CHAPTER 1

EFFECT & APLICATION OF LAW

ARTICLES 1-18
ALO, MIZELLE ROSE A.

I. PUBLICATION & EFFECTIVITY OF LAW, WHICH LAWS MUST BE PUBLISHED, WHICH

NEED NOT
1. TANADA V TUVERA GR
63915
ESCOLIN, J.:
Invoking the people's right to be informed on matters of public concern, a right recognized
in Section 6, Article IV of the 1973 Philippine Constitution, 1 as well as the principle that
laws to be valid and enforceable must be published in the Official Gazette or otherwise
effectively promulgated, petitioners seek a writ of mandamus to compel respondent public
officials to publish, and/or cause the publication in the Official Gazette of various
presidential decrees, letters of instructions, general orders, proclamations, executive
orders, letter of implementation and administrative orders.
Specifically, the publication of the following presidential issuances is sought:
a] Presidential Decrees Nos. 12, 22, 37, 38, 59, 64, 103, 171, 179, 184, 197, 200, 234,
265, 286, 298, 303, 312, 324, 325, 326, 337, 355, 358, 359, 360, 361, 368, 404, 406, 415,
427, 429, 445, 447, 473, 486, 491, 503, 504, 521, 528, 551, 566, 573, 574, 594, 599, 644,
658, 661, 718, 731, 733, 793, 800, 802, 835, 836, 923, 935, 961, 1017-1030, 1050, 10601061, 1085, 1143, 1165, 1166, 1242, 1246, 1250, 1278, 1279, 1300, 1644, 1772, 1808,
1810, 1813-1817, 1819-1826, 1829-1840, 18421847.
b] Letter of Instructions Nos.: 10, 39, 49, 72, 107, 108, 116, 130, 136, 141, 150, 153, 155,
161, 173, 180, 187, 188, 192, 193, 199, 202, 204, 205, 209, 211-213, 215-224, 226-228,
231-239, 241-245, 248, 251, 253-261, 263-269, 271-273, 275-283, 285289, 291, 293, 297299, 301-303, 309, 312-315, 325, 327, 343, 346, 349, 357, 358, 362, 367, 370, 382, 385,
386, 396-397, 405, 438-440, 444- 445, 473, 486, 488, 498, 501, 399, 527, 561, 576, 587,
594, 599, 600, 602, 609, 610, 611, 612, 615, 641, 642, 665, 702, 712-713, 726, 837-839,
878-879, 881, 882, 939-940, 964,997,11491178,1180-1278.
c] General Orders Nos.: 14, 52, 58, 59, 60, 62, 63, 64 & 65.
d] Proclamation Nos.: 1126, 1144, 1147, 1151, 1196, 1270, 1281, 1319-1526, 1529, 1532,
1535, 1538, 1540-1547, 1550-1558, 1561-1588, 1590-1595, 1594-1600, 16061609, 16121628, 1630-1649, 1694-1695, 1697-1701, 1705-1723, 1731-1734, 17371742, 1744, 17461751, 1752, 1754, 1762, 1764-1787, 1789-1795, 1797, 1800,
1802-1804, 1806-1807, 1812-1814, 1816, 1825-1826, 1829, 1831-1832, 1835-1836, 18391840, 1843-1844, 1846-1847, 1849, 1853-1858, 1860, 1866, 1868, 1870, 1876-1889,
1892, 1900, 1918, 1923, 1933, 1952, 1963, 1965-1966, 1968-1984, 1986-2028, 20302044, 2046-2145, 2147-2161, 2163-2244.
e] Executive Orders Nos.: 411, 413, 414, 427, 429-454, 457- 471, 474-492, 494-507, 509510, 522, 524-528, 531-532, 536, 538, 543-544, 549, 551-553, 560, 563, 567568, 570,
574, 593, 594, 598-604, 609, 611- 647, 649-677, 679-703, 705-707, 712786, 788-852,
854-857.
f] Letters of Implementation Nos.: 7, 8, 9, 10, 11-22, 25-27, 39, 50, 51, 59, 76, 80-81, 92,
94, 95, 107, 120, 122, 123.
g] Administrative Orders Nos.: 347, 348, 352-354, 360- 378, 380-433, 436-439.

The respondents, through the Solicitor General, would have this case dismissed outright
on the ground that petitioners have no legal personality or standing to bring the instant
petition. The view is submitted that in the absence of any showing that petitioners are
personally and directly affected or prejudiced by the alleged non-publication of the
presidential issuances in question 2 said petitioners are without the requisite legal
personality to institute this mandamus proceeding, they are not being "aggrieved parties"
within the meaning of Section 3, Rule 65 of the Rules of Court, which we quote:
SEC. 3. Petition for Mandamus.When any tribunal, corporation, board or person
unlawfully neglects the performance of an act which the law specifically enjoins as a duty
resulting from an office, trust, or station, or unlawfully excludes another from the use a rd
enjoyment of a right or office to which such other is entitled, and there is no other plain,
speedy and adequate remedy in the ordinary course of law, the person aggrieved thereby
may file a verified petition in the proper court alleging the facts with certainty and praying
that judgment be rendered commanding the defendant, immediately or at some other
specified time, to do the act required to be done to Protect the rights of the petitioner, and
to pay the damages sustained by the petitioner by reason of the wrongful acts of the
defendant.
Upon the other hand, petitioners maintain that since the subject of the petition concerns a
public right and its object is to compel the performance of a public duty, they need not
show any specific interest for their petition to be given due course.
The issue posed is not one of first impression. As early as the 1910 case of Severino vs.
Governor General, 3 this Court held that while the general rule is that "a writ of mandamus
would be granted to a private individual only in those cases where he has some private or
particular interest to be subserved, or some particular right to be protected, independent
of that which he holds with the public at large," and "it is for the public officers exclusively
to apply for the writ when public rights are to be subserved [Mithchell vs. Boardmen, 79
M.e., 469]," nevertheless, "when the question is one of public right and the object of the
mandamus is to procure the enforcement of a public duty, the people are regarded as the
real party in interest and the relator at whose instigation the proceedings are instituted
need not show that he has any legal or special interest in the result, it being sufficient to
show that he is a citizen and as such interested in the execution of the laws [High,
Extraordinary Legal Remedies, 3rd ed., sec. 431].
Thus, in said case, this Court recognized the relator Lope Severino, a private individual, as
a proper party to the mandamus proceedings brought to compel the Governor General to
call a special election for the position of municipal president in the town of Silay, Negros
Occidental. Speaking for this Court, Mr. Justice Grant T. Trent said:
We are therefore of the opinion that the weight of authority supports the proposition that
the relator is a proper party to proceedings of this character when a public right is sought
to be enforced. If the general rule in America were otherwise, we think that it would not be
applicable to the case at bar for the reason 'that it is always dangerous to apply a general
rule to a particular case without keeping in mind the reason for the rule, because, if under
the particular circumstances the reason for the rule does not exist, the rule itself is not
applicable and reliance upon the rule may well lead to error'
No reason exists in the case at bar for applying the general rule insisted upon by counsel
for the respondent. The circumstances which surround this case are different from those in

the United States, inasmuch as if the relator is not a proper party to these proceedings no
other person could be, as we have seen that it is not the duty of the law officer of the
Government to appear and represent the people in cases of this character.
The reasons given by the Court in recognizing a private citizen's legal personality in the
aforementioned case apply squarely to the present petition. Clearly, the right sought to be
enforced by petitioners herein is a public right recognized by no less than the fundamental
law of the land. If petitioners were not allowed to institute this proceeding, it would indeed
be difficult to conceive of any other person to initiate the same, considering that the
Solicitor General, the government officer generally empowered to represent the people,
has entered his appearance for respondents in this case.
Respondents further contend that publication in the Official Gazette is not a sine qua non
requirement for the effectivity of laws where the laws themselves provide for their own
effectivity dates. It is thus submitted that since the presidential issuances in question
contain special provisions as to the date they are to take effect, publication in the Official
Gazette is not indispensable for their effectivity. The point stressed is anchored on Article 2
of the Civil Code:
Art. 2. Laws shall take effect after fifteen days following the completion of their publication
in the Official Gazette, unless it is otherwise provided, ...
The interpretation given by respondent is in accord with this Court's construction of said
article. In a long line of decisions, 4 this Court has ruled that publication in the Official
Gazette is necessary in those cases where the legislation itself does not provide for its
effectivity date-for then the date of publication is material for determining its date of
effectivity, which is the fifteenth day following its publication-but not when the law itself
provides for the date when it goes into effect.
Respondents' argument, however, is logically correct only insofar as it equates the
effectivity of laws with the fact of publication. Considered in the light of other statutes
applicable to the issue at hand, the conclusion is easily reached that said Article 2 does
not preclude the requirement of publication in the Official Gazette, even if the law itself
provides for the date of its effectivity. Thus, Section 1 of Commonwealth Act 638 provides
as follows:
Section 1. There shall be published in the Official Gazette [1] all important legisiative acts
and resolutions of a public nature of the, Congress of the Philippines; [2] all executive and
administrative orders and proclamations, except such as have no general applicability; [3]
decisions or abstracts of decisions of the Supreme Court and the Court of Appeals as may
be deemed by said courts of sufficient importance to be so published; [4] such documents
or classes of documents as may be required so to be published by law; and [5] such
documents or classes of documents as the
President of the Philippines shall determine from time to time to have general applicability
and legal effect, or which he may authorize so to be published. ...
The clear object of the above-quoted provision is to give the general public adequate
notice of the various laws which are to regulate their actions and conduct as citizens.
Without such notice and publication, there would be no basis for the application of the
maxim "ignorantia legis non excusat." It would be the height of injustice to punish or

otherwise burden a citizen for the transgression of a law of which he had no notice
whatsoever, not even a constructive one.
Perhaps at no time since the establishment of the Philippine Republic has the publication
of laws taken so vital significance that at this time when the people have bestowed upon
the President a power heretofore enjoyed solely by the legislature. While the people are
kept abreast by the mass media of the debates and deliberations in the Batasan
Pambansaand for the diligent ones, ready access to the legislative recordsno such
publicity accompanies the law-making process of the President. Thus, without publication,
the people have no means of knowing what presidential decrees have actually been
promulgated, much less a definite way of informing themselves of the specific contents
and texts of such decrees. As the Supreme Court of Spain ruled: "Bajo la denominacion
generica de leyes, se comprenden tambien los reglamentos, Reales decretos,
Instrucciones, Circulares y Reales ordines dictadas de conformidad con las mismas por el
Gobierno en uso de su potestad. 5
The very first clause of Section I of Commonwealth Act 638 reads: "There shall be
published in the Official Gazette ... ." The word "shall" used therein imposes upon
respondent officials an imperative duty. That duty must be enforced if the Constitutional
right of the people to be informed on matters of public concern is to be given substance
and reality. The law itself makes a list of what should be published in the Official Gazette.
Such listing, to our mind, leaves respondents with no discretion whatsoever as to what
must be included or excluded from such publication.
The publication of all presidential issuances "of a public nature" or "of general
applicability" is mandated by law. Obviously, presidential decrees that provide for fines,
forfeitures or penalties for their violation or otherwise impose a burden or. the people,
such as tax and revenue measures, fall within this category. Other presidential issuances
which apply only to particular persons or class of persons such as administrative and
executive orders need not be published on the assumption that they have been
circularized to all concerned. 6
It is needless to add that the publication of presidential issuances "of a public nature" or
"of general applicability" is a requirement of due process. It is a rule of law that before a
person may be bound by law, he must first be officially and specifically informed of its
contents. As Justice Claudio Teehankee said in Peralta vs. COMELEC 7:
In a time of proliferating decrees, orders and letters of instructions which all form part of
the law of the land, the requirement of due process and the Rule of Law demand that the
Official Gazette as the official government repository promulgate and publish the texts of
all such decrees, orders and instructions so that the people may know where to obtain
their official and specific contents.
The Court therefore declares that presidential issuances of general application, which have
not been published, shall have no force and effect. Some members of the Court, quite
apprehensive about the possible unsettling effect this decision might have on acts done in
reliance of the validity of those presidential decrees which were published only during the
pendency of this petition, have put the question as to whether the Court's declaration of
invalidity apply to P.D.s which had been enforced or implemented prior to their publication.
The answer is all too familiar. In similar situations in the

past this Court had taken the pragmatic and realistic course set forth in Chicot County
Drainage District vs. Baxter Bank 8 to wit:
The courts below have proceeded on the theory that the Act of Congress, having been
found to be unconstitutional, was not a law; that it was inoperative, conferring no rights
and imposing no duties, and hence affording no basis for the challenged decree. Norton v.
Shelby County, 118 U.S. 425, 442; Chicago, 1. & L. Ry. Co. v. Hackett, 228 U.S. 559, 566. It
is quite clear, however, that such broad statements as to the effect of a determination of
unconstitutionality must be taken with qualifications. The actual existence of a statute,
prior to such a determination, is an operative fact and may have consequences which
cannot justly be ignored. The past cannot always be erased by a new judicial declaration.
The effect of the subsequent ruling as to invalidity may have to be considered in various
aspects-with respect to particular conduct, private and official. Questions of rights claimed
to have become vested, of status, of prior determinations deemed to have finality and
acted upon accordingly, of public policy in the light of the nature both of the statute and of
its previous application, demand examination. These questions are among the most
difficult of those which have engaged the attention of courts, state and federal and it is
manifest from numerous decisions that an all-inclusive statement of a principle of absolute
retroactive invalidity cannot be justified.
Consistently with the above principle, this Court in Rutter vs. Esteban 9 sustained the right
of a party under the Moratorium Law, albeit said right had accrued in his favor before said
law was declared unconstitutional by this Court.
Similarly, the implementation/enforcement of presidential decrees prior to their
publication in the Official Gazette is "an operative fact which may have consequences
which cannot be justly ignored. The past cannot always be erased by a new judicial
declaration ... that an all-inclusive statement of a principle of absolute retroactive
invalidity cannot be justified."
From the report submitted to the Court by the Clerk of Court, it appears that of the
presidential decrees sought by petitioners to be published in the Official Gazette, only
Presidential Decrees Nos. 1019 to 1030, inclusive, 1278, and 1937 to 1939, inclusive, have
not been so published. 10 Neither the subject matters nor the texts of these PDs can be
ascertained since no copies thereof are available. But whatever their subject matter may
be, it is undisputed that none of these unpublished PDs has ever been implemented or
enforced by the government. In Pesigan vs. Angeles, 11 the Court, through Justice Ramon
Aquino, ruled that "publication is necessary to apprise the public of the contents of [penal]
regulations and make the said penalties binding on the persons affected thereby. " The
cogency of this holding is apparently recognized by respondent officials considering the
manifestation in their comment that "the government, as a matter of policy, refrains from
prosecuting violations of criminal laws until the same shall have been published in the
Official Gazette or in some other publication, even though some criminal laws provide that
they shall take effect immediately.
WHEREFORE, the Court hereby orders respondents to publish in the Official Gazette all
unpublished presidential issuances which are of general application, and unless so
published, they shall have no binding force and effect.
SO ORDERED.

PUBLICATION & EFFECTIVITY OF LAW, WHICH LAWS MUST BE PUBLISHED, WHICH

NEED NOT
2. DADOLE V COA GR 125350
CORONA, J.:
Before us is a petition for certiorari under Rule 64 to annul the decision1 and
resolution2, dated September 21, 1995 and May 28, 1996, respectively, of the
respondent Commission on Audit (COA) affirming the notices of the Mandaue City
Auditor which diminished the monthly additional allowances received by the
petitioner judges of the Regional Trial Court (RTC) and Municipal Trial Court (MTC)
stationed in Mandaue City.
The undisputed facts are as follows:
In 1986, the RTC and MTC judges of Mandaue City started receiving monthly
allowances of P1,260 each through the yearly appropriation ordinance enacted by
the Sangguniang Panlungsod of the said city. In 1991, Mandaue City increased the
amount to P1,500 for each judge.
On March 15, 1994, the Department of Budget and Management (DBM) issued the
disputed Local Budget Circular No. 55 (LBC 55) which provided that:
"x x x
xxx
xxx
2.3.2. In the light of the authority granted to the local government units under the
Local Government Code to provide for additional allowances and other benefits to
national government officials and employees assigned in their locality, such
additional allowances in the form of honorarium at rates not exceeding P1,000.00 in
provinces and cities and P700.00 in municipalities may be granted subject to the
following conditions:
a) That the grant is not mandatory on the part of the LGUs;
b) That all contractual and statutory obligations of the LGU including the
implementation of R.A. 6758 shall have been fully provided in the budget;
c) That the budgetary requirements/limitations under Section 324 and 325 of R.A.
7160 should be satisfied and/or complied with; and

d) That the LGU has fully implemented the devolution of functions/personnel in

accordance with R.A. 7160.3" (italics supplied)
xxx
xxx
xxx
The said circular likewise provided for its immediate effectivity without need of
publication:
"5.0 EFFECTIVITY
This Circular shall take effect immediately."
Acting on the DBM directive, the Mandaue City Auditor issued notices of
disallowance to herein petitioners, namely, Honorable RTC Judges Mercedes G.
Dadole, Ulric R. Caete, Agustin R. Vestil, Honorable MTC Judges Temistocles M.
Boholst, Vicente C. Fanilag and Wilfredo A. Dagatan, in excess of the amount
authorized by LBC 55. Beginning October, 1994, the additional monthly allowances
of the petitioner judges were reduced to P1,000 each. They were also asked to
reimburse the amount they received in excess of P1,000 from April to September,
1994.
The petitioner judges filed with the Office of the City Auditor a protest against the
notices of disallowance. But the City Auditor treated the protest as a motion for
reconsideration and indorsed the same to the COA Regional Office No. 7. In turn, the
COA Regional Office referred the motion to the head office with a recommendation
that the same be denied.
On September 21, 1995, respondent COA rendered a decision denying petitioners'
motion for reconsideration. The COA held that:
The issue to be resolved in the instant appeal is whether or not the City Ordinance
of Mandaue which provides a higher rate of allowances to the appellant judges may
prevail over that fixed by the DBM under Local Budget Circular No. 55 dated March
15, 1994.
xxx
xxx
xxx
Applying the foregoing doctrine, appropriation ordinance of local government units
is subject to the organizational, budgetary and compensation policies of budgetary
authorities (COA 5th Ind., dated March 17, 1994 re: Province of Antique; COA letter
dated May 17, 1994 re: Request of Hon. Renato Leviste, Cong. 1st Dist. Oriental
Mindoro). In this regard, attention is invited to Administrative Order No. 42 issued on
March 3, 1993 by the President of the Philippines clarifying the role of DBM in the
compensation and classification of local government positions under RA No. 7160
vis-avis the provisions of RA No. 6758 in view of the abolition of the JCLGPA. Section
1 of said Administrative Order provides that:
"Section 1. The Department of Budget and Management as the lead administrator of
RA No. 6758 shall, through its Compensation and Position Classification Bureau,
continue to have the following responsibilities in connection with the
implementation of the Local Government Code of 1991:
a) Provide guidelines on the classification of local government positions and on the
specific rates of pay therefore;
b) Provide criteria and guidelines for the grant of all allowances and additional forms
of compensation to local government employees; xxx." (underscoring supplied)
To operationalize the aforecited presidential directive, DBM issued LBC No. 55, dated
March 15, 1994, whose effectivity clause provides that:
xxx
xxx
xxx
"5.0 EFFECTIVITY
This Circular shall take effect immediately."
It is a well-settled rule that implementing rules and regulations promulgated by
administrative or executive officer in accordance with, and as authorized by law,
has the force and effect of law or partake the nature of a statute (Victorias Milling
Co., Inc., vs. Social Security Commission, 114 Phil. 555, cited in Agpalo's Statutory
Construction, 2nd Ed. P. 16; Justice Cruz's Phil. Political Law, 1984 Ed., p. 103;
Espanol vs. Phil Veterans Administration, 137 SCRA 314; Antique Sawmills Inc. vs.
Tayco, 17 SCRA 316).

xxx
xxx
xxx
There being no statutory basis to grant additional allowance to judges in excess of
P1,000.00 chargeable against the local government units where they are stationed,
this Commission finds no substantial grounds or cogent reason to disturb the
decision of the City Auditor, Mandaue City, disallowing in audit the allowances in
question. Accordingly, the above-captioned appeal of the MTC and RTC Judges of
Mandaue City, insofar as the same is not covered by Circular Letter No. 91-7, is
hereby dismissed for lack of merit.
xxx
xxx
x x x4
On November 27, 1995, Executive Judge Mercedes Gozo-Dadole, for and in behalf of
the petitioner judges, filed a motion for reconsideration of the decision of the COA.
In a resolution dated May 28, 1996, the COA denied the motion.
Hence, this petition for certiorari by the petitioner judges, submitting the following
questions for resolution:
I
HAS THE CITY OF MANDAUE STATUTORY AND CONSTITUTIONAL BASIS TO PROVIDE
ADDITIONAL ALLOWANCES AND OTHER BENEFITS TO JUDGES STATIONED IN AND
ASSIGNED TO THE CITY?
II
CAN AN ADMINISTRATIVE CIRCULAR OR GUIDELINE SUCH AS LOCAL BUDGET
CIRCULAR NO. 55 RENDER INOPERATIVE THE POWER OF THE LEGISLATIVE BODY OF
A CITY BY SETTING A LIMIT TO THE EXTENT OF THE EXERCISE OF SUCH POWER?
III
HAS THE COMMISSION ON AUDIT CORRECTLY INTERPRETED LOCAL BUDGET
CIRCULAR NO. 55 TO INCLUDE MEMBERS OF THE JUDICIARY IN FIXING THE CEILING
OF ADDITIONAL ALLOWANCES AND BENEFITS TO BE PROVIDED TO JUDGES
STATIONED IN AND ASSIGNED
TO MANDAUE CITY BY THE CITY GOVERNMENT AT P1,000.00 PER MONTH
NOTWITHSTANDING THAT THEY HAVE BEEN RECEIVING ALLOWANCES OF P1,500.00
MONTHLY FOR THE PAST FIVE YEARS?
IV
IS LOCAL BUDGET CIRCULAR NO. 55 DATED MARCH 15, 1994 ISSUED BY THE
DEPARTMENT OF BUDGET AND MANAGEMENT VALID AND ENFORCEABLE
CONSIDERING THAT IT WAS NOT DULY PUBLISHED IN ACCODANCE WITH LAW?5
Petitioner judges argue that LBC 55 is void for infringing on the local autonomy of
Mandaue City by dictating a uniform amount that a local government unit can
disburse as additional allowances to judges stationed therein. They maintain that
said circular is not supported by any law and therefore goes beyond the supervisory
powers of the President. They further allege that said circular is void for lack of
publication.
On the other hand, the yearly appropriation ordinance providing for additional
allowances to judges is allowed by Section 458, par. (a)(1)[xi], of RA 7160, otherwise
known as the Local Government Code of 1991, which provides that:
Sec. 458. Powers, Duties, Functions and Compensation. (a) The sangguniang
panlungsod, as the legislative body of the city, shall enact ordinances, approve
resolutions and appropriate funds for the general welfare of the city and its
inhabitants pursuant to Section 16 of this Code and in the proper exercise of the
corporate powers of the city as provided for under Section 22 of this Code, and
shall:
(1) Approve ordinances and pass resolutions necessary for an efficient and effective
city government, and in this connection, shall:
xxx
xxx
xxx
(xi) When the finances of the city government allow, provide for additional
allowances and other benefits to judges, prosecutors, public elementary and high
school teachers, and other national government officials stationed in or assigned to
the city; (italics supplied)

Instead of filing a comment on behalf of respondent COA, the Solicitor General filed
a manifestation supporting the position of the petitioner judges. The Solicitor
General argues that (1) DBM only enjoys the power to review and determine
whether the disbursements of funds were made in accordance with the ordinance
passed by a local government unit while (2) the COA has no more than auditorial
visitation powers over local government units pursuant to Section 348 of RA 7160
which provides for the power to inspect at any time the financial accounts of local
government units.
Moreover, the Solicitor General opines that "the DBM and the respondent are only
authorized under RA 7160 to promulgate a Budget Operations Manual for local
government units, to improve and systematize methods, techniques and procedures
employed in budget preparation, authorization, execution and accountability"
pursuant to Section 354 of RA 7160. The Solicitor General points out that LBC 55
was not exercised under any of the aforementioned provisions.
Respondent COA, on the other hand, insists that the constitutional and statutory
authority of a city government to provide allowances to judges stationed therein is
not absolute. Congress may set limitations on the exercise of autonomy. It is for the
President, through the DBM, to check whether these legislative limitations are being
followed by the local government units.
One such law imposing a limitation on a local government unit's autonomy is
Section 458, par. (a) (1) [xi], of RA 7160, which authorizes the disbursement of
additional allowances and other benefits to judges subject to the condition that the
finances of the city government should allow the same. Thus, DBM is merely
enforcing the condition of the law when it sets a uniform maximum amount for the
additional allowances that a city government can release to judges stationed
therein.
Assuming arguendo that LBC 55 is void, respondent COA maintains that the
provisions of the yearly approved ordinance granting additional allowances to
judges are still prohibited by the appropriation laws passed by Congress every year.
COA argues that Mandaue City gets the funds for the said additional allowances of
judges from the Internal Revenue Allotment (IRA). But the General Appropriations
Acts of 1994 and 1995 do not mention the disbursement of additional allowances to
judges as one of the allowable uses of the IRA. Hence, the provisions of said
ordinance granting additional allowances, taken from the IRA, to herein petitioner
judges are void for being contrary to law.
To resolve the instant petition, there are two issues that we must address: (1)
whether LBC 55 of the DBM is void for going beyond the supervisory powers of the
President and for not having been published and (2) whether the yearly
appropriation ordinance enacted by the City of Mandaue that provides for additional
allowances to judges contravenes the annual appropriation laws enacted by
Congress.
We rule in favor of the petitioner judges.
On the first issue, we declare LBC 55 to be null and void.
We recognize that, although our Constitution6 guarantees autonomy to local
government units, the exercise of local autonomy remains subject to the power of
control by Congress and the power of supervision by the President. Section 4 of
Article X of the 1987 Philippine Constitution provides that:
Sec. 4. The President of the Philippines shall exercise general supervision over local
governments. x x x
In Pimentel vs. Aguirre7, we defined the supervisory power of the President and
distinguished it from the power of control exercised by Congress. Thus:
This provision (Section 4 of Article X of the 1987 Philippine Constitution) has been
interpreted to exclude the power of control. In Mondano v. Silvosa,i 5 the Court
contrasted the President's power of supervision over local government officials with
that of his power of control over executive officials of the national government. It

was emphasized that the two terms -- supervision and control -- differed in meaning
and extent. The Court distinguished them as follows:
"x x x In administrative law, supervision means overseeing or the power or authority
of an officer to see that subordinate officers perform their duties. If the latter fail or
neglect to fulfill them, the former may take such action or step as prescribed by law
to make them perform their duties. Control, on the other hand, means the power of
an officer to alter or modify or nullify or set aside what a subordinate officer ha[s]
done in the performance of his duties and to substitute the judgment of the former
for that of the latter."ii 6
In Taule v. Santos,iii 7 we further stated that the Chief Executive wielded no more
authority than that of checking whether local governments or their officials were
performing their duties as provided by the fundamental law and by statutes. He
cannot interfere with local governments, so long as they act within the scope of
their authority. "Supervisory power, when contrasted with control, is the power of
mere oversight over an inferior body; it does not include any restraining authority
over such body,"iv 8 we said.
In a more recent case, Drilon v. Lim,v 9 the difference between control and
supervision was further delineated. Officers in control lay down the rules in the
performance or accomplishment of an act. If these rules are not followed, they may,
in their discretion, order the act undone or redone by their subordinates or even
decide to do it themselves. On the other hand, supervision does not cover such
authority. Supervising officials merely see to it that the rules are followed, but they
themselves do not lay down such rules, nor do they have the discretion to modify or
replace them. If the rules are not observed, they may order the work done or
redone, but only to conform to such rules. They may not prescribe their own manner
of execution of the act. They have no discretion on this matter except to see to it
that the rules are followed.
Under our present system of government, executive power is vested in the
President.vi10 The members of the Cabinet and other executive officials are merely
alter egos. As such, they are subject to the power of control of the President, at
whose will and behest they can be removed from office; or their actions and
decisions changed, suspended or reversed.vii 11 In contrast, the heads of political
subdivisions are elected by the people. Their sovereign powers emanate from the
electorate, to whom they are directly accountable. By constitutional fiat, they are
subject to the President's supervision only, not control, so long as their acts are
exercised within the sphere of their legitimate powers. By the same token, the
President may not withhold or alter any authority or power given them by the
Constitution and the law.
Clearly then, the President can only interfere in the affairs and activities of a local
government unit if he or she finds that the latter has acted contrary to law. This is
the scope of the President's supervisory powers over local government units. Hence,
the President or any of his or her alter egos cannot interfere in local affairs as long
as the concerned local government unit acts within the parameters of the law and
the Constitution. Any directive therefore by the President or any of his or her alter
egos seeking to alter the wisdom of a law-conforming judgment on local affairs of a
local government unit is a patent nullity because it violates the principle of local
autonomy and separation of powers of the executive and legislative departments in
governing municipal corporations.
Does LBC 55 go beyond the law it seeks to implement? Yes.
LBC 55 provides that the additional monthly allowances to be given by a local
government unit should not exceedP1,000 in provinces and cities and P700 in
municipalities. Section 458, par. (a)(1)(xi), of RA 7160, the law that supposedly
serves as the legal basis of LBC 55, allows the grant of additional allowances to
judges "when the finances of the city government allow." The said provision does
not authorize setting a definite maximum limit to the additional allowances granted
to judges. Thus, we need not belabor the point that the finances of a city

government may allow the grant of additional allowances higher than P1,000 if the
revenues of the said city government exceed its annual expenditures. Thus, to
illustrate, a city government with locally generated annual revenues of P40 million
and expenditures of P35 million can afford to grant additional allowances of more
thanP1,000 each to, say, ten judges inasmuch as the finances of the city can afford
it.
Setting a uniform amount for the grant of additional allowances is an inappropriate
way of enforcing the criterion found in Section 458, par. (a)(1)(xi), of RA 7160. The
DBM over-stepped its power of supervision over local government units by imposing
a prohibition that did not correspond with the law it sought to implement. In other
words, the prohibitory nature of the circular had no legal basis.
Furthermore, LBC 55 is void on account of its lack of publication, in violation of our
ruling in Taada vs. Tuvera8where we held that:
xxx. Administrative rules and regulations must also be published if their purpose is
to enforce or implement existing law pursuant to a valid delegation.
Interpretative regulations and those merely internal in nature, that is, regulating
only the personnel of an administrative agency and the public, need not be
published. Neither is publication required of the so-called letters of instruction
issued by administrative superiors concerning the rules or guidelines to be followed
by their subordinates in the performance of their duties.
Respondent COA claims that publication is not required for LBC 55 inasmuch as it is
merely an interpretative regulation applicable to the personnel of an LGU. We
disagree. In De Jesus vs. Commission on Audit9 where we dealt with the same issue,
this Court declared void, for lack of publication, a DBM circular that disallowed
payment of allowances and other additional compensation to government officials
and employees. In refuting respondent COA's argument that said circular was
merely an internal regulation, we ruled that:
On the need for publication of subject DBM-CCC No. 10, we rule in the affirmative.
Following the doctrine enunciated in Taada v. Tuvera, publication in the Official
Gazette or in a newspaper of general circulation in the Philippines is required since
DBM-CCC No. 10 is in the nature of an administrative circular the purpose of which
is to enforce or implement an existing law. Stated differently, to be effective and
enforceable, DBM-CCC No. 10 must go through the requisite publication in the
Official Gazette or in a newspaper of general circulation in the Philippines.
In the present case under scrutiny, it is decisively clear that DBM-CCC No. 10, which
completely disallows payment of allowances and other additional compensation to
government officials and employees, starting November 1, 1989, is not a mere
interpretative or internal regulation. It is something more than that. And why not,
when it tends to deprive government workers of their allowance and additional
compensation sorely needed to keep body and soul together. At the very least,
before the said circular under attack may be permitted to substantially reduce their
income, the government officials and employees concerned should be apprised and
alerted by the publication of subject circular in the Official Gazette or in a
newspaper of general circulation in the Philippines to the end that they be given
amplest opportunity to voice out whatever opposition they may have, and to
ventilate their stance on the matter. This approach is more in keeping with
democratic precepts and rudiments of fairness and transparency. (emphasis
supplied)
In Philippine International Trading Corporation vs. Commission on Audit10, we again
declared the same circular as void, for lack of publication, despite the fact that it
was re-issued and then submitted for publication. Emphasizing the importance of
publication to the effectivity of a regulation, we therein held that:
It has come to our knowledge that DBM-CCC No. 10 has been re-issued in its
entirety and submitted for publication in the Official Gazette per letter to the
National Printing Office dated March 9, 1999. Would the subsequent publication

thereof cure the defect and retroact to the time that the abovementioned items
were disallowed in audit?
The answer is in the negative, precisely for the reason that publication is required as
a condition precedent to the effectivity of a law to inform the public of the contents
of the law or rules and regulations before their rights and interests are affected by
the same. From the time the COA disallowed the expenses in audit up to the filing of
herein petition the subject circular remained in legal limbo due to its nonpublication. As was stated in Taada v. Tuvera, "prior publication of laws before they
become effective cannot be dispensed with, for the reason that it would deny the
public knowledge of the laws that are supposed to govern it."11
We now resolve the second issue of whether the yearly appropriation ordinance
enacted by Mandaue City providing for fixed allowances for judges contravenes any
law and should therefore be struck down as null and void.
According to respondent COA, even if LBC 55 were void, the ordinances enacted by
Mandaue City granting additional allowances to the petitioner judges would "still
(be) bereft of legal basis for want of a lawful source of funds considering that the
IRA cannot be used for such purposes." Respondent COA showed that Mandaue
City's funds consisted of locally generated revenues and the IRA. From 1989 to
1995, Mandaue City's yearly expenditures exceeded its locally generated revenues,
thus resulting in a deficit. During all those years, it was the IRA that enabled
Mandaue City to incur a surplus. Respondent avers that Mandaue City used its IRA
to pay for said additional allowances and this violated paragraph 2 of the Special
Provisions, page 1060, of RA 7845 (The General Appropriations Act of 1995)12 and
paragraph 3 of the Special Provision, page 1225, of RA 7663 (The General
Appropriations Act of 1994)13 which specifically identified the objects of
expenditure of the IRA. Nowhere in said provisions of the two budgetary laws does it
say that the IRA can be used for additional allowances of judges. Respondent COA
thus argues that the provisions in the ordinance providing for such disbursement
are against the law, considering that the grant of the subject allowances is not
within the specified use allowed by the aforesaid yearly appropriations acts.
We disagree.
Respondent COA failed to prove that Mandaue City used the IRA to spend for the
additional allowances of the judges. There was no evidence submitted by COA
showing the breakdown of the expenses of the city government and the funds used
for said expenses. All the COA presented were the amounts expended, the locally
generated revenues, the deficit, the surplus and the IRA received each year. Aside
from these items, no data or figures were presented to show that Mandaue City
deducted the subject allowances from the IRA. In other words, just because
Mandaue City's locally generated revenues were not enough to cover its
expenditures, this did not mean that the additional allowances of petitioner judges
were taken from the IRA and not from the city's own revenues.
Moreover, the DBM neither conducted a formal review nor ordered a disapproval of
Mandaue City's appropriation ordinances, in accordance with the procedure outlined
by Sections 326 and 327 of RA 7160 which provide that:
Section 326. Review of Appropriation Ordinances of Provinces, Highly Urbanized
Cities, Independent Component Cities, and Municipalities within the Metropolitan
Manila Area. The Department of Budget and Management shall review ordinances
authorizing the annual or supplemental appropriations of provinces, highlyurbanized cities, independent component cities, and municipalities within the
Metropolitan Manila Area in accordance with the immediately succeeding Section.
Section 327. Review of Appropriation Ordinances of Component Cities and
Municipalities.- The sangguninang panlalawigan shall review the ordinance
authorizing annual or supplemental appropriations of component cities and
municipalities in the same manner and within the same period prescribed for the
review of other ordinances.

If within ninety (90) days from receipt of copies of such ordinance, the sangguniang
panlalawigan takes no action thereon, the same shall be deemed to have been
reviewed in accordance with law and shall continue to be in full force and effect.
(emphasis supplied)
Within 90 days from receipt of the copies of the appropriation ordinance, the DBM
should have taken positive action. Otherwise, such ordinance was deemed to have
been properly reviewed and
deemed to have taken effect. Inasmuch as, in the instant case, the DBM did not
follow the appropriate procedure for reviewing the subject ordinance of Mandaue
City and allowed the 90-day period to lapse, it can no longer question the legality of
the provisions in the said ordinance granting additional allowances to judges
stationed in the said city.
WHEREFORE, the petition is hereby GRANTED, and the assailed decision and
resolution, dated September 21, 1995 and May 28, 1996, respectively, of the
Commission on Audit are hereby set aside.
No costs.
SO ORDERED.
I.PUBLICATION & EFFECTIVITY OF LAW, WHICH LAWS MUST BE PUBLISHED,
WHICH NEED NOT
3. CAWAD V ABAD GR 207145
PERALTA, J.:
Before the Court is a petition for certiorari and prohibition under Rule 65 of the
Rules of Court filed by the officers and members of the Philippine Public Health
Association, Inc. (PPHAI) assailing the validity of Joint Circular No. 11 dated
November 29, 2012 of the Department of Budget and Management (DBM) and the
Department of Health (DOH) as well as Item
6.5 of the Joint Circular2 dated September 3, 2012 of the DBM and the Civil Service
Commission (CSC).
The antecedent facts are as follows:
On March 26, 1992, Republic Act (RA) No. 7305, otherwise known as The Magna
Carta of Public Health Workers was signed into law in order to promote the social
and economic well-being of health workers, their living and working conditions and
terms of employment, to develop their skills and capabilities to be better equipped
to deliver health projects and programs, and to encourage those with proper
qualifications and excellent abilities to join and remain in government service.3
Accordingly, public health workers (PHWs) were granted the following allowances
and benefits, among others:
Section 20. Additional Compensation. - Notwithstanding Section 12 of Republic Act
No. 6758, public health workers shall receive the following allowances: hazard
allowance, subsistence allowance, longevity pay, laundry allowance and remote
assignment allowance.
Section 21. Hazard Allowance. - Public health workers in hospitals, sanitaria, rural
health units, main health centers, health infirmaries, barangay health stations,
clinics and other health-related establishments located in difficult areas, strife-torn
or embattled areas, distressed or isolated stations, prisons camps, mental hospitals,
radiationexposed clinics, laboratories or disease-infested areas or in areas declared
under state of calamity or emergency for the duration thereof which expose them to
great danger, contagion, radiation, volcanic activity/eruption, occupational risks or
perils to life as determined by the Secretary of Health or the Head of the unit with

the approval of the Secretary of Health, shall be compensated hazard allowances

equivalent to at least twenty-five percent (25%) of the monthly basic salary of
health workers receiving salary grade 19 and below, and five percent (5%) for
health workers with salary grade 20 and above.
Section 22. Subsistence Allowance. - Public health workers who are required to
render service within the premises of hospitals, sanitaria, health infirmaries, main
health centers, rural health units and barangay health stations, or clinics, and other
health-related establishments in order to make their services available at any and
all times, shall be entitled to full subsistence allowance of three (3) meals which
may be computed in accordance with prevailing circumstances as determined by
the Secretary of Health in consultation with the Management-Health Worker's
Consultative Councils, as established under Section 33 of this Act: Provided, That
representation and travel allowance shall be given to rural health physicians as
enjoyed by municipal agriculturists, municipal planning and development officers
and budget officers.
Section 23. Longevity Pay. - A monthly longevity pay equivalent to five percent (5%)
of the monthly basic pay shall be paid to a health worker for every five (5) years of
continuous, efficient and meritorious services rendered as certified by the chief of
office concerned, commencing with the service after the approval of this Act.4
Pursuant to Section 355 of the Magna Carta, the Secretary of Health promulgated its
Implementing Rules and Regulations (IRR) in July 1992. Thereafter, in November
1999, the DOH, in collaboration with various government agencies and health
workers organizations, promulgated a Revised IRR consolidating all additional and
clarificatory rules issued by the former Secretaries of Health dating back from the
effectivity of the Magna Carta. The pertinent provisions of said Revised IRR provide:
6.3. Longevity Pay. A monthly longevity pay equivalent to five percent (5%) of the
present monthly basic pay shall be paid to public health workers for every five (5)
years of continuous, efficient and meritorious services rendered as certified by the
Head of Agency/Local Chief Executives commencing after the approval of the Act.
(April 17, 1992)
xxxx
7.1.1. Eligibility to Receive Hazard Pay. All public health workers covered under
RA 7305 are eligible to receive hazard pay when the nature of their work exposes
them to high risk/low risk hazards for at least fifty percent (50%) of their working
hours as determined and approved by the Secretary of Health or his authorized
representatives.
x
7.2.1. Eligibility for Subsistence Allowance
a. All public health workers covered under RA 7305 are eligible to receive full
subsistence allowance as long as they render actual duty.
b. Public Health Workers shall be entitled to full Subsistence Allowance of three (3)
meals which may be computed in accordance with prevailing circumstances as
determined by the Secretary of Health in consultation with the Management-Health
Workers Consultative Council, as established under Section 33 of the Act.
c. Those public health workers who are out of station shall be entitled to per diems
in place of Subsistence Allowance. Subsistence Allowance may also be commuted.
7.2.3 Rates of Subsistence Allowance
a. Subsistence allowance shall be implemented at not less than PhP50.00 per day
or PhP1,500.00 per month as certified by head of agency.
xxxx

d. Part-time public health workers/consultants are entitled to one-half (1/2) of the

prescribed rates received by full-time public health workers.6
On July 28, 2008, the Fourteenth Congress issued Joint Resolution No. 4, entitled
Joint Resolution Authorizing the President of the Philippines to Modify the
Compensation and Position Classification System of Civilian Personnel and the Base
Pay Schedule of Military and Uniformed Personnel in the Government, and for other
Purposes, approved by then President Gloria Macapagal-Arroyo on June 17, 2009,
which provided for certain amendments in the Magna Carta and its IRR.
On September 3, 2012, respondents DBM and CSC issued one of the two assailed
issuances, DBM-CSC Joint Circular No. 1, Series of 2012, to prescribe the rules on
the grant of Step Increments due to meritorious performance and Step Increment
due to length of service.7 Specifically, it provided that an official or employee
authorized to be granted Longevity Pay under an existing law is not eligible for the
grant of Step Increment due to length of service.8
Shortly thereafter, on November 29, 2012, respondents DBM and DOH then
circulated the other assailed issuance, DBM-DOH Joint Circular No. 1, Series of 2012,
the relevant provisions of which state:
7.0. Hazard Pay. Hazard pay is an additional compensation for performing
hazardous duties and for enduring physical hardships in the course of performance
of duties.
As a general compensation policy, and in line with Section 21 of R. A. No. 7305,
Hazard Pay may be granted to PHWs only if the nature of the duties and
responsibilities of their positions, their actual services, and location of work expose
them to great danger, occupational risks, perils of life, and physical hardships; and
only during periods of actual exposure to hazards and hardships.
8.3 The Subsistence Allowance shall be P50 for each day of actual full-time service,
or P25 for each day of actual part-time service.
xxxx
9.0 Longevity Pay (LP)
9.1 Pursuant to Section 23 of R. A. No. 7305, a PHW may be granted LP at 5% of
his/her current monthly basic salary, in recognition of every 5 years of continuous,
efficient, and meritorious services rendered as PHW. The grant thereof is based on
the following criteria:
9.1.1 The PHW holds a position in the agency plantilla of regular positions; and
9.1.2 He/She has rendered at least satisfactory performance and has not been
found guilty of any administrative or criminal case within all rating periods covered
by the 5-year period.
In a letter9 dated January 23, 2013 addressed to respondents Secretary of Budget
and Management and Secretary of Health, petitioners expressed their opposition to
the Joint Circular cited above on the ground that the same diminishes the benefits
granted by the Magna Carta to PHWs.
Unsatisfied, petitioners, on May 30, 2013, filed the instant petition raising the
following issues:
I. WHETHER RESPONDENTS ENRIQUE T. ONA AND FLORENCIO B. ABAD ACTED WITH
GRAVE ABUSE OF DISCRETION AND VIOLATED SUBSTANTIVE DUE PROCESS WHEN
THEY ISSUED DBM-DOH JOINT CIRCULAR NO. 1, S. 2012 WHICH:
A) MADE THE PAYMENT OF HAZARD PAY DEPENDENT ON THE ACTUAL DAYS OF
EXPOSURE TO THE RISK INVOLVED; B) ALLOWED PAYMENT OF SUBSISTENCE
ALLOWANCE AT P50 FOR EACH DAY OF ACTUAL FULL-TIME SERVICE OR P25 FOR
EACH DAY OF ACTUAL PART-TIME SERVICE WITHOUT CONSIDERATION OF THE
PREVAILING CIRCUMSTANCES AS DETERMINED BY THE SECRETARY OF HEALTH IN

CONSULTATION WITH THE MANAGEMENT HEALTH WORKERS CONSULTATIVE

COUNCILS; C) REQUIRED THAT LONGEVITY PAY BE GRANTED ONLY TO PHWs WHO
HOLD PLANTILLA AND REGULAR POSITIONS; AND
9 Annex C to Petition, rollo, pp. 125-127.
Decision
-6G.R. No.
207145
D) MADE THE JOINT CIRCULAR EFFECTIVE ON JANUARY 1, 2013, BARELY THREE (3)
DAYS AFTER IT WAS PUBLISHED IN A NEWSPAPER OF GENERAL CIRCULATION ON
DECEMBER 29, 2012, IN VIOLATION OF THE RULES ON PUBLICATION.
II. WHETHER RESPONDENTS FRANCISCO T. DUQUE AND FLORENCIO B. ABAD ACTED
WITH GRAVE ABUSE OF DISCRETION WHEN THEY ISSUED DBM-CSC JOINT CIRCULAR
NO. 1, S. 2012 DATED SEPTEMBER 2, 2012 WHICH PROVIDED THAT AN OFFICIAL OR
EMPLOYEE ENTITLED TO LONGEVITY PAY UNDER EXISTING LAW SHALL NO LONGER
BE GRANTED STEP INCREMENT DUE TO LENGTH OF SERVICE.
III. WHETHER RESPONDENTS ISSUANCE OF DBM-DOH JOINT CIRCULAR NO. 1, S.
2012 IS NULL AND VOID FOR BEING AN UNDUE EXERCISE OF LEGISLATIVE POWER
BY ADMINISTRATIVE BODIES WHEN RESPONDENT ONA ALLOWED RESPONDENT
ABAD TO SIGNIFICANTLY SHARE THE POWER TO FORMULATE AND PREPARE THE
NECESSARY RULES AND REGULATIONS TO IMPLEMENT THE PROVISIONS OF THE
MAGNA CARTA.
IV. WHETHER RESPONDENT ONA WAS REMISS IN IMPLEMENTING THE MANDATE OF
THE MAGNA CARTA WHEN HE DID NOT INCLUDE THE MAGNA CARTA BENEFITS IN
THE DEPARTMENTS YEARLY BUDGET.
V. WHETHER RESPONDENTS ISSUANCE OF DBM-DOH JOINT CIRCULAR NO. 1, S.
2012 IS NULL AND VOID FOR BEING AN UNDUE EXERCISE OF LEGISLATIVE POWER
BY ADMINISTRATIVE BODIES WHEN THE SAME WAS ISSUED SANS CONSULTATION
WITH PROFESSIONAL AND HEALTH WORKERS ORGANZATIONS AND UNIONS.
Petitioners contend that respondents acted with grave abuse of discretion when
they issued DBM-DOH Joint Circular No. 1, Series of 2012 and DBM-CSC Joint Circular
No. 1, Series of 2012 which prescribe certain requirements on the grant of benefits
that are not otherwise required by RA No. 7305. Specifically, petitioners assert that
the DBM-DOH Joint Circular grants the payment of Hazard Pay only if the nature of
the PHWs duties expose them to danger when RA No. 7305 does not make any
qualification. They likewise claim that said circular unduly fixes Subsistence
Allowance at P50 for each day of full-time service and P25 for part-time service
which are not in accordance with prevailing circumstances determined by the
Secretary of Health as required by RA No. 7305. Moreover, petitioners fault
respondents for the premature effectivity of the DBM-DOH Joint Circular
Decision
-7G.R. No.
207145
which they believe should have been on January 29, 2012 and not on January 1,
2012. As to the grant of Longevity Pay, petitioners posit that the same was
wrongfully granted only to PHWs holding regular plantilla positions. Petitioners
likewise criticize the DBM-CSC Joint Circular insofar as it withheld the Step
Increment due to length of service from those who are already being granted
Longevity Pay. As a result, petitioners claim that the subject circulars are void for
being an undue exercise of legislative power by administrative bodies.
In their Comment, respondents, through the Solicitor General, refute petitioners
allegations in stating that the assailed circulars were issued within the scope of their
authority, and are therefore valid and binding. They also assert the authority of Joint

Resolution No. 4, Series of 2009, approved by the President, in accordance with the
prescribed procedure. Moreover, respondents question the remedies of Certiorari
and Prohibition used by petitioners for the assailed circulars were done in the
exercise of their quasilegislative, and not of their judicial or quasi-judicial functions.
The petition is partly meritorious.
At the outset, the petition for certiorari and prohibition filed by petitioners is not the
appropriate remedy to assail the validity of respondents circulars. Sections 1 and 2
of Rule 65 of the Rules of Court provide:
RULE 65 CERTIORARI, PROHIBITION AND MANDAMUS
Section 1. Petition for certiorari. - When any tribunal, board or officer exercising
judicial or quasi-judicial functions has acted without or in excess of its or his
jurisdiction, or with grave abuse of discretion amounting to lack or excess of
jurisdiction, and there is no appeal, or any plain, speedy, and adequate remedy in
the ordinary course of law, a person aggrieved thereby may file a verified petition in
the proper court, alleging the facts with certainty and praying that judgment be
rendered annulling or modifying the proceedings of such tribunal, board or officer,
and granting such incidental reliefs as law and justice may require.
xxxx
Sec. 2. Petition for Prohibition. - When the proceedings of any tribunal, corporation,
board, officer or person, whether exercising judicial, quasi-judicial or ministerial
functions, are without or in excess of its jurisdiction, or with grave abuse of
discretion amounting to lack or excess of jurisdiction, and there is no appeal or any
other plain, speedy, and adequate remedy in the ordinary course of law, a person
aggrieved thereby may file a verified petition in the proper court, alleging the facts
with certainty and praying that judgment be rendered commanding the respondent
to desist from further proceedings in the action or matter specified therein, or
otherwise granting such incidental reliefs as law and justice may require.10
Thus, on the one hand, certiorari as a special civil action is available only if:
(1) it is directed against a tribunal, board, or officer exercising judicial or quasijudicial functions; (2) the tribunal, board, or officer acted without or in excess of
jurisdiction or with grave abuse of discretion amounting to lack or excess of
jurisdiction; and (3) there is no appeal nor any plain, speedy, and adequate remedy
in the ordinary course of law.11
On the other hand, prohibition is available only if: (1) it is directed against a
tribunal, corporation, board, officer, or person exercising functions, judicial, quasijudicial, or ministerial; (2) the tribunal, corporation, board or person acted without
or in excess of its jurisdiction, or with grave abuse of discretion amounting to lack or
excess of jurisdiction; and (3) there is no appeal or any other plain, speedy, and
adequate remedy in the ordinary course of law.12 Based on the foregoing, this
Court has consistently reiterated that petitions for certiorari and prohibition may be
invoked only against tribunals, corporations, boards, officers, or persons exercising
judicial, quasi-judicial or ministerial functions, and not against their exercise of
legislative or quasi-legislative functions.13
Judicial functions involve the power to determine what the law is and what
the legal rights of the parties are, and then undertaking to determine these
questions and adjudicate upon the rights of the parties.14 Quasijudicial functions
apply to the actions and discretion of public administrative officers or bodies
required to investigate facts, hold hearings, and draw conclusions from them as a
basis for their official action, in their exercise of discretion of a judicial nature.15
Ministerial functions are those which an officer or tribunal performs in the context of

a given set of facts, in a prescribed manner and without regard to the exercise of his
own judgment upon the propriety or impropriety of the act done.16
Before a tribunal, board, or officer may exercise judicial or quasijudicial acts,
it is necessary that there be a law that gives rise to some specific rights under
which adverse claims are made, and the controversy ensuing therefrom is brought
before a tribunal, board, or officer clothed with authority to determine the law and
adjudicate the respective rights of the contending parties.17
In this case, respondents did not act in any judicial, quasi-judicial, or
ministerial capacity in their issuance of the assailed joint circulars. In issuing and
implementing the subject circulars, respondents were not called upon to adjudicate
the rights of contending parties to exercise, in any manner, discretion of a judicial
nature. The issuance and enforcement by the Secretaries of the DBM, CSC and DOH
of the questioned joint circulars were done in the exercise of their quasi-legislative
and administrative functions. It was in the nature of subordinate legislation,
promulgated by them in their exercise of delegated power. Quasi-legislative power
is exercised by administrative agencies through the promulgation of rules and
regulations within the confines of the granting statute and the doctrine of nondelegation of powers from the separation of the branches of the government.18
Based on the foregoing, certiorari and prohibition do not lie against herein
respondents issuances. It is beyond the province of certiorari to declare the
aforesaid administrative issuances illegal because petitions for certiorari seek solely
to correct defects in jurisdiction, and not to correct just any error committed by a
court, board, or officer exercising judicial or quasijudicial functions unless such
court, board, or officer thereby acts without or in excess of jurisdiction or with such
grave abuse of discretion amounting to lack of jurisdiction.19
It is likewise beyond the territory of a writ of prohibition since generally, the
purpose of the same is to keep a lower court within the limits of its jurisdiction in
order to maintain the administration of justice in orderly channels. It affords relief
against usurpation of jurisdiction by an inferior court, or when, in the exercise of
jurisdiction, the inferior court transgresses the bounds prescribed by the law, or
where there is no adequate remedy available in the ordinary course of law.20
Be that as it may, We proceed to discuss the substantive issues raised in the
petition in order to finally resolve the doubt over the Joint Circulars validity. For
proper guidance, the pressing issue of whether or not the joint circulars regulating
the salaries and benefits relied upon by public health workers were tainted with
grave abuse of discretion rightly deserves its prompt resolution.
With respect to the infirmities of the DBM-DOH Joint Circular raised in the
petition, they cannot be said to have been issued with grave abuse of discretion for
not only are they reasonable, they were likewise issued well within the scope of
authority granted to the respondents. In fact, as may be gathered from prior
issuances on the matter, the circular did not make any substantial deviation
therefrom, but actually remained consistent with, and germane to, the purposes of
the law.
First, the qualification imposed by the DBM-DOH Joint Circular granting the
payment of Hazard Pay only if the nature of PHWs duties expose them to danger
and depending on whether the risk involved is high or low was merely derived from
Section 7.1.1 of the Revised IRR of RA No. 7305, duly promulgated by the DOH in
collaboration with various government health agencies and health workers
organizations in November 1999, to wit:

SECTION 7.1.1. Eligibility to Receive Hazard Pay. All public health workers covered
under RA 7305 are eligible to receive hazard pay when the nature of their work
exposes them to high risk/low risk hazards for at least fifty percent (50%) of their
working hours as determined and approved by the Secretary of Health or his
authorized representatives.21
Second, fixing the Subsistence Allowance at P50 for each day of fulltime service and
P25 for part-time service was also merely a reiteration of the limits prescribed by
the Revised IRR, validly issued by the Secretary of Health pursuant to Section 3522
of RA No. 7305, the pertinent portions of which states:
Section 7.2.3 Rates of Subsistence Allowance
a. Subsistence allowance shall be implemented at not less than PhP50.00 per day
or PhP1,500.00 per month as certified by head of agency.
d. Part-time public health workers/consultants are entitled to one-half (1/2) of the
prescribed rates received by full-time public health workers.
Third, the condition imposed by the DBM-DOH Joint Circular granting longevity pay
only to those PHWs holding regular plantilla positions merely implements the
qualification imposed by the Revised IRR which provides:
6.3. Longevity Pay. A monthly longevity pay equivalent to five percent (5%) of the
present monthly basic pay shall be paid to public health workers for every five (5)
years of continuous, efficient and meritorious services rendered as certified by the
Head of Agency/Local Chief Executives commencing after the approval of the Act.
(April 17, 1992)
6.3.1. Criteria for Efficient and Meritorious Service A Public Worker shall have:
a. At least a satisfactory performance rating within the rating period. b. Not been
found guilty of any administrative or criminal case within the rating period.
As can be gleaned from the aforequoted provision, petitioners failed to show any
real inconsistency in granting longevity pay to PHWs holding regular plantilla
positions. Not only are they based on the same premise, but the intent of longevity
pay, which is paid to workers for every five (5) years of continuous, efficient and
meritorious services, necessarily coincides with that of regularization. Thus, the
assailed circular cannot be invalidated for its issuance is consistent with, and
germane to, the purposes of the law.
Anent petitioners contention that the DBM-DOH Joint Circular is null and void for its
failure to comply with Section 3523 of RA No. 7305 providing that its implementing
rules shall take effect thirty (30) days after publication in a newspaper of general
circulation, as well as its failure to file a copy of the same with the University of the
Philippines Law Center-Office of the National Administrative Register (UP Law
Center-ONAR), jurisprudence as well as the circumstances of this case dictate
otherwise.
Indeed, publication, as a basic postulate of procedural due process, is required by
law
in
order
for
administrative
rules
and
regulations
to
be
23 Section 35. Rules and Regulations. - The Secretary of Health after consultation
with appropriate agencies of the Government as well as professional and health
workers' organizations or unions, shall formulate and prepare the necessary rules
and regulations to implement the provisions of this Act. Rules and regulations issued
pursuant to this Section shall take effect thirty (30) days after publication in a
newspaper of general circulation. (Emphasis ours)
Decision
- 12 G.R. No.
207145

effective.24 There are, however, several exceptions, one of which are interpretative
regulations which need nothing further than their bare issuance for they give no
real consequence more than what the law itself has already prescribed.25 These
regulations need not be published for they add nothing to the law and do not affect
substantial rights of any person.26
Thus, in Association of Southern Tagalog Electric Cooperatives, et. al. v. Energy
Regulatory Commission (ERC),27 wherein several orders issued by the ERC were
sought to be invalidated for lack of publication and nonsubmission of copies thereof
to the UP Law Center - ONAR, it has been held that since they merely interpret RA
No. 7832 and its IRR, particularly on the computation of the cost of purchased
power, without modifying, amending or supplanting the same, they cannot be
rendered ineffective, to wit:
When the policy guidelines of the ERC directed the exclusion of discounts
extended by power suppliers in the computation of the cost of purchased power, the
guidelines merely affirmed the plain and unambiguous meaning of "cost" in Section
5, Rule IX of the IRR of R.A. No. 7832. "Cost" is an item of outlay, and must therefore
exclude discounts since these are "not amounts paid or charged for the sale of
electricity, but are reductions in rates.
xxxx
Thus, the policy guidelines of the ERC on the treatment of discounts extended
by power suppliers "give no real consequence more than what the law itself has
already prescribed." Publication is not necessary for the effectivity of the policy
guidelines.
As interpretative regulations, the policy guidelines of the ERC on the
treatment of discounts extended by power suppliers are also not required to be filed
with the U.P. Law Center in order to be effective. Section 4, Chapter 2, Book VII of
the Administrative Code of 1987 requires every rule adopted by an agency to be
filed with the U.P. Law Center to be effective. However, in Board of Trustees of the
Government Service Insurance System v. Velasco, this Court pronounced that "not
all rules and regulations adopted by every government agency are to be filed with
the UP Law Center." Interpretative regulations and those merely internal in nature
are not required to be filed with the U.P. Law Center. Paragraph 9 (a) of the
Guidelines for Receiving and Publication of Rules and Regulations FileD w/ UP. 9.
Rules and Regulations which need not be filed with the U.P. Law Center, shall,
among others, include but not be limited to, the following:
a. Those which are interpretative regulations and those merely internal in nature,
that is, regulating only the personnel of the Administrative agency and not the
public.
xxxx
Furthermore, the policy guidelines of the ERC did not create a new obligation and
impose a new duty, nor did it attach a new disability. As previously discussed, the
policy guidelines merely interpret R.A. No. 7832 and its IRR, particularly on the
computation of the cost of purchased power. The policy guidelines did not modify,
amend or supplant the IRR.
Similarly, in Republic v. Drugmakers Laboratories, Inc.,28 the validity of circulars
issued by the Food and Drug Administration (FDA) was upheld in spite of the noncompliance with the publication, prior hearing, and consultation requirements for
they merely implemented the provisions of Administrative Order No. 67, entitled
Revised Rules and Regulations on Registration of Pharmaceutical Products issued
by the DOH, in the following wise:

A careful scrutiny of the foregoing issuances would reveal that AO 67, s. 1989 is
actually the rule that originally introduced the BA/BE testing requirement as a
component of applications for the issuance of CPRs covering certain pharmaceutical
products. As such, it is considered an administrative regulation a legislative rule to
be exact issued by the Secretary of Health in consonance with the express
authority granted to him by RA 3720 to implement the statutory mandate that all
drugs and devices should first be registered with the FDA prior to their manufacture
and sale. Considering that neither party contested the validity of its issuance, the
Court deems that AO 67, s. 1989 complied with the requirements of prior hearing,
notice, and publication pursuant to the presumption of regularity accorded to the
government in the exercise of its official duties.42
On the other hand, Circular Nos. 1 and 8, s. 1997 cannot be considered as
administrative regulations because they do not: (a) implement a primary legislation
by providing the details thereof; (b) interpret, clarify, or explain existing statutory
regulations under which the FDA operates; and/or (c) ascertain the existence of
certain facts or things upon which the enforcement of RA 3720 depends. In fact, the
only purpose of these circulars is for the FDA to administer and supervise the
implementation of the provisions of AO 67, s. 1989, including those covering the
BA/BE testing requirement, consistent with and pursuant to RA 3720.43 Therefore,
the FDA has sufficient authority to issue the said circulars and since they would not
affect the substantive rights of the parties that they seek to govern as they are
not, strictly speaking, administrative regulations in the first place no prior hearing,
consultation, and publication are needed for their validity.
In this case, the DBM-DOH Joint Circular in question gives no real
consequence more than what the law itself had already prescribed. As previously
discussed, the qualification of actual exposure to danger for the PHWs entitlement
to hazard pay, the rates of P50 and P25 subsistence allowance, and the entitlement
to longevity pay on the basis of PHWs status in the plantilla of regular positions
were already prescribed and authorized by pre-existing law. There is really no new
obligation or duty imposed by the subject circular for it merely reiterated those
embodied in RA No. 7305 and its Revised IRR. The Joint Circular did not modify,
amend nor supplant the Revised IRR, the validity of which is undisputed.
Consequently, whether it was duly published and filed with the UP Law Center
ONAR is necessarily immaterial to its validity because in view of the
pronouncements above, interpretative regulations, such as the DBM-DOH circular
herein, need not be published nor filed with the UP Law Center ONAR in order to
be effective. Neither is prior hearing or consultation mandatory.
Nevertheless, it bears stressing that in spite of the immateriality of the
publication requirement in this case, and even assuming the necessity of the same,
its basic objective in informing the public of the contents of the law was sufficiently
accomplished when the DBM-DOH Joint Circular was published in the Philippine Star,
a newspaper of general circulation, on December 29, 2012.29
As to petitioners allegation of grave abuse of discretion on the part of respondent
DOH Secretary in failing to include the Magna Carta benefits in his departments
yearly budget, the same is belied by the fact that petitioners themselves specifically
provided in their petition an account of the amounts allocated for the same in the
years 2012 and 2013.30
Based on the foregoing, it must be recalled that administrative regulations,
such as the DBM-DOH Joint Circular herein, enacted by administrative agencies to

implement and interpret the law they are entrusted to enforce are entitled to great
respect.31 They partake of the nature of a statute and are just as binding as if they
have been written in the statute itself. As such, administrative regulations have the
force and effect of law and enjoy the presumption of legality. Unless and until they
are overcome by sufficient evidence showing that they exceeded the bounds of the
law,32 their validity and legality must be upheld.
Thus, notwithstanding the contention that the Joint Resolution No. 4 promulgated by
Congress cannot be a proper source of delegated power, the subject Circular was
nevertheless issued well within the scope of authority granted to the respondents.
The issue in this case is not whether the Joint Resolution No. 4 can become law and,
consequently, authorize the issuance of the regulation in question, but whether the
circular can be struck down as invalid for being tainted with grave abuse of
discretion. Regardless, therefore, of the validity or invalidity of Joint Resolution No.
4, the DBMDOH Joint Circular assailed herein cannot be said to have been arbitrarily
or capriciously issued for being consistent with prior issuances duly promulgated
pursuant to valid and binding law.
Distinction must be made, however, with respect to the DBM-CSC Joint Circular, the
contested provision of which states:
6.5 An official or employee authorized to be granted Longevity Pay under an
existing law is not eligible for the grant of Step Increment Due to Length of Service.
A review of RA No. 7305 and its Revised IRR reveals that the law does not
similarly impose such condition on the grant of longevity pay to PHWs in the
government service. As such, the DBM-CSC Joint Circular effectively created a new
imposition which was not otherwise stipulated in the law it sought to interpret.
Consequently, the same exception granted to the DBM-DOH Joint Circular cannot be
applied to the DBM-CSC Joint Circular insofar as the requirements on publication and
submission with the UP Law Center ONAR are concerned. Thus, while it was well
within the authority of the respondents to issue rules regulating the grant of step
increments as provided by RA No. 6758, otherwise known as the Compensation and
Position Classification Act of 1989, which pertinently states:
Section 13. Pay Adjustments. - Paragraphs (b) and (c), Section 15 of
Presidential Decree No. 985 are hereby amended to read as follows:
xxxx
(c) Step Increments - Effective January 1, 1990 step increments shall be granted
based on merit and/or length of service in accordance with rules and regulations
that will be promulgated jointly by the DBM and the Civil Service Commission, and
while it was duly published in the Philippine Star, a newspaper of general
circulation, on September 15, 2012,33 the DBM-CSC Joint Circular remains
unenforceable for the failure of respondents to file the same with the UP Law Center
ONAR.34
Moreover, insofar as the DBM-DOH Joint Circular similarly withholds the Step
Increment due to length of service from those who are already being granted
Longevity Pay, the same must likewise be declared unenforceable.35
Note also that the DBM-DOH Joint Circular must further be invalidated insofar
as it lowers the hazard pay at rates below the minimum prescribed by Section 21 of
RA No. 7305 and Section 7.1.5 (a) of its Revised IRR as follows:
SEC. 21. Hazard Allowance. - Public health worker in hospitals, sanitaria, rural
health units, main centers, health infirmaries, barangay health stations, clinics and
other health-related establishments located in difficult areas, strife-torn or
embattled areas, distresses or isolated stations, prisons camps, mental hospitals,

radiation-exposed clinics, laboratories or disease-infested areas or in areas declared

under state of calamity or emergency for the duration thereof which expose them to
great danger, contagion, radiation, volcanic activity/eruption occupational risks or
perils to life as determined by the Secretary of Health or the Head of the unit with
the approval of the Secretary of Health, shall be compensated hazard allowance
equivalent to at least twenty-five percent (25%) of the monthly basic salary of
health workers receiving salary grade 19 and below, and five percent (5%) for
health workers with salary grade 20 and above.
7.1.5. Rates of Hazard Pay
a. Public health workers shall be compensated hazard allowances equivalent to at
least twenty five (25%) of the monthly basic salary of health workers, receiving
salary grade 19 and below, and five percent (5%) for health workers with salary
grade 20 and above. This may be granted on a monthly, quarterly or annual basis.
It is evident from the foregoing provisions that the rates of hazard pay must be at
least 25% of the basic monthly salary of PWHs receiving salary grade 19 and below,
and 5% receiving salary grade 20 and above. As such, RA No. 7305 and its
implementing rules noticeably prescribe the minimum rates of hazard pay due all
PHWs in the government, as is clear in the selfexplanatory phrase "at least" used in
both the law and the rules.36 Thus, the following rates embodied in Section 7.2 of
DBM-DOH Joint Circular must be struck down as invalid for being contrary to the
mandate of RA No. 7305 and its Revised IRR:
7.2.l For PHWs whose positions are at SG-19 and below, Hazard Pay shall be based
on the degree of exposure to high risk or low risk hazards, as specified in sub-items
7 .1.1 and 7 .1.2 above, and the number of workdays of actual exposure over 22
workdays in a month, at rates not to exceed 25% of monthly basic salary. In case of
exposure to both high risk and low risk hazards, the Hazard Pay for the month shall
be based on only one risk level, whichever is more advantageous to the PHW.
7.2.2 PHWs whose positions are at SG-20 and above may be entitled to Hazard Pay
at 5% of their monthly basic salaries for all days of exposure to high risk and/or low
risk hazards. However, those exposed to high risk hazards for 12 or more days in a
month may be entitled to a fixed amount of P4,989.75 per month.
WHEREFORE, premises considered, the instant petition is PARTLY GRANTED. The
DBM-DOH Joint Circular, insofar as it lowers the hazard pay at rates below the
minimum prescribed by Section 21 of RA No. 7305 and Section 7.1.5 (a) of its
Revised IRR, is declared INVALID. The DBM-CSC Joint Circular, insofar as it provides
that an official or employee authorized to be granted Longevity Pay under an
existing law is not eligible for the grant of Step Increment Due to Length of Service,
is declared UNENFORCEABLE. The validity, however, of the DBM-DOH Joint Circular
as to the qualification of actual exposure to danger for the PHW's entitlement to
hazard pay, the rates of P50 and P25 subsistence allowance, and the entitlement to
longevity pay on the basis of the PHW' s status in the plantilla of regular positions, is
UPHELD.
SO ORDERED.

II. MANDATORY EFFECTS OF LAWS; MISTAKE OF FACT VS MISTAKE OF LAW ; NON

RETROACTIVITY OF LAWS
4.LIAM LAW V OLYMPIC SAWMILL GR L307771
MELENCIO-HERRERA, J.:
This is an appeal by defendants from a Decision rendered by the then Court of First
Instance of Bulacan. The appeal was originally taken to the then Court of Appeals,
which endorsed it to this instance stating that the issue involved was one of law.
It appears that on or about September 7, 1957, plaintiff loaned P10,000.00, without
interest, to defendant partnership and defendant Elino Lee Chi, as the managing
partner. The loan became ultimately due on January 31, 1960, but was not paid on
that date, with the debtors asking for an extension of three months, or up to April
30, 1960.
On March 17, 1960, the parties executed another loan document. Payment of the
P10,000.00 was extended to April 30, 1960, but the obligation was increased by
P6,000.00 as follows:
That the sum of SIX THOUSAND PESOS (P6,000.00), Philippine currency shall form
part of the principal obligation to answer for attorney's fees, legal interest, and
other cost incident thereto to be paid unto the creditor and his successors in
interest upon the termination of this agreement.
Defendants again failed to pay their obligation by April 30, 1960 and, on September
23, 1960, plaintiff instituted this collection case. Defendants admitted the
P10,000.00 principal obligation, but claimed that the additional P6,000.00
constituted usurious interest.
Upon application of plaintiff, the Trial Court issued, on the same date of September
23, 1960, a writ of Attachment on real and personal properties of defendants
located at Karanglan, Nueva Ecija. After the Writ of Attachment was implemented,
proceedings before the Trial Court versed principally in regards to the attachment.
On January 18, 1961, an Order was issued by the Trial Court stating that "after
considering the manifestation of both counsel in Chambers, the Court hereby allows
both parties to simultaneously submit a Motion for Summary Judgment. 1 The
plaintiff filed his Motion for Summary Judgment on January 31, 1961, while
defendants filed theirs on February 2, 196l. 2
On June 26, 1961, the Trial Court rendered decision ordering defendants to pay
plaintiff "the amount of P10,000.00 plus the further sum of P6,000.00 by way of
liquidated damages . . . with legal rate of interest on both amounts from April 30,
1960." It is from this judgment that defendants have appealed.
We have decided to affirm.
Under Article 1354 of the Civil Code, in regards to the agreement of the parties
relative to the P6,000.00 obligation, "it is presumed that it exists and is lawful,
unless the debtor proves the contrary". No evidentiary hearing having been held, it
has to be concluded that defendants had not proven that the P6,000.00 obligation
was illegal. Confirming the Trial Court's finding, we view the P6,000.00 obligation as

liquidated damages suffered by plaintiff, as of March 17, 1960, representing loss of

interest income, attorney's fees and incidentals.
The main thrust of defendants' appeal is the allegation in their Answer that the
P6,000.00 constituted usurious interest. They insist the claim of usury should have
been deemed admitted by plaintiff as it was "not denied specifically and under
oath". 3
Section 9 of the Usury Law (Act 2655) provided:
SEC. 9. The person or corporation sued shall file its answer in writing under oath to
any complaint brought or filed against said person or corporation before a
competent court to recover the money or other personal or real property, seeds or
agricultural products, charged or received in violation of the provisions of this Act.
The lack of taking an oath to an answer to a complaint will mean the admission of
the facts contained in the latter.
The foregoing provision envisages a complaint filed against an entity which has
committed usury, for the recovery of the usurious interest paid. In that case, if the
entity sued shall not file its answer under oath denying the allegation of usury, the
defendant shall be deemed to have admitted the usury. The provision does not
apply to a case, as in the present, where it is the defendant, not the plaintiff, who is
alleging usury.
Moreover, for sometime now, usury has been legally non-existent. Interest can now
be charged as lender and borrower may agree upon. 4 The Rules of Court in regards
to allegations of usury, procedural in nature, should be considered repealed with
retroactive effect.
Statutes regulating the procedure of the courts will be construed as applicable to
actions pending and undetermined at the time of their passage. Procedural laws are
retrospective in that sense and to that extent. 5
... Section 24(d), Republic Act No. 876, known as the Arbitration Law, which took
effect on 19 December 1953, and may be retroactively applied to the case at bar
because it is procedural in nature. ... 6
WHEREFORE, the appealed judgment is hereby affirmed, without pronouncement as
to costs.
SO ORDERED.

