G.R. No. L-12262 February 10, 1917 above quoted regulation.
above quoted regulation. It is charged in the information that he violated the provisions of
THE UNITED STATES, plaintiff-appellee,
vs.
ANTONIO ABAD SANTOS, defendant-appellant.
Quirino Abad Santos for appellant.
Attorney-General Avanceña for appellee.
MORELAND, J.:
The appellant here is accused of violating the Internal Revenue Law. He was convicted
and sentenced to pay a fine of P10. He appealed.
Section 185 of Act No. 2339 (now section 2727 of the Administrative Code) reads as
follows:
A person who violates any provision of the Internal Revenue Law or any
lawful regulation of the Bureau of Internal Revenue made in conformity with
the same, for which delinquency no specific penalty is provided by law, shall
be punished by a fine of not more than three hundred pesos or by
imprisonment for not more than six months, or both.
Pursuant to the authorization in the Internal Revenue Law, the Collector of Internal
Revenue issued Circular No. 467, the third section of which reads as follows:
3. Printers, publishers, contractors, common carriers, etc. — Each printer,
publisher, contractor, warehouseman, proprietor of a dockyard, keeper of a
hotel or restaurant, keeper of a livery stable or garage, transportation contractor
and common carrier by land or water, and so forth, subject to the tax imposed
by sections 42, 43, and 44 of Act No. 2339, shall keep a day book in which he
shall enter in detail, in English or Spanish, each amount of money received in
the conduct of his business. Before being used for said purpose, the pages of
the book must be numbered serially in a permanent and legible manner, and
the book itself presented to an internal revenue agent or office for approval. In
this book the cash receipts of the owner thereof shall be entered under the
corresponding date within the twenty-four hours next following the date the
money was received. If no money is received on any day, then that fact shall
be noted in the book within the said twenty-four hours under the corresponding
date.
The appellant is the owner of a printing establishment called "The Excelsior" and as such
was required by law to keep a book in which he should make the entire required by the
said regulation in that he failed to make any entry for the 5th day of January, 1915,
indicating whether any business was done on that day or not.
We are of the opinion that the accused must be acquitted. It appears undisputed that he
regularly employed a bookkeeper who was in complete charge of the book in which the
entries referred to should have been made and that the failure to make the entry required
by law was due to the omission of the bookkeeper of which appellant knew nothing.
We do not believe that a person should be held criminally liable for the acts of another
done without his knowledge or consent, unless the law clearly so provides. In the case
before us the accused employed a bookkeeper, with the expectation that he would
perform all the duties pertaining to his position including the entries required to be made
by the Collector of Internal Revenue. It is undisputed that the accused took no part in the
keeping of the book in question in this case and that he personally never made an entry in
it. He left everything to his bookkeeper. Under such circumstances we do not believe that
the mere proof of the fact that the bookkeeper omitted to make the entries required by the
Internal Revenue Circular for the 5th day of January, 1915, is an act upon which the
conviction of the accused can be based. No knowledge on his part was shown with regard
to the bookkeeper's omission and the Government does not contend that he had any
knowledge. Nor is it contended that the bookkeeper omitted the entry under the direction
of the accused or with his connivance. No connection between the accused and the
omission of the bookkeeper is shown or claimed. On the contrary the board contention is
that the accused is responsible for the acts and omissions of his bookkeeper, and that, if
any act or omissions of his bookkeeper, violates the criminal law, the principal is
responsible criminally.
With this we cannot agree. Neither the statute nor the circular of the Collector of Internal
Revenue, nor both together, expressly require such a result nor can we say from the
circular or the law that the intention to do so was so clear as to leave no room for doubt.
Courts will not hold one person criminally responsible for the acts of another, committed
without his knowledge or consent, unless there is a statute requiring it so plain in its
terms that there is no doubt of the intention of the Legislature. Criminal statutes are to be
strictly construed. No person should be brought within their terms who is not clearly
within them, nor should any act be pronounced criminal which is not clearly made so by
the statute. (U. S. vs. Madrigal, 27 Phil. Rep., 347.)
The judgment of conviction is reversed and the accused acquitted. Costs de officio. So
ordered.
1
 G.R. Nos. L-12011-14 September 30, 1958
THE PEOPLE OF THE PHILIPPINES, plaintiff-appellant,
vs.
ALFONSO GATCHALIAN, defendant-appellee.
Office of the Solicitor General Ambrosio Padilla and Solicitor Troadio T. Quiazon, Jr.
for appellant.
Ishmael Rodriguez for appellee.
BAUTISTA ANGELO, J.:
Alfonso Gatchalian was charged before the Court of First Instance of Zamboanga with a
violation of Section 3 of Republic Act No. 602 in four separate informations (Criminal
Cases Nos. 2206, 2207, 2208 and 2209) committed as follows:
That on or about August 4, 1951, up to and including December 31, 1953 and
within the jurisdiction of this Court, viz, in the City of Zamboanga,
Philippines, the above named accused, owner or manager of the New Life
Drug Store, a business establishment in the City of Zamboanga and having
under his employ one Expedito Fernandez as salesman in the said
establishment, did then and there willfully, and feloniously, pay and cause to
be paid to said Expedito Fernandez, a monthly salary of P60 to P90 for the
period above-mentioned which is less than that provided for by law, thereby
leaving a difference of an unpaid salary to the latter in the total amount of
P1,016.64 for the period above-mentioned.
When arraigned on June 19, 1956, he pleaded not guilty to the charge. On August 29,
1956, his counsel, in his behalf, filed a written motion to dismiss based on two grounds
which in substance merely consist in that the violation charged does not constitute a
criminal offense but carries only a civil liability, and even if it does, the section of the law
alleged to have been violated does not carry any penalty penalizing it. On September 25,
1956, the City Attorney of Zamboanga filed his answer to the motion to dismiss
contending that the law which was violated by the accused carries with it both civil and
criminal liability, the latter being covered by Section 15 which provides for the penalty
for all willful violations of any of the provisions of the Minimum Wage Law. On
December 3, 1956, the Court, after hearing the arguments of both parties, as well as some
members of the local bar, issued an order dismissing the informations with costs de
oficio and cancelling the bail bond filed by the accused. The court in the same order
directed the Regional Representative of the Department of Labor to immediately institute
a civil action against the erring employer for the collection of the alleged underpayment
of wages due the employees. A motion for reconsideration having been denied, the
Government took the present appeal.
The pertinent portion of Section 3 of Republic Act 602 under which appellee was
prosecuted, reads as follows:.
SEC. 3. Minimum wage. — (a) Every employer shall pay to each of his
employees who is employed by an enterprise other than in agriculture wages at
the rate of not less than —
(1) Four pesos a day on the effective date of this Act and thereafter for
employees of an establishment located in Manila or its environs;
(2) Three pesos a day on the effective date of this Act and for one year after
the effective date, and thereafter P4 a day, for employees of establishment
located outside of Manila or its environs: Provided, That this Act shall not
apply to any retail or service enterprise that regularly employs not more than
five employees.
Section 15 of the same law, which treats of "penalties and recovery of wages due",
likewise provides:
SEC. 15. Penalties and recovery of wage due under this Act. —
(a) Any person who wilfully violates any of the provisions of this Act shall
upon conviction thereof be subject to a fine of not more than two thousand
pesos, or, upon second conviction, to imprisonment of not more than one year,
or to both fine and imprisonment, in the discretion of the court.
(b) If any violation of this Act is committed by a corporation, trust, partnership
or association, the manager or in his default, the person acting as such when
the violation took place, shall be responsible. In the case of a government
corporation, the managing head shall be made responsible, except when shown
that the violation was due to an act or commission of some other person, over
whom he has no control, in which case the latter shall be held responsible.
