Republic of the Philippines

SUPREME COURT
Manila
EN BANC
G.R. No. L-45127 May 5, 1989
PEOPLE OF THE PHILIPPINES, represented by the Provincial Fiscal of Leyte, petitioner,
vs.
HON. JUDGE AUXENCIO C. DACUYCUY, CELESTINO S. MATONDO, SEGUNDINO A,
CAVAL and CIRILO M. ZANORIA, respondents.
The Office of the Solicitor General for petitioner.
Adelino B. Sitoy for private respondents.

REGALADO, J.:
Involved in this special civil action is the unique situation, to use an euphemistic phrase, of an
alternative penal sanction of imprisonment imposed by law but without a specification as to the
term or duration thereof.
As a consequence of such legislative faux pas or oversight, the petition at bar seeks to set aside
the decision of the then Court of First Instance of Leyte, Branch IV, dated September 8,1976, 1
penned by herein respondent judge and granting the petition for certiorari and prohibition with
preliminary injunction filed by herein private respondents and docketed therein as Civil Case No.
5428, as well as his resolution of October 19, 1976 2 denying the motions for reconsideration
filed by the parties therein. Subject of said decision were the issues on jurisdiction over
violations of Republic Act No. 4670, otherwise known as the Magna Carta for Public School
Teachers, and the constitutionality of Section 32 thereof.
In a complaint filed by the Chief of Police of Hindang, Leyte on April 4, 1975, herein private
respondents Celestino S. Matondo, Segundino A. Caval and Cirilo M. Zanoria, public school
officials of Leyte, were charged before the Municipal Court of Hindang, Leyte in Criminal Case
No. 555 thereof for violation of Republic Act No. 4670. The case was set for arraignment and
trial on May 29, 1975. At the arraignment, the herein private respondents, as the accused
therein, pleaded not guilty to the charge. Immediately thereafter, they orally moved to quash the
complaint for lack of jurisdiction over the offense allegedly due to the correctional nature of the
penalty of imprisonment prescribed for the offense. The motion to quash was subsequently
reduced to writing on June 13, 1975. 3 On August 21, 1975, the municipal court denied the
motion to quash for lack of merit. 4 On September 2, 1975, private respondents filed a motion for
the reconsideration of the aforesaid denial order on the same ground of lack of jurisdiction, but
with the further allegation that the facts charged do not constitute an offense considering that
Section 32 of Republic Act No. 4670 is null and void for being unconstitutional. In an undated
order received by the counsel for private respondents on October 20,1975, the motion for
reconsideration was denied. 5

On October 26, 1975, private respondents filed a petitions 6 for certiorari and prohibition with
preliminary injunction before the former Court of First Instance of Leyte, Branch VIII, where it
was docketed as Civil Case No. B-622, to restrain the Municipal Judge, Provincial Fiscal and
Chief of Police of Hindang, Leyte from proceeding with the trial of said Criminal Case No. 555
upon the ground that the former Municipal Court of Hindang had no jurisdiction over the offense
charged. Subsequently, an amended petition 7 alleged the additional ground that the facts
charged do not constitute an offense since the penal provision, which is Section 32 of said law,
is unconstitutional for the following reasons: (1) It imposes a cruel and unusual punishment, the
term of imprisonment being unfixed and may run to reclusion perpetua; and (2) It also
constitutes an undue delegation of legislative power, the duration of the penalty of imprisonment
being solely left to the discretion of the court as if the latter were the legislative department of
the Government.
On March 30, 1976, having been advised that the petition of herein private respondents was
related to Criminal Case No. 1978 for violation of Presidential Decree No. 442 previously
transferred from Branch VIII to Branch IV of the erstwhile Court of First Instance of Leyte, Judge
Fortunate B. Cuna of the former branch transferred the said petition to the latter branch for
further proceedings and where it was subsequently docketed therein as Civil Case No. 5428. 8
On March 15, 1976, the petitioner herein filed an opposition to the admission of the said
amended petitions 9 but respondent judge denied the same in his resolution of April 20, 1976. 10
On August 2, 1976, herein petitioner filed a supplementary memorandum in answer to the
amended petition. 11
On September 8, 1976, respondent judge rendered the aforecited challenged decision holding
in substance that Republic Act No. 4670 is valid and constitutional but cases for its violation fall
outside of the jurisdiction of municipal and city courts, and remanding the case to the former
Municipal Court of Hindang, Leyte only for preliminary investigation.
As earlier stated, on September 25, 1976, petitioner filed a motion for reconsideration. 12
Likewise, private respondents filed a motion for reconsideration of the lower court's decision but
the same was limited only to the portion thereof which sustains the validity of Section 32 of
Republic Act No. 4670. 13 Respondent judge denied both motions for reconsideration in a
resolution dated October 19, 1976. 14
The instant petition to review the decision of respondent judge poses the following questions of
law: (1) Whether the municipal and city courts have jurisdiction over violations of Republic Act
No. 4670; and (2) Whether Section 32 of said Republic Act No. 4670 is constitutional.
We shall resolve said queries in inverse order, since prior determination of the constitutionality
of the assailed provision of the law involved is necessary for the adjudication of the jurisdictional
issue raised in this petition.
1. The disputed section of Republic Act No. 4670 provides:
Sec. 32. Penal Provision. A person who shall wilfully interfere with, restrain or
coerce any teacher in the exercise of his rights guaranteed by this Act or who
shall in any other manner commit any act to defeat any of the provisions of this
Act shall, upon conviction, be punished by a fine of not less than one hundred
pesos nor more than one thousand pesos, or by imprisonment, in the discretion
of the court. (Emphasis supplied).

Two alternative and distinct penalties are consequently imposed, to wit: (a) a fine ranging from
P100.00 to P1,000.00; or (b) imprisonment. It is apparent that the law has no prescribed period
or term for the imposable penalty of imprisonment. While a minimum and maximum amount for
the penalty of fine is specified, there is no equivalent provision for the penalty of imprisonment,
although both appear to be qualified by the phrase "in the discretion of the court.
Private respondents contend that a judicial determination of what Congress intended to be the
duration of the penalty of imprisonment would be violative of the constitutional prohibition
against undue delegation of legislative power, and that the absence of a provision on the
specific term of imprisonment constitutes that penalty into a cruel and unusual form of
punishment. Hence, it is vigorously asserted, said Section 32 is unconstitutional.
The basic principle underlying the entire field of legal concepts pertaining to the validity of
legislation is that in the enactment of legislation a constitutional measure is thereby created. In
every case where a question is raised as to the constitutionality of an act, the court employs this
doctrine in scrutinizing the terms of the law. In a great volume of cases, the courts have
enunciated the fundamental rule that there is a presumption in favor of the constitutionality of a
legislative enactment. 15
It is contended that Republic Act No. 4670 is unconstitutional on the ground that the imposable
but indefinite penalty of imprisonment provided therein constitutes a cruel and unusual
punishment, in defiance of the express mandate of the Constitution. This contention is
inaccurate and should be rejected.
We note with approval the holding of respondent judge that
The rule is established beyond question that a punishment authorized by statute
is not cruel or unusual or disproportionate to the nature of the offense unless it is
a barbarous one unknown to the law or so wholly disproportionate to the nature
of the offense as to shock the moral sense of the community. Based on the
principle, our Supreme Court has consistently overruled contentions of the
defense that the punishment of fine or imprisonment authorized by the statute
involved is cruel and unusual. (Legarda vs. Valdez, 1 Phil. 146; U.S. vs. Pico, 18
Phil. 386; People vs. Garay, 2 ACR 149; People vs. Estoista 93 Phil. 647; People
vs. Tiu Ua. 96 Phil. 738; People vs. Dionisio, 22 SCRA 1299). The language of
our Supreme Court in the first of the cases it decided after the last world war is
appropriate here:
The Constitution directs that 'Excessive fines shall not be
imposed, nor cruel and unusual punishment inflicted.' The
prohibition of cruel and unusual punishments is generally aimed at
the form or character of the punishment rather than its severity in
respect of duration or amount, and apply to punishments which
never existed in America, or which public sentiment has regarded
as cruel or obsolete (15 Am. Jur., p. 172), for instance there (sic)
inflicted at the whipping post, or in the pillory, burning at the stake,
breaking on the wheel, disemboweling, and the like (15 Am. Jur.
Supra, Note 35 L.R.A. p. 561). Fine and imprisonment would not
thus be within the prohibition.' (People vs. de la Cruz, 92 Phil.
906). 16

The question that should be asked, further, is whether the constitutional prohibition looks only to
the form or nature of the penalty and not to the proportion between the penalty and the crime.
The answer thereto may be gathered from the pronouncement in People vs. Estoista, 17 where
an "excessive" penalty was upheld as constitutional and was imposed but with a
recommendation for executive clemency, thus:
... If imprisonment from 5 to 10 years is out of proportion to the present case in
view of certain circumstances, the law is not to be declared unconstitutional for
this reason. The constitutionality of an act of the legislature is not to be judged in
the light of exceptional cases. Small transgressors for which the heavy net was
not spread are, like small fishes, bound to be caught, and it is to meet such a
situation as this that courts are advised to make a recommendation to the Chief
Executive for clemency or reduction of the penalty...
That the penalty is grossly disproportionate to the crime is an insufficient basis to declare the
law unconstitutional on the ground that it is cruel and unusual. The fact that the punishment
authorized by the statute is severe does not make it cruel or unusual. 18 In addition, what degree
of disproportion the Court will consider as obnoxious to the Constitution has still to await
appropriate determination in due time since, to the credit of our legislative bodies, no decision
has as yet struck down a penalty for being "cruel and unusual" or "excessive."
We turn now to the argument of private respondents that the entire penal provision in question
should be invalidated as an 49 "undue delegation of legislative power, the duration of penalty of
imprisonment being solely left to the discretion of the court as if the lattter were the legislative
department of the government."
Petitioner counters that the discretion granted therein by the legislature to the courts to
determine the period of imprisonment is a matter of statutory construction and not an undue
delegation of legislative power. It is contended that the prohibition against undue delegation of
legislative power is concerned only with the delegation of power to make laws and not to
interpret the same. It is also submitted that Republic Act No. 4670 vests in the courts the
discretion, not to fix the period of imprisonment, but to choose which of the alternative penalties
shall be imposed.
Respondent judge sustained these theses of petitioner on his theory that "the principle of
separation of powers is not violated by vesting in courts discretion as to the length of sentence
or amount of fine between designated limits in sentencing persons convicted of crime. In such
instance, the exercise of judicial discretion by the courts is not an attempt to use legislative
power or to prescribe and create a law but is an instance of the administration of justice and the
application of existing laws to the facts of particular cases." 19 What respondent judge obviously
overlooked is his own reference to penalties "between designated limits."
In his commentary on the Constitution of the United States, Corwin wrote:
.. At least three distinct ideas have contributed to the development of the
principle that legislative power cannot be delegated. One is the doctrine of
separation of powers: Why go to the trouble of separating the three powers of
government if they can straightway remerge on their own motion? The second is
the concept of due process of laws which precludes the transfer of regulatory

functions to private persons. Lastly, there is the maxim of agency "Delegata

potestas non potest delegari." 20
An apparent exception to the general rule forbidding the delegation of legislative authority to the
courts exists in cases where discretion is conferred upon said courts. It is clear, however, that
when the courts are said to exercise a discretion, it must be a mere legal discretion which is
exercised in discerning the course prescribed by law and which, when discerned, it is the duty of
the court to follow. 21
So it was held by the Supreme Court of the United States that the principle of separation of
powers is not violated by vesting in courts discretion as to the length of sentence or the amount
of fine between designated limits in sentencing persons convicted of a crime. 22
In the case under consideration, the respondent judge erronneously assumed that since the
penalty of imprisonment has been provided for by the legislature, the court is endowed with the
discretion to ascertain the term or period of imprisonment. We cannot agree with this postulate.
It is not for the courts to fix the term of imprisonment where no points of reference have been
provided by the legislature. What valid delegation presupposes and sanctions is an exercise of
discretion to fix the length of service of a term of imprisonment which must be encompassed
within specific or designated limits provided by law, the absence of which designated limits well
constitute such exercise as an undue delegation, if not-an outright intrusion into or assumption,
of legislative power.
Section 32 of Republic Act No. 4670 provides for an indeterminable period of imprisonment,
with neither a minimum nor a maximum duration having been set by the legislative authority.
The courts are thus given a wide latitude of discretion to fix the term of imprisonment, without
even the benefit of any sufficient standard, such that the duration thereof may range, in the
words of respondent judge, from one minute to the life span of the accused. Irremissibly, this
cannot be allowed. It vests in the courts a power and a duty essentially legislative in nature and
which, as applied to this case, does violence to the rules on separation of powers as well as the
non-delegability of legislative powers. This time, the preumption of constitutionality has to yield.
On the foregoing considerations, and by virtue of the separability clause in Section 34 of
Republic Act No. 4670, the penalty of imprisonment provided in Section 32 thereof should be,
as it is hereby, declared unconstitutional.
It follows, therefore, that a ruling on the proper interpretation of the actual term of imprisonment,
as may have been intended by Congress, would be pointless and academic. It is, however,
worth mentioning that the suggested application of the so-called rule or principle of parallelism,
whereby a fine of P1,000.00 would be equated with one year of imprisonment, does not merit
judicial acceptance. A fine, whether imposed as a single or as an alternative penalty, should not
and cannot be reduced or converted into a prison term; it is to be considered as a separate and
independent penalty consonant with Article 26 of the Revised Penal Code. 23 It is likewise
declared a discrete principal penalty in the graduated scales of penalties in Article 71 of said
Code. There is no rule for transmutation of the amount of a fine into a term of imprisonment.
Neither does the Code contain any provision that a fine when imposed in conjunction with
imprisonment is subordinate to the latter penalty. In sum, a fine is as much a principal penalty
as imprisonment. Neither is subordinate to the other. 24

2. It has been the consistent rule that the criminal jurisdiction of the court is determined by the
statute in force at the time of the commencement of the action. 25
With the deletion by invalidation of the provision on imprisonment in Section 32 of Republic Act
No. 4670, as earlier discussed, the imposable penalty for violations of said law should be limited
to a fine of not less than P100.00 and not more than P1,000.00, the same to serve as the basis
in determining which court may properly exercise jurisdiction thereover. When the complaint
against private respondents was filed in 1975, the pertinent law then in force was Republic Act
No. 296, as amended by Republic Act No. 3828, under which crimes punishable by a fine of not
more than P 3,000.00 fall under the original jurisdiction of the former municipal courts.
Consequently, Criminal Case No. 555 against herein private respondents falls within the original
jurisdiction of the Municipal Trial Court of Hindang, Leyte.
WHEREFORE, the decision and resolution of respondent judge are hereby REVERSED and
SET ASIDE. Criminal Case No. 555 filed against private respondents herein is hereby ordered
to be remanded to the Municipal Trial Court of Hindang, Leyte for trial on the merits.
SO ORDERED.

Republic of the Philippines

SUPREME COURT
Manila
SECOND DIVISION
G.R. No. 74806 January 9, 1989
SM AGRI AND GENERAL MACHINERIES, petitioner,
vs.
NATIONAL LABOR RELATIONS COMMISSION (Third Division), EXECUTIVE LABOR
ARBITER, REGION V, THE PROVINCIAL SHERIFF OF ALBAY, or any of his deputies, and
VIVENCIO ABO, respondents.
Rolando L. Bobis for petitioner.
The Solicitor General for public respondent.
Muoz Law Office for private respondent.

RESOLUTION

PADILLA, J.:
Before the Court is a petition for certiorari with prayer for issuance of a writ of preliminary
injunction, assailing the resolution of the National Labor Relations Commission (NLRC), dated
29 November 1985, 1 dismissing petitioner's appeal for allegedly having been filed out of time,
and the resolution, dated 7 April 1986 2 denying petitioner's motion for reconsideration.
Private respondent Vivencio Abo was first employed on 2 August 1976 by SM Industries as
Officer-in-Charge (OIC) of a branch office. In 1981, SM Industries changed its business name
into SM Agricultural and General Machineries where Mr. Abo remained, to work as an OIC, until
his termination from employment on 31 May 1982.
In a complaint filed with the Ministry of Labor and Employment, docketed as Case No. RAB-VNo. 0891-82, 3 private respondent charged petitioner for unlawful dismissal and prayed for an
award of damages. Petitioner's defense to the charge was the willful disobedience on the part of
Abo in refusing to report sales, collection reports and monthly allowance since his appointment
as OIC in January 1981 which, according to petitioner, rendered the termination of his
employment on 31 May 1982 lawful.
The Labor Arbiter, on 29 March 1984, rendered a decision in favor of private respondent, copy
of which was received by petitioner on 10 April 1984. The dispositive part of the decision
provides:
WHEREFORE, judgment is rendered in favor of the petitioner ordering
respondent.
1. To reinstate petitioner with backwages without loss of seniority
rights and other privileges due him from June 1982 and for a
limited period of three (3) years.
2. To pay petitioner his unpaid salary for two (2) years in the
amount of P10,000.00 and the sum of P7,920.00 emergency
allowances covering the period from July 1980 up to June 1982.
3. To pay petitioner his 13th month pay for the last three (3) years
in the sum of P1,350.00, service incentive leave of five (5) days in
the sum of P257.96.
4. To pay petitioner moral damages in the sum of P30,000.00 and
exemplary damages in the amount of P15,000.00 and to pay
attorney's fees equivalent to 10% of the petitioner's total claim. 4

From said decision, petitioner filed an appeal, by Registered Mail, on 23 April 1984 5 on the
grounds that there are serious errors in the findings of fact, excessive award of money claims
and lack of authority to award damages.
However, in a Resolution dated 29 November 1985, the NLRC dismissed petitioner's appeal on
the ground that it was filed out of time. The resolution reads as follows:
xxx xxx xxx
Respondent's counsel, Atty. Rolando L. Bobis, expressly admitted that he
received a copy of the decision on 10 April 1984, while the appeal was only filed
thru registered mail on 23 April 1984, or a period of thirteen (13) days.
Under Article 223 of the Labor Code of the Philippines, as amended. 'Decision,
awards or orders of :Labor Arbiters or compulsory arbitrators are final and
executory unless appealed to the Commission by any or both of the parties within
ten (10) days from receipt of such awards, orders or decision. (Emphasis
supplied.) In the case of Vir-Jen Shipping Corporation and Marine Services vs.
the National Labor Relations Commission, et al., G.R. No. 58011, The Supreme
Court interpreted Article 223 to mean that an appeal from the Labor Arbiter's
decision to the National Labor Relations Commission shall be within ten (10)
calendar days, not ten (10) working days.
WHEREFORE, the appeal is hereby dismissed for having been filed out of time.
5
A
Petitioner moved for reconsideration of said decision 6 contending that the appeal was filed
within the reglementary 10-day period as provided in Art 223 of the Labor Code. According to
petitioner, it was physically impossible to file the appeal on 20 April 1984 either personally or by
registered mail, since it was Good Friday, a Legal Holiday. Such being the case, he filed the
appeal on 23 April 1984 (Monday) which was the first business day after the Legal Holiday.
Petitioner, while admitting that he filed the appeal on the 13th day, argued that the computation
of the 10-day period requirement should not be strictly applied to this case. NLRC, however,
denied petitioner's motion for reconsideration in its 7 April 1986 resolution. Hence, this present
recourse by the petitioner.
The issue to be resolved in this petition is whether or not the NLRC committed grave abuse of
discretion in dismissing petitioner's appeal on the ground of tardiness or late filing.
We sustain petitioner's argument that when the last day for filing an appeal falls on a legal
Holiday, the same can be filed on the next business day following said Legal Holiday. In fact,
the Revised Administrative Code, specifically, Sec. 31, Art. VIII thereof, clearly provides that:
Sec. 31. Pretermission of Holiday. Where the day, or the last day, for doing
any act required or permitted by law falls on a holiday, the act may be done on
the next succeeding business day.
In the instant case, the records show that petitioner actually received the Labor Arbiter's
decision on 10 April 1984. Following the 10-day period requirement of the Labor Code, the last
day to appeal therefore was 20 April 1984, or the 10th calendar day from 10 April 1984. But

since 20 April 1984 was a legal Holiday, it being Good Friday, and the next day, Saturday, was
also declared a non-working public holiday by presidential proclamation No. 2353, the appeal
could be filed (as it was actually filed) on the next business day which was 23 April 1984, a
Monday, in accordance with the above-quoted administrative code provision.
Public respondent NLRC cites the case of Vir-Jen Shipping and Marine Services v. NLRC 7 in its
29 November 1985 resolution. This Court reiterates the doctrine enunciated in said case that
the 10-day period provided in Art. 223 of the Labor Code refers to 10 calendar days and not 10
working days. This means that Saturdays, Sundays and Legal Holidays are not to be excluded,
but included, in counting the 10-day period. This is in line with the objective of the law for
speedy disposition of labor cases with the end in view of protecting the interests of the working
man.
The ruling in the Vir-Jen Shipping case does not however apply to the case at bar. This is not a
case of a Legal Holiday falling within the period, between the day when the decision appealed
from was received and the last day to appeal or the 10th day. Instead, we have here a case
where the Legal Holiday is coincidentally the 10th or the last day to appeal. NLRC's contention
that petitioner's appeal was filed out of time because 20 April was the last day to file the appeal,
and a Legal Holiday is deemed included in the computation of the 10-day reglementary period,
is untenable. Sec. 31, Art. VIII of the Revised Administrative Code, and not the case of Vir-Jen
Shipping, applies to the peculiar facts of this case.
Therefore, while upholding the interpretation made in the Vir-Jen Shipping case that the 10-day
period fixed by Art. 223 of the Labor Code contemplates calendar days and not working days,
the court recognizes an exception to this general rule, i.e., where the 10th day is a Sunday or a
Legal Holiday, in which event, the appeal can be filed on the next business day. Consequently,
in such a case, the supposedly last day to appeal will not be deemed the last day because it
happens to be a Sunday or Legal Holiday. Instead, the act can be done on the next business
day following that Sunday or Legal Holiday. Stated differently, the ruling in Vir-Jen Shipping
case contemplates a situation where one is burdened with the task of computing a 10-day
period which includes a Saturday, Sunday or Legal Holiday and not when the 10th day falls on a
Sunday or Legal Holiday. To be noted is the fact that Saturday (unless legally declared a
holiday) is considered a business day and therefore if the last day to appeal falls on a Saturday,
the act is still due on that day and not on the next succeeding business day.
Without going into the merits of petitioner's appeal, we hold that the NLRC erred in dismissing
the appeal on the ground that it was filed out of time.
ACCORDINGLY, the petition is GRANTED. The 29 November 1985 and 7 April 1986
resolutions of the NLRC are hereby ANNULLED and SET ASIDE. The NLRC is ordered to give
due course to petitioner's motion for reconsideration and/or appeal for resolution on the merits
thereof.
SO ORDERED.
Melencio-Herrera (Chairperson), Paras, Sarmiento and Regalado, JJ., concur.

Republic of the Philippines

SUPREME COURT
Manila
EN BANC
G.R. No. 81006 May 12, 1989
VICTORINO C. FRANCISCO, petitioner,
vs.
WINAI PERMSKUL and THE HON. COURT OF APPEALS, respondents.

CRUZ, J.:
An important constitutional question has been injected in this case which started out as an
ordinary complaint for a sum of money. The question squarely presented to the Court is the
validity of the memorandum decision authorized under Section 40 of B.P. Blg. 129 in the light of
Article VIII, Section 14 of the Constitution.
On May 21, 1984, the petitioner leased his apartment in Makati to the private respondent for a
period of one year for the stipulated rental of P3,000.00 a month. Pursuant to the lease contract,
the private respondent deposited with the petitioner the amount of P9,000.00 to answer for
unpaid rentals or any damage to the leased premises except when caused by reasonable wear
and tear. On May 31, 1985, the private respondent vacated the property. He thereafter
requested the refund of his deposit minus the sum of P1,000.00, representing the rental for the
additional ten days of his occupancy after the expiration of the lease. The petitioner rejected this
request. He said the lessee still owed him for other charges, including the electricity and water
bills and the sum of P2,500.00 for repainting of the leased premises to restore them to their
original condition. 1
The private respondent sued in the Metropolitan Trial Court of Makati. After the submission of
position papers by the parties, a summary judgment was rendered on October 11, 1985,
sustaining the complainant and holding that the repainting was not chargeable to him. The
defendant was ordered to pay the plaintiff the amount of P7,750.00, representing the balance of
the deposit after deducting the water and electricity charges. The plaintiff was also awarded the
sum of P1,250.00 as attorney's fees, plus the Costs. 2
This decision was appealed to the Regional Trial Court of Makati and was affirmed by Judge
Jose C. de la Rama on January 14, 1987. This was done in a memorandum decision reading in
full as follows:
MEMORANDUM DECISION
After a careful and thorough perusal, evaluation and study of the records of this
case, this Court hereby adopts by reference the findings of fact and conclusions
of law contained in the decision of the Metropolitan Trial Court of Makati, Metro
Manila, Branch 63 and finds that there is no cogent reason to disturb the same.

WHEREFORE, judgment appealed from is hereby affirmed in toto. 3

When the defendant went to the Court of Appeals, his petition for review was denied on
September 29, 1987, as so too was his motion for reconsideration, on December 1, 1987. 4 He
is now before us to fault the respondent court, principally for sustaining the memorandum
decision of the regional trial court. His contention is that it violates Article VIII, Section 14 of the
Constitution.
This provision reads as follows:
Sec. 14. No decision shall be rendered by any court without expressing therein
clearly and distinctly the facts and the law on which it is based.
No petition for review or motion for reconsideration of a decision of the court shall
be refused due course or denied without stating the legal basis therefor.
Except for the second paragraph, which was introduced only in the present charter, Section 14
has been in force since the Constitution of 1935. The provision was recast in affirmative terms in
the 1973 Constitution but has been virtually restored to its original form in the Constitution of
1987, to apply to all courts, including the municipal courts. The purpose has always been the
same, viz., to inform the person reading the decision, and especially the parties, of how it was
reached by the court after consideration of the pertinent facts and examination of the applicable
laws.
The parties are entitled to no less than this explanation if only to assure them that the court
rendering the decision actually studied the case before pronouncing its judgment. But there are
more substantial reasons. For one thing, the losing party must be given an opportunity to
analyze the decision so that, if permitted, he may elevate what he may consider its errors for
review by a higher tribunal. For another, the decision, if well-presented and reasoned, may
convince the losing party of its merits and persuade it to accept the verdict in good grace
instead of prolonging the litigation with a useless appeal. A third reason is that decisions with a
full exposition of the facts and the law on which they are based, especially those coming from
the Supreme Court, will constitute a valuable body of case law that can serve as useful
references and even as precedents in the resolution of future controversies. As the Court said in
Rosales v. Court of First Instance. 5
Precedents are helpful in deciding cases when they are on all fours or at least
substantially Identical with previous litigations. Argumentum a simili valet in lege.
Earlier decisions are guideposts that can lead us in the right direction as we tread
the highways and byways of the law in the search for truth and justice. These
pronouncements represent the wisdom of the past. They are the voice of
vanished judges talking to the future. Except where there is a need to reverse
them because of an emergent viewpoint or an altered situation, they urge us
strongly that, indeed, the trodden path is best.
According to the petitioner, the memorandum decision rendered by the regional trial court
should be revoked for non-compliance with the above-quoted constitutional mandate. He asks
that the case be remanded to the regional trial court for a full blown hearing on the merits, to be
followed by a decision stating therein clearly and distinctly the facts and the law on which it is
based. For his part, the private respondent demurs. He justifies the memorandum decision as

authorized by B.P. Blg. 129 and invokes the ruling of this Court in Romero v. Court of Appeals,
Which sustained the said law.

Section 40 of B.P. Blg. 129 reads as follows:

Sec. 40. Form of decision in appealed cases. Every decision or final resolution
of a court in appealed cases shall clearly and distinctly state the findings of fact
and the conclusions of law on which it is based which may be contained in the
decision or final resolution itself, or adopted by reference from those set forth in
the decision, order or resolution appealed from.
The above section was applied in the Romero case, together with a similar rule embodied in
Section 18 of P.D. No. 946, providing that:
All cases of the Court of Agrarian Relations now pending before the Court of
Appeals shall remain in the Division to which they have been assigned, and shall
be decided within sixty (60) days from the effectivity of this Decree; Provided,
however, That if the decision or order be an affirmance in toto of the dispositive
conclusion of the judgment appealed from, then the Court of Appeals may,
instead of rendering an extended opinion, indicate clearly the trial court's findings
of fact and pronouncements of law which have been adopted as basis for the
affirmance.
In the said case, Justice Jose Y. Feria, speaking for a unanimous Court, declared:
As previously stated, the decision of the Court of Agrarian Relations consisted of
thirteen pages, single space. The above-quoted decision of the respondent Court
of Appeals consists of four pages, three of which contains verbatim the
dispositive portion of the decision appealed from. The remaining page is devoted
to an explanation of why "for judicial convenience and expediency, therefore, We
hereby adopt, by way of reference, the findings of facts and conclusions of the
court a quo spread in its decision, as integral part of this Our decision." The said
decision may be considered as substantial compliance with the above-quoted
provisions in Section 18 of P.D. No. 946 and Section 40 of B.P. Blg. 129.
Nevertheless, he was quick to add a tenable misgiving and to express the following reservation:
The authority given the appellate court to adopt by reference the findings of fact
and conclusions of law from those set forth in the appealed decisions should be
exercised with caution and prudence, because the tendency would be to follow
the line of least resistance by just adopting the findings and conclusions of the
lower court without thoroughly studying the appealed case.
This caveat was necessary because, as he correctly observed:
It cannot be too strongly emphasized that just as important as the intrinsic validity
of a decision is the perception by the parties-litigants that they have been
accorded a fair opportunity to be heard by a fair and responsible magistrate
before judgment is rendered. It is this perception, coupled with a clear

conscience, which enables the members of the judiciary to discharge the

awesome responsibility of sitting in judgment on their fellowmen.
There is no question that the purpose of the law in authorizing the memorandum decision is to
expedite the termination of litigations for the benefit of the parties as well as the courts
themselves.
Concerned with the mounting problem of delay in the administration of justice, the Constitution
now contains a number of provisions aimed at correcting this serious difficulty that has caused
much disaffection among the people. Thus, Section 16 of the Bill of Rights reiterates the original
provision in the 1973 Constitution guaranteeing to all persons "the right to a speedy disposition
of their cases before all judicial, quasi-judicial or administrative bodies." Section 14(2) of the
same Article III retains the rule that the accused shall be entitled to a trial that shall not only be
public and impartial but also speedy. In Article VIII, Section 5(3), the Supreme Court is
expressly permitted to temporarily assign a judge from one station to another when the public
interest so requires, as when there is a necessity for less occupied judge to help a busier
colleague dispose of his cases. In paragraph 5 of the same section, it is stressed that the rules
of court to be promulgated by the Supreme Court "shall provide a simplified and inexpensive
procedure for the speedy disposition of cases." In Section 15, of the same article, maximum
periods are prescribed for the decision or resolution of cases, to wit, twenty-four months in the
case of Supreme Court and, unless reduced by the Supreme Court, twelve months for all lower
collegiate courts and three months for all other lower courts.
The courts of justice are really hard put at coping with the tremendous number of cases in their
dockets which, to make matters worse, continues to grow by the day despite the efforts being
taken to reduce it. In the Supreme Court alone, an average of 400 cases is received every
month as against the average of 300 cases disposed of during the same month, leaving a
difference of 100 cases monthly that is added to some 5,000 still unresolved cases that have
accumulated during the last two decades or so. At this rate, the backlog will increase by 1,200
cases every year on top of the earlier balance, much of which, despite its age, is still viable and
have still to be resolved. Considering that the Court spends four days of the week for studying
and deliberating on these cases in its en banc and division sessions, one can appreciate the
limited time allowed its members for the actual writing of its decisions. (This particular decision,
while extended, happens fortunately to be less complicated than many of the other cases
submitted to it, which require more time to write, not to mention the antecedent research that
may have to be made.)
Viewed in the light of these practical considerations, the memorandum decision can be
welcomed indeed as an acceptable method of dealing expeditiously with the case load of the
courts of justice, But expediency alone, no matter how compelling, cannot excuse noncompliance with the Constitution; or to put it more familiarly, the end does not justify the means.
It is plain that if Section 40 of B.P. Blg. 129 is unconstitutional, it must be struck down.
In the case at bar, we find that a judgment was made by the metropolitan trial court in
compliance with the rule on summary procedure. The decision consisted of three typewritten
pages, single space, and stated clearly and distinctly the facts and the law on which it was
based. It was a concise and well-written decision, and a correct one to boot, for which Judge
Paciano B. Balita is to be commended.

The problem, though, as the petitioner sees it, is that in affirming this judgment, the regional trial
court of Makati rendered a mere memorandum decision that simply adopted by reference the
findings of fact and law made by Judge Balita and then concluded, without saying more, that
"there was no cogent reason to disturb the same." It is claimed that as Judge de la Rama did
not make his own statement of the facts and the law as required by the Constitution, his
memorandum decision was a total nullity. Worse, when the appeal was taken to the respondent
court, what it reviewed was not the memorandum decision of the regional trial court but the
decision rendered by the metropolitan trial court which, legally speaking, was not before the
appellate court.
It is not really correct to say that the Court of Appeals did not review the memorandum decision
of the regional trial court which was the subject of the petition for review. A reading of its own
decision will show that it dealt extensively with the memorandum decision and discussed it at
some length in the light of the observations and reservations of this Court in the Romero
case. Moreover, in reviewing the decision of the metropolitan trial court, the Court of Appeals
was actually reviewing the decision of the regional trial court, which had incorporated by
reference the earlier decision rendered by Judge Balita.
The question, of course, is whether such incorporation by reference was a valid act that
effectively elevated the decision of the metropolitan trial court for examination by the Court of
Appeals.
To be fair, let it be said that when Judge dela Rama availed himself of the convenience offered
by Section 40 of B.P. Blg. 129, he was only acting in accordance with the ruling announced in
Romero permitting the use of the memorandum decision. It must also be observed that even if
the respondent court appeared to be partial to the reservation rather than the rule in the said
case, it nevertheless had the duty which it discharged to abide by the doctrine announced
therein by the highest tribunal of the land. The respondent court could not have acted otherwise.
This Court is not hampered by such inhibitions. As we may re-examine our own rulings and
modify or reverse them whenever warranted, we take a second look at the memorandum
decision and the Romero case and test them on the touchstone of the Constitution.
The law does not define the memorandum decision and simply suggests that the court may
adopt by reference the findings of fact and the conclusions of law stated in the decision, order or
resolution on appeal before it. No particular form is prescribed; the conditions for its use are not
indicated. In fact, B.P. Blg. 129 does not even employ the term "memorandum decision" in
Section 40 or elsewhere in the rest of the statute. This phrase appears to have been introduced
in this jurisdiction not by that law but by Section 24 of the Interim Rules and Guidelines, reading
as follows:
Sec. 24. Memorandum decisions. -The judgment or final resolution of a court
in appealed cases may adopt by reference the findings of fact and conclusions of
law contained in the decision or final order appealed from.
It is clear that where the decision of the appellate court actually reproduces the findings of fact
or the conclusions of law of the court below, it is not a memorandum decision as envisioned in
the above provision. The distinctive features of the memorandum decision are, first, it is
rendered by an appellate court, and second, it incorporates by reference the findings of fact or
the conclusions of law contained in the decision, order or ruling under review. Most likely, the

purpose is to affirm the decision, although it is not impossible that the approval of the findings of
fact by the lower court may lead to a different conclusion of law by the higher court. At any rate,
the reason for allowing the incorporation by reference is evidently to avoid the cumbersome
reproduction of the decision of the lower court, or portions thereof, in the decision of the higher
court. The Idea is to avoid having to repeat in the body of the latter decision the findings or
conclusions of the lower court since they are being approved or adopted anyway.
Parenthetically, the memorandum decision is also allowed in the United States, but its form (at
least) differs from the one under consideration in this case. Such a decision is rendered in that
country upon a previous' determination by the judge that there is no need for a published
opinion and that it will have no precedential effect. The judgment is usually limited to the
dispositive portion but a memorandum is attached containing a brief statement of the facts and
the law involved, mainly for the information of the parties to the case.
When a law is questioned before the Court, we employ the presumption in favor of its
constitutionality. As we said in Peralta v. Commission of Elections, "to justify the nullification of a
law, there must be a clear and unequivocal breach of the Constitution, not a doubtful and
argumentative implication." 7 Courts will bend over backward to sustain that presumption. In
case of doubt, it is the duty of the judiciary to exert every effort to prevent the invalidation of the
law and the nullification of the will of the legislature that enacted it and the executive that
approved it. This norm is based on a becoming respect that the judiciary is expected to accord
the political departments of the government which, it must be assumed in fairness, thoroughly
studied the measure under challenge and assured themselves of its constitutionality before
agreeing to enact it.
The Court has deliberated extensively on the challenge posed against the memorandum
decision as now authorized by law. Taking into account the salutary purpose for which it is
allowed, and bearing in mind the above-discussed restraint we must observe when a law is
challenged before us, we have come to the conclusion that Section 40 of B.P. Blg. 129, as we
shall interpret it here, is not unconstitutional.
What is questioned about the law is the permission it gives for the appellate court to merely
adopt by reference in its own decision the judgment of the lower court on appeal. It is easy to
understand that this device may feed the suspicion feared by Justice Feria that the court has not
given the appeal the attention it deserved and thus deprived the parties of due process. True or
not, this impression is likely to undermine popular faith in the judiciary as an impartial forum
which hears before it decides and bases its decision on the established facts and the applicable
law.
No less objectionable is the inconvenience involved in having to search for the decision referred
to, which, having been incorporated by reference only, does not have to be attached to the
memorandum decision. The Court had occasion earlier to complain about this difficulty in the
case of Gindoy v. Tapucar, 8 where we said:
. . . True it is that the Court of First Instance may adopt in toto either expressly or
impliedly the findings and conclusions of the inferior court, and as a rule, such
adoption would amount to a substantial compliance with the constitutional
mandate discussed herein, but where, as in this case, the specific arguments
presented against the decision of the inferior court are of such nature that a
blanket affirmance of said decision does not in fact adequately dispose of the

strictures against it, it is but proper, if only to facilitate the action to be taken by
the appellate court on the petition for review, that the concrete bases of the
impugned decision should appear on its face, instead of the appellate court
having to dig into the records to find out how the inferior court resolved the issues
of the case.
As to this problem, the Solicitor General correctly points out that it does not exist in the case at
bar because the decision of the Court of Appeals extensively quoted from the decision of the
metropolitan trial court. Although only incorporated by reference in the memorandum decision of
the regional trial court, Judge Balita's decision was nevertheless available to the Court of
Appeals. It is this circumstance, or even happenstance, if you will, that has validated the
memorandum decision challenged in this case and spared it from constitutional infirmity.
That same circumstance is what will move us now to lay down the following requirement, as a
condition for the proper application of Section 40 of B.P. Blg. 129. The memorandum decision,
to be valid, cannot incorporate the findings of fact and the conclusions of law of the lower court
only by remote reference, which is to say that the challenged decision is not easily and
immediately available to the person reading the memorandum decision. For the incorporation by
reference to be allowed, it must provide for direct access to the facts and the law being adopted,
which must be contained in a statement attached to the said decision. In other words, the
memorandum decision authorized under Section 40 of B.P. Blg. 129 should actually embody the
findings of fact and conclusions of law of the lower court in an annex attached to and made an
indispensable part of the decision.
It is expected that this requirement will allay the suspicion that no study was made of the
decision of the lower court and that its decision was merely affirmed without a proper
examination of the facts and the law on which it was based. The proximity at least of the
annexed statement should suggest that such an examination has been undertaken. It is, of
course, also understood that the decision being adopted should, to begin with, comply with
Article VIII, Section 14 as no amount of incorporation or adoption will rectify its violation.
The Court finds it necessary to emphasize that the memorandum decision should be sparingly
used lest it become an addictive excuse for judicial sloth. It is an additional condition for its
validity that this kind of decision may be resorted to only in cases where the facts are in the
main accepted by both parties or easily determinable by the judge and there are no doctrinal
complications involved that will require an extended discussion of the laws involved. The
memorandum decision may be employed in simple litigations only, such as ordinary collection
cases, where the appeal is obviously groundless and deserves no more than the time needed to
dismiss it.
Despite the convenience afforded by the memorandum decision, it is still desirable that the
appellate judge exert some effort in restating in his own words the findings of fact of the lower
court and presenting his own interpretation of the law instead of merely parroting the language
of the court a quo as if he cannot do any better. There must be less intellectual indolence and
more pride of authorship in the writing of a decision, especially if it comes from an appellate
court.
It ill becomes an appellate judge to write his rulings with a pair of scissors and a pot of paste as
if he were a mere researcher. He is an innovator, not an echo. The case usually becomes
progressively simpler as it passes through the various levels of appeal and many issues

become unimportant or moot and drop along the way. The appellate judge should prune the
cluttered record to make the issues clearer. He cannot usually do this by simply mimicking the
lower court. He must use his own perceptiveness in unraveling the rollo and his own
discernment in discovering the law. No less importantly, he must use his own language in laying
down his judgment. And in doing so, he should also guard against torpidity lest his
pronouncements excite no more fascination than a technical tract on the values of horse
manure as a fertilizer. A little style will help liven the opinion trapped in the tortuous lexicon of
the law with all its whereases and wherefores. A judicial decision does not have to be a bore.
The interpretation we make today will not apply retroactively to the memorandum decision
rendered by the regional trial court in the case at bar, or to the decision of the respondent court
such decision on the strength of Romero v. Court of Appeals. As earlier observed, there was
substancial compliance with Section 40 because of the direct availability and actual review of
the decision of Judge Balita incorporated by reference in the memorandum decision of Judge de
la Rama. The memorandum decision as then understood under the Romero decision was a
valid act at the time it was rendered by Judge de la Rama and produced binding legal effect. We
also affirm the finding of the respondent court that the summary judgment without a formal trial
was in accord with the Rule on Summary Procedure and that the award of attorney's fees is not
improper.
Henceforth, all memorandum decisions shall comply with the requirements herein set forth both
as to the form prescribed and the occasions when they may be rendered. Any deviation will
summon the strict enforcement of Article VIII, Section 14 of the Constitution and strike down the
flawed judgment as a lawless disobedience.
WHEREFORE, the petition is DENIED, with costs against the petitioner. This decision is
immediately executory. It is so ordered.
Fernan, C.J., Narvasa, Melencio-Herrera, Gutierrez, Jr., Paras, Gancayco, Padilla, Bidin,
Sarmiento, Cortes, Grio-Aquino, Medialdea and Regalado, JJ., concur.

Republic of the Philippines

SUPREME COURT
Manila

EN BANC
G.R. No. 85815 May 19, 1989
ELENO T. REGIDOR, JR., ANICETO T. SIETE, CAMILO B. ZAPATOS & RODULFO
ENRIQUEZ, petitioners,
vs.
GOV. WILLIAM CHIONGBIAN, Vice Gov. FLORENCIO GARCIA, Sangguniang
Panlalawigan, Members MARIVIC SAGRADO, MORPHEUS AGOT, CONSTANCIO BALAIS,
ALEGRIA CARIO, ERNESTO IRA, PACITA YAP, JULIO TIU and Sangguniang
Panglunsod, ROBERT O. TACLOB, respondents.
Donatilo C. Macamay for petitioners.
Vicente Sarigumba for respondents.

GRIO-AQUINO, J.:
This petition for prohibition with a prayer for the issuance of temporary restraining order or writ
of preliminary injunction was filed by the petitioners who are the duly elected city officials of
Tangub City of Misamis Occidental. Eleno T. Regidor was elected City Mayor of Tangub City,
the other petitioners, Aniceto T. Siete, Camilo B. Zapatos and Rodulfo Enriquez, are
respectively the Vice-Mayor and members of the Sangguniang Panglunsod of Tangub City, who
were elected in the January 18, 1988 local elections, were proclaimed in due course, and
assumed office.
On November 3, 1988, respondents William Chiongbian and Florencio Garcia, Marivic Sagrada
Morpheus Agot, Constancio Balais, Alegria Carifio, Ernesto Ira, Pacita Yap, and Julio Tiu, who
are respectively the Provincial Governor, the Vice-Governor, and members of the Sangguniang
Panlalawigan, approved Resolution No. 340-88 recommending the suspension of the petitioners
who failed to appear on November 18, 1988 at the hearing of a complaint for unspecified
misconduct which respondent Robert O. Taclob filed against them in the office of the Governor
and the Sangguniang Panlalawigan.
Pursuant to that resolution, Governor William Chiongbian issued on November 24,1988 an
Order of Preventive Suspension, suspending the petitioners "from their elective positions as City
Mayor, City Vice-Mayor and Sangguniang Panglunsod members of Tangub City for a period of
60 days effective November 25, 1988" and ordering them to "cease and desist from performing
the functions and duties" of their respective offices (Annex D, p. 10, Rollo).
On the same day, Governor Chiongbian appointed Taclob, a member of the Sangguniang
Panglunsod of Tangub City, as Officer-in-Charge of Tangub City in lieu of Mayor Eleno T.
Regidor (Annex E, p. 110, Rollo). Taclob belongs to the governor's political faction while
Regidor and the other petitioners belong to the rival faction of Alfonso Tan, the defeated
opponent of respondent Chiongbian for the governorship of Misamis Occidental.
The petition alleges that respondents Governor Chiongbian and the Sangguniang Panlalawigan
acted without authority, and contrary to law, in issuing the Order of Preventive Suspension

against the petitioners because under Section 63 of the Local Government Code, a provincial or
city official may be preventively suspended by the Minister of Local Government, not by the
Provincial Governor.
Upon receipt of the petition, this Court issued a temporary restraining order commanding the
respondents to "cease and desist from implementing or enforcing Resolution No. 340-88 dated
November 23, 1988 and Preventive Suspension Order dated November 24, 1988, and enjoining
respondent Robert O. Taclob from assuming the position of OIC Mayor of Tangub City" (pp. 1416, Rollo).
In their comment on the petition, the respondents justified the suspension of the petitioners as a
valid exercise of the Provincial Governor's power of general supervision over a component city
(Par. 6.4, Section 1, Rule 4 of the Implementing Rules & Regulations of the Local Government
Code), and that it was done "in pursuance to (sic) the provisions of the Local Government Code
and the Rules & Regulations implementing said law." (P. 25, Rollo.)
However, the pertinent provisions of the Local Government Code and the Implementing Rules
and Regulations thereof do not sustain the respondents' contention in this case.
Section 61 of the Local Government Code provides that complaints against elective provincial or
city officials should be verified and should be filed before the Minister of Local Government.
Section 63 Provides that the Minister of Local Government may impose a preventive
suspension against the accused elective provincial or city official, thus:
Sec. 63. Preventive Suspension. (1) Preventive suspension may be imposed
by the Minister of Local Government if the respondent is a provincial or city
official, by the provincial governor if the respondent is an elective municipal
official, or by the city or municipal mayor if the respondent is an elective
barangay official.
(2) Preventive suspension may be imposed at any time after the issues are
joined, when there is reasonable ground to believe that the respondent has
committed the act or acts complained of, when the evidence of culpability is
strong, when the gravity of the offense so warrants, or when the continuance in
office of the respondent could influence the witnesses or pose a threat to the
safety and integrity of the records and other evidence. In all cases, preventive
suspension shall not extend beyond sixty days after the start of said suspension.
(3) At the expiration of sixty days, the suspended official shall be deemed
reinstated in office without prejudice to the continuation of the proceedings
against him until its termination. However, if the delay in the proceedings of the
case is due to his fault, neglect or request, the time of the delay shall not be
counted in computing the time of suspension.
Section 7 of the Implementing Rules & Regulations reads as follows:
Sec. 7. Preventive Suspension. If from the answer of the respondent, and the
complaint filed, the Minister/Sanggunian concerned find and determine that there
is reasonable ground to believe that he has committed the act or acts complained

of, when the evidence of guilt is strong, when the gravity of the offense so
warrants, or the continuance in office of the respondent could influence the
witnesses or pose a threat to the safety and integrity of the records and other
evidences, the Minister of Local Government, provincial petitioner of municipal
mayor as the case may be, may preventively suspend an elective provincial, City
Municipal or barangay official, respectively: Provided, That the preventive
suspension shall not exceed sixty (60) days after the start of said suspension.
There is no merit in the respondents' contention that the order of preventive suspension issued
by Governor Chiongbian was within the authority granted in Section 7, Rule 18 of the
Implementing Rules & Regulations to "the Minister of Local Government, provincial governor, or
municipal mayor, as the case may be," to "preventively suspend an elective provincial, city,
municipal or barangay official, respectively."
Respondents misread and misconstrued Section 7, Rule 18 of the Implementing Rules &
Regulations of the Local Government Code. The rule should be read in juxtaposition with
Section 63 of the Code which provides that "preventive suspension may be imposed by the
Minister of Local Government if the respondent is a provincial or city official, by the provincial
governor if the respondent is an elective municipal official, or by the city or municipal mayor if
the respondent is an elective barangay official." In light of Section 63 of the Code, Section 7 of
Rule 18 of the Implementing Rules & Regulations should be interpreted to mean that the
Minister of Local Government may preventively suspend an elective provincial or city official, the
Provincial Governor may preventively suspend an elective municipal official, and the city or
municipal mayor may preventively suspend an elective barangay official. This is as it should be
for complaints against provincial or city officials are supposed to be filed with the Minister (now
Secretary) of Local Government, hence, it is he (not the provincial governor) who would know
whether or not the charges are serious enough to warrant the suspension of the accused
elective provincial or city official.
No rule or regulation issued by the Secretary of Local Government may alter, amend, or
contravene a provision of the Local Government Code. The implementing rules should conform,
not clash, with the law that they implement, for a regulation which operates to create a rule out
of harmony with the statute is a nullity (Commissioner of Internal Revenue vs. Vda. de Prieto, L13912, September 30, 1950). A rule or regulation that was issued to implement a law may not
go beyond the terms and provisions of the law (People vs. Lim, 108 Phil. 1091).
In this case, the implementing rule (Sec. 7, Rule 18) does not in fact clash with the law (Sec. 63,
Local Government Code) the draftsmanship is not perfect but the use of the phrase "as the
case may be" and the term "respectively" indicates a delineation of the power to suspend.
As the complaint or complaints against the petitioners were filed with the Office of the Provincial
Governor, not with the Minister of Local Government as required in Section 61 of the Local
Government Code, and, as the preventive suspension of the petitioners was ordered by the
Provincial Governor, not by the Minister of Local Government, the notice of hearing, subpoena,
and order of preventive suspension issued by the respondents governor and members of the
Sangguniang Panlalawigan against the petitioners are hereby declared null and void. (Local
Government Code [BP 337], Title Two, Chapter 4, See. 63[1].) The respondents are without
authority to investigate the petitioners, and the latter may not be compelled to attend the
hearings. Their refusal to answer the charges against them was justified.

WHEREFORE, the petition for certiorari is granted. The Resolution No. 340-88 of the
Sangguniang Panglunsod, and the order of preventive suspension issued by respondent
Governor William Chiongbian the appointment of Robert O. Taclob as OIC Mayor of Tangub
City, the notices of hearing and subpoenas issued to the petitioners by the respondents are all
annulled and set aside. The temporary restraining order which We issued on December 7,
1988, is hereby made permanent.
SO ORDERED.

Republic of the Philippines

SUPREME COURT
Manila
THIRD DIVISION
G.R. No. 84850 June 29, 1989
RICARDO A. LLAMADO, petitioner,
vs.
HONORABLE COURT OF APPEALS and LEON GAW, respondents.
Ambrosio Padilla, Mempin & Reyes Law Offices for petitioner.
FELICIANO, J.:
Petitioner Ricardo A. Llamado was Treasurer of Pan Asia Finance Corporation. Together with
Jacinto N. Pascual, Sr., President of the same corporation, petitioner Llamado was prosecuted
for violation of Batas Pambansa Blg. 22 in Criminal Case No. 85-38653, Regional Trial Court of
Manila, Branch 49. The two (2) had co-signed a postdated check payable to private respondent
Leon Gaw in the amount of P186,500.00, which check was dishonored for lack of sufficient
funds.
In a decision dated 10 March 1987, the trial court convicted the petitioner alone, since
jurisdiction over the person of Pascual, who had thoughtfully fled the country, had not been
obtained. Petitioner was sentenced to imprisonment for a period of one (1) year of prision
correccional and to pay a fine of P 200,000.00 with subsidiary imprisonment in case of
insolvency. Petitioner was also required to reimburse respondent Gaw the amount of
P186,500.00 plus the cost of suit.

On 20 March 1987, after the decision of the trial court was read to him, petitioner through
counsel orally manifested that he was taking an appeal. Having been so notified, the trial court
on the same day ordered the forwarding of the records of the case to the Court of Appeals. On 9
July 1987, petitioner through his counsel received from the Court of Appeals a notice to file his
Appellant's Brief within thirty (30) days. Petitioner managed to secure several extensions of time
within which to file his brief, the last extension expiring on 18 November 1987. 1
Petitioner Llamado, even while his Appellant's Brief was being finalized by his then counsel of
record, sought advice from another counselor. On 30 November 1987, petitioner, with the
assistance of his new counsel, filed in the Regional Trial Court a Petition for Probation invoking
Presidential Decree No. 968, as amended. The Petition was not, however, accepted by the
lower court, since the records of the case had already been forwarded to the Court of Appeals.
Petitioner then filed with the Court of Appeals Manifestation and Petition for Probation" dated 16
November 1987, enclosing a copy of the Petition for Probation that he had submitted to the trial
court. Petitioner asked the Court of Appeals to grant his Petition for Probation or, in the
alternative, to remand the Petition back to the trial court, together with the records of the
criminal case, for consideration and approval under P.D. No. 968, as amended. At the same
time, petitioner prayed that the running of the period for the filing of his Appellant's Brief be held
in abeyance until after the Court of Appeals shall have acted on his Petition for Probation.
In a "Manifestation and Motion" dated 3 March 1988 and filed with the Court of Appeals,
petitioner formally withdrew his appeal conditioned, however, on the approval of his Petition for
Probation. 2
Complying with a Resolution of the Court of Appeals, the Office of the Solicitor General filed a
Comment stating that it had no objection to petitioner Llamado's application for probation.
Private respondent-complainant, upon the other hand, sought and obtained leave to file a
Comment on petitioner Llamado's application for probation, to which Comment, petitioner filed a
Reply. Private respondent then filed his "Comment" on the Office of the Solicitor General's
Comment of 18 March 1988.
In a Resolution dated 17 June 1988, the Court of Appeals, through Mr. Justice Magsino, denied
the Petition for Probation. A dissenting opinion was filed by Mr. Justice Bellosillo while Mr.
Justice Santiago submitted a concurring opinion. Petitioner moved for reconsideration which
Motion was denied by the Court of Appeals on 23 August 1988, with another, briefer, dissenting
opinion from Mr. Justice Bellosillo.
Petitioner now asks this Court to review and reverse the opinion of the majority in the Court of
Appeals and, in effect, to accept and adopt the dissenting opinion as its own.
The issue to be resolved here is whether or not petitioner's application for probation which was
filed after a notice of appeal had been filed with the trial court, after the records of the case had
been forwarded to the Court of Appeals and the Court of Appeals had issued the notice to file
Appellant's Brief, after several extensions of time to file Appellant's Brief had been sought from
and granted by the Court of Appeals but before actual filing of such brief, is barred under P.D.
No. 968, as amended.
P.D. No. 968, known as the Probation Law of 1976, was promulgated on 24 July 1976. Section
4 of this statute provided as follows:

Sec. 4. Grant of Probation. Subject to the provisions of this Decree, the court
may, after it shall have convicted and sentenced a defendant and upon
application at any time of said defendant, suspend the execution of said
sentence and place the defendant on probation for such period and upon such
terms and conditions as it may deem best.
Probation may be granted whether the sentence imposes a term of imprisonment
or a fine only. An application for probation shall be filed with the trial court, with
notice to the appellate court if an appeal has been taken from the sentence of
conviction. The filing of the application shall be deemed a waiver of the right to
appeal, or the automatic withdrawal of a pending appeal.
An order granting or denying probation shall not be appealable. (Emphasis
supplied)
It will be noted that under Section 4 of P.D. No. 968, the trial court could grant an application for
probation "at any time" "after it shall have convicted and sentenced a defendant" and certainly
after "an appeal has been taken from the sentence of conviction." Thus, the filing of the
application for probation was "deemed [to constitute] automatic withdrawal of a pending appeal."
On 1 December 1977, Section 4 of P.D. No. 968 was amended by P.D. No. 1257 so as to read
as follows:
Sec. 4. Grant of Probation. Subject to the provisions of this Decree, the court
may, senteafter it shall have convicted and sentenced a defendant but before he
begins to serve his sentence and upon his application, suspend the execution of
said sentence and place the defendant on probation for such period and upon
such terms and conditions as it may deem best.
The prosecuting officer concerned shall be notified by the court of the filing of the application for
probation and he may submit his comment on such application within ten days from receipt of
the notification.
Probation may be granted whether the sentence imposes a term of imprisonment
or a fine with subsidiary imprisonment in case of insolvency. An application for
probation shall be filed with the trial court, with notice to the appellate court if an
appeal has been taken from the sentence of conviction. The filing of the
application shall be deemed a waiver of the right to appeal, or the automatic
withdrawal of a pending appeal. In the latter case, however, if the application is
filed on or after the date of the judgment of the appellate court, said application
shall be acted upon by the trial court on the basis of the judgment of the
appellate court. (Emphasis supplied)
Examination of Section 4, after its amendment by P.D. No. 1257, reveals that it had established
a prolonged but definite period during which an application for probation may be granted by the
trial court. That period was: 'After [the trial court] shall have convicted and sentenced a
defendant but before he begins to serve his sentence." Clearly, the cut-off time-commencement
of service of sentence-takes place not only after an appeal has been taken from the sentence of
conviction, but even after judgement has been rendered by the appellate court and after
judgment has become final. Indeed, in this last situation, Section 4, as amended by P.D. No.