II. MANDATORY EFFECTS OF LAWS; MISTAKE OF FACT VS MISTAKE OF LAW ; NON

RETROACTIVITY OF LAWS
4. SEC VS LAIGO GR 188639
In this petition for certiorari1 under Rule 65 of the Rules of Court, petitioner Securities and Exchange
Commission (SEC), through the Office of the Solicitor General (OSG), assails the June 26, 2009 Order 2 (June
26, 2009 Order) issued by respondent Judge Reynaldo M. Laigo (Judge Laigo) of the Regional Trial Court,
Branch 56, Makati City (RTC), in Sp. Proc. No. M-6758, 3 a petition for involuntary insolvency of Legacy
Consolidated Plans, Incorporated (Legacy), ordering the inclusion of the trust fund in its corporate assets to
the prejudice of the planholders.
Factual Antecedents
Republic Act (R.A.) No. 8799, otherwise known as the Securities Regulation Code (SRC), specifically Section
16 thereof, mandated the Securities and Exchange Commission (SEC) to prescribe rules and regulations
governing the pre-need industry. Pursuant thereto, the SEC issued the correspondingNew Rules on the
4

Registration and Sale of Pre-Need Plans (New Rules) to govern the pre-need industry prior to the
enactment of R.A. No. 9829, otherwise known as the Pre-need Code of the Philippines (Pre-Need Code).
It required from the pre-need providers the creation of trust funds as a requirement for registration.
As defined in Rule 1.9 of the New Rules, " 'Trust Fund' means a fund set up from planholders' payments,
separate and distinct from the paid-up capital of a registered pre-need company, established with a trustee
under a trust agreement approved by the SEC, to pay for the benefits as provided in the pre-need plan."
Legacy, being a pre-need provider, complied with the trust fund requirement and entered into a trust agreement with
the Land Bank of the Philippines (IBP).
In mid-2000, the industry collapsed for a range of reasons. Legacy, like the others, was unable to pay its obligations
to the planholders.
This resulted in Legacy being the subject of a petition for involuntary insolvency filed on February 18, 2009 by
private respondents in their capacity as planholders. Through its manifestation filed in the RTC, Legacy did not object
5

to the proceedings. Accordingly, it was declared insolvent by the RTC in its Order, dated April 27, 2009. The trial
court also ordered Legacy to submit an inventory of its assets and liabilities pursuant to Sections 15 and 16 of Act
6

No. 1956, otherwise known as the Insolvency Law, the applicable bankruptcy law at that time.
On May 15, 2009, the RTC ordered the SEC, being the pre-need industry's regulator, to submit the documents
pertaining to Legacy's assets and liabilities.
In its Manifestation with Evaluation, dated June 10, 2009, the SEC opposed the inclusion of the trust fund in the
inventory of corporate assets on the ground that to do so would contravene the New Rules which treated trust funds
as principally established for the exclusive purpose of guaranteeing the delivery of benefits due to the planholders. It
was of the position that the inclusion of the trust fund in the insolvent's estate and its being opened to claims by
non-planholders would contravene the purpose for its establishment.
On June 26, 2009, despite the opposition of the SEC, Judge Laigo ordered the insolvency Assignee, Gener T.
Mendoza (Assignee) to take possession of the trust fund. Judge Laigo viewed the trust fund as Legacy's corporate
assets and, for said reason, included it in the insolvent's estate. Thus:
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WHEREFORE,

the

Court

rules

as

follows:

ChanRoblesvirtualLawlibrary

1. Directing the afore-named banks to report to Assignee, Gener T. Mendoza, whose address is at c/o GNCA

Holdings, Inc., Unit 322, 3/F, LRI design Center, 210 Nicanor Garcia St., Makati City, the total funds as of today
deposited to the insolvent debtor's respective Trust Funds, within five (5) days from receipt of this Order.
2. Subject funds can be withdrawn by the Assignee only upon Order of the Court for distribution among the creditors
who have officially filed their valid claims with this Court, and for all the expenses to be incurred by the Assignee in
the
course
of
the
discharge
of
his
duties
and
responsibilities
as
such
Assignee.
3. Stopping the Securities and Exchange Commission (SEC) from further validating the claims of planholders (now
creditors) pertaining to their pre-need plans.
xxx xxx xxx
SO ORDERED.7
The RTC stated that the trust fund could be withdrawn by the Assignee to be used for the expenses he would incur in
the discharge of his functions and to be distributed among the creditors who had officially filed their valid claims with
the court.

The Present Petition

Intent on protecting the interest of the investing public and securing the trust fund exclusively for the planholders,
the SEC filed "this present recourse directly to this Honorable Court in accordance with Section 5 (1), Article VIII of
the 1987 Constitution for the reason that the matters involve an issue oftranscendental importance to numerous
hard-working Filipinos who had invested their lifetime savings and hard-earned money in Legacy, hoping that
through this pre-need company they will be able to fulfill their dreams of providing a bright future for their
children."8
The SEC's Position
In essence, the SEC contends that Judge Laigo gravely abused his discretion in treating the trust fund as part of the
insolvency estate of Legacy. It argues that the trust fund should redound exclusively to the benefit of the
planholders, who are the ultimate beneficial owners; that the trust fund is held, managed and administered by the
trustee bank to address and answer the claims against the pre-need company by all its planholders and/or
beneficiaries; that to consider the said fund as corporate assets is to open the floodgates to creditors of Legacy other
than the planholders; and that, in issuing the order, Judge Laigo effectively allowed non-planholders to reach the
trust fund in patent violation of the New Rules established to protect the pre-need investors.
9

In its Memorandum, the SEC stressed that the setting-up of the trust funds effectively created a demarcation line
between the claims of planholders vis-a-vis those of the other creditors of Legacy; that Legacy's interest over the
trust properties was only by virtue of it being a trustor and not the owner; and that the SEC was authorized to
validate claims of planholders in the exercise of its power as regulator of pre-need corporations.
Further, the SEC is of the position that Section 52 of the Pre-Need Code
procedural in character.

10

should be given retroactive effect for being

Thus, the SEC raises the following

ISSUES
I.
Whether or not the Trust Funds of Legacy form part of its Corporate Assets.
II.
Whether or not respondent Trial Court Judge committed grave abuse of discretion amounting to lack or
excess of jurisdiction in issuing the herein assailed Order dated June 26, 2009.
III.
Whether or not the claims of planholders are to be treated differently from the claims of other creditors
of Legacy.
IV.
Whether or not Legacy retains ownership over the trust funds assets despite the execution of trust
agreements.
V.

Whether or not the insolvency court, presided by respondent Trial Court Judge, has the authority to
enjoin petitioner SEC from further validating the claims of Legacy's planholders and treating them as if
they are ordinary creditors of Legacy.
VI.
Whether or not the provision of the Pre-need Code regarding liquidation is in the nature of a procedural
law that can be retroactively applied to the case at bar.11
Private Respondents 'position
12

In their Comment/Opposition, the private respondents, Glicera Ayad, Sahlee Delos Reyes and Antonio P. Huerte, Jr.
(private respondents), submit that nothing in the New Rules expressly provided that the trust fund is excluded from
the inventory of corporate assets which is required to be submitted to the insolvency court; that the SEC's
interference in the insolvency proceedings is incongruous to the legal system; and that under the provisions of the
Insolvency Law, all claims, including those against the trust funds should be filed in the liquidation
13

proceedings. Hence, private respondents assert that no grave abuse of discretion was committed by Judge Laigo in
issuing the June 26, 2009 Order.
The Assignee's Position
14

15

In his separate Comments on Petition and Memorandum, the Assignee contends that the trust fund forms part of
Legacy's corporate assets for the following reasons: first, the insolvency court has jurisdiction over all the claims
against the insolvent and the trust fund forms part of the company's corporate assets. It cited Abrera v. College
16

Assurance Plan, where the Court held that claims arising from pre-need contracts should not be treated separately
from other claims against a pre-need company. As such, the claims over the trust fund, being claims against Legacy,
are necessarily lodged with the insolvency court. Second, the setting up of the trust fund is a mere scheme to attain
an administrative end, that is, the assurance that the benefits will be delivered under the pre-need contracts.
Considering that Legacy is the debtor as regards such benefits, it is only through it, or through the insolvency court,
that the assets including the trust fund can be distributed to satisfy valid claims. Third, though the trustee banks
hold legal title over the funds, the real parties-in-interest are the pre-need companies as the terms of the trust
agreement between Legacy and LBP (as trustee) show this intent.
The Assignee also submits that no law authorized the SEC to interfere in the insolvency proceedings because its
authority under the SRC is only to regulate the sale of pre-need plans and not to regulate the management of trust
funds.
In sum, the Assignee interprets the June 26, 2009 Order in this wise: that the creditors, planholders or not, should
first line up and file valid claims with the insolvency court and not get entangled in the validation process of the SEC;
and that once the planholders have qualified, they will be given preference in the distribution of the trust assets.
Moreover, he proposes that if the trust fund assets will not be enough to satisfy all claims, the planholders can still
join other claimants and participate in the distribution of the other assets of the pre-need company.

17
cralawrednad

From the foregoing, the Court is called to determine whether Judge Laigo gravely abused his discretion in:

1.

Including the trust properties in the insolvent's estate; and

2.

Prohibiting the SEC from validating the claims filed by the planholders against the trust fund.

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The Court's Ruling

The overarching consideration in the legislative mandate to establish trust funds is the protection of the interest of
the planholders in the investment plans. The SRC provides in no uncertain terms the intent to make such interests
paramount above all else. Thus, it directed the SEC to come up with rules and regulations to govern not only trust
funds but the industry as a whole. Pursuant to its mandate and delegated authority, the SEC came out with the New
Rules, which the Congress later on toughened through the enactment of the Pre-Need Code, carrying similar
protection but far more detailed in scope.
It is in this context that this Court rules to grant the petition filed by the SEC. The Court finds that Judge Laigo
gravely abused his discretion in treating the trust fund as assets that form part of Legacy's insolvency estate and in

enjoining the SEC's validation of the planholders' claims against the trust properties.
The Trust Fund is for the sole benefit
of the planholders and cannot be used to
satisfy the claims of other creditors of Legacy
Section 30 of the Pre-Need Code clearly provides that the proceeds of trust funds shall redound solely to the
planholders. Section 30 reads:
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Trust Fund
SECTION 30. Trust Fund. To ensure the delivery of the guaranteed benefits and services provided under a preneed plan contract, a trust fund per pre-need plan category shall be established. A portion of the installment
payment collected shall be deposited by the pre-need company in the trust fund, the amount of which will be as
determined by the actuary based on the viability study of the pre-need plan approved by the Commission. Assets in
the trust fund shall at all times remain for the sole benefit of the planholders . At no time shall any part of
the trust fund be used for or diverted to any purpose other than for the exclusive benefit of the planholders. In no
case shall the trust fund assets be used to satisfy claims of other creditors of the pre-need company . The
provision of any law to the contrary notwithstanding, in case of insolvency of the pre-need company, the general
creditors
shall
not
be
entitled
to
the
trust
fund.
Except for the payment of the cost of benefits or services, the termination values payable to the planholders, the
insurance premium payments for insurance-funded benefits of memorial life plans and other costs necessary to
ensure the delivery of benefits or services to planholders, no withdrawal shall be made from the trust fund unless
approved by the Commission. The benefits received by the planholders shall be exempt from all taxes and the trust
fund shall not be held liable for attachment, garnishment, levy or seizure by or under any legal or equitable
processes except to pay for the debt of the planholder to the benefit plan or that arising from criminal liability
imposed in a criminal action.
[Emphases Supplied]
The Assignee argues that Legacy has retained a beneficial interest in the trust fund despite the execution of the trust
agreement and that the properties can be the subject of insolvency proceedings. In this regard, the Assignee calls
the Court's attention to the trust agreement provisions which supposedly refer to the interest of Legacy in the trust
properties, to wit:
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The TRUSTEE hereby undertakes to perform the functions and duties of a TRUSTEE provided for in this Agreement
with the utmost good faith, care and prudence required by a fiduciary relation, being understood, however, that the
COMPANY shall be solely and exclusive (sic) responsible for (1) fulfilling the services referred to in the recital
clauses, (ii) the settlement/payment of claims of any person or firm availing of such services , (iii) compliance with all
laws and governmental regulations on pre-need plans, and (iv) submission of other data or information as may be
prescribed by the Commission.
xxx
xxx the Trustee shall from time to time on the written directions of the Company make payments out of the Trust
Fund to the Company. To the extent permitted by law, the Trustee shall be under no liability for any payment made
pursuant to the direction of the Company. Any written direction of the Company shall constitute a certification that
the distribution of payment so directed is one which the Company is authorized to direct. From time to time and
when directed in writing by the Company, the Trustee shall pay monies from the Trust Fund in amounts equal to the
outstanding amount of the Trust Fund at any given time to defray the Company's obligations to the Planholders
under its pre-need plan contract and provided further that the company shall be reimbursed by the Trustee from the
Trust Fund for whatever amounts it has advanced to its beneficiaries. 18 [Italics supplied]
To the Assignee, these "control" mechanisms are indicative of the interest of Legacy in the enforcement of the trust
fund because the agreement gives it the power to dictate on LBP the fulfillment of the trust, such as the delivery of
monies to it to facilitate the payment to the planholders.
The Court, however, sees it differently.
In the course of delving into the complex relationships created by the agreement and the existing regulatory
framework, this Court finds that Legacy's claimed interest in the enforcement of the trust and in the trust properties
is mere apparent than real. Legacy is not a beneficiary.
First, it must be stressed that a person is considered as a beneficiary of a trust if there is a manifest intention to give
such a person the beneficial interest over the trust properties.

19

This is the considered opinion expressed in the

Restatement of the Law of Trust (Restatement)

20

which Justice Vicente Abad Santos has described in his contribution

21

to the Philippine Law Journal as containing the more salient principles, doctrines and rules on the subject. Here,
the terms of the trust agreement plainly confer the status of beneficiary to the planholders, not to Legacy. In the
recital clauses of the said agreement, Legacy bound itself to provide for the sound, prudent and efficient
management and administration of such portion of the collection "for the benefit and account of the
planholders,"

22

through LBP (as the trustee).

This categorical declaration doubtless indicates that the intention of the trustor is to make the planholders the
beneficiaries of the trust properties, and not Legacy. It is clear that because the beneficial ownership is vested in the
planholders and the legal ownership in the trustee, LBP, Legacy, as trustor, is left without any iota of interest in the
trust fund. This is consistent with the nature of a trust arrangement, whereby there is a separation of interests in the
subject matter of the trust, the beneficiary having an equitable interest, and the trustee having an interest which is
normally legal interest.

23

cralawrednad

Second, considering the fact that a mandated pre-need trust is one imbued with public interest, the issue on who the
beneficiary is must be determined on the basis of the entire regulatory framework. Under the New Rules, it is
unmistakable that the beneficial interest over the trust properties is with the planholders. Rule 16.3 of the New Rules
provides that : [n]o withdrawal shall be made from the trust fund except for paying the benefits such as monetary
consideration, the cost of services rendered or property delivered, trust fees, bank charges and investment expenses
in the operation of the trust fund, termination values payable to the planholders, annuities, contributions of
cancelled plans to the fund and taxes on trust funds.
Rule 17.1 also states that to ensure the liquidity of the trust fund to guarantee the delivery of the benefits provided
for under the plan contract and to obtain sufficient capital growth to meet the growing actuarial reserve liabilities, all
investments of the trust fund shall be limited to Fixed Income Instruments, Mutual Funds, Equities, and Real Estate,
subject to certain limitations.
Further, Rule 20.1 directs the trustee to exercise due diligence for the protection of the planholders guided by sound
investment principles in the exclusive management and control over the funds and its right, at any time, to sell,
convert, invest, change, transfer, or otherwise change or dispose of the assets comprising the funds. All these
certainly underscore the importance of the planholders being recognized as the ultimate beneficiaries of the SECmandated trust.
This consistently runs in accord with the legislative intent laid down in Chapter IV of R.A. No. 8799, or the SRC,
which provides for the establishment of trust funds for the payment of benefits under such plans. Section 16
of the SRC provides:
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SEC. 16. Pre-Need Plans. - No person shall sell or offer for sale to the public any pre-need plan except in accordance
with rules and regulations which the Commission shall prescribe. Such rules shall regulate the sale of preneed plans by, among other things, requiring the registration of pre-need plans, licensing persons involved in the
sale of pre-need plans, requiring disclosures to prospective plan holders, prescribing advertising guidelines, providing
for uniform accounting system, reports and record keeping with respect to such plans, imposing capital, bonding and
other financial responsibility, and establishing trust funds for the payment of benefits under such plans. [ Emphasis
supplied]
It is clear from Section 16 that the underlying congressional intent is to make the planholders the exclusive
beneficiaries. It has been said that what is within the spirit is within the law even if it is not within the letter of the
24

law because the spirit prevails over the letter.

cralawre dnad

25

This will by the legislature was fortified with the enactment of R.A. No. 9829 or the Pre-Need Code in 2009.
The
Congress, because of the chaos confounding the industry at the time, considered it necessary to provide a stronger
legal framework so that no entity could claim that the mandate and delegated authority of the SEC under the SRC
was nebulous. The Pre-Need Code cemented the regulatory framework governing the pre-need industry with precise
specifics to ensure that the rights of the pre-need planholders would be categorically defined and protected. Similar
provisions in the Pre-Need Code are the following:
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SECTION 32. Terms and Conditions of a Trust Fund. A trust fund must be established separately for each
type of pre-need plan with the trust department of a trust company, bank or investment house doing business in the
Philippines. No trust fund shall be established by a pre-need company with an affiliate trust entity subject to Section
38
hereof.
The trust agreement shall be submitted to the Commission for approval before execution and shall contain the
following
salient
provisions,
among
others:

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(a)

The

manner

in

which

the

trust

fund

is

to

be

operated;

(b) Investment powers of the trustee with respect to trust deposits, including the character and kind of investment;
(c)

Auditing

(d)

and

Basis

(e)

settlement
upon

of
which

Provisions

for

(f) That the trustee shall

accounts

of

the

the

trustee

trust

with

respect

fund

withdrawals

may

from

the

to

the
be

trust

fund;

terminated;

trust

fund;

submit to the power of the Commission to examine and verify the trust fund;

(g) An undertaking by the trustee that it shall abide by the rules and regulations of the Commission with respect to
the
trust
fund;
and
(h) An undertaking by the trustee that it shall submit such other data or information as may be prescribed by the
Commission.
SECTION

33.

Responsibilities

of

the

Trustee.

The

trustee

shall:

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(a) Administer and manage the trust fund with utmost good faith, care and prudence required by a fiduciary
relationship;
(b) The trustee shall have the exclusive management and control over the funds and the right at any time to sell,
convert, invest, change, transfer or otherwise change or dispose of the assets comprising the funds within the
parameters prescribed by the pre-need company and provided these parameters are compliant with the
Commission's
regulations;
and
(c) Not use the trust fund to invest in or extend any loan or credit accommodation to the pre-need company, its
directors, officers, stockholders, and related interests as well as to persons or enterprises controlling, owned or
controlled by, or under common control with said company, its directors, officers, stockholders and related
interests
except
for
entities
which
are
direct
providers
of
pre-need
companies.
SECTION 34. Investment of the Trust Fund. To ensure the liquidity of the trust fund to guarantee the delivery
of the benefits provided for under the plan contract and likewise obtain sufficient capital growth to meet the growing
actuarial reserve liabilities, all investments of the trust fund/s of a pre-need company shall be limited to the following
and
subject
to
limitations,
to
wit:

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(a) Fixed income instruments. These maybe classified into short-term and long-term instruments. The instrument
is short- term if the maturity period is three hundred sixty-five (365) days or less. This category includes:

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(1)

Government securities which shall not be less than ten percent (10%) of the trust fund amount;

(2) Savings/time deposits and unit investment trust funds maintained with and managed by a duly authorized bank
with
satisfactory
examination
rating
as
of
the
last
examination
by
the
BSP;
(3) Commercial papers duly registered with the SEC with a credit rating of "1" for short-term and "AAA" for longterm based on the rating scale of an accredited Philippine Rating Agency or its equivalent at the time of investment.
The maximum exposure to long-term commercial papers shall not exceed fifteen percent (15%) of the total trust
fund amount while the exposure to each commercial paper issuer shall not exceed ten percent (10%) of the
allocated
amount;
and
(4) Direct loans to corporations which are financially stable, profitable for the last three (3) years and have a good
track
record
of
paying
their
previous
loans.
These loans shall be fully secured by a real estate mortgage up to the extent of sixty percent (60%) of the zonal
valuation
of
the
property
at
the
time
the
loan
was
granted.
The property shall be covered by a transfer certificate of title registered in the name of the mortgagor and free from
liens
and
encumbrances.
The maximum amount to be allocated for direct loans shall not exceed five percent (5%) of the total trust fund
amount while the amount to be granted to each corporate borrower shall not exceed ten percent (10%) of the
amount
allocated.
The

maximum

term

of

the

loan

should

be

no

longer

than

four

(4)

years.

Direct loans to planholders are exempt from the limitations set forth under this section: Provided, That such loans to

planholders

shall

not

exceed

ten

percent

(10%)

of

the

total

trust

fund

amount.

(b) Equities. Investments in equities shall be limited to stocks listed on the main board of a local stock exchange.
Investments in duly registered collective investment instruments such as mutual funds are allowed hereunder:
Provided, That such funds are invested only in fixed income instruments and blue chips securities, subject to the
limitations
prescribed
by
laws,
rules
and
regulations.
These investments shall include stocks issued by companies that are financially stable, actively traded, possess good
track record of growth and have declared dividends for the past three (3) years. Notwithstanding the prohibition
against transactions with directors, officers, stockholders and related interests, the trustee may invest in equities of
companies related to the trustee provided these companies comply with the foregoing criteria provided in this
paragraph
forEQUITY
INVESTMENTS .
The amount to be allocated for this purpose shall not exceed thirty percent (30%) of the total trust fund while the
investment in any particular issue shall not exceed ten percent (10%) of the allocated amount. The investment shall
be
recorded
at
the
aggregate
of
the
lower
of
cost
or
market.
Existing investments which are not in accordance herewith shall be disposed of within three (3) years from the
effectivity
of
this
Act.
(c) Real Estate. These shall include real estate properties located in strategic areas of cities and first class
municipalities. The transfer certificate of title (TCT) shall be in the name of the seller, free from liens and
encumbrances and shall be transferred in the name of the trustee in trust for the planholders unless the
seller/transferor is the pre-need company wherein an annotation to the TCT relative to the sale/transfer may be
allowed.
It
shall
be
recorded
at
acquisition
cost.
However, the real estate shall be appraised every three (3) years by a licensed real estate appraiser, accredited by
the Philippine Association of Real Estate Appraisers, to reflect the increase or decrease in the value of the property.
In case the appraisal would result in an increase in the value, only sixty percent (60%) of the appraisal increase is
allowed to be recorded in the books of the trust fund but in case of decline in value, the entire decline shall be
recorded. Appraisal increment should not be used to cover up the required monthly contribution to the trust fund.
The total recorded value of the real estate investment shall not exceed ten percent (10%) of the total trust fund
amount of the pre-need company. In the event that the existing real estate investment exceeds the aforesaid limit,
the same shall be leveled off to the prescribed limit within three (3) years from the effectivity of this Code.
Investment of the trust fund, which is not in accordance with the preceding paragraphs, shall not be allowed unless
the prior written approval of the Commission had been secured: Provided, further, That no deposit or investment in
any single entity shall exceed fifteen percent (15%) of the total value of the trust fund: Provided, finally, That the
Commission is authorized to adjust the percentage allocation per category set forth herein not in excess of two
percentage (2%) points upward or downward and no oftener than once every five (5) years. The first adjustment
hereunder may be made no earlier than five (5) years from the effectivity of this Act. The pre-need company shall
not use the trust fund to extend any loan to or to invest in its directors, stockholders, officers or its affiliates.
xxx
SECTION 36. Trust Fund Deficiencies. Upon approval by the Commission of the pre-need reserve computation
submitted in the preceding section, any deficiency in the trust fund, when compared to the reserve liabilities as
reported in the pre-need reserve valuation report, shall be funded by the pre-need company within sixty (60) days
from such approval. Failure to cover the deficiency in an appropriate manner within the time required shall subject
the pre-need company to the payment of a penalty, in addition to other remedies exercisable by the Commission, as
provided for in this Code. Any excess of the trust fund over the actuarial reserve liabilities may be credited to future
deposit
requirements.
SECTION 37. Liquidity Reserve. The trustee shall at all times maintain a liquidity reserve which shall be
sufficient to cover at least fifteen percent (15%) of the trust fund but in no case less than one hundred twenty-five
percent (125%) of the amount of the availing plans for the succeeding year. For this purpose, the pre-need company
shall timely submit to the trustee a summary of benefits payable for the succeeding year.
The

following

shall

qualify

as

investments

for

the

liquidity

reserve:

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(a) Loans secured by a hold-out on assignment or pledge deposits maintained either with the trustee or other banks,
or of deposit substitute of the trustee itself or mortgage and chattel mortgage bonds issued by the trustee;
(b) Treasury notes or bills, other government securities or bonds, and such other evidences or indebtedness or
obligations the servicing and repayment of which are fully guaranteed by the Republic of the Philippines;
(c) Repurchase agreements with any of those mentioned in Item "b" above, as underlying instruments thereof; and

(d)

Savings

or

time

deposits

with

government-owned

banks

or

commercial

banks.

SECTION 38. Trustees. Upon approval of the Commission or when the Commission requires for the protection of
planholders, the pre-need company shall entrust the management and administration of the trust fund to any
reputable bank's trust department, trust company or any entity authorized to perform trust functions in the
Philippines: Provided, That no director and/or officer of the pre-need company shall at the same time serve as
director and/or officer of the affiliate or related trust entity: Provided, further, That no trust fund shall be established
by a pre-need company with a subsidiary, affiliate or related trust entity. However, such may be allowed: Provided,
That
the
following
conditions
are
complied
with:

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(a)

written

approval

of

the

Commission

has

been

previously

obtained;

and

(b) Public disclosure of the affiliation with the trust entity be included in all materials in whatever form.
The Commission shall have the authority to prescribe appropriate rules that shall ensure that the yield of the trust
fund is maximized, consistent with the requirements of safety and liquidity.
[Italics Supplied]
"Under the principle of legislative approval of administrative interpretation by re-enactment, the re-enactment of a
statute, substantially unchanged (as in this case), is persuasive indication of the adoption by Congress of a prior
26

executive construction." Accordingly, where a statute is susceptible of the meaning placed upon it by a ruling of
the government agency charged with its enforcement and the legislature thereafter reenacts the provisions without
substantial change, such action is to some extent confirmatory that the ruling carries out the legislative purpose.

27
cralawrednad

The Court cannot go against that legislative intent for it is the duty of this institution to read what the law intends. It
is a cardinal rule that, in seeking the meaning of the law, the first concern of the judge should be to discover in its
provisions the intent of the lawmaker. Unquestionably, the law should never be interpreted in such a way as to cause
injustice as this is never within the legislative intent. An indispensable part of that intent, in fact, for we presume the
good motives of the legislature, is to render justice.

28

cralawrednad

To rule that Legacy has retained a beneficial interest in the trust fund is to perpetuate the injustices being committed
against the planholders and violate not only the spirit of the trust agreement but, more importantly, the lawmaker's
intent. If indeed Legacy had an interest that could be reached by its creditors even during insolvency, the
planholders would be prejudiced as they would be forced to share in the assets that would be distributed pro rata to
all creditors, whether planholders or not. It would contradict the very purpose for which the trust was mandated by
the Congress in the first place.
Third, the perceived interest of Legacy, as touted by the Assignee, has simply no basis. It may appear that Legacy
under the agreement has control over the enforcement of the trust because of its provisions stating that Legacy shall
"solely and exclusively] [be] responsible for fulfilling the services referred to in the recital clauses and the
settlement/payment of claims of any person or firm availing of such services" and that "[a]ny written direction of the
Company [to the trustee] shall constitute a certification that the distribution of payment so directed is one which the
Company is authorized to direct"29 Such provisions, however, cannot be construed as Legacy having retained a
beneficial interest in the trust fund.
To begin with, the aforestated provisions refer solely to the delivery of the proceeds of the trust from LBP to Legacy
and then finally to the beneficiaries. In effect, Legacy merely agreed to facilitate the payment of the benefits
from the trust fund to the intended beneficiaries, acting as a conduit or an agent of the trustee in the
enforcement of the trust agreement. Under the general principles of trust, a trustee, by the terms of the
agreement may be permitted to delegate to agents or to co-trustees or to other persons the
administration of the trust or the performance of act which could not otherwise be properly
30

delegated. Thus, by the terms of the trust, as in this case, a trustee may be authorized or permit an agent to do
acts such as the delivery of the benefits out of the trust fund.
The Court cannot subscribe either to the Assignee's position that Legacy is a debtor of the planholders relative to the
trust fund. In trust, it is the trustee, and not the trustor, who owes fiduciary duty to the beneficiary. The Restatement
is clear on this point. Section 170 thereof provides that the "trustee is under a duty to the beneficiary to administer
the trust solely in the interest of the beneficiary."
32

income to the beneficiary.

31

Section 182 also states that the duty of a trustee is to pay

Thus, LBP is tasked with the fiduciary duty to act for the benefit of the planholders as to
33

matters within the scope of the relation. Like a debtor, LBP owes the planholders the amounts due from the trust
fund. As to the planholders, as creditors, they can rightfully use equitable remedies against the trustee for the
protection of their interest in the trust fund and, in particular, their right to demand the payment of what is due them
from the fund. Verily, Legacy is out of the picture and exists only as a representative of the trustee, LBP, with the
limited role of facilitating the delivery of the benefits of the trust fund to the beneficiaries -the planholders. The trust

fund should not revert to Legacy, which has no beneficial interest over it. Not being an asset of Legacy, the trust
fund is immune from its reach and cannot be included by the RTC in the insolvency estate.
In the end, the failure of Judge Laigo to consider the provisions of the SRC, the New Rules and the law on trusts,
that should have warranted the exclusion of the trust fund from the insolvency estate of Legacy, constituted grave
abuse of discretion. In treating the trust fund as forming part of Legacy's insolvency estate, Judge Laigo acted
against what was contemplated by law. He turned a blind eye to the will of the Congress as expressed through the
SRC and the Pre-Need Code. In the process, he endangered the claims of the planholders by allowing the probability
that they would be drastically reduced or dissipated. He should have acted prudently bearing in mind that the
establishment of the trust was precisely for the exclusive benefit of the planholders.
Enjoining the SEC from validating the
claims against the trust fund is grave
abuse of discretion for the insolvency
court has no authority to order the
reversion of properties that do not
form part of Legacy's insolvent estate.
34

The Assignee cited Abrera v. College Assurance Plan (Abrera), where the Court held that claims covered by
rehabilitation proceedings before the RTC should include all claims or demands of whatever nature or character
against a debtor or its property. At the heart of the Assignee's argument is that because the authority is with the
RTC, the SEC has no right to interfere in the insolvency proceedings.
It is an error for the Assignee to assume that the authority of the RTC extends to the claims against the trust fund.
Claims against the trust fund must be distinguished from claims against Legacy. The claims against the trust fund
are directed not against Legacy, but against LBP, the trustee, being the debtor relative to the trust properties.
The Pre-Need Code is clear on this. It recognizes the distinction between claims against the pre-need company and
those against the trust fund. Section 52 (b) states that liquidation "proceedings in court shall
proceed independently of proceedings in the Commission for the liquidation of claims, andcreditors of the preneed company shall have no personality whatsoever in the Commission proceedings to litigate their
claims against the trust funds." The reason why claims against the trust funds can proceed independently of the
proceedings in the courts is the fact that the latter is directed against a different person or entity.
Moreover, the Assignee must be reminded that the issue in Abrera is not similar to the question raised here by the
SEC. In the case at bench, the SEC questions the propriety of including the trust fund in the inventory of Legacy's
corporate assets.
Jurisdiction over claims filed
against the trust fund
From the effectivity of the Pre-Need Code, it is the Insurance Commission (IC) that "shall have the primary and
35

exclusive power to adjudicate any and all claims involving pre-need plans." The transitory provisions of the
Pre-Need Code, however, provide that "[notwithstanding any provision to the contrary, all pending
claims, complaints and cases (referring to pre-need contract and trust claims) filed with the SEC shall be
continued in its full and final conclusion."

36

cralawre dnad

The Pre-Need Code recognizes that the jurisdiction over pending claims against the trust funds prior to its effectivity
is vested with the SEC. Such authority can be easily discerned even from the provisions of the SRC. Section 4
thereof provides that despite the transfer of jurisdiction

37

to the RTC of those matters enumerated under Section 5

38

of P.D. No. 902-A, the SEC remains authorized to "exercise such other powers as may be provided by law as well
as those which may be implied from, or which are necessary or incidental to the carrying out of, the express
39

powers granted the Commission to achieve the objectives and purposes of these laws."
Section 36.5 (b) of the SRC which states that:

40

Relevant thereto is

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The Commission may, having due regard to the public interest or the protection of investors, regulate, supervise,
examine, suspend or otherwise discontinue such and other similar funds under such rules and regulations which the
Commission may promulgate, and which may include taking custody and management of the fund itself as well as
investments in, and disbursements from, the funds under such forms of control and supervision by the Commission
as it may from time to time require. The authority granted to the Commission under this subsection shall also apply
to all funds established for the protection of investors (which necessarily includes the trust funds), whether
established by the Commission or otherwise.41
Concomitantly, under the New Rules, the SEC "may, at its discretion, demand for the conversion to cash or other
near cash assets of the investments made by the Trustee to protect the interest of the Planholders."

42

Therefore, even prior to the transfer to the IC of matters pertaining to pre-need plans and trust funds, the SEC had
authority to regulate, manage, and hear all claims involving trust fund assets, if in its discretion, public interest so
required. Accordingly, all claims against the trust funds, which have been pending before it, are clearly within the
SEC's authority to rule upon.
Pre-Need Code is curative and
remedial in character and, therefore,
can be applied retroactively
Finally, it must be stressed that the primary protection accorded by the Pre-Need Code to the planholders is curative
and remedial and, therefore, can be applied retroactively. The rule is that where the provisions of a statute clarify an
existing law and do not contemplate a change in that law, the statute may be given curative, remedial and
retroactive effect.
certain evils.

44

43

To review, curative statutes are those enacted to cure defects, abridge superfluities, and curb

As stressed by the Court in Fabian v. Desierto,

45
cralawre dnad

If the rule takes away a vested right, it is not procedural. If the rule creates a right such as the right to appeal, it
may be clarified as a substantive matter; but if it operates as a means of implementing an existing right then
the rule deals merely with procedure.
[Emphasis Supplied]
A reading of the Pre-Need Code immediately shows that its provisions operate merely in furtherance of the remedy
or confirmation of the right of the planholders to exclusively claim against the trust funds as intended by the
legislature. No new substantive right was created or bestowed upon the planholders. Section 52 of the Pre-Need
Code only echoes and clarifies the SRC's intent to exclude from the insolvency proceeding trust fund assets that have
been established "exclusively for the benefit of planholders." It was precisely enacted to foil the tactic of taking
undue advantage of any ambiguities in the New Rules.
Any doubt or reservation in this regard has been dispelled by the Pre-Need Code. Section 57 thereof provides that
"[a]ny pre-need company who, at the time of the effectivitv of this Code has been registered and licensed to
sell pre-need plans and similar contracts, shall be considered registered and licensed under the
provision of this Code and its implementing rules and regulations and shall be subject to and governed
by the provisions hereof xxx." Thus, Legacy and all other existing pre-need companies cannot claim that the
provisions of the Pre-Need Code are not applicable to them and to the claims which accrued prior to the enactment
of the said law.
"[I]t has been said that a remedial statute must be so construed as to make it effect the evident purpose for which it
was enacted, so that if the reason of the statute extends to past transactions, as well as to those in the future, then
it will be so applied although the statute does not in terms so direct:46 With the Pre-Need Code having the attribute
of a remedial statute, Legacy and all pre-need providers or their creditors cannot argue that it cannot be
retroactively applied.

Conclusion
In sum, improvidently ordering the inclusion of the trust fund in Legacy's insolvency estate without regard to
the avowed state policy of protecting the consumer of pre-need plans, as laid down in the SRC, the New
Rules, and the Pre-Need Code, constitutes grave abuse of discretion. The RTC should have known, and ought
to know, the overarching consideration the Congress intended in requiring the establishment of trust funds to uphold first and foremost the interest of the planholders.
The Court upholds its duty to protect the ordinary Filipino workers who are seeking a future for their children
through pre-need contracts. Their incredibly long wait is over as this is the moment when their rightful and
exclusive right to the trust funds, created primarily for them, is judicially respected and affirmed.
WHEREFORE, the petition is GRANTED. The June 26, 2009 Order of the Regional Trial Court, Branch 56,
Makati City, is declared NULL and VOID.
The Securities and Exchange Commission is directed to process the claims of legitimate planholders with
dispatch.
SO ORDERED.

III. MANDATORY & PROHIBITORY LAWS

5. UOBP V BOARD OF COMMISSIONERS GR 182133
6.

8.

DECISION

7. PERALTA, J.:
Before this Court is a Petition for Review on Certiorari under Rule 45 of the Rules of Court, assailing the
Decision1 and Resolution2 of the Court of Appeals (CA), dated February 27, 2006 and March 5, 2008,
respectively, in CAG.R.SP No. 86401.
The antecedents are as follows:

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Respondent J.O.S. Managing Builders, Inc. (JOS Managing Builders) is the registered owner and developer of
the condominium project Aurora Milestone Tower. On December 16, 1997, JOS Managing Builders and
respondent EDUPLAN Philippines, Inc. (EDUPLAN) entered into a Contract to Sell covering Condominium Unit
E, 10th Floor of the Aurora Milestone Tower with an area of 149.72 square meters, more or less. In August
1998, EDUPLAN effected full payment, and in December 1998, JOS Managing Builders and EDUPLAN
executed a Deed of Absolute Sale over the condominium unit. Notwithstanding the execution of the deed of
sale in favor of EDUPLAN, JOS Managing Builders failed to cause the issuance of a Condominium Certificate
of Title over the condominium unit in the name of EDUPLAN. EDUPLAN learned that the lots on which the
condominium building project Aurora Milestone Tower was erected had been mortgaged by JOS Managing
Builders to petitioner United Overseas Bank of the Philippines (United Overseas Bank) without the prior
written approval of the Housing and Land Use Regulatory Board (HLURB). Due to the inability of JOS
Managing Builders to deliver the condominium certificate of title covering the unit purchased by EDUPLAN,
the latter filed a complaint for specific performance and damages against JOS Managing Builders and United
Overseas Bank before the HLURB praying that: (a) the mortgage between JOS Managing Builders and United
Overseas Bank be declared null and void; (b) JOS Managing Builders and United Overseas Bank be
compelled to cause the issuance and release of the Condominium Certificate of Title; and (c) JOS Managing
Builders be ordered to provide emergency power facilities, to refund the monthly telephone carrier charges,
and to permanently cease and desist from further collecting such charges.
In its defense, JOS Managing Builders alleged that it could not issue an individual Condominium Certificate
of Title in favor of EDUPLAN, because petitioner United Overseas Bank has custody of the Transfer
Certificates of Title covering the condominium building.
United Overseas Bank, on the other hand, alleged that JOS Managing Builders is the owner of several
parcels of land covered by Transfer Certificate of Title (TCT) Nos. N-146444, N-146445 and N-143601. On
April 3, 1997, JOS Managing Builders executed in favor of United Overseas Bank a Real Estate
Mortgage3 over the said parcels of land and the improvements existing or to be erected thereon to secure
the Two Hundred Million Peso (PhP200,000,000.00)4 loan it acquired from the bank. The subject
condominium building project Aurora Milestone Tower, which is situated in the said parcels of land, are part
of the properties mortgaged to United Overseas Bank. JOS Managing Builders defaulted in the payment of
its loan obligations to United Overseas Bank. Hence, United Overseas Bank foreclosed the mortgage
constituted over properties of JOS Managing Builders and the subject properties were sold by public auction
on March 22, 1999 wherein United Overseas Bank was declared as the highest bidder. Subsequently, a
certificate of sale was issued in favor of United Overseas Bank corresponding to the foreclosed properties,
which was registered with the Register of Deeds of Quezon City on April 27, 1999.
On August 15, 2001, the HLURB Arbiter ruled,5 in favor of EDUPLAN and declared the mortgage executed
between JOS Managing Builders and United Overseas Bank as well as the foreclosure proceedings null and
void, pointing out that the mortgage was executed without the approval of the HLURB as required under
Section 18 of Presidential Decree (P.D.) No. 957.6 The Arbiter held that that since EDUPLAN has paid the full
purchase price of the condominium unit, JOS Managing Builders and United Overseas Bank should cause the
release from encumbrance of the mother titles to the condominium building project, and issue the
corresponding condominium certificate of title in favor of EDUPLAN. Further, JOS Managing Builders should
provide EDUPLAN with emergency power facilities and refund it with the monthly telephone carrier charges it
has been collecting since September 1999, and permanently cease and desist from further imposing and

collecting such fees. Moreover, JOS Managing Builders was directed to pay EDUPLAN damages, attorney's
fees and costs of suit. The dispositive portion of the decision reads:
9. Wherefore, the foregoing premises considered and as prayed for, judgment is hereby rendered in
favor of the Complainant and against the Respondents as follows:
10. 1. Declaring the mortgage executed by Respondent J.O.S. Managing Builders in favor of Respondent
United Overseas Bank (Westmont) as null and void, including the foreclosure of the mortgage, for
being in violation of Section 18 of P.D. 957;
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2. Ordering Respondents to cause the release from the encumbrances of the "mother titles" to the
Condominium Building Project and, issuance of the individual Condominium Certificate of Title of
Complainant to its Condominium Unit, free from any and all liens and encumbrances;
3. Ordering Respondent J.O.S. Managing Builders to provide the Complainant with emergency
power facilities, strictly as represented in its sales brochures;
4. Ordering Respondent J.O.S. Managing Builders to refund to Complainant the monthly telephone
carrier charges it has been collecting since September 1, 1999 and permanently cease and desist
from further imposing and collecting said charges;
5. Ordering Respondent J.O.S. to pay the complainant P100,000.00 by way of temperate damages,
P50,000.00 by way of exemplary damages, P40,000.00 as and by way of Attorney's Fees; and the
costs of suit.
6. Ordering Respondent J.O.S. Managing Builders to pay Respondent United Overseas Bank
(Westmont) the loan release value of the subject condominium unit.
11. United Overseas Bank then filed a petition for review with the HLURB. On August 20, 2004, the HLURB
Board of Commissioners affirmed the Arbiter's decision, but deleted the award of emergency power facilities
and refund of the monthly telephone carrier charges. Hence, United Overseas Bank filed a petition for review
under Rule 43 before the CA.7
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On February 27, 2006, the CA dismissed the petition.8 A motion for reconsideration was filed, but it was
denied for lack of merit.9 The CA held that United Overseas Bank did not exhaust the administrative
remedies available to it due to its failure to appeal the decision of the HLURB Board of Commissioners to the
Office of the President before going to the CA.
Hence, the petition assigning the lone error:
12. THE COURT OF APPEALS ERRED IN REFUSING TO APPLY THE EXCEPTION TO THE DOCTRINE OF
EXHAUSTION OF ADMINISTRATIVE REMEDIES.10
13. Petitioner United Overseas Bank argues that the CA erred when it dismissed the petition due to its failure to
exhaust administrative remedies. It alleges that the question on whether the HLURB is correct in declaring
null and void the entire mortgage constituted by JOS Managing Builders in favor of United Overseas Bank, as
well as the foreclosure of the entire mortgage, is a legal question which is an exception to the rule on
exhaustion of administrative remedies.
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The petition is meritorious.

The doctrine of exhaustion of administrative remedies is a cornerstone of our judicial system. The thrust of
the rule is that courts must allow administrative agencies to carry out their functions and discharge their
responsibilities within the specialized areas of their respective competence. 11 It has been held, however, that
the doctrine of exhaustion of administrative remedies and the doctrine of primary jurisdiction are not ironclad rules. In the case of Republic v. Lacap,12 the Court enumerated the numerous exceptions to these rules,
namely: (a) where there is estoppel on the part of the party invoking the doctrine; (b) where the challenged
administrative act is patently illegal, amounting to lack of jurisdiction; (c) where there is unreasonable delay
or official inaction that will irretrievably prejudice the complainant; (d) where the amount involved is
relatively so small as to make the rule impractical and oppressive; (e) where the question involved is purely
legal and will ultimately have to be decided by the courts of justice; (f) where judicial intervention is urgent;
(g) where the application of the doctrine may cause great and irreparable damage; (h) where the
controverted acts violate due process; (i) where the issue of non-exhaustion of administrative remedies has
been rendered moot; (j) where there is no other plain, speedy and adequate remedy; (k) where strong
public interest is involved; and (1) in quo warranto proceedings.13
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The situation in paragraph (e) of the foregoing enumeration obtains in this case.
The issue on whether non-compliance with the clearance requirement with the HLURB would result to the
nullification of the entire mortgage contract or only a part of it is purely legal which will have to be decided
ultimately by a regular court of law. It does not involve an examination of the probative value of the
evidence presented by the parties. There is a question of law when the doubt or difference arises as to what
the law is on a certain state of facts, and not as to the truth or the falsehood of alleged facts. Said question
at best could be resolved only tentatively by the administrative authorities. The final decision on the matter

rests not with them but with the courts of justice. Exhaustion of administrative remedies does not apply,
because nothing of an administrative nature is to be or can be done. The issue does not require technical
knowledge and experience, but one that would involve the interpretation and application of law.14 There is,
thus, no need to exhaust administrative remedies, under the premises.
The Court will now proceed to the legal issue on hand.
Petitioner United Overseas Bank alleges that the HLURB erred in declaring null and void the entire mortgage
constituted by JOS Managing Builders in its favor, as EDUPLAN does not claim ownership over all the
properties mortgaged by JOS Managing Builders in favor of United Overseas Bank, but only over a single
condominium unit, i.e., Unit E, 10th Floor of the Aurora Milestone Tower.
We agree with petitioner.
The HLURB erred in declaring null and void the entire mortgage executed between JOS Managing Builders
and United Overseas Bank.
At the onset, it is worthy to note that jurisprudence have varying conclusions of the issue at hand. InFar
East Bank & Trust Co. v Marquez,15 the Court sustained the HLURB when it declared the mortgage entered
into between the subdivision developer and the bank as unenforceable against the lot buyer for failure of the
developer to obtain the prior written approval of the HLURB. However, we were categorical that the HLURB
acted beyond bounds when it nullified the mortgage covering the entire parcel of land, of which the lot
subject of the buyer's complaint is merely a part of.
In Far East Bank, the Court held that:
14. Acts executed against the provisions of mandatory or prohibitory laws shall be void. Hence,
the mortgage over the lot is null and void insofar as private respondent is concerned.
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The remedy granted by the HLURB and sustained by the Office of the President is proper only insofar as it
refers to the lot of respondent. In short, the mortgage contract is void as against him. Since there is no law
stating the specifics of what should be done under the circumstances, that which is in accord with equity,
should be ordered. The remedy granted by the HLURB in the first and the second paragraphs of the
dispositive portion of its Decision insofar as it referred to respondent's lot is in accord with equity.
The HLURB, however, went overboard in its disposition in paragraphs 3 and 4, which pertained not only to
the lot but to the entire parcel of land mortgaged. Such ruling was improper. The subject of this litigation is
limited only to the lot that respondent is buying, not to the entire parcel of land. He has no personality or
standing to bring suit on the whole property, as he has actionable interest over the subject lot
only. (Citations omitted and underscoring ours)16
15. In Metropolitan Bank and Trust Co., Inc. v. SLGT Holdings, Inc.,17 however, the Court nullified the entire
mortgage contract executed between the subdivision developer and the bank albeit the fact that only two
units or lot buyer/s filed a case for declaration of nullity of mortgage. In the said case, the entire mortgage
contract was nullified on the basis of the principle of indivisibility of mortgage as provided in Article 2089 18 of
the New Civil Code.
This notwithstanding, in the fairly recent case of Philippine National Bank v. Lim,19 the Court reverted to our
previous ruling in Far East Bank that a unit buyer has no standing to seek for the complete nullification of
the entire mortgage, because he has an actionable interest only over the unit he has bought. Hence, in the
said case, the mortgage was nullified only insofar as it affected the unit buyer.
We find the recent view espoused in Philippine National Bank to be in accord with law and equity. While a
mortgage may be nullified if it was in violation of Section 18 of P.D. No. 957, such nullification applies only to
the interest of the complaining buyer. It cannot extend to the entire mortgage. A buyer of a particular unit
or lot has no standing to ask for the nullification of the entire mortgage.
Since EDUPLAN has an actionable interest only over Unit E, 10 th Floor, Aurora Milestone Tower, it is but
logical to conclude that it has no standing to seek for the complete nullification of the subject mortgage and
the HLURB was incorrect when it voided the whole mortgage between JOS Managing Builders and United
Overseas Bank.
Considering that EDUPLAN had already paid the full purchase price of the subject unit, the latter is entitled
to the transfer of ownership of the subject property in its favor. This right is provided for in Section 25 of
P.D. No. 957, 50 wit:
16. Issuance of Title. The owner or development shall deliver the title of the lot or unit to the buyer upon full
payment of the lot or unit, x x x.
17. Verily, JOS Managing Builders has the obligation to cause the delivery of the Title to the subject
condominium unit in favor of EDUPALN.
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Nevertheless, despite the fact that the mortgage constituted between JOS Managing Builders and United

Overseas Bank cannot bind EDUPLAN, because of the non-observance of the provision of P.D. No. 957 by
JOS managing Builders, the mortgage between the former and United Overseas Bank is still valid.
In the present case, it is undisputed that JOS Managing Builders mortgaged several parcels of land, including
all the buildings and improvements therein covered by TCT Nos. N-146444, N-146445 and N-143601 to
United Overseas Bank without prior clearance from the HLURB. The said omission clearly violates Section 18
of P.D. No. 957 (The Subdivision and condominium Buyers' Protective Decree), which provides as follows:
18. Section 18. Mortgages. - No mortgage on any unit or lot shall be made by the owner or developer without
prior written approval of the [HLURB]. xxx (Word in bracket added)
19. It should be noted, however, that the failure of JOS Managing Builders to secure prior approval of the
mortgage from the HLURB and United Overseas Bank's failure to inquire on the status of the property
offered for mortgage placed the condominium developer and the creditor Bank in pari delicto.20Hence, they
cannot ask the courts for relief for such parties should be left where they are found for being equally at
fault.
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More importantly, it should be understood that the prior approval requirement is intended to protect buyers
of condominium units from fraudulent manipulations perpetrated by unscrupulous condominium sellers and
operators, such as their failure to deliver titles to the buyer or titles free from lien and encumbrances. 21 This
is pursuant to the intent of P.D. No. 957 to protect hapless buyers from the unjust practices of unscrupulous
developers which may constitute mortgages over condominium projects sans the knowledge of the former
and the consent of the HLURB.22
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Thus, failure to secure the HLURB'S prior written approval as required by P.D. No. 957 will not annul the
entire mortgage between the condominium developer and the creditor bank, otherwise the protection
intended for condominium buyers will inadvertently be extended to the condominium developer even
though, by failing to secure the government's prior approval, it is the party at fault.
To rule otherwise would certainly affect the stability of large-scale mortgages, which is prevalent in the real
estate industry. To be sure, mortgagee banks would be indubitably placed at risk if condominium developers
are empowered to unilaterally invalidate mortgage contracts based on their mere failure to secure prior
written approval of the mortgage by the HLURB, which could be easily caused by inadvertence or by
deliberate intent.
From all the foregoing, the HLURB erred when it declared the entire mortgage constituted by JOS Managing
Builders, Inc. in favor of United Overseas Bank null and void based solely on the complaint of EDUPLAN
which was only claiming ownership over a single condominium unit of Aurora Milestone Tower. Accordingly,
the mortgage executed between JOS Managing Builders and United Overseas Bank is valid.
WHEREFORE, the petition is GRANTED. The Decision and Resolution of the Court of Appeals, dated
February 27, 2006 and March 5, 2008, respectively, in CA-G.R. SP No. 86401, are REVERSED andSET
ASIDE. The Decision of the HLURB, dated August 20, 2004, is AFFIRMED with MODIFICATION. The
mortgage executed and the succeeding foreclosure proceedings between respondent J.O.S. Managing
Builders, Inc. and petitioner United Overseas Bank of the Philippines, Inc., with respect to respondent
EDUPLAN Philippines, Inc.'s unit E., 10TH Floor, Aurora Milestone Tower, is declared null and void.
SO ORDERED.

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IV. TERMINATION OF EFFECTIVITY OF LAWS; JUDICIAL DECISION

20.
DE ROY V CA GR 80718
CORTES, J.:
This special civil action for certiorari seeks to declare null and void two (2) resolutions of
the Special First Division of the Court of Appeals in the case of Luis Bernal, Sr., et al. v.
Felisa Perdosa De Roy, et al., CA-G.R. CV No. 07286. The first resolution promulgated on 30
September 1987 denied petitioners' motion for extension of time to file a motion for
reconsideration and directed entry of judgment since the decision in said case had
become final; and the second Resolution dated 27 October 1987 denied petitioners'
motion for reconsideration for having been filed out of time.
At the outset, this Court could have denied the petition outright for not being verified as
required by Rule 65 section 1 of the Rules of Court. However, even if the instant petition
did not suffer from this defect, this Court, on procedural and substantive grounds, would
still resolve to deny it.
The facts of the case are undisputed. The firewall of a burned-out building owned by
petitioners collapsed and destroyed the tailoring shop occupied by the family of private
respondents, resulting in injuries to private respondents and the death of Marissa Bernal, a
daughter. Private respondents had been warned by petitioners to vacate their shop in view
of its proximity to the weakened wall but the former failed to do so. On the basis of the
foregoing facts, the Regional Trial Court. First Judicial Region, Branch XXXVIII, presided by
the Hon. Antonio M. Belen, rendered judgment finding petitioners guilty of gross
negligence and awarding damages to private respondents. On appeal, the decision of the
trial court was affirmed in toto by the Court of Appeals in a decision promulgated on
August 17, 1987, a copy of which was received by petitioners on August 25, 1987. On
September 9, 1987, the last day of the fifteen-day period to file an appeal, petitioners filed
a motion for extension of time to file a motion for reconsideration, which was eventually
denied by the appellate court in the Resolution of September 30, 1987. Petitioners filed
their motion for reconsideration on September 24, 1987 but this was denied in the
Resolution of October 27, 1987.
This Court finds that the Court of Appeals did not commit a grave abuse of discretion when
it denied petitioners' motion for extension of time to file a motion for reconsideration,
directed entry of judgment and denied their motion for reconsideration. It correctly applied
the rule laid down in Habaluyas Enterprises, Inc. v. Japzon, [G.R. No. 70895, August 5,
1985,138 SCRA 461, that the fifteen-day period for appealing or for filing a motion for
reconsideration cannot be extended. In its Resolution denying the motion for
reconsideration, promulgated on July 30, 1986 (142 SCRA 208), this Court en banc
restated and clarified the rule, to wit:

Beginning one month after the promulgation of this Resolution, the rule shall be strictly
enforced that no motion for extension of time to file a motion for reconsideration may be
filed with the Metropolitan or Municipal Trial Courts, the Regional Trial Courts, and the
Intermediate Appellate Court. Such a motion may be filed only in cases pending with the
Supreme Court as the court of last resort, which may in its sound discretion either grant or
deny the extension requested. (at p. 212)
Lacsamana v. Second Special Cases Division of the intermediate Appellate Court, [G.R. No.
73146-53, August 26, 1986, 143 SCRA 643], reiterated the rule and went further to restate
and clarify the modes and periods of appeal.
Bacaya v. Intermediate Appellate Court, [G.R. No. 74824, Sept. 15, 1986,144 SCRA
161],stressed the prospective application of said rule, and explained the operation of the
grace period, to wit:
In other words, there is a one-month grace period from the promulgation on May 30, 1986
of the Court's Resolution in the clarificatory Habaluyas case, or up to June 30, 1986, within
which the rule barring extensions of time to file motions for new trial or reconsideration is,
as yet, not strictly enforceable.
Since petitioners herein filed their motion for extension on February 27, 1986, it is still
within the grace period, which expired on June 30, 1986, and may still be allowed.
This grace period was also applied in Mission v. Intermediate Appellate Court [G.R. No.
73669, October 28, 1986, 145 SCRA 306].]
In the instant case, however, petitioners' motion for extension of time was filed on
September 9, 1987, more than a year after the expiration of the grace period on June 30,
1986. Hence, it is no longer within the coverage of the grace period. Considering the
length of time from the expiration of the grace period to the promulgation of the decision
of the Court of Appeals on August 25, 1987, petitioners cannot seek refuge in the
ignorance of their counsel regarding said rule for their failure to file a motion for
reconsideration within the reglementary period.
Petitioners contend that the rule enunciated in the Habaluyas case should not be made to
apply to the case at bar owing to the non-publication of the Habaluyas decision in the
Official Gazette as of the time the subject decision of the Court of Appeals was
promulgated. Contrary to petitioners' view, there is no law requiring the publication of
Supreme Court decisions in the Official Gazette before they can be binding and as a
condition to their becoming effective. It is the bounden duty of counsel as lawyer in active
law practice to keep abreast of decisions of the Supreme Court particularly where issues
have been clarified, consistently reiterated, and published in the advance reports of
Supreme Court decisions (G. R. s) and in such publications as the Supreme Court Reports
Annotated (SCRA) and law journals.
This Court likewise finds that the Court of Appeals committed no grave abuse of discretion
in affirming the trial court's decision holding petitioner liable under Article 2190 of the Civil
Code, which provides that "the proprietor of a building or structure is responsible for the
damage resulting from its total or partial collapse, if it should be due to the lack of
necessary repairs.

Nor was there error in rejecting petitioners argument that private respondents had the
"last clear chance" to avoid the accident if only they heeded the. warning to vacate the
tailoring shop and , therefore, petitioners prior negligence should be disregarded, since the
doctrine of "last clear chance," which has been applied to vehicular accidents, is
inapplicable to this case.
WHEREFORE, in view of the foregoing, the Court Resolved to DENY the instant petition for
lack of merit.

V.TERMINATION OF EFFECTIVITY OF LAWS; JUDICIAL DECISION

8. QUIQUI VS BONCAROS GR 51841
GANCAYCO, J.:
This is a Petition for certiorari, prohibition and mandamus. It concerns a parcel of
agricultural land situated in Barangay Cabangan, Siaton, Negros Oriental with an area of
about 450 square meters. The said parcel of land is a portion of Lot No. 3217, Pls-659-D
covered by Free Patent Title No. FV-13703. The improvements on the parcel of land in
question include several fruit trees and a modest residential house.
The record of the case reveals that on May 22, 1973, the herein private respondents
Estefania G. Amolo, Lope Amolo, Sofia G. Albon, Pastor Gadingan, Angel Gadingan, Antero
Gadingan, Teofilo Gadingan and Felicitas Gadingan were able to secure Free Patent Title
No. FV-13703 in their names. The 450-square meter lot in question was included in the
survey of the entire parcel of land covered by the said Title.
On the other hand, it is the position of the herein petitioners Remigio Quiqui, Emiliana Q.
Arellano, Turcuata Q. Diputado, Apolonia Q. Salcedor, Loreto Quiqui, Suplicia Q. Chan,
Eldegunda Q. Monasterio, Elsa Q. Arbon and Antipas Q. Yang that the 450-square meter lot
in question belongs to them and not to the private respondents. They contend that the
said lot was purchased by their late father sometime in 1920 and that ever since then,
they have been in actual possession thereof, peacefully, openly continuously and
adversely, for a period of 56 years already. They also contend that the private respondents
succeeded in putting the said property in their name by clandestinely including the said lot
in the survey of the premises undertaken by the Government sometime in the 1970s.
On November 9, 1976, the petitioners, assisted by the Citizens Legal Assistance Office of
the then Ministry of Justice, filed a Complaint in the Court of First Instance of Negros

Oriental for "reconveyance and/or annulment of Title with damages" against the private
respondents. 1 The said Complaint was anchored on the theory that the title to the lot in
question obtained by the private respondents in their name was secured through fraud.
The case was docketed as Civil Case No. 6606.
On December 5, 1976, the private respondents filed their Answer to the Complaint,
alleging, inter alia, that the petitioners have no cause of action against them. By way of
Counterclaim, the private respondents sought the payment to them of moral damages and
attorney's fees. 2
Thereafter, a pre-trial conference was scheduled by the trial court. Inasmuch as the parties
could not reach an amicable settlement of their case, the pre-trial conference was
terminated and the case was set for trial on the merits. In the course of the proceedings,
more particularly on May 10, 1979, the private respondents filed a Motion to dismiss the
case on the ground of lack of jurisdiction on the part of the trial court. 3
On June 7, 1979, the petitioners submitted their Opposition to the said Motion, stressing
that the trial court has jurisdiction over cases for reconveyance. 4 In its Order dated July
16, 1979, the trial court, with respondent Judge Alejandro R. Boncaros presiding, dismissed
the Complaint for reconveyance on the ground that it had no jurisdiction over the case. 5
Counsel for the petitioners received a copy of the said Order on July 17, 1979. 6
On August 17, 1979, the petitioners filed a Motion for the reconsideration of the Order of
the trial court dismissing the Complaint. 7 The said Motion for Reconsideration is dated
August 16, 1979.
The private respondents opposed the Motion for Reconsideration, stating that the same
had been filed beyond the 30 day reglementary period under the Rules. The private
respondents maintain that inasmuch as the petitioners received their copy of the Order of
dismissal on July 17, 1979, they had up to August 16, 1979 to file the Motion for
reconsideration, computed on the basis of the 30-day reglementary period. They contend
that since the said Motion was filed beyond the 30-day period, the Order of dismissal has
become final and executory and could no longer be the subject of a Motion for
reconsideration. 8 In its Order dated August 21, 1979, the trial court denied the Motion for
Reconsideration on the ground asserted by the private respondents. 9
On August 23, 1979, the petitioners filed a Notice of Appeal, seeking relief from the Court
of Appeals. They sought the Appeal on the ground that the Orders of the trial court
dismissing their Complaint and denying their Motion for Reconsideration are contrary to
law and the evidence submitted. 10 On August 24, 1979, the petitioners filed their Appeal
Bond, together with their Motion to approve the same.
In its Order dated August 28, 1979, the trial court denied the Notice of Appeal, including
the Motion to approve the Appeal Bond. The pertinent portion of the said Order are as
follows
The order of dismissal of this Court which was dated July 16, 1979 was received by the
plaintiffs (the herein petitioners) on July 17, 1979. Under Section 3, Rule 41 of the Revised
Rules of Court, the period to appeal is thirty (30) days, so with the motion for a
reconsideration so that (sic) under Art. 13 of the Civil Code that in the computation of the
period exclude the first (day), include the last (sic), August 16, 1979 therefore was the last

day to file the motion for reconsideration but it was filed on August 17 or one day late and
this motion for reconsideration was denied by this Court on August 21, 1979 (sic). The
reason for the denial was the motion for reconsideration was filed (sic) beyond the
reglementary period, in which case, the notice of appeal ... (was) likewise filed beyond the
reglementary period ....
xxx xxx xxx 11
Finding the action taken by the trial court unsatisfactory, the petitioners brought their case
directly to this Court by way of the instant Petition for certiorari, prohibition and
mandamus under Rule 65 of the Rules of Court. They maintain that the Order of the trial
court dated July 16, 1979 is illegal and void for having been "issued without jurisdiction or
in excess of jurisdiction or with grave abuse of discretion, for the so called "one day late"
(ground) upon which it is based does not actually exist. " 12 They pray, inter alia, that the
trial court be ordered to approve their Notice of Appeal.13
Complying with the instructions of this Court, the private respondents submitted their
Comment on the Petition. 14
In the Resolution of this Court dated January 14, 1980, We gave due course to the instant
Petition. 15 The parties submitted their respective Memoranda after which the case was
deemed submitted for decision on June 11, 1980.
After a careful examination of the entire record of the case, We find the instant Petition
devoid of merit.
At the time this litigation was instituted in the trial court, Section 3, Rule 41 of the Rules of
Court was the provision governing the period within which an Appeal may be taken to the
Court of Appeals, to wit
SEC. 3. How appeal is taken. Appeal may be taken by serving upon the adverse party
and filing with the trial court within thirty (30) days from notice of order or judgment, a
notice of appeal, an appeal bond, and a record on appeal. The time during which a motion
to set aside the judgment or order or for a new trial has been pending shall be deducted,
unless such motion fails to satisfy the requirements of Rule 37.
But where such a motion has been filed during office hours of the last day of the period
herein provided, the appeal must be perfected within the day following that in which the
party appealing received notice of the denial of said motion.
Under this cited provision, the Appeal may be taken within 30 days from notice of the
judgment or order of the trial court. 16 In the event that the party aggrieved by the
judgment or order of the trial court files a Motion to set aside the judgment or order, i. e a
Motion for Reconsideration, the time during which such Motion is pending resolution shall,
as a rule, be deducted from the 30-day period. 17 In relation thereto, the New Civil Code
states that in computing a period, the first day shall be excluded and the last day
included. 18
The petitioners admit that they received their copy of the Order of dismissal of their
Complaint on July 17, 1979. Under Section 3, Rule 41, they had 30 days within which to
appeal their case or to file a Motion for Reconsideration of the judgment or order of the
trial court. In computing the 30-day period, July 17, 1979 (the first day) is excluded,

pursuant to Article 13 of the New Civil Code. Counting 30 days thereafter, beginning on
July 18, 1979, the petitioners had up to August 16, 1979 to file their Motion for
Reconsideration. Their Motion for Reconsideration, although dated August 16, 1979, was
filed with the trial court on August 17, 1979 or one day beyond the 30-day reglementary
period prescribed by Section 3 of Rule 41.
Under these circumstances, the order of the trial court dismissing the Complaint has
become final and executory. As such, it is beyond the reach of a Motion for consideration.
19 The Notice of Appeal, therefore, was properly denied. Perfection of an appeal in the
manner and within the period laid down by law is not only mandatory but also
jurisdictional and failure to perfect an appeal as required by the rules has the effect of
rendering the judgment final and executory. A strict observance of the reglementary
period within which to exercise the statutory right of appeal has been considered as
absolutely indispensable to the prevention of needless delays. 20
As a last recourse in support of their case, the petitioners invoke the following
observations made by this Court in De Las Alas v. Court of Appeals, 21 to wit:
Regardless, however, of the above findings and even assuming that respondents' position
were correct, WE find that a one-day delay does not justify the dismissal of the appeal
under the circumstances obtaining in this case. The real purpose behind the limitation of
the period of appeal is to forestall or avoid an unreasonable delay in the administration of
justice and to put an end to controversies ... 22
Unfortunately for the petitioners, the observation made by this Court in De Las Alas does
not apply to their case.
In De Las Alas, the view expressed by this Court to the effect that "a one-day delay does
not justify the dismissal of the appeal" is qualified by the phrase "under the circumstances
obtaining in this case". Unlike the situation faced by the herein petitioners, there is no
showing that the petitioners in the De Las Alas case failed to file their Motion for
Reconsideration as well as their Record on Appeal within the reglementary period. On the
contrary, this Court noted therein the lack of delay on the part of the petitioners in that
case, viz
Furthermore, WE note from the records the absence or lack of the element of intent to
delay the administration of justice on the part of petitioners in this case. On the contrary,
petitioners' counsel have demonstrated cautiousness, concern and punctuality in the
prosecution of the appeal. They filed their motion for reconsideration October 7, 1972,
even if the respondent lower court judge had given them an extension up to October 24,
1972, within which to file the said motion. Petitioners had up to December 25, 1972, within
which to submit their record on appeal, yet they filed their record on appeal on December
8, 1972, or 17 days before the deadline. 23
Moreover, a doubtful and controversial question of law confronted the parties in the De Las
Alas case, i.e., the matter of computing the reglementary period for filing an Appeal. The
respondent court found petitioner had only two (2) days left to perfect the appeal after the
denial of the motion for reconsideration while this Court held petitioners had three (3)
days left deducting the period within which the motion for reconsideration has been
pending, excluding the first day in the computation of the period, but since the last day
falls on a Sunday the period of appeal is ipso jure extended to the first working day

immediately following. 24 In the case at bar, however, there is no such doubtful or

controversial question of law submitted for Our resolution.
For the petitioners to seek exception for their failure to comply strictly with the
requirements for perfecting their Appeal, strong compelling reasons, like the prevention of
a grave miscarriage of justice, must be shown to exist in order to warrant this Court to
suspend the Rules. 25 No such reasons have been shown to exist in this case. In fact, the
petitioners did not even offer any reasonable explanation for their delay.
On the basis of the foregoing discussion, We find no jurisdictional infirmity, sufficient to
call for the issuance of the corrective writ of certiorari in the action taken by the trial court.
As stated earlier, the instant Petition is devoid of merit.
WHEREFORE, in view of the foregoing, the instant Petition for certiorari prohibition and
mandamus is hereby DISMISSED for lack of merit. We make no pronouncement as to costs.
SO ORDERED

VI.CONFLICT OF RULES PRINCIPLE OF TERRITORIALITY NATIONALITY PRINCIPLE

21.

PILAPIL V IBAY SOMERA GR 80116

REGALADO, J.:

An ill-starred marriage of a Filipina and a foreigner which ended in a foreign absolute

divorce, only to be followed by a criminal infidelity suit of the latter against the former,
provides Us the opportunity to lay down a decisional rule on what hitherto appears to be
an unresolved jurisdictional question.
On September 7, 1979, petitioner Imelda Manalaysay Pilapil, a Filipino citizen, and private
respondent Erich Ekkehard Geiling, a German national, were married before the Registrar
of Births, Marriages and Deaths at Friedensweiler in the Federal Republic of Germany. The
marriage started auspiciously enough, and the couple lived together for some time in
Malate, Manila where their only child, Isabella Pilapil Geiling, was born on April 20, 1980. 1
Thereafter, marital discord set in, with mutual recriminations between the spouses,
followed by a separation de facto between them.
After about three and a half years of marriage, such connubial disharmony eventuated in
private respondent initiating a divorce proceeding against petitioner in Germany before
the Schoneberg Local Court in January, 1983. He claimed that there was failure of their
marriage and that they had been living apart since April, 1982. 2
Petitioner, on the other hand, filed an action for legal separation, support and separation
of property before the Regional Trial Court of Manila, Branch XXXII, on January 23, 1983
where the same is still pending as Civil Case No. 83-15866. 3
On January 15, 1986, Division 20 of the Schoneberg Local Court, Federal Republic of
Germany, promulgated a decree of divorce on the ground of failure of marriage of the
spouses. The custody of the child was granted to petitioner. The records show that under
German law said court was locally and internationally competent for the divorce
proceeding and that the dissolution of said marriage was legally founded on and
authorized by the applicable law of that foreign jurisdiction. 4
On June 27, 1986, or more than five months after the issuance of the divorce decree,
private respondent filed two complaints for adultery before the City Fiscal of Manila
alleging that, while still married to said respondent, petitioner "had an affair with a certain
William Chia as early as 1982 and with yet another man named Jesus Chua sometime in
1983". Assistant Fiscal Jacinto A. de los Reyes, Jr., after the corresponding investigation,
recommended the dismissal of the cases on the ground of insufficiency of evidence. 5
However, upon review, the respondent city fiscal approved a resolution, dated January 8,
1986, directing the filing of two complaints for adultery against the petitioner. 6 The
complaints were accordingly filed and were eventually raffled to two branches of the
Regional Trial Court of Manila. The case entitled "People of the Philippines vs. Imelda Pilapil
and William Chia", docketed as Criminal Case No. 87-52435, was assigned to Branch XXVI
presided by the respondent judge; while the other case, "People of the Philippines vs.
Imelda Pilapil and James Chua", docketed as Criminal Case No. 87-52434 went to the sala
of Judge Leonardo Cruz, Branch XXV, of the same court. 7
On March 14, 1987, petitioner filed a petition with the Secretary of Justice asking that the
aforesaid resolution of respondent fiscal be set aside and the cases against her be
dismissed. 8 A similar petition was filed by James Chua, her co-accused in Criminal Case
No. 87-52434. The Secretary of Justice, through the Chief State Prosecutor, gave due
course to both petitions and directed the respondent city fiscal to inform the Department
of Justice "if the accused have already been arraigned and if not yet arraigned, to move to
defer further proceedings" and to elevate the entire records of both cases to his office for
review. 9
Petitioner thereafter filed a motion in both criminal cases to defer her arraignment and to
suspend further proceedings thereon. 10 As a consequence, Judge Leonardo Cruz
suspended proceedings in Criminal Case No. 8752434. On the other hand, respondent
judge merely reset the date of the arraignment in Criminal Case No. 87-52435 to April 6,

1987. Before such scheduled date, petitioner moved for the cancellation of the
arraignment and for the suspension of proceedings in said Criminal Case No. 87-52435
until after the resolution of the petition for review then pending before the Secretary of
Justice. 11 A motion to quash was also filed in the same case on the ground of lack of
jurisdiction, 12 which motion was denied by the respondent judge in an order dated
September 8, 1987. The same order also directed the arraignment of both accused
therein, that is, petitioner and William Chia. The latter entered a plea of not guilty while
the petitioner refused to be arraigned. Such refusal of the petitioner being considered by
respondent judge as direct contempt, she and her counsel were fined and the former was
ordered detained until she submitted herself for arraignment. 13 Later, private respondent
entered a plea of not guilty. 14
On October 27, 1987, petitioner filed this special civil action for certiorari and prohibition,
with a prayer for a temporary restraining order, seeking the annulment of the order of the
lower court denying her motion to quash. The petition is anchored on the main ground that
the court is without jurisdiction "to try and decide the charge of adultery, which is a
private offense that cannot be prosecuted de officio (sic), since the purported
complainant, a foreigner, does not qualify as an offended spouse having obtained a final
divorce decree under his national law prior to his filing the criminal complaint." 15
On October 21, 1987, this Court issued a temporary restraining order enjoining the
respondents from implementing the aforesaid order of September 8, 1987 and from
further proceeding with Criminal Case No. 87-52435. Subsequently, on March 23, 1988
Secretary of Justice Sedfrey A. Ordoez acted on the aforesaid petitions for review and,
upholding petitioner's ratiocinations, issued a resolution directing the respondent city
fiscal to move for the dismissal of the complaints against the petitioner. 16
We find this petition meritorious. The writs prayed for shall accordingly issue.
Under Article 344 of the Revised Penal Code, 17 the crime of adultery, as well as four other
crimes against chastity, cannot be prosecuted except upon a sworn written complaint filed
by the offended spouse. It has long since been established, with unwavering consistency,
that compliance with this rule is a jurisdictional, and not merely a formal, requirement. 18
While in point of strict law the jurisdiction of the court over the offense is vested in it by
the Judiciary Law, the requirement for a sworn written complaint is just as jurisdictional a
mandate since it is that complaint which starts the prosecutory proceeding 19 and without
which the court cannot exercise its jurisdiction to try the case.
Now, the law specifically provides that in prosecutions for adultery and concubinage the
person who can legally file the complaint should be the offended spouse, and nobody else.
Unlike the offenses of seduction, abduction, rape and acts of lasciviousness, no provision is
made for the prosecution of the crimes of adultery and concubinage by the parents,
grandparents or guardian of the offended party. The so-called exclusive and successive
rule in the prosecution of the first four offenses above mentioned do not apply to adultery
and concubinage. It is significant that while the State, as parens patriae, was added and
vested by the 1985 Rules of Criminal Procedure with the power to initiate the criminal
action for a deceased or incapacitated victim in the aforesaid offenses of seduction,
abduction, rape and acts of lasciviousness, in default of her parents, grandparents or
guardian, such amendment did not include the crimes of adultery and concubinage. In
other words, only the offended spouse, and no other, is authorized by law to initiate the
action therefor.
Corollary to such exclusive grant of power to the offended spouse to institute the action, it
necessarily follows that such initiator must have the status, capacity or legal
representation to do so at the time of the filing of the criminal action. This is a familiar and
express rule in civil actions; in fact, lack of legal capacity to sue, as a ground for a motion
to dismiss in civil cases, is determined as of the filing of the complaint or petition.

The absence of an equivalent explicit rule in the prosecution of criminal cases does not
mean that the same requirement and rationale would not apply. Understandably, it may
not have been found necessary since criminal
actions are generally and fundamentally commenced by the State, through the People of
the Philippines, the offended party being merely the complaining witness therein.
However, in the so-called "private crimes" or those which cannot be prosecuted de oficio,
and the present prosecution for adultery is of such genre, the offended spouse assumes a
more predominant role since the right to commence the action, or to refrain therefrom, is
a matter exclusively within his power and option.
This policy was adopted out of consideration for the aggrieved party who might prefer to
suffer the outrage in silence rather than go through the scandal of a public trial. 20 Hence,
as cogently argued by petitioner, Article 344 of the Revised Penal Code thus presupposes
that the marital relationship is still subsisting at the time of the institution of the criminal
action for, adultery. This is a logical consequence since the raison d'etre of said provision
of law would be absent where the supposed offended party had ceased to be the spouse
of the alleged offender at the time of the filing of the criminal case. 21
In these cases, therefore, it is indispensable that the status and capacity of the
complainant to commence the action be definitely established and, as already
demonstrated, such status or capacity must indubitably exist as of the time he initiates
the action. It would be absurd if his capacity to bring the action would be determined by
his status before or subsequent to the commencement thereof, where such capacity or
status existed prior to but ceased before, or was acquired subsequent to but did not exist
at the time of, the institution of the case. We would thereby have the anomalous spectacle
of a party bringing suit at the very time when he is without the legal capacity to do so.
To repeat, there does not appear to be any local precedential jurisprudence on the specific
issue as to when precisely the status of a complainant as an offended spouse must exist
where a criminal prosecution can be commenced only by one who in law can be
categorized as possessed of such status. Stated differently and with reference to the
present case, the inquiry ;would be whether it is necessary in the commencement of a
criminal action for adultery that the marital bonds between the complainant and the
accused be unsevered and existing at the time of the institution of the action by the
former against the latter.
American jurisprudence, on cases involving statutes in that jurisdiction which are in pari
materia with ours, yields the rule that after a divorce has been decreed, the innocent
spouse no longer has the right to institute proceedings against the offenders where the
statute provides that the innocent spouse shall have the exclusive right to institute a
prosecution for adultery. Where, however, proceedings have been properly commenced, a
divorce subsequently granted can have no legal effect on the prosecution of the criminal
proceedings to a conclusion. 22
In the cited Loftus case, the Supreme Court of Iowa held that
'No prosecution for adultery can be commenced except on the complaint of the husband
or wife.' Section 4932, Code. Though Loftus was husband of defendant when the offense is
said to have been committed, he had ceased to be such when the prosecution was begun;
and appellant insists that his status was not such as to entitle him to make the complaint.
We have repeatedly said that the offense is against the unoffending spouse, as well as the
state, in explaining the reason for this provision in the statute; and we are of the opinion
that the unoffending spouse must be such when the prosecution is commenced.
(Emphasis supplied.)
We see no reason why the same doctrinal rule should not apply in this case and in our
jurisdiction, considering our statutory law and jural policy on the matter. We are convinced

that in cases of such nature, the status of the complainant vis-a-vis the accused must be
determined as of the time the complaint was filed. Thus, the person who initiates the
adultery case must be an offended spouse, and by this is meant that he is still married to
the accused spouse, at the time of the filing of the complaint.
In the present case, the fact that private respondent obtained a valid divorce in his
country, the Federal Republic of Germany, is admitted. Said divorce and its legal effects
may be recognized in the Philippines insofar as private respondent is concerned 23 in view
of the nationality principle in our civil law on the matter of status of persons.
Thus, in the recent case of Van Dorn vs. Romillo, Jr., et al., 24 after a divorce was granted
by a United States court between Alice Van Dornja Filipina, and her American husband, the
latter filed a civil case in a trial court here alleging that her business concern was conjugal
property and praying that she be ordered to render an accounting and that the plaintiff
be granted the right to manage the business. Rejecting his pretensions, this Court
perspicuously demonstrated the error of such stance, thus:
There can be no question as to the validity of that Nevada divorce in any of the States of
the United States. The decree is binding on private respondent as an American citizen. For
instance, private respondent cannot sue petitioner, as her husband, in any State of the
Union. ...
It is true that owing to the nationality principle embodied in Article 15 of the Civil Code,
only Philippine nationals are covered by the policy against absolute divorces the same
being considered contrary to our concept of public policy and morality. However, aliens
may obtain divorces abroad, which may be recognized in the Philippines, provided they
are valid according to their national law. ...
Thus, pursuant to his national law, private respondent is no longer the husband of
petitioner. He would have no standing to sue in the case below as petitioner's husband
entitled to exercise control over conjugal assets. ... 25
Under the same considerations and rationale, private respondent, being no longer the
husband of petitioner, had no legal standing to commence the adultery case under the
imposture that he was the offended spouse at the time he filed suit.
The allegation of private respondent that he could not have brought this case before the
decree of divorce for lack of knowledge, even if true, is of no legal significance or
consequence in this case. When said respondent initiated the divorce proceeding, he
obviously knew that there would no longer be a family nor marriage vows to protect once
a dissolution of the marriage is decreed. Neither would there be a danger of introducing
spurious heirs into the family, which is said to be one of the reasons for the particular
formulation of our law on adultery, 26 since there would thenceforth be no spousal
relationship to speak of. The severance of the marital bond had the effect of dissociating
the former spouses from each other, hence the actuations of one would not affect or cast
obloquy on the other.
The aforecited case of United States vs. Mata cannot be successfully relied upon by
private respondent. In applying Article 433 of the old Penal Code, substantially the same
as Article 333 of the Revised Penal Code, which punished adultery "although the marriage
be afterwards declared void", the Court merely stated that "the lawmakers intended to
declare adulterous the infidelity of a married woman to her marital vows, even though it
should be made to appear that she is entitled to have her marriage contract declared null
and void, until and unless she actually secures a formal judicial declaration to that effect".
Definitely, it cannot be logically inferred therefrom that the complaint can still be filed
after the declaration of nullity because such declaration that the marriage is void ab initio
is equivalent to stating that it never existed. There being no marriage from the beginning,

any complaint for adultery filed after said declaration of nullity would no longer have a leg
to stand on. Moreover, what was consequently contemplated and within the purview of the
decision in said case is the situation where the criminal action for adultery was filed before
the termination of the marriage by a judicial declaration of its nullity ab initio. The same
rule and requisite would necessarily apply where the termination of the marriage was
effected, as in this case, by a valid foreign divorce.
Private respondent's invocation of Donio-Teves, et al. vs. Vamenta, hereinbefore cited, 27
must suffer the same fate of inapplicability. A cursory reading of said case reveals that the
offended spouse therein had duly and seasonably filed a complaint for adultery, although
an issue was raised as to its sufficiency but which was resolved in favor of the
complainant. Said case did not involve a factual situation akin to the one at bar or any
issue determinative of the controversy herein.
WHEREFORE, the questioned order denying petitioner's motion to quash is SET ASIDE and
another one enteredDISMISSING the complaint in Criminal Case No. 87-52435 for lack of
jurisdiction. The temporary restraining order issued in this case on October 21, 1987 is
hereby made permanent.
SO ORDERED

VI.CONFLICT OF RULES PRINCIPLE OF TERRITORIALITY NATIONALITY PRINCIPLE

22.

LLORENTE V CA GR 124371

The Case
The case raises a conflict of laws issue.
What is before us is an appeal from the decision of the Court of Appeals[1] modifying
that of the Regional Trial Court, Camarines Sur, Branch 35, Iriga City[2] declaring
respondent Alicia F. Llorente (herinafter referred to as Alicia), as co-owners of whatever
property she and the deceased Lorenzo N. Llorente (hereinafter referred to as Lorenzo)
may have acquired during the twenty-five (25) years that they lived together as
husband and wife.
The Facts
The deceased Lorenzo N. Llorente was an enlisted serviceman of the United States
Navy from March 10, 1927 to September 30, 1957.[3]
On February 22, 1937, Lorenzo and petitioner Paula Llorente (hereinafter referred to as
Paula) were married before a parish priest, Roman Catholic Church, in Nabua,
Camarines Sur.[4]
Before the outbreak of the Pacific War, Lorenzo departed for the United States and
Paula stayed in the conjugal home in barrio Antipolo, Nabua, Camarines Sur.[5]
On November 30, 1943, Lorenzo was admitted to United States citizenship and
Certificate of Naturalization No. 5579816 was issued in his favor by the United States
District Court, Southern District of New York.[6]
Upon the liberation of the Philippines by the American Forces in 1945, Lorenzo was
granted an accrued leave by the U. S. Navy, to visit his wife and he visited the

Philippines.[7] He discovered that his wife Paula was pregnant and was living in and
having an adulterous relationship with his brother, Ceferino Llorente.[8]
On December 4, 1945, Paula gave birth to a boy registered in the Office of the Registrar
of Nabua as Crisologo Llorente, with the certificate stating that the child was not
legitimate and the line for the fathers name was left blank.[9]
Lorenzo refused to forgive Paula and live with her. In fact, on February 2, 1946, the
couple drew a written agreement to the effect that (1) all the family allowances allotted
by the United States Navy as part of Lorenzos salary and all other obligations for Paulas
daily maintenance and support would
be suspended; (2) they would dissolve their marital union in accordance with judicial
proceedings; (3) they would make a separate agreement regarding their conjugal
property acquired during their marital life; and (4) Lorenzo would not prosecute Paula
for her adulterous act since she voluntarily admitted her fault and agreed to separate
from Lorenzo peacefully. The agreement was signed by both Lorenzo and Paula and was
witnessed by Paulas father and stepmother. The agreement was notarized by Notary
Public Pedro Osabel.[10]
Lorenzo returned to the United States and on November 16, 1951 filed for divorce with
the Superior Court of the State of California in and for the County of San Diego. Paula
was represented by counsel, John Riley, and actively participated in the proceedings.
On November 27, 1951, the Superior Court of the State of California, for the County of
San Diego found all factual allegations to be true and issued an interlocutory judgment
of divorce.[11]
On December 4, 1952, the divorce decree became final.[12]
In the meantime, Lorenzo returned to the Philippines.
On January 16, 1958, Lorenzo married Alicia F. Llorente in Manila.[13] Apparently, Alicia
had no knowledge of the first marriage even if they resided in the same town as Paula,
who did not oppose the marriage or cohabitation.[14]
From 1958 to 1985, Lorenzo and Alicia lived together as husband and wife.[15] Their
twenty-five (25) year union produced three children, Raul, Luz and Beverly, all
surnamed Llorente.[16]
On March 13, 1981, Lorenzo executed a Last Will and Testament. The will was notarized
by Notary Public Salvador M. Occiano, duly signed by Lorenzo with attesting witnesses
Francisco Hugo, Francisco Neibres and Tito Trajano. In the will, Lorenzo bequeathed all
his property to Alicia and their three children, to wit:
(1) I give and bequeath to my wife ALICIA R. FORTUNO exclusively my residential house
and lot, located at San Francisco, Nabua, Camarines Sur, Philippines, including ALL the
personal properties and other movables or belongings that may be found or existing
therein;
(2) I give and bequeath exclusively to my wife Alicia R. Fortuno and to my children,
Raul F. Llorente, Luz F. Llorente and Beverly F. Llorente, in equal shares, all my real
properties whatsoever and wheresoever located, specifically my real properties located
at Barangay Aro-Aldao, Nabua, Camarines Sur; Barangay Paloyon, Nabua, Camarines
Sur; Barangay Baras, Sitio Puga, Nabua, Camarines Sur; and Barangay Paloyon, Sitio
Nalilidong, Nabua, Camarines Sur;
(3) I likewise give and bequeath exclusively unto my wife Alicia R. Fortuno and unto my
children, Raul F. Llorente, Luz F. Llorente and Beverly F. Llorente, in equal shares, my

real properties located in Quezon City Philippines, and covered by Transfer Certificate
of Title No. 188652; and my lands in Antipolo, Rizal, Philippines, covered by Transfer
Certificate of Title Nos. 124196 and 165188, both of the Registry of Deeds of the
province of Rizal, Philippines;
(4) That their respective shares in the above-mentioned properties, whether real or
personal properties, shall not be disposed of, ceded, sold and conveyed to any other
persons, but could only be sold, ceded, conveyed and disposed of by and among
themselves;
(5) I designate my wife ALICIA R. FORTUNO to be the sole executor of this my Last Will
and Testament, and in her default or incapacity of the latter to act, any of my children
in the order of age, if of age;
(6) I hereby direct that the executor named herein or her lawful substitute should
served (sic) without bond;
(7) I hereby revoke any and all my other wills, codicils, or testamentary dispositions
heretofore executed, signed, or published, by me;
(8) It is my final wish and desire that if I die, no relatives of mine in any degree in the
Llorentes Side should ever bother and disturb in any manner whatsoever my wife Alicia
R. Fortunato and my children with respect to any real or personal properties I gave and
bequeathed respectively to each one of them by virtue of this Last Will and Testament.
[17]
On December 14, 1983, Lorenzo filed with the Regional Trial Court, Iriga, Camarines
Sur, a petition for the probate and allowance of his last will and testament wherein
Lorenzo moved that Alicia be appointed Special Administratrix of his estate.[18]
On January 18, 1984, the trial court denied the motion for the reason that the testator
Lorenzo was still alive.[19]
On January 24, 1984, finding that the will was duly executed, the trial court admitted
the will to probate.[20]
On June 11, 1985, before the proceedings could be terminated, Lorenzo died.[21]
On September 4, 1985, Paula filed with the same court a petition[22] for letters of
administration over Lorenzos estate in her favor. Paula contended (1) that she was
Lorenzos surviving spouse, (2) that the various property were acquired during their
marriage, (3) that Lorenzos will disposed of all his property in favor of Alicia and her
children, encroaching on her legitime and 1/2 share in the conjugal property.[23]
On December 13, 1985, Alicia filed in the testate proceeding (Sp. Proc. No. IR-755), a
petition for the issuance of letters testamentary.[24]
On October 14, 1985, without terminating the testate proceedings, the trial court gave
due course to Paulas petition in Sp. Proc. No. IR-888.[25]
On November 6, 13 and 20, 1985, the order was published in the newspaper Bicol Star.
[26]
On May 18, 1987, the Regional Trial Court issued a joint decision, thus:
Wherefore, considering that this court has so found that the divorce decree granted to
the late Lorenzo Llorente is void and inapplicable in the Philippines, therefore the
marriage he contracted with Alicia Fortunato on January 16, 1958 at Manila is likewise
void. This being so the petition of Alicia F. Llorente for the issuance of letters

testamentary is denied. Likewise, she is not entitled to receive any share from the
estate even if the will especially said so her relationship with Lorenzo having gained the
status of paramour which is under Art. 739 (1).
On the other hand, the court finds the petition of Paula Titular Llorente, meritorious,
and so declares the intrinsic disposition of the will of Lorenzo Llorente dated March 13,
1981
as void and declares her entitled as conjugal partner and entitled to one-half of their
conjugal properties, and as primary compulsory heir, Paula T. Llorente is also entitled to
one-third of the estate and then one-third should go to the illegitimate children, Raul,
Luz and Beverly, all surname (sic) Llorente, for them to partition in equal shares and
also entitled to the remaining free portion in equal shares.
Petitioner, Paula Llorente is appointed legal administrator of the estate of the
deceased, Lorenzo Llorente. As such let the corresponding letters of administration
issue in her favor upon her filing a bond in the amount (sic) of P100,000.00 conditioned
for her to make a return to the court within three (3) months a true and complete
inventory of all goods, chattels, rights, and credits, and estate which shall at any time
come to her possession or to the possession of any other person for her, and from the
proceeds to pay and discharge all debts, legacies and charges on the same, or such
dividends thereon as shall be decreed or required by this court; to render a true and
just account of her administration to the court within one (1) year, and at any other
time when required by the court and to perform all orders of this court by her to be
performed.
On the other matters prayed for in respective petitions for want of evidence could not
be granted.
SO ORDERED.[27]
In time, Alicia filed with the trial court a motion for reconsideration of the aforequoted
decision.[28]
On September 14, 1987, the trial court denied Alicias motion for reconsideration but
modified its earlier decision, stating that Raul and Luz Llorente are not children
legitimate or otherwise of Lorenzo since they were not legally adopted by him.[29]
Amending its decision of May 18, 1987, the trial court declared Beverly Llorente as the
only illegitimate child of Lorenzo, entitling her to one-third (1/3) of the estate and onethird (1/3) of the free portion of the estate.[30]
On September 28, 1987, respondent appealed to the Court of Appeals.[31]
On July 31, 1995, the Court of Appeals promulgated its decision, affirming with
modification the decision of the trial court in this wise:
WHEREFORE, the decision appealed from is hereby AFFIRMED with the MODIFICATION
that Alicia is declared as co-owner of whatever properties she and the deceased may
have acquired during the twenty-five (25) years of cohabitation.
SO ORDERED.[32]
On August 25, 1995, petitioner filed with the Court of Appeals a motion for
reconsideration of the decision.[33]
On March 21, 1996, the Court of Appeals,[34] denied the motion for lack of merit.
Hence, this petition.[35]

The Issue
Stripping the petition of its legalese and sorting through the various arguments raised,
[36] the issue is simple. Who are entitled to inherit from the late Lorenzo N. Llorente?
We do not agree with the decision of the Court of Appeals. We remand the case to the
trial court for ruling on the intrinsic validity of the will of the deceased.
The Applicable Law
The fact that the late Lorenzo N. Llorente became an American citizen long before and
at the time of: (1) his divorce from Paula; (2) marriage to Alicia; (3) execution of his will;
and (4) death, is duly established, admitted and undisputed.
Thus, as a rule, issues arising from these incidents are necessarily governed by foreign
law.
The Civil Code clearly provides:
Art. 15. Laws relating to family rights and duties, or to the status, condition and legal
capacity of persons are binding upon citizens of the Philippines, even though living
abroad.
Art. 16. Real property as well as personal property is subject to the law of the country
where it is situated.
However, intestate and testamentary succession, both with respect to the order of
succession and to the amount of successional rights and to the intrinsic validity of
testamentary provisions, shall be regulated by the national law of the person whose
succession is under consideration, whatever may be the nature of the property and
regardless of the country wherein said property may be found. (emphasis ours)
True, foreign laws do not prove themselves in our jurisdiction and our courts are not
authorized to take judicial notice of them. Like any other fact, they must be alleged and
proved.[37]
While the substance of the foreign law was pleaded, the Court of Appeals did not admit
the foreign law. The Court of Appeals and the trial court called to the fore the renvoi
doctrine, where the case was referred back to the law of the decedents domicile, in this
case, Philippine law.
We note that while the trial court stated that the law of New York was not sufficiently
proven, in the same breath it made the categorical, albeit equally unproven statement
that American law follows the domiciliary theory hence, Philippine law applies when
determining the validity of Lorenzos will.[38]
First, there is no such thing as one American law. The "national law" indicated in Article
16 of the Civil Code cannot possibly apply to general American law. There is no such
law governing the validity of testamentary provisions in the United States. Each State
of the union has its own law applicable to its citizens and in force only within the State.
It can therefore refer to no other than the law of the State of which the decedent was a
resident.[39] Second, there is no showing that the application of the renvoi doctrine is
called for or required by New York State law.
The trial court held that the will was intrinsically invalid since it contained dispositions
in favor of Alice, who in the trial courts opinion was a mere paramour. The trial court
threw the will out, leaving Alice, and her two children, Raul and Luz, with nothing.

The Court of Appeals also disregarded the will. It declared Alice entitled to one half
(1/2) of whatever property she and Lorenzo acquired during their cohabitation, applying
Article 144 of the Civil Code of the Philippines.
The hasty application of Philippine law and the complete disregard of the will, already
probated as duly executed in accordance with the formalities of Philippine law, is fatal,
especially in light of the factual and legal circumstances here obtaining.
Validity of the Foreign Divorce
In Van Dorn v. Romillo, Jr.[40] we held that owing to the nationality principle embodied
in Article 15 of the Civil Code, only Philippine nationals are covered by the policy
against absolute divorces, the same being considered contrary to our concept of public
policy and morality. In the same case, the Court ruled that aliens may obtain divorces
abroad, provided they are valid according to their national law.
Citing this landmark case, the Court held in Quita v. Court of Appeals,[41] that once
proven that respondent was no longer a Filipino citizen when he obtained the divorce
from petitioner, the ruling in Van Dorn would become applicable and petitioner could
very well lose her right to inherit from him.
In Pilapil v. Ibay-Somera,[42] we recognized the divorce obtained by the respondent in
his country, the Federal Republic of Germany. There, we stated that divorce and its
legal effects may be recognized in the Philippines insofar as respondent is concerned in
view of the nationality principle in our civil law on the status of persons.
For failing to apply these doctrines, the decision of the Court of Appeals must be
reversed.[43] We hold that the divorce obtained by Lorenzo H. Llorente from his first
wife Paula was valid and recognized in this jurisdiction as a matter of comity. Now, the
effects of this divorce (as to the succession to the estate of the decedent) are matters
best left to the determination of the trial court.
Validity of the Will
The Civil Code provides:
Art. 17. The forms and solemnities of contracts, wills, and other public instruments
shall be governed by the laws of the country in which they are executed.
When the acts referred to are executed before the diplomatic or consular officials of the
Republic of the Philippines in a foreign country, the solemnities established by
Philippine laws shall be observed in their execution. (underscoring ours)
The clear intent of Lorenzo to bequeath his property to his second wife and children by
her is glaringly shown in the will he executed. We do not wish to frustrate his wishes,
since he was a foreigner, not covered by our laws on family rights and duties, status,
condition and legal capacity.[44]
Whether the will is intrinsically valid and who shall inherit from Lorenzo are issues best
proved by foreign law which must be pleaded and proved. Whether the will was
executed in accordance with the formalities required is answered by referring to
Philippine law. In fact, the will was duly probated.
As a guide however, the trial court should note that whatever public policy or good
customs may be involved in our system of legitimes, Congress did not intend to extend
the same to the succession
of foreign nationals. Congress specifically left the amount of successional rights to the
decedent's national law.[45]

Having thus ruled, we find it unnecessary to pass upon the other issues raised.
The Fallo
WHEREFORE, the petition is GRANTED. The decision of the Court of Appeals in CA-G. R.
SP No. 17446 promulgated on July 31, 1995 is SET ASIDE.
In lieu thereof, the Court REVERSES the decision of the Regional Trial Court and
RECOGNIZES as VALID the decree of divorce granted in favor of the deceased Lorenzo
N. Llorente by the Superior Court of the State of California in and for the County of San
Diego, made final on December 4, 1952.
Further, the Court REMANDS the cases to the court of origin for determination of the
intrinsic validity of Lorenzo N. Llorentes will and determination of the parties
successional rights allowing proof of foreign law with instructions that the trial court
shall proceed with all deliberate dispatch to settle the estate of the deceased within the
framework of the Rules of Court.
No costs.
SO ORDERED.

VI.CONFLICT OF RULES PRINCIPLE OF TERRITORIALITY NATIONALITY PRINCIPLE

23.

ROEHR V RODRIGUEZ GR 142820

QUISUMBING, J.:
At the core of the present controversy are issues of (a) grave abuse of discretion allegedly
committed by public respondent and (b) lack of jurisdiction of the regional trial court, in
matters that spring from a divorce decree obtained abroad by petitioner.
In this special civil action for certiorari, petitioner assails (a) the order1 dated September
30, 1999 of public respondent Judge Josefina Guevara-Salonga, Presiding Judge of Makati
Regional Trial Court,2 Branch 149, in Civil Case No. 96-1389 for declaration of nullity of
marriage, and (b) the order3 dated March 31, 2000 denying his motion for reconsideration.
The assailed orders partially set aside the trial courts order dismissing Civil Case No. 961389, for the purpose of resolving issues relating to the property settlement of the
spouses and the custody of their children.
Petitioner Wolfgang O. Roehr, a German citizen and resident of Germany, married private
respondent Carmen Rodriguez, a Filipina, on December 11, 1980 in Hamburg, Germany.
Their marriage was subsequently ratified on February 14, 1981 in Tayasan, Negros
Oriental.4 Out of their union were born Carolynne and Alexandra Kristine on November 18,
1981 and October 25, 1987, respectively.
On August 28, 1996, private respondent filed a petition5 for declaration of nullity of
marriage before the Regional Trial Court (RTC) of Makati City. On February 6, 1997,
petitioner filed a motion to dismiss,6 but it was denied by the trial court in its order7 dated
May 28, 1997.
On June 5, 1997, petitioner filed a motion for reconsideration, but was also denied in an
order8 dated August 13, 1997. On September 5, 1997, petitioner filed a petition for
certiorari with the Court of Appeals. On November 27, 1998, the appellate court denied
the petition and remanded the case to the RTC.
Meanwhile, petitioner obtained a decree of divorce from the Court of First Instance of
Hamburg-Blankenese, promulgated on December 16, 1997.
The decree provides in part:
[T]he Court of First Instance, Hamburg-Blankenese, Branch 513, has ruled through Judge
van Buiren of the Court of First Instance on the basis of the oral proceedings held on 4 Nov.
1997:
The marriage of the Parties contracted on 11 December 1980 before the Civil Registrar of
Hamburg-Altona is hereby dissolved.
The parental custody for the children
Carolynne Roehr, born 18 November 1981
Alexandra Kristine Roehr, born on 25 October 1987
is granted to the father.
The litigation expenses shall be assumed by the Parties.9
In view of said decree, petitioner filed a Second Motion to Dismiss on May 20, 1999 on the
ground that the trial court had no jurisdiction over the subject matter of the action or suit

as a decree of divorce had already been promulgated dissolving the marriage of petitioner
and private respondent.
On July 14, 1999, Judge Guevara-Salonga issued an order granting petitioners motion to
dismiss. Private respondent filed a Motion for Partial Reconsideration, with a prayer that
the case proceed for the purpose of determining the issues of custody of children and the
distribution of the properties between petitioner and private respondent.
On August 18, 1999, an Opposition to the Motion for Partial Reconsideration was filed by
the petitioner on the ground that there is nothing to be done anymore in the instant case
as the marital tie between petitioner Wolfgang Roehr and respondent Ma. Carmen D.
Rodriguez had already been severed by the decree of divorce promulgated by the Court of
First Instance of Hamburg, Germany on December 16, 1997 and in view of the fact that
said decree of divorce had already been recognized by the RTC in its order of July 14,
1999, through the implementation of the mandate of Article 26 of the Family Code,10
endowing the petitioner with the capacity to remarry under the Philippine law.
On September 30, 1999, respondent judge issued the assailed order partially setting aside
her order dated July 14, 1999 for the purpose of tackling the issues of property relations of
the spouses as well as support and custody of their children. The pertinent portion of said
order provides:
Acting on the Motion for Partial Reconsideration of the Order dated July 14, 1999 filed by
petitioner thru counsel which was opposed by respondent and considering that the second
paragraph of Article 26 of the Family Code was included as an amendment thru Executive
Order 227, to avoid the absurd situation of a Filipino as being still married to his or her
alien spouse though the latter is no longer married to the Filipino spouse because he/she
had obtained a divorce abroad which is recognized by his/her national law, and
considering further the effects of the termination of the marriage under Article 43 in
relation to Article 50 and 52 of the same Code, which include the dissolution of the
property relations of the spouses, and the support and custody of their children, the Order
dismissing this case is partially set aside with respect to these matters which may be
ventilated in this Court.
SO ORDERED.11 (Emphasis supplied.)
Petitioner filed a timely motion for reconsideration on October 19, 1999, which was denied
by respondent judge in an order dated March 31, 2000.12
Petitioner ascribes lack of jurisdiction of the trial court and grave abuse of discretion on
the part of respondent judge. He cites as grounds for his petition the following:
1. Partially setting aside the order dated July 14, 1999 dismissing the instant case is not
allowed by 1997 Rules of Civil Procedure.13
2. Respondent Maria Carmen Rodriguez by her motion for Partial Reconsideration had
recognized and admitted the Divorce Decision obtained by her ex-husband in Hamburg,
Germany.14
3. There is nothing left to be tackled by the Honorable Court as there are no conjugal
assets alleged in the Petition for Annulment of Marriage and in the Divorce petition, and
the custody of the children had already been awarded to Petitioner Wolfgang Roehr.15
Pertinent in this case before us are the following issues:
1. Whether or not respondent judge gravely abused her discretion in issuing her order
dated September 30, 1999, which partially modified her order dated July 14, 1999; and

2. Whether or not respondent judge gravely abused her discretion when she assumed and
retained jurisdiction over the present case despite the fact that petitioner has already
obtained a divorce decree from a German court.
On the first issue, petitioner asserts that the assailed order of respondent judge is
completely inconsistent with her previous order and is contrary to Section 3, Rule 16,
Rules of Civil Procedure, which provides:
Sec. 3. Resolution of motion - After the hearing, the court may dismiss the action or claim,
deny the motion, or order the amendment of the pleading.
The court shall not defer the resolution of the motion for the reason that the ground relied
upon is not indubitable.
In every case, the resolution shall state clearly and distinctly the reasons therefor.
(Emphasis supplied.)
Petitioner avers that a courts action on a motion is limited to dismissing the action or
claim, denying the motion, or ordering the amendment of the pleading.
Private respondent, on her part, argues that the RTC can validly reconsider its order dated
July 14, 1999 because it had not yet attained finality, given the timely filing of
respondents motion for reconsideration.
Pertinent to this issue is Section 3 in relation to Section 7, Rule 37 of the 1997 Rules of
Civil Procedure, which provides:
Sec. 3. Action upon motion for new trial or reconsideration.The trial court may set aside
the judgment or final order and grant a new trial, upon such terms as may be just, or may
deny the motion. If the court finds that excessive damages have been awarded or that the
judgment or final order is contrary to the evidence or law, it may amend such judgment or
final order accordingly.
Sec. 7. Partial new trial or reconsideration.If the grounds for a motion under this Rule
appear to the court to affect the issues as to only a part, or less than all of the matters in
controversy, or only one, or less than all, of the parties to it, the court may order a new
trial or grant reconsideration as to such issues if severable without interfering with the
judgment or final order upon the rest. (Emphasis supplied.)
It is clear from the foregoing rules that a judge can order a partial reconsideration of a
case that has not yet attained finality. Considering that private respondent filed a motion
for reconsideration within the reglementary period, the trial court's decision of July 14,
1999 can still be modified. Moreover, in Saado v. Court of Appeals,16we held that the
court could modify or alter a judgment even after the same has become executory
whenever circumstances transpire rendering its decision unjust and inequitable, as where
certain facts and circumstances justifying or requiring such modification or alteration
transpired after the judgment has become final and executory17 and when it becomes
imperative in the higher interest of justice or when supervening events warrant it.18 In our
view, there are even more compelling reasons to do so when, as in this case, judgment
has not yet attained finality.
Anent the second issue, petitioner claims that respondent judge committed grave abuse of
discretion when she partially set aside her order dated July 14, 1999, despite the fact that
petitioner has already obtained a divorce decree from the Court of First Instance of
Hamburg, Germany.
In Garcia v. Recio,19 Van Dorn v. Romillo, Jr.,20 and Llorente v. Court of Appeals,21 we
consistently held that a divorce obtained abroad by an alien may be recognized in our

jurisdiction, provided such decree is valid according to the national law of the foreigner.
Relevant to the present case is Pilapil v. Ibay-Somera,22 where this Court specifically
recognized the validity of a divorce obtained by a German citizen in his country, the
Federal Republic of Germany. We held in Pilapil that a foreign divorce and its legal effects
may be recognized in the Philippines insofar as respondent is concerned in view of the
nationality principle in our civil law on the status of persons.
In this case, the divorce decree issued by the German court dated December 16, 1997 has
not been challenged by either of the parties. In fact, save for the issue of parental custody,
even the trial court recognized said decree to be
valid and binding, thereby endowing private respondent the capacity to remarry. Thus, the
present controversy mainly relates to the award of the custody of their two children,
Carolynne and Alexandra Kristine, to petitioner.
As a general rule, divorce decrees obtained by foreigners in other countries are
recognizable in our jurisdiction, but the legal effects thereof, e.g. on custody, care and
support of the children, must still be determined by our courts.23 Before our courts can
give the effect of res judicata to a foreign judgment, such as the award of custody to
petitioner by the German court, it must be shown that the parties opposed to the
judgment had been given ample opportunity to do so on grounds allowed under Rule 39,
Section 50 of the Rules of Court (now Rule 39, Section 48, 1997 Rules of Civil Procedure),
to wit:
SEC. 50. Effect of foreign judgments. - The effect of a judgment of a tribunal of a foreign
country, having jurisdiction to pronounce the judgment is as follows:
(a) In case of a judgment upon a specific thing, the judgment is conclusive upon the title
to the thing;
(b) In case of a judgment against a person, the judgment is presumptive evidence of a
right as between the parties and their successors in interest by a subsequent title; but the
judgment may be repelled by evidence of a want of jurisdiction, want of notice to the
party, collusion, fraud, or clear mistake of law or fact.
It is essential that there should be an opportunity to challenge the foreign judgment, in
order for the court in this jurisdiction to properly determine its efficacy. In this jurisdiction,
our Rules of Court clearly provide that with respect to actions in personam, as
distinguished from actions in rem, a foreign judgment merely constitutes prima facie
evidence of the justness of the claim of a party and, as such, is subject to proof to the
contrary.24
In the present case, it cannot be said that private respondent was given the opportunity to
challenge the judgment of the German court so that there is basis for declaring that
judgment as res judicata with regard to the rights of petitioner to have parental custody of
their two children. The proceedings in the German court were summary. As to what was
the extent of private respondents participation in the proceedings in the German court,
the records remain unclear. The divorce decree itself states that neither has she
commented on the proceedings25 nor has she given her opinion to the Social Services
Office.26 Unlike petitioner who was represented by two lawyers, private respondent had
no counsel to assist her in said proceedings.27 More importantly, the divorce judgment
was issued to petitioner by virtue of the German Civil Code provision to the effect that
when a couple lived separately for three years, the marriage is deemed irrefutably
dissolved. The decree did not touch on the issue as to who the offending spouse was.
Absent any finding that private respondent is unfit to obtain custody of the children, the
trial court was correct in setting the issue for hearing to determine the issue of parental
custody, care, support and education mindful of the best interests of the children. This is in

consonance with the provision in the Child and Youth Welfare Code that the childs welfare
is always the paramount consideration in all questions concerning his care and custody. 28
On the matter of property relations, petitioner asserts that public respondent exceeded
the bounds of her jurisdiction when she claimed cognizance of the issue concerning
property relations between petitioner and private respondent. Private respondent herself
has admitted in Par. 14 of her petition for declaration of nullity of marriage dated August
26, 1996 filed with the RTC of Makati, subject of this case, that: "[p]etitioner and
respondent have not acquired any conjugal or community property nor have they incurred
any debts during their marriage."29 Herein petitioner did not contest this averment. Basic
is the rule that a court shall grant relief warranted by the allegations and the proof.30
Given the factual admission by the parties in their pleadings that there is no property to be
accounted for, respondent judge has no basis to assert jurisdiction in this case to resolve a
matter no longer deemed in controversy.
In sum, we find that respondent judge may proceed to determine the issue regarding the
custody of the two children born of the union between petitioner and private respondent.
Private respondent erred, however, in claiming cognizance to settle the matter of property
relations of the parties, which is not at issue.
WHEREFORE, the orders of the Regional Trial Court of Makati, Branch 149, issued on
September 30, 1999 and March 31, 2000 are AFFIRMED with MODIFICATION. We hereby
declare that the trial court has jurisdiction over the issue between the parties as to who
has parental custody, including the care, support and education of the children, namely
Carolynne and Alexandra Kristine Roehr. Let the records of this case be remanded
promptly to the trial court for continuation of appropriate proceedings. No pronouncement
as to costs.
SO ORDERED

Lex Situs law of the place where property is situated; the general rule is that lands and other
immovables are governed by the law of the state where they are situated
Lex Loci Celebrationis law of the place where the contract is made
Renvoi Doctrine doctrine whereby a jural matter is presented which the conflict of laws rules of
the forum refer to a foreign law which in turn, refers the matter back to the law of the forum or a
third state. When reference is made back to the law of the forum, this is said to be remission
while reference to a third state is called transmission.
Nationality Theory by virtue of which the status and capacity of an individual are generally
governed by the law of his nationality. This is principally adopted in the RP

Domiciliary Theory in general, the status, condition, rights, obligations, & capacity of a person
should be governed by the law of his domicile.

WAYS OF DEALING WITH A CONFLICTS PROBLEM:

1.
Dismiss the case for lack of jurisdiction, or on the ground of forum non-conveniens

DOCTRINE OF FORUM NON CONVENIENS the forum is inconvenient; the ends of justice would be best
served by trial in another forum; the controversy may be more suitably tried elsewhere
1.
Assume jurisdiction and apply either the law of the forum or of another state
1.
i.
A specific law of the forum decrees that internal law should apply
1.
APPLY INTERNAL LAW forum law should be applied whenever there is good reason to do so; there is a
good reason when any one of the following factors is present:
Examples:

Article. 16 of the Civil Code real and personal property subject to the law of the country where they
are situated and testamentary succession governed by lex nationalii

Article 829 of the Civil Code makes revocation done outside Philippines valid according to law of the
place where will was made or lex domicilii

Article 819 of the Civil Code prohibits Filipinos from making joint wills even if valid in foreign country
1.
ii. The proper foreign law was not properly pleaded and proved
NOTICE AND PROOF OF FOREIGN LAW

As a general rule, courts do not take judicial notice of foreign laws; Foreign laws must be pleaded and
proved

Effect of failure to plead and prove foreign law (3 alternatives) of the forum court:
(a) Dismiss the case for inability to establish cause of action
(b) Assume that the foreign law of the same as the law of the forum
(c) Apply the law of the forum
1.

The case falls under any of the exceptions to the application of foreign law

Exceptions to application of foreign law:

(a) The foreign law is contrary to the public policy of the forum
(b) The foreign law is procedural in nature
(c) The case involves issues related to property, real or personal (lex situs)
(d) The issue involved in the enforcement of foreign claim is fiscal or administrative
(e) The foreign law or judgment is contrary to good morals (contra bonos mores)
(f) The foreign law is penal in character
(g) When application of the foreign law may work undeniable injustice to the citizens of the forum
(h) When application of the foreign law might endanger the vital interest of the state
2.

APPLY FOREIGN LAW when properly pleaded and proved

THEORIES WHY FOREIGN LAW SHOULD BE GIVEN EFFECT

1.
Theory of Comity foreign law is applied because of its convenience & because we want to
giveprotection to our citizens, residents, & transients in our land
2.
Theory of Vested Rights we seek to enforce not foreign law itself but the rights that have been
vested under such foreign law; an act done in another state may give rise to the existence of a right if
the laws of that state crated such right.

3.

Theory of Local Law adherents of this school of thought believe that we apply foreign law not
because it is foreign, but because our laws, by applying similar rules, require us to do so; hence, it is as
if the foreign law has become part & parcel of our local law
4.
Theory of Harmony of Laws theorists here insist that in many cases we have to apply the foreign
laws so that wherever a case is decided, that is, irrespective of the forum, the solution should be
approximately the same; thus, identical or similar solutions anywhere & everywhere. When the goal is
realized, there will be harmony of laws
5.
Theory of Justice the purpose of all laws, including Conflict of Laws, is the dispensing of justice; if
this can be attained in may cases applying the proper foreign law, we must do so

Rules on Marriage as a Contract

FACTUAL SITUATION

Celebrat
ed

POINT OF CONTACT

Between Filipinos

Lex loci celebrationis is without

prejudice to the exceptions under
Articles 25, 35 (1, 4, 5 & 6), 36, 37 &
38 of the Family Code (bigamous &
incestuous marriages) & consular
marriages

Between Foreigners

Lex loci celebrationis EXCEPT if the

marriage is:
1.
Highly immoral (like
bigamous/ polygamous
marriages)
2.
Universally considered
incestuous (between brothersister, and ascendantsdescendants)

Mixed

Apply 1 (b) to uphold validity of

marriage

Between Foreigners

National law (Article 21, FC)

PROVIDED the marriage is not highly
immoral or universally considered
incestuous)

Mixed

National law of Filipino (otherwise

public policy may be militated
against)

Marriage by proxy (NOTE: a marriage

by proxy is considered celebrated
where the proxy appears

Lex loci celebrationis (with prejudice

to the foregoing rules)

Abroad

Celebrat
ed in RP

Rules on Marriage as a Status

FACTUAL SITUATION

Personal rights & obligations between

husband & wife

POINT OF CONTACT
National of husband(Note: Effect of
subsequent change of nationality:
1.
If both will have a new
nationality the new one

2.

If only one will change the last

common nationality
3.
If no common nationality
nationality of husband at the time
of wedding)

2
Property relations bet husband & wife

National law of husband without

prejudice to what the CC provides
concerning REAL property located in the
RP (Article 80) (NOTE: Change of
nationality has NO EFFECT. This is
the DOCTRINE OF IMMUTABILITY IN THE
MATRIMONIAL PROPERTY REGIME)

Rules on Property
FACTUAL SITUATION
Real property

Exceptions

POINT OF CONTACT
Lex rei sitae (Article 16, CC)

Successional rights

National law of decedent (Article 16 par. 2,

CC)

Capacity to succeed

National law of decedent (Article. 1039)

Contracts involving real property which do

not deal with the title thereto

The law intended will be the proper law of

the contract (lex loci voluntantis orlex loci
intentionis)

Contracts where the real property is given

as security

The principal contract (usually loan) is

governed by the proper law oft the
contract (lex loci voluntatis or lex loci
intentionis)NOTE: the mortgage itself is
governed by lex rei sitae. There is a
possibility that the principal contract is
valid but the mortgage is void; or it may be
the other way around. If the principal
contract is void, the mortgage will also be
void (for lack of proper cause or
consideration), although by itself, the
mortgage could have been valid.

Tangible personal property (choses in possession)

1
In General

Lex rei sitae (Article. 16, CC)

Exceptions: same as those for real property

EXCEPTION: same as those for real

property EXCEPT that in the example
concerning mortgage, the same must be
changed to pledge of personal property)

Means of Transportation

Vessels

Law of the flag (or in some cases, place of

registry)

Law of the depot (storage place for

supplies or resting place)

Other means
Things in transitu (these things have a
changing status because they move)
Loss, destruction, deterioration

Law of the destination (Article. 1753, CC)

Validity & effect of the seizure of the

goods

Locus regit actum (where seized) because

said place is their temporarysitus

Disposition or alienage of the goods

Lex loci volutantis or lex loci intentionis

because here there is a contract

FACTUAL SITUATION

POINT OF CONTACT

INTangIBLE PERSONAL PROPERTY (CHOSES IN

ACTION)

Recovery of debts or involuntary

assignment of debts (garnishment)

Where debtor may be effectively served

with summons (usually the domicile)

Voluntary assignment of debts

Lex loci voluntatis or lex loci

intentionis(proper law of the contract)

2
Other Theories:
1.
National law of the debtor or creditor
2.
Domicile of the debtor or creditor
3.
Lex loci celebrationis
4.
Lex loci solutionis

3
Taxation of debts

Domicile of creditor

Administration of debts

Lex situs of assets of the debtor (for

these assets can be held liable for the
debts)

Negotiability or non-negotiability of an
instrument

The right embodied in the instrument

(for example, in the case of a Swedish
bill of exchange, Swedish law determines
its negotiability)

Validity of transfer, delivery or

negotiation of the instrument

In general, situs of the instrument at the

time of transfer, delivery or negotiation

Effect on a corporation of the sale of

corporate shares

Law of the place incorporation

Effect between the parties of the sale of

corporate shares

Lex loci voluntatis or lex loci intentionis

(proper law of the contract) for this is
really a contract; usually this is the place
where the certificate is delivered)

Taxation on the dividends of corporate

shares

Law of the place of incorporation

Taxation on the income from the sale of

corporate shares

Law of the place where the sale was

consummated

Franchises

Law of the place that granted them

Goodwill of the business & taxation

thereto

Law of the place where the business is

carried on

Patents, copyrights, trademarks, trade

names

In the absence of a treaty, they are

protected only by the state that granted
themNOTE: foreigners may sue for
infringement of trademarks and trade
names in the RP ONLY IF Filipinos are
granted reciprocal concessions in the
state of the foreigners

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Wills, Succession & Administration of Conflict Rules

FACTUAL SITUATION

POINT OF CONTACT

Extrinsic Validity of Wills

Made by an alien abroad

Lex nationalii OR lex domicilii OR RP law

(Article 816, CC), OR lex loci
celebrationis(Article 17(1))

Made by a Filipino abroad

Lex nationalii OR lex loci

celebrationis(Article 815)

Made by an alien in the RP

Lex nationalii OR lex loci

celebrationis(Article 817)

FACTUAL SITUATION

POINT OF CONTACT

Extrinsic Validity of Joint Wills (made in the

same instrument)

1
Made by Filipinos abroad

Lex nationalii (void, even if valid where

made) (Article 819)

Made by aliens abroad

Valid if valid according to lex

domicilii orlex loci celebrationis (Article
819)

Made by aliens in the RP

Lex loci celebrationis therefore void even

if apparently allowed by Article 817
because the prohibition on joint wills is a
clear expression of public policy

Intrinsic Validity of Wills

Lex nationalii of the deceased

regardless of the LOCATION & NATURE of
the property (Article 16 (2))

Capacity to Succeed

Lex nationalii of the deceased not of

the heir (Article 1039)

Revocation of Wills

1
If done in the RP

Lex loci actus (of the revocation) (Article.

829)

If done OUTSIDE the RP

1.

By a NON-DOMICILIARY

Lex loci celebrationis (of the making of

the will, NOT revocation), OR lex
domicilii(Article 829)

1.

By a DOMICILIARY of the RP

Lex domicilii (RP law) OR lex loci

actus (of the revocation) (Article 17)

2
Probate of Wills Made Abroad

If not yet probated abroad

Lex fori of the RP applies as to the

procedural aspects, i.e., the will must be
fully probated here & due execution must
be shown

If already probated abroad

Lex fori of the RP again applies as to the

procedural aspects; must also be
probated here, but instead of proving due
execution, generally it is enough to ask
for the enforcement here of the foreign
judgment on the probate abroad

2
Executors and Administrators
Where appointed

Place where domiciled at death or incase

of non-domiciliary, where assets are

found
Co-extensive with the qualifying of the
appointing court powers may only be
exercised within the territorial
jurisdiction of the court concernedNOTE:
these rules also apply to principal,
domiciliary, or ancillary administrators &
receivers even in non-successive cases

2
Powers

Rules on Obligation and Contracts

FACTUAL SITUATION
Formal or Extrinsic Validity

POINT OF CONTACT
Lex loci celebrationis (Article 17 {1})

Exceptions
1.

Alienation & encumbrance of

property

1.

Lex situs (Article 16 [1])

Consular contracts

Law of the RP (if made in RP consulates)

Capacity of Contracting Parties

National law (Article 15) without

prejudice to the case of Insular
Government v Frank 13 P 236, where the
SC adhered to the theory of lex loci
celebrationis

Exception
Alienation & encumbrance of property
Intrinsic validity (including interpretation of
the instruments, and amt. of damages for
breach)

Lex situs (Article 16 {1})

Proper law of the contract lex
contractus(in the broad sense), meaning
the lex voluntatis or lex loci intentionis

Other Theories are:

1.
Lex loci celebrationis (defect: this makes possible the evasion of the national law)
2.
Lex nationalii (defect: this may impede commercial transactions)
3.
Lex loci solutionis (law of the place of performance) (defect: there may be several
places of performance
4.
Prof Minors solution:
5.
Perfection lex loci celebrationis
6.
Cause or consideration lex loci considerations
7.
Performance lex loci solutionis (defect: this theory combines the defect of the
others)

Rules on Torts
FACTUAL SITUATION
Liability & damages for torts in

POINT OF CONTACT
Lex loci delicti (law of the place where the

generalNOTE: The locus delicti (place of

commission of torts) is faced by the problem
of characterization. In civil law countries,
the locus delicti is generally where the act
began; in common law countries, it is where
the act first became effective

delict was committed)NOTE: liability for

foreign torts may be enforced in the RP if:
1.
The tort is not penal in character
2.
If the enforcement of the tortious
liability wont contravene our public
policy
3.
If our judicial machinery is adequate
for such enforcement

Rules on Crimes
FACTUAL SITUATION
Essential elements of a crime and penalties

POINT OF CONTACT
Generally where committed (locus regit
actum)

Theories as to what court has jurisdiction:

1.
Territoriality theory where the crime was committed
2.
Nationality theory country which the criminal is citizen or a subject
3.
Real theory any state whose penal code has been violated has jurisdiction, where
the crime was committed inside or outside its territory
4.
Protective theory any state whose national interests may be jeopardized has
jurisdiction so that it may protect itself
5.
Cosmopolitan or universality theory state where the criminal is found or which has
his custody has jurisdiction
6.
Passive personality theory the state of which the victim is a citizen or subject has
jurisdiction

NOTE: In the RP, we follow the territoriality theory in general; exception: Article 2, RPC,
stresses the protective theory
The locus delicti of certain crimes

Frustrated an consummated, homicide,

murder, infanticide & parricide

Where the victim was injured (not where

the aggressor wielded his weapon)

Attempted homicide, etc.

Where the intended victim was (not where

the aggressor was situated) so long as
the weapon or the bullet either touched
him or fell inside the territory where he
was

Bigamy

Where the illegal marriage was performed

Theft & robbery

Where the property was unlawfully taken

from the victim (not the place to which
the criminal went after the commission of
the crime)

Estafa or swindling thru false

representation

Where the object of the crime was

received (not where the false
representations were made)

Conspiracy to commit treason, rebellion,

or seditionNOTE: Other conspiracies are
NOT penalized by our laws

Where the conspiracy was formed (not

where the overt act of treason, rebellion
or sedition was committed)

Libel

Where published or circulated

Continuing crime

Any place where the offense begins, exists

or continues

Complex crime

Any place where any of the essential

elements of the crime took place

9
Rules on Juridical Persons
FACTUAL SITUATION

POINT OF CONTACT

Corporations

Powers and liabilities

General rule: the law of the place of

incorporationEXCEPTIONS:
1.
For constitutional purposes
even of the corporation was
incorporated in the RP, it is nor
deemed a Filipino corporation &
therefore cant acquire land,
exploit our natural resources, 7
operate public utilities unless 60%
of capital if Filipino owned
2.
For wartime purposes we pierce
the corporation veil & go to the
nationality of the controlling
stockholders to determine if the
corporation is an enemy (CONTROL
TEST)

Formation of the corporation (requisites);

kind of stocks, transfer of stocks to bind
the corporation, issuance, amount &
legality & dividends, powers & duties of
members, stockholders and officers

Law of the place of incorporation

Validity of corporate acts & contracts

(including ultra vires acts)

Law of the place of incorporation & law

of the place of performance (the act or
contract must be authorized by BOTH
laws)

Right to sue & amenability to court

processes & suits against it

Lex fori

Manner & effect of dissolution

Law of the place of incorporation

provided that the public policy of the

forum is not militated against

Domicile

If not fixed by the law creating or

recognizing the corporation or by any
other provision the domicile is where it
is legal representation is established or
where it exercises its principal functions
(Article. 15)

Receivers (appointment & powers)

Principal receiver is appointed by the

courts of the state of incorporation;
ancillary receivers, by the courts of any
state where the corporation has assets
(authority is CO-EXTENSIVE) w/ the
authority of the appointing court

NOTE: Theories on the personal and/or governing law of corporations:

1.
Law of the place of incorporation (this is generally the RP rule)
2.
Law of the place or center of management (center for administration or siege social)
(center office principle)
3.
Law of the place of exploitation (exploitation centre or siege d exploitation)
Partnerships
The existence or non-existence of legal
personality of the firm; the capacity to
contract; liability of the firm & the
partners to 3rd persons

The personal law of the partnership, i.e.,

the law of the place where it was
created (Article 15 of the Code of
Commerce) (Subject to the exceptions
given above as in the case of corps.)

Creation of branches in the RP; validity &

effect of the branches commercial
transaction; & the jurisdiction of the
court

RP law (law of the place where branches

were created) (Article 15, Code of
Commerce)

Dissolution, winding up, & termination of

branches in the RP

RP law (Article 15, Code of Commerce)

Domicile

If not fixed by the law creating or

recognizing the partnership or by any
other provision the domicile is where it
is legal representation is established or
where it exercises its principal functions
(Article. 15)

Receivers

RP law insofar as the assets in the RP are

concerned can be exercised as such only
in the RP

Foundations (combination of capital

independent of individuals, usually not for
profit)

Personal law of the foundation (place of

principal center of administration)