SANGALANG vs INTERMEDIATE APPELLATE COURT

G.R. No. 71169 December 22, 1988

Facts:

Jose Sangalang and wife, herein petitioners are residents of Jupiter Street, Makati Metro Manila.
Sangalang and the other petitioners who are also residents of Jupiter Street initially filed a case against
Ayala to enforce by specific performance restrictive easement upon property pursuant to stipulations
embodied in the deeds of sale covering the subdivision, and for damages. The other petitions were also
for the enforcement of the aforesaid restrictions stipulated in the deeds of sale executed by the Ayala
Corporation.

The lots which were acquired by the petitioners, were all sold by MDC subject to certain conditions and
easements contained in Deed Restrictions which formed a part of each deed of sale. When MDC sold
the above-mentioned lots to appellees' predecessors-in-interest, the whole stretch of the commercial
block between Buendia Avenue and Jupiter Street, from Reposo Street in the west to Zodiac Street in
the east, was still undeveloped. Altough it was not part of the original plan, MDC constructed a fence or
wall on the commercial block along Jupiter.

In 1975, the municipal council of Makati enacted its ordinance No. 81, providing for the zonification of
Makati (Exh. 18). Under this Ordinance, Bel-Air Village was classified as a Class A Residential Zone, with
its boundary in the south extending to the center line of Jupiter Street. Under the zoning classifications,
Jupiter Street, therefore, is a common boundary of Bel-Air Village and the commercial zone.

Gates had been installed by BAVA (Bell-Arat strategic locations across Jupiter Street which were manned
and operated by its own security guards who were employed to maintain, supervise and enforce traffic
regulations in the roads and streets of the village. Then, on January 17, 1977, the Office of the Mayor of
Makati directed that, in the interest of public welfare and for the purpose of easing traffic congestion,
the streets in Bel-Air Village should be opened for public use. The other streets in Bel-Air Village were
voluntarily opened except Jupiter Street. The Municipal Engineer of Makati in a letter addressed to
BAVA advised the latter to open for vehicular and pedestrian traffic the entire portion of Jupiter Street
from Makati Avenue to Reposo Street. Finally, the municipal officials of Makati concerned allegedly
opened, destroyed and removed the gates constructed/located at the corner of Reposo Street and
Jupiter Street as well as the gates/fences located/constructed at Jupiter Street and Makati Avenue
forcibly, and then opened the entire length of Jupiter Street to public traffic.

Petitioners brought the present action for damages against the defendant-appellant Ayala Corporation
predicated on both breach of contract and on tort or quasi-delict. After trial on the merits, the then
Court of First Instance favored the petitioners and awarded damages. Defendant is further ordered to
restore/reconstruct the perimeter wall at its original position in 1966 from Reposo Street in the west to
Zodiac Street in the east, at its own expense,

On appeal, CA reversed the lower court, finding the decision appealed from as not supported by the
facts and the law on the matter, it was set aside and another one entered dismissing the case for lack of
a cause of action.

Issues:
1. Whether or not Ayala Corporation is liable for damages as a result of the destruction of the perimeter
wall.

2. Whether or not the exercise of police power is valid.

Held:

1. NO. Jupiter Street lies as the boundary between Bel-Air Village and Ayala Corporation's commercial
section, it had been considered as a boundary not as a part of either the residential or commercial zones
of Ayala Corporation's real estate development projects, hence it cannot be said to have been "for the
exclusive benefit" of Bel-Air Village residents.

Jupiter Street lies as a mere boundary, a fact acknowledged by the authorities of Makati and the
National Government and, as a scrutiny of the records themselves reveals, by the petitioners
themselves, as the articles of incorporation of Bel-Air Village Association itself would confirm. As a
consequence, Jupiter Street was intended for the use by both -the commercial and residential blocks. It
was not originally constructed, therefore, for the exclusive use of either block, least of all the residents
of Bel-Air Village, but, we repeat, in favor of both, as distinguished from the general public. When the
wall was erected in 1966 and rebuilt twice, in 1970 and 1972, it was not for the purpose of physically
separating the two blocks. According to Ayala Corporation, it was put up to enable the Bel-Air Village
Association "better control of the security in the area, and as the Ayala Corporation's "show of
goodwill". That maintaining the wall was a matter of a contractual obligation on the part of Ayala, to be
pure conjecture. In fine, we cannot hold the Ayala Corporation liable for damages for a commitment it
did not make, much less for alleged resort to machinations in evading it.

2. Yes. While non-impairment of contracts is constitutionally guaranteed, the rule is not absolute, since
it has to be reconciled with the legitimate exercise of police power, i.e., "the power to prescribe
regulations to promote the health, morals, peace, education, good order or safety and general welfare
of the people.' Invariably described as "the most essential, insistent, and illimitable of powers" and "in a
sense, the greatest and most powerful attribute of government," the exercise of the power may be
judicially inquired into and corrected only if it is capricious, whimsical, unjust or unreasonable, there
having been a denial of due process or a violation of any other applicable constitutional guarantee.
Resolution No. 27, 1960 declaring the western part of High way 54, now E. de los Santos Avenue (EDSA,
for short) from Shaw Boulevard to the Pasig River as an industrial and commercial zone, was obviously
passed by the Municipal Council of Mandaluyong, Rizal in the exercise of police power to safeguard or
promote the health, safety, peace, good order and general welfare of the people in the locality.

Today is Friday, October 13, 2017

Republic of the Philippines

SUPREME COURT
Manila

EN BANC
 G.R. No. 33403 September 4, 1930

THIRTY-FIRST INFANTRY POST EXCHANGE and FIRST LIEUTENANT DAVID L. HARDEE, THIRTY-FIRST
INFANTRY, UNITED STATES ARMY, plaintiffs,
vs.
JUAN POSADAS, JR., Collector of Internal Revenue, Philippine Islands, defendant.

Wm. Taylor, Mark E. Guerin, and Thomas T. Trapnell for plaintiffs.

Attorney-General Jaranilla for defendant.

MALCOLM, J.:

The question involved in these original proceedings of prohibition is whether a tax may be levied by
the Government of the Philippine Islands on sales made by merchants to Post Exchanges of the United
States Army in the Philippines. The point of jurisdiction of this court has not been raised by the
Attorney-General in representation of the defendant, and we do not propose to be supercritical in this
respect.

The parties have submitted the case on the following agreed statement of facts:

1. The plaintiff, Thirty-first Infantry Post Exchange, is now and for all the times material to this suit has
been constituted as a post exchange in accordance with the Army Regulations (of which the court may
take judicial notice) and the laws of the United States, with its place of business in the Cuartel de Espaa
in the City of Manila, P. I. It is an agency within the United States Army, under the control of the officers
of the Army. It is recognized and authorized in general terms by the Congress of the United States in
various enactments. First Lieutenant David L. Hardee, Thirty-first Infantry, whose residence is in the City
of Manila, P. I., is the duly appointed and acting Exchange Officer of said exchange, and is charged with
the immediate conduct and management of the business of said plaintiff Exchange. The defendant, Juan
Posadas, jr., is the duly qualified and acting Collector of Internal Revenue of the Philippine islands, with
office and residence in the City of Manila, P. I.

2. The said plaintiff Exchange is designed for the accommodation, convenience, and assistance of the
personnel of the Army. All of the goods sold to and purchased by the said plaintiff Exchange are
intended for resale to and are in fact resold, as they have been in the past, to the officers, soldiers and
the civilian employees of the Army, and their families. The goods sold to and purchased by the said
plaintiff Exchange have consisted and do consist largely of sundry articles for personal use, such as
soaps, shaving materials, and other toilet articles, and other goods generally found in a well-stocked
general store. Such purchases and resales, though fully authorized by law and the Army Regulations, are
not specifically required by statutory enactment. The net proceeds derived from all such resales do not
accrue to the general funds of the United States, that is, they are not deposited in the Treasury of the
United States, but are used for the betterment of the condition of the enlisted personnel of the Army, to
the end that thereby the morale and efficiency of the armed forces of the United States may be
improved and increased.

3. In the course of its duly authorized business transactions, the said plaintiff Exchange, under the
direction of the said plaintiff David L. Hardee, as Exchange Officer, and his predecessors in that office,
has, during the period of several years last past, made many purchases of various and divers
commodities, goods, wares, and merchandise from various and divers merchants in the Philippine
Islands, and is continuing to do so, and like purchases by the said plaintiff Exchange from merchants in
the Philippine Islands are intended and contemplated as necessary in the conduct of its duly authorized
business.

4. Following many and divers of the aforesaid purchases by the said plaintiff Exchange, the defendant,
Juan Posadas, Jr., Collector of Internal Revenue of the Philippine Islands, and his predecessors in that
office, have collected from the merchants who made the sales of the commodities, goods, wares, and
merchandise to the plaintiff Exchange, taxes at the rate of one and one-half per centum on the gross
value in money of the commodities, goods, wares, and merchandise, sold by them to the plaintiff
Exchange, and based on the actual prices at which the sales were made, and the average amount of
money per annum for several years last past demanded and collected by the defendant and his
predecessors in office as such taxes on the aforesaid sales to the plaintiff Exchange has been several
thousand pesos, averaging more than two thousand pesos per annum since January 1, 1927.

5. The defendant persists in demanding and collecting such taxes and at the said rates on the sales of
commodities, goods, wares, and merchandise which are being effected by merchants in the Philippine
Islands to the plaintiff Exchange. He intends and expects to continue to demand and collect such taxes
and at said rates on sales of commodities, goods, wares, and merchandise sold by merchants in the
Philippine Islands to plaintiff Exchange, and all other Army post exchanges in the Philippine Islands,
unless certain statutes of the Philippine Islands and of the United States in respect thereof shall be
modified or repealed, or he be restrained and prohibited therefrom by judgment of the proper tribunal.
The statutes upon which the defendant relies as his authority for such demand and collection of taxes,
particularly, are section 1459 of Act. No. 2711, and Act No. 3243 of the public laws enacted by the
Philippine Legislature; also the Act of June 4, 1918 (40 Stat., 597) and the Act of March 3, 1927 (44 Stat.,
1390), enacted by the Congress of the United States, ratifying the said two enactments of the Philippine
Legislature.

6. The effect of the demand and collection of taxes by the defendant on the sales of such
commodities, goods, wares and merchandise thus sold to and bought by the plaintiff Exchange has
been, is, and in the future will be unless the defendant be commanded to desist and refrain from such
demand and collection, to increase the cost thereof to the plaintiff Exchange, by at least the amounts of
such taxes demanded and collected as aforesaid in each instance.

What is known as the sales tax is in force in the Philippines. A percentage tax of 1 1/2 per centum is
collected on merchants' sales. (Administrative Code, sec. 1459; Act No. 3243.) The taxes imposed by the
Philippine Legislature in said section 1459 and in Act No. 3243 have by Acts of Congress been "legalized
and ratified, and the collection of all such taxes . . . legalized, ratified, and confirmed to all intents and
purposes as if the same had by prior Act of Congress been specifically authorized and directed." (Acts of
Congress of June 4, 1918, and March 3, 1927, 40 Stat. L., 597, and 44 Stat. L., 1390.) Philippine law as
thus enacted and expressly confirmed by the Congress, makes particular mention of the persons exempt
from this tax, without, however, including in the enumeration commercial transactions with Army Post
Exchanges. On the other hand, our general law provides express exemptions from the other taxes for
the United States and its agencies. (Administrative Code, sec. 344, 1418, 1439, 1449 [s], 1450, 1474, and
1478.)

Taxes have been collected from merchants who make sales to Army Post Exchanges since 1904. (Act
No. 1189, sec. 139.) Similar taxes are paid by those who sell merchandise to the Philippine Government
through the Bureau of Supply (Ruling, Bureau of Internal Revenue, March 5, 1925, and prior
precedents), and we likewise assume, by those who do business with the United States Army and Navy
in the Philippines. Only in the case at bar has formal legal protest been made.

