ANTONIO
Case 3: Cases involving Security Bank and Trust Co.
1st Week – Retail Trade Laws
a. Discuss In re: Joaquin Borromeo, 241 SCRA
405, A.M. No. 93-7-696-0, 21 February 1995.
FACTS: The respondent in this case, Joaquin T.
Borromeo, is not a lawyer but has apparently read
some law books, and ostensibly come to possess
some superficial awareness of a few substantive legal
principles and procedural rules. Incredibly, with
nothing more than this smattering of learning, the
respondent has, for some sixteen (16) years now,
from 1978 to the present, been instituting and
prosecuting legal proceedings in various courts,
dogmatically pontificating on errors supposedly
committed by the courts, including the Supreme
Court.
Case 1: Cases involving Traders Royal Bank (TRB).
The first bank that Joaquin T. Borromeo appears to
have dealt with was the Traders Royal Bank (TRB).
On June 2, 1978, he got a loan from it in the sum of
P45,000.00. This he secured by a real estate
mortgage created over two parcels of land covered
by TCT No. 59596 and TCT No. 59755 owned,
respectively, by Socorro Borromeo-Thakuria (his
sister) and Teresita Winniefred Lavarino. On June 16,
1978, Borromeo obtained a second loan from TRB in
the amount of P10,000.00, this time giving as security
a mortgage over a parcel of land owned by the Heirs
of Vicente V. Borromeo, covered by TCT No.
RT-7634. Authority to mortgage these three lots was
vested in him by a Special Power of Attorney
executed by their respective owners.
Case 2: Cases involving United Coconut Planters
Bank (UCPB). Borromeo (together with a certain
Mercader) also borrowed money from the United
Coconut Planters Bank (UCPB) and executed a real
estate mortgage to secure repayment thereof. The
mortgage was constituted over a 122-square-meter
commercial lot covered by TCT No. 75680 in
Borromeo's name. This same lot was afterwards sold
on August 7, 1980 by Borromeo to one Samson K.
Lao for P170,000.00, with a stipulation for its
repurchase (pacto de retro) by him (Borromeo, as the
vendor). The sale was made without the knowledge
and consent of UCPB.
He then went to the RTC of Valenzuela to compel his
(SBTC). The third banking institution which Joaquin T.
Borromeo engaged in running court battles, was the
Security Bank & Trust Company (SBTC). From it
Borromeo had obtained five (5) loans in the aggregate
sum of P189,126.19, consolidated in a single
Promissory Note on May 31, 1979. To secure
payment thereof, Summa Insurance Corp. (Summa)
issued a performance bond which set a limit of
P200,000.00 on its liability thereunder. Again, as in
the case of his obligations to Traders Royal Bank and
UCPB, Borromeo failed to discharge his contractual
obligations. Hence, SBTC brought an action in the
Cebu City RTC against Borromeo and Summa for
collection.
ISSUE: Whether the respondent-accused is liable for
constructive contempt.
HELD: Joaquin T. Borromeo is found and declared
GUILTY of constructive contempt repeatedly
committed over time, despite warnings and
instructions given to him, and to the end that he may
ponder his serious errors and grave misconduct and
learn due respect for the Courts and their authority, he
is hereby sentenced to serve a term of imprisonment
of TEN (10) DAYS in the City Jail of Cebu City and to
pay a fine of ONE THOUSAND PESOS (P1,000.00).
He is warned that a repetition of any of the offenses of
which he is herein found guilty, or any similar or other
offense against courts, judges or court employees, will
merit further and more serious sanctions.
b. Discuss Department of Education Culture and
Sports v. San Diego, G.R. No. 89572, 21 December
1989.
FACTS: Private respondent, San Diego, is a graduate
of the University of the East with a degree of B.S. in
Zoology. The petitioner claims that he took the
National Medical Admission Test (NMAT) three times
and flunked it as many times. When he applied to
take it again, the petitioner, DECS, rejected his
application on the basis of the NMAT rule: “H.) A
STUDENT SHALL BE ALLOWED ONLY THREE (3)
CHANCES TO TAKE THE NMAT. AFTER THREE (3)
SUCCESSIVE FAILURES, A STUDENT SHALL NOT
BE ALLOWED TO TAKE THE NMAT FOR THE
FOURTH TIME.”
admission to the test. In his petition, he squarely
challenged the constitutionality of MECS Order No.
12, Series of 1972, containing the above-cited rule.
The additional grounds raised were due process and
equal protection.
ISSUE: Whether respondent was deprived of his right
to a medical education through exercise of police
power.
HELD: The regulation of the practice of medicine in all
its branches has long been recognized as a
reasonable method of protecting the health and safety
of the public. The Court agreed that the government is
entitled to prescribe an admission test like the NMAT
as a means of achieving its stated objective of
“upgrading the selection of applicants into medical
schools” and of “improving the quality of medical
education in the country.”
It is the right and indeed the responsibility of the State
to ensure that the medical profession is not infiltrated
by incompetents to whom patients may unwarily
entrust their lives and health. The three-flunk rule is
intended to insulate the medical schools and
ultimately the medical profession from the intrusion of
those not qualified to be doctors.
NOTE: The subject of the challenged regulation is
certainly within the ambit of the police power.
c. What is law as defined by St. Thomas Aquinas?
St. Thomas Aquinas defines law as “an ordinance
of reason for the common good, made by him
who has care of the community, and
promulgated.”
“ordinance of reason” - rules and norms of conduct.
The law is reasonable and a product of careful
deliberation.
“properly promulgated” - clearly communicated to
all people concerned. Generally, laws take effect after
15 days following its publication in the official gazette.

“competent authority” - those who are vested by
the people. The government, Senate, and House of
Representatives.
“common good” – promotion of respect for the
dignity and freedom of each for the general welfare.
NOTE: Whenever someone desires an end (telos),
reason commands what is to be done to be able
to reach it. For him, the law is for the common
good because the end goal (telos) of law is for the
good of the community it binds, and not merely for
the good of the lawmaker or specific groups of
people.
It is made by the proper authority who has "care of
the community", and not arbitrarily imposed by
outsiders. It is promulgated so that the law can be
known.
d. What are the three inherent powers of the
state? Discuss each.
1. Power of taxation - Power of the state by which it
is able to demand from the members of society their
proportionate share or contribution to sustain
government functions, by way of services. It is
exercised through legislature, to impose burdens
upon subjects and objects within its jurisdiction, for
the purpose of raising revenues to carry out the
legitimate objects of the government.
NOTE: NATURE: An inherent power of the state
exercised through the legislature.
2. Police Power - Power of the state to regulate
liberty & property for the promotion of general welfare.
3. Power of Eminent Domain - This is the right of the
State to acquire private property for public use upon
payment of just compensation and observance of due
process. Requisites: (1) there must be taking of
public property; (2) It must be for public use.; (3)
There must be just compensation; and (4) due
process of law must be observed in taking of the
property.
e. Discuss the hierarchy of laws. (Article 7,
Republic Act No. 386 or the Civil Code of the
Philippines)
Art. 7. “Laws are repealed only by subsequent ones,
and their violation or non-observance shall not be
excused by disuse, or custom or practice to the
contrary.
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.”
Comment: Art. 7 is obvious because time moves
forward.
Only subsequent laws can repeal prior laws either
through:
1. A repealing clause; or
2. Incompatibility of the subsequent and prior
laws.
The violation of a law is not justified even if:
1. No one follows the law (i.e., nonpayment of
taxes); or
2. There is a custom to the contrary.
f. What are the three branches of government?
Discuss each.
1.) Legislative Department - The legislative
department is the source of Statutes. It is composed
of the Philippine Senate and the House of
Representatives which has the power to enact,
revoke, or alter such, and any, law as it sees fit. Its
primary function is to determine what the law should
be and enact the appropriate legislation.
NOTE: Before any legislative proposal (Bill) can
become an Act of Congress, it must proceed through
and be approved by both Houses of Congress and
must be approved by the President of the Philippines.
ANTONIO
This is also the source of the Philippine Constitution,
and laws enacted by congress which are called
“Statutes” which are laws that declare the rights and
duties or command or prohibit certain conduct.
2.) Judiciary Department - It holds the power to
settle controversies involving rights which are
legally demandable and enforceable.
Art. 8 of the New Civil Code states that: “judicial
decisions applying or interpreting the laws, or the
constitution shall form part of the legal system of the
Philippines.”
NOTE: In case of silence, obscurity, or insufficiency of
the law, judges are guided by Art. 9 of the New Civil
Code which states that: “No judge or court shall
decline to render judgement by reason of the silence,
obscurity, or insufficiency of the laws.”
NOTE: The judiciary department is the source of case
or common laws, jurisprudence, or judge-made laws.
3.) Executive Department - It has the authority to
administer the law primarily by bringing law
breakers to trial and to appoint officials to
oversee the administration of gov’t
responsibilities.
It is composed of the President (who also heads the
executive department.), the vice-president, and the
cabinet secretaries (who are also appointed by the
President.)
NOTE: The body of law that results is called
“administrative law”.
Additional NOTE: Implementing Rules and
Regulations or Administrative Laws – These rules and
regulations have the authority of law.
g. Discuss Article VII of the 1987 Philippine
Constitution. Who exercises executive power?
Article VII, 1987 Philippine Constitution
EXECUTIVE DEPARTMENT
Section 1. The executive power shall be vested in the
President of the Philippines.

Section 2. No person may be elected President
unless he is a natural-born citizen of the Philippines, a
registered voter, able to read and write, at least forty
years of age on the day of the election, and a resident
of the Philippines for at least ten years immediately
preceding such election.
Section 3. There shall be a Vice-President who shall
have the same qualifications and term of office and be
elected with, and in the same manner, as the
President. He may be removed from office in the
same manner as the President.
The Vice-President may be appointed as a Member of
the Cabinet. Such appointment requires no
confirmation.
Section 4. The President and the Vice-President shall
be elected by direct vote of the people for a term of
six years which shall begin at noon on the thirtieth day
of June next following the day of the election and shall
end at noon of the same date, six years thereafter.
The President shall not be eligible for any re-election.
No person who has succeeded as President and has
served as such for more than four years shall be
qualified for election to the same office at any time.
No Vice-President shall serve for more than two
successive terms. Voluntary renunciation of the office
for any length of time shall not be considered as an
interruption in the continuity of the service for the full
term for which he was elected.
Unless otherwise provided by law, the regular election
for President and Vice-President shall be held on the
second Monday of May.
The returns of every election for President and
Vice-President, duly certified by the board of
canvassers of each province or city, shall be
transmitted to the Congress, directed to the President
of the Senate. Upon receipt of the certificates of
canvass, the President of the Senate shall, not later
than thirty days after the day of the election, open all
the certificates in the presence of the Senate and the
House of Representatives in joint public session, and
the Congress, upon determination of the authenticity
and due execution thereof in the manner provided by
law, canvass the votes.
The person having the highest number of votes shall
be proclaimed elected, but in case two or more shall
have an equal and highest number of votes, one of
them shall forthwith be chosen by the vote of a
majority of all the Members of both Houses of the
Congress, voting separately.
The Congress shall promulgate its rules for the
canvassing of the certificates.
The Supreme Court, sitting en banc, shall be the sole
judge of all contests relating to the election, returns,
and qualifications of the President or Vice-President,
and may promulgate its rules for the purpose.
Section 5. Before they enter on the execution of their
office, the President, the Vice-President, or the Acting
President shall take the following oath or affirmation:
“I do solemnly swear [or affirm] that I will faithfully and
conscientiously fulfill my duties as President [or
Vice-President or Acting President] of the Philippines,
preserve and defend its Constitution, execute its laws,
do justice to every man, and consecrate myself to the
service of the Nation. So help me God.” [In case of
affirmation, last sentence will be omitted].
Section 6. The President shall have an official
residence. The salaries of the President and
Vice-President shall be determined by law and shall
not be decreased during their tenure. No increase in
said compensation shall take effect until after the
expiration of the term of the incumbent during which
such increase was approved. They shall not receive
during their tenure any other emolument from the
Government or any other source.
Section 7. The President-elect and the Vice
President-elect shall assume office at the beginning of
their terms.
If the President-elect fails to qualify, the Vice
President-elect shall act as President until the
President-elect shall have qualified.
If a President shall not have been chosen, the Vice
President-elect shall act as President until a President
shall have been chosen and qualified.
If at the beginning of the term of the President, the
President-elect shall have died or shall have become
ANTONIO
permanently disabled, the Vice President-elect shall
become President.
Where no President and Vice-President shall have
been chosen or shall have qualified, or where both
shall have died or become permanently disabled, the
President of the Senate or, in case of his inability, the
Speaker of the House of Representatives, shall act as
President until a President or a Vice-President shall
have been chosen and qualified.
The Congress shall, by law, provide for the manner in
which one who is to act as President shall be selected
until a President or a Vice-President shall have
qualified, in case of death, permanent disability, or
inability of the officials mentioned in the next
preceding paragraph.
Section 8. In case of death, permanent disability,
removal from office, or resignation of the President,
the Vice-President shall become the President to
serve the unexpired term. In case of death,
permanent disability, removal from office, or
resignation of both the President and Vice-President,
the President of the Senate or, in case of his inability,
the Speaker of the House of Representatives, shall
then act as President until the President or
Vice-President shall have been elected and qualified.
The Congress shall, by law, provide who shall serve
as President in case of death, permanent disability, or
resignation of the Acting President. He shall serve
until the President or the Vice-President shall have
been elected and qualified, and be subject to the
same restrictions of powers and disqualifications as
the Acting President.
Section 9. Whenever there is a vacancy in the Office
of the Vice-President during the term for which he was
elected, the President shall nominate a Vice-President
from among the Members of the Senate and the
House of Representatives who shall assume office
upon confirmation by a majority vote of all the
Members of both Houses of the Congress, voting
separately.
Section 10. The Congress shall, at ten o’clock in the
morning of the third day after the vacancy in the
offices of the President and Vice-President occurs,
convene in accordance with its rules without need of a

call and within seven days, enact a law calling for a
special election to elect a President and a
Vice-President to be held not earlier than forty-five
days nor later than sixty days from the time of such
call. The bill calling such special election shall be
deemed certified under paragraph 2, Section 26,
Article VI of this Constitution and shall become law
upon its approval on third reading by the Congress.
Appropriations for the special election shall be
charged against any current appropriations and shall
be exempt from the requirements of paragraph 4,
Section 25, Article VI of this Constitution. The
convening of the Congress cannot be suspended nor
the special election postponed. No special election
shall be called if the vacancy occurs within eighteen
months before the date of the next presidential
election.
Section 11. Whenever the President transmits to the
President of the Senate and the Speaker of the
House of Representatives his written declaration that
he is unable to discharge the powers and duties of his
office, and until he transmits to them a written
declaration to the contrary, such powers and duties
shall be discharged by the Vice-President as Acting
President.
Whenever a majority of all the Members of the
Cabinet transmit to the President of the Senate and to
the Speaker of the House of Representatives their
written declaration that the President is unable to
discharge the powers and duties of his office, the
Vice-President shall immediately assume the powers
and duties of the office as Acting President.
Thereafter, when the President transmits to the
President of the Senate and to the Speaker of the
House of Representatives his written declaration that
no inability exists, he shall reassume the powers and
duties of his office. Meanwhile, should a majority of all
the Members of the Cabinet transmit within five days
to the President of the Senate and to the Speaker of
the House of Representatives, their written
declaration that the President is unable to discharge
the powers and duties of his office, the Congress shall
decide the issue. For that purpose, the Congress shall
convene, if it is not in session, within forty-eight hours,
in accordance with its rules and without need of call.
If the Congress, within ten days after receipt of the
last written declaration, or, if not in session, within
twelve days after it is required to assemble,
determines by a two-thirds vote of both Houses,
voting separately, that the President is unable to
discharge the powers and duties of his office, the
Vice-President shall act as President; otherwise, the
President shall continue exercising the powers and
duties of his office.
Section 12. In case of serious illness of the
President, the public shall be informed of the state of
his health. The members of the Cabinet in charge of
national security and foreign relations and the Chief of
Staff of the Armed Forces of the Philippines, shall not
be denied access to the President during such illness.
Section 13. The President, Vice-President, the
Members of the Cabinet, and their deputies or
assistants shall not, unless otherwise provided in this
Constitution, hold any other office or employment
during their tenure. They shall not, during said tenure,
directly or indirectly, practice any other profession,
participate in any business, or be financially interested
in any contract with, or in any franchise, or special
privilege granted by the Government or any
subdivision, agency, or instrumentality thereof,
including government-owned or controlled
corporations or their subsidiaries. They shall strictly
avoid conflict of interest in the conduct of their office.
The spouse and relatives by consanguinity or affinity
within the fourth civil degree of the President shall not,
during his tenure, be appointed as Members of the
Constitutional Commissions, or the Office of the
Ombudsman, or as Secretaries, Undersecretaries,
chairmen or heads of bureaus or offices, including
government-owned or controlled corporations and
their subsidiaries.
Section 14. Appointments extended by an Acting
President shall remain effective, unless revoked by
the elected President, within ninety days from his
assumption or reassumption of office.
Section 15. Two months immediately before the next
presidential elections and up to the end of his term, a
President or Acting President shall not make
appointments, except temporary appointments to
executive positions when continued vacancies therein
will prejudice public service or endanger public safety.
ANTONIO
Section 16. The President shall nominate and, with
the consent of the Commission on Appointments,
appoint the heads of the executive departments,
ambassadors, other public ministers and consuls, or
officers of the armed forces from the rank of colonel or
naval captain, and other officers whose appointments
are vested in him in this Constitution. He shall also
appoint all other officers of the Government whose
appointments are not otherwise provided for by law,
and those whom he may be authorized by law to
appoint. The Congress may, by law, vest the
appointment of other officers lower in rank in the
President alone, in the courts, or in the heads of
departments, agencies, commissions, or boards.
The President shall have the power to make
appointments during the recess of the Congress,
whether voluntary or compulsory, but such
appointments shall be effective only until disapproved
by the Commission on Appointments or until the next
adjournment of the Congress.
Section 17. The President shall have control of all the
executive departments, bureaus, and offices. He shall
ensure that the laws be faithfully executed.
Section 18. The President shall be the
Commander-in-Chief of all armed forces of the
Philippines and whenever it becomes necessary, he
may call out such armed forces to prevent or
suppress lawless violence, invasion or rebellion. In
case of invasion or rebellion, when the public safety
requires it, he may, for a period not exceeding sixty
days, suspend the privilege of the writ of habeas
corpus or place the Philippines or any part thereof
under martial law. Within forty-eight hours from the
proclamation of martial law or the suspension of the
privilege of the writ of habeas corpus, the President
shall submit a report in person or in writing to the
Congress. The Congress, voting jointly, by a vote of at
least a majority of all its Members in regular or special
session, may revoke such proclamation or
suspension, which revocation shall not be set aside
by the President. Upon the initiative of the President,
the Congress may, in the same manner, extend such
proclamation or suspension for a period to be
determined by the Congress, if the invasion or
rebellion shall persist and public safety requires it.

The Congress, if not in session, shall, within
twenty-four hours following such proclamation or
suspension, convene in accordance with its rules
without need of a call.
The Supreme Court may review, in an appropriate
proceeding filed by any citizen, the sufficiency of the
factual basis of the proclamation of martial law or the
suspension of the privilege of the writ of habeas
corpus or the extension thereof, and must promulgate
its decision thereon within thirty days from its filing.
A state of martial law does not suspend the operation
of the Constitution, nor supplant the functioning of the
civil courts or legislative assemblies, nor authorize the
conferment of jurisdiction on military courts and
agencies over civilians where civil courts are able to
function, nor automatically suspend the privilege of
the writ of habeas corpus.
The suspension of the privilege of the writ of habeas
corpus shall apply only to persons judicially charged
for rebellion or offenses inherent in, or directly
connected with, invasion.
During the suspension of the privilege of the writ of
habeas corpus, any person thus arrested or detained
shall be judicially charged within three days,
otherwise he shall be released.
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 20. The President may contract or guarantee
foreign loans on behalf of the Republic of the
Philippines with the prior concurrence of the Monetary
Board, and subject to such limitations as may be
provided by law. The Monetary Board shall, within
thirty days from the end of every quarter of the
calendar year, submit to the Congress a complete
report of its decision on applications for loans to be
contracted or guaranteed by the Government or
government-owned and controlled corporations which
would have the effect of increasing the foreign debt,
and containing other matters as may be provided by
law.
Section 21. No treaty or international agreement shall
be valid and effective unless concurred in by at least
two-thirds of all the Members of the Senate.
Section 22. The President shall submit to the
Congress, within thirty days from the opening of every
regular session as the basis of the general
appropriations bill, a budget of expenditures and
sources of financing, including receipts from existing
and proposed revenue measures.
Section 23. The President shall address the
Congress at the opening of its regular session. He
may also appear before it at any other time.
h. Discuss Executive Order No. 292
(Administrative Code of 1987), Book IV, Title X,
Chapter 1, Secs. 1 to 4.
i. What are the state policies found in Sec. 1?
SECTION 1. “Declaration of Policy.—The State shall
develop a self-reliant and independent national
economy effectively controlled by Filipinos. It
recognizes the indispensable role of the private
sector, encourages private enterprise, and provides
incentives to needed investments.
The State shall promote industrialization and full
employment based on sound agricultural
development and agrarian reform, through industries
that make full and efficient use of human and natural
resources, and which are competitive in both
domestic and foreign markets. It shall protect Filipino
enterprises against unfair foreign competition and
trade practices.
In pursuit of these goals, all sectors of the economy
and all regions of the country shall be given optimum
opportunity to develop. Private enterprises, including
corporations, cooperatives, and similar collective
organizations shall be encouraged to broaden the
base of their ownership.
ANTONIO
The State shall pursue a trade policy that serves the
general welfare and utilizes all forms and
arrangements of exchange on the basis of equality
and reciprocity.
The State shall regulate or prohibit monopolies when
the public interest so requires. No combinations in
restraint of trade or unfair competition shall be
allowed. The state shall protect consumers from trade
malpractices and from substandard or hazardous
products.”
j. What is the mandate of the Department of Trade
and Industry (Sec. 2)?
SECTION 2. “Mandate.—The Department of Trade
and Industry shall be the primary coordinative,
promotive, facilitative and regulatory arm of the
Executive Branch of government in the area of trade,
industry and investments. It shall promote and
develop an industrialization program effectively
controlled by Filipinos and shall act as catalyst for
intensified private sector activity in order to accelerate
and sustain economic growth through: (a)
comprehensive industrial growth strategy, (b) a
progressive and socially responsible liberalization
program, (c) policies designed for the expansion and
diversification of trade, and (d) policies to protect
Filipino enterprises against unfair foreign competition
and trade practices.”
k. What are the powers and functions of the
Department of Trade and Industry (Sec. 3)?
SECTION 3. “Powers and Functions.—The
Department of Trade and Industry shall:
(1) Formulate and implement policies, plans and
programs relative to the development, expansion,
promotion and regulation of trade, industry, and
investments;
(2) Consolidate and coordinate all functions and
efforts pertaining to the promotion of exports,
diversification and decentralization of industries, and
development of foreign trade;
(3) Encourage and promote the growth and expansion
of industries which make full use of human and

natural resources and which are competitive in
domestic and foreign markets;
(4) Adopt and implement measures to protect Filipino
enterprises against unfair foreign competition and
trade practices;
(5) Provide incentives to broaden the base of
ownership of large-scale industrial enterprises and
accelerate the formulation and growth of small and
medium-scale enterprises;
(6) Regulate the importation of essential consumer
and producer items to maintain their fair and
competitive prices to end-users;
(7) Protect consumers from trade malpractices and
from substandard or hazardous products;
(8) Adopt and implement measures to prohibit
combinations in restraint of trade and unfair
competition;
(9) Develop the capabilities of industry to increase the
domestic content of its products and upgrade the
quality of products according to competitive
international standards;
(10) Encourage and support the formation of People’s
Economic Councils at regional, provincial and
municipal levels as well as other trade, industry and
consumer protection institutions or associations;
(11) Upgrade and develop the manufacture of local
capital goods and precision machinery components;
(12) Formulate the appropriate mechanics to guide
and manage the transfer of appropriate industrial
technology in the country;
(13) Formulate country and product export strategies
which will guide the export promotion and
development thrusts of the government; and
implement programs and activities geared towards
the overseas promotion of Philippine exports in
overseas markets;
(14) Take the primary role in negotiating and
reviewing existing international trade agreements,
particularly those affecting commodity quotas limiting
existing exports of Philippine products to determine
programs for renegotiations of more favorable terms;
(15) Administratively adjudicate and impose
reasonable fines and penalties for violation of existing
trade and industry laws;
(16) Prepare, for consideration of the Monetary
Board, proposed programs in the commercial banking
sector for directing commercial lending facilities
towards priority areas of commercial and industrial
development, as well as coordinate government direct
funding and financial guarantee programs to achieve
trade and industry growth;
(17) Issue subpoena and subpoena duces tecum to
compel the attendance of witnesses and the
production of the necessary information, papers and
documents which it may deem necessary in the
exercise of its powers and functions;
(18) Prescribe and enforce compliance with such
rules and regulations as may be necessary to
implement the intent and provisions of this Code,
which rules and regulations shall take effect fifteen
(15) days following their publication in the Official
Gazette; and
(19) Perform such other functions as may be
necessary or incidental in carrying into effect the
provisions of this Code and as may be provided by
law.”
l. Who heads the Department of Trade and
Industry Sec. 4)?
SECTION 4. “Organizational Structure.—The
department shall consist of the offices of the
secretary, undersecretaries and assistant secretaries,
national service centers, regional offices, and line
corporate agencies and government entities.”
m. Discuss 1987 Constitution, Art. VII, Section 17.
ANTONIO
SECTION 17. “The President shall have control of all
the executive departments, bureaus, and offices. He
shall ensure that the laws be faithfully executed.”
n. What is the doctrine of qualified political
agency?
The doctrine of qualified political agency, also known
as the “alter ego doctrine”, essentially postulates
that the heads of the various executive
departments are the alter egos of the President,
and, thus, the actions taken by such heads in the
performance of their official duties are deemed
the acts of the President unless the President
himself should disapprove such acts.
In Angeles v. Gaite, it was stated that “When the
President herself did not revoke the order issued by
respondent Acting Deputy Executive Secretary for
Legal Affairs nor saw the necessity to exempt
petitioner’s case from the application of Memorandum
Circular No. 58, the act of the latter is deemed to be
an act of the President herself.
The President's act of delegating authority to the
Secretary of Justice by virtue of said Memorandum
Circular is well within the purview of the doctrine of
qualified political agency, long been established in our
jurisdiction.”
NOTE: This doctrine is in recognition of the fact that in
our presidential form of government, all executive
organizations are adjuncts of a single Chief
Executive; that the heads of the Executive
Departments are assistants and agents of the Chief
Executive; and that the multiple executive functions of
the President as the Chief Executive are performed
through the Executive Departments. The doctrine has
been adopted here out of practical necessity,
considering that the President cannot be expected to
personally perform the multifarious functions of the
executive office.
NOTE: The doctrine of qualified political agency was
introduced in the landmark case of Villena v. The
Secretary of Interior.

n.1. Discuss Angeles v. Gaite, G.R. No. 165276, 25
November 2009.
FACTS: Petitioner [Angeles] was the foster mother of
her fourteen (14) year-old grandniece Maria
Mercedes Vistan.
Petitioner provided the child with love and care and
sent her to a good school and attended to her general
well-being for nine (9) memorable and happy years.
The child also reciprocated the affections of her foster
mother and wrote the latter letters.
Petitioner’s love for the child extended to her siblings,
particularly her half-brother respondent Michael
Vistan, a former drug-addict, and the latter’s family
who were regular beneficiaries of the undersigned’s
generosity.
In the evening of 11 April 1999, Michael Vistan had a
falling out with petitioner for his failure to do a very
important errand for which he was severely
reprimanded over the phone. He was told that from
then on, no assistance of any kind would be extended
to him and that he was no longer welcome at the
petitioner's residence.
Feeling thwarted, he, in conspiracy with his co-horts,
retaliated on 12 April 1999 by inducing his half-sister,
Maria Mercedes, to leave petitioner’s custody while
the petitioner was at her office.
Thus, on 1 December 1999, petitioner filed a
complaint against Michael Vistan before the Office of
the Provincial Prosecutor in Malolos, Bulacan for five
counts of Violation of Section 10 (a), Article VI of RA
7610, otherwise known as the Child Abuse Act, and
for four counts of Violation of Sec. 1 (e) of PD 1829.
She likewise filed a complaint for Libel against Maria
Cristina Vistan, aunt of Michael and Maria Mercedes.
The Provincial Prosecutor denied the
recommendation of the Investigating Prosecutor that
Michael Vistan be indicted for violation RA 7610. He
also approved the recommendation for the dismissal
of the charge of violation of PD 1829. The petitioner
filed a petition for review with the Department of
Justice, which eventually dismissed the petition.
The petitioner then filed a Petition for Review before
the Office of President. The Office of the President
dismissed the petition, citing Memorandum Circular
No. 58 which bars an appeal or a petition for review of
decisions, orders, and resolutions of the Secretary of
Justice except those involving offenses punishable by
reclusion perpetua or death.
The petitioner then appealed to the Court of Appeals,
which dismissed the petition.
The petitioner argued before the Supreme Court that
Memorandum Circular No. 58 is an invalid regulation
because it diminishes the power of control of the
President and bestows upon the Secretary of Justice,
a subordinate officer, almost unfettered power.
ISSUE: Whether or not the CA erred in its application
of doctrine of qualified political and .
HELD: No. CA Decision Affirmed. Petitioner argues
that Memorandum Circular No. 58 is an invalid
regulation, because it diminishes the power of control
of the President and bestows upon the Secretary of
Justice, a subordinate officer, almost unfettered
power. This argument is absurd.
Under this doctrine, which primarily recognizes the
establishment of a single executive, "all executive and
administrative organizations are adjuncts of the
Executive Department; the heads of the various
executive departments are assistants and agents of
the Chief Executive; and, except in cases where the
Chief Executive is required by the Constitution or law
to act in person or the exigencies of the situation
demand that he act personally, the multifarious
executive and administrative functions of the Chief
Executive are performed by and through the
executive departments, and the acts of the
secretaries of such departments, performed and
promulgated in the regular course of business, are,
unless disapproved or reprobated by the Chief
Executive, presumptively the acts of the Chief
Executive." The CA cannot be deemed to have
committed any error in upholding the Office of the
President's reliance on the Memorandum Circular as
it merely interpreted and applied the law as it should
be.
ANTONIO
It is quite evident from the foregoing that the
President himself set the limits of his power to review
decisions/orders/resolutions of the Secretary of
Justice in order to expedite the disposition of cases.
Petitioner's argument that the Memorandum Circular
unduly expands the power of the Secretary of Justice
to the extent of rendering even the Chief Executive
helpless to rectify whatever errors or abuses the
former may commit in the exercise of his discretion is
purely speculative to say the least.
Petitioner cannot second-guess the President's power
and the President's own judgment to delegate
whatever it is he deems necessary to delegate in
order to achieve proper and speedy administration of
justice, especially that such delegation is upon a
cabinet secretary - his own alter ego.
In the case at bar, the power of the President to
review the Decision of the Secretary of Justice
dealing with the preliminary investigation of cases
cannot be considered as falling within the same
exceptional class which cannot be delegated.
Besides, the President has not fully abdicated his
power of control as Memorandum Circular No. 58
allows an appeal if the imposable penalty is reclusion
perpetua or higher.
Certainly, it would be unreasonable to impose upon
the President the task of reviewing all preliminary
investigations decided by the Secretary of Justice. To
do so will unduly hamper the other important duties of
the President by having to scrutinize each and every
decision of the Secretary of Justice notwithstanding
the latter's expertise in said matter.
Petitioner's contention that Memorandum Circular No.
58 violates both the Constitution and Section 1,
Chapter 1, Book III of EO No. 292, for depriving the
President of his power of control over the executive
departments deserves scant consideration.
In the first place, Memorandum Circular No. 58 was
promulgated by the Office of the President and it is
settled that the acts of the secretaries of such
departments, performed and promulgated in the
regular course of business are, unless disapproved or
reprobated by the Chief Executive, presumptively the
acts of the Chief Executive Memorandum Circular No.

58 has not been reprobated by the President;
therefore, it goes without saying that the said
Memorandum Circular has the approval of the
President.
n.2. Discuss Tiu v. Dizon, G.R. No. 211269, 15 June
2016.
FACTS: On June 16, 2000, petitioner, Tiu, was found
guilty of selling "shabu". Consequently, they were
sentenced to suffer the penalty of reclusion perpetua.
The conviction became final and executory in 2004.
On March 24, 2009, the Board of Pardons and
Parole (BPP) issued a resolution recommending the
grant of executive clemency to petitioner. On June 3,
2010, then President Gloria Macapagal-Arroyo
granted him "conditional pardon without parole
conditions," but was still "subject to the conditions
indicated in [the individual pardon papers]." It turned
out that no such papers were issued in petitioner's
favor and that the records of his case were referred
back to the BPP. Respondent Natividad G. Dizon,
Chairman of the BPP, confirmed in a letter that
petitioner's Certificate of Conditional Pardon without
Parole Conditions was not signed by PGMA and the
BPP had resolved to defer action thereon pending
compliance with all the basic requirements for
executive clemency.
On July 7, 2014, petitioner filed the instant Amended
Petition for Habeas Corpus, insisting on the efficacy
and enforceability of his conditional pardon without
parole conditions, which allegedly necessitates his
release from prison.
On the other hand, respondents maintain that a
prisoner serving a sentence of life imprisonment and
retaining classification as a penal colonist will
automatically have his sentence modified to 30 years
of imprisonment only "when receiving the executive
approval for this classification." However, the
petitioner failed to obtain such executive approval.
Petitioner's colonist status granted merely by the
Director of Corrections, without executive
approval, did not modify his sentence. Hence,
there being no unlawful restraint, no writ of
habeas corpus should be issued in his favor.
NOTE: Section 6, Chapter 3, Part II, Book I of the
BuCor-OM
Section 6. Colonist. - The Director may, upon the
recommendation of the Classification Board, classify
an inmate who has the following qualifications as a
colonist:
a. be at least a first class inmate and has
served one (1) year immediately preceding
the completion of the period specified in the
following qualifications;
b. has served imprisonment with good conduct
for a period equivalent to one fifth (1/5) of the
maximum term of his prison sentence, or
seven (7) years in the case of a life
sentence.
ISSUE: Whether or not a writ of habeas corpus
should be issued in favor of the petitioner.
ISSUE ON QUALIFIED POLITICAL AGENCY:
Whether the President may delegate the authority to
pardon prisoners under the doctrine of qualified
political agency.
RULING: No. The object of the writ of habeas corpus
is to inquire into the legality of the detention, and, if
the detention is found to be illegal, to
require the release of the detainee. In this case,
petitioner failed to show, however, that his further
incarceration is no longer lawful and that he is entitled
to relief under a writ of habeas corpus.The executive
clemency extended by PGMA on June 3, 2010 to a
number of prisoners including petitioner was made
"subject to the conditions indicated in the
corresponding documents."It is undisputed, however,
that no individual pardon papers were issued in
petitioner's favor, thereby rendering the grant of
executive clemency to him as incomplete and
ineffective.
Notably, when the records of petitioner's case were
referred back to the BPP, it required compliance first
with all the basic requirements for executive clemency
before acting thereon. This is not to say, however, that
petitioner's pardon papers may not have been
issued due to non-compliance with the
requirements, which is a matter that the Court shall
ANTONIO
not, and could not, resolve here. This is because the
grant of pardon and the determination of the terms
and conditions of a conditional pardon are purely
executive acts which are not subject to judicial
scrutiny.
Ruling on the issue of qualified political agency:
The exercise of the pardoning power, notwithstanding
the judicial determination of guilt of the accused,
demands the exclusive exercise by the President of
the constitutionally vested power. Stated otherwise,
since the Chief Executive is required by the
Constitution to act in person, he may not delegate
the authority to pardon prisoners under the
doctrine of qualified political agency, which
"essentially postulates that the heads of the various
executive departments are the alter egos of the
President, and, thus, the actions taken by suchheads
in the performance of their official duties are deemed
the acts of the President unless the President himself
should disapprove such acts."
o. What is the Filipino First Policy?
The Filipino First Policy is a product of Philippine
nationalism. It is embodied in the 1987 Constitution
not merely to be used as a guideline for future
legislation but primarily to be enforced; so must it
be enforced. This Court as the ultimate guardian of
the Constitution will never shun, under any
reasonable circumstance, the duty of upholding the
majesty of the Constitution which it is tasked to
defend. It is worth emphasizing that it is not the
intention of this Court to impede and diminish, much
less undermine, the influx of foreign investments. Far
from it, the Court encourages and welcomes more
business opportunities but avowedly sanctions
the preference for Filipinos whenever such
preference is ordained by the Constitution.
p. Discuss 1987 Constitution, Art, XII, Section 10.
Art. XII, Sec. 10 of the 1987 Constitution is a
mandatory, positive command which is complete in
itself and which needs no further guidelines or
implementing laws or rules for its enforcement. From
its very words the provision does not require any
legislation to put it in operation. is per se judicially
enforceable. When our Constitution mandates that

in the grant of rights, privileges, and concessions
covering national economy and patrimony, the
State shall give preference to qualified Filipinos, it
means just that qualified Filipinos shall be
preferred. And when our Constitution declares that a
right exists in certainly specified circumstances an
action may be maintained to enforce such right
notwithstanding the absence of any legislation on the
subject; consequently, if there is no statute especially
enacted to enforce such constitutional right such right
enforces itself by its own inherent potency and
puissance, and from which all legislations must take
their bearings. Where there is a right there is a
remedy. Ubi jus ibi remedium.
p.1. Discuss Manila Prince Hotel v. GSIS, G.R. No.
122156, 03 February 1997.
FACTS:
The Government Service Insurance System (GSIS)
decided to sell through public bidding 30% to 51% of
the issued and outstanding shares of the Manila Hotel
(MHC).
In a close bidding, two bidders participated: Manila
Prince Hotel Corporation (MPHC), a Filipino
corporation, which offered to buy 51% of the MHC at
P41.58 per share, and Renong Berhad, a Malaysian
firm, with ITT-Sheraton as its hotel operator, which bid
for the same number of shares at P44.00 per share,
or P2.42 more than the bid of petitioner.
Pending the declaration of Renong Berhard as the
winning bidder and the execution of the contracts, the
MPHC matched the bid price in a letter to GSIS.
MPHC sent a manager’s check to the GSIS in a
subsequent letter, which GSIS refused to accept. On
17 October 1995, perhaps apprehensive that GSIS
had disregarded the tender of the matching bid,
MPHC came to the Court on prohibition and
mandamus.
Petitioner invokes Sec. 10, second par., Art. XII, of the
1987 Constitution and submits that the Manila Hotel
has been identified with the Filipino nation and has
practically become a historical monument which
reflects the vibrancy of Philippine heritage and
culture.
Respondents assert that Sec. 10, second par., Art.
XII, of the 1987 Constitution is merely a statement of
principle and policy since it is not a self-executing
provision and requires implementing legislation(s).
ISSUE: Whether the provisions of the Constitution,
particularly Article XII Section 10, are self-executing.
RULING: Yes. Sec 10, Art. XII of the 1987
Constitution is a self-executing provision.
A provision which lays down a general principle, such
as those found in Article II of the 1987 Constitution, is
usually not self-executing. But a provision which is
complete in itself and becomes operative without the
aid of supplementary or enabling legislation, or that
which supplies sufficient rule by means of which the
right it grants may be enjoyed or protected, is
self-executing.
Hence, Manila Prince Hotel should be declared as the
winning bidder in the partial sale of Manila Hotel
Corporation.
It is in consonance with the “Filipino First” provision of
Section 10, Article XII of the 1987 Constitution. Also,
the Constitution is the fundamental, paramount, and
supreme law of the land, it is deemed written in every
statute and contract
GSIS must sell to Manila Prince Hotel Corporation the
subject 51% of shares of the Manila Hotel Corporation
at the matching bid.
NOTE: Unless it is expressly provided that a
legislative act is necessary to enforce a constitutional
mandate, the presumption now is that all provisions of
the constitution are self-executing. If the constitutional
provisions are treated as requiring legislation instead
of self-executing, the legislature would have the
power to ignore and practically nullify the mandate of
the fundamental law.
q. What is the Foreign Investment Negative List?
Read Executive Order No. 65, Series of 2018.
“WHEREAS there is a need to formulate the Eleventh
Regular Foreign Investment Negative List, replacing
the Tenth Regular Foreign Investment Negative List,
ANTONIO
to reflect changes to List A and List B. Pursuant to
existing laws, consistent with the policy to ease
restrictions on foreign participation in certain
investment areas or activities;
NOW, THEREFORE, I, RODRIGO ROA DUTERTE,
President of the Republic of the Philippines, by virtue
of the powers vested in me by the Constitution and
existing laws, do hereby order:
SECTION 1. Eleventh Regular Foreign Investment
Negative List. Only the investment areas and/or
activities listed in the attached Eleventh Regular
Foreign Investment Negative List shall be reserved for
Philippine nationals subject to the exceptions and
conditions indicated therein.”
Republic Act No. 7042, Sec. 3(g) states that "The
term "Foreign Investments Negative List" or
"Negative List" shall mean a list of areas of
economic activity whose foreign ownership is
limited to a maximum of forty ownership is limited
to a maximum of forty percent (40%) of the equity
capital of the enterprise engaged therein."
r. Which industries are included?
List A, wherein foreign ownership is limited by
mandate of the constitution and specific laws. These
entities are the ones with:
(1) No Foreign Equity (ex. Retail trade
enterprises, cooperatives, etc.)
(2) Up to 25% Foreign Equity (ex. Private
recruitment and contracts for the
construction of defense-related structures.)
(3) Up to 30% Foreign Equity (ex. Advertising)
(4) Up to 40% Foreign Equity (ex. Ownership
of private lands, ownership of condominium
units, private radio communications network,
etc.)
List B, wherein foreign ownership is limited for
reasons of security, defense, risk to health and
morals, and protection of small and medium scale
enterprises. These entities are the ones with up to
40% foreign equity. (ex. Manufacturing, repairing,
storing, or distributing of products requiring PNP
Clearance.)

s. How is Filipino or foreign ownership
determined in a corporation?
Republic Act No. 7042, Sec. 3(a) states that “The
term "Philippine national" shall mean a citizen of the
Philippines or a domestic partnership or
association wholly owned by citizens of the
Philippines; or a corporation organized under the
laws of the Philippines of which at least sixty
percent (60%) of the capital stock outstanding and
entitled to vote is owned and held by citizens of
the Philippines; or a trustee of funds for pension or
other employee retirement or separation benefits,
where the trustee is a Philippine national and at least
sixty (60%) of the fund will accrue to the benefit of the
Philippine nationals: Provided, That where a
corporation and its non-Filipino stockholders own
stocks in a Securities and Exchange Commission
(SEC) registered enterprise, at least sixty percent
(60%) of the capital stocks outstanding and entitled to
vote of both corporations must be owned and held by
citizens of the Philippines and at least sixty percent
(60%) of the members of the Board of Directors of
both corporations must be citizens of the Philippines,
in order that the corporations shall be considered a
Philippine national.”
s.1. Control Test and the Grandfather rule.
Discuss Narra Nickel Mining and Development
Corp. v. Redmont Consolidated Mines Corp., G.R.
No. 195580, 21 April 2014.
In determining the nationality of corporations, the SEC
uses two methods:
Under the Control Test, if it is seen that at least 60
percent of a corporation or partnership’s capital is
owned by Filipinos, the corporation will be
considered of Philippine nationality.
There is no need to further trace the ownership of the
60% (or more) Filipino stockholdings of the Investing
Corporation since a corporation which is at least 60%
Filipino-owned is considered as Filipino. This test
remains the prevailing one in gauging the nationality
of corporations.
Under the Grandfather Rule, if the percentage of
Filipino ownership in the corporation or partnership is
less than 60%, only the number of shares
corresponding to such percentage shall be
counted as of Philippine nationality.
This applies only when the 60-40 Filipino-foreign
equity ownership is in “doubt” (less than 60%).
Moreover, the combined total in the investing
corporation and investee corporation must be traced
or “grandfathered” to determine the total percentage
of Filipino ownership.
NARRA NICKEL MINING AND DEVELOPMENT
CORP., TESORO MINING AND DEVELOPMENT,
INC., and MCARTHUR MINING, INC. vs. REDMONT
CONSOLIDATED MINES CORP.
FACTS: Respondent Redmont took interest in mining
and exploring certain areas of the province of
Palawan. The areas where it wanted to undertake
exploration and mining activities where already
covered by Mineral Production Sharing Agreement
(MPSA) applications of petitioners Narra, Tesoro, and
McArthur.
Petitioner McArthur, through Sara Marie Mining, Inc.
(SMMI) filed for an MPSA and Exploration Permit
(EP) with the Mines and Geo-Sciences Bureau
(MGB), Region IV-B, Office of DENR. SMMI was then
issued with MPSA-AMA-IVB-153 covering an area in
Barangay Sumbiling, Municipality of Bataraza,
Province of Palawan and EPA-IVB-44 which includes
an area in Barangay Malatagao, Bataraza, Palawan.
The MPSA and EP were then transferred to
Madridejos Mining Corporation (MMC) and assigned
to petitioner McArthur.
Petitioner Narra acquired its MPSA from Alpha
Resources and Development Corporation and Patricia
Louise Mining and Development Corporation
(PLDMC). PLDMC acquired MPSA-IV-1-12 covering
an area in barangays Calategas and San Isidro,
Municipality of Narra, Palawan. PLDMC conveyed,
transferred and/or assigned its rights over the MPSA
application in favor of Narra.
Another MPSA application of SMMI was filed with the
DENR Region IV-B, labeled as MPSA-AMA-IVB-154
(formerly EPA-IVB-47) in Barangays Malinao and
Princesa Urduja, Municipality of Narra, Province of
ANTONIO
Palawan. SMMI subsequently conveyed, transferred
and assigned its rights and interest over the said
MPSA application to Tesoro.
Redmont filed Panel of Arbitrators (POA) of DENR
three (3) separate petitions for the denial of
petitioners’ applications for MPSA:
1. MPSA-AMA-IVB-153 (SMMI to McArthur)
2. MPSA-IV-1-12 (PLDC to Narra)
3. MPSA-AMA-IVB-154 (SMMI to Tesoro)
He alleged that at least 60% of the capital stock of
McArthur, Tesoro and Narra are owned and controlled
by MBMI Resources, Inc. (MBMI), a 100% Canadian
corporation. Redmont reasoned that since MBMI is a
considerable stockholder of petitioners, it was the
driving force behind petitioners’ filing of the MPSAs
over the areas covered by applications since it knows
that it can only participate in mining activities through
corporations which are deemed Filipino citizens.
Redmont argued that given that petitioners’ capital
stocks were mostly owned by MBMI, they were
likewise disqualified from engaging in mining activities
through MPSAs, which are reserved only for Filipino
citizens.
Petitioners averred the following:
a. That they were qualified persons under
Section 3(aq) of R.A. 7942 or the Philippine
Mining Act of 1995:
"Qualified person" means any citizen of the
Philippines with capacity to contract, or a
corporation, partnership, association, or
cooperative organized or authorized for the
purpose of engaging in mining, with technical
and financial capability to undertake mineral
resources development and duly registered
in accordance with law at least sixty per cent
(60%) of the capital of which is owned by
citizens of the Philippines: Provided, That a
legally organized foreign-owned corporation
shall be deemed a qualified person for
purposes of granting an exploration permit,
financial or technical assistance agreement
or mineral processing permit.”

b. That their nationality as applicants is
immaterial because they also applied for
Financial or Technical Assistance
Agreements (FTAA) which are granted to
foreign-owned corporations.
c. That the issue on nationality should not be
raised since McArthur, Tesoro, and Narra are
in fact Philippine Nationals as 60% of their
capital is owned by citizens of the
Philippines.
d. That though MMBI owns 40% each for
PLMC (owns 5,997 shares of Narra), MMC
(owns 5,997 shares of McArthur), and SLMC
(owns 5,997 shares of Tesoro), such shares
will not make it the owner of at least 60% of
the capital stock of each of the petitioners.
e. That the best tool in determining the
nationality of the corporation is the “control
test”.
f. That the POA of DENR did not have
jurisdiction over the issues in Redmont’s
petition since they are not enumerated in
Sec. 77 of R.A. 7942.
g. That Redmont has no personality to sue
them because it has no pending claim or
application over the areas applied for by
petitioners.
ISSUE: Whether or not the petitioners’ nationality are
foreign.
HELD: Yes. In Paragraph 7 of DOJ Opinion No. 020,
Series of 2005, adopting the 1967 SEC Rules, the
control test or the liberal rule is when “shares
belonging to corporations or partnerships at least 60%
of the capital of which is owned by Filipino citizens
shall be considered as of Philippine nationality”. On
the other hand, the second part of the DOJ Opinion
which provides, "if the percentage of the Filipino
ownership in the corporation or partnership is less
than 60%, only the number of shares corresponding
to such percentage shall be counted as Philippine
nationality," pertains to the stricter, more stringent
grandfather rule.
The SC disagreed with petitioners’ constant
advocating of the application of the control test under
R.A. 7042, as amended by R.A. 8179, otherwise
known as the Foreign Investments Act (FIA), rather
than using the stricter grandfather rule. "Corporate
ANTONIO
layering" is admittedly allowed by the FIA; but if it is The Court finds that this case calls for the application
used to circumvent the Constitution and pertinent of the grandfather rule since, as ruled by the POA and
laws, then it becomes illegal. Further, the affirmed by the OP, doubt prevails and persists in
pronouncement of petitioners that the grandfather rule the corporate ownership of petitioners. Also, as found
has already been abandoned must be discredited for by the CA, doubt is present in the 60-40 Filipino
lack of basis. equity ownership of petitioners Narra, McArthur and
Tesoro, since their common investor, the 100%
Art. XII, Sec. 2 of the Constitution provides: Canadian corporation––MBMI, funded them.
Sec. 2. All lands of the public domain, In grandfathering of the corporations, the Court finds
waters, minerals, coal, petroleum and other that petitioners McArthur, Tesoro and Narra are not
mineral oils, all forces of potential energy, Filipino since MBMI, a 100% Canadian corporation,
fisheries, forests or timber, wildlife, flora and owns 60% or more of their equity interests. Such
fauna, and other natural resources are conclusion is derived from grandfathering petitioners’
owned by the State. With the exception of corporate owners, namely: MMI, SMMI and PLMDC.
agricultural lands, all other natural resources
shall not be alienated. The exploration,
development, and utilization of natural
resources shall be under the full control and
supervision of the State. The State may
directly undertake such activities, or it
may enter into co-production, joint
venture or production-sharing
agreements with Filipino citizens, or
corporations or associations at least
sixty per centum of whose capital is
owned by such citizens. Such agreements
may be for a period not exceeding
twenty-five years, renewable for not more
than twenty-five years, and under such terms
and conditions as may be provided by law.
Elementary in statutory construction is when there is
conflict between the Constitution and a statute, the
Constitution will prevail.
Moreover, based on the said SEC Rule and DOJ
Opinion, the Grandfather Rule or the second part
of the SEC Rule applies only when the 60-40
Filipino-foreign equity ownership is in doubt (i.e.,
in cases where the joint venture corporation with
Filipino and foreign stockholders with less than 60%
Filipino stockholdings [or 59%] invests in other joint
venture corporation which is either 60-40%
Filipino-alien or the 59% less Filipino). Stated
differently, where the 60-40 Filipino-foreign equity
ownership is not in doubt, the Grandfather Rule will
not apply.

