Republic of the Philippines SUPREME COURT Manila EN BANC G.R. No.

L-19650 September 29, 1966

CALTEX (PHILIPPINES), INC., petitioner-appellee, vs. ENRICO PALOMAR, in his capacity as THE POSTMASTER GENERAL, respondent-appellant. Office of the Solicitor General for respondent and appellant. Ross, Selph and Carrascoso for petitioner and appellee.

CASTRO, J.: In the year 1960 the Caltex (Philippines) Inc. (hereinafter referred to as Caltex) conceived and laid the groundwork for a promotional scheme calculated to drum up patronage for its oil products. Denominated "Caltex Hooded Pump Contest", it calls for participants therein to estimate the actual number of liters a hooded gas pump at each Caltex station will dispense during a specified period. Employees of the Caltex (Philippines) Inc., its dealers and its advertising agency, and their immediate families excepted, participation is to be open indiscriminately to all "motor vehicle owners and/or licensed drivers". For the privilege to participate, no fee or consideration is required to be paid, no purchase of Caltex products required to be made. Entry forms are to be made available upon request at each Caltex station where a sealed can will be provided for the deposit of accomplished entry stubs. A three-staged winner selection system is envisioned. At the station level, called "Dealer Contest", the contestant whose estimate is closest to the actual number of liters dispensed by the hooded pump thereat is to be awarded the first prize; the next closest, the second; and the next, the third. Prizes at this level consist of a 3-burner kerosene stove for first; a thermos bottle and a Ray-O-Vac hunter lantern for second; and an Everready Magnet-lite flashlight with batteries and a screwdriver set for third. The first-prize winner in each station will then be qualified to join in the "Regional Contest" in seven different regions. The winning stubs of the qualified contestants in each region will be deposited in a sealed can from which the first-prize, second-prize and third-prize winners of that region will be drawn. The regional first-prize winners will be entitled to make a three-day all-expenses-paid round trip to Manila, accompanied by their respective Caltex dealers, in order to take part in the "National Contest". The regional second-prize and third-prize winners will receive cash prizes of P500 and P300, respectively. At the national level, the stubs of the seven regional first-prize winners will be placed inside a sealed can from which the drawing for the final first-prize, second-prize and third-prize winners will be made. Cash prizes in store for winners at this final stage are: P3,000 for first; P2,000 for second; Pl,500 for third; and P650 as consolation prize for each of the remaining four participants. Foreseeing the extensive use of the mails not only as amongst the media for publicizing the contest but also for the transmission of communications relative thereto, representations were made by

Caltex with the postal authorities for the contest to be cleared in advance for mailing, having in view sections 1954(a), 1982 and 1983 of the Revised Administrative Code, the pertinent provisions of which read as follows: SECTION 1954. Absolutely non-mailable matter. No matter belonging to any of the following classes, whether sealed as first-class matter or not, shall be imported into the Philippines through the mails, or to be deposited in or carried by the mails of the Philippines, or be delivered to its addressee by any officer or employee of the Bureau of Posts: Written or printed matter in any form advertising, describing, or in any manner pertaining to, or conveying or purporting to convey any information concerning any lottery, gift enterprise, or similar scheme depending in whole or in part upon lot or chance, or any scheme, device, or enterprise for obtaining any money or property of any kind by means of false or fraudulent pretenses, representations, or promises. "SECTION 1982. Fraud orders.Upon satisfactory evidence that any person or company is engaged in conducting any lottery, gift enterprise, or scheme for the distribution of money, or of any real or personal property by lot, chance, or drawing of any kind, or that any person or company is conducting any scheme, device, or enterprise for obtaining money or property of any kind through the mails by means of false or fraudulent pretenses, representations, or promises, the Director of Posts may instruct any postmaster or other officer or employee of the Bureau to return to the person, depositing the same in the mails, with the word "fraudulent" plainly written or stamped upon the outside cover thereof, any mail matter of whatever class mailed by or addressed to such person or company or the representative or agent of such person or company. SECTION 1983. Deprivation of use of money order system and telegraphic transfer service.The Director of Posts may, upon evidence satisfactory to him that any person or company is engaged in conducting any lottery, gift enterprise or scheme for the distribution of money, or of any real or personal property by lot, chance, or drawing of any kind, or that any person or company is conducting any scheme, device, or enterprise for obtaining money or property of any kind through the mails by means of false or fraudulent pretenses, representations, or promise, forbid the issue or payment by any postmaster of any postal money order or telegraphic transfer to said person or company or to the agent of any such person or company, whether such agent is acting as an individual or as a firm, bank, corporation, or association of any kind, and may provide by regulation for the return to the remitters of the sums named in money orders or telegraphic transfers drawn in favor of such person or company or its agent. The overtures were later formalized in a letter to the Postmaster General, dated October 31, 1960, in which the Caltex, thru counsel, enclosed a copy of the contest rules and endeavored to justify its position that the contest does not violate the anti-lottery provisions of the Postal Law. Unimpressed, the then Acting Postmaster General opined that the scheme falls within the purview of the provisions aforesaid and declined to grant the requested clearance. In its counsel's letter of December 7, 1960, Caltex sought a reconsideration of the foregoing stand, stressing that there being involved no consideration in the part of any contestant, the contest was not, under controlling authorities, condemnable as a lottery. Relying, however, on an opinion rendered by the Secretary of Justice on an unrelated case seven years before (Opinion 217, Series of 1953), the Postmaster General maintained his

view that the contest involves consideration, or that, if it does not, it is nevertheless a "gift enterprise" which is equally banned by the Postal Law, and in his letter of December 10, 1960 not only denied the use of the mails for purposes of the proposed contest but as well threatened that if the contest was conducted, "a fraud order will have to be issued against it (Caltex) and all its representatives". Caltex thereupon invoked judicial intervention by filing the present petition for declaratory relief against Postmaster General Enrico Palomar, praying "that judgment be rendered declaring its 'Caltex Hooded Pump Contest' not to be violative of the Postal Law, and ordering respondent to allow petitioner the use of the mails to bring the contest to the attention of the public". After issues were joined and upon the respective memoranda of the parties, the trial court rendered judgment as follows: In view of the foregoing considerations, the Court holds that the proposed 'Caltex Hooded Pump Contest' announced to be conducted by the petitioner under the rules marked as Annex B of the petitioner does not violate the Postal Law and the respondent has no right to bar the public distribution of said rules by the mails. The respondent appealed. The parties are now before us, arrayed against each other upon two basic issues: first, whether the petition states a sufficient cause of action for declaratory relief; and second, whether the proposed "Caltex Hooded Pump Contest" violates the Postal Law. We shall take these up in seriatim. 1. By express mandate of section 1 of Rule 66 of the old Rules of Court, which was the applicable legal basis for the remedy at the time it was invoked, declaratory relief is available to any person "whose rights are affected by a statute . . . to determine any question of construction or validity arising under the . . . statute and for a declaration of his rights thereunder" (now section 1, Rule 64, Revised Rules of Court). In amplification, this Court, conformably to established jurisprudence on the matter, laid down certain conditions sine qua non therefor, to wit: (1) there must be a justiciable controversy; (2) the controversy must be between persons whose interests are adverse; (3) the party seeking declaratory relief must have a legal interest in the controversy; and (4) the issue involved must be ripe for judicial determination (Tolentino vs. The Board of Accountancy, et al., G.R. No. L-3062, September 28, 1951; Delumen, et al. vs. Republic of the Philippines, 50 O.G., No. 2, pp. 576, 578-579; Edades vs. Edades, et al., G.R. No. L-8964, July 31, 1956). The gravamen of the appellant's stand being that the petition herein states no sufficient cause of action for declaratory relief, our duty is to assay the factual bases thereof upon the foregoing crucible. As we look in retrospect at the incidents that generated the present controversy, a number of significant points stand out in bold relief. The appellee (Caltex), as a business enterprise of some consequence, concededly has the unquestioned right to exploit every legitimate means, and to avail of all appropriate media to advertise and stimulate increased patronage for its products. In contrast, the appellant, as the authority charged with the enforcement of the Postal Law, admittedly has the power and the duty to suppress transgressions thereof particularly thru the issuance of fraud orders, under Sections 1982 and 1983 of the Revised Administrative Code, against legally non-mailable schemes. Obviously pursuing its right aforesaid, the appellee laid out plans for the sales promotion scheme hereinbefore detailed. To forestall possible difficulties in the dissemination of information thereon thru the mails, amongst other media, it was found expedient to request the appellant for an advance clearance therefor. However, likewise by virtue of his jurisdiction in the premises and construing the pertinent provisions of the Postal Law, the appellant saw a violation thereof in the proposed scheme

and accordingly declined the request. A point of difference as to the correct construction to be given to the applicable statute was thus reached. Communications in which the parties expounded on their respective theories were exchanged. The confidence with which the appellee insisted upon its position was matched only by the obstinacy with which the appellant stood his ground. And this impasse was climaxed by the appellant's open warning to the appellee that if the proposed contest was "conducted, a fraud order will have to be issued against it and all its representatives." Against this backdrop, the stage was indeed set for the remedy prayed for. The appellee's insistent assertion of its claim to the use of the mails for its proposed contest, and the challenge thereto and consequent denial by the appellant of the privilege demanded, undoubtedly spawned a live controversy. The justiciability of the dispute cannot be gainsaid. There is an active antagonistic assertion of a legal right on one side and a denial thereof on the other, concerning a real not a mere theoretical question or issue. The contenders are as real as their interests are substantial. To the appellee, the uncertainty occasioned by the divergence of views on the issue of construction hampers or disturbs its freedom to enhance its business. To the appellant, the suppression of the appellee's proposed contest believed to transgress a law he has sworn to uphold and enforce is an unavoidable duty. With the appellee's bent to hold the contest and the appellant's threat to issue a fraud order therefor if carried out, the contenders are confronted by the ominous shadow of an imminent and inevitable litigation unless their differences are settled and stabilized by a tranquilizing declaration (Pablo y Sen, et al. vs. Republic of the Philippines, G.R. No. L-6868, April 30, 1955). And, contrary to the insinuation of the appellant, the time is long past when it can rightly be said that merely the appellee's "desires are thwarted by its own doubts, or by the fears of others" which admittedly does not confer a cause of action. Doubt, if any there was, has ripened into a justiciable controversy when, as in the case at bar, it was translated into a positive claim of right which is actually contested (III Moran, Comments on the Rules of Court, 1963 ed., pp. 132-133, citing: Woodward vs. Fox West Coast Theaters, 36 Ariz., 251, 284 Pac. 350). We cannot hospitably entertain the appellant's pretense that there is here no question of construction because the said appellant "simply applied the clear provisions of the law to a given set of facts as embodied in the rules of the contest", hence, there is no room for declaratory relief. The infirmity of this pose lies in the fact that it proceeds from the assumption that, if the circumstances here presented, the construction of the legal provisions can be divorced from the matter of their application to the appellee's contest. This is not feasible. Construction, verily, is the art or process of discovering and expounding the meaning and intention of the authors of the law with respect to its application to a given case, where that intention is rendered doubtful, amongst others, by reason of the fact that the given case is not explicitly provided for in the law (Black, Interpretation of Laws, p. 1). This is precisely the case here. Whether or not the scheme proposed by the appellee is within the coverage of the prohibitive provisions of the Postal Law inescapably requires an inquiry into the intended meaning of the words used therein. To our mind, this is as much a question of construction or interpretation as any other. Nor is it accurate to say, as the appellant intimates, that a pronouncement on the matter at hand can amount to nothing more than an advisory opinion the handing down of which is anathema to a declaratory relief action. Of course, no breach of the Postal Law has as yet been committed. Yet, the disagreement over the construction thereof is no longer nebulous or contingent. It has taken a fixed and final shape, presenting clearly defined legal issues susceptible of immediate resolution. With the battle lines drawn, in a manner of speaking, the propriety nay, the necessity of setting the dispute at rest before it accumulates the asperity distemper, animosity, passion and violence of a full-blown battle

which looms ahead (III Moran, Comments on the Rules of Court, 1963 ed., p. 132 and cases cited), cannot but be conceded. Paraphrasing the language in Zeitlin vs. Arnebergh 59 Cal., 2d., 901, 31 Cal. Rptr., 800, 383 P. 2d., 152, cited in 22 Am. Jur., 2d., p. 869, to deny declaratory relief to the appellee in the situation into which it has been cast, would be to force it to choose between undesirable alternatives. If it cannot obtain a final and definitive pronouncement as to whether the anti-lottery provisions of the Postal Law apply to its proposed contest, it would be faced with these choices: If it launches the contest and uses the mails for purposes thereof, it not only incurs the risk, but is also actually threatened with the certain imposition, of a fraud order with its concomitant stigma which may attach even if the appellee will eventually be vindicated; if it abandons the contest, it becomes a selfappointed censor, or permits the appellant to put into effect a virtual fiat of previous censorship which is constitutionally unwarranted. As we weigh these considerations in one equation and in the spirit of liberality with which the Rules of Court are to be interpreted in order to promote their object (section 1, Rule 1, Revised Rules of Court) which, in the instant case, is to settle, and afford relief from uncertainty and insecurity with respect to, rights and duties under a law we can see in the present case any imposition upon our jurisdiction or any futility or prematurity in our intervention. The appellant, we apprehend, underrates the force and binding effect of the ruling we hand down in this case if he believes that it will not have the final and pacifying function that a declaratory judgment is calculated to subserve. At the very least, the appellant will be bound. But more than this, he obviously overlooks that in this jurisdiction, "Judicial decisions applying or interpreting the law shall form a part of the legal system" (Article 8, Civil Code of the Philippines). In effect, judicial decisions assume the same authority as the statute itself and, until authoritatively abandoned, necessarily become, to the extent that they are applicable, the criteria which must control the actuations not only of those called upon to abide thereby but also of those in duty bound to enforce obedience thereto. Accordingly, we entertain no misgivings that our resolution of this case will terminate the controversy at hand. It is not amiss to point out at this juncture that the conclusion we have herein just reached is not without precedent. In Liberty Calendar Co. vs. Cohen, 19 N.J., 399, 117 A. 2d., 487, where a corporation engaged in promotional advertising was advised by the county prosecutor that its proposed sales promotion plan had the characteristics of a lottery, and that if such sales promotion were conducted, the corporation would be subject to criminal prosecution, it was held that the corporation was entitled to maintain a declaratory relief action against the county prosecutor to determine the legality of its sales promotion plan. In pari materia, see also: Bunis vs. Conway, 17 App. Div. 2d., 207, 234 N.Y.S. 2d., 435; Zeitlin vs. Arnebergh, supra; Thrillo, Inc. vs. Scott, 15 N.J. Super. 124, 82 A. 2d., 903. In fine, we hold that the appellee has made out a case for declaratory relief. 2. The Postal Law, chapter 52 of the Revised Administrative Code, using almost identical terminology in sections 1954(a), 1982 and 1983 thereof, supra, condemns as absolutely non-mailable, and empowers the Postmaster General to issue fraud orders against, or otherwise deny the use of the facilities of the postal service to, any information concerning "any lottery, gift enterprise, or scheme for the distribution of money, or of any real or personal property by lot, chance, or drawing of any kind". Upon these words hinges the resolution of the second issue posed in this appeal. Happily, this is not an altogether untrodden judicial path. As early as in 1922, in "El Debate", Inc. vs. Topacio, 44 Phil., 278, 283-284, which significantly dwelt on the power of the postal authorities under the abovementioned provisions of the Postal Law, this Court declared that

While countless definitions of lottery have been attempted, the authoritative one for this jurisdiction is that of the United States Supreme Court, in analogous cases having to do with the power of the United States Postmaster General, viz.: The term "lottery" extends to all schemes for the distribution of prizes by chance, such as policy playing, gift exhibitions, prize concerts, raffles at fairs, etc., and various forms of gambling. The three essential elements of a lottery are: First, consideration; second, prize; and third, chance. (Horner vs. States [1892], 147 U.S. 449; Public Clearing House vs. Coyne [1903], 194 U.S., 497; U.S. vs. Filart and Singson [1915], 30 Phil., 80; U.S. vs. Olsen and Marker [1917], 36 Phil., 395; U.S. vs. Baguio [1919], 39 Phil., 962; Valhalla Hotel Construction Company vs. Carmona, p. 233, ante.) Unanimity there is in all quarters, and we agree, that the elements of prize and chance are too obvious in the disputed scheme to be the subject of contention. Consequently as the appellant himself concedes, the field of inquiry is narrowed down to the existence of the element of consideration therein. Respecting this matter, our task is considerably lightened inasmuch as in the same case just cited, this Court has laid down a definitive yard-stick in the following terms In respect to the last element of consideration, the law does not condemn the gratuitous distribution of property by chance, if no consideration is derived directly or indirectly from the party receiving the chance, but does condemn as criminal schemes in which a valuable consideration of some kind is paid directly or indirectly for the chance to draw a prize. Reverting to the rules of the proposed contest, we are struck by the clarity of the language in which the invitation to participate therein is couched. Thus No puzzles, no rhymes? You don't need wrappers, labels or boxtops? You don't have to buy anything? Simply estimate the actual number of liter the Caltex gas pump with the hood at your favorite Caltex dealer will dispense from to , and win valuable prizes . . . ." . Nowhere in the said rules is any requirement that any fee be paid, any merchandise be bought, any service be rendered, or any value whatsoever be given for the privilege to participate. A prospective contestant has but to go to a Caltex station, request for the entry form which is available on demand, and accomplish and submit the same for the drawing of the winner. Viewed from all angles or turned inside out, the contest fails to exhibit any discernible consideration which would brand it as a lottery. Indeed, even as we head the stern injunction, "look beyond the fair exterior, to the substance, in order to unmask the real element and pernicious tendencies which the law is seeking to prevent" ("El Debate", Inc. vs. Topacio, supra, p. 291), we find none. In our appraisal, the scheme does not only appear to be, but actually is, a gratuitous distribution of property by chance. There is no point to the appellant's insistence that non-Caltex customers who may buy Caltex products simply to win a prize would actually be indirectly paying a consideration for the privilege to join the contest. Perhaps this would be tenable if the purchase of any Caltex product or the use of any Caltex service were a pre-requisite to participation. But it is not. A contestant, it hardly needs reiterating, does not have to buy anything or to give anything of value.1awphl.nt Off-tangent, too, is the suggestion that the scheme, being admittedly for sales promotion, would naturally benefit the sponsor in the way of increased patronage by those who will be encouraged to prefer Caltex products "if only to get the chance to draw a prize by securing entry blanks". The required

element of consideration does not consist of the benefit derived by the proponent of the contest. The true test, as laid down in People vs. Cardas, 28 P. 2d., 99, 137 Cal. App. (Supp.) 788, is whether the participant pays a valuable consideration for the chance, and not whether those conducting the enterprise receive something of value in return for the distribution of the prize. Perspective properly oriented, the standpoint of the contestant is all that matters, not that of the sponsor. The following, culled from Corpus Juris Secundum, should set the matter at rest: The fact that the holder of the drawing expects thereby to receive, or in fact does receive, some benefit in the way of patronage or otherwise, as a result of the drawing; does not supply the element of consideration. Griffith Amusement Co. vs. Morgan, Tex. Civ. App., 98 S.W., 2d., 844" (54 C.J.S., p. 849). Thus enlightened, we join the trial court in declaring that the "Caltex Hooded Pump Contest" proposed by the appellee is not a lottery that may be administratively and adversely dealt with under the Postal Law. But it may be asked: Is it not at least a "gift enterprise, or scheme for the distribution of money, or of any real or personal property by lot, chance, or drawing of any kind", which is equally prescribed? Incidentally, while the appellant's brief appears to have concentrated on the issue of consideration, this aspect of the case cannot be avoided if the remedy here invoked is to achieve its tranquilizing effect as an instrument of both curative and preventive justice. Recalling that the appellant's action was predicated, amongst other bases, upon Opinion 217, Series 1953, of the Secretary of Justice, which opined in effect that a scheme, though not a lottery for want of consideration, may nevertheless be a gift enterprise in which that element is not essential, the determination of whether or not the proposed contest wanting in consideration as we have found it to be is a prohibited gift enterprise, cannot be passed over sub silencio. While an all-embracing concept of the term "gift enterprise" is yet to be spelled out in explicit words, there appears to be a consensus among lexicographers and standard authorities that the term is commonly applied to a sporting artifice of under which goods are sold for their market value but by way of inducement each purchaser is given a chance to win a prize (54 C.J.S., 850; 34 Am. Jur., 654; Black, Law Dictionary, 4th ed., p. 817; Ballantine, Law Dictionary with Pronunciations, 2nd ed., p. 55; Retail Section of Chamber of Commerce of Plattsmouth vs. Kieck, 257 N.W., 493, 128 Neb. 13; Barker vs. State, 193 S.E., 605, 56 Ga. App., 705; Bell vs. State, 37 Tenn. 507, 509, 5 Sneed, 507, 509). As thus conceived, the term clearly cannot embrace the scheme at bar. As already noted, there is no sale of anything to which the chance offered is attached as an inducement to the purchaser. The contest is open to all qualified contestants irrespective of whether or not they buy the appellee's products. Going a step farther, however, and assuming that the appellee's contest can be encompassed within the broadest sweep that the term "gift enterprise" is capable of being extended, we think that the appellant's pose will gain no added comfort. As stated in the opinion relied upon, rulings there are indeed holding that a gift enterprise involving an award by chance, even in default of the element of consideration necessary to constitute a lottery, is prohibited (E.g.: Crimes vs. States, 235 Ala 192, 178 So. 73; Russell vs. Equitable Loan & Sec. Co., 129 Ga. 154, 58 S.E., 88; State ex rel. Stafford vs. Fox-Great Falls Theater Corporation, 132 P. 2d., 689, 694, 698, 114 Mont. 52). But this is only one side of the coin. Equally impressive authorities declare that, like a lottery, a gift enterprise comes within the prohibitive statutes only if it exhibits the tripartite elements of prize, chance and consideration (E.g.: Bills vs. People, 157 P. 2d., 139, 142, 113 Colo., 326; D'Orio vs. Jacobs, 275 P. 563, 565, 151 Wash., 297; People vs.

Psallis, 12 N.Y.S., 2d., 796; City and County of Denver vs. Frueauff, 88 P., 389, 394, 39 Colo., 20, 7 L.R.A., N.S., 1131, 12 Ann. Cas., 521; 54 C.J.S., 851, citing: Barker vs. State, 193 S.E., 605, 607, 56 Ga. App., 705; 18 Words and Phrases, perm. ed., pp. 590-594). The apparent conflict of opinions is explained by the fact that the specific statutory provisions relied upon are not identical. In some cases, as pointed out in 54 C.J.S., 851, the terms "lottery" and "gift enterprise" are used interchangeably (Bills vs. People, supra); in others, the necessity for the element of consideration or chance has been specifically eliminated by statute. (54 C.J.S., 351-352, citing Barker vs. State, supra; State ex rel. Stafford vs. Fox-Great Falls Theater Corporation, supra). The lesson that we derive from this state of the pertinent jurisprudence is, therefore, that every case must be resolved upon the particular phraseology of the applicable statutory provision. Taking this cue, we note that in the Postal Law, the term in question is used in association with the word "lottery". With the meaning of lottery settled, and consonant to the well-known principle of legal hermeneuticsnoscitur a sociis which Opinion 217 aforesaid also relied upon although only insofar as the element of chance is concerned it is only logical that the term under a construction should be accorded no other meaning than that which is consistent with the nature of the word associated therewith. Hence, if lottery is prohibited only if it involves a consideration, so also must the term "gift enterprise" be so construed. Significantly, there is not in the law the slightest indicium of any intent to eliminate that element of consideration from the "gift enterprise" therein included. This conclusion firms up in the light of the mischief sought to be remedied by the law, resort to the determination thereof being an accepted extrinsic aid in statutory construction. Mail fraud orders, it is axiomatic, are designed to prevent the use of the mails as a medium for disseminating printed matters which on grounds of public policy are declared non-mailable. As applied to lotteries, gift enterprises and similar schemes, justification lies in the recognized necessity to suppress their tendency to inflame the gambling spirit and to corrupt public morals (Com. vs. Lund, 15 A. 2d., 839, 143 Pa. Super. 208). Since in gambling it is inherent that something of value be hazarded for a chance to gain a larger amount, it follows ineluctably that where no consideration is paid by the contestant to participate, the reason behind the law can hardly be said to obtain. If, as it has been held Gratuitous distribution of property by lot or chance does not constitute "lottery", if it is not resorted to as a device to evade the law and no consideration is derived, directly or indirectly, from the party receiving the chance, gambling spirit not being cultivated or stimulated thereby. City of Roswell vs. Jones, 67 P. 2d., 286, 41 N.M., 258." (25 Words and Phrases, perm. ed., p. 695, emphasis supplied). we find no obstacle in saying the same respecting a gift enterprise. In the end, we are persuaded to hold that, under the prohibitive provisions of the Postal Law which we have heretofore examined, gift enterprises and similar schemes therein contemplated are condemnable only if, like lotteries, they involve the element of consideration. Finding none in the contest here in question, we rule that the appellee may not be denied the use of the mails for purposes thereof. Recapitulating, we hold that the petition herein states a sufficient cause of action for declaratory relief, and that the "Caltex Hooded Pump Contest" as described in the rules submitted by the appellee does not transgress the provisions of the Postal Law. ACCORDINGLY, the judgment appealed from is affirmed. No costs.

Concepcion, C.J., Reyes, J.B.L., Barrera, Dizon, Regala, Makalintal, Bengzon, J.P., Zaldivar and Sanchez, JJ., concur.

EN BANC

[G.R. No. 94723. August 21, 1997]

KAREN E. SALVACION, minor, thru Federico N. Salvacion, Jr., father and Natural Guardian, and Spouses FEDERICO N. SALVACION, JR., and EVELINA E. SALVACION, petitioners, vs. CENTRAL BANK OF THE PHILIPPINES, CHINA BANKING CORPORATION and GREG BARTELLI y NORTHCOTT, respondents. DECISION TORRES, JR., J.: In our predisposition to discover the original intent of a statute, courts become the unfeeling pillars of the status quo. Little do we realize that statutes or even constitutions are bundles of compromises thrown our way by their framers. Unless we exercise vigilance, the statute may already be out of tune and irrelevant to our day. The petition is for declaratory relief. It prays for the following reliefs: a.) Immediately upon the filing of this petition, an Order be issued restraining the respondents from applying and enforcing Section 113 of Central Bank Circular No. 960; b.) After hearing, judgment be rendered: 1.) Declaring the respective rights and duties of petitioners and respondents; 2.) Adjudging Section 113 of Central Bank Circular No. 960 as contrary to the provision of the Constitution, hence void; because its provision that Foreign currency deposits shall be exempt from attachment, garnishment, or any other order to process of any court, legislative body, government agency or any administrative body whatsoever i.) has taken away the right of petitioners to have the bank deposit of defendant Greg Bartelli y Northcott garnished to satisfy the judgment rendered in petitioners favor in violation of substantive due process guaranteed by the Constitution; ii.) has given foreign currency depositors an undue favor or a class privilege in violation of the equal protection clause of the Constitution; iii.) has provided a safe haven for criminals like the herein respondent Greg Bartelli y Northcott since criminals could escape civil liability for their wrongful acts by merely converting their money to a foreign currency and depositing it in a foreign currency deposit account with an authorized bank. The antecedents facts:

On February 4, 1989, Greg Bartelli y Northcott, an American tourist, coaxed and lured petitioner Karen Salvacion, then 12 years old to go with him to his apartment. Therein, Greg Bartelli detained Karen Salvacion for four days, or up to February 7, 1989 and was able to rape the child once on February 4, and three times each day on February 5, 6, and 7, 1989. On February 7, 1989, after policemen and people living nearby, rescued Karen, Greg Bartelli was arrested and detained at the Makati Municipal Jail. The policemen recovered from Bartelli the following items: 1.) Dollar Check No. 368, Control No. 021000678-1166111303, US 3,903.20; 2.) COCOBANK Bank Book No. 104-108758-8 (Peso Acct.); 3.) Dollar Account China Banking Corp., US $/A#54105028-2; 4.) ID-122-308877; 5.) Philippine Money (P234.00) cash; 6.) Door Keys 6 pieces; 7.) Stuffed Doll (Teddy Bear) used in seducing the complainant. On February 16, 1989, Makati Investigating Fiscal Edwin G. Condaya filed against Greg Bartelli, Criminal Case No. 801 for Serious Illegal Detention and Criminal Cases Nos. 802, 803, 804, and 805 for four (4) counts of Rape. On the same day, petitioners filed with the Regional Trial Court of Makati Civil Case No. 89-3214 for damages with preliminary attachment against Greg Bartelli. On February 24, 1989, the day there was a scheduled hearing for Bartellis petition for bail the latter escaped from jail. On February 28, 1989, the court granted the fiscals Urgent Ex-Parte Motion for the Issuance of Warrant of Arrest and Hold Departure Order. Pending the arrest of the accused Greg Bartelli y Northcott, the criminal cases were archived in an Order dated February 28, 1989. Meanwhile, in Civil Case No. 89-3214, the Judge issued an Order dated February 22, 1989 granting the application of herein petitioners, for the issuance of the writ of preliminary attachment. After petitioners gave Bond No. JCL (4) 1981 by FGU Insurance Corporation in the amount P100,000.00, a Writ of Preliminary Attachment was issued by the trial court on February 28, 1989. On March 1, 1989, the Deputy Sheriff of Makati served a Notice of Garnishment on China Banking Corporation. In a letter dated March 13, 1989 to the Deputy Sheriff of Makati, China Banking Corporation invoked Republic Act No. 1405 as its answer to the notice of garnishment served on it. On March 15, 1989, Deputy Sheriff of Makati Armando de Guzman sent his reply to China Banking Corporation saying that the garnishment did not violate the secrecy of bank deposits since the disclosure is merely incidental to a garnishment properly and legally made by virtue of a court order which has placed the subject deposits in custodia legis. In answer to this letter of the Deputy Sheriff of Makati, China Banking Corporation, in a letter dated March 20, 1989, invoked Section 113 of Central Bank Circular No. 960 to the effect that the dollar deposits of defendant Greg Bartelli are exempt from attachment, garnishment, or any other order or process of any court, legislative body, government agency or any administrative body, whatsoever. This prompted the counsel for petitioners to make an inquiry with the Central Bank in a letter dated April 25, 1989 on whether Section 113 of CB Circular No. 960 has any exception or whether said section has been repealed or amended since said section has rendered nugatory the substantive right of the plaintiff to have the claim sought to be enforced by the civil action secured by way of the writ of preliminary attachment as granted to the plaintiff under Rule 57 of the Revised Rules of Court. The Central Bank responded as follows: May 26, 1989 Ms. Erlinda S. Carolino 12 Pres. Osmea Avenue South Admiral Village

Paranaque, Metro Manila Dear Ms. Carolino: This is in reply to your letter dated April 25, 1989 regarding your inquiry on Section 113, CB Circular No. 960 (1983). The cited provision is absolute in application. It does not admit of any exception, nor has the same been repealed nor amended. The purpose of the law is to encourage dollar accounts within the countrys banking system which would help in the development of the economy. There is no intention to render futile the basic rights of a person as was suggested in your subject letter. The law may be harsh as some perceive it, but it is still the law. Compliance is, therefore, enjoined. Very truly yours, (SGD) AGAPITO S. FAJARDO Director[1] Meanwhile, on April 10, 1989, the trial court granted petitioners motion for leave to serve summons by publication in the Civil Case No. 89-3214 entitled Karen Salvacion. et al. vs. Greg Bartelli y Northcott. Summons with the complaint was published in the Manila Times once a week for three consecutive weeks. Greg Bartelli failed to file his answer to the complaint and was declared in default on August 7, 1989. After hearing the case ex-parte, the court rendered judgment in favor of petitioners on March 29, 1990, the dispositive portion of which reads: WHEREFORE, judgment is hereby rendered in favor of plaintiffs and against defendant, ordering the latter: 1. To pay plaintiff Karen E. Salvacion the amount of P500,000.00 as moral damages; 2. To pay her parents, plaintiffs spouses Federico N. Salvacion, Jr., and Evelina E. Salvacion the amount of P150,000.00 each or a total of P300,000.00 for both of them; 3. To pay plaintiffs exemplary damages of P100,000.00; and 4. To pay attorneys fees in an amount equivalent to 25% of the total amount of damages herein awarded; 5. To pay litigation expenses of P10,000.00; plus 6. Costs of the suit. SO ORDERED. The heinous acts of respondents Greg Bartelli which gave rise to the award were related in graphic detail by the trial court in its decision as follows: The defendant in this case was originally detained in the municipal jail of Makati but was able to escape therefrom on February 24, 1989 as per report of the Jail Warden of Makati to the Presiding Judge, Honorable Manuel M. Cosico of the Regional Trial Court of Makati, Branch 136, where he was charged with four counts of Rape and Serious Illegal Detention (Crim. Cases Nos. 802 to 805). Accordingly, upon motion of plaintiffs, through counsel, summons was served upon defendant by publication in the Manila Times, a newspaper of general circulation

as attested by the Advertising Manager of the Metro Media Times, Inc., the publisher of the said newspaper. Defendant, however, failed to file his answer to the complaint despite the lapse of the period of sixty (60) days from the last publication; hence, upon motion of the plaintiffs through counsel, defendant was declared in default and plaintiffs were authorized to present their evidence ex parte. In support of the complaint, plaintiffs presented as witness the minor Karen E. Salvacion, her father, Federico N. Salacion, Jr., a certain Joseph Aguilar and a certain Liberato Mandulio, who gave the following testimony: Karen took her first year high school in St. Marys Academy in Pasay City but has recently transferred to Arellano University for her second year. In the afternoon of February 4, 1989, Karen was at the Plaza Fair Makati Cinema Square, with her friend Edna Tangile whiling away her free time. At about 3:30 p.m. while she was finishing her snack on a concrete bench in front of Plaza Fair, an American approached her. She was then alone because Edna Tangile had already left, and she was about to go home. (TSN, Aug. 15, 1989, pp. 2 to 5) The American asked her name and introduced himself as Greg Bartelli. He sat beside her when he talked to her. He said he was a Math teacher and told her that he has a sister who is a nurse in New York. His sister allegedly has a daughter who is about Karens age and who was with him in his house along Kalayaan Avenue. (TSN, Aug. 15, 1989, pp. 4-5). The American asked Karen what was her favorite subject and she told him its Pilipino. He then invited her to go with him to his house where she could teach Pilipino to his niece. He even gave her a stuffed toy to persuade her to teach his niece. (Id., pp.5-6) They walked from Plaza Fair along Pasong Tamo, turning right to reach the defendants house along Kalayaan Avenue. (Id., p.6) When they reached the apartment house, Karen notices that defendants alleged niece was not outside the house but defendant told her maybe his niece was inside. When Karen did not see the alleged niece inside the house, defendant told her maybe his niece was upstairs, and invited Karen to go upstairs. (Id., p. 7) Upon entering the bedroom defendant suddenly locked the door. Karen became nervous because his niece was not there. Defendant got a piece of cotton cord and tied Karens hands with it, and then he undressed her. Karen cried for help but defendant strangled her. He took a packing tape and he covered her mouth with it and he circled it around her head. (Id., p. 7) Then, defendant suddenly pushed Karen towards the bed which was just near the door. He tied her feet and hands spread apart to the bed posts. He knelt in front of her and inserted his finger in her sex organ. She felt severe pain. She tried to shout but no sound could come out because there were tapes on her mouth. When defendant withdrew his finger it was full of blood and Karen felt more pain after the withdrawal of the finger. (Id., p.8) He then got a Johnsons Baby Oil and he applied it to his sex organ as well as to her sex organ. After that he forced his sex organ into her but he was not able to do so. While he was doing it, Karen found it

difficult to breathe and she perspired a lot while feeling severe pain. She merely presumed that he was able to insert his sex organ a little, because she could not see. Karen could not recall how long the defendant was in that position. (Id., pp. 8-9) After that, he stood up and went to the bathroom to wash. He also told Karen to take a shower and he untied her hands. Karen could only hear the sound of the water while the defendant, she presumed, was in the bathroom washing his sex organ. When she took a shower more blood came out from her. In the meantime, defendant changed the mattress because it was full of blood. After the shower, Karen was allowed by defendant to sleep. She fell asleep because she got tired crying. The incident happened at about 4:00 p.m. Karen had no way of determining the exact time because defendant removed her watch. Defendant did not care to give her food before she went to sleep. Karen woke up at about 8:00 oclock the following morning. (Id., pp. 9-10) The following day, February 5, 1989, a Sunday, after breakfast of biscuit and coke at about 8:30 to 9:00 a.m. defendant raped Karen while she was still bleeding. For lunch, they also took biscuit and coke. She was raped for the second time at about 12:00 to 2:00 p.m. In the evening, they had rice for dinner which defendant had stored downstairs; it was he who cooked the rice that is why it looks like lugaw. For the third time, Karen was raped again during the night. During those three times defendant succeeded in inserting his sex organ but she could not say whether the organ was inserted wholly. Karen did not see any firearm or any bladed weapon. The defendant did not tie her hands and feet nor put a tape on her mouth anymore but she did not cry for help for fear that she might be killed; besides, all those windows and doors were closed. And even if she shouted for help, nobody would hear her. She was so afraid that if somebody would hear her and would be able to call a police, it was still possible that as she was still inside the house, defendant might kill her. Besides, the defendant did not leave that Sunday, ruling out her chance to call for help. At nighttime he slept with her again. (TSN, Aug. 15, 1989, pp. 12-14) On February 6, 1989, Monday, Karen was raped three times, once in the morning for thirty minutes after breakfast of biscuits; again in the afternoon; and again in the evening. At first, Karen did not know that there was a window because everything was covered by a carpet, until defendant opened the window for around fifteen minutes or less to let some air in, and she found that the window was covered by styrofoam and plywood. After that, he again closed the window with a hammer and he put the styrofoam, plywood, and carpet back. (Id., pp. 14-15) That Monday evening, Karen had a chance to call for help, although defendant left but kept the door closed. She went to the bathroom and saw a small window covered by styrofoam and she also spotted a small hole. She stepped on the bowl and she cried for help through the hole. She cried: Maawa na po kayo sa akin. Tulungan nyo akong makalabas dito. Kinidnap ako! Somebody heard her. It was a woman, probably a neighbor, but she got angry and said she was istorbo. Karen pleaded for help and the woman told her to sleep and she will call the police. She finally fell asleep but no policeman came. (TSN, Aug. 15, 1989, pp. 15-16) She woke up at 6:00 oclock the following morning, and she saw defendant in bed, this time sleeping. She waited for him to wake up. When he woke up, he again got some food but he always kept the door locked. As usual, she was merely fed with biscuit and coke. On that day, February 7, 1989, she was again raped three times. The first at about 6:30 to 7:00 a.m., the second at about 8:30 9:00, and

the third was after lunch at 12:00 noon. After he had raped her for the second time he left but only for a short while. Upon his return, he caught her shouting for help but he did not understand what she was shouting about. After she was raped the third time, he left the house. (TSN, Aug. 15, 1989, pp. 1617) She again went to the bathroom and shouted for help. After shouting for about five minutes, she heard many voices. The voices were asking for her name and she gave her name as Karen Salvacion. After a while, she heard a voice of a woman saying they will just call the police. They were also telling her to change her clothes. She went from the bathroom to the room but she did not change her clothes being afraid that should the neighbors call the police and the defendant see her in different clothes, he might kill her. At that time she was wearing a T-shirt of the American bacause the latter washed her dress. (Id., p. 16) Afterwards, defendant arrived and opened the door. He asked her if she had asked for help because there were many policemen outside and she denied it. He told her to change her clothes, and she did change to the one she was wearing on Saturday. He instructed her to tell the police that she left home and willingly; then he went downstairs but he locked the door. She could hear people conversing but she could not understand what they were saying. (Id., p. 19) When she heard the voices of many people who were conversing downstairs, she knocked repeatedly at the door as hard as she could. She heard somebody going upstairs and when the door was opened, she saw a policeman. The policeman asked her name and the reason why she was there. She told him she was kidnapped. Downstairs, he saw about five policemen in uniform and the defendant was talking to them. Nakikipag-areglo po sa mga pulis, Karen added. The policeman told him to just explain at the precinct. (Id., p. 20) They went out of the house and she saw some of her neighbors in front of the house. They rode the car of a certain person she called Kuya Boy together with defendant, the policeman, and two of her neighbors whom she called Kuya Bong Lacson and one Ate Nita. They were brought to Sub-Station I and there she was investigated by a policeman. At about 2:00 a.m., her father arrived, followed by her mother together with some of their neighbors. Then they were brought to the second floor of the police headquarters. (Id., p. 21) At the headquarters, she was asked several questions by the investigator. The written statement she gave to the police was marked Exhibit A. Then they proceeded to the National Bureau of Investigation together with the investigator and her parents. At the NBI, a doctor, a medico-legal officer, examined her private parts. It was already 3:00 in early morning, of the following day when they reached the NBI, (TSN, Aug. 15, 1989, p. 22) The findings of the medico-legal officer has been marked as Exhibit B. She was studying at the St. Marys Academy in Pasay City at the time of the Incident but she subsequently transferred to Apolinario Mabini, Arellano University, situated along Taft Avenue, because she was ashamed to be the subject of conversation in the school. She first applied for transfer to Jose Abad Santos, Arellano University along Taft Avenue near the Light Rail Transit Station but she was denied admission after she told the school the true reason for her transfer. The reason for their denial was that they might be implicated in the case. (TSN, Aug. 15, 1989, p. 46) xxx xxx xxx

After the incident, Karen has changed a lot. She does not play with her brother and sister anymore, and she is always in a state of shock; she has been absent-minded and is ashamed even to go out of the house. (TSN, Sept. 12, 1989, p. 10) She appears to be restless or sad. (Id., p. 11) The father prays for P500,000.00 moral damages for Karen for this shocking experience which probably, she would always recall until she reaches old age, and he is not sure if she could ever recover from this experience. (TSN, Sept. 24, 1989, pp. 10-11) Pursuant to an Order granting leave to publish notice of decision, said notice was published in the Manila Bulletin once a week for three consecutive weeks. After the lapse of fifteen (15) days from the date of the last publication of the notice of judgment and the decision of the trial court had become final, petitioners tried to execute on Bartellis dollar deposit with China Banking Corporation. Likewise, the bank invoked Section 113 of Central Bank Circular No. 960. Thus, petitioners decided to seek relief from this Court. The issues raised and the arguments articulated by the parties boil down to two: May this Court entertain the instant petition despite the fact that original jurisdiction in petitions for declaratory relief rests with the lower court? She Section 113 of Central Bank Circular No. 960 and Section 8 of R.A. 6426, as amended by P.D. 1246, otherwise known as the Foreign Currency Deposit Act be made applicable to a foreign transient? Petitioners aver as heretofore stated that Section 113 of Central Bank Circular No. 960 providing that Foreign currency deposits shall be exempt from attachment, garnishment, or any other order or process of any court, legislative body, government agency or any administrative body whatsoever. should be adjudged as unconstitutional on the grounds that: 1.) it has taken away the right of petitioners to have the bank deposit of defendant Greg Bartelli y Northcott garnished to satisfy the judgment rendered in petitioners favor in violation of substantive due process guaranteed by the Constitution; 2.) it has given foreign currency depositors an undue favor or a class privilege n violation of the equal protection clause of the Constitution; 3.) it has provided a safe haven for criminals like the herein respondent Greg Bartelli y Northcott since criminal could escape civil liability for their wrongful acts by merely converting their money to a foreign currency and depositing it in a foreign currency deposit account with an authorized bank; and 4.) The Monetary Board, in issuing Section 113 of Central Bank Circular No. 960 has exceeded its delegated quasi- legislative power when it took away: a.) the plaintiffs substantive right to have the claim sought to be enforced by the civil action secured by way of the writ of preliminary attachment as granted by Rule 57 of the Revised Rules of Court; b.) the plaintiffs substantive right to have the judgment credit satisfied by way of the writ of execution out of the bank deposit of the judgment debtor as granted to the judgment creditor by Rule 39 of the Revised Rules of Court, which is beyond its power to do so. On the other hand, respondent Central Bank, in its Comment alleges that the Monetary Board in issuing Section 113 of CB Circular No. 960 did not exceed its power or authority because the subject Section is copied verbatim from a portion of R.A. No. 6426 as amended by P.D. 1246. Hence, it was not the Monetary Board that grants exemption from attachment or garnishment to foreign currency deposits, but the law (R.A. 6426 as amended) itself; that it does not violate the substantive due process guaranteed by the Constitution because a.) it was based on a law; b.) the law seems to be reasonable; c.) it is enforced according to regular methods of procedure; and d.) it applies to all members of a class.

Expanding, the Central Bank said; that one reason for exempting the foreign currency deposits from attachment, garnishment or any other order process of any court, is to assure the development and speedy growth of the Foreign Currency Deposit System and the Offshore Banking System in the Philippines; that another reason is to encourage the inflow of foreign currency deposits into the banking institutions thereby placing such institutions more in a position to properly channel the same to loans and investments in the Philippines, thus directly contributing to the economic development of the country; that the subject section is being enforced according to the regular methods of procedure; and that it applies to all currency deposits made by any person and therefore does not violate the equal protection clause of the Constitution. Respondent Central Bank further avers that the questioned provision is needed to promote the public interest and the general welfare; that the State cannot just stand idly by while a considerable segment of the society suffers from economic distress; that the State had to take some measures to encourage economic development; and that in so doing persons and property may be subjected to some kinds of restraints or burdens to secure the general welfare or public interest. Respondent Central Bank also alleges that Rule 39 and Rule 57 of the Revised Rules of Court provide that some properties are exempted from execution/attachment especially provided by law and R.A. No. 6426 as amended is such a law, in that it specifically provides, among others, that foreign currency deposits shall be exempted from attachment, garnishment, or any other order or process of any court, legislative body, government agency or any administrative body whatsoever. For its part, respondent China Banking Corporation, aside from giving reasons similar to that of respondent Central Bank, also stated that respondent China Bank is not unmindful of the inhuman sufferings experienced by the minor Karen E. Salvacion from the beastly hands of Greg Bartelli; that it is not only too willing to release the dollar deposit of Bartelli which may perhaps partly mitigate the sufferings petitioner has undergone; but it is restrained from doing so in view of R.A. No. 6426 and Section 113 of Central Bank Circular No. 960; and that despite the harsh effect to these laws on petitioners, CBC has no other alternative but to follow the same. This court finds the petition to be partly meritorious. Petitioner deserves to receive the damages awarded to her by the court. But this petition for declaratory relief can only be entertained and treated as a petition for mandamus to require respondents to honor and comply with the writ of execution in Civil Case No. 89-3214. The Court has no original and exclusive jurisdiction over a petition for declatory relief.[2] However, exceptions to this rule have been recognized. Thus, where the petition has far-reaching implications and raises questions that should be resolved, it may be treated as one for mandamus.[3] Here is a child, a 12-year old girl, who in her belief that all Americans are good and in her gesture of kindness by teaching his alleged niece the Filipino language as requested by the American, trustingly went with said stranger to his apartment, and there she was raped by said American tourist Greg Bartelli. Not once, but ten times. She was detained therein for four (4) days. This American tourist was able to escape from the jail and avoid punishment. On the other hand, the child, having received a favorable judgment in the Civil Case for damages in the amount of more than P1,000,000.00, which amount could alleviate the humiliation, anxiety, and besmirched reputation she had suffered and may continue to suffer for a long, long time; and knowing that this person who had wronged her has the money, could not, however get the award of damages because of this unreasonable law. This questioned law, therefore makes futile the favorable judgment and award of damages that she and her parents fully deserve. As stated by the trial court in its decision,

Indeed, after hearing the testimony of Karen, the Court believes that it was indoubtedly a shocking and traumatic experience she had undergone which could haunt her mind for a long, long time, the mere recall of which could make her feel so humiliated, as in fact she had been actually humiliated once when she was refused admission at the Abad Santos High School, Arellano University, where she sought to transfer from another school, simply because the school authorities of the said High School learned about what happened to her and allegedly feared that they might be implicated in the case. xxx The reason for imposing exemplary or corrective damages is due to the wanton and bestial manner defendant had committed the acts of rape during a period of serious illegal detention of his hapless victim, the minor Karen Salvacion whose only fault was in her being so naive and credulous to believe easily that defendant, an American national, could not have such a bestial desire on her nor capable of committing such heinous crime. Being only 12 years old when that unfortunate incident happened, she has never heard of an old Filipino adage that in every forest there is a snake, xxx.[4] If Karens sad fate had happened to anybodys own kin, it would be difficult for him to fathom how the incentive for foreign currency deposit could be more important than his childs right to said award of damages; in this case, the victims claim for damages from this alien who had the gall to wrong a child of tender years of a country where he is mere visitor. This further illustrates the flaw in the questioned provisions. It is worth mentioning that R.A. No. 6426 was enacted in 1983 or at a time when the countrys economy was in a shambles; when foreign investments were minimal and presumably, this was the reason why said statute was enacted. But the realities of the present times show that the country has recovered economically; and even if not, the questioned law still denies those entitled to due process of law for being unreasonable and oppressive. The intention of the questioned law may be good when enacted. The law failed to anticipate the inquitous effects producing outright injustice and inequality such as as the case before us. It has thus been said thatBut I also know,[5] that laws and institutions must go hand in hand with the progress of the human mind. As that becomes more developed, more enlightened, as new discoveries are made, new truths are disclosed and manners and opinions change with the change of circumstances, institutions must advance also, and keep pace with the times We might as well require a man to wear still the coat which fitted him when a boy, as civilized society to remain ever under the regimen of their barbarous ancestors. In his comment, the Solicitor General correctly opined, thus: "The present petition has far-reaching implications on the right of a national to obtain redress for a wrong committed by an alien who takes refuge under a law and regulation promulgated for a purpose which does not contemplate the application thereof envisaged by the allien. More specifically, the petition raises the question whether the protection against attachment, garnishment or other court process accorded to foreign currency deposits PD No. 1246 and CB Circular No. 960 applies when the deposit does not come from a lender or investor but from a mere transient who is not expected to maintain the deposit in the bank for long.