1257 provides that "the application [for probation] shall be acted upon by the trial court on the
basis of the judgment of the appellate court"; for the appellate court might have increased or
reduced the original penalty imposed by the trial court. It would seem beyond dispute then that
had the present case arisen while Section 4 of the statute as amended by P.D. No. 1257 was
still in effect, petitioner Llamado's application for probation would have had to be granted. Mr.
Llamado's application for probation was filed well before the cut-off time established by Section
4 as then amended by P.D. No. 1257.
On 5 October 1985, however, Section 4 of the Probation Law of 1976 was once again
amended. This time by P.D. No. 1990. As so amended and in its present form, Section 4 reads
as follows:
Sec. 4. Grant of Probation. Subject to the provisions of this Decree, the trial court
may, after it shall have convicted and sentenced a defendant, and upon
application by said defendant within the period for perfecting an appeal, suspend
the execution of the sentence and place the defendant on probation for such
period and upon such terms and conditions as it may deem best; Provided, That
no application for probation shall be entertained or granted if the defendant has
perfected an appeal from the judgment of conviction.
Probation may be granted whether the sentence imposes a term of imprisonment
or a fine only An application for probation shall be filed with the trial court. The
filing of the application shall be deemed a waiver of the right to appeal.
An order granting or denying probation shall not be appealable. (Emphasis
supplied)
In sharp contrast with Section 4 as amended by PD No. 1257, in its present form, Section 4
establishes a much narrower period during which an application for probation may be filed with
the trial court: "after [the trial court] shall have convicted and sentenced a defendant and
within the period for perfecting an appeal ." As if to provide emphasis, a new proviso was
appended to the first paragraph of Section 4 that expressly prohibits the grant of an application
for probation "if the defendant has perfected an appeal from the judgment of conviction." It is
worthy of note too that Section 4 in its present form has dropped the phrase which said that the
filing of an application for probation means "the automatic withdrawal of a pending appeal". The
deletion is quite logical since an application for probation can no longer be filed once an appeal
is perfected; there can, therefore, be no pending appeal that would have to be withdrawn.
In applying Section 4 in the form it exists today (and at the time petitioner Llamado was
convicted by the trial court), to the instant case, we must then inquire whether petitioner
Llamado had submitted his application for probation "within the period for perfecting an appeal."
Put a little differently, the question is whether by the time petitioner Llamado's application was
filed, he had already "perfected an appeal" from the judgment of conviction of the Regional Trial
Court of Manila.
The period for perfecting an appeal from a judgment rendered by the Regional Trial Court,
under Section 39 of Batas Pambansa Blg. 129, Section 19 of the Interim Rules and Guidelines
for the Implementation of B.P. Blg. 129 and under the 1985 Rules on Criminal Procedure, as
amended, or more specifically Section 5 of Rule 122 of the Revised Rules of Court, is fifteen
(15) days from the promulgation or notice of the judgment appealed from. It is also clear from

Section 3 (a) of Rule 122 that such appeal is taken or perfected by simply filing a notice of
appeal with the Regional Trial Court which rendered the judgment appealed from and by serving
a copy thereof upon the People of the Philippines. As noted earlier, petitioner Llamado had
manifested orally and in open court his intention to appeal at the time of promulgation of the
judgment of conviction, a manifestation at least equivalent to a written notice of appeal and
treated as such by the Regional Trial Court.
Petitioner urges, however, that the phrase "period for perfecting an appeal" and the clause "if
the defendant has perfected an appeal from the judgment of conviction" found in Section 4 in its
current form, should not be interpreted to refer to Rule 122 of the Revised Rules of Court; and
that the "whereas" or preambulatory clauses of P.D. No. 1990 did not specify a period of fifteen
(15) days for perfecting an appeal. 3 It is also urged that "the true legislative intent of the
amendment (P.D. No. 1990) should not apply to petitioner who filed his Petition for probation at
the earliest opportunity then prevailing and withdrew his appeal." 4
Petitioner invokes the dissenting opinion rendered by Mr. Justice Bellosillo in the Court of
Appeals. Petitioner then asks us to have recourse to "the cardinal rule in statutory construction"
that "penal laws [should] be liberally construed in favor of the accused," and to avoid "a too
literal and strict application of the proviso in P.D. No. 1990" which would "defeat the manifest
purpose or policy for which the [probation law] was enacted-."
We find ourselves unable to accept the eloquently stated arguments of petitioner's counsel and
the dissenting opinion. We are unable to persuade ourselves that Section 4 as it now stands, in
authorizing the trial court to grant probation "upon application by [the] defendant within the
period for perfecting an appeal" and in reiterating in the proviso that
no application for probation shall be entertained or granted if the defendant has
perfected an appeal from the judgment of conviction.
did not really mean to refer to the fifteen-day period established, as indicated above, by B.P.
Blg. 129, the Interim Rules and Guidelines Implementing B.P. Blg. 129 and the 1985 Rules on
Criminal Procedure, but rather to some vague and undefined time, i.e., "the earliest opportunity"
to withdraw the defendant's appeal. The whereas clauses invoked by petitioner did not, of
course, refer to the fifteen-day period. There was absolutely no reason why they should have so
referred to that period for the operative words of Section 4 already do refer, in our view, to such
fifteen-day period. Whereas clauses do not form part of a statute, strictly speaking; they are not
part of the operative language of the statute. 5 Nonetheless, whereas clauses may be helpful to
the extent they articulate the general purpose or reason underlying a new enactment, in the
present case, an enactment which drastically but clearly changed the substantive content of
Section 4 existing before the promulgation of P.D. No. 1990. Whereas clauses, however, cannot
control the specific terms of the statute; in the instant case, the whereas clauses of P.D. No.
1990 do not purport to control or modify the terms of Section 4 as amended. Upon the other
hand, the term "period for perfecting an appeal" used in Section 4 may be seen to furnish
specification for the loose language "first opportunity" employed in the fourth whereas clause.
"Perfection of an appeal" is, of course, a term of art but it is a term of art widely understood by
lawyers and judges and Section 4 of the Probation Law addresses itself essentially to judges
and lawyers. "Perfecting an appeal" has no sensible meaning apart from the meaning given to
those words in our procedural law and so the law-making agency could only have intended to
refer to the meaning of those words in the context of procedural law.

Turning to petitioner's invocation of "liberal interpretation" of penal statutes, we note at the

outset that the Probation Law is not a penal statute. We, however, understand petitioner's
argument to be really that any statutory language that appears to favor the accused in a criminal
case should be given a "liberal interpretation." Courts, however, have no authority to invoke
"liberal interpretation' or "the spirit of the law" where the words of the statute themselves, and as
illuminated by the history of that statute, leave no room for doubt or interpretation. We do not
believe that "the spirit of law" may legitimately be invoked to set at naught words which have a
clear and definite meaning imparted to them by our procedural law. The "true legislative intent"
must obviously be given effect by judges and all others who are charged with the application
and implementation of a statute. It is absolutely essential to bear in mind, however, that the
spirit of the law and the intent that is to be given effect are to be derived from the words actually
used by the law-maker, and not from some external, mystical or metajuridical source
independent of and transcending the words of the legislature.
The Court is not here to be understood as giving a "strict interpretation rather than a "liberal"
one to Section 4 of the Probation Law of 1976 as amended by P.D. No. 1990. "Strict" and
"liberal" are adjectives which too frequently impede a disciplined and principled search for the
meaning which the law-making authority projected when it promulgated the language which we
must apply. That meaning is clearly visible in the text of Section 4, as plain and unmistakable as
the nose on a man's face. The Court is simply reading Section 4 as it is in fact written. There is
no need for the involved process of construction that petitioner invites us to engage in, a
process made necessary only because petitioner rejects the conclusion or meaning which
shines through the words of the statute. The first duty of a judge is to take and apply a statute
as he finds it, not as he would like it to be. Otherwise, as this Court in Yangco v. Court of First
Instance of Manila warned, confusion and uncertainty in application will surely follow, making,
we might add, stability and continuity in the law much more difficult to achieve:
. . . [w]here language is plain, subtle refinements which tinge words so as to give
them the color of a particular judicial theory are not only unnecessary but
decidedly harmful. That which has caused so much confusion in the law, which
has made it so difficult for the public to understand and know what the law is with
respect to a given matter, is in considerable measure the unwarranted
interference by judicial tribunals with the English language as found in statutes
and contracts, cutting the words here and inserting them there, making them fit
personal ideas of what the legislature ought to have done or what parties should
have agreed upon, giving them meanings which they do not ordinarily have
cutting, trimming, fitting, changing and coloring until lawyers themselves are
unable to advise their clients as to the meaning of a given statute or contract until
it has been submitted to some court for its interpretation and construction. 6
The point in this warning may be expected to become sharper as our people's grasp of English
is steadily attenuated.
There is another and more fundamental reason why a judge must read a statute as the
legislative authority wrote it, not as he would prefer it to have been written. The words to be
given meaning whether they be found in the Constitution or in a statute, define and therefore
limit the authority and discretion of the judges who must apply those words. If judges may,
under cover of seeking the "true spirit" and "real intent" of the law, disregard the words in fact
used by the law-giver, the judges will effectively escape the constitutional and statutory
limitations on their authority and discretion. Once a judge goes beyond the clear and ordinary

import of the words of the legislative authority, he is essentially on uncharted seas. In a polity
like ours which enshrines the fundamental notion of limiting power through the separation and
distribution of powers, judges have to be particularly careful lest they substitute their
conceptions or preferences of policy for that actually projected by the legislative agency. Where
a judge believes passionately that he knows what the legislative agency should have said on
the particular matter dealt with by a statute, it is easy enough for him to reach the conclusion
that therefore that was what the law-making authority was really saying or trying to say, if
somewhat ineptly As Mr. Justice Frankfurter explained:
Even within their area of choice the courts are not at large. They are confined by
the nature and scope of the judicial function in its particular exercise in the field of
interpretation. They are under the constraints imposed by the judicial function in
our democratic society. As a matter of verbal recognition certainly, no one will
gainsay that the function in construing a statute is to ascertain the meaning of
words used by the legislature. To go beyond it is to usurp a power which our
democracy has lodged in its elected legislature. The great judges have
constantly admonished their brethren of the need for discipline in observing the
limitations A judge must not rewrite a statute, neither to enlarge nor to contract it.
Whatever temptations the statesmanship of policy-making might wisely suggest,
construction must eschew interpolation and evisceration He must not read in by
way of creation. He must not read out except to avoid patent nonsense of internal
contradictions. ... 7
Petitioner finally argues that since under Section 4 of Probation Law as amended has vested in
the trial court the authority to grant the application for probation, the Court of Appeals had no
jurisdiction to entertain the same and should have (as he had prayed in the alternative)
remanded instead the records to the lower court. Once more, we are not persuaded. The trial
court lost jurisdiction over the case when petitioner perfected his appeal. The Court of Appeals
was not, therefore, in a position to remand the case except for execution of judgment. Moreover,
having invoked the jurisdiction of the Court of Appeals, petitioner is not at liberty casually to
attack that jurisdiction when exercised adversely to him. In any case, the argument is mooted by
the conclusion that we have reached, that is, that petitioner's right to apply for probation was
lost when he perfected his appeal from the judgment of conviction.
WHEREFORE, the Decision of the Court of Appeals in CAGR No. 04678 is hereby AFFIRMED.
No pronouncement as to costs.
SO ORDERED.
Fernan (C.J.), Gutierrez, Jr., Bidin and Cortes, JJ., concur.

Republic of the Philippines

SUPREME COURT
Manila
FIRST DIVISION
G.R. No. L-50999 March 23, 1990
JOSE SONGCO, ROMEO CIPRES, and AMANCIO MANUEL, petitioners,
vs
NATIONAL LABOR RELATIONS COMMISSION (FIRST DIVISION), LABOR ARBITER
FLAVIO AGUAS, and F.E. ZUELLIG (M), INC., respondents.
Raul E. Espinosa for petitioners.
Lucas Emmanuel B. Canilao for petitioner A. Manuel.
Atienza, Tabora, Del Rosario & Castillo for private respondent.

MEDIALDEA, J.:
This is a petition for certiorari seeking to modify the decision of the National Labor Relations
Commission in NLRC Case No. RB-IV-20840-78-T entitled, "Jose Songco and Romeo Cipres,
Complainants-Appellants, v. F.E. Zuellig (M), Inc., Respondent-Appellee" and NLRC Case No.
RN- IV-20855-78-T entitled, "Amancio Manuel, Complainant-Appellant, v. F.E. Zuellig (M), Inc.,
Respondent-Appellee," which dismissed the appeal of petitioners herein and in effect affirmed
the decision of the Labor Arbiter ordering private respondent to pay petitioners separation pay
equivalent to their one month salary (exclusive of commissions, allowances, etc.) for every year
of service.
The antecedent facts are as follows:
Private respondent F.E. Zuellig (M), Inc., (hereinafter referred to as Zuellig) filed with the
Department of Labor (Regional Office No. 4) an application seeking clearance to terminate the
services of petitioners Jose Songco, Romeo Cipres, and Amancio Manuel (hereinafter referred
to as petitioners) allegedly on the ground of retrenchment due to financial losses. This
application was seasonably opposed by petitioners alleging that the company is not suffering
from any losses. They alleged further that they are being dismissed because of their
membership in the union. At the last hearing of the case, however, petitioners manifested that

they are no longer contesting their dismissal. The parties then agreed that the sole issue to be
resolved is the basis of the separation pay due to petitioners. Petitioners, who were in the sales
force of Zuellig received monthly salaries of at least P40,000. In addition, they received
commissions for every sale they made.
The collective Bargaining Agreement entered into between Zuellig and F.E. Zuellig Employees
Association, of which petitioners are members, contains the following provision (p. 71, Rollo):
ARTICLE XIV Retirement Gratuity
Section l(a)-Any employee, who is separated from employment due to old age,
sickness, death or permanent lay-off not due to the fault of said employee shall
receive from the company a retirement gratuity in an amount equivalent to one
(1) month's salary per year of service. One month of salary as used in this
paragraph shall be deemed equivalent to the salary at date of retirement; years
of service shall be deemed equivalent to total service credits, a fraction of at least
six months being considered one year, including probationary employment.
(Emphasis supplied)
On the other hand, Article 284 of the Labor Code then prevailing provides:
Art. 284. Reduction of personnel. The termination of employment of any
employee due to the installation of labor saving-devices, redundancy,
retrenchment to prevent losses, and other similar causes, shall entitle the
employee affected thereby to separation pay. In case of termination due to the
installation of labor-saving devices or redundancy, the separation pay shall be
equivalent to one (1) month pay or to at least one (1) month pay for every year of
service, whichever is higher. In case of retrenchment to prevent losses and other
similar causes, the separation pay shall be equivalent to one (1) month pay or at
least one-half (1/2) month pay for every year of service, whichever is higher. A
fraction of at least six (6) months shall be considered one (1) whole year.
(Emphasis supplied)
In addition, Sections 9(b) and 10, Rule 1, Book VI of the Rules Implementing the Labor Code
provide:
xxx
Sec. 9(b). Where the termination of employment is due to retrechment initiated
by the employer to prevent losses or other similar causes, or where the
employee suffers from a disease and his continued employment is prohibited by
law or is prejudicial to his health or to the health of his co-employees, the
employee shall be entitled to termination pay equivalent at least to his one month
salary, or to one-half month pay for every year of service, whichever is higher, a
fraction of at least six (6) months being considered as one whole year.
xxx
Sec. 10. Basis of termination pay. The computation of the termination pay of
an employee as provided herein shall be based on his latest salary rate, unless

the same was reduced by the employer to defeat the intention of the Code, in
which case the basis of computation shall be the rate before its deduction.
(Emphasis supplied)
On June 26,1978, the Labor Arbiter rendered a decision, the dispositive portion of which reads
(p. 78, Rollo):
RESPONSIVE TO THE FOREGOING, respondent should be as it is hereby,
ordered to pay the complainants separation pay equivalent to their one month
salary (exclusive of commissions, allowances, etc.) for every year of service that
they have worked with the company.
SO ORDERED.
The appeal by petitioners to the National Labor Relations Commission was dismissed for lack of
merit.
Hence, the present petition.
On June 2, 1980, the Court, acting on the verified "Notice of Voluntary Abandonment and
Withdrawal of Petition dated April 7, 1980 filed by petitioner Romeo Cipres, based on the
ground that he wants "to abide by the decision appealed from" since he had "received, to his full
and complete satisfaction, his separation pay," resolved to dismiss the petition as to him.
The issue is whether or not earned sales commissions and allowances should be included in
the monthly salary of petitioners for the purpose of computation of their separation pay.
The petition is impressed with merit.
Petitioners' position was that in arriving at the correct and legal amount of separation pay due
them, whether under the Labor Code or the CBA, their basic salary, earned sales commissions
and allowances should be added together. They cited Article 97(f) of the Labor Code which
includes commission as part on one's salary, to wit;
(f) 'Wage' paid to any employee shall mean the remuneration or earnings,
however designated, capable of being expressed in terms of money, whether
fixed or ascertained on a time, task, piece, or commission basis, or other method
of calculating the same, which is payable by an employer to an employee under
a written or unwritten contract of employment for work done or to be done, or for
services rendered or to be rendered, and includes the fair and reasonable value,
as determined by the Secretary of Labor, of board, lodging, or other facilities
customarily furnished by the employer to the employee. 'Fair reasonable value'
shall not include any profit to the employer or to any person affiliated with the
employer.
Zuellig argues that if it were really the intention of the Labor Code as well as its implementing
rules to include commission in the computation of separation pay, it could have explicitly said so
in clear and unequivocal terms. Furthermore, in the definition of the term "wage", "commission"
is used only as one of the features or designations attached to the word remuneration or
earnings.

Insofar as the issue of whether or not allowances should be included in the monthly salary of
petitioners for the purpose of computation of their separation pay is concerned, this has been
settled in the case of Santos v. NLRC, et al., G.R. No. 76721, September 21, 1987, 154 SCRA
166, where We ruled that "in the computation of backwages and separation pay, account must
be taken not only of the basic salary of petitioner but also of her transportation and emergency
living allowances." This ruling was reiterated in Soriano v. NLRC, et al., G.R. No. 75510,
October 27, 1987, 155 SCRA 124 and recently, in Planters Products, Inc. v. NLRC, et al., G.R.
No. 78524, January 20, 1989.
We shall concern ourselves now with the issue of whether or not earned sales commission
should be included in the monthly salary of petitioner for the purpose of computation of their
separation pay.
Article 97(f) by itself is explicit that commission is included in the definition of the term "wage". It
has been repeatedly declared by the courts that where the law speaks in clear and categorical
language, there is no room for interpretation or construction; there is only room for application
(Cebu Portland Cement Co. v. Municipality of Naga, G.R. Nos. 24116-17, August 22, 1968, 24
SCRA 708; Gonzaga v. Court of Appeals, G.R.No. L-2 7455, June 28,1973, 51 SCRA 381). A
plain and unambiguous statute speaks for itself, and any attempt to make it clearer is vain labor
and tends only to obscurity. How ever, it may be argued that if We correlate Article 97(f) with
Article XIV of the Collective Bargaining Agreement, Article 284 of the Labor Code and Sections
9(b) and 10 of the Implementing Rules, there appears to be an ambiguity. In this regard, the
Labor Arbiter rationalized his decision in this manner (pp. 74-76, Rollo):
The definition of 'wage' provided in Article 96 (sic) of the Code can be correctly
be (sic) stated as a general definition. It is 'wage ' in its generic sense. A careful
perusal of the same does not show any indication that commission is part of
salary. We can say that commission by itself may be considered a wage. This is
not something novel for it cannot be gainsaid that certain types of employees like
agents, field personnel and salesmen do not earn any regular daily, weekly or
monthly salaries, but rely mainly on commission earned.
Upon the other hand, the provisions of Section 10, Rule 1, Book VI of the
implementing rules in conjunction with Articles 273 and 274 (sic) of the Code
specifically states that the basis of the termination pay due to one who is sought
to be legally separated from the service is 'his latest salary rates.
x x x.
Even Articles 273 and 274 (sic) invariably use 'monthly pay or monthly salary'.
The above terms found in those Articles and the particular Rules were
intentionally used to express the intent of the framers of the law that for purposes
of separation pay they mean to be specifically referring to salary only.
.... Each particular benefit provided in the Code and other Decrees on Labor has
its own pecularities and nuances and should be interpreted in that light. Thus, for
a specific provision, a specific meaning is attached to simplify matters that may
arise there from. The general guidelines in (sic) the formation of specific rules for
particular purpose. Thus, that what should be controlling in matters concerning

termination pay should be the specific provisions of both Book VI of the Code
and the Rules. At any rate, settled is the rule that in matters of conflict between
the general provision of law and that of a particular- or specific provision, the
latter should prevail.
On its part, the NLRC ruled (p. 110, Rollo):
From the aforequoted provisions of the law and the implementing rules, it could
be deduced that wage is used in its generic sense and obviously refers to the
basic wage rate to be ascertained on a time, task, piece or commission basis or
other method of calculating the same. It does not, however, mean that
commission, allowances or analogous income necessarily forms part of the
employee's salary because to do so would lead to anomalies (sic), if not absurd,
construction of the word "salary." For what will prevent the employee from
insisting that emergency living allowance, 13th month pay, overtime, and
premium pay, and other fringe benefits should be added to the computation of
their separation pay. This situation, to our mind, is not the real intent of the Code
and its rules.
We rule otherwise. The ambiguity between Article 97(f), which defines the term 'wage' and
Article XIV of the Collective Bargaining Agreement, Article 284 of the Labor Code and Sections
9(b) and 10 of the Implementing Rules, which mention the terms "pay" and "salary", is more
apparent than real. Broadly, the word "salary" means a recompense or consideration made to a
person for his pains or industry in another man's business. Whether it be derived from
"salarium," or more fancifully from "sal," the pay of the Roman soldier, it carries with it the
fundamental idea of compensation for services rendered. Indeed, there is eminent authority for
holding that the words "wages" and "salary" are in essence synonymous (Words and Phrases,
Vol. 38 Permanent Edition, p. 44 citing Hopkins vs. Cromwell, 85 N.Y.S. 839,841,89 App. Div.
481; 38 Am. Jur. 496). "Salary," the etymology of which is the Latin word "salarium," is often
used interchangeably with "wage", the etymology of which is the Middle English word "wagen".
Both words generally refer to one and the same meaning, that is, a reward or recompense for
services performed. Likewise, "pay" is the synonym of "wages" and "salary" (Black's Law
Dictionary, 5th Ed.). Inasmuch as the words "wages", "pay" and "salary" have the same
meaning, and commission is included in the definition of "wage", the logical conclusion,
therefore, is, in the computation of the separation pay of petitioners, their salary base should
include also their earned sales commissions.
The aforequoted provisions are not the only consideration for deciding the petition in favor of the
petitioners.
We agree with the Solicitor General that granting, in gratia argumenti, that the commissions
were in the form of incentives or encouragement, so that the petitioners would be inspired to put
a little more industry on the jobs particularly assigned to them, still these commissions are direct
remuneration services rendered which contributed to the increase of income of Zuellig .
Commission is the recompense, compensation or reward of an agent, salesman, executor,
trustees, receiver, factor, broker or bailee, when the same is calculated as a percentage on the
amount of his transactions or on the profit to the principal (Black's Law Dictionary, 5th Ed., citing
Weiner v. Swales, 217 Md. 123, 141 A.2d 749, 750). The nature of the work of a salesman and
the reason for such type of remuneration for services rendered demonstrate clearly that
commission are part of petitioners' wage or salary. We take judicial notice of the fact that some

salesmen do not receive any basic salary but depend on commissions and allowances or
commissions alone, are part of petitioners' wage or salary. We take judicial notice of the fact
that some salesman do not received any basic salary but depend on commissions and
allowances or commissions alone, although an employer-employee relationship exists. Bearing
in mind the preceeding dicussions, if we adopt the opposite view that commissions, do not form
part of wage or salary, then, in effect, We will be saying that this kind of salesmen do not
receive any salary and therefore, not entitled to separation pay in the event of discharge from
employment. Will this not be absurd? This narrow interpretation is not in accord with the liberal
spirit of our labor laws and considering the purpose of separation pay which is, to alleviate the
difficulties which confront a dismissed employee thrown the the streets to face the harsh
necessities of life.
Additionally, in Soriano v. NLRC, et al., supra, in resolving the issue of the salary base that
should be used in computing the separation pay, We held that:
The commissions also claimed by petitioner ('override commission' plus 'net
deposit incentive') are not properly includible in such base figure since such
commissions must be earned by actual market transactions attributable to
petitioner.
Applying this by analogy, since the commissions in the present case were earned by actual
market transactions attributable to petitioners, these should be included in their separation pay.
In the computation thereof, what should be taken into account is the average commissions
earned during their last year of employment.
The final consideration is, in carrying out and interpreting the Labor Code's provisions and its
implementing regulations, the workingman's welfare should be the primordial and paramount
consideration. This kind of interpretation gives meaning and substance to the liberal and
compassionate spirit of the law as provided for in Article 4 of the Labor Code which states that
"all doubts in the implementation and interpretation of the provisions of the Labor Code
including its implementing rules and regulations shall be resolved in favor of labor" (Abella v.
NLRC, G.R. No. 71812, July 30,1987,152 SCRA 140; Manila Electric Company v. NLRC, et al.,
G.R. No. 78763, July 12,1989), and Article 1702 of the Civil Code which provides that "in case
of doubt, all labor legislation and all labor contracts shall be construed in favor of the safety and
decent living for the laborer.
ACCORDINGLY, the petition is hereby GRANTED. The decision of the respondent National
Labor Relations Commission is MODIFIED by including allowances and commissions in the
separation pay of petitioners Jose Songco and Amancio Manuel. The case is remanded to the
Labor Arbiter for the proper computation of said separation pay.
SO ORDERED.

Republic of the Philippines

SUPREME COURT
Manila
EN BANC
G.R. No. 79269

June 5, 1991

PEOPLE OF THE PHILIPPINES, petitioner,

vs.
HON. PROCORO J. DONATO, in his official capacity as Presiding Judge, Regional Trial
Court, Branch XII, Manila; RODOLFO C. SALAS, alias Commander Bilog, respondents.
The Solicitor General for petitioner.
Jose Suarez, Romeo Capulong, Efren Mercado and Movement of Attorneys for Brotherhood,
Integrity, Nationalism, Inc. (MABINI) for Rodolfo Salas.

DAVIDE, JR., J.:

The People of the Philippines, through the Chief State Prosecutor of the Department of Justice,
the City Fiscal of Manila and the Judge Advocate General, filed the instant petition for certiorari
and prohibition, with a prayer for restraining order/preliminary injunction, to set aside the order
of respondent Judge dated July 7, 1987 granting bail to the accused Rodolfo Salas alias
"Commander Bilog" in Criminal Case No. 86-48926 for Rebellion,1 and the subsequent Order
dated July 30, 1987 granting the motion for reconsideration of 16 July 1987 by increasing the
bail bond from P30,000.00 to P50,000.00 but denying petitioner's supplemental motion for
reconsideration of July 17, 1987 which asked the court to allow petitioner to present evidence in
support of its prayer for a reconsideration of the order of 7 July 1987.
The pivotal issues presented before Us are whether the right to bail may, under certain
circumstances, be denied to a person who is charged with an otherwise bailable offense, and
whether such right may be waived.
The following are the antecedents of this petition:
In the original Information2 filed on 2 October 1986 in Criminal Case No. 86-48926 of the
Regional Trial Court of Manila, later amended in an Amended Information3 which was filed on
24 October 1986, private respondent Rodolfo Salas, alias "Commander Bilog", and his coaccused were charged for the crime of rebellion under Article 134, in relation to Article 135, of
the Revised Penal Code allegedly committed as follows:
That in or about 1968 and for some time before said year and continuously thereafter
until the present time, in the City of Manila and elsewhere in the Philippines, the
Communist Party of the Philippines, its military arm, the New People's Army, its mass

infiltration network, the National Democratic Front with its other subordinate
organizations and fronts, have, under the direction and control of said organizations'
leaders, among whom are the aforenamed accused, and with the aid, participation or
support of members and followers whose whereabouts and identities are still unknown,
risen publicly and taken arms throughout the country against the Government of the
Republic of the Philippines for the purpose of overthrowing the present Government, the
seat of which is in the City of Manila, or of removing from the allegiance to that
government and its laws, the country's territory or part of it;
That from 1970 to the present, the above-named accused in their capacities as leaders of
the aforenamed organizations, in conspiracy with, and in support of the cause of, the
organizations aforementioned, engaged themselves in war against the forces of the
government, destroying property or committing serious violence, and other acts in the
pursuit of their unlawful purpose, such as . . .
(then follows the enumeration of specific acts committed before and after February
1986).
At the time the Information was filed the private respondent and his co-accused were in military
custody following their arrest on 29 September 1986 at the Philippine General Hospital, Taft
Ave., Manila; he had earlier escaped from military detention and a cash reward of P250,000.00
was offered for his
capture.4
A day after the filing of the original information, or on 3 October 1986, a petition for habeas
corpus for private respondent and his co-accused was filed with this Court5 which, as shall
hereafter be discussed in detail, was dismissed in Our resolution of 16 October 1986 on the basis
of the agreement of the parties under which herein private respondent "will remain in legal
custody and will face trial before the court having custody over his person" and the warrants for
the arrest of his co-accused are deemed recalled and they shall be immediately released but shall
submit themselves to the court having jurisdiction over their person.
On November 7, 1986 , private respondent filed with the court below a Motion to Quash the
Information alleging that: (a) the facts alleged do not constitute an offense; (b) the Court has no
jurisdiction over the offense charged; (c) the Court has no jurisdiction over the persons of the
defendants; and (d) the criminal action or liability has been extinguished,6 to which petitioner
filed an Opposition7 citing, among other grounds, the fact that in the Joint Manifestation and
Motion dated October 14, 1986, in G.R. No. 76009, private respondent categorically conceded
that:
xxx

xxx

xxx

Par. 2 (B) Petitioner Rodolfo Salas will remain in legal custody and face trial before
the court having custody over his person.
In his Order of March 6, 1987,8 respondent Judge denied the motion to quash.

Instead of asking for a reconsideration of said Order, private respondent filed on 9 May 1987 a
petition for bail,9 which herein petitioner opposed in an Opposition filed on 27 May 198710 on
the ground that since rebellion became a capital offense under the provisions of P.D. Nos. 1996,
942 and 1834, which amended Article 135 of the Revised Penal Code, by imposing the penalty
of reclusion perpetua to death on those who promote, maintain, or head a rebellion the accused
is no longer entitled to bail as evidence of his guilt is strong.
On 5 June 1987 the President issued Executive Order No. 187 repealing, among others, P.D.
Nos. 1996, 942 and 1834 and restoring to full force and effect Article 135 of the Revised Penal
Code as it existed before the amendatory decrees. Thus, the original penalty for rebellion, prision
mayor and a fine not to exceed P20,000.00, was restored.
Executive Order No. 187 was published in the Official Gazette in its June 15, 1987 issue (Vol.
83, No. 24) which was officially released for circulation on June 26, 1987.
In his Order of 7 July 198711 respondent Judge, taking into consideration Executive Order No.
187, granted private respondent's petition for bail, fixed the bail bond at P30,000.00 and imposed
upon private respondent the additional condition that he shall report to the court once every two
(2) months within the first ten (10) days of every period thereof. In granting the petition
respondent Judge stated:
. . . There is no more debate that with the effectivity of Executive Order No. 187, the
offense of rebellion, for which accused Rodolfo Salas is herein charged, is now
punishable with the penalty of prision mayor and a fine not exceeding P20,000.00, which
makes it now bailable pursuant to Section 13, Article III, 1986 Constitution and Section
3, Rule 114, 1985 Rules of Criminal Procedure. Unlike the old rule, bail is now a matter
of right in non-capital offenses before final judgment. This is very evident upon a reading
of Section 3, Rule 114, aforementioned, in relation to Section 21, same rule. In view,
therefore, of the present circumstances in this case, said accused-applicant is now entitled
to bail as a matter of right inasmuch as the crime of rebellion ceased to be a capital
offense.
As to the contention of herein petitioner that it would be dangerous to grant bail to private
respondent considering his stature in the CPP-NPA hierarchy, whose ultimate and overriding
goal is to wipe out all vestiges of our democracy and to replace it with their ideology, and that
his release would allow his return to his organization to direct its armed struggle to topple the
government before whose courts he invokes his constitutional right to bail, respondent Judge
replied:
True, there now appears a clash between the accused's constitutional right to bail in a
non-capital offense, which right is guaranteed in the Bill of Rights and, to quote again the
prosecution, "the existence of the government that bestows the right, the paramount
interest of the state." Suffice to state that the Bill of Rights, one of which is the right to
bail, is a "declaration of the rights of the individual, civil, political and social and
economic, guaranteed by the Constitution against impairment or intrusion by any form of
governmental action. Emphasis is placed on the dignity of man and the worth of

individual. There is recognition of certain inherent and inalienable rights of the

individual, which the government is prohibited from violating" (Quisumbing-Fernando,
Philippine Constitutional Law, 1984 Edition, p. 77). To this Court, in case of such
conflict as now pictured by the prosecution, the same should be resolved in favor of the
individual who, in the eyes of the law, is alone in the assertion of his rights under the Bill
of Rights as against the State. Anyway, the government is that powerful and strong,
having the resources, manpower and the wherewithals to fight those "who oppose,
threathen (sic) and destroy a just and orderly society and its existing civil and political
institutions." The prosecution's fear may or may not be founded that the accused may
later on jump bail and rejoin his comrades in the field to sow further disorders and
anarchy against the duly constituted authorities. But, then, such a fear can not be a reason
to deny him bail. For the law is very explicit that when it comes to bailable offenses an
accused is entitled as a matter of light to bail. Dura est lex sed lex.
In a motion to reconsider12 the above order filed on 16 July 1987, petitioner asked the court to
increase the bail from P30,000.00 to P100,000.00 alleging therein that per Department of Justice
Circular No. 10 dated 3 July 1987, the bail for the, provisional release of an accused should be in
an amount computed at P10,000.00 per year of imprisonment based on the medium penalty
imposable for the offense and explaining that it is recommending P100,000.00 because the
private respondent "had in the past escaped from the custody of the military authorities and the
offense for which he is charged is not an ordinary crime, like murder, homicide or robbery,
where after the commission, the perpetrator has achieved his end" and that "the rebellious acts
are not consummated until the well-organized plan to overthrow the government through armed
struggle and replace it with an alien system based on a foreign ideology is attained."
On 17 July 1987, petitioner filed a supplemental motion for reconsideration13 indirectly asking
the court to deny bail to the private respondent and to allow it to present evidence in support
thereof considering the "inevitable probability that the accused will not comply with this main
condition of his bail to appear in court for trial," a conclusion it claims to be buttressed "by
the following facts which are widely known by the People of the Philippines and which this
Honorable Court may have judicial notice of:
1. The accused has evaded the authorities for thirteen years and was an escapee from
detention when arrested;
2. He was not arrested at his residence as he had no known address;
3. He was using the false name "Manuel Mercado Castro" at the time of his arrest and
presented a Driver's License to substantiate his false identity;
4. The address he gave "Panamitan, Kawit, Cavite," turned out to be also a false address;
5. He and his companions were on board a private vehicle with a declared owner whose
identity and address were also found to be false;

6. Pursuant to Ministry Order No. 1-A dated 11 January 1982 , a reward of P250,000.00
was offered and paid for his arrest,
which "clearly indicate that the accused does not entertain the slightest intention to appear in
court for trial, if released." Petitioner further argues that the accused, who is the Chairman of the
Communist Party of the Philippines and head of its military arm, the NPA, together with his
followers, are now engaged in an open warfare and rebellion against this government and
threatens the existence of this very Court from which he now seeks provisional release," and that
while he is entitled to bail as a matter of right in view of Executive Order No. 187 which restored
the original penalty for rebellion under Article 135 of the Revised Penal Code, yet, when the
interest of the State conflicts with that of an individual, that of the former prevails for "the right
of the State of self-preservation is paramount to any of the rights of an individual enshrined in
the Bill of Rights of the Constitution." Petitioner further invokes precedents in the United States
of America holding "that there is no absolute constitutional barrier to detention of potentially
dangerous resident aliens pending deportation proceedings,14 and that an arrestee may be
incarcerated until trial as he presents a risk of flight;15 and sustaining a detention prior to trial of
arrestee charged with serious felonies who are found after an adversary hearing to pose threat to
the safety of individuals and to the community which no condition of release can dispel.16
On 30 July 1987 respondent Judge handed down the Order17 adverted to in the introductory
portion of this decision the dispositive portion of which reads:
WHEREFORE, in the light of the foregoing considerations, the Court finds the
"supplemental" motion for reconsideration to be without merit and hereby denies it but
finds the first motion for reconsideration to be meritorious only insofar as the amount of
bail is concerned and hereby reconsiders its Order of July 7, 1987 only to increase the
amount of bail from P30,000.00 to P50,000.00, subject to the approval of this Court, and
with the additional condition that accused Rodolfo Salas shall report to the court once
every two (2) months within the first ten (10) days of every period thereof (Almendras vs.
Villaluz, et al., L-31665, August 6, 1975, 66 SCRA 58).
In denying the supplemental motion for reconsideration the respondent Judge took into account
the "sudden turn-about" on the part of the petitioner in that a day earlier it filed a motion for
reconsideration wherein it conceded the right of the private respondent to bail but merely asked
to increase the amount of bail; observed that it is only a reiteration of arguments in its opposition
to the petition for bail of 25 May 1987; asserted that the American precedents are not applicable
since the cases involved deportation of aliens and, moreover, the U.S. Federal Constitution does
not contain a proviso on the right of an accused to bail in bailable offenses, but only an
injunction against excessive bail; and quoted the concurring opinion of the late Justice Pedro
Tuason in the cases of Nava, et al. vs. Gatmaitan, L-4853, Hernandez vs. Montesa, L-4964 and
Angeles vs. Abaya, L-5108, October 11, 1951, 90 Phil, 172.
Unable to agree with said Order, petitioner commenced this petition submitting therein the
following issues:

THE HONORABLE RESPONDENT JUDGE PROCORO J. DONATO ACTED WITH

GRAVE ABUSE OF DISCRETION AND IN EXCESS OF HIS JURISDICTION, AND
IN TOTAL DISREGARD OF THE PREVAILING REALITIES, WHEN HE DENIED
PETITIONER'S SUPPLEMENTAL MOTION FOR RECONSIDERATION WITH
PRAYER TO BE GIVEN THE OPPORTUNITY TO ADDUCE EVIDENCE IN
SUPPORT OF ITS OPPOSITION TO THE GRANT OF BAIL TO THE RESPONDENT
RODOLFO SALAS.
THE HONORABLE RESPONDENT JUDGE PROCORO J. DONATO ACTED WITH
GRAVE ABUSE OF DISCRETION AND IN EXCESS OF HIS JURISDICTION
WHEN HE GRANTED BAIL TO THE RESPONDENT RODOLFO SALAS.
in support of which petitioner argues that private respondent is estopped from invoking his right
to bail, having expressly waived it in G.R. No. 76009 when he agreed to "remain in legal custody
and face trial before the court having custody of his person" in consideration of the recall of the
warrant of arrest for his co-petitioners Josefina Cruz and Jose Concepcion; and the right to bail,
even in non-capital offenses, is not absolute when there is prima facie evidence that the accused
is a serious threat to the very existence of the State, in which case the prosecution must be
allowed to present evidence for the denial of bail. Consequently, respondent Judge acted with
grave abuse of discretion when he did not allow petitioner to present all the evidence it may
desire to support its prayer for the denial of bail and when he declared that the State has forfeited
its right to do so since during all the time that the petition for bail was pending, it never
manifested, much less hinted, its intention to adduce such evidence. And that even if release on
bail may be allowed, respondent judge, in fixing the amount of bail at P50,000.00 (originally
P30,000.00 only), failed to take into account the lengthy record of private respondents' criminal
background, the gravity of the pending charge, and the likelihood of flight.18
In Our resolution of 11 August 198719 We required the respondents to comment on the petition
and issued a Temporary Restraining Order ordering respondent Judge to cease and desist from
implementing his order of 30 July 1987 granting bail to private respondent in the amount of
P50,000.00.
In his Comment filed on 27 August 1987,20 private respondent asks for the outright dismissal of
the petition and immediate lifting of the temporary restraining order on the following grounds:
I
RESPONDENT SALAS NEVER WAIVED HIS RIGHT TO BAIL; NEITHER IS HE
ESTOPPED FROM ASSERTING SAID RIGHT. ON THE CONTRARY IT IS
PETITIONER WHO IS ESTOPPED FROM RAISING THE SAID ISSUE FOR THE
FIRST TIME ON APPEAL.
II
RESPONDENT SALAS ENJOYS NOT ONLY THE CONSTITUTIONAL RIGHT TO
BE PRESUMED INNOCENT BUT ALSO THE RIGHT TO BAIL.

III
RESPONDENT SALAS IS NOT CHARGED WITH A CAPITAL OFFENSE
(RECLUSION PERPETUA), HENCE HE HAS THE RIGHT TO BAIL AS
MANDATED BY THE CONSTITUTION.
IV
THE ORDER OF JULY 30, 1987 DENYING PETITIONER OPPORTUNITY TO
PRESENT EVIDENCE IS CORRECT. PETITIONER'S ALLEGED RIGHT TO
PRESENT EVIDENCE IS NON-EXISTENT AND/OR HAD BEEN WAIVED.
V
THE ISSUANCE OF A TEMPORARY RESTRAINING ORDER IN THIS CASE
VIOLATES NOT ONLY RESPONDENT SALAS' RIGHT TO BAIL BUT ALSO HIS
OTHER CONSTITUTIONAL RIGHT TO DUE PROCESS.
We required the petitioner to reply to the comment of private respondent.21 The reply was filed
on 18 September 1987.22
In Our resolution of 15 October 198723 We gave due course to the petition and required the
parties to file simultaneously their memoranda within twenty days from notice.
In their respective manifestations and motions dated 5 November24 and 23 November 198725
petitioner and private respondents asked to be excused from filing their Memoranda and that the
petition and reply be considered as the Memorandum for petitioner and the Comment as the
Memorandum for private respondent, which We granted in Our resolution of 19 November
198726 and 1 December 1987,27 respectively.
In Our resolution of 14 September 1989 We required the Solicitor General to express his stand
on the issues raised in this petitions,28 which he complied with by filing his Manifestation on 30
May 199029 wherein he manifests that he supports the petition and submits that the Order of
respondent Judge of July 7, July 17 and July 30, 1987 should be annulled and set aside asserting
that private respondent had waived the light to bail in view of the agreement in G.R. No. 76009;
that granting bail to him is accepting wide-eyed his undertaking which he is sure to break; in
determining bail, the primary consideration is to insure the attendance of the accused at the trial
of the case against him which would be frustrated by the "almost certainty that respondent Salas
will lump bail of whatever amount"; and application of the guidelines provided for in Section 10
of Rule 114, 1985 Rules on Criminal Procedure on the amount of bail dictates denial of bail to
private respondent. The Solicitor General likewise maintains that the right of the petitioner to
hearing on the application of private respondent for bail cannot be denied by respondent Judge.
And now on the issues presented in this case.
I.

Unquestionably, at the time the original and the amended Informations for rebellion and the
application for bail were filed before the court below the penalty imposable for the offense for
which the private respondent was charged was reclusion perpetua to death. During the pendency
of the application for bail Executive Order No. 187 was issued by the President, by virtue of
which the penalty for rebellion as originally provided for in Article 135 of the Revised Penal
Code was restored. The restored law was the governing law at the time the respondent court
resolved the petition for bail.
We agree with the respondent court that bail cannot be denied to the private respondent for he is
charged with the crime of rebellion as defined in Article 134 of the Revised Penal Code to which
is attached the penalty of prision mayor and a fine not exceeding P20,000.00.30 It is, therefore, a
bailable offense under Section 13 of Article III of the 1987 Constitution which provides thus:
Sec. 13. All persons, except those charged with offenses punishable by reclusion
perpetua when evidence of guilt is strong, shall, before conviction, be bailable by
sufficient sureties, or be released on recognizance as may be prescribed by law. The right
to bail shall not be impaired even when the privilege of the writ of habeas corpus is
suspended. Excessive bail shall not be required.
Section 3, Rule 114 of the Rules of Court, as amended, also provides:
Bail, a matter of right: exception. All persons in custody shall, before final conviction,
be entitled to bail as a matter of right, except those charged with a capital offense or an
offense which, under the law at the time of its commission and at the time of the
application for bail, is punishable by reclusion perpetua, when evidence of guilt is strong.
Therefore, before conviction bail is either a matter of right or of discretion. It is a matter of right
when the offense charged is punishable by any penalty lower than reclusion perpetua.31 To that
extent the right is absolute.32
And so, in a similar case for rebellion, People vs. Hernandez, et al., 99 Phil. 515, despite the fact
that the accused was already convicted, although erroneously, by the trial court for the complex
crime of rebellion with multiple murders, arsons and robberies, and sentenced to life
imprisonment, We granted bail in the amount of P30,000.00 during the pendency of his appeal
from such conviction. To the vigorous stand of the People that We must deny bail to the accused
because the security of the State so requires, and because the judgment of conviction appealed
from indicates that the evidence of guilt of Hernandez is strong, We held:
. . . Furthermore, individual freedom is too basic, too transcendental and vital in a
republican state, like ours, to be derived upon mere general principles and abstract
consideration of public safety. Indeed, the preservation of liberty is such a major
preoccupation of our political system that, not satisfied with guaranteeing its enjoyment
in the very first paragraph of section (1) of the Bill of Rights, the framers of our
Constitution devoted paragraphs (3), (4), (5), (6), (7), (8), (11), (12), (13), (14), (15), (16),
(17), (18), and (21) of said section (1) to the protection of several aspects of freedom.

The 1987 Constitution strengthens further the right to bail by explicitly providing that it shall not
be impaired even when the privilege of the writ of habeas corpus is suspended. This overturns
the Court's ruling in Garcia-Padilla vs. Enrile, et al., supra., to wit:
The suspension of the privilege of the writ of habeas corpus must, indeed, carry with it
the suspension of the right to bail, if the government's campaign to suppress the rebellion
is to be enhanced and rendered effective. If the right to bail may be demanded during the
continuance of the rebellion, and those arrested, captured and detained in the course
thereof will be released, they would, without the least doubt, rejoin their comrades in the
field thereby jeopardizing the success of government efforts to bring to an end the
invasion, rebellion or insurrection.
Upon the other hand, if the offense charged is punishable by reclusion perpetua bail becomes a
matter of discretion. It shall be denied if the evidence of guilt is strong. The court's discretion is
limited to determining whether or not evidence of guilt is strong.33 But once it is determined that
the evidence of guilt is not strong, bail also becomes a matter of right. In Teehankee vs. Director
of Prisons, supra., We held:
The provision on bail in our Constitution is patterned after similar provisions contained in
the Constitution of the United States and that of many states of the Union. And it is said
that:
The Constitution of the United States and the constitution of the many states
provide that all persons shall be bailable by sufficient sureties, except for capital
offenses, where the proof is evident or the presumption of guilt is great, and,
under such provisions, bail is a matter of right which no court or judge can
properly refuse, in all cases not embraced in the exceptions. Under such
provisions bail is a matter of right even in cases of capital offenses, unless the
proof of guilt is evident or the presumption thereof is great!34
Accordingly, the prosecution does not have the right to present evidence for the denial of
bail in the instances where bail is a matter of right. However, in the cases where the grant
of bail is discretionary, due process requires that the prosecution must be given an
opportunity to present, within a reasonable time, all the evidence that it may desire to
introduce before the court should resolve the motion for bail.35
We agree, however, with petitioner that it was error for the respondent court to fix the
bond at P30,000.00, then later at P50,000.00 without hearing the prosecution. The
guidelines for the fixing of the amount of bail provided for in Section 10 of Rule 114 of
the Rules of Court are not matters left entirely to the discretion of the court. As We stated
in People vs. Dacudao, et al., 170 SCRA, 489, 495:
Certain guidelines in the fixing of a bailbond call for the presentation of evidence
and reasonable opportunity for the prosecution to refute it. Among them are the
nature and circumstances of the crime, character and reputation of the accused,
the weight of the evidence against him, the probability of the accused appearing at

the trial, whether or not the accused is a fugitive from justice, and whether or not
the accused is under bond in other case. . . .
In the instant case petitioner has sufficiently made out allegations which necessitate a
grant of an opportunity to be heard for the purpose of determining the amount of bail, but
not for the denial thereof because aforesaid Section 10 of Rule 114 does not authorize
any court to deny bail.
II.
It must, however, be stressed that under the present state of the law, rebellion is no longer
punishable by prision mayor and fine not exceeding P20,000.00. Republic Act No. 6968
approved on 24 October 1990 and which took effect after publication in at least two
newspapers of general circulation, amended, among others, Article 135 of the Revised
Penal Code by increasing the penalty for rebellion such that, as amended, it now reads:
Article 135. Penalty for rebellion, insurrection or coup d'etat. Any person
who promotes, maintains, or heads a rebellion or insurrection shall suffer the
penalty of reclusion perpetua.
Any person merely participating or executing the commands of others in a
rebellion or insurrection shall suffer the penalty of reclusion perpetua.
xxx

xxx

xxx

This amendatory law cannot apply to the private respondent for acts allegedly committed
prior to its effectivity. It is not favorable to him. "Penal laws shall have a retroactive
effect insofar as they favor the person guilty of a felony, who is not a habitual criminal,
as this term is defined in Rule 5 of Article 62 of this Code, although at the time of the
publication of such laws a final sentence has been pronounced and the convict is serving
the same.36
III.
We agree with Petitioner that private respondent has, however, waived his right to bail in
G.R. No. 76009.
On 3 October 1986, or the day following the filing of the original information in Criminal
Case No. 86-48926 with the trial court, a petition for habeas corpus for herein private
respondent, and his co-accused Josefina Cruz and Jose Concepcion, was filed with this
Court by Lucia Cruz, Aida Concepcion Paniza and Beatriz Salas against Juan Ponce
Enrile, Gen. Fidel Ramos, Brig. Gen. Renato de Villa, Brig. Gen. Ramon Montao, and
Col. Saldajeno praying, among others, that the petition be given due course and a writ of
habeas corpus be issued requiring respondents to produce the bodies of herein private
respondent and his co-accused before the Court and explain by what authority they
arrested and detained them. The following proceedings took place thereafter in said case:

1. In a resolution of 7 October 1986 We issued a writ of habeas corpus, required

respondents to make a return of the writ on or before the close of office hours on 13
October and set the petition for hearing on 14 October 1986 at 10:00 o'clock in the
morning.
2. On 13 October 1986 respondents, through the Office of the Solicitor General, filed a
Return To The Writ of Habeas Corpus alleging therein that private respondent and
Josefina Cruz alias "Mrs. Mercado", and Jose Milo Concepcion alias "Eugene Zamora"
were apprehended by the military on September 29, 1986 in the evening at the Philippine
General Hospital Compound at Taft Ave., Mangga being leaders or members of the
Communist Party of the Philippines, New People's Army and National Democratic Front,
organizations dedicated to the overthrow of the Government through violent means, and
having actually committed acts of rebellion under Article 134 of the Revised Penal Code,
as amended. After their arrest they were forthwith charged with rebellion before Branch
XII of the Regional Trial Court, National Capital Region in Criminal Case No. 86-48926
and on 3 October warrants for their arrest were issued and respondents continue to detain
them because of the warrants of arrest and the pendency of the criminal cases against
them. Respondents further allege that, contrary to the allegation in the petition, herein
private respondent was not a member of the NDF panel involved in peace negotiations
with the Government; neither is he and his companions Cruz and Concepcion covered by
any, safe conduct pass issued by competent authorities.
3. At the hearing on 14 October 1986 the parties informed the Court of certain
agreements reached between them. We issued a resolution reading as follows:
When this case was called for hearing this morning, Attorneys Romeo Capulong,
Arno V. Sanidad, Efren H. Mercado, Edgardo Pamin-tuan, Casiano Sabile,
Ramon Cura, and William Chua appeared for the petitioners with Atty. Capulong
arguing for the petitioners. Solicitor General Sedfrey Ordonez, Assistant Solicitor
General Romeo C. de la Cruz and Trial Attorney Josue E. Villanueva appeared
for the respondents, with Solicitor General Ordoez arguing for the respondents.
Petitioners' counsel, Atty. Romeo Capulong, manifested in open Court that in
conformity with the agreement reached with the government, the petition for
habeas corpus will be withdrawn with detainee Rodolfo Salas to remain under
custody, whereas his co-detainees Josefina Cruz and Jose Milo Concepcion will
be released immediately.
Solicitor General Sedfrey Ordoez, also in open Court, confirmed the foregoing
statement made by petitioners' counsel regarding the withdrawal of the petition
for habeas corpus, declaring that no objection will be interposed to the immediate
release of detainees Josefina Cruz and Jose Milo Concepcion, and that no bond
will be required of them, but they will continue to face trial with their co-accused,
Rodolfo Salas; further, that they will not be rearrested on the basis of the warrants
issued by the trial court provided that they manifest in open Court their

willingness to subject themselves to the jurisdiction of the Court and to appear in

court when their presence is required.
In addition, he stated that he is willing to confer with petitioners' counsel today
relative to the compromise agreement that they have previously undertaken to
submit.
Upon manifestation of petitioners' counsel, Atty. Romeo Capulong, that on his
oath as member of the Bar, the detainees Josefina Cruz and Jose Milo Concepcion
have agreed to subject themselves to the jurisdiction of the trial court, the Court
ordered their immediate release.
Thereafter, the Court approved the foregoing manifestations and statements and
required both parties to SUBMIT to the Court their compromise agreement by
4:00 o'clock this afternoon. Teehankee, C.J., is on official leave.
4. At 3:49 o'clock in the afternoon of 14 October 1986 the parties submitted a Joint
Manifestation and Motion duly signed by Atty. Romeo Capulong, counsel for petitioners,
and Solicitor General Sedfrey Ordoez, Assistant Solicitor General Romeo C. de la Cruz
and Trial Attorney Josue S. Villanueva, counsel for respondents, which reads as follows:
COME NOW petitioners and the respondents, assisted by their respective counsel,
and to this Honorable Tribunal respectfully manifest:
1. That in the discussion between Romeo Capulong, petitioners' counsel, and
Solicitor General Sedfrey A. Ordoez on October 13, 1986 exploratory talks were
conducted to find out how the majesty of the law may be preserved and human
considerations may be called into play.
2. That in the conference both counsel agreed to the following terms of
agreement:
a. The petition for habeas corpus will be withdrawn by petitioners and
Josefina Cruz and Jose Milo Concepcion will be immediately released but
shall appear at the trial of the criminal case for rebellion (People v.
Rodolfo Salas, et al., Criminal Case No. 4886 [should be 86-48926],
Regional Trial Court, National Capital Judicial Region) filed against them
under their personal recognizance.
b. Petitioner Rodolfo Salas will remain in legal custody and face trial
before the court having custody over his person.
c. The warrant of arrest for the persons of Josefina Cruz and Jose Milo
Concepcion is hereby deemed recalled in view of formal manifestation
before the Supreme Court that they will submit themselves to the court
having jurisdiction over their person.