(c) The Secretary is authorized to supervise the payment of the unpaid
minimum wages or the wages found owing to any employee under this Act.
(d) The Secretary may bring an action in any competent court to recover the
wages owing to an employee under this Act, with legal interest. Any sum thus
recovered by the Secretary on behalf of an employee pursuant to this
subsection shall be held in a special deposit account and shall be paid, on order
of the Secretary, directly to the employee or employees affected. Any such
sums not paid to an employee because he cannot be located within a period of
three years shall be covered into the Treasury as miscellaneous receipts.
2
 (e) Any employer who underpays an employee in violation of this Act shall be
liable to the employee affected in the amount of the unpaid wages with legal
interest. Action to recover such liability may be maintained in any competent
court by anyone or more employees on behalf of himself or themselves. The
court in such action shall, in addition to any judgment awarded to the plaintiff
or plaintiffs, allow a reasonable attorney's fee which shall not exceed ten per
cent of the amount awarded to the plaintiffs, unless the amount awarded is less
than one hundred pesos, in which event the fee may be ten pesos, but not in
excess of that amount. Payment of the amount found due to the plaintiffs shall
be made directly to the plaintiffs, in the presence of a representative of the
Secretary or the Court. In the event payment is witnessed by the court or its
representative, the Secretary shall be notified within ten days of payment that
the payment has been made.
(f) No employer, attorney, or any other person, other than the employee to
whom underpayment are found due, shall receive any part of the
underpayment due the employee; and no attorney shall receive any fee in
excess of the maximum specified herein.
(g) In determining when an action is commenced under this section for the
purpose of the statute of limitation, it shall be considered to be commenced in
the case of any individual claimant on the date when the complaint is filed if
he is specifically named as a party plaintiff in the complaint, or if his name did
not so appear, on the subsequent date on which his name is added as a party
plaintiff in such action.
It is clear from the above-quoted provisions that while Section 3 explicitly requires every
owner of an establishment located outside of Manila or its environs to pay each of its
employees P3.00 a day on the effective date of the Act, and one year thereafter P4.00 a
day, Section 15 imposes both a criminal penalty for a willful violation of any of the
above provisions and a civil liability for any underpayment of wages due an employee.
The intention of the law is clear: to slap not only a criminal liability upon an erring
employer for any willful violation of the acts sought to be enjoined but to attach
concurrently a civil liability for any underpayment he may commit as a result thereof.
The law speaks of a willful violation of "any of the provisions of this Act", which is all-
embracing, and the same must include what is enjoined in Section 3 thereof which
embodies the very fundamental purpose for which the law has been adopted. A study of
the origin of our Minimum Wage Law (Republic Act 602) may be of help in arriving at
an enlightened and proper interpretation of the provisions under consideration. Our
research shows that this Act was patterned after the U. S. Fair Labor Standards Act of
1938, as amended, and so a comparative study of the pertinent provisions of both would
be enlightening.
The pertinent provisions of the U. S. Fair Labor Stardards Act of 1938, as amended,
follow:
MINIMUM WAGES.
SEC. 6. (a) Every employer shall pay to each of his employees who is engaged
in commerce or in the production of goods for commerce wages at the
following rates —
(1) not less than 75 cents an hour;
xxx xxx xxx
PROHIBITED ACTS
SEC. 15. (a) After the expiration of one hundred and twenty days from the date
of enactment of this Act, it shall be unlawful for any person —
(1) to transport, offer for transportation, ship, deliver, or sell in commerce, or
to ship, deliver, or sell with knowledge that shipment or delivery or sale
thereof in commerce is intended, any goods in the production of which any
employee was employed in violation of section 6 or section 7, or in violation
of any regulation or order of the Administrator issued under section 14; . . . .
(2) to violate any of the provisions of section 6 or section 7, or any of the
provisions of any regulation or order of the Administrator issued under section
14;
(3) to discharge or in any other manner discriminate against any employee
because such employee has filed any complaint or instituted or cause to be
instituted any proceeding under or related to this Act, or has testified or is
about to testify in any such proceeding, or has served or is about to serve on an
industry committee;
(4) to violate any of the provisions of section 11 (c) or any regulation or order
made or continued in effect under the provisions of section 11 (d), or to make
any statement, report, or record filed or kept pursuant to the provisions of such
section or of any regulation or order thereunder, knowing such statement,
report, or record to be false in a material respect.
xxx xxx xxx
3
 PENALTIES
SEC. 16. (a) Any person who willfully violates any of the provisions of section
15 shall upon conviction thereof be subject to a line of not more than P10,000,
or to imprisonment for not more than six months, or both. No person shall be
imprisoned under this subsection except for an offense committed after the
conviction of such person for a prior offense under this subsection.
(b) Any employer who violates the provisions of section 6 or 7 of this Act shall
be liable to the employee or employees affected in the amount of their unpaid
minimum wages, or their unpaid overtime compensation, as the case may be,
and in additional equal amount as liquidated damages. Action to recover such
liability may be maintained in any court of competent jurisdiction by any one
or more employees for and in behalf of himself or themselves and other
employees similarly situated. No employee shall be a party plaintiff to any
such action unless he gives his consent in writing to become such a party and
such consent is filed in the court in which such action is brought. The court in
such action shall, in addition to any judgment awarded to the plaintiff or
plaintiffs, allow a reasonable attorney's fee to be paid by the defendant costs of
the action.
The pertinent provisions of Republic Act 602 read:
SEC. 3. Minimum wage. — (a) Every employer shall pay to each of his
employees who is employed by an enterprise other than in agriculture wages at
the rate of not less than —
xxx xxx xxx
(2) Three pesos a day on the effective date of this Act and for one year after
the effective date, and thereafter P4 a day, for employees of establishments
located outside of Manila or its environs: Provided, That this Act shall not
apply to any retail or service enterprise that regularly employs not more than
five employees.
SEC. 15. Penalties and recovery of wage due under this Act. —
(a) Any person who willfully violates any of the provisions of this Act shall
upon conviction thereof be subject to a fine of not more than two thousand
pesos, or, upon second conviction, to imprisonment of not more than one year,
or to both fine and imprisonment, in the discretion of the court.
xxx xxx xxx
(e) Any employer who underpays an employee in violation of this Act shall be
liable to the employee affected in the amount of the unpaid wages with legal
interest. Action to recover such liability may be maintained in any competent
court by anyone or employees on behalf of himself or themselves. The court in
such action shall, in addition to any judgment awarded to the plaintiff or
plaintiffs, allow a reasonable attorney's fee which shall not exceed ten per cent
of the amount awarded to the plaintiffs, unless the amount awarded is less than
one hundred pesos, in which event the fee may be ten pesos, but not in excess
of that amount. Payment of the amount found due to the plaintiffs shall be
made directly to the plaintiffs, in the presence of a representative of the
Secretary or of the Court. In the event payment is witnessed by the court or its
representative, the Secretary shall be notified within ten days of payment that
the payment has been made.
An examination of the above-quoted provisions of the two Acts will show that while in
substance they are similar, they however contain some differences in their phraseology
and in the apportionment of their provisions. Thus, while Section 15 (a), paragraph 2, of
the Fair Labor Standards Act makes it unlawful for an employer not to pay the minimum
wage prescribed therein, our Minimum Wage Law does not contain a similar provision.
Again, the Fair Labor Standards Act enumerates in one single section all those acts which
are declared unlawful and are not spread out in different sections as done in our law.
Thus, the acts that are declared unlawful by the former law as enumerated in Section
15(a) are: (1) to transport or deliver any goods in the production of which any employee
was employed in violation of Section 6 or Section 7, or in violation of any regulation or
order of the Administrator; (2) failure to pay the minimum wage; (3) to discharge or in
any other manner discriminate against an employee who has filed a complaint against the
employer in relation to the Act; and (4) failure to keep the record or report required by
law or to make a false record or report. On the other hand, our law declares unlawful the
following acts, to wit: (1) to pay wages in the form of promissory notes, vouchers,
coupons, tokens or any other form alleged to represent legal tender [Section 10 (a) (1)];
(2) to make any deduction or withhold any amount from the wages of an employee, or
induce any employee to give part of his wages by force or intimidation [ Section 10 (g)];
(3) to commit any act of discrimination against an employee because of certain complaint
he has filed or caused to be filed against the employer (Section 13); and (4) to make any
false statement, report or record to subvert the purpose of the Act (Section 14), which
acts are contained in separate sections mentioned therein. The failure to pay the
prescribed minimum wage is not declared unlawful in our law.
It should also be noted that while Section 16 of the Fair Labor Standards Act which
provides for the penalties to be imposed for any willful violation of the provisions of the
Act specifically states that those penalties refer to acts declared unlawful under Section
15 of the same Act, our law does not contain such specification. It merely provides in
Section 15 (a) that "Any person who willfully violates any of the provisions of this Act
shall upon conviction" be subject to the penalty therein prescribed. This distinction is
4
very revealing. It clearly indicates that while the Fair Labor Standards Act intends to
subject to criminal action only acts that are declared unlawful, our law by legislative fiat
intends to punish not only those expressly declared unlawful but even those not so
declared but are clearly enjoined to be observed to carry out the fundamental purpose of
the law. One such provision is undoubtedly that which refers to the payment of the
minimum wage embodied in Section 3. This is the only rational interpretation that can be
drawn from the attitude of our Congress in framing our law in a manner different from
that appearing in the mother law.
Indeed, the main objective of the law is to provide for a rock-bottom wage to be observed
and by an employers of an agricultural and industrial establishment. This objective would
be defeated were we to adopt a restrictive interpretation of the above penal clause, for an
employer who knows that he cannot be amenable to a criminal action would be prone to
subvert the law because if he is detected it would be easy for him to pay the
underpayment and the corresponding interest as would be the case were he to assume
merely a civil liability. This would be a mockery and a derision of the law not
contemplated by our lawmaker which would certainly render it nugatory and abortive.
We are not prepared to adopt an interpretation which would give such adverse result to a
legislation conceived in the lofty purpose of protecting labor and giving it a living wage.
If the law is to survive, it must be real, militant and effective.
The establishment of the maximum wage benefits directly the low-
paid employees, who now receiveinadequate wages on which to support thems
elves and their families. It benefits all wage earners indirectly bysetting a floor
below which their remuneration cannot fail. It raises the standards of competiti
on amongemployers, since it would protect the fair-
minded employer who voluntarily pays a wage that supports thewage earner fr
om the competition of the employer, who operates at lower cost by reasons of
paying hisworkers a wage below subsistence. If, in fact, the employer cannot p
ay a subsistence wage, then he shouldnot continue his operation unless he impr
oves his methods and equipment so as to make the payment of theminimum wa
ge feasible for him; otherwise the employer is wasting the toil of the worker an
d the materialresources used in the employment. Second methods of operation,
progressive and fair-
minded management,and an adequate minimum wage go hand in hand. (Expla
natory Note to H.B. No. 1476).
Counsel for appellee however entertains a different interpretation. He contends that if
Section 15(a) should be interpreted in a manner that would embrace a willful violation
of any of the provisions of the law we would have a situation where even the officials
entrusted with its enforcement may be held criminally liable which is not contemplated in
the law. Thus, he contends, the Secretary of Labor may be criminally prosecuted for
willfully not using all available devices for investigation [Section 4 (c)], for not
presenting to the Wage Board all the evidence in his possession relating to the wages in
the industries for which the Wage Board is appointed and other information relevant to
the establishment of the minimum wage [Section 5 (p)], and for not doing all other acts
which the law requires him to do under Section 6. This, he emphasizes, is absurd and
should not be entertained.
To begin with, the Minimum Wage Law is a social legislation which has been adopted
for the benefit of labor and as such it contains provisions that are enjoined to be observed
by the employer. These provisions are substantive in nature and had been adopted for
common observance by the persons affected. They cannot be eluded nor subverted lest
the erring employer runs into the sanction of the law. On the other hand, the provisions
adverted to by counsel are merely administrative in character which had been adopted to
set the machinery by which the law is to be enforced. They are provisions established for
observance by the officials entrusted with its enforcement. Failure to comply with them
would therefore subject them merely to administrative sanction. They do not come under
the penal clause embodied in Section 15(a). This is clearly inferred from Section 18(c), of
Republic Act No. 602, which provides: "Any official of the Government to whom
responsibility in administration and enforcement has been delegated under this Act shall
be removable on the sustaining of charges of malfeasance or non-feasance in office."
This specific provision should be interpreted as qualifying the penal clause provided for
in Section 15(a).
It is true that Section 3 under which appellee was charged does not state that it shall be
unlawfull for an employer to pay his employees wages below the minimum wage but
merely requires that the employer shall pay wages not below the minimum wage. But
failure of such declaration does not make the non-observance of the provisions less
unlawful than otherwise, for such provision embodies precisely the raison d'etre of the
law itself. Indeed, Section 3 is the very provision on which all the other provisions of the
law are built. Thus, the prohibition against discriminating against any employee because
he has filed a complaint or caused to be instituted one against the employer is just a
means to insure the effective enforcement of that provision (Section 13); and so the
prohibition against the making of a false statement, report or record required to be filed or
kept by the law (Section 13); the prohibition against the payment of wages in the form of
promissory notes, vouchers, coupons, tokens, or any other form to represent legal tender
(Section 10, par. a, sub-paragraph 1); and the prohibition against making deductions or
withholding any amount from the wages of an employee (Section 10, par. g). These are
acts which were declared unlawful because they may be resorted to by unscrupulous
employers with the evident purpose of subverting or defeating the payment of the
minimum wage. If these supplementary provisions are mere safeguards established by the
lawmaker to close every avenue to trickery or subversion on the part of the employer,
they cannot be more important and imperative as the central provision fixing the
minimum wage without which the law will have no reason to exist. We cannot therefore
entertain the claim that because said provision was not declared unlawful it cannot be
subject to the penal sanction embodied in Section 15.
It is likewise true that the informations under which the accused was charged only
mention Section 3 of the law as the one violated and this section does not contain a penal
clause, but this does not make the informations defective. There is no law which requires
that in order that an accused may be convicted the specific provision which penalizes that
5
act charged be mentioned in the information. The Rules of Court do not require such
designation. In fact, the rule provides that an information, to be sufficient, should
state only the name of the defendant, the designation of the offense by the statute, the acts
or omissions complained of as constituting the offense, the name of the offended party,
the approximate time of the commission of the offense, and the place wherein the offense
was committed (Rule 106, Section 5). The rule does not require that it should mention the
particular penal provision penalizing the offense.
The final claim of appellee is that inasmuch as the provisions of the law under which he
was prosecuted are ambiguous and there is doubt as to their interpretation, that doubt
should be resolved in his favor because a penal statute should be strictly construed
against the State. This contention must also fail if we are to be consistent with our
interpretation of the provisions of Section 15 (a) of the law. We have stated that that
section is clear and unambiguous and covers the provisions embodied in Section 3 of the
law, and if such is the case then there is no room for the application of the principle
invoked by appellee.
We are therefore persuaded to conclude that the court a quo erred in dismissing the
informations filed against the appellee and, consequently, its order of December 3, 1956,
subject of this appeal should be set aside.
Wherefore, the order appealed from is hereby set aside. It is ordered that these cases be
remanded to the court a quo for further proceedings, with costs against appellee..
G.R. No. 134498 November 13, 2001
CELIA M. MERIZ, petitioner,
vs.
PEOPLE OF THE PHILIPPINES, respondent.
VITUG, J.:
A maxim in statutory construction mandates that penal statutes should be strictly
construed against the state and liberally in favor of the accused. The phrase, truly,
may not be a mere cliché but, so also, it is not meant to wrongly shield an accused from
criminal liability.
On appeal to this Court is the decision, dated 06 July 1999, of the Court of Appeals
(6th Division), in CA-G.R. No. 18985 affirming in toto the decision of the court a quo in
Criminal Case No. 90-5598 to Criminal Case No. 5601, inclusive, which found Celia M.
Meriz, herein petitioner, guilty beyond reasonable doubt of having transgressed Batas
Pambansa ("BP") Bilang 22.
Petitioner was engaged in the business of manufacturing garments for export using the
name and style of "Hi-Marc Needlecraft." During the course of her business
undertakings, she obtained a number of loans from Amelia Santos (Santos) and Summit
Financing Corporation. Sometime in 1988, petitioner issued in favor of Santos four
Pilipinas Bank Checks in the aggregate amount of P188,400.00. Santos deposited the
checks with her bank. The checks, however, were later returned, with the notation
"Insufficient Funds" tamped on the dorsal portion of each check, 1 by the depositary
bank.1âwphi1.nêt
On 15 December 1988, Santos, through her counsel, sent a telegram to petitioner, reading
–
"Unless your bounced checkes for Two Hundred Twenty-Six Thousand Three
Hundred Pesos paid in cash in three (3) days, [we] shall institute criminal
action."2
Despite the warning, petitioner failed to settle her account. On 05 January 1990, another
demand letter was sent; it read:
"Your account with Mr. and Mrs. Leonardo G. Santos as of December 1, 1989
has amounted to P285,773.90.
"In this connection we demand that you settle this account within seven (7)
days from receipt hereof. Failing to do so, we might be constrained to take
legal action, including damages and attorney’s fees."3
On 12 January 1990, petitioner acknowledged the letter-demand; she wrote thusly:
"Dear Mr. Santos,
"RE: OUR OUTSTANDING ACCOUNT OF P285,733.90
"With reference to the DEMAND LETTER dated January 5, 1990 [sent] to us
by your counsel Vicente P. Fernando, we would like to request from you to
please give us a little more time to settle said account with you.
"Business has not been good the past year and up to now we haven’t collected
yet from our buyer. We’ve been doing all possible means to generate funds
and be able to settle our account. For the meantime, all we ask from you is
give us more time.
"We thank you for the consideration.
6
 "Very truly yours,
"(Sgd.) CELIA M. MERIZ"4
Still, petitioner did not settle the obligation.
In due time, four informations for violation of BP 22 were filed before Branch 147 of the
Regional trial Court of Makati City; to wit:
"Criminal Case No. 90-5598 –
th
"That on or about the 30 day of September, 1988, in the Municipality of
Makati, Metro Manila, Philippines, and within the jurisdiction of this
Honorable Court, the said accused being then the authorized signatory of Hi-
Marc Needle Craft, did then and there willfully, unlawfully and feloniously
make or draw and issue to Amelia A. Santos, to apply on account or for value
the check described below:
Check No. 01587894
Drawn Against Pilipinas Bank
- 135 Sen. Gil Puyal Ave.,
Makati, Metro Manila
In the amount of P47,100.00
Dated September 30, 1988
Payable to Amelia Santos
said accused well knowing fully that at the time of issue Hi-Marc Needlecraft
had no sufficient funds in or credit with the drawee bank for the payment in
full of the face amount of such check upon its presentment which check when
presented for payment within ninety (90) days from the date thereof was
subsequently dishonored by the drawee bank for the reason ‘Drawn against
insufficient funds/Account Closed’ and despite receipt of notice of dishonor,
the accused and or Hi-Marc Needlecraft failed to pay said payee the face
amount of said check or to make arrangement for full payment thereof, within
five (5) banking days after receiving notice."5
Criminal Case No. 90-5599 –
"That on or about the 31st day of October, 1988, in the Municipality of Makati,
Metro Manila, Philippines, and within the jurisdiction of this Honorable Court,
the said accused being then the authorized signatory of Hi-Marc Needle Craft,
did then and there willfully, unlawfully and feloniously make or draw and
issue to Amelia A. Santos, to apply on account or for value the check
described below:
Check No. 01587895
Drawn Against Pilipinas Bank
- 135 Sen. Gil Puyal Ave.
Makati, Metro Manila
In the amount of P47,100.00
Dated October 31, 1988
Payable to Amelia Santos
said accused well knowing fully that at the time of issue Hi-Marc Needlecraft
had no sufficient funds in or credit with the drawee bank for the payment in
full of the face amount of such check upon its presentment which check when
presented for payment within ninety (90) days from the date thereof was
subsequently dishonored by the drawee bank for the reason ‘Drawn against
insufficient funds/Account Closed’ and despite receipt of notice of dishonor,
the accused and or Hi-Marc Needlecraft failed to pay said payee the face
amount of said check or to make arrangement for full payment thereof, within
five (5) banking days after receiving notice."6
Criminal Case No. 90-5600 –
"That on or about the 30th day of November, 1988, in the Municipality of
Makati, Metro Manila, Philippines, and within the jurisdiction of this
Honorable Court, the said accused being then the authorized signatory of Hi-
Marc Needle Craft, did then and there willfully, unlawfully and feloniously
make or draw and issue to Amelia A. Santos, to apply on account or for value
the check described below:
Check No. 01587896
Drawn Against Pilipinas Bank
- 135 Sen. Gil Puyal Ave.
Makati, Metro Manila
In the amount of P47,100.00
Dated November 30, 1988
Payable to Amelia Santos
said accused well knowing fully that at the time of issue Hi-Marc Needlecraft
had no sufficient funds in or credit with the drawee bank for the payment in
full of the face amount of such check upon its presentment which check when
presented for payment within ninety (90) days from the date thereof was
subsequently dishonored by the drawee bank for the reason ‘Drawn against
insufficient funds’ and despite receipt of notice of dishonor, the accused and or
Hi-Marc Needlecraft failed to pay said payee the face amount of said check or
7
 to make arrangement for full payment thereof, within five (5) banking days
after receiving notice."7
Criminal Case No. 90-5601 –
"That on or about the 15th day of December, 1988, in the Municipality of
Makati, Metro Manila, Philippines, and within the jurisdiction of this
Honorable Court, the said accused being then the authorized signatory of Hi-
Marc Needle Craft, did then and there willfully, unlawfully and feloniously
make or draw and issue to Amelia A. Santos, to apply on account or for value
the check described below:
Check No. 01587897
Drawn Against Pilipinas Bank
- 135 Sen. Gil Puyal Ave.
Makati, Metro Manila
In the amount of P47,100.00
Dated December 15, 1988
Payable to Amelia Santos
said accused well knowing fully that at the time of issue Hi-Marc Needlecraft
had no sufficient funds in or credit with the drawee bank for the payment in
full of the face amount of such check upon its presentment which check when
presented for payment within ninety (90) days from the date thereof was
subsequently dishonored by the drawee bank for the reason ‘Drawn against
insufficient funds’ and despite receipt of notice of dishonor, the accused and or
Hi-Marc Needlecraft failed to pay said payee the face amount of said check or
to make arrangement for full payment thereof, within five (5) banking days
after receiving notice."8
Pleas of "not guilty" were entered by the accused at the arraignment. Trial ensued with
both parties submitting their respective cases. On 16 March 1994, the trial court,
following the reception of evidence, rendered its judgment convicting petitioner of all the
charges; it held:
"WHEREFORE, in view of the foregoing, the Court, finding the accused
guilty beyond reasonable doubt of the crimes charged, hereby sentences her to
suffer an imprisonment of one (1) year in each of these cases, and to indemnify
the complainant the sum of P47,100.00 in each case. With costs."9
Aggrieved, petitioner elevated the case, docketed CA-G.R. CR No. 18985, to the Court of
Appeals. In its decision of 06 July 1998, the appellate court affirmed in toto the decision
of the trial court.
