CHAPTER VIII STRICT AND LIBERAL CONSTRUCTION AND INTERPRETATION OF STATUTES GENERAL PRINCIPLES If a statute should be strictly construed,

nothing should be included within the scope that does not come clearly within the meaning of the language used. But the rule of strict construction is not applicable where the meaning of the statute is certain and unambiguous , for under these circumstances, there is no need for construction. On the other hand, there are many statutes which will be liberally construed. The meaning of the statute may be extended to matters which come within the spirit or reason of the law or within the evils which the law seeks to suppress or correct. Liberal interpretation or construction of the law or rules, however, applies only in proper cases and under justifiable causes and circumstances. While it is true that litigation is not a game of technicalities, it is equally true that every case must be prosecuted in accordance with the prescribed procedure to insure an orderly and speedy administration of justice. PENAL STATUTES Penal laws are to be construed strictly against the state and in favor of the accused. Hence, in the interpretation of a penal statute, the tendency is to subject it to careful scrutiny and to construe it with such strictness as to safeguard the right of the accused. If the statute is ambiguous and admits of two reasonable but contradictory constructions, that which operates in favor of a party accused under its provisions is to be preferred. C. Remedial statutes FIRST DIVISION G.R. No. 77154 June 30, 1987 JESUS DEL ROSARIO, petitioner, vs. HON. JAIME HAMOY, Presiding Judge, RTC, Branch XV, Region IX, Zamboanga City, and WILEADO DE LEON, DOMINGO DE LEON, CRISTINO DE LEON, HENCIANO DE LEON, MARCIANO AIZON, and EPIFANIA DE LEON, respondents. SARMIENTO, J.: For want of a one-peso documentary stamp in a special power of attorney for pre-trial purposes, in lieu of the personal appearance of the plaintiff, the petitioner in this case, the respondent Judge declared him non-suited and dismissed the complaint "for failure of the plaintiff to appear for pre-trial conference. 1 We do not agree. The respondent Judge manifestly erred. He acted with indecent haste. He could have easily required the counsel for the

plaintiff to buy the required one-peso documentary stamp outside the court room and affix the same to the special power of attorney and that respite would not have taken ten minutes. Had he been less technical and more sensible, the present proceedings and the consequent waste of time of this Court and of his own would have been avoided. The respondent trial Judge had three chances to rectify his grave error but he missed all of them. He was adamant. By such rigidity he denied the petitioner substantial justice. (1) He procrastinated when the plaintiff and his counsel immediately after the hearing on the same morning of July 25, 1986, made oral representations with him inside his chamber for the reconsideration of his order declaring the plaintiff non-suited and dismissing the complaint. The plaintiff, through his counsel, explained that he was actually inside the court room while his lawyer and the defendants' counsel, were arguing, but he (plaintiff) was too timorous to interrupt the proceedings and make known his presence to his counsel or to the court. Despite the immediacy of the representations and the plausibility of this explanation considering the plaintiff's nescience, being merely an agricultural tenant and can hardly write his name, the respondent Judge still required him to file a written motion and set it for hearing "in accordance with the Rules of Court." (2) Complying, the plaintiff's counsel forthwith filed the written motion, 2 duly supported by an Affidavit of Merit of the plaintiff, on the same day, July 25, 1986, and set it for hearing as ordered by the respondent Judge. This motion for reconsideration was denied "for lack of merit" on August 29, 1986. 3 The order of denial states in part: xxx xxx xxx A judicious appraisal of the facts alleged in the motion for reconsideration and in the accompanying affidavit of merit fail to convince the Court to reconsider the Order. As admitted by the plaintiff, he was inside the Court room when the case was caned for pre-trial conference and when his counsel, Atty. Alejandro Saavedra and defendants' counsel Atty. Navarro Belar Navarro were arguing about the insufficiency of the special power of attorney, but he never made known his presence to the Court or to his counsel or to the defendants. He approached his counsel and presented himself to him when they were already outside the Courtroom and after the case was already dismissed. To the mind of the Court, the foregoing circumstances detailed by the plaintiff do not constitute excusable negligence or mistake. 4 xxx xxx xxx (3) Undaunted, seven days later, on September 5, 1986, the petitioner filed a second motion for reconsideration 5verified by his counsel, setting it for hearing

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on September 19, 1986, which was promptly denied on the same day of the hearing. And, on October 7, 1986, as a coup de grace, an over-kill to be sure, the respondent Judge issued a court order which reads: xxx xxx xxx The Court having denied the second motion for reconsideration for not being allowed by Section 4 of the Interim Rules as per Order entered on September 19, 1986, the case at bar is therefore considered closed and terminated. SO ORDERED. 6 xxx xxx xxx The respondent Judge lost sight of the fact that even the Rules of Court themselves, fortified by jurisprudence, mandate a liberal construction of the rules and the pleadings in order to effect substantial justice. 7 After an, "[O]verriding all the foregoing technical considerations is the trend of the rulings of this Court to afford every party-litigant the amplest opportunity for the proper and just determination of his cause, freed from the constraints of technicalities. 8 In a recent case 9 where the trial court, as in this instance, declared the petitioner non-suited for failure to appear at the pre-trial conference, and consequently dismissed the complaint, this Court reiterated the doctrine of liberality in the construction of the rules of procedure to be followed by all courts. While it is true under Section 1, Rule 20 of the Rules of Court, it is mandatory for the parties and their counsel to appear at the pretrial to consider inter-alia "the possibility of an amicable settlement, the simplification of the issues, the possibility of obtaining stipulations or admission of facts, totally or partially, and such other matters as may aid in the prompt disposition of the action," and that a party who fails to appear at the pre-trial may be non-suited or considered as in default, this rule was by no means intended as an implacable bludgeon but as a tool to assist the trial courts in the orderly and expeditious conduct of trials. Time and again WE have emphasized that the rule should be liberally construed in order to promote their object and assist the parties in obtaining not only speedy, but more importantly, just and inexpensive determination of every action and proceeding. 10 Practically on all fours with this case is Gabucan vs. Hon. Judge Luis D. Manta, et al., 11 in which the petition for the probate of a notarial will was dismissed on the sole ground that the will did not bear a thirty-centavo documentary stamp, and, hence, according to the respondent Judge, it was not admissible in evidence, citing section 238 of the Tax Code, now section 250 of the 1977 Tax Code, which reads:

xxx xxx xxxSEC. 238. Effect of failure to stamp taxable document. An instrument, document, or paper which is required by law to be stamped and which has been signed, issued, accepted, or transferred without being duly stamped, shall not be recorded, nor shall it or any copy thereof or any record of transfer of the same be admitted or used in evidence in any court until the requisite stamp or stamps shall have been affixed thereto and cancelled. No notary public or other officer authorized to administer oaths shall add his jurat or acknowledgment to any document subject to documentary stamp tax unless the proper documentary stamps are affixed thereto and cancelled. 12 In reversing the interpretation of the provisions of sections 238 and 250 of the old Tax Codes above copied which are Identical to those of section 214 of the National Internal Code of 1986, as amended, the law now obtaining, this Court held: xxx xxx xxxWhat the probate court should have done was to require the petitioner or proponent to affix the requisite thirty-centavo documentary stamp to the notarial acknowledgment of the will which is the taxable portion of that document. That procedure may be implied from the provision of section 238 that the non-admissibility of the document, which does not bear the requisite documentary stamp, subsists only "until the requisite stamp or stamps shall have been affixed thereto and cancelled." Thus, it was held that the documentary stamp may be affixed at the time the taxable document is presented in evidence (Del Castillo vs. Madrilena, 49 Phil. 749). If the promissory note does not bear a documentary stamp, the court should have allowed plaintiff's tender of a stamp of supply the deficiency. (Rodriguez vs. Martinez, 5 Phil. 67, 71. Note the holding in Azarraga vs. Rodriguez, 9 Phil. 637, that the lack of the documentary stamp on a document does not invalidate such document. See Cia. General de Tabacos vs. Jeanjaquet, 12 Phil. 195, 201-2 and Delgado and Figueroa vs. Amenabar, 16 Phil. 403, 405-6.) 13 This is as it should be because the quality of justice is not strained. WHEREFORE, the orders of the trial court complained of the first dated July 25, 1986 declaring the petitioner non-suited and dismissing his complaint, and those dated August 29, 1986 and October 7, 1986, denying the petitioner's motions for reconsideration are hereby ANNULLED and SET ASIDE. Civil Case No. 3331 is hereby remanded to the respondent trial court for further proceedings. No costs.

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Let a copy of this Decision be attached to the personal record of the respondent judge. SO ORDERED. SECOND DIVISION G.R. No. L-69560 June 30, 1988 THE INTERNATIONAL CORPORATE BANK INC., petitioner, vs. THE IMMEDIATE APPELLATE COURT, HON. ZOILO AGUINALDO, as presiding Judge of the Regional Trial Court of Makati, Branch 143, NATIVIDAD M. FAJARDO, and SILVINO R. PASTRANA, as Deputy and Special Sheriff, respondents. PARAS, J.: This is a petition for review on certiorari of the Decision of the Court of Appeals dated October 31, 1984 in AC-G.R. SP No. 02912 entitled "THE INTERNATIONAL CORPORATE BANK, INC. v. Hon. ZOILO AGUINALDO, et al.," dismissing petitioner's petition for certiorari against the Regional Trial Court of Makati (Branch 143) for lack of merit, and of its Resolution dated January 7, 1985, denying petitioner's motion for reconsideration of the aforementioned Decision. Petitioner also prays that upon filing of the petition, a restraining order be issued ex-parte, enjoining respondents or any person acting in their behalf, from enforcing or in any manner implementing the Order of the respondent trial court dated February 13 and March 9, 1984, and January 10 and January 11, 1985. The facts of this case, as found by the trial court and subsequently adopted by the Court of Appeals, are as follows: In the early part of 1980, private respondent secured from petitioner's predecessors-in-interest, the then Investment and Underwriting Corp. of the Philippines and Atrium Capital Corp., a loan in the amount of P50,000,000.00. To secure this loan, private respondent mortgaged her real properties in Quiapo, Manila and in San Rafael, Bulacan, which she claimed have a total market value of P110,000,000.00. Of this loan, only the amount of P20,000,000.00 was approved for release. The same amount was applied to pay her other obligations to petitioner, bank charges and fees. Thus, private respondent's claim that she did not receive anything from the approved loan. On September 11, 1980, private respondent made a money market placement with ATRIUM in the amount of P1,046,253.77 at 17% interest per annum for a period of 32 days or until October 13, 1980, its maturity date. Meanwhile, private respondent allegedly failed to pay her mortgaged indebtedness to the bank so that the latter refused to pay the proceeds of the money market placement on maturity but applied the amount instead to the deficiency in the

proceeds of the auction sale of the mortgaged properties. With Atrium being the only bidder, said properties were sold in its favor for only P20,000,000.00. Petitioner claims that after deducting this amount, private respondent is still indebted in the amount of P6.81 million. On November 17, 1982, private respondent filed a complaint with the trial court against petitioner for annulment of the sheriff's sale of the mortgaged properties, for the release to her of the balance of her loan from petitioner in the amount of P30,000,000,00, and for recovery of P1,062,063.83 representing the proceeds of her money market investment and for damages. She alleges in her complaint, which was subsequently amended, that the mortgage is not yet due and demandable and accordingly the foreclosure was illegal; that per her loan agreement with petitioner she is entitled to the release to her of the balance of the loan in the amount of P30,000,000.00; that petitioner refused to pay her the proceeds of her money market placement notwithstanding the fact that it has long become due and payable; and that she suffered damages as a consequence of petitioner's illegal acts. In its answer, petitioner denies private respondent's allegations and asserts among others, that it has the right to apply or set off private respondent's money market claim of P1,062,063.83. Petitioner thus interposes counterclaims for the recovery of P5,763,741.23, representing the balance of its deficiency claim after deducting the proceeds of the money market placement, and for damages. The trial court subsequently dismissed private respondent's cause of action concerning the annulment of the foreclosure sale, for lack of jurisdiction, but left the other causes of action to be resolved after trial. Private respondent then filed separate complaints in Manila and in Bulacan for annulment of the foreclosure sale of the properties in Manila and in Bulacan, respectively. On December 15, 1983, private respondent filed a motion to order petitioner to release in her favor the sum of P1,062,063.83, representing the proceeds of the money market placement, at the time when she had already given her direct testimony on the merits of the case and was being cross-examined by counsel. On December 24, 1983, petitioner filed an opposition thereto, claiming that the proceeds of the money market investment had already been applied to partly satisfy its deficiency claim, and that to grant the motion would be to render judgment in her favor without trial and make the proceedings moot and academic. However, at the hearing on February 9, 1984, counsel for petitioner and private respondent jointly manifested that they were submitting for resolution said motion as well as the opposition thereto on the basis of the pleadings and of the evidence which private respondent had already presented.

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On February 13, 1984, respondent judge issued an order granting the motion, as follows: IN VIEW OF THE FOREGOING, the defendant International Corporate Bank is hereby ordered to deliver to the plaintiff Natividad M. Pajardo the amount of P1,062,063.83 covered by the repurchase agreement with Serial No. AOY-14822 (Exhibit "A'), this amount represented the principal of P1,046,253.77 which the plaintiff held including its interest as of October 13, 1980, conditioned upon the plaintiff filing a bond amount to P1,062,063.83 to answer for all damages which the said defendant bank may suffer in the event that the Court should finally decide that the plaintiff was not entitled to the said amount. Petitioner filed a motion for reconsideration to the aforesaid order, asserting among other things that said motion is not verified, and therefore a mere scrap of paper. Private respondent however manifested that since she testified in open court and was cross-examined by counsel for petitioner on the motion for release of the proceeds of the money market placement, the defect had already been cured. On March 9, 1984, the respondent judge issued an order denying petitioner's motion for reconsideration. (CA Decision, Rollo, pp. 109-111). On March 13, 1984, petitioner filed a special civil action for certiorari and prohibition with preliminary injunction with the Court of Appeals, (a) for the setting aside and annulment of the Orders dated February 13, 1984 and March 9,1984, issued by the respondent trial court, and (b) for an order commanding or directing the respondent trial judge to desist from enforcing and/or implementing and/or executing the aforesaid Orders. The temporary restraining order prayed for was issued by respondent Court of Appeals on March 22, 1984. (Please see CA Decision, Rollo, p. 114, last paragraph). In a decision rendered on October 31, 1984 (Rollo, pp. 109-14), the Court of Appeals dismissed said petition finding(a) that while the Motion for the release of the proceeds of the money market investment in favor of private respondent was not verified by her, that defect was cured when she testified under oath to substantiate her allegations therein: (b) that, petitioner cannot validly claim it was denied due process for the reason that it was given ample time to be heard, as it was in fact heard when it filed an Opposition to the motion and a motion for reconsideration; (c) that the circumstances of this case prevent legal compensation from taking place because the question of whether private respondent is indebted to petitioner in the amount of 6.81 million representing the deficiency balance after the foreclosure of the mortgage executed to secure the loan extended to her, is vigorously disputed; (d) that the release of the proceeds of the money market investment for private respondent

will not make the causes of action of the case pending before the trial court moot and academic nor will it cause irreparable damage to petitioner, private respondent having filed her bond in the amount of P1,062,063.83 to answer for all damages which the former may suffer in the event that the court should finally decide that private respondent is not entitled to the return of said amount (CA Decision, Rello, pp. 112-114). The dispositive portion of the aforementioned Decision reads: ... We hold that the respondent court cannot be successfully charged with grave abuse of discretion amounting to lack of jurisdiction when it issued its Orders of February 13, 1984 and March 9, 1984, based as they are on a correct appreciation of the import of the parties' evidence and the applicable law. IN VIEW WHEREOF, the petition is dismissed for lack of merit and the temporary restraining order issued by this Court on March 22, 1984 is lifted. (Ibid., p. 114). Petitioner moved for the reconsideration of the above decision (Annex "S", Rollo, pp. 116-124), but for the reason that the same failed to raise any issue that had not been considered and passed upon by the respondent Court of Appeals, it was denied in a Resolution dated January 7, 1985 (CA Resolution, Rollo, p. 126). Having been affirmed by the Court of Appeals, the trial court issued a Writ of Execution to implement its Order of February 13, 1984 (Annex "BB", Rollo, p. 188) and by virtue thereof, a levy was made on petitioner's personal property consisting of 20 motor vehicles (Annex "U", Rollo, p. 127). On January 9, 1985, herein private respondent (then plaintiff) filed in the trial court an ex-parte motion praying that the four branches of the petitioner such as: Baclaran Branch, Paranaque, Metro Manila; Ylaya Branch, Divisoria, Metro Manila; Cubao Branch, Quezon City and Binondo Branch, Sta. Cruz, Manila, be ordered to pay the amount of P250,000.00 each, and the main office of the petitioner bank at Paseo de Roxas, Makati, Metro Manila, be ordered to pay the amount of P62,063.83 in order to answer for the claim of private respondent amounting to P1,062,063.83. Thereupon, on January 10, 1985, the trial court issued an Order (Annex "V", Rollo, p. 129) granting the above-mentioned prayers. Acting on the ex-parte motion by the plaintiff (now private respondent), the trial court, on January 11, 1984, ordered the President of defendant International Corporate Bank (now petitioner) and all its employees and officials concemed to deliver to the sheriff the 20 motor vehicles levied by virtue of the Writ of Execution dated December 12, 1984 (Annex "W", Rollo, p. 131).

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The petitioner having failed to comply with the above-cited Order, the respondent trial court issued two (2) more Orders: the January 16, 1985 (Annex "CC," Rollo, p. 190) and January 21, 1985 Orders (Annex "DD", Rollo, p. 191), directing several employees mentioned therein to show cause wily they should not be cited in contempt. Hence, this petition for review on certiorari with prayer for a restraining order and for a writ of preliminary injunction. Three days after this petition was filed, or specifically on January 18, 1985, petitioner filed an urgent motion reiterating its prayer for the issuance of an exparte restraining order (Rollo, p. 132). Simultaneous with the filing of the present petition, petitioner, as defendant, filed with the trial court an ex-partemotion to suspend the implementation of any and all orders and writs issued pursuant to Civil Case No. 884 (Annex "A", Rollo, p. 135). This Court's resolution dated January 21, 1985, without giving due course to the petition, resolved (a) to require the respondents to comment: (b) to issue, effective immediately and until further orders from this Court, a Temporary Restraining Order enjoining the respondents from enforcing or in any manner implementing the questioned Orders dated February 13, 1984, March 9, 1984, January 10, 1985 and January 11 and 16, 1985, issued in Civil Case No. 884. The corresponding writ was issued on the same day (Rollo, pp. 139-140). As required, the Comment of private respondent was filed on January 28, 1985 (Rollo, pp. 141- 150). Thereafter, petitioner moved for leave to file a supplemental petition on the ground that after it had filed this present petition, petitioner discovered that the bond filed with, and approved by, the respondent lower court showed numerous material erasures, alterations and/or additions (Rollo, p. 151), which the issuing insurance company certified as having been done without its authority or consent (Annex "Z", Rollo, p. 178). The Supplemental Petition was actually filed on February 1, 1985 (Rollo, pp. 154-171). It pointed out the erasures, alterations and/or additions in the bond as follows: a. below "Civil Case No. 884" after the words, "Plaintiff's Bond," the phrase "For Levying of Attachment" was erased or deleted; b. in lines 2 and 3 after the word "order," the phrase "approving plaintiff's motion dated Dec. 15, 1983, was inserted or added; c. in line 3, the phrases "Of attachment" and "ordered that a writ of attachment issue' were erased or deleted; d also in line 3 after the words "the court has" the phrase "approved the Motion was likewise inserted or added;

e. in line 9, the phrase "and of the levying of said attachment" was also erased or deleted; f. in line 13, the word "attachment" was likewise erased or deleted; g. also in line 13 after the deletion of word "attachment" the phrase "release of the P1,062,063.83 to the plaintiff was similarly inserted or added." Petitioner contended therein that in view of the foregoing facts, the genuineness, due execution and authenticity as well as the validity and enforceability of the bond (Rello, p. 174) is now placed in issue and consequently, the bond may successfully be repudiated as falsified and, therefore, without any force and effect and the bonding company may thereby insist that it has been released from any hability thereunder. Also, petitioner pointed as error the respondent trial court's motu proprio transferring Civil Case No. 884 to the Manila Branch of the same Court arguing that improper venue, as a ground for, and unless raised in, a Motion to Dismiss, may be waived by the parties and the court may not pre-empt the right of the parties to agree between or among themselves as to the venue of their choice in litigating their justiciable controversy (Supplemental Petition, Rollo, p. 160). On being required to comment thereon, (Rollo, p. 192) private respondent countered (Rollo, pp. 193-198) that bond forms are ready-prepared forms and the bonding company used the form for "Levying of Attachment" because the company has no ready-prepared form for the kind of bond called for or required in Civil Case 884. Whatever deletions or additions appear on the bond were made by the Afisco Insurance Corporation itself for the purpose of accomplishing what was required or intended. Nonetheless, on May 7, 1985, private respondent filed "Plaintiffs Bond" in the respondent trial court in the amount of P1,062,063.83 a xerox copy of which was furnished this Court (Rollo, p. 219), and noted in the Court's Resolution dated May 29,1985 (Rollo, p. 225). On March 11, 1985, petitioner was required to file a Consolidated Reply (Rollo, p. 199) which was filed on April 10, 1985 (Rollo, p. 201). Thereafter, a Rejoinder (Rollo, p. 238) was filed by private respondent on September 18, 1985 after Atty. Advincula, counsel for private respondents was required by this Court to show cause why he should not be disciplinarily dealt with or held in contempt for his failure to comply on time (Rollo, p. 226) and on August 19, 1985 said lawyer was finally admonished (Rollo, p. 229) for his failure to promptly apprise the Court of his alleged non-receipt of copy of petitioner's reply, which alleged non-receipt was vehemently denied by petitioner in its Counter Manifestation (Rollo, p. 230) filed on August 5, 1985.

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Finally, on October 7, 1985, this petition was given due course and both parties were required to submit simultaneous memoranda (Rollo, p. 249) but before the same were filed, petitioner moved for leave to file sur-rejoinder (Rollo, p. 250), the sur-rejoinder was filed on October 14,1985 (Rollo, pp. 252-254). Petitioner's memorandum was filed on December 28, 1985 (Rollo, pp. 264-292) while that of private respondent was submitted on January 10, 1986 (Rollo, pp. 295-304). Petitioner again moved for leave to file a Reply Memorandum (Rollo, p. 307) which, despite permission from this Court, was not filed and on August 22, 1986, private respondent prayed for early resolution of the petition (Rollo, p. 311). In a resolution dated October 13, 1986 (Rollo, p. 314) this case was transferred to the Second Division of this Court, the same being assigned to a member of that Division. The crucial issue to be resolved in this case is whether or not there can be legal compensation in the case at bar. Petitioner contends that after foreclosing the mortgage, there is still due from private respondent as deficiency the amount of P6.81 million against which it has the right to apply or set off private respondent's money market claim of P1,062,063.83. The argument is without merit. As correctly pointed out by the respondent Court of Appeals Compensation shall take place when two persons, in their own right, are creditors and debtors of each other. (Art. 1278, Civil Code). "When all the requisites mentioned in Art. 1279 of the Civil Code are present, compensation takes effect by operation of law, even without the consent or knowledge of the debtors." (Art. 1290, Civil Code). Article 1279 of the Civil Code requires among others, that in order that legal compensation shall take place, "the two debts be due" and "they be liquidated and demandable." Compensation is not proper where the claim of the person asserting the set-off against the other is not clear nor liquidated; compensation cannot extend to unliquidated, disputed claim arising from breach of contract. (Compaia General de Tabacos vs. French and Unson, 39 Phil. 34; Lorenzo & Martinez vs. Herrero, 17 Phil. 29). There can be no doubt that petitioner is indebted to private respondent in the amount of P1,062,063.83 representing the proceeds of her money market investment. This is admitted. But whether private respondent is indebted to petitioner in the amount of P6.81 million representing the deficiency balance after the foreclosure

of the mortgage executed to secure the loan extended to her, is vigorously disputed. This circumstance prevents legal compensation from taking place. (CA Decision, Rollo, pp. 112-113). It must be noted that Civil Case No. 83-19717 is still pending consideration at the RTC Manila, for annulment of Sheriffs sale on extra-judicial foreclosure of private respondent's property from which the alleged deficiency arose. (Annex "AA", Rollo, pp. 181-189). Therefore, the validity of the extrajudicial foreclosure sale and petitioner's claim for deficiency are still in question, so much so that it is evident, that the requirement of Article 1279 that the debts must be liquidated and demandable has not yet been met. For this reason, legal compensation cannot take place under Article 1290 of the Civil Code. Petitioner now assails the motion of the plaintiff (now private respondent) filed in the trial court for the release of the proceeds of the money market investment, arguing that it is deficient in form, the same being unverified (petitioner's Memorandum, Rollo, p. 266). On this score, it has been held that "as enjoined by the Rules of Court and the controlling jurisprudence, a liberal construction of the rules and the pleadings is the controlling principle to effect substantial justice." (Maturan v. Araula, 111 SCRA 615 [1982]). Finally, the filing of insufficient or defective bond does not dissolve absolutely and unconditionally the injunction issued. Whatever defect the bond possessed was cured when private respondent filed another bond in the trial court. PREMISES CONSIDERED, the questioned Decision and Resolution of the respondent Court of Appeals are hereby AFFIRMED. SO ORDERED FIRST DIVISION G.R. No. L-56590 May 29, 1981 PERLA COMPAIA DE SEGUROS, INC., petitioner, vs. HON. ALFREDO B. CONCEPCION as Presiding Judge of the Court of First Instance of Cavite, Branch IV-Tagaytay City and MIGUEL ILAGAN, respondents. TEEHANKEE, J: The Court hereby sets aside the questioned orders of respondent judge disapproving herein petitioner's appeal bond in Civil Case No. TG-438 of the Court of First Instance of Cavite, Branch IV, Tagaytay City, upon the ground that said bond "is void and unenforceable for lack of a principal debtor or obligation," and peremptorily declaring his judgment under appeal as having become final and executory and ordering execution thereof. A mere technical defect or imperfection in the filing of an appeal bond does not render the decision subject of the appeal immediately final. and executory, for where said bond is in substantial conformity with the provisions of the law such that its

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legal effect accomplishes the objective of insuring to the appellee the payment of the costs of appeal, the appeal should be given due course. In an action for the enforcement of a commercial vehicle comprehensive insurance policy with damages, judgment was rendered by respondent judge sentencing petitioner as defendant to pay respondent-plaintiff Ilagan "the total sum of P18,773.58 minus the sum of P500.00 representing the deductible franchise, plus attorney's fees in the amount of P5,600.00 or the total sum of P23,873.58, with interest thereon at the rate of 36% per annum from February 21, 1978 until said amount shall have been fully satisfied; and to pay the costs." From said judgment, petitioner-defendant timely filed a notice of appeal, appeal bond and a record on appeal. But the herein private respondent, the prevailing party in the lower court, filed therein a motion to dismiss the appeal and for the issuance of a writ of execution, impugning the validity of petitioner's appeal bond as having no principal debtor and therefore void. Despite opposition, respondent judge upheld respondent's contention and denied due course to the appeal and further directed the issuance of the corresponding writ of execution of judgment, in his questioned Order of January 28, 1981, as follows:1wph1.t No issue exists regarding the seasonable filing of the notice, bond and record of appeal. the issue centers on the efficacy of the appeal bond executed by Rodrigo Y. Arandia and Porfirio B. Yabut, both lawyers, as sureties whereby they 'jointly and severally bind (themselves) in favor of Miguel Ilagan, ... for the payment of cost ... As correctly pointed out by the plaintiff the disputed appeal bond is void and unenforceable for lack of a principal debtor or obligation. Indeed, while the sureties bound t herself to pay, jointly and severally, 'such an undertaking presupposes that the obligation is enforceable against someone else besides the sureties and the latter could always claim that it was never ( their) intention to the sole person obligated thereby. (Manila Railroad Co., et al. vs. Alvendia, 17 SCRA 154,156.) It therefore, follows that the judgment rendered in this case had become final and executory, because the defendant had not filed any appeal bond in due time. Reconsideration was denied in respondent judge's Order of March 27, 1981. Hence, this petition for certiorari which we find to be meritorious Section 5 of Rule 41 of the Rules of Court. reads1wph1.t Section 5. Appeal Bond. The appeal bond shall answer for the payment of costs. It shall he in the amount of one hundred and twenty pesos (P120) unless the court shall fix a different amount. If the appeal

bond is not in cash, it must be approved by the court before the transmittal of the record on appeal to the appellate court. The last sentence of the abovequoted section presupposes that before elevating the record on appeal to the appellate count, the trial court has the duty to pass upon the sufficiency of the appeal bond, and it is called upon to require the party-appellant within a period of time to fully comply with the requirements as to said appeal bond in case of some defect in its execution, in the same manner it requires correction or amplification of a deficient record on appeal. Thus, it behooves the trial court upon opposition to the effectivity of an appeal bond to examine it, to declare it lacking of the requirements if ii be so, and then to require and allow the appellant to complete or amend it in accordance with instructions within a reasonable period, so as to perfect the appeal. 1 Indeed, as in the filing of records on appeal, 2 the Court has invariably taken a liberal attitude in favor of the appellant when it comes to the filing of appeal bonds in relation to perfection of appeals. 3 Thus, it has been held that an appeal bond is sufficient when it is in substantial conformity with the provisions of the law as long as the legal effect is to insure to the appellee the payment of all costs required by law. 4 In Javier Cruz vs. Enriquez, 5 which is similar to the case at bar, the respondent judge therein ordered the disapproval of the appeal bond after discovering that the same consisted merely in the signatures of two lawyers. The Court ruled therein as follows:1wph1.t This provision of law 6 does not prescribe a special form for appeal bond. It only requires that the same be for the amount of sixty pesos, (at that time) conditioned for the payment of costs which the appellate court may award against the appellant.' The bond in question complies substantially with the provision of law, and we see no reason why the respondent judge found it defective. When he approved the record on appeal, there has been an implied approval of the original bond, and we find no reason either why after such approval, he had to disapprove said bond and dismiss the appeal on the allegation that the new bond was filed out of time. Furthermore, granting that the first bond was really defective, justice demands that herein petitioners, as appellants in that case, be given an opportunity to cure its defect by filing, as they did another bond. In dismissing the appeal the respondent judge has entirely overlooked the fact that the second bond was not a new one but merely a correction of the original supposedly defective bond. ... Respondent Laserna vigorously contends that under the inherent powers of the court to amend and control its process and orders so

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as to make them conformable to law and justice, the dismissal of the appeal on the ground that the first bond was defective and the second one was filed out of time, should be sustained; but under the facts obtaining in the case, this contention is evidently untenable for the original bond, in our opinion, is not defective, and even granting that it were, petitioners herein were diligent in curing the supposed defect by filing a new bond in order to protect their right to appeal. Certainly, the respondent judge should not have been strictly technical in the application of the rules, for in so doing he has deprived herein petitioners of their right to appeal, or at least to perfect it within the time allowed by law. There is no question in the instant case, as acknowledged in the challenged order, that the record on appeal, notice of appeal and the appeal bond were filed on time. However, as in the above cited case of Cruz, the appeal bond in question was executed by petitioner's lawyers, Attys. Rodrigo Y. Arandia and Porfirio B. Yabut, both lawyers of the law firm representing herein petitioner as defendant in the main case, as well as in the case at t bar, whereby they did "hereby jointly and severally bind ourselves in favor of Miguel Ilagan, in the amount of One Hundred Twenty Pesos (P120.00) conditioned for the payment of costs which the appellate court may award against appellants." Clearly enough. this undertaking, albeit not signed by herein petitioner as partyappellant, effectively insures to the appellee the payment of costs and is, therefore, in substantial compliance with the requirement of the cited Rule, for they certainly are estopped from denying principal liability under the said bond, as baselessly feared by respondent judge in his Order. One additional observation. The authority cited by respondent judge in the questioned order, Manila Railroad Company (MRC) vs. Alvendia 7 wherein the appeal bond was held void and unenforceable for lack of a principal debtor or obligation since the MRC as co-appellant of the Manila Port Service was not a sigtatory to the bond, has been superseded by the decision of the is same court in the later case of Manila Railroad Company vs. Alvendia 8where we held that the Manila Port Service must be deemed part of the Manila Railroad Company and not a separate entity in a suit against the MRC based on arrastre operations undertaken by it through its "agents and subsidiary," the Manila Port Service. Similarly, in this case the lawyers as agents and attorneys of petitioners properly executed the appeal bond in their own name but for the benefit and on behalf of petitioner as their client who has in turn ratified as principal the execution of said appeal bond with the very prosecution of this action, as evidenced by the verification of the petition at bar by petitioner's vice-president. 9

ACCORDINGLY, judgment is hereby rendered setting aside respondent judge's orders of January 28, 1981 and March 27, 1981 and ordering respondent judge to give due course to the appeal and to transmit the records to the Court of Appeals for proper proceedings and determination of the appeal on the merits. With costs against private respondent. SO ORDERED. D. Penal statutes E. Statutes in Derogation of Fundamental Rights EN BANC G.R. No. L-53460 May 27, 1983 THE PROVINCIAL CHAPTER of LAGUNA, NACIONALISTA PARTY (NP), petitioner, vs. COMMISSION ON ELECTIONS and FELICISIMO T. SAN LUIS, respondents. Marciano P. Brion Jr. for petitioner. The Solicitor General for respondent COMELEC. Felicisimo T San Luis and Rustico F. de los Reyes for private respondent. MAKASIAR, J.: This is a petition for certiorari filed by the petitioner against respondents which seeks to impugn the validity of the proceedings held before the respondent Commission on Elections (COMELEC) in PDC No. 165, wherein the disqualification of herein private respondent Felicisimo T. San Luis was sought, the same being allegedly violative of the due process clause of the Constitution; and to reverse the dismissal resolution issued by respondent COMELEC in said PDC No. 165, as being allegedly in contravention of the Constitution (Article XII-C, Section 10) and of Section 4, Batas Pambansa Blg. 52. In the elections of November 8, 1971, private respondent Felicisimo T. San Luis was the official candidate of' the Liberal Party (LP) for Governor of Laguna. Private respondent won and accordingly assumed said position, the term of which would have ordinarily expired on December 31, 1975. On January 18, 1980, petitioner filed with the COMELEC a petition (docketed as PDC No. 165) to disqualify the private respondent from running as official candidate of the Kilusang Bagong Lipunan (KBL) for the organization,'as of Governor in the province of Laguna based on "turncoatism" as provided for under Section 10, Article XII-C, of the 1973 Constitution in relation to Section 4 of Batas Pambansa Blg. 52 [pp. 22-24, rec.]. Section 10, Article XII-C, of the 1973 Constitution reads: Sec. 10. No elective public officer may change his political party affiliation during his term of office, and no candidate for

