Page 1 of 40

First Bath of Cases

G.R. No. 71813

July 20, 1987

ABELLA vs NLRC

WHEREFORE, the respondent is hereby ordered to pay the complainants

separation pay at the rate of half-month salary for every year of service, a
fraction of six (6) months being considered one (1) year. (Rollo pp. 29-30)

This is a petition for review on certiorari of the April 8, 1985 Resolution of the Ministry
of Labor and Employment affirming the July 16, 1982 Decision of the Labor Arbiter,
which ruled in favor of granting separation pay to private respondents.

On appeal on August 11, 1982, the National Labor Relations Commission, in a

Resolution dated April 8, 1985 (Ibid, pp. 3940), affirmed the decision and dismissed
the appeal for lack of merit.

On June 27, 1960, herein petitioner Rosalina Perez Abella leased a farm land in
Monteverde, Negros Occidental, known as Hacienda Danao-Ramona, for a period of
ten (10) years, renewable, at her option, for another ten (10) years (Rollo, pp. 16-20).

On May 22, 1985, petitioner filed a Motion for Reconsideration (Ibid, pp. 41-45), but
the same was denied in a Resolution dated June 10, 1985 (Ibid, p. 46). Hence, the
present petition (Ibid, pp. 3-8).

On August 13, 1970, she opted to extend the lease contract for another ten (10)
years (Ibid, pp. 26-27).

The First Division of this Court, in a Resolution dated September 16, 1985, resolved
to require the respondents to comment (Ibid, p. 58). In compliance therewith, private
respondents filed their Comment on October 23, 1985 (Ibid, pp. 53-55); and the
Solicitor General on December 17, 1985 (Ibid, pp. 71-73-B).

During the existence of the lease, she employed the herein private respondents.
Private respondent Ricardo Dionele, Sr. has been a regular farm worker since 1949
and he was promoted to Cabo in 1963. On the other hand, private respondent
Romeo Quitco started as a regular employee in 1968 and was promoted to Cabo in
November of the same year.
Upon the expiration of her leasehold rights, petitioner dismissed private respondents
and turned over the hacienda to the owners thereof on October 5, 1981, who
continued the management, cultivation and operation of the farm (Rollo, pp. 33; 89).
On November 20, 1981, private respondents filed a complaint against the petitioner
at the Ministry of Labor and Employment, Bacolod City District Office, for overtime
pay, illegal dismissal and reinstatement with backwages. After the parties had
presented their respective evidence, Labor Arbiter Manuel M. Lucas, Jr., in a
Decision dated July 16, 1982 (Ibid, pp. 29-31), ruled that the dismissal is warranted
by the cessation of business, but granted the private respondents separation pay.
Pertinent portion of the dispositive portion of the Decision reads:
In the instant case, the respondent closed its business operation not by
reason of business reverses or losses. Accordingly, the award of termination
pay in complainants' favor is warranted.

On February 19, 1986, petitioner filed her Consolidated Reply to the Comments of
private and public respondents (Ibid, pp. 80-81).
The First Division of this Court, in a Resolution dated March 31, 1986, resolved to
give due course to the petition; and to require the parties to submit simultaneous
memoranda (Ibid., p. 83). In compliance therewith, the Solicitor General filed his
Memorandum on June 18, 1986 (Ibid, pp. 89-94); and petitioner on July 23, 1986
(Ibid, pp. 96-194).
The petition is devoid of merit.
The sole issue in this case is
WHETHER OR NOT PRIVATE RESPONDENTS ARE ENTITLED TO SEPARATION
PAY.
Petitioner claims that since her lease agreement had already expired, she is not
liable for payment of separation pay. Neither could she reinstate the complainants in
the farm as this is a complete cessation or closure of a business operation, a just
cause for employment termination under Article 272 of the Labor Code.

Page 2 of 40
First Bath of Cases
On the other hand, the legal basis of the Labor Arbiter in granting separation pay to
the private respondents is Batas Pambansa Blg. 130, amending the Labor Code,
Section 15 of which, specifically provides:
Sec 15 Articles 285 and 284 of the Labor Code are hereby amended to read
as follows:
xxx

xxx

xxx

Art. 284. Closure of establishment and reduction of personnel. The

employer may also terminate the employment of any employee due to the
installation of labor-saving devices, redundancy, retrenchment to prevent
losses or the closing or cessation of operation of the establisment or
undertaking unless the closing is for the purpose of circumventing the
provisions of this title, by serving a written notice on the workers and the
Ministry of Labor and Employment at least one (1) month before the intended
date thereof. In case of termination due to the installation of labor-saving
devices or redundancy, the worker affected thereby shall be entitled to a
separation pay equivalent to at least his 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 in cases of closure or cessation of
operations of establishment or undertaking not due to serious business
losses or financial reverses, 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.1avvphi1
There is no question that Article 284 of the Labor Code as amended by BP 130 is the
law applicable in this case.
Article 272 of the same Code invoked by the petitioner pertains to the just causes of
termination. The Labor Arbiter does not argue the justification of the termination of
employment but applied Article 284 as amended, which provides for the rights of the
employees under the circumstances of termination.
Petitioner then contends that the aforequoted provision violates the constitutional
guarantee against impairment of obligations and contracts, because when she leased
Hacienda Danao-Ramona on June 27, 1960, neither she nor the lessor contemplated
the creation of the obligation to pay separation pay to workers at the end of the lease.

Such contention is untenable.

This issue has been laid to rest in the case of Anucension v. National Labor Union
(80 SCRA 368-369 [1977]) where the Supreme Court ruled:
It should not be overlooked, however, that the prohibition to impair the
obligation of contracts is not absolute and unqualified. The prohibition is
general, affording a broad outline and requiring construction to fill in the
details. The prohibition is not to read with literal exactness like a
mathematical formula for it prohibits unreasonable impairment only. In spite
of the constitutional prohibition the State continues to possess authority to
safeguard the vital interests of its people. Legislation appropriate to
safeguard said interest may modify or abrogate contracts already in effect.
For not only are existing laws read into contracts in order to fix the
obligations as between the parties but the reservation of essential attributes
of sovereign power is also read into contracts as a postulate of the legal
order. All contracts made with reference to any matter that is subject to
regulation under the police power must be understood as made in reference
to the possible exercise of that power. Otherwise, important and valuable
reforms may be precluded by the simple device of entering into contracts for
the purpose of doing that which otherwise maybe prohibited. ...
In order to determine whether legislation unconstitutionally impairs contract
of obligations, no unchanging yardstick, applicable at all times and under all
circumstances, by which the validity of each statute may be measured or
determined, has been fashioned, but every case must be determined upon
its own circumstances. Legislation impairing the obligation of contracts can
be sustained when it is enacted for the promotion of the general good of the
people, and when the means adopted must be legitimate, i.e. within the
scope of the reserved power of the state construed in harmony with the
constitutional limitation of that power. (Citing Basa vs. Federacion Obrera de
la Industria Tabaquera y Otros Trabajadores de Filipinas [FOITAF] [L-27113],
November 19, 1974; 61 SCRA 93,102-113]).
The purpose of Article 284 as amended is obvious-the protection of the workers
whose employment is terminated because of the closure of establishment and
reduction of personnel. Without said law, employees like private respondents in the
case at bar will lose the benefits to which they are entitled for the thirty three years
of service in the case of Dionele and fourteen years in the case of Quitco. Although

Page 3 of 40
First Bath of Cases
they were absorbed by the new management of the hacienda, in the absence of any
showing that the latter has assumed the responsibilities of the former employer, they
will be considered as new employees and the years of service behind them would
amount to nothing.
Moreover, to come under the constitutional prohibition, the law must effect a change
in the rights of the parties with reference to each other and not with reference to nonparties.
As correctly observed by the Solicitor General, Article 284 as amended refers to
employment benefits to farm hands who were not parties to petitioner's lease
contract with the owner of Hacienda Danao-Ramona. That contract cannot have the
effect of annulling subsequent legislation designed to protect the interest of the
working class.
In any event, it is well-settled that in the implementation and interpretation of the
provisions of the Labor Code and its implementing regulations, the workingman's
welfare should be the primordial and paramount consideration. (Volshel Labor Union
v. Bureau of Labor Relations, 137 SCRA 43 [1985]). It is the kind of interpretation
which gives meaning and substance to the liberal and compassionate spirit of the law
as provided for in Article 4 of the New Labor Code which states that "all doubts in the
implementation and interpretation of the provisions of this Code including its
implementing rules and regulations shall be resolved in favor of labor." The policy is
to extend the applicability of the decree to a greater number of employees who can
avail of the benefits under the law, which is in consonance with the avowed policy of
the State to give maximum aid and protection to labor. (Sarmiento v. Employees
Compensation Commission, 144 SCRA 422 [1986] citing Cristobal v. Employees
Compensation Commission, 103 SCRA 329; Acosta v. Employees Compensation
Commission, 109 SCRA 209).

This is a petition for review on certiorari seeking to reverse and set aside the
resolution of public respondent, *NLRC, in Case No. RAB 111-2-1589-84 entitled
"Jimmy O. Pastoral v. Euro-Linea Phils., Inc." affirming the decision of the Labor
Arbiter ** which ordered the reinstatement of complainant with six months
backwages.
The facts as found by the Solicitor General are as follows:
On August 17, 1983, petitioner hired Pastoral as shipping expediter on a probationary
basis for a period of six months ending February 18, 1984. However, prior to hiring by
petitioner, Pastoral had been employed by Fitscher Manufacturing Corporation also
as shipping expediter for more than one and a half years. Pastoral was absorbed by
petitioner but under a probationary basis.
On February 4, 1984, Pastoral received a memorandum dated January 31, 1984
terminating his probationary employment effective also on February 4, 1984 in view
of his failure ito meet the performance standards set by the company." To contest his
dismissal, Pastoral filed a complaint for illegal dismissal against petitioner on
February 6, 1984 (Rollo, pp. 45-46). On July 19, 1985, the Labor Arbiter found
petitioner guilty of illegal dismissal, the dispositive portion of the decision reading:
WHEREFORE all things considered the respondent or its President and/or General
Manager should be as it is hereby ordered to reinstate complainant with six months
backwages.
SO ORDERED.
San Fernando, Pampanga, Philippines, July 19,1985.
EMILIO TONGIO

PREMISES CONSIDERED, the instant petition is hereby DISMISSED and the July
16, 1982 Decision of the Labor Arbiter and the April 8, 1985 Resolution of the Ministry
of Labor and Employment are hereby AFFIRMED. SO ORDERED.

G.R. No. 75782 December 1, 1987

EURO-LINEA PHILS. INC vs NLRC

Labor Arbiter

(Rollo, p. 32).

Page 4 of 40
First Bath of Cases
Petitioner appealed the decision to the NLRC on August 5, 1985 (Rollo, pp. 33-39)
but the appeal was dismissed on July 16, 1986 (Resolution; Rollo, p. 41).
Hence, this petition.
Petitioner raises the following errors of the NLRC (Rollo, p. 7):

Petitioner claims that the dismissal is with cause, since respondent during his period
of employment failed to meet the performance standards set by the company; that
employers should be given leeway in the application of his right to choose efficient
workers (Rollo, p. 6) and that the determination of compliance with the standards is
the prerogative of the employer as long as it is not whimsical; that it had terminated
for cause the respondent before the expiration of the probationary employment
(Rollo, p. 70, Petitioner's Memorandum).

a) The Labor Arbiter decided a question of law in a manner contrary to the spirit and
purpose of the law; and that

The records, however, reveal the contrary.

b) The Labor Arbiter gravely abused his discretion by ignoring the material and
significant facts in favor of employer.

Petitioner not only failed to present sufficient evidence to substantiate the cause of
private respondent's dismissal, but likewise failed to cite particular acts or instances
to show the latter's poor performance.

In the resolution of October 29, 1986, the Second Division of the Court without giving
due course to the petition required the respondents to comment (Rollo, p. 42).

As correctly argued by the Solicitor General

The Solicitor General submitted his comment on November 24, 1986 (Rollo, pp. 4549), while petitioner through counsel filed its reply to public respondent National
Labor Relations Commission's comment in compliance with the resolution of
December 10, 1986 (Rollo, p. 50).
In the resolution of February 18, 1987 (Rollo, 58), the Court gave due course to the
petition and required the parties to file their respective memoranda.
The only issue is whether or not the National Labor Relations Commission acted with
grave abuse of discretion amounting to excess of jurisdiction in ruling against the
dismissal of the respondent, a temporary or probationary employee, by his employer
(Petitioner).
Although a probationary or temporary employee has a limited tenure, he still enjoys
the constitutional protection of security of tenure. During his tenure of employment or
before his contract expires, he cannot be removed except for cause as provided for
by law (Manila Hotel Corp. v. NLRC, 141 SCRA 169 [1986]).
This brings us to the issue of whether or not private respondent's dismissal was
justifiable.

There is no dispute that failure to qualify as a regular employee in accordance with

reasonable standards prescribed by the employer is a ground to terminate an
employee engaged on a probationary basis (Art. 282, Labor Code; Bk. VI, Rule 1,
Section 6(c), Implementing Rules, Labor Code). In this case, petitioner alleged that
Pastoral was dismissed because he failed to meet its performance standard.
However, petitioner did not bother to cite particular acts or instances in its position
paper which show that Pastoral was performing below par. ...
Petitioner's performance as shipping expediter can readily be gauged from specific
acts as may be gleaned from his duties enumerated by petitioner to include
processing of export and import documents for dispatch or release and talking to
customs personnel regarding said documents. (p. 2, Annex "E " Petition).
Furthermore, what makes the dismissal highly suspicious is the fact that while
petitioner claims that respondent was inefficient, it retained his services until the last
remaining two weeks of the six months probationary employment.
No less important is the fact that private respondent had been a shipping expediter
for more than one and a half years before he was absorbed by petitioner. It therefore
appears that the dismissal in question is without sufficient justification.

Page 5 of 40
First Bath of Cases
It must be emphasized that the prerogative of management to dismiss or lay- off an
employee must be done without abuse of discretion, for what is at stake is not only
petitioner's position but also his means of livelihood. (Remerco Garments
Manufacturing vs. Minister of Labor, 135 SCRA 137 [1985]). The right of an employer
to freely select or discharge his employees is subject to regulation by the State,
basically in the exercise of its paramount police power (PAL, Inc. vs. PALEA, 57
SCRA 489 [1974]). This is so because the preservation of the lives of the citizens is a
basic duty of the State, more vital than the preservation of corporate profits (Phil.
Apparel Workers Union v. NLRC, 106 SCRA 444 [1981]; Manila Hotel Corp. v. NLRC,
supra).
Finally, it is significant to note that in the interpretation of the protection to labor and
social justice provisions of the constitution and the labor laws and rules and
regulations implementing the constitutional mandate, the Supreme Court has always
adopted the liberal approach which favors the exercise of labor rights. (Adamson &
Adamson, Inc. v. CIR, 127 SCRA 268 [1984]).
In the instant case, it is evident that the NLRC correctly applied Article 282 in the light
of the foregoing and that its resolution is not tainted with unfairness or arbitrariness
that would amount to grave abuse of discretion or lack of jurisdiction (Rosario
Brothers Inc. v. Ople, 131 SCRA 73 [1984]).

Petitioner Manuel Sosito was employed in 1964 by the private respondent, a logging
company, and was in charge of logging importation, with a monthly salary of
P675.00, 1 when he went on indefinite leave with the consent of the company on
January 16, 1976. 2 On July 20, 1976, the private respondent, through its president,
announced a retrenchment program and offered separation pay to employees in the
active service as of June 30, 1976, who would tender their resignations not later than
July 31, 1976. The petitioner decided to accept this offer and so submitted his
resignation on July 29, 1976, "to avail himself of the gratuity benefits"
promised. 3 However, his resignation was not acted upon and he was never given the
separation pay he expected. The petitioner complained to the Department of Labor,
where he was sustained by the labor arbiter. 4 The company was ordered to pay
Sosito the sum of P 4,387.50, representing his salary for six and a half months. On
appeal to the National Labor Relations Commission, this decision was reversed and it
was held that the petitioner was not covered by the retrenchment program. 5 The
petitioner then came to us.
For a better understanding of this case, the memorandum of the private respondent
on its retrenchment program is reproduced in full as follows:
July 20, 1976
Memorandum To: ALL EMPLOYEES

PREMISES CONSIDERED, the petition is DISMISSED for lack of merit, and the
resolution of the NLRC is affirmed.
SO ORDERED
G.R. No. L-48926 December 14, 1987
SOSITO vs AGUINALDO
We gave due course to this petition and required the parties to file simultaneous
memoranda on the sole question of whether or not the petitioner is entitled to
separation pay under the retrenchment program of the private respondent.
The facts are as follows:

Re: RETRENCHMENT PROGRAM

As you are all aware, the operations of wood-based industries in the Philippines for
the last two (2) years were adversely affected by the worldwide decline in the
demand for and prices of logs and wood products. Our company was no exception to
this general decline in the market, and has suffered tremendous losses. In 1975
alone, such losses amounted to nearly P20,000,000.00.
The company has made a general review of its operations and has come to the
unhappy decision of the need to make adjustments in its manpower strength if it is to
survive. This is indeed an unfortunate and painful decision to make, but it leaves the
company no alternative but to reduce its tremendous and excessive overhead
expense in order to prevent an ultimate closure.
Although the law allows the Company, in a situation such as this, to drastically reduce
it manpower strength without any obligation to pay separation benefits, we recognize

Page 6 of 40
First Bath of Cases
the need to provide our employees some financial assistance while they are looking
for other jobs.
The Company therefore is adopting a retrenchment program whereby employees
who are in the active service as of June 30, 1976 will be paid separation benefits in
an amount equivalent to the employee's one-half (1/2) month's basic salary multiplied
by his/her years of service with the Company. Employees interested in availing of the
separation benefits offered by the Company must manifest such intention by
submitting written letters of resignation to the Management not later than July 31,
1976. Those whose resignations are accepted shall be informed accordingly and
shall be paid their separation benefits.
After July 31, 1976, this offer of payment of separation benefits will no longer be
available. Thereafter, the Company shall apply for a clearance to terminate the
services of such number of employees as may be necessary in order to reduce the
manpower strength to such desired level as to prevent further losses.
(SGD.) JOSE G. RICAFORT
President

N.B.
For additional information
and/or resignation forms,
please see Mr. Vic Maceda
or Atty. Ben Aritao.

