Republic of the Philippines

SUPREME COURT
Manila

3. To pay plaintiff P30,000.00 as exemplary damages;

4. To pay plaintiff 15% of P1,401,468.00, the principal obligation, as and
for attorney's fees; and

FIRST DIVISION
5. To pay the costs of suit.
G.R. No. 72005 May 29, 1987
PHILIPPINE BRITISH ASSURANCE CO., INC., petitioner,
vs.
HONORABLE INTERMEDIATE APPELLATE COURT; SYCWIN COATING & WIRES,
INC., and DOMINADOR CACPAL, CHIEF DEPUTY SHERRIF OF MANILA, respondents.

GANCAYCO, J.:
This is a Petition for Review on certiorari of the Resolution dated September 12, 1985 of
the Intermediate Appellate Court in AC-G.R. No. CR-05409 1 granting private respondent's
motion for execution pending appeal and ordering the issuance of the corresponding writ of
execution on the counterbond to lift attachment filed by petitioner. The focal issue that
emerges is whether an order of execution pending appeal of a judgment maybe enforced
on the said bond. In the Resolution of September 25, 1985 2 this Court as prayed for,
without necessarily giving due course to the petition, issued a temporary restraining order
enjoining the respondents from enforcing the order complaint of.
The records disclose that private respondent Sycwin Coating & Wires, Inc., filed a
complaint for collection of a sum of money against Varian Industrial Corporation before the
Regional Trial Court of Quezon City. During the pendency of the suit, private respondent
succeeded in attaching some of the properties of Varian Industrial Corporation upon the
posting of a supersedeas bond. 3 The latter in turn posted a counterbond in the sum of
P1,400, 000.00 4 thru petitioner Philippine British Assurance Co., Inc., so the attached
properties were released.
On December 28, 1984, the trial court rendered a Decision, the dispositive portion of which
reads:
WHEREFORE, plaintiff's Motion for Summary Judgment is hereby
GRANTED, and judgment is rendered in favor of the plaintiff and
against the defendant Varian Industrial Corporation, and the latter is
hereby ordered:
1. To pay plaintiff the amount of P1,401,468.00, the principal obligation
with 12% interest per annum from the date of default until fully paid;
2. To pay plaintiff 5% of the principal obligation as liquidated damages;

Accordingly, the counterclaim of the defendant is hereby DISMISSED

for lack of merit.
SO ORDERED. 5
Varian Industrial Corporation appealed the decision to the respondent Court. Sycwin then
filed a petition for execution pending appeal against the properties of Varian in respondent
Court. Varian was required to file its comment but none was filed. In the Resolution of July
5, 1985, respondent Court ordered the execution pending appeal as prayed for. 6 However,
the writ of execution was returned unsatisfied as Varian failed to deliver the previously
attached personal properties upon demand. In a Petition dated August 13, 1985 filed with
respondent Court Sycwin prayed that the surety (herein petitioner) be ordered to pay the
value of its bond. 7 In compliance with the Resolution of August 23, 1985 of the respondent
Court herein petitioner filed its comment. 8 In the Resolution of September 12, 1985, 9 the
respondent Court granted the petition. Hence this action.
It is the submission of private respondent Sycwin that without a previous motion for
reconsideration of the questioned resolution, certiorari would not lie. While as a general
rule a motion for reconsideration has been considered a condition sine qua non for the
granting of a writ of certiorari, this rule does not apply when special circumstances warrant
immediate or more direct action. 10 It has been held further that a motion for
reconsideration may be dispensed with in cases like this where execution had been
ordered and the need for relief was extremely urgent. 11
The counterbond provides:
WHEREAS, in the above-entitled case pending in the Regional Trial
Court, National Capital Judicial Region, Branch LXXXV, Quezon City,
an order of Attachment was issued against abovenamed Defendant;
WHEREAS, the Defendant, for the purpose of lifting and/or dissolving
the order of attachment issued against them in the above-en-titled
case, have offered to file a counterbond in the sum of PESOS ONE
MILLION FOUR HUNDRED THOUSAND ONLY (P1,400,000.00),
Philippine Currency, as provided for in Section 5, Rule 57 of the
Revised Rules of Court.
NOW, THEREFORE, we, VARIAN INDUSTRIAL CORPORATION, as
Principal and the PHILIPPINE BRITISH ASSURANCE COMPANY,
INC., a corporation duly organized and existing under and by virtue of

the laws of the Philippines, as Surety, in consideration of the above and

of the lifting or dissolution of the order of attachment, hereby jointly and
severally, bind ourselves in favor of the above Plaintiff in the sum of
PESOS ONE MILLION FOUR HUNDRED THOUSAND ONLY
(P1,400,000.00), Philippine Currency, under the condition that in case
the Plaintiff recovers judgment in the action, and Defendant will, on
demand, re-deliver the attached property so released to the Officer of
the Court and the same shall be applied to the payment of the
judgment, or in default thereof, the defendant and Surety will, on
demand, pay to the Plaintiff the full value of the property released.
EXECUTED at Manila, Philippines, this 28th day of June, 1984. 12
Sections 5, 12, and 17 of Rule 57 of the Revised Rules of Court also provide:
SEC. 5. Manner of attaching property. The officer executing the
order shall without delay attach, to await judgment and execution in the
action, all the properties of the party against whom the order is issued
in the province, not exempt from execution, or so much thereof as may
be sufficient to satisfy the applicant's demand, unless the former makes
a deposit with the clerk or judge of the court from which the order
issued, or gives a counter-bond executed to the applicant, in an amount
sufficient to satisfy such demand besides costs, or in an amount equal
to the value of the property which is about to be attached, to secure
payment to the applicant of any judgement ment which he may recover
in the action. The officer shall also forthwith serve a copy of the
applicant's affidavit and bond, and of the order of attachment, on the
adverse party, if he be found within the province.
SEC. 12. Discharge of attachment upon giving counterbond. At any
time after an order of attachment has been granted, the party whose
property has been attached, or the person appearing on his behalf,
may, upon reasonable notice to the applicant, apply to the judge who
granted the order, or to the judge of the court in which the action is
pending, for an order discharging the attachment wholly or in part on
the security given. The judge shall, after hearing, order the discharge of
the attachment if a cash deposit is made, or a counter-bond executed
to the attaching creditor is filed, on behalf of the adverse party, with the
clerk or judge of the court where the application is made, in an amount
equal to the value of the property attached as determined by the
judge, to secure the payment of any judgment that the attaching
creditor may recover in the action. Upon the filing of such counter-bond,
copy thereof shall forthwith be served on the attaching creditor or his
lawyer. Upon the discharge of an attachment in accordance with the
provisions of this section the property attached, or the proceeds of any
sale thereof, shall be delivered to the party making the deposit or giving
the counterbond aforesaid standing in place of the property so
released. Should such counterbond for any reason be found to be, or

become, insufficient, and the party furnishing the same fail to file an
additional counterbond, the attaching creditor may apply for a new
order of attachment.
SEC. 17. When execution returned unsatisfied, recovery had upon
bond. If the execution be returned unsatisfied in whole or in part, the
surety or sureties on any counter-bond given pursuant to the provisions
of this rule to secure the payment of the judgment shall become
charged on such counter- bond, and bound to pay to the judgement
creditor upon demand, the amount due under the judgment, which
amount may be recovered from such surety or sureties after notice and
summary hearing in the same action. (Emphasis supplied.)
Under Sections 5 and 12, Rule 57 above reproduced it is provided that the counterbond is
intended to secure the payment of "any judgment" that the attaching creditor may recover
in the action. Under Section 17 of same rule it provides that when "the execution be
returned unsatisfied in whole or in part" it is only then that "payment of thejudgment shall
become charged on such counterbond."
The counterbond was issued in accordance with the provisions of Section 5, Rule 57 of the
Rules of Court as provided in the second paragraph aforecited which is deemed
reproduced as part of the counterbond. In the third paragraph it is also stipulated that the
counterbond is to be "applied for the payment of the judgment." Neither the rules nor the
provisions of the counterbond limited its application to a final and executory judgment.
Indeed, it is specified that it applies to the payment of any judgment that maybe recovered
by plaintiff. Thus, the only logical conclusion is that an execution of any judgment including
one pending appeal if returned unsatisfied maybe charged against such a counterbond.
It is well recognized rule that where the law does not distinguish, courts should not
distinguish. Ubi lex non distinguish nec nos distinguere debemos. 13 "The rule, founded on
logic, is a corollary of the principle that general words and phrases in a statute should
ordinarily be accorded their natural and general significance. 14 The rule requires that a
general term or phrase should not be reduced into parts and one part distinguished from
the other so as to justify its exclusion from the operation of the law. 15 In other words,
there should be no distinction in the application of a statute where none is indicated.16 For
courts are not authorized to distinguish where the law makes no distinction. They should
instead administer the law not as they think it ought to be but as they find it and without
regard to consequences. 17
A corollary of the principle is the rule that where the law does not make any exception,
courts may not except something therefrom, unless there is compelling reason apparent in
the law to justify it.18 Thus where a statute grants a person against whom possession of
"any land" is unlawfully withheld the right to bring an action for unlawful detainer, this Court
held that the phrase "any land" includes all kinds of land, whether agricultural, residential,
or mineral.19 Since the law in this case does not make any distinction nor intended to
make any exception, when it speaks of "any judgment" which maybe charged against the
counterbond, it should be interpreted to refer not only to a final and executory judgment in
the case but also a judgment pending appeal.

All that is required is that the conditions provided for by law are complied with, as outlined
in the case of Towers Assurance Corporation v. Ororama Supermart, 20
Under Section 17, in order that the judgment creditor might recover
from the surety on the counterbond, it is necessary (1) that the
execution be first issued against the principal debtor and that such
execution was returned unsatisfied in whole or in part; (2) that the
creditor make a demand upon the surety for the satisfaction of the
judgment, and (3) that the surety be given notice and a summary
hearing on the same action as to his liability for the judgment under his
counterbond.
The rule therefore, is that the counterbond to lift attachment that is issued in accordance
with the provisions of Section 5, Rule 57, of the Rules of Court, shall be charged with the
payment of any judgment that is returned unsatisfied. It covers not only a final and
executory judgement but also the execution of a judgment pending appeal.
WHEREFORE, the petition is hereby DISMISSED for lack of merit and the restraining
order issued on September 25, 1985 is hereby dissolved with costs against petitioner. SO
ORDERED.

On March 22, 1992, petitioner Juanito C. Pilar filed his certificate of candidacy for the
position of member of the Sangguniang Panlalawigan of the Province of Isabela.
On March 25, 1992, petitioner withdrew his certificate of candidacy.
In M.R. Nos. 93-2654 and 94-0065 dated November 3, 1993 and February 13, 1994
respectively, the COMELEC imposed upon petitioner the fine of Ten Thousand Pesos
(P10,000.00) for failure to file his statement of contributions and expenditures.
In M.R. No. 94-0594 dated February 24, 1994, the COMELEC denied the motion for
reconsideration of petitioner and deemed final M.R. Nos. 93-2654 and 94-0065
(Rollo, p. 14).
Petitioner went to the COMELEC En Banc (UND No. 94-040), which denied the
petition in a Resolution dated April 28, 1994 (Rollo, pp. 10-13).
Hence, this petition for certiorari.
We dismiss the petition.
II

Republic of the Philippines

SUPREME COURT
Manila

Section 14 of R.A. No. 7166 entitled "An Act Providing for Synchronized National and
Local Elections and for Electoral Reforms, Authorizing Appropriations Therefor, and
for Other Purposes" provides as follows:

EN BANC
Statement of Contributions and Expenditures: Effect of Failure to
File Statement. Every candidateand treasurer of the political
party shall, within thirty (30) days after the day of the election, file in
duplicate with the offices of the Commission the full, true and
itemized statement of all contributions and expenditures in
connection with the election.

G.R. No. 115245 July 11, 1995

JUANITO C. PILAR, petitioner,
vs.
COMMISSION ON ELECTIONS, respondent.

No person elected to any public office shall enter upon the duties of
his office until he has filed the statement of contributions and
expenditures herein required.

QUIASON, J.:
This is a petition for certiorari under Rule 65 of the Revised Rules of Court assailing
the Resolution dated April 28, 1994 of the Commission on Elections (COMELEC) in
UND No. 94-040.
I

The same prohibition shall apply if the political party which

nominated the winning candidate fails to file the statement required
herein within the period prescribed by this Act.
Except candidates for elective barangay office, failure to file the
statements or reports in connection with electoral contributions and
expenditures as required herein shall constitute an administrative

offense for which the offenders shall be liable to pay an

administrative fine ranging from One Thousand Pesos ( P1,000.00)
to Thirty Thousand Pesos (P30,000.00), in the discretion of the
Commission.
The fine shall be paid within thirty (30) days from receipt of notice of
such failure; otherwise, it shall be enforceable by a writ of execution
issued by the Commission against the properties of the offender.
It shall be the duty of every city or municipal election registrar to
advise in writing, by personal delivery or registered mail, within five
(5) days from the date of election all candidates residing in his
jurisdiction to comply with their obligation to file their statements of
contributions and expenditures.
For the commission of a second or subsequent offense under this
Section, the administrative fine shall be from Two Thousand Pesos
(P2,000.00) to Sixty Thousand Pesos (P60,000.00), in the
discretion of the Commission. In addition, the offender shall be
subject to perpetual disqualification to hold public office (Emphasis
supplied).
To implement the provisions of law relative to election contributions and expenditures,
the COMELEC promulgated on January 13, 1992 Resolution No. 2348 (Re: Rules
and Regulations Governing Electoral Contributions and Expenditures in Connection
with the National and Local Elections on
May 11, 1992). The pertinent provisions of said Resolution are:

The same prohibition shall apply if the political party which

nominated the winning candidates fails to file the statement
required within the period prescribed by law.
(b) Except candidates for elective barangay office, failure to file
statements or reports in connection with the electoral contributions
and expenditures as required herein shall constitute an
administrative offense for which the offenders shall be liable to pay
an administrative fine ranging from One Thousand Pesos (P1,000)
to Thirty Thousand Pesos (P30,000), in the discretion of the
Commission.
The fine shall be paid within thirty (30) days from receipt of notice of
such failure; otherwise, it shall be enforceable by a writ of execution
issued by the Commission against the properties of the offender.
For the commission of a second or subsequent offense under this
section, the administrative fine shall be from Two Thousand Pesos
(P2,000) to Sixty Thousand Pesos (P60,000), in the discretion of
the Commission. In addition, the offender shall be subject to
perpetual disqualification to hold public office.
Petitioner argues that he cannot be held liable for failure to file a statement of
contributions and expenditures because he was a "non-candidate," having withdrawn
his certificates of candidacy three days after its filing. Petitioner posits that "it is . . .
clear from the law that candidate must have entered the political contest, and should
have either won or lost" (Rollo, p. 39).

Sec. 13. Statement of contributions and expenditures: Reminders

to candidates to file statements. Within five (5) days from the day of
the election, the Law Department of the Commission, the regional
election director of the National Capital Region, the provincial
election supervisors and the election registrars shall advise in
writing by personal delivery or registered mail all candidates who
filed their certificates of candidacy with them to comply with their
obligation to file their statements of contributions and expenditures
in connection with the elections. Every election registrar shall also
advise all candidates residing in his jurisdiction to comply with said
obligation (Emphasis supplied).

Petitioner's argument is without merit.

Sec. 17. Effect of failure to file statement. (a) No person elected to

any public office shall enter upon the duties of his office until he has
filed the statement of contributions and expenditures herein
required.

In the case at bench, as the law makes no distinction or qualification as to whether

the candidate pursued his candidacy or withdrew the same, the term "every
candidate" must be deemed to refer not only to a candidate who pursued his
campaign, but also to one who withdrew his candidacy.

Section 14 of R.A. No. 7166 states that "every candidate" has the obligation to file his
statement of contributions and expenditures.
Well-recognized is the rule that where the law does not distinguish, courts should not
distinguish, Ubi lex non distinguit nec nos distinguere debemos (Philippine British
Assurance Co. Inc. v. Intermediate Appellate Court, 150 SCRA 520 [1987]; cf Olfato v.
Commission on Elections, 103 SCRA 741 [1981]). No distinction is to be made in the
application of a law where none is indicated (Lo Cham v. Ocampo, 77 Phil. 636
[1946]).

The COMELEC, the body tasked with the enforcement and administration of all laws
and regulations relative to the conduct of an election, plebiscite, initiative, referendum,
and recall (The Constitution of the Republic of the Philippines, Art. IX(C), Sec. 2[1]),
issued Resolution No. 2348 in implementation or interpretation of the provisions of
Republic Act No. 7166 on election contributions and expenditures. Section 13 of
Resolution No. 2348 categorically refers to "all candidates who filed their certificates
of candidacy."
Furthermore, Section 14 of the law uses the word "shall." As a general rule, the use of
the word "shall" in a statute implies that the statute is mandatory, and imposes a duty
which may be enforced , particularly if public policy is in favor of this meaning or
where public interest is involved. We apply the general rule (Baranda v. Gustilo, 165
SCRA 757 [1988]; Diokno v. Rehabilitation Finance Corporation, 91 Phil. 608 [1952]).
The state has an interest in seeing that the electoral process is clean, and ultimately
expressive of the true will of the electorate. One way of attaining such objective is to
pass legislation regulating contributions and expenditures of candidates, and
compelling the publication of the same. Admittedly, contributions and expenditures
are made for the purpose of influencing the results of the elections (B.P. Blg. 881,
Sec. 94; Resolution No. 2348, Sec. 1). Thus, laws and regulations prescribe what
contributions are prohibited (B.P. Blg. 881, Sec. 95, Resolution No. 2348, Sec. 4), or
unlawful (B.P. Blg. 881, Sec. 96), and what expenditures are authorized (B.P. Blg.
881, Sec. 102; R.A. No. 7166, Sec. 13; Resolution No. 2348, Sec. 7) or lawful
(Resolution No. 2348, Sec. 8).
Such statutes are not peculiar to the Philippines. In "corrupt and illegal practices acts"
of several states in the United States, as well as in federal statutes, expenditures of
candidates are regulated by requiring the filing of statements of expenses and by
limiting the amount of money that may be spent by a candidate. Some statutes also
regulate the solicitation of campaign contributions (26 Am Jur 2d, Elections 287).
These laws are designed to compel publicity with respect to matters contained in the
statements and to prevent, by such publicity, the improper use of moneys devoted by
candidates to the furtherance of their ambitions (26 Am Jur 2d, Elections 289).
These statutes also enable voters to evaluate the influences exerted on behalf of
candidates by the contributors, and to furnish evidence of corrupt practices for
annulment of elections (Sparkman v. Saylor [Court of Appeals of Kentucky], 180 Ky.
263, 202 S.W. 649 [1918]).
State courts have also ruled that such provisions are mandatory as to the requirement
of filing (State ex rel. Butchofsky v. Crawford [Court of Civil Appeals of Texas], 269
S.W. 2d 536 [1954]; Best v. Sidebottom, 270 Ky. 423,109 S.W. 2d 826 [1937];
Sparkman v. Saylor, supra.)

It is not improbable that a candidate who withdrew his candidacy has accepted
contributions and incurred expenditures, even in the short span of his campaign. The
evil sought to be prevented by the law is not all too remote.
It is notesworthy that Resolution No. 2348 even contemplates the situation where a
candidate may not have received any contribution or made any expenditure. Such a
candidate is not excused from filing a statement, and is in fact required to file a
statement to that effect. Under Section 15 of Resolution No. 2348, it is provided that
"[i]f a candidate or treasurer of the party has received no contribution, made no
expenditure, or has no pending obligation, the statement shall reflect such fact."
Lastly, we note that under the fourth paragraph of Section 73 of the B.P. Blg. 881 or
the Omnibus Election Code of the Philippines, it is provided that "[t]he filing or
withdrawal of certificate of candidacy shall not affect whatever civil, criminal or
administrative liabilities which a candidate may have incurred." Petitioner's withdrawal
of his candidacy did not extinguish his liability for the administrative fine.
WHEREFORE, the petition is DISMISSED.

Republic of the Philippines

SUPREME COURT
Manila
SECOND DIVISION
G.R. No. 110898

February 20, 1996

PEOPLE OF THE PHILIPPINES, petitioner,

vs.
HON. JUDGE ANTONIO C. EVANGELISTA, as Presiding Judge of Branch XXI, 10th
Judicial Region, RTC of Misamis Oriental, Cagayan de Oro City, and GRILDO S.
TUGONON, respondents.
DECISION
MENDOZA, J.:
Private respondent Grildo S. Tugonan was charged with frustrated homicide in the
Regional Trial Court of Misamis Oriental (Branch 21), the information against him alleging
That on or about the 26th day of May, 1988, at more or less 9:00 o'clock in the
evening at Barangay Publican+.3, Municipality of Villanueva, Province of Misamis
Oriental, Republic of the Philippines and within the jurisdiction of this Honorable
Court, the above-named accused with intent to kill and with the use of a knife,
which he was then conveniently provided of, did then and there willfully,
unlawfully and feloniously assault, attack and stab Roque T. Bade thereby
inflicting upon him the following injuries, to wit:
Stab wound, right iliac area,
0.5 cm. penetrating non
perforating lacerating posterior
peritoneum, 0,5 cm.
thus performing all the acts of execution which would produce the crime of
Homicide as a consequence but which, nevertheless, did not produce it by
reason of causes independent of the will of the accused, that is by timely medical
attendance which prevented his death.
CONTRARY TO and in violation of Article 249 in relation to Article 6 of the
Revised Penal Code.
After trial he was found guilty and sentenced to one year of prision correccional in its
minimum period and ordered to pay to the offended party P5,000.00 for medical expense,

without subsidiary imprisonment, and the costs. The RTC appreciated in his favor the
privileged mitigating circumstances of incomplete self-defense and the mitigating
circumstance of voluntary surrender.
On appeal the Court of Appeals affirmed private respondent's conviction but modified his
sentence by imposing on him an indeterminate penalty of 2 months of arresto mayor, as
minimum, to 2 years and 4 months of prision correccional, as maximum.1
On December 21, 1992, respondent Judge Antonio C. Evangelista of the RTC set the case
for repromulgation on January 4, 1993.
On December 28, 1992, private respondent filed a petition for probation, 2 alleging that (1)
he possessed all the qualifications and none of the disqualifications for probation under
P.D. No. 968, as amended; (2) the Court of Appeals has in fact reduced the penalty
imposed on him by the trial court; (3) in its resolution, the Court of Appeals took no action
on a petition for probation which he had earlier filed with it so that the petition could be filed
with the trial court; (4) in the trial court's decision, two mitigating circumstances of
incomplete self-defense and voluntarily surrender were appreciated in his favor; and (5)
in Santos To v. Pao,3 the Supreme Court upheld the right of the accused to probation
notwithstanding the fact that he had appealed from his conviction by the trial court.
On February 2, 1993, the RTC ordered private respondent to report for interview to the
Provincial Probation Officer. The Provincial Probation Officer on the other hand was
required to submit his report with recommendation to the court within 60 days. 4
On February 18, 1993, Chief Probation and Parole Officer Isias B. Valdehueza
recommended denial of private respondent's application for probation on the ground that
by appealing the sentence of the trial court, when he could have then applied for probation,
private respondent waived the right to make his application. The Probation Officer thought
the present case to be distinguishable from Santos To v. Pao in the sense that in this
case the original sentence imposed on private respondent by the trial court (1 year of
imprisonment) was probationable and there was no reason for private respondent not to
have filed his application for probation then, whereas inSantos To v. Pao the penalty only
became probationable after it had been reduced as a result of the appeal.
On April 16, 1993 Valdehueza reiterated5 his "respectful recommendation that private
respondent's application for probation be denied and that a warrant of arrest be issued for
him to serve his sentence in jail."
The RTC set aside the Probation Officer's recommendation and granted private
respondent's application for probation in its order of April 23, 1993, 6 Hence this petition by
the prosecution.
The issue in this case is whether the RTC committed a grave abuse of its discretion by
granting private respondent's application for probation despite the fact that he had
appealed from the judgment of his conviction of the trial court.

The Court holds that it did.

Until its amendment by P.D. No. 1990 in 1986, it was possible under P.D. No. 986,
otherwise known as the Probation Law, for the accused to take his chances on appeal by
allowing probation to be granted even after an accused had appealed his sentence and
failed to obtain an acquittal, just so long as he had not yet started to serve the
sentence.7 Accordingly, in Santos To v. Pao, it was held that the fact that the accused had
appealed did not bar him from applying for probation especially because it was as a result
of the appeal that his sentence was reduced and made the probationable limit.
The law was, however, amended by P.D. No. 1990 which took effect on January 15,
19868 precisely to put a stop to the practice of appealing from judgments of conviction
even if the sentence is probationable for the purpose of securing an acquittal and applying
for probation only if the accused fails in his bid. Thus, as amended by P.D. No, 1990, 4 of
the Probation Law now reads:
4. Grant of Probation. Subject to the provisions of this Decree, the trial court
may, after it shall have convicted and sentenced a defendant, and upon
application by said defendant within the period for perfecting an appeal, suspend
the execution of the sentence and place the defendant on probation for such
period and upon such terms and conditions as it may deem best; Provided,
That no application for probation shall be entertained or granted if the defendant
has perfected the appeal from the judgment of conviction.
Probation may be granted whether the sentence imposes a term of imprisonment
or a fine only. An application for probation shall be filed with the trial court. The
filing of the application shall be deemed a waiver of the right to appeal.
An order granting or denying probation shall not be appealable. (Emphasis
added).
Since private respondent filed his application for probation on December 28, 1992, after
P.D. No. 1990 had taken effect,9 it is covered by the prohibition that "no application for
probation shall be entertained or granted if the defendant has perfected the appeal from
the judgment of conviction" and that "the filing of the application shall be deemed a waiver
of the right to appeal," Having appealed from the judgment of the trial court and having
applied for probation only after the Court of Appeals had affirmed his conviction, private
respondent was clearly precluded from the benefits of probation.
Private respondent argues, however, that a distinction should be drawn between
meritorious appeals (like his appeal notwithstanding the appellate court's affirmance of his
conviction) and unmeritorious appeals. But the law does not make any distinction and so
neither should the Court. In fact if an appeal is truly meritorious the accused would be set
free and not only given probation. Private respondent's original sentence (1 year of prision
correccional in its minimum period) and the modified sentence imposed by the Court of
Appeals (2 months ofarresto mayor, as minimum, to 2 years and 4 months of prision
correccional, as maximum) are probationable. Thus the fact that he appealed meant that

private respondent was taking his chances which the law precisely frowns upon. This is
precisely the evil that the amendment in P.D. No. 1990 sought to correct, since in the
words of the preamble to the amendatory law, "probation was not intended as an escape
hatch and should not be used to obstruct and delay the administration of justice, but should
be availed of at the first opportunity by offenders who are willing to be reformed and
rehabilitated."
The ruling of the RTC that "[h]aving not perfected an appeal against the Court of Appeals
decision, [private respondent] is, therefore, not covered by [the amendment in] P.D. 1990"
is an obvious misreading of the law. The perfection of the appeal referred in the law refers
to the .appeal taken from a judgment of conviction by the trial court and not that of the
appellate court, since under the law an application for probation is filed with the trial court
which can only grant the same "after it shall have convicted and sentenced [the]
defendant, and upon application by said defendant within the period for perfecting an
appeal. "Accordingly, in Llamado v. Court of Appeals, 10 it was held that the petitioner who
had appealed his sentence could not subsequently apply for probation.
WHEREFORE, the petition is GRANTED and the order of April 23, 1993 of the Regional
Trial Court of Misamis Oriental (Branch 21) granting probation to private respondent Grildo
S. Tugonon is SET ASIDE.
SO ORDERED.