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any elective public office may change his political party affiliation within six months immediately preceding or following an election. The pertinent portion of Section 4, Batas Pambansa Blg. 52 reads: Sec. 4. Special Disqualification. In addition to violation of Section 10 of Article XII-C, of the Constitution and disqualifications mentioned in existing laws, which are hereby declared as disqualifications for any of the elective officials enumerated in Section 1 hereof, any retired elective provincial, city or municipal official, who has received payment of the retirement benefits to which he is entitled under the law and who shall have been 65 years of age at the commencement of the term of office to which he seeks to be elected, shall not be qualified to run for the same elective local organization,'as from which he has retired (emphasis supplied). The records likewise reveal that prior to January 23, 1980, a similar petition to disqualify on the ground of turncoatism (docketed as PDC No. 172) was filed by the Provincial Chapter of Laguna, Kilusang Bagong Lipunan (KBL) against Wenceslao R. Lagumbay, the Nacionalista Party (NP) official candidate for Governor of Laguna, in the January 30, 1980 elections [pp.. 79-80, rec.]. On January 21, 1980, private respondent Felicisimo T. San Luis filed with the Commission on Elections (COMELEC) his answer in PDC No. 165 [pp. 25-28, rec.]. On the same date, the Commission on Elections (COMELEC) set for joint hearing PDC No. 165 and PDC No. 172 on January 24, 1980 at 10:00 A.M. [pp. 75-76, rec.]. On January 23, 1980, the private respondent filed with the public respondent COMELEC his "Formal Submission of Annexes" [pp. 31-32, rec.]. On January 24, 1980, private respondent Felicisimo T. San Luis (respondent in PDC No. 165) filed with the Commission on Elections (COMELEC) a memorandum [pp. 77-78, rec.l. Likewise, on the same date, Wenceslao R. Lagumbay, respondent in PDC No. 172, filed with the COMELEC a "Formal Offer of Documentary Evidences with Comments on Petitioner's Own Evidences" [pp. 85-A to 87, rec.]. On January 25, 1980, herein petitioner filed with the Commission on Elections a memorandum [p. 2, COMELEC's Comment; p. 95, rec.]. On February 4, 1980, the private respondent filed with the COMELEC a motion for an early favorable resolution of the case, it allegedly appearing that he had won over Wenceslao R. Lagumbay, the Nacionalista Party (NP) official candidate, by a majority of around 55,000 votes [p. 2, COMELEC's Comment; p. 95, rec.].

On February 6, 1980, the petitioner filed with the COMELEC its reiteration to disqualify private respondent Felicisimo T. San Luis [p. 2, COMELEC's Comment; p. 95, rec.]. On February 21, 1980, the COMELEC, in a resolution, denied the petition to disqualify private respondent Felicisimo T. San Luis as "the petitioner failed to present sufficient evidence against herein respondent. " Thus, Resolution No. 9188 reads: 9188. (PDC No. 165). In the matter of the petition for disqualification, dated January 18, 1980, tied by the Provincial Chapter of Laguna, Nacionalista Party (NP), represented by Wenceslao R. Lagumbay, Acting Chairman, against Felicisimo T. San Luis, respondent, on the ground that said respondent allegedly violated the provision of Section 10, Article XII- C, Constitution in relation to Batas Pambansa Big. 52. A review of the said petition shows that the petitioner failed to present sufficient evidence against herein respondent. Premises considered, the Commission RESOLVED to deny the Petition of the Provincial Chapter of Laguna, Nacionalista Party (NP). SO ORDERED [p. 33, rec.; emphasis supplied]. Hence, the instant petition. I It is initially contended by the petitioner that public respondent Commission on Elections issued the questioned resolution (No. 9188) dismissing the petition in PDC No. 165, without observance of the cardinal precepts of due process. While petitioner admitted that the disqualification case was set for hearing on January 24, 1980 at 10:00 A.M., nevertheless, it vehemently argued that the mere setting alone of such hearing cannot be taken as satisfying the requirements of due process. Thus, petitioner insisted "that at COMELEC no formal hearing was conducted wherein the parties could have confronted witnesses against each other. "NOT A SINGLE COMMISSIONER WAS IN ATTENDANCE. Only a staff member of its Legal Department was present when the case was called for hearing, and he directed the parties to submit their respective 'Annexes' (exhibits) after which, their memoranda" [p. 1, Petitioner's Reply; p. 118, rec.]. The aforesaid allegations of the petitioner have no foundation. It is to be noted that private respondent in its comment filed before this Court alleged the following. Private respondent thru counsel manifested that he was formally resting his case on the basis of the exhibits 1 evidence which he had formally offered in

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writing, and a copy of which was further presentation Atty. Marciano Brion Jr., counsel for the petitioner. Atty. Brion reserved his right to register his objections to the exhibits in writing, and manifested that he was; not presenting any more evidence, in view of the admission of private respondent that he was elected Governor of Laguna on November 8,1971 as official candidate of the Liberal Party and then ran for the same position as the standard bearer of the KBL Party during the January 30, 1980 elections. In fact, this was the same trend of argument adopted by petitioner when it argued as follows: If private respondent is bound, as all parties who filed pleadings in Court should be bound, by his affirmative allegations and admission in his pleadings signed by him under oath, then the case should end here with his disqualification and without any need for any presentation discussion.' Not that private respondent agrees with the aforegoing Argument of Petitioner. The same was merely cited to show that in the proceedings before respondent COMELEC, petitioner really preferred not to present evidence, contrary to its claim now, that it was denied procedural due process, in that its counsel was not able to present evidence confront witnesses or object to exhibits. Parties were even required to submit their respective memoranda. Private respondent submitted his memoranda in both cases, PDC No. 165 and 172, xerox copies of which are hereto attached as Annexes 3 and 4 of this comment. If Petitioner did not submit its memoranda, that is its fault, but certainly, it cannot shift the blame on the respondent COMELEC or to private respondent for not doing what it should have done. Attached to this Comment as Annex 5 is the xerox copy of the Formal Submission of Annexes of Respondent in PDC No. 166 showing on the bottom of page 2 thereof, that petitioner thru counsel was duly furnished a copy thereof. The fact of the matter is that counsel for petitioner concentrated his efforts more on PDC No. 172 entitled the Provincial Chapter of Laguna (KBL) vs. Wenceslao R. Lagumbay, as shown by the fact that on the date of the hearing on January 24, 1980, he submitted therein his own 'Formal Offer of Documentary Evidence with Comments on Petitioner's Own Evidences' a xerox copy of which is hereto attached as Annex 6 of this Comment [pp.

46, Comment of Private Respondent Felicisimo T. San Luis; pp. 48-50, rec.; emphasis supplied]. In its reply, petitioner miserably failed to deny the said allegations of the private respondent. This is fatal to the cause of the petitioner. WE are constrained to sustain the stand of private respondent; for, apart from the presumption of regularity accorded to respondent Commission in the performance of its duties, petitioner failed to timely assert his right prior to the issuance of the abovequestioned resolution. From January 24, 1980 up to February 21, 1980, when respondent COMELEC issued the aforementioned resolution, petitioner failed to press before respondent COMELEC its bid for an opportunity to be heard and belatedly cry for an alleged denial of due process only after receipt of an adverse resolution. As correctly pointed out by the private respondent, "(I)ndeed, if petitioner had evidence to present or wanted to confront witnesses or object to evidence in open session (instead of submitting a written objection as he manifested before respondent COMELEC) why did it not file a motion to set the case again for hearing, knouting that elections were over and either its candidate or the private respondent would be proclaimed sooner or later. Surely, if petitioner sincerely believed that it has not presented evidence, it should have acted immediately by asking the COMELEC to set the case for hearing for reception of its evidence, unless of course, petitioner thought that its candidate would win the elections, which was, of course, presumptuous on its part [pp. 8-9, Comment of Private Respondent Felicisimo T. San Luis, pp. 52-53, rec.; emphasis supplied]. The requirements of due process are obeyed as long as the parties are given the opportunity to be heard. In the case at bar, petitioner was afforded all the chances to be heard until it submitted the case for resolution by his manifestation that, because of the admission of private respondent that he ran as Liberal Party candidate in the 1971 elections, he was not presenting any more evidence, only reserving his right to object to respondent's evidence. In the case of Maglasang vs. Ople (L-38813, 63 SCRA 508 [19751, then Associate Justice, now Chief Justice Enrique M. Fernando, ruled that the right of due process is not denied where the aggrieved party was given the opportunity to be heard. The essence of due process is the requirement of notice and hearing, the presence of a party at a trial is not always of the essence of due process, and an that due process requires is an opportunity to be heard (Auyong Hian vs. Court of Tax Appeals, et al., L-28782, Sept. 12, 1974, 59 SCRA 110; Asprec vs. Itchon, L-21685, April 30, 1966, 16 SCRA 921; Cornejo vs. Secretary of Justice, et al., L-32818, June 28, 1974, 57 SCRA 663). It is significant to note that respondent COMELEC's resolution was issued after private respondent submitted his "Formal Submission of Annexes" and

