FBDC v.
CIR the term "goods" in Section 105 of the Old NIRC
FORT BONIFACIO DEVELOPMENT
CORPORATION (Corp.) v. COMMISSIONER OF
INTERNAL REVENUE (CIR), REGIONAL
DIRECTOR, REVENUE REGION NO. 8, and
CHIEF, ASSESSMENT DIVISION, REVENUE
REGION NO. 8, BIR
& validly repealed Section 105 as amended by EO
FORT BONIFACIO DEVELOPMENT
CORPORATION v. COMMISSIONER OF
INTERNAL REVENUE, REVENUE DISTRICT
OFFICER, REVENUE DISTRICT NO. 44,
TAGUIG and PATEROS, BUREAU OF
INTERNAL REVENUE.
G.R. No. 158885 & G.R. No. 170680, 10-2-2009,
EN BANC, LEONARDO-DE CASTRO, J.:
ONE LINE: Administrative rule or regulation
cannot contravene the law on which it is
based. (Sec. 4.105-1 of RR 7-95 is an
administrative rule and regulation implementing
an existing law Term used in Tanada v Tuvera)
NATURE: Motion for Reconsideration of SCs
Decision dated April 2, 2009 which granted the
consolidated petitions of petitioner Fort Bonifacio
Development Corporation (Corp.) where the C CIR
was (1) restrained from collecting from the Corp.
the amount of P28,413,783.00 representing the
transitional input tax credit due it for the fourth
quarter of 1996; and
(2) directed to refund to the Corp. the amount of
P347,741,695.74 paid as output VAT for the third
quarter of 1997 in light of the persisting
transitional input tax credit available to the Corp.
for the said quarter, or to issue a tax credit
corresponding to such amount.
FACTS: In the April 2, 2009 Decision, which is
what CIR wants to be reconsidered in this case, the
Court struck down Section 4.105-1 of RR 7-95 for
being in conflict with the law. It held that the CIR
had no power to limit the meaning and coverage of
sans statutory authority or basis and justification
to make such limitation. This it did when it
restricted the application of Section 105 in the case
of real estate dealers only to improvements on the
real property belonging to their beginning
inventory.
ISSUES: 1. WON CIR Revenue Regulations 7-95
273.
2. WON CIR Revenue Regulations # 6-97
repealed CIR Revenue Regulations # 7-95
HELD: 1. NO, admin rule and reg less than
statutes 2. YES, no repealing cause does not mean
a lack of intent to repeal.
1. + EO No. 273 [1987] contains first
VAT law. It amended several provisions of the
Internal Revenue Code of 1986 (Old NIRC). In
anticipation of the probable burdens of the shift to
the VAT system it allowed newly VAT-registered
persons to avail of a transitional input tax
credit as provided for in Section 105 of the Old
NIRC. Section 105 as amended by EO 273.
Sec. 105. Transitional Input Tax Credits.
A person who becomes liable to value-
added tax or any person who elects to be a
VAT-registered person shall, subject to the
filing of an inventory as prescribed by
regulations, be allowed input tax on his
beginning inventory of goods, materials
and supplies equivalent to 8% of the value
of such inventory or the actual value-added
tax paid on such goods, materials and
supplies, whichever is higher, which shall
be creditable against the output tax.
+ RA 7716 [1996] - amended Sec. 100 of Old NIRC
by imposing for the first time value-added-tax on
sale of real properties. The amendment basically
states that a 10% VAT shall be imposed upon
goods or properties among others. It clarified that
the term goods and properties shall mean all
tangible and intangible objects which are capable of
pecuniary estimation and shall include: (A) Real
properties held primarily for sale to customers or
held for lease in the ordinary course of trade or
business; xxx
However, RA 7716 did not amend the
provisions of SEC 105 of the Old NIRC, regarding
transitional input tax credit.
+ RA 8424 (1997) - National Internal Revenue
Code of 1997 (New NIRC) however amended Sec.
105 specifically by Sec. 111(A) of the New NIRC The
provisions on the transitional input tax credit are
now embodied in Section 111(A) of the New NIRC,
which reads:
Section 111. Transitional/Presumptive
Input Tax Credits. (A) Transitional Input
Tax Credits. - A person who becomes liable
to value-added tax or any person who
elects to be a VAT-registered person shall,
subject to the filing of an inventory
according to rules and regulations
prescribed by the Secretary of finance,
upon recommendation of the
Commissioner, be allowed input tax on his
beginning inventory of goods, materials
and supplies equivalent for 8% of the value
of such inventory or the actual value-added
tax paid on such goods, materials and
supplies, whichever is higher, which shall
be creditable against the output tax.
[Emphasis SCs.]
Rule on statutory construction sections of the
law cannot be interpreted apart from each other. All
of it must be considered in fixing the meaning of
any of its parts in order to produce a harmonious
whole.
Rule applied - statutory definition of the term
"goods or properties" leaves no room for doubt.
Sec. 100. Value-added tax on sale of goods or
properties. (a) Rate and base of tax. xxx. (1) The
term goods or properties shall mean all tangible
and intangible objects which are capable of
pecuniary estimation and shall include: (A) Real
properties held primarily for sale to customers or
held for lease in the ordinary course of trade or
business; xxx.
Sec 100 of the Old NIRC defined the term
"goods or properties" by the unambiguous
terms "real properties held primarily for sale
to costumers or held for lease in the ordinary
course of business." The term "goods" as used in
Section 105 of the same code could not have a
different meaning. This has been explained in the
prior Decision.
ADMINISTRATIVE RULE IN ISSUE: RR No. 7-
95 is an Administrative Rule and Regulation based
upon the existing statutes Old and New NIRC.
Section 4.100-1 of which made by the BIR which
includes in its enumeration of "goods or properties"
such "real properties held primarily for sale to
customers or held for lease in the ordinary course of
trade or business." Said definition was taken from
the very statutory language of Section 100 of the
Old NIRC.
Section 4.105-1 of RR no. 7-95 however
limited this definition to "improvements" - BIR
thus not only contravened the definition of
"goods" as provided in the Old NIRC, but also
the definition which the same revenue
regulation itself has provided.
Section 4.105-1 of RR 7-95 restricted the definition
of "goods", viz:
However, in the case of real estate dealers,
the basis of the presumptive input tax
shall be the improvements, such as
buildings, roads, drainage systems, and
other similar structures, constructed on or
after the effectivity of EO 273 (January 1,
1988).
Par 3, Art. 7 of NCC, states that an
administrative rule or regulation cannot
contravene the law on which it is based. RR 7-
95 is inconsistent with Section 105 insofar as
the definition of the term "goods" is
concerned.
This is already a legislative act that is
beyond the authority of the CIR and the Secretary
of Finance more so when the law which the National Tobacco Admin v. COA
administrative rule is contravening is also the law
which it is based upon. Admin rules should not be NATIONAL TOBACCO ADMINISTRATION
in contradiction to, but in conformity with, the represented herein by Administrator
standards prescribed by law. AMANTE SIAPNO, EVANGELISTA A.
GARCIA, RICARDO BRIONES,
RULE: In order to be valid, an administrative rule CLARITA B. CASTRO, CRISTINA
or regulation must conform, not contradict, the LOPEZ, JESUS C. BONDOC and
provisions of the enabling law. An implementing
ROSALINA C. CARINO, petitioners,
rule or regulation cannot modify, expand, or
vs. COMMISSION ON
subtract from the law it is intended to implement.
AUDIT, respondent.
Any rule that is not consistent with the statute
itself is null and void.
DECISION