The resolution of this question is important for the protection of nationals who are victimized in the forum by foreigners who are merely passing through. xxx xxx Respondents China Banking Corporation and Central Bank of the Philippines refused to honor the writ of execution issued in Civil Case No. 89-3214 on the strength of the following provision of Central Bank Circular No. 960: Sec. 113 Exemption from attachment. Foreign currency deposits shall be exempt from attachment, garnishment, or any other order or process of any court, legislative body, government agency or any administrative body whatsoever. Central Bank Circular No. 960 was issued pursuant to Section 7 of Republic Act No. 6426: Sec. 7. Rules and Regulations. The Monetary Board of the Central Bank shall promulgate such rules and regulations as may be necessary to carry out the provisions of this Act which shall take effect after the publication of such rules and regulations in the Official Gazette and in a newspaper of national circulation for at least once a week for three consecutive weeks. In case the Central Bank promulgates new rules and regulations decreasing the rights of depositors, the rules and regulations at the time the deposit was made shall govern. The aforecited Section 113 was copied from Section 8 of Republic Act No. 6426. As amended by P.D. 1246, thus: Sec. 8. Secrecy of Foreign Currency Deposits. -- All foreign currency deposits authorized under this Act, as amended by Presidential Decree No. 1035, as well as foreign currency deposits authorized under Presidential Decree No. 1034, are hereby declared as and considered of an absolutely confidential nature and, except upon the written permission of the depositor, in no instance shall such foreign currency deposits be examined, inquired or looked into by any person, government official, bureau or office whether judicial or administrative or legislative or any other entity whether public or private: Provided, however, that said foreign currency deposits shall be exempt from attachment, garnishment, or any other order or process of any court, legislative body, government agency or any administrative body whatsoever. The purpose of PD 1246 in according protection against attachment, garnishment and other court process to foreign currency deposits is stated in its whereases, viz.: WHEREAS, under Republic Act No. 6426, as amended by Presidential Decree No. 1035, certain Philippine banking institutions and branches of foreign banks are authorized to accept deposits in foreign currency; WHEREAS, under provisions of Presidential Decree No. 1034 authorizing the establishment of an offshore banking system in the Philippines, offshore banking units are also authorized to receive foreign currency deposits in certain cases; WHEREAS, in order to assure the development and speedy growth of the Foreign Currency Deposit System and the Offshore Banking System in the Philippines, certain incentives were provided for under the two Systems such as confidentiality

subject to certain exceptions and tax exemptions on the interest income of depositors who are nonresidents and are not engaged in trade or business in the Philippines; WHEREAS, making absolute the protective cloak of confidentiality over such foreign currency deposits, exempting such deposits from tax, and guaranteeing the vested right of depositors would better encourage the inflow of foreign currency deposits into the banking institutions authorized to accept such deposits in the Philippines thereby placing such institutions more in a position to properly channel the same to loans and investments in the Philippines, thus directly contributing to the economic development of the country; Thus, one of the principal purposes of the protection accorded to foreign currency deposits is to assure the development and speedy growth of the Foreign Currency Deposit system and the Offshore Banking in the Philippines (3rd Whereas). The Offshore Banking System was established by PD No. 1034. In turn, the purposes of PD No. 1034 are as follows: WHEREAS, conditions conducive to the establishment of an offshore banking system, such as political stability, a growing economy and adequate communication facilities, among others, exist in the Philippines; WHEREAS, it is in the interest of developing countries to have as wide access as possible to the sources of capital funds for economic development; WHEREAS, an offshore banking system based in the Philippines will be advantageous and beneficial to the country by increasing our links with foreign lenders, facilitating the flow of desired investments into the Philippines, creating employment opportunities and expertise in international finance, and contributing to the national development effort. WHEREAS, the geographical location, physical and human resources, and other positive factors provide the Philippines with the clear potential to develop as another financial center in Asia; On the other hand, the Foreign Currency Deposit system was created by PD No. 1035. Its purpose are as follows: WHEREAS, the establishment of an offshore banking system in the Philippines has been authorized under a separate decree; WHEREAS, a number of local commercial banks, as depository bank under the Foreign Currency Deposit Act (RA No. 6426), have the resources and managerial competence to more actively engage in foreign exchange transactions and participate in the grant of foreign currency loans to resident corporations and firms; WHEREAS, it is timely to expand the foreign currency lending authority of the said depository banks under RA 6426 and apply to their transactions the same taxes as would be applicable to transaction of the proposed offshore banking units; It is evident from the above *Whereas clauses] that the Offshore Banking System and the Foreign Currency Deposit System were designed to draw deposits from

foreign lenders and investors (Vide second Whereas of PD No. 1034; third Whereas of PD No. 1035). It is these depositors that are induced by the two laws and given protection and incentives by them. Obviously, the foreign currency deposit made by a transient or a tourist is not the kind of deposit encourage by PD Nos. 1034 and 1035 and given incentives and protection by said laws because such depositor stays only for a few days in the country and, therefore, will maintain his deposit in the bank only for a short time. Respondent Greg Bartelli, as stated, is just a tourist or a transient. He deposited his dollars with respondent China Banking Corporation only for safekeeping during his temporary stay in the Philippines. For the reasons stated above, the Solicitor General thus submits that the dollar deposit of respondent Greg Bartelli is not entitled to the protection of Section 113 of Central Bank Circular No. 960 and PD No. 1246 against attachment, garnishment or other court processes. [6] In fine, the application of the law depends on the extent of its justice. Eventually, if we rule that the questioned Section 113 of Central Bank Circular No. 960 which exempts from attachment, garnishment, or any other order or process of any court. Legislative body, government agency or any administrative body whatsoever, is applicable to a foreign transient, injustice would result especially to a citizen aggrieved by a foreign guest like accused Greg Bartelli. This would negate Article 10 of the New Civil Code which provides that in case of doubt in the interpretation or application of laws, it is presumed that the lawmaking body intended right and justice to prevail. Ninguno non deue enriquecerse tortizerzmente con damo de otro. Simply stated, when the statute is silent or ambiguous, this is one of those fundamental solutions that would respond to the vehement urge of conscience. (Padilla vs. Padilla, 74 Phil. 377) It would be unthinkable, that the questioned Section 113 of Central Bank No. 960 would be used as a device by accused Greg Bartelli for wrongdoing, and in so doing, acquitting the guilty at the expense of the innocent. Call it what it may but is there no conflict of legal policy here? Dollar against Peso? Upholding the final and executory judgment of the lower court against the Central Bank Circular protecting the foreign depositor? Shielding or protecting the dollar deposit of a transient alien depositor against injustice to a national and victim of a crime? This situation calls for fairness legal tyranny. We definitely cannot have both ways and rest in the belief that we have served the ends of justice. IN VIEW WHEREOF, the provisions of Section 113 of CB Circular No. 960 and PD No. 1246, insofar as it amends Section 8 of R.A. 6426 are hereby held to be INAPPLICABLE to this case because of its peculiar circumstances. Respondents are hereby REQUIRED to COMPLY with the writ of execution issued in Civil Case No. 89-3214, Karen Salvacion, et al. vs. Greg Bartelli y Northcott, by Branch CXLIV, RTC Makati and to RELEASE to petitioners the dollar deposit of respondent Greg Bartelli y Northcott in such amount as would satisfy the judgment. SO ORDERED. Narvasa, C.J., Regalado, Davide, Jr., Romero, Bellosillo, Melo, Puno, Vitug, Kapunan, Francisco, and Panganiban, JJ., concur. Padilla, J., no part. Mendoza, and Hermosisima, Jr., JJ., on leave.

EN BANC

[G.R. No. 138298. November 29, 2000]

RAOUL B. DEL MAR, petitioner, vs. PHILIPPINE AMUSEMENT AND GAMING CORPORATION, BELLE JAIALAI CORPORATION, FILIPINAS GAMING ENTERTAINMENT TOTALIZATOR CORPORATION, respondents.

[G.R. No. 138982. November 29, 2000]

FEDERICO S. SANDOVAL II and MICHAEL T. DEFENSOR, petitioners, vs. PHILIPPINE AMUSEMENT AND GAMING CORPORATION, respondent. JUAN MIGUEL ZUBIRI, intervenor. DECISION PUNO, J.: These two consolidated petitions concern the issue of whether the franchise granted to the Philippine Amusement and Gaming Corporation (PAGCOR) includes the right to manage and operate jaialai. First, we scour the significant facts. The Philippine Amusement and Gaming Corporation is a government-owned and controlled corporation organized and existing under Presidential Decree No. 1869 which was enacted on July 11, 1983. Pursuant to Sections 1 and 10 of P.D. No. 1869, respondent PAGCOR requested for legal advice from the Secretary of Justice as to whether or not it is authorized by its Charter to operate and manage jai-alai frontons in the country. In its Opinion No. 67, Series of 1996 dated July 15, 1996, the Secretary of Justice opined that the authority of PAGCOR to operate and maintain games of chance or gambling extends to jai-alai which is a form of sport or game played for bets and that the Charter of PAGCOR amounts to a legislative franchise for the purpose.[1] Similar favorable opinions were received by PAGCOR from the Office of the Solicitor General per its letter dated June 3, 1996 and the Office of theGovernment Corporate Counsel under its Opinion No. 150 dated June 14, 1996.[2] Thus, PAGCOR started the operation of jai-alai frontons. On May 6, 1999, petitioner Raoul B. del Mar initially filed in G.R. No. 138298 a Petition for Prohibition to prevent respondent PAGCOR from managing and/or operating the jai-alai or Basque pelota games, by itself or in agreement with Belle Corporation, on the ground that the controverted act is patently illegal and devoid of any basis either from the Constitution or PAGCORs own Charter. However, on June 17, 1999, respondent PAGCOR entered into an Agreement with private respondents Belle Jai Alai Corporation (BELLE) and Filipinas Gaming Entertainment Totalizator Corporation (FILGAME) wherein it was agreed that BELLE will make available to PAGCOR the required

infrastructure facilities including the main fronton, as well as provide the needed funding for jai-alai operations with no financial outlay from PAGCOR, while PAGCOR handles the actual management and operation of jai-alai.[3] Thus, on August 10, 1999, petitioner Del Mar filed a Supplemental Petition for Certiorari questioning the validity of said Agreement on the ground that PAGCOR is without jurisdiction, legislative franchise, authority or power to enter into such Agreement for the opening, establishment, operation, control and management of jai-alai games. A little earlier, or on July 1, 1999, petitioners Federico S. Sandoval II and Michael T. Defensor filed a Petition for Injunction, docketed as G.R. No. 138982, which seeks to enjoin respondent PAGCOR from operating or otherwise managing the jai-alai or Basque pelota games by itself or in joint venture with Belle Corporation, for being patently illegal, having no basis in the law or the Constitution, and in usurpation of the authority that properly pertains to the legislative branch of the government. In this case, a Petition in Intervention was filed by Juan Miguel Zubiri alleging that the operation by PAGCOR of jai-alai is illegal because it is not included in the scope of PAGCORs franchise which covers only games of chance. Petitioners Raoul B. del Mar, Federico S. Sandoval II, Michael T. Defensor, and intervenor Juan Miguel Zubiri, are suing as taxpayers and in their capacity as members of the House of Representatives representing the First District of Cebu City, the Lone Congressional District of MalabonNavotas, the Third Congressional District of Quezon City, and the Third Congressional District of Bukidnon, respectively. The bedrock issues spawned by the petitions at bar are: G.R. No. 138298 Petitioner Del Mar raises the following issues: I. The respondent PAGCOR has no jurisdiction or legislative franchise or acted with grave abuse of discretion, tantamount to lack or excess of jurisdiction, in arrogating unto itself the authority or power to open, pursue, conduct, operate, control and manage jai-alai game operations in the country. II. x x x Respondent PAGCOR has equally no jurisdiction or authority x x x in executing its agreement with co-respondents Belle and Filgame for the conduct and management of jaialai game operations, upon undue reliance on an opinion of the Secretary of Justice. III. x x x Respondent PAGCOR has equally no jurisdiction or authority x x x in entering into a partnership, joint venture or business arrangement with its co-respondents Belle and Filgame, through their agreement x x x. The Agreement was entered into through manifest partiality and evident bad faith (Sec. 3 (e), RA 3019), thus manifestly and grossly disadvantageous to the government [Anti-Graft and Corrupt Practices Act, RA 3019, Sec. 3 (g)]. IV. x x x Respondent PAGCOR has equally no jurisdiction or authority x x x to award to its corespondents Belle and Filgame the right to avail of the tax benefits which, by law, inures solely and exclusively to PAGCOR itself. V. x x x Respondent PAGCOR has equally no jurisdiction or authority x x x to cause the disbursement of funds for the illegal establishment, management and operation of jai-alai game operations.

VI. x x x Respondent PAGCOR has equally no jurisdiction or authority x x x to award or grant authority for the establishment, management and operation of off-fronton betting stations or bookies. VII. The respondent PAGCOR has no jurisdiction or authority x x x in awarding unto its corespondents Belle and Filgame, without public bidding, the subject agreement. In defense, private respondents BELLE and FILGAME assert: 1. The petition states no cause of action and must be dismissed outright; 2. The petitioner has no cause of action against the respondents, he not being a real party in interest; 3. The instant petition cannot be maintained as a taxpayer suit, there being no illegal disbursement of public funds involved; 4. The instant petition is essentially an action for quo warranto and may only be commenced by the Solicitor General; 5. The operation of jai-alai is well within PAGCORs authority to operate and maintain. PAGCORs franchise is intended to be wide in its coverage, the underlying considerations being, that: (1) the franchise must be used to integrate all gambling operations in one corporate entity (i.e. PAGCOR); and (2) it must be used to generate funds for the government to support its social impact projects; 6. The agreement executed by, between and among PAGCOR, BJAC and FILGAME is outside the coverage of existing laws requiring public bidding. Substantially the same defenses were raised by respondent PAGCOR in its Comment. G.R. No. 138982 Petitioners contend that: I. The operation of jai-alai games by PAGCOR is illegal in that: 1) the franchise of PAGCOR does not include the operation of jai-alai since jai-alai is a prohibited activity under the Revised Penal Code, as amended by P.D. No. 1602 which is otherwise known as the Anti-Gambling Law; 2) jai-alai is not a game of chance and therefore cannot be the subject of a PAGCOR franchise. II. A franchise is a special privilege that should be construed strictly against the grantee. III. To allow PAGCOR to operate jai-alai under its charter is tantamount to a license to PAGCOR to legalize and operate any gambling activity. In its Comment, respondent PAGCOR avers that: 1. An action for injunction is not among the cases or proceedings originally cognizable by the Honorable Supreme Court, pursuant to Section 1, Rule 56 of the 1997 Rules of Civil Procedure.

2. Assuming, arguendo, the Honorable Supreme Court has jurisdiction over the petition, the petition should be dismissed for failure of petitioners to observe the doctrine on hierarchy of courts. 3. x x x Petitioners have no legal standing to file a taxpayers suit based on their cause of action nor are they the real parties-in-interest entitled to the avails of the suit. 4. Respondents franchise definitely includes the operation of jai-alai. 5. Petitioners have no right in esse to be entitled to a temporary restraining order and/or to be protected by a writ of preliminary injunction. The Solicitor General claims that the petition, which is actually an action for quo warranto under Rule 66 of the Rules of Court, against an alleged usurpation by PAGCOR of a franchise to operate jai alai, should be dismissed outright because only the Solicitor General or public prosecutor can file the same; that P.D. No. 1869, the Charter of PAGCOR, authorizes PAGCOR to regulate and operate games of chance and skill which include jai-alai; and that P.D. No. 1602 did not outlaw jai-alai but merely provided for stiffer penalties to illegal or unauthorized activities related to jai-alai and other forms of gambling. We shall first rule on the important procedural issues raised by the respondents. Respondents in G.R. No. 138982 contend that the Court has no jurisdiction to take original cognizance of a petition for injunction because it is not one of those actions specifically mentioned in Section 1 of Rule 56 of the 1997 Rules of Civil Procedure. Moreover, they urge that the petition should be dismissed for failure of petitioners to observe the doctrine on hierarchy of courts. It is axiomatic that what determines the nature of an action and hence, the jurisdiction of the court, are the allegations of the pleading and the character of the relief sought.[4] A cursory perusal of the petition filed in G.R. No. 138982 will show that it is actually one for Prohibition under Section 2 of Rule 65 for it seeks to prevent PAGCOR from managing, maintaining and operating jai-alai games. Even assuming, arguendo, that it is an action for injunction, this Court has the discretionary power to take cognizance of the petition at bar if compelling reasons, or the nature and importance of the issues raised, warrant the immediate exercise of its jurisdiction.[5] It cannot be gainsaid that the issues raised in the present petitions have generated an oasis of concern, even days of disquiet in view of the public interest at stake. In Tano, et al. vs. Socrates, et al.,[6] this Court did not hesitate to treat a petition for certiorari and injunction as a special civil action for certiorariand prohibition to resolve an issue of far-reaching impact to our people. This is in consonance with our case law now accorded near religious reverence that rules of procedure are but tools designed to facilitate the attainment of justice such that when its rigid application tends to frustrate rather than promote substantial justice, this Court has the duty to suspend their operation.[7] Respondents also assail the locus standi or the standing of petitioners to file the petitions at bar as taxpayers and as legislators. First, they allege that petitioners have no legal standing to file a taxpayers suit because the operation of jai-alai does not involve the disbursement of public funds. Respondents' stance is not without oven ready legal support. A party suing as a taxpayer must specifically prove that he has sufficient interest in preventing the illegal expenditure of money raised by taxation.[8] In essence, taxpayers are allowed to sue where there is a claim of illegal disbursement of public funds,[9] or that public money is being deflected to any improper purpose,[10]or where petitioners seek to restrain respondent from wasting public funds through the enforcement of an invalid or unconstitutional law.[11]

In the petitions at bar, the Agreement entered into between PAGCOR and private respondents BELLE and FILGAME will show that all financial outlay or capital expenditure for the operation of jai-alai games shall be provided for by the latter. Thus, the Agreement provides, among others, that: PAGCOR shall manage, operate and control the jai-alai operation at no cost or financial risk to it (Sec. 1[A][1]); BELLE shall provide funds, at no cost to PAGCOR, for all capital expenditures (Sec. 1[B][1]); BELLE shall make available to PAGCOR, at no cost to PAGCOR, the use of the integrated nationwide network of online computerized systems (Sec. 1[B][2]); FILGAME shall make available for use of PAGCOR on a rent-free basis the jai-alai fronton facilities (Sec. 1 [C][1]); BELLE & FILGAME jointly undertake to provide funds, at no cost to PAGCOR, for pre-operating expenses and working capital (Sec. 1 [D][1]); and that BELLE & FILGAME will provide PAGCOR with goodwill money in the amount of P 200 million (Sec. 1 [D][2]). In fine, the record is barren of evidence that the operation and management of jai-alai by the PAGCOR involves expenditure of public money. Be that as it may, in line with the liberal policy of this Court on locus standi when a case involves an issue of overarching significance to our society,[12] we find and so hold that as members of the House of Representatives, petitioners have legal standing to file the petitions at bar. In the instant cases, petitioners complain that the operation of jai-alai constitutes an infringement by PAGCOR of the legislatures exclusive power to grant franchise. To the extent the powers of Congress are impaired, so is the power of each member thereof, since his office confers a right to participate in the exercise of the powers of that institution, so petitioners contend. The contention commands our concurrence for it is now settled that a member of the House of Representatives has standing to maintain inviolate the prerogatives, powers and privileges vested by the Constitution in his office.[13] As presciently stressed in the case of Kilosbayan, Inc., viz: We find the instant petition to be of transcendental importance to the public. The issues it raised are of paramount public interest and of a category even higher than those involved in many of the aforecited cases. The ramifications of such issues immeasurably affect the social, economic, and moral well-being of the people even in the remotest barangays of the country and the counter-productive and retrogressive effects of the envisioned on-line lottery system are as staggering as the billions in pesos it is expected to raise. The legal standing then of the petitioners deserves recognition x x x. After hurdling the threshold procedural issues, we now come to the decisive substantive issue of whether PAGCOR's legislative franchise includes the right to manage and operate jai-alai.[14]The issue is of supreme significance for its incorrect resolution can dangerously diminish the plenary legislative power of Congress, more especially its exercise of police power to protect the morality of our people. After a circumspect consideration of the clashing positions of the parties, we hold that the charter of PAGCOR does not give it any franchise to operate and manage jai-alai. FIRST. A franchise is a special privilege conferred upon a corporation or individual by a government duly empowered legally to grant it.[15] It is a privilege of public concern which cannot be exercised at will and pleasure, but should be reserved for public control and administration, either by the government directly, or by public agents, under such conditions and regulations as the government may impose on them in the interest of the public.[16] A franchise thus emanates from a sovereign power[17] and the grant is inherently a legislative power. It may, however, be derived indirectly from the state through an agency to which the power has been clearly and validly delegated.[18] In such cases, Congress prescribes the conditions on which the grant of a franchise may be made.[19] Thus, the manner of granting the franchise, to whom it may be granted, the mode of conducting the business, the character and quality of the service to be rendered and the duty of the grantee to the public in exercising the franchise are almost always defined in clear and unequivocal language. In the absence of

these defining terms, any claim to a legislative franchise to operate a game played for bets and denounced as a menace to morality ought to be rejected. SECOND. A historical study of the creation, growth and development of PAGCOR will readily show that it was never given a legislative franchise to operate jai-alai. (2.a) Before the creation of PAGCOR, a 25-year right to operate jai-alai in Manila was given by President Marcos to the Philippine Jai-Alai and Amusement Corporation then controlled by his in-laws, the Romualdez family. The franchise was granted on October 16, 1975 thru P.D. No. 810 issued by President Marcos in the exercise of his martial law powers. On that very date, the 25-year franchise of the prior grantee expired and was not renewed. A few months before, President Marcos had issued P.D. No. 771 dated August 20, 1975, revoking the authority of local government units to issue jaialai franchises. By these acts, the former President exercised complete control of the sovereign power to grant franchises. (2.b) Almost one year and a half after granting the Philippine Jai-Alai and Amusement Corporation a 25-year franchise to operate jai-alai in Manila, President Marcos created PAGCORon January 1, 1977 by issuing P.D. No. 1067-A. The decree is entitled Creating the Philippine Amusements and Gaming Corporation, Defining Its Powers and Functions, Providing Funds therefor and for Other Purposes. Its Declaration of Policy[20] trumpeted the intent that PAGCOR was created to implement the policy of the State to centralize and integrate all games of chance not heretofore authorized by existing franchises or permitted by law x x x. One of its whereas clauses referred to the need to prevent the proliferation of illegal casinos or clubs conducting games of chance x x x.[21] To achieve this objective, PAGCOR was empowered to establish and maintain clubs, casinos, branches, agencies or subsidiaries, or other units anywhere in the Philippines x x x.[22] (2.c) On the same day after creating PAGCOR, President Marcos issued P.D. No. 1067-B granting PAGCOR x x x a Franchise to Establish, Operate, and Maintain Gambling Casinos on Land or Water Within the Territorial Jurisdiction of the Republic of the Philippines. Obviously, P.D. No. 1067-A which created the PAGCOR is not a grant of franchise to operate the game of jai-alai. On the other hand, Section 1 of P.D. No. 1067-B provides the nature and term of PAGCORS franchise to maintain gambling casinos (not a franchise to operate jai-alai), viz: SECTION 1. NATURE AND TERM OF FRANCHISE. Subject to the terms and conditions established in this Decree, the Philippine Amusements and Gaming Corporation is hereby granted for a period of twenty-five (25) years, renewable for another 25 years, the right, privilege, and authority to operate and maintain gambling casinos, clubs and other recreation or amusement places, sports, gaming pools, i.e., basketball, football, etc., whether on land or sea, within the territorial jurisdiction of the Republic of the Philippines. Section 2 of the same decree spells out the scope of the PAGCOR franchise to maintain gambling casinos (not a franchise to operate jai-alai), viz: SEC. 2. SCOPE OF FRANCHISE. In addition to the right and privileges granted it under Sec. 1, this Franchise shall entitle the franchise holder to do and undertake the following: (1) Enter into operators and/or management contracts with duly registered and accredited company possessing the knowledge, skill, expertise and facilities to insure the efficient operation ofgambling casinos; Provided, That the service fees of such management and/or operator companies whose services

may be retained by the franchise holder of this Franchise shall not in the aggregate exceed ten (10%) percent of the gross income. (2) Purchase foreign exchange that may be required for the importation of equipment, facilities and other gambling paraphernalia indispensably needed or useful to insure the successful operation of gambling casinos. (3) Acquire the right of way, access to or thru public lands, public waters or harbors, including the Manila Bay Area; such right to include, but not limited to, the right to lease and/or purchase public lands, government reclaimed lands, as well as land of private ownership or those leased from the government. This right shall carry with it the privilege of the franchise holder to utilize piers, quays, boat landings, and such other pertinent and related facilities within these specified areas for use as landing, anchoring, or berthing sites in connection with its authorized casino operations. (4) Build or construct structures, buildings, coastways, piers, docks, as well as any other form of land and berthing facilities for its floating casinos. (5) To do and perform such other acts directly related to the efficient and successful operation and conduct of games of chance in accordance with existing laws and decrees. (2.d) Still on the day after creating PAGCOR, President Marcos issued P.D. No. 1067-C amending P.D. Nos. 1067-A and B. The amendment provides that PAGCORs franchise to maintain gambling casinos x x x shall become exclusive in character, subject only to the exception of existing franchises and games of chance heretofore permitted by law, upon the generation by the franchise holder of gross revenues amounting to P1.2 billion and its contribution therefrom of the amount of P720 million as the governments share. (2.e) On June 2, 1978, President Marcos issued P.D. No. 1399 amending P.D. Nos. 1067-A and 1067-B. The amendments did not change the nature and scope of the PAGCOR franchise to maintain gambling casinos. Rather, they referred to the Composition of the Board of Directors,[23] Special Condition of Franchise,[24]` Exemptions,[25] and Other Conditions.[26] (2.f) On August 13, 1979, President Marcos issued P.D. No. 1632. Again, the amendments did not change a comma on the nature and scope of PAGCORs franchise to maintain gambling casinos. They related to the allocation of the 60% share of the government where the host area is a city or municipality other than Metro Manila,[27] and the manner of payment of franchise tax of PAGCOR.[28] (2.g) On July 11, 1983, President Marcos issued P.D. No. 1869 entitled Consolidating and Amending P.D. Nos. 1067-A, 1067-B, 1067-C, 1399 and 1632 Relative to the Franchise and Power of the PAGCOR. As a consolidated decree, it reiterated the nature and scope of PAGCORs existing franchise to maintain gambling casinos (not a franchise to operate jai-alai), thus: SEC. 10. Nature and term of franchise. Subject to the terms and conditions established in this Decree, the Corporation is hereby granted for a period of twenty-five (25) years, renewable for another twentyfive (25) years, the rights, privilege and authority to operate and maintain gambling casinos, clubs, and other recreation or amusement places, sports, gaming pools, i.e. basketball, football, lotteries, etc., whether on land or sea, within the territorial jurisdiction of the Republic of the Philippines.

SEC. 11. Scope of Franchise. In addition to the rights and privileges granted it under the preceding Section, this Franchise shall entitle the corporation to do and undertake the following: (1) Enter into operating and/or management contracts with any registered and accredited company possessing the knowledge, skill, expertise and facilities to insure the efficient operation ofgambling casinos; provided, that the service fees of such management and/or operator companies whose services may be retained by the Corporation shall not in the aggregate exceed ten (10%) percent of the gross income; (2) Purchase foreign exchange that may be required for the importation of equipment, facilities and other gambling paraphernalia indispensably needed or useful to insure the successful operation of gambling casinos; (3) Acquire the right of way or access to or thru public land, public waters or harbors, including the Manila Bay Area; such right shall include, but not be limited to, the right to lease and/or purchase public lands, government reclaimed lands, as well as lands of private ownership or those leased from the Government. This right shall carry with it the privilege of the Corporation to utilize piers, quays, boat landings, and such other pertinent and related facilities within these specified areas for use as landing, anchoring or berthing sites in connection with its authorized casino operations; (4) Build or construct structures, buildings, castways, piers, decks, as well as any other form of landing and boarding facilities for its floating casinos; and (5) To do and perform such other acts directly related to the efficient and successful operation and conduct of games of chance in accordance with existing laws and decrees. (2.h) Then came the 1986 EDSA revolution and the end of the Marcos regime. On May 8, 1987, President Corazon Aquino issued Executive Order No. 169 repealing P.D. Nos. 810, 1124 and 1966 thus revoking the franchise of the Philippine Jai-Alai and Amusement Corporation controlled by the Romualdezes to operate jai-alai in Manila. PAGCORs franchise to operate gambling casinos was not revoked. Neither was it given a franchise to operate jai-alai. THIRD. In light of its legal history, we hold that PAGCOR cannot maintain that section 10 of P.D. No. 1869 grants it a franchise to operate jai-alai. Section 10 provides: SEC. 10 Nature and term of franchise. Subject to the terms and conditions established in this Decree, the Corporation is hereby granted for a period of twenty-five (25) years, renewable for another twentyfive (25) years, the rights, privilege and authority to operate and maintain gambling casinos, clubs, and other recreation or amusement places, sports, gaming pools, i.e., basketball, football, lotteries, etc., whether on land or sea, within the territorial jurisdiction of the Republic of the Philippines. (3.a) P.D. No. 1869 is a mere consolidation of previous decrees dealing with PAGCOR. PAGCOR cannot seek comfort in section 10 as it is not a new provision in P.D. No. 1869 and, from the beginning of its history, was never meant to confer it with a franchise to operate jai-alai. It is a reiteration of section 1 of P.D. No. 1067-B which provides: SECTION 1. Nature and Term of Franchise. Subject to the terms and conditions established in this Decree, the Philippine Amusements and Gaming Corporation is hereby granted for a period of twenty-

five (25) years, renewable for another 25 years, the right, privilege, and authority to operate and maintain gambling casinos, clubs and other recreation or amusement places, sports gaming pools, i.e., basketball, football, etc., whether on land or sea, within the territorial jurisdiction of the Republic of the Philippines. (3.b) Plainly, section 1 of P.D. No. 1067-B which was reenacted as section 10 of P.D. No. 1869 is not a grant of legislative franchise to operate jai-alai. P.D. No. 1067-B is a franchise to maintain gambling casinos alone. The two franchises are as different as day and night and no alchemy of logic will efface their difference. (3.c) PAGCOR's stance becomes more sterile when we consider the law's intent. It cannot be the intent of President Marcos to grant PAGCOR a franchise to operate jai-alaibecause a year and a half before it was chartered, he issued P.D. No. 810 granting Philippine Jai-Alai and Amusement Corporation a 25-year franchise to operate jai-alai in Manila. This corporation is controlled by his in-laws, the Romualdezes.[29] To assure that this Romualdez corporation would have no competition, President Marcos earlier revoked the power of local governments to grant jai-alai franchises. Thus, PAGCORs stance that P.D. No. 1067-B is its franchise to operate jai-alai, which would have competed with the Romualdezes franchise, extends credulity to the limit. Indeed, P.D. No. 1067-A which created PAGCOR made it crystal clear that it was to implement "the policy of the State to centralize and integrate all games of chance not heretofore authorized by existing franchises or permitted by law," which included the Philippine Jai-Alai and Amusement Corporation. (3.d) There can be no sliver of doubt that under P.D. No. 1869, PAGCORs franchise is only to operate gambling casinos and not jai-alai. This conclusion is compelled by a plain readingof its various provisions, viz: "SECTION 1. Declaration of Policy. - It is hereby declared to be the policy of the State to centralize and integrate all games of chance not heretofore authorized by existing franchises or permitted by law in order to attain the following objectives: xxx xxx

(b) To establish and operate clubs and casinos, for amusement and recreation, including sports, gaming pools (basketball, football, lotteries, etc.) and such other forms of amusement and recreation including games of chance, which may be allowed by law within the territorial jurisdiction of the Philippines and which will: x x x (3) minimize, if not totally eradicate, the evils, malpractices and corruptions that are normally prevalent in the conduct and operation of gambling clubs and casinos without direct government involvement. xxx xxx TITLE IV GRANT OF FRANCHISE SEC. 10. Nature and term of franchise. Subject to the terms and conditions established in this Decree, the Corporation is hereby granted for a period of twenty-five (25) years, renewable for another twentyfive (25) years, the rights, privileges and authority to operate and maintain gambling casinos, clubs, and other recreation or amusement places, sports, gaming pools, i.e. basketball, football, lotteries, etc. whether on land or sea, within the territorial jurisdiction of the Republic of the Philippines.

SEC. 11. Scope of Franchise. In addition to the rights and privileges granted it under the preceding Section, this Franchise shall entitle the Corporation to do and undertake the following: (1) Enter into operating and/or management contracts with any registered and accredited company possessing the knowledge, skill, expertise and facilities to insure the efficient operation of gambling casinos; provided, that the service fees of such management and/or operator companies whose services may be retained by the Corporation shall not in the aggregate exceed ten (10%) percent of the gross income; (2) Purchase foreign exchange that may be required for the importation of equipment, facilities and other gambling paraphernalia indispensably needed or useful to insure the successful operation of gambling casinos; (3) Acquire the right of way or access to or thru public land, public waters or harbors x x x. This right shall carry with it the privilege of the Corporation to utilize x x x such other pertinent and related facilities within these specified areas x x x in connection with its authorized casino operations; (4) Build or construct structures, building castways, piers, decks, as well as any other form of landing and boarding facilities for its floating casinos; xxx xxx

SEC. 13. Exemptions. (1) Customs duties, taxes and other imposts on importations. All importations of equipment, vehicles, automobiles, boats, ships, barges, aircraft and such other gambling paraphernalia, including accessories or related facilities, for the sole and exclusive use of the casinos, the proper and efficient management and administration thereof, and such other clubs. Recreation or amusement places to be established under and by virtue of this Franchise shall be exempt from the payment of all kinds of customs duties, taxes and other imposts, including all kinds of fees, levies, or charges of any kind or nature, whether National or Local. Vessels and/or accessory ferry boats imported or to be imported by any corporation having existing contractual arrangements with the Corporation, for the sole and exclusive use of the casino or to be used to service the operations and requirements of the casino, shall likewise be totally exempt from the payment of all customs duties, x x x. (2) Income and other taxes. (a) x x x (b) Others: The exemption herein granted for earnings derived from the operations conducted under the franchise x x x shall inure to the benefit of and extend to corporation(s) x x x with whom the Corporation or operator has any contractual relationship in connection with the operations of the casino(s) authorized to be conducted under this Franchise x x x. (3) Dividend Income. x x x The dividend income shall not in such case be considered as part of beneficiaries taxable income; provided, however, that such dividend income shall be totally exempted from income or other forms of taxes if invested within six (6) months from date the dividend income is received, in the following:

(a) operation of the casino(s) or investments in any affiliate activity that will ultimately redound to the benefit of the Corporation or any other corporation with whom the Corporation has anyexisting arrangements in connection with or related to the operations of the casino(s); xxx xxx

(4) Utilization of Foreign Currencies. The Corporation shall have the right and authority, solely and exclusively in connection with the operations of the casino(s), to purchase, receive, exchange and disburse foreign exchange, subject to the following terms and conditions: (a) A specific area in the casino(s) or gaming pit shall be put up solely and exclusively for players and patrons utilizing foreign currencies; (b) The Corporation shall appoint and designate a duly accredited commercial bank agent of the Central Bank, to handle, administer and manage the use of foreign currencies in the casino(s); (c) The Corporation shall provide an office at casino(s) for the employees of the designated bank, agent of the Central Bank, where the Corporation will maintain a dollar account which will be utilized exclusively for the above purpose and the casino dollar treasury employees; xxx xxx

(f) The disbursement, administration, management and recording of foreign exchange currencies used in the casino(s) shall be carried out in accordance with existing foreign exchange regulations x x x. SEC. 14. Other Conditions. (1) Place. The Corporation shall conduct the gambling activities or games of chance on land or water within the territorial jurisdiction of the Republic of the Philippines. When conducted on water, the Corporation shall have the right to dock the floating casino(s) in any part of the Philippines where vessels/boats are authorized to dock under the Customs and Maritime Laws. (2) Time. Gambling activities may be held and conducted at anytime of the day or night; provided, however, that in places where curfew hours are observed, all players and personnel of gambling casinos shall remain within the premises of the casinos. (3) Persons allowed to play. x x x (4) Persons not allowed to play. xxx xxx

From these are excepted the personnel employed by the casinos, special guests, or those who at the discretion of the Management may be allowed to stay in the premises. TITLE VI EXEMPTION FROM CIVIL SERVICE LAW

SEC. 16. Exemption. All position in the Corporation, whether technical, administrative, professional or managerial are exempt from the provisions of the Civil Service Law, rules and regulations, and shall be governed only by the personnel management policies set by the Board of Directors. All employees of the casinos and related services shall be classified as Confidential appointees. TITLE VII TRANSITORY PROVISIONS SEC. 17. Transitory Provisions. x x x SEC. 18. Exemption from Labor Laws. No union or any form of association shall be formed by all those working as employees of the casino or related services whether directly or indirectly. For such purpose, all employees of the casinos or related services shall be classified as confidential appointees and their employment thereof, whether by the franchise holder, or the operators, or the managers, shall be exempt from the provisions of the Labor Code or any implementing rules and regulations thereof. From its creation in 1977 and until 1999, PAGCOR never alleged that it has a franchise to operate jai-alai. Twenty-two years is a long stretch of silence. It is inexplicable why it never claimed its alleged franchise for so long a time which could have allowed it to earn billions of pesos as additional income. (3.e) To be sure, we need not resort to intellectual jujitsu to determine whether PAGCOR has a franchise to operate jai-alai. It is easy to tell whether there is a legislative grant or not. Known as the game of a thousand thrills, jai-alai is a different game, hence, the terms and conditions imposed on a franchisee are spelled out in standard form. A review of some laws and executive orders granting a franchise to operate jai-alai will demonstrate these standard terms and conditions, viz: (3.e.1) Commonwealth Act No. 485 (An Act to Permit Bets in the Game of Basque Pelota) June 18, 1939 Be it enacted by the National Assembly of the Philippines: SECTION 1. Any provision of existing law to the contrary notwithstanding, it shall be permissible in the game of Basque pelota, a game of skill (including the games of pala, raqueta, cestapunta, remonte and mano), in which professional players participate, to make either direct bets or bets by means of a totalizer; Provided, That no operator or maintainer of a Basque pelota court shall collect as commission a fee in excess of twelve per centum on such bets, or twelve per centum of the receipts of the totalizer, and of such per centum three shall be paid to the Government of the Philippines, for distribution in equal shares between the General Hospital and the Philippine Anti-tuberculosis Society. SEC. 2. Any person, company or corporation, that shall build a court for Basque pelota games with bets within eighteen months from the date of the approval of this Act, shall thereunder have the privilege to maintain and operate the said court for a term of twenty-five years from the date in which the first game with bets shall have taken place. At the expiration of the said term of twenty-five years, the buildings and the land on which the court and the stadium shall be established, shall become the property of the Government of the Philippines, without payment. SEC. 3. The location and design of the buildings that shall be used for the same games of Basque pelota, shall have prior approval of the Bureau of Public Works and the operator shall pay a license fee of five

hundred pesos a year to the city or municipality in which the establishment shall be situated, in addition to the real-estate tax due on such real property. SEC. 4. This Act shall take effect upon its approval. ENACTED, without Executive approval, June 18, 1939. (3.e.2) Executive Order No. 135 (Regulating the Establishment, Maintenance and Operation of Frontons and Basque Pelota Games [Jai Alai]) May 4, 1948 By virtue of the powers vested in me by Commonwealth Act No. 601, entitled An Act to regulate the establishment, maintenance and operation of places of amusements in chartered cities, municipalities and municipal districts, the following rules and regulations governing frontons and basque pelota games are hereby promulgated: SECTION 1. Definitions. Whenever used in this Order and unless the context indicates a different meaning, the following terms shall bear the meaning indicated herein: (a) Basque pelota game shall include the pelota game with the use of pala, raqueta, cesta punta, remonte and mano, in which professional players participate. (b) Fronton comprises the court where basque pelota games are played, inlcuding the adjoining structures used in connection with such games, such as the betting booths and galleries, totalizator equipment, and the grandstands where the public is admitted in connection with such games. (c) Pelotari is a professional player engaged in playing basque pelota. (d) Professional player is one who plays for compensation. SEC. 2. Supervision over the establishment and operation of frontons and basque pelota games. Subject to the administrative control and supervision of the Secretary of the Interior, city or municipal mayors shall exercise supervision over the establishment, maintenance and operation of frontons and basque pelota games within their respective territorial jurisdiction, as well as over the officials and employees of such frontons and shall see to it that all laws, orders and regulations relating to such establishments are duly enforced. Subject to similar approval, they shall appoint such personnel as may be needed in the discharge of their duties and fix their compensation which shall be paid out of the allotment of one-half per centum (1/2%) out of the total bets or wager funds set aside and made available for the purpose in accordance with Section 19 hereof. The Secretary of the Interior shall have the power to prohibit or allow the operation of such frontons on any day or days, or modify their hour of operation and to prescribe additional rules and regulations governing the same. SEC. 3. Particular duties of city or municipal mayors regarding operation of basque pelota games and frontons. In connection with their duty to enforce the laws, orders, rules and regulations relating to frontons and basque pelota games, the city or municipal mayor shall require that such frontons shall be properly constructed and maintained in accordance with the provisions of Commonwealth Act No. 485; shall see that the proper sanitary accommodations are provided in the grandstands and other structures

comprising such frontons; and shall require that such frontons be provided with a properly equipped clinic for the treatment of injuries to the pelotaris. SEC. 4. Permits. In the absence of a legislative franchise, it shall be unlawful for any person or entity to establish and/or operate frontons and conduct basque pelota games without a permit issued by the corresponding city or municipal mayor, with the approval of the provincial governor in the latter case. Any permit issued hereunder shall be reported by the provincial governor or city mayor, as the case may be, to the Secretary of the Interior. SEC. 5. License fees. The following license fees shall be paid: (a) For each basque pelota fronton, five hundred pesos (P500) annually, or one hundred and twentyfive pesos (P125) quarterly. (b) For pelotaris, judges or referees and superintendents (intendentes) of basque pelota games, eighteen pesos (P18) each annually. The above license fees shall accrue to the funds of the city or municipality where the fronton is operated. SEC. 6. Location. Except in the case of any basque pelota fronton licensed as of December 8, 1941, no basque pelota fronton shall be maintained or operated within a radius of 200 lineal meters from any city hall or municipal building, provincial capitol building, national capitol building, public playa or park, public school, church, hospital, athletic stadium, or any institution of learning or charity. SEC. 7. Buildings, sanitary and parking requirements. No permit or license for the construction or operation of a basque pelota fronton shall be issued without proper certificate of the provincial or city engineer and architect certifying to the suitability and safety of the building and of the district or city health officer certifying to the sanitary condition of said building. The city or municipal mayor may, in his discretion and as circumstances may warrant, require that the fronton be provided with sufficient space for parking so that the public roads and highways be not used for such purposes. SEC. 8. Protest and complaint. Any person who believes that any basque pelota fronton is located or established in any place not authorized herein or is being operated in violation of any provision of this order may file a protest or complaint with the city or municipal mayor concerned, and after proper investigation of such complaint the city or municipal mayor may take such action as he may consider necessary in accordance with the provisions of section 10 hereof. Any decision rendered on the matter by the city or municipal mayor shall be appealable to the Secretary of the Interior. SEC. 9. Persons prohibited admission. Persons under 16 years of age, persons carrying firearms or deadly weapons of any description, except government officials actually performing their official duties therein, intoxicated persons, and persons of disorderly nature and conduct who are apt to disturb peace and order, shall not be admitted or allowed in any basque pelota fronton: Provided, That persons under 16 years of age may, when accompanied by their parents or guardians, be admitted therein but in no case shall such minors be allowed to bet.

