the United States employed in the U.S.

military bases in the

Philippines. On the same date, July 11, 1960, petitioner sold
his car for $6,600.00 to a certain Willie Johnson, Jr. (Private
first class), United States Marine Corps, Sangley Point,
Cavite, Philippines, as shown by a Bill of Sale . . . executed at
Clark Air Base. On the same date, Pfc. Willie (William)
Johnson, Jr. sold the car to Fred Meneses for P32,000.00 as
evidenced by a deed of sale executed in Manila."5
As a result of the transaction thus made, respondent
Commissioner of Internal Revenue, after deducting the
landed cost of the car as well as the personal exemption to
which petitioner was entitled, fixed as his net taxable income
arising from such transaction the amount of P17,912.34,
rendering him liable for income tax in the sum of P2,979.00.
After paying the sum, he sought a refund from respondent
claiming that he was exempt, but pending action on his
request for refund, he filed the case with the Court of Tax
Appeals seeking recovery of the sum of P2,979.00 plus the
legal rate of interest.
As noted in the appealed decision: "The only issue submitted
for our resolution is whether or not the said income tax of
P2,979.00 was legally collected by respondent for
petitioner."6 After discussing the legal issues raised,
primarily the contention that the Clark Air Base "in legal
contemplation, is a base outside the Philippines" the sale
therefore having taken place on "foreign soil", the Court of
Tax Appeals found nothing objectionable in the assessment
and thereafter the payment of P2,979.00 as income tax and
denied the refund on the same. Hence, this appeal
predicated on a legal theory we cannot accept. Petitioner
cannot make out a case for reversal.
1. Resort to fundamentals is unavoidable to place things in
their proper perspective, petitioner apparently feeling
justified in his refusal to defer to basic postulates of
constitutional and international law, induced no doubt by the
weight he would accord to the observation made by this
Court in the two opinions earlier referred to. To repeat, scant
comfort, if at all is to be derived from such an obiter dictum,
one which is likewise far from reflecting the fact as it is.
Nothing is better settled than that the Philippines being
independent and sovereign, its authority may be exercised
over its entire domain. There is no portion thereof that is
beyond its power. Within its limits, its decrees are supreme,
its commands paramount. Its laws govern therein, and
everyone to whom it applies must submit to its terms. That
is the extent of its jurisdiction, both territorial and personal.
Necessarily, likewise, it has to be exclusive. If it were not
thus, there is a diminution of its sovereignty.
It is to be admitted that any state may, by its consent,
express or implied, submit to a restriction of its sovereign
rights. There may thus be a curtailment of what otherwise is
a power plenary in character. That is the concept of
sovereignty as auto-limitation, which, in the succinct
language of Jellinek, "is the property of a state-force due to
which it has the exclusive capacity of legal selfdetermination and self-restriction."7 A state then, if it
chooses to, may refrain from the exercise of what otherwise
is illimitable competence.
Its laws may as to some persons found within its territory no
longer control. Nor does the matter end there. It is not
precluded from allowing another power to participate in the
exercise of jurisdictional right over certain portions of its
territory. If it does so, it by no means follows that such areas
become impressed with an alien character. They retain their
status as native soil. They are still subject to its authority. Its
jurisdiction may be diminished, but it does not disappear. So

G.R. No. L-26379

December 27, 1969
WILLIAM C. REAGAN, ETC., petitioner,
vs.
COMMISSIONER OF INTERNAL REVENUE, respondent.
Quasha, Asperilla, Blanco, Zafra and Tayag for petitioner.
ffice of the Solicitor General Antonio P. Barredo, Assistant
Solicitor General Felicisimo R. Rosete, Solicitor Lolita O. Gallang and Special Attorney Gamaliel H. Mantolino for
respondent.
FERNANDO, J.:
A question novel in character, the answer to which has farreaching implications, is raised by petitioner William C.
Reagan, at one time a civilian employee of an American
corporation providing technical assistance to the United
States Air Force in the Philippines. He would dispute the
payment of the income tax assessed on him by respondent
Commissioner of Internal Revenue on an amount realized by
him on a sale of his automobile to a member of the United
States Marine Corps, the transaction having taken place at
the Clark Field Air Base at Pampanga. It is his contention,
seriously
and earnestly
expressed,
that
in legal
contemplation the sale was made outside Philippine territory
and therefore beyond our jurisdictional power to tax.
Such a plea, far-fetched and implausible, on its face
betraying no kinship with reality, he would justify by
invoking, mistakenly as will hereafter be more fully shown an
observation to that effect in a 1951 opinion, 1 petitioner
ignoring that such utterance was made purely as a flourish
of rhetoric and by way of emphasizing the decision reached,
that the trading firm as purchaser of army goods must
respond for the sales taxes due from an importer, as the
American armed forces being exempt could not be taxed as
such under the National Internal Revenue Code. 2 Such an
assumption, inspired by the commendable aim to render
unavailing any attempt at tax evasion on the part of such
vendee, found expression anew in a 1962 decision, 3 coupled
with the reminder however, to render the truth
unmistakable, that "the areas covered by the United States
Military Bases are not foreign territories both in the political
and geographical sense."
As thus clarified, it is manifest that such a view amounts at
most to a legal fiction and is moreover obiter. It certainly
cannot control the resolution of the specific question that
confronts us. We declare our stand in an unequivocal
manner. The sale having taken place on what indisputably is
Philippine territory, petitioner's liability for the income tax
due as a result thereof was unavoidable. As the Court of Tax
Appeals reached a similar conclusion, we sustain its decision
now before us on appeal.
In the decision appealed from, the Court of Tax Appeals,
after stating the nature of the case, started the recital of
facts thus: "It appears that petitioner, a citizen of the United
States and an employee of Bendix Radio, Division of Bendix
Aviation Corporation, which provides technical assistance to
the United States Air Force, was assigned at Clark Air Base,
Philippines, on or about July 7, 1959 ... . Nine (9) months
thereafter and before his tour of duty expired, petitioner
imported on April 22, 1960 a tax-free 1960 Cadillac car with
accessories valued at $6,443.83, including freight, insurance
and other charges."4 Then came the following: "On July 11,
1960, more than two (2) months after the 1960 Cadillac car
was imported into the Philippines, petitioner requested the
Base Commander, Clark Air Base, for a permit to sell the car,
which was granted provided that the sale was made to a
member of the United States Armed Forces or a citizen of

2. In the light of the above, the first and crucial error

imputed to the Court of Tax Appeals to the effect that it
should have held that the Clark Air Force is foreign soil or
territory for purposes of income tax legislation is clearly
without support in law. As thus correctly viewed, petitioner's
hope for the reversal of the decision completely fades away.
There is nothing in the Military Bases Agreement that lends
support to such an assertion. It has not become foreign soil
or territory. This country's jurisdictional rights therein,
certainly not excluding the power to tax, have been
preserved. As to certain tax matters, an appropriate
exemption was provided for.
Petitioner could not have been unaware that to maintain the
contrary would be to defy reality and would be an affront to
the law. While his first assigned error is thus worded, he
would seek to impart plausibility to his claim by the
ostensible invocation of the exemption clause in the
Agreement by virtue of which a "national of the United
States serving in or employed in the Philippines in
connection with the construction, maintenance, operation or
defense of the bases and residing in the Philippines only by
reason of such employment" is not to be taxed on his
income unless "derived from Philippine source or sources
other than the United States sources."13 The reliance, to
repeat, is more apparent than real for as noted at the outset
of this opinion, petitioner places more faith not on the
language of the provision on exemption but on a sentiment
given expression in a 1951 opinion of this Court, which
would be made to yield such an unwarranted interpretation
at war with the controlling constitutional and international
law principles. At any rate, even if such a contention were
more adequately pressed and insisted upon, it is on its face
devoid of merit as the source clearly was Philippine.
In Saura Import and Export Co. v. Meer,14 the case above
referred to, this Court affirmed a decision rendered about
seven months previously,15 holding liable as an importer,
within the contemplation of the National Internal Revenue
Code provision, the trading firm that purchased army goods
from a United States government agency in the Philippines.
It is easily understandable why. If it were not thus, tax
evasion would have been facilitated. The United States
forces that brought in such equipment later disposed of as
surplus, when no longer needed for military purposes, was
beyond the reach of our tax statutes.
Justice Tuason, who spoke for the Court, adhered to such a
rationale, quoting extensively from the earlier opinion. He
could have stopped there. He chose not to do so. The
transaction having occurred in 1946, not so long after the
liberation of the Philippines, he proceeded to discuss the role
of the American military contingent in the Philippines as a
belligerent occupant. In the course of such a dissertion,
drawing on his well-known gift for rhetoric and cognizant
that he was making an as if statement, he did say: "While in
army bases or installations within the Philippines those
goods were in contemplation of law on foreign soil."
It is thus evident that the first, and thereafter the controlling,
decision as to the liability for sales taxes as an importer by
the purchaser, could have been reached without any need
for such expression as that given utterance by Justice
Tuason. Its value then as an authoritative doctrine cannot be
as much as petitioner would mistakenly attach to it. It was
clearly obiter not being necessary for the resolution of the
issue before this Court.16 It was an opinion "uttered by the
way."17 It could not then be controlling on the question
before us now, the liability of the petitioner for income tax