2nd Week - Retail Trade Laws
a. Read Republic Act No. 8762 or the Retail Trade
Liberalization Act of 2000 and its Implementing
Rules and Regulations from the DTI.
LINK: R.A. 8762 (lawphil.net)
This Act shall be known as the "Retail Trade
Liberalization Act of 2000” It is the policy of the
State to promote consumer welfare in attracting
promoting and welcoming productive investment
that will bring down price for the Filipino
consumer, create more jobs, promote tourism,
assist small manufacturers, stimulate economic
growth and enable Philippine goods and services
to become globally competitive through the
liberalization of the become globally competitive
through the liberalization of the retail trade sector.
b. Study the history of the ban on foreigners from
engaging in retail trade in the Philippines.
Throughout the 20th Century, the 1935
Commonwealth Constitution started to limit the
areas of economic activity in which aliens could
participate because in those times, foreign
participation in the Philippine economy was a
controversial issue.
Operation of public utilities, exploitation of natural
resources, and ownership of public lands were
limited to Filipinos or corporations controlled by
Filipinos. Control of banking and credit was limited
to Filipinos with the passage of the General
Banking Act in 1948, and the Retail Nationalization
Act of 1954 restricted ownership in retail trade to
Filipinos.
Except in specifically designated areas, foreigners
could invest only through joint ventures with
Filipino capitalists. Legal decisions altered the
interpretation of various restrictive measures, as did
Marcos decrees during the martial law era, but the
basic restrictions remained and were reaffirmed in
the 1987 Constitution. Constraints on foreigners
also were aimed at non-Filipino residents in the
Philippines.
The Securities and Exchange Commission ruled
in September 1990 that firms engaging in
business in areas of the economy that had been
at least partially nationalized could not employ
non-Filipinos in management positions.
Liberalization of rules limiting areas of foreign
investment was being considered in the
Philippine Congress in early 1991.
- The old Retail Trade Nationalization Law,
which nationalized the retail trade system
and which allowed only Filipino citizens and
juridical entities which are 100% owned by
Filipinos to engage in retail trade, sprang
“from deep, militant, and positive nationalistic
impulse” which sought to “protect citizen and
country from the alien retailer.”
- Conversely, RTLA 2000 now liberalizes the
retail trade industry to further the declared
policy of the State “to promote consumer
welfare in attracting, promoting and
welcoming productive investments that will
bring down prices for the Filipino consumer,
create more jobs, promote tourism, assist
small manufacturers, stimulate economic
growth and enable Philippine goods and
services to become globally competitive
through the liberalization of the retail trade
sector.”
- Pursuant to this policy, RTLA 2000
liberalized the Philippine retail industry to
encourage Filipino and foreign investors to
forge an efficient and competitive retail trade
sector in the interest of empowering the
Filipino consumer through lower prices,
higher quality goods, better services and
wider choices.
b.1. Read Republic Act No. 1180
R.A. No. 1180
An Act to Regulate the Retail Business
Be it enacted by the Senate and House of
Representatives of the Philippine Congress
Assembled:
ANTONIO
Section 1. No person who is not a citizen of the
Philippines, and no association, partnership, or
corporation the capital of which is not wholly
owned by citizens of the Philippines, shall engage
directly or indirectly in the retail business:
Provided, That a person who is not a citizen of the
Philippines, or an association, partnership, or
corporation not wholly owned by citizens of the
Philippines, which is actually engaged in the said
business on May, fifteen, nineteen hundred and
fifty-four (MAY 15, 1944), shall be entitled to continue
to engage therein, unless its license is forfeited in
accordance herewith, until his death or voluntary
retirement from said business, in the case of a natural
person, and for a period of ten year from the date of
the approval of this Act or until the expiration of the
term of the association or partnership or of the
corporate existence of the corporation, whichever
event comes first, in the case of juridical persons.
Failure to renew a license to engage in retail business
shall be considered voluntary retirement.
Nothing contained in this Act shall in any way impair
or abridge whatever rights may be granted to citizens
and juridical entities of the United States of America
under the Executive Agreement signed on July fourth,
nineteen hundred and forty-six, between that country
and the Republic of the Philippines.
The license of any person who is not a citizen of
the Philippines and of any association,
partnership or corporation not wholly owned by
citizens of the Philippines to engage in retail
business, shall be forfeited for any violation of
any provision of laws on nationalization,
economic control, weights and measures, and
labor and other laws relating to trade, commerce
and industry.
No license shall be issued to any person who is
not a citizen of the Philippines and to any
association, partnership or corporation not wholly
owned by citizens of the Philippines, actually
engaged in the retail business, to establish or
open additional stores or branches for retail
business.
Section 2. Every person who is not a citizen of the
Philippines and every association, partnership or
corporation not wholly owned by citizens of the

Philippines, engaged in the retail business, shall,
within ninety days after the approval of this Act
and within the first fifteen days of January every
year thereafter, present for registration with the
municipal or city treasurer a verified statement
containing the names, addresses, and nationality of
the owners, partners or stockholders, the nature of
the retail business it is engaged in, the amount of its
assets and liabilities, the names of its principal
officials, and such other related data as may be
required by the Secretary of Commerce and Industry.
Section 3. In case of death of a person who is not
a citizen of the Philippines and who is entitled to
engage in retail business under the provisions of
this Act, his or her heir, administrator or executor
is entitled to continue with such retail business
only for the purpose of liquidation for a period of
not more than six months after such death.
Section 4. As used in this Act, the term "retail
business" shall mean any act, occupation or
calling of habitually selling direct to the general
public merchandise, commodities or goods for
consumption, but shall not include:
(a) a manufacturer, processor, laborer, or worker
selling to the general public the products
manufactured, processed or produced by
him if his capital does not exceed five
thousand pesos, or
(b) a farmer or agriculturist selling the project of
his farm.
Section 5. Every license to engage in retail
business issued in favor of any citizen of the
Philippines or of any association, partnership or
corporation wholly owned by citizens of the
Philippines shall be conclusive evidence of the
ownership by such citizen, association,
partnership or corporation of the business for
which the license was issued, except as against
the Government or the State.
Section 6. Any violation of this Act shall be
punished by imprisonment for not less than three
years and not more than five years and by a fine
of not less than three thousand pesos and not
more than five thousand pesos. In the case of
associations, partnerships or corporations, the penalty
shall be imposed upon its partners, president,
directors, managers, and other officers responsible for
the violation. If the offender is not a citizen of the
Philippines, he shall be deported immediately after
service of sentence. If the offender is a public officer
or employee, he shall, in addition to the penalty
prescribed herein, be dismissed from the public
service, perpetually disenfranchised, and perpetually
disqualified from holding any public office.
Section 7. This Act shall take effect upon its approval.
b.1.a. Discuss Ichong v. Hernandez, G.R. No.
L-7995, 31 May 1957.
Doctrine: Inchong v. Hernandez recognized the
importance of retail trade in the national economy,
thus: “Under modern conditions and standards of
living, in which man’s needs have multiplied and
diversified to unlimited extents and proportions, the
retailer comes as essential as the producer, because
thru him the infinite variety of articles, goods and
commodities needed for daily life are placed within
the easy reach of consumers. Retail dealers perform
the functions of capillaries in the human body, thru
which all the needed food and supplies are ministered
to members of the communities comprising the
nation. … The retailer, therefore, from the lowly
peddler, the owner of a small sari-sari store, to the
operator of a department store or a supermarket is so
much a part of day-to-day existence.”
Facts: Lao Ichong is a Chinese businessman who
entered the country to take advantage of business
opportunities particularly in the retail business. For
some time he and his fellow Chinese businessmen
enjoyed a “monopoly” in the local market in Pasay.
Until in June 1954 when Congress passed the RA
1180 or the Retail Trade Nationalization Act the
purpose of which is to reserve to Filipinos the right to
engage in the retail business. Ichong then petitioned
for the nullification of the said Act on the ground that it
contravened several treaties concluded by the RP
which, according to him, violates the equal protection
clause (pacta sund servanda). He said that as a
Chinese businessman engaged in the business here
in the country who helps in the income generation of
the country he should be given equal opportunity.
ANTONIO
Petitioner, also on behalf of other alien residents’
corporations and partnerships, brought this action to
obtain a judicial declaration that RA 1180 is
unconstitutional. Petitioner contends, among others,
that said act violates the equal protection of laws and
that it violates the treaty of the Philippines with China.
Solicitor General contends that the act was a valid
exercise of the police power and that not a single
treaty was infringed by said act.
Issue: Whether RA 1180 violates the equal protection
of laws.
Held: The equal protection of the law clause is
against undue favor and individual or class privilege,
as well as hostile discrimination on the oppression of
inequality. The real question at hand is whether or not
the exclusion of the future aliens for the retail trade is
unreasonable. **The equal protection clause “is not
infringed by a specified class if it applies to all
persons within such class and reasonable grounds
exist for making a distinction between those who fall
within such class and those who do not”. Aliens are
under no special constitutional protection which
forbids a classification otherwise justified simply
because the limitation of the class falls along the
lines of nationality. The difference in status between
citizens and aliens constitute a basis for reasonable
classification in the exercise of police power.
c. Why is there a need to restrict participation of
foreigners in retail trade activities in the
Philippines?
The State has an interest in preventing alien control of
the retail trade. The Constitution prohibits foreign
powers or interests from maneuvering our
economic policies and ensures that Filipinos are
given preference in all areas of development.
The control and regulation of trade in the interest of
the public welfare is of course an exercise of the
police power of the State.
Also, according to Art. XII of the 1987 Constitution
the ideals of economic nationalism are (1) by
expressing preference in favor of qualified Filipinos in
the grant of rights, privileges and concessions
covering the national economy and patrimony and in

the of Filipino labor, domestic materials and
locally-produced goods; use (2) by mandating the
State to adopt measures that help make them
competitive; and (3) by requiring the State to develop
a self reliant and independent national economy
effectively controlled by Filipinos.
d. Is RA 8762 constitutional?
Yes. The control and regulation of trade in the
interest of the public welfare is an exercise of the
police power of the State.
According to the Court in Espina v. Zamora, there is
no showing that the law has contravened any
constitutional mandate. The Court is not convinced
that the implementation of the law would eventually
lead to alien control of the retail trade argument to
support its thesis.
The law itself has provided strict safeguards on
foreign participation in that business. Thus,
Here, to the extent that R.A. 8762, the Retail Trade
Liberalization Act, lessens the restraint on the
foreigners’ right to property or to engage in an
ordinarily lawful business, it cannot be said that the
law amounts to a denial of the Filipinos’ right to
property and to due process of law. Filipinos
continue to have the right to engage in the kinds
of retail business to which the law in question has
permitted the entry of foreign investors.
d.1. Discuss Espina v. Zamora, G.R. No. 143855,
21 September 2010.
On October 11, 2000 petitioners, all members of the
House of Representatives, filed the present petition,
assailing the constitutionality of the newly signed
Republic Act No. 8762 by Pres. Erap, also known as
the Retail Trade Liberalization Act of 2000 which
expressly repealed Republic Act No. 1180, which
absolutely prohibited foreign nationals from engaging
in the retail trade business. The law also allows
natural-born Filipino citizens, who had lost their
citizenship and now reside in the Philippines, to
engage in the retail trade business with the same
rights as Filipino citizens.
The petitioners argue:
First, the law runs afoul of Sections 9, 19, and 20 of
Article II of the Constitution which enjoins the State to
place the national economy under the control of
Filipinos to achieve equal distribution of opportunities,
promote industrialization and full employment, and
protect Filipino enterprise against unfair competition
and trade policies
Second, the implementation of R.A. 8762 would lead
to alien control of the retail trade, which together with
alien dominance of other areas of business, would
result in the loss of effective Filipino control of the
economy.
Third, foreign retailers like Walmart and K-Mart would
crush Filipino retailers and sari-sari store vendors,
destroy self-employment, and bring about
unemployment.
Fourth, the World Bank-International Monetary Fund
had improperly imposed the passage of R.A. 8762 on
the government as a condition for the release of
certain loans.
Fifth, there is a clear and present danger that the law
would promote monopolies or combinations in
restraint of trade.
Respondents countered that petitioners have no legal
standing to file the petition. They cannot invoke the
fact that they are taxpayers since the law does not
involve the disbursement of public funds. Nor can
they invoke the fact that they are members of
Congress since they made no claim that the law
infringes on their right as legislators.
Additionally, respondents argue that the petition does
not involve any justiciable controversy. Petitioners of
course claim that, as members of Congress, they
represent the small retail vendors in their respective
districts but the petition does not allege that the
subject law violates the rights of those vendors.
Finally, respondents aver that petitioners have failed
to overcome the presumption of constitutionality of the
law. Indeed, they could not specify how the new law
violates the constitutional provisions they cite.
ANTONIO
Simplified, the case presents two issues:
a.) Whether or not petitioner lawmakers have the
legal standing to challenge the constitutionality of the
law; and b.) Whether or not the law is
unconstitutional.
One - The long settled rule is that he who challenges
the validity of a law must have a standing to do so.
Legal standing or locus standi refers to the right of a
party to come to a court of justice and make such
challenge. More particularly, standing refers to his
personal and substantial interest in that he has
suffered or will suffer direct injury as a result of the
passage of that law. To put it another way, he must
show that he has been or is about to be denied some
right or privilege to which he is lawfully entitled or that
he is about to be subjected to some burdens or
penalties by reason of the law he complains of.
Here, there is no clear showing that the
implementation of the Retail Trade Liberalization Act
prejudices petitioners or inflicts damages on them,
either as taxpayers or legislators. Still the Court will
resolve the question they raised since the rule on
standing can be relaxed for nontraditional plaintiffs
like ordinary citizens, taxpayers, and legislators when
as in this case the public interest so requires or the
matter is of transcendental importance, of overarching
significance to society, or of paramount public interest.
Two - Petitioners mainly argue that the law violates
the mandate of the 1987 Constitution for the State to
develop a self-reliant and independent national
economy effectively controlled by Filipinos. They
invoke provisions of the Declaration of Principles and
State Principles under Art. II of the Constitution.
Petitioners also invoke the provisions of the National
Economy and Patrimony under Article XII of the 1987
Constitution.
But, as the Court explained in Tañada Angara, the
provisions of Article of the 1987 Constitution, the
declarations of principles and state policies, are not
self-executing. Legislative failure to pursue such
policies cannot give rise to a cause of action in the
courts.

The Court further explained in Tañada that Article XII
of the 1987 Constitution lays down the ideals of
economic nationalism (1) by expressing preference in
favor of qualified Filipinos in the grant of rights,
privileges and concessions covering the national
economy and patrimony and in the of Filipino labor,
domestic materials and locally-produced goods; use
(2) by mandating the State to adopt measures that
help make them competitive; and (3) by requiring the
State to develop a self reliant and independent
national economy effectively controlled by Filipinos.
Indeed, the 1987 Constitution takes into account the
realities of the outside world as it requires the pursuit
of a trade policy that serves the general welfare and
utilizes all forms and arrangements of exchange on
the basis of equality and reciprocity and speaks of
industries which are competitive in both domestic and
foreign markets as well as of the protection of Filipino
enterprises against unfair foreign competition and
trade practices. Thus, while the Constitution
mandates a bias in favor of Filipino goods,
services, labor and enterprises, it also recognizes
the need for business exchange with the rest of
the world on the bases of equality and reciprocity
and limits protection of Filipino enterprises only
against foreign competition and trade practices
that are unfair.
In other words, the 1987 Constitution does not rule
out the entry of foreign investments, goods, and
services. While it does not encourage their unlimited
entry into the country, it does not prohibit them either.
In fact, it allows an exchange on the basis of equality
and reciprocity, frowning only on foreign competition
that is unfair. The key, as in all economies in the
world, is to strike a balance between protecting local
businesses and allowing the entry of foreign
investments and services.
Here, to the extent that R.A. 8762, the Retail Trade
Liberalization Act, lessens the restraint on the
foreigners’ right to property or to engage in an
ordinarily lawful business, it cannot be said that the
law amounts to a denial of the Filipinos’ right to
property and to due process of law. Filipinos
continue to have the right to engage in the kinds
of retail business to which the law in question has
permitted the entry of foreign investors.
e. Discuss the state policy stated in RA 8762.
SEC. 2. Declaration of Policy. – It is the policy of
the State to promote consumer welfare in
attracting, promoting and welcoming productive
investments that will bring down prices for the Filipino
consumer, create more jobs, promote tourism, assist
small manufacturers, stimulate economic growth and
enable Philippine goods and services to become
globally competitive through the liberalization of the
retail trade sector. Pursuant to this policy, the
Philippine retail industry is hereby liberalized to
encourage Filipino and foreign investors to forge an
efficient and competitive retail trade section in the
interest of empowering the Filipino consumer through
lower prices, higher quality goods, better services and
wider choices.
f. What is retail trade?
Under the RTLA, “Retail trade” shall mean any act,
occupation or calling of habitually selling direct to
the general public merchandise, commodities or
good for consumption --
g. What are the sale transactions not considered
as a retail trade activity?
-- but the restriction of this law shall not apply to the
following:
(a) Sales by manufacturer, processor, laborer, or
worker, to the general public the products
manufactured, processed or products by him
if his capital does not exceed One hundred
thousand pesos (100,000.00);
(b) Sales by a farmer or agriculturist selling the
products of his farm;
(c) Sales in restaurant operations by a hotel
owner or inn-keeper irrespective of the
amount capital: provided, that the restaurant
is incidental to the hotel business; and
(d) Sales which are limited only to products
manufactured, processed or assembled by a
manufacturer, processed or assembled by a
manufacturer through a single outlet,
irrespective of capitalization.
h. What are high end or luxury goods?
ANTONIO
“High-end or luxury goods” shall refer to goods
which are not necessary for life maintenance and
whose demand is generated in large part by the
higher income groups. Luxury goods shall include,
but are not limited to products such as; jewelry,
branded or designer clothing and footwear, wearing
apparel,leisure and sporting goods, electronics and
other personal effects.
i. Who is a natural born Filipino citizen?
1987 Constitution of the Republic of the Philippines
Article IV Citizenship :
Section 1. The following are citizens of the
Philippines:
1) Those who are citizens of the Philippines at
the time of the adoption of this
Constitution;
2) Those whose fathers or mothers are
citizens of the Philippines;
3) Those born before January 17, 1973, of
Filipino mothers, who elect Philippine
citizenship upon reaching the age of
majority; and
4) Those who are naturalized in accordance
with law.
* Section 2. Natural-born citizens are those who
are citizens of the Philippines from birth without
having to perform any act to acquire or perfect
their Philippine citizenship. Those who elect
Philippine citizenship in accordance with paragraph
(3), Section 1 hereof shall be deemed natural-born
citizens.
NOTE: Section 4 of RA 8762. Treatment of Natural
Born Citizen Who Has Lost His Philippine
Citizenship. - A natural-born citizen of the
Philippines who resides in the Philippines shall be
granted the same rights as Filipino citizens for
purposes of this Act.
j. Who is considered a resident former
natural-born Filipino citizen?
Section 1 of Rule I of the Implementing Rules and
Regulations of RA 8762 states that a former natural

born Filipino citizen is deemed “residing in the
Philippines” if he physically stays in the country for
at least one hundred eighty (180) days within a
given year (6 mos).
k. Discuss foreign equity participation: Categories
A, B, C, and D.
Foreign-owned partnerships, associations and
corporation formed and organized under the laws
of the Philippines may, upon registration with the
Securities and Exchange Commission (SEC) and the
Department of Trade and Industry (DTI), or in case of
foreign owned single proprietorships, with the DTI,
engage or invest in the retail trade business, subject
to the following categories.
Category A - Enterprises with paid-up capital of the
equivalent in Philippine Peso of the then two million
five hundred thousand US dollars (US$2,500,000.00)
shall be reserved exclusively for Filipino citizens and
corporations wholly owned by Filipino citizens.
Category B - Enterprises with a minimum paid-up
capital of the equivalent in Philippine Pesos of two
million five hundred thousand US dollar
(US$2,500,000.00) but less than Seven million five
hundred thousand US dollars (US$7,500,000.00) may
be wholly owned by foreigners except for the first two
(2) years after the effectivity of this law wherein
foreign participation shall be limited to not more than
sixty percent (60%) of total equity.
Category C - Enterprises with a paid-up capital of the
equivalent in Philippine Pesos of Seven million five
hundred thousand US dollars (US$7,500,000.00), or
more may be wholly owned by foreigners: Provided,
however, that in no case shall the investments for
establishing a store investments for establishing a
store in Categories B and C be less than the
equivalent in Philippine peso of Eight hundred thirty
thousand US dollars (US$830,000.00)
Category D - Enterprises specializing in high-end or
luxury products with a paid-up capital of the
equivalent in Philippine Pesos of Two hundred fifty
thousand US dollars (US$250,000.00) per store may
be wholly owned by foreigners.
The foreign investor shall be required to maintain in
the Philippines the full amount of the prescribed
minimum capital unless the foreign investor has
notified the SEC and the DTI of its intention to
repatriate its capital and cease operations in the
Philippines. The actual use in Philippine operations of
the inwardly remitted minimum capital requirement
shall be monitored by the SEC.
Failure to maintain the full amount of the prescribed
minimum capital prior to notification of the SEC and
the DTI, shall subject the foreign investor to penalties
or restrictions on any future trading activities/business
in the Philippines.
Foreign retail stores shall secure a certification from
the Bangko Sentral ng Pilipinas (BSP) and the DTI,
which will verify or confirm inward remittance of the
minimum required capital investments.
l. What is paid-up capital?
“Paid-Up Capital” shall mean the total investment
in a business that has been paid in a corporation
or partnership or invested in a single
proprietorship, which may be in cash or property.
It shall also refer to assigned capital in the case of
foreign corporations (Sec.1(l), Rule 1, IRR).
m. Does the requirement of a paid-up capital
contradict the Revised Corporation Code, which
does not require a minimum capital stock for
stock corporations?
SEC. 12. Minimum Capital Stock Not Required of
Stock Corporations. – Stock corporations shall not
be required to have a minimum capital stock, except
as otherwise specifically provided by special law.
NO. The requirement does not contradict the Revised
Corporation Code. As provided by Sec. 1, Rule III of
the IRR, an investor may invest in a retail trade
business without organizing a corporation,
partnership, or association under Philippine laws.
The paid-up capital values provided serves as a guide
on which retail trade business a foreign may or may
not invest. Contrary, Section 12 of the RCC deals with
no required minimum capital stock for the
incorporation and organization of private corporations.
ANTONIO
Furthermore, Sec. 12 stated that it can be overruled if
otherwise specifically provided by special laws.
n. What are the requirements regarding
maintenance of the capital stated in Section 5 of
RA 8762?
Section 5. Foreign Equity Participation. The foreign
investor shall be required to maintain in the
Philippines the full amount of the prescribed
minimum capital unless the foreign investor has
notified the SEC and the DTI of its intention to
repatriate its capital and cease operations in the
Philippines. The actual use in Philippine operations
of the inwardly remitted minimum capital requirement
shall be monitored by the SEC.
Failure to maintain the full amount of the prescribed
minimum capital prior to notification of the SEC and
the DTI, shall subject the foreign investor to
penalties or restrictions on any future trading
activities/business in the Philippines.
Foreign retail stores shall secure a certification from
the Bangko Sentral ng Pilipinas (BSP) and the DTI,
which will verify or confirm inward remittance of the
minimum required capital investments.
o. What is a retail store?
Section 1 (m) of Rule I of the Implementing Rules and
Regulations of RA 8762.
(m) “Retail Store” shall mean the company that
owns the retail store and/or the physical location,
such as a shop, where goods are sold on a retail
basis. It includes the administrative offices,
warehouse, preparation facility or storage facility of
such goods, regardless of whether or not it is adjacent
to such outlets.
p. What are the applicable rules regarding
acquisition of shares of stock of local retailers by
foreign investors?
Based on Section 6 of R.A. No. 8762
SEC. 6. Foreign Investors Acquiring Shares of Stock
of Local Retailers. - Foreign investors acquiring
shares from existing retail stores whether or not

publicly listed whose net worth is in excess of the
peso equivalent of Two million five hundred thousand
US dollars (U$2,500,000.00) may purchase only up
to a maximum of sixty percent (60%) of the equity
thereof within the first two (2) years from the
effectivity of this Act and thereafter, they may
acquire the remaining percentage consistent with
the allowable foreign participation as herein
provided.
q. What is a public offering of shares of stock?
Based on Section 2, Rule IX of R.A. No. 8762 IRR
-SEC. 2. Public Offering of Shares of Stock. – All
registered retail trade enterprises under
Categories B and C in which foreign ownership
excess eighty percent (80%) of equity shall offer a
minimum of thirty percent (30%) of their equity to
the public through any stock exchange in the
Philippines within eight (8) years from their start
of operations, provided that with respect to existing
enterprises as of March 25, 2000, the period shall run
from the date of registration of the retail enterprise
with the DTI under Rule IV thereof.
r. Where will the shares of stock be offered
publicly?
According to Sec. 7 of RA No. 8762 and Sec. 2, Rule
IX of its IRR, the shares of stock shall be offered
through any stock exchange in the Philippines
within eight (8) years from their start of
operations.
s. Who are required to make a public offering?
According to Sec. 7 of RA No. 8762 and Sec. 2, Rule
IX of its IRR, all registered retail trade enterprises
under Categories B and C in which foreign
ownership excess eighty percent (80%) of equity
are required to make a public offering.
t. What is the effect of the requirement of offering
shares of stock to the public on the foreign equity
of the retailer?
The requirement to base the public offering of the
share of stocks on the foreign equity of the retailers is
to ensure that no Foreign Investor will be able to
take advantage and out-source Filipino retailers. It
also encourages Filipino and foreign investors to
forge an efficient and competitive retail trade section
in the interest of empowering the Filipino consumer
through lower prices, higher quality goods, better
services and wider choices.
t.1. Read Sections 6, 7, 8, and 9 of Republic Act
No. 11232 (Revised Corporation Code).
Sec. 6. Classification of shares. - The shares of
stock of stock corporations may be divided into
classes or series of shares, or both, any of which
classes or series of shares may have such rights,
privileges or restrictions as may be stated in the
articles of incorporation: Provided, That no share may
be deprived of voting rights except those classified
and issued as "preferred" or "redeemable" shares,
unless otherwise provided in this Code: Provided,
further, That there shall always be a class or series of
shares which have complete voting rights. Any or all
of the shares or series of shares may have a par
value or have no par value as may be provided for in
the articles of incorporation: Provided, however, That
banks, trust companies, insurance companies, public
utilities, and building and loan associations shall not
be permitted to issue no-par value shares of stock.
Preferred shares of stock issued by any corporation
may be given preference in the distribution of the
assets of the corporation in case of liquidation and in
the distribution of dividends, or such other
preferences as may be stated in the articles of
incorporation which are not violative of the provisions
of this Code: Provided, That preferred shares of stock
may be issued only with a stated par value. The board
of directors, where authorized in the articles of
incorporation, may fix the terms and conditions of
preferred shares of stock or any series thereof:
Provided, That such terms and conditions shall be
effective upon the filing of a certificate thereof with the
Securities and Exchange Commission.
Shares of capital stock issued without par value shall
be deemed fully paid and non-assessable and the
holder of such shares shall not be liable to the
corporation or to its creditors in respect thereto:
Provided; That shares without par value may not be
issued for a consideration less than the value of five
(P5.00) pesos per share: Provided, further, That the
ANTONIO
entire consideration received by the corporation for its
no-par value shares shall be treated as capital and
shall not be available for distribution as dividends.
A corporation may, furthermore, classify its
shares for the purpose of insuring compliance
with constitutional or legal requirements.
Except as otherwise provided in the articles of
incorporation and stated in the certificate of stock,
each share shall be equal in all respects to every
other share.
Where the articles of incorporation provide for
non-voting shares in the cases allowed by this Code,
the holders of such shares shall nevertheless be
entitled to vote on the following matters:
1. Amendment of the articles of incorporation;
2. Adoption and amendment of by-laws;
3. Sale, lease, exchange, mortgage, pledge or
other disposition of all or substantially all of
the corporate property;
4. Incurring, creating or increasing bonded
indebtedness;
5. Increase or decrease of capital stock;
6. Merger or consolidation of the corporation
with another corporation or other
corporations;
7. Investment of corporate funds in another
corporation or business in accordance with
this Code; and
8. Dissolution of the corporation.
Except as provided in the immediately preceding
paragraph, the vote necessary to approve a particular
corporate act as provided in this Code shall be
deemed to refer only to stocks with voting rights.
Sec. 7. Founders' shares. - Founders' shares
classified as such in the articles of incorporation may
be given certain rights and privileges not enjoyed by
the owners of other stocks, provided that where the
exclusive right to vote and be voted for in the
election of directors is granted, it must be for a
limited period not to exceed five (5) years subject to
the approval of the Securities and Exchange
Commission. The five-year period shall commence

from the date of the aforesaid approval by the
Securities and Exchange Commission.
Sec. 8. Redeemable shares. - Redeemable shares
may be issued by the corporation when expressly so
provided in the articles of incorporation. They may be
purchased or taken up by the corporation upon
the expiration of a fixed period, regardless of the
existence of unrestricted retained earnings in the
books of the corporation, and upon such other
terms and conditions as may be stated in the
articles of incorporation, which terms and
conditions must also be stated in the certificate of
stock representing said shares.
Sec. 9. Treasury shares. - Treasury shares are
shares of stock which have been issued and fully
paid for, but subsequently reacquired by the
issuing corporation by purchase, redemption,
donation or through some other lawful means.
Such shares may again be disposed of for a
reasonable price fixed by the board of directors.
t.2. Discuss Power to Increase Capital Stock (Sec.
37) and Power to Deny Preemptive Right (Sec. 38)
as stated in the Revised Corporation Code.
SEC. 37. Power to Increase or Decrease Capital
Stock; Incur, Create or Increase Bonded
Indebtedness. – No corporation shall increase or
decrease its capital stock or incur, create or
increase any bonded indebtedness unless
approved by a majority vote of the board of
directors and by two thirds (2/3) of the
outstanding capital stock at a stockholders’
meeting duly called for the purpose. Written notice
of the time and place of the stockholders’ meeting and
the purpose for said meeting must be sent to the
stockholders at their places of residence as shown in
the books of the corporation and served on the
stockholders personally, or through electronic means
recognized in the corporation’s bylaws and/or the
Commission’s rules as a valid mode for service of
notices.
A certificate must be signed by a majority of the
directors of the corporation and countersigned by the
chairperson and secretary of the stockholders’
meeting, setting forth:
a) That the requirements of this section have
been complied with;
b) The amount of the increase or decrease of
the capital stock;
c) In case of an increase of the capital stock,
the amount of capital stock or number of
shares of no-par stock thereof actually
subscribed, the names, nationalities and
addresses of the persons subscribing, the
amount of capital stock or number of no-par
stock subscribed by each, and the amount
paid by each on the subscription in cash or
property, or the amount of capital stock or
number of shares of no-par stock allotted to
each stockholder if such increase is for the
purpose of making effective stock dividend
therefor authorized;
d) Any bonded indebtedness to be incurred,
created or increased;
e) The amount of stock represented at the
meeting; and f) The vote authorizing the
increase or decrease of the capital stock, or
the incurring, creating or increasing of any
bonded indebtedness.
Any increase or decrease in the capital stock or the
incurring, creating or increasing of any bonded
indebtedness shall require prior approval of the
Commission, and where appropriate, of the Philippine
Competition Commission. The application with the
Commission shall be made within six (6) months from
the date of approval of the board of directors and
stockholders, which period may be extended for
justifiable reasons.
Copies of the certificate shall be kept on file in the
office of the corporation and filed with the Commission
and attached to the original articles of incorporation.
After approval by the Commission and the issuance
by the Commission of its certificate of filing, the
capital stock shall be deemed increased or decreased
and the incurring, creating or increasing of any
bonded indebtedness authorized, as the certificate of
filing may declare: Provided, That the Commission
shall not accept for filing any certificate of increase of
capital stock unless accompanied by a sworn
statement of the treasurer of the corporation lawfully
holding office at the time of the filing of the certificate,
showing that at least twenty-five percent (25%) of the
increase in capital stock has been subscribed and
ANTONIO
that at least twenty-five percent (25%) of the amount
subscribed has been paid in actual cash to the
corporation or that property, the valuation of which is
equal to twenty-five percent (25%) of the subscription,
has been transferred to the corporation: Provided,
further, That no decrease in capital stock shall be
approved by the Commission if its effect shall
prejudice the rights of corporate creditors.
Nonstock corporations may incur, create or increase
bonded indebtedness when approved by a majority of
the board of trustees and of at least two-thirds (2/3) of
the members in a meeting duly called for the purpose.
Bonds issued by a corporation shall be registered with
the Commission, which shall have the authority to
determine the sufficiency of the terms thereof.
SEC. 38. Power to Deny Preemptive Right. – All
stockholders of a stock corporation shall enjoy
preemptive right to subscribe to all issues or
disposition of shares of any class, in proportion
to their respective shareholdings, unless such
right is denied by the articles of incorporation or
an amendment thereto: Provided, that such
preemptive right shall not extend to shares issued in
compliance with laws requiring stock offerings or
minimum stock ownership by the public; or to shares
issued in good faith with the approval of the
stockholders representing two-thirds (2/3) of the
outstanding capital stock, in exchange for property
needed for corporate purposes or in payment of a
previously contracted debt.
u. Discuss the qualifications of foreign retailers.
Based on Sec. 1, Rule IV of the IRR of R.A. No. 8762:
Section 1. Prequalification Requirements. – Before
a foreign retailer is allowed to establish or organize an
entity that will engage in the retail trade business or
invest in a retail store in the Philippines, it must
possess all of the following qualifications:
a) A minimum of Two hundred million US
dollars (US$200,000,000.00) net worth of the
registrant corporation for Categories B and
C, and Fifty million US dollars
(US$50,000,000.00) net worth of the
registrant corporation for Category D;

b) Five (5) retailing branches or franchise in
operation anywhere around the world unless
such retailer has at least one (1) store
capitalized at a minimum of Twenty-five
million US dollars (US$25,000,000.00);
c) Five (5) year track record in retailing; and
d) Nationals from, or juridical entities formed or
incorporated in countries which allow the
entry of Filipino retailers shall be allowed to
engage in retail trade in the Philippines.
For purposes of determining compliance with above
requirements, the net worth, existence of branches
and franchises, track record as well as the domiciles
of the registrant’s parent company, its subsidiaries, its
affiliate companies as well as their predecessors shall
be considered. Moreover, for publicly traded
companies, net worth may be determined by the
number of outstanding shares multiplied by the
shares’ annual average trading price.
v. Discuss promotion of locally manufactured
products. How much of the inventory should be
products made in the Philippines?
Based on Sec. 3, Rule IX of the IRR of R.A. No. 8762:
Section 3. Promotion of Locally Manufactured
Products. – For ten (10) years from March 25, 2000,
at any given time, locally manufactured goods
should account for at least thirty percent (30%) of
the aggregate cost of the stock inventory situated in
the Philippines of foreign retailers falling under
Categories B and C and ten percent (10%) for
Category D.
All registered foreign retailers shall be required to
maintain books of accounts showing the
inventory situated in the Philippines and its origin
at all time and these books may be examined at any
time, by the duly authorized representative of the
Department of Trade and Industry.
Furthermore, these registered foreign retailers
shall be required to submit quarterly statements
under oath certifying the ratio of their local and
imported inventory.
w. What are the prohibited activities of qualified
foreign retailers?
Based on Rule VIII of the IRR of R.A. No. 8762:
Section 1. Prohibited Modes of Retailing. –
Qualified foreign retailers shall not be allowed to
engage in certain retailing activities outside their
accredited stores through the use of mobile or
rolling stores or carts, the use of sales
representatives, door-to-door selling, restaurants
and sari-sari stores and such other similar
retailing activities.
x. What is the penalty imposed on any person
guilty of violating any provision of RA 8762?
SEC. 12. Penalty Clause. - Any person who shall be
found guilty of violation of any provision of this
Act shall be punished by imprisonment of not less
than six (6) years and one (1) day but not more
than eight (8) years, and a fine of not less than
One million pesos (P1,000,000.00) but not more
than Twenty million pesos (P20,000,000.00). In the
case of associations, partnerships, or corporations,
the penalty shall be imposed upon its partners,
president, directors, manager and other officers
responsible for the violation. If the offender is not a
citizen of the Philippines, he shall be deported
immediately after service of sentence. If the Filipino
offender is a public officer or employee, he shall, in
addition to the penalty prescribed herein, suffer
dismissal and permanent disqualification from public
office.
ANTONIO
3rd Week - Retail Trade Laws
4th Week - Retail Trade Laws
a. What is Article 1458?
By the contract of sale one of the contracting parties
obliges himself to transfer the ownership of and
deliver a determinate thing, and the other to pay
therefor a price certain in money or its equivalent
A contract of sale may be absolute or conditional
b. What is a contract of sale?
The contract of sale is an agreement whereby one of
the parties (called the seller or vendor) obligates
himself to deliver something to the other (called the
buyer or purchaser or vendee) who, on his part, binds
himself to pay therefor a sum of money or its
equivalent (known as the price). (PARAS)
- A contract of sale, as defined in the Civil Code, is a
contract where one of the parties obligates himself to
transfer the ownership of and to deliver a determinate
thing to the other or others who shall pay therefore a
sum certain in money or its equivalent. (PINEDA)
- A contract of sale is an agreement whereby a party
called the seller or vendor obligates himself to deliver
and transfer the ownership of a determinate thing to
another party called the buyer or vendee who in turn
obligates himself to pay therefore, a price certain in
money or its equivalent to the former. (PINEDA)
c. What are the stages of a contract of sale?
1. Generation or negotiation - A sales negotiation is
a strategic discussion (or series of discussions)
between buyer and seller that ideally leads to a deal
being closed. The main goal of the negotiation
process is to reach an agreement that is fit to the
parties’ interests
2. perfection – meeting of minds - refers to the
comprehension and mutual agreement of all
obligations within a contract. (It is essential that all

elements of a contract are met to validate the
perfection)
Meeting of the minds is a critical element of a contract
associated with acceptance and acknowledgment
3. consummation – when the object is delivered and
the price paid. – a buyer is not interested in merely
physical transfer: he is after ownership
d. What are the characteristics of a contract of
sale?
a. consensual (as distinguished from real) – the
contract is perfected by merely consent
b. bilateral reciprocal – both parties are bound by
obligations dependent upon each other
c. onerous – to acquire rights, valuable consideration
must be given
d. commutative – (as a rule) values exchanged are
almost equivalent to each other (note: by way of
exemption, sone contracts of sale are aleatory; i.e.,
what one receives may be greater or smaller than
what he has given example: sale of genuine
sweepstakes ticket)
e. principal – a contract of sale does not need the
existence of another valid contract for the prior to be
valid.
f. nominate – code refers to it by special designation
or name, i.e., contract of sale
e. Distinguish between absolute sale and
conditional sale?
Absolute sale is a sale in which property passes to a
buyer upon completion of an agreement or bargain
between the parties. An absolute sale takes place
without conditions. The title is transferred by the seller
to the buyer without any restrictions other than
payment of an agreed-upon amount of money.
Conditional sale is a real estate transaction where the
parties have set conditions. The sale of goods
according to a contract containing conditions, typically
that ownership does not pass to the buyer until after a
set time, usually after payment of the last installment
of the purchase price, although the buyer has
possession and is committed to acquiring ownership
f. What are the essential elements of a contract of
sale?
Essential elements/requisites – Those without which a
contract of sale would not exist.
1. consent or meeting of minds – i.e., consent to
transfer ownership in exchange for the price
2. determinate subject matter - certain which is the
subject matter of the contract;
3. price certain in money or its equivalent (cause or
consideration) – the price need not be money.
f.1. Discuss Manila Metal Container Corporation v.
PNB, G.R. No. 166862, 20 December 2006.
Facts:
Petitioner was the owner of 8,015 square meters of
parcel of land located in Mandaluyong City, Metro
Manila. To secure a P900,000.00 loan it had obtained
from respondent Philippine National Bank, petitioner
executed a real estate mortgage over the lot.
Respondent PNB later granted petitioner a new credit
accommodation. On August 5, 1982, respondent PNB
filed a petition for extrajudicial foreclosure of the real
estate mortgage and sought to have the property sold
at public auction. After due notice and publication, the
property was sold at public action where respondent
PNB was declared the winning bidder. Petitioner sent
a letter to PNB, requesting it to be granted an
extension of time to redeem/repurchase the property.
Some PNB personnel informed that as a matter of
policy, the bank does not accept “partial redemption”.
Since petitioner failed to redeem the property, the
Register of Deeds cancelled TCT No. 32098 and
issued a new title in favor of PNB.
Meanwhile, the Special Asset Management
Department (SAMD) had prepared a statement of
account of petitioner’s obligation. It also
ANTONIO
recommended the management of PNB to allow
petitioner to repurchase the property for
P1,574,560.oo. PNB rejected the offer and
recommendation of SAMD. It instead suggested to
petitioner to purchase the property for P2,660,000.00,
in its minimum market value. Petitioner declared that
it had already agreed to SAMD’s offer to purchase for
P1,574,560.47 and deposited a P725,000.00.
Issue:
Whether or not petitioner and respondent PNB had
entered into a perfected contract for petitioner to
repurchase the property for respondent.
Ruling:
The SC affirmed the ruling of the appellate court that
there was no perfected contact of sale between the
parties.
A contract is meeting of minds between two persons
whereby one binds himself, with respect to the other,
to give something or to render some service. Under
1818 of the Civil Code, there is no contract unless the
following requisites concur:
1. Consent of the contracting parties;
2. Objection certain which is the subject matter of
the contract;
3. Cause of the obligation which is established.
Contract is perfected by mere consent which is
manifested by the meeting of the offer and the
acceptance upon the thing and causes which are to
constitute the contract. Once perfected, the bind
between other contracting parties and the obligations
arising therefrom have the form of law between the
parties and should be complied in good faith. The
absence of any essential element will negate the
existence of a perfected contract of sale.
(Since di sila nagkaintindihan sa price and PNB did
not consent to the offered price of SAMD, and while
manila metal container corp. assumed na PNB would
accept the price provided by SAMD, nagkagulo, which
means that there were no consent sa part ni PNB.

Since the essential element of a contract of sale
requires the consent of minds which was absent or
lacking in the case, there was no valid sale.)
g. What are the natural elements of a contract of
sale?
Those which are inherent in the contract, and which in
the absence if any contrary provision, are deemed to
exists in the contract
1. warranty against eviction – deprivation of the
property bought – the seller warrants that the buyer
shall enjoy legal and peaceful possession of the thing
purchased, during the period of the contract under the
terms and conditions
ART. 1548. Eviction shall take place whenever by a
final judgment based on a right prior to the sale or an
act imputable to the vendor, the vendee is deprived of
the whole or of a part of the thing purchased.
The vendor shall answer for the eviction even though
nothing has been said in the contract on the subject.
The contracting parties, however, may increase,
diminish, or suppress this legal obligation of the
vendor.
2. warranty against hidden defects – the vendor is
liable for hidden defects of the thing sold even though
he was not aware of. The vendor should announce if
the thing is unfit for the use of which it is intended for,
they are also responsible to make this aware to the
vendee for the knowledge of whether or not he should
acquire it or it should have been given a lower price
However, the vendor shall not be answerable for
defects that are visible or hidden defects only if the
vendee is an expert of the thing being sold.
Art. 1566. The vendor is responsible to the vendee for
any hidden faults or defects in the thing sold, even
though he was not aware thereof.
Art. 1561. The vendor shall be responsible for
warranty against the hidden defects which the thing
sold may have, should they render it unfit for the use
for which it is intended, or should they diminish its
fitness for such use to such an extent that, had the
vendee been aware thereof, he would not have
acquired it or would have given a lower price for it; but
said vendor shall not be answerable for patent defects
or those which may be visible, or for those which are
not visible if the vendee is an expert who, by reason
of this trade or profession, should have known them.
h. What are the accidental elements of a contract
of sale?
Those which may be present or absent in the
stipulation for the purpose of expanding, limiting, or
modifying a contract. such accidental elements are
condition, clauses, terms, place, time, modes of
payment, or penalties which are established by the
parties.
i. Discuss Article 1546.
ART. 1546. Any affirmation of fact or any promise by
the seller relating to the thing is an express warranty if
the natural tendency of such affirmation or promise is
to induce the buyer to purchase the same, and if the
buyer purchases the thing relying thereon. No
affirmation of the value of the thing, nor any statement
purporting to be a statement of the seller’s opinion
only, shall be construed as a warranty, unless the
seller made such affirmation or statement as an
expert and it was relied upon by the buyer.
j. What is a warranty?
- Warranty is a collateral undertaking in sale of either
realty or personalty, express or implied that if the
property sold does not possess certain incidents or
qualities, the purchaser may either consider the sale
void and claim damages for breach of warranty. The
warranty is a contract in which the implied promise is
that the seller will pay damages if the property does
not possess the characteristics warranted, or if the
protection is not furnished, and the consideration for
this promise is the making of the contract of sale.
(Pineda)
- A warranty is a promise that a fact is true in the sale
of personal property. A warranty is a statement of fact
concerning the quality or character of good sold made
by the seller to induce the sale and relied on by the
ANTONIO
buyer. A breach or violation of warranty gives rise to a
suit for damages. (Pineda)
k. What is an express warranty?
It is any affirmation of fact, or any promise by the
seller relating to the thing if the natural tendency of
such affirmation or promise is to induce the buyer to
purchase the same, and if the buyer purchases the
thing relying thereon.
- includes all warranties derived from the language of
the contract, so long as the language is express.
Thus, the warranty may take the form of affirmation, a
promise or a representation.
Note: if the purchaser investigates the object, and no
prevention occurred from the seller, the purchaser is
not allowed to say that the vendor made a false
representation. (If the thing is obvious. i.e., land)
l. How is express warranty different from mere
sales talk or dealer’s talk?
Dealer’s talk like “excellent,” cannot be considered as
an express warranty. A little exaggeration is
apparently allowed by the law as a concession to
human nature. This is in accordance with the civil law
maxim “simplex commendation non-obligat” or the
principle “caveat emptor” (let the buyer beware).
(PARAS)
l.1. Discuss Philippine Steel Coating Corp. v.
Quinones, G.R. No. 194533, 19 April 2017.
Facts: A complaint for damages was filed by
respondent Quinones (owner of Amianan Motors)
against petitioner PhilSteel. Richard Lopez, a sales
engineer of PhilSteel, offered Quinones their new
product: primer-coated, long-span, rolled galvanized
iron (G.I.) sheets. The latter showed interest but
asked if the primer-coated sheets were compatible
with the Guilder acrylic paint process used by
Amianan Motors in the finishing of its assembled
buses. Uncertain, Lopez referred the query to his
immediate superior, Ferdinand Angbengco,
PhilSteel’s sales manager.

Angbengco assured Quinones that the quality of their
new product was superior to that of the non-primer
coated G.I. sheets being used by the latter in his
business. He further guaranteed that a laboratory test
had in fact been conducted by PhilSteel, and that the
results proved that the two products were compatible.
However, Quinones received several complaints from
customers who had bought bus units, claiming that
the paint or finish used on the purchased vehicles
was breaking and peeling off. Quinones sent a
letter-complaint to PhilSteel claiming that the damage
to the vehicles was attributable to the hidden defects
of the primer-coated sheets and/or their
incompatibility with the Guilder acrylic paint process
used by the Amianan Motors. Because of the barrage
of complaints, Quinones was forced to repair the
damaged buses.
PhilSteel counters that that the breaking and peeling
off of the paint was caused by the erroneous painting
application done by Quinones.
The RTC rendered a Decision in favor of Quinones
and ordered PhilSteel to pay damages. The trial court
concluded that the paint blistering and peeling off
were due to the incompatibility of the painting process
with the primer-coated G.I. sheets. It also found out
that the assurance made by Angbengco constituted
an express warranty under Article 1546.
The CA affirmed the ruling of the RTC in toto.
Issues:
Were the oral statements made by Angbengco a case
of express warranty under Article 1546 of the Civil
Code that may be invoked to warrant payment of
damages?
Ruling:
Yes. Article 1546 of the Civil Code provides that any
affirmation of fact or any promise by the seller relating
to the thing is an express warranty if the natural
tendency of such affirmation or promise is to induce
the buyer to purchase the same, and if the buyer
purchases the thing relying thereon. As held in
Carrascoso, Jr. vs. CA, the following requisites must
be established in order to prove that there is an
express warranty in a contract of sale: (1) the express
warranty must be an affirmation of fact or any promise
by the seller relating to the subject matter of the sale;
(2) the natural effect of the affirmation or promise is to
induce the buyer to purchase the thing; and (3) the
buyer purchases the thing relying on that affirmation
or promise. Here, the oral statements of Angbengco
created an express warranty. They were positive
affirmations of fact that the buyer relied on, and that
induced him to buy petitioner’s primer-coated G.I.
sheets. Seller is an expert in the eyes of the buyer.
m. Discuss Article 1547.
ART. 1547. In a contract of sale, unless a contrary
intention appears, there is:
(1) An implied warranty on the part of the seller that
he has a right to sell the thing at the time when the
ownership is to pass, and that the buyer shall from
that time have and enjoy the legal and peaceful
possession of the thing;
(2) An implied warranty that the thing shall be free
from any hidden faults or defects, or any charge or
encumbrance not declared or known to the buyer.
This article shall not, however, be held to render liable
a sheriff, auctioneer, mortgagee, pledgee or other
person professing to sell by virtue of authority in fact
or law, for the sale of a thing in which a third person
has a legal or equitable interest.
Additional notes:
- Applicability. The article applies only to implied
warranty meaning there is no formal express or
explicit agreement about any express warranty
appearing on the contract of sale. (Pineda
n. What is an implied warranty?
Concept. Warranty is implied if it is not expressly
made in the contract of sale.
Nature and character of implied warranty. An implied
warranty is inherent in the contract of sale. It is
presumed to exist although nothing has been
ANTONIO
mentioned about it. It is deemed important in the
contract of sale. The reason for this is to protect naïve
and unsuspecting buyers from scrupulous sellers who
may, through fraudulent machinations, insidious
words and sweet talks, convince these unsuspecting
buyers to buy things which are flawed, defective or
damaged and not easily detectable, and thereafter,
run away free from the wrongful acts.
Implied warranty however may be modified or
suppressed by agreement of the parties.
o. What are the implied warranties in a contract of
sale?
The term implied warranty is reserved for cases
where the law attaches an obligation to the seller
which is not expressed in any words. (1 Williston, op.
cit., p. 498.) Implied warranties under Articles 1547
and 1562 are:
(1) Implied warranty as to seller’s title. — that
the seller guarantees that he has a right to sell the
thing sold and to transfer ownership to the buyer who
shall not be disturbed in his legal and peaceful
possession thereof (Art. 1548.);
(2) Implied warranty against hidden defects or
unknown encumbrance. — that the seller guarantees
that the thing sold is free from any hidden faults or
defects or any charge or encumbrance not declared
or known to the buyer (Art. 1561.); and
(3) Implied warranty as to fitness or
merchantability. — that the seller guarantees that the
thing sold is reasonably fit for the known particular
purpose for which it was acquired by the buyer or,
where it was bought by description, that it is of
merchantable quality. (Art. 1562.)
p. When is implied warranty not applicable?
1. sale made by a sheriff, auctioneer, mortgagee,
pledge or other person professing to sell by virtue of
authority in fact or law (the judgment debtor is
responsible here for eviction)
2. sale under “as is and where is” – this carries no
warranty as to the quality or workable condition of the

goods and the buyer takes them as they are.
However, such condition does not include those that
could not be discovered by a physical examination of
the goods sold.
3. sale of second-hand articles does not carry warrant
as to the condition, adaptation, fitness, or suitability
for the purposes for which they have been purchased.
4. sale of property sold at public auction for tax
delinquency. There is no warranty on the part of the
state as to the title of the owner.
q. Discuss Article 1561.
ART. 1561. The vendor shall be responsible for
warranty against the hidden defects which the thing
sold may have, should they render it unfit for the use
for which it is intended, or should they diminish its
fitness for such use to such an extent that, had the
vendee been aware thereof, he would not have
acquired it or would have given a lower price for it; but
said vendor shall not be answerable for patent defects
or those which may be visible, or for those which are
not visible if the vendee is an expert who, by reason
of his trade or profession, should have known them.
Note: (4) Effect of Long Inaction - If the buyer
questions only after 3 years, and the seller has not
made any misrepresentation, there is no breach of the
warranty. In fact, the action is prescribed in 6 months.
r. What are the requisites for enforcement of the
warranty against hidden defects?
The following requisites must concur for the existence
of the warranty against hidden defects:
1) The defect must be important or serious; (a)
renders the thing sold unfit for the use for which it is
intended, or (b) diminishes its fitness for the use
intended, to such an extent that the vendee would not
have acquired if he had been aware thereof, or would
have given a lower price for it. Minor defects do not
justify enforcement of warranty.
2) It must be hidden; This means it cannot be
discovered by an ordinary inspection examination.
3) It must exist at the time of the sale; If the defect
has appeared only after the sale and for cause or
causes not traceable to any cause existing at the time
of the perfection of the contract, the vendor is free
from liability.
4) The vendee must give notice of the defect to the
vendor within a reasonable time (Art. 1586.);
5) The action for rescission or reduction of the price
must be brought within the proper period — 6 months
from the delivery of the thing sold (Art. 1571.) or
within 40 days from the date of the delivery in case of
animals (Art. 1577, par. 1.); and
6) There must be no waiver of warranty on the part of
the vendee. (Art. 1548, par. 3.) - If the vendee made a
waiver of the warranty, then he is placed under
estoppel from enforcing the warranty.
r.1. Discuss Sps. Batalla v. Prudential Bank, G.R.
No. 200676, 25 March 2019.
FACTS: March 1998, Petitioner spouses Batalla
purchased a brand-new Honda from Honda Cars San
Pablo. Respondent Rantael, acting manager of
Pilipinas Bank, now merged with respondent
Prudential Bank, brokered the deal. To finance the
purchase of the said motor vehicle, Spouses Batalla
applied for a car loan with Prudential. They executed
a promissory note for the sum of P292,200.00
payable within 36 months. The load agreement was
approved. Spouses Batalla received the car after
Rantael informed them that it was parked near
Prudential. However, after three days, the rear right
door of the car broke down. The Spouses Batalla
consulted a certain Jojo Sanchez (Sanchez), who
claimed that the power lock of the rear right door
was defective and that the car was no longer
brand new because the paint of the roof was
merely retouched. Spouses Batalla sent a letter to
the manager of Prudential notifying it of the said
defects and demanding the immediate replacement
of the motor vehicle. According to Villanueva, the
vehicle was no longer brand new because the rooftop
was no longer shiny in appearance. Thereafter, the
manager of Prudential, together with two individuals
from Honda, met Spouses Batalla and offered to
repair the vehicle. Spouses Batalla rejected it
ANTONIO
because they wanted the car to be replaced with a
brand new one without hidden defects Unable to
secure a brand-new car in replacement of the alleged
defective vehicle, Spouses Batalla filed a Complaint
for Rescission of Contracts and Damages against
Prudential and Honda. RTC dismissed the
complaint by the Spouses Batalla. The trial court
ruled that the car sold to Spouses Batalla was a
brand new one and that any perceived defects
could not be attributed to Honda. It highlighted that
Spouses Batalla failed to prove that the defects in the
car door were due to the fault of Honda and that the
car was merely repainted to make it appear brand
new.
On appeal, CA affirmed the RTC decision with
modification saying that the appellate courtruled that
Spouses Batalla cannot rescind the promissory note
and car loan agreement on account of the car's
alleged defects because they are distinct from the
contract of sale entered into with Honda. In any case,
it found that the documentary evidence, which
Spouses Batalla never disputed, presented by Honda,
proved that the motor vehicle was brand new with no
signs of alteration and tampering. Hence, this petition.
ISSUE: Whether the spouses Batalla may rescind the
contract of sale, car loan agreement, and promissory
note due to the defects of the motor vehicle sold.
RULING: No. Spouses Batalla anchored their
complaint for rescission of contract against
Prudential and Honda on the allegation that the
car delivered to them was not brand new and
that it contained hidden defects. In support of their
allegations, they presented Villanueva who testified
that the car was no longer brand new because the
roof was no longer shiny and appeared to be only
repainted —he also testified that the rear door was
damaged. But the RTC correctly gave little credence
to the testimony of Villanueva as the court stated that
he only had limited formal training in painting and that
his assessment as to the condition of the car
paint was made only after a visual examination.
As such, the RTC cannot be faulted if it was left
unconvinced of Villanueva's testimony for lack of
certainty and technical basis. Neither could the
alleged defects of the car door be sufficient basis to
prove that what was delivered to Spouses Batalla
was a second-hand car. As they admitted, they

immediately had a remote-control door mechanism
installed. It could not be readily ascertained whether
the defects in the car door were existing at the
time of the car's manufacture or was caused by
the installation of the remote-control door system.
Thus, the defects in the car door or in the paint,
neither establish that the car was second hand nor
could it be attributed, to the fault of Honda. Even
assuming that the car delivered to Spouses Batalla
had a defective car door, they still do not have any
grounds for rescinding the contract of sale. Article
1561 of the Civil Code provides for an implied
warranty against hidden defects in that the vendor
shall be responsible for any hidden defects which
render the thing sold unfit for the use for which it is
intended, or should they diminish its fitness for such
use to such an extent that, had the vendee been
aware thereof, he would not have acquired it or would
have given a lower price. In an implied warranty
against hidden defects, vendors cannot raise the
defense of ignorance as they are responsible to the
vendee for any hidden defects even if they were not
aware of its existence. In order for the implied
warranty against hidden defects to be applicable, the
following conditions must be met:
1) Defect is Important or Serious:
a) The thing sold is unfit for the use which it is
intended
b) Diminishes its fitness for such use or to such an
extent that the buyer would not have acquired it had
he been aware thereof
2) Defect is Hidden
3) Defect Exists at the time of the sale
4) Buyer gives Notice of the defect to the seller within
reasonable time.
In case of a breach of an implied warranty
against hidden defects, the buyer may either
elect between withdrawing from the contract and
demanding a proportionate reduction of the price, with
damages in either case. Here, Spouses Batalla
opted to withdraw from the contract of sale after their
demand for a replacement car was not granted. But
such action pursued by Spouses Batalla was without
basis. They failed to prove that such defect
had severely diminished the roadworthiness of the
motor vehicle. In fact, they admitted that they had no
problem as to the road worthiness of the car. As to the
recission of the loan agreement and promissory note
also sought by Spouses Batalla, it is not hard to see
the absurdity in the position of Spouses Batalla that
they could rescind the car loan agreement and
promissory note with Prudential on the ground of
alleged defects of the car delivered to them by Honda.
The transactions of Spouses Batalla with Prudential
and Honda are distinct and separate from each other.
From the time Spouses Batalla accepted the loan
proceeds from Prudential, the loan agreement had
been perfected. As such, they were bound to comply
with their obligations under the loan agreement
regardless of the outcome of the contract of sale with
Honda. Even assuming that the car that Spouses
Batalla received was not brand new or had hidden
defects, they could not renege on their obligation of
paying Prudential the loan amount. Spouses
Batalla's recourse in case of defects in the motor
vehicle delivered to them was limited against Honda
and does not extend to Prudential as it merely lent the
money to purchase the car.
s. What is a redhibitory action?
Redhibitory action - is an action instituted to avoid a
sale on account of some vice or defect in the thing
sold which renders its use impossible, or so
inconvenient and imperfect that it must be supposed
that the buyer would not have purchased it had he
known of the vice.
- The action based on the redhibitory default
or defects of animals, which are determined by law or
by local customs, must be brought within 40 days
from the date of delivery.
The object is the rescission of the contract. If the
object is to procure the return of a part of the
purchase price paid by the vendee.
s.1. Discuss Nurtrimix Feeds Corporation v. Court
of Appeals, G.R. No. 152219, 25 October 2004.
ANTONIO
FACTS: Respondent efren spouses herein started to
directly procure various kinds of animal feeds from
petitioner Nutrimix Feeds Corporation. Initially, the
respondents were good paying customers. In some
instances, however, they failed to issue checks
despite the deliveries of animal feeds which were
appropriately covered by sales invoices.
Consequently, the respondents incurred an aggregate
unsettled account with the petitioner. The petitioner
made several demands for the respondents to settle
their unpaid obligation, but the latter failed and
refused to pay their remaining balance with the
petitioner.
Petitioner filed with RTC a complaint, against the
respondents for sum of money and damages with a
prayer for issuance of writ of preliminary attachment.
In their answer with counterclaim, the respondents
admitted their unpaid obligation but impugned their
liability to the petitioner. They contended that
inasmuch as the sudden and massive death of their
animals was caused by the contaminated products of
the petitioner, the nonpayment of their obligation was
based on a just and legal ground.
The respondents also lodged a complaint for
damages against the petitioner for the untimely and
unforeseen death of their animals supposedly effected
by the adulterated animal feeds the petitioner sold to
them. Petitioner moved to dismiss the respondents’
complaint on the ground of litis pendentia. The trial
court denied the same and the petitioner alleged that
the death of the respondents’ animals was due to the
widespread pestilence in their farm. The petitioner,
likewise, maintained that it received information that
the respondents were in an unstable financial
condition and even sold their animals to settle their
obligations from other enraged and insistent creditors.
It, moreover, theorized that it was the respondents
who mixed poison to its feeds to make it appear that
the feeds were contaminated.
ISSUE: Is the petitioner corporation guilty of breach of
warranty due to hidden defects despite a finding that
there was a difference of approximately three months
from delivery of the animal feeds, to respondent
spouses, to the time the animals died and the animal
feeds were examined?

HELD: A difference of approximately three months
enfeebles the respondents’ theory that the petitioner
is guilty of breach of warranty by virtue of hidden
defects. In a span of three months, the feeds could
have already been contaminated by outside factors
and subjected to many conditions unquestionably
beyond the control of the petitioner. The provisions on
warranty against hidden defects are found in Articles
1561 and 1566 of the New Civil Code of the
Philippines. A hidden defect is one which is unknown
or could not have been known to the vendee. Under
the law, the requisites to recover on account of hidden
defects are as follows:
(a) the defect must be hidden;
(b) the defect must exist at the time the sale was
made;
(c) the defect must ordinarily have been excluded
from contract;
(d) the defect, must be important (renders thing
UNFIT or considerably decreases FITNESS);
(e) the action must be instituted within the statute of
limitations.
In the sale of animal feeds, there is an implied
warranty that it is reasonably fit and suitable to be
used for the purpose which both parties
contemplated. To be able to prove liability on the
basis of breach of implied warranty, three things must
be established by the respondents. The first is that
they sustained injury because of the product; the
second is that the injury occurred because the
product was defective or unreasonably unsafe; and
finally, the defect existed when the product left the
hands of the petitioner. A manufacturer or seller of a
product cannot be held liable for any damage
allegedly caused by the product in the absence of any
proof that the product in question was defective. The
defect must be present upon the delivery or
manufacture of the product; or when the product left
the seller’s or manufacturer’s control; or when the
product was sold to the purchaser; or the product
must have reached the user or consumer without
substantial change in the condition it was sold.
Tracing the defect to the petitioner requires some
evidence that there was no tampering with, or
changing of the animal feeds. The nature of the
animal feeds makes it necessarily difficult for the
respondents to prove that the defect was existing
when the product left the premises of the petitioner. A
review of the facts of the case would reveal that the
petitioner delivered the animal feeds, allegedly
containing rat poison, on July 26, 1993; but it is
astonishing that the respondents had the animal
feeds examined only on October 20, 1993, or barely
three months after their broilers and hogs had died. It
bears stressing, too, that the chickens brought for
laboratory tests were healthy animals, and were not
the ones that were ostensibly poisoned. There was
even no attempt to have the dead fowls examined.
Neither was there any analysis of the stomach of the
dead chickens to determine whether the petitioner’s
feeds really caused their sudden death. Mere
sickness and death of the chickens is not satisfactory
evidence in itself to establish a prima facie case of
breach of warranty. Likewise, there was evidence
tending to show that the respondents combined
different kinds of animal feeds and that the mixture
was given to the animals. In essence, we hold that the
respondents failed to prove that the petitioner is guilty
of breach of warranty due to hidden defects. It is,
likewise, rudimentary that common law places upon
the buyer of the product the burden of proving that the
seller of the product breached its warranty. The bevy
of expert evidence adduced by the respondents is too
shaky and utterly insufficient to prove that the Nutrimix
feeds caused the death of their animals. For these
reasons, the expert testimonies lack probative weight.
The respondents’ case of breach of implied warranty
was fundamentally based upon the circumstantial
evidence that the chickens and hogs sickened,
stunted, and died after eating Nutrimix feeds; but this
was not enough to raise a reasonable supposition that
the unwholesome feeds were the proximate cause of
the death with that degree of certainty and probability
required.
t. Discuss Article 1562.
ART. 1562. In a sale of goods, there is an implied
warranty or condition as to the quality or fitness of the
goods, as follows:
ANTONIO
(1) Where the buyer, expressly or by implication,
makes known to the seller the particular purpose for
which the goods are acquired, and it appears that the
buyer relies on the seller’s skill of judgment (whether
he be the grower or manufacturer or not), there is an
implied warranty that the goods shall be reasonably fit
for such purpose.
(2) Where the goods are bought by description from a
seller who deals in goods of that description (whether
he be the grower or manufacturer or not), there is an
implied warranty that the goods shall be of
merchantable quality.
No implied warranty of fitness for particular purpose;
exception. In sale of goods there is no implied
warranty as to the quality or fitness of the thing for
any particular purpose for which the goods are
acquired
Warranty of merchantability. When goods are bought
by description, there is an implied warranty that the
goods are of merchantable quality. This means that
the goods are of such quality and condition that a
reasonable man would, after full examination, accept
the same under the circumstances of the case, in the
performance of his offer to buy, weather for his own
use or for resale.
Distinction between warranty of fitness for a particular
purpose and warranty of merchantable quality. The
first is a warranty that the goods are suitable for the
particular or special purpose disclosed by the buyer
which will not be satisfied by the mere fitness of the
goods for general purposes.
The second is a warranty that the goods purchased
are reasonably fit for the general purposes for which
they are sold.
u. Discuss Article 1571.
Art. 1571. Actions arising from the provisions of the
preceding ten articles shall be barred after six
months, from the delivery of the thing sold.
Articles covered. The prescriptive period of six
months applies only to the 10 preceding articles, that
is Articles 1561 to 1570 under Subsection 2. The said

articles speak of the seller’s liability for the defects of
the things sold.
u.1. Discuss Sps. Gaspar v. Disini, G.R. No.
239644, 03 February 2021.
The property subject of [the] litigation is a year 2000
model, white Mitsubishi Pajero with plate number
WVC-555. The subject vehicle, registered in the name
of a certain Artemio Marquez (Marquez), was
mortgaged by the latter as security for a loan obtained
from Legacy Lending Investor (Legacy). Legacy is
owned by x x x Joseph Yu (Yu). Marquez failed to pay
his loan, leading Legacy to seize the Pajero. To
facilitate the disposal of the Pajero, Marquez
executed and signed a Deed of Sale in blank that is,
without the name and details of the buyer.
[Spouses Gaspar] who are engaged in the business
of buying and selling second-band vehicles,
purchased the subject Pajero from Legacy for the
price of [php1,000,000.00],
x Rocky Gaspar (Rocky), son of the Spouses Gaspar,
offered the Pajero for sale to [Disini], who agreed to
buy it for the total purchase price of 1,160,000.00.
Disini gave a down payment of 50,000 on July 22,
2002. July 30, 2002. disini paid the remaining balance
of php1,110,000, after the Spouses Gaspar obtained
a Motor Vehicle Clearance Certificate, dated [July 26,
2002], and registered the subject Pajero in the name
of Disini on [ August 6, 2002.
About a year later, on [June 30, 2003], the police
apprehended the subject Pajero while it was illegally
parked in Makati. Further police investigation revealed
that the vehicle had been stolen from the Office of the
President. It appears that the chassis number had
been overlaid with another number through welding in
order to avoid identification.
Disini immediately informed the Spouses Gaspar
about the confiscation of the subject Pajero, and the
latter promised to return the full purchase price that
he had paid to them. In turn, the Spouses Gaspar
sought reimbursement from [Yu] and Legacy, and the
latter gave back [php150,000.00]. The Spouses
Gaspar turned over the [php150,000.00] to Disini on
[July 22, 2003.J On [August 5, 2003], the Spouses
Gaspar paid further [php200,000.00] to Disini, and
finally [150,000.00] on [December 3, 2003] for a total
reimbursement of [php400,000.00] and leaving an
unpaid balance of php 760,000.00.
Apart from the [php150,000.00] initially returned by
[Yu] to the Spouses Gaspar, [Yu] failed to reimburse
the balance of the purchase price paid by the
Spouses Gaspar for the subject Pajero in the amount
of php 850,000.00.
When written demand failed, Disini filed [ a complaint
for sum of money with prayer for preliminary
attachment (Complaint)] against Rocky and the
Spouses Gaspar to collect the unpaid reimbursement
of what he paid for the subject Pajero.
In turn, the [Spouses Gaspar] filed a third-party
complaint against [Yu] and his employee [Salita] for
the unpaid reimbursement of [php850,000.00.]
After trial, the RTC rendered a Decision directing: (i)
Spouses Gaspar to refund the amount of
php760,000.00 with legal interest in favor of Disini,
and pay the latter attorney's fees in the amount of
php50,000.00; (ii) Yu to reimburse Spouses Gaspar
the amount of php850,000.00 with legal interest, and
to pay the latter attorney's fees also in the amount
ofphp50,000.00.
The RTC dismissed the third-party complaint as
against Salita.
Spouses Gaspar and Yu filed separate appeals that
were later consolidated by the CA.
For their part, Spouses Gaspar argued that the order
directing them to pay Disini attorney's fees is baseless
as there was no finding that they acted in bad faith.
Further, Spouses Gaspar assailed the dismissal of the
third-party complaint against Salita
On the other hand, Yu and Salita argued that they
should not be held liable to reimburse Spouses
Gaspar considering that:
(i) their implied warranty as sellers does not extend to
defects which are apparent and can be ascertained
by the buyers after examination;
ANTONIO
(ii) Spouses Gaspar are engaged in the business of
buying and selling cars and must bear the risk
involved in the purchase of the subject Pajero
following the principle of caveat emptor; and
(iii) as sellers, Yu and Salita relied on the Certificate of
Registration and clearances provided by their
mortgagee, Marquez, and should thus be deemed
sellers in good faith.
Yu and Salita also assailed the order directing them to
pay attorney's fees in favor of Spouses Gaspar
WHEREFORE, the xx x Decision dated [April 13,
2016] of the [RTC], Branch 18, Manila, in Civil Case
No. 06-115408, for Sum of Money with Prayer for
Preliminary Attachment, (1) ordering original
defendants [Spouses] Gaspar to refund the amount of
[P760,000.00] with legal interest to plaintiff Disini, as
well as pay [P50,000.00] as attorney's fees; and (2)
ordering third-party defendant [Yu] to reimburse
defendants [Spouses] Gaspar the amount of
[i"850,000.00] with legal interest, and to pay
[i"S0,000.00] as attorney's fees is AFFIRMED with
MODIFICATION in that the award of attorney's fees to
Disini is DELETED. Further, the third-party complaint
against [Yu] and [Salita] is DISMISSED for having
been filed out of time. All orders not inconsistent with
the foregoing are affirmed. SO ORDERED.IO
(Additional emphasis supplied; italics in the original)
Foremost, the CA noted that during the course of trial,
it was established that Spouses Gaspar promised to
return Disini's money in case the title of the subject
Pajero is found to be defective. Spouses Gaspar
followed through with this promise when they partially
returned Disini's payment. However, Spouses Gaspar
failed to return the purchase price in full due to lack of
funds. The CA found that these circumstances show
that Spouses Gaspar did not act in bad faith.
However, the CA found that the RTC also erred in
ordering Yu to reimburse Spouses Gaspar the amount
they returned to Disini, and to pay them attorney's fee
According to the CA, the sale of the subject Pajero
from Yu to Spouses Gaspar gave rise to an implied
warranty of title and a concomitant implied warranty
against eviction. These implied warranties, in turn,

prescribe six (6) months from date of delivery of the
thing sold pursuant to Article 1571 of the Civil Code.
Here, Spouses Gaspar filed the third-party complaint
against Yu and Salita on October 9, 2006, or nearly
four (4) years after delivery of the subject Pajero on
July 12, 2002. Thus, said third-party complaint was
filed out of time.
In this Petition, Spouses Gaspar argue that the CA
misapplied the rule on implied warranties under
Article 1561 of the Civil Code. They claim that the
warranty against hidden defects pertains to defects in
workmanship. Here, the subject Pajero is not
defective but rather, stolen. Thus, Spouses Gaspar
assert that this case does not involve a breach of
implied warranties, but rather, a fraudulent sale
facilitated by Yu and Salita. On this score, they posit
that the applicable prescriptive period is ten (10)
years, as set forth in Article 1144 of the Civil Code
which governs actions based on written contracts
The Issues The issues presented for the Court's
resolution are:
1. Whether the CA erred in dismissing the third-party
complaint filed by Spouses Gaspar against Yu and
Salita; and
2. Whether the CA erred in holding that Yu and Salita
are not liable to pay Spouses Gaspar attorney's fees.
Here, Spouses Gaspar argue that the basis of Yu and
Salita's liability is the written "Contract of Sale" (COS)
which they entered into.35 On the other hand, Yu
denies liability and claims that as seller, he is only
liable for the subject Pajero's hidden defects which do
not exist in this case.36 He adds that the conditions
necessary for the application of the implied warranty
against eviction are not present. In any event, Yu
further claims that any cause of action that Spouses
Gaspar may have had based on said implied
warranties have long prescribed.37 In this connection,
the Court notes that while the Comment was filed in
the name of Yu and Salita, none of the allegations
and defenses therein specifically pertain to the latter.
The Petition is granted, in part.
The Court finds Yu solely liable to reimburse Spouses
Gaspar the unpaid portion of the purchase price of the
subject Pajero with legal interest. Yu's liability is
anchored on the nullity of the (contract of sale) COS
he executed with Spouses Gaspar. In addition, Yu is
liable to pay Spouses Gaspar attorney's fees as he
unjustifiably refused in bad faith to satisfy the latter's
valid claim.
Since none of the foregoing warranties apply, the
six-month prescriptive period under Article 1571 of the
Civil Code is inapplicable. As the third-party complaint
filed by Spouses Gaspar assumes the nature of an
action to declare the inexistence of a contract due to
its illicit object, said complaint is imprescriptible under
Article 1409. The CA thus erred when it dismissed the
third-party complaint on the ground of prescription.
ANTONIO
5th Week - Retail Trade Laws
a. Read (1) Republic Act No. 8792 or the
Electronic Commerce Act of 2000 and (2) the
Rules on Electronic Evidence (A.M. No.
01-07-01-SC).
b. Discuss the state policy expressed in RA 8792.
SECTION 2(2). Declaration of Policy. — The State
recognizes the vital role of information and
communications technology (ICT) in nation-building;
the need to create an information-friendly
environment which supports and ensures the
availability, diversity and affordability of ICT products
and services; the primary responsibility of the private
sector in contributing investments and services in ICT;
the need to develop, with appropriate training
programs and institutional policy changes, human
resources for the information age, a labor force skilled
in the use of ICT and a population capable of
operating and utilizing electronic appliances and
computers; its obligation to facilitate the transfer and
promotion of technology; to ensure network security,
connectivity and neutrality of technology for the
national benefit; and the need to marshal, organize
and deploy national information infrastructures,
comprising in both communications network and
strategic information services, including their
interconnection to the global information networks,
with the necessary and appropriate legal, financial,
diplomatic and technical framework, systems and
facilities.
c. Discuss the objective stated in RA 8792.
The law aims to facilitate domestic and international
dealings, transactions, arrangements agreements,
contracts and exchanges and storage of information
through the utilization of electronic, optical and similar
medium, mode, instrumentality and technology to
recognize the authenticity and reliability of electronic
documents related to such activities and to promote
the universal use of electronic transaction in the
government and general public.
d. What is the sphere of application of RA 8792?

This law shall apply to any kind of data message and
electronic document used in the context of
commercial and non-commercial activities to include
domestic and international dealings, transactions,
arrangements, agreements, contracts, and exchanges
and storage of information. Moreover – according to
the OSG, prosecution under republic act No. 8484 or
the Access Drive Regulations Act of 1998 and
Republic act no. 8792 or the electronic commerce act
of 2000 does not preclude prosecution under the
revised penal code for the crime of theft.
e. Discuss the terms defined in RA 8792.
SECTION 5(5). Definition of Terms. — For the
purposes of this Act, the following terms are defined,
as follows:
(a) “Addressee” refers to a person who is intended by
the originator to receive the electronic data message
or electronic document, but does not include a person
acting as an intermediary with respect to that
electronic data message or electronic document.
(b) “Computer” refers to any device or apparatus
singly or interconnected which, by electronic,
electro-mechanical, optical and/or magnetic impulse,
or other means with the same function, can receive,
record, transmit, store, process, correlate, analyze,
project, retrieve and/or produce information, data,
text, graphics, figures, voice, video, symbols or other
modes of expression or perform any one or more of
these functions.
(c) “Electronic data message” refers to information
generated, sent, received or stored by electronic,
optical or similar means.
(d) “Information and Communication System” refers to
a system for generating, sending, receiving, storing or
otherwise processing electronic data messages or
electronic documents and includes the computer
system or other similar device by or in which data is
recorded or stored and any procedures related to the
recording or storage of electronic data message or
electronic document.
(e) “Electronic signature” refers to any distinctive
mark, characteristic and/or sound in electronic form,
representing the identity of a person and attached to
or logically associated with the electronic data
message or electronic document or any methodology
or procedures employed or adopted by a person and
executed or adopted by such person with the intention
of authenticating or approving an electronic data
message or electronic document.
(f) “Electronic document” refers to information or the
representation of information, data, figures, symbols
or other modes of written expression, described or
however represented, by which a right is established
or an obligation extinguished, or by which a fact may
be proved and affirmed, which is received, recorded,
transmitted, stored, processed, retrieved or produced
electronically.
(g) “Electronic key” refers to a secret code which
secures and defends sensitive information that
crosses over public channels into a form decipherable
only with a matching electronic key.
(h) “Intermediary” refers to a person who in behalf of
another person and with respect to a particular
electronic data message or electronic document
sends, receives and/or stores or provides other
services in respect of that electronic data message or
electronic document.
(i) “Originator” refers to a person by whom, or on
whose behalf, the electronic document purports to
have been created, generated and/or sent. The term
does not include a person acting as an intermediary
with respect to that electronic document.
(j) “Service provider” refers to a provider of —
i) Online services or network access, or the operator
of facilities therefor, including entities offering the
transmission, routing, or providing of connections for
online communications, digital or otherwise, between
or among points specified by a user, of electronic
documents of the user’s choosing; or
ii) The necessary technical means by which electronic
documents of an originator may be stored and made
accessible to a designated or undesignated third
party.
ANTONIO
Such service providers shall have no authority to
modify or alter the content of the electronic document
received or to make any entry therein on behalf of the
originator, addressee or any third party unless
specifically authorized to do so, and who shall retain
the electronic document in accordance with the
specific request or as necessary for the purpose of
performing the services it was engaged to perform.
f. Is a facsimile transmission an electronic
document?
Since a facsimile transmission is not an "electronic
data message" or an "electronic document," and
cannot be considered as electronic evidence by the
Court, with greater reason is a photocopy of such a
fax transmission not electronic evidence. In the
present case, therefore, Pro Forma Invoice Nos.
ST2-POSTS0401-1 and ST2-POSTS0401-2 (Exhibits
"E" and "F"), which are mere photocopies of the
original fax transmittals, are not electronic evidence,
contrary to the position of both the trial and the
appellate courts.
f.1. Discuss Rule 3 of the Rules on Electronic
Evidence.
RULE 3: ELECTRONIC DOCUMENTS
Section 1. Electronic documents as functional
equivalent of paper-based documents. – Whenever a
rule of evidence refers to the term of writing,
document, record, instrument, memorandum or any
other form of writing, such term shall be deemed to
include an electronic document as defined in these
Rules.
Section 2. Admissibility. – An electronic document is
admissible in evidence if it complies with the rules on
admissibility prescribed by the Rules of Court and
related laws and is authenticated in the manner
prescribed by these Rules.
Section 3. Privileged communication. – The
confidential character of a privileged communications
is not solely on the ground that it is in the form of an
electronic document.

f.2. Discuss Torres v. PAGCOR, G.R. No. 193531,
14 December 2011.
FACTS:
Petitioner was a Slot Machine Operations Supervisor
(SMOS) of respondent Philippine Amusement and
Gaming Corporation (PAGCOR). On the basis of an
alleged intelligence report of padding of the Credit
Meter Readings (CMR) of the slot machines at
PAGCOR-Hyatt Manila, then Casino Filipino-Hyatt
(CF Hyatt), which involved the slot machine and
internal security personnel of respondent PAGCOR,
and in connivance with slot machine customers,
respondent PAGCOR's Corporate Investigation Unit
(CIU) allegedly conducted an investigation to verify
the veracity of such report. The CIU discovered the
scheme of CMR padding which was committed by
adding zero after the first digit of the actual CMR of a
slot machine or adding a digit before the first digit of
the actual CMR, e.g., a slot machine with an actual
CMR of P5,000.00 will be issued a CMR receipt with
the amount of eitherP50,000.00 or P35,000.00. Based
on the CIU's investigation of all the CMR receipts and
slot machine jackpot slips issued by CF Hyatt for the
months of February and March 2007, the CIU
identified the members of the syndicate who were
responsible for such CMR padding, which included
herein petitioner.
On the same day, another Memorandum of Charges
signed by Rogelio Y. Bangsil, Jr., Senior Branch
Manager, CF Hyatt Manila, was issued to petitioner
informing him of the charge of dishonesty (padding of
anomalous SM jackpot receipts). Petitioner was then
required to explain in writing within seventy-two (72)
hours from receipt thereof why he should not be
sanctioned or dismissed. Petitioner was placed under
preventive suspension effective immediately until
further orders.
On May 7, 2007, petitioner wrote Manager Bangsil a
letter explanation/refutation of the charges against
him. He denied any involvement or participation in
any fraudulent manipulation of the CMR or padding of
the slot machine receipts, and he asked for a formal
investigation of the accusations against him.
On August 4, 2007, petitioner received a letter dated
August 2, 2007 from Atty. Lizette F. Mortel, Managing
Head of PAGCOR's Human Resource and
Development Department, dismissing him from the
service.
On September 14, 2007, petitioner filed with the (civil
service commission) CSC a Complaint against
PAGCOR and its Chairman Efraim Genuino for illegal
dismissal, non-payment of backwages and other
benefits. The complaint alleged among other things,
that he tried to persuade respondent PAGCOR to
review and reverse its decision in a letter of
reconsideration dated August 13, 2007 addressed to
the Chairman, the members of the Board of Directors
and the Merit Systems Protection Board and that no
resolution was issued on his letter reconsideration.
Thereafter, the CSC dismissed the complaint on the
ground that the same has already prescribed.
After the denial of his Motion for Reconsideration,
Torres elevated the case to the Court of Appeals,
which likewise dismissed his petition on the same
ground.
Hence, this appeal.
ISSUE:
Whether or not the sending of his letter of
reconsideration by means of a fax machine is a valid
mode of filing a letter of reconsideration?
DECISION:
A motion for reconsideration may either be filed by
mail or personal delivery. When a motion for
reconsideration was sent by mail, the same shall be
deemed filed on the date shown by the postmark on
the envelope which shall be attached to the records of
the case. On the other hand, in case of personal
delivery, the motion is deemed filed on the date
stamped thereon by the proper office. And the movant
has 15 days from receipt of the decision within which
to file a motion for reconsideration or an appeal
therefrom.
ANTONIO
Petitioner received a copy of the letter/notice of
dismissal on August 4, 2007; thus, the motion for
reconsideration should have been submitted either by
mail or by personal delivery on or before August 19,
2007. However, records do not show that petitioner
had filed his motion for reconsideration. In fact, the
CSC found that the non-receipt of petitioner's letter
reconsideration was duly supported by certifications
issued by PAGCOR employees.
Even assuming arguendo that petitioner indeed
submitted a letter reconsideration which he claims
was sent through a facsimile transmission, such letter
reconsideration did not toll the period to appeal. The
mode used by petitioner in filing his reconsideration is
not sanctioned by the Uniform Rules on
Administrative Cases in the Civil Service. As we
stated earlier, the motion for reconsideration may be
filed only in two ways, either by mail or personal
delivery.
xxx A facsimile is not a genuine and authentic
pleading. It is, at best, an exact copy preserving all
the marks of an original. Without the original, there is
no way of determining on its face whether the
facsimile pleading is genuine and authentic and was
originally signed by the party and his counsel. It may,
in fact, be a sham pleading. xxx
Moreover, a facsimile transmission is not considered
as electronic evidence under the Electronic
Commerce Act.
f. Discuss legal recognition of electronic data
message, electronic documents, electronic
signatures.
SECTION 6(6). Legal Recognition of Electronic Data
Message. — Information shall not be denied validity
or enforceability solely on the ground that it is in the
form of an electronic data message purporting to give
rise to such legal effect, or that it is merely
incorporated by reference in that electronic data
message.
SECTION 7(7). Legal Recognition of Electronic
Documents. — Electronic documents shall have the
legal effect, validity or enforceability as any other
document or legal writing, and —

(a) Where the law requires a document to be in
writing, that requirement is met by an electronic
document if the said electronic document maintains
its integrity and reliability and can be authenticated so
as to be usable for subsequent reference, in that —
(i) The electronic document has remained complete
and unaltered, apart from the addition of any
endorsement and any authorized change, or any
change which arises in the normal course of
communication, storage and display; and
(ii) The electronic document is reliable in the light of
the purpose for which it was generated and in the light
of all relevant circumstances.
(b) Paragraph (a) applies whether the requirement
therein is in the form of an obligation or whether the
law simply provides consequences for the document
not being presented or retained in its original form.
(c) Where the law requires that a document be
presented or retained in its original form, that
requirement is met by an electronic document if —
i) There exists a reliable assurance as to the integrity
of the document from the time when it was first
generated in its final form; and
ii) That document is capable of being displayed to the
person to whom it is to be presented: Provided, that
no provision of this Act shall apply to vary any and all
requirements of existing laws on formalities required
in the execution of documents for their validity.
For evidentiary purposes, an electronic document
shall be the functional equivalent of a written
document under existing laws.
This Act does not modify any statutory rule relating to
the admissibility of electronic data messages or
electronic documents, except the rules relating to
authentication and best evidence.
SECTION 8(8). Legal Recognition of Electronic
Signatures. — An electronic signature on the
electronic document shall be equivalent to the
signature of a person on a written document if the
signature is an electronic signature and proved by
showing that a prescribed procedure, not alterable by
the parties interested in the electronic document,
existed under which —
a.) A method is used to identify the party sought to be
bound and to indicate said party’s access to the
electronic document necessary for his consent or
approval through the electronic signature;
b.) Said method is reliable and appropriate for the
purpose for which the electronic document was
generated or communicated, in the light of all
circumstances, including any relevant agreement;
c.) It is necessary for the party sought to be bound, in
order to proceed further with the transaction, to have
executed or provided the electronic signature; and
d.) The other party is authorized and enabled to verify
the electronic signature and to make the decision to
proceed with the transaction authenticated by the
same.
f.1. Discuss Rule 6 of the Rules on Electronic
Evidence.
RULE 6: ELECTRONIC SIGNATURES
Section 1. Electronic signature. – An electronic
signature or a digital signature authenticated in the
manner prescribed hereunder is admissible in
evidence as the functional equivalent of the signature
of a person on a written document.
Section 2. Authentication of electronic signatures. –
An electronic signature may be authenticated in any
of the following manner:
(a) By evidence that a method or process was utilized
to establish a digital signature and verity the same;
(b) By any other means provided by law; or
(c) By any other means satisfactory to the judge as
establishing the genuineness of the electronic
signature.
ANTONIO
Section 4. Disputable presumptions relating to digital
signatures. – Upon the authentication of a digital
signature, it shall be presumed, in addition to those
mentioned in the immediately preceding section, that:
(a) The information contained in a certificate is
correct;
(b) The digital signature was created during the
operational period of a certificate;
(c) The message associated with a digital signature
has not been altered from the time it was signed; and
(d) A certificate had been issued by the certification
authority indicated therein
g. What are the presumptions involving electronic
signatures?
In any proceedings involving an electronic signature,
it shall be presumed that –
a. the electronic signature is the signature of the
person to whom it correlates; and
b. the electronic signature was affixed by that person
with the intention of signing or approving the
electronic document unless the person relying on the
electronically signed document knows or has noticed
of defects in or unreliability of the signature or reliance
on the electronic signature is not reasonable under
the circumstances.
h. What are considered original documents under
the E-Commerce Act?
Sec. 10. Original Documents - (1) Where the law
requires information to be presented or retained in its
original form, that requirement is met by an electronic
data message or electronic document if:
a) the integrity of the information from the time when it
was first generated in its final form, as an electronic
data message or electronic document is shown by
evidence aliunde or otherwise; and

b) where it is required that information be presented,
that the information is capable of being displayed to
the person to whom it is to be presented.
(2) Paragraph (1) applies whether the requirement
therein is in the form of an obligation or whether the
law simply provides consequences for the information
not being presented or retained in its original form.
(3) For the purposes of subparagraph (a) of
paragraph (1):
a) the criteria for assessing integrity shall be whether
the information has remained complete and unaltered,
apart from the addition of any endorsement and any
change which arises in the normal course of
communication, storage and display; and
b) the standard of reliability required shall be
assessed in the light of the purpose for which the
information was generated and in the light of all the
relevant circumstances.
h.1. Discuss Rule 4 of the Rules on Electronic
Evidence.
Rule 4
BEST EVIDENCE RULE
Section 1. Original of an electronic document. – An
electronic document shall be regarded as the
equivalent of an original document under the Best
Evidence Rule if it is a printout or output readable by
sight or other means, shown to reflect the data
accurately.
Section 2. Copies as equivalent of the originals. –
When a document is in two or more copies executed
at or about the same time with identical contents, or is
a counterpart produced by the same impression as
the original, or from the same matrix, or by
mechanical or electronic re-recording, or by chemical
reproduction, or by other equivalent techniques which
accurately reproduces the original, such copies or
duplicates shall be regarded as the equivalent of the
original.
Notwithstanding the foregoing, copies or duplicates
shall not be admissible to the same extent as the
original if:
(a) a genuine question is raised as to the authenticity
of the original; or
(b) in the circumstances it would be unjust or
inequitable to admit the copy in lieu of the original.
i. How are electronic data messages and
electronic documents authenticated?
shall be authenticated by demonstrating,
substantiating and validating a claimed identity of a
user, device, or another entity may be a way to inform
or communicate the authenticity of an electronic
document.
i.1. Discuss Rule 5 of the Rules on Electronic
Evidence.
RULE 5: AUTHENTICATION OF ELECTRONIC
DOCUMENTS
Section 1. Burden of proving authenticity. – The
person seeking to introduce an electronic document in
any legal proceeding has the burden of proving its
authenticity in the manner provided in this Rule.
Section 2. Manner of authentication. – Before any
private electronic document offered as authentic is
received in evidence, its authenticity must be proved
by any of the following means:
(a) by evidence that it had been digitally signed by the
person purported to have signed the same;
(b) by evidence that other appropriate security
procedures or devices as may be authorized by the
Supreme Court or by law for authentication of
electronic documents were applied to the document;
or
(c) by other evidence showing its integrity and
reliability to the satisfaction of the judge.
ANTONIO
Section 3. Proof of electronically notarized document.
– A document electronically notarized in accordance
with the rules promulgated by the Supreme Court
shall be considered as a public document and proved
as a notarial document under the Rules of Court.
j. Discuss admissibility and evidentiary weight of
electronic message or electronic document.
SECTION 12(12). Admissibility and Evidential Weight
of Electronic Data Messages or Electronic
Documents. — In any legal proceedings, nothing in
the application of the rules on evidence shall deny the
admissibility of an electronic data message or
electronic document in evidence —
a. On the sole ground that it is in electronic form; or
b. On the ground that it is not in the standard written
form, and the electronic data message or electronic
document meeting, and complying with the
requirements under Sections 6 or 7 hereof shall be
the best evidence of the agreement and transaction
contained therein.
In assessing the evidential weight of an electronic
data message or electronic document, the reliability of
the manner in which it was generated, stored or
communicated, the reliability of the manner in which
its originator was identified, and other relevant factor
shall be given due regard.
j.1. Discuss Rule 7 of the Rules on Electronic
Evidence.
RULE 7: EVIDENTIARY WEIGHT OF ELECTRONIC
DOCUMENTS
Section 1. Factors for assessing evidentiary weight. –
In assessing the evidentiary weight of an electronic
document, the following factors may be considered:
(a) The reliability of the manner or method in which it
was generated, stored or communicated, including
but not limited to input and output procedures,
controls, tests and checks for accuracy and reliability
of the electronic data message or document, in the
light of all the circumstances as well as any relevant
agreement;

(b) The reliability of the manner in which its originator
was identified;
(c) The integrity of the information and communication
system in which it is recorded or stored, including but
not limited to the hardware and computer programs or
software used as well as programming errors;
(d) The familiarity of the witness or the person who
made the entry with the communication and
information system;
(e) The nature and quality of the information which
went into the communication and information system
upon which the electronic data message or electronic
document was based; or
(f) Other factors which the court may consider as
affecting the accuracy or integrity of the electronic
document or electronic data message.
Section 2. Integrity of an information and
communication system. – In any dispute involving the
integrity of the information and communication system
in which an electronic document or electronic data
message is recorded or stored, the court may
consider, among others, the following factors:
(a) Whether the information and communication
system or other similar device was operated in a
manner that did not affect the integrity of the
electronic document, and there are no other
reasonable grounds to doubt the integrity of the
information and communication system;
(b) Whether the electronic document was recorded or
stored by a party to the proceedings with interest
adverse to that of the party using it; or
(c) Whether the electronic document was recorded or
stored in the usual and ordinary course of business by
a person who is not a party to the proceedings and
who did not act under the control of the party using it.
j.2. What is hearsay? (Read Section 37 of Rule 130
of the 2019 Amendments to the 1989 Rules on
Evidence)
Section 37. Hearsay. – Hearsay is a statement other
than one made by the declarant while testifying at a
trial or hearing, off erred to prove the truth of the facts
asserted therein. A statement is (1) an oral or written
assertion or (2) a non-verbal conduct of a person, if it
is intended by him or her as an assertion. Hearsay
evidence is inadmissible except as otherwise
provided in these Rules. A statement is not hearsay if
the declarant testify es at the trial or hearing and is
subject to cross-examination concerning the
statement, and the statement is (a) inconsistent with
the declarant’s testimony, and was given under oath
subject to the penalty of perjury at a trial, hearing, or
other proceeding, or in a deposition; (b) consistent
with the declarant’s testimony and is off erred to rebut
an express or implied charge against the declarant of
recent fabrication or improper influence or motive; or
(c) one of identification of a person made after
perceiving him or her.
j.3. Discuss Rule 8 of the Rules on Electronic
Evidence.
RULE 8: BUSINESS RECORDS AS EXCEPTION TO
THE HEARSAY RULE
Section 1. Inapplicability of the hearsay rule. – A
memorandum, report, record or data compilation of
acts, events, conditions, opinions, or diagnoses,
made by electronic, optical or other similar means at
or near the time of or from transmission or supply of
information by a person with knowledge thereof, and
kept in the regular course or conduct of a business
activity, and such was the regular practice to make the
memorandum, report, record, or data compilation by
electronic, optical or similar means, all of which are
shown by the testimony of the custodian or other
qualified witnesses, is excepted from the rule or
hearsay evidence.
Section 2. Overcoming the presumption. – The
presumption provided for in Section 1 of this Rule
may be overcome by evidence of the
untrustworthiness of the source of information or the
method or circumstances of the preparation,
transmission or storage thereof.
k. Discuss Rules 9 to 11 of the Rules on Electronic
Evidence.
ANTONIO
RULE 9: METHOD OF PROOF
Section 1. Affidavit of evidence. – All matters relating
to the admissibility and evidentiary weight of an
electronic document may be established by an
affidavit stating facts of direct personal knowledge of
the affiant or based on authentic records. The affidavit
must affirmatively show the competence of the affiant
to testify on the matters contained therein.
Section 2. Cross-examination of deponent. – The
affiant shall be made to affirm the contents of the
affidavit in open court and may be cross-examined as
a matter of right by the adverse party.
RULE 10: EXAMINATION OF WITNESSES
Section 1. Electronic testimony. – After summarily
hearing the parties pursuant to Rule 9 of these Rules,
the court may authorize the presentation of
testimonial evidence by electronic means. Before so
authorizing, the court shall determine the necessity for
such presentation and prescribe terms and conditions
as may be necessary under the circumstance,
including the protection of the rights of the parties and
witnesses concerned.
Section 2. Transcript of electronic testimony. – When
examination of a witness is done electronically, the
entire proceedings, including the questions and
answers, shall be transcribed by a stenographer,
stenotypes or other recorder authorized for the
purpose, who shall certify as correct the transcript
done by him. The transcript should reflect the fact that
the proceedings, either in whole or in part, had been
electronically recorded.
Section 3. Storage of electronic evidence. – The
electronic evidence and recording thereof as well as
the stenographic notes shall form part of the record of
the case. Such transcript and recording shall be
deemed prima facie evidence of such proceedings.
RULE 11: AUDIO, PHOTOGRAPHIC. VIDEO AND
EPHEMERAL EVIDENCE
Section 1. Audio, video and similar evidence. – Audio,
photographic and video evidence of events, acts or
transactions shall be admissible provided is shall be

shown, presented or displayed to the court and shall
be identified, explained or authenticated by the
person who made the recording or by some other
person competent to testify on the accuracy thereof.
Section 2. Ephemeral electronic communication. –
Ephemeral electronic communications shall be proven
by the testimony of a person who was a party to the
same or has personal knowledge thereof. In the
absence or unavailability of such witnesses, other
competent evidence may be admitted.A recording of
the telephone conversation or ephemeral electronic
communication shall be covered by the immediately
preceding section.If the foregoing communications
are recorded or embodied in an electronic document,
then the provisions of Rule 5 shall apply.
l. Read Republic Act No. 8484 or Access Devices
Regulation Act of 1998.
m. What is an access device?
(a) Access Device – means any card, plate, code,
account number, electronic serial number, personal
identification number, or other telecommunications
service, equipment, or instrumental identifier, or other
means of account access that can be used to obtain
money, good, services, or any other thing of value or
to initiate a transfer of funds (other than a transfer
originated solely by paper instrument);
n. What is a credit card?
(f) Credit Card – means any card, plate, coupon book,
or other credit device existing for the purpose of
obtaining money, goods, property, labor or services or
any thing of value on credit;
n.1. Discuss Pantaleon v. American Express
International, Inc., G.R. No. 174269, 25 Aug. 2010.
Facts:
1. The petitioner (Pantaleon) and his family,
joined an escorted tour of Western Europe.
2. In Coster Diamond House, Amsterdam, Mrs.
Pantaleon (wife) was about to bought a 2.5 karat
diamond brilliant cut, a pendant and a chain, all of
which totaled U.S. $13,826.00.
3. To pay these purchases, around 9:15am,
Pantaleon presented his American Express Credit
Card together with his passport.
4. By 9:40am, Pantaleon was already worried
about further inconveniencing the tour group, he
asked the store clerk to cancel the sale. the store
manager though asked him to wait a few more
minutes.
5. Around 10:00am (around 45 minutes after
Pantaleon had presented his AmexCard), Coster
decided to release the items even without American
Express International, Inc.’s (herein respondent,
Amex for brevity) approval of the purchase. This was
30 minutes after the tour group was supposed to have
left the store.
6. The spouses Pantelon returned. Their offers
of apology were met by their tourmates with stony
silence. The tour group’s visible irritation was
aggravated when the tour guide announced that the
city tour of Amsterdam was to be canceled due to lack
of remaining time. Mrs. Pantaleon ended up weeping.
7. After the star-crossed tour had ended, the
Pantaleon family proceeded to the United States
before returning to Manila. While in the United States,
Pantaleon continued to use his AmEx card, several
times without hassle or delay, but with two other
incidents similar to the Amsterdam brouhaha.
ISSUE:
1. Whether or not AmEx had committed a breach of
its obligations to Pantaleon.
2. Whether or not AmEx is liable for damages.
RULING:
1. Yes. The popular notion that credit card purchases
are approved “within seconds,” there really is no strict,
legally determinative point of demarcation on how
long must it take for a credit card company to approve
or disapprove a customer’s purchase, much less one
ANTONIO
specifically contracted upon by the parties. One hour
appears to be patently unreasonable length of time to
approve or disapprove a credit card purchase.
The culpable failure of AmEx herein is not the failure
to timely approve petitioner’s purchase, but the more
elemental failure to timely act on the same, whether
favorably or unfavorably. Even assuming that AmEx’s
credit authorizers did not have sufficient basis on
hand to make a judgment, we see no reason why it
could not have promptly informed Pantaleon the
reason for the delay, and duly advised him that
resolving the same could take some time.
2. Yes. The reason why Pantaleon is entitled to
damages is not simply because AmEx incurred delay,
but because the delay, for which culpability lies under
Article 1170, led to the particular injuries under Article
2217 of the Civil Code for which moral damages are
remunerative. The somewhat unusual attending
circumstances to the purchase at Coster – that there
was a deadline for the completion of that purchase by
petitioner before any delay would redound to the
injury of his several traveling companions – gave rise
to the moral shock, mental anguish, serious anxiety,
wounded feelings and social humiliation sustained by
Pantaleon, as concluded by the RTC.
o. Discuss the other terms defined in Section 3 of
RA 8484.
Section 3. Definition of terms. – For purposes of this
Act, the terms:
(a) Access Device – means any card, plate, code,
account number, electronic serial number, personal
identification number, or other telecommunications
service, equipment, or instrumental identifier, or other
means of account access that can be used to obtain
money, good, services, or any other thing of value or
to initiate a transfer of funds (other than a transfer
originated solely by paper instrument);
(b) Counterfeit Access Device – means any access
device that is counterfeit, fictitious, altered, or forged,
or an identifiable component of an access device or
counterfeit access device;