SEC. 10. Gambling prohibited. No card games or any of the prohibited games shall be permitted within the premises of any basque pelota fronton; and upon satisfactory evidence that the operator or entity conducting the game has tolerated the existence of any prohibited game within its premises, the city or municipal mayor may take the necessary action in accordance with the provisions of section 11 hereof. SEC. 11. Revocation or suspension of permits and licenses. The city or municipal mayor, subject to the approval of the Secretary of the Interior, may suspend or revoke any license granted under this Order to any basque pelota fronton or to any official or employee thereof, for violation of any of the rules and regulations provided in this Order or those which said city or municipal mayor may prescribe, or for any just cause. Such suspension or revocation shall operate to forfeit to the city or municipality concerned all sums paid therefor. SEC. 12. Appeals. Any action taken by the city or municipal mayor under the provisions of this Order shall stand, unless modified or revoked by the Secretary of the Interior. SEC. 13. Books, records and accounts. The city or municipal mayor, or his duly authorized representative, shall have the power to inspect at all times the books, records, and accounts of any basque pelota fronton. He may, in his discretion and as the circumstances may warrant, require that the books and financial or other statements of the person or entity operating the game be kept in such manner as he may prescribe. SEC. 14. Days and hours of operation. Except as may otherwise be provided herein, basque pelota games with betting shall be allowed every day, excepting Sundays, from 2 oclock p.m. to not later than 11 oclock p.m. SEC. 15. Pelotaris, judges, referees, etc. shall be licensed. No person or entity operating a basque pelota fronton, wherein games are played with betting, shall employ any pelotari, judge or referee, superintendent of games (intendente), or any other official whose duties are connected with the operation or supervision of the games, unless such person has been duly licensed by the city or municipal mayor concerned. Such license shall be granted upon satisfactory proof that the applicant is in good health, know the rules and usages of the game, and is a person of good moral character and of undoubted honesty. In the case of pelotaris, such license shall be granted only upon the further condition that they are able to play the game with reasonable skill and with safety to themselves and to their opponents. The city or municipal mayor may further require other reasonable qualifications for applicants to a license, not otherwise provided herein. Such license shall be obtained yearly. SEC. 16. Installation of automatic electric totalizator. Any person or entity operating a fronton wherein betting in any form is allowed shall install in its premises within the period of one year from the date this Order takes effect, an automatic electrically operated indicator system and ticket selling machine, commonly known as totalizator, which shall clearly record each ticket purchased on every player in any game, the total number of tickets sold on each event, as well as the dividends that correspond to holders of winning numbers. This requirement shall, however, not apply to double events or forecast pools or to any betting made on the basis of a combination or grouping of players until a totalizator that can register such bets has been invented and placed on the market. SEC. 17. Supervision over sale of betting tickets and payment of dividends. For the purpose of verifying the accuracy of reports in connection with the sale of betting tickets and the computation of

dividends awarded to winners on each event, as well as other statements with reference to the betting in the games played, the city or municipal mayor shall assign such number of auditing officers and checkers as may be necessary for the purpose. These auditing officers and checkers shall be placed in the ticket selling booths, dividend computation booths and such other parts of the fronton, where betting tickets are sold and dividends computed. It shall be their duty to check up and correct any irregularity or any erroneous report or computation that may be made by officials of the fronton, in connection with the sale of tickets and the payment of dividends. SEC. 18. Wager tickets and dividends. The face value of the wager tickets for any event shall not exceed P5 whether for win or place, or for any combination or grouping of winning numbers. The face value of said tickets, as the case may be, shall be the basis for the computation of the dividends and such dividends shall be paid after eliminating fractions of ten centavos (P0.10); for example: if the resulting dividend is P10.43, the dividend that shall be paid will be only P10.40. SEC. 19. Distribution of wager funds. The total wager funds or gross receipts from the sale of the betting tickets shall be apportioned as follows: a commission not exceeding ten and one-half per centum (10 %) on the total bets on each game or event shall be set aside for the person or entity operating the fronton and four and one-half per centum (4 %) of such bets shall be covered into the National Treasury for disposition as may be authorized by law or executive order; and the balance or eighty-five per centum (85%) of the total bets shall be distributed in the form of dividends among holders of win or place numbers or holders of the winning combination or grouping of numbers, as the case may be: Provided, however, That of the ten and one-half per centum (10 %) representing the commission of the person or entity operating the fronton, an amount equivalent to one-half per centum (1/2%) of the total bets or wager funds shall be set aside and made available to cover the expenses of the personnel assigned to supervise the operation of basque pelota games and frontons, including payment of salaries of such personnel, purchase of necessary equipment and other sundry expenses as may be authorized by competent authority. SEC. 20. Supervision over the conduct of games; enforcement of rules and regulations. The city or municipal mayor is authorized to place within the premises of the fronton such number of inspectors and agents as may be deemed necessary to supervise the conduct of the games to see that the rules of the games are strictly enforced, and to carry out the provisions of this Order as well as such other regulations as may hereafter be prescribed. SEC. 21. Rules governing the games and personnel of the fronton. The rules and regulations that have been adopted by any fronton to govern the operation of its games and the behavior, duties and performance of the officials and personnel connected therewith, such as pelotaris, judges, referees or superintendents of games (intendentes) and others, shall be the recognized rules and regulations of such fronton until the same are altered or repealed by the Secretary of the Interior; and any fronton may introduce any type or form of games or events, provided they are not contrary to the provisions of this Order or any rule or regulation hereafter issued by the Secretary of the Interior. SEC. 22. Regulations governing pelotaris. Any rule or regulation adopted by any established fronton governing the conduct or performance of pelotaris to the contrary notwithstanding, the following regulations shall be observed:

(a) The pelotaris who are participating in the games shall not be allowed to communicate, talk or make signs with any one in the public or with any official or employee of the fronton during the games, except with the judges or referees or the superintendent (intendente) in charge of the games; (b) The program of games or events, as well as the line-up or order of playing of the pelotaris in each event shall be determined by the superintendent of the games (intendente), subject to the approval of the city or municipal mayor, or his authorized representatives; (c) Pelotaris shall be in good physical condition before participating in any game and shall be laid off from playing at least two days in a week. Every pelotari shall once a month secure a medical certificate from a government physician to be designated by the city or municipal mayor concerned certifying to his physical fitness to engage in the games; and (d) The amount of dividends computed for any event shall not be posted within the view of the pelotaris participating in the event until after the termination of said event. (3.e.3) Presidential Decree No. 810 (An Act Granting the Philippine Jai-Alai and Amusement Corporation a Franchise to Operate, Construct and Maintain a Fronton for Basque Pelota and Similar Games of Skill in the Greater Manila Area) October 16, 1975 WHEREAS, by virtue of the provisions of Commonwealth Act Numbered 485 the franchise to operate and maintain a fronton for the Basque pelota and similar games of skill in the City of Manila, shall expire on October, 1975 whereupon the ownership of the land, buildings and improvements used in the said game will be transferred without payment to the government by operation of law; WHEREAS, there is a pressing need not only to further develop the game as a sport and amusement for the general public but also to exploit its full potential in support of the governments objectives and development programs; WHEREAS, Basque pelota is a game of international renown, the maintenance and promotion of which will surely assist the tourism industry of the country; WHEREAS, the tourism appeal of the game will be enhanced only with the governments support and inducement in developing the sport to a level at par with international standards; WHEREAS, once such tourism appeal is developed, the same will serve as a stable and expanding base for revenue generation for the governments development projects. NOW, THEREFORE, I, FERDINAND E. MARCOS, President of the Philippines, by virtue of the powers vested in me by the Constitution, hereby decree as follows: SECTION 1. Any provision of law to the contrary notwithstanding, there is hereby granted to the Philippine Jai-Alai and Amusement Corporation, a corporation duly organized and registered under the laws of the Philippines, hereinafter called the grantee or its successors, for a period of twenty-five years from the approval of this Act, extendable for another twenty-five years without the necessity of another franchise, the right, privilege and authority to construct, operate and maintain a court for Basque Pelota (including the games of pala, raqueta, cestapunta, remonte and mano) within the Greater Manila Area,

establish branches thereof for booking purposes and hold or conduct Basque pelota games therein with bettings either directly or by means of electric and/or computerized totalizator. The games to be conducted by the grantee shall be under the supervision of the Games and Amusements Board, hereinafter referred to as the Board, which shall enforce the laws, rules and regulations governing Basque pelota as provided in Commonwealth Act numbered four hundred and eighty-five, as amended, and all the officials of the game and pelotaris therein shall be duly licensed as such by the Board. SEC. 2. The grantee or its duly authorized agent may offer, take or arrange bets within or outside the place, enclosure or court where the Basque pelota games are held: Provided, That bets offered, taken or arranged outside the place, enclosure or court where the games are held, shall be offered, taken or arranged only in places duly licensed by the corporation; Provided, however, That the same shall be subject to the supervision of the Board. No person other than the grantee or its duly authorized agents shall take or arrange bets on any pelotari or on the game, or maintain or use a totalizator or other device, method or system to bet on any pelotari or on the game within or without the place, enclosure or court where the games are held by the grantee. Any violation of this section shall be punished by a fine of not more than two thousand pesos or by imprisonment of not more than six months, or both in the discretion of the Court. If the offender is a partnership, corporation, or association, the criminal liability shall devolve upon its president, directors or any other officials responsible for the violation. SEC. 3. The grantee shall provide mechanical and/or computerized devices, namely: a) electric totalizator; b) machine directly connected to a computer in a display board, for the sale of tickets, including, those sold from the off-court stations; c) modern sound system and loud speakers; d) facilities that bring safety, security, comfort and convenience to the public; e) modern intercommunication devices; and f) such other facilities, devices and instruments for clean, honest and orderly Basque pelota games, within three years from the approval of this Act. The Board shall assign its auditors and/or inspectors to supervise and regulate the placing of bets, proper computation of dividends and the distribution of wager funds. SEC. 4. The total wager fund or gross receipts from the sale of betting tickets will be apportioned as follows: eighty-five per centum (85%) shall be distributed in the form of dividends among the holders of win or place numbers or holders of the winning combination or grouping of numbers as the case may be. The remaining balance of fifteen per centum (15%) shall be distributed as follows: eleven and one-half per centum (11 %) shall be set aside as the commission fee of the grantee, and three and onehalf per centum (3 %) thereof shall be set aside and alloted to any special health, educational, civic, cultural, charitable, social welfare, sports, and other similar projects as may be directed by the President. The receipts from betting corresponding to the fraction of ten centavos eliminated from the dividends paid to the winning tickets, commonly known as breakage, shall also be set aside for the above-named special projects. SEC. 5. The provision of any existing law to the contrary notwithstanding, the grantee is hereby authorized to hold Basque pelota games (including the games of pala, raqueta, cestapunta, remonte and mano) on all days of the week except Sundays and official holidays.

SEC. 6. The provisions of Commonwealth Act numbered four hundred and eighty-five as amended, shall be deemed incorporated herein, provided that the provisions of this Act shall take precedence over the provisions thereof and all other laws, executive orders and regulations which are inconsistent herewith. SEC. 7. The grantee shall not lease, transfer, grant the usufruct of, sell or assign this franchise permit, or the rights or privileges acquired thereunder to any person, firm, company, corporation or other commercial or legal entity, nor merge with any other person, company or corporation organized for the same purpose, without the previous approval of the President of the Philippines. SEC. 8. For purposes of this franchise, the grantee is herein authorized to make use of the existing fronton, stadium and facilities located along Taft Avenue, City of Manila, belonging to the government by virtue of the provisions of Commonwealth Act numbered four hundred and eighty-five. It is abundantly clear from the aforequoted laws, executive orders and decrees that the legislative practice is that a franchise to operate jai-alai is granted solely for that purpose and the terms and conditions of the grant are unequivocably defined by the grantor. Such express grant and its conditionalities protective of the public interest are evidently wanting in P.D. No. 1869, the present Charter of PAGCOR. Thus, while E.O. 135 and P.D. No. 810 provided for the apportionment of the wager funds or gross receipts from the sale of betting tickets, as well as the distribution of dividends among holders of win or place numbers or holders of the winning combination or grouping of numbers, no such provisions can be found in P.D. No. 1869. Likewise, while P.D. No. 810 describes where and how the games are to be conducted and bettings to be made, and imposes a penalty in case of a violation thereof, such provisions are absent in P.D. No. 1869. In fine, P.D. No. 1869 does not have the standard marks of a law granting a franchise to operate jai-alai as those found under P.D. No. 810 or E.O. 135. We cannot blink away from the stubborn reality that P.D. No. 1869 deals with details pertinent alone to the operation of gambling casinos. It prescribes the rules and regulations concerning the operation of gambling casinos such as the place, time, persons who are and are not entitled to play, tax exemptions, use of foreign exchange, and the exemption of casino employees from the coverage of the Civil Service Law and the Labor Code. The short point is that P.D. No. 1869 does not have the usual provisions with regards to jai-alai. The logical inference is that PAGCOR was not given a franchise to operate jai-alai frontons. There is no reason to resist the beguiling rule that acts of incorporation, and statutes granting other franchises or special benefits or privileges to corporations, are to be construed strictly against the corporations; and whatever is not given in unequivocal terms is understood to be withheld.[30] FOURTH. The tax treatment between jai-alai operations and gambling casinos are distinct from each other. Letters of Instruction No. 1439 issued on November 2, 1984 directed the suspension of the imposition of the increased tax on winnings in horse races and jai-alai under the old revenue code, to wit: WHEREAS, the increased tax on winnings on horse races and jai-alai under Presidential Decree 1959 has already affected the holding of horse races and jai-alai games, resulting in government revenue loss and affecting the livelihood of those dependent thereon; WHEREAS, the manner of taxation applicable thereto is unique and its effects and incidence are in no way similar to the taxes on casino operation or to any shiftable tax;

NOW, THEREFORE, I, FERDINAND E. MARCOS, President of the Philippines, by virtue of the powers vested in me by the Constitution, do hereby order and instruct the Minister of Finance, the Commissioner of the Bureau of Internal Revenue, and the Chairman, Games & Amusements Board, to suspend the implementation of the increased rate of tax winnings in horse races and jai-alai games and collect instead the rate applicable prior to the effectivity of PD 1959. Similarly, under Republic Act No. 8424, or the Tax Reform Act of 1997, there is an amusement tax imposed on operators of jai-alai (Section 125) and a stamp tax on jai-alai tickets (Section 190). There is no corresponding imposition on gambling casinos. Well to note, section 13 of P.D. No. 1869 grants to the franchise holder and casino operators tax exemptions from the payment of customs duties and income tax, except a franchise tax of five (5%) percent which shall be in lieu of all kinds of taxes, levies, fees or assessments of any kind, nature or description, levied, established or collected by any municipal, provincial, or national government authority. No similar exemptions have been extended to operators of jai-alai frontons. FIFTH. P.D. No. 1869, the present Charter of PAGCOR, is a consolidation of P.D. Nos. 1067-A, 1067B and 1067-C all issued on January 1, 1977. P.D. No. 1067-A created the PAGCOR and defined its powers and functions; P.D. No. 1067-B granted to PAGCOR a franchise to establish, operate, and maintain gambling casinos on land or water within the territorial jurisdiction of the Republic of the Philippines; and P.D. No. 1067-C granted PAGCOR the exclusive right, privilege and authority to operate and maintain gambling casinos, subject only to the exception of existing franchises and games of chance permitted by law. Beyond debate, P.D. No. 1869 adopted substantially the provisions of said prior decrees, with some additions which, however, have no bearing on the franchise granted to PAGCOR to operate gambling casinos alone, such as the Affiliation Provisions under Title III and the Transitory Provisions under Title VII. It also added the term lotteries under Section 1 (b) on Declaration of Policy and Section 10 on the Nature and Term of Franchise. It ought to follow that P.D. No. 1869 carries with it the same legislative intent that infused P.D. Nos. 1067-A, 1067-B and 1067-C. To be sure, both P.D. No. 1067-A and P.D. No. 1869 seek to enforce the same avowed policy of the State to minimize, if not totally eradicate, the evils, malpractices and corruptions that normally are found prevalent in the conduct and operation of gambling clubs and casinos without direct government involvement. It did not address the moral malevolence of jai-alai games and the need to contain it thru PAGCOR. We cannot deface this legislative intent by holding that the grant to PAGCOR under P.D. Nos. 1067-A and 1067-B to establish, operate, and maintain gambling casinos, has been enlarged, broadened or expanded by P.D. No. 1869 so as to include a grant to operate jai-alai frontons. Then and now, the intention was merely to grant PAGCOR a franchise to operate gambling casinos, no more, no less. SIXTH. Lest the idea gets lost in the shoals of our subconsciousness, let us not forget that PAGCOR is engaged in business affected with public interest. The phrase affected with public interest means that an industry is subject to control for the public good;[31] it has been considered as the equivalent of subject to the exercise of the police power.[32] Perforce, a legislative franchise to operate jai-alai is imbued with public interest and involves an exercise of police power. The familiar rule is that laws which grant the right to exercise a part of the police power of the state are to be construed strictly and any doubt must be resolved against the grant.[33] The legislature is regarded as the guardian of society, and therefore is not presumed to disable itself or abandon the discharge of its duty. Thus, courts do not assume that the legislature intended to part away with its power to regulate public morals.[34] The presumption is influenced by constitutional considerations. Constitutions are widely

understood to withhold from legislatures any authority to bargain away their police power[35] for the power to protect the public interest is beyond abnegation. It is stressed that the case at bar does not involve a franchise to operate a public utility (such as water, transportation, communication or electricity) the operation of which undoubtedly redounds to the benefit of the general public. What is claimed is an alleged legislative grant of a gambling franchise a franchise to operate jai-alai. A statute which legalizes a gambling activity or business should be strictly construed and every reasonable doubt must be resolved to limit the powers and rights claimed under its authority.[36] The dissent would like to make capital of the fact that the cases of Stone vs. Mississippi and Aicardi vs. Alabama are not on all fours to the cases at bar and, hence, the rulings therein do not apply. The perceived incongruity is more apparent than real. Stone[37] involves a contract entered into by the State of Mississippi with the plaintiffs which allowed the latter to sell and dispose of certificates of subscription which would entitle the holders thereof to such prizes as may be awarded to them, by the casting of lots or by lot, chance or otherwise. The contract was entered into by plaintiffs pursuant to their charter entitled An Act Incorporating the Mississippi Agricultural, Educational and Manufacturing Aid Society which purportedly granted them the franchise to issue and sell lottery tickets. However, the state constitution expressly prohibits the legislature from authorizing any lottery or allowing the sale of lottery tickets. Mississippi law makes it unlawful to conduct a lottery. The question raised in Stone concerned the authority of the plaintiffs to exercise the franchise or privilege of issuing and selling lottery tickets. This is essentially the issue involved in the cases at bar, that is, whether PAGCORs charter includes the franchise to operate jai-alai frontons. Moreover, even assuming arguendo that the facts in the cases at bar are not identical, the principles of law laid down in Stone are illuminating. For one, it was held in Stone that: Experience has shown that the common forms of gambling are comparatively innocuous when placed in contrast with the wide-spread pestilence of lotteries. The former are confined to a few persons and places, but the latter infests the whole community; it enters every dwelling; it reaches every class; it preys upon the hard earnings of the poor; and it plunders the ignorant and simple. x x x[38] The verity that all species of gambling are pernicious prompted the Mississippi Court to rule that the legislature cannot bargain away public health or public morals. We can take judicial notice of the fact that jai-alai frontons have mushroomed in every nook and corner of the country. They are accessible to everyone and they specially mangle the morals of the marginalized sector of society. It cannot be gainsaid that there is but a miniscule of a difference between jai-alai and lottery with respect to the evils sought to be prevented. In the case of Aicardi vs. Alabama, Moses & Co. was granted a legislative franchise to carry on gaming in the form specified therein, and its agent, Antonio Aicardi, was indicted for keeping a gaming table. In ascertaining whether the scope of the companys franchise included the right to keep a gaming table, the Court there held that such an Act should be construed strictly. Every reasonable doubt should be so resolved as to limit the powers and rights claimed under its authority. Implications and intendments should have no place except as they are inevitable from the language or the context. The view expressed in the dissent that the aforequoted ruling was taken out of context is perched on the premise that PAGCORs franchise is couched in a language that is broad enough to cover the

operations of jai-alai. This view begs the question for as shown in our disquisition, PAGCOR's franchise is restricted only to the operation of gambling casinos. Aicardi supports the thesis that a gambling franchise should be strictly construed due to its ill-effects on public order and morals. SEVENTH. The dissent also insists that the legislative intent must be sought first of all in the language of the statute itself. In applying a literal interpretation of the provision under Section 11 of P.D. 1869 that x x x the Corporation is hereby granted x x x the rights, privileges, and authority to operate and maintain gambling casinos, clubs, and other recreation or amusement places, sports, gaming pools, i.e., basketball, football, lotteries, etc. x x x, it contends that the extent and nature of PAGCORs franchise is so broad that literally all kinds of sports and gaming pools, including jai-alai, are covered therein. It concluded that since under Section 11 of P.D. No. 1869, games of skill like basketball and football have been lumped together with the word lotteries just before the word etc. and after the words gaming pools, it may be deduced from the wording of the law that when bets or stakes are made in connection with the games of skill, they may be classified as games of chance under the coverage of PAGCORs franchise. We reject this simplistic reading of the law considering the social, moral and public policy implications embedded in the cases at bar. The plain meaning rule used in the dissent rests on the assumption that there is no ambiguity or obscurity in the language of the law. The fact, however, that the statute admits of different interpretations is the best evidence that the statute is vague and ambiguous.[39] It is widely acknowledged that a statute is ambiguous when it is capable of being understood by reasonably well-informed persons in either of two or more senses.[40] In the cases at bar, it is difficult to see how a literal reading of the statutory text would unerringly reveal the legislative intent. To be sure, the term jai-alai was never used and is nowhere to be found in the law. The conclusion that it is included in the franchise granted to PAGCOR cannot be based on a mere cursory perusal of and a blind reliance on the ordinary and plain meaning of the statutory terms used such as gaming pools and lotteries. Sutherland tells us that a statute is ambiguous, and so open to explanation by extrinsic aids, not only when its abstract meaning or the connotation of its terms is uncertain, but also when it is uncertain in its application to, or effect upon, the fact-situation of the case at bar.[41] Similarly, the contention in the dissent that : x x x Even if the Court is fully persuaded that the legislature really meant and intended something different from what it enacted, and that the failure to convey the real meaning was due to inadvertence or mistake in the use of the language, yet, if the words chosen by the legislature are not obscure or ambiguous, but convey a precise and sensible meaning (excluding the case of obvious clerical errors or elliptical forms of expression), then the Court must take the law as it finds it, and give it its literal interpretation, without being influenced by the probable legislative meaning lying at the back of the words. In that event, the presumption that the legislature meant what it said, though it be contrary to the fact, is conclusive. cannot apply in the cases at bar considering that it has not been shown that the failure to convey the true intention of the legislature is attributable to inadvertence or a mistake in the language used. EIGHTH. Finally, there is another reason why PAGCOR's claim to a legislative grant of a franchise to operate jai-alai should be subjected to stricter scrutiny. The so-called legislative grant to PAGCOR did not come from a real Congress. It came from President Marcos who assumed legislative powers under martial law. The grant is not the result of deliberations of the duly elected representatives of our people.

This is not to assail President Marcos legislative powers granted by Amendment No. 6 of the 1973 Constitution, as the dissent would put it. It is given that in the exercise of his legislative power, President Marcos legally granted PAGCOR's franchise to operate gambling casinos. The validity of this franchise to operate gambling casinos is not, however, the issue in the cases at bar. The issue is whether this franchise to operate gambling casinos includes the privilege to operate jai-alai. PAGCOR says it does. We hold that it does not. PAGCOR's overarching claim should be given the strictest scrutiny because it was granted by one man who governed when the country was under martial law and whose governance was repudiated by our people in EDSA 1986. The reason for this submission is rooted in the truth that PAGCOR's franchise was not granted by a real Congress where the passage of a law requires a more rigorous process in terms of floor deliberations and voting by members of both the House and the Senate. It is self-evident that there is a need to be extra cautious in treating this alleged grant of a franchise as a grant by the legislature, as a grant by the representatives of our people, for plainly it is not. We now have a real Congress and it is best to let Congress resolve this issue considering its policy ramifications on public order and morals. In view of this ruling, we need not resolve the other issues raised by petitioners. WHEREFORE, the petitions are GRANTED. Respondents PAGCOR, Belle Jai Alai Corporation and Filipinas Gaming Entertainment Totalizator Corporation are ENJOINED from managing, maintaining and operating jai-alai games, and from enforcing the agreement entered into by them for that purpose. SO ORDERED. Melo, Panganiban, Pardo, Buena, Gonzaga-Reyes, and Ynares-Santiago JJ., concur. Davide, Jr., C.J., Vitug and De Leon Jr., JJ., see separate opinion. Bellosillo, Kapunan, and Quisumbing, JJ., join the opinion of J. De Leon. Mendoza, J., join in the separate opinion of Vitug, J.

EN BANC

[G.R. No. 123169. November 4, 1996]

DANILO E. PARAS, petitioner, vs. COMMISSION ON ELECTIONS, respondent. RESOLUTION FRANCISCO, J.: Petitioner Danilo E. Paras is the incumbent Punong Barangay of Pula, Cabanatuan City who won during the last regular barangay election in 1994. A petition for his recall as Punong Barangay was filed by the registered voters of the barangay. Acting on the petition for recall, public respondent Commission on Elections (COMELEC) resolved to approve the petition, scheduled the petition signing on October 14, 1995, and set the recall election on November 13, 1995.[1] At least 29.30% of the registered voters signed the petition, well above the 25% requirement provided by law. The COMELEC, however, deferred the recall election in view of petitioners opposition. On December 6, 1995, the COMELEC set anew the recall election, this time onDecember 16, 1995. To prevent the holding of the recall election, petitioner filed before the Regional Trial Court of Cabanatuan City a petition for injunction, docketed as SP Civil Action No. 2254-AF, with the trial court issuing a temporary restraining order. After conducting a summary hearing, the trial court lifted the restraining order, dismissed the petition and required petitioner and his counsel to explain why they should not be cited for contempt for misrepresenting that the barangay recall election was without COMELEC approval.[2] In a resolution dated January 5, 1996, the COMELEC, for the third time, re-scheduled the recall election on January 13, 1996; hence, the instant petition for certiorari with urgent prayer for injunction. On January 12, 1996, the Court issued a temporary restraining order and required the Office of the Solicitor General, in behalf of public respondent, to comment on the petition. In view of the Office of the Solicitor Generals manifestation maintaining an opinion adverse to that of the COMELEC, the latter through its law department filed the required comment. Petitioner thereafter filed a reply.[3] Petitioners argument is simple and to the point. Citing Section 74 (b) of Republic Act No. 7160, otherwise known as the Local Government Code, which states that no recall shall take place within one (1) year from the date of the officials assumption to office or one (1) year immediately preceding a regular local election, petitioner insists that the scheduled January 13, 1996 recall election is now barred as the Sangguniang Kabataan (SK) election was set by Republic Act No. 7808 on the first Monday of May 1996, and every three years thereafter. In support thereof, petitioner cites Associated Labor Union v. Letrondo-Montejo, 237 SCRA 621, where the Court considered the SK election as a regular local election. Petitioner maintains that as the SK election is a regular local election, hence no recall election can be had for barely four months separate the SK election from the recall election. We do not agree. The subject provision of the Local Government Code provides: SEC. 74. Limitations on Recall. (a) Any elective local official may be the subject of a recall election only once during his term of office for loss of confidence.

(b) No recall shall take place within one (1) year from the date of the officials assumption to office or one (1) year immediately preceding a regular local election. [Emphasis added.] It is a rule in statutory construction that every part of the statute must be interpreted with reference to the context, i.e., that every part of the statute must be considered together with the other parts, and kept subservient to the general intent of the whole enactment.[4] The evident intent of Section 74 is to subject an elective local official to recall election once during his term of office. Paragraph (b) construed together with paragraph (a) merely designates the period when such elective local official may be subject of a recall election, that is, during the second year of his term of office. Thus, subscribing to petitioners interpretation of the phrase regular local election to include the SK election will unduly circumscribe the novel provision of the Local Government Code on recall, a mode of removal of public officers by initiation of the people before the end of his term. And if the SK election which is set by R.A. No. 7808 to be held every three years from May 1996 were to be deemed within the purview of the phrase regular local election, as erroneously insisted by petitioner, then no recall election can be conducted rendering inutile the recall provision of the Local Government Code. In the interpretation of a statute, the Court should start with the assumption that the legislature intended to enact an effective law, and the legislature is not presumed to have done a vain thing in the enactment of a statute.[5] An interpretation should, if possible, be avoided under which a statute or provision being construed is defeated, or as otherwise expressed, nullified, destroyed, emasculated, repealed, explained away, or rendered insignificant, meaningless, inoperative or nugatory.[6] It is likewise a basic precept in statutory construction that a statute should be interpreted in harmony with the Constitution.[7] Thus, the interpretation of Section 74 of the Local Government Code, specifically paragraph (b) thereof, should not be in conflict with the Constitutional mandate of Section 3 of Article X of the Constitution to enact a local government code which shall provide for a more responsive and accountable local government structure instituted through a system of decentralization with effective mechanisms of recall, initiative, and referendum x x x. Moreover, petitioners too literal interpretation of the law leads to absurdity which we cannot countenance. Thus, in a case, the Court made the following admonition: We admonish against a too-literal reading of the law as this is apt to constrict rather than fulfill its purpose and defeat the intention of its authors. That intention is usually found not in the letter that killeth but in the spirit that vivifieth x x x[8] The spirit, rather than the letter of a law determines its construction; hence, a statute, as in this case, must be read according to its spirit and intent. Finally, recall election is potentially disruptive of the normal working of the local government unit necessitating additional expenses, hence the prohibition against the conduct of recall election one year immediately preceding the regular local election. The proscription is due to the proximity of the next regular election for the office of the local elective official concerned. The electorate could choose the officials replacement in the said election who certainly has a longer tenure in office than a successor elected through a recall election. It would, therefore, be more in keeping with the intent of the recall provision of the Code to construe regular local election as one referring to an election where the office held by the local elective official sought to be recalled will be contested and be filled by the electorate.

Nevertheless, recall at this time is no longer possible because of the limitation stated under Section 74 (b) of the Code considering that the next regular election involving the barangay office concerned is barely seven (7) months away, the same having been scheduled on May 1997.[9] ACCORDINGLY, the petition is hereby dismissed for having become moot and academic. The temporary restraining order issued by the Court on January 12, 1996, enjoining the recall election should be as it is hereby made permanent. SO ORDERED. Romero, Melo, Puno, Kapunan, Hermosisima, Jr., Panganiban, and Torres, Jr., JJ., concur. Narvasa, C.J., Padilla, Regalado, Bellosillo, Vitug, and Mendoza, JJ., concur in the majority and separate concurring opinions. Davide, Jr., Please see separate concurring opinion.

Republic of the Philippines SUPREME COURT Manila EN BANC G.R. No. L-30642 April 30, 1985 PERFECTO S. FLORESCA, in his own behalf and on behalf of the minors ROMULO and NESTOR S. FLORESCA; and ERLINDA FLORESCA-GABUYO, PEDRO S. FLORESCA, JR., CELSO S. FLORESCA, MELBA S. FLORESCA, JUDITH S. FLORESCA and CARMEN S. FLORESCA; LYDIA CARAMAT VDA. DE MARTINEZ in her own behalf and on behalf of her minor children LINDA, ROMEO, ANTONIO JEAN and ELY, all surnamed Martinez; and DANIEL MARTINEZ and TOMAS MARTINEZ; SALUSTIANA ASPIRAS VDA. DE OBRA, in her own behalf and on behalf of her minor children JOSE, ESTELA, JULITA SALUD and DANILO, all surnamed OBRA; LYDIA CULBENGAN VDA. DE VILLAR, in her own behalf and on behalf of her minor children EDNA, GEORGE and LARRY III, all surnamed VILLAR; DOLORES LOLITA ADER VDA. DE LANUZA, in her own behalf and on behalf of her minor children EDITHA, ELIZABETH, DIVINA, RAYMUNDO, NESTOR and AURELIO, JR. all surnamed LANUZA; EMERENCIANA JOSE VDA. DE ISLA, in her own behalf and on behalf of her minor children JOSE, LORENZO, JR., MARIA, VENUS and FELIX, all surnamed ISLA, petitioners, vs. PHILEX MINING CORPORATION and HON. JESUS P. MORFE, Presiding Judge of Branch XIII, Court of First Instance of Manila, respondents. Rodolfo C. Pacampara for petitioners. Tito M. Villaluna for respondents.

MAKASIAR, J.: This is a petition to review the order of the former Court of First Instance of Manila, Branch XIII, dated December 16, 1968 dismissing petitioners' complaint for damages on the ground of lack of jurisdiction. Petitioners are the heirs of the deceased employees of Philex Mining Corporation (hereinafter referred to as Philex), who, while working at its copper mines underground operations at Tuba, Benguet on June 28, 1967, died as a result of the cave-in that buried them in the tunnels of the mine. Specifically, the complaint alleges that Philex, in violation of government rules and regulations, negligently and

deliberately failed to take the required precautions for the protection of the lives of its men working underground. Portion of the complaint reads: xxx xxx xxx 9. That for sometime prior and up to June 28,1967, the defendant PHILEX, with gross and reckless negligence and imprudence and deliberate failure to take the required precautions for the due protection of the lives of its men working underground at the time, and in utter violation of the laws and the rules and regulations duly promulgated by the Government pursuant thereto, allowed great amount of water and mud to accumulate in an open pit area at the mine above Block 43-S-1 which seeped through and saturated the 600 ft. column of broken ore and rock below it, thereby exerting tremendous pressure on the working spaces at its 4300 level, with the result that, on the said date, at about 4 o'clock in the afternoon, with the collapse of all underground supports due to such enormous pressure, approximately 500,000 cubic feet of broken ores rocks, mud and water, accompanied by surface boulders, blasted through the tunnels and flowed out and filled in, in a matter of approximately five (5) minutes, the underground workings, ripped timber supports and carried off materials, machines and equipment which blocked all avenues of exit, thereby trapping within its tunnels of all its men above referred to, including those named in the next preceding paragraph, represented by the plaintiffs herein; 10. That out of the 48 mine workers who were then working at defendant PHILEX's mine on the said date, five (5) were able to escape from the terrifying holocaust; 22 were rescued within the next 7 days; and the rest, 21 in number, including those referred to in paragraph 7 hereinabove, were left mercilessly to their fate, notwithstanding the fact that up to then, a great many of them were still alive, entombed in the tunnels of the mine, but were not rescued due to defendant PHILEX's decision to abandon rescue operations, in utter disregard of its bounden legal and moral duties in the premises; xxx xxx xxx 13. That defendant PHILEX not only violated the law and the rules and regulations duly promulgated by the duly constituted authorities as set out by the Special Committee above referred to, in their Report of investigation, pages 7-13, Annex 'B' hereof, but also failed completely to provide its men working underground the necessary security for the protection of their lives notwithstanding the fact that it had vast financial resources, it having made, during the year 1966 alone, a total operating income of P 38,220,254.00, or net earnings, after taxes of P19,117,394.00, as per its llth Annual Report for the year ended December 31, 1966, and with aggregate assets totalling P 45,794,103.00 as of December 31, 1966; xxx xxx xxx (pp. 42-44, rec.)

A motion to dismiss dated May 14, 1968 was filed by Philex alleging that the causes of action of petitioners based on an industrial accident are covered by the provisions of the Workmen's Compensation Act (Act 3428, as amended by RA 772) and that the former Court of First Instance has no jurisdiction over the case. Petitioners filed an opposition dated May 27, 1968 to the said motion to dismiss claiming that the causes of action are not based on the provisions of the Workmen's Compensation Act but on the provisions of the Civil Code allowing the award of actual, moral and exemplary damages, particularly: Art. 2176. Whoever by act or omission causes damage to another, there being fault or negligence, is obliged to pay for the damage done. Such fault or negligence, if there is no pre- existing contractual relation between the parties, is called a quasi-delict and is governed by the provisions of this Chapter. Art. 2178. The provisions of articles 1172 to 1174 are also applicable to a quasi-delict. (b) Art. 1173The fault or negligence of the obligor consists in the omission of that diligence which is required by the nature of the obligation and corresponds with the circumstances of the persons, of the time and of the place. When negligence shows bad faith, the provisions of Articles 1171 and 2201, paragraph 2 shall apply. Art. 2201. x x x x x x x x x In case of fraud, bad faith, malice or wanton attitude, the obligor shall be responsible for all damages which may be reasonably attributed to the non-performance of the obligation. Art. 2231. In quasi-delicts, exemplary damages may be granted if the defendant acted with gross negligence. After a reply and a rejoinder thereto were filed, respondent Judge issued an order dated June 27, 1968 dismissing the case on the ground that it falls within the exclusive jurisdiction of the Workmen's Compensation Commission. On petitioners' motion for reconsideration of the said order, respondent Judge, on September 23, 1968, reconsidered and set aside his order of June 27, 1968 and allowed Philex to file an answer to the complaint. Philex moved to reconsider the aforesaid order which was opposed by petitioners. On December 16, 1968, respondent Judge dismissed the case for lack of jurisdiction and ruled that in accordance with the established jurisprudence, the Workmen's Compensation Commission has exclusive original jurisdiction over damage or compensation claims for work-connected deaths or injuries of workmen or employees, irrespective of whether or not the employer was negligent, adding that if the employer's negligence results in work-connected deaths or injuries, the employer shall, pursuant to Section 4-A of the Workmen's Compensation Act, pay additional compensation equal to 50% of the compensation fixed in the Act. Petitioners thus filed the present petition. In their brief, petitioners raised the following assignment of errors:

I THE LOWER COURT ERRED IN DISMISSING THE PLAINTIFFS- PETITIONERS' COMPLAINT FOR LACK OF JURISDICTION. II THE LOWER COURT ERRED IN FAILING TO CONSIDER THE CLEAR DISTINCTION BETWEEN CLAIMS FOR DAMAGES UNDER THE CIVIL CODE AND CLAIMS FOR COMPENSATION UNDER THE WORKMEN'S COMPENSATION ACT. A In the first assignment of error, petitioners argue that the lower court has jurisdiction over the cause of action since the complaint is based on the provisions of the Civil Code on damages, particularly Articles 2176, 2178, 1173, 2201 and 2231, and not on the provisions of the Workmen's Compensation Act. They point out that the complaint alleges gross and brazen negligence on the part of Philex in failing to take the necessary security for the protection of the lives of its employees working underground. They also assert that since Philex opted to file a motion to dismiss in the court a quo, the allegations in their complaint including those contained in the annexes are deemed admitted. In the second assignment of error, petitioners asseverate that respondent Judge failed to see the distinction between the claims for compensation under the Workmen's Compensation Act and the claims for damages based on gross negligence of Philex under the Civil Code. They point out that workmen's compensation refers to liability for compensation for loss resulting from injury, disability or death of the working man through industrial accident or disease, without regard to the fault or negligence of the employer, while the claim for damages under the Civil Code which petitioners pursued in the regular court, refers to the employer's liability for reckless and wanton negligence resulting in the death of the employees and for which the regular court has jurisdiction to adjudicate the same. On the other hand, Philex asserts that work-connected injuries are compensable exclusively under the provisions of Sections 5 and 46 of the Workmen's Compensation Act, which read: SEC. 5. Exclusive right to compensation.The rights and remedies granted by this Act to an employee by reason of a personal injury entitling him to compensation shall exclude all other rights and remedies accruing to the employee, his personal representatives, dependents or nearest of kin against the employer under the Civil Code and other laws because of said injury ... SEC. 46. Jurisdiction. The Workmen's Compensation Commissioner shall have exclusive jurisdiction to hear and decide claims for compensation under the Workmen's Compensation Act, subject to appeal to the Supreme Court, ... Philex cites the case of Manalo vs. Foster Wheeler (98 Phil. 855 [1956]) where it was held that "all claims of workmen against their employer for damages due to accident suffered in the course of employment shall be investigated and adjudicated by the Workmen's Compensation Commission," subject to appeal to the Supreme Court.

Philex maintains that the fact that an employer was negligent, does not remove the case from the exclusive character of recoveries under the Workmen's Compensation Act; because Section 4-A of the Act provides an additional compensation in case the employer fails to comply with the requirements of safety as imposed by law to prevent accidents. In fact, it points out that Philex voluntarily paid the compensation due the petitioners and all the payments have been accepted in behalf of the deceased miners, except the heirs of Nazarito Floresca who insisted that they are entitled to a greater amount of damages under the Civil Code. In the hearing of this case, then Undersecretary of Labor Israel Bocobo, then Atty. Edgardo Angara, now President of the University of the Philippines, Justice Manuel Lazaro, as corporate counsel and Assistant General Manager of the GSIS Legal Affairs Department, and Commissioner on Elections, formerly UP Law Center Director Froilan Bacungan, appeared as amici curiae and thereafter, submitted their respective memoranda. The issue to be resolved as WE stated in the resolution of November 26, 1976, is: Whether the action of an injured employee or worker or that of his heirs in case of his death under the Workmen's Compensation Act is exclusive, selective or cumulative, that is to say, whether his or his heirs' action is exclusively restricted to seeking the limited compensation provided under the Workmen's Compensation Act or whether they have a right of selection or choice of action between availing of the worker's right under the Workmen's Compensation Act and suing in the regular courts under the Civil Code for higher damages (actual, moral and/or exemplary) from the employer by virtue of negligence (or fault) of the employer or of his other employees or whether they may avail cumulatively of both actions, i.e., collect the limited compensation under the Workmen's Compensation Act and sue in addition for damages in the regular courts. There are divergent opinions in this case. Justice Lazaro is of the opinion that an injured employee or worker, or the heirs in case of his death, may initiate a complaint to recover damages (not compensation under the Workmen's Compensation Act) with the regular court on the basis of negligence of an employer pursuant to the Civil Code provisions. Atty. Angara believes otherwise. He submits that the remedy of an injured employee for work-connected injury or accident is exclusive in accordance with Section 5 of the Workmen's Compensation Act, while Atty. Bacungan's position is that the action is selective. He opines that the heirs of the employee in case of his death have a right of choice to avail themselves of the benefits provided under the Workmen's Compensation Act or to sue in the regular court under the Civil Code for higher damages from the employer by virtue of negligence of the latter. Atty. Bocobo's stand is the same as that of Atty. Bacungan and adds that once the heirs elect the remedy provided for under the Act, they are no longer entitled to avail themselves of the remedy provided for under the Civil Code by filing an action for higher damages in the regular court, and vice versa. On August 3, 1978, petitioners-heirs of deceased employee Nazarito Floresca filed a motion to dismiss on the ground that they have amicably settled their claim with respondent Philex. In the resolution of September 7, 1978, WE dismissed the petition only insofar as the aforesaid petitioners are connected, it appearing that there are other petitioners in this case. WE hold that the former Court of First Instance has jurisdiction to try the case,

It should be underscored that petitioners' complaint is not for compensation based on the Workmen's Compensation Act but a complaint for damages (actual, exemplary and moral) in the total amount of eight hundred twenty-five thousand (P825,000.00) pesos. Petitioners did not invoke the provisions of the Workmen's Compensation Act to entitle them to compensation thereunder. In fact, no allegation appeared in the complaint that the employees died from accident arising out of and in the course of their employments. The complaint instead alleges gross and reckless negligence and deliberate failure on the part of Philex to protect the lives of its workers as a consequence of which a cave-in occurred resulting in the death of the employees working underground. Settled is the rule that in ascertaining whether or not the cause of action is in the nature of workmen's compensation claim or a claim for damages pursuant to the provisions of the Civil Code, the test is the averments or allegations in the complaint (Belandres vs. Lopez Sugar Mill, Co., Inc., 97 Phil. 100). In the present case, there exists between Philex and the deceased employees a contractual relationship. The alleged gross and reckless negligence and deliberate failure that amount to bad faith on the part of Philex, constitute a breach of contract for which it may be held liable for damages. The provisions of the Civil Code on cases of breach of contract when there is fraud or bad faith, read: Art. 2232. In contracts and quasi-contracts, the court may award exemplary damages if the defendant acted in a wanton, fraudulent, reckless, oppressive or malevolent manner. Art. 2201. In contracts and quasi-contracts, the damages for which the obligor who acted in good faith is able shall be those that are the natural and probable consequences of the breach of the obligation, and which the parties have foreseen or could have reasonably foreseen at the time the obligation was constituted. In cases of fraud, bad faith, malice or wanton attitude, the obligor shall be responsible for all damages which may be reasonably attributed to the non-performance of the obligation. Furthermore, Articles 2216 et seq., Civil Code, allow the payment of all kinds of damages, as assessed by the court. The rationale in awarding compensation under the Workmen's Compensation Act differs from that in giving damages under the Civil Code. The compensation acts are based on a theory of compensation distinct from the existing theories of damages, payments under the acts being made as compensation and not as damages (99 C.J.S. 53). Compensation is given to mitigate the harshness and insecurity of industrial life for the workman and his family. Hence, an employer is liable whether negligence exists or not since liability is created by law. Recovery under the Act is not based on any theory of actionable wrong on the part of the employer (99 C.J.S. 36). In other words, under the compensation acts, the employer is liable to pay compensation benefits for loss of income, as long as the death, sickness or injury is work-connected or work-aggravated, even if the death or injury is not due to the fault of the employer (Murillo vs. Mendoza, 66 Phil. 689). On the other hand, damages are awarded to one as a vindication of the wrongful invasion of his rights. It is the indemnity recoverable by a person who has sustained injury either in his person, property or relative rights, through the act or default of another (25 C.J.S. 452).

The claimant for damages under the Civil Code has the burden of proving the causal relation between the defendant's negligence and the resulting injury as well as the damages suffered. While under the Workmen's Compensation Act, there is a presumption in favor of the deceased or injured employee that the death or injury is work-connected or work-aggravated; and the employer has the burden to prove otherwise (De los Angeles vs. GSIS, 94 SCRA 308; Carino vs. WCC, 93 SCRA 551; Maria Cristina Fertilizer Corp. vs. WCC, 60 SCRA 228). The claim of petitioners that the case is not cognizable by the Workmen's Compensation Commission then, now Employees Compensation Commission, is strengthened by the fact that unlike in the Civil Code, the Workmen's Compensation Act did not contain any provision for an award of actual, moral and exemplary damages. What the Act provided was merely the right of the heirs to claim limited compensation for the death in the amount of six thousand (P6,000.00) pesos plus burial expenses of two hundred (P200.00) pesos, and medical expenses when incurred (Sections 8, 12 and 13, Workmen's Compensation Act), and an additional compensation of only 50% if the complaint alleges failure on the part of the employer to "install and maintain safety appliances or to take other precautions for the prevention of accident or occupational disease" (Section 4-A, Ibid.). In the case at bar, the amount sought to be recovered is over and above that which was provided under the Workmen's Compensation Act and which cannot be granted by the Commission. Moreover, under the Workmen's Compensation Act, compensation benefits should be paid to an employee who suffered an accident not due to the facilities or lack of facilities in the industry of his employer but caused by factors outside the industrial plant of his employer. Under the Civil Code, the liability of the employer, depends on breach of contract or tort. The Workmen's Compensation Act was specifically enacted to afford protection to the employees or workmen. It is a social legislation designed to give relief to the workman who has been the victim of an accident causing his death or ailment or injury in the pursuit of his employment (Abong vs. WCC, 54 SCRA 379). WE now come to the query as to whether or not the injured employee or his heirs in case of death have a right of selection or choice of action between availing themselves of the worker's right under the Workmen's Compensation Act and suing in the regular courts under the Civil Code for higher damages (actual, moral and exemplary) from the employers by virtue of that negligence or fault of the employers or whether they may avail themselves cumulatively of both actions, i.e., collect the limited compensation under the Workmen's Compensation Act and sue in addition for damages in the regular courts. In disposing of a similar issue, this Court in Pacana vs. Cebu Autobus Company, 32 SCRA 442, ruled that an injured worker has a choice of either to recover from the employer the fixed amounts set by the Workmen's Compensation Act or to prosecute an ordinary civil action against the tortfeasor for higher damages but he cannot pursue both courses of action simultaneously. In Pacaa WE said: In the analogous case of Esguerra vs. Munoz Palma, involving the application of Section 6 of the Workmen's Compensation Act on the injured workers' right to sue third- party tortfeasors in the regular courts, Mr. Justice J.B.L. Reyes, again speaking for the Court, pointed out that the injured worker has the choice of remedies but cannot pursue both courses of action simultaneously and thus balanced the relative advantage of recourse under the Workmen's Compensation Act as against an ordinary action.