It is clear from the memorandum that the offer of separation pay was extended only
to those who were in the active service of the company as of June 30, 1976. It is
equally clear that the petitioner was not eligible for the promised gratuity as he was

not actually working with the company as of the said date. Being on indefinite leave,
he was not in the active service of the private respondent although, if one were to be
technical, he was still in its employ. Even so, during the period of indefinite leave, he
was not entitled to receive any salary or to enjoy any other benefits available to those
in the active service.
It seems to us that the petitioner wants to enjoy the best of two worlds at the expense
of the private respondent. He has insulated himself from the insecurities of the
floundering firm but at the same time would demand the benefits it offers. Being on
indefinite leave from the company, he could seek and try other employment and
remain there if he should find it acceptable; but if not, he could go back to his former
work and argue that he still had the right to return as he was only on leave.
There is no claim that the petitioner was temporarily laid off or forced to go on leave;
on the contrary, the record shows that he voluntarily sought the indefinite leave which
the private respondent granted. It is strange that the company should agree to such
an open-ended arrangement, which is obviously one-sided. The company would not
be free to replace the petitioner but the petitioner would have a right to resume his
work as and when he saw fit.
We note that under the law then in force the private respondent could have validly
reduced its work force because of its financial reverses without the obligation to grant
separation pay. This was permitted under the original Article 272(a), of the Labor
Code, 7 which was in force at the time. To its credit, however, the company voluntarily
offered gratuities to those who would agree to be phased out pursuant to the terms
and conditions of its retrenchment program, in recognition of their loyalty and to tide
them over their own financial difficulties. The Court feels that such compassionate
measure deserves commendation and support but at the same time rules that it
should be available only to those who are qualified therefore. We hold that the
petitioner is not one of them.
While the Constitution is committed to the policy of social justice and the protection of
the working class, it should not be supposed that every labor dispute will be
automatically decided in favor of labor. Management also has its own rights which, as
such, are entitled to respect and enforcement in the interest of simple fair play. Out of
its concern for those with less privileges in life, this Court has inclined more often
than not toward the worker and upheld his cause in his conflicts with the employer.
Such favoritism, however, has not blinded us to the rule that justice is in every case

Page 7 of 40
First Bath of Cases
for the deserving, to be dispensed in the light of the established facts and the
applicable law and doctrine.

"In Re: Assumption of Jurisdiction over the Labor Dispute at Colgate Palmolive
Philippines, Inc." In its position paper, petitioner pointed out that

WHEREFORE, the petition is DISMISSED and the challenged decision AFFIRMED,

with costs against the petitioner.

(a) There is no legal basis for the charge that the company refused to
bargain collectively with the union considering that the alleged union
is not the certified agent of the company salesmen;

SO ORDERED.
(b) The union's status as a legitimate labor organization is still under
question because on 6 March 1985, a certain Monchito Rosales
informed the BLR that an overwhelming majority of the salesmen are
not in favor of the Notice of Strike allegedly filed by the Union (Annex
"C");
G.R. No. 73681 June 30, 1988
COLGATE-PALMOLIVE PHILIPPINES vs OPLE
Before Us is a Petition for certiorari seeking to set aside and annul the Order of
respondent Minister of Labor and Employment (MOLE) directly certifying private
respondent as the recognized and duly-authorized collective bargaining agent for
petitioner's sales force and ordering the reinstatement of three employees of
petitioner.
Acting on the petition for certiorari with prayer for temporary restraining order, this
Court issued a Temporary Restraining Order enjoining respondents from enforcing
and/or carrying out the assailed order.
The antecedent facts are as follows:
On March 1, 1985, the respondent Union filed a Notice of Strike with the Bureau of
Labor Relations (BLR) on ground of unfair labor practice consisting of alleged refusal
to bargain, dismissal of union officers/members; and coercing employees to retract
their membership with the union and restraining non-union members from joining the
union.
After efforts at amicable settlement proved unavailing, the Office of the MOLE, upon
petition of petitioner assumed jurisdiction over the dispute pursuant to Article 264 (g)
of the Labor Code, Thereafter the case was captioned AJML-3-142-85, BLR-3-86-85

(c) Upon verification of the records of the Ministry of Labor and Employment, it
appeared that a petition for cancellation of the registration of the alleged union was
filed by Monchito Rosales on behalf of certain salesmen of the company who are
obviously against the formation of the Colgate Palmolive Sales Labor Union which is
supposed to represent them;
(d) The preventive suspensions of salesmen Peregrino Sayson, Salvador Reynante
and Cornelio Mejia, and their eventual dismissal from the employ of the company
were carried out pursuant to the inherent right and prerogative of management to
discipline erring employees; that based on the preliminary investigation conducted by
the company, there appeared substantial grounds to believe that Sayson, Reynante
and Mejia violated company rules and regulations necessitating their suspension
pending further investigation of their respective cases;
(e) It was also ascertained that the company sustained damages resulting from the
infractions committed by the three salesmen, and that the final results of the
investigation fully convinced the company of the existence of just causes for the
dismissal of the three salesmen;
(f) The formation of the union and the membership therein of Sayson, Reynante and
Mejia were not in any manner connected with the company's decision to dismiss the
three; that the fact that their dismissal came at a time when the alleged union was
being formed was purely coincidental;

Page 8 of 40
First Bath of Cases
(g) The union's charge therefore, that the membership in the union and refusal to
retract precipitated their dismissal was totally false and amounted to a malicious
imputation of union busting;
(h) The company never coerced or attempted to coerce employees, much less
interferred in the exercise of their right to self-organization; the company never
thwarted nor tried to defeat or frustrate the employees' right to form their union in
pursuit of their collective interest, as long as that right is exercised within the limits
prescribed by law; in fact, there are at present two unions representing the rank and
file employees of the company-the factory workers who are covered by a CBA which
expired on 31 October 1985 (which was renewed on May 31, 1985) and are
represented by Colgate Palmolive Employees Union (PAFLU); whereas, the salaried
employees are covered by a CBA which will expire on 31 May 1986 represented by
Philippine Association of Free Labor Union (PAFLU)-CPPI Office Chapter. (pp. 4-6,
Rollo)
The respondent Union, on the other hand, in its position paper, reiterated the issue in
its Notice to Strike, alleging that it was duly registered with the Bureau of Labor
Relations under Registry No. 10312-LC with a total membership of 87 regular
salesmen (nationwide) out of 117 regular salesmen presently employed by the
company as of November 30, 1985 and that since the registration of the Union up to
the present, more than 2/3 of the total salesmen employed are already members of
the Union, leaving no doubt that the true sentiment of the salesmen was to form and
organize the Colgate-Palmolive Salesmen Union. The Union further alleged that the
company is unreasonably delaying the recognition of the union because when it was
informed of the organization of the union, and when presented with a set of proposals
for a collective bargaining agreement, the company took an adversarial stance by
secretly distributing a "survey sheet on union membership" to newly hired salesmen
from the Visayas, Mindanao and Metro Manila areas, purposely avoiding regular
salesmen who are now members of the union; that in the accomplishment of the
form, District Sales Managers, and Sales Supervisors coerced salesmen from the
Visayas and Mindanao by requiring them to fill up and/or accomplish said form by
checking answers which were adverse to the union; that with a handful of the survey
sheets secured by management through coercion, it now would like to claim that all
salesmen are not in favor of the organization of the union, which acts are clear
manifestations of unfair labor practices.
On August 9,1985, respondent Minister rendered a decision which:

(a) found no merit in the Union's Complaint for unfair labor practice
allegedly committed by petitioner as regards the alleged refusal of
petitioner to negotiate with the Union, and the secret distribution of
survey sheets allegedly intended to discourage unionism,
(b) found the three salesmen, Peregrino Sayson, Salvador Reynante
& Cornelio Mejia "not without fault" and that "the company 1 has
grounds to dismiss above named salesmen"
and at the same time respondent Minister directly certified the respondent Union as
the collective bargaining agent for the sales force in petitioner company and ordered
the reinstatement of the three salesmen to the company on the ground that the
employees were first offenders.
Petitioner filed a Motion for Reconsideration which was denied by respondent
Minister in his assailed Order, dated December 27, 1985. Petitioner now comes to Us
with the following:
Assignment of Errors
I
Respondent Minister committed a grave abuse of discretion when he
directly certified the Union solely on the basis of the latter's selfserving assertion that it enjoys the support of the majority of the
sales force in petitioner's company.

II
Respondent Minister committed a grave abuse of discretion when,
notwithstanding his very own finding that there was just cause for the
dismissal of the three (3) salesmen, he nevertheless ordered their
reinstatement. (pp. 7-8, Rollo)
Petitioner concedes that respondent Minister has the power to decide a labor dispute
in a case assumed by him under Art. 264 (g) of the Labor Code but this power was

Page 9 of 40
First Bath of Cases
exceeded when he certified respondent Union as the exclusive bargaining agent of
the company's salesmen since this is not a representation proceeding as described
under the Labor Code. Moreover the Union did not pray for certification but merely for
a finding of unfair labor practice imputed to petitioner-company.
The petition merits our consideration. The procedure for a representation case is
outlined in Arts. 257-260 of the Labor Code, in relation to the provisions on
cancellation of a Union registration under Arts. 239-240 thereof, the main purpose of
which is to aid in ascertaining majority representation. The requirements under the
law, specifically Secs. 2, 5, and 6 of Rule V, Book V, of the Rules Implementing the
Labor Code are all calculated to ensure that the certified bargaining representative is
the true choice of the employees against all contenders. The Constitutional mandate
that the State shall "assure the rights of the workers to self-organization, collective
bargaining, security of tenure and just and humane conditions of work," should be
achieved under a system of law such as the aforementioned provisions of the
pertinent statutes. When an overzealous official by-passes the law on the pretext of
retaining a laudable objective, the intendment or purpose of the law will lose its
meaning as the law itself is disregarded. When respondent Minister directly certified
the Union, he in fact disregarded this procedure and its legal requirements. There
was therefore failure to determine with legal certainty whether the Union indeed
enjoyed majority representation. Contrary to the respondent Minister's observation,
the holding of a certification election at the proper time is not necessarily a mere
formality as there was a compelling legal reason not to directly and unilaterally certify
a union whose legitimacy is precisely the object of litigation in a pending cancellation
case filed by certain "concerned salesmen," who also claim majority status. Even in a
case where a union has filed a petition for certification elections, the mere fact that no
opposition is made does not warrant a direct certification. More so as in the case at
bar, when the records of the suit show that the required proof was not presented in
an appropriate proceeding and that the basis of the direct certification was the
Union's mere allegation in its position paper that it has 87 out of 117 regular
salesmen. In other words, respondent Minister merely relied on the self-serving
assertion of the respondent Union that it enjoyed the support of the majority of the
salesmen, without subjecting such assertion to the test of competing claims. As
pointed out by petitioner in its petition, what the respondent Minister achieved in
rendering the assailed orders was to make a mockery of the procedure provided
under the law for representation cases because:
(a) He has created havoc by impliedly establishing a procedural
short-cut to obtaining a direct certification-by merely filing a notice of
strike.

(b) By creating such a short-cut, he has officially encouraged

disrespect for the law.
(c) By directly certifying a Union without sufficient proof of majority
representation, he has in effect arrogated unto himself the right,
vested naturally in the employees, to choose their collective
bargaining representative.
(d) He has in effect imposed upon the petitioner the obligation to
negotiate with a union whose majority representation is under
serious question. This is highly irregular because while the Union
enjoys the blessing of the Minister, it does not enjoy the blessing of
the employees. Petitioner is therefore under threat of being held
liable for refusing to negotiate with a union whose right to bargaining
status has not been legally established. (pp. 9-10, Rollo)
The order of the respondent Minister to reinstate the employees despite a clear
finding of guilt on their part is not in conformity with law. Reinstatement is simply
incompatible with a finding of guilt. Where the totality of the evidence was sufficient to
warrant the dismissal of the employees the law warrants their dismissal without
making any distinction between a first offender and a habitual delinquent. Under the
law, respondent Minister is duly mandated to equally protect and respect not only the
labor or workers' side but also the management and/or employers' side. The law, in
protecting the rights of the laborer, authorizes neither oppression nor self-destruction
of the employer. To order the reinstatement of the erring employees namely, Mejia,
Sayson and Reynante would in effect encourage unequal protection of the laws as a
managerial employee of petitioner company involved in the same incident was
already dismissed and was not ordered to be reinstated. As stated by Us in the case
of San Miguel Brewery vs. National Labor Union, 2 "an employer cannot legally be
compelled to continue with the employment of a person who admittedly was guilty of
misfeasance or malfeasance towards his employer, and whose continuance in the
service of the latter is patently inimical to his interest."
In the subject order, respondent Minister cited a cases 3 implying that "the proximity
of the dismissal of the employees to the assumption order created a doubt as to
whether their dismissal was really for just cause or due to their activities." 4
This is of no moment for the following reasons:

Page 10 of 40
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(a) Respondent Minister has still maintained in his assailed order that a just cause
existed to justify the dismissal of the employees.
(b) Respondent Minister has not made any finding substantiated by evidence that the
employees were dismissed because of their union activities.
WHEREFORE, judgment is hereby rendered REVERSING and SETTING ASIDE the
Order of the respondent Minister, dated December 27, 1985 for grave abuse of
discretion. However, in view of the fact that the dismissed employees are first
offenders, petitioner is hereby ordered to give them separation pay. The temporary
restraining order is hereby made permanent.

1971. As such, his work consisted of the repair of engines and underchassis, as well
as trouble shooting and overhauling of company vehicles. He is likewise entrusted
with some tools and spare parts in furtherance of the work assigned to him.
On April 11, 1987, private respondent was caught by the security guards taking out of
GELMART's premises one (1) plastic container filled with about 16 ounces of "used'
motor oil, without the necessary gate pass to cover the same as required under
GELMART's rules and regulations. By reason thereof, petitioner, on April 13, 1987,
was placed under preventive suspension pending investigation for violation of
company rules and regulations. Under the said rules, theft and/or pilferage of
company property merits an outright termination from employment.
After due investigation, or on May 20, 1987, private respondent was found guilty of
theft of company property. As a consequence, his services were severed.

SO ORDERED.

Thereafter, private respondent filed a complaint for illegal dismissal before the NLRC.
In a decision dated February 26, 1988, Labor Arbiter Ceferina J. Diosana ruled that
private respondent was illegally dismissed and, accordingly, ordered the latter's
reinstatement with full backwages from April 13, 1987 up to the time of actual
reinstatement. 2
The ground relied upon by the labor arbiter in her decision is worth quoting
hereunder, to wit:
G.R. No. 85668 August 10, 1989
GELMART INDUSTRIES PHILS. INC., vs. NLRC
At issue in this petition is whether or not the National Labor Relations Commission
(hereinafter referred to as NLRC) committed a grave abuse of discretion amounting
to lack or excess of jurisdiction in ordering the reinstatement of private respondent to
his former position with payment of backwages equivalent to six (6) months. 1
As revealed by the records, the background facts are as follows:
Private respondent Felix Francis started working as an auto-mechanic for petitioner
Gelmart Industries Phils., Inc. (hereinafter referred to as GELMART) sometime in

The most important aspect that should be considered in interpreting

this rule (referring to the company's rules on theft and pilferages) is
the deprivation of the company of property belonging to it without any
compensation. Hence, the property that must be stolen or pilfered
must be property which has value.
x x x.
x x x.
In the respondent company, ... the used oil is thrown away by the
mechanics. ... In other words, the taking by complainant of the
subject 16 ounces of used oil did not deprive the respondent
company of anything. As it appears, the said used oil for as part of

Page 11 of 40
First Bath of Cases
the waste that should be thrown away and the respondent company
had no use for the same, hence, the respondent company was not
deprived of any property ... and, therefore, and (sic) it is the position
of this Labor Arbiter that there was no stealing or pilferage to speak
of. 3 (Emphasis supplied.)
From this decision, GELMART interposed an appeal with the NLRC. In its decision
dated October 21, 1988, the NLRC affirmed with modification the ruling of Labor
Arbiter Diosana, 4 the dispositive portion of which reads as follows:
WHEREFORE, in view of the foregoing, the decision is hereby
MODIFIED. Respondent-appellant is hereby directed to reinstate
complainant-appellee to his former position without loss of seniority
rights and to pay him backwages equivalent to six (6) months.
SO ORDERED. 5
On December 12, 1988, GELMART filed before this Court a special civil action for
certiorari with a prayer for the issuance of a temporary restraining order.
On January 18, 1989, this Court, without necessarily giving due course to the
petition, issued a temporary restraining order enjoining respondents from enforcing
the assailed decision. On the same date, this Court required respondents to
comment on the petition.
Aside from the substantive issues raised in their comment which will be discussed
later on in this decision, public respondent pointed to a procedural error allegedly
committed by petitioner. 6 The Solicitor General contends that petitioner failed to
exhaust "[t]he administrative remedies afforded by law ... before resort can be had to
the courts ... 7 More specifically, our attention is called to the fact that no motion for
reconsideration of the NLRC decision was filed by petitioner. The Solicitor General
then concludes that "[s]ince petitioners failed to avail of the plain, speedy and
adequate remedy accorded to them in the ordinary course of law ..., the instant
petition for certiorari ran is prematurely filed, and hence, does not state a cause of
action. 8
The legal provision pertinent to this issue is found in Article 223 of the Labor Code
which provides, in part:

ART. 223. Appeal. ... .

x x x.
The decision of the Commission shall be immediately executory
even pending appeal ... (Emphasis supplied.)
From this provision, it can be gleaned that the filing of a motion for reconsideration
may not prove to be an adequate remedy. For one, assuming that a motion for
reconsideration is filed, nowhere does it state that the filing thereof would
automatically suspend the execution of the decision. Second, although a motion for
reconsideration has often been considered a condition precedent for granting the writ
of certiorari, this rule, however, finds exception in cases where execution had been
ordered and the need for relief is extremely urgent. 9
This Court is not unaware of Section 2, Rule XI of the Revised Rules of the National
Labor Relations Commission which provides in paragraphs (a) and (b) thereof:
See. 2. Finality of Decisions of the Commission
(a) The decisions, resolutions or orders of the Commission shall
become executory after ten (10) calendar days from receipt of the
same.
(b) Should there be a motion for reconsideration in accordance with
Sec. 9, Rule X of these Rules, the decision shall be executory after
10 days from receipt of the resolution on such motion.
x x x.
However, this Court has already ruled against the validity of the abovecited rule,
particularly Section 2, Rule XI, paragraph (a) in Juan vs. Musngi. 10 Interpreting the
word "immediately" in Article 223 of the Labor Code to mean "without interval of time"
or "without delay," this Court declared that the NLRC rules which provide that
decisions, resolutions or orders of the Commission shall become executory after ten
(10) calendar days from receipt thereof cannot prevail over Article 223 of the Labor
Code. Further amplifying on this ruling, this Court stated that administrative
regulations under legislative authority by a particular department must be in harmony

Page 12 of 40
First Bath of Cases
with the provision of the law for the sole purpose of carrying into effect its general
provisions. 11 Otherwise stated, no period of time need elapse before the decision of
the NLRC becomes executory.
From the foregoing, it will be seen that a motion for reconsideration may not be a
plain, speedy and adequate remedy. Hence, a petition for certiorari with this Court
with a prayer for the issuance of a temporary restraining order is but a proper remedy
to forestall the immediate execution of the assailed decision.
The Court will now look into the substance of this petition. In their petition, GELMART
ascribes grave abuse of discretion on the part of the NLRC for rendering a decision
that is contrary to law and existing jurisprudence.
We find no merit in this petition.
Consistent with the policy of the State to bridge the gap between the underprivileged
workingmen and the more affluent employers, the NLRC rightfully tilted the balance
in favor of the workingmen and this was done without being blind to the
concomitant right of the employer to the protection of his property. The NLRC went on
to say as follows:
We do not fully concur with the findings of the Labor Arbiter.
Complainant-appellee's suspension prior to termination had sufficient
basis. We disagree with the conclusion that complainant-appellee did
not violate respondent-appellant's rule requiring a gate pass for
taking out company property as the used motor oil was not really in a
sense ' property' considering that it was plain waste and had no
commercial value. ... Used motor oil is not plain waste because it
had its use to respondent-appellant's motor pool. ... Besides, it is not
for complainant-appellee to interpret the rule according to his own
understanding. Respondent appellant had the right to interpret the
rule and ... to exact discipline ... in the light of its policy to instill
discipline on its 6,000 workforce.
We find however, complainant-appellee's dismissal unwarranted. ...
The penalty of preventive suspension was sufficient punishment for
the violation under the circumstances. ... 12 (Emphasis supplied)

Thus, without being too harsh to the employer, on the one hand, and naively liberal to
labor, on the other, the NLRC correctly pointed out that private respondent cannot
totally escape liability for what is patently a violation of company rules and
regulations.
To reiterate, be it of big or small commercial value, intended to be re-used or
altogether disposed of or wasted, the "used" motor oil still remains, in legal
contemplation, the property of GELMART. As such, to take the same out of
GELMART's premises without the corresponding gate pass is a violation of the
company rule on theft and/or pilferage of company property. However, as this Court
ruled in Meracap vs. International Ceramics Mfg. Co., Inc.,"[w]here a penalty less
punitive would suffice, whatever missteps may be committed by labor ought not to be
visited with a consequence so severe. 13 On this score, it is very difficult for this Court
to discern grave abuse of discretion on the part of the NLRC in modifying the
appealed decision. The suspension imposed upon private respondent is a sufficient
penalty for the misdemeanor committed.
As stated earlier, petitioner assails the NLRC decision on the ground that the same is
contrary to existing jurisprudence, particularly citing in support thereof Firestone Tire
and Rubber Co. of the Phil. vs. Lariosa 14Petitioner contends that by virtue of this
ruling they have the right to dismiss private respondent from employment on the
ground of breach of trust or loss of confidence resulting from theft of company
property.
We believe otherwise.
There is nothing in Firestone which categorically gives management an unhampered
right in terminating an employee's services. The, decision in Firestone specifically
focuses only on the legality of a dismissal by reason of acts of dishonesty in the
handling of company property for what was involved in that case is theft of sixteen
(16) flannel swabs which were supposed to be used to clean certain machineries in
the company. 15 In fact, a careful review of the cases cited in Firestone 16 will readily
reveal that the underlying reason behind sustaining the personam. of dismissal or
outright termination is that, under the circumstances obtaining in those cases, there
exists ample reason to distrust the employees concerned.
Thus, in upholding the dismissal of a cashier found guilty of misappropriating
corporate funds, this Court, in Metro Drug," 17 made, a distinction between
managerial personnel and-in other employees occupying positions of trust and-in

Page 13 of 40
First Bath of Cases
confidence from ordinary employees. On the other hand, in Dole Philippines, 18 this
Court spoke of the "nature of participation" which renders one absolutely unworthy of
the trust and-in confidence demanded by the position in upholding the dismissal of
employee found guilty of illegally selling for their philosophy benefit two (2) drums of
crude oil belonging to the company.
Additionally, in Firestone, it clearly appears that to retain the employee would "[i]n the
long run, endanger the company's viability. 19
The, Court rules that these circumstances are not present in this instant case.
Contrary to the assertion of petitioner, the ruling in Firestone does not preclude the
NLRC from looking into the particular facts of the case to determine if there is ample
reason to dismiss an employee charged and subsequently found guilty of theft of
company property. The, said decision cannot be deemed as a limitation on the right
of the State in the exercise of its paramount police power to regulate or temper the
prerogative of management to dismiss an erring employee. 20 Consequently, even
when there exists some rules agreed upon between the employer and-in the
employee, it cannot preclude the State from inquiring on whether or not its rigid
application would work too harshly on the employee.
Considering that private respondent herein has no previous derogatory record in his
fifteen (15) years of service with petitioner GELMART the value of the property
pilfered (16 ounces of used motor oil) is very minimal, plus the fact that petitioner
failed to reasonably establish that non-dismissal of private respondent would work
undue prejudice to the viability of their operation or is patently inimical to the
company's interest, it is more in consonance with the policy of the State, as
embodied in the Constitution, to resolve all doubts in favor of labor. This is our ruling
in Philippine Air Lines, Inc. vs. Philippine Air Lines Employees Association 21 involving
as it does essentially the same facts and in circumstances. At this point, this Court
does not see any reason to deviate from the said ruling.
WHEREFORE, in view of the foregoing, the petition is DISMISSED for lack of merit.
The, restraining order issued by this Court on January 18, 1989 enjoining the
enforcement of the questioned decision of the National Labor Relations Commission
is hereby lifted. No pronouncement as to costs.
SO ORDERED

G.R. No. 156515

October 19, 2004
CHINA BANKING CORPORATION vs. MARIANO M. BORROMEO
Before the Court is the petition for review on certiorari filed by China Banking
Corporation seeking the reversal of the Decision 1 dated July 19, 2002 of the Court of
Appeals in CA-G.R. SP No. 57365, remanding to the Labor Arbiter for further
hearings the complaint for payment of separation pay, mid-year bonus, profit share
and damages filed by respondent Mariano M. Borromeo against the petitioner Bank.
Likewise, sought to be reversed is the appellate courts Resolution dated January 6,
2003, denying the petitioner Banks motion for reconsideration.
The factual antecedents of the case are as follows:
Respondent Mariano M. Borromeo joined the petitioner Bank on June 1,
1989 as Manager assigned at the latters Regional Office in Cebu City. He
then had the rank of Manager Level I. Subsequently, the respondent was
laterally transferred to Cagayan de Oro City as Branch Manager of the
petitioner Banks branch thereat.
For the years 1989 and 1990, the respondent received a "highly satisfactory"
performance rating and was given the corresponding profit
sharing/p>erformance bonus. From 1991 up to 1995, he consistently
received a "very good" performance rating for each of the said years and
again received the corresponding profit sharing/p>erformance bonus.
Moreover, in 1992, he was promoted from Manager Level I to Manager Level
II. In 1994, he was promoted to Senior Manager Level I. Then again, in 1995,
he was promoted to Senior Manager Level II. Finally, in 1996, with a "highly
satisfactory" performance rating, the respondent was promoted to the
position of Assistant Vice-President, Branch Banking Group for the Mindanao
area effective October 16, 1996. Each promotion had the corresponding
increase in the respondents salary as well as in the benefits he received
from the petitioner Bank.
However, prior to his last promotion and then unknown to the petitioner Bank, the
respondent, without authority from the Executive Committee or Board of Directors,
approved several DAUD/BP accommodations amounting toP2,441,375 in favor of
Joel Maniwan, with Edmundo Ramos as surety. DAUD/BP is the acronym for checks

Page 14 of 40
First Bath of Cases
"Drawn Against Uncollected Deposits/Bills Purchased." Such checks, which are not
sufficiently funded by cash, are generally not honored by banks. Further, a DAUD/BP
accommodation is a credit accommodation granted to a few and select bank clients
through the withdrawal of uncollected or uncleared check deposits from their current
account. Under the petitioner Banks standard operating procedures, DAUD/BP
accommodations may be granted only by a bank officer upon express authority from
its Executive Committee or Board of Directors.
As a result of the DAUD/BP accommodations in favor of Maniwan, a total of ten outof-town checks (7 PCIB checks and 3 UCPB checks) of various dates amounting
to P2,441,375 were returned unpaid from September 20, 1996 to October 17, 1996.
Each of the returned checks was stamped with the notation "Payment
Stopped/Account Closed."
On October 8, 1996, the respondent wrote a Memorandum to the petitioner Banks
senior management requesting for the grant of a P2.4 million loan to Maniwan. The
memorandum stated that the loan was "to regularize/liquidate subjects (referring to
Maniwan) DAUD availments." It was only then that the petitioner Bank came to know
of the DAUD/BP accommodations in favor of Maniwan. The petitioner Bank further
learned that these DAUD/BP accommodations exceeded the limit granted to clients,
were granted without proper prior approval and already past due. Acting on this
information, Samuel L. Chiong, the petitioner Banks First Vice- President and HeadVisayas Mindanao Division, in his Memorandum dated November 19, 1996 for the
respondent, sought clarification from the latter on the following matters:
1) When DAUD/BP accommodations were allowed, what efforts, if any, were
made to establish the identity and/or legitimacy of the alleged broker or
drawers of the checks accommodated?
2) Did the branch follow and comply with operating procedure which require
that all checks accommodated for DAUD/BP should be previously verified
with the drawee bank and history if not outright balances determined if
enough to cover the checks?
3) How did the accommodations reach P2,441,375.00 when our records
indicate that the borrowers B/p>-DAUD line is only for P500,000.00? When
did the accommodations start exceeding the limit of P500,000.00 and under
whose authority?
4) When did the accommodated checks start bouncing?
5) What is the status of these checks now and what has the branch done so
far to protect/ensure collectibility of the returned checks?

6) What about client Joel Maniwan and surety Edmund Ramos, what steps
have they done to pay the checks returned?2
In reply thereto, the respondent, in his Letter dated December 5, 1996, answered the
foregoing queries in seriatim and explained, thus:
1. None
2. No
3. The accommodations reach P2.4 million upon the request of Mr. Edmund
Ramos, surety, and this request was subsequently approved by undersigned.
The excess accommodations started in July 96 without higher management
approval.
4. Checks started bouncing on September 20, 1996.
5. Checks have remained unpaid. The branch sent demand letters to Messrs.
Maniwan and Ramos and referred the matter to our Legal Dept. for filing of
appropriate legal action.
6. Mr. Maniwan, thru his lawyer, Atty. Oscar Musni has signified their intention
to settle by Feb. 1997.
Justification for lapses committed (Item nos. 1 to 3).
The account was personally endorsed and referred to us by Mr. Edmund Ramos,
Branch Manager of Metrobank, Divisoria Br., Cagayan de Oro City. In fact, the CASA
account was opened jointly as &/or (Maniwan &/or Ramos). Mr. Ramos gave us his
full assurance that the checks that we intend to purchase are the same drawee that
Metrobank has been purchasing for the past one (1) year already. He even disclosed
that these checks were verified by his own branch accountant and that Mr. Maniwans
loan account was being co-maked by Mr. Elbert Tan Yao Tin, son of Jose Tan Yao Tin
of CIFC. To show his sincerity, Mr. Ramos signed as surety for Mr. Maniwan
for P2.5MM. Corollary to this, Mr. Ramos applied for a loan with us mortgaging his
house, lot and duplex with an estimated market value of P4.508MM. The branch,
therefore, is not totally negligent as officer to officer bank checking was done. In fact,
it is also for the very same reason that other banks granted DAUD to subject account
and, likewise, the checks returned unpaid, namely:
Solidbank
Allied Bank

P1.8 Million
.8

Page 15 of 40
First Bath of Cases
Far East Bank

2.0

MBTC

5.0

The attached letter of Mr. Ramos dated 19 Nov. 1996 will speak for itself.
Further to this, undersigned conferred with the acting BOH VSYap if these
checks are legitimate 3rd party checks.
On the other hand, Atty. Musni continues to insist that Mr. Maniwan was
gypped by a broker in the total amount of P10.00 Million.
Undersigned accepts full responsibility for committing an error in judgment,
lapses in control and abuse of discretion by relying solely on the word,
assurance, surety and REM of Mr. Edmund Ramos, a friend and a co-bank
officer. I am now ready to face the consequence of my action. 3
In another Letter dated April 8, 1997, the respondent notified Chiong of his intention
to resign from the petitioner Bank and apologized "for all the trouble I have caused
because of the Maniwan case."4 The respondent, however, vehemently denied
benefiting therefrom. In his Letter dated April 30, 1997, the respondent formally
tendered his irrevocable resignation effective May 31, 1997. 5
In the Memorandum dated May 23, 1997 addressed to the respondent, Nancy D.
Yang, the petitioner Banks Senior Vice-President and Head-Branch Banking Group,
informed the former that his approval of the DAUD/BP accommodations in favor of
Maniwan without authority and/or approval of higher management violated the
petitioner Banks Code of Ethics. As such, he was directed to restitute the amount
of P1,507,736.79 representing 90% of the total loss of P1,675,263.10 incurred by the
petitioner Bank. However, in view of his resignation and considering the years of
service in the petitioner Bank, the management earmarked only P836,637.08 from
the respondents total separation benefits or pay. The memorandum addressed to the
respondent stated:
After a careful review and evaluation of the facts surrounding the above
case, the following have been conclusively established:
1. The branch granted various BP/DAUD accommodations to clients Joel
Maniwan/Edmundo Ramos in excess of approved lines through the following

out-of-town checks which were returned for the reason "Payment

Stopped/Account Closed":
1. PCIB Cebu Check No. 86256 P251,816.00
2. PCIB Cebu Check No. 86261 235,880.00
3. PCIB Cebu Check No. 8215 241,443.00
4. UCPB Tagbilaran Check No. 277,630.00
5. PCIB Bogo, Cebu Check No. 6117 267,418.00
6. UCPB Tagbilaran Check No. 216070 197,467.00
7. UCPB Tagbilaran Check No. 216073 263,920.00
8. PCIB Bogo, Cebu Check No. 6129 253,528.00
9. PCIB Bogo, Cebu Check No. 6122 198,615.00
10. PCIB Bogo, Cebu Check No. 6134 253,658.00
2. The foregoing checks were accommodated through your approval which
was in excess of your authority.
3. The branch failed to follow the fundamental and basic procedures in
handling BP/DAUD accommodations which made the accommodations
basically flawed.
4. The accommodations were attended by lapses in control consisting of
failure to report the exception and failure to cover the account of Joel
Maniwan with the required Credit Line Agreement.
Since the foregoing were established by your own admissions in your letter
explanation dated 5 December 1996, and the Audit Report and findings of the Region
Head, Management finds your actions in violation of the Banks Code of Ethics:
Table 6.2., no. 1: Compliance with Standard Operating Procedures
- "Infraction of Bank procedures in handling any bank transactions or
work assignment which results in a loss or probable loss."
Table 6.3., no. 6: Proper Conduct and Behavior "Willful misconduct in the performance of duty whether or not the
bank suffers a loss," and/or

Page 16 of 40
First Bath of Cases
Table 6.5., no. 1: Work Responsibilities "Dereliction of duty whether or not the Bank suffers a loss," and/or
Table 6.6., no. 2: Authority and Subordination "Failure to carry out lawful orders or instructions of superiors."
Your approval of the accommodations in excess of your authority without
prior authority and/or approval from higher management is a violation of the
above cited Rules.
In view of these, you are directed to restitute the amount of P1,507,736.79
representing 90% of the total loss of P1,675,263.10 incurred by the Bank as
your proportionate share. However, in light of your voluntary separation from
the Bank effective May 31, 1997, in view of the years of service you have
given to the Bank, management shall earmark and segregate only the
amount of P836,637.08 from your total separation benefits/p>ay. The Bank
further directs you to fully assist in the effort to collect from Joel Maniwan and
Edmundo Ramos the sums due to the Bank.6
In the Letter dated May 26, 1997 addressed to the respondent, Remedios
Cruz, petitioner Banks Vice-President of the Human Resources Division,
again informed him that the management would withhold the sum
of P836,637.08 from his separation pay, mid-year bonus and profit sharing.
The amount withheld represented his proportionate share in the
accountability vis--vis the DAUD/BP accommodations in favor of Maniwan.
The said amount would be released upon recovery of the sums demanded
from Maniwan in Civil Case No. 97174 filed against him by the petitioner
Bank with the Regional Trial Court in Cagayan de Oro City.
Consequently, the respondent, through counsel, made a demand on the
petitioner Bank for the payment of his separation pay and other benefits. The
petitioner Bank maintained its position to withhold the sum ofP836,637.08.
Thus, the respondent filed with the National Labor Relations Commission
(NLRC), Regional Arbitration Branch No. 10, in Cagayan de Oro City, the
complaint for payment of separation pay, mid-year bonus, profit share and
damages against the petitioner Bank.