Petitioner, in the instant appeal, would have it that there was an absolute lack of
consideration for the subject checks which were issued only as a condition for the grant
of loan in her favor and that the requisite element of notice was not complied with.
The petition is bereft of merit.
The essential elements of the offense penalized under BP 22 are "(1) the making, drawing
and issuance of any check to apply to account or for value; (2) the knowledge of the
maker, drawer or issuer that at the time of issue he does not have sufficient funds in or
credit with the drawee bank for the payment of such check in full upon its presentment;
and (3) subsequent dishonor of the check by the drawee bank for insufficiency of funds
or credit or dishonor for the same reason had not the drawer, without any valid cause,
ordered the bank to stop payment."10
The Court has consistently declared that the cause or reason for the issuance of the check
is inconsequential in determining criminal culpability under BP 22. The Court has since
said11 that a "check issued as an evidence of debt, although not intended for encashment,
has the same effect like any other check" and must thus be held to be "within the
contemplation of BP 22." Once a check is presented for payment, the drawee bank gives
it the usual course whether issued in payment of an obligation or just as a guaranty of an
obligation.12 BP 22 does not appear to concern itself with what might actually be
envisioned by the parties,13 its primordial intention being to instead ensure the stability
and commercial value of checks as being virtual substitutes for currency. It is a policy
that can easily be eroded if one has yet to determine the reason for which checks are
issued, or the terms and conditions for their issuance, before an appropriate application of
the legislative enactment can be made. The gravamen of the offense under BP 22 is the
act of making or issuing a worthless check or a check that is dishonored upon
presentment for payment. The act effectively declares the offense to be one of malum
prohibitum. The only valid query then is whether the law has been breached, i.e., by the
mere act of issuing a bad check, without so much regard as to the criminal intent of the
issuer.14
The element of "knowledge" involves a state of mind that obviously would be difficult to
establish; hence, the statute itself creates a prima facie presumption of knowledge on the
insufficiency of funds or credit coincidental with the attendance of the two other
elements. Section 2 of the Act provides:
"Sec. 2. Evidence of knowledge of insufficient funds. – The making, drawing
and issuance of a check payment of which is refused by the drawee bank
because of insufficient funds in or credit with such bank, when presented
within ninety (90) days from the date of the check, shall be prima facie
8
 evidence of knowledge of such insufficiency of funds or credit unless such
maker or drawer pays the holder thereof the amount due thereon, or makes
arrangements for payment in full by the drawee of such check within five (5)
banking days after receiving notice that such check has not been paid by the
drawee."
The Court has elucidated in one case15 thusly –
"The begin with, the second element involves knowledge on the part of the
issuer at the time of the check’s issuance that he did not have enough funds or
credit in the bank for payment thereof upon its presentment. B.P. No. 22
creates a presumption juris tantum that the second element prima facie exists
when the first and third elements of the offense are present (Magno vs. Court
of Appeals, 210 SCRA 471). But such evidence may be rebutted. If not
rebutted or contradicted, it will suffice to sustain a judgment in favor of the
issue, which it supports (People vs. Nuque, 58 O.G. 844). As pointed out by
the Solicitor General, such knowledge of the insufficiency of petitioner’s funds
‘is legally presumed from the dishonor of his checks for insufficiency of
funds.’"
The prima facie presumption that the drawer has knowledge of the insufficiency of funds
or credit at the time of the issuance, or on the presentment for payment, of the check
might be rebutted by payment of the value of the check either by the drawer or by the
drawee bank within five banking days from notice of the dishonor given to the drawer.
The payment could thus be a complete defense that would lie regardless of the strength of
the evidence offered by the prosecution.16 It must be presupposed then that the issuer
receives a notice of dishonor and that, within five days from receipt thereof, he would
have failed to pay the amount of the check or to make arrangement for its payment.
Anent the notice of dishonor, petitioner bewails the inaccuracy thereof. She underscores
the fact that the questioned checks have not been sufficiently identified. There is nothing
in the law, however, that prescribes the contents of a notice of dishonor except that the
same be in writing as opposed to a mere oral notice.17
Both the Court of Appeals and the trial court found that a telegram, dated 15 December
1988, and a demand letter, dated 05 January 1990, were sent to petitioner. The latter, in
reply to the 05 January 1990 letter, acknowledged her liability and indeed sought an
extension within which to satisfy her account. A review of the findings of facts of the
Court of Appeals is not a function that the Supreme Court undertakes, and there is here
no cogent reason to depart from the rule.
All told, the judgment of conviction must be upheld. Given the circumstances, however,
the Court deems it appropriate to modify the sentence of the trial court by deleting the
prison sentence of one (1) year and, in its stead, imposing a fine of P94,200.00 in each of
the cases.
WHEREFORE, the assailed decision is MODIFIED by deleting the prison sentence of
one year and, in its stead, imposing, as the Court so hereby imposes, a fine of P94,200.00
in each of the cases, herein involved, on petitioner Celia M. Meriz. The award of civil
indemnity made by the trial court in favor of private complainant is AFFIRMED. Costs
against petitioner.
1âwphi1.nê t
SO ORDERED.
G.R. No. L-12436 May 31, 1961
LA CARLOTA SUGAR CENTRAL and ELIZALDE & CO., INC., petitioners-
appellants,
vs.
PEDRO JIMENEZ, AUDITOR GENERAL OF THE PHILIPPINES, respondent-
appellee.
Pacifico de Ocampo for petitioners-appellants.
Office of the Solicitor General for respondent-appellee.
DIZON, J.:
Sometime in September, 1955 La Carlota Sugar Central — a domestic corporation
hereinafter referred to as the Central, managed, controlled and operated by Elizalde &
Co., Inc., referred to hereinafter as Elizalde, imported 500 short tons of ammonium
sulphate and 350 short tons of ammonium phosphate. The corresponding letter of credit
in the sum of $60,930.00, U.S. currency, was opened through the Hongkong & Shanghai
Banking Corporation in the name of the Central and in favor of the Overseas Central
Enterprises, Inc., 141 Battery St., San Francisco 11, California, U.S.A. The invoices, bill
of lading, and all other papers incident to said importation were also in the name of the
Central.
When the fertilizers arrived in the Philippines, the Central Bank imposed on, and
demanded with the provisions of Republic Act No. 601, as amended, and the Central paid
in that connection the total sum of P20,872.09 (Annexes B and C attached to the Petition
for Review).
On November 18, 1955 the Central filed, through the Hongkong & Shanghai Banking
Corporation, a petition for the refund of the P20,872.09 paid as above stated, claiming
that it had imported the fertilizers mentioned heretofore upon request and for the
exclusive use of five haciendas known as "Esperanza", "Nahalin", "Valencia" — owned
by Elizalde — "Consuelo" and "Maayon", these last two managed by the same company,
and therefore the importation was exempt from the 17% exchange tax in accordance with
Sec. 2, Rep. Act 601, as amended by Act 1375. The Auditor of the Central Bank,
however, denied the petition on July 2, 1956. The Central requested the Auditor to
9
reconsider his ruling, but after a reexamination of all pertinent papers the reconsideration
was denied. The Central then appealed to the Auditor General of the Philippines, who on
January 18, 1957, affirmed the ruling of the Auditor of the Central Bank upon the ground
that "the importation of the fertilizers here in question does not fall within the scope of
the exempting provisions of Section 2 of Republic Act No. 601, as amended by Republic
Act No. 1357. Accordingly, the decision of the Auditor, Central Bank of the Philippines,
denying the aforementioned request for refund of 17% exchange tax, is hereby affirmed."