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after both parties submitted their respective memoranda. Thus, respondent COMELEC stated that it "decided PDC No. 165 based on the petition and memorandum of the petitioner and the answer, memorandum and the motion for the early favorable resolution of the case of the private respondent. To say, at this late hour, that the petitioner was denied the process in the COMELEC is unwarranted, ... . The petitioner had been allowed ample opportunity to ventilate its charge before the respondent COMELEC, as seen above, and failed in its attempt to support the same with proof " (p. 4, COMELEC's Comment; p. 97, rec.). In other words, the petition filed against private respondent in PDC No. 165 was deemed submitted for decision on the basis of the pleadings, annexes and memoranda of the parties. And there is no denial of due process if the decision was "rendered on the evidence presented at the hearing, or at least contained in the record and disclosed to the parties affected (Interstate Commerce Commission vs. L. & N.R. Co., 227 U.S. 88, 33 S. Ct. 185, 57 Law. ed. 431; cited in Ang Tibay, et al. vs. The Court of Industrial Relations, et al., 69 Phil. 635, 643; emphasis supplied). A case in point is the case of Armedilla vs. COMELEC, et al. (No. 53393, recently decided by this Court on March 31, 1981). In said case, the COMELEC dismissed Armedilla's petition to disqualify private respondent Dizon. The dismissal was anchored on the ground of insufficiency of evidence. Thus: 30. With respect to the disqualification case against Dizon, Armedilla interposed in this Court on March 18, 1980 an 'appeal by certiorari' wherein he contended that the Comelec did not observe due process in dismissing the case (G.R. No. 53393). 31. Dizon in his comment on that appeal traversed the allegation as to nonobservance of due process. He said that at the hearing of the petition for disqualification on January 26, 1980 in the Comelec the case was submitted on the basis of the pleadings (p. 30, rollo of G.R. No. 53393) [emphasis supplied]. In Ruling to the effect that the COMELEC complied with the basic requirements of procedural due process in deciding the case on the basis of the pleadings submitted by the parties, this Court declared: With respect to the disqualification case against Mayor Dizon (G.R. No. 53393), the contention that due process was not observed in dismissing that case is not well-taken because petitioner Armedilla was given a chance to controvert Dizon's defense that he was already a KBL partisan in April 1978, or more than six months prior to January 30, 1980 but Armedilla was not able to overthrow that

defense.He submitted the case for decision by the Comelec on the pleadings (emphasis supplied). Similarly, in the more recent case of Garcia vs. COMELEC, et al., (No. 53793, June 29,1981), this Court ruled: Likewise, We are not in accord with the argument of the petitioner that she was denied due process because she was not afforded the opportunity 'to refute the alleged findings of the handwriting experts of the Comelec.' Such contention is without merit. At the outset, it should be recalled that at the hearing on March 11, 1980 before the COMELEC, the parties dispensed with the presentation of testimonial evidence, and merely prepared oral arguments and submitted the case for decision after filing their 'Annexes' memoranda. Petitioner therefore waived further presentation of evidence(emphasis supplied). Aside from the fact that petitioner expressly waived its right to present presentation evidence, the mere act of petitioner's counsel in merely filing a memorandum after being satisfied with the alleged admission of private respondent until the issuance of the aforequoted adverse resolution, is already an implied manifestation that he was waiving his right to the other elements of a judicial hearing, like the presentation of additional evidence or the crossexamination of witnesses. And petitioner's right to a hearing embracing particular elements, appropriate to judicial proceedings may be waived by taking part in informal proceedings without objection (Martin vs. Wolfson, 218 Minn. 557, 16 NW 2d 884; cited in 2 Am. Jur. 2d 114). Thus: ... The right to present evidence, to have witnesses sworn and to have them subjected to direct and cross-examination in accordance with recognized judicial procedure was the right of any interested person present at the hearing. But unless that right was asserted, it must be considered waived While courts have a tender regard for the rights and privileges of citizens, there is no reason of public policy why they should invoke for him constitutional or statutory rights which he himself has voluntarily relinquished . ... And, if the failure to swear a witness in an ordinary civil trial, or even in a criminal trial, may be waived by failure to object or by express consent (70 C.J., Witnesses, S 654; 39 Am. Jur., New Trial, S 532), clearly the right to have witnesses sworn and subjected to examination in an administrative hearing conducted without traditional court ritual must be considered as waived where interested participate therein without questioning the procedure. People ex rel. Niebuhr v. McAdoo 184 N.Y. 304, 77 N.E.

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260, 6 Ann. Cas. 56; Proctor v. Smith, Tex. Civ. App., 299 S.W. 663 ... [Martin vs. Wolfson,supra, p. 890; emphasis supplied]. It is finally contended by petitioner that private respondent Felicisimo T. San Luis is guilty of "turncoatism," in violation of Section 10, Article XII (C) of the 1973 Constitution in relation to Section 4 of Batas Pambansa Blg. 52 and P.D. No. 1661, as amended by P.D. No. 1661-A. It is undisputed that private respondent won the gubernatorial organization,'as in the 1971 local elections under the banner of the Liberal Party and that when he filed his certificate of candidacy for governor on January 3, 1980 for the January 30, 1980 elections, he indicated his party affiliation as that of Kilusang Bagong Lipunan (KBL). Since 1971 however, "much water has passed under the bridge." A review of the political events prior and subsequent to the November 8, 1971 local elections becomes imperative to resolve the aforesaid issue. On March 16, 1967, Congress of the Philippines passed Resolution No. 2, which was amended by Resolution No. 4 of said body, adopted on June 17, 1969, calling a Convention to propose amendments to the Constitution of the Philippines. Said Resolution No. 2, as amended, was implemented by Republic Act No. 6132, approved on August 24, 1970, pursuant to the provisions of which the election of delegates to said Convention was held on November 10, 1970, and the 1971 Constitutional Convention began to perform its functions on June 1, 1971. While the Convention was in session on September 21, 1972, the President issued Proclamation No. 1081 placing the entire Philippines under Martial Law. On November 29, 1972, the Convention approved its Proposed Constitution of the Philippines. The next day, November 30, 1972, the President of the Philippines issued Presidential Decree No. 73, 'submitting to the Filipino people for ratification or rejection the Constitution of the Republic of the Philippines proposed by the 1971 Constitutional Convention, and appropriating funds thereof,' as well as setting the plebiscite for said ratification or rejection of the Proposed Constitution on January 15, 1973. ... (Javellana vs. The Executive Secretary, 50 SCRA 30, 55). In a Presidential Decree dated December 31, 1972, the President issued P.D. No. 86 organizing Citizens Assemblies in each barrio in municipalities and in each district or ward in chartered cities "to broaden the base of citizens participation in the democratic process and to afford ample opportunities for the citizenry to express their views on important national issues." This was subsequently amended by P.D. No. 86-A on January 5, 1973 and P.D. No. 86-B

on January 7, 1973 requiring the submission of important national questions or issues, among them the approval of the New Constitution, and the holding of a plebiscite on the New Constitution. On January 17, 1973, the President issued Proclamation No. 1102 "(A)nnouncing the ratification by the Filipino people of the Constitution proposed by the 1971 Constitutional Convention." On March 31, 1973, this Court ruled in the above-quoted Javellana case that "there is no presentation judicial obstacle to the new Constitution being considered in force and effect." The aforesaid new Constitution in its Transitory Provisions extended indefinitely the term of organization,'as of all incumbent public officers and employees at the time of the ratification of the said Constitution. Thus: All officials and employees in the existing Government of the Republic of the Philippines shall continue in organization,'as until otherwise provided by law or decreed by the incumbent President of the Philippines, but all officials whose appointments are by this Constitution vested in the Prime Minister shall vacate their 'Annexes' offices upon the appointment and qualification of their successors (Sec. 9, Art. XVII). It is significant to point out at this juncture that a novel provision of the 1973 Constitution pertinent to the case at bar reads: No elective public officer may change his political party affiliation during his term of office, and no candidate for any elective public organization,'as may change his political party affiliation within six months immediately preceding or following an election (Sec. 10, Art. XII [C]). A casual perusal of Section 10, Article XII (C) of the 1973 Constitution would readily show that it imposes prohibition, on two classes of individuals, namely: (1) an elective public officer who changes political party affiliation during his term of office, and (2) a candidate for any elective public office who changes political party affiliation within 6 months immediately preceding or following an election. It is very much apparent from the pleadings filed by the petitioner that in seeking the disqualification of herein private respondent before respondent COMELEC it heavily relied on the first clause of Section 10, Article XII (C)prohibiting elective public officers from changing party affiliation during their term of office. In arguing that private respondent is guilty of "turncoatism" under the second clause of Section 10, Article XII (C) of the 1973 Constitution, petitioner asserted: More than anything, it may not be safe to admit that private respondent, legally speaking, moved over to the KBL on March 15,

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1978, as contended. Not even if the genuineness of his purported Certificate of Affiliation with that organization is admitted. To be reckoned with, unfortunately for him, are the pronouncements of the Honorable Supreme Court in Peralta vs. Comelec, 82 SCRA 30 and Lakas ng Bayan vs. Comelec, 82 SCRA 196, to the effect that the KBL was not a political party in 1978, but only 'an umbrella organization,'as it specifically said: The KBL is NOT A POLITICAL PARTY. It is a group or aggrupation ..., which is "a tempo-alliance, union, or coalition ... of persons or parties for the purpose of joint action and combining their resources to support a common list of candidates (emphasis supplied). And so, insofar as the now involved, constitutional ban is concerned, when did private respondent transfer affiliation to the KBL? Certainly, not before KBL became a political party 'only in late December, 1979, after the sudden calling of the elections for January 30, 1980,' by the words of Justice Teehankee in concurring in the Reyes vs. Comelec decision. Thus, did private respondent also violate the second phase of the same constitutional prohibition that of changing party affiliation within six months before election (pp. 6-7, Petitioner's Reply; pp. 123-124, rec.). The above contention is not wen taken. In the case of Sevilleja vs. COMELEC (Nos. 52793 and 53504, August 31, 1981), reiterated in Geronimo vs. COMELEC (No. 52413, September 26, 1981), this Court ruled: ... (T)he question of whether or not the KBL is a political party has been foreclosed by subsequent political developments. As significantly observed by this Court in Santos vs. Commission on Elections, et al., supraUnder its Resolution Ne 1406, promulgated December 22, 1979 laying down rules on the accreditation of political parties, Section 1 thereof provides that any duly registered political party in the April 7, 1978 election shag be entitled to accreditation. Pursuant to this Resolution, KBL was duly accredited separately from the NP That KBL had always been a political party or aggrupation can, therefore, no longer be open to question. Were KBL not such a political party, block voting as was declared valid in the case of

Peralta vs. COMELEC, 82 SCRA 30, G.R. No. L47771, March 11, 1978, could not have been availed of, by it, as it unquestionably did, in the 1978 elections. For block voting is voting for a political party. Moreover, after the decision in the case of LABAN vs. COMELEC (82 SCRA 196 [19781), the KBL was transformed into a distinct political party and ceased as a mere umbrella organization, as shown by subsequent political developments. It is significant to note that, after the April 1978 election, in the Interim Batasang Pambansa, majority of the assemblymen are Identified and Identify themselves with pride as KBL members sporting T-shirts, hats and pins labelled KBL; while the handful of opposition diehards Identify themselves as members of the Nacionalista Party or Pusyon Bisaya or Mindanao Alliance Much later, until December, 1979, the majority members of the IBP kept referring to themselves as KBL members and held caucuses or meetings to discuss vital issues and proposed legislations as such KBL members. On the floor of the IBP, the members of the KBL Identify themselves as such and the KBL has been referred to as the party of the administration. The actuations of the organizers, leaders and members of the KBL established the said party as a de facto political party since April 1, 1978. The acts performed by the KBL leaders and their members, not the formality of its registration as a party, should determine the commencement of its existence as such political party. It has been held with reference to illegal associations that the nature and true character of an organization are oftentimes determined by the speeches and activities of its leaders and members rather than by its constitution and by-laws (Mr. Justice Mariano Albert in People vs. Ramos, CA-G.R. No. 5318, Dec. 28,1940,40 O.G. 2305, Sept. 30,1941). The hesitant stance taken by petitioner in assailing the candidacy of private respondent based on the second clause of Section 10, Article XII (C), prohibiting candidates for any elective public office from changing party affiliation within 6 months immediately preceding or following an election is not surprising. It must be noted that as early as March, 1978, private respondent was undisputedly expelled from the Liberal Party together with other Liberal Party stalwarts as Governor Eduardo Joson of Nueva Ecija, Governor Faustino Dy of Isabela and Assemblyman Eddie Ilarde-about fifteen (15) months before the six-month prohibitive period commenced in July, 1979 (pp. 83-84, rec.). The expulsion was obviously due to private respondent's open support for and affiliation with the then newly organized Kilusang Bagong Lipunan (KBL). This