The parties submitted their respective position papers to the Labor Arbiter.
Thereafter, the respondent filed a motion to set case for trial or hearing.
Acting thereon, the Labor Arbiter, in the Order dated January 29, 1999,
denied the same stating that:
... This Branch views that if complainant finds the necessity to
controvert the allegations in the respondents pleadings, then he may
file a supplemental position paper and adduce thereto evidence and
additional supporting documents, the soonest possible time. All the
evidence will be evaluated by the Branch to determine whether or
not a clarificatory hearing shall be conducted.7
On February 26, 1999, the Labor Arbiter issued another Order submitting the
case for resolution upon finding that he could judiciously pass on the merits
without the necessity of further hearing.
On even date, the Labor Arbiter promulgated the Decision 8 dismissing the
respondents complaint. According to the Labor Arbiter, the respondent, an
officer of the petitioner Bank, had committed a serious infraction when, in
blatant violation of the banks standard operating procedures and policies, he
approved the DAUD/BP accommodations in favor of Maniwan without
authorization by senior management. Even the respondent himself had
admitted this breach in the letters that he wrote to the senior officers of the
petitioner Bank.
The Labor Arbiter, likewise, made the finding that the respondent offered to
assign or convey a property that he owned to the petitioner Bank as well as
proposed the withholding of the benefits due him to answer for the losses
that the petitioner Bank incurred on account of unauthorized DAUD/BP
accommodations. But even if the respondent had not given his consent, the
Labor Arbiter held that the petitioner Banks act of withholding the benefits
due the respondent was justified under its Code of Ethics. The respondent,
as an officer of the petitioner Bank, was bound by the provisions of the said
Code.
Aggrieved, the respondent appealed to the National Labor Relations
Commission. After the parties had filed their respective memoranda, the
NLRC, in the Decision dated October 20, 1999, dismissed the appeal as it
affirmed in toto the findings and conclusions of the Labor Arbiter. The NLRC

Page 17 of 40
First Bath of Cases
preliminarily ruled that the Labor Arbiter committed no grave abuse of
discretion when he decided the case on the basis of the position papers
submitted by the parties. On the merits, the NLRC, like the Labor Arbiter,
gave credence to the petitioner Banks allegation that the respondent offered
to pledge his property to the bank and proposed the withholding of his
benefits in acknowledgment of the serious infraction he committed against
the bank. Further, the NLRC concurred with the Labor Arbiter that the
petitioner Bank was justified in withholding the benefits due the respondent.
Being a responsible bank officer, the respondent ought to know that, based
on the petitioner Banks Code of Ethics, restitution may be imposed on erring
employees apart from any other penalty for acts resulting in loss or damage
to the bank. The decretal portion of the NLRC decision reads:
WHEREFORE, the decision of the Labor Arbiter is Affirmed. The
appeal is Dismissed for lack of merit.
SO ORDERED.9
The respondent moved for a reconsideration of the said decision but the
NLRC, in the Resolution of December 20, 1999, denied his motion.
The respondent then filed a petition for certiorari with the Court of Appeals
alleging that the NLRC committed grave abuse of discretion when it affirmed
the findings and conclusions of the Labor Arbiter. He vehemently denied
having offered to pledge his property to the bank or proposed the withholding
of his separation pay and other benefits. Further, he argued that the
petitioner Bank deprived him of his right to due process because it
unilaterally imposed the penalty of restitution on him. The DAUD/BP
accommodations in favor of Maniwan allegedly could not be considered as a
"loss" to the bank as the amounts may still be recovered. The respondent,
likewise, maintained that the Labor Arbiter should not have decided the case
on the basis of the parties position papers but should have conducted a fullblown hearing thereon.
On July 19, 2002, the CA rendered the Decision 10 now being assailed by the
petitioner Bank. The CA found merit in the respondents contention that he
was deprived of his right to due process by the petitioner Bank as no
administrative investigation was conducted by it prior to its act of withholding
the respondents separation pay and other benefits. The respondent was not

informed of any charge against him in connection with the Maniwan

DAUD/BP accommodations nor afforded the right to a hearing or to defend
himself before the penalty of restitution was imposed on him. This, according
to the appellate court, was contrary not only to the fundamental principle of
due process but to the petitioner Banks Code of Ethics as well.
The CA further held that the Labor Arbiter, likewise, failed to afford the
respondent due process when it denied his motion to set case for trial or
hearing. While the authority of the Labor Arbiter to decide a case based on
the parties position papers and documents is indubitable, the CA opined that
factual issues attendant to the case, including whether or not the respondent
proposed the withholding of his benefits or pledged the same to the petitioner
Bank, necessitated the conduct of a full-blown trial. The appellate court
explained that:
Procedural due process, as must be remembered, has two main
concerns, the prevention of unjustified or mistaken deprivation and
the promotion of participation and dialogue by affected individuals in
the decision-making process. Truly, the magnitude of the case and
the withholding of Borromeos property as well as the willingness of
the parties to conciliate, make a hearing imperative. As manifested
by the bank, it did not contest Borromeos motion for hearing or trial
inasmuch as the bank itself wanted to fully ventilate its side. 11
Accordingly, the CA set aside the decision of the NLRC and ordered that the
records of the case be remanded to the Labor Arbiter for further hearings on
the factual issues involved.
The petitioner Bank filed a motion for reconsideration of the said decision but
the CA, in the assailed Resolution of January 6, 2003, denied the same as it
found no compelling ground to warrant reconsideration. 12 Hence, its recourse
to this Court alleging that the assailed CA decision is contrary to law and
jurisprudence in that:
I.
THE FACTUAL FINDINGS OF THE LABOR ARBITER AS
AFFIRMED BY THE NATIONAL LABOR RELATIONS COMMISSION
ARE SUPPORTED BY SUBSTANTIAL EVIDENCE AND SHOULD
HAVE BEEN ACCORDED RESPECT AND FINALITY BY THE

Page 18 of 40
First Bath of Cases
COURT OF APPEALS IN ACCORDANCE WITH GOVERNING
JURISPRUDENCE.
II.
AT ALL TIMES, THE LABOR ARBITER ACTED IN ACCORDANCE
WITH THE REQUIREMENTS OF DUE PROCESS IN THE
PROCEEDINGS A QUO.
III.
THERE WAS NO VIOLATION BY PETITIONER BANK OF
RESPONDENTS RIGHT TO DUE PROCESS AS NO
ADMINISTRATIVE INVESTIGATION WAS NEEDED TO BE
CONDUCTED ON HIS ADMITTED MISCONDUCT.13
The petitioner Bank posits that the sole factual issue that remained in dispute
was whether the respondent pledged his benefits as guarantee for the losses
the bank incurred resulting from the unauthorized DAUD/BP
accommodations in favor of Maniwan. On this issue, both the Labor Arbiter
and the NLRC found that the respondent had indeed pledged his benefits to
the bank. According to the petitioner Bank, this factual finding should have
been accorded respect by the CA as the same is supported by the evidence
on record. By ordering the remand of the case to the Labor Arbiter, the CA
allegedly unjustifiably analyzed and weighed all over again the evidence
presented.
The petitioner Bank insists that the Labor Arbiter acted within his authority
when he denied the respondents motion to set case for hearing or trial and
instead decided the case on the basis of the position papers and evidence
submitted by the parties. Due process simply demands an opportunity to be
heard and the respondent was not denied of this as he was even given the
opportunity to file a supplemental position paper and other supporting
documents, but he did not do so.
The petitioner Bank takes exception to the findings of the appellate court that
the respondent was not afforded the right to a hearing or to defend himself by
the petitioner Bank as it did not conduct an administrative investigation. The
petitioner Bank points out that it was poised to conduct one but was
preempted by the respondents resignation. In any case, respondent himself
in his Letter dated December 5, 1996, in reply to the clarificatory queries of
Chiong, admitted that the DAUD/BP accommodations were granted "without
higher management approval" and that he (the respondent) "accepts full

responsibility for committing an error of judgment, lapses in control and

abuse of discretion ..." Given the respondents admission, the holding of a
formal investigation was no longer necessary.
For his part, the respondent, in his Comment, maintains that the DAUD/BP
accommodations in favor of Maniwan were approved, albeit not expressly, by
the senior management of the petitioner Bank. He cites the regular reports
he made to Chiong, his superior, regarding the DAUD/BP transactions made
by the branch, including that of Maniwan, and Chiong never called his
attention thereto nor stopped or reprimanded him therefor. These reports
further showed that he did not conceal these transactions to the
management.
The respondent vehemently denies having offered the withholding of his
benefits or pledged the same to the petitioner Bank. The findings of the
Labor Arbiter and the NLRC that what he did are allegedly not supported by
the evidence on record.
The respondent is of the view that restitution is not proper because the
petitioner Bank has not, as yet, incurred any actual loss as the amount owed
by Maniwan may still be recovered from him. In fact, the petitioner Bank had
already instituted a civil case against Maniwan for the recovery of the sum
and the RTC rendered judgment in the petitioner Banks favor. The case is
still pending appeal. In any case, the respondent argues that the petitioner
Bank could not properly impose the accessory penalty of restitution on him
without imposing the principal penalty of "Written Reprimand/Suspension" as
provided under its Code of Ethics. He, likewise, vigorously avers that, in
contravention of its own Code of Ethics, he was denied due process by the
petitioner Bank as it did not conduct any administrative investigation relative
to the unauthorized DAUD/BP accommodations. He was not informed in
writing of any charge against him nor was he given the opportunity to defend
himself.
The petition is meritorious.
The Court shall first resolve the procedural issue raised in the petition, i.e., whether
the CA erred in remanding the case to the Labor Arbiter. The Court rules in the
affirmative. It is settled that administrative bodies like the NLRC, including the Labor
Arbiter, are not bound by the technical niceties of the law and procedure and the

Page 19 of 40
First Bath of Cases
rules obtaining in courts of law.14 Rules of evidence are not strictly observed in
proceedings before administrative bodies like the NLRC, where decisions may be
reached on the basis of position papers.15 The holding of a formal hearing or trial is
discretionary with the Labor Arbiter and is something that the parties cannot demand
as a matter of right.16 As a corollary, trial-type hearings are not even required as the
cases may be decided based on verified position papers, with supporting documents
and their affidavits.17
Hence, the Labor Arbiter acted well within his authority when he issued the Order
dated February 26, 1999 submitting the case for resolution upon finding that he could
judiciously pass on the merits without the necessity of further hearing. On the other
hand, the assailed CA decisions directive requiring him to conduct further hearings
constitutes undue interference with the Labor Arbiters discretion. Moreover, to
require the conduct of hearings would be to negate the rationale and purpose of the
summary nature of the proceedings mandated by the Rules and to make mandatory
the application of the technical rules of evidence. 18 The appellate court, therefore,
committed reversible error in ordering the remand of the case to the Labor Arbiter for
further hearings.
Before delving on the merits of the case, it is well to remember that factual findings of
the NLRC affirming those of the Labor Arbiter, both bodies being deemed to have
acquired expertise in matters within their jurisdiction, when sufficiently supported by
evidence on record, are accorded respect, if not finality, and are considered binding
on this Court.19 As long as their decisions are devoid of any arbitrariness in the
process of their deduction from the evidence proffered by the parties, all that is left is
for the Court to stamp its affirmation.20
In this case, the factual findings of the Labor Arbiter and those of the NLRC concur
on the following material points: the respondent was a responsible officer of the
petitioner Bank; by his own admission, he granted DAUD/BP accommodations in
excess of the authority given to him and in violation of the banks standard operating
procedures; the petitioner Banks Code of Ethics provides that restitution/forfeiture of
benefits may be imposed on the employees for, inter alia, infraction of the banks
standard operating procedures; and, the respondent resigned from the petitioner
Bank on May 31, 1998. These factual findings are amply supported by the evidence
on record.
Indeed, it had been indubitably shown that the respondent admitted that he
violated the petitioner Banks standard operating procedures in granting the

DAUD/BP accommodations in favor of Maniwan without higher management

approval. The respondents replies to the clarificatory questions propounded
to him by way of the Memorandum dated November 19, 1996 were
particularly significant. When the respondent was asked whether efforts were
made to establish the identity and/or legitimacy of the drawers of the checks
before the DAUD/BP accommodations were allowed, 21 he replied in the
negative.22 To the query "did the branch follow and comply with operating
procedure which require that all checks accommodated for DAUD/BP should
be previously verified with the drawee bank and history, if not outright
balances, determined if enough to cover the checks?" 23 again, the
respondent answered "no."24 When asked under whose authority the excess
DAUD/BP accommodations were granted,25 the respondent expressly stated
that they were "approved by undersigned (referring to himself)" and that the
excess accommodation was granted "without higher management
approval."26 More telling, however, is the respondents statement that he
"accepts full responsibility for committing an error in judgment, lapses in
control and abuse of discretion by relying solely on the word, assurance,
surety and REM of Mr. Edmundo Ramos." 27 The respondent added that he
was "ready to face the consequence of [his] action." 28
The foregoing sufficiently establish that the respondent, by his own
admissions, had violated the petitioner Banks standard operating
procedures. Among others, the petitioner Banks Code of Ethics provides:
Table 6.2 COMPLIANCE WITH STANDARD OPERATING PROCEDURES
PENALTIES

VIOLATIONS

1st

Written
Infraction of Bank procedures in handling Reprimand/
any Bank transaction or work assignment Suspension
which results in a loss or probable loss

With restitution, if warranted.

Further, the said Code states that:

2nd

3rd

Suspensi
on/
Dismissal

Dismis
sal*

4th

Page 20 of 40
First Bath of Cases
7.2.5. Restitution/Forfeiture of Benefits
Restitution may be imposed independently or together with any other penalty in case
of loss or damage to the property of the Bank, its employees, clients or other parties
doing business with the Bank. The Bank may recover the amount involved by means
of salary deduction or whatever legal means that will prompt offenders to pay the
amount involved. But restitution shall in no way mitigate the penalties attached to the
violation or infraction.
Forfeiture of benefits/p>rivileges may also be effected in cases where infractions or
violations were incurred in connection with or arising from the application/availment
thereof.
It is well recognized that company policies and regulations are, unless shown to be
grossly oppressive or contrary to law, generally binding and valid on the parties and
must be complied with until finally revised or amended unilaterally or preferably
through negotiation or by competent authority.29 Moreover, management has the
prerogative to discipline its employees and to impose appropriate penalties on erring
workers pursuant to company rules and regulations. 30 With more reason should these
truisms apply to the respondent, who, by reason of his position, was required to act
judiciously and to exercise his authority in harmony with company policies. 31
Contrary to the respondents contention that the petitioner Bank could not properly
impose the accessory penalty of restitution on him without imposing the principal
penalty of "Written Reprimand/Suspension," the latters Code of Ethics expressly
sanctions the imposition of restitution/forfeiture of benefits apart from or independent
of the other penalties. Obviously, in view of his voluntary separation from the
petitioner Bank, the imposition of the penalty of reprimand or suspension would be
futile. The petitioner Bank was left with no other recourse but to impose the ancillary
penalty of restitution. It was certainly within the petitioner Banks prerogative to
impose on the respondent what it considered the appropriate penalty under the
circumstances pursuant to its company rules and regulations.
Anent the issue that the respondents right to due process was violated by the
petitioner Bank since no administrative investigation was conducted prior to the
withholding of his separation benefits, the Court rules that, under the circumstances
obtaining in this case, no formal administrative investigation was necessary. Due
process simply demands an opportunity to be heard and this opportunity was not
denied the respondent.32

Prior to the respondents resignation, he was furnished with the Memorandum 33 dated
November 19, 1996 in which several clarificatory questions were propounded to him
regarding the DAUD/BP accommodations in favor of Maniwan. Among others, the
respondent was asked whether the banks standard operating procedures were
complied with and under whose authority the accommodations were granted. From
the tenor thereof, it could be reasonably gleaned that the said memorandum
constituted notice of the charge against the respondent.
Replying to the queries, the respondent, in his Letter 34 dated December 5, 1996,
admitted, inter alia, that he approved the DAUD/BP accommodations in favor of
Maniwan and the amount in excess of the credit limit ofP500,000 was approved by
him without higher management approval. The respondent, likewise, admitted noncompliance with the banks standard operating procedures, specifically, that which
required that all checks accommodated for DAUD/BP be previously verified with the
drawee bank and history, if not outright balances determined if enough to cover the
checks. In the same letter, the respondent expressed that he "accepts full
responsibility for committing an error in judgment, lapses in control and abuse of
discretion" and that he is "ready to face the consequence of his action."
Contrary to his protestations, the respondent was given the opportunity to be heard
and considering his admissions, it became unnecessary to hold any formal
investigation.35 More particularly, it became unnecessary for the petitioner Bank to
conduct an investigation on whether the respondent had committed an "[I]nfraction of
Bank procedures in handling any Bank transaction or work assignment which results
in a loss or probable loss" because the respondent already admitted the same. All
that was needed was to inform him of the findings of the management 36 and this was
done by way of the Memorandum 37 dated May 23, 1997 addressed to the
respondent. His claim of denial of due process must perforce fail.
Significantly, the respondent is not wholly deprived of his separation benefits. As the
Labor Arbiter stressed in his decision, "the separation benefits due the complainant
(the respondent herein) were merely withheld." 38 The NLRC made the same
conclusion and was even more explicit as it opined that the respondent "is entitled to
the benefits he claimed in pursuance to the Collective Bargaining Agreement but, in
the meantime, such benefits shall be deposited with the bank by way of
pledge."39 Even the petitioner Bank itself gives "the assurance that as soon as the
Bank has satisfied a judgment in Civil Case No. 97174, the earmarked portion of his
benefits will be released without delay."40