Thus, RR 7-95, insofar as it restricts the PURISIMA, J.:

definition of "goods" as basis of transitional input
tax credit under Section 105 is a nullity.
2. On January 1, 1997, RR 6-97 was issued by
the Commissioner of Internal Revenue. RR 6-97
was basically a reiteration of the same Section
4.105-1 of RR 7-95, except that the RR 6-97 deleted
the following paragraph.
However, in the case of real estate dealers,
the basis of the presumptive input tax
shall be the improvements, such as
buildings, roads, drainage systems, and
other similar structures, constructed on or
after the effectivity of E.O. 273 (January 1,
1988).
It is clear, therefore, that under RR 6-97,
the allowable transitional input tax credit is not
limited to improvements on real properties. The
particular provision of RR 7-95 has effectively been
repealed by RR 6-97 which is now in consonance
with Section 100 of the NIRC, insofar as the
definition of real properties as goods is concerned.
At bar is a petition for review
on certiorari under Rule 45 of the Revised Rules of
Court to review and set aside the decision of the
Commission on Audit[1] dated February 7, 1995 in
COA Decision No. 95-108.[2]
The National Tobacco Administration (NTA,
for short), under Executive Order No. 116, as
amended by Executive Order No. 245,[3] is a
government-owned and controlled
corporation (GOCC, for brevity) tasked to supervise
and improve the viability of the tobacco industry in
this country.
On August 9, 1989, Congress passed Republic
Act No. 6758,[4] entitled An Act Prescribing a
Revised Compensation and Position Classification
in the Government and for Other Purposes. On
October 2, 1989, pursuant to Section 23 of said law,
the Department of Budget and
Management (DBM) issued Corporate
Compensation Circular No. 10 (CCC No. 10) to
serve as the Implementing Rules and Regulations
of R.A. No. 6758.

Pertinent records show that even prior to the

The failure to add a specific repealing
clause would not necessarily indicate that
there was no intent to repeal RR 7-95. The
fact that the aforequoted paragraph was
deleted created an irreconcilable
inconsistency and repugnancy between the
provisions of RR 6-97 and RR 7-95.
effectivity of Republic Act No. 6758, officials and
employees of the NTA have been enjoying Mid-Year
Social Amelioration Benefit equivalent to one-and-a
half (1 1/2) month of their basic salary. From 1989
to 1993, however, the said benefit was reduced to
one (1) month of the basic salary due to
financial/budgetary constraints. In May, 1993, the
nomenclature of subject social amelioration
benefit was changed to educational assistance in
order to reflect the rationale behind the same,
which is to encourage its beneficiaries to pursue
graduate studies and to finance the schooling of
their children.
Sometime in February, 1994, Miss Dalisay E.
Aracan, Resident Auditor of NTA, issued a Notice of
Disallowance of the payment of the educational
assistance for calendar year 1993, opining that the
NTA has no statutory authority to grant the
incentive. In January, 1995, the same Resident
Auditor caused the disallowance of the same benefit
paid in 1994, for the same reason.
On April 25, 1994, the petitioners appealed to
the Commission on Audit, praying for the lifting of
the disallowance in question, pointing out that:
(1) Benefits received by employees as of July
1, 1989 not integrated into the
standardized salary rates shall continue
to be authorized, pursuant to Section 12 of
R.A. 6758;
(2) (2) the benefit having been received for so
many years, even prior to the effectivity of
the Salary Standardization Law of 1989,
has been a vested right, on the part of the
recipients and
(3) (3) such allowance regularly granted,
forms part of the total compensation
package of NTA Officers and employees,
and, therefore, the disallowance thereof
amounts to unathorized diminution of
pay.
On February 7, 1995, the Commission on
Audit came out with its questioned Decision the
pertinent portion of which, reads:
After a thorough evaluation, this Office believes and
so holds that the disallowance of the Auditor on the
payment of the mid-year social amelioration benefits
or the educational assistance benefits is in order. It
bears stress that Sec. 5.6 of CCC No. 10
(Implementing R.A. 6758) is so explicit when it
provides that:
Payment of other allowances/fringe benefit and all
other forms of compensation granted on top of basic
salary, whether in cash or in kind, not mentioned in
Sub-Paragraphs 5.4 and 5.5 above shall
be discontinued effective November 1,
1989. Payment made for such allowance/fringe
benefits after said date shall be considered as illegal
disbursement of public Funds.
Since the educational assistance or the mid- year
social amelioration is not among those allowances
mentioned in Sub-pars. 5.4 and 5.5 of CCC No. 10,
the same shall be discontinued effective November 1,
1989 and considering that NTA paid its
officials/employees this type of allowance, such
payment shall be considered as illegal disbursement
of public funds.
The provision of Sec. 12 second sentence thereof as
invoked by the Administrator should be read in
conjunction with the first sentence thus -
Consolidation of Allowances and Compensation -
All allowances except for representation and
transportation allowances; clothing and laundry
allowances; subistence [sic] allowance of marine
officers and crew on board government vessels and
hospital personnel; hazard pay; allowances of
foreign service personnel stationed abroad;
and such other additional compensation not
otherwise specified herein as may be determined by
the DBM shall be deemed included in the
standardized salary rates herein prescribed. Such
other additional compensation, whether in cash or
in kind, being received by incumbents only as of
July 1, 1989 not integrated into the standardized
salary rates shall continue to be authorized. xxx
xxx xxx xxx
Premises considered and for lack of legal basis, the
herein request of the Administrator, NTA for the
lifting of the disallowance in question, may not be
given due course.[5] [Underscoring; supplied]
Undaunted, petitioners found their way to this
Court via the present Petition for Review
on Certiorari, filed on April 24, 1995, seeking the
annulment of the said COA Decision; theorizing
that the respondent Commission on Audit erred:

I.
IN HOLDING THAT THE PAYMENT OF
SUBJECT SOCIAL AMELIORATION
/EDUCATIONAL ASSISTANCE BENEFIT - A
BENEFIT CONTINUOUSLY BEING RECEIVED
BY INDIVIDUAL PETITIONERS AND OTHER
NTA EMPLOYEES STARTING WAY BEFORE
THE EFFECTIVITY OF THE SALARY
STANDARDIZATION LAW (R.A. 6758) ON 1 JULY
1989 - IS NOT AUTHORIZED UNDER THE SAME
LAW (R.A. 6758) OR IS OTHERWISE WITHOUT
LEGAL BASIS;
II.
IN FAILING TO REALIZE AND CONSIDER THAT
THE DISALLOWANCE OF THE PAYMENT OF
SUBJECT SOCIAL
AMELIORATION/EDUCATIONAL ASSISTANCE
BENEFIT IS CONSTITUTIVE OF DIMINUTION
OF COMPENSATION PROSCRIBED UNDER
EXISTING LAWS AND IN VIOLATION OF THE
GENERAL WELFARE CLAUSE OF THE
CONSTITUTION;
III.
IN FAILING TO RECOGNIZE THAT INDIVIDUAL
PETITIONERS AND OTHER SIMILARLY
SITUATED NTA EMPLOYEES HAVE ACQUIRED
A VESTED RIGHT OVER SAID SOCIAL
AMELIORATION/EDUCATIONAL ASSISTANCE
BENEFIT AND COAs DISALLOWANCE
THEREOF IS AN ILLEGAL VIOLATION OF
SUCH RIGHT.
Petitioners raise the
issues: (1) whether or not the social amelioration or
educational assistance benefit given to the
individual petitioners prior to enactment of R.A.
6758 is authorized under the law, (2) whether or not
the disallowance of the said benefit is tantamount
to diminution of pay, and (3) whether or not the
individual petitioners have acquired a vested right
thereover.
First Issue:
Proper Interpretation of Sections 12 and 17 of
R.A. 6758 in Relation to Sub-paragraphs 4.1,
5.4 and 5.5 of Corporate Compensation Circular
No.10, the Implementing Rules and Regulation of
R.A. 6758.
A. Sections 12 and 17 of R. A. 6758, read:
Section 12: Consolidation of Allowances and
Compensation - All allowances, except for
representation and transportation allowances;
clothing and laundry allowances; subsistence
allowance of marine officers and crew on board
government vessels and hospital personnel; hazard
pay; allowances of foreign service personnel
stationed abroad; and such other additional
compensation not otherwise specified herein as may
be determined by the DBM, shall be deemed
included in the standardized salary rates herein
prescribed. Such other additional compensation,
whether in cash or in kind, being received by
incumbents only as of July 1, 1989 not integrated
into the standardized salary rates shall continue to
be authorized.
Existing additional compensation of any national
government official or employee paid from local
funds of a local government unit shall be absorbed
into the basic salary of said official or employee and
shall be paid by the National Government.
while
Section 17. Salaries of Incumbents - Incumbents of
positions presently receiving salaries and additional
compensation/fringe benefits including those
pivotal
absorbed from local government units and other
emoluments, the aggregate of which exceeds the
standardized salary rate as herein prescribed, shall
continue to receive such excess compensation, which
shall be referred to as transition allowance. The
transition allowance shall be reduced by the amount
of salary adjustment that the incumbent shall
received [sic] in the future.
B. Section 4.1 of CCC No. 10:
4.0 DEFINITION OF TERMS
4.1 The present salary of an incumbent
for purposes of this Circular shall
refer to the sum total of actual basic
salary including allowances
enumerated hereunder, being received
as of June 30, 1989 and certified and
authorized by the DBM.
4.1.1 Cost-of-Living Allowance
(COLA)/Bank Equity Pay
(BEP) equivalent to forty
percent (40%) of basic
salary or P300.00 per
month, whichever is higher;
4.1.2 Amelioration Allowance
equivalent to ten percent
(10%) of basic salary or
P150.00 per month, which
ever is higher;
4.1.3 COLA granted to
GOCCs/GFIs covered by the
Compensation and Position
Classification Plan for the
regular agencies/offices of
the National Government
and to GOCCs/GFIs
following the Compensation
and Position Classification
Plan under LOImp. No.
104/CCC No. 1 and
LOImp. No. 97/CCC No. 2,
in the amount of P550.00
per month for those whose
monthly basic salary is
P1,500.00 and below, and
P500.00 for those whose
monthly basic salary is
P1,501.00 and above,
granted on top of the
COLA/BEP mentioned in
Item 4.1.1 above;
4.1.4 Stabilization Allowance;
and
4.1.5 Allowance/fringe benefits
converted into Transition
Allowance pursuant to
Memorandum Order No.
177, as implemented by
Corporate Budget Circular
No. 15, both series of 1988.
4.2 Allowances enumerated above are
deemed integrated into the basic
salary for the position effective July 1,
1989.
4.3 Transition allowance, for purposes of
this circular shall mean the excess of
the present salary of the incumbent
defined in Item 4.1 hereinabove, over
the eighth step of the Salary Grade to
which his position is allocated.
C. Sub-Paragraphs 5.4, 5.5 and 5.6 of CCC.
No. 10:
5.0 IMPLEMENTING PROCEDURES
xxx xxx xxx
5.4 The rates of the following
allowances/fringe benefits
which are not integrated into
the basic salary and which
are allowed to be continued
after June 30, 1989 shall be
subject to the condition that
the grant of such benefit is
covered by statutory
authority.
5.4.1 Representation and
Transportation
Allowances (RATA)
of incumbent of the
position authorized
to receive the same
at the highest
amount legally
authorized as of
June 30, 1989 of the
level of his position
within the
particular
GOCC/GFI;
5.4.2 Uniform and Clothing
Allowance at a rate
 as previously 5.4.10 Overseas, Living Quarters
authorized; and other
allowances presently
5.4.3 Hazard Pay as authorized
authorized for
by law;
personnel stationed
5.4.4 Honoraria/additional abroad;
compensation for
5.4.11 Night Differential of
employees on detail
personnel on night
with special projects
duty;
of inter-
agency undertakings 5.4.12 Per Diems of members of
; governing Boards of
GOCCs/GFIs at the
5.4.5 Honoraria for services
rate as prescribed in
rendered by
their respective
researchers, experts
Charters;
and specialists who
are of acknowledged 5.4.13 Flying Pay of personnel
authorities in their undertaking aerial
field of flights;
specialization;
5.4.14 Per Diems/Allowances of
5.4.6 Honoraria for lecturers Chairman and
and resource Members/Staff of
persons/speakers; collegial bodies and
Committees; and
5.4.7 Overtime Pay in
accordance to Memorandum 5.4.15 Per Diems/Allowances of
Order No. 228; officials and
employees on official
5.4.8 Clothing/laundry
foreign and local
allowances and
travel outside of
subsistence of
their official station;
marine officers and
crew on board 5.5 Other allowances/fringe benefits not
GOCCs/GFIs likewise Integrated into the basic
owned vessels and salary and allowed to be continued
used in their only for incumbents as of June 30,
operations, and of 1989 subject to the condition that the
hospital personnel grant of the same is with appropriate
who attend directly authorization either from the DBM,
to patients and who Office of the President or legislative
by nature of their issuances are as follows:
duties are required
5.5.1 Rice Subsidy;
to wear uniforms;
5.5.2 Sugar Subsidy;
5.4.9 Quarters Allowance of
officials and 5.5.3 Death Benefits other than
employees who are those granted by the GSIS;
presently entitled to
the same; 5.5.4 Medical/Dental/Optical
Allowances/Benefits;
 5.5.5 Childrens Allowance; shall be referred as transition allowance. The
transition allowance shall be reduced by the amount
5.5.6 Special Duty
of salary adjustment that the incumbent shall
Pay/Allowance;
received in the future.
5.5.7 Meal Subsidy;
It is the submission of the Commission on
5.5.8 Longevity Pay; and
Audit that payment of the educational assistance in
5.5.9 Tellers Allowance. question is not authorized under Republic Act No.
6758, arguing that the provision of Sec. 12, second
5.6 Payment of other allowances/fringe
sentence thereof as invoked by the Administrator
benefits and all other forms of
[representing the petitioner herein] should be read
compensation granted on top of basic
in conjunction with the first sentence...;[7] and if the
salary, whether in cash or in kind, not
entire Section 12 is further considered in relation to
mentioned in Sub-paragraphs 5.4
sub-paragraphs 5.4, 5.5 and 5.6 of CCC No. 10,
and 5.5 above shall be
respondent concluded that the grant of subject
discontinued effective November 1,
educational assistance would have no legal basis at
1989. Payment made for such
all.
allowances/fringe benefits after said
date shall be considered as illegal Confusion as to the proper interpretation of
disbursement of public funds. Section 12 springs from two seemingly
contradictory provisions. The last clause of the first
Petitioners maintain that since they have been
sentence of Section 12, reads:
receiving the social amelioration or educational
assistance benefit before July 1, 1989, when R.A.
[A]nd such other additional compensation not
No. 6758 took effect, and the benefit was not
otherwise specified herein as may be determined by
integrated into their standardized salary rate, they
the DBM shall be deemed included in the
are entitled to receive it even after the effectivity of
standardized salary rates herein prescribed;
the said Act.[6] They base their claim on the second
sentence of Section 12 and on Section 17 of the
while the second sentence of Section 12 is to the
Salary Standardization Law which, for the sake of
following effect:
thoroughness and clarity of discussion, we deem it
expedient to quote again, to wit:
Such other additional compensation, whether in
cash or in kind, being received by incumbents only
Second Sentence of Section 12, R.A. 6758 -
as of July 1, 1989 not integrated into the
xxx. Such other additional compensation, whether
standardized salary rates shall continue to be
in cash or in kind, being received by incumbents
authorized.
only as of July 1, 1989 not integrated into the
standardized salary rates shall continue to be
Before proceeding to rule on the proper
authorized;
interpretation of the two provisos aforecited, the
salient features of the provision as a whole should
xxx
first be pondered upon and tackled.