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is shown by the fact that he became Chairman of the KBL, Provincial Chapter in Laguna, and Chairman and Campaign Manager for Region IV-A consisting among others of the Southern Tagalog provinces and hence actively campaigned for KBL candidates in the April, 1978 elections for the members of the Interim Batasang Pambansa. It is likewise undisputed that private respondent has been a holder of a certificate of affiliation as a bona fide KBL member as early as of March, 1978. Of course, there can be no doubt that had private respondent sought within six months before January 30, 1980, his expulsion from the Liberal Party to anticipate a forthcoming elections as alluded to by petitioner, the same is clearly an act of political opportunism. But such expulsion could not have been sought by private respondent as there was no certainty as to the calling of elections on January 30, 1980. As a matter of fact, the January 30, 1980 local elections was not even contemplated in April, 1978. In the language of petitioner, "(N)o one for a fact, then knew when the next elections would be called" (p. 6, Petitioner's Reply; p. 123, rec.). The contention of petitioner that private respondent switched party affiliation during his term of organization,'as and hence guilty of "turncoatism" is not tenable. It is appropriate to note that private respondent was elected governor on November 8, 1971 for a frameup. term or up to 1975. As correctly pointed out by private respondent, that the term of office of those elected in the November 1971 elections expired on December 31, 1975, the period intended by the framers to be covered by the constitutional prohibition, can be gleaned from among the questions asked during the February 27, 1975 referendum and from one of the whereases of P.D. No. 1296, also known as "The 1978 Election Code." Thus, in the referendum of February 27, 1975, the following specific question was among the questions asked: ON LOCAL OFFICIALS At the expiration of the terms of office of your local elective officials on December 31, 1975, how do you want their successors chosen: to be appointed by the President or elected in accordance with the Election Code? (Emphasis supplied). And among the whereases of P.D. No. 1296, more popularly known as "The 1978 Election Code" reads: WHEREAS, the elective local officials whose terms of office expired on December 31, 1975 were allowed to continue in organization,'as subject to the pleasure of the President; (emphasis supplied). Furthermore, in the case of Seares vs. COMELEC (L-34381, May 31, 1977, 77 SCRA 273, 278), this Court ruled that four-year term of office of those elected in the November 8, 1971 elections already expired. In the aforesaid Seares case,

a petition was filed on November 23, 1971 against private respondents Carmelo Barbero and Gavino Balbin, who were duly elected as governor and vicegovernor respectively, assailing the minute resolution issued by respondent COMELEC denying for lack of merit, petitioner's petition for the cancellation of the certificate of candidacy of private respondents and the minute resolution likewise issued by respondent COMELEC denying petitioner's motion for reconsideration subsequently filed. In dismissing the said petition, this Court, speaking through then Associate Justice Felix Q. Antonio, stated inter alia: "and considering further, that the fouryear term of office of those elected and proclaimed in the election of November 8, 1971, particularly the offices of Governor and Vice-Governor has already expired, We find the present petition moot and academic" (emphasis supplied). Noteworthy in the above-cited case is the fact that it was decided by this Court after December 1975 and over four (4) years prior to the January 30, 1980 local elections. While there might be plausibility in the contention of petitioner that Section 9, Article XVII in the Transitory Provisions extended indefinitely the term of organization,'as of all incumbent public officers and employees, nonetheless, the same will not suffice to bring the case of the private respondent within the constitutional prohibition. WE take the view that the evident intention of the new Constitution was to apply the prohibition, as to party switching (turncoatism) to the term of office for which one was previously elected in relation to the political party under which he ran and won. In the present case, the prombition, should only apply to the term for which private respondent was elected governor as a Liberal Party candidate from January 1, 1972 to December 3l,1975. It must be noted that the new Constitution was ratified on January 17, 1973 when the term of office of local elective public officials, who were elected as such under the two major political parties, the Nacionalista Party and Liberal Party, had not expired. Having been elected in the November, 1971 local elections, their term of organization,'as expired on December 31, 1975. It is worth noting that private respondent was allowed to continue in office at the pleasure of the President by virtue of the provisions of the Transitory Provisions and supplemented by the results of the referendum on February 27, 1975, thru which the people opted for appointment by the President as the manner of choosing the successors of local offtce whose terms were to expire on December 31, 1975. The period beyond December 31, 1975 is no longer within the coverage of the phrase "term of office" for which respondent was elected as a Liberal candidate for purposes of applying the constitutional prohibition.

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Thus, private respondent argued that "(E)ven granting arguendo therefore, that private respondent changed political party affiliation when the constitutional prohibition, was already in effect, and not before, as discussed earlier in this Comment, still it could not be said that he changed affiliation during the term for which he was elected Governor as a Liberal which is what is obviously contemplated in the prohibition. A public officer is prohibited from changing political party affiliation during his term of organization,'as to prevent opportunism of one who after having been catapulted to organization,'as with the help of a political party simply abandons his party and switches to another, while serving his term, thereby ignoring the meaning of the electoral results and making a mockery of the popular will. But if the change took place after the expiration of the term to which he had been elected under a particular party, as in this case, where private respondent ran as a KBL four (4) years after the expiration of his frameup. term on December 31, 1975, then the prombition, does not apply, for the reason that, that part of his term from December 31, 1975 up to March 2, 1980, was not by virtue of his having been elected as a Liberal but because he was allowed to continue in office 'at the pleasure of the President,' who apropos is the titular head of the KBL party" (pp. 24-25, Private Respondent's Comment; pp. 68-69, rec.; emphasis supplied). In fine, what is essential is the political party of the elective public official as of the date of his election and during the four-year term to which he had been elected and not his political inclinations after the said frameup. term expires. Finally, to make the constitutional prohibition, applicable to the period beyond the frameup. term to which public officials were elected in the 1971 local elections under their respective political parties would work manifest injustice and unduly impinge on the freedom of association guaranteed to all individuals. Incumbent public officials who ran during the last election (1971 elections) prior to the 1973 Constitution which embodies the said novel provision, would be undoubtedly unjustifiably prejudiced if the party under the banner of which they ran and won, would no longer participate in the succeeding elections after the effectivity of the new Constitution, such as the Liberal Party in the case at bar which boycotted all elections during and after the lifting of martial law. In the present case, it appears that most of the prominent LP leaders who participated in the elections held after the effectivity of the new Constitution, campaigned and ran under new opposition groups such as the Lakas ng Bayan (LABAN), National Union for Liberation (NUL) Mindanao Alliance (MA) Pusyon Bisaya, Bicol Saro and other new political aggrupations. This We believe was not the manifest intention of the framers. Indeed, "of two reasonably possible constructions, one of which wouId diminish or restrict fundamental right of people and the other of which would not do so, latter construction must be adopted" (16 C.J..S 69 footnote). Hence,

the more logical interpretation is that which gives effect to Section 10 of Article XII (C) of the 1973 Constitution and does not violate the individual's basic right to association. WHEREFORE, THE PETITION IS HEREBY DISMISSED. NO COSTS. SO ORDERED. THIRD DIVISION G.R. No. 108718 July 14, 1994 GENARO R. REYES CONSTRUCTION, INC. and UNIVERSAL DOCKYARD., petitioners, vs. THE HONORABLE COURT OF APPEALS, THE DEPARTMENT OF PUBLIC WORKS AND HIGHWAYS, JOSE P. DE JESUS, ROMULO M. DEL ROSARIO, ET AL. J.P. Villanueva & Associates and Ricardo J.M. Rivera Law Office for petitioners. MELO, J.: Herein petitioners Genaro G. Reyes Construction, Inc. (or GGRCI) and Universal Dockyard Ltd. (or UDL) seek the nullification of the decision dated October 20, 1992 and the resolution dated January 20, 1993 of the Eighth Division of the Court of Appeals in CA-G.R. SP No. 28632. The said decision and resolution affirmed the two orders issued by the Regional Trial Court of the National Capital Judicial Region (Branch 15) dated June 22, 1992 and August 5, 1992 in its Civil Case No. 92-61345 which denied herein petitioners' application for a temporary restraining order and a writ of preliminary injunction to enjoin the Department of Public Works and Highways (DPWH) and then DPWH Secretary Jose P. de Jesus, and others therein impleaded from enforcing and implementing the notice of pre-termination of petitioners' contract for the implementation of Lower Agusan Development Project, Stage I, Phase 1, Butuan City, or any part thereof, to any person; and prohibiting said defendants from bidding said project or any part thereof, or awarding it to any person. On March 1, 1992, the Government through respondent DPWH on one hand, and the joint venture of Genaro G. Reyes Construction, Inc. (GGRCI), Universal Dockyard, Ltd. (UDL), a British construction firm, Home Construction (HC), and JPL Construction (JPLC), (represented by petitioner Genaro G. Reyes, as President of lead contractor GGRCI) on the other hand, entered into a "Contract for the construction of the flood control facilities and land improvement works of the Lower Agusan Development Project, Stage 1, Phase 1, Butuan City" (Annex B, Petition; pp. 75-88, Rollo). In the bidding which preceded the awards by the DPWH of the contract to the GGRCI, et al. Joint Venture, petitioners submitted the lowest bid below the Approved Government Estimate (AGE) of P492,563,998.00. The following bids were submitted:

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1. Petitioner P445,858,196.02 9.45% below approved government estimate of P492,563,998.00. 2. D.M. Wenceslao & Associates P659,980,029.00 33.99% above government estimate. 3. Hanil Development Corporation P696,524,897.91 41% above government estimate. 4. F.F. Cruz and China Stage Engineering backed out. 5. C.M. Pancho and A.M. Oreta disqualified. On May 8, 1992 the Notice to Proceed (Annex C, Petition; p. 89, Rollo) was issued by DPWH Undersecretary Romulo Del Rosario. It was received by petitioners on May 9, 1992 and they forthwith mobilized and deployed their men and equipment. The notice to proceed specifically stated that the contract would take effect not later than thirty days from its receipt by petitioners. On April 23, 1992, the other respondents, DPWH Project Engineers Japanese Eiichiro Araide and Engineer Aquiles C. Sollano recommended termination of the contract alleging that as of that date "the project work progress is already 9.50 percent behind schedule (negative slippage)" (Annex F, Petition; pp. 9293, Rollo). Four days later, or on April 27, 1992, Consultant Eiichiro Araide gave another figure of 9.8% negative slippage (Annex G, Petition; pp. 93-96, Rollo). Under the law, specifically Presidential Decree No. 1870, the Government (herein represented by the DPWH) is authorized to take over delayed infrastructure projects only whenever a contractor is behind schedule in its contract and incurs 15% or more negative slippage based on its approved PERT/CM, and the implementing agency, at the discretion of the Minister concerned, may undertake the administration of the whole or a portion of the unfinished work or have the whole or portion of such unfinished work done by another contractor through a negotiated contract at the current valuation price. Also, Department Order No. 102, Series of 1988 of the DPWH, provides: To insure timely and effective remedial steps in response to delays in project implementation, all Project Managers (PMs), Regional Directors (RDs) and District Engineers (DEs) concerned shall undertake the following calibrated actions where contracts for infrastructure projects reach the levels of negative slippage (attributable to the contractor) indicated below: 1. Negative Slippage of 5% (Early Warning Stage). The contractor shall be given a warning and required to submit a "catch-up" program to eliminate the slippage. The PM/RD/DE shall provide temporary supervision and monitoring of the work. 2. Negative Slippage of 10% ("ICU" Stage). The contractor shall be given a second warning and required to submit a detailed action