(c) Unauthorized Access Device – means any access
device that is stolen, lost, expired, revoked, canceled,
suspended, or obtained with intent to defraud;
(d) Access Device Fraudulently Applied for – means
any access device that was applied for or issued on
account of the use of falsified document, false
information, fictitious identities and addresses, or any
form of false pretense or misrepresentation;
(e) Consumer – means a natural person;
(f) Credit Card – means any card, plate, coupon book,
or other credit device existing for the purpose of
obtaining money, goods, property, labor or services or
any thing of value on credit;
(g) Device Making or Altering Equipment – means any
equipment, mechanism or impression designed or
primarily used for making or altering or reencoding an
access device or a counterfeit access device;
(h) Finance Charges – represent the amount to be
paid by the debtor incident to the extension of credit
such as interest or discounts, collection fees, credit
investigation fees, and other service charges;
(i) Open-end-credit plan – means a consumer credit
extended on an account pursuant to a plan under
which:
1) the creditor may permit the person to make
purchase or obtain loans, from time to time, directly
from the creditor or indirectly by use of credit card, or
other service;
2) the person has the privilege of paying the balance;
or
3) a finance charge may be computed by the creditor
from time to time on an unpaid balance.(j) Penalty
Charges – means such amount, in addition to interest,
imposed on the credit card holder for non-payment of
an account within a prescribed period;
(k) Produce – includes design, alter, authenticate,
duplicate or assemble; and
(l) Trafficking – means transferring, or otherwise
disposing of, to another, or obtaining control of, with
intent to transfer or dispose of.
p. What are the pieces of information required to
be disclosed during credit card application and
solicitation process?
Section 4. Credit Card Application and Solicitation. –
Any application to open a credit card account for any
person under an open-end credit plan or a solicitation
to open such an account, either by mail, telephone or
other means, shall disclose in writing or orally, as the
case may be, the following information:
(a) Annual Percentage Rate
1) Each annual percentage rate of interest on the
amount of credit obtained by the credit card holder
under such credit plan. Where an extension of credit
is subject to a variable rate, the fact that the rate is
variable, and the annual percentage rate in effect at
the time of the mailing.
2) Where more than one rate applies, the range of
balances to which each rate applies.
(b) Annual and other Fees
1) Any annual fee, other periodic fee, or membership
fee imposed for the issuance or availability of a credit
card, including any account maintenance fee or any
other charge imposed based on activity or inactivity
for the account during the billing cycle.
2) Any minimum finance charge imposed for each
period during which any extension of credit which is
subject to a finance charge is outstanding.
3) Any transaction charge imposed in connection with
use of the card to purchase goods or services.
4) Any fee, penalty or surcharge imposed for the
delay in payment of an account.
(c) Balance Calculation Method – the name or a
detailed explanation of the balance calculation
ANTONIO
method used in determining the balance upon which
the finance charge is computed.
(d) Cash Advance Fee – any fee imposed for an
extension of credit in the form of cash.
(e) Over-the-Limit-Fee – any fee imposed in
connection with an extension of credit in excess of the
amount of credit authorized to be extended with
respect to such amount: Provided, however, that in
case the application or solicitation to open a credit
card account for any person under an open-end
consumer credit plan be made through catalogs,
magazines, or other publications, the following
additional information shall be disclosed:
1) A statement, in a conspicuous and prominent
location on the application or solicitation, that:
i) the information is accurate as of the date the
application or solicitation was printed;
ii) the information contained in the application or
solicitation is subject to change after such date;
iii) the applicant should contact the creditor for
information on any change in the information
contained in the application or solicitation since it was
printed;
(2) The date the application or solicitation was printed;
and
(3) In a conspicuous and prominent location on the
application or solicitation, a toll-free telephone number
or mailing address which the applicant may contact to
obtain any change in the information provided in the
application or solicitation since it was printed.
q. What pieces of information need not be
disclosed?
Section 6. Exceptions. – The disclosures required
under Section 4 of this Act may be omitted in any
telephone solicitation or application if the credit card
issuer:

(a) does not impose any fee in connection with
paragraph (b)(1), Section 4 of this Act;
(b) does not impose any fee in connection with
telephone solicitation unless the consumer signifies
acceptance by using the card;
(c) discloses clearly the information described in
Section 4 of this Act in writing within thirty (30) days
after the consumer requests the card, but in no event
later than the date of delivery of the card; and
(d) discloses clearly that the consumer is not
obligated to accept the card or account and the
consumer will not be obligated to pay any fees or
charges disclosed unless the consumer elects to
accept the card or account by using the card.
r. What pieces of information should be disclosed
prior to renewal?
Section 7. Disclosure Prior to Renewal. – Except in
telephone solicitations a card issuer that imposes any
fee described in Section 4 shall transmit to a
consumer's credit card account a clear and
conspicuous disclosure of:
(a) the date by which, the month by which, or the
billing period at the close of which, the account will
expire if not renewed;
(b) the information described in Section 4 which shall
be transmitted to a consumer at least thirty (30) days
prior to the scheduled renewal date of the consumer's
credit card account;
(c) the information described in Section 4 (a) (1)
which shall be transmitted to a consumer's credit card
account; and
(d) the method by which the consumer may terminate
continued credit availability under the account:
Provided, That the disclosures required by this
section must be made prior to posting a fee described
in Section 4 (b) (1) to the account, or with the periodic
billing statement first disclosing that the fee has been
posted to the account subject to the condition that the
consumer is given thirty (30) day period to avoid
payment of the fee or to have the fee recredited to the
account in any case where the consumer does not
wish to continue the availability of the credit.
s. What is the penalty for failure to disclose those
required pieces of information?
Section 8. Failure to Disclose. – Credit card
companies which shall fail to disclose the information
required under Sections 4, 5 and 7 of this Act, after
due notice and hearing, shall be subject to
suspension or cancellation of their authority to issue
credit cards by the Bangko Sentral ng Pilipinas,
Securities and Exchange Commission and such other
government agencies.
t. Discuss the acts that constitute access devices
fraud.
Section 9. Prohibited Acts. – The following acts shall
constitute access device fraud and are hereby
declared to be unlawful:
(a) producing, using, trafficking in one or more
counterfeit access devices;
(b) trafficking in one or more unauthorized access
devices or access devices fraudulently applied for;
(c) using, with intent to defraud, an unauthorized
access device;
(d) using an access device fraudulently applied for;
(e) possessing one or more counterfeit access
devices or access devices fraudulently applied for;
(f) producing, trafficking in, having control or custody
of, or possessing device-making or altering equipment
without being in the business or employment, which
lawfully deals with the manufacture, issuance, or
distribution of such equipment;
(g) inducing, enticing, permitting or in any manner
allowing another, for consideration or otherwise to
produce, use, traffic in counterfeit access devices,
unauthorized access devices or access devices
fraudulently applied for;
ANTONIO
(h) multiple imprinting on more than one transaction
record, sales slip or similar document, thereby making
it appear that the device holder has entered into a
transaction other than those which said device holder
had lawfully contracted for, or submitting, without
being an affiliated merchant, an order to collect from
the issuer of the access device, such extra sales slip
through an affiliated merchant who connives
therewith, or, under false pretenses of being an
affiliated merchant, present for collection such sales
slips, and similar documents;
(i) disclosing any information imprinted on the access
device, such as, but not limited to, the account
number or name or address of the device holder,
without the latter's authority or permission;
(j) obtaining money or anything of value through the
use of an access device, with intent to defraud or with
intent to gain and fleeing thereafter;
(k) having in one's possession, without authority from
the owner of the access device or the access device
company, an access device, or any material, such as
slips, carbon paper, or any other medium, on which
the access device is written, printed, embossed, or
otherwise indicated;
(l) writing or causing to be written on sales slips,
approval numbers from the issuer of the access
device of the fact of approval, where in fact no such
approval was given, or where, if given, what is written
is deliberately different from the approval actually
given;
(m) making any alteration, without the access device
holder's authority, of any amount or other information
written on the sales slip;
(n) effecting transaction, with one or more access
devices issued to another person or persons, to
receive payment or any other thing of value;
(o) without the authorization of the issuer of the
access device, soliciting a person for the purpose of:
1) offering an access device; or

2) selling information regarding or an application to
obtain an access device; or
(p) without the authorization of the credit card system
member or its agent, causing or arranging for another
person to present to the member or its agent, for
payment, one or more evidence or records of
transactions made by credit card.
t.1. Discuss Soledad v. People of the Philippines,
G.R. No. 184274, 23 February 2011.
FACTS:
Henry Yu received a call from Rochelle Bagaporo
offering a loan assistance at a low interest rate.
Private complainant then invited her to go to his office.
Bagaporo then indorsed private complainant to a
certain Arthur, herein petitioner. In their telephone
conversation, petitioner told private complainant to
submit documents. Private complainant submitted
various documents, such as his Globe handyphone
original platinum gold card, identification cards and
statements of accounts. Subsequently, private
complainant followed up his loan status but failed to
do so.
Private complainant then received his Globe
handyphone statement of account where he was
charged for two mobile phone numbers which were
not his. Upon verification with the phone company,
private complainant learned that he had additional five
mobile numbers in his name, and the application for
said cellular phone lines bore the picture of petitioner
and his forged signature. Private complainant also
checked with credit card companies and learned that
his Citibank Credit Card database information was
altered and he had a credit card application with
Metrobank. Yu then lodged a complaint with NBI
which conducted an entrapment operation.
During the entrapment operation, NBI’s Special
Investigator together with some other NBI operatives,
arrived in Las Piñas around 5:00 P.M. [Arteche] posed
as the delivery boy of the Metrobank credit card.
Upon reaching the address written on the delivery
receipt, [Arteche] asked for Henry Yu. [Petitioner]
responded that he was Henry Yu and presented to
[Arteche] two (2) identification cards which bore the
name and signature of private complainant, while the
picture showed the face of [petitioner]. [Petitioner]
signed the delivery receipt. Thereupon, [Arteche]
introduced himself as an NBI operative and
apprehended recovered from the two (2) identification
cards he presented to [Arteche] earlier.
Petitioner was thus charged with Violation of Section
9(e), R.A. No. 8484 for "possessing a counterfeit
access device or access device fraudulently applied
for."
Upon arraignment, petitioner pleaded "not guilty." Trial
on the merits ensued. After the presentation of the
evidence for the prosecution, petitioner filed a
Demurrer to Evidence, alleging that he was not in
physical and legal possession of the credit card
presented and marked in evidence by the
prosecution.
Issue:
whether the petitioner was legally in possession of the
credit card subject of the case. YES
HELD:
Petitioner avers that he was never in possession of
the subject credit card because he was arrested
immediately after signing the acknowledgement
receipt. Thus, he did not yet know the contents of the
envelope delivered and had no control over the
subject credit card
t.2. Discuss Cruz v. People of the Philippines, G.R.
No. 210266, 07 June 2017.
FACTS:
According to the prosecution, on April 18, 2006, at
around 7:30 p.m., Cruz allegedly tried to purchase
two (2) bottles of Calvin Klein perfume worth
US$96.00 from Duty Free Philippines Fiesta Mall.
Danilo Wong (Wong), the cashier at the Perfume
Section, testified that Cruz paid for the purchase
using a Citibank Visa credit card. The transaction was
approved, although Wong doubted the validity of the
credit card since the number at the back was not
aligned. At around 8:00 p.m., Cruz allegedly tried to
ANTONIO
purchase a pair of Ferragamo shoes worth
US$363.00. Ana Margarita Lim (Lim), the cashier on
duty, facilitated the sales transaction. Cruz paid for the
purchase using a Citibank Visa credit card bearing the
name "Gerry Santos," with credit card number 4539
7207 8677 7008. When Lim asked for Cruz's Duty
Free shopping card, Cruz presented a shopping card
with the name of "Rodolfo Garcia." Lim asked for
another identification card, and Cruz gave her a
driver's license bearing the name "Gerry Santos."
Lim proceeded to the mall's Electronic Section to
swipe the credit card for approval. The card was
approved, but she noticed that the last four (4) digits
of the card were not properly embossed and its
validity date started in November 2006. She called
Citibank to verify the credit card. Upon verification,
Citibank informed Lim that the credit card was
counterfeit and that the real Gerry Santos was the
Head of Citibank's Fraud Risk Management Division.
Lim was advised to transfer the matter to the Security
Department. Redentor Quejada, Security Supervisor
of Duty Free Philippines, testified that he and two (2)
other guards held Cruz and his companion, Rodolfo
De Silva Cruz, at the security office until the
representative from Citibank arrived.
At around 9:00 p.m. to 10:00 p.m., Gerardo T. Santos,
Head of Citibank's Fraud Risk Management Division,
arrived with members of the Philippine National Police
- Criminal Investigation Detective Group, together with
a certain Atty. Abad Santos, who was allegedly Cruz's
lawyer. Before Redentor Quejada could turn Cruz
over to the police, Cruz tried to escape with the help
of Atty. Abad Santos. The security officers, however,
were able to close the mall's main gate, which
prevented their escape. Cruz and Rodolfo De Silva
Cruz were turned over to the Criminal Investigation
Detective Group and brought to Camp Crame for
questioning. Citibank Visa credit card number 4539
7207 8677 7008 was also turned over to the Criminal
Investigation Detective Group. Gerardo T. Santos
testified that he first heard of Cruz's name in May
2004. Cruz and his wife Aileen were then managing
Antonely's Fabric Warehouse and were involved in
incidents related to credit card fraud.
Santos did not file a case against them for lack of
basis. He came across Cruz's name again in 2005,
with regard to a fraudulent transaction with a Thai

restaurant in Shoemart Megamall. He also testified
that the credit card number was validly issued to a
certain Jessamine Bongat, and that the counterfeit
credit card had been previously used on several
fraudulent occasions.
ISSUE:
Whether the prosecution was able to prove beyond
reasonable doubt that petitioner was guilty of violating
Section 9(a) and (e) of Republic Act No. 8484.
Corollary to this is whether the counterfeit access
device can still be presented in trial despite not having
been presented and marked during pre-trial.
HELD:
Yes. Petitioner was found in possession of Citibank
Visa credit card number 4539 7207 8677 7008, which
bore the name "Gerry Santos."
This resolves a Petition for Review on Certiorari
assailing the Decision dated July 4, 2013 and
Resolution dated November 26, 2013 of the Court of
Appeals, which affirmed the conviction of petitioner
Anthony De Silva Cruz (Cruz) by the Regional Trial
Court for violation of Republic Act No. 8484,
otherwise known as the Access Devices Regulation
Act of 1998. Cruz was charged with violation of
Section 9 (a) and (e) of Republic Act No. 8484, which
provide the Section 9.
Prohibited Acts. - The following acts shall constitute
access device fraud and are hereby declared to be
unlawful: (a) producing, using, trafficking in one or
more counterfeit access devices; and (e) possessing
one or more counterfeit access devices or access
devices fraudulently applied for. He was charged with
Criminal Case No. 06-0479, Criminal Case No.
06-0480 and Criminal Case No. 06-0481. Cruz was
arraigned on October 17, 2006, where he pleaded not
guilty for each charge.
u. When is there conspiracy to commit access
devices fraud? What is the penalty?
Section 11. Conspiracy to commit access device
fraud. – If two (2) or more persons conspire to commit
any of the offenses listed in Section 9 and one or
more of such persons does any act to effect the object
of the conspiracy, each of the parties to such
conspiracy shall be punished as in the case of the
doing of the act, the accomplishment of which is the
object of such conspiracy.
v. What is the penalty for frustrated and attempted
access devices fraud?
Section 12. Frustrated and attempted access device
fraud. – Any person who performs all the acts of
execution which would produce any of the unlawful
acts enumerated in Section 9 of this Act, but which
nevertheless does not produce it by reason of causes
independent of the will of said person, shall be
punished with two-thirds (2/3) of the fine and
imprisonment provided for the consummated offenses
listed in said section. Any person who commences
the commission of any of the unlawful acts
enumerated in Section 9 of this Act directly by overt
acts and does not perform all the acts of execution
which would produce the said acts by reason of some
cause or accident other than said person's own
spontaneous desistance, shall be punished with
one-half (1/2) of the fine and imprisonment provided
for the consummated offenses listed in the said
section.
w. What is the penalty for being an accessory to
access devices fraud?
Section 13. Accessory to access device fraud. – Any
person who, with intent to gain for himself or for
another, buy, receives, possesses, keeps, acquires,
conceals, sells, or disposes of, shall buy and sell, or
in any manner deal in any article, item, object or
anything of value which he knows or should be known
to him, to have been acquired through the use of
counterfeit access device or an unauthorized access
device or an access device known to him to have
been fraudulently applied for, shall be considered as
an accessory to an access device fraud and shall be
punished with one-half (1/2) of the fine and
imprisonment provided for the applicable
consummated offenses listed in Section 9 of this Act.
Said person shall be prosecuted under this Act or
under the Anti-Fencing Law of 1979 (Presidential
Decree No. 1612) whichever imposes the longer
prison term as penalty for the consummated offense.
ANTONIO
x. When is there prima facie evidence of intent to
defraud?
Section 14. Presumption and prima facie evidence of
intent to defraud. – The mere possession, control or
custody of:
(a) an access device, without permission of the owner
or without any lawful authority;
(b) a counterfeit access device;
(c) access device fraudulently applied for;
(d) any device-making or altering equipment by any
person whose business or employment does not
lawfully deal with the manufacture, issuance, or
distribution of access device;
(e) an access device or medium on which an access
device is written, not in the ordinary course of the
possessor's trade or business; or
(f) a genuine access device, not in the name of the
possessor, or not in the ordinary course of the
possessor's trade or business, shall be prima facie
evidence that such device or equipment is intended to
be used to defraud.
A cardholder who abandons or surreptitiously leaves
the place of employment, business or residence
stated in his application or credit card, without
informing the credit card company of the place where
he could actually be found, if at the time of such
abandonment or surreptitious leaving, the outstanding
and unpaid balance is past due for at least ninety (90)
days and is more than Ten thousand pesos
(P10,000.00), shall be prima facie presumed to have
used his credit card with intent to defraud.
y. What is the effect of timely reporting of the loss
of an access device to the issuer?
Section 15. Loss of access devices. – In case of loss
of an access device, the holder thereof must notify the
issuer of the access device of the details and
circumstances of such loss upon knowledge of the
loss. Full compliance with such procedure would
absolve the access device holder of any financial

liability from fraudulent use of the access device from
the time the loss or theft is reported to the issuer.
6th Week - Retail Trade Laws
a. Read Republic Act No. 10642 or the Philippine
Lemon Law and its Implementing Rules and
Regulations (IRR) from the DTI.
An act strengthening consumer protection in the
purchase of brand-new motor vehicles
b. Discuss the state policy declared in RA 10642.
Section 2. Declaration of Policy. – It is hereby
declared the policy of the State to promote full
protection to the rights of consumers in the sale of
motor vehicles against business and trade practices
which are deceptive, unfair or otherwise inimical to
consumers and the public interest.
The State recognizes that a motor vehicle is a major
consumer purchase or investment. Hence, the rights
of consumers should be clearly defined, including the
means for redress for violations thereof.
c. Discuss the terms defined in RA 10642 and its
IRR.
Section 3. Definition of Terms. – As used in this Act:
(a) Brand new motor vehicle refers to a vehicle
constructed entirely from new parts and covered by a
manufacturer’s express warranty at the time of
purchase that it has never been sold or registered
with the Department of Transportation and
Communications (DOTC) or an appropriate agency or
authority, and has never been operated on any
highway of the Philippines, or in any foreign state or
country;
(b) Collateral charges refer to the fees paid’ to the
Land Transportation Office (LTO) for the registration
of a brand new motor vehicle and other incidental
expenses such as, but not limited to, the cost of
insurance pertaining to the vehicle, chattel mortgage
fees and interest expenses if applicable;
(c) Comparable motor vehicle refers to a motor
vehicle that is identical or reasonably equivalent to the
motor vehicle to be replaced, in terms of
specifications and values, subject to availability, as
ANTONIO
the motor vehicle existed at the time of purchase:
Provided, that there shall be an offsetting from this
value for reasonable allowance for its use;
(d) Consumer refers to any person, natural or
juridical, who purchases a brand new motor vehicle
either by cash or credit from an authorized distributor,
dealer or retailer in the Philippines;
(e) Dealer or retailer refers to any person, natural or
juridical, authorized by the manufacturer or distributor
to sell brand new motor vehicles directly to the retail
buyers and the public;
(f) Distributor refers to any person, natural or juridical,
authorized by the manufacturer to sell brand new
motor vehicles to duly authorized dealers or retailers;
(g) Implementing agency refers to the Department of
Trade and Industry (DTI), reorganized under Title X,
Book IV of Executive Order No. 292, series of 1987,
otherwise known as the "Administrative Code of
1987";
(h) Lemon Law rights period refers to the period
ending twelve (12) months after the date of the
original delivery of a brand new motor vehicle to a
consumer or the first twenty thousand (20,000)
kilometers of operation after such delivery, whichever
comes first. This shall be the period during which the
consumer can report any nonconformity, as defined in
paragraph (k) herein, to the standards and
specifications of the manufacturer, authorized
distributor, authorized dealer or retailer, and pursue
any right as provided for under this Act;
(i) Manufacturer refers to any person, natural or
juridical, engaged in the business of manufacturing or
assembling motor vehicles;
(j) Motor vehicle refers to any self-propelled, four (4)
wheeled road vehicle designed to carry passengers
including, but not limited to, sedans, coupes, station
wagons, convertibles, pick-ups, vans, sports utility
vehicles (SUVs) and Asian Utility Vehicles (AUVs) but
excluding motorcycles, delivery trucks, dump trucks,
buses, road rollers, trolley cars, street sweepers,
sprinklers, lawn mowers and heavy equipment such
as, but not limited to, bulldozers, payloaders, graders,

forklifts, amphibian trucks, cranes, and vehicles which
run only on rails or tracks, and tractors, trailers and
traction engines of all kinds used exclusively for
agricultural purposes. Trailers having any number of
wheels, when propelled or intended by attachment to
a motor vehicle, shall be classified as separate motor
vehicle with no power rating;
(k) Nonconformity refers to any defect or condition
that substantially impairs the use, value or safety of a
brand new motor vehicle which prevents it from
conforming to the manufacturer’s or distributor’s
standards or specifications, which cannot be repaired,
but excluding conditions resulting from
noncompliance by the consumer of his or her
obligations under the warranty, modifications not
authorized by the manufacturer or distributor, abuse
or neglect, and damage due to accident or force
majeure;
(l) Purchase price refers to the invoice price or the
amount of money which the dealer or retailer actually
received for the brand new motor vehicle, in
consideration of the sale of such brand new motor
vehicle;
(m) Warranty refers to the written assurance, so
labeled, of the manufacturer of a brand new motor
vehicle including any term or condition precedent to
the enforcement of obligations under the warranty;
and
(n) Warranty rights period refers to the period
provided for under the contract of sale when the
manufacturer would guarantee the materials used, the
workmanship and the roadworthiness of a brand new
motor vehicle for ordinary use or reasonable intended
purposes.
d. What are the motor vehicles covered under RA
10642?
Section 4. Coverage. – This Act shall cover brand
new motor vehicles purchased in the Philippines
reported by a consumer to be in nonconformity with
the vehicle’s manufacturer or distributor’s standards
or specifications within twelve (12) months from the
date of original delivery to the consumer, or up to
twenty thousand (20,000) kilometers of operation after
such delivery, whichever comes first. The following
causes of nonconformity shall be excluded:
(a) Noncompliance by the consumer of the obligations
under the warranty;
(b) Modifications not authorized by the manufacturer,
distributor, authorized dealer or retailer;
(c) Abuse or neglect of the brand new motor vehicle;
and
(d) Damage to the vehicle due to accident or force
majeure.
e. What is repair attempt?
Section 5. Repair Attempts. – At any time within the
Lemon Law rights period, and after at least four (4)
separate repair attempts by the same manufacturer,
distributor, authorized dealer or retailer for the same
complaint, and the nonconformity issue remains
unresolved, the consumer may invoke his or her
rights under this Act.
The repair may include replacement of parts
components, or assemblies.
f. Discuss the repair attempt process outlined in
the IRR of RA 10642.
Section 2. Repair Attempt Process. A completed
repair/job order constitutes one repair attempt by
undergoing the process outlined below.
2.1. The Consumer and/or representative, specifically
authorized in writing by the Consumer, bring the
motor vehicle to the same authorized Dealer report
and/or demonstrate the complaint on the Motor
Vehicle.
2.2. The Dealer, at all times, shall receive the motor
vehicle, and records the consumer's complaint on the
Motor Vehicle.
2.3. The Dealer shall advise the Consumer of the
proposed repair(s) and the estimated time to
complete the repair(s).
ANTONIO
2.4. The Consumer authorizes the repair by affixing
his/her signature on the repair/job order.
2.5. The Dealer, upon completion of the repair activity,
releases the motor vehicle to the consumer and shall
provide the Consumer with an inventory of repairs
done as completed and parts replaced.
2.6. The Dealer returns the parts replaced and
furnishes the results of any testactivity which was
performed, if any.
g. When must the consumer make the notice of
availment of Lemon Law rights and in what form?
Section 6. Notice of Availment of Lemon Law Rights.
– Before availing of any remedy under this Act and
subject to compliance with the provisions of Section 5
hereof, the consumer shall, in writing, notify the
manufacturer, distributor, authorized dealer or retailer
of the unresolved complaint, and the consumer’s
intention to invoke his or her rights under this Act
within the Lemon Law rights period.
The warranty booklet issued by the manufacturer,
distributor, authorized dealer or retailer shall clearly
state the manner and form of such notice to constitute
a valid and legal notice to the manufacturer,
distributor, authorized dealer or retailer. It shall also
clearly state the responsibility of the consumer under
this section.
h. Discuss the responsibilities of the consumer
under Rule II of the IRR of RA 10642.
Section 2, Responsibilities of the Consumer. The
warranty booklet shall clearly state the responsibilities
of the consumer as follows:
2.1. The Consumer shall keep copy of repair records;
2.2. The Consumer shall ensure that the odometer
reading or the date of vehicle delivery for Final
Attempt at the servicing dealer is within the Lemon
Law rights period;
2.3. The Consumer shall, in writing and in the form
prescribed in the Warranty Booklet (the Notice of
Availment form), notify the manufacturer, distributor,

authorized dealer or retailer of the unresolved
complaint after four (4) separate repair attempts; and
2.4. The Consumer shall likewise retain the
documentary requirements specified in Section 2,
Rule Ill of these rules
i. Discuss the process of availment of Lemon Law
rights.
Section 7. Availment of Lemon Law Rights. –
Subsequent to filing the notice of availment referred to
in the preceding section, the consumer shall bring the
vehicle to the manufacturer, distributor, authorized
dealer or retailer from where the vehicle was
purchased for a final attempt to address the complaint
of the consumer to his or her satisfaction.
It shall be the duty of the manufacturer, distributor,
authorized dealer or retailer, upon receipt of the motor
vehicle and the notice of nonconformity required
under Section 6 hereof, to attend to the complaints of
the consumer including, as may be necessary, making
the repairs and undertaking such actions to make the
vehicle conform to the standards or specifications of
the manufacturer, distributor, authorized dealer or
retailer for such vehicle.
In case the nonconformity issue remains unresolved
despite the manufacturer, distributor, authorized
dealer or retailer’s efforts to repair the vehicle,
pursuant to the consumer’s availment of his or her
Lemon Law rights, the consumer may file a complaint
before the DTI as provided for under this Act:
Provided, however, That if the vehicle is not returned
for repair, based on the same complaint, within thirty
(30) calendar days from the date of notice of release
of the motor vehicle to the consumer following this
repair attempt within the Lemon Law rights period, the
repair is deemed successful: Provided, finally, That, in
the event that the nonconformity issue still exists or
persists after the thirty (30)-day period but still within
the Lemon Law rights period, the consumer may be
allowed to avail of the same remedies under Sections
5 and 6 hereof.
To compensate for the non-usage of the vehicle while
under repair and during the period of availment of the
Lemon Law rights, the consumer shall be provided a
reasonable daily transportation allowance, an amount
which covers the transportation of the consumer from
his or her residence to his or her regular workplace or
destination and vice versa, equivalent to
air-conditioned taxi fare, as evidenced by official
receipt, or in such amount to be agreed upon by the
parties, or a service vehicle at the option of the
manufacturer, distributor, authorized dealer or retailer.
Any disagreement on this matter shall be resolved by
the DTI.
Nothing herein shall be construed to limit or impair the
rights and remedies of a consumer under any other
law.
j. What are the documents to be presented before
a consumer may avail of his Lemon Law rights?
Section 3. Documentary Requirements. In order for
the consumer to invoke the Lemon Law Rights, the
following documents are necessary:
3.1. Warranty Booklet/Service Booklet;
3.2. Current Motor Vehicle Registration;
3.3. All repair/job order invoices, and
3.4. Notice of Availment stamped received by the
Dealer or accompanied by proof of receipt by the
Dealer of the Notice of Availment.
k. Discuss the remedies for dispute resolution.
The remedies for dispute resolution is found in Title III
of the Implementing Rules and Regulations and
Section 8 of the Philippine Lemon Law. It includes
meditation arbitration and adjudication
k.1. Who exercises exclusive and original
jurisdiction over disputes arising RA 10642?
Section 8. Remedies for Dispute Resolution. – The
DTI shall exercise exclusive and original jurisdiction
over disputes arising from the provisions of this Act.
The Secretary of the DTI shall decide on the appeal
within thirty (30) days from receipt thereof. A party
ANTONIO
seeking further appeal from the decision of the
Secretary of the DTI may file a case for certiorari to
the Court of Appeals under Section 4, Rule 65 of the
Revised Rules of Court.
k.2. Discuss mediation and the process.
Meditation –
(1) The principles of negotiation, conciliation and
mediation towards amicable settlement between the
manufacturer, distributor, authorized dealer or retailer
and the consumer shall be strictly observed;
(2) In the course of its dispute resolution efforts, the
DTI shall endeavor to independently establish the
validity of the consumer’s outstanding complaint. The
DTI shall likewise retain the services of other
government agencies or qualified independent private
entities in the ascertainment of the validity of the
consumer’s complaint. Any cost incurred in
establishing the validity of the consumer’s complaint
shall be bornejointly by the consumer and the
manufacturer, distributor, authorized dealer or retailer;
(3) The complaint shall be deemed valid if it is
independently established that the motor vehicle does
not conform to the standards or specifications set by
the manufacturer, distributor, authorized dealer or
retailer;
(4) Upon failure of the negotiation or mediation
between the manufacturer, distributor, authorized,
dealer or retailer and the consumer, the parties shall
execute a certificate attesting to such failure; and
(5) At any time during the dispute resolution period,
the manufacturer, distributor, authorized dealer or
retailer and the consumer shall be encouraged to
settle amicably. All disputes that have been submitted
for mediation shall be settled not later than ten (10)
working days from the date of filing of the complaint
with the DTI.
k.3. Discuss arbitration.
Arbitration - In the event there is a failure to settle the
complaint during the mediation proceedings, both

parties may voluntarily decide to undertake arbitration
proceedings.
k.4. Discuss adjudication and the process.
Adjudication –
(1) In the event that both parties do not undertake
arbitration proceedings, at least one of the parties
may commence adjudication proceedings,
administered by the DTI. The DTI shall rely on the
qualified independent findings as to conformity to
standards and specifications established herein. In no
case shall adjudication proceedings exceed twenty
(20) working days;
(2) In case a finding of nonconformity is arrived at, the
DTI shall rule in favor of the consumer and direct the
manufacturer, distributor, authorized dealer or retailer
to grant either of the following remedies to the
consumer:
(i) Replace the motor vehicle with a similar or
comparable motor vehicle in terms of specifications
and values, subject to availability; or
(ii) Accept the return of the motor vehicle and pay the
consumer the purchase price plus the collateral
charges.
In case the consumer decides to purchase another
vehicle with a higher value and specifications from the
same manufacturer, distributor, authorized dealer or
retailer, the consumer shall pay the difference in cost.
In both cases of replacement and repurchase, the
reasonable allowance for use, as defined in this Act,
shall be deducted in determining the value of the
nonconforming motor vehicle; and
(3) In case a nonconformity of the motor vehicle is not
found by the DTI, it shall rule in favor of the
manufacturer, distributor, authorized dealer or retailer,
and direct the consumer to reimburse the
manufacturer, distributor, authorized dealer or retailer
the costs incurred by the latter in validating the
consumer’s complaints.
An appeal may be taken from a final judgment or
order of the Adjudication Officer which completely
disposes of the case within fifteen (15) days from
receipt thereof. The appeal shall be taken by filing a
Memorandum of Appeal with the Secretary of the DTI,
with Notice of Appeal to the Adjudication Officer, and
with a copy duly furnished the adverse party or parties
on any of the following grounds:
(i) Grave abuse of discretion;
(ii) The decision/order is in excess of jurisdiction or
authority of the Adjudication Officer; and
(iii) The decision/order is not supported by the
evidence or there is serious error in the findings of
facts.
The Secretary of the DTI shall decide on the appeal
within thirty (30) days from receipt thereof. A party
seeking further appeal from the decision of the
Secretary of the DTI may file a case for certiorari to
the Court of Appeals under Section 4, Rule 65 of the
Revised Rules of Court.
k.5. Is the DTI Secretary’s decision final and
non-appealable? (Read Sections 1 and 4 of Rule
65 of the Rules of Court)
NO. The Secretary of the DTI shall decide on the
appeal within thirty (30) days from receipt thereof. A
party seeking further appeal from the decision of the
Secretary of the DTI may file a case for certiorari to
the Court of Appeals under Section 4, Rule 65 of the
Revised Rules of Court.
Section 1. Petition for certiorari. — When any tribunal,
board or officer exercising judicial or quasi-judicial
functions has acted without or in excess its or his
jurisdiction, or with grave abuse of discretion
amounting to lack or excess of jurisdiction, and there
is no appeal, or any plain, speedy, and adequate
remedy in the ordinary course of law, a person
aggrieved thereby may file a verified petition in the
proper court, alleging the facts with certainty and
praying that judgment be rendered annulling or
modifying the proceedings of such tribunal, board or
officer, and granting such incidental reliefs as law and
justice may require.
ANTONIO
The petition shall be accompanied by a certified true
copy of the judgment, order or resolution subject
thereof, copies of all pleadings and documents
relevant and pertinent thereto, and a sworn
certification of non-forum shopping as provided in the
third paragraph of section 3, Rule 46.
Section 4. When and where petition filed. — The
petition shall be filed not later than sixty (60) days
from notice of the judgment, order or resolution. In
case a motion for reconsideration or new trial is timely
filed, whether such motion is required or not, the sixty
(60) day period shall be counted from notice of the
denial of said motion.
The petition shall be filed in the Supreme Court or, if it
relates to the acts or omissions of a lower court or of
a corporation, board, officer or person, in the Regional
Trial Court exercising jurisdiction over the territorial
area as defined by the Supreme Court. It may also be
filed in the Court of Appeals whether or not the same
is in aid of its appellate jurisdiction, or in the
Sandiganbayan if it is in aid of its appellate
jurisdiction. If it involves the acts or omissions of a
quasi-judicial agency, unless otherwise provided by
law or these Rules, the petition shall be filed in and
cognizable only by the Court of Appeals.
No extension of time to file the petition shall be
granted except for compelling reason and in no case
exceeding fifteen (15) days. (4a) (Bar Matter No. 803,
21 July 1998; A.M. No. 00-2-03-SC)
l. What is reasonable allowance for use?
Section 9. Determination of Reasonable Allowance for
Use. – For purposes of this Act, "reasonable
allowance for use" shall mean twenty percent (20%)
per annum deduction from the purchase price, or the
product of the distance traveled in kilometers and the
purchase price divided by one hundred thousand
(100,000) kilometers, whichever is lower.
m. What should be disclosed on resale?
Section 10. Disclosure on Resale. – Should the
returned motor vehicle be made available for resale,
the manufacturer, distributor, authorized dealer or
retailer shall, prior to sale or transfer, disclose in

writing to the next purchaser of the same vehicle the
following information:
(a) The motor vehicle was returned to the
manufacturer, distributor, authorized dealer or retailer;
(b) The nature of the nonconformity which caused the
return; and
(c) The condition of the motor vehicle at the time of
the transfer to the manufacturer, distributor,
authorized dealer or retailer.
The responsibility of the manufacturer, distributor,
authorized dealer or retailer under this section shall
cease upon the sale of the affected motor vehicle to
the first purchaser.
n. Is violation of the Philippine Lemon Law a
crime?
Section 11. Penalty. – The manufacturer, distributor,
authorized dealer or retailer adjudged to have violated
the provisions requiring disclosure as mentioned in
the preceding section shall be liable to pay a
minimum amount of One hundred thousand pesos
(P100,000.00) as damages to the aggrieved party
without prejudice to any civil or criminal liability they
and/or the responsible officer may incur under existing
laws.
o. What are the three Rs of consumer protection
in relation to the Philippine Lemon Law?
The 3 R’s: Repair, Replacement and Refund are the
options that consumers have when the product or
service they bought is defective. If ever the consumer
opted to have the product repaired and the service
center failed to mend it, they may now demand for
either replacement or refund.
7th Week - Retail Trade Laws
a. Read Arts. 1 to 47 of Republic Act No. 7394 and
its Implementing Rules and Regulations.
ARTICLE 1. "Short Title. — This Act shall be known
as the “Consumer Act of the Philippines.”
b. Discuss the state policy declared in RA 7394.
ARTICLE 2. “Declaration of Basic Policy. — It is the
policy of the State to protect the interests of the
consumer, promote his general welfare and to
establish standards of conduct for business and
industry. Towards this end, the State shall implement
measures to achieve the following objectives:
a) protection against hazards to health and
safety;
b) protection against deceptive, unfair and
unconscionable sales acts and practices;
c) provision of information and education to
facilitate sound choice and the proper
exercise of rights by the consumer;
d) provision of adequate rights and means
of redress; and
e) involvement of consumer representatives
in the formulation of social and economic
policies.”
c. What is the rule in construing and interpreting
provisions of RA 7394?
ARTICLE 3. “Construction. — The best interest of
the consumer shall be considered in the
interpretation and implementation of the provisions of
this Act, including its implementing rules and
regulations.”
d. Discuss the terms defined in RA 7394 (Art. 4).
* credits to 4LM2 for the highlights *
ARTICLE 4. Definition of Terms. — For purposes
of this Act, the term:
a) “Advertisement” means the prepared and
through any form of mass medium, subsequently
applied, disseminated or circulated advertising matter.
b) “Advertising” means the business of
conceptualizing, presenting or making available to the
public, through any form of mass media, fact, data or
ANTONIO
information about the attributes, features, quality or
availability of consumer products, services or credit.
c) “Advertising agency or Agent” means a
service organization or enterprise creating,
conducting, producing, implementing or giving
counsel on promotional campaigns or programs
through any medium for and on behalf of any
advertiser.
d) “Advertiser” means the client of the
advertising agency or the sponsor of the
advertisement on whose account the advertising is
prepared, conceptualized, presented or disseminated.
e) “Agricultural purpose” means a purpose
related to the production, harvest, processing,
manufacture, distribution, storage, transportation,
marketing, exhibition or disposition of agricultural,
fishery or marine products.
f) “Amount financed” in a consumer credit
sale constitutes the cash price plus non-finance
charges less the amount of any downpayment
whether made in cash or in property traded in, or in a
consumer loan the amount paid to, receivable by or
paid or payable to the buyer or to another person in
his behalf.
g) “Banned hazardous substance” means
(1) any toy or other articles intended for use
by children, which are hazardous per se, or
which bear or contain substances harmful to
human beings; or
(2) any hazardous substance intended or
packaged in a form suitable for use in the
household, which the implementing agency
by regulation, classifies as “banned
hazardous substance” notwithstanding the
existence of cautionary labels, to safeguard
public health and safety: Provided, That the
implementing agency may, by regulation,
exempt from this Act, articles which by
reason of their functional purpose require the
inclusion of the hazardous substance
involved and which bear appropriate labels
giving adequate directions and warnings for
their safe use.

