EN BANC

[G.R. No. 86889 : December 4, 1990.]

192 SCRA 51
LUZ FARMS, Petitioner, vs. THE HONORABLE SECRETARY OF THE DEPARTMENT OF AGRARIAN REFORM,
Respondent.

DECISION

PARAS, J.:

This is a petition for prohibition with prayer for restraining order and/or preliminary and permanent injunction against the
Honorable Secretary of the Department of Agrarian Reform for acting without jurisdiction in enforcing the assailed provisions
of R.A. No. 6657, otherwise known as the Comprehensive Agrarian Reform Law of 1988 and in promulgating the Guidelines
and Procedure Implementing Production and Profit Sharing under R.A. No. 6657, insofar as the same apply to herein
petitioner, and further from performing an act in violation of the constitutional rights of the petitioner.
As gathered from the records, the factual background of this case, is as follows:
On June 10, 1988, the President of the Philippines approved R.A. No. 6657, which includes the raising of livestock, poultry
and swine in its coverage (Rollo, p. 80).
On January 2, 1989, the Secretary of Agrarian Reform promulgated the Guidelines and Procedures Implementing Production
and Profit Sharing as embodied in Sections 13 and 32 of R.A. No. 6657 (Rollo, p. 80).
On January 9, 1989, the Secretary of Agrarian Reform promulgated its Rules and Regulations implementing Section 11 of
R.A. No. 6657 (Commercial Farms). (Rollo, p. 81).
Luz Farms, petitioner in this case, is a corporation engaged in the livestock and poultry business and together with others in
the same business allegedly stands to be adversely affected by the enforcement of Section 3(b), Section 11, Section 13,
Section 16(d) and 17 and Section 32 of R.A. No. 6657 otherwise known as Comprehensive Agrarian Reform Law and of the
Guidelines and Procedures Implementing Production and Profit Sharing under R.A. No. 6657 promulgated on January 2, 1989
and the Rules and Regulations Implementing Section 11 thereof as promulgated by the DAR on January 9, 1989 (Rollo, pp.
2-36).: rd
Hence, this petition praying that aforesaid laws, guidelines and rules be declared unconstitutional. Meanwhile, it is also prayed
that a writ of preliminary injunction or restraining order be issued enjoining public respondents from enforcing the same, insofar
as they are made to apply to Luz Farms and other livestock and poultry raisers.
This Court in its Resolution dated July 4, 1939 resolved to deny, among others, Luz Farms' prayer for the issuance of a
preliminary injunction in its Manifestation dated May 26, and 31, 1989. (Rollo, p. 98).
Later, however, this Court in its Resolution dated August 24, 1989 resolved to grant said Motion for Reconsideration regarding
the injunctive relief, after the filing and approval by this Court of an injunction bond in the amount of P100,000.00. This Court
also gave due course to the petition and required the parties to file their respective memoranda (Rollo, p. 119).
The petitioner filed its Memorandum on September 6, 1989 (Rollo, pp. 131-168).
On December 22, 1989, the Solicitor General adopted his Comment to the petition as his Memorandum (Rollo, pp. 186-187).
Luz Farms questions the following provisions of R.A. 6657, insofar as they are made to apply to it:
(a) Section 3(b) which includes the "raising of livestock (and poultry)" in the definition of "Agricultural, Agricultural
Enterprise or Agricultural Activity."
(b) Section 11 which defines "commercial farms" as "private agricultural lands devoted to commercial, livestock,
poultry and swine raising . . ."
(c) Section 13 which calls upon petitioner to execute a production-sharing plan.
(d) Section 16(d) and 17 which vest on the Department of Agrarian Reform the authority to summarily determine the
just compensation to be paid for lands covered by the Comprehensive Agrarian Reform Law.
(e) Section 32 which spells out the production-sharing plan mentioned in Section 13 —
". . . (W)hereby three percent (3%) of the gross sales from the production of such lands are distributed within sixty
(60) days of the end of the fiscal year as compensation to regular and other farmworkers in such lands over and
 above the compensation they currently receive: Provided, That these individuals or entities realize gross sales in
excess of five million pesos per annum unless the DAR, upon proper application, determine a lower ceiling.
In the event that the individual or entity realizes a profit, an additional ten (10%) of the net profit after tax shall be
distributed to said regular and other farmworkers within ninety (90) days of the end of the fiscal year . . ."
The main issue in this petition is the constitutionality of Sections 3(b), 11, 13 and 32 of R.A. No. 6657 (the Comprehensive
Agrarian Reform Law of 1988), insofar as the said law includes the raising of livestock, poultry and swine in its coverage as
well as the Implementing Rules and Guidelines promulgated in accordance therewith.:-cralaw
The constitutional provision under consideration reads as follows:
ARTICLE XIII
x x x
AGRARIAN AND NATURAL RESOURCES REFORM
Section 4. The State shall, by law, undertake an agrarian reform program founded on the right of farmers and regular
farmworkers, who are landless, to own directly or collectively the lands they till or, in the case of other farmworkers,
to receive a just share of the fruits thereof. To this end, the State shall encourage and undertake the just distribution
of all agricultural lands, subject to such priorities and reasonable retention limits as the Congress may prescribe,
taking into account ecological, developmental, or equity considerations, and subject to the payment of just
compensation. In determining retention limits, the State shall respect the rights of small landowners. The State shall
further provide incentives for voluntary land-sharing.
x x x"
Luz Farms contended that it does not seek the nullification of R.A. 6657 in its entirety. In fact, it acknowledges the
correctness of the decision of this Court in the case of the Association of Small Landowners in the Philippines, Inc.
vs. Secretary of Agrarian Reform (G.R. 78742, 14 July 1989) affirming the constitutionality of the Comprehensive
Agrarian Reform Law. It, however, argued that Congress in enacting the said law has transcended the mandate of
the Constitution, in including land devoted to the raising of livestock, poultry and swine in its coverage (Rollo, p. 131).
Livestock or poultry raising is not similar to crop or tree farming. Land is not the primary resource in this undertaking
and represents no more than five percent (5%) of the total investment of commercial livestock and poultry raisers.
Indeed, there are many owners of residential lands all over the country who use available space in their residence
for commercial livestock and raising purposes, under "contract-growing arrangements," whereby processing
corporations and other commercial livestock and poultry raisers (Rollo, p. 10). Lands support the buildings and other
amenities attendant to the raising of animals and birds. The use of land is incidental to but not the principal factor or
consideration in productivity in this industry. Including backyard raisers, about 80% of those in commercial livestock
and poultry production occupy five hectares or less. The remaining 20% are mostly corporate farms (Rollo, p. 11).
On the other hand, the public respondent argued that livestock and poultry raising is embraced in the term "agriculture" and
the inclusion of such enterprise under Section 3(b) of R.A. 6657 is proper. He cited that Webster's International Dictionary,
Second Edition (1954), defines the following words:
"Agriculture — the art or science of cultivating the ground and raising and harvesting crops, often, including also,
feeding, breeding and management of livestock, tillage, husbandry, farming.
It includes farming, horticulture, forestry, dairying, sugarmaking . . .
Livestock — domestic animals used or raised on a farm, especially for profit.
Farm — a plot or tract of land devoted to the raising of domestic or other animals." (Rollo, pp. 82-83).
The petition is impressed with merit.
The question raised is one of constitutional construction. The primary task in constitutional construction is to ascertain and
thereafter assure the realization of the purpose of the framers in the adoption of the Constitution (J.M. Tuazon & Co. vs. Land
Tenure Administration, 31 SCRA 413 [1970]).: rd
Ascertainment of the meaning of the provision of Constitution begins with the language of the document itself. The words used
in the Constitution are to be given their ordinary meaning except where technical terms are employed in which case the
significance thus attached to them prevails (J.M. Tuazon & Co. vs. Land Tenure Administration, 31 SCRA 413 [1970]).
It is generally held that, in construing constitutional provisions which are ambiguous or of doubtful meaning, the courts may
consider the debates in the constitutional convention as throwing light on the intent of the framers of the Constitution. It is true
that the intent of the convention is not controlling by itself, but as its proceeding was preliminary to the adoption by the people
of the Constitution the understanding of the convention as to what was meant by the terms of the constitutional provision which
was the subject of the deliberation, goes a long way toward explaining the understanding of the people when they ratified it
(Aquino, Jr. v. Enrile, 59 SCRA 183 [1974]).
The transcripts of the deliberations of the Constitutional Commission of 1986 on the meaning of the word "agricultural," clearly
show that it was never the intention of the framers of the Constitution to include livestock and poultry industry in the coverage
of the constitutionally-mandated agrarian reform program of the Government.
The Committee adopted the definition of "agricultural land" as defined under Section 166 of R.A. 3844, as laud devoted to any
growth, including but not limited to crop lands, saltbeds, fishponds, idle and abandoned land (Record, CONCOM, August 7,
1986, Vol. III, p. 11).
The intention of the Committee is to limit the application of the word "agriculture." Commissioner Jamir proposed to insert the
word "ARABLE" to distinguish this kind of agricultural land from such lands as commercial and industrial lands and residential
properties because all of them fall under the general classification of the word "agricultural". This proposal, however, was not
considered because the Committee contemplated that agricultural lands are limited to arable and suitable agricultural lands
and therefore, do not include commercial, industrial and residential lands (Record, CONCOM, August 7, 1986, Vol. III, p. 30).
In the interpellation, then Commissioner Regalado (now a Supreme Court Justice), posed several questions, among others,
quoted as follows:
x x x
"Line 19 refers to genuine reform program founded on the primary right of farmers and farmworkers. I wonder if it
means that leasehold tenancy is thereby proscribed under this provision because it speaks of the primary right of
farmers and farmworkers to own directly or collectively the lands they till. As also mentioned by Commissioner Tadeo,
farmworkers include those who work in piggeries and poultry projects.
I was wondering whether I am wrong in my appreciation that if somebody puts up a piggery or a poultry project and
for that purpose hires farmworkers therein, these farmworkers will automatically have the right to own eventually,
directly or ultimately or collectively, the land on which the piggeries and poultry projects were constructed. (Record,
CONCOM, August 2, 1986, p. 618).
x x x
The questions were answered and explained in the statement of then Commissioner Tadeo, quoted as follows:
x x x
"Sa pangalawang katanungan ng Ginoo ay medyo hindi kami nagkaunawaan. Ipinaaalam ko kay Commissioner
Regalado na hindi namin inilagay ang agricultural worker sa kadahilanang kasama rito ang piggery, poultry at
livestock workers. Ang inilagay namin dito ay farm worker kaya hindi kasama ang piggery, poultry at livestock
workers (Record, CONCOM, August 2, 1986, Vol. II, p. 621).
It is evident from the foregoing discussion that Section II of R.A. 6657 which includes "private agricultural lands devoted to
commercial livestock, poultry and swine raising" in the definition of "commercial farms" is invalid, to the extent that the
aforecited agro-industrial activities are made to be covered by the agrarian reform program of the State. There is simply no
reason to include livestock and poultry lands in the coverage of agrarian reform. (Rollo, p. 21).
Hence, there is merit in Luz Farms' argument that the requirement in Sections 13 and 32 of R.A. 6657 directing "corporate
farms" which include livestock and poultry raisers to execute and implement "production-sharing plans" (pending final
redistribution of their landholdings) whereby they are called upon to distribute from three percent (3%) of their gross sales and
ten percent (10%) of their net profits to their workers as additional compensation is unreasonable for being confiscatory, and
therefore violative of due process (Rollo, p. 21).:-cralaw
It has been established that this Court will assume jurisdiction over a constitutional question only if it is shown that the essential
requisites of a judicial inquiry into such a question are first satisfied. Thus, there must be an actual case or controversy involving
a conflict of legal rights susceptible of judicial determination, the constitutional question must have been opportunely raised
by the proper party, and the resolution of the question is unavoidably necessary to the decision of the case itself (Association
of Small Landowners of the Philippines, Inc. v. Secretary of Agrarian Reform, G.R. 78742; Acuna v. Arroyo, G.R. 79310;
Pabico v. Juico, G.R. 79744; Manaay v. Juico, G.R. 79777, 14 July 1989, 175 SCRA 343).
However, despite the inhibitions pressing upon the Court when confronted with constitutional issues, it will not hesitate to
declare a law or act invalid when it is convinced that this must be done. In arriving at this conclusion, its only criterion will be
the Constitution and God as its conscience gives it in the light to probe its meaning and discover its purpose. Personal motives
and political considerations are irrelevancies that cannot influence its decisions. Blandishment is as ineffectual as intimidation,
for all the awesome power of the Congress and Executive, the Court will not hesitate "to make the hammer fall heavily," where
the acts of these departments, or of any official, betray the people's will as expressed in the Constitution (Association of Small
Landowners of the Philippines, Inc. v. Secretary of Agrarian Reform, G.R. 78742; Acuna v. Arroyo, G.R. 79310; Pabico v.
Juico, G.R. 79744; Manaay v. Juico, G.R. 79777, 14 July 1989).
Thus, where the legislature or the executive acts beyond the scope of its constitutional powers, it becomes the duty of the
judiciary to declare what the other branches of the government had assumed to do, as void. This is the essence of judicial
power conferred by the Constitution "(I)n one Supreme Court and in such lower courts as may be established by law" (Art.
VIII, Section 1 of the 1935 Constitution; Article X, Section I of the 1973 Constitution and which was adopted as part of the
Freedom Constitution, and Article VIII, Section 1 of the 1987 Constitution) and which power this Court has exercised in many
instances (Demetria v. Alba, 148 SCRA 208 [1987]).
PREMISES CONSIDERED, the instant petition is hereby GRANTED. Sections 3(b), 11, 13 and 32 of R.A. No. 6657 insofar
as the inclusion of the raising of livestock, poultry and swine in its coverage as well as the Implementing Rules and Guidelines
promulgated in accordance therewith, are hereby DECLARED null and void for being unconstitutional and the writ of
preliminary injunction issued is hereby MADE permanent.
SO ORDERED.