Page 21 of 40
First Bath of Cases
It bears stressing that the respondent was not just a rank and file employee. At the
time of his resignation, he was the Assistant Vice- President, Branch Banking Group
for the Mindanao area of the petitioner Bank. His position carried authority for the
exercise of independent judgment and discretion, characteristic of sensitive posts in
corporate hierarchy.41 As such, he was, as earlier intimated, required to act
judiciously and to exercise his authority in harmony with company policies. 42
On the other hand, the petitioner Banks business is essentially imbued with public
interest and owes great fidelity to the public it deals with. 43 It is expected to exercise
the highest degree of diligence in the selection and supervision of their
employees.44 As a corollary, and like all other business enterprises, its prerogative to
discipline its employees and to impose appropriate penalties on erring workers
pursuant to company rules and regulations must be respected. 45 The law, in
protecting the rights of labor, authorized neither oppression nor self-destruction of an
employer company which itself is possessed of rights that must be entitled to
recognition and respect.46
WHEREFORE, the petition is GRANTED. The Decision dated July 19, 2002 of the
Court of Appeals and its Resolution dated January 6, 2003 in CA-G.R. SP No. 57365
are REVERSED AND SET ASIDE. The Resolution dated October 20, 1999 of the
NLRC, affirming the Decision dated February 26, 1999 of the Labor Arbiter,
isREINSTATED.
SO ORDERED.
G.R. No. 78517 February 27, 1989
ALITA vs COURT OF APPEALS

2. Declaring that the four registered co-owners will cultivate and

operate the farmholding themselves as owners thereof; and
3. Ejecting from the land the so-called tenants, namely; Gabino Alita,
Jesus Julian, Sr., Jesus Julian, Jr., Pedro Ricalde, Vicente Ricalde
and Rolando Salamar, as the owners would want to cultivate the
farmholding themselves.
No pronouncement as to costs.
SO ORDERED. (p. 31, Rollo)
The facts are undisputed. The subject matter of the case consists of two (2) parcels
of land, acquired by private respondents' predecessors-in-interest through
homestead patent under the provisions of Commonwealth Act No. 141. Said lands
are situated at Guilinan, Tungawan, Zamboanga del Sur.
Private respondents herein are desirous of personally cultivating these lands, but
petitioners refuse to vacate, relying on the provisions of P.D. 27 and P.D. 316 and
appurtenant regulations issued by the then Ministry of Agrarian Reform (DAR for
short), now Department of Agrarian Reform (MAR for short).
On June 18, 1981, private respondents (then plaintiffs), instituted a complaint against
Hon. Conrado Estrella as then Minister of Agrarian Reform, P.D. Macarambon as
Regional Director of MAR Region IX, and herein petitioners (then defendants) for the
declaration of P.D. 27 and all other Decrees, Letters of Instructions and General
Orders issued in connection therewith as inapplicable to homestead lands.
Defendants filed their answer with special and affirmative defenses of July 8, 1981.

Before us is a petition seeking the reversal of the decision rendered by the

respondent Court of Appeals**on March 3, 1987 affirming the judgment of the court a
quo dated April 29, 1986, the dispositive portion of the trial court's decision reading
as follows;

Subsequently, on July 19, 1982, plaintiffs filed an urgent motion to enjoin the
defendants from declaring the lands in litigation under Operation Land Transfer and
from being issued land transfer certificates to which the defendants filed their
opposition dated August 4, 1982.

WHEREFORE, the decision rendered by this Court on November 5,

1982 is hereby reconsidered and a new judgment is hereby
rendered:

On November 5, 1982, the then Court of Agrarian Relations 16th Regional District,
Branch IV, Pagadian City (now Regional Trial Court, 9th Judicial Region, Branch
XVIII) rendered its decision dismissing the said complaint and the motion to enjoin
the defendants was denied.

1. Declaring that Presidential Decree No. 27 is inapplicable to lands

obtained thru the homestead law,

On January 4, 1983, plaintiffs moved to reconsider the Order of dismissal, to which

defendants filed their opposition on January 10, 1983.

Page 22 of 40
First Bath of Cases
Thus, on April 29, 1986, the Regional Trial Court issued the aforequoted decision
prompting defendants to move for a reconsideration but the same was denied in its
Order dated June 6, 1986.
On appeal to the respondent Court of Appeals, the same was sustained in its
judgment rendered on March 3, 1987, thus:
WHEREFORE, finding no reversible error thereof, the decision
appealed from is hereby AFFIRMED.
SO ORDERED. (p. 34, Rollo)
Hence, the present petition for review on certiorari.
The pivotal issue is whether or not lands obtained through homestead patent are
covered by the Agrarian Reform under P.D. 27.
The question certainly calls for a negative answer.
We agree with the petitioners in saying that P.D. 27 decreeing the emancipation of
tenants from the bondage of the soil and transferring to them ownership of the land
they till is a sweeping social legislation, a remedial measure promulgated pursuant to
the social justice precepts of the Constitution. However, such contention cannot be
invoked to defeat the very purpose of the enactment of the Public Land Act or
Commonwealth Act No. 141. Thus,
The Homestead Act has been enacted for the welfare and protection
of the poor. The law gives a needy citizen a piece of land where he
may build a modest house for himself and family and plant what is
necessary for subsistence and for the satisfaction of life's other
needs. The right of the citizens to their homes and to the things
necessary for their subsistence is as vital as the right to life itself.
They have a right to live with a certain degree of comfort as become
human beings, and the State which looks after the welfare of the
people's happiness is under a duty to safeguard the satisfaction of
this vital right. (Patricio v. Bayog, 112 SCRA 45)

In this regard, the Philippine Constitution likewise respects the superiority of the
homesteaders' rights over the rights of the tenants guaranteed by the Agrarian
Reform statute. In point is Section 6 of Article XIII of the 1987 Philippine Constitution
which provides:
Section 6. The State shall apply the principles of agrarian reform or stewardship,
whenever applicable in accordance with law, in the disposition or utilization of other
natural resources, including lands of public domain under lease or concession
suitable to agriculture, subject to prior rights, homestead rights of small settlers, and
the rights of indigenous communities to their ancestral lands.
Additionally, it is worthy of note that the newly promulgated Comprehensive Agrarian
Reform Law of 1988 or Republic Act No. 6657 likewise contains a proviso supporting
the inapplicability of P.D. 27 to lands covered by homestead patents like those of the
property in question, reading,
Section 6. Retention Limits. ...
... Provided further, That original homestead grantees or their direct compulsory heirs
who still own the original homestead at the time of the approval of this Act shall retain
the same areas as long as they continue to cultivate said homestead.'
WHEREFORE, premises considered, the decision of the respondent Court of
Appeals sustaining the decision of the Regional Trial Court is hereby AFFIRMED.
SO ORDERED.
G.R. No. 78742 July 14, 1989
ASSOCIATION OF SMALL LAND OWNERS OF THE PHILS
vs SECRETARY OF AGRARIAN REFORM
In ancient mythology, Antaeus was a terrible giant who blocked and challenged
Hercules for his life on his way to Mycenae after performing his eleventh labor. The
two wrestled mightily and Hercules flung his adversary to the ground thinking him
dead, but Antaeus rose even stronger to resume their struggle. This happened
several times to Hercules' increasing amazement. Finally, as they continued
grappling, it dawned on Hercules that Antaeus was the son of Gaea and could never
die as long as any part of his body was touching his Mother Earth. Thus forewarned,
Hercules then held Antaeus up in the air, beyond the reach of the sustaining soil, and
crushed him to death.

Page 23 of 40
First Bath of Cases
Mother Earth. The sustaining soil. The giver of life, without whose invigorating touch
even the powerful Antaeus weakened and died.
The cases before us are not as fanciful as the foregoing tale. But they also tell of the
elemental forces of life and death, of men and women who, like Antaeus need the
sustaining strength of the precious earth to stay alive.
"Land for the Landless" is a slogan that underscores the acute imbalance in the
distribution of this precious resource among our people. But it is more than a slogan.
Through the brooding centuries, it has become a battle-cry dramatizing the
increasingly urgent demand of the dispossessed among us for a plot of earth as their
place in the sun.
Recognizing this need, the Constitution in 1935 mandated the policy of social justice
to "insure the well-being and economic security of all the people," 1 especially the
less privileged. In 1973, the new Constitution affirmed this goal adding specifically
that "the State shall regulate the acquisition, ownership, use, enjoyment and
disposition of private property and equitably diffuse property ownership and
profits." 2 Significantly, there was also the specific injunction to "formulate and
implement an agrarian reform program aimed at emancipating the tenant from the
bondage of the soil." 3
The Constitution of 1987 was not to be outdone. Besides echoing these sentiments, it
also adopted one whole and separate Article XIII on Social Justice and Human
Rights, containing grandiose but undoubtedly sincere provisions for the uplift of the
common people. These include a call in the following words for the adoption by the
State of an agrarian reform program:
SEC. 4. The State shall, by law, undertake an agrarian reform
program founded on the right of farmers and regular farmworkers,
who are landless, to own directly or collectively the lands they till or,
in the case of other farmworkers, to receive a just share of the fruits
thereof. To this end, the State shall encourage and undertake the just
distribution of all agricultural lands, subject to such priorities and
reasonable retention limits as the Congress may prescribe, taking
into account ecological, developmental, or equity considerations and
subject to the payment of just compensation. In determining retention
limits, the State shall respect the right of small landowners. The State
shall further provide incentives for voluntary land-sharing.

Earlier, in fact, R.A. No. 3844, otherwise known as the Agricultural Land Reform
Code, had already been enacted by the Congress of the Philippines on August 8,
1963, in line with the above-stated principles. This was substantially superseded
almost a decade later by P.D. No. 27, which was promulgated on October 21, 1972,
along with martial law, to provide for the compulsory acquisition of private lands for
distribution among tenant-farmers and to specify maximum retention limits for
landowners.
The people power revolution of 1986 did not change and indeed even energized the
thrust for agrarian reform. Thus, on July 17, 1987, President Corazon C. Aquino
issued E.O. No. 228, declaring full land ownership in favor of the beneficiaries of P.D.
No. 27 and providing for the valuation of still unvalued lands covered by the decree
as well as the manner of their payment. This was followed on July 22, 1987 by
Presidential Proclamation No. 131, instituting a comprehensive agrarian reform
program (CARP), and E.O. No. 229, providing the mechanics for its implementation.
Subsequently, with its formal organization, the revived Congress of the Philippines
took over legislative power from the President and started its own deliberations,
including extensive public hearings, on the improvement of the interests of farmers.
The result, after almost a year of spirited debate, was the enactment of R.A. No.
6657, otherwise known as the Comprehensive Agrarian Reform Law of 1988, which
President Aquino signed on June 10, 1988. This law, while considerably changing the
earlier mentioned enactments, nevertheless gives them suppletory effect insofar as
they are not inconsistent with its provisions. 4
The above-captioned cases have been consolidated because they involve common
legal questions, including serious challenges to the constitutionality of the several
measures mentioned above. They will be the subject of one common discussion and
resolution, The different antecedents of each case will require separate treatment,
however, and will first be explained hereunder.
G.R. No. 79777
Squarely raised in this petition is the constitutionality of P.D. No. 27, E.O. Nos. 228
and 229, and R.A. No. 6657.
The subjects of this petition are a 9-hectare riceland worked by four tenants and
owned by petitioner Nicolas Manaay and his wife and a 5-hectare riceland worked by
four tenants and owned by petitioner Augustin Hermano, Jr. The tenants were

Page 24 of 40
First Bath of Cases
declared full owners of these lands by E.O. No. 228 as qualified farmers under P.D.
No. 27.
The petitioners are questioning P.D. No. 27 and E.O. Nos. 228 and 229 on grounds
inter alia of separation of powers, due process, equal protection and the
constitutional limitation that no private property shall be taken for public use without
just compensation.
They contend that President Aquino usurped legislative power when she promulgated
E.O. No. 228. The said measure is invalid also for violation of Article XIII, Section 4,
of the Constitution, for failure to provide for retention limits for small landowners.
Moreover, it does not conform to Article VI, Section 25(4) and the other requisites of a
valid appropriation.
In connection with the determination of just compensation, the petitioners argue that
the same may be made only by a court of justice and not by the President of the
Philippines. They invoke the recent cases of EPZA v. Dulay 5and Manotok v. National
Food Authority. 6 Moreover, the just compensation contemplated by the Bill of Rights
is payable in money or in cash and not in the form of bonds or other things of value.
In considering the rentals as advance payment on the land, the executive order also
deprives the petitioners of their property rights as protected by due process. The
equal protection clause is also violated because the order places the burden of
solving the agrarian problems on the owners only of agricultural lands. No similar
obligation is imposed on the owners of other properties.
The petitioners also maintain that in declaring the beneficiaries under P.D. No. 27 to
be the owners of the lands occupied by them, E.O. No. 228 ignored judicial
prerogatives and so violated due process. Worse, the measure would not solve the
agrarian problem because even the small farmers are deprived of their lands and the
retention rights guaranteed by the Constitution.
In his Comment, the Solicitor General stresses that P.D. No. 27 has already been
upheld in the earlier cases ofChavez v. Zobel, 7 Gonzales v. Estrella, 8 and
Association of Rice and Corn Producers of the Philippines, Inc. v. The National Land
Reform Council. 9 The determination of just compensation by the executive
authorities conformably to the formula prescribed under the questioned order is at
best initial or preliminary only. It does not foreclose judicial intervention whenever
sought or warranted. At any rate, the challenge to the order is premature because no

valuation of their property has as yet been made by the Department of Agrarian
Reform. The petitioners are also not proper parties because the lands owned by
them do not exceed the maximum retention limit of 7 hectares.
Replying, the petitioners insist they are proper parties because P.D. No. 27 does not
provide for retention limits on tenanted lands and that in any event their petition is a
class suit brought in behalf of landowners with landholdings below 24 hectares. They
maintain that the determination of just compensation by the administrative authorities
is a final ascertainment. As for the cases invoked by the public respondent, the
constitutionality of P.D. No. 27 was merely assumed in Chavez, while what was
decided in Gonzales was the validity of the imposition of martial law.
In the amended petition dated November 22, 1588, it is contended that P.D. No. 27,
E.O. Nos. 228 and 229 (except Sections 20 and 21) have been impliedly repealed by
R.A. No. 6657. Nevertheless, this statute should itself also be declared
unconstitutional because it suffers from substantially the same infirmities as the
earlier measures.
A petition for intervention was filed with leave of court on June 1, 1988 by Vicente
Cruz, owner of a 1. 83- hectare land, who complained that the DAR was insisting on
the implementation of P.D. No. 27 and E.O. No. 228 despite a compromise
agreement he had reached with his tenant on the payment of rentals. In a
subsequent motion dated April 10, 1989, he adopted the allegations in the basic
amended petition that the above- mentioned enactments have been impliedly
repealed by R.A. No. 6657.
G.R. No. 79310
The petitioners herein are landowners and sugar planters in the Victorias Mill District,
Victorias, Negros Occidental. Co-petitioner Planters' Committee, Inc. is an
organization composed of 1,400 planter-members. This petition seeks to prohibit the
implementation of Proc. No. 131 and E.O. No. 229.
The petitioners claim that the power to provide for a Comprehensive Agrarian Reform
Program as decreed by the Constitution belongs to Congress and not the President.
Although they agree that the President could exercise legislative power until the
Congress was convened, she could do so only to enact emergency measures during
the transition period. At that, even assuming that the interim legislative power of the
President was properly exercised, Proc. No. 131 and E.O. No. 229 would still have to

Page 25 of 40
First Bath of Cases
be annulled for violating the constitutional provisions on just compensation, due
process, and equal protection.

sugar planters all over the country. On September 10, 1987, another motion for
intervention was filed, this time by Manuel Barcelona, et al., representing coconut
and riceland owners. Both motions were granted by the Court.