In 1916, the case of Walter E. Olsen & Co. vs. Rafferty ([1919], 39 Phil., 464), pertaining to the
payment of specific taxes by Army Post Exchanges, arose. The revenue laws at that time, as they do
now, provided that "no specific tax shall be collected on any articles sold and delivered directly to the
United States Army or Navy for actual use or issue by the Army or Navy, and any taxes which have been
paid on articles so sold and delivered for such use or issue shall be refunded upon such sale and delivery,
. . . ." Although in this case passing reference was made in the court below and in appellant's brief to
some of the larger constitutional aspects, the Supreme Court confined its decision to determining
whether or not merchandise, which is generally subject to the payment of internal revenue tax, is
relieved from said tax when it is sold to the Army or Navy of the United States for resale to individuals
by means or through the post exchanges or ship's stores. The court, in resolving against the contention
of the plaintiff merchant, said:

While "post exchanges" and "ship's stores" are institutions within the Army and Navy of the United
States, and are recognized by Acts of Congress, and are under the control of the Army and Navy, and are
organized for the convenience and assistance of the soldiers and sailors, we are not inclined to believe
that goods sold to the soldiers and sailors of the Army and Navy, even though they be sold through said
exchanges by the intervention of officers of the Army and Navy, are goods sold directly to the United
States Army or Navy for actual use or issue by the Army or Navy. They are goods sold for the use and
benefit of the post exchanges, etc., and not for the actual use or issue by the Army or Navy. We do not
believe that the exemption provided for in the above-quoted section applies to goods sold to the United
States Army and Navy to be resold to the individuals of said organization. The money used for the
purchase of merchandise sold through the post exchanges, etc., is not supplied by, nor for, the United
States Army and Navy. Neither does the money received in the resale of such merchandise through the
post exchanges, etc., become a part of the general funds of the Army and Navy. In our opinion, the sale
of merchandise through the post exchanges to the individuals of the United States Army and Navy are
not goods sold and delivered directly to the United States Army or Navy for the actual use or issue by
the Army or Navy and are therefore, not exempt from the payment of the internal revenue tax imposed
by the law. (Emphasis those of court.)

The laws to be applied are, in effect, Acts of the Congress of the United States, and so form a part of
Philippine Organic Law. (Mitsui Bussan Kaisha vs. Manila E. R. R. & L. Co. [1919], 39 Phil., 624.) We do
not wish to be guilty of overstating the proper principle, but it would seem that since no law of the
Congress forbids the taxation of merchants who deal with Army Post Exchanges, and since the Congress
has legalized the applicable law, and in doing so has granted no immunity from taxation to merchants
who deal with Army Post Exchanges, the Congress has permitted such transactions with Army Post
Exchanges, on the assumption that Post Exchanges are agencies of the United States, to be taxed by the
Philippine Government. It must be understood, however, that the waiver must be clear, and that every
well grounded doubt should be resolved in favor of the exemption. (Austin vs. Aldermen of Boston
[1869], 7 Wall., 694.)

As to the facts, the nature of Army Post Exchanges is explained in the stipulation of facts and in the
case of Walter E. Olsen & Co. vs. Rafferty, supra. In addition, it might be advisable to state that the
construction, equipment, and maintenance of post exchange buildings are provided for by appropriation
Acts of the Congress. The Court of Claims in holding an officer in charge of a post exchange not a retail
dealer in liquors, said that post exchanges "though conducted without financial liability to the
Government, are, in their creation and management, governmental agencies . . . ." (Dugan vs. U. S.
[1899], 34 Court of Claims, 458.) The Judge Advocate General has said that "a post exchange is a
voluntary unincorporated cooperative association of Army organizations, a kind of cooperative store, in
which all share in the benefits and all assume a position analogous to that of partners." (Opinion, J. A.
G., June 4, 1918.) Again, although we do not desire to overstate the matter, the rule is that whenever a
state engages in a business which is of a private nature, that business is not withdrawn from the taxing
power of the Nation, or, conversely stated, whenever the National Government permits an organization
under its control to engage in a business which is of a private nature, that business is not withdrawn
from the taxing power of the state. (South Carolina vs. U. S. [1905], 199 U. S., 437.)

The plaintiffs in this case are the Thirty-first Infantry Post Exchange and the Exchange Officer of that
Exchange. But the stipulation of facts concedes that it is the merchants who effect the sales to the Post
Exchange who pay the tax. And it is the officers, soldiers, and civilian employees and their families who
are benefited by the post exchange to whom the tax is ultimately shifted. Justice Holmes of the Supreme
Court of the United States had quite similar facts in mind when in his dissenting opinion in the case of
Panhandle Oil Co. vs. Knox ([1928], 277 U. S., 218), he said: "If the plaintiff in error had paid the tax and
had added it to the price, the Government would have had nothing to say." Here, it must again be stated
that it is not the vendors of merchandise who are protesting, but it is the Army Post Exchange which is
the complainant.

The foregoing might be sufficient to dispose of the case. However, we would not like to be charged
with dodging the more vital issues, and so will take under view the larger constitutional aspects of the
question.

Chief Justice Marshall was originally responsible for the rule that without Congressional consent, no
Federal agency or instrumentality can be taxed by state authority. (McCulloch vs. State of Maryland
[1819], 4 Wheat., 316; Jaybird Mining Co. vs. Weir [1926], 271 U. S., 609.) Naturally, in the course of
time, attempts have been made to extend the exemption from state taxation, established by the case of
McCulloch vs. State of Maryland, supra, beyond its terms. Only those agencies through which the
Federal Government immediately and directly exercises its sovereign powers are immune from the
taxing power of the states. The reason upon which the rule rests must be the guiding principle to control
its operation. The limitations upon the taxing power of the state must receive a practical construction
which does not seriously impair the taxing power of the Government imposing the tax. The effect of the
tax upon the functions of the Government and the nature of the governmental agency determine finally
the extent of the exemption. (Metcalf vs. Mitchell [1926], 269 U. S., 514; Thomson vs. Union Pacific
Railroad Co. [1869], 9 Wall., 579.)

It would be impracticable to point out all of the limitations to the general rule, but a few may be
noted. Thus in the well considered decision in Union Pacific Railroad Co. vs. Peniston ([1873], 18 Wall.,
5), it was said: "It cannot be that a state tax which remotely affects the efficient exercise of a federal
power is for that reason alone inhibited by the Constitution." Again, with more direct application,
although contained in a dissenting opinion, Justice Thompson, in Weston vs. City Council of Charleston
([1829], 2 Pet., 449), said: "The unqualified proposition that a State cannot directly or indirectly tax any
instrument or means employed by the general government in the execution of its power, cannot be
literally sustained. Congress has power to raise armies, such armies are made up of officers and soldiers,
and are instruments employed by the government in executing its powers; and although the army, as
such, cannot be taxed, yet it will not be claimed that all such officers and soldiers are exempt from State
taxation." The United States Supreme Court has held that the use of machinery and boats in the harbor
of San Juan, Porto Rico, in the performance of a dredging contract with the United States, does not
exempt them from location taxation. (Gromer vs. Standard Dredging Co. [1911], 224 U. S., 362.)

It has been contended during the course of our deliberations that, all other questions to one side, the
case is governed by the comparatively recent decision of the Supreme Court of the United States in the
case of Panhandle Oil Co. vs. Knox, supra. There it was held by a closely divided court that (1) A state tax
imposed on dealers in gasoline for the privilege of selling, and measured at so many cents per gallon of
gasoline sold, is void under the Federal Constitution as applied to sales to instrumentalities of the United
States, such as the Coast Guard Fleet and a Veterans' Hospital; (2) that the substance and legal effect is
to tax the sale, and thus burden and tax the United States, exacting tribute on its transactions for the
support of the State; and (3) that such an exaction infringes the right of the dealer to have the
constitutional independence of the United States in respect of such purchases remain untrammeled.
With all due deference to the pronouncements of the higher court which we are bound to abide by, we
are yet convinced that the cited case is not controlling. We will point out some of the differences
between the two cases. There the plaintiff in error was a private oil company which had been sued by
the state to recover taxes; here the plaintiffs are not the private individuals who paid the taxes but are
an Army Post Exchange and its Exchange Officer. There the law in question was an Act of the State
Legislature; here the laws in question are Acts of the Philippine Legislature which have been ratified by
the Congress of the United States and raised to the level of organic laws. There the right of the United
States to make purchases was derived from the United States' Constitution; here the right of the Army
Post Exchange to make purchases is derived from Army regulations and Army practice. There the sale
was made to instrumentalities authorized by the constitution, which consumed the merchandise; here
the sales were made to Army Post Exchanges not so constitutionally authorized, which merely acted as
intermediaries. There it must be taken for granted that the Coast Guard Fleet and the Veterans' Hospital
were constructed and operated by Government funds; here, except that buildings are provided by the
United States Government for the Army Post Exchanges, the latter are not so constructed and operated.

The majority decision in the Panhandle Oil case carries the Marshallian theory of national supremacy
just about to its extreme limits. We do not think that the present case falls within those limits. When a
merchant sells a case of hair pins to an Army post exchange, and the wife of an Army officer purchases a
package of those hair pins, and when a merchant sells a quantity of tobacco to an Army post exchange,
and a soldier provides himself with his tobacco; and when the merchants who perfect the sales make
good the required taxes, "the exertion of national power" is not so burdened or interfered with, and
"the exactions demanded" do not so infringe the constitutional independence of the United States as to
exempt the sales from taxation, which every one else, including the merchant who sells to the Philippine
Government, must pay. That is our understanding of the authorities and of the law.

There can exist no measure of doubt that the basic rule, together with its qualifications, applies not
only to the States of the American Union, but also to unincorporated territories with the status of the
Government of the Philippine Islands.

Placing some emphasis on the point of long acquiescence in the imposition of the sales tax on vendors
of merchandise to Army Post Exchanges; on the point that the Congress of the United States has
virtually sanctioned such a sales tax by confirming Philippine revenue laws without reservation; and on
the point that a kind of cooperative store in the Army is akin to a private business enterprise which is
not withdrawn from taxation, we desire with more emphasis to indicate the lack of standing of the
plaintiffs to contest the tax. On still broader grounds, we would consider the effects of the sales tax
upon the United States Army, and the nature of an Army Post Exchange. The tax laid upon Philippine
merchants who sell to Army Post Exchanges does not interfere with the supremacy of the United States
Government, or with the operations of its instrumentality, the United States Army, to such an extent or
in such a manner as to render the tax illegal. The tax does not deprive the Army of the power to serve
the Government as it was intended to serve it, or hinder the efficient exercise of its power.

We rule that an Army Post Exchange, although an agency within the United States Army, cannot
secure exemption from taxation for merchants who make sales to the Post Exchange. The question
must, therefore, be answered in the affirmative. The plaintiffs have not made out a case.

Wherefore, the complaint will be dismissed, with costs.

Avancea, C.J., Street, Villamor, Romualdez and Villa-Real, JJ., concur.

Separate Opinions

JOHNS, J., dissenting:

This was case tried and submitted upon a stipulation of facts, from which it appears that the plaintiff
is a post exchange operated under Army Regulations, of which the courts take judicial notice, and the
laws of the United States, with its place of business in the City of Manila. "It is an agency within the
United States Army, under the control of the officers of the Army. It is recognized and authorized in
general terms by the Congress of the United States in various enactments." First Lieutenant Hardee "is
its duly appointed and acting Exchange Officer, and is charged with the immediate conduct and
management of its business."

2. The said plaintiff Exchange is designed for the accommodation, convenience, and assistance of the
personnel of the Army. All of the goods sold to and purchased by the said plaintiff Exchange are
intended for resale to and are in fact resold, as they have been in the past, to the officers, soldiers and
the civilian employees of the Army, and their families. . . . Such purchases and resales, though fully
authorized by law and the Army Regulations, are not specifically required by statutory enactment. The
net proceeds derived from all such resales do not accrue to the general funds of the United States, that
is, they are not deposited in the Treasury of the United States, but are used for the betterment of the
condition of the enlisted personnel of the Army, to the end that thereby the morale and efficiency of the
armed forces of the United States may be improved and increased.

3. In the course of its duly authorized business transactions, the said plaintiff Exchange, under the
direction of the said plaintiff David L. Hardee, as Exchange Officer, and his predecessors in that office,
has, during the period of several years last past, made many purchases of various and divers
commodities, goods, wares, and merchandise from various and divers merchants in the Philippine
Islands, and is continuing to do so, and like purchases by the said plaintiff Exchange from merchants in
the Philippine Islands are intended and contemplated as necessary in the conduct of its duly authorized
business.

xxx xxx xxx

6. The effect of the demand and collection of taxes by the defendant on the sales of such
commodities, goods, wares, and merchandise thus sold to and bought by the plaintiff Exchange has
been, is, and in the future will be unless the defendant be commanded to desist and refrain from such
demand and collection, to increase the cost thereof to the plaintiff Exchange, by at least the amounts of
such taxes demanded and collected as aforesaid in each instance.

Army Regulations are prescribed by the Secretary of War, under section 161 of the Revised Statutes,
and have the force of law when they do not contravene statute law. When Congress permits regulations
to be promulgated and published and carried into effect year after year, legislative ratification must be
implied. (Maddux vs. United States, 20 Court of Claims, 193, 198), and in Chattamal vs. Collector of
Customs (42 Phil., 916-919), this court said that it would take judicial notice of Army Regulations.
Congress in every annual appropriation since June 30, 1902, has made an appropriation "For the
construction, equipment and maintenance of suitable buildings at military posts and stations for the
conduct of post exchange, school, library, reading lunch and amusement rooms."

In Dugan vs. United States, supra, at page 467 of the opinion, it is said that Army post exchanges, in
their creation and management, are "governmental agencies."

In Post Exchange, 31st Infantry, vs. Kinney, G. R. No. 30920,1 in speaking of them, this court said:

While they are in a sense associations of military organizations for business purposes, they are simply
governmental agencies or instrumentalities expressly recognized by Congress in the annual
appropriation acts, and are designed to carry out a governmental purpose. (Dugan vs. U. S., 34 Court of
Claims, 458.)"

Hence, we have a post exchange established and operated under Army Rules and Regulations
empowered and authorized to buy and sell its goods, wares, and merchandise to the personnel of the
Army, and the question is squarely presented as to whether or not it is liable for the payment of the
sales tax provided for by section 1459 of Act No. 2711 and Act No. 3243 of the Public Laws enacted by
the Philippine Legislature, as such laws are ratified by the Congress of the United States. It will be noted
that in neither section 1459 of Act No. 2711 nor Act No. 3243 or either act of Congress is there any
reference to sales made to the United States or any of its instrumentalities, and it must be conceded
that no State of the Union has the power to levy taxes upon property of the United States or its
instrumentalities without the consent of Congress.

Plaintiffs contend that if the Philippine Legislature intended that the tax in question should apply to
the sales made to the United States or its instrumentalities, they are void as against the Constitution,
citing 37 Cyc., p. 865, which says:

The United States has no authority to tax the property of a state, nor a state to extract revenue from
the property of the federal government, and from the nature of the case neither government will lay
taxes upon its own property. Hence as a general rule all public property is exempt from taxation, either
by express exemption or by necessary implication, including not only the property of the state itself, but
also the public property of its political subdivisions, such as counties and municipal corporations. While
in the absence of Constitutional prohibition the state may include in its scheme of taxation such
property of its own or of its municipal subdivisions, the presumption is always against an intention to do
so, and such property is impliedly exempt unless an intention to include it is clearly manifested.

As we construe the stipulation of facts and the Army Rules and Regulations, the United States has
created and operates the Army post exchange as an instrumentality for the carrying out of its functions
in the exercise of its constitutional powers "To raise and support armies," and "To make all laws which
shall be necessary for carrying into execution the foregoing powers."

It is stipulated that the plaintiff exchange "is designed for the accommodation, convenience, and
assistance of the personnel of the Army," and that the net proceeds of all such resales "are used for the
betterment of the condition of the enlisted personnel of the Army, to the end that thereby the morale
and efficiency of the armed forces of the United States may be improved and increased." In other
words, it is agreed that the post exchange is established and operated under Army Rules and
Regulations designed for the accommodation, convenience, and assistance of the personnel of the Army
"to the end that thereby the moral and efficiency of the armed forces of the United States may be
improved and increased," and yet in the exercise of that right post exchanges in the Philippine Islands
are required to pay a sales tax to the local government, the effect of which under paragraph 6 of the
stipulation of facts is "To increase the cost thereof to the plaintiff Exchange, by at least the amounts of
such taxes demanded, and collected as aforesaid." In other words, for the privilege of operating a post
exchange must pay a sales tax to the Government of the Philippine Islands.

In the case of Panhandle Oil Company vs. State of Mississippi (72 Law. ed., 857), the syllabus says:

1. States may not burden or interfere with the exertion of national power or make it a source of
revenue or take the funds raised or tax the means used for the performance of Federal functions.

2. A state may not impose a tax measured by the quantity sold upon the privilege of one of its citizens
of selling gasoline to the Federal government for use of its Coast Guard Fleet or Veterans' Hospital which
the United States is empowered by the Constitution to maintain and operate.

And in the opinion, it is said:

The validity of the taxes claimed is to be determined by the practical effect of enforcement in respect
of sales of the government. (Wagner vs. Covington, 251 U. S., 95, 102; 64 L. ed., 157, 167; 40 Sup. Ct.
Rep., 93.) A charge at the prescribed rate is made on account of every gallon acquired by the United
States. It is immaterial that the seller and not the purchaser is required to report and make payment to
the state. Sale and purchase constitute a transaction by which the tax is measured and on which the
burden rests. The amount of money claimed by the state rises and falls precisely as does the quantity of
gasoline so secured by the Government. It depends immediately upon the number of gallons. The
necessary operation of these enactments when so construed is directly to retard, impede and burden
the exertion by the United States, of its constitutional powers to operate the fleet and hospital.

It is true that decision was rendered by a divided court, but it is also true that the majority opinion is
the law of that court, and upon the stipulation of facts it would seem to apply to this case, and hence
should be followed by this court.

In the final analysis, you have this situation. The United States at its own expense maintains an army
in the Philippine Islands. Under long established rules and regulations, and as incidental to and as a part
of it, the United States Army maintains and operates its post exchanges, one of which is the plaintiff, to
improve and promote "the morale and efficiency of the armed forces of the United States."

Why then should the plaintiff be required to pay a sales tax to promote "the morale and efficiency" of
the personnel of the Army? Yet, in the final analysis, that is the legal effect of the majority opinion. It
would seem on principle that where the United States at its own expense maintains an army in the
Philippine Islands, and under Army Rules and Regulations has established and operates a post exchange,
to improve the "morale and efficiency" of its members, that the personnel of the Army which affords
that protection should be exempt from the payment of the sales tax to the Philippine Government
which does not pay a centavo for such protection.

The writ should be granted, and we dissent.

Ostrand, J., concurs.

Footnotes

JOHNS, J., dissenting:

1 Promulgated August 28, 1929, not reported.

The Lawphil Project - Arellano Law Foundation

R. No. 198753, March 25, 2015 - JOSE PEPE SANICO, Petitioner, v. PEOPLE OF THE
PHILIPPINES AND JENNIFER SON-TENIO, Respondent.

FIRST DIVISION

G.R. No. 198753, March 25, 2015

JOSE PEPE SANICO, Petitioner, v. PEOPLE OF THE PHILIPPINES AND JENNIFER

SON-TENIO, Respondent.

DECISION

BERSAMIN, J.:

The dismissal by the Regional Trial Court (RTC) of an appeal by an accused on the ground of his
failure to submit his memorandum on appeal should be nullified because the pertinent rule of
procedure governing the appeal specifies such submission as optional on his part, and commands
the resolution of the appeal by the RTC on the basis of the records of the trial court and of any
memoranda of appeal as the parties may file in the case.

The Case

This appeal directly assails the resolution promulgated on April 14, 2011 in C.A.-G.R. CR UDK
No. 0019 entitled People of the Philippines v. Jose Pepe Sanico, et al.,1 whereby the Court of
Appeals (CA) dismissed the petitioners petition to review and undo the dismissal of his appeal
by the RTC; and the subsequent resolution promulgated on September 15, 2011,2 denying his
motion for reconsideration.

Antecedents

The petitioner and Marsito Batiquin were criminally charged for trespassing (Criminal Case No.
3433-CR) and theft of minerals (Criminal Case No. 3434-CR) in the Municipal Circuit Trial
Court of Catmon-Carmen-Sogod, Cebu (MCTC). In due course, the MCTC rendered its
judgment on April 2, 2009, convicting the accused, disposing as follows:

WHEREFORE, and in view of the foregoing judgment is hereby rendered in Criminal Case No.
3434-CR finding the accused Jose Pepe Sanico and Marsito Batiquin guilty beyond reasonable
doubt for Violation of Section 103 of Republic Act No. 7942 otherwise known as the Philippine
Mining Act of 1995, and they are hereby both sentenced to suffer an imprisonment of Six (6)
Months and One (1) Day of Prision Correccional, as minimum, to Two (2) Years Four (4)
Months and One (1) day of Prision Correccional, as maximum, and to pay a fine of Ten
Thousand Pesos (P10,000.00) each, with subsidiary imprisonment in case of insolvency.

The truck with Plate No.GAX-119, as an instrument of the crime is hereby ordered confiscated
in favour of the government.

In addition, both accused are hereby ordered to solidarily pay private complainant Jennifer S.
Tenio actual damages in the amount of Four Million Forty Two Thousand and Five Hundred
Pesos (P4,042,500.00), Moral damages in the amount of Five Hundred Thousand Pesos
(P500,000.00), Exemplary Damages in the amount of Two Hundred Thousand Pesos
(P200,000.00), Attorneys Fees in the amount of One Hundred Thousand Pesos (P100,000.00)
and Litigation Expenses in the amount of Fifty Thousand Pesos (P50,000.00).

In Criminal Case No. 3433-CR Trespassing, the Court finds accused Jose Pepe Sanico and
Marsito Batiquin not guilty for failure of the prosecution to prove the guilt of the accused beyond
reasonable doubt.

SO ORDERED.3

On April 22, 2009, Sanicos counsel filed a notice of appeal in the MCTC.4 Consequently, on
January 5, 2010, the RTC, Branch 25, in Danao City ordered Sanico to file his memorandum on
appeal. Sanico did not comply; hence, the RTC ruled on March 16, 2010,5 as follows:

The motion of plaintiff is impressed with merit. The failure of the accused-appellants to file
Memorandum on Appeal is a ground for dismissal of the Appeal.

WHEREFORE, the appeal of the accused is ordered dismissed with prejudice.

SO ORDERED.6

On April 26, 2010, one Atty. Dennis Caete, another lawyer acting for Sanico, filed a motion for
reconsideration7 vis--vis the dismissal of the appeal, stating that Sanico had not filed the
memorandum on appeal because he had been beset with problems due to his wifes debilitating
illness which eventually claimed her life, as well as his counsel, Atty. Barings own medical
condition which caused her to forget how she got this case and whom to contact as principal
counsel hereof.

On June 1, 2010, the RTC denied the motion for reconsideration because of its lack of
verification and affidavit of merit; and because the supposed sickness of Sanicos wife and the
lapses of Atty. Baring were not justifiable reasons.8

On June 23, 2010, Sanico, through Atty. Caete, filed a petition for review in the CA,9 contesting
his conviction, and assailing the dismissal of his appeal for failure to file the memorandum on
appeal.10

On April 14, 2011, the CA denied the petition for review on the following grounds, namely: (a)
the docket fees were not paid; (b) there was no proper proof of service of a copy of the petition
for review on the adverse party; (c) the petitioner did not furnish to the RTC a copy of the
petition for review; (d) there was no affidavit of service; (e) no written explanation for not
resorting to personal filing was filed; (f) the documents appended to the petition were only plain
photocopies of the certified true copies; (g) no copies of pleadings and other material portions of
the record were attached; (h) the verification and certification of non-forum shopping were
defective due to failure to contain a statement that the allegations therein were based on the
petitioners personal knowledge; (i) the verification and certification of non-forum shopping did
not contain competent evidence of identity of the petitioner; and (j) the serial number of the
commission of the notary public and the office address of the notary public were not properly
indicated.11

The petitioner moved for reconsideration, but his motion was denied on September 15, 2011,12
with the CA holding:

Jurisprudence is replete with pronouncements in regard to the mandatory and jurisdictional

nature of the legal requirement to pay docket and appeal fees. Without such payment, the
appellate court does not acquire jurisdiction over the subject matter of the action and the
decision sought to be appealed from becomes final and executor. Further, the other infirmities
of the Petition, insofar as the lack of proper proof of service and failure to append material
portions of the record, necessarily warrant the dismissal of the Petition, given the mandatory
language of Section 3, Rule 42 of the 1997 Rules of Civil Procedure.

xxxx

Petitioner invoked that it could not be bound by the gross and inexcusable negligence of his
counsels. However, a client is generally bound by the acts, even mistakes, of his counsel in the
realm of procedural technique. In cases where the negligence of counsel is so gross, reckless
and inexcusable that the client is deprived of his day in court, the appropriate recourse is
provided under the Rules: x x x.

WHEREFORE, in view of the foregoing premises, appellants Motion for Reconsideration with
Application for Temporary Restraining Order and Preliminary injunction dated 31 May 2011 is
hereby DENIED.

SO ORDERED.13

In the meantime, the counsel for respondent Jennifer S. Tenio filed an Ex Parte Motion for Entry
of Judgment, which the RTC authorized the issuance of on March 28, 2011.14 Thence, Sanico
filed an omnibus motion to recall the order and to quash the entry of judgment,15 but the RTC
denied the omnibus motion on August 22, 2011, noting that Sanico did not provide the RTC with
a copy of his petition for review; hence, the RTC had no way of knowing about the pendency of
his petition for review in the CA; and that in any case, the CA had already denied his petition for
review, while his motion for reconsideration had yet to be acted upon by the CA.16 Sanicos
motion for reconsideration was denied by the RTC on October 3, 2011.17

The records show that the entry of judgment was issued on March 30, 2011,18 and the writ of
execution on April 19, 2011;19 and that execution sales covering several personal properties of
the petitioner were made on June 14 and June 16, 2011, and the certificates of sale were issued in
favor of Tenio.20

Issues

Hence, this appeal by petition for review on certiorari.

The petitioner contends that the CA erred in holding against him his former counsels gross and
inexcusable negligence, thereby depriving him of his right to have the conviction reviewed by
the RTC; that the CA committed reversible error in not nullifying the RTCs order dismissing the
appeal for failure to file a memorandum, and in not nullifying the entry of judgment issued by
the RTC despite the pendency of the petition for review in the CA; and that the CA further erred
in not remanding the case to the RTC for the review of the legal infirmities committed by the
MCTC in rendering its judgment of conviction.21

In her comment,22 Tenio avers that the appeal seeks to evaluate, assess and examine the findings
of the lower courts, which cannot be done in this appeal; and that the petitioner already lost all
his opportunities to contest the decision and orders by which he was aggrieved through the usual
process by not complying with the requirements under the Rules of Court to submit his appeal
memorandum to the RTC, and by filing a petition for review that was plagued with congenital
infirmities.23

The State, through the Office of the Solicitor General (OSG),24 submits that the CA did not err in
dismissing the petition for review for failure to comply with procedural requirements; that the
petitioner was bound by the mistakes of his counsel in the realm of procedural technique; that
there was no compelling reason to warrant the relaxation of the rules of procedure in favor of the
petitioner because, firstly, the dismissal of his appeal was in accord with Section 7, Rule 40 of
the Rules of Court; secondly, the decisions of the RTC rendered in the exercise of its appellate
jurisdiction were immediately executory without prejudice to an appeal; thirdly, the MCTC
validly acquired jurisdiction over the criminal case; and, finally, the variance in the mode of
commission of the offense was binding on the accused if he did not object to the evidence
showing that the crime was committed in a manner different from what was alleged.25

Ruling of the Court

The appeal is meritorious.

To start with, the RTC was guilty of the prejudicial error of misapplying the Rules of Court in its
dismissal of the appeal timely made by the petitioner. In dismissing the appeal for the sole reason
that he did not file the memorandum on appeal, the RTC wrongly relied on Section 7, Rule 40 of
the Rules of Court, which authorizes the dismissal of the appeal once the appellant fails to file
the memorandum on appeal, viz.:

Section 7. Procedure in the Regional Trial Court.

(a) Upon receipt of the complete record or the record on appeal, the clerk of court of the
Regional Trial Court shall notify the parties of such fact.

(b) Within fifteen (15) days from such notice, it shall be the duty of the appellant to submit a
memorandum which shall briefly discuss the errors imputed to the lower court, a copy of which
shall be furnished by him to the adverse party. Within fifteen (15) days from receipt of the
appellants memorandum, the appellee may file his memorandum. Failure of the appellant to
file a memorandum shall be a ground for dismissal of the appeal.

(c) Upon the filing of the memorandum of the appellee, or the expiration of the period to do so,
the case shall be considered submitted for decision. The Regional Trial Court shall decide the
case on the basis of the entire record of the proceedings had in the court of origin and such
memoranda as are filed.

The RTC thereby ignored Rule 122 of the Rules of Court, which specifically governed appeals in
criminal cases. The relevant portions of Rule 122 are the following:

Section 3. How appeal taken.

(a) The appeal to the Regional Trial Court, or to the Court of Appeals in cases decided by the
Regional Trial Court in the exercise of its original jurisdiction, shall be taken by filing a notice
of appeal with the court which rendered the judgment or final order appealed from and by
serving a copy thereof upon the adverse party.

xxxx

Section 8. Transmission of papers to appellate court upon appeal.Within five (5) days from
the filing of the notice of appeal, the clerk of the court with whom the notice of appeal was filed
must transmit to the clerk of court of the appellate court the complete record of the case, together
with said notice. The original and three copies of the transcript of stenographic notes, together
with the records, shall also be transmitted to the clerk of the appellate court without undue delay.
The other copy of the transcript shall remain in the lower court. (8a)
Section 9. Appeal to the Regional Trial Courts.

(a) Within five (5) days from perfection of the appeal, the clerk of court shall transmit the
original record to the appropriate Regional Trial Court.

(b) Upon receipt of the complete record of the case, transcripts and exhibits, the clerk of court of
the Regional Trial Court shall notify the parties of such fact.

(c) Within fifteen (15) days from receipt of said notice, the parties may submit memoranda or
briefs, or may be required by the Regional Trial Court to do so. After the submission of
such memoranda or briefs, or upon the expiration of the period to file the same, the
Regional Trial Court shall decide the case on the basis of the entire record of the case and
of such memoranda or briefs as may have been filed. (9a) (Emphasis supplied)

The failure to file the memorandum on appeal is a ground for the RTC to dismiss the appeal only
in civil cases. The same rule does not apply in criminal cases, because Section 9(c), supra,
imposes on the RTC the duty to decide the appeal on the basis of the entire record of the case
and of such memoranda or briefs as may have been filed upon the submission of the appellate
memoranda or briefs, or upon the expiration of the period to file the same. Hence, the dismissal
of the petitioners appeal cannot be properly premised on the failure to file the memorandum on
appeal.

Having timely perfected his appeal by filing the notice of appeal in the MCTC, the petitioner was
entitled to expect that the RTC would resolve his appeal in due course, whether he filed his
memorandum on appeal or not. The unwarranted dismissal of the appeal by the RTC was,
therefore, an outright denial of due process to him in a manner that occasioned severe prejudice
because his conviction was not reviewed despite his first-time appeal being a matter of right, and
because his conviction was then declared to have attained finality, causing the execution of the
decision as to its civil aspect.

We are appalled that the CA turned a blind eye to the egregious error of the RTC by limiting its
attention to the supposedly patent defects and shortcomings of the petitioners petition for
review. The foremost noted defect was the non-payment of the docket fees, which, in other
circumstances, would have alone warranted the outright rejection of the petition for review due
to the mandatory and jurisdictional character of the payment of the full amount of docket fees
within the prescribed period.26 Such payment was the condition sine qua non for the perfection
of the appeal by petition for review, and only by such payment could the CA have acquired
jurisdiction over the appeal.27 But the appeal of the conviction before the RTC had not yet been
completed, and, as such, the petition for review of the petitioner was logically premature. In
other words, it was plain to the CA that it could not validly act on the petition for review. To
insist otherwise would be unjust against the petitioner, considering that the wrong turn in
procedure that had generated the whole problem had been caused by the RTC.

The parties have argued on whether or not the negligence of the petitioners counsel should be
binding on the petitioner. In our view, however, we do not need to belabor the point with a
lengthy discussion. Without doubt, the petitioner could reasonably expect that his counsel would
afford to him competent legal representation. The mere failure of the counsel to observe a
modicum of care and vigilance in the protection of the interests of the petitioner as the client as
manifested in the multiple defects and shortcomings discovered in the petition for review was
gross negligence in any language because the defects were plainly avoidable by the simple
application of the relevant guidelines existing in the Rules of Court. If the incompetence of
counsel was so great and the error committed as a result was so serious that the client was
prejudiced by a denial of his day in court, the litigation ought to be re-opened to give to the client
another chance to present his case. The legitimate interests of the petitioner, particularly the right
to have his conviction reviewed by the RTC as the superior tribunal, should not be sacrificed in
the altar of technicalities.

The Court notes that the petitioner has raised several issues against the award of damages in
favor of Tenio.28 We defer from making any findings on such issues at this stage, however,
because the logical outcome is to remand the case to the RTC for appellate review as if the
appeal was filed on time, which it was. Meanwhile, the petitioner is entitled to be restored to his
situation at the time when the RTC wrongly dismissed his appeal. The RTC should quash the
execution enforced against him; order the restitution of whatever properties were levied and sold
on execution; and assiduously review the conviction.

Finally, it behooves the Court to remind all lower courts and their judges to be alert in
safeguarding the right of the parties to appeal. Although the right to appeal is statutory, it must
be respected and observed because it is an essential component of due process. What happened
herein was the uncharacteristic oversight of the RTC in the application of the proper governing
rules. There should have been no difficulty to discern the applicable rules, given the clear
distinction between the civil and the criminal procedures. The alertness could have avoided the
oversight, and prevented the waste of time by the petitioner who had to come all the way to this
Court to safeguard his right to appeal.

WHEREFORE, the Court GRANTS the petition for review on certiorari; REVERSES and
SETS ASIDE the resolutions promulgated on April 14, 2011 and September 15, 2011 by the
Court of Appeals in C.A.-G.R. CR UDK No. 0019 entitled People v. Jose Pepe: Sanico, et al.
respectively dismissing the petitioners petition for review assailing the dismissal of his appeal
by the Regional Trial Court, and denying his motion for reconsideration; ANNULS and SETS
ASIDE the orders issued on March 16, 2010, June 1, 2010, and August 22, 2011 by the
Regional Trial Court, Branch 25, in Danao City respectively dismissing his appeal, denying his
motion for reconsideration, and denying his omnibus motion to recall the order issued on March
28, 2011 for the issuance of the entry of judgment and to quash the entry of judgment;
QUASHES and VACATES the entry of judgment dated March 30, 2011 for lack of legal basis;
NULLIFIES all acts taken by virtue of the entry of judgment; REMANDS the records to the
Regional Trial Court for further proceedings as outlined in this decision; and ORDERS the
private respondent to pay the costs of suit.

SO ORDERED.

SECOND DIVISION
G.R. No. 188753, October 01, 2014

AM-PHIL FOOD CONCEPTS, INC., Petitioner, v. PAOLO JESUS T. PADILLA, Respondent.

DECISION

LEONEN, J.:

This is a petition for review on certiorari1 under Rule 45 of the Rules of Court, praying that the February
25, 2009 decision2 of the Court of Appeals sustaining the February 28, 2007 resolution3 of the National
Labor Relations Commission, and the July 3, 2009 resolution4 of the Court of Appeals denying petitioner
Am-Phil Food Concept, Inc.s (Am-Phil) motion for reconsideration, be annulled. The February 28, 2007
decision of the National Labor Relations Commission affirmed the May 9, 2005 decision5 of Labor
Arbiter Eric V. Chuanico that held that respondent Paolo Jesus T. Padilla (Padilla) was illegally dismissed.

Padillas position paper6 states that he was hired on April 1, 2002 as a Marketing Associate by Am-Phil, a
corporation engaged in the restaurant business.7 On September 29, 2002, Am-Phil sent Padilla a letter
confirming his regular employment.8 Sometime in the first week of March 2004, three (3) of Am-Phils
officers (Marketing Supervisor Elaine de Jesus, Area Director Art Latinazo, and Human Resources Officer
Eunice Tugab) informed Padilla that Am-Phil would be implementing a retrenchment program that
would be affecting three (3) of its employees, Padilla being one of them. The retrenchment program
was allegedly on account of serious and adverse business conditions, i.e., lack of demand in the market,
stiffer competition, devaluation of the Philippine peso, and escalating operation costs.9cralawlawlibrary

Padilla questioned Am-Phils choice to retrench him. He noted that Am-Phil had six (6) contractual
employees, while he was a regular employee who had a good evaluation record. He pointed out that
Am-Phil was actually then still hiring new employees. He also noted that Am-Phil's sales have not been
lower relative to the previous year.10cralawlawlibrary

In response, Am-Phil's three (3) officers gave him two options: (1) be retrenched with severance pay or
(2) be transferred as a waiter in Am-Phils restaurant, a move that entailed his
demotion.11cralawlawlibrary

On March 17, 2004, Am-Phil sent Padilla a memorandum notifying him of his retrenchment.12 Padilla
was paid separation pay in the amount of ?26,245.38. On April 20, 2004, Padilla executed a quitclaim
and release in favor of Am-Phil.13cralawlawlibrary

On July 28, 2004, Padilla filed the complaint14 for illegal dismissal (with claims for backwages, damages,
and attorneys fees), which is now subject of this petition. Apart from Am-Phil, Padilla impleaded Am-
Phils officers: Luis L. Vera, Jr., Winston L. Chan, Robert B. Epes, Richmond S. Yang, John Arthur Latinazo,
and Eunice D. Tugab.

For its defense, Am-Phil claimed that Padilla was not illegally terminated and that it validly exercised a
management prerogative. It asserted that Padilla was hired merely as part of an experimental
marketing program. It added that in 2003, it did suffer serious and adverse business losses and that, in
the first quarter of 2004, it was compelled to retrench employees so as to avoid further losses. Am-Phil
also underscored that Padilla executed a quitclaim and release in its favor. With respect to its
impleaded officers, Am-Phil claimed that the complaint should be dismissed as they have a personality
distinct and separate from Am-Phil.15cralawlawlibrary

On May 9, 2005, Labor Arbiter Eric V. Chuanico (Labor Arbiter Chuanico) rendered the decision finding
that Padilla was illegally dismissed.16 He noted that Am-Phil failed to substantiate its claim of serious
business losses and that it failed to comply with the procedural requirement for a proper retrenchment
(i.e., notifying the Department of Labor and Employment).17 He also held that the quitclaim and release
executed by Padilla is contrary to law.18 Finding, however, that Padilla failed to show bad faith on the
part of Am-Phils officers, Labor Arbiter Chuanico dismissed the complaint with respect to the latter and
held that only Am-Phil was liable to Padilla.19cralawlawlibrary

The dispositive portion of Labor Arbiter Chuanicos decision reads:chanRoblesvirtualLawlibrary

Prescinding from the forgoing, this office orders the respondent to pay the complainant limited
backwages from the time of his dismissal up to the time of rendition of this judgment. The computation
of backwages as prepared by the NLRC Computation Unit is herewith attached and made an integral
part of this decision. Given that the position had already been abolished and since separation pay had
already been received by the complainant, reinstatement is no longer viable [sic] remedy under the
present situation.

As the complainant was constrained to hire the services of a lawyer, attorneys [sic] fees are ordered
paid equivalent to ten percent of the total award thereof [sic]. Complainants [sic] claim for damages are
[sic] denied for lack of merit.

For failure of the complainant to properly substantiate that individual respondents are guilty of bad
faith or conduct towards him (in Sunio et. al. vs. NLRC GRN L 57767 [sic] January 31, 1984) only
respondent Am-Phil Food Concepts, Inc. is held solidarily liable towards [sic] the complainant.

SO ORDERED.20chanrobleslaw

On August 15, 2005, Am-Phil filed an appeal21 with the National Labor Relations Commission. Apart
from asserting its position that Padilla was validly retrenched, Am-Phil claimed that Labor Arbiter
Chuanico was in error in deciding the case despite the pendency of its motion for leave to file
supplemental rejoinder.22 Through this supplemental rejoinder, Am-Phil supposedly intended to
submit its audited financial statements for the years 2001 to 2004 and, thereby, prove that it had
suffered business losses. Am-Phil claimed that its right to due process was violated by Labor Arbiter
Chuanicos refusal to consider its 2001 to 2004 audited financial statements.23cralawlawlibrary

On February 28, 2007, the National Labor Relations Commission issued the resolution affirming Labor
Arbiter Chuanicos ruling, albeit clarifying that Labor Arbiter Chuanico wrongly used the word
solidarily in describing Am-Phils liability to Padilla.24cralawlawlibrary

With respect to Am-Phils claim that Labor Arbiter Chuanico erroneously ignored its 2001 to 2004
audited financial statements, the National Labor Relations Commission noted that a supplemental
rejoinder was not a necessary pleading in proceedings before labor arbiters. It added that, with the
exception of the 2004 audited financial statements, all of Am-Phils relevant audited financial
statements were already available at the time it submitted its position paper, reply, and rejoinder, but
that Am-Phil failed to annex them to these pleadings. The National Labor Relations Commission added
that, granting that this failure was due to mere oversight, Am-Phil was well in a position to attach them
in its memorandum of appeal but still failed to do so.25 Holding that Labor Arbiter Chuanico could not
be faulted for violating Am-Phils right to due process, the National Labor Relations Commission
emphasized that:chanRoblesvirtualLawlibrary

[O]mission by a party to rebut that which would have naturally invited an immediate pervasive and
stiff competition creates an adverse inference that either the controverting evidence to be presented
will only prejudice its case or that the uncontroverted evidence speaks the truth.26 (Citation omitted)

The dispositive portion of this National Labor Relations Commission resolution

reads:chanRoblesvirtualLawlibrary

WHEREFORE, the foregoing premises considered, the instant appeal is DIMISSED for lack of merit.
Accordingly, the decision appealed from is AFFIRMED.

However, the word solidarily in the last sentence of the decision should be deleted to conform with
the Labor Arbiters finding that the complainant-appellee failed to properly substantiate that individual
respondents-appellants were guilty of bad faith or conduct towards him.

SO ORDERED.27chanrobleslaw

In the resolution28 dated April 27, 2007, the National Labor Relations Commission denied Am-Phils
motion for reconsideration.

Am-Phil then filed with the Court of Appeals a petition for certiorari29 under Rule 65 of the 1997 Rules
of Civil Procedure.

On February 25, 2009, the Court of Appeals rendered the assailed decision30 dismissing Am-Phils
petition for certiorari and affirming the National Labor Relations Commissions February 28, 2007 and
April 27, 2007 resolutions. The Court of Appeals denied Am-Phil's motion for reconsideration in its July
3, 2009 resolution.

Hence, this petition.

Am-Phil insists on its position that it was denied due process and posits that the National Labor
Relations Commissions contrary findings are founded on illogical ratiocinations.31 It asserts that the
evidence support the conclusion that Padilla was validly dismissed, that it was an error to ignore the
quitclaim and release which Padilla had executed, and that Padillas retrenchment was a valid exercise
of management prerogative.32cralawlawlibrary

For resolution is the issue of whether respondent Paolo Jesus T. Padila was dismissed through a valid
retrenchment implemented by petitioner Am-Phil Food Concepts, Inc. Related to this, we must likewise
resolve the underlying issue of whether it was proper for Labor Arbiter Eric V. Chuanico to have ruled
that Padilla was illegally dismissed despite Am-Phils pending motion for leave to file supplemental
rejoinder.

Am-Phils right to due

process was not violated

Am-Phil faults Labor Arbiter Chuanico for not having allowed its motion for leave to file supplemental
rejoinder that included its 2001 to 2004 audited financial statements as annexes. These statements
supposedly show that Am-Phil suffered serious business losses. Thus, it claims that its right to due
process was violated.

Am-Phils motion for leave to file supplemental rejoinder,33 dated May 20, 2005,34 was filed on May
31, 2005,35 well after Labor Arbiter Chuanico promulgated his May 9, 2005 decision. Common sense
dictates that as the motion for leave to file supplemental rejoinder was filed after the rendition of the
decision, the decision could not have possibly taken into consideration the motion. Giving consideration
to a motion filed after the promulgation of the decision is not only unreasonable, it is impossible. It
follows that it is completely absurd to fault Labor Arbiter Chuanico for not considering a May 31 motion
in his May 9 decision

Even if we were to ignore the curious fact that the motion was filed after the rendition of the decision,
Labor Arbiter Chuanico was under no obligation to admit the supplemental rejoinder.

Rule V of the 2002 National Labor Relations Commission Rules of Procedure (2002 Rules), which were in
effect when Labor Arbiter Chuanico promulgated his decision on May 9, 2005,36
provides:chanRoblesvirtualLawlibrary

SECTION 4. SUBMISSION OF POSITION PAPERS / MEMORANDA. Without prejudice to the provisions of

the last paragraph, SECTION 2 of this Rule, the Labor Arbiter shall direct both parties to submit
simultaneously their position papers with supporting documents and affidavits within an inextendible
period of ten (10) days from notice of termination of the mandatory conference.

These verified position papers to be submitted shall cover only those claims and causes of action
raised in the complaint excluding those that may have been amicably settled, and shall be accompanied
by all supporting documents including the affidavits of their respective witnesses which shall take the
place of the latters direct testimony. The parties shall thereafter not be allowed to allege facts, or
present evidence to prove facts, not referred to and any cause or causes of action not included in the
complaint or position papers, affidavits and other documents.37 (Emphasis supplied)

....

SECTION 11. ISSUANCE OF AN ORDER SUBMITTING THE CASE FOR DECISION. After the parties have
submitted their position papers and supporting documents, and upon evaluation of the case the Labor
Arbiter finds no necessity of further hearing, he shall issue an order expressly declaring the submission
of the case for decision.38chanrobleslaw
From the provisions of the 2002 Rules, it is clear that a supplemental rejoinder, as correctly ruled by the
National Labor Relations Commission,39 is not a pleading which a labor arbiter is duty-bound to
accept.40 Even following changes to the National Labor Relations Commission Rules of Procedure in
2005 and 2011, a rejoinder has not been recognized as a pleading that labor arbiters must necessarily
admit. The 2005 and 2011 National Labor Relations Commission Rules of Procedure only go so far as to
recognize that a reply may be filed by the parties.41cralawlawlibrary

Thus, Labor Arbiter Chuanico was under no obligation to grant Am-Phils motion for leave to admit
supplemental rejoinder and, thereby, consider the supplemental rejoinders averments and annexes.
That Am-Phil had to file a motion seeking permission to file its supplemental rejoinder (i.e., motion for
leave to file) is proof of its own recognition that the labor arbiter is under no compulsion to accept any
such pleading and that the supplemental rejoinders admission rests on the labor arbiters discretion.

The standard of due process in labor cases was explained by this court in Sy v. ALC Industries,
Inc.:42cralawlawlibrary

Due process is satisfied when the parties are afforded fair and reasonable opportunity to explain their
respective sides of the controversy. In Mariveles Shipyard Corp. v. CA, we
held:chanRoblesvirtualLawlibrary

The requirements of due process in labor cases before a Labor Arbiter is satisfied when the parties
are given the opportunity to submit their position papers to which they are supposed to attach all the
supporting documents or documentary evidence that would prove their respective claims, in the event
that the Labor Arbiter determines that no formal hearing would be conducted or that such hearing was
not necessary.43 (Emphasis in the original)

Am-Phil filed three (3) pleadings with Labor Arbiter Chuanico: first, its position paper44 on September 9,
2004; second, its reply45 on September 30, 2004; and third, its rejoinder46 on October 11, 2004. It was
more than six (6) months after it had filed its rejoinder that it filed its motion for leave to admit
supplemental rejoinder on May 31, 2005.

Its three (3) pleadings having been allowed, Am-Phil had no shortage of opportunities to plead its claims
and to adduce its evidence. It has no basis for claiming that it was not afforded [a] fair and reasonable
opportunity to explain [its side] of the controversy.47 The filing of its motion for leave to admit
supplemental rejoinder represents nothing more than a belated and procedurally inutile attempt at
resuscitating its case.

Retrenchment and its

requirements

Article 283 of the Labor Code recognizes retrenchment as an authorized cause for terminating
employment. It states:chanRoblesvirtualLawlibrary

Art. 283. Closure of establishment and reduction of personnel. The employer may also terminate the
employment of any employee due to the installation of labor-saving devices, redundancy, retrenchment
to prevent losses or the closing or cessation of operation of the establishment or undertaking unless the
closing is for the purpose of circumventing the provisions of this Title, by serving a written notice on the
workers and the Ministry of Labor and Employment at least one (1) month before the intended date
thereof. In case of termination due to the installation of labor-saving devices or redundancy, the worker
affected thereby shall be entitled to a separation pay equivalent to at least his one (1) month pay or to
at least one (1) month pay for every year of service, whichever is higher. In case of retrenchment to
prevent losses and in cases of closures or cessation of operations of establishment or undertaking not
due to serious business losses or financial reverses, the separation pay shall be equivalent to one (1)
month pay or at least one-half (1/2) month pay for every year of service, whichever is higher. A fraction
of at least six (6) months shall be considered one (1) whole year.

In Sebuguero v. National Labor Relations Commission,48 this court explained the concept of
retrenchment as follows:chanRoblesvirtualLawlibrary

Retrenchment . . . is used interchangeably with the term "lay-off." It is the termination of employment
initiated by the employer through no fault of the employee's and without prejudice to the latter,
resorted to by management during periods of business recession, industrial depression, or seasonal
fluctuations, or during lulls occasioned by lack of orders, shortage of materials, conversion of the plant
for a new production program or the introduction of new methods or more efficient machinery, or of
automation. Simply put, it is an act of the employer of dismissing employees because of losses in the
operation of a business, lack of work, and considerable reduction on the volume of his business, a right
consistently recognized and affirmed by this Court.49chanrobleslaw

As correctly pointed out by Am-Phil, retrenchment entails an exercise of management prerogative. In

Andrada v. National Labor Relations Commission,50 this court stated:chanRoblesvirtualLawlibrary

Retrenchment is an exercise of managements prerogative to terminate the employment of its

employees -en masse, to either minimize or prevent losses, or when the company is about to close or
cease operations for causes not due to business losses.51chanrobleslaw

Nevertheless, as has also been emphasized in Andrada, the exercise of management prerogative is not
absolute:chanRoblesvirtualLawlibrary

A companys exercise of its management prerogatives is not absolute. It cannot exercise its
prerogative in a cruel, repressive, or despotic manner. We held in F.F. Marine Corp. v.
NLRC:chanRoblesvirtualLawlibrary

This Court is not oblivious of the significant role played by the corporate sector in the countrys
economic and social progress. Implicit in turn in the success of the corporate form in doing business is
the ethos of business autonomy which allows freedom of business determination with minimal
governmental intrusion to ensure economic independence and development in terms defined by
businessmen. Yet, this vast expanse of management choices cannot be an unbridled prerogative that
can rise above the constitutional protection to labor. Employment is not merely a lifestyle choice to
stave off boredom. Employment to the common man is his very life and blood, which must be protected
against concocted causes to legitimize an otherwise irregular termination of employment. Imagined or
undocumented business losses present the least propitious scenario to justify retrenchment.52
(Underscoring supplied, citation omitted)

Thus, retrenchment has been described as a measure of last resort when other less drastic means have
been tried and found to be inadequate.53cralawlawlibrary

Retrenchment is, therefore, not a tool to be wielded and used nonchalantly. To justify retrenchment, it
must be due to business losses or reverses which are serious, actual and real.54cralawlawlibrary

There are substantive requirements relating to the losses or reverses that must underlie a
retrenchment. That these losses are serious relates to their gravity and that they are actual and real
relates to their veracity and verifiability. Likewise, that a retrenchment is anchored on serious, actual,
and real losses or reverses is to say that the retrenchment is done in good faith and not merely as a
veneer to disguise the illicit termination of employees. Equally significant is an employers basis for
determining who among its employees shall be retrenched. Apart from these substantive requirements
are the procedural requirements imposed by Article 283 of the Labor Code.

Thus, this court has outlined the requirements for a valid retrenchment, each of which must be shown
by clear and convincing evidence, as follows:chanRoblesvirtualLawlibrary

(1)

that the retrenchment is reasonably necessary and likely to prevent business losses which, if already
incurred, are not merely de minimis, but substantial, serious, actual and real, or if only expected, are
reasonably imminent as perceived objectively and in good faith by the employer;
(2)

that the employer served written notice both to the employees and to the Department of Labor and
Employment at least one month prior to the intended date of retrenchment;
(3)

that the employer pays the retrenched employees separation pay equivalent to one month pay or at
least month pay for every year of service, whichever is higher;
(4)

that the employer exercises its prerogative to retrench employees in good faith for the advancement
of its interest and not to defeat or circumvent the employees right to security of tenure; and
(5)

that the employer used fair and reasonable criteria in ascertaining who would be dismissed and who
would be retained among the employees, such as status (i.e., whether they are temporary, casual,
regular or managerial employees), efficiency, seniority, physical fitness, age, and financial hardship for
certain workers.55 (Citations omitted)
Am-Phil failed to establish
compliance with the requisites
for a valid retrenchment

Am-Phils 2001 to 2004 audited financial statements, the sole proof upon which Am-Phil relies on to
establish its claim that it suffered business losses, have been deemed unworthy of consideration. These
audited financial statements were mere annexes to the motion for leave to admit supplemental
rejoinder which Labor Arbiter Chuanico validly disregarded. No credible explanation was offered as to
why these statements were not presented when the evidence-in-chief was being considered by the
labor arbiter. It follows that there is no clear and convincing evidence to sustain the substantive ground
on which the supposed validity of Padillas retrenchment rests.

Moreover, it is admitted that Am-Phil did not serve a written notice to the Department of Labor and
Employment one (1) month before the intended date of Padillas retrenchment, as required by Article
283 of the Labor Code.56cralawlawlibrary

While it is true that Am-Phil gave Padilla separation pay, compliance with none but one (1) of the many
requisites for a valid retrenchment does not absolve Am-Phil of liability.

Padillas quitclaim and release

does not negate his having been
illegally dismissed

It is of no consequence that Padilla ostensibly executed a quitclaim and release in favor of Am-Phil. This
courts pronouncements in F.F. Marine Corporation v. National Labor Relations Commission,57 which
similarly involved an invalid retrenchment, are of note:chanRoblesvirtualLawlibrary

Considering that the ground for retrenchment availed of by petitioners was not sufficiently and
convincingly established, the retrenchment is hereby declared illegal and of no effect. The quitclaims
executed by retrenched employees in favor of petitioners were therefore not voluntarily entered into by
them. Their consent was similarly vitiated by mistake or fraud. The law looks with disfavor upon
quitclaims and releases by employees pressured into signing by unscrupulous employers minded to
evade legal responsibilities. As a rule, deeds of release or quitclaim cannot bar employees from
demanding benefits to which they are legally entitled or from contesting the legality of their dismissal.
The acceptance of those benefits would not amount to estoppel. The amounts already received by the
retrenched employees as consideration for signing the quitclaims should, however, be deducted from
their respective monetary awards.58 (Citations omitted)

In sum, the Court of Appeals committed no error in holding that there was no grave abuse of discretion
amounting to lack or excess of jurisdiction on the part of the National Labor Relations Commission in
affirming the May 9, 2005 decision of Labor Arbiter Eric V. Chuanico holding that respondent Paolo Jesus
T. Padilla was illegally dismissed.
WHEREFORE, the petition for review on certiorari is DENIED. The February 25, 2009 decision and the
July 3, 2009 resolution of the Court of Appeals are AFFIRMED.

SO ORDERED.cralawred

Carpio, (Chairperson), Brion, Del Castillo, Mendoza, and Leonen, JJ., concur.

Endnotes:

1 Rollo, pp. 1028.

2 Id. at 3245.

3 Id. at 138144.

4 Id. at 4647.

5 Id. at 206212.

6 Id. at 259265. Position paper of Padilla.

7 Id. at 260.

8 Id. at 261.

9 Id. at 262.

10 Id.

11 Id.

12 Id.

13 Id. at 263.

14 Id. at 282.

15 Id. at 267277.

16 Id. at 209.

17 Id. at 210211.

18 Id. at 211.

19 Id. at 211212.
 20 Id.

21 Id. at 175199.

22 Id. at 183.

23 Id. at 183184.

24 Id. at 144.

25 Id. at 141142.

26 Id. at 142.

27 Id. at 144.

28 Id. at 145146.

29 Id. at 119135.

30 This decision was penned by Associate Justice Rosalinda Asuncion-Vicente and concurred in by
Chairman of the Third Division Associate Justice Martin S. Villarama, Jr. and Associate Justice Myrna
Dimaranan-Vidal of the Third Division of the Court of Appeals.

31Rollo, p. 19.

32 Id. at 2324.

33 Id. at 213214.

34 Id. at 214.

35 Id. at 213.

36 The 2005 NLRC Rules of Procedure took effect on January 7, 2006. See Garcia v. Philippine Airlines,
596 Phil. 510, 542 (2009) [Per J. Carpio Morales, En Banc].

37 See Tegimenta Chemical Phils. v. Buensalida, 577 Phil. 534, 541542 (2008) [Per J. Ynares-Santiago,
Third Division].

38 See Mariveles Shipyard Corp. v. Court of Appeals, 461 Phil. 249, 264265 (2003) [Per J.
Quisumbing, Second Division].

39Rollo, p. 142.

40 cf. 2005 and 2011 NLRC Rules of Procedure.

41 Per Rule V, sec. 7 of the 2005 NLRC Rules of Procedure:chanRoblesvirtualLawlibrary

 Section 7. Submission of Position Paper and Reply.

a) Subject to Sections 4 and 5 of this Rule, the Labor Arbiter shall direct the parties to submit
simultaneously their verified position papers with supporting documents and affidavits, if any, within an
inextendible period of ten (10) calendar days from the date of termination of the mandatory conciliation
and mediation conference.

b) The position papers of the parties shall cover only those claims and causes of action raised in the
complaint or amended complaint, excluding those that may have been amicably settled, and
accompanied by all supporting documents, including the affidavits of witnesses, which shall take the
place of their direct testimony.

c) A reply may be filed by any party within ten (10) calendar days from receipt of the position paper of
the adverse party.

d) In their position papers and replies, the parties shall not be allowed to allege facts, or present
evidence to prove facts and any cause or causes of action not referred to or included in the original or
amended complaint or petition.

Per Rule V, Section 11 of the 2011 NLRC Rules of Procedure:

SECTION 11. SUBMISSION OF POSITION PAPER AND REPLY.

a) Subject to Sections 9 and 10 of this Rule, the Labor Arbiter shall direct the parties to submit
simultaneously their verified position papers with supporting documents and affidavits, if any, on a date
set by him/her within ten (10) calendar days from the date of termination of the mandatory conciliation
and mediation conference.

b) No amendment of the complaint or petition shall be allowed after the filing of position papers,
unless with leave of the Labor Arbiter.

c) The position papers of the parties shall cover only those claims and causes of action stated in the
complaint or amended complaint, accompanied by all supporting documents, including the affidavits of
witnesses, which shall take the place of their direct testimony, excluding those that may have been
amicably settled.

d) Within ten (10) days from receipt of the position paper of the adverse party, a reply may be filed
on a date agreed upon and during a schedule set before the Labor Arbiter. The reply shall not allege
and/or prove facts and any cause or causes of action not referred to or included in the original or
amended complaint or petition or raised in the position paper. (Underscoring supplied)

42 589 Phil. 354 (2008) [Per J. Corona, First Division].

43 Id. at 361, citing Gutierrez v. Singer Sewing Machine Co., 458 Phil. 401, 409410 (2003) [Per J.
Quisumbing, Second Division] and Mariveles Shipyard Corp. v. Court of Appeals, 461 Phil. 249, 265
(2003) [Per J. Quisumbing, Second Division].

44Rollo, pp. 267277.

 45 Id. at 255258.

46 Id. at 242246.

47Sy v. ALC Industries, Inc., 589 Phil. 354, 361 (2008) [Per J. Corona, First Division].

48 318 Phil. 635 (1995) [Per J. Davide, Jr., First Division]. See also Andrada v. NLRC, 565 Phil. 821, 843
(2007) [Per J. Velasco, Jr., Second Division].

49 Id. at 646, citing J. A. Sibal, Philippine Legal Encyclopedia 502 (1986); LVN Pictures Employees and
Workers Association v. LVN Pictures, Inc., 146 Phil. 153, 164 (1970) [Per J. Ruiz Castro, En Banc]; and
Columbia Development Corp. v. Minister of Labor and Employment, 230 Phil. 520, 527 (1986) [Per J.
Fernan, Second Division].

50 565 Phil. 821 (2007) [Per J. Velasco, Jr., Second Division].

51 Id. at 840.

52 Id. at 839.

53Edge Apparel, Inc. v. NLRC, 349 Phil. 972, 983 (1998) [Per J. Vitug, First Division], citing Guerrero v.
NLRC, 329 Phil. 1069, 1076 (1996) [Per J. Puno, Second Division].

54Edge Apparel, Inc. v. NLRC, 349 Phil. 972, 982 (1998) [Per J. Vitug, First Division], citing Guerrero v.
NLRC, 329 Phil. 1069, 1074 (1996) [Per J. Puno, Second Division].

55Asian Alcohol Corporation v. NLRC, 364 Phil. 912, 926927 (1999) [Per J. Puno, Second Division].

56 Rollo, p. 42.

57 495 Phil. 140 (2005) [Per J. Tinga, Second Division].

58 Id. at 158159.

G.R. No. 18081 March 3, 1922

IN THE MATTER OF THE ESTATE OF CHEONG BOO, deceased.

MORA ADONG, petitioner-appellant,
vs.
CHEONG SENG GEE, opponent-appellant.

Kincaid, Perkins & Kincaid and P. J. Moore for petitioner-appellant.

Carlos A. Sobral for opponent-appellant.

MALCOLM, J.:
The two question presented for determination by these appeals may be framed as follows: Is a marriage
contracted in China and proven mainly by an alleged matrimonial letter, valid in the Philippines? Are the
marriage performed in the Philippines according to the rites of the Mohammedan religion valid? As the
decision of the Supreme Court on the last point will affect marriages consummated by not less than one
hundred and fifty thousand Moros who profess the Mohammedan faith, the transcendental importance
of the cause can be realized. We proposed to give to the subject the serious consideration which it
deserves.

Cheong Boo, a native of China, died intestate in Zamboanga, Philippine Islands, on August 5, 1919. He
left property worth nearly P100,000. The estate of the deceased was claimed, on the one hand, by
Cheong Seng Gee, who alleged that he was a legitimate child by a marriage contracted by Cheong Boo
with Tan Dit in China in 1895. The estate was claimed, on the other hand, by the Mora Adong who
alleged that she had been lawfully married to Cheong Boo in 1896 in Basilan, Philippine Islands, and her
daughters, Payang, married to Cheng Bian Chay, and Rosalia Cheong Boo, unmarried.

The conflicting claims to the estate of Cheong Boo were ventilated in the Court of First Instance of
Zamboanga. The trial judge, the Honorable Quirico Abeto, after hearing the evidence presented by both
sides, reached the conclusion, with reference to the allegations of Cheong Seng Gee, that the proof did
not sufficiently establish the Chinese marriage, but that because Cheong Seng Gee had been admitted to
the Philippine Islands as the son of the deceased, he should share in the estate as a natural child. With
reference to the allegations of the Mora Adong and her daughters Payang and Rosalia, the trial judge
reached the conclusion that the marriage between the Mora Adong and the deceased had been
adequately proved but that under the laws of the Philippine Islands it could not be held to be a lawful
marriage; accordingly, the daughters Payang and Rosalia would inherit as natural children. The order of
the trial judge, following these conclusions, was that there should be a partition of the property of the
deceased Cheong Boo between the natural children, Cheong Seng Gee, Payang, and Rosalia.

From the judgment of the Judge of First Instance both parties perfected appeals. As to the facts, we can
say that we agree in substance with the findings of the trial court. As to the legal issues submitted for
decision by the numerous assignments of error, these can best be resolved under two heads, namely:
(1) The validity of the Chinese marriage; and (2) the validity of the Mohammedan marriage.

1. Validity of the Chinese Marriage

The theory advanced on behalf of the claimant Cheong Seng Gee was that Cheong Boo was married in
the city of Amoy, China, during the second moon of the twenty-first year of the Emperor Quang Su, or,
according to the modern count, on February 16, 1985, to a young lady named Tan Dit. Witnesses were
presented who testified to having been present at the marriage ceremony. There was also introduced in
evidence a document in Chinese which in translation reads as follows:
One hundred years of life and health for both.

Your nephew, Tan Chao, respecfully answers the venerable Chiong Ing, father of the bridegroom,
accepting his offer of marriage, and let this document serve as proof of the acceptance of said marriage
which is to be celebrated during the merry season of the flowers.

I take advantage of this occasion to wish for your and the spouses much happiness, a long life, and
prolific issue, as noble and great as that which you brought forth. I consider the marriage of your son
Boo with my sister Lit Chia as a mandate of God and I hope that they treat each other with great love
and mutual courtesy and that both they and their parents be very happy.

Given during the second moon of the twenty-first year of the reign of the Emperor Quang Su.

Cheong Boo is said to have remained in China for one year and four months after his marriage during
which time there was born to him and his wife a child named Cheong Seng Gee. Cheong Boo then left
China for the Philippine Islands and sometime thereafter took to himself a concubine Mora by whom he
had two children. In 1910, Cheong Boo was followed to the Philippines by Cheong Seng Gee who, as
appears from documents presented in evidence, was permitted to land in the Philippine Islands as the
son of Cheong Boo. The deceased, however, never returned to his native hearth and seems never to
have corresponded with his Chinese wife or to have had any further relations with her except once
when he sent her P10.

The trial judge found, as we have said, that the proof did not sustain the allegation of the claimant
Cheong Seng Gee, that Cheong Boo had married in China. His Honor noted a strong inclination on the
part of the Chinese witnesses, especially the brother of Cheong Boo, to protect the interests of the
alleged son, Cheong Seng Gee, by overstepping the limits of truthfulness. His Honor also noted that
reliable witnesses stated that in the year 1895, when Cheong Boo was supposed to have been in China,
he was in reality in Jolo, in the Philippine Islands. We are not disposed to disturb this appreciation of fact
by the trial court. The immigration documents only go to show the relation of parent and child existing
between the deceased Cheong Boo and his son Cheong Seng Gee and do not establish the marriage
between the deceased and the mother of Cheong Seng Gee.

Section IV of the Marriage Law (General Order No. 68) provides that "All marriages contracted without
these Islands, which would be valid by the laws of the country in which the same were contracted, are
valid in these Islands." To establish a valid foreign marriage pursuant to this comity provision, it is first
necessary to prove before the courts of the Islands the existence of the foreign law as a question of fact,
and it is then necessary to prove the alleged foreign marriage by convincing evidence.

As a case directly in point is the leading one of Sy Joc Lieng vs. Encarnacion ([1910]), 16 Phil., 137;
[1913], 228 U.S., 335). Here, the courts of the Philippines and the Supreme Court of the United States
were called upon to decide, as to the conflicting claims to the estate of a Chinese merchant, between
the descendants of an alleged Chinese marriage and the descendants of an alleged Philippine marriage.
The Supreme Courts of the Philippine Islands and the United States united in holding that the Chinese
marriage was not adequately proved. The legal rule was stated by the United States Supreme Court to
be this: A Philippine marriage, followed by forty years of uninterrupted marital life, should not be
impugned and discredited, after the death of the husband and administration of his estate, though an
alleged prior Chinese marriage, "save upon proof so clear, strong, and unequivocal as to produce a
moral conviction of the existence of such impediment." Another case in the same category is that of Son
Cui vs. Guepangco ([1912], 22 Phil., 216).

In the case at bar there is no competent testimony as to what the laws of China in the Province of Amoy
concerning marriage were in 1895. As in the Encarnacion case, there is lacking proof so clear, strong,
and unequivocal as to produce a moral conviction of the existence of the alleged prior Chinese marriage.
Substitute twenty-three years for forty years and the two cases are the same.
The lower court allowed the claimant, Cheong Seng Gee, the testamentary rights of an acknowledged
natural child. This finding finds some support in Exhibit 3, the affidavit of Cheong Boo before the
American Vice-Consul at Sandakan, British North Borneo. But we are not called upon to make a
pronouncement on the question, because the oppositor-appellant indicates silent acquiescence by
assigning no error.

2. Validity of the Mohammedan Marriage

The biographical data relating to the Philippine odyssey of the Chinaman Cheong Boo is fairly complete.
He appears to have first landed on Philippine soil sometime prior to the year 1896. At least, in the year
las mentioned, we find him in Basilan, Philippine Islands. There he was married to the Mora Adong
according to the ceremonies prescribed by the book on marriage of the Koran, by the Mohammedan
Iman (priest) Habubakar. That a marriage ceremony took place is established by one of the parties to the
marriage, the Mora Adong, by the Iman who solemnized the marriage, and by other eyewitnesses, one
of whom was the father of the bride, and another, the chief of the rancheria, now a municipal councilor.
The groom complied with Quranic law by giving to the bride a dowry of P250 in money and P250 in
goods.

The religious rites began with the bride and groom seating themselves in the house of the father of the
bride, Marahadja Sahibil. The Iman read from the Koran. Then the Iman asked the parents if they had
any objection to the marriage. The marital act was consummated by the groom entering the woman's
mosquito net.