Republic of the Philippines

SUPREME COURT
Manila
SECOND DIVISION
G.R. No. 87416

April 8, 1991

CECILIO S. DE VILLA, petitioner,

vs.
THE HONORABLE COURT OF APPEALS, PEOPLE OF THE PHILIPPINES,
HONORABLE JOB B. MADAYAG, and ROBERTO Z. LORAYES, respondents.
San Jose Enriquez, Lacas Santos & Borje for petitioner.
Eduardo R. Robles for private respondent.

said ROBERTO Z. LORAYEZ the amount of P50,000.00 of said check

or to make arrangement for full payment of the same within five (5)
banking days after receiving said notice.
After arraignment and after private respondent had testified on direct
examination, petitioner moved to dismiss the Information on the following
grounds: (a) Respondent court has no jurisdiction over the offense charged; and
(b) That no offense was committed since the check involved was payable in
dollars, hence, the obligation created is null and void pursuant to Republic Act
No. 529 (An Act to Assure Uniform Value of Philippine Coin and Currency).
On July 19, 1988, respondent court issued its first questioned orders stating:
Accused's motion to dismiss dated July 5, 1988, is denied for lack of
merit.
Under the Bouncing Checks Law (B.P. Blg. 22), foreign checks,
provided they are either drawn and issued in the Philippines though
payable outside thereof, or made payable and dishonored in the
Philippines though drawn and issued outside thereof, are within the
coverage of said law. The law likewise applied to checks drawn against
current accounts in foreign currency.

PARAS, J.:
This petition for review on certiorari seeks to reverse and set aside the decision* of the
Court of Appeals promulgated on February 1, 1989 in CA-G.R. SP No. 16071 entitled
"Cecilio S. de Villa vs. Judge Job B. Madayag, etc. and Roberto Z. Lorayes," dismissing
the petition for certiorari filed therein.
The factual backdrop of this case, as found by the Court of Appeals, is as follows:
On October 5, 1987, petitioner Cecilio S. de Villa was charged before the
Regional Trial Court of the National Capital Judicial Region (Makati, Branch 145)
with violation of Batas Pambansa Bilang 22, allegedly committed as follows:
That on or about the 3rd day of April 1987, in the municipality of Makati,
Metro Manila, Philippines and within the jurisdiction of this Honorable
Court, the above-named accused, did, then and there willfully,
unlawfully and feloniously make or draw and issue to ROBERTO Z.
LORAYEZ, to apply on account or for value a Depositors Trust
Company Check No. 3371 antedated March 31, 1987, payable to
herein complainant in the total amount of U.S. $2,500.00 equivalent to
P50,000.00, said accused well knowing that at the time of issue he had
no sufficient funds in or credit with drawee bank for payment of such
check in full upon its presentment which check when presented to the
drawee bank within ninety (90) days from the date thereof was
subsequently dishonored for the reason "INSUFFICIENT FUNDS" and
despite receipt of notice of such dishonor said accused failed to pay

Petitioner moved for reconsideration but his motion was subsequently denied by
respondent court in its order dated September 6, 1988, and which reads:
Accused's motion for reconsideration, dated August 9, 1988, which was
opposed by the prosecution, is denied for lack of merit.1wphi1
The Bouncing Checks Law is applicable to checks drawn against
current accounts in foreign currency (Proceedings of the Batasang
Pambansa, February 7, 1979, p. 1376, cited in Makati RTC Judge (now
Manila City Fiscal) Jesus F. Guerrero's The Ramifications of the Law on
Bouncing Checks, p. 5). (Rollo, Annex "A", Decision, pp. 20-22).
A petition for certiorari seeking to declare the nullity of the aforequoted orders
dated July 19, 1988 and September 6, 1988 was filed by the petitioner in the
Court of Appeals wherein he contended:
(a) That since the questioned check was drawn against the dollar
account of petitioner with a foreign bank, respondent court has no
jurisdiction over the same or with accounts outside the territorial
jurisdiction of the Philippines and that Batas Pambansa Bilang 22 could
have not contemplated extending its coverage over dollar accounts;

(b) That assuming that the subject check was issued in connection with
a private transaction between petitioner and private respondent, the
payment could not be legally paid in dollars as it would violate Republic
Act No. 529; and
(c) That the obligation arising from the issuance of the questioned
check is null and void and is not enforceable with the Philippines either
in a civil or criminal suit. Upon such premises, petitioner concludes that
the dishonor of the questioned check cannot be said to have violated
the provisions of Batas Pambansa Bilang 22. (Rollo, Annex "A",
Decision, p. 22).
On February 1, 1989, the Court of Appeals rendered a decision, the decretal
portion of which reads:
WHEREFORE, the petition is hereby dismissed. Costs against
petitioner.
SO ORDERED. (Rollo, Annex "A", Decision, p. 5)
A motion for reconsideration of the said decision was filed by the petitioner on
February 7, 1989 (Rollo, Petition, p. 6) but the same was denied by the Court of
Appeals in its resolution dated March 3, 1989 (Rollo, Annex "B", p. 26).
Hence, this petition.
In its resolution dated November 13, 1989, the Second Division of this Court
gave due course to the petition and required the parties to submit simultaneously
their respective memoranda (Rollo, Resolution, p. 81).
The sole issue in this case is whether or not the Regional Trial Court of Makati
has jurisdiction over the case in question.
The petition is without merit.
Jurisdiction is the power with which courts are invested for administering justice,
that is, for hearing and deciding cases (Velunta vs. Philippine Constabulary, 157
SCRA 147 [1988]).
Jurisdiction in general, is either over the nature of the action, over the subject
matter, over the person of the defendant, or over the issues framed in the
pleadings (Balais vs. Balais, 159 SCRA 37 [1988]).
Jurisdiction over the subject matter is determined by the statute in force at the
time of commencement of the action (De la Cruz vs. Moya, 160 SCRA 538
[1988]).

The trial court's jurisdiction over the case, subject of this review, can not be
questioned.
Sections 10 and 15(a), Rule 110 of the Rules of Court specifically provide that:
Sec. 10. Place of the commission of the offense. The complaint or
information is sufficient if it can be understood therefrom that the
offense was committed or some of the essential ingredients thereof
occured at some place within the jurisdiction of the court, unless the
particular place wherein it was committed constitutes an essential
element of the offense or is necessary for identifying the offense
charged.
Sec. 15. Place where action is to be instituted. (a) Subject to existing
laws, in all criminal prosecutions the action shall be instituted and tried
in the court of the municipality or territory where the offense was
committed or any of the essential ingredients thereof took place.
In the case of People vs. Hon. Manzanilla (156 SCRA 279 [1987] cited in the
case of Lim vs. Rodrigo, 167 SCRA 487 [1988]), the Supreme Court ruled "that
jurisdiction or venue is determined by the allegations in the information."
The information under consideration specifically alleged that the offense was
committed in Makati, Metro Manila and therefore, the same is controlling and
sufficient to vest jurisdiction upon the Regional Trial Court of Makati. The Court
acquires jurisdiction over the case and over the person of the accused upon the
filing of a complaint or information in court which initiates a criminal action
(Republic vs. Sunga, 162 SCRA 191 [1988]).
Moreover, it has been held in the case of Que v. People of the Philippines (154
SCRA 160 [1987] cited in the case of People vs. Grospe, 157 SCRA 154 [1988])
that "the determinative factor (in determining venue) is the place of the issuance
of the check."
On the matter of venue for violation of Batas Pambansa Bilang 22, the Ministry of
Justice, citing the case of People vs. Yabut (76 SCRA 624 [1977], laid down the
following guidelines in Memorandum Circular No. 4 dated December 15, 1981,
the pertinent portion of which reads:
(1) Venue of the offense lies at the place where the check was
executed and delivered; (2) the place where the check was written,
signed or dated does not necessarily fix the place where it was
executed, as what is of decisive importance is the delivery thereof
which is the final act essential to its consummation as an obligation; . . .
(Res. No. 377, s. 1980, Filtex Mfg. Corp. vs. Manuel Chua, October 28,
1980)." (See The Law on Bouncing Checks Analyzed by Judge Jesus F.

Guerrero, Philippine Law Gazette, Vol. 7. Nos. 11 & 12, OctoberDecember, 1983, p. 14).
It is undisputed that the check in question was executed and delivered by the
petitioner to herein private respondent at Makati, Metro Manila.
However, petitioner argues that the check in question was drawn against the
dollar account of petitioner with a foreign bank, and is therefore, not covered by
the Bouncing Checks Law (B.P. Blg. 22).
But it will be noted that the law does not distinguish the currency involved in the
case. As the trial court correctly ruled in its order dated July 5, 1988:

dollar checks, etc. We are talking about checks in our country. There
are U.S. dollar checks, checks, in our currency, and many others.
THE SPEAKER. The Sponsor may answer that inquiry.
MR. MENDOZA. The bill refers to any check, Mr. Speaker, and this
check may be a check in whatever currency. This would not even be
limited to U.S. dollar checks. The check may be in French francs or
Japanese yen or deutschunorhs. (sic.) If drawn, then this bill will apply.
MR TUPAY. So it include U.S. dollar checks.
MR. MENDOZA. Yes, Mr. Speaker.

Under the Bouncing Checks Law (B.P. Blg. 22), foreign checks,
provided they are either drawn and issued in the Philippines though
payable outside thereof . . . are within the coverage of said law.
It is a cardinal principle in statutory construction that where the law does not
distinguish courts should not distinguish.1wphi1 Parenthetically, the rule is that
where the law does not make any exception, courts may not except something
unless compelling reasons exist to justify it (Phil. British Assurance Co., Inc. vs.
IAC, 150 SCRA 520 [1987]).
More importantly, it is well established that courts may avail themselves of the
actual proceedings of the legislative body to assist in determining the
construction of a statute of doubtful meaning (Palanca vs. City of Manila, 41 Phil.
125 [1920]). Thus, where there is doubts as to what a provision of a statute
means, the meaning put to the provision during the legislative deliberation or
discussion on the bill may be adopted (Arenas vs. City of San Carlos, 82 SCRA
318 [1978]).
The records of the Batasan, Vol. III, unmistakably show that the intention of the
lawmakers is to apply the law to whatever currency may be the subject thereof.
The discussion on the floor of the then Batasang Pambansa fully sustains this
view, as follows:
xxx

xxx

xxx

THE SPEAKER. The Gentleman from Basilan is recognized.

MR. TUPAY. Parliamentary inquiry, Mr. Speaker.
THE SPEAKER. The Gentleman may proceed.
MR. TUPAY. Mr. Speaker, it has been mentioned by one of the
Gentlemen who interpellated that any check may be involved, like U.S.

xxx

xxx

xxx

(p. 1376, Records of the Batasan, Volume III; Emphasis supplied).

PREMISES CONSIDERED, the petition is DISMISSED for lack of merit.
Melencio-Herrera, Padilla, Sarmiento and Regalado, JJ., concur.

Republic of the Philippines

SUPREME COURT
Manila
EN BANC
G.R. No. L-14787

January 28, 1961

COLGATE-PALMOLIVE PHILIPPINE, INC., petitioner,

vs.
HON. PEDRO M. GIMENEZ as Auditor General and ISMAEL MATHAY as
AUDITOR OF THE CENTRAL BANK OF THE PHILIPPINES, respondents.
Ross, Selph and Carrascoso for petitioner.
Office of the Solicitor General for respondents.
GUTIERREZ DAVID, J.:
The petitioner Colgate-Palmolive Philippines, Inc. is a corporation duly
organized and existing under Philippine laws engaged in the manufacture of
toilet preparations and household remedies. On several occasions, it
imported from abroad various materials such as irish moss extract, sodium
benzoate, sodium saccharinate precipitated calcium carbonate and dicalcium
phosphate, for use as stabilizers and flavoring of the dental cream it
manufactures. For every importation made of these materials, the petitioner
paid to the Central Bank of the Philippines the 17% special excise tax on the
foreign exchange used for the payment of the cost, transportation and other
charges incident thereto, pursuant to Republic Act No. 601, as amended,
commonly known as the Exchange Tax Law.
On March 14, 1956, the petitioner filed with the Central Bank three
applications for refund of the 17% special excise tax it had paid in the
aggregate sum of P113,343.99. The claim for refund was based on section 2
of Republic Act 601, which provides that "foreign exchange used for the
payment of the cost, transportation and/or other charges incident to the
importation into the Philippines of . . . stabilizer and flavors . . . shall be
refunded to any importer making application therefor, upon satisfactory proof
of actual importation under the rules and regulations to be promulgated
pursuant to section seven thereof." After the applications were processed by
the officer-in-charge of the Exchange Tax Administration of the Central Bank,
that official advised, the petitioner that of the total sum of P113,343.99

claimed by it for refund, the amount of P23,958.13 representing the 17%

special excise tax on the foreign exchange used to import irish moss extract,
sodium benzoate and precipitated calcium carbonate had been approved.
The auditor of the Central Bank, however, refused to pass in audit its claims
for refund even for the reduced amount fixed by the Officer-in-Charge of the
Exchange Tax Administration, on the theory that toothpaste stabilizers and
flavors are not exempt under section 2 of the Exchange Tax Law.
Petitioner appealed to the Auditor General, but the latter or, December 4,
1958 affirmed the ruling of the auditor of the Central Bank, maintaining that
the term "stabilizer and flavors" mentioned in section 2 of the Exchange Tax
Law refers only to those used in the preparation or manufacture of food or
food products. Not satisfied, the petitioner brought the case to this Court thru
the present petition for review.
The decisive issue to be resolved is whether or not the foreign exchange
used by petitioner for the importation of dental cream stabilizers and flavors
is exempt from the 17% special excise tax imposed by the Exchange Tax
Law, (Republic Act No. 601) so as to entitle it to refund under section 2
thereof, which reads as follows:
SEC, 2. The tax collected under the preceding section on foreign
exchange used for the payment of the cost, transportation and/or
other charges incident to importation into the Philippines of rice, flour,
canned milk, cattle and beef, canned fish, soya beans, butterfat,
chocolate, malt syrup, tapioca, stabilizer and flavors, vitamin
concentrate, fertilizer, poultry feed; textbooks, reference books, and
supplementary readers approved by the Board of Textbooks and/or
established public or private educational institutions; newsprint
imported by or for publishers for use in the publication of books,
pamphlets, magazines and newspapers; book paper, book cloth,
chip board imported for the printing of supplementary readers
(approved by the Board of Textbooks) to be supplied to the
Government under contracts perfected before the approval of this
Act, the quantity thereof to be certified by the Director of Printing;
anesthetics, anti-biotics, vitamins, hormones, x-ray films, laboratory
reagents, biologicals, dental supplies, and pharmaceutical drugs
necessary for compounding medicines; medical and hospital
supplies listed in the appendix to this Act, in quantities to be certified
by the Director of Hospitals as actually needed by the hospitals
applying therefor; drugs and medicines listed in the said appendix;

and such other drugs and medicines as may be certified by the

Secretary of Health from time to time to promote and protect the
health of the people of the Philippines shall be refunded to any
importer making application therefor, upon satisfactory proof of
actual importation under the rules and regulations to be promulgated
pursuant to section seven thereof." (Emphasis supplied.)
The ruling of the Auditor General that the term "stabilizer and flavors" as
used in the law refers only to those materials actually used in the preparation
or manufacture of food and food products is based, apparently, on the
principle of statutory construction that "general terms may be restricted by
specific words, with the result that the general language will be limited by the
specific language which indicates the statute's object and purpose."
(Statutory Construction by Crawford, 1940 ed. p. 324-325.) The rule,
however, is, in our opinion, applicable only to cases where, except for one
general term, all the items in an enumeration belong to or fall under one
specific class. In the case at bar, it is true that the term "stabilizer and flavors"
is preceded by a number of articles that may be classified as food or food
products, but it is likewise true that the other items immediately following it do
not belong to the same classification. Thus "fertilizer" and "poultry feed" do
not fall under the category of food or food products because they are used in
the farming and poultry industries, respectively. "Vitamin concentrate"
appears to be more of a medicine than food or food product, for, as matter of
fact, vitamins are among those enumerated in the list of medicines and drugs
appearing in the appendix to the law. It should also here be stated that
"cattle", which is among those listed preceding the term in question, includes
not only those intended for slaughter but also those for breeding purposes.
Again, it is noteworthy that under, Republic Act No. 814 amending the abovequoted section of Republic Act No. 601, "industrial starch", which does not
always refer to food for human consumption, was added among the items
grouped with "stabilizer and flavors". Thus, on the basis of the grouping of
the articles alone, it cannot validly be maintained that the term "stabilizer and
flavors" as used in the above-quoted provision of the Exchange Tax Law
refers only to those used in the manufacture of food and food products. This
view is supported by the principle "Ubi lex non distinguish nec nos distinguire
debemos", or "where the law does not distinguish, neither do we distinguish".
(Ligget & Myers Tobacco Company vs. Collector of Internal Revenue, 53 Off.
Gaz. No. 15, page 4831). Since the law does not distinguish between
"stabilizer and flavors" used in the preparation of food and those used in the
manufacture of toothpaste or dental cream, we are not authorized to make
any distinction and must construe the words in their general sense. The rule
of construction that general and unlimited terms are restrained and limited by

particular recitals when used in connection with them, does not require the
rejection of general terms entirely. It is intended merely as an aid in
ascertaining the intention of the legislature and is to be taken in connection
with other rules of construction. (See Handbook of the Construction and
Interpretation of Laws by Black, p. 215.216, 2nd ed.)
Having arrived at the above conclusion, we deem it now idle to pass upon
the other questions raised by the parties.
WHEREFORE, the decision under review is reversed and the respondents
are hereby ordered to audit petitioners applications for refund which were
approved by the Officer-in-Charge of the Exchange Tax Administration in the
total amount of P23,958.13.
Bengzon, Bautista Angelo, Concepcion, Reyes, J.B.L., Barrera, Paredes and
Dizon, JJ., concur.
Labrador, J., reserves his vote.

EN BANC

and was granted, several postponements, but was unable to produce his supporting
evidence because they were allegedly in the custody of his bookkeeper who had
gone abroad.

[G.R. No. 89483. August 30, 1990.]

REPUBLIC OF THE PHILIPPINES THRU: THE PRESIDENTIAL COMMISSION ON
GOOD GOVERNMENT (PCGG), AFP ANTI-GRAFT BOARD, COL. ERNESTO A.
PUNSALANG and PETER T. TABANG, Petitioners, v. HON. EUTROPIO MIGRINO,
as Presiding Judge, Regional Trial Court, NCJR, Branch 151, Pasig, Metro
Manila and TROADIO TECSON, Respondents.

Just the same, the Board proceeded with its investigation and submitted its
resolution, dated June 30, 1988, recommending that private respondent be
prosecuted and tried for violation of Rep. Act No. 3019, as amended, and Rep. Act
No. 1379, as amended.chanrobles lawlibrary : rednad
The case was set for preliminary investigation by the PCGG. Private respondent
moved to dismiss the case on the following grounds: (1) that the PCGG has no
jurisdiction over his person; (2) that the action against him under Rep. Act No. 1379
has already prescribed; (3) that E.O. No. 14, insofar as it suspended the provisions of
Rep. Act No. 1379 on prescription of actions, was inapplicable to his case; and (4)
that having retired from the AFP on May 9, 1984, he was now beyond the reach of
Rep. Act No. 3019. The Board opposed the motion to dismiss.

The Solicitor General, for Petitioners.

Pacifico B. Advincula for Private Respondent.

DECISION

CORTES, J.:

This case puts in issue the authority of the Presidential Commission on Good
Government (PCGG), through the New Armed Forces of the Philippines Anti-Graft
Board (hereinafter referred to as the "Board"), to investigate and cause the
prosecution of petitioner, a retired military officer, for violation of Republic Acts Nos.
3019 and 1379.
Assailed by the Republic in this petition for certiorari, prohibition and/or mandamus
with prayer for the issuance of a writ of preliminary injunction and/or temporary
restraining order are the orders of respondent judge in Civil Case No. 57092 Branch
151 of the Regional Trial Court of Pasig, Metro Manila: (1) dated June 23, 1989,
denying petitioners Motion to Dismiss and Opposition, and (2) dated June 26, 1989,
granting private respondents application for the issuance of a writ of preliminary
injunction. Thus, the petition seeks the annulment of the two orders, the issuance of
an injunction to enjoin respondent judge from proceeding with Civil Case No. 57092
and, finally, the dismissal of the case before the trial court.
The controversy traces its roots to the order of then PCGG Chairman Jovito R.
Salonga, dated May 13, 1986, which created the New Armed Forces of the
Philippines Anti-Graft Board. The Board was created to "investigate the unexplained
wealth and corrupt practices of AFP personnel, both retired and in active service."
The order further stated that" [t]he Board shall be primarily charged with the task of
investigating cases of alleged violations of the Anti-Graft and Corrupt Practices Act
(Republic Act No. 3019, as amended) and shall make the necessary
recommendations to appropriate government agencies and instrumentalities with
respect to the action to be taken thereon based on its findings."cralaw virtua1aw
library
Acting on information received by the Board, which indicated the acquisition of wealth
beyond his lawful income, private respondent Lt. Col. Troadio Tecson (ret.) was
required by the Board to submit his explanation/comment together with his supporting
evidence by October 31, 1987 [Annex "B", Petition]. Private respondent requested,

In a resolution dated February 8, 1989, the PCGG denied the motion to dismiss for
lack of merit. Private respondent moved for reconsideration but this was denied by
the PCGG in a resolution dated March 8, 1989. Private respondent was directed to
submit his counter-affidavit and other controverting evidence on March 20, 1989 at
2:00 p.m.
On March 13, 1989, private respondent filed a petition for prohibition with preliminary
injunction with the Regional Trial Court in Pasig, Metro Manila. The case was
docketed as Case No. 57092 and raffled to Branch 151, respondent judges court.
Petitioner filed a motion to dismiss and opposed the application for the issuance of a
writ of preliminary injunction on the principal ground that the Regional Trial Court had
no jurisdiction over the Board, citing the case of PCGG v. Pea, G.R. No. 77663, April
12, 1988, 159 SCRA 556. Private respondent opposed the motion to dismiss.
Petitioner replied to the opposition.
On June 23, 1989, respondent judge denied petitioners motion to dismiss. On June
26, 1989, respondent judge granted the application for the issuance of a writ of
preliminary injunction, enjoining petitioners from investigating or prosecuting private
respondent under Rep. Acts Nos. 3019 and 1379 upon the filing of a bond in the
amount of Twenty Thousand Pesos (P20,000.00).
Hence, the instant petition.
On August 29, 1989, the Court issued a restraining order enjoining respondent judge
from enforcing his orders dated June 23, 1989 and June 26, 1989 and from
proceeding with Civil Case No. 57092.
Private respondent filed his comment, to which petitioners filed a reply. A rejoinder to
the reply was filed by private Respondent. The Court gave due course to the petition
and the parties filed their memoranda. Thereafter, the case was deemed submitted.
The issues raised in the petition are as follows:chanrob1es virtual 1aw library
I.

WHETHER OR NOT RESPONDENT JUDGE GRAVELY ABUSED HIS DISCRETION

OR ACTED WITHOUT OR IN EXCESS OF JURISDICTION IN ASSUMING
JURISDICTION OVER AND INTERFERING WITH THE ORDERS AND FUNCTIONS
OF THE PRESIDENTIAL COMMISSION ON GOOD GOVERNMENT.
II.
WHETHER, OR NOT RESPONDENT JUDGE GRAVELY ABUSED HIS DISCRETION
OR ACTED WITHOUT OR IN EXCESS OF JURISDICTION IN ISSUING THE
ASSAILED ORDER DATED JUNE 26, 1989 ENJOINING PETITIONERS FROM
INVESTIGATING AND PROSECUTING PRIVATE RESPONDENT FOR VIOLATION
OF REPUBLIC ACT NO. 3019, OTHERWISE KNOWN AS ANTI-GRAFT AND
CORRUPT PRACTICES ACT AND REPUBLIC ACT NO. 1379, OTHERWISE
KNOWN AS AN ACT FOR THE FORFEITURE OF UNLAWFULLY ACQUIRED
PROPERTY [Rollo, p. 19].
As to the first issue, petitioner contends that following the ruling of the Court in PCGG
v. Pea the Board, being a creation and/or extension of the PCGG, is beyond the
jurisdiction of the Regional Trial Court. On the second issue, petitioner strongly
argues that the private respondents case falls within the jurisdiction of the PCGG.
The pivotal issue is the second one. On this point, private respondents position is as
follows:chanrob1es virtual 1aw library
1. . . . he is not one of the subordinates contemplated in Executive Orders 1 , 2 , 14
and 14-A as the alleged illegal acts being imputed to him, that of alleged amassing
wealth beyond his legal means while Finance Officer of the Philippine Constabulary,
are acts of his own alone, not connected with his being a crony, business associate,
etc. or subordinate as the petition does not allege so. Hence the PCGG has no
jurisdiction to investigate him.
If indeed private respondent amassed wealth beyond his legal means, the procedure
laid down by Rep. Act 1379 as already pointed out before be applied. And since, he
has been separated from the government more than four years ago, the action
against him under Republic Act 1379 has already prescribed.
2. . . . no action can be filed anymore against him now under Republic Act 1379 for
recovery of unexplained wealth for the reason that he has retired more than four
years ago.

(a) The recovery of all ill-gotten wealth accumulated by former President Ferdinand E.
Marcos, his immediate family, relatives, subordinates and close associates, whether
located in the Philippines or abroad, including the takeover or sequestration of all
business enterprises and entities owned or controlled by them, during his
administration, directly or through nominees, by taking undue advantage of their
public office and/or using their powers, authority, influence, connections or
relationship. [E.O. No. 1, sec. 2.].
Undoubtedly, the alleged unlawful accumulation of wealth was done during the
administration of Pres. Marcos. However, what has to be inquired into is whether or
not private respondent acted as a "subordinate" of Pres. Marcos within the
contemplation of E.O. No. 1, the law creating the PCGG, when he allegedly unlawfully
acquired the properties.
A close reading of E. O. No. 1 and related executive orders will readily show what is
contemplated within the term "subordinate."cralaw virtua1aw library
The Whereas Clauses of E. O. No. 1 express the urgent need to recover the ill-gotten
wealth amassed by former President Ferdinand E. Marcos, his immediate family,
relatives, and close associates both here and abroad.
E.O. No. 2 freezes "all assets and properties in the Philippines in which former
President Marcos and/or his wife, Mrs. Imelda Romualdez Marcos, their close
relatives, subordinates, business associates, dummies, agents, or nominees have
any interest or participation."cralaw virtua1aw library
Applying the rule in statutory construction known as ejusdem generis, that is
[W]here general words follow an enumeration of persons or things, by words of a
particular and specific meaning, such general words are not to be construed in their
widest extent, but are to be held as applying only to persons or things of the same
kind or class as those specifically mentioned [Smith, Bell & Co., Ltd. v. Register of
Deeds of Davao, 96 Phil. 53, 58 (1954), citing Black on Interpretation of Laws, 2nd
Ed., 203].
the term "subordinate" as used in E.O. Nos. 1 and 2 would refer to one who enjoys a
close association or relation with former Pres. Marcos and/or his wife, similar to the
immediate family member, relative, and close associate in E.O. No. 1 and the close
relative, business associate, dummy, agent, or nominee in E.O. No. 2.

3. . . . The order creating the AFP Anti-Graft Board (Annex "A", Petition) is null and
void. Nowhere in Executive Orders 1, 2, 14 and 14-A is there any authority given to
the commission, its chairman and members, to create Boards or bodies to be
invested with powers similar to the powers invested with the commission ..
[Comment, pp. 6-7; Rollo, pp. 117-118].

Thus, as stated by the Court in Bataan Shipyard & Engineering Co., Inc. v. PCGG,
G.R. No. 75885, May 27, 1987, 150 SCRA 181, 205-206.

1. The most important question to be resolved in this case is whether or not private
respondent may be investigated and caused to be prosecuted by the Board, an
agency of the PCGG, for violation of Rep. Acts Nos. 3019 and 1379. According to
petitioners, the PCGG has the power to investigate and cause the prosecution of
private respondent because he is a "subordinate" of former President Marcos. They
cite the PCGGs jurisdiction over

1) that" (i)ll gotten properties (were) amassed by the leaders and supporters of the
previous regime" ;

The situations envisaged and sought to be governed [by Proclamation No. 3 and E.O.
Nos. 1, 2 and 14] are self-evident, these being:chanrob1es virtual 1aw library

a) more particularly, that" (i)ll-gotten wealth (was) accumulated by former President

Ferdinand E. Marcos, his immediate family, relatives, subordinates, and close
associates, . . . located in the Philippines or abroad, xx (and) business enterprises

and entities (came to be) owned or controlled by them, during . . . (the Marcos)
administration, directly or through nominees, by taking undue advantage of their
public office and/or using their powers, authority, influence, connections or
relationship;"
b) otherwise stated, that "there are assets and properties pertaining to former
President Ferdinand E. Marcos, and/or his wife Mrs. Imelda Romualdez Marcos, their
close relatives, subordinates, business associates, dummies, agents or nominees
which had been or were acquired by them directly or indirectly, through or as a result
of the improper or illegal use of funds or properties owned by the Government of the
Philippines or any of its branches, instrumentalities, enterprises, banks or financial
institutions, or by taking undue advantage of their office, authority, influence,
connections or relationship, resulting in their unjust enrichment and causing grave
damage and prejudice to the Filipino people and the Republic of the Philippines" ;
c) that "said assets and properties are in the form of bank accounts, deposits, trust
accounts, shares of stocks, buildings, shopping centers, condominiums, mansions,
residences, estates, and other kinds of real and personal properties in the Philippines
and in various countries of the world;" and.
2) that certain "business enterprises and properties (were) taken over by the
government of the Marcos Administration or by entities or persons close to former
President Marcos." [Footnotes deleted].
It does not suffice, as in this case, that the respondent is or was a government official
or employee during the administration of former Pres. Marcos. There must be a prima
facie showing that the respondent unlawfully accumulated wealth by virtue of his
close association or relation with former Pres. Marcos and/or his wife. This is so
because otherwise the respondents case will fall under existing general laws and
procedures on the matter. Rep. Act No. 3019, the Anti-Graft and Corrupt Practices
Act, penalizes the corrupt practices of any public officer. Under Rep. Act No. 1379 (An
Act Declaring Forfeited in Favor of the State Any Property Found to Have Been
Unlawfully Acquired By Any Public Officer or Employee and Providing for the
Procedure Therefor), whenever any public officer or employee has acquired during
his incumbency an amount of property which is manifestly out of proportion to his
salary as such public officer or employee and to his other lawful income and the
income from legitimately acquired property, said property shall be presumed prima
facie to have been unlawfully acquired [Sec. 2]. The Solicitor General shall file the
petition and prosecute the case in behalf of the Republic, after preliminary
investigation by the provincial or city prosecutor [Ibid].
Moreover, the record shows that private respondent was being investigated for
unlawfully acquired wealth under Rep. Acts Nos. 3019 and 1379, and not under E.O.
Nos. 1, 2, 14 and 14-A.

legal means of income in violation of Rep. Act No. 3019 known as the Anti-Graft and
Corrupt Practices Act." [Rollo, p. 39].
(b) The Resolution dated June 30, 1988 of the Board categorically states:chanrob1es
virtual 1aw library
I. PRELIMINARY STATEMENT:chanrob1es virtual 1aw library
This refers to the case against Col Troadio B. Tecson PC (Ret) for alleged
unexplained wealth pursuant to R.A. 3019, as amended, otherwise known as AntiGraft and Corrupt Practices Act and R.A. 1379, as amended, otherwise known as the
"Act for Forfeiture of Unlawfully Acquired Property." [Rollo, p. 43].
The resolution alleges that private respondent unlawfully accumulated wealth by
taking advantage of his office as Finance Officer of the Philippine Constabulary. No
attempt is made in the Boards resolution to link him or his accumulation of wealth to
former Pres. Marcos and/or his wife.
(c) The letter of the Board chairman to the chairman of the PCGG, dated July 28,
1988, is clear:chanrob1es virtual 1aw library
Respectfully transmitted herewith for the prosecution before the Sandiganbayan is the
case folder of COLONEL TROADIO TECSON (Ret) who after preliminary
investigation of the case by the Board, found a prima facie evidence against subject
officer for violating Section 8, R.A. 3019, as amended by BP 195, otherwise known as
the Anti-Graft and Corrupt Practices Act and R.A. 1379, otherwise known as an Act
for the Forfeiture of Unlawfully Acquired Property." [Rollo, p. 46].
Moreover, from the allegations of petitioner in its memorandum, it would appear that
private respondent accumulated his wealth for his own account. Petitioner quoted the
letter of Ignacio Datahan, a retired PC sergeant, to General Fidel Ramos, the material
portion of which reads:chanrob1es virtual 1aw library
. . . After an official in the military unit received an Allotment Advice the same signed a
cash advance voucher, let us say in the amount of P5,000.00. Without much ado,
outright, Col. Tecson paid the amount. The official concerned was also made to sign
the receipt portion on the voucher the amount of which was left blank. Before the
voucher is passed for routine processing by Mrs. Leonor Cagas, clerk of Col. Tecson
and its facilitator, the maneuver began. The amount on the face of the cash advance
voucher is altered or superimposed. The original amount of P5,000.00 was now made
say, P95,000.00. So it was actually the amount of P95,000.00 that appeared on the
records. The difference of P90,000.00 went to the syndicate.
. . . Boy Tanyag, bookkeeper in Col. Tecsons office took care of the work.

Since private respondent was being investigated by the PCGG through the AFP AntiGraft Board it would have been presumed that this was under Rep. Acts Nos. 3019
and 1379 in relation to E.O. Nos. 1, 2, 14 and 14-A. But the record itself belies this
presumption:chanrob1es virtual 1aw library

. . . In the liquidation of the altered cash advance amount, names of persons found in
the Metropolitan Manila Telephone Directory with fictitious addresses appeared as
recipients or payees. Leonor and Boy got their shares on commission basis of the
looted amount while the greater part went to Col. Tecson. [Rollo, pp. 184-185.].

(a) The letter of the chairman of the AFP Anti-Graft Board to private respondent, dated
October 16, 1987, states: "This letter is in connection with the alleged information
received by the AFP Anti-Graft Board indicating your acquisition of wealth beyond

Clearly, this alleged unlawful accumulation of wealth is not that contemplated in E.O.
Nos. 1, 2, 14 and 14-A.

2. It will not do to cite the order of the PCGG Chairman, dated May 13, 1986, creating
the Board and authorizing it to investigate the unexplained wealth and corrupt
practices of AFP personnel, both retired and in active service, to support the
contention that PCGG has jurisdiction over the case of private Respondent. The
PCGG cannot do more than what it was empowered to do. Its powers are limited. Its
task is limited to the recovery of the ill-gotten wealth of the Marcoses, their relatives
and cronies. The PCGG cannot, through an order of its chairman, grant itself
additional powers powers not contemplated in its enabling law.
3. Petitioner assails the trial courts cognizance of the petition filed by
private Respondent. Particularly, petitioner argues that the trial court cannot acquire
jurisdiction over the PCGG. This matter has already been settled in Pea, supra,
where the Court ruled that those who wish to question or challenge the PCGGs acts
or orders must seek recourse in the Sandiganbayan, which is vested with exclusive
and original jurisdiction. The Sandiganbayans decisions and final orders are in turn
subject to review on certiorari exclusively by this Court. [Ibid, at pp. 564-565].
The ruling in Pea was applied in PCGG v. Aquino, G.R. No. 77816, June 30, 1988,
163 SCRA 363, Soriano III v. Yuson, G.R. No. 74910 (and five other cases), August
10, 1988, 164 SCRA 226 and Olaguer v. RTC, NCJR, Br. 48, G.R. No. 81385,
February 21, 1989, 170 SCRA 478, among others, to enjoin the regional trial courts
from interfering with the actions of the PCGG.
Respondent judge clearly acted without or in excess of his jurisdiction when he took
cognizance of Civil Case No. 57092 and issued the writ of preliminary injunction
against the PCGG.
4. Thus, we are confronted with a situation wherein the PCGG acted in excess of its
jurisdiction and, hence, may be enjoined from doing so, but the court that issued the
injunction against the PCGG has not been vested by law with jurisdiction over it and,
thus, the injunction issued was null and void.
The nullification of the assailed order of respondent judge issuing the writ of
preliminary injunction is therefore in order. Likewise, respondent judge must be
enjoined from proceeding with Civil Case No. 57092.
But in view of the patent lack of authority of the PCGG to investigate and cause the
prosecution of private respondent for violation of Rep. Acts Nos. 3019 and 1379, the
PCGG must also be enjoined from proceeding with the case, without prejudice to any
action that may be taken by the proper prosecutory agency. The rule of law mandates
that an agency of government be allowed to exercise only the powers granted it.
5. The pronouncements made above should not be taken to mean that the PCGGs
creation of the AFP Anti-Graft Board is a nullity and that the PCGG has no authority to
investigate and cause the prosecution of members and former members of the Armed
Forces of the Philippines for violations of Rep. Acts Nos. 3019 and 1379. The PCGG
may investigate and cause the prosecution of active and retired members of the AFP
for violations of Rep. Acts Nos. 3019 and 1379 only in relation to E.O. Nos. 1, 2, 14
and 14-A, i.e., insofar as they involve the recovery of the ill-gotten wealth of former
Pres. Marcos and his family and "cronies." But the PCGG would not have jurisdiction
over an ordinary case falling under Rep. Acts Nos. 3019 and 1379, as in the case at
bar. E.O. Nos. 1, 2, 14 and 14-A did not envision the PCGG as the investigator and
prosecutor of all unlawful accumulations of wealth. The PCGG was created for a

specific and limited purpose, as we have explained earlier, and necessarily its powers
must be construed with this in mind.
6. n his pleadings, private respondent contends that he may no longer be prosecuted
because of prescription. He relies on section 2 of Rep. Act No. 1379 which provides
that" [t]he right to file such petition [for forfeiture of unlawfully acquired wealth] shall
prescribe within four years from the date of resignation, dismissal or separation or
expiration of the term of the officer or employee concerned." He retired on May 9,
1984, or more than six (6) years ago. However, it must be pointed out that section 2
of Rep. Act No. 1379 should be deemed amended or repealed by Article XI, section
15 of the 1987 Constitution which provides that" [t]he right of the State to recover
properties unlawfully acquired by public officials or employees, from them or from
their nominees or transferees, shall not be barred by prescription, laches, or
estoppel." Considering that sec. 2 of Rep. Act No. 1379 was deemed amended or
repealed before the prescriptive period provided therein had lapsed insofar as private
respondent is concerned, we cannot say that he had already acquired a vested right
that may not be prejudiced by a subsequent enactment.
Moreover, to bar the Government from recovering ill-gotten wealth would result in the
validation or legitimization of the unlawful acquisition, a consequence at variance with
the clear intent of Rep. Act No. 1379, which provides:chanrobles virtual lawlibrary
SEC. 11. Laws on prescription. The laws concerning acquisitive prescription and
limitation of actions cannot be invoked by, nor shall they benefit the respondent, in
respect to any property unlawfully acquired by him.
Thus, we hold that the appropriate prosecutory agencies, i.e., the city or provincial
prosecutor and the Solicitor General under sec. 2 of Rep. Act No. 1379, may still
investigate the case and file the petition for the forfeiture of unlawfully acquired wealth
against private respondent, now a private citizen. (On the other hand, as regards
respondents for violations of Rep. Acts Nos. 3019 and 1379 who are still in the
government service, the agency granted the power to investigate and prosecute them
is the Office of the Ombudsman [Rep. Act No. 6770]). Under Presidential Decree No.
1606, as amended, and Batas Pambansa Blg. 195 violations of Rep. Acts Nos. 3019
and 1379 shall be tried by the Sandiganbayan.
7. The Court hastens to add that this decision is without prejudice to the prosecution
of private respondent under the pertinent provisions of the Revised Penal Code and
other related penal laws.
WHEREFORE, the order of respondent judge dated June 26, 1989 in Civil Case No.
57092 is NULLIFIED and SET ASIDE. Respondent judge is ORDERED to dismiss
Civil Case No. 57092. The temporary restraining order issued by the Court on August
29, 1989 is MADE PERMANENT. The PCGG is ENJOINED from proceeding with the
investigation and prosecution of private respondent in I.S. No. 37, without prejudice to
his investigation and prosecution by the appropriate prosecutory agency.
SO ORDERED.
Fernan, C.J., Narvasa, Melencio-Herrera, Gutierrez, Jr., Cruz, Paras, Feliciano,
Gancayco, Padilla, Bidin, Grio-Aquino, Medialdea and Regalado, JJ., concur.

Republic of the Philippines

SUPREME COURT
Manila
SECOND DIVISION
G.R. No. L-47757-61 January 28, 1980
THE PEOPLE OF THE PHILIPPINES, ABUNDIO R. ELLO, As 4th Assistant of
Provincial Bohol VICENTE DE LA SERNA. JR., as complainant all private
prosecutor, petitioners,
vs.
HON. VICENTE B. ECHAVES, JR., as Judge of the Court of First Instance of
Bohol Branch II, ANO DACULLO, GERONIMO OROYAN, MARIO APARICI,
RUPERTO CAJES and MODESTO S SUELLO,respondents.

AQUINO, J.:p
The legal issue in this case is whether Presidential Decree No. 772, which penalizes
squatting and similar acts, applies to agricultural lands. The decree (which took effect
on August 20, 1975) provides:
SECTION 1. Any person who, with the use of force, intimidation or
threat, or taking advantage of the absence or tolerance of the
landowner, succeeds in occupying or possessing the property of
the latter against his will for residential, commercial or any other
purposes, shall be punished by an imprisonment ranging from six
months to one year or a fine of not less than one thousand nor
more than five thousand pesos at the discretion of the court, with
subsidiary imprisonment in case of insolvency. (2nd paragraph is
omitted.)
The record shows that on October 25, 1977 Fiscal Abundio R. Ello filed with the lower
court separate informations against sixteen persons charging them with squatting as
penalized by Presidential Decree No. 772. The information against Mario Aparici
which is similar to the other fifteen informations, reads:
That sometime in the year 1974 continuously up to the present at
barangay Magsaysay, municipality of Talibon, province of Bohol,
Philippines and within the jurisdiction of this Honorable Court, the
above-named accused, with stealth and strategy, enter into, occupy
and cultivate a portion of a grazing land physically occupied,
possessed and claimed by Atty. Vicente de la Serna, Jr. as

successor to the pasture applicant Celestino de la Serna of Pasture

Lease Application No. 8919, accused's entrance into the area has
been and is still against the win of the offended party; did then and
there willfully, unlawfully, and feloniously squat and cultivate a
portion of the said grazing land; said cultivating has rendered a
nuisance to and has deprived the pasture applicant from the full
use thereof for which the land applied for has been intended, that is
preventing applicant's cattle from grazing the whole area, thereby
causing damage and prejudice to the said applicant-possessoroccupant, Atty. Vicente de la Serna, Jr. (sic)
Five of the informations, wherein Ano Dacullo, Geronimo Oroyan, Mario Aparici,
Ruperto Cajes and Modesto Suello were the accused, were raffled to Judge Vicente
B. Echaves, Jr. of Branch II (Criminal Cases Nos. 1824, 1828, 1832, 1833 and 1839,
respectively).
Before the accused could be arraigned, Judge Echaves motu proprio issued an
omnibus order dated December 9, 1977 dismissing the five informations on the
grounds (1) that it was alleged that the accused entered the land through "stealth and
strategy", whereas under the decree the entry should be effected "with the use of
force, intimidation or threat, or taking advantage of the absence or tolerance of the
landowner", and (2) that under the rule of ejusdem generis the decree does not apply
to the cultivation of a grazing land.
Because of that order, the fiscal amended the informations by using in lieu of "stealth
and strategy" the expression "with threat, and taking advantage of the absence of the
ranchowner and/or tolerance of the said ranchowner". The fiscal asked that the
dismissal order be reconsidered and that the amended informations be admitted.
The lower court denied the motion. It insisted that the phrase "and for other purposes"
in the decree does not include agricultural purposes because its preamble does not
mention the Secretary of Agriculture and makes reference to the affluent class.
From the order of dismissal, the fiscal appealed to this Court under Republic Act No.
5440. The appeal is devoid of merit.
We hold that the lower court correctly ruled that the decree does not apply to pasture
lands because its preamble shows that it was intended to apply to squatting in urban
communities or more particularly to illegal constructions in squatter areas made by
well-to-do individuals. The squating complained of involves pasture lands in rural
areas.
The preamble of the decree is quoted below:

WHEREAS, it came to my knowledge that despite the issuance of

Letter of Instruction No. 19 dated October 2, 1972, directing the
Secretaries of National Defense, Public Work. 9 and
communications, Social Welfare and the Director of Public Works,
the PHHC General Manager, the Presidential Assistant on Housing
and Rehabilitation Agency, Governors, City and Municipal Mayors,
and City and District Engineers, "to remove an illegal constructions
including buildings on and along esteros and river banks, those
along railroad tracks and those built without permits on public and
private property." squatting is still a major problem in urban
communities all over the country;
WHEREAS, many persons or entities found to have been
unlawfully occupying public and private lands belong to the affluent
class;
WHEREAS, there is a need to further intensify the government's
drive against this illegal and nefarious practice.
It should be stressed that Letter of Instruction No. 19 refers to illegal constructions on
public and private property. It is complemented by Letter of Instruction No. 19-A which
provides for the relocation of squatters in the interest of public health, safety and
peace and order.
On the other hand, it should be noted that squatting on public agricultural lands, like
the grazing lands involved in this case, is punished by Republic Act No. 947 which
makes it unlawful for any person, corporation or association to forcibly enter or
occupy public agricultural lands. That law provides:
SECTION 1. It shall be unlawful for any person corporation or
association to enter or occupy, through force, intimidation, threat,
strategy or stealth, any public agriculture land including such public
lands as are granted to private individuals under the provision of
the Public Land Act or any other laws providing for the of public
agriculture lands in the Philippines and are duly covered by the
corresponding applications for the notwithstanding standing the fact
that title thereto still remains in the Government or for any person,
natural or judicial to investigate induce or force another to commit
such acts.
Violations of the law are punished by a fine of not exceeding one thousand or
imprisonment for not more than one year, or both such fine and imprisonment in the
discretion of the court, with subsidiary imprisonment in case of insolvency. (See
People vs. Lapasaran 100 Phil. 40.)

The rule of ejusdem generis (of the same kind or species) invoked by the trial court
does not apply to this case. Here, the intent of the decree is unmistakable. It is
intended to apply only to urban communities, particularly to illegal constructions. The
rule of ejusdem generis is merely a tool of statutory construction which is resorted to
when the legislative intent is uncertain (Genato Commercial Corp. vs. Court of Tax
Appeals, 104 Phil. 615,618; 28 C.J.S. 1049-50).
WHEREFORE, the trial court's order of dismissal is affirmed. No costs.
SO ORDERED.
Barredo, Antonio, Concepcion Jr. and Abad Santos, J., concur.

Republic of the Philippines

SUPREME COURT
Manila

the Tax Code within fifteen (15) days from receipt of the order with the explicit warning that
failure of plaintiffs' private respondents to comply with said order will result in the institution
of the necessary action against any violation of the aforesaid order. Section 169 of the Tax
Code reads as follows:

FIRST DIVISION
G.R. No. L-33693-94 May 31, 1979
MISAEL P. VERA, as Commissioner of Internal Revenue, and THE FAIR TRADE
BOARD, petitioner,
vs.
HON. SERAFIN R. CUEVAS, as Judge of the Court of First Instance of Manila,
Branch IV, INSTITUTE OF EVAPORATED FILLED MILK MANUFACTURERS OF THE
PHILIPPINES, INC., CONSOLIDATED MILK COMPANY (PHIL.) INC., and MILK
INDUSTRIES, INC., respondents.
Solicitor General Felix Q. Antonio and Solicitor Bernardo P. Pardo for petitioners.
Sycip, Salazar, Luna, Manalo & Feliciano for private respondents.

DE CASTRO, J.:
This is a petition for certiorari with preliminary injunction to review the decision rendered by
respondent judge, in Civil Case No. 52276 and in Special Civil Action No. 52383 both of
the Court of First Instance of Manila.
Plaintiffs, in Civil Case No. 52276 private respondents herein, are engaged in the
manufacture, sale and distribution of filled milk products throughout the Philippines. The
products of private respondent, Consolidated Philippines Inc. are marketed and sold under
the brand Darigold whereas those of private respondent, General Milk Company (Phil.),
Inc., under the brand "Liberty;" and those of private respondent, Milk Industries Inc., under
the brand "Dutch Baby." Private respondent, Institute of Evaporated Filled Milk
Manufacturers of the Philippines, is a corporation organized for the principal purpose of
upholding and maintaining at its highest the standards of local filled milk industry, of which
all the other private respondents are members.
Civil Case No. 52276 is an action for declaratory relief with ex-parte petition for preliminary
injunction wherein plaintiffs pray for an adjudication of their respective rights and
obligations in relation to the enforcement of Section 169 of the Tax Code against their filled
milk products.
The controversy arose from the order of defendant, Commissioner of Internal Revenue
now petitioner herein, requiring plaintiffs- private respondents to withdraw from the market
all of their filled milk products which do not bear the inscription required by Section 169 of

Section 169. Inscription to be placed on skimmed milk. All

condensed skimmed milk and all milk in whatever form, from which the
fatty part has been removed totally or in part, sold or put on sale in the
Philippines shall be clearly and legibly marked on its immediate
containers, and in all the language in which such containers are
marked, with the words, "This milk is not suitable for nourishment for
infants less than one year of age," or with other equivalent words.
The Court issued a writ of preliminary injunction dated February 16, 1963 restraining the
Commissioner of Internal Revenue from requiring plaintiffs' private respondents to print on
the labels of their rifled milk products the words, "This milk is not suitable for nourishment
for infants less than one year of age or words of similar import, " as directed by the above
quoted provision of Law, and from taking any action to enforce the above legal provision
against the plaintiffs' private respondents in connection with their rifled milk products,
pending the final determination of the case, Civil Case No. 52276, on the merits.
On July 25, 1969, however, the Office of the Solicitor General brought an appeal from the
said order by way of certiorari to the Supreme Court. 1 In view thereof, the respondent
court in the meantime suspended disposition of these cases but in view of the absence of
any injunction or restraining order from the Supreme Court, it resumed action on them until
their final disposition therein.
Special Civil Action No. 52383, on the other hand, is an action for prohibition and injunction
with a petition for preliminary injunction. Petitioners therein pray that the respondent Fair
Trade Board desist from further proceeding with FTB I.S. No. I . entitled "Antonio R. de
Joya vs. Institute of Evaporated Milk Manufacturers of the Philippines, etc." pending final
determination of Civil Case No. 52276. The facts of this special civil action show that on
December 7, 1962, Antonio R. de Joya and Sufronio Carrasco, both in their individual
capacities and in their capacities as Public Relations Counsel and President of the
Philippine Association of Nutrition, respectively, filed FTB I.S. No. 1 with Fair Trade Board
for misleading advertisement, mislabeling and/or misbranding. Among other things, the
complaint filed include the charge of omitting to state in their labels any statement sufficient
to Identify their filled milk products as "imitation milk" or as an imitation of genuine cows
milk. and omitting to mark the immediate containers of their filled milk products with the
words: "This milk is not suitable for nourishment for infants less than one year of age or
with other equivalent words as required under Section 169 of the Tax Code. The Board
proceeded to hear the complaint until it received the writ of preliminary injunction issued by
the Court of First Instance on March 19, 1963.
Upon agreement of the parties, Civil Case No. 52276 and Special Civil Action No. 52383
were heard jointly being intimately related with each other, with common facts and issues
being also involved therein. On April 16, 1971, the respondent court issued its decision, the
dispositive part of which reads as follows:

Wherefore, judgment is hereby rendered:

In Civil Case No. 52276:
(a) Perpetually restraining the defendant, Commissioner of Internal
Revenue, his agents, or employees from requiring plaintiffs to print on
the labels of their filled milk products the words: "This milk is not
suitable for nourishment for infants less than one year of age" or words
with equivalent import and declaring as nun and void and without
authority in law, the order of said defendant dated September 28, 1961,
Annex A of the complaint, and the Ruling of the Secretary of Finance,
dated November 12, 1962, Annex G of the complaint; and
In Special Civil Action No. 52383:
(b) Restraining perpetually the respondent Fair Trade Board, its agents
or employees from continuing in the investigation of the complaints
against petitioners docketed as FTB I.S. No. 2, or any charges related
to the manufacture or sale by the petitioners of their filled milk products
and declaring as null the proceedings so far undertaken by the
respondent Board on said complaints. (pp. 20- 21, Rollo).
From the above decision of the respondent court, the Commissioner of Internal Revenue
and the Fair Trade Board joined together to file the present petition for certiorari with
preliminary injunction, assigning the following errors:
I. THE LOWER COURT ERRED IN RULING THAT SEC. TION 169 OF
THE TAX CODE HAS BEEN REPEALED BY IMPLICATION.
II. THE LOWER COURT ERRED IN RULING THAT SECTION 169 OF
THE TAX CODE HAS LOST ITS TAX PURPOSE, AND THAT
COMMISSIONER NECESSARILY LOST HIS AUTHORITY TO
ENFORCE THE SAME AND THAT THE PROPER AUTHORITY TO
PROMOTE THE HEALTH OF INFANTS IS THE FOOD AND DRUG
ADMINISTRATION, THE SECRETARY OF HEALTH AND THE
SECRETARY OF JUSTICE, AS PROVIDED FOR IN RA 3720, NOT
THE COMMISSIONER OF INTERNAL REVENUE.
III. THE LOWER COURT ERRED IN RULING THAT THE POWER TO
INVESTIGATE AND TO PROSECUTE VIOLATIONS OF FOOD LAWS
IS ENTRUSTED TO THE FOOD AND DRUG INSPECTION, THE
FOOD AND DRUG ADMINISTRATION, THE SECRETARY OF
HEALTH AND THE SECRETARY OF JUSTICE, AND THAT THE FAIR
TRADE BOARD IS WITHOUT JURISDICTION TO INVESTIGATE AND
PROSECUTE ALLEGED MISBRANDING, MISLABELLING AND/OR
MISLEADING ADVERTISEMENT OF FILLED MILK PRODUCTS. (pp,
4-5, Rollo).

The lower court did not err in ruling that Section 169 of the Tax Code has been repealed by
implication. Section 169 was enacted in 1939, together with Section 141 (which imposed a
Specific tax on skimmed milk) and Section 177 (which penalized the sale of skimmed milk
without payment of the specific tax and without the legend required by Section 169).
However, Section 141 was expressly repealed by Section 1 of Republic Act No. 344, and
Section 177, by Section 1 of Republic Act No. 463. By the express repeal of Sections 141
and 177, Section 169 became a merely declaratory provision, without a tax purpose, or a
penal sanction.
Moreover, it seems apparent that Section 169 of the Tax Code does not apply to filled milk.
The use of the specific and qualifying terms "skimmed milk" in the headnote and
"condensed skimmed milk" in the text of the cited section, would restrict the scope of the
general clause "all milk, in whatever form, from which the fatty pat has been removed
totally or in part." In other words, the general clause is restricted by the specific term
"skimmed milk" under the familiar rule of ejusdem generis that general and unlimited terms
are restrained and limited by the particular terms they follow in the statute.
Skimmed milk is different from filled milk. According to the "Definitions, Standards of Purity,
Rules and Regulations of the Board of Food Inspection," skimmed milk is milk in whatever
form from which the fatty part has been removed. Filled milk, on the other hand, is any
milk, whether or not condensed, evaporated concentrated, powdered, dried, dessicated, to
which has been added or which has been blended or compounded with any fat or oil other
than milk fat so that the resulting product is an imitation or semblance of milk cream or
skim milk." The difference, therefore, between skimmed milk and filled milk is that in the
former, the fatty part has been removed while in the latter, the fatty part is likewise
removed but is substituted with refined coconut oil or corn oil or both. It cannot then be
readily or safely assumed that Section 169 applies both to skimmed milk and filled milk.
The Board of Food Inspection way back in 1961 rendered an opinion that filled milk does
not come within the purview of Section 169, it being a product distinct from those specified
in the said Section since the removed fat portion of the milk has been replaced with
coconut oil and Vitamins A and D as fortifying substances (p. 58, Rollo). This opinion
bolsters the Court's stand as to its interpretation of the scope of Section 169. Opinions and
rulings of officials of the government called upon to execute or implement administrative
laws command much respect and weight. (Asturias Sugar Central Inc. vs. Commissioner of
Customs, G. R. No. L-19337, September 30, 1969, 29 SCRA 617; Tan, et. al. vs. The
Municipality of Pagbilao et. al., L-14264, April 30, 1963, 7 SCRA 887; Grapilon vs.
Municipal Council of Carigara L-12347, May 30, 1961, 2 SCRA 103).
This Court is, likewise, induced to the belief that filled milk is suitable for nourishment for
infants of all ages. The Petitioners themselves admitted that: "the filled milk products of the
petitioners (now private respondents) are safe, nutritious, wholesome and suitable for
feeding infants of all ages" (p. 44, Rollo) and that "up to the present, Filipino infants fed
since birth with filled milk have not suffered any defects, illness or disease attributable to
their having been fed with filled milk." (p. 45, Rollo).
There would seem, therefore, to be no dispute that filled milk is suitable for feeding infants
of all ages. Being so, the declaration required by Section 169 of the Tax Code that filled

milk is not suitable for nourishment for infants less than one year of age would, in effect,
constitute a deprivation of property without due. process of law.

Food and Drug Administrator. The decisions of the Board shall be

advisory to the Food and Drug Administrator.

Section 169 is being enforced only against respondent manufacturers of filled milk product
and not as against manufacturers, distributors or sellers of condensed skimmed milk such
as SIMILAC, SMA, BREMIL, ENFAMIL, OLAC, in which, as admitted by the petitioner, the
fatty part has been removed and substituted with vegetable or corn oil. The enforcement of
Section 169 against the private respondents only but not against other persons similarly
situated as the private respondents amounts to an unconstitutional denial of the equal pro
petition of the laws, for the law, equally enforced, would similarly offend against the
Constitution. Yick Wo vs. Hopkins, 118 U.S. 356,30 L. ed. 220).

Section 26. ...

xxx xxx xxx
(c) Hearing authorized or required by this Act shall be conducted by the
Board of Food and Drug Inspection which shall submit recommendation
to the Food and Drug Administrator.
(d) When it appears to the Food and Drug Administrator from the
reports of the Food and Drug Laboratory that any article of food or any
drug or cosmetic secured pursuant to Section 28 of this Act is
adulterated or branded 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 subject evidence impeaching the correctness of
the finding or charge in question.

As stated in the early part of this decision, with the repeal of Sections 141 and 177 of the
Tax Code, Section 169 has lost its tax purpose. Since Section 169 is devoid of any tax
purpose, petitioner Commissioner necessarily lost his authority to enforce the same. This
was so held by his predecessor immediately after Sections 141 and 177 were repealed in
General Circular No. V-85 as stated in paragraph IX of the Partial Stipulation of facts
entered into by the parties, to wit:
... As the act of sewing skimmed milk without first paying the specific
tax thereon is no longer unlawful and the enforcement of the
requirement in regard to the placing of the proper legend on its
immediate containers is a subject which does not come within the
jurisdiction of the Bureau of Internal Revenue, the penal provisions of
Section 177 of the said Code having been repealed by Republic Act No.
463. (p. 102, Rollo).
Petitioner's contention that he still has jurisdiction to enforce Section 169 by virtue of
Section 3 of the Tax Code which provides that the Bureau of Internal Revenue shall also
"give effect to and administer the supervisory and police power conferred to it by this Code
or other laws" is untenable. The Bureau of Internal Revenue may claim police power only
when necessary in the enforcement of its principal powers and duties consisting of the
"collection of all national internal revenue taxes, fees and charges, and the enforcement of
all forfeitures, penalties and fines connected therewith." The enforcement of Section 169
entails the promotion of the health of the nation and is thus unconnected with any tax
purpose. This is the exclusive function of the Food and Drug Administration of the
Department of Health as provided for in Republic Act No. 3720. In particular, Republic Act
No. 3720 provides:
Section 9. ... It shall be the duty of the Board (Food and Drug
Inspection), conformably with the rules and regulations, to hold
hearings and conduct investigations relative to matters touching the
Administration of this Act, to investigate processes of food, drug and
cosmetic manufacture and to subject reports to the Food and Drug
Administrator, recommending food and drug standards for adoption.
Said Board shall also perform such additional functions, properly within
the scope of the administration thereof, as maybe assigned to it by the

(e) When a violation of any provisions of this Act comes to the

knowledge of the Food and Drug Administrator of such character that a
criminal prosecution ought to be instituted against the offender, he shall
certify the facts to the Secretary of Justice through the Secretary of
Health, together with the chemists' report, the findings of the Board of
Food and Drug Inspection, or other documentary evidence on which the
charge is based.
(f) Nothing in this Act shall be construed as requiring the Food and Drug
Administrator to certify for prosecution pursuant to subparagraph (e)
hereof, minor violations of this Act whenever he believes that public
interest will be adequately served by a suitable written notice or
warning.
The aforequoted provisions of law clearly show that petitioners, Commissioner of Internal
Revenue and the Fair Trade Board, are without jurisdiction to investigate and to prosecute
alleged misbranding, mislabeling and/or misleading advertisements of filled milk. The
jurisdiction on the matters cited is vested upon the Board of Food and Drug inspection and
the Food and Drug Administrator, with the Secretary of Health and the Secretary of Justice,
also intervening in case criminal prosecution has to be instituted. To hold that the
petitioners have also jurisdiction as would be the result were their instant petition granted,
would only cause overlapping of powers and functions likely to produce confusion and
conflict of official action which is neither practical nor desirable.
WHEREFORE, the decision appealed from is hereby affirmed en toto. No costs.
SO ORDERED.

Teehankee, (Chairman), Fernandez, Melencio-Herrera, JJ., concur.

Republic of the Philippines

SUPREME COURT
Manila
SECOND DIVISION
G.R. No. 147749

June 22, 2006

SAN PABLO MANUFACTURING CORPORATION, Petitioner,

vs.
COMMISSIONER OF INTERNAL REVENUE,* Respondent.
DECISION

SPMC contends that its appeal should have been given due course since it substantially
complied with the requirements on verification and certification against forum shopping. It
insists on the liberal application of the rules because, on the merits of the petition, SPMC
was not liable for the 3% millers tax. It maintains that the crude oil which it sold to
UNICHEM was actually exported by UNICHEM as an ingredient of fatty acid and glycerine,
hence, not subject to millers tax pursuant to Section 168 of the 1987 Tax Code.
For SPMC, Section 168 of the 1987 Tax Code contemplates two exemptions from the
millers tax: (a) the milled products in their original state were actually exported by the
miller himself or by another person, and (b) the milled products sold by the miller were
actually exported as an ingredient or part of any manufactured article by the buyer or
manufacturer of the milled products. The exportation may be effected by the miller himself
or by the buyer or manufacturer of the milled products. Since UNICHEM, the buyer of
SPMCs milled products, subsequently exported said products, SPMC should be exempted
from the millers tax.

CORONA, J.:
The petition must fail.
In this petition for review under Rule 45 of the Rules of Court, San Pablo Manufacturing
Corporation (SPMC) assails the July 19, 20001 and April 3, 2001 resolutions of the Court of
Appeals in CA-G.R. SP No. 59139.
SPMC is a domestic corporation engaged in the business of milling, manufacturing and
exporting of coconut oil and other allied products. It was assessed and ordered to pay by
the Commissioner of Internal Revenue the total amount of P8,182,182.852 representing
deficiency millers tax and manufacturers sales tax, 3 among other deficiency taxes,4 for
taxable year 1987. The deficiency millers tax was imposed on SPMCs sales of crude oil to
United Coconut Chemicals, Inc. (UNICHEM) while the deficiency sales tax was applied on
its sales of corn and edible oil as manufactured products.
SPMC opposed the assessments but the Commissioner denied its protest. SPMC
appealed the denial of its protest to the Court of Tax Appeals (CTA) by way of a petition for
review docketed as CTA Case No. 5423.
In its March 10, 2000 decision, the CTA cancelled SPMCs liability for deficiency
manufacturers tax on the sales of corn and edible oils but upheld the Commissioners
assessment for the deficiency millers tax. SPMC moved for the partial reconsideration of
the CTA affirmation of the millers tax assessment but it was denied.
SPMC elevated the case to the Court of Appeals via a petition for review of the CTA
decision insofar as it upheld the deficiency millers tax assessment. In its July 19, 2000
resolution, the appellate court dismissed the petition on the principal ground 5 that the
verification attached to it was signed merely by SPMCs chief financial officer without
the corporate secretarys certificate, board resolution or power of attorney authorizing him
to sign the verification and certification against forum shopping. SPMC sought a
reconsideration of the resolution but the same was denied. Hence, this petition.
Did the Court of Appeals err when it dismissed SPMCs appeal?

Under Rule 43, Section 5 of the Rules of Court, appeals from the CTA and quasi-judicial
agencies to the Court of Appeals should be verified. A pleading required to be verified
which lacks proper verification shall be treated as an unsigned pleading. 6
Moreover, a petition for review under Rule 43 requires a sworn certification against forum
shopping.7 Failure of the petitioner to comply with any of the requirements of a petition for
review is sufficient ground for the dismissal of the petition. 8
A corporation may exercise the powers expressly conferred upon it by the Corporation
Code and those that are implied by or are incidental to its existence through its board of
directors and/or duly authorized officers and agents.9 Hence, physical acts, like the signing
of documents, can be performed only by natural persons duly authorized for the purpose
by corporate by-laws or by specific act of the board of directors. 10 In the absence of
authority from the board of directors, no person, not even the officers of the corporation,
can bind the corporation.11
SPMCs petition in the Court of Appeals did not indicate that the person who signed the
verification/certification on non-forum shopping was authorized to do so. SPMC merely
relied on the alleged inherent power of its chief financial officer to represent SPMC in all
matters regarding the finances of the corporation including, among others, the filing of suits
to defend or protect it from assessments and to recover erroneously paid taxes. SPMC
even admitted that no power of attorney, secretarys certificate or board resolution to prove
the affiants authority was attached to the petition. Thus, the petition was not properly
verified. Since the petition lacked proper verification, it was to be treated as an unsigned
pleading subject to dismissal.12
In PET Plans, Inc. v. Court of Appeals,13 the Court upheld the dismissal by the Court of
Appeals of the petition on the ground that the verification and certification against forum
shopping was signed by PET Plans, Inc.s first vice-president for legal affairs/corporate

secretary without any certification that he was authorized to sign in behalf of the
corporation.

shall not be allowed against the miller's tax due, except in the case of a proprietor or
operator of a refined sugar factory as provided hereunder. (emphasis supplied)

In BPI Leasing Corporation v. Court of Appeals,14 the Court ruled that the petition should be
dismissed outright on the ground that the verification/certification against forum shopping
was signed by BPI Leasing Corporations counsel with no specific authority to do so. Since
the counsel was purportedly acting for the corporation, he needed a resolution issued by
the board of directors that specifically authorized him to institute the petition and execute
the certification. Only then would his actions be legally binding on the corporation. 15

The language of the exempting clause of Section 168 of the 1987 Tax Code was clear. The
tax exemption applied only to the exportation of rope, coconut oil, palm oil, copra byproducts and dessicated coconuts, whether in their original state or as an ingredient or part
of any manufactured article or products, by the proprietor or operator of the factory or by
the miller himself.

In this case, therefore, the appellate court did not commit an error when it dismissed the
petition on the ground that it was signed by a person who had not been issued any
authority by the board of directors to represent the corporation.
Neither can the Court subscribe to SPMCs claim of substantial compliance or to its plea
for a liberal application of the rules. Save for the most persuasive of reasons, strict
compliance with procedural rules is enjoined to facilitate the orderly administration of
justice.16 Substantial compliance will not suffice in a matter involving strict observance such
as the requirement on non-forum shopping,17 as well as verification. Utter disregard of the
rules cannot justly be rationalized by harping on the policy of liberal construction. 18
But even if the fatal procedural infirmity were to be disregarded, the petition must still fail
for lack of merit.
As the CTA correctly ruled, SPMCs sale of crude coconut oil to UNICHEM was subject to
the 3% millers tax. Section 168 of the 1987 Tax Code provided:
Sec. 168. Percentage tax upon proprietors or operators of rope factories, sugar central
mills, coconut oil mills, palm oil mills, cassava mills and desiccated coconut factories.
Proprietors or operators of rope factories, sugar central and mills, coconut oil mills, palm oil
mills, cassava mills and desiccated coconut factories, shall pay a tax equivalent to three
percent (3%) of the gross value in money of all the rope, sugar, coconut oil, palm oil,
cassava flour or starch, dessicated coconut, manufactured, processed or milled by them,
including the by-product of the raw materials from which said articles are produced,
processed or manufactured, such tax to be based on the actual selling price or market
value of these articles at the time they leave the factory or mill warehouse:Provided,
however, That this tax shall not apply to rope, coconut oil, palm oil and the byproduct of copra from which it is produced or manufactured and dessicated
coconut, if such rope, coconut oil, palm oil, copra by-products and dessicated
coconuts, shall be removed for exportation by the proprietor or operator of the
factory or the miller himself, and are actually exported without returning to the
Philippines, whether in their original state or as an ingredient or part of any
manufactured article or products: Provided further, That where the planter or the owner
of the raw materials is the exporter of the aforementioned milled or manufactured products,
he shall be entitled to a tax credit of the miller's taxes withheld by the proprietor or operator
of the factory or mill, corresponding to the quantity exported, which may be used against
any internal revenue tax directly due from him: and Provided, finally, That credit for any
sales, miller's or excise taxes paid on raw materials or supplies used in the milling process

The language of the exemption proviso did not warrant the interpretation advanced by
SPMC. Nowhere did it provide that the exportation made by the purchaser of the materials
enumerated in the exempting clause or the manufacturer of products utilizing the said
materials was covered by the exemption. Since SPMCs situation was not within the ambit
of the exemption, it was subject to the 3% millers tax imposed under Section 168 of the
1987 Tax Code.
SPMCs proposed interpretation unduly enlarged the scope of the exemption clause. The
rule is that the exemption must not be so enlarged by construction since the reasonable
presumption is that the State has granted in express terms all it intended to grant and that,
unless the privilege is limited to the very terms of the statute, the favor would be intended
beyond what was meant.19
Where the law enumerates the subject or condition upon which it applies, it is to be
construed as excluding from its effects all those not expressly mentioned. Expressio unius
est exclusio alterius. Anything that is not included in the enumeration is excluded therefrom
and a meaning that does not appear nor is intended or reflected in the very language of the
statute cannot be placed therein.20 The rule proceeds from the premise that the legislature
would not have made specific enumerations in a statute if it had the intention not to restrict
its meaning and confine its terms to those expressly mentioned. 21
The rule of expressio unius est exclusio alterius is a canon of restrictive interpretation.22 Its
application in this case is consistent with the construction of tax exemptions in strictissimi
juris against the taxpayer. To allow SPMCs claim for tax exemption will violate these
established principles and unduly derogate sovereign authority.
WHEREFORE, the petition is hereby DENIED.
Costs against petitioner.
SO ORDERED.

Republic of the Philippines

SUPREME COURT
Manila

c) The residents of our barangay always complain of the irritating smell of

gasoline most of the time especially during gas filling which tend to expose
residents especially children to frequent colds, asthma, cough and the like
nowadays.

SECOND DIVISION
July 14, 2006

d) xxx the gasoline station violated Building and Fire Safety Codes because the
station has 2nd floor storey building used for business rental offices, with iron
grilled windows, no firewalls. It also endangers the lives of people upstairs.

CONCEPCION PARAYNO, petitioner,

vs.
JOSE JOVELLANOS and the MUNICIPALITY OF CALASIAO,
PANGASINAN,* respondents.

e) It hampers the flow of traffic, the gasoline station is too small and narrow, the
entrance and exit are closed to the street property lines. It couldn't cope situation
(sic) on traffic because the place is a congested area.2

G.R. No. 148408

DECISION
CORONA, J.:
This is a petition for review on certiorari under Rule 45 of the 1997 Rules of Court
questioning the resolution of the Court of Appeals (CA) which dismissed the petition for
certiorari, mandamus and prohibition, with prayer for issuance of a preliminary and
mandatory injunction, filed by petitioner Concepcion Parayno against respondents Jose
Jovellanos and the Municipality of Calasiao, Pangasinan.
Petitioner was the owner of a gasoline filling station in Calasiao, Pangasinan. In 1989,
some residents of Calasiao petitioned the Sangguniang Bayan (SB) of said municipality for
the closure or transfer of the station to another location. The matter was referred to the
Municipal Engineer, Chief of Police, Municipal Health Officer and the Bureau of Fire
Protection for investigation. Upon their advise, the Sangguniang Bayan recommended to
the Mayor the closure or transfer of location of petitioner's gasoline station. In Resolution
No. 50, it declared:
a) xxx the existing gasoline station is a blatant violation and disregard of existing
law to wit:
The Official Zoning Code of Calasiao, Art. 6, Section 44,1 the nearest
school building which is San Miguel Elementary School and church, the
distances are less than 100 meters. No neighbors were called as
witnesses when actual measurements were done by HLURB Staff,
Baguio City dated 22 June 1989.
b) The gasoline station remains in thickly populated area with
commercial/residential buildings, houses closed (sic) to each other which still
endangers the lives and safety of the people in case of fire. Moreover, additional
selling and storing of several LPG tanks in the station (sic).

Petitioner moved for the reconsideration of the SB resolution but it was denied. Hence, she
filed a special civil action for prohibition and mandamus with the Regional Trial Court
(RTC) of Dagupan City, Branch 44 against respondents. The case, docketed as SP Civil
Case No. 99-03010-D, was raffled to the sala of Judge Crispin Laron.
Petitioner claimed that her gasoline station was not covered by Section 44 of the Official
Zoning Code since it was not a "gasoline service station" but a "gasoline filling station"
governed by Section 21 thereof. She added that the decision of the Housing and Land Use
Regulatory Board (HLURB),3 in a previous case filed by the same respondent Jovellanos
against her predecessor (Dennis Parayno), barred the grounds invoked by respondent
municipality in Resolution No. 50. In the HLURB case, respondent Jovellanos opposed the
establishment of the gas station on the grounds that: (1) it was within the 100-meter
prohibited radius under Section 44 and (2) it posed a pernicious effect on the health and
safety of the people in Calasiao.
After the hearing on the propriety of issuing a writ of preliminary prohibitory and mandatory
injunction, the trial court ruled:
There is no basis for the court to issue a writ of preliminary prohibitory and
mandatory injunction. Albeit,Section 44 of the Official Zoning Code of
respondent municipality does not mention a gasoline filling station, [but]
following the principle of ejusdem generis, a gasoline filling station falls
within the ambit of Section 44.
The gasoline filling station of the petitioner is located under the establishment
belonging to the petitioner and is very near several buildings occupied by several
persons. Justice dictates that the same should not be allowed to continue
operating its business on that particular place. Further, the gasoline filling
station endangers the lives and safety of people because once there is fire,
the establishment and houses nearby will be razed to the
ground.4(emphasis supplied)
Petitioner moved for reconsideration of the decision but it was denied by the trial court.

Petitioner elevated the case to the CA via a petition for certiorari, prohibition and
mandamus,5 with a prayer for injunctive relief. She ascribed grave abuse of discretion,
amounting to lack or excess of jurisdiction, on the part of Judge Laron who dismissed her
case.
After the CA dismissed the petition, petitioner filed a motion for reconsideration but the
same was denied. Hence, this appeal.
Before us, petitioner insists that (1) the legal maxim of ejusdem generis did not apply to her
case; (2) the closure/transfer of her gasoline filling station by respondent municipality was
an invalid exercise of the latter's police powers and (3) it was the principle of res
judicata that applied in this case.6
We find merit in the petition.
The Principle of Ejusdem Generis
We hold that the zoning ordinance of respondent municipality made a clear distinction
between "gasoline service station" and "gasoline filling station." The pertinent provisions
read:
xxx

xxx

xxx

Section 21. Filling Station. A retail station servicing automobiles and other motor
vehicles with gasoline and oil only.7
xxx

xxx

xxx

Section 42. Service Station. A building and its premises where gasoline oil,
grease, batteries, tires and car accessories may be supplied and dispensed at
retail and where, in addition, the following services may be rendered and sales
and no other.
a. Sale and servicing of spark plugs, batteries, and distributor parts;
b. Tire servicing and repair, but not recapping or regrooving;
c. Replacement of mufflers and tail pipes, water hose, fan belts, brake
fluids, light bulbs, fuses, floor mats, seat covers, windshield wipers and
wiper blades, grease retainers, wheel, bearing, mirrors and the like;
d. Radiator cleaning and flushing;
e. Washing and polishing, and sale of automobile washing and
polishing materials;

f. Grease and lubricating;

g. Emergency wiring repairs;
h. Minor servicing of carburators;
i. Adjusting and repairing brakes;
j. Minor motor adjustments not involving removal of the head or
crankcase, or raising the motor.8
xxx

xxx

xxx

It is evident from the foregoing that the ordinance intended these two terms to be separate
and distinct from each other. Even respondent municipality's counsel admitted this
dissimilarity during the hearing on the application for the issuance of a writ of preliminary
prohibitory and mandatory injunction. Counsel in fact admitted:
1. That there exist[ed] an official zoning code of Calasiao, Pangasinan which
[was] not yet amended;
2. That under Article III of said official zoning code there [were] certain
distinctions made by said municipality about the designation of the
gasoline filling station and that of the gasoline service station as appearing
in Article III, Nos. 21 and 42, [respectively];
3. That the business of the petitioner [was] one of a gasoline filling station
as defined in Article III, Section 21 of the zoning code and not as a service
station as differently defined under Article 42 of the said official zoning
code;
4. That under Section 44 of the official zoning code of Calasiao, the term
filling station as clearly defined under Article III, Section 21, [did] not
appear in the wordings thereof;9(emphasis supplied)
The foregoing were judicial admissions which were conclusive on the municipality, the
party making them.10Respondent municipality thus could not find solace in the legal maxim
of ejusdem generis11 which means "of the same kind, class or nature." Under this maxim,
where general words follow the enumeration of particular classes of persons or things, the
general words will apply only to persons or things of the same general nature or class as
those enumerated.12 Instead, what applied in this case was the legal maxim expressio
unius est exclusio alteriuswhich means that the express mention of one thing implies the
exclusion of others.13 Hence, because of the distinct and definite meanings alluded to the
two terms by the zoning ordinance, respondents could not insist that "gasoline service
station" under Section 44 necessarily included "gasoline filling station" under Section 21.