SECOND DIVISION

[G.R. No. 95664. September 13, 1991.]

NINA M. QUISMUNDO, Petitioner, v. HON. COURT OF APPEALS, HON. REYNALDO B. DAWAY,

FELICISIMO OCAMPO, CATALINO OCAMPO, PEDRO MARQUEZ, ROMEO ENRIQUEZ and HERMINIO
YUSON, Respondents.

Aladdin F. Trinidad for Petitioner.

The Trial Attorney III for Private Respondents.

SYLLABUS

1. ADMINISTRATIVE LAW; DEPARTMENT OF AGRARIAN REFORM; VESTED WITH EXCLUSIVE JURISDICTION

OVER ALL AGRARIAN REFORM MATTERS. — The foregoing holding is further sustained by the passage of
Republic Act No. 6657, the Comprehensive Agrarian Reform Law, which took effect on June 15, 1988. The
said law contains provisions which evince and support the intention of the legislature to vest in the
Department of Agrarian Reform exclusive jurisdiction over all agrarian reform matters. Section 50 of said Act
substantially reiterates Section 17 of Executive Order No . 229 vesting in the Department of Agrarian
Reform exclusive and original jurisdiction over all matters involving the implementation of agrarian reform.
In addition, Sections 56 and 57 thereof provide for the designation by the Supreme Court of at least one (1)
branch of the regional trial court within each province to act as a special agrarian court. The said special
court shall have original and exclusive jurisdiction only over petitions for the determination of just
compensation to landowners and the prosecution of criminal offenses under said Act. Said provisions thus
delimit the jurisdiction of the regional trial courts in agrarian cases only to these two instances.

DECISION

REGALADO, J.:

This petition for review on certiorari seeks the reversal of the decision and resolution of respondent Court of
Appeals in CA-G.R. SP No. 16418, 1 dated November 29, 1989 and October 9, 1990, respectively, which
upheld the jurisdiction of the Regional Trial Court of Angeles City, Branch 58, in AGRA. Case No. 5174. 2

It appears that on February 19, 1988, private respondents, as tenants of petitioner, filed a complaint with
the trial court praying that their relationship with petitioner be changed from share tenancy to a leasehold
system, pursuant to Section 4 of Republic Act No. 3844, as amended, their request therefor having been
denied by petitioner. 3

On March 2, 1988, private respondents further filed a motion for the issuance of an order authorizing the
supervision by the deputy sheriff of the court of the harvesting and liquidation of the 1987-1988 sugarcane
crops, which motion was granted by the trial court in an order dated March 3, 1988. 4
On March 16, 1988, petitioner filed a motion to dismiss on the ground of lack of cause of action since the
law that should allegedly govern the relationship of the parties is Act No. 4115, as amended by
Commonwealth Act No. 271, and not Republic Act No. 3844, as amended. The trial court denied the motion
for lack of merit in an order dated June 2, 1988. 5

On June 18, 1988, petitioner filed a motion for reconsideration of the denial order, invoking as an additional
ground the lack of jurisdiction of the court over the case under the authority and by reason of the
Comprehensive Agrarian Reform Program, specifically Executive Order No. 229 and Republic Act No. 6657.
6

Pending the resolution of said motion for reconsideration, private respondents filed another motion dated
November 9, 1988, for the supervision of harvesting. On December 6, 1988, the trial court granted the
motion of private respondents and denied petitioner’s motion for reconsideration. 7

Petitioner then elevated the controversy to respondent court on a petition for certiorari but, as stated at the
outset, said court upheld the jurisdiction of the court below, ruling that: chan roble s law lib rary

x x x

"Second. The right of the private respondents to choose leasehold tenancy is governed by RA 3844. We find
nothing in Proclamation No. 131, E.O. No. 229 and RA 6657 divesting the trial court of jurisdiction over the
case. To be sure, RA 6657 was enacted on June 10, 1988 or later than the filing of the Complaint in AGRA
Case No. 5174 on February 18, 1988. On the other hand, sec. 27 of E.O. 229 approved on July 22, 1987
provides that." . . the provisions of RA 3844 and other agrarian laws not inconsistent with this order shall
have suppletory effect." We see no inconsistency between RA 3844 and E.O. No. 229 with respect to the
jurisdiction of the trial court over the cause of action of the private respondent who desires to adopt a
leasehold system pursuant to RA 3844. E.O. No. 229 vests quasi-judicial powers on the DAR to determine
and adjudicate `agrarian reform matters’ subject of Proclamation No. 229. 8 We hold that the right of
private respondents to adopt a leasehold system under RA 3844 is distinct and separate and not affected by
the enactment of E.O. No. 229 and, hence, may be enforced pursuant to the judicial mechanism provided
for by RA 3844." 9

Petitioner’s motion for reconsideration was denied by respondent Court of Appeals in its resolution dated
October 9, 1990. 10 Not satisfied therewith, petitioner is now before us raising the sole issue of jurisdiction.

It is the contention of petitioner that the Regional Trial Court of Angeles City has no jurisdiction to try the
case at bar considering that the exclusive original jurisdiction to adjudicate agrarian cases has already been
vested in the Department of Agrarian Reform (DAR) by Executive Order No. 229, as amended by Republic
Act No. 6657.

We find said contention tenable.

Executive Order No. 229, which provides for the mechanism for the implementation of the Comprehensive
Agrarian Reform Program instituted by Proclamation No. 131, dated July 22, 1987, vests in the Department
of Agrarian Reform quasi-judicial powers to determine and adjudicate agrarian reform matters. The
pertinent provision of said executive order reads as follows: jgc:chan roble s.com.p h

"SECTION 17. Quasi-Judicial Powers of the DAR. — The DAR is hereby vested with quasi-judicial powers to
determine and adjudicate agrarian reform matters, and shall have exclusive original jurisdiction over all
matters involving implementation of agrarian reform, except those falling under the exclusive original
jurisdiction of the DENR and the Department of Agriculture (DA).

"The DAR shall have powers to punish for contempt and to issue subpoena, subpoena duces tecum and writs
to enforce its order or decisions.

"The decisions of the DAR may, in proper cases, be appealed to the Regional Trial Courts but shall be
immediately executory notwithstanding such appeal." cralaw virt ua1aw li bra ry

The above quoted provision should be deemed to have repeated 11 Section 12 (a) and (b) of Presidential
Decree No. 946 which invested the then courts of agrarian relations with original exclusive jurisdiction over
cases and questions involving rights granted and obligations imposed by presidential issuances promulgated
in relation to the agrarian reform program.

Formerly, under Presidential Decree No. 946, amending Chapter IX of Republic Act No. 3844, the courts of
agrarian relations had original and exclusive jurisdiction over "cases involving the rights and obligations of
persons in the cultivation and use of agricultural land except those cognizable by the National Labor
Relations Commission" and "questions involving rights granted and obligations imposed by laws, Presidential
Decrees, Orders, Instructions, Rules and Regulations issued and promulgated in relation to the agrarian
reform program," except those matters involving the administrative implementation of the transfer of land
to the tenant-farmer under Presidential Decree No. 27 and amendments thereto which shall be exclusively
cognizable by the Secretary of Agrarian Reform. 12

In 1980, upon the passage of Batas Pambansa Blg. 129, otherwise known as the Judiciary Reorganization
Act, the courts of agrarian relations were integrated into the regional trial courts and the jurisdiction of the
former was vested in the latter courts. 13

However, with the enactment of Executive Order No. 229, which took effect on August 29, 1987, fifteen (15)
days after its release for publication in the Official Gazette, 14 the regional trial courts were divested of their
general jurisdiction to try agrarian reform matters. The said jurisdiction is now vested in the Department of
Agrarian Reform.

Thus, is the case at bar, the Regional Trial Court of Angeles City, at the time private respondents filed their
complaint, was already bereft of authority to act on the same. The allegation of private respondents that
their complaint was filed on November 3, 1987, and not on February 13, 1988 as found by the Court of
Appeals, is immaterial since as of either date Executive Order No. 229 was already in effect. chanrob les vi rtual lawlib rary

The foregoing holding is further sustained by the passage of Republic Act No. 6657, the Comprehensive
Agrarian Reform Law, which took effect on June 15, 1988. The said law contains provisions which evince and
support the intention of the legislature to vest in the Department of Agrarian Reform exclusive jurisdiction
over all agrarian reform matters.

Section 50 of said Act substantially reiterates Section 17 of Executive Order No . 229 vesting in the
Department of Agrarian Reform exclusive and original jurisdiction over all matters involving the
implementation of agrarian reform, to wit: jgc:cha nrob les.com. ph

"SECTION 50. Quasi-Judicial Powers of the DAR. — The DAR is hereby vested with primary jurisdiction to
determine and adjudicate agrarian reform matters and shall have exclusive original jurisdiction over all
matters involving the implementation of agrarian reform, except those falling under the exclusive
jurisdiction of the Department of Agriculture (DA) and the Department of Environment and Natural
Resources (DENR)." cralaw virtua1aw li bra ry

x x x

In addition, Sections 56 and 57 thereof provide for the designation by the Supreme Court of at least one (1)
branch of the regional trial court within each province to act as a special agrarian court. The said special
court shall have original and exclusive jurisdiction only over petitions for the determination of just
compensation to landowners and the prosecution of criminal offenses under said Act. Said provisions thus
delimit the jurisdiction of the regional trial courts in agrarian cases only to these two instances.

It is also worth noting at this juncture that the resolution of this case by the Department of Agrarian Reform
is to the best advantage of private respondents since it is in a better position to resolve agrarian disputes,
being the administrative agency possessing the necessary expertise on the matter. Further, the proceedings
therein are summary in nature and the department is not bound by technical rules of procedure and
evidence, to the end that agrarian reform disputes and other issues will be adjudicated in a just, expeditious
and inexpensive action or proceedings. 15

WHEREFORE, the petition at bar is GRANTED. The decision of the Court of Appeals is REVERSED and another
judgment is hereby rendered declaring NULL and VOID the orders of the lower court dated March 3, 1988,
June 2, 1988 and December 6, 1988. The respondent judge, or whosoever now presides over the court a
quo or to which the case is assigned, is ordered to cease and desist from further proceeding with AGRA.
Case No . 5176 which is hereby dismissed for lack of jurisdiction, without prejudice, however, to the refiling
of the same with the Department of Agrarian Reform.
SO ORDERED. chanrobles. com : virt ual law l ibra ry

Melencio-Herrera, Paras and Padilla, JJ., concur.

Sarmiento, J., is on leave.

FIRST DIVISION

[G.R. No. 101974 * . July 12, 2001.]

