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 self-appointed 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
hermeneutics noscitur 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.

The Lawphil Project - Arellano Law Foundation

G.R. No. 70443 September 15, 1986

BRAULIO CONDE, RUFINA CONDE, GERARDO CONDE, CONCHITA C. LUNDANG, and ALFREDO
VENTURA, petitioners, vs. INTERMEDIATE APPELLATE COURT, HON. CESAR C. PERALEJO, in
his capacity as Presiding Judge, Regional Trial Court, Branch LXVI, Third Judicial Region,
Capas, Tarlac, and MARCELO GUTIERREZ, respondents.

Tomas P. Matic, Jr. for petitioners.

Adelaido G. Rivera for private respondent.

GUTIERREZ, JR., J.:

On January 16, 1984, the petitioners filed an action to annul the judgment of the Court of Appeals dated
September 23, 1981, which reversed the decision of the Regional Trial Court and ordered the petitioners
and/or their successors-in-interest to deliver immediately the ownership and possession of the property
in question to the then plaintiff-appellant Marcelo Gutierrez. In their complaint filed before the Regional
Trial Court of Capas, Tarlac, the petitioners alleged that through fraud, Gutierrez was able to make it
appear that he was the son of Esteban Gutierrez and Fermina Ramos and as a necessary consequence
of such filiation, was the absolute owner by succession of the property in question.
On February 27, 1984, the trial court dismissed the petitioners' complaint on the ground that it had no
jurisdiction to annul the judgment of the Court of Appeals. Upon the denial of their motion for
reconsideration, the petitioners filed a petition for certiorari, mandamus and a writ of injunction before
the appellate court. The said court in turn, dismissed the petition and a subsequent motion for
reconsideration on the grounds that a Regional Trial Court is without jurisdiction to annul the judgment of
the Court of Appeals and that only the Supreme Court is empowered to review the judgment of said
appellate court. Hence, the petitioners elevated the case before this Court.

On August 31, 1984, we issued a resolution dated August 22, 1984, remanding the case to the appellate
court for decision on the merits.

The resolution reads as follows:

The respondent intermediate Appellate Court erred when it declared that the complaint for annulment of
judgment in this case should be filed with the Supreme Court. This Court has no original jurisdiction to
look into allegations of fraud upon which the complaint for annulment is based. In January, 1984, the
petitioners filed a complaint with the Regional Trial Court of Tarlac seeking among other things the
annulment of a decision which had already passed, on appeal, the Court of Appeals

in CA-G.R. No. 60139-R. On February 17, 1984, the lower court dismissed the petitioners' complaint for
annulment of judgment. The petitioners appealed the dismissal to the respondent Intermediate Appellate
Court which denied due course to the petition stating that what is sought to be annulled is a decision of
the Court of Appeals over which the regional trial court is obviously without jurisdiction. The decision
sought to be annulled calls for the turning over of possession to the original respondent of the disputed
properties. While the judgment being enforced may have been that of the Court of Appeals, it was
actually an appellate judgment rendered on a review of the trial court's decision. Considering that
Section 9 of the Judiciary Reorganization Act of 1980-B.P. No. 129 gives the Intermediate Appellate
Court exclusive jurisdiction over actions for annulment of judgments of regional trial courts, the COURT
RESOLVED to REMAND this case to the Intermediate Appellate Court for it to hear and decide the
action.

On January 29, 1985, the appellate court rendered a decision dismissing the petition for lack of
jurisdiction and for lack of merit. In its decision on the issue of jurisdiction, the respondent court ruled
that since the decision of the Metropolitan Trial Court can be annulled by the Regional Trial Court and a
decision of the latter is annullable by the Court of Appeals, then logically the decision of the appellate
court should be annullable only by the Supreme Court. Moreover, the appellate court ruled that it is but
logical to conclude that it cannot annul its own decision unless there is an express grant under the
Judiciary Reorganization Act of 1980. Finding none, it stated that it must perforce dismiss the case for
lack of jurisdiction.

On the merits of the petition, the appellate court ruled that the fraud relied upon by the petitioners is only
intrinsic and thus, even on the assumption that it has jurisdiction to decide the case, still the same has
no merit. It dismissed the petition. The petitioners elevated this decision to us.

On June 5, 1985, we resolved to require the respondents to comment on the petition. Notwithstanding
proof that a copy of the petition was served on the respondents' counsel on June 24, 1985, no comment
has been filed.

We decide the petition.

We need not emphasize the rule that this Court decides appeals which only involve questions of law and
that "it is not the function of the Supreme Court to analyze or weigh such evidence all over again, its
jurisdiction being limited to receiving errors of law that might have been committed by the lower court."
(Baniqued v. Court of Appeals, 127 SCRA 596, 601; citing Tiongco v. de la Merced, 58 SCRA 89). It
was, thus, totally pointless for the Intermediate Appellate Court to delve into the question of whether or
not it has jurisdiction to pass upon the merits of the petition which then alleged the perpetration of fraud
by one of the parties in the original case, and which thereby called for a review of the factual findings of
the court. Furthermore, the fact that this Court already remanded the case to the appellate court for
decision on the merits should have prompted the latter to limit its decision only to the merits of the case.

There are instances when this Court desires a further review of facts or a detailed analysis and
systematic presentation of issues which the appellate court is in a more favored position to accomplish.
Standing between the trial courts and the Supreme Court, the appellate court was precisely created to
take over much of the work that used to be previously done by this Court. It has been of great help to the
Supreme Court in synthesizing facts, issues, and rulings in an orderly and intelligible manner and in
Identifying errors which ordinarily might have escaped detection. Statistics will show that the great
majority of petitions to review the decisions of the appellate court have been denied due course for lack
of merit in minute resolutions. The appellate court has, therefore, freed

this Court to better discharge its constitutional duties and perform its most important work which, in the
words of Dean Vicente G. Sinco, "is less concerned with the decision of cases that begin and end with
the transient rights and obligations of particular individuals but is more intertwined with the direction of
national policies, momentous economic and social problems, the delimitation of governmental authority
and its impact upon fundamental rights." (Philippine Political Law, 10th Edition, p. 323). It is, therefore,
difficult to understand why a Division of the Intermediate Appellate Court should hesitate to help the
Supreme Court and to act on an action which it was specifically ordered to hear and decide.