In view of this result, the Central and Elizalde filed the present petition for review.
The only question to be resolved is whether upon the undisputed facts of the case the
importation of the fertilizers mentioned heretofore is covered by the exemption provided
by Sections 1 and 2 of Republic Act No. 601, as amended by Republic Acts Nos. 1175,
1197 and 1375, which read as follows:
SECTION 1. Except as herein otherwise provided, there shall be assessed,
collected and paid a special excise tax of seventeen per centum on the value in
Philippine peso of foreign exchange sold by the Central Bank of the
Philippines, or any of its agents until June thirtieth, nineteen hundred and fifty-
six.
SEC. 2. The tax provided for in section one of this Act shall not be collected
on foreign exchange used for the payment of the cost, transportation and/or
other charges of canned milk, canned beef, cattle, canned fish, cocoa beans,
malt, stabilizer and flavors, vitamin concentrate; supplies and equipment
purchased directly by the Government or any of its instrumentalities for its
own exclusive use; machinery, equipment, accessories, and spare parts, for the
use of industries, miners, mining enterprises, planters and farmers; and
fertilizers when imported by planters or farmers directly or through their
cooperatives; . . . .
The law is, therefore, clear that imported fertilizers are exempt from the payment of the
17% tax only if the same were imported by planters or farmers directly or through their
cooperatives. In the present case, as appellants admit that the Central "is not the planter
ultimately benefited by the fertilizers, much less a cooperative within the purview of Rep.
Act No. 601, as amended", the only possible conclusion is that the imported fertilizers in
question are not entitled to the exemption provided by law.
It is, however, argued that the Central imported the fertilizers for the exclusive purpose of
accommodating the haciendas mentioned heretofore, who were to use the fertilizers; that
the Central acted merely as an agent of the aforesaid haciendas; that considering the
relationship and corporate tie-up between the Central, on the one hand, and Elizalde, on
the other, the act of the Central in importing the fertilizers should be considered as an act
of Elizalde and, therefore, the act of the haciendas themselves, three of which were
owned and two managed by Elizalde. We find these contentions to be without merit.
As already stated, the exemption covers exclusively fertilizers imported by planters or
farmers directly or through their cooperatives. The word "directly" has been interpreted to
mean "without anything intervening" (Words and Phrases, Vol. 12A, p. 140 — citing
Gulf Atlantic Warehouse, etc. vs. Bennet, 51 So 2nd 544, 546, 36 Ala. App. 33);
"proximately or without intervening agency or person" (Idem, p. 142 — citing
Employers' Casualty Co. v. Underwood, 286 P. 7, 10; 142 Okl. 208). Consequently, an
importation of fertilizers made by a farmer or planter through an agent, other than his
cooperative, is not imported directly as required by the exemption. This conclusion
acquires added force upon consideration of the fact that the legal provision in question
has already established an exception from the meaning or scope of the term "directly" by
providing coverage for fertilizers imported by planters or farmers through their
cooperatives. The latter, therefore, is the only agent of planters or farmers recognized by
the exception, and we can not recognize any other.
On the other hand, that the agent acted simply to accommodate the planter or farmer and
without any idea of making any profit from the transaction would seem to be immaterial
considering the language employed in the statute under consideration.
In connection with what has been stated heretofore, we have to bear in mind likewise that
when the issue is whether or not the exemption from a tax imposed by law is applicable,
the rule is that the exempting provision is to be construed liberally in favor of the taxing
authority and strictly against exemption from tax liability, the result being that statutory
provisions for the refund of taxes are strictly construed in favor of the State and against
the taxpayer (82 C.J.S. pp. 957-958; Helvering vs. Northwest Steel Rolling Mills, 311 US
46 85 L. ed. 29 S. Ct., 51 Am. Jur. p. 526). Indeed, were we to adopt appellants'
construction of the law by exempting from the 17% tax all fertilizers imported by planters
or farmers through any agent other than their cooperatives, we would be rendering
useless the only exception expressly established in the case of fertilizers imported by
planters or farmers through their cooperatives.
IN VIEW OF THE FOREGOING, the ruling appealed from is hereby affirmed, with
costs.
10
 G.R. No. L-30264 March 12, 1929 provisions beyond the clear import of the language used. In every case of doubt, such
statutes are construed most strongly against the Government and in favor of the citizen,
MANILA RAILROAD COMPANY, plaintiff-appellee, because burdens are not to be imposed, nor presumed to be imposed, beyond what the
statutes expressly and clearly import. (U. S. vs. Wigglesworth [1842], 2 Story, 369;
vs.
INSULAR COLLECTOR OF CUSTOMS, defendant-appellant. Froehlich & Kuttner vs. Collector of Customs [1911], 18 Phil., 461.)

Attorney-General Jaranilla for appellant. There are present two fundamental considerations which guide the way out of the legal
dilemma. The first is by taking into account the purpose of the article and then
Jose C. Abrew for appellee.
acknowledging that it is in reality used as a detached part or railways vehicles. The
second point is that paragraph 141 is a general provision while paragraph 197 is a special
MALCOLM, J.: provision. Where there is in the same statute a particular enactment and also a general
one which is embraced in the former, the particular enactment must be operative, and the
The question involved in this appeal is the following: How should dust shields be general enactment must be taken to effect only such cases within its general language as
classified for the purposes of the tariff, under paragraph 141 or under paragraph 197 of are not within the provisions of the particular enactment (25 R. C. L., p. 1010, citing
section 8 of the Tariff Law of 1909? These paragraphs placed in parallel columns for numerous cases).
purposes of comparison read:
We conclude that the trial judge was correct in classifying dust shields under paragraph
141. Manufactures of wool not otherwise provided for, forty per centum ad 197 of section 8 of the Tariff Law of 1909, and in refusing to classify them under
valorem paragraph 141 of the same section of the law. Accordingly, the judgment appealed from
will be affirmed in its entirety, without special taxation of costs in either instance.
197. Vehicles for use on railways and tramways, and detached parts thereof,
ten per centum ad valorem. G.R. No. L-40858 September 15, 1987

Dust shields are manufactured of wool and hair mixed. The component material of chief SPOUSES FEDERICO SERFINO and LORNA BACHAR, petitioners,
value is the wool. They are used by the Manila Railroad Company on all of its railway vs.
wagons. The purpose of the dust shield is to cover the axle box in order to protect from THE COURT OF APPEALS and LOPEZ SUGAR CENTRAL MILL CO.,
dust the oil deposited therein which serves to lubricate the bearings of the wheel. "Dust INC., respondents.
guard," which is the same as "dust shield," is defined in the work Car Builders'
Cyclopedia of American Practice, 10th ed., 1922, p. 41, as follows: "A this piece of No. L-40751 September 15, 1987
wood, leather, felt, asbestos or other material inserted in the dust guard chamber at the
back of a journal box, and fitting closely around the dust guard bearing of the axle. Its
purpose is to exclude dust and to prevent the escape of oil and waste. Sometimes called PHILIPPINE NATIONAL BANK, petitioner,
axle packing or box packing." vs.