it is with the bases under lease to the American armed

forces by virtue of the military bases agreement of 1947.
They are not and cannot be foreign territory.
Decisions coming from petitioner's native land, penned by
jurists of repute, speak to that effect with impressive
unanimity. We start with the citation from Chief Justice
Marshall, announced in the leading case of Schooner
Exchange v. M'Faddon,8 an 1812 decision: "The jurisdiction
of the nation within its own territory is necessarily exclusive
and absolute. It is susceptible of no limitation not imposed
by itself. Any restriction upon it, deriving validity from an
external source, would imply a diminution of its sovereignty
to the extent of the restriction, and an investment of that
sovereignty to the same extent in that power which could
impose such restriction." After which came this paragraph:
"All exceptions, therefore, to the full and complete power of
a nation within its own territories, must be traced up to the
consent of the nation itself. They can flow from no other
legitimate source."
Chief Justice Taney, in an 1857 decision, 9 affirmed the
fundamental principle of everyone within the territorial
domain of a state being subject to its commands: "For
undoubtedly every person who is found within the limits of a
government, whether the temporary purposes or as a
resident, is bound by its laws." It is no exaggeration then for
Justice Brewer to stress that the United States government
"is one having jurisdiction over every foot of soil within its
territory, and acting directly upon each [individual found
therein]; . . ."10
Not too long ago, there was a reiteration of such a view, this
time from the pen of Justice Van Devanter. Thus: "It now is
settled in the United States and recognized elsewhere that
the territory subject to its jurisdiction includes the land areas
under its dominion and control the ports, harbors, bays, and
other in closed arms of the sea along its coast, and a
marginal belt of the sea extending from the coast line
outward a marine league, or 3 geographic miles." 11 He
could cite moreover, in addition to many American decisions,
such eminent treatise-writers as Kent, Moore, Hyde, Wilson,
Westlake, Wheaton and Oppenheim.
As a matter of fact, the eminent commentator Hyde in his
three-volume work on International Law, as interpreted and
applied by the United States, made clear that not even the
embassy premises of a foreign power are to be considered
outside the territorial domain of the host state. Thus: "The
ground occupied by an embassy is not in fact the territory of
the foreign State to which the premises belong through
possession or ownership. The lawfulness or unlawfulness of
acts there committed is determined by the territorial
sovereign. If an attache commits an offense within the
precincts of an embassy, his immunity from prosecution is
not because he has not violated the local law, but rather for
the reason that the individual is exempt from prosecution. If
a person not so exempt, or whose immunity is waived,
similarly commits a crime therein, the territorial sovereign, if
it secures custody of the offender, may subject him to
prosecution, even though its criminal code normally does not
contemplate the punishment of one who commits an offense
outside of the national domain. It is not believed, therefore,
that an ambassador himself possesses the right to exercise
jurisdiction, contrary to the will of the State of his sojourn,
even within his embassy with respect to acts there
committed. Nor is there apparent at the present time any
tendency on the part of States to acquiesce in his exercise of
it."12

Frankfurter, to be guilty of succumbing to the vice of

literalness. To so conclude is, whether by design or
inadvertence, to misread it. It certainly is not susceptible of
the mischievous consequences now sought to be fastened
on it by petitioner.
That it would be fraught with such peril to the enforcement
of our tax statutes on the military bases under lease to the
American armed forces could not have been within the
contemplation of Justice Tuason. To so attribute such a
bizarre consequence is to be guilty of a grave disservice to
the memory of a great jurist. For his real and genuine
sentiment on the matter in consonance with the imperative
mandate of controlling constitutional and international law
concepts was categorically set forth by him, not as an obiter
but as the rationale of the decision, in People v. Acierto24
thus: "By the [Military Bases] Agreement, it should be noted,
the Philippine Government merely consents that the United
States exercise jurisdiction in certain cases. The consent was
given purely as a matter of comity, courtesy, or expediency
over the bases as part of the Philippine territory or divested
itself completely of jurisdiction over offenses committed
therein."
Nor did he stop there. He did stress further the full extent of
our territorial jurisdiction in words that do not admit of
doubt. Thus: "This provision is not and can not on principle
or authority be construed as a limitation upon the rights of
the Philippine Government. If anything, it is an emphatic
recognition and reaffirmation of Philippine sovereignty over
the bases and of the truth that all jurisdictional rights
granted to the United States and not exercised by the latter
are reserved by the Philippines for itself."25
It is in the same spirit that we approach the specific question
confronting us in this litigation. We hold, as announced at
the outset, that petitioner was liable for the income tax
arising from a sale of his automobile in the Clark Field Air
Base, which clearly is and cannot otherwise be other than,
within our territorial jurisdiction to tax.
4. With the mist thus lifted from the situation as it truly
presents itself, there is nothing that stands in the way of an
affirmance of the Court of Tax Appeals decision. No useful
purpose would be served by discussing the other assigned
errors, petitioner himself being fully aware that if the Clark
Air Force Base is to be considered, as it ought to be and as it
is, Philippine soil or territory, his claim for exemption from
the income tax due was distinguished only by its futility.
There is further satisfaction in finding ourselves unable to
indulge petitioner in his plea for reversal. We thus manifest
fealty to a pronouncement made time and time again that
the law does not look with favor on tax exemptions and that
he who would seek to be thus privileged must justify it by
words too plain to be mistaken and too categorical to be
misinterpreted.26 Petitioner had not done so. Petitioner
cannot do so.
WHEREFORE, the decision of the Court of Tax Appeals of May
12, 1966 denying the refund of P2,979.00 as the income tax
paid by petitioner is affirmed. With costs against petitioner.
Concepcion, C.J., Dizon, Makalintal, Zaldivar, Sanchez, Castro
and Teehankee, JJ., concur.
Reyes, J.B.L., J., concurs in the result.
Barredo, J., took no part.

LEOPOLDO T. BACANI and MATEO A. MATOTO,

Plaintiffs-Appellees, vs. NATIONAL COCONUT
CORPORATION, ET AL., Defendants, NATIONAL

which, as announced at the opening of this opinion, is

squarely raised for the first time.18
On this point, Chief Justice Marshall could again be listened
to with profit. Thus: "It is a maxim, not to be disregarded,
that general expressions, in every opinion, are to be taken in
connection with the case in which those expressions are
used. If they go beyond the case, they may be respected,
but ought not to control the judgment in a subsequent suit
when the very point is presented for decision."19
Nor did the fact that such utterance of Justice Tuason was
cited in Co Po v. Collector of Internal Revenue,20 a 1962
decision relied upon by petitioner, put a different complexion
on the matter. Again, it was by way of pure embellishment,
there being no need to repeat it, to reach the conclusion that
it was the purchaser of army goods, this time from military
bases, that must respond for the advance sales taxes as
importer. Again, the purpose that animated the reiteration of
such a view was clearly to emphasize that through the
employment of such a fiction, tax evasion is precluded. What
is more, how far divorced from the truth was such statement
was emphasized by Justice Barrera, who penned the Co Po
opinion, thus: "It is true that the areas covered by the United
States Military Bases are not foreign territories both in the
political and geographical sense."21
Justice Tuason moreover made explicit that rather than
corresponding with reality, what was said by him was in the
way of a legal fiction. Note his stress on "in contemplation of
law." To lend further support to a conclusion already
announced, being at that a confirmation of what had been
arrived at in the earlier case, distinguished by its sound
appreciation of the issue then before this Court and to
preclude any tax evasion, an observation certainly not to be
taken literally was thus given utterance.
This is not to say that it should have been ignored altogether
afterwards. It could be utilized again, as it undoubtedly was,
especially so for the purpose intended, namely to stigmatize
as without support in law any attempt on the part of a
taxpayer to escape an obligation incumbent upon him. So it
was quoted with that end in view in the Co Po case. It
certainly does not justify any effort to render futile the
collection of a tax legally due, as here. That was farthest
from the thought of Justice Tuason.
What is more, the statement on its face is, to repeat, a legal
fiction. This is not to discount the uses of a fictio juris in the
science of the law. It was Cardozo who pointed out its value
as a device "to advance the ends of justice" although at
times it could be "clumsy" and even "offensive". 22 Certainly,
then, while far from objectionable as thus enunciated, this
observation of Justice Tuason could be misused or
misconstrued in a clumsy manner to reach an offensive
result. To repeat, properly used, a legal fiction could be relied
upon by the law, as Frankfurter noted, in the pursuit of
legitimate ends.23 Petitioner then would be well-advised to
take to heart such counsel of care and circumspection before
invoking not a legal fiction that would avoid a mockery of the
law by avoiding tax evasion but what clearly is a
misinterpretation thereof, leading to results that would have
shocked its originator.
The conclusion is thus irresistible that the crucial error
assigned, the only one that calls for discussion to the effect
that for income tax purposes the Clark Air Force Base is
outside Philippine territory, is utterly without merit. So we
have said earlier.
3. To impute then to the statement of Justice Tuason the
meaning that petitioner would fasten on it is, to paraphrase