As applied to this case, petitioner Esguerra cannot maintain his action for damages against the respondents (defendants below), because he has elected to seek compensation under the Workmen's Compensation Law, and his claim (case No. 44549 of the Compensation Commission) was being processed at the time he filed this action in the Court of First Instance. It is argued for petitioner that as the damages recoverable under the Civil Code are much more extensive than the amounts that may be awarded under the Workmen's Compensation Act, they should not be deemed incompatible. As already indicated, the injured laborer was initially free to choose either to recover from the employer the fixed amounts set by the Compensation Law or else, to prosecute an ordinary civil action against the tortfeasor for higher damages. While perhaps not as profitable, the smaller indemnity obtainable by the first course is balanced by the claimant's being relieved of the burden of proving the causal connection between the defendant's negligence and the resulting injury, and of having to establish the extent of the damage suffered; issues that are apt to be troublesome to establish satisfactorily. Having staked his fortunes on a particular remedy, petitioner is precluded from pursuing the alternate course, at least until the prior claim is rejected by the Compensation Commission. Anyway, under the proviso of Section 6 aforequoted, if the employer Franklin Baker Company recovers, by derivative action against the alleged tortfeasors, a sum greater than the compensation he may have paid the herein petitioner, the excess accrues to the latter. Although the doctrine in the case of Esguerra vs. Munoz Palma (104 Phil. 582), applies to third-party tortfeasor, said rule should likewise apply to the employer-tortfeasor. Insofar as the heirs of Nazarito Floresca are concerned, as already stated, the petition has been dismissed in the resolution of September 7, 1978 in view of the amicable settlement reached by Philex and the said heirs. With regard to the other petitioners, it was alleged by Philex in its motion to dismiss dated May 14, 1968 before the court a quo, that the heirs of the deceased employees, namely Emerito Obra, Larry Villar, Jr., Aurelio Lanuza, Lorenzo Isla and Saturnino Martinez submitted notices and claims for compensation to the Regional Office No. 1 of the then Department of Labor and all of them have been paid in full as of August 25, 1967, except Saturnino Martinez whose heirs decided that they be paid in installments (pp. 106-107, rec.). Such allegation was admitted by herein petitioners in their opposition to the motion to dismiss dated May 27, 1968 (pp. 121-122, rec.) in the lower court, but they set up the defense that the claims were filed under the Workmen's Compensation Act before they learned of the official report of the committee created to investigate the accident which established the criminal negligence and violation of law by Philex, and which report was forwarded by the Director of Mines to the then Executive Secretary Rafael Salas in a letter dated October 19, 1967 only (p. 76, rec.). WE hold that although the other petitioners had received the benefits under the Workmen's Compensation Act, such may not preclude them from bringing an action before the regular court because they became cognizant of the fact that Philex has been remiss in its contractual obligations with the deceased miners only after receiving compensation under the Act. Had petitioners been aware of said violation of government rules and regulations by Philex, and of its negligence, they would not have sought redress under the Workmen's Compensation Commission which awarded a lesser amount for compensation. The choice of the first remedy was based on ignorance or a mistake of fact, which nullifies the choice as it was not an intelligent choice. The case should therefore be remanded to the

lower court for further proceedings. However, should the petitioners be successful in their bid before the lower court, the payments made under the Workmen's Compensation Act should be deducted from the damages that may be decreed in their favor. B Contrary to the perception of the dissenting opinion, the Court does not legislate in the instant case. The Court merely applies and gives effect to the constitutional guarantees of social justice then secured by Section 5 of Article 11 and Section 6 of Article XIV of the 1935 Constitution, and now by Sections 6, 7, and 9 of Article 11 of the DECLARATION OF PRINCIPLES AND STATE POLICIES of the 1973 Constitution, as amended, and as implemented by Articles 2176, 2177, 2178, 1173, 2201, 2216, 2231 and 2232 of the New Civil Code of 1950. To emphasize, the 1935 Constitution declares that: Sec. 5. The promotion of social justice to insure the well-being and economic security of all the people should be the concern of the State (Art. II). Sec. 6. The State shall afford protection to labor, especially to working women, and minors, and shall regulate the relations between landowner and tenant, and between labor and capital in industry and in agriculture. The State may provide for compulsory arbitration (Art. XIV). The 1973 Constitution likewise commands the State to "promote social justice to insure the dignity, welfare, and security of all the people "... regulate the use ... and disposition of private property and equitably diffuse property ownership and profits "establish, maintain and ensure adequate social services in, the field of education, health, housing, employment, welfare and social security to guarantee the enjoyment by the people of a decent standard of living" (Sections 6 and 7, Art. II, 1973 Constitution); "... afford protection to labor, ... and regulate the relations between workers and employers ..., and assure the rights of workers to ... just and humane conditions of work"(Sec. 9, Art. II, 1973 Constitution, emphasis supplied). The foregoing constitutional guarantees in favor of labor institutionalized in Section 9 of Article 11 of the 1973 Constitution and re-stated as a declaration of basic policy in Article 3 of the New Labor Code, thus: Art. 3. Declaration of basic policy.The State shall afford protection to labor, promote full employment, ensure equal work opportunities regardless of sex, race or creed, and regulate the relations between workers and employers. The State shall assure the rights of workers to self-organization, collective bargaining, security of tenure, and just and humane conditions of work. (emphasis supplied). The aforestated constitutional principles as implemented by the aforementioned articles of the New Civil Code cannot be impliedly repealed by the restrictive provisions of Article 173 of the New Labor Code. Section 5 of the Workmen's Compensation Act (before it was amended by R.A. No. 772 on June 20, 1952), predecessor of Article 173 of the New Labor Code, has been superseded by the aforestated provisions of the New Civil Code, a subsequent law, which took effect on August 30, 1950, which obey the constitutional mandates of social justice enhancing as they do the rights of the workers as against

their employers. Article 173 of the New Labor Code seems to diminish the rights of the workers and therefore collides with the social justice guarantee of the Constitution and the liberal provisions of the New Civil Code. The guarantees of social justice embodied in Sections 6, 7 and 9 of Article II of the 1973 Constitution are statements of legal principles to be applied and enforced by the courts. Mr. Justice Robert Jackson in the case of West Virginia State Board of Education vs. Barnette, with characteristic eloquence, enunciated: The very purpose of a Bill of Rights was to withdraw certain subjects from the vicissitudes of political controversy, to place them beyond the reach of majorities and officials and to establish them as legal principles to be applied by the courts. One's right to life, liberty, and property, to free speech, a free press, freedom of worship and assembly, and other fundamental rights may not be submitted to vote; they depend on the outcome of no elections (319 U.S. 625, 638, 87 L.ed. 1638, emphasis supplied). In case of any doubt which may be engendered by Article 173 of the New Labor Code, both the New Labor Code and the Civil Code direct that the doubts should be resolved in favor of the workers and employees. Thus, Article 4 of the New Labor Code, otherwise known as Presidential Decree No. 442, as amended, promulgated on May 1, 1974, but which took effect six months thereafter, provides that "all doubts in the implementation and interpretation of the provisions of this Code, including its implementing rules and regulations, shall be resolved in favor of labor" (Art. 2, Labor Code). Article 10 of the New Civil Code states: "In case of doubt in the interpretation or application of laws, it is presumed that the law-making body intended right and justice to prevail. " More specifically, Article 1702 of the New Civil Code likewise directs that. "In case of doubt, all labor legislation and all labor contracts shall be construed in favor of the safety and decent living of the laborer." Before it was amended by Commonwealth Act No. 772 on June 20, 1952, Section 5 of the Workmen's Compensation Act provided: Sec. 5. Exclusive right to compensation.- The rights and remedies granted by this Act to an employee by reason of a personal injury entitling him to compensation shall exclude all other rights and remedies accruing to the employee, his personal representatives, dependents or nearest of kin against the employer under the Civil Code and other laws, because of said injury (emphasis supplied). Employers contracting laborecsrs in the Philippine Islands for work outside the same may stipulate with such laborers that the remedies prescribed by this Act shall apply exclusively to injuries received outside the Islands through accidents happening in and during the performance of the duties of the employment; and all service contracts made in the manner prescribed in this section shall be presumed to include such agreement.

Only the second paragraph of Section 5 of the Workmen's Compensation Act No. 3428, was amended by Commonwealth Act No. 772 on June 20, 1952, thus: Sec. 5. Exclusive right to compensation.- The rights and remedies granted by this Act to an employee by reason of a personal injury entitling him to compensation shall exclude all other rights and remedies accruing to the employee, his personal representatives, dependents or nearest of kin against the employer under the Civil Code and other laws, because of said injury. Employers contracting laborers in the Philippine Islands for work outside the same shall stipulate with such laborers that the remedies prescribed by this Act shall apply to injuries received outside the Island through accidents happening in and during the performance of the duties of the employment. Such stipulation shall not prejudice the right of the laborers to the benefits of the Workmen's Compensation Law of the place where the accident occurs, should such law be more favorable to them (As amended by section 5 of Republic Act No. 772). Article 173 of the New Labor Code does not repeal expressly nor impliedly the applicable provisions of the New Civil Code, because said Article 173 provides: Art. 173. Exclusiveness of liability.- Unless otherwise provided, the liability of the State Insurance Fund under this Title shall be exclusive and in place of all other liabilities of the employer to the employee, his dependents or anyone otherwise entitled to receive damages on behalf of the employee or his dependents. The payment of compensation under this Title shall bar the recovery of benefits as provided for in Section 699 of the Revised Administrative Code, Republic Act Numbered Eleven hundred sixty-one, as amended, Commonwealth Act Numbered One hundred eighty- six, as amended, Commonwealth Act Numbered Six hundred ten, as amended, Republic Act Numbered Forty-eight hundred Sixty-four, as amended, and other laws whose benefits are administered by the System during the period of such payment for the same disability or death, and conversely (emphasis supplied). As above-quoted, Article 173 of the New Labor Code expressly repealed only Section 699 of the Revised Administrative Code, R.A. No. 1161, as amended, C.A. No. 186, as amended, R.A. No. 610, as amended, R.A. No. 4864, as amended, and all other laws whose benefits are administered by the System (referring to the GSIS or SSS). Unlike Section 5 of the Workmen's Compensation Act as aforequoted, Article 173 of the New Labor Code does not even remotely, much less expressly, repeal the New Civil Code provisions heretofore quoted. It is patent, therefore, that recovery under the New Civil Code for damages arising from negligence, is not barred by Article 173 of the New Labor Code. And the damages recoverable under the New Civil Code are not administered by the System provided for by the New Labor Code, which defines the "System" as referring to the Government Service Insurance System or the Social Security System (Art. 167 [c], [d] and [e] of the New Labor Code).

Furthermore, under Article 8 of the New Civil Code, decisions of the Supreme Court form part of the law of the land. Article 8 of the New Civil Code provides: Art. 8. Judicial decisions applying or interpreting the laws or the Constitution shall form a part of the legal system of the Philippines. The Court, through the late Chief Justice Fred Ruiz Castro, in People vs. Licera ruled: Article 8 of the Civil Code of the Philippines decrees that judicial decisions applying or interpreting the laws or the Constitution form part of this jurisdiction's legal system. These decisions, although in themselves not laws, constitute evidence of what the laws mean. The application or interpretation placed by the Court upon a law is part of the law as of the date of the enactment of the said law since the Court's application or interpretation merely establishes the contemporaneous legislative intent that the construed law purports to carry into effect" (65 SCRA 270, 272-273 [1975]). WE ruled that judicial decisions of the Supreme Court assume the same authority as the statute itself (Caltex vs. Palomer, 18 SCRA 247; 124 Phil. 763). The aforequoted provisions of Section 5 of the Workmen's Compensation Act, before and after it was amended by Commonwealth Act No. 772 on June 20, 1952, limited the right of recovery in favor of the deceased, ailing or injured employee to the compensation provided for therein. Said Section 5 was not accorded controlling application by the Supreme Court in the 1970 case of Pacana vs. Cebu Autobus Company (32 SCRA 442) when WE ruled that an injured worker has a choice of either to recover from the employer the fixed amount set by the Workmen's Compensation Act or to prosecute an ordinary civil action against the tortfeasor for greater damages; but he cannot pursue both courses of action simultaneously. Said Pacana case penned by Mr. Justice Teehankee, applied Article 1711 of the Civil Code as against the Workmen's Compensation Act, reiterating the 1969 ruling in the case of Valencia vs. Manila Yacht Club (28 SCRA 724, June 30,1969) and the 1958 case of Esguerra vs. Munoz Palma (104 Phil. 582), both penned by Justice J.B.L. Reyes. Said Pacana case was concurred in by Justices J.B.L. Reyes, Dizon, Makalintal, Zaldivar, Castro, Fernando and Villamor. Since the first sentence of Article 173 of the New Labor Code is merely a re-statement of the first paragraph of Section 5 of the Workmen's Compensation Act, as amended, and does not even refer, neither expressly nor impliedly, to the Civil Code as Section 5 of the Workmen's Compensation Act did, with greater reason said Article 173 must be subject to the same interpretation adopted in the cases of Pacana, Valencia and Esguerra aforementioned as the doctrine in the aforesaid three (3) cases is faithful to and advances the social justice guarantees enshrined in both the 1935 and 1973 Constitutions. It should be stressed likewise that there is no similar provision on social justice in the American Federal Constitution, nor in the various state constitutions of the American Union. Consequently, the restrictive nature of the American decisions on the Workmen's Compensation Act cannot limit the range and compass of OUR interpretation of our own laws, especially Article 1711 of the New Civil Code, vis-a-vis Article 173 of the New Labor Code, in relation to Section 5 of Article II and Section 6 of Article XIV of the

1935 Constitution then, and now Sections 6, 7 and 9 of the Declaration of Principles and State Policies of Article II of the 1973 Constitution. The dissent seems to subordinate the life of the laborer to the property rights of the employer. The right to life is guaranteed specifically by the due process clause of the Constitution. To relieve the employer from liability for the death of his workers arising from his gross or wanton fault or failure to provide safety devices for the protection of his employees or workers against the dangers which are inherent in underground mining, is to deprive the deceased worker and his heirs of the right to recover indemnity for the loss of the life of the worker and the consequent loss to his family without due process of law. The dissent in effect condones and therefore encourages such gross or wanton neglect on the part of the employer to comply with his legal obligation to provide safety measures for the protection of the life, limb and health of his worker. Even from the moral viewpoint alone, such attitude is un-Christian. It is therefore patent that giving effect to the social justice guarantees of the Constitution, as implemented by the provisions of the New Civil Code, is not an exercise of the power of law-making, but is rendering obedience to the mandates of the fundamental law and the implementing legislation aforementioned. The Court, to repeat, is not legislating in the instant case. It is axiomatic that no ordinary statute can override a constitutional provision. The words of Section 5 of the Workmen's Compensation Act and of Article 173 of the New Labor Code subvert the rights of the petitioners as surviving heirs of the deceased mining employees. Section 5 of the Workmen's Compensation Act and Article 173 of the New Labor Code are retrogressive; because they are a throwback to the obsolete laissez-faire doctrine of Adam Smith enunciated in 1776 in his treatise Wealth of Nations (Collier's Encyclopedia, Vol. 21, p. 93, 1964), which has been discarded soon after the close of the 18th century due to the Industrial Revolution that generated the machines and other mechanical devices (beginning with Eli Whitney's cotton gin of 1793 and Robert Fulton's steamboat of 1807) for production and transportation which are dangerous to life, limb and health. The old socio-political-economic philosophy of live-and-let-live is now superdesed by the benign Christian shibboleth of live-and-help others to live. Those who profess to be Christians should not adhere to Cain's selfish affirmation that he is not his brother's keeper. In this our civilization, each one of us is our brother's keeper. No man is an island. To assert otherwise is to be as atavistic and ante-deluvian as the 1837 case of Prisley vs. Fowler (3 MN 1,150 reprint 1030) invoked by the dissent, The Prisley case was decided in 1837 during the era of economic royalists and robber barons of America. Only ruthless, unfeeling capitalistics and egoistic reactionaries continue to pay obeisance to such un-Christian doctrine. The Prisley rule humiliates man and debases him; because the decision derisively refers to the lowly worker as "servant" and utilizes with aristocratic arrogance "master" for "employer." It robs man of his inherent dignity and dehumanizes him. To stress this affront to human dignity, WE only have to restate the quotation from Prisley, thus: "The mere relation of the master and the servant never can imply an obligation on the part of the master to take more care of the servant than he may reasonably be expected to do himself." This is the very selfish doctrine that provoked the American Civil War which generated so much hatred and drew so much precious blood on American plains and valleys from 1861 to 1864.

"Idolatrous reverence" for the letter of the law sacrifices the human being. The spirit of the law insures man's survival and ennobles him. In the words of Shakespeare, "the letter of the law killeth; its spirit giveth life." C It is curious that the dissenting opinion clings to the myth that the courts cannot legislate. That myth had been exploded by Article 9 of the New Civil Code, which provides that "No judge or court shall decline to render judgment by reason of the silence, obscurity or insufficiency of the laws. " Hence, even the legislator himself, through Article 9 of the New Civil Code, recognizes that in certain instances, the court, in the language of Justice Holmes, "do and must legislate" to fill in the gaps in the law; because the mind of the legislator, like all human beings, is finite and therefore cannot envisage all possible cases to which the law may apply Nor has the human mind the infinite capacity to anticipate all situations. But about two centuries before Article 9 of the New Civil Code, the founding fathers of the American Constitution foresaw and recognized the eventuality that the courts may have to legislate to supply the omissions or to clarify the ambiguities in the American Constitution and the statutes. 'Thus, Alexander Hamilton pragmatically admits that judicial legislation may be justified but denies that the power of the Judiciary to nullify statutes may give rise to Judicial tyranny (The Federalist, Modern Library, pp. 503-511, 1937 ed.). Thomas Jefferson went farther to concede that the court is even independent of the Nation itself (A.F.L. vs. American Sash Company, 1949 335 US 538). Many of the great expounders of the American Constitution likewise share the same view. Chief Justice Marshall pronounced: "It is emphatically the province and duty of the Judicial department to say what the law is (Marbury vs. Madison I Cranch 127 1803), which was re-stated by Chief Justice Hughes when he said that "the Constitution is what the judge says it is (Address on May 3, 1907, quoted by President Franklin Delano Roosevelt on March 9, 1937). This was reiterated by Justice Cardozo who pronounced that "No doubt the limits for the judge are narrower. He legislates only between gaps. He fills the open spaces in the law. " (The Nature of the Judicial Process, p. 113). In the language of Chief Justice Harlan F. Stone, "The only limit to the judicial legislation is the restraint of the judge" (U.S. vs. Butler 297 U.S. 1 Dissenting Opinion, p. 79), which view is also entertained by Justice Frankfurter and Justice Robert Jackson. In the rhetoric of Justice Frankfurter, "the courts breathe life, feeble or strong, into the inert pages of the Constitution and all statute books." It should be stressed that the liability of the employer under Section 5 of the Workmen's Compensation Act or Article 173 of the New Labor Code is limited to death, ailment or injury caused by the nature of the work, without any fault on the part of the employers. It is correctly termed no fault liability. Section 5 of the Workmen's Compensation Act, as amended, or Article 173 of the New Labor Code, does not cover the tortious liability of the employer occasioned by his fault or culpable negligence in failing to provide the safety devices required by the law for the protection of the life, limb and health of the workers. Under either Section 5 or Article 173, the employer remains liable to pay compensation benefits to the employee whose death, ailment or injury is work-connected, even if the employer has

faithfully and diligently furnished all the safety measures and contrivances decreed by the law to protect the employee. The written word is no longer the "sovereign talisman." In the epigrammatic language of Mr. Justice Cardozo, "the law has outgrown its primitive stage of formalism when the precise word was the sovereign talisman, and every slip was fatal" (Wood vs. Duff Gordon 222 NW 88; Cardozo, The Nature of the Judicial Process 100). Justice Cardozo warned that: "Sometimes the conservatism of judges has threatened for an interval to rob the legislation of its efficacy. ... Precedents established in those items exert an unhappy influence even now" (citing Pound, Common Law and Legislation 21 Harvard Law Review 383, 387). Finally, Justice Holmes delivered the coup de grace when he pragmatically admitted, although with a cautionary undertone: "that judges do and must legislate, but they can do so only interstitially they are confined from molar to molecular motions" (Southern Pacific Company vs. Jensen, 244 US 204 1917). And in the subsequent case of Springer vs. Government (277 US 188, 210-212, 72 L.ed. 845, 852- 853), Justice Holmes pronounced: The great ordinances of the Constitution do not establish and divide fields of black and white. Even the more specific of them are found to terminate in a penumbra shading gradually from one extreme to the other. x x x. When we come to the fundamental distinctions it is still more obvious that they must be received with a certain latitude or our government could not go on. To make a rule of conduct applicable to an individual who but for such action would be free from it is to legislate yet it is what the judges do whenever they determine which of two competing principles of policy shall prevail. xxx xxx xxx It does not seem to need argument to show that however we may disguise it by veiling words we do not and cannot carry out the distinction between legislative and executive action with mathematical precision and divide the branches into waterlight compartments, were it ever so desirable to do so, which I am far from believing that it is, or that the Constitution requires. True, there are jurists and legal writers who affirm that judges should not legislate, but grudgingly concede that in certain cases judges do legislate. They criticize the assumption by the courts of such lawmaking power as dangerous for it may degenerate into Judicial tyranny. They include Blackstone, Jeremy Bentham, Justice Black, Justice Harlan, Justice Roberts, Justice David Brewer, Ronald Dworkin, Rolf Sartorious, Macklin Fleming and Beryl Harold Levy. But said Justices, jurists or legal commentators, who either deny the power of the courts to legislate in-between gaps of the law, or decry the exercise of such power, have not pointed to examples of the exercise by the courts of such law-making authority in the interpretation and application of the laws in specific cases that gave rise to judicial tyranny or oppression or that such judicial legislation has not protected public interest or individual welfare, particularly the lowly workers or the underprivileged.

On the other hand, there are numerous decisions interpreting the Bill of Rights and statutory enactments expanding the scope of such provisions to protect human rights. Foremost among them is the doctrine in the cases of Miranda vs. Arizona (384 US 436 1964), Gideon vs. Wainright (372 US 335), Escubedo vs. Illinois (378 US 478), which guaranteed the accused under custodial investigation his rights to remain silent and to counsel and to be informed of such rights as even as it protects him against the use of force or intimidation to extort confession from him. These rights are not found in the American Bill of Rights. These rights are now institutionalized in Section 20, Article IV of the 1973 Constitution. Only the peace-and-order adherents were critical of the activism of the American Supreme Court led by Chief Justice Earl Warren. Even the definition of Identical offenses for purposes of the double jeopardy provision was developed by American judicial decisions, not by amendment to the Bill of Rights on double jeopardy (see Justice Laurel in People vs. Tarok, 73 Phil. 260, 261-268). And these judicial decisions have been re-stated in Section 7 of Rule 117 of the 1985 Rules on Criminal Procedure, as well as in Section 9 of Rule 117 of the 1964 Revised Rules of Court. In both provisions, the second offense is the same as the first offense if the second offense is an attempt to commit the first or frustration thereof or necessarily includes or is necessarily included in the first offense. The requisites of double jeopardy are not spelled out in the Bill of Rights. They were also developed by judicial decisions in the United States and in the Philippines even before people vs. Ylagan (58 Phil. 851853). Again, the equal protection clause was interpreted in the case of Plessy vs. Ferguson (163 US 537) as securing to the Negroes equal but separate facilities, which doctrine was revoked in the case of Brown vs. Maryland Board of Education (349 US 294), holding that the equal protection clause means that the Negroes are entitled to attend the same schools attended by the whites-equal facilities in the same school-which was extended to public parks and public buses. De-segregation, not segregation, is now the governing principle. Among other examples, the due process clause was interpreted in the case of People vs. Pomar (46 Phil. 440) by a conservative, capitalistic court to invalidate a law granting maternity leave to working womenaccording primacy to property rights over human rights. The case of People vs. Pomar is no longer the rule. As early as 1904, in the case of Lochner vs. New York (198 US 45, 76, 49 L. ed. 937, 949), Justice Holmes had been railing against the conservatism of Judges perverting the guarantee of due process to protect property rights as against human rights or social justice for the working man. The law fixing maximum hours of labor was invalidated. Justice Holmes was vindicated finally in 1936 in the case of West Coast Hotel vs. Parish (300 US 377-79; 81 L. ed. 703) where the American Supreme Court upheld the rights of workers to social justice in the form of guaranteed minimum wage for women and minors, working hours not exceeding eight (8) daily, and maternity leave for women employees. The power of judicial review and the principle of separation of powers as well as the rule on political questions have been evolved and grafted into the American Constitution by judicial decisions (Marbury vs. Madison, supra Coleman vs. Miller, 307 US 433, 83 L. ed. 1385; Springer vs. Government, 277 US 210212, 72 L. ed. 852, 853).

It is noteworthy that Justice Black, who seems to be against judicial legislation, penned a separate concurring opinion in the case of Coleman vs. Miller, supra, affirming the doctrine of political question as beyond the ambit of judicial review. There is nothing in both the American and Philippine Constitutions expressly providing that the power of the courts is limited by the principle of separation of powers and the doctrine on political questions. There are numerous cases in Philippine jurisprudence applying the doctrines of separation of powers and political questions and invoking American precedents. Unlike the American Constitution, both the 1935 and 1973 Philippine Constitutions expressly vest in the Supreme Court the power to review the validity or constitutionality of any legislative enactment or executive act. WHEREFORE, THE TRIAL COURT'S ORDER OF DISMISSAL IS HEREBY REVERSED AND SET ASIDE AND THE CASE IS REMANDED TO IT FOR FURTHER PROCEEDINGS. SHOULD A GREATER AMOUNT OF DAMAGES BE DECREED IN FAVOR OF HEREIN PETITIONERS, THE PAYMENTS ALREADY MADE TO THEM PURSUANT TO THE WORKMEN'S COMPENSATION ACT SHALL BE DEDUCTED. NO COSTS. SO ORDERED. Fernando, C.J., Teehankee, Plana, Escolin, De la Fuente, Cuevas and Alampay JJ., concur. Concepcion, Jr., J., is on leave. Abad Santos and Relova, JJ., took no part.

Separate Opinions

MELENCIO-HERRERA, J., dissenting: A This case involves a complaint for damages for the death of five employees of PHILEX Mining Corporation under the general provisions of the Civil Code. The Civil Code itself, however, provides for its non-applicability to the complaint. It is specifically provided in Article 2196 of the Code, found in Title XVIII-Damages that: COMPENSATION FOR WORKMEN AND OTHER EMPLOYEES IN CASE OF DEATH, INJURY OR ILLNESS IS REGULATED BY SPECIAL LAWS. Compensation and damages are synonymous. In Esguerra vs. Muoz Palma, etc., et al., 104 Phil. 582, 586, Justice J.B.L. Reyes had said:

Petitioner also avers that compensation is not damages. This argument is but a play on words. The term compensation' is used in the law (Act 3812 and Republic Act 772) in the sense of indemnity for damages suffered, being awarded for a personal injury caused or aggravated by or in the course of employment. ... By the very provisions of the Civil Code, it is a "special law", not the Code itself, which has to apply to the complaint involved in the instant case. That "special law", in reference to the complaint, can be no other than the Workmen's Compensation Even assuming, without conceding, that an employee is entitled to an election of remedies, as the majority rules, both options cannot be exercised simultaneously, and the exercise of one will preclude the exercise of the other. The petitioners had already exercised their option to come under the Workmen's Compensation Act, and they have already received compensation payable to them under that Act. Stated differently, the remedy under the Workmen's Compensation Act had already become a "finished transaction". There are two considerations why it is believed petitioners should no longer be allowed to exercise the option to sue under the Civil Code. In the first place, the proceedings under the Workmen's Compensation Act have already become the law in regards to" the "election of remedies", because those proceedings had become a "finished transaction". In the second place, it should be plainly equitable that, if a person entitled to an "election of remedies" makes a first election and accepts the benefits thereof, he should no longer be allowed to avail himself of the second option. At the very least, if he wants to make a second election, in disregard of the first election he has made, when he makes the second election he should surrender the benefits he had obtained under the first election, This was not done in the case before the Court. B. 'There is full concurrence on my part with the dissenting opinion of Mr. Justice Gutierrez upholding "the exclusory provision of the Workmen's Compensation Act." I may further add: 1. The Workmen's Compensation Act (Act No. 3428) was approved on December 10, 1927 and took effect on June 10, 1928. It was patterned from Minnesota and Hawaii statutes. Act No. 3428 was adopted by the Philippine legislature, in Spanish and some sections of the law were taken from the statutes of Minnesota and Hawaii, (Chapter 209 of the Revised Laws of Hawaii, 1925). [Morabe & Inton, Workmen's Compensation Act, p. 2] Under the Workmen's Compensation Act of Hawaii, when the Act is applicable, the remedy under the Act is exclusive The following is stated in 1 Schneider Workmen's Compensation Text, pp. 266, 267. Sec. 112. Hawaii Statutory Synopsis. The act is compulsory as to employees in 'all industrial employment' and employees of the territory and its political subdivisions. (Sections 7480-7481, S.S., Vol. 1, p. 713.)

Compensation is not payable when injury is due to employee's willful intention to injure himself or another or to his intoxication. (Sec. 7482, S.S., p. 713.) When the act is applicable the remedy thereunder is exclusive (Sec. 7483, S.S., p. 714.) 2. In providing for exclusiveness of the remedy under our Workmen's Compensation Act, the Philippine Legislature worded the first paragraph of Section 5 of the Act as follows: SEC. 5. Exclusive right to compensation.-The rights and remedies granted by this Act to an employee by reason of a personal injury entitling him to compensation shall exclude all other rights and remedies accruing to the employee, his personal representatives, dependents or nearest of kin against the employer under the Civil Code and other laws, because of said injury (Paragraphing and emphasis supplied) In regards to the intent of the Legislature under the foregoing provision: A cardinal rule in the interpretation of statutes is that the meaning and intention of the law-making body must be sought, first of all in the words of the statute itself, read and considered in their natural, ordinary, commonly-accepted and most obvious significations, according to good and approved usage and without resorting to forced or subtle construction Courts, therefore, as a rule, cannot presume that the law-making body does not know the meaning of words and the rules of grammar. Consequently, the grammatical reading of a statute must be presumed to yield its correct sense. (Espino vs. Cleofe 52 SCRA 92, 98) [Italics supplied] 3. The original second paragraph of Section 5 provided: Employers contracting laborers in the Philippine Islands for work outside the same shall stipulate with such laborers that the remedies prescribed by this Act shall apply exclusively to injuries received outside the Islands through accidents happening in and during the performance of the duties of the employment. (Italics supplied) The use of the word "exclusively is a further confirmation of the exclusory provision of the Act, subject only to exceptions which may be provided in the Act itself. 4. It might be mentioned that, within the Act itself, provision is made for remedies other than within the Act itself. Thus, Section 6, in part, provides: SEC. 6. Liability of third parties.-In case an employee suffers an injury for which compensation is due under this Act by any other person besides his employer, it shall be optional with such injured employee either to claim compensation from his employer,

under this Act, or sue such other person for damages, in accordance with law; ... (Emphasis supplied) If the legislative intent under the first paragraph of Section 5 were to allow the injured employee to sue his employer under the Civil Code, the legislator could very easily have formulated the said first paragraph of Section 5 according to the pattern of Section 6. That that was not done shows the legislative intent not to allow any option to an employee to sue the employer under the Civil Code for injuries compensable under the Act. 5. There should be no question but that the original first paragraph of Section 5 of the Workmen's Compensation Act, formulated in 1927, provided that an injured worker or employee, or his heirs, if entitled to compensation under the Act, cannot have independent recourse neither to the Civil Code nor to any other law relative to the liability of the employer. After 1927, there were occasions when the legislator had the opportunity to amend the first paragraph of Section 5 such that the remedies under the Act would not be exclusive; yet, the legislator refrained from doing so. That shows the legislatives continuing intent to maintain the exclusory provision of the first paragraph of Section 5 unless otherwise provided in the Act itself. (a) The original second paragraph of Section 5 provided: Employers contracting laborers in the Philippine Islands for work outside the same shall stipulate with such laborers that the remedies prescribed by this Act shall apply (exclusively) to injuries received outside the Islands through accidents happening in and during the performance of the duties of the employment (and all service contracts made in the manner prescribed in this section be presumed to include such agreement). On June 20, 1952, through RA 772, the foregoing second paragraph was amended with the elimination of the underlined words in parentheses, and the addition of this sentence at the end of the paragraph: Such stipulation shall not prejudice the right of the laborers to the benefits of the Workmen's Compensation Law of the place where the accident occurs, should such law be more favorable to them. (Emphasis supplied) It will be seen that, within the Act itself, the exclusory character of the Act was amended. At that time, if he had so desired, the legislator could have amended the first paragraph of Section 5 so that the employee would have the option to sue the employer under the Act, or under the Civil Code, should the latter be more favorable to him. (b) The Workmen's Compensation Act, which took effect in 1927, grants compensation to an injured employee without regard to the presence or absence of negligence on the part of the employer. The compensation is deemed an expense chargeable to the industry (Murillo vs. Mendoza, 66 Phil. 689 [1938]). In time, it must have been thought that it was inequitable to have the amount of compensation, caused by negligence on the part of the employer, to be the same amount payable when the employer was not negligent. Based on that thinking, Section 4-A 1 was included into the Act, on June 20, 1952, through RA 772. Said Section 4-A increased the compensation payable by 50% in case there was negligence on the

part of the employer. That additional section evidenced the intent of the legislator not to give an option to an employee, injured with negligence on the part of the employer, to sue the latter under the provisions of the Civil Code. On June 20, 1964, Section 4-A was amended (insubstantially) by RA 4119. The legislator was again given the opportunity to provide, but he did not, the option to an employee to sue under the Act or under the Civil Code. When a Court gives effect to a statute not in accordance with the intent of the law-maker, the Court is unjustifiably legislating. It is in view of the foregoing that I vote for affirmation of the trial Court's dismissal of the Complaint. GUTIERREZ, JR., J., dissenting: To grant the petition and allow the victims of industrial accidents to file damages suits based on torts would be a radical innovation not only contrary to the express provisions of the Workmen's Compensation Act but a departure from the principles evolved in the long history of workmen's compensation. At the very least, it should be the legislature and not this Court which should remove the exclusory provision of the Workmen's Compensation Act, a provision reiterated in the present Labor Code on employees' compensation. Workmen's compensation evolved to remedy the evils associated with the situation in the early years of the industrial revolution when injured workingmen had to rely on damage suits to get recompense. Before workmen's compensation, an injured worker seeking damages would have to prove in a tort suit that his employer was either negligent or in bad faith, that his injury was caused by the employer and not a fellow worker, and that he was not guilty of contributory negligence. The employer could employ not only his wealth in defeating the claim for damages but a host of common law defenses available to him as well. The worker was supposed to know what he entered into when he accepted employment. As stated in the leading case of Priestley u. Fowler (3 M. & W. 1, 150 Reprint 1030) decided in 1837 "the mere relation of the master and the servant never can imply an obligation on the part of the master to take more care of the servant than he may reasonably be expected to do of himself." By entering into a contract of employment, the worker was deemed to accept the risks of employment that he should discover and guard against himself. The problems associated with the application of the fellow servant rule, the assumption of risk doctrine, the principle of contributory negligence, and the many other defenses so easily raised in protracted damage suits illustrated the need for a system whereby workers had only to prove the fact of covered employment and the fact of injury arising from employment in order to be compensated. The need for a compensation scheme where liability is created solely by statute and made compulsory and where the element of fault-either the fault of the employer or the fault of the employeedisregarded became obvious. Another objective was to have simplified, expeditious, inexpensive, and non-litigious procedures so that victims of industrial accidents could more readily, if not automatically, receive compensation for work-related injuries.

Inspite of common law defenses to defeat a claim being recognized, employers' liability acts were a major step in the desired direction. However, employers liability legislation proved inadequate. Legislative reform led to the workmen's compensation. I cite the above familiar background because workmen's compensation represents a compromise. In return for the near certainty of receiving a sum of money fixed by law, the injured worker gives up the right to subject the employer to a tort suit for huge amounts of damages. Thus, liability not only disregards the element of fault but it is also a pre- determined amount based on the wages of the injured worker and in certain cases, the actual cost of rehabilitation. The worker does not receive the total damages for his pain and suffering which he could otherwise claim in a civil suit. The employer is required to act swiftly on compensation claims. An administrative agency supervises the program. And because the overwhelming mass of workingmen are benefited by the compensation system, individual workers who may want to sue for big amounts of damages must yield to the interests of their entire working class. The nature of the compensation principle is explained as follows: An appreciation of the nature of the compensation principle is essential to an understanding of the acts and the cases interpreting them. By the turn of the century it was apparent that the toll of industrial accidents of both the avoidable and unavoidable variety had become enormous, and government was faced with the problem of who was to pay for the human wreckage wrought by the dangers of modern industry. If the accident was avoidable and could be attributed to the carelessness of the employer, existing tort principles offered some measure of redress. Even here, however, the woeful inadequacy of the fault principle was manifest. The uncertainty of the outcome of torts litigation in court placed the employee at a substantial disadvantage. So long as liability depended on fault there could be no recovery until the finger of blame had been pointed officially at the employer or his agents. In most cases both the facts and the law were uncertain. The witnesses, who were usually fellow workers of the victim, were torn between friendship or loyalty to their class, on the one hand, and fear of reprisal by the employer, on the other. The expense and delay of litigation often prompted the injured employee to accept a compromise settlement for a fraction of the full value of his claim. Even if suit were successfully prosecuted, a large share of the proceeds of the judgment were exacted as contingent fees by counsel. Thus the employer against whom judgment was cast often paid a substantial damage bill, while only a part of this enured to the benefit of the injured employee or his dependents. The employee's judgment was nearly always too little and too late. xxx xxx xxx Workmen's Compensation rests upon the economic principle that those persons who enjoy the product of a business- whether it be in the form of goods or services- should ultimately bear the cost of the injuries or deaths that are incident to the manufacture, preparation and distribution of the product. ...

xxx xxx xxx Under this approach the element of personal fault either disappears entirely or is subordinated to broader economic considerations. The employer absorbs the cost of accident loss only initially; it is expected that this cost will eventually pass down the stream of commerce in the form of increase price until it is spread in dilution among the ultimate consumers. So long as each competing unit in a given industry is uniformly affected, no producer can gain any substantial competitive advantage or suffer any appreciable loss by reason of the general adoption of the compensation principle. In order that the compensation principle may operate properly and with fairness to all parties it is essential that the anticipated accident cost be predictable and that it be fixed at a figure that will not disrupt too violently the traffic in the product of the industry affected. Thus predictability and moderateness of cost are necessary from the broad economic viewpoint. .... Compensation, then, differs from the conventional damage suit in two important respects: Fault on the part of either employer or employee is eliminated; and compensation payable according to a definitely limited schedule is substituted for damages. All compensation acts alike work these two major changes, irrespective of how they may differ in other particulars. Compensation, when regarded from the viewpoint of employer and employee represents a compromise in which each party surrenders certain advantages in order to gain others which are of more importance both to him and to society. The employer gives up the immunity he otherwise would enjoy in cases where he is not at fault, and the employee surrenders his former right to full damages and accepts instead a more modest claim for bare essentials, represented by compensation. The importance of the compromise character of compensation cannot be overemphasized. The statutes vary a great deal with reference to the proper point of balance. The amount of weekly compensation payments and the length of the period during which compensation is to be paid are matters concerning which the acts differ considerably. The interpretation of any compensation statute will be influenced greatly by the court's reaction to the basic point of compromise established in the Act. If the court feels that the basic compromise unduly favors the employer, it will be tempted to restore what it regards as a proper balance by adopting an interpretation that favors the worker. In this way, a compensation act drawn in a spirit of extreme conservatism may be transformed by a sympathetic court into a fairly liberal instrument; and conversely, an act that greatly favors the laborer may be so interpreted by the courts that employers can have little reason to complain. Much of the unevenness and apparent conflict in compensation decisions throughout the various jurisdictions must be attributed to this." (Malone & Plant, Workmen's Compensation American Casebook Series, pp. 63-65). The schedule of compensation, the rates of payments, the compensable injuries and diseases, the premiums paid by employers to the present system, the actuarial stability of the trust fund and many other interrelated parts have all been carefully studied before the integrated scheme was enacted in to

law. We have a system whose parts must mesh harmonious with one another if it is to succeed. The basic theory has to be followed. If this Court disregards this totality of the scheme and in a spirit of generosity recasts some parts of the system without touching the related others, the entire structure is endangered. For instance, I am personally against stretching the law and allowing payment of compensation for contingencies never envisioned to be compensable when the law was formulated. Certainly, only harmful results to the principle of workmen's compensation can arise if workmen, whom the law allows to receive employment compensation, can still elect to file damage suits for industrial accidents. It was precisely for this reason that Section 5 of the Workmen's Compensation Act, which reads: SEC. 5. Exclusive right to compensation.-The rights and remedies granted by this Act to an employee by reason of a personal injury entitling him to compensation shall exclude all other rights and remedies accruing to the employee, his personal representatives, dependents or nearest of kin against the employer under the Civil Code and other laws because of said injury. ... Article 173 of the labor Code also provides: ART. 173. Exclusivenesss of liability.Unless otherwise provided, the liability of the State Insurance Fund under this Title shall be exclusive and in place of all other liabilities of the employer to the employee his dependents or anyone otherwise entitled to receive damages on behalf of the employee or his dependents. I am against the Court assuming the role of legislator in a matter calling for actuarial studies and public hearings. If employers already required to contribute to the State Insurance Fund will still have to bear the cost of damage suits or get insurance for that purpose, a major study will be necessary. The issue before us is more far reaching than the interests of the poor victims and their families. All workers covered by workmen's compensation and all employers who employ covered employees are affected. Even as I have deepest sympathies for the victims, I regret that I am constrained to dissent from the majority opinion.

Separate Opinions

MELENCIO-HERRERA, J., dissenting: A This case involves a complaint for damages for the death of five employees of PHILEX Mining Corporation under the general provisions of the Civil Code. The Civil Code itself, however, provides for

its non-applicability to the complaint. It is specifically provided in Article 2196 of the Code, found in Title XVIII-Damages that: COMPENSATION FOR WORKMEN AND OTHER EMPLOYEES IN CASE OF DEATH, INJURY OR ILLNESS IS REGULATED BY SPECIAL LAWS. Compensation and damages are synonymous. In Esguerra vs. Muoz Palma, etc., et al., 104 Phil. 582, 586, Justice J.B.L. Reyes had said: Petitioner also avers that compensation is not damages. This argument is but a play on words. The term compensation' is used in the law (Act 3812 and Republic Act 772) in the sense of indemnity for damages suffered, being awarded for a personal injury caused or aggravated by or in the course of employment. ... By the very provisions of the Civil Code, it is a "special law", not the Code itself, which has to apply to the complaint involved in the instant case. That "special law", in reference to the complaint, can be no other than the Workmen's Compensation Even assuming, without conceding, that an employee is entitled to an election of remedies, as the majority rules, both options cannot be exercised simultaneously, and the exercise of one will preclude the exercise of the other. The petitioners had already exercised their option to come under the Workmen's Compensation Act, and they have already received compensation payable to them under that Act. Stated differently, the remedy under the Workmen's Compensation Act had already become a "finished transaction". There are two considerations why it is believed petitioners should no longer be allowed to exercise the option to sue under the Civil Code. In the first place, the proceedings under the Workmen's Compensation Act have already become the law in regards to" the "election of remedies", because those proceedings had become a "finished transaction". In the second place, it should be plainly equitable that, if a person entitled to an "election of remedies" makes a first election and accepts the benefits thereof, he should no longer be allowed to avail himself of the second option. At the very least, if he wants to make a second election, in disregard of the first election he has made, when he makes the second election he should surrender the benefits he had obtained under the first election, This was not done in the case before the Court. B. 'There is full concurrence on my part with the dissenting opinion of Mr. Justice Gutierrez upholding "the exclusory provision of the Workmen's Compensation Act." I may further add: 1. The Workmen's Compensation Act (Act No. 3428) was approved on December 10, 1927 and took effect on June 10, 1928. It was patterned from Minnesota and Hawaii statutes. Act No. 3428 was adopted by the Philippine legislature, in Spanish and some sections of the law were taken from the statutes of Minnesota and Hawaii, (Chapter 209 of the Revised Laws of Hawaii, 1925). [Morabe & Inton, Workmen's Compensation Act, p. 2]

Under the Workmen's Compensation Act of Hawaii, when the Act is applicable, the remedy under the Act is exclusive The following is stated in 1 Schneider Workmen's Compensation Text, pp. 266, 267. Sec. 112. Hawaii Statutory Synopsis. The act is compulsory as to employees in 'all industrial employment' and employees of the territory and its political subdivisions. (Sections 7480-7481, S.S., Vol. 1, p. 713.) Compensation is not payable when injury is due to employee's willful intention to injure himself or another or to his intoxication. (Sec. 7482, S.S., p. 713.) When the act is applicable the remedy thereunder is exclusive (Sec. 7483, S.S., p. 714.) 2. In providing for exclusiveness of the remedy under our Workmen's Compensation Act, the Philippine Legislature worded the first paragraph of Section 5 of the Act as follows: SEC. 5. Exclusive right to compensation.-The rights and remedies granted by this Act to an employee by reason of a personal injury entitling him to compensation shall exclude all other rights and remedies accruing to the employee, his personal representatives, dependents or nearest of kin against the employer under the Civil Code and other laws, because of said injury (Paragraphing and emphasis supplied) In regards to the intent of the Legislature under the foregoing provision: A cardinal rule in the interpretation of statutes is that the meaning and intention of the law-making body must be sought, first of all in the words of the statute itself, read and considered in their natural, ordinary, commonly-accepted and most obvious significations, according to good and approved usage and without resorting to forced or subtle construction Courts, therefore, as a rule, cannot presume that the law-making body does not know the meaning of words and the rules of grammar. Consequently, the grammatical reading of a statute must be presumed to yield its correct sense. (Espino vs. Cleofe 52 SCRA 92, 98) [Italics supplied] 3. The original second paragraph of Section 5 provided: Employers contracting laborers in the Philippine Islands for work outside the same shall stipulate with such laborers that the remedies prescribed by this Act shall apply exclusively to injuries received outside the Islands through accidents happening in and during the performance of the duties of the employment. (Italics supplied)

The use of the word "exclusively is a further confirmation of the exclusory provision of the Act, subject only to exceptions which may be provided in the Act itself. 4. It might be mentioned that, within the Act itself, provision is made for remedies other than within the Act itself. Thus, Section 6, in part, provides: SEC. 6. Liability of third parties.-In case an employee suffers an injury for which compensation is due under this Act by any other person besides his employer, it shall be optional with such injured employee either to claim compensation from his employer, under this Act, or sue such other person for damages, in accordance with law; ... (Emphasis supplied) If the legislative intent under the first paragraph of Section 5 were to allow the injured employee to sue his employer under the Civil Code, the legislator could very easily have formulated the said first paragraph of Section 5 according to the pattern of Section 6. That that was not done shows the legislative intent not to allow any option to an employee to sue the employer under the Civil Code for injuries compensable under the Act. 5. There should be no question but that the original first paragraph of Section 5 of the Workmen's Compensation Act, formulated in 1927, provided that an injured worker or employee, or his heirs, if entitled to compensation under the Act, cannot have independent recourse neither to the Civil Code nor to any other law relative to the liability of the employer. After 1927, there were occasions when the legislator had the opportunity to amend the first paragraph of Section 5 such that the remedies under the Act would not be exclusive; yet, the legislator refrained from doing so. That shows the legislatives continuing intent to maintain the exclusory provision of the first paragraph of Section 5 unless otherwise provided in the Act itself. (a) The original second paragraph of Section 5 provided: Employers contracting laborers in the Philippine Islands for work outside the same shall stipulate with such laborers that the remedies prescribed by this Act shall apply (exclusively) to injuries received outside the Islands through accidents happening in and during the performance of the duties of the employment (and all service contracts made in the manner prescribed in this section be presumed to include such agreement). On June 20, 1952, through RA 772, the foregoing second paragraph was amended with the elimination of the underlined words in parentheses, and the addition of this sentence at the end of the paragraph: Such stipulation shall not prejudice the right of the laborers to the benefits of the Workmen's Compensation Law of the place where the accident occurs, should such law be more favorable to them. (Emphasis supplied) It will be seen that, within the Act itself, the exclusory character of the Act was amended. At that time, if he had so desired, the legislator could have amended the first paragraph of Section 5 so that the employee would have the option to sue the employer under the Act, or under the Civil Code, should the latter be more favorable to him.