program on a fortnightly (two weeks) basis which commits him to accelerate the work and accomplish specific physical targets which will reduce the slippage over a definite time period. Furthermore, the contractor shall be instructed to specify the additional input resources money, manpower, materials, machines, and management in which he should mobilize for this action program. The PM/RD/DE shall exercise closer supervision and meet the contractor every other week to evaluate the progress of work and resolve any problems and bottlenecks. 3. Negative Slippage of 15% ("make or break" stage). The contractor shall be issued a final warning and required to come up with a more detailed program of activities with weekly physical targets together with the required additional input resources. On-site supervision shall be intensified, and evaluation of project performance will be done at least once a week. At the same time the PM/RD/DE shall prepare contingency plans for the termination and rescission of the contract and/or take over of the work by administration or contract. 4. Negative Slippage beyond 15% ("terminal" stage). The PM/RD/DE shall contract and/or take over of the remaining work by administration or assignment to another contractor/appropriate agency. Proper transitory measures shall be taken to minimize work disruptions, e.g., take over by administration while rebidding is going on. Because of negative slippage of 9.50% as of April 23, 1992, or 9.86% as revised on April 27, 1992, respondent Project Director Antonio A. Alpasan wrote a memorandum (Annex H, Petition; p. 98, Rollo) dated May 8, 1992 to respondent DPWH Undersecretary Romulo Del Rosario recommending either of two alternatives: 1. Negotiate the entire balance of the work with the second lowest bidder, but if the second lowest bidder is blacklisted, then to the third lowest bidder; or 2. Rebid the whole balance of the work or divide it into contract packages. On May 14, 1992, DPWH Acting Secretary Gregorio Alvarez notified petitioner GGRCI that its contract is being terminated (Annex D, Petition; p. 90, Rollo). Also on May 14, 1992, respondent DPWH Undersecretary Romulo Del Rosario wrote respondent Secretary De Jesus a memorandum (Annex I, Petition; p. 99, Rollo), "recommending that the balance of the work be offered to the third lowest bidder, the Korean firm of Hanil Development Corporation and that in the event that the negotiation with Hanil fails, the balance of the work be repackaged into several components for rebidding as soon as possible. At this juncture, note must be taken of the circumstance that the bid price of Hanil of P696,524,897.96 was 41.4% over and above the approved government

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estimate (AGE) of P492,563,998.00 for the project. Hanil's bid was higher by P254,666,701.94 vis-a-vis petitioners' bid and contract price. On May 14, 1992, respondent DPWH Secretary De Jesus wrote petitioners that its contract for the project was terminated (Annex E, Petition; p. 91, Rollo). On May 22, 1992, petitioners wrote a letter requesting reconsideration of the termination order, pointing out, inter alia, that: . . . the bid of Hanil Corp. when the project was bidded 15 October 1990 was already P696,524,897.00, 41.4% above the Approved Agency Estimate (AAE), which amounts to P492,563,998.00. Categorically, we are taking a price difference of P203,960,849.00, which is obviously much to the disadvantage of the Department and the Filipino people. In comparison to the contract price of P445,858,196.00, 9.48% below the AAE, the government and Filipino people stand to earn a savings of P46,705,802.00 and P250,666,651 compared to Hanil's bid price. . . . Reviewing the incurred negative slippage in detail, it can clearly be seen that the bulk can be attributed to the unaccomplished spoilbank and dredging section of the project. The spoilbank section, supposedly 100 hectares in area had right of way problems; that is, only 40 hectares or 40% of the total area have been acquired. (Annex J, Petition; pp. 100-101, Rollo.) The request for reconsideration was reiterated on May 26, 1992 and June 14, 1992 (Annexes K and L, Petition; pp. 102-106, Rollo) inviting the DPWH's attention that: (a) based on Hanil's bid price the government stands to lose P250,666,651.00, apart from the additional P100 Million worth in escalation price as indicated in the recommendation of respondents Alpasa (Annex H, Petition) and Del Rosario (Annex I, supra); (b) the delay and failure of the DPWH Project Office (PMO) to procure the 100 hectares right of way for the project's spoilbank area (only 40 hectares was acquired by the DPWH) as provided for in the tender documents, thereby contributing to a negative slippage equivalent to 3% due to the suspension of work in that area because of right of way problems. On June 2, 1992, DPWH Secretary De Jesus terminated the contract of the GGRCI, et al. Joint Venture (Annex M, Petition; p. 107, Rollo). On October 8, 1992, respondent DPWH Undersecretary Romulo del Rosario sent a letter (Annex N, Petition; pp. 108-110, Rollo) to Mr. Hideo Tanaka, Chief Representative of Japan's Overseas Economic Cooperation Fund (or OECF) recommending that the termination of petitioners' contract be lifted upon the following observations:

. . . some reasons contributed to the delay covering the negative slippage was also due to the government's fault, such as: a. Overlapping of duties and responsibilities among the expatriates, the local consultants and the field PMO. b. Unauthorized variation order with the project manager and the expatriate consultant issuing it without prior authority from the central office reducing the length of the flood wall from 5.825 km. to 1.868 km. and change it to levee, with a total cost reduction of P75,458,091.03. c. The right of way problem where the project has a so-called spoiled bank section which is supposed to be 100 hectares and the government has to secure the right-of-way. But as of the present, only about 40 hectares or 40% has been acquired, out of which, about 20 hectares are contiguous while the remaining are scattered. Because of this the contractor found it difficult to pursue the project as it is quite unrealistic to dispose of the dredged materials. Aside from this, there is also the right-of-way problems encountered in the floodwall and levee construction. 3. With the termination effected, the contractor filed a case in the trial court twice denied by the trial court. Right now the case has been appealed to the Court of Appeals. 4. The DPWH sent an investigating team to verify the allegations of the contractor on the faults of the Government and found to have been true. 5. To resolve the issue, we have studied and came up with three options to continue the project as presented in our report to Secretary De Jesus (copy attached). Considering the advantages and disadvantages presented, we recommend that the termination order be lifted and the contract with the joint venture be pursued on the premise that the vigorous action of the contractor in pursuing the case, it is evident that they have all the intention to finish the project. Otherwise all their actions would prove nothing and futile. The above recommendation was based on the report of Andres Canlas, DPWH Project Manager IV, dated September 8, 1992 (Annex C-2, Urgent Motion for Issuance of Temporary Restraining Order; p. 196, Rollo) that the negative slippage of the project was caused not only by the contractor but also by the government side.

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On May 28, 1992 GGRCI, et al. Joint Venture filed a case for prohibition, specific performance, and injunction against respondent DPWH as the sole defendant before the Regional Trial Court of Manila (Civil Case No. 92-61345). The joint venture subsequently filed an Amended Petition impleading additional defendants (respondents herein) and including claims for damages. On June 25, 1992 and August 5, 1992, the regional trial court issued orders denying the joint venture's prayer for preliminary injunction citing Section 1 of Presidential Decree No. 1818 providing that: No court in the Philippines shall have jurisdiction to issue any restraining order, preliminary injunction, or preliminary mandatory injunction in any case, dispute or controversy involving any infrastructure project or a mining, fishery, forest or other natural resource development of the government or any public utility operated by the government including any other public utilities for the transport of the goods or commodities, stevedoring and arrastre contracts, to prohibit any person or persons, entity or government official from proceeding with, or continuing the execution or implementation of any such project, or the operation of such public utility, or pursuing any lawful activity necessary for such execution, implementation or operation. On August 11, 1992 the joint venture filed with the Court of Appeals a petition for certiorari and prohibition with a prayer for a writ of preliminary injunction to set aside the trial court's orders. The petition in CA-G.R. 28632 was dismissed by respondent Court of Appeals in a decision dated October 20, 1992 (Annex A, Petition; pp. 68-75, Rollo) and a subsequent motion for reconsideration was denied in a resolution dated January 20, 1993 (Annex A-1, Petition; p. 77, Rollo). Much reliance is placed on the prohibition embodied in Section 1 of Presidential Decree No. 1818 which forbids any Court in the Philippines, including this Court, from issuing any restraining order, preliminary injunction, or preliminary mandatory injunction in any case, dispute or controversy involving, as in the case at bar, an infrastructure project, to prohibit any person or entity from continuing with the execution or implementation of such project. It is on the basis of such provision that the door is being closed on petitioners' prayer for redress. Such proposition is not well-taken. Against the backdrop of the undisputed facts that (a) respondents terminated petitioners' contract based on slippage of 9.86% and (b) the contributory fault of the government which substantially added to the slippage the primary question that presents itself is whether the termination was proper even if the

slippage had not reached the 15% level mentioned by the law as to justify termination. This is a legal, not a factual question. In consequence, if the termination be adjudged unjustified, are the courts powerless to intervene due to the caveat under the aforequoted Section 1 of Presidential Decree No. 1818? Although we entertain serious doubts in regard to the constitutionality of Presidential Decree No. 1818, we nonetheless feel that said decree finds no application to the case at bench. It will be observed that what Presidential Decree No. 1818 proscribes is the issuance of a writ of injunction to impede or, in the language of the statute: . . . to prohibit any person or persons, entity or government official from proceeding with, or continuing the execution or implementation of any such project, or the operation of such public utility, or pursuing any lawful activity necessary for such execution, implementation or operation. In the case at bench, the net effect of granting the petition is not to stave off implementation of a government project but precisely to say to public respondents that they ought to implement the award and should not thus cancel the contract of petitioners inasmuch as the negative slippage is less than the minimum level specified by Presidential Decree No. 1870. Hence, the proscription under Presidential Decree No. 1818 is inapplicable since we are not restraining implementation of a government project. Verily, we are instructing public respondents to allow petitioners to proceed with the project. In the determination of whether respondents have acted within the bounds of the law when they terminated the contract based on the admitted 9.86% slippage, resort must be had to the very law, Presidential Decree No. 1870 and DPWH Circular No. 102, upon which respondents anchor their authority to terminate the contract. The pertinent provisions of Presidential Decree No. 1870 give the implementing agency (in this instance, the DPWH) authority to terminate the contract whenever the contractor is behind schedule in its contract work and incurs 15% or more negative slippage based on its approved PERT/CPM. Section 1 of Presidential Decree No. 1870 reads thus: 1. Whenever a contractor is behind schedule in the contract work and incurs 15% or more negative slippage based on its approved PERT/CPM, the implementing agency, at the discretion of the Ministry concerned, may undertake by administration the whole or a portion of the unfinished work done by another qualified contractor through negotiated contract at the current valuation prices. Now Circular No. 102, Series of 1988, promulgated to implement Presidential Decree No. 1870, provides four stages of negative slippage with which

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calibrated action, at each stage, has to be undertaken as remedial steps to correct delays in project implementation, as follows: 1) Negative slippage of 5% ("early warning" stage). Contractor is given a warning; 2) Negative slippage of 10% ("ICU" stage). The contractor is given a second warning; 3) Negative slippage of 15% ("make or break" stage). The contractor shall be issued a final warning; 4) Negative slippage beyond 15% ("terminal" stage). The PM/RD/DE shall initiate termination/rescission of the contract and/or take-over of the remaining work by administration or assignment to another contractor/appropriate agency. The discretion, therefore, of the DPWH to terminate or rescind the contract comes into play only in the event the contractor shall have incurred a negative slippage of 15% or more. In the instant case, the negative slippage of petitioners at the time they were served the notice of termination was only 9.86%. Hence, respondents violated the law and committed an illegal act and abused their discretion when they terminated petitioners contract based on negative slippage of only 9.86%. Such wrongful and illegal act is in derogation of petitioners' right not to be deprived of property without due process of law. Petitioners' contract with the DPWH covering the project in question is a proprietary right within the meaning of the Constitution and can only be rescinded strictly in accordance with the governing law, Presidential Decree No. 1870, as implemented by DPWH Circular No. 102. And relative to this axiom, it has been previously emphasized that courts may declare an action or resolution of an administrative authority to be illegal because it violates or fails to comply with some mandatory provision of the law or because it is corrupt, arbitrary, or capricious (Borromeo vs. City of Manila and Rodriguez Lanuza, 62 Phil. 512; 516 [1935]; Annotation on the Power of Judicial Review of Public Bidding and Awards of Government Contracts, 50 SCRA 491; 498 [1973]) The Office of the Solicitor General maintains that under Paragraph 2 of Presidential Decree No. 1870, the DPWH may take over or award a project to another contractor whenever work is not done on schedule, meaning anywhere from zero slippage to 15% slippage. This would lead to hopeless contradiction between Paragraph 1 and Paragraph 2. A law cannot possibly negate in one paragraph what it grants in another. Paragraph 2 can only be interpreted as allowing discretion after the 15% limit in Paragraph 1 is exceeded. It cannot be doubted that in cases of force majeure, revolution, anomalous transactions in the DPWH itself, and other similar reasons, the Department Head may still

extend the contract beyond 15% slippage. Only then may sound discretion come in. Paragraph 3 of Presidential Decree No. 1870 refers to specific causes (a) refusal of the contractor to provide tools, equipment, and workers; (b) subletting or assigning the contract to subcontractors without DPWH permission; and (c) willful violation of covenants and agreements. Not one of the above exists in the case at bench. Respondents cannot, as they allege, rely on the ordinary rules of contract under the Civil Code that if the obligor does not comply with the terms and conditions of the contract, the obligee has the right to ask for rescission with damages. A special law fixes the condition of slippage at 15%. This has to be followed. The law on contracts cannot also penalize the obligor for faults of the obligee. The 15% slippage required by Presidential Decree No. 1870 can be likened to the 15-day reglementary period for appealing that cannot co-exist with a contradictory provision allowing a court, in its discretion, to reduce the period to one or two days. Fifteen days means fifteen days. Fifteen percent slippage does not mean 9.5%. The six (6) instances cited as capable of offsetting or negating the first requirement of 15% slippage would give the DPWH blanket prerogative to terminate a contract at anytime and on the slightest pretext, including those created by DPWH itself as in this case. It is a grant of arbitrary power. It is delegation running riot. The requirement of public bidding might as well be abolished. DPWH officials are compelled by law to accept only the best bid in the award of contract. However, what is the point in conducting a public bidding if, only a short while later, a winning bidder can be disqualified on a one or two percent slippage caused by DPWH itself or a claim that certain tools and equipment have not been provided or a pretext that any term or condition has been violated. The 15% limiting point must be followed. The other provisions come in only if they caused the slippage to go beyond 15%. It is argued that this Court is not a trier of facts. However, neither can this Court ignore facts coming from DPWH itself. Except for general statements and conclusions, there is nothing presented by respondents to show that the logical and convincing assertions of petitioner are not true. According to respondents, petitioners failed to mobilize the minimum equipment for the project and to send a sufficient number of engineers. Respondents state that from Day One, there should have been thirty-four (34) pieces of light and heavy equipment but that petitioners dispatched only fourteen (14) to the job site. Precisely, all these alleged shortcomings of

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petitioners were clearly taken into consideration in arriving at a conclusion that the negative slippage is only 9.50%. Petitioners, of course, deny the allegation of delay. They state that they mobilized surveyors, engineers, and laborers; brought all the necessary equipment to the job site, constructed bunk houses, relocated buildings such as those of the Pagatpatan Elementary School. Petitioners' engineers were old hands of DPWH and familiar with every aspect of the construction. The best evidence that the statements of petitioners are more accurate than those of respondents is that the DPWH Investigating Team went to the jobsite and thereafter filed a lengthy report. It was on the basis of the report that then Undersecretary del Rosario later recommended that the termination order be reconsidered and revoked and that petitioners should be allowed to continue with the construction under the original contract. The Undersecretary did not mention what respondents now allege in their memorandum. Common sense also dictates that 34 pieces of light and heavy equipment cannot all be used simultaneously on Day One. More so, because the right of way was admittedly not secured by DPWH. The machinery would only be idle or get in each other's way. Assuming respondents to be correct that there was a three-month delay in commencing the job, the slippage is still 9.86% inspite of all petitioners' alleged shortcomings. Petitioners claim to have mobilized the men and the materials on time and attribute the delay to DPWH but emphasize that "whatever dates are chosen and whatever causes are adduced by the respondents and given the worst scenario, the slippage does not go beyond 9.85%, still not a basis to cancel the contract" (p. 4, Petitioners' Memorandum dated February 2, 1994). Respondents keep on blaming petitioners for delay but their own DPWH Investigating Team and the second highest official of the DPWH laid the blame on the government engineers and purchasing officials. The right of way problem calls for special mention. The letter of DPWH Undersecretary Romulo del Rosario dated October 8, 1992 recommended the lifting of the cancellation of the contract, because of, among other things, the right-of-way problem. It was ascertained during the hearing conducted by the Court on January 12, 1994 that of the 100-hectare spoiled bank section, only 40 hectares have been acquired. Half of this 40 hectares is broken down into small parcels separate from each other. In the other half, DPWH paid the landowners but took no steps to attend to the tenants who refused and continue to refuse to vacate their farms unless compensated. The dredging on the river shall result in 1,300,000 cubic meters of mud, silt, and debris flowing into the area. Unless a ring embankment is constructed around the entire 100 hectares, the mud and silt

would inundate neighboring areas. Petitioners cannot possibly start dredging until after the 100 hectares are acquired because this would drown or bury the people, work animals, and farms in the still-to-be acquired 60 hectares, not to mention the tenants who refuse to leave their farms in the 40 hectares already purchased until compensation benefits are given to them. The Solicitor General has also failed to explain the purchase of non-essential areas. There was no explanation for the sudden change from a reinforced concrete floodwall to an earthen levee along a six kilometer stretch of the project. The concrete floodwall calls for the purchase of a 10-meter wide strip of land along it. The earthen levee requires a 35-meter wide adjacent strip of land. Anywhere up to 25 meters wide and six kilometers long of expensive urban land had to be purchased to cover up the use of right-of-way funds where it is not essential. There should likewise be an explanation why an extra P71,000,000 in addition to the earlier amount of P51,000,000 had to be appropriated for right of way. What is appalling and seemingly anomalous is the recommendation of respondent officials to offer the project to Hanil Corporation, the third lowest bidder, and whose bid had been previously disqualified for being 41.40% over and above the government estimate for the project of P492,563,998.00. Indeed, the Hanil bid was P696,524,897.96, or higher by P254,666,701.94 as compared to petitioners' bid and contract price of P445,858,196.02. Respondents' wrongful termination of the contract which petitioners agreed to execute, and have in fact executed partially, at the price of P445,858,196.02 and in offering it to Hanil, a disqualified bidder which previously entered with a bid of P696,524,817.96, would result in a financial loss to the government in the amount of no less than P254,666,201.94, Hence, respondents would seem to appear to be entering into a negotiated contract grossly disadvantageous to the government. The intent of the law (P.D. 1870) in allowing the government to take over delayed construction projects with negative slippage of 15% or more is primarily "to save money and to avoid dislocation of the financial projections and/or cash flow of the government", as clearly stated in the 3rd preambulatory clause of said decree, as follows: Whereas, any delay in the completion of the contract in accordance with the approved PERT/CPM and/or contract time as stipulated, will not only dislocate the financial projections and/or the cash flow of the Government on these projects, but also unduly prejudice the public interest sought to be subserved by the timely completion of the infrastructure project.

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The termination of petitioners' contract does not, therefore, subserve public interest. On the other hand, it would result in a huge dislocation of the financial projections and/or cash flow of the Government. On this score, it has been said as a general doctrine that though the law be fair on its face, and impartial in appearance, yet if it is applied and administered by the public authorities charged with their administration and thus representing the government itself, with an evil eye and unequal hand so as practically to make unjust and illegal discrimination, the denial of equal justice is still within the prohibition of the Constitution. (Yick Wo vs. Hopkins, 128 U.S. 356; Ex parte Virginia, 100 U.S. 339; Henderson vs. Mayor, 92 U.S. 259; Chy Lung vs. Freeman, 92 U.S. 175; Ned vs. Delaware, 103 U.S. 320; Soon Hing vs. Crowley, 113 U.S. 703). If the unjust and unlawful acts of respondents are not struck down and respondents are not restrained, the Government stands to lose from Three Hundred Fifty Million (P350 Million) Pesos additional expenditures. Under Presidential Decree No. 1870 when the project is rebidded or awarded through negotiated contract, compensation is at "current valuation price" (Sec. 1, P.D. 1870). Considering the increase in prices of labor and materials, it is a certainty that any new bidder would ask for prices much higher than the already high prices which the losing bidders offered in the March 1, 1991 bidding. Tremendous loss of taxpayers' money thus is inevitable. This Court cannot, therefore, close its eyes to the resultant evil which will be inflicted not only upon petitioners, but also on the Filipino people and the dissipation of taxpayers' money arising from the unjust termination of petitioners' contract and the rebidding to or renegotiation with other parties of the project. Public interest and the stakes of the Government dictate the issuance of the writs of injunction and prohibition restraining respondents from enforcing the order terminating petitioners' contract for the construction of the flood control facilities and land improvement works of the Lower Agusan Development Project, Stage I, Phase 1. It may be emphasized that the law fixing the stages of negative slippage before termination of a contract may be effected and the undisputed loss of P350 million if the termination is pushed through are not the only reasons why this petition should be granted. By the very admissions of respondent DPWH, such as the October 8, 1992 letter of Undersecretary Roberto del Rosario to the Japanese consultant, earlier cited, the main cause of the delay was due to respondent DPWH officials and not to petitioner. A total of P51 million was appropriated and released to acquire rights of way or to buy the lands upon which the flood control project would be constructed. The farmers and landowners refused to move out when

the funds to compensate them were not forthcoming. This was the main cause of the 9.6% slippage and it is not attributable to petitioners. The DPWH Team which investigated the causes of slippage further found that there was an overlapping of duties and responsibilities among the Japanese consultant, the local consultants, and the Field Project Manager, thus sustaining petitioners' claim of unwarranted delays in the approval of work and equipment, not to mention changes of orders which left petitioners wondering what to do and whom to follow. There is ample evidence in the record before us to show that the DPWH was responsible for the main causes of the delay. As stated by petitioners, DPWH, in failing to comply with its obligations seemingly wants the contractors to work in a most unorthodox if not unthinkable manner to justify irregular purchases which should not have been made. In fine, not only was the slippage within legally tolerable limits but the cause of the slippage are attributable to respondent DPWH officials. The inflexible stance of respondents towards the compromise offers of petitioners, even before this Court ordered them to explore such a possibility, but especially after we asked them to do so, convinces the Court all the more that there are irregularities which respondents are sweeping under the rug. The record also shows that even after the stop-work order was given and while petitioners were trying to have it reconsidered, they continued working full force on the project thus minimizing or eliminating the slippage which caused the disputed problems. WHEREFORE, the petition is hereby GRANTED and the decision dated October 20, 1992, as well as the resolution dated January 20, 1993 of the Court of Appeals in CA-G.R. SP No. 28632 are hereby SET ASIDE. SO ORDERED.

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