Procedures for the issuance, amendment or repeal of
regulations pursuant to clause (2) or paragraph (g) of
this Article shall be governed by the rules and
regulations promulgated by the Department of Health;
Provided, That if the Department of Health finds that
the distribution for household use of the hazardous
substance involved presents an imminent hazard to
the public health, it may publish in a newspaper of
general circulation a notice of such finding and such
substance shall be deemed to be a “banned
hazardous substance” pending the issuance of
regulation formally banning such substance.
h) “Batch” means a quantity of any drug or
device produced during a given cycle of manufacture.
i) “Business name, firm name or style”
means any name or designation other than the true
name of a person, partnership, corporation or
association which is used or signed in connection with
his/its business or in
1) any written or printed receipt,
including receipt for tax on business;
2) any written or printed contract not
verified by a notary public;
3) any written or printed evidence of
any agreement or business transaction; and
4) any sign or billboard kept
conspicuously exhibited in plain view in or at
the place of the business, announcing a firm
name or business name or style.
j) “Cash price or delivered price”, in case of
trade transaction, means the amount of money which
would constitute full payment upon delivery of the
property (except money) or service purchased at the
creditor’s place of business. In the case of financial
transactions, cash price represents the amount
received by the debtor upon consummation of the
credit transaction, net of finance charges collected at
the time the credit is extended, if any.
k) “Chain distribution plans” or “pyramid
sales schemes” means sales devices whereby a
person, upon condition that he makes an investment,
is granted by the manufacturer or his representative a
right to recruit for profit one or more additional
persons who will also be granted such right to recruit
upon condition of making similar investments:
Provided, That, the profits of the person employing
such a plan are derived primarily from the recruitment
of other persons into the plan rather than from the
sale of consumer products, services and credit:
Provided, further, That the limitation on the number of
participants does not change the nature of the plan.
l) “Closing out sale” means a consumer sale
wherein the seller uses the announcement to create
the impression that he is willing to give large
discounts or merchandise in order to reduce, dispose
or close out his inventory and business.
m) “Commerce” means the sale, lease,
exchange, traffic or distribution of goods,
commodities, productions, services or property,
tangible or intangible.
n) “Consumer” means a natural person who is
a purchaser, lessee, recipient or prospective
purchaser, lessor or recipient of consumer products,
services or credit.
o) “Consumer credit” means any credit
extended by a creditor to a consumer for the sale or
lease of any consumer product or service under which
part or all of the price or payment therefor is payable
at some future time, whether in full or in installments.
p) “Consumer loan” means a loan made by
the lender to a person which is payable in installments
for which a finance charge is or may be imposed. This
term includes credit transactions pursuant to an
open-end-credit plan other than a seller credit card.
q) “Consumer products and services”
means goods, services and credits, debts or
obligations which are primarily for personal, family,
household or agricultural purposes, which shall
include but not limited to food, drugs, cosmetics, and
devices.
r) “Consumer product safety rule” means a
consumer product safety standard described in Article
78 or a rule under this Chapter declaring a consumer
product banned hazardous product.
s) “Consumer transaction” means (1) (i) a
sale, lease, assignment, award by chance, or other
ANTONIO
disposition of consumer products, including chattels
that are intended to be affixed to land, or of services,
or of any right, title, or interest therein, except
securities as defined in the Securities Act and
contracts of insurance under the Insurance Code, or
(ii) grant of provision of credit to a consumer for
purposes that are primarily personal, family,
household or agricultural, or (2) a solicitation or
promotion by a supplier with respect to a transaction
referred to in clause (1).
t) “Corrosive” means any substance which on
contact with living tissue will cause destruction of
tissue by chemical action.
u) “Cosmetics” means (1) articles intended to
be rubbed, poured, sprinkled or sprayed on,
introduced into or otherwise applied to the human
body or any part thereof for cleansing, beautifying,
promoting attractiveness, or altering the appearance,
and (2) article intended for uses as a component of
any such article except that such term shall not
include soap.
v) “Counterfeit product” means any
consumer product which, or the container or labeling
of which, without authorization, bears the trademark,
trade name, or other identifying mark, imprint, or
device, or any likeness thereof, of a consumer
product manufacturer, processor, packer, distributor,
other than the person or persons who in fact
manufactured, processed, packed or distributed such
product and which thereby falsely purports or is
represented to be the product of, or to have been
packed or distributed by such consumer product
manufacturer, processor, packer, or distributor.
w) “Credit card” means any card, plate,
coupon book or other credit device existing for the
purpose of obtaining money, property, labor or
services on credit.
x) “Credit Sale” means a sale of products,
services or an interest in land to a person on credit
where a debt is payable in installments or a finance
charge is imposed and includes any agreement in the
form of a bailment of products or lease of products or
real property if the bailee or lessee pays or agrees to
pay compensation for use a sum substantially
equivalent to or in excess of the aggregate value of

the products or real property involved and it is agreed
that the bailee or lessee will become, or for no other
or a nominal consideration has the option to become,
the owner of the products or real property upon full
compliance with the terms of the agreement.
y) “Credit transaction” means a transaction
between a natural person and a creditor in which real
or personal property, services or money acquired on
credit and the person’s obligation is payable in
installment.
z) “Creditor” means any person engaged in
the business of extending credit and shall include any
person who as a regular business practice makes
loans or sells or rents property or services on a time,
credit or installment basis, either as principal or as
agent who requires as an incident to the extension of
credit, the payment of a finance charge.
aa) “Default or delinquency charge” means,
with respect to a consumer credit transaction, the
penalty charge payable by the consumer-debtor for
failure to pay an amount or installment in full on the
date the same becomes due and demandable, or on
or before the period specified for the purpose in the
consumer credit sale documents.
ab) “Device” means an instrument, apparatus,
implement, machine, contrivance, implant, in vitro
reagent, or other similar or related article, including
any component, part or accessory which is
(1) recognized in the official United States
Pharmacopoeia-National Formulary
(USP-NF) or any supplement to them,
(2) intended for use in the diagnosis of
disease or other condition or in the cure,
mitigation, treatment or prevention of
disease, in man or other animals; or
(3) intended to affect the structure or any
function of the body of man or other animals,
and which does not achieve any of its
principal intended purposes through
chemical action within or on the body of man
or other animals and which is not dependent
upon being metabolized for the achievement
of any of its principal intended purposes.
ac) “Distributor” means any person to whom a
consumer product is delivered or sold for purposes of
distribution in commerce, except that such term does
not include a manufacturer or retailer of such product.
ad) “Drugs” mean
(1) articles recognized in the current official
United States Pharmacopoeia-National
Formulary, official Homeopathic
Pharmacopoeia of the United States, official
National Drug Formulary, or any supplement
to any of them; and
(2) articles intended for use in the diagnosis,
cure, mitigation, treatment, or prevention of
disease in man or other animals; and
(3) articles (other than food) intended to
affect the structure or any function of the
body of man or animals; and
(4) articles intended for use as a component
of any articles specified in clauses (1), (2), or
(3) but do not include devices or their
components, parts or accessories.
The term “drug” when used in this Act shall
include herbal and/or traditional drug. They
are defined as articles from indigenous plant
or animal origin used in folk medicine which
are:
(1) recognized in the Philippine
National Formulary;
(2) intended for use in the treatment
or cure, mitigation of disease
symptoms, injury or bodily defect
for use in man;
(3) other than food, intended to
affect the structure of any function
of the body of man;
(4) put into finishes, ready to use
form by means of formulation,
dosage or dosage directions; and
ANTONIO
(5) intended for use as a
component of any of the articles
specified in clauses (1), (2), (3) and
(4) of this paragraph.
ae) “Expiry or expiration date” means the date
stated on the label of food, drug, cosmetic, device or
hazardous substance after which they are not
expected to retain their claimed safety, efficacy and
quality or potency and after which it is no longer
permissible to sell them.
af) “Extremely flammable” means any
substance which has a flash point at or below
negative six and six-tenths degrees centigrade as
determined by the Tagliabue Open Cub Tester; and
the term “combustible” shall apply to any substance
which has a flash point of above twenty-six and
six-tenths degrees to and including sixty-five and
five-tenths degrees centigrade as determined by the
Tagliabue Open Cub Tester: Provided, That the
flammability or combustibility of solids and of the
contents of self-pressurized containers shall be
determined through methods found by the
implementing agency to be generally applicable to
such materials or containers, respectively, and
established by regulations issued by it.
ag) “Food” means any substance, whether
processed, semi-processed or raw, intended for
human consumption and includes chewing gum,
drinks and beverages and any substance which has
been used as an ingredient or a component in the
manufacture, preparation or treatment of food.
ah) “Food additive” means any substance, the
intended use of which results or may reasonably be
expected to result, directly or indirectly, in its
becoming a component or otherwise affecting the
characteristics of any food (including any substance
intended for use in producing, manufacturing,
packing, processing, preparing, treating, packaging,
transporting, or holding food; and including any
source of radiation intended for any such use), if such
substance is not generally recognized, among experts
qualified as having been adequately shown through
scientific procedures to be safe under the conditions
of the intended use.

ai) “Generic name” is the identification of
drugs and medicines by their scientifically and
internationally recognized active ingredients or by
their official generic name as determined by the
Bureau of Food and Drugs of the Department of
Health.
aj) “Guarantee” means an expressed or
implied assurance of the quality of the consumer
products and services offered for sale or length of
satisfactory use to be expected from a product or
other similar specified assurances.
ak) “Hazardous substance” means:
(1)
(i) Any substance or mixture of substances
which is toxic, corrosive, irritant, a strong
sensitizer, flammable or combustible, or
generates pressure through decomposition,
heat or other means, if such substance or
mixture or substances may cause substantial
injury or substantial illness during or as a
proximate result of any customary or
reasonably foreseeable ingestion by
children;
(ii) Any substance which the
department finds to be under the categories
enumerated in clause (1) (i) of this
paragraph;
(iii) Any radioactive substance, if, with
respect to such substance as used in a
particular class of article or as packaged, the
Department, upon approval of the
Department determines by regulation that
the substance is sufficiently hazardous to
require labeling in accordance with this
section in order to protect the public health;
(iv) Any toy or other articles intended
for use by children which the director may, by
regulation, determine the presence of an
electrical, mechanical or thermal hazard.
(2) This term shall not apply to food, drugs,
cosmetics, and devices nor to substances intended
for use as fuels when stored in containers and used in
the heating, cooking or refrigeration system of a
house, but such term shall apply to any article which
is not in itself a pesticide but which is a hazardous
substance, as construed in clause (a) of paragraph
(1), by reason of bearing or containing such harmful
substances described therein.
al) “Highly Toxic” means any substance which
has any of the following effects:
(1) produces death within fourteen days to
one-half or more than one-half of a group of
ten or more laboratory white rats each
weighing between Two hundred and three
hundred grams, at a single dose of fifty
milligrams or less per kilogram of body
weight, when orally administered; or
(2) produces death within fourteen days to
one-half or more of a group of ten or more
laboratory white rats each weighing between
two hundred and three hundred grams, when
inhaled continuously for a period of one hour
or less at an atmospheric concentration of
two hundred parts per million by volume or
less of gas or vapor or two milligrams per
liter by volume or less of mist or dust,
provided such concentration is likely to be
encountered by man when the substance is
used in any reasonably foreseeable manner;
or
(3) produces death within fourteen days to
one-half or more of a group of ten or more
rabbits, when tested in a dosage of two
hundred milligrams or less per kilogram of
body weight, or when administered through
continuous contact with the bare skin for
twenty-four hours or less.
am) “Home solicitation sale” means consumer
sales or leases which are personally solicited by any
person or organization by telephone,
person-to-person contact or by written or printed
communication other than general advertising or
consummated at the buyer’s residence or a place of
business, at the seller’s transient quarters, or away
from a seller’s regular place of business.
an) “Immediate container” means the
container or package which is immediately after or
ANTONIO
near the substance but does not include package
liners.
ao) “Imminently hazardous product” means a
consumer product which presents an unreasonable
risk of death, serious illness or severe personal injury.
ap) “Irritant” means any substance not
corrosive within the meaning of paragraph (t) of this
Article which, on immediate, prolonged or repeated
contact with normal living tissue will induce a local
inflammatory reaction.
aq) “Label, labeling” means the display of
written, printed or graphic matter on any consumer
product, its immediate container, tag, literature or
other suitable material affixed thereto for the purpose
of giving information as to the identity, components,
ingredients, attributes, directions for use,
specifications and such other information as may be
required by law or regulations.
ar) “Manufacture” means any and all
operations involved in the production, including
preparation, propagation, processing, formulating,
filling, packing, repacking, altering, ornamenting,
finishing or otherwise changing the container, wrapper
or labeling of a consumer product in the furtherance
of the distribution of the same from the original place
of manufacture to the person who makes the final
delivery or sale to the ultimate consumer.
as) “Manufacturer” means any person who
manufactures, assembles or processes consumer
products, except that if the goods are manufactured,
assembled or processed for another person who
attaches his own brand name to the consumer
products, the latter shall be deemed the manufacturer.
In case of imported products, the manufacturer’s
representative or, in his absence, the importer, shall
be deemed the manufacturer.
at) “Mass media” refers to any means or
methods used to convey advertising messages to the
public such as television, radio, magazines, cinema,
billboards, posters, streamers, hand bills, leaflets,
mails and the like.
au) “Materially defective product” means a
product which, because of the pattern of the defect,
the number of defective products distributed in

commerce and the severity of the risk or otherwise,
creates a substantial risk of injury to the public.
av) “Mislabeled hazardous substance” means
any hazardous substance intended, or packaged in a
form suitable, for use in households, especially by
children, the packaging or labeling of which is in
violation of the special packaging regulation issued by
the Department of Health under Article 91 or if such
substance fails to bear a label which
(1) states conspicuously
(i) the name and the exact address of the
manufacturer, packer, distributor or seller;
(ii) the common or usual name of the
hazardous substance or of each component
which contributes substantially to the
harmfulness of the substance, unless the
Department by regulation approved by the
Department permits or requires the use of
the recognized generic name;
(iii) the signal word “danger” on substances
which are extremely flammable, corrosive, or
highly toxic;
(iv) the signal word “warning” or “caution” on
all other hazardous substances;
(v) a frank statement of the principal hazard
or hazards involved, as “flammable”, “vapor
harmful”, “causes burns”, “absorbed through
skin”, or similar wording describing the action
to be followed or avoided, except when
modified by regulation by the Department
pursuant to Section 46;
(vi) instructions, when necessary or
appropriate, for first aid treatment;
(vii) the word “poison” for any hazardous
substance which is defined as highly toxic;
(viii) instructions for handling and storage of
packages which require special care in
handling or storage; and
(ix) the statement “keep out of the reach of
children”, or its practical equivalent, if the
article is intended for use by children and is
not a banned hazardous substance, with
adequate directions for the protection of
children from the hazard involved. The
aforementioned signal words, affirmative
statements, description of precautionary
measures, necessary instructions or other
words or statements may be in the English
language or its equivalent in Filipino; and
(2) on which any statement required under
clause (1) of this paragraph are located prominently
and in contrast by typography are located prominently
and in contrast by typography, layout, with other
printed matters on the label.
aw) “New Drugs” mean
(1) any drug the composition of which is
such that said drug is not generally
recognized among experts qualified by
scientific training and experience to evaluate
the safety, efficacy, and quality of drugs as
safe, efficacious and of good quality for use
under the conditions prescribed,
recommended, or suggested in the labeling
thereof; or
(2) any drug the composition of which is
such that said drug, as a result of its
previous investigations to determine its
safety, efficacy and good quality for use
under certain conditions, has become so
recognized but which has not, otherwise
than in such investigations, been used to a
material extent or for a material time under
new conditions.
“New Drugs” shall include drugs
(a) containing a newly discovered active
ingredient;
(b) containing a new fixed combination of
drugs, either by molecular or physical combination;
(c) intended for new indications;
(d) an additional new mode of administration;
or
ANTONIO
(e) in an additional dosage or strength of the
dosage form, which meets the conditions as defined
under the new drug.
The definition of “new drugs” covers to the extent
applicable, “new devices”.
ax) “New Product” means a consumer product
which incorporates a design, material or form of
energy exchange which has not previously been used
substantially in consumer products and as to which
there exists a lack of adequate information to
determine the quality and safety of such product if
used by the consumers.
ay) “Open-end-credit plan” means a consumer
credit extended on an account pursuant to a plan
under which:
1) the creditor may permit the person
to make purchases or obtain loans, from
time to time, directly from the creditor or
indirectly by use of credit card, check or
other device;
2) the person has the privilege of
paying the balance; or
3) a finance charge may be computed
by the creditor from time to time on an
outstanding unpaid balance.
az) “Package” or “packaging” means any
container or wrapping in which any consumer product
is enclosed for use in the delivery or display of that
consumer product to retail purchasers, but does not
include:
1) shipping containers or wrappings
used solely for the transportation of any
consumer product in bulk or in big quantities
by manufacturers, packers, or processors to
wholesale retail distributors thereof;
2) shipping containers or outer
wrappings used by retailers to ship or deliver
any product to retail customers if such
containers and wrappings bear no printed
matter pertaining any particular product;
3) The wrappers or containers of
consumer products sold in small quantities

by small retail stores to the consumer which
by tradition are wrapped with ordinary paper.
ba) “Person” means any individual, partnership,
corporation or association, trust, government or
governmental subdivision or any other legal entity.
bb) “Poisonous substance” means any
substance capable of destroying life or seriously
endangering health when applied externally to the
body or introduced internally in moderate doses.
bc) “Price comparison” means the direct
comparison in any advertisement of a seller’s current
price for consumer products or services with any
other price or statement of value for such property or
services expressed in pesos, centavos, fractions or
percentages.
bd) “Price tag” means any device, written,
printed, affixed or attached to a consumer product or
displayed in a consumer repair or service
establishment for the purpose of indicating the retail
price per unit or service.
be) “Principal display panel” means that part
of the label that is most likely to be displayed,
presented, shown or examined under normal and
customary conditions of display for retail or sale. -
front label of a product
bf) “Private labeler” means an owner of a
brand or trademark on the label of a consumer
product other than a manufacturer of the product.
A consumer product bears a private label if
(1) the product or its container is labeled with
a brand or trademark of a person other than
its manufacturer; or
(2) the brand or trademark of the
manufacturer of such product does not
appear on such label.
bg) “Radioactive substance” means any
substance which emits ionizing radiation.
bh) “Referral selling” means the sales device
employed by the sellers wherein the buyer is induced
to acquire goods or services by representing that after
the acquisition of the goods or services, he will
receive a rebate, commission or other benefit in return
for the submission of names of potential customers or
otherwise helping the seller enter into other sales, if
the receipt of such benefit is contingent on an event
occurring after the sale is made.
bi) “Repair and service firm” means any
business establishment, engaged directly or indirectly,
in the repair, service or maintenance of any consumer
product.
bk) “Retailer” means a person engaged in the
business of selling consumer products directly to
consumers.
bl) “Sale or distribution” shall mean an act
made by a manufacturer or seller, or their respective
representative or agent, to make available consumer
products, services or credit to the end consumers
under a consumer sale transaction. It shall not include
sampling or any distribution not for sale.
bm) “Sales Promotion” means techniques
intended for broad consumer participation which
contain promises of gain such as prizes, in cash or in
kind, as reward for the purchase of a product,
security, service or winning in contest, game,
tournament and other similar competitions which
involve determination of winner/s and which utilize
mass media or other widespread media of
information. It also means techniques purely intended
to increase the sales, patronage and/or goodwill of a
product.
bn) “Seller” means a person engaged in the
business of selling consumer products directly to
consumers. It shall include a supplier or distributor if
(1) the seller is a subsidiary or affiliate of the
supplier or distributor;
(2) the seller interchanges personnel or
maintains common or overlapping officers or
directors with the supplier or distributor; or
(3) the supplier or distributor provides or
exercises supervision, direction or control
over the selling practices of the seller.
ANTONIO
bo) “Service” shall mean, with respect to repair
and service firms, services supplied in connection
with a contract for construction, maintenance, repair,
processing, treatment or cleaning of goods or of
fixtures on land, or distribution of goods, or
transportation of goods.
bp) “Services” means services that are the
subject of a consumer transaction, either together
with, or separate from any kind of personal property,
whether tangible or intangible.
bq) “Special packaging” means packaging that
is designed or constructed to be significantly difficult
for children five years of age to open or to obtain a
toxic or harmful amount of the substance contained
therein within a reasonable time and not difficult for
normal adults to use properly but does not mean
packaging which all such children cannot open or
obtain a toxic or harmful amount within a reasonable
time.
br) “Standard” means a set of conditions to be
fulfilled to ensure the quality and safety of a product;
bs) “Strong sensitizer” means any substance
which will cause on normal living tissue, allergy or
photodynamic quality of hypersensitivity which
becomes evident on reapplication of the same
substance, to be designated as such by the
implementing agency. Before designating any
substance as a strong sensitizer, the implementing
agency, upon consideration of the frequency of
occurrence and severity of the reaction, shall find that
the substance has a significant capacity to cause
hypersensitivity.
bt) “Substandard product” means a product
which fails to comply with an applicable consumer
product safety rule which creates a substantial risk of
injury to the public.
bu) “Supplier” means a person, other than a
consumer, who, in the course of his business, solicits,
offers, advertises, or promotes the disposition or
supply of a consumer product or who other than the
consumer, engages in, enforces, or otherwise
participates in a consumer transaction, whether or not
any privity of contract actually exists between that
person and the consumer, and includes the successor

to, or assignee of, any right or obligation of the
supplier.
bv) “Technical personnel of repair and
service enterprise” shall mean a machine or
technician or any person who works or renders
diagnosis or advice in connection with repair, service
and maintenance of the consumer products in a repair
and service firm.
bw) “Toxic substance” means any substance
other than a radioactive substance which can cause
injury, illness or death to man through ingestion,
inhalation or absorption through any body surface.
bx) “Trade name” or “trademark” means a
word or words, name, title, symbol, emblem, sign or
device or any combination thereof used as an
advertisement, sign, label, poster or otherwise for the
purpose of enabling the public to distinguish the
business of the person who owns and uses said trade
name or trademark.
e. Discuss Consumer Product Quality and Safety
f. What is the declared policy involving consumer
product and safety?
ARTICLE 5. "Declaration of Policy. — It shall be the
duty of the State:
a) to develop and provide safety and quality
standards for consumer products,
including performance or use-oriented
standards, codes of practice and methods of
tests;
b) to assist the consumer in evaluating the
quality, including safety, performance and
comparative utility of consumer products;
c) to protect the public against
unreasonable risks of injury associated
with consumer products;
d) to undertake research on quality
improvement of products and investigation
into causes and prevention of product
related deaths, illness and injuries;
e) to assure the public of the consistency of
standardized products."
g. Who are tasked to implement consumer
product quality and safety?
ARTICLE 6. “Implementing Agencies. — The
provisions of this Article and its implementing rules
and regulations shall be enforced by:
a) the Department of Health with respect to
food, drugs, cosmetics, devices and
substances;
b) the Department of Agriculture with respect
to products related to agriculture, and;
c) the Department of Trade and Industry with
respect to other consumer products not
specified above.”
h. What is a consumer product safety rule?
“Consumer product safety rule” means a
consumer product safety standard described in
Article 78 or a rule under this Chapter declaring a
consumer product banned as a hazardous product.
ARTICLE 78. “Philippine Product Standard Mark. —
The label may contain the Philippine Product
Standard Mark if it is certified to have passed the
consumer product standard prescribed by the
concerned department.”
i. Discuss the minimum requirements for
consumer product standards under Article 7.
ARTICLE 7. “Promulgation and Adoption of
Consumer Product Standards. — The concerned
department shall establish consumer product quality
and safety standards which shall consist of one or
more of the following:
a) requirements as to performance,
composition, contents, design, construction,
finish, packaging of a consumer product;
b) requirements as to kind, class, grade,
dimensions, weights, material;
c) requirements as to the methods of
sampling, tests and codes used to check
the quality of the product;
d) requirements as to precautions in
storage, transporting and packaging;
e) requirements that a consumer product be
marked with or accompanied by clear and
adequate safety warnings or instructions,
ANTONIO
or requirements respecting the form of
warnings or instructions.
For this purpose, the concerned department shall
adopt existing government domestic product
quality and safety standards: Provided, that in the
absence of such standards, the concerned
department shall form specialized technical
committees composed of equal number of
representatives from each of the Government,
business and consumer sectors to formulate,
develop and purpose consumer product quality
and safety standards. The said technical
committees shall consult with the private sector, which
may, motu proprio, develop its own quality and safety
standards that shall be subject to review and approval
of the concerned government agency or agencies
after public hearings have been conducted for that
purpose; and shall likewise consider existing
international standards recognized by the Philippine
Government.”
j. What should be done in case a consumer
product is found to be injurious, unsafe, or
dangerous?
ARTICLE 10 par. 1. “Injurious, Dangerous and
Unsafe Products. — Whenever the departments
find, by their own initiative or by petition of a
consumer, that a consumer product is found to be
injurious, unsafe or dangerous, it shall, after due
notice and hearing, make the appropriate order
for its recall, prohibition or seizure from public
sale or distribution: Provided, That, in the sound
discretion of the department it may declare a
consumer product to be imminently injurious, unsafe
or dangerous, and order is immediate recall, ban or
seizure from public sale or distribution, in which case,
the seller, distributor, manufacturer or producer
thereof shall be afforded a hearing within
forty-eight (48) hours from such order.”
k. What happens if a consumer product is found
to be imminently injurious, unsafe or dangerous?
ARTICLE 10 par. 2. “The ban on the sale and
distribution of a consumer product adjudged
injurious, unsafe or dangerous, or imminently
injurious, unsafe or dangerous under the preceding
paragraph shall stay in force until such time that

its safety can be assured or measures to ensure
its safety have been established.”
l. In case a department determines a consumer
product to be substandard or materially defective,
what must the department do under Article 11?
ARTICLE 11. “Amendment and Revocation of
Declaration of the Injurious, Unsafe or Dangerous
Character of a Consumer Product. — Any interested
person may petition the appropriate department to
commence a proceeding for the issuance of an
amendment or revocation of a consumer product
safety rule or an order declaring a consumer product
injurious, dangerous and unsafe.
In case the department, upon petition by an
interested party or its own initiative and after due
notice and hearing, determines a consumer
product to be substandard or materially defective,
it shall so notify the manufacturer, distributor or
seller thereof of such finding and order such
manufacturer, distributor or seller to:
a) give notice to the public of the defect or
failure to comply with the product safety
standards; and
b) give notice to each distributor or retailer
of such product.
The department shall also direct the manufacturer,
distributor or seller of such product to extend any
or all of the following remedies to the injured
person:
a) to bring such product into conformity
with the requirements of the applicable
consumer product standards or to repair the
defect in order to conform with the same;
b) to replace the product with a like or
equivalent product which complies with
the applicable consumer product
standards which does not contain the
defect;
c) to refund the purchase price of the
product less a reasonable allowance for
use; and
d) to pay the consumer reasonable damages
as may be determined by the department.
The manufacturer, distributor or seller shall not
charge a consumer who avails himself of the
remedy as provided above of any expense and cost
that may be incurred.”
m. What is a certification of conformity to
consumer product standards?
ARTICLE 14. "Certification of Conformity to
Consumer Product Standards. — The concerned
department shall aim at having consumer product
standards established for every consumer
product so that consumer products shall be
distributed in commerce only after inspection and
certification of its quality and safety standards by
the department. The manufacturer shall avail of the
Philippine Standard Certification Mark which the
department shall grant after determining the product’s
compliance with the relevant standard in accordance
with the implementing rules and regulations."
m.1. Discuss Dept. of Trade and
Industry v. SteelAsia Manufacturing Corporation,
G.R. No. 238263, 16 November 2020. (Discuss also
application of Art. 15)
FACTS:
On June 24, 2016, respondent Steelasia sought to
nullify through a petition for declaratory relief some of
DTI's Regulations. (DAO No. 5, IRR of DAO No. 5,
DAO No. 15-01) for being in conflict with RA 4109 and
violative of the equal protection clause because the
DTI Regulations allows the conditional release of
imported merchandise from the Bureau of Customs
(BOC) premises prior to compliance with the required
testing while local manufacturers are not given the
same privilege.
DTI, through the OSG, responded that the DTI
Regulations allow the conditional physical release of
the merchandise only for the purpose of moving them
from the heavily congested BOC premises into a
suitable, safe, secure and accredited warehouse or
storage area where the merchandise shall be stored
and continue to be within the control of DTI pending
the required product testing and clearance.
The OSG added that conditional release is even
necessary considering that the process of BPS
testing, inspection and certification in the customs
ANTONIO
premises is highly impractical, if not impossible for
this would require the installation of highly specialized
equipment and machinery in a laboratory which, at
present, can only be done by the Metals Industry
Research and Development Center (MIRDC) of the
Department of Science and Technology (DOST) in
Bicutan, Parañaque City, Metro Manila.
The conditional release of merchandise for the
aforesaid purpose should not be confused with the
final release of the merchandise to the market or in
commerce. It is this second type of release which
definitely ought to be preceded by such testing,
inspection, and certification. Surely, the process
cannot be reversed.
The trial court declared DAO No. 5 and its
Implementing Rules and Regulations, and DAO.
No. 15-01, ultra vires and with no force and effect.
The court held that the inspection of imported
merchandise must precede their release, not the
other way around. This is to ensure that they comply
with the applicable standards before they are sold and
distributed in the market. Also, the fact that there is
currently only one testing center for steel bars in the
country does not justify the conditional release of
imported merchandise prior to testing. The BPS, after
all, is required by law to have its own facilities for
product testing and analysis. DTI must rely on the
effective implementation of its procedures rather than
cut corners in violation of the law.
The OSG now seeks affirmative relief (SC) and pray
that the foregoing dispositions be reversed and set
aside.
ISSUES:
1.) Are the DTI Regulations in conflict with RA 4109
and RA 7394, hence, should be invalidated? (NO.)
2.) Are the DTI Regulations violative of the equal
protection clause insofar as they apply only to
imported merchandise but not to locally manufactured
products? (NO.)
3.) Is there a requirement for the DTI Regulations to
be jointly promulgated with the Commissioner of
Customs? (NO.)
RULING:
1.) The requirements from both RA 4109 and RA
7394 are intended to prevent substandard

products from getting released to the market. On this
score, the distinction being raised by Steelasia as
to the kind of imported products governed by RA
4109, on one hand, and those by RA 7394, on the
other, has no bearing at all on the required testing,
inspection, and certification of product quality and
safety prior to the release of any kind of imported
products to the market or in commerce. Both laws are
in pari materia and ought to be applied together on all
imported merchandise.
2.) There are substantial distinctions between locally
produced merchandise and imported merchandise.
Locally produced merchandise are easily
accessible and available to the regulatory body for
inspection and compliance whereas imported
merchandise is not. In fact, DTI can only rely on
documents issued by the importers' foreign
counterparts. Additionally, local manufacturers can
access and closely monitor local channels of
distribution more easily, while importers have to go
through the tedious importation process before they
could do so.
3.) Article 15(c) of RA 7394 covers situations wherein
the imported goods have already undergone testing
and failed the mandatory product standards. In
such a case, the goods may still be released for a
maximum of ten (10) days for the limited purpose of
alteration or modification to make them compliant.
This is the only instance where the joint promulgation
of rules by the DTI and the BOC is required under
Article 15. It does not contemplate scenarios wherein
imported goods are simply moved to a warehouse or
storage area before they are sent to testing facilities.
The petition is GRANTED. The Decision dated
November 10, 2017, and Order dated March 23,
2018, of the Regional Trial Court, Branch 142,
Makati City are REVERSED and SET ASIDE.
Department of Trade and Industry Department
Administrative Order No. 5, Series of 2008 and its
Implementing Rules and Regulations, and DTI
Department Administrative Order No. 15-01,
Series of 2015 are not ultra vires, nor illegal or
unconstitutional.
NOTE: “Ultra vires” - acting or done beyond one's
legal power or authority.
“In pari materia” - a canon of construction holding
that the meaning of an ambiguous law can be
determined in light of other statutes on the same
subject matter.
"Action for declaratory relief" - filed to secure an
authoritative statement of the rights and obligations of
the parties under a statute, deed or contract for their
guidance in complying with or enforcing its provisions
and thus, presupposes that there has been no actual
breach of any of these instruments.
RA 4109 - Entitled: “An Act to Convert the Division
of Standards Under the Bureau of Commerce into
a Bureau of Standards, to Provide for the
Standardization and/or Inspection of Products and
Imports of the Philippines and for Other Purposes”
n. Discuss the rules involving imported consumer
products under Article 15.
ARTICLE 15. "Imported Products. —
a) Any consumer product offered for importation
into the customs of the Philippine territory shall be
refused admission if such product:
1) fails to comply with an applicable
consumer product quality and safety
standard or rule;
2) is or has been determined to be injurious,
unsafe and dangerous;
3) is substandard; or
4) has material defect.
b) Samples of consumer products being imported into
the Philippines in a quantity necessary for purposes of
determining the existence of any of the above causes
for non-admission may be obtained by the concerned
department or agency without charge from the owner
or consignee thereof. The owner or consignee of the
imported consumer product under examination shall
be afforded an opportunity to a hearing with respect to
the importation of such products into the Philippines.
If it appears from examination of such samples or
otherwise that an imported consumer product does
not conform to the consumer product safety rule
or its injurious, unsafe and dangerous, is substandard
or has a material defect, such product shall be
refused admission unless the owner or the
consignee thereof manifests under bond that
none of the above ground for non-admission
exists or that measures have been taken to cure
ANTONIO
them before they are sold, distributed or offered for
sale to the general public.
Any consumer product, the sale or use of which
has been banned or withdrawn in the country of
manufacture, shall not be imported into the
country.
c) If it appears that any consumer product which
may not be admitted pursuant to paragraph (a) of
this Article can be so modified that it can already
be accepted, the concerned department may defer
final determination as to the admission of such
product for a period not exceeding ten (10) days,
and in accordance with such regulations as the
department and the Commissioner of Customs shall
jointly promulgate, such product may be released
from customs custody under bond for the purpose of
permitting the owner or consignee an opportunity to
so modify such product.
d) All modifications taken by an owner or
consignee for the purpose of securing admission
of an imported consumer product under paragraph (c)
shall be subject to the supervision of the
concerned department. If the product cannot be so
modified, or if the owner or consignee is not
proceeding to satisfactorily modify such product,
it shall be refused admission and the department
may direct redelivery of the product into customs
custody, and to seize the product if not so redelivered.
e) Imported consumer products not admitted
must be exported, except that upon application, the
Commissioner of Customs may permit the
destruction of the product if, within a reasonable
time, the owner or consignee thereof fails to
export the same.
f) All expenses in connection with the destruction
provided for in this Article, and all expenses in
connection with the storage, cartage or labor with
respect to any consumer product refused admission
under this Article, shall be paid by the owner or
consignee and, in default of such payment, shall
constitute a lien against any future importation
made by such owner or consignee."
o. Discuss the rules involving exported consumer
products under Article 16.

ARTICLE 16. "Consumer Products for Export. — The
preceding article on safety does not apply to any
consumer product if:
a) it can be shown that such product is
manufactured, sold or held for sale for
export from the Philippines, or that such
product was imported for export, unless such
consumer product is in fact distributed in
commerce for use in the Philippines; and
b) such consumer product or the packaging
thereof bears a stamp or label stating that
such consumer product is intended for
export and actually exported."
p. Discuss the prohibited acts and penalties
stated in Articles 18 and 19.
ARTICLE 18. "Prohibited Acts. — It shall be unlawful
for any person to:
a) manufacture for sale, offer for sale,
distribute in commerce, or import into the
Philippines any consumer product which
is not in conformity with an applicable
consumer product quality or safety
standard promulgated in this Act;
b) manufacture for sale, offer for sale,
distribute in commerce, or import into the
Philippines any consumer product which
has been declared as banned consumer
product by a rule in this Act;
c) refuse access to or copying of pertinent
records or fail or refuse to permit entry of or
inspection by authorized officers or
employees of the department;
d) fail to comply with an order issued under
Article 11 relating to notifications of
substantial product hazards and to recall,
repair, replacement or refund of unsafe
products;
e) fail to comply with the rule prohibiting
stockpiling."
ARTICLE 19. "Penalties. —
a) Any person who shall violate any
provision of Article 18 shall upon
conviction, be subject to a fine of not less
than One thousand pesos (P1,000.00) but
not more than Ten thousand pesos
(P10,000.00) or imprisonment of not less
than two (2) months but not more than
one (1) year, or both upon the discretion of
the court. If the offender is an alien, he shall
be deported after service of sentence and
payment of fine without further deportation
proceedings.
b) In case the offender is a naturalized
citizen, he shall, in addition to the penalty
prescribed herein, suffer the penalty of
cancellation of his naturalization
certificate and its registration in the civil
register and immediate deportation after
service of sentence and payment of fine.
c) Any director, officer or agent of a
corporation who shall authorize, order or
perform any of the acts or practices
constituting in whole or in part a violation of
Article 18, and who has knowledge or notice
of noncompliance received by the
corporation from the concerned department,
shall be subject to penalties to which that
corporation may be subject.
In case the violation is committed by, or in the interest
of a foreign juridical person duly licensed to engage
in business in the Philippines, such license to
engage in business in the Philippines shall
immediately be revoked."
q. Discuss regulations involving consumer food,
drugs, cosmetics, and devices.
r. What is the declared policy under Article 20?
ARTICLE 20. “Declaration of Policy. — The State
shall ensure safe and good quality of food, drugs,
cosmetics and devices, and regulate their
production, sale, distribution and advertisement
to protect the health of the consumer.”
s. Which agency is tasked to implement the policy
in Article 20?
ARTICLE 21. “Implementing Agency. — In the
implementation of the foregoing policy, the State,
through the Department of Health, hereby referred
as the Department, shall, in accordance with the
provisions of this Act:
ANTONIO
a) establish standards and quality measures
for foods, drugs, devices and cosmetics;
b) adopt measures to ensure pure and safe
supply of foods and cosmetics, and safe,
efficacious and good quality of drugs and
devices in the Country;
c) adopt measures to ensure the rational
use of drugs and devices, such as, but not
limited to, banning, recalling or withdrawing
from the market drugs and devices which are
unregistered, unsafe, inefficacious or of
doubtful therapeutic value, the adoption of
an official National Drug Formulary, and the
use of generic names in the labeling of
drugs;
d) strengthen the Bureau of Food and
Drugs.”
t. What is an adulterated food (Art. 23)?
ARTICLE 23. "Adulterated Food. — A food shall be
deemed to be adulterated:
a)
1) if it bears or contains any poisonous or
deleterious substance which may render it
injurious to health; but in case the substance
is not an added substance, such food shall
not be considered adulterated under this
clause if the quantity of such substance does
not ordinarily render it injurious to health;
2) if it bears or contains any added
poisonous or deleterious substance other
than one which is (i) a pesticide chemical in
or on a raw agricultural commodity, (ii) a food
additive, (iii) a color additive, for which
tolerances have been established and it
conforms to such tolerances;
3) if it consists in whole or in part of any
filthy, putrid or decomposed substance,
or if it is otherwise unfit for food;
4) if it has been prepared, packed or held
under unsanitary conditions whereby it
may have become contaminated with filth,
or whereby, it may have been rendered
injurious to health;
5) if it is, in whole or part, the product of a
diseased animal or of an animal which has
died other than by slaughter;

6) if its container is composed, in whole or in
part, of any poisonous or deleterious
substance which may render the contents
injurious to health; or
7) if it has passed its expiry date.
b)
1) If any valuable constituent has been, in
whole or in part, omitted or abstracted
therefrom and the same has not been
substituted by any healthful equivalent of
such constituent;
2) if any substance, not a valuable
constituent, has been added or
substituted or in part therefor;
3) if damage or inferiority has been
concealed in any manner; or
4) if any substance has been added thereto
or packed therewith so as to increase its
bulk or weight, reduce its quality or
strength, or make it appear better or of
greater value than it is.
c) if it is, or bears or contains a color additive
which is unsafe under existing regulations:
Provided, That the Department shall promulgate
regulations providing for the listing of color additives
which are harmless and suitable for use in food for
which tolerances have been established;
d) if it is confectionary, and it bears or contains
any alcohol or non-nutritive article or substance
except harmless coloring, harmless flavoring,
harmless resinous glass not in excess of
four-tenths (4/10) of one per centum (1%) natural
gum and pectin: Provided, That this clause shall not
apply to a safe non-nutritive article or substance if, in
the judgment of the Department as provided by
regulations, (1) such article or substance is of
practical functional value in the manufacture,
packaging or storage of such confectionery, (2) if the
use of the substance does not promote deception of
the consumer or otherwise results in adulteration or
mislabeling in violation of any provision of this Act,
and (3) would not render the product injurious or
hazardous to health: Provided, further, That this
paragraph shall not apply to any confectionery by
reason of its containing less than one-half (1/2) of one
per centum (1%) by volume of alcohol, derived solely
from the use of flavoring extracts, or to any chewing
gum by reason of its containing harmless non-nutritive
masticatory substance: Provided, finally, That the
Department may, for the purposes of avoiding or
resolving uncertainty as to the application of this
clause, promulgate regulations allowing or prohibiting
the use of particular non-nutritive substances;
e) if it is oleomargarine (a spread made chiefly from
vegetable oils and used as a substitute for butter),
margarine or butter and any of the raw materials
used therein consists in whole or in part of any
filthy, putrid or decomposed substance, or such
oleomargarine, margarine or butter is otherwise unfit
for food;
f) if it has not been prepared in accordance with
current acceptable manufacturing practice
established by the Department through
regulations."
t.1. Discuss Department of Health v.
Nestle Philippines, Inc., G.R. No. 244242, 14
September 2020.
FFF
FACTS:
On October 16, 2007, Mymanette M. Jarra (Jarra)
bought one (1) Nestle Bear Brand Powdered Filled
Milk, 150 grams, from Joy Store located along
West Riverside, San Francisco Del Monte, Quezon
City. When Jarra opened the foil pack, she noticed
objects inside it, which appeared to be larvae, and
the powder therein looked yellowish and lumpy.
On the following day, Jarra filed a complaint before
the DOH Consumer Arbitration Office. During the
conciliation proceedings, the Acting Consumer
Arbitration Officer (ACAO) requested the Bureau
of Food and Drugs (BFAD) for a laboratory test on
the subject product. The BFAD issued a Report of
Analysis finding that the sample specimen had
live insect larvae and that the cream powder has a
strong stale odor rendering it unfit for human
consumption.
On January 11, 2016, the Consumer Arbitration
Office issued a Resolution in favor of Jarra and
found that the substantial evidence on record
proved that there is clear violation of RA 7394.
Nestle moved for reconsideration of the Resolution,
which was denied in an Order dated June 8, 2016.
ANTONIO
Thus, Nestle appealed the case before the Office
of the Secretary of the DOH.
On April 17, 2017, the Office of the Secretary
DENIED Nestle's present appeal but MODIFIED the
same Resolution whereby the award of Php5,000.00
representing expenses was deleted.
Nestle elevated the case before the CA via a
Petition for Certiorari under Rule 65 of the Rules of
Court ascribing grave abuse of discretion
amounting to lack or excess of jurisdiction on the
part of the DOH.
CA ruled in favor of Nestle and reversed and set
aside the questioned Decision dated April 17, 2017
and the Resolution dated September 11, 2017 of the
DOH.
CA held: BFAD Report of Analysis did not state
whether the sample tested was adulterated while
in the custody of Jarra or on account of its
defective or unsanitary manufacturing process. It
could be assumed that the infestation occurred
while in transit or at the time when the product
was purchased, packed and transported or when
the product was stored or kept in stock by the
vendor. The CA added that the infestation of the
milk product could not have been caused by
Nestle's defective handling but by some other
unknown reasons.
DOH elevated the case before the Court via Rule 45
of the Rules of Court.
ISSUE:
Whether the Consumer Arbitration Officer properly
found Nestle liable for violation of RA 7394 on the
distribution of adulterated products on the basis of
substantial evidence.
RULING:
The SC evaluated the records of this case and
finds that, contrary to the findings of the CA, the
evidence available before the DOH and the
CAO-NCR were sufficient and substantial to hold
Nestle liable, to wit: (a) the Complaint filed by
complainant Jarra; and (b) the BFAD Report of
Analysis which affirmed Jarra's complaint that the milk

product contained live larvae and that the milk powder
was stale and unfit for human consumption.
It added that under the doctrine of conclusiveness
of administrative findings of fact, the courts
accord great weight and respect, if not finality and
conclusiveness, to findings of fact of
administrative bodies when such are supported
by substantial evidence. The reason behind this is
that administrative bodies are deemed specialists
in their respective fields and can thus resolve the
cases before them with more expertise and dispatch.
Upon perusal, other than the defense of denial and
its self-serving postulations that the infestation
could have been caused by other factors, such as
the mishandling of the retail store or from Jarra
herself, Nestle failed to muster the required
burden of proof to persuade the Court that it is
not responsible for the spoilage or adulteration of
the milk product. Hence, no grave abuse of
discretion can be attributed to the DOH in giving more
weight on the account of Jarra and the findings of the
BFAD over the denials and suppositions of Nestle.
WHEREFORE, in view of the foregoing, the Petition
for Review on Certiorari is GRANTED. The Decision
dated October 19, 2018 and the Resolution dated
January 17, 2019 of the Court of Appeals in CA-G.R.
SP No. 153068 are REVERSED. The Decision dated
April 17, 2017 and the Resolution dated September
11, 2017 of the Department of Health are
REINSTATED with MODIFICATION
u. Who regulates unprocessed food?
ARTICLE 24. "Regulation of Unprocessed Food. —
The provincial, municipal and city governments
shall regulate the preparation and sale of meat, fresh
fruits, poultry, milk, fish, vegetables and other
foodstuff for public consumption, pursuant to the
Local Government Code."
v. Discuss the rules involving poisonous
ingredients in food.
ARTICLE 25. “Tolerance for Poisonous Ingredients in
Food. — Any poisonous or deleterious substance
added to any food shall be deemed to be unsafe,
except when such substance is required or can
not be avoided in its production or can not be
avoided by good manufacturing practice. In such
case, the Department shall promulgate regulations
limiting the quantity therein in such extent as he finds
necessary for the protection of public health, and any
quantity exceeding the limits so fixed shall be deemed
to be unsafe. In determining the quantity of such
added substance to be tolerated in different articles of
food, the Department shall take into account the
extent to which the use of such article is required or
can not be avoided in the production or manufacture
of such articles and the other ways in which the
consumer may be affected by the same or other
poisonous or deleterious substance.”
w. What is a food additive? When is it allowed?
ARTICLE 26. "Unsafe Food Additives, Exceptions for
Conformity with Regulation. — A food additive, with
respect to any particular use or intended use, shall
be deemed unsafe unless:
a) it and its use or intended use conforms to
the terms of an exemption for being
solely intended for investigational use by
qualified experts; or
b) it and its use or intended use is in
conformity with a regulation issued by
the Department prescribing the conditions
under which such additives may be safely
used."
ARTICLE 4 (ah). “Food additive” means any
substance, the intended use of which results or
may reasonably be expected to result, directly or
indirectly, in its becoming a component or
otherwise affecting the characteristics of any food
(including any substance intended for use in
producing, manufacturing, packing, processing,
preparing, treating, packaging, transporting, or
holding food; and including any source of radiation
intended for any such use), if such substance is not
generally recognized, among experts qualified as
having been adequately shown through scientific
procedures to be safe under the conditions of the
intended use.
x. Discuss petition for regulation of food additive.
ARTICLE 27. "Petition for Regulation of Food
Additive. — Any person may, with respect to any
ANTONIO
intended use of a food additive, file with the
Department a petition proposing the issuance of a
regulation prescribing the conditions under which
such additives may be safely used.
The Department shall (1) establish a regulation
prescribing, with respect to one or more proposed
uses of the food additive involved, (i) the conditions
under which a food additive may be safely used
including, but not limited to, specifications as to the
particular food, or classes of food, in which such
additive may be used, (ii) the maximum quantity
which may be used, or permitted to remain in or on
such food; (iii) the manner in which such additive may
be added to or used in or on such food, and (iv) any
directions or other labeling or packaging requirement
for such additive deemed necessary to assure the
safety of such use, and shall notify the petitioner of
such order and the reasons for such action; or (2)
deny the petition and notify the petitioner of and the
reasons for such action.
The Department may, at any time upon his own
initiative, issue a regulation prescribing, with respect
to any particular food additive, the conditions under
which such additive may be safely used and the
reasons thereof, and cause the publication of the
same."
y. What are considered as adulterated drugs and
devices?
ARTICLE 29. "Adulterated Drugs and Devices. — A
drug or device shall be deemed to be adulterated:
a) (1) if it contains in whole or in part of any
filthy, putrid, or decomposed substance
which may affect its safety, efficacy or
good quality; or (2) if it has been
manufactured, prepared or held under
unsanitary conditions whereby it may have
been contaminated with dirt or filth or
whereby it may have been rendered injurious
to health; or (3) if its container is
composed, in whole or in part, of any
poisonous or deleterious substance which
may render the contents injurious to health;
or (4) if it bears or contains any color
other than a permissible one as
determined by the Department, taking into

consideration standards of safety, efficacy or
good quality.
b) If it purports to be or is represented as a
drug, the name of which is recognized in an
official compendium, and its strength differs
from, or its safety, efficacy, quality or purity
falls below the standards set forth in such
compendium, except that whenever tests or
methods of assay as prescribed are, in the
judgment of the Department, insufficient for
the making of such determination, the
Department shall promulgate regulations
prescribing appropriate tests or methods of
assay in accordance with which such
determination as to strength, safety, efficacy,
quality or purity shall be made. No drug
defined in an official compendium shall be
deemed to be adulterated under this
paragraph because it differs from the
standards of strength, safety, efficacy, quality
or purity therefor set forth in such
compendium, if its difference in strength,
safety, efficacy, quality or purity from such
standards is plainly stated in its label and
approved for registration as such.
c) If it is not subject to the provisions of
paragraph (b) and its strength differs from,
or its efficacy, quality or purity falls below,
that which it purports or is represented to
possess.
d) If a drug or device and any substance has
been mixed or packed therewith, or any
substance has been substituted wholly or in
part thereof, so as to reduce its safety,
efficacy, quality, strength or purity.
e) If the methods used in, or the facilities or
controls used for its manufacture or holding
do not conform to or are not operated or
administered in conformity with current
good manufacturing practice to assure
that such drug meets the requirements of
this Act as to safety, quality and efficacy, and
has the identity and strength, and meets the
quality and purity characteristics which it
purports or is represented to possess."
z. Discuss Article 30 regarding exemptions.
ARTICLE 30. "Exemption in Case of Drugs and
Devices. —
a) The Department is hereby directed to promulgate
regulations exempting from any labeling or packaging
requirement of this Act drugs and devices which
are, in accordance with the practice of the trade,
to be processed, labeled or repacked in
substantial quantities at establishments other
than those where originally processed or packed,
on condition that such drugs and devices are not
adulterated or mislabeled under the provisions of this
Act upon removal from such processing, labeling or
repacking establishment.
b) 1) Drugs intended for use by man which:
(i) are habit-forming;
(ii) because of their toxicity or other
potentiality for harmful effect, or method of
their use is not safe for use except under
the supervision of practitioner licensed
by law to administer such drug;
(iii) are new drugs whose applications are
limited to investigational use; shall be
dispensed only (a) upon written prescription
of a practitioner licensed by law to administer
such drug, or (b) upon an oral prescription of
such practitioner which is reduced promptly
to writing and filed by the pharmacist, or (c)
by refilling any such written or oral
prescription if such refilling is authorized by
the prescriber either in the original
prescription or by oral order which is reduced
promptly to writing and filed by the
pharmacist. The act of dispensing a drug
contrary to the provisions of this paragraph
shall be deemed to be an act which results in
the drug being mislabeled while held for
sale.
2) Any drug dispensed by filling or refilling a
written prescription of a practitioner licensed by
law to administer such drug shall be exempt from the
requirements of Article 89, except paragraphs (a), (h),
(2) and (3), and the packaging requirements of
paragraphs (f) and (g), if the drug bears a label
containing the name and address of the dispenser,
the serial number and date of the prescription or its
filling, the name of the prescriber and, if stated in the
prescription the name of the patient and the directions
for use and cautionary statements, if any, contained in
such prescription.
ANTONIO
3) The Department may, by regulation, remove
drugs subject to Article 89(d) and Article 31 from
the requirements of sub-article (b)(1) of this Article,
when such requirements are not necessary for the
protection of the public health.
4) A drug which is subject to sub-article (b)(1) of
this Article shall be deemed to be mislabeled if at
any time prior to dispensing, its label fails to bear
the statement “Caution: Should not be dispensed
without prescription.” A drug to which sub-article
(b)(1) of this Article does not apply shall be deemed to
be mislabeled if at any time prior to dispensing, its
label bears the caution statement quoted in the
preceding sentence."
aa. Discuss the requirement of certificate of
product registration and license to operate (Art.
31).
ARTICLE 31. “Licensing and Registration. —
a) No person shall manufacture, sell, offer for sale,
import, export, distribute or transfer any drug or
device, unless an application filed pursuant to
sub-article (b) hereof is effective with respect to such
drug or device.
b) Any person may file with the Department,
through the Department, an application under oath
with respect to any drug or device subject to the
provisions of sub-article (a) hereof. Such persons
shall submit to the Department:
(1) full reports of investigations which have
been made to show whether or not such
drug or device is safe, efficacious and of
good quality for use based on clinical studies
conducted in the Philippines;
(2) a full list of the articles used as
components of such drug or device;
(3) a full statement of the composition of
such drug or device;
(4) a full description of the methods used in
and the facilities and controls used for
the manufacture of such drug or device;
(5) such samples of such drug or device and
of the articles used as components thereof
as the Department may require;