Indeed, the activities undertaken in a "gas service station" did not automatically embrace
those in a "gas filling station."
The Exercise of Police Powers
Respondent municipality invalidly used its police powers in ordering the closure/transfer of
petitioner's gasoline station. While it had, under RA 7160, 14 the power to take actions and
enact measures to promote the health and general welfare of its constituents, it should
have given due deference to the law and the rights of petitioner.
A local government is considered to have properly exercised its police powers only when
the following requisites are met: (1) the interests of the public generally, as distinguished
from those of a particular class, require the interference of the State and (2) the means
employed are reasonably necessary for the attainment of the object sought to be
accomplished and not unduly oppressive.15 The first requirement refers to the equal
protection clause and the second, to the due process clause of the Constitution. 16
Respondent municipality failed to comply with the due process clause when it passed
Resolution No. 50. While it maintained that the gasoline filling station of petitioner was less
than 100 meters from the nearest public school and church, the records do not show that it
even attempted to measure the distance, notwithstanding that such distance was crucial in
determining whether there was an actual violation of Section 44. The different local offices
that respondent municipality tapped to conduct an investigation never conducted such
measurement either.
Moreover, petitioner's business could not be considered a nuisance which respondent
municipality could summarily abate in the guise of exercising its police powers. The
abatement of a nuisance without judicial proceedings is possible only if it is a nuisance per
se. A gas station is not a nuisance per se or one affecting the immediate safety of persons
and property,17 hence, it cannot be closed down or transferred summarily to another
location.
As a rule, this Court does not pass upon evidence submitted by the parties in the lower
courts.18 We deem it necessary, however, to recall the findings of the HLURB which
petitioner submitted as evidence during the proceedings before the trial court, if only to
underscore petitioner's compliance with the requirements of law before she put up her
gasoline station.
Another factor that should not be left unnoticed is the diligence exercised by
[petitioner] in complying with the requirements of the several laws prior to the
actual implementation of the project as can be attested by the fact that
[petitioner] has secured the necessary building permit and approval of [her]
application for authority to relocate as per the letter of the Energy Regulatory
Board xxx.19
On the alleged hazardous effects of the gasoline station to the lives and properties of the
people of Calasiao, we again note:

Relative to the allegations that the project (gasoline station) is hazardous to life
and property, the Board takes cognizance of the respondent's contention that the
project "is not a fire hazard since petroleum products shall be safely stored in
underground tanks and that the installation and construction of the underground
tanks shall be in accordance with the Caltex Engineering Procedures which is
true to all gasoline stations in the country. xxx
Hence, the Board is inclined to believe that the project being hazardous to
life and property is more perceived than factual. For, after all, even the Fire
Station Commander, after studying the plans and specifications of the subject
proposed construction, recommended on 20 January 1989, "to build such
buildings after conform (sic) all the requirements of PP 1185." It is further
alleged by the complainants that the proposed location is "in the heart of
the thickly populated residential area of Calasiao." Again, findings of the
[HLURB] staff negate the allegations as the same is within a designated
Business/Commercial Zone per the Zoning Ordinance. xxx20 (emphasis
supplied)
The findings of fact of the HLURB are binding as they are already final and conclusive vis-vis the evidence submitted by respondents.
The Principle of Res Judicata
Petitioner points out that the HLURB decision in the previous case filed against her
predecessor (Dennis Parayno) by respondent Jovellanos had effectively barred the issues
in Resolution No. 50 based on the principle of res judicata. We agree.
Res judicata refers to the rule that a final judgment or decree on the merits by a court of
competent jurisdiction is conclusive of the rights of the parties or their privies in all later
suits on all points and matters determined in the former suit. 21 For res judicata to apply, the
following elements must be present: (1) the judgment or order must be final; (2) the
judgment must be on the merits; (3) it must have been rendered by a court having
jurisdiction over the subject matter and the parties and (4) there must be, between the first
and second actions, identity of parties, of subject matter and of cause of action. 22
Respondent municipality does not contest the first, second and third requisites. However, it
claims that it was not a party to the HLURB case but only its co-respondent Jovellanos,
hence, the fourth requisite was not met. The argument is untenable.
The absolute identity of parties is not required for the principle of res judicata to apply.23 A
shared identity of interests is sufficient to invoke the application of this principle. 24 The
proscription may not be evaded by the mere expedient of including an additional
party.25 Res judicata may lie as long as there is a community of interests between a party in
the first case and a party in the second case although the latter may not have been
impleaded in the first.26

In the assailed resolution of respondent municipality, it raised the same grounds invoked
by its co-respondent in the HLURB: (1) that the resolution aimed to close down or transfer
the gasoline station to another location due to the alleged violation of Section 44 of the
zoning ordinance and (2) that the hazards of said gasoline station threatened the health
and safety of the public. The HLURB had already settled these concerns and its
adjudication had long attained finality. It is to the interest of the public that there should be
an end to litigation by the parties over a subject matter already fully and fairly adjudged.
Furthermore, an individual should not be vexed twice for the same cause. 27
WHEREFORE, the petition is hereby GRANTED. The assailed resolution of the Court of
the Appeals isREVERSED and SET ASIDE. Respondent Municipality of Calasiao is
hereby directed to cease and desist from enforcing Resolution No. 50 against petitioner
insofar as it seeks to close down or transfer her gasoline station to another location. No
costs.SO ORDERED.

Republic of the Philippines

SUPREME COURT
Manila
EN BANC

According to the petition, the said order was issued upon the recommendation of
Director Raul Arnaw and Investigator Amy de Villa-Rosero, without affording
petitioners the opportunity to controvert the charges filed against them. Petitioners
had sought to disqualify Director Arnaw and Investigator Villa-Rosero for manifest
partiality and bias (Rollo, pp. 4-15).
On September 10, 1992, this Court required respondents' Comment on the petition.

G.R. No. 106719 September 21, 1993

DRA. BRIGIDA S. BUENASEDA, Lt. Col. ISABELO BANEZ, JR., ENGR.
CONRADO REY MATIAS, Ms. CORA S. SOLIS and Ms. ENYA N.
LOPEZ, petitioners,
vs.
SECRETARY JUAN FLAVIER, Ombudsman CONRADO M. VASQUEZ, and NCMH
NURSES ASSOCIATION, represented by RAOULITO GAYUTIN, respondents.
Renato J. Dilag and Benjamin C. Santos for petitioners.
Danilo C. Cunanan for respondent Ombudsman.
Crispin T. Reyes and Florencio T. Domingo for private respondent.

QUIASON, J.:
This is a Petition for Certiorari, Prohibition and Mandamus, with Prayer for Preliminary
Injunction or Temporary Restraining Order, under Rule 65 of the Revised Rules of
Court.
Principally, the petition seeks to nullify the Order of the Ombudsman dated January 7,
1992, directing the preventive suspension of petitioners,
Dr. Brigida S. Buenaseda, Chief of Hospital III; Isabelo C. Banez, Jr., Administrative
Officer III; Conrado Rey Matias, Technical Assistant to the Chief of Hospital; Cora C.
Solis, Accountant III; and Enya N. Lopez, Supply Officer III, all of the National Center
for Mental Health. The petition also asks for an order directing the Ombudsman to
disqualify Director Raul Arnaw and Investigator Amy de Villa-Rosero, of the Office of
the Ombudsman, from participation in the preliminary investigation of the charges
against petitioner (Rollo, pp. 2-17; Annexes to Petition, Rollo, pp. 19-21).
The questioned order was issued in connection with the administrative complaint filed
with the Ombudsman (OBM-ADM-0-91-0151) by the private respondents against the
petitioners for violation of the Anti-Graft and Corrupt Practices Act.

On September 14 and September 22, 1992, petitioners filed a "Supplemental Petition

(Rollo, pp. 124-130); Annexes to Supplemental Petition; Rollo pp. 140-163) and an
"Urgent Supplemental Manifestation" (Rollo,
pp. 164-172; Annexes to Urgent Supplemental Manifestation; Rollo, pp. 173-176),
respectively, averring developments that transpired after the filing of the petition and
stressing the urgency for the issuance of the writ of preliminary injunction or
temporary restraining order.
On September 22, 1992, this Court ". . . Resolved to REQUIRE the respondents to
MAINTAIN in the meantime, the STATUS QUO pending filing of comments by said
respondents on the original supplemental manifestation" (Rollo, p. 177).
On September 29, 1992, petitioners filed a motion to direct respondent Secretary of
Health to comply with the Resolution dated September 22, 1992 (Rollo, pp. 182-192,
Annexes, pp. 192-203). In a Resolution dated October 1, 1992, this Court required
respondent Secretary of Health to comment on the said motion.
On September 29, 1992, in a pleading entitled "Omnibus Submission," respondent
NCMH Nurses Association submitted its Comment to the Petition, Supplemental
Petition and Urgent Supplemental Manifestation. Included in said pleadings were the
motions to hold the lawyers of petitioners in contempt and to disbar them (Rollo, pp.
210-267). Attached to the "Omnibus Submission" as annexes were the orders and
pleadings filed in Administrative Case No. OBM-ADM-0-91-1051 against petitioners
(Rollo, pp. 268-480).
The Motion for Disbarment charges the lawyers of petitioners with:
(1) unlawfully advising or otherwise causing or inducing their clients petitioners
Buenaseda, et al., to openly defy, ignore, disregard, disobey or otherwise violate,
maliciously evade their preventive suspension by Order of July 7, 1992 of the
Ombudsman . . ."; (2) "unlawfully interfering with and obstructing the implementation
of the said order (Omnibus Submission, pp. 50-52; Rollo, pp. 259-260); and (3)
violation of the Canons of the Code of Professional Responsibility and of
unprofessional and unethical conduct "by foisting blatant lies, malicious falsehood
and outrageous deception" and by committing subornation of perjury, falsification and
fabrication in their pleadings (Omnibus Submission, pp. 52-54; Rollo, pp. 261-263).

On November 11, 1992, petitioners filed a "Manifestation and Supplement to 'Motion

to Direct Respondent Secretary of Health to Comply with 22 September 1992
Resolution'" (Manifestation attached to Rollo without pagination between pp. 613 and
614 thereof).
On November 13, 1992, the Solicitor General submitted its Comment dated
November 10, 1992, alleging that: (a) "despite the issuance of the September 22,
1992 Resolution directing respondents to maintain the status quo, respondent
Secretary refuses to hold in abeyance the implementation of petitioners' preventive
suspension; (b) the clear intent and spirit of the Resolution dated September 22, 1992
is to hold in abeyance the implementation of petitioners' preventive suspension,
the status quo obtaining the time of the filing of the instant petition; (c) respondent
Secretary's acts in refusing to hold in abeyance implementation of petitioners'
preventive suspension and in tolerating and approving the acts of Dr. Abueva, the
OIC appointed to replace petitioner Buenaseda, are in violation of the Resolution
dated September 22, 1992; and
(d) therefore, respondent Secretary should be directed to comply with the Resolution
dated September 22, 1992 immediately, by restoring the status quo
ante contemplated by the aforesaid resolution" (Comment attached toRollo without
paginations between pp. 613-614 thereof).
In the Resolution dated November 25, 1992, this Court required respondent Secretary
to comply with the aforestated status quo order, stating inter alia, that:
It appearing that the status quo ante litem motam, or the last
peaceable uncontested status which preceded the present
controversy was the situation obtaining at the time of the filing of
the petition at bar on September 7, 1992 wherein petitioners were
then actually occupying their respective positions, the Court hereby
ORDERS that petitioners be allowed to perform the duties of their
respective positions and to receive such salaries and benefits as
they may be lawfully entitled to, and that respondents and/or any
and all persons acting under their authority desist and refrain from
performing any act in violation of the aforementioned Resolution of
September 22, 1992 until further orders from the Court (Attached
to Rollo after p. 615 thereof).
On December 9, 1992, the Solicitor General, commenting on the Petition,
Supplemental Petition and Supplemental Manifestation, stated that (a) "The authority
of the Ombudsman is only to recommend suspension and he has no direct power to
suspend;" and (b) "Assuming the Ombudsman has the power to directly suspend a
government official or employee, there are conditions required by law for the exercise
of such powers; [and] said conditions have not been met in the instant case"
(Attached to Rollo without pagination).

In the pleading filed on January 25, 1993, petitioners adopted the position of the
Solicitor General that the Ombudsman can only suspend government officials or
employees connected with his office. Petitioners also refuted private respondents'
motion to disbar petitioners' counsel and to cite them for contempt (Attached
to Rollowithout pagination).
The crucial issue to resolve is whether the Ombudsman has the power to suspend
government officials and employees working in offices other than the Office of the
Ombudsman, pending the investigation of the administrative complaints filed against
said officials and employees.
In upholding the power of the Ombudsman to preventively suspend petitioners,
respondents (Urgent Motion to LiftStatus Quo, etc, dated January 11, 1993, pp. 1011), invoke Section 24 of R.A. No. 6770, which provides:
Sec. 24. Preventive Suspension. The Ombudsman or his Deputy
may preventively suspend any officer or employee under his
authority pending an investigation, if in his judgment the evidence
of guilt is strong, and (a) the charge against such officer or
employee involves dishonesty, oppression or grave misconduct or
neglect in the performance of duty; (b) the charge would warrant
removal from the service; or (c) the respondent's continued stay in
office may prejudice the case filed against him.
The preventive suspension shall continue until the case is
terminated by the Office of Ombudsman but not more than six
months, without pay, except when the delay in the disposition of the
case by the Office of the Ombudsman is due to the fault,
negligence or petition of the respondent, in which case the period of
such delay shall not be counted in computing the period of
suspension herein provided.
Respondents argue that the power of preventive suspension given the Ombudsman
under Section 24 of R.A. No. 6770 was contemplated by Section 13 (8) of Article XI of
the 1987 Constitution, which provides that the Ombudsman shall exercise such other
power or perform such functions or duties as may be provided by law."
On the other hand, the Solicitor General and the petitioners claim that under the 1987
Constitution, the Ombudsman can only recommend to the heads of the departments
and other agencies the preventive suspension of officials and employees facing
administrative investigation conducted by his office. Hence, he cannot order the
preventive suspension himself.
They invoke Section 13(3) of the 1987 Constitution which provides that the Office of
the Ombudsman shall haveinter alia the power, function, and duty to:

Direct the officer concerned to take appropriate action against a

public official or employee at fault, and recommend his removal,
suspension, demotion, fine, censure or prosecution, and ensure
compliance therewith.
The Solicitor General argues that under said provision of the Constitutions, the
Ombudsman has three distinct powers, namely: (1) direct the officer concerned to
take appropriate action against public officials or employees at fault; (2) recommend
their removal, suspension, demotion fine, censure, or prosecution; and (3) compel
compliance with the recommendation (Comment dated December 3, 1992, pp. 9-10).
The line of argument of the Solicitor General is a siren call that can easily mislead,
unless one bears in mind that what the Ombudsman imposed on petitioners was not
a punitive but only a preventive suspension.
When the constitution vested on the Ombudsman the power "to recommend the
suspension" of a public official or employees (Sec. 13 [3]), it referred to "suspension,"
as a punitive measure. All the words associated with the word "suspension" in said
provision referred to penalties in administrative cases, e.g. removal, demotion, fine,
censure. Under the rule of Noscitor a sociis, the word "suspension" should be given
the same sense as the other words with which it is associated. Where a particular
word is equally susceptible of various meanings, its correct construction may be
made specific by considering the company of terms in which it is found or with which
it is associated (Co Kim Chan v. Valdez Tan Keh, 75 Phil. 371 [1945]; Caltex (Phils.)
Inc. v. Palomar, 18 SCRA 247 [1966]).
Section 24 of R.A. No. 6770, which grants the Ombudsman the power to preventively
suspend public officials and employees facing administrative charges before him, is a
procedural, not a penal statute. The preventive suspension is imposed after
compliance with the requisites therein set forth, as an aid in the investigation of the
administrative charges.
Under the Constitution, the Ombudsman is expressly authorized to recommend to the
appropriate official the discipline or prosecution of erring public officials or employees.
In order to make an intelligent determination whether to recommend such actions, the
Ombudsman has to conduct an investigation. In turn, in order for him to conduct such
investigation in an expeditious and efficient manner, he may need to suspend the
respondent.
The need for the preventive suspension may arise from several causes, among them,
the danger of tampering or destruction of evidence in the possession of respondent;
the intimidation of witnesses, etc. The Ombudsman should be given the discretion to
decide when the persons facing administrative charges should be preventively
suspended.

Penal statutes are strictly construed while procedural statutes are liberally construed
(Crawford, Statutory Construction, Interpretation of Laws, pp. 460-461; Lacson v.
Romero, 92 Phil. 456 [1953]). The test in determining if a statute is penal is whether a
penalty is imposed for the punishment of a wrong to the public or for the redress of an
injury to an individual (59 Corpuz Juris, Sec. 658; Crawford, Statutory Construction,
pp. 496-497). A Code prescribing the procedure in criminal cases is not a penal
statute and is to be interpreted liberally (People v. Adler, 140 N.Y. 331; 35 N.E. 644).
The purpose of R.A. No. 6770 is to give the Ombudsman such powers as he may
need to perform efficiently the task committed to him by the Constitution. Such being
the case, said statute, particularly its provisions dealing with procedure, should be
given such interpretation that will effectuate the purposes and objectives of the
Constitution. Any interpretation that will hamper the work of the Ombudsman should
be avoided.
A statute granting powers to an agency created by the Constitution should be liberally
construed for the advancement of the purposes and objectives for which it was
created (Cf. Department of Public Utilities v. Arkansas Louisiana Gas. Co., 200 Ark.
983, 142 S.W. (2d) 213 [1940]; Wallace v. Feehan, 206 Ind. 522, 190 N.E., 438
[1934]).
In Nera v. Garcia, 106 Phil. 1031 [1960], this Court, holding that a preventive
suspension is not a penalty, said:
Suspension is a preliminary step in an administrative investigation.
If after such investigation, the charges are established and the
person investigated is found guilty of acts warranting his removal,
then he is removed or dismissed. This is the penalty.
To support his theory that the Ombudsman can only preventively suspend
respondents in administrative cases who are employed in his office, the Solicitor
General leans heavily on the phrase "suspend any officer or employee under his
authority" in Section 24 of R.A. No. 6770.
The origin of the phrase can be traced to Section 694 of the Revised Administrative
Code, which dealt with preventive suspension and which authorized the chief of a
bureau or office to "suspend any subordinate or employee in his bureau or under his
authority pending an investigation . . . ."
Section 34 of the Civil Service Act of 1959 (R.A. No. 2266), which superseded
Section 694 of the Revised Administrative Code also authorized the chief of a bureau
or office to "suspend any subordinate officer or employees, in his bureau or under his
authority."

However, when the power to discipline government officials and employees was
extended to the Civil Service Commission by the Civil Service Law of 1975 (P.D. No.
805), concurrently with the President, the Department Secretaries and the heads of
bureaus and offices, the phrase "subordinate officer and employee in his bureau" was
deleted, appropriately leaving the phrase "under his authority." Therefore, Section 41
of said law only mentions that the proper disciplining authority may preventively
suspend "any subordinate officer or employee under his authority pending an
investigation . . ." (Sec. 41).
The Administrative Code of 1987 also empowered the proper disciplining authority to
"preventively suspend any subordinate officer or employee under his authority
pending an investigation" (Sec. 51).
The Ombudsman Law advisedly deleted the words "subordinate" and "in his bureau,"
leaving the phrase to read "suspend any officer or employee under his authority
pending an investigation . . . ." The conclusion that can be deduced from the deletion
of the word "subordinate" before and the words "in his bureau" after "officer or
employee" is that the Congress intended to empower the Ombudsman to preventively
suspend all officials and employees under investigation by his office, irrespective of
whether they are employed "in his office" or in other offices of the government. The
moment a criminal or administrative complaint is filed with the Ombudsman, the
respondent therein is deemed to be "in his authority" and he can proceed to
determine whether said respondent should be placed under preventive suspension.
In their petition, petitioners also claim that the Ombudsman committed grave abuse of
discretion amounting to lack of jurisdiction when he issued the suspension order
without affording petitioners the opportunity to confront the charges against them
during the preliminary conference and even after petitioners had asked for the
disqualification of Director Arnaw and Atty. Villa-Rosero (Rollo, pp. 6-13). Joining
petitioners, the Solicitor General contends that assuming arguendo that the
Ombudsman has the power to preventively suspend erring public officials and
employees who are working in other departments and offices, the questioned order
remains null and void for his failure to comply with the requisites in Section 24 of the
Ombudsman Law (Comment dated December 3, 1992, pp. 11-19).
Being a mere order for preventive suspension, the questioned order of the
Ombudsman was validly issued even without a full-blown hearing and the formal
presentation of evidence by the parties. In Nera, supra, petitioner therein also claimed
that the Secretary of Health could not preventively suspend him before he could file
his answer to the administrative complaint. The contention of petitioners herein can
be dismissed perfunctorily by holding that the suspension meted out was merely
preventive and therefore, as held in Nera, there was "nothing improper in suspending
an officer pending his investigation and before tho charges against him are heard . . .
(Nera v. Garcia., supra).

There is no question that under Section 24 of R.A. No. 6770, the Ombudsman cannot
order the preventive suspension of a respondent unless the evidence of guilt is strong
and (1) the charts against such officer or employee involves dishonesty, oppression
or grave misconduct or neglect in the performance of duty; (2) the charge would
warrant removal from the service; or (3) the respondent's continued stay in office may
prejudice the case filed against him.
The same conditions for the exercise of the power to preventively suspend officials or
employees under investigation were found in Section 34 of R.A. No. 2260.
The import of the Nera decision is that the disciplining authority is given the discretion
to decide when the evidence of guilt is strong. This fact is bolstered by Section 24 of
R.A. No. 6770, which expressly left such determination of guilt to the "judgment" of
the Ombudsman on the basis of the administrative complaint. In the case at bench,
the Ombudsman issued the order of preventive suspension only after: (a) petitioners
had filed their answer to the administrative complaint and the "Motion for the
Preventive Suspension" of petitioners, which incorporated the charges in the criminal
complaint against them (Annex 3, Omnibus Submission, Rollo, pp. 288-289; Annex
4, Rollo,
pp. 290-296); (b) private respondent had filed a reply to the answer of petitioners,
specifying 23 cases of harassment by petitioners of the members of the private
respondent (Annex 6, Omnibus Submission, Rollo, pp. 309-333); and (c) a
preliminary conference wherein the complainant and the respondents in the
administrative case agreed to submit their list of witnesses and documentary
evidence.
Petitioners herein submitted on November 7, 1991 their list of exhibits (Annex 8 of
Omnibus Submission, Rollo, pp. 336-337) while private respondents submitted their
list of exhibits (Annex 9 of Omnibus Submission, Rollo, pp. 338-348).
Under these circumstances, it can not be said that Director Raul Arnaw and
Investigator Amy de Villa-Rosero acted with manifest partiality and bias in
recommending the suspension of petitioners. Neither can it be said that the
Ombudsman had acted with grave abuse of discretion in acting favorably on their
recommendation.
The Motion for Contempt, which charges the lawyers of petitioners with unlawfully
causing or otherwise inducing their clients to openly defy and disobey the preventive
suspension as ordered by the Ombudsman and the Secretary of Health can not
prosper (Rollo, pp. 259-261). The Motion should be filed, as in fact such a motion was
filed, with the Ombudsman. At any rate, we find that the acts alleged to constitute
indirect contempt were legitimate measures taken by said lawyers to question the
validity and propriety of the preventive suspension of their clients.

On the other hand, we take cognizance of the intemperate language used by counsel
for private respondents hurled against petitioners and their counsel (Consolidated: (1)
Comment on Private Respondent" "Urgent Motions, etc.;
(2) Adoption of OSG's Comment; and (3) Reply to Private Respondent's Comment
and Supplemental Comment, pp. 4-5).
A lawyer should not be carried away in espousing his client's cause. The language of
a lawyer, both oral or written, must be respectful and restrained in keeping with the
dignity of the legal profession and with his behavioral attitude toward his brethren in
the profession (Lubiano v. Gordolla, 115 SCRA 459 [1982]). The use of abusive
language by counsel against the opposing counsel constitutes at the same time a
disrespect to the dignity of the court of justice. Besides, the use of impassioned
language in pleadings, more often than not, creates more heat than light.
The Motion for Disbarment (Rollo, p. 261) has no place in the instant special civil
action, which is confined to questions of jurisdiction or abuse of discretion for the
purpose of relieving persons from the arbitrary acts of judges and quasi-judicial
officers. There is a set of procedure for the discipline of members of the bar separate
and apart from the present special civil action.
WHEREFORE, the petition is DISMISSED and the Status quo ordered to be
maintained in the Resolution dated September 22, 1992 is LIFTED and SET ASIDE.
SO ORDERED.
Narvasa, C.J., Cruz, Padilla, Bidin, Grio-Aquino, Regalado, Davide, Jr., Romero,
Nocon, Melo, Puno and Vitug, JJ., concur.
Feliciano, J., is on leave.

Republic of the Philippines

SUPREME COURT
Manila

At the hearing of August 23, 1985, only the prosecution presented its evidence consisting of
Exhibits "A," "B" and "C." At the subsequent hearing on September 17, 1985, petitioner-appellant
waived the right to present evidence and, in lieu thereof, submitted a Memorandum confirming
the Stipulation of Facts. The Trial Court convicted petitioner-appellant.