3. That on October 14, the Solicitor General was able to obtain the conformity of
the Government to the foregoing terms which were likewise accepted by
petitioner (sic) and their counsel of record.
4. That the two counsel submitted their oral manifestation during the hearing on
October 14 and the present manifestation in compliance with the resolution
announced in court this morning.
WHEREFORE, it is prayed that the petition for habeas corpus be dismissed.
5. On 16 October 1986 We issued the following resolution:
G.R. No. 76009 [In the Matter of the Petition for Habeas Corpus of Rodolfo
Salas, Josefina Cruz and Jose Milo Concepcion, et al. v. Hon. Juan Ponce Enrile,
Gen. Fidel V. Ramos, Brig. Gen. Renato de Villa, Brig. Gen. Ramon Montao
and Col. Virgilio Saldajeno] considering the Joint Manifestation and Motion
dated October 14, 1986 filed by Attorneys Romeo Capulong, Arno V. Sanidad,
Efren H. Mercado and Ricardo Fernandez, Jr. as counsel for petitioners and
Solicitor General Sedfrey A. Ordonez and Assistant Solicitor General Romeo C.
de la Cruz and Trial Attorney Josue S. Villanueva as counsel for respondents
which states that they have entered into an agreement whereby: [a] the petition for
habeas corpus will be withdrawn by petitioners, and Josefina Cruz and Jose Milo
Concepcion will be immediately released but shall appear at the trial of the
criminal case for rebellion [People vs. Rodolfo Salas, et al., Criminal Case No.
4886, Regional Trial Court, National Capital Judicial Region, Branch XII,
Manila], filed against them, on their personal recognizance; [b] petitioner Rodolfo
Salas will remain in legal custody and face trial before the court having custody
over his person; and [c] the warrant of arrest for the person of Josefina Cruz and
Jose Milo Concepcion is hereby deemed recalled in view of the formal
manifestation before this Court that they will submit themselves to the court
having jurisdiction over their person and in view of the said agreement, the
petition for habeas corpus be dismissed, the Court Resolved to DISMISS the
petition for habeas corpus but subject to the condition that petitioners' lead
counsel, Atty. Capulong, upon his oath as member of the Bar, shall abide by his
commitment to ensure the appearance of Josefina Cruz and Jose Milo Concepcion
at the trial of the criminal case for rebellion filed against them. Teehankee, C.J., is
on official leave.
It is the stand of the petitioner that private respondent, "in agreeing to remain in legal custody
even during the pendency of the trial of his criminal case, [he] has expressly waived his right to
bail."37 Upon the other hand, private respondent asserts that this claim is totally devoid of
factual and legal basis, for in their petition for habeas corpus they precisely questioned the
legality of the arrest and the continued detention of Rodolfo Salas, Josefina Cruz and Jose Milo
Concepcion, which was not resolved by this Court or by the compromise agreement of the
parties but left open for further determination in another proceeding. Moreover, the matter of the
right to bail was neither raised by either party nor resolved by this Court, and the legal steps

promptly taken by private respondent after the agreement was reached, like the filing of the
motion to quash on 7 November 1986 and the petition for bail on 14 May 1987, were clear and
positive assertions of his statutory and constitutional rights to be granted not only provisional but
final and permanent liberty. Finally, private respondent maintains that the term "legal custody" as
used in the Joint Manifestation and Motion simply means that private respondent agreed to
continue to be in the custody of the law or in custodia legis and nothing else; it is not to be
interpreted as waiver.
Interestingly, private respondent admits that:
"Custody" has been held to mean nothing less than actual imprisonment. It is also defined
as the detainer of a person by virtue of a lawful authority, or the "care and possession of a
thing or person." (Bouviers Law Dictionary, Third Ed, Vol. I, pp. 741-742 citing Smith v.
Com. 59 Pa. 320 and Rolland v. Com. 82 Pa. 306)
He further admits that, in the light of Section 1 of Rule 114 of the Rules of Court and settled
jurisprudence, the "constitutional right to bail is subject to the limitation that the person applying
for admission to bail should be in the custody of the law or otherwise deprived of his liberty."38
When the parties in G.R. No. 76009 stipulated that:
b. Petitioner Rodolfo Salas will remain in legal custody and face trial before the court
having custody over his person.
they simply meant that Rodolfo Salas, herein respondent, will remain in actual physical custody
of the court, or in actual confinement or detention, as distinguished from the stipulation
concerning his co-petitioners, who were to be released in view of the recall of the warrants of
arrest against them; they agreed, however, "to submit themselves to the court having jurisdiction
over their persons." Note should be made of the deliberate care of the parties in making a fine
distinction between legal custody and court having custody over the person in respect to Rodolfo
Salas and court having jurisdiction over the persons of his co-accused. Such a fine distinction
was precisely intended to emphasize the agreement that Rodolfo Salas will not be released, but
should remain in custody. Had the parties intended otherwise, or had this been unclear to private
respondent and his counsel, they should have insisted on the use of a clearer language. It must be
remembered that at the time the parties orally manifested before this Court on 14 October 1986
the terms and conditions of their agreement and prepared and signed the Joint Manifestation and
Motion, a warrant of arrest had already been issued by the trial court against private respondent
and his co-accused. The stipulation that only the warrants of arrest for Josefina Cruz and Jose
Milo Concepcion shall be recalled and that only they shall be released, further confirmed the
agreement that herein petitioner shall remain in custody of the law, or detention or confinement.
In defining bail as:
. . . the security given for the release of a person in custody of the law, . . .

Section 1 of Rule 114 of the Revised Rules of Court admits no other meaning or interpretation
for the term "in custody of the law" than that as above indicated. The purpose of bail is to relieve
an accused from imprisonment until his conviction and yet secure his appearance at the trial.39 It
presupposes that the person applying for it should be in the custody of the law or otherwise
deprived of liberty.40
Consequently, having agreed in G.R. No. 76009 to remain in legal custody, private respondent
had unequivocably waived his right to bail.
But, is such waiver valid?
Article 6 of the Civil Code expressly provides:
Art. 6. Rights may be waived, unless the waiver is contrary to law, public order, public
policy, morals, or good customs, or prejudicial to a third person with a right recognized
by law.
Waiver is defined as "a voluntary and intentional relinquishment or abandonment of a known
existing legal right, advantage, benefit, claim or privilege, which except for such waiver the party
would have enjoyed; the voluntary abandonment or surrender, by a capable person, of a right
known by him to exist, with the intent that such right shall be surrendered and such person
forever deprived of its benefit; or such conduct as warrants an inference of the relinquishment of
such right; or the intentional doing of an act inconsistent with claiming it."41
As to what rights and privileges may be waived, the authority is settled:
. . . the doctrine of waiver extends to rights and privileges of any character, and, since the
word "waiver" covers every conceivable right, it is the general rule that a person may
waive any matter which affects his property, and any alienable right or privilege of which
he is the owner or which belongs to him or to which he is legally entitled, whether
secured by contract, conferred with statute, or guaranteed by constitution, provided such
rights and privileges rest in the individual, are intended for his sole benefit, do not
infringe on the rights of others, and further provided the waiver of the right or privilege is
not forbidden by law, and does not contravene public policy; and the principle is
recognized that everyone has a right to waive, and agree to waive, the advantage of a law
or rule made solely for the benefit and protection of the individual in his private capacity,
if it can be dispensed with and relinquished without infringing on any public right, and
without detriment to the community at large. . . .
Although the general rule is that any right or privilege conferred by statute or guaranteed
by constitution may be waived, a waiver in derogation of a statutory right is not favored,
and a waiver will be inoperative and void if it infringes on the rights of others, or would
be against public policy or morals and the public interest may be waived.
While it has been stated generally that all personal rights conferred by statute and
guaranteed by constitution may be waived, it has also been said that constitutional

provisions intended to protect property may be waived, and even some of the
constitutional rights created to secure personal liberty are subjects of waiver.42
In Commonwealth vs. Petrillo,43 it was held:
Rights guaranteed to one accused of a crime fall naturally into two classes: (a) those in
which the state, as well as the accused, is interested; and (b) those which are personal to
the accused, which are in the nature of personal privileges. Those of the first class cannot
be waived; those of the second may be.
It is "competent for a person to waive a right guaranteed by the Constitution, and to consent to
action which would be invalid if taken against his will."44
This Court has recognized waivers of constitutional rights such as, for example, the right against
unreasonable searches and seizures;45 the right to counsel and to remain silent;46 and the right
to be heard.47
Even the 1987 Constitution expressly recognizes a waiver of rights guaranteed by its Bill of
Rights.1wphi1 Section 12(l) of Article III thereof on the right to remain silent and to have a
competent and independent counsel, preferably of his own choice states:
. . . These rights cannot be waived except in writing and in the presence of counsel.
This provision merely particularizes the form and manner of the waiver; it, nevertheless, clearly
suggests that the other rights may be waived in some other form or manner provided such waiver
will not offend Article 6 of the Civil Code.
We hereby rule that the right to bail is another of the constitutional rights which can be waived.
It is a right which is personal to the accused and whose waiver would not be contrary to law,
public order, public policy, morals, or good customs, or prejudicial to a third person with a right
recognized by law.
The respondent Judge then clearly acted with grave abuse of discretion in granting bail to the
private respondent.
WHEREFORE, the Orders of respondent Judge of July 7, 1987 and July 30, 1987 in Criminal
Case No. 86-48926 entitled People of the Philippines vs. Rodolfo C. Salas alias Commander
Bilog/Henry, Josefina Cruz alias Mrs. Mercado, and Jose Milo Concepcion alias Eugene
Zamora, for Rebellion, are hereby NULLIFIED and SET ASIDE.
SO ORDERED.
Fernan, C.J., Narvasa, Melencio-Herrera, Gutierrez, Jr., Cruz, Paras, Feliciano, Gancayco,
Padilla, Bidin, Grio-Aquino, Medialdea and Regalado, JJ., concur.
Sarmiento, J., took no part.

Republic of the Philippines

SUPREME COURT
Manila
EN BANC

G.R. No. 91649

May 14, 1991

ATTORNEYS HUMBERTO BASCO, EDILBERTO BALCE, SOCRATES MARANAN

AND LORENZO SANCHEZ, petitioners,
vs.
PHILIPPINE AMUSEMENTS AND GAMING CORPORATION (PAGCOR), respondent.
H.B. Basco & Associates for petitioners.
Valmonte Law Offices collaborating counsel for petitioners.
Aguirre, Laborte and Capule for respondent PAGCOR.

PARAS, J.:
A TV ad proudly announces:
"The new PAGCOR responding through responsible gaming."
But the petitioners think otherwise, that is why, they filed the instant petition seeking to annul the
Philippine Amusement and Gaming Corporation (PAGCOR) Charter PD 1869, because it is
allegedly contrary to morals, public policy and order, and because
A. It constitutes a waiver of a right prejudicial to a third person with a right recognized by
law. It waived the Manila City government's right to impose taxes and license fees, which
is recognized by law;
B. For the same reason stated in the immediately preceding paragraph, the law has
intruded into the local government's right to impose local taxes and license fees. This, in
contravention of the constitutionally enshrined principle of local autonomy;
C. It violates the equal protection clause of the constitution in that it legalizes PAGCOR
conducted gambling, while most other forms of gambling are outlawed, together with
prostitution, drug trafficking and other vices;
D. It violates the avowed trend of the Cory government away from monopolistic and
crony economy, and toward free enterprise and privatization. (p. 2, Amended Petition; p.
7, Rollo)

In their Second Amended Petition, petitioners also claim that PD 1869 is contrary to the declared
national policy of the "new restored democracy" and the people's will as expressed in the 1987
Constitution. The decree is said to have a "gambling objective" and therefore is contrary to
Sections 11, 12 and 13 of Article II, Sec. 1 of Article VIII and Section 3 (2) of Article XIV, of
the present Constitution (p. 3, Second Amended Petition; p. 21, Rollo).
The procedural issue is whether petitioners, as taxpayers and practicing lawyers (petitioner
Basco being also the Chairman of the Committee on Laws of the City Council of Manila), can
question and seek the annulment of PD 1869 on the alleged grounds mentioned above.
The Philippine Amusements and Gaming Corporation (PAGCOR) was created by virtue of P.D.
1067-A dated January 1, 1977 and was granted a franchise under P.D. 1067-B also dated January
1, 1977 "to establish, operate and maintain gambling casinos on land or water within the
territorial jurisdiction of the Philippines." Its operation was originally conducted in the well
known floating casino "Philippine Tourist." The operation was considered a success for it proved
to be a potential source of revenue to fund infrastructure and socio-economic projects, thus, P.D.
1399 was passed on June 2, 1978 for PAGCOR to fully attain this objective.
Subsequently, on July 11, 1983, PAGCOR was created under P.D. 1869 to enable the
Government to regulate and centralize all games of chance authorized by existing franchise or
permitted by law, under the following declared policy
Sec. 1. Declaration of Policy. It is hereby declared to be the policy of the State to
centralize and integrate all games of chance not heretofore authorized by existing
franchises or permitted by law in order to attain the following objectives:
(a) To centralize and integrate the right and authority to operate and conduct games of
chance into one corporate entity to be controlled, administered and supervised by the
Government.
(b) To establish and operate clubs and casinos, for amusement and recreation, including
sports gaming pools, (basketball, football, lotteries, etc.) and such other forms of
amusement and recreation including games of chance, which may be allowed by law
within the territorial jurisdiction of the Philippines and which will: (1) generate sources
of additional revenue to fund infrastructure and socio-civic projects, such as flood control
programs, beautification, sewerage and sewage projects, Tulungan ng Bayan Centers,
Nutritional Programs, Population Control and such other essential public services; (2)
create recreation and integrated facilities which will expand and improve the country's
existing tourist attractions; and (3) minimize, if not totally eradicate, all the evils,
malpractices and corruptions that are normally prevalent on the conduct and operation of
gambling clubs and casinos without direct government involvement. (Section 1, P.D.
1869)
To attain these objectives PAGCOR is given territorial jurisdiction all over the Philippines.
Under its Charter's repealing clause, all laws, decrees, executive orders, rules and regulations,
inconsistent therewith, are accordingly repealed, amended or modified.

It is reported that PAGCOR is the third largest source of government revenue, next to the Bureau
of Internal Revenue and the Bureau of Customs. In 1989 alone, PAGCOR earned P3.43 Billion,
and directly remitted to the National Government a total of P2.5 Billion in form of franchise tax,
government's income share, the President's Social Fund and Host Cities' share. In addition,
PAGCOR sponsored other socio-cultural and charitable projects on its own or in cooperation
with various governmental agencies, and other private associations and organizations. In its 3 1/2
years of operation under the present administration, PAGCOR remitted to the government a total
of P6.2 Billion. As of December 31, 1989, PAGCOR was employing 4,494 employees in its nine
(9) casinos nationwide, directly supporting the livelihood of Four Thousand Four Hundred
Ninety-Four (4,494) families.
But the petitioners, are questioning the validity of P.D. No. 1869. They allege that the same is
"null and void" for being "contrary to morals, public policy and public order," monopolistic and
tends toward "crony economy", and is violative of the equal protection clause and local
autonomy as well as for running counter to the state policies enunciated in Sections 11 (Personal
Dignity and Human Rights), 12 (Family) and 13 (Role of Youth) of Article II, Section 1 (Social
Justice) of Article XIII and Section 2 (Educational Values) of Article XIV of the 1987
Constitution.
This challenge to P.D. No. 1869 deserves a searching and thorough scrutiny and the most
deliberate consideration by the Court, involving as it does the exercise of what has been
described as "the highest and most delicate function which belongs to the judicial department of
the government." (State v. Manuel, 20 N.C. 144; Lozano v. Martinez, 146 SCRA 323).
As We enter upon the task of passing on the validity of an act of a co-equal and coordinate
branch of the government We need not be reminded of the time-honored principle, deeply
ingrained in our jurisprudence, that a statute is presumed to be valid. Every presumption must be
indulged in favor of its constitutionality. This is not to say that We approach Our task with
diffidence or timidity. Where it is clear that the legislature or the executive for that matter, has
over-stepped the limits of its authority under the constitution, We should not hesitate to wield the
axe and let it fall heavily, as fall it must, on the offending statute (Lozano v. Martinez, supra).
In Victoriano v. Elizalde Rope Workers' Union, et al, 59 SCRA 54, the Court thru Mr. Justice
Zaldivar underscored the
. . . thoroughly established principle which must be followed in all cases where questions
of constitutionality as obtain in the instant cases are involved. All presumptions are
indulged in favor of constitutionality; one who attacks a statute alleging
unconstitutionality must prove its invalidity beyond a reasonable doubt; that a law may
work hardship does not render it unconstitutional; that if any reasonable basis may be
conceived which supports the statute, it will be upheld and the challenger must negate all
possible basis; that the courts are not concerned with the wisdom, justice, policy or
expediency of a statute and that a liberal interpretation of the constitution in favor of the
constitutionality of legislation should be adopted. (Danner v. Hass, 194 N.W. 2nd 534,
539; Spurbeck v. Statton, 106 N.W. 2nd 660, 663; 59 SCRA 66; see also e.g. Salas v.
Jarencio, 46 SCRA 734, 739 [1970]; Peralta v. Commission on Elections, 82 SCRA 30,

55 [1978]; and Heirs of Ordona v. Reyes, 125 SCRA 220, 241-242 [1983] cited in
Citizens Alliance for Consumer Protection v. Energy Regulatory Board, 162 SCRA 521,
540)
Of course, there is first, the procedural issue. The respondents are questioning the legal
personality of petitioners to file the instant petition.
Considering however the importance to the public of the case at bar, and in keeping with the
Court's duty, under the 1987 Constitution, to determine whether or not the other branches of
government have kept themselves within the limits of the Constitution and the laws and that they
have not abused the discretion given to them, the Court has brushed aside technicalities of
procedure and has taken cognizance of this petition. (Kapatiran ng mga Naglilingkod sa
Pamahalaan ng Pilipinas Inc. v. Tan, 163 SCRA 371)
With particular regard to the requirement of proper party as applied in the cases before
us, We hold that the same is satisfied by the petitioners and intervenors because each of
them has sustained or is in danger of sustaining an immediate injury as a result of the acts
or measures complained of. And even if, strictly speaking they are not covered by the
definition, it is still within the wide discretion of the Court to waive the requirement and
so remove the impediment to its addressing and resolving the serious constitutional
questions raised.
In the first Emergency Powers Cases, ordinary citizens and taxpayers were allowed to
question the constitutionality of several executive orders issued by President Quirino
although they were involving only an indirect and general interest shared in common
with the public. The Court dismissed the objection that they were not proper parties and
ruled that "the transcendental importance to the public of these cases demands that they
be settled promptly and definitely, brushing aside, if we must technicalities of
procedure." We have since then applied the exception in many other cases. (Association
of Small Landowners in the Philippines, Inc. v. Sec. of Agrarian Reform, 175 SCRA
343).
Having disposed of the procedural issue, We will now discuss the substantive issues raised.
Gambling in all its forms, unless allowed by law, is generally prohibited. But the prohibition of
gambling does not mean that the Government cannot regulate it in the exercise of its police
power.
The concept of police power is well-established in this jurisdiction. It has been defined as the
"state authority to enact legislation that may interfere with personal liberty or property in order to
promote the general welfare." (Edu v. Ericta, 35 SCRA 481, 487) As defined, it consists of (1) an
imposition or restraint upon liberty or property, (2) in order to foster the common good. It is not
capable of an exact definition but has been, purposely, veiled in general terms to underscore its
all-comprehensive embrace. (Philippine Association of Service Exporters, Inc. v. Drilon, 163
SCRA 386).

Its scope, ever-expanding to meet the exigencies of the times, even to anticipate the future where
it could be done, provides enough room for an efficient and flexible response to conditions and
circumstances thus assuming the greatest benefits. (Edu v. Ericta, supra)
It finds no specific Constitutional grant for the plain reason that it does not owe its origin to the
charter. Along with the taxing power and eminent domain, it is inborn in the very fact of
statehood and sovereignty. It is a fundamental attribute of government that has enabled it to
perform the most vital functions of governance. Marshall, to whom the expression has been
credited, refers to it succinctly as the plenary power of the state "to govern its citizens". (Tribe,
American Constitutional Law, 323, 1978). The police power of the State is a power co-extensive
with self-protection and is most aptly termed the "law of overwhelming necessity." (Rubi v.
Provincial Board of Mindoro, 39 Phil. 660, 708) It is "the most essential, insistent, and
illimitable of powers." (Smith Bell & Co. v. National, 40 Phil. 136) It is a dynamic force that
enables the state to meet the agencies of the winds of change.
What was the reason behind the enactment of P.D. 1869?
P.D. 1869 was enacted pursuant to the policy of the government to "regulate and centralize thru
an appropriate institution all games of chance authorized by existing franchise or permitted by
law" (1st whereas clause, PD 1869). As was subsequently proved, regulating and centralizing
gambling operations in one corporate entity the PAGCOR, was beneficial not just to the
Government but to society in general. It is a reliable source of much needed revenue for the cash
strapped Government. It provided funds for social impact projects and subjected gambling to
"close scrutiny, regulation, supervision and control of the Government" (4th Whereas Clause, PD
1869). With the creation of PAGCOR and the direct intervention of the Government, the evil
practices and corruptions that go with gambling will be minimized if not totally eradicated.
Public welfare, then, lies at the bottom of the enactment of PD 1896.
Petitioners contend that P.D. 1869 constitutes a waiver of the right of the City of Manila to
impose taxes and legal fees; that the exemption clause in P.D. 1869 is violative of the principle
of local autonomy. They must be referring to Section 13 par. (2) of P.D. 1869 which exempts
PAGCOR, as the franchise holder from paying any "tax of any kind or form, income or
otherwise, as well as fees, charges or levies of whatever nature, whether National or Local."
(2) Income and other taxes. a) Franchise Holder: No tax of any kind or form, income
or otherwise as well as fees, charges or levies of whatever nature, whether National or
Local, shall be assessed and collected under this franchise from the Corporation; nor shall
any form or tax or charge attach in any way to the earnings of the Corporation, except a
franchise tax of five (5%) percent of the gross revenues or earnings derived by the
Corporation from its operations under this franchise. Such tax shall be due and payable
quarterly to the National Government and shall be in lieu of all kinds of taxes, levies, fees
or assessments of any kind, nature or description, levied, established or collected by any
municipal, provincial or national government authority (Section 13 [2]).
Their contention stated hereinabove is without merit for the following reasons:

(a) The City of Manila, being a mere Municipal corporation has no inherent right to impose taxes
(Icard v. City of Baguio, 83 Phil. 870; City of Iloilo v. Villanueva, 105 Phil. 337; Santos v.
Municipality of Caloocan, 7 SCRA 643). Thus, "the Charter or statute must plainly show an
intent to confer that power or the municipality cannot assume it" (Medina v. City of Baguio, 12
SCRA 62). Its "power to tax" therefore must always yield to a legislative act which is superior
having been passed upon by the state itself which has the "inherent power to tax" (Bernas, the
Revised [1973] Philippine Constitution, Vol. 1, 1983 ed. p. 445).
(b) The Charter of the City of Manila is subject to control by Congress. It should be stressed that
"municipal corporations are mere creatures of Congress" (Unson v. Lacson, G.R. No. 7909,
January 18, 1957) which has the power to "create and abolish municipal corporations" due to its
"general legislative powers" (Asuncion v. Yriantes, 28 Phil. 67; Merdanillo v. Orandia, 5 SCRA
541). Congress, therefore, has the power of control over Local governments (Hebron v. Reyes,
G.R. No. 9124, July 2, 1950). And if Congress can grant the City of Manila the power to tax
certain matters, it can also provide for exemptions or even take back the power.
(c) The City of Manila's power to impose license fees on gambling, has long been revoked. As
early as 1975, the power of local governments to regulate gambling thru the grant of "franchise,
licenses or permits" was withdrawn by P.D. No. 771 and was vested exclusively on the National
Government, thus:
Sec. 1. Any provision of law to the contrary notwithstanding, the authority of chartered
cities and other local governments to issue license, permit or other form of franchise to
operate, maintain and establish horse and dog race tracks, jai-alai and other forms of
gambling is hereby revoked.
Sec. 2. Hereafter, all permits or franchises to operate, maintain and establish, horse and
dog race tracks, jai-alai and other forms of gambling shall be issued by the national
government upon proper application and verification of the qualification of the applicant .
..
Therefore, only the National Government has the power to issue "licenses or permits" for the
operation of gambling. Necessarily, the power to demand or collect license fees which is a
consequence of the issuance of "licenses or permits" is no longer vested in the City of Manila.
(d) Local governments have no power to tax instrumentalities of the National Government.
PAGCOR is a government owned or controlled corporation with an original charter, PD 1869.
All of its shares of stocks are owned by the National Government. In addition to its corporate
powers (Sec. 3, Title II, PD 1869) it also exercises regulatory powers thus:
Sec. 9. Regulatory Power. The Corporation shall maintain a Registry of the affiliated
entities, and shall exercise all the powers, authority and the responsibilities vested in the
Securities and Exchange Commission over such affiliating entities mentioned under the
preceding section, including, but not limited to amendments of Articles of Incorporation
and By-Laws, changes in corporate term, structure, capitalization and other matters
concerning the operation of the affiliated entities, the provisions of the Corporation Code

of the Philippines to the contrary notwithstanding, except only with respect to original
incorporation.
PAGCOR has a dual role, to operate and to regulate gambling casinos. The latter role is
governmental, which places it in the category of an agency or instrumentality of the Government.
Being an instrumentality of the Government, PAGCOR should be and actually is exempt from
local taxes. Otherwise, its operation might be burdened, impeded or subjected to control by a
mere Local government.
The states have no power by taxation or otherwise, to retard, impede, burden or in any
manner control the operation of constitutional laws enacted by Congress to carry into
execution the powers vested in the federal government. (MC Culloch v. Marland, 4
Wheat 316, 4 L Ed. 579)
This doctrine emanates from the "supremacy" of the National Government over local
governments.
Justice Holmes, speaking for the Supreme Court, made reference to the entire absence of
power on the part of the States to touch, in that way (taxation) at least, the
instrumentalities of the United States (Johnson v. Maryland, 254 US 51) and it can be
agreed that no state or political subdivision can regulate a federal instrumentality in such
a way as to prevent it from consummating its federal responsibilities, or even to seriously
burden it in the accomplishment of them. (Antieau, Modern Constitutional Law, Vol. 2, p.
140, emphasis supplied)
Otherwise, mere creatures of the State can defeat National policies thru extermination of what
local authorities may perceive to be undesirable activities or enterprise using the power to tax as
"a tool for regulation" (U.S. v. Sanchez, 340 US 42).
The power to tax which was called by Justice Marshall as the "power to destroy" (Mc Culloch v.
Maryland, supra) cannot be allowed to defeat an instrumentality or creation of the very entity
which has the inherent power to wield it.
(e) Petitioners also argue that the Local Autonomy Clause of the Constitution will be violated by
P.D. 1869. This is a pointless argument. Article X of the 1987 Constitution (on Local Autonomy)
provides:
Sec. 5. Each local government unit shall have the power to create its own source of
revenue and to levy taxes, fees, and other charges subject to such guidelines and
limitation as the congress may provide, consistent with the basic policy on local
autonomy. Such taxes, fees and charges shall accrue exclusively to the local government.
(emphasis supplied)
The power of local government to "impose taxes and fees" is always subject to "limitations"
which Congress may provide by law. Since PD 1869 remains an "operative" law until "amended,
repealed or revoked" (Sec. 3, Art. XVIII, 1987 Constitution), its "exemption clause" remains as

an exception to the exercise of the power of local governments to impose taxes and fees. It
cannot therefore be violative but rather is consistent with the principle of local autonomy.
Besides, the principle of local autonomy under the 1987 Constitution simply means
"decentralization" (III Records of the 1987 Constitutional Commission, pp. 435-436, as cited in
Bernas, The Constitution of the Republic of the Philippines, Vol. II, First Ed., 1988, p. 374). It
does not make local governments sovereign within the state or an "imperium in imperio."
Local Government has been described as a political subdivision of a nation or state which
is constituted by law and has substantial control of local affairs. In a unitary system of
government, such as the government under the Philippine Constitution, local
governments can only be an intra sovereign subdivision of one sovereign nation, it cannot
be an imperium in imperio. Local government in such a system can only mean a measure
of decentralization of the function of government. (emphasis supplied)
As to what state powers should be "decentralized" and what may be delegated to local
government units remains a matter of policy, which concerns wisdom. It is therefore a political
question. (Citizens Alliance for Consumer Protection v. Energy Regulatory Board, 162 SCRA
539).
What is settled is that the matter of regulating, taxing or otherwise dealing with gambling is a
State concern and hence, it is the sole prerogative of the State to retain it or delegate it to local
governments.
As gambling is usually an offense against the State, legislative grant or express charter
power is generally necessary to empower the local corporation to deal with the subject. .
. . In the absence of express grant of power to enact, ordinance provisions on this subject
which are inconsistent with the state laws are void. (Ligan v. Gadsden, Ala App. 107 So.
733 Ex-Parte Solomon, 9, Cals. 440, 27 PAC 757 following in re Ah You, 88 Cal. 99, 25
PAC 974, 22 Am St. Rep. 280, 11 LRA 480, as cited in Mc Quinllan Vol. 3 Ibid, p. 548,
emphasis supplied)
Petitioners next contend that P.D. 1869 violates the equal protection clause of the Constitution,
because "it legalized PAGCOR conducted gambling, while most gambling are outlawed
together with prostitution, drug trafficking and other vices" (p. 82, Rollo).
We, likewise, find no valid ground to sustain this contention. The petitioners' posture ignores the
well-accepted meaning of the clause "equal protection of the laws." The clause does not preclude
classification of individuals who may be accorded different treatment under the law as long as
the classification is not unreasonable or arbitrary (Itchong v. Hernandez, 101 Phil. 1155). A law
does not have to operate in equal force on all persons or things to be conformable to Article III,
Section 1 of the Constitution (DECS v. San Diego, G.R. No. 89572, December 21, 1989).
The "equal protection clause" does not prohibit the Legislature from establishing classes of
individuals or objects upon which different rules shall operate (Laurel v. Misa, 43 O.G. 2847).