Section 17: Salaries of Incumbents - Incumbents of Under the first sentence of Section
positions presently receiving salaries and additional 12, all allowances are integrated into the
compensation /fringe benefits including those prescribed salary rates, except:
absorbed from local government units and other
emoluments, the aggregate of which exceeds the (1) representation and transportation
standardized salary rate as herein prescribed, shall allowances (RATA);
continue to receive such excess compensation, which (2) clothing and laundry allowances;
 (3) subsistence allowances of marine (4) Honoraria/additional compensation
officers and crew on board for employees on detail with special
government vessels; projects or inter-agency
undertakings;
(4) subsistence allowance of hospital
personnel; (5) Honoraria for services rendered by
researchers, experts and specialists
(5) hazard pay;
who are of acknowledged authorities
(6) allowance of foreign service personnel in their fields of specialization;
stationed abroad; and
(6) Honoraria for lectures and resource
(7) such other additional compensation persons or speakers;
not otherwise specified in Section
(7) Overtime pay in accordance to
12 as may be determined by the
Memorandum Order No. 228;
DBM.
(8) Clothing/laundry allowances and
Analyzing No. 7, which is the last clause of the
subsistence allowance of marine
first sentence of Section 12, in relation to the other
officers and crew on board
benefits therein enumerated, it can be gleaned
GOCCs/GFIs owned vessels and used
unerringly that it is a catch-all proviso. Further
in their operations, and of hospital
reflection on the nature of subject fringe benefits
personnel who attend directly to
indicates that all of them have one thing in common
patients and who by nature of their
- they belong to one category of privilege
duties are required to wear uniforms;
called allowances which are usually granted to
officials and employees of the government to defray (9) Quarters Allowance of officials and
or reimburse the expenses incurred in the employees who are presently entitled
performance of their official to the same;
functions. In Philippine Ports Authority vs.
(10) Overseas, Living Quarters and other
Commission on Audit, this Court rationalized
[8]
allowances presently authorized for
that if these allowances are consolidated with the personnel stationed abroad;
standardized rate, then the government official or
employee will be compelled to spend his personal (11) Night differential of personnel on
funds in attending to his duties. night duty;

The conclusion - that the enumerated fringe (12) Per Diems of members of the
benefits are in the nature of allowance - finds governing Boards of GOCCs/GFIs at
support in sub-paragraphs 5.4 and 5.5 of CCC No. the rate as prescribed in their
10. respective Charters;

Sub-paragraph 5.4 enumerates the (13) Flying pay of personnel undertaking

allowance/fringe benefits which are not integrated aerial flights;
into the basic salary and which may be continued
(14) Per Diems/Allowances of Chairman
after June 30, 1989 subject to the condition that the
and Members or Staff of collegial
grant of such benefit is covered by statutory
bodies and Committees; and
authority, to wit:
(15) Per Diems/Allowances of officials and
(1) RATA;
employees on official foreign and local
(2) Uniform and Clothing allowances; travel outside of their official station.

(3) Hazard pay; In addition, sub-paragraph 5.5 of the same

Implementing Rules provides for the other
allowances/fringe benefits not likewise integrated
into the basic salary and allowed to be continued
only for incumbents as of June 30, 1989 subject to
the condition that the grant of the same is with
appropriate authorization either from the DBM,
Office of the President or legislative issuances, as
follows:
(1) Rice Subsidy;
(2) Sugar Subsidy;
(3) Death Benefits other than those
granted by the GSIS;
(4) Medical/Dental/Optical
Allowances/Benefits;
(5) Childrens Allowances;
(6) Special Duty Pay/Allowance;
(7) Meal Subsidy;
(8) Longevity Pay; and
(9) Tellers Allowance.
On the other hand, the challenged financial
incentive is awarded by the government in order to
encourage the beneficiaries to pursue further
studies and to help them underwrite the expenses
for the education of their children and
dependents. In other words, subject benefit is in the
nature of financial assistance and not of
an allowance. For the former, reimbursement is not
necessary while for the latter, reimbursement is
required. Not only that, the former is basically
an incentive wage which is defined as a bonus or
other payment made to employees in addition to
guaranteed hourly wages[9] while the latter cannot
be reckoned with as a bonus or additional
income, strictly speaking.
It is indeed decisively clear that the benefits
mentioned in the first sentence of Section 12 and
sub-paragraphs 5.4 and 5.5 of CCC No. 10 are
entirely different from the benefit in dispute,
denominated as Educational Assistance. The
distinction elucidated upon is material in arriving
at the correct interpretation of the two seemingly
contradictory provisions of Section 12.
Cardinal is the rule in statutory construction
that 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 a
harmonious whole. A statute must so construed as
to harmonize and give effect to all its provisions
whenever possible.[10] And the rule - that statute
must be construed as a whole - requires that
apparently conflicting provisions should be
reconciled and harmonized, if at all possible.[11] It is
likewise a basic precept in statutory construction
that the intent of the legislature is the controlling
factor in the interpretation of the subject statute.
[12]
With these rules and the foregoing distinction
elaborated upon, it is evident that the two
seemingly irreconcilable propositions are
susceptible to perfect harmony. Accordingly, the
Court concludes that under the aforesaid catch-all
proviso, the legislative intent is just to include the
fringe benefits which are in the nature
of allowances and since the benefit under
controversy is not in the same category, it is safe to
hold that subject educational assistance is not one
of the fringe benefits within the contemplation of
the first sentence of Section 12 but rather, of the
second sentence of Section 12, in relation to Section
17 of R.A. No. 6758, considering that (1) the
recipients were incumbents when R.A. No. 6758
took effect on July 1, 1989, (2) were, in fact,
receiving the same, at the time, and (3) such
additional compensation is distinct and separate
from the specific allowances above-listed, as the
former is not integrated into the standardized
salary rate. Simply stated, the challenged benefit is
covered by the second sentence of Section 12 of R.A.
No. 6758, the application of sub-paragraphs 5.4 and
5.5 of CCC No. 10 being only confined to the first
sentence of Section 12, particularly the last clause
thereof which amplifies the catch-all proviso.
Furthermore, the non-inclusion by the
Department of Budget and Management of the
controverted educational assistance in Sub-
paragraphs 5.4 and 5.5 of CCC No. 10 is expected
since the term allowance does not include the
questioned benefit which belongs to a
different genus. The argument that the said fringe
benefit should be disallowed on the ground that it is WHEREFORE, the petition is hereby
not mentioned in the Implementing Rules of the GRANTED; the assailed COA Decision No. 95 - 108
Statute is consequently fallacious. It is a settled is SET ASIDE, and the disallowance in question
rule of legal hermeneutics that the implementing LIFTED. No pronouncement as to costs.
rules and regulations (CCC No. 10, in this
SO ORDERED.
case) cannot amend the act of Congress (R.A.
6758). The second sentence of R.A. No. 6758 Davide, Jr., C.J., Bellosillo, Melo, Puno, Vitug,
expressly provides that such additional Kapunan, Mendoza, Panganiban, Quisumbing,
compensation ... being received by incumbents ... Pardo, Buena, Gonzaga-Reyes, and Ynares-
not integrated into the standardized salary rates Santiago, JJ., concur.
shall continue to be authorized. To be sure, the said
Circular cannot go beyond the terms and provisions PLDT v. city of Davao
of the statute as to prohibit something permitted
and allowed by law.[13] The Circular cannot extend PHILIPPINE LONG DISTANCE TELEPHONE
the law or expand its coverage as the power to
COMPANY, INC. (PLDT)
amend or repeal a statute is vested in the
vs.
legislature.[14]
CITY OF DAVAO and ADELAIDA B.
Conformably, as mandated by the second BARCELONA, in her capacity as City
sentence of Section 12, in relation to Section 17 of Treasurer of Davao
the Republic Act under interpretation, the mid-year
educational assistance should continue to be GR. No. 143867
authorized.
March 25, 2003
____________________________
THE SECOND AND THE THIRD ISSUES:
TAX EXEMPTIONS vs. TAX EXCLUSION; IN
LIEU OF ALL TAXES PROVISION
____________________________
That the Disallowance of the Payment of
Subject Educational Assistance Constitutes
Diminution of Compensation; That the NTA Facts:
Employees Have Already Acquired a Vested Right
Over the Same. PLDT paid a franchise tax equal to three
percent (3%) of its gross receipts.
Gleanable from the wordings of the second
sentence of Section 12 of R.A. No. 6758 is the
The franchise tax was paid in lieu of all
intention of Congress to prevent any diminution of
taxes on this franchise or earnings thereof
the pay and benefits being received by incumbents
pursuant to RA 7082.
at the time of the enactment of the Salary
Standardization Law. Verily, disallowing any such
benefit is against the spirit of the Statute and is The exemption from all taxes on this
inconsistent with the principle of equity which franchise or earnings thereof was
regards the spirit and not the letter...[15] of the subsequently withdrawn by RA 7160 (LGC),
law. Hence, while it cannot be said that the NTA which at the same time gave local government
employees have acquired a vested right over the units the power to tax businesses enjoying a
educational assistance in dispute as it is always franchise on the basis of income received or
subject to availability of funds,[16] nevertheless, earned by them within their territorial
disallowing the same, where funds are available as jurisdiction. The LGC took effect on January
in the case under consideration, would be violative 1, 1992.
of the principle of equity. The City of Davao enacted Ordinance No. 519,
Series of 1992, which in pertinent part
provides:
Notwithstanding any exemption granted by
law or other special laws, there is hereby
imposed a tax on businesses enjoying a
franchise, a rate of seventy-five percent (75%)
of one percent (1%) of the gross annual
receipts for the preceding calendar year
based on the income receipts realized within
the territorial jurisdiction of Davao City.
Subsequently, Congress granted in favor of
Globe Mackay Cable and Radio Corporation
(Globe) and Smart Information Technologies,
Inc. (Smart) franchises which contained in
leiu of all taxes provisos.
In 1995, it enacted RA 7925, or the Public
Telecommunication Policy of the Philippines,
Sec. 23 of which provides that any advantage,
favor, privilege, exemption, or immunity
granted under existing franchises, or may
hereafter be granted, shall ipso facto become
part of previously granted
telecommunications franchises and shall be
accorded immediately and unconditionally to
the grantees of such franchises.
The law took effect on March 16, 1995.
In January 1999, when PLDT applied for a
mayors permit to operate its Davao Metro
exchange, it was required to pay the local
franchise tax which then had amounted to
P3,681,985.72. PLDT challenged the power of
the city government to collect the local
franchise tax and demanded a refund of what
had been paid as a local franchise tax for the
year 1997 and for the first to the third
quarters of 1998.
Issue:
Whether or not by virtue of RA 7925, Sec. 23,
PLDT is again entitled to the exemption from
payment of the local franchise tax in view of
the grant of tax exemption to Globe and
Smart.
Held:
Petitioner contends that because their
existing franchises contain in lieu of all
taxes clauses, the same grant of tax
exemption must be deemed to have become
ipso facto part of its previously granted
telecommunications franchise.
But the rule is that tax exemptions should be
granted only by a clear and unequivocal
provision of law expressed in a language too
plain to be mistaken and assuming for the
nonce that the charters of Globe and of Smart
grant tax exemptions, then this runabout way
of granting tax exemption to PLDT is not a
direct, clear and unequivocal way of
communicating the legislative intent.
Nor does the term exemption in Sec. 23 of
RA 7925 mean tax exemption. The term refers
to exemption from regulations and
requirements imposed by the National
Telecommunications Commission (NTC). For
instance, RA 7925, Sec. 17 provides: The
Commission shall exempt any specific
telecommunications service from its rate or
tariff regulations if the service has sufficient
competition to ensure fair and reasonable
rates of tariffs.
Another exemption granted by the law in line
with its policy of deregulation is the
exemption from the requirement of securing
permits from the NTC every time a
telecommunications company imports
equipment.
Tax exemptions should be granted only by
clear and unequivocal provision of law on the
basis of language too plain to be mistaken.
Asia v. NLRC

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.
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

ROMERO, J.: Investigation and Security Agency
and Mariano Marcos State
May the principal of a security service agreement University to pay each
be held jointly and severally liable with the complainant the amount of
contractor for non-payment of the minimum wage? FORTY ONE THOUSAND FOUR
HUNDRED FIFTY NINE PESOS
The facts are undisputed. AND FIFTY ONE CENTAVOS
(P41,459.51) representing salary
Petitioner Alpha Investigation and Agency, Inc. differential for the period from
(AISA) is a private corporation engaged in the February 16 September 30, 1991,
business of providing security services to its clients, or the total amount of P787,730.69
one of whom is the Don Mariano Marcos State as follows:
University (DMMSU).
1. Nestor
Private respondents were hired as security guards Loloquisen
by AISA. on February 16, 1990. Five months later, P41,459.51
43 security guards filed before the Regional Office
of the Department of Labor and Employment 2. Nestor Ibuyat
(DOLE) a complaint against AISA for non- 41,459.51
compliance with the current minimum wage order.
After 24 of the original complainants filed a motion 3. Jose Acio
for the exclusion from the case, the remaining 19 41,459.51
security guards filed their individual amended
complaints impleading DMMSU as party- 4. Cresencio
respondent. Agres 41,459.51

Private respondents have been receiving a monthly 5. Wilfred Butay

salary of P900.00 although the security service 41,459.51
6. Carlito Castro
41,459.51 P787,730.69

7. Federico b) Dismissing the claims for 13th

Calunnay month pay for failure to
41,459.51 substantiate the same.

8. Jaime c) Claims of complainants who

Fontanilla filed their motion for
41,459.51 reconsideration are hereby
dismissed.
9. William
Galimba SO ORDERED. 2
41,459.51
AISA and DMMSU interposed separate appeals.
10. Leonardo The NLRC, on May 7, 1993, rendered a decision
Ibuyat 41,459.51 affirming the solidary liability of AISA and
DMMSU and remanding the records of the case to
11. Rodrigo Luis the arbitration branch of origin for computation of
41,459.51 the salary differentials awarded by the Labor
Arbiter.
12. Roman
Nalundasan Only AISA filed a motion for reconsideration, which
41,459.51 was denied by the NLRC on July 1, 1993, for lack of
merit.
13. Ronnie Nino
41,459.51 The judgment against DMMSU, finding it jointly
and severally liable with AISA for the payment of
14. Jose Perdido increase in wages, became final and executory after
41,459.51 it failed to file a petition for certiorari with this
Court within a reasonable time. "Although Rule 65
15. Roger does not specify any period for the filing of a
Rambaud petition for certiorari and mandamus, it must,
41,459.51 nevertheless, be filed within a reasonable time.
In certiorari cases, the definitive rule now is that
16. Benedicto such reasonable time is within three months from
Sugui 41,459.51 the commission of the complained act." 3

17. Mario Sugui In this petition, AISA alleges that payment of the
41,459.51 wage increases under the current minimum wage
order should be borne exclusively by DMMSU,
18. Felipe pursuant to Section 6 of Republic Act 6727 (RA
Tolentino 6727) 4 which reads as follows:
41,459.51
Sec. 6. In the case of contracts
19. Edison for construction projects and
Valdez 41,459.51 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 wage 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 a particular
provision alone. 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. . . .
Art. 107. Indirect employer. The
provisions of the immediately
preceding Article shall likewise
apply to any person, partnership,
association or corporation which,
not 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 wage 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 case of Eagle Security v. NLRC: 10
The solidary liability of PTSI and
EAGLE, however, does not
preclude the right of
reimbursement from his co-debtor
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. (Emphasis
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 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.
Jmm promotions v. NLRC
JMM v NLRC (1993)
 JMM Promotions & Management, Inc.,
petitioner, vs. National Labor Relations
Commission and Ulpiano L. De Los Santos,
respondents.
Ponente: Cruz, J.
Facts:
1. Following Secs. 4 and 17, Rule II, Book II of
the POEA Rules, the petitioner, a recruiting
agency, made the following:
a. Paid the license fee (Sec. 4)
b. Posted a cash bond of 100k and surety bond of
50k(Sec. 4)
c. Placed money in escrow worth 200k (Sec. 17)
2. The petitioner wanted to appeal a decision of the
Philippine Overseas Employment Administration
(POEA) to the respondent NLRC, but the latter
dismissed the appeal because of failure of the
petitioner to post an appeal bond required by Sec.
6, Rule V, Book VII of the POEA Rules. The
decision being appealed involved a monetary award.
3. The petitioner contended that its payment of a
license fee, posting of cash bond and surety bond,
and placement of money in escrow are enough;
posting an appeal bond is unnecessary. According
to Sec. 4, the bonds are posted to answer for all
valid and legal claims arising from violations of the
conditions for the grant and use of the license,
and/or accreditation and contracts of
employment. On the other hand, according to Sec.
17, the escrow shall answer for valid and legal
claims of recruited workers as a result of
recruitment violations or money claims.
4. Sec. 6 reads:
In case the decision of the Administration involves
a monetary award, an appeal by the employer shall
be perfected only upon the posting of a cash or
surety bond
The bonds required here are different from the
bonds required in Sec. 4.
Issue: Was the petitioner still required to post an
appeal bond despite the fact that it has posted
bonds of 150k and placed 200k in escrow before?
Held:
Yes. It is possible for the monetary reward in favor
of the employee to exceed the amount of 350,000
because of the stringent requirements posed upon
recruiters. The reason for such is that overseas
employees are subjected to greater risks and hence,
the money will be used to insure more care on the
part of the local recruiter in its choice of foreign
principal to whom the worker will be sent.
Doctrine: Construction:
It is a principle of legal hermeneutics that in
interpreting a statute (or a set of rules as in this
case), care should be taken that every part thereof
be given effect, on the theory that it was enacted as
an integrated measure and not as a hodge-podge of
conflicting provisions. Ut res magis valeat quam
pereat. That the thing may rather have effect than
be destroyed.
The rule is that a construction that would render a
provision inoperative should be avoided; instead,
apparently inconsistent provisions should be
reconciled whenever possible as parts of a
coordinated and harmonious whole. With regard to
the present case, the doctrine can be applied when
the Court found that Sec. 6 complements Sec. 4 and
Sec. 17.
In the POEA Rules, the bonds required in Sec.
4 Rule 2, Book 2 and the escrow required in
Sec. 17 Rule 2, Book 2 have different purposes
from the appeal bond required in Sec. 6, Rule
5 Book 7.
The bonds in Sec. 4 are made to answer for all
claims against the employer, which is not limited to
monetary awards to employees whose contracts of
employment have been violated.
The escrow agreement in Sec. 17 is used only as a
last resort in claiming against the employer.
On the other hand, Sec. 6 requires an appeal bond
in an amount equivalent to the monetary
award. Indeed, this appeal bond is intended to
further insure the payment of the monetary
award. Also, it is possible that the monetary award
may exceed the bonds posted previously and the
money placed in escrow. If such a case happens,
where will the excess be sourced? To solve such a
dilemma, an appeal bond equivalent to the amount
of the monetary award is required by Sec. 6.
Sajonas v. CA
Land Titles: Sajonas vs. Court of Appeals; July 5,
1996
Facts:
The case is for cancellation of the inscription of a
Notice of Levy on Execution from a certificate of
Title covering a parcel of real property. The
inscription was caused to be made by the private
respondent on Transfer Certificate of Title No. N-
79073 of the Register of Deeds of Marikina, issued
in the name of the spouses Uychocde, and was later
carried over to and annotated on Transfer
Certificate of Title No. N-109417 of the same
registry, issued in the name of the spouses Sajonas,
who purchased the parcel of land from the
Uychocdes, and are now the petitioners in this case.
The subject property was bought by Sajonas
spouses on September 1983 and caused the
annotation of their adverse claim on August 1984.
The Deed of Sale was executed upon the full
payment of the purchase price and the same was
registered only on August 1985.
Meanwhile, without the petitioners' knowledge,
there has been a compromise agreement between
the spouses Uychocde and Pilares (Uychocde's
judgment creditor), and a notice of levy on
execution was issued on February 12, 1985. On
February 12, 1985, defendant sheriff Roberto
Garcia of Quezon City presented said notice of levy
on execution before the Register of Deeds of
Marikina and the same was annotated at the back
of TCT No. 79073 as Entry No. 123283.
Issue:
Which should be preferred between the notice of
levy on execution and the deed of absolute sale.The
Deed of Absolute Sale was executed on September
4, 1984, but was registered only on August 28,
1985, while the notice of levy on execution was
annotated six (6) months prior to the registration of
the sale on February 12, 1985.
Decision:
The annotation of the adverse claim is equivalent to
notice to third persons of the interest of the
claimant. The provision of the law (PD 1529) that
the adverse claim is only valid for 30 days cannot be
upheld. Clearly, the intention of the law is
otherwise as may be gleaned on the following
discussion:
Sec. 70 Adverse Claim- Whoever claims any part or
interest in registered land adverse to the registered
owner, arising subsequent to the date of the
original registration, may, if no other provision is
made in this decree for registering the same, make
a statement in writing setting forth fully his alleged
right or interest, and how or under whom acquired,
a reference to the number of certificate of title of
the registered owner, the name of the registered
owner, and a description of the land in which the
right or interest is claimed.
The statement shall be signed and sworn to, and
shall state the adverse claimants residence, and a
place at which all notices may be served upon
him. This statement shall be entitled to registration
as an adverse claim on the certificate of title. The
adverse claim shall be effective for a period of thirty
days from the date of registration. After the lapse of
said period, the annotation of adverse claim may be
cancelled upon filing of a verified petition therefor
by the party in interest: Provided, however, that
after cancellation, no second adverse claim based
on the same ground shall be registered by the same
claimant.
Before the lapse of thirty days aforesaid, any party
in interest may file a petition in the Court of First
Instance where the land is situated for the
cancellation of the adverse claim, and the court
shall grant a speedy hearing upon the question of
the validity of such adverse claim, and shall render
judgment as may be just and equitable. If the
adverse claim is adjudged to be invalid, the
registration thereof shall be ordered cancelled. If, in
any case, the court, after notice and hearing shall
find that the adverse claim thus registered was
frivolous, it may fine the claimant in an amount not
less than one thousand pesos, nor more than five
thousand pesos, in its discretion. Before the lapse of
thirty days, the claimant may withdraw his adverse
claim by filing with the Register of Deeds a sworn
petition to that effect.
Construing the provision as a whole would reconcile
the apparent inconsistency between the portions of
the law such that the provision on cancellation of
adverse claim by verified petition would serve to
qualify the provision on the effectivity period. The
law, taken together, simply means that the
cancellation of the adverse claim is still necessary
to render it ineffective, otherwise, the inscription
will remain annotated and shall continue as a lien
upon the property. For if the adverse claim has
already ceased to be effective upon the lapse of said
period, its cancellation is no longer necessary and
the process of cancellation would be a useless
ceremony.
To interpret the effectivity period of the adverse
claim as absolute and without qualification limited
to thirty days defeats the very purpose for which
the statute provides for the remedy of an
inscription of adverse claim, as the annotation of an
adverse claim is a measure designed to protect the
interest of a person over a piece of real property
where the registration of such interest or right is
not otherwise provided for by the Land Registration
Act or Act 496 (now P.D. 1529 or the Property
Registration Decree), and serves as a warning to
third parties dealing with said property that
someone is claiming an interest or the same or a
better right than the registered owner thereof.
Petition was granted. The inscription of the notice
of levy on execution on TCT No. N-109417 is
ordered CANCELLED.
Lalican v. Vergara
EPIFANIO LALICAN, petitioner, vs. HON.
FILOMENO A. VERGARA, Presiding
Judge, RTC Branch 52, Puerto
Princesa City and PEOPLE OF THE
PHILIPPINES, respondents.
DECISION
ROMERO, J.:
The issue posed for resolution in this petition
for certiorari and prohibition with prayer for the
issuance of a temporary restraining order is
whether or not a charge of illegal possession of
"lumber" is excluded from the crime of illegal
possession of "timber" as defined in Sec. 68 of
Presidential Decree No. 705 (The Forestry Reform
Code of the Philippines), as amended, to warrant
the quashal of an information charging the former
offense or a "nonexistent crime."
On July 23, 1991, an information for violation
of Section 68 of P.D. No. 705, as amended by
Executive Order No. 277, was filed by the City
Prosecutor of Puerto Princesa City against
petitioner Epifanio Lalican,[1] Ruben Benitez, Allan
Pulgar and Jose Roblo before the Regional Trial
Court of that city. Docketed as Criminal Case No.
9543, the information reads:
"That on or about the 9th day of February, 1991, at
Sitio Cadiz, Barangay Bacungan, City of Puerto
Princesa, Philippines, and within the jurisdiction of
this Honorable Court, the above-named accused,
without lawful authority or permit, conspiring and
confederating together and mutually helping one
another, did then and there willfully, unlawfully
and feloniously have in their possession, custody
and control 1,800 board feet of assorted species and
dimensions of lumber on board two (2) passenger
jeeps, with a value of Fourteen Thousand Pesos
(14,000.00), Philippine Currency, to the damage
and prejudice of the Government in the amount
aforestated.
CONTRARY TO LAW."
At their arraignment on August 9, 1991, all
the accused pleaded not guilty to the crime charged.
On August 23, 1991, petitioner Lalican filed a
motion to quash the information on the ground that
the facts charged did not constitute an
offense. Contending that Sec. 68 of P.D. No. 705
refers to "timber and other forest products" and not
to "lumber," and asserting that "timber" becomes
"lumber" only after it is sawed into beams, planks
or boards, petitioner alleged that said decree "does
not apply to 'lumber.'" He added that the law is
"vague and standardless" as it does not specify the
authority or the legal documents required by
existing forest laws and regulations. Hence,
petitioner asserted that the information should be
quashed as it violated his constitutional rights to
due process and equal protection of the law.[2]
The prosecution opposed the motion to quash
on the ground that it is not for the courts to
determine the wisdom of the law nor to set out the
policy of the legislature which deemed it proper
that the word "timber" should include "lumber"
which is a "product or derivative after the timber is
cut." The position of the prosecution was that to
hold otherwise would result in the easy
circumvention of the law, for one could stealthily cut
timber from any forest, have it sawn into lumber
and escape criminal prosecution. The prosecution
asserted that the issue raised by petitioner was
more semantical than a question of law.[3]
On September 24, 1991, the lower court,
[4]
guided by the principles that penal laws should
be construed strictly against the state and that all
doubts should be resolved in favor of the accused,
issued an Order quashing the information. It held
that the distinction between "timber" and "lumber"
is not artificial nor a matter of semantics as the law
itself distinguishes the two terms. Sec. 3(q) of P.D.
No. 705 classifies "timber" as a forest product while
Sec. 3(aa) thereof considers "lumber" as a finished
wood product. Adding that unlicensed cutting,
gathering and/or collecting of "timber" is penalized
under Sec. 68 while sale of "lumber" without
compliance with grading rules established by the
government is prohibited by Sec. 79, the lower court
categorically stated that:
"Logically, lumber, being a manufactured wood
product, poses no more danger to forest lands by
being cut, gathered, collected or removed. It is in
fact, only bought and sold. Thus, Sec. 68 cannot be
made to apply to lumber."
The court, however, refrained from exploring
the constitutional issues raised by petitioner upon a
holding that the case could be resolved on some
other grounds or issues.[5]
The prosecution filed a motion for the
reconsideration of this Order, pointing out that
under the Primer on Illegal Logging of the
Department of Energy and Natural Resources
(DENR), timber is not just any piece of wood for it
may consist of squared and manufactured timber or
one which has been sawn to pieces to facilitate
transportation or hauling. It stressed that to
consider a person who had made lumber out of
timber as not criminally liable is an absurd
interpretation of the law.
Moreover, the prosecution underscored the
facts that when apprehended, the accused
presented Private Land Timber Permit No. 030140
dated February 10, 1991 which had expired; that
while the certificate of origin indicated Brgy. Sta.
Cruz, the product actually came from Sitio Cadiz,
and that the two jeeps bearing the product were not
equipped with certificates of transport
agreement. Added to this was the fact that, if the
product were indeed lumber, then the accused could
have presented a certificate of lumber origin,
lumber sale invoices in case of sale, tally sheets and
delivery receipts for transportation from one point
to another.[6]
Petitioner opposed the motion for
reconsideration contending that the DENR primer's
definition of "timber" is erroneous because the law
itself distinguishes "timber" from "sawn lumber."
The non-inclusion of "lumber" in Sec. 68 could only
mean a clear legislative intent to exclude possession
of "lumber" from the acts penalized under that
section.[7]
Pending resolution of the motion for
reconsideration, the Presiding Judge of Branch 49
inhibited himself from taking cognizance of
Criminal Case No. 9543. The case was subsequently
assigned to Branch 52.
On June 10, 1992, the lower court[8] issued the
herein questioned Order setting aside the quashal
Order of the previous judge. It declared that from
the law itself, it is evident that what is sought to be
penalized is not the possession, without the
required legal documents, of timber only but also of
"other forest products." It stated that even if lumber
is not timber, still, lumber is a forest product and
possession thereof without legal documents is
equally prohibited by the law which includes "wood"
in the definition of forest products.
Petitioner sought the reconsideration of this
Order but the lower court denied it. Hence, the
instant petition arguing that the lower court
gravely abused its discretion amounting to lack of
jurisdiction in setting aside the quashal order and
in denying his motion for reconsideration on the
ground that Sec. 68 of P.D. No. 705 neither specifies
nor includes "lumber" in the phrase "timber or
other forest products."
The petition is devoid of merit.
Sec. 68 of P.D. No. 705, as amended by
Executive Order No. 277 which was issued on July
25, 1987 by then President Corazon C. Aquino,
provides:
"SEC. 68. Cutting, Gathering and/or collecting
Timber, or Other Forest Products Without License.-
Any person who shall cut, gather, collect, remove
timber or other forest products from any forest
land, or timber from alienable or disposable public
land, or from private land, without any authority,
or possess timber or other forest products without
the legal documents as required under existing
forest laws and regulations, shall be punished with
the penalties imposed under Articles 309 and 310 of
the Revised Penal Code: Provided, That in the case
of partnerships, associations, or corporations, the
officers who ordered the cutting, gathering,
collection or possession shall be liable, and if such
officers are aliens, they shall, in addition to the
penalty, be deported without further proceedings on
the part of the Commission on Immigration and
Deportation.
The Court shall further order the confiscation in
favor of the government of the timber or any forest
products cut, gathered, collected, removed, or
possessed, as well as the machinery, equipment,
implements and tools illegally used in the area
where the timber or forest products are found."
(Underscoring supplied.)
Punished then in this section are: (a) the
cutting, gathering, collection, or removal of timber
or other forest products from the places therein
mentioned without any authority; or (b) possession
of timber or other forest products without the legal
documents as required under existing forest laws
and regulations.
In the recent case of Mustang Lumber, Inc. v.
Court of Appeals,[9] this Court, thru Justice Hilario
Davide, held:
"The Revised Forestry Code contains no
definition of either timber or lumber. While the
former is included in forest products as defined in
paragraph (q) of Section 3, the latter is found in
paragraph (aa) of the same section in the definition
of 'Processing plant,' which reads:
(aa) Processing plant is any mechanical set-up,
machine or combination of machine used for the
processing of logs and other forest raw materials
into lumber, veneer, plywood, wallboard,
blockboard, paper board, pulp, paper or other
finished wood product.
This simply means that lumber is a processed log or
processed forest raw material. Clearly, the Code
uses the term lumber in its ordinary or common
usage. In the 1993 copyright edition of Webster's
Third New International Dictionary, lumber is
defined, inter alia, as 'timber or logs after being
prepared for the market.' Simply put, lumber is
a processed log or timber.
It is settled that in the absence of legislative intent
to the contrary, words and phrases used in a statute
should be given their plain, ordinary, and common
usage meaning. And insofar as possession
of timber without the required legal documents is
concerned, Section 68 of P.D. No. 705, as amended,
makes no distinction between raw or processed
timber. Neither should we. Ubi lex non distinguit
nec nos distinguere debemus."
 Be that as it may, the legislative intent to
include possession of lumber in Sec. 68 is clearly
gleaned from the expressed reasons for enacting the
law which, under Executive Order No. 277, are the
following:
"WHEREAS, there is an urgency to conserve the
remaining forest resources of the country for the
benefit and welfare of the present and future
generations of Filipinos;
WHEREAS, our forest resources may be effectively
conserved and protected through the vigilant
enforcement and implementation of our forestry
laws, rules and regulations;
WHEREAS, the implementation of our forestry
laws suffers from technical difficulties, due to
certain inadequacies in the penal provisions of the
Revised Forestry Code of the Philippines; and
WHEREAS, to overcome these difficulties, there is
a need to penalize certain acts to make our forestry
laws more responsive to present situations and
realities; x x x"
To exclude possession of "lumber" from the
acts penalized in Sec. 68 would certainly
emasculate the law itself. A law should not be so
construed as to allow the doing of an act which is
prohibited by law, nor so interpreted as to afford an
opportunity to defeat compliance with its terms,
create an inconsistency, or contravene the plain
words of the law.[10] After all, the phrase "forest
products" is broad enough to encompass lumber
which, to reiterate, is manufactured timber. Hence,
to mention lumber in Sec. 68 would merely result in
tautology. As the lower court said:
"Even should it be conceded that lumber is not
timber and is thus not covered by the prohibition,
still it cannot be denied that lumber is a forest
product and possession thereof without legal
documents is equally and, to the same extent,
prohibited. Sec. 3 (q) of PD 705 as amended or
otherwise known as the Revised Forestry Code
defines forest products, viz., x x x
Stress must be given to the term WOOD embodied
in the definition of forest product (supra). If we are
to follow the rather tangential argument by the
accused that lumber is not timber, then, it will be
very easy for a person to circumvent the law. He
could stealthily cut timber from any forest, have it
sawn into lumber and escape criminal prosecution.
It is rather too narrow an interpretation. But the
law also provided a plug for the loophole. If lumber
is not timber, then surely, lumber is wood. x x x.
If in seeking to abate the proceedings the accused
also seek to imply that lumber seized in their
possession were procured from lawful source, all
they have to do is produce the legal documents
contemplated by the law. It is not the mere cutting
or possession of timber, forest products or whatever
that is prohibited and penalized by the law. What is
prohibited and penalized is the act of cutting or
possessing of timber, wood, or other forest products
without lawful authority."
The Court, therefore, finds that the lower
court did not gravely abuse its discretion in denying
the quashal of the information. The petition simply
has no legal basis. Certiorari may be issued only
where it is clearly shown that there is patent and
gross abuse of discretion as to amount to an evasion
of positive duty or to virtual refusal to perform a
duty enjoined by law, or to act at all in
contemplation of law, as where the power is
exercised in an arbitrary and despotic manner by
reason of passion or personal hostility.[11] Grave
abuse of discretion implies a capricious and
whimsical exercise of power.[12]
On the other hand, certiorari may not be
availed of where it is not shown that the respondent
court lacked or exceeded its jurisdiction or
committed grave abuse of discretion.[13] Where the
court has jurisdiction over the case, even if its
findings are not correct, its questioned acts would
at most constitute errors of law and not abuse of
discretion correctible by certiorari.[14] As this Court
said:
"x x x. When a court exercises its jurisdiction, an
error committed while so engaged does not deprive
it of the jurisdiction being exercised when the error
is committed. If it did, every error committed by a
court would deprive it of its jurisdiction and every
erroneous judgment would be a void judgment. This
cannot be allowed. The administration of justice
would not survive such a rule. Consequently, an
error of judgment that the court may commit in the
exercise of its jurisdiction is not correctible through
the original civil action of certiorari."[15]
In other words, certiorari will issue only to correct
errors of jurisdiction and not to correct errors of
procedure or mistakes in the judge's findings and
conclusions.[16]
The unavailability of the writ of certiorari, and
even that of prohibition, in this case is borne out of
the fact that what petitioner considers as grave
abuse of discretion in this case is the denial of his
motion to quash the information filed against him
and three others. This Court has consistently
defined the proper procedure in case of denial of a
motion to quash. The accused has to enter a plea,
go to trial without prejudice on his part to present
the special defenses he had invoked in his motion
and, if after trial on the merits, an adverse decision
is rendered, to appeal therefrom in the manner
authorized by law.[17]
Certiorari is not the proper remedy where a
motion to quash an information is denied. That the
appropriate recourse is to proceed to trial and in
case of conviction, to appeal such conviction, as well
as the denial of the motion to quash, is impelled by
the fact that a denial of a motion to quash is an
interlocutory procedural aspect which cannot be
appealed nor can it be the subject of a petition
for certiorari.[18] The remedies of appeal
and certiorari are mutually exclusive and not
alternative or successive.[19] An interlocutory order
may be assailed by certiorari or prohibition only
when it is shown that the court acted without or in
excess of jurisdiction or with grave abuse of
discretion.[20] However, this Court generally frowns
upon this remedial measure as regards
interlocutory orders. To tolerate the practice of
allowing interlocutory orders to be the subject of
review by certiorariwould not only delay the
administration of justice but also would unduly
burden the courts.[21]
Petitioner may not seek refuge under Flordelis
v. Himalaloan[22] for his contention that a denial of
a motion to quash may be the subject of a petition
for certiorari. That case has an entirely different
factual milieu from the one at bar. The information
herein not being "patently defective" nor that the
offense charged has prescribed,[23] this case may not
be considered an exception to the rule on the proper
remedy for the denial of a motion to quash.
With respect to the constitutionality of Sec. 68
of P.D. No. 705 which petitioner would have this
Court consider,[24] this Court has always desisted
from delving on constitutional issues. Thus, even if
all the requisites for judicial review of a
constitutional matter are present in a case,[25] this
Court will not pass upon a constitutional question
unless it is the lis mota of the case or if the case can
be disposed of on some other grounds, such as the
application of the statute or general law.[26]
The Court can well take judicial notice of the
deplorable problem of deforestation in this country,
considering that the deleterious effects of this
problem are now imperiling our lives and
properties, more specifically, by causing rampaging
floods in the lowlands. While it is true that the
rights of an accused must be favored in the
interpretation of penal provisions of law, it is
equally true that when the general welfare and
interest of the people are interwoven in the
prosecution of a crime, the Court must arrive at a
solution only after a fair and just balancing of
interests. This the Court did in arriving at the
foregoing interpretation of Sec. 68 of the Revised
Forestry Reform Code. This task, however, has not
at all been a difficult one considering that, contrary
to petitioner's assertion, his rights to due process
and equal protection of the law have not been
clearly shown to have been jeopardized.
WHEREFORE, the instant petition
for certiorari and prohibition is hereby
DISMISSED. The lower court is enjoined to proceed
with dispatch in the prosecution of Criminal Case
No. 9543. This Decision is immediately
executory. Costs against petitioner.

SO ORDERED.