EN BANC
G.R. No. 79094 June 22, 1988
MANOLO P. FULE, petitioner,
vs.
THE HONORABLE COURT OF APPEALS, respondent.
Balagtas P. Ilagan for petitioner.
The Solicitor General for respondent.

On appeal, respondent Appellate Court upheld the Stipulation of Facts and affirmed the
judgment of conviction. 1
Hence, this recourse, with petitioner-appellant contending that:
The Honorable Respondent Court of Appeals erred in the decision of the
Regional Trial Court convicting the petitioner of the offense charged, despite
the cold fact that the basis of the conviction was based solely on the
stipulation of facts made during the pre-trial on August 8, 1985, which was
not signed by the petitioner, nor by his counsel.
Finding the petition meritorious, we resolved to give due course.

MELENCIO-HERRERA, J.:
This is a Petition for Review on certiorari of the Decision of respondent Appellate Court, which
affirmed the judgment of the Regional Trial Court, Lucena City, Branch LIV, convicting petitioner
(the accused-appellant) of Violation of Batas Pambansa Blg. 22 (The Bouncing Checks Law) on
the basis of the Stipulation of Facts entered into between the prosecution and the defense
during the pre-trial conference in the Trial Court. The facts stipulated upon read:
a) That this Court has jurisdiction over the person and subject matter of this
case;
b) That the accused was an agent of the Towers Assurance Corporation on
or before January 21, 1981;
c) That on January 21, 1981, the accused issued and made out check No.
26741, dated January 24, 1981 in the sum of P2,541.05;
d) That the said check was drawn in favor of the complaining witness, Roy
Nadera;
e) That the check was drawn in favor of the complaining witness in
remittance of collection;
f) That the said check was presented for payment on January 24, 1981 but
the same was dishonored for the reason that the said checking account was
already closed;
g) That the accused Manolo Fule has been properly Identified as the
accused party in this case.

The 1985 Rules on Criminal Procedure, which became effective on January 1, 1985, applicable
to this case since the pre-trial was held on August 8, 1985, provides:
SEC. 4. Pre-trial agreements must be signed. No agreement or
admission made or entered during the pre-trial conference shall be used in
evidence against the accused unless reduced to writing and signed by him
and his counsel. (Rule 118) [Emphasis supplied]
By its very language, the Rule is mandatory. Under the rule of statutory construction, negative
words and phrases are to be regarded as mandatory while those in the affirmative are merely
directory (McGee vs. Republic, 94 Phil. 820 [1954]). The use of the term "shall" further
emphasizes its mandatory character and means that it is imperative, operating to impose a duty
which may be enforced (Bersabal vs. Salvador, No. L-35910, July 21, 1978, 84 SCRA 176). And
more importantly, penal statutes whether substantive and remedial or procedural are, by
consecrated rule, to be strictly applied against the government and liberally in favor of the
accused (People vs. Terrado No. L-23625, November 25, 1983, 125 SCRA 648).
The conclusion is inevitable, therefore, that the omission of the signature of the accused and his
counsel, as mandatorily required by the Rules, renders the Stipulation of Facts inadmissible in
evidence. The fact that the lawyer of the accused, in his memorandum, confirmed the Stipulation
of Facts does not cure the defect because Rule 118 requires both the accused and his counsel
to sign the Stipulation of Facts. What the prosecution should have done, upon discovering that
the accused did not sign the Stipulation of Facts, as required by Rule 118, was to submit
evidence to establish the elements of the crime, instead of relying solely on the supposed
admission of the accused in the Stipulation of Facts. Without said evidence independent of the
admission, the guilt of the accused cannot be deemed established beyond reasonable doubt.
Consequently, under the circumstances obtaining in this case, the ends of justice require that
evidence be presented to determine the culpability of the accused. When a judgment has been
entered by consent of an attorney without special authority, it will sometimes be set aside or
reopened (Natividad vs. Natividad, 51 Phil. 613 [1928]).

WHEREFORE, the judgment of respondent Appellate Court is REVERSED and this case is
hereby ordered RE-OPENED and REMANDED to the appropriate Branch of the Regional Trial
Court of Lucena City, for further reception of evidence.
SO ORDERED.

Republic of the Philippines

SUPREME COURT
Manila
FIRST DIVISION
G.R. No. L-35910 July 21, 1978
PURITA BERSABAL, petitioner,
vs.
HONORABLE JUDGE SERAFIN SALVADOR, as Judge of the Court of First
Instance of Caloocan City, Branch XIV, TAN THAT and ONG PIN
TEE, respondents.

MAKASIAR, J.:
On March 23, 1972, petitioner Purita Bersabal seeks to annul the orders of
respondent Judge of August 4, 1971, October 30, 1971 and March 15, 1972 and to
compel said respondent Judge to decide petitioner's perfected appeal on the basis of
the evidence and records of the case submitted by the City Court of Caloocan City
plus the memorandum already submitted by the petitioner and respondents.
Since only questions of law were raised therein, the Court of Appeals, on October 13,
1972, issued a resolution certifying said case to this Court pursuant to Section 17,
paragraph (4) of the Judiciary Act of 1948, as amended.
As found by the Court of Appeals, the facts of this case are as follows:
It appears that private respondents Tan That and Ong Pin Tee filed
an ejectment suit, docketed as Civil Case No. 6926 in the City
Court of Caloocan City, against the petitioner. A decision was
rendered by said Court on November 25, 1970, which decision was
appealed by the petitioner to the respondent Court and docketed
therein as Civil Case No. C-2036.

During the pendency of the appeal the respondent court issued on

March 23, 1971 an order which reads:
Pursuant to the provisions of Rep. Act No. 6031,
the Clerk of Court of Caloocan City, is hereby
directed to transmit to this Court within fifteen
(15) days from receipt hereof the transcripts of
stenographic notes taken down during the
hearing of this case before the City Court of
Caloocan City, and likewise, counsels for both
parties are given thirty (30) days from receipt of
this order within which to file their respective
memoranda, and thereafter, this case shall be
deemed submitted for decision by this Court.
which order was apparently received by petitioner on April 17,
1971.
The transcript of stenographic notes not having yet been forwarded
to the respondent court, petitioner filed on May 5, 1971 a 'MOTION
EX-PARTE TO SUBMIT MEMORANDUM WITHIN 30 DAYS FROM
RECEIPT OF NOTICE OF SUBMISSION OF THE TRANSCRIPT
OF STENOGRAPHIC NOTES TAKEN DURING THE HEARING OF
THE CASE BEFORE THE CITY COURT OF CALOOCAN CITY'
which was granted by respondent court on May 7, 1971. However,
before the petitioner could receive any such notice from the
respondent court, the respondent Judge issued an order on August
4, 1971 which says:
For failure of the defendant-appellant to
prosecute her appeal the same is hereby ordered
DISMISSED with costs against her.
Petitioner filed a motion for reconsideration of the order on
September 28, 1971, citing as a ground the granting of his ex-parte
motion to submit memorandum within 30 days from notice of the
submission of the stenographic notes taken before the City Court.
Private respondents filed their opposition to the motion on
September 30,1971. In the meantime, on October 20,1971,
petitioner filed her memorandum dated October 18, 1971. On
October 30, 1971 the respondent Court denied the motion for
reconsideration. Then on January 25, 1972, petitioner filed a motion
for leave to file second motion for reconsideration which was
likewise denied by the respondent court on March 15, 1972. Hence
this petition.

The sole inquiry in the case at bar can be stated thus: Whether, in the light of the
provisions of the second paragraph of Section 45 of Republic Act No. 296, as
amended by R.A. No. 6031, the mere failure of an appellant to submit on nine the
memorandum mentioned in the same paragraph would empower the Court of First
Instance to dismiss the appeal on the ground of failure to Prosecute; or, whether it is
mandatory upon said Court to proceed to decide the appealed case on the basis of
the evidence and records transmitted to it, the failure of the appellant to submit a
memorandum on time notwithstanding.
The second paragraph of Section 45 of R.A. No. 296, otherwise known as the
Philippine Judiciary Act of 1948, as amended by R.A. No. 6031 provides, in part, as
follows:
Courts of First Instance shall decide such appealed cases on the
basis of the evidence and records transmitted from the city or
municipal courts: Provided, That the parties may
submit memoranda and/or brief with oral argument if so
requested ... . (Emphasis supplied).
The foregoing provision is clear and leaves no room for doubt. It cannot be
interpreted otherwise than that the submission of memoranda is optional on the part
of the parties. Being optional on the part of the parties, the latter may so choose to
waive submission of the memoranda. And as a logical concomitant of the choice
given to the Parties, the Court cannot dismiss the appeal of the party waiving the
submission of said memorandum the appellant so chooses not to submit the
memorandum, the Court of First Instance is left with no alternative but to decide the
case on the basis of the evidence and records transmitted from the city or municipal
courts. In other words, the Court is not empowered by law to dismiss the appeal on
the mere failure of an appellant to submit his memorandum, but rather it is the Court's
mandatory duty to decide the case on the basis of the available evidence and records
transmitted to it.
As a general rule, the word "may" when used in a statute is permissive only and
operates to confer discretion; while the word "shall" is imperative, operating to impose
a duty which may be enforced (Dizon vs. Encarnacion, L-18615, Dec. 24, 1963, 9
SCRA 714, 716-717). The implication is that the Court is left with no choice but to
decide the appealed case either on the basis of the evidence and records transmitted
to it, or on the basis of the latter plus memoranda and/or brief with oral argument duly
submitted and/or made on request.
Moreover, memoranda, briefs and oral arguments are not essential requirements.
They may be submitted and/or made only if so requested.
Finally, a contrary interpretation would be unjust and dangerous as it may defeat the
litigant's right to appeal granted to him by law. In the case of Republic vs. Rodriguez

(L-26056, May 29, 1969, 28 SCRA 378) this Court underscored "the need of
proceeding with caution so that a party may not be deprived of its right to appeal
except for weighty reasons." Courts should heed the rule inMunicipality of Tiwi, Albay
vs. Cirujales
(L-37520, Dec. 26, 1973, 54 SCRA 390, 395), thus:
The appellate court's summary dismissal of the appeal even before
receipt of the records of the appealed case as ordered by it in a
prior mandamus case must be set aside as having been issued
precipitously and without an opportunity to consider and appreciate
unavoidable circumstances of record not attributable to petitioners
that caused the delay in the elevation of the records of the case on
appeal.
In the instant case, no notice was received by petitioner about the submission of the
transcript of the stenographic notes, so that his 30-day period to submit his
memorandum would commence to run. Only after the expiration of such period can
the respondent Judge act on the case by deciding it on the merits, not by dismissing
the appeal of petitioner.
WHEREFORE, THE CHALLENGED ORDERS OF RESPONDENT JUDGE DATED
AUGUST 4, 1971, OCTOBER 30, 1971 AND MARCH 15, 1971 ARE HEREBY SET
ASIDE AS NULL AND VOID AND THE RESPONDENT COURT IS HEREBY
DIRECTED TO DECIDE CIVIL CASE NO. C-2036 ON THE MERITS. NO COSTS.
Muoz Palma, Fernandez and Guerrero, JJ., concur.

Republic of the Philippines

SUPREME COURT
SECOND DIVISION
G.R. No. 167631 December 16, 2005
Jenette Marie B. Crisologo, Petitioner,
vs.
GLOBE TELECOM INC. and Cesar M. Maureal, Vice President for
Human Resources, Respondents.
RESOLUTION
AUSTRIA-MARTINEZ, J.:
Petitioner was an employee of respondent company. When she was
promoted as Director of Corporate Affairs and Regulatory Matters, she
became entitled to an executive car, and she procured a 1997 Toyota Camry.
In April 2002, she was separated from the company. Petitioner filed a
complaint for illegal dismissal and reinstatement with the National Labor
Relations Commission (NLRC), which later dismissed the complaint.
Petitioner filed, on August 12, 2004, a petition for certiorari with the Court of
Appeals, docketed as CA-G.R. SP No. 85679 assailing the NLRCs
dismissal.
Pending said petition, respondent company filed with the Regional Trial Court
of Mandaluyong (Branch 213) an action for recovery of possession of a
motor vehicle with application for a writ of replevin with damages, docketed
as Civil Case No. MC04-2480. Petitioner filed a motion to dismiss on the
ground of litis pendentia and forum shopping but this was denied by the trial
court. Thus, petitioner filed a petition for certiorari with the Court of Appeals,
docketed as CA-G.R. SP No. 85927.1 Petitioner also filed with the Court of
Appeals a motion for the issuance of a writ of prohibition to enjoin
proceedings in the replevin case before the trial court.
Thereafter, respondent company filed a motion to declare defendant in
default in Civil Case No. MC04-2480, which was granted by the trial court.
Respondent company was thus allowed to present its evidence ex-parte.
Petitioner filed a motion for reconsideration of the order of default but it was

denied by the trial court. On April 5, 2005, the trial court rendered a judgment
by default, the dispositive portion of which reads:
WHEREFORE, finding merit in all the foregoing uncontroverted facts
supported by documentary exhibits, judgment is hereby rendered declaring
plaintiff to have the right of possession over the subject motor vehicle and
ordering defendant plaintiff to pay plaintiff the following:
1. The amount of TWO MILLION FIVE HUNDRED FIFTY SIX THOUSAND
FOUR HUNDRED SIXTY PESOS (p2,556,460.00) as damages in the form of
unpaid daily car rental for 730 (From 15 August 2002 until 22 June 2004)
days at THREE THOUSAND FIVE HUNDRED TWO PESOS (P3,502.00) per
day;
2. The sum of TWO HUNDRED THOUSAND PESOS (P200,000.00) AS AND
BY WAY OF Attorneys fee;
3. The sum of TWO HUNDRED THOUSAND PESOS (P200,000.00) as
exemplary damages in order to deter others from doing similar act in
withholding possession of a property to another to which he/she has no right
to possess; and
4. Costs of suit.
SO ORDERED.
Petitioner then filed with the Court a petition for review on certiorari under
Rule 45 of the Rules of Court, which was denied by the Court in a Resolution
dated May 16, 2005, for being the wrong remedy under the 1997 Rules of
Civil Procedure, as amended.
Petitioner thus filed the present motion for reconsideration, alleging that the
filing of said petition is the proper recourse, citing Matute vs. Court of
Appeals, 26 SCRA 798 (1969), wherein it was ruled that a defendant
declared in default has the remedy set forth in Section 2, paragraph 3 of Rule
41 of the old Rules of Court.2 Petitioner then cited in her motion, "Section 2,
paragraph 3 or (c) of the Rules of Civil Procedure." 3
Evidently, petitioner misread the provision cited in the Matute case as that
pertaining to Section 2(c), Rule 41 of the 1997 Rules of Civil Procedure, as
amended, which states: "(c) Appeal by certiorari. - In all cases where only

questions of law are raised or involved, the appeal shall be to the Supreme
Court by petition for review oncertiorari in accordance with Rule 45." Hence,
she directly filed her petition for review on certiorari with the Court.

(b) Petition for review. The appeal to the Court of Appeals in cases
decided by the Regional Trial Court in the exercise of its appellate jurisdiction
shall be by petition for review in accordance with Rule 42.

Petitioner should be reminded that the Matute case is of 1969 vintage and
pertained to the old Rules of Court. As stated in the Matute case, a defendant
validly declared in default has the remedy set forth in Section 2, paragraph 3
of Rule 41. Note that under the old Rules, Section 2, paragraph 3 of Rule 41
governed appeals from Courts of First Instance, the Social Security
Commission and the Court of Agrarian Relations TO THE COURT OF
APPEALS, and reads:

(c) Appeal by certiorari. In all cases where only questions of law are raised
or involved, the appeal shall be to the Supreme Court by petition for review
on certiorari in accordance with Rule 45. (Emphasis supplied)

A party who has been declared in default may likewise appeal from the
judgment rendered against him as contrary to the evidence or to the law,
even if no petition for relief to set aside the order of default has been
presented by him in accordance with Rule 38. (Emphasis supplied)
Had petitioner been more circumspect, she would have easily ascertained
that said Section 2, paragraph 3 of Rule 41 of the old Rules of Court, as cited
in the Matute case, had already been superseded by the 1997 Rules of Civil
Procedure, as amended, and under these new rules, the different modes of
appeal are clearly laid down.
The decision sought to be reviewed in this case is a judgment by default
rendered by the trial court in Civil Case No. MC04-2480. As such, the
applicable rule is Section 2, Rule 41 of the 1997 Rules of Civil Procedure,
as amended, which provides for the different modes of appeal from a
Regional Trial Courts judgment or final order, to wit:
Section 2. Modes of appeal.
(a) Ordinary appeal. The appeal to the Court of Appeals in cases
decided by the Regional Trial Court in the exercise of its original
jurisdiction shall be taken by filing a notice of appeal with the court
which rendered the judgment or final order appealed from and serving
a copy thereof upon the adverse party. No record on appeal shall be
required except in special proceedings and other cases of multiple or
separate appeals where the law or these Rules so require. In such
cases, the record on appeal shall be filed and served in like manner.

In Cerezo vs. Tuazon,4 the Court reiterated the remedies available to a party
declared in default:
a) The defendant in default may, at any time after discovery thereof and
before judgment, file a motion under oath to set aside the order of
default on the ground that his failure to answer was due to fraud, accident,
mistake or excusable negligence, and that he has a meritorious defense
(Sec. 3, Rule 18 [now Sec. 3(b), Rule 9]);
b) If the judgment has already been rendered when the defendant discovered
the default, but before the same has become final and executory, he may file
a motion for new trial under Section 1 (a) of Rule 37;
c) If the defendant discovered the default after the judgment has become
final and executory, he may file a petition for relief under Section 2 [now
Section 1] of Rule 38; and
d) He may also appeal from the judgment rendered against him as contrary
to the evidence or to the law, even if no petition to set aside the order of
default has been presented by him (Sec. 2, Rule 41).
Moreover, a petition for certiorari to declare the nullity of a judgment by
default is also available if the trial court improperly declared a party in default,
or even if the trial court properly declared a party in default, if grave abuse of
discretion attended such declaration.5
The filing of the present petition is clearly not the proper remedy to assail the
default judgment rendered by the trial court. Petitioner still has the available
remedy of filing with the Regional Trial Court a motion for new trial or an
ordinary appeal to the Court of Appeals from the trial courts default
judgment. Note that petitioner admits that she was "properly declared in
default."6 Thus, there is no question of any improvident or improper
declaration of default by the trial court, and the remedy of filing a special civil

action for certiorari has been effectively foreclosed on petitioner. Her only
recourse then is to file an ordinary appeal with the Court of Appeals under
Section 2(a), Rule 41 of the 1997 Rules of Civil Procedure, as amended.

COURSE OF JUDICIAL PROCEEDINGS AS TO CALL FOR THE

EXERCISE BY THE SUPREME COURT OF ITS POWER OF
SUPERVISION

Instead, she came directly to this Court via petition for review on certiorari,
without setting forth substantial reasons why the ordinary remedies under the
law should be disregarded and the petition entertained. Petitioner cannot
even find solace in the Matute case as the old Rules of Court then applicable
explicitly laid down the remedy of an ordinary appeal to the Court of Appeals,
and not appeal by certiorari to this Court, by a defendant declared in default.

The test of whether a question is one of law or of fact is not the appellation
given to such question by the party raising the same; rather, it is whether the
appellate court can determine the issue raised without reviewing or
evaluating the evidence, in which case, it is a question of law; otherwise, it is
a question of fact.7 The issues on the award of damages call for a reevaluation of the evidence before the trial court, which is obviously a
question of fact. Cases where an appeal involved questions of fact, of law,
or both fall within the exclusive appellate jurisdiction of the Court of
Appeals.8 (Emphasis supplied)

Petitioner further argues that the petition involved questions of law, and the
Court should have taken cognizance of the case. The grounds set forth in her
petition prove otherwise, viz.:
GROUNDS
I
THE COMPLAINT FOR REPLEVIN FILED BY RESPONDENTS AGAINST
PETITIONER SHOULD HAVE BEEN DISMISSED ON THE GROUND
OF LITIS PENDENTIA AND FOR RESPONDENTS VIOLATION OF THE
RULES AGAINST FORUM-SHOPPING
II
THE TRIAL COURT WENT AHEAD WITH THE EX-PARTE PRESENTATION
OF RESPONDENTS EVIDENCE DESPITE THE PETITIONERS PENDING
MOTION FOR RECONSIDERATION
III
THE MONETARY AWARDS FOR DAMAGES AND ATTORNEYS FEES ARE
UNWARRANTED AND UNJUSTIFIABLE CONSIDERING THAT SUCH ARE
NOT SUPPORTED BY LAW AND JURISPRUDENCE
IV
THE COURT A QUO ISSUED THE ASSAILED DECISION IN A WAY THAT IT
IS NOT IN ACCORD WITH LAW OR APPLICABLE DECISIONS OF THE
SUPREME COURT AND HAS SO FAR DEPARTED FROM THE USUAL

It is on this score that the Court is inclined to concur with petitioners

argument that even if the remedy resorted to was wrong, the Court may refer
the case to the Court of Appeals under Rule 56, Section 6, paragraph 2 of
the 1997 Rules of Civil Procedure, as amended, which provides: "(A)n appeal
by certiorari taken to the Supreme Court from the Regional Trial Court
submitting issues of fact may be referred to the Court of Appeals for decision
or appropriate action." This despite the express provision in Section 5(f) of
the same Rule, which provides that an appeal may be dismissed when there
is error in the choice or mode of appeal.
Both Sections 5(f) and 6 of Rule 57 use the term "may," denoting discretion
on the part of the Court in dismissing the appeal or referring the case to the
Court of Appeals. The question of fact involved in the appeal and substantial
ends of justice warrant a referral of this case to the Court of Appeals for
further appropriate proceedings.
WHEREFORE, the motion for reconsideration is GRANTED. The petition is
reinstated and the case is REFERREDto the Court of Appeals for appropriate
action.
SO ORDERED.

Republic of the Philippines

SUPREME COURT
Manila
SECOND DIVISION

G.R. No. 117188 August 7, 1997

LOYOLA GRAND VILLAS HOMEOWNERS (SOUTH) ASSOCIATION,
INC., petitioner,
vs.
HON. COURT OF APPEALS, HOME INSURANCE AND GUARANTY
CORPORATION, EMDEN ENCARNACION and HORATIO AYCARDO, respondents.

ROMERO, J.:
May the failure of a corporation to file its by-laws within one month from the date of its
incorporation, as mandated by Section 46 of the Corporation Code, result in its
automatic dissolution?
This is the issue raised in this petition for review on certiorari of the Decision 1 of the
Court of Appeals affirming the decision of the Home Insurance and Guaranty
Corporation (HIGC). This quasi-judicial body recognized Loyola Grand Villas
Homeowners Association (LGVHA) as the sole homeowners' association in Loyola
Grand Villas, a duly registered subdivision in Quezon City and Marikina City that was
owned and developed by Solid Homes, Inc. It revoked the certificates of registration
issued to Loyola Grand Villas homeowners (North) Association Incorporated (the
North Association for brevity) and Loyola Grand Villas Homeowners (South)
Association Incorporated (the South Association).

organizations within the subdivision the North Association and the South
Association. According to private respondents, a non-resident and Soliven himself,
respectively headed these associations. They also discovered that these associations
had five (5) registered homeowners each who were also the incorporators, directors
and officers thereof. None of the members of the LGVHAI was listed as member of
the North Association while three (3) members of LGVHAI were listed as members of
the South Association. 3 The North Association was registered with the HIGC on
February 13, 1989 under Certificate of Registration No. 04-1160 covering Phases
West II, East III, West III and East IV. It submitted its by-laws on December 20, 1988.
In July, 1989, when Soliven inquired about the status of LGVHAI, Atty. Joaquin A.
Bautista, the head of the legal department of the HIGC, informed him that LGVHAI
had been automatically dissolved for two reasons. First, it did not submit its by-laws
within the period required by the Corporation Code and, second, there was non-user
of corporate charter because HIGC had not received any report on the association's
activities. Apparently, this information resulted in the registration of the South
Association with the HIGC on July 27, 1989 covering Phases West I, East I and East
II. It filed its by-laws on July 26, 1989.
These developments prompted the officers of the LGVHAI to lodge a complaint with
the HIGC. They questioned the revocation of LGVHAI's certificate of registration
without due notice and hearing and concomitantly prayed for the cancellation of the
certificates of registration of the North and South Associations by reason of the earlier
issuance of a certificate of registration in favor of LGVHAI.
On January 26, 1993, after due notice and hearing, private respondents obtained a
favorable ruling from HIGC Hearing Officer Danilo C. Javier who disposed of HIGC
Case No. RRM-5-89 as follows:
WHEREFORE, judgment is hereby rendered recognizing the Loyola Grand
Villas Homeowners Association, Inc., under Certificate of Registration No.
04-197 as the duly registered and existing homeowners association for
Loyola Grand Villas homeowners, and declaring the Certificates of
Registration of Loyola Grand Villas Homeowners (North) Association, Inc.
and Loyola Grand Villas Homeowners (South) Association, Inc. as hereby
revoked or cancelled; that the receivership be terminated and the Receiver
is hereby ordered to render an accounting and turn-over to Loyola Grand
Villas Homeowners Association, Inc., all assets and records of the
Association now under his custody and possession.

LGVHAI was organized on February 8, 1983 as the association of homeowners and

residents of the Loyola Grand Villas. It was registered with the Home Financing
Corporation, the predecessor of herein respondent HIGC, as the sole homeowners'
organization in the said subdivision under Certificate of Registration No. 04-197. It
was organized by the developer of the subdivision and its first president was Victorio
V. Soliven, himself the owner of the developer. For unknown reasons, however,
LGVHAI did not file its corporate by-laws.

The South Association appealed to the Appeals Board of the HIGC. In its Resolution
of September 8, 1993, the Board 4 dismissed the appeal for lack of merit.

Sometime in 1988, the officers of the LGVHAI tried to register its by-laws. They failed
to do so. 2 To the officers' consternation, they discovered that there were two other

Rebuffed, the South Association in turn appealed to the Court of Appeals, raising two
issues. First, whether or not LGVHAI's failure to file its by-laws within the period

prescribed by Section 46 of the Corporation Code resulted in the automatic

dissolution of LGVHAI. Second, whether or not two homeowners' associations may
be authorized by the HIGC in one "sprawling subdivision." However, in the Decision of
August 23, 1994 being assailed here, the Court of Appeals affirmed the Resolution of
the HIGC Appeals Board.