(6) specimens of the labeling proposed to be
used for such drug or device; and
(7) such other requirements as may be
prescribed by regulations to ensure
safety, efficacy and good quality of such
drug or device.
c) Within one hundred eighty (180) days after the
filing of an application under this sub-article, or such
additional period as may be agreed upon by the
Department and the applicant, the Department shall
either (1) approve the application if he then finds
that none of the grounds for denying approval
specified in sub-article (d) applies, or (2) give the
applicant notice of an opportunity for a hearing
before the Department under sub-article (d) on the
question whether such application is approvable.
d) If the Department finds, after due notice to the
applicant and giving him an opportunity for a hearing,
that
(1) the reports of the investigations which are
required to be submitted to the Department
pursuant to sub-article (b) hereof, do not
include adequate tests by all methods
reasonably applicable to show whether or
not such drug or device is safe, efficacious
and of good quality for use under the
conditions prescribed, recommended or
suggested in the proposed labeling thereof;
(2) the results of such test show that such drug
or device is unsafe, inefficacious or of
doubtful therapeutic value for use under
such conditions or do not show that such
drug or device is safe, efficacious or of good
quality for use under such conditions;
(3) the methods used in, and the facilities and
controls used for the manufacture of such
drug or device are inadequate to preserve its
identity, strength, quality and purity; or
(4) upon the basis of the information submitted
to him as part of the application, or upon the
basis of any other information before him
with respect to such drug or device, he has
insufficient information to determine whether
such drug or device is safe, efficacious or of
good equality for use under such conditions;
or
(5) evaluated on the basis of the information
submitted to him as part of the application,
and any other information before him with
respect to such drug or device, there is a
lack of substantial evidence that the drug or
device will have the effect it purports or is
represented to have under the conditions of
use prescribed, recommended or suggested
in the proposed labeling thereof; or
(6) based on a fair evaluation of all material
facts, such labeling is false or misleading in
any way; he shall issue an order
disapproving the application.
e) The effectiveness of an application with respect to
any drug or device shall, after due notice and
opportunity for hearing to the applicant, by order of
the Department be suspended if it finds (1) that
clinical experience, tests by new methods, or tests by
methods not deemed reasonably applicable when
such application became effective show that such
drug or device is unsafe or ineffective for use under
the conditions of use upon the basis of which the
application became effective, or (2) that the
application contains any untrue statement of a
material fact. The order shall state the findings upon
which it is based.
f) The Department shall promulgate regulations for
exempting from the operation of this Article drugs and
devices intended solely for investigational used by
experts qualified by scientific training and experience
to investigate the safety and effectiveness of drugs
and devices.
g) No person shall manufacture, sell, offer for sale,
import, export, distribute or transfer any drug or
device without first securing a license to operate from
the Department after due compliance with technical
requirements in accordance with the rules and
regulations promulgated by the Department pursuant
to this Act.
h) No drug or device shall be manufactured, sold,
offered for sale, imported, exported, distributed or
transferred, unless registered by the manufacturer,
importer or distributor thereof in accordance with rules
and regulations promulgated by the Department
pursuant to this Act. The provisions of Article 31 (b),
(d) and (e), to the extent applicable, shall govern the
registration of such drugs and devices.
ANTONIO
i) The Department shall promulgate a schedule of
fees for the issuance of the certificate of product
registration and license to operate provided for under
this Article.”
bb. What are the rules involving dangerous drugs
under Article 32?
ARTICLE 32. "Dangerous Drugs. — The
importation, distribution, manufacture, production,
compounding, prescription, dispensing and sale of,
and other lawful acts in connection with,
dangerous drugs of such kind and quantity as
may be deemed necessary according to the
medical and research needs of the country and the
determination of the quantity/quantities to be
imported, manufactured and held in stock at any
given time by an authorized importer, manufacturer or
distributor of dangerous drugs shall be under the
jurisdiction and authority of the Dangerous Drugs
Board as provided for by existing laws and
regulations."
cc. What are the rules involving banned or
restricted drugs under Article 33?
ARTICLE 33. "Banned or Restricted Drugs. —
Banned or severely restricted drugs for health
and safety reasons in their country of origin shall
be banned and confiscated or its uses severely
restricted, whichever is appropriate, by the
Department. The Department shall monitor the
presence in the market of such drugs and cause
the maintenance and regular publications of an
updated consolidated list thereof."
dd. Discuss certification of drugs containing
antibiotics.
ARTICLE 34. "Certification of Certain Drugs. —
a) The Department shall, by regulations,
provide for the certification of batches of
drugs composed wholly or partially of
any kind of antibiotic. A batch of such
drug shall be certified if such drug has
such characteristics of identity, strength,
quality and purity, as the Department
prescribes in such regulations as

necessary to insure adequately safety
and efficacy of use and good quality, but
shall not otherwise be certified. Prior to
the effective date of such regulations the
Department, in lieu of certification, shall
issue a release for any batch which, in his
judgment, may be released without risk as to
the safety and efficacy of its use. Such
release shall prescribe the date of its
expiration and other conditions under which
it shall cease to be effective as to such batch
and as to portions thereof. For purposes of
this Article and of Article 89 (j), the term
“antibiotic drug” means any drug intended for
use by man containing any quantity of any
chemical substance which is produced by a
micro-organism and which has the capacity
to inhibit or destroy micro-organisms in dilute
solution (including the chemically
synthesized equivalent of any such
substance).
b) Whenever in the judgment of the
Department, the requirements of this Article
and of Article 89 (j) with respect to any drug
or class of drugs are not necessary to insure
safety and efficacy of use and good quality,
the Department shall promulgate regulations
exempting such drug or class of drugs from
such requirements.
c) The Department shall promulgate
regulations exempting from any requirement
of this Article and of Article 89(j), (1) drugs
which are to be stored, processed, labeled,
or repacked at establishments other than
those where manufactured, or condition that
such drugs comply with all such
requirements upon removal from such
establishments; (2) drugs which conform to
applicable standards of identity, strength,
quality, and purity prescribed by these
regulations and are intended for use in
manufacturing other drugs; and (3) drugs
which are intended for investigational use by
experts qualified by scientific training and
experience to investigate the safety and
efficacy of drugs."
ee. What are adulterated cosmetics?
ARTICLE 35. "Adulterated Cosmetics. — A cosmetic
shall be deemed to be adulterated:
a) if it bears or contains any poisonous or
deleterious substance which may render it
injurious to users under the condition of use
prescribed in the labeling thereof, or under
the condition of use as are customary or
usual: Provided, That this provision shall not
apply to color additive hair dye, the label of
which bears the following legend
conspicuously displayed thereon: “Caution:
this product contains ingredients which may
cause skin irritation on certain individuals
and a preliminary test according to
accompanying directions should first be
made. This product must not be used for
dyeing the eyelashes or eyebrows; to do so
may cause blindness” and labeling of which
bears adequate directions for such
preliminary testing. For purposes of this
paragraph (e) the term “hair dye” shall not
include eyelash dyes or eyebrow dyes.
b) if it consists in whole or in part of any filthy,
putrid, or decomposed substance.
c) if it has been prepared, packed or held
under unsanitary conditions whereby it
may have become contaminated with filth, or
whereby it may have been rendered injurious
to health.
d) if its container is composed, in whole or in
part, of any poisonous or deleterious
substance which may render the contents
injurious to health.
e) if it is not a hair dye, and it bears or
contains color additive other than which
is permissible.
f) if any of its substances has been (1)
mixed or packed therewith so as to
reduce its quality or strength or (2)
substituted wholly or in parts therefor."
ff. What are provisional permits?
ARTICLE 37. "Provisional Permits. — Whenever the
Department finds, after investigation, that the sale or
distribution in commerce of any class of food,
cosmetics, drugs or devices, may be injurious to
health, and that such injurious nature cannot be
adequately determined after such articles have
entered into domestic commerce, it shall promulgate
ANTONIO
regulations providing for the issuance,
suspension and revocation of provisional permits,
offer for sale or transfer of such classes of food,
cosmetics, drugs or devices to manufacturers,
processors or packers of the same in such locality to
which shall be attached such conditions governing the
manufacture, processing or packing of such
consumer products for such temporary period of time
as may be necessary to protect public health; and
after the effective date of such regulations, and during
such temporary period, no person shall, offer for sale
or transfer any such food, cosmetics, drugs or devices
unless such manufacturer, processor or packer holds
such permit."
gg. What are the prohibited acts and penalties
under Arts. 40 and 41?
ARTICLE 40. "Prohibited Acts. — The following acts
and the causing thereof are hereby prohibited:
a) the manufacture, importation, exportation,
sale, offering for sale, distribution or transfer
of any food, drug, device or cosmetic that is
adulterated or mislabeled;
b) the adulteration or misbranding of any
food, drug, device, or cosmetic;
c) the refusal to permit entry or inspection
as authorized by Article 36 to allow samples
to be collected;
d) the giving of a guaranty or undertaking
referred to in Article 41(b) hereof which
guaranty or undertaking is false, except
by a person who relied upon a guaranty or
undertaking to the same effect signed by,
and containing the name and address of, the
person residing in the Philippines from whom
he received in good faith the food, drug,
device, or cosmetic or the giving of a
guaranty or undertaking referred to in Article
41(b) which guaranty or undertaking is false;
e) forging, counterfeiting, simulating, or
falsely representing or without proper
authority using any mark, stamp, tag, label,
or other identification device authorized or
required by regulations promulgated under
the provisions of this Act;
f) the using by any person to his own
advantage, or revealing, other than to the
Department or to the courts when relevant in
any judicial proceeding under this Act, any

information concerning any method or
process which as a trade secret is entitled to
protection;
g) the alteration, mutilation, destruction,
obliteration, or removal of the whole or
any part of the labeling of, or the doing of
any other act with respect to a food, drug,
device, or cosmetic, if such act is done while
such product is held for sale (whether or not
the first sale) and results in such product
being adulterated or mislabeled;
h) the use, on the labeling of any drug or in
any advertising relating to such drug, of
any representation or suggestion that an
application with respect to such drug is
effective under Article 31 hereof, or that such
drug complies with the provisions of such
articles;
i) the use, in labeling, advertising or other
sales promotion, of any reference to any
report or analysis furnished in
compliance with Section 19 of Executive
Order 175, series of 1987;
j) the manufacture, importation, exportation,
sale, offering for sale, distribution, or transfer
of any drug or device which is not
registered with the Department pursuant
to this Act;
k) the manufacture, importation, exportation,
sale, offering for sale, distribution, or transfer
of any drug or device by any person
without the license from the Department
required in this Act;
l) the sale or offering for sale of any drug or
device beyond its expiration or expiry
date;
m) the release for sale or distribution of a batch
of drugs without batch certification when
required under Article 34 hereof."
ARTICLE 41. "Penalties. —
a) Any person who violates any of the
provisions of Article 40 hereof shall, upon
conviction, be subject to imprisonment of
not less than one (1) year but not more
than five (5) years, or a fine of not less
than Five thousand pesos (P5,000.00) but
not more than Ten thousand pesos
(P10,000.00), or both such imprisonment
and fine, in the discretion of the Court.
Should the offense be committed by a
juridical person, the Chairman of the Board
of Directors, the President, General
Manager, or the partners and/or the persons
directly responsible therefor shall be
penalized.
b) No person shall be subject to the penalties of
sub-article (a) of this Article for (1) having
sold, offered for sale or transferred any
product and delivered it, if such delivery was
made in good faith, unless he refuses to
furnish on request of the Department, the
name and address of the person from whom
he purchased or received such product and
copies of all documents, if any there be,
pertaining to the delivery of the product to
him; (2) having violated Article 40(a) if he
established a guaranty or undertaking signed
by, and containing the name and address of,
the person residing in the Philippines from
whom he received in good faith the product,
or (3) having violated Article 40(a), where the
violation exists because the product is
adulterated by reason of containing a color
other than the permissible one under
regulations promulgated by the Department
in this Act, if such person establishes a
guaranty or undertaking signed by, and
containing the name and address, of the
manufacturer of the color, to the effect that
such color is permissible, under applicable
regulations promulgated by the Department
in this Act."
hh. What is a hazardous substance?
According to paragraph (ak), clause (1)(i) of Article 4:
ak) “Hazardous substance” means: (1) (i) Any
substance or mixture of substances which is toxic,
corrosive, irritant, a strong sensitizer, flammable or
combustible, or generates pressure through
decomposition, heat or other means, if such
substance or mixture or substances may cause
substantial injury or substantial illness during or
as a proximate result of any customary or
reasonably foreseeable ingestion by children;
ARTICLE 42. “Declaration of Policy. — The State
shall adopt measures designed to protect the
ANTONIO
consumer against substances other than food,
drugs, cosmetics and devices that are hazardous
to his health and safety.”
ARTICLE 43. “Implementing Agency. — The
Department of Health, hereby referred to as the
Department, shall enforce the provisions of this
Chapter.”
ii. Discuss regulations regarding hazardous
substances.
ARTICLE 44. “Regulations Declaring Hazardous
Substances and Establishing Variations and
Exemptions. — The Department shall promulgate
the rules and regulations governing the
implementation of this Article.
To resolve uncertainty as to the coverage of this
Article, the Department may, by regulations, declare
as hazardous any substance of mixture of substances
which he finds meets the requirements of paragraph
(ak), clause (1)(i) of Article 4.
If the Department finds that for good and sufficient
reasons, full compliance with the labeling
requirements otherwise applicable under this Chapter
is impracticable or is not necessary for the adequate
protection of public health and safety, it shall
promulgate regulations exempting such
substances from these requirements to the extent
he deems consistent with the objective of
adequately safeguarding public health and safety,
and any hazardous substance which does not
bear a label in accordance with such regulations
shall be deemed to be a mislabeled hazardous
substance.”
jj. What are the prohibited acts and penalties
under Arts. 41 and 42? (CORRECTION: “under
Arts. 46 and 47”)
ARTICLE 46. “Prohibited Acts. — It shall be unlawful
for any person to:
a) introduce or deliver for introduction into
commerce of any mislabeled hazardous

substance or banned hazardous
substance;
b) alter, mutilate, destroy, obliterate or remove
the whole or any part of the label of a
mislabeled hazardous substance, or
banned hazardous substance, if such act
is done while the substance is in commerce
or while the substance is held for sale,
whether or not it is the first sale;
c) receive in commerce any mislabeled
hazardous substance or banned
hazardous substance and the delivery or
preferred delivery thereof at cost or
otherwise;
d) give the guaranty or undertaking referred to
in paragraph (b) of Article 93 and paragraph
(b) of Article 45 if such guaranty or
undertaking is false, except by a person
who relied upon a guaranty or undertaking
which he received in good faith;
e) introduce or deliver for introduction into
commerce or receive in commerce and
subsequently deliver or preferred at cost
or otherwise, or a hazardous substance in
a reused food, drug, cosmetic or device
container or in a container which, though not
a reused container, is identifiable as a food,
drug, cosmetic or device container by its
labeling or by other identification. The use of
a used food, drug, cosmetic or device
container for a hazardous substance does
not diminish the danger posed by the
hazardous substance involved, therefore,
such substance shall be deemed a
mislabeled hazardous substance.”
ARTICLE 47. “Penalties, Exception. —
a) Any person who violates any of the
provisions of Article 46 shall, upon
conviction, be subject to a fine of not less
than One thousand pesos (P1,000.00) or
an imprisonment of not less than six (6)
months but not more than five (5) years or
both upon the discretion of the court.
b) No person shall be subject to the penalties of
paragraph (a) of this Article for (1) having
violated paragraph (c) of Article 46 unless he
refuses to furnish, upon request by the
Department or his representative, the name
and address of the person from who he
purchased such hazardous substances and
(2) having violated paragraph (a) of Article
46, if he establishes a guaranty or
undertaking signed by, and containing the
name and address of, the person from whom
he received in good faith, the hazardous
substance to the effect that the hazardous
substance is not a mislabeled hazardous
substance or banned hazardous within the
meaning of that term in this Act.”
ANTONIO
8th Week - Retail Trade Laws
a. Read Arts 48 to 73 of Republic Act No. 7394 and
its Implementing Rules and Regulations.
RA 7394 TITLE III. – PROTECTION AGAINST
DECEPTIVE, UNFAIR AND UNCONSCIONABLE
SALES ACTS OR PRACTICES
b. Discuss the state policy declared in Art. 48 of
RA 7394.
ARTICLE 48. "Declaration of Policy. — The State
shall promote and encourage fair, honest and
equitable relations among parties in consumer
transactions and protect the consumer against
deceptive, unfair and unconscionable sales acts
or practices."
ARTICLE 49. “Implementing Agency. — The
Department of Trade and Industry, hereby referred
to as the Department, shall enforce the provisions of
this Chapter.”
Department of Trade and Industry jurisdiction -
Under the Consumer Act, the DTI has the authority
and the mandate to act upon complaints filed by
the consumers pursuant to the state policy of
protecting the consumers against deceptive, unfair
and unconscionable sales acts or practices.
c. What are considered deceptive sales acts or
practices under Art. 50?
ARTICLE 50. "Prohibition Against Deceptive Sales
Acts or Practices. — A deceptive act or practice by a
seller or supplier in connection with a consumer
transaction violates this Act whether it occurs before,
during or after the transaction. An act or practice shall
be deemed deceptive whenever the producer,
manufacturer, supplier or seller, through concealment,
false representation or fraudulent manipulation,
induces a consumer to enter into a sales or lease
transaction of any consumer product or service.
Without limiting the scope of the above paragraph, the
act or practice of a seller or supplier is deceptive
when it represents that:
a) a consumer product or service has the
sponsorship, approval, performance,

characteristics, ingredients, accessories,
uses, or benefits it does not have;
b) a consumer product or service is of a
particular standard, quality, grade, style, or
model when in fact it is not;
c) a consumer product is new, original or
unused, when in fact, it is in a deteriorated,
altered, reconditioned, reclaimed or
second-hand state;
d) a consumer product or service is available to
the consumer for a reason that is different
from the fact;
e) a consumer product or service has been
supplied in accordance with the previous
representation when in fact it is not;
f) a consumer product or service can be
supplied in a quantity greater than the
supplier intends;
g) a service, or repair of a consumer product is
needed when in fact it is not;
h) a specific price advantage of a consumer
product exists when in fact it does not;
i) the sales act or practice involves or does not
involve a warranty, a disclaimer of
warranties, particular warranty terms or other
rights, remedies or obligations if the
indication is false; and
j) the seller or supplier has a sponsorship,
approval, or affiliation he does not have."
c.1. Discuss Islamic Da'wah Council of
the Philippines, Inc., v. Office of the Executive
Secretary, G.R. No. 153888, 09 July 2003.
FACTS:
Petitioner IDCP is a non-governmental
organization that extends voluntary services to
the Filipino people, especially to Muslim
communities. The RISEAP (Regional Islamic Da'wah
Council of Southeast Asia and the Pacific) accredited
the petitioner to issue halal certifications in the
Philippines. Thus, petitioner orients manufacturers
on halal food and issues halal certifications to the
qualified products and manufacturers.
Petitioner formulated in 1995 internal rules and
procedures based on the Qur'an and the Sunnah
for the analysis of food, inspection thereof and
issuance of halal certifications. In that same year,
the petitioner began to issue, for a fee,
certifications to qualified products and food
manufacturers. Petitioner even adopted for use on
its halal certificates a distinct sign or logo
registered in the Philippine Patent Office.
On October 26, 2001, respondent Office of the
Executive Secretary issued EO 46 which gave
respondent Office of Muslim Affairs (OMA) the
exclusive authority to issue halal certificates and
perform other related regulatory activities.
On May 8, 2002, a news article entitled "OMA
Warns NGOs Issuing Illegal 'Halal' Certification"
was published in the Manila Bulletin, where OMA
warned Muslim consumers to buy only products
with its official halal certification since those
without said certification had not been subjected
to careful analysis and therefore could contain
pork or its derivatives.
Respondent OMA also sent letters to food
manufacturers asking them to secure the halal
certification only from OMA lest they violate EO 46
and RA 4109. As a result, petitioner lost revenues
after food manufacturers stopped securing
certifications from it.
Hence, this petition for prohibition.
Petitioner contends that a government agency like
herein respondent OMA cannot therefore perform
a religious function like certifying qualified food
products as halal because a food product becomes
halal only after the performance of Islamic
religious ritual and prayer.
According to petitioner, the subject EO was issued
with utter haste and without even consulting Muslim
people's organizations like petitioner before it became
effective.
To justify EO 46's intrusion into the subject religious
activity, the Solicitor General argues that by
delegating to OMA the authority to issue halal
certifications, the government allegedly seeks to
protect and promote the muslim Filipinos' right to
health, and to instill health consciousness in
them.
ISSUES:
ANTONIO
Whether EO 46 is unconstitutional for violating the
non-establishment and free exercise clauses
guaranteed under Art. III, Sec. 5 of the 1987
Constitution. (YES.)
HELD:
We grant the petition.
By giving OMA the exclusive power to classify
food products as halal, EO 46 encroached on the
religious freedom of Muslim organizations to
interpret for Filipino Muslims what food products
are fit for Muslim consumption. Also, by arrogating
to itself the task of issuing halal certifications, the
State has in effect forced Muslims to accept its own
interpretation of the Qur'an and Sunnah on halal food.
Even on the premise that the health of muslim
Filipinos can be effectively protected by assigning
to OMA the exclusive power to issue halal
certifications. The protection and promotion of the
muslim Filipinos' right to health are already
provided for in existing laws such as RA 7493
which do not encroach on the religious freedom of
muslims.
RA 7394, otherwise known as "The Consumer Act of
1992," gives to certain government departments the
duty to protect the interests of the consumer, promote
his general welfare and to establish standards of
conduct for business and industry. To this end, a food
product, before its distribution to the market, is
required to secure the Philippine Standard
Certification Mark after the concerned department
inspects and certifies its compliance with quality and
safety standards.
One such government agency designated by RA
7394 is the Bureau of Food and Drugs (BFD) of the
Department of Health (DOH). Under Article 22 of said
law, BFD has the duty to promulgate and enforce
rules and regulations fixing and establishing a
reasonable definition and standard of identity, a
standard of quality and a standard of fill of containers
for food. The BFD also ensures that food products
released in the market are not adulterated.
Furthermore, under Article 48 of RA 7394, the
Department of Trade and Industry (DTI) is tasked to
protect the consumer against deceptive, unfair

and unconscionable sales acts or practices as
defined in Article 50. DTI also enforces compulsory
labeling and fair packaging to enable the consumer to
obtain accurate information as to the nature, quality
and quantity of the contents of consumer products
and to facilitate his comparison of the value of such
products.
WHEREFORE, the petition is GRANTED. Executive
Order 46, s. 2000, is hereby declared NULL AND
VOID. Consequently, respondents are prohibited from
enforcing the same.
d. What are considered unfair or unconscionable
sales acts or practice under Art. 52?
ARTICLE 52. "Unfair or Unconscionable Sales Act or
Practice. — An unfair or unconscionable sales act or
practice by a seller or supplier in connection with a
consumer transaction violates this Chapter whether it
occurs before, during or after the consumer
transaction. An act or practice shall be deemed
unfair or unconscionable whenever the producer,
manufacturer, distributor, supplier or seller, by
taking advantage of the consumer’s physical or
mental infirmity, ignorance, illiteracy, lack of time
or the general conditions of the environment or
surroundings, induces the consumer to enter into
a sales or lease transaction grossly inimical to the
interests of the consumer or grossly one-sided in
favor of the producer, manufacturer, distributor,
supplier or seller.
In determining whether an act or practice is unfair and
unconscionable, the following circumstances shall be
considered:
a) that the producer, manufacturer, distributor,
supplier or seller took advantage of the
inability of the consumer to reasonably
protect his interest because of his inability to
understand the language of an agreement,
or similar factors;
b) that when the consumer transaction was
entered into, the price grossly exceeded the
price at which similar products or services
were readily obtainable in similar transaction
by like consumers;
c) that when the consumer transaction was
entered into, the consumer was unable to
receive a substantial benefit from the subject
of the transaction;
d) that when the consumer transaction was
entered into, the seller or supplier was aware
that there was no reasonable probability or
payment of the obligation in full by the
consumer; and
e) that the transaction that the seller or supplier
induced the consumer to enter into was
excessively one-sided in favor of the seller or
supplier."
d.1. Discuss Aowa Electronic Philippines,
Inc. v. DTI-NCR, G.R. No. 189655, 13 April 2011.
e. What are chain distribution plans or pyramid
sales? Is it a valid practice?
NO. "Chain distribution plans" or "pyramid sales
schemes" means sales devices whereby a person,
upon condition that he makes an investment, is
granted by the manufacturer, producer or
importer or his representative, a right to recruit
for profit one or more additional persons who will
also be granted such right upon making a similar
investment: Provided, That the profits of the person
employing such a plan are derived primarily from the
recruitment of other persons into the plan rather than
from the sale of consumer products, services or
credit: Provided, further, That the limitation on the
number of participants does not change the nature of
the plan.
ARTICLE 53. "Chain Distribution Plans or Pyramid
Sales Schemes. — Chain distribution plans or
pyramid sales schemes shall not be employed in the
sale of consumer products."
NOTE: Pyramiding is illegal because it is a money
game. Profits are derived primarily from
participants' entry fees, and the income is
dependent on the participants slot or position
within the organization rather than the ability to sell
the products or services.
f. What is home solicitation sales? When is it
allowed?
ANTONIO
Home solicitation sale means to make or attempt to
make a Sale of Goods or Services by a Solicitor at
a Residence by means of Door-to-Door
Solicitation.
ARTICLE 54. "Home Solicitation Sales. — No
business entity shall conduct any home solicitation
sale of any consumer product or service without first
obtaining a permit from the Department. Such permit
may be denied, suspended, or revoked upon cause
as provided in the rules and regulations promulgated
by the Department, after due notice and hearing."
ARTICLE 55. "Home Solicitation Sales; When
Conducted. — Home solicitation sales may be
conducted only between the hours of nine o’clock in
the morning and seven o’clock in the evening of each
working day: Provided, That solicitation sales may be
made at a time other than the prescribed hours where
the person solicited has previously agreed to the
same."
ARTICLE 56. "Home Solicitation Sales; by Whom
Conducted. — Home solicitation sales shall only be
conducted by a person who has the proper
identification and authority from his principal to make
such solicitations."
ARTICLE 57. "Receipts for Home Solicitation Sales.
— Sales generated from home solicitation sales shall
be properly receipted as per existing laws, rules and
regulations on sale transactions."
Additional NOTE: Home solicitation sales; Ponzi
scheme. Pyramid scheme; words and Phrases Ponzi
scheme explained. - Parenthetically, what appellants
offered the public was a Ponzi scheme and
investment program that offers impossibly high
returns and pays this return to early investors out
of the capital contributed by later investors?
Named after Charles Ponzi who promoted the
scheme in the 1920s. The original scheme involved
the issuance of bonds which offered 50% interest in
45 days or a 100% profit if held for 90 days. The
Ponzi used the money he received from later
investors to pay extravagant rates of return to early
investors, thereby inducing more investors to place
their money with him and false hope or realizing this
same extravagant rate of return themselves.

g. What are the prohibited representations
involving home solicitation sales?
ARTICLE 58. "Prohibited Representations. — A home
solicitation sale shall not represent that:
a) the buyer has been specially selected;
b) a survey, test or research is being
conducted; or
c) the seller is making a special offer to a few
persons only for a limited period of time."
h. What is a referral sale?
Referral selling is simply asking your current
customers to refer your product to another
company. You leverage the trust you've built with
your customer, and the trust your customer has with
the other company to open up a sales conversation.
ARTICLE 59. "Referral Sales. — Referral selling
plans shall not be used in the sale of consumer
products unless the seller executes in favor of the
buyer a written undertaking that will grant a specified
compensation or other benefit to said buyer in return
for each and every transaction consummated by said
seller with the persons referred by said buyer or for
subsequent sales that said buyers has helped the
seller enter into."
i What are the penalties stated in Article 60 of the
Consumer Act?
ARTICLE 60. "Penalties. —
a) Any person who shall violate the provisions
of Title III, Chapter I, shall upon conviction,
be subject to a fine of not less than Five
Hundred Pesos (P500.00) but not more than
Ten Thousand Pesos (P10,000.00) or
imprisonment of not less than five (5)
months but not more than one (1) year or
both, upon the discretion of the court.
b) In addition to the penalty provided for in
paragraph (1), the court may grant an
injunction restraining the conduct constituting
the contravention of the provisions of Articles
50 and 51 and/or actual damages and such
other orders as it thinks fit to redress injury to
the person caused by such conduct."
j. Discuss regulation of practices relative to
weight and measures.
Fraudulently representing an article sold to have a
greater weight than it actually has means
knowingly representing the same to have a wait
greater than it really has. This in turn means that a
person charged with a crime described in that section
must himself make representation, or it must be done
by some other person through his induction or with his
knowledge and consent.
k. Which agency enforces provisions involving
regulation of practices relative to weight and
measurements?
ARTICLE 61. "Implementing Agency. — The
provincial, city, or municipal treasurers shall
strictly enforce the provisions of this Chapter, and its
implementing rules and regulations: Provided, That,
with respect to the use of the Metric System, it shall
be enforced by the Department of Trade and
Industry."
l. Discuss sealing and testing of instruments of
weights and measure.
ARTICLE 62. "Sealing and Testing of Instruments of
Weights and Measure. — All instruments for
determining weights and measures in all consumer
and consumer related transactions shall be tested,
calibrated and sealed every six (6) months by the
official sealer who shall be the provincial or city
or municipal treasurer or his authorized
representative upon payment of fees required under
existing law: Provided, That all instruments of weights
and measures shall continuously be inspected for
compliance with the provisions of this Chapter."
m. What is the system of measurement used?
According to P.D. No. 187
Metric system, which employs decimals, is officially
adopted by many countries and even the United
Kingdom and the United States are planning to
gradually adopt it in lieu of the English system;
WHEREAS, the exclusive use of the metric system
will facilitate domestic and foreign trade, avoid
ANTONIO
unnecessary waste and diversity in
manufacturing goods, promote uniformity and
simplification of measurements and consistency in
calculations, and afford other advantages;
n. What is the metric system?
ARTICLE 63. "Use of Metric System. — The system
of weights and measures to be used for all products,
commodities, materials, utilities, services and
commercial transactions, in all contracts, deeds and
other official and legal instruments and documents
shall be the metric system, in accordance with
existing laws and their implementing rules and
regulations.
The Department of Trade and Industry shall also
adopt standard measurement for garments, shoes
and other similar consumer products."
o. What are the prohibited acts and penalties
stated in Arts. 64 and 65?
ARTICLE 64. "Fraudulent Practices Relative to
Weights and Measures. — The following acts relating
to weights and measures are prohibited:
a) for any person other than the official sealer
or his duly authorized representative to place
or attach an official tag, seal, sticker, mark,
stamp, brand or other characteristic sign
used to indicate that such instrument of
weight and measure has officially been
tested, calibrated, sealed or inspected;
b) for any person to imitate any seal, sticker,
mark, stamp, brand, tag or other
characteristic sign used to indicate that such
instrument of weight or measures has been
officially tested, calibrated, sealed or
inspected;
c) for any person other than the official sealer
or his duly authorized representative to
alter in any way the certificate or receipt
given by the official sealer or his duly
authorized representative as an
acknowledgment that the instrument for
determining weight or measure has been
fully tested, calibrated, sealed or inspected;
d) for any person to make or knowingly sell or
use any false or counterfeit seal, sticker,
brand, stamp, tag, certificate or license or

any dye for printing or making the same or
any characteristic sign used to indicate that
such instrument of weight or measure has
been officially tested, calibrated, sealed or
inspected;
e) for any person other than the official sealer
or his duly authorized representative to alter
the written or printed figures, letters or
symbols on any official seal, sticker, receipt,
stamp, tag, certificate or license used or
issued;
f) for any person to use or reuse any restored,
altered, expired, damaged stamp, tag
certificate or license for the purpose of
making it appear that the instrument of
weight of measure has been tested,
calibrated, sealed or inspected;
g) for any person engaged in the buying and
selling of consumer products or of furnishing
services the value of which is estimated by
weight or measure to possess, use or
maintain with intention to use any scale,
balance, weight or measure that has not
been sealed or if previously sealed, the
license therefor has expired and has not
been renewed in due time;
h) for any person to fraudulently alter any scale,
balance, weight or measure after it is
officially sealed;
i) for any person to knowingly use any false
scale, balance, weight or measure, whether
sealed or not;
j) for any person to fraudulently give short
weight or measure in the making of a scale;
k) for any person, assuming to determine truly
the weight or measure of any article bought
or sold by weight or measure, to fraudulently
misrepresent the weight or measure thereof;
or
l) for any person to procure the commission of
any such offense abovementioned by
another.
Instruments officially sealed at some previous time
which have remained unaltered and accurate and the
seal or tag officially affixed thereto remains intact and
in the same position and condition in which it was
placed by the official sealer or his duly authorized
representative shall, if presented for sealing, be
sealed promptly on demand by the official sealer or
his authorized representative without penalty except a
surcharge fixed by law or regulation."
ARTICLE 65. "Penalties. —
a) Any person who shall violate the
provisions of paragraphs (a) to (f) and
paragraph (l) of Article 64 or its
implementing rules and regulations shall,
upon conviction, be subject to a fine of not
less than Two hundred pesos (P200.00) but
not more than One thousand pesos
(P1,000.00) or by imprisonment of not more
than one (1) year or both upon the
discretion of the court.
b) Any person who shall violate the provisions
of paragraph (g) of Article 64 for the first
time shall be subject to a fine of not less than
Five hundred pesos (P500.00) or by
imprisonment of not less than one (1) month
but not more than five (5) years or both,
upon the discretion of the court.
c) The owner-possessor or user of instrument
of weights and measure enumerated in
paragraphs (h) to (k) of Article 64 shall,
upon conviction, be subject to a fine of not
less than Three hundred pesos (P300.00) or
imprisonment not exceeding one (1) year,
or both, upon the discretion of the court."
p. Discuss consumer product and service
warranties.
Consumer products and services – means goods,
services and credits, debts or obligations which are
primarily for personal, family, household or agricultural
purposes, which shall include but not limited to food,
drugs, cosmetics, and devices.
v. Which agency is tasked to implement
provisions on consumer products and service
warranties?
ARTICLE 66. "Implementing Agency. — The
Department of Trade and Industry, shall strictly
enforce the provision of this Chapter and its
implementing rules and regulations."
w. What is the applicable law on warranties?
ANTONIO
ARTICLE 67. "Applicable Law on Warranties. — The
provisions of the Civil Code on conditions and
warranties shall govern all contracts of sale with
conditions and warranties."
Arts. 1561-1581 of the Revised Civil Code of the
Philippines.
x. Discuss the additional provisions on warranties
stated in Article 68.
ARTICLE 68. “Additional Provisions on Warranties. —
In addition to the Civil Code provisions on sale with
warranties, the following provisions shall govern the
sale of consumer products with warranty:
a) Terms of express warranty. — Any seller or
manufacturer who gives an express warranty shall:
1) set forth the terms of warranty in clear and
readily understandable language and clearly
identify himself as the warrantor;
2) identify the party to whom the warranty is
extended;
3) state the products or parts covered;
4) state what the warrantor will do in the event
of a defect, malfunction of failure to conform
to the written warranty and at whose
expense;
5) state what the consumer must do to avail of
the rights which accrue to the warranty; and
6) stipulate the period within which, after notice
of defect, malfunction or failure to conform to
the warranty, the warrantor will perform any
obligation under the warranty.
b) Express warranty — operative from moment of
sale. — All written warranties or guarantees issued by
a manufacturer, producer, or importer shall be
operative from the moment of sale.
1) Sales Report. — All sales made by
distributors of products covered by this
Article shall be reported to the manufacturer,
producer, or importer of the product sold
within thirty (30) days from date of purchase,
unless otherwise agreed upon. The report
shall contain, among others, the date of
purchase, model of the product bought, its
serial number, name and address of the
buyer. The report made in accordance with
this provision shall be equivalent to a

warranty registration with the manufacturer,
producer, or importer. Such registration is
sufficient to hold the manufacturer, producer,
or importer liable, in appropriate cases,
under its warranty.
2) Failure to make or send report. — Failure of
the distributor to make the report or send
them the form required by the manufacturer,
producer, or importer shall relieve the latter
of its liability under the warranty: Provided,
however, That the distributor who failed to
comply with its obligation to send the sales
report shall be personally liable under the
warranty. For this purpose, the manufacturer
shall be obligated to make good the warranty
at the expense of the distributor.
3) Retail. — The retailer shall be subsidiarily
liable under the warranty in case of failure of
both the manufacturer and distributor to
honor the warranty. In such case, the retailer
shall shoulder the expenses and costs
necessary to honor the warranty. Nothing
therein shall prevent the retailer from
proceeding against the distributor or
manufacturer.
4) Enforcement of warranty or guarantee. —
The warranty rights can be enforced by
presentment of a claim. To this end, the
purchaser needs only to present to the
immediate seller either the warranty card or
the official receipt along with the product to
be serviced or returned to the immediate
seller. No other documentary requirement
shall be demanded from the purchaser. If the
immediate seller is the manufacturer’s
factory or showroom, the warranty shall
immediately be honored. If the product was
purchased from a distributor, the distributor
shall likewise immediately honor the
warranty. In the case of a retailer other than
the distributor, the former shall take
responsibility without cost to the buyer of
presenting the warranty claim to the
distributor in the consumer’s behalf.
5) Record of purchases. — Distributors and
retailers covered by this Article shall keep a
record of all purchases covered by a
warranty or guarantee for such period of time
corresponding to the lifetime of the product’s
respective warranties or guarantees.
6) Contrary stipulations — null and void. — All
covenants, stipulations or agreements
contrary to the provisions of this Article shall
be without legal effect.
c) Designation of warranties. — A written warranty
shall clearly and conspicuously designate such
warranty as:
1) “Full warranty” if the written warranty meets
the minimum requirements set forth in
paragraph (d); or
2) “Limited warranty” if the written warranty
does not meet such minimum requirements.
d) Minimum standards for warranties. — For the
warrantor of a consumer product to meet the
minimum standards for warranty, he shall:
1) remedy such consumer product within a
reasonable time and without charge in case
of a defect, malfunction or failure to conform
to such written warranty;
2) permit the consumer to elect whether to ask
for a refund or replacement without charge of
such product or part, as the case may be,
where after reasonable number of attempts
to remedy the defect or malfunction, the
product continues to have the defect or to
malfunction.
The warrantor will not be required to perform the
above duties if he can show that the defect,
malfunction or failure to conform to a written warranty
was caused by damage due to unreasonable use
thereof.
e) Duration of warranty. — The seller and the
consumer may stipulate the period within which the
express warranty shall be enforceable. If the implied
warranty on merchantability accompanies an express
warranty, both will be of equal duration.
Any other implied warranty shall endure not less than
sixty (60) days nor more than one (1) year following
the sale of new consumer products.
f) Breach of warranties. —
1) In case of breach of express warranty, the
consumer may elect to have the goods
repaired or its purchase price refunded by
the warrantor. In case the repair of the
ANTONIO
product in whole or in part is elected, the
warranty work must be made to conform to
the express warranty within thirty (30) days
by either the warrantor or his representative.
The thirty-day period, however, may be
extended by conditions which are beyond
the control of the warrantor or his
representative. In case the refund of the
purchase price is elected, the amount
directly attributable to the use of the
consumer prior to the discovery of the
non-conformity shall be deducted.
2) In case of breach of implied warranty, the
consumer may retain in the goods and
recover damages, or reject the goods,
cancel and contract and recover from the
seller so much of the purchase price as has
been paid, including damages.
x.1. Discuss De Guzman v. Toyota Cubao,
Inc., G.R. No. 141480, 29 November 2006.
FACTS:
On November 27, 1997, petitioner purchased from
respondent a brand new white Toyota Hilux 2.4 SS
double cab motor vehicle, 1996 model, in the amount
of ₱508,000. Petitioner made a down payment of
₱152,400, leaving a balance of ₱355,600 which was
payable in 36 months with 54% interest. The vehicle
was delivered to petitioner two days later (and it was).
On October 18, 1998, petitioner demanded the
replacement of the engine of the vehicle because it
developed a crack after traversing Marcos Highway
during a heavy rain. Petitioner asserted that
respondent should replace the engine with a new one
based on an implied warranty. Respondent countered
that the alleged damage on the engine was not
covered by a warranty.
On April 20, 1999, petitioner filed a complaint for
damages against respondent with the RTC.
Respondent moved to dismiss the case on the ground
that under Article 1571 of the Civil Code, the
petitioner’s cause of action had prescribed as the
case was filed more than six months from the date the
vehicle was sold and/or delivered.
RTC granted respondent’s motion and dismissed the
complaint.

Since no warranty card or agreement was attached to
the complaint, the contract of sale of the subject
pick-up carried an implied warranty that it was free
from any hidden faults or defects, or any charge or
encumbrance not declared or known to the buyer. The
prescriptive period thereof is six (6) months under the
Civil Code (Art. 1571).
Under RA No. 7394, the provisions of the Civil Code
on conditions and warranties shall govern all
contracts of sale with condition and warranties (Art.
67). The duration of the implied warranty (not
accompanied by an express warranty) shall endure
not less than sixty days nor more than one (1) year
following the sale of new consumer products (Art. 68,
par. [e]). The two (2) year prescriptive period under
Art. 169 cannot prevail over Art. 68 because the latter
is the specific provision on the matter.
The Court has noted that the prescriptive period for
implied and express warranties cannot be the same.
In the Civil Code, a redhibitory action for violation of
an implied warranty against hidden defects prescribes
in six (6) months, while if it based on an express
warranty, the action prescribes in four (4) years.
Under RA No. 7394, the implied warranty cannot be
more than one (1) year; however, the implied warranty
can only be of equal duration to that an express
warranty when the implied warranty of merchantability
accompanies an express warranty (Art. 68, par. [e]).
Therefore, the prescriptive period of two years under
Art. 169 does not cover an implied warranty, which is
not accompanied by an express warranty. It is
applicable to cases where there is an express
warranty in the sale of the consumer product.
Relative to plaintiff’s argument that the claim for moral
and exemplary damages and attorney’s fees is based
on quasi-delict or breach of contract, such are merely
ancillary to the main cause of action which is based
on warranty against hidden defects. Without the latter,
the former cannot stand alone.
Based on the record, the subject vehicle was
purchased on 27 November 1997 and delivered on 29
November 1997. This case was filed only on 20 April
1999 or almost nineteen (19) months from [the] sale
and/or delivery. Applying Art. 1571 of Civil Code, the
action is barred by prescription because the complaint
was filed more than six (6) months after the sale
and/or delivery of the vehicle. In addition, the duration
of the implied warranty of not more than one (1) year
under Art. 68, par (e) of RA No. 7394 has already
elapsed because plaintiff only filed a complaint on
April 20, 1999.
Accordingly, RTC granted defendant’s Motion and the
plaintiff’s Complaint is ordered dismissed.
Petitioner thereupon filed a petition for review on
certiorari with this Court.
ISSUE: Whether respondent is responsible for breach
of implied warranty for having sold a vehicle with
defective engine. (NO.)
HELD:
Petitioner should have exercised this right within six
months from the delivery of the thing sold. Since
petitioner filed the complaint on April 20, 1999, or
more than nineteen months counted from November
29, 1997 (the date of the delivery of the motor
vehicle), his cause of action had become time-barred.
Consequently, even if the complaint is made to fall
under the Republic Act No. 7394, the same should
still be dismissed since the prescriptive period for
implied warranty thereunder, which is one year, had
likewise lapsed.
y. What are the warranties in supply of services?
ARTICLE 69. "Warranties in Supply of Services. —
a) In every contract for the supply of
services to a consumer made by a seller in
the course of a business, there is an
implied warranty that the service will be
rendered with due care and skill and that
any material supplied in connection with
such services will be reasonably fit for
the purpose for which it is supplied.
b) Where a seller supplies consumer services
in the course of a business and the
consumer, expressly or by implication,
makes known to the seller the particular
purpose for which the services are
required, there is an implied warranty that
the services supplied under the contract
and any material supplied in connection
ANTONIO
therewith will be reasonably fit for that
purpose or are of such a nature or quality
that they might reasonably be expected
to achieve that result, unless the
circumstances show that the consumer does
not rely or that it is unreasonable for him to
rely, on the seller’s skill or judgment."
z. Does the provisions of the Consumer Act on
warranty apply to professional services? (No.)
What will apply?
ARTICLE 70. "Professional Services. — The
provisions of this Act on warranty shall not apply to
professional services of certified public accountants,
architects, engineers, lawyers, veterinarians,
optometrists, pharmacists, nurses, nutritionists,
dietitians, physical therapists, salesmen, medical and
dental practitioners and other professionals engaged
in their respective professional endeavors."
aa. What is the guaranty for service firms?
ARTICLE 71. "Guaranty of Service Firms. — Service
firms shall guarantee workmanship and
replacement of spare parts for a period not less
than ninety (90) days which shall be indicated in
the pertinent invoices."
bb. What are the prohibited acts under Art. 72?
ARTICLE 72. "Prohibited Acts. — The following acts
are prohibited:
a) refusal without any valid legal cause by
the total manufacturer or any person
obligated under the warranty or guarantee to
honor a warranty or guarantee issued;
b) unreasonable delay by the local
manufacturer or any person obligated under
the warranty or guarantee in honoring the
warranty;
c) removal by any person of a product’s
warranty card for the purpose of evading
said warranty obligation;
d) any false representation in an
advertisement as to the existence of a
warranty or guarantee."
cc. What are the penalties under Art. 73?

ARTICLE 73. "Penalties. —
a) Any person who shall violate the
provisions of Article 67 shall be subject to
fine of not less than Five hundred pesos
(P500.00) but not more than Five thousand
pesos (P5,000.00) or an imprisonment of not
less than three (3) months but not more
than two (2) years or both upon the
discretion of the court. A second conviction
under this paragraph shall also carry with it
the penalty or revocation of his business
permit and license.
b) Any person, natural or juridical, committing
any of the illegal acts provided for in
Chapter III, except with respect to Article
67, shall be liable for a fine of not less than
One thousand pesos (P1,000.00) but not
more than Fifty thousand pesos
(P50,000.00) or imprisonment for a period of
at least one (1) year but not more than five
(5) years, or both, at the discretion of the
court.
The imposition of any of the penalties herein provided
is without prejudice to any liability incurred under the
warranty or guarantee."
ANTONIO
9th Week - Retail Trade Laws
n. Which law applies for labeling of drugs?
a. Read Arts. 74 to 107 of Republic Act No. 7394
and its Implementing Rules and Regulations.
o. What are the additional labeling requirements
for cosmetics?
b. Discuss the state policy declared in Article 74
of RA 7394.
p. When are cosmetic products deemed
mislabeled?
c. What is the implementing agency for the
provisions on labeling and fair packaging?
q. When are hazardous substances deemed
mislabeled?
d. What are the prohibited acts on labeling and
packaging?
r. What are the grounds for seizure and
condemnation of mislabeled hazardous
e. What are the minimum labeling requirements substances?
for consumer products?
s. What are the labeling requirements for
f. What is the Philippine Product Standard (PS) cigarettes?
Mark?
Article 94. Labeling Requirements of Cigarettes. - All
cigarettes for sale or distribution within the country
g. Is it mandatory to place the Philippine PS mark shall be contained in a package which shall bear the
in the product label? following statement or its equivalent in Filipino:
"Warning: Cigarette Smoking is Dangerous to Your
Health". Such a statement shall be located in
h. Discuss special packaging requirements for conspicuous place on every cigarette package and
protection of children. shall appear in conspicuous and legible type in
contrast by typography, layout or color with other
printed matter on the package. Any advertisement of
i. What is a price tag? cigarette shall contain the name warning as indicated
in the label.
j. When is a price tag required? Requirement: Package contains “BABALA: Ang
Paninigarilyo ay Mapanganib sa Iyong
Kalusugan.” which should be located in a
k. Discuss the manner and regulations for price conspicuous place (a place for it to stand out.)
tags.
t. What are the penalties stated in Article 95.
l. What are the additional labeling requirements Article 95. Penalties. –
for food?
a) Any person who shall violate the provisions of Title
III, Chapter IV of this Act, or its implementing rules
m. What is a mislabeled food? and regulations, except Articles 81 to 83 of the same
Chapter, shall be subject to a fine of not less than

Five hundred pesos (P500.00) but not more than
Twenty thousand pesos (P20,000.00) or
imprisonment of not less than three (3) months but
not more than two (2) years or both, at the discretion
of the court: Provided, That, if the consumer product
is one which is not a food, cosmetic, drug, device or
hazardous substance, the penalty shall be a fine of
not less than Two hundred pesos (P200.00) but not
more than Five thousand pesos (P5,000.00) or
imprisonment of not less than one (1) month but not
more than one (1) year or both, at the discretion of the
court.
b) Any person who violates the provisions of Article
81 to 83 for the first time shall be subject to a fine of
not less than Two hundred pesos (P200.00) but not
more than Five thousand pesos (P5,000.00) or by
imprisonment of not less than one (1) month but not
more than six (6) months or both, at the discretion of
the court. A second conviction under this paragraph
shall also carry with it the penalty of revocation of
business permit and license.
u. What is a defective product?
A product is defective when it does not offer the
safety rightfully expected of it, taking relevant
circumstances into consideration, including but not
limited to:
a) presentation of product;
b) use and hazards reasonably expected of
it;
c) the time it was put into circulation.
A product is not considered defective because
another better quality product has been placed in
the market.
The manufacturer, builder, producer or importer
shall not be held liable when it evidences:
a) that it did not place the product on the
market;
b) that although it did place the product on the
market such product has no defect;
c) that the consumer or a third party is solely
at fault.
v. Who is liable for defective products?
Article 97. Liability for the Defective Products. – Any
Filipino or foreign manufacturer, producer, and any
importer, shall be liable for redress, independently
of fault, for damages caused to consumers by
defects resulting from design, manufacture,
construction, assembly and erection, formulas and
handling and making up, presentation or packing of
their products, as well as for the insufficient or
inadequate information on the use and hazards
thereof.
w. What is a defective service?
(Art. 99) The service is defective when it does not
provide the safety the consumer may rightfully
expect of it, taking the relevant circumstances into
consideration, including but not limited to:
a) the manner in which it is provided;
b) the result of hazards which may reasonably
be expected of it;
c) the time when it was provided.
A service is not considered defective because of
the use or introduction of new techniques.
The supplier of the services shall not be held liable
when it is proven:
a) that there is no defect in the service
rendered;
b) that the consumer or third party is solely
at fault.
x. Who is liable for defective service?
Article 99. Liability for Defective Services. – The
service supplier is liable for redress,
independently of fault, for damages caused to
consumers by defects relating to the rendering of the
services, as well as for insufficient or inadequate
information on the fruition and hazards thereof.
The service is defective when it does not provide the
safety the consumer may rightfully expect of it, taking
the relevant circumstances into consideration,
including but not limited to:
a) the manner in which it is provided;
b) the result of hazards which may reasonably
be expected of it;
c) the time when it was provided.
ANTONIO
A service is not considered defective because of the
use or introduction of new techniques.
The supplier of the services shall not be held liable
when it is proven:
a) that there is no defect in the service
rendered;
b) that the consumer or third party is solely at
fault.
y. What is considered a product or service
imperfection?
ARTICLE 100. Liability for Product and Service
Imperfection. — The suppliers of durable or
non-durable consumer products are jointly liable
for imperfections in quality that render the
products unfit or inadequate for consumption for
which they are designed or decrease their value,
and for those resulting from inconsistency with the
information provided on the container, packaging,
labels or publicity messages/advertisement, with due
regard to the variations resulting from their
nature, the consumer being able to demand
replacement to the imperfect parts.
If the imperfection is not corrected within thirty
(30) days, the consumer may alternatively demand
at his option:
a) the replacement of the product by another
of the same kind, in a perfect state of use;
b) the immediate reimbursement of the
amount paid, with monetary updating,
without prejudice to any losses and
damages;
c) a proportionate price reduction.
The parties may agree to reduce or increase the
term specified in the immediately preceding
paragraph; but such shall not be less than seven (7)
nor more than one hundred and eighty (180) days.
The consumer may make immediate use of the
alternatives under the second paragraph of this
Article when by virtue of the extent of the
imperfection, the replacement of the imperfect
parts may jeopardize the product quality or
characteristics, thus decreasing its value.