Republic
of
the
Philippines
as
follows:chanroblesvirtuallawlibrary
The Government of the Philippine Islands is a term which
refers to the corporate governmental entity through which
the functions of government are exercised throughout the
Philippine Islands, including, save as the contrary appears
from the context, the various arms through which political
authority is made effective in said Islands, whether
pertaining to the central Government or to the provincial or
municipal branches or other form of local government.
The question now to be determined is whether the National
Coconut Corporation may be considered as included in the
term Government of the Republic of the Philippines for the
purposes of the exemption of the legal fees provided for in
Rule 130 of the Rules of Court.
As may be noted, the term Government of the Republic of
the Philippines refers to a government entity through which
the functions of government are exercised, including the
various arms through which political authority is made
effective in the Philippines, whether pertaining to the central
government or to the provincial or municipal branches or
other form of local government. This requires a little
digression on the nature and functions of our government as
instituted in our Constitution.
To begin with, we state that the term Government may be
defined as that institution or aggregate of institutions by
which an independent society makes and carries out those
rules of action which are necessary to enable men to live in
a social state, or which are imposed upon the people forming
that society by those who possess the power or authority of
prescribing them (U.S. vs. Dorr, 2 Phil., 332). This institution,
when referring to the national government, has reference to
what our Constitution has established composed of three
great departments, the legislative, executive, and the
judicial, through which the powers and functions of
government
are
exercised.
These
functions
are
twofold:chanroblesvirtuallawlibrary
constitute
and
ministrant. The former are those which constitute the very
bonds of society and are compulsory in nature; chan
roblesvirtualawlibrarythe
latter
are
those
that
are
undertaken only by way of advancing the general interests
of society, and are merely optional. President Wilson
enumerates
the
constituent
functions
as
follows:chanroblesvirtuallawlibrary
(1) The keeping of order and providing for the protection of
persons and property from violence and robbery.
(2) The fixing of the legal relations between man and wife
and between parents and children.
(3) The regulation of the holding, transmission, and
interchange of property, and the determination of its
liabilities for debt or for crime.
(4)
The determination of contract rights between
individuals.
(5) The definition and punishment of crime.
(6) The administration of justice in civil cases.
(7) The determination of the political duties, privileges, and
relations of citizens.
(8)
Dealings
of
the
state
with
foreign
powers:chanroblesvirtuallawlibrary the preservation of the
state from external danger or encroachment and the
advancement of its international interests. (Malcolm, The
Government of the Philippine Islands, p. 19.)

COCONUT CORPORATION and BOARD OF

LIQUIDATORS, Defendants-Appellants.
DECISION
BAUTISTA ANGELO, J.:
Plaintiffs herein are court stenographers assigned in Branch
VI of the Court of First Instance of Manila. During the
pendency of Civil Case No. 2293 of said court, entitled
Francisco Sycip vs. National Coconut Corporation, Assistant
Corporate Counsel Federico Alikpala, counsel for Defendant,
requested said stenographers for copies of the transcript of
the stenographic notes taken by them during the hearing.
Plaintiffs complied with the request by delivering to Counsel
Alikpala the needed transcript containing 714 pages and
thereafter submitted to him their bills for the payment of
their fees. The National Coconut Corporation paid the
amount of P564 to Leopoldo T. Bacani and P150 to Mateo A.
Matoto for said transcript at the rate of P1 per page.
Upon inspecting the books of this corporation, the Auditor
General disallowed the payment of these fees and sought
the recovery of the amounts paid. On January 19, 1953, the
Auditor General required the Plaintiffs to reimburse said
amounts on the strength of a circular of the Department of
Justice wherein the opinion was expressed that the National
Coconut Corporation, being a government entity, was
exempt from the payment of the fees in question. On
February 6, 1954, the Auditor General issued an order
directing the Cashier of the Department of Justice to deduct
from the salary of Leopoldo T. Bacani the amount of P25
every payday and from the salary of Mateo A. Matoto the
amount of P10 every payday beginning March 30, 1954. To
prevent deduction of these fees from their salaries and
secure a judicial ruling that the National Coconut Corporation
is not a government entity within the purview of section 16,
Rule 130 of the Rules of Court, this action was instituted in
the Court of First Instance of Manila.
Defendants set up as a defense that the National Coconut
Corporation is a government entity within the purview of
section 2 of the Revised Administrative Code of 1917 and,
hence, it is exempt from paying the stenographers fees
under Rule 130 of the Rules of Court. After trial, the court
found for the Plaintiffs declaring (1) that Defendant National
Coconut Corporation is not a government entity within the
purview of section 16, Rule 130 of the Rules of Court; chan
roblesvirtualawlibrary(2) that the payments already made by
said Defendant to Plaintiffs herein and received by the latter
from the former in the total amount of P714, for copies of
the stenographic transcripts in question, are valid, just and
legal; chan roblesvirtualawlibraryand (3) that Plaintiffs are
under no obligation whatsoever to make a refund of these
payments already received by them. This is an appeal from
said decision.
Under section 16, Rule 130 of the Rules of Court, the
Government of the Philippines is exempt from paying the
legal fees provided for therein, and among these fees are
those which stenographers may charge for the transcript of
notes taken by them that may be requested by any
interested person (section 8). The fees in question are for
the transcript of notes taken during the hearing of a case in
which the National Coconut Corporation is interested, and
the transcript was requested by its assistant corporate
counsel for the use of said corporation.
On the other hand, section 2 of the Revised Administrative
Code defines the scope of the term Government of the

exercised as an attribute of sovereignty, and in this are

included those arms through which political authority is
made effective whether they be provincial, municipal or
other form of local government. These are what we call
municipal corporations. They do not include government
entities which are given a corporate personality separate
and distinct from the government and which are governed
by the Corporation Law. Their powers, duties and liabilities
have to be determined in the light of that law and of their
corporate charters. They do not therefore come within the
exemption clause prescribed in section 16, Rule 130 of our
Rules of Court.
Public corporations are those formed or organized for the
government of a portion of the State. (Section 3, Republic
Act No. 1459, Corporation Law).
The generally accepted definition of a municipal
corporation would only include organized cities and towns,
and like organizations, with political and legislative powers
for the local, civil government and police regulations of the
inhabitants of the particular district included in the
boundaries of the corporation. Heller vs. Stremmel, 52 Mo.
309, 312.
In its more general sense the phrase municipal corporation
may include both towns and counties, and other public
corporations created by government for political purposes. In
its more common and limited signification, it embraces only
incorporated villages, towns and cities. Dunn vs. Court of
County Revenues, 85 Ala. 144, 146, 4 So. 661. (McQuillin,
Municipal Corporations, 2nd ed., Vol. 1, p. 385.)
We may, therefore, define a municipal corporation in its
historical and strict sense to be the incorporation, by the
authority of the government, of the inhabitants of a
particular place or district, and authorizing them in their
corporate capacity to exercise subordinate specified powers
of legislation and regulation with respect to their local and
internal concerns. This power of local government is the
distinctive purpose and the distinguishing feature of a
municipal
corporation
proper.
(Dillon,
Municipal
Corporations, 5th ed., Vol. I, p. 59.)
It is true that under section 8, Rule 130, stenographers may
only charge as fees P0.30 for each page of transcript of not
less than 200 words before the appeal is taken and P0.15 for
each page after the filing of the appeal, but in this case the
National Coconut Corporation has agreed and in fact has
paid P1.00 per page for the services rendered by the
Plaintiffs and has not raised any objection to the amount
paid until its propriety was disputed by the Auditor General.
The payment of the fees in question became therefore
contractual and as such is valid even if it goes beyond the
limit prescribed in section 8, Rule 130 of the Rules of Court.
As regards the question of procedure raised by Appellants,
suffice it to say that the same is insubstantial, considering
that this case refers not to a money claim disapproved by
the Auditor General but to an action of prohibition the
purpose of which is to restrain the officials concerned from
deducting from Plaintiffs salaries the amount paid to them
as stenographers fees. This case does not come under
section 1, Rule 45 of the Rules of Court relative to appeals
from a decision of the Auditor General.
Wherefore, the decision appealed from is affirmed, without
pronouncement as to costs.

The
most
important
of
the
ministrant
functions
are:chanroblesvirtuallawlibrary
public
works,
public
education, public charity, health and safety regulations, and
regulations of trade and industry. The principles deter mining
whether or not a government shall exercise certain of these
optional functions are:chanroblesvirtuallawlibrary (1) that a
government should do for the public welfare those things
which private capital would not naturally undertake and (2)
that a government should do these things which by its very
nature it is better equipped to administer for the public
welfare than is any private individual or group of individuals.
(Malcolm, The Government of the Philippine Islands, pp. 1920.)
From the above we may infer that, strictly speaking, there
are functions which our government is required to exercise
to promote its objectives as expressed in our Constitution
and which are exercised by it as an attribute of sovereignty,
and those which it may exercise to promote merely the
welfare, progress and prosperity of the people. To this latter
class belongs the organization of those corporations owned
or controlled by the government to promote certain aspects
of the economic life of our people such as the National
Coconut Corporation. These are what we call governmentowned or controlled corporations which may take on the
form of a private enterprise or one organized with powers
and formal characteristics of a private corporations under
the Corporation Law.
The question that now arises is:chanroblesvirtuallawlibrary
Does the fact that these corporation perform certain
functions of government make them a part of the
Government of the Philippines?
The answer is simple:chanroblesvirtuallawlibrary they do not
acquire that status for the simple reason that they do not
come under the classification of municipal or public
corporation. Take for instance the National Coconut
Corporation. While it was organized with the purpose of
adjusting the coconut industry to a position independent of
trade preferences in the United States and of providing
Facilities for the better curing of copra products and the
proper utilization of coconut by-products, a function which
our government has chosen to exercise to promote the
coconut industry, however, it was given a corporate power
separate and distinct from our government, for it was made
subject to the provisions of our Corporation Law in so far as
its corporate existence and the powers that it may exercise
are concerned (sections 2 and 4, Commonwealth Act No.
518). It may sue and be sued in the same manner as any
other private corporations, and in this sense it is an entity
different from our government. As this Court has aptly said,
The mere fact that the Government happens to be a
majority stockholder does not make it a public corporation
(National Coal Co. vs. Collector of Internal Revenue, 46 Phil.,
586-587). By becoming a stockholder in the National Coal
Company, the Government divested itself of its sovereign
character so far as respects the transactions of the
corporation cralaw . Unlike the Government, the corporation
may be sued without its consent, and is subject to taxation.
Yet the National Coal Company remains an agency or
instrumentality of government. (Government of the
Philippine Islands vs. Springer, 50 Phil., 288.)
To recapitulate, we may mention that the term Government
of the Republic of the Philippines used in section 2 of the
Revised Administrative Code refers only to that government
entity through which the functions of the government are

2. To comply with and implement the provision of the

collective bargaining contract executed on September 4,
1961, including the payment of P30.00 a month living
allowance;
3. To bargain in good faith and expeditiously with the
herein complainants.
The ACCFA moved to reconsider but was turned down in a
resolution dated April 25, 1963 of the CIR en banc.
Thereupon it brought this appeal by certiorari.
The ACCFA raises the following issues in its petition, to wit:
1. Whether or not the respondent court has jurisdiction
over this case, which in turn depends on whether or not
ACCFA exercised governmental or proprietary functions.
2. Whether or not the collective bargaining agreement
between the petitioner and the respondent union is
valid; if valid, whether or not it has already lapsed; and if
not, whether or not its (sic) fringe benefits are already
enforceable.
3. Whether or not there is a legal and/or factual basis for
the finding of the respondent court that the petitioner
had committed acts of unfair labor practice.
4. Whether or not it is within the competence of the
court to enforce the collective bargaining agreement
between the petitioner and the respondent unions, the
same having already expired.
G.R. No. L-23605
During the pendency of the above mentioned case (G.R. No.
L-21484), specifically on August 8, 1963, the President of the
Philippines signed into law the Agricultural Land Reform
Code (Republic Act No. 3844), which among other things
required the reorganization of the administrative machinery
of the Agricultural Credit and Cooperative Financing
Administration (ACCFA) and changed its name to Agricultural
Credit Administration (ACA). On March 17, 1964 the ACCFA
Supervisors' Association and the ACCFA Workers' Association
filed a petition for certification election with the Court of
Industrial Relations (Case No. 1327-MC) praying that they be
certified as the exclusive bargaining agents for the
supervisors and rank-and-file employees, respectively, in the
ACA. The trial Court in its order dated March 30, 1964
directed the Manager or Officer-in-Charge of the ACA to allow
the posting of said order "for the information of all
employees and workers thereof," and to answer the petition.
In compliance therewith, the ACA, while admitting most of
the allegations in the petition, denied that the Unions
represented the majority of the supervisors and rank-and-file
workers, respectively, in the ACA. It further alleged that the
petition was premature, that the ACA was not the proper
party to be notified and to answer the petition, and that the
employees and supervisors could not lawfully become
members of the Unions, nor be represented by them.
However, in a joint manifestation of the Unions dated May 7,
1964, with the conformity of the ACA Administrator and of
the Agrarian Counsel in his capacity as such and as counsel
for the National Land Reform Council, it was agreed "that the
union petitioners in this case represent the majority of the
employees in their respective bargaining units" and that only
the legal issues raised would be submitted for the resolution
of the trial Court.
Finding the remaining grounds for ACA's opposition to the
petition to be without merit, the trial Court in its order dated
May 21, 1964 certified "the ACCFA Workers' Association and
the ACCFA Supervisors' Association as the sole and exclusive
bargaining representatives of the rank-and-file employees
and supervisors, respectively, of the Agricultural Credit
Administration." Said order was affirmed by the CIR en banc
in its resolution dated August 24, 1964.

THE AGRICULTURAL CREDIT and COOPERATIVE

FINANCING ADMINISTRATION (ACCFA), petitioner,
vs.
ACCFA SUPERVISORS' ASSOCIATION, ACCFA WORKERS'
ASSOCIATION, and THE COURT OF INDUSTRIAL
RELATIONS, respondents.
Deogracias E. Lerma and Esmeraldo U. Guloy for petitioner
Agricultural Credit and Cooperative Financing
Administration.
Office of the Agrarian Counsel, Department of Justice for
petitioner Agricultural Credit Administration
J. C. Espinas and Associates for respendents Confederation
of Unions in Government Corporations Offices, et al. Mariano
B. Tuason for respondent Court of Industrial Relations.
MAKALINTAL, J.:
These are two separate appeals by certiorari from the
decision dated March 25, 1963 (G.R. No. L-21484) and the
order dated May 21, 1964 (G.R. No. L-23605) as affirmed by
the resolutions en banc, of the Court of Industrial Relations,
in Cases Nos. 3450-ULP and 1327-MC, respectively. The
parties, except the Confederation of Unions in Government
Corporations and Offices (CUGCO), being practically the
same and the principal issues involved related, only one
decision is now rendered in these two cases.
The Agricultural Credit and Cooperative Financing
Administration (ACCFA) was a government agency created
under Republic Act No. 821, as amended. Its administrative
machinery was reorganized and its name changed to
Agricultural Credit Administration (ACA) under the Land
Reform Code (Republic Act No. 3844). On the other hand, the
ACCFA Supervisors' Association (ASA) and the ACCFA
Workers' Association (AWA), hereinafter referred to as the
Unions, are labor organizations composed of the supervisors
and the rank-and-file employees, respectively, in the ACCFA
(now ACA).
G.R. No. L-21484
On September 4, 1961 a collective bargaining agreement,
which was to be effective for a period of one (1) year from
July 1, 1961, was entered into by and between the Unions
and the ACCFA. A few months thereafter, the Unions started
protesting
against
alleged
violations
and
nonimplementation of said agreement. Finally, on October 25,
1962 the Unions declared a strike, which was ended when
the strikers voluntarily returned to work on November 26,
1962.
On October 30, 1962 the Unions, together with its mother
union, the Confederation of Unions in Government
Corporations and Offices (CUGCO), filed a complaint with the
Court of Industrial Relations against the ACCFA (Case No.
3450-ULP) for having allegedly committed acts of unfair
labor practice, namely: violation of the collective bargaining
agreement in order to discourage the members of the
Unions in the exercise of their right to self-organization,
discrimination against said members in the matter of
promotions, and refusal to bargain. The ACCFA denied the
charges and interposed as affirmative and special defenses
lack of jurisdiction of the CIR over the case, illegality of the
bargaining contract, expiration of said contract and lack of
approval by the office of the President of the fringe benefits
provided for therein. Brushing aside the foregoing defenses,
the CIR in its decision dated March 25, 1963 ordered the
ACCFA:
1. To cease and desist from committing further acts
tending to discourage the members of complainant
unions in the exercise of their right to self-organization;

audit their operations, records and books of account and to

issue subpoena and subpoena duces tecum to compel the
attendance of witnesses and the production of books,
documents and records in the conduct of such audit or of
any inquiry into their affairs. Any person who, without lawful
cause, fails to obey such subpoena or subpoena duces
tecum shall, upon application of the head of Agricultural
Credit Administration with the proper court, be liable to
punishment for contempt in the manner provided by law and
if he is an officer of the Association, to suspension or
removal from office.
SEC. 114. Prosecution of officials. The Agricultural Credit
Administration, through the appropriate provincial or city
fiscal, shall have the power to file and prosecute any and all
actions which it may have against any and all officials or
employees
of
farmers'
cooperatives
arising
from
misfeasance or malfeasance in office.
SEC. 115. Free Notarial Service. Any justice of the peace,
in his capacity as notary ex-officio, shall render service free
of charge to any person applying for a loan under this Code
either in administering the oath or in the acknowledgment of
instruments relating to such loan.
SEC. 116. Free Registration of Deeds. Any register of
deeds shall accept for registration, free of charge any
instrument relative to a loan made under this Code.
SEC. 117. Writing-off Unsecured and Outstanding Loans.
Subject to the approval of the President upon
recommendation of the Auditor General, the Agricultural
Credit Administration may write-off from its books,
unsecured and outstanding loans and accounts receivable
which may become uncollectible by reason of the death or
disappearance of the debtor, should there be no visible
means of collecting the same in the foreseeable future, or
where the debtor has been verified to have no income or
property whatsoever with which to effect payment. In all
cases, the writing-off shall be after five years from the date
the debtor defaults.
SEC. 118. Exemption from Duties, Taxes and Levies. The
Agricultural Credit Administration is hereby exempted from
the payment of all duties, taxes, levies, and fees, including
docket and sheriff's fees, of whatever nature or kind, in the
performance of its functions and in the exercise of its powers
hereunder.
The power to audit the operations of farmers' cooperatives
and otherwise inquire into their affairs, as given by Section
113, is in the nature of the visitorial power of the sovereign,
which only a government agency specially delegated to do
so by the Congress may legally exercise.
On March 19, 1964 Executive Order No. 75 was promulgated.
It is entitled: "Rendering in Full Force and Effect the Plan of
Reorganization Proposed by the Special Committee on
Reorganization of Agencies for Land Reform for the
Administrative Machinery of the Agricultural Land Reform
Code," and contains the following pertinent provisions:
Section 3. The Land Reform Project Administration 2 shall be
considered a single organization and the personnel
complement of the member agencies including the legal
officers of the Office of the Agrarian Counsel which shall
provide legal services to the LRPA shall be regarded as one
personnel pool from which the requirements of the
operations shall be drawn and subject only to the civil
service laws, rules and regulations, persons from one agency
may be freely assigned to positions in another agency within
the LRPA when the interest of the service so demands.

On October 2, 1964 the ACA filed in this Court a petition for

certiorari with urgent motion to stay the CIR order of May 21,
1964. In a resolution dated October 6, 1964, this Court
dismissed the petition for "lack of adequate allegations," but
the dismissal was later reconsidered when the ACA complied
with the formal requirement stated in said resolution. As
prayed for, this Court ordered the CIR to stay the execution
of its order of May 21, 1964.
In this appeal, the ACA in effect challenges the jurisdiction of
the CIR to entertain the petition of the Unions for
certification election on the ground that it (ACA) is engaged
in governmental functions. The Unions join the issue on this
single point, contending that the ACA forms proprietary
functions.
Under Section 3 of the Agricultural Land Reform Code the
ACA was established, among other governmental agencies, 1
to extend credit and similar assistance to agriculture, in
pursuance of the policy enunciated in Section 2 as follows:
SEC. 2. Declaration of Policy. It is the policy of the State:
(1) To establish owner-cultivatorships and the economic
family-size farm as the basis of Philippine agriculture and, as
a consequence, divert landlord capital in agriculture to
industrial development;
(2) To achieve a dignified existence for the small farmers
free from pernicious institutional restraints and practices;
(3) To create a truly viable social and economic structure in
agriculture conducive to greater productivity and higher
farm incomes;
(4) To apply all labor laws equally and without discrimination
to both industrial and agricultural wage earners;
(5) To provide a more vigorous and systematic land
resettlement program and public land distribution; and
(6) To make the small farmers more independent, self-reliant
and responsible citizens, and a source of genuine strength in
our democratic society.
The implementation of the policy thus enunciated, insofar as
the role of the ACA therein is concerned, is spelled out in
Sections 110 to 118, inclusive, of the Land Reform Code.
Section 110 provides that "the administrative machinery of
the ACCFA shall be reorganized to enable it to align its
activities with the requirements and objective of this Code
and shall be known as the
Agricultural
Credit
Administration." Under Section 112 the sum of P150,000,000
was appropriated out of national funds to finance the
additional credit functions of the ACA as a result of the land
reform program laid down in the Code. Section 103 grants
the ACA the privilege of rediscounting with the Central Bank,
the Development Bank of the Philippines and the Philippine
National Bank. Section 105 directs the loaning activities of
the ACA "to stimulate the development of farmers'
cooperatives," including those "relating to the production
and marketing of agricultural products and those formed to
manage and/or own, on a cooperative basis, services and
facilities, such as irrigation and transport systems,
established to support production and/or marketing of
agricultural products." Section 106 deals with the extension
by ACA of credit to small farmers in order to stimulate
agricultural production. Sections 107 to 112 lay down certain
guidelines to be followed in connection with the granting of
loans, such as security, interest and supervision of credit.
Sections 113 to 118, inclusive, invest the ACA with certain
rights and powers not accorded to non-governmental
entities, thus:
SEC. 113. Auditing of Operations. For the effective
supervision of farmers' cooperatives, the head of the
Agricultural Credit Administration shall have the power to

way of obtaining credit, not depending on a paternalistic

system but one which is business-like that is to say, a
government office, which on the barrio level will provide
them that credit directly . . . . (p. 40, Senate Journal No. 7,
July 3, 1963) (emphasis supplied).
The considerations set forth above militate quite strongly
against the recognition of collective bargaining powers in the
respondent Unions within the context of Republic Act No.
875, and hence against the grant of their basic petition for
certification election as proper bargaining units. The ACA is a
government office or agency engaged in governmental, not
proprietary functions. These functions may not be strictly
what President Wilson described as "constituent" (as
distinguished from "ministrant"),4 such as those relating to
the maintenance of peace and the prevention of crime,
those regulating property and property rights, those relating
to the administration of justice and the determination of
political duties of citizens, and those relating to national
defense and foreign relations. Under this traditional
classification, such constituent functions are exercised by
the State as attributes of sovereignty, and not merely to
promote the welfare, progress and prosperity of the people
these letter functions being ministrant he exercise of
which is optional on the part of the government.
The growing complexities of modern society, however, have
rendered this traditional classification of the functions of
government quite unrealistic, not to say obsolete. The areas
which used to be left to private enterprise and initiative and
which the government was called upon to enter optionally,
and only "because it was better equipped to administer for
the public welfare than is any private individual or group of
individuals,"5 continue to lose their well-defined boundaries
and to be absorbed within activities that the government
must undertake in its sovereign capacity if it is to meet the
increasing social challenges of the times. Here as almost
everywhere else the tendency is undoubtedly towards a
greater socialization of economic forces. Here of course this
development was envisioned, indeed adopted as a national
policy, by the Constitution itself in its declaration of principle
concerning the promotion of social justice.
It was in furtherance of such policy that the Land Reform
Code was enacted and the various agencies, the ACA among
them, established to carry out its purposes. There can be no
dispute as to the fact that the land reform program
contemplated in the said Code is beyond the capabilities of
any private enterprise to translate into reality. It is a purely
governmental function, no less than, say, the establishment
and maintenance of public schools and public hospitals. And
when, aside from the governmental objectives of the ACA,
geared as they are to the implementation of the land reform
program of the State, the law itself declares that the ACA is a
government office, with the formulation of policies, plans
and programs vested no longer in a Board of Governors, as
in the case of the ACCFA, but in the National Land Reform
Council, itself a government instrumentality; and that its
personnel are subject to Civil Service laws and to rules of
standardization with respect to positions and salaries, any
vestige of doubt as to the governmental character of its
functions disappears.
In view of the foregoing premises, we hold that the
respondent Unions are not entitled to the certification
election sought in the Court below. Such certification is
admittedly for purposes of bargaining in behalf of the
employees with respect to terms and conditions of
employment, including the right to strike as a coercive
economic weapon, as in fact the said unions did strike in

Section 4. The Land Reform Project Administration shall be

considered as one organization with respect to the
standardization of job descriptions position classification and
wage and salary structures to the end that positions
involving the same or equivalent qualifications and equal
responsibilities and effort shall have the same remuneration.
Section 5. The Civil Service laws, rules and regulations with
respect to promotions, particularly in the consideration of
person next in rank, shall be made applicable to the Land
Reform Project Administration as a single agency so that
qualified individuals in one member agency must be
considered in considering promotion to higher positions in
another member agency.
The implementation of the land reform program of the
government according to Republic Act No. 3844 is most
certainly a governmental, not a proprietary, function; and for
that purpose Executive Order No. 75 has placed the ACA
under the Land Reform Project Administration together with
the other member agencies, the personnel complement of
all of which are placed in one single pool and made available
for assignment from one agency to another, subject only to
Civil Service laws, rules and regulations, position
classification and wage structures.
The appointing authority in respect of the officials and
employees of the ACA is the President of the Philippines, as
stated in a 1st indorsement by his office to the Chairman of
the National Reform Council dated May 22, 1964, as follows:
Appointments of officials and employees of the National
Land Reform Council and its agencies may be made only by
the President, pursuant to the provisions of Section 79(D) of
the Revised Administrative Code. In accordance with the
policy and practice, such appointments should be prepared
for the signature of the Executive Secretary, "By Authority
ofthe President".3
When the Agricultural Reform Code was being considered by
the Congress, the nature of the ACA was the subject of the
following exposition on the Senate floor:
Senator Tolentino: . . . . "The ACA is not going to be a profit
making institution. It is supposed to be a public service of
the government to the lessees and farmer-owners of the
lands that may be bought after expropriation from owners. It
is the government here that is the lender. The government
should not exact a higher interest than what we are telling a
private landowner now in his relation to his tenants if we
give to their farmers a higher rate of interest . . . ." (pp. 17 &
18, Senate Journal No. 16, July 3, 1963)
The reason is obvious, to pinpoint responsibility for many
losses in the government, in order to avoid irresponsible
lending of government money to pinpoint responsibility
for many losses . . . .
Senator Manglapus: ". . . But assuming that hypothesis, that
is the reason why we are appropriating P150,000,000.00 for
the Agricultural Credit Administration which will go to
intensified credit operations on the barrio level . . ." (p. 3,
Senate Journal No. 7).
That it is the reason why we are providing for the expansion
of the ACCFA and the weeding out of the cooperative activity
of the ACCFA and turning this over to the Agricultural
Productivity Commission, so that the Agricultural Credit
Administration will concentrate entirely on the facilitation of
credit on the barrio level with the massive support of 150
million provided by the government. . . . (pp. 4 & 5 of Senate
Journal No. 7, July 3, 1963)
. . . But by releasing them from this situation, we feel that we
are putting them in a much better condition than that in
which they are found by providing them with a business-like

3. All benefits accruing after July 1, 1963, shall be allowed to

accumulate but payable only after all benefits accruing up to
June 30, 1963, as per CIR decision hereinabove referred to
shall have been settled in full; provided, however, that
commencing July 1, 1963 and for a period of only two (2)
months thereafter (during which period the ACCFA and the
Unions shall negotiate a new Collective Bargaining
Agreement) the provisions of the September 4, 1961
Collective Bargaining Agreement shall be temporarily
suspended, except as to Cost of Living Adjustment and
"political" or non-economic privileges and benefits
thereunder.
On July 24, 1963 the ACCFA Board of Governors ratified the
agreement thus entered into, pursuant to the provision
thereof requiring such ratification, but with the express
qualification that the same was "without prejudice to the
pending appeal in the Supreme Court . . . in Case No. 3450ULP." The payment of the fringe benefits agreed upon, to our
mind, shows that the same were within the financial
capability of the ACCFA then, and hence justifies the
conclusion that this particular condition imposed by the
Office of the President in its approval of the bargaining
contract was satisfied.
We hold, therefore, that insofar as the fringe benefits already
paid are concerned, there is no reason to set aside the
decision of the respondent Court, but that since the
respondent Unions have no right to the certification election
sought by them nor, consequently, to bargain collectively
with the petitioner, no further fringe benefits may be
demanded on the basis of any collective bargaining
agreement.
The decisions and orders appealed from are set aside and/or
modified in accordance with the foregoing pronouncements.
No costs.
Concepcion, C.J., Reyes, J.B.L., Dizon, Sanchez, Castro,
Teehankee and Barredo, JJ., concur.
Zaldivar, J., concurs in the result.
Co Kim Chan v Valdez Tan Keh
Facts of the case:
Co Kim Chan had a pending civil case, initiated during the
Japanese occupation, with the Court of First Instance of
Manila. After the
Liberation of the Manila and the American occupation, Judge
ArsenioDizonrefused to continue hearings on the case,
saying that a proclamation issued by General Douglas
MacArthur had invalidated and
nullified all judicial proceedings and judgments of the courts
of the Philippines
and, without an enabling law, lower courts have no
jurisdiction to take
cognizance of and continue judicial proceedings pending in
the courts of the
defunct Republic of the Philippines (the Philippine
government under the
Japanese).
The court resolved three issues:
1. Whether or not judicial proceedings and
decisions made during the Japanese occupation were valid
and remained
valid even after the American occupation;
2. Whether or not the October 23,

1962 against the ACCFA (G.R. No. L-21824). 6 This is contrary

to Section 11 of Republic Act No. 875, which provides:
SEC. 11. Prohibition Against Strike in the Government The
terms and conditions of employment in the Government,
including any political subdivision or instrumentality thereof,
are governed by law and it is declared to be the policy of this
Act that employees therein shall not strike for the purposes
of securing changes or modification in their terms and
conditions of employment. Such employees may belong to
any labor organization which does not impose the obligation
to strike or to join in strike: Provided, However, that this
section shall apply only to employees employed in
governmental functions of the Government including but not
limited to governmental corporations. 7
With the reorganization of the ACCFA and its conversion into
the ACA under the Land Reform Code and in view of our
ruling as to the governmental character of the functions of
the ACA, the decision of the respondent Court dated March
25, 1963, and the resolution en banc affirming it, in the
unfair labor practice case filed by the ACCFA, which decision
is the subject of the present review in G. R. No. L-21484, has
become moot and academic, particularly insofar as the order
to bargain collectively with the respondent Unions is
concerned.
What remains to be resolved is the question of fringe
benefits provided for in the collective bargaining contract of
September 4, 1961. The position of the ACCFA in this regard
is that the said fringe benefits have not become enforceable
because the condition that they should first be approved by
the Office of the President has not been complied with. The
Unions, on the other hand, contend that no such condition
existed in the bargaining contract, and the respondent Court
upheld this contention in its decision.
It is to be listed that under Section 3, Article XIV, of the
agreement, the same "shall not become effective unless and
until the same is duly ratified by the Board of Governors of
the Administration." Such approval was given even before
the formal execution of the agreement, by virtue of
"Resolution No. 67, Regular Meeting No. 7, FY 1960-61, held
on August 17, 1961," but with the proviso that "the fringe
benefits contained therein shall take effect only if approved
by the office of the President." The condition is, therefore,
deemed to be incorporated into the agreement by reference.
On October 23, 1962 the Office of the President, in a letter
signed by the Executive Secretary, expressed its approval of
the bargaining contract "provided the salaries and benefits
therein fixed are not in conflict with applicable laws and
regulations, are believed to be reasonable considering the
exigencies of the service and the welfare of the employees,
and are well within the financial ability of the particular
corporation to bear."
On July 1, 1963 the ACCFA management and the Unions
entered into an agreement for the implementation of the
decision of the respondent Court concerning the fringe
benefits, thus:
In the meantime, only Cost of Living Adjustment, Longevity
Pay, and Night Differential Benefits accruing from July 1,
1961 to June 30, 1963 shall be paid to all employees entitled
thereto, in the following manner:
A) The sum of P180,000 shall be set aside for the payment
of:
1) Night differential benefits for Security Guards.
2) Cost of Living Adjustment and Longevity Pay.
3) The unpaid balance due employees on Item A (1) and (2)
this paragraph shall be paid in monthly installments as
finances permit but not beyond December 20, 1963.

words.Annulling judgments of courts made during the

Japanese occupation
would clog the dockets and violate international law,
therefore what MacArthur
said should not be construed to mean that judicial
proceedings are included in
the phrase processes of any other governments.In the
case of US vs
Reiter, the court said that if such laws and institutions are
continued in use by
the occupant, they become his and derive their force from
him. The laws and
courts of the Philippines did not become, by being continued
as required by
the law of nations, laws and courts of Japan.It is a legal
maxim that,
excepting of a political nature, law once established
continues until changed
by some competent legislative power. IT IS NOT CHANGED
MERELY BY
CHANGE OF SOVEREIGNTY. Until, of course, the new
sovereign by
legislative act creates a change.Therefore, even assuming
that Japan
legally acquired sovereignty over the Philippines, and the
laws and courts of
the Philippines had become courts of Japan, as the said
courts and laws
creating and conferring jurisdiction upon them have
continued in force until
now, it follows that the same courts may continue exercising
the same
jurisdiction over cases pending therein before the
restoration of the
Commonwealth Government, until abolished or the laws
creating and
conferring jurisdiction upon them are repealed by the said
government.DECISION: Writ of mandamus issued to the
judge of the Court
of First Instance of Manila, ordering him to take cognizance
of and continue to
final judgment the proceedings in civil case no. 3012.
Summary of ratio:1. International law says the acts of a de
facto government
are valid and civil laws continue even during occupation
unless repealed.2.
MacArthur annulled proceedings of other governments, but
this cannot be
applied on judicial proceedings because such a construction
would violate the
law of nations.3. Since the laws remain valid, the court
must continue
hearing the case pending before it.***3 kinds of de facto
government: one
established through rebellion (govt gets possession and
control through force
or the voice of the majority and maintains itself against the
will of the rightful
government)through occupation (established and
maintained by military
forces who invade and occupy a territory of the enemy in the
course of war;