The Court of Appeals added that, as there was no showing that the registration of
LGVHAI had been validly revoked, it continued to be the duly registered homeowners'
association in the Loyola Grand Villas. More importantly, the South Association did
not dispute the fact that LGVHAI had been organized and that, thereafter, it
transacted business within the period prescribed by law.

In resolving the first issue, the Court of Appeals held that under the Corporation Code,
a private corporation commences to have corporate existence and juridical
personality from the date the Securities and Exchange Commission (SEC) issues a
certificate of incorporation under its official seal. The requirement for the filing of bylaws under Section 46 of the Corporation Code within one month from official notice
of the issuance of the certificate of incorporation presupposes that it is already
incorporated, although it may file its by-laws with its articles of incorporation.
Elucidating on the effect of a delayed filing of by-laws, the Court of Appeals said:

On the second issue, the Court of Appeals reiterated its previous ruling 5 that the
HIGC has the authority to order the holding of a referendum to determine which of
two contending associations should represent the entire community, village or
subdivision.

We also find nothing in the provisions cited by the petitioner, i.e., Section 46
and 22, Corporation Code, or in any other provision of the Code and other
laws which provide or at least imply that failure to file the by-laws results in
an automatic dissolution of the corporation. While Section 46, in prescribing
that by-laws must be adopted within the period prescribed therein, may be
interpreted as a mandatory provision, particularly because of the use of the
word "must," its meaning cannot be stretched to support the argument that
automatic dissolution results from non-compliance.
We realize that Section 46 or other provisions of the Corporation Code are
silent on the result of the failure to adopt and file the by-laws within the
required period. Thus, Section 46 and other related provisions of the
Corporation Code are to be construed with Section 6 (1) of P.D. 902-A. This
section empowers the SEC to suspend or revoke certificates of registration
on the grounds listed therein. Among the grounds stated is the failure to file
by-laws (see also II Campos: The Corporation Code, 1990 ed., pp. 124-125).
Such suspension or revocation, the same section provides, should be made
upon proper notice and hearing. Although P.D. 902-A refers to the SEC, the
same principles and procedures apply to the public respondent HIGC as it
exercises its power to revoke or suspend the certificates of registration or
homeowners association. (Section 2 [a], E.O. 535, series 1979, transferred
the powers and authorities of the SEC over homeowners associations to the
HIGC.)
We also do not agree with the petitioner's interpretation that Section 46,
Corporation Code prevails over Section 6, P.D. 902-A and that the latter is
invalid because it contravenes the former. There is no basis for such
interpretation considering that these two provisions are not inconsistent with
each other. They are, in fact, complementary to each other so that one
cannot be considered as invalidating the other.

Undaunted, the South Association filed the instant petition for review on certiorari. It
elevates as sole issue for resolution the first issue it had raised before the Court of
Appeals, i.e., whether or not the LGVHAI's failure to file its by-laws within the period
prescribed by Section 46 of the Corporation Code had the effect of automatically
dissolving the said corporation.
Petitioner contends that, since Section 46 uses the word "must" with respect to the
filing of by-laws, noncompliance therewith would result in "self-extinction" either due
to non-occurrence of a suspensive condition or the occurrence of a resolutory
condition "under the hypothesis that (by) the issuance of the certificate of registration
alone the corporate personality is deemed already formed." It asserts that the
Corporation Code provides for a "gradation of violations of requirements." Hence,
Section 22 mandates that the corporation must be formally organized and should
commence transaction within two years from date of incorporation. Otherwise, the
corporation would be deemed dissolved. On the other hand, if the corporation
commences operations but becomes continuously inoperative for five years, then it
may be suspended or its corporate franchise revoked.
Petitioner concedes that Section 46 and the other provisions of the Corporation Code
do not provide for sanctions for non-filing of the by-laws. However, it insists that no
sanction need be provided "because the mandatory nature of the provision is so clear
that there can be no doubt about its being an essential attribute of corporate birth." To
petitioner, its submission is buttressed by the facts that the period for compliance is
"spelled out distinctly;" that the certification of the SEC/HIGC must show that the bylaws are not inconsistent with the Code, and that a copy of the by-laws "has to be
attached to the articles of incorporation." Moreover, no sanction is provided for
because "in the first place, no corporate identity has been completed." Petitioner
asserts that "non-provision for remedy or sanction is itself the tacit proclamation that
non-compliance is fatal and no corporate existence had yet evolved," and therefore,
there was "no need to proclaim its demise." 6 In a bid to convince the Court of its
arguments, petitioner stresses that:
. . . the word MUST is used in Sec. 46 in its universal literal meaning and
corollary human implication its compulsion is integrated in its very

essence MUST is always enforceable by the inevitable consequence

that is, "OR ELSE". The use of the word MUST in Sec. 46 is no exception
it means file the by-laws within one month after notice of issuance of
certificate of registration OR ELSE. The OR ELSE, though not specified, is
inextricably a part of MUST . Do this or if you do not you are "Kaput". The
importance of the by-laws to corporate existence compels such meaning for
as decreed the by-laws is "the government" of the corporation. Indeed, how
can the corporation do any lawful act as such without by-laws. Surely, no law
is indeed to create chaos. 7
Petitioner asserts that P.D. No. 902-A cannot exceed the scope and power of the
Corporation Code which itself does not provide sanctions for non-filing of by-laws. For
the petitioner, it is "not proper to assess the true meaning of Sec. 46 . . . on an
unauthorized provision on such matter contained in the said decree."
In their comment on the petition, private respondents counter that the requirement of
adoption of by-laws is not mandatory. They point to P.D. No. 902-A as having resolved
the issue of whether said requirement is mandatory or merely directory. Citing Chung
Ka Bio v. Intermediate Appellate Court, 8 private respondents contend that Section
6(I) of that decree provides that non-filing of by-laws is only a ground for suspension
or revocation of the certificate of registration of corporations and, therefore, it may not
result in automatic dissolution of the corporation. Moreover, the adoption and filing of
by-laws is a condition subsequent which does not affect the corporate personality of a
corporation like the LGVHAI. This is so because Section 9 of the Corporation Code
provides that the corporate existence and juridical personality of a corporation begins
from the date the SEC issues a certificate of incorporation under its official seal.
Consequently, even if the by-laws have not yet been filed, a corporation may be
considered a de facto corporation. To emphasize the fact the LGVHAI was registered
as the sole homeowners' association in the Loyola Grand Villas, private respondents
point out that membership in the LGVHAI was an "unconditional restriction in the
deeds of sale signed by lot buyers."
In its reply to private respondents' comment on the petition, petitioner reiterates its
argument that the word " must" in Section 46 of the Corporation Code is mandatory. It
adds that, before the ruling in Chung Ka Bio v.Intermediate Appellate Court could be
applied to this case, this Court must first resolve the issue of whether or not the
provisions of P.D. No. 902-A prescribing the rules and regulations to implement the
Corporation Code can "rise above and change" the substantive provisions of the
Code.
The pertinent provision of the Corporation Code that is the focal point of controversy
in this case states:
Sec. 46. Adoption of by-laws. Every corporation formed under this Code,
must within one (1) month after receipt of official notice of the issuance of its

certificate of incorporation by the Securities and Exchange Commission,

adopt a code of by-laws for its government not inconsistent with this Code.
For the adoption of by-laws by the corporation, the affirmative vote of the
stockholders representing at least a majority of the outstanding capital stock,
or of at least a majority of the members, in the case of non-stock
corporations, shall be necessary. The by-laws shall be signed by the
stockholders or members voting for them and shall be kept in the principal
office of the corporation, subject to the stockholders or members voting for
them and shall be kept in the principal office of the corporation, subject to
inspection of the stockholders or members during office hours; and a copy
thereof, shall be filed with the Securities and Exchange Commission which
shall be attached to the original articles of incorporation.
Notwithstanding the provisions of the preceding paragraph, by-laws may be
adopted and filed prior to incorporation; in such case, such by-laws shall be
approved and signed by all the incorporators and submitted to the Securities
and Exchange Commission, together with the articles of incorporation.
In all cases, by-laws shall be effective only upon the issuance by the
Securities and Exchange Commission of a certification that the by-laws are
not inconsistent with this Code.
The Securities and Exchange Commission shall not accept for filing the bylaws or any amendment thereto of any bank, banking institution, building and
loan association, trust company, insurance company, public utility,
educational institution or other special corporations governed by special
laws, unless accompanied by a certificate of the appropriate government
agency to the effect that such by-laws or amendments are in accordance
with law.
As correctly postulated by the petitioner, interpretation of this provision of law begins
with the determination of the meaning and import of the word "must" in this section
Ordinarily, the word "must" connotes an imperative act or operates to impose a duty
which may be enforced. 9 It is synonymous with "ought" which connotes compulsion
or mandatoriness. 10 However, the word "must" in a statute, like "shall," is not always
imperative. It may be consistent with an exercise of discretion. In this jurisdiction, the
tendency has been to interpret "shall" as the context or a reasonable construction of
the statute in which it is used demands or requires. 11 This is equally true as regards
the word "must." Thus, if the languages of a statute considered as a whole and with
due regard to its nature and object reveals that the legislature intended to use the
words "shall" and "must" to be directory, they should be given that meaning. 12
In this respect, the following portions of the deliberations of the Batasang Pambansa
No. 68 are illuminating:

MR. FUENTEBELLA. Thank you, Mr. Speaker.

On page 34, referring to the adoption of by-laws, are we made to understand
here, Mr. Speaker, that by-laws must immediately be filed within one month
after the issuance? In other words, would this be mandatory or directory in
character?
MR. MENDOZA. This is mandatory.
MR. FUENTEBELLA. It being mandatory, Mr. Speaker, what would be the
effect of the failure of the corporation to file these by-laws within one month?
MR. MENDOZA. There is a provision in the latter part of the Code which
identifies and describes the consequences of violations of any provision of
this Code. One such consequences is the dissolution of the corporation for
its inability, or perhaps, incurring certain penalties.
MR. FUENTEBELLA. But it will not automatically amount to a dissolution of
the corporation by merely failing to file the by-laws within one month.
Supposing the corporation was late, say, five days, what would be the
mandatory penalty?
MR. MENDOZA. I do not think it will necessarily result in the automatic
or ipso facto dissolution of the corporation. Perhaps, as in the case, as you
suggested, in the case of El Hogar Filipino where a quo warranto action is
brought, one takes into account the gravity of the violation committed. If the
by-laws were late the filing of the by-laws were late by, perhaps, a day or
two, I would suppose that might be a tolerable delay, but if they are delayed
over a period of months as is happening now because of the absence
of a clear requirement that by-laws must be completed within a specified
period of time, the corporation must suffer certain consequences. 13
This exchange of views demonstrates clearly that automatic corporate dissolution for
failure to file the by-laws on time was never the intention of the legislature. Moreover,
even without resorting to the records of deliberations of the Batasang Pambansa, the
law itself provides the answer to the issue propounded by petitioner.
Taken as a whole and under the principle that the best interpreter of a statute is the
statute itself (optima statuli interpretatix est ipsum statutum), 14 Section 46
aforequoted reveals the legislative intent to attach a directory, and not mandatory,
meaning for the word "must" in the first sentence thereof. Note should be taken of the
second paragraph of the law which allows the filing of the by-laws even prior to
incorporation. This provision in the same section of the Code rules out mandatory
compliance with the requirement of filing the by-laws "within one (1) month after
receipt of official notice of the issuance of its certificate of incorporation by the

Securities and Exchange Commission." It necessarily follows that failure to file the bylaws within that period does not imply the "demise" of the corporation. By-laws may
be necessary for the "government" of the corporation but these are subordinate to the
articles of incorporation as well as to the Corporation Code and related
statutes. 15 There are in fact cases where by-laws are unnecessary to corporate
existence or to the valid exercise of corporate powers, thus:
In the absence of charter or statutory provisions to the contrary, by-laws are
not necessary either to the existence of a corporation or to the valid exercise
of the powers conferred upon it, certainly in all cases where the charter
sufficiently provides for the government of the body; and even where the
governing statute in express terms confers upon the corporation the power
to adopt by-laws, the failure to exercise the power will be ascribed to mere
nonaction which will not render void any acts of the corporation which would
otherwise be valid. 16 (Emphasis supplied.)
As Fletcher aptly puts it:
It has been said that the by-laws of a corporation are the rule of its life, and
that until by-laws have been adopted the corporation may not be able to act
for the purposes of its creation, and that the first and most important duty of
the members is to adopt them. This would seem to follow as a matter of
principle from the office and functions of by-laws. Viewed in this light, the
adoption of by-laws is a matter of practical, if not one of legal, necessity.
Moreover, the peculiar circumstances attending the formation of a
corporation may impose the obligation to adopt certain by-laws, as in the
case of a close corporation organized for specific purposes. And the statute
or general laws from which the corporation derives its corporate existence
may expressly require it to make and adopt by-laws and specify to some
extent what they shall contain and the manner of their adoption. The mere
fact, however, of the existence of power in the corporation to adopt by-laws
does not ordinarily and of necessity make the exercise of such power
essential to its corporate life, or to the validity of any of its acts. 17
Although the Corporation Code requires the filing of by-laws, it does not expressly
provide for the consequences of the non-filing of the same within the period provided
for in Section 46. However, such omission has been rectified by Presidential Decree
No. 902-A, the pertinent provisions on the jurisdiction of the SEC of which state:
Sec. 6. In order to effectively exercise such jurisdiction, the Commission
shall possess the following powers:
xxx xxx xxx

(1) To suspend, or revoke, after proper notice and hearing, the franchise or
certificate of registration of corporations, partnerships or associations, upon
any of the grounds provided by law, including the following:

These may not be essential to corporate birth but certainly, these are required by law
for an orderly governance and management of corporations. Nonetheless, failure to
file them within the period required by law by no means tolls the automatic dissolution
of a corporation.

xxx xxx xxx

5. Failure to file by-laws within the required period;
xxx xxx xxx
In the exercise of the foregoing authority and jurisdiction of the Commission
or by a Commissioner or by such other bodies, boards, committees and/or
any officer as may be created or designated by the Commission for the
purpose. The decision, ruling or order of any such Commissioner, bodies,
boards, committees and/or officer may be appealed to the Commission
sitting en banc within thirty (30) days after receipt by the appellant of notice
of such decision, ruling or order. The Commission shall promulgate rules of
procedures to govern the proceedings, hearings and appeals of cases falling
with its jurisdiction.
The aggrieved party may appeal the order, decision or ruling of the
Commission sitting en banc to the Supreme Court by petition for review in
accordance with the pertinent provisions of the Rules of Court.
Even under the foregoing express grant of power and authority, there can be
no automatic corporate dissolutionsimply because the incorporators failed to abide by
the required filing of by-laws embodied in Section 46 of the Corporation Code. There
is no outright "demise" of corporate existence. Proper notice and hearing are cardinal
components of due process in any democratic institution, agency or society. In other
words, the incorporators must be given the chance to explain their neglect or
omission and remedy the same.
That the failure to file by-laws is not provided for by the Corporation Code but in
another law is of no moment. P.D. No. 902-A, which took effect immediately after its
promulgation on March 11, 1976, is very much apposite to the Code. Accordingly, the
provisions abovequoted supply the law governing the situation in the case at bar,
inasmuch as the Corporation Code and P.D. No. 902-A are statutes in pari
materia. Interpretare et concordare legibus est optimus interpretandi. Every statute
must be so construed and harmonized with other statutes as to form a uniform
system of jurisprudence. 18
As the "rules and regulations or private laws enacted by the corporation to regulate,
govern and control its own actions, affairs and concerns and its stockholders or
members and directors and officers with relation thereto and among themselves in
their relation to it," 19 by-laws are indispensable to corporations in this jurisdiction.

In this regard, private respondents are correct in relying on the pronouncements of

this Court in Chung Ka Bio v.Intermediate Appellate Court, 20 as follows:
. . . . Moreover, failure to file the by-laws does not automatically operate to
dissolve a corporation but is now considered only a ground for such
dissolution.
Section 19 of the Corporation Law, part of which is now Section 22 of the
Corporation Code, provided that the powers of the corporation would cease
if it did not formally organize and commence the transaction of its business
or the continuation of its works within two years from date of its
incorporation. Section 20, which has been reproduced with some
modifications in Section 46 of the Corporation Code, expressly declared that
"every corporation formed under this Act, must within one month after the
filing of the articles of incorporation with the Securities and Exchange
Commission, adopt a code of by-laws." Whether this provision should be
given mandatory or only directory effect remained a controversial question
until it became academic with the adoption of PD 902-A. Under this decree,
it is now clear that the failure to file by-laws within the required period is only
a ground for suspension or revocation of the certificate of registration of
corporations.
Non-filing of the by-laws will not result in automatic dissolution of the
corporation. Under Section 6(I) of PD 902-A, the SEC is empowered to
"suspend or revoke, after proper notice and hearing, the franchise or
certificate of registration of a corporation" on the ground inter alia of "failure
to file by-laws within the required period." It is clear from this provision that
there must first of all be a hearing to determine the existence of the ground,
and secondly, assuming such finding, the penalty is not necessarily
revocation but may be only suspension of the charter. In fact, under the rules
and regulations of the SEC, failure to file the by-laws on time may be
penalized merely with the imposition of an administrative fine without
affecting the corporate existence of the erring firm.
It should be stressed in this connection that substantial compliance with
conditions subsequent will suffice to perfect corporate personality.
Organization and commencement of transaction of corporate business are
but conditions subsequent and not prerequisites for acquisition of corporate
personality. The adoption and filing of by-laws is also a condition
subsequent. Under Section 19 of the Corporation Code, a Corporation

commences its corporate existence and juridical personality and is deemed

incorporated from the date the Securities and Exchange Commission issues
certificate of incorporation under its official seal. This may be done even
before the filing of the by-laws, which under Section 46 of the Corporation
Code, must be adopted "within one month after receipt of official notice of
the issuance of its certificate of incorporation." 21
That the corporation involved herein is under the supervision of the HIGC does not
alter the result of this case. The HIGC has taken over the specialized functions of the
former Home Financing Corporation by virtue of Executive Order No. 90 dated
December 17, 1989. 22 With respect to homeowners associations, the HIGC shall
"exercise all the powers, authorities and responsibilities that are vested on the
Securities and Exchange Commission . . . , the provision of Act 1459, as amended by
P.D. 902-A, to the contrary notwithstanding." 23
WHEREFORE, the instant petition for review on certiorari is hereby DENIED and the
questioned Decision of the Court of Appeals AFFIRMED. This Decision is immediately
executory. Costs against petitioner.
SO ORDERED.

Republic of the Philippines

SUPREME COURT
Manila
EN BANC
G.R. No. 170678

Despite the pendency of the appeal, petitioner was proclaimed on May 19, 2004 by
the MBC as the winning candidate for mayor of Camalig, Albay.7
On May 21, 2004, private respondent filed with the COMELEC a petition to annul the
proclamation of the petitioner for being premature and illegal. The case was docketed
as SPC No. 04-124 and raffled to the COMELEC First Division.8

July 17, 2006

ROMMEL G. MUOZ, petitioner,

vs.
COMMISSION ON ELECTIONS, CARLOS IRWIN G. BALDO, JR., respondents.
DECISION
YNARES-SANTIAGO, J.:
This is a petition for certiorari and prohibition with prayer for the issuance of a writ of
preliminary injunction and/or temporary restraining order filed by petitioner Rommel
G. Muoz assailing the Resolution1 dated December 15, 2005 of the Commission on
Elections (COMELEC) En Banc in SPC No. 04-124 which affirmed the
Resolution2dated October 25, 2004 of the COMELEC First Division granting the
petition of private respondent Carlos Irwin G. Baldo, Jr. to annul petitioner's
proclamation as mayor of Camalig, Albay.
The facts of the case are as follows:
Petitioner and private respondent were candidates for mayor of Camalig, Albay in the
May 10, 2004 election.3 At 6:00 o'clock in the evening of May 10, 2004, the Municipal
Board of Canvassers (MBC) convened and canvassed the election returns (ER).4
On May 11, 2004, the lawyers of private respondent objected to the inclusion of the
26 ERs from various precincts based on the following grounds: 1) eight ERs lack
inner seal; 2) seven ERs lack material data; 3) one ER lack signatures; 4) four ERs
lack signatures and thumbmarks of the members of the Board of Election Inspectors
on the envelope containing them; 5) one ER lack the name and signature of the poll
clerk on the second page thereof; 6) one ER lack the number of votes in words and
figures; and 7) four ERs were allegedly prepared under intimidation.5
On May 13, 2004, the MBC denied the objections and ruled to include the objected
ERs in the canvass. Private respondent appealed the said ruling to the COMELEC on
May 18, 2004 and was docketed as SPC No. 04-087 and raffled to the COMELEC
First Division.6

On October 25, 2004, the COMELEC First Division rendered a Resolution in SPC No.
04-124 granting the petition to annul the proclamation. The dispositive portion thereof
reads:
WHEREFORE, in view of the foregoing, the Commission (FIRST DIVISION)
hereby GRANTS the Petition. The proclamation of x x x ROMMEL MUOZ
as winning candidate for mayor of Camalig, Albay is ANNULLED for having
been made in an irregular proceeding and for being precipitate and
premature.
SO ORDERED.9
Petitioner's motion for reconsideration10 was denied for lack of merit by the
COMELEC En Banc in a Resolution dated December 15, 2005, thus:
WHEREFORE, premises considered, the Commission En Banc hereby
DENIES the Motion for Reconsideration filed by x x x Muoz for lack of
merit. Accordingly, the ANNULMENT and SETTING ASIDE, by the First
Division, of the proclamation of x x x ROMMEL MUOZ as the duly elected
Mayor is hereby AFFIRMED.
The Regional Election Director of Region V, Atty. Zacarias C. Zaragoza, Jr.,
is hereby DIRECTED to constitute a new Municipal Board of Canvassers
from among the Election Officers in the Region.
Accordingly, the new Municipal Board of Canvassers of Camalig, Albay is
hereby DIRECTED to:
a) RECONVENE, and after due notice to all parties/candidates
concerned,
b) RE-CANVASS all the election returns of Camalig, Albay, and on
the basis thereof,
c) PREPARE a new Certificate of Canvass, and forthwith
d) PROCLAIM the winning candidates for Mayoralty position.

SO ORDERED.11
Hence, petitioner files the instant petition for certiorari and prohibition with prayer for
the issuance of a writ of preliminary injunction and/or temporary restraining order.

of, the merits of the former case; and 2) whether or not the COMELEC En
Banc correctly ordered the new MBC to re-canvass all the ERs and to proclaim the
winner on the basis thereof despite the pendency of the appeal with the First Division.
The petition is partly granted.

On January 17, 2006, the Court issued a temporary restraining order effective
immediately and ordered the COMELEC to cease and desist from implementing and
enforcing the December 15, 2005 Resolution in SPC No. 04-124.12
Petitioner relies on the following grounds in support of his petition:
I
THE PUBLIC [RESPONDENT] COMELEC COMMITTED GRAVE ABUSE
OF DISCRETION AMOUNTING TO LACK OR EXCESS OF JURISDICTION
WHEN IT ISSUED THE ASSAILED RESOLUTION DENYING FOR LACK
OF MERIT PETITIONER'S MOTION FOR RECONSIDERATION OF THE 25
OCTOBER [2004] RESOLUTION OF THE PUBLIC RESPONDENT'S FIRST
DIVISION, FOR BEING CONTRARY TO LAW, RULES AND WELLSETTLED JURISPRUDENCE;
II
THE PUBLIC RESPONDENT COMMITTED GRAVE ABUSE OF
DISCRETION AMOUNTING TO LACK OR EXCESS OF JURISDICTION
WHEN IT ISSUED THE ASSAILED RESOLUTION ANNULLING AND
SETTING ASIDE THE PROCLAMATION OF PETITIONER AS DULY
ELECTED MAYOR OF CAMALIG, ALBAY WITHOUT FIRST RESOLVING
THE PENDING APPEAL FIRST INITIATED, SPC 04-87;
III
THE PUBLIC RESPONDENT COMMITTED GRAVE ABUSE OF
DISCRETION AMOUNTING TO LACK OR EXCESS OF JURISDICTION
WHEN IT ISSUED THE ASSAILED RESOLUTION DIRECTING THE NEW
MUNICIPAL BOARD OF CANVASSERS OF CAMALIG, ALBAY, TO
RECONVENE AND RE-CANVASS ALL ELECTION RESULTS OF
CAMALIG, ALBAY, FOR BEING CONTRARY TO LAW.13
The foregoing issues may be summarized into two: 1) whether or not the COMELEC
First Division committed grave abuse of discretion when it decided only the Petition to
Annul Proclamation despite the agreement of the parties to consolidate private
respondent's appeal from the ruling of the MBC since both cases were raffled to the
same Division and the issue in the latter case was connected to, if not determinative

Anent the first issue, we find no merit in petitioner's contention.

While Section 9, Rule 3 of the COMELEC Rules of Procedure provides that "when an
action or proceeding involves a question of law and fact which is similar to or
common with that of another action or proceeding, the same may be consolidated
with the action or proceeding bearing the lower docket number," however, this rule is
only permissive, not mandatory. We have consistently held that the term "may" is
indicative of a mere possibility, an opportunity or an option. The grantee of that
opportunity is vested with a right or faculty which he has the option to exercise. If he
chooses to exercise the right, he must comply with the conditions attached
thereto,14which in this case require that the cases to be consolidated must involve
similar questions of law and fact.
In the case at bar, the consolidation of SPC No. 04-087 with SPC No. 04-124 is
inappropriate as they do not involve similar questions of law and fact. SPC No. 04087 assails the inclusion of the 26 ERs by the MBC on the ground that these were
incomplete, contained material defects and were prepared under intimidation, issues
which are proper for a pre-proclamation controversy under paragraphs (b) and (c) of
Section 243 of the Omnibus Election Code. On the other hand, SPC No. 04-124 is a
petition for the annulment of petitioner's proclamation for allegedly being prematurely
done, in violation of Section 36(i) of COMELEC Resolution No. 666915 which instructs
the board of canvassers "not proclaim any candidate as winner unless authorized by
the Commission after the latter has ruled on the objections brought to it on appeal by
the losing party; [a]ny proclamation made in violation hereof shall be void ab initio,
unless the contested returns/certificates will not affect the results of the elections." In
fine, SPC No. 04-087 pertains to the preparation of the ERs which is a preproclamation controversy, while SPC No. 04-124 refers to the conduct of the MBC in
proclaiming the petitioner without authority of the COMELEC.
Mere pendency of the two cases before the same division of the COMELEC is not a
ground for their outright consolidation. The discretion to consolidate cases may be
exercised only when the conditions are present. In any event, the records are bereft
of evidence that the parties agreed to consolidate the two cases or that the
COMELEC First Division had granted the same.
Further, we find that the COMELEC First Division correctly annulled the proclamation
of the petitioner. Time and again, this Court has given its imprimatur on the principle
that COMELEC is with authority to annul any canvass and proclamation which was
illegally made.16 At the time the proclamation was made, the COMELEC First Division

had not yet resolved SPC No. 04-087. Pursuant to Section 36(i) of COMELEC
Resolution No. 6669, which finds basis in Section 20(i) of Republic Act (R.A.) No.
7166,17 the MBC should not have proclaimed petitioner as the winning candidate
absent the authorization from the COMELEC. Any proclamation made under such
circumstances is void ab initio.18

reflective of the true vote of the electorate unless the board of canvassers considers
all returns and omits none.21

We likewise do not agree with petitioner's contention that the proclamation was valid
as the contested ERs will not affect the results of the election.