From the marriage day until the death of Cheong Boo, twenty-three years later, the Chinaman and the
Mora Adong cohabited as husband and wife. To them were born five children, two of whom, Payang and
Rosalia, are living. Both in his relations with Mora Adong and with third persons during his lifetime,
Cheong Boo treated Adong as his lawful wife. He admitted this relationship in several private and public
documents. Thus, when different legal documents were executed, including decrees of registration,
Cheong Boo stated that he was married to the Mora Adong while as late as 1918, he gave written
consent to the marriage of his minor daughter, Payang.

Notwithstanding the insinuation of counsel for the Chinese appellant that the custom is prevalent
among the Moros to favor in their testimony, a relative or friend, especially when they do not swear on
the Koran to tell the truth, it seems to us that proof could not be more convincing of the fact that a
marriage was contracted by the Chinaman Cheong Boo and the Mora Adong, according to the
ceremonies of the Mohammedan religion.

It is next incumbent upon us to approach the principal question which we announced in the very
beginning of this decision, namely, Are the marriages performed in the Philippines according to the rites
of the Mohammedan religion valid? Three sections of the Marriage Law (General Order No. 68) must be
taken into consideration.

Section V of the Marriage Law provides that "Marriage may be solemnized by either a judge of any court
inferior to the Supreme Court, justice of the peace, or priest or minister of the Gospel of any
denomination . . ." Counsel, failing to take account of the word "priest," and only considering the phrase
"minister of the Gospel of any denomination" would limit the meaning of this clause to ministers of the
Christian religion. We believe this is a strained interpretation. "Priest," according to the lexicographers,
means one especially consecrated to the service of a divinity and considered as the medium through
whom worship, prayer, sacrifice, or other service is to be offered to the being worshipped, and pardon,
blessing, deliverance, etc., obtained by the worshipper, as a priest of Baal or of Jehovah; a Buddhist
priest. "Minister of the Gospel" means all clergymen of every denomination and faith. A "denomination"
is a religious sect having a particular name. (Haggin vs. Haggin [1892], 35 Neb., 375; In re Reinhart, 9 O.
Dec., 441; Hale vs. Everett [1868], 53 N. H. 9.) A Mohammedan Iman is a "priest or minister of the
Gospel," and Mohammedanism is a "denomination," within the meaning of the Marriage Law.

The following section of the Marriage Law, No. VI, provides that "No particular form for the ceremony of
marriage is required, but the parties must declare, in the presence of the person solemnizing the
marriage, that they take each other as husband and wife." The law is quite correct in affirming that no
precise ceremonial is indispensable requisite for the creation of the marriage contract. The two
essentials of a valid marriage are capacity and consent. The latter element may be inferred from the
ceremony performed, the acts of the parties, and habit or repute. In this instance, there is no question
of capacity. Nor do we think there can exist any doubt as to consent. While it is true that during the
Mohammedan ceremony, the remarks of the priest were addressed more to the elders than to the
participants, it is likewise true that the Chinaman and the Mora woman did in fact take each other to be
husband and wife and did thereafter live together as husband and wife. (Travers vs. Reinhardt [1907],
205 U.S., 423.

It would be possible to leave out of view altogether the two sections of the Marriage Law which have
just been quoted and discussed. The particular portion of the law which, in our opinion, is controlling, is
section IX, reading as follows: "No marriage heretofore solemnized before any person professing to have
authority therefor shall be invalid for want of such authority or on account of any informality,
irregularity, or omission, if it was celebrated with the belief of the parties, or either of them, that he had
authority and that they have been lawfully married."

The trial judge in construing this provision of law said that he did not believe that the legislative
intention in promulgating it was to validate marriages celebrated between Mohammedans. To quote
the judge:

This provisions relates to marriages contracted by virtue of the provisions of the Spanish law before
revolutionary authorized to solemnized marriages, and it is not to be presumed that the legislator
intended by this law to validate void marriages celebrated during the Spanish sovereignty contrary to
the laws which then governed.

What authority there is for this statement, we cannot conceive. To our mind, nothing could be clearer
than the language used in section IX. Note for a moment the all embracing words found in this section:

"No marriage" Could more inclusive words be found? "Heretofore solemnized" Could any other
construction than that of retrospective force be given to this phrase? "Before any person professing to
have authority therefor shall be invalid for want of such authority" Could stronger language than this
be invoked to announce legislative intention? "Or on account of any informality, irregularity, or
omission" Could the legislative mind frame an idea which would more effectively guard the marriage
relation against technicality? "If it was celebrated with the belief of the parties, or either of them, that
he had authority and that they have been lawfully married" What was the purpose of the legislator
here, if it was not to legalize the marriage, if it was celebrated by any person who thought that he had
authority to perform the same, and if either of the parties thought that they had been married? Is there
any word or hint of any word which would restrict the curative provisions of section IX of the Marriage
Law to Christian marriages? By what system of mental gymnastics would it be possible to evolve from
such precise language the curious idea that it was restricted to marriages performed under the Spanish
law before the revolutionary authorities?

In view of the importance of the question, we do not desire to stop here but would ascertain from other
sources the meaning and scope of Section IX of General Order No. 68.

The purpose of the government toward the Mohammedan population of the Philippines has, time and
again, been announced by treaty, organic law, statutory law, and executive proclamation. The Treaty of
Paris in its article X, provided that "The inhabitants of the territories over which Spain relinquishes or
cedes her sovereignty shall be secured Instructions to the Philippine Commission imposed on every
branch of the Government of the Philippine Islands the inviolable rule "that no law shall be made
respecting an establishment of religion or prohibiting the free exercise thereof, and that the free
exercise and enjoyment of religious profession and worship, without discrimination or preference, shall
forever be allowed ... That no form of religion and no minister of religion shall be forced upon any
community or upon any citizen of the Islands; that, upon the other hand, no minister of religion shall be
interfered with or molested in following his calling, and that the separation between state and church
shall be real, entire, and absolute." The notable state paper of President McKinley also enjoined the
Commission, "to bear in mind that the Government which they are establishing is designed . . . for the
happiness, peace, and prosperity of the people of the Philippine Islands" and that, therefore, "the
measures adopted should be made to conform to their customs, their habits, and even their prejudices.
. . . The Philippine Bill and the Jones Law reproduced the main constitutional provisions establishing
religious toleration and equality.

Executive and legislative policy both under Spain and the United States followed in the same path. For
instance, in the Treaty of April 30, 1851, entered into by the Captain General of the Philippines and the
Sultan of Sulu, the Spanish Government guaranteed "with all solemnity to the Sultan and other
inhabitants of Sulu the free exercise of their religion, with which it will not interfere in the slightest way,
and it will also respect their customs." (See further Decree of the Governor-General of January 14,
1881.) For instance, Act No. 2520 of the Philippine Commission, section 3, provided that "Judges of the
Court of First Instance and justices of the peace deciding civil cases in which the parties are
Mohammedans or pagans, when such action is deemed wise, may modify the application of the law of
the Philippine Islands, except laws of the United States applicable to the Philippine Islands, taking into
account local laws and customs. . . ." (See further Act No. 787, sec. 13 [ j]; Act No. 1283, sec. 6 [b]; Act
No. 114 of the Legislative Council amended and approved by the Philippine Commission; Cacho vs.
Government of the United States [1914], 28 Phil., 616.) Various responsible officials have so oft
announced the purpose of the Government not to interfere with the customs of the Moros, especially
their religious customs, as to make quotation of the same superfluous.

The retrospective provisions of the Philippine Marriage Law undoubtedly were inspired by the
governmental policy in the United States, with regard to the marriages of the Indians, the Quakers, and
the Mormons. The rule as to Indians marriages is, that a marriage between two Indians entered into
according to the customs and laws of the people at a place where such customs and laws are in force,
must be recognized as a valid marriage. The rule as to the Society of Quakers is, that they will be left to
their own customs and that their marriages will be recognized although they use no solemnization. The
rule as to Mormon marriages is that the sealing ceremony entered into before a proper official by
members of that Church competent to contract marriage constitutes a valid marriage.
The basis of human society throughout the civilized world is that of marriage. Marriage in this
jurisdiction is not only a civil contract, but, it is a new relation, an institution in the maintenance of
which the public is deeply interested. Consequently, every intendment of the law leans toward legalizing
matrimony. Persons dwelling together in apparent matrimony are presumed, in the absence of any
counter-presumption or evidence special to the case, to be in fact married. The reason is that such is the
common order of society, and if the parties were not what they thus hold themselves out as being, they
would be living in the constant violation of decency and of law. A presumption established by our Code
of Civil Procedure is "that a man and woman deporting themselves as husband and wife have entered
into a lawful contract of marriage.:" (Sec. 334, No. 28.) Semper praesumitur pro matrimonio Always
presume marriage. (U. S. vs. Villafuerte and Rabano [1905], 4 Phil., 476; Son Cui vs. Guepangco, supra;
U.S. vs. Memoracion and Uri [1916], 34 Phil., 633; Teter vs. Teter [1884], 101 Ind., 129.)

Section IX of the Marriage Law is in the nature of a curative provision intended to safeguard society by
legalizing prior marriages. We can see no substantial reason for denying to the legislative power the
right to remove impediments to an effectual marriage. If the legislative power can declare what shall be
valid marriages, it can render valid, marriages which, when they took place, were against the law. Public
policy should aid acts intended to validate marriages and should retard acts intended to invalidate
marriages. (Coghsen vs. Stonington [1822], 4 Conn, 209; Baity vs. Cranfill [1884], 91 N. C., 273.)

The courts can properly incline the scales of their decisions in favors of that solution which will mot
effectively promote the public policy. That is the true construction which will best carry legislative
intention into effect. And here the consequences, entailed in holding that the marriage of the Mora
Adong and the deceased Cheong Boo, in conformity with the Mohammedan religion and Moro customs,
was void, would be far reaching in disastrous result. The last census shows that there are at least one
hundred fifty thousand Moros who have been married according to local custom. We then have it within
our power either to nullify or to validate all of these marriages; either to make all of the children born of
these unions bastards or to make them legitimate; either to proclaim immorality or to sanction morality;
either to block or to advance settled governmental policy. Our duty is a obvious as the law is plain.

In moving toward our conclusion, we have not lost sight of the decisions of this court in the cases of
United States vs. Tubban ([1915]), 29 Phil., 434) and United States vs. Verzola ([1916, 33 Phil., 285). We
do not, however, believe these decisions to be controlling. In the first place, these were criminal actions
and two Justice dissented.. In the second place, in the Tubban case, the marriage in question was a tribal
marriage of the Kalingas, while in the Verzola case, the marriage had been performed during the Spanish
regime by a lieutenant of the Guardia Civil. In neither case, in deciding as to whether or not the accused
should be given the benefit of the so-called unwritten law, was any consideration given to the provisions
of section IX of General Order No. 68. We are free to admit that, if necessary, we would unhesitatingly
revoke the doctrine announced in the two cases above mentioned.

We regard the evidence as producing a moral conviction of the existence of the Mohammedan
marriage. We regard the provisions of section IX of the Marriage law as validating marriages performed
according to the rites of the Mohammedan religion.

There are other questions presented in the various assignments of error which it is unnecessary to
decide. In resume, we find the Chinese marriage not to be proved and that the Chinaman Cheong Seng
Gee has only the rights of a natural child, and we find the Mohammedan marriage to be proved and to
be valid, thus giving to the widow and the legitimate children of this union the rights accruing to them
under the law.
Judgment is reversed in part, and the case shall be returned to the lower court for a partition of the
property in accordance with this decision, and for further proceedings in accordance with law. Without
special findings as to costs in this instance, it is so ordered.

Araullo, C.J., Johnson, Street, Avancea, Villamor, Ostrand, Johns and Romualdez, JJ., concur.