The Constitution does not require situations which are different in fact or opinion to be treated in
law as though they were the same (Gomez v. Palomar, 25 SCRA 827).
Just how P.D. 1869 in legalizing gambling conducted by PAGCOR is violative of the equal
protection is not clearly explained in the petition. The mere fact that some gambling activities
like cockfighting (P.D 449) horse racing (R.A. 306 as amended by RA 983), sweepstakes,
lotteries and races (RA 1169 as amended by B.P. 42) are legalized under certain conditions,
while others are prohibited, does not render the applicable laws, P.D. 1869 for one,
unconstitutional.
If the law presumably hits the evil where it is most felt, it is not to be overthrown because
there are other instances to which it might have been applied. (Gomez v. Palomar, 25
SCRA 827)
The equal protection clause of the 14th Amendment does not mean that all occupations
called by the same name must be treated the same way; the state may do what it can to
prevent which is deemed as evil and stop short of those cases in which harm to the few
concerned is not less than the harm to the public that would insure if the rule laid down
were made mathematically exact. (Dominican Hotel v. Arizona, 249 US 2651).
Anent petitioners' claim that PD 1869 is contrary to the "avowed trend of the Cory Government
away from monopolies and crony economy and toward free enterprise and privatization" suffice
it to state that this is not a ground for this Court to nullify P.D. 1869. If, indeed, PD 1869 runs
counter to the government's policies then it is for the Executive Department to recommend to
Congress its repeal or amendment.
The judiciary does not settle policy issues. The Court can only declare what the law is
and not what the law should be.1wphi1 Under our system of government, policy issues
are within the domain of the political branches of government and of the people
themselves as the repository of all state power. (Valmonte v. Belmonte, Jr., 170 SCRA
256).
On the issue of "monopoly," however, the Constitution provides that:
Sec. 19. The State shall regulate or prohibit monopolies when public interest so requires.
No combinations in restraint of trade or unfair competition shall be allowed. (Art. XII,
National Economy and Patrimony)
It should be noted that, as the provision is worded, monopolies are not necessarily prohibited by
the Constitution. The state must still decide whether public interest demands that monopolies be
regulated or prohibited. Again, this is a matter of policy for the Legislature to decide.
On petitioners' allegation that P.D. 1869 violates Sections 11 (Personality Dignity) 12 (Family)
and 13 (Role of Youth) of Article II; Section 13 (Social Justice) of Article XIII and Section 2
(Educational Values) of Article XIV of the 1987 Constitution, suffice it to state also that these

are merely statements of principles and, policies. As such, they are basically not self-executing,
meaning a law should be passed by Congress to clearly define and effectuate such principles.
In general, therefore, the 1935 provisions were not intended to be self-executing
principles ready for enforcement through the courts. They were rather directives
addressed to the executive and the legislature. If the executive and the legislature failed to
heed the directives of the articles the available remedy was not judicial or political. The
electorate could express their displeasure with the failure of the executive and the
legislature through the language of the ballot. (Bernas, Vol. II, p. 2)
Every law has in its favor the presumption of constitutionality (Yu Cong Eng v. Trinidad, 47
Phil. 387; Salas v. Jarencio, 48 SCRA 734; Peralta v. Comelec, 82 SCRA 30; Abbas v. Comelec,
179 SCRA 287). Therefore, for PD 1869 to be nullified, it must be shown that there is a clear and
unequivocal breach of the Constitution, not merely a doubtful and equivocal one. In other words,
the grounds for nullity must be clear and beyond reasonable doubt. (Peralta v. Comelec, supra)
Those who petition this Court to declare a law, or parts thereof, unconstitutional must clearly
establish the basis for such a declaration. Otherwise, their petition must fail. Based on the
grounds raised by petitioners to challenge the constitutionality of P.D. 1869, the Court finds that
petitioners have failed to overcome the presumption. The dismissal of this petition is therefore,
inevitable. But as to whether P.D. 1869 remains a wise legislation considering the issues of
"morality, monopoly, trend to free enterprise, privatization as well as the state principles on
social justice, role of youth and educational values" being raised, is up for Congress to
determine.
As this Court held in Citizens' Alliance for Consumer Protection v. Energy Regulatory Board,
162 SCRA 521
Presidential Decree No. 1956, as amended by Executive Order No. 137 has, in any case,
in its favor the presumption of validity and constitutionality which petitioners Valmonte
and the KMU have not overturned. Petitioners have not undertaken to identify the
provisions in the Constitution which they claim to have been violated by that statute. This
Court, however, is not compelled to speculate and to imagine how the assailed legislation
may possibly offend some provision of the Constitution. The Court notes, further, in this
respect that petitioners have in the main put in question the wisdom, justice and
expediency of the establishment of the OPSF, issues which are not properly addressed to
this Court and which this Court may not constitutionally pass upon. Those issues should
be addressed rather to the political departments of government: the President and the
Congress.
Parenthetically, We wish to state that gambling is generally immoral, and this is precisely so
when the gambling resorted to is excessive. This excessiveness necessarily depends not only on
the financial resources of the gambler and his family but also on his mental, social, and spiritual
outlook on life. However, the mere fact that some persons may have lost their material fortunes,
mental control, physical health, or even their lives does not necessarily mean that the same are
directly attributable to gambling. Gambling may have been the antecedent, but certainly not

necessarily the cause. For the same consequences could have been preceded by an overdose of
food, drink, exercise, work, and even sex.
WHEREFORE, the petition is DISMISSED for lack of merit.
SO ORDERED.
Fernan, C.J., Narvasa, Gutierrez, Jr., Cruz, Feliciano, Gancayco, Bidin, Sarmiento, GrioAquino, Medialdea, Regalado and Davide, Jr., JJ., concur.

Republic of the Philippines

SUPREME COURT
Manila
EN BANC

G.R. No. 88291 June 8, 1993

ERNESTO M. MACEDA, petitioner,
vs.
HON. CATALINO MACARAIG, JR., in his capacity as Executive Secretary, Office of the President, HON. VICENTE JAYME, ETC., ET
AL., respondents.
Angara, Abello, Concepcion & Cruz for respondent Pilipinas Shell Petroleum Corporation.
Siguion Reyna, Montecillo & Ongsiako for Caltex.

NOCON, J.:
Just like lightning which does strike the same place twice in some instances, this matter of indirect tax exemption of the private respondent
1
National Power Corporation (NPC) is brought to this Court a second time. Unfazed by the Decision We promulgated on May 31, 1991

petitioner Ernesto Maceda asks this Court to reconsider said Decision. Lest We be criticized for denying
due process to the petitioner. We have decided to take a second look at the issues. In the process, a
hearing was held on July 9, 1992 where all parties presented their respective arguments. Etched in this
Court's mind are the paradoxical claims by both petitioner and private respondents that their respective
positions are for the benefit of the Filipino people.
I
A Chronological review of the relevant NPC laws, specially with respect to its tax exemption provisions, at
the risk of being repetitious is, therefore, in order.
On November 3, 1936, Commonwealth Act No. 120 was enacted creating the National Power
Corporation, a public corporation, mainly to develop hydraulic power from all water sources in the
2
Philippines. The sum of P250,000.00 was appropriated out of the funds in the Philippine Treasury for the
3
purpose of organizing the NPC and conducting its preliminary work. The main source of funds for the
4
NPC was the flotation of bonds in the capital markets and these bonds
. . . issued under the authority of this Act shall be exempt from the payment of all taxes by
the Commonwealth of the Philippines, or by any authority, branch, division or political
subdivision thereof and subject to the provisions of the Act of Congress, approved March
24, 1934, otherwise known as the Tydings McDuffle Law, which facts shall be stated
5
upon the face of said bonds. . . . .
On June 24, 1938, C.A. No. 344 was enacted increasing to P550,000.00 the funds needed for the initial
operations of the NPC and reiterating the provision of the flotation of bonds as soon as the first
6
construction of any hydraulic power project was to be decided by the NPC Board. The provision on tax
exemption in relation to the issuance of the NPC bonds was neither amended nor deleted.
On September 30, 1939, C.A. No. 495 was enacted removing the provision on the payment of the bond's
7
principal and interest in "gold coins" but adding that payment could be made in United States dollars.

The provision on tax exemption in relation to the issuance of the NPC bonds was neither amended nor
deleted.
On June 4, 1949, Republic Act No. 357 was enacted authorizing the President of the Philippines to
8
guarantee, absolutely and unconditionally, as primary obligor, the payment of any and all NPC loans. He
was also authorized to contract on behalf of the NPC with the International Bank for Reconstruction and
9
Development (IBRD) for NPC loans for the accomplishment of NPC's corporate objectives and for the
10
reconstruction and development of the economy of the country. It was expressly stated that:
Any such loan or loans shall be exempt from taxes, duties, fees, imposts, charges,
contributions and restrictions of the Republic of the Philippines, its provinces, cities and
11
municipalities.
On the same date, R.A. No. 358 was enacted expressly authorizing the NPC, for the first time, to incur
12
other types of indebtedness, aside from indebtedness incurred by flotation of bonds. As to the pertinent
tax exemption provision, the law stated as follows:
To facilitate payment of its indebtedness, the National Power Corporation shall be
exempt from all taxes, duties, fees, imposts, charges, and restrictions of the Republic of
13
the Philippines, its provinces, cities and municipalities.
On July 10, 1952, R.A. No. 813 was enacted amending R.A. No. 357 in that, aside from the IBRD, the
President of the Philippines was authorized to negotiate, contract and guarantee loans with the Export14
Import Bank of of Washigton, D.C., U.S.A., or any other international financial institution. The tax
provision for repayment of these loans, as stated in R.A. No. 357, was not amended.
On June 2, 1954, R.A. No. 987 was enacted specifically to withdraw NPC's tax exemption for real estate
taxes. As enacted, the law states as follows:
To facilitate payment of its indebtedness, the National Power Corporation shall be
exempt from all taxes, except real property tax, and from all duties, fees, imposts,
charges, and restrictions of the Republic of the Philippines, its provinces, cities, and
15
municipalities.
On September 8, 1955, R.A. No. 1397 was enacted directing that the NPC projects to be funded by the
16
increased indebtedness should bear the National Economic Council's stamp of approval. The tax
exemption provision related to the payment of this total indebtedness was not amended nor deleted.
On June 13, 1958, R.A. No. 2055 was enacted increasing the total amount of foreign loans NPC was
17
authorized to incur to US$100,000,000.00 from the US$50,000,000.00 ceiling in R.A. No. 357. The tax
provision related to the repayment of these loans was not amended nor deleted.
On June 13, 1958, R.A. No. 2058 was enacting fixing the corporate life of NPC to December 31, 2000.
All laws or provisions of laws and executive orders contrary to said R.A. No. 2058 were expressly
19
repealed.

18

On June 18, 1960, R.A. No 2641 was enacted converting the NPC from a public corporation into a stock
corporation with an authorized capital stock of P100,000,000.00 divided into 1,000.000 shares having a
20
par value of P100.00 each, with said capital stock wholly subscribed to by the Government. No tax
exemption was incorporated in said Act.

On June 17, 1961, R.A. No. 3043 was enacted increasing the above-mentioned authorized capital stock
21
to P250,000,000.00 with the increase to be wholly subscribed by the Government. No tax provision was
incorporated in said Act.
On June 17, 1967, R.A. No 4897 was enacted. NPC's capital stock was increased again to
P300,000,000.00, the increase to be wholly subscribed by the Government. No tax provision was
22
incorporated in said Act.
On September 10, 1971, R.A. No. 6395 was enacted revising the charter of the NPC, C.A. No. 120, as
amended. Declared as primary objectives of the nation were:
Declaration of Policy. Congress hereby declares that (1) the comprehensive
development, utilization and conservation of Philippine water resources for all beneficial
uses, including power generation, and (2) the total electrification of the Philippines
through the development of power from all sources to meet the needs of industrial
development and dispersal and the needs of rural electrification are primary objectives of
the nation which shall be pursued coordinately and supported by all instrumentalities and
23
agencies of the government, including the financial institutions.
Section 4 of C.A. No. 120, was renumbered as Section 8, and divided into sections 8 (a) (Authority to
incur Domestic Indebtedness) and Section 8 (b) (Authority to Incur Foreign Loans).
As to the issuance of bonds by the NPC, Paragraph No. 3 of Section 8(a), states as follows:
The bonds issued under the authority of this subsection shall be exempt from the
payment of all taxes by the Republic of the Philippines, or by any authority, branch,
division or political subdivision thereof which facts shall be stated upon the face of said
24
bonds. . . .
As to the foreign loans the NPC was authorized to contract, Paragraph No. 5, Section 8(b), states as
follows:
The loans, credits and indebtedness contracted under this subsection and the payment of
the principal, interest and other charges thereon, as well as the importation of machinery,
equipment, materials and supplies by the Corporation, paid from the proceeds of any
loan, credit or indebtedeness incurred under this Act, shall also be exempt from all taxes,
fees, imposts, other charges and restrictions, including import restrictions, by the
25
Republic of the Philippines, or any of its agencies and political subdivisions.
A new section was added to the charter, now known as Section 13, R.A. No. 6395, which declares the
non-profit character and tax exemptions of NPC as follows:
The Corporation shall be non-profit and shall devote all its returns from its capital
investment, as well as excess revenues from its operation, for expansion. To enable the
Corporation to pay its indebtedness and obligations and in furtherance and effective
implementation of the policy enunciated in Section one of this Act, the Corporation is
hereby declared exempt:
(a) From the payment of all taxes, duties, fees, imposts, charges costs and service fees
in any court or administrative proceedings in which it may be a party, restrictions and
duties to the Republic of the Philippines, its provinces, cities, and municipalities and other
government agencies and instrumentalities;

(b) From all income taxes, franchise taxes and realty taxes to be paid to the National
Government, its provinces, cities, municipalities and other government agencies and
instrumentalities;
(c) From all import duties, compensating taxes and advanced sales tax, and wharfage
fees on import of foreign goods required for its operations and projects; and
(d) From all taxes, duties, fees, imposts and all other charges its provinces, cities,
municipalities and other government agencies and instrumentalities, on all petroleum
products used by the Corporation in the generation, transmission, utilization, and sale of
26
electric power.
On November 7, 1972, Presidential Decree No. 40 was issued declaring that the
electrification of the entire country was one of the primary concerns of the country. And in
connection with this, it was specifically stated that:
The setting up of transmission line grids and the construction of associated generation
facilities in Luzon, Mindanao and major islands of the country, including the Visayas, shall
be the responsibility of the National Power Corporation (NPC) as the authorized
27
implementing agency of the State.
xxx xxx xxx
It is the ultimate objective of the State for the NPC to own and operate as a single
integrated system all generating facilities supplying electric power to the entire area
28
embraced by any grid set up by the NPC.
On January 22, 1974, P.D. No. 380 was issued giving extra powers to the NPC to enable it to fulfill its role
29
under aforesaid P.D. No. 40. Its authorized capital stock was raised to P2,000,000,000.00, its total
30
domestic indebtedness was pegged at a maximum of P3,000,000,000.00 at any one time, and the NPC
31
was authorized to borrow a total of US$1,000,000,000.00 in foreign loans.
The relevant tax exemption provision for these foreign loans states as follows:
The loans, credits and indebtedness contracted under this subsection and the payment of
the principal, interest and other charges thereon, as well as the importation of machinery,
equipment, materials, supplies and services, by the Corporation, paid from the proceeds
of any loan, credit or indebtedness incurred under this Act, shall also be exempt from all
direct and indirect taxes, fees, imposts, other charges and restrictions, including import
restrictions previously and presently imposed, and to be imposed by the Republic of the
32
Philippines, or any of its agencies and political subdivisions. (Emphasis supplied)
Section 13(a) and 13(d) of R.A. No 6395 were amended to read as follows:
(a) From the payment of all taxes, duties, fees, imposts, charges and restrictions to the
Republic of the Philippines, its provinces, cities, municipalities and other government
agencies and instrumentalities including the taxes, duties, fees, imposts and other
charges provided for under the Tariff and Customs Code of the Philippines, Republic Act
Numbered Nineteen Hundred Thirty-Seven, as amended, and as further amended by
Presidential Decree No. 34 dated October 27, 1972, and Presidential Decree No. 69,
dated November 24, 1972, and costs and service fees in any court or administrative
proceedings in which it may be a party;

xxx xxx xxx

(d) From all taxes, duties, fees, imposts, and all other charges imposed directly or
indirectly by the Republic of the Philippines, its provinces, cities, municipalities and other
government agencies and instrumentalities, on all petroleum products used by the
33
Corporation in the generation, transmission, utilization and sale of electric power.
(Emphasis supplied)
On February 26, 1970, P.D. No. 395 was issued removing certain restrictions in the NPC's sale of
34
electricity to its different customers. No tax exemption provision was amended, deleted or added.
On July 31, 1975, P.D. No. 758 was issued directing that P200,000,000.00 would be appropriated
annually to cover the unpaid subscription of the Government in the NPC authorized capital stock, which
amount would be taken from taxes accruing to the General Funds of the Government, proceeds from
loans, issuance of bonds, treasury bills or notes to be issued by the Secretary of Finance for this
35
particular purpose.
On May 27, 1976 P.D. No. 938 was issued
(I)n view of the accelerated expansion programs for generation and transmission facilities
which includes nuclear power generation, the present capitalization of National Power
Corporation (NPC) and the ceilings for domestic and foreign borrowings are deemed
36
insufficient;
xxx xxx xxx
(I)n the application of the tax exemption provisions of the Revised Charter, the non-profit
character of NPC has not been fully utilized because of restrictive interpretation of the
37
taxing agencies of the government on said provisions;
xxx xxx xxx
(I)n order to effect the accelerated expansion program and attain the declared objective
of total electrification of the country, further amendments of certain sections of Republic
Act No. 6395, as amended by Presidential Decrees Nos. 380, 395 and 758, have
38
become imperative;
39

Thus NPC's capital stock was raised to P8,000,000,000.00, the total domestic indebtedness ceiling was
40
41
increased to P12,000,000,000.00, the total foreign loan ceiling was raised to US$4,000,000,000.00
and Section 13 of R.A. No. 6395, was amended to read as follows:
The Corporation shall be non-profit and shall devote all its returns from its capital
investment as well as excess revenues from its operation, for expansion. To enable the
Corporation to pay to its indebtedness and obligations and in furtherance and effective
implementation of the policy enunciated in Section one of this Act, the Corporation,
including its subsidiaries, is hereby declared exempt from the payment of all forms of
taxes, duties, fees, imposts as well as costs and service fees including filing fees, appeal
42
bonds, supersedeas bonds, in any court or administrative proceedings.
II
On the other hand, the pertinent tax laws involved in this controversy are P.D. Nos. 882, 1177, 1931 and
Executive Order No. 93 (S'86).

On January 30, 1976, P.D. No. 882 was issued withdrawing the tax exemption of NPC with regard to
imports as follows:
WHEREAS, importations by certain government agencies, including government-owned
or controlled corporation, are exempt from the payment of customs duties and
compensating tax; and
WHEREAS, in order to reduce foreign exchange spending and to protect domestic
industries, it is necessary to restrict and regulate such tax-free importations.
NOW THEREFORE, I, FERDINAND E. MARCOS, President of the Philippines, by virtue
of the powers vested in me by the Constitution, and do hereby decree and order the
following:
Sec. 1. All importations of any government agency, including government-owned or
controlled corporations which are exempt from the payment of customs duties and
internal revenue taxes, shall be subject to the prior approval of an Inter-Agency
Committee which shall insure compliance with the following conditions:
(a) That no such article of local manufacture are available in sufficient quantity and
comparable quality at reasonable prices;
(b) That the articles to be imported are directly and actually needed and will be used
exclusively by the grantee of the exemption for its operations and projects or in the
conduct of its functions; and
(c) The shipping documents covering the importation are in the name of the grantee to
whom the goods shall be delivered directly by customs authorities.
xxx xxx xxx
Sec. 3. The Committee shall have the power to regulate and control the tax-free
importation of government agencies in accordance with the conditions set forth in Section
1 hereof and the regulations to be promulgated to implement the provisions of this
Decree. Provided, however, That any government agency or government-owned or
controlled corporation, or any local manufacturer or business firm adversely affected by
any decision or ruling of the Inter-Agency Committee may file an appeal with the Office of
the President within ten days from the date of notice thereof. . . . .
xxx xxx xxx
Sec. 6. . . . . Section 13 of Republic Act No. 6395; . . .. and all similar provisions of all
general and special laws and decrees are hereby amended accordingly.
xxx xxx xxx
On July 30, 1977, P.D. 1177 was issued as it was
. . . declared the policy of the State to formulate and implement a National Budget that is
an instrument of national development, reflective of national objectives, strategies and
plans. The budget shall be supportive of and consistent with the socio-economic
development plan and shall be oriented towards the achievement of explicit objectives
and expected results, to ensure that funds are utilized and operations are conducted

effectively, economically and efficiently. The national budget shall be formulated within a
context of a regionalized government structure and of the totality of revenues and other
receipts, expenditures and borrowings of all levels of government-owned or controlled
corporations. The budget shall likewise be prepared within the context of the national
43
long-term plan and of a long-term budget program.
In line with such policy, the law decreed that
All units of government, including government-owned or controlled corporations, shall pay income taxes,
customs duties and other taxes and fees are imposed under revenues laws: provided, that organizations
otherwise exempted by law from the payment of such taxes/duties may ask for a subsidy from the
General Fund in the exact amount of taxes/duties due: provided, further, that a procedure shall be
established by the Secretary of Finance and the Commissioner of the Budget, whereby such subsidies
44
shall automatically be considered as both revenue and expenditure of the General Fund.
The law also declared that
[A]ll laws, decrees, executive orders, rules and regulations or parts thereof which are
inconsistent with the provisions of the Decree are hereby repealed and/or modified
45
accordingly.
On July 11, 1984, most likely due to the economic morass the Government found itself in after the Aquino
assassination, P.D. No. 1931 was issued to reiterate that:
WHEREAS, Presidential Decree No. 1177 has already expressly repealed the grant of
tax privileges to any government-owned or controlled corporation and all other units of
46
government;
and since there was a
. . . need for government-owned or controlled corporations and all other units of
government enjoying tax privileges to share in the requirements of development, fiscal or
47
otherwise, by paying the duties, taxes and other charges due from them.
it was decreed that:
Sec. 1. The provisions of special on general law to the contrary notwithstanding, all
exemptions from the payment of duties, taxes, fees, imposts and other charges
heretofore granted in favor of government-owned or controlled corporations including
their subsidiaries, are hereby withdrawn.
Sec. 2. The President of the Philippines and/or the Minister of Finance, upon the
recommendation of the Fiscal Incentives Review Board created under Presidential
Decree No. 776, is hereby empowered to restore, partially or totally, the exemptions
withdrawn by Section 1 above, any applicable tax and duty, taking into account, among
others, any or all of the following:
1) The effect on the relative price levels;
2) The relative contribution of the corporation to the revenue generation effort;
3) The nature of the activity in which the corporation is engaged in; or

4) In general the greater national interest to be served.

xxx xxx xxx
Sec. 5. The provisions of Presidential Decree No. 1177 as well as all other laws, decrees,
executive orders, administrative orders, rules, regulations or parts thereof which are
inconsistent with this Decree are hereby repealed, amended or modified accordingly.
On December 17, 1986, E.O. No. 93 (S'86) was issued with a view to correct presidential restoration or
grant of tax exemption to other government and private entities without benefit of review by the Fiscal
Incentives Review Board, to wit:
WHEREAS, Presidential Decree Nos. 1931 and 1955 issued on June 11, 1984 and
October 14, 1984, respectively, withdrew the tax and duty exemption privileges, including
the preferential tax treatment, of government and private entities with certain exceptions,
in order that the requirements of national economic development, in terms of fiscals and
other resources, may be met more adequately;
xxx xxx xxx
WHEREAS, in addition to those tax and duty exemption privileges were restored by the
Fiscal Incentives Review Board (FIRB), a number of affected entities, government and
private, had their tax and duty exemption privileges restored or granted by Presidential
action without benefit or review by the Fiscal Incentives Review Board (FIRB);
xxx xxx xxx
Since it was decided that:
[A]ssistance to government and private entities may be better provided where necessary
by explicit subsidy and budgetary support rather than tax and duty exemption privileges if
only to improve the fiscal monitoring aspects of government operations.
It was thus ordered that:
Sec. 1. The Provisions of any general or special law to the contrary notwithstanding, all
tax and duty incentives granted to government and private entities are hereby withdrawn,
except:
a) those covered by the non-impairment clause of the Constitution;
b) those conferred by effective internation agreement to which the Government of the
Republic of the Philippines is a signatory;
c) those enjoyed by enterprises registered with:
(i) the Board of Investment pursuant to Presidential Decree No. 1789, as
amended;
(ii) the Export Processing Zone Authority, pursuant to Presidential
Decree No. 66 as amended;

(iii) the Philippine Veterans Investment Development Corporation

Industrial Authority pursuant to Presidential Decree No. 538, was
amended.
d) those enjoyed by the copper mining industry pursuant to the provisions of Letter of
Instructions No. 1416;
e) those conferred under the four basic codes namely:
(i) the Tariff and Customs Code, as amended;
(ii) the National Internal Revenue Code, as amended;
(iii) the Local Tax Code, as amended;
(iv) the Real Property Tax Code, as amended;
f) those approved by the President upon the recommendation of the
Fiscal Incentives Review Board.
Sec. 2. The Fiscal Incentives Review Board created under Presidential Decree No. 776,
as amended, is hereby authorized to:
a) restore tax and/or duty exemptions withdrawn hereunder in whole or in part;
b) revise the scope and coverage of tax and/or duty exemption that may be restored;
c) impose conditions for the restoration of tax and/or duty exemption;
d) prescribe the date of period of effectivity of the restoration of tax and/or duty
exemption;
e) formulate and submit to the President for approval, a complete system for the grant of
subsidies to deserving beneficiaries, in lieu of or in combination with the restoration of tax
and duty exemptions or preferential treatment in taxation, indicating the source of funding
therefor, eligible beneficiaries and the terms and conditions for the grant thereof taking
into consideration the international commitment of the Philippines and the necessary
precautions such that the grant of subsidies does not become the basis for countervailing
action.
Sec. 3. In the discharge of its authority hereunder, the Fiscal Incentives Review Board
shall take into account any or all of the following considerations:
a) the effect on relative price levels;
b) relative contribution of the beneficiary to the revenue generation effort;
c) nature of the activity the beneficiary is engaged; and
d) in general, the greater national interest to be served.
xxx xxx xxx

Sec. 5. All laws, orders, issuances, rules and regulations or parts thereof inconsistent
with this Executive Order are hereby repealed or modified accordingly.
48

E.O. No. 93 (S'86) was decreed to be effective upon the promulgation of the rules and regulations, to
49
be issued by the Ministry of Finance. Said rules and regulations were promulgated and published in the
Official Gazette
50
on February 23, 1987. These became effective on the 15th day after promulgation in the Official
51
Gasetter, which 15th day was March 10, 1987.
III
Now to some definitions. We refer to the very simplistic approach that all would-be lawyers, learn in their
TAXATION I course, which fro convenient reference, is as follows:
Classifications or kinds of Taxes:
According to Persons who pay or who bear the burden:
a. Direct Tax the where the person supposed to pay the tax really pays it. WITHOUT
transferring the burden to someone else.
Examples: Individual income tax, corporate income tax, transfer taxes (estate tax, donor's
tax), residence tax, immigration tax
b. Indirect Tax that where the tax is imposed upon goods BEFORE reaching the
consumer who ultimately pays for it, not as a tax, but as a part of the purchase price.
Examples: the internal revenue indirect taxes (specific tax, percentage taxes, (VAT) and
52
the tariff and customs indirect taxes (import duties, special import tax and other dues)
IV
To simply matter, the issues raised by petitioner in his motion for reconsideration can be reduced to the
following:
(1) What kind of tax exemption privileges did NPC have?
(2) For what periods in time were these privileges being enjoyed?
(3) If there are taxes to be paid, who shall pay for these taxes?
V
Petitioner contends that P.D. No. 938 repealed the indirect tax exemption of NPC as the phrase "all forms
of taxes etc.," in its section 10, amending Section 13, R.A. No. 6395, as amended by P.D. No. 380, does
not expressly include "indirect taxes."
His point is not well-taken.
A chronological review of the NPC laws will show that it has been the lawmaker's intention that the NPC
was to be completely tax exempt from all forms of taxes direct and indirect.

NPC's tax exemptions at first applied to the bonds it was authorized to float to finance its operations upon
its creation by virtue of C.A. No. 120.
When the NPC was authorized to contract with the IBRD for foreign financing, any loans obtained were to
be completely tax exempt.
After the NPC was authorized to borrow from other sources of funds aside issuance of bonds it was
again specifically exempted from all types of taxes "to facilitate payment of its indebtedness." Even when
the ceilings for domestic and foreign borrowings were periodically increased, the tax exemption privileges
of the NPC were maintained.
NPC's tax exemption from real estate taxes was, however, specifically withdrawn by Rep. Act No. 987, as
above stated. The exemption was, however, restored by R.A. No. 6395.
Section 13, R.A. No. 6395, was very comprehensive in its enumeration of the tax exemptions allowed
NPC. Its section 13(d) is the starting point of this bone of contention among the parties. For easy
reference, it is reproduced as follows:
[T]he Corporation is hereby declared exempt:
xxx xxx xxx
(d) From all taxes, duties, fees, imposts and all other charges imposed by the Republic of
the Philippines, its provinces, cities, municipalities and other government agencies and
instrumentalities, on all petroleum products used by the Corporation in the generation,
transmission, utilization, and sale of electric power.
P.D. No. 380 added phrase "directly or indirectly" to said Section 13(d), which now reads as follows:
xxx xxx xxx
(d) From all taxes, duties, fees, imposts, and all other charges imposed directly or
indirectly by the Republic of the Philippines, its provinces, cities, municipalities and other
government agencies and instrumentalities, on all petroleum products used by the
Corporation in the generation, transmission, utilization and sale of electric power.
(Emphasis supplied)
Then came P.D. No. 938 which amended Sec. 13(a), (b), (c) and (d) into one very simple paragraph as
follows:
The Corporation shall be non-profit and shall devote all its returns from its capital
investment as well as excess revenues from its operation, for expansion. To enable the
Corporation to pay its indebtedness and obligations and in furtherance and effective
implementation of the policy enunciated in Section one of this Act, the Corporation,
including its subsidiaries, is hereby declared exempt from the payment of ALL FORMS
OF taxes, duties, fees, imposts as well as costs and service fees including filing fees,
appeal bonds, supersedeas bonds, in any court or administrative proceedings.
(Emphasis supplied)
Petitioner reminds Us that:
[I]t must be borne in mind that Presidential Decree Nos. 380
and 938 were issued by one man, acting as such the Executive and Legislative.