In the case at bar, petitioner obtained a margin of 762 votes over the private
respondent based on the canvass of the uncontested ERs whereas the total number
of votes in the 26 contested ERs is 5,178, which is higher than the 762-lead of the
petitioner over the private respondent. Clearly, the results of the election would be
adversely affected by the uncanvassed returns.

Section 20(i) of R.A. No. 7166 reads:

As aptly held by the COMELEC First Division:

Sec. 20. Procedure in Disposition of Contested Election Returns.

xxxx
(i) The board of canvassers shall not proclaim any candidate as winner
unless authorized by the Commission after the latter has ruled on the
objections brought to it on appeal by the losing party. Any proclamation
made in violation hereof shall be void ab initio, unless the contested
returns will not adversely affect the results of the election. (Emphasis
supplied)
The phrase "results of the election" is not statutorily defined. However, it had been
jurisprudentially explained inLucero v. Commission on Elections19 to mean:
[T]he net result of the election in the rest of the precincts in a given
constituency, such that if the margin of a leading candidate over that of his
closest rival in the latter precincts is less than the total number of votes in
the precinct where there was failure of election, then such failure would
certainly affect "the result of the election."20
Although the Lucero case involves a failure of election, the definition of "results of
election" applies to the disposition of contested election returns under Section 20(i) of
R.A. No. 7166. In both situations, the law endeavors to determine the will of the
people in an expeditious manner in that if the total number of votes in the precinct
where there is a failure of election or in case of the contested ERs, is less than the
lead of a candidate over his closest rival, the results of the election would not be
adversely affected. Hence, a proclamation may be made because the winning
candidate can be ascertained. Otherwise, a special election must be held or an
authorization of the COMELEC is necessary after ruling on the objections brought to it
on appeal by the losing party in order to determine the will of the electorate.
Proclamation made in violation of the rules is void ab initio as it would be based on an
incomplete canvass of votes. It is well settled that an incomplete canvass of votes is
illegal and cannot be the basis of a subsequent proclamation. A canvass is not

The votes obtained by petitioner and private respondent tallied in the

contested election returns can not be the basis of the partial proclamation.
The objected election returns cannot be considered, even provisionally, as
the true and final result of the elections in the contested precincts. The
possibility remains, remote thought (sic) it may be that they could be
excluded and the results reflected therein disregarded. The contested
election returns involved 5,178 votes as this is the number of voters who
actually voted in the precincts covered by the objections. The lead of
[petitioner] over [private respondent] as shown in the uncontested returns
was less than this number. Clearly, the results of the elections could be
adversely affected by the uncanvassed returns. Truly, the Board erred in its
perception that its partial proclamation was warranted.22
While the COMELEC En Banc correctly affirmed the October 25, 2004 Resolution of
its First Division in SPC 04-124 insofar as it annulled petitioner's proclamation,
however, we find that it exceeded its authority and thus gravely abused its discretion
when it ordered the new MBC to re-canvass all ERs even before its First Division
could decide on SPC No. 04-087 filed by private respondent assailing the ruling of the
MBC to include the 26 contested ERs in the canvass.
Section 3 of Article IX-C of the 1987 Constitution provides:
Sec. 3. The Commission on Elections may sit en banc or in two divisions,
and shall promulgate its rules of procedure in order to expedite disposition of
election cases, including pre-proclamation controversies. All such election
cases shall be heard and decided in division, provided that motions for
reconsideration of decisions shall be decided by the Commission en banc.
In Sarmiento v. Commission on Elections23 and Zarate v. Commission on
Elections,24 the Court similarly held that "election cases must first be heard and
decided by a Division of the Commission," and that the "Commission, sitting en banc,
does not have the authority to hear and decide the same at the first instance."

Thus, in Acosta v. Commission on Elections,25 the Court held that the COMELEC En
Banc violated the foregoing Constitutional mandate when it affirmed the trial court's
decision that was not the subject of the special civil action before it, but of the appeal
filed by therein petitioner, which was still undocketed at the time and the parties have
not yet submitted any evidence in relation thereto.
Clearly, by ordering the re-canvass of all the ERs in SPC No. 04-124, the
COMELEC En Banc in effect rendered a decision on the merits of SPC No. 04-087,
which up to the present is still pending before its First Division, in violation of the rule
that it does not have the authority to hear and decide election cases, including preproclamation controversies, at the first instance. As the proclamation of the winning
candidate has been delayed for more than two years now due to these cases, the
COMELEC First Division is directed to expeditiously resolve SPC No. 04-087, which
is summary in nature.
WHEREFORE, in view of the foregoing, the petition is PARTLY GRANTED. The
December 15, 2005 Resolution of the COMELEC En Banc in SPC No. 04-124 which
affirmed the annulment and setting aside by its First Division of the proclamation of
petitioner Rommel G. Muoz as Mayor of Camalig, Albay for being premature,
is AFFIRMED with the MODIFICATION that the order to constitute a new Municipal
Board of Canvassers to re-canvass all the election returns of Camalig, Albay; to
prepare a new Certificate of Canvass; and to declare the winning candidate for
mayoralty position is SET ASIDE for having been issued with grave abuse of
discretion. The temporary restraining order issued on January 17, 2006 is
hereby SET ASIDE.

Republic of the Philippines

SUPREME COURT
Manila
EN BANC
G.R. No. L-26001

October 29, 1968

PHILIPPINE NATIONAL BANK, petitioner,

vs.
THE COURT OF APPEALS and PHILIPPINE COMMERCIAL AND INDUSTRIAL
BANK, respondents.
Tomas Besa, Jose B. Galang and Juan C. Jimenez for petitioner.
San Juan, Africa & Benedicto for respondents.
CONCEPCION, C.J.:
The Philippine National Bank hereinafter referred to as the PNB seeks the
review by certiorari of a decision of the Court of Appeals, which affirmed that of the
Court of First Instance of Manila, dismissing plaintiff's complaint against the Philippine
Commercial and Industrial Bank hereinafter referred to as the PCIB for the
recovery of P57,415.00.
A partial stipulation of facts entered into by the parties and the decision of the Court of
Appeals show that, on about January 15, 1962, one Augusto Lim deposited in his
current account with the PCIB branch at Padre Faura, Manila, GSIS Check No.
645915- B, in the sum of P57,415.00, drawn against the PNB; that, following an
established banking practice in the Philippines, the check was, on the same date,
forwarded, for clearing, through the Central Bank, to the PNB, which did not return
said check the next day, or at any other time, but retained it and paid its amount to the
PCIB, as well as debited it against the account of the GSIS in the PNB; that,
subsequently, or on January 31, 1962, upon demand from the GSIS, said sum of
P57,415.00 was re-credited to the latter's account, for the reason that the signatures
of its officers on the check were forged; and that, thereupon, or on February 2, 1962,
the PNB demanded from the PCIB the refund of said sum, which the PCIB refused to
do. Hence, the present action against the PCIB, which was dismissed by the Court of
First Instance of Manila, whose decision was, in turn, affirmed by the Court of
Appeals.
It is not disputed that the signatures of the General Manager and the Auditor of the
GSIS on the check, as drawer thereof, are forged; that the person named in the check
as its payee was one Mariano D. Pulido, who purportedly indorsed it to one Manuel
Go; that the check purports to have been indorsed by Manuel Go to Augusto Lim,
who, in turn, deposited it with the PCIB, on January 15, 1962; that, thereupon, the

PCIB stamped the following on the back of the check: "All prior indorsements and/or
Lack of Endorsement Guaranteed, Philippine Commercial and Industrial Bank," Padre
Faura Branch, Manila; that, on the same date, the PCIB sent the check to the PNB,
for clearance, through the Central Bank; and that, over two (2) months before, or on
November 13, 1961, the GSIS had notified the PNB, which acknowledged receipt of
the notice, that said check had been lost, and, accordingly, requested that its payment
be stopped.
In its brief, the PNB maintains that the lower court erred: (1) in not finding the PCIB
guilty of negligence; (2) in not finding that the indorsements at the back of the check
are forged; (3) in not finding the PCIB liable to the PNB by virtue of the former's
warranty on the back of the check; (4) in not holding that "clearing" is not
"acceptance", in contemplation of the Negotiable Instruments law; (5) in not finding
that, since the check had not been accepted by the PNB, the latter is entitled to
reimbursement therefor; and (6) in denying the PNB's right to recover from the PCIB.
The first assignment of error will be discussed later, together with the last,with which it
is interrelated.
As regards the second assignment of error, the PNB argues that, since the signatures
of the drawer are forged, so must the signatures of the supposed indorsers be; but
this conclusion does not necessarily follow from said premise. Besides, there is
absolutely no evidence, and the PNB has not even tried to prove that the
aforementioned indorsements are spurious. Again, the PNB refunded the amount of
the check to the GSIS, on account of the forgery in the signatures, not of the
indorsers or supposed indorsers, but of the officers of the GSISas drawer of the
instrument. In other words, the question whether or not the indorsements have been
falsified is immaterial to the PNB's liability as a drawee, or to its right to recover from
the PCIB,1 for, as against the drawee, the indorsement of an intermediate bank does
not guarantee the signature of the drawer,2 since the forgery of the indorsement
is not the cause of the loss.3
With respect to the warranty on the back of the check, to which the third assignment
of error refers, it should be noted that the PCIB thereby guaranteed "all
prior indorsements," not the authenticity of the signatures of the officers of the GSIS
who signed on its behalf, because the GSIS is not an indorser of the check, but its
drawer.4Said warranty is irrelevant, therefore, to the PNB's alleged right to recover
from the PCIB. It could have been availed of by a subsequent indorsee5 or a holder in
due course6 subsequent to the PCIB, but, the PNB is neither.7 Indeed, upon payment
by the PNB, as drawee, the check ceased to be a negotiable instrument, and became
a mere voucher or proof of payment.8
Referring to the fourth and fifth assignments of error, we must bear in mind that, in
general, "acceptance", in the sense in which this term is used in the Negotiable
Instruments Law9 is not required for checks, for the same are payable on

demand.10 Indeed, "acceptance" and "payment" are, within the purview of said Law,
essentially different things, for the former is "a promise to perform an act," whereas
the latter is the "actual performance" thereof.11 In the words of the Law,12 "the
acceptance of a bill is the signification by the drawee of his assent to the order of the
drawer," which, in the case of checks, is the payment, on demand, of a given sum of
money. Upon the other hand, actual payment of the amount of a check implies not
only an assent to said order of the drawer and a recognition of the drawer's obligation
to pay the aforementioned sum, but, also, a compliance with such obligation.
Let us now consider the first and the last assignments of error. The PNB maintains
that the lower court erred in not finding that the PCIB had been guilty of negligence in
not discovering that the check was forged. Assuming that there had been such
negligence on the part of the PCIB, it is undeniable, however, that the PNB has, also,
been negligent, with the particularity that the PNB had been guilty of a greater
degree of negligence, because it had a previous and formal notice from the GSIS that
the check had been lost, with the request that payment thereof be stopped. Just as
important, if not more important and decisive, is the fact that the PNB's negligence
was the main or proximate cause for the corresponding loss.
In this connection, it will be recalled that the PCIB did not cash the check upon its
presentation by Augusto Lim; that the latter had merely deposited it in his current
account with the PCIB; that, on the same day, the PCIB sent it, through the Central
Bank, to the PNB, for clearing; that the PNB did not return the check to the PCIB the
next day or at any other time; that said failure to return the check to the PCIB implied,
under the current banking practice, that the PNB considered the check good and
would honor it; that, in fact, the PNB honored the check and paid its amount to the
PCIB; and that only then did the PCIB allow Augusto Lim to draw said amount from
his aforementioned current account.
Thus, by not returning the check to the PCIB, by thereby indicating that the PNB had
found nothing wrong with the check and would honor the same, and by actually
paying its amount to the PCIB, the PNB induced the latter, not only to believe that the
check was genuine and good in every respect, but, also, to pay its amount to Augusto
Lim. In other words, the PNB was the primary or proximate cause of the loss, and,
hence, may not recover from the PCIB.13
It is a well-settled maxim of law and equity that when one of two (2) innocent persons
must suffer by the wrongful act of a third person, the loss must be borne by the one
whose negligence was the proximate cause of the loss or who put it into the power of
the third person to perpetrate the wrong.14
Then, again, it has, likewise, been held that, where the collecting (PCIB) and the
drawee (PNB) banks are equally at fault, the court will leave the parties where it finds
them.15

Lastly, Section 62 of Act No. 2031 provides:

The acceptor by accepting the instrument engages that he will pay it
according to the tenor of his acceptance; and admits:
(a) The existence of the drawer, the genuineness of his signature, and his
capacity and authority to draw the instrument; and
(b) The existence of the payee and his then capacity to indorse.
The prevailing view is that the same rule applies in the case of a drawee who pays a
bill without having previously accepted it.16
WHEREFORE, the decision appealed from is hereby affirmed, with costs against the
Philippine National Bank. It is so ordered.

Republic of the Philippines

SUPREME COURT
Manila
EN BANC

G.R. No. 109902 August 2, 1994

ALU-TUCP, Representing Members: ALAN BARINQUE, with 13 others, namely:
ENGR. ALAN G. BARINQUE, ENGR. DARRELL LEE ELTAGONDE, EDUARD H.
FOOKSON, JR., ROMEO R. SARONA, RUSSELL GACUS, JERRY BONTILAO,
EUSEBIO MARIN, JR., LEONIDO ECHAVEZ, BONIFACIO MEJOS, EDGAR S.
BONTUYAN, JOSE G. GARGUENA, JR., OSIAS B. DANDASAN, and GERRY I.
FETALVERO,petitioners,
vs.
NATIONAL LABOR RELATIONS COMMISSION and NATIONAL STEEL
CORPORATION (NSC), respondents.
Leonard U. Sawal for petitioners.
Saturnino Mejorada for private respondent.

FELICIANO, J.:
In this Petition for Certiorari, petitioners assail the Resolution of the National Labor
Relations Commission ("NLRC") dated 8 January 1993 which declared petitioners to
be project employees of private respondent National Steel Corporation ("NSC"), and
the NLRC's subsequent Resolution of 15 February 1993, denying petitioners' motion
for reconsideration.
Petitioners plead that they had been employed by respondent NSC in connection with
its Five Year Expansion Program (FAYEP I & II) 1 for varying lengths of time when
they were separated from NSC's service:

3. Edgar Bontuyan 11-03-82 Chairman to present

4. Osias Dandasan 9-21-82 Utilityman 1991
5. Leonido Echavez 6-16-82 Eng. Assistant 6-30-92
6. Darrell Eltagonde 5-20-85 Engineer 1 8-31-91
7. Gerry Fetalvero 4-08-85 Mat. Expediter regularized
8. Eduard Fookson 9-20-84 Eng. Assistant 8-31-91
9. Russell Gacus 1-30-85 Engineer 1 6-30-92
10. Jose Garguena 3-02-81 Warehouseman to present
11. Eusebio Mejos 11-17-82 Survey Aide 8-31-91
12. Bonifacio Mejos 11-17-82 Surv. Party Head 1992
13. Romeo Sarona 2-26-83 Machine Operator 8-31-91 2
On 5 July 1990, petitioners filed separate complaints for unfair labor practice,
regularization and monetary benefits with the NLRC, Sub-Regional Arbitration Branch
XII, Iligan City.
The complaints were consolidated and after hearing, the Labor Arbiter in a Decision
dated 7 June 1991, declared petitioners "regular project employees who shall
continue their employment as such for as long as such [project] activity exists," but
entitled to the salary of a regular employee pursuant to the provisions in the collective
bargaining agreement. It also ordered payment of salary differentials. 3
Both parties appealed to the NLRC from that decision. Petitioners argued that they
were regular, not project, employees. Private respondent, on the other hand, claimed
that petitioners are project employees as they were employed to undertake a specific
project NSC's Five Year Expansion Program (FAYEP I & II).
The NLRC in its questioned resolutions modified the Labor Arbiter's decision. It
affirmed the Labor Arbiter's holding that petitioners were project employees since they
were hired to perform work in a specific undertaking the Five Years Expansion
Program, the completion of which had been determined at the time of their
engagement and which operation was not directly related to the business of steel
manufacturing. The NLRC, however, set aside the award to petitioners of the same
benefits enjoyed by regular employees for lack of legal and factual basis.
Deliberating on the present Petition for Certiorari, the Court considers that petitioners
have failed to show any grave abuse of discretion or any act without or in excess of
jurisdiction on the part of the NLRC in rendering its questioned resolutions of 8
January 1993 and 15 February 1993.

Employee Date Nature of Separated

The law on the matter is Article 280 of the Labor Code which reads in full:
Employed Employment
1. Alan Barinque 5-14-82 Engineer 1 8-31-91
2. Jerry Bontilao 8-05-85 Engineer 2 6-30-92

Art. 280. Regular and Casual Employment The provisions of the

written agreement to the contrary notwithstanding and regardless of
the oral agreement of the parties, and employment shall be

deemed to be regular where the employee has been engaged to

perform activities which are usually necessary or desirable in the
usual business or trade of the employer, except where the
employment has been fixed for a specific project or undertaking
the completion or termination of which has been determined at the
time of the engagement of the employee or where the work or
services to be performed is seasonal in nature and the employment
is for the duration of the season.
An employment shall be deemed to be casual if it is not covered by
the preceding paragraph: Provided, That, any employee who has
rendered at least one year service, whether such service is
continuous or broken, shall be considered a regular employee with
respect to the activity in which he is employed and his employment
shall continue while such actually exists. (Emphasis supplied)
Petitioners argue that they are "regular" employees of NSC because: (i) their jobs are
"necessary, desirable and work-related to private respondent's main business, steelmaking"; and (ii) they have rendered service for six (6) or more years to private
respondent NSC. 4
The basic issue is thus whether or not petitioners are properly characterized as
"project employees" rather than "regular employees" of NSC. This issue relates, of
course, to an important consequence: the services of project employees are coterminous with the project and may be terminated upon the end or completion of the
project for which they were hired. 5 Regular employees, in contract, are legally entitled
to remain in the service of their employer until that service is terminated by one or
another of the recognized modes of termination of service under the Labor Code. 6
It is evidently important to become clear about the meaning and scope of the term
"project" in the present context. The "project" for the carrying out of which "project
employees" are hired would ordinarily have some relationship to the usual business
of the employer. Exceptionally, the "project" undertaking might not have an ordinary or
normal relationship to the usual business of the employer. In this latter case, the
determination of the scope and parameeters of the "project" becomes fairly easy. It is
unusual (but still conceivable) for a company to undertake a project which has
absolutely no relationship to the usual business of the company; thus, for instance, it
would be an unusual steel-making company which would undertake the breeding and
production of fish or the cultivation of vegetables. From the viewpoint, however, of the
legal characterization problem here presented to the Court, there should be no
difficulty in designating the employees who are retained or hired for the purpose of
undertaking fish culture or the production of vegetables as "project employees," as
distinguished from ordinary or "regular employees," so long as the duration and scope
of the project were determined or specified at the time of engagement of the "project
employees." 7 For, as is evident from the provisions of Article 280 of the Labor Code,

quoted earlier, the principal test for determining whether particular employees are
properly characterized as "project employees" as distinguished from "regular
employees," is whether or not the "project employees" were assigned to carry out a
"specific project or undertaking," the duration (and scope) of which were specified at
the time the employees were engaged for that project.
In the realm of business and industry, we note that "project" could refer to one or the
other of at least two (2) distinguishable types of activities. Firstly, a project could refer
to a particular job or undertaking that is within the regular or usual business of the
employer company, but which is distinct and separate, and identifiable as such, from
the other undertakings of the company. Such job or undertaking begins and ends at
determined or determinable times. The typical example of this first type of project is a
particular construction job or project of a construction company. A construction
company ordinarily carries out two or more discrete identifiable construction projects:
e.g., a twenty-five- storey hotel in Makati; a residential condominium building in
Baguio City; and a domestic air terminal in Iloilo City. Employees who are hired for the
carrying out of one of these separate projects, the scope and duration of which has
been determined and made known to the employees at the time of employment, are
properly treated as "project employees," and their services may be lawfully terminated
at completion of the project.
The term "project" could also refer to, secondly, a particular job or undertaking that
is not within the regular business of the corporation. Such a job or undertaking must
also be identifiably separate and distinct from the ordinary or regular business
operations of the employer. The job or undertaking also begins and ends at
determined or determinable times. The case at bar presents what appears to our
mind as a typical example of this kind of "project."
NSC undertook the ambitious Five Year Expansion Program I and II with the ultimate
end in view of expanding the volume and increasing the kinds of products that it may
offer for sale to the public. The Five Year Expansion Program had a number of
component projects: e.g., (a) the setting up of a "Cold Rolling Mill Expansion Project";
(b) the establishment of a "Billet Steel-Making Plant" (BSP); (c) the acquisition and
installation of a "Five Stand TDM"; and (d) the "Cold Mill Peripherals
Project." 8 Instead of contracting out to an outside or independent contractor the tasks
of constructing the buildings with related civil and electrical works that would house
the new machinery and equipment, the installation of the newly acquired mill or plant
machinery and equipment and the commissioning of such machinery and equipment,
NSC opted to execute and carry out its Five Yeear Expansion Projects "in house," as
it were, by administration. The carrying out of the Five Year Expansion Program (or
more precisely, each of its component projects) constitutes a distinct undertaking
identifiable from the ordinary business and activity of NSC. Each component project,
of course, begins and ends at specified times, which had already been determined by
the time petitioners were engaged. We also note that NSC did the work here involved
the construction of buildings and civil and electrical works, installation of machinery
and equipment and the commissioning of such machinery only for itself. Private

respondent NSC was not in the business of constructing buildings and installing plant
machinery for the general business community, i.e., for unrelated, third party,
corporations. NSC did not hold itself out to the public as a construction company or as
an engineering corporation.

xxx xxx xxx

The present case therefore strictly falls under the definition of
"project employees" on paragraph one of Article 280 of the Labor
Code, as amended. Moreover, it has been held that the length of
service of a project employee is not the controlling test of
employment tenure but whether or not "the employment has been
fixed for a specific project or undertaking the completion or
termination of which has been determined at the time of the
engagement of the employee". (See Hilario Rada v. NLRC, G.R.
No. 96078, January 9, 1992; and Sandoval Shipping, Inc. v. NLRC,
136 SCRA 674 (1985). 9

Which ever type of project employment is found in a particular case, a common basic
requisite is that the designation of named employees as "project employees" and their
assignment to a specific project, are effected and implemented in good faith, and not
merely as a means of evading otherwise applicable requirements of labor laws.
Thus, the particular component projects embraced in the Five Year Expansion
Program, to which petitioners were assigned, were distinguishable from the regular or
ordinary business of NSC which, of course, is the production or making and
marketing of steel products. During the time petitioners rendered services to NSC,
their work was limited to one or another of the specific component projects which
made up the FAYEP I and II. There is nothing in the record to show that petitioners
were hired for, or in fact assigned to, other purposes, e.g., for operating or
maintaining the old, or previously installed and commissioned, steel-making
machinery and equipment, or for selling the finished steel products.
We, therefore, agree with the basic finding of the NLRC (and the Labor Arbiter) that
the petitioners were indeed "project employees:"
It is well established by the facts and evidence on record that
herein 13 complainants were hired and engaged for specific
activities or undertaking the period of which has been determined at
time of hiring or engagement. It is of public knowledge and which
this Commission can safely take judicial notice that the expansion
program (FAYEP) of respondent NSC consist of various phases [of]
project components which are being executed or implemented
independently or simultaneously from each other . . .
In other words, the employment of each "project worker" is
dependent and co-terminous with the completion or termination of
the specific activity or undertaking [for which] he was hired which
has been pre-determined at the time of engagement. Since, there is
no showing that they (13 complainants) were engaged to perform
work-related activities to the business of respondent which is steelmaking, there is no logical and legal sense of applying to them the
proviso under the second paragraph of Article 280 of the Labor
Code, as amended.

Petitioners next claim that their service to NSC of more than six (6) years should
qualify them as regular employees. We believe this claim is without legal basis. The
simple fact that the employment of petitioners as project employees had gone beyond
one (1) year, does not detract from, or legally dissolve, their status as project
employees. 10 The second paragraph of Article 280 of the Labor Code, quoted above,
providing that an employee who has served for at least one (1) year, shall be
considered a regular employee, relates to casual employees, not to project
employees.
In the case of Mercado, Sr. vs. National Labor Relations Commission, 11 this Court
ruled that the proviso in the second paragraph of Article 280 relates only to casual
employees and is not applicable to those who fall within the definition of said Article's
first paragraph, i.e., project employees. The familiar grammatical rule is that a proviso
is to be construed with reference to the immediately preceding part of the provision to
which it is attached, and not to other sections thereof, unless the clear legislative
intent is to restrict or qualify not only the phrase immediately preceding the proviso
but also earlier provisions of the statute or even the statute itself as a whole. No such
intent is observable in Article 280 of the Labor Code, which has been quoted earlier.
ACCORDINGLY, in view of the foregoing, the Petition for Certiorari is hereby
DISMISSED for lack of merit. The Resolutions of the NLRC dated 8 January 1993
and 15 February 1993 are hereby AFFIRMED. No pronouncement as to costs.
SO ORDERED.