If the consumer opts for the alternative under
sub-paragraph (a) of the second paragraph of this
Article, and replacement of the product is not
possible, it may be replaced by another of a
different kind, mark or model: Provided, That any
difference in price may result thereof shall be
supplemented or reimbursed by the party which
caused the damage, without prejudice to the
provisions of the second, third and fourth paragraphs
of this Article.
z. Who is liable for product or service
imperfections?
ARTICLE 100. Liability for Product and Service
Imperfection. — The suppliers of durable or
non-durable consumer products are jointly liable
for imperfections in quality that render the
products unfit or inadequate for consumption for
which they are designed or decrease their value,
and for those resulting from inconsistency with
the information provided on the container,
packaging, labels or publicity
messages/advertisement, with due regard to the
variations resulting from their nature, the consumer
being able to demand replacement to the imperfect
parts.
Wes: If 2 or more ang gumawa ng sinasabing
product/service, pareho sila liable to the specified
product/service na imperfect. So, for example, si
consumer A bumili ng CPU na gawa ng dalawang
company/supplier tapos imperfect sya, like may
nawawala palang processor, both of them are jointly
liable.
aa. What are the rules in dealing with product or
service imperfection?
If the imperfection is not corrected within thirty
(30) days, the consumer may alternatively demand
at his option:
a) the replacement of the product by another
of the same kind, in a perfect state of use;
b) the immediate reimbursement of the
amount paid, with monetary updating,
without prejudice to any losses and
damages;
c) a proportionate price reduction.
The parties may agree to reduce or increase the
term specified in the immediately preceding
paragraph; but such shall not be less than seven (7)
nor more than one hundred and eighty (180) days.
The consumer may make immediate use of the
alternatives under the second paragraph of this
Article when by virtue of the extent of the
imperfection, the replacement of the imperfect
parts may jeopardize the product quality or
characteristics, thus decreasing its value.
If the consumer opts for the alternative under
sub-paragraph (a) of the second paragraph of this
Article, and replacement of the product is not
possible, it may be replaced by another of a
different kind, mark or model: Provided, That any
difference in price may result thereof shall be
supplemented or reimbursed by the party which
caused the damage, without prejudice to the
provisions of the second, third and fourth paragraphs
of this Article.
Wes: Yung term na pagpalit ng product/service with
imperfection pwedeng pag usapan ni seller and
consumer kung gaano katagal bago pwede palitan ni
seller pero minimum lang ng 7 days and max of 180
days.
bb. Who is liable for product quantity
imperfection?
ARTICLE 101. Liability for Product Quantity
Imperfection. — Suppliers are jointly liable for
imperfections in the quantity of the product when,
in due regard for variations inherent thereto, their
net content is less than that indicated on the
container, packaging, labeling or advertisement,
the consumer having powers to demand,
alternatively, at his own option.
a) the proportionate price
b) the supplementing of weight or measure
differential;
c) the replacement of the product by another
of the same kind, mark or model, without
said imperfections;
d) the immediate reimbursement of the
amount paid, with monetary updating without
prejudice to losses and damages if any.
ANTONIO
The provisions of the fifth paragraph of Article 99
shall apply to this Article.
The immediate supplier shall be liable if the
instrument used for weighing or measuring is not
gauged in accordance with official standards.
NOTE: Art. 99(par. 5). The supplier of the services
shall not be held liable when it is proven:
a) that there is no defect in the service
rendered;
b) that the consumer or third party is solely at
fault.
cc. Who is liable for service quality imperfection?
Article 102. Liability for Service Quality Imperfection.
– The service supplier is liable for any quality
imperfections that render the services improper
for consumption or decrease their value, and for
those resulting from inconsistency with the
information contained in the offer or
advertisement, the consumer being entitled to
demand alternatively at his option:
a) the performance of the services, without
any additional cost and when applicable;
b) the immediate reimbursement of the
amount paid, with monetary updating without
prejudice to losses and damages, if any;
c) a proportionate price reduction.
Reperformance of services may be entrusted to
duly qualified third parties, at the supplier's risk
and cost.
Improper services are those which prove to be
inadequate for purposes reasonably expected of
them and those that fail to meet the provisions of this
Act regulating service rendering.
dd. What are the rules in dealing with service
quality imperfection?
Art. 102 states the consumer being entitled to
demand alternatively at his option:
a) the performance of the services, without
any additional cost and when applicable;

b) the immediate reimbursement of the
amount paid, with monetary updating without
prejudice to losses and damages, if any;
c) a proportionate price reduction.
Reperformance of services may be entrusted to
duly qualified third parties, at the supplier's risk
and cost.
Improper services are those which prove to be
inadequate for purposes reasonably expected of
them and those that fail to meet the provisions of this
Act regulating service rendering.
ee. What are the rules in dealing with repair
service obligation?
ARTICLE 103. Repair Service Obligation. —
When services are provided for the repair of any
product, the supplier shall be considered implicitly
bound to use adequate, new, original replacement
parts, or those that maintain the manufacturer’s
technical specifications unless, otherwise
authorized, as regards to the latter by the
consumer.
ff. Is supplier’s ignorance of quality imperfection a
valid defense?
ARTICLE 104. Ignorance of Quality Imperfection.
— The supplier’s ignorance of the quality
imperfections due to inadequacy of the products
and services does not exempt him from any
liability.
gg. Discuss legal guarantee of adequacy.
ARTICLE 105. Legal Guarantee of Adequacy. —
The legal guarantee of product or service
adequacy does not require an express instrument
or contractual exoneration of the supplier being
forbidden.
hh. What are the prohibited contractual
stipulations under Article 106?
ARTICLE 106. Prohibition in Contractual
Stipulation. — The stipulation in a contract of a
clause preventing, exonerating or reducing the
obligation to indemnify for damages effected, as
provided for in this and in the preceding Articles, is
hereby prohibited, if there is more than one person
responsible for the cause of the damage, they shall
be jointly liable for the redress established in the
pertinent provisions of this Act. However, if the
damage is caused by a component or part
incorporated in the product or service, its
manufacturer, builder or importer and the person who
incorporated the component or part are jointly liable.
ii. What are the penalties stated in Article 107?
ARTICLE 107. Penalties. — Any person who shall
violate any provision of this Chapter or its
implementing rules and regulations with respect to
any consumer product which is not food, cosmetic, or
hazardous substance shall upon conviction, be
subject to a fine of not less than Five thousand
pesos (P5,000.00) and by imprisonment of not more
than one (1) year or both upon the discretion of
the court.
In case of juridical persons, the penalty shall be
imposed upon its president, manager or head. If
the offender is an alien, he shall, after payment of
fine and service of sentence, be deported without
further deportation proceedings.
ANTONIO
10th Week - Retail Trade Laws
a. Read Arts. 110 to 130 of Republic Act No. 7394
and its Implementing Rules and Regulations.
CHAPTER VI
Advertising and Sales Promotion
b. Discuss the state policy declared in Article 108*
of RA 7394.
ARTICLE 108. "Declaration of Policy. — The
State shall protect the consumer from misleading
advertisements and fraudulent sales promotion
practices."
Advertising is seen as misleading if it involves
false, misleading or deceptive information that is
likely to cause the average consumer to act in a
way they might otherwise not. Advertising may
also be considered misleading if important
information that the average consumer needs to
make an informed decision is left out. Misleading
advertising covers claims made directly to
consumers by manufacturers, distributors and
retailers, as well as in advertisements, catalogues,
websites etc.
Examples of misleading advertising:
- A false claim about the characteristics of the
goods or service, e.g. – a product is a
different colour, size or weight to what is
advertised.
- The price or way the price is calculated is
misrepresented, e.g. – products are
advertised at sale prices, but turn out not to
be.
- The way the goods or service are supplied is
misrepresented, e.g. – free delivery is
advertised, but the delivery actually involves
some sort of fee or charge.
- Any aspect about the advertiser is
misrepresented, e.g. – the business is
presented as being a member of a trade
association, when they are actually not.
- The advertisement creates a false
impression about a product or service, even
if the information given is correct.

- Any important information is hidden or left
out.
Examples of fraudulent sales promotion practices:
- Exaggerating the qualities of a product or
service in advertising
- Hiding side effects or potential harms.
c. What is the implementing agency for the
provisions on advertising and sales promotion?
ARTICLE 109. "Implementing Agency. — The
Department of Trade and Industry shall enforce the
provisions of this Chapter and its implementing
rules and regulations: Provided, That with respect to
food, drugs, cosmetics, devices and hazardous
substances, it shall be enforced by the Department
of Health."
DTI and DOH (if about food, drugs, cosmetics,
devices and hazardous substances) are tasked to
enforce the provisions regarding advertising and sales
promotion.
d. What are the acts considered false, deceptive,
or misleading advertisement?
ARTICLE 110. "False, Deceptive or Misleading
Advertisement. — It shall be unlawful for any person
to disseminate or to cause the dissemination of
any false, deceptive or misleading advertisement
by Philippine mail or in commerce by print, radio,
television, outdoor advertisement or other medium for
the purpose of inducing or which is likely to induce
directly or indirectly the purchase of consumer
products or services.
An advertisement shall be false, deceptive or
misleading if it is not in conformity with the
provisions of this Act or if it is misleading in a
material respect. In determining whether any
advertisement is false, deceptive or misleading, there
shall be taken into account, among other things, not
only representations made or any combination
thereof, but also the extent to which the
advertisement fails to reveal material facts in the light
of such representations, or materials with respect to
consequences which may result from the use or
application of consumer products or services to which
the advertisement relates under the conditions
prescribed in said advertisement, or under such
conditions as are customary or usual."
Art. 110 explains that it is against the law for anyone
to disseminate or to cause the dissemination of any
false, deceptive, or misleading advertisement through
any medium for the purpose of inducing directly or
indirectly the purchase of consumer products or
services.
e. When is price comparison in advertisements
allowed?
ARTICLE 111. "Price Comparisons. —
Comparative price advertising by sellers of consumer
products or services shall conform to the following
conditions:
a) Where the comparison relates to a former
price of the seller, the item compared shall
either have been sold at that price within the
ninety (90) days immediately preceding the
date of the advertisement, or it shall have
been offered for sale for at least four (4)
weeks during such ninety-day period. If the
comparison does not relate to an item sold
effect on the date disclosed in the
advertisement or within ninety (90) days after
the price comparison is stated in the
advertisement. The stated future price shall
be maintained by the seller for a period of at
least four (4) weeks after its effective date:
Provided, That compliance thereof may be
dispensed with in case of circumstances
beyond the seller’s control.
b) Where the comparison relates to a
competitor’s price, the competitor’s price
shall relate to the consumer products or
services advertised or sold in the ninety-day
period and shall be representative of the
prices similar consumer products or services
are sold or advertised in the locality where
the price comparison was made."
Wes: Pagkakaintindi ko is an advertisement kung
saan may price comparison is tungkol sa former price
kunyari gagawan ng sale/discount ng seller, pwede
lang i-compare ang former price if nabenta within 90
days or na offer for sale ng 4 weeks.
ANTONIO
f. What are the special advertising requirements
for food, drug, cosmetic, device, or hazardous
substance?
ARTICLE 112. "Special Advertising Requirements
for Food, Drug, Cosmetic, Device, or Hazardous
Substance. —
a) No claim in the advertisement may be
made which is not contained in the label
or approved by the concerned department.
b) No person shall advertise any food, drug,
cosmetic, device, or hazardous substance in
a manner that is false, misleading or
deceptive or is likely to create an erroneous
impression regarding its character, value,
quantity, composition, merit, or safety.
c) Where a standard has been prescribed for a
food, drug, cosmetic, or device, no person
shall advertise any article or substance in
such a manner that it is likely to be
mistaken for such product, unless the
article complies with the prescribed standard
or regulation.
d) No person shall, in the advertisement of
any food, drug, cosmetic, device, or
hazardous substance, make use of any
reference to any laboratory report of
analysis required to be furnished to the
concerned department, unless such
laboratory report is duly approved by such
department.
e) Any businessman who is doubtful as to
whether his advertisement relative to food,
drug, cosmetic, device, or hazardous
substance will violate or does not conform
with this Act or the concerned department’s
pertinent rules and regulations may apply to
the same for consideration and opinion
on such matter before such
advertisement is disseminated to the
public. In this case, the concerned
department shall give its opinion and notify
the applicant of its action within thirty (30)
days from the date of application; otherwise,
the application shall be deemed approved.
f) No person shall advertise any food, drug,
cosmetic, device, or hazardous substance
unless such product is duly registered
and approved by the concerned
department for use in any advertisement."

g. What are the requirements for credit
advertising?
ARTICLE 113. “Credit Advertising. — No
advertisement to aid, promote, or assist, directly or
indirectly, any extension of consumer credit may:
a) state that a specific periodic consumer credit
amount or installment amount can be
arranged, unless the creditor usually and
customarily arranges credit payment or
installments for that period and in that
amount; and
b) state that a specified down payment is
required in any extension of consumer credit,
unless the creditor usually or customarily
arranges down payment in that amount.”
(Examples: Tuition, Installment Plans, Loans)
credit advertisement means an advertisement that is
covered by the Equal Credit Opportunity Act, 15
U.S.C. ... (“ECOA”), i.e., an advertisement offering a
specific credit opportunity. Credit Advertisements
include advertisements that link or direct users to a
page offering such specific credit opportunities.
h. What is an open-end credit plan?
ARTICLE 114. "Advertising of Open-end Credit
Plan. — In case of an open-end credit plan, the rate
of interest and other material features of the plan
shall be disclosed in the advertisement."
(Example: Credit Card)
Open-End Credit Plan - Open-end credit agreements
are good for borrowers because it gives them more
control over when and how much they borrow. In
addition, interest usually isn't charged on the part of
the line of credit that is not used, which can lead to
interest savings for the borrower compared to using
an installment loan.
Open-end credit often takes one of two forms: a loan
or a credit card. In the consumer market, credit cards
are the more common form as they provide flexible
access to funds, which are available immediately
again once a payment is received. A home equity line
of credit is another of the more common loan forms in
the consumer market, allowing borrowers to access
funds based on the level of equity in their homes or
other property.
On the business side, a line of credit loan may use
different metrics to determine the maximum amounts.
These measures can include information regarding a
company’s value or revenue, or by collateral such as
real estate assets and the value of other tangible
goods held by the organization.
Andy - Open-end credit is a pre-approved loan,
granted by a financial institution to a borrower, that
can be used repeatedly. With open-end loans, like
credit cards, once the borrower has started to pay
back the balance, they can choose to take out the
funds again—meaning it is a revolving loan.
i. What are the requirements for open-end credit
plan advertising?
Art. 114 states that the rate of interest and other
material features of the open-end credit plan shall be
disclosed in the advertisement.
Example of other material features: Incentives.
j. What is a special claim?
ARTICLE 115. "Special Claims. — Any
advertisement which makes special claims shall:
a) substantiate such claims; and
b) properly use research results, scientific
terms, statisics or quotations.
Promotion of Sales of Consumer Products and
Services"
k. What are the requirements for an advertisement
which makes special claims?
Art. 115 states that “[a]ny advertisement which makes
special claims shall:
a) substantiate such claims; and
b) properly use research results, scientific
terms, statistics or quotations.”
Own understanding (Edric): “Special claims” are
those that advertise “promises” or “special
qualities” of that of which it is advertising. (For
example: “Our gadget has the first ever holographic
ANTONIO
display system.” Before the State approves of this, the
manufacturer shall meet the above mentioned
requirements first.)
NOTE: “Substantiate” - provide evidence to support or
prove the truth of.
l. Discuss permit to conduct promotion.
ARTICLE 116. "Permit to Conduct Promotion. —
No person shall conduct any sales campaigns,
including beauty contests, national in character,
sponsored and promoted by manufacturing
enterprises without first securing a permit from the
concerned department at least thirty (30) calendar
days prior to the commencement thereof. Unless
an objection or denial is received within fifteen (15)
days from filing of the application, the same shall be
deemed approved and the promotion campaign or
activity may be conducted: Provided, That any sales
promotion campaign using medical prescriptions or
any part thereof or attachment thereto for raffles or a
promise of reward shall not be allowed, nor a permit
be issued thereof."
l.1. Discuss DOH v. Philip Morris
Philippines Manufacturing, Inc. G.R. No. 202943,
25 March 2015.
FACTS:
On November 19, 2008, PMPMI, through the
advertising agency PCN Promopro, Inc. (PCN), by
virtue of Article 116 of RA 7394 applied for a sales
promotion permit before the BFAD, now the FDA, for
its Gear Up Promo.
With more than 15 days lapsing without the BFAD
formally acting upon the application, PMPMI inquired
about its status. However, PMPMI was verbally
informed of a Memo issued by the DOH which
prohibits tobacco companies from conducting any
tobacco promotional activities.
On November 28, 2008, PMPMI, through another
advertising agency, Arc Worldwide Philippines Co.
(AWPC), filed another application for a sales
promotional permit for its Golden Stick Promo which
the BFAD refused pursuant to a directive of the BFAD
Director that all permit applications for promotional

activities of tobacco companies will no longer be
accepted.
On January 5, 2009, the BFAD denied PMPMI’s Gear
Up Promo application in accordance with RA 9211 or
the "Tobacco Regulation Act of 2003." which states
that "all promotions, advertisements and/or
sponsorships of tobacco products are already
prohibited"
On January 19, 2009, PMPMI filed an administrative
appeal before the DOH Secretary. In its appeal,
PMPMI maintained that under RA 9211, promotion is
not prohibited but merely restricted, and that while
there are specific provisions therein totally banning
tobacco advertising and sponsorships, no similar
provision could be found banning promotion.
Additional Note: It likewise averred that it
had acquired a vested right over the granting
of its sales promotional permit applications,
considering that the BFAD has been granting
such applications prior to January 5, 2009.
Finally, it insisted that the denial of its
promotional permit applications was
tantamount to a violation of its right to due
process as well as their right to property.
DOH Ruling:
On April 30, 2009, Sec. Duque denied PMPMI’s
appeal, as well as all other similar actions filed by
other tobacco companies and thereby affirmed the
action of the BFAD denying their sales promotional
permit applications, pursuant to the provisions of RA
9211.
DOH Ruling for Additional Note: Sec.
Duque ruled that the issuance of permits for
sales promotional activities was a created the IAC-Tobacco and granted upon it the
discretionary power to be exercised within
the confines of the law. Moreover, previous
approvals of sales promotional permit
applications made by the BFAD did not
create a vested right on the part of the
tobacco companies to have all applications
approved.
The DOH likewise ruled that the intent and purpose of
RA 9211 was to completely ban tobacco
advertisements, promotions, and sponsorships, as
promotion is inherent in both advertising and
sponsorship.
DOH cited the Philippines’ obligation to observe the
provisions of the Framework Convention on Tobacco
Control (FCTC), an international treaty, which has
been duly ratified and adopted by the country on June
6, 2005.
PMPMI elevated the matter to the CA via petition for
certiorari and mandamus
CA Ruling:
CA granted the petition and nullified DOH’s Decision
upon a finding that the provisions of RA 9211 were
clear when it distinguished promotion from advertising
and sponsorship, so much so that while advertising
and sponsorship were completely banned as of July
1, 2008, the same does not hold true with regard to
promotion, which was only restricted.
Furthermore, DOH is bereft of any authority to enforce
the provisions of RA 9211, in view of the creation of
the Inter- Agency Committee–Tobacco (IAC-Tobacco)
under Section 29 of the said law, which shall have the
"exclusive power and function to administer and
implement the provisions of [RA 9211] x x x."
CA ruled that the DOH wrongfully arrogated unto itself
the authority given to the IAC-Tobacco to administer
and implement the provisions of RA 9211, which
includes regulation of tobacco promotions.
ISSUE:
(1) Whether the authority of the DOH, through the
BFAD, to regulate tobacco sales promotions under
Article 116 in relation to Article 109 of RA 7394 had
already been impliedly repealed by RA 9211, which
exclusive authority to administer and implement the
provisions thereof. (YES.)
(2) Whether RA 9211 has also completely prohibited
tobacco PROMOTIONS as of July 1, 2008. (NO.)
HELD:
SC Ruling:
(1) The creation of the IAC-Tobacco effectively and
impliedly repealed the above-quoted provisions of RA
7394, thereby removing the authority of the DOH to
ANTONIO
rule upon applications for sales promotional permits
filed by tobacco companies such as those filed by
PMPMI subject of this case.
(2) It is the IAC-Tobacco and not the DOH which has
the primary jurisdiction to regulate sales promotion
activities as explained in the foregoing discussion. As
such, the DOH’s ruling, including its construction of
RA 9211 (i.e., that it completely banned tobacco
advertisements, promotions, and sponsorships, as
promotion is inherent in both advertising and
sponsorship), are declared null and void, which, as a
necessary consequence, precludes the Court from
further delving on the same. As it stands, the present
applications filed by PMPMI are thus remanded to the
IAC-Tobacco for its appropriate action.
Takeaway: It must be stressed that RA 9211 is a
special legislation which exclusively deals with the
subject of tobacco products and related activities. On
the other hand, RA 7394 is broader and more general
in scope, and treats of the general welfare and
interests of consumers vis-à-vis proper conduct for
business and industry. As such, lex specialis derogat
generali. General legislation must give way to special
legislation on the same subject, and generally is so
interpreted as to embrace only cases in which the
special provisions are not applicable. In other words,
where two statutes are of equal theoretical application
to a particular case, the one specially designed
therefore should prevail.
m. When may publication or dissemination of
information be suspended?
ARTICLE 117. "Suspension of Publication or
Dissemination of Information. — The concerned
department may, after due notice and hearing,
suspend the publication and dissemination of any
information accompanying a sales promotion
campaign, if it finds the campaign to be in
violation of the provisions of this Chapter or its
implementing rules and regulations."
n. What are the requirements for conduct of sales
promotion?
ARTICLE 118. "Conduct of Sales Promotion. — A
sales promotion which is intended for broad
consumer participation and utilizes mass media

shall indicate the duration, commencement and
termination of the promotion, the deadline for
submission of entries and the governing criteria
or procedure to be followed therein."
o. What are the requirements for packaging of
products under promotion?
ARTICLE 119. "Packaging of Products Under
Promotion. — The packaging of the products
covered by the sales promotion shall not be
tampered, neither shall any change in the
product’s package be affected without the
authority of the sponsoring agency or the owner or
manufacturer of the product."
p. What are the requirements when there will be a
change in the starting and termination dates of
promotion?
ARTICLE 120. "Change in Starting and
Termination Dates of Promotion. — The concerned
department shall be advised of any delay of
starting dates or termination dates and details of
any change in the conduct of a sales promotion. Any
change in the termination dates shall be
published in a newspaper of general circulation
before the expiration of the original schedule or
the termination date, whichever comes first."
q. What are the requirements in determining
winners in any sales promotion?
ARTICLE 121. "Determination of Winners. — The
winners in any sales promotion shall be
determined at a definite time and place and shall
be verified by a representative of the concerned
department and the sponsor. Immediately after the
winners are selected or determined, a list with their
addresses and corresponding prizes shall be
submitted to the concerned department. All
winners shall be announced or published in the
same manner that the sales promotion was
announced or published: Provided, That publication in
a newspaper of general circulation shall be done in a
legible manner at least once, if the sales promotion is
national in scope: Provided, further, That such
announcement and publication shall be done not later
than two (2) weeks after the determination of winners.
In all cases where the amount of the price is Five
hundred pesos (P500.00) or more, the winners shall
also be notified in writing by registered mail or any
communication wherein proof of notice or service can
be verified."
r. What is an injunctive relief?
Injunctive relief, also known as an injunction, is a
remedy which restrains a party from doing certain
acts or requires a party to act in a certain way. It is
generally only available when there is no other
remedy at law and irreparable harm will result if
the relief is not granted.
s. When is an injunctive relief allowed under
Article 122?
ARTICLE 122. "Injunctive Relief. —
a) Whenever the concerned department has
the reason to believe (1) that any person,
partnership or corporation is engaged in
or is about to engage in the
dissemination or the causing of
dissemination of any advertisement in
violation of Articles 110 to 115, and (2)
that the enjoining thereof would be to the
interest of the public, the concerned
department shall direct the filing of a
complaint in the court of competent
jurisdiction, to enjoin the dissemination
or the causing of the dissemination of
such advertisement. Upon proper showing,
a temporary injunction or restraining order
shall be granted without bond. Any such
complaint shall be filed in the locality in
which the person, partnership or corporation
resides or transacts business.
b) Any person who may suffer loss, damage
or injury due to a false, misleading or
deceptive advertisement as defined in
Article 4 may file a complaint with
injunction in his own name with any court of
competent jurisdiction to recover damages,
cost of suit and reasonable attorney’s fees."
t. What are the penalties under Article 123
ARTICLE 123. "Penalties. — a) any person,
association, partnership or corporation who shall
violate any of the provisions of Articles 110 to 115
ANTONIO
shall, upon conviction, be subject to a fine of not less
than Five Hundred Pesos (P500.00) but not more
than Five thousand pesos (P5,000.00) or an
imprisonment of not less than one (1) month but
not more than (6) months or both upon the
discretion of the court.
b) Any violation of the provisions of Articles 116 to
121 shall, upon conviction, subject the offenders to a
fine of not less than Two hundred pesos (P200.00)
but not more than Six hundred pesos (P600.00) or an
imprisonment of not less than one (1) month but not
more than six (6) months or both upon the
discretion of the court. If the violation was
committed by a juridical person, the manager,
representative, director, agent or employee of said
juridical person responsible for the act shall be
deported after service of sentence and payment of the
fine without need for further deportation proceedings."
u. Who are exempt from penalties?
ARTICLE 124. “Exemption from Penalties. — No
publisher, radio broadcast, television licensee or
medium for the dissemination of advertising shall
be liable, under this Chapter, by reason of
dissemination by him of any false advertisement
unless he refuses, on the request of appropriate
authorities, to furnish the name and post office
address of the manufacturer, packer, distributor seller
or advertising agency. This exemption shall not
apply however, to the manufacturer, packer,
distributor or seller of the consumer product or
service and the advertising agency responsible
for the false and misleading advertising.”
v. Discuss regulation of repair and service firms.
CHAPTER VII
Regulation of Repair and Service Firms
w. Discuss the declared policy under Article 125.
ARTICLE 125. “Declaration of Policy. — The
State shall cause the accreditation of repair and
service firms or establishments and their technical
personnel in order to protect the interest of the
consumers availing of their services.”

Andy- In order to protect the interest of consumers
there must be proper recognition of repair and service
firms through accreditation, such accreditation helps
recognize that such repair and service firm met the
requirements and quality standards of the concerned
department. (DTI)
x. Who is the implementing agency of the
provision on regulation of repair and service
firms?
ARTICLE 126. “Implementing Agency. — The
Department of Trade and Industry, hereby referred
to as the Department, shall enforce the provisions of
this Chapter.”
y. What are the minimum requirements for
accreditation?
ARTICLE 127. "Minimum Requirements for
Accreditation. — The following shall be the minimum
requirements for accreditation or repair and service
firms:
a) the duly registered business name, firm
name or style of the firm;
b) date of issue and effectivity of the certificate
of accreditation;
c) number and skills of technical personnel;
and
d) required license for the repair or
servicing of any consumer product as
required by special laws."
z. May a repair or service firm operate without
accreditation from DTI?
ARTICLE 128. "Accreditation of Repair and
Service Firm. — No person shall operate a repair
and service firm or act as technical personnel therein
without first being accredited by the Department."
aa. What are the rules involving certification of
accreditation?
ARTICLE 129. "Certification of Accreditation. —
Upon compliance with the requirements for
accreditation, the Department shall issue the
corresponding certificate of accreditation. A
separate certificate shall be required for each
branch of an enterprise located in areas outside of
the main office. However, with respect to repair and
service centers of factory authorized
representatives or franchised dealers, such centers
may display a certified true copy of the certificate
of accreditation of the parent company."
bb. When may a certificate of accreditation be
suspended, revoked, or cancelled?
ARTICLE 130. "Suspension, Revocation or
Cancellation of Certification of Accreditation. — Any
certificate of accreditation may be suspended,
revoked or cancelled by the Department, for
cause, after due notice and hearing."
ANTONIO
11th Week - Retail Trade Laws
a. What is the declared policy under Article 131?
TITLE IV
Consumer Credit Transaction
ARTICLE 131. “Declaration of Policy. — The
State shall simplify, clarify and modernize the laws
governing credit transactions and encourage the
development of fair and economically sound
consumer credit practices. To protect the consumer
from lack of awareness of the true cost of credit to the
user, the State shall assure the full disclosure of the
true cost of credit.”
Andy - In order to attain fair and economically sound
consumer credit practice. The Declaration policy here
in Article 131 pertains to the full disclosure of credit
transactions, so that consumers could be aware of
certain credit transactions, it’s costs and rates of
interest to the user, as well as the underlying
consequences of credit transactions, so that
consumers could make a sound and reasonable
decision under their discretion.
b. What is a consumer credit transaction?
“Consumer credit transaction” means any
transaction in which credit is offered or extended
to an individual for personal, family, or household
purposes.
c. What are included in finance charges?
ARTICLE 132. “Determination of Finance
Charges. — Except as otherwise provided, the
amount of the finance charges in connection with any
consumer credit transaction shall be determined as
the sum of all charges, payable directly or indirectly
by the person to whom the credit is extended and
imposed directly or indirectly by the creditor as an
accident to the extension of credit, including any of
the following type of charges which are applicable:
a) interest or time price differential and any
amount payable under point or other system
of additional charges;
b) collection fees which include finder’s fees or
similar charges;

c) credit investigation fees;
d) notarial fees, if any;
e) premium or other charges for any guarantee
or insurance protecting the creditor against
the obligor’s default or other credit loss. The
implementing agency shall determine what
items shall be exempted from the
computation of the finance charges.”
What is a finance Charge: A finance charge is the
cost of borrowing money, including interest and other
fees. It can be a percentage of the amount borrowed
or a flat fee charged by the company. Credit card
companies have a variety of ways of computing
finance charges.
d. Discuss determination of simple annual rate,
deferral charges, finance charge on refinancing,
right to prepay, and rebate on prepayment.
ARTICLE 133. "Determination of Simple Annual
Rate. — The simple annual rate applicable to any
extension of consumer credit shall be determined in
accordance with the rules and regulations
promulgated by the implementing agency."
ARTICLE 134. “Delinquency Charges. — With
respect to a consumer credit transaction other than
one pursuant to an open-end credit plan, the parties
may agree to a delinquency charge on any installment
not paid in full on or before the tenth day after its
scheduled or deferred due date.”
For Example- There has been an agreement to a
delinquency charge if ever on the lapse of the 30th
day the debtor has not paid the full installment price
for a motorcycle. The full price is P100,000 and a 6%
delinquency charge has been implemented. Thus if
the 30th day has lapsed and the installment was not
paid in full the debtor shall pay an additional of P
6,000 as 6% Delinquency charge.
ARTICLE 135. “Deferral Charges. — The parties
in a consumer credit transaction may at any time
agree in writing to a deferral of all or part of one
or more unpaid installments and the creditor may
make and collect a charge which shall not exceed
the rate previously disclosed pursuant to the
provisions on disclosure. A deferral charge may be
collected at the time it is assessed.”
Deferral Charge- is a long-term prepaid expense that
is carried as an asset until used and consumed.
ARTICLE 136. “Finance Charge on Refinancing.
— The parties may agree on a finance charge in an
open-end credit plan based on the amount financed
resulting from the refinancing or consolidation at a
rate not exceeding that permitted by the rules
promulgated by the implementing agency.”
What is a finance Charge: A finance charge is the
cost of borrowing money, including interest and other
fees. It can be a percentage of the amount borrowed
or a flat fee charged by the company. Credit card
companies have a variety of ways of computing
finance charges.
ARTICLE 137. “Right to Prepay. — The person to
whom credit is extended may prepay in full or in part,
at any time without penalty, the unpaid balance of any
consumer credit transaction.”
The term prepayment privilege refers to the right a
consumer has to pay part or all of a debt prior to its
maturity or ahead of schedule, usually without the risk
of incurring any penalties. Prepayment privileges are
often associated with mortgages or automobile loans.
ARTICLE 138. “Rebate on Prepayment. — Upon
prepayment in full of the unpaid balance of a
precomputed consumer credit transaction,
refinancing or consolidation, an amount not less
than the unearned portion of the finance charge
calculated according to this Article shall be rebated to
the person to whom credit is extended.
Prepaid Rebates means any payment made to or
credit allowed to a customer or prospective customer
of the Company or any Subsidiary, or to any affiliate of
such customer or prospective customer, in each case
in the ordinary course of the Company’s or such
Subsidiary’s business and pursuant to a written
agreement or purchase order, which represents the
prepayment of a rebate, price discount or price
reduction on products sold or to be sold by the
Company or such Subsidiary to one or more
customers or prospective customers.
ANTONIO
The unearned portion of the precomputed finance
charge on consumer transactions repayable in
substantially equal successive installments shall
be equal to at least that portion of finance charge
which the sums of the installment balances of the
obligation scheduled to be outstanding after the
installment date nearest the date of prepayment bears
to the sum of all installment balances originally
scheduled to be outstanding under the obligation.
For the purpose of determining the installment date
nearest the date of prepayment when payments are
monthly, any payment made on or before the
fifteenth day following an installment due date
shall be deemed to have been made as of the
installment due date, and if prepayment occurs after
the fifteenth day, it shall be deemed to have been
made on the succeeding installment due date. This
method of calculating rebates may be referred to as
the “rule of 78” or “sum of the digits” method.
The implementing agency may promulgate and adopt
rules and regulations with respect to other
precomputed consumer credit transactions.”
e. What are the general requirements on credit
cost disclosure?
ARTICLE 139. "General Requirement on Credit
Cost Disclosure. — Each creditor shall disclose, in
accordance with the regulations of the implementing
agency, to each person to whom consumer credit
is extended, the disclosures required by this Act.
If there is more than one obligor, a creditor need not
furnish a statement of information required under this
Act to more than one of them."
f. What are the required disclosures for credit
sale?
NOTE: Credit sales - payments
that are not made until several days
or weeks after a product has been
delivered.
ARTICLE 140. "Credit Sale, Required
Disclosures. — Any creditor extending a consumer
credit sale other than one pursuant to an open-end

credit plan shall disclose in a statement to the
extent applicable, the following information:
a) the cash price or delivered price of the
property or service to be acquired;
(EX: A Lambo worth 7 million,
must be disclosed.)
b) the amounts, if any, to be credited as
down payment and/or trade in;
(EX; Disclosure of a down
payment for P3,500,000 on the
brand Lambo.)
c) the total amount to be financed or the
difference between the amounts set forth
under paragraphs (1) and (2);
(EX: There are two credit plans
for the Toyota Landcruiser. One
is a down payment of P1,131,400
and P101,072 monthly payment
for the next succeeding 60
months; another is a DP of
P2,828,500 and a monthly
payment of P63,170 per month.
(60 months))
d) the charges, individually itemized, which
are paid or to be paid by such person in
connection with the transaction but which
are not incident to the extension of credit;
(EDRIC: From what I understand, it is said
here na kailangan nakalagay yung
“charges” which means yung mga
additional charges such as a broker’s fee,
maintenance fee, etc.)
NOTE: A sales charge is called a
commission or load or a fee paid to
a financial intermediary (such as
financial planner, broker, distributor,
investment advisor, etc.) to buy or
sell a particular investment. The
term sales charge is mostly used
when discussing Mutual funds. In
simple words, it is known as a
percentage of the investment value.
e) the finance charge expressed in terms of
pesos and centavos;
NOTE: Types of finance charges
include things such as account
maintenance fees, late fees
charged for making loan or credit
card payments past the due date,
and account transaction fees.
f) the percentage that the finance charge
bears to the total amount to be financed
expressed as a simple annual rate on the
outstanding balance of the obligation;
(EX: A remaining outstanding
credit card balance that
accumulates 10% interest
annually.)
g) the effective interest rate;
(EX: Investment A pays 10%
interest, compounded monthly.
Investment B pays 10.1%
compounded semi-annually.)
h) the number, amount and due dates or
periods of payments scheduled to repay
the indebtedness;
(EX: “Every 15th day of the
month, you have to pay P101,072
as your installment payment for
your Landcruiser.”) and
i) the default, delinquency or similar
charges payable in the event of late
payments." (EX: Penalties for late
payments.)
NOTE: EXAMPLE OF
DELINQUENCY. If no payment is
made within thirty (30) days from
the said date, all stocks covered by
the subscription shall thereupon
become delinquent.
ART. 134. “the parties may agree to
a delinquency charge on any
installment not paid in full on or
before the tenth day after its
scheduled or deferred due date.”
g. What are the required disclosures on an
open-end credit plan?
NOTE: Open-end credit agreements are
good for borrowers because it gives them
more control over when and how much they
borrow. In addition, interest usually isn't
charged on the part of the line of credit that
is not used, which can lead to interest
savings for the borrower compared to using
an installment loan.
ANTONIO
NOTE: Open-end credit often takes one of
two forms: a loan or a credit card. In the
consumer market, credit cards are the more
common form as they provide flexible access
to funds, which are available immediately
again once a payment is received. A home
equity line of credit is another of the more
common loan forms in the consumer market,
allowing borrowers to access funds based on
the level of equity in their homes or other
property.
ARTICLE 141. "Required Disclosure on
Open-end Credit Plan. — Before opening any
account under an open-end consumer credit plan, the
creditor shall disclose, to the extent applicable, the
following information:
a) the conditions under which a finance
charge may be imposed, including the time
period, if any, within which any credit
extended may be repaid without incurring
a finance charge;
(EX: A credit card company
issues annual maintenance fees
for it’s holders amounting to
5,000 pesos.)
b) the method of determining the balance
upon which a finance charge may be
imposed;
(EX: Kailangan po ilagay kung
paano nila cinocompute yung
bills mo. For example, a common
way of calculating a finance
charge on a credit card is to
multiply the average daily
balance by the annual
percentage rate (APR) and the
days in your billing cycle. The
product is then divided by 365.)
c) the method of determining the amount of
the finance charges, including any
minimum or fixed amount imposed as a
finance charge;
(EX: How to determine the
transaction fees you’ve
incurred.)
d) where one or more periodic rates may be
used to compute a finance charge, each
such rate, the range of balances to which

it is applicable, and the corresponding
simple annual rate;
NOTE: A periodic interest rate is
a rate that can be charged on a
loan, or realized on an investment
over a specific period of time.
Lenders typically quote interest
rates on an annual basis, but the
interest compounds more frequently
than annually in most cases.
e) the conditions under which the creditor
may impose a security lien and a
description of the goods to which such
lien may attach.
NOTE: Security interest is an
enforceable legal claim or lien on
collateral that has been pledged,
usually to obtain a loan.
Additional NOTE: A lien is a right
to keep possession of property
belonging to another person until
a debt owed by that person is
discharged.
The implementing agency shall prescribe
regulations consistent with commonly accepted
accounting standards to carry out the
requirements of this Article." (GAAP - Generally
Accepted Accounting Principles)
h. What are the required disclosure on consumer
loans not under an open-end credit plan?
Mga requirements sa consumer loans na wala sa
open end credit plan. (EX: Student Loan.)
ARTICLE 142. "Required Disclosures on
Consumer Loans Not Under Open-End Credit
Plan. — Any creditor extending a consumer loan or in
a transaction which is neither a consumer credit
sale nor under an open-end consumer credit plan
shall disclose, to the extent applicable, the following
information:
a) the amount of credit of which the debtor
will have the actual use, or which is or will
be paid to him or for his account or to
another person on his behalf;
EX: A bank loan constituting an
amount of 500,000 which has a
designated interest of 3% per
month.
b) all charges, individually itemized, which
are included in the amount of credit
extended but which are not part of the
finance charge;
EX: Getting a Bank Loan requires
Processing fees, Disbursement
Fees, and Early settlement Fees
for individuals who want to settle
their liabilities ahead of time.
c) The total amount to be financed or the
sum of the amounts referred to in
paragraphs (a) and (b);
d) the finance charge expressed in terms or
pesos and centavos;
e) the effective interest rate; EX: Is it annual
or a monthly form interest.
f) the percentage that the finance charge
bears to the total amount to be financed
expressed as a simple annual rate on the
outstanding unpaid balance of the obligation;
g) the default, delinquency or similar
charges payable in the event of late
payments;
h) a description of any security interest held
or to be held or to be retained or acquired
by the creditor in connection with the
extension of credit and a clear identification
of the property to which the security interest
relates."
EX: A applied for a loan of 200
million to a bank he mortgaged
his 2000 square meter house and
lot in Alabang which has the
same value to the loan. A lien is
attached to the title of ownership.
The bank therefore has records
specifying the lien attached and
filed in the register of deeds.
i. Discuss the form and timing of disclosure?
ARTICLE 143. “Form and Timing of Disclosure.
— All disclosures required under this Act shall be
made clearly and conspicuously in writing before
the transaction is consummated."
ANDY: Form and timing of disclosure is
important because it brings clear and
ANTONIO
concise information regarding the
arrangements of the transaction. It should
be made in writing so that it could properly
show that consumers consented to such
clear stipulations stated therein.
j. What must be stated in the periodic statement of
charges?
ARTICLE 144. "Periodic Statement of Charges.
— The periodic statement transmitted by the creditor
in connection with any extension of consumer credit
other than under an open-end consumer credit plan,
shall set forth the following information:
a) the simple annual rate;
b) the effective interest rate;
c) the date by which, or the period (if any)
within which payment must be made in
order to avoid additional finance charges;
d) method of determining the balance upon
which the finance charge may be imposed."
NOTE: A periodic Statement is a
written record prepared by a
financial institution, usually once a
month, listing all credit card
transactions for an account,
including purchases, payments,
fees and finance charges. It may be
mailed to consumers or provided
electronically online.
k. What are the exempted transactions?
ARTICLE 145. "Exempted Transaction. — The
foregoing requirements on consumer credit
transactions shall not apply to the following credit
transactions:
a) those involving extension of credits for
business or commercial purposes, or to
the Government and governmental
agencies and instrumentalities, juridical
entities or to organizations;
b) those in which the debtor is the one
specifying the definite set of credit terms
such as bank deposits, insurance
contracts, sale of bonds or analogous
transactions."

EDRIC: Dito kasi, yung debtor
mismo yung gumagawa ng terms
and conditions. Thus, hindi
kailangan ng creditor na magbigay
ng mga requirements na nakalagay
sa previous Articles.
l. What are the rules involving sale of consumer
products by installment payment?
ARTICLE 146. "Sale of Consumer Products On
Installment Payment. — In a consumer credit sale
other than one pursuant to an open-end credit plan,
the obligation of the consumer to whom credit is being
extended shall be evidenced by a single instrument
which shall include, in addition to the disclosures
required by this act, the signature of the seller and
the person to whom credit is extended, the date it
was signed, a description of the property sold and
a description of any property transferred as a
trade-in. The instrument evidencing the credit shall
contain a clear and conspicuous typewritten notice to
the person to whom credit is being extended that:
a) he should not sign the instrument if it
contains any blank space;
(EDRIC: Understanding ko dito is;
kapag may kulang na details or
“blank spaces”, di dapat pirmahan
ng buyer since contract of sale
siya.)
b) he is entitled to a reasonable return of the
precomputed finance charge if the
balance is prepaid; and
NOTE: Since debtor paid the
balance early (prepaid), then he is
entitled to a reasonable return of
the precomputed finance charge.
c) he is entitled to an exact, true copy of the
agreement. (EX. Original Receipt (OR))
In cases where the instrument will be sold at a
discount to a bank, financing company or other
lender, the said transferee shall be subject to all
claims and defenses which the debtor could
assert against the seller of consumer products
obtained hereto or with the proceeds thereof."
m. What are the penalties stated in Art. 147?
ANTONIO
ARTICLE 147. "Penalties. — Any creditor who in President from among the nominees
connection with any credit transaction fails to submitted by the various business
disclose to any person any information in organizations."
violation of this Chapter or the Implementing rules
and regulations issued thereunder shall be liable to o. What are the powers and functions of the
such person in the amount of One thousand pesos NCAC?
(P1,000.00) or in amount equal to twice the
finance charge required by such creditor in CHAPTER II
connection with such transaction, whichever is
greater, except that such liability shall not exceed POWERS AND FUNCTIONS
Three thousand pesos (P3,000.00) for any credit
transaction and actual damages with the ARTICLE 153. "Powers and Functions. — The
non-disclosure of the required information. Action to Council shall have the following powers and functions:
recover such penalty may be brought by such person a) to rationalize and coordinate the
within one (1) year from the date of the occurrence of functions of the agencies charged with
the violation in any court of competent jurisdiction." consumer programs and enforcement of
consumer related laws to the end that an
n. What is the National Consumer Affairs Council? effective, coordinated and integrated system
of consumer protection, research and
TITLE V implementation and enforcement of such
laws shall be achieved;
The National Consumer Affairs Council b) to recommend new policies and
legislation or amendments to existing ones;
CHAPTER I c) to monitor and evaluate implementation
of consumer programs and projects and
ESTABLISHMENT AND COMPOSITION to take appropriate steps to ensure that
concerned agencies take appropriate steps
ARTICLE 148. "National Consumer Affairs to comply with the established priorities,
Council. — To improve the management, standards and guidelines;
coordination and effectiveness of consumer d) to seek the assistance of government
programs, a National Consumer Affairs Council is instrumentalities in the form of augmenting
hereby created, hereinafter referred to as the the need for personnel, facilities and other
“Council”." resources;
e) to undertake a continuing education and
ARTICLE 149. "Composition. — The Council shall information campaign to provide the
be composed of representatives from the consumer with, among others:
following government agencies and 1) facts about consumer products
non-government agencies: and services;
a) Department of Trade and Industry; 2) consumer rights and the
b) Department of Education, Culture and mechanism for redress available to
Sports; him;
c) Department of Health; 3) information on new concepts and
d) Department of Agriculture; developments on consumer
e) four (4) representatives from consumer protection; and
organizations of nationwide base to be 4) general knowledge and
chosen by the President from among the awareness necessary for a critical
nominees submitted by the various and better judgment on
consumer groups in the Philippines; consumption;
f) two (2) representatives from
business/industry sector to be chosen by the

5) such other matters of importance
to the consumer’s general
well-being."
p. Read DAO No. 07, Series of 2006 or the
Simplified and Uniform Rules of Procedure for
Administrative Cases Filed with the Department of
Trade and Industry (DTI) for Violations of the
Consumer Act of the Philippines and Other Trade
and Industry Laws
q. What is a complaint?
According to RULE II, SEC. 1(f) of DAO No. 07,
Series of 2006:
(f) "Complaint” - means a sworn written statement
of ultimate facts, filed by any consumer or any
person, charging any person (natural or juridical)
with any violation of the Consumer Act, or any
Trade and Industry Law, or the Price Act and its IRR.
NOTE: Complaint defined. — A complaint
is a sworn written statement charging a
person with an offense, subscribed by
the offended party, any peace officer, or
other public officer charged with the
enforcement of the law violated. (legal
term)
r. What happens after a consumer complaint is
filed?
CHAPTER III
CONSUMER COMPLAINTS
Article 159. Consumer Complaints. – The concerned
department may commence an investigation upon
petition or upon letter-complaint from any
consumer: Provided, That, upon a finding by the
department of prima facie violation of any
provisions of this Act or any rule or regulation
promulgated under its authority, it may motu proprio
or upon verified complaint commerce formal
administrative action against any person who
appears responsible therefor. The department shall
establish procedures for systematically logging in,
investigating and responding to consumer complaints
into the development of consumer policies, rules and
regulations, assuring as far as practicable simple and
easy access on the part of the consumer to seek
redress for his grievances.
s. Who is a consumer arbitration officer?
Article 160. Consumer Arbitration Officers. – The
concerned Department Secretaries shall appoint as
many qualified consumer arbitration officers as
may be necessary for the effective and efficient
protection of consumer rights: Provided, however,
That there shall be not more than ten (10)
consumer arbitration officers per province,
including the National Capital Region
(WES: In short, consumer
arbitration officers are the
necessary officers for effective
and efficient protection of
consumer rights limited to ten
per province)
t. What are minimum qualifications of a consumer
arbitration officer? Read also Section 9 of DAO
No. 07, Series of 2006
Article 161. Consumer Arbitration Officers;
Qualifications. – The consumer arbitration officer
must be a college graduate with at least three (3)
years experience in the field of consumer
protection and shall be of good moral character.
DAO No. 07 Series of 2006 Section 9. Consumer
Arbitration Officers, Acting Consumer Arbitration
Officers, and Hearing Officers; To Whom They Refer
To. -
(a) "Consumer Arbitration Officers" are
lawyers who are holding the plantilla
positions of Attorney III in the various
regional offices of DTI.
"Acting Consumer Arbitration Officers"
were DTI employees/officers who were
designated as Acting Consumer Arbitration
Officers by the Undersecretary for
Regional Operations Group.
"Hearing Officers" are DTI
employees/officers who will be designated
as Hearing Officers by the
Undersecretary for Regional Operations
ANTONIO
Group and/or by their Supervising
Undersecretary.
(b) Every such designation (whether original or
renewal) shall be for a period of not
exceeding three (3) years.
(c) Under this Order, a Consumer Arbitration
Officer or an Acting Consumer Arbitration
Officer can be designated further as a
Hearing Officer,
A Hearing Officer can be designated further
as an Acting Consumer Arbitration
Officer.
u. What is the jurisdiction of a consumer
arbitration officer?
Article 162. Arbitration Officers; Jurisdiction. – The
consumer arbitration officers shall have original and
exclusive jurisdiction to mediate, conciliate, hear
and adjudicate all consumer complaints, Provided,
however, That this does not preclude the parties
from pursuing the proper judicial action.
NOTE: Arbitration Officers should
not refrain the parties from pursuing
the proper judicial action.
v. What are imposable sanctions under Article
164?
Article 164. Sanctions. – After investigation, any of
the following administrative penalties may be
imposed even if not prayed for in the complaint
(Meaning; discretion of the Court):
a) the issuance of a cease and desist order,
Provided, however, That such order shall specify the
acts that respondent shall cease and desist from and
shall require him to submit a report of compliance
therewith within a reasonable time;
NOTE: A cease and desist order
denotes a legally enforceable order
from a court or government agency
directing someone to stop engaging
in a particular activity.
b) the acceptance of a voluntary assurance of
compliance or discontinuance from the
respondent which may include any or all of the
following terms and conditions:

1) an assurance to comply with the
provisions of this Act and its implementing
rules and regulations;
2) an assurance to refrain from engaging in
unlawful acts and practices or unfair or
unethical trade practices subject of the
formal investigation;
3) an assurance to comply with the terms
and conditions specified in the consumer
transaction subject of the complaint;
4) an assurance to recall, replace, repair, or
refund the money value of defective
products distributed in commerce;
5) an assurance to reimburse the complaint
out of any money or property in
connection with the complaint, including
expenses in making or pursuing the
complaint, if any, and to file a bond to
guarantee compliance therewith.
c) restitution or rescission of the contract without
damages;
d) condemnation and seizure of the consumer
product found to be hazardous to health and
safety unless the respondent files a bond to
answer for any damage or injury that may arise from
the continued use of the product;
e) the imposition of administrative fines in such
amount as deemed reasonable by the Secretary,
which shall in no case be less that Five hundred
pesos (P500.00) nor more than Three hundred
thousand pesos (P300,000.00) depending on the
gravity of the offense, and an additional fine of not
more than One thousand pesos (P1,000.00) or each
day of continuing violation.
w. Discuss appeal from orders.
Article 165. Appeal from Orders. – Any order, not
interlocutory of the Consumer arbitration officer,
becomes final and executory unless appealed to
the Department Secretary concerned within fifteen
(15) days from receipt of such order. An appeal may
be entertained only on any of the following grounds:
a) grave abuse of discretion;
b) the order is in excess of the jurisdiction or
authority of the consumer arbitration officer;
c) the order is not supported by the evidence or
there is serious error in the findings of facts.
NOTE: Interlocutory means (of a decree or
judgment) given provisionally during the
course of a legal action relating to dialogue
or conversation.
x. May the decision of the DTI Secretary on the
appeal be appealed to a regular court?
Article 166. Decision on Appeal. – The Secretary
shall decide the appeal within thirty (30) days
from receipt thereof. The decision becomes final
after fifteen (15) days from receipt thereof unless a
petition for certiorari is filed with the proper court.
x.1. Discuss Moran, Jr. v. Office of the
President, G.R. No. 192957, 29 September 2014.
(Private Respondent: PGA Cars, Inc.)
WES CASE DIGEST:
FACTS:
On February 2, 2004, the late Emmanuel B. Moran,
Jr. filed with the Consumer Arbitration Office (CAO)
a verified complaint against private respondent PGA
Cars, Inc. pursuant to the relevant provisions of
Republic Act No. 7394 (RA 7394), otherwise known
as the Consumer Act of the Philippines. Docketed as
DTI Administrative Case No. 04-17, the complaint
alleged that the private respondent should be held
liable for the product imperfections of a BMW car
which it sold to complainant.
On September 23, 2005, the CAO rendered a
Decision in favor of complainant and ordered the
private respondent to refund the purchase price
of the BMW car in addition to the payment of
costs of litigation and administrative fines:
WHEREFORE, in view of the foregoing, the
respondent is hereby found guilty for violation of the
aforequoted provisions and [is] hereby ordered to
perform the following:
1. To refund the purchase price of the subject vehicle
in the amount of three million three hundred seventy
five thousand pesos (₱3,375,000.00);
ANTONIO
2. To pay complainant the amount of five thousand
pesos (₱5,000.00) as costs of litigation;
3. To pay an administrative fine in the amount of
₱10,000.00 payable at 4th flr., DTI Cashier, 361 Sen.
Gil Puyat Ave., Makati City.
SO ORDERED
On October 19, 2005, the private respondent sought
reconsideration of the Decision but the CAO denied
the motion in an Order dated January 19, 2006. Thus,
the private respondent appealed to the Secretary of
the Department of Trade and Industry (DTI), the
quasi-judicial agency designated by Article 1658 of
RA 7394 to entertain appeals from the adverse
decisions and orders of the CAO. However, in a
Resolution dated April 28, 2006, the DTI Secretary
dismissed the appeal of the private respondent
who then filed an appeal with the herein public
respondent OP(OFFICE OF THE PRESIDENT).
On April 3, 2007, the OP granted the appeal,
reversed the DTI Secretary’s Resolution, and
dismissed the complaint. The OP ruled that the DTI
erred in holding the private respondent liable for
product defects which issue was never raised by
the complainant and because the private
respondent was not the manufacturer, builder,
producer or importer of the subject BMW car but
only its seller. As Such, it could not be held liable
especially since none of the circumstances under
Article 9810 of RA 7394 were present in the case.
The OP further ruled that the private respondent
could also not be held liable for product
imperfections because the product was never
proven to be unfit or inadequate under the
conditions laid down by law. Neither was there any
inconsistency in the information provided in the
container or product advertisements/messages. More,
it was only after the lapse of a considerable time
(nearly 10 months) since the purchase of the car and
after it had been driven for 12,518 kilometers, that
the complainant first complained about it. The vehicle
never once broke down before then and the
complainant could not, in fact, point to any specific
part that is defective.
Complainant filed a motion for reconsideration
with the OP, but the OP denied said motion in an

Order dated October 22, 2008. On November 25,
2008, complainant received a copy of the Order
denying his motion for reconsideration.
On January 23, 2009, complainant filed a petition
for certiorari with the CA and alleged lack of
jurisdiction on the part of the OP for ruling on
cases involving a violation of RA 7394. On March
13, 2009, the CA dismissed the petition for certiorari
on the ground that it was a wrong mode of appeal and
for the failure of the petitioner to state material
dates. On June 25, 2010, the CA likewise denied
the motion for reconsideration filed by the
petitioner.
Since the original complainant Emmanuel B. Moran,
Jr. passed away on May 17, 2010, his widow,
Concordia V. Moran filed the present petition for
review on certiorari on August 9, 2010. Petitioner
argues that the CA erred in denying the petition for
certiorari which alleged error of jurisdiction on the part
of the OP. She contends that in cases alleging
error of jurisdiction on the part of the OP, the
proper remedy is to file a petition for certiorari
with the CA because appeal is not available to
correct lack of jurisdiction. Moreover, even though
appeal is available, it is not considered as the plain,
speedy, and adequate legal remedy.
Further, the petitioner claims that the OP lacked
appellate jurisdiction to review decisions of the
DTI in cases involving a violation of RA 7394 based
on Article 16611 thereof, which expressly confers
appellate jurisdiction to review such decisions of the
DTI to the proper court through a petition for certiorari.
Hence, the OP cannot be deemed as the "proper
court" within the purview of Article 166.
On the other hand, private respondent argues that the
CA was correct in denying the petition for certiorari
since this was an improper remedy in view of the
availability of an appeal from the OP. Furthermore,
the private respondent confirms the appellate
jurisdiction of the OP over the DTI based on the
constitutional power of control of the OP over
Executive Departments and the well-entrenched
doctrine of exhaustion of administrative remedies.
Meanwhile, the public respondent, through the Office
of the Solicitor General (OSG), claims that the
availability of an appeal from the OP precluded
the petitioner from availing of the extraordinary
remedy of certiorari. Even though there is an
allegation of error of jurisdiction, the OSG avers
that appeal still takes precedence over a petition
for certiorari as long as the same is at the
disposal of the petitioner. However, in the present
case, the OSG claims that the OP acted within its
jurisdiction in deciding the case on appeal from
the DTI Secretary as Article 166 of RA 7394 must
yield to the constitutional power of control of the OP
over Executive Departments. The OSG also cites the
doctrine of exhaustion of administrative remedies to
support the appellate jurisdiction of the OP over the
DTI.
ISSUES :
Is the CA correct in dismissing the petition for
certiorari on the ground that petitioner resorted to a
wrong mode of appeal?
RULING:
Article 166 thereof provides:
ART. 166. Decision on Appeal.– The Secretary shall
decide the appeal within thirty (30) days from receipt
thereof. The decision becomes final after fifteen (15)
days from receipt thereof unless a petition for
certiorari is filed with the proper court. (Emphasis
supplied.)
We reverse the CA.
The procedure for appeals to the OP is governed by
Administrative Order No. 18,14 Series of 1987.
Section 1 thereof provides:
SECTION 1. Unless otherwise governed by special
laws, an appeal to the Office of the President shall
be taken within thirty (30) days from receipt by the
aggrieved party of the decision/resolution/order
complained of or appealed from… (Emphasis
supplied.)
The executive power of control over the acts of
department secretaries is laid down in Section 17,
Article VII of the 1987 Constitution. The power of
control has been defined as the "power of an officer to
alter or modify or nullify or set aside what a
subordinate officer had done in the performance of his
ANTONIO
duties and to substitute the judgment of the former for
that of the latter."
Such "executive control" is not absolute. The
definition of the structure of the executive branch of
government, and the corresponding degrees of
administrative control and supervision is not the
exclusive preserve of the executive. It may be
effectively limited by the Constitution, by law, or
by judicial decisions. All the more in the matter of
appellate procedure as in the instant case.Appeals
are remedial in nature; hence, constitutionally subject
to this Court’s rulemaking power. The Rules of
Procedure was issued by the Court pursuant to
Section 5, Article VIII of the Constitution, which
expressly empowers the Supreme Court to
promulgate rules concerning the procedure in all
courts.
In this case, a special law, RA 7394,likewise
expressly provided for immediate judicial relief from
decisions of the DTI Secretary by filing a petition for
certiorari with the "proper court." Hence, private
respondent should have elevated the case directly
to the CA through a petition for certiorari.
In filing a petition for certiorari before the CA
raising the issue of the OP’s lack of jurisdiction,
complainant Moran, Jr. thus availed of the proper
remedy.
Certioraris an extraordinary remedy available in
extraordinary cases where a tribunal, board or officer,
among others, completely acted without jurisdiction.
Ineluctably, a judgment rendered without jurisdiction
over the subject matter is void.While errors of
judgment are correctable by appeal, errors of
jurisdiction are reviewable by certiorari. Considering
that the OP had no jurisdiction to entertain private
respondent’s appeal, certiorari lies to correct such
jurisdictional error. The CA thus erred in dismissing
the petition for certiorari on the ground of being an
improper remedy.
Further, we hold that the Resolution dated April 28,
2006 of the DTI Secretary had become FINAL and
EXECUTORY with private respondent’s failure to
appeal the same within the 15-day reglementary
period.

WHEREFORE, the petition for review on certiorari is
GRANTED. The Resolutions dated March 13, 2009
and June 25, 2010 in CA-G.R. SP No. 107059 are
REVERSED and SET ASIDE. The Decision dated
April 3, 2007 and Order dated October 22, 2008 of the
Office of the President are hereby declared NULL and
VOID. Consequently, the Resolution dated April 28,
2006 of the DTI Secretary is hereby REINSTATED
and UPHELD.
EDRIC CASE DIGEST:
FACTS:
On February 2, 2004, the late Emmanuel B. Moran,
Jr. filed with the Consumer Arbitration Office (CAO) a
verified complaint against private respondent PGA
Cars, Inc. pursuant to the relevant provisions of RA
7394. The complaint alleged that the PGA Cars
should be held liable for the product imperfections of
a BMW car which it sold to Moran.
CAO Decision: Moran filed, CAO decided in favor
of Moran
On September 23, 2005, the CAO decided in favor of
Moran and ordered PGA Cars to refund the purchase
price of the BMW car in addition to the payment of
costs of litigation and administrative fines.
1. To refund the purchase price of the subject
vehicle in the amount of ₱3,375,000.00;
2. To pay complainant the amount of ₱5,000.00
as costs of litigation;
3. To pay an administrative fine in the amount
of ₱10,000.00 payable at 4th flr., DTI
Cashier, 361 Sen. Gil Puyat Ave., Makati
City.
DTI Decision: PGA for recon., DTI dismissed
PGA’s recon
On October 19, 2005, PGA Cars sought
reconsideration of the Decision but the CAO denied.
Thus, PGA Cars appealed to the Secretary of the DTI.
DTI Secretary dismissed.
PGA Cars then filed an appeal with the herein public
respondent OP (Office of the President).
OP Decision: PGA appealed, OP reversed DTI
On April 3, 2007, OP reversed the DTI Secretary’s
Resolution and dismissed the complaint. OP ruled
that the DTI erred in holding PGA Cars liable for
product defects which issue was never raised by the
complainant and because PGA Cars was not the
manufacturer of the subject BMW car but only its
seller. As such, could not be held liable especially
since none of the circumstances under Article 98 of
RA 7394 were present in the case.
OP further ruled that PGA Cars could also not be held
liable for product imperfections because the product
was never proven to be unfit or inadequate under the
conditions laid down by law. Neither was there any
inconsistency in the information provided in the
container or product advertisements/messages. More,
it was only after the lapse of a considerable time
(nearly 10 months) since the purchase of the car
and after it had been driven for 12,518 kilometers,
that the complainant first complained about it. The
vehicle never once broke down before then and the
complainant could not, in fact, point to any specific
part that is defective.
Moran filed a motion for reconsideration with the
OP, but OP denied.
CA Decision: Moran for certiorari, CA dismissed
On January 23, 2009, Moran filed a petition for
certiorari with the CA and alleged lack of jurisdiction
on the part of the OP for ruling on cases involving a
violation of RA 7394. On March 13, 2009, CA
dismissed the petition for certiorari on the ground that
it was a wrong mode of appeal and for the failure of
the petitioner to state material dates. On June 25,
2010, Moran filed a motion for reconsideration before
the CA but CA denied.
Emmanuel Moran passed away on May 17, 2010, his
widow, Concordia Moran filed the present petition for
review on certiorari on August 9, 2010. Concordia
Moran argues that the CA erred in denying the
petition for certiorari which alleged error of jurisdiction
on the part of the OP. She contends that in cases
alleging error of jurisdiction on the part of the OP, the
proper remedy is to file a petition for certiorari
ANTONIO
with the CA because appeal is not available to
correct lack of jurisdiction. Moreover, even
though appeal is available, it is not considered as
the plain, speedy, and adequate legal remedy.
Moran claims that the OP lacked appellate jurisdiction
to review decisions of the DTI in cases involving a
violation of RA 7394 based on Article 166 thereof,
which expressly confers appellate jurisdiction to
review such decisions of the DTI to the proper court
through a petition for certiorari. Hence, the OP cannot
be deemed as the "proper court" within the purview of
Article 166.
ART. 166. Decision on Appeal.– The
Secretary shall decide the appeal within
thirty (30) days from receipt thereof. The
decision becomes final after fifteen (15) days
from receipt thereof unless a petition for
certiorari is filed with the proper court.
PGA Cars, through the OSG, claims that the
availability of an appeal from the OP precluded the
petitioner from availing of the extraordinary remedy of
certiorari. Even though there is an allegation of error
of jurisdiction, the OSG avers that appeal still takes
precedence over a petition for certiorari as long as the
same is at the disposal of Moran. However, in the
present case, the OSG claims that the OP acted
within its jurisdiction in deciding the case on appeal
from the DTI Secretary as Article 166 of RA 7394
must yield to the constitutional power of control of the
OP over Executive Departments. The OSG also cites
the doctrine of exhaustion of administrative remedies
to support the appellate jurisdiction of the OP over the
DTI.
ISSUE: Whether CA is correct in dismissing the
petition for certiorari on the ground that Moran
resorted to a wrong mode of appeal. (NO.)
SC Decision: Vda. Moran for certiorari, SC
reverses CA
We reverse the CA's decision.
Under the Consumer Act (RA 7394), the DTI has the
authority and the mandate to act upon complaints
filed by consumers pursuant to the State policy of
protecting the consumer against deceptive, unfair and

unconscionable sales, acts or practices. Said law
provided for an arbitration procedure whereby
consumer complaints are heard and investigated by
consumer arbitration officers whose decisions are
appealable to the DTI Secretary. Article 166 thereof
provides:
ART. 166. "Decision on Appeal. – The
Secretary shall decide the appeal within
thirty (30) days from receipt thereof. The
decision becomes final after fifteen (15) days
from receipt thereof unless a petition for
certiorari is filed with the proper court."
In his motion for reconsideration from the OP’s
Decision dated April 3, 2007 which reversed and set
aside the resolution dated April 28, 2006 of the DTI
Secretary, complainant Emmanuel Moran, raised the
issue of lack of jurisdiction of the OP, not being the
proper court referred to in Article 166 of R.A. 7394.
The OP, however, denied his motion on the ground
that the President’s power of control over the
executive department grants him the power to amend,
modify, alter or repeal decisions of the department
secretaries. On the other hand, the CA, in dismissing
outright the petition for certiorari filed by Moran,
implicitly sustained such reasoning when it held that
the proper remedy from an adverse order or judgment
of the OP is a petition for review under Rule 43 of the
1997 Rules of Civil Procedure, as amended.
NOTE: Such "executive control", however, is
not absolute. The definition of the structure
of the executive branch of government, and
the corresponding degrees of administrative
control and supervision is not the exclusive
preserve of the executive. It may be
effectively limited by the Constitution, by law,
or by judicial decisions. All the more in the
matter of appellate procedure as in the
instant case.Appeals are remedial in nature;
hence, constitutionally subject to this Court’s
rulemaking power. The Rules of Procedure
was issued by the Court pursuant to Section
5, Article VIII of the Constitution, which
expressly empowers the Supreme Court to
promulgate rules concerning the procedure
in all courts.
The procedure for appeals to the OP is
governed by Administrative Order No. 18,14
Series of 1987. Section 1 thereof provides:
SECTION 1. Unless otherwise governed by
special laws, an appeal to the Office of the
President shall be taken within thirty (30)
days from receipt by the aggrieved party
of the decision/resolution/order
complained of or appealed from…
(Emphasis supplied.)
In this case, a special law, RA 7394, likewise
expressly provided for immediate judicial relief
from decisions of the DTI Secretary by filing a
petition for certiorari with the "proper court."
Hence, PGA Cars should have elevated the case
directly to the CA through a petition for certiorari.
In filing a petition for certiorari before the CA raising
the issue of the OP’s lack of jurisdiction, complainant
Moran availed of the proper remedy.
Further, we hold that the Resolution dated April 28,
2006 of the DTI Secretary had become FINAL and
EXECUTORY with PGA Car’s failure to appeal the
same within the 15-day reglementary period.
ANTONIO
12th Week - Retail Trade Laws
a. Read DAO No. 07, Series of 2006 or the
Simplified and Uniform Rules of Procedure for
Administrative Cases Filed with the Department of
Trade and Industry (DTI) for Violations of the
Consumer Act of the Philippines and Other Trade
and Industry Laws
b. Discuss the rules on construction of provisions
and the applicability of the Rules of Court. (Rule I)
RULE I
TITLE AND CONSTRUCTION
Section 1. Title of the Rules. - These Rules shall be
known as the "Simplified and Uniform Rules of
Procedure for Administrative Cases Filed with the
Department of Trade & Industry (DTI) for Violations of
the Consumer Act of the Philippines and Other Trade
and Industry Laws."
Section 2. Construction. - These Rules shall be
liberally construed to carry out their objective of
promoting the just, speedy, and inexpensive
resolution of cases. Further, the best interest of the
consumer shall be considered in the interpretation
and implementation of the provisions of these Rules.
Section 3. Applicability of the Revised Rules of Court.
(a) Subject to the requirements of due process,
the technical rules of evidence (Part IV of the
Revised Rules of Court) prevailing in the
courts of law shall not be strictly applied
hereto.
(b) In the absence of any applicable provision
in these Rules, the pertinent provisions of
the Revised Rules of Court shall apply
suppletorily.
NOTE: The rule on construction is
that the rules shall be liberally
construed which means that it
should be interpreted in a just and
reasonable manner.

NOTE: DOH v. Philip Morris
Philippines G.R. No. 202943, 25
March 2015 - SC stated that it must
be stressed that RA 9211 is a
special legislation which exclusively
deals with the subject of tobacco
products and related activities. On
the other hand, RA 7394 is broader
and more general in scope, and
treats of the general welfare and
interests of consumers vis-à-vis
proper conduct for business and
industry. As such, lex specialis
derogat generali. General
legislation must give way to special
legislation on the same subject, and
generally is so interpreted as to
embrace only cases in which the
special provisions are not
applicable.
c. Discuss the basic terms enumerated. (Rule II)
RULE II
DEFINITION OF TERMS
Section 1. Basic Terms. - For purposes of these
Rules, the following definitions shall be observed:
(a) "Consumer" - means a natural person who is a
purchaser, lessee, recipient or prospective
purchaser, lessee or recipient of consumer
products or services over which the DTI has
jurisdiction.
(b) "Juridical person' - means:
1. The State and its political subdivisions;
2. Other corporations, institutions and
entities for public interest or purpose
created by law;
3. Corporations, partnership and
associations· for private interest or
purpose to which the law grants a juridical
personality separate and distinct from
that of each shareholder, partner or
member: Provided, however, That
associations defined by law as corporations
or partnerships de facto or by estoppel shall
be considered as juridical persons under
these Rules; and
4. Entities authorized by law to sue and be
sued.
(c) "Adjudication Officer" - means:
1. the Consumer Arbitration Officer (CAO)
assigned to adjudicate the cases mentioned
in Section 5 (a), Rule III of this Order. This
term includes the Acting Consumer
Arbitration Officer; or
2. the Hearing Officer assigned to adjUdicate
the cases mentioned in Section 5 (b),
Rule III of this Order.
(d) "Mediation - means an alternative mode of
dispute resolution forming part of the adjudication
process under Rule X of these Rules, under which
the Adjudication Officer, as defined hereinabove,
facilitates communication and negotiation
between the parties, and assists the parties in
reaching a voluntary agreement regarding a
dispute. This shall include the mediation conducted
by the Consumer Welfare Officer (CWO) at the pre
adjudication level.
(e) "Adjudicate" and "adjudication" - includes
"mediate" and "mediation", respectively.
(f) "Complaint - means a sworn written statement of
ultimate facts, filed by any consumer or any person,
charging any person (natural or juridical) with any
violation of the Consumer Act, or any Trade and
Industry Law, or the Price Act and its IRR.
(g) "Formal Charge" - means a written statement of
ultimate facts, signed and sworn to by the duly
authorized officer or representative of the
initiating office or agency, filed by any office or
agency of the DTI, charging any person (natural or
juridical) with any violation of the Consumer Act, or
any Trade and Industry Law, or the Price Act and its
IRR.
(h) "Consumer Act - refers to Republic Act No. 7394,
otherwise known as the "Consumer Act of the
Philippines", including any Mure amendment thereto.
(i) "Violations of the Consumer Act - refers to any
and all of the acts, omissions, and offenses
ANTONIO
enumerated in Title II, Chapter I; and Title III,
Chapters I, II (except the provisions on the sealing
and testing of instruments of weights and
measure), III, IV, V, VI, and VII of the Consumer
Act, as violative of said Act.
(j) "Trade and Industry Law" - means any Act,
Batas Pambansa, Presidential Decree, General
Order, Letter of Instructions, Executive Order, and
other similar issuances, as well as any and all
amendments thereto, which regulates trade and
industry activities, the violation of which subjects
the offender to criminal or administrative
penalties or civil liability, or does not subject the
offender to any penalty, sanction, or liability at all,
and which law or issuance is subject to the
implementation, administration, execution or
enforcement of the Department, such as those
enumerated in Section 1 of Ministry Order No. 69,
Series of 1983, as amended, and Department
Administrative Order No.3, Series of 1993.
(k) "Price Act" - refers to Republic Act No. 7581
otherwise known as the "Price Act".
(I) "Department' or “DTI” - refers to the Department of
Trade and Industry.
(m) "Secretary' - refers to the Secretary of the DT!.
(n) "Regional Office" - refers to the DTI office having
jurisdiction over a particular region of the Philippines.
(o) "Provincial Office" - refers to the DTI office
having jurisdiction over a particular province of the
Philippines.
(p) "Area Office" - refers to any office of the
DTI-National Capital Region (NCR) which has
jurisdiction over a particular area of Metro Manila.
(q) "AgencY' - refers to any bureau or unit of DTI
which handles certain cases,
(r) "This Order" - refers to this Department
Administrative Order.
d. Discuss jurisdiction of the adjudication
officers. (Rule III)

RULE III
JURISDICTION
Section 5. Jurisdiction of Adjudication Officers (AOs).
(a) Consumer Arbitration Officers (CAOs) shall
have original and exclusive jurisdiction to
adjudicate all cases filed by consumers under the
Consumer Act.
(b) Hearing Officers (HEROs) shall have original
and exclusive jurisdiction to adjudicate: (1) all
cases filed by natural or juridical persons for
violations of any Trade and Industry Law; and (2)
all motu proprio cases filed under a formal charge (as
defined under these Rules) by any office or agency of
the Department for violations of any Trade and
Industry Law, or of the Consumer Act, or of the Price
Act and its IRR.
NOTE: Adjudications officers, also known as
administrative law judges, hearing officers or
simply adjudicators, are legal professionals
who work for government agencies.
NOTE: In law, motu proprio (Latin for "on
his own impulse") describes an official act
taken without a formal request from another
party.
e. Discuss venue for complaints, formal charges,
and change of venue. (Rule IV)
RULE IV
VENUE
Section 1. Venue for Complaints Filed by
Consumers for Violations of the Consumer Act -
The complaint shall be filed in duplicate with the
Provincial Office (or with its field office) or with its
mother Regional Office if the province has no
Provincial Office, or in the case of the National
Capital Region (NCR), with the Area Office,
situated in the place specified by the parties in a
written agreement executed prior to the filing of
the complaint. If there is no such written agreement,
then in any of the following places, at the option of the
complainant, to wit:
(a) Place where the transaction was done,
wholly or partially;
(b) Place where the violation of the
Consumer Act was committed, wholly or
partially;
(c) Place of the execution of the contract
sued upon, as it appears therefrom;
(d) Place of residence of the complainant at
the time of the transaction, or at the time
of the violation, or at the time of the filing
of the complaint; and
(e) Place of residence of the respondent, or
business domicile if the respondent is a
juridical person, at the time of the
transaction, or at the time of the violation,
or at the time of the filing of the
complaint.
Section 2. Venue for Complaints filed for
Violations of Trade and Industry Laws, Including
the Price Act and its IRR. - Section 1 of this Rule
shall apply to all complaints filed by natural or
juridical persons for violations of Trade and Industry
Laws and the Price Act and its IRR.
Section 3. Venue for Formal Charges. - Formal
charges shall be filed in accordance with in Section
1 of this Rule: Provided, That should the office filing
the formal charge be a Provincial Office, the
formal charge shall be filed with its mother
Regional Office.
Section 4. Change of Venue After the
Complaint/Formal Charges Has Been Filed. - After
the complaint/formal charge has been filed but before
the mediation stage is finished, the parties to the
case may agree in writing to a change in venue:
Provided, however, That this change can be done
only once.
NOTE: The parties may change
venue only ONCE, provided that it
is after the complaint/formal charge
has been filed but before the
mediation stage is finished.
f. Discuss commencement of actions and the
essential elements and parts of a complaint and a
formal charge. (Rule V)
ANTONIO
RULE V
COMMENCEMENT OF ACTION
Section 1. Commencement of Action.
(a) In all cases filed under these Rules, the
party initiating the action shall be called
the "Complainant” and the opposing party
the "Respondent". In the case of a formal
charge, the initiating office or agency is
the complainant.
(b) All cases for violations of the Consumer
Act, or of any Trade and Industry Law, or of
the Price Act and its IRR, shall be
commenced by filing a complaint or a
formal charge, as the case may be.
(c) The full names of any and all real
parties-in-interest, whether natural or
juridical persons, or of the DTI office or
agency, shall be stated in the caption of
the complaint or formal charge, as well as
in the decisions and orders.
(d) All complaints shall be prosecuted by the
complainant or by his/its counsel. All
formal charges shall be prosecuted by the
duly authorized officer or representative of
the initiating office or agency of DTI. The
respondent shall defend himself personally
or by counsel.
Section 2. Essential Elements and Parts of a
Complaint.
(a) The following shall be alleged in the complaint
(1) The names and addresses of the parties
and their capacity to sue or be sued;
(2) A statement of relevant facts, including all
relevant dates;
(3) A statement of causes of action;
(4) A statement of lawls violated; and
(5) The reliefs prayed for, and the preliminary
order, preventive measure order, or
temporary order sought, if any.
(b) The following documents shall be attached to the
complaint, to form integral parts thereof:
(1) Clear sworn statements of witness/es;
(2) Clear copies of documentary evidence;
and
(3) A verified statement on any civil, criminal
or administrative action that has been

filed or is/are pending, as provided in
Section 4, Rule 1 of this Order.
(c) The absence of anyone, some, or all of the above
shall be a ground for the motu proprio dismissal
without prejudice of the case.
NOTE: “Causes of action” - a set
of facts sufficient to justify suing to
obtain money, property, or the
enforcement of a legal right against
another
“Preliminary order” - an order
granted at any stage of an action or
proceeding prior to the judgment or
final order, requiring a party or a
court, agency or a person to
perform to refrain from performing a
particular act or acts.
“Temporary order” - An order that
the parties must follow until it is
changed or until final judgment in
the case.
Section 3. Essential Elements and Parts of a Formal
Charge. (a) The following shall be alleged in the
Formal Charge:
(1) The names and addresses of the parties;
(2) The designation of the violation/offense
committed;
(3) The acts and/or omission/s constituting
the violation/ offense;
(4) The approximate date of the commission
of the violation/ offense;
(5) The place where the violation/offense was
committed; and
(6) The relief/s prayed for, and the preliminary
order, preventive measure order, or
temporary order sought, if any.
(b) The following documents shall be attached to the
formal charge, to form integral parts thereof:
(1) Clear sworn statements of witnesses; .
(2) Clear copies of documentary evidence;
and
(3) A verified statement on any civil, criminal
or administrative action that has been
filed or islare pending, as provided in
Section 4, Rule III of this Order.
(c) The absence of anyone, some, or all of the
above shall be a ground for the motu proprio
dismissal without prejudice of the case.
g. Distinguish between a complaint and a formal
charge.
According to RULE II, SEC. 1 of DAO No. 07, Series
of 2006:
(f) "Complaint” - means a sworn written statement
of ultimate facts, filed by any consumer or any
person, charging any person (natural or juridical)
with any violation of the Consumer Act, or any Trade
and Industry Law, or the Price Act and its IRR.
(g) "Formal Charge" - means a written statement of
ultimate facts, signed and sworn to by the duly
authorized officer or representative of the
initiating office or agency, filed by any office or
agency of the DTI, charging any person (natural or
juridical) with any violation of the Consumer Act, or
any Trade and Industry Law, or the Price Act and its
IRR.
h. Discuss service of pleadings and other papers.
(Rule VI)
RULE VI
SERVICE OF PLEADINGS AND OTHER PAPERS
Section 1. Filing and Service of Pleadings. - All
pleadings and other papers in connection with the
case shall be filed with the appropriate docketing unit
of the Regional office, Provincial or field office, Area
Office, or other appropriate office or agency of the
Department, as the case may be.
NOTE: A pleading is a formal statement of
the cause of an action or defense.
Section 2. Service of Summons, Notices,
Decisions and Orders. -
(a) Summons, notices, and copies of decisions
and orders shall be served on the parties
to the case personally by the duly
authorized process server or other officer
of the Department or by registered mail.
ANTONIO
(b) The serving officer shall submit his return
within five (5) days from date of service
thereof, stating legibly in his return, his
name, the name of person served, and
the date of receipt, which return shall be
immediately attached to and shall form
part of the records of the case. If no
service was effected, the serving officer shall
state the reason therefor in his return.
i. Discuss prohibited pleadings and motions.
(Rule VII)
RULE VII
PROHIBITED PLEADINGS AND MOTIONS
Section 1. Prohibited Pleadings or Motions. - For
purposes of these Rules, the following pleadings and
motions shall be prohibited:
(a) Motion to dismiss, except a motion to
dismiss based on lack of jurisdiction,
which must be raised at the earliest
opportunity;
(b) Motion for judgment on the pleadings;
(c) Motion for summary judgment;
(d) Motion for bill of particulars;
(e) Motion for extension of time to file any
required pleading;
(f) Counterclaim;
(g) Cross-claim;
(h) Reply;
(i) Rejoinder;
(j) Motion to Intervene; and
(k) Memorandum of any kind.
EDRIC: According to Rule 1, Sec.
2, since these Rules shall be
liberally construed to carry out the
objective of promoting the just,
speedy, and inexpensive resolution
of cases, the above mentioned are
prohibited to refrain for delay from
the resolution of cases.
Section 2. Motion for Postponement - No dilatory
motions for postponement shall be allowed.
During the mediation stage, however, the parties shall
be allowed a maximum of two (2) postponements:
Provided, That these shall be for the purpose of

seriously seeking an amicable settlement of the
case: Provided, further, That such postponements
shall cover a period of not more than a total of
thirty (30) days.
EDRIC: Dilatory/SLOW. DAO 07, s.
2006 is basically saying that cases
regarding the settlement involving a
consumer should not be done
dilatorily or “slowly” but in the
swiftest way possible.
j. Discuss prescription of actions. (Rule VIII)
RULE VIII
PRESCRIPTION OF ACTIONS
Section 1. Prescription of Actions Under the
Consumer Act - Any complaint of a consumer (as
defined under Section 1 (a), Rule II of this Order), for
violation of the Consumer Act, shall be filed within
two (2) years from the time the consumer
transaction was consummated, or the deceptive
or unfair and unconscionable act or practice was
committed, or in case of hidden defects, from the
date of discovery thereof. After the said period,
the filing thereof shall be barred.
Section 2. Prescription of Actions Under Other
Cases. - Any other complaint or formal charge
shall be filed within three (3) years from the date
of the commission of the Violation/offense, or if
such date is unknown at that time, then within
three (3) years from the date of discovery thereof.
After the said period, the filing thereof shall be barred.
k. Discuss proceedings before adjudication
officers. (Rule IX)
RULE IX
PROCEEDINGS BEFORE THE ADJUDICATION
OFFICER
Section 1. Docketing of Cases and Assignment to an
Adjudication Officer.
(a) All complaints and formal charges shall be
docketed. Merdocketing, the Head of
Office concerned shall assign the case to
an Adjudication Officer.
(b) The adjudication of any complaint, except
one which is initiated by a consumer for
violation of the Consumer Act, is
discretionary with the Department, and
not a matter of right for the complainant.
Thus, after the docketing and assignment of
an administrative case number, the Head of
Office concerned shall determine whether
or not the Department should adjUdicate
the case, taking into consideration the
following:
(i) Whether or not the adjudication of the case will aid
in the enforcement of the Trade and Industry Law
allegedly violated, and if it does, the extent thereof;
(ii) The wisdom, propriety, and expediency of
adjudicating the case;
(iii) The other legal remedies available to the parties
in settling their dispute/s; and
(iv) Whether or not the subject matter of the case is a
priority in the adjudication program of the Department.
(c) Unless the Secretary determines
otherwise, if the Head of Office elects not to
submit the case for adjudication, he shall
issue an order to such effect. No reason
shall be given for such elected action, except
that it is pursuant to Section 1 (b) of this
Rule. The said order shall not be appealable.
Section 2. Preliminary Determination Dismissal Motu
Proprio by the Adjudication Officer. - Upon
assignment of the case, the Adjudication Officer shall
determine whether:
(a) the Head of Office has already elected to
adjudicate the case (this is not applicable
to complaints filed by consumers for
violations of the Consumer Act);
(b) the case falls within the jUrisdiction of the
Department in accordance with these Rules;
(c) the complaint or formal charge is sufficient in
form and substance, and a cause of action
or the charge is sufficiently alleged, as the
case may be; and
(d) the action has not yet prescribed. Should the
Adjudication Officer find that any or some of
the essential elements required for a
complaint or formal charge do not exist, or
that the complaint or formal charge do not
have the required attachments, he shall
ANTONIO
motu proprio dismiss the action without
prejudice.
l. Discuss mediation. (Rule X)
RULE X
MEDIATION
Section 1. Statement of Policy. -In applying and
implementing the provisions of these Rules, primary
consideration must be given to the need to promote
candor of parties and the AdjUdication Officer through
the policy of fostering prompt, economical and
amicable resolution of disputes in accordance with
principles of integrity of determination by the parties,
and the policy that the decision making authority in
the mediation process rests with the parties, pursuant
to R.A. No. 9285 or the Alternative Dispute Resolution
Act of 2004.
Section 2. Mediation. - Within five (5) days from the
filing of the answer, or from the lapse of the period to
answer if none has been filed, the Adjudication Officer
shall issue a notice of mediation, which shall be
served upon each of the parties concerned at least
five (5) days before the holding thereof. During
mediation, the Adjudication Officer shall:
a. Explain to all parties the nature of the action;
b. Clarify from the parties the relief/s sought;
c. Encourage the parties to settle the case, and
ask for the parties offers and counter offers;
d. In all cases, endeavor to facilitate the
amicable settlement by the parties, by
stressing on the advantages thereof, e.g.,
cost effective, peace of mind and reliefs;
e. Propose to the parties alternative solutions
and encourage counter-offers; and
f. Resort to such other means toward the
speedy and impartial disposition of the case.
A successful mediation shall operate as a
dismissal with prejUdice of the case and is
immediately final and executory.
Section 3. Compromise and Execution During
Mediation. During the mediation stage, if the parties
agree on an amicable settlement of the case, they
shall sign an agreement indicating the terms and
conditions thereof. The agreement shall not be
contrary to law, morals, good customs, public order or

public policy. The Adjudication Officer shall render a
decision based on the compromise agreement, which
shall immediately be final and executory.
m. Discuss preliminary conference. (Rule XI)
RULE XI
PRELIMINARY CONFERENCE
Section 1. Next Action When There is Failure of
Mediation.
(a) Should mediation fail to resolve the case, the
Adjudication Officer shall conduct a preliminary
conference to consider the following:
(1) The simplification of the issues;
(2) The necessity or desirability of amendments
to the pleadings;
(3) The possibility of obtaining stipulations or
admissions of facts and of documents to
avoid unnecessary proof;
(4) The limitation of the number of
affiant-witnesses; and
(5) Such other matters as may aid in the prompt
disposition of the case.
(b) The Adjudication Officer shall have the option of
requiring the parties to simultaneously submit
preliminary conference briefs to aid him in the conduct
of the preliminary conference.
(c) Thereafter, the Adjudication Officer shall issue a
Preliminary Conference Order stating: (a) the
stipulated and/or admitted facts, if any; (b) the issues
of law and of fact agreed upon; and (c) other matters
taken up during the preliminary conference.
n. Discuss submission of position paper and
hearing. (Rule XII)
RULE XII
POSITION PAPER; HEARING
Section 1. Submission of Position Paper and
Supporting Evidence.
(a) In lieu of a formal hearing, the Adjudication
Officer shall direct the parties to
simultaneously submit their respective
position paper with supporting affidavits and
other documentary evidence not later than
fifteen (15) days from receipt of the
Preliminary Conference Order.
(b) The supporting affidavits shall take the place
of direct testimony. Affidavits and supporting
documentary evidence which were annexed
to the complaint or formal charge, and the
answer, as the case may be, and forming
part of the records of the case, are deemed
automatically reproduced for purposes of
presentation of evidence and need not be
annexed to the position papers. They shall,
however, be distinctly identified for reference
in the position paper.
(c) The Adjudication Officer, at his option, may
set the submission of position paper and
supporting evidence for hearing.
(d) Upon the submission of the position papers,
or upon the expiration of the fifteen (15)-day
period mentioned in paragraph (a) of this
section if no position paper has been filed, or
upon termination of the hearing mentioned in
the immediately following section, the case
shall be deemed submitted for decision.
Section 2. Hearing. - Should the AdjUdication Officer
believe that there is/are question/s of fact, he may set
the case for hearing before the same is submitted for
decision, purposely to resolve that issue. During the
said hearing, questions may be propounded by
parties to each other's affiants-witnesses.
o. Discuss decision and administrative penalties.
(Rule XIII)
RULE XIII
DECISION AND ADMINISTRATIVE
PENALTIES/SANCTIONS
Section 1. Decision.- Within fifteen (15) days from the
time the case is submitted for decision, the
Adjudication officer shall issue a decision in writing.
The decision shall be clear and concise, and shall
contain statements on: (a) the relevant facts of the
case; (b) the issues involved; (c) applicable law
and/or jUrisprudence; (d) conclusions and reasons
therefor; and (c) the relief granted, if any, and the
administrative penalty fines imposed, if any.
ANTONIO
Section 2. Imposition of Administrative Penalties. -
The Adjudication Officer shall have the power to
impose administrative penalties upon the respondent,
if warranted,and even if these have not been prayed
for by the complainant, to wit:
(a) For the violation of the Consumer Act:
(1) The issuance of a Cease and Desist Order
(COO), which shall be embodied in the
decision: ProVided; however, That such
order shall specify the acts that the
respondent shall cease and desist from and
shall require him to submit a report of
compliance therewith within a reasonable
time;
(2) The acceptance by the Adjudication Officer
of a voluntary assurance of compliance or
discontinuance from the respondent which
may include any or all of the following terms
and conditions:
(2.1) an assurance to comply with
the provisions of RA No. 7394 and
its implementing rules and
regulations;
(2.2) an assurance to refrain from
engaging in unlawful acts and
practices or unfair or unethical trade
practices subject of the
adjudication;
(2.3) an assurance to comply with
the terms and conditions specified
in the consumer transaction Subject
of the complaint;
(2.4) an assurance to recall,
replace, repair or refund the money
value of defective products
distributed in commerce; and
(2.5) an assurance to reimburse the
complainant out of any money
and/or property in connection with
the complaint, if any, and to file a
bond to guarantee compliance
therewith;
Said acceptance does not require as a
condition precedent, the consent of the
complainant.
(3) the restitution or recission of the contract
without damages;

(4) The seizure and condemnation of the
consumer products found to be hazardous to
health and safety unless the respondent files
a bond issued by an accredited bonding
company, equivalent to ten percent (10%) of
the value of the seized or condemned items,
or such other percentage as may be
determined by the Adjudication Officer, to
answer for any damages or injUry that may
arise from the continued use of the product;
(5) The imposition of an administrative fine in
such amount as deemed reasonable by the
Adjudication Officer, which shall in no case
be less than Five Hundred Pesos (PI 500.00)
nor more than Three Hundred Thousand
Pesos (PI 300,000.00) depending on the
gravity of the offense, and the additional
administrative fine of not more than One
Thousand Pesos (P/1 ,000.00)for each day
of continuing violation; and
(6) Other penalties provided elsewhere in the
Consumer Act.
(b) For the violation of any Trade and Industry law:
(1) The issuance of a Cease and Desist Order
(COO), which shall be embodied in the
decision;
(2) The acceptance by the Adjudication Officer
of a voluntary assurance of compliance or
discontinuance from the respondent under
such terms and conditions as may be
imposed by the Adjudication Officer. Said
acceptance does not require as a condition
precedent, the consent of the complainant;
(3) The seizure, forfeiture or condemnation of
the products which are the SUbject of the
offense, as well as the proceeds of the
offense;
(4) The seizure and forfeiture of the
paraphernalia and all properties, real or
personal, which have been used in the
commission of the offense
(5) The imposition of an administrative fine in
such amount as deemed reasonable by the
Adjudication Officer, which shall in no case
be less than Five Hundred Pesos (PI 500.00)
nor more than One Hundred Fifty Thousand
Pesos (PI 150,000.00), plus the additional
administrative fine of not more than One
Thousand Pesos (PI 1,000.00) for each day
of continuing violation. The fine imposed
under this Section shall be regardless of the
limits of the criminal fine fixed in the trade
and industry law violated;
(6) The cancellation of any permit, license,
authority, or registration which may have
been granted by the Department, or the
suspension of the validity thereof for such
period of time as the Adjudication Officer
may deem reasonable which shall not
however, exceed one year;
(7) The withholding of any permit, license,
authority, or registration which is being
secured by the respondent from the
Department;
(8) The submission of a recommendation to the
LGU concerned, through proper channel, for
the cancellation/suspension of a Mayor's
Business Permit;
(9) The awarding of nominal and liquidated
damages;
(10) Censure; and
(11) Other penalties/sanctions analogous to the
above, such as:
(11.1) Closure of the business establishment
for a period not exceeding one year;
(11.2) Ordering the respondent to recall,
replace, repair, or refund the money value of
defective products distributed in commerce;
and/or
(11.3) Ordering the respondent to reimburse
the complainant the expenses and the costs
incurred in prosecuting the case in the
Department.
(c) For the violation of the Price Act and its IRR:
(1) The permanent closure of the establishment;
(2) The confiscation/seizure and forfeiture of all
products and/or effects subject of the
offense;
(3) The confiscation/seizure and forfeiture of all
paraphernalia used in the commission of the
offense/crime;
(4) The suspension, revocation or cancellation
of any permit, license, authority, or
registration issued by the Department;
(5) The issuance of a cease and desist order,
which shall be embodied in the decision;
(6) Censure;
(7) Reprimand; and
ANTONIO
(8) The imposition of an administrative fine of
not less than One Thousand Pesos (PI
1,000.00) nor more than One Million Pesos
(PI 1,000,000.00).
Section 3. Service of the Decision. - A copy of the
decision may either be served personally or by
registered mail, to the parties or counsel. If the
decision is served on the respondent by way of
publication once in a newspaper of general
circulation, the cost thereof shall be shouldered by the
complainant.
p. Discuss motion for reconsideration. (Rule XIV)
RULE XIV
MOTION FOR RECONSIDERATION
Section 1. Motion for Reconsideration.
(a) Cases Filed by Consumers for Violations of
the Consumer Act - Per Article 165 of the
Consumer Act, no Motion for
Reconsideration is allowed for said cases.
(b) Cases Filed for Violations of Trade and
Industry Laws or of the Price Act and its IRR
- Per Section 13 of E.O. No. 913, only one
(1) Motion for Reconsideration is allowed
within the appeal period. The filing of the
Motion for Reconsideration shall suspend
the running of the said appeal period, and
the number of days lapsed shall be deducted
in the computation of the remaining appeal
period.
Should the Adjudication Officer believe that the
motion for reconsideration is merely pro forma and
filed manifestly for delay, he shall deny the same in
writing. Otherwise, the Adjudication Officer shall ask
the adverse party to file a comment and/or opposition
thereto within ten (10) days from receipt of said order.
Upon the lapse of said period, whether with or without
any comment and/or opposition being filed, the
Adjudication Officer shall proceed to resolve the
motion.
q. Discuss appeals. (Rule XV)
RULE XV

APPEALS
Section 1. Manner of Appeal.
(a) Under Article 165 of the Consumer Act, an appeal
may be taken from a final judgment or order of the
Adjudication Officer which completely disposes of a
case, within fifteen (15) days from receipt thereof. The
appeal shall be taken by filing a Memorandum of
Appeal with the Secretary, with Notice of Appeal to
the Adjudication Officer, and with copy duly furnished
the adverse party lies on any of the following grounds:
(1) Grave abuse of discretion;
(2) The decision/order is in excess of jurisdiction
or authority of the Adjudication Officer; and
(3) The decision/order is not supported by the
evidence or there is serious error in the
findings of facts.
(b) To ensure simplicity and uniformity in these Rules,
paragraph (a) of this section is hereby made
applicable to appeals from decisions of Adjudication
Officers to the Secretary, in cases filed for violations
of Trade and Industry Laws and the Price Act and its
IRR.
Section 2. Decision on Appeal. - The Secretary shall
decide the said appeal within thirty (30) days from
receipt thereof. His decision on the appeal shall
become final and executory if no further appeal is
made within the reglementary period provided by law,
as follows:
a. If the case falls under the Consumer Act (where the
complainant is a consumer), the further appeal shall
be by way of certiorari to the Court of Appeals,
pursuant to Section 4, Rule 65 of the Revised Rules
of Court, which must be filed by the appellant within
sixty (60) days from receipt of the decision to be
assailed in the Court of Appeals.
b. If the case falls under any Trade and Industry Law
(E.O. No. 913) or under the Price Act and its IRR, the
further appeal shall be made to either:
1. the Office of the President; or to the
2. Court of Appeals under Rule 43 of the
Revised Rules of Court.
ANTONIO
Section 3. Delegation of the Secretary's Appeal
Function. - The Secretary may delegate to
subordinate officers his function of reviewing and
deciding said appeals from decisions/final orders of
Adjudication Officers.
r. Discuss execution of decisions. (Rule XVI)
RULE XVI
EXECUTION OF DECISIONS
Section 1. When Decision Becomes Final and
Executory. - All decisions shall become final and
executory when all periods for Motion for
Reconsideration and Appeal provided in these Rules,
whether taken or not, shall have lapsed.
Section 2. Execution.
(a) As soon as a decision becomes final and
executory, the Adjudication Officer shall,
either on motion of the interested party or
motu proprio, issue an Order of Execution
with the corresponding Writ of Execution,
requesting the proper Sheriff's Office to
execute said decision. No deputation is
necessary.
(b) When there is a need to deputize and enlist
the assistance of public officers and
government agencies (other than the
Sheriff's Office), or private individuals and
entities, the Adjudication Officer may
deputize anyone of them, and the deputation
shall take effect as soon as the said officers,
agencies, individuals, and entities give their
consent to their deputation.