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G.R. No.

202943

THE DEPARTMENT OF HEALTH, represented by SECRETARY ENRIQUE T. ONA, and THE


FOOD AND DRUG ADMINISTRATION (Formerly the Bureau of Food and Drugs),
represented by ASSISTANT SECRETARY OF HEALTH NICOLAS B. LUTERO III, Officer-in-
Charge, Petitioners,
vs.
PHILIP MORRIS PHILIPPINES MANUFACTURING, INC, Respondent.

TOPIC: POLICE POWER

DECISION

PERLAS-BERNABE, J.:

Assailed in this petition for review on certiorari1 are the Decision2 dated August 26, 2011 and the
Resolution3dated August 3, 2012 rendered by the Court of Appeals (CA) in CA-G.R. SP No.
109493, finding grave abuse of discretion on the part of petitioners the Department of Health
(DOH) and the Food and Drug Administration (FDA), then known as the Bureau of Food and
Drugs (BFAD), for denying respondent Philip Morris Philippines Manufacturing, Inc.'s (PMPMI)
permit applications for its tobacco sales promotions.

The Facts

On November 19, 2008, PMPMI, through the advertising agency PCN Promopro, Inc. (PCN), by
virtue of Article 1164 of Republic Act No. (RA) 73945 or the "Consumer Act of the Philippines,"
applied for a sales promotion permit before the BFAD, now the FDA, for its Gear Up
Promotional Activity (Gear Up Promo).6 The application included the mechanics for the
promotional activity, as well as relevant materials and fees.7

With more than fifteen (15) days lapsing without the BFAD formally acting upon the application,
PMPMI then inquired about its status. However, PMPMI was only verbally informed of the
existence of a Memorandum issued by the DOH purportedly prohibiting tobacco companies
from conducting any tobacco promotional activities in the country. On January 8, 2009, PCN
requested8 the BFAD to formally place on record the lack of any formal action on its Gear Up
Promo application.9

Meanwhile, on November 28, 2008, PMPMI, through another advertising agency, Arc
Worldwide Philippines Co. (AWPC), filed another application for a sales promotional permit, this
time for its Golden Stick Promotional Activity (Golden Stick Promo) which the BFAD, however,
refused outright, pursuant to a directive of the BFAD Director that all permit applications for
promotional activities of tobacco companies will no longer be accepted. Despite inquiries, the
BFAD merely advised AWPC to await the formal written notice regarding its application.10

Eventually, in a letter11 dated January 5, 2009, the BFAD, through Director IV Leticia Barbara B.
Gutierrez, M.S. (Dir. Gutierrez), denied PMPMIs Gear Up Promo application in accordance with
the instructions of the Undersecretary of Health for Standards and Regulations, directing that as
of July 1, 2008, "all promotions, advertisements and/or sponsorships of tobacco products are
already prohibited," based on the provisions of RA 921112 or the "Tobacco Regulation Act of
2003."13
On January 19, 2009, PMPMI filed an administrative appeal14 before the DOH Secretary,
assailing the BFADs denial of its Gear Up Promo application, as well as its refusal to accept
the Golden Stick Promo application. In its appeal, PMPMI maintained that under RA
9211, promotion is not prohibited but merely restricted, and that while there are specific
provisions therein totally banning tobacco advertising and sponsorships, no similar provision
could be found banning promotion.15 It likewise averred that it had acquired a vested right over
the granting of its sales promotional permit applications, considering that the BFAD has been
granting such applications prior to January 5, 2009. Finally, it insisted that the denial of its
promotional permit applications was tantamount to a violation of its right to due process as well
as their right to property.16

The DOH Ruling

In a Consolidated Decision17 dated April 30, 2009, then DOH Secretary Francisco T. Duque III
(Sec. Duque) denied PMPMIs appeal, as well as all other similar actions filed by other tobacco
companies and thereby affirmed the action of the BFAD denying their sales promotional permit
applications, pursuant to the provisions of RA 9211.18

In denying PMPMIs and other tobacco companies promotional applications, the DOH ruled that
the issuance of permits for sales promotional activities was never a ministerial duty of the
BFAD; rather, it was a discretionary power to be exercised within the confines of the law.
Moreover, previous approvals of sales promotional permit applications made by the BFAD did
not create a vested right on the part of the tobacco companies to have all applications
approved.19

The DOH likewise ruled that the intent and purpose of RA 9211 was to completely ban tobacco
advertisements, promotions, and sponsorships, as promotion is inherent in both advertising and
sponsorship. As such, if RA 9211 completely prohibited advertisements and sponsorships, then
it is clear that promotion, which is necessarily included in both activities, is likewise prohibited,
explaining further that the provisions of RA 9211 should not be interpreted in a way as would
render them ridiculous or meaningless.20

Lastly, the DOH cited the Philippines obligation to observe the provisions of the Framework
Convention on Tobacco Control (FCTC), an international treaty, which has been duly ratified
and adopted by the country on June 6, 2005.21

Aggrieved, PMPMI elevated the matter to the CA via petition


for certiorari and mandamus,22 docketed as CA G.R. SP No. 109493, ascribing grave abuse of
discretion upon the DOH in refusing to grant its sales promotional permit applications,
maintaining, inter alia, that RA 9211 still allows promotion activities notwithstanding the phase-
out of advertising and sponsorship activities after July 1, 2008.

The CA Ruling

In a Decision23 dated August 26, 2011, the CA granted the petition and nullified the
Consolidated Decision of the DOH upon a finding that the provisions of RA 9211 were clear
when it distinguished promotion from advertisingand sponsorship, so much so that while the
latter two (2) activities were completely banned as of July 1, 2008, the same does not hold true
with regard to promotion, which was only restricted. The CA held that the DOH cannot
exercise carte blanche authority to deny PMPMIs promotional permit applications, adding that
"[w]hen the law is clear and free from any doubt or ambiguity, there is no room for construction
or interpretation, only for application."24

Furthermore, it ruled that the DOH is bereft of any authority to enforce the provisions of RA
9211, in view of the creation of the Inter- Agency CommitteeTobacco (IAC-Tobacco) under
Section 29 of the said law, which shall have the "exclusive power and function to administer and
implement the provisions of [RA 9211] x x x."25 Thus, even though PMPMI originally applied for
sales promotional permits under Article 116 in relation to Article 109 of RA 7394, from which the
DOH derives its authority to regulate tobacco sales promotions, the said provision has already
been repealed by Section 39 of RA 9211,26 which states:

Section 39. Repealing Clause. DOH Administrative Orders No. 10[,] s. 1993 and No. 24[,] s.
2003 are hereby repealed. Article 94 of Republic Act No. 7394, as amended, otherwise known
as the Consumer Act of the Philippines, is hereby amended.

All other laws, decrees, ordinances, administrative orders, rules and regulations, or any part
thereof, which are inconsistent with this Act are likewise repealed or amended accordingly.

Hence, the CA ruled that the DOH wrongfully arrogated unto itself the authority given to the IAC-
Tobacco to administer and implement the provisions of RA 9211, which includes regulation of
tobacco promotions.27

Dissatisfied, the DOH, through the Office of the Solicitor General (OSG), moved for the
reconsideration28 of the said Decision, which the CA denied in a Resolution29 dated August 3,
2012, hence, this petition.

The Issues Before the Court

The essential issues to be resolved are: (a) whether or not the CA erred in finding that the
authority of the DOH, through the BFAD, to regulate tobacco sales promotions under Article 116
in relation to Article 109 of RA 7394 had already been impliedly repealed by RA 9211, which
created the IAC-Tobacco and granted upon it the exclusive authority to administer and
implement the provisions thereof; and (b) whether or not the CA erred in ascribing grave abuse
of discretion upon the DOH when the latter held that RA 9211 has also completely prohibited
tobacco promotions as of July 1, 2008.

The Courts Ruling

The petition is bereft of merit.

At the core of the present controversy are the pertinent provisions of RA 7394, i.e., Article 116 in
relation to Article 109, to wit:

Article 116. Permit to Conduct Promotion. No person shall conduct any sales campaigns,
including beauty contest, national in character, sponsored and promoted by manufacturing
enterprises without first securing a permit from the concerned department at least thirty
(30) calendar days prior to the commencement thereof. Unless an objection or denial is
received within fifteen (15) days from filing of the application, the same shall be deemed
approved and the promotion campaign or activity may be conducted: Provided, That any sales
promotion campaign using medical prescriptions or any part thereof or attachment thereto for
raffles or a promise of reward shall not be allowed, nor a permit be issued therefor. (Emphasis
supplied)1wphi1

Article 109. Implementing Agency. The Department of Trade and Industry shall enforce the
provisions of this Chapter and its implementing rules and regulations: Provided, That with
respect to food, drugs, cosmetics, devices, and hazardous substances, it shall be
enforced by the Department of Health. (Emphasis and underscoring supplied)

The DOH derives its authority to rule upon applications for sales promotion permits from the
above-cited provisions. On the other hand, Section 29 of RA 9211 creating the IAC-Tobacco
provides:

Section 29. Implementing Agency. An Inter-Agency Committee- Tobacco (IAC-Tobacco),


which shall have the exclusive power and function to administer and implement the
provisions of this Act, is hereby created. The IAC-Tobacco shall be chaired by the Secretary
of the Department of Trade and Industry (DTI) with the Secretary of the Department of Health
(DOH) as Vice Chairperson. The IAC-Tobacco shall have the following as members:

a. Secretary of the Department of Agriculture (DA);

b. Secretary of the Department of Justice (DOJ);

c. Secretary of the Department of Finance (DOF);

d. Secretary of the Department of Environment and Natural Resources (DENR);

e. Secretary of the Department of Science and Technology (DOST);

f. Secretary of the Department of Education (DepEd);

g. Administrator of the National Tobacco Administration (NTA);

h. A representative from the Tobacco Industry to be nominated by the legitimate and


recognized associations of the industry; and

i. A representative from a nongovernment organization (NGO) involved in public health


promotion nominated by DOH in consultation with the concerned NGOs[.]

The Department Secretaries may designate their Undersecretaries as their authorized


representative to the IAC. (Emphasis and underscoring supplied)

It is the CAs pronouncement that the creation of the IAC-Tobacco effectively and impliedly
repealed30 the above-quoted provisions of RA 7394, thereby removing the authority of the DOH
to rule upon applications for sales promotional permits filed by tobacco companies such as
those filed by PMPMI subject of this case.

On the other hand, while the DOH and the BFAD concede that the creation of the IAC-Tobacco
expressly grants upon the IAC-Tobacco the exclusive power and function to administer and
implement its provisions, they nevertheless maintain that RA 9211 did not remove their authority
under RA 7394 to regulate tobacco sales promotions.31 They point out that this much can be
deduced from the lack of provisions in RA 9211 and its implementing rules laying down the
procedure for the processing of applications for tobacco sales promotions permit.32 As such, the
DOH, through the BFAD, retains the authority to rule on PMPMIs promotional permit
applications.

The Court agrees with the CA.

After a meticulous examination of the above-quoted pertinent provisions of RA 7394 and RA


9211, the Court finds that the latter law impliedly repealed the relevant provisions of the former
with respect to the authority of the DOH to regulate tobacco sales promotions.

At this point, the Court notes that both laws separately treat "promotion" as one of the activities
related to tobacco: RA 7394 defines "sales promotion" under Article 4 (bm), while RA 9211
speaks of "promotion" or "tobacco promotion" under Section 4 (l).

"Sales promotion" is defined in Article 4 (bm) of RA 7394, to wit:

Article 4. Definition of Terms. For purposes of this Act, the term:

xxxx

bm) "Sales Promotion" means techniques intended for broad consumer participation which
contain promises of gain such as prizes, in cash or in kind, as reward for the purchase of a
product, security, service or winning in contest, game, tournament and other similar
competitions which involve determination of winner/s and which utilize mass media or other
widespread media of information. It also means techniques purely intended to increase the
sales, patronage and/or goodwill of a product. (Emphases and underscoring supplied)

Identifying its Gear Up Promo and Golden Stick Promo to be activities that fall under sales
promotion as contemplated in the said provision, PMPMI filed its permit applications under
Article 116 of RA 7394 before the BFAD.

Meanwhile, Section 4 (l) of RA 9211 defines "promotion" as follows:

Section 4. Definition of Terms. As used in this Act:

xxxx

l. "Promotion" refers to an event or activity organized by or on behalf of a tobacco


manufacturer, distributor or retailer with the aim of promoting a brand of tobacco product,
which event or activity would not occur but for the support given to it by or on behalf of the
tobacco manufacturer, distributor or retailer. It may also refer to the display of a tobacco
product or manufacturers name, trademark, logo, etc. on non-tobacco products. This
includes the paid use of tobacco products bearing the brand names, trademarks,
logos, etc. in movies, television and other forms of entertainment. For the purpose of this Act,
promotion shall be understood as tobacco promotion[.] (Emphases and underscoring
supplied)
As adverted to elsewhere, the IAC-Tobacco shall have the exclusive power and function to
administer and implement the provisions of RA 9211, which includes the conduct of
regulating promotion.

The Court has judiciously scrutinized the above definitions and finds that there is no substantial
difference between the activities that would fall under the purview of "sales promotion" in RA
7394, as well as those under "promotion" in RA 9211, as would warrant a delineation in the
authority to regulate its conduct. In fact, the techniques, activities, and methods mentioned in
the definition of "sales promotion" can be subsumed under the more comprehensive and broad
scope of "promotion."

In order to fully understand the depth and scope of these marketing activities, the Court finds it
necessary to go beyond the ambit of the definitions provided in our laws.

Outside RA 7394, "sales promotion" refers to activities which make use of "media and non-
media marketing communication for a pre- determined, limited time to increase consumer
demand, stimulate market demand or improve product availability,"33 "to provide added value or
incentives to consumers, wholesalers, retailers, or other organizational customers to stimulate
immediate sales" and "product interest, trial, or purchase."34 Examples of devices used in "sales
promotion" are contests, coupons, freebies, point-of-purchase displays, premiums, raffle prizes,
product samples, sweepstakes, and rebates.35

On the other hand, "promotion" is a term frequently used in marketing which pertains to "raising
customer awareness of a product or brand, generating sales, and creating brand
loyalty"36 which utilize the following subcategories: personal selling, advertising, sales
promotion, direct marketing, and publicity.37 The three basic objectives of promotion are: (1) to
present information to consumers as well as others; (2) to increase demand; and (3) to
differentiate a product.38 "Promotion" can be done through various methods, e.g., internet
advertisements, special events, endorsements, incentives in the purchase of a product like
discounts (i.e., coupons), free items, or contests.39

Consequently, if "sales promotion" is considered as one of the subcategories of "promotion," it


is clear, therefore, that "promotion" necessarily incorporates the activities that fall under "sales
promotion." Considering that the common and fundamental purpose of these marketing
strategies is to raise customer awareness in order to increase consumer demand or sales,
drawing a demarcation line between "promotion" and "sales promotion" as two distinct and
separate activities would be unnecessarily stretching their meanings and, accordingly, sow
more confusion. Moreover, the techniques, methods, and devices through which "sales
promotion" are usually accomplished can likewise be considered as activities relating to
"promotion," like raffle contests, which necessarily require prizes and drawing of winners,
discounts, and freebies.

Concomitantly, while the Court acknowledges the attempt of the Department of Justice (DOJ),
through its DOJ Opinion No. 29, series of 2004,40 (DOJ Opinion) to reconcile and harmonize the
apparently conflicting provisions of RA 7394 and RA 9211 in this respect, to the Courts mind, it
is more logical to conclude that "sales promotion" and "promotion" are actually one and the
same. The DOJ, in fact, referred41 to "product promotion" in RA 9211 as "promotion per se"
which, therefore, can be taken to mean an all-encompassing activity or marketing strategy
which may reasonably and logically include "sales promotion." Besides, the DOJ Opinion is
merely persuasive and not necessarily controlling.42
Furthermore, the declared policy of RA 9211 where "promotion" is defined includes the
institution of "a balanced policy whereby the use, sale and advertisements of tobacco
products shall be regulated in order to promote a healthful environment and protect the citizens
from the hazards of tobacco smoke x x x."43 Hence, if the IAC-Tobacco was created and
expressly given the exclusive authority to implement the provisions of RA 9211 in accordance
with the foregoing State policy, it signifies that it shall also take charge of the regulation of the
use, sale, distribution, and advertisements of tobacco products, as well as all forms of
"promotion" which essentially includes "sales promotion." Therefore, with this regulatory power
conferred upon the IAC-Tobacco by RA 9211, the DOH and the BFAD have been effectively
and impliedly divested of any authority to act upon applications for tobacco sales promotional
permit, including PMPMIs.

Finally, it must be stressed that RA 9211 is a special legislation which exclusively deals with the
subject of tobacco products and related activities. On the other hand, RA 7394 is broader and
more general in scope, and treats of the general welfare and interests of consumers vis--vis
proper conduct for business and industry. As such, lex specialis derogat generali. General
legislation must give way to special legislation on the same subject, and generally is so
interpreted as to embrace only cases in which the special provisions are not applicable. In other
words, where two statutes are of equal theoretical application to a particular case, the one
specially designed therefore should prevail.44

In fine, the Court agrees with the CA that it is the IAC-Tobacco and not the DOH which has the
primary jurisdiction to regulate sales promotion activities as explained in the foregoing
discussion. As such, the DOHs ruling, including its construction of RA 9211 (i.e., that
it completely banned tobacco advertisements, promotions, and sponsorships, as promotion is
inherent in both advertising and sponsorship), are declared null and void, which, as a necessary
consequence, precludes the Court from further delving on the same. As it stands, the present
applications filed by PMPMI are thus remanded to the IAC-Tobacco for its appropriate action.
Notably, in the proper exercise of its rule-making authority, nothing precludes the IAC- Tobacco
from designating any of its pilot agencies (which, for instance, may even be the DOH45 ) to
perform its multifarious functions under RA 9211.

WHEREFORE, the petition is DENIED. The Decision dated August 26, 2011 and the Resolution
dated August 3, 2012 of the Court of Appeals in CA-G.R. SP No. 109493 are
hereby AFFIRMED with the MODIFICATION in that the present permit applications filed by
respondent Philip Morris Philippines Manufacturing, Inc. for its tobacco sales promotions are
hereby REMANDED to the Inter-Agency Committee- Tobacco for appropriate action.

SO ORDERED.
G.R. No. 175356 December 3, 2013

MANILA MEMORIAL PARK, INC. AND LA FUNERARIA PAZ-SUCAT, INC., Petitioners,


vs.
SECRETARY OF THE DEPARTMENT OF SOCIAL WELFARE AND DEVELOPMENT and
THE SECRETARY OF THE DEPARTMENT OF FINANCE, Respondents.

TOPIC: POLICE POWER

DECISION

DEL CASTILLO, J.:

When a party challeges the constitutionality of a law, the burden of proof rests upon him.

Before us is a Petition for Prohibition2 under Rule 65 of the Rules of Court filed by petitioners
Manila Memorial Park, Inc. and La Funeraria Paz-Sucat, Inc., domestic corporations engaged in
the business of providing funeral and burial services, against public respondents Secretaries of
the Department of Social Welfare and Development (DSWD) and the Department of Finance
(DOF).

Petitioners assail the constitutionality of Section 4 of Republic Act (RA) No. 7432,3 as amended
by RA 9257,4 and the implementing rules and regulations issued by the DSWD and DOF insofar
as these allow business establishments to claim the 20% discount given to senior citizens as a
tax deduction.

Factual Antecedents

On April 23, 1992, RA 7432 was passed into law, granting senior citizens the following
privileges:

SECTION 4. Privileges for the Senior Citizens. The senior citizens shall be entitled to the
following:

a) the grant of twenty percent (20%) discount from all establishments relative to
utilization of transportation services, hotels and similar lodging establishment[s],
restaurants and recreation centers and purchase of medicine anywhere in the country:
Provided, That private establishments may claim the cost as tax credit;

b) a minimum of twenty percent (20%) discount on admission fees charged by theaters,


cinema houses and concert halls, circuses, carnivals and other similar places of culture,
leisure, and amusement;

c) exemption from the payment of individual income taxes: Provided, That their annual
taxable income does not exceed the property level as determined by the National
Economic and Development Authority (NEDA) for that year;
d) exemption from training fees for socioeconomic programs undertaken by the OSCA
as part of its work;

e) free medical and dental services in government establishment[s] anywhere in the


country, subject to guidelines to be issued by the Department of Health, the Government
Service Insurance System and the Social Security System;

f) to the extent practicable and feasible, the continuance of the same benefits and
privileges given by the Government Service Insurance System (GSIS), Social Security
System (SSS) and PAG-IBIG, as the case may be, as are enjoyed by those in actual
service.

On August 23, 1993, Revenue Regulations (RR) No. 02-94 was issued to implement RA 7432.
Sections 2(i) and 4 of RR No. 02-94 provide:

Sec. 2. DEFINITIONS. For purposes of these regulations: i. Tax Credit refers to the amount
representing the 20% discount granted to a qualified senior citizen by all establishments relative
to their utilization of transportation services, hotels and similar lodging establishments,
restaurants, drugstores, recreation centers, theaters, cinema houses, concert halls, circuses,
carnivals and other similar places of culture, leisure and amusement, which discount shall be
deducted by the said establishments from their gross income for income tax purposes and from
their gross sales for value-added tax or other percentage tax purposes. x x x x Sec. 4.
RECORDING/BOOKKEEPING REQUIREMENTS FOR PRIVATE ESTABLISHMENTS.
Private establishments, i.e., transport services, hotels and similar lodging establishments,
restaurants, recreation centers, drugstores, theaters, cinema houses, concert halls, circuses,
carnivals and other similar places of culture[,] leisure and amusement, giving 20% discounts to
qualified senior citizens are required to keep separate and accurate record[s] of sales made to
senior citizens, which shall include the name, identification number, gross sales/receipts,
discounts, dates of transactions and invoice number for every transaction. The amount of 20%
discount shall be deducted from the gross income for income tax purposes and from gross sales
of the business enterprise concerned for purposes of the VAT and other percentage taxes.

In Commissioner of Internal Revenue v. Central Luzon Drug Corporation,5 the Court declared
Sections 2(i) and 4 of RR No. 02-94 as erroneous because these contravene RA 7432,6 thus:

RA 7432 specifically allows private establishments to claim as tax credit the amount of
discounts they grant. In turn, the Implementing Rules and Regulations, issued pursuant thereto,
provide the procedures for its availment. To deny such credit, despite the plain mandate of the
law and the regulations carrying out that mandate, is indefensible. First, the definition given by
petitioner is erroneous. It refers to tax credit as the amount representing the 20 percent discount
that "shall be deducted by the said establishments from their gross income for income tax
purposes and from their gross sales for value-added tax or other percentage tax purposes." In
ordinary business language, the tax credit represents the amount of such discount. However,
the manner by which the discount shall be credited against taxes has not been clarified by the
revenue regulations. By ordinary acceptation, a discount is an "abatement or reduction made
from the gross amount or value of anything." To be more precise, it is in business parlance "a
deduction or lowering of an amount of money;" or "a reduction from the full amount or value of
something, especially a price." In business there are many kinds of discount, the most common
of which is that affecting the income statement or financial report upon which the income tax is
based.
xxxx

Sections 2.i and 4 of Revenue Regulations No. (RR) 2-94 define tax credit as the 20 percent
discount deductible from gross income for income tax purposes, or from gross sales for VAT or
other percentage tax purposes. In effect, the tax credit benefit under RA 7432 is related to a
sales discount. This contrived definition is improper, considering that the latter has to be
deducted from gross sales in order to compute the gross income in the income statement and
cannot be deducted again, even for purposes of computing the income tax. When the law says
that the cost of the discount may be claimed as a tax credit, it means that the amount when
claimed shall be treated as a reduction from any tax liability, plain and simple. The option to
avail of the tax credit benefit depends upon the existence of a tax liability, but to limit the benefit
to a sales discount which is not even identical to the discount privilege that is granted by law
does not define it at all and serves no useful purpose. The definition must, therefore, be
stricken down.

Laws Not Amended by Regulations

Second, the law cannot be amended by a mere regulation. In fact, a regulation that "operates to
create a rule out of harmony with the statute is a mere nullity;" it cannot prevail. It is a cardinal
rule that courts "will and should respect the contemporaneous construction placed upon a
statute by the executive officers whose duty it is to enforce it x x x." In the scheme of judicial tax
administration, the need for certainty and predictability in the implementation of tax laws is
crucial. Our tax authorities fill in the details that "Congress may not have the opportunity or
competence to provide." The regulations these authorities issue are relied upon by taxpayers,
who are certain that these will be followed by the courts. Courts, however, will not uphold these
authorities interpretations when clearly absurd, erroneous or improper. In the present case, the
tax authorities have given the term tax credit in Sections 2.i and 4 of RR 2-94 a meaning utterly
in contrast to what RA 7432 provides. Their interpretation has muddled x x x the intent of
Congress in granting a mere discount privilege, not a sales discount. The administrative agency
issuing these regulations may not enlarge, alter or restrict the provisions of the law it
administers; it cannot engraft additional requirements not contemplated by the legislature.

In case of conflict, the law must prevail. A "regulation adopted pursuant to law is law."
Conversely, a regulation or any portion thereof not adopted pursuant to law is no law and has
neither the force nor the effect of law.7

On February 26, 2004, RA 92578 amended certain provisions of RA 7432, to wit:

SECTION 4. Privileges for the Senior Citizens. The senior citizens shall be entitled to the
following:

(a) the grant of twenty percent (20%) discount from all establishments relative to the utilization
of services in hotels and similar lodging establishments, restaurants and recreation centers, and
purchase of medicines in all establishments for the exclusive use or enjoyment of senior
citizens, including funeral and burial services for the death of senior citizens;

xxxx

The establishment may claim the discounts granted under (a), (f), (g) and (h) as tax deduction
based on the net cost of the goods sold or services rendered: Provided, That the cost of the
discount shall be allowed as deduction from gross income for the same taxable year that the
discount is granted. Provided, further, That the total amount of the claimed tax deduction net of
value added tax if applicable, shall be included in their gross sales receipts for tax purposes and
shall be subject to proper documentation and to the provisions of the National Internal Revenue
Code, as amended.

To implement the tax provisions of RA 9257, the Secretary of Finance issued RR No. 4-2006,
the pertinent provision of which provides:

SEC. 8. AVAILMENT BY ESTABLISHMENTS OF SALES DISCOUNTS AS DEDUCTION


FROM GROSS INCOME. Establishments enumerated in subparagraph (6) hereunder
granting sales discounts to senior citizens on the sale of goods and/or services specified
thereunder are entitled to deduct the said discount from gross income subject to the following
conditions:

(1) Only that portion of the gross sales EXCLUSIVELY USED, CONSUMED OR
ENJOYED BY THE SENIOR CITIZEN shall be eligible for the deductible sales discount.

(2) The gross selling price and the sales discount MUST BE SEPARATELY INDICATED
IN THE OFFICIAL RECEIPT OR SALES INVOICE issued by the establishment for the
sale of goods or services to the senior citizen.

(3) Only the actual amount of the discount granted or a sales discount not exceeding
20% of the gross selling price can be deducted from the gross income, net of value
added tax, if applicable, for income tax purposes, and from gross sales or gross receipts
of the business enterprise concerned, for VAT or other percentage tax purposes.

(4) The discount can only be allowed as deduction from gross income for the same
taxable year that the discount is granted.

(5) The business establishment giving sales discounts to qualified senior citizens is
required to keep separate and accurate record[s] of sales, which shall include the name
of the senior citizen, TIN, OSCA ID, gross sales/receipts, sales discount granted, [date]
of [transaction] and invoice number for every sale transaction to senior citizen.

(6) Only the following business establishments which granted sales discount to senior
citizens on their sale of goods and/or services may claim the said discount granted as
deduction from gross income, namely:

xxxx

(i) Funeral parlors and similar establishments The beneficiary or any person who shall
shoulder the funeral and burial expenses of the deceased senior citizen shall claim the discount,
such as casket, embalmment, cremation cost and other related services for the senior citizen
upon payment and presentation of [his] death certificate.

The DSWD likewise issued its own Rules and Regulations Implementing RA 9257, to wit:

RULE VI DISCOUNTS AS TAX DEDUCTION OF ESTABLISHMENTS


Article 8. Tax Deduction of Establishments. The establishment may claim the discounts
granted under Rule V, Section 4 Discounts for Establishments, Section 9, Medical and Dental
Services in Private Facilities and Sections 10 and 11 Air, Sea and Land Transportation as tax
deduction based on the net cost of the goods sold or services rendered.

Provided, That the cost of the discount shall be allowed as deduction from gross income for the
same taxable year that the discount is granted; Provided, further, That the total amount of the
claimed tax deduction net of value added tax if applicable, shall be included in their gross sales
receipts for tax purposes and shall be subject to proper documentation and to the provisions of
the National Internal Revenue Code, as amended; Provided, finally, that the implementation of
the tax deduction shall be subject to the Revenue Regulations to be issued by the Bureau of
Internal Revenue (BIR) and approved by the Department of Finance (DOF).

Feeling aggrieved by the tax deduction scheme, petitioners filed the present recourse, praying
that Section 4 of RA 7432, as amended by RA 9257, and the implementing rules and
regulations issued by the DSWD and the DOF be declared unconstitutional insofar as these
allow business establishments to claim the 20% discount given to senior citizens as a tax
deduction; that the DSWD and the DOF be prohibited from enforcing the same; and that the tax
credit treatment of the 20% discount under the former Section 4 (a) of RA 7432 be reinstated.

Issues

Petitioners raise the following issues:

A.

WHETHER THE PETITION PRESENTS AN ACTUAL CASE OR CONTROVERSY.

B.

WHETHER SECTION 4 OF REPUBLIC ACT NO. 9257 AND X X X ITS IMPLEMENTING


RULES AND REGULATIONS, INSOFAR AS THEY PROVIDE THAT THE TWENTY PERCENT
(20%) DISCOUNT TO SENIOR CITIZENS MAY BE CLAIMED AS A TAX DEDUCTION BY THE
PRIVATE ESTABLISHMENTS, ARE INVALID AND UNCONSTITUTIONAL.9

Petitioners Arguments

Petitioners emphasize that they are not questioning the 20% discount granted to senior citizens
but are only assailing the constitutionality of the tax deduction scheme prescribed under RA
9257 and the implementing rules and regulations issued by the DSWD and the DOF.10

Petitioners posit that the tax deduction scheme contravenes Article III, Section 9 of the
Constitution, which provides that: "[p]rivate property shall not be taken for public use without just
compensation."11

In support of their position, petitioners cite Central Luzon Drug Corporation,12 where it was ruled
that the 20% discount privilege constitutes taking of private property for public use which
requires the payment of just compensation,13 and Carlos Superdrug Corporation v. Department
of Social Welfare and Development,14 where it was acknowledged that the tax deduction
scheme does not meet the definition of just compensation.15

Petitioners likewise seek a reversal of the ruling in Carlos Superdrug Corporation16 that the tax
deduction scheme adopted by the government is justified by police power.17

They assert that "[a]lthough both police power and the power of eminent domain have the
general welfare for their object, there are still traditional distinctions between the two"18 and that
"eminent domain cannot be made less supreme than police power."19

Petitioners further claim that the legislature, in amending RA 7432, relied on an erroneous
contemporaneous construction that prior payment of taxes is required for tax credit.20

Petitioners also contend that the tax deduction scheme violates Article XV, Section 421 and
Article XIII, Section 1122of the Constitution because it shifts the States constitutional mandate or
duty of improving the welfare of the elderly to the private sector.23

Under the tax deduction scheme, the private sector shoulders 65% of the discount because only
35%24 of it is actually returned by the government.25

Consequently, the implementation of the tax deduction scheme prescribed under Section 4 of
RA 9257 affects the businesses of petitioners.26

Thus, there exists an actual case or controversy of transcendental importance which deserves
judicious disposition on the merits by the highest court of the land.27

Respondents Arguments

Respondents, on the other hand, question the filing of the instant Petition directly with the
Supreme Court as this disregards the hierarchy of courts.28

They likewise assert that there is no justiciable controversy as petitioners failed to prove that the
tax deduction treatment is not a "fair and full equivalent of the loss sustained" by them.29

As to the constitutionality of RA 9257 and its implementing rules and regulations, respondents
contend that petitioners failed to overturn its presumption of constitutionality.30

More important, respondents maintain that the tax deduction scheme is a legitimate exercise of
the States police power.31

Our Ruling

The Petition lacks merit.

There exists an actual case or controversy.

We shall first resolve the procedural issue. When the constitutionality of a law is put in issue,
judicial review may be availed of only if the following requisites concur: "(1) the existence of an
actual and appropriate case; (2) the existence of personal and substantial interest on the part of
the party raising the [question of constitutionality]; (3) recourse to judicial review is made at the
earliest opportunity; and (4) the [question of constitutionality] is the lis mota of the case." 32

In this case, petitioners are challenging the constitutionality of the tax deduction scheme
provided in RA 9257 and the implementing rules and regulations issued by the DSWD and the
DOF. Respondents, however, oppose the Petition on the ground that there is no actual case or
controversy. We do not agree with respondents. An actual case or controversy exists when
there is "a conflict of legal rights" or "an assertion of opposite legal claims susceptible of judicial
resolution."33

The Petition must therefore show that "the governmental act being challenged has a direct
adverse effect on the individual challenging it."34

In this case, the tax deduction scheme challenged by petitioners has a direct adverse effect on
them. Thus, it cannot be denied that there exists an actual case or controversy.

The validity of the 20% senior citizen discount and tax deduction scheme under RA 9257,
as an exercise of police power of the State, has already been settled in Carlos Superdrug
Corporation.

Petitioners posit that the resolution of this case lies in the determination of whether the legally
mandated 20% senior citizen discount is an exercise of police power or eminent domain. If it is
police power, no just compensation is warranted. But if it is eminent domain, the tax deduction
scheme is unconstitutional because it is not a peso for peso reimbursement of the 20% discount
given to senior citizens. Thus, it constitutes taking of private property without payment of just
compensation. At the outset, we note that this question has been settled in Carlos Superdrug
Corporation.35

In that case, we ruled:

Petitioners assert that Section 4(a) of the law is unconstitutional because it constitutes
deprivation of private property. Compelling drugstore owners and establishments to grant the
discount will result in a loss of profit and capital because 1) drugstores impose a mark-up of only
5% to 10% on branded medicines; and 2) the law failed to provide a scheme whereby
drugstores will be justly compensated for the discount. Examining petitioners arguments, it is
apparent that what petitioners are ultimately questioning is the validity of the tax deduction
scheme as a reimbursement mechanism for the twenty percent (20%) discount that they extend
to senior citizens. Based on the afore-stated DOF Opinion, the tax deduction scheme does not
fully reimburse petitioners for the discount privilege accorded to senior citizens. This is because
the discount is treated as a deduction, a tax-deductible expense that is subtracted from the
gross income and results in a lower taxable income. Stated otherwise, it is an amount that is
allowed by law to reduce the income prior to the application of the tax rate to compute the
amount of tax which is due. Being a tax deduction, the discount does not reduce taxes owed on
a peso for peso basis but merely offers a fractional reduction in taxes owed. Theoretically, the
treatment of the discount as a deduction reduces the net income of the private establishments
concerned. The discounts given would have entered the coffers and formed part of the gross
sales of the private establishments, were it not for R.A. No. 9257. The permanent reduction in
their total revenues is a forced subsidy corresponding to the taking of private property for public
use or benefit. This constitutes compensable taking for which petitioners would ordinarily
become entitled to a just compensation. Just compensation is defined as the full and fair
equivalent of the property taken from its owner by the expropriator. The measure is not the
takers gain but the owners loss. The word just is used to intensify the meaning of the word
compensation, and to convey the idea that the equivalent to be rendered for the property to be
taken shall be real, substantial, full and ample. A tax deduction does not offer full
reimbursement of the senior citizen discount. As such, it would not meet the definition of just
compensation. Having said that, this raises the question of whether the State, in promoting the
health and welfare of a special group of citizens, can impose upon private establishments the
burden of partly subsidizing a government program. The Court believes so. The Senior Citizens
Act was enacted primarily to maximize the contribution of senior citizens to nation-building, and
to grant benefits and privileges to them for their improvement and well-being as the State
considers them an integral part of our society. The priority given to senior citizens finds its basis
in the Constitution as set forth in the law itself.1wphi1 Thus, the Act provides: SEC. 2. Republic
Act No. 7432 is hereby amended to read as follows:

SECTION 1. Declaration of Policies and Objectives. Pursuant to Article XV, Section 4 of the
Constitution, it is the duty of the family to take care of its elderly members while the State may
design programs of social security for them. In addition to this, Section 10 in the Declaration of
Principles and State Policies provides: "The State shall provide social justice in all phases of
national development." Further, Article XIII, Section 11, provides: "The State shall adopt an
integrated and comprehensive approach to health development which shall endeavor to make
essential goods, health and other social services available to all the people at affordable cost.
There shall be priority for the needs of the underprivileged sick, elderly, disabled, women and
children." Consonant with these constitutional principles the following are the declared policies
of this Act:

xxx xxx xxx

(f) To recognize the important role of the private sector in the improvement of the welfare of
senior citizens and to actively seek their partnership.

To implement the above policy, the law grants a twenty percent discount to senior citizens for
medical and dental services, and diagnostic and laboratory fees; admission fees charged by
theaters, concert halls, circuses, carnivals, and other similar places of culture, leisure and
amusement; fares for domestic land, air and sea travel; utilization of services in hotels and
similar lodging establishments, restaurants and recreation centers; and purchases of medicines
for the exclusive use or enjoyment of senior citizens. As a form of reimbursement, the law
provides that business establishments extending the twenty percent discount to senior citizens
may claim the discount as a tax deduction. The law is a legitimate exercise of police power
which, similar to the power of eminent domain, has general welfare for its object. Police power is
not capable of an exact definition, but has been purposely veiled in general terms to underscore
its comprehensiveness to meet all exigencies and provide enough room for an efficient and
flexible response to conditions and circumstances, thus assuring the greatest benefits.
Accordingly, it has been described as "the most essential, insistent and the least limitable of
powers, extending as it does to all the great public needs." It is "[t]he power vested in the
legislature by the constitution to make, ordain, and establish all manner of wholesome and
reasonable laws, statutes, and ordinances, either with penalties or without, not repugnant to the
constitution, as they shall judge to be for the good and welfare of the commonwealth, and of the
subjects of the same." For this reason, when the conditions so demand as determined by the
legislature, property rights must bow to the primacy of police power because property rights,
though sheltered by due process, must yield to general welfare. Police power as an attribute to
promote the common good would be diluted considerably if on the mere plea of petitioners that
they will suffer loss of earnings and capital, the questioned provision is invalidated. Moreover, in
the absence of evidence demonstrating the alleged confiscatory effect of the provision in
question, there is no basis for its nullification in view of the presumption of validity which every
law has in its favor. Given these, it is incorrect for petitioners to insist that the grant of the senior
citizen discount is unduly oppressive to their business, because petitioners have not taken time
to calculate correctly and come up with a financial report, so that they have not been able to
show properly whether or not the tax deduction scheme really works greatly to their
disadvantage. In treating the discount as a tax deduction, petitioners insist that they will incur
losses because, referring to the DOF Opinion, for every 1.00 senior citizen discount that
petitioners would give, P0.68 will be shouldered by them as only P0.32 will be refunded by the
government by way of a tax deduction. To illustrate this point, petitioner Carlos Super Drug cited
the anti-hypertensive maintenance drug Norvasc as an example. According to the latter, it
acquires Norvasc from the distributors at 37.57 per tablet, and retails it at 39.60 (or at a
margin of 5%). If it grants a 20% discount to senior citizens or an amount equivalent to 7.92,
then it would have to sell Norvasc at 31.68 which translates to a loss from capital of 5.89 per
tablet. Even if the government will allow a tax deduction, only 2.53 per tablet will be refunded
and not the full amount of the discount which is 7.92. In short, only 32% of the 20% discount
will be reimbursed to the drugstores. Petitioners computation is flawed. For purposes of
reimbursement, the law states that the cost of the discount shall be deducted from gross
income, the amount of income derived from all sources before deducting allowable expenses,
which will result in net income. Here, petitioners tried to show a loss on a per transaction basis,
which should not be the case. An income statement, showing an accounting of petitioners'
sales, expenses, and net profit (or loss) for a given period could have accurately reflected the
effect of the discount on their income. Absent any financial statement, petitioners cannot
substantiate their claim that they will be operating at a loss should they give the discount. In
addition, the computation was erroneously based on the assumption that their customers
consisted wholly of senior citizens. Lastly, the 32% tax rate is to be imposed on income, not on
the amount of the discount.

Furthermore, it is unfair for petitioners to criticize the law because they cannot raise the prices of
their medicines given the cutthroat nature of the players in the industry. It is a business decision
on the part of petitioners to peg the mark-up at 5%. Selling the medicines below acquisition
cost, as alleged by petitioners, is merely a result of this decision. Inasmuch as pricing is a
property right, petitioners cannot reproach the law for being oppressive, simply because they
cannot afford to raise their prices for fear of losing their customers to competition. The Court is
not oblivious of the retail side of the pharmaceutical industry and the competitive pricing
component of the business. While the Constitution protects property rights, petitioners must
accept the realities of business and the State, in the exercise of police power, can intervene in
the operations of a business which may result in an impairment of property rights in the process.

Moreover, the right to property has a social dimension. While Article XIII of the Constitution
provides the precept for the protection of property, various laws and jurisprudence, particularly
on agrarian reform and the regulation of contracts and public utilities, continuously serve as x x
x reminder[s] that the right to property can be relinquished upon the command of the State for
the promotion of public good. Undeniably, the success of the senior citizens program rests
largely on the support imparted by petitioners and the other private establishments concerned.
This being the case, the means employed in invoking the active participation of the private
sector, in order to achieve the purpose or objective of the law, is reasonably and directly related.
Without sufficient proof that Section 4 (a) of R.A. No. 9257 is arbitrary, and that the continued
implementation of the same would be unconscionably detrimental to petitioners, the Court will
refrain from quashing a legislative act.36 (Bold in the original; underline supplied)

We, thus, found that the 20% discount as well as the tax deduction scheme is a valid exercise of
the police power of the State.

No compelling reason has been proffered to overturn, modify or abandon the ruling in
Carlos Superdrug Corporation.

Petitioners argue that we have previously ruled in Central Luzon Drug Corporation37 that the
20% discount is an exercise of the power of eminent domain, thus, requiring the payment of just
compensation. They urge us to re-examine our ruling in Carlos Superdrug Corporation38 which
allegedly reversed the ruling in Central Luzon Drug Corporation.39

They also point out that Carlos Superdrug Corporation40 recognized that the tax deduction
scheme under the assailed law does not provide for sufficient just compensation. We agree with
petitioners observation that there are statements in Central Luzon Drug
Corporation41 describing the 20% discount as an exercise of the power of eminent domain, viz.:

[T]he privilege enjoyed by senior citizens does not come directly from the State, but rather from
the private establishments concerned. Accordingly, the tax credit benefit granted to these
establishments can be deemed as their just compensation for private property taken by the
State for public use. The concept of public use is no longer confined to the traditional notion of
use by the public, but held synonymous with public interest, public benefit, public welfare, and
public convenience. The discount privilege to which our senior citizens are entitled is actually a
benefit enjoyed by the general public to which these citizens belong. The discounts given would
have entered the coffers and formed part of the gross sales of the private establishments
concerned, were it not for RA 7432. The permanent reduction in their total revenues is a forced
subsidy corresponding to the taking of private property for public use or benefit. As a result of
the 20 percent discount imposed by RA 7432, respondent becomes entitled to a just
compensation. This term refers not only to the issuance of a tax credit certificate indicating the
correct amount of the discounts given, but also to the promptness in its release. Equivalent to
the payment of property taken by the State, such issuance when not done within a
reasonable time from the grant of the discounts cannot be considered as just compensation.
In effect, respondent is made to suffer the consequences of being immediately deprived of its
revenues while awaiting actual receipt, through the certificate, of the equivalent amount it needs
to cope with the reduction in its revenues. Besides, the taxation power can also be used as an
implement for the exercise of the power of eminent domain. Tax measures are but "enforced
contributions exacted on pain of penal sanctions" and "clearly imposed for a public purpose." In
recent years, the power to tax has indeed become a most effective tool to realize social justice,
public welfare, and the equitable distribution of wealth. While it is a declared commitment under
Section 1 of RA 7432, social justice "cannot be invoked to trample on the rights of property
owners who under our Constitution and laws are also entitled to protection. The social justice
consecrated in our [C]onstitution [is] not intended to take away rights from a person and give
them to another who is not entitled thereto." For this reason, a just compensation for income
that is taken away from respondent becomes necessary. It is in the tax credit that our legislators
find support to realize social justice, and no administrative body can alter that fact. To put it
differently, a private establishment that merely breaks even without the discounts yet will
surely start to incur losses because of such discounts. The same effect is expected if its mark-
up is less than 20 percent, and if all its sales come from retail purchases by senior citizens.
Aside from the observation we have already raised earlier, it will also be grossly unfair to an
establishment if the discounts will be treated merely as deductions from either its gross income
or its gross sales.1wphi1 Operating at a loss through no fault of its own, it will realize that the
tax credit limitation under RR 2-94 is inutile, if not improper. Worse, profit-generating businesses
will be put in a better position if they avail themselves of tax credits denied those that are losing,
because no taxes are due from the latter.42 (Italics in the original; emphasis supplied)

The above was partly incorporated in our ruling in Carlos Superdrug Corporation43 when we
stated preliminarily that

Petitioners assert that Section 4(a) of the law is unconstitutional because it constitutes
deprivation of private property. Compelling drugstore owners and establishments to grant the
discount will result in a loss of profit and capital because 1) drugstores impose a mark-up of only
5% to 10% on branded medicines; and 2) the law failed to provide a scheme whereby
drugstores will be justly compensated for the discount. Examining petitioners arguments, it is
apparent that what petitioners are ultimately questioning is the validity of the tax deduction
scheme as a reimbursement mechanism for the twenty percent (20%) discount that they extend
to senior citizens. Based on the afore-stated DOF Opinion, the tax deduction scheme does not
fully reimburse petitioners for the discount privilege accorded to senior citizens. This is because
the discount is treated as a deduction, a tax-deductible expense that is subtracted from the
gross income and results in a lower taxable income. Stated otherwise, it is an amount that is
allowed by law to reduce the income prior to the application of the tax rate to compute the
amount of tax which is due. Being a tax deduction, the discount does not reduce taxes owed on
a peso for peso basis but merely offers a fractional reduction in taxes owed. Theoretically, the
treatment of the discount as a deduction reduces the net income of the private establishments
concerned. The discounts given would have entered the coffers and formed part of the gross
sales of the private establishments, were it not for R.A. No. 9257. The permanent reduction in
their total revenues is a forced subsidy corresponding to the taking of private property for public
use or benefit. This constitutes compensable taking for which petitioners would ordinarily
become entitled to a just compensation. Just compensation is defined as the full and fair
equivalent of the property taken from its owner by the expropriator. The measure is not the
takers gain but the owners loss. The word just is used to intensify the meaning of the word
compensation, and to convey the idea that the equivalent to be rendered for the property to be
taken shall be real, substantial, full and ample. A tax deduction does not offer full
reimbursement of the senior citizen discount. As such, it would not meet the definition of just
compensation. Having said that, this raises the question of whether the State, in promoting the
health and welfare of a special group of citizens, can impose upon private establishments the
burden of partly subsidizing a government program. The Court believes so.44

This, notwithstanding, we went on to rule in Carlos Superdrug Corporation45 that the 20%
discount and tax deduction scheme is a valid exercise of the police power of the State. The
present case, thus, affords an opportunity for us to clarify the above-quoted statements in
Central Luzon Drug Corporation46 and Carlos Superdrug Corporation.47

First, we note that the above-quoted disquisition on eminent domain in Central Luzon Drug
Corporation48 is obiter dicta and, thus, not binding precedent. As stated earlier, in Central Luzon
Drug Corporation,49 we ruled that the BIR acted ultra vires when it effectively treated the 20%
discount as a tax deduction, under Sections 2.i and 4 of RR No. 2-94, despite the clear wording
of the previous law that the same should be treated as a tax credit. We were, therefore, not
confronted in that case with the issue as to whether the 20% discount is an exercise of police
power or eminent domain. Second, although we adverted to Central Luzon Drug
Corporation50 in our ruling in Carlos Superdrug Corporation,51 this referred only to preliminary
matters. A fair reading of Carlos Superdrug Corporation52 would show that we categorically
ruled therein that the 20% discount is a valid exercise of police power. Thus, even if the current
law, through its tax deduction scheme (which abandoned the tax credit scheme under the
previous law), does not provide for a peso for peso reimbursement of the 20% discount given by
private establishments, no constitutional infirmity obtains because, being a valid exercise of
police power, payment of just compensation is not warranted. We have carefully reviewed the
basis of our ruling in Carlos Superdrug Corporation53 and we find no cogent reason to overturn,
modify or abandon it. We also note that petitioners arguments are a mere reiteration of those
raised and resolved in Carlos Superdrug Corporation.54 Thus, we sustain Carlos Superdrug
Corporation.55

Nonetheless, we deem it proper, in what follows, to amplify our explanation in Carlos Superdrug
Corporation56 as to why the 20% discount is a valid exercise of police power and why it may not,
under the specific circumstances of this case, be considered as an exercise of the power of
eminent domain contrary to the obiter in Central Luzon Drug Corporation.57

Police power versus eminent domain.

Police power is the inherent power of the State to regulate or to restrain the use of liberty and
property for public welfare.58

The only limitation is that the restriction imposed should be reasonable, not oppressive.59

In other words, to be a valid exercise of police power, it must have a lawful subject or objective
and a lawful method of accomplishing the goal.60

Under the police power of the State, "property rights of individuals may be subjected to
restraints and burdens in order to fulfill the objectives of the government."61

The State "may interfere with personal liberty, property, lawful businesses and occupations to
promote the general welfare [as long as] the interference [is] reasonable and not arbitrary."62

Eminent domain, on the other hand, is the inherent power of the State to take or appropriate
private property for public use.63

The Constitution, however, requires that private property shall not be taken without due process
of law and the payment of just compensation.64

Traditional distinctions exist between police power and eminent domain. In the exercise of
police power, a property right is impaired by regulation,65 or the use of property is merely
prohibited, regulated or restricted66 to promote public welfare. In such cases, there is no
compensable taking, hence, payment of just compensation is not required. Examples of these
regulations are property condemned for being noxious or intended for noxious purposes (e.g., a
building on the verge of collapse to be demolished for public safety, or obscene materials to be
destroyed in the interest of public morals)67 as well as zoning ordinances prohibiting the use of
property for purposes injurious to the health, morals or safety of the community (e.g., dividing a
citys territory into residential and industrial areas).68
It has, thus, been observed that, in the exercise of police power (as distinguished from eminent
domain), although the regulation affects the right of ownership, none of the bundle of rights
which constitute ownership is appropriated for use by or for the benefit of the public.69

On the other hand, in the exercise of the power of eminent domain, property interests are
appropriated and applied to some public purpose which necessitates the payment of just
compensation therefor. Normally, the title to and possession of the property are transferred to
the expropriating authority. Examples include the acquisition of lands for the construction of
public highways as well as agricultural lands acquired by the government under the agrarian
reform law for redistribution to qualified farmer beneficiaries. However, it is a settled rule that the
acquisition of title or total destruction of the property is not essential for "taking" under the power
of eminent domain to be present.70

Examples of these include establishment of easements such as where the land owner is
perpetually deprived of his proprietary rights because of the hazards posed by electric
transmission lines constructed above his property71or the compelled interconnection of the
telephone system between the government and a private company.72

In these cases, although the private property owner is not divested of ownership or possession,
payment of just compensation is warranted because of the burden placed on the property for
the use or benefit of the public.

The 20% senior citizen discount is an exercise of police power.

It may not always be easy to determine whether a challenged governmental act is an exercise
of police power or eminent domain. The very nature of police power as elastic and responsive to
various social conditions73 as well as the evolving meaning and scope of public use74 and just
compensation75 in eminent domain evinces that these are not static concepts. Because of the
exigencies of rapidly changing times, Congress may be compelled to adopt or experiment with
different measures to promote the general welfare which may not fall squarely within the
traditionally recognized categories of police power and eminent domain. The judicious
approach, therefore, is to look at the nature and effects of the challenged governmental act and
decide, on the basis thereof, whether the act is the exercise of police power or eminent domain.
Thus, we now look at the nature and effects of the 20% discount to determine if it constitutes an
exercise of police power or eminent domain. The 20% discount is intended to improve the
welfare of senior citizens who, at their age, are less likely to be gainfully employed, more prone
to illnesses and other disabilities, and, thus, in need of subsidy in purchasing basic
commodities. It may not be amiss to mention also that the discount serves to honor senior
citizens who presumably spent the productive years of their lives on contributing to the
development and progress of the nation. This distinct cultural Filipino practice of honoring the
elderly is an integral part of this law. As to its nature and effects, the 20% discount is a
regulation affecting the ability of private establishments to price their products and services
relative to a special class of individuals, senior citizens, for which the Constitution affords
preferential concern.76

In turn, this affects the amount of profits or income/gross sales that a private establishment can
derive from senior citizens. In other words, the subject regulation affects the pricing, and, hence,
the profitability of a private establishment. However, it does not purport to appropriate or burden
specific properties, used in the operation or conduct of the business of private establishments,
for the use or benefit of the public, or senior citizens for that matter, but merely regulates the
pricing of goods and services relative to, and the amount of profits or income/gross sales that
such private establishments may derive from, senior citizens. The subject regulation may be
said to be similar to, but with substantial distinctions from, price control or rate of return on
investment control laws which are traditionally regarded as police power measures.77

These laws generally regulate public utilities or industries/enterprises imbued with public interest
in order to protect consumers from exorbitant or unreasonable pricing as well as temper
corporate greed by controlling the rate of return on investment of these corporations considering
that they have a monopoly over the goods or services that they provide to the general public.
The subject regulation differs therefrom in that (1) the discount does not prevent the
establishments from adjusting the level of prices of their goods and services, and (2) the
discount does not apply to all customers of a given establishment but only to the class of senior
citizens. Nonetheless, to the degree material to the resolution of this case, the 20% discount
may be properly viewed as belonging to the category of price regulatory measures which affect
the profitability of establishments subjected thereto. On its face, therefore, the subject regulation
is a police power measure. The obiter in Central Luzon Drug Corporation,78 however, describes
the 20% discount as an exercise of the power of eminent domain and the tax credit, under the
previous law, equivalent to the amount of discount given as the just compensation therefor. The
reason is that (1) the discount would have formed part of the gross sales of the establishment
were it not for the law prescribing the 20% discount, and (2) the permanent reduction in total
revenues is a forced subsidy corresponding to the taking of private property for public use or
benefit. The flaw in this reasoning is in its premise. It presupposes that the subject regulation,
which impacts the pricing and, hence, the profitability of a private establishment, automatically
amounts to a deprivation of property without due process of law. If this were so, then all price
and rate of return on investment control laws would have to be invalidated because they impact,
at some level, the regulated establishments profits or income/gross sales, yet there is no
provision for payment of just compensation. It would also mean that overnment cannot set price
or rate of return on investment limits, which reduce the profits or income/gross sales of private
establishments, if no just compensation is paid even if the measure is not confiscatory. The
obiter is, thus, at odds with the settled octrine that the State can employ police power measures
to regulate the pricing of goods and services, and, hence, the profitability of business
establishments in order to pursue legitimate State objectives for the common good, provided
that the regulation does not go too far as to amount to "taking."79

In City of Manila v. Laguio, Jr.,80 we recognized that x x x a taking also could be found if
government regulation of the use of property went "too far." When regulation reaches a certain
magnitude, in most if not in all cases there must be an exercise of eminent domain and
compensation to support the act. While property may be regulated to a certain extent, if
regulation goes too far it will be recognized as a taking. No formula or rule can be devised to
answer the questions of what is too far and when regulation becomes a taking. In Mahon,
Justice Holmes recognized that it was "a question of degree and therefore cannot be disposed
of by general propositions." On many other occasions as well, the U.S. Supreme Court has said
that the issue of when regulation constitutes a taking is a matter of considering the facts in each
case. The Court asks whether justice and fairness require that the economic loss caused by
public action must be compensated by the government and thus borne by the public as a whole,
or whether the loss should remain concentrated on those few persons subject to the public
action.81

The impact or effect of a regulation, such as the one under consideration, must, thus, be
determined on a case-to-case basis. Whether that line between permissible regulation under
police power and "taking" under eminent domain has been crossed must, under the specific
circumstances of this case, be subject to proof and the one assailing the constitutionality of the
regulation carries the heavy burden of proving that the measure is unreasonable, oppressive or
confiscatory. The time-honored rule is that the burden of proving the unconstitutionality of a law
rests upon the one assailing it and "the burden becomes heavier when police power is at
issue."82

The 20% senior citizen discount has not been shown to be unreasonable, oppressive or
confiscatory.

In Alalayan v. National Power Corporation,83 petitioners, who were franchise holders of electric
plants, challenged the validity of a law limiting their allowable net profits to no more than 12%
per annum of their investments plus two-month operating expenses. In rejecting their plea, we
ruled that, in an earlier case, it was found that 12% is a reasonable rate of return and that
petitioners failed to prove that the aforesaid rate is confiscatory in view of the presumption of
constitutionality.84

We adopted a similar line of reasoning in Carlos Superdrug Corporation85 when we ruled that
petitioners therein failed to prove that the 20% discount is arbitrary, oppressive or confiscatory.
We noted that no evidence, such as a financial report, to establish the impact of the 20%
discount on the overall profitability of petitioners was presented in order to show that they would
be operating at a loss due to the subject regulation or that the continued implementation of the
law would be unconscionably detrimental to the business operations of petitioners. In the case
at bar, petitioners proceeded with a hypothetical computation of the alleged loss that they will
suffer similar to what the petitioners in Carlos Superdrug Corporation86 did. Petitioners went
directly to this Court without first establishing the factual bases of their claims. Hence, the
present recourse must, likewise, fail. Because all laws enjoy the presumption of constitutionality,
courts will uphold a laws validity if any set of facts may be conceived to sustain it. 87

On its face, we find that there are at least two conceivable bases to sustain the subject
regulations validity absent clear and convincing proof that it is unreasonable, oppressive or
confiscatory. Congress may have legitimately concluded that business establishments have the
capacity to absorb a decrease in profits or income/gross sales due to the 20% discount without
substantially affecting the reasonable rate of return on their investments considering (1) not all
customers of a business establishment are senior citizens and (2) the level of its profit margins
on goods and services offered to the general public. Concurrently, Congress may have,
likewise, legitimately concluded that the establishments, which will be required to extend the
20% discount, have the capacity to revise their pricing strategy so that whatever reduction in
profits or income/gross sales that they may sustain because of sales to senior citizens, can be
recouped through higher mark-ups or from other products not subject of discounts. As a result,
the discounts resulting from sales to senior citizens will not be confiscatory or unduly
oppressive. In sum, we sustain our ruling in Carlos Superdrug Corporation88 that the 20% senior
citizen discount and tax deduction scheme are valid exercises of police power of the State
absent a clear showing that it is arbitrary, oppressive or confiscatory.

Conclusion

In closing, we note that petitioners hypothesize, consistent with our previous ratiocinations, that
the discount will force establishments to raise their prices in order to compensate for its impact
on overall profits or income/gross sales. The general public, or those not belonging to the senior
citizen class, are, thus, made to effectively shoulder the subsidy for senior citizens. This, in
petitioners view, is unfair.

As already mentioned, Congress may be reasonably assumed to have foreseen this eventuality.
But, more importantly, this goes into the wisdom, efficacy and expediency of the subject law
which is not proper for judicial review. In a way, this law pursues its social equity objective in a
non-traditional manner unlike past and existing direct subsidy programs of the government for
the poor and marginalized sectors of our society. Verily, Congress must be given sufficient
leeway in formulating welfare legislations given the enormous challenges that the government
faces relative to, among others, resource adequacy and administrative capability in
implementing social reform measures which aim to protect and uphold the interests of those
most vulnerable in our society. In the process, the individual, who enjoys the rights, benefits and
privileges of living in a democratic polity, must bear his share in supporting measures intended
for the common good. This is only fair. In fine, without the requisite showing of a clear and
unequivocal breach of the Constitution, the validity of the assailed law must be sustained.

Refutation of the Dissent

The main points of Justice Carpios Dissent may be summarized as follows: (1) the discussion
on eminent domain in Central Luzon Drug Corporation89 is not obiter dicta ; (2) allowable taking,
in police power, is limited to property that is destroyed or placed outside the commerce of man
for public welfare; (3) the amount of mandatory discount is private property within the ambit of
Article III, Section 990 of the Constitution; and (4) the permanent reduction in a private
establishments total revenue, arising from the mandatory discount, is a taking of private
property for public use or benefit, hence, an exercise of the power of eminent domain requiring
the payment of just compensation. I We maintain that the discussion on eminent domain in
Central Luzon Drug Corporation91 is obiter dicta. As previously discussed, in Central Luzon
Drug Corporation,92 the BIR, pursuant to Sections 2.i and 4 of RR No. 2-94, treated the senior
citizen discount in the previous law, RA 7432, as a tax deduction instead of a tax credit despite
the clear provision in that law which stated

SECTION 4. Privileges for the Senior Citizens. The senior citizens shall be entitled to the
following:

a) The grant of twenty percent (20%) discount from all establishments relative to
utilization of transportation services, hotels and similar lodging establishment,
restaurants and recreation centers and purchase of medicines anywhere in the country:
Provided, That private establishments may claim the cost as tax credit; (Emphasis
supplied)

Thus, the Court ruled that the subject revenue regulation violated the law, viz:

The 20 percent discount required by the law to be given to senior citizens is a tax credit, not
merely a tax deduction from the gross income or gross sale of the establishment concerned. A
tax credit is used by a private establishment only after the tax has been computed; a tax
deduction, before the tax is computed. RA 7432 unconditionally grants a tax credit to all covered
entities. Thus, the provisions of the revenue regulation that withdraw or modify such grant are
void. Basic is the rule that administrative regulations cannot amend or revoke the law. 93
As can be readily seen, the discussion on eminent domain was not necessary in order to arrive
at this conclusion. All that was needed was to point out that the revenue regulation contravened
the law which it sought to implement. And, precisely, this was done in Central Luzon Drug
Corporation94 by comparing the wording of the previous law vis--vis the revenue regulation;
employing the rules of statutory construction; and applying the settled principle that a regulation
cannot amend the law it seeks to implement. A close reading of Central Luzon Drug
Corporation95would show that the Court went on to state that the tax credit "can be deemed" as
just compensation only to explain why the previous law provides for a tax credit instead of a tax
deduction. The Court surmised that the tax credit was a form of just compensation given to the
establishments covered by the 20% discount. However, the reason why the previous law
provided for a tax credit and not a tax deduction was not necessary to resolve the issue as to
whether the revenue regulation contravenes the law. Hence, the discussion on eminent domain
is obiter dicta.

A court, in resolving cases before it, may look into the possible purposes or reasons that
impelled the enactment of a particular statute or legal provision. However, statements made
relative thereto are not always necessary in resolving the actual controversies presented before
it. This was the case in Central Luzon Drug Corporation96resulting in that unfortunate statement
that the tax credit "can be deemed" as just compensation. This, in turn, led to the erroneous
conclusion, by deductive reasoning, that the 20% discount is an exercise of the power of
eminent domain. The Dissent essentially adopts this theory and reasoning which, as will be
shown below, is contrary to settled principles in police power and eminent domain analysis. II
The Dissent discusses at length the doctrine on "taking" in police power which occurs when
private property is destroyed or placed outside the commerce of man. Indeed, there is a whole
class of police power measures which justify the destruction of private property in order to
preserve public health, morals, safety or welfare. As earlier mentioned, these would include a
building on the verge of collapse or confiscated obscene materials as well as those mentioned
by the Dissent with regard to property used in violating a criminal statute or one which
constitutes a nuisance. In such cases, no compensation is required. However, it is equally true
that there is another class of police power measures which do not involve the destruction of
private property but merely regulate its use. The minimum wage law, zoning ordinances, price
control laws, laws regulating the operation of motels and hotels, laws limiting the working hours
to eight, and the like would fall under this category. The examples cited by the Dissent, likewise,
fall under this category: Article 157 of the Labor Code, Sections 19 and 18 of the Social Security
Law, and Section 7 of the Pag-IBIG Fund Law. These laws merely regulate or, to use the term
of the Dissent, burden the conduct of the affairs of business establishments. In such cases,
payment of just compensation is not required because they fall within the sphere of permissible
police power measures. The senior citizen discount law falls under this latter category. III The
Dissent proceeds from the theory that the permanent reduction of profits or income/gross sales,
due to the 20% discount, is a "taking" of private property for public purpose without payment of
just compensation. At the outset, it must be emphasized that petitioners never presented any
evidence to establish that they were forced to suffer enormous losses or operate at a loss due
to the effects of the assailed law. They came directly to this Court and provided a hypothetical
computation of the loss they would allegedly suffer due to the operation of the assailed law. The
central premise of the Dissents argument that the 20% discount results in a permanent
reduction in profits or income/gross sales, or forces a business establishment to operate at a
loss is, thus, wholly unsupported by competent evidence. To be sure, the Court can invalidate a
law which, on its face, is arbitrary, oppressive or confiscatory.97

But this is not the case here.


In the case at bar, evidence is indispensable before a determination of a constitutional violation
can be made because of the following reasons. First, the assailed law, by imposing the senior
citizen discount, does not take any of the properties used by a business establishment like, say,
the land on which a manufacturing plant is constructed or the equipment being used to produce
goods or services. Second, rather than taking specific properties of a business establishment,
the senior citizen discount law merely regulates the prices of the goods or services being sold to
senior citizens by mandating a 20% discount. Thus, if a product is sold at 10.00 to the general
public, then it shall be sold at 8.00 ( i.e., 10.00 less 20%) to senior citizens. Note that the law
does not impose at what specific price the product shall be sold, only that a 20% discount shall
be given to senior citizens based on the price set by the business establishment. A business
establishment is, thus, free to adjust the prices of the goods or services it provides to the
general public. Accordingly, it can increase the price of the above product to 20.00 but is
required to sell it at 16.00 (i.e. , 20.00 less 20%) to senior citizens. Third, because the law
impacts the prices of the goods or services of a particular establishment relative to its sales to
senior citizens, its profits or income/gross sales are affected. The extent of the impact would,
however, depend on the profit margin of the business establishment on a particular good or
service. If a product costs 5.00 to produce and is sold at 10.00, then the profit98 is 5.0099 or
a profit margin100 of 50%.101

Under the assailed law, the aforesaid product would have to be sold at 8.00 to senior citizens
yet the business would still earn 3.00102 or a 30%103 profit margin. On the other hand, if the
product costs 9.00 to produce and is required to be sold at 8.00 to senior citizens, then the
business would experience a loss of 1.00.104

But note that since not all customers of a business establishment are senior citizens, the
business establishment may continue to earn 1.00 from non-senior citizens which, in turn, can
offset any loss arising from sales to senior citizens.

Fourth, when the law imposes the 20% discount in favor of senior citizens, it does not prevent
the business establishment from revising its pricing strategy.

By revising its pricing strategy, a business establishment can recoup any reduction of profits or
income/gross sales which would otherwise arise from the giving of the 20% discount. To
illustrate, suppose A has two customers: X, a senior citizen, and Y, a non-senior citizen. Prior to
the law, A sells his products at 10.00 a piece to X and Y resulting in income/gross sales of
20.00 (10.00 + 10.00). With the passage of the law, A must now sell his product to X at
8.00 (i.e., 10.00 less 20%) so that his income/gross sales would be 18.00 (8.00 + 10.00)
or lower by 2.00. To prevent this from happening, A decides to increase the price of his
products to 11.11 per piece. Thus, he sells his product to X at 8.89 (i.e. , 11.11 less 20%)
and to Y at 11.11. As a result, his income/gross sales would still be 20.00105 (8.89 +
11.11). The capacity, then, of business establishments to revise their pricing strategy makes it
possible for them not to suffer any reduction in profits or income/gross sales, or, in the
alternative, mitigate the reduction of their profits or income/gross sales even after the passage
of the law. In other words, business establishments have the capacity to adjust their prices so
that they may remain profitable even under the operation of the assailed law.

The Dissent, however, states that The explanation by the majority that private establishments
can always increase their prices to recover the mandatory discount will only encourage private
establishments to adjust their prices upwards to the prejudice of customers who do not enjoy
the 20% discount. It was likewise suggested that if a company increases its prices, despite the
application of the 20% discount, the establishment becomes more profitable than it was before
the implementation of R.A. 7432. Such an economic justification is self-defeating, for more
consumers will suffer from the price increase than will benefit from the 20% discount. Even then,
such ability to increase prices cannot legally validate a violation of the eminent domain
clause.106

But, if it is possible that the business establishment, by adjusting its prices, will suffer no
reduction in its profits or income/gross sales (or suffer some reduction but continue to operate
profitably) despite giving the discount, what would be the basis to strike down the law? If it is
possible that the business establishment, by adjusting its prices, will not be unduly burdened,
how can there be a finding that the assailed law is an unconstitutional exercise of police power
or eminent domain? That there may be a burden placed on business establishments or the
consuming public as a result of the operation of the assailed law is not, by itself, a ground to
declare it unconstitutional for this goes into the wisdom and expediency of the law.

The cost of most, if not all, regulatory measures of the government on business establishments
is ultimately passed on to the consumers but that, by itself, does not justify the wholesale
nullification of these measures. It is a basic postulate of our democratic system of government
that the Constitution is a social contract whereby the people have surrendered their sovereign
powers to the State for the common good.107

All persons may be burdened by regulatory measures intended for the common good or to
serve some important governmental interest, such as protecting or improving the welfare of a
special class of people for which the Constitution affords preferential concern. Indubitably, the
one assailing the law has the heavy burden of proving that the regulation is unreasonable,
oppressive or confiscatory, or has gone "too far" as to amount to a "taking." Yet, here, the
Dissent would have this Court nullify the law without any proof of such nature.

Further, this Court is not the proper forum to debate the economic theories or realities that
impelled Congress to shift from the tax credit to the tax deduction scheme. It is not within our
power or competence to judge which scheme is more or less burdensome to business
establishments or the consuming public and, thereafter, to choose which scheme the State
should use or pursue. The shift from the tax credit to tax deduction scheme is a policy
determination by Congress and the Court will respect it for as long as there is no showing, as
here, that the subject regulation has transgressed constitutional limitations. Unavoidably, the
lack of evidence constrains the Dissent to rely on speculative and hypothetical argumentation
when it states that the 20% discount is a significant amount and not a minimal loss (which
erroneously assumes that the discount automatically results in a loss when it is possible that the
profit margin is greater than 20% and/or the pricing strategy can be revised to prevent or
mitigate any reduction in profits or income/gross sales as illustrated above), 108 and not all
private establishments make a 20% profit margin (which conversely implies that there are those
who make more and, thus, would not be greatly affected by this regulation).109

In fine, because of the possible scenarios discussed above, we cannot assume that the 20%
discount results in a permanent reduction in profits or income/gross sales, much less that
business establishments are forced to operate at a loss under the assailed law. And, even if we
gratuitously assume that the 20% discount results in some degree of reduction in profits or
income/gross sales, we cannot assume that such reduction is arbitrary, oppressive or
confiscatory. To repeat, there is no actual proof to back up this claim, and it could be that the
loss suffered by a business establishment was occasioned through its fault or negligence in not
adapting to the effects of the assailed law. The law uniformly applies to all business
establishments covered thereunder. There is, therefore, no unjust discrimination as the
aforesaid business establishments are faced with the same constraints. The necessity of proof
is all the more pertinent in this case because, as similarly observed by Justice Velasco in his
Concurring Opinion, the law has been in operation for over nine years now. However, the grim
picture painted by petitioners on the unconscionable losses to be indiscriminately suffered by
business establishments, which should have led to the closure of numerous business
establishments, has not come to pass. Verily, we cannot invalidate the assailed law based on
assumptions and conjectures. Without adequate proof, the presumption of constitutionality must
prevail. IV At this juncture, we note that the Dissent modified its original arguments by including
a new paragraph, to wit:

Section 9, Article III of the 1987 Constitution speaks of private property without any distinction. It
does not state that there should be profit before the taking of property is subject to just
compensation. The private property referred to for purposes of taking could be inherited,
donated, purchased, mortgaged, or as in this case, part of the gross sales of private
establishments. They are all private property and any taking should be attended by
corresponding payment of just compensation. The 20% discount granted to senior citizens
belong to private establishments, whether these establishments make a profit or suffer a loss. In
fact, the 20% discount applies to non-profit establishments like country, social, or golf clubs
which are open to the public and not only for exclusive membership. The issue of profit or loss
to the establishments is immaterial.110

Two things may be said of this argument. First, it contradicts the rest of the arguments of the
Dissent. After it states that the issue of profit or loss is immaterial, the Dissent proceeds to
argue that the 20% discount is not a minimal loss111 and that the 20% discount forces business
establishments to operate at a loss.112

Even the obiter in Central Luzon Drug Corporation,113 which the Dissent essentially adopts and
relies on, is premised on the permanent reduction of total revenues and the loss that business
establishments will be forced to suffer in arguing that the 20% discount constitutes a "taking"
under the power of eminent domain. Thus, when the Dissent now argues that the issue of profit
or loss is immaterial, it contradicts itself because it later argues, in order to justify that there is a
"taking" under the power of eminent domain in this case, that the 20% discount forces business
establishments to suffer a significant loss or to operate at a loss. Second, this argument suffers
from the same flaw as the Dissent's original arguments. It is an erroneous characterization of
the 20% discount. According to the Dissent, the 20% discount is part of the gross sales and,
hence, private property belonging to business establishments. However, as previously
discussed, the 20% discount is not private property actually owned and/or used by the business
establishment. It should be distinguished from properties like lands or buildings actually used in
the operation of a business establishment which, if appropriated for public use, would amount to
a "taking" under the power of eminent domain. Instead, the 20% discount is a regulatory
measure which impacts the pricing and, hence, the profitability of business establishments. At
the time the discount is imposed, no particular property of the business establishment can be
said to be "taken." That is, the State does not acquire or take anything from the business
establishment in the way that it takes a piece of private land to build a public road. While the
20% discount may form part of the potential profits or income/gross sales114 of the business
establishment, as similarly characterized by Justice Bersamin in his Concurring Opinion,
potential profits or income/gross sales are not private property, specifically cash or money,
already belonging to the business establishment. They are a mere expectancy because they are
potential fruits of the successful conduct of the business. Prior to the sale of goods or services,
a business establishment may be subject to State regulations, such as the 20% senior citizen
discount, which may impact the level or amount of profits or income/gross sales that can be
generated by such establishment. For this reason, the validity of the discount is to be
determined based on its overall effects on the operations of the business establishment.

Again, as previously discussed, the 20% discount does not automatically result in a 20%
reduction in profits, or, to align it with the term used by the Dissent, the 20% discount does not
mean that a 20% reduction in gross sales necessarily results. Because (1) the profit margin of a
product is not necessarily less than 20%, (2) not all customers of a business establishment are
senior citizens, and (3) the establishment may revise its pricing strategy, such reduction in
profits or income/gross sales may be prevented or, in the alternative, mitigated so that the
business establishment continues to operate profitably. Thus, even if we gratuitously assume
that some degree of reduction in profits or income/gross sales occurs because of the 20%
discount, it does not follow that the regulation is unreasonable, oppressive or confiscatory
because the business establishment may make the necessary adjustments to continue to
operate profitably. No evidence was presented by petitioners to show otherwise. In fact, no
evidence was presented by petitioners at all. Justice Leonen, in his Concurring and Dissenting
Opinion, characterizes "profits" (or income/gross sales) as an inchoate right. Another way to
view it, as stated by Justice Velasco in his Concurring Opinion, is that the business
establishment merely has a right to profits. The Constitution adverts to it as the right of an
enterprise to a reasonable return on investment.115

Undeniably, this right, like any other right, may be regulated under the police power of the State
to achieve important governmental objectives like protecting the interests and improving the
welfare of senior citizens. It should be noted though that potential profits or income/gross sales
are relevant in police power and eminent domain analyses because they may, in appropriate
cases, serve as an indicia when a regulation has gone "too far" as to amount to a "taking" under
the power of eminent domain. When the deprivation or reduction of profits or income/gross
sales is shown to be unreasonable, oppressive or confiscatory, then the challenged
governmental regulation may be nullified for being a "taking" under the power of eminent
domain. In such a case, it is not profits or income/gross sales which are actually taken and
appropriated for public use. Rather, when the regulation causes an establishment to incur
losses in an unreasonable, oppressive or confiscatory manner, what is actually taken is capital
and the right of the business establishment to a reasonable return on investment. If the
business losses are not halted because of the continued operation of the regulation, this
eventually leads to the destruction of the business and the total loss of the capital invested
therein. But, again, petitioners in this case failed to prove that the subject regulation is
unreasonable, oppressive or confiscatory.

V.

The Dissent further argues that we erroneously used price and rate of return on investment
control laws to justify the senior citizen discount law. According to the Dissent, only profits from
industries imbued with public interest may be regulated because this is a condition of their
franchises. Profits of establishments without franchises cannot be regulated permanently
because there is no law regulating their profits. The Dissent concludes that the permanent
reduction of total revenues or gross sales of business establishments without franchises is a
taking of private property under the power of eminent domain. In making this argument, it is
unfortunate that the Dissent quotes only a portion of the ponencia The subject regulation may
be said to be similar to, but with substantial distinctions from, price control or rate of return on
investment control laws which are traditionally regarded as police power measures. These laws
generally regulate public utilities or industries/enterprises imbued with public interest in order to
protect consumers from exorbitant or unreasonable pricing as well as temper corporate greed
by controlling the rate of return on investment of these corporations considering that they have a
monopoly over the goods or services that they provide to the general public. The subject
regulation differs therefrom in that (1) the discount does not prevent the establishments from
adjusting the level of prices of their goods and services, and (2) the discount does not apply to
all customers of a given establishment but only to the class of senior citizens. x x x116

The above paragraph, in full, states

The subject regulation may be said to be similar to, but with substantial distinctions from, price
control or rate of return on investment control laws which are traditionally regarded as police
power measures. These laws generally regulate public utilities or industries/enterprises imbued
with public interest in order to protect consumers from exorbitant or unreasonable pricing as well
as temper corporate greed by controlling the rate of return on investment of these corporations
considering that they have a monopoly over the goods or services that they provide to the
general public. The subject regulation differs therefrom in that (1) the discount does not prevent
the establishments from adjusting the level of prices of their goods and services, and (2) the
discount does not apply to all customers of a given establishment but only to the class of senior
citizens.

Nonetheless, to the degree material to the resolution of this case, the 20% discount may be
properly viewed as belonging to the category of price regulatory measures which affects the
profitability of establishments subjected thereto. (Emphasis supplied)

The point of this paragraph is to simply show that the State has, in the past, regulated prices
and profits of business establishments. In other words, this type of regulatory measures is
traditionally recognized as police power measures so that the senior citizen discount may be
considered as a police power measure as well. What is more, the substantial distinctions
between price and rate of return on investment control laws vis--vis the senior citizen discount
law provide greater reason to uphold the validity of the senior citizen discount law. As previously
discussed, the ability to adjust prices allows the establishment subject to the senior citizen
discount to prevent or mitigate any reduction of profits or income/gross sales arising from the
giving of the discount. In contrast, establishments subject to price and rate of return on
investment control laws cannot adjust prices accordingly. Certainly, there is no intention to say
that price and rate of return on investment control laws are the justification for the senior citizen
discount law. Not at all. The justification for the senior citizen discount law is the plenary powers
of Congress. The legislative power to regulate business establishments is broad and covers a
wide array of areas and subjects. It is well within Congress legislative powers to regulate the
profits or income/gross sales of industries and enterprises, even those without franchises. For
what are franchises but mere legislative enactments? There is nothing in the Constitution that
prohibits Congress from regulating the profits or income/gross sales of industries and
enterprises without franchises. On the contrary, the social justice provisions of the Constitution
enjoin the State to regulate the "acquisition, ownership, use, and disposition" of property and its
increments.117
This may cover the regulation of profits or income/gross sales of all businesses, without
qualification, to attain the objective of diffusing wealth in order to protect and enhance the right
of all the people to human dignity.118

Thus, under the social justice policy of the Constitution, business establishments may be
compelled to contribute to uplifting the plight of vulnerable or marginalized groups in our society
provided that the regulation is not arbitrary, oppressive or confiscatory, or is not in breach of
some specific constitutional limitation. When the Dissent, therefore, states that the "profits of
private establishments which are non-franchisees cannot be regulated permanently, and there
is no such law regulating their profits permanently,"119 it is assuming what it ought to prove.
First, there are laws which, in effect, permanently regulate profits or income/gross sales of
establishments without franchises, and RA 9257 is one such law. And, second, Congress can
regulate such profits or income/gross sales because, as previously noted, there is nothing in the
Constitution to prevent it from doing so. Here, again, it must be emphasized that petitioners
failed to present any proof to show that the effects of the assailed law on their operations has
been unreasonable, oppressive or confiscatory. The permanent regulation of profits or
income/gross sales of business establishments, even those without franchises, is not as
uncommon as the Dissent depicts it to be. For instance, the minimum wage law allows the State
to set the minimum wage of employees in a given region or geographical area. Because of the
added labor costs arising from the minimum wage, a permanent reduction of profits or
income/gross sales would result, assuming that the employer does not increase the prices of his
goods or services. To illustrate, suppose it costs a company 5.00 to produce a product and it
sells the same at 10.00 with a 50% profit margin. Later, the State increases the minimum
wage. As a result, the company incurs greater labor costs so that it now costs 7.00 to produce
the same product. The profit per product of the company would be reduced to 3.00 with a profit
margin of 30%. The net effect would be the same as in the earlier example of granting a 20%
senior citizen discount. As can be seen, the minimum wage law could, likewise, lead to a
permanent reduction of profits. Does this mean that the minimum wage law should, likewise, be
declared unconstitutional on the mere plea that it results in a permanent reduction of profits?
Taking it a step further, suppose the company decides to increase the price of its product in
order to offset the effects of the increase in labor cost; does this mean that the minimum wage
law, following the reasoning of the Dissent, is unconstitutional because the consuming public is
effectively made to subsidize the wage of a group of laborers, i.e., minimum wage earners? The
same reasoning can be adopted relative to the examples cited by the Dissent which, according
to it, are valid police power regulations. Article 157 of the Labor Code, Sections 19 and 18 of the
Social Security Law, and Section 7 of the Pag-IBIG Fund Law would effectively increase the
labor cost of a business establishment.1wphi1 This would, in turn, be integrated as part of the
cost of its goods or services. Again, if the establishment does not increase its prices, the net
effect would be a permanent reduction in its profits or income/gross sales. Following the
reasoning of the Dissent that "any form of permanent taking of private property (including profits
or income/gross sales)120 is an exercise of eminent domain that requires the State to pay just
compensation,"121 then these statutory provisions would, likewise, have to be declared
unconstitutional. It does not matter that these benefits are deemed part of the employees
legislated wages because the net effect is the same, that is, it leads to higher labor costs and a
permanent reduction in the profits or income/gross sales of the business establishments.122

The point then is this most, if not all, regulatory measures imposed by the State on business
establishments impact, at some level, the latters prices and/or profits or income/gross sales.123
If the Court were to sustain the Dissents theory, then a wholesale nullification of such measures
would inevitably result. The police power of the State and the social justice provisions of the
Constitution would, thus, be rendered nugatory. There is nothing sacrosanct about profits or
income/gross sales. This, we made clear in Carlos Superdrug Corporation:124

Police power as an attribute to promote the common good would be diluted considerably if on
the mere plea of petitioners that they will suffer loss of earnings and capital, the questioned
provision is invalidated. Moreover, in the absence of evidence demonstrating the alleged
confiscatory effect of the provision in question, there is no basis for its nullification in view of the
presumption of validity which every law has in its favor.

xxxx

The Court is not oblivious of the retail side of the pharmaceutical industry and the competitive
pricing component of the business. While the Constitution protects property rights petitioners
must the realities of business and the State, in the exercise of police power, can intervene in the
operations of a business which may result in an impairment of property rights in the process.

Moreover, the right to property has a social dimension. While Article XIII of the Constitution
provides the percept for the protection of property, various laws and jurisprudence, particularly
on agrarian reform and the regulation of contracts and public utilities, continously serve as a
reminder for the promotion of public good.

Undeniably, the success of the senior citizens program rests largely on the support imparted by
petitioners and the other private establishments concerned. This being the case, the means
employed in invoking the active participation of the private sector, in order to achieve the
purpose or objective of the law, is reasonably and directly related. Without sufficient proof that
Section 4(a) of R.A. No. 9257 is arbitrary, and that the continued implementation of the same
would be unconscionably detrimental to petitioners, the Court will refrain form quashing a
legislative act.125

In conclusion, we maintain that the correct rule in determining whether the subject regulatory
measure has amounted to a "taking" under the power of eminent domain is the one laid down
in Alalayan v. National Power Corporation126 and followed in Carlos Superdurg
Corporation127 consistent with long standing principles in police power and eminent domain
analysis. Thus, the deprivation or reduction of profits or income. Gross sales must be clearly
shown to be unreasonable, oppressive or confiscatory. Under the specific circumstances of this
case, such determination can only be made upon the presentation of competent proof which
petitioners failed to do. A law, which has been in operation for many years and promotes the
welfare of a group accorded special concern by the Constitution, cannot and should not be
summarily invalidated on a mere allegation that it reduces the profits or income/gross sales of
business establishments.

WHEREFORE, the Petition is hereby DISMISSED for lack of merit.

SO ORDERED.
G.R. No. 191424 August 7, 2013

ALFEO D. VIVAS, ON HIS BEHALF AND ON BEHALF OF THE SHAREHOLDERS OF


EUROCREDIT COMMUNITY BANK, PETITIONER,
vs.
THE MONETARY BOARD OF THE BANGKO SENTRAL NG PILIPINAS AND THE
PHILIPPINE DEPOSIT INSURANCE CORPORATION, RESPONDENTS.

TOPIC: POLICE POWER

DECISION

MENDOZA, J.:

This is a petition for prohibition with prayer for the issuance of a status quo ante order or writ of
preliminary injunction ordering the respondents to desist from closing EuroCredit Community
Bank, Incorporated (ECBI) and from pursuing the receivership thereof. The petition likewise
prays that the management and operation of ECBI be restored to its Board of Directors (BOD)
and its officers.

The Facts

The Rural Bank of Faire, Incorporated (RBFI) was a duly registered rural banking institution with
principal office in Centro Sur, Sto. Nio, Cagayan. Record shows that the corporate life of RBFI
expired on May 31, 2005.1Notwithstanding, petitioner Alfeo D. Vivas (Vivas) and his principals
acquired the controlling interest in RBFI sometime in January 2006. At the initiative of Vivas and
the new management team, an internal audit was conducted on RBFI and results thereof
highlighted the dismal operation of the rural bank. In view of those findings, certain measures
calculated to revitalize the bank were allegedly introduced.2 On December 8, 2006, the Bangko
Sentral ng Pilipinas (BSP) issued the Certificate of Authority extending the corporate life of RBFI
for another fifty (50) years. The BSP also approved the change of its corporate name to
EuroCredit Community Bank, Incorporated, as well as the increase in the number of the
members of its BOD, from five (5) to eleven (11).3

Pursuant to Section 28 of Republic Act (R.A.) No. 7653, otherwise known as The New Central
Bank Act, the Integrated Supervision Department II (ISD II) of the BSP conducted a general
examination on ECBI with the cut-off date of December 31, 2007. Shortly after the completion of
the general examination, an exit conference was held on March 27, 2008 at the BSP during
which the BSP officials and examiners apprised Vivas, the Chairman and President of ECBI, as
well as the other bank officers and members of its BOD, of the advance findings noted during
the said examination. The ECBI submitted its comments on BSPs consolidated findings and
risk asset classification through a letter, dated April 8, 2008.4

Sometime in April 2008, the examiners from the Department of Loans and Credit of the BSP
arrived at the ECBI and cancelled the rediscounting line of the bank. Vivas appealed the
cancellation to BSP.5 Thereafter, the Monetary Board (MB) issued Resolution No. 1255, dated
September 25, 2008, placing ECBI under Prompt Corrective Action (PCA) framework because
of the following serious findings and supervisory concerns noted during the general
examination: 1] negative capital of ?14.674 million and capital adequacy ratio of negative
18.42%; 2] CAMEL (Capital Asset Management Earnings Liquidity) composite rating of "2" with
a Management component rating of "1"; and 3] serious supervisory concerns particularly on
activities deemed unsafe or unsound.6 Vivas claimed that the BSP took the above courses of
action due to the joint influence exerted by a certain hostile shareholder and a former BSP
examiner.7

Through its letter, dated September 30, 2008, the BSP furnished ECBI with a copy of the Report
of Examination (ROE) as of December 31, 2007. In addition, the BSP directed the banks BOD
and senior management to: 1] infuse fresh capital of ?22.643 million; 2] book the amount of
?28.563 million representing unbooked valuation reserves on classified loans and other risks
assets on or before October 31, 2008; and 3] take appropriate action necessary to address the
violations/exceptions noted in the examination.8

Vivas moved for a reconsideration of Resolution No. 1255 on the grounds of non-observance of
due process and arbitrariness. The ISD II, on several instances, had invited the BOD of ECBI to
discuss matters pertaining to the placement of the bank under PCA framework and other
supervisory concerns before making the appropriate recommendations to the MB. The
proposed meeting, however, did not materialize due to postponements sought by Vivas.9

In its letter, dated February 20, 2009, the BSP directed ECBI to explain why it transferred the
majority shares of RBFI without securing the prior approval of the MB in apparent violation of
Subsection X126.2 of the Manual of Regulation for Banks (MORB).10 Still in another
letter,11 dated March 31, 2009, the ISD II required ECBI to explain why it did not obtain the prior
approval of the BSP anent the establishment and operation of the banks sub-offices.

Also, the scheduled March 31, 2009 general examination of the books, records and general
condition of ECBI with the cut-off date of December 31, 2008, did not push through. According
to Vivas, ECBI asked for the deferment of the examination pending resolution of its appeal
before the MB. Vivas believed that he was being treated unfairly because the letter of authority
to examine allegedly contained a clause which pertained to the Anti-Money Laundering Law and
the Bank Secrecy Act.12

The MB, on the other hand, posited that ECBI unjustly refused to allow the BSP examiners from
examining and inspecting its books and records, in violation of Sections 25 and 34 of R.A. No.
7653. In its letter,13 dated May 8, 2009, the BSP informed ECBI that it was already due for
another annual examination and that the pendency of its appeal before the MB would not
prevent the BSP from conducting another one as mandated by Section 28 of R.A. No. 7653.

In view of ECBIs refusal to comply with the required examination, the MB issued Resolution No.
726,14 dated May 14, 2009, imposing monetary penalty/fine on ECBI, and referred the matter to
the Office of the Special Investigation (OSI) for the filing of appropriate legal action. The BSP
also wrote a letter,15 dated May 26, 2009, advising ECBI to comply with MB Resolution No. 771,
which essentially required the bank to follow its directives. On May 28, 2009, the ISD II
reiterated its demand upon the ECBI BOD to allow the BSP examiners to conduct a general
examination on June 3, 2009.16

In its June 2, 2009 Letter-Reply,17 ECBI asked for another deferment of the examination due to
the pendency of certain unresolved issues subject of its appeal before the MB, and because
Vivas was then out of the country. The ISD II denied ECBIs request and ordered the general
examination to proceed as previously scheduled.18
Thereafter, the MB issued Resolution No. 823,19 dated June 4, 2009, approving the issuance of
a cease and desist order against ECBI, which enjoined it from pursuing certain acts and
transactions that were considered unsafe or unsound banking practices, and from doing such
other acts or transactions constituting fraud or might result in the dissipation of its assets.

On June 10, 2009, the OSI filed with the Department of Justice (DOJ) a complaint for Estafa
Through Falsification of Commercial Documents against certain officials and employees of
ECBI. Meanwhile, the MB issued Resolution No. 1164,20 dated August 13, 2009, denying the
appeal of ECBI from Resolution No. 1255 which placed it under PCA framework. On November
18, 2009, the general examination of the books and records of ECBI with the cut-off date of
September 30, 2009, was commenced and ended in December 2009. Later, the BSP officials
and examiners met with the representatives of ECBI, including Vivas, and discussed their
findings.21 On December 7, 2009, the ISD II reminded ECBI of the non-submission of its
financial audit reports for the years 2007 and 2008 with a warning that failure to submit those
reports and the written explanation for such omission shall result in the imposition of a monetary
penalty.22 In a letter, dated February 1, 2010, the ISD II informed ECBI of MB Resolution No.
1548 which denied its request for reconsideration of Resolution No. 726.

On March 4, 2010, the MB issued Resolution No. 27623 placing ECBI under receivership in
accordance with the recommendation of the ISD II which reads:

On the basis of the examination findings as of 30 September 2009 as reported by the Integrated
Supervision Department (ISD) II, in its memorandum dated 17 February 2010, which findings
showed that the Eurocredit Community Bank, Inc. a Rural Bank (Eurocredit Bank) (a) is
unable to pay its liabilities as they become due in the ordinary course of business; (b) has
insufficient realizable assets to meet liabilities; (c) cannot continue in business without involving
probable losses to its depositors and creditors; and (d) has willfully violated a cease and desist
order of the Monetary Board for acts or transactions which are considered unsafe and unsound
banking practices and other acts or transactions constituting fraud or dissipation of the assets of
the institution, and considering the failure of the Board of Directors/management of Eurocredit
Bank to restore the banks financial health and viability despite considerable time given to
address the banks financial problems, and that the bank had been accorded due process, the
Board, in accordance with Section 30 of Republic Act No. 7653 (The New Central Bank Act),
approved the recommendation of ISD II as follows:

To prohibit the Eurocredit Bank from doing business in the Philippines and to place its assets
and affairs under receivership; and

To designate the Philippine Deposit Insurance Corporation as Receiver of the bank.

Assailing MB Resolution No. 276, Vivas filed this petition for prohibition before this Court,
ascribing grave abuse of discretion to the MB for prohibiting ECBI from continuing its banking
business and for placing it under receivership. The petitioner presents the following

ARGUMENTS:

(a)
It is grave abuse of discretion amounting to loss of jurisdiction to apply the general law
embodied in Section 30 of the New Central Bank Act as opposed to the specific law embodied
in Sections 11 and 14 of the Rural Banks Act of 1992.

(b)

Even if it assumed that Section 30 of the New Central Bank Act is applicable, it is still the
gravest abuse of discretion amounting to lack or excess of jurisdiction to execute the law with
manifest arbitrariness, abuse of discretion, and bad faith, violation of constitutional rights and to
further execute a mandate well in excess of its parameters.

(c)

The power delegated in favor of the Bangko Sentral ng Pilipinas to place rural banks under
receiverships is unconstitutional for being a diminution or invasion of the powers of the Supreme
Court, in violation of Section 2, Article VIII of the Philippine Constitution.24

Vivas submits that the respondents committed grave abuse of discretion when they erroneously
applied Section 30 of R.A. No. 7653, instead of Sections 11 and 14 of the Rural Bank Act of
1992 or R.A. No. 7353. He argues that despite the deficiencies, inadequacies and oversights in
the conduct of the affairs of ECBI, it has not committed any financial fraud and, hence, its
placement under receivership was unwarranted and improper. He posits that, instead, the BSP
should have taken over the management of ECBI and extended loans to the financially
distrained bank pursuant to Sections 11 and 14 of R.A. No. 7353 because the BSPs power is
limited only to supervision and management take-over of banks.

He contends that the implementation of the questioned resolution was tainted with arbitrariness
and bad faith, stressing that ECBI was placed under receivership without due and prior hearing
in violation of his and the banks right to due process. He adds that respondent PDIC actually
closed ECBI even in the absence of any directive to this effect. Lastly, Vivas assails the
constitutionality of Section 30 of R.A. No. 7653 claiming that said provision vested upon the
BSP the unbridled power to close and place under receivership a hapless rural bank instead of
aiding its financial needs. He is of the view that such power goes way beyond its constitutional
limitation and has transformed the BSP to a sovereign in its own "kingdom of banks." 25

The Courts Ruling

The petition must fail.

Vivas Availed of the Wrong Remedy

To begin with, Vivas availed of the wrong remedy. The MB issued Resolution No. 276, dated
March 4, 2010, in the exercise of its power under R.A. No. 7653. Under Section 30 thereof, any
act of the MB placing a bank under conservatorship, receivership or liquidation may not be
restrained or set aside except on a petition for certiorari. Pertinent portions of R.A. 7653 read:

Section 30.

x x x x.
The actions of the Monetary Board taken under this section or under Section 29 of this Act shall
be final and executory, and may not be restrained or set aside by the court except on petition for
certiorari on the ground that the action taken was in excess of jurisdiction or with such grave
abuse of discretion as to amount to lack or excess of jurisdiction. The petition for certiorari may
only be filed by the stockholders of record representing the majority of the capital stock within
ten (10) days from receipt by the board of directors of the institution of the order directing
receivership, liquidation or conservatorship.

x x x x. [Emphases supplied]

Prohibition is already unavailing

Granting that a petition for prohibition is allowed, it is already an ineffective remedy under the
circumstances obtaining. Prohibition or a "writ of prohibition" is that process by which a superior
court prevents inferior courts, tribunals, officers, or persons from usurping or exercising a
jurisdiction with which they have not been vested by law, and confines them to the exercise of
those powers legally conferred. Its office is to restrain subordinate courts, tribunals or persons
from exercising jurisdiction over matters not within its cognizance or exceeding its jurisdiction in
matters of which it has cognizance.26 In our jurisdiction, the rule on prohibition is enshrined in
Section 2, Rule 65 of the Rules on Civil Procedure, to wit:

Sec. 2. Petition for prohibition - When the proceedings of any tribunal, corporation, board, officer
or person, whether exercising judicial, quasi-judicial or ministerial functions, are without or in
excess of its or his jurisdiction, or with grave abuse of discretion amounting to lack or excess of
jurisdiction, and there is no appeal or any other plain, speedy, and adequate remedy in the
ordinary course of law, a person aggrieved thereby may file a verified petition in the proper
court, alleging the facts with certainty and praying that the judgment be rendered commanding
the respondent to desist from further proceedings in the action or matter specified therein, or
otherwise granting such incidental reliefs as the law and justice require.

x x x x.

Indeed, prohibition is a preventive remedy seeking that a judgment be rendered which would
direct the defendant to desist from continuing with the commission of an act perceived to be
illegal.27 As a rule, the proper function of a writ of prohibition is to prevent the doing of an act
which is about to be done. It is not intended to provide a remedy for acts already
accomplished.28

Though couched in imprecise terms, this petition for prohibition apparently seeks to prevent the
acts of closing of ECBI and placing it under receivership. Resolution No. 276, however, had
already been issued by the MB and the closure of ECBI and its placement under receivership by
the PDIC were already accomplished. Apparently, the remedy of prohibition is no longer
appropriate. Settled is the rule that prohibition does not lie to restrain an act that is already a fait
accompli.29

The Petition Should Have Been Filed in the CA

Even if treated as a petition for certiorari, the petition should have been filed with the CA.
Section 4 of Rule 65 reads:
Section 4. When and where petition filed. The petition shall be filed not later than sixty (60)
days from notice of the judgment, order or resolution. In case a motion for reconsideration or
new trial is timely filed, whether such motion is required or not, the sixty (60) day period shall be
counted from notice of the denial of said motion.

The petition shall be filed in the Supreme Court or, if it relates to the acts or omissions of a lower
court or of a corporation, board, officer or person, in the Regional Trial Court exercising
jurisdiction over the territorial area as defined by the Supreme Court. It may also be filed in the
Court of Appeals whether or not the same is in aid of its appellate jurisdiction, or in the
Sandiganbayan if it is in aid of its appellate jurisdiction. If it involves the acts or omissions of a
quasi-judicial agency, unless otherwise provided by law or these Rules, the petition shall be filed
in and cognizable only by the Court of Appeals. [Emphases supplied]

That the MB is a quasi-judicial agency was already settled and reiterated in the case of Bank of
Commerce v. Planters Development Bank And Bangko Sentral Ng Pilipinas.30

Doctrine of Hierarchy of Courts

Even in the absence of such provision, the petition is also dismissible because it simply ignored
the doctrine of hierarchy of courts. True, the Court, the CA and the RTC have original
concurrent jurisdiction to issue writs of certiorari, prohibition and mandamus. The concurrence
of jurisdiction, however, does not grant the party seeking any of the extraordinary writs the
absolute freedom to file a petition in any court of his choice. The petitioner has not advanced
any special or important reason which would allow a direct resort to this Court. Under the Rules
of Court, a party may directly appeal to this Court only on pure questions of law.31 In the case at
bench, there are certainly factual issues as Vivas is questioning the findings of the investigating
team.

Strict observance of the policy of judicial hierarchy demands that where the issuance of the
extraordinary writs is also within the competence of the CA or the RTC, the special action for the
obtainment of such writ must be presented to either court. As a rule, the Court will not entertain
direct resort to it unless the redress desired cannot be obtained in the appropriate lower courts;
or where exceptional and compelling circumstances, such as cases of national interest and with
serious implications, justify the availment of the extraordinary remedy of writ of certiorari,
prohibition, or mandamus calling for the exercise of its primary jurisdiction.32 The judicial policy
must be observed to prevent an imposition on the precious time and attention of the Court.

The MB Committed No Grave Abuse of Discretion

In any event, no grave abuse of discretion can be attributed to the MB for the issuance of the
assailed Resolution No. 276.

Vivas insists that the circumstances of the case warrant the application of Section 11 of R.A.
No. 7353, which provides:

Sec. 11. The power to supervise the operation of any rural bank by the Monetary Board as
herein indicated shall consist in placing limits to the maximum credit allowed to any individual
borrower; in prescribing the interest rate, in determining the loan period and loan procedures, in
indicating the manner in which technical assistance shall be extended to rural banks, in
imposing a uniform accounting system and manner of keeping the accounts and records of rural
banks; in instituting periodic surveys of loan and lending procedures, audits, test-check of cash
and other transactions of the rural banks; in conducting training courses for personnel of rural
banks; and, in general, in supervising the business operations of the rural banks.

The Central Bank shall have the power to enforce the laws, orders, instructions, rules and
regulations promulgated by the Monetary Board, applicable to rural banks; to require rural
banks, their directors, officers and agents to conduct and manage the affairs of the rural banks
in a lawful and orderly manner; and, upon proof that the rural bank or its Board of Directors, or
officers are conducting and managing the affairs of the bank in a manner contrary to laws,
orders, instructions, rules and regulations promulgated by the Monetary Board or in a manner
substantially prejudicial to the interest of the Government, depositors or creditors, to take over
the management of such bank when specifically authorized to do so by the Monetary Board
after due hearing process until a new board of directors and officers are elected and qualified
without prejudice to the prosecution of the persons responsible for such violations under the
provisions of Sections 32, 33 and 34 of Republic Act No. 265, as amended.

x x x x.

The thrust of Vivas argument is that ECBI did not commit any financial fraud and, hence, its
placement under receivership was unwarranted and improper. He asserts that, instead, the BSP
should have taken over the management of ECBI and extended loans to the financially
distrained bank pursuant to Sections 11 and 14 of R.A. No. 7353 because the BSPs power is
limited only to supervision and management take-over of banks, and not receivership.

Vivas argues that implementation of the questioned resolution was tainted with arbitrariness and
bad faith, stressing that ECBI was placed under receivership without due and prior hearing,
invoking Section 11 of R.A. No. 7353 which states that the BSP may take over the management
of a rural bank after due hearing.33 He adds that because R.A. No. 7353 is a special law, the
same should prevail over R.A. No. 7653 which is a general law.

The Court has taken this into account, but it appears from all over the records that ECBI was
given every opportunity to be heard and improve on its financial standing. The records disclose
that BSP officials and examiners met with the representatives of ECBI, including Vivas, and
discussed their findings.34 There were also reminders that ECBI submit its financial audit reports
for the years 2007 and 2008 with a warning that failure to submit them and a written explanation
of such omission shall result in the imposition of a monetary penalty.35 More importantly, ECBI
was heard on its motion for reconsideration. For failure of ECBI to comply, the MB came out
with Resolution No. 1548 denying its request for reconsideration of Resolution No. 726. Having
been heard on its motion for reconsideration, ECBI cannot claim that it was deprived of its right
under the Rural Bank Act.

Close Now, Hear Later

At any rate, if circumstances warrant it, the MB may forbid a bank from doing business and
place it under receivership without prior notice and hearing. Section 30 of R.A. No. 7653
provides, viz:

Sec. 30. Proceedings in Receivership and Liquidation. Whenever, upon report of the head of
the supervising or examining department, the Monetary Board finds that a bank or quasi-bank:
(a) is unable to pay its liabilities as they become due in the ordinary course of business:
Provided, That this shall not include inability to pay caused by extraordinary demands
induced by financial panic in the banking community;

(b) has insufficient realizable assets, as determined by the Bangko Sentral, to meet its
liabilities; or

(c) cannot continue in business without involving probable losses to its depositors or
creditors; or

(d) has wilfully violated a cease and desist order under Section 37 that has become final,
involving acts or transactions which amount to fraud or a dissipation of the assets of the
institution; in which cases, the Monetary Board may summarily and without need for prior
hearing forbid the institution from doing business in the Philippines and designate the
Philippine Deposit Insurance Corporation as receiver of the banking institution.
[Emphases supplied.]

x x x x.

Accordingly, there is no conflict which would call for the application of the doctrine that a special
law should prevail over a general law. It must be emphasized that R.A .No. 7653 is a later law
and under said act, the power of the MB over banks, including rural banks, was increased and
expanded. The Court, in several cases, upheld the power of the MB to take over banks without
need for prior hearing. It is not necessary inasmuch as the law entrusts to the MB the
appreciation and determination of whether any or all of the statutory grounds for the closure and
receivership of the erring bank are present. The MB, under R.A. No. 7653, has been invested
with more power of closure and placement of a bank under receivership for insolvency or
illiquidity, or because the banks continuance in business would probably result in the loss to
depositors or creditors. In the case of Bangko Sentral Ng Pilipinas Monetary Board v. Hon.
Antonio-Valenzuela,36 the Court reiterated the doctrine of "close now, hear later," stating that it
was justified as a measure for the protection of the public interest. Thus:

The "close now, hear later" doctrine has already been justified as a measure for the protection
of the public interest. Swift action is called for on the part of the BSP when it finds that a bank is
in dire straits. Unless adequate and determined efforts are taken by the government against
distressed and mismanaged banks, public faith in the banking system is certain to deteriorate to
the prejudice of the national economy itself, not to mention the losses suffered by the bank
depositors, creditors, and stockholders, who all deserve the protection of the
government.37[Emphasis supplied]

In Rural Bank of Buhi, Inc. v. Court of Appeals,38 the Court also wrote that

x x x due process does not necessarily require a prior hearing; a hearing or an opportunity to be
heard may be subsequent to the closure. One can just imagine the dire consequences of a prior
hearing: bank runs would be the order of the day, resulting in panic and hysteria. In the process,
fortunes may be wiped out and disillusionment will run the gamut of the entire banking
community.39

The doctrine is founded on practical and legal considerations to obviate unwarranted dissipation
of the banks assets and as a valid exercise of police power to protect the depositors, creditors,
stockholders, and the general public.40 Swift, adequate and determined actions must be taken
against financially distressed and mismanaged banks by government agencies lest the public
faith in the banking system deteriorate to the prejudice of the national economy.

Accordingly, the MB can immediately implement its resolution prohibiting a banking institution to
do business in the Philippines and, thereafter, appoint the PDIC as receiver. The procedure for
the involuntary closure of a bank is summary and expeditious in nature. Such action of the MB
shall be final and executory, but may be later subjected to a judicial scrutiny via a petition for
certiorari to be filed by the stockholders of record of the bank representing a majority of the
capital stock. Obviously, this procedure is designed to protect the interest of all concerned, that
is, the depositors, creditors and stockholders, the bank itself and the general public. The
protection afforded public interest warrants the exercise of a summary closure.

In the case at bench, the ISD II submitted its memorandum, dated February 17, 2010,
containing the findings noted during the general examination conducted on ECBI with the cut-off
date of September 30, 2009. The memorandum underscored the inability of ECBI to pay its
liabilities as they would fall due in the usual course of its business, its liabilities being in excess
of the assets held. Also, it was noted that ECBIs continued banking operation would most
probably result in the incurrence of additional losses to the prejudice of its depositors and
creditors. On top of these, it was found that ECBI had willfully violated the cease-and-desist
order of the MB issued in its June 24, 2009 Resolution, and had disregarded the BSP rules and
directives. For said reasons, the MB was forced to issue the assailed Resolution No. 276
placing ECBI under receivership. In addition, the MB stressed that it accorded ECBI ample time
and opportunity to address its monetary problem and to restore and improve its financial health
and viability but it failed to do so.

In light of the circumstances obtaining in this case, the application of the corrective measures
enunciated in Section 30 of R.A. No. 7653 was proper and justified. Management take-over
under Section 11 of R.A. No. 7353 was no longer feasible considering the financial quagmire
that engulfed ECBI showing serious conditions of insolvency and illiquidity. Besides, placing
ECBI under receivership would effectively put a stop to the further draining of its assets.

No Undue Delegation of Legislative Power

Lastly, the petitioner challenges the constitutionality of Section 30 of R.A. No. 7653, as the
legislature granted the MB a broad and unrestrained power to close and place a financially
troubled bank under receivership. He claims that the said provision was an undue delegation of
legislative power. The contention deserves scant consideration.

Preliminarily, Vivas attempt to assail the constitutionality of Section 30 of R.A. No. 7653
constitutes collateral attack on the said provision of law. Nothing is more settled than the rule
that the constitutionality of a statute cannot be collaterally attacked as constitutionality issues
must be pleaded directly and not collaterally.41 A collateral attack on a presumably valid law is
not permissible. Unless a law or rule is annulled in a direct proceeding, the legal presumption of
its validity stands.42

Be that as it may, there is no violation of the non-delegation of legislative power.1wphi1 The


rationale for the constitutional proscription is that "legislative discretion as to the substantive
contents of the law cannot be delegated. What can be delegated is the discretion to determine
how the law may be enforced, not what the law shall be. The ascertainment of the latter subject
is a prerogative of the legislature. This prerogative cannot be abdicated or surrendered by the
legislature to the delegate."43

"There are two accepted tests to determine whether or not there is a valid delegation of
legislative power, viz, the completeness test and the sufficient standard test. Under the first test,
the law must be complete in all its terms and conditions when it leaves the legislature such that
when it reaches the delegate the only thing he will have to do is enforce it. Under the sufficient
standard test, there must be adequate guidelines or stations in the law to map out the
boundaries of the delegate's authority and prevent the delegation from running riot. Both tests
are intended to prevent a total transference of legislative authority to the delegate, who is not
allowed to step into the shoes of the legislature and exercise a power essentially legislative." 44

In this case, under the two tests, there was no undue delegation of legislative authority in the
issuance of R.A. No. 7653. To address the growing concerns in the banking industry, the
legislature has sufficiently empowered the MB to effectively monitor and supervise banks and
financial institutions and, if circumstances warrant, to forbid them to do business, to take over
their management or to place them under receivership. The legislature has clearly spelled out
the reasonable parameters of the power entrusted to the MB and assigned to it only the manner
of enforcing said power. In other words, the MB was given a wide discretion and latitude only as
to how the law should be implemented in order to attain its objective of protecting the interest of
the public, the banking industry and the economy.

WHEREFORE, the petition for prohibition is DENIED.

SO ORDERED.
G.R. No. 182358 February 20, 2013

DEPARTMENT OF HEALTH, THE SECRETARY OF HEALTH, and MA. MARGARITA M.


GALON, Petitioners,
vs.
PHIL PHARMA WEALTH, INC., Respondent.

TOPIC: STATE IMMUNITY FROM SUIT

DECISION

DEL CASTILLO, J.:

The state may not be sued without its consent. Likewise, public officials may not be sued for
acts done in the perfom1ance of their official functions or within the scope of their authority.

This Petition for Review on Certiorari1 assails the October 25, 2007 Decision2 of the Court of
Appeals (CA) in CA-G.R. CV No. 85670, and its March 31, 2008 Reso1ution3 denying
petitioners' Motion for Reconsideration.4

Factual Antecedents

On December 22, 1998, Administrative Order (AO) No. 27 series of 19985 was issued by then
Department of Health (DOH) Secretary Alfredo G. Romualdez (Romualdez). AO 27 set the
guidelines and procedure for accreditation of government suppliers of pharmaceutical products
for sale or distribution to the public, such accreditation to be valid for three years but subject to
annual review.

On January 25, 2000, Secretary Romualdez issued AO 10 series of 20006 which amended AO
27. Under Section VII7 of AO 10, the accreditation period for government suppliers of
pharmaceutical products was reduced to two years. Moreover, such accreditation may be
recalled, suspended or revoked after due deliberation and proper notice by the DOH
Accreditation Committee, through its Chairman.

Section VII of AO 10 was later amended by AO 66 series of 2000,8 which provided that the two-
year accreditation period may be recalled, suspended or revoked only after due
deliberation, hearing and notice by the DOH Accreditation Committee, through its Chairman.

On August 28, 2000, the DOH issued Memorandum No. 171-C9 which provided for a list and
category of sanctions to be imposed on accredited government suppliers of pharmaceutical
products in case of adverse findings regarding their products (e.g. substandard, fake, or
misbranded) or violations committed by them during their accreditation.

In line with Memorandum No. 171-C, the DOH, through former Undersecretary Ma. Margarita M.
Galon (Galon), issued Memorandum No. 209 series of 2000,10 inviting representatives of 24
accredited drug companies, including herein respondent Phil Pharmawealth, Inc. (PPI) to a
meeting on October 27, 2000. During the meeting, Undersecretary Galon handed them copies
of a document entitled "Report on Violative Products"11 issued by the Bureau of Food and
Drugs12 (BFAD), which detailed violations or adverse findings relative to these accredited drug
companies products. Specifically, the BFAD found that PPIs products which were being sold to
the public were unfit for human consumption.

During the October 27, 2000 meeting, the 24 drug companies were directed to submit within 10
days, or until November 6, 2000, their respective explanations on the adverse findings covering
their respective products contained in the Report on Violative Products.

Instead of submitting its written explanation within the 10-day period as required, PPI belatedly
sent a letter13dated November 13, 2000 addressed to Undersecretary Galon, informing her that
PPI has referred the Report on Violative Products to its lawyers with instructions to prepare the
corresponding reply. However, PPI did not indicate when its reply would be submitted; nor did it
seek an extension of the 10-day period, which had previously expired on November 6, 2000,
much less offer any explanation for its failure to timely submit its reply. PPIs November 13,
2000 letter states:

Madam,

This refers to your directive on 27 October 2000, on the occasion of the meeting with selected
accredited suppliers, during which you made known to the attendees of your requirement for
them to submit their individual comments on the Report on Violative Products (the "Report")
compiled by your office and disseminated on that date.

In this connection, we inform you that we have already instructed our lawyers to prepare on our
behalf the appropriate reply to the Report furnished to us. Our lawyers in time shall revert to you
and furnish you the said reply.

Please be guided accordingly.

Very truly yours,

(signed)
ATTY. ALAN A.B. ALAMBRA

Vice-President for Legal and Administrative Affairs14

In a letter-reply15 dated November 23, 2000 Undersecretary Galon found "untenable" PPIs
November 13, 2000 letter and therein informed PPI that, effective immediately, its accreditation
has been suspended for two years pursuant to AO 10 and Memorandum No. 171-C.

In another December 14, 2000 letter16 addressed to Undersecretary Galon, PPI through counsel
questioned the suspension of its accreditation, saying that the same was made pursuant to
Section VII of AO 10 which it claimed was patently illegal and null and void because it arrogated
unto the DOH Accreditation Committee powers and functions which were granted to the BFAD
under Republic Act (RA) No. 372017 and Executive Order (EO) No. 175.18 PPI added that its
accreditation was suspended without the benefit of notice and hearing, in violation of its right to
substantive and administrative due process. It thus demanded that the DOH desist from
implementing the suspension of its accreditation, under pain of legal redress.
On December 28, 2000, PPI filed before the Regional Trial Court of Pasig City a
Complaint19 seeking to declare null and void certain DOH administrative issuances, with prayer
for damages and injunction against the DOH, former Secretary Romualdez and DOH
Undersecretary Galon. Docketed as Civil Case No. 68200, the case was raffled to Branch 160.
On February 8, 2002, PPI filed an Amended and Supplemental Complaint,20 this time
impleading DOH Secretary Manuel Dayrit (Dayrit). PPI claimed that AO 10, Memorandum No.
171-C, Undersecretary Galons suspension order contained in her November 23, 2000 letter,
and AO 14 series of 200121are null and void for being in contravention of Section 26(d) of RA
3720 as amended by EO 175, which states as follows:

SEC. 26. x x x

(d) When it appears to the Director [of the BFAD] that the report of the Bureau that any article of
food or any drug, device, or cosmetic secured pursuant to Section twenty-eight of this Act is
adulterated, misbranded, or not registered, he shall cause notice thereof to be given to the
person or persons concerned and such person or persons shall be given an opportunity to be
heard before the Bureau and to submit evidence impeaching the correctness of the finding or
charge in question.

For what it claims was an undue suspension of its accreditation, PPI prayed that AO 10,
Memorandum No. 171-C, Undersecretary Galons suspension order contained in her November
23, 2000 letter, and AO 14 be declared null and void, and that it be awarded moral damages of
5 million, exemplary damages of 1 million, attorneys fees of 1 million, and costs of suit. PPI
likewise prayed for the issuance of temporary and permanent injunctive relief.

In their Amended Answer,22 the DOH, former Secretary Romualdez, then Secretary Dayrit, and
Undersecretary Galon sought the dismissal of the Complaint, stressing that PPIs accreditation
was suspended because most of the drugs it was importing and distributing/selling to the public
were found by the BFAD to be substandard for human consumption. They added that the DOH
is primarily responsible for the formulation, planning, implementation, and coordination of
policies and programs in the field of health; it is vested with the comprehensive power to make
essential health services and goods available to the people, including accreditation of drug
suppliers and regulation of importation and distribution of basic medicines for the public.

Petitioners added that, contrary to PPIs claim, it was given the opportunity to present its side
within the 10-day period or until November 6, 2000, but it failed to submit the required
comment/reply. Instead, it belatedly submitted a November 13, 2000 letter which did not even
constitute a reply, as it merely informed petitioners that the matter had been referred by PPI to
its lawyer. Petitioners argued that due process was afforded PPI, but because it did not timely
avail of the opportunity to explain its side, the DOH had to act immediately by suspending
PPIs accreditation to stop the distribution and sale of substandard drug products which posed
a serious health risk to the public. By exercising DOHs mandate to promote health, it cannot be
said that petitioners committed grave abuse of discretion.

In a January 8, 2001 Order,23 the trial court partially granted PPIs prayer for a temporary
restraining order, but only covering PPIs products which were not included in the list of violative
products or drugs as found by the BFAD.

In a Manifestation and Motion24 dated July 8, 2003, petitioners moved for the dismissal of Civil
Case No. 68200, claiming that the case was one against the State; that the Complaint was
improperly verified; and lack of authority of the corporate officer to commence the suit, as the
requisite resolution of PPIs board of directors granting to the commencing officer PPIs Vice
President for Legal and Administrative Affairs, Alan Alambra, the authority to file Civil Case
No. 68200 was lacking. To this, PPI filed its Comment/Opposition.25

Ruling of the Regional Trial Court

In a June 14, 2004 Order,26 the trial court dismissed Civil Case No. 68200, declaring the case to
be one instituted against the State, in which case the principle of state immunity from suit is
applicable.

PPI moved for reconsideration,27 but the trial court remained steadfast.28

PPI appealed to the CA.

Ruling of the Court of Appeals

Docketed as CA-G.R. CV No. 85670, PPIs appeal centered on the issue of whether it was
proper for the trial court to dismiss Civil Case No. 68200.

The CA, in the herein assailed Decision,29 reversed the trial court ruling and ordered the remand
of the case for the conduct of further proceedings. The CA concluded that it was premature for
the trial court to have dismissed the Complaint. Examining the Complaint, the CA found that a
cause of action was sufficiently alleged that due to defendants (petitioners) acts which were
beyond the scope of their authority, PPIs accreditation as a government supplier of
pharmaceutical products was suspended without the required notice and hearing as required by
Section 26(d) of RA 3720 as amended by EO 175. Moreover, the CA held that by filing a motion
to dismiss, petitioners were deemed to have hypothetically admitted the allegations in the
Complaint which state that petitioners were being sued in their individual and personal
capacities thus negating their claim that Civil Case No. 68200 is an unauthorized suit against
the State.

The CA further held that instead of dismissing the case, the trial court should have deferred the
hearing and resolution of the motion to dismiss and proceeded to trial. It added that it was
apparent from the Complaint that petitioners were being sued in their private and personal
capacities for acts done beyond the scope of their official functions. Thus, the issue of whether
the suit is against the State could best be threshed out during trial on the merits, rather than in
proceedings covering a motion to dismiss.

The dispositive portion of the CA Decision reads:

WHEREFORE, the appeal is hereby GRANTED. The Order dated June 14, 2004 of the
Regional Trial Court of Pasig City, Branch 160, is hereby REVERSED and SET-
ASIDE. ACCORDINGLY, this case is REMANDED to the trial court for further proceedings.

SO ORDERED.30

Petitioners sought, but failed, to obtain a reconsideration of the Decision. Hence, they filed the
present Petition.
Issue

Petitioners now raise the following lone issue for the Courts resolution:

Should Civil Case No. 68200 be dismissed for being a suit against the State?31

Petitioners Arguments

Petitioners submit that because PPIs Complaint prays for the award of damages against the
DOH, Civil Case No. 68200 should be considered a suit against the State, for it would require
the appropriation of the needed amount to satisfy PPIs claim, should it win the case. Since the
State did not give its consent to be sued, Civil Case No. 68200 must be dismissed. They add
that in issuing and implementing the questioned issuances, individual petitioners acted officially
and within their authority, for which reason they should not be held to account individually.

Respondents Arguments

Apart from echoing the pronouncement of the CA, respondent insists that Civil Case No. 68200
is a suit against the petitioners in their personal capacity for acts committed outside the scope of
their authority.

Our Ruling

The Petition is granted.

The doctrine of non-suability.

The discussion of this Court in Department of Agriculture v. National Labor Relations


Commission32 on the doctrine of non-suability is enlightening.

The basic postulate enshrined in the constitution that (t)he State may not be sued without its
consent, reflects nothing less than a recognition of the sovereign character of the State and an
express affirmation of the unwritten rule effectively insulating it from the jurisdiction of courts. It
is based on the very essence of sovereignty. x x x [A] sovereign is exempt from suit, not
because of any formal conception or obsolete theory, but on the logical and practical ground
that there can be no legal right as against the authority that makes the law on which the right
depends. True, the doctrine, not too infrequently, is derisively called the royal prerogative of
dishonesty because it grants the state the prerogative to defeat any legitimate claim against it
by simply invoking its nonsuability. We have had occasion to explain in its defense, however,
that a continued adherence to the doctrine of non-suability cannot be deplored, for the loss of
governmental efficiency and the obstacle to the performance of its multifarious functions would
be far greater in severity than the inconvenience that may be caused private parties, if such
fundamental principle is to be abandoned and the availability of judicial remedy is not to be
accordingly restricted.

The rule, in any case, is not really absolute for it does not say that the state may not be sued
under any circumstance. On the contrary, as correctly phrased, the doctrine only conveys, the
state may not be sued without its consent; its clear import then is that the State may at times be
sued. The States consent may be given either expressly or impliedly. Express consent may be
made through a general law or a special law. x x x Implied consent, on the other hand, is
conceded when the State itself commences litigation, thus opening itself to a counterclaim or
when it enters into a contract. In this situation, the government is deemed to have descended to
the level of the other contracting party and to have divested itself of its sovereign immunity. This
rule, x x x is not, however, without qualification. Not all contracts entered into by the government
operate as a waiver of its non-suability; distinction must still be made between one which is
executed in the exercise of its sovereign function and another which is done in its proprietary
capacity.33

As a general rule, a state may not be sued. However, if it consents, either expressly or
impliedly, then it may be the subject of a suit.34 There is express consent when a law, either
special or general, so provides. On the other hand, there is implied consent when the state
"enters into a contract or it itself commences litigation."35 However, it must be clarified that when
a state enters into a contract, it does not automatically mean that it has waived its non-
suability. 36 The State "will be deemed to have impliedly waived its non-suability [only] if it has
entered into a contract in its proprietary or private capacity. [However,] when the contract
involves its sovereign or governmental capacity[,] x x x no such waiver may be
implied."37 "Statutory provisions waiving [s]tate immunity are construed in strictissimi juris. For,
waiver of immunity is in derogation of sovereignty."38

The DOH can validly invoke state immunity.

a) DOH is an unincorporated agency which performs sovereign or governmental


functions.

In this case, the DOH, being an "unincorporated agency of the government"39 can validly invoke
the defense of immunity from suit because it has not consented, either expressly or impliedly, to
be sued. Significantly, the DOH is an unincorporated agency which performs functions of
governmental character.

The ruling in Air Transportation Office v. Ramos40 is relevant, viz:

An unincorporated government agency without any separate juridical personality of its own
enjoys immunity from suit because it is invested with an inherent power of sovereignty.
Accordingly, a claim for damages against the agency cannot prosper; otherwise, the doctrine of
sovereign immunity is violated. However, the need to distinguish between an unincorporated
government agency performing governmental function and one performing proprietary functions
has arisen. The immunity has been upheld in favor of the former because its function is
governmental or incidental to such function; it has not been upheld in favor of the latter whose
function was not in pursuit of a necessary function of government but was essentially a
business.41

b) The Complaint seeks to hold the DOH solidarily and jointly liable with the other
defendants for damages which constitutes a charge or financial liability against the state.

Moreover, it is settled that if a Complaint seeks to "impose a charge or financial liability against
the state,"42 the defense of non-suability may be properly invoked. In this case, PPI specifically
prayed, in its Complaint and Amended and Supplemental Complaint, for the DOH, together with
Secretaries Romualdez and Dayrit as well as Undersecretary Galon, to be held jointly and
severally liable for moral damages, exemplary damages, attorneys fees and costs of
suit.43 Undoubtedly, in the event that PPI succeeds in its suit, the government or the state
through the DOH would become vulnerable to an imposition or financial charge in the form of
damages. This would require an appropriation from the national treasury which is precisely the
situation which the doctrine of state immunity aims to protect the state from.

The mantle of non-suability extends to complaints filed against public officials for acts
done in the performance of their official functions.

As regards the other petitioners, to wit, Secretaries Romualdez and Dayrit, and Undersecretary
Galon, it must be stressed that the doctrine of state immunity extends its protective mantle also
to complaints filed against state officials for acts done in the discharge and performance of their
duties.44 "The suability of a government official depends on whether the official concerned was
acting within his official or jurisdictional capacity, and whether the acts done in the performance
of official functions will result in a charge or financial liability against the
government."45 Otherwise stated, "public officials can be held personally accountable for acts
claimed to have been performed in connection with official duties where they have acted ultra
vires or where there is showing of bad faith."46 Moreover, "[t]he rule is that if the judgment
against such officials will require the state itself to perform an affirmative act to satisfy the same,
such as the appropriation of the amount needed to pay the damages awarded against them, the
suit must be regarded as against the state x x x. In such a situation, the state may move to
dismiss the [C]omplaint on the ground that it has been filed without its consent." 47

It is beyond doubt that the acts imputed against Secretaries Romualdez and Dayrit, as well as
Undersecretary Galon, were done while in the performance and discharge of their official
functions or in their official capacities, and not in their personal or individual capacities.
Secretaries Romualdez and Dayrit were being charged with the issuance of the assailed orders.
On the other hand, Undersecretary Galon was being charged with implementing the assailed
issuances. By no stretch of imagination could the same be categorized as ultra vires simply
because the said acts are well within the scope of their authority. Section 4 of RA 3720
specifically provides that the BFAD is an office under the Office of the Health Secretary. Also,
the Health Secretary is authorized to issue rules and regulations as may be necessary to
effectively enforce the provisions of RA 3720.48 As regards Undersecretary Galon, she is
authorized by law to supervise the offices under the DOHs authority,49 such as the BFAD.
Moreover, there was also no showing of bad faith on their part. The assailed issuances were not
directed only against PPI. The suspension of PPIs accreditation only came about after it failed
to submit its comment as directed by Undersecretary Galon. It is also beyond dispute that if
found wanting, a financial charge will be imposed upon them which will require an appropriation
from the state of the needed amount. Thus, based on the foregoing considerations, the
Complaint against them should likewise be dismissed for being a suit against the state which
absolutely did not give its consent to be sued. Based on the foregoing considerations, and
regardless of the merits of PPIs case, this case deserves a dismissal. Evidently, the very
foundation of Civil Case No. 68200 has crumbled at this initial juncture.

PPI was not denied due process.

However, we cannot end without a discussion of PPIs contention that it was denied due
process when its accreditation was suspended "without due notice and hearing." It is undisputed
that during the October 27, 2000 meeting, Undersecretary Galon directed representatives of
pharmaceutical companies, PPI included, to submit their comment and/or reactions to the
Report on Violative Products furnished them within a period of 10 days. PPI, instead of
submitting its comment or explanation, wrote a letter addressed to Undersecretary Galon
informing her that the matter had already been referred to its lawyer for the drafting of an
appropriate reply. Aside from the fact that the said letter was belatedly submitted, it also failed to
specifically mention when such reply would be forthcoming. Finding the foregoing explanation to
be unmeritorious, Undersecretary Galon ordered the suspension of PPIs accreditation for two
years. Clearly these facts show that PPI was not denied due process. It was given the
opportunity to explain its side. Prior to the suspension of its accreditation, PPI had the chance to
rebut, explain, or comment on the findings contained in the Report on Violative Products that
several of PPIs products are not fit for human consumption. However, PPI squandered its
opportunity to explain. Instead of complying with the directive of the DOH Undersecretary within
the time allotted, it instead haughtily informed Undersecretary Galon that the matter had been
referred to its lawyers. Worse, it impliedly told Undersecretary Galon to just wait until its lawyers
shall have prepared the appropriate reply. PPI however failed to mention when it will submit its
"appropriate reply" or how long Undersecretary Galon should wait. In the meantime, PPIs drugs
which are included in the Report on Violative Products are out and being sold in the market.
Based on the foregoing, we find PPIs contention of denial of due process totally unfair and
absolutely lacking in basis. At this juncture, it would be trite to mention that "[t]he essence of due
process in administrative proceedings is the opportunity to explain ones side or seek a
reconsideration of the action or ruling complained of. As long as the parties are given the
opportunity to be heard before judgment is rendered, the demands of due process are
sufficiently met. What is offensive to due process is the denial of the opportunity to be heard.
The Court has repeatedly stressed that parties who chose not to avail themselves of the
opportunity to answer charges against them cannot complain of a denial of due process."50

Incidentally, we find it inieresting that in the earlier case of Department q( Health v. Phil
Pharmawealth, Inc. 51respondent filed a Complaint against DOH anchored on the same
issuances which it assails in the present case. In the earlier case of Department of Health v. Phil
Pharmawealth, Jnc., 52 PPI submitted to the DOH a request for the inclusion of its products in
the list of accredited drugs as required by AO 27 series of 1998 which was later amended by
AO 10 series of 2000. In the instant case, however, PPI interestingly claims that these
issuances are null and void.

WHEREFORE, premises considered, the Petition is GRANTED. Civil Case No. 68200 is
ordered DISMISSED.

SO ORDERED.
G.R. No. 179492 June 5, 2013

REPUBLIC OF THE PHILIPPINES, represented by ABUSAMA M. ALID, Officer-in-Charge,


DEPARTMENT OF AGRICULTURE - REGIONAL FIELD UNIT XII (DA-RFU XII), Petitioner,
vs.
ABDULWAHAB A. BAYAO, OSMEA I. MONTAER, RAKMA B. BUISAN, HELEN M.
ALVAREZ, NEILA P. LIMBA, ELIZABETH B. PUSTA, ANNA MAE A. SIDENO, UDTOG B.
TABONG, JOHN S. KAMENZA, DELIA R. SUBALDO, DAYANG W. MACMOD, FLORENCE
S. TAYUAN, in their own behalf and in behalf of the other officials and employees of DA-
RFU XII, Respondents.

TOPIC: SEPARATION OF POWERS

DECISION

LEONEN, J.:

Before us is a Petition for Review on Certiorari filed under Rule 45. This Petition prays for the
reversal and setting aside of the Court of Appeals (1) Resolution dated March 21, 2007 that
dismissed the Petition for Certiorari under Rule 65 filed by petitioner for failure to resort to a
Motion for Reconsideration of the assailed trial court Order dated October 9, 2006 and (2)
Resolution dated August 16, 2007 denying petitioners Motion for Reconsideration.

Petitioner Department of AgricultureRegional Field Unit XII (DARFU XII) is a government office
mandated to implement the laws, policies, plans, programs, rules, and regulations of the
Department of Agriculture in its regional area, while respondents are officials and employees of
DA-RFU XII.1

On March 30, 2004, Executive Order (E.O.) No. 304 was passed designating Koronadal City as
the regional center and seat of SOCCSKSARGEN Region.2 It provides that all departments,
bureaus, and offices of the national government in the SOCCSKSARGEN Region shall transfer
their regional seat of operations to Koronadal City.3

In an April 1, 2005 Memorandum, the Department of Agriculture (DA) Undersecretary for


Operations Edmund J. Sana directed Officer-inCharge (OIC) and Regional Executive Director of
DA-RFU XII Abusama M. Alid as follows:

In compliance with Executive Order No. 304 of which Section 2 states "Transfer of Regional
Offices. All departments, bureaus and offices of the National Government on the
SOCCSKSARGEN Region shall transfer their regional seat of operations to Koronadal City,"
you are hereby directed to immediately effect the transfer of the administrative, finance and
operations base of RFU XII from Cotabato City to Koronadal City. On the interim, part of the
staff can temporarily hold office at either or both the ATI building in Tantangan and Tupi Seed
Farm, but the main office shall be within Koronadal City.

The action plan for transfer should be submitted to my office not later than 6 April 2005 so that
appropriate funding can be processed soonest. Further, execution of the plan should commence
by 16 April 2005 or earlier so that concerned personnel can benefit from the summer break to
make personal arrangements for the transfer of their work base.

For strict compliance.4

In a Memorandum dated April 22, 2005 addressed to DA Secretary Arthur Yap, private
respondents opposed the implementation of the April 1, 2005 Memorandum.5

They alleged that in 2004, former President Gloria Macapagal-Arroyo made a pronouncement
during one of her visits in Cotabato City that the regional seat of Region 12 shall remain in
Cotabato City.6 Only three departments were not covered by the suspension of E.O. No. 304,
namely, the Department of Trade and Industry (DTI), Department of Tourism (DOT), and
Department of Labor and Employment (DOLE).7

Respondents alleged further in their Memorandum to the DA Secretary that on March 7, 2005,
they appealed to the Secretary of Agriculture that the implementation of E.O. No. 304 be held in
abeyance. A copy of the Petition was attached to the Memorandum. It cited reasons such as the
huge costs the physical transfer will entail and the plight of employees who have already settled
and established their homes in Cotabato City.8

On March 8, 2005, their Petition was endorsed by Department of Agriculture Employees


Association-12 (DAEAS-12) President Osmea I. Motaer to then President Macapagal-Arroyo,
and on April 12, 2005, this was referred to DA Secretary Yap for his information and appropriate
action.9 Respondents justified their appeal saying that a building was constructed in Cotabato
City that can accommodate the whole staff of DARFU XII. On the other hand, there is no
building yet in Koronadal City where rent is very expensive.10 Moreover, if the regional office
remains in Cotabato City, the government need not spend over 7,200,000.00 as dislocation
pay as well as other expenses for equipment hauling and construction.11 Finally, respondents
alleged that the proposed third floor of the ATI Building in Tantangan has a sub-standard
foundation and will not be issued a certificate of occupancy by the City Engineering Office of
Koronadal City as per information from an auditor.12

On May 17, 2005, OIC Abusama M. Alid held a meeting and ordered the transfer of the regional
office to ATI Building in Tantangan and Tupi Seed Farm in Tupi, both located in South Cotabato
and Uptown, Koronadal City, to be carried out on May 21, 2005.13

This prompted respondents to file on May 18, 2005 a Complaint for Injunction with Prayer for
Issuance of Writ of Preliminary Injunction and/or Temporary Restraining Order with the Regional
Trial Court, Branch 14 of Cotabato City.14

By Order dated October 9, 2006, the trial court granted respondents' Prayer for a Writ of
Preliminary Injunction.15

In a petition dated December 17, 2006,16 petitioner went to the Court of Appeals via Rule 65 on
the ground that the assailed Order of the trial court is contrary to the pronouncement of this
Court in DENR v. DENR Region 12 Employees.

Through the March 21, 2007 Resolution, the Court of Appeals dismissed the Petition for
Certiorari for failure of petitioner to resort to a Motion for Reconsideration of the assailed trial
court Order.17
Hence, the present Petition under Rule 45.

Petitioner argues that (1) this case falls under the exceptions for filing a Motion for
Reconsideration prior to filing a Petition under Rule 65; (2) the trial court Order enjoining the
transfer is contrary to DENR v. DENR Region 12 Employees18 that upheld the separation of
powers between the executive and judiciary on the wisdom of transfer of regional offices; (3) the
trial court interfered into this wisdom of the executive in the management of its affairs; and (4)
the trial court disregarded basic rules on amendment and revocation of administrative issuances
and the propriety of injunction as a remedy.19

In their Comment, respondents counter that a Petition via Rule 45 is not the proper remedy to
assail the disputed Resolutions.20 They allege that the assailed Court of Appeals Resolution
dismissing the Petition for Certiorari for failure of the petitioners to file a Motion for
Reconsideration is not a "final order or resolution" contemplated by Rule 45.21 It is not an
adjudication on the merits.22 In fact, the Court of Appeals did not even attempt to resolve the
propriety of the issuance of the assailed trial court Order.23 In any case, respondents argue that
petitioners failure to file a Motion for Reconsideration is fatal. They contend that this is a
condition sine qua non for a Petition under Rule 65, and none of the exceptions are present in
this case.24

Based on both parties contentions, the issues involved in this case may be summarized as
follows:

I. Whether a Petition via Rule 45 is the proper remedy to assail the disputed Resolutions

II. Whether the present case falls within the exceptions on the requisite for filing a Motion
for Reconsideration prior to filing a Petition for Certiorari under Rule 65

III. Whether petitioner can raise other issues not addressed in the assailed Resolutions

IV. Whether the issuance by the RTC of a preliminary injunction against the transfer of
the DA Regional Office to Koronadal City violates the separation of powers between the
executive department and the judiciary as to the wisdom behind the transfer

First, we discuss the procedural issues.

Respondents contend that a Petition via Rule 45 is not the proper remedy to assail the disputed
Resolutions.25They allege that the assailedCourt of Appeals Resolution dismissing the Petition
for Certiorari for failure of the petitioners to file a Motion for Reconsideration is not a "final order
or resolution" contemplated by Rule 45.26

On the other hand, petitioner argues that if the assailed Resolutions are not elevated via Rule
45, they would attain finality and consequently, the trial court Order dated October 9, 2006
would become unassailable as well.27

A dismissal by the Court of Appeals of a Petition via Rule 65 for failure to file a Motion for
Reconsideration may be assailed via Rule 45.
Unlike a Petition via Rule 45 that is a continuation of the appellate process over the original
case, a special civil action for certiorari under Rule 65 is an original or independent
action.28 Consequently, the March 21, 2007 Resolution of the Court of Appeals dismissing the
Petition via Rule 65 as well as its August 16, 2007 Resolution denying reconsideration are the
final Resolutions contemplated under Rule 45. As correctly pointed out by petitioner, these
Resolutions would attain finality if these are not elevated on appeal via Rule 45. As a result, the
trial court Order dated October 9, 2006 would also become unassailable.291wphi1

Respondents also argue that petitioners failure to file a Motion for Reconsideration of the
assailed Regional Trial Court Order dated October 9, 2006 is fatal.30 They contend that the
reasons raised by petitioner do not justify dispensing with the prerequisite of filing a Motion for
Reconsideration.31

For its part, petitioner argues that its Petition for Certiorari filed before the Court of Appeals falls
under the exceptions to the necessity of filing a Motion for Reconsideration.32 In its Petition with
the Court of Appeals, petitioners explained its reasons for no longer filing a Motion for
Reconsideration of the assailed order in that (a) the questions to be raised in the motion have
already been duly raised and passed upon by the lower court33 and (b) there is urgent necessity
for the resolution of the questions or issues raised.34 Petitioners allege that the trial court
presiding judge was not acting on the disposition of the case with dispatch and that any further
delay would unduly prejudice the interests of the government in pursuing its economic
development strategies in the region.35

The settled rule is that a Motion for Reconsideration is a condition sine qua non for the filing of a
Petition for Certiorari.36 Its purpose is to grant an opportunity for the court to correct any actual
or perceived error attributed to it by re-examination of the legal and factual circumstances of the
case.37

This rule admits well-defined exceptions as follows:

Concededly, the settled rule is that a motion for reconsideration is a condition sine qua non for
the filing of a petition for certiorari.

Its purpose is to grant an opportunity for the court to correct any actual or perceived error
attributed to it by the re-examination of the legal and factual circumstances of the case. The rule
is, however, circumscribed by well-defined exceptions, such as (a) where the order is a patent
nullity, as where the court a quo has no jurisdiction; (b) where the questions raised in the
certiorari proceedings have been duly raised and passed upon by the lower court, or are the
same as those raised and passed upon in the lower court; (c) where there is an urgent
necessity for the resolution of the question and any further delay would prejudice the interests of
the Government or of the petitioner or the subject matter of the action is perishable; (d) where,
under the circumstances, a motion for reconsideration would be useless; (e) where petitioner
was deprived of due process and there is extreme urgency for relief; (f) where, in a criminal
case, relief from an order of arrest is urgent and the granting of such relief by the trial court is
improbable; (g) where the proceedings in the lower court are a nullity for lack of due process; (h)
where the proceeding were ex parte or in which the petitioner had no opportunity to object; and
(i) where the issue raised is one purely of law or where public interest is involved.38 (Emphasis
provided)

The second exception is present in this case.


In Siok Ping Tang v. Subic Bay Distribution, Inc.,39 this Court found that the non-filing of a
Motion for Reconsideration in the case was not fatal since the questions raised in the certiorari
proceedings have already been duly raised and passed upon by the lower court, viz:

Respondent explained their omission of filing a motion for reconsideration before resorting to a
petition for certiorari based on exceptions (b), (c) and (i). The CA brushed aside the filing of the
motion for reconsideration based on the ground that the questions raised in the certiorari
proceedings have been duly raised and passed upon by the lower court, or are the same as
those raised and passed upon in the lower court. We agree.

Respondent had filed its position paper in the RTC stating the reasons why the injunction
prayed for by petitioner should not be granted. However, the RTC granted the injunction.
Respondent filed a petition for certiorari with the CA and presented the same arguments which
were already passed upon by the RTC. The RTC already had the opportunity to consider and
rule on the question of the propriety or impropriety of the issuance of the injunction. We found
no reversible error committed by the CA for relaxing the rule since respondent's case falls within
the exceptions.40

Similarly, the various issues raised in the Petition with the Court of Appeals have already been
raised by petitioner on several occasions through its pleadings with the trial court. The lower
court, therefore, passed upon them prior to its issuance of its Order dated October 9, 2006.
Specifically, the table below summarizes the issues and arguments raised by petitioner before
the trial court vis a vis those raised in the Petition for Certiorari filed with the Court of Appeals:

COURT OF
TRIAL COURT
APPEALS
Motion to Dismiss41 Memorandum42 Manifestation and Petition for
Reply43 Certiorari44
dated June 27, 2005 dated September 1,
2006 dated September 5, dated December 17,
2006 2006
The Honorable The instant complaint To reiterate, the Respondent judge
Supreme Court had filed by plaintiffs for Supreme Court has held committed grave
already ruled that injunction is an indirect in the applicable case of abuse of discretion to
the propriety or way of preventing the DENR v. DENR Region lack or excess of
wisdom of the transfer of the regional 12 Employees (409 jurisdiction when he
transfer of seat of DARFU XII which SCRA 359 [2003]) that enjoined petitioner
government has been upheld by the respondent DENR from transferring DA-
agencies or offices Supreme Court in DENR employees "cannot, by RFU XII from
from Cotabato City v. DENR Region 12 means of an injunction, Cotabato City to South
to Koronadal, South Employees (409 SCRA force the DENR XII Cotabato and
Cotabato is beyond 359 [2003]). If this Regional Offices to Koronadal City. The
judicial inquiry.45 Honorable Court cannot remain in Cotabato City, assailed order of the
countermand the as the exercise of the lower court enjoining
Supreme Courts ruling authority to transfer the petitioner from
directly, it cannot do so same is executive in transferring the seat of
indirectly.46 nature." The Supreme the DA-RFU XII office
Court further stated in to Koronadal City in
said case that "the South Cotabato is
judiciary cannot inquire contrary to the
into the wisdom or pronouncement of the
expediency of the acts Supreme Court in
of the executive or the DENR v. DENR
legislative Region 12 Employees
department."47 (409 SCRA 359
[2003]).48
Corollary to the above,
the Order dated May 31,
2005 of this Honorable
Court enjoining
defendants from
transferring the seat of
the DA-RFU XII office to
Koronadal City in South
Cotabato is contrary to
the above
pronouncement of the
Supreme Court.
Perforce, the Order must
be set aside
accordingly.49
The allegation under Executive orders are Respondent judge
Paragraph 4 of the amended, modified or acted arbitrarily,
Complaint that her revoked by subsequent whimsically and in a
Excellency, ones. The alleged public very biased manner
President Gloria pronouncement of the when he concluded
Macapagal-Arroyo President suspending that the President of
only made a public the implementation of the Republic has
pronouncement that Executive Order No. 304 suspended the
the effect of E.O. No. is contrary to the implementation of
304 is suspended is ordinance power of the Executive Order No.
hearsay and President as provided 304.52
contrary to the under the Administrative
procedure on the Code of 1987.51
repeal, amendment
or modification of
rules and
regulations.50
By the nature of their Respondent judge
appointment as committed grave
Regional Officials abuse of discretion
and Employees, when he concluded
plaintiffs can be that the transfer of DA-
reassigned RFU XII to Koronadal
anywhere within City will affect
Region XII in the seriously the studies
exigency of the of respondents
service.53 children and that there
will be no buildings to
house respondents.54
The allegation of If the plight and
possible injury to conditions of the
plaintiffs and their families of the DENR
families as a employees are worth
consequence of the considering, like the
planned transfer of the dislocation of schooling
regional seat of DA-RFU of their children, which
XII to Koronadal City had without doubt has more
been ruled upon by the adverse impact than the
Supreme Court in DENR supposed absence of
v. DENR Region 12 allowances for the
Employees (409 SCRA transfer, the Supreme
359 [2003]) to be beyond Court should have
judicial inquiry because it granted the injunction
involves concerns that prayed for by said
are more on the DENR employees.
propriety or wisdom of Apparently, the
the transfer rather than Supreme Court did not
on its legality.55 find it compelling to
grant the injunction over
and above the wisdom
of the transfer.56
The families of the
employees can still stay
in Cotabato City in as
much as they have
established residences
in the area. It must be
emphasized that the
employees derive
salaries and benefits
from their government
work, from which they
support their families.
The movement of
employees thus would
not cause much financial
dislocation as long as
the employees received
their salaries and
benefits.57
The Honorable Court Respondent judge
must further realize that committed grave
the employees are abuse of discretion
being paid their salaries. when he concluded
In the given order of that the transfer of DA-
things, such salaries are RFU XII would stretch
enough to provide for out the meager
their basic necessities. salaries of
The Regional Office can respondents and that
simply provide for it would cause them
transportation to economic
effectuate the minimum strangulation.59
required for the transfer
to Koronadal City and
expect the employees to
live on their salaries.
Any allowances due and
owing the employees
connected with the
transfer can be given to
them later as back
payments. This is not to
forget that the Regional
Office has provided
temporary housing for
said employees to
alleviate any
inconvenience that they
may suffer.58
There is absolutely The issues on the Respondent judge
no technical alleged illegal committed grave
malversation in the realignment of funds, abuse of discretion
realignment of unauthorized ssuance of when he ordered the
budgetary allocation memorandum and the issuance of a writ of
for the intended alleged unjust transfer of preliminary injunction
transfer of DA-RFU employees of DA-RFU based on the absence
XII to Koronadal XII are acts that are of appropriation for the
City.60 executive in nature x x transfer to Koronadal
x.61 City in the amount of
9,250,000.00.62
x x x the funds needed
for the transfer can be
sourced and met by the
DA from sources such as
the discretionary
administrative fund of the
Office of the Secretary.
Respondents
computation of the
amount required for the
transfer in the amount of
9,222,000.00 is bloated
or exaggerated.63
Respondents who are Respondent judge
accountable officers committed grave
cannot be coerced to abuse of discretion
transfer funds that are when he concluded
deemed illegal or that respondents
improper. Hence, no would suffer
personal liability or irreparable damage if
irreparable injury would the transfer of DARFU
be caused upon them. XII from Cotabato City
On the other hand, the to Koronadal City is
rest of respondents who not enjoined.65
are ordinary employees
would not suffer any
irreparable
injury.1wphi1 This is
due to the fact that they
have no privity to the
alleged illegal transfer of
funds.64

Thus, the present case falls under the second exception in that a Motion for Reconsideration
need not be filed where questions raised in the certiorari proceedings are the same as those
raised and passed upon in the lower court.

In any case, this Court disregards the presence of procedural flaws when there is necessity to
address the issues because of the demands of public interest, including the need for stability in
the public service and the serious implications the case may cause on the effective
administration of the executive department.66

The instant Petition involves the effective administration of the executive department and would
similarly warrant relaxation of procedural rules if need be. Specifically, the fourth clause of E.O.
No. 304 states as follows: "WHEREAS, the political and socio-economic conditions in
SOCCSKSARGEN Region point to the need for designating the regional center and seat of the
region to improve government operations and services."67

Respondents final contention is that the disputed Resolutions issued by the Court of Appeals
dwell solely on the indispensability of the filing of a Motion for Reconsideration with the trial
court before filing a Petition via Rule 65; thus, the other grounds in the present Petition need not
be addressed.68

Considering that the Petition has overcome the procedural issues as discussed above, we can
now proceed to discuss the substantive issues raised by petitioner.

Petitioner argues that the assailed Order of the trial court enjoining it from transferring the seat
of the DA-RFU XII Regional Office to Koronadal City is contrary to this Courts pronouncement
in DENR v. DENR Region 12 Employees upholding the separation of powers of the executive
department and the judiciary when it comes to the wisdom of transfer of regional offices.69
This Court has held that while the power to merge administrative regions is not provided for
expressly in the Constitution, it is a power which has traditionally been lodged with the President
to facilitate the exercise of the power of general supervision over local governments.70 This
power of supervision is found in the Constitution71as well as in the Local Government Code of
1991, as follows:

Section 25 National Supervision over Local Government Units

(a) Consistent with the basic policy on local autonomy, the President shall exercise general
supervision over local government units to ensure that their acts are within the scope of their
prescribed powers and functions.

The President shall exercise supervisory authority directly over provinces, highly urbanized
cities, and independent component cities; through the province with respect to component cities
and municipalities; and through the city and municipality with respect to barangays.72

In Chiongbian v. Orbos, we held further that the power of the President to reorganize
administrative regions carries with it the power to determine the regional center.73

The case of DENR v. DENR Region 12 Employees is in point. This Court held that the DENR
Secretary can reorganize validly the DENR by ordering the transfer of the DENR XII Regional
Offices from Cotabato City to Koronadal, South Cotabato. We also found as follows: 74

It may be true that the transfer of the offices may not be timely considering that: (1) there are no
buildings yet to house the regional offices in Koronadal, (2) the transfer falls on the month of
Ramadan, (3) the children of the affected employees are already enrolled in schools in Cotabato
City, (4) the Regional Development Council was not consulted, and (5) the Sangguniang
Panglungsod, through a resolution, requested the DENR Secretary to reconsider the orders.
However, these concern issues addressed to the wisdom of the transfer rather than to its
legality. It is basic in our form of government that the judiciary cannot inquire into the wisdom or
expediency of the acts of the executive or the legislative department, for each department is
supreme and independent of the others, and each is devoid of authority not only to encroach
upon the powers or field of action assigned to any of the other department, but also to inquire
into or pass upon the advisability or wisdom of the acts performed, measures taken or decisions
made by the other departments.75 (Emphasis provided)

The transfer of the regional center of the SOCCSKSARGEN region to Koronadal City is an
executive function.

Similar to DENR v. DENR Region 12 Employees, the issues in the present case are addressed
to the wisdom of the transfer rather than to its legality. Some of these concerns are the lack of a
proper and suitable building in Koronadal to house the DA regional office, the inconvenience of
the transfer considering that the children of respondent-employees are already enrolled in
Cotabato City schools, and other similar reasons.

The judiciary cannot inquire into the wisdom or expediency of the acts of the executive.76 When
the trial court issued its October 9, 2006 Order granting preliminary injunction on the transfer of
the regional center to Koronadal City when such transfer was mandated by E.O. No. 304, the
lower court did precisely that.
The principle of separation of powers ordains that each of the three great government branches
has exclusive cognizance of and is supreme in concerns falling within its own constitutionally
allocated sphere.77 The judiciary as Justice Laurel emphatically asserted "will neither direct nor
restrain executive or legislative action x x x. "78

Finally, a verbal pronouncement to the effect that E.O. No. 304 is suspended should not have
been given weight. An executive order is valid when it is not contrary to the law or
Constitution.79

WHEREFORE, the Petition is GRANTED. The Resolutions of the Court of Appeals dated March
21, 2007 and August 16, 2007 in CA-G.R. SP No. 0 1457-MIN, as well as the Decision dated
October 9, 2006 of the Regional Trial Court, Branch 14 of Cotabato City are REVERSED and
SET ASIDE.

SO ORDERED.
G.R. No. 193707 December 10, 2014

NORMA A. DEL SOCORRO, for and in behalf of her minor child RODERIGO NORJO VAN
WILSEM,Petitioner,
vs.
ERNST JOHAN BRINKMAN VAN WILSEM, Respondent.

TOPIC: CONFLICT OF LAWS

DECISION

PERALTA, J.:

Before the Court is a petition for review on certiorari under Rule 45 of the Rules of Court
seeking to reverse and set aside the Orders1 dated February 19, 2010 and September 1, 2010,
respectively, of the Regional Trial Court of Cebu City (RTC-Cebu), which dismissed the criminal
case entitled People of the Philippines v. Ernst Johan Brinkman Van Wilsem, docketed as
Criminal Case No. CBU-85503, for violation of Republic Act (R.A.) No. 9262, otherwise known
as the Anti-Violence Against Women and Their Children Act of 2004.

The following facts are culled from the records:

Petitioner Norma A. Del Socorro and respondent Ernst Johan Brinkman Van Wilsem contracted
marriage in Holland on September 25, 1990.2 On January 19, 1994, they were blessed with a
son named Roderigo Norjo Van Wilsem, who at the time of the filing of the instant petition was
sixteen (16) years of age.3

Unfortunately, their marriage bond ended on July 19, 1995 by virtue of a Divorce Decree issued
by the appropriate Court of Holland.4 At that time, their son was only eighteen (18) months
old.5 Thereafter, petitioner and her son came home to the Philippines.6

According to petitioner, respondent made a promise to provide monthly support to their son in
the amount of Two Hundred Fifty (250) Guildene (which is equivalent to Php17,500.00 more or
less).7 However, since the arrival of petitioner and her son in the Philippines, respondent never
gave support to the son, Roderigo.8

Not long thereafter, respondent cameto the Philippines and remarried in Pinamungahan, Cebu,
and since then, have been residing thereat.9 Respondent and his new wife established a
business known as Paree Catering, located at Barangay Tajao, Municipality of Pinamungahan,
Cebu City.10 To date, all the parties, including their son, Roderigo, are presently living in Cebu
City.11
On August 28, 2009, petitioner, through her counsel, sent a letter demanding for support from
respondent. However, respondent refused to receive the letter.12

Because of the foregoing circumstances, petitioner filed a complaint affidavit with the Provincial
Prosecutor of Cebu City against respondent for violation of Section 5, paragraph E(2) of R.A.
No. 9262 for the latters unjust refusal to support his minor child with petitioner.13 Respondent
submitted his counter-affidavit thereto, to which petitioner also submitted her reply-
affidavit.14 Thereafter, the Provincial Prosecutor of Cebu City issued a Resolution
recommending the filing of an information for the crime charged against herein respondent.

The information, which was filed with the RTC-Cebu and raffled to Branch 20 thereof, states
that:

That sometime in the year 1995 and up to the present, more or less, in the Municipality of
Minglanilla, Province of Cebu, Philippines, and within the jurisdiction of this Honorable Court,
the above-named accused, did then and there wilfully, unlawfully and deliberately deprive,
refuse and still continue to deprive his son RODERIGO NORJO VAN WILSEM, a fourteen (14)
year old minor, of financial support legally due him, resulting in economic abuse to the victim.
CONTRARY TO LAW.15

Upon motion and after notice and hearing, the RTC-Cebu issued a Hold Departure Order
against respondent.16Consequently, respondent was arrested and, subsequently, posted
bail.17 Petitioner also filed a Motion/Application of Permanent Protection Order to which
respondent filed his Opposition.18 Pending the resolution thereof, respondent was
arraigned.19 Subsequently, without the RTC-Cebu having resolved the application of the
protection order, respondent filed a Motion to Dismiss on the ground of: (1) lack of jurisdiction
over the offense charged; and (2) prescription of the crime charged.20

On February 19, 2010, the RTC-Cebu issued the herein assailed Order,21 dismissing the instant
criminal case against respondent on the ground that the facts charged in the information do not
constitute an offense with respect to the respondent who is an alien, the dispositive part of
which states:

WHEREFORE, the Court finds that the facts charged in the information do not constitute an
offense with respect to the accused, he being an alien, and accordingly, orders this case
DISMISSED.

The bail bond posted by accused Ernst Johan Brinkman Van Wilsem for his provisional liberty is
hereby cancelled (sic) and ordered released.

SO ORDERED.

Cebu City, Philippines, February 19, 2010.22

Thereafter, petitioner filed her Motion for Reconsideration thereto reiterating respondents
obligation to support their child under Article 19523 of the Family Code, thus, failure to do so
makes him liable under R.A. No. 9262 which "equally applies to all persons in the Philippines
who are obliged to support their minor children regardless of the obligors nationality."24
On September 1, 2010, the lower court issued an Order25 denying petitioners Motion for
Reconsideration and reiterating its previous ruling. Thus:

x x x The arguments therein presented are basically a rehash of those advanced earlier in the
memorandum of the prosecution. Thus, the court hereby reiterates its ruling that since the
accused is a foreign national he is not subject to our national law (The Family Code) in regard to
a parents duty and obligation to givesupport to his child. Consequently, he cannot be charged
of violating R.A. 9262 for his alleged failure to support his child. Unless it is conclusively
established that R.A. 9262 applies to a foreigner who fails to give support tohis child,
notwithstanding that he is not bound by our domestic law which mandates a parent to give such
support, it is the considered opinion of the court that no prima faciecase exists against the
accused herein, hence, the case should be dismissed.

WHEREFORE, the motion for reconsideration is hereby DENIED for lack of merit.

SO ORDERED.

Cebu City, Philippines, September 1, 2010.26

Hence, the present Petition for Review on Certiorari raising the following issues:

1. Whether or not a foreign national has an obligation to support his minor child under
Philippine law; and

2. Whether or not a foreign national can be held criminally liable under R.A. No. 9262 for
his unjustified failure to support his minor child.27

At the outset, let it be emphasized that We are taking cognizance of the instant petition despite
the fact that the same was directly lodged with the Supreme Court, consistent with the ruling in
Republic v. Sunvar Realty Development Corporation,28 which lays down the instances when a
ruling of the trial court may be brought on appeal directly to the Supreme Court without violating
the doctrine of hierarchy of courts, to wit:

x x x Nevertheless, the Rules do not prohibit any of the parties from filing a Rule 45 Petition with
this Court, in case only questions of law are raised or involved. This latter situation was one that
petitioners found themselves in when they filed the instant Petition to raise only questions of
law. In Republic v. Malabanan, the Court clarified the three modes of appeal from decisions of
the RTC, to wit: (1) by ordinary appeal or appeal by writ of error under Rule 41, whereby
judgment was rendered in a civil or criminal action by the RTC in the exercise of its original
jurisdiction; (2) by a petition for review under Rule 42, whereby judgment was rendered by the
RTC in the exercise of its appellate jurisdiction; and (3) by a petition for review on certiorari
before the Supreme Court under Rule 45. "The first mode of appeal is taken to the [Court of
Appeals] on questions of fact or mixed questions of fact and law. The second mode of appeal is
brought to the CA on questions of fact, of law, or mixed questions of fact and law. The third
mode of appealis elevated to the Supreme Court only on questions of law." (Emphasis supplied)

There is a question of law when the issue does not call for an examination of the probative
value of the evidence presented or of the truth or falsehood of the facts being admitted, and the
doubt concerns the correct application of law and jurisprudence on the matter. The resolution of
the issue must rest solely on what the law provides on the given set of circumstances.29
Indeed, the issues submitted to us for resolution involve questions of law the response thereto
concerns the correct application of law and jurisprudence on a given set of facts, i.e.,whether or
not a foreign national has an obligation to support his minor child under Philippine law; and
whether or not he can be held criminally liable under R.A. No. 9262 for his unjustified failure to
do so.

It cannot be negated, moreover, that the instant petition highlights a novel question of law
concerning the liability of a foreign national who allegedly commits acts and omissions
punishable under special criminal laws, specifically in relation to family rights and duties. The
inimitability of the factual milieu of the present case, therefore, deserves a definitive ruling by
this Court, which will eventually serve as a guidepost for future cases. Furthermore, dismissing
the instant petition and remanding the same to the CA would only waste the time, effort and
resources of the courts. Thus, in the present case, considerations of efficiency and economy in
the administration of justice should prevail over the observance of the hierarchy of courts.

Now, on the matter of the substantive issues, We find the petition meritorious. Nonetheless, we
do not fully agree with petitioners contentions.

To determine whether or not a person is criminally liable under R.A. No. 9262, it is imperative
that the legal obligation to support exists.

Petitioner invokes Article 19530 of the Family Code, which provides the parents obligation to
support his child. Petitioner contends that notwithstanding the existence of a divorce decree
issued in relation to Article 26 of the Family Code,31 respondent is not excused from complying
with his obligation to support his minor child with petitioner.

On the other hand, respondent contends that there is no sufficient and clear basis presented by
petitioner that she, as well as her minor son, are entitled to financial support.32 Respondent also
added that by reason of the Divorce Decree, he is not obligated topetitioner for any financial
support.33

On this point, we agree with respondent that petitioner cannot rely on Article 19534 of the New
Civil Code in demanding support from respondent, who is a foreign citizen, since Article 1535 of
the New Civil Code stresses the principle of nationality. In other words, insofar as Philippine
laws are concerned, specifically the provisions of the Family Code on support, the same only
applies to Filipino citizens. By analogy, the same principle applies to foreigners such that they
are governed by their national law with respect to family rights and duties.36

The obligation to give support to a child is a matter that falls under family rights and duties.
Since the respondent is a citizen of Holland or the Netherlands, we agree with the RTC-Cebu
that he is subject to the laws of his country, not to Philippinelaw, as to whether he is obliged to
give support to his child, as well as the consequences of his failure to do so.37

In the case of Vivo v. Cloribel,38 the Court held that

Furthermore, being still aliens, they are not in position to invoke the provisions of the Civil Code
of the Philippines, for that Code cleaves to the principle that family rights and duties are
governed by their personal law, i.e.,the laws of the nation to which they belong even when
staying in a foreign country (cf. Civil Code, Article 15).39
It cannot be gainsaid, therefore, that the respondent is not obliged to support petitioners son
under Article195 of the Family Code as a consequence of the Divorce Covenant obtained in
Holland. This does not, however, mean that respondent is not obliged to support petitioners son
altogether.

In international law, the party who wants to have a foreign law applied to a dispute or case has
the burden of proving the foreign law.40 In the present case, respondent hastily concludes that
being a national of the Netherlands, he is governed by such laws on the matter of provision of
and capacity to support.41 While respondent pleaded the laws of the Netherlands in advancing
his position that he is not obliged to support his son, he never proved the same.

It is incumbent upon respondent to plead and prove that the national law of the Netherlands
does not impose upon the parents the obligation to support their child (either before, during or
after the issuance of a divorce decree), because Llorente v. Court of Appeals,42 has already
enunciated that:

True, foreign laws do not prove themselves in our jurisdiction and our courts are not authorized
to takejudicial notice of them. Like any other fact, they must be alleged and proved.43

In view of respondents failure to prove the national law of the Netherlands in his favor, the
doctrine of processual presumption shall govern. Under this doctrine, if the foreign law involved
is not properly pleaded and proved, our courts will presume that the foreign law is the same as
our local or domestic or internal law.44 Thus, since the law of the Netherlands as regards the
obligation to support has not been properly pleaded and proved in the instant case, it is
presumed to be the same with Philippine law, which enforces the obligation of parents to
support their children and penalizing the non-compliance therewith.

Moreover, while in Pilapil v. Ibay-Somera,45 the Court held that a divorce obtained in a foreign
land as well as its legal effects may be recognized in the Philippines in view of the nationality
principle on the matter of status of persons, the Divorce Covenant presented by respondent
does not completely show that he is notliable to give support to his son after the divorce decree
was issued. Emphasis is placed on petitioners allegation that under the second page of the
aforesaid covenant, respondents obligation to support his child is specifically stated,46which
was not disputed by respondent.

We likewise agree with petitioner that notwithstanding that the national law of respondent states
that parents have no obligation to support their children or that such obligation is not punishable
by law, said law would still not find applicability,in light of the ruling in Bank of America, NT and
SA v. American Realty Corporation,47 to wit:

In the instant case, assuming arguendo that the English Law on the matter were properly
pleaded and proved in accordance with Section 24, Rule 132 of the Rules of Court and the
jurisprudence laid down in Yao Kee, et al. vs. Sy-Gonzales, said foreign law would still not find
applicability.

Thus, when the foreign law, judgment or contract is contrary to a sound and established public
policy of the forum, the said foreign law, judgment or order shall not be applied.

Additionally, prohibitive laws concerning persons, their acts or property, and those which have
for their object public order, public policy and good customs shall not be rendered ineffective by
laws or judgments promulgated, or by determinations or conventions agreed upon in a foreign
country.

The public policy sought to be protected in the instant case is the principle imbedded in our
jurisdiction proscribing the splitting up of a single cause of action.

Section 4, Rule 2 of the 1997 Rules of Civil Procedure is pertinent

If two or more suits are instituted on the basis of the same cause of action, the filing of one or a
judgment upon the merits in any one is available as a ground for the dismissal of the others.
Moreover, foreign law should not be applied when its application would work undeniable
injustice to the citizens or residents of the forum. To give justice is the most important function of
law; hence, a law, or judgment or contract that is obviously unjust negates the fundamental
principles of Conflict of Laws.48

Applying the foregoing, even if the laws of the Netherlands neither enforce a parents obligation
to support his child nor penalize the noncompliance therewith, such obligation is still duly
enforceable in the Philippines because it would be of great injustice to the child to be denied of
financial support when the latter is entitled thereto.

We emphasize, however, that as to petitioner herself, respondent is no longer liable to support


his former wife, in consonance with the ruling in San Luis v. San Luis,49 to wit:

As to the effect of the divorce on the Filipino wife, the Court ruled that she should no longerbe
considered marriedto the alien spouse. Further, she should not be required to perform her
marital duties and obligations. It held:

To maintain, as private respondent does, that, under our laws, petitioner has to be considered
still married to private respondent and still subject to a wife's obligations under Article 109, et.
seq. of the Civil Code cannot be just. Petitioner should not be obliged to live together with,
observe respect and fidelity, and render support to private respondent. The latter should not
continue to be one of her heirs with possible rights to conjugal property. She should not be
discriminated against in her own country if the ends of justice are to be served. (Emphasis
added)50

Based on the foregoing legal precepts, we find that respondent may be made liable under
Section 5(e) and (i) of R.A. No. 9262 for unjustly refusing or failing to give support topetitioners
son, to wit:

SECTION 5. Acts of Violence Against Women and Their Children.- The crime of violence
against women and their children is committed through any of the following acts:

xxxx

(e) Attempting to compel or compelling the woman or her child to engage in conduct which the
woman or her child has the right to desist from or desist from conduct which the woman or her
child has the right to engage in, or attempting to restrict or restricting the woman's or her child's
freedom of movement or conduct by force or threat of force, physical or other harm or threat of
physical or other harm, or intimidation directed against the woman or child. This shall include,
butnot limited to, the following acts committed with the purpose or effect of controlling or
restricting the woman's or her child's movement or conduct:

xxxx

(2) Depriving or threatening to deprive the woman or her children of financial support legally due
her or her family, or deliberately providing the woman's children insufficient financial support; x x
xx

(i) Causing mental or emotional anguish, public ridicule or humiliation to the woman or her child,
including, but not limited to, repeated verbal and emotional abuse, and denial of financial
support or custody of minor childrenof access to the woman's child/children.51

Under the aforesaid special law, the deprivation or denial of financial support to the child is
considered anact of violence against women and children.

In addition, considering that respondent is currently living in the Philippines, we find strength in
petitioners claim that the Territoriality Principle in criminal law, in relation to Article 14 of the
New Civil Code, applies to the instant case, which provides that: "[p]enal laws and those of
public security and safety shall be obligatory upon all who live and sojourn in Philippine territory,
subject to the principle of public international law and to treaty stipulations." On this score, it is
indisputable that the alleged continuing acts of respondent in refusing to support his child with
petitioner is committed here in the Philippines as all of the parties herein are residents of the
Province of Cebu City. As such, our courts have territorial jurisdiction over the offense charged
against respondent. It is likewise irrefutable that jurisdiction over the respondent was acquired
upon his arrest.

Finally, we do not agree with respondents argument that granting, but not admitting, that there
is a legal basis for charging violation of R.A. No. 9262 in the instant case, the criminal liability
has been extinguished on the ground of prescription of crime52 under Section 24 of R.A. No.
9262, which provides that:

SECTION 24. Prescriptive Period. Acts falling under Sections 5(a) to 5(f) shall prescribe in
twenty (20) years. Acts falling under Sections 5(g) to 5(I) shall prescribe in ten (10) years.

The act of denying support to a child under Section 5(e)(2) and (i) of R.A. No. 9262 is a
continuing offense,53which started in 1995 but is still ongoing at present. Accordingly, the crime
charged in the instant case has clearly not prescribed.

Given, however, that the issue on whether respondent has provided support to petitioners child
calls for an examination of the probative value of the evidence presented, and the truth and
falsehood of facts being admitted, we hereby remand the determination of this issue to the RTC-
Cebu which has jurisdiction over the case.

WHEREFORE, the petition is GRANTED. The Orders dated February 19, 2010 and September
1, 2010, respectively, of the Regional Trial Court of the City of Cebu are hereby REVERSED
and SET ASIDE. The case is REMANDED to the same court to conduct further proceedings
based on the merits of the case.
SO ORDERED.

G.R. No. 196049 June 26, 2013

MINORU FUJIKI, PETITIONER,


vs.
MARIA PAZ GALELA MARINAY, SHINICHI MAEKARA, LOCAL CIVIL REGISTRAR OF
QUEZON CITY, AND THE ADMINISTRATOR AND CIVIL REGISTRAR GENERAL OF THE
NATIONAL STATISTICS OFFICE, RESPONDENTS.

TOPIC: CONFLICT OF LAWS

DECISION

CARPIO, J.:

The Case

This is a direct recourse to this Court from the Regional Trial Court (RTC), Branch 107, Quezon
City, through a petition for review on certiorari under Rule 45 of the Rules of Court on a pure
question of law. The petition assails the Order1 dated 31 January 2011 of the RTC in Civil Case
No. Q-11-68582 and its Resolution dated 2 March 2011 denying petitioners Motion for
Reconsideration. The RTC dismissed the petition for "Judicial Recognition of Foreign Judgment
(or Decree of Absolute Nullity of Marriage)" based on improper venue and the lack of personality
of petitioner, Minoru Fujiki, to file the petition.

The Facts

Petitioner Minoru Fujiki (Fujiki) is a Japanese national who married respondent Maria Paz
Galela Marinay (Marinay) in the Philippines2 on 23 January 2004. The marriage did not sit well
with petitioners parents. Thus, Fujiki could not bring his wife to Japan where he resides.
Eventually, they lost contact with each other.

In 2008, Marinay met another Japanese, Shinichi Maekara (Maekara). Without the first marriage
being dissolved, Marinay and Maekara were married on 15 May 2008 in Quezon City,
Philippines. Maekara brought Marinay to Japan. However, Marinay allegedly suffered physical
abuse from Maekara. She left Maekara and started to contact Fujiki.3

Fujiki and Marinay met in Japan and they were able to reestablish their relationship. In 2010,
Fujiki helped Marinay obtain a judgment from a family court in Japan which declared the
marriage between Marinay and Maekara void on the ground of bigamy.4 On 14 January 2011,
Fujiki filed a petition in the RTC entitled: "Judicial Recognition of Foreign Judgment (or Decree
of Absolute Nullity of Marriage)." Fujiki prayed that (1) the Japanese Family Court judgment be
recognized; (2) that the bigamous marriage between Marinay and Maekara be declared void ab
initiounder Articles 35(4) and 41 of the Family Code of the Philippines;5 and (3) for the RTC to
direct the Local Civil Registrar of Quezon City to annotate the Japanese Family Court judgment
on the Certificate of Marriage between Marinay and Maekara and to endorse such annotation to
the Office of the Administrator and Civil Registrar General in the National Statistics Office
(NSO).6

The Ruling of the Regional Trial Court

A few days after the filing of the petition, the RTC immediately issued an Order dismissing the
petition and withdrawing the case from its active civil docket.7 The RTC cited the following
provisions of the Rule on Declaration of Absolute Nullity of Void Marriages and Annulment of
Voidable Marriages (A.M. No. 02-11-10-SC):

Sec. 2. Petition for declaration of absolute nullity of void marriages.

(a) Who may file. A petition for declaration of absolute nullity of void marriage may be filed
solely by the husband or the wife.

xxxx

Sec. 4. Venue. The petition shall be filed in the Family Court of the province or city where the
petitioner or the respondent has been residing for at least six months prior to the date of filing,
or in the case of a non-resident respondent, where he may be found in the Philippines, at the
election of the petitioner. x x x

The RTC ruled, without further explanation, that the petition was in "gross violation" of the above
provisions. The trial court based its dismissal on Section 5(4) of A.M. No. 02-11-10-SC which
provides that "[f]ailure to comply with any of the preceding requirements may be a ground for
immediate dismissal of the petition."8 Apparently, the RTC took the view that only "the husband
or the wife," in this case either Maekara or Marinay, can file the petition to declare their marriage
void, and not Fujiki.

Fujiki moved that the Order be reconsidered. He argued that A.M. No. 02-11-10-SC
contemplated ordinary civil actions for declaration of nullity and annulment of marriage. Thus,
A.M. No. 02-11-10-SC does not apply. A petition for recognition of foreign judgment is a special
proceeding, which "seeks to establish a status, a right or a particular fact,"9 and not a civil action
which is "for the enforcement or protection of a right, or the prevention or redress of a
wrong."10 In other words, the petition in the RTC sought to establish (1) the status and
concomitant rights of Fujiki and Marinay as husband and wife and (2) the fact of the rendition of
the Japanese Family Court judgment declaring the marriage between Marinay and Maekara as
void on the ground of bigamy. The petitioner contended that the Japanese judgment was
consistent with Article 35(4) of the Family Code of the Philippines11 on bigamy and was
therefore entitled to recognition by Philippine courts.12

In any case, it was also Fujikis view that A.M. No. 02-11-10-SC applied only to void marriages
under Article 36 of the Family Code on the ground of psychological incapacity.13 Thus, Section
2(a) of A.M. No. 02-11-10-SC provides that "a petition for declaration of absolute nullity of void
marriages may be filed solely by the husband or the wife." To apply Section 2(a) in bigamy
would be absurd because only the guilty parties would be permitted to sue. In the words of
Fujiki, "[i]t is not, of course, difficult to realize that the party interested in having a bigamous
marriage declared a nullity would be the husband in the prior, pre-existing marriage."14 Fujiki
had material interest and therefore the personality to nullify a bigamous marriage.
Fujiki argued that Rule 108 (Cancellation or Correction of Entries in the Civil Registry) of the
Rules of Court is applicable. Rule 108 is the "procedural implementation" of the Civil Register
Law (Act No. 3753)15 in relation to Article 413 of the Civil Code.16 The Civil Register Law
imposes a duty on the "successful petitioner for divorce or annulment of marriage to send a
copy of the final decree of the court to the local registrar of the municipality where the dissolved
or annulled marriage was solemnized."17 Section 2 of Rule 108 provides that entries in the civil
registry relating to "marriages," "judgments of annulments of marriage" and "judgments
declaring marriages void from the beginning" are subject to cancellation or correction.18 The
petition in the RTC sought (among others) to annotate the judgment of the Japanese Family
Court on the certificate of marriage between Marinay and Maekara.

Fujikis motion for reconsideration in the RTC also asserted that the trial court "gravely erred"
when, on its own, it dismissed the petition based on improper venue. Fujiki stated that the RTC
may be confusing the concept of venue with the concept of jurisdiction, because it is lack of
jurisdiction which allows a court to dismiss a case on its own. Fujiki cited Dacoycoy v.
Intermediate Appellate Court19 which held that the "trial court cannot pre-empt the defendants
prerogative to object to the improper laying of the venue by motu proprio dismissing the
case."20Moreover, petitioner alleged that the trial court should not have "immediately dismissed"
the petition under Section 5 of A.M. No. 02-11-10-SC because he substantially complied with
the provision.

On 2 March 2011, the RTC resolved to deny petitioners motion for reconsideration. In its
Resolution, the RTC stated that A.M. No. 02-11-10-SC applies because the petitioner, in effect,
prays for a decree of absolute nullity of marriage.21 The trial court reiterated its two grounds for
dismissal, i.e. lack of personality to sue and improper venue under Sections 2(a) and 4 of A.M.
No. 02-11-10-SC. The RTC considered Fujiki as a "third person"22 in the proceeding because he
"is not the husband in the decree of divorce issued by the Japanese Family Court, which he
now seeks to be judicially recognized, x x x."23 On the other hand, the RTC did not explain its
ground of impropriety of venue. It only said that "[a]lthough the Court cited Sec. 4 (Venue) x x x
as a ground for dismissal of this case[,] it should be taken together with the other ground cited
by the Court x x x which is Sec. 2(a) x x x."24

The RTC further justified its motu proprio dismissal of the petition based on Braza v. The City
Civil Registrar of Himamaylan City, Negros Occidental.25 The Court in Braza ruled that "[i]n a
special proceeding for correction of entry under Rule 108 (Cancellation or Correction of Entries
in the Original Registry), the trial court has no jurisdiction to nullify marriages x x x." 26 Braza
emphasized that the "validity of marriages as well as legitimacy and filiation can be questioned
only in a direct action seasonably filed by the proper party, and not through a collateral attack
such as [a] petition [for correction of entry] x x x."27

The RTC considered the petition as a collateral attack on the validity of marriage between
Marinay and Maekara. The trial court held that this is a "jurisdictional ground" to dismiss the
petition.28 Moreover, the verification and certification against forum shopping of the petition was
not authenticated as required under Section 529 of A.M. No. 02-11-10-SC. Hence, this also
warranted the "immediate dismissal" of the petition under the same provision.

The Manifestation and Motion of the Office of the Solicitor General and the Letters of
Marinay and Maekara
On 30 May 2011, the Court required respondents to file their comment on the petition for
review.30 The public respondents, the Local Civil Registrar of Quezon City and the Administrator
and Civil Registrar General of the NSO, participated through the Office of the Solicitor General.
Instead of a comment, the Solicitor General filed a Manifestation and Motion.31

The Solicitor General agreed with the petition. He prayed that the RTCs "pronouncement that
the petitioner failed to comply with x x x A.M. No. 02-11-10-SC x x x be set aside" and that the
case be reinstated in the trial court for further proceedings.32 The Solicitor General argued that
Fujiki, as the spouse of the first marriage, is an injured party who can sue to declare the
bigamous marriage between Marinay and Maekara void. The Solicitor General cited Juliano-
Llave v. Republic33 which held that Section 2(a) of A.M. No. 02-11-10-SC does not apply in
cases of bigamy. In Juliano-Llave, this Court explained:

[t]he subsequent spouse may only be expected to take action if he or she had only discovered
during the connubial period that the marriage was bigamous, and especially if the conjugal bliss
had already vanished. Should parties in a subsequent marriage benefit from the bigamous
marriage, it would not be expected that they would file an action to declare the marriage void
and thus, in such circumstance, the "injured spouse" who should be given a legal remedy is the
one in a subsisting previous marriage. The latter is clearly the aggrieved party as the bigamous
marriage not only threatens the financial and the property ownership aspect of the prior
marriage but most of all, it causes an emotional burden to the prior spouse. The subsequent
marriage will always be a reminder of the infidelity of the spouse and the disregard of the prior
marriage which sanctity is protected by the Constitution.34

The Solicitor General contended that the petition to recognize the Japanese Family Court
judgment may be made in a Rule 108 proceeding.35 In Corpuz v. Santo Tomas,36 this Court held
that "[t]he recognition of the foreign divorce decree may be made in a Rule 108 proceeding
itself, as the object of special proceedings (such as that in Rule 108 of the Rules of Court) is
precisely to establish the status or right of a party or a particular
fact."37 While Corpuz concerned a foreign divorce decree, in the present case the Japanese
Family Court judgment also affected the civil status of the parties, especially Marinay, who is a
Filipino citizen.

The Solicitor General asserted that Rule 108 of the Rules of Court is the procedure to record
"[a]cts, events and judicial decrees concerning the civil status of persons" in the civil registry as
required by Article 407 of the Civil Code. In other words, "[t]he law requires the entry in the civil
registry of judicial decrees that produce legal consequences upon a persons legal capacity and
status x x x."38 The Japanese Family Court judgment directly bears on the civil status of a
Filipino citizen and should therefore be proven as a fact in a Rule 108 proceeding.

Moreover, the Solicitor General argued that there is no jurisdictional infirmity in assailing a void
marriage under Rule 108, citing De Castro v. De Castro39 and Nial v. Bayadog40 which
declared that "[t]he validity of a void marriage may be collaterally attacked."41

Marinay and Maekara individually sent letters to the Court to comply with the directive for them
to comment on the petition.42 Maekara wrote that Marinay concealed from him the fact that she
was previously married to Fujiki.43Maekara also denied that he inflicted any form of violence on
Marinay.44 On the other hand, Marinay wrote that she had no reason to oppose the
petition.45 She would like to maintain her silence for fear that anything she say might cause
misunderstanding between her and Fujiki.46
The Issues

Petitioner raises the following legal issues:

(1) Whether the Rule on Declaration of Absolute Nullity of Void Marriages and
Annulment of Voidable Marriages (A.M. No. 02-11-10-SC) is applicable.

(2) Whether a husband or wife of a prior marriage can file a petition to recognize a
foreign judgment nullifying the subsequent marriage between his or her spouse and a
foreign citizen on the ground of bigamy.

(3) Whether the Regional Trial Court can recognize the foreign judgment in a proceeding
for cancellation or correction of entries in the Civil Registry under Rule 108 of the Rules
of Court.

The Ruling of the Court

We grant the petition.

The Rule on Declaration of Absolute Nullity of Void Marriages and Annulment of Voidable
Marriages (A.M. No. 02-11-10-SC) does not apply in a petition to recognize a foreign judgment
relating to the status of a marriage where one of the parties is a citizen of a foreign country.
Moreover, in Juliano-Llave v. Republic,47 this Court held that the rule in A.M. No. 02-11-10-SC
that only the husband or wife can file a declaration of nullity or annulment of marriage "does not
apply if the reason behind the petition is bigamy."48

I.

For Philippine courts to recognize a foreign judgment relating to the status of a marriage where
one of the parties is a citizen of a foreign country, the petitioner only needs to prove the foreign
judgment as a fact under the Rules of Court. To be more specific, a copy of the foreign
judgment may be admitted in evidence and proven as a fact under Rule 132, Sections 24 and
25, in relation to Rule 39, Section 48(b) of the Rules of Court.49 Petitioner may prove the
Japanese Family Court judgment through (1) an official publication or (2) a certification or copy
attested by the officer who has custody of the judgment. If the office which has custody is in a
foreign country such as Japan, the certification may be made by the proper diplomatic or
consular officer of the Philippine foreign service in Japan and authenticated by the seal of
office.50

To hold that A.M. No. 02-11-10-SC applies to a petition for recognition of foreign judgment
would mean that the trial court and the parties should follow its provisions, including the form
and contents of the petition,51 the service of summons,52 the investigation of the public
prosecutor,53 the setting of pre-trial,54 the trial55 and the judgment of the trial court.56 This is
absurd because it will litigate the case anew. It will defeat the purpose of recognizing foreign
judgments, which is "to limit repetitive litigation on claims and issues."57 The interpretation of the
RTC is tantamount to relitigating the case on the merits. In Mijares v. Raada,58 this Court
explained that "[i]f every judgment of a foreign court were reviewable on the merits, the plaintiff
would be forced back on his/her original cause of action, rendering immaterial the previously
concluded litigation."59
A foreign judgment relating to the status of a marriage affects the civil status, condition and legal
capacity of its parties. However, the effect of a foreign judgment is not automatic. To extend the
effect of a foreign judgment in the Philippines, Philippine courts must determine if the foreign
judgment is consistent with domestic public policy and other mandatory laws.60 Article 15 of the
Civil Code provides that "[l]aws relating to family rights and duties, or to the status, condition
and legal capacity of persons are binding upon citizens of the Philippines, even though living
abroad." This is the rule of lex nationalii in private international law. Thus, the Philippine State
may require, for effectivity in the Philippines, recognition by Philippine courts of a foreign
judgment affecting its citizen, over whom it exercises personal jurisdiction relating to the status,
condition and legal capacity of such citizen.

A petition to recognize a foreign judgment declaring a marriage void does not require relitigation
under a Philippine court of the case as if it were a new petition for declaration of nullity of
marriage. Philippine courts cannot presume to know the foreign laws under which the foreign
judgment was rendered. They cannot substitute their judgment on the status, condition and
legal capacity of the foreign citizen who is under the jurisdiction of another state. Thus,
Philippine courts can only recognize the foreign judgment as a fact according to the rules of
evidence.

Section 48(b), Rule 39 of the Rules of Court provides that a foreign judgment or final order
against a person creates a "presumptive evidence of a right as between the parties and their
successors in interest by a subsequent title." Moreover, Section 48 of the Rules of Court states
that "the judgment or final order may be repelled by evidence of a want of jurisdiction, want of
notice to the party, collusion, fraud, or clear mistake of law or fact." Thus, Philippine courts
exercise limited review on foreign judgments. Courts are not allowed to delve into the merits of a
foreign judgment. Once a foreign judgment is admitted and proven in a Philippine court, it can
only be repelled on grounds external to its merits, i.e. , "want of jurisdiction, want of notice to the
party, collusion, fraud, or clear mistake of law or fact." The rule on limited review embodies the
policy of efficiency and the protection of party expectations,61 as well as respecting the
jurisdiction of other states.62

Since 1922 in Adong v. Cheong Seng Gee,63 Philippine courts have recognized foreign divorce
decrees between a Filipino and a foreign citizen if they are successfully proven under the rules
of evidence.64 Divorce involves the dissolution of a marriage, but the recognition of a foreign
divorce decree does not involve the extended procedure under A.M. No. 02-11-10-SC or the
rules of ordinary trial. While the Philippines does not have a divorce law, Philippine courts may,
however, recognize a foreign divorce decree under the second paragraph of Article 26 of the
Family Code, to capacitate a Filipino citizen to remarry when his or her foreign spouse obtained
a divorce decree abroad.65

There is therefore no reason to disallow Fujiki to simply prove as a fact the Japanese Family
Court judgment nullifying the marriage between Marinay and Maekara on the ground of bigamy.
While the Philippines has no divorce law, the Japanese Family Court judgment is fully
consistent with Philippine public policy, as bigamous marriages are declared void from the
beginning under Article 35(4) of the Family Code. Bigamy is a crime under Article 349 of the
Revised Penal Code. Thus, Fujiki can prove the existence of the Japanese Family Court
judgment in accordance with Rule 132, Sections 24 and 25, in relation to Rule 39, Section 48(b)
of the Rules of Court.

II.
Since the recognition of a foreign judgment only requires proof of fact of the judgment, it may be
made in a special proceeding for cancellation or correction of entries in the civil registry under
Rule 108 of the Rules of Court. Rule 1, Section 3 of the Rules of Court provides that "[a] special
proceeding is a remedy by which a party seeks to establish a status, a right, or a particular fact."
Rule 108 creates a remedy to rectify facts of a persons life which are recorded by the State
pursuant to the Civil Register Law or Act No. 3753. These are facts of public consequence such
as birth, death or marriage,66 which the State has an interest in recording. As noted by the
Solicitor General, in Corpuz v. Sto. Tomas this Court declared that "[t]he recognition of the
foreign divorce decree may be made in a Rule 108 proceeding itself, as the object of special
proceedings (such as that in Rule 108 of the Rules of Court) is precisely to establish the status
or right of a party or a particular fact."67

Rule 108, Section 1 of the Rules of Court states:

Sec. 1. Who may file petition. Any person interested in any act, event, order or
decree concerning the civil status of persons which has been recorded in the civil
register, may file a verified petition for the cancellation or correction of any entry relating
thereto, with the Regional Trial Court of the province where the corresponding civil registry is
located. (Emphasis supplied)

Fujiki has the personality to file a petition to recognize the Japanese Family Court judgment
nullifying the marriage between Marinay and Maekara on the ground of bigamy because the
judgment concerns his civil status as married to Marinay. For the same reason he has the
personality to file a petition under Rule 108 to cancel the entry of marriage between Marinay
and Maekara in the civil registry on the basis of the decree of the Japanese Family Court.

There is no doubt that the prior spouse has a personal and material interest in maintaining the
integrity of the marriage he contracted and the property relations arising from it. There is also no
doubt that he is interested in the cancellation of an entry of a bigamous marriage in the civil
registry, which compromises the public record of his marriage. The interest derives from the
substantive right of the spouse not only to preserve (or dissolve, in limited instances68) his most
intimate human relation, but also to protect his property interests that arise by operation of law
the moment he contracts marriage.69 These property interests in marriage include the right to be
supported "in keeping with the financial capacity of the family"70 and preserving the property
regime of the marriage.71

Property rights are already substantive rights protected by the Constitution,72 but a spouses
right in a marriage extends further to relational rights recognized under Title III ("Rights and
Obligations between Husband and Wife") of the Family Code.73 A.M. No. 02-11-10-SC cannot
"diminish, increase, or modify" the substantive right of the spouse to maintain the integrity of his
marriage.74 In any case, Section 2(a) of A.M. No. 02-11-10-SC preserves this substantive right
by limiting the personality to sue to the husband or the wife of the union recognized by law.

Section 2(a) of A.M. No. 02-11-10-SC does not preclude a spouse of a subsisting marriage to
question the validity of a subsequent marriage on the ground of bigamy. On the contrary, when
Section 2(a) states that "[a] petition for declaration of absolute nullity of void marriage may be
filed solely by the husband or the wife"75it refers to the husband or the wife of the
subsisting marriage. Under Article 35(4) of the Family Code, bigamous marriages are void from
the beginning. Thus, the parties in a bigamous marriage are neither the husband nor the wife
under the law. The husband or the wife of the prior subsisting marriage is the one who has the
personality to file a petition for declaration of absolute nullity of void marriage under Section 2(a)
of A.M. No. 02-11-10-SC.

Article 35(4) of the Family Code, which declares bigamous marriages void from the beginning, is
the civil aspect of Article 349 of the Revised Penal Code,76 which penalizes bigamy. Bigamy is a
public crime. Thus, anyone can initiate prosecution for bigamy because any citizen has an
interest in the prosecution and prevention of crimes.77If anyone can file a criminal action which
leads to the declaration of nullity of a bigamous marriage,78 there is more reason to confer
personality to sue on the husband or the wife of a subsisting marriage. The prior spouse does
not only share in the public interest of prosecuting and preventing crimes, he is also personally
interested in the purely civil aspect of protecting his marriage.

When the right of the spouse to protect his marriage is violated, the spouse is clearly an injured
party and is therefore interested in the judgment of the suit.79 Juliano-Llave ruled that the prior
spouse "is clearly the aggrieved party as the bigamous marriage not only threatens the financial
and the property ownership aspect of the prior marriage but most of all, it causes an emotional
burden to the prior spouse."80 Being a real party in interest, the prior spouse is entitled to sue in
order to declare a bigamous marriage void. For this purpose, he can petition a court to
recognize a foreign judgment nullifying the bigamous marriage and judicially declare as a fact
that such judgment is effective in the Philippines. Once established, there should be no more
impediment to cancel the entry of the bigamous marriage in the civil registry.

III.

In Braza v. The City Civil Registrar of Himamaylan City, Negros Occidental, this Court held that
a "trial court has no jurisdiction to nullify marriages" in a special proceeding for cancellation or
correction of entry under Rule 108 of the Rules of Court.81 Thus, the "validity of marriage[] x x x
can be questioned only in a direct action" to nullify the marriage.82 The RTC relied on Braza in
dismissing the petition for recognition of foreign judgment as a collateral attack on the marriage
between Marinay and Maekara.

Braza is not applicable because Braza does not involve a recognition of a foreign judgment
nullifying a bigamous marriage where one of the parties is a citizen of the foreign country.

To be sure, a petition for correction or cancellation of an entry in the civil registry cannot
substitute for an action to invalidate a marriage. A direct action is necessary to prevent
circumvention of the substantive and procedural safeguards of marriage under the Family Code,
A.M. No. 02-11-10-SC and other related laws. Among these safeguards are the requirement of
proving the limited grounds for the dissolution of marriage,83 support pendente lite of the
spouses and children,84 the liquidation, partition and distribution of the properties of the
spouses,85 and the investigation of the public prosecutor to determine collusion.86 A direct action
for declaration of nullity or annulment of marriage is also necessary to prevent circumvention of
the jurisdiction of the Family Courts under the Family Courts Act of 1997 (Republic Act No.
8369), as a petition for cancellation or correction of entries in the civil registry may be filed in the
Regional Trial Court "where the corresponding civil registry is located."87 In other words, a
Filipino citizen cannot dissolve his marriage by the mere expedient of changing his entry of
marriage in the civil registry.

However, this does not apply in a petition for correction or cancellation of a civil registry entry
based on the recognition of a foreign judgment annulling a marriage where one of the parties is
a citizen of the foreign country. There is neither circumvention of the substantive and procedural
safeguards of marriage under Philippine law, nor of the jurisdiction of Family Courts under R.A.
No. 8369. A recognition of a foreign judgment is not an action to nullify a marriage. It is an
action for Philippine courts to recognize the effectivity of a foreign judgment, which
presupposes a case which was already tried and decided under foreign law. The
procedure in A.M. No. 02-11-10-SC does not apply in a petition to recognize a foreign judgment
annulling a bigamous marriage where one of the parties is a citizen of the foreign country.
Neither can R.A. No. 8369 define the jurisdiction of the foreign court.

Article 26 of the Family Code confers jurisdiction on Philippine courts to extend the effect of a
foreign divorce decree to a Filipino spouse without undergoing trial to determine the validity of
the dissolution of the marriage. The second paragraph of Article 26 of the Family Code provides
that "[w]here a marriage between a Filipino citizen and a foreigner is validly celebrated and a
divorce is thereafter validly obtained abroad by the alien spouse capacitating him or her to
remarry, the Filipino spouse shall have capacity to remarry under Philippine law." In Republic v.
Orbecido,88 this Court recognized the legislative intent of the second paragraph of Article 26
which is "to avoid the absurd situation where the Filipino spouse remains married to the alien
spouse who, after obtaining a divorce, is no longer married to the Filipino spouse"89 under the
laws of his or her country. The second paragraph of Article 26 of the Family Code only
authorizes Philippine courts to adopt the effects of a foreign divorce decree precisely because
the Philippines does not allow divorce. Philippine courts cannot try the case on the merits
because it is tantamount to trying a case for divorce.

The second paragraph of Article 26 is only a corrective measure to address the anomaly that
results from a marriage between a Filipino, whose laws do not allow divorce, and a foreign
citizen, whose laws allow divorce. The anomaly consists in the Filipino spouse being tied to the
marriage while the foreign spouse is free to marry under the laws of his or her country. The
correction is made by extending in the Philippines the effect of the foreign divorce decree, which
is already effective in the country where it was rendered. The second paragraph of Article 26 of
the Family Code is based on this Courts decision in Van Dorn v. Romillo90 which declared that
the Filipino spouse "should not be discriminated against in her own country if the ends of justice
are to be served."91

The principle in Article 26 of the Family Code applies in a marriage between a Filipino and a
foreign citizen who obtains a foreign judgment nullifying the marriage on the ground of bigamy.
The Filipino spouse may file a petition abroad to declare the marriage void on the ground of
bigamy. The principle in the second paragraph of Article 26 of the Family Code applies because
the foreign spouse, after the foreign judgment nullifying the marriage, is capacitated to remarry
under the laws of his or her country. If the foreign judgment is not recognized in the Philippines,
the Filipino spouse will be discriminatedthe foreign spouse can remarry while the Filipino
spouse cannot remarry.

Under the second paragraph of Article 26 of the Family Code, Philippine courts are empowered
to correct a situation where the Filipino spouse is still tied to the marriage while the foreign
spouse is free to marry. Moreover, notwithstanding Article 26 of the Family Code, Philippine
courts already have jurisdiction to extend the effect of a foreign judgment in the Philippines to
the extent that the foreign judgment does not contravene domestic public policy. A critical
difference between the case of a foreign divorce decree and a foreign judgment nullifying a
bigamous marriage is that bigamy, as a ground for the nullity of marriage, is fully consistent with
Philippine public policy as expressed in Article 35(4) of the Family Code and Article 349 of the
Revised Penal Code. The Filipino spouse has the option to undergo full trial by filing a petition
for declaration of nullity of marriage under A.M. No. 02-11-10-SC, but this is not the only remedy
available to him or her. Philippine courts have jurisdiction to recognize a foreign judgment
nullifying a bigamous marriage, without prejudice to a criminal prosecution for bigamy.

In the recognition of foreign judgments, Philippine courts are incompetent to substitute their
judgment on how a case was decided under foreign law. They cannot decide on the "family
rights and duties, or on the status, condition and legal capacity" of the foreign citizen who is a
party to the foreign judgment. Thus, Philippine courts are limited to the question of whether to
extend the effect of a foreign judgment in the Philippines. In a foreign judgment relating to the
status of a marriage involving a citizen of a foreign country, Philippine courts only decide
whether to extend its effect to the Filipino party, under the rule of lex nationalii expressed in
Article 15 of the Civil Code.

For this purpose, Philippine courts will only determine (1) whether the foreign judgment is
inconsistent with an overriding public policy in the Philippines; and (2) whether any alleging
party is able to prove an extrinsic ground to repel the foreign judgment, i.e. want of jurisdiction,
want of notice to the party, collusion, fraud, or clear mistake of law or fact. If there is neither
inconsistency with public policy nor adequate proof to repel the judgment, Philippine courts
should, by default, recognize the foreign judgment as part of the comity of nations. Section
48(b), Rule 39 of the Rules of Court states that the foreign judgment is already "presumptive
evidence of a right between the parties." Upon recognition of the foreign judgment, this right
becomes conclusive and the judgment serves as the basis for the correction or cancellation of
entry in the civil registry. The recognition of the foreign judgment nullifying a bigamous marriage
is a subsequent event that establishes a new status, right and fact92 that needs to be reflected in
the civil registry. Otherwise, there will be an inconsistency between the recognition of the
effectivity of the foreign judgment and the public records in the Philippines.1wphi1

However, the recognition of a foreign judgment nullifying a bigamous marriage is without


prejudice to prosecution for bigamy under Article 349 of the Revised Penal Code.93 The
recognition of a foreign judgment nullifying a bigamous marriage is not a ground for extinction of
criminal liability under Articles 89 and 94 of the Revised Penal Code. Moreover, under Article 91
of the Revised Penal Code, "[t]he term of prescription [of the crime of bigamy] shall not run
when the offender is absent from the Philippine archipelago."

Since A.M. No. 02-11-10-SC is inapplicable, the Court no longer sees the need to address the
questions on venue and the contents and form of the petition under Sections 4 and 5,
respectively, of A.M. No. 02-11-10-SC.

WHEREFORE, we GRANT the petition. The Order dated 31 January 2011 and the Resolution
dated 2 March 2011 of the Regional Trial Court, Branch 107, Quezon City, in Civil Case No. Q-
11-68582 are REVERSED and SET ASIDE. The Regional Trial Court
is ORDERED to REINSTATE the petition for further proceedings in accordance with this
Decision.

SO ORDERED.
G.R. No. 173540 January 22, 2014

PEREGRINA MACUA VDA. DE AVENIDO, Petitioner,


vs.
TECLA HOYBIA AVENIDO, Respondent.

TOPIC: PROOF OF MARRIAGE

DECISION

PEREZ, J.:

This is a Petition for Review on Certiorari under Rule 45.ofthe Rules of Court, assailing the 31
August 2005 Decision1 of the Court of Appeals (CA) in CA-G.R. CV No. 79444, which reversed
the 25 March 2003 Decision2 of the Regional Trial Court (RTC), Branch 8 of Davao City, in a
complaint for Declaration of Absolute Nullity of Marriage docketed as Civil Case No. 26, 908-
98.

The Facts

This case involves a contest between two women both claiming to have been validly married to
the same man, now deceased.

Respondent Tecla Hoybia Avenido (Tecla) instituted on 11 November 1998, a Complaint for
Declaration of Nullity of Marriage against Peregrina Macua Vda. de Avenido (Peregrina) on the
ground that she (Tecla), is the lawful wife of the deceased Eustaquio Avenido (Eustaquio). In
her complaint, Tecla alleged that her marriage to Eustaquio was solemnized on 30 September
1942 in Talibon, Bohol in rites officiated by the Parish Priest of the said town. According to her,
the fact of their marriage is evidenced by a Marriage Certificate recorded with the Office of the
Local Civil Registrar (LCR) of Talibon, Bohol. However, due to World War II, records were
destroyed. Thus, only a Certification3 was issued by the LCR.

During the existence of Tecla and Eustaquios union, they begot four (4) children, namely:
Climaco H. Avenido, born on 30 March 1943; Apolinario H. Avenido, born on 23 August 1948;
Editha A. Ausa, born on 26 July 1950, and Eustaquio H. Avenido, Jr., born on 15 December
1952. Sometime in 1954, Eustaquio left his family and his whereabouts was not known. In 1958,
Tecla and her children were informed that Eustaquio was in Davao City living with another
woman by the name of Buenaventura Sayson who later died in 1977 without any issue.

In 1979, Tecla learned that her husband Eustaquio got married to another woman by the name
of Peregrina, which marriage she claims must be declared null and void for being bigamous
an action she sought to protect the rights of her children over the properties acquired by
Eustaquio.

On 12 April 1999, Peregrina filed her answer to the complaint with counterclaim,4 essentially
averring that she is the legal surviving spouse of Eustaquio who died on 22 September 1989 in
Davao City, their marriage having been celebrated on 30 March 1979 at St. Jude Parish in
Davao City. She also contended that the case was instituted to deprive her of the properties she
owns in her own right and as an heir of Eustaquio.

Trial ensued.

Tecla presented testimonial and documentary evidence consisting of:

1) Testimonies of Adelina Avenido-Ceno (Adelina), Climaco Avenido (Climaco) and


Tecla herself to substantiate her alleged prior existing and valid marriage with (sic)
Eustaquio;

2) Documentary evidence such as the following:

a. Certification of Loss/Destruction of Record of Marriage from 1900 to 1944


issued by the Office of the Civil Registrar, Municipality of Talibon, Bohol;5

b. Certification of Submission of a copy of Certificate of Marriage to the Office of


the Civil Registrar General, National Statistics Office (NSO), R. Magsaysay Blvd.,
Sta Mesa, Manila;6

c. Certification that Civil Registry records of births, deaths and marriages that
were actually filed in the Office of the Civil Registrar General, NSO Manila,
started only in 1932;7

d. Certification that Civil Registry records submitted to the Office of the Civil
Registrar General, NSO, from 1932 to the early part of 1945, were totally
destroyed during the liberation of Manila;8

e. Certification of Birth of Apolinario Avenido;9

f. Certification of Birth of Eustaquio Avenido, Jr.;10

g. Certification of Birth of Editha Avenido;11

h. Certification of Marriage between Eustaquio Sr., and Tecla issued by the


Parish Priest of Talibon, Bohol on 30 September 1942;12

i. Certification that record of birth from 1900 to 1944 were destroyed by Second
World War issued by the Office of the Municipal Registrar of Talibon, Bohol, that
they cannot furnish as requested a true transcription from the Register of Birth of
Climaco Avenido;13

j. Certificate of Baptism of Climaco indicating that he was born on 30 March 1943


to spouses Eustaquio and Tecla;14

k. Electronic copy of the Marriage Contract between Eustaquio and Peregrina.15

On the other hand, Peregrina testified on, among others, her marriage to Eustaquio that took
place in Davao City on 3 March 1979; her life as a wife and how she took care of Eustaquio
when he already had poor health, as well as her knowledge that Tecla is not the legal wife, but
was once a common law wife of Eustaquio.16 Peregrina likewise set forth documentary evidence
to substantiate her allegations and to prove her claim for damages, to wit:

1) Marriage Contract17 between Pregrina and the late Eustaquio showing the date of
marriage on 3 March 1979;

2) Affidavit of Eustaquio executed on 22 March 1985 declaring himself as single when


he contracted marriage with the petitioner although he had a common law relation with
one Tecla Hoybia with whom he had four (4) children namely: Climaco, Tiburcio, Editha
and Eustaquio, Jr., all surnamed Avenido;18

3) Letter of Atty. Edgardo T. Mata dated 15 April 2002, addressed to the Civil Registrar
of the Municipality of Alegria, Surigao del Norte;19 and

4) Certification dated 25 April 2002 issued by Colita P. Umipig, in her capacity as the
Civil Registrar of Alegria, Surigao del Norte.20

In addition, as basis for the counterclaim, Peregrina averred that the case was initiated in bad
faith so as to deprive her of the properties she owns in her own right and as an heir of
Eustaquio; hence, her entitlement to damages and attorneys fees.

On 25 March 2003, the RTC rendered a Decision21 denying Teclas petition, as well as
Peregrinas counter-claim. The dispositive portion thereof reads:

For The Foregoing, the petition for the "DECLARATION OF NULLITY OF MARRIAGE" filed by
petitioner TECLA HOYBIA AVENIDO against respondent PEREGRINA MACUA is hereby
DENIED.

The "COUNTERCLAIM" filed by respondent PEREGRINA MACUA against petitioner TECLA


HOYBIA AVENIDO is hereby DISMISSED.22

Not convinced, Tecla appealed to the CA raising as error the trial courts alleged disregard of
the evidence on the existence of her marriage to Eustaquio.

In its 31 August 2005 Decision,23 the CA ruled in favor of Tecla by declaring the validity of her
marriage to Eustaquio, while pronouncing on the other hand, the marriage between Peregrina
and Eustaquio to be bigamous, and thus, null and void. The CA ruled:

The court a quo committed a reversible error when it disregarded (1) the testimonies of
[Adelina], the sister of EUSTAQUIO who testified that she personally witnessed the wedding
celebration of her older brother EUSTAQUIO and [Tecla] on 30 September 1942 at Talibon,
Bohol; [Climaco], the eldest son of EUSTAQUIO and [Tecla], who testified that his mother
[Tecla] was married to his father, EUSTAQUIO, and [Tecla] herself; and (2) the documentary
evidence mentioned at the outset. It should be stressed that the due execution and the loss of
the marriage contract, both constituting the condition sine qua non, for the introduction of
secondary evidence of its contents, were shown by the very evidence the trial court has
disregarded.24
Peregrina now questions the said ruling assigning as error, among others, the failure of the CA
to appreciate the validity of her marriage to Eustaquio. For its part, the Office of the Solicitor
General (OSG), in its Memorandum25dated 5 June 2008, raises the following legal issues:

1. Whether or not the court can validly rely on the "presumption of marriage" to overturn
the validity of a subsequent marriage;

2. Whether or not secondary evidence may be considered and/or taken cognizance of,
without proof of the execution or existence and the cause of the unavailability of the best
evidence, the original document;

and

3. Whether or not a Certificate of Marriage issued by the church has a probative value to
prove the existence of a valid marriage without the priest who issued the same being
presented to the witness stand.26

Our Ruling

Essentially, the question before us is whether or not the evidence presented during the trial
proves the existence of the marriage of Tecla to Eustaquio.

The trial court, in ruling against Teclas claim of her prior valid marriage to Eustaquio relied on
Teclas failure to present her certificate of marriage to Eustaquio. Without such certificate, the
trial court considered as useless the certification of the Office of the Civil Registrar of Talibon,
Bohol, that it has no more records of marriages during the period 1900 to 1944. The same thing
was said as regards the Certification issued by the National Statistics Office of Manila. The trial
court observed:

Upon verification from the NSO, Office of the Civil Registrar General, Manila, it, likewise, issued
a Certification (Exhibit "B") stating that:

records from 1932 up to early part of 1945 were totally destroyed during the liberation of Manila
on February 4, 1945. What are presently filed in this office are records from the latter part of
1945 to date, except for the city of Manila which starts from 1952. Hence, this office has no way
of verifying and could not issue as requested, certified true copy of the records of marriage
between [Eustaquio] and [Tecla], alleged to have been married on 30th September 1942, in
Talibon, Bohol.27

In the absence of the marriage contract, the trial court did not give credence to the testimony of
Tecla and her witnesses as it considered the same as mere self-serving assertions. Superior
significance was given to the fact that Tecla could not even produce her own copy of the said
proof of marriage. Relying on Section 3 (a) and Section 5, Rule 130 of the Rules of Court, the
trial court declared that Tecla failed to prove the existence of the first marriage.

The CA, on the other hand, concluded that there was a presumption of lawful marriage between
Tecla and Eustaquio as they deported themselves as husband and wife and begot four (4)
children. Such presumption, supported by documentary evidence consisting of the same
Certifications disregarded by the trial court, as well as the testimonial evidence especially that of
Adelina Avenido-Ceno, created, according to the CA, sufficient proof of the fact of marriage.
Contrary to the trial courts ruling, the CA found that its appreciation of the evidence presented
by Tecla is well in accord with Section 5, Rule 130 of the Rules of Court.

We uphold the reversal by the CA of the decision of the trial court. Quite recently, in Aonuevo
v. Intestate Estate of Rodolfo G. Jalandoni,28 we said, citing precedents, that:

While a marriage certificate is considered the primary evidence of a marital union, it is not
regarded as the sole and exclusive evidence of marriage. Jurisprudence teaches that the fact of
marriage may be proven by relevant evidence other than the marriage certificate. Hence, even a
persons birth certificate may be recognized as competent evidence of the marriage between his
parents.

The error of the trial court in ruling that without the marriage certificate, no other proof of the fact
can be accepted, has been aptly delineated in Vda de Jacob v. Court of Appeals.29 Thus:

It should be stressed that the due execution and the loss of the marriage contract, both
constituting the conditio sine qua non for the introduction of secondary evidence of its contents,
were shown by the very evidence they have disregarded. They have thus confused the
evidence to show due execution and loss as "secondary" evidence of the marriage. In Hernaez
v. Mcgrath, the Court clarified this misconception thus:

x x x [T]he court below was entirely mistaken in holding that parol evidence of the execution of
the instrument was barred. The court confounded the execution and the contents of the
document. It is the contents, x x x which may not be proven by secondary evidence when the

instrument itself is accessible. Proofs of the execution are not dependent on the existence or
non-existence of the document, and, as a matter of fact, such proofs of the contents: due
execution, besides the loss, has to be shown as foundation for the inroduction of secondary
evidence of the contents.

xxxx

Evidence of the execution of a document is, in the last analysis, necessarily collateral or
primary. It generally consists of parol testimony or extrinsic papers. Even when the document is
actually produced, its authencity is not necessarily, if at all, determined from its face or recital of
its contents but by parol evidence. At the most, failure to produce the document, when available,
to establish its execution may effect the weight of the evidence presented but not the
admissibility of such evidence.

The Court of Appeals, as well as the trial court, tried to justify its stand on this issue by relying
on Lim Tanhu v. Ramolete. But even there, we said that "marriage may be prove[n] by other
competent evidence.

Truly, the execution of a document may be proven by the parties themselves, by the swearing
officer, by witnesses who saw and recognized the signatures of the parties; or even by those to
whom the parties have previously narrated the execution thereof. The Court has also held that
"[t]he loss may be shown by any person who [knows] the fact of its loss, or by any one who
ha[s] made, in the judgment of the court, a sufficient examination in the place or places where
the document or papers of similar character are usually kept by the person in whose custody the
document lost was, and has been unable to find it; or who has made any other investigation
which is sufficient to satisfy the court that the instrument [has] indeed [been] lost."

In the present case, due execution was established by the testimonies of Adela Pilapil, who was
present during the marriage ceremony, and of petitioner herself as a party to the event. The
subsequent loss was shown by the testimony and the affidavit of the officiating priest,
Monsignor Yllana, as relevant, competent and admissible evidence. Since the due execution
and the loss of the marriage contract were clearly shown by the evidence presented, secondary
evidencetestimonial and documentarymay be admitted to prove the fact of marriage.30

As correctly stated by the appellate court:

In the case at bench, the celebration of marriage between [Tecla] and EUSTAQUIO was
established by the testimonial evidence furnished by [Adelina] who appears to be present during
the marriage ceremony, and by [Tecla] herself as a living witness to the event. The loss was
shown by the certifications issued by the NSO and LCR of Talibon, Bohol. These are relevant,
competent and admissible evidence. Since the due execution and the loss of the marriage
contract were clearly shown by the evidence presented, secondary evidence testimonial and
documentary may be admitted to prove the fact of marriage. In PUGEDA v. TRIAS, the

Supreme Court held that "marriage may be proven by any competent and relevant evidence.
The testimony by one of the parties to the marriage or by one of the witnesses to the marriage
has been held to be admissible to prove the fact of marriage. The person who officiated at the
solemnization is also competent to testify as an eyewitness to the fact of marriage."

xxxx

The court a quo committed a reversible error when it disregarded (1) the testimonies of
[Adelina], the sister of EUSTAQUIO who testified that she personally witnessed the wedding
celebration of her older brother EUSTAQUIO and [Tecla] on 30 September 1942 at Talibon,
Bohol; [Climaco], the eldest son of EUSTAQUIO and [Tecla], who testified that his mother
[Tecla] was married to his father, EUSTAQUIO, and [Tecla] herself; and (2) the documentary
evidence mentioned at the outset. It should be stressed that the due execution and the loss of
the marriage contract, both constituting the condition sine qua non for the introduction of
secondary evidence of its contents, were shown by the very evidence the trial court has
disregarded.31

The starting point then, is the presumption of marriage.

As early as the case of Adong v. Cheong Seng Gee,32 this Court has elucidated on the rationale
behind the presumption:

The basis of human society throughout the civilized world is that of marriage.1wphi1 Marriage
in this jurisdiction is not only a civil contract, but it is a new relation, an institution in the
maintenance of which the public is deeply interested. Consequently, every intendment of the
law leans toward legalizing matrimony. Persons dwelling together in apparent matrimony are
presumed, in the absence of any counter-presumption or evidence special to the case, to be in
fact married. The reason is that such is the common order of society, and if the parties were not
what they thus hold themselves out as being, they would be living in the constant violation of
decency and of law. A presumption established by our Code of Civil Procedure is that a man
and a woman deporting themselves as husband and wife have entered into a lawful contract of
marriage. (Sec. 334, No. 28) Semper praesumitur pro matrimonio Always presume
marriage.

In the case at bar, the establishment of the fact of marriage was completed by the testimonies of
Adelina, Climaco and Tecla; the unrebutted the certifications of marriage issued by the parish
priest of the Most Holy Trinity Cathedral of Talibon, Bohol.

WHEREFORE, the Petition is DENIED and the assailed Decision of the Court of Appeals in CA-
G.R. CV No. 79444 is AFFIRMED. The marriage between petitioner Peregrina Macua Avenido
and the deceased Eustaquio Avenido is hereby declared NULL and VOID. No pronouncement
as to costs.

SO ORDERED.

G.R. No. 89572 December 21, 1989

DEPARTMENT OF EDUCATION, CULTURE AND SPORTS (DECS) and DIRECTOR OF CENTER


FOR EDUCATIONAL MEASUREMENT, petitioners,
vs.
ROBERTO REY C. SAN DIEGO and JUDGE TERESITA DIZON-CAPULONG, in her capacity as
Presiding Judge of the Regional Trial Court of Valenzuela, Metro Manila, Branch
172, respondents.

Ramon M. Guevara for private respondent.

CRUZ, J.:

The issue before us is mediocrity. The question is whether a person who has thrice failed the
National Medical Admission Test (NMAT) is entitled to take it again.

The petitioner contends he may not, under its rule that-

h) A student shall be allowed only three (3) chances to take the NMAT. After three
(3) successive failures, a student shall not be allowed to take the NMAT for the fourth
time.

The private respondent insists he can, on constitutional grounds.

But first the facts.

The private respondent is a graduate of the University of the East with a degree of Bachelor of
Science in Zoology. The petitioner claims that he took the NMAT three times and flunked it as many
times.1 When he applied to take it again, the petitioner rejected his application on the basis of the
aforesaid rule. He then went to the Regional Trial Court of Valenzuela, Metro Manila, to compel his
admission to the test.

In his original petition for mandamus, he first invoked his constitutional rights to academic freedom
and quality education. By agreement of the parties, the private respondent was allowed to take the
NMAT scheduled on April 16, 1989, subject to the outcome of his petition. 2 In an amended petition
filed with leave of court, he squarely challenged the constitutionality of MECS Order No. 12, Series
of 1972, containing the above-cited rule. The additional grounds raised were due process and equal
protection.

After hearing, the respondent judge rendered a decision on July 4, 1989, declaring the challenged
order invalid and granting the petition. Judge Teresita Dizon-Capulong held that the petitioner had
been deprived of his right to pursue a medical education through an arbitrary exercise of the police
power. 3

We cannot sustain the respondent judge. Her decision must be reversed.

In Tablarin v. Gutierrez, 4 this Court upheld the constitutionality of the NMAT as a measure intended
to limit the admission to medical schools only to those who have initially proved their competence
and preparation for a medical education. Justice Florentino P. Feliciano declared for a unanimous
Court:

Perhaps the only issue that needs some consideration is whether there is some
reasonable relation between the prescribing of passing the NMAT as a condition for
admission to medical school on the one hand, and the securing of the health and
safety of the general community, on the other hand. This question is perhaps most
usefully approached by recalling that the regulation of the pratice of medicine in all its
branches has long been recognized as a reasonable method of protecting the health
and safety of the public. That the power to regulate and control the practice of
medicine includes the power to regulate admission to the ranks of those authorized
to practice medicine, is also well recognized. Thus, legislation and administrative
regulations requiring those who wish to practice medicine first to take and pass
medical board examinations have long ago been recognized as valid exercises of
governmental power. Similarly, the establishment of minimum medical educational
requirements-i.e., the completion of prescribed courses in a recognized medical
school-for admission to the medical profession, has also been sustained as a
legitimate exercise of the regulatory authority of the state. What we have before us in
the instant case is closely related: the regulation of access to medical schools.
MECS Order No. 52, s. 1985, as noted earlier, articulates the rationale of regulation
of this type: the improvement of the professional and technical quality of the
graduates of medical schools, by upgrading the quality of those admitted to the
student body of the medical schools. That upgrading is sought by selectivity in the
process of admission, selectivity consisting, among other things, of limiting admission
to those who exhibit in the required degree the aptitude for medical studies and
eventually for medical practice. The need to maintain, and the difficulties of
maintaining, high standards in our professional schools in general, and medical
schools in particular, in the current state of our social and economic development,
are widely known.

We believe that the government is entitled to prescribe an admission test like the
NMAT as a means of achieving its stated objective of "upgrading the selection of
applicants into [our] medical schools" and of "improv[ing] the quality of medical
education in the country." Given the widespread use today of such admission tests
in, for instance, medical schools in the United States of America (the Medical College
Admission Test [MCAT] and quite probably, in other countries with far more
developed educational resources than our own, and taking into account the failure or
inability of the petitioners to even attempt to prove otherwise, we are entitled to hold
that the NMAT is reasonably related to the securing of the ultimate end of legislation
and regulation in this area. That end, it is useful to recall, is the protection of the
public from the potentially deadly effects of incompetence and ignorance in those
who would undertake to treat our bodies and minds for disease or trauma.

However, the respondent judge agreed with the petitioner that the said case was not applicable. Her
reason was that it upheld only the requirement for the admission test and said nothing about the so-
called "three-flunk rule."

We see no reason why the rationale in the Tablarin case cannot apply to the case at bar. The issue
raised in both cases is the academic preparation of the applicant. This may be gauged at least
initially by the admission test and, indeed with more reliability, by the three-flunk rule. The latter
cannot be regarded any less valid than the former in the regulation of the medical profession.

There is no need to redefine here the police power of the State. Suffice it to repeat that the power is
validly exercised if (a) the interests of the public generally, as distinguished from those of a particular
class, require the interference of the State, and (b) the means employed are reasonably necessary
to the attainment of the object sought to be accomplished and not unduly oppressive upon
individuals.5

In other words, the proper exercise of the police power requires the concurrence of a lawful subject
and a lawful method.

The subject of the challenged regulation is certainly within the ambit of the police power. It is the
right and indeed the responsibility of the State to insure that the medical profession is not infiltrated
by incompetents to whom patients may unwarily entrust their lives and health.

The method employed by the challenged regulation is not irrelevant to the purpose of the law nor is it
arbitrary or oppressive. The three-flunk rule is intended to insulate the medical schools and
ultimately the medical profession from the intrusion of those not qualified to be doctors.

While every person is entitled to aspire to be a doctor, he does not have a constitutional right to be a
doctor. This is true of any other calling in which the public interest is involved; and the closer the link,
the longer the bridge to one's ambition. The State has the responsibility to harness its human
resources and to see to it that they are not dissipated or, no less worse, not used at all. These
resources must be applied in a manner that will best promote the common good while also giving the
individual a sense of satisfaction.

A person cannot insist on being a physician if he will be a menace to his patients. If one who wants
to be a lawyer may prove better as a plumber, he should be so advised and adviced. Of course, he
may not be forced to be a plumber, but on the other hand he may not force his entry into the bar. By
the same token, a student who has demonstrated promise as a pianist cannot be shunted aside to
take a course in nursing, however appropriate this career may be for others.

The right to quality education invoked by the private respondent is not absolute. The Constitution
also provides that "every citizen has the right to choose a profession or course of study, subject to
fair, reasonable and equitable admission and academic requirements.6
The private respondent must yield to the challenged rule and give way to those better prepared.
Where even those who have qualified may still not be accommodated in our already crowded
medical schools, there is all the more reason to bar those who, like him, have been tested and found
wanting.

The contention that the challenged rule violates the equal protection clause is not well-taken. A law
does not have to operate with equal force on all persons or things to be conformable to Article III,
Section 1 of the Constitution.

There can be no question that a substantial distinction exists between medical students and other
students who are not subjected to the NMAT and the three-flunk rule. The medical profession
directly affects the very lives of the people, unlike other careers which, for this reason, do not require
more vigilant regulation. The accountant, for example, while belonging to an equally respectable
profession, does not hold the same delicate responsibility as that of the physician and so need not
be similarly treated.

There would be unequal protection if some applicants who have passed the tests are admitted and
others who have also qualified are denied entrance. In other words, what the equal protection
requires is equality among equals.

The Court feels that it is not enough to simply invoke the right to quality education as a guarantee of
the Constitution: one must show that he is entitled to it because of his preparation and promise. The
private respondent has failed the NMAT five times. 7 While his persistence is noteworthy, to say the
least, it is certainly misplaced, like a hopeless love.

No depreciation is intended or made against the private respondent. It is stressed that a person who
does not qualify in the NMAT is not an absolute incompetent unfit for any work or occupation. The
only inference is that he is a probably better, not for the medical profession, but for another calling
that has not excited his interest.

In the former, he may be a bungler or at least lackluster; in the latter, he is more likely to succeed
and may even be outstanding. It is for the appropriate calling that he is entitled to quality education
for the full harnessing of his potentials and the sharpening of his latent talents toward what may even
be a brilliant future.

We cannot have a society of square pegs in round holes, of dentists who should never have left the
farm and engineers who should have studied banking and teachers who could be better as
merchants.

It is time indeed that the State took decisive steps to regulate and enrich our system of education by
directing the student to the course for which he is best suited as determined by initial tests and
evaluations. Otherwise, we may be "swamped with mediocrity," in the words of Justice Holmes, not
because we are lacking in intelligence but because we are a nation of misfits.

WHEREFORE, the petition is GRANTED. The decision of the respondent court dated January 13,
1989, is REVERSED, with costs against the private respondent. It is so ordered.

G.R. No. 184621 December 10, 2013


REPUBLIC OF THE PHILIPPINES, Petitioner,
vs.
MARIA FE ESPINOSA CANTOR, Respondent.

DECISION

BRION, J.:

The petition for review on certiorari1 before us assails the decision2 dated August 27, 2008 of the
Court of Appeals (CA) in CA-G.R. SP No. 01558-MIN which affirmed be order3 dated December 15,
2006 of the Regional Trial Court (RTC), Branch 25, Koronadal City, South Cotabato, in SP Proc.
Case No. 313-25, declaring Jerry F. Cantor, respondent Maria Fe Espinosa Cantors husband,
presumptively dead under Article 41 of the Family Code.

The Factual Antecedents

The respondent and Jerry were married on September 20, 1997. They lived together as husband
and wife in their conjugal dwelling in Agan Homes, Koronadal City, South Cotabato. Sometime in
January 1998, the couple had a violent quarrel brought about by: (1) the respondents inability to
reach "sexual climax" whenever she and Jerry would have intimate moments; and (2) Jerrys
expression of animosity toward the respondents father.

After their quarrel, Jerry left their conjugal dwelling and this was the last time that the respondent
ever saw him. Since then, she had not seen, communicated nor heard anything from Jerry or about
his whereabouts.

On May 21, 2002, or more than four (4) years from the time of Jerrys disappearance, the
respondent filed before the RTC a petition4for her husbands declaration of presumptive death,
docketed as SP Proc. Case No. 313-25. She claimed that she had a well-founded belief that Jerry
was already dead. She alleged that she had inquired from her mother-in-law, her brothers-in-law, her
sisters-in-law, as well as her neighbors and friends, but to no avail. In the hopes of finding Jerry, she
also allegedly made it a point to check the patients directory whenever she went to a hospital. All
these earnest efforts, the respondent claimed, proved futile, prompting her to file the petition in court.

The Ruling of the RTC

After due proceedings, the RTC issued an order granting the respondents petition and declaring
Jerry presumptively dead. It concluded that the respondent had a well-founded belief that her
husband was already dead since more than four (4) years had passed without the former receiving
any news about the latter or his whereabouts. The dispositive portion of the order dated December
15, 2006 reads:

WHEREFORE, the Court hereby declares, as it hereby declared that respondent Jerry F. Cantor is
presumptively dead pursuant to Article 41 of the Family Code of the Philippines without prejudice to
the effect of the reappearance of the absent spouse Jerry F. Cantor.5

The Ruling of the CA

The case reached the CA through a petition for certiorari6filed by the petitioner, Republic of the
Philippines, through the Office of the Solicitor General (OSG). In its August 27, 2008 decision, the
CA dismissed the petitioners petition, finding no grave abuse of discretion on the RTCs part, and,
accordingly, fully affirmed the latters order, thus:

WHEREFORE, premises foregoing (sic), the instant petition is hereby DISMISSED and the assailed
Order dated December 15, 2006 declaring Jerry F. Cantor presumptively dead is hereby AFFIRMED
in toto.7

The petitioner brought the matter via a Rule 45 petition before this Court. The Petition The petitioner
contends that certiorari lies to challenge the decisions, judgments or final orders of trial courts in
petitions for declaration of presumptive death of an absent spouse under Rule 41 of the Family
Code. It maintains that although judgments of trial courts in summary judicial proceedings, including
presumptive death cases, are deemed immediately final and executory (hence, not appeal able
under Article 247 of the Family Code), this rule does not mean that they are not subject to review
on certiorari.

The petitioner also posits that the respondent did not have a well-founded belief to justify the
declaration of her husbands presumptive death. It claims that the respondent failed to conduct the
requisite diligent search for her missing husband. Likewise, the petitioner invites this Courts
attention to the attendant circumstances surrounding the case, particularly, the degree of search
conducted and the respondents resultant failure to meet the strict standard under Article 41 of the
Family Code.

The Issues

The petition poses to us the following issues:

(1) Whether certiorarilies to challenge the decisions, judgments or final orders of trial courts
in petitions for declaration of presumptive death of an absent spouse under Article 41 of the
Family Code; and

(2) Whether the respondent had a well-founded belief that Jerry is already dead.

The Courts Ruling

We grant the petition.

a. On the Issue of the Propriety of Certiorari as a Remedy

Courts Judgment in the Judicial


Proceedings for Declaration of
Presumptive Death Is Final and
Executory, Hence, Unappealable

The Family Code was explicit that the courts judgment in summary proceedings, such as the
declaration of presumptive death of an absent spouse under Article 41 of the Family Code, shall be
immediately final and executory.

Article 41,in relation to Article 247, of the Family Code provides:

Art. 41. A marriage contracted by any person during subsistence of a previous marriage shall be null
and void, unless before the celebration of the subsequent marriage, the prior spouse had been
absent for four consecutive years and the spouse present has a well-founded belief that the absent
spouse was already dead. In case of disappearance where there is danger of death under the
circumstances set forth in the provisions of Article 391 of the Civil Code, an absence of only two
years shall be sufficient.

For the purpose of contracting the subsequent marriage under the preceding paragraph the spouse
present must institute a summary proceeding as provided in this Code for the declaration of
presumptive death of the absentee, without prejudice to the effect of reappearance of the absent
spouse.

Art. 247. The judgment of the court shall be immediately final and executory. [underscores ours]

With the judgment being final, it necessarily follows that it is no longer subject to an appeal, the
dispositions and conclusions therein having become immutable and unalterable not only as against
the parties but even as against the courts.8 Modification of the courts ruling, no matter how
erroneous is no longer permissible. The final and executory nature of this summary proceeding thus
prohibits the resort to appeal. As explained in Republic of the Phils. v. Bermudez-Lorino,9 the right to
appeal is not granted to parties because of the express mandate of Article 247 of the Family Code,
to wit:

In Summary Judicial Proceedings under the Family Code, there is no reglementary period within
which to perfect an appeal, precisely because judgments rendered thereunder, by express provision
of [Article] 247, Family Code, supra, are "immediately final and executory." It was erroneous,
therefore, on the part of the RTCto give due course to the Republics appeal and order the
transmittal of the entire records of the case to the Court of Appeals.

An appellate court acquires no jurisdiction to review a judgment which, by express provision of law,
is immediately final and executory. As we have said in Veloria vs. Comelec, "the right to appeal is
not a natural right nor is it a part of due process, for it is merely a statutory privilege." Since, by
express mandate of Article 247 of the Family Code, all judgments rendered in summary judicial
proceedings in Family Law are "immediately final and executory," the right to appeal was not granted
to any of the parties therein. The Republic of the Philippines, as oppositor in the petition for
declaration of presumptive death, should not be treated differently. It had no right to appeal the RTC
decision of November 7, 2001. [emphases ours; italics supplied]

Certiorari Lies to Challenge the


Decisions, Judgments or Final
Orders of Trial Courts in a Summary
Proceeding for the Declaration of Presumptive
Death Under the Family Code

A losing party in this proceeding, however, is not entirely left without a remedy. While jurisprudence
tells us that no appeal can be made from the trial court's judgment, an aggrieved party may,
nevertheless, file a petition for certiorari under Rule 65 of the Rules of Court to question any abuse
of discretion amounting to lack or excess of jurisdiction that transpired.

As held in Delos Santos v. Rodriguez, et al.,10 the fact that a decision has become final does not
automatically negate the original action of the CA to issue certiorari, prohibition and mandamus in
connection with orders or processes issued by the trial court. Certiorari may be availed of where a
court has acted without or in excess of jurisdiction or with grave abuse of discretion, and where the
ordinary remedy of appeal is not available. Such a procedure finds support in the case of Republic v.
Tango,11 wherein we held that:
This case presents an opportunity for us to settle the rule on appeal of judgments rendered in
summary proceedings under the Family Code and accordingly, refine our previous decisions
thereon.

Article 238 of the Family Code, under Title XI: SUMMARY JUDICIAL PROCEEDINGS IN THE
FAMILY LAW, establishes the rules that govern summary court proceedings in the Family Code:

"ART. 238. Until modified by the Supreme Court, the procedural rules in this Title shall apply in all
cases provided for in this Code requiring summary court proceedings. Such cases shall be decided
in an expeditious manner without regard to technical rules."

In turn, Article 253 of the Family Code specifies the cases covered by the rules in chapters two and
three of the same title. It states:

"ART. 253. The foregoing rules in Chapters 2and 3 hereof shall likewise govern summary
proceedings filed under Articles 41, 51, 69, 73, 96, 124 and 217, insofar as they are
applicable."(Emphasis supplied.)

In plain text, Article 247 in Chapter 2 of the same title reads:

"ART.247. The judgment of the court shall be immediately final and executory."

By express provision of law, the judgment of the court in a summary proceeding shall be
immediately final and executory. As a matter of course, it follows that no appeal can be had of the
trial court's judgment ina summary proceeding for the declaration of presumptive death of an absent
spouse under Article 41 of the Family Code. It goes without saying, however, that an aggrieved party
may file a petition for certiorari to question abuse of discretion amounting to lack of jurisdiction. Such
petition should be filed in the Court of Appeals in accordance with the Doctrine of Hierarchy of
Courts. To be sure, even if the Court's original jurisdiction to issue a writ of certiorari is concurrent
with the RTCs and the Court of Appeals in certain cases, such concurrence does not sanction an
unrestricted freedom of choice of court forum. [emphasis ours]

Viewed in this light, we find that the petitioners resort to certiorari under Rule 65 of the Rules of
Court to question the RTCs order declaring Jerry presumptively dead was proper.

b. On the Issue of the Existence of Well-Founded Belief

The Essential Requisites for the


Declaration of Presumptive Death
Under Article 41 of the Family Code

Before a judicial declaration of presumptive death can be obtained, it must be shown that the prior
spouse had been absent for four consecutive years and the present spouse had a well-founded
belief that the prior spouse was already dead. Under Article 41 of the Family Code, there are four (4)
essential requisites for the declaration of presumptive death:

1. That the absent spouse has been missing for four consecutive years, or two consecutive
years if the disappearance occurred where there is danger of death under the circumstances
laid down in Article 391, Civil Code;

2. That the present spouse wishes to remarry;


3. That the present spouse has a well-founded belief that the absentee is dead; and

4. That the present spouse files a summary proceeding for the declaration of presumptive
death of the absentee.12

The Present Spouse Has the Burden


of Proof to Show that All the
Requisites Under Article 41 of the
Family Code Are Present

The burden of proof rests on the present spouse to show that all the requisites under Article 41 of
the Family Code are present. Since it is the present spouse who, for purposes of declaration of
presumptive death, substantially asserts the affirmative of the issue, it stands to reason that the
burden of proof lies with him/her. He who alleges a fact has the burden of proving it and mere
allegation is not evidence.13

Declaration of Presumptive Death


Under Article 41 of the Family Code
Imposes a Stricter Standard

Notably, Article 41 of the Family Code, compared to the old provision of the Civil Code which it
superseded, imposes a stricter standard. It requires a "well-founded belief " that the absentee is
already dead before a petition for declaration of presumptive death can be granted. We have had
occasion to make the same observation in Republic v. Nolasco,14 where we noted the crucial
differences between Article 41 of the Family Code and Article 83 of the Civil Code, to wit:

Under Article 41, the time required for the presumption to arise has been shortened to four (4) years;
however, there is need for a judicial declaration of presumptive death to enable the spouse present
to remarry. Also, Article 41 of the Family Code imposes a stricter standard than the Civil Code:
Article 83 of the Civil Code merely requires either that there be no news that such absentee is still
alive; or the absentee is generally considered to be dead and believed to be so by the spouse
present, or is presumed dead under Articles 390 and 391 of the Civil Code. The Family Code, upon
the other hand, prescribes as "well founded belief" that the absentee is already dead before a
petition for declaration of presumptive death can be granted.

Thus, mere absence of the spouse (even for such period required by the law), lack of any news that
such absentee is still alive, failure to communicate or general presumption of absence under the
Civil Code would not suffice. This conclusion proceeds from the premise that Article 41 of the Family
Code places upon the present spouse the burden of proving the additional and more stringent
requirement of "well-founded belief" which can only be discharged upon a showing of proper and
honest-to-goodness inquiries and efforts to ascertain not only the absent spouses whereabouts but,
more importantly, that the absent spouse is still alive or is already dead.15

The Requirement of Well-Founded Belief

The law did not define what is meant by "well-founded belief." It depends upon the circumstances of
each particular case. Its determination, so to speak, remains on a case-to-case basis. To be able to
comply with this requirement, the present spouse must prove that his/her belief was the result of
diligent and reasonable efforts and inquiries to locate the absent spouse and that based on these
efforts and inquiries, he/she believes that under the circumstances, the absent spouseis already
dead. It requires exertion of active effort (not a mere passive one).
To illustrate this degree of "diligent and reasonable search" required by the law, an analysis of the
following relevant cases is warranted:

i. Republic of the Philippines v. Court of Appeals (Tenth Div.)16

In Republic of the Philippines v. Court of Appeals (Tenth Div.),17 the Court ruled that the present
spouse failed to prove that he had a well-founded belief that his absent spouse was already dead
before he filed his petition. His efforts to locate his absent wife allegedly consisted of the following:

(1) He went to his in-laws house to look for her;

(2) He sought the barangay captains aid to locate her;

(3) He went to her friends houses to find her and inquired about her whereabouts among his
friends;

(4) He went to Manila and worked as a part-time taxi driver to look for her in malls during his
free time;

(5) He went back to Catbalogan and again looked for her; and

(6) He reported her disappearance to the local police station and to the NBI.

Despite these alleged "earnest efforts," the Court still ruled against the present spouse. The Court
found that he failed to present the persons from whom he allegedly made inquiries and only reported
his wifes absence after the OSG filed its notice to dismiss his petition in the RTC.

The Court also provided the following criteria for determining the existence of a "well-founded belief"
under Article 41 of the Family Code:

The belief of the present spouse must be the result of proper and honest to goodness inquiries and
efforts to ascertain the whereabouts of the absent spouse and whether the absent spouse is still
alive or is already dead. Whether or not the spouse present acted on a well-founded belief of death
of the absent spouse depends upon the inquiries to be drawn from a great many circumstances
occurring before and after the disappearance of the absent spouse and the nature and extent of the
inquiries made by [the] present spouse.18

ii. Republic v. Granada19

Similarly in Granada, the Court ruled that the absent spouse failed to prove her "well-founded belief"
that her absent spouse was already dead prior to her filing of the petition. In this case, the present
spouse alleged that her brother had made inquiries from their relatives regarding the absent
spouses whereabouts. The present spouse did not report to the police nor seek the aid of the mass
media. Applying the standards in Republic of the Philippines v. Court of Appeals (Tenth Div.),20 the
Court ruled against the present spouse, as follows:

Applying the foregoing standards to the present case, petitioner points out that respondent Yolanda
did not initiate a diligent search to locate her absent husband. While her brother Diosdado Cadacio
testified to having inquiredabout the whereabouts of Cyrus from the latters relatives, these relatives
were not presented to corroborate Diosdados testimony. In short, respondent was allegedly not
diligent in her search for her husband. Petitioner argues that if she were, she would have sought
information from the Taiwanese Consular Office or assistance from other government agencies in
Taiwan or the Philippines. She could have also utilized mass media for this end, but she did not.
Worse, she failed to explain these omissions.

iii.Republic v. Nolasco21

In Nolasco, the present spouse filed a petition for declaration of presumptive death of his wife, who
had been missing for more than four years. He testified that his efforts to find her consisted of:

(1) Searching for her whenever his ship docked in England;

(2) Sending her letters which were all returned to him; and

(3) Inquiring from their friends regarding her whereabouts, which all proved fruitless. The
Court ruled that the present spouses investigations were too sketchy to form a basis that his
wife was already dead and ruled that the pieces of evidence only proved that his wife had
chosen not to communicate with their common acquaintances, and not that she was dead.

iv.The present case

In the case at bar, the respondents "well-founded belief" was anchored on her alleged "earnest
efforts" to locate Jerry, which consisted of the following:

(1) She made inquiries about Jerrys whereabouts from her in-laws, neighbors and friends;
and

(2) Whenever she went to a hospital, she saw to it that she looked through the patients
directory, hoping to find Jerry.

These efforts, however, fell short of the "stringent standard" and degree of diligence required by
jurisprudence for the following reasons:

First, the respondent did not actively look for her missing husband. It can be inferred from the
1wphi 1

records that her hospital visits and her consequent checking of the patients directory therein were
unintentional. She did not purposely undertake a diligent search for her husband as her hospital
visits were not planned nor primarily directed to look for him. This Court thus considers these
attempts insufficient to engender a belief that her husband is dead.

Second, she did not report Jerrys absence to the police nor did she seek the aid of the authorities to
look for him. While a finding of well-founded belief varies with the nature of the situation in which the
present spouse is placed, under present conditions, we find it proper and prudent for a present
spouse, whose spouse had been missing, to seek the aid of the authorities or, at the very least,
report his/her absence to the police.

Third, she did not present as witnesses Jerrys relatives or their neighbors and friends, who can
corroborate her efforts to locate Jerry. Worse, these persons, from whom she allegedly made
inquiries, were not even named. As held in Nolasco, the present spouses bare assertion that he
inquired from his friends about his absent spouses whereabouts is insufficient as the names of the
friends from whom he made inquiries were not identified in the testimony nor presented as
witnesses.
Lastly, there was no other corroborative evidence to support the respondents claim that she
conducted a diligent search. Neither was there supporting evidence proving that she had a well-
founded belief other than her bare claims that she inquired from her friends and in-laws about her
husbands whereabouts. In sum, the Court is of the view that the respondent merely engaged in a
"passive search" where she relied on uncorroborated inquiries from her in-laws, neighbors and
friends. She failed to conduct a diligent search because her alleged efforts are insufficient to form a
well-founded belief that her husband was already dead. As held in Republic of the Philippines v.
Court of Appeals (Tenth Div.),22 "[w]hether or not the spouse present acted on a well-founded belief
of death of the absent spouse depends upon the inquiries to be drawn from a great many
circumstances occurring before and after the disappearance of the absent spouse and the
natureand extent of the inquiries made by [the] present spouse."

Strict Standard Approach Is


Consistent with the States Policy
to Protect and Strengthen Marriage

In the above-cited cases, the Court, fully aware of the possible collusion of spouses in nullifying their
marriage, has consistently applied the "strictstandard" approach. This is to ensure that a petition for
declaration of presumptive death under Article 41 of the Family Code is not used as a tool to
conveniently circumvent the laws. Courts should never allow procedural shortcuts and should ensure
that the stricter standard required by the Family Code is met. In Republic of the Philippines v. Court
of Appeals (Tenth Div.),23 we emphasized that:

In view of the summary nature of proceedings under Article 41 of the Family Code for the declaration
of presumptive death of ones spouse, the degree of due diligence set by this Honorable Court in the
above-mentioned cases in locating the whereabouts of a missing spouse must be strictly complied
with. There have been times when Article 41 of the Family Code had been resorted to by parties
wishing to remarry knowing fully well that their alleged missing spouses are alive and well. It is even
possible that those who cannot have their marriages xxx declared null and void under Article 36 of
the Family Code resort to Article 41 of the Family Code for relief because of the xxx summary nature
of its proceedings.

The application of this stricter standard becomes even more imperative if we consider the States
policy to protect and strengthen the institution of marriage.24 Since marriage serves as the familys
foundation25 and since it is the states policy to protect and strengthen the family as a basic social
institution,26 marriage should not be permitted to be dissolved at the whim of the parties. In
interpreting and applying Article 41, this is the underlying rationale to uphold the sanctity of
marriage. Arroyo, Jr.v. Court of Appeals27 reflected this sentiment when we stressed:

[The]protection of the basic social institutions of marriage and the family in the preservation of which
the State has the strongest interest; the public policy here involved is of the most fundamental kind.
In Article II, Section 12 of the Constitution there is set forth the following basic state policy:

The State recognizes the sanctity of family life and shall protect and strengthen the family as a basic
autonomous social institution.

Strict Standard Prescribed Under


Article 41 of the Family Code
Is for the Present Spouses Benefit

The requisite judicial declaration of presumptive death of the absent spouse (and consequently, the
application of a stringent standard for its issuance) is also for the present spouse's benefit. It is
intended to protect him/her from a criminal prosecution of bigamy under Article 349 of the Revised
Penal Code which might come into play if he/she would prematurely remarry sans the court's
declaration.

Upon the issuance of the decision declaring his/her absent spouse presumptively dead, the present
spouse's good faith in contracting a second marriage is effectively established. The decision of the
competent court constitutes sufficient proof of his/her good faith and his/her criminal intent in case of
remarriage is effectively negated.28 Thus, for purposes of remarriage, it is necessary to strictly
comply with the stringent standard and have the absent spouse judicially declared presumptively
dead.

Final Word

As a final word, it has not escaped this Court's attention that the strict standard required in petitions
for declaration of presumptive death has not been fully observed by the lower courts. We need only
to cite the instances when this Court, on review, has consistently ruled on the sanctity of marriage
and reiterated that anything less than the use of the strict standard necessitates a denial. To rectify
this situation, lower courts are now expressly put on notice of the strict standard this Court requires
in cases under Article 41 of the Family Code.

WHEREFORE, in view of the foregoing, the assailed decision dated August 27, 2008 of the Court of
Appeals, which affirmed the order dated December 15, 2006 of the Regional Trial Court, Branch 25,
Koronadal City, South Cotabato, declaring Jerry F. Cantor presumptively dead is hereby
REVERSED and SET ASIDE.

SO ORDERED.
G.R. No. 178044 January 19, 2011

ALAIN M. DIO , Petitioner,


vs.
MA. CARIDAD L. DIO, Respondent.

DECISION

CARPIO, J.:

The Case

Before the Court is a petition for review1 assailing the 18 October 2006 Decision2 and the 12 March
2007 Order3of the Regional Trial Court of Las Pias City, Branch 254 (trial court) in Civil Case No.
LP-01-0149.

The Antecedent Facts

Alain M. Dio (petitioner) and Ma. Caridad L. Dio (respondent) were childhood friends and
sweethearts. They started living together in 1984 until they decided to separate in 1994. In 1996,
petitioner and respondent decided to live together again. On 14 January 1998, they were married
before Mayor Vergel Aguilar of Las Pias City.

On 30 May 2001, petitioner filed an action for Declaration of Nullity of Marriage against respondent,
citing psychological incapacity under Article 36 of the Family Code. Petitioner alleged that
respondent failed in her marital obligation to give love and support to him, and had abandoned her
responsibility to the family, choosing instead to go on shopping sprees and gallivanting with her
friends that depleted the family assets. Petitioner further alleged that respondent was not faithful,
and would at times become violent and hurt him.

Extrajudicial service of summons was effected upon respondent who, at the time of the filing of the
petition, was already living in the United States of America. Despite receipt of the summons,
respondent did not file an answer to the petition within the reglementary period. Petitioner later
learned that respondent filed a petition for divorce/dissolution of her marriage with petitioner, which
was granted by the Superior Court of California on 25 May 2001. Petitioner also learned that on 5
October 2001, respondent married a certain Manuel V. Alcantara.

On 30 April 2002, the Office of the Las Pias prosecutor found that there were no indicative facts of
collusion between the parties and the case was set for trial on the merits.

Dr. Nedy L. Tayag (Dr. Tayag), a clinical psychologist, submitted a psychological report establishing
that respondent was suffering from Narcissistic Personality Disorder which was deeply ingrained in
her system since her early formative years. Dr. Tayag found that respondents disorder was long-
lasting and by nature, incurable.

In its 18 October 2006 Decision, the trial court granted the petition on the ground that respondent
was psychologically incapacited to comply with the essential marital obligations at the time of the
celebration of the marriage.

The Decision of the Trial Court


The trial court ruled that based on the evidence presented, petitioner was able to establish
respondents psychological incapacity. The trial court ruled that even without Dr. Tayags
psychological report, the allegations in the complaint, substantiated in the witness stand, clearly
made out a case of psychological incapacity against respondent. The trial court found that
respondent committed acts which hurt and embarrassed petitioner and the rest of the family, and
that respondent failed to observe mutual love, respect and fidelity required of her under Article 68 of
the Family Code. The trial court also ruled that respondent abandoned petitioner when she obtained
a divorce abroad and married another man.

The dispositive portion of the trial courts decision reads:

WHEREFORE, in view of the foregoing, judgment is hereby rendered:

1. Declaring the marriage between plaintiff ALAIN M. DIO and defendant MA. CARIDAD L.
DIO on January 14, 1998, and all its effects under the law, as NULL and VOID from the
beginning; and

2. Dissolving the regime of absolute community of property.

A DECREE OF ABSOLUTE NULLITY OF MARRIAGE shall only be issued upon compliance with
Article[s] 50 and 51 of the Family Code.

Let copies of this Decision be furnished the parties, the Office of the Solicitor General, Office of the
City Prosecutor, Las Pias City and the Office of the Local Civil Registrar of Las Pias City, for their
information and guidance.

SO ORDERED.4

Petitioner filed a motion for partial reconsideration questioning the dissolution of the absolute
community of property and the ruling that the decree of annulment shall only be issued upon
compliance with Articles 50 and 51 of the Family Code.

In its 12 March 2007 Order, the trial court partially granted the motion and modified its 18 October
2006 Decision as follows:

WHEREFORE, in view of the foregoing, judgment is hereby rendered:

1) Declaring the marriage between plaintiff ALAIN M. DIO and defendant MA. CARIDAD L.
DIO on January 14, 1998, and all its effects under the law, as NULL and VOID from the
beginning; and

2) Dissolving the regime of absolute community of property.

A DECREE OF ABSOLUTE NULLITY OF MARRIAGE shall be issued after liquidation, partition and
distribution of the parties properties under Article 147 of the Family Code.

Let copies of this Order be furnished the parties, the Office of the Solicitor General, the Office of the
City Prosecutor of Las Pias City and the Local Civil Registrar of Las Pias City, for their information
and guidance.5

Hence, the petition before this Court.


The Issue

The sole issue in this case is whether the trial court erred when it ordered that a decree of absolute
nullity of marriage shall only be issued after liquidation, partition, and distribution of the parties
properties under Article 147 of the Family Code.

The Ruling of this Court

The petition has merit.

Petitioner assails the ruling of the trial court ordering that a decree of absolute nullity of marriage
shall only be issued after liquidation, partition, and distribution of the parties properties under Article
147 of the Family Code. Petitioner argues that Section 19(1) of the Rule on Declaration of Absolute
Nullity of Null Marriages and Annulment of Voidable Marriages6 (the Rule) does not apply to Article
147 of the Family Code.

We agree with petitioner.

The Court has ruled in Valdes v. RTC, Branch 102, Quezon City that in a void marriage, regardless
of its cause, the property relations of the parties during the period of cohabitation is governed either
by Article 147 or Article 148 of the Family Code.7 Article 147 of the Family Code applies to union of
parties who are legally capacitated and not barred by any impediment to contract marriage, but
whose marriage is nonetheless void,8 such as petitioner and respondent in the case before the
Court.

Article 147 of the Family Code provides:

Article 147. When a man and a woman who are capacitated to marry each other, live exclusively
with each other as husband and wife without the benefit of marriage or under a void marriage, their
wages and salaries shall be owned by them in equal shares and the property acquired by both of
them through their work or industry shall be governed by the rules on co-ownership.

In the absence of proof to the contrary, properties acquired while they lived together shall be
presumed to have been obtained by their joint efforts, work or industry, and shall be owned by them
in equal shares. For purposes of this Article, a party who did not participate in the acquisition by the
other party of any property shall be deemed to have contributed jointly in the acquisition thereof if the
formers efforts consisted in the care and maintenance of the family and of the household.

Neither party can encumber or dispose by acts inter vivos of his or her share in the property
acquired during cohabitation and owned in common, without the consent of the other, until after the
termination of their cohabitation.

When only one of the parties to a void marriage is in good faith, the share of the party in bad faith in
the co-ownership shall be forfeited in favor of their common children. In case of default of or waiver
by any or all of the common children or their descendants, each vacant share shall belong to the
respective surviving descendants. In the absence of descendants, such share shall belong to the
innocent party. In all cases, the forfeiture shall take place upon termination of the cohabitation.

For Article 147 of the Family Code to apply, the following elements must be present:

1. The man and the woman must be capacitated to marry each other;
2. They live exclusively with each other as husband and wife; and

3. Their union is without the benefit of marriage, or their marriage is void.9

All these elements are present in this case and there is no question that Article 147 of the Family
Code applies to the property relations between petitioner and respondent.

We agree with petitioner that the trial court erred in ordering that a decree of absolute nullity of
marriage shall be issued only after liquidation, partition and distribution of the parties properties
under Article 147 of the Family Code. The ruling has no basis because Section 19(1) of the Rule
does not apply to cases governed under Articles 147 and 148 of the Family Code. Section 19(1) of
the Rule provides:

Sec. 19. Decision. - (1) If the court renders a decision granting the petition, it shall declare therein
that the decree of absolute nullity or decree of annulment shall be issued by the court only after
compliance with Articles 50 and 51 of the Family Code as implemented under the Rule on
Liquidation, Partition and Distribution of Properties.

The pertinent provisions of the Family Code cited in Section 19(1) of the Rule are:

Article 50. The effects provided for in paragraphs (2), (3), (4) and (5) of Article 43 and in Article 44
shall also apply in proper cases to marriages which are declared void ab initio or annulled by final
judgment under Articles 40 and 45.10

The final judgment in such cases shall provide for the liquidation, partition and distribution of the
properties of the spouses, the custody and support of the common children, and the delivery of their
presumptive legitimes, unless such matters had been adjudicated in previous judicial proceedings.

All creditors of the spouses as well as of the absolute community of the conjugal partnership shall be
notified of the proceedings for liquidation.

In the partition, the conjugal dwelling and the lot on which it is situated, shall be adjudicated in
accordance with the provisions of Articles 102 and 129.

Article 51. In said partition, the value of the presumptive legitimes of all common children, computed
as of the date of the final judgment of the trial court, shall be delivered in cash, property or sound
securities, unless the parties, by mutual agreement judicially approved, had already provided for
such matters.

The children of their guardian, or the trustee of their property, may ask for the enforcement of the
judgment.

The delivery of the presumptive legitimes herein prescribed shall in no way prejudice the ultimate
successional rights of the children accruing upon the death of either or both of the parents; but the
value of the properties already received under the decree of annulment or absolute nullity shall be
considered as advances on their legitime.

It is clear from Article 50 of the Family Code that Section 19(1) of the Rule applies only to marriages
which are declared void ab initio or annulled by final judgment under Articles 40 and 45 of the
Family Code. In short, Article 50 of the Family Code does not apply to marriages which are declared
void ab initio under Article 36 of the Family Code, which should be declared void without waiting for
the liquidation of the properties of the parties.

Article 40 of the Family Code contemplates a situation where a second or bigamous marriage was
contracted. Under Article 40, "[t]he absolute nullity of a previous marriage may be invoked for
1avvphil

purposes of remarriage on the basis solely of a final judgment declaring such previous marriage
void." Thus we ruled:

x x x where the absolute nullity of a previous marriage is sought to be invoked for purposes of
contracting a second marriage, the sole basis acceptable in law, for said projected marriage to be
free from legal infirmity, is a final judgment declaring a previous marriage void.11

Article 45 of the Family Code, on the other hand, refers to voidable marriages, meaning, marriages
which are valid until they are set aside by final judgment of a competent court in an action for
annulment.12 In both instances under Articles 40 and 45, the marriages are governed either by
absolute community of property13 or conjugal partnership of gains14 unless the parties agree to a
complete separation of property in a marriage settlement entered into before the marriage. Since the
property relations of the parties is governed by absolute community of property or conjugal
partnership of gains, there is a need to liquidate, partition and distribute the properties before a
decree of annulment could be issued. That is not the case for annulment of marriage under Article
36 of the Family Code because the marriage is governed by the ordinary rules on co-ownership.

In this case, petitioners marriage to respondent was declared void under Article 3615 of the Family
Code and not under Article 40 or 45. Thus, what governs the liquidation of properties owned in
common by petitioner and respondent are the rules on co-ownership. In Valdes, the Court ruled that
the property relations of parties in a void marriage during the period of cohabitation is governed
either by Article 147 or Article 148 of the Family Code.16The rules on co-ownership apply and the
properties of the spouses should be liquidated in accordance with the Civil Code provisions on co-
ownership. Under Article 496 of the Civil Code, "[p]artition may be made by agreement between the
parties or by judicial proceedings. x x x." It is not necessary to liquidate the properties of the spouses
in the same proceeding for declaration of nullity of marriage.

WHEREFORE, we AFFIRM the Decision of the trial court with the MODIFICATION that the decree
of absolute nullity of the marriage shall be issued upon finality of the trial courts decision without
waiting for the liquidation, partition, and distribution of the parties properties under Article 147 of the
Family Code.

SO ORDERED.