They also argue that under Section 2 of Proc. No. 131 which provides:
Agrarian Reform Fund.-There is hereby created a special fund, to be known as the
Agrarian Reform Fund, an initial amount of FIFTY BILLION PESOS
(P50,000,000,000.00) to cover the estimated cost of the Comprehensive Agrarian
Reform Program from 1987 to 1992 which shall be sourced from the receipts of the
sale of the assets of the Asset Privatization Trust and Receipts of sale of ill-gotten
wealth received through the Presidential Commission on Good Government and such
other sources as government may deem appropriate. The amounts collected and
accruing to this special fund shall be considered automatically appropriated for the
purpose authorized in this Proclamation the amount appropriated is in futuro, not in
esse. The money needed to cover the cost of the contemplated expropriation has yet
to be raised and cannot be appropriated at this time.
Furthermore, they contend that taking must be simultaneous with payment of just
compensation as it is traditionally understood, i.e., with money and in full, but no such
payment is contemplated in Section 5 of the E.O. No. 229. On the contrary, Section
6, thereof provides that the Land Bank of the Philippines "shall compensate the
landowner in an amount to be established by the government, which shall be based
on the owner's declaration of current fair market value as provided in Section 4
hereof, but subject to certain controls to be defined and promulgated by the
Presidential Agrarian Reform Council." This compensation may not be paid fully in
money but in any of several modes that may consist of part cash and part bond, with
interest, maturing periodically, or direct payment in cash or bond as may be mutually
agreed upon by the beneficiary and the landowner or as may be prescribed or
approved by the PARC.
The petitioners also argue that in the issuance of the two measures, no effort was
made to make a careful study of the sugar planters' situation. There is no tenancy
problem in the sugar areas that can justify the application of the CARP to them. To
the extent that the sugar planters have been lumped in the same legislation with
other farmers, although they are a separate group with problems exclusively their
own, their right to equal protection has been violated.
A motion for intervention was filed on August 27,1987 by the National Federation of
Sugarcane Planters (NASP) which claims a membership of at least 20,000 individual

NASP alleges that President Aquino had no authority to fund the Agrarian Reform
Program and that, in any event, the appropriation is invalid because of uncertainty in
the amount appropriated. Section 2 of Proc. No. 131 and Sections 20 and 21 of E.O.
No. 229 provide for an initial appropriation of fifty billion pesos and thus specifies the
minimum rather than the maximum authorized amount. This is not allowed.
Furthermore, the stated initial amount has not been certified to by the National
Treasurer as actually available.
Two additional arguments are made by Barcelona, to wit, the failure to establish by
clear and convincing evidence the necessity for the exercise of the powers of
eminent domain, and the violation of the fundamental right to own property.
The petitioners also decry the penalty for non-registration of the lands, which is the
expropriation of the said land for an amount equal to the government assessor's
valuation of the land for tax purposes. On the other hand, if the landowner declares
his own valuation he is unjustly required to immediately pay the corresponding taxes
on the land, in violation of the uniformity rule.
In his consolidated Comment, the Solicitor General first invokes the presumption of
constitutionality in favor of Proc. No. 131 and E.O. No. 229. He also justifies the
necessity for the expropriation as explained in the "whereas" clauses of the
Proclamation and submits that, contrary to the petitioner's contention, a pilot project
to determine the feasibility of CARP and a general survey on the people's opinion
thereon are not indispensable prerequisites to its promulgation.
On the alleged violation of the equal protection clause, the sugar planters have failed
to show that they belong to a different class and should be differently treated. The
Comment also suggests the possibility of Congress first distributing public agricultural
lands and scheduling the expropriation of private agricultural lands later. From this
viewpoint, the petition for prohibition would be premature.
The public respondent also points out that the constitutional prohibition is against the
payment of public money without the corresponding appropriation. There is no rule
that only money already in existence can be the subject of an appropriation law.
Finally, the earmarking of fifty billion pesos as Agrarian Reform Fund, although

Page 26 of 40
First Bath of Cases
denominated as an initial amount, is actually the maximum sum appropriated. The
word "initial" simply means that additional amounts may be appropriated later when
necessary.

(2) The said executive orders are violative of the constitutional

provision that no private property shall be taken without due process
or just compensation.

On April 11, 1988, Prudencio Serrano, a coconut planter, filed a petition on his own
behalf, assailing the constitutionality of E.O. No. 229. In addition to the arguments
already raised, Serrano contends that the measure is unconstitutional because:

(3) The petitioner is denied the right of maximum retention provided

for under the 1987 Constitution.

(1) Only public lands should be included in the CARP;

(2) E.O. No. 229 embraces more than one subject which is not
expressed in the title;
(3) The power of the President to legislate was terminated on July 2,
1987; and
(4) The appropriation of a P50 billion special fund from the National
Treasury did not originate from the House of Representatives.
G.R. No. 79744
The petitioner alleges that the then Secretary of Department of Agrarian Reform, in
violation of due process and the requirement for just compensation, placed his
landholding under the coverage of Operation Land Transfer. Certificates of Land
Transfer were subsequently issued to the private respondents, who then refused
payment of lease rentals to him.
On September 3, 1986, the petitioner protested the erroneous inclusion of his small
landholding under Operation Land transfer and asked for the recall and cancellation
of the Certificates of Land Transfer in the name of the private respondents. He claims
that on December 24, 1986, his petition was denied without hearing. On February 17,
1987, he filed a motion for reconsideration, which had not been acted upon when
E.O. Nos. 228 and 229 were issued. These orders rendered his motion moot and
academic because they directly effected the transfer of his land to the private
respondents.
The petitioner now argues that:
(1) E.O. Nos. 228 and 229 were invalidly issued by the President of
the Philippines.

The petitioner contends that the issuance of E.0. Nos. 228 and 229 shortly before
Congress convened is anomalous and arbitrary, besides violating the doctrine of
separation of powers. The legislative power granted to the President under the
Transitory Provisions refers only to emergency measures that may be promulgated in
the proper exercise of the police power.
The petitioner also invokes his rights not to be deprived of his property without due
process of law and to the retention of his small parcels of riceholding as guaranteed
under Article XIII, Section 4 of the Constitution. He likewise argues that, besides
denying him just compensation for his land, the provisions of E.O. No. 228 declaring
that:
Lease rentals paid to the landowner by the farmer-beneficiary after
October 21, 1972 shall be considered as advance payment for the
land.
is an unconstitutional taking of a vested property right. It is also his contention that
the inclusion of even small landowners in the program along with other landowners
with lands consisting of seven hectares or more is undemocratic.
In his Comment, the Solicitor General submits that the petition is premature because
the motion for reconsideration filed with the Minister of Agrarian Reform is still
unresolved. As for the validity of the issuance of E.O. Nos. 228 and 229, he argues
that they were enacted pursuant to Section 6, Article XVIII of the Transitory
Provisions of the 1987 Constitution which reads:
The incumbent president shall continue to exercise legislative powers until the first
Congress is convened.
On the issue of just compensation, his position is that when P.D. No. 27 was
promulgated on October 21. 1972, the tenant-farmer of agricultural land was deemed

Page 27 of 40
First Bath of Cases
the owner of the land he was tilling. The leasehold rentals paid after that date should
therefore be considered amortization payments.
In his Reply to the public respondents, the petitioner maintains that the motion he
filed was resolved on December 14, 1987. An appeal to the Office of the President
would be useless with the promulgation of E.O. Nos. 228 and 229, which in effect
sanctioned the validity of the public respondent's acts.
G.R. No. 78742
The petitioners in this case invoke the right of retention granted by P.D. No. 27 to
owners of rice and corn lands not exceeding seven hectares as long as they are
cultivating or intend to cultivate the same. Their respective lands do not exceed the
statutory limit but are occupied by tenants who are actually cultivating such lands.
According to P.D. No. 316, which was promulgated in implementation of P.D. No. 27:
No tenant-farmer in agricultural lands primarily devoted to rice and
corn shall be ejected or removed from his farmholding until such time
as the respective rights of the tenant- farmers and the landowner
shall have been determined in accordance with the rules and
regulations implementing P.D. No. 27.
The petitioners claim they cannot eject their tenants and so are unable to enjoy their
right of retention because the Department of Agrarian Reform has so far not issued
the implementing rules required under the above-quoted decree. They therefore ask
the Court for a writ of mandamus to compel the respondent to issue the said rules.
In his Comment, the public respondent argues that P.D. No. 27 has been amended
by LOI 474 removing any right of retention from persons who own other agricultural
lands of more than 7 hectares in aggregate area or lands used for residential,
commercial, industrial or other purposes from which they derive adequate income for
their family. And even assuming that the petitioners do not fall under its terms, the
regulations implementing P.D. No. 27 have already been issued, to wit, the
Memorandum dated July 10, 1975 (Interim Guidelines on Retention by Small
Landowners, with an accompanying Retention Guide Table), Memorandum Circular
No. 11 dated April 21, 1978, (Implementation Guidelines of LOI No. 474),
Memorandum Circular No. 18-81 dated December 29,1981 (Clarificatory Guidelines
on Coverage of P.D. No. 27 and Retention by Small Landowners), and DAR

Administrative Order No. 1, series of 1985 (Providing for a Cut-off Date for
Landowners to Apply for Retention and/or to Protest the Coverage of their
Landholdings under Operation Land Transfer pursuant to P.D. No. 27). For failure to
file the corresponding applications for retention under these measures, the petitioners
are now barred from invoking this right.
The public respondent also stresses that the petitioners have prematurely initiated
this case notwithstanding the pendency of their appeal to the President of the
Philippines. Moreover, the issuance of the implementing rules, assuming this has not
yet been done, involves the exercise of discretion which cannot be controlled through
the writ of mandamus. This is especially true if this function is entrusted, as in this
case, to a separate department of the government.
In their Reply, the petitioners insist that the above-cited measures are not applicable
to them because they do not own more than seven hectares of agricultural land.
Moreover, assuming arguendo that the rules were intended to cover them also, the
said measures are nevertheless not in force because they have not been published
as required by law and the ruling of this Court in Tanada v. Tuvera. 10 As for LOI 474,
the same is ineffective for the additional reason that a mere letter of instruction could
not have repealed the presidential decree.
I
Although holding neither purse nor sword and so regarded as the weakest of the
three departments of the government, the judiciary is nonetheless vested with the
power to annul the acts of either the legislative or the executive or of both when not
conformable to the fundamental law. This is the reason for what some quarters call
the doctrine of judicial supremacy. Even so, this power is not lightly assumed or
readily exercised. The doctrine of separation of powers imposes upon the courts a
proper restraint, born of the nature of their functions and of their respect for the other
departments, in striking down the acts of the legislative and the executive as
unconstitutional. The policy, indeed, is a blend of courtesy and caution. To doubt is to
sustain. The theory is that before the act was done or the law was enacted, earnest
studies were made by Congress or the President, or both, to insure that the
Constitution would not be breached.
In addition, the Constitution itself lays down stringent conditions for a declaration of
unconstitutionality, requiring therefor the concurrence of a majority of the members of
the Supreme Court who took part in the deliberations and voted on the issue during
their session en banc. 11 And as established by judge made doctrine, the Court will

Page 28 of 40
First Bath of Cases
assume jurisdiction over a constitutional question only if it is shown that the essential
requisites of a judicial inquiry into such a question are first satisfied. Thus, there must
be an actual case or controversy involving a conflict of legal rights susceptible of
judicial determination, the constitutional question must have been opportunely raised
by the proper party, and the resolution of the question is unavoidably necessary to
the decision of the case itself. 12
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. 13 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, 14 ordinary citizens and taxpayers were
allowed to question the constitutionality of several executive orders issued by
President Quirino although they were invoking 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 this exception in
many other cases. 15
The other above-mentioned requisites have also been met in the present petitions.
In must be stressed that despite the inhibitions pressing upon the Court when
confronted with constitutional issues like the ones now before it, it will not hesitate to
declare a law or act invalid when it is convinced that this must be done. In arriving at
this conclusion, its only criterion will be the Constitution as God and its conscience
give it the light to probe its meaning and discover its purpose. Personal motives and
political considerations are irrelevancies that cannot influence its decision.
Blandishment is as ineffectual as intimidation.
For all the awesome power of the Congress and the Executive, the Court will not
hesitate to "make the hammer fall, and heavily," to use Justice Laurel's pithy
language, where the acts of these departments, or of any public official, betray the
people's will as expressed in the Constitution.

It need only be added, to borrow again the words of Justice Laurel, that
... when the judiciary mediates to allocate constitutional boundaries,
it does not assert any superiority over the other departments; it does
not in reality nullify or invalidate an act of the Legislature, but only
asserts the solemn and sacred obligation assigned to it by the
Constitution to determine conflicting claims of authority under the
Constitution and to establish for the parties in an actual controversy
the rights which that instrument secures and guarantees to them.
This is in truth all that is involved in what is termed "judicial
supremacy" which properly is the power of judicial review under the
Constitution. 16
The cases before us categorically raise constitutional questions that this Court must
categorically resolve. And so we shall.
II
We proceed first to the examination of the preliminary issues before resolving the
more serious challenges to the constitutionality of the several measures involved in
these petitions.
The promulgation of P.D. No. 27 by President Marcos in the exercise of his powers
under martial law has already been sustained in Gonzales v. Estrella and we find no
reason to modify or reverse it on that issue. As for the power of President Aquino to
promulgate Proc. No. 131 and E.O. Nos. 228 and 229, the same was authorized
under Section 6 of the Transitory Provisions of the 1987 Constitution, quoted above.
The said measures were issued by President Aquino before July 27, 1987, when the
Congress of the Philippines was formally convened and took over legislative power
from her. They are not "midnight" enactments intended to pre-empt the legislature
because E.O. No. 228 was issued on July 17, 1987, and the other measures, i.e.,
Proc. No. 131 and E.O. No. 229, were both issued on July 22, 1987. Neither is it
correct to say that these measures ceased to be valid when she lost her legislative
power for, like any statute, they continue to be in force unless modified or repealed by
subsequent law or declared invalid by the courts. A statute does not ipso
facto become inoperative simply because of the dissolution of the legislature that
enacted it. By the same token, President Aquino's loss of legislative power did not
have the effect of invalidating all the measures enacted by her when and as long as
she possessed it.

Page 29 of 40
First Bath of Cases
Significantly, the Congress she is alleged to have undercut has not rejected but in
fact substantially affirmed the challenged measures and has specifically provided that
they shall be suppletory to R.A. No. 6657 whenever not inconsistent with its
provisions. 17 Indeed, some portions of the said measures, like the creation of the
P50 billion fund in Section 2 of Proc. No. 131, and Sections 20 and 21 of E.O. No.
229, have been incorporated by reference in the CARP Law.18
That fund, as earlier noted, is itself being questioned on the ground that it does not
conform to the requirements of a valid appropriation as specified in the Constitution.
Clearly, however, Proc. No. 131 is not an appropriation measure even if it does
provide for the creation of said fund, for that is not its principal purpose. An
appropriation law is one the primary and specific purpose of which is to authorize the
release of public funds from the treasury.19 The creation of the fund is only incidental
to the main objective of the proclamation, which is agrarian reform.
It should follow that the specific constitutional provisions invoked, to wit, Section 24
and Section 25(4) of Article VI, are not applicable. With particular reference to
Section 24, this obviously could not have been complied with for the simple reason
that the House of Representatives, which now has the exclusive power to initiate
appropriation measures, had not yet been convened when the proclamation was
issued. The legislative power was then solely vested in the President of the
Philippines, who embodied, as it were, both houses of Congress.
The argument of some of the petitioners that Proc. No. 131 and E.O. No. 229 should
be invalidated because they do not provide for retention limits as required by Article
XIII, Section 4 of the Constitution is no longer tenable. R.A. No. 6657 does provide
for such limits now in Section 6 of the law, which in fact is one of its most
controversial provisions. This section declares:
Retention Limits. Except as otherwise provided in this Act, no
person may own or retain, directly or indirectly, any public or private
agricultural land, the size of which shall vary according to factors
governing a viable family-sized farm, such as commodity produced,
terrain, infrastructure, and soil fertility as determined by the
Presidential Agrarian Reform Council (PARC) created hereunder, but
in no case shall retention by the landowner exceed five (5) hectares.
Three (3) hectares may be awarded to each child of the landowner,
subject to the following qualifications: (1) that he is at least fifteen
(15) years of age; and (2) that he is actually tilling the land or directly

managing the farm; Provided, That landowners whose lands have

been covered by Presidential Decree No. 27 shall be allowed to keep
the area originally retained by them thereunder, further, That original
homestead grantees or direct compulsory heirs who still own the
original homestead at the time of the approval of this Act shall retain
the same areas as long as they continue to cultivate said
homestead.
The argument that E.O. No. 229 violates the constitutional requirement that a bill
shall have only one subject, to be expressed in its title, deserves only short attention.
It is settled that the title of the bill does not have to be a catalogue of its contents and
will suffice if the matters embodied in the text are relevant to each other and may be
inferred from the title. 20
The Court wryly observes that during the past dictatorship, every presidential
issuance, by whatever name it was called, had the force and effect of law because it
came from President Marcos. Such are the ways of despots. Hence, it is futile to
argue, as the petitioners do in G.R. No. 79744, that LOI 474 could not have repealed
P.D. No. 27 because the former was only a letter of instruction. The important thing is
that it was issued by President Marcos, whose word was law during that time.
But for all their peremptoriness, these issuances from the President Marcos still had
to comply with the requirement for publication as this Court held in Tanada v.
Tuvera. 21 Hence, unless published in the Official Gazette in accordance with Article 2
of the Civil Code, they could not have any force and effect if they were among those
enactments successfully challenged in that case. LOI 474 was published, though, in
the Official Gazette dated November 29,1976.)
Finally, there is the contention of the public respondent in G.R. No. 78742 that the
writ of mandamus cannot issue to compel the performance of a discretionary act,
especially by a specific department of the government. That is true as a general
proposition but is subject to one important qualification. Correctly and categorically
stated, the rule is that mandamus will lie to compel the discharge of the discretionary
duty itself but not to control the discretion to be exercised. In other words, mandamus
can issue to require action only but not specific action.
Whenever a duty is imposed upon a public official and an
unnecessary and unreasonable delay in the exercise of such duty
occurs, if it is a clear duty imposed by law, the courts will intervene