VICTORIA P. CABRAL, Petitioner, v. THE HONORABLE COURT OF APPEALS, HON. ELIGIO P. PACIS,
REGIONAL DIRECTOR, REGION III, DEPARTMENT OF AGRARIAN REFORM, FLORENCIO ADOLFO,
GREGORIO LAZARO, GREGORIA ADOLFO and ELIAS POLICARPIO,Respondents.

DECISION

KAPUNAN, J.:

On January 16, 1990, petitioner Victoria Cabral filed a petition before the Barangay Agrarian Reform Council
(BARC) for the cancellation of the Emancipation Patents and Torrens Titles issued in favor of private
respondents. The patents and titles covered portions of the property owned and registered in the name of
petitioner.
c han rob1es v irt ua1 1aw 1 ibra ry

Petitioner alleged therein that she was the registered owner of several parcels of land covered by Original
Certificate of Title (OCT) No. 0-1670 of the Registry of Deeds of Bulacan, 1 among which is a parcel of land
described therein as Lot 4 of Plan Psu-164390. The petition further averred that as early as July 1973,
petitioner applied with the Department of Agrarian Reform (DAR) for the reclassification or conversion of the
land for residential, commercial or industrial purposes. The application for conversion, however, was not
acted upon. Instead, on April 25, 1988, Emancipation Patents, and, thereafter, Transfer Certificates of Title,
were issued in favor of private respondents.

Petitioner sought the cancellation of the TCTs on the grounds that: petitioner had a pending application for
conversion and reclassification; the lots covered by the emancipation patents included areas not actually
tilled by private respondents; private respondents had illegally transferred their rights over the parcels of
land covered by the emancipation patents; private respondents are deemed to have abandoned their rights
over the properties; and the subject property was taken without just compensation.

On January 19, 1990, petitioner filed with the DAR itself another petition for the cancellation of the same
Emancipation Patents and Torrens Titles.

On January 29, 1990, petitioner received a letter from the Municipal Agrarian Reform Office (MARO) of Sta.
Maria, Bulacan, stating, among other things, that in order "that your petition be given due process by this
Office, your petition will be forwarded to the legal section of this office for legal action." cralaw virtua 1aw lib rary

On February 11, 1990, Regional Director Eligio Pacis issued an order dismissing the petition 2 for
cancellation of Emancipation Patents, thus: chanrob1e s virtual 1aw l ibra ry

WHEREFORE, premises considered, this Office hereby orders the DISMISSAL of the petition of Victoria P.
Cabral for lack of legal and factual basis’ likewise, this office request[s] that the annotation of the notice of
lis pendens on the original copies of Emancipation Patents issued to petitioners covering the subject
landholdings be CANCELLED by the Office of the Register of Deeds concerned. chanro b1es vi rtua 1 1aw 1ib ra ry

SO ORDERED. 3
The Regional Director likewise denied petitioner’s motion for reconsideration dated July 11, 1990.
Consequently, petitioner filed a petition for certiorari in the Court of Appeals questioning the jurisdiction of
the Regional Director and claiming denial of due process. On January 8, 1991, the appellate court dismissed
the petition for lack of merit. Petitioner’s motion for reconsideration was likewise denied, prompting
petitioner to turn to this Court for relief, alleging that: chan rob 1es vi rtual 1aw lib rary

(a) THE HONORABLE COURT OF APPEALS ERRED IN RULING THAT THE DAR REGIONAL DIRECTOR OF
REGION III ACTED WITH JURISDICTION WHEN IT TOOK COGNIZANCE OF AND RESOLVED THE
CONVERSION APPLICATION AND/OR CANCELLATION OF CLT/EP PETITION OF PETITIONER-APPELLANT;

(b) THE HONORABLE COURT OF APPEALS ERRED IN NOT HOLDING THAT OUTSIDE OF THE BARANGAY
AGRARIAN REFORM COMMITTEE (BARC), IT IS THE DEPARTMENT OF AGRARIAN REFORM ADJUDICATION
BOARD (DARAB) THAT HAS JURISDICTION OVER AGRARIAN REFORM CASES, DISPUTES OR
CONTROVERSIES;

(c) THE HONORABLE COURT OF APPEALS ERRED IN HOLDING THAT PETITIONER WAS NOT DENIED DUE
PROCESS AS ALLEGEDLY SHE LOST HER OPPORTUNITY TO BE HEARD AFTER THE JUNE 27, 1990 HEARING.
4

On April 21, 1993, petitioner filed with this Court an urgent motion for the issuance of a temporary
restraining order. Petitioner alleged that private respondent Gregoria Adolfo had conveyed the land awarded
to her to the Aqualand Development Corporation and the Sta. Rita Steel Resources Corporation. These
corporations, in turn,

. . . converted the parcel of land from agricultural to commercial and industrial and have constructed high
adobe stone walls[,] commenced the construction of a steel finishing plant and other structures for the
manufacture of steel products[,] and are putting in place more installations to complete all facilities
necessary for their business. As a matter of fact, they have just applied for a building permit for the
construction of a two (2) storey office condominium/business office building. . . . 5

In a Resolution dated May 17, 1993, the Court issued the temporary restraining order prayed for. The Court
enjoined Sta. Rita Steel Resources and Aqualand Development Corporation, its officers, agents,
representatives and/or persons acting in their place or stead from continuing the construction of building
and the like on the landholding of petitioner, pending final resolution of the petition. 6

Petitioner contended before the Court of Appeals that jurisdiction over the case pertained to the Department
of Agrarian Reform Agrarian Board (DARAB), not the Regional Director. Addressing this argument, the Court
of Appeals held in its Decision: chanrob1es vi rt ual 1aw li bra ry

Relevant to the issue raised is Ministry Administrative Order No. 2-85, Series of 1985, effective July 24,
1985 (Annex 2, Comment) which empowers all DAR Regional Directors to hear and decide cases which
include the issuance of Decisions/Resolutions, the recall and cancellation of Certificates of Land Transfers
(CLTs) if such is the necessary consequence of the facts and circumstances of the case. chanro b1es vi rtua 1 1aw lib ra ry

A later directive, DAR Memo Cir. No. 5, Series of 1987 (Annex 3, Comment), clothed the Regional Directors
as titular regional heads, with powers to hear and resolve cases involving lands in their respective
jurisdiction in order to achieve the expanded and comprehensive agrarian reform program of the present
administration, and to tackle the issue of huge number and increasing backlog or unresolved cases in the
DAR Central Office.

Additionally, a memorandum dated September 14, 1987 (Annex 4, Comment) addressed to the Director,
Bureau of Land Acquisition Development, by the then Director, Bureau of Agrarian Legal Assistance,
contains a decisive opinion regarding the question on order of cancellation issued by the Regional Director,
DAR Region III, to wit:jgc:chanrob les.com. ph

"The Regional Director is now authorized to hear/investigate and hereby resolve cases arising from the
implementation of CLT pursuant to PD 27 and amendatory and related decrees and letter of instructions,
rules and regulations as well as conflict of claim in landed estates and resettlement areas and such other
lands as have been placed under the administration and disposition of this Department." 7

In its Resolution dated September 17, 1991, the Court of Appeals also made reference to Section 13 of
Executive Order No. 129-A, which authorized the delegation of the adjudication of agrarian reform cases to
regional offices. It further cited certain provisions of the DARAB Revised Rules of Procedure providing for,
among others, delegated jurisdiction, and concluded that: chan rob1es v irt ual 1aw l ibra ry

. . . the Regional Director cannot be faulted with assuming jurisdiction over the case, considering that the
powers and functions of the DARAB may be delegated to the regional office . . . .

While it is true that the jurisdiction is vested with the DARAB, the Regional Director took cognizance of the
instant case invoking the delegated powers and functions upon him. 8

Evidently, the DARAB, in the Court of Appeals’ view, had concurrent jurisdiction with the Regional Director
over the case. Petitioner, on the other hand, maintains that the jurisdiction of the DARAB is exclusive of the
DAR Regional Director.

Petitioner is correct. Whatever jurisdiction the Regional Director may have had over the cancellation of
emancipation patents, it lost with the passage of subsequent laws.

Section 17 of Executive Order No. 229 (Providing for the Mechanism for the Implementation of the
Comprehensive Agrarian Reform Program) 9 granted DAR quasi-judicial powers to adjudicate agrarian
reform matters, thus: chanrob1e s virtual 1aw l ibra ry

SECTION 50. Quasi-Judicial Powers of the DAR. — The DAR is hereby vested with quasi-judicial powers to
determine and adjudicate agrarian reform matters, and shall have exclusive original jurisdiction over all
matters involving implementation of agrarian reform, except those falling under the exclusive jurisdiction of
the Department of Agriculture (DA) and the Department of Environment and Natural Resources (DENR).

x x x

Executive Order No. 129-A (Modifying Executive Order No. 129 Reorganizing and Strengthening Department
of Agrarian Reform and for other purposes) 10 subsequently provided for the creation of the Agrarian
Reform Adjudicatory Board, granting it the powers and functions with respect to the adjudication of agrarian
reform cases: chanrob1es vi rt ual 1aw li bra ry

SECTION 13. Agrarian Reform Adjudication Board. — There is hereby created an Agrarian Reform
Adjudication Board under the Office of the Secretary. The Board shall be composed of the Secretary as
Chairman, two (2) Undersecretaries as may be designated by the Secretary, the Assistant Secretary for
Legal Affairs, and three (3) others to be appointed by the President upon recommendation of the Secretary
as members. A Secretariat shall be constituted to support the Board. The Board shall assume the powers
and functions with respect to the adjudication of agrarian reform cases under Executive Order No. 229 and
this Executive Order. These powers and functions may be delegated to the regional office of the Department
in accordance with the rules and regulations promulgated by the Board. chanrob1es v irt ua1 1aw 1 ibra ry

Congress substantially reiterated Section 17 of E.O. No. 229 in Republic Act No. 6657, otherwise known as
the Comprehensive Agrarian Law of 1988 (CARL). 11 Section 50 thereof states: chanrob 1es vi rtua l 1aw lib rary

SECTION 50. Quasi-Judicial Powers of the DAR. — The DAR is hereby vested with primary jurisdiction to
determine and adjudicate agrarian reform matters and shall have exclusive original jurisdiction over all
matters involving the implementation of agrarian reform, except those falling under the exclusive
jurisdiction of the Department of Agriculture (DA) and the Department of Environment and Natural
Resources (DENR).

x x x

CARL took effect on June 15, 1988, after it was published in two newspapers of general circulation.

In order "to achieve a just, expeditious and inexpensive determination of every action or proceeding before
it," the DAR is mandated "to adopt a uniform rule of procedure" (Second par., Section 50, RA. No. 6657),
which is, at present, the DARAB Revised Rules. 12 The Rules were promulgated on December 26, 1988.

The provisions of Rule II (Jurisdiction of the Adjudication Board) of the Revised Rules read: chan rob1es v irt ual 1aw l ibra ry
SECTION 1. Primary, Original and Appellate Jurisdiction. — The Agrarian Reform Adjudication Board shall
have primary jurisdiction, both original and appellate, to determine and adjudicate all agrarian disputes,
cases, controversies, and matters or incidents involving the implementation of the Comprehensive Agrarian
Reform Program under Republic Act No. 6657, Executive Order Nos. 229, 228 and 129-A, Republic Act No.
3844 as amended by Republic Act No. 6389, Presidential Decree No. 27 and other agrarian laws and their
implementing rules and regulations.

Specifically, such jurisdiction shall extend over but not be limited to the following:
chan rob 1es vi rtual 1aw lib rary

a) Cases involving the rights and obligations of persons engaged in the cultivation and use of agricultural
land covered by the Comprehensive Agrarian Reform Program (CARP) and other agrarian laws;

b) Cases involving the valuation of land, and determination and payment of just compensation, fixing and
collection of lease rentals, disturbance compensation, amortization payments, and similar disputes
concerning the function of the Land Bank;

c) Cases involving the annulment or cancellation of orders or decisions of DAR officials other than the
Secretary, lease contracts or deeds of sale or their amendments under the administration and disposition of
the DAR and LBP;

d) Cases arising from, or connected with membership or representation in compact farms, farmers’
cooperatives and other registered farmers’ associations or organizations, related to land covered by the
CARP and other agrarian laws;

e) Cases involving the sale, alienation, mortgage, foreclosure, pre-emption and redemption of agricultural
lands under the coverage of the CARP or other agrarian laws;

f) Cases involving the issuance of Certificate of Land Transfer (CLT), Certificate of Land Ownership Award
(CLOA) and Emancipation Patent (EP) and the administrative correction thereof;

g) And such other agrarian cases, disputes, matters or concerns referred to it by the Secretary of the DAR.

Provided, however, that matters involving strictly the administrative implementation of the CARP and other
agrarian laws and regulations, shall be the exclusive prerogative of and cognizable by the Secretary of the
DAR. chanrob1es vi rt ua1 1aw 1i bra ry

SECTION 2. Delegated Jurisdiction. — The Regional Agrarian Reform Adjudicators (RARAD) and the
Provincial Agrarian Reform Adjudicators (PARAD) are empowered and authorized to receive, hear, determine
and adjudicate all agrarian cases and disputes, and incidents in connection therewith, arising within their
respective territorial jurisdiction.

SECTION 3. Functional Relationships. — The Board shall exercise functional supervision over the RARADs;
and the PARADs. For administrative purposes, however, the RARADs and the PARADs are deemed to form
part of the DAR Regional Office where they are stationed, and as such, shall be given administrative support
by their respective Regional and Provincial offices, in terms of office space, personal services, equipment
and supply, and other facilities.

SECTION 4. Role of the RARAD. — The RARAD shall be the Executive Adjudicator in his region directly
responsible to the Board. As such, he shall coordinate and monitor the work of the PARADs in his region and
see to it that their dockets do not remain clogged. He shall receive, hear, and adjudicate the following
cases: chanrob 1es vi rtual 1aw lib rary

a) Cases that cannot be handled by the PARAD on account of inhibition or disqualification;

b) Cases brought directly before him which for some cogent reason, cannot be properly handled by the
PARAD concerned;

c) Cases of such complexity and sensitivity that the decision thereof would constitute an important
precedent affecting regional or national interest; and

d) Such other cases which the Board may assign to him.

SECTION 5. Appellate Jurisdiction. — The Board shall have exclusive appellate jurisdiction to review,
reverse, modify, alter or affirm resolutions, orders, decisions, and other dispositions of its RARAD and
PARAD.

SECTION 6. Enforcement Powers. — The members of the Board and its RARADs and PARADs are empowered
to summon witnesses, administer oaths, take testimony, require submission of reports, compel production
of books and documents and answers to interrogatories, and to issue subpoena, subpoena duces tecum,
writs of possession, writs of execution and other writs to enforce its orders and decisions thru sheriffs or
duly deputized officers.

For such purpose, whenever necessary, it may call upon the police and military authorities for assistance in
the enforcement and execution of its decisions, orders, writs and other processes.

In Department of Agrarian Reform Adjudication Board v. Court of Appeals, 13 this Court observed that: chanro b1es vi rtua l 1aw lib ra ry

. . . the DAR’s exclusive original jurisdiction [as set forth in Section 50 of the CARL] is exercised through
hierarchically arranged agencies, namely, the DARAB, RARAD and PARAD. The latter two exercise "delegated
authority," while the first exercises appellate jurisdiction over resolutions, orders, decisions and other
dispositions of the RARAD and the PARAD.

On the other hand, Executive Order 129-A, in Section 24 thereof, defines the functions of the Regional
Offices as follows:
chan rob1es v irt ual 1aw l ibra ry

SECTION 24. Regional Offices. — The Department shall have twelve (12) Regional Offices. Each Regional
Office shall be headed by a Regional Director who shall be assisted by an Assistant Regional Director for
Operations and an Assistant Regional Director for Administration.

The Regional Offices shall be responsible for the implementation of laws, policies, plans, programs, projects,
rules and regulations of the Department in its administrative region. For such purposes, it shall have the
following functions.

a) Prepare and submit plans and programs for the regions on: chanrob 1es vi rtual 1aw lib rary

1) Land acquisition and distribution;

2) Information and education;

3) Land use management and land development;

4) Agrarian reform beneficiaries development;

b) Provide technical assistance to Provincial Offices and Municipal Agrarian Reform Offices in the
implementation of approved plans and programs;

c) Conduct operations research and evaluation of agrarian reform implementation within the region;

d) Coordinate with other government and private agencies and farmers and farm workers’ organizations at
the regional level, to carry out programs/projects for the general welfare of agrarian reform beneficiaries;

e) Maintain an information system in coordination with the established monitoring system;

f) Review and evaluate reports and other documents submitted by the Provincial Offices and Municipal
Agrarian Reform Offices and agrarian reform clientele;

g) Submit periodic feedback as may be necessary in the service of the Department’s clientele.

In addition, the Revised Administrative Code of 1987, in Chapter 5 (Field Offices), Book IV (The Executive
Branch) thereof, provides: chan rob1es v irt ua 1 1aw 1ib rary

SECTION 26. Functions of a Regional Office. — (1) A regional office shall: cha nrob 1es vi rtua l 1aw lib rary

(a) Implement laws, policies, plans, programs, rules and regulations of the department or agency in the
regional area;

(b) Provide economical, efficient and effective service to the people in the area;

(c) Coordinate with regional offices of other departments, bureaus and agencies in the area;

(d) Coordinate with local government units in the area; and

(e) Perform such other functions as may be provided by law.

(2) . . .

SECTION 27. Duties of a Regional Director. — The Regional Director shall: chan rob1e s virtual 1aw lib rary

(1) Implement laws, policies, rules and regulations within the responsibility of the agency;

(2) Implement agency programs in the region;

(3) Exercise the management functions of planning, organizing, directing and controlling;

(4) Appoint personnel to positions in the first level and casual and seasonal employees; and exercise
disciplinary actions over them in accordance with the Civil Service Law;

(5) Approve sick, vacation and maternity leaves of absence with or without pay, for a period not beyond one
year;

(6) Prepare and submit budget proposals for the region to the central office, administer the budget of the
regional office, authorize disbursement of funds pursuant to approved financial and work programs, and
administer the budget control machinery in the region;

(7) Approve requisition for supplies, materials and equipment, as well as books and periodicals, and other
items for the region, in accordance with the approved supply procurement program;

(8) Negotiate and enter into contracts for services or furnishing supplies, materials and equipment to the
regional office involving an amount not exceeding fifty thousand pesos (50,000.00) within a given quarter,
provided that authority in excess of fifty thousand pesos (P50,000.00) may be further authorized by the
proper department or agency head;

(9) Approve claims for benefits under existing laws;

(10) Approve requests for overtime services;

(11) Promote coordination among regional offices, and between his regional office and local government
units in the region;

(12) Provide housekeeping services for the regional office;

(13) Approve application of personnel for permission to teach, exercise a profession, or engage in business
outside of office hours, in accordance with standards and guidelines of the Civil Service Commission;

(14) Issue travel vouchers authorizing employees to travel on official days within the region for a period not
exceeding thirty days;

(15) Approve attendance of personnel in conferences, seminars, and non-degree training programs within
the region;

(16) Authorize the allocation of funds to provincial/district offices; and

(17) Perform such other duties and functions as may be provided by law or further delegated by the head of
agency or other proper authorities concerned.

Title XI of Book IV of the same Code, dealing specifically with the Department of Agrarian Reform,
provides:c han rob1es v irt ua1 1aw 1 ibra ry

SECTION 18. Regional Offices. — The Regional Office shall be responsible for supporting the field units and
supervising program implementation of the Department within the region. It shall: chanrob 1es vi rtual 1a w libra ry

(1) Implement laws, policies, plans, rules and regulations of the Department in the regional area;

(2) Develop and implement a regional personnel management program;

(3) Prepare, submit, execute and control the budget of the region;

(4) Prepare and properly maintain books of accounts;

(5) Pay salaries and wages and other approved vouchers;

(6) Provide administrative services to the regional and provincial offices;

(7) Prepare and submit plans and programs for the region on: chanrob 1es vi rtua l 1aw lib rary

a. land tenure development

b. information and education

c. land use management and land development

d. legal services

e. agrarian reform beneficiaries development

(8) Provide technical assistance to the provincial offices and agrarian reform teams in the implementation of
approved plans and programs;

(9) Extend effective legal assistance, advice or service to agrarian reform beneficiaries;

(10) Conduct operations research and evaluation of agrarian reform program implementation within the
region;

(11) Coordinate with other government and private agencies and farmer organizations at the Regional level
through the Agrarian Reform Coordinating Council, to carry out programs/projects for the general welfare of
the agrarian reform beneficiaries;

(12) Coordinate para-legal services;

(13) Maintain a data-based information system in coordination with the established monitoring system;

(14) Review documents submitted by the Provincial and Team Offices or by the clientele;

(15) Submit periodic feedback and recommend policy changes and/or modification of procedures on
program implementation; and

(16) Perform such other functions as may be necessary in the service of the clientele.

The foregoing provisions were already in effect when petitioner filed her petition in the BARC in 1990. And it
is amply clear from these provisions that the function of the Regional Office concerns the implementation of
agrarian reform laws while that of the DARAB/RARAD/PARAD is the adjudication of agrarian reform cases.

The first is essentially executive. It pertains to the enforcement and administration of the laws, carrying
them into practical operation and enforcing their due observance. 14 Thus, the Regional Director is primarily
tasked with" [i]mplement[ing] laws, policies, rules and regulations within the responsibility of the agency,"
as well as the "agency program in the region." 15

The second is judicial in nature, involving as it does the determination of rights and obligations of the
parties. To aid the DARAB in the exercise of this function, the Rules grant the Board and Adjudicators the
powers to issue subpoenas 16 and injunctions, 17 to cite and punish for contempt, 18 and to order the
execution of its orders and decision, 19 among other powers. The Rules also contain very specific provisions
to ensure the orderly procedure before the DARAB, RARADs and PARADs. These provisions govern the
commencement of actions, venue and cause of action, 20 the service of pleadings, 21 the presentation of
evidence, 22 motions, 23 appeals 24 and judicial review. 25 Notable are provisions intended to prevent
multiplicity of suits such as the rules on one suit for one cause of action, 26 the joinder of causes of action,
27 and the assignment of all incidents of a case to the Adjudicator to whom the case is assigned. 28 No such
powers were granted or provisions adopted when the purported delegation was made to the Regional
Director or since. The DARAB Rules grant broader powers to the Board and the Adjudicators and contain
more detailed rules on procedure than those provided by the orders, circulars, memoranda and opinions
cited by the Court of Appeals delegating jurisdiction to the Regional Director. c hanro b1es vi rt ua1 1aw 1i bra ry

The Court of Appeals has underscored the fact that Section 13 of E.O. No. 129-A authorizes the DARAB to
delegate its powers and functions to the regional office in accordance with the rules and regulations
promulgated by the Board. The authority purportedly provides additional justification for the Regional
Office’s jurisdiction over the case. Precisely, however, the DARAB, through its Revised Rules, has delegated
such powers and functions to the RARADs and the PARADs, which, under Section 3 of the Rules, "are
deemed to form part of the DAR Regional Office where they are stationed." cralaw virtua1aw lib rary

It is evident from the foregoing that the DAR, like most administrative agencies, is granted with a fusion of
governmental powers, in this case, a commingling of the quasi-judicial and the executive. The growing
complexity of modern life, the multiplication of the subjects of governmental regulation and the increased
difficulty of administering the laws have impelled this constantly growing tendency toward such delegation.
29

In delegating these powers, it would hardly seem practical to allow a duplication of functions between
agencies. Duplication results in confusion between the various agencies upon whom these powers are
reposed, and in the public that the agencies are supposed to serve. It divides the agencies’ resources and
prevents them from devoting their energy to similarly important tasks. The intention to avoid this very
situation is evident in the various laws’ distinct delineation of the functions of the DARAB/RARAD/PARAD and
the DAR Regional Office. Accordingly, the Court must reject the theory of concurrent jurisdiction between
the former and the latter. We hold that the DAR Regional Office has no jurisdiction over the subject case.

In view of this conclusion, we need not resolve the issue of deprivation of due process allegedly suffered by
petitioner in the proceedings before the Regional Director.

WHEREFORE, the petition is given DUE COURSE and GRANTED. The Decision and Resolution of the Court of
Appeals is REVERSED and SET ASIDE. The restraining order issued per this Court’s Resolution dated May 17,
1993 is hereby made permanent.

SO ORDERED. chanrob1es vi rtua 1 1aw 1i bra ry

Davide, Jr., C.J., Puno, Pardo and Ynares-Santiago, JJ., concur.

SECOND DIVISION

G.R. No. 183204, January 13, 2014

THE METROPOLITAN BANK AND TRUST COMPANY, Petitioner, v. ANA GRACE ROSALES AND YO YUK
TO, Respondents.

DECISION

DEL CASTILLO, J.:

Bank deposits, which are in the nature of a simple loan or mutuum,1 must be paid upon demand by the
depositor.2
This Petition for Review on Certiorari3 under Rule 45 of the Rules of Court assails the April 2, 2008
Decision4 and the May 30, 2008 Resolution5 of he Court of Appeals CA) in CA-G.R. CV No. 89086.

Factual Antecedents

Petitioner Metropolitan Bank and Trust Company is a domestic banking corporation duly organized and
existing under the laws of the Philippines.6 Respondent Ana Grace Rosales (Rosales) is the owner of China
Golden Bridge Travel Services,7 a travel agency.8 Respondent Yo Yuk To is the mother of respondent
Rosales.9

In 2000, respondents opened a Joint Peso Account10 with petitioner’s Pritil-Tondo Branch.11 As of August 4,
2004, respondents’ Joint Peso Account showed a balance of P2,515,693.52.12

In May 2002, respondent Rosales accompanied her client Liu Chiu Fang, a Taiwanese National applying for a
retiree’s visa from the Philippine Leisure and Retirement Authority (PLRA), to petitioner’s branch in Escolta
to open a savings account, as required by the PLRA.13 Since Liu Chiu Fang could speak only in Mandarin,
respondent Rosales acted as an interpreter for her.14

On March 3, 2003, respondents opened with petitioner’s Pritil-Tondo Branch a Joint Dollar Account15 with an
initial deposit of US$14,000.00.16

On July 31, 2003, petitioner issued a "Hold Out" order against respondents’ accounts.17

On September 3, 2003, petitioner, through its Special Audit Department Head Antonio Ivan Aguirre, filed
before the Office of the Prosecutor of Manila a criminal case for Estafa through False Pretences,
Misrepresentation, Deceit, and Use of Falsified Documents, docketed as I.S. No. 03I-25014,18 against
respondent Rosales.19 Petitioner accused respondent Rosales and an unidentified woman as the ones
responsible for the unauthorized and fraudulent withdrawal of US$75,000.00 from Liu Chiu Fang’s dollar
account with petitioner’s Escolta Branch.20 Petitioner alleged that on February 5, 2003, its branch in Escolta
received from the PLRA a Withdrawal Clearance for the dollar account of Liu Chiu Fang;21 that in the
afternoon of the same day, respondent Rosales went to petitioner’s Escolta Branch to inform its Branch
Head, Celia A. Gutierrez (Gutierrez), that Liu Chiu Fang was going to withdraw her dollar deposits in
cash;22 that Gutierrez told respondent Rosales to come back the following day because the bank did not
have enough dollars;23 that on February 6, 2003, respondent Rosales accompanied an unidentified impostor
of Liu Chiu Fang to the bank;24 that the impostor was able to withdraw Liu Chiu Fang’s dollar deposit in the
amount of US$75,000.00;25 that on March 3, 2003, respondents opened a dollar account with petitioner;
and that the bank later discovered that the serial numbers of the dollar notes deposited by respondents in
the amount of US$11,800.00 were the same as those withdrawn by the impostor.26

Respondent Rosales, however, denied taking part in the fraudulent and unauthorized withdrawal from the
dollar account of Liu Chiu Fang.27 Respondent Rosales claimed that she did not go to the bank on February
5, 2003.28 Neither did she inform Gutierrez that Liu Chiu Fang was going to close her account.29 Respondent
Rosales further claimed that after Liu Chiu Fang opened an account with petitioner, she lost track of
her.30 Respondent Rosales’ version of the events that transpired thereafter is as follows:

On February 6, 2003, she received a call from Gutierrez informing her that Liu Chiu Fang was at the bank to
close her account.31 At noon of the same day, respondent Rosales went to the bank to make a
transaction.32 While she was transacting with the teller, she caught a glimpse of a woman seated at the desk
of the Branch Operating Officer, Melinda Perez (Perez).33 After completing her transaction, respondent
Rosales approached Perez who informed her that Liu Chiu Fang had closed her account and had already
left.34 Perez then gave a copy of the Withdrawal Clearance issued by the PLRA to respondent Rosales.35 On
June 16, 2003, respondent Rosales received a call from Liu Chiu Fang inquiring about the extension of her
PLRA Visa and her dollar account.36 It was only then that Liu Chiu Fang found out that her account had been
closed without her knowledge.37 Respondent Rosales then went to the bank to inform Gutierrez and Perez of
the unauthorized withdrawal.38 On June 23, 2003, respondent Rosales and Liu Chiu Fang went to the PLRA
Office, where they were informed that the Withdrawal Clearance was issued on the basis of a Special Power
of Attorney (SPA) executed by Liu Chiu Fang in favor of a certain Richard So.39 Liu Chiu Fang, however,
denied executing the SPA.40 The following day, respondent Rosales, Liu Chiu Fang, Gutierrez, and Perez met
at the PLRA Office to discuss the unauthorized withdrawal.41 During the conference, the bank officers
assured Liu Chiu Fang that the money would be returned to her.42

On December 15, 2003, the Office of the City Prosecutor of Manila issued a Resolution dismissing the
criminal case for lack of probable cause.43 Unfazed, petitioner moved for reconsideration.

On September 10, 2004, respondents filed before the Regional Trial Court (RTC) of Manila a Complaint44for
Breach of Obligation and Contract with Damages, docketed as Civil Case No. 04110895 and raffled to Branch
21, against petitioner. Respondents alleged that they attempted several times to withdraw their deposits but
were unable to because petitioner had placed their accounts under "Hold Out" status.45 No explanation,
however, was given by petitioner as to why it issued the "Hold Out" order.46 Thus, they prayed that the
"Hold Out" order be lifted and that they be allowed to withdraw their deposits.47 They likewise prayed for
actual, moral, and exemplary damages, as well as attorney’s fees.48

Petitioner alleged that respondents have no cause of action because it has a valid reason for issuing the
"Hold Out" order.49 It averred that due to the fraudulent scheme of respondent Rosales, it was compelled to
reimburse Liu Chiu Fang the amount of US$75,000.0050 and to file a criminal complaint for Estafa against
respondent Rosales.51

While the case for breach of contract was being tried, the City Prosecutor of Manila issued a Resolution
dated February 18, 2005, reversing the dismissal of the criminal complaint.52 An Information, docketed as
Criminal Case No. 05-236103,53 was then filed charging respondent Rosales with Estafa before Branch 14 of
the RTC of Manila.54

Ruling of the Regional Trial Court

On January 15, 2007, the RTC rendered a Decision55 finding petitioner liable for damages for breach of
contract.56 The RTC ruled that it is the duty of petitioner to release the deposit to respondents as the act of
withdrawal of a bank deposit is an act of demand by the creditor.57 The RTC also said that the recourse of
petitioner is against its negligent employees and not against respondents.58 The dispositive portion of the
Decision reads:

WHEREFORE, premises considered, judgment is hereby rendered ordering [petitioner] METROPOLITAN BANK
& TRUST COMPANY to allow [respondents] ANA GRACE ROSALES and YO YUK TO to withdraw their Savings
and Time Deposits with the agreed interest, actual damages of P50,000.00, moral damages ofP50,000.00,
exemplary damages of P30,000.00 and 10% of the amount due [respondents] as and for attorney’s fees
plus the cost of suit.

The counterclaim of [petitioner] is hereby DISMISSED for lack of merit.

SO ORDERED.59

Ruling of the Court of Appeals

Aggrieved, petitioner appealed to the CA.

On April 2, 2008, the CA affirmed the ruling of the RTC but deleted the award of actual damages because
"the basis for [respondents’] claim for such damages is the professional fee that they paid to their legal
counsel for [respondent] Rosales’ defense against the criminal complaint of [petitioner] for estafa before the
Office of the City Prosecutor of Manila and not this case."60 Thus, the CA disposed of the case in this wise:

WHEREFORE, premises considered, the Decision dated January 15, 2007 of the RTC, Branch 21, Manila in
Civil Case No. 04-110895 is AFFIRMED with MODIFICATION that the award of actual damages to
[respondents] Rosales and Yo Yuk To is hereby DELETED.

SO ORDERED.61
Petitioner sought reconsideration but the same was denied by the CA in its May 30, 2008 Resolution.62

Issues

Hence, this recourse by petitioner raising the following issues:

A. THE [CA] ERRED IN RULING THAT THE "HOLD-OUT" PROVISION IN THE APPLICATION AND AGREEMENT
FOR DEPOSIT ACCOUNT DOES NOT APPLY IN THIS CASE.

B. THE [CA] ERRED WHEN IT RULED THAT PETITIONER’S EMPLOYEES WERE NEGLIGENT IN RELEASING LIU
CHIU FANG’S FUNDS.

C. THE [CA] ERRED IN AFFIRMING THE AWARD OF MORAL DAMAGES, EXEMPLARY DAMAGES, AND
ATTORNEY’S FEES.63

Petitioner’s Arguments

Petitioner contends that the CA erred in not applying the "Hold Out" clause stipulated in the Application and
Agreement for Deposit Account.64 It posits that the said clause applies to any and all kinds of obligation as it
does not distinguish between obligations arising ex contractu or ex delictu.65 Petitioner also contends that
the fraud committed by respondent Rosales was clearly established by evidence;66thus, it was justified in
issuing the "Hold-Out" order.67 Petitioner likewise denies that its employees were negligent in releasing the
dollars.68 It claims that it was the deception employed by respondent Rosales that caused petitioner’s
employees to release Liu Chiu Fang’s funds to the impostor.69

Lastly, petitioner puts in issue the award of moral and exemplary damages and attorney’s fees. It insists
that respondents failed to prove that it acted in bad faith or in a wanton, fraudulent, oppressive or
malevolent manner.70

Respondents’ Arguments

Respondents, on the other hand, argue that there is no legal basis for petitioner to withhold their deposits
because they have no monetary obligation to petitioner.71 They insist that petitioner miserably failed to
prove its accusations against respondent Rosales.72 In fact, no documentary evidence was presented to
show that respondent Rosales participated in the unauthorized withdrawal.73 They also question the fact that
the list of the serial numbers of the dollar notes fraudulently withdrawn on February 6, 2003, was not signed
or acknowledged by the alleged impostor.74 Respondents likewise maintain that what was established during
the trial was the negligence of petitioner’s employees as they allowed the withdrawal of the funds without
properly verifying the identity of the depositor.75Furthermore, respondents contend that their deposits are in
the nature of a loan; thus, petitioner had the obligation to return the deposits to them upon
demand.76 Failing to do so makes petitioner liable to pay respondents moral and exemplary damages, as
well as attorney’s fees.77

Our Ruling

The Petition is bereft of merit.

At the outset, the relevant issues in this case are (1) whether petitioner breached its contract with
respondents, and (2) if so, whether it is liable for damages. The issue of whether petitioner’s employees
were negligent in allowing the withdrawal of Liu Chiu Fang’s dollar deposits has no bearing in the resolution
of this case. Thus, we find no need to discuss the same.

The "Hold Out" clause does not apply

to the instant case.

Petitioner claims that it did not breach its contract with respondents because it has a valid reason for issuing
the "Hold Out" order. Petitioner anchors its right to withhold respondents’ deposits on the Application and
Agreement for Deposit Account, which reads:

Authority to Withhold, Sell and/or Set Off:

The Bank is hereby authorized to withhold as security for any and all obligations with the Bank, all monies,
properties or securities of the Depositor now in or which may hereafter come into the possession or under
the control of the Bank, whether left with the Bank for safekeeping or otherwise, or coming into the hands of
the Bank in any way, for so much thereof as will be sufficient to pay any or all obligations incurred by
Depositor under the Account or by reason of any other transactions between the same parties now existing
or hereafter contracted, to sell in any public or private sale any of such properties or securities of Depositor,
and to apply the proceeds to the payment of any Depositor’s obligations heretofore mentioned.

xxx

JOINT ACCOUNT

xxx

The Bank may, at any time in its discretion and with or without notice to all of the Depositors, assert a lien
on any balance of the Account and apply all or any part thereof against any indebtedness, matured or
unmatured, that may then be owing to the Bank by any or all of the Depositors. It is understood that if said
indebtedness is only owing from any of the Depositors, then this provision constitutes the consent by all of
the depositors to have the Account answer for the said indebtedness to the extent of the equal share of the
debtor in the amount credited to the Account.78

Petitioner’s reliance on the "Hold Out" clause in the Application and Agreement for Deposit Account is
misplaced.

The "Hold Out" clause applies only if there is a valid and existing obligation arising from any of the sources
of obligation enumerated in Article 115779 of the Civil Code, to wit: law, contracts, quasi-contracts, delict,
and quasi-delict. In this case, petitioner failed to show that respondents have an obligation to it under any
law, contract, quasi-contract, delict, or quasi-delict. And although a criminal case was filed by petitioner
against respondent Rosales, this is not enough reason for petitioner to issue a "Hold Out" order as the case
is still pending and no final judgment of conviction has been rendered against respondent Rosales. In fact, it
is significant to note that at the time petitioner issued the "Hold Out" order, the criminal complaint had not
yet been filed. Thus, considering that respondent Rosales is not liable under any of the five sources of
obligation, there was no legal basis for petitioner to issue the "Hold Out" order. Accordingly, we agree with
the findings of the RTC and the CA that the "Hold Out" clause does not apply in the instant case.

In view of the foregoing, we find that petitioner is guilty of breach of contract when it unjustifiably refused
to release respondents’ deposit despite demand. Having breached its contract with respondents, petitioner is
liable for damages.

Respondents are entitled to moral and

exemplary damages and attorney’s fees.

In cases of breach of contract, moral damages may be recovered only if the defendant acted fraudulently or
in bad faith,80 or is "guilty of gross negligence amounting to bad faith, or in wanton disregard of his
contractual obligations."81

In this case, a review of the circumstances surrounding the issuance of the "Hold Out" order reveals that
petitioner issued the "Hold Out" order in bad faith. First of all, the order was issued without any legal basis.
Second, petitioner did not inform respondents of the reason for the "Hold Out."82 Third, the order was issued
prior to the filing of the criminal complaint. Records show that the "Hold Out" order was issued on July 31,
2003,83 while the criminal complaint was filed only on September 3, 2003.84 All these taken together lead us
to conclude that petitioner acted in bad faith when it breached its contract with respondents. As we see it
then, respondents are entitled to moral damages.

As to the award of exemplary damages, Article 222985 of the Civil Code provides that exemplary damages
may be imposed "by way of example or correction for the public good, in addition to the moral, temperate,
liquidated or compensatory damages." They are awarded only if the guilty party acted in a wanton,
fraudulent, reckless, oppressive or malevolent manner.86

In this case, we find that petitioner indeed acted in a wanton, fraudulent, reckless, oppressive or malevolent
manner when it refused to release the deposits of respondents without any legal basis. We need not belabor
the fact that the banking industry is impressed with public interest.87 As such, "the highest degree of
diligence is expected, and high standards of integrity and performance are even required of it."88 It must
therefore "treat the accounts of its depositors with meticulous care and always to have in mind the fiduciary
nature of its relationship with them."89 For failing to do this, an award of exemplary damages is justified to
set an example.

The award of attorney's fees is likewise proper pursuant to paragraph 1, Article 220890 of the Civil Code.

In closing, it must be stressed that while we recognize that petitioner has the right to protect itself from
fraud or suspicions of fraud, the exercise of his right should be done within the bounds of the law and in
accordance with due process, and not in bad faith or in a wanton disregard of its contractual obligation to
respondents.

WHEREFORE, the Petition is hereby DENIED. The assailed April 2, 2008 Decision and the May 30, 2008
Resolution of the Court of Appeals in CA-G.R. CV No. 89086 are hereby AFFIRMED. SO ORDERED.