10

1944 proclamation MacArthur issued in which he declared

that all laws,
regulations and processes of any other government in the
Philippines than
that of the said Commonwealth are null and void and without
legal effect in
areas of the Philippines free of enemy occupation and
control invalidated all
judgments and judicial acts and proceedings of the
courts;3. And whether or
not if they were not invalidated by MacArthurs
proclamation, those courts
could continue hearing the cases pending before them.
Ratio: Political and international law recognizes that all acts
and proceedings
of a de facto government are good and valid. The Philippine
Executive
Commission and the Republic of the Philippines under the
Japanese
occupation may be considered de facto governments,
supported by the
military force and deriving their authority from the laws of
war.Municipal laws
and private laws, however, usually remain in force unless
suspended or
changed by the conqueror. Civil obedience is expected even
during war, for
the existence of a state of insurrection and war did not
loosen the bonds of
society, or do away with civil government or the regular
administration of the
laws. And if they were not valid, then it would not have been
necessary for
MacArthur to come out with a proclamation abrogating
them.The second
question, the court said, hinges on the interpretation of the
phrase processes
of any other government and whether or not he intended it
to annul all other
judgments and judicial proceedings of courts during the
Japanese military
occupation.IF, according to international law, non-political
judgments and
judicial proceedings of de facto governments are valid and
remain valid even
after the occupied territory has been liberated, then it could
not have been
MacArthurs intention to refer to judicial processes, which
would be in violation
of international law.A well-known rule of statutory
construction is: A statute
ought never to be construed to violate the law of nations if
any other possible
construction remains.Another is that where great
inconvenience will result
from a particular construction, or great mischief done, such
construction is to
be avoided, or the court ought to presume that such
construction was not
intended by the makers of the law, unless required by clear
and unequivocal

stating that the "new government was installed through a

direct exercise of the power of the Filipino people assisted by
units of the New Armed Forces of the Philippines."
ISSUE:
Whether or not the government of Corazon Aquino is
legitimate.
HELD:
Yes. The legitimacy of the Aquino government is not a
justiciable matter but belongs to the realm of politics where
only the people are the judge.
The Court further held that:
The people have accepted the Aquino government which is
in effective control of the entire country;
It is not merely a de facto government but in fact and law a
de jure government; and
The community of nations has recognized the legitimacy of
the new government.
G.R. No. 76180 October 24, 1986
IN RE: SATURNINO V. BERMUDEZ, petitioner.
R E S O L U T IO N
PER CURIAM:
In a petition for declaratory relief impleading no
respondents, petitioner, as a lawyer, quotes the first
paragraph of Section 5 (not Section 7 as erroneously stated)
of Article XVIII of the proposed 1986 Constitution, which
provides in full as follows:
Sec. 5. The six-year term of the incumbent President and
Vice-President elected in the February 7, 1986 election is, for
purposes of synchronization of elections, hereby extended to
noon of June 30, 1992.
The first regular elections for the President and VicePresident under this Constitution shall be held on the second
Monday of May, 1992.
Claiming that the said provision "is not clear" as to whom it
refers, he then asks the Court "to declare and answer the
question of the construction and definiteness as to who,
among the present incumbent President Corazon Aquino and
Vice-President Salvador Laurel and the elected President
Ferdinand E. Marcos and Vice-President Arturo M. Tolentino
being referred to under the said Section 7 (sic) of ARTICLE
XVIII of the TRANSITORY PROVISIONS of the proposed 1986
Constitution refers to, . ...
The petition is dismissed outright for lack of jurisdiction and
for lack for cause of action.
Prescinding from petitioner's lack of personality to sue or to
bring this action, (Tan vs. Macapagal, 43 SCRA 677), it is
elementary that this Court assumes no jurisdiction over
petitions for declaratory relief. More importantly, the petition
amounts in effect to a suit against the incumbent President
of the Republic, President Corazon C. Aquino, and it is
equally elementary that incumbent Presidents are immune
from suit or from being brought to court during the period of
their incumbency and tenure.
The petition furthermore states no cause of action.
Petitioner's allegation of ambiguity or vagueness of the
aforequoted provision is manifestly gratuitous, it being a
matter of public record and common public knowledge that
the Constitutional Commission refers therein to incumbent
President Corazon C. Aquino and Vice-President Salvador H.
Laurel, and to no other persons, and provides for the
extension of their term to noon of June 30, 1992 for purposes

11

denoted as a government of paramount force)through

insurrection
[G.R. No. 73748, May 22, 1986]
LAWYERS LEAGUE FOR A BETTER PHILIPPINES AND/OR
OLIVER A. LOZANO VS. PRESIDENT CORAZON C.
AQUINO, ET AL.
SIRS/MESDAMES:
Quoted hereunder, for your information, is a resolution of
this Court MAY 22, 1986.
In G.R. No. 73748, Lawyers League for a Better Philippines
vs. President Corazon C. Aquino, et al.; G.R. No. 73972,
People's Crusade for Supremacy of the Constitution vs. Mrs.
Cory Aquino, et al., and G.R. No. 73990, Councilor Clifton U.
Ganay vs. Corazon C. Aquino, et al., the legitimacy of the
government of President Aquino is questioned. It is claimed
that her government is illegal because it was not established
pursuant to the 1973 Constitution.
As early as April 10, 1986, this Court* had already
voted to dismiss the petitions for the reasons to be
stated below. On April 17, 1986, Atty. Lozano as
counsel for the petitioners in G.R. Nos. 73748 and
73972 withdrew the petitions and manifested that
they would pursue the question by extra-judicial
methods. The withdrawal is functus oficio.
The three petitions obviously are not impressed with merit.
Petitioners have no personality to sue and their petitions
state no cause of action. For the legitimacy of the Aquino
government is not a justiciable matter. It belongs to the
realm of politics where only the people of the Philippines are
the judge. And the people have made the judgment; they
have accepted the government of President Corazon C.
Aquino which is in effective control of the entire country so
that it is not merely a de factogovernment but is in fact and
law a de jure government. Moreover, the community of
nations has recognized the legitimacy of the present
government. All the eleven members of this Court, as
reorganized, have sworn to uphold the fundamental law of
the Republic under her government.
In view of the foregoing, the petitions are hereby dismissed.
Very truly yours,
(Sgd.) GLORIA C. PARAS
Clerk of Court
* The Court was then composed of Teehankee, C.J. and Abad
Santos., Melencio-Herrera, Plana, Escolin, Gutierrez, Jr.,
Cuevas, Alampay and Patajo,
JJ.-----------------------------------------DIGEST
FACTS:
On February 25, 1986, President Corazon Aquino issued
Proclamation No. 1 announcing that she and Vice President
Laurel were taking power.
On March 25, 1986, proclamation No.3 was issued providing
the basis of the Aquino government assumption of power by

were elected President and Vice President in the February 7,

1986 elections.
As to who are the incumbent President and Vice President
referred to in the 12121986 Draft Constitution, we agree that
there is no doubt the 1986 Constitutional Commission
referred to President Corazon C. Aquino and Vice President
Salvador H. Laurel.
Finally, we agree with the Resolution of the Court in G.R. Nos.
73748, 73972, and 73990.
For the foregoing reasons, we vote to DISMISS the instant
petition.
CRUZ, J., concurring:
I vote to dismiss this petition on the ground that the
Constitution we are asked to interpret has not yet been
ratified and is therefore not yet effective. I see here no
actual conflict of legal rights susceptible of judicial
determination at this time. (Aetna Life Insurance Co. vs.
Haworth, 300 U.S. 227; PACU vs. Secretary of Education, 97
Phil. 806.)
In re: Letter of Associate Justice Reynato S. Puno
Wednesday, April 30, 2014
Facts:
- The petitioner, Reynato S. Puno, was first appointed as
Associate Justice of the Court of Appeals on 1980.
- On 1983, the Court of Appeals was reorganized and
became the Intermediate Appellate Court pursuant to BP
Blg. 129.
- On 1984, petitioner was appointed to be Deputy Minister of
Justice in the Ministry of Justice. Thus, he ceased to be a
member of the Judiciary.
- After February 1986 EDSA Revolution, there was a
reorganization of the entire government, including the
Judiciary.
- A Screening Committee for the reorganization of the
Intermediate Appelate Court and lower courts recommended
the return of petitioner as Associate Justice of the new court
of Appeals and assigned him the rank of number 11 in the
roster of appellate court justices.
- When the appointments were signed by Pres. Aquino,
petitioner's seniority ranking changes from number 11 to
26.
- Then, petitioner alleged that the change in seniority
ranking was due to "inadvertence" of the President,
otherwise, it would run counter to the provisions of Section 2
of E.O. No. 33.
- Petitioner Justice Reynato S. Puno wrote a letter to the
Court seeking the correction of his seniority ranking in the
Court of Appeals.
- The Court en banc granted Justice Puno's request.
- A motion for reconsideration was later filed by Associate
Justices Campos Jr. and Javellana who are affected by the
ordered correction.
- They alleged that petitioner could not claim reappointment
because the courts where he had previously been appointed
ceased to exist at the date of his last appointment.
Issue: WON the present Court of Appeals is merely a
continuation of the old Court of Appeals and Intermediate
Appellate Court existing before the promulgation of E.O. No.
33.
Held:

12

of synchronization of elections. Hence, the second paragraph

of the cited section provides for the holding on the second
Monday of May, 1992 of the first regular elections for the
President and Vice-President under said 1986 Constitution. In
previous cases, the legitimacy of the government of
President Corazon C. Aquino was likewise sought to be
questioned with the claim that it was not established
pursuant to the 1973 Constitution. The said cases were
dismissed outright by this court which held that:
Petitioners have no personality to sue and their petitions
state no cause of action. For the legitimacy of the Aquino
government is not a justiciable matter. It belongs to the
realm of politics where only the people of the Philippines are
the judge. And the people have made the judgment; they
have accepted the government of President Corazon C.
Aquino which is in effective control of the entire country so
that it is not merely a de facto government but in fact and
law a de jure government. Moreover, the community of
nations has recognized the legitimacy of tlie present
government. All the eleven members of this Court, as
reorganized, have sworn to uphold the fundamental law of
the Republic under her government. (Joint Resolution of May
22, 1986 in G.R. No. 73748 [Lawyers League for a Better
Philippines, etc. vs. President Corazon C. Aquino, et al.]; G.R.
No. 73972 [People's Crusade for Supremacy of the
Constitution. etc. vs. Mrs. Cory Aquino, et al.]; and G.R. No.
73990 [Councilor Clifton U. Ganay vs. Corazon C. Aquino, et
al.])
For the above-quoted reason, which are fully applicable to
the petition at bar, mutatis mutandis, there can be no
question that President Corazon C. Aquino and VicePresident Salvador H. Laurel are the incumbent and
legitimate President and Vice-President of the Republic of the
Philippines.or the above-quoted reasons, which are fully
applicable to the petition at bar,
ACCORDINGLY, the petition is hereby dismissed.
Teehankee, C.J., Feria, Yap, Fernan, Narvasa, Alampay and
Paras, JJ., concur.
MELENCIO-HERRERA, J., concurring:
GUTIERREZ, Jr., J., concurring:
FELICIANO, JJ., concurring.
The petitioner asks the Court to declare who are "the
incumbent President and Vice President elected in the
February 7, 1986 elections" as stated in Article XVIII, Section
5 of the Draft Constitution adopted by the Constitutional
Commission of 1986.
We agree that the petition deserves outright dismissal as
this Court has no original jurisdiction over petitions for
declaratory relief.
As to lack of cause of action, the petitioner's prayer for a
declaration as to who were elected President and Vice
President in the February 7, 1986 elections should be
addressed not to this Court but to other departments of
government constitutionally burdened with the task of
making that declaration.
The 1935 Constitution, the 1913 Constitution as amended,
and the 1986 Draft Constitution uniformly provide 'that
boards of canvassers in each province and city shall certified
who were elected President and Vice President in their
respective areas. The certified returns are transmitted to the
legislature which proclaims, through the designated
Presiding Head, who were duty elected.
Copies of the certified returns from the provincial and city
boards of canvassers have not been furnished this Court nor
is there any need to do so. In the absence of a legislature,
we cannot assume the function of stating, and neither do we
have any factual or legal capacity to officially declare, who

president, thus allowing Arroyo to be the acting president.

7. The Arroyo administration was met with acceptance by
the different branches of government, by majority of the
public, and by the international community. The
impeachment trial was closed, despite sentiments such as
those of Senator Defensor- Santiago that the impeachment
court had failed to resolve the case, leaving open questions
regarding Estradas qualifications to run for other elected
posts.
8. The Office of the Ombudsman proceeded to file a series of
cases regarding the corruption of Estrada. Estrada filed a
motion compelling the Ombudsman to refrain from further
proceedings until his term as president was over. He also
filed a petition to be confirmed as the lawful and incumbent
president, temporarily unable to fulfill his duties, thus
making Arroyo an acting president only.
9. The Supreme Court ruled a) to inform the parties that they
did not declare the Office of the President vacant on 20
January 2001, b) to prohibit either party from discussing in
public the merits of the case while in its pendency, c) to
enjoin the Ombudsman from resolving pending criminal
cases against Estrada for 30 days.
Issues:
I. Whether the petitions present a justiciable controversy.
II. Assuming that the petitions present a justiciable
controversy, whether petitioner Estrada is a President on
leave while respondent Arroyo is an Acting President.
III. Whether conviction in the impeachment proceedings is a
condition precedent for the criminal prosecution of petitioner
Estrada. In the negative and on the assumption that
petitioner is still president, whether he is immune from
criminal prosecution.
IV. Whether the prosecution of petitioner Estrada should be
enjoined on the ground of prejudicial publicity
Ruling:
I. The petitions present a justiciable controversy because the
cases at bar pose legal, and not political, questions. Hence,
the cases are within the jurisdiction of the Court to decide.
Definition of political questions: ...those
questions which, under the Constitution, are to be
decided by the people in their sovereign capacity,
or in regard to which full discretionary authority has
been delegated to the legislative or executive
branch of government. --Former CJ Roberto
Concepcion
Arroyos government is NOT revolutionary in
character, since her oath was taken under the 1987
Constitution.
EDSA II is an exercise of people power of freedom
of speech and the right to assembly. It is intra
constitutional in this regard (within the scope of the

13

The Court held that the Court of Appeals and Intermediate

Appellate Court existing prior to E.O. No. 33 phased out as
part of the legal system abolished by the 1987 Revolution.
The Court of Appeals that was established under E.O. No. 33
is considered as an entirely new court.
The present Court of Appeals is a new entity, different and
distinct from the courts existing before E.O. No. 33. It was
created in the wake of the massive reorganization launched
by the revolutionary government of Corazon Aquino in the
aftermath of the people power in 1986.
Revolution is defined as "the complete overthrow of the
established government in any country or state by those
who were previously subject to it." or "as sudden. radical and
fundamental change in the government or political system,
usually effected with violence or at least some acts of
violence."
Estrada v Desierto
GR Nos. 146710-15, March 2, 2001 Ponente : Puno, J.
Facts :
1. In 1998, Joseph Estrada was elected President of the
Philippines, while Gloria Macapagal- Arroyo was elected VicePresident. The president was accused with corruption,
culminating in Ilocos Sur Governor ChavitSingsons
accusations that the president received millions of pesos
from jueteng lords.
2. The Senate and the House of Representatives began early
investigations regarding the accusation, while key sociopolitical figures like Cardinal Sin, former Presidents Aquino
and Ramos, the vice president, senior advisers and cabinet
members called on the president to resign, and resigned
from their cabinet posts themselves.
3. The impeachment trial began on 7 December 2000, with
21 senator-judges presided over by Chief Justice
HilarioDavide. At a point when 11 senator-judges ruled
against opening a second envelope of evidence showing the
presidents P3.3 billion bank account under the name Jose
Velarde, the public prosecutors resigned and a mass
demonstration at EDSA began.
4. CJ Davide granted Senator Raul Rocos motion to postpone
the impeachment trial until the House of Representatives
resolved the lack of public prosecutors.
5. With the defection of more officials and of the army and
police from the Estrada administration, the president
attempted to appease public sentiment by announcing a
snap election and by allowing the second envelope to be
opened. The measures failed, and the calls for resignation
strengthened.
6. On 20 January 2001, the president negotiated with
representatives of the vice-president. News broke out that
Chief Justice HilarioDavide would administer the oath of
presidency to the vice president at EDSA Shrine. Estrada
issued two statements - one stating reservations on the
constitutionality of Arroyos presidency, and another stating
that he is incapable of dispensing his responsibilities as

 Executive immunity provision of 1973 Constitution

was no longer included in the 1986 Constitution.
This is in accordance with SC ruling in In Re:
Saturnino Bermudez that incumbent Presidents are
immune from suit or from being brought to court
during the period of their incumbency and tenure
but not beyond.
When the president has resigned, then proper
criminal and civil cases may already be filed against
him

IV. Estrada argued that respondent Ombudsman

should be stopped from conducting the
investigation of the cases filed against him because
of prejudicial publicity on his guilt, and that
respondent has also developed bias.
In People v Teehankee, Jr. and Larranaga v Court
of Appeals it was laid down that the right of an
accused to a fair trial is not incompatible to a free
press. Responsible press.
Our judges are smart enough to know the law and
to disregard camera drama and off-court evidence.
Their exposure to media does not affect their
impartiality.

14

Constitution). The resignation of Estrada that it

caused and the subsequent succession of of Arroyo
are subject to judicial review.
II. Estrada is NOT a President on leave while Arroyo
is Acting President.
Under Section 11 Article VII, Estrada says that
only Congress has the ultimate
authority to determine whether the President is
incapable of performing his
functions in the manner provided by said provision.
Hence, Arroyo has no power to judge Estradas
inability to do his job as President.
However, both houses of Congress expressed
their recognition and support of Arroyo
as the new President, and it is implicitly clear in this
recognition that Estradas inability is no longer
temporary. Thus, Congress has rejected Estradas
claim of inability.
Furthermore, Court cannot exercise its judicial
power to revise decision of Congress in recognizing
Arroyo. To do so would be to transgress principle of
separation of powers, since this is a political issue.
III. Estrada contends that he has not been convicted
in the impeachment case and that he enjoys
immunity from all kinds of suit.