53

xxx xxx xxx

[S]ince both presidential decrees were made by the same person, it would have been
very easy for him to retain the same or similar language used in P.D. No. 380 P.D. No.
54
938 if his intention were to preserve the indirect tax exemption of NPC.
Actually, P.D. No. 938 attests to the ingenuousness of then President Marcos no matter what his fault
were. It should be noted that section 13, R.A. No. 6395, provided for tax exemptions for the following
items:
13(a) : court or administrative proceedings;
13(b) : income, franchise, realty taxes;
13(c) : import of foreign goods required for its operations and projects;
13(d) : petroleum products used in generation of electric power.
P.D. No. 938 lumped up 13(b), 13(c), and 13(d) into the phrase "ALL FORMS OF TAXES, ETC.,",
included 13(a) under the "as well as" clause and added PNOC subsidiaries as qualified for tax
exemptions.
This is the only conclusion one can arrive at if he has read all the NPC laws in the order of enactment or
issuance as narrated above in part I hereof. President Marcos must have considered all the NPC statutes
from C.A. No. 120 up to its latest amendments, P.D. No. 380, P.D. No. 395 and P.D. No. 759, AND came
55
up with a very simple Section 13, R.A. No. 6395, as amended by P.D. No. 938.
56

One common theme in all these laws is that the NPC must be enable to pay its indebtedness which, as
of P.D. No. 938, was P12 Billion in total domestic indebtedness, at any one time, and U$4 Billion in total
foreign loans at any one time. The NPC must be and has to be exempt from all forms of taxes if this goal
is to be achieved.
By virtue of P.D. No. 938 NPC's capital stock was raised to P8 Billion. It must be remembered that to pay
the government share in its capital stock P.D. No. 758 was issued mandating that P200 Million would be
appropriated annually to cover the said unpaid subscription of the Government in NPC's authorized
capital stock. And significantly one of the sources of this annual appropriation of P200 million is TAX
MONEY accruing to the General Fund of the Government. It does not stand to reason then that former
President Marcos would order P200 Million to be taken partially or totally from tax money to be used to
pay the Government subscription in the NPC, on one hand, and then order the NPC to pay all its indirect
taxes, on the other.
The above conclusion that then President Marcos lumped up Sections 13 (b), 13 (c) and (d) into the
phrase "All FORMS OF" is supported by the fact that he did not do the same for the tax exemption
provision for the foreign loans to be incurred.
The tax exemption on foreign loans found in Section 8(b), R.A. No. 6395, reads as follows:
The loans, credits and indebtedness contracted under this subsection and the payment of
the principal, interest and other charges thereon, as well as the importation of machinery,
equipment, materials and supplies by the Corporation, paid from the proceeds of any
loan, credit or indebtedness incurred under this Act, shall also be exempt from all taxes,
fees, imposts, other charges and restrictions, including import restrictions, by the
57
Republic of the Philippines, or any of its agencies and political subdivisions.

The same was amended by P.D. No. 380 as follows:

The loans, credits and indebtedness contracted this subsection and the payment of the
principal, interest and other charges thereon, as well as the importation of machinery,
equipment, materials, supplies and services, by the Corporation, paid from the proceeds
of any loan, credit or indebtedness incurred under this Act, shall also be exempt from all
direct and indirect taxes, fees, imposts, other charges and restrictions, including import
restrictions previously and presently imposed, and to be imposed by the Republic of the
58
Philippines, or any of its agencies and political subdivisions. (Emphasis supplied)
59

P.D. No. 938 did not amend the same and so the tax exemption provision in Section 8 (b), R.A. No.
6395, as amended by P.D. No. 380, still stands. Since the subject matter of this particular Section 8 (b)
had to do only with loans and machinery imported, paid for from the proceeds of these foreign loans,
THERE WAS NO OTHER SUBJECT MATTER TO LUMP IT UP WITH, and so, the tax exemption stood
as is with the express mention of "direct
and indirect" tax exemptions. And this "direct and indirect" tax exemption privilege extended to "taxes,
fees, imposts, other charges . . . to be imposed" in the future surely, an indication that the lawmakers
wanted the NPC to be exempt from ALL FORMS of taxes direct and indirect.
It is crystal clear, therefore, that NPC had been granted tax exemption privileges for both direct and
indirect taxes under P.D. No. 938.
VI
Five (5) years on into the now discredited New Society, the Government decided to rationalize
60
government receipts and expenditures by formulating and implementing a National Budget. The NPC,
being a government owned and controlled corporation had to be shed off its tax exemption status
privileges under P.D. No. 1177. It was, however, allowed to ask for a subsidy from the General Fund in
the exact amount of taxes/duties due.
Actually, much earlier, P.D. No. 882 had already repealed NPC's tax-free importation privileges. It
allowed, however, NPC to appeal said repeal with the Office of the President and to avail of tax-free
importation privileges under its Section 1, subject to the prior approval of an Inter-Agency Committed
created by virtue of said P.D. No. 882. It is presumed that the NPC, being the special creation of the
State, was allowed to continue its tax-free importations.
This Court notes that petitioner brought to the attention of this Court, the matter of the abolition of NPC's
61
tax exemption privileges by P.D. No. 1177 only in his Common Reply/Comment to private
Respondents' "Opposition" and "Comment" to Motion for Reconsideration, four (4) months AFTER the
motion for Reconsideration had been filed. During oral arguments heard on July 9, 1992, he proceeded to
discuss this tax exemption withdrawal as explained by then Secretary of Justice Vicente Abad Santos in
62
opinion No. 133 (S '77). A careful perusal of petitioner's senate Blue Ribbon Committee Report No.
474, the basis of the petition at bar, fails to yield any mention of said P.D. No. 1177's effect on NPC's tax
63
64
exemption privileges. Applying by analogy Pulido vs. Pablo, the court declares that the matter of P.D.
65
No. 1177 abolishing NPC's tax exemption privileges was not seasonably invoked by the petitioner.
Be that as it may, the Court still has to discuss the effect of P.D. No. 1177 on the NPC tax exemption
privileges as this statute has been reiterated twice in P.D. No. 1931. The express repeal of tax privileges
of any government-owned or controlled corporation (GOCC). NPC included, was reiterated in the fourth
whereas clause of P.D. No. 1931's preamble. The subsidy provided for in Section 23, P.D. No. 1177,
being inconsistent with Section 2, P.D. No. 1931, was deemed repealed as the Fiscal Incentives Revenue
Board was tasked with recommending the partial or total restoration of tax exemptions withdrawn by
Section 1, P.D. No. 1931.

The records before Us do not indicate whether or not NPC asked for the subsidy contemplated in Section
23, P.D. No. 1177. Considering, however, that under Section 16 of P.D. No. 1177, NPC had to submit to
the Office of the President its request for the P200 million mandated by P.D. No. 758 to be appropriated
annually by the Government to cover its unpaid subscription to the NPC authorized capital stock and that
under Section 22, of the same P.D. No. NPC had to likewise submit to the Office of the President its
internal operating budget for review due to capital inputs of the government (P.D. No. 758) and to the
national government's guarantee of the domestic and foreign indebtedness of the NPC, it is clear that
NPC was covered by P.D. No. 1177.
There is reason to believe that NPC availed of subsidy granted to exempt GOCC's that suddenly found
themselves having to pay taxes. It will be noted that Section 23, P.D. No. 1177, mandated that the
Secretary of Finance and the Commissioner of the Budget had to establish the necessary procedure to
accomplish the tax payment/tax subsidy scheme of the Government. In effect, NPC, did not put any cash
to pay any tax as it got from the General Fund the amounts necessary to pay different revenue collectors
for the taxes it had to pay.
In his memorandum filed July 16, 1992, petitioner submits:
[T]hat with the enactment of P.D. No. 1177 on July 30, 1977, the NPC lost all its duty and
tax exemptions, whether direct or indirect. And so there was nothing to be withdrawn or
to be restored under P.D. No. 1931, issued on June 11, 1984. This is evident from
sections 1 and 2 of said P.D. No. 1931, which reads:
"Section 1. The provisions of special or general law to the contrary
notwithstanding, all exemptions from the payment of duties, taxes, fees,
imports and other charges heretofore granted in favor of governmentowned or controlled corporations including their subsidiaries are hereby
withdrawn."
Sec. 2. The President of the Philippines and/or the Minister of Finance,
upon the recommendation of the Fiscal Incentives Review Board created
under P.D. No. 776, is hereby empowered to restore partially or totally,
the exemptions withdrawn by section 1 above. . . .
Hence, P.D. No. 1931 did not have any effect or did it change NPC's status. Since it had
already lost all its tax exemptions privilege with the issuance of P.D. No. 1177 seven (7)
years earlier or on July 30, 1977, there were no tax exemptions to be withdrawn by
section 1 which could later be restored by the Minister of Finance upon the
recommendation of the FIRB under Section 2 of P.D. No. 1931. Consequently, FIRB
resolutions No. 10-85, and 1-86, were all illegally and validly issued since FIRB acted
beyond their statutory authority by creating and not merely restoring the tax exempt
status of NPC. The same is true for FIRB Res. No. 17-87 which restored NPC's tax
exemption under E.O. No. 93 which likewise abolished all duties and tax exemptions but
allowed the President upon recommendation of the FIRB to restore those abolished.
The Court disagrees.
Applying by analogy the weight of authority that:
When a revised and consolidated act re-enacts in the same or substantially the same
terms the provisions of the act or acts so revised and consolidated, the revision and
consolidation shall be taken to be a continuation of the former act or acts, although the
former act or acts may be expressly repealed by the revised and consolidated act; and all

rights
and liabilities under the former act or acts are preserved and may be enforced.

66

the Court rules that when P.D. No. 1931 basically reenacted in its Section 1 the first half of Section 23,
P.D. No. 1177, on withdrawal of tax exemption privileges of all GOCC's said Section 1, P.D. No. 1931
was deemed to be a continuation of the first half of Section 23, P.D. No. 1177, although the second half of
Section 23, P.D. No. 177, on the subsidy scheme for former tax exempt GOCCs had been expressly
repealed by Section 2 with its institution of the FIRB recommendation of partial/total restoration of tax
exemption privileges.
The NPC tax privileges withdrawn by Section 1. P.D. No. 1931, were, therefore, the same NPC tax
exemption privileges withdrawn by Section 23, P.D. No. 1177. NPC could no longer obtain a subsidy for
the taxes it had to pay. It could, however, under P.D. No. 1931, ask for a total restoration of its tax
67
exemption privileges, which, it did, and the same were granted under FIRB Resolutions Nos. 10-85 and
68
1-86 as approved by the Minister of Finance.
Consequently, contrary to petitioner's submission, FIRB Resolutions Nos. 10-85 and 1-86 were both
legally and validly issued by the FIRB pursuant to P.D. No. 1931. FIRB did not created NPC's tax
69
exemption status but merely restored it.
Some quarters have expressed the view that P.D. No. 1931 was illegally issued under the now rather
70
infamous Amendment No. 6 as there was no showing that President Marcos' encroachment on
legislative prerogatives was justified under the then prevailing condition that he could legislate "only if the
Batasang Pambansa 'failed or was unable to act inadequately on any matter that in his judgment required
71
immediate action' to meet the 'exigency'.
Actually under said Amendment No. 6, then President Marcos could issue decrees not only when the
Interim Batasang Pambansa failed or was unable to act adequately on any matter for any reason that in
his (Marcos') judgment required immediate action, but also when there existed a grave emergency or a
threat or thereof. It must be remembered that said Presidential Decree was issued only around nine (9)
72
months after the Philippines unilaterally declared a moratorium on its foreign debt payments as a result
of the economic crisis triggered by loss of confidence in the government brought about by the Aquino
73
assassination. The Philippines was then trying to reschedule its debt payments. One of the big
74
borrowers was the NPC which had a US$ 2.1 billion white elephant of a Bataan Nuclear Power Plant
75
on its back. From all indications, it must have been this grave emergency of a debt rescheduling which
76
compelled Marcos to issue P.D. No. 1931, under his Amendment 6 power.
The rule, therefore, that under the 1973 Constitution "no law granting a tax exemption shall be passed
77
without the concurrence of a majority of all the members of the Batasang Pambansa" does not apply as
said P.D. No. 1931 was not passed by the Interim Batasang Pambansa but by then President Marcos
under His Amendment No. 6 power.
P.D. No. 1931 was, therefore, validly issued by then President Marcos under his Amendment No. 6
authority.
Under E.O No. 93 (S'86) NPC's tax exemption privileges were again clipped by, this time, President
Aquino. Its section 2 allowed the NPC to apply for the restoration of its tax exemption privileges. The
78
same was granted under FIRB Resolution No. 17-87 dated June 24, 1987 which restored NPC's tax
exemption privileges effective, starting March 10, 1987, the date of effectivity of E.O. No. 93 (S'86).
79

FIRB Resolution No. 17-87 was approved by the President on October 5, 1987. There is no indication,
however, from the records of the case whether or not similar approvals were given by then President
Marcos for FIRB Resolutions Nos. 10-85 and 1- 86. This has led some quarters to believe that a "travesty
of justice" might have occurred when the Minister of Finance approved his own recommendation as

Chairman of the Fiscal Incentives Review Board as what happened in Zambales Chromate vs. Court of
80
Appeals when the Secretary of Agriculture and Natural Resources approved a decision earlier rendered
81
82
by him when he was the Director of Mines, and in Anzaldo vs. Clave where Presidential Executive
Assistant Clave affirmed, on appeal to Malacaang, his own decision as Chairman of the Civil Service
83
Commission.
Upon deeper analysis, the question arises as to whether one can talk about "due process" being violated
when FIRB Resolutions Nos. 10-85 and 1-86 were approved by the Minister of Finance when the same
84
were recommended by him in his capacity as Chairman of the Fiscal Incentives Review Board.
In Zambales Chromite and Anzaldo, two (2) different parties were involved: mining groups and scientistdoctors, respectively. Thus, there was a need for procedural due process to be followed.
In the case of the tax exemption restoration of NPC, there is no other comparable entity not even a
single public or private corporation whose rights would be violated if NPC's tax exemption privileges
were to be restored. While there might have been a MERALCO before Martial Law, it is of public
knowledge that the MERALCO generating plants were sold to the NPC in line with the State policy that
NPC was to be the State implementing arm for the electrification of the entire country. Besides,
MERALCO was limited to Manila and its environs. And as of 1984, there was no more MERALCO as a
producer of electricity which could have objected to the restoration of NPC's tax exemption privileges.
It should be noted that NPC was not asking to be granted tax exemption privileges for the first time. It was
just asking that its tax exemption privileges be restored. It is for these reasons that, at least in NPC's
case, the recommendation and approval of NPC's tax exemption privileges under FIRB Resolution Nos.
10-85 and 1-86, done by the same person acting in his dual capacities as Chairman of the Fiscal
Incentives Review Board and Minister of Finance, respectively, do not violate procedural due process.
While as above-mentioned, FIRB Resolution No. 17-87 was approved by President Aquino on October 5,
1987, the view has been expressed that President Aquino, at least with regard to E.O. 93 (S'86), had no
authority to sub-delegate to the FIRB, which was allegedly not a delegate of the legislature, the power
delegated to her thereunder.
A misconception must be cleared up.
When E.O No. 93 (S'86) was issued, President Aquino was exercising both Executive and Legislative
powers. Thus, there was no power delegated to her, rather it was she who was delegating her power.
She delegated it to the FIRB, which, for purposes of E.O No. 93 (S'86), is a delegate of the legislature.
Clearly, she was not sub-delegating her power.
And E.O. No. 93 (S'86), as a delegating law, was complete in itself it set forth the policy to be carried
85
out and it fixed the standard to which the delegate had to conform in the performance of his functions,
86
87
both qualities having been enunciated by this Court in Pelaez vs. Auditor General.
Thus, after all has been said, it is clear that the NPC had its tax exemption privileges restored from June
11, 1984 up to the present.
VII
The next question that projects itself is who pays the tax?
The answer to the question could be gleamed from the manner by which the Commissaries of the Armed
Forces of the Philippines sell their goods.

88

By virtue of P.D. No. 83, veterans, members of the Armed of the Philippines, and their defendants but
groceries and other goods free of all taxes and duties if bought from any AFP Commissaries.
In practice, the AFP Commissary suppliers probably treat the unchargeable specific, ad valorem and
other taxes on the goods earmarked for AFP Commissaries as an added cost of operation and distribute
it over the total units of goods sold as it would any other cost. Thus, even the ordinary supermarket buyer
probably pays for the specific, ad valorem and other taxes which theses suppliers do not charge the AFP
89
Commissaries.
IN MUCH THE SAME MANNER, it is clear that private respondents-oil companies have to absorb the
taxes they add to the bunker fuel oil they sell to NPC.
It should be stated at this juncture that, as early as May 14, 1954, the Secretary of Justice renders an
90
opinion, wherein he stated and We quote:
xxx xxx xxx
Republic Act No. 358 exempts the National Power Corporation from "all taxes, duties,
fees, imposts, charges, and restrictions of the Republic of the Philippines and its
provinces, cities, and municipalities." This exemption is broad enough to include all taxes,
whether direct or indirect, which the National Power Corporation may be required to pay,
such as the specific tax on petroleum products. That it is indirect or is of no amount
[should be of no moment], for it is the corporation that ultimately pays it. The view which
refuses to accord the exemption because the tax is first paid by the seller disregards
realities and gives more importance to form than to substance. Equity and law always
exalt substance over from.
xxx xxx xxx
Tax exemptions are undoubtedly to be construed strictly but not so grudgingly as
knowledge that many impositions taxpayers have to pay are in the nature of indirect
taxes. To limit the exemption granted the National Power Corporation to direct taxes
notwithstanding the general and broad language of the statue will be to thwrat the
legislative intention in giving exemption from all forms of taxes and impositions without
distinguishing between those that are direct and those that are not. (Emphasis supplied)
In view of all the foregoing, the Court rules and declares that the oil companies which supply bunker fuel
oil to NPC have to pay the taxes imposed upon said bunker fuel oil sold to NPC. By the very nature of
indirect taxation, the economic burden of such taxation is expected to be passed on through the channels
of commerce to the user or consumer of the goods sold. Because, however, the NPC has been exempted
from both direct and indirect taxation, the NPC must beheld exempted from absorbing the economic
burden of indirect taxation. This means, on the one hand, that the oil companies which wish to sell to
NPC absorb all or part of the economic burden of the taxes previously paid to BIR, which could they shift
to NPC if NPC did not enjoy exemption from indirect taxes. This means also, on the other hand, that the
NPC may refuse to pay the part of the "normal" purchase price of bunker fuel oil which represents all or
part of the taxes previously paid by the oil companies to BIR. If NPC nonetheless purchases such oil from
the oil companies because to do so may be more convenient and ultimately less costly for NPC than
NPC itself importing and hauling and storing the oil from overseas NPC is entitled to be reimbursed by
the BIR for that part of the buying price of NPC which verifiably represents the tax already paid by the oil
company-vendor to the BIR.
It should be noted at this point in time that the whole issue of who WILL pay these indirect taxes HAS
BEEN RENDERED moot and academic by E.O. No. 195 issued on June 16, 1987 by virtue of which the

ad valorem tax rate on bunker fuel oil was reduced to ZERO (0%) PER CENTUM. Said E.O. no. 195
reads as follows:
EXECUTIVE ORDER NO. 195
AMENDING PARAGRAPH (b) OF SECTION 128 OF THE NATIONAL INTERNAL
REVENUE CODE, AS AMENDED BY REVISING THE EXCISE TAX RATES OF
CERTAIN PETROLEUM PRODUCTS.
xxx xxx xxx
Sec. 1. Paragraph (b) of Section 128 of the National Internal Revenue Code, as
amended, is hereby amended to read as follows:
Par. (b) For products subject to ad valorem tax only:
PRODUCT AD VALOREM TAX RATE
1. . . .
2. . . .
3. . . .
4. Fuel oil, commercially known as bunker oil and on similar fuel oils having more or less
the same generating power 0%
xxx xxx xxx
Sec. 3. This Executive Order shall take effect immediately.
Done in the city of Manila, this 17th day of June, in the year of Our Lord, nineteen
hundred and eighty-seven. (Emphasis supplied)
The oil companies can now deliver bunker fuel oil to NPC without having to worry about who is going to
bear the economic burden of the ad valorem taxes. What this Court will now dispose of are petitioner's
complaints that some indirect tax money has been illegally refunded by the Bureau of Internal Revenue to
the NPC and that more claims for refunds by the NPC are being processed for payment by the BIR.
A case in point is the Tax Credit Memo issued by the Bureau of Internal Revenue in favor of the NPC last
July 7, 1986 for P58.020.110.79 which were for "erroneously paid specific and ad valorem taxes during
91
the period from October 31, 1984 to April 27, 1985. Petitioner asks Us to declare this Tax Credit Memo
illegal as the PNC did not have indirect tax exemptions with the enactment of P.D. No. 938. As We have
already ruled otherwise, the only questions left are whether NPC Is entitled to a tax refund for the tax
component of the price of the bunker fuel oil purchased from Caltex (Phils.) Inc. and whether the Bureau
of Internal Revenue properly refunded the amount to NPC.
After P.D. No. 1931 was issued on June 11, 1984 withdrawing the
tax exemptions of all GOCCs NPC included, it was only on May 8, 1985 when the BIR issues its letter
authority to the NPC authorizing it to withdraw tax-free bunker fuel oil from the oil companies pursuant to
92
FIRB Resolution No. 10-85. Since the tax exemption restoration was retroactive to June 11, 1984 there
was a need. therefore, to recover said amount as Caltex (PhiIs.) Inc. had already paid the BIR the specific

and ad valorem taxes on the bunker oil it sold NPC during the period above indicated and had billed NPC
93
correspondingly. It should be noted that the NPC, in its letter-claim dated September 11, 1985 to the
Commissioner of the Bureau of Internal Revenue DID NOT CATEGORICALLY AND UNEQUIVOCALLY
STATE that itself paid the P58.020,110.79 as part of the bunker fuel oil price it purchased from Caltex
94
(Phils) Inc.
The law governing recovery of erroneously or illegally, collected taxes is section 230 of the National
Internal Revenue Code of 1977, as amended which reads as follows:
Sec. 230. Recover of tax erroneously or illegally collected. No suit or proceeding shall
be maintained in any court for the recovery of any national internal revenue tax hereafter
alleged to have been erroneously or illegally assessed or collected, or of any penalty
claimed to have been collected without authority, or of any sum alleged to have been
excessive or in any Manner wrongfully collected. until a claim for refund or credit has
been duly filed with the Commissioner; but such suit or proceeding may be maintained,
whether or not such tax, penalty, or sum has been paid under protest or duress.
In any case, no such suit or proceeding shall be begun after the expiration of two years
from the date of payment of the tax or penalty regardless of any supervening cause that
may arise after payment; Provided, however, That the Commissioner may, even without
a written claim therefor, refund or credit any tax, where on the face of the return upon
which payment was made, such payment appears clearly, to have been erroneously
paid.
xxx xxx xxx
Inasmuch as NPC filled its claim for P58.020,110.79 on September 11, 1985,
correctly issued the Tax Credit Memo in view of NPC's indirect tax exemption.

95

the Commissioner

Petitioner, however, asks Us to restrain the Commissioner from acting favorably on NPC's claim for
P410.580,000.00 which represents specific and ad valorem taxes paid by the oil companies to the BIR
96
from June 11, 1984 to the early part of 1986.
A careful examination of petitioner's pleadings and annexes attached thereto does not reveal when the
alleged claim for a P410,580,000.00 tax refund was filed. It is only stated In paragraph No. 2 of the Deed
97
of Assignment executed by and between NPC and Caltex (Phils.) Inc., as follows:
That the ASSIGNOR(NPC) has a pending tax credit claim with the Bureau of Internal
Revenue amounting to P442,887,716.16. P58.020,110.79 of which is due to Assignor's
oil purchases from the Assignee (Caltex [Phils.] Inc.)
Actually, as the Court sees it, this is a clear case of a "Mexican standoff." We cannot restrain the BIR from
refunding said amount because of Our ruling that NPC has both direct and indirect tax exemption
privileges. Neither can We order the BIR to refund said amount to NPC as there is no pending petition for
review on certiorari of a suit for its collection before Us. At any rate, at this point in time, NPC can no
longer file any suit to collect said amount EVEN IF lt has previously filed a claim with the BIR because it is
time-barred under Section 230 of the National Internal Revenue Code of 1977. as amended, which
states:
In any case, no such suit or proceeding shall be begun after the expiration of two years
from the date of payment of the tax or penalty REGARDLESS of any supervening cause
that may arise after payment. . . . (Emphasis supplied)

The date of the Deed of Assignment is June 6. 1986. Even if We were to assume that payment by NPC
for the amount of P410,580,000.00 had been made on said date. it is clear that more than two (2) years
had already elapsed from said date. At the same time, We should note that there is no legal obstacle to
the BIR granting, even without a suit by NPC, the tax credit or refund claimed by NPC, assuming that
NPC's claim had been made seasonably, and assuming the amounts covered had actually been paid
previously by the oil companies to the BIR.
WHEREFORE, in view of all the foregoing, the Motion for Reconsideration of petitioner is hereby DENIED
for lack of merit and the decision of this Court promulgated on May 31, 1991 is hereby AFFIRMED.
SO ORDERED.
Narvasa, C.J., Feliciano, Bidin, Regalado, Romero, Bellosillo and Melo, JJ., concur.
Padilla and Quiason, JJ. took no part.

Republic of the Philippines

Supreme Court
Manila

FIRST DIVISION

SALUN-AT
MARQUEZ
NESTOR DELA CRUZ,
Petitioners,

and

G.R. No. 168387

Present:
- versus ELOISA ESPEJO, ELENITA
ESPEJO, EMERITA ESPEJO,
OPHIRRO ESPEJO, OTHNIEL
ESPEJO, ORLANDO ESPEJO,
OSMUNDO ESPEJO, ODELEJO
ESPEJO and NEMI FERNANDEZ,

Respondents.

CORONA, C. J., Chairperson,

VELASCO, JR.,
LEONARDO-DE CASTRO,
DEL CASTILLO, and
PEREZ, J.

Promulgated:
August 25, 2010

x--------------------------------------------------------x

DECISION

DEL CASTILLO, J.

When the parties admit the contents of written documents but put in issue whether
these documents adequately and correctly express the true intention of the parties, the
deciding body is authorized to look beyond these instruments and into the
contemporaneous and subsequent actions of the parties in order to determine such intent.

Well-settled is the rule that in case of doubt, it is the intention of the contracting
parties that prevails, for the intention is the soul of a contract, not its wording which is
prone to mistakes, inadequacies, or ambiguities. To hold otherwise would give life,
validity, and precedence to mere typographical errors and defeat the very purpose of
agreements.
This Petition for Review on Certiorari1[1] assails the October 7, 2003
Decision,2[2] as well as the May 11, 2005 Resolution3[3] of the Court of Appeals (CA)
in CA G.R. SP No. 69981. The dispositive portion of the appellate courts Decision reads:

WHEREFORE, finding reversible error committed by the Department of

Agrarian Reform Adjudication Board, the instant petition for review is GRANTED. The
assailed Decision, dated 17 January 2001, rendered by the Department of Agrarian

Reform Adjudication Board is hereby ANNULLED and SET ASIDE. The Decision of
the Department of Agrarian Reform Adjudication Board of Bayombong[,] Nueva
Vizcaya, dated 17 March 1998, is REINSTATED. Costs against respondents.
SO ORDERED.4[4]

The reinstated Decision of the Department of Agrarian Reform Adjudication

Board (DARAB) of Bayombong, Nueva Vizcaya, in turn, contained the following
dispositive portion:

Accordingly, judgment is rendered:

1.

Finding [respondents] to be the owner by re-purchase from RBBI [of] the Murong
property covered by TCT No. [T-]62096 (formerly TCT No. 43258);

2.

Ordering the cancellation of TCT with CLOA Nos. 395 and 396 in the name[s] of
Salun-at Marquez and Nestor de la Cruz respectively, as they are disqualified to
become tenants of the Lantap property;

3.

Directing RBBI to sell through VOS the Lantap property to its rightful
beneficiary, herein tenant-farmer Nemi Fernandez under reasonable terms and
conditions;

4.

Ordering RBBI to return the amount paid to it by Nestor and Salun-at; and
ordering the latter to pay 20 cavans of palay per hectare at 46 kilos per cavan unto
[respondents] plus such accrued and unpaid rentals for the past years as may be duly
accounted for with the assistance of the Municipal Agrarian Reform Officer of
Bagabag, Nueva Vizcaya who is also hereby instructed to assist the parties execute
their leasehold contracts and;

5.

The order to supervise harvest dated March 11, 1998 shall be observed until
otherwise modified or dissolved by the appellate body.

SO ORDERED.5[5]

Factual Antecedents

Respondents Espejos were the original registered owners of two parcels of

agricultural land, with an area of two hectares each. One is located at Barangay Lantap,
Bagabag, Nueva Vizcaya (the Lantap property) while the other is located in Barangay
Murong, Bagabag, Nueva Vizcaya (the Murong property). There is no dispute among the
parties that the Lantap property is tenanted by respondent Nemi Fernandez (Nemi)6[6]
(who is the husband7[7] of respondent Elenita Espejo (Elenita), while the Murong
property is tenanted by petitioners Salun-at Marquez (Marquez) and Nestor Dela Cruz
(Dela Cruz).8[8]

The respondents mortgaged both parcels of land to Rural Bank of Bayombong,

Inc. (RBBI) to secure certain loans. Upon their failure to pay the loans, the mortgaged
properties were foreclosed and sold to RBBI. RBBI eventually consolidated title to the

properties and transfer certificates of title (TCTs) were issued in the name of RBBI. TCT
No. T-62096 dated January 14, 1985 was issued for the Murong property. It contained
the following description:

Beginning at a point marked I on plan H-176292, S. 44034 W. 1656.31 m. more or less

from B.L.L.M. No 1, Bagabag Townsite, K-27,
thence N. 28 deg. 20 E., 200.00 m. to point 2;
thence S. 61 deg. 40 E., 100.00 m. to point 3;
thence S. 28 deg. 20 W., 200.00 m. to point 4;
thence N. 61 deg. 40 W., 100.00 m. to point 1; point of beginning;
Containing an area of 2.000 hectares. Bounded on the northeast, by Road; on the
southeast, and southwest by public land; and on the northwest by Public Land, properties
claimed by Hilario Gaudia and Santos Navarrete. Bearings true. Declination 0131 E.
Points referred to are marked on plan H-176292. Surveyed under authority of sections
12-22 Act No. 2874 and in accordance with existing regulations of the Bureau of Lands
by H.O. Bauman Public Land Surveyor, [in] December 1912-March 1913. Note: All
corners are Conc. Mons. 15x15x60 cm. This is Lot No. 79-A=Lot No. 159 of Bagabag
Townsite, K-27.9[9]

Subsequently, TCT No. T-62836 dated June 4, 1985 was issued for the Lantap property
and contained the following description:

Beginning at a point marked 1 on plan H-105520, N. 80 deg. 32 W., 1150.21 m. from

BLLM No. 122, Irrigation project,
thence N. 61 deg. 40E., 200.00 m. to point 2;
thence N. 28 deg. 20E, 100.00 m. to point 3;
thence S. 61 deg. 40E, 200.00 m. to point 4;
thence S. 28 deg. 20W, 100.00 m. to point 1; point of beginning; containing an
area of 2.0000 hectares. Bounded on the northeast, southeast, and southwest by Public
land; and on the northwest by Road and public land. Bearings true. Declination 0 deg.

31E., points referred to are marked on plan H-105520. Surveyed under authority of
Section 12-22, Act No. 2874 and in accordance with existing regulations of the Bureau of
Lands, by H.O. Bauman Public Land Surveyor, [in] Dec. 1912-Mar. 1913 and approved
on January 6, 1932. Note: This is Lot No. 119-A Lot No. 225 of Bagabag Townsite K27. All corners are B.I. Conc. Mons. 15x60 cm.10[10]

Both TCTs describe their respective subjects as located in Bagabag Townsite, K-27,
without any reference to either Barangay Lantap or Barangay Murong.

On February 26, 1985, respondents Espejos bought back one of their lots from
RBBI. The Deed of Sale11[11] described the property sold as follows:

x x x do hereby SELL, TRANSFER, and CONVEY, absolutely and

unconditionally x x x that certain parcel of land, situated in the Municipality of Bagabag,
Province of Nueva Vizcaya, and more particularly bounded and described as follows, to
wit:
Beginning at a point marked 1 on plan x x x x Containing an area of 2.000
hectares. Bounded on the NE., by Road; on the SE., and SW by Public
Land; and on the NW., by Public Land, properties claimed by Hilario
Gaudia and Santos Navarrete. Bearing true. Declination 013 B. Points
referred to are marked on plan H-176292.

of which the Rural Bank of Bayombong (NV) Inc., is the registered owner in fee simple
in accordance with the Land Registration Act, its title thereto being evidenced by
Transfer Certificate of Title No. T-62096 issued by the Registry of Deeds of Nueva
Vizcaya.

As may be seen from the foregoing, the Deed of Sale did not mention the barangay
where the property was located but mentioned the title of the property (TCT No. T62096), which title corresponds to the Murong property. There is no evidence, however,
that respondents took possession of the Murong property, or demanded lease rentals from
the petitioners (who continued to be the tenants of the Murong property), or otherwise
exercised acts of ownership over the Murong property. On the other hand, respondent
Nemi (husband of respondent Elenita and brother-in-law of the other respondents),
continued working on the other property -- the Lantap property -- without any evidence
that he ever paid rentals to RBBI or to any landowner. The Deed of Sale was annotated
on TCT No. T-62096 almost a decade later, on July 1, 1994.12[12]

Meanwhile, on June 20, 1990, RBBI, pursuant to Sections 2013[13] and 2114[14]
of Republic Act (RA) No. 6657,15[15] executed separate Deeds of Voluntary Land
Transfer (VLTs) in favor of petitioners Marquez and Dela Cruz, the tenants of the
Murong property. Both VLTs described the subject thereof as an agricultural land located
in Barangay Murong and covered by TCT No. T-62836 (which, however, is the title
corresponding to the Lantap property).16[16]

After the petitioners completed the payment of the purchase price of P90,000.00 to
RBBI, the DAR issued the corresponding Certificates of Land Ownership Award
(CLOAs) to petitioners Marquez17[17] and Dela Cruz18[18] on September 5, 1991.
Both CLOAs stated that their subjects were parcels of agricultural land situated in
Barangay Murong.19[19] The CLOAs were registered in the Registry of Deeds of
Nueva Vizcaya on September 5, 1991.

On February 10, 1997 (more than 10 years after the Deed of Sale in favor of the
respondents and almost seven years after the execution of VLTs in favor of the
petitioners), respondents filed a Complaint20[20] before the Regional Agrarian Reform
Adjudicator (RARAD) of Bayombong, Nueva Vizcaya for the cancellation of petitioners
CLOAs, the deposit of leasehold rentals by petitioners in favor of respondents, and the
execution of a deed of voluntary land transfer by RBBI in favor of respondent Nemi. The
complaint was based on respondents theory that the Murong property, occupied by the
petitioners, was owned by the respondents by virtue of the 1985 buy-back, as
documented in the Deed of Sale. They based their claim on the fact that their Deed of
Sale refers to TCT No. 62096, which pertains to the Murong property.

Petitioners filed their Answer21[21] and insisted that they bought the Murong
property as farmer-beneficiaries thereof. They maintained that they have always
displayed good faith, paid lease rentals to RBBI when it became the owner of the
Murong property, bought the same from RBBI upon the honest belief that they were
buying the Murong property, and occupied and exercised acts of ownership over the
Murong property. Petitioners also argued that what respondents Espejos repurchased
from RBBI in 1985 was actually the Lantap property, as evidenced by their continued
occupation and possession of the Lantap property through respondent Nemi.

RBBI answered22[22] that it was the Lantap property which was the subject of
the buy-back transaction with respondents Espejos. It denied committing a grave mistake
in the transaction and maintained its good faith in the disposition of its acquired assets in
conformity with the rural banking rules and regulations.

OIC-RARAD Decision23[23]

The OIC-RARAD gave precedence to the TCT numbers appearing on the Deed of
Sale and the VLTs. Since TCT No. T-62096 appeared on respondents Deed of Sale and
the said title refers to the Murong property, the OIC-RARAD concluded that the subject

of sale was indeed the Murong property. On the other hand, since the petitioners VLTs
referred to TCT No. T-62836, which corresponds to the Lantap property, the OICRARAD ruled that petitioners CLOAs necessarily refer to the Lantap property. As for the
particular description contained in the VLTs that the subject thereof is the Murong
property, the OIC-RARAD ruled that it was a mere typographical error.
Further, since the VLTs covered the Lantap property and petitioners are not the
actual tillers thereof, the OIC-RARAD declared that they were disqualified to become
tenants of the Lantap property and ordered the cancellation of their CLOAs. It then
ordered RBBI to execute a leasehold contract with the real tenant of the Lantap property,
Nemi.

The OIC-RARAD recognized that petitioners only right as the actual tillers of the
Murong property is to remain as the tenants thereof after the execution of leasehold
contracts with and payment of rentals in arrears to respondents.

DARAB Decision24[24]

Upon appeal filed by petitioners, the DARAB reversed the OIC-RARAD

Decision. It ruled that in assailing the validity of the CLOAs issued to petitioners as bona
fide tenant-farmers, the burden of proof rests on the respondents. There being no
evidence that the DAR field personnel were remiss in the performance of their official

duties when they issued the corresponding CLOAs in favor of petitioners, the
presumption of regular performance of duty prevails. This conclusion is made more
imperative by the respondents admission that petitioners are the actual tillers of the
Murong property, hence qualified beneficiaries thereof.

As for respondents allegation that they bought back the Murong property from
RBBI, the DARAB ruled that they failed to support their allegation with substantial
evidence. It gave more credence to RBBIs claim that respondents repurchased the Lantap
property, not the Murong property. Respondents, as owners of the Lantap property, were
ordered to enter into an agricultural leasehold contract with their brother-in-law Nemi,
who is the actual tenant of the Lantap property.

The DARAB ended its January 17, 2001 Decision in this wise:

We find no basis or justification to question the authenticity and validity of the

CLOAs issued to appellants as they are by operation of law qualified beneficiaries over
the landholdings; there is nothing to quiet as these titles were awarded in conformity with
the CARP program implementation; and finally, the Board declares that all controverted
claims to or against the subject landholding must be completely and finally laid to rest.
WHEREFORE, premises considered and finding reversible errors[,] the assailed
decision is ANNULLED and a new judgment is hereby rendered, declaring:
1.
Appellants Salun-at Marquez and Nestor Dela Cruz as the bona fide
tenant-tillers over the Murong property and therefore they are the qualified beneficiaries
thereof;
2.
Declaring Transfer Certificate of Title (TCT) Nos. 395 and 396 issued in
the name of [farmer-beneficiaries] Salun-at Marquez and Nestor Dela Cruz respectively,
covered formerly by TCT No. 62096 (TCT No. 43258) of the Murong property as valid

and legal;
3.
Ordering the co-[respondents] to firm-up an agricultural leasehold contract
with bona fide tenant-tiller Nemi Fernandez over the Lantap property, [the latter] being
the subject matter of the buy back arrangement entered into between [respondents] and
Rural Bank of Bayombong, Incorporated, and other incidental matters are deemed
resolved.
SO ORDERED.25[25]

Ruling of the Court of Appeals

In appealing to the CA, the respondents insisted that the DARAB erred in ruling
that they repurchased the Lantap property, while the petitioners were awarded the
Murong property. They were adamant that the title numbers indicated in their respective
deeds of conveyance should control in determining the subjects thereof. Since
respondents Deed of Sale expressed that its subject is the property with TCT No. T62096, then what was sold to them was the Murong property. On the other hand,
petitioners VLTs and CLOAs say that they cover the property with TCT No. T-62836;
thus it should be understood that they were awarded the Lantap property. Respondents
added that since petitioners are not the actual tillers of the Lantap property, their CLOAs
should be cancelled due to their lack of qualification.

The CA agreed with the respondents. Using the Best Evidence Rule embodied in
Rule 130, Section 3, the CA held that the Deed of Sale is the best evidence as to its
contents, particularly the description of the land which was the object of the sale. Since

the Deed of Sale expressed that its subject is the land covered by TCT No. T-62096 the
Murong property then that is the property that the respondents repurchased.

The CA further ruled that as for petitioners VLTs, the same refer to the property
with TCT No. T-62836; thus, the subject of their CLOAs is the Lantap property. The
additional description in the VLTs that the subject thereof is located in Barangay Murong
was considered to be a mere typographical error. The CA ruled that the technical
description contained in the TCT is more accurate in identifying the subject property
since the same particularly describes the properties metes and bounds.

Both the RBBI26[26] and petitioners27[27] filed their respective motions for
reconsideration, which were separately denied.28[28]

On June 22, 2004, RBBI filed a separate Petition for Review on Certiorari,
docketed as G.R. No. 163320, with this Court.29[29] RBBI raised the issue that the CA
failed to appreciate that respondents did not come to court with clean hands because they
misled RBBI to believe at the time of the sale that the two lots were not tenanted. RBBI
also asked that they be declared free from any liability to the parties as it did not enrich

itself at anyones expense. RBBIs petition was dismissed on July 26, 2004 for lack of
merit. The said Resolution reads:

Considering the allegations, issues[,] and arguments adduced in the petition for
review on certiorari, the Court Resolves to DENY the petition for lack of sufficient
showing that the Court of Appeals had committed any reversible error in the questioned
judgment to warrant the exercise by this Court of its discretionary appellate jurisdiction in
this case.30[30]

Their Motion for Reconsideration was likewise denied with finality.31[31] Entry of
judgment was made in that case on December 15, 2004.32[32]

On July 27, 2005,33[33] petitioners filed the instant petition.

Issues

Rephrased and consolidated, the parties present the following issues for the Courts
determination:

I
What is the effect of the final judgment dismissing RBBIs Petition for Review on
Certiorari, which assailed the same CA Decision

II
Whether the CA erred in utilizing the Best Evidence Rule to determine the subject of the
contracts

III
What are the subject properties of the parties respective contracts with RBBI

Our Ruling

Propriety of the Petition

Respondents maintain that the instant petition for review raises factual issues
which are beyond the province of Rule 45.34[34]

The issues involved herein are not entirely factual. Petitioners assail the appellate
courts rejection of their evidence (as to the contractual intent) as inadmissible under the
Best Evidence Rule. The question involving the admissibility of evidence is a legal
question that is within the Courts authority to review.35[35]

Besides, even if it were a factual question, the Court is not precluded to review the
same. The rule that a petition for review should raise only questions of law admits of
exceptions, among which are (1) when the findings are grounded entirely on
speculations, surmises, or conjectures; (2) when the inference made is manifestly
mistaken, absurd or impossible; (3) when there is grave abuse of discretion; (4) when the
judgment is based on a misappreciation of facts; (5) when the findings of fact are
conflicting; (6) when, in making its findings, the same are contrary to the admissions of
both appellant and appellee; (7) when the findings are contrary to those of the trial court;
(8) when the findings are conclusions without citation of specific evidence on which they
are based; (9) when the facts set forth in the petition as well as in the petitioner's main and
reply briefs are not disputed by the respondent; and (10) when the findings of fact are
premised on the supposed absence of evidence and contradicted by the evidence on
record.36[36]

In the instant case, we find sufficient basis to apply the exceptions to the general
rule because the appellate court misappreciated the facts of the case through its erroneous
application of the Best Evidence Rule, as will be discussed below. Moreover, the
disparate rulings of the three reviewing bodies below are sufficient for the Court to
exercise its jurisdiction under Rule 45.

First Issue
Dismissal of RBBIs appeal

Respondents maintain that the Courts earlier dismissal of RBBIs petition

for review of the same CA Decision is eloquent proof that there is no reversible error in
the appellate courts decision in favor of the respondents.37[37]

We are not persuaded. This Court dismissed RBBIs earlier petition in G.R. No.
163320 because it failed to convincingly demonstrate the alleged errors in the CA
Decision. The bank did not point out the inadequacies and errors in the appellate courts
decision but simply placed the responsibility for the confusion on the respondents for
allegedly misleading the bank as to the identity of the properties and for misrepresenting
that the two lots were not tenanted. Thus, RBBI argued that respondents did not come to
court with clean hands.

These arguments were ineffectual in convincing the Court to review the appellate
courts Decision. It is the appellants responsibility to point out the perceived errors in the
appealed decision. When a party merely raises equitable considerations such as the clean
hands doctrine without a clear-cut legal basis and cogent arguments to support his claim,
there should be no surprise if the Court is not swayed to exercise its appellate jurisdiction
and the appeal is dismissed outright. The dismissal of an appeal does not always and
necessarily mean that the appealed decision is correct, for it could simply be the result of
the appellants inadequate discussion, ineffectual arguments, or even procedural lapses.

RBBIs failure to convince the Court of the merits of its appeal should not
prejudice petitioners who were not parties to RBBIs appeal, especially because
petitioners duly filed a separate appeal and were able to articulately and effectively
present their arguments. A party cannot be deprived of his right to appeal an adverse
decision just because another party had already appealed ahead of him,38[38] or just
because the other partys separate appeal had already been dismissed.39[39]

There is another reason not to bind the petitioners to the final judgment against
RBBI. RBBI executed the transfer (VLTs) in favor of petitioners prior to the
commencement of the action. Thus, when the action for cancellation of CLOA was filed,
RBBI had already divested itself of its title to the two properties involved. Under the rule

on res judicata, a judgment (in personam) is conclusive only between the parties and
their successors-in-interest by title subsequent to the commencement of the action.40[40]
Thus, when the vendor (in this case RBBI) has already transferred his title to third
persons (petitioners), the said transferees are not bound by any judgment which may be
rendered against the vendor.41[41]

Second Issue
Is it correct to apply the Best Evidence Rule?

Citing the Best Evidence Rule in Rule 130, Section 3, the CA held that the Deed
of Sale between respondents and RBBI is the best evidence as to the property that was
sold by RBBI to the respondents. Since the Deed of Sale stated that its subject is the land
covered by TCT No. T-62096 the title for the Murong property then the property
repurchased by the respondents was the Murong property. Likewise, the CA held that
since the VLTs between petitioners and RBBI refer to TCT No. T-62836 the title for the
Lantap property then the property transferred to petitioners was the Lantap property.

Petitioners argue that the appellate court erred in using the best evidence rule to
determine the subject of the Deed of Sale and the Deeds of Voluntary Land Transfer.
They maintain that the issue in the case is not the contents of the contracts but the

intention of the parties that was not adequately expressed in their contracts. Petitioners
then argue that it is the Parol Evidence Rule that should be applied in order to adequately
resolve the dispute.

Indeed, the appellate court erred in its application of the Best Evidence Rule. The
Best Evidence Rule states that when the subject of inquiry is the contents of a document,
the best evidence is the original document itself and no other evidence (such as a
reproduction, photocopy or oral evidence) is admissible as a general rule. The original is
preferred because it reduces the chance of undetected tampering with the
document.42[42]

In the instant case, there is no room for the application of the Best Evidence Rule
because there is no dispute regarding the contents of the documents. It is admitted by the
parties that the respondents Deed of Sale referred to TCT No. T-62096 as its subject;
while the petitioners Deeds of Voluntary Land Transfer referred to TCT No. T-62836 as
its subject, which is further described as located in Barangay Murong.

The real issue is whether the admitted contents of these documents adequately and
correctly express the true intention of the parties. As to the Deed of Sale, petitioners (and
RBBI) maintain that while it refers to TCT No. T-62096, the parties actually intended the
sale of the Lantap property (covered by TCT No. T-62836).

As to the VLTs, respondents contend that the reference to TCT No. T-62836
(corresponding to the Lantap property) reflects the true intention of RBBI and the
petitioners, and the reference to Barangay Murong was a typographical error. On the
other hand, petitioners claim that the reference to Barangay Murong reflects their true
intention, while the reference to TCT No. T-62836 was a mere error. This dispute reflects
an intrinsic ambiguity in the contracts, arising from an apparent failure of the instruments
to adequately express the true intention of the parties. To resolve the ambiguity, resort
must be had to evidence outside of the instruments.

The CA, however, refused to look beyond the literal wording of the documents
and rejected any other evidence that could shed light on the actual intention of the
contracting parties. Though the CA cited the Best Evidence Rule, it appears that what it
actually applied was the Parol Evidence Rule instead, which provides:

When the terms of an agreement have been reduced to writing, it is considered as

containing all the terms agreed upon and there can be, between the parties and their
successors in interest, no evidence of such terms other than the contents of the written
agreement.43[43]

The Parol Evidence Rule excludes parol or extrinsic evidence by which a party seeks to
contradict, vary, add to or subtract from the terms of a valid agreement or instrument.

Thus, it appears that what the CA actually applied in its assailed Decision when it refused
to look beyond the words of the contracts was the Parol Evidence Rule, not the Best
Evidence Rule. The appellate court gave primacy to the literal terms of the two contracts
and refused to admit any other evidence that would contradict such terms.

However, even the application of the Parol Evidence Rule is improper in the case
at bar. In the first place, respondents are not parties to the VLTs executed between RBBI
and petitioners; they are strangers to the written contracts. Rule 130, Section 9
specifically provides that parol evidence rule is exclusive only as between the parties and
their successors-in-interest. The parol evidence rule may not be invoked where at least
one of the parties to the suit is not a party or a privy of a party to the written document in
question, and does not base his claim on the instrument or assert a right originating in the
instrument.44[44]

Moreover, the instant case falls under the exceptions to the Parol Evidence Rule,
as provided in the second paragraph of Rule 130, Section 9:

However, a party may present evidence to modify, explain or add to the terms of
the written agreement if he puts in issue in his pleading:
(1)

An intrinsic ambiguity, mistake or imperfection in the written

agreement;

(2)

The failure of the written agreement to express the true intent and
agreement of the parties thereto;

x x x x (Emphasis supplied)

Here, the petitioners VLTs suffer from intrinsic ambiguity. The VLTs described
the subject property as covered by TCT No. T-62836 (Lantap property), but they also
describe the subject property as being located in Barangay Murong. Even the
respondents Deed of Sale falls under the exception to the Parol Evidence Rule. It refers to
TCT No. T-62096 (Murong property), but RBBI contended that the true intent was to sell
the Lantap property. In short, it was squarely put in issue that the written agreement failed
to express the true intent of the parties.

Based on the foregoing, the resolution of the instant case necessitates an

examination of the parties respective parol evidence, in order to determine the true intent
of the parties. Well-settled is the rule that in case of doubt, it is the intention of the
contracting parties that prevails, for the intention is the soul of a contract,45[45] not its
wording which is prone to mistakes, inadequacies, or ambiguities. To hold otherwise
would give life, validity, and precedence to mere typographical errors and defeat the very
purpose of agreements.

In this regard, guidance is provided by the following articles of the Civil Code
involving the interpretation of contracts:

Article 1370. If the terms of a contract are clear and leave no doubt upon the
intention of the contracting parties, the literal meaning of its stipulations shall control.
If the words appear to be contrary to the evident intention of the parties, the latter
shall prevail over the former.
Article 1371. In order to judge the intention of the contracting parties, their
contemporaneous and subsequent acts shall be principally considered.

Rule 130, Section 13 which provides for the rules on the interpretation of documents is
likewise enlightening:

Section 13. Interpretation according to circumstances. For the proper

construction of an instrument, the circumstances under which it was made, including the
situation of the subject thereof and of the parties to it, may be shown, so that the judge
may be placed in the position of those whose language he is to interpret.

Applying the foregoing guiding rules, it is clear that the Deed of Sale was intended
to transfer the Lantap property to the respondents, while the VLTs were intended to
convey the Murong property to the petitioners. This may be seen from the
contemporaneous and subsequent acts of the parties.

Third issue
Determining the intention of the parties

regarding the subjects of their contracts

We are convinced that the subject of the Deed of Sale between RBBI and the
respondents was the Lantap property, and not the Murong property. After the execution
in 1985 of the Deed of Sale, the respondents did not exercise acts of ownership that could
show that they indeed knew and believed that they repurchased the Murong property.
They did not take possession of the Murong property. As admitted by the parties, the
Murong property was in the possession of the petitioners, who occupied and tilled the
same without any objection from the respondents. Moreover, petitioners paid leasehold
rentals for using the Murong property to RBBI, not to the respondents.

Aside from respondents neglect of their alleged ownership rights over the Murong
property, there is one other circumstance that convinces us that what respondents really
repurchased was the Lantap property. Respondent Nemi (husband of respondent Elenita)
is the farmer actually tilling the Lantap property, without turning over the supposed
landowners share to RBBI. This strongly indicates that the respondents considered
themselves (and not RBBI) as the owners of the Lantap property. For if respondents
(particularly spouses Elenita and Nemi) truly believed that RBBI retained ownership of
the Lantap property, how come they never complied with their obligations as supposed
tenants of RBBIs land? The factual circumstances of the case simply do not support the
theory propounded by the respondents.

We are likewise convinced that the subject of the Deeds of Voluntary Land
Transfer (VLTs) in favor of petitioners was the Murong property, and not the Lantap
property. When the VLTs were executed in 1990, petitioners were already the tenantfarmers of the Murong property, and had been paying rentals to RBBI accordingly. It is
therefore natural that the Murong property and no other was the one that they had
intended to acquire from RBBI with the execution of the VLTs. Moreover, after the
execution of the VLTs, petitioners remained in possession of the Murong property,
enjoying and tilling it without any opposition from anybody. Subsequently, after the
petitioners completed their payment of the total purchase price of P90,000.00 to RBBI,
the Department of Agrarian Reform (DAR) officials conducted their investigation of the
Murong property which, with the presumption of regularity in the performance of official
duty, did not reveal any anomaly. Petitioners were found to be in actual possession of the
Murong property and were the qualified beneficiaries thereof. Thus, the DAR officials
issued CLOAs in petitioners favor; and these CLOAs explicitly refer to the land in
Barangay Murong. All this time, petitioners were in possession of the Murong property,
undisturbed by anyone for several long years, until respondents started the controversy in
1997.

All of these contemporaneous and subsequent actions of RBBI and petitioners

support their position that the subject of their contract (VLTs) is the Murong property, not
the Lantap property. Conversely, there has been no contrary evidence of the parties
actuations to indicate that they intended the sale of the Lantap property. Thus, it appears
that the reference in their VLT to TCT No. T-62836 (Lantap property) was due to their
honest but mistaken belief that the said title covers the Murong property. Such a mistake
is not farfetched considering that TCT No. T-62836 only refers to the Municipality of
Bayombong, Nueva Vizcaya, and does not indicate the particular barangay where the

property is located. Moreover, both properties are bounded by a road and public land.
Hence, were it not for the detailed technical description, the titles for the two properties
are very similar.

The respondents attempt to discredit petitioners argument that their VLTs were
intrinsically ambiguous and failed to express their true intention by asking why
petitioners never filed an action for the reformation of their contract.46[46] A cause of
action for the reformation of a contract only arises when one of the contracting parties
manifests an intention, by overt acts, not to abide by the true agreement of the
parties.47[47] It seems fairly obvious that petitioners had no cause to reform their VLTs
because the parties thereto (RBBI and petitioners) never had any dispute as to the
interpretation and application thereof. They both understood the VLTs to cover the
Murong property (and not the Lantap property). It was only much later, when strangers to
the contracts argued for a different interpretation, that the issue became relevant for the
first time.

All told, we rule that the Deed of Sale dated February 26, 1985 between
respondents and RBBI covers the Lantap property under TCT No. T-62836, while the
Deeds of Voluntary Land Transfer and TCT Nos. CLOA-395 and CLOA-396 of the
petitioners cover the Murong property under TCT No. T-62096. In consequence, the
CAs ruling against RBBI should not be executed as such execution would be inconsistent
with our ruling herein. Although the CAs decision had already become final and

executory as against RBBI with the dismissal of RBBIs petition in G.R. No. 163320, our
ruling herein in favor of petitioners is a supervening cause which renders the execution of
the CA decision against RBBI unjust and inequitable.

WHEREFORE, the Petition for Review on Certiorari is GRANTED. The

assailed October 7, 2003 Decision, as well as the May 11, 2005 Resolution of the Court
of Appeals in CA-G.R. SP No. 69981 are REVERSED and SET ASIDE. The January
17, 2001 Decision of the DARAB Central Office is REINSTATED. The Deed of Sale
dated February 26, 1985 between respondents and Rural Bank of Bayombong, Inc.
covers the Lantap property under TCT No. T-62836, while the Deeds of Voluntary Land
Transfer and TCT Nos. CLOA-395 and CLOA-396 of the petitioners cover the Murong
property under TCT No. T-62096. The Register of Deeds of Nueva Vizcaya is directed to
make the necessary corrections to the titles of the said properties in accordance with this
Decision. Costs against respondents.

SO ORDERED.