Republic of the Philippines

SUPREME COURT
Manila

EN BANC

G.R. No. L-19650

September 29, 1966
CALTEX (PHILIPPINES), INC., petitioner-appellee,
vs.
ENRICO PALOMAR, in his capacity as THE POSTMASTER GENERAL, respondent-appellant.
Office of the Solicitor General for respondent and appellant.
Ross, Selph and Carrascoso for petitioner and appellee.

CASTRO, J.:
In the year 1960 the Caltex (Philippines) Inc. (hereinafter referred to as Caltex) conceived and laid
the groundwork for a promotional scheme calculated to drum up patronage for its oil products.
Denominated "Caltex Hooded Pump Contest", it calls for participants therein to estimate the actual
number of liters a hooded gas pump at each Caltex station will dispense during a specified period.
Employees of the Caltex (Philippines) Inc., its dealers and its advertising agency, and their
immediate families excepted, participation is to be open indiscriminately to all "motor vehicle owners
and/or licensed drivers". For the privilege to participate, no fee or consideration is required to be
paid, no purchase of Caltex products required to be made. Entry forms are to be made available
upon request at each Caltex station where a sealed can will be provided for the deposit of
accomplished entry stubs.

A three-staged winner selection system is envisioned. At the station level, called "Dealer Contest",
the contestant whose estimate is closest to the actual number of liters dispensed by the hooded
pump thereat is to be awarded the first prize; the next closest, the second; and the next, the third.
Prizes at this level consist of a 3-burner kerosene stove for first; a thermos bottle and a Ray-O-Vac
hunter lantern for second; and an Everready Magnet-lite flashlight with batteries and a screwdriver
set for third. The first-prize winner in each station will then be qualified to join in the "Regional
Contest" in seven different regions. The winning stubs of the qualified contestants in each region will
be deposited in a sealed can from which the first-prize, second-prize and third-prize winners of that
region will be drawn. The regional first-prize winners will be entitled to make a three-day all-
expenses-paid round trip to Manila, accompanied by their respective Caltex dealers, in order to take
part in the "National Contest". The regional second-prize and third-prize winners will receive cash
prizes of P500 and P300, respectively. At the national level, the stubs of the seven regional first-
prize winners will be placed inside a sealed can from which the drawing for the final first-prize,
second-prize and third-prize winners will be made. Cash prizes in store for winners at this final stage
are: P3,000 for first; P2,000 for second; Pl,500 for third; and P650 as consolation prize for each of
the remaining four participants.

Foreseeing the extensive use of the mails not only as amongst the media for publicizing the contest
but also for the transmission of communications relative thereto, representations were made by
Caltex with the postal authorities for the contest to be cleared in advance for mailing, having in view
sections 1954(a), 1982 and 1983 of the Revised Administrative Code, the pertinent provisions of
which read as follows:

SECTION 1954. Absolutely non-mailable matter. — No matter belonging to any of the

following classes, whether sealed as first-class matter or not, shall be imported into the
Philippines through the mails, or to be deposited in or carried by the mails of the Philippines,
or be delivered to its addressee by any officer or employee of the Bureau of Posts:

Written or printed matter in any form advertising, describing, or in any manner pertaining to,
or conveying or purporting to convey any information concerning any lottery, gift enterprise,
or similar scheme depending in whole or in part upon lot or chance, or any scheme, device,
or enterprise for obtaining any money or property of any kind by means of false or fraudulent
pretenses, representations, or promises.

"SECTION 1982. Fraud orders.—Upon satisfactory evidence that any person or company is
engaged in conducting any lottery, gift enterprise, or scheme for the distribution of money, or
of any real or personal property by lot, chance, or drawing of any kind, or that any person or
company is conducting any scheme, device, or enterprise for obtaining money or property of
any kind through the mails by means of false or fraudulent pretenses, representations, or
promