24FEB

Republic of the Philippines

SUPREME COURT
Manila
EN BANC
G.R. No. L-19650

September 29, 1966

CALTEX (PHILIPPINES), INC., petitioner-appellee,

vs.
ENRICO PALOMAR, in his capacity as THE POSTMASTER GENERAL, respondent-appellant.
Office of the Solicitor General for respondent and appellant.
Ross, Selph and Carrascoso for petitioner and appellee.
CASTRO, J.:
In the year 1960 the Caltex (Philippines) Inc. (hereinafter referred to as Caltex) conceived and laid the
groundwork for a promotional scheme calculated to drum up patronage for its oil products. Denominated "Caltex
Hooded Pump Contest", it calls for participants therein to estimate the actual number of liters a hooded gas
pump at each Caltex station will dispense during a specified period. Employees of the Caltex (Philippines) Inc.,
its dealers and its advertising agency, and their immediate families excepted, participation is to be open
indiscriminately to all "motor vehicle owners and/or licensed drivers". For the privilege to participate, no fee or
consideration is required to be paid, no purchase of Caltex products required to be made. Entry forms are to be
made available upon request at each Caltex station where a sealed can will be provided for the deposit of
accomplished entry stubs.
A three-staged winner selection system is envisioned. At the station level, called "Dealer Contest", the contestant
whose estimate is closest to the actual number of liters dispensed by the hooded pump thereat is to be awarded
the first prize; the next closest, the second; and the next, the third. Prizes at this level consist of a 3-burner
kerosene stove for first; a thermos bottle and a Ray-O-Vac hunter lantern for second; and an Everready Magnetlite flashlight with batteries and a screwdriver set for third. The first-prize winner in each station will then be
qualified to join in the "Regional Contest" in seven different regions. The winning stubs of the qualified
contestants in each region will be deposited in a sealed can from which the first-prize, second-prize and thirdprize winners of that region will be drawn. The regional first-prize winners will be entitled to make a three-day allexpenses-paid round trip to Manila, accompanied by their respective Caltex dealers, in order to take part in the
"National Contest". The regional second-prize and third-prize winners will receive cash prizes of P500 and P300,
respectively. At the national level, the stubs of the seven regional first-prize winners will be placed inside a
sealed can from which the drawing for the final first-prize, second-prize and third-prize winners will be made.
Cash prizes in store for winners at this final stage are: P3,000 for first; P2,000 for second; Pl,500 for third; and
P650 as consolation prize for each of the remaining four participants.
Foreseeing the extensive use of the mails not only as amongst the media for publicizing the contest but also for
the transmission of communications relative thereto, representations were made by Caltex with the postal
authorities for the contest to be cleared in advance for mailing, having in view sections 1954(a), 1982 and 1983
of the Revised Administrative Code, the pertinent provisions of which read as follows:
SECTION 1954. Absolutely non-mailable matter. No matter belonging to any of the following classes,
whether sealed as first-class matter or not, shall be imported into the Philippines through the mails, or to
be deposited in or carried by the mails of the Philippines, or be delivered to its addressee by any officer
or employee of the Bureau of Posts:
Written or printed matter in any form advertising, describing, or in any manner pertaining to, or conveying
or purporting to convey any information concerning any lottery, gift enterprise, or similar scheme
depending in whole or in part upon lot or chance, or any scheme, device, or enterprise for obtaining any
money or property of any kind by means of false or fraudulent pretenses, representations, or promises.
"SECTION 1982. Fraud orders.Upon satisfactory evidence that any person or company is engaged in
conducting any lottery, gift enterprise, or scheme for the distribution of money, or of any real or personal
property by lot, chance, or drawing of any kind, or that any person or company is conducting any
scheme, device, or enterprise for obtaining money or property of any kind through the mails by means of
false or fraudulent pretenses, representations, or promises, the Director of Posts may instruct any

postmaster or other officer or employee of the Bureau to return to the person, depositing the same in the
mails, with the word "fraudulent" plainly written or stamped upon the outside cover thereof, any mail
matter of whatever class mailed by or addressed to such person or company or the representative or
agent of such person or company.
SECTION 1983. Deprivation of use of money order system and telegraphic transfer service.The
Director of Posts may, upon evidence satisfactory to him that any person or company is engaged in
conducting any lottery, gift enterprise or scheme for the distribution of money, or of any real or personal
property by lot, chance, or drawing of any kind, or that any person or company is conducting any
scheme, device, or enterprise for obtaining money or property of any kind through the mails by means of
false or fraudulent pretenses, representations, or promise, forbid the issue or payment by any
postmaster of any postal money order or telegraphic transfer to said person or company or to the agent
of any such person or company, whether such agent is acting as an individual or as a firm, bank,
corporation, or association of any kind, and may provide by regulation for the return to the remitters of
the sums named in money orders or telegraphic transfers drawn in favor of such person or company or
its agent.
The overtures were later formalized in a letter to the Postmaster General, dated October 31, 1960, in which the
Caltex, thru counsel, enclosed a copy of the contest rules and endeavored to justify its position that the contest
does not violate the anti-lottery provisions of the Postal Law. Unimpressed, the then Acting Postmaster General
opined that the scheme falls within the purview of the provisions aforesaid and declined to grant the requested
clearance. In its counsel's letter of December 7, 1960, Caltex sought a reconsideration of the foregoing stand,
stressing that there being involved no consideration in the part of any contestant, the contest was not, under
controlling authorities, condemnable as a lottery. Relying, however, on an opinion rendered by the Secretary of
Justice on an unrelated case seven years before (Opinion 217, Series of 1953), the Postmaster General
maintained his view that the contest involves consideration, or that, if it does not, it is nevertheless a "gift
enterprise" which is equally banned by the Postal Law, and in his letter of December 10, 1960 not only denied
the use of the mails for purposes of the proposed contest but as well threatened that if the contest was
conducted, "a fraud order will have to be issued against it (Caltex) and all its representatives".
Caltex thereupon invoked judicial intervention by filing the present petition for declaratory relief against
Postmaster General Enrico Palomar, praying "that judgment be rendered declaring its 'Caltex Hooded Pump
Contest' not to be violative of the Postal Law, and ordering respondent to allow petitioner the use of the mails to
bring the contest to the attention of the public". After issues were joined and upon the respective memoranda of
the parties, the trial court rendered judgment as follows:
In view of the foregoing considerations, the Court holds that the proposed 'Caltex Hooded Pump
Contest' announced to be conducted by the petitioner under the rules marked as Annex B of the
petitioner does not violate the Postal Law and the respondent has no right to bar the public distribution of
said rules by the mails.
The respondent appealed.
The parties are now before us, arrayed against each other upon two basic issues: first, whether the petition
states a sufficient cause of action for declaratory relief; and second, whether the proposed "Caltex Hooded
Pump Contest" violates the Postal Law. We shall take these up in seriatim.
1. By express mandate of section 1 of Rule 66 of the old Rules of Court, which was the applicable legal basis for
the remedy at the time it was invoked, declaratory relief is available to any person "whose rights are affected by
a statute . . . to determine any question of construction or validity arising under the . . . statute and for a
declaration of his rights thereunder" (now section 1, Rule 64, Revised Rules of Court). In amplification, this
Court, conformably to established jurisprudence on the matter, laid down certain conditions sine qua
non therefor, to wit: (1) there must be a justiciable controversy; (2) the controversy must be between persons
whose interests are adverse; (3) the party seeking declaratory relief must have a legal interest in the
controversy; and (4) the issue involved must be ripe for judicial determination (Tolentino vs. The Board of
Accountancy, et al., G.R. No. L-3062, September 28, 1951; Delumen, et al. vs. Republic of the Philippines, 50
O.G., No. 2, pp. 576, 578-579; Edades vs. Edades, et al., G.R. No. L-8964, July 31, 1956). The gravamen of the
appellant's stand being that the petition herein states no sufficient cause of action for declaratory relief, our duty
is to assay the factual bases thereof upon the foregoing crucible.
As we look in retrospect at the incidents that generated the present controversy, a number of significant points
stand out in bold relief. The appellee (Caltex), as a business enterprise of some consequence, concededly has

the unquestioned right to exploit every legitimate means, and to avail of all appropriate media to advertise and
stimulate increased patronage for its products. In contrast, the appellant, as the authority charged with the
enforcement of the Postal Law, admittedly has the power and the duty to suppress transgressions thereof
particularly thru the issuance of fraud orders, under Sections 1982 and 1983 of the Revised Administrative Code,
against legally non-mailable schemes. Obviously pursuing its right aforesaid, the appellee laid out plans for the
sales promotion scheme hereinbefore detailed. To forestall possible difficulties in the dissemination of
information thereon thru the mails, amongst other media, it was found expedient to request the appellant for an
advance clearance therefor. However, likewise by virtue of his jurisdiction in the premises and construing the
pertinent provisions of the Postal Law, the appellant saw a violation thereof in the proposed scheme and
accordingly declined the request. A point of difference as to the correct construction to be given to the applicable
statute was thus reached. Communications in which the parties expounded on their respective theories were
exchanged. The confidence with which the appellee insisted upon its position was matched only by the obstinacy
with which the appellant stood his ground. And this impasse was climaxed by the appellant's open warning to the
appellee that if the proposed contest was "conducted, a fraud order will have to be issued against it and all its
representatives."
Against this backdrop, the stage was indeed set for the remedy prayed for. The appellee's insistent assertion of
its claim to the use of the mails for its proposed contest, and the challenge thereto and consequent denial by the
appellant of the privilege demanded, undoubtedly spawned a live controversy. The justiciability of the dispute
cannot be gainsaid. There is an active antagonistic assertion of a legal right on one side and a denial thereof on
the other, concerning a real not a mere theoretical question or issue. The contenders are as real as their
interests are substantial. To the appellee, the uncertainty occasioned by the divergence of views on the issue of
construction hampers or disturbs its freedom to enhance its business. To the appellant, the suppression of the
appellee's proposed contest believed to transgress a law he has sworn to uphold and enforce is an unavoidable
duty. With the appellee's bent to hold the contest and the appellant's threat to issue a fraud order therefor if
carried out, the contenders are confronted by the ominous shadow of an imminent and inevitable litigation unless
their differences are settled and stabilized by a tranquilizing declaration (Pablo y Sen, et al. vs. Republic of the
Philippines, G.R. No. L-6868, April 30, 1955). And, contrary to the insinuation of the appellant, the time is long
past when it can rightly be said that merely the appellee's "desires are thwarted by its own doubts, or by the
fears of others" which admittedly does not confer a cause of action. Doubt, if any there was, has ripened into
a justiciable controversy when, as in the case at bar, it was translated into a positive claim of right which is
actually contested (III Moran, Comments on the Rules of Court, 1963 ed., pp. 132-133, citing: Woodward vs. Fox
West Coast Theaters, 36 Ariz., 251, 284 Pac. 350).
We cannot hospitably entertain the appellant's pretense that there is here no question of construction because
the said appellant "simply applied the clear provisions of the law to a given set of facts as embodied in the rules
of the contest", hence, there is no room for declaratory relief. The infirmity of this pose lies in the fact that it
proceeds from the assumption that, if the circumstances here presented, the construction of the legal provisions
can be divorced from the matter of their application to the appellee's contest. This is not feasible. Construction,
verily, is the art or process of discovering and expounding the meaning and intention of the authors of the
law with respect to its application to a given case, where that intention is rendered doubtful, amongst others, by
reason of the fact that the given case is not explicitly provided for in the law (Black, Interpretation of Laws, p. 1).
This is precisely the case here. Whether or not the scheme proposed by the appellee is within the coverage of
the prohibitive provisions of the Postal Law inescapably requires an inquiry into the intended meaning of the
words used therein. To our mind, this is as much a question of construction or interpretation as any other.
Nor is it accurate to say, as the appellant intimates, that a pronouncement on the matter at hand can amount to
nothing more than an advisory opinion the handing down of which is anathema to a declaratory relief action. Of
course, no breach of the Postal Law has as yet been committed. Yet, the disagreement over the construction
thereof is no longer nebulous or contingent. It has taken a fixed and final shape, presenting clearly defined legal
issues susceptible of immediate resolution. With the battle lines drawn, in a manner of speaking, the propriety
nay, the necessity of setting the dispute at rest before it accumulates the asperity distemper, animosity,
passion and violence of a full-blown battle which looms ahead (III Moran, Comments on the Rules of Court, 1963
ed., p. 132 and cases cited), cannot but be conceded. Paraphrasing the language in Zeitlin vs. Arnebergh 59
Cal., 2d., 901, 31 Cal. Rptr., 800, 383 P. 2d., 152, cited in 22 Am. Jur., 2d., p. 869, to deny declaratory relief to
the appellee in the situation into which it has been cast, would be to force it to choose between undesirable
alternatives. If it cannot obtain a final and definitive pronouncement as to whether the anti-lottery provisions of
the Postal Law apply to its proposed contest, it would be faced with these choices: If it launches the contest and
uses the mails for purposes thereof, it not only incurs the risk, but is also actually threatened with the certain
imposition, of a fraud order with its concomitant stigma which may attach even if the appellee will eventually be

vindicated; if it abandons the contest, it becomes a self-appointed censor, or permits the appellant to put into
effect a virtual fiat of previous censorship which is constitutionally unwarranted. As we weigh these
considerations in one equation and in the spirit of liberality with which the Rules of Court are to be interpreted in
order to promote their object (section 1, Rule 1, Revised Rules of Court) which, in the instant case, is to settle,
and afford relief from uncertainty and insecurity with respect to, rights and duties under a law we can see in
the present case any imposition upon our jurisdiction or any futility or prematurity in our intervention.
The appellant, we apprehend, underrates the force and binding effect of the ruling we hand down in this case if
he believes that it will not have the final and pacifying function that a declaratory judgment is calculated to
subserve. At the very least, the appellant will be bound. But more than this, he obviously overlooks that in this
jurisdiction, "Judicial decisions applying or interpreting the law shall form a part of the legal system" (Article 8,
Civil Code of the Philippines). In effect, judicial decisions assume the same authority as the statute itself and,
until authoritatively abandoned, necessarily become, to the extent that they are applicable, the criteria which
must control the actuations not only of those called upon to abide thereby but also of those in duty bound to
enforce obedience thereto. Accordingly, we entertain no misgivings that our resolution of this case will terminate
the controversy at hand.
It is not amiss to point out at this juncture that the conclusion we have herein just reached is not without
precedent. In Liberty Calendar Co. vs. Cohen, 19 N.J., 399, 117 A. 2d., 487, where a corporation engaged in
promotional advertising was advised by the county prosecutor that its proposed sales promotion plan had the
characteristics of a lottery, and that if such sales promotion were conducted, the corporation would be subject to
criminal prosecution, it was held that the corporation was entitled to maintain a declaratory relief action against
the county prosecutor to determine the legality of its sales promotion plan. In pari materia, see also: Bunis vs.
Conway, 17 App. Div. 2d., 207, 234 N.Y.S. 2d., 435; Zeitlin vs. Arnebergh, supra; Thrillo, Inc. vs. Scott, 15 N.J.
Super. 124, 82 A. 2d., 903.
In fine, we hold that the appellee has made out a case for declaratory relief.
2. The Postal Law, chapter 52 of the Revised Administrative Code, using almost identical terminology in sections
1954(a), 1982 and 1983 thereof, supra, condemns as absolutely non-mailable, and empowers the Postmaster
General to issue fraud orders against, or otherwise deny the use of the facilities of the postal service to, any
information concerning "any lottery, gift enterprise, or scheme for the distribution of money, or of any real or
personal property by lot, chance, or drawing of any kind". Upon these words hinges the resolution of the second
issue posed in this appeal.
Happily, this is not an altogether untrodden judicial path. As early as in 1922, in "El Debate", Inc. vs. Topacio, 44
Phil., 278, 283-284, which significantly dwelt on the power of the postal authorities under the abovementioned
provisions of the Postal Law, this Court declared that
While countless definitions of lottery have been attempted, the authoritative one for this jurisdiction is
that of the United States Supreme Court, in analogous cases having to do with the power of the United
States Postmaster General, viz.: The term "lottery" extends to all schemes for the distribution of prizes
by chance, such as policy playing, gift exhibitions, prize concerts, raffles at fairs, etc., and various forms
of gambling. The three essential elements of a lottery are: First, consideration; second, prize; and third,
chance. (Horner vs. States [1892], 147 U.S. 449; Public Clearing House vs. Coyne [1903], 194 U.S.,
497; U.S. vs. Filart and Singson [1915], 30 Phil., 80; U.S. vs. Olsen and Marker [1917], 36 Phil., 395;
U.S. vs. Baguio [1919], 39 Phil., 962; Valhalla Hotel Construction Company vs. Carmona, p. 233, ante.)
Unanimity there is in all quarters, and we agree, that the elements of prize and chance are too obvious in the
disputed scheme to be the subject of contention. Consequently as the appellant himself concedes, the field of
inquiry is narrowed down to the existence of the element of consideration therein. Respecting this matter, our
task is considerably lightened inasmuch as in the same case just cited, this Court has laid down a definitive yardstick in the following terms
In respect to the last element of consideration, the law does not condemn the gratuitous distribution of
property by chance, if no consideration is derived directly or indirectly from the party receiving the
chance, but does condemn as criminal schemes in which a valuable consideration of some kind is paid
directly or indirectly for the chance to draw a prize.
Reverting to the rules of the proposed contest, we are struck by the clarity of the language in which the invitation
to participate therein is couched. Thus

No puzzles, no rhymes? You don't need wrappers, labels or boxtops? You don't have to buy anything?
Simply estimate the actual number of liter the Caltex gas pump with the hood at your favorite Caltex
dealer will dispense from to , and win valuable prizes . . . ." .
Nowhere in the said rules is any requirement that any fee be paid, any merchandise be bought, any service be
rendered, or any value whatsoever be given for the privilege to participate. A prospective contestant has but to
go to a Caltex station, request for the entry form which is available on demand, and accomplish and submit the
same for the drawing of the winner. Viewed from all angles or turned inside out, the contest fails to exhibit any
discernible consideration which would brand it as a lottery. Indeed, even as we head the stern injunction, "look
beyond the fair exterior, to the substance, in order to unmask the real element and pernicious tendencies which
the law is seeking to prevent" ("El Debate", Inc. vs. Topacio, supra, p. 291), we find none. In our appraisal, the
scheme does not only appear to be, but actually is, a gratuitous distribution of property by chance.
There is no point to the appellant's insistence that non-Caltex customers who may buy Caltex products simply to
win a prize would actually be indirectly paying a consideration for the privilege to join the contest. Perhaps this
would be tenable if the purchase of any Caltex product or the use of any Caltex service were a pre-requisite to
participation. But it is not. A contestant, it hardly needs reiterating, does not have to buy anything or to give
anything of value.1awphl.nt
Off-tangent, too, is the suggestion that the scheme, being admittedly for sales promotion, would naturally benefit
the sponsor in the way of increased patronage by those who will be encouraged to prefer Caltex products "if only
to get the chance to draw a prize by securing entry blanks". The required element of consideration does not
consist of the benefit derived by the proponent of the contest. The true test, as laid down in People vs. Cardas,
28 P. 2d., 99, 137 Cal. App. (Supp.) 788, is whether the participant pays a valuable consideration for the chance,
and not whether those conducting the enterprise receive something of value in return for the distribution of the
prize. Perspective properly oriented, the standpoint of the contestant is all that matters, not that of the sponsor.
The following, culled from Corpus Juris Secundum, should set the matter at rest:
The fact that the holder of the drawing expects thereby to receive, or in fact does receive, some benefit
in the way of patronage or otherwise, as a result of the drawing; does not supply the element of
consideration.Griffith Amusement Co. vs. Morgan, Tex. Civ. App., 98 S.W., 2d., 844" (54 C.J.S., p. 849).
Thus enlightened, we join the trial court in declaring that the "Caltex Hooded Pump Contest" proposed by the
appellee is not a lottery that may be administratively and adversely dealt with under the Postal Law.
But it may be asked: Is it not at least a "gift enterprise, or scheme for the distribution of money, or of any real or
personal property by lot, chance, or drawing of any kind", which is equally prescribed? Incidentally, while the
appellant's brief appears to have concentrated on the issue of consideration, this aspect of the case cannot be
avoided if the remedy here invoked is to achieve its tranquilizing effect as an instrument of both curative and
preventive justice. Recalling that the appellant's action was predicated, amongst other bases, upon Opinion 217,
Series 1953, of the Secretary of Justice, which opined in effect that a scheme, though not a lottery for want of
consideration, may nevertheless be a gift enterprise in which that element is not essential, the determination of
whether or not the proposed contest wanting in consideration as we have found it to be is a prohibited gift
enterprise, cannot be passed over sub silencio.
While an all-embracing concept of the term "gift enterprise" is yet to be spelled out in explicit words, there
appears to be a consensus among lexicographers and standard authorities that the term is commonly applied to
a sporting artifice of under which goods are sold for their market value but by way of inducement each purchaser
is given a chance to win a prize (54 C.J.S., 850; 34 Am. Jur., 654; Black, Law Dictionary, 4th ed., p. 817;
Ballantine, Law Dictionary with Pronunciations, 2nd ed., p. 55; Retail Section of Chamber of Commerce of
Plattsmouth vs. Kieck, 257 N.W., 493, 128 Neb. 13; Barker vs. State, 193 S.E., 605, 56 Ga. App., 705; Bell vs.
State, 37 Tenn. 507, 509, 5 Sneed, 507, 509). As thus conceived, the term clearly cannot embrace the scheme
at bar. As already noted, there is no sale of anything to which the chance offered is attached as an inducement
to the purchaser. The contest is open to all qualified contestants irrespective of whether or not they buy the
appellee's products.
Going a step farther, however, and assuming that the appellee's contest can be encompassed within the
broadest sweep that the term "gift enterprise" is capable of being extended, we think that the appellant's pose
will gain no added comfort. As stated in the opinion relied upon, rulings there are indeed holding that a gift
enterprise involving an award by chance, even in default of the element of consideration necessary to constitute
a lottery, is prohibited (E.g.: Crimes vs. States, 235 Ala 192, 178 So. 73; Russell vs. Equitable Loan & Sec. Co.,
129 Ga. 154, 58 S.E., 88; State ex rel. Stafford vs. Fox-Great Falls Theater Corporation, 132 P. 2d., 689, 694,

698, 114 Mont. 52). But this is only one side of the coin. Equally impressive authorities declare that, like a lottery,
a gift enterprise comes within the prohibitive statutes only if it exhibits the tripartite elements of prize, chance and
consideration (E.g.: Bills vs. People, 157 P. 2d., 139, 142, 113 Colo., 326; D'Orio vs. Jacobs, 275 P. 563, 565,
151 Wash., 297; People vs. Psallis, 12 N.Y.S., 2d., 796; City and County of Denver vs. Frueauff, 88 P., 389, 394,
39 Colo., 20, 7 L.R.A., N.S., 1131, 12 Ann. Cas., 521; 54 C.J.S., 851, citing: Barker vs. State, 193 S.E., 605, 607,
56 Ga. App., 705; 18 Words and Phrases, perm. ed., pp. 590-594). The apparent conflict of opinions is explained
by the fact that the specific statutory provisions relied upon are not identical. In some cases, as pointed out in 54
C.J.S., 851, the terms "lottery" and "gift enterprise" are used interchangeably (Bills vs. People, supra); in others,
the necessity for the element of consideration or chance has been specifically eliminated by statute. (54 C.J.S.,
351-352, citing Barker vs. State, supra; State ex rel. Stafford vs. Fox-Great Falls Theater Corporation, supra).
The lesson that we derive from this state of the pertinent jurisprudence is, therefore, that every case must be
resolved upon the particular phraseology of the applicable statutory provision.
Taking this cue, we note that in the Postal Law, the term in question is used in association with the word "lottery".
With the meaning of lottery settled, and consonant to the well-known principle of legal hermeneutics noscitur a
sociis which Opinion 217 aforesaid also relied upon although only insofar as the element of chance is
concerned it is only logical that the term under a construction should be accorded no other meaning than that
which is consistent with the nature of the word associated therewith. Hence, if lottery is prohibited only if it
involves a consideration, so also must the term "gift enterprise" be so construed. Significantly, there is not in the
law the slightest indicium of any intent to eliminate that element of consideration from the "gift enterprise" therein
included.
This conclusion firms up in the light of the mischief sought to be remedied by the law, resort to the determination
thereof being an accepted extrinsic aid in statutory construction. Mail fraud orders, it is axiomatic, are designed
to prevent the use of the mails as a medium for disseminating printed matters which on grounds of public policy
are declared non-mailable. As applied to lotteries, gift enterprises and similar schemes, justification lies in the
recognized necessity to suppress their tendency to inflame the gambling spirit and to corrupt public morals
(Com. vs. Lund, 15 A. 2d., 839, 143 Pa. Super. 208). Since in gambling it is inherent that something of value be
hazarded for a chance to gain a larger amount, it follows ineluctably that where no consideration is paid by the
contestant to participate, the reason behind the law can hardly be said to obtain. If, as it has been held
Gratuitous distribution of property by lot or chance does not constitute "lottery", if it is not resorted to as a
device to evade the law and no consideration is derived, directly or indirectly, from the party receiving the
chance, gambling spirit not being cultivated or stimulated thereby. City of Roswell vs. Jones, 67 P. 2d.,
286, 41 N.M., 258." (25 Words and Phrases, perm. ed., p. 695, emphasis supplied).
we find no obstacle in saying the same respecting a gift enterprise. In the end, we are persuaded to hold that,
under the prohibitive provisions of the Postal Law which we have heretofore examined, gift enterprises and
similar schemes therein contemplated are condemnable only if, like lotteries, they involve the element of
consideration. Finding none in the contest here in question, we rule that the appellee may not be denied the use
of the mails for purposes thereof.
Recapitulating, we hold that the petition herein states a sufficient cause of action for declaratory relief, and that
the "Caltex Hooded Pump Contest" as described in the rules submitted by the appellee does not transgress the
provisions of the Postal Law.
ACCORDINGLY, the judgment appealed from is affirmed. No costs.
Concepcion, C.J., Reyes, J.B.L., Barrera, Dizon, Regala, Makalintal, Bengzon, J.P., Zaldivar and Sanchez, JJ.,
concur.

2.) Republic of the Philippines

SUPREME COURT
Manila
EN BANC
G.R. No. L-63318 November 25, 1983
PHILIPPINE CONSUMERS FOUNDATION, INC., petitioner,
vs.

NATIONAL TELECOMMUNICATIONS COMMISSION AND PHILIPPINE LONG DISTANCE TELEPHONE

COMPANY, respondents.
Tomas C. Llamas for petitioner.
The Solicitor General for respondent NTC.
Graciano C. Regala and Eliseo B. Alampay for respondent PLDT.
RELOVA, J.:+.wph!1
Petition for certiorari seeking to set aside and annul the decision, dated November 22, 1982, of public
respondent National Telecommunications Commission (NTC, for short), approving the application of the
Philippine Long Distance Telephone Company (PLDT, for short) of its revised schedule for its Subscriber
Investment Plan (SIP) for the entire service area, including the ex-RETELCO area; as well as the order of
January 14, 1983 which denied the motion for reconsideration of petitioner Philippine Consumers Foundation,
Inc. (PCFI, for short).
Records show that on March 20, 1980, private respondent PLDT filed an application with the NTC for the
approval of a revised schedule for its Subscriber Investment Plan (SIP), docketed as Case No. 82-27.
On April 14, 1982, the NTC issued an ex-parte order provisionally approving the revised schedule which,
however, was set aside by this Court on August 31, 1982 in the case of "Samuel Bautista vs. NTC, et al.," 116
SCRA 411. The Court therein ruled that "there was necessity of a hearing by the Commission before it should
have acted on the application of the PLDT so that the public could air its opposition, particularly the herein
petitioner and the Solicitor General, representing the government. They should be given the opportunity to
substantiate their objection that the rates under the subscriber investment plan are excessive and unreasonable
and, as a consequence, the low income and middle class group cannot afford to have telephone connections;
and, that there is no need to increase the rate because the applicant is financially sound."
On November 22, 1982, the NTC rendered the questioned decision permanently approving PLDT's new and
increased SIP rates, the dispositive portion of which reads: t.hqw
IN VIEW OF ALL THE FOREGOING, this Commission finds that applicant's reduced proposals
for its revised Subscriber Investment Plan Schedule, upon further reductions herein ordered with
respect to subscriber investments for new installations of single residential telephones in the
Metro Manila and Provincial Service Areas, are all within the 50%-of-cost limit provided in P.D.
217; that they are just and reasonable and in consonance with the public policies declared in
said decree; and that it is in the public interest that applicant's revised SIP Schedule be, as it is
hereby APPROVED, as follows:
REVISED SIP SCHEDULE
Service Category Revised SIP Rates
Metro Manila Provincial t.hqw
1. New Installations
1. PBX/PABX Trunk P 5,000 P3,000
2. Business Phone:
Single line 3,500 2,000
Party line 2,000 1,600
3. Residential Phone:
Single line 1,800 1,300
Party line 900 800
4. Leased Line 2,500 2,500
5. Tie trunk or tie line 2,500 2,500
6. Outside local 2,500 2,500

II. Transfers
1. PBX/PABX 1,500 1,200
2. Business Phone:
Single line 800 600
Party line 600 500
3. Residential Phone:
Single line 600 500
Party line 500 300
4. Leased Line 800 800
Revised SIP Rates
Metro Manila Provincial
5. Tie trunk or tie line P800 P800
6. Outside Local 800 800
(pp. 34-35, Rollo)
Petitioner filed a motion for reconsideration of the above judgment on December 14, 1982, and after a month, or
on January 14, 1983, NTC denied said motion for reconsideration.
It is the submission of petitioner that the SIP schedule presented by the PLDT is pre-mature and, therefore,
illegal and baseless, because the NTC has not yet promulgated the required rules and regulations implementing
Section 2 of Presidential Decree No. 217 which provides: t.hqw
Section 2. The Department of Public Works, Transportation and Communications through
its Board of Communications and/or appropriate agency shall see to it that the herein declared
policies for the telephone industry are immediately implemented and for this purpose pertinent
rules and regulations may be promulgated ... (Emphasis supplied).
Petitioner avers that the "substitute procedural vehicle utilized by NTC in allowing the establishment of SIP by
PLDT was by treating the appropriate Petition of PLDT as if the same were a rate case over which the Rules of
Practice was applicable. NTC proceeded to invoke the summary powers provided for in the Rules of Practice to
fully bear on the hapless consumer, notably the repressive 'Provisional Reliefs;' (pp. 5-6, Rollo) that at the
hearings thereof, "NTC limited the numerous oppositors in the instant Application, among them PCFI, by
applying the two oppositor-rule. This means that only two of the oppositors will be heard in representation of all
the oppositors, again pursuant to the procedure laid down in the Rules of Practice." (p. 130, rollo) Further, the
NTC invoked its extraordinary powers pursuant to Section 3 of Rule 15 of the Rules of Practice, "whereby even
without an iota or proof to substantiate its application, NTC allowed the desired increase purportedly on a
provisional basis. " (p. 129, rollo)
The question is whether or not respondent acted with grave abuse of discretion when it approved the Revised
Subscriber Investment Plan (SIP) of respondent PLDT in the absence of specific rules and regulations
implementing Presidential Decree No. 217. Petitioner claims that these implementing rules and regulations are
mandatory pre-requisite for the approval of said SIP rates.
Respondent NTC admits the absence of rules and regulations referred to in PD 217. However, it contends that
nowhere in said decree is there any legal provision making the promulgation of rules a mandatory pre-requisite
to the establishment of SIP and the determination of its schedules; that since respondent NTC is enjoined to
implement the declared policies of the decree, for its immediate implementation, it may rely on existing Rules of
Practice; that under the same Rules of Practice all existing subscriber investment plans were presented,
considered and approved by the NTC; that the promulgation of the rules is inherently an internal and
administrative matter and therefore, is not a proper subject of litigation, much less a duty of the NTC to
accomplish; and, that public respondent may or may not promulgate the rules in the immediate implementation
of said decree as the word used there is "may."
We are not persuaded.

Presidential Decree No. 217 was promulgated on June 16, 1973 and paragraph 4 of Section 1 thereof
provides: t.hqw
4. In line with the objective of spreading ownership among a wide base of the people, the
concept of telephone subscriber self-financing is hereby adopted whereby a telephone
subscriber finances part of the capital investments in telephone installations through the
purchase of stocks, whether common or preferred stock, of the telephone company. (Emphasis
supplied)
There is merit in the contention of petitioner that it is the duty of respondent NTC to promulgate rules and
regulations because: t.hqw
1. P.D. 217 deals with matters so alien, innovative and untested such that existing substantive
and procedural laws would not be applicable. Thus, the Subscriber Investment Plan (SIP) was
so set up precisely to ensure the financial viability of public telecommunications companies
which in turn assures the enjoyment of the population at minimum cost the benefits of a
telephone facility.
The SIP has never been contemplated prior to P.D. 217.
The existing law on the other hand, the Public Service Act, diametrically runs counter to the spirit
and intention, if not the purpose of P.D. 217. It may even be gainsaid that as long as the
optimum number of individuals may enjoy telephone service, there is no limitation on the
profitability of such companies. Hence, while P.D. 217 encourages the profitability of public
telecommunication companies, the Public Service Act limits the same.
2. In the absence of such rules and regulations, there is outright confusion among the rights of
PLDT, the consumers and the government itself. As may clearly be seen, how can the Decision
be said to have assured that most of the population will enjoy telephone facilities? Did the
Decision likewise assure the financial viability of PLDT? Was the government's duty to provide
telephone service to its constituents subserved by the Decision? These questions can never be
answered unless such rules and regulations are set up.
3. Finally, it should be emphasized that NTC is estopped from claiming that there is no need to
promulgate such rules and regulations. In the case of PCFI vs. NTC, G.R. No. 61892, now
pending resolution before this Honorable Tribunal, NTC totally refused to act on a petition filed
by PLDT precisely for the promulgation of such rules and regulations.
Why then did NTC refuse to act on such petition if and when there is no need for the
promulgation of such rules and regulations? After all NTC could have simply ruled that the
petition in G.R. No. 61892 is unnecessary because such rules and regulations are also
unnecessary. (pp. 135-136, Rollo)
At any rate, there is no justification for the rate increase of the revised schedule of PLDT's Subscriber
Investment Plan. It is to say the least, untimely, considering the present economic condition obtaining in the
country. The approved rate defeats the purpose of the decree which is to spread ownership among the wide
base of investors. The State, in Presidential Decree No. 217 promulgated on June 16, 1973, adopted the basic
policies of the telephone industry, which, among others, are: (1) the attainment of efficient telephone service for
as wide an area as possible at the lowest reasonable costs to the subscriber; (2) the capital requirements of
telephone utilities obtained from ownership funds shall be raised from a broad base of investors, involving as
large a number of individual investors as may be possible; and (3) in any subscriber self-financing plan, the
amount of subscriber self-financing will, in no case, exceed fifty per centum (50%) of the cost of the installed
telephone line, as may be determined from time to time by the regulatory bodies of the State.
The load on the back of our people is heavy enough. Let us not increase its weight further. Noteworthy is the
concurrence of Justice Vicente Abad Santos in the case of Bautista vs. NTC (supra) that "the PLDT which is
reported to have made over 100 million pesos in profits in just six months but with its service so poor that even
the First Lady has taken notice should think of improved service before increased profits."
Indeed, let t us not aggravate the situation of the populace by raising the revised SIP schedule plan of the PLDT.
A rate increase would be an additional burden on the telephone subscribers. The plan to expand the company
program and/or improve its service is laudable, but the expenses should not be shouldered by the telephone
subscribers. Considering the multi-million profits of the company, the cost of expansion and/or improvement
should come from part of its huge profits.

Anent the question that petitioner should have appealed the decision of respondent NTC, instead of filing the
instant petition, suffice it to say that certiorari is available despite existence of the remedy of appeal where public
welfare and the advancement of public policy so dictate, or the orders complained of were issued in excess of or
without jurisdiction (Jose vs. Zulueta, 2 SCRA 574).
ACCORDINGLY, the DECISION of the public respondent National Telecommunications Commission, dated
November 22, 1982, and the ORDER dated January 14, 1983. are hereby ANNULLED and SET ASIDE.
SO ORDERED.1wph1.t
Fernando, C.J., Teehankee, Makasiar, Guerrero, Abad Santos, Melencio- Herrera, Escolin and Gutierrez, Jr.,
JJ., concur.
Aquino, Concepcion Jr., and De Castro, JJ., took no part.
Plana, J., I reserve my vote.

3.) Paat vs CA, GR No. 111107, 10 January 1997, 266 SCRA 167
FACTS
The truck of private respondent Victoria de Guzman was seized by the DENR personnel while on its way to
Bulacan because the driver could not produce the required documents for the forest product found concealed in
the truck. Petitioner Jovito Layugan, CENRO ordered the confiscation of the truck and required the owner to
explain. Private respondents failed to submit required explanation. The DENR Regional Executive Director
Rogelio Baggayan sustained Layugans action for confiscation and ordered the forfeiture of the truck. Private
respondents brought the case to the DENR Secretary. Pending appeal, private respondents filed a replevin case
before the RTC against petitioner Layugan and Baggayan. RTC granted the same. Petitioners moved to dismiss
the case contending, inter alia, that private respondents had no cause of action for their failure to exhaust
administrative remedies. The trial court denied their motion. Hence, this petition for review on certiorari.
Petitioners aver that the trial court could not legally entertain the suit for replevin because the truck was under
administrative seizure proceedings.
ISSUE
Whether or not the instant case falls within the exception of the doctrine.
HELD
The Court held in the negative. The Court has consistently held that before a party is allowed to seek the
intervention of the court, it is a pre-condition that he should have availed of all the means of administrative
processed afforded him. Hence, if a remedy within the administrative machinery can still be resorted to by giving
the administrative officer concerned every opportunity to decide on a matter that comes within his jurisdiction
then such remedy should be exhausted first before courts judicial power can be sought. The premature
invocation of court intervention is fatal to ones cause of action.
The doctrine is a relative one and its flexibility is called upon by the peculiarity and uniqueness of the factual and
circumstantial settings of a case. Hence, it is disregarded (1) when there is violation of due process, (2) when the
issue involved is purely a legal question, (3) when the administrative action is patently illegal amounting to lack
or excess of jurisdiction, (4) when there is estoppels on the part of the administrative agency concerned, (5)
when there is irreparable injury, (6) when the respondent is a department secretary whose acts as an alter ego of
the President bears the implied and assumed approval of the latter, (7) when to require exhaustion of

administrative remedies would be unreasonable, (8) when it would amount to nullification of a claim, (9) when
the subject matter is a private land in land case proceedings, (10) when the rule does not provide a plain, speedy
and adequate remedy, and (11) when there are circumstances indicating the urgency of judicial intervention.

4.) Republic of the Philippines

SUPREME COURT
Manila
THIRD DIVISION
G.R. No. L-66614 January 25, 1988
PRIMITIVO LEVERIZA, FE LEVERIZA, PARUNGAO & ANTONIO C. VASCO, petitioners,
vs.
INTERMEDIATE APPELLATE COURT, MOBIL OIL PHILIPPINES & CIVIL AERONAUTICS
ADMINISTRATION,respondents.
BIDIN, J.:
This is a Petition for Review on certiorari seeking the reversal of the decision of the Intermediate Appellate Court,
Third Division * dated February 29, 1984 in AC-G.R. No. CV No. 61705 entitled Mobil Oil Philippines, Inc.,
plaintiff-appellee vs. Primitivo Leveriza Parungao, Antonio C. Vasco and Civil Aeronautics Administration,
defendants-appellants; Primitive Leveriza, Fe Leveriza Parungao and Antonio C. Leveriza, cross-defendant,
affirming in toto the decision of the trial court dated April 6, 1976.
As found by the trial court and adopted by the Intermediate Appellate Court, the facts of this case are as follows:
Around three contracts of lease resolve the basic issues in the instant case. These three
contracts are as follows:
First Contract. For purposes of easy reference and brevity, this contract shall be referred to
hereinafter as Contract A. This is a "CONTRACT OF LEASE", executed between the REPUBLIC
OF THE PHILIPPINES, represented by Defendant CIVIL AERONAUTICS ADMINISTRATION, as
lessor, and ROSARIO C. LEVERIZA, as lessee, on April 2, 1965, over a certain parcel of land at
the MIA area, consisting of approximately 4,502 square meters, at a monthly rental of P450.20,
for a period of 25 years, (Exhibit "A", Exhibit "I-Leverizas", Exhibit "I-CAA").
Second Contracts. For purposes of easy references and brevity, this contract shall be referred
to hereinafter as Contract B. This is a "LEASE AGREEMENT", executed between ROSARIO C.
LEVERIZA, as lessor, and Plaintiff MOBIL OIL PHILIPPINES, INC., as lessee on May 21, 1965,
over 3,000 square meters of that SAME Parcel of land subject of Contract A above mentioned, at
a monthly rental of P1,500.00, for a period of 25 years (Exhibit 'B', Exhibit 4-Leverizas' ).
Third Contract. For purposes of easy reference and brevity, this contract shall be referred to
hereinafter as Contract C. This is a "LEASE AGREEMENT", executed between Defendant CIVIL
AERONAUTICS ADMINISTRATION, as lessor, and plaintiff MOBIL OIL PHILIPPINES, INC., as
lessee, on June 1, 1968 over that SAME parcel of land (Lot A, on plan being a portion of Parcel,
Psu 2031), containing an area of 3,000 square meters more or less, at a monthly rental of P.25
per square meter for the second 200 square meters, and P.20 per square meter for the rest, for a
period of 29 (sic) years. (Exhibit "C").
There is no dispute among the parties that the subject matter of the three contracts of lease
above mentioned, Contract A, Contract B, and Contract C, is the same parcel of land, with the

noted difference that while in Contract A, the area leased is 4,502 square meters, in Contract B
and Contract C, the area has been reduced to 3,000 square meters. To summarize:
Contract A a lease contract of April 2, 1965 between the Republic of the
Philippines, represented by Defendant Civil Aeronautics Administration and
Rosario C. Leveriza over a parcel of land containing an area of 4,502 square
meters, for 25 years.
Contract B a lease contract (in effect a sublease) of May 21, 1965 between
defendant Rosario C. Leveriza and plaintiff Mobil Oil Philippines, Inc. over the
same parcel of land, but reduced to 3,000 square meters for 25 years; and
Contract C a lease contract of June 1, 1968 between defendant Civil
Aeronautics Administration and plaintiff Mobil Oil Philippines, Inc., over the same
parcel of land, but reduced to 3,000 square meters, for 25 years.
It is important to note, for a clear understanding of the issues involved, that it appears that
defendant Civil Aeronautics Administration as LESSOR, leased the same parcel of land, for
durations of time that overlapped to two lessees, to wit: (1) Defendant Rosario C. Leveriza, and
that plaintiff Mobil Oil Philippines, Inc., as LESSEE, leased the same parcel of land from two
lessors, to wit: (1) defendant Rosario C. Leveriza and (2) defendant Civil Aeronautics
Administration, Inc., for durations of time that also overlapped.
For purposes of brevity defendant Civil Aeronautics Administration shall be referred to
hereinafter as defendant CAA.
Rosario C. Leveriza, the lessee in Contract A and the lessor in Contract B, is now deceased.
This is the reason why her successor-in-interest, her heirs, are sued, namely: Defendants
Primitive Leveriza, her second husband, (now also deceased), Fe Leveriza Parungao, her
daughter by her second husband, and Antonio C. Vasco, her son by her first husband. For
purposes of brevity, these defendants shall be referred to hereinafter as Defendants Leveriza.
Plaintiff Mobil Oil Philippines, Inc., shall be referred to hereinafter simply as the Plaintiff. (pp. 9599, Record on Appeal).
Plaintiff in this case seeks the rescission or cancellation of Contract A and Contract B on the
ground that Contract A from which Contract B is derived and depends has already been
cancelled by the defendant Civil Aeronautics Administration and maintains that Contract C with
the defendant CAA is the only valid and subsisting contract insofar as the parcel of land, subject
to the present litigation is concerned. On the other hand, defendants Leverizas' claim that
Contract A which is their contract with CAA has never been legally cancelled and still valid and
subsisting; that it is Contract C between plaintiff and defendant CAA which should be declared
void.
Defendant CAA asserts that Exhibit "A" is still valid and subsisting because its cancellation by
Guillermo Jurado was ineffective and asks the court to annul Contract A because of the violation
committed by defendant Leveriza in leasing the parcel of land to plaintiff by virtue of Contract B
without the consent of defendant CAA. Defendant CAA further asserts that Contract C not having
been approved by the Director of Public Works and Communications is not valid. ...
xxx xxx xxx
After trial, the lower court render judgment on April 6, 1976 the dispositive part of which reads:
WHEREFORE, after having thus considered the evidence of all the parties, testimonial and
documentary, and their memoranda and reply-memoranda, this Court hereby renders judgment:
1. Declaring Contract A as having been validly cancelled on June 28, 1966, and
has therefore ceased to have any effect as of that date;
2. Declaring that Contract B has likewise ceased to have any effect as of June
28, 1966 because of the cancellation of Contract A;
3. Declaring that Contract C was validly entered into on June 1, 1968, and that it
is still valid and subsisting;

4. Ordering defendant CAA to refund to defendants Leverizas the amount of

P32,189.30 with 6% per annum until fully paid;
5. Ordering defendants Leverizas to refund to plaintiff the amount of P48,000.00
with 6% interest per annum until fully paid;
6. Dismissing defendants Leverizas' four counterclaims against plaintiff;
7. Dismissing defendants Leverizas' cross-claim against defendant CAA;
8. Dismissing defendant CAA's counterclaim against plaintiff;
9. Dismissing defendant CAA's counterclaim against defendant Leverizas.
No pronouncements as to costs.
On June 2, 1976, defendant Leveriza filed a motion for new trial on the ground of newly discovered evidence,
lack of jurisdiction of the court over the case and lack of evidentiary support of the decision which was denied in
the order of November 12,1976 (Rollo, p. 17).
On July 27, 1976, the CAA filed a Motion for Reconsideration, averring that because the lot lease was properly
registered in the name of the Republic of the Philippines, it was only the President of the Philippines or an officer
duly designated by him who could execute the lease contract pursuant to Sec. 567 of the Revised Administrative
Code; that the Airport General Manager has no authority to cancel Contract A, the contract entered into between
the CAA and Leveriza, and that Contract C between the CAA and Mobil was void for not having been approved
by the Secretary of Public Works and Communications. Said motion was however denied on November 12, 1976
(Rollo, p. 18).
On appeal, the Intermediate Appellate Court, being in full accord with the trial court, rendered a decision on
February 29, 1984, the dispositive part of which reads:
WHEREFORE, finding no reversible error in the decision of the lower court dated April 6, 1976,
the same is hereby affirmed in toto.
Hence, this petition.
The petitioners raised the following assignment of errors:
I
THE INTERMEDIATE APPELLATE COURT ERRED IN HOLDING THAT THE ADMINISTRATOR
OF THE CIVIL AERONAUTICS ADMINISTRATION (CAA) HAD THE STATUTORY AUTHORITY
TO LEASE, EVEN WITHOUT APPROVAL OF THE THEN SECRETARY OF PUBLIC WORKS
AND COMMUNICATIONS, REAL PROPERTY BELONGING TO THE REPUBLIC OF THE
PHILIPPINES.
II
THE INTERMEDIATE APPELLATE COURT ERRED IN HOLDING THAT THE ADMINISTRATOR
OF THE CIVIL AERONAUTICS ADMINISTRATION HAD STATUTORY AUTHORITY, WITHOUT
THE APPROVAL OF THE THEN SECRETARY OF PUBLIC WORKS AND COMMUNICATIONS,
TO CANCEL A LEASE CONTRACT OVER REAL PROPERTY OWNED BY THE REPUBLIC OF
THE PHILIPPINES, WHICH CONTRACT WAS APPROVED, AS REQUIRED BY LAW, BY THE
SECRETARY.
III
THE INTERMEDIATE APPELLATE COURT ERRED WHEN IT RULED THAT THE CONTRACT
OF SUBLEASE (CONTRACT B) ENTERED INTO BETWEEN PETITIONERS' PREDECESSORIN-INTEREST AND RESPONDENT MOBIL OIL PHILIPPINES, INC. WAS WITHOUT THE
CONSENT OF THE ADMINISTRATOR OF THE CIVIL AERONAUTICS ADMINISTRATION.
The petition is devoid of merit.
There is no dispute that Contract "A" at the time of its execution was a valid contract. The issue therefore is
whether or not said contract is still subsisting after its cancellation by CAA on the ground of a sublease executed
by petitioners with Mobil Oil Philippines without the consent of CAA and the execution of another contract of
lease between CAA and Mobil Oil Philippines (Contract "C").

Petitioners contend that Contract "A" is still subsisting because Contract "B" is a valid sublease and does not
constitute a ground for the cancellation of Contract "A", while Contract "C", a subsequent lease agreement
between CAA and Mobil Oil Philippines is null and void, for lack of approval by the Department Secretary.
Petitioners anchor their position on Sections 567 and 568 of the Revised Administrative Code which require
among others, that subject contracts should be executed by the President of the Philippines or by an officer duly
designated by him, unless authority to execute the same is by law vested in some other officer (Petition, Rollo,
pp. 15-16).
At the other extreme, respondent Mobil Oil Philippines asserts that Contract "A" was validly cancelled on June
28, 1966 and so was Contract "B" which was derived therefrom. Accordingly, it maintains that Contract "C" is the
only valid contract insofar as the parcel of land in question is concerned and that approval of the Department
Head is not necessary under Section 32 (par. 24) of the Republic Act 776 which expressly vested authority to
enter into such contracts in the Administrator of CAA (Comment; Rollo, p. 83).
On its part, respondent Civil Aeronautics Administration took the middle ground with its view that Contract "A" is
still subsisting as its cancellation is ineffective without the approval of the Department Head but said contract is
not enforceable because of petitioners' violation of its terms and conditions by entering into Contract "B" of
sublease without the consent of CAA. The CAA further asserts that Contract "C" not having been approved by
the Secretary of Public Works and Communications, is not valid (Rollo, p. 43). However, in its comment filed with
the Supreme Court, the CAA made a complete turnabout adopting the interpretation and ruling made by the trial
court which was affirmed by the Intermediate Appellate Court (Court of Appeals), that the CAA Administrator has
the power to execute the deed or contract of lease involving real properties under its administration belonging to
the Republic of the Philippines without the approval of the Department Head as clearly provided in Section 32,
paragraph (24) of Republic Act 776.
The issue narrows down to whether or not there is a valid ground for the cancellation of Contract "A."
Contract "A" was entered into by CAA as the lessor and the Leverizas as the lessee specifically "for the purpose
of operating and managing a gasoline station by the latter, to serve vehicles going in and out of the airport."
As regards prior consent of the lessor to the transfer of rights to the leased premises, the provision of paragraph
7 of said Contract reads in full:
7. The Party of the Second part may transfer her rights to the leased premises but in such
eventuality, the consent of the Party of the First Part shall first be secured. In any event, such
transfer of rights shall have to respect the terms and conditions of this agreement.
Paragraph 8 provides the sanction for the violation of the above-mentioned terms and conditions of the contract.
Said paragraph reads:
8. Failure on the part of the Party of the Second Part to comply with the terms and conditions
herein agreed upon shall be sufficient for revocation of this contract by the Party of the First Part
without need of judicial demand.
It is not disputed that the Leverizas (lessees) entered into a contract of sublease (Contract "B") with Mobil Oil
Philippines without the consent of CAA (lessor). The cancellation of the contract was made in a letter dated June
28, 1966 of Guillermo P. Jurado, Airport General Manager of CAA addressed to Rosario Leveriza, as follows:
(Letterhead)
June 28, 1966
Mrs.
Manila International Airport

Rosario

Leveriza

Madam:
It has been found out by the undersigned that you have sublet the property of
the CAA leased to you and by virtue of this, your lease contract is hereby
cancelled because of the violation of the stipulations of the contract. I would like
to inform you that even without having sublet the said property the said contract
would have been cancelled as per attached communication.
Very truly yours,
For the Director:

(Sgd.)
(Typed)

Illegible

GUILLERMO
P.
JURADO
Airport General Manager
Respondent Leverizas and the CAA assailed the validity of such cancellation, claiming that the Airport General
Manager had no legal authority to make the cancellation. They maintain that it is only the Secretary of Public
Works and Communications, acting for the President, or by delegation of power, the Director of Civil Aeronautics
Administration who could validly cancel the contract. They do admit, however, and it is evident from the records
that the Airport General Manager signed "For the Director." Under the circumstances, there is no question that
such act enjoys the presumption of regularity, not to mention the unassailable fact that such act was
subsequently affirmed or ratified by the Director of the CAA himself (Record on Appeal, pp. 108-110).
Petitioners argue that cancelling or setting aside a contract approved by the Secretary is, in effect, repealing an
act of the Secretary which is beyond the authority of the Administrator.
Such argument is untenable. The terms and conditions under which such revocation or cancellation may be
made, have already been specifically provided for in Contract "A" which has already been approved by the
Department Head, It is evident that in the implementation of aforesaid contract, the approval of said Department
Head is no longer necessary if not redundant.
It is further contended that even granting that such cancellation was effective, a subsequent billing by the
Accounting Department of the CAA has in effect waived or nullified the rescission of Contract "A."
It will be recalled that the questioned cancellation of Contract "A" was among others, mainly based on the
violation of its terms and conditions, specifically, the sublease of the property by the lessee without the consent
of the lessor.
The billing of the petitioners by the Accounting Department of the CAA if indeed it transpired, after the
cancellation of Contract "A" is obviously an error. However, this Court has already ruled that the mistakes of
government personnel should not affect public interest. In San Mauricio Mining Company v. Ancheta (105 SCRA
391, 422), it has been held that as a matter of law rooted in the protection of public interest, and also as a
general policy to protect the government and the people, errors of government personnel in the performance of
their duties should never deprive the people of the right to rectify such error and recover what might be lost or be
bartered away in any actuation, deal or transaction concerned. In the case at bar, the lower court in its decision
which has been affirmed by the Court of Appeals, ordered the CAA to refund to the petitioners the amount of
rentals which was not due from them with 6% interest per annum until fully paid.
Petitioners further assail the interpretation of Contract "A", claiming that Contract "B" was a mere sublease to
respondent Mobil Oil Philippines, Inc. and requires no prior consent of CAA to perfect the same. Citing Article
1650 of the Civil Code, they assert that the prohibition to sublease must be expressed and cannot be merely
implied or inferred (Rollo, p. 151).
As correctly found by the Court of Appeals, petitioners in asserting the non- necessity for a prior consent
interprets the first sentence of paragraph 7 of Contract "A" to refer to an assignment of lease under Article 1649
of the Civil Code and not to a mere sublease. A careful scrutiny of said paragraph of Contract "A" clearly shows
that it speaks of transfer of rights of Rosario Leveriza to the leased premises and not to assignment of the lease
(Rollo, pp. 48-49).
Petitioners likewise argued that it was contemplated by the parties to Contract "A" that Mobil Oil Philippines
would be the owner of the gasoline station it would construct on the leased premises during the period of the
lease, hence, it is understood that it must be given a right to use and occupy the lot in question in the form of a
sub-lease (Rollo, p. 152).
In Contract "A", it was categorically stated that it is the lessee (petitioner) who will manage and operate the
gasoline station. The fact that Mobil Oil was mentioned in that contract was clearly not intended to give approval
to a sublease between petitioners and said company but rather to insure that in the arrangements to be made
between them, it must be understood that after the expiration of the lease contract, whatever improvements have
been constructed in the leased premises shall be relinquished to CAA. Thus, this Court held that "the primary
and elementary rule of construction of documents is that when the words or language thereof is clear and plain
or readily understandable by any ordinary reader thereof, there is absolutely no room for interpretation or
construction anymore." (San Mauricio Mining Company v. Ancheta, supra).

Finally, petitioners contend that the administrator of CAA cannot execute without approval of the Department
Secretary, a valid contract of lease over real property owned by the Republic of the Philippines, citing Sections
567 and 568 of the Revised Administrative Code, which provide as follows:
SEC. 567. Authority of the President of the Philippines to execute contracts relative to real
property. When the Republic of the Philippines is party to a deed conveying the title to real
property or is party to any lease or other contract relating to real property belonging to said
government, said deed or contract shall be executed on behalf of said government by the
President of the Philippines or by an officer duly designated by him, unless authority to execute
the same is by law expressly vested in some other officer. (Emphasis supplied)
SEC. 568. Authority of national officials to make contract. Written contracts not within the
purview of the preceding section shall, in the absence of special provision, be executed, with the
approval of the proper Department Head, by the Chief of the Bureau or Office having control of
the appropriation against which the contract would create a charge; or if there is no such chief,
by the proper Department Head himself or the President of the Philippines as the case may
require.
On the other hand, respondent CAA avers that the CAA Administrator has the authority to lease real property
belonging to the Republic of the Philippines under its administration even without the approval of the Secretary
of Public Works and Communications, which authority is expressly vested in it by law, more particularly Section
32 (24) of Republic Act 776, which reads:
Sec. 32. Powers and Duties of the Administrator. Subject to the general control and
supervision of the Department Head, the Administrator shall have, among others, the following
powers and duties:
xxx xxx xxx
(24) To administer, operate, manage, control, maintain and develop the Manila International
Airport and all government aerodromes except those controlled or operated by the Armed Forces
of the Philippines including such power and duties as: ... (b) to enter into, make and execute
contracts of any kind with any person, firm, or public or private corporation or entity; (c) to
acquire, hold, purchase, or lease any personal or real property; right of ways, and easements
which may be proper or necessary: Provided, that no real property thus acquired and any other
real property of the Civil Aeronautics Administration shall be sold without the approval of the
President of the Philippines. ...
There is no dispute that the Revised Administrative Code is a general law while Republic Act 776
is a special law nor in the fact that the real property subject of the lease in Contract "C" is real
property belonging to the Republic of the Philippines.
Under 567 of the Revised Administrative Code, such contract of lease must be executed: (1) by the President of
the Philippines, or (2) by an officer duly designated by him or (3) by an officer expressly vested by law. It is
readily apparent that in the case at bar, the Civil Aeronautics Administration has the authority to enter into
Contracts of Lease for the government under the third category. Thus, as correctly ruled by the Court of Appeals,
the Civil Aeronautics Administration has the power to execute the deed or contract involving leases of real
properties belonging to the Republic of the Philippines, not because it is an entity duly designated by the
President but because the said authority to execute the same is, by law expressly vested in it.
Under the above-cited Section 32 (par. 24) of Republic Act 776, the Administrator (Director) of the Civil
Aeronautics Administration by reason of its creation and existence, administers properties belonging to the
Republic of the Philippines and it is on these properties that the Administrator must exercise his vast power and
discharge his duty to enter into, make and execute contract of any kind with any person, firm, or public or private
corporation or entity and to acquire, hold, purchase, or lease any personal or real property, right of ways and
easements which may be proper or necessary. The exception, however, is the sale of properties acquired by
CAA or any other real properties of the same which must have the approval of the President of the Philippines.
The Court of appeals took cognizance of the striking absence of such proviso in the other transactions
contemplated in paragraph (24) and is convinced as we are, that the Director of the Civil Aeronautics
Administration does not need the prior approval of the President or the Secretary of Public Works and
Communications in the execution of Contract "C."

In this regard, this Court, ruled that another basic principle of statutory construction mandates that general
legislation must give way to special legislation on the same subject, and generally be so interpreted as to
embrace only cases in which the special provisions are not applicable (Sto. Domingo v. De los Angeles, 96
SCRA 139),. that specific statute prevails over a general statute (De Jesus v. People, 120 SCRA 760) and that
where two statutes are of equal theoretical application to a particular case, the one designed therefor specially
should prevail (Wil Wilhensen, Inc. v. Baluyot, 83 SCRA 38)
WHEREFORE, the petition is DISMISSED for lack of merit and the decision of the Court of Appeals appealed
from is AFFIRMED in toto.
SO ORDERED.
Gutierrez, Jr., Feliciano and Cortes, JJ., concur.
Fernan, J took no part.
5.) Republic of the Philippines
SUPREME COURT
Manila
SECOND DIVISION
G.R. No. L-34568 March 28, 1988
RODERICK DAOANG, and ROMMEL DAOANG, assisted by their father, ROMEO DAOANG, petitioners,
vs.
THE MUNICIPAL JUDGE, SAN NICOLAS, ILOCOS NORTE, ANTERO AGONOY and AMANDA RAMOSAGONOY, respondents.
PADILLA, J.:
This is a petition for review on certiorari of the decision, dated 30 June 1971, rendered by the respondent
judge *in Spec. Proc. No. 37 of Municipal Court of San Nicolas, Ilocos Norte, entitled: "In re Adoption of the
Minors Quirino Bonilla and Wilson Marcos; Antero Agonoy and Amanda R. Agonoy, petitioners", the dispositive
part of which reads, as follows:
Wherefore, Court renders judgment declaring that henceforth Quirino Bonilla and Wilson Marcos
be, to all legitimate intents and purposes, the children by adoption of the joint petitioners Antero
Agonoy and Amanda R. Agonoy and that the former be freed from legal obedience and
maintenance by their respective parents, Miguel Bonilla and Laureana Agonoy for Quirino Bonilla
and Modesto Marcos and Benjamina Gonzales for Wilson Marcos and their family names
'Bonilla' and 'Marcos' be changed with "Agonoy", which is the family name of the petitioners.
Successional rights of the children and that of their adopting parents shall be governed by the
pertinent provisions of the New Civil Code.
Let copy of this decision be furnished and entered into the records of the Local Civil Registry of
San Nicolas, Ilocos Norte, for its legal effects at the expense of the petitioners. 1
The undisputed facts of the case are as follows:
On 23 March 1971, the respondent spouses Antero and Amanda Agonoy filed a petition with the Municipal Court
of San Nicolas, Ilocos Norte, seeking the adoption of the minors Quirino Bonilla and Wilson Marcos. The case,
entitled: "In re Adoption of the Minors Quirino Bonilla and Wilson Marcos, Antero Agonoy and Amanda RamosAgonoy, petitioners", was docketed therein as Spec. Proc. No. 37. 2
The petition was set for hearing on 24 April 1971 and notices thereof were caused to be served upon the office
of the Solicitor General and ordered published in the ILOCOS TIMES, a weekly newspaper of general circulation
in the province of Ilocos Norte, with editorial offices in Laoag City. 3
On 22 April 1971, the minors Roderick and Rommel Daoang, assisted by their father and guardian ad litem, the
petitioners herein, filed an opposition to the aforementioned petition for adoption, claiming that the spouses
Antero and Amanda Agonoy had a legitimate daughter named Estrella Agonoy, oppositors' mother, who died on
1 March 1971, and therefore, said spouses were disqualified to adopt under Art. 335 of the Civil Code. 4

After the required publication of notice had been accomplished, evidence was presented. Thereafter, the
Municipal Court of San Nicolas, Ilocos Norte rendred its decision, granting the petition for adoption. 5
Hence, the present recourse by the petitioners (oppositors in the lower court).
The sole issue for consideration is one of law and it is whether or not the respondent spouses Antero Agonoy
and Amanda Ramos-Agonoy are disqualified to adopt under paragraph (1), Art. 335 of the Civil Code.
The pertinent provision of law reads, as follows:
Art. 335. The following cannot adopt:
(1) Those who have legitimate, legitimated, acknowledged natural children, or children by legal
fiction;
xxx xxx xxx
In overruling the opposition of the herein petitioners, the respondents judge held that "to add grandchildren in
this article where no grandchil is included would violate to (sic) the legal maxim that what is expressly included
would naturally exclude what is not included".
But, it is contended by the petitioners, citing the case of In re Adoption of Millendez, 6 that the adoption of
Quirino Bonilla and Wilson Marcos would not only introduce a foreign element into the family unit, but would
result in the reduction of their legititimes. It would also produce an indirect, permanent and irrevocable
disinheritance which is contrary to the policy of the law that a subsequent reconciliation between the offender
and the offended person deprives the latter of the right to disinherit and renders ineffectual any disinheritance
that may have been made.
We find, however, that the words used in paragraph (1) of Art. 335 of the Civil Code, in enumerating the persons
who cannot adopt, are clear and unambiguous. The children mentioned therein have a clearly defined meaning
in law and, as pointed out by the respondent judge, do not include grandchildren.
Well known is the rule of statutory construction to the effect that a statute clear and unambiguous on its face
need not be interpreted; stated otherwise, the rule is that only statutes with an ambiguous or doubtful meaning
may be the subject of statutory construction. 7
Besides, it appears that the legislator, in enacting the Civil Code of the Philippines, obviously intended that only
those persons who have certain classes of children, are disqualified to adopt. The Civil Code of Spain, which
was once in force in the Philippines, and which served as the pattern for the Civil Code of the Philippines, in its
Article 174, disqualified persons who have legitimate or legitimated descendants from adopting. Under this
article, the spouses Antero and Amanda Agonoy would have been disqualified to adopt as they have legitimate
grandchildren, the petitioners herein. But, when the Civil Code of the Philippines was adopted, the word
"descendants" was changed to "children", in paragraph (1) of Article 335.
Adoption used to be for the benefit of the adoptor. It was intended to afford to persons who have no child of their
own the consolation of having one, by creating through legal fiction, the relation of paternity and filiation where
none exists by blood relationship. 8 The present tendency, however, is geared more towards the promotion of
the welfare of the child and the enhancement of his opportunities for a useful and happy life, and every
intendment is sustained to promote that objective. 9 Under the law now in force, having legitimate, legitimated,
acknowledged natural children, or children by legal fiction, is no longer a ground for disqualification to adopt. 10
WHEREFORE, the petition is DENIED. The judgment of the Municipal Court of San Nicolas, Ilocos Norte in
Spec. Proc. No. 37 is AFFIRMED. Without pronouncement as to costs in this instance.
SO ORDERED.
Yap, Melencio-Herrera, Paras and Sarmiento, JJ., concur.
Footnotes
* Judge Pascual C. Barab.
1 Rollo, pp. 19-20.
2 Id., p. 8.
3 Id., p. 12.

4 Id., p. 13.
5 Id., p. 14.
6 G.R. No. L-28195, June 10, 1971, 39 SCRA 499.
7 2 Sutherland, Statutory Construction, 3rd. ed., Section 4502, p. 316.
8 In re Adoption of Resaba, 95 Phil. 244.
9 Santos vs. Aranzanso, 123 Phil. 160.
10 Child and Welfare Code, Art. 28.

6.) SECOND DIVISION

[G.R. No. 111722. May 27, 1997]

ALPHA INVESTIGATION AND SECURITY AGENCY, INC. (AISA), petitioner, vs. NATIONAL LABOR
RELATIONS COMMISSION, THIRD DIVISION, and WILLIAM GALIMBA, NESTOR LOLOQUISEN,
NESTOR IBUYAT, CARLITO CASTRO, JOSE PERDIDO, FELIPE TOLENTINO, LEONARDO IBUYAT,
FELINO CULANNAY, RONIE NINO, ROMAN NALUNDASAN, JAIME FONTANILLA, WILFRED
BUTAY, JOSE ACIO, EDISON VALDEZ, CRESENCIO AGRES, RODRIGO LUIS, MARIO SUGUI,
BENEDICTO SUGUI, ROGER RAMBAUD, respondents.
DECISION
ROMERO, J.:
May the principal of a security service agreement be held jointly and severally liable with the contractor for
non-payment of the minimum wage?
The facts are undisputed.
Petitioner Alpha Investigation and Agency, Inc. (AISA) is a private corporation engaged in the business of
providing security services to its clients, one of whom is the Don Mariano Marcos State University (DMMSU).
Private respondents were hired as security guards by AISA on February 16, 1990. Five months later, 43
security guards filed before the Regional Office of the Department of Labor and Employment (DOLE) a complaint
against AISA for non-compliance with the current minimum wage order. After 24 of the original complainants filed
a motion for exclusion from the case, the remaining 19 security guards filed their individual amended complaints
impleading DMMSU as party-respondent.
Private respondents have been receiving a monthly salary of P900.00 although the security service
agreement between AISA and DMMSU[1] provided a monthly pay of P1,200.00 for each security guard. AISA
made representations with DMMSU for an increase in the contract rates of the security guards to enable them to
pay the mandated minimum wage rates without compromising its administrative and operational
expenses. DMMSU, however, replied that, being a government corporation, it cannot grant said request due to
budgetary constraints.

On August 17, 1992, Labor Arbiter Emiliano T. de Asis rendered a decision, the dispositive portion of which
reads as follows:
"RESPONSIVE TO THE FOREGOING, judgment is hereby rendered:
a) Ordering the respondent Alpha Investigation and Security Agency and Mariano Marcos State University to pay
each complainant the amount of FORTY ONE THOUSAND FOUR HUNDRED FIFTY NINE PESOS AND FIFTY
ONE CENTAVOS (P41,459.51) representing salary differential for the period from February 16, 1990 to
September 30, 1991, or the total amount of P787,730.69 as follows:
1. Nestor Loloquisen P41,459.51
2. Nestor Ibuyat 41,459.51
3. Jose Acio 41,459.51
4. Cresencio Agres 41,459.51
5. Wilfred Butay 41,459.51
6. Carlito Castro 41,459.51
7. Federico Calunnay 41,459.51
8. Jaime Fontanilla 41,459.51
9. William Galimba 41,459.51
10. Leonardo Ibuyat 41,459.51
11. Rodrigo Luis 41,459.51
12. Roman Nalundasan 41,459.51
13. Ronnie Nino 41,459.51
14. Jose Perdido 41,459.51
15. Roger Rambaud 41,459.51
16. Benedicto Sugui 41,459.51
17. Mario Sugui 41,459.51
18. Felipe Tolentino 41,459.51
19. Edison Valdez 41,459.51
P787,730.69
b) Dismissing the claims for 13th month pay for failure to substantiate the same.
c) Claims of complainants who filed their motion for reconsideration are hereby dismissed.
SO ORDERED."[2]
AISA and DMMSU interposed separate appeals. The NLRC, on May 7, 1993, rendered a decision affirming
the solidary liability of AISA and DMMSU and remanding the records of the case to the arbitration branch of
origin for computation of the salary differential awarded by the Labor Arbiter.
Only AISA filed a motion for reconsideration, which was denied by the NLRC on July 1, 1993, for lack of
merit.
The judgment against DMMSU, finding it jointly and severally liable with AISA for the payment of increase in
wages, became final and executory after it failed to file a petition forcertiorari with this Court within a reasonable
time. "Although Rule 65 does not specify any period for the filing of a petition for certiorari and mandamus, it
must, nevertheless, be filed within a reasonable time. In certiorari cases, the definitive rule now is that such
reasonable time is within three months from the commission of the complained act."[3]

In this petition, AISA alleges that payment of the wage increases under the current minimum wage order
should be borne exclusively by DMMSU, pursuant to Section 6 of Republic Act 6727 (RA 6727)[4] which reads
as follows:
"Sec. 6. In the case of contracts for construction projects and for security, janitorial and similar
services, the prescribed increases in the wage rates of the workers shall be borne by the principals or clients of
the construction/service contractors and the contract shall be deemed amended accordingly. In the event,
however, that the principal or client fails to pay the prescribed wage rates, the construction/service contractor
shall be jointly and severally liable with his principal or client."
It further contends that Articles 106, 107 and 109 of the Labor Code generally refer to the failure of the
contractor or sub-contractor to pay wages in accordance with the Labor Code with a mandate that failure to pay
such wages would make the employer and contractor jointly and severally liable for such payment. AISA insists
that the matter involved in the case at bar hinges on wage differentials or wages increases, as prescribed in the
aforequoted Section 6 of RA 6727, and not wages in general, as provided by the Labor Code.
This interpretation is not acceptable. It is a cardinal rule in statutory construction that in interpreting the
meaning and scope of a term used in the law, a careful review of the whole law involved, as well as the
intendment
of
the
law,
must
be
made.[5] In
fact,
legislative
intent
must
be
ascertained from a consideration of the statute as a whole, and not of an isolated part or aparticular provision alo
ne.[6]
AISA's solidary liability for the amounts due the security guards finds support in Articles 106, 107 and 109 of
the Labor Code, to wit:
"ART. 106. Contractor or Sub-Contractor. Whenever an employer enters into a contract with another person for
the performance of the former's work, the employees of the contractor and of the latter's sub-contractor, if any,
shall be paid in accordance with the provisions of this code.
In the event that the contractor or sub-contractor fails to pay the wages of his employees in accordance with this
Code, the employer shall be jointly and severally liable with his contractor or sub-contractor to such employees
to the extent of the work performed under the contract, in the same manner and extent that he is liable to
employees directly employed by him. xxx
ART. 107. Indirect employer. The provisions of the immediately preceding Article shall likewise apply to any
person, partnership association or corporation which, nor being an employer, contracts with an independent
contractor for the performance of any work, task, job or project.
ART. 109. Solidary Liability. The provisions of existing laws to the contrary notwithstanding, every employer or
indirect employer shall be held responsible with his contractor or sub-contractor for any violation of any provision
of this Code. For purposes of determining the extent of their civil liability under the Chapter, they shall be
considered as direct employers."
The joint and several liability of the contractor and the principal is mandated by the Labor Code to ensure
compliance with its provisions, including the statutory minimum wage.[7] The contractor is made liable by virtue
of his status as direct employer, while the principal becomes the indirect employer of the former's employees for
the purpose of paying their wages in the event of failure of the contractor to pay them. This gives the workers
ample protection consonant with the labor and social justice provisions of the 1987 Constitution.[8]
In the case at bar, it is not disputed that private respondents are the employees of AISA. Neither is there
any question that they were assigned to guard the premises of DMMSU pursuant to the latter's security service
agreement with AISA and that these two entities paid their wage increases.
It is to be borne in mind that wages orders, being statutory and mandatory, cannot be waived. AISA cannot
escape liability since the law provides for the joint and solidary liability of the principal and the contractor to
protect the laborers.[9] Thus, the Court held in the Eagle Security v. NLRC:[10]
"The solidary liability of PTSI and EAGLE, however, does not preclude the right of reimbursement from his codebtor by the one who paid (See Article 1217, Civil Code). It is with respect to this right of reimbursement that
petitioners can find support in the aforecited contractual stipulation and Wage Order provision.

The Wage Orders are explicit that payment of the increases are 'to be borne' by the principal or client. 'To be
borne', however, does not mean that the principal, PTSI in this case, would directly pay the security guards the
wage and allowance increases because there is no privity of contract between them. The security guards'
contractual relationship is with their immediate employer, EAGLE. As an employer, EAGLE is tasked, among
others, with the payment of their wages. (See Article VII Sec. 3 of the Contract for Security Services, supra and
Bautista v. Inciong, G.R. No. 52824, March 16, 1988, 158 SCRA 556).
Premises considered, the security guards' immediate recourse for the payment of the increases is with their
direct employer, EAGLE. However, in order for the security agency to comply with the new wage and allowance
rates it has to pay the security guards, the Wage Order made specific provision to amend existing contracts for
security services by allowing the adjustments of the consideration paid by the principal to the security agency
concerned. What the Wage Orders require, therefore, is the amendment of the contract as to the consideration
to cover the service contractor's payment of the increases mandated. In the end, therefore, ultimate liability for
the payment of the increases rests with the principal." (Underscoring supplied)
Section 6 of RA 6727 merely provides that in case of wage increases resulting in a salary differential, the
liability of the principal and the contractor shall be joint and several. The same liability attaches under Articles
106, 107 and 109 of the Labor Code, which refer to the prevailing standard minimum wage.
The Court finds that the NLRC acted correctly in holding petitioner jointly and severally liable with DMMSU
for the payment of the wage increases to private respondents. Accordingly, no grave abuse of discretion may be
attributed to the NLRC in arriving at the impugned decision.
WHEREFORE, premises considered, the petition is DISMISSED for lack of merit and the assailed
resolution is AFFIRMED. Costs against petitioner.
SO ORDERED.
Regalado, (Chairman), Puno, Mendoza, and Torres, Jr., JJ., concur.

7.) Republic of the Philippines

SUPREME COURT
Manila
EN BANC
G.R. No. 123169 November 4, 1996
DANILO
vs.
COMMISSION ON ELECTIONS, respondent.

E.

PARAS, petitioner,

RESOLUTION
FRANCISCO, J.:
Petitioner Danilo E. Paras is the incumbent Punong Barangay of Pula, Cabanatuan City who won during the last
regular barangay election in 1994. A petition for his recall as Punong Barangay was filed by the registered voters
of the barangay. Acting on the petition for recall, public respondent Commission on Elections (COMELEC)
resolved to approve the petition, scheduled the petition signing on October 14, 1995, and set the recall election

on
November
13,
1995. 1 At least 29.30% of the registered voters signed the petition, well above the 25% requirement provided by
law. The COMELEC, however, deferred the recall election in view of petitioner's opposition. On December 6,
1995, the COMELEC set anew the recall election, this time on December 16, 1995. To prevent the holding of the
recall election, petitioner filed before the Regional Trial Court of Cabanatuan City a petition for injunction,
docketed as SP Civil Action No. 2254-AF, with the trial court issuing a temporary restraining order. After
conducting a summary hearing, the trial court lifted the restraining order, dismissed the petition and required
petitioner and his counsel to explain why they should not be cited for contempt for misrepresenting that the
barangay recall election was without COMELEC approval. 2
In a resolution dated January 5, 1996, the COMELEC, for the third time, re-scheduled the recall election an
January 13, 1996; hence, the instant petition for certiorari with urgent prayer for injunction. On January 12, 1996,
the Court issued a temporary restraining order and required the Office of the Solicitor General, in behalf of public
respondent, to comment on the petition. In view of the Office of the Solicitor General's manifestation maintaining
an opinion adverse to that of the COMELEC, the latter through its law department filed the required comment.
Petitioner thereafter filed a reply. 3
Petitioner's argument is simple and to the point. Citing Section 74 (b) of Republic Act No. 7160, otherwise known
as the Local Government Code, which states that "no recall shall take place within one (1) year from the date of
the official's assumption to office or one (1) year immediately preceding a regular local election", petitioner insists
that the scheduled January 13, 1996 recall election is now barred as the Sangguniang Kabataan (SK) election
was set by Republic Act No. 7808 on the first Monday of May 1996, and every three years thereafter. In support
thereof, petitioner cites Associated Labor Union v. Letrondo-Montejo, 237 SCRA 621, where the Court
considered the SK election as a regular local election. Petitioner maintains that as the SK election is a regular
local election, hence no recall election can be had for barely four months separate the SK election from the recall
election. We do not agree.
The subject provision of the Local Government Code provides:
Sec. 74. Limitations on Recall. (a) Any elective local official may be the subject of a recall
election only once during his term of office for loss of confidence.
(b) No recall shall take place within one (1) year from the date of the official's assumption to
office or one (1) year immediately preceding a regular local election.
[Emphasis added]
It is a rule in statutory construction that every part of the statute must be interpreted with reference to the
context,i.e., that every part of the statute must be considered together with the other parts, and kept subservient
to the general intent of the whole enactment. 4 The evident intent of Section 74 is to subject an elective local
official to recall election once during his term of office. Paragraph (b) construed together with paragraph (a)
merely designates the period when such elective local official may be subject of a recall election, that is, during
the second year of his term of office. Thus, subscribing to petitioner's interpretation of the phrase regular local
election to include the SK election will unduly circumscribe the novel provision of the Local Government Code on
recall, a mode of removal of public officers by initiation of the people before the end of his term. And if the SK
election which is set by R.A No. 7808 to be held every three years from May 1996 were to be deemed within the
purview of the phrase "regular local election", as erroneously insisted by petitioner, then no recall election can be
conducted rendering inutile the recall provision of the Local Government Code.
In the interpretation of a statute, the Court should start with the assumption that the legislature intended to enact
an effective law, and the legislature is not presumed to have done a vain thing in the enactment of a
statute. 5 An interpretation should, if possible, be avoided under which a statute or provision being construed is
defeated, or as otherwise expressed, nullified, destroyed, emasculated, repealed, explained away, or rendered
insignificant, meaningless, inoperative or nugatory. 6
It is likewise a basic precept in statutory construction that a statute should be interpreted in harmony with the
Constitution. 7 Thus, the interpretation of Section 74 of the Local Government Code, specifically paragraph (b)
thereof, should not be in conflict with the Constitutional mandate of Section 3 of Article X of the Constitution to
"enact a local government code which shall provide for a more responsive and accountable local government
structure instituted through a system of decentralization with effective mechanism of recall, initiative, and
referendum . . . ."

Moreover, petitioner's too literal interpretation of the law leads to absurdity which we cannot countenance. Thus,
in a case, the Court made the following admonition:
We admonish against a too-literal reading of the law as this is apt to constrict rather than fulfill its
purpose and defeat the intention of its authors. That intention is usually found not in "the letter
that killeth but in the spirit that vivifieth". . . 8
The spirit, rather than the letter of a law determines its construction; hence, a statute, as in this case,
must be read according to its spirit and intent.
Finally, recall election is potentially disruptive of the normal working of the local government unit necessitating
additional expenses, hence the prohibition against the conduct of recall election one year immediately preceding
the regular local election. The proscription is due to the proximity of the next regular election for the office of the
local elective official concerned. The electorate could choose the official's replacement in the said election who
certainly has a longer tenure in office than a successor elected through a recall election. It would, therefore, be
more in keeping with the intent of the recall provision of the Code to construe regular local election as one
referring to an election where the office held by the local elective official sought to be recalled will be contested
and be filled by the electorate.
Nevertheless, recall at this time is no longer possible because of the limitation stated under Section 74 (b) of the
Code considering that the next regular election involving the barangay office concerned is barely seven (7)
months away, the same having been scheduled on May 1997. 9
ACCORDINGLY, the petition is hereby dismissed for having become moot and academic. The temporary
restraining order issued by the Court on January 12, 1996, enjoining the recall election should be as it is hereby
made permanent.
SO ORDERED.
Narvasa, C.J., Padilla, Regalado, Romero, Bellosillo, Melo, Puno, Vitug, Kapunan, Mendoza, Hermosisima, Jr.,
Panganiban and Torres, Jr., JJ., concur.

Separate Opinions
DAVIDE, JR., J., concurring:
I concur with Mr. Justice Ricardo J. Francisco in his ponencia.
However, I wish to add another reason as to why the SK election cannot be considered a "regular local election"
for purposes of recall under Section 74 of the Local Government Code of 1991.
The term "regular local election" must be confined to the regular election of elective local officials, as
distinguished from the regular election of national officials. The elective national officials are the President, VicePresident, Senators and Congressmen. The elective local officials are Provincial Governors, Vice-Governors of
provinces, Mayors and Vice-Mayors of cities and municipalities, Members of the Sanggunians of provinces,
cities and municipalities, punong barangays and members of the sangguniang barangays, and the elective
regional officials of the Autonomous Region of Muslim Mindanao. These are the only local elective officials
deemed recognized by Section 2(2) of Article IX-C of the Constitution, which provides:
Sec. 2. The Commission on Elections shall exercise the following powers and functions:
xxx xxx xxx
(2) Exercise exclusive original jurisdiction over all contests relating to the elections, returns, and
qualifications of all elective regional, provincial, and city officials, and appellate jurisdiction over
all contests involving elective municipal officials decided by trial courts of general jurisdiction, or
involving elective barangay officials decided by trial courts of limited jurisdiction.
A regular election, whether national or local, can only refer to an election participated in by those who possess
the right of suffrage, are not otherwise disqualified by law, and who are registered voters. One of the

requirements for the exercise of suffrage under Section 1, Article V of the Constitution is that the person must be
at least 18 years of age, and one requisite before he can vote is that he be a registered voter pursuant to the
rules on registration prescribed in the Omnibus Election Code (Section 113-118).
Under the law, the SK includes the youth with ages ranging from 15 to 21 (Sec. 424, Local Government Code of
1991). Accordingly, they include many who are not qualified to vote in a regular election, viz., those from ages 15
to less than 18. In no manner then may SK elections be considered a regular election (whether national or local).
Indeed the Sangguniang Kabataan is nothing more than a youth organization, and although fully recognized in
the Local Government Code and vested with certain powers and functions, its elective officials have not attained
the status of local elective officials. So, in Mercado vs. Board of Election Supervisors (243 SCRA 422 [1995]),
this Court ruled that although the SK Chairman is an ex-officio member of the sangguniang barangay an
elective body that fact does not make him "an elective barangay official," since the law specifically provides
who comprise the elective officials of the sangguniang barangay, viz., the punong barangay and the seven (7)
regularsangguniang barangay members elected at large by those qualified to exercise the right of suffrage under
Article V of the Constitution, who are likewise registered voters of the barangay. This shows further that the SK
election is not a regular local election for purposes of recall under Section 74 of the Local Government Code.
Separate Opinions
DAVIDE, JR., J., concurring:
I concur with Mr. Justice Ricardo J. Francisco in his ponencia.
However, I wish to add another reason as to why the SK election cannot be considered a "regular local election"
for purposes of recall under Section 74 of the Local Government Code of 1991.
The term "regular local election" must be confined to the regular election of elective local officials, as
distinguished from the regular election of national officials. The elective national officials are the President, VicePresident, Senators and Congressmen. The elective local officials are Provincial Governors, Vice-Governors of
provinces, Mayors and Vice-Mayors of cities and municipalities, Members of the Sanggunians of provinces,
cities and municipalities, punong barangays and members of the sangguniang barangays, and the elective
regional officials of the Autonomous Region of Muslim Mindanao. These are the only local elective officials
deemed recognized by Section 2(2) of Article IX-C of the Constitution, which provides:
Sec. 2. The Commission on Elections shall exercise the following powers and functions:
xxx xxx xxx
(2) Exercise exclusive original jurisdiction over all contests relating to the elections, returns, and
qualifications of all elective regional, provincial, and city officials, and appellate jurisdiction over
all contests involving elective municipal officials decided by trial courts of general jurisdiction, or
involving elective barangay officials decided by trial courts of limited jurisdiction.
A regular election, whether national or local, can only refer to an election participated in by those who possess
the right of suffrage, are not otherwise disqualified by law, and who are registered voters. One of the
requirements for the exercise of suffrage under Section 1, Article V of the Constitution is that the person must be
at least 18 years of age, and one requisite before he can vote is that he be a registered voter pursuant to the
rules on registration prescribed in the Omnibus Election Code (Section 113-118).
Under the law, the SK includes the youth with ages ranging from 15 to 21 (Sec. 424, Local Government Code of
1991). Accordingly, they include many who are not qualified to vote in a regular election, viz., those from ages 15
to less than 18. In no manner then may SK elections be considered a regular election (whether national or local).
Indeed the Sangguniang Kabataan is nothing more than a youth organization, and although fully recognized in
the Local Government Code and vested with certain powers and functions, its elective officials have not attained
the status of local elective officials. So, in Mercado vs. Board of Election Supervisors (243 SCRA 422 [1995]),
this Court ruled that although the SK Chairman is an ex-officio member of the sangguniang barangay an
elective body that fact does not make him "an elective barangay official," since the law specifically provides
who comprise the elective officials of the sangguniang barangay, viz., the punong barangay and the seven (7)
regularsangguniang barangay members elected at large by those qualified to exercise the right of suffrage under
Article V of the Constitution, who are likewise registered voters of the barangay. This shows further that the SK
election is not a regular local election for purposes of recall under Section 74 of the Local Government Code.

Narvasa, C.J., Padilla, Regalado, Bellosillo, Vitug and Mendoza, JJ., concur.
Footnotes
1 COMELEC Resolution No. 95-3345, September 5, 1995.
2 RTC, Cabanatuan City, Order dated December 20, 1995; Rollo, p. 28.
3 Rollo, pp. 64-66.
4 Aisporna v. Court of Appeals, 113 SCRA 464, 467.
5 Asturias Sugar Central, Inc. v. Commissioner of Customs, 29 SCRA 617, 627.
6 Id. at p. 628.
7 PLDT v. Collector of Internal Revenue, 90 Phil. 674.
8 People v. Salas, 143 SCRA 163, 167.
9 Petition, p. 3; Rollo, p. 5; See: Evardorne v. COMELEC, 204 SCRA 464.

Statutory Construction vs Judicial Legislation

Chester Cabalza recommends his visitors to please read the original & full texts of the cases cited. Xie xie!
Reviewer by Chester B Cabalza
When is it construction and when is it judicial legislation?
To declare what the law shall be is a legislative power, but to declare what the law is or has been, is judicial.
However, the court do and must legislate to fill in the gaps in the law. The Court decided to go beyond merely
ruling on the facts of the existing law and jurisprudence. (Floresca v. Philex Mining; Republic v. CA and Molina)
1. Floresca v. Philex Mining
Does CFI (RTC) have jurisdiction over the complaint?
Pursuant to Article 9 of the Civil Code which provides that: No judge or court shall decline to render judgment by
reason of the silence, obscurity or insufficiency of the laws. It argues that the application or interpretation placed
by the Court upon a law is part of the law as of the date of the enactment of the said law since the Courts
application or interpretation merely establishes the contemporaneous legislative intent that the construed law
purports to carry into effect. Yet, the Court argues that the Court can legislate, pursuant to Article 9 of the New
Civil Code. However, even the legislator himself recognizes that in certain instances, the court do and must
legislate to fill in the gaps in the law; because the mind of the legislator, like all human beings, is finite and
therefore cannot envisage all possible cases to which the law may apply.
2. Republic v. CA and Molina
Guidelines presented by the court.
The Family Code of the Philippines provides an entirely new ground (in addition to those enumerated in the Civil
Code) to assail the validity of a marriage, namely, "psychological incapacity." In addition to resolving the present
case, the court finds the need to lay down specific guidelines in the interpretation and application of Article 36 of
the Family Code. In the present case, it appears to that there is a "difficulty," if not outright "refusal" or "neglect"
in the performance of some marital obligations of the respondent spouse. Mere showing of "irreconcilable
differences" and "conflicting personalities" in no wise constitutes psychological incapacity. Hence, the Court
decided to go beyond merely ruling on the facts of this case vis-a-vis existing law and jurisprudence. For
psychological incapacity to foster, three characteristics should manifest, that include gravity, juridical
antecedence and incurability.

B. How must legislative intent be ascertained?

How must legislative intent be ascertained?
Legislative intent must be ascertained from a consideration of the statute as a whole. The particular words,
clauses and phrases should not be studied as detached and isolated expressions, but the whole and every part
of the statute must be considered in fixing the meaning of any of its parts and in order to produce harmonious
whole. (Aisporna v. CA; China Bank v. Ortega; PVA Board of Administrators v. Bautista)
1. Aisporna v. CA
Legislative intent of the Insurance Act: whether an insurance subagent or proxy covered in section 189 of
Insurance Act.
Legislative intent must be ascertained from a consideration of the statute as a whole. The particular words,
clauses and phrases should not be studied as detached and isolated expressions, but the whole and every part
of the statute must be considered in fixing the meaning of any of its parts and in order to produce harmonious
whole. In the present case, the first paragraph of Section 189 prohibits a person from acting as agent, subagent
or broker in the solicitation or procurement of applications for insurance without first procuring a certificate of
authority so to act from the Insurance Commissioner; while the second paragraph defines who is an insurance
agent within the intent of the section; while the third paragraph prescribes the penalty to be imposed for its
violation.
2. China Bank v. Ortega
Whether a banking institution can validly refuse a court process garnishing the bank deposit invoking the
provisions of R.A. No. 1405 (An Act prohibiting Disclosure of or Inquiry into, Deposits with any Banking
Institution)
In gist of the pertinent provisions of RA 1405, Sec. 2., that although transactions with banking institutions in the
Philippines is absolutely confidential, there is an exception upon written permission of depositor, or in cases of
impeachment, or upon order of the competent court in cases of bribery or dereliction of duty of public officials, or
in cases where the money deposited or invested is the subject matter of the litigation. In the present case, China
Bank is at default because the court merely required the bank to inform the court whether or not the defendant
had a deposit with the bank for the purposes of garnishment issued by the court. However, the disclosure is
purely incidental to the execution process.
3. PVA Board of Administrators v. Bautista
Whether plaintiff is entitled to the pension from 1955 instead of from 1968.
The purpose of Congress in granting veterans pensions is to compensate, as far as may be, a class of men who
suffered in the service for the hardships they endured and the dangers they encountered, and more importantly,
those who have become incapacitated for work owing to sickness, disease or injuries sustained while in the line
of the duty. R.A. No. 65 (Veterans Bill of Rights) or veteran pension law is therefore, a governmental expression
of gratitude to and those who rendered service for the country, by extending to them regular monetary aid. If the
pension awards are made effective only upon approval of the application, then the noble and humanitarian
purposes for which the law had enacted could easily be thwarted or defeated.
8.) SUPREME COURT
Manila
EN BANC
G.R. No. L-30642 April 30, 1985
PERFECTO S. FLORESCA, in his own behalf and on behalf of the minors ROMULO and NESTOR S.
FLORESCA; and ERLINDA FLORESCA-GABUYO, PEDRO S. FLORESCA, JR., CELSO S. FLORESCA,
MELBA S. FLORESCA, JUDITH S. FLORESCA and CARMEN S. FLORESCA;

LYDIA CARAMAT VDA. DE MARTINEZ in her own behalf and on behalf of her minor children LINDA,
ROMEO, ANTONIO JEAN and ELY, all surnamed Martinez; and DANIEL MARTINEZ and TOMAS
MARTINEZ;
SALUSTIANA ASPIRAS VDA. DE OBRA, in her own behalf and on behalf of her minor children JOSE,
ESTELA, JULITA SALUD and DANILO, all surnamed OBRA;
LYDIA CULBENGAN VDA. DE VILLAR, in her own behalf and on behalf of her minor children EDNA,
GEORGE and LARRY III, all surnamed VILLAR;
DOLORES LOLITA ADER VDA. DE LANUZA, in her own behalf and on behalf of her minor children
EDITHA, ELIZABETH, DIVINA, RAYMUNDO, NESTOR and AURELIO, JR. all surnamed LANUZA;
EMERENCIANA JOSE VDA. DE ISLA, in her own behalf and on behalf of her minor children JOSE,
LORENZO, JR., MARIA, VENUS and FELIX, all surnamed ISLA, petitioners,
vs.
PHILEX MINING CORPORATION and HON. JESUS P. MORFE, Presiding Judge of Branch XIII, Court of
First Instance of Manila, respondents.
Rodolfo C. Pacampara for petitioners.
Tito M. Villaluna for respondents.
MAKASIAR, J.:
This is a petition to review the order of the former Court of First Instance of Manila, Branch XIII, dated December
16, 1968 dismissing petitioners' complaint for damages on the ground of lack of jurisdiction.
Petitioners are the heirs of the deceased employees of Philex Mining Corporation (hereinafter referred to as
Philex), who, while working at its copper mines underground operations at Tuba, Benguet on June 28, 1967,
died as a result of the cave-in that buried them in the tunnels of the mine. Specifically, the complaint alleges that
Philex, in violation of government rules and regulations, negligently and deliberately failed to take the required
precautions for the protection of the lives of its men working underground. Portion of the complaint reads:
xxx xxx xxx
9. That for sometime prior and up to June 28,1967, the defendant PHILEX, with gross and
reckless negligence and imprudence and deliberate failure to take the required precautions for
the due protection of the lives of its men working underground at the time, and in utter violation
of the laws and the rules and regulations duly promulgated by the Government pursuant thereto,
allowed great amount of water and mud to accumulate in an open pit area at the mine above
Block 43-S-1 which seeped through and saturated the 600 ft. column of broken ore and rock
below it, thereby exerting tremendous pressure on the working spaces at its 4300 level, with the
result that, on the said date, at about 4 o'clock in the afternoon, with the collapse of all
underground supports due to such enormous pressure, approximately 500,000 cubic feet of
broken ores rocks, mud and water, accompanied by surface boulders, blasted through the
tunnels and flowed out and filled in, in a matter of approximately five (5) minutes, the
underground workings, ripped timber supports and carried off materials, machines and
equipment which blocked all avenues of exit, thereby trapping within its tunnels of all its men
above referred to, including those named in the next preceding paragraph, represented by the
plaintiffs herein;
10. That out of the 48 mine workers who were then working at defendant PHILEX's mine on the
said date, five (5) were able to escape from the terrifying holocaust; 22 were rescued within the
next 7 days; and the rest, 21 in number, including those referred to in paragraph 7 hereinabove,
were left mercilessly to their fate, notwithstanding the fact that up to then, a great many of them
were still alive, entombed in the tunnels of the mine, but were not rescued due to defendant
PHILEX's decision to abandon rescue operations, in utter disregard of its bounden legal and
moral duties in the premises;
xxx xxx xxx
13. That defendant PHILEX not only violated the law and the rules and regulations duly
promulgated by the duly constituted authorities as set out by the Special Committee above

referred to, in their Report of investigation, pages 7-13, Annex 'B' hereof, but also failed
completely to provide its men working underground the necessary security for the protection of
their lives notwithstanding the fact that it had vast financial resources, it having made, during the
year 1966 alone, a total operating income of P 38,220,254.00, or net earnings, after taxes of
P19,117,394.00, as per its llth Annual Report for the year ended December 31, 1966, and with
aggregate assets totalling P 45,794,103.00 as of December 31, 1966;
xxx xxx xxx
(pp. 42-44, rec.)
A motion to dismiss dated May 14, 1968 was filed by Philex alleging that the causes of action of petitioners
based on an industrial accident are covered by the provisions of the Workmen's Compensation Act (Act 3428, as
amended by RA 772) and that the former Court of First Instance has no jurisdiction over the case. Petitioners
filed an opposition dated May 27, 1968 to the said motion to dismiss claiming that the causes of action are not
based on the provisions of the Workmen's Compensation Act but on the provisions of the Civil Code allowing the
award of actual, moral and exemplary damages, particularly:
Art. 2176. Whoever by act or omission causes damage to another, there being fault or
negligence, is obliged to pay for the damage done. Such fault or negligence, if there is no preexisting contractual relation between the parties, is called a quasi-delict and is governed by the
provisions of this Chapter.
Art. 2178. The provisions of articles 1172 to 1174 are also applicable to a quasi-delict.
(b) Art. 1173The fault or negligence of the obligor consists in the omission of that diligence
which is required by the nature of the obligation and corresponds with the circumstances of the
persons, of the time and of the place. When negligence shows bad faith, the provisions of
Articles 1171 and 2201, paragraph 2 shall apply.
Art. 2201. x x x x x x x x x
In case of fraud, bad faith, malice or wanton attitude, the obligor shall be responsible for all
damages which may be reasonably attributed to the non-performance of the obligation.
Art. 2231. In quasi-delicts, exemplary damages may be granted if the defendant acted with gross
negligence.
After a reply and a rejoinder thereto were filed, respondent Judge issued an order dated June 27, 1968
dismissing the case on the ground that it falls within the exclusive jurisdiction of the Workmen's Compensation
Commission. On petitioners' motion for reconsideration of the said order, respondent Judge, on September 23,
1968, reconsidered and set aside his order of June 27, 1968 and allowed Philex to file an answer to the
complaint. Philex moved to reconsider the aforesaid order which was opposed by petitioners.
On December 16, 1968, respondent Judge dismissed the case for lack of jurisdiction and ruled that in
accordance with the established jurisprudence, the Workmen's Compensation Commission has exclusive
original jurisdiction over damage or compensation claims for work-connected deaths or injuries of workmen or
employees, irrespective of whether or not the employer was negligent, adding that if the employer's negligence
results in work-connected deaths or injuries, the employer shall, pursuant to Section 4-A of the Workmen's
Compensation Act, pay additional compensation equal to 50% of the compensation fixed in the Act.
Petitioners thus filed the present petition.
In their brief, petitioners raised the following assignment of errors:
I
THE LOWER COURT ERRED IN DISMISSING THE PLAINTIFFS- PETITIONERS' COMPLAINT
FOR LACK OF JURISDICTION.
II
THE LOWER COURT ERRED IN FAILING TO CONSIDER THE CLEAR DISTINCTION
BETWEEN CLAIMS FOR DAMAGES UNDER THE CIVIL CODE AND CLAIMS FOR
COMPENSATION UNDER THE WORKMEN'S COMPENSATION ACT.
A

In the first assignment of error, petitioners argue that the lower court has jurisdiction over the cause of action
since the complaint is based on the provisions of the Civil Code on damages, particularly Articles 2176, 2178,
1173, 2201 and 2231, and not on the provisions of the Workmen's Compensation Act. They point out that the
complaint alleges gross and brazen negligence on the part of Philex in failing to take the necessary security for
the protection of the lives of its employees working underground. They also assert that since Philex opted to file
a motion to dismiss in the court a quo, the allegations in their complaint including those contained in the annexes
are deemed admitted.
In the second assignment of error, petitioners asseverate that respondent Judge failed to see the distinction
between the claims for compensation under the Workmen's Compensation Act and the claims for damages
based on gross negligence of Philex under the Civil Code. They point out that workmen's compensation refers to
liability for compensation for loss resulting from injury, disability or death of the working man through industrial
accident or disease, without regard to the fault or negligence of the employer, while the claim for damages under
the Civil Code which petitioners pursued in the regular court, refers to the employer's liability for reckless and
wanton negligence resulting in the death of the employees and for which the regular court has jurisdiction to
adjudicate the same.
On the other hand, Philex asserts that work-connected injuries are compensable exclusively under the
provisions of Sections 5 and 46 of the Workmen's Compensation Act, which read:
SEC. 5. Exclusive right to compensation.The rights and remedies granted by this Act to an
employee by reason of a personal injury entitling him to compensation shall exclude all other
rights and remedies accruing to the employee, his personal representatives, dependents or
nearest of kin against the employer under the Civil Code and other laws because of said injury ...
SEC. 46. Jurisdiction. The Workmen's Compensation Commissioner shall have exclusive
jurisdiction to hear and decide claims for compensation under the Workmen's Compensation Act,
subject to appeal to the Supreme Court, ...
Philex cites the case of Manalo vs. Foster Wheeler (98 Phil. 855 [1956]) where it was held that "all claims of
workmen against their employer for damages due to accident suffered in the course of employment shall be
investigated and adjudicated by the Workmen's Compensation Commission," subject to appeal to the Supreme
Court.
Philex maintains that the fact that an employer was negligent, does not remove the case from the exclusive
character of recoveries under the Workmen's Compensation Act; because Section 4-A of the Act provides an
additional compensation in case the employer fails to comply with the requirements of safety as imposed by law
to prevent accidents. In fact, it points out that Philex voluntarily paid the compensation due the petitioners and all
the payments have been accepted in behalf of the deceased miners, except the heirs of Nazarito Floresca who
insisted that they are entitled to a greater amount of damages under the Civil Code.
In the hearing of this case, then Undersecretary of Labor Israel Bocobo, then Atty. Edgardo Angara, now
President of the University of the Philippines, Justice Manuel Lazaro, as corporate counsel and Assistant
General Manager of the GSIS Legal Affairs Department, and Commissioner on Elections, formerly UP Law
Center Director Froilan Bacungan, appeared as amici curiae and thereafter, submitted their respective
memoranda.
The issue to be resolved as WE stated in the resolution of November 26, 1976, is:
Whether the action of an injured employee or worker or that of his heirs in case of his death
under the Workmen's Compensation Act is exclusive, selective or cumulative, that is to say,
whether his or his heirs' action is exclusively restricted to seeking the limited compensation
provided under the Workmen's Compensation Act or whether they have a right of selection or
choice of action between availing of the worker's right under the Workmen's Compensation Act
and suing in the regular courts under the Civil Code for higher damages (actual, moral and/or
exemplary) from the employer by virtue of negligence (or fault) of the employer or of his other
employees or whether they may avail cumulatively of both actions, i.e., collect the limited
compensation under the Workmen's Compensation Act and sue in addition for damages in the
regular courts.
There are divergent opinions in this case. Justice Lazaro is of the opinion that an injured employee or worker, or
the heirs in case of his death, may initiate a complaint to recover damages (not compensation under the
Workmen's Compensation Act) with the regular court on the basis of negligence of an employer pursuant to the

Civil Code provisions. Atty. Angara believes otherwise. He submits that the remedy of an injured employee for
work-connected injury or accident is exclusive in accordance with Section 5 of the Workmen's Compensation
Act, while Atty. Bacungan's position is that the action is selective. He opines that the heirs of the employee in
case of his death have a right of choice to avail themselves of the benefits provided under the Workmen's
Compensation Act or to sue in the regular court under the Civil Code for higher damages from the employer by
virtue of negligence of the latter. Atty. Bocobo's stand is the same as that of Atty. Bacungan and adds that once
the heirs elect the remedy provided for under the Act, they are no longer entitled to avail themselves of the
remedy provided for under the Civil Code by filing an action for higher damages in the regular court, and vice
versa.
On August 3, 1978, petitioners-heirs of deceased employee Nazarito Floresca filed a motion to dismiss on the
ground that they have amicably settled their claim with respondent Philex. In the resolution of September 7,
1978, WE dismissed the petition only insofar as the aforesaid petitioners are connected, it appearing that there
are other petitioners in this case.
WE hold that the former Court of First Instance has jurisdiction to try the case,
It should be underscored that petitioners' complaint is not for compensation based on the Workmen's
Compensation Act but a complaint for damages (actual, exemplary and moral) in the total amount of eight
hundred twenty-five thousand (P825,000.00) pesos. Petitioners did not invoke the provisions of the Workmen's
Compensation Act to entitle them to compensation thereunder. In fact, no allegation appeared in the complaint
that the employees died from accident arising out of and in the course of their employments. The complaint
instead alleges gross and reckless negligence and deliberate failure on the part of Philex to protect the lives of
its workers as a consequence of which a cave-in occurred resulting in the death of the employees working
underground. Settled is the rule that in ascertaining whether or not the cause of action is in the nature of
workmen's compensation claim or a claim for damages pursuant to the provisions of the Civil Code, the test is
the averments or allegations in the complaint (Belandres vs. Lopez Sugar Mill, Co., Inc., 97 Phil. 100).
In the present case, there exists between Philex and the deceased employees a contractual relationship. The
alleged gross and reckless negligence and deliberate failure that amount to bad faith on the part of Philex,
constitute a breach of contract for which it may be held liable for damages. The provisions of the Civil Code on
cases of breach of contract when there is fraud or bad faith, read:
Art. 2232. In contracts and quasi-contracts, the court may award exemplary damages if the
defendant acted in a wanton, fraudulent, reckless, oppressive or malevolent manner.
Art. 2201. In contracts and quasi-contracts, the damages for which the obligor who acted in good
faith is able shall be those that are the natural and probable consequences of the breach of the
obligation, and which the parties have foreseen or could have reasonably foreseen at the time
the obligation was constituted.
In cases of fraud, bad faith, malice or wanton attitude, the obligor shall be responsible for all
damages which may be reasonably attributed to the non-performance of the obligation.
Furthermore, Articles 2216 et seq., Civil Code, allow the payment of all kinds of damages, as assessed by the
court.
The rationale in awarding compensation under the Workmen's Compensation Act differs from that in giving
damages under the Civil Code. The compensation acts are based on a theory of compensation distinct from the
existing theories of damages, payments under the acts being made as compensation and not as damages (99
C.J.S. 53). Compensation is given to mitigate the harshness and insecurity of industrial life for the workman and
his family. Hence, an employer is liable whether negligence exists or not since liability is created by law.
Recovery under the Act is not based on any theory of actionable wrong on the part of the employer (99 C.J.S.
36).
In other words, under the compensation acts, the employer is liable to pay compensation benefits for loss of
income, as long as the death, sickness or injury is work-connected or work-aggravated, even if the death or
injury is not due to the fault of the employer (Murillo vs. Mendoza, 66 Phil. 689). On the other hand, damages are
awarded to one as a vindication of the wrongful invasion of his rights. It is the indemnity recoverable by a person
who has sustained injury either in his person, property or relative rights, through the act or default of another (25
C.J.S. 452).
The claimant for damages under the Civil Code has the burden of proving the causal relation between the
defendant's negligence and the resulting injury as well as the damages suffered. While under the Workmen's

Compensation Act, there is a presumption in favor of the deceased or injured employee that the death or injury is
work-connected or work-aggravated; and the employer has the burden to prove otherwise (De los Angeles vs.
GSIS, 94 SCRA 308; Carino vs. WCC, 93 SCRA 551; Maria Cristina Fertilizer Corp. vs. WCC, 60 SCRA 228).
The claim of petitioners that the case is not cognizable by the Workmen's Compensation Commission then, now
Employees Compensation Commission, is strengthened by the fact that unlike in the Civil Code, the Workmen's
Compensation Act did not contain any provision for an award of actual, moral and exemplary damages. What the
Act provided was merely the right of the heirs to claim limited compensation for the death in the amount of six
thousand (P6,000.00) pesos plus burial expenses of two hundred (P200.00) pesos, and medical expenses when
incurred (Sections 8, 12 and 13, Workmen's Compensation Act), and an additional compensation of only 50% if
the complaint alleges failure on the part of the employer to "install and maintain safety appliances or to take
other precautions for the prevention of accident or occupational disease" (Section 4-A, Ibid.). In the case at bar,
the amount sought to be recovered is over and above that which was provided under the Workmen's
Compensation Act and which cannot be granted by the Commission.
Moreover, under the Workmen's Compensation Act, compensation benefits should be paid to an employee who
suffered an accident not due to the facilities or lack of facilities in the industry of his employer but caused by
factors outside the industrial plant of his employer. Under the Civil Code, the liability of the employer, depends on
breach of contract or tort. The Workmen's Compensation Act was specifically enacted to afford protection to the
employees or workmen. It is a social legislation designed to give relief to the workman who has been the victim
of an accident causing his death or ailment or injury in the pursuit of his employment (Abong vs. WCC, 54 SCRA
379).
WE now come to the query as to whether or not the injured employee or his heirs in case of death have a right of
selection or choice of action between availing themselves of the worker's right under the Workmen's
Compensation Act and suing in the regular courts under the Civil Code for higher damages (actual, moral and
exemplary) from the employers by virtue of that negligence or fault of the employers or whether they may avail
themselves cumulatively of both actions, i.e., collect the limited compensation under the Workmen's
Compensation Act and sue in addition for damages in the regular courts.
In disposing of a similar issue, this Court in Pacana vs. Cebu Autobus Company, 32 SCRA 442, ruled that an
injured worker has a choice of either to recover from the employer the fixed amounts set by the Workmen's
Compensation Act or to prosecute an ordinary civil action against the tortfeasor for higher damages but he
cannot pursue both courses of action simultaneously.
In Pacaa WE said:
In the analogous case of Esguerra vs. Munoz Palma, involving the application of Section 6 of the
Workmen's Compensation Act on the injured workers' right to sue third- party tortfeasors in the
regular courts, Mr. Justice J.B.L. Reyes, again speaking for the Court, pointed out that the
injured worker has the choice of remedies but cannot pursue both courses of action
simultaneously and thus balanced the relative advantage of recourse under the Workmen's
Compensation Act as against an ordinary action.
As applied to this case, petitioner Esguerra cannot maintain his action for damages against the
respondents (defendants below), because he has elected to seek compensation under the
Workmen's Compensation Law, and his claim (case No. 44549 of the Compensation
Commission) was being processed at the time he filed this action in the Court of First Instance. It
is argued for petitioner that as the damages recoverable under the Civil Code are much more
extensive than the amounts that may be awarded under the Workmen's Compensation Act, they
should not be deemed incompatible. As already indicated, the injured laborer was initially free to
choose either to recover from the employer the fixed amounts set by the Compensation Law or
else, to prosecute an ordinary civil action against the tortfeasor for higher damages. While
perhaps not as profitable, the smaller indemnity obtainable by the first course is balanced by the
claimant's being relieved of the burden of proving the causal connection between the
defendant's negligence and the resulting injury, and of having to establish the extent of the
damage suffered; issues that are apt to be troublesome to establish satisfactorily. Having staked
his fortunes on a particular remedy, petitioner is precluded from pursuing the alternate course, at
least until the prior claim is rejected by the Compensation Commission. Anyway, under the
proviso of Section 6 aforequoted, if the employer Franklin Baker Company recovers, by
derivative action against the alleged tortfeasors, a sum greater than the compensation he may
have paid the herein petitioner, the excess accrues to the latter.

Although the doctrine in the case of Esguerra vs. Munoz Palma (104 Phil. 582), applies to third-party tortfeasor,
said rule should likewise apply to the employer-tortfeasor.
Insofar as the heirs of Nazarito Floresca are concerned, as already stated, the petition has been dismissed in the
resolution of September 7, 1978 in view of the amicable settlement reached by Philex and the said heirs.
With regard to the other petitioners, it was alleged by Philex in its motion to dismiss dated May 14, 1968 before
the court a quo, that the heirs of the deceased employees, namely Emerito Obra, Larry Villar, Jr., Aurelio Lanuza,
Lorenzo Isla and Saturnino Martinez submitted notices and claims for compensation to the Regional Office No. 1
of the then Department of Labor and all of them have been paid in full as of August 25, 1967, except Saturnino
Martinez whose heirs decided that they be paid in installments (pp. 106-107, rec.). Such allegation was admitted
by herein petitioners in their opposition to the motion to dismiss dated May 27, 1968 (pp. 121-122, rec.) in the
lower court, but they set up the defense that the claims were filed under the Workmen's Compensation Act
before they learned of the official report of the committee created to investigate the accident which established
the criminal negligence and violation of law by Philex, and which report was forwarded by the Director of Mines
to the then Executive Secretary Rafael Salas in a letter dated October 19, 1967 only (p. 76, rec.).
WE hold that although the other petitioners had received the benefits under the Workmen's Compensation Act,
such may not preclude them from bringing an action before the regular court because they became cognizant of
the fact that Philex has been remiss in its contractual obligations with the deceased miners only after receiving
compensation under the Act. Had petitioners been aware of said violation of government rules and regulations
by Philex, and of its negligence, they would not have sought redress under the Workmen's Compensation
Commission which awarded a lesser amount for compensation. The choice of the first remedy was based on
ignorance or a mistake of fact, which nullifies the choice as it was not an intelligent choice. The case should
therefore be remanded to the lower court for further proceedings. However, should the petitioners be successful
in their bid before the lower court, the payments made under the Workmen's Compensation Act should be
deducted from the damages that may be decreed in their favor.
B
Contrary to the perception of the dissenting opinion, the Court does not legislate in the instant case. The Court
merely applies and gives effect to the constitutional guarantees of social justice then secured by Section 5 of
Article 11 and Section 6 of Article XIV of the 1935 Constitution, and now by Sections 6, 7, and 9 of Article 11 of
the DECLARATION OF PRINCIPLES AND STATE POLICIES of the 1973 Constitution, as amended, and as
implemented by Articles 2176, 2177, 2178, 1173, 2201, 2216, 2231 and 2232 of the New Civil Code of 1950.
To emphasize, the 1935 Constitution declares that:
Sec. 5. The promotion of social justice to insure the well-being and economic security of all the
people should be the concern of the State (Art. II).
Sec. 6. The State shall afford protection to labor, especially to working women, and minors, and
shall regulate the relations between landowner and tenant, and between labor and capital in
industry and in agriculture. The State may provide for compulsory arbitration (Art. XIV).
The 1973 Constitution likewise commands the State to "promote social justice to insure the dignity, welfare, and
security of all the people "... regulate the use ... and disposition of private property and equitably diffuse property
ownership and profits "establish, maintain and ensure adequate social services in, the field of education, health,
housing, employment, welfare and social security to guarantee the enjoyment by the people of a decent
standard of living" (Sections 6 and 7, Art. II, 1973 Constitution); "... afford protection to labor, ... and regulate the
relations between workers and employers ..., and assure the rights of workers to ... just and humane conditions
of work"(Sec. 9, Art. II, 1973 Constitution, emphasis supplied).
The foregoing constitutional guarantees in favor of labor institutionalized in Section 9 of Article 11 of the 1973
Constitution and re-stated as a declaration of basic policy in Article 3 of the New Labor Code, thus:
Art. 3. Declaration of basic policy.The State shall afford protection to labor, promote full
employment, ensure equal work opportunities regardless of sex, race or creed, and regulate the
relations between workers and employers. The State shall assure the rights of workers to selforganization, collective bargaining, security of tenure, and just and humane conditions of work.
(emphasis supplied).
The aforestated constitutional principles as implemented by the aforementioned articles of the New Civil Code
cannot be impliedly repealed by the restrictive provisions of Article 173 of the New Labor Code. Section 5 of the

Workmen's Compensation Act (before it was amended by R.A. No. 772 on June 20, 1952), predecessor of
Article 173 of the New Labor Code, has been superseded by the aforestated provisions of the New Civil Code, a
subsequent law, which took effect on August 30, 1950, which obey the constitutional mandates of social justice
enhancing as they do the rights of the workers as against their employers. Article 173 of the New Labor Code
seems to diminish the rights of the workers and therefore collides with the social justice guarantee of the
Constitution and the liberal provisions of the New Civil Code.
The guarantees of social justice embodied in Sections 6, 7 and 9 of Article II of the 1973 Constitution are
statements of legal principles to be applied and enforced by the courts. Mr. Justice Robert Jackson in the case of
West Virginia State Board of Education vs. Barnette, with characteristic eloquence, enunciated:
The very purpose of a Bill of Rights was to withdraw certain subjects from the vicissitudes of
political controversy, to place them beyond the reach of majorities and officials and to establish
them as legal principles to be applied by the courts. One's right to life, liberty, and property, to
free speech, a free press, freedom of worship and assembly, and other fundamental rights may
not be submitted to vote; they depend on the outcome of no elections (319 U.S. 625, 638, 87
L.ed. 1638, emphasis supplied).
In case of any doubt which may be engendered by Article 173 of the New Labor Code, both the New Labor Code
and the Civil Code direct that the doubts should be resolved in favor of the workers and employees.
Thus, Article 4 of the New Labor Code, otherwise known as Presidential Decree No. 442, as amended,
promulgated on May 1, 1974, but which took effect six months thereafter, provides 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" (Art. 2, Labor Code).
Article 10 of the New Civil Code states: "In case of doubt in the interpretation or application of laws, it is
presumed that the law-making body intended right and justice to prevail. "
More specifically, Article 1702 of the New Civil Code likewise directs that. "In case of doubt, all labor legislation
and all labor contracts shall be construed in favor of the safety and decent living of the laborer."
Before it was amended by Commonwealth Act No. 772 on June 20, 1952, Section 5 of the Workmen's
Compensation Act provided:
Sec. 5. Exclusive right to compensation.- The rights and remedies granted by this Act to an
employee by reason of a personal injury entitling him to compensation shall exclude all other
rights and remedies accruing to the employee, his personal representatives, dependents or
nearest of kin against the employer under the Civil Code and other laws, because of said injury
(emphasis supplied).
Employers contracting laborecsrs in the Philippine Islands for work outside the same may
stipulate with such laborers that the remedies prescribed by this Act shall apply exclusively to
injuries received outside the Islands through accidents happening in and during the performance
of the duties of the employment; and all service contracts made in the manner prescribed in this
section shall be presumed to include such agreement.
Only the second paragraph of Section 5 of the Workmen's Compensation Act No. 3428, was amended by
Commonwealth Act No. 772 on June 20, 1952, thus:
Sec. 5. Exclusive right to compensation.- The rights and remedies granted by this Act to an
employee by reason of a personal injury entitling him to compensation shall exclude all other
rights and remedies accruing to the employee, his personal representatives, dependents or
nearest of kin against the employer under the Civil Code and other laws, because of said injury.
Employers contracting laborers in the Philippine Islands for work outside the same shall stipulate
with such laborers that the remedies prescribed by this Act shall apply to injuries received
outside the Island through accidents happening in and during the performance of the duties of
the employment. Such stipulation shall not prejudice the right of the laborers to the benefits of
the Workmen's Compensation Law of the place where the accident occurs, should such law be
more favorable to them (As amended by section 5 of Republic Act No. 772).
Article 173 of the New Labor Code does not repeal expressly nor impliedly the applicable provisions of the New
Civil Code, because said Article 173 provides:

Art. 173. Exclusiveness of liability.- Unless otherwise provided, the liability of the State Insurance
Fund under this Title shall be exclusive and in place of all other liabilities of the employer to the
employee, his dependents or anyone otherwise entitled to receive damages on behalf of the
employee or his dependents. The payment of compensation under this Title shall bar the
recovery of benefits as provided for in Section 699 of the Revised Administrative Code, Republic
Act Numbered Eleven hundred sixty-one, as amended, Commonwealth Act Numbered One
hundred eighty- six, as amended, Commonwealth Act Numbered Six hundred ten, as amended,
Republic Act Numbered Forty-eight hundred Sixty-four, as amended, and other laws whose
benefits are administered by the System during the period of such payment for the same
disability or death, and conversely (emphasis supplied).
As above-quoted, Article 173 of the New Labor Code expressly repealed only Section 699 of the Revised
Administrative Code, R.A. No. 1161, as amended, C.A. No. 186, as amended, R.A. No. 610, as amended, R.A.
No. 4864, as amended, and all other laws whose benefits are administered by the System (referring to the GSIS
or SSS).
Unlike Section 5 of the Workmen's Compensation Act as aforequoted, Article 173 of the New Labor Code does
not even remotely, much less expressly, repeal the New Civil Code provisions heretofore quoted.
It is patent, therefore, that recovery under the New Civil Code for damages arising from negligence, is not barred
by Article 173 of the New Labor Code. And the damages recoverable under the New Civil Code are not
administered by the System provided for by the New Labor Code, which defines the "System" as referring to the
Government Service Insurance System or the Social Security System (Art. 167 [c], [d] and [e] of the New Labor
Code).
Furthermore, under Article 8 of the New Civil Code, decisions of the Supreme Court form part of the law of the
land.
Article 8 of the New Civil Code provides:
Art. 8. Judicial decisions applying or interpreting the laws or the Constitution shall form a part of
the legal system of the Philippines.
The Court, through the late Chief Justice Fred Ruiz Castro, in People vs. Licera ruled:
Article 8 of the Civil Code of the Philippines decrees that judicial decisions applying or
interpreting the laws or the Constitution form part of this jurisdiction's legal system. These
decisions, although in themselves not laws, constitute evidence of what the laws mean. The
application or interpretation placed by the Court upon a law is part of the law as of the date of the
enactment of the said law since the Court's application or interpretation merely establishes the
contemporaneous legislative intent that the construed law purports to carry into effect" (65 SCRA
270, 272-273 [1975]).
WE ruled that judicial decisions of the Supreme Court assume the same authority as the statute itself (Caltex vs.
Palomer, 18 SCRA 247; 124 Phil. 763).
The aforequoted provisions of Section 5 of the Workmen's Compensation Act, before and after it was amended
by Commonwealth Act No. 772 on June 20, 1952, limited the right of recovery in favor of the deceased, ailing or
injured employee to the compensation provided for therein. Said Section 5 was not accorded controlling
application by the Supreme Court in the 1970 case of Pacana vs. Cebu Autobus Company (32 SCRA 442) when
WE ruled that an injured worker has a choice of either to recover from the employer the fixed amount set by the
Workmen's Compensation Act or to prosecute an ordinary civil action against the tortfeasor for greater damages;
but he cannot pursue both courses of action simultaneously. Said Pacana case penned by Mr. Justice
Teehankee, applied Article 1711 of the Civil Code as against the Workmen's Compensation Act, reiterating the
1969 ruling in the case of Valencia vs. Manila Yacht Club (28 SCRA 724, June 30,1969) and the 1958 case of
Esguerra vs. Munoz Palma (104 Phil. 582), both penned by Justice J.B.L. Reyes. Said Pacana case was
concurred in by Justices J.B.L. Reyes, Dizon, Makalintal, Zaldivar, Castro, Fernando and Villamor.
Since the first sentence of Article 173 of the New Labor Code is merely a re-statement of the first paragraph of
Section 5 of the Workmen's Compensation Act, as amended, and does not even refer, neither expressly nor
impliedly, to the Civil Code as Section 5 of the Workmen's Compensation Act did, with greater reason said Article
173 must be subject to the same interpretation adopted in the cases of Pacana, Valencia and Esguerra
aforementioned as the doctrine in the aforesaid three (3) cases is faithful to and advances the social justice
guarantees enshrined in both the 1935 and 1973 Constitutions.

It should be stressed likewise that there is no similar provision on social justice in the American Federal
Constitution, nor in the various state constitutions of the American Union. Consequently, the restrictive nature of
the American decisions on the Workmen's Compensation Act cannot limit the range and compass of OUR
interpretation of our own laws, especially Article 1711 of the New Civil Code, vis-a-vis Article 173 of the New
Labor Code, in relation to Section 5 of Article II and Section 6 of Article XIV of the 1935 Constitution then, and
now Sections 6, 7 and 9 of the Declaration of Principles and State Policies of Article II of the 1973 Constitution.
The dissent seems to subordinate the life of the laborer to the property rights of the employer. The right to life is
guaranteed specifically by the due process clause of the Constitution. To relieve the employer from liability for
the death of his workers arising from his gross or wanton fault or failure to provide safety devices for the
protection of his employees or workers against the dangers which are inherent in underground mining, is to
deprive the deceased worker and his heirs of the right to recover indemnity for the loss of the life of the worker
and the consequent loss to his family without due process of law. The dissent in effect condones and therefore
encourages such gross or wanton neglect on the part of the employer to comply with his legal obligation to
provide safety measures for the protection of the life, limb and health of his worker. Even from the moral
viewpoint alone, such attitude is un-Christian.
It is therefore patent that giving effect to the social justice guarantees of the Constitution, as implemented by the
provisions of the New Civil Code, is not an exercise of the power of law-making, but is rendering obedience to
the mandates of the fundamental law and the implementing legislation aforementioned.
The Court, to repeat, is not legislating in the instant case.
It is axiomatic that no ordinary statute can override a constitutional provision.
The words of Section 5 of the Workmen's Compensation Act and of Article 173 of the New Labor Code subvert
the rights of the petitioners as surviving heirs of the deceased mining employees. Section 5 of the Workmen's
Compensation Act and Article 173 of the New Labor Code are retrogressive; because they are a throwback to
the obsolete laissez-faire doctrine of Adam Smith enunciated in 1776 in his treatise Wealth of Nations (Collier's
Encyclopedia, Vol. 21, p. 93, 1964), which has been discarded soon after the close of the 18th century due to the
Industrial Revolution that generated the machines and other mechanical devices (beginning with Eli Whitney's
cotton gin of 1793 and Robert Fulton's steamboat of 1807) for production and transportation which are
dangerous to life, limb and health. The old socio-political-economic philosophy of live-and-let-live is now
superdesed by the benign Christian shibboleth of live-and-help others to live. Those who profess to be Christians
should not adhere to Cain's selfish affirmation that he is not his brother's keeper. In this our civilization, each one
of us is our brother's keeper. No man is an island. To assert otherwise is to be as atavistic and ante-deluvian as
the 1837 case of Prisley vs. Fowler (3 MN 1,150 reprint 1030) invoked by the dissent, The Prisley case was
decided in 1837 during the era of economic royalists and robber barons of America. Only ruthless, unfeeling
capitalistics and egoistic reactionaries continue to pay obeisance to such un-Christian doctrine. The Prisley rule
humiliates man and debases him; because the decision derisively refers to the lowly worker as "servant" and
utilizes with aristocratic arrogance "master" for "employer." It robs man of his inherent dignity and dehumanizes
him. To stress this affront to human dignity, WE only have to restate the quotation from Prisley, thus: "The mere
relation of the master and the servant never can imply an obligation on the part of the master to take more care
of the servant than he may reasonably be expected to do himself." This is the very selfish doctrine that provoked
the American Civil War which generated so much hatred and drew so much precious blood on American plains
and valleys from 1861 to 1864.
"Idolatrous reverence" for the letter of the law sacrifices the human being. The spirit of the law insures man's
survival and ennobles him. In the words of Shakespeare, "the letter of the law killeth; its spirit giveth life."
C
It is curious that the dissenting opinion clings to the myth that the courts cannot legislate.
That myth had been exploded by Article 9 of the New Civil Code, which provides that "No judge or court shall
decline to render judgment by reason of the silence, obscurity or insufficiency of the laws. "
Hence, even the legislator himself, through Article 9 of the New Civil Code, recognizes that in certain instances,
the court, in the language of Justice Holmes, "do and must legislate" to fill in the gaps in the law; because the
mind of the legislator, like all human beings, is finite and therefore cannot envisage all possible cases to which
the law may apply Nor has the human mind the infinite capacity to anticipate all situations.

But about two centuries before Article 9 of the New Civil Code, the founding fathers of the American Constitution
foresaw and recognized the eventuality that the courts may have to legislate to supply the omissions or to clarify
the ambiguities in the American Constitution and the statutes.
'Thus, Alexander Hamilton pragmatically admits that judicial legislation may be justified but denies that the power
of the Judiciary to nullify statutes may give rise to Judicial tyranny (The Federalist, Modern Library, pp. 503-511,
1937 ed.). Thomas Jefferson went farther to concede that the court is even independent of the Nation itself
(A.F.L. vs. American Sash Company, 1949 335 US 538).
Many of the great expounders of the American Constitution likewise share the same view. Chief Justice Marshall
pronounced: "It is emphatically the province and duty of the Judicial department to say what the law is (Marbury
vs. Madison I Cranch 127 1803), which was re-stated by Chief Justice Hughes when he said that "the
Constitution is what the judge says it is (Address on May 3, 1907, quoted by President Franklin Delano
Roosevelt on March 9, 1937). This was reiterated by Justice Cardozo who pronounced that "No doubt the limits
for the judge are narrower. He legislates only between gaps. He fills the open spaces in the law. " (The Nature of
the Judicial Process, p. 113). In the language of Chief Justice Harlan F. Stone, "The only limit to the judicial
legislation is the restraint of the judge" (U.S. vs. Butler 297 U.S. 1 Dissenting Opinion, p. 79), which view is also
entertained by Justice Frankfurter and Justice Robert Jackson. In the rhetoric of Justice Frankfurter, "the courts
breathe life, feeble or strong, into the inert pages of the Constitution and all statute books."
It should be stressed that the liability of the employer under Section 5 of the Workmen's Compensation Act or
Article 173 of the New Labor Code is limited to death, ailment or injury caused by the nature of the work, without
any fault on the part of the employers. It is correctly termed no fault liability. Section 5 of the Workmen's
Compensation Act, as amended, or Article 173 of the New Labor Code, does not cover the tortious liability of the
employer occasioned by his fault or culpable negligence in failing to provide the safety devices required by the
law for the protection of the life, limb and health of the workers. Under either Section 5 or Article 173, the
employer remains liable to pay compensation benefits to the employee whose death, ailment or injury is workconnected, even if the employer has faithfully and diligently furnished all the safety measures and contrivances
decreed by the law to protect the employee.
The written word is no longer the "sovereign talisman." In the epigrammatic language of Mr. Justice Cardozo,
"the law has outgrown its primitive stage of formalism when the precise word was the sovereign talisman, and
every slip was fatal" (Wood vs. Duff Gordon 222 NW 88; Cardozo, The Nature of the Judicial Process 100).
Justice Cardozo warned that: "Sometimes the conservatism of judges has threatened for an interval to rob the
legislation of its efficacy. ... Precedents established in those items exert an unhappy influence even now" (citing
Pound, Common Law and Legislation 21 Harvard Law Review 383, 387).
Finally, Justice Holmes delivered the coup de grace when he pragmatically admitted, although with a cautionary
undertone: "that judges do and must legislate, but they can do so only interstitially they are confined from molar
to molecular motions" (Southern Pacific Company vs. Jensen, 244 US 204 1917). And in the subsequent case of
Springer vs. Government (277 US 188, 210-212, 72 L.ed. 845, 852- 853), Justice Holmes pronounced:
The great ordinances of the Constitution do not establish and divide fields of black and white.
Even the more specific of them are found to terminate in a penumbra shading gradually from one
extreme to the other. x x x. When we come to the fundamental distinctions it is still more obvious
that they must be received with a certain latitude or our government could not go on.
To make a rule of conduct applicable to an individual who but for such action would be free from
it is to legislate yet it is what the judges do whenever they determine which of two competing
principles of policy shall prevail.
xxx xxx xxx
It does not seem to need argument to show that however we may disguise it by veiling words we
do not and cannot carry out the distinction between legislative and executive action with
mathematical precision and divide the branches into waterlight compartments, were it ever so
desirable to do so, which I am far from believing that it is, or that the Constitution requires.
True, there are jurists and legal writers who affirm that judges should not legislate, but grudgingly concede that in
certain cases judges do legislate. They criticize the assumption by the courts of such law-making power as
dangerous for it may degenerate into Judicial tyranny. They include Blackstone, Jeremy Bentham, Justice Black,
Justice Harlan, Justice Roberts, Justice David Brewer, Ronald Dworkin, Rolf Sartorious, Macklin Fleming and
Beryl Harold Levy. But said Justices, jurists or legal commentators, who either deny the power of the courts to

legislate in-between gaps of the law, or decry the exercise of such power, have not pointed to examples of the
exercise by the courts of such law-making authority in the interpretation and application of the laws in specific
cases that gave rise to judicial tyranny or oppression or that such judicial legislation has not protected public
interest or individual welfare, particularly the lowly workers or the underprivileged.
On the other hand, there are numerous decisions interpreting the Bill of Rights and statutory enactments
expanding the scope of such provisions to protect human rights. Foremost among them is the doctrine in the
cases of Miranda vs. Arizona (384 US 436 1964), Gideon vs. Wainright (372 US 335), Escubedo vs. Illinois (378
US 478), which guaranteed the accused under custodial investigation his rights to remain silent and to counsel
and to be informed of such rights as even as it protects him against the use of force or intimidation to extort
confession from him. These rights are not found in the American Bill of Rights. These rights are now
institutionalized in Section 20, Article IV of the 1973 Constitution. Only the peace-and-order adherents were
critical of the activism of the American Supreme Court led by Chief Justice Earl Warren.
Even the definition of Identical offenses for purposes of the double jeopardy provision was developed by
American judicial decisions, not by amendment to the Bill of Rights on double jeopardy (see Justice Laurel in
People vs. Tarok, 73 Phil. 260, 261-268). And these judicial decisions have been re-stated in Section 7 of Rule
117 of the 1985 Rules on Criminal Procedure, as well as in Section 9 of Rule 117 of the 1964 Revised Rules of
Court. In both provisions, the second offense is the same as the first offense if the second offense is an attempt
to commit the first or frustration thereof or necessarily includes or is necessarily included in the first offense.
The requisites of double jeopardy are not spelled out in the Bill of Rights. They were also developed by judicial
decisions in the United States and in the Philippines even before people vs. Ylagan (58 Phil. 851-853).
Again, the equal protection clause was interpreted in the case of Plessy vs. Ferguson (163 US 537) as securing
to the Negroes equal but separate facilities, which doctrine was revoked in the case of Brown vs. Maryland
Board of Education (349 US 294), holding that the equal protection clause means that the Negroes are entitled
to attend the same schools attended by the whites-equal facilities in the same school-which was extended to
public parks and public buses.
De-segregation, not segregation, is now the governing principle.
Among other examples, the due process clause was interpreted in the case of People vs. Pomar (46 Phil. 440)
by a conservative, capitalistic court to invalidate a law granting maternity leave to working women-according
primacy to property rights over human rights. The case of People vs. Pomar is no longer the rule.
As early as 1904, in the case of Lochner vs. New York (198 US 45, 76, 49 L. ed. 937, 949), Justice Holmes had
been railing against the conservatism of Judges perverting the guarantee of due process to protect property
rights as against human rights or social justice for the working man. The law fixing maximum hours of labor was
invalidated. Justice Holmes was vindicated finally in 1936 in the case of West Coast Hotel vs. Parish (300 US
377-79; 81 L. ed. 703) where the American Supreme Court upheld the rights of workers to social justice in the
form of guaranteed minimum wage for women and minors, working hours not exceeding eight (8) daily, and
maternity leave for women employees.
The power of judicial review and the principle of separation of powers as well as the rule on political questions
have been evolved and grafted into the American Constitution by judicial decisions (Marbury vs. Madison, supra
Coleman vs. Miller, 307 US 433, 83 L. ed. 1385; Springer vs. Government, 277 US 210-212, 72 L. ed. 852, 853).
It is noteworthy that Justice Black, who seems to be against judicial legislation, penned a separate concurring
opinion in the case of Coleman vs. Miller, supra, affirming the doctrine of political question as beyond the ambit
of judicial review. There is nothing in both the American and Philippine Constitutions expressly providing that the
power of the courts is limited by the principle of separation of powers and the doctrine on political questions.
There are numerous cases in Philippine jurisprudence applying the doctrines of separation of powers and
political questions and invoking American precedents.
Unlike the American Constitution, both the 1935 and 1973 Philippine Constitutions expressly vest in the
Supreme Court the power to review the validity or constitutionality of any legislative enactment or executive act.
WHEREFORE, THE TRIAL COURT'S ORDER OF DISMISSAL IS HEREBY REVERSED AND SET ASIDE AND
THE CASE IS REMANDED TO IT FOR FURTHER PROCEEDINGS. SHOULD A GREATER AMOUNT OF
DAMAGES BE DECREED IN FAVOR OF HEREIN PETITIONERS, THE PAYMENTS ALREADY MADE TO
THEM PURSUANT TO THE WORKMEN'S COMPENSATION ACT SHALL BE DEDUCTED. NO COSTS.
SO ORDERED.

Fernando, C.J., Teehankee, Plana, Escolin, De la Fuente, Cuevas and Alampay JJ., concur.
Concepcion, Jr., J., is on leave.
Abad Santos and Relova, JJ., took no part.

Separate Opinions
MELENCIO-HERRERA, J., dissenting:
A
This case involves a complaint for damages for the death of five employees of PHILEX Mining Corporation under
the general provisions of the Civil Code. The Civil Code itself, however, provides for its non-applicability to the
complaint. It is specifically provided in Article 2196 of the Code, found in Title XVIII-Damages that:
COMPENSATION FOR WORKMEN AND OTHER EMPLOYEES IN CASE OF DEATH, INJURY
OR ILLNESS IS REGULATED BY SPECIAL LAWS.
Compensation and damages are synonymous. In Esguerra vs. Muoz Palma, etc., et al., 104 Phil. 582, 586,
Justice J.B.L. Reyes had said:
Petitioner also avers that compensation is not damages. This argument is but a play on words.
The term compensation' is used in the law (Act 3812 and Republic Act 772) in the sense of
indemnity for damages suffered, being awarded for a personal injury caused or aggravated by or
in the course of employment. ...
By the very provisions of the Civil Code, it is a "special law", not the Code itself, which has to apply to the
complaint involved in the instant case. That "special law", in reference to the complaint, can be no other than the
Workmen's Compensation
Even assuming, without conceding, that an employee is entitled to an election of remedies, as the majority rules,
both options cannot be exercised simultaneously, and the exercise of one will preclude the exercise of the other.
The petitioners had already exercised their option to come under the Workmen's Compensation Act, and they
have already received compensation payable to them under that Act. Stated differently, the remedy under the
Workmen's Compensation Act had already become a "finished transaction".
There are two considerations why it is believed petitioners should no longer be allowed to exercise the option to
sue under the Civil Code. In the first place, the proceedings under the Workmen's Compensation Act have
already become the law in regards to" the "election of remedies", because those proceedings had become a
"finished transaction".
In the second place, it should be plainly equitable that, if a person entitled to an "election of remedies" makes a
first election and accepts the benefits thereof, he should no longer be allowed to avail himself of the second
option. At the very least, if he wants to make a second election, in disregard of the first election he has made,
when he makes the second election he should surrender the benefits he had obtained under the first election,
This was not done in the case before the Court.
B.
'There is full concurrence on my part with the dissenting opinion of Mr. Justice Gutierrez upholding "the exclusory
provision of the Workmen's Compensation Act." I may further add:
1. The Workmen's Compensation Act (Act No. 3428) was approved on December 10, 1927 and took effect on
June 10, 1928. It was patterned from Minnesota and Hawaii statutes.
Act No. 3428 was adopted by the Philippine legislature, in Spanish and some sections of the law
were taken from the statutes of Minnesota and Hawaii, (Chapter 209 of the Revised Laws of
Hawaii, 1925). [Morabe & Inton, Workmen's Compensation Act, p. 2]
Under the Workmen's Compensation Act of Hawaii, when the Act is applicable, the remedy under the Act is
exclusive The following is stated in 1 Schneider Workmen's Compensation Text, pp. 266, 267.

Sec. 112. Hawaii

Statutory Synopsis. The act is compulsory as to employees in 'all industrial employment' and
employees of the territory and its political subdivisions. (Sections 7480-7481, S.S., Vol. 1, p.
713.)
Compensation is not payable when injury is due to employee's willful intention to injure himself
or another or to his intoxication. (Sec. 7482, S.S., p. 713.)
When the act is applicable the remedy thereunder is exclusive (Sec. 7483, S.S., p. 714.)
2. In providing for exclusiveness of the remedy under our Workmen's Compensation Act, the Philippine
Legislature worded the first paragraph of Section 5 of the Act as follows:
SEC. 5. Exclusive right to compensation.-The rights and remedies granted by this Act to an
employee
by reason of a personal injury entitling him to compensation
shall exclude all other rights and remedies accruing to the employee, his personal
representatives, dependents or nearest of kin against the employer
under the Civil Code and other laws, because of said injury (Paragraphing and emphasis
supplied)
In regards to the intent of the Legislature under the foregoing provision:
A cardinal rule in the interpretation of statutes is that the meaning and intention of the lawmaking body must be sought, first of all in the words of the statute itself, read and considered in
their natural, ordinary, commonly-accepted and most obvious significations, according to good
and approved usage and without resorting to forced or subtle construction Courts, therefore, as
a rule, cannot presume that the law-making body does not know the meaning of words and the
rules of grammar. Consequently, the grammatical reading of a statute must be presumed to yield
its correct sense. (Espino vs. Cleofe 52 SCRA 92, 98) [Italics supplied]
3. The original second paragraph of Section 5 provided:
Employers contracting laborers in the Philippine Islands for work outside the same shall stipulate
with such laborers that the remedies prescribed by this Act shall apply exclusively to injuries
received outside the Islands through accidents happening in and during the performance of the
duties of the employment. (Italics supplied)
The use of the word "exclusively is a further confirmation of the exclusory provision of the Act, subject only to
exceptions which may be provided in the Act itself.
4. It might be mentioned that, within the Act itself, provision is made for remedies other than within the Act itself.
Thus, Section 6, in part, provides:
SEC. 6. Liability of third parties.-In case an employee suffers an injury for which compensation is
due under this Act by any other person besides his employer, it shall be optional with such
injured employee either to claim compensation from his employer, under this Act, or sue such
other person for damages, in accordance with law; ... (Emphasis supplied)
If the legislative intent under the first paragraph of Section 5 were to allow the injured employee to sue his
employer under the Civil Code, the legislator could very easily have formulated the said first paragraph of
Section 5 according to the pattern of Section 6. That that was not done shows the legislative intent not to allow
any option to an employee to sue the employer under the Civil Code for injuries compensable under the Act.
5. There should be no question but that the original first paragraph of Section 5 of the Workmen's Compensation
Act, formulated in 1927, provided that an injured worker or employee, or his heirs, if entitled to compensation
under the Act, cannot have independent recourse neither to the Civil Code nor to any other law relative to the
liability of the employer. After 1927, there were occasions when the legislator had the opportunity to amend the
first paragraph of Section 5 such that the remedies under the Act would not be exclusive; yet, the legislator
refrained from doing so. That shows the legislatives continuing intent to maintain the exclusory provision of the
first paragraph of Section 5 unless otherwise provided in the Act itself.
(a) The original second paragraph of Section 5 provided:

Employers contracting laborers in the Philippine Islands for work outside the same shall stipulate
with such laborers that the remedies prescribed by this Act shall apply (exclusively) to injuries
received outside the Islands through accidents happening in and during the performance of the
duties of the employment (and all service contracts made in the manner prescribed in this
section be presumed to include such agreement).
On June 20, 1952, through RA 772, the foregoing second paragraph was amended with the elimination of the
underlined words in parentheses, and the addition of this sentence at the end of the paragraph:
Such stipulation shall not prejudice the right of the laborers to the benefits of the Workmen's
Compensation Law of the place where the accident occurs, should such law be more favorable
to them. (Emphasis supplied)
It will be seen that, within the Act itself, the exclusory character of the Act was amended. At that time, if he had
so desired, the legislator could have amended the first paragraph of Section 5 so that the employee would have
the option to sue the employer under the Act, or under the Civil Code, should the latter be more favorable to him.
(b) The Workmen's Compensation Act, which took effect in 1927, grants compensation to an injured employee
without regard to the presence or absence of negligence on the part of the employer. The compensation is
deemed an expense chargeable to the industry (Murillo vs. Mendoza, 66 Phil. 689 [1938]).
In time, it must have been thought that it was inequitable to have the amount of compensation, caused by
negligence on the part of the employer, to be the same amount payable when the employer was not negligent.
Based on that thinking, Section 4-A 1 was included into the Act, on June 20, 1952, through RA 772. Said Section
4-A increased the compensation payable by 50% in case there was negligence on the part of the employer. That
additional section evidenced the intent of the legislator not to give an option to an employee, injured with
negligence on the part of the employer, to sue the latter under the provisions of the Civil Code.
On June 20, 1964, Section 4-A was amended (insubstantially) by RA 4119. The legislator was again given the
opportunity to provide, but he did not, the option to an employee to sue under the Act or under the Civil Code.
When a Court gives effect to a statute not in accordance with the intent of the law-maker, the Court is
unjustifiably legislating.
It is in view of the foregoing that I vote for affirmation of the trial Court's dismissal of the Complaint.
GUTIERREZ, JR., J., dissenting:
To grant the petition and allow the victims of industrial accidents to file damages suits based on torts would be a
radical innovation not only contrary to the express provisions of the Workmen's Compensation Act but a
departure from the principles evolved in the long history of workmen's compensation. At the very least, it should
be the legislature and not this Court which should remove the exclusory provision of the Workmen's
Compensation Act, a provision reiterated in the present Labor Code on employees' compensation.
Workmen's compensation evolved to remedy the evils associated with the situation in the early years of the
industrial revolution when injured workingmen had to rely on damage suits to get recompense.
Before workmen's compensation, an injured worker seeking damages would have to prove in a tort suit that his
employer was either negligent or in bad faith, that his injury was caused by the employer and not a fellow worker,
and that he was not guilty of contributory negligence. The employer could employ not only his wealth in defeating
the claim for damages but a host of common law defenses available to him as well. The worker was supposed to
know what he entered into when he accepted employment. As stated in the leading case of Priestley u. Fowler (3
M. & W. 1, 150 Reprint 1030) decided in 1837 "the mere relation of the master and the servant never can imply
an obligation on the part of the master to take more care of the servant than he may reasonably be expected to
do of himself." By entering into a contract of employment, the worker was deemed to accept the risks of
employment that he should discover and guard against himself.
The problems associated with the application of the fellow servant rule, the assumption of risk doctrine, the
principle of contributory negligence, and the many other defenses so easily raised in protracted damage suits
illustrated the need for a system whereby workers had only to prove the fact of covered employment and the fact
of injury arising from employment in order to be compensated.
The need for a compensation scheme where liability is created solely by statute and made compulsory and
where the element of fault-either the fault of the employer or the fault of the employee-disregarded became
obvious. Another objective was to have simplified, expeditious, inexpensive, and non-litigious procedures so that

victims of industrial accidents could more readily, if not automatically, receive compensation for work-related
injuries.
Inspite of common law defenses to defeat a claim being recognized, employers' liability acts were a major step in
the desired direction. However, employers liability legislation proved inadequate. Legislative reform led to the
workmen's compensation.
I cite the above familiar background because workmen's compensation represents a compromise. In return for
the near certainty of receiving a sum of money fixed by law, the injured worker gives up the right to subject the
employer to a tort suit for huge amounts of damages. Thus, liability not only disregards the element of fault but it
is also a pre- determined amount based on the wages of the injured worker and in certain cases, the actual cost
of rehabilitation. The worker does not receive the total damages for his pain and suffering which he could
otherwise claim in a civil suit. The employer is required to act swiftly on compensation claims. An administrative
agency supervises the program. And because the overwhelming mass of workingmen are benefited by the
compensation system, individual workers who may want to sue for big amounts of damages must yield to the
interests of their entire working class.
The nature of the compensation principle is explained as follows:
An appreciation of the nature of the compensation principle is essential to an understanding of
the acts and the cases interpreting them.
By the turn of the century it was apparent that the toll of industrial accidents of both the
avoidable and unavoidable variety had become enormous, and government was faced with the
problem of who was to pay for the human wreckage wrought by the dangers of modern industry.
If the accident was avoidable and could be attributed to the carelessness of the employer,
existing tort principles offered some measure of redress. Even here, however, the woeful
inadequacy of the fault principle was manifest. The uncertainty of the outcome of torts litigation
in court placed the employee at a substantial disadvantage. So long as liability depended on
fault there could be no recovery until the finger of blame had been pointed officially at the
employer or his agents. In most cases both the facts and the law were uncertain. The witnesses,
who were usually fellow workers of the victim, were torn between friendship or loyalty to their
class, on the one hand, and fear of reprisal by the employer, on the other. The expense and
delay of litigation often prompted the injured employee to accept a compromise settlement for a
fraction of the full value of his claim. Even if suit were successfully prosecuted, a large share of
the proceeds of the judgment were exacted as contingent fees by counsel. Thus the employer
against whom judgment was cast often paid a substantial damage bill, while only a part of this
enured to the benefit of the injured employee or his dependents. The employee's judgment was
nearly always too little and too late.
xxx xxx xxx
Workmen's Compensation rests upon the economic principle that those persons who enjoy the
product of a business- whether it be in the form of goods or services- should ultimately bear the
cost of the injuries or deaths that are incident to the manufacture, preparation and distribution of
the product. ...
xxx xxx xxx
Under this approach the element of personal fault either disappears entirely or is subordinated to
broader economic considerations. The employer absorbs the cost of accident loss only initially; it
is expected that this cost will eventually pass down the stream of commerce in the form of
increase price until it is spread in dilution among the ultimate consumers. So long as each
competing unit in a given industry is uniformly affected, no producer can gain any substantial
competitive advantage or suffer any appreciable loss by reason of the general adoption of the
compensation principle.
In order that the compensation principle may operate properly and with fairness to all parties it is
essential that the anticipated accident cost be predictable and that it be fixed at a figure that will
not disrupt too violently the traffic in the product of the industry affected. Thus predictability and
moderateness of cost are necessary from the broad economic viewpoint. ....
Compensation, then, differs from the conventional damage suit in two important respects: Fault
on the part of either employer or employee is eliminated; and compensation payable according

to a definitely limited schedule is substituted for damages. All compensation acts alike work
these two major changes, irrespective of how they may differ in other particulars.
Compensation, when regarded from the viewpoint of employer and employee represents a
compromise in which each party surrenders certain advantages in order to gain others which are
of more importance both to him and to society. The employer gives up the immunity he otherwise
would enjoy in cases where he is not at fault, and the employee surrenders his former right to full
damages and accepts instead a more modest claim for bare essentials, represented by
compensation.
The importance of the compromise character of compensation cannot be overemphasized. The
statutes vary a great deal with reference to the proper point of balance. The amount of weekly
compensation payments and the length of the period during which compensation is to be paid
are matters concerning which the acts differ considerably. The interpretation of any
compensation statute will be influenced greatly by the court's reaction to the basic point of
compromise established in the Act. If the court feels that the basic compromise unduly favors the
employer, it will be tempted to restore what it regards as a proper balance by adopting an
interpretation that favors the worker. In this way, a compensation act drawn in a spirit of extreme
conservatism may be transformed by a sympathetic court into a fairly liberal instrument; and
conversely, an act that greatly favors the laborer may be so interpreted by the courts that
employers can have little reason to complain. Much of the unevenness and apparent conflict in
compensation decisions throughout the various jurisdictions must be attributed to this." (Malone
& Plant, Workmen's Compensation American Casebook Series, pp. 63-65).
The schedule of compensation, the rates of payments, the compensable injuries and diseases, the premiums
paid by employers to the present system, the actuarial stability of the trust fund and many other interrelated parts
have all been carefully studied before the integrated scheme was enacted in to law. We have a system whose
parts must mesh harmonious with one another if it is to succeed. The basic theory has to be followed.
If this Court disregards this totality of the scheme and in a spirit of generosity recasts some parts of the system
without touching the related others, the entire structure is endangered. For instance, I am personally against
stretching the law and allowing payment of compensation for contingencies never envisioned to be compensable
when the law was formulated. Certainly, only harmful results to the principle of workmen's compensation can
arise if workmen, whom the law allows to receive employment compensation, can still elect to file damage suits
for industrial accidents. It was precisely for this reason that Section 5 of the Workmen's Compensation Act, which
reads:
SEC. 5. Exclusive right to compensation.-The rights and remedies granted by this Act to an
employee by reason of a personal injury entitling him to compensation shall exclude all other
rights and remedies accruing to the employee, his personal representatives, dependents or
nearest of kin against the employer under the Civil Code and other laws because of said
injury. ...
Article 173 of the labor Code also provides:
ART. 173. Exclusivenesss of liability.Unless otherwise provided, the liability of the State
Insurance Fund under this Title shall be exclusive and in place of all other liabilities of the
employer to the employee his dependents or anyone otherwise entitled to receive damages on
behalf of the employee or his dependents.
I am against the Court assuming the role of legislator in a matter calling for actuarial studies and public hearings.
If employers already required to contribute to the State Insurance Fund will still have to bear the cost of damage
suits or get insurance for that purpose, a major study will be necessary. The issue before us is more far reaching
than the interests of the poor victims and their families. All workers covered by workmen's compensation and all
employers who employ covered employees are affected. Even as I have deepest sympathies for the victims, I
regret that I am constrained to dissent from the majority opinion.

Separate Opinions

MELENCIO-HERRERA, J., dissenting:

A
This case involves a complaint for damages for the death of five employees of PHILEX Mining Corporation under
the general provisions of the Civil Code. The Civil Code itself, however, provides for its non-applicability to the
complaint. It is specifically provided in Article 2196 of the Code, found in Title XVIII-Damages that:
COMPENSATION FOR WORKMEN AND OTHER EMPLOYEES IN CASE OF DEATH, INJURY
OR ILLNESS IS REGULATED BY SPECIAL LAWS.
Compensation and damages are synonymous. In Esguerra vs. Muoz Palma, etc., et al., 104 Phil. 582, 586,
Justice J.B.L. Reyes had said:
Petitioner also avers that compensation is not damages. This argument is but a play on words.
The term compensation' is used in the law (Act 3812 and Republic Act 772) in the sense of
indemnity for damages suffered, being awarded for a personal injury caused or aggravated by or
in the course of employment. ...
By the very provisions of the Civil Code, it is a "special law", not the Code itself, which has to apply to the
complaint involved in the instant case. That "special law", in reference to the complaint, can be no other than the
Workmen's Compensation
Even assuming, without conceding, that an employee is entitled to an election of remedies, as the majority rules,
both options cannot be exercised simultaneously, and the exercise of one will preclude the exercise of the other.
The petitioners had already exercised their option to come under the Workmen's Compensation Act, and they
have already received compensation payable to them under that Act. Stated differently, the remedy under the
Workmen's Compensation Act had already become a "finished transaction".
There are two considerations why it is believed petitioners should no longer be allowed to exercise the option to
sue under the Civil Code. In the first place, the proceedings under the Workmen's Compensation Act have
already become the law in regards to" the "election of remedies", because those proceedings had become a
"finished transaction".
In the second place, it should be plainly equitable that, if a person entitled to an "election of remedies" makes a
first election and accepts the benefits thereof, he should no longer be allowed to avail himself of the second
option. At the very least, if he wants to make a second election, in disregard of the first election he has made,
when he makes the second election he should surrender the benefits he had obtained under the first election,
This was not done in the case before the Court.
B.
'There is full concurrence on my part with the dissenting opinion of Mr. Justice Gutierrez upholding "the exclusory
provision of the Workmen's Compensation Act." I may further add:
1. The Workmen's Compensation Act (Act No. 3428) was approved on December 10, 1927 and took effect on
June 10, 1928. It was patterned from Minnesota and Hawaii statutes.
Act No. 3428 was adopted by the Philippine legislature, in Spanish and some sections of the law
were taken from the statutes of Minnesota and Hawaii, (Chapter 209 of the Revised Laws of
Hawaii, 1925). [Morabe & Inton, Workmen's Compensation Act, p. 2]
Under the Workmen's Compensation Act of Hawaii, when the Act is applicable, the remedy under the Act is
exclusive The following is stated in 1 Schneider Workmen's Compensation Text, pp. 266, 267.
Sec. 112. Hawaii
Statutory Synopsis. The act is compulsory as to employees in 'all industrial employment' and
employees of the territory and its political subdivisions. (Sections 7480-7481, S.S., Vol. 1, p.
713.)
Compensation is not payable when injury is due to employee's willful intention to injure himself
or another or to his intoxication. (Sec. 7482, S.S., p. 713.)
When the act is applicable the remedy thereunder is exclusive (Sec. 7483, S.S., p. 714.)
2. In providing for exclusiveness of the remedy under our Workmen's Compensation Act, the Philippine
Legislature worded the first paragraph of Section 5 of the Act as follows:

SEC. 5. Exclusive right to compensation.-The rights and remedies granted by this Act to an
employee
by reason of a personal injury entitling him to compensation
shall exclude all other rights and remedies accruing to the employee, his personal
representatives, dependents or nearest of kin against the employer
under the Civil Code and other laws, because of said injury (Paragraphing and emphasis
supplied)
In regards to the intent of the Legislature under the foregoing provision:
A cardinal rule in the interpretation of statutes is that the meaning and intention of the lawmaking body must be sought, first of all in the words of the statute itself, read and considered in
their natural, ordinary, commonly-accepted and most obvious significations, according to good
and approved usage and without resorting to forced or subtle construction Courts, therefore, as
a rule, cannot presume that the law-making body does not know the meaning of words and the
rules of grammar. Consequently, the grammatical reading of a statute must be presumed to yield
its correct sense. (Espino vs. Cleofe 52 SCRA 92, 98) [Italics supplied]
3. The original second paragraph of Section 5 provided:
Employers contracting laborers in the Philippine Islands for work outside the same shall stipulate
with such laborers that the remedies prescribed by this Act shall apply exclusively to injuries
received outside the Islands through accidents happening in and during the performance of the
duties of the employment. (Italics supplied)
The use of the word "exclusively is a further confirmation of the exclusory provision of the Act, subject only to
exceptions which may be provided in the Act itself.
4. It might be mentioned that, within the Act itself, provision is made for remedies other than within the Act itself.
Thus, Section 6, in part, provides:
SEC. 6. Liability of third parties.-In case an employee suffers an injury for which compensation is
due under this Act by any other person besides his employer, it shall be optional with such
injured employee either to claim compensation from his employer, under this Act, or sue such
other person for damages, in accordance with law; ... (Emphasis supplied)
If the legislative intent under the first paragraph of Section 5 were to allow the injured employee to sue his
employer under the Civil Code, the legislator could very easily have formulated the said first paragraph of
Section 5 according to the pattern of Section 6. That that was not done shows the legislative intent not to allow
any option to an employee to sue the employer under the Civil Code for injuries compensable under the Act.
5. There should be no question but that the original first paragraph of Section 5 of the Workmen's Compensation
Act, formulated in 1927, provided that an injured worker or employee, or his heirs, if entitled to compensation
under the Act, cannot have independent recourse neither to the Civil Code nor to any other law relative to the
liability of the employer. After 1927, there were occasions when the legislator had the opportunity to amend the
first paragraph of Section 5 such that the remedies under the Act would not be exclusive; yet, the legislator
refrained from doing so. That shows the legislatives continuing intent to maintain the exclusory provision of the
first paragraph of Section 5 unless otherwise provided in the Act itself.
(a) The original second paragraph of Section 5 provided:
Employers contracting laborers in the Philippine Islands for work outside the same shall stipulate
with such laborers that the remedies prescribed by this Act shall apply (exclusively) to injuries
received outside the Islands through accidents happening in and during the performance of the
duties of the employment (and all service contracts made in the manner prescribed in this
section be presumed to include such agreement).
On June 20, 1952, through RA 772, the foregoing second paragraph was amended with the elimination of the
underlined words in parentheses, and the addition of this sentence at the end of the paragraph:
Such stipulation shall not prejudice the right of the laborers to the benefits of the Workmen's
Compensation Law of the place where the accident occurs, should such law be more favorable
to them. (Emphasis supplied)

It will be seen that, within the Act itself, the exclusory character of the Act was amended. At that time, if he had
so desired, the legislator could have amended the first paragraph of Section 5 so that the employee would have
the option to sue the employer under the Act, or under the Civil Code, should the latter be more favorable to him.
(b) The Workmen's Compensation Act, which took effect in 1927, grants compensation to an injured employee
without regard to the presence or absence of negligence on the part of the employer. The compensation is
deemed an expense chargeable to the industry (Murillo vs. Mendoza, 66 Phil. 689 [1938]).
In time, it must have been thought that it was inequitable to have the amount of compensation, caused by
negligence on the part of the employer, to be the same amount payable when the employer was not negligent.
Based on that thinking, Section 4-A 1 was included into the Act, on June 20, 1952, through RA 772. Said Section
4-A increased the compensation payable by 50% in case there was negligence on the part of the employer. That
additional section evidenced the intent of the legislator not to give an option to an employee, injured with
negligence on the part of the employer, to sue the latter under the provisions of the Civil Code.
On June 20, 1964, Section 4-A was amended (insubstantially) by RA 4119. The legislator was again given the
opportunity to provide, but he did not, the option to an employee to sue under the Act or under the Civil Code.
When a Court gives effect to a statute not in accordance with the intent of the law-maker, the Court is
unjustifiably legislating.
It is in view of the foregoing that I vote for affirmation of the trial Court's dismissal of the Complaint.
GUTIERREZ, JR., J., dissenting:
To grant the petition and allow the victims of industrial accidents to file damages suits based on torts would be a
radical innovation not only contrary to the express provisions of the Workmen's Compensation Act but a
departure from the principles evolved in the long history of workmen's compensation. At the very least, it should
be the legislature and not this Court which should remove the exclusory provision of the Workmen's
Compensation Act, a provision reiterated in the present Labor Code on employees' compensation.
Workmen's compensation evolved to remedy the evils associated with the situation in the early years of the
industrial revolution when injured workingmen had to rely on damage suits to get recompense.
Before workmen's compensation, an injured worker seeking damages would have to prove in a tort suit that his
employer was either negligent or in bad faith, that his injury was caused by the employer and not a fellow worker,
and that he was not guilty of contributory negligence. The employer could employ not only his wealth in defeating
the claim for damages but a host of common law defenses available to him as well. The worker was supposed to
know what he entered into when he accepted employment. As stated in the leading case of Priestley u. Fowler (3
M. & W. 1, 150 Reprint 1030) decided in 1837 "the mere relation of the master and the servant never can imply
an obligation on the part of the master to take more care of the servant than he may reasonably be expected to
do of himself." By entering into a contract of employment, the worker was deemed to accept the risks of
employment that he should discover and guard against himself.
The problems associated with the application of the fellow servant rule, the assumption of risk doctrine, the
principle of contributory negligence, and the many other defenses so easily raised in protracted damage suits
illustrated the need for a system whereby workers had only to prove the fact of covered employment and the fact
of injury arising from employment in order to be compensated.
The need for a compensation scheme where liability is created solely by statute and made compulsory and
where the element of fault-either the fault of the employer or the fault of the employee-disregarded became
obvious. Another objective was to have simplified, expeditious, inexpensive, and non-litigious procedures so that
victims of industrial accidents could more readily, if not automatically, receive compensation for work-related
injuries.
Inspite of common law defenses to defeat a claim being recognized, employers' liability acts were a major step in
the desired direction. However, employers liability legislation proved inadequate. Legislative reform led to the
workmen's compensation.
I cite the above familiar background because workmen's compensation represents a compromise. In return for
the near certainty of receiving a sum of money fixed by law, the injured worker gives up the right to subject the
employer to a tort suit for huge amounts of damages. Thus, liability not only disregards the element of fault but it
is also a pre- determined amount based on the wages of the injured worker and in certain cases, the actual cost
of rehabilitation. The worker does not receive the total damages for his pain and suffering which he could
otherwise claim in a civil suit. The employer is required to act swiftly on compensation claims. An administrative

agency supervises the program. And because the overwhelming mass of workingmen are benefited by the
compensation system, individual workers who may want to sue for big amounts of damages must yield to the
interests of their entire working class.
The nature of the compensation principle is explained as follows:
An appreciation of the nature of the compensation principle is essential to an understanding of
the acts and the cases interpreting them.
By the turn of the century it was apparent that the toll of industrial accidents of both the
avoidable and unavoidable variety had become enormous, and government was faced with the
problem of who was to pay for the human wreckage wrought by the dangers of modern industry.
If the accident was avoidable and could be attributed to the carelessness of the employer,
existing tort principles offered some measure of redress. Even here, however, the woeful
inadequacy of the fault principle was manifest. The uncertainty of the outcome of torts litigation
in court placed the employee at a substantial disadvantage. So long as liability depended on
fault there could be no recovery until the finger of blame had been pointed officially at the
employer or his agents. In most cases both the facts and the law were uncertain. The witnesses,
who were usually fellow workers of the victim, were torn between friendship or loyalty to their
class, on the one hand, and fear of reprisal by the employer, on the other. The expense and
delay of litigation often prompted the injured employee to accept a compromise settlement for a
fraction of the full value of his claim. Even if suit were successfully prosecuted, a large share of
the proceeds of the judgment were exacted as contingent fees by counsel. Thus the employer
against whom judgment was cast often paid a substantial damage bill, while only a part of this
enured to the benefit of the injured employee or his dependents. The employee's judgment was
nearly always too little and too late.
xxx xxx xxx
Workmen's Compensation rests upon the economic principle that those persons who enjoy the
product of a business- whether it be in the form of goods or services- should ultimately bear the
cost of the injuries or deaths that are incident to the manufacture, preparation and distribution of
the product. ...
xxx xxx xxx
Under this approach the element of personal fault either disappears entirely or is subordinated to
broader economic considerations. The employer absorbs the cost of accident loss only initially; it
is expected that this cost will eventually pass down the stream of commerce in the form of
increase price until it is spread in dilution among the ultimate consumers. So long as each
competing unit in a given industry is uniformly affected, no producer can gain any substantial
competitive advantage or suffer any appreciable loss by reason of the general adoption of the
compensation principle.
In order that the compensation principle may operate properly and with fairness to all parties it is
essential that the anticipated accident cost be predictable and that it be fixed at a figure that will
not disrupt too violently the traffic in the product of the industry affected. Thus predictability and
moderateness of cost are necessary from the broad economic viewpoint. ....
Compensation, then, differs from the conventional damage suit in two important respects: Fault
on the part of either employer or employee is eliminated; and compensation payable according
to a definitely limited schedule is substituted for damages. All compensation acts alike work
these two major changes, irrespective of how they may differ in other particulars.
Compensation, when regarded from the viewpoint of employer and employee represents a
compromise in which each party surrenders certain advantages in order to gain others which are
of more importance both to him and to society. The employer gives up the immunity he otherwise
would enjoy in cases where he is not at fault, and the employee surrenders his former right to full
damages and accepts instead a more modest claim for bare essentials, represented by
compensation.
The importance of the compromise character of compensation cannot be overemphasized. The
statutes vary a great deal with reference to the proper point of balance. The amount of weekly
compensation payments and the length of the period during which compensation is to be paid

are matters concerning which the acts differ considerably. The interpretation of any
compensation statute will be influenced greatly by the court's reaction to the basic point of
compromise established in the Act. If the court feels that the basic compromise unduly favors the
employer, it will be tempted to restore what it regards as a proper balance by adopting an
interpretation that favors the worker. In this way, a compensation act drawn in a spirit of extreme
conservatism may be transformed by a sympathetic court into a fairly liberal instrument; and
conversely, an act that greatly favors the laborer may be so interpreted by the courts that
employers can have little reason to complain. Much of the unevenness and apparent conflict in
compensation decisions throughout the various jurisdictions must be attributed to this." (Malone
& Plant, Workmen's Compensation American Casebook Series, pp. 63-65).
The schedule of compensation, the rates of payments, the compensable injuries and diseases, the premiums
paid by employers to the present system, the actuarial stability of the trust fund and many other interrelated parts
have all been carefully studied before the integrated scheme was enacted in to law. We have a system whose
parts must mesh harmonious with one another if it is to succeed. The basic theory has to be followed.
If this Court disregards this totality of the scheme and in a spirit of generosity recasts some parts of the system
without touching the related others, the entire structure is endangered. For instance, I am personally against
stretching the law and allowing payment of compensation for contingencies never envisioned to be compensable
when the law was formulated. Certainly, only harmful results to the principle of workmen's compensation can
arise if workmen, whom the law allows to receive employment compensation, can still elect to file damage suits
for industrial accidents. It was precisely for this reason that Section 5 of the Workmen's Compensation Act, which
reads:
SEC. 5. Exclusive right to compensation.-The rights and remedies granted by this Act to an
employee by reason of a personal injury entitling him to compensation shall exclude all other
rights and remedies accruing to the employee, his personal representatives, dependents or
nearest of kin against the employer under the Civil Code and other laws because of said
injury. ...
Article 173 of the labor Code also provides:
ART. 173. Exclusivenesss of liability.Unless otherwise provided, the liability of the State
Insurance Fund under this Title shall be exclusive and in place of all other liabilities of the
employer to the employee his dependents or anyone otherwise entitled to receive damages on
behalf of the employee or his dependents.
I am against the Court assuming the role of legislator in a matter calling for actuarial studies and public hearings.
If employers already required to contribute to the State Insurance Fund will still have to bear the cost of damage
suits or get insurance for that purpose, a major study will be necessary. The issue before us is more far reaching
than the interests of the poor victims and their families. All workers covered by workmen's compensation and all
employers who employ covered employees are affected. Even as I have deepest sympathies for the victims, I
regret that I am constrained to dissent from the majority opinion.
Footnotes
1 SEC. 4-A. Right to additional compensation.- In case of the employee's death, injury or
sickness due to the failure of the to comply with any law, or with any order, rule or regulation of
the Workmen's Compensation Commission or the Bureau of Labor Standards or should the
employer violate the provisions of Republic Act Numbered Six hundred seventy-nine and its
amendments or fail to install and maintain safety appliances, or take other precautions for the
prevention of accidents or occupational disease, he shall be liable to pay an additional
compensation equal to fifty per centum of the compensation fixed in this Act.

9.) G.R. No. L-39419 April 12, 1982

MAPALAD AISPORNA, petitioner,

vs.
THE COURT OF APPEALS and THE PEOPLE OF THE PHILIPPINES, respondents.
DE CASTRO, J.:
In this petition for certiorari, petitioner-accused Aisporna seeks the reversal of the decision dated August
14, 19741 in CA-G.R. No. 13243-CR entitled "People of the Philippines, plaintiff-appellee, vs. Mapalad Aisporna,
defendant-appellant" of respondent Court of Appeals affirming the judgment of the City Court of
Cabanatuan 2 rendered on August 2, 1971 which found the petitioner guilty for having violated Section 189 of the
Insurance Act (Act No. 2427, as amended) and sentenced her to pay a fine of P500.00 with subsidiary
imprisonment in case of insolvency, and to pay the costs.
Petitioner Aisporna was charged in the City Court of Cabanatuan for violation of Section 189 of the
Insurance Act on November 21, 1970 in an information 3 which reads as follows:
That on or before the 21st day of June, 1969, in the City of Cabanatuan, Republic of the
Philippines, and within the jurisdiction of this Honorable Court, the above-named accused,
did then and there, wilfully, unlawfully and feloniously act as agent in the solicitation or
procurement of an application for insurance by soliciting therefor the application of one
Eugenio S. Isidro, for and in behalf of Perla Compania de Seguros, Inc., a duly organized
insurance company, registered under the laws of the Republic of the Philippines, resulting in
the issuance of a Broad Personal Accident Policy No. 28PI-RSA 0001 in the amount not
exceeding FIVE THOUSAND PESOS (P5,000.00) dated June 21, 1969, without said
accused having first secured a certificate of authority to act as such agent from the office of
the Insurance Commissioner, Republic of the Philippines.
CONTRARY TO LAW.
The facts, 4 as found by the respondent Court of Appeals are quoted hereunder:
IT RESULTING: That there is no debate that since 7 March, 1969 and as of 21 June, 1969,
appellant's husband, Rodolfo S. Aisporna was duly licensed by Insurance Commission as
agent to Perla Compania de Seguros, with license to expire on 30 June, 1970, Exh. C; on
that date, at Cabanatuan City, Personal Accident Policy, Exh. D was issued by Perla thru its
author representative, Rodolfo S. Aisporna, for a period of twelve (12) months with
beneficiary as Ana M. Isidro, and for P5,000.00; apparently, insured died by violence during
lifetime of policy, and for reasons not explained in record, present information was filed by
Fiscal, with assistance of private prosecutor, charging wife of Rodolfo with violation of Sec.
189 of Insurance Law for having, wilfully, unlawfully, and feloniously acted, "as agent in the
solicitation for insurance by soliciting therefore the application of one Eugenio S. Isidro for
and in behalf of Perla Compaa de Seguros, ... without said accused having first secured a
certificate of authority to act as such agent from the office of the Insurance Commission,
Republic of the Philippines."
and in the trial, People presented evidence that was hardly disputed, that aforementioned
policy was issued with active participation of appellant wife of Rodolfo, against which
appellant in her defense sought to show that being the wife of true agent, Rodolfo, she
naturally helped him in his work, as clerk, and that policy was merely a renewal and was
issued because Isidro had called by telephone to renew, and at that time, her husband,
Rodolfo, was absent and so she left a note on top of her husband's desk to renew ...
Consequently, the trial court found herein petitioner guilty as charged. On appeal, the trial court's decision
was affirmed by the respondent appellate court finding the petitioner guilty of a violation of the first
paragraph of Section 189 of the Insurance Act. Hence, this present recourse was filed on October 22,
1974. 5

In its resolution of October 28, 1974, 6 this Court resolved, without giving due course to this instant petition, to
require the respondent to comment on the aforesaid petition. In the comment 7 filed on December 20, 1974, the
respondent, represented by the Office of the Solicitor General, submitted that petitioner may not be considered
as having violated Section 189 of the Insurance Act. 8 On April 3, 1975, petitioner submitted his Brief 9 while the
Solicitor General, on behalf of the respondent, filed a manifestation 10 in lieu of a Brief on May 3, 1975
reiterating his stand that the petitioner has not violated Section 189 of the Insurance Act.
In seeking reversal of the judgment of conviction, petitioner assigns the following errors 11 allegedly
committed by the appellate court:
1. THE RESPONDENT COURT OF APPEALS ERRED IN FINDING THAT RECEIPT OF
COMPENSATION IS NOT AN ESSENTIAL ELEMENT OF THE CRIME DEFINED BY THE
FIRST PARAGRAPH OF SECTION 189 OF THE INSURANCE ACT.
2. THE RESPONDENT COURT OF APPEALS ERRED IN GIVING DUE WEIGHT TO
EXHIBITS F, F-1, TO F-17, INCLUSIVE SUFFICIENT TO ESTABLISH PETITIONER'S
GUILT BEYOND REASONABLE DOUBT.
3. THE RESPONDENT COURT OF APPEALS ERRED IN NOT ACQUITTING HEREIN
PETITIONER.
We find the petition meritorious.
The main issue raised is whether or not a person can be convicted of having violated the first paragraph of
Section 189 of the Insurance Act without reference to the second paragraph of the same section. In other
words, it is necessary to determine whether or not the agent mentioned in the first paragraph of the
aforesaid section is governed by the definition of an insurance agent found on its second paragraph.
The pertinent provision of Section 189 of the Insurance Act reads as follows:
No insurance company doing business within the Philippine Islands, nor any agent thereof,
shall pay any commission or other compensation to any person for services in obtaining
new insurance, unless such person shall have first procured from the Insurance
Commissioner a certificate of authority to act as an agent of such company as hereinafter
provided. No person shall act as agent, sub-agent, or broker in the solicitation of
procurement of applications for insurance, or receive for services in obtaining new
insurance, any commission or other compensation from any insurance company doing
business in the Philippine Islands, or agent thereof, without first procuring a certificate of
authority so to act from the Insurance Commissioner, which must be renewed annually on
the first day of January, or within six months thereafter. Such certificate shall be issued by
the Insurance Commissioner only upon the written application of persons desiring such
authority, such application being approved and countersigned by the company such person
desires to represent, and shall be upon a form approved by the Insurance Commissioner,
giving such information as he may require. The Insurance Commissioner shall have the
right to refuse to issue or renew and to revoke any such certificate in his discretion. No such
certificate shall be valid, however, in any event after the first day of July of the year following
the issuing of such certificate. Renewal certificates may be issued upon the application of
the company.
Any person who for compensation solicits or obtains insurance on behalf of any insurance
company, or transmits for a person other than himself an application for a policy of
insurance to or from such company or offers or assumes to act in the negotiating of such
insurance, shall be an insurance agent within the intent of this section, and shall thereby
become liable to all the duties, requirements, liabilities, and penalties to which an agent of
such company is subject.
Any person or company violating the provisions of this section shall be fined in the sum of
five hundred pesos. On the conviction of any person acting as agent, sub-agent, or broker,
of the commission of any offense connected with the business of insurance, the Insurance
Commissioner shall immediately revoke the certificate of authority issued to him and no
such certificate shall thereafter be issued to such convicted person.

A careful perusal of the above-quoted provision shows that the first paragraph thereof prohibits a person
from acting as agent, sub-agent or broker in the solicitation or procurement of applications for insurance
without first procuring a certificate of authority so to act from the Insurance Commissioner, while its second
paragraph defines who is an insurance agent within the intent of this section and, finally, the third
paragraph thereof prescribes the penalty to be imposed for its violation.
The respondent appellate court ruled that the petitioner is prosecuted not under the second paragraph of
Section 189 of the aforesaid Act but under its first paragraph. Thus
... it can no longer be denied that it was appellant's most active endeavors that resulted in
issuance of policy to Isidro, she was there and then acting as agent, and received the pay
thereof her defense that she was only acting as helper of her husband can no longer be
sustained, neither her point that she received no compensation for issuance of the policy
because
any person who for compensation solicits or obtains insurance on behalf of
any insurance company or transmits for a person other than himself an
application for a policy of insurance to or from such company or offers or
assumes to act in the negotiating of such insurance, shall be an insurance
agent within the intent of this section, and shall thereby become liable to all
the duties, requirements, liabilities, and penalties, to which an agent of such
company is subject. paragraph 2, Sec. 189, Insurance Law,
now it is true that information does not even allege that she had obtained the insurance,
for compensation
which is the gist of the offense in Section 189 of the Insurance Law in its 2nd paragraph, but
what appellant apparently overlooks is that she is prosecuted not under the 2nd but under
the 1st paragraph of Sec. 189 wherein it is provided that,
No person shall act as agent, sub-agent, or broker, in the solicitation or
procurement of applications for insurance, or receive for services in
obtaining new insurance any commission or other compensation from any
insurance company doing business in the Philippine Island, or agent thereof,
without first procuring a certificate of authority to act from the insurance
commissioner, which must be renewed annually on the first day of January,
or within six months thereafter.
therefore, there was no technical defect in the wording of the charge, so that Errors 2 and 4
must be overruled. 12
From the above-mentioned ruling, the respondent appellate court seems to imply that the definition of an
insurance agent under the second paragraph of Section 189 is not applicable to the insurance agent
mentioned in the first paragraph. Parenthetically, the respondent court concludes that under the second
paragraph of Section 189, a person is an insurance agent if he solicits and obtains an insurance for
compensation, but, in its first paragraph, there is no necessity that a person solicits an insurance for
compensation in order to be called an insurance agent.
We find this to be a reversible error. As correctly pointed out by the Solicitor General, the definition of an
insurance agent as found in the second paragraph of Section 189 is intended to define the word "agent"
mentioned in the first and second paragraphs of the aforesaid section. More significantly, in its second
paragraph, it is explicitly provided that the definition of an insurance agent is within the intent of Section
189. Hence
Any person who for compensation ... shall be an insurance agent within the intent of this
section, ...
Patently, the definition of an insurance agent under the second paragraph holds true with respect to the
agent mentioned in the other two paragraphs of the said section. The second paragraph of Section 189 is a
definition and interpretative clause intended to qualify the term "agent" mentioned in both the first and third
paragraphs of the aforesaid section.