THE HONORABLE COURT OF APPEALS, LOPEZ SUGAR CENTRAL MILL
COMPANY, INC., SPOUSES FEDERICO SERFINO and LORNA
Based on these facts, it was the decision of the Insular Collector of Customs that dust BACHAR, respondents.
shields should be classified as "manufactures of wool, not otherwise provided for." That
decision is entitled to our respect. The burden is upon the importer to overcome the
presumption of a legal collection of duties by proof that their exaction was unlawful. The PARAS, J.:
question to be decided is not whether the Collector was wrong but whether the importer
was right. (Erhardt vs. Schroeder [1894], 155 U. S., 124; Behn, Meyer & Co. vs. Before Us are two (2) Petitions for certiorari to review the decision 1 of the Court of
Collector of Customs [1913], 26 Phil., 647.) On the other hand, His Honor, Judge Appeals als in CA-G.R. No. 37748-R, consolidated for Our disposition since they arose from the
Simplicio del Rosario, took an opposite view, overruled the decision of the Collector of same factual background.
Customs, and held that dust shields should be classified as "detached parts" of vehicles
for the use on railways. This impartial finding is also entitled to our respect. It is the The records of the case show that on August 25, 1937, a parcel of land consisting of
general rule in the interpretation of statutes levying taxes or duties not to extend their 21.1676 hectares situated in the Municipality of Sagay, Province of Negros Occidental,

11
was patented in the name of Pacifico Casamayor, under Homestead Patent No. 44139.
Upon registration of said patent in the office of the Register of Deeds of Negros
Occidental, OCT No. 1839 was issued by said office in the name of Pacifico Casamayor.
On December 14, 1945, the latter sold said land in favor of Nemesia D. Baltazar.
Apparently, OCT No. 1839 was lost during the war and upon petition of Nemesia
Baltazar, the Court of First Instance of Negros Occidental ordered 2 the reconstitution
thereof. Pursuant thereto, OCT No. 14-R (1839) was issued on January 18, 1946 in the
name of Pacifico Casamayor. On that same day, TCT No. 57-N was issued in the name of
Nemesia Baltazar but after the cancellation of OCT No. 14-R (1839).
On August 25, 1951, Nemesia Baltazar, sold said property to Lopez Sugar Central Mill
Co., Inc. (Lopez Sugar Central, for brevity). The latter, however did not present the
documents for registration until December 17, 1964 to the Office of the Registry of
Deeds. Said office refused registration upon its discovery that the same property was
covered by another certificate of title, TCT No. 38985, in the name of Federico Serfino.
An inquiry into this discrepancy reveals that the Provincial Treasurer of Negros
Occidental on October 30, 1956 had conducted a public auction sale of this property for
tax delinquency for the period starting the year 1950. Notice of this public auction sale
was sent to Pacifico Casamayor but none to Nemesia Baltazar and Lopez Sugar Million
There being no public bidders on the scheduled date of sale, the Provincial Treasurer of
Negros Occidental issued a Certification of Sale of Delinquent Real Property over the
disputed land to the Province of Negros Occidental. On May 14, 1964, upon payment of
the amount of P1,838.49 by Federico Serfino, a Certificate of Repurchase of Real
Property was issued and executed by the Provincial Treasurer in favor of Federico
Serfino, for and in behalf of Pacifico Casamayor.
On May 28, 1964, Serfino filed a petition with the Court of First Instance of Negros
Occidental for the Reconstitution of OCT No. 1839 in the name of Pacifico Casamayor,
upon the allegation that said title was lost. After due publication and hearing, said OCT
was ordered reconstituted and thus OCT No. RP-1304 (1839) was issued by the Registry
of Deeds in the name of Casamayor.
On October 30, 1964, Serfino petitioned the court for confirmation of his title to the land
as purchaser in the auction sale. On October 31, 1964, court granted the petition and on
November 2, 1964, OCT No. RP-1304 (1839) was cancelled and TCT No. 38985 was
issued in the name of Federico Serfino, married to Lorna Bachar.
On November 19, 1964, the spouses Serfinos mortgaged the land to the Philippine
National Bank (PNB) to secure a loan in the amount of P5,000.00. Said mortgage in favor
of PNB was inscribed in TCT No. 38985. Hence, this was the situation of the land when
the Office of the Register of Deeds refused registration of the property in question
requested by the Lopez Sugar Central.
The lower court in its Order, dated January 16, 1965 in the Petition of the Office of the
Register of Deeds seeking the cancellation of either TCT No. 57-N (in the name of
Nemesia Baltazar) or TCT No. 38985 (in the name of Lopez Sugar Central), ordered
Lopez Sugar Central and spouses Serfino to take the necessary steps towards the clearing
of their respective titles before a court of general jurisdiction. Pursuant thereto, Lopez
Sugar Central, on May 5, 1965, instituted an action for 1) annulment of OCT No. RP-
1304 (1839), of TCT No. 38985 and of the mortgage executed by the Serfinos in favor of
PNB, 2) for the registration of the Deed of Sale, 3) for the issuance of a TCT in its name
and 4) for recovery of possession of the disputed land from the Serfinos.
On February 4, 1966, the lower court rendered its decision, 3 the dispositive portion
reading as follows:
WHEREFORE, and considering the conclusions and opinion set
forth above, judgment is hereby rendered as follows:
1. The Register of Deeds of Negros Occidental is hereby ordered to
cancel Transfer Certificate of Title No. 38985;
2. The same Register of Deeds is ordered to register the deed of sale
executed by Nemesia D. Baltazar on August 25, 1951, and after
cancelling Transfer Certificate of Title No. 57-N and other titles
issued prior thereto, to issue a new transfer certificate of title in the
name of Lopez Sugar Central Mill Co., Inc., upon previous
payments of the legal fees;
3. The Lopez Sugar Central Mill Co., Inc., shall pay the Philippine
National Bank, Bacolod Branch, the sum of P5,261.11 secured by a
real estate mortgaged registered and annotated on Transfer
Certificate of Title 38985 which shall be carried over in the new
transfer certificate of title to be issued to the Lopez Sugar Central
Mill Co., Inc. with the right of recourse to the Assurance Fund; and
4. The defendant, Federico Serfino, is hereby ordered to vacate the
land in question and to deliver the possession thereof to the plaintiff;
5. The plaintiff is exempt from reimbursing the defendant, Federico
Serfino, for the sum of P602.94 which the latter paid for the
repurchase of the land in question for the reason that the former is
already burdened with the payment of the mortgage indebtedness
with the Philippine National Bank in the amount of P5,261.11; and
6. The Court makes no award for damages and costs.
12
 SO ORDERED. (Rollo L-40751, pp. 117 & 118, Joint Record on
Appeal, Annex "D", p. 50)
Both parties appealed from this decision of the trial court. Ruling on the assignment of
errors, the appellate court affirmed the judgment of the trial court with modification in its
decision, the pertinent portion reading as follows:
Plaintiff contends that the mortgage executed by the Serfinos in
favor of PNB is null and void, because the property conveyed in
mortgage did not belong to them. The contention is meritorious.
That the mortgagor should be the absolute owner of the property
mortgaged is an essential requisite for the validity of a contract of
mortgage (Art. 2085, Civil Code); and a mortgage constituted by
one not the owner of the property mortgaged is null and void, the
registration of the mortgage notwithstanding (Parqui vs. PNB, 96
Phil. 157). Thus, the mortgage lien of PNB in the contract executed
in its favor by the Serfinos did not attach to the property in question.
The argument advanced by appellee PNB that it is a mortgagee in
good faith deserves scant consideration. Note that when the
mortgage was constituted, the disputed land was covered by a valid
and existing title, TCT No. 57-N, in the name of Nemesis D.
Baltazar. Indeed, the whole world, including appellee PNB, is
charged with notice thereof. Consequently, that portion of the trial
court's decision declaring plaintiff liable to the PNB for payment of
the sum of P5,261.11 should beset aside.