If its initial hesitation was due to doubts about the correctness of our action, then it should recall the
admonition in Tugade v. Court of Appeals (85 SCRA 226, 230-231) that:

xxx xxx xxx

Respondent Court of Appeals really was devoid of any choice at all It could not have ruled in any other
way on the legal question raised. This Tribunal having spoken, its duty was to obey. It is as simple as
that. There is relevance to this excerpt from Barrera v. Barrera (34 SCRA 98): 'The delicate task of
ascertaining the significance that attaches to a constitutional or statutory provision, an executive order, a
procedural norm or a municipal ordinance is committed to the judiciary. It thus discharges a role no less
crucial than that appertaining to the other two departments in the maintenance of the rule of law. To
assure stability in legal relations and avoid confusion, it has to speak with one voice. It does so with
finality, logically and rightly, through the highest judicial organ, this Court. What it says then should be
definitive and authoritative, binding on those occupying the lower ranks in the judicial hierarchy. They
have to defer and to submit.' (Ibid. 107. The opinion of Justice Laurel in People v. Vera, 65 Phil. 56
[1937] was cited.) The ensuing paragraphs of the opinion in Barrera further emphasizes the point: 'Such
a thought was reiterated in an opinion of Justice J.B.L. Reyes and further emphasized in these words:
'Judge Gaudencio Cloribel need not be reminded that the Supreme Court, by tradition and in our system
of judicial administration, has the last word on what the law is it is the final arbiter of any justifiable
controversy. There is only one Supreme Court from whose decisions an other courts should take their
bearings. (Justice J.B.L. Reyes spoke thus in Albert v. Court of First Instance of Manila [Br. VI], 23
SCRA 948, 961).

The fault of the Intermediate Appellate Court is mitigated by the fact that it still decided the remanded
case on the merits. It stated:

On February of 1950 an original complaint for recovery of possession of a parcel of land was filed before
the Court of First Instance of Tarlac, which was subsequently amended on March 19, 1951.

On May 20, 1976, after a full blown trial the Regional Trial Court Branch 64 (formerly Court of First
Instance) of Tarlac, rendered a decision dismissing the complaint and ordering plaintiff Marcelo
Gutierrez to pay the defendants the costs of the suit. The dispositive portion of which reads as follows:

WHEREFORE, judgment is hereby rendered dismissing the complaint and ordering plaintiff Marcelo
Gutierrez to pay the defendants the costs of this suit. He (sic) pronouncement as to damages for want of
proof.

From the above judgment an appeal was filed with the Court of Appeals.
On September 23, 1981, the then Court of Appeals reversed the decision of the Regional Trial Court,
Branch 64, this time ordering the ten appellees (now petitioners) to deliver the ownership and
possession of the litigated property to then appellant (now respondent Marcelo Gutierrez), which
decision became final and executory on December 20, 1982, the dispositive portion of which reads, as
follows:

WHEREFORE, in the light of the foregoing, the decision appealed from, not being in accordance with
the applicable law and evidence and finding validity in the errors assigned, is hereby reversed and set
aside. In lieu thereof, another one is entered ordering defendants-appellees and/or their successors-in-
interest to deliver immediately the ownership and possession of the property described under par. 3 of
the complaint to herein plaintiff- appellant Marcelo Gutierrez. With costs.

On January 16, 1984, an action to annul the judgment of the former Court of Appeals was filed before
the Regional Trial Court, Branch 56, Third Judicial Region in Capas, Tarlac.

On February 27, 1984, the respondent Court (Regional Trial Court), dismissed the case for annulment of
judgment on the ground that it has no jurisdiction to annul the judgment of the Court of Appeals.

On March 19, 1984, the motion for reconsideration filed by herein petitioner was denied by the
respondent court. Accordingly, a petition for certiorari, mandamus and a writ of injunction was filed
before the Intermediate Appellate Court and raffled to the Third Special Cases Division, The court
dismissed the petition for lack of merit on the ground that a Regional Trial Court is without jurisdiction to
annul a judgment of the Intermediate Appellate Court, the dispositive portion of which reads:

WHEREFORE, this case should be, as it is hereby DISMISSED OUTRIGHT. With costs against the
petitioners.

On June 14, 1984, the motion for reconsideration filed by herein petitioner was denied by this Court.

xxx xxx xxx

Finally, a judgment based on alleged false testimony is not an extrinsic fraud by which an action for
annulment of judgment could be grounded. The Supreme Court in Ilacad v. Court of Appeals (supra, p.
302), declared that:

xxx xxx xxx

... and speaking of extrinsic fraud, it is that fraudulent scheme of the prevailing litigant which prevents a
party from having his day in court from presenting his case. Fraud has been regarded as extrinsic or
collateral, within the meaning of the rule 'where it is one of the effect of which prevents a party from
having a trial, or real contests, or from presenting all of his case to the court, or where it operates upon
matters pertaining not to the judgment itself, but to the manner by which it was procured so that there is
not a fair submission of the controversy. In other words, extrinsic fraud refers to any fraudulent act of the
prevailing party in the litigation which is committed outside of the

trial of the case, where the defeated party has been prevented from presenting fully his side of the case,
by fraud or deception practiced on him by his opponent.

The resort to fraud in introducing fabricated evidence is definitely an intrinsic fraud, hence false
testimony being a matter of evidence is definitely intrinsic and not extrinsic. Fraud consisting in acting
fictitious cause of false testimony is intrinsic (sic) (Francisco v. David, 38 CG 714). Intrinsic fraud takes
the form of acts of a party in a litigation during the trial such as the use of forged instruments or perjured
testimony, which did not affect the presentation of the case, but did prevent a fair and just determination
of the case (Libudan v. Palma, [S1, 45 SCRA 17]). Intrinsic fraud is not sufficient to attack a judgment
(Yatco v. Sumagui, 44623-R, July 31, 1971).

Petitioners stand that extrinsic fraud was employed by the respondents, is bereft of any factual basis,
hence, even on the assumption that this court has jurisdiction to decide this issue, still the petitioners
cause of action must fail.
A careful review of the present petition and of the records of the appellate court on this case shows that
even on the assumption that all the facts alleged in the petition are true, the petition should be dismissed
for lack of merit because the fraud allegedly perpetrated by the private respondent in AC-G.R. SP No.
03301 is only intrinsic in nature and not extrinsic. Fraud is regarded as extrinsic or collateral where it has
prevented a party from having a trial or from presenting an of his case to the court. (Asian Surety and
Insurance Co. v. Island Steel, Inc., 118 SCRA 233, 239; citing Amuran v. Aquino, 38 Phil. 29). In the
case at bar, the fraud was in the nature of documents allegedly manufactured by Marcelo Gutierrez to
make it appear that he was the rightful heir of the disputed property, Hence, the Intermediate Appellate
Court is correct in finding the fraud to be intrinsic in nature.

WHEREFORE, the petition is hereby DISMISSED for lack of merit. The respondents' counsel, Atty.
Adelaido G. Rivera is fined Five Hundred Pesos (P500.00) for his failure to act on the order to file
comment.

SO ORDERED.

Feria (Chairman), Fernan, Alampay and Paras, JJ., concur,

The Lawphil Project - Arellano Law Foundation

[G.R. No. L-48437. September 30, 1986.]

MANTRADE/FMMC DIVISION EMPLOYEES AND WORKERS UNION (represented by PHILIPPINE

SOCIAL SECURITY LABOR UNION PSSLU Fed. TUCP), Petitioner, v. ARBITRATOR
FROILAN M. BACUNGAN and MANTRADE DEVELOPMENT CORPORATION, Respondents.

SYLLABUS

1. LABOR AND SOCIAL LEGISLATION; LABOR CODE; VOLUNTARY ARBITRATORS; DECISIONS

SUBJECT TO JUDICIAL REVIEW. The contentions of respondent corporation have been ruled
against in the decision of this court in the case of Oceanic Bic Division (FFW) v. Romero, promulgated
on July 16, 1984, wherein it stated: . . . "A voluntary arbitrator by the nature of her functions acts in a
quasijudicial capacity. There is no reason why her decisions involving interpretation of law should be
beyond this courts review. Administrative officials are presumed to act in accordance with law and yet
we do not hesitate to pass upon their work where a question of law is involved or where a showing of
abuse of discretion in their officials acts is properly raised in petitions for certiorari." (130 SCRA 392,
399, 400-401) 2. ID.; ID.; GRANT FOR HOLIDAY PAY MONTHLY PAID EMPLOYEES; ISSUE
SETTLED IN THE CASES OF INSULAR BANK OF ASIA AND AMERICA EMPLOYEES UNION VS.
INCIONG, [132 SCRA 633], AND CHARTERED BANK EMPLOYEES UNION VS. OPLE [141 SCRA 9].
Respondent arbitrator opined that respondent corporation does not have any legal obligation to grant
its monthly salaried employees holiday pay, unless it is argued that the pertinent section of the Rule and
Regulations implementing Section 94 of the Labor Code is not in conformity with the law, and thus,
without force and effect. This issue was subsequently decided on October 24, 1984 by a division of this
court in the case of Insular Bank of Asia and American Employees Union (IBAAEU) v. Inciong, wherein
it held as follows: "We agree with petitioners contention that Section 2, Rule IV, Book III of the
implementing rules and Policy Instruction No. 9 issued by the then Secretary of Labor are null and void
since in the guise of clarifying the Labor Codes provisions on holiday pay, they in effect amended them
enlarging the scope of their exclusion (p. 11, rec.). . . . "From the above-cited provisions, it is clear that
monthly paid employees are not excluded from the benefits of holiday pay. However, the implementing
rules on holiday pay promulgated by the then Secretary of Labor excludes monthly paid employees from
the said benefits by inserting under Rule IV, Book III of the implementing rules, section 2, which provides
that: employees who are uniformly paid by the month, irrespective of the number of working days
therein , with the salary of not less than the statutory or established minimum wage shall be presumed to
be paid for all days in the month whether worked or not." (132 SCRA 663, 672-673) This ruling was
reiterated by the court en banc on August 28, 1985 in the case of Chartered Bank Employees
Association v. Ople, wherein it added that: "The questioned Sec. 2, Rule IV, Book III of the Integrated
Rules and the Secretarys Policy Instruction No. 9 add another excluded group, namely employees who
are uniformly paid by the month. While additional exclusion is only in the form of a presumption that all
monthly paid employees have already been paid holiday paid, it constitutes a taking away or a
deprivation which must be in the law if it is to be valid. An administrative interpretation which diminishes
the benefits of labor more than what the statute delimits or withholds is obviously ultra vires." (138 SCRA
273, 282. See also CBTC Employees Union v. Clave, January 7, 1986, 141 SCRA 9.) 3. REMEDIAL
LAW; SPECIAL CIVIL ACTION; MANDAMUS; APPROPRIATE EQUITABLE REMEDY IN CASE AT
BAR. Respondent corporation contends that mandamus does not lie to compel the performance of an
act which the law does not clearly enjoin as a duty. True it is also that mandamus is not proper to
enforce a contractual obligation, the remedy being an action for specific performance (Province of
Pangasinan v. Reparations Commission, November 29, 1977, 80 SCRA 376). In the case at bar,
however, in view of the above-cited subsequent decisions of this Court clearly defining the legal duty to
grant holiday pay to monthly salaried employees, mandamus is an appropriate equitable remedy
(Dionisio v. Paterno, July 23,

1980, 98 SCRA 677; Gonzales v. Government Service Insurance System, September 10, 1981, 107
SCRA 492).

DECISION

FERIA, J.:

This is a petition for Certiorari and Mandamus filed by petitioner against arbitrator Froilan M. Bacungan
and Mantrade Development Corporation arising from the decision of respondent arbitrator, the
dispositive part of which reads as follows:jgc:chanrobles.com.ph "CONSIDERING ALL THE ABOVE, We
rule that Mantrade Development Corporation is not under legal obligation to pay holiday pay (as
provided for in Article 94 of the Labor Code in the third official Department of Labor edition) to its
monthly paid employees who are uniformly paid by the month, irrespective of the number of working
days therein, with a salary of not less than the statutory or established minimum wage, and this rule is
applicable not only as of March 2, 1976 but as of November 1, 1974."cralaw virtua1aw library Petitioner
questions the validity of the pertinent section of the Rules and Regulations Implementing the Labor
Code as amended on which respondent arbitrator based his decision. On the other hand, respondent
corporation has raised procedural and substantive objections. It contends that petitioner is barred from
pursuing the present action in view of Article 263 of the Labor Code, which provides in part that
"voluntary arbitration awards or decisions shall be final, inappealable, and executory," as well as the
rules implementing the same; the pertinent provision of the Collective Bargaining Agreement between
petitioner and respondent corporation; and Article 2044 of the Civil Code which provides that "any
stipulation that the arbitrators award or decision shall be final, is valid, without prejudice to Articles 2038,
2039, and 2040." Respondent corporation further contends that the special civil action of certiorari does
not lie because respondent arbitrator is not an "officer exercising judicial functions" within the
contemplation of Rule 65, Section 1, of the Rules of Court; that the instant petition raises an error of
judgment on the part of respondent arbitrator and not an error of jurisdiction; that it prays for the
annulment of certain rules and regulations issued by the Department of Labor, not for the annulment of
the voluntary arbitration proceedings; and that appeal by certiorari under Section 29 of the Arbitration
Law, Republic Act No. 876, is not applicable to the case at bar because arbitration in labor disputes is
expressly excluded by Section 3 of said law.chanrobles law library : red These contentions have been
ruled against in the decision of this Court in the case of Oceanic Bic Division (FFW) v. Romero,
promulgated on July 16, 1984, wherein it stated:jgc:chanrobles.com.ph "We agree with the petitioner
that the decisions of voluntary arbitrators must be given the highest respect and as a general rule must
be accorded a certain measure of finality. This is especially true where the arbitrator chosen by the
parties enjoys the first rate credentials of Professor Flerida Ruth Pineda Romero, Director of the U.P.
Law Center and an academician of unquestioned expertise in the field of Labor Law. It is not correct,
however, that this respect precludes the exercise of judicial review over their decisions. Article 262 of
the Labor Code making voluntary arbitration awards final, inappealable and executory, except where the
money claims exceed P100,000.00 or 40% of the paid-up capital of the employer or where there is
abuse of discretion or gross incompetence refers to appeals to the National Labor Relations
Commission and not to judicial review. "In spite of statutory provisions making final the decisions of
certain administrative agencies, we have taken cognizance of petitions questioning these decisions
where want of jurisdiction, grave abuse of discretion, violation of due process, denial of substantial
justice, or erroneous interpretation of the Law were brought to our attention. . . .
xxx

"A voluntary arbitrator by the nature of her functions acts in a quasi-judicial capacity. There is no reason
why her decisions involving interpretation of law should be beyond this Courts review. Administrative

officials are presumed to act in accordance with law and yet we do not hesitate to pass upon their work
where a question of law is involved or where a showing of abuse of discretion in their official acts is
properly raised in petitions for certiorari." (130 SCRA 392, 399, 400-401) In denying petitioners claim for
holiday pay, respondent arbitrator stated that although monthly salaried employees are not among those
excluded from receiving such additional pay under Article 94 of the Labor Code of the Philippines, to
wit:chanrobles virtual lawlibrary ART. 94. Right to holiday pay. (a) Every worker shall be paid his
regular daily wage during regular holidays, except in retail and service establishments regularly
employing less than ten (10) workers; (b) The employer may require an employee to work on any
holiday but such employee shall be paid compensation equivalent to twice his regular rate; and (c) As
used in this Article, "holiday" includes: New Years Day, Maundy Thursday, Good Friday, the ninth of
April, the first of May, the twelfth of June, the fourth of July, the thirtieth of November, the twenty-fifth
and the thirtieth of December, and the day designated by law for holding a general election. they appear
to be excluded under Sec. 2, Rule IV, Book III of the Rules and Regulations implementing said provision
which reads thus:chanrob1es virtual 1aw library SEC. 2. Status of employees paid by the month.
Employees who are uniformly paid by the month, irrespective of the number of working days therein,
with a salary of not less than the statutory or established minimum wage shall be presumed to be paid
for all days in the month whether worked or not. Respondent arbitrator further opined that respondent
corporation does not have any legal obligation to grant its monthly salaried employees holiday pay,
unless it is argued that the pertinent section of the Rules and Regulations implementing Section 94 of
the Labor Code is not in conformity with the law, and thus, without force and effect. This issue was
subsequently decided on October 24, 1984 by a division of this Court in the case of Insular Bank of Asia
and America Employees Union (IBAAEU) v. Inciong, wherein it held as follows:jgc:chanrobles.com.ph
"WE agree with the petitioners contention that Section 2, Rule IV, Book III of the implementing rules and
Policy Instruction No. 9, issued by the then Secretary of Labor are null and void since in the guise of
clarifying the Labor Codes provisions on holiday pay, they in effect amended them by enlarging the
scope of their exclusion (p. 11, rec.) "Article 94 of the Labor Code, as amended by P.D. 850,
provides:chanrob1es virtual 1aw library Art. 94. Right to holiday pay. (a) Every worker shall be paid
his regular daily wage during regular holidays, except in retail and service establishments regularly
employing less than ten (10) workers . . . "The coverage and scope of exclusion of the Labor Codes
holiday pay provisions is spelled out under Article 82 thereof which reads:chanrob1es virtual 1aw library
Art. 82. Coverage. The provision of this Title shall apply to employees in all establishments and
undertakings, whether for profit or not, but not to government employees, managerial employees, field
personnel, members of the family of the employer who are dependent on him for support, domestic
helpers, persons, in the personal service of another, and workers who are paid by results as determined
by the Secretary of Labor in appropriate regulations.
xxx

"From the above-cited provisions, it is clear that monthly paid employees are not excluded from the
benefits of holiday pay. However, the implementing rules on holiday pay promulgated by the then
Secretary of Labor excludes monthly paid employees from the said benefits by inserting under Rule IV,
Book III of the implementing rules, Section 2, which provides that: employees who are uniformly paid by
the month, irrespective of the number of working days therein, with a salary of not less than the statutory
or established minimum wage shall be presumed to be paid for all days in the month whether worked or
not." (132 SCRA 663, 672-673).

This ruling was reiterated by the Court en banc on August 28, 1985 in the case of Chartered Bank
Employees Association v. Ople, wherein it added that:chanrobles virtualawlibrary
chanrobles.com:chanrobles.com.ph "The questioned Sec. 2, Rule IV, Book III of the Integrated Rules
and the Secretarys Policy Instruction No. 9 add another excluded group, namely employees who are
uniformly paid by the month. While the additional exclusion is only in the form of a presumption that all
monthly paid employees have already been paid holiday pay, it constitutes a taking away or a
deprivation which must be in the law if it is to be valid. An administrative interpretation which diminishes
the benefits of labor more than what the statute delimits or withholds is obviously ultra vires." (138 SCRA
273, 282. See also CBTC Employees Union v. , Clave, January 7, 1986, 141 SCRA 9.) Lastly,
respondent corporation contends that mandamus does not lie to compel the performance of an act
which the law does not clearly enjoin as a duty. True it is also that mandamus is not proper to enforce a
contractual obligation, the remedy being an action for specific performance (Province of Pangasinan v.
Reparations Commission, November 29, 1977, 80 SCRA 376). In the case at bar, however, in view of
the above cited subsequent decisions of this Court clearly defining the legal duty to grant holiday pay to
monthly salaried employees, mandamus is an appropriate equitable remedy (Dionisio v. Paterno, July
23, 1980, 98 SCRA 677; Gonzales v. Government Service Insurance System, September 10, 1981, 107
SCRA 492). WHEREFORE, the questioned decision of respondent arbitrator is SET ASIDE and
respondent corporation is ordered to GRANT holiday pay to its monthly salaried employees. No costs.
SO ORDERED. Fernan, Alampay, Gutierrez, Jr. and Paras, JJ., concur.

[A.M. No. RTJ-04-1868. August 13, 2004]

RE: REQUEST OF JUDGE TITO G. GUSTILO THAT THE SECOND 25% GRANT OF THE SPECIAL
ALLOWANCE FOR JUDGES BE INCLUDED IN THE COMPUTATION OF HIS RETIREMENT
BENEFITS.

RESOLUTION

CALLEJO, SR., J.:

In his Letter dated May 26, 2004 addressed to Chief Justice Hilario G. Davide, Jr., Judge Tito G. Gustilo
of the Regional Trial Court of Iloilo City, Branch 23, avers that he is due to retire at the age of 70
(compulsory retirement) on September 29, 2004. By then, he would have served the Judiciary for 21
years; 7 years and 11-and-1/2 months of which as Executive Judge of the RTC of Iloilo City. Judge
Gustilo requests that, considering his retirement is barely one month from November 2004, the second
tranche of the Special Allowance granted to judges under Republic Act No. 9227[1] be included in the
computation of his retirement benefits.

To recall, Rep. Act No. 9227, which took effect on November 11, 2003,[2] granted additional
compensation in the form of Special Allowance to justices, judges and all other positions in the Judiciary
with the equivalent rank of justices of the Court of Appeals and judges of the Regional Trial Court.
Section 2 thereof reads:

Sec. 2. Grant of Special Allowances. All justices, judges and all other positions in the Judiciary with the
equivalent rank of justices of the Court of Appeals and judges of the Regional Trial Court as authorized
under existing laws shall be granted special allowances equivalent to one hundred percent (100%) of
the basic monthly salary specified for their respective salary grades under Republic Act No. 6758, as
amended, otherwise known as the Salary Standardization Law, to be implemented for a period of four
(4) years.

The grant of special allowances shall be implemented uniformly in such sums or amounts equivalent to
twenty-five percent (25%) of the basic salaries of the positions covered hereof. Subsequent
implementation shall be in such sums and amounts and up to the extent only that can be supported by
the funding source specified in Section 3 hereof.

Further, Section 5 of the same law provides:

Sec. 5. Inclusion in the Computation of Retirement Benefits. For purposes of retirement, only the
allowances actually received and the tranche or tranches of the special allowance already implemented
and received pursuant to this Act by the justices, judges and all other positions in the Judiciary with the
equivalent rank of justices of the Court of Appeals and judges of the Regional Trial Court as authorized
under existing laws shall, at the date of their retirement, be included in the computation of their
respective retirement benefits.

On March 9, 2004, in A.M. No. 03-12-04-SC (Re: Possible Means to Implement the Special Allowance
under R.A. 9227 and to Increase the Judiciary Development Fund), the Court promulgated the
GUIDELINES ON THE GRANT OF ADDITIONAL COMPENSATION IN THE FORM OF SPECIAL
ALLOWANCE FOR JUSTICES AND JUDGES IN THE JUDICIARY AND ALL OTHER OFFICIALS WITH
THE EQUIVALENT RANK OF JUSTICES OF THE COURT OF APPEALS AND JUDGES OF THE
REGIONAL TRIAL COURT. The Guidelines provide for the manner of the implementation in this wise:

4.1 The Special Allowance shall be implemented uniformly in such sums or amounts equivalent to
twenty-five percent (25%) of the actual basic monthly salaries for the positions covered starting 11
November 2003 until the one hundred percent (100%) special allowance is fully implemented.

If the source of fund is insufficient to cover the twenty-five percent (25%) special allowance for any year,
it shall be granted in such sums and amounts and up to the extent only that can be supported by the
funding source specified in Section 3 of Rep. Act No. 9227; provided that annually the special allowance
shall always be twenty-five percent (25%) of the actual basic monthly salary.

The Guidelines, likewise, reiterate that:

4.2 For purposes of computing the retirement benefits, only the special allowance actually received and
that which has accrued at the time of retirement shall be included.

Paragraph 7.0 thereof states that cases not covered thereby shall be referred to the Chief Justice for
resolution.

Judge Gustilo claims that pursuant to OCA Circular No. 48-2004 dated March 3, 2004, the first tranche
of the Special Allowance equivalent to 25% was implemented starting November 11, 2003. The next
25% (second tranche) will be implemented on November 11, 2004. In this connection, Judge Gustilo
appeals to the Chief Justice that, in the computation of his retirement benefits, the second tranche of the
Special

Allowance be included since his retirement is only one (1) month and twelve (12) days before its
implementation on November 11, 2004.

In support thereof, Judge Gustilo points out that in the past, Judges who retire in October are included in
the grant of the December 13th month pay. He, thus, invokes the liberal policy of the Court in granting
benefits to the underpaid Trial Court Judges.

In the Memorandum dated June 18, 2004 for the Chief Justice, the Office of the Court Administrator
(OCA)[3] recommends that the request of Judge Gustilo be granted. The OCA cites Judge Gustilos
service record in the Judiciary, which started on January 18, 1983, including his exemplary record of
disposing cases at an average of 2.25 cases each month. It also mentions that Judge Gustilo, as
Executive Judge, introduced several innovations in the Iloilo City courts and was able to manage well
the 17 judges under his administrative supervision.Further, Judge Gustilo was the recipient of several
awards and recognitions.[4] Considering the foregoing, the OCA concludes that it is but just and fair that
the second additional Special Allowance of 25% be granted to him and included in the computation of
his retirement benefits.[5]

In compliance with the Courts Resolution dated July 6, 2004, referring Judge Gustilos letter and the
OCAs memorandum to her for study and recommendation, Chief Attorney Edna E. Dio submitted her
Report dated July 15, 2004. The Chief Attorney recommends that Judge Gustilos request be denied for
not being in accord with Rep. Act No. 9227 and the Guidelines promulgated by the Court.

After a careful evaluation of Judge Gustilos letter, the OCAs memorandum and the Chief Attorneys
report, the Court, regrettably, cannot grant the request of Judge Gustilo.
It is axiomatic that when the law is clear, the function of the courts is simple application, not
interpretation or circumvention.[6] With respect to the manner of computation of the retirement benefits
in light of the Special Allowance granted under Rep. Act No. 9227, Section 5 thereof, quoted anew
below, could not be any clearer:

Sec. 5. Inclusion in the Computation of Retirement Benefits. For purposes of retirement, only the
allowances actually received and the tranche or tranches of the special allowance already implemented
and received pursuant to this Act by the justices, judges and all other positions in the Judiciary with the
equivalent rank of justices of the Court of Appeals and judges of the Regional Trial Court as authorized
under existing laws shall, at the date of their retirement, be included in the computation of their
respective retirement benefits.

A plain reading of the above provision shows that, for purposes of retirement, only the allowances
actually received and the tranche or tranches already received and implemented, upon the date of
retirement, shall be included in the computation of the retirement benefits. Otherwise put, before the
Special Allowance could be considered in the computation of retirement benefits, it should have been
actually received and the tranche or tranches thereof should have been already implemented and
received at the date of retirement.

Section 5 of Rep. Act No. 9227 is clear and unambiguous. There is no room for its interpretation.
Further, the foregoing exchange among the members of the Bicameral Conference Committee[7] on the
Disagreeing Provisions of Senate Bill (SB) No. 2018 and House Bill (HB) No. 5178[8] is particularly
instructive:

...

THE CHAIRMAN (SEN. PANGILINAN). Accepted.

Section 4. No questions? (Silence)

Section 5. (Silence)

Just again for purposes of record and clarification, Section 5, lines 3 and 4, For purposes of retirement,
only the allowances actually received, and so forth and so on, I just like to make it clear that the
computation of retirement would include the salary already being received, plus the special allowance.

THE CO-CHAIRMAN (REP. ANDAYA). Yes.

THE CHAIRMAN (SEN. PANGILINAN). Because this seems to suggest that you compute, rather the
computation of retirement will be on the basis only of the special allowance. So, at least, lets make that
on record.

THE CO-CHAIRMAN (REP. ANDAYA). Yes. On record, yes.

And I think that first word in the title of Section 5, Inclusion also explains that.

REP. LIBANAN. Mr. Chairman.

THE CO-CHAIRMAN (REP. ANDAYA). Congressman Libanan.

REP. LIBANAN. For the sake of further clarification, would it mean that if, for example, a judge retires
on the second year of the implementation, so his retirement benefits would be only computed.

THE CHAIRMAN (SEN. PANGILINAN). On the basis of what he is already receiving.

REP. LIBANAN. on the basis of [what] he is receiving, not on the 100 percent.

THE CO-CHAIRMAN (REP. ANDAYA). Actually receiving. That is correct.

REP. LIBANAN. Thank you, Mr. Chairman.

...

THE CHAIRMAN (SEN. PANGILINAN). Can we now go back to Section 5?

THE CHAIRMAN (REP. ANDAYA). Section 5, Mr. Chairman, just a suggestion but in the House panel

SEN. ARROYO. Kasi kung mandatory, doon sa voluntary, hindi naman dapat iyon.

THE CHAIRMAN (REP. ANDAYA). Ill be constrained to withdraw my proposal.

SEN. ARROYO. But your idea is very attractive.

SEN. VILLAR. In fact, its too attractive. In the first place, iyong allowance is already part of the
retirement benefit. Iyon, malaking bagay na iyon, eh.

Mr. Chairman, may add-on pa. Medyo sobra naman yata na iyon.

SEN. ARROYO. No, because by the accident of birth, when they retire, they retire on the second year,
halimbawa, 68 sila ngayon. Pagkatapos, mandatorily they have to retire at the age of 70, di iyong
benefits nila is

THE CHAIRMAN (SEN. PANGILINAN). For those born in 1934 up to 1937.

THE CHAIRMAN (REP. ANDAYA). But the fact here remains, the allowances they have been receiving
so far which is over and above, kasama na talaga sa retirement. I mean, sobra-sobra na, eh. Lahat na
lang ng allowance na puwedeng gawin, nandoon na, eh. At saka nagre-retire pa sila sa 70, ibig sabihin
talagang marami na iyan.

THE CHAIRMAN (SEN. PANGILINAN). Okay?

THE CHAIRMAN (REP. ANDAYA). Okay.

THE CHAIRMAN (SEN. PANGILINAN). So, as is?

THE CHAIRMAN (REP. ANDAYA). Nandoon na, eh.

THE CHAIRMAN (SEN. PANGILINAN). So, whether they retire at 60 or 70, whether they opt for early
retirement or mandatory retirement, they will receive the actual. Would it not be a good idea to
encourage them to stay on [9]

Thus, the congressional records as well as the text itself of Rep. Act No. 9227 reveal the unequivocal
intention of the lawmakers that only the Special Allowance actually received at the date of retirement
shall be included in the computation of the retirement benefits.

The Guidelines promulgated by this Court pursuant to Rep. Act No. 9227 is even more definite as it
used the term accrued in this wise: only the special allowance actually received and that which has
accrued at the time of retirement shall be included. As correctly reasoned by the Chief Attorney:

Notably, the phrase has accrued at the time of retirement is used in the Guidelines instead of the
tranche or tranches of the special allowance already implemented and received which is used in Section
5 of Rep. Act No. 9227. Nevertheless, the same meaning is conveyed. The word accrue means to come
into existence as an enforceable claim: vest as a right or to come by way of increase or addition: arise
as a growth or result or to be periodically accumulated in the process of time whether as an increase or
a decrease. Hence, a Special Allowance that has not yet come into existence as an enforceable claim or
has not yet vested on the recipient judge as a matter of right cannot be considered in the computation of
retirement benefits.[10]

Indeed, accrue in its past tense is in sense of due and demandable; vested.[11] In the case of Judge
Gustilo, on the date of his retirement, the second tranche of the Special Allowance has not accrued as
yet; hence, it cannot be said that the same is due and demandable or that it has vested insofar as he is
concerned.
The Chief Attorney, likewise, correctly posits that the strict application of Section 5 of Rep. Act No. 9227
is called for by the fact that, under Section 3 thereof,[12] the source for the Special Allowance is the
Judiciary Development Fund (JDF), established under Presidential Decree No. 1949, which basically
comes from the docket fees paid by litigants:

... As such, the JDF as a fund source is not constant or fixed in amount, as its amount depends on the
amount collected by the courts and the amount of increase in docket fees that the Court would
impose.The fact of the JDF becoming insufficient has been foreseen by the Court and is reflected in the
second paragraph of 4.1 of the Guidelines quoted above. It is worth noting that until now, the first
tranche of the Special Allowance has been received only for the months of 11 November 2003 until
February 2004. The delay in receipt thereof may continue if courts nationwide do not timely transmit the
reports of collections to the OCA, as the JDF should be disbursed only if the reports of collections and
the deposits under the JDF account for the Special Allowance tally in accordance with accounting and
auditing rules.[13]

While this Court had, in certain cases,[14] adopted a liberal stance in interpreting retirement laws in
favor of the retiree, it cannot do so in this case because, as earlier

stated, Section 5 of Rep. Act No. 9227 is quite clear and unambiguous. In other words, there is no room
for interpretation but only simple application of the law.

ACCORDINGLY, the request of Judge Tito G. Gustilo that the second 25% or second tranche of the
Special Allowance granted under Rep. Act No. 9227 be included in the computation of his retirement
benefits is DENIED.

SO ORDERED.

Davide, Jr., C.J., Puno, Panganiban, Quisumbing, Ynares-Santiago, Carpio, Austria-Martinez, Corona,
Carpio-Morales, Azcuna, Tinga, and Chico-Nazario, JJ., concur.

Sandoval-Gutierrez, J., on leave.

[1] An Act Granting Additional Compensation in the Form of Special Allowances for Justices, Judges
and all Other Positions in the Judiciary with the Equivalent Rank of Justices of the Court of Appeals and
Judges of the Regional Trial Court, and For Other Purposes.

[4] These awards are: (1) National Awardee of the 3rd PNP Anniversary on January 29, 1994 at Camp
Crame, Quezon City; (2) Plaque of Recognition for his services as Executive Judge given on March 4,
1991; (3) Plaque of Appreciation given by the IBP, Iloilo Chapter, on April 4, 1997; (4) Certificate of
Appreciation given at the Forum with Educators, Media and other Concerned Sectors on Enhancing
Communication Between the Judiciary and the Citizenry, given at the Days Hotel, Iloilo City, on
September 11, 1998; and (5) Certificate of Recognition for his assistance to the Supreme Court
Centenary Celebrations Executive Committee, given on June 11, 2001.

[7] The Senate Conferees were Senators Francis Pangilinan, Manuel Villar, Jr., Joker Arroyo, Edgardo
Angara and John Osmea.

The House of Representatives Conferees were Representatives Rolando Andaya, Jr., Marcelino
Libanan, Rodolfo Albano, Jr., Danton Bueser, Rolex Suplico, Gilbert Remulla and Bellaflor Angara-
Castillo.

[12] The said provision states:

Sec. 3. Funding Source. The amount necessary to implement the additional compensation in the form of
special allowances granted under this Act shall be sourced from, and charged against, the legal fees
originally prescribed, imposed and collected under Rule 141 of the Rules of Court prior to the
promulgation of the amendments under Presidential Decree No. 1949, dated July 18, 1984, and from
the increases in current fees and new fees which may be imposed by the Supreme Court of the
Philippines after the effectivity of this Act.
In the event that the said amounts are insufficient to cover the grant of allowances on the last year of
implementation of this Act, the National Government shall subsidize the special allowance granted for
justices, judges and all other positions in the Judiciary with the equivalent rank of justices of the Court of
Appeals and judges of the Regional Trial Court as authorized under existing laws in an amount not
exceeding One hundred sixty-five million pesos (Php165,000,000.00) per annum.

If the collections from any increase in current fees and any new fees imposed after the effectivity of this
Act exceed the amount needed to fund the special allowances granted to justices, judges and all other
positions in the Judiciary with the equivalent rank of justices of the Court of Appeals and judges of the
Regional Trial Court as authorized under existing laws, the surplus may be used by the Chief Justice of
the Supreme Court to grant additional allowances exclusively to other court personnel not covered by
the benefits granted under this Act.

SECOND DIVISION
ROOS INDUSTRIAL CONSTRUCTION, G.R. No. 172409
INC. and OSCAR TOCMO,
Petitioners, Present:
QUISUMBING, J.,
Chairperson,
CARPIO,
- versus - CARPIO MORALES,
TINGA, and
VELASCO, JR., JJ.
NATIONAL LABOR RELATIONS
COMMISSION and JOSE MARTILLOS,
Respondents. Promulgated:
February 4, 2008
DECISION
TINGA, J.:

In this Petition for Review on Certiorari[1] under Rule 45 of the 1997 Rules of Civil Procedure, petitioners
Roos Industrial Construction, Inc. and Oscar Tocmo assail the Court of Appeals[2] Decision dated 12
January 2006 in C.A. G.R. SP No. 87572 and its Resolution[3] dated 10 April 2006 denying their Motion
for Reconsideration.[4]

The following are the antecedents.

On 9 April 2002, private respondent Jose Martillos (respondent) filed a complaint against petitioners for
illegal dismissal and money claims such as the payment of

separation pay in lieu of reinstatement plus full backwages, service incentive leave, 13th month pay,
litigation expenses, underpayment of holiday pay and other equitable reliefs before the National Capital
Arbitration Branch of the National Labor Relations Commission (NLRC), docketed as NLRC NCR South
Sector Case No. 30-04-01856-02.

Respondent alleged that he had been hired as a driver-mechanic sometime in 1988 but was not made to
sign any employment contract by petitioners. As driver mechanic, respondent was assigned to work at
Carmona, Cavite and he worked daily from 7:00 a.m. to 10:00 p.m. at the rate of P200.00 a day. He was
also required to work during legal holidays but was only paid an additional 30% holiday pay. He likewise
claimed that he had not been paid service incentive leave and 13th month pay during the entire course
of his employment. On 16 March 2002, his employment was allegedly terminated without due
process.[5]

Petitioners denied respondents allegations. They contended that respondent had been hired on several
occasions as a project employee and that his employment was coterminous with the duration of the
projects. They also maintained that respondent was fully aware of this arrangement. Considering that
respondents employment had been validly terminated after the completion of the projects, petitioners
concluded that he is not entitled to separation pay and other monetary claims, even attorneys fees.[6]

The Labor Arbiter ruled that respondent had been illegally dismissed after finding that he had acquired
the status of a regular employee as he was hired as a driver with little interruption from one project to
another, a task which is necessary to the usual trade of his employer.[7] The Labor Arbiter pertinently
stated as follows:

x x x If it were true that complainant was hired as project employee, then there should have been project
employment contracts specifying the project for which complainants services were hired, as well as the
duration of the project as required in Art. 280 of the Labor Code. As there were four (4) projects where
complainant was allegedly assigned, there should have been the equal number of project employment
contracts executed by the complainant. Further, for every project termination, there should have been
the equal number of termination report submitted to the Department of Labor and Employment.
However, the record shows that there is only one termination [report] submitted to DOLE pertaining to
the last project assignment of complainant in Carmona, Cavite.

In the absence of said project employment contracts and the corresponding Termination Report to
DOLE at every project termination, the inevitable conclusion is that the complainant was a regular
employee of the respondents.

In the case of Maraguinot, Jr. v. NLRC, 284 SCRA 539, 556 [1998], citing capital Industrial Construction
Group v. NLRC, 221 SCRA 469, 473-474 [1993], it was ruled therein that a project employee may
acquire the status of a regular employee when the following concurs: (1) there is a continuous rehiring of
project employees even after the cessation of a project; and (2) the tasks performed by the alleged
project employee are vital, necessary and indispensable to the usual business or trade of the employer.
Both factors are present in the instant case. Thus, even granting that complainant was hired as a project
employee, he eventually became a regular employee as there was a continuous rehiring of this services.

xxx

In the instant case, apart from the fact that complainant was not made to sign any project employment
contract x x x he was successively transferred from one project after another, and he was made to
perform the same kind of work as driver.[8]

The Labor Arbiter ordered petitioners to pay respondent the aggregate sum of P224,647.17 representing
backwages, separation pay, salary differential, holiday pay, service incentive leave pay and 13th month
pay.[9]

Petitioners received a copy of the Labor Arbiters decision on 17 December 2003. On 29 December
2003, the last day of the reglementary period for perfecting an

appeal, petitioners filed a Memorandum of Appeal[10] before the NLRC and paid the appeal fee.
However, instead of posting the required cash or surety bond within the reglementary period, petitioners
filed a Motion for Extension of Time to Submit/Post Surety Bond.[11] Petitioners stated that they could
not post and submit the required surety bond as the signatories to the bond were on leave during the
holiday season, and made a commitment to post and submit the surety bond on or before 6 January
2004. The NLRC did not act on the motion. Thereafter, on 6 January 2004, petitioners filed a surety
bond equivalent to the award of the Labor Arbiter.[12]

In a Resolution[13] dated July 29, 2004, the Second Division of the NLRC dismissed petitioners appeal
for lack of jurisdiction. The NLRC stressed that the bond is an indispensable requisite for the perfection
of an appeal by the employer and that the perfection of an appeal within the reglementary period and in
the manner prescribed by law is mandatory and jurisdictional. In addition, the NLRC restated that its
Rules of Procedure proscribes the filing of any motion for extension of the period within which to perfect
an appeal. The NLRC summed up that considering that petitioners appeal had not been perfected, it had
no jurisdiction to act on said appeal and the assailed decision, as a consequence, has become final and
executory.[14] The NLRC likewise denied petitioners Motion for Reconsideration[15] for lack of merit in
another Resolution.[16] On 11 November 2004, the NLRC issued an entry of judgment declaring its
resolution final and executory as of 9 October 2004. On respondents motion, the Labor Arbiter ordered
that the writ of execution be issued to enforce the award. On 26 January 2005, a writ of execution was
issued.[17]

Petitioners elevated the dismissal of their appeal to the Court of Appeals by way of a special civil action
of certiorari. They argued that the filing of the appeal bond evinced their willingness to comply and was
in fact substantial compliance with the Rules. They likewise maintained that the NLRC gravely abused
its discretion in failing to consider the meritorious grounds for their motion for extension of time to

file the appeal bond. Lastly, petitioners contended that the NLRC gravely erred in issuing an entry of
judgment as the assailed resolution is still open for review.[18] On 12 January 2006, the Court of
Appeals affirmed the challenged resolution of the NLRC. Hence, the instant petition.

Before this Court, petitioners reiterate their previous assertions. They insist on the application of Star
Angel Handicraft v. National Labor Relations Commission, et al.[19] where it was held that a motion for
reduction of bond may be filed in lieu of the bond during the period for appeal. They aver that Borja
Estate v. Ballad,[20] which underscored the importance of the filing of a cash or surety bond in the
perfection of appeals in labor cases, had not been promulgated yet in 2003 when they filed their appeal.
As such, the doctrine in Borja could not be given retroactive effect for to do so would prejudice and
impair petitioners right to appeal. Moreover, they point out that judicial decisions have no retroactive
effect.[21]

The Court denies the petition.

The Court reiterates the settled rule that an appeal from the decision of the Labor Arbiter involving a
monetary award is only deemed perfected upon the posting of a cash or surety bond within ten (10)
days from such decision.[22] Article 223 of the Labor Code states:

ART. 223. Appeal.Decisions, awards or orders of the Labor Arbiter are final and executory unless
appealed to the Commission by any or both parties within ten (10) calendar days from receipt of such
decisions, awards, or orders.

In case of a judgment involving a monetary award, an appeal by the employer may be perfected only
upon the posting of a cash or surety bond issued by a reputable bonding company duly accredited by
the Commission in the amount equivalent to the monetary award in the judgment appealed from.

xxx

Contrary to petitioners assertion, the appeal bond is not merely procedural but jurisdictional. Without
said bond, the NLRC does not acquire jurisdiction over the appeal.[23]Indeed, non-compliance with such
legal requirements is fatal and has the effect of rendering the judgment final and executory.[24] It must
be stressed that there is no inherent right to an appeal in a labor case, as it arises solely from the grant
of statute.[25]

Evidently, the NLRC did not acquire jurisdiction over petitioners appeal within the ten (10)-day
reglementary period to perfect the appeal as the appeal bond was filed eight (8) days after the last day
thereof. Thus, the Court cannot ascribe grave abuse of discretion to the NLRC or error to the Court of
Appeals in refusing to take cognizance of petitioners belated appeal.

While indeed the Court has relaxed the application of this requirement in cases where the failure to
comply with the requirement was justified or where there was substantial compliance with the rules,[26]
the overpowering legislative intent of Article 223 remains to be for a strict application of the appeal bond
requirement as a requisite for the perfection of an appeal and as a burden imposed on the employer.[27]
As the Court held in the case of Borja Estate v. Ballad:[28]

The intention of the lawmakers to make the bond an indispensable requisite for the perfection of an
appeal by the employer is underscored by the provision that an appeal may be perfected only upon the
posting of a cash or surety bond. The word only makes it perfectly clear that the LAWMAKERS intended
the posting of a cash or surety bond by the employer to be

the exclusive means by which an employers appeal may be considered completed. The law however
does not require its outright payment, but only the posting of a bond to ensure that the award will be
eventually paid should the appeal fail. What petitioners have to pay is a moderate and reasonable sum
for the premium of such bond.[29]

Moreover, no exceptional circumstances obtain in the case at bar which would warrant a relaxation of
the bond requirement as a condition for perfecting the appeal. It is only in highly meritorious cases that
this Court opts not to strictly apply the rules and thus prevent a grave injustice from being done[30] and
this is not one of those cases.

In addition, petitioners cannot take refuge behind the Courts ruling in Star Angel. Pertinently, the Court
stated in Computer Innovations Center v. National Labor Relations Commission:[31]

Moreover, the reference in Star Angel to the distinction between the period to file the appeal and to
perfect the appeal has been pointedly made only once by this Court in Gensoli v. NLRC thus, it has not
acquired the sheen of venerability reserved for repeatedly-cited cases. The distinction, if any, is not
particularly evident or material in the Labor Code; hence, the reluctance of the Court to adopt such
doctrine. Moreover, the present provision in the NLRC Rules of Procedure, that the filing of a motion to
reduce bond shall not stop the running of the period to perfect appeal flatly contradicts the notion
expressed in Star Angel that there is a distinction between filing an appeal and perfecting an appeal.

Ultimately, the disposition of Star Angel was premised on the ruling that a motion for reduction of the
appeal bond necessarily stays the period for perfecting the appeal, and that the employer cannot be
expected to perfect the appeal by posting the proper bond until such time the said motion for reduction is
resolved. The unduly stretched-out distinction between the period to file an appeal and to perfect an
appeal was not material to the resolution of Star Angel, and thus could properly be considered as obiter
dictum.[32]

Lastly, the Court does not agree that the Borja doctrine should only be applied prospectively. In the first
place, Borja is not a ground-breaking precedent as it is a reiteration, emphatic though, of long standing
jurisprudence.[33] It is well to recall too our pronouncement in Senarillos v. Hermosisima, et al.[34] that
the judicial

interpretation of a statute constitutes part of the law as of the date it was originally passed, since the
Courts construction merely establishes the contemporaneous legislative intent that the interpreted law
carried into effect. Such judicial doctrine does not amount to the passage of a new law but consists
merely of a construction or interpretation of a pre-existing one, as is the situation in this case.[35]

At all events, the decision of the Labor Arbiter appears to be well-founded and petitioners ill-starred
appeal untenable.

WHEREFORE, the Petition is DENIED. Costs against petitioners.

SO ORDERED.

DANTE O. TINGA

Associate Justice

WE CONCUR:

LEONARDO A. QUISUMBING

Associate Justice

Chairperson
ANTONIO T. CARPIO CONCHITA CARPIO MORALES

Associate Justice Associate Justice

PRESBITERO J. VELASCO, JR.

Associate Justice

ATTESTATION

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

LEONARDO A. QUISUMBING

Associate Justice

Chairperson, Second Division

CERTIFICATION

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

REYNATO S. PUNO

Chief Justice