Page 30 of 40
First Bath of Cases
by the extraordinary legal remedy of mandamus to compel action. If
the duty is purely ministerial, the courts will require specific action. If
the duty is purely discretionary, the courts by mandamus will require
action only. For example, if an inferior court, public official, or board
should, for an unreasonable length of time, fail to decide a particular
question to the great detriment of all parties concerned, or a court
should refuse to take jurisdiction of a cause when the law clearly
gave it jurisdiction mandamus will issue, in the first case to require a
decision, and in the second to require that jurisdiction be taken of the
cause. 22
And while it is true that as a rule the writ will not be proper as long as there is still a
plain, speedy and adequate remedy available from the administrative authorities,
resort to the courts may still be permitted if the issue raised is a question of law. 23
III
There are traditional distinctions between the police power and the power of eminent
domain that logically preclude the application of both powers at the same time on the
same subject. In the case of City of Baguio v. NAWASA, 24 for example, where a law
required the transfer of all municipal waterworks systems to the NAWASA in
exchange for its assets of equivalent value, the Court held that the power being
exercised was eminent domain because the property involved was wholesome and
intended for a public use. Property condemned under the police power is noxious or
intended for a noxious purpose, such as a building on the verge of collapse, which
should be demolished for the public safety, or obscene materials, which should be
destroyed in the interest of public morals. The confiscation of such property is not
compensable, unlike the taking of property under the power of expropriation, which
requires the payment of just compensation to the owner.
In the case of Pennsylvania Coal Co. v. Mahon, 25 Justice Holmes laid down the limits
of the police power in a famous aphorism: "The general rule at least is that while
property may be regulated to a certain extent, if regulation goes too far it will be
recognized as a taking." The regulation that went "too far" was a law prohibiting
mining which might cause the subsidence of structures for human habitation
constructed on the land surface. This was resisted by a coal company which had
earlier granted a deed to the land over its mine but reserved all mining rights
thereunder, with the grantee assuming all risks and waiving any damage claim. The
Court held the law could not be sustained without compensating the grantor. Justice
Brandeis filed a lone dissent in which he argued that there was a valid exercise of the
police power. He said:

Every restriction upon the use of property imposed in the exercise of

the police power deprives the owner of some right theretofore
enjoyed, and is, in that sense, an abridgment by the State of rights in
property without making compensation. But restriction imposed to
protect the public health, safety or morals from dangers threatened is
not a taking. The restriction here in question is merely the prohibition
of a noxious use. The property so restricted remains in the
possession of its owner. The state does not appropriate it or make
any use of it. The state merely prevents the owner from making a
use which interferes with paramount rights of the public. Whenever
the use prohibited ceases to be noxious as it may because of
further changes in local or social conditions the restriction will
have to be removed and the owner will again be free to enjoy his
property as heretofore.
Recent trends, however, would indicate not a polarization but a mingling of the police
power and the power of eminent domain, with the latter being used as an implement
of the former like the power of taxation. The employment of the taxing power to
achieve a police purpose has long been accepted. 26 As for the power of
expropriation, Prof. John J. Costonis of the University of Illinois College of Law
(referring to the earlier case of Euclid v. Ambler Realty Co., 272 US 365, which
sustained a zoning law under the police power) makes the following significant
remarks:
Euclid, moreover, was decided in an era when judges located the
Police and eminent domain powers on different planets. Generally
speaking, they viewed eminent domain as encompassing public
acquisition of private property for improvements that would be
available for public use," literally construed. To the police power, on
the other hand, they assigned the less intrusive task of preventing
harmful externalities a point reflected in the Euclid opinion's reliance
on an analogy to nuisance law to bolster its support of zoning. So
long as suppression of a privately authored harm bore a plausible
relation to some legitimate "public purpose," the pertinent measure
need have afforded no compensation whatever. With the progressive
growth of government's involvement in land use, the distance
between the two powers has contracted considerably. Today
government often employs eminent domain interchangeably with or
as a useful complement to the police power-- a trend expressly
approved in the Supreme Court's 1954 decision in Berman v. Parker,

Page 31 of 40
First Bath of Cases
which broadened the reach of eminent domain's "public use" test to
match that of the police power's standard of "public purpose." 27
The Berman case sustained a redevelopment project and the improvement of
blighted areas in the District of Columbia as a proper exercise of the police power. On
the role of eminent domain in the attainment of this purpose, Justice Douglas
declared:
If those who govern the District of Columbia decide that the Nation's
Capital should be beautiful as well as sanitary, there is nothing in the
Fifth Amendment that stands in the way.
Once the object is within the authority of Congress, the right to
realize it through the exercise of eminent domain is clear.
For the power of eminent domain is merely the means to the end.

28

In Penn Central Transportation Co. v. New York City, 29 decided by a 6-3 vote in 1978,
the U.S Supreme Court sustained the respondent's Landmarks Preservation Law
under which the owners of the Grand Central Terminal had not been allowed to
construct a multi-story office building over the Terminal, which had been designated a
historic landmark. Preservation of the landmark was held to be a valid objective of the
police power. The problem, however, was that the owners of the Terminal would be
deprived of the right to use the airspace above it although other landowners in the
area could do so over their respective properties. While insisting that there was here
no taking, the Court nonetheless recognized certain compensatory rights accruing to
Grand Central Terminal which it said would "undoubtedly mitigate" the loss caused by
the regulation. This "fair compensation," as he called it, was explained by Prof.
Costonis in this wise:
In return for retaining the Terminal site in its pristine landmark status, Penn Central
was authorized to transfer to neighboring properties the authorized but unused rights
accruing to the site prior to the Terminal's designation as a landmark the rights
which would have been exhausted by the 59-story building that the city refused to
countenance atop the Terminal. Prevailing bulk restrictions on neighboring sites were
proportionately relaxed, theoretically enabling Penn Central to recoup its losses at
the Terminal site by constructing or selling to others the right to construct larger,
hence more profitable buildings on the transferee sites. 30

The cases before us present no knotty complication insofar as the question of

compensable taking is concerned. To the extent that the measures under challenge
merely prescribe retention limits for landowners, there is an exercise of the police
power for the regulation of private property in accordance with the Constitution. But
where, to carry out such regulation, it becomes necessary to deprive such owners of
whatever lands they may own in excess of the maximum area allowed, there is
definitely a taking under the power of eminent domain for which payment of just
compensation is imperative. The taking contemplated is not a mere limitation of the
use of the land. What is required is the surrender of the title to and the physical
possession of the said excess and all beneficial rights accruing to the owner in favor
of the farmer-beneficiary. This is definitely an exercise not of the police power but of
the power of eminent domain.
Whether as an exercise of the police power or of the power of eminent domain, the
several measures before us are challenged as violative of the due process and equal
protection clauses.
The challenge to Proc. No. 131 and E.O. Nos. 228 and 299 on the ground that no
retention limits are prescribed has already been discussed and dismissed. It is noted
that although they excited many bitter exchanges during the deliberation of the CARP
Law in Congress, the retention limits finally agreed upon are, curiously enough, not
being questioned in these petitions. We therefore do not discuss them here. The
Court will come to the other claimed violations of due process in connection with our
examination of the adequacy of just compensation as required under the power of
expropriation.
The argument of the small farmers that they have been denied equal protection
because of the absence of retention limits has also become academic under Section
6 of R.A. No. 6657. Significantly, they too have not questioned the area of such limits.
There is also the complaint that they should not be made to share the burden of
agrarian reform, an objection also made by the sugar planters on the ground that
they belong to a particular class with particular interests of their own. However, no
evidence has been submitted to the Court that the requisites of a valid classification
have been violated.
Classification has been defined as the grouping of persons or things similar to each
other in certain particulars and different from each other in these same
particulars. 31 To be valid, it must conform to the following requirements: (1) it must be
based on substantial distinctions; (2) it must be germane to the purposes of the law;

Page 32 of 40
First Bath of Cases
(3) it must not be limited to existing conditions only; and (4) it must apply equally to all
the members of the class. 32 The Court finds that all these requisites have been met
by the measures here challenged as arbitrary and discriminatory.
Equal protection simply means that all persons or things similarly situated must be
treated alike both as to the rights conferred and the liabilities imposed. 33 The
petitioners have not shown that they belong to a different class and entitled to a
different treatment. The argument that not only landowners but also owners of other
properties must be made to share the burden of implementing land reform must be
rejected. There is a substantial distinction between these two classes of owners that
is clearly visible except to those who will not see. There is no need to elaborate on
this matter. In any event, the Congress is allowed a wide leeway in providing for a
valid classification. Its decision is accorded recognition and respect by the courts of
justice except only where its discretion is abused to the detriment of the Bill of Rights.
It is worth remarking at this juncture that a statute may be sustained under the police
power only if there is a concurrence of the lawful subject and the lawful method. Put
otherwise, the interests of the public generally as distinguished from those of a
particular class require the interference of the State and, no less important, the
means employed are reasonably necessary for the attainment of the purpose sought
to be achieved and not unduly oppressive upon individuals. 34 As the subject and
purpose of agrarian reform have been laid down by the Constitution itself, we may
say that the first requirement has been satisfied. What remains to be examined is the
validity of the method employed to achieve the constitutional goal.
One of the basic principles of the democratic system is that where the rights of the
individual are concerned, the end does not justify the means. It is not enough that
there be a valid objective; it is also necessary that the means employed to pursue it
be in keeping with the Constitution. Mere expediency will not excuse constitutional
shortcuts. There is no question that not even the strongest moral conviction or the
most urgent public need, subject only to a few notable exceptions, will excuse the
bypassing of an individual's rights. It is no exaggeration to say that a, person invoking
a right guaranteed under Article III of the Constitution is a majority of one even as
against the rest of the nation who would deny him that right.
That right covers the person's life, his liberty and his property under Section 1 of
Article III of the Constitution. With regard to his property, the owner enjoys the added
protection of Section 9, which reaffirms the familiar rule that private property shall not
be taken for public use without just compensation.

This brings us now to the power of eminent domain.

IV
Eminent domain is an inherent power of the State that enables it to forcibly acquire
private lands intended for public use upon payment of just compensation to the
owner. Obviously, there is no need to expropriate where the owner is willing to sell
under terms also acceptable to the purchaser, in which case an ordinary deed of sale
may be agreed upon by the parties. 35 It is only where the owner is unwilling to sell, or
cannot accept the price or other conditions offered by the vendee, that the power of
eminent domain will come into play to assert the paramount authority of the State
over the interests of the property owner. Private rights must then yield to the
irresistible demands of the public interest on the time-honored justification, as in the
case of the police power, that the welfare of the people is the supreme law.
But for all its primacy and urgency, the power of expropriation is by no means
absolute (as indeed no power is absolute). The limitation is found in the constitutional
injunction that "private property shall not be taken for public use without just
compensation" and in the abundant jurisprudence that has evolved from the
interpretation of this principle. Basically, the requirements for a proper exercise of the
power are: (1) public use and (2) just compensation.
Let us dispose first of the argument raised by the petitioners in G.R. No. 79310 that
the State should first distribute public agricultural lands in the pursuit of agrarian
reform instead of immediately disturbing property rights by forcibly acquiring private
agricultural lands. Parenthetically, it is not correct to say that only public agricultural
lands may be covered by the CARP as the Constitution calls for "the just distribution
of all agricultural lands." In any event, the decision to redistribute private agricultural
lands in the manner prescribed by the CARP was made by the legislative and
executive departments in the exercise of their discretion. We are not justified in
reviewing that discretion in the absence of a clear showing that it has been abused.
A becoming courtesy admonishes us to respect the decisions of the political
departments when they decide what is known as the political question. As explained
by Chief Justice Concepcion in the case of Taada v. Cuenco: 36
The term "political question" connotes what it means in ordinary
parlance, namely, a question of policy. It refers to "those questions
which, under the Constitution, are to be decided by the people in
their sovereign capacity; or in regard to which full discretionary

Page 33 of 40
First Bath of Cases
authority has been delegated to the legislative or executive branch of
the government." It is concerned with issues dependent upon the
wisdom, not legality, of a particular measure.
It is true that the concept of the political question has been constricted with the
enlargement of judicial power, which now includes the authority of the courts "to
determine whether or not there has been a grave abuse of discretion amounting to
lack or excess of jurisdiction on the part of any branch or instrumentality of the
Government." 37 Even so, this should not be construed as a license for us to reverse
the other departments simply because their views may not coincide with ours.
The legislature and the executive have been seen fit, in their wisdom, to include in
the CARP the redistribution of private landholdings (even as the distribution of public
agricultural lands is first provided for, while also continuing apace under the Public
Land Act and other cognate laws). The Court sees no justification to interpose its
authority, which we may assert only if we believe that the political decision is not
unwise, but illegal. We do not find it to be so.
In U.S. v. Chandler-Dunbar Water Power Company, 38 it was held:
Congress having determined, as it did by the Act of March 3,1909
that the entire St. Mary's river between the American bank and the
international line, as well as all of the upland north of the present
ship canal, throughout its entire length, was "necessary for the
purpose of navigation of said waters, and the waters connected
therewith," that determination is conclusive in condemnation
proceedings instituted by the United States under that Act, and there
is no room for judicial review of the judgment of Congress ... .
As earlier observed, the requirement for public use has already been settled for us by
the Constitution itself No less than the 1987 Charter calls for agrarian reform, which
is the reason why private agricultural lands are to be taken from their owners, subject
to the prescribed maximum retention limits. The purposes specified in P.D. No. 27,
Proc. No. 131 and R.A. No. 6657 are only an elaboration of the constitutional
injunction that the State adopt the necessary measures "to encourage and undertake
the just distribution of all agricultural lands to enable farmers who are landless to own
directly or collectively the lands they till." That public use, as pronounced by the
fundamental law itself, must be binding on us.

The second requirement, i.e., the payment of just compensation, needs a longer and
more thoughtful examination.
Just compensation is defined as the full and fair equivalent of the property taken from
its owner by the expropriator. 39 It has been repeatedly stressed by this Court that the
measure is not the taker's gain but the owner's loss. 40 The word "just" is used to
intensify the meaning of the word "compensation" to convey the idea that the
equivalent to be rendered for the property to be taken shall be real, substantial, full,
ample. 41
It bears repeating that the measures challenged in these petitions contemplate more
than a mere regulation of the use of private lands under the police power. We deal
here with an actual taking of private agricultural lands that has dispossessed the
owners of their property and deprived them of all its beneficial use and enjoyment, to
entitle them to the just compensation mandated by the Constitution.
As held in Republic of the Philippines v. Castellvi, 42 there is compensable taking
when the following conditions concur: (1) the expropriator must enter a private
property; (2) the entry must be for more than a momentary period; (3) the entry must
be under warrant or color of legal authority; (4) the property must be devoted to
public use or otherwise informally appropriated or injuriously affected; and (5) the
utilization of the property for public use must be in such a way as to oust the owner
and deprive him of beneficial enjoyment of the property. All these requisites are
envisioned in the measures before us.
Where the State itself is the expropriator, it is not necessary for it to make a deposit
upon its taking possession of the condemned property, as "the compensation is a
public charge, the good faith of the public is pledged for its payment, and all the
resources of taxation may be employed in raising the amount." 43 Nevertheless,
Section 16(e) of the CARP Law provides that:
Upon receipt by the landowner of the corresponding payment or, in
case of rejection or no response from the landowner, upon the
deposit with an accessible bank designated by the DAR of the
compensation in cash or in LBP bonds in accordance with this Act,
the DAR shall take immediate possession of the land and shall
request the proper Register of Deeds to issue a Transfer Certificate
of Title (TCT) in the name of the Republic of the Philippines. The

Page 34 of 40
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DAR shall thereafter proceed with the redistribution of the land to the
qualified beneficiaries.
Objection is raised, however, to the manner of fixing the just compensation, which it
is claimed is entrusted to the administrative authorities in violation of judicial
prerogatives. Specific reference is made to Section 16(d), which provides that in case
of the rejection or disregard by the owner of the offer of the government to buy his
land... the DAR shall conduct summary administrative proceedings to
determine the compensation for the land by requiring the landowner,
the LBP and other interested parties to submit evidence as to the just
compensation for the land, within fifteen (15) days from the receipt of
the notice. After the expiration of the above period, the matter is
deemed submitted for decision. The DAR shall decide the case
within thirty (30) days after it is submitted for decision.
To be sure, the determination of just compensation is a function addressed to the
courts of justice and may not be usurped by any other branch or official of the
government. EPZA v. Dulay 44 resolved a challenge to several decrees promulgated
by President Marcos providing that the just compensation for property under
expropriation should be either the assessment of the property by the government or
the sworn valuation thereof by the owner, whichever was lower. In declaring these
decrees unconstitutional, the Court held through Mr. Justice Hugo E. Gutierrez, Jr.:
The method of ascertaining just compensation under the aforecited decrees
constitutes impermissible encroachment on judicial prerogatives. It tends to render
this Court inutile in a matter which under this Constitution is reserved to it for final
determination.
Thus, although in an expropriation proceeding the court technically would still have
the power to determine the just compensation for the property, following the
applicable decrees, its task would be relegated to simply stating the lower value of
the property as declared either by the owner or the assessor. As a necessary
consequence, it would be useless for the court to appoint commissioners under Rule
67 of the Rules of Court. Moreover, the need to satisfy the due process clause in the
taking of private property is seemingly fulfilled since it cannot be said that a judicial
proceeding was not had before the actual taking. However, the strict application of
the decrees during the proceedings would be nothing short of a mere formality or

charade as the court has only to choose between the valuation of the owner and that
of the assessor, and its choice is always limited to the lower of the two. The court
cannot exercise its discretion or independence in determining what is just or fair.
Even a grade school pupil could substitute for the judge insofar as the determination
of constitutional just compensation is concerned.
xxx
In the present petition, we are once again confronted with the same question of
whether the courts under P.D. No. 1533, which contains the same provision on just
compensation as its predecessor decrees, still have the power and authority to
determine just compensation, independent of what is stated by the decree and to this
effect, to appoint commissioners for such purpose.
This time, we answer in the affirmative.
xxx
It is violative of due process to deny the owner the opportunity to
prove that the valuation in the tax documents is unfair or wrong. And
it is repulsive to the basic concepts of justice and fairness to allow
the haphazard work of a minor bureaucrat or clerk to absolutely
prevail over the judgment of a court promulgated only after expert
commissioners have actually viewed the property, after evidence and
arguments pro and con have been presented, and after all factors
and considerations essential to a fair and just determination have
been judiciously evaluated.
A reading of the aforecited Section 16(d) will readily show that it does not suffer from
the arbitrariness that rendered the challenged decrees constitutionally objectionable.
Although the proceedings are described as summary, the landowner and other
interested parties are nevertheless allowed an opportunity to submit evidence on the
real value of the property. But more importantly, the determination of the just
compensation by the DAR is not by any means final and conclusive upon the
landowner or any other interested party, for Section 16(f) clearly provides:
Any party who disagrees with the decision may bring the matter to
the court of proper jurisdiction for final determination of just
compensation.

Page 35 of 40
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The determination made by the DAR is only preliminary unless accepted by all
parties concerned. Otherwise, the courts of justice will still have the right to review
with finality the said determination in the exercise of what is admittedly a judicial
function.

(a) Market interest rates aligned with 91-day treasury bill rates. Ten percent (10%) of
the face value of the bonds shall mature every year from the date of issuance until
the tenth (10th) year: Provided, That should the landowner choose to forego the cash
portion, whether in full or in part, he shall be paid correspondingly in LBP bonds;

The second and more serious objection to the provisions on just compensation is not
as easily resolved.

(b) Transferability and negotiability. Such LBP bonds may be used by the landowner,
his successors-in- interest or his assigns, up to the amount of their face value, for any
of the following:

This refers to Section 18 of the CARP Law providing in full as follows:

SEC. 18. Valuation and Mode of Compensation. The LBP shall compensate the
landowner in such amount as may be agreed upon by the landowner and the DAR
and the LBP, in accordance with the criteria provided for in Sections 16 and 17, and
other pertinent provisions hereof, or as may be finally determined by the court, as the
just compensation for the land.
The compensation shall be paid in one of the following modes, at the option of the
landowner:

(i) Acquisition of land or other real properties of the government, including assets
under the Asset Privatization Program and other assets foreclosed by government
financial institutions in the same province or region where the lands for which the
bonds were paid are situated;
(ii) Acquisition of shares of stock of government-owned or controlled corporations or
shares of stock owned by the government in private corporations;
(iii) Substitution for surety or bail bonds for the provisional release of accused
persons, or for performance bonds;

(1) Cash payment, under the following terms and conditions:

(a) For lands above fifty (50) hectares, insofar as the excess hectarage is concerned
Twenty-five percent (25%) cash, the balance to be paid in government financial
instruments negotiable at any time.
(b) For lands above twenty-four (24) hectares and up to fifty (50) hectares Thirty
percent (30%) cash, the balance to be paid in government financial instruments
negotiable at any time.
(c) For lands twenty-four (24) hectares and below Thirty-five percent (35%) cash,
the balance to be paid in government financial instruments negotiable at any time.
(2) Shares of stock in government-owned or controlled corporations, LBP preferred
shares, physical assets or other qualified investments in accordance with guidelines
set by the PARC;
(3) Tax credits which can be used against any tax liability;
(4) LBP bonds, which shall have the following features:

(iv) Security for loans with any government financial institution, provided the proceeds
of the loans shall be invested in an economic enterprise, preferably in a small and
medium- scale industry, in the same province or region as the land for which the
bonds are paid;
(v) Payment for various taxes and fees to government: Provided, That the use of
these bonds for these purposes will be limited to a certain percentage of the
outstanding balance of the financial instruments; Provided, further, That the PARC
shall determine the percentages mentioned above;
(vi) Payment for tuition fees of the immediate family of the original bondholder in
government universities, colleges, trade schools, and other institutions;
(vii) Payment for fees of the immediate family of the original bondholder in
government hospitals; and
(viii) Such other uses as the PARC may from time to time allow.

Page 36 of 40
First Bath of Cases
The contention of the petitioners in G.R. No. 79777 is that the above provision is
unconstitutional insofar as it requires the owners of the expropriated properties to
accept just compensation therefor in less than money, which is the only medium of
payment allowed. In support of this contention, they cite jurisprudence holding that:
The fundamental rule in expropriation matters is that the owner of the
property expropriated is entitled to a just compensation, which should be
neither more nor less, whenever it is possible to make the assessment, than
the money equivalent of said property. Just compensation has always been
understood to be the just and complete equivalent of the loss which the
owner of the thing expropriated has to suffer by reason of the
expropriation . 45 (Emphasis supplied.)
In J.M. Tuazon Co. v. Land Tenure Administration,

46

The medium of payment of compensation is ready money or cash.

The condemnor cannot compel the owner to accept anything but
money, nor can the owner compel or require the condemnor to pay
him on any other basis than the value of the property in money at the
time and in the manner prescribed by the Constitution and the
statutes. When the power of eminent domain is resorted to, there
must be a standard medium of payment, binding upon both parties,
and the law has fixed that standard as money in cash. 47 (Emphasis
supplied.)
Part cash and deferred payments are not and cannot, in the nature
of things, be regarded as a reliable and constant standard of
compensation. 48

this Court held:

It is well-settled that just compensation means the equivalent for the

value of the property at the time of its taking. Anything beyond that is
more, and anything short of that is less, than just compensation. It
means a fair and full equivalent for the loss sustained, which is the
measure of the indemnity, not whatever gain would accrue to the
expropriating entity. The market value of the land taken is the just
compensation to which the owner of condemned property is entitled,
the market value being that sum of money which a person desirous,
but not compelled to buy, and an owner, willing, but not compelled to
sell, would agree on as a price to be given and received for such
property. (Emphasis supplied.)
In the United States, where much of our jurisprudence on the subject has been
derived, the weight of authority is also to the effect that just compensation for
property expropriated is payable only in money and not otherwise. Thus

"Just compensation" for property taken by condemnation means a

fair equivalent in money, which must be paid at least within a
reasonable time after the taking, and it is not within the power of the
Legislature to substitute for such payment future obligations, bonds,
or other valuable advantage. 49 (Emphasis supplied.)
It cannot be denied from these cases that the traditional medium for the payment of
just compensation is money and no other. And so, conformably, has just
compensation been paid in the past solely in that medium. However, we do not deal
here with the traditional excercise of the power of eminent domain. This is not an
ordinary expropriation where only a specific property of relatively limited area is
sought to be taken by the State from its owner for a specific and perhaps local
purpose.
What we deal with here is a revolutionary kind of expropriation.
The expropriation before us affects all private agricultural lands whenever found and
of whatever kind as long as they are in excess of the maximum retention limits
allowed their owners. This kind of expropriation is intended for the benefit not only of
a particular community or of a small segment of the population but of the entire
Filipino nation, from all levels of our society, from the impoverished farmer to the
land-glutted owner. Its purpose does not cover only the whole territory of this country
but goes beyond in time to the foreseeable future, which it hopes to secure and edify
with the vision and the sacrifice of the present generation of Filipinos. Generations
yet to come are as involved in this program as we are today, although hopefully only

Page 37 of 40
First Bath of Cases
as beneficiaries of a richer and more fulfilling life we will guarantee to them tomorrow
through our thoughtfulness today. And, finally, let it not be forgotten that it is no less
than the Constitution itself that has ordained this revolution in the farms, calling for "a
just distribution" among the farmers of lands that have heretofore been the prison of
their dreams but can now become the key at least to their deliverance.
Such a program will involve not mere millions of pesos. The cost will be tremendous.
Considering the vast areas of land subject to expropriation under the laws before us,
we estimate that hundreds of billions of pesos will be needed, far more indeed than
the amount of P50 billion initially appropriated, which is already staggering as it is by
our present standards. Such amount is in fact not even fully available at this time.
We assume that the framers of the Constitution were aware of this difficulty when
they called for agrarian reform as a top priority project of the government. It is a part
of this assumption that when they envisioned the expropriation that would be needed,
they also intended that the just compensation would have to be paid not in the
orthodox way but a less conventional if more practical method. There can be no
doubt that they were aware of the financial limitations of the government and had no
illusions that there would be enough money to pay in cash and in full for the lands
they wanted to be distributed among the farmers. We may therefore assume that
their intention was to allow such manner of payment as is now provided for by the
CARP Law, particularly the payment of the balance (if the owner cannot be paid fully
with money), or indeed of the entire amount of the just compensation, with other
things of value. We may also suppose that what they had in mind was a similar
scheme of payment as that prescribed in P.D. No. 27, which was the law in force at
the time they deliberated on the new Charter and with which they presumably agreed
in principle.
The Court has not found in the records of the Constitutional Commission any
categorical agreement among the members regarding the meaning to be given the
concept of just compensation as applied to the comprehensive agrarian reform
program being contemplated. There was the suggestion to "fine tune" the
requirement to suit the demands of the project even as it was also felt that they
should "leave it to Congress" to determine how payment should be made to the
landowner and reimbursement required from the farmer-beneficiaries. Such
innovations as "progressive compensation" and "State-subsidized compensation"
were also proposed. In the end, however, no special definition of the just
compensation for the lands to be expropriated was reached by the Commission. 50

On the other hand, there is nothing in the records either that militates against the
assumptions we are making of the general sentiments and intention of the members
on the content and manner of the payment to be made to the landowner in the light of
the magnitude of the expenditure and the limitations of the expropriator.
With these assumptions, the Court hereby declares that the content and manner of
the just compensation provided for in the afore- quoted Section 18 of the CARP Law
is not violative of the Constitution. We do not mind admitting that a certain degree of
pragmatism has influenced our decision on this issue, but after all this Court is not a
cloistered institution removed from the realities and demands of society or oblivious
to the need for its enhancement. The Court is as acutely anxious as the rest of our
people to see the goal of agrarian reform achieved at last after the frustrations and
deprivations of our peasant masses during all these disappointing decades. We are
aware that invalidation of the said section will result in the nullification of the entire
program, killing the farmer's hopes even as they approach realization and
resurrecting the spectre of discontent and dissent in the restless countryside. That is
not in our view the intention of the Constitution, and that is not what we shall decree
today.
Accepting the theory that payment of the just compensation is not always required to
be made fully in money, we find further that the proportion of cash payment to the
other things of value constituting the total payment, as determined on the basis of the
areas of the lands expropriated, is not unduly oppressive upon the landowner. It is
noted that the smaller the land, the bigger the payment in money, primarily because
the small landowner will be needing it more than the big landowners, who can afford
a bigger balance in bonds and other things of value. No less importantly, the
government financial instruments making up the balance of the payment are
"negotiable at any time." The other modes, which are likewise available to the
landowner at his option, are also not unreasonable because payment is made in
shares of stock, LBP bonds, other properties or assets, tax credits, and other things
of value equivalent to the amount of just compensation.
Admittedly, the compensation contemplated in the law will cause the landowners, big
and small, not a little inconvenience. As already remarked, this cannot be avoided.
Nevertheless, it is devoutly hoped that these countrymen of ours, conscious as we
know they are of the need for their forebearance and even sacrifice, will not begrudge
us their indispensable share in the attainment of the ideal of agrarian reform.
Otherwise, our pursuit of this elusive goal will be like the quest for the Holy Grail.

Page 38 of 40
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The complaint against the effects of non-registration of the land under E.O. No. 229
does not seem to be viable any more as it appears that Section 4 of the said Order
has been superseded by Section 14 of the CARP Law. This repeats the requisites of
registration as embodied in the earlier measure but does not provide, as the latter
did, that in case of failure or refusal to register the land, the valuation thereof shall be
that given by the provincial or city assessor for tax purposes. On the contrary, the
CARP Law says that the just compensation shall be ascertained on the basis of the
factors mentioned in its Section 17 and in the manner provided for in Section 16.
The last major challenge to CARP is that the landowner is divested of his property
even before actual payment to him in full of just compensation, in contravention of a
well- accepted principle of eminent domain.
The recognized rule, indeed, is that title to the property expropriated shall pass from
the owner to the expropriator only upon full payment of the just compensation.
Jurisprudence on this settled principle is consistent both here and in other democratic
jurisdictions. Thus:
Title to property which is the subject of condemnation proceedings does not vest the
condemnor until the judgment fixing just compensation is entered and paid, but the
condemnor's title relates back to the date on which the petition under the Eminent
Domain Act, or the commissioner's report under the Local Improvement Act, is filed. 51

use, but that the title does not pass from the owner without his consent, until just
compensation has been made to him."
Our own Supreme Court has held in Visayan Refining Co. v. Camus and
Paredes, 56 that:
If the laws which we have exhibited or cited in the preceding
discussion are attentively examined it will be apparent that the
method of expropriation adopted in this jurisdiction is such as to
afford absolute reassurance that no piece of land can be finally and
irrevocably taken from an unwilling owner until compensation is
paid ... . (Emphasis supplied.)
It is true that P.D. No. 27 expressly ordered the emancipation of tenant-farmer as
October 21, 1972 and declared that he shall "be deemed the owner" of a portion of
land consisting of a family-sized farm except that "no title to the land owned by him
was to be actually issued to him unless and until he had become a full-fledged
member of a duly recognized farmers' cooperative." It was understood, however, that
full payment of the just compensation also had to be made first, conformably to the
constitutional requirement.
When E.O. No. 228, categorically stated in its Section 1 that:

... although the right to appropriate and use land taken for a canal is complete at the
time of entry, title to the property taken remains in the owner until payment is actually
made. 52 (Emphasis supplied.)

All qualified farmer-beneficiaries are now deemed full owners as of

October 21, 1972 of the land they acquired by virtue of Presidential
Decree No. 27. (Emphasis supplied.)

In Kennedy v. Indianapolis, 53 the US Supreme Court cited several cases holding that
title to property does not pass to the condemnor until just compensation had actually
been made. In fact, the decisions appear to be uniformly to this effect. As early as
1838, in Rubottom v. McLure, 54 it was held that "actual payment to the owner of the
condemned property was a condition precedent to the investment of the title to the
property in the State" albeit "not to the appropriation of it to public use." In Rexford v.
Knight, 55 the Court of Appeals of New York said that the construction upon the
statutes was that the fee did not vest in the State until the payment of the
compensation although the authority to enter upon and appropriate the land was
complete prior to the payment. Kennedy further said that "both on principle and
authority the rule is ... that the right to enter on and use the property is complete, as
soon as the property is actually appropriated under the authority of law for a public

it was obviously referring to lands already validly acquired under the said decree,
after proof of full-fledged membership in the farmers' cooperatives and full payment
of just compensation. Hence, it was also perfectly proper for the Order to also provide
in its Section 2 that the "lease rentals paid to the landowner by the farmerbeneficiary after October 21, 1972 (pending transfer of ownership after full payment
of just compensation), shall be considered as advance payment for the land."
The CARP Law, for its part, conditions the transfer of possession and ownership of
the land to the government on receipt by the landowner of the corresponding
payment or the deposit by the DAR of the compensation in cash or LBP bonds with
an accessible bank. Until then, title also remains with the landowner. 57 No outright
change of ownership is contemplated either.

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Hence, the argument that the assailed measures violate due process by arbitrarily
transferring title before the land is fully paid for must also be rejected.
It is worth stressing at this point that all rights acquired by the tenant-farmer under
P.D. No. 27, as recognized under E.O. No. 228, are retained by him even now under
R.A. No. 6657. This should counter-balance the express provision in Section 6 of the
said law that "the landowners whose lands have been covered by Presidential
Decree No. 27 shall be allowed to keep the area originally retained by them
thereunder, further, That original homestead grantees or direct compulsory heirs who
still own the original homestead at the time of the approval of this Act shall retain the
same areas as long as they continue to cultivate said homestead."

By the decision we reach today, all major legal obstacles to the comprehensive
agrarian reform program are removed, to clear the way for the true freedom of the
farmer. We may now glimpse the day he will be released not only from want but also
from the exploitation and disdain of the past and from his own feelings of inadequacy
and helplessness. At last his servitude will be ended forever. At last the farm on which
he toils will be his farm. It will be his portion of the Mother Earth that will give him not
only the staff of life but also the joy of living. And where once it bred for him only deep
despair, now can he see in it the fruition of his hopes for a more fulfilling future. Now
at last can he banish from his small plot of earth his insecurities and dark
resentments and "rebuild in it the music and the dream."
WHEREFORE, the Court holds as follows:

In connection with these retained rights, it does not appear in G.R. No. 78742 that the
appeal filed by the petitioners with the Office of the President has already been
resolved. Although we have said that the doctrine of exhaustion of administrative
remedies need not preclude immediate resort to judicial action, there are factual
issues that have yet to be examined on the administrative level, especially the claim
that the petitioners are not covered by LOI 474 because they do not own other
agricultural lands than the subjects of their petition.

1. R.A. No. 6657, P.D. No. 27, Proc. No. 131, and E.O. Nos. 228 and
229 are SUSTAINED against all the constitutional objections raised
in the herein petitions.
2. Title to all expropriated properties shall be transferred to the State
only upon full payment of compensation to their respective owners.
3. All rights previously acquired by the tenant- farmers under P.D. No.
27 are retained and recognized.
4. Landowners who were unable to exercise their rights of retention
under P.D. No. 27 shall enjoy the retention rights granted by R.A. No.
6657 under the conditions therein prescribed.
5. Subject to the above-mentioned rulings all the petitions are
DISMISSED, without pronouncement as to costs.

Obviously, the Court cannot resolve these issues. In any event, assuming that the
petitioners have not yet exercised their retention rights, if any, under P.D. No. 27, the
Court holds that they are entitled to the new retention rights provided for by R.A. No.
6657, which in fact are on the whole more liberal than those granted by the decree.
V
The CARP Law and the other enactments also involved in these cases have been
the subject of bitter attack from those who point to the shortcomings of these
measures and ask that they be scrapped entirely. To be sure, these enactments are
less than perfect; indeed, they should be continuously re-examined and rehoned, that
they may be sharper instruments for the better protection of the farmer's rights. But
we have to start somewhere. In the pursuit of agrarian reform, we do not tread on
familiar ground but grope on terrain fraught with pitfalls and expected difficulties. This
is inevitable. The CARP Law is not a tried and tested project. On the contrary, to use
Justice Holmes's words, "it is an experiment, as all life is an experiment," and so we
learn as we venture forward, and, if necessary, by our own mistakes. We cannot
expect perfection although we should strive for it by all means. Meantime, we
struggle as best we can in freeing the farmer from the iron shackles that have
unconscionably, and for so long, fettered his soul to the soil.

SO ORDERED.

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