Applying the definition of an insurance agent in the second paragraph to the agent mentioned in the first
and second paragraphs would give harmony to the aforesaid three paragraphs of Section 189. Legislative
intent must be ascertained from a consideration of the statute as a whole. The particular words, clauses
and phrases should not be studied as detached and isolated expressions, but the whole and every part of
the statute must be considered in fixing the meaning of any of its parts and in order to produce harmonious
whole. 13 A statute must be so construed as to harmonize and give effect to all its provisions whenever
possible. 14 The meaning of the law, it must be borne in mind, is not to be extracted from any single part, portion
or section or from isolated words and phrases, clauses or sentences but from a general consideration or view of
the act as a whole. 15 Every part of the statute must be interpreted with reference to the context. This means
that every part of the statute must be considered together with the other parts, and kept subservient to the
general intent of the whole enactment, not separately and independently. 16 More importantly, the doctrine of
associated words (Noscitur a Sociis) provides that where a particular word or phrase in a statement is
ambiguous in itself or is equally susceptible of various meanings, its true meaning may be made clear and
specific by considering the company in which it is found or with which it is associated. 17
Considering that the definition of an insurance agent as found in the second paragraph is also applicable to
the agent mentioned in the first paragraph, to receive a compensation by the agent is an essential element
for a violation of the first paragraph of the aforesaid section. The appellate court has established ultimately
that the petitioner-accused did not receive any compensation for the issuance of the insurance policy of
Eugenio Isidro. Nevertheless, the accused was convicted by the appellate court for, according to the latter,
the receipt of compensation for issuing an insurance policy is not an essential element for a violation of the
first paragraph of Section 189 of the Insurance Act.
We rule otherwise. Under the Texas Penal Code 1911, Article 689, making it a misdemeanor for any person
for direct or indirect compensation to solicit insurance without a certificate of authority to act as an
insurance agent, an information, failing to allege that the solicitor was to receive compensation either
directly or indirectly, charges no offense. 18 In the case of Bolen vs. Stake, 19 the provision of Section 3750,
Snyder's Compiled Laws of Oklahoma 1909 is intended to penalize persons only who acted as insurance
solicitors without license, and while acting in such capacity negotiated and concluded insurance contracts for
compensation. It must be noted that the information, in the case at bar, does not allege that the negotiation of an
insurance contracts by the accused with Eugenio Isidro was one for compensation. This allegation is essential,
and having been omitted, a conviction of the accused could not be sustained. It is well-settled in Our
jurisprudence that to warrant conviction, every element of the crime must be alleged and proved. 20
After going over the records of this case, We are fully convinced, as the Solicitor General maintains, that
accused did not violate Section 189 of the Insurance Act.
WHEREFORE, the judgment appealed from is reversed and the accused is acquitted of the crime charged,
with costs de oficio.
SO ORDERED.
Teehankee (Acting C.J.,) Makasiar, De Castro, Fernandez, Guerrero and Melencio-Herrera, JJ., concur.
Plana, J., took no part.
10.) G.R. No. L-34964 January 31, 1973

CHINA BANKING CORPORATION and TAN KIM LIONG, petitioners-appellants,

vs.
HON. WENCESLAO ORTEGA, as Presiding Judge of the Court of First Instance of Manila, Branch
VIII, and VICENTE G. ACABAN, respondents-appellees.
Sy Santos, Del Rosario and Associates for petitioners-appellants.
Tagalo, Gozar and Associates for respondents-appellees.
MAKALINTAL, J.:

The only issue in this petition for certiorari to review the orders dated March 4, 1972 and March 27, 1972,
respectively, of the Court of First Instance of Manila in its Civil Case No. 75138, is whether or not a banking
institution may validly refuse to comply with a court process garnishing the bank deposit of a judgment
debtor, by invoking the provisions of Republic Act No. 1405. *
On December 17, 1968 Vicente Acaban filed a complaint in the court a quo against Bautista Logging Co.,
Inc., B & B Forest Development Corporation and Marino Bautista for the collection of a sum of money.
Upon motion of the plaintiff the trial court declared the defendants in default for failure to answer within the
reglementary period, and authorized the Branch Clerk of Court and/or Deputy Clerk to receive the plaintiff's
evidence. On January 20, 1970 judgment by default was rendered against the defendants.
To satisfy the judgment, the plaintiff sought the garnishment of the bank deposit of the defendant B & B
Forest Development Corporation with the China Banking Corporation. Accordingly, a notice of garnishment
was issued by the Deputy Sheriff of the trial court and served on said bank through its cashier, Tan Kim
Liong. In reply, the bank' cashier invited the attention of the Deputy Sheriff to the provisions of Republic Act
No. 1405 which, it was alleged, prohibit the disclosure of any information relative to bank deposits.
Thereupon the plaintiff filed a motion to cite Tan Kim Liong for contempt of court.
In an order dated March 4, 1972 the trial court denied the plaintiff's motion. However, Tan Kim Liong was
ordered "to inform the Court within five days from receipt of this order whether or not there is a deposit in
the China Banking Corporation of defendant B & B Forest Development Corporation, and if there is any
deposit, to hold the same intact and not allow any withdrawal until further order from this Court." Tan Kim
Liong moved to reconsider but was turned down by order of March 27, 1972. In the same order he was
directed "to comply with the order of this Court dated March 4, 1972 within ten (10) days from the receipt of
copy of this order, otherwise his arrest and confinement will be ordered by the Court." Resisting the two
orders, the China Banking Corporation and Tan Kim Liong instituted the instant petition.
The pertinent provisions of Republic Act No. 1405 relied upon by the petitioners reads:
Sec. 2. All deposits of whatever nature with banks or banking institutions in the Philippines
including investments in bonds issued by the Government of the Philippines, its political
subdivisions and its instrumentalities, are hereby considered as of absolutely confidential
nature and may not be examined, inquired or looked into by any person, government
official, bureau or office, except upon written permission of the depositor, or in cases of
impeachment, or upon order of a competent court in cases of bribery or dereliction of duty
of public officials, or in cases where the money deposited or invested is the subject matter
of the litigation.
Sec 3. It shall be unlawful for any official or employee of a banking institution to disclose to
any person other than those mentioned in Section two hereof any information concerning
said deposits.
Sec. 5. Any violation of this law will subject offender upon conviction, to an imprisonment of
not more than five years or a fine of not more than twenty thousand pesos or both, in the
discretion of the court.
The petitioners argue that the disclosure of the information required by the court does not fall within any of
the four (4) exceptions enumerated in Section 2, and that if the questioned orders are complied with Tan
Kim Liong may be criminally liable under Section 5 and the bank exposed to a possible damage suit by B &
B Forest Development Corporation. Specifically referring to this case, the position of the petitioners is that
the bank deposit of judgment debtor B & B Forest Development Corporation cannot be subject to
garnishment to satisfy a final judgment against it in view of the aforequoted provisions of law.
We do not view the situation in that light. The lower court did not order an examination of or inquiry into the
deposit of B & B Forest Development Corporation, as contemplated in the law. It merely required Tan Kim
Liong to inform the court whether or not the defendant B & B Forest Development Corporation had a
deposit in the China Banking Corporation only for purposes of the garnishment issued by it, so that the
bank would hold the same intact and not allow any withdrawal until further order. It will be noted from the
discussion of the conference committee report on Senate Bill No. 351 and House Bill No. 3977, which later

became Republic Act 1405, that it was not the intention of the lawmakers to place bank deposits beyond
the reach of execution to satisfy a final judgment. Thus:
Mr. MARCOS. Now, for purposes of the record, I should like the Chairman of the Committee
on Ways and Means to clarify this further. Suppose an individual has a tax case. He is being
held liable by the Bureau of Internal Revenue for, say, P1,000.00 worth of tax liability, and
because of this the deposit of this individual is attached by the Bureau of Internal Revenue.
Mr. RAMOS. The attachment will only apply after the court has pronounced sentence
declaring the liability of such person. But where the primary aim is to determine whether he
has a bank deposit in order to bring about a proper assessment by the Bureau of Internal
Revenue, such inquiry is not authorized by this proposed law.
Mr. MARCOS. But under our rules of procedure and under the Civil Code, the attachment or
garnishment of money deposited is allowed. Let us assume, for instance, that there is a
preliminary attachment which is for garnishment or for holding liable all moneys deposited
belonging to a certain individual, but such attachment or garnishment will bring out into the
open the value of such deposit. Is that prohibited by this amendment or by this law?
Mr. RAMOS. It is only prohibited to the extent that the inquiry is limited, or rather, the inquiry
is made only for the purpose of satisfying a tax liability already declared for the protection of
the right in favor of the government; but when the object is merely to inquire whether he has
a deposit or not for purposes of taxation, then this is fully covered by the law.
Mr. MARCOS. And it protects the depositor, does it not?
Mr. RAMOS. Yes, it protects the depositor.
Mr. MARCOS. The law prohibits a mere investigation into the existence and the amount of
the deposit.
Mr. RAMOS. Into the very nature of such deposit.
Mr. MARCOS. So I come to my original question. Therefore, preliminary garnishment or
attachment of the deposit is not allowed?
Mr. RAMOS. No, without judicial authorization.
Mr. MARCOS. I am glad that is clarified. So that the established rule of procedure as well as
the substantive law on the matter is amended?
Mr. RAMOS. Yes. That is the effect.
Mr. MARCOS. I see. Suppose there has been a decision, definitely establishing the liability
of an individual for taxation purposes and this judgment is sought to be executed ... in the
execution of that judgment, does this bill, or this proposed law, if approved, allow the
investigation or scrutiny of the bank deposit in order to execute the judgment?
Mr. RAMOS. To satisfy a judgment which has become executory.
Mr. MARCOS. Yes, but, as I said before, suppose the tax liability is P1,000,000 and the
deposit is half a million, will this bill allow scrutiny into the deposit in order that the judgment
may be executed?
Mr. RAMOS. Merely to determine the amount of such money to satisfy that obligation to the
Government, but not to determine whether a deposit has been made in evasion of taxes.
xxx xxx xxx
Mr. MACAPAGAL. But let us suppose that in an ordinary civil action for the recovery of a
sum of money the plaintiff wishes to attach the properties of the defendant to insure the
satisfaction of the judgment. Once the judgment is rendered, does the gentleman mean that
the plaintiff cannot attach the bank deposit of the defendant?

Mr. RAMOS. That was the question raised by the gentleman from Pangasinan to which I
replied that outside the very purpose of this law it could be reached by attachment.
Mr. MACAPAGAL. Therefore, in such ordinary civil cases it can be attached?
Mr. RAMOS. That is so.
(Vol. II, Congressional Record, House of Representatives, No. 12, pp. 3839-3840, July 27,
1955).
It is sufficiently clear from the foregoing discussion of the conference committee report of the two houses of
Congress that the prohibition against examination of or inquiry into a bank deposit under Republic Act 1405
does not preclude its being garnished to insure satisfaction of a judgment. Indeed there is no real inquiry in
such a case, and if the existence of the deposit is disclosed the disclosure is purely incidental to the
execution process. It is hard to conceive that it was ever within the intention of Congress to enable debtors
to evade payment of their just debts, even if ordered by the Court, through the expedient of converting their
assets into cash and depositing the same in a bank.
WHEREFORE, the orders of the lower court dated March 4 and 27, 1972, respectively, are hereby
affirmed, with costs against the petitioners-appellants.
Zaldivar, Castro, Fernando, Barredo, Makasiar, Antonio and Esguerra, JJ., concur.
Concepcion, C.J. and Teehankee, J., took no part.
11.) G.R. No. L-37867 February 22, 1982

BOARD OF ADMINISTRATORS, PHILIPPINES VETERANS ADMINISTRATION, petitioner,

vs.
HON. JOSE G. BAUTISTA, in his capacity as Presiding Judge of the CFI Manila, Branch III, and
CALIXTO V. GASILAO, respondents.
GUERRERO, J.:
This is a petition to review on certiorari the decision of respondent Court of First Instance of Manila, Branch
III, rendered on October 25, 1973 in Civil Case No. 90450 for mandamus filed by Calixto V. Gasilao against
the Board of Administrators of the Philippine Veterans Administration.
The facts as found by the Court a quo to have been established by the pleadings find by the parties are
stated in the decision under review from which We quote the following:
Calixto V. Gasilao, pauper litigant and petitioner in the above-entitled case, was a veteran in
good standing during World War II. On October 19, 1955, he filed a claim for disability
pension under Section 9, Republic Act No. 65. The claim was disapproved by the Philippine
Veterans Board (now Board of Administrators, Philippine Veterans Administration).
Meanwhile, Republic Act 65 was amended by Republic Act 1362 on June 22, 1955 by
including as part of the benefit of P50.00, P10.00 a month for each of the unmarried minor
children below 18 of the veteran Republic Act No. 1362 was implemented by the
respondents only on July 1, 1955.
On June 18, 1957, Section 9 of Republic Act No. 65 was further amended by Republic Act
1920 increasing the life pension of the veteran to P100.00 a month and maintaining the
P10.00 a month each for the unmarried minor children below 18.
Fortunately, on August 8, 1968, the claim of the petitioner which was disapproved in
December, 1955 was reconsidered and his claim was finally approved at the rate of
P100.00 a month, life pension, and the additional Pl0.00 for each of his ten unmarried minor
children below 18. In view of the approval of the claim of petitioner, he requested

respondents that his claim be made retroactive as of the date when his original application
was flied or disapproved in 1955. Respondents did not act on his request.
On June 22, 1969, Section 9 of Republic Act No. 65 was amended by Republic Act No.
5753 which increased the life pension of the veteran to P200.00 a month and granted
besides P30.00 a month for the wife and P30.00 a month each for his unmarried minor
children below 18. In view of the new law, respondents increased the monthly pension of
petitioner to P125.00 effective January 15, 1971 due to insufficient funds to cover full
implementation. His wife was given a monthly pension of P7.50 until January 1, 1972 when
Republic Act 5753 was fully implemented.
Petitioner now claims that he was deprived of his right to the pension from October 19, 1955
to June 21, 1957 at the rate of P50.00 per month plus P10.00 a month each for his six (6)
unmarried minor children below 18. lie also alleges that from June 22, 1957 to August 7,
1968 he is entitled to the difference of P100.00 per month plus P10.00 a month each for his
seven (7) unmarried nor children below 18. Again, petitioner asserts the difference of
P100.00 per month, plus P30.00 a month for his wife and the difference of P20.00 a month
each for his four (4) unmarried minor children below 18 from June 22, 1969 up to January
14, 1971 and finally, the difference of P75.00 per month plus P30.00 a month for his wife
and the difference of P20.00 a month for his three (3) unmarried minor children below 18
from January 15, 1971 to December 31, 1971. 1
According to the records, the parties, through their respective counsels, filed on September 24, 1973 the
following stipulation of facts in the lower Court:
STIPULATION OF FACTS
COME NOW the parties thru their respective counsel, and unto this Honorable Court,
respectfully state that they agree on the following facts which may be considered as proved
without the need of the introduction of any evidence thereon, to wit:
1. Petitioner was a veteran in good standing during the last World War that took active
participation in the liberation drive against the enemy, and due to his military service, he was
rendered disabled.
2. The Philippine Veterans Administration, formerly the Philippine Veterans Board, (now
Philippine Veterans Affairs Office) is an agency of the Government charged with the
administration of different laws giving various benefits in favor of veterans and their
orphans/or widows and parents; that it has the power to adopt rules and regulations to
implement said laws and to pass upon the merits and qualifications of persons applying for
rights and privileges extended by this Act pursuant to such rules and regulations as it may
adopt to insure the speedy and honest fulfillment of its aims and purposes.
3. On July 23, 1955, petitioner filed a claim (Claim No. Dis-12336) for disability pension
under Section 9 of RA 65, with the Philippine Veterans Board (later succeeded by the
Philippine Veterans Administration, now Philippine Veterans Affairs Office), alleging that he
was suffering from PTB, which he incurred in line of duty.
4. Due to petitioner's failure to complete his supporting papers and submit evidence to
establish his service connected illness, his claim was disapproved by the Board of the
defunct Philippine Veterans Board on December 18, 1955.
5. On August 8, 1968, petitioner was able to complete his supporting papers and, after due
investigation and processing, the Board of Administrators found out that his disability was
100% thus he was awarded the full benefits of section 9 of RA 65, and was therefore given
a pension of P100.00 a month and with an additional P 10.00 a month for each of his
unmarried minor children pursuant to RA 1920, amending section 9 of RA 65.
6. RA 5753 was approved on June 22, 1969, providing for an increase in the basic pension
to P200.00 a month and the additional pension, to P30.00 a month for the wife and each of
the unmarried minor children. Petitioner's monthly pension was, however, increased only on

January 15, 1971, and by 25% of the increases provided by law, due to the fact that it was
only on said date that funds were released for the purpose, and the amount so released
was only sufficient to pay only 25% of the increase.
7. On January 15, 1972, more funds were released to implement fully RA 5753 and snow
payment in full of the benefits thereunder from said date.
WHEREFORE, it is respectfully prayed that a decision be rendered in accordance with the
foregoing stipulation of facts. It is likewise prayed that the parties be granted a period of (15)
days within which to file their memoranda. 2
Upon consideration of the foregoing and the Memoranda filed by the parties, the lower Court rendered
judgment against therein respondent Board of Administrators, the dispositive portion of which reads as
follows:
WHEREFORE, premises considered, judgment is hereby rendered for petitioner and the
respondents are ordered to make petitioner's pension effective as of December 18, 1955 at
the rate of P50.00 per month; and the rate increased to P100.00 per month plus P10.00 per
month each for his ten unmarried minor children below 18 years of age from June 22, 1957
up to August 7..1968; to pay the difference of P100.00 per month plus P30.00 per month
and P20.00 per month each for his ten unmarried children below 18 years of age from June
22, 1969 up to January 15, 1971, the difference of P75.00 per month plus P22.50 per month
for his wife and P20.00 per month each for his unmarried nor children then below 18 years
of age from January 16, 1971 up to December 31, 1971.
SO ORDERED.
Manila, October 25, 1973. 3
In its Petition before this Court, the Board of Administrators of the Philippine Veterans Administration,
through the Office of the Solicitor General, challenges the abovementioned decision of the Court a quo on
the following grounds:
1. The lower Court erred in ordering the petitioners to retroact the effectivity of their award to
respondent Calixto V. Gasilao of full benefits under section 9 of RA 65 to December 18,
1955, the date when his application was disapproved due to dis failure to complete his
supporting papers and submit evidence to establish his service connected illness, and not
August 8, 1968, the date when he was able to complete his papers and allow processing
and approval of his application.
2. The lower Court erred in ordering payment of claims which had prescribed.
3. The lower Court erred in allowing payment of claims under a law for which no funds had
been released. 4
The question raised under the first assigned error is: When should private respondent Gasilao's pension
benefits start
The lower Court, quoting excerpts from Our decision in Begosa vs. Chairman Philippine Veterans
Administration,5 ruled that Gasilao's pension benefits should retroact to the date of the disapproval of his claim
on December 18, 1955, and not commence from the approval thereon on August 8, 1968 as contended by the
Board of Administrators.
Petitioner maintains the stand that the facts of the Begosa case are not similar to those of the case at bar
to warrant an application of the ruling therein on the retroactivity of a pension award to the date of prior
disapproval of the claim. In the Begosa case, the Supreme Court speaking thru then Associate Justice, now
Chief Justice Fernando, affirmed the decision of the lower Court, and ruled in part as follows:
From the facts just set out, it will be noted that plaintiff filed his said claim for disability
pension as far back as March 4, 1955; that it was erroneously disapproved on June 21,
1955, because his dishonorable discharge from the Army was not a good or proper ground
for the said disapproval and that on reconsideration asked for by him on November 1, 1957,
which he continued to follow up, the Board of Administrators, Philippine Veterans

Administration, composed of herein defendants, which took over the duties of the Philippine
Veterans Board, finally approved his claim on September 2, 1964, at the rate of P30.00 a
month. 6
Had it not been for the said error, it appears that there was no good ground to deny the said
claim, so that the latter was valid and meritorious even as of the date of its filing on March 4,
1955, hence to make the same effective only as of the date of its approval on September 2,
1964 according to defendant's stand would be greatly unfair and prejudicial to
plaintiff. 7
In other words, the favorable award which claimant Begosa finally obtained on September 2, 1964 was
made to retroact to the date of prior disapproval of the claim on June 2, 1955 for the reason that such
disapproval was erroneously made.
In the instant case, on the other hand, the herein claim of respondent Gasilao was denied on December
18, 1955 because of his "failure to complete his supporting papers and submit evidence to establish his
service-connected illness" (Stipulation of Facts, Par. 4, ante). Nonetheless, the Stipulation of Facts
admitted in par. 1 that "Petitioner was a veteran in good standing during the last World War that took active
participation in the liberation drive against the enemy, and due to his military service, he was rendered
disabled." From this admission in par. 1, it can reasonably be deduced that the action on the claim of
Gasilao was merely suspended by the Philippine Veterans Administration pending the completion of the
required supporting papers and evidence to establish his service-connected illness. Hence, Our ruling in
the Begosa case making retroactive the award in favor of the veteran still holds.
Republic Act No. 65 otherwise known as the Veterans' Bill of Rights, as amended, does not explicitly
provide for the effectivity of pension awards. However, petitioner seeks to remedy this legislative deficiency
by citing Section 15 of the law which in part reads as follows:
Sec. 15. Any person who desires to take advantage of the rights and privileges provided for
in this Act should file his application with the Board ...
Petitioner contends that since the foregoing section impliedly requires that the application filed should first
be approved by the Board of Administrators before the claimant could receive his pension, therefore, an
award of pension benefits should commence form the date of he approval of the application.
This stand of the petitioner does not appear to be in consonance with the spirit and intent of the law,
considering that Republic Act 65 is a veteran pension law which must be accorded a liberal construction
and interpretation in order to favor those entitled to the rights, privileges and benefits granted thereunder,
among which are the right to resume old positions in the government, educational benefits, the privilege to
take promotional examinations, a life pension for the incapacitated, pensions for widow and children,
hospitalization and medical care benefits.
As it is generally known, the purpose of Congress in granting veteran pensions is to compensate, as far as
may be, a class of men who suffered in the service for the hardships they endured and the dangers they
encountered,8 and more particularly, those who have become incapacitated for work owing to sickness, disease
or injuries sustained while in line of duty. 9 A veteran pension law is, therefore, a governmental expression of
gratitude to and recognition of those who rendered service for the country, especially during times of war or
revolution, by extending to them regular monetary aid. For this reason, it is the general rule that a liberal
construction is given to pension statutes in favor of those entitled to pension. Courts tend to favor the pensioner,
but such constructional preference is to be considered with other guides to interpretation, and a construction of
pension laws must depend on its own particular language. 10
Significantly, the original text of RA 65 provided that:
Sec. 6. It also shall be the duty of the Board (then the Philippine Veterans Board) to pass
upon the merits and qualifications of persons applying for the rights and/or privileges
extended by this Act, pursuant to such rules as it may adopt to insure the speedy and
honest fulfillment of its aims and purposes. (Emphasis supplied.)
The foregoing provision clearly makes it incumbent upon the implementing Board to carry out the
provisions of the statute in the most expeditious way possible and without unnecessary delay. In

the Begosa case, it took nine years (from June 2, 1955 to September 2, 1964) before the claimant finally
obtained his pension grant, whereas in the instant case, it took about twelve years (from December, 1955
to August 8, 1968) for respondent Gasilao to receive his pension claim. To Our mind, it would be more in
consonance with the spirit and intentment of the law that the benefits therein granted be received and
enjoyed at the earliest possible time by according retroactive effect to the grant of the pension award as
We have done in the Begosa case.
On the other hand, if the pension awards are made effective only upon approval of the corresponding
application which would be dependent on the discretion of the Board of Administrators which as noted
above had been abused through inaction extending to nine years, even to twelve years, the noble and
humanitarian purposes for which the law had enacted could easily be thwarted or defeated.
On the issue of prescription, petitioner cites Article 1144 of the Civil Code which provides:
Art. 1144. The following actions must be brought within ten years from the time the right of
action accrues:
(1) Upon a written contract;
(2) Upon an obligation created by law; and
(3) Upon a judgment.
Petitioner now contends that since the action was filed in the lower Court on April 13, 1973 seeking the
payment of alleged claims which have accrued more than ten (10) years prior to said date, the same
should have been disallowed as to the prescribed claims.
The obligation of the government to pay pension was created by law (Sec. 9, R.A. 65). Hence, the ten-year
prescriptive period should be counted from the date of passage of the law which is September 25, 1946,
the reason being that it is only from said date that private respondent could have filed his application.
Taking September 25, 1946 as the point of reference, the actual filing of Gasilao's application on July 23,
1955 was clearly made within and effectively interrupted the prescriptive period. It is not the date of the
commencement of the action in the lower Court which should be reckoned with, for it was not on said date
that Gasilao first sought to claim his pension benefits, but on July 23, 1955 when he filed his application
with the defunct Philippine Veterans Board. As We had the occasion to state in the case of Vda. de Nator
vs. C.I.R., 11 "the basis of prescription is the unwarranted failure to bring the matter to the attention of those who
are by law authorized to take cognizance thereof."
The Stipulation of Facts do not show and neither do the records indicate when Gasilao attempted to
reinstate his claim after the same was disapproved on December 18, 1955. What is evident is that he did
take steps to reinstate his claim because on August 8, 1968, herein petitioner finally approved his
application. We find it more logical to presume that upon being properly notified of the disapproval of his
application and the reasons therefor, Gasilao, being the interested party that he was proceeded to work for
the completion of the requirements of the Board, as in fact he was successful in meeting such
requirements. There is nothing in the record to show intentional abandonment of the claim to as to make
the prescriptive period continue to run again.
The third ground relied upon in support of this Petition involves the issue as to whether or not the payment
of increased pension provided in the amendatory Act, R.A. 5753, could be ordered, even where there was
no actual release of funds for the purpose, although the law itself expressly provided for an appropriation.
In the case ofBoard of Adminitrators, Philippine Veterans Administration vs. Hon. Agcoili, et al., 12 penned
by Chief Justice Fred Ruiz Castro, the same issue was treated in this wise:
... The inability of the petitioner to pay Abrera the differential of P60.00 in monthly pension is
attributed by it, in its own words, "to the failure of Congress to appropriate the necessary
funds to cover all claims for benefits, pensions and allowances." And the petitioner states
that it has "no alternative but to suspend (full implementation of said laws until such time, as
sufficient funds have been appropriated by Congress" to cover the total amount of all
approved claims.
We find the explanation of the petitioner satisfactory, but we nevertheless hold that as a
matter of law Abrera is entitled to a monthly pension of P120.00 from January 1, 1972 when

Republic Act 5753 was implemented up to the present, if his physical disability rating has
continued and continues to be 60%. Payment to him of what is due him from January 1,
1972 must however remain subject to the availability of Government funds duly set aside for
the purpose and subject further periodic re-rating of his physical disability.
But even if we have thus defined the precise terms, nature and scope of the entitlement of
the respondent Abrera, for the guidance of petitioner, we nevertheless refrain from ordering
the petitioner to pay the amount of P120.00 per month from January 1, 1972 that is due to
the respondent by virtue of the mandate of section 9 of Republic Act 65, as amended by
Republic Act 5753, because the Government has thus far not provided the necessary
funds to pay all valid claims duly approved under the authority of said statute. 13 (Emphasis
supplied.)
ACCORDINGLY, the judgment of the Court a quo is hereby modified to read as follows:
WHEREFORE, premises considered, the Board of Administrators of the Philippine Veterans
Administration (now the Philippine Veterans Affairs Office) is hereby ordered to make
Gasilao's pension effective December 18, 1955 at the rate of P50-00 per month plus P10.00
per month for each of his then unmarried minor children below 18, and the former amount
increased to P100.00 from June 22, 1957 to August 7, 1968.
The differentials in pension to which said Gasilao, his wife and his unmarried minor children
below 18 are entitled for the period from June 22, 1969 to January 14, 1972 by virtue of
Republic Act No. 5753 are hereby declared subject to the availability of Government funds
appropriated for the purpose.
SO ORDERED.
Teehankee (Chairman), Makasiar, Fernandez, Melencio-Herrera and Plana, JJ., concur.