As to the plaintiff's claim for damages against the Serfinos, We find
the same devoid of merit. Whatever injury plaintiff may have
suffered was occasioned by the faulty and defective indexing and
filing system in the office of the Register of Deeds of Negros
Occidental, and not by any intentional Act on the part of the Serfino
Spouses. Anyway, the evidence fails to show that they deliberately
intended to cause damage to plaintiff.
However, equity dictates that plaintiff should reimburse the Serfino
spouses of the sum of P1,839.49, representing the unpaid taxes and
penalties paid by the latter when they repurchased the property from
the province of Negros Occidental.
WHEREFORE, with the modifications above indicated, the
judgment appealed from is hereby affirmed. No costs.
SO ORDERED. (Decision, Annex "A", pp. 40-42, Rollo-L40751)
From the aforesaid ruling, the spouses Serfino and the Philippine National Bank appealed
to Us by way of certiorari. Petitioners, spouses Serfinos 4 assign the following errors:
I. The Purchase by plaintiff-appellant corporation (Lopez Sugar
Central) of the lot in question was null and void from the beginning.
II. Petitioners are proper parties to challenge the legality of the sale
of the land in question to private respondent.
III. Notice to Nemesia Baltazar of the Tax Sale of the land in
question was not essential to the validity of the sale.
IV. The legality of the auction sale of the property in question was
not in issue before the court a quo.
Petitioner Philippine National Bank 5 submits the following.
ASSIGNMENT OF ERRORS
I. The Court of Appeals erred in holding that the auction sale of the
disputed property was null and void.
II. The Court of Appeals erred in not holding that petitioner is a
mortgagee in good faith.
Petitioners spouses Serfinos maintain that sale of a land covered by homestead to be valid
must have the following requisites: 1) consent of the grantee 2) approval of the Secretary
of Agriculture and Natural Resources 3) sale is solely for educational, religious, or
charitable purposes or for a right of way (Sec. 121, CA No. 141 ).
Petitioner spouses Serfinos in support of their first assignment of error cited Sec. 121, CA
No. 141 reading as follows:
SEC. 121. Except with the consent of the grantee and the approval
of the Secretary of Agriculture and Commerce, and solely for
commercial, industrial, educational, religious or charitable purposes
or for a right of way, no corporation, association, or partnership may
acquire or have any right, title, interest, or property right whatsoever
to any land granted under the free patent, homestead or individual
sale provisions of this Act or to any permanent improvement on
such land.
13
They argue that since private respondent is a corporation, it is barred from owning land
granted under the free patent if the aforementioned requisites are not present. Such
Pacifico Casamayor who obtained a Homestead Patent and later an original certificate of
title in his name. Later it was this original grantee who sold the land in question to
Nemesia Baltazar on December 14, 1945 or more than eight (8) years after he obtained
his homestead patent on August 25, 1937. On these facts, We now apply Sec. 118 of
Commonwealth Act No. 141 which prohibits the alienation of homestead lots to private
individual within five (5) years from the date of the issuance of the patent and not Sec.
121 which governs sale to corporation. Since the grant was more than five (5) years
before, the transfer to Nemesia Baltazar was valid and legal. Nemesia Baltazar who
became the titled or registered owner as evidenced by TCT No. 57-N, could exercise acts
of ownership over the land such as disposing of it to private respondent by a deed of sale.
The assailed decision of the appellate court declares that the prescribed procedure in
auction sales of property for tax delinquency being in derogation of property rights
should be followed punctiliously. Strict adherence to the statutes governing tax sales is
imperative not only for the protection of the tax payers, but also to allay any possible
suspicion of collusion between the buyer and the public officials called upon to enforce
such laws. Notice of sale to the delinquent land owners and to the public in general is an
essential and indispensable requirement of law, the non-fulfillment of which initiates the
sale.
We give our stamp of approval on the aforementioned ruling of the respondent court. In
the case at bar, there is no evidence that Nemesia Baltazar, who had obtained a transfer
certificate of title in her name on January 18, 1946, was notified of the auction sale which
was scheduled on October 30, 1956. Neither was she furnished as the owner of the
delinquent real property with the certificate of sale as prescribed by Sec. 37 of
Commonwealth Act No. 470. These infirmities are fatal. Worth mentioning also is the
fact that Lopez Sugar Central was not entirely negligent in its payment of land taxes. The
record shows that taxes were paid for the years 1950 to 1953 and a receipt therefor was
obtained in its name. The sale therefore by the Province of Negros Occidental of the land
in dispute to the spouses Serfinos was void since the Province of Negros Occidental was
not the real owner of the property thus sold. In turn, the spouses Serfinos title which has
been derived from that of the Province of Negros Occidental is likewise void. A
purchaser of real estate at the tax sale obtains only such title as that held by the taxpayer,
the principle of caveat emptor applies. Where land is sold for delinquency taxes under the
provisions of the Provincial Assessment Law, rights of registered but undeclared owners
of the land are not affected by the proceedings and the sale conveys only such interest as
the person who has declared the property for taxation has therein.
We now come to the arguments of petitioner Philippine National Bank. The appellate
court in modifying the trial court's decision nullified the mortgage in favor of Philippine
National Bank and exempted Lopez Sugar Central from the payment to PNB of the
amount of the mortgage loan. Petitioner Philippine National Bank now questions this
maintaining that it is a mortgagee in good faith and as such is entitled to the protection of
the law.
We find merit in petitioner's contention. The findings of fact by the trial court which were
undisputed by the contending parties show that after TCT No. 38985 had been issued in
the name of Federico Serfino, he declared the property in his name for the year 1965
under T.D. No. 9382, continuously paid the taxes and introduced improvements thereon
in the nature of feeder roads and sugar cane plants. It was under these circumstances that
PNB extended a loan to Serfino, secured by the land in question on the strength of TCT
No. 38985 in the name of the Serfinos and after a spot investigation by one of the bank
inspectors who made a report of his investigation. After the execution of a real estate
mortgage in favor of the Philippine National Bank duly annotated on the title of the
Serfinos TCT No. 38985, the bank actually loaned Serfino the amount of P5,000.00
which amounted to P5,261.11 as of August 17, 1965. Petitioner Philippine National Bank
relied on TCT No. 38985, the genuineness of which is not in issue as it was really issued
by the Register of Deeds of Negros Occidental. Philippine National Bank had every right
to rely on TCT No. 38985 as it was a sufficient evidence of ownership of the mortgagor.
The Philippine National Bank at that time had no way of knowing of the existence of
another genuine title covering the same land in question.
The fact that the public auction sale of the disputed property was not valid (for lack of
notice of the auction sale to the actual owner) can not in any way be attributed to the
mortgagee's (PNB's) fault. The fact remains that in spite of the lack of notice to the actual
registered owner at that time (who was Nemesia Baltazar) the Register of Deeds issued a
TCT in the name of Federico Serfino married to Lorna Bachar which title was relied
upon by petitioner Philippine National Bank. The Register of Deeds disowned liability
and negligence or connivance claiming that existence of TCT No. 57-N in the name of
Nemesia Baltazar was not found in the records of the Register of Deeds for the reason
that it did not exist in the index card as the land was not designated by cadastral lot
number. Thus the discrepancy was due to the faulty system of indexing the parcels of
land. Be it noted that the inability of the Register of Deeds to notify the actual owner or
Lopez Sugar Central of the scheduled public auction sale was partly due to the failure of
Lopez Sugar Central to declare the land in its name for a number of years and to pay the
complete taxes thereon. Petitioner Philippine National Bank is therefore entitled to the
payment of the mortgage loan as ruled by the trial court and exempted from the payment
of costs.
WHEREFORE, premises considered, with the slight modification that the PNB mortgage
credit must be paid by Lopez Sugar Central, the assailed decision is hereby AFFIRMED.
SO ORDERED.
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