(b) The Workmen's Compensation Act, which took effect in 1927, grants compensation to an injured employee without regard to the presence or absence of negligence on the part of the employer. The compensation is deemed an expense chargeable to the industry (Murillo vs. Mendoza, 66 Phil. 689 [1938]). In time, it must have been thought that it was inequitable to have the amount of compensation, caused by negligence on the part of the employer, to be the same amount payable when the employer was not negligent. Based on that thinking, Section 4-A 1 was included into the Act, on June 20, 1952, through RA 772. Said Section 4-A increased the compensation payable by 50% in case there was negligence on the part of the employer. That additional section evidenced the intent of the legislator not to give an option to an employee, injured with negligence on the part of the employer, to sue the latter under the provisions of the Civil Code. On June 20, 1964, Section 4-A was amended (insubstantially) by RA 4119. The legislator was again given the opportunity to provide, but he did not, the option to an employee to sue under the Act or under the Civil Code. When a Court gives effect to a statute not in accordance with the intent of the law-maker, the Court is unjustifiably legislating. It is in view of the foregoing that I vote for affirmation of the trial Court's dismissal of the Complaint. GUTIERREZ, JR., J., dissenting: To grant the petition and allow the victims of industrial accidents to file damages suits based on torts would be a radical innovation not only contrary to the express provisions of the Workmen's Compensation Act but a departure from the principles evolved in the long history of workmen's compensation. At the very least, it should be the legislature and not this Court which should remove the exclusory provision of the Workmen's Compensation Act, a provision reiterated in the present Labor Code on employees' compensation. Workmen's compensation evolved to remedy the evils associated with the situation in the early years of the industrial revolution when injured workingmen had to rely on damage suits to get recompense. Before workmen's compensation, an injured worker seeking damages would have to prove in a tort suit that his employer was either negligent or in bad faith, that his injury was caused by the employer and not a fellow worker, and that he was not guilty of contributory negligence. The employer could employ not only his wealth in defeating the claim for damages but a host of common law defenses available to him as well. The worker was supposed to know what he entered into when he accepted employment. As stated in the leading case of Priestley u. Fowler (3 M. & W. 1, 150 Reprint 1030) decided in 1837 "the mere relation of the master and the servant never can imply an obligation on the part of the master to take more care of the servant than he may reasonably be expected to do of himself." By entering into a contract of employment, the worker was deemed to accept the risks of employment that he should discover and guard against himself. The problems associated with the application of the fellow servant rule, the assumption of risk doctrine, the principle of contributory negligence, and the many other defenses so easily raised in protracted

damage suits illustrated the need for a system whereby workers had only to prove the fact of covered employment and the fact of injury arising from employment in order to be compensated. The need for a compensation scheme where liability is created solely by statute and made compulsory and where the element of fault-either the fault of the employer or the fault of the employeedisregarded became obvious. Another objective was to have simplified, expeditious, inexpensive, and non-litigious procedures so that victims of industrial accidents could more readily, if not automatically, receive compensation for work-related injuries. Inspite of common law defenses to defeat a claim being recognized, employers' liability acts were a major step in the desired direction. However, employers liability legislation proved inadequate. Legislative reform led to the workmen's compensation. I cite the above familiar background because workmen's compensation represents a compromise. In return for the near certainty of receiving a sum of money fixed by law, the injured worker gives up the right to subject the employer to a tort suit for huge amounts of damages. Thus, liability not only disregards the element of fault but it is also a pre- determined amount based on the wages of the injured worker and in certain cases, the actual cost of rehabilitation. The worker does not receive the total damages for his pain and suffering which he could otherwise claim in a civil suit. The employer is required to act swiftly on compensation claims. An administrative agency supervises the program. And because the overwhelming mass of workingmen are benefited by the compensation system, individual workers who may want to sue for big amounts of damages must yield to the interests of their entire working class. The nature of the compensation principle is explained as follows: An appreciation of the nature of the compensation principle is essential to an understanding of the acts and the cases interpreting them. By the turn of the century it was apparent that the toll of industrial accidents of both the avoidable and unavoidable variety had become enormous, and government was faced with the problem of who was to pay for the human wreckage wrought by the dangers of modern industry. If the accident was avoidable and could be attributed to the carelessness of the employer, existing tort principles offered some measure of redress. Even here, however, the woeful inadequacy of the fault principle was manifest. The uncertainty of the outcome of torts litigation in court placed the employee at a substantial disadvantage. So long as liability depended on fault there could be no recovery until the finger of blame had been pointed officially at the employer or his agents. In most cases both the facts and the law were uncertain. The witnesses, who were usually fellow workers of the victim, were torn between friendship or loyalty to their class, on the one hand, and fear of reprisal by the employer, on the other. The expense and delay of litigation often prompted the injured employee to accept a compromise settlement for a fraction of the full value of his claim. Even if suit were successfully prosecuted, a large share of the proceeds of the judgment were exacted as contingent fees by counsel. Thus the employer against whom judgment was cast often paid a substantial damage bill, while only a part of this enured to the benefit of the injured employee or his dependents. The employee's judgment was nearly always too little and too late.

xxx xxx xxx Workmen's Compensation rests upon the economic principle that those persons who enjoy the product of a business- whether it be in the form of goods or services- should ultimately bear the cost of the injuries or deaths that are incident to the manufacture, preparation and distribution of the product. ... xxx xxx xxx Under this approach the element of personal fault either disappears entirely or is subordinated to broader economic considerations. The employer absorbs the cost of accident loss only initially; it is expected that this cost will eventually pass down the stream of commerce in the form of increase price until it is spread in dilution among the ultimate consumers. So long as each competing unit in a given industry is uniformly affected, no producer can gain any substantial competitive advantage or suffer any appreciable loss by reason of the general adoption of the compensation principle. In order that the compensation principle may operate properly and with fairness to all parties it is essential that the anticipated accident cost be predictable and that it be fixed at a figure that will not disrupt too violently the traffic in the product of the industry affected. Thus predictability and moderateness of cost are necessary from the broad economic viewpoint. .... Compensation, then, differs from the conventional damage suit in two important respects: Fault on the part of either employer or employee is eliminated; and compensation payable according to a definitely limited schedule is substituted for damages. All compensation acts alike work these two major changes, irrespective of how they may differ in other particulars. Compensation, when regarded from the viewpoint of employer and employee represents a compromise in which each party surrenders certain advantages in order to gain others which are of more importance both to him and to society. The employer gives up the immunity he otherwise would enjoy in cases where he is not at fault, and the employee surrenders his former right to full damages and accepts instead a more modest claim for bare essentials, represented by compensation. The importance of the compromise character of compensation cannot be overemphasized. The statutes vary a great deal with reference to the proper point of balance. The amount of weekly compensation payments and the length of the period during which compensation is to be paid are matters concerning which the acts differ considerably. The interpretation of any compensation statute will be influenced greatly by the court's reaction to the basic point of compromise established in the Act. If the court feels that the basic compromise unduly favors the employer, it will be tempted to restore what it regards as a proper balance by adopting an interpretation that favors the worker. In this way, a compensation act drawn in a spirit of extreme conservatism may be transformed by a sympathetic court into a fairly liberal instrument; and conversely, an act that greatly favors the laborer may be so interpreted by the courts that

employers can have little reason to complain. Much of the unevenness and apparent conflict in compensation decisions throughout the various jurisdictions must be attributed to this." (Malone & Plant, Workmen's Compensation American Casebook Series, pp. 63-65). The schedule of compensation, the rates of payments, the compensable injuries and diseases, the premiums paid by employers to the present system, the actuarial stability of the trust fund and many other interrelated parts have all been carefully studied before the integrated scheme was enacted in to law. We have a system whose parts must mesh harmonious with one another if it is to succeed. The basic theory has to be followed. If this Court disregards this totality of the scheme and in a spirit of generosity recasts some parts of the system without touching the related others, the entire structure is endangered. For instance, I am personally against stretching the law and allowing payment of compensation for contingencies never envisioned to be compensable when the law was formulated. Certainly, only harmful results to the principle of workmen's compensation can arise if workmen, whom the law allows to receive employment compensation, can still elect to file damage suits for industrial accidents. It was precisely for this reason that Section 5 of the Workmen's Compensation Act, which reads: SEC. 5. Exclusive right to compensation.-The rights and remedies granted by this Act to an employee by reason of a personal injury entitling him to compensation shall exclude all other rights and remedies accruing to the employee, his personal representatives, dependents or nearest of kin against the employer under the Civil Code and other laws because of said injury. ... Article 173 of the labor Code also provides: ART. 173. Exclusivenesss of liability.Unless otherwise provided, the liability of the State Insurance Fund under this Title shall be exclusive and in place of all other liabilities of the employer to the employee his dependents or anyone otherwise entitled to receive damages on behalf of the employee or his dependents. I am against the Court assuming the role of legislator in a matter calling for actuarial studies and public hearings. If employers already required to contribute to the State Insurance Fund will still have to bear the cost of damage suits or get insurance for that purpose, a major study will be necessary. The issue before us is more far reaching than the interests of the poor victims and their families. All workers covered by workmen's compensation and all employers who employ covered employees are affected. Even as I have deepest sympathies for the victims, I regret that I am constrained to dissent from the majority opinion.

Footnotes 1 SEC. 4-A. Right to additional compensation.- In case of the employee's death, injury or sickness due to the failure of the to comply with any law, or with any order, rule or regulation of the Workmen's Compensation Commission or the Bureau of Labor

Standards or should the employer violate the provisions of Republic Act Numbered Six hundred seventy-nine and its amendments or fail to install and maintain safety appliances, or take other precautions for the prevention of accidents or occupational disease, he shall be liable to pay an additional compensation equal to fifty per centum of the compensation fixed in this Act.

Republic of the Philippines SUPREME COURT Manila FIRST DIVISION G.R. No. L-39419 April 12, 1982 MAPALAD AISPORNA, petitioner, vs. THE COURT OF APPEALS and THE PEOPLE OF THE PHILIPPINES, respondents.

DE CASTRO, J.: In this petition for certiorari, petitioner-accused Aisporna seeks the reversal of the decision dated August 14, 19741 in CA-G.R. No. 13243-CR entitled "People of the Philippines, plaintiff-appellee, vs. Mapalad Aisporna, defendant-appellant" of respondent Court of Appeals affirming the judgment of the City Court of Cabanatuan 2rendered on August 2, 1971 which found the petitioner guilty for having violated Section 189 of the Insurance Act (Act No. 2427, as amended) and sentenced her to pay a fine of P500.00 with subsidiary imprisonment in case of insolvency, and to pay the costs. Petitioner Aisporna was charged in the City Court of Cabanatuan for violation of Section 189 of the Insurance Act on November 21, 1970 in an information 3 which reads as follows: That on or before the 21st day of June, 1969, in the City of Cabanatuan, Republic of the Philippines, and within the jurisdiction of this Honorable Court, the above-named accused, did then and there, wilfully, unlawfully and feloniously act as agent in the solicitation or procurement of an application for insurance by soliciting therefor the application of one Eugenio S. Isidro, for and in behalf of Perla Compania de Seguros, Inc., a duly organized insurance company, registered under the laws of the Republic of the Philippines, resulting in the issuance of a Broad Personal Accident Policy No. 28PIRSA 0001 in the amount not exceeding FIVE THOUSAND PESOS (P5,000.00) dated June 21, 1969, without said accused having first secured a certificate of authority to act as such agent from the office of the Insurance Commissioner, Republic of the Philippines. CONTRARY TO LAW. The facts, 4 as found by the respondent Court of Appeals are quoted hereunder: IT RESULTING: That there is no debate that since 7 March, 1969 and as of 21 June, 1969, appellant's husband, Rodolfo S. Aisporna was duly licensed by Insurance Commission as agent to Perla Compania de Seguros, with license to expire on 30 June, 1970, Exh. C; on that date, at Cabanatuan City, Personal Accident Policy, Exh. D was issued by Perla thru its author representative, Rodolfo S. Aisporna, for a period of twelve (12) months with beneficiary as Ana M. Isidro, and for P5,000.00; apparently, insured died by violence

during lifetime of policy, and for reasons not explained in record, present information was filed by Fiscal, with assistance of private prosecutor, charging wife of Rodolfo with violation of Sec. 189 of Insurance Law for having, wilfully, unlawfully, and feloniously acted, "as agent in the solicitation for insurance by soliciting therefore the application of one Eugenio S. Isidro for and in behalf of Perla Compaa de Seguros, ... without said accused having first secured a certificate of authority to act as such agent from the office of the Insurance Commission, Republic of the Philippines." and in the trial, People presented evidence that was hardly disputed, that aforementioned policy was issued with active participation of appellant wife of Rodolfo, against which appellant in her defense sought to show that being the wife of true agent, Rodolfo, she naturally helped him in his work, as clerk, and that policy was merely a renewal and was issued because Isidro had called by telephone to renew, and at that time, her husband, Rodolfo, was absent and so she left a note on top of her husband's desk to renew ... Consequently, the trial court found herein petitioner guilty as charged. On appeal, the trial court's decision was affirmed by the respondent appellate court finding the petitioner guilty of a violation of the first paragraph of Section 189 of the Insurance Act. Hence, this present recourse was filed on October 22, 1974. 5 In its resolution of October 28, 1974, 6 this Court resolved, without giving due course to this instant petition, to require the respondent to comment on the aforesaid petition. In the comment 7 filed on December 20, 1974, the respondent, represented by the Office of the Solicitor General, submitted that petitioner may not be considered as having violated Section 189 of the Insurance Act. 8 On April 3, 1975, petitioner submitted his Brief 9 while the Solicitor General, on behalf of the respondent, filed a manifestation 10 in lieu of a Brief on May 3, 1975 reiterating his stand that the petitioner has not violated Section 189 of the Insurance Act. In seeking reversal of the judgment of conviction, petitioner assigns the following errors 11 allegedly committed by the appellate court: 1. THE RESPONDENT COURT OF APPEALS ERRED IN FINDING THAT RECEIPT OF COMPENSATION IS NOT AN ESSENTIAL ELEMENT OF THE CRIME DEFINED BY THE FIRST PARAGRAPH OF SECTION 189 OF THE INSURANCE ACT. 2. THE RESPONDENT COURT OF APPEALS ERRED IN GIVING DUE WEIGHT TO EXHIBITS F, F-1, TO F-17, INCLUSIVE SUFFICIENT TO ESTABLISH PETITIONER'S GUILT BEYOND REASONABLE DOUBT. 3. THE RESPONDENT COURT OF APPEALS ERRED IN NOT ACQUITTING HEREIN PETITIONER. We find the petition meritorious. The main issue raised is whether or not a person can be convicted of having violated the first paragraph of Section 189 of the Insurance Act without reference to the second paragraph of the same section. In

other words, it is necessary to determine whether or not the agent mentioned in the first paragraph of the aforesaid section is governed by the definition of an insurance agent found on its second paragraph. The pertinent provision of Section 189 of the Insurance Act reads as follows: No insurance company doing business within the Philippine Islands, nor any agent thereof, shall pay any commission or other compensation to any person for services in obtaining new insurance, unless such person shall have first procured from the Insurance Commissioner a certificate of authority to act as an agent of such company as hereinafter provided. No person shall act as agent, sub-agent, or broker in the solicitation of procurement of applications for insurance, or receive for services in obtaining new insurance, any commission or other compensation from any insurance company doing business in the Philippine Islands, or agent thereof, without first procuring a certificate of authority so to act from the Insurance Commissioner, which must be renewed annually on the first day of January, or within six months thereafter. Such certificate shall be issued by the Insurance Commissioner only upon the written application of persons desiring such authority, such application being approved and countersigned by the company such person desires to represent, and shall be upon a form approved by the Insurance Commissioner, giving such information as he may require. The Insurance Commissioner shall have the right to refuse to issue or renew and to revoke any such certificate in his discretion. No such certificate shall be valid, however, in any event after the first day of July of the year following the issuing of such certificate. Renewal certificates may be issued upon the application of the company. Any person who for compensation solicits or obtains insurance on behalf of any insurance company, or transmits for a person other than himself an application for a policy of insurance to or from such company or offers or assumes to act in the negotiating of such insurance, shall be an insurance agent within the intent of this section, and shall thereby become liable to all the duties, requirements, liabilities, and penalties to which an agent of such company is subject. Any person or company violating the provisions of this section shall be fined in the sum of five hundred pesos. On the conviction of any person acting as agent, sub-agent, or broker, of the commission of any offense connected with the business of insurance, the Insurance Commissioner shall immediately revoke the certificate of authority issued to him and no such certificate shall thereafter be issued to such convicted person. A careful perusal of the above-quoted provision shows that the first paragraph thereof prohibits a person from acting as agent, sub-agent or broker in the solicitation or procurement of applications for insurance without first procuring a certificate of authority so to act from the Insurance Commissioner, while its second paragraph defines who is an insurance agent within the intent of this section and, finally, the third paragraph thereof prescribes the penalty to be imposed for its violation. The respondent appellate court ruled that the petitioner is prosecuted not under the second paragraph of Section 189 of the aforesaid Act but under its first paragraph. Thus

... it can no longer be denied that it was appellant's most active endeavors that resulted in issuance of policy to Isidro, she was there and then acting as agent, and received the pay thereof her defense that she was only acting as helper of her husband can no longer be sustained, neither her point that she received no compensation for issuance of the policy because any person who for compensation solicits or obtains insurance on behalf of any insurance company or transmits for a person other than himself an application for a policy of insurance to or from such company or offers or assumes to act in the negotiating of such insurance, shall be an insurance agent within the intent of this section, and shall thereby become liable to all the duties, requirements, liabilities, and penalties, to which an agent of such company is subject. paragraph 2, Sec. 189, Insurance Law, now it is true that information does not even allege that she had obtained the insurance, for compensation which is the gist of the offense in Section 189 of the Insurance Law in its 2nd paragraph, but what appellant apparently overlooks is that she is prosecuted not under the 2nd but under the 1st paragraph of Sec. 189 wherein it is provided that, No person shall act as agent, sub-agent, or broker, in the solicitation or procurement of applications for insurance, or receive for services in obtaining new insurance any commission or other compensation from any insurance company doing business in the Philippine Island, or agent thereof, without first procuring a certificate of authority to act from the insurance commissioner, which must be renewed annually on the first day of January, or within six months thereafter. therefore, there was no technical defect in the wording of the charge, so that Errors 2 and 4 must be overruled.12 From the above-mentioned ruling, the respondent appellate court seems to imply that the definition of an insurance agent under the second paragraph of Section 189 is not applicable to the insurance agent mentioned in the first paragraph. Parenthetically, the respondent court concludes that under the second paragraph of Section 189, a person is an insurance agent if he solicits and obtains an insurance for compensation, but, in its first paragraph, there is no necessity that a person solicits an insurance for compensation in order to be called an insurance agent. We find this to be a reversible error. As correctly pointed out by the Solicitor General, the definition of an insurance agent as found in the second paragraph of Section 189 is intended to define the word "agent" mentioned in the first and second paragraphs of the aforesaid section. More significantly, in its second paragraph, it is explicitly provided that the definition of an insurance agent is within the intent of Section 189. Hence

Any person who for compensation ... shall be an insurance agent within the intent of this section, ... Patently, the definition of an insurance agent under the second paragraph holds true with respect to the agent mentioned in the other two paragraphs of the said section. The second paragraph of Section 189 is a definition and interpretative clause intended to qualify the term "agent" mentioned in both the first and third paragraphs of the aforesaid section. Applying the definition of an insurance agent in the second paragraph to the agent mentioned in the first and second paragraphs would give harmony to the aforesaid three paragraphs of Section 189. Legislative intent must be ascertained from a consideration of the statute as a whole. The particular words, clauses and phrases should not be studied as detached and isolated expressions, but the whole and every part of the statute must be considered in fixing the meaning of any of its parts and in order to produce harmonious whole. 13 A statute must be so construed as to harmonize and give effect to all its provisions whenever possible. 14 The meaning of the law, it must be borne in mind, is not to be extracted from any single part, portion or section or from isolated words and phrases, clauses or sentences but from a general consideration or view of the act as a whole. 15 Every part of the statute must be interpreted with reference to the context. This means that every part of the statute must be considered together with the other parts, and kept subservient to the general intent of the whole enactment, not separately and independently. 16 More importantly, the doctrine of associated words (Noscitur a Sociis) provides that where a particular word or phrase in a statement is ambiguous in itself or is equally susceptible of various meanings, its true meaning may be made clear and specific by considering the company in which it is found or with which it is associated. 17 Considering that the definition of an insurance agent as found in the second paragraph is also applicable to the agent mentioned in the first paragraph, to receive a compensation by the agent is an essential element for a violation of the first paragraph of the aforesaid section. The appellate court has established ultimately that the petitioner-accused did not receive any compensation for the issuance of the insurance policy of Eugenio Isidro. Nevertheless, the accused was convicted by the appellate court for, according to the latter, the receipt of compensation for issuing an insurance policy is not an essential element for a violation of the first paragraph of Section 189 of the Insurance Act. We rule otherwise. Under the Texas Penal Code 1911, Article 689, making it a misdemeanor for any person for direct or indirect compensation to solicit insurance without a certificate of authority to act as an insurance agent, an information, failing to allege that the solicitor was to receive compensation either directly or indirectly, charges no offense. 18 In the case of Bolen vs. Stake, 19 the provision of Section 3750, Snyder's Compiled Laws of Oklahoma 1909 is intended to penalize persons only who acted as insurance solicitors without license, and while acting in such capacity negotiated and concluded insurance contracts for compensation. It must be noted that the information, in the case at bar, does not allege that the negotiation of an insurance contracts by the accused with Eugenio Isidro was one for compensation. This allegation is essential, and having been omitted, a conviction of the accused could not be sustained. It is well-settled in Our jurisprudence that to warrant conviction, every element of the crime must be alleged and proved. 20 After going over the records of this case, We are fully convinced, as the Solicitor General maintains, that accused did not violate Section 189 of the Insurance Act.

WHEREFORE, the judgment appealed from is reversed and the accused is acquitted of the crime charged, with costs de oficio. SO ORDERED. Teehankee (Acting C.J.,) Makasiar, De Castro, Fernandez, Guerrero and Melencio-Herrera, JJ., concur. Plana, J., took no part.

THIRD DIVISION VALENTINA A. NUEZ, FELIX FELIXITA A. NUEZ, LEONILO A. ELIZA A. NUEZ, EMMANUEL A. DIVINA A. NUEZ as heirs of NUEZ,** Petitioners, - versus A. NUEZ, NUEZ, JR., NUEZ and LEONILO S. G.R. No. 163988 Present: PANGANIBAN, J., Chairman, SANDOVAL-GUTIERREZ,* CORONA, CARPIO MORALES, and GARCIA, JJ.

GSIS FAMILY BANK (Formerly COMSAVINGS BANK) and the COURT OF APPEALS, Respondents.

Promulgated: November 17, 2005

xx- - - - - - - - - - -- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -xx DECISION CARPIO MORALES, J.: The facts are not disputed: Petitioners are the heirs of Leonilo S. Nuez (Leonilo) who, during his lifetime, obtained three loans from the GSIS Family Bank, formerly ComSavings Bank which in turn was formerly known as Royal Savings and Loan Association (the bank). The first loan, contracted on April 6, 1976 in the amount of P55,900.00, was secured by a mortgage over a parcel of land covered by TCT NT-139575-A whereon the mortgage was annotated on April 8, 1976.[1] The second loan, obtained on July 7, 1976 in the amount of P127,000.00, was secured by mortgage of properties covered by TCT Nos. NT-143002, 143003 and 139575.[2] The third loan, obtained also on July 7, 1976 in the amount of P105, 900.00, actually amended the first loan of P55,900.00 to secure which amended loan the same property covered by TCT No. NT139575-A[3] was mortgaged. The amended loan, no copy of which forms part of the records, was admitted by the parties during the pre-trial.[4]

On June 30, 1978, when the three loans were maturing, Leonilo purportedly obtained a fourth loan in the amount of P1,539,135.00 to secure which he executed a Real Estate Mortgage antedated June 28, 1978 over properties covered by TCT Nos. NT-145734, 143001, 143004, 143005, 143006, 143007.[5] On the maturity of the three loans or on June 30, 1978, Leonilo executed a Promissory Note[6] in the amount of P1,539,135.00, due and payable on December 27, 1978.

The details of the loans secured by Leonilo including the purported fourth loan are shown in the following table: Loan Date Contracted Amount Maturity Titled subject of the Real Estate Mortgages NT- 139575-A NT-143002; NT143003; NT139575 NT-139575-A

First Loan Second Loan

April 1976

6,

P 55,900.00 P127,000.00

June 30, 1978 June 30, 1978

July 7, 1976

Third Loan July 7, 1976 (amended the first loan) Fourth Loan June 1978 30,

P105,900.00

June 30, 1978

P1,539,135.00

December 27, NT-145734; 1978 NT-143001; NT-143004; NT-143005; NT-143006; NT-143007.

More than nineteen (19) years after Leonilos June 30, 1978 Promissory Note matured or on December 11, 1997, the bank undertook to extrajudicially foreclose[7]the properties covered by TCT Nos. NT-143002, 143003, 139575 and 139575-A which secured the first two loans. In its petition for extrajudicial foreclosure, the bank alleged that Leonilo violated the terms and conditions of the loans secured by the Real Estate Mortgages since June 30, 1978 when he failed, despite repeated demands, to pay his principal obligations, and interest due thereon from December 27, 1978, up to the time that the petition was filed.[8]

Acting on the banks petition for Extra-judicial Foreclosure of Mortgage, the Ex-Officio Sheriff of Gapan, Nueva Ecija issued a Notice of Extra-judicial Sale[9] setting the sale of the properties involved at public auction on January 9, 1998. The auction took place as scheduled, with the bank as the highest and only bidder in the amount of P33,026,100.00. A Certificate of Sale[10] was thus issued in favor of the bank. On September 1, 1999, on petition of the bank, the mortgage over properties covered by TCT Nos. 143001 and 143007, two of the six parcels of land which secured the fourth loan that matured on December 27, 1978, was extrajudicially foreclosed. At the public auction, the bank was the highest bidder and a Certificate of Sale[11] dated February 18, 2000 was issued in its name. Leonilo later filed on June 20, 2000 before the Regional Trial Court (RTC) of Gapan, Nueva Ecija a complaint against the GSIS Family Bank,[12] docketed as Civil Case No. 2269, for Annulment of Extrajudicial Foreclosure Sale, Reconveyance and Cancellation of Encumbrances. In his complaint, Leonilo denied securing a fourth loan but nevertheless alleged that for purposes of the action, the same shall be assumed to have been validly secured. Invoking prescription, he citing Articles 1142[13] and 1144[14] of the Civil Code, Leonilo contended that his first three loans and the fourth loan matured on June 30, 1978 and December 27, 1978, hence, they had prescribed on June 28, 1988 and December 25, 1988, respectively.[15] When, on December 11, 1997 and September 1, 1999 then, the bank filed the Petitions for Extrajudicial Foreclosure of Mortgage, Leonilo concluded that it no longer had any right as prescription had set in. Leonilo invited the attention of the court to the fact that although six titles secured the purported fourth loan of P1,539, 135.00, only two, TCT Nos. NT-143001 and NT-143007, were the subject of foreclosure sale on September 1, 1999 and the mortgage was not annotated on the four other mortgaged titles, TCT Nos. NT-143004, 143005, 143006 and 145734.[16] Moreover, he pointed out that the record[17] shows that the Real Estate Mortgage dated June 28, 1978 purportedly securing the fourth loan was annotated on NT-143001 and NT-143007 subject of the September 1, 1999 foreclosure only on August 31, 1999 or more than 11 years after the prescriptive period to foreclose had set in.[18] By Decision dated August 9, 2002, Branch 34 of the Gapan RTC found for Leonilo who died during the pendency of the trial of the case, hence, his substitution by his heirs - herein petitioners,

declaring that the banks cause of action over the loans had prescribed and, therefore, the proceedings for extrajudicial foreclosure of real estate mortgages were null and void. The bank filed a motion for reconsideration[19] on September 20, 2002, the last of the 15-day period within which it could interpose an appeal, but it did not comply with the provision of Section 4, Rule 15[20] of the Rules of Court on notice of hearing, prompting herein petitioners to file a Motion to Strike Out Motion for Reconsideration with Motion for the issuance of a writ of execution.[21] The bank filed an Opposition with Motion to Admit[22] (the Motion for Reconsideration), attributing its failure to incorporate the notice of hearing to inadvertent deletion from its computer file of standard clauses for pleadings the required notice of hearing and to the heavy workload of the handling counsel, Atty. George Garvida. The trial court denied the banks Motion for Reconsideration by Order[23] of November 18, 2002 and accordingly ordered it stricken off the record: After a serious evaluation of the arguments for/and against the instant Motion for Reconsideration, the Court believes and so-holds that, while it is true that the high Court has set aside technicality in order not to defeat the ends of justice in appropriate cases, it is likewise true that litigations at some point of time must end otherwise, litigation of cases will be endless. WHEREFORE, given the foregoing, the instant Motion for Reconsideration is hereby DENIED, for failure to comply with Rule 15, Section 4, of the 1997 Rules on Civil Procedures (sic). x x x[24] The bank filed a Notice of Appeal[25] to which petitioners filed a Motion to Dismiss for being filed late,[26] which motion was granted by the trial court by Order[27] of February 10, 2003. The bank thereupon elevated via petition for certiorari[28] the case before the Court of Appeals (CA) faulting the trial court to have I. . . . COMMITTED GRAVE ABUSE OF DISCRETION TANTAMOUNT TO LACK AND/OR EXCESS OF JURISDICTION IN ISSUING THE HEREIN ASSAILED ORDER DATED 10 FEBRUARY 2003 CONSIDERING THAT THE TRIAL COURT HAD ALREADY LOST JURISDICTION OF THE CASE IN VIEW OF THE PERFECTION OF THE PETITIONERS APPEAL ON DECEMBER 11, 2002.

II.

. . . COMMITTED GRAVE ABUSE OF DISCRETION TANTAMOUNT TO LACK AND/OR EXCESS OF JURISDICTION WHEN IT DENIED HEREIN PETITIONERS MOTION FOR RECONSIDERATION IN ITS ORDER DATED 18 NOVEMBER 2002, THERE BEING STRONG AND COMPELLING REASONS TO ADMIT SAID MOTION AND TO CONSIDER THE ERRONEOUS CONCLUSIONS OF FACT AND LAW ON WHICH THE DECISION OF THE TRIAL COURT WAS BASED.[29]

The bank, which is owned by the Government Service Insurance System, argued that to rigidly and strictly apply the rules of procedure would result to injustice and irreparable damage to the government as it stands to lose a substantial amount if not allowed to recover the proceeds of the loans.[30] The appellate court, by February 23, 2004 Decision,[31] found for the bank. Citing Labad v. University of Southeastern Philippines,[32] it ruled that while the right to appeal is a statutory and not a natural right, it is nevertheless an essential part of the judicial system, hence, courts should be cautious not to deprive a party of the right to appeal; and in the exercise of its equity jurisdiction, the trial court should have given the banks Notice of Appeal due course to better serve the ends, and prevent a miscarriage of justice. Petitioners Motion for Reconsideration having been denied by Resolution[33] of May 25, 2004, the present Petition for Certiorari under Rule 65 was filed, raising these issues: 1. Whether or not the public respondent committed grave abuse of discretion in reversing the order of the Regional Trial Court denying the notice of appeal and in giving due course to the notice of appeal. Whether the private respondent could still appeal a judgment which has become final and executory.[34]

2.

At the outset, clarification on petitioners mode of appeal is in order. Petitioners and counsel confuse their petition as one Petition for Review under Rule 45[35] with a Petition for Certiorari under Rule 65.[36] For while they treat it as one for Review on Certiorari, they manifest that it is filed pursuant to Rule 65 of the 1997 Rules of Civil Procedure in relation to Rule 45 of the New Rules of Court.[37] In Ligon v. Court of Appeals[38] where the therein petitioner described her petition as an appeal under Rule 45 and at the same time as a special civil action of certiorari under Rule 65 of the Rules of Court, this Court, in frowning over what it described as a chimera, reiterated that the remedies of appeal and certiorari are mutually exclusive and not alternative nor successive.[39]

To be sure, the distinctions between Rules 45 and 65 are far and wide. However, the most apparent is that errors of jurisdiction are best reviewed in a special civil action for certiorari under Rule

65 while errors of judgment can only be corrected by appeal in a petition for review under Rule 45.[40] This Court, however, in accordance with the liberal spirit which pervades the Rules of Court and in the interest of justice may treat a petition for certiorari as having filed under Rule 45, more so if the same was filed within the reglementary period for filing a petition for review.[41] The records show that the petition was filed on time both under Rules 45 and 65.[42] Following Delsan Transport, the petition, stripped of allegations of grave abuse of discretion, actually avers errors of judgment which are the subject of a petition for review.[43] This Court finds the petition impressed with merit.

Rule 41 of the 1997 Rules of Civil Procedure which governs appeals from Regional Trial Courts provides: SEC. 2. Modes of appeal. (a) Ordinary appeal. The appeal to the Court of Appeals in cases decided by the Regional Trial Court in the exercise of its original jurisdiction shall be taken by filing a notice of appeal with the court which rendered the judgment or final order appealed from and serving a copy thereof upon the adverse party. No record on appeal shall be required except in special proceedings and other cases of multiple or separate appeals where the law or these Rules so require. In such cases, the record on appeal shall be filed and served in like manner. xxx SEC. 3. Period of ordinary appeal. The appeal shall be taken within fifteen (15) days from notice of the judgment or final order appealed from. Where a record on appeal is required, the appellants shall file a notice of appeal and a record on appeal within thirty (30) days from notice of the judgment or final order. However, on appeal in habeas corpus cases shall be taken within forty-eight (48) hours from notice of the judgment or final order appealed from. The period of appeal shall be interrupted by a timely motion for new trial or reconsideration. No motion for extension of time to file a motion for new trial or reconsideration shall be allowed. (Underscoring supplied).

On the other hand, Rule 22 provides for the manner of computing time and the effect of interruption: SEC. 1. How to compute time. In computing any period of time prescribed or allowed by these Rules, or by order of the court, or by any applicable statute, the day of the act or event from which the designated period of time begins to run is to be excluded and the date of performance included. If the last day of the period, as thus computed, falls on a Saturday, a Sunday or a legal holiday in the place where the court sits, the time shall not run until the next working day. SEC. 2. Effect of interruption. Should an act be done which effectively interrupts the running of the period, the allowable period after such interruption shall start to run on the day after notice of the cessation of the cause thereof. The day of the act that caused the interruption shall be excluded in the computation of the period. (Emphasis and underscoring supplied).

The requirement of notice under Sections 4 and 5[44] of Rule 15 in connection with Section 2, Rule 37 of the Rules of Court is mandatory.[45] Absence of the mandatory requirement renders the motion a worthless piece of paper which the clerk of court has no right to receive and which the court has no authority to act upon.[46]Being a fatal defect, in cases of motions to reconsider a decision, the running of the period to appeal is not tolled by their filing or pendency.[47] When the bank then filed its Motion for Reconsideration on the last of the 15-day period for taking an appeal and it was subsequently denied, the bank had only one (1) day from December 9, 2002 when it received a copy of the order denying the motion or until December 10, 2002 within which to perfect its appeal.[48] It filed the Notice of Appeal, however, on December 11, 2002, hence, out of time, and the decision of the trial court had become final and executory. While Rules may be relaxed when the party invoking liberality adequately explains his failure to abide therewith, the bank failed to do so. The explanations[49] proffered by the bank behind its failure to incorporate a notice of hearing of the Motion for Reconsideration inadvertent deletion from its computer file of the standard clauses for pleadings during the printing of the finalized draft of the motion and the handling counsels heavy workload are unsatisfactory. To credit the foregoing explanations would render the mandatory rule on notice of hearing meaningless and nugatory as lawyers would simply invoke these grounds should they fail to comply with the rules. As to the claim that the government would suffer loss of substantial amount if not allowed to recover the proceeds of the loans, this Court finds that any loss was caused by respondents own doing or undoing. In fine, the failure to timely perfect an appeal cannot simply be dismissed as a mere technicality, for it is jurisdictional.[50] Nor can petitioner invoke the doctrine that rules of technicality must yield to the broader interest of substantial justice. While every litigant must be given the amplest opportunity for the proper and just determination of his cause, free from the constraints of technicalities, the failure to perfect

an appeal within the reglementary period is not a mere technicality. It raises a jurisdictional problem as it deprives the appellate court of jurisdiction over the appeal. The failure to file the notice of appeal within the reglementary period is akin to the failure to pay the appeal fee within the prescribed period. In both cases, the appeal is not perfected in due time. As we held in Pedrosa v. Hill, the requirement of an appeal fee is by no means a mere technicality of law or procedure, but an essential requirement without which the decision appealed from would become final and executory. The same can be said about the late filing of a notice of appeal. (Emphasis and underscoring supplied).[51]

Jurisdictional issue aside, upon the ground of prescription, the banks case would just the same fail. An action to foreclose a real estate mortgage prescribes in ten years.[52] The running of the period, however, may be interrupted.[53] A review of the records of the case shows that, as correctly claimed by petitioners, no letter of demand, court action, or foreclosure proceeding was undertaken prior to December 11, 1997 and September 1, 1999. While the bank included in its Formal Offer of Evidence[54] Exhibits E and H which are the Petitions for Extra-Judicial Foreclosure alleging that repeated demands for payment were made after Leonilo defaulted and failed to pay the loan

obligations, allegations are not proofs. Unless a demand is proven, one cannot be held in default.[55] In justifying its failure to file a collection suit, the bank contended that it would have amounted to a waiver of its right to foreclose. But if early on it opted to foreclose the mortgages, why it waited until 1997 and 1999, more than nineteen years after the right to do so arose, the bank is glaringly mute. Clutching at straws, the bank argues that the applicable provision is Article 1141,[56] not Article 1142[57] of the Civil Code. Article 1141 of the Civil Code speaks of real actions over immovables or rights. Article 1142 of the Civil Code speaks of a mortgage action which prescribes in ten years. The strategic location of Article 1142 immediately right after Article 1141 of the same Code, which speaks of real actions, indicates that it is an exception to the rule in the previous article.

That an action for foreclosure of mortgage over real property prescribes in ten years is in fact settled. In Buhat, et al. v. Besana, etc., et al.[58] where an action was instituted on December 6, 1952 for the foreclosure of mortgage over real property to secure an obligation payable on or before May 31, 1930, this Court affirmed the dismissal of the action by the then Court of First Instance as the action was filed more than ten years from May 31, 1930 or some 22 years after the obligation had become due and demandable. WHEREFORE, the petition is GRANTED. The assailed Court of Appeals decision dated February 23, 2004 and Resolution dated May 25, 2004 are REVERSEDand SET ASIDE. The Decision dated August 9, 2002 of the Regional Trial Court of Gapan, Nueva Ecija, Branch 34, which had become final and executory, stands. SO ORDERED. CONCHITA CARPIO MORALES Associate Justice

WE CONCUR:

ARTEMIO V. PANGANIBAN Associate Justice Chairman

ANGELINA SANDOVAL-GUTIERREZ Associate Justice

RENATO C. CORONA Associate Justice

CANCIO C. GARCIA Associate Justice

ATTESTATION

I attest that the conclusions in the above Decision were reached in consultation before the case was assigned to the writer of the opinion of the Courts Division.

ARTEMIO V. PANGANIBAN Associate Justice Chairman

CERTIFICATION

Pursuant to Article VIII, Section 13 of the Constitution, and the Division Chairmans Attestation, it is hereby certified that the conclusions in the above Decision were reached in consultation before the case was assigned to the writer of the opinion of the Court.

HILARIO G. DAVIDE, JR. Chief Justice

Republic of the Philippines SUPREME COURT Manila EN BANC

G.R. No. L-34964 January 31, 1973 CHINA BANKING CORPORATION and TAN KIM LIONG, petitioners-appellants, vs. HON. WENCESLAO ORTEGA, as Presiding Judge of the Court of First Instance of Manila, Branch VIII, and VICENTE G. ACABAN, respondents-appellees. Sy Santos, Del Rosario and Associates for petitioners-appellants. Tagalo, Gozar and Associates for respondents-appellees.

MAKALINTAL, J.: The only issue in this petition for certiorari to review the orders dated March 4, 1972 and March 27, 1972, respectively, of the Court of First Instance of Manila in its Civil Case No. 75138, is whether or not a banking institution may validly refuse to comply with a court process garnishing the bank deposit of a judgment debtor, by invoking the provisions of Republic Act No. 1405. * On December 17, 1968 Vicente Acaban filed a complaint in the court a quo against Bautista Logging Co., Inc., B & B Forest Development Corporation and Marino Bautista for the collection of a sum of money. Upon motion of the plaintiff the trial court declared the defendants in default for failure to answer within the reglementary period, and authorized the Branch Clerk of Court and/or Deputy Clerk to receive the plaintiff's evidence. On January 20, 1970 judgment by default was rendered against the defendants. To satisfy the judgment, the plaintiff sought the garnishment of the bank deposit of the defendant B & B Forest Development Corporation with the China Banking Corporation. Accordingly, a notice of garnishment was issued by the Deputy Sheriff of the trial court and served on said bank through its cashier, Tan Kim Liong. In reply, the bank' cashier invited the attention of the Deputy Sheriff to the provisions of Republic Act No. 1405 which, it was alleged, prohibit the disclosure of any information relative to bank deposits. Thereupon the plaintiff filed a motion to cite Tan Kim Liong for contempt of court. In an order dated March 4, 1972 the trial court denied the plaintiff's motion. However, Tan Kim Liong was ordered "to inform the Court within five days from receipt of this order whether or not there is a deposit in the China Banking Corporation of defendant B & B Forest Development Corporation, and if there is any deposit, to hold the same intact and not allow any withdrawal until further order from this

Court." Tan Kim Liong moved to reconsider but was turned down by order of March 27, 1972. In the same order he was directed "to comply with the order of this Court dated March 4, 1972 within ten (10) days from the receipt of copy of this order, otherwise his arrest and confinement will be ordered by the Court." Resisting the two orders, the China Banking Corporation and Tan Kim Liong instituted the instant petition. The pertinent provisions of Republic Act No. 1405 relied upon by the petitioners reads: Sec. 2. All deposits of whatever nature with banks or banking institutions in the Philippines including investments in bonds issued by the Government of the Philippines, its political subdivisions and its instrumentalities, are hereby considered as of absolutely confidential nature and may not be examined, inquired or looked into by any person, government official, bureau or office, except upon written permission of the depositor, or in cases of impeachment, or upon order of a competent court in cases of bribery or dereliction of duty of public officials, or in cases where the money deposited or invested is the subject matter of the litigation. Sec 3. It shall be unlawful for any official or employee of a banking institution to disclose to any person other than those mentioned in Section two hereof any information concerning said deposits. Sec. 5. Any violation of this law will subject offender upon conviction, to an imprisonment of not more than five years or a fine of not more than twenty thousand pesos or both, in the discretion of the court. The petitioners argue that the disclosure of the information required by the court does not fall within any of the four (4) exceptions enumerated in Section 2, and that if the questioned orders are complied with Tan Kim Liong may be criminally liable under Section 5 and the bank exposed to a possible damage suit by B & B Forest Development Corporation. Specifically referring to this case, the position of the petitioners is that the bank deposit of judgment debtor B & B Forest Development Corporation cannot be subject to garnishment to satisfy a final judgment against it in view of the aforequoted provisions of law. We do not view the situation in that light. The lower court did not order an examination of or inquiry into the deposit of B & B Forest Development Corporation, as contemplated in the law. It merely required Tan Kim Liong to inform the court whether or not the defendant B & B Forest Development Corporation had a deposit in the China Banking Corporation only for purposes of the garnishment issued by it, so that the bank would hold the same intact and not allow any withdrawal until further order. It will be noted from the discussion of the conference committee report on Senate Bill No. 351 and House Bill No. 3977, which later became Republic Act 1405, that it was not the intention of the lawmakers to place bank deposits beyond the reach of execution to satisfy a final judgment. Thus: Mr. MARCOS. Now, for purposes of the record, I should like the Chairman of the Committee on Ways and Means to clarify this further. Suppose an individual has a tax case. He is being held liable by the Bureau of Internal Revenue for, say, P1,000.00 worth of tax liability, and because of this the deposit of this individual is attached by the Bureau of Internal Revenue.

Mr. RAMOS. The attachment will only apply after the court has pronounced sentence declaring the liability of such person. But where the primary aim is to determine whether he has a bank deposit in order to bring about a proper assessment by the Bureau of Internal Revenue, such inquiry is not authorized by this proposed law. Mr. MARCOS. But under our rules of procedure and under the Civil Code, the attachment or garnishment of money deposited is allowed. Let us assume, for instance, that there is a preliminary attachment which is for garnishment or for holding liable all moneys deposited belonging to a certain individual, but such attachment or garnishment will bring out into the open the value of such deposit. Is that prohibited by this amendment or by this law? Mr. RAMOS. It is only prohibited to the extent that the inquiry is limited, or rather, the inquiry is made only for the purpose of satisfying a tax liability already declared for the protection of the right in favor of the government; but when the object is merely to inquire whether he has a deposit or not for purposes of taxation, then this is fully covered by the law. Mr. MARCOS. And it protects the depositor, does it not? Mr. RAMOS. Yes, it protects the depositor. Mr. MARCOS. The law prohibits a mere investigation into the existence and the amount of the deposit. Mr. RAMOS. Into the very nature of such deposit. Mr. MARCOS. So I come to my original question. Therefore, preliminary garnishment or attachment of the deposit is not allowed? Mr. RAMOS. No, without judicial authorization. Mr. MARCOS. I am glad that is clarified. So that the established rule of procedure as well as the substantive law on the matter is amended? Mr. RAMOS. Yes. That is the effect. Mr. MARCOS. I see. Suppose there has been a decision, definitely establishing the liability of an individual for taxation purposes and this judgment is sought to be executed ... in the execution of that judgment, does this bill, or this proposed law, if approved, allow the investigation or scrutiny of the bank deposit in order to execute the judgment? Mr. RAMOS. To satisfy a judgment which has become executory.

Mr. MARCOS. Yes, but, as I said before, suppose the tax liability is P1,000,000 and the deposit is half a million, will this bill allow scrutiny into the deposit in order that the judgment may be executed? Mr. RAMOS. Merely to determine the amount of such money to satisfy that obligation to the Government, but not to determine whether a deposit has been made in evasion of taxes. xxx xxx xxx Mr. MACAPAGAL. But let us suppose that in an ordinary civil action for the recovery of a sum of money the plaintiff wishes to attach the properties of the defendant to insure the satisfaction of the judgment. Once the judgment is rendered, does the gentleman mean that the plaintiff cannot attach the bank deposit of the defendant? Mr. RAMOS. That was the question raised by the gentleman from Pangasinan to which I replied that outside the very purpose of this law it could be reached by attachment. Mr. MACAPAGAL. Therefore, in such ordinary civil cases it can be attached? Mr. RAMOS. That is so. (Vol. II, Congressional Record, House of Representatives, No. 12, pp. 3839-3840, July 27, 1955). It is sufficiently clear from the foregoing discussion of the conference committee report of the two houses of Congress that the prohibition against examination of or inquiry into a bank deposit under Republic Act 1405 does not preclude its being garnished to insure satisfaction of a judgment. Indeed there is no real inquiry in such a case, and if the existence of the deposit is disclosed the disclosure is purely incidental to the execution process. It is hard to conceive that it was ever within the intention of Congress to enable debtors to evade payment of their just debts, even if ordered by the Court, through the expedient of converting their assets into cash and depositing the same in a bank. WHEREFORE, the orders of the lower court dated March 4 and 27, 1972, respectively, are hereby affirmed, with costs against the petitioners-appellants. Zaldivar, Castro, Fernando, Barredo, Makasiar, Antonio and Esguerra, JJ., concur. Concepcion, C.J. and Teehankee, J., took no part.

Footnotes * An Act Probihiting Disclosure of or Inquiry into, Deposits with any Banking Institution and Providing Penalty Therefor.

Republic of the Philippines SUPREME COURT Manila FIRST DIVISION G.R. No. L-37867 February 22, 1982 BOARD OF ADMINISTRATORS, PHILIPPINES VETERANS ADMINISTRATION, petitioner, vs. HON. JOSE G. BAUTISTA, in his capacity as Presiding Judge of the CFI Manila, Branch III, and CALIXTO V. GASILAO, respondents.

GUERRERO, J.: This is a petition to review on certiorari the decision of respondent Court of First Instance of Manila, Branch III, rendered on October 25, 1973 in Civil Case No. 90450 for mandamus filed by Calixto V. Gasilao against the Board of Administrators of the Philippine Veterans Administration. The facts as found by the Court a quo to have been established by the pleadings find by the parties are stated in the decision under review from which We quote the following: Calixto V. Gasilao, pauper litigant and petitioner in the above-entitled case, was a veteran in good standing during World War II. On October 19, 1955, he filed a claim for disability pension under Section 9, Republic Act No. 65. The claim was disapproved by the Philippine Veterans Board (now Board of Administrators, Philippine Veterans Administration). Meanwhile, Republic Act 65 was amended by Republic Act 1362 on June 22, 1955 by including as part of the benefit of P50.00, P10.00 a month for each of the unmarried minor children below 18 of the veteran Republic Act No. 1362 was implemented by the respondents only on July 1, 1955. On June 18, 1957, Section 9 of Republic Act No. 65 was further amended by Republic Act 1920 increasing the life pension of the veteran to P100.00 a month and maintaining the P10.00 a month each for the unmarried minor children below 18. Fortunately, on August 8, 1968, the claim of the petitioner which was disapproved in December, 1955 was reconsidered and his claim was finally approved at the rate of P100.00 a month, life pension, and the additional Pl0.00 for each of his ten unmarried minor children below 18. In view of the approval of the claim of petitioner, he requested respondents that his claim be made retroactive as of the date when his original application was flied or disapproved in 1955. Respondents did not act on his request.

On June 22, 1969, Section 9 of Republic Act No. 65 was amended by Republic Act No. 5753 which increased the life pension of the veteran to P200.00 a month and granted besides P30.00 a month for the wife and P30.00 a month each for his unmarried minor children below 18. In view of the new law, respondents increased the monthly pension of petitioner to P125.00 effective January 15, 1971 due to insufficient funds to cover full implementation. His wife was given a monthly pension of P7.50 until January 1, 1972 when Republic Act 5753 was fully implemented. Petitioner now claims that he was deprived of his right to the pension from October 19, 1955 to June 21, 1957 at the rate of P50.00 per month plus P10.00 a month each for his six (6) unmarried minor children below 18. lie also alleges that from June 22, 1957 to August 7, 1968 he is entitled to the difference of P100.00 per month plus P10.00 a month each for his seven (7) unmarried nor children below 18. Again, petitioner asserts the difference of P100.00 per month, plus P30.00 a month for his wife and the difference of P20.00 a month each for his four (4) unmarried minor children below 18 from June 22, 1969 up to January 14, 1971 and finally, the difference of P75.00 per month plus P30.00 a month for his wife and the difference of P20.00 a month for his three (3) unmarried minor children below 18 from January 15, 1971 to December 31, 1971. 1 According to the records, the parties, through their respective counsels, filed on September 24, 1973 the following stipulation of facts in the lower Court: STIPULATION OF FACTS COME NOW the parties thru their respective counsel, and unto this Honorable Court, respectfully state that they agree on the following facts which may be considered as proved without the need of the introduction of any evidence thereon, to wit: 1. Petitioner was a veteran in good standing during the last World War that took active participation in the liberation drive against the enemy, and due to his military service, he was rendered disabled. 2. The Philippine Veterans Administration, formerly the Philippine Veterans Board, (now Philippine Veterans Affairs Office) is an agency of the Government charged with the administration of different laws giving various benefits in favor of veterans and their orphans/or widows and parents; that it has the power to adopt rules and regulations to implement said laws and to pass upon the merits and qualifications of persons applying for rights and privileges extended by this Act pursuant to such rules and regulations as it may adopt to insure the speedy and honest fulfillment of its aims and purposes. 3. On July 23, 1955, petitioner filed a claim (Claim No. Dis-12336) for disability pension under Section 9 of RA 65, with the Philippine Veterans Board (later succeeded by the Philippine Veterans Administration, now Philippine Veterans Affairs Office), alleging that he was suffering from PTB, which he incurred in line of duty.

4. Due to petitioner's failure to complete his supporting papers and submit evidence to establish his service connected illness, his claim was disapproved by the Board of the defunct Philippine Veterans Board on December 18, 1955. 5. On August 8, 1968, petitioner was able to complete his supporting papers and, after due investigation and processing, the Board of Administrators found out that his disability was 100% thus he was awarded the full benefits of section 9 of RA 65, and was therefore given a pension of P100.00 a month and with an additional P 10.00 a month for each of his unmarried minor children pursuant to RA 1920, amending section 9 of RA 65. 6. RA 5753 was approved on June 22, 1969, providing for an increase in the basic pension to P200.00 a month and the additional pension, to P30.00 a month for the wife and each of the unmarried minor children. Petitioner's monthly pension was, however, increased only on January 15, 1971, and by 25% of the increases provided by law, due to the fact that it was only on said date that funds were released for the purpose, and the amount so released was only sufficient to pay only 25% of the increase. 7. On January 15, 1972, more funds were released to implement fully RA 5753 and snow payment in full of the benefits thereunder from said date. WHEREFORE, it is respectfully prayed that a decision be rendered in accordance with the foregoing stipulation of facts. It is likewise prayed that the parties be granted a period of (15) days within which to file their memoranda. 2 Upon consideration of the foregoing and the Memoranda filed by the parties, the lower Court rendered judgment against therein respondent Board of Administrators, the dispositive portion of which reads as follows: WHEREFORE, premises considered, judgment is hereby rendered for petitioner and the respondents are ordered to make petitioner's pension effective as of December 18, 1955 at the rate of P50.00 per month; and the rate increased to P100.00 per month plus P10.00 per month each for his ten unmarried minor children below 18 years of age from June 22, 1957 up to August 7..1968; to pay the difference of P100.00 per month plus P30.00 per month and P20.00 per month each for his ten unmarried children below 18 years of age from June 22, 1969 up to January 15, 1971, the difference of P75.00 per month plus P22.50 per month for his wife and P20.00 per month each for his unmarried nor children then below 18 years of age from January 16, 1971 up to December 31, 1971. SO ORDERED. Manila, October 25, 1973. 3 In its Petition before this Court, the Board of Administrators of the Philippine Veterans Administration, through the Office of the Solicitor General, challenges the abovementioned decision of the Court a quo on the following grounds:

1. The lower Court erred in ordering the petitioners to retroact the effectivity of their award to respondent Calixto V. Gasilao of full benefits under section 9 of RA 65 to December 18, 1955, the date when his application was disapproved due to dis failure to complete his supporting papers and submit evidence to establish his service connected illness, and not August 8, 1968, the date when he was able to complete his papers and allow processing and approval of his application. 2. The lower Court erred in ordering payment of claims which had prescribed. 3. The lower Court erred in allowing payment of claims under a law for which no funds had been released. 4 The question raised under the first assigned error is: When should private respondent Gasilao's pension benefits start The lower Court, quoting excerpts from Our decision in Begosa vs. Chairman Philippine Veterans Administration, 5ruled that Gasilao's pension benefits should retroact to the date of the disapproval of his claim on December 18, 1955, and not commence from the approval thereon on August 8, 1968 as contended by the Board of Administrators. Petitioner maintains the stand that the facts of the Begosa case are not similar to those of the case at bar to warrant an application of the ruling therein on the retroactivity of a pension award to the date of prior disapproval of the claim. In the Begosa case, the Supreme Court speaking thru then Associate Justice, now Chief Justice Fernando, affirmed the decision of the lower Court, and ruled in part as follows: From the facts just set out, it will be noted that plaintiff filed his said claim for disability pension as far back as March 4, 1955; that it was erroneously disapproved on June 21, 1955, because his dishonorable discharge from the Army was not a good or proper ground for the said disapproval and that on reconsideration asked for by him on November 1, 1957, which he continued to follow up, the Board of Administrators, Philippine Veterans Administration, composed of herein defendants, which took over the duties of the Philippine Veterans Board, finally approved his claim on September 2, 1964, at the rate of P30.00 a month. 6 Had it not been for the said error, it appears that there was no good ground to deny the said claim, so that the latter was valid and meritorious even as of the date of its filing on March 4, 1955, hence to make the same effective only as of the date of its approval on September 2, 1964 according to defendant's stand would be greatly unfair and prejudicial to plaintiff. 7 In other words, the favorable award which claimant Begosa finally obtained on September 2, 1964 was made to retroact to the date of prior disapproval of the claim on June 2, 1955 for the reason that such disapproval was erroneously made. In the instant case, on the other hand, the herein claim of respondent Gasilao was denied on December 18, 1955 because of his "failure to complete his supporting papers and submit evidence to establish his

service-connected illness" (Stipulation of Facts, Par. 4, ante). Nonetheless, the Stipulation of Facts admitted in par. 1 that "Petitioner was a veteran in good standing during the last World War that took active participation in the liberation drive against the enemy, and due to his military service, he was rendered disabled." From this admission in par. 1, it can reasonably be deduced that the action on the claim of Gasilao was merely suspended by the Philippine Veterans Administration pending the completion of the required supporting papers and evidence to establish his service-connected illness. Hence, Our ruling in the Begosa case making retroactive the award in favor of the veteran still holds. Republic Act No. 65 otherwise known as the Veterans' Bill of Rights, as amended, does not explicitly provide for the effectivity of pension awards. However, petitioner seeks to remedy this legislative deficiency by citing Section 15 of the law which in part reads as follows: Sec. 15. Any person who desires to take advantage of the rights and privileges provided for in this Act should file his application with the Board ... Petitioner contends that since the foregoing section impliedly requires that the application filed should first be approved by the Board of Administrators before the claimant could receive his pension, therefore, an award of pension benefits should commence form the date of he approval of the application. This stand of the petitioner does not appear to be in consonance with the spirit and intent of the law, considering that Republic Act 65 is a veteran pension law which must be accorded a liberal construction and interpretation in order to favor those entitled to the rights, privileges and benefits granted thereunder, among which are the right to resume old positions in the government, educational benefits, the privilege to take promotional examinations, a life pension for the incapacitated, pensions for widow and children, hospitalization and medical care benefits. As it is generally known, the purpose of Congress in granting veteran pensions is to compensate, as far as may be, a class of men who suffered in the service for the hardships they endured and the dangers they encountered,8 and more particularly, those who have become incapacitated for work owing to sickness, disease or injuries sustained while in line of duty. 9 A veteran pension law is, therefore, a governmental expression of gratitude to and recognition of those who rendered service for the country, especially during times of war or revolution, by extending to them regular monetary aid. For this reason, it is the general rule that a liberal construction is given to pension statutes in favor of those entitled to pension. Courts tend to favor the pensioner, but such constructional preference is to be considered with other guides to interpretation, and a construction of pension laws must depend on its own particular language. 10 Significantly, the original text of RA 65 provided that: Sec. 6. It also shall be the duty of the Board (then the Philippine Veterans Board) to pass upon the merits and qualifications of persons applying for the rights and/or privileges extended by this Act, pursuant to such rules as it may adopt to insure the speedy and honest fulfillment of its aims and purposes. (Emphasis supplied.) The foregoing provision clearly makes it incumbent upon the implementing Board to carry out the provisions of the statute in the most expeditious way possible and without unnecessary delay. In

the Begosa case, it took nine years (from June 2, 1955 to September 2, 1964) before the claimant finally obtained his pension grant, whereas in the instant case, it took about twelve years (from December, 1955 to August 8, 1968) for respondent Gasilao to receive his pension claim. To Our mind, it would be more in consonance with the spirit and intentment of the law that the benefits therein granted be received and enjoyed at the earliest possible time by according retroactive effect to the grant of the pension award as We have done in the Begosa case. On the other hand, if the pension awards are made effective only upon approval of the corresponding application which would be dependent on the discretion of the Board of Administrators which as noted above had been abused through inaction extending to nine years, even to twelve years, the noble and humanitarian purposes for which the law had enacted could easily be thwarted or defeated. On the issue of prescription, petitioner cites Article 1144 of the Civil Code which provides: Art. 1144. The following actions must be brought within ten years from the time the right of action accrues: (1) Upon a written contract; (2) Upon an obligation created by law; and (3) Upon a judgment. Petitioner now contends that since the action was filed in the lower Court on April 13, 1973 seeking the payment of alleged claims which have accrued more than ten (10) years prior to said date, the same should have been disallowed as to the prescribed claims. The obligation of the government to pay pension was created by law (Sec. 9, R.A. 65). Hence, the tenyear prescriptive period should be counted from the date of passage of the law which is September 25, 1946, the reason being that it is only from said date that private respondent could have filed his application. Taking September 25, 1946 as the point of reference, the actual filing of Gasilao's application on July 23, 1955 was clearly made within and effectively interrupted the prescriptive period. It is not the date of the commencement of the action in the lower Court which should be reckoned with, for it was not on said date that Gasilao first sought to claim his pension benefits, but on July 23, 1955 when he filed his application with the defunct Philippine Veterans Board. As We had the occasion to state in the case of Vda. de Nator vs. C.I.R., 11 "the basis of prescription is the unwarranted failure to bring the matter to the attention of those who are by law authorized to take cognizance thereof." The Stipulation of Facts do not show and neither do the records indicate when Gasilao attempted to reinstate his claim after the same was disapproved on December 18, 1955. What is evident is that he did take steps to reinstate his claim because on August 8, 1968, herein petitioner finally approved his application. We find it more logical to presume that upon being properly notified of the disapproval of his application and the reasons therefor, Gasilao, being the interested party that he was proceeded to work for the completion of the requirements of the Board, as in fact he was successful in meeting such requirements. There is nothing in the record to show intentional abandonment of the claim to as to make the prescriptive period continue to run again.

The third ground relied upon in support of this Petition involves the issue as to whether or not the payment of increased pension provided in the amendatory Act, R.A. 5753, could be ordered, even where there was no actual release of funds for the purpose, although the law itself expressly provided for an appropriation. In the case ofBoard of Adminitrators, Philippine Veterans Administration vs. Hon. Agcoili, et al., 12 penned by Chief Justice Fred Ruiz Castro, the same issue was treated in this wise: ... The inability of the petitioner to pay Abrera the differential of P60.00 in monthly pension is attributed by it, in its own words, "to the failure of Congress to appropriate the necessary funds to cover all claims for benefits, pensions and allowances." And the petitioner states that it has "no alternative but to suspend (full implementation of said laws until such time, as sufficient funds have been appropriated by Congress" to cover the total amount of all approved claims. We find the explanation of the petitioner satisfactory, but we nevertheless hold that as a matter of law Abrera is entitled to a monthly pension of P120.00 from January 1, 1972 when Republic Act 5753 was implemented up to the present, if his physical disability rating has continued and continues to be 60%. Payment to him of what is due him from January 1, 1972 must however remain subject to the availability of Government funds duly set aside for the purpose and subject further periodic re-rating of his physical disability. But even if we have thus defined the precise terms, nature and scope of the entitlement of the respondentAbrera, for the guidance of petitioner, we nevertheless refrain from ordering the petitioner to pay the amount of P120.00 per month from January 1, 1972 that is due to the respondent by virtue of the mandate of section 9 of Republic Act 65, as amended by Republic Act 5753, because the Government has thus far not provided the necessary funds to pay all valid claims duly approved under the authority of said statute. 13 (Emphasis supplied.) ACCORDINGLY, the judgment of the Court a quo is hereby modified to read as follows: WHEREFORE, premises considered, the Board of Administrators of the Philippine Veterans Administration (now the Philippine Veterans Affairs Office) is hereby ordered to make Gasilao's pension effective December 18, 1955 at the rate of P50-00 per month plus P10.00 per month for each of his then unmarried minor children below 18, and the former amount increased to P100.00 from June 22, 1957 to August 7, 1968. The differentials in pension to which said Gasilao, his wife and his unmarried minor children below 18 are entitled for the period from June 22, 1969 to January 14, 1972 by virtue of Republic Act No. 5753 are hereby declared subject to the availability of Government funds appropriated for the purpose. SO ORDERED. Teehankee (Chairman), Makasiar, Fernandez, Melencio-Herrera and Plana, JJ., concur.

Republic of the Philippines SUPREME COURT Manila SECOND DIVISION G.R. No. 137489 May 29, 2002

COOPERATIVE DEVELOPMENT AUTHORITY, petitioner, vs. DOLEFIL AGRARIAN REFORM BENEFICIARIES COOPERATIVE, INC., ESMERALDO A. DUBLIN, ALICIA SAVAREZ, EDNA URETA, ET AL., respondents. DE LEON, JR., J.: At the core of the instant petition for review on certiorari of the Decision1 of the Court of Appeals, 13th Division, in CA-G.R. SP. No. 47933 promulgated on September 9, 1998 and its Resolution2 dated February 9, 1999 is the issue of whether or not petitioner Cooperative Development Authority (CDA for brevity) is vested with quasi-judicial authority to adjudicate intra-cooperative disputes. The record shows that sometime in the later part of 1997, the CDA received from certain members of the Dolefil Agrarian Reform Beneficiaries Cooperative, Inc. (DARBCI for brevity), an agrarian reform cooperative that owns 8,860 hectares of land in Polomolok, South Cotabato, several complaints alleging mismanagement and/or misappropriation of funds of DARBCI by the then incumbent officers and members of the board of directors of the cooperative, some of whom are herein private respondents. Acting on the complaints docketed as CDA-CO Case No. 97-011, CDA Executive Director Candelario L. Verzosa, Jr. issued an order3 dated December 8, 1997 directing the private respondents to file their answer within ten (10) days from receipt thereof. Before the private respondents could file their answer, however, CDA Administrator Alberto P. Zingapan issued on December 15, 1997 an order,4 upon the motion of the complainants in CDA-CO Case No. 97011, freezing the funds of DARBCI and creating a management committee to manage the affairs of the said cooperative. On December 18, 1991, the private respondents filed a Petition for Certiorari5 with a prayer for preliminary injunction, damages and attorneys fees against the CDA and its officers namely: Candelario L. Verzosa, Jr. and Alberto P. Zingapan, including the DOLE Philippines Inc. before the Regional Trial Court (RTC for brevity) of Polomolok, South Cotabato, Branch 39. The petition which was docketed as SP Civil Case No. 25, primarily questioned the jurisdiction of the CDA to resolve the complaints against the private respondents, specifically with respect to the authority of the CDA to issue the "freeze order" and to create a management committee that would run the affairs of DARBCI. On February 24, 1998, CDA Chairman Jose C. Medina, Jr. issued an order6 in CDA-CO Case No. 97-011 placing the private respondents under preventive suspension, hence, paving the way for the newlycreated management committee7 to assume office on March 10, 1998.

On March 27, 1998, the RTC of Polomolok, South Cotabato, Branch 39, issued a temporary restraining order8(TRO), initially for seventy-two (72) hours and subsequently extended to twenty (20) days, in an Order dated March 31, 1998. The temporary restraining order, in effect, directed the parties to restore status quo ante, thereby enabling the private respondents to reassume the management of DARBCI. The CDA questioned the propriety of the temporary restraining order issued by the RTC of Polomolok, South Cotabato on March 27, 1998 through a petition for certiorari before the Court of Appeals, 12th Division, which was docketed as CA-G.R. SP No. 47318. On April 21, 1998, the Court of Appeals, 12th Division, issued a temporary restraining order9 in CA-G.R. SP No. 47318 enjoining the RTC of Polomolok, South Cotabato, Branch 39, from enforcing the restraining order which the latter court issued on March 27, 1998, and ordered that the proceedings in SP Civil Case No. 25 be held in abeyance.1wphi1.nt Consequently, the CDA continued with the proceedings in CDA-CO Case No. 97-011. On May 26, 1998 CDA Administrator Arcadio S. Lozada issued a resolution10 which directed the holding of a special general assembly of the members of DARBCI and the creation of an ad hoc election committee to supervise the election of officers and members of the board of directors of DARBCI scheduled on June 14, 1998. The said resolution of the CDA, issued on May 26, 1998 prompted the private respondents to file on June 8, 1998 a Petition for Prohibition11 with a prayer for preliminary mandatory injunction and temporary restraining order with the Court of Appeals, 13th Division, which was docketed as CA-G.R. SP No. 47933. On June 10, 1998, the appellate court issued a resolution12 restraining the CDA and its administrator, Arcadio S. Lozada, the three (3) members of the ad hoc election committee or any and all persons acting in their behalf from proceeding with the election of officers and members of the board of directors of DARBCI scheduled on June 14, 1998. Incidentally, on the same date that the Court of Appeals issued a temporary restraining order in CA-G.R. SP No. 47933 on June 10, 1998, a corporation by the name of Investa Land Corporation (Investa for brevity) which allegedly executed a "Lease Agreement with Joint Venture" with DARBCI filed a petition13 with the RTC of Polomolok, South Cotabato, Branch 39, docketed as SP Civil Case No. 28, essentially seeking the annulment of orders and resolutions issued by the CDA in CDA-CO Case No. 97011 with a prayer for temporary restraining order and preliminary injunction. On the following day, June 11, 1998, the trial court issued a temporary restraining order14 enjoining the respondents therein from proceeding with the scheduled special general assembly and the elections of officers and members of the board of directors of DARBCI on June 14, 1998. Thereafter, it also issued a writ of preliminary injunction. With the issuance of the two (2) restraining orders by the Court of Appeals, 13th Division, and the RTC of Polomolok, South Cotabato, Branch 39, on June 10 and 11, 1998, respectively, the scheduled special general assembly and the election of officers and members of the board of directors of DARBCI on June 14, 1998 did not take place. Nevertheless, on July 12, 1998, the majority of the 7,511 members of DARBCI, on their own initiative, convened a general assembly and held an election of the members of the board of directors and officers of the cooperative, thereby effectively replacing the private respondents. Hence, the private

respondents filed a Twin Motions for Contempt of Court and to Nullify Proceedings15 with the Court of Appeals in CA-G.R. SP No. 47933. On September 9, 1998 the Court of Appeals, 13th Division, promulgated its subject appealed Decision16 granting the petition in CA-G.R. SP No. 47933, the dispositive portion of which reads: Wherefore, the foregoing considered, the Petition is hereby GRANTED. The Orders of the respondent Cooperative Development Authority in CDA-CO case No. 97-011 dated 08 December 1997, 15 December 1997, 26 January 1998, 24 February 1998, 03 March 1998, and the Resolution dated 26 May 1998, are hereby declared NULL AND VOID and of no legal force and effect. Further, the respondents are hereby ORDERED to perpetually CEASE AND DESIST from taking any further proceedings in CDA-CO Case No. 97-011. Lastly, the respondent CDA is hereby ORDERED to REINSTATE the Board of Directors of DARBCI who were ousted by virtue of the questioned Orders, and to RESTORE the status quo prior to the filing of CDA-CO Case No. 97-011. SO ORDERED. The CDA filed a motion for reconsideration17 of the Decision in CA-G.R. SP No. 47933 but it was denied by the Court of Appeals in its assailed Resolution18 dated February 9, 1999, thus: WHEREFORE, the Motion for Reconsideration is hereby DENIED for being patently without merit. MOREOVER, acting on petitioners Twin Motion, and in view of the Decision in this case dated 09, September 1998, the tenor of which gives it legal effect nunc pro tunc. We therefore hold the 12 July 1998 election of officers, the resolutions passed during the said assembly, and the subsequent oath-taking of the officers elected therein, and all actions taken during the said meeting, being in blatant defiance of a valid restraining order issued by this Court, to be NULL AND VOID AB INITIO AND OF NO LEGAL FORCE AND EFFECT. FURTHERMORE, the private respondents are hereby given thirty (30) days from receipt of this Resolution within which to explain in writing why they should not be held in contempt of this Court for having openly defied the restraining order dated 10 July 1998. The Hon. Jose C. Medina of the CDA is given a like period to explain in writing why he should not be cited in contempt for having administered the oath of the "Board of Officers" pending the effectivity of the restraining order. The respondent Arcadio S. Lozada, Administrator of the CDA, is likewise given the same period to explain why he should not be held in contempt for issuing a resolution on 21 July 1998 validating the proceedings of the assembly, and another resolution on 28 August 1998 confirming the election of the officers thereof. SO ORDERED. Hence, the instant petition19 for review which raises the following assignments of error:

I THE HONORABLE COURT OF APPEALS, IN NULLIFYING THE ORDERS AND RESOLUTIONS OF THE COOPERATIVE DEVELOPMENT AUTHORITY IN CDA CO CASE NO. 97-011, DECIDED A QUESTION OF SUBSTANCE THAT IS NOT IN ACCORD WITH LAW AND APPLICABLE DECISIONS OF THE SUPREME COURT. II THE HONORABLE COURT OF APPEALS ERRED IN NOT APPLYING THE RULE ON FORUMSHOPPING. III THE HONORABLE COURT OF APPEALS ERRED IN RENDERING A DECISION ON THE BASIS OF PURE CONJECTURES AND SURMISES AND HAS DEPARTED FROM THE ACCEPTED AND USUAL COURSE OF JUDICIAL PROCEEDINGS WHICH CALL FOR AN EXERCISE OF THIS HONORABLE COURTS SUPERVISION. Petitioner CDA claims that it is vested with quasi-judicial authority to adjudicate cooperative disputes in view of its powers, functions and responsibilities under Section 3 of Republic Act No. 6939.20 The quasijudicial nature of its powers and functions was confirmed by the Department of Justice, through the then Acting Secretary of Justice Demetrio G. Demetria, in DOJ Opinion No. 10, Series of 1995, which was issued in response to a query of the then Chairman Edna E. Aberina of the CDA, to wit: Applying the foregoing, the express powers of the CDA to cancel certificates of registration of cooperatives for non-compliance with administrative requirements or in cases of voluntary dissolution under Section 3(g), and to mandate and conciliate disputes within a cooperative or between cooperatives under Section 8 of R.A. No. 6939, may be deemed quasi-judicial in nature. The reason is that in the performance of its functions such as cancellation of certificate of registration, it is necessary to establish non-compliance or violation of administrative requirement. To do so, there arises an indispensable need to hold hearings, investigate or ascertain facts that possibly constitute non-compliance or violation and, based on the facts investigated or ascertained, it becomes incumbent upon the CDA to use its official discretion whether or not to cancel a cooperatives certificate of registration, thus, clearly revealing the quasi-judicial nature of the said function. When the CDA acts as a conciliatory body pursuant to Section 8 of R.A. No. 6939, it in effect performs the functions of an arbitrator. Arbitrators are by the nature of their functions act in quasi-judicial capacity xxx. The quasi-judicial nature of the foregoing functions is bolstered by the provisions of Sections 3(o) of R.A. No. 6939 which grants CDA on (sic) the exercise of other functions as may be necessary to implement the provisions of cooperative laws, the power to summarily punish for direct contempt any person guilty of misconduct in the presence thereof who seriously interrupts any hearing or inquiry with a fine or imprisonment prescribed therein, a power usually granted to make effective the exercise of quasi-judicial functions.21

Likewise, the Office of the President, through the then Deputy Executive Secretary, Hon. Leonardo A. Quisumbing, espoused the same view in the case of Alberto Ang, et al. v. The Board of Directors, Metro Valenzuela Transport Services Cooperative, Inc., O.P. Case No. 51111, when it declared and ruled that: Concededly, Section 3(o) of R.A. No. 6939 and Article 35(4) of R.A. 6938, may not be relied upon by the CDA as authority to resolve internal conflicts of cooperatives, they being general provisions. Nevertheless, this does not preclude the CDA from resolving the instant case. The assumption of jurisdiction by the CDA on matters which partake of cooperative disputes is a logical, necessary and direct consequence of its authority to register cooperatives. Before a cooperative can acquire juridical personality, registration thereof is a condition sine qua non, and until and unless the CDA issues a certificate of registration under its official seal, any cooperative for that matter cannot be considered as having been legally constituted. To our mind, the grant of this power impliedly carries with it the visitorial power to entertain cooperative conflicts, a lesser power compared to its authority to cancel registration certificates when, in its opinion, the cooperative fails to comply with some administrative requirements (Sec. 2(g), R.A. No. 6939). Evidently, respondents-appellants claim that the CDA is limited to conciliation and mediation proceedings is bereft of legal basis. Simply stated, the CDA, in the exercise of such other function and in keeping with the mandate of the law, could render the decisions and/or resolutions as long as they pertain to the internal affairs of the public service cooperative, such as the rights and privileges of its members, the rules and procedures for meetings of the general assembly, Board of Directors and committees, election and qualifications of officers, directors and committee members, and allocation and distribution of surpluses.22 The petitioner avers that when an administrative agency is conferred with quasi-judicial powers and functions, such as the CDA, all controversies relating to the subject matter pertaining to its specialization are deemed to be covered within the jurisdiction of said administrative agency. The courts will not interfere in matters which are addressed to the sound discretion of government agencies entrusted with the regulation of activities undertaken upon their special technical knowledge and training. The petitioner added that the decision in the case of CANORECO v. Hon. Ruben D. Torres,23 affirmed the adjudicatory powers and functions of CDA contrary to the view held by the Court of Appeals, when the Supreme Court upheld therein the ruling of the CDA annulling the election of therein respondents Norberto Ochoa, et al. as officers of the Camarines Norte Electric Cooperative. Petitioner CDA also claims that herein private respondents are guilty of forum-shopping by filing cases in three (3) different fora seeking the same relief. Petitioner pointed out that private respondents originally filed a petition with a prayer for preliminary injunction dated December 17, 1997 before the RTC of Polomolok, South Cotabato which was docketed as SP Civil Case No. 25. Subsequently, the same private respondents filed another petition with a prayer for preliminary injunction with the Court of Appeals, 13th Division, docketed as CA-G.R. SP No. 47933. Thereafter, Investa, also represented by the same counsel of private respondents, Atty. Reni Dublin, filed another case with the RTC of Polomolok, South Cotabato, docketed as SP Civil Case No. 28, likewise praying, among others, for the issuance of preliminary injunction and an application for a temporary restraining order. In effect, petitioner was confronted with three (3) TROs issued in three (3) separate actions enjoining it from enforcing its orders and resolutions in CDA-CO Case No. 97-011.

In their Comment,24 private respondents contend that the instant petition for review on certiorari filed by CDA Administrator Alberto Zingapan should be dismissed and struck down as a mere scrap of paper for lack of authority to file the same from the Office of the Solicitor General and for having been filed without approval from the Board of Administrators of CDA. The private respondents also contend that, contrary to the claim of the petitioner, the powers, functions and responsibilities of the CDA show that it was merely granted regulatory or supervisory powers over cooperatives in addition to its authority to mediate and conciliate between parties involving the settlement of cooperative disputes. Private respondents denied that they are guilty of forum-shopping. They clarified that the case filed with the RTC of Polomolok, South Cotabato, Branch 39, docketed as SP Civil Case No. 25, was a petition for certiorari. On the other hand, the case that they filed with the Court of Appeals, 13th Division, docketed therein as CA-G.R. SP No. 47933, was a petition for prohibition to stop the holding of a special general assembly and the election of a new set of DARBCI officers on June 14, 1998 as ordered by the petitioner CDA on May 26, 1998, which events have not yet occurred at the time the petition for certiorari was filed by the private respondents with the RTC of Polomolok, South Cotabato, Branch 39. Private respondents also denied that the filing by Investa of the petition for the declaration of nullity of the orders and resolutions of petitioner CDA, with a prayer for temporary restraining order with the RTC of Polomolok, South Cotabato, docketed therein as SP Civil Case No. 28, constituted forum-shopping on their part. They pointed out that Investa has a separate juridical personality from DARBCI and that, contrary to the claim of petitioner CDA, the former is not represented by the lawyer of the private respondents. By way of reply,25 petitioner claims that Atty. Rogelio P. Madriaga was properly deputized, among other lawyers, as Special Attorney by the Office of the Solicitor General to represent the CDA in the instant petition pursuant to the letter26 of Assistant Solicitor General Carlos N. Ortega addressed to CDA Chairman Jose C. Medina, Jr. dated April 8, 1999. Likewise, the filing of the instant petition was an official act of CDA Administrator Alberto P. Zingapan who was duly appointed by the CDA Board of Administrators as chairman of the Oversight Committee on Legal Matters per Resolution No. 201, S1998.27 Meanwhile, on March 26, 1999, certain persons alleging to be incumbent officers and members of the board of directors of DARBCI filed a motion to intervene in the instant petition which was granted by this Court per its Resolution dated July 7, 1999.28 In the same resolution, this Court required both petitioner CDA and the private respondents in this case to file their respective comments to the petition-in-intervention within ten (10) days from notice, but both parties failed to comply to do so up to the present. We note that the instant petition for review on certiorari suffers from a basic infirmity for lack of the requisite imprimatur from the Office of the Solicitor General, hence, it is dismissible on that ground. The general rule is that only the Solicitor General can bring or defend actions on behalf of the Republic of the Philippines and that actions filed in the name of the Republic, or its agencies and instrumentalities for that matter, if not initiated by the Solicitor General, will be summarily dismissed.29

The authority of the Office of the Solicitor General to represent the Republic of the Philippines, its agencies and instrumentalities, is embodied under Section 35(1), Chapter 12, Title III, Book IV of the Administrative Code of 1987 which provides that: SEC. 35. Powers and Functions.The Office of the Solicitor General shall represent the Government of the Philippines, its agencies and instrumentalities and its officials and agents in any litigation, proceeding, investigation or matter requiring the services of lawyers. When authorized by the President or head of the office concerned, it shall also represent government owned or controlled corporations. The Office of the Solicitor General shall constitute the law office of the Government and, as such, shall discharge duties requiring the services of lawyers. It shall have the following specific powers and functions: (1) Represent the Government in the Supreme Court and the Court of Appeals in all criminal proceedings; represent the Government and its officers in the Supreme Court, Court of Appeals, and all other courts or tribunals in all civil actions and special proceedings in which the Government or any officer thereof in his official capacity is a party. The import of the above-quoted provision of the Administrative Code of 1987 is to impose upon the Office of the Solicitor General the duty to appear as counsel for the Government, its agencies and instrumentalites and its officials and agents before the Supreme Court, the Court of Appeals, and all other courts and tribunals in any litigation, proceeding, investigation or matter requiring the services of a lawyer. Its mandatory character was emphasized by this Court in the case of Gonzales v. Chavez,30 thus: It is patent that the intent of the lawmaker was to give the designated official, the Solicitor General, in this case, the unequivocal mandate to appear for the government in legal proceedings. Spread out in the laws creating the office is the discernible intent which may be gathered from the term "shall", which is invariably employed, from Act No. 136 (1901) to the more recent Executive Order No. 292 (1987). xxx xxx xxx

The decision of this Court as early as 1910 with respect to the duties of the Attorney-General well applies to the Solicitor General under the facts of the present case. The Court then declared: In this jurisdiction, it is the duty of the Attorney General to perform the duties imposed upon him by law and he shall prosecute all causes, civil and criminal, to which the Government of the Philippine Islands, or any officer thereof, in his official capacity, is a party xxx. xxx xxx xxx

The Court is firmly convinced that considering the spirit and the letter of the law, there can be no other logical interpretation of Sec. 35 of the Administrative Code than that it is, indeed, mandatory upon the OSG to "represent the Government of the Philippines, its agencies and

instrumentalities and its officials and agents in any litigation, proceeding, investigation or matter requiring the services of a lawyer." As an exception to the general rule, the Solicitor General, in providing legal representation for the government, is empowered under Section 35(8), Chapter 12, Title III, Book IV of the Administrative Code of 1987 to "deputize legal officers of government departments, bureaus, agencies and offices to assist the Solicitor General and appear or represent the Government in cases involving their respective offices, brought before the courts and exercise supervision and control over such legal officers with respect to such cases." Petitioner claims that its counsel of record, Atty. Rogelio P. Madriaga, was deputized by the Solicitor General to represent the CDA in the instant petition. To prove its claim, the petitioner attached to its Reply to the Comment dated January 31, 2000, a photocopy of the alleged deputation letter31 from the Office of the Solicitor General signed by Hon. Carlos N. Ortega, Assistant Solicitor General, addressed to CDA Chairman Jose C. Medina, Jr. A close scrutiny of the alleged deputation letter from the Office of the Solicitor General shows, however, that said counsel for the petitioner was only "authorized to appear as counsel in all civil cases in the lower courts (RTCs and MTCs) wherein the CDA is a party-litigant". Likewise, the same letter appears to be dated April 8, 1999 while the Petition for Review on Certiorari filed by the petitioner was dated February 26, 1999. Clearly then, when the petition was filed with this Court on March 3, 1999, Atty. Rogelio P. Madriaga was not yet deputized by the Office of the Solicitor General to represent the CDA. Even on the assumption that the alleged letter from the Office of the Solicitor General was intended to validate or ratify the authority of counsel to represent the petitioner in this case, the same contains certain conditions, one of which is that petitioner "shall submit to the Solicitor General, for review, approval and signature, all important pleadings and motions, including motions to withdraw complaints or appeals, as well as compromise agreements." Significantly, one of the major pleadings filed subsequently by the petitioner in this case namely, the Reply to the Respondents Comment on the Petition dated January 31, 2000, does not have any indication that the same was previously submitted to the Office of the Solicitor General for review or approval, much less bear the requisite signature of the Solicitor General as required in the alleged deputation letter. Nonetheless, in view of the novelty of the main issue raised in this petition concerning the nature and scope of jurisdiction of the CDA in the settlement of cooperative disputes as well as the long standing legal battle involving the management of DARBCI between two (2) opposing factions that inevitably threatens the very existence of one of the countrys major cooperatives, this Court has decided to act on and determine the merits of the instant petition. Section 3 of R.A. No. 6939 enumerates the powers, functions and responsibilities of the CDA, thus: SEC. 3. Powers, Functions and Responsibilities.The Authority shall have the following powers, functions and responsibilities: (a) Formulate, adopt and implement integrated and comprehensive plans and programs on cooperative development consistent with the national policy on cooperatives and the overall socio-economic development plan of the Government;

(b) Develop and conduct management and training programs upon request of cooperatives that will provide members of cooperatives with the entrepreneurial capabilities, managerial expertise, and technical skills required for the efficient operation of their cooperatives and inculcate in them the true spirit of cooperativism and provide, when necessary, technical and professional assistance to ensure the viability and growth of cooperatives with special concern for agrarian reform, fishery and economically depressed sectors; (c) Support the voluntary organization and consensual development of activities that promote cooperative movements and provide assistance to wards upgrading managerial and technical expertise upon request of the cooperatives concerned; (d) Coordinate the effects of the local government units and the private sector in the promotion, organization, and development of cooperatives; (e) Register all cooperatives and their federations and unions, including their division, merger, consolidation, dissolution or liquidation. It shall also register the transfer of all or substantially all of their assets and liabilities and such other matters as may be required by the Authority; (f) Require all cooperatives, their federations and unions to submit their annual financial statements, duly audited by certified public accountants, and general information sheets; (g) Order the cancellation after due notice and hearing of the cooperatives certificate of registration for non-compliance with administrative requirements and in cases of voluntary dissolution; (h) Assist cooperatives in arranging for financial and other forms of assistance under such terms and conditions as are calculated to strengthen their viability and autonomy; (i) Establish extension offices as may be necessary and financially viable to implement this Act. Initially, there shall be extension offices in the Cities of Dagupan, Manila, Naga, Iloilo, Cebu, Cagayan de Oro and Davao; (j) Impose and collect reasonable fees and charges in connection with the registration of cooperatives; (k) Administer all grants and donations coursed through the Government for cooperative development, without prejudice to the right of cooperatives to directly receive and administer such grants and donations upon agreement with the grantors and donors thereof; (l) Formulate and adopt continuing policy initiatives consultation with the cooperative sector through public hearing; (m) Adopt rules and regulations for the conduct of its internal operations; (n) Submit an annual report to the President and Congress on the state of the cooperative movement;

(o) Exercise such other functions as may be necessary to implement the provisions of the cooperative laws and, in the performance thereof, the Authority may summarily punish for direct contempt any person guilty of misconduct in the presence of the Authority which seriously interrupts any hearing or inquiry with a fine of not more than five hundred pesos (P500.00) or imprisonment of not more than ten (10) days, or both. Acts constituting indirect contempt as defined under Rule 71 of the Rules of Court shall be punished in accordance with the said Rule. It is a fundamental rule in statutory construction that when the law speaks in clear and categorical language, there is no room for interpretation, vacillation or equivocation there is only room for application.32 It can be gleaned from the above-quoted provision of R.A. No. 6939 that the authority of the CDA is to discharge purely administrative functions which consist of policy-making, registration, fiscal and technical assistance to cooperatives and implementation of cooperative laws. Nowhere in the said law can it be found any express grant to the CDA of authority to adjudicate cooperative disputes. At most, Section 8 of the same law provides that "upon request of either or both parties, the Authority shall mediate and conciliate disputes with a cooperative or between cooperatives" however, with a restriction "that if no mediation or conciliation succeeds within three (3) months from request thereof, a certificate of non-resolution shall be issued by the commission prior to the filing of appropriate action before the proper courts". Being an administrative agency, the CDA has only such powers as are expressly granted to it by law and those which are necessarily implied in the exercise thereof.33 Petitioner CDA, however, insists that its authority to conduct hearings or inquiries and the express grant to it of contempt powers under Section 3, paragraphs (g) and (o) of R. A. No. 6939, respectively, necessarily vests upon the CDA quasi-judicial authority to adjudicate cooperative disputes. A review of the records of the deliberations by both chambers of Congress prior to the enactment of R.A. No. 6939 provides a definitive answer that the CDA is not vested with quasi-judicial authority to adjudicate cooperative disputes. During the house deliberations on the then House Bill No. 10787, the following exchange transpired: MR. AQUINO (A.). The response of the sponsor is not quite clear to this humble Representation. Let me just point out other provisions under this particular section, which to the mind of this humble Representation appear to provide this proposed Authority with certain quasi-judicial functions. Would I be correct in this interpretation of paragraphs (f) and (g) under this section which state that among the powers of the Authority are: To administer the dissolution, disposal of assets and settlement of liabilities of any cooperative that has been found to be inoperable, inactive or defunct. To make appropriate action on cooperatives found to be in violation of any provision It appears to the mind of this humble Representation that the proposed Authority may be called upon to adjudicate in these particular instances. Is it therefore vested with quasi-judicial authority? MR. ROMUALDO. No, Mr. Speaker. We have to resort to the courts, for instance, for the dissolution of cooperatives. The Authority only administers once a cooperative is dissolved. It is also the CDA which initiates actions against any group of persons that may use the name of a

cooperative to its advantage, that is, if the word "cooperative" is merely used by it in order to advance its intentions, Mr. Speaker. MR. AQUINO (A.). So, is the sponsor telling us that the adjudication will have to be left to the courts of law? MR. ROMUALDO. To the courts, Mr. Speaker.34 xxx xxx xxx

MR. ADASA. One final question, Mr. Speaker. On page 4, line 33, it seems that one of the functions given to the Cooperative Development Authority is to recommend the filing of legal charges against any officer or member of a cooperative accused of violating the provisions of this Act, existing laws and cooperative by-laws and other rules and regulations set forth by the government. Would this not conflict with the function of the prosecuting fiscal? MR. ROMUALDO. No, it will be the provincial fiscal that will file the case. The Authority only recommends the filing of legal charges, that is, of course, after preliminary investigation conducted by the provincial fiscal or the prosecuting arm of the government. MR. ADASA. Does the Gentleman mean to say that the Cooperative Development Authority can take the place of the private complainant or the persons who are the offended party if the latter would not pursue the case? MR. ROMULDO. Yes, Mr. Speaker. The Authority can initiate even the filing of the charges as embraced and defined on line 33 of page 4 of this proposed bill.35 xxx xxx xxx

MR. CHIONGBIAN. xxx. Under the same section, line 28, subparagraph (g) says that the Authority can take appropriate action on cooperatives found to be violating any provision of this Act, existing laws and cooperative by-laws, and other rules and regulations set forth by the government by way of withdrawal of Authority assistance, suspension of operation or cancellation of accreditation. My question is: If a cooperative, whose officers are liable for wrongdoing, is found violating any of the provisions of this Act, are we going to sacrifice the existence of that cooperative just because some of the officers have taken advantage of their positions and misused some of the funds? It would be very unfair for the Authority to withdraw its assistance at the expense of the majority. It is not clear as to what the liabilities of the members of these cooperatives are. xxx xxx xxx

MR. ROMUALDO. Mr. Speaker, before this action may be taken by the Authority, there will be due process. However, this provision is applicable in cases where the cooperative as a whole violated the provisions of this Act as well as existing laws. In this case, punitive actions may be taken against the cooperative as a body.

With respect to the officials, if they themselves should be punished, then Section (h) of this chapter provides that legal charges shall be filed by the Cooperative Development Authority.36 In like manner, the deliberations on Senate Bill No. 485, which was the counterpart of House Bill No. 10787, yield the same legislative intent not to grant quasi-judicial authority to the CDA as shown by the following discussions during the period of amendments: SEN. ALVAREZ. On page 3, between lines 5 and 6, if I may, insert the following as one of the powers: CONDUCT INQUIRIES, STUDIES, HEARINGS AND INVESTIGATIONS AND ISSUE ORDERS, DECISIONS AND CIRCULARS AS MAY BE NECESSARY TO IMPLEMENT ALL LAWS, RULES AND REGULATIONS RELATING TO COOPERATIVES. THE AGENCY MAY SUMMARILY PUNISH FOR CONTEMPT BY A FINE OF NOT MORE THAN TWO HUNDRED PESOS (P200.00) OR IMPRISONMENT NOT EXCEEDING TEN (10) DAYS, OR BOTH, ANY PERSONS GUILTY OF SUCH MISCONDUCT IN THE PRESENCE OF THE AGENCY WHICH SERIOUSLY INTERRUPTS ANY HEARING OR INVESTIGATION, INCLUDING WILFULL FAILURE OR REFUSAL, WITHOUT JUST CAUSE, COMPLY WITH A SUMMONS, SUBPOENA, SUBPOENA DUCES TECUM, DECISION OR ORDER, RULE OR REGULATION, OR, BEING PRESENT AT A HEARING OR INVESTIGATION, REFUSES TO BE SWORN IN AS A WITNESS OR TO ANSWER QUESTIONS OR TO FURNISH INFORMATION REQUIRED BY THE AGENCY. THE SHERIFF AND/OR POLICE AGENCIES OF THE PLACE WHERE THE HEARING OR INVESTIGATION IS CONDUCTED SHALL, UPON REQUEST OF THE AGENCY, ASSIST IT TO ENFORCE THE PENALTY. THE PRESIDENT. That is quite a long amendment. Does the Gentleman have a written copy of his amendment, so that the Members will have an opportunity to go over it and examine its implications? Anyway, why do we not hold in abeyance the proposed amendment? Do we have that? xxx xxx xxx

SEN. ALVAREZ. Mr. President, this is almost an inherent power of a registering body. With the tremendous responsibility that we have assigned to the Authority or the agencyfor it to be able to function and discharge its mandateit will need this authority.1wphi1.nt SEN. AQUINO. Yes, Mr. President, conceptually, we do not like the agency to have quasi-judicial powers. And, we are afraid that if we empower the agency to conduct inquiries, studies, hearings and investigations, it might interfere in the autonomous character of cooperatives. So, I am sorry Mr. President, we dont accept the amendment.37 The decision to withhold quasi-judicial powers from the CDA is in accordance with the policy of the government granting autonomy to cooperatives. It was noted that in the past 75 years cooperativism failed to flourish in the Philippines. Of the 23,000 cooperatives organized under P.D. No. 175, only 10 to 15 percent remained operational while the rest became dormant. The dismal failure of cooperativism in the Philippines was attributed mainly to the stifling attitude of the government toward cooperatives. While the government wished to help, it invariably wanted to control.38 Also, in its anxious efforts to push cooperativism, it smothered cooperatives with so much help that they failed to develop self-

reliance. As one cooperative expert put it, "The strong embrace of government ends with a kiss of death for cooperatives."39 But then, acknowledging the role of cooperatives as instruments of national development, the framers of the 1987 Constitution directed Congress under Article XII, Section 15 thereof to create a centralized agency that shall promote the viability and growth of cooperatives. Pursuant to this constitutional mandate, the Congress approved on March 10, 1990 Republic Act No. 6939 which is the organic law creating the Cooperative Development Authority. Apparently cognizant of the errors in the past, Congress declared in an unequivocal language that the state shall "maintain the policy of noninterference in the management and operation of cooperatives."40 After ascertaining the clear legislative intent underlying R.A. No. 6939, effect should be given to it by the judiciary.41 Consequently, we hold and rule that the CDA is devoid of any quasi-judicial authority to adjudicate intra-cooperative disputes and more particularly disputes as regards the election of the members of the Board of Directors and officers of cooperatives. The authority to conduct hearings or inquiries and the power to hold any person in contempt may be exercised by the CDA only in the performance of its administrative functions under R.A. No. 6939. The petitioners reliance on the case of CANORECO is misplaced for the reason that the central issue raised therein was whether or not the Office of the President has the authority to supplant or reverse the resolution of an administrative agency, specifically the CDA, that had long became final and on which issue we ruled in the negative. In fact, this Court declared in the said case that the CDA has no jurisdiction to adjudicate intra-cooperative disputes thus:42 xxx xxx xxx

Obviously there was a clear case of intra-cooperative dispute. Article 121 of the Cooperative Code is explicit on how the dispute should be resolved; thus: ART. 121. Settlement of Disputes. Disputes among members, officers, directors, and committee members, and intra-cooperative disputes shall, as far as practicable, be settled amicably in accordance with the conciliation or mediation mechanisms embodied in the by-laws of the cooperative, and in applicable laws. Should such a conciliation/mediation proceeding fail, the matter shall be settled in a court of competent jurisdiction. Complementing this Article is Section 8 of R.A. No. 6939, which provides: SEC. 8. Mediation and Conciliation. Upon request of either or both or both parties, the [CDA] shall mediate and conciliate disputes with the cooperative or between cooperatives: Provided, That if no mediation or conciliation succeeds within three (3) months from request thereof, a certificate of non-resolution shall be issued by the request thereof, a certificate of nonresolution shall be issued by the commission prior to the filing of appropriate action before the proper courts.

Likewise, we do not find any merit in the allegation of forum-shopping against the private respondents. Forum-shopping exists where the elements of litis pendentia are present or where a final judgment in one case will amount to res judicata in the other.43 The requisites for the existence of litis pendentia, in turn, are (1) identity of parties or at least such representing the same interest in both actions; (2) identity of rights asserted as prayed for, the relief being founded on the same facts; and (3) the identity in both cases is such that the judgment that may be rendered in the pending case, regardless of which party is successful, would amount to res judicata to the other case.44 While there may be identity of parties between SP Civil Case No. 25 filed with the RTC of Polomolok, South Cotabato, Branch 39, and CA-G.R. SP No. 47933 before the Court of Appeals, 13th Division, the two (2) other requisites are not present. The Court of Appeals correctly observed that the case filed with the RTC of Polomolok, South Cotabato was a petition for certiorari assailing the orders of therein respondent CDA for having been allegedly issued without or in excess of jurisdiction. On the other hand, the case filed with the Court of Appeals was a petition for prohibition seeking to restrain therein respondent from further proceeding with the hearing of the case. Besides, the filing of the petition for prohibition with the Court of Appeals was necessary after the CDA issued the Order dated May 26, 1998 which directed the holding of a special general assembly for purposes of conducting elections of officers and members of the board of DARBCI after the Court of Appeals, 12th Division, in CA-G.R. SP No. 47318 issued a temporary restraining order enjoining the proceedings in Special Civil Case No. 25 and for the parties therein to maintain the status quo. Under the circumstances, the private respondents could not seek immediate relief before the trial court and hence, they had to seek recourse before the Court of Appeals via a petition for prohibition with a prayer for preliminary injunction to forestall the impending damage and injury to them in view of the order issued by the petitioner on May 26, 1998. The filing of Special Civil Case No. 28 with the RTC of Polomolok, South Cotabato does not also constitute forum-shopping on the part of the private respondents. Therein petitioner Investa, which claims to have a subsisting lease agreement and a joint venture with DARBCI, is an entity whose juridical personality is separate and distinct from that of private respondent cooperative or herein individual private respondents and that they have totally different interests in the subject matter of the case. Moreover, it was incorrect for the petitioner to charge the private respondents with forum-shopping partly based on its erroneous claim that DARBCI and Investa were both represented by the same counsel. A charge of forum-shopping may not be anchored simply on the fact that the counsel for different petitioners in two (2) cases is one and the same.45 Besides, a review of the records of this case shows that the counsel of record of Investa in Special Civil Case No. 28 is a certain Atty. Ignacio D. Debuque, Jr. and not the same counsel representing the private respondents.46 Anent the petition-in-intervention, the intervenors aver that the Resolution of the Court of Appeals dated February 9, 1999 in CA-G.R. SP No. 47933 denying the motion for reconsideration of herein petitioner CDA also invalidated the election of officers and members of the board of directors of DARBCI held during the special general assembly on July 12, 1998, thus adversely affecting their substantial rights including their right to due process. They claim that the object of the order issued by the appellate court on June 10, 1998 was to restrain the holding of the general assembly of DARBCI as directed in the order of CDA Administrator Arcadio Lozada dated May 26, 1998. In compliance with the said order of the Court of Appeals, no general assembly was held on June 14, 1998. However, due to the grave concern over the alleged tyrannical administration and unmitigated abuses of herein private respondents, the majority of the members of DARBCI, on their own initiative and in the exercise of their inherent right to assembly under the law and the 1987 Constitution, convened a general assembly on July 12, 1998. On the said occasion, the majority of the members of DARBCI unanimously elected herein

petitioners-in-intervention as new officers and members of the board of directors of DARBCI,47 and thereby resulting in the removal of the private respondents from their positions in DARBCI. Petitioners-in-intervention pointed out that the validity of the general assembly held on July 12, 1998 was never raised as an issue in CA-G.R. SP No. 47933. The petitioners-in-intervention were not even ordered by the Court of Appeals to file their comment on the "Twin Motions For Contempt of Court and to Nullify Proceedings" filed by the private respondents on July 29, 1998. As earlier noted, the Court of Appeals issued a temporary restraining order48 in CA-G.R. SP No. 47933 on June 10, 1998, the pertinent portion of which reads: Meanwhile, respondents or any and all persons acting in their behalf and stead are temporarily restrained from proceeding with the election of officers and members of the board of directors of the Dolefil Agrarian Reform Beneficiaries Cooperative, Inc. scheduled on June 14, 1998 and or any other date thereafter. It was also noted that as a consequence of the temporary restraining order issued by the appellate court, the general assembly and the election of officers and members of the board of directors of DARBCI, pursuant to the resolution issued by CDA Administrator Arcadio S. Lozada, did not take place as scheduled on June 14, 1998. However, on July 12, 1998 the majority of the members of DARBCI, at their own initiative, held a general assembly and elected a new set of officers and members of the board of directors of the cooperative which resulted in the ouster of the private respondents from their posts in the said cooperative. The incident on July 12, 1998 prompted herein private respondents to file their Twin Motions for Contempt of Court and to Nullify Proceedings on July 26, 1998. The twin motions prayed, among others, that after due notice and hearing, certain personalities, including the petitioners-in-intervention, be cited in indirect contempt for their participation in the subject incident and for the nullification of the election on July 12, 1998 for being illegal, contrary to the by-laws of the cooperative and in defiance of the injunctive processes of the appellate court. On September 9, 1998, the Court of Appeals, 13th Division, rendered a Decision in CA-G.R. SP No. 47933 which declared the CDA devoid of quasi-judicial jurisdiction to settle the dispute in CDA-CO Case No. 97011 without however, taking any action on the "Twin Motions for Contempt of Court and to Nullify Proceedings" filed by the private respondents. As it turned out, it was only in its Resolution dated February 9, 1999 denying petitioners motion for reconsideration of the Decision in CA-G.R. SP No. 47933 that the Court of Appeals, 13th Division, acted on the "Twin Motions for Contempt of Court and to Nullify Proceedings" by declaring as null and void the election of the petitioners-in-intervention on July 12, 1998 as officers and members of the board of directors of DARBCI. We find, however, that the action taken by the Court of Appeals, 13th Division, on the "Twin Motions for Contempt of Court and to Nullify Proceedings" insofar as it nullified the election of the officers and members of the Board of Directors of DARBCI, violated the constitutional right of the petitioners-inintervention to due process. The requirement of due process is satisfied if the following conditions are present, namely: (1) there must be a court or tribunal clothed with judicial power to hear and determine the matter before it; (2) jurisdiction must be lawfully acquired over the person of the defendant or over the property which is the subject of the proceedings; (3) the defendant must be given an opportunity to

be heard; and (4) judgment must be rendered upon lawful hearing.49The appellate court should have first required the petitioners-in-intervention to file their comment or opposition to the said "Twin Motions For Contempt Of Court And to Nullify Proceedings" which also refers to the elections held during the general assembly on July 12, 1998. It was precipitate for the appellate court to render judgment against the petitioners-in-intervention in its Resolution dated February 9, 1999 without due notice and opportunity to be heard. Besides, the validity of the general assembly held on July 12, 1998 was not raised as an issue in CA-G.R. SP No. 47933.1wphi1.nt WHEREFORE, judgment is hereby rendered as follows: 1. The petition for review on certiorari is hereby DENIED for lack of merit. The orders, resolutions, memoranda and any other acts rendered by petitioner Cooperative Development Authority in CDA-CO Case No. 97-011 are hereby declared null and void ab initio for lack of quasi-judicial authority of petitioner to adjudicate intra-cooperative disputes; and the petitioner is hereby ordered to cease and desist from taking any further proceedings therein; and 2. In the interest of justice, the dispositive portion of the Resolution of the Court of Appeals, dated February 9, 1999, in CA-G.R. SP No. 47933, insofar as it nullified the elections of the members of the Board of Directors and Officers of DARBCI held during the general assembly of the DARBCI members on July 12, 1998, is hereby SET ASIDE. No pronouncement as to costs. SO ORDERED. Bellosillo, Mendoza, Quisumbing, and Corona, JJ., concur.

Republic of the Philippines SUPREME COURT Manila EN BANC

G.R. No. 74851 December 9, 1999 RIZAL COMMERCIAL BANKING CORPORATION, petitioner, vs. INTERMEDIATE APPELLATE COURT AND BF HOMES, INC., respondents. RESOLUTION

MELO, J.: On September 14, 1992, the Court passed upon the case at bar and rendered its decision, dismissing the petition of Rizal Commercial Banking Corporation (RCBC), thereby affirming the decision of the Court of Appeals which canceled the transfer certificate of title issued in favor of RCBC, and reinstating that of respondent BF Homes. This will now resolve petitioner's motion for reconsideration which, although filed in 1992 was not deemed submitted for resolution until in late 1998. The delay was occasioned by exchange of pleadings, the submission of supplemental papers, withdrawal and change of lawyers, not to speak of the case having been passed from one departing to another retiring justice. It was not until May 3, 1999, when the case was re-raffled to herein ponente, but the record was given to him only sometime in the late October 1999. By way of review, the pertinent facts as stated in our decision are reproduced herein, to wit: On September 28, 1984, BF Homes filed a "Petition for Rehabilitation and for Declaration of Suspension of Payments" (SEC Case No. 002693) with the Securities and Exchange Commission (SEC). One of the creditors listed in its inventory of creditors and liabilities was RCBC. On October 26, 1984, RCBC requested the Provincial Sheriff of Rizal to extra-judicially foreclose its real estate mortgage on some properties of BF Homes. A notice of extrajudicial foreclosure sale was issued by the Sheriff on October 29, 1984, scheduled on November 29, 1984, copies furnished both BF Homes (mortgagor) and RCBC (mortgagee).

On motion of BF Homes, the SEC issued on November 28, 1984 in SEC Case No. 002693 a temporary restraining order (TRO), effective for 20 days, enjoining RCBC and the sheriff from proceeding with the public auction sale. The sale was rescheduled to January 29, 1985. On January 25, 1985, the SEC ordered the issuance of a writ of preliminary injunction upon petitioner's filing of a bond. However, petitioner did not file a bond until January 29, 1985, the very day of the auction sale, so no writ of preliminary injunction was issued by the SEC. Presumably, unaware of the filing of the bond, the sheriffs proceeded with the public auction sale on January 29, 1985, in which RCBC was the highest bidder for the properties auctioned. On February 5, 1985, BF Homes filed in the SEC a consolidated motion to annul the auction sale and to cite RCBC and the sheriff for contempt. RCBC opposed the motion Because of the proceedings in the SEC, the sheriff withheld the delivery to RCBC of a certificate of sale covering the auctioned properties. On February 13, 1985, the SEC in Case No. 002693 belatedly issued a writ of preliminary injunction stopping the auction sale which had been conducted by the sheriff two weeks earlier. On March 13, 1985, despite SEC Case No. 002693, RCBC filed with the Regional Trial Court, Br. 140, Rizal (CC 10042) an action for mandamus against the provincial sheriff of Rizal and his deputy to compel them to execute in its favor a certificate of sale of the auctioned properties. In answer, the sheriffs alleged that they proceeded with the auction sale on January 29, 1985 because no writ of preliminary injunction had been issued by SEC as of that date, but they informed the SEC that they would suspend the issuance of a certificate of sale to RCBC. On March 18, 1985, the SEC appointed a Management Committee for BF Homes. On RCBC's motion in the mandamus case, the trial court issued on May 8, 1985 a judgment on the pleadings, the dispositive portion of which states: WHEREFORE, petitioner's Motion for Judgment on the pleadings is granted and judgment is hereby rendered ordering respondents to execute and deliver to petitioner the Certificate of the Auction Sale of January 29, 1985, involving the properties sold therein, more particularly those described in Annex "C" of their Answer." (p. 87, Rollo.) On June 4, 1985, B.F. Homes filed an original complaint with the IAC pursuant to Section 9 of B.P. 129 praying for the annulment of the judgment, premised on the following:

. . .: (1) even before RCBC asked the sheriff to extra-judicially foreclose its mortgage on petitioner's properties, the SEC had already assumed exclusive jurisdiction over those assets, and (2) that there was extrinsic fraud in procuring the judgment because the petitioner was not impleaded as a party in the mandamus case, respondent court did not acquire jurisdiction over it, and it was deprived of its right to be heard. (CA Decision, p. 88, Rollo). On April 8, 1986, the IAC rendered a decision, setting aside the decision of the trial court, dismissing the mandamus case and suspending issuance to RCBC of new land titles, "until the resolution of case by SEC in Case No. 002693," disposing as follows: WHEREFORE, the judgment dated May 8, 1985 in Civil Case No. 10042 is hereby annulled and set aside and the case is hereby dismissed. In view of the admission of respondent Rizal Commercial Banking Corporation that the sheriff's certificate of sale has been registered on BF Homes' TCT's . . . (here the TCTs were enumerated) the Register of Deeds for Pasay City is hereby ordered to suspend the issuance to the mortgageepurchaser, Rizal Commercial Banking Corporation, of the owner's copies of the new land titles replacing them until the matter shall have been resolved by the Securities and Exchange Commission in SEC Case No. 002693. (p. 257260, Ro llo; also pp. 832834, 213 SCRA 830 [1992]; Emphas is in the original .) On June 18, 1986, RCBC appealed the decision of the then Intermediate Appellate Court (now, back to its old revered name, the Court of Appeals) to this Court, arguing that: 1. Petitioner did not commit extrinsic fraud in excluding private respondent as party defendant in Special Civil Case No. 10042 as private respondent was not indispensable party thereto, its participation not being necessary for the full resolution of the issues raised in said case. 2. SEC Case No. 2693 cannot be invoked to suspend Special Civil Case No. 10042, and for that matter, the extra-judicial foreclosure of the real

estate mortgage in petitioner's favor, as these do not constitute actions against private respondent contemplated under Section 6(c) of Presidential Decree No. 902-A. 3. Even assuming arguendo that the extra-judicial sale constitute an action that may be suspended under Section 6(c) of Presidential Decree No. 902-A, the basis for the suspension thereof did not exist so as to adversely affect the validity and regularity thereof. 4. The Regional Trial court had jurisdiction to take cognizable of Special Civil Case No. 10042. 5. The Regional Trial court had jurisdiction over Special Civil Case No. 10042. (p. 5, Rollo. ) On November 12, 1986, the Court gave due course to the petition. During the pendency of the case, RCBC brought to the attention of the Court an order issued by the SEC on October 16, 1986 in Case No. 002693, denying the consolidated Motion to Annul the Auction Sale and to cite RCBC and the Sheriff for Contempt, and ruling as follows: WHEREFORE, the petitioner's "Consolidated Motion to Cite Sheriff and Rizal Commercial Banking Corporation for Contempt and to Annul Proceedings and Sale," dated February 5, 1985, should be as is, hereby DENIED. While we cannot direct the Register of Deeds to allow the consolidation of the titles subject of the Omnibus Motion dated September 18, 1986 filed by the Rizal Commercial Banking Corporation, and therefore, denies said Motion, neither can this Commission restrain the said bank and the Register of Deeds from effecting the said consolidation. SO ORDERED. ( p . 1 4 3 , R

o l l o . ) By virtue of the aforesaid order, the Register of Deeds of Pasay City effected the transfer of title over subject pieces of property to petitioner RCBC, and the issuance of new titles in its name. Thereafter, RCBC presented a motion for the dismissal of the petition, theorizing that the issuance of said new transfer certificates of title in its name rendered the petition moot and academic. In the decision sought to be reconsidered, a greatly divided Court (Justices Gutierrez, Nocon, and Melo concurred with the ponente, Justice Medialdea; Chief Justice Narvasa, Justices Bidin, Regalado, and Bellosillo concurred only in the result; while Justice Feliciano dissented and was joined by Justice Padilla, then Justice, now Chief Justice Davide, and Justice Romero; Justices Grio-Aquino and Campos took no part) denied petitioner's motion to dismiss, finding basis for nullifying and setting aside the TCTs in the name of RCBC. Ruling on the merits, the Court upheld the decision of the Intermediate Appellate Court which dismissed the mandamus case filed by RCBC and suspended the issuance of new titles to RCBC. Setting aside RCBC's acquisition of title and nullifying the TCTs issued to it, the Court held that: . . . whenever a distressed corporation asks the SEC for rehabilitation and suspension of payments, preferred creditors may no longer assert such preference, but . . . stand on equal footing with other creditors. Foreclosure shall be disallowed so as not to prejudice other creditors, or cause discrimination among them. If foreclosure is undertaken despite the fact that a petition, for rehabilitation has been filed, the certificate of sale shall not be delivered pending rehabilitation. Likewise, if this has also been done, no transfer of title shall be effected also, within the period of rehabilitation. The rationale behind PD 902-A, as amended to effect a feasible and viable rehabilitation. This cannot be achieved if one creditor is preferred over the others. In this connection, the prohibition against foreclosure attaches as soon as a petition for rehabilitation is filed. Were it otherwise, what is to prevent the petitioner from delaying the creation of a Management Committee and in the meantime dissipate all its assets. The sooner the SEC takes over and imposes a freeze on all the assets, the better for all concerned. (pp. 265266, Ro llo; also p. 838, 213 SCRA

830 [1992].) Then Justice Feliciano (joined by three other Justices), dissented and voted to grant the petition. He opined that the SEC acted prematurely and without jurisdiction or legal authority in enjoining RCBC and the sheriff from proceeding with the public auction sale. The dissent maintain that Section 6 (c) of Presidential Decree 902-A is clear and unequivocal that, claims against the corporations, partnerships, or associations shall be suspended only upon the appointment of a management committee, rehabilitation receiver, board or body. Thus, in the case under consideration, only upon the appointment of the Management Committee for BF Homes on March 18, 1985, should the suspension of actions for claims against BF Homes have taken effect and not earlier. In support of its motion for reconsideration, RCBC contends: The restraining order and the writ of preliminary injunction issued by the Securities and Exchange Commission enjoining the foreclosure sale of the properties of respondent BF Homes were issued without or in excess of its jurisdiction because it was violative of the clear provision of Presidential Decree No. 902-A, and are therefore null and void; and Petitioner, being a mortgage creditor, is entitled to rely solely on its security and to refrain from joining the unsecured creditors in SEC Case No. 002693, the petition for rehabilitation filed by private respondent. We find the motion for reconsideration meritorious. The issue of whether or not preferred creditors of distressed corporations stand on equal footing with all other creditors gains relevance and materiality only upon the appointment of a management committee, rehabilitation receiver, board, or body. Insofar as petitioner RCBC is concerned, the provisions of Presidential Decree No. 902-A are not yet applicable and it may still be allowed to assert its preferred status because it foreclosed on the mortgage prior to the appointment of the management committee on March 18, 1985. The Court, therefore, grants the motion for reconsideration on this score. The law on the matter, Paragraph (c), Section 6 of Presidential Decree 902-A, provides: Sec. 6. In order to effectively exercise such jurisdiction, the Commission shall posses the following powers: c) To appoint one or more receivers of the property, real and personal, which is the subject of the action pending before the Commission in accordance with the pertinent provisions of the Rules of Court in such other cases whenever necessary to preserve the rights of the parties litigants to and/or protect the interest of the investing public and creditors; Provided, however, that the Commission may, in appropriate cases, appoint a rehabilitation receiver of corporations, partnerships or other associations not supervised or regulated by other government agencies who shall have, in addition to the powers of a regular receiver under the provisions of the Rules of Court, such functions and powers as are provided for in the succeeding paragraph (d) hereof: Provided,

finally, That upon appointment of a management committee rehabilitation receiver, board or body, pursuant to this Decree, all actions for claims against corporations, partnerships or associations under management or receivership, pending before any court, tribunal, board or body shall be suspended accordingly. (As amended by PDs No. 1673, 1758 and by PD No. 1799. Emphasis supplied.) It is thus adequately clear that suspension of claims against a corporation under rehabilitation is counted or figured up only upon the appointment of a management committee or a rehabilitation receiver. The holding that suspension of actions for claims against a corporation under rehabilitation takes effect as soon as the application or a petition for rehabilitation is filed with the SEC may, to some, be more logical and wise but unfortunately, such is incongruent with the clear language of the law. To insist on such ruling, no matter how practical and noble, would be to encroach upon legislative prerogative to define the wisdom of the law plainly judicial legislation. It bears stressing that the first and fundamental duty of the Court is to apply the law. When the law is clear and free from any doubt or ambiguity, there is no room for construction or interpretation. As has been our consistent ruling, where the law speaks in clear and categorical language, there is no occasion for interpretation; there is only room for application (Cebu Portland Cement Co. vs. Municipality of Naga, 24 SCRA-708 [1968]). Where the law is clear and unambiguous, it must be taken to mean exactly what it says and the court has no choice but to see to it that its mandate is obeyed (Chartered Bank Employees Association vs. Ople, 138 SCRA 273 [1985]; Luzon Surety Co., Inc. vs. De Garcia, 30 SCRA 111 [1969]; Quijano vs. Development Bank of the Philippines, 35 SCRA 270 [1970]). Only when the law is ambiguous or of doubtful meaning may the court interpret or construe its true intent. Ambiguity is a condition of admitting two or more meanings, of being understood in more than one way, or of referring to two or more things at the same time. A statute is ambiguous if it is admissible of two or more possible meanings, in which case, the Court is called upon to exercise one of its judicial functions, which is to interpret the law according to its true intent. Furthermore, as relevantly pointed out in the dissenting opinion, a petition for rehabilitation does nor always result in the appointment of a receiver or the creation of a management committee. The SEC has to initially determine whether such appointment is appropriate and necessary under the circumstances. Under Paragraph (d), Section 6 of Presidential Decree No. 902-A, certain situations must be shown to exist before a management committee may be created or appointed, such as; 1. when there is imminent danger of dissipation, loss, wastage or destruction of assets or other properties; or 2. when there is paralization of business operations of such corporations or entities which may be prejudicial to the interest of minority stockholders, parties-litigants or to the general public. On the other hand, receivers may be appointed whenever:

1. necessary in order to preserve the rights of the parties-litigants; and/or 2. protect the interest of the investing public and creditors. (Section 6 (c), P.D. 902-A.) These situations are rather serious in nature, requiring the appointment of a management committee or a receiver to preserve the existing assets and property of the corporation in order to protect the interests of its investors and creditors. Thus, in such situations, suspension of actions for claims against a corporation as provided in Paragraph (c) of Section 6, of Presidential Decree No. 902-A is necessary, and here we borrow the words of the late Justice Medialdea, "so as not to render the SEC management Committee irrelevant and inutile and to give it unhampered "rescue efforts" over the distressed firm" (Rollo, p. 265). Otherwise, when such circumstances are not obtaining or when the SEC finds no such imminent danger of losing the corporate assets, a management committee or rehabilitation receiver need not be appointed and suspension of actions for claims may not be ordered by the SEC. When the SEC does not deem it necessary to appoint a receiver or to create a management committee, it may be assumed, that there are sufficient assets to sustain the rehabilitation plan and, that the creditors and investors are amply protected. Petitioner additionally argues in its motion for reconsideration that, being a mortgage creditor, it is entitled to rely on its security and that it need not join the unsecured creditors in filing their claims before the SEC appointed receiver. To support its position, petitioner cites the Court's ruling in the case of Philippine Commercial International Bank vs. Court of Appeals, (172 SCRA 436 [1989]) that an order of suspension of payments as well as actions for claims applies only to claims of unsecured creditors and cannot extend to creditors holding a mortgage, pledge, or any lien on the property. Ordinarily, the Court would refrain from discussing additional matters such as that presented in RCBC's second ground, and would rather limit itself only to the relevant issues by which the controversy may be settled with finality. In view, however, of the significance of such issue, and the conflicting decisions of this Court on the matter, coupled with the fact that our decision of September 14, 1992, if not clarified, might mislead the Bench and the Bar, the Court resolved to discuss further. It may be recalled that in the herein en banc majority opinion (pp. 256-275, Rollo, also published as RCBC vs. IAC, 213 SCRA 830 [1992]), we held that: . . . whenever a distressed corporation asks the SEC for rehabilitation and suspension of payments, preferred creditors may no longer assert such preference, but . . . stand on equal footing with other creditors. Foreclosure shall be disallowed so as not to prejudice other creditors, or cause discrimination among them. If foreclosure is undertaken despite the fact that a petition for rehabilitation has been filed, the certificate of sale shall not be delivered pending rehabilitation. Likewise, if this has also, been done, no transfer of title shall be effected also, within the period of rehabilitation. The rationale

behind PD 902-A, as amended, is to effect a feasible and viable rehabilitation. This cannot be achieved if one creditor is preferred over the others. In this connection, the prohibition against foreclosure attaches as soon as a petition for rehabilitation is filed. Were it otherwise, what is to prevent the petitioner from delaying the creation of a Management Committee and in the meantime dissipate all its assets. The sooner the SEC takes over and imposes a freeze on all the assets, the better for all concerned. ( p p . 2 6 5 2 6 6 , R o l l o ; a l s o p . 8 3 8 , 2 1 3 S

C R A 8 3 0 [ 1 9 9 2 ] E m p h a s i s s u p p l i e d ) The foregoing majority opinion relied upon BF Homes, Inc. vs. Court of Appeals (190 SCRA 262 [1990] per Cruz, J.: First Division) where it held that "when a corporation threatened by bankruptcy is taken over by a receiver, all the creditors should stand on an equal footing. Not anyone of them should be given preference by paying one or some of them ahead of the others. This is precisely the reason for the suspension of all pending claims against the corporation under receivership. Instead of creditors vexing the courts with suits against the distressed firm, they are directed to file their claims with the receiver who is a duly appointed officer of the SEC(pp. 269-270; emphasis in the original). This ruling is a reiteration of Alemar's Sibal & Sons, Inc. vs. Hon. Jesus M. Elbinias (pp. 99-100; 186 SCRA 94 [1991] per Fernan, C.J.: Third Division). Taking the lead from Alemar's Sibal & Sons, the Court also applied this same ruling in Araneta vs. Court of Appeals (211 SCRA 390 [1992] per Nocon, J.: Second Division).

All the foregoing cases departed from the ruling of the Court in the much earlier case of PCIB vs. Court of Appeals(172 SCRA 436 [1989] per Medialdea, J.: First Division) where the Court categorically ruled that: SEC's order for suspension of payments of Philfinance as well as for all actions of claims against Philfinance could only be applied to claims of unsecured creditors. Such order can not extend to creditors holding a mortgage, pledge or any lien on the property unless they give up the property, security or lien in favor of all the creditors of Philfinance . . . (p. 440. Emphasis supplied) Thus, in BPI vs. Court of Appeals (229 SCRA 223 [1994] per Bellosilio, J.: First Division) the Court explicitly stared that ". . . the doctrine in the PCIB Case has since been abrogated. In Alemar's Sibal & Sons v. Elbinias, BF Homes, Inc. v. Court of Appeals, Araneta v. Court of Appeals and RCBC v. Court of Appeals, we already ruled that whenever a distressed corporation asks SEC for rehabilitation and suspension of payments, preferred creditorsmay no longer assert such preference, but shall stand on equal footing with other creditors . . ." (pp. 227-228). It may be stressed, however, that of all the cases cited by Justice Bellosillo in BPI, which abandoned the Court's ruling in PCIB, only the present case satisfies the constitutional requirement that "no doctrine or principle of law laid down by the court in a decision rendered en banc or in division may be modified or reversed except by the court sitting en banc" (Sec 4, Article VIII, 1987 Constitution). The rest were division decisions. It behooves the Court, therefore, to settle the issue in this present resolution once and for all, and for the guidance of the Bench and the Bar, the following rules of thumb shall are laid down: 1. All claims against corporations, partnerships, or associations that are pending before any court, tribunal, or board, without distinction as to whether or not a creditor is secured or unsecured, shall be suspended effective upon the appointment of a management committee, rehabilitation receiver, board, or body in accordance which the provisions of Presidential Decree No. 902-A. 2. Secured creditors retain their preference over unsecured creditors, but enforcement of such preference is equally suspended upon the appointment of a management committee, rehabilitation receiver, board, or body. In the event that the assets of the corporation, partnership, or association are finally liquidated, however, secured and preferred credits under the applicable provisions of the Civil Code will definitely have preference over unsecured ones. In other words, once a management committee, rehabilitation receiver, board or body is appointed pursuant to P.D. 902-A, all actions for claims against a distressed corporation pending before any court, tribunal, board or body shall be suspended accordingly. This suspension shall not prejudice or render ineffective the status of a secured creditor as compared totally unsecured creditor P.D. 902-A does not state anything to this effect. What it merely provides is that all actions for claims against the corporation, partnership or association shall be suspended. This should give the receiver a chance to rehabilitate the corporation if there should still be a possibility of

doing so. (This will be in consonance with Alemar's BF Homes, Araneta, and RCBC insofar as enforcing liens by preferred creditors are concerned.) However, in the event that rehabilitation is no longer feasible and claims against the distressed corporation would eventually have to be settled, the secured creditors shall enjoy preference over the unsecured creditors (still maintaining PCIB ruling), subject only to the provisions of the Civil Code on Concurrence and Preferences of Credit (our ruling in State Investment House, Inc. vs. Court of Appeals, 277 SCRA 209 [1997]). The Majority ruling in our 1992 decision that preferred creditors of distressed corporations shall, in a way, stand an equal footing with all other creditors, must be read and understood in the light of the foregoing rulings. All claims of both a secured or unsecured creditors, without distinction on this score, are suspended once a management committee is appointed. Secured creditors, in the meantime, shall not be allowed to assert such preference before the Securities and Exchange Commission. It may be stressed, however, that this shall only take effect upon the appointment of a management committee, rehabilitation receiver, board, or body, as opined in the dissent. In fine, the Court grants the motion for reconsideration for the cogent reason that suspension of actions for claims commences only from the time a management committee or receiver is appointed by the SEC. Petitioner RCBC, therefore, could have rightfully, as it did, move for the extrajudicial foreclosure of its mortgage on October 26, 1984 because a management committee was not appointed by the SEC until March 18, 1985. WHEREFORE, petitioner's motion for reconsideration is hereby GRANTED. The decision, dated September 14, 1992 is vacated, the decision of Intermediate Appellate Court in AC-G.R. No. SP-06313 REVERSED and SET ASIDE, and the judgment of the Regional Trial Court National Capital Judicial Region, Branch 140, in Civil Case No. 10042 REINSTATED. SO ORDERED. Davide, Jr., C.J., Bellosillo, Puno, Vitug, Kapunan, Mendoza, Quisumbing, Purisima, Pardo, Buena, Gonzaga-Reyes, Ynares-Santiago and De Leon, Jr., JJ., concur. Panganiban, J., please see separate (concuring) opinion. Separate Opinions PANGANIBAN, J., separate opinion; The issue as to when suspension of payments takes effect upon a petition of a distressed corporation is a contentious one. The ponencia in the case under consideration, Rizal Commercial Banking Corporation (RCBC) v. Immediate Appellate Court, 1 has ruled that "the prohibition against foreclosure attaches as soon as a petition for rehabilitation is filed. Were it otherwise, what is to prevent the [creditors] from delaying the creation of the Management Committee and in the meantime [seizing] all [the debtor's] assets. The sooner the SEC takes over and imposes a freeze on all the assets, the better for all concerned." 2

Suspension Takes Effect Only Upon Constitution of Management Committee A Dissent debunking the quoted ruling was written by the esteemed Justice Florentino P. Feliciano as follows: I understand the above quoted portion of the ponencia to be saying that suspension of actions for claims against the corporation which applies for rehabilitation takes effect as soon as the application or a petition for rehabilitation is filed with the SEC. I would point out with respect, that the actual language used in Section 6 (c) and (d) of P.D. No. 902-A, as amended, does not support the position taken in the ponencia. The pertinent provision of Section 6 (c) is as follows: Sec. 6. In order to effectively exercise such jurisdiction, the commission shall possess the following powers: xxx xxx xxx c) To appoint one or more receivers of the property, real and personal, which is the subject of the action pending before the Commission in accordance with the pertinent provisions of the Rules of Court in such cases whenever necessary to preserve the rights of the parties-litigants to and/or protect the interest of the investing public and creditors; Provided, however, That the Commission may, in appropriate cases, appoint a rehabilitation receiver of corporations, partnerships or other associations not supervised or regulated by other government agencies who shall have, in addition to the powers of a regular receiver under the provisions of the Rules of Court, such functions and powers as are provided for in the succeeding paragraph (d) hereof; Provided, further, that the Commission may appoint a rehabilitation receiver of corporations, partnerships or other associations supervised or regulated by other government agencies, such as banks and insurance companies, upon request of the government agency concerned; Provided, finally, that upon appointment of a management committee, rehabilitation receiver, board or body pursuant to this Decree, all actions for claims against corporations, partnerships or associations under management or receivership pending before any court, tribunal, board or body shall be suspended accordingly. It should be pointed out that the appointment of a management committee or a rehabilitation receiver is not ordinarily effected immediately upon the filing of an application for suspension of payments and for rehabilitation. The reason is that the SEC must first determine whether the jurisdictional requirements for the appointment of a management committee are present. There are at least two (2) sets of requirements: (a) the requirements in respect of the petition for declaration of suspension of payments;

and (b) the requirements concerning the petition for creation and appointment of a management committee. xxx xxx xxx As already noted, SEC took just about six (6) months after the filing of the petition of B.F. Homes to decide to create and appoint a management committee. Only upon such appointment of the management committee did the proviso in Section 6 (c) which decrees suspension of actions for claims against the petitioning corporation take effect. It is only then that the SEC determines that the circumstances warranting, under the statute, the appointment of a management committee do exist, i.e., that there is "imminent danger of dissipation, loss, wastage or destruction of assets or paralization of business operations which [would] be prejudicial to the interest of minority stockholders, parties litigant or the general public." Only when such circumstances have been determined to exist is there justification for suspending actions for claims against the corporation so placed under SEC management. The authority of the SEC to suspend or freeze the judicial enforcement of claims against a corporation is an extraordinary authority, most especially where credits secured by specific liens on property, like real estate mortgages, are involved; such authority cannot lightly be assumed to have arisen simply because the corporation on its own initiative goes to the SEC and there seeks shelter from its lawful creditors. 3 The foregoing Dissent found jural expression in a later case, Barotac Sugar Mills, Inc. v. Court of Appeals, 4penned by then Associate, now Chief Justice Hilario G. Davide Jr.: The appointment of a management committee or rehabilitation receiver may only take place after the filing with the SEC of an appropriate petition for suspension of payments. This is clear from a reading of sub-paragraph (d) of Section 5 and sub-paragraph (d) of Section 6 P.D. No. 902-A, as amended by P.D. Nos. 1653 and 1758 . . . . xxx xxx xxx The conclusion then is inevitable that pursuant to the underscored proviso in subparagraph (c) of the aforementioned Section 6, taken together with sub-paragraph (d) of Section 6, a court action isipso jure suspended only upon the appointment of a management committee or a rehabilitation receiver. As a member of the then First Division which promulgated Barotac, I concurred in the aforequoted ruling. To repeat, Barotac and Justice Feliciano's Dissent are clearly supported by Section 6, paragraph (c) of presidential Decree 902-A. It is basic in statutory construction that in the absence of doubt or ambiguity, there is no necessity for construction or interpretation of the law, as in this case. Where the law speaks in clear and categorical language, there is no room for interpretation. There is only room for application. 5 SEC Retains Power to

Issue Injunctive Relief Left unsaid in RCBC, Barotac and even in the present Resolution, however, is the existence of two competing economic interests in the determination of the issue. On the one hand, there is the creditor; on the other, the corporation and its stockholders. Under the RCBC ponencia of Justice Medialdea, an unscrupulous company can seek shelter in a petition for suspension of payments in order to evade or at least unfairly delay the payment of just obligations. This course of action would clearly prejudice its creditors, who would be barred from judicially enforcing their rightful claims, simply because a petition for suspension has been filed. Indeed, to paraphrase Justice Medialdea, what is to prevent the debtor from delaying the creation of the management committee, in the meantime dissipating all its assets? On the other hand, if the bare ruling of Barotac were to be applied strictly, a distressed company would be exposed to grave danger that may precipitate its untimely demise, the very evil sought to be avoided by a suspension of payments. Notably, the appointment of a management committee takes place only after several months, even years, from submission of the petition. The appointment entails hearings and the submission of documentary evidence to determine whether the requisites for suspension of payments have been met. By the time a management committee or receiver is appointed, creditors, upon knowledge of the application for suspension of payments, will have feasted on the distressed corporation. Money lenders will demand satisfaction of their credits by precipitately foreclosing on their mortgages. Particularly vulnerable are liquid assets which can be attached and rendered useless. Payrolls will be frozen and suppliers will lose faith in the company. Verily, the distressed company's credit standing would be zero-rated. Indeed, after the vultures' feast, the remaining corporate carcass can no longer be resurrected into a viable enterprise. When this happens, there will be no more company left to rehabilitate, thus rendering ineffectual the very law which was enacted precisely to effect such rehabilitation. In the business world, bridge liquidity and credit are sometimes even more important than profits. The prudent way to avoid the disastrous consequence of a strict application of said law is to call attention to the power of the SEC to issue injunctive reliefs. Herein movant (RCBC) raises the issue of the validity of the restraining order and the writ of preliminary injunction later issued by the Securities and Exchange Commission (SEC) prior to the appointment of the management committee. It contends that the issuance of the injunctive reliefs effectively results, the suspension of actions against the petitioning distressed corporation. Movant is thus saying that the SEC has no jurisdiction to issue injunctive reliefs in favor of the distressed corporation petitioning for suspension of payments prior to the appointment of a management committee I disagree. Sec. 5(d) of PD 902-A clearly enumerates the cases over which the SEC has original and exclusive jurisdiction to hear and decide: Sec. 5. In addition to the regulatory and adjudicative functions of the Securities and Exchange Commission over corporations, partnerships and other forms of associations registered with it as expressly granted under existing laws and decrees, it shall have original and exclusive jurisdiction to hear and decide cases involving:

xxx xxx xxx d) Petitions of corporations, partnerships or associations to be declared in the state of suspension of payments in cases where the corporation, partnership or association possesses sufficient property to cover all its debts but foresees the impossibility of meeting them when they respectively fall due or in cases where the corporation, partnership or association has no sufficient assets to cover its liabilities, but is under the management of a Rehabilitation Receiver or Management Committee created pursuant to this Decree. Sec. 6 (a) of said Decree goes on further to say: Sec. 6. In order to effectively exercise such jurisdiction, the Commission shall possess the following powers: a) To issue preliminary or permanent injunctions, whether prohibitory or mandatory, in all cases in which it has jurisdiction, and in which cases the pertinent provisions of the Rules of Court shall apply; xxx xxx xxx Thus, it is obvious from the above-quoted provisions that the SEC acquires jurisdiction over the distressed companies upon the submission of a petition for suspension of payments. And when the legal requirements are complied with, it has the authority to issue injunctive reliefs for the effective exercise of its jurisdiction. I would like to emphasize that this power to issue restraining orders or preliminary injunctions, upon the prayer of the petitioning corporation, may be the only buffer that could save a company from being feasted on by any vulture-creditor prior to the appointment of a management committee or a rehabilitation receiver. WHEREFORE, I vote to GRANT the Motion for Reconsideration, subject to the caveat that the Securities and Exchange Commission, in meritorious cases, may issue injunctive reliefs. Footnotes 1 213 SCRA 830, September 14, 1992. (Concurring unqualifiedly with Justice Medialdea's ponencia were Gutierrez Jr., Nocon, and Melo, JJ.; concurring in the result were Narvasa, CJ, Bidin, Regalado and Bellosillo, JJ.; dissenting were Feliciano, Padilla, Davide Jr. and Romero, JJ.; Cruz, Grio-Aquino and Campos, JJ., did not take part in the voting.) 2 Ibid., p. 838. 3 Ibid., pp. 839-844. 4 275 SCRA 497, July 15, 1997. (With the concurrence of Narvasa, CJ; Melo, Francisco and Panganiban, JJ., of the Court's First Division).

5 Cebu Portland Cement Co. v. Municipality of Naga, 24 SCRA 708, August 22, 1968, per Fernando, J.

THIRD DIVISION

[A.M. No. RTJ-00-1553. November 20, 2000]

Attys. ALFREDO BENJAMIN S. CAGUIOA and RICARDO MA. P.G. ONGKIKO, complainants, vs. Judge CELSO D. LAVIA, Regional Trial Court of Pasig City, Branch 71, respondent. DECISION PANGANIBAN, J.: A judge is presumed to act with regularity and good faith in the performance of judicial functions. However, a blatant disregard of the clear and unmistakable provisions of a statute, as well as Supreme Court circulars enjoining strict compliance therewith, upends this presumption and subjects the magistrate to administrative sanctions. In the present case, the Writ issued by respondent judge impeded the implementation of a government infrastructure project and thus constituted a palpable transgression of Presidential Decree (PD) 1818 and Supreme Court Circular Nos. 13-93, 68-94 and 07-99.

The Case and the Facts

In a sworn letter-complaint dated July 28, 1997,[1] filed by Attys. Alfredo Benjamin S. Caguioa and Ricardo Ma. P.G. Ongkiko of Sycip Salazar Hernandez and Gatmaitan Law Office, Judge Celso D. Lavia of the Regional Trial Court of Pasig City (Branch 71) was accused of grave misconduct for maliciously issuing several void Orders relative to Civil Case No. 66060. Complying with the directive of Court Administrator Alfredo L. Benipayo, respondent filed his Comment[2] by way of a 2nd Indorsement dated October 17, 1997, denying liability for the acts complained of. In a Report and Recommendation dated March 6, 2000,[3] the court administrator related the factual antecedents that gave rise to herein administrative Complaint, which we quote: "Complainants, who are partners in the law firm of Sycip Salazar Hernandez and Gatmaitan, and counsel for Tokyu Construction Co., Ltd. ("Tokyu" for brevity), a Japanese corporation that is the lead member of a Consortium currently under contract with the Philippine Government for the construction of the new NAIA Terminal 2 building, accuses respondent of alleged malicious issuance of several void orders in connection with Civil Case No. 66060 x x x." xxx xxx xxx

"Sometime in the middle of 1994, the government, through the Manila International Airport Authority ("MIAA") invited prospective contractors to bid for the construction of a new Ninoy Aquino International Airport ("NAIA") terminal building. Four (4) private construction companies, namely Tokyu, BF Corporation ("BF"), Oreta & Co. ("Oreta") and Mitsubishi Corporation ("Mitsubishi"), decided to form a

Consortium called the MTOB Consortium (the "Consortium") for purposes of submitting a bid for the Project. To this end, the four companies executed on May 31, 1995 a Consortium Agreement (the "Consortium Agreement") which was only couched in general terms, the specific items of work to be done by each of the Consortium members, as well as its pricing, were not yet agreed upon because the Consortium had yet to win the bid. "The Consortium won the bid and after the contract was awarded by MIAA to the Consortium, BF and Tokyu met several times to agree on the specific portions of work to be allotted to BF. However, BF and Tokyu were unable to agree not only on the specific items of work that would be allotted to BF, but also on BF's fees especially with respect to the subcontract portion. "On January 10, 1997, BF filed a complaint against Tokyu, docketed as Civil case No. 66060, for alleged breach of the terms of the Consortium agreement and prayed, in the alternative, for specific performance, rescission and/or damages, and for the issuance of a temporary restraining order and/or writ of preliminary injunction. "Pursuant to existing Supreme Court Circulars, the Executive Judge of the Regional Trial Court of Pasig City issued on that same day a 72-hour Temporary Restraining Order ("TRO'), and ordered the immediate raffling of BF's complaint. The case was raffled on January 13, 1997 to Branch 71 of the Regional Trial Court of Pasig City, presided by respondent judge who, in turn, directed the parties to appear in Court on January 14 and 15, 1997, to determine whether there existed sufficient grounds to extend to twenty days the 72-hour TRO previously issued. xxx xxx xxx

"On the very same day the BF complaint was raffled to the sala of respondent judge, Tokyu filed an Urgent Verified Opposition, bringing to the attention of respondent Judge the existence of P.D. 1818 as well as Supreme Court Circulars Nos. 13-93 and 68-94 which prohibit the issuance by any court of any injunction that would delay the progress of a government infrastructure project. In spite of that cautionary notice in the Verified Opposition, the respondent judge on January 21, 1997, issued an order extending the TRO without even mentioning P.D. No. 1818 or the Supreme Court Circulars Nos. 13-93 and 68-94. (Emphasis supplied) "On January 24, 1997, Tokyu filed with the Court of Appeals a Petition for Certiorari and Prohibition with Very Urgent Prayer for Issuance of a Writ of Preliminary Injunction and/or Temporary Restraining Order and Disqualification docketed as C.A. G.R. SP No. 43133, praying for the issuance ex-parte of a restraining order commanding respondent Judge not to act, or in any manner, execute the January 21, 1997 Order, and, after appropriate proceedings, of a writ of preliminary injunction restraining respondent Judge from taking any further action on the case. xxx xxx xxx

"On February 5, 1997, the Court of Appeals issued a TRO enjoining respondent Judge from enforcing the January 21 Order, and from proceeding with the hearing of BF's application for a writ of preliminary injunction, until further orders from the appellate court.

"On May 15, 1997, the Court of Appeals rendered a decision in C.A.-G.R. Sp. No. 43133 allowing respondent Judge to proceed with the suspended hearing on the application for a writ of preliminary injunction in Civil Case No. 66060, to 'be limited only and narrowed down to the issue of whether, PENDENTE LITE, Tokyu x x x should recognize the status of BF as a partner or member of the Consortium x x x and, in the affirmative, the amount that BF should be entitled to share out of the payments made from time to time by MIAA to the Consortium...' "On June 11, 1997, Tokyu moved for the reconsideration of the May 15, 1997 CA decision, praying that respondent judge be also prohibited from conducting hearing even on the delimited issue. In the meantime, the respondent judge had set for June 13, 1997 a hearing for the cross-examination of a Japanese national as Tokyu's witness, and despite Tokyu's plea to re-set the hearing due to the very limited time available for Tokyu to plane in its witness from Japan, the respondent Judge on June 13, 1997 denied Tokyu's motion to postpone and ordered the affidavit-testimony of the aforementioned witness stricken off the records. Tokyu filed a motion for reconsideration of that June 13, 1997 order striking out the testimony of its Japanese witness which respondent denied in his Order of June 30, 1997 x x x. "On July 18, 1997, at 4:00P.M., while Tokyu was still preparing its Memorandum which was due for filing on July 31, 1997 yet, Tokyu or its counsel received a Writ of Preliminary Prohibitory and Mandatory Injunction enjoining Tokyu from performing, and to perform, certain specific acts in relation to the project subject matter of Civil Case No. 66060. And at 4:32 P.M. of the same day, Tokyu received through mails the respondent Judge's order dated July 8, 1997 granting the application for preliminary prohibition and mandatory injunction. July 18,1997 was a Friday, and Tokyu laments that that was chosen as the day to serve it a copy of the writ in order to prevent it (Tokyu) from seeking immediate redress from the appellate courts (the following two days being a Saturday and a Sunday), what with only three (3) days given it to comply with the writ." As can be gleaned from the foregoing recital of facts, complainants assailed several Orders of respondent. These were dated January 21, 1997; June 13, 1997; June 30, 1997; and July 8, 1997. Also questioned was the injunctive Writ dated July 18, 1997. In this regard, it is significant to note that, except for the January 21, 1997 Order, the abovementioned Orders and Writ issued by respondent were likewise questioned in a special civil action for certiorari filed with the Court of Appeals (CA), in which it was docketed as CA-GR SP. No. 44729. In a Decision dated October 20, 1997,[4] the CA Seventh Division ruled that "the order dated July 8, 1997 granting the writ of preliminary prohibitory mandatory injunction, and the writ of preliminary mandatory injunction dated July 18, 1997 issued as a consequence of said order, both in Civil Case No. 66060 of the Regional Trial Court, Pasig City, Branch 71 were issued with grave abuse of discretion amounting to lack or excess of jurisdiction."[5] However, it did not make a finding on the June 13 and the June 30, 1997 Orders. The CA Decision was subsequently challenged in a Petition for Review, docketed as GR No. 131155, which is still pending before this Court.[6] Complainants and respondent judge, in their respective Manifestations dated June 13, 2000[7] and June 7, 2000[8], submitted the case for resolution on the basis of the pleadings and records already filed.

Recommendation of the Court Administrator

According to the court administrator, respondents January 21, 1997 Order completely ignored the prohibition on the issuance of injunctive writs as contained in PD 1818 and Supreme Court Circular Nos. 13-93 and 68-94. The said Order had extended the initial 72-hour Temporary Restraining Order (TRO) to the full 20-day period despite complainants' verified opposition. Hence, he recommended that respondent be fined in the amount of five thousand pesos (P5,000). Further, he submitted that the other Orders which are subjects of GR No. 131155 should be dealt with after said appeal shall have been resolved with finality.

The Court's Ruling

We agree with the Office of the Court Administrator that respondent should be fined in the amount of five thousand pesos for the issuance of the Order dated January 21, 1997. However, in regard to the other Orders of respondent judge, the Complaint should be dismissed for prematurity.

Preliminary Matters

The validity and the propriety of the issuance of the Orders dated June 13, June 30 and July 8, 1997, as well as the injunctive Writ dated July 18, 1997, should be threshed out first in the above-mentioned case and considered as judicial issues arising from the exercise of respondents judicial discretion. To rule on these matters in the instant administrative case would be premature. The established doctrine and policy is that disciplinary proceedings and criminal actions against judges do not complement, supplement, or substitute judicial remedies, whether ordinary or extraordinary. An inquiry into their civil, criminal and administrative liability may be made only after the available remedies have been exhausted and decided with finality.[9] Moreover, a party litigant abuses the processes of the court by prematurely resorting to administrative disciplinary action or criminal prosecution of a judge even before the judicial remedies are settled. Such prematurity occurs when the correctness of the latters orders -- upon which the viability of the recourse depends is still pending appellate review.[10] On the other hand, we deem it appropriate to rule on the administrative liability of respondent with regard to his January 21, 1997 Order. The appellate court, in its May 15, 1997 Decision, allowed him to continue with the injunction proceedings. Notably, it did not make any conclusive or categorical ruling on the legality of the Order vis-a-vis PD 1818. It merely declared: As previously stated MIAA is no longer a party in the RTC x x x. As f[a]r [as] MIAA is concerned, it is thus academic for this Court to have to refer to PD 1818/Supreme Court Circular No. 68-94 which prohibit courts from issuing restraining orders or preliminary injunction in cases involving infrastructure and natural resources development projects of, and public utilities operated by, the Government.[11] Clearly, the foregoing pronouncement demonstrates that the CA skirted the issue of a possible violation of PD 1818 with respect to Tokyu, for it confined its discussion to the effects of the statute on the Manila International Airport Authority (MIAA). It should be stressed, though, that the statute

prohibits the issuance of injunctive writs not only against government entities, but against any person or entity involved in the execution, implementation and operation of government infrastructure projects. Furthermore, the CA could not have annulled or invalidated the said Order even if it had wanted to, because by the time it promulgated its Decision, the expiration of the twenty-day TRO had already rendered the issue moot and academic. Hence, it is incorrect to argue that the CA effectively affirmed respondents questioned January 21, 1997 Order. Thus, although the said Order may no longer be reversed or its effects abjured, respondents administrative liability in relation thereto may nonetheless subsist.

Liability of Respondent Judge

The administrative liability of respondent judge proceeds from his failure to observe a simple, comprehensible and unequivocal mandate of PD 1818 prohibiting the issuance of injunctive writs relative to government infrastructure projects. The pertinent provision of the law clearly and categorically states: "SECTION 1. No court in the Philippines shall have jurisdiction to issue any restraining order, preliminary injunction, or preliminary mandatory injunction in any case, dispute or controversy involving an infrastructure project, or a mining, fishery, forest or other natural resource development project of the government, or any public utility operated by the government, including among others public utilities for the transport of the goods or commodities, stevedoring and arrastre contracts, to prohibit any person or persons, entity or government official from proceeding with, or continuing the execution or implementation of any such project, or the operation of such public utility, or pursuing any lawful activity necessary for such execution, implementation or operation." Indeed, in Supreme Court Circulars 13-93[12] and 68-94,[13] judges were reminded to comply strictly with the foregoing provision. In Garcia v. Burgos,[14] the prohibitory character of PD 1818 was reiterated by the Court in these words: Section 1 of PD 1818 distinctly provides that *n+o court in the Philippines shall have jurisdiction to issue any restraining order, preliminary injunction, or preliminary mandatory injunction in any case, dispute, or controversy involving an infrastructure project x x x of the government, x x x to prohibit any person or persons, entity or government official from proceeding with, or continuing the execution or implementation of any such project, x x x or pursuing any lawful activity necessary for such execution , implementation or operation. At the risk of being repetitious, we stress that the foregoing statutory provision expressly deprives courts of jurisdiction to issue injunctive writs against the implementation or execution of an infrastructure project.(Emphasis supplied) Consequently, Chief Justice Hilario G. Davide Jr. issued Administrative Circular No. 07-99 dated June 25, 1999, reiterating earlier circulars and reminding all judges of lower courts to exercise utmost caution, prudence and judiciousness in the issuance of TROs and writs of preliminary injunction. While this Circular does not directly cover respondents issuance of the January 21, 1997 Order, we cite it to show the strict and mandatory nature of Section 1, PD 1818.

In his Comment, respondent maintains that the issuance of the assailed Order was done in good faith and in accordance with the rules. He further argues that there was no violation of PD 1818 because the Order did not at all "prohibit any person or persons, entity or government official from proceeding with, or continuing the implementation of the government project." However, the directives of the previously issued 72-hour TRO, which was extended to 20 days by the January 21, 1997 Order, contradict respondents assertion. The relevant portions of the TRO are hereunder reproduced as follows: "In the meantime and still pursuant to the above-cited Administrative Circular No. 20-95, a temporary order is hereby issued for a period of 72 hours from date hereof enjoining defendant TOKYU CORPORATION, its assigns, agents and any and all persons claiming rights under it from 1. further receiving any amount from MIAA as compensation vis-a-vis TOKYU's illegal and unjust execution of BF's portion of the work in the Project; 2. from engaging the services of other subcontractors to do BF's portion of the Project; 3. from further acting as lead member of the consortium in the execution of the Project; 4. from further compelling BF to reduce its prices; and MANILA INTERNATIONAL AIRPORT AUTHORITY from directly paying TOKYU the collectible compensation vis-a-vis TOKYU's illegal and unjust execution of BF's portion of the work in the Project. SO ORDERED."[15] Indubitably, the foregoing belies respondents seemingly obscure, if not incoherent, explanation that PD 1818 did not apply to his January 21, 1997 Order. Moreover, complainants verified Opposition bringing to his attention PD 1818, as well as related Supreme Court Circulars, should have cautioned him from arbitrarily issuing the ostensibly unlawful Order. PD 1818 prohibits a court from issuing an injunctive writ to stop any person, entity or government official from proceeding with or continuing the execution or implementation of an infrastructure project.[16] Section 1of the statute clearly states that an injunction may not be issued "to prohibit any person or persons, entity or government official" from undertaking the protected activities enumerated therein. The prohibition applies whether the person or entity being enjoined is public or private in nature. Indeed, the law seeks to prevent the delay of essential government projects.[17] By enjoining (1) Tokyu from further receiving any amount from MIAA as compensation for the execution of a portion of the work in the project and from engaging the services of subcontractors to do portions of the same; and (2) MIAA from directly paying Tokyu the collectible compensation for the execution of a portion of the project, the TRO effectively interfered with, impeded and obstructed an entity directly and primarily responsible for the execution of a government infrastructure project. The tenor of the directives in the TRO and the nature of the prohibitions stated therein more than adequately evince a net effect of delaying and disrupting the operation and the execution of a government infrastructure project involving a vital industry imbued with public interest. Patently

absurd and incongruous to the manifest intent of the law is the contention that the provisions of PD 1818 do not restrain the issuance of the questioned TRO or of the Order extending it. When a statute is clear and explicit, there is no need for any extended court ratiocination on the law.[18] There is no room for interpretation, vacillation or equivocation; there is room only for application.[19] It appears that respondent is either feigning a misunderstanding of the law or openly manifesting a contumacious indifference thereto. In any case, his disregard of the clear mandate of PD 1818, as well as of the Supreme Court Circulars enjoining strict compliance therewith, constitutes grave misconduct and conduct prejudicial to the proper administration of justice. His claim that the said statute is inapplicable to his January 21, 1997 Order extending the dubious TRO is but a contrived subterfuge to evade administrative liability. In resolving matters in litigation, judges should endeavor assiduously to ascertain the facts and the applicable laws.[20] Moreover, they should exhibit more than just a cursory acquaintance with statutes and procedural rules. Also, they are expected to keep abreast of and be conversant with the rules and the circulars which the Supreme Court has adopted and which affect the disposition of cases before them.[21] Although judges have in their favor the presumption of regularity and good faith in the performance of their official functions, a blatant disregard of the clear and unmistakable terms of the law obviates this presumption and renders them susceptible to administrative sanctions. WHEREFORE, respondent is found GUILTY of grave misconduct and conduct prejudicial to the administration of justice for his violation of PD 1818 and Supreme Court Administrative Circular Nos. 1393 and 68-94, and is hereby FINED in the amount of five thousand pesos (P5,000). He is WARNED that a repetition of the same or a similar offense will be dealt with more severely. The Complaint in regard to his other Orders is hereby DISMISSED for being premature. SO ORDERED. Melo, (Chairman), and Vitug, JJ., concur. Gonzaga-Reyes, J., no part.

Republic of the Philippines SUPREME COURT Manila SECOND DIVISION G.R. No. L-25316 February 28, 1979 KAPISANAN NG MGA MANGGAGAWA SA MANILA RAILROAD COMPANY CREDIT UNION, INC., petitioner-appellant, vs. MANILA RAILROAD COMPANY, respondent appellee. Gregorio E. Fajardo for appellant. Gregorio Baroque for appellee.

FERNANDO, J.: In this mandamus petition dismissed by the lower court, petitioner-appellant would seek a reversal of such decision relying on what it considered to be a right granted by Section 62 of the Republic Act No. 2023, more specifically the first two paragraphs thereof: "... (1) A member of a cooperative may, notwithstanding the provisions of existing laws, execute an agreement in favor of the co-operative authorizing his employer to deduct from the salary or wages payable to him by the employer such amount as may be specified in the agreement and to pay the amount so deducted to the co-operative in satisfaction of any debt or other demand owing from the member to the co-operative. (2) Upon the exemption of such agreement the employer shall if so required by the co-operative by a request in writing and so long as such debt or other demand or any part of it remains unpaid, make the claimant and remit forth with the amount so deducted to the co-operative." 1 To show that such is futile, the appealed decision, as quoted in the brief for petitioner-appellant, stated the following: "Then petitioner contends that under the above provisions of Rep. Act 2023, the loans granted by credit union to its members enjoy first priority in the payroll collection from the respondent's employees' wages and salaries. As can be clearly seen, there is nothing in the provision of Rep. Act 2023 hereinabove quoted which provides that obligation of laborers and employees payable to credit unions shall enjoy first priority in the deduction from the employees' wages and salaries. The only effect of Rep. Act 2023 is to compel the employer to deduct from the salaries or wages payable to members of the employees' cooperative credit unions the employees' debts to the union and to pay the same to the credit union. In other words, if Rep. Act 2023 had been enacted, the employer could not be compelled to act as the collecting agent of the employees' credit union for the employees' debt to his credit union but to contend that the debt of a member of the employees cooperative credit union as having first priority in the matter of deduction, is to write something into the law which does not appear. In other words, the mandatory character of Rep. Act 2023 is only to compel the employer to make the deduction of the employees' debt from the latter's salary and turn this over to the employees' credit union but this mandatory character does not convert the credit union's credit into a first priority credit. If the

legislative intent in enacting pars. 1 and 2 of Sec. 62 of Rep. Act 2023 were to give first priority in the matter of payments to the obligations of employees in favor of their credit unions, then, the law would have so expressly declared. Thus, the express provisions of the New Civil Code, Arts. 2241, 2242 and 2244 show the legislative intent on preference of credits. 2 Such an interpretation, as could be expected, found favor with the respondent-appellee, which, in its brief, succinctly pointed out "that there is nothing in said provision from which it could be implied that it gives top priority to obligations of the nature of that payable to petitioner, and that, therefore, respondent company, in issuing the documents known as Exhibit "3" and Exhibit "P", which establish the order of priority of payment out of the salaries of the employees of respondent-appellee, did not violate the above-quoted Section 62 of Republic Act 2023. In promulgating Exhibit "3", [and] Exhibit "P" respondent, in effect, implemented the said provision of law. 3 This petition being one for mandamus and the provision of law relied upon being clear on its face, it would appear that no favorable action can be taken on this appeal. We affirm. 1. The applicable provision of Republic Act No. 2023 quoted earlier, speaks for itself. There is no ambiguity. As thus worded, it was so applied. Petitioner-appellant cannot therefore raise any valid objection. For the lower court to view it otherwise would have been to alter the law. That cannot be done by the judiciary. That is a function that properly appertains to the legislative branch. As was pointed out in Gonzaga v. Court of Appeals: 4 "It has been repeated time and time again that where the statutory norm speaks unequivocally, there is nothing for the courts to do except to apply it. The law, leaving no doubt as to the scope of its operation, must be obeyed. Our decisions have consistently born to that effect. 5. 2. Clearly, then, mandamus does not lie. Petitioner-appellant was unable to show a clear legal right. The very law on which he would base his action fails to supply any basis for this petition. A more rigorous analysis would have prevented him from instituting a a suit of this character. In J.R.S. Business Corporation v. Montesa, 6 this Court held. "Man-damus is the proper remedy if it could be shown that there was neglect on the part of a tribunal in the performance of an act, which specifically the law enjoins as a duty or an unlawful exclusion of a party from the use and enjoyment of a right to which he is entitled. 7 The opinion continued in this wise:"According to former Chief Justice Moran," only specific legal rights may be enforced by mandamus if they are clear and certain. If the legal rights are of the petitioner are not well defined, clear, and certain, the petition must be dismissed. In support of the above view, Viuda e Hijos de Crispulo Zamora v. Wright was cited. As was there categorically stated: "This court has held that it is fundamental that the duties to be enforced by mandamus must be those which are clear and enjoined by law or by reason of official station, and that petitioner must have a clear, legal right to the thing and that it must be the legal duty of the defendant to perform the required act.' As expressed by the then Justice Recto in a subsequent opinion: "It is well establish that only specific legal rights are enforceable by mandamus, that the right sought to be enforced must be certain and clear, and that the writ not issue in cases where the right is doubtful." To the same effect is the formulation of such doctrine by former Justice Barrera: "Stated otherwise, the writ never issues in doubtful cases. It neither confers powers nor imposes duties. It is simply a command to exercise a power already possessed and to perform a duty already imposed." 8 So it has been since then. 9 The latest reported case, Province. of Pangasinan v. Reparations Commission, 10 this court speaking through Justice Concepcion Jr., reiterated such a well-settled doctrine: "It has also been held that it is essential to the issuance of the writ of mandamus that the plaintiff should have a clear legal right to the thing

demanded, and it must be the imperative duty of the defendant to perform the act required. It never issues in doubtful cases. 11 WHEREFORE, the appealed decision is affirmed. No pronouncement as to costs. Barredo, Antonio, Concepcion, Jr., Santos and Abad Santos, JJ., concur. Aquino, J., took no part.

Republic of the Philippines SUPREME COURT Manila THIRD DIVISION

G.R. No. 124067 March 27, 1998 PERLA A. SEGOVIA, REYNALDO C. SANTIAGO, and WINIFREDO SM. PANGILINAN, petitioners, vs. The SANDIGANBAYAN, PEOPLE OF THE PHILIPPINES, and the PRESIDENT of the NATIONAL POWER CORPORATION, respondents.

NARVASA, C.J.: The special civil action of certiorari and prohibition at bar seeks nullification of two (2) Resolutions of the Second Division of the Sandiganbayan issued in Criminal Case No. 21711 in which petitioners are prosecuted for a violation of the Anti-Graft and Corrupt Practices Act: Republic Act No. 3019, as amended. The resolutions assailed are: 1) that dated February 1, 1996, which ordered petitioners' preventive suspension for ninety (90) days in accordance with Section 13 of said R.A. 3019; and 2) that dated February 23, 1996, which denied petitioners' motion for reconsideration of the suspension order. The primary issue raised is whether it is mandatory or discretionary for the Sandiganbayan to place under preventive suspension public officers who stand accused before it, pursuant to said Section 13 of the law. Section 13 reads: Sec. 13. Suspension and loss of benefits. Any incumbent public officer against whom any criminal prosecution under a valid information under this Act or under Title 7, Book II of the Revised Penal Code or for any offense involving fraud upon government or public funds or property, whether as a simple or as a complex offense in whatever stage of execution and mode of participation, is pending in court, shall be suspended from office. . . . . It is petitioners' submission that preventive suspension under this section "rests in the sound discretion of the Sandiganbayan despite the ostensibly mandatory Language" of the statute, and that that discretion was gravely abused by the Sandiganbayan, or it exceeded its jurisdiction, when it decreed their suspension.

Petitioners Perla Segovia, Reynaldo Santiago, and Winifredo SM Pangilinan all hold regular executive positions in the National Power Corporation (NPC). They together with two other officers who have since resigned from the NPC, namely: Gilberto A. Pastoral and Cecilia D. Vales were designated by the NPC Board to compose the Contracts Committee for said NPC's "Mindanao Grid LDC & SCADA/EMS System Operation Control Center and Facilities Project." The Contracts Committee thus constituted conducted the pre-qualification and bidding procedures for the project. The lowest and second lowest bidders were the Joint Venture of INPHASE and T & D, and Urban Consolidated Constructors, Inc., respectively. The Technical Task Force on Bid Evaluation of the NPC reviewed all the bids submitted and recommended approval of the results. The Contracts Committee, however, declared the lowest bidder (Joint Venture) disqualified after verification from the Philippine Contractors Accreditation Board that that group, as well as the second lowest bidder (Urban) had been "downgraded," thereby rendering both ineligible as bidders. The Contracts Committee also stated that since a review of relevant factors disclosed that the other bids had exceeded the Approved Agency Estimates and the Allowable Government Estimates for Options A and B of the Project, it was needful for the NPC Board to declare a failure of bidding and direct a rebidding. The recommendation was unanimously approved by the NPC Board: but for reasons not appearing on record (and, in any event, not relevant to the inquiry), the project was eventually canceled. Obviously feeling aggrieved by the turn of events, Urban filed a complaint with the Office of the Ombudsman against the Chairman and Members of the Board of Directors of NPC; the Chairman (Gilberto Pascual) and Members of the NPC Contracts Awards Committee; the Chairman (Perla Segovia) of the Pre-Qualification Bids & Awards Committee; the Manager (Cecilia D. Vales) of the Contracts Management Office, and two others. 1 Urban alleged that before the bidding, Joint Venture had been disqualified, but the Contracts Committee, without basis and in order to favor it, reconsidered its disqualification and thus enabled it to take part in the bidding and in fact to submit the lowest bid; that the NPC was "already poised to award the contract to Joint Venture" but because Urban protested, it was compelled to "post-disqualify" the former; that, however, instead of awarding the contract for the project to Urban as the second lowest bidder, the Committee and the NPC Board declared a failure of bidding and ultimately canceled the project. These acts, it is claimed, constituted a violation of the AntiGraft and Corrupt Practices Act. A preliminary investigation was conducted by the Ombudsman's Office after which Graft Investigation Officer A.A. Amante submitted a Resolution dated August 2, 1994 2 recommending, among others, that: 1) petitioners Perla Segovia, Reynaldo Santiago, Winifredo SM Pangilinan, as well as Gilberto Pastoral and Cecilia Vales be charged with a violation of Section 3 (e) of RA 3019 for having in "one way or the other extended undue advantage to Joint Venture through manifest partiality, evident bad faith and gross inexcusable negligence;" and 2) the NPC President, NPC Chairman and Members of the Board of Directors be cleared of the . . . complaint as their official actuation of sustaining a failure of bidding and the consequent re-bidding is supported by factual and legal basis.

Assistant Ombudsman Abelardo L. Aportadera, Jr., favorably endorsed the recommendation which was eventually approved on December 6, 1994 by Hon. Conrado M. Vasquez, then the Ombudsman. 3 An information was accordingly filed with the Sandiganbayan against petitioners Segovia, Santiago, and Pangilinan, as well as Pastoral and Vales, docketed as Criminal Case No. 21711. They were charged with infringement of Section 3 (e) of RA 3019: i.e. "causing undue injury to any party, including the Government, or giving any party any unwarranted benefits, advantage or preference in the discharge of his official, administrative or judicial functions through manifest partiality, evident bad faith or gross inexcusable negligence." Petitioners sought and obtained a reinvestigation of their case but gained no benefit thereby. For although the reinvestigating officer made a recommendation on March 7, 1995 that the information against petitioners be withdrawn because the "prima facie case had already been overthrown, considering that, as it now stands, the evidence at hand cannot stand judicial scrutiny" 4 and that recommendation met with the approval of the Special Prosecutor, it was ultimately turned down by the chief Special Prosecutor 5 on April 18, 1995, and on April 20, 1995, by the Ombudsman himself. 6 The case thus proceeded in the Sandiganbayan. The accused were arraigned and entered pleas of not guilty; and a pre-trial was held which resulted in a stipulation of facts embodied in an order dated January 11, 1996. 7 Earlier, the People had filed a "Motion to Suspend Accused Pendente Lite" dated October 24 1995, invoking Section 13 of RA 3019, as amended, and relevant jurisprudence, and alleging that the "information/s is/are valid."8 Petitioners opposed the motion. 9 In their pleading dated November 28, 1995, they theorized that the explicit terms of the law notwithstanding, their suspension was not mandatory in the premises. They claimed that the admissions at the pre-trial show that the transactions in question resulted in no unwarranted benefits, advantage or preference, or injury, to anyone; that two of the five accused were no longer employees of the NPC; that the positions that Segovia, Pangilinan and Santiago continued to occupy in the NPC were quite sensitive and had no relation to pre-qualification of contractors, biddings or awards which was an additional function temporarily assigned to them and for which they received no compensation at all and their suspension might cause delay of vital projects of the NPC; and that under the circumstances obtaining, they were in no position to tamper with any evidence. Petitioners' opposition was overruled. On January 31, 1996 the Sandiganbayan 10 handed down its Resolution suspending them for a period of ninety (90) days. 11 The Sandiganbayan held that the suspension was mandated under the law upon a finding that a proper preliminary investigation had been conducted, the information was valid, and the accused were charged with any of the crimes specified in the law; and stressed that its "authority and power to suspend the accused had been repeatedly upheld" in several precedents. It subsequently denied petitioners' motion for reconsideration dated February 14, 1996, "(c)onsidering the paucity of the(ir) arguments . . . and in the light of the mass of jurisprudence involving the power and authority of this Court to issue orders for the preventive suspension of the accused . . . ." 12 Petitioners would now have this Court strike down these resolutions because supposedly rendered in excess of jurisdiction or with grave abuse of discretion. The Court will not do so. In no sense may the

challenged resolutions be stigmatized as so clearly capricious, whimsical, oppressive, egregiously erroneous or wanting in logic as to call for invalidation by the extraordinary writ of certiorari. On the contrary, in promulgating those resolutions, the Sandiganbayan did but adhere to the clear command of the law and what it calls a "mass of jurisprudence" emanating from this Court, sustaining its authority to decree suspension of public officials and employees indicted before it. Indeed, that the theory of "discretionary suspension" should still be advocated at this late date, despite the "mass of jurisprudence" relevant to the issue, is little short of amazing, bordering on contumacious disregard of the solemn magisterial pronouncements of the Highest Court of the land. Republic Act No. 3019 was enacted by Congress more than 37 years ago, on August 17, 1960, becoming effective on the same date. The law was later amended by Republic Act No. 3047, Presidential Decree 677 and Presidential Decree No. 1288. The last amendment to Section 13 thereof was introduced by Batas Pambansa Bilang 195, approved on March 16, 1972. The validity of Section 13, R.A. 3019, as amended treating of the suspension pendente lite of an accused public officer may no longer be put at issue, having been repeatedly upheld by this Court. As early as 1984, inBayot v. Sandiganbayan, 13 the Court held that such suspension was not penal in character but merely a preventive measure before final judgment; hence, the suspension of a public officer charged with one of the crimes listed in the amending law, committed before said amendment, does not violate the constitutional provision against an ex post facto law. The purpose of suspension is to prevent the accused public officer from frustrating or hampering his prosecution by intimidating or influencing witnesses or tampering with documentary evidence, or from committing further acts of malfeasance while in office. 14 Substantially to the same effect was the Court's holding, in 1991, in Gonzaga v. Sandiganbayan, 15 that preventive suspension is not violative of the Constitution as it is not a penalty; and a person under preventive suspension remains entitled to the constitutional presumption of innocence since his culpability must still be established. The Anti-Graft and Corrupt Practices Act implicitly recognizes that the power of preventive suspension lies in the court in which the criminal charge is filed; once a case is filed in court, all other acts connected with the discharge of court functions including preventive suspension should be acknowledged as within the competence of the court that has taken cognizance thereof, no violation of the doctrine of separation of powers being perceivable in that acknowledgment. 16 The provision of suspension pendente lite applies to all persons indicted upon a valid information under the Act, whether they be appointive or elective officials; or permanent or temporary employees, or pertaining to the career or non-career service. 17 It applies to a Public High School Principal; 18 a Municipal Mayor; 19 a Governor; 20 a Congressman; 21 a Department of Science and Technology (DOST) non-career Project Manager; 22 a Commissioner of the Presidential Commission on Good Government (PCGG). 23 The term "office" in Section 13 of the law applies to any office which the officer might currently be holding and not necessarily the particular office in relation to which he is charged. 24 It is mandatory for the court to place under preventive suspension a public officer accused before it. 25 Imposition of suspension, however, is not automatic or self-operative. A pre-condition therefor is the existence of a valid information, determined at a pre-suspension hearing. Such a hearing is in accord with the spirit of the law, considering the serious and far-reaching consequences of a suspension of a public official even before his conviction, and the demands of public interest for a speedy determination of the issues involved in the case. 26The purpose of the pre-suspension hearing is basically to determine the validity of the information and thereby furnish the court with a basis to either suspend the accused

and proceed with the trial on the merits of the case, or refuse suspension of the latter and dismiss the case, or correct any part of the proceeding which impairs its validity. 27 The accused should be given adequate opportunity to challenge the validity or regularity of the criminal proceedings against him; e.g. that he has not been afforded the right to due preliminary investigation; that the acts imputed to him do not constitute a specific crime (under R.A. 3019 or the Revised Penal Code) warranting his mandatory suspension from office under Section 13 of the Act; or that the information is subject to quashal on any of the grounds set out in Rule 117 of the Rules of Court. 28 But once a proper determination of the validity of the information has been made, it becomes the ministerial duty of the court to forthwith issue the order of preventive suspension, The court has no discretion, for instance, to hold in abeyance the suspension of the accused official on the pretext that the order denying the latter's motion to quash is pending review before the appellate courts. 29 However, the preventive suspension may not be of indefinite duration or for an unreasonable length of time; it would be constitutionally proscribed otherwise as it raises, at the very least, questions of denial of due process and equal protection of the laws. 30 The Court has thus laid down the rule that preventive suspension may not exceed the maximum period of ninety (90) days in consonance with Presidential Decree No. 807 (the Civil Service Decree), now Section 52 of the Administrative Code of 1987. 31 While petitioners concede that this Court has "almost consistently ruled that the preventive suspension contemplated in Section 13 of RA 3019 is mandatory in character," they nonetheless urge the Court to consider their case an exception because of the " peculiar circumstances" thereof. They assert that the evils sought to be avoided by "separating a public official from the scene of his alleged misfeasance while the same is being investigated" 32 e.g., "to preclude the abuse of the prerogatives of . . . (his) office, such as through intimidation of witnesses," 33 or the tampering with documentary evidence will not occur in the present situation where: 1. The Project has been canceled. 2. (Their) . . . official duties no longer pertain, in any manner, to the pre-qualification of contractors dealing with the NPC. Neither are they now involved in any bidding for or awarding of contracts, . . . it (being) emphasized (in this connection) that they were merely designated as ad hoc members of the Committee without additional compensation for their additional duties. 3. All the relevant documentary evidence had been submitted either to the Ombudsman or to the Honorable Sandiganbayan. They conclude that their preventive suspension "at this point would actually be purposeless, as there is no more need for precautionary measures against their abuse of the prerogatives of their office." The arguments are not new. They have been advanced and rejected in earlier cases. They will again be so rejected in this case. The Court's pronouncements in Bolastig v. Sandiganbayan, supra, 34 are germane: Our holding that, upon the filing of a valid information charging violation of Republic Act No. 30 19, Book II, Title 7 of the Revised Penal Code, or fraud upon government or

public property, it is the duty of the court to place the accused under preventive suspension disposes of petitioner's other contention that since the trial in the Sandiganbayan is now over with respect to the presentation of evidence for the prosecution there is no longer any danger that petitioners would intimidate prosecution's witnesses. The fact is that the possibility that the accused would intimidate witnesses or otherwise hamper his prosecution is just one of the grounds for preventive suspension. The other one is, . . . to prevent the accused from committing further acts of malfeasance while in office. Bolastig also disposes of the other contention that vital projects of the NPC may be delayed by their preventive suspension, viz.: 35 Finally, the fact that petitioner's preventive suspension may deprive the people of Samar of the services of an official elected by them, at least temporarily, is not a sufficient basis for reducing what is otherwise a mandatory period prescribed by law. The vice governor, who has likewise been elected by them, will act as governor. (The Local Government Code of 1991, sec. 46[a]) Indeed, even the Constitution authorizes the suspension for not more than sixty days of members of Congress found guilty of disorderly behavior, (Art. VI, sec. 16[3]) thus rejecting the view expressed in one case (Alejandrino v. Quezon, 46 Phil. 83, 96 [1924]) that members of the legislature could not be suspended because in the case of suspension, unlike in the case of removal, the seat remains filled but the constituents are deprived of representation. The firmly entrenched doctrine is that under Section 13 of the Anti-Graft and Corrupt Practices Law, the suspension of a public officer is mandatory after a determination has been made of the validity of the information in a pre-suspension hearing conducted for that purpose. In Socrates v. Sandiganbayan, et al., 36 decided fairly recently, the Court again expatiated on the mandatory character of suspension pendente lite under Section 13 of R.A. No. 3019 and the nature of the pre-suspension hearing. This Court has ruled that under Section 13 of the anti-graft law, the suspension of a public officer is mandatory after the validity of the information has been upheld in a pre-suspension hearing conducted for that purpose. This pre-suspension hearing conducted to determine basically the validity of the information, from which the court can have a basis to either suspend the accused and proceed with the trial on the merits of the case, or withhold the suspension of the latter and dismiss the case, or correct any part of the proceeding which impairs its validity. That hearing may be treated in the same manner as a challenge to the validity of the information by way of a motion to quash (SeePeople vs. Alabano, etc., et al., L-45376-77, July 28, 1988, 163 SCRA 511) In the leading case of Luciano, et al. vs. Mariano, et al. (L-32950, July 30, 1971, 40 SCRA 187), we have set out the guidelines to be followed by the lower courts in the exercise of the power of suspension under Section 13 of the law, to wit: (c) By way of broad guidelines for the lower courts in the exercise of the power of suspension from office of public officers charged under a valid

information under the provisions of Republic Act No. 3019 or under the provisions of the Revised Penal Code on bribery, pursuant to section 13 of said Act, it may be briefly stated that upon the filing of such information, the trial court should issue an order with proper notice requiring the accused officer to show cause at a specific date of hearing why he should not be ordered suspended from office pursuant to the cited mandatory provisions of the Act. Where either the prosecution seasonably files a motion for an order of suspension or the accused in turn files a motion to quash the information or challenges the validity thereof, such show-cause order of the trial court would no longer be necessary. What is indispensable is that the trial court duly hear the parties at a hearing held for determining the validity of the information, and thereafter hand down its ruling, issuing the corresponding order of suspension should it uphold the validity of the information or withhold such suspension in the contrary case. (d) No specific rules need be laid down for such pre-suspension hearing. Suffice it to state that the accused should be given a fair and adequate opportunity to challenge the validity of the criminal proceedings against him, e.g., that he has not been afforded the right of due preliminary investigation, the act for which he stands charged do not constitute a violation of the provisions of Republic Act No. 3019 or of the bribery provisions of the Revised Penal Code which would warrant his mandatory suspension from office under Section 13 of the Act, or he may present a motion to quash the information on any of the grounds provided in Rule 117 of the Rules of Court. The mandatory suspension decreed by the act upon determination of the pendency in court or a criminal prosecution for violation of the Anti-Graft Act or for bribery under a valid information requires at the same time that the hearing be expeditious, and not unduly protracted such as to thwart the prompt suspension envisioned by the Act. Hence, if the trial court, say, finds the ground alleged in the quashal motion not to be indubitable, then it shall be called upon to issue the suspension order upon its upholding the validity of the information and setting the same for trial on the merits. With the aforequoted jurisprudential authority as the basis, it is evident that upon a proper determination of the validity of the information, it becomes mandatory for the court to immediately issue the suspension order. The rule on the matter is specific and categorical. It leaves no room for interpretation. It is not within the court's discretion to hold in abeyance the suspension of the accused officer on the pretext that the order denying the motion to quash is pending review before the appellate courts. Its discretion lies only during the pre-suspension hearing where it is required to ascertain whether or not (1) the accused had been afforded due preliminary investigation prior to the filing of the information against him, (2) the acts for which he was charged constitute a violation of the provisions of Republic Act No. 3019 or of the provisions of Title 7, Book II of the Revised Penal Code, or (3) the informations against him can be quashed, under any of the grounds provided in Section 2, Rule 117 of the Rules of Court. (People vs. Albano, etc., et al. supra, fn. 26)

Once the information is found to be sufficient in form and substance, then the court must issue the order of suspension as a matter of course. There are no ifs and buts about it. This is because a preventive suspension is not a penalty. It is not imposed as a result of judicial proceedings. In fact, if acquitted, the official concerned shall be entitled to reinstatement and to the salaries and benefits which he failed to receive during suspension. In view of this latter provision, the accused elective public officer does not stand to be prejudiced by the immediate enforcement of the suspension order in the event that the information is subsequently declared null and void on appeal and the case dismissed as against him. Taking into consideration the public policy involved in preventively suspending a public officer charged under a valid information, the protection of public interest will definitely have to prevail over the private interest of the accused. (Bayot vs. Sandiganbayan, et al., G.R. Nos. 61776-61861, March 23, 1984, 128 SCRA 383) To further emphasize the ministerial duty of the court under Section 13 of Republic Act No. 3019, it is said that the court trying the case has neither discretion nor duty to determine whether or not a preventive suspension is required to prevent the accused from using his office to intimidate witnesses or frustrate his prosecution or continue committing malfeasance in office. The presumption is that unless the accused is suspended, he may frustrate his prosecution or commit further acts of malfeasance or do both, in the same way that upon a finding that there is probable cause to believe that a crime has been committed and that the accused is probably guilty thereof, the law requires the judge to issue a warrant for the arrest of the accused. The law does not require the court to determine whether the accused is likely to escape or evade the jurisdiction of the court. The Court is satisfied that the Second Division of the Sandigabayan, after upholding the validity of the information against petitioners, correctly ordered their preventive suspension from any public office for a period of ninety (90) days. As was stressed in Libanan v. Sandiganbayan, 37: . . . When the statute is clear and explicit, there is hardly room for any extended court ratiocination or rationalization of the law. Republic Act No. 3019 unequivocally mandates the suspension of a public official from office pending a criminal prosecution against him. This Court has repeatedly held that such preventive suspension is mandatory . . . , and there are no "ifs" and "buts" about it. WHEREFORE, the petition in this case is hereby DISMISSED for lack of merit. Costs against petitioners. SO ORDERED. Romero, Kapunan and Purisima, JJ., concur.

Republic of the Philippines SUPREME COURT Manila SECOND DIVISION

G.R. No. L-27760 May 29, 1974 CRISPIN ABELLANA and FRANCISCO ABELLANA, petitioners, vs. HONORABLE GERONIMO R. MARAVE, Judge, Court of First Instance of Misamis Occidental, Branch II; and GERONIMO CAMPANER, MARCELO LAMASON, MARIA GURREA, PACIENCIOSA FLORES and ESTELITA NEMEN0, respondents. Prud. V. Villafuerte for petitioners. Hon. Geronimo R. Marave in his own behalf.

FERNANDO, J.:p This petition for certiorari is characterized by a rather vigorous insistence on the part of petitioners Crispin Abellana and Francisco Abellana that an order of respondent Judge was issued with grave abuse of discretion. It is their contention that he ought to have dismissed an independent civil action filed in his court, considering that the plaintiffs, as offended parties, private respondents here, 1 failed to reserve their right to institute it separately in the City Court of Ozamis City, when the criminal case for physical injuries through reckless imprudence was commenced. Such a stand of petitioners was sought to be bolstered by a literal reading of Sections 1 and 2 of Rule 111. 2 It does not take into account, however, the rule as to a trial de novo found in Section 7 of Rule 123. 3What is worse, petitioners appear to be oblivious of the principle that if such an interpretation were to be accorded the applicable Rules of Court provisions, it would give rise to a grave constitutional question in view of the constitutional grant of power to this Court to promulgate rules concerning pleading, practice, and procedure being limited in the sense that they "shall not diminish, increase, or modify substantive rights." 4 It thus appears clear that the petition for certiorari is without merit. The relevant facts were set forth in the petition and admitted in the answer. The dispute had its origins in a prosecution of petitioner Francisco Abellana of the crime of physical injuries through reckless imprudence in driving his cargo truck, hitting a motorized pedicab resulting in injuries to its passengers, namely, private respondents Marcelo Lamason, Maria Gurrea, Pacienciosa Flores, and Estelita Nemeo. The criminal case was filed with the city court of Ozamis City, which found the accused Francisco Abellana guilty as charged, damages in favor of the offended parties likewise being awarded. The accused, now petitioner, Francisco Abellana appealed such decision to the Court of First Instance. 5 At this stage, the private respondents as the offended parties filed with another branch of the Court of First Instance of Misamis Occidental, presided by respondent Judge, a separate and independent civil action

for damages allegedly suffered by them from the reckless driving of the aforesaid Francisco Abellana. 6 In such complaint, the other petitioner, Crispin Abellana, as the alleged employer, was included as defendant. Both of them then sought the dismissal of such action principally on the ground that there was no reservation for the filing thereof in the City Court of Ozamis. It was argued by them that it was not allowable at the stage where the criminal case was already on appeal. 7 Respondent Judge was not persuaded. On April 28, 1967, he issued the following order: "This is a motion to dismiss this case on the ground that in Criminal Case No. OZ-342 which was decided by the City Court and appealed to this Court, the offended parties failed to expressly waive the civil action or reserve their right to institute it separately in said City Court, as required in Section 1, Rule 111, Rules of Court. From the Records of Criminal Case No. OZ-342, it appears that the City Court convicted the accused. On appeal to this Court, the judgment of the City Court was vacated and a trial de novo will have to be conducted. This Court has not as yet begun trying said criminal case. In the meantime, the offended parties expressly waived in this Court the civil action impliedly instituted with the criminal action, and reserve their right to institute a separate action as in fact, they did file. The Court is of the opinion that at this stage, the offended parties may still waive the civil action because the judgment of the City Court is vacated and a trial de novo will have to be had. In view of this waiver and reservation, this Court would be precluded from judging civil damages against the accused and in favor of the offended parties. [Wherefore], the motion to dismiss is hereby denied. ..." 8 There was a motion for reconsideration which was denied. Hence this petition. The only basis of petitioners for the imputation that in the issuance of the challenged order there was a grave abuse of discretion, is their reading of the cited Rules of Court provision to the effect that upon the institution of a criminal action "the civil action for recovery of civil liability arising from the offense charge is impliedly instituted with the criminal action, unless the offended party ...reserves his right to institute it separately." 9 Such an interpretation, as noted, ignores the de novo aspect of appealed cases from city courts. 10It does likewise, as mentioned, give rise to a constitutional question to the extent that it could yield a meaning to a rule of court that may trench on a substantive right. Such an interpretation is to be rejected. Certiorari, to repeat, clearly does not lie. 1. In the language of the petition, this is the legal proposition submitted for the consideration of this Court : "That a separate civil action can be legally filed and allowed by the court only at the institution, or the right to file such separate civil action reserved or waived, at such institution of the criminal action, and never on appeal to the next higher court." 11 It admits of no doubt that an independent civil action was filed by private respondents only at the stage of appeal. Nor was there any reservation to that effect when the criminal case was instituted in the city court of Ozamis. Petitioners would then take comfort from the language of the aforesaid Section 1 of Rule 111 for the unwarranted conclusion that absent such a reservation, an independent civil action is barred. In the first place, such an inference does not per se arise from the wording of the cited rule. It could be looked upon plausibly as anon-sequitur. Moreover, it is vitiated by the grievous fault of ignoring what is so explicitly provided in Section 7 of Rule 123: "An appealed case shall be tried in all respects anew in the Court of First Instance as if it had been originally instituted in that court." 12 Unlike petitioners, respondent Judge was duly mindful of such a norm. This Court has made clear that its observance in appealed criminal cases is mandatory. 13 In a 1962 decision, People v. Carreon, 14 Justice Barrera, as ponente, could trace such a rule to a 1905 decision, Andres v. Wolfe. 15 Another case cited by him is Crisostomo v. Director of Prisons, 16 where Justice Malcolm emphasized how deeply rooted in Anglo-American legal history is such a rule. In the latest case in point, People v. Jamisola, 17 this Court, through Justice Dizon, reiterated such a doctrine in

these words: "The rule in this jurisdiction is that upon appeal by the defendant from a judgment of conviction by the municipal court, the appealed decision is vacated and the appealed case 'shall be tried in all respects anew in the court of first instance as if it had been originally instituted in that court.'" 18 So it is in civil cases under Section 9 of Rule 40. 19 Again, there is a host of decisions attesting to its observance. 20 It cannot be said then that there was an error committed by respondent Judge, much less a grave abuse of discretion, which is indispensable if this petition were to prosper. 2. Nor is the above the only ground for rejecting the contention of petitioners. The restrictive interpretation they would place on the applicable rule does not only result in its emasculation but also gives rise to a serious constitutional question. Article 33 of the Civil Code is quite clear: "In cases of ... physical injuries, a civil action for damages, entirely separate and distinct from the criminal action, may be brought by the injured party. Such civil action shall proceed independently of the criminal prosecution, and shall require only a preponderance of evidence." 21 That is a substantive right, not to be frittered away by a construction that could render it nugatory, if through oversight, the offended parties failed at the initial stage to seek recovery for damages in a civil suit. As referred to earlier, the grant of power to this Court, both in the present Constitution and under the 1935 Charter, does not extend to any diminution, increase or modification of substantive right. 22 It is a well-settled doctrine that a court is to avoid construing a statute or legal norm in such a manner as would give rise to a constitutional doubt. Unfortunately, petitioners, unlike respondent Judge, appeared to lack awareness of the undesirable consequence of their submission. Thus is discernible another insuperable obstacle to the success of this suit. 3. Nor is this all that needs to be said. It is understandable for any counsel to invoke legal propositions impressed with a certain degree of plausibility if thereby the interest of his client would be served. That is though, merely one aspect of the matter. There is this other consideration. He is not to ignore the basic purpose of a litigation, which is to assure parties justice according to law. He is not to fall prey, as admonished by Justice Frankfurter, to the vice of literalness. The law as an instrument of social control will fail in its function if through an ingenious construction sought to be fastened on a legal norm, particularly a procedural rule, there is placed an impediment to a litigant being given an opportunity of vindicating an alleged right. 23 The commitment of this Court to such a primordial objective has been manifested time and time again. 24 WHEREFORE, this petition for certiorari is dismissed. Costs against petitioners. Zaldivar (Chairman), Barredo, Fernandez and Aquino, JJ., concur. Antonio, J., concurs on the bases of par. nos. 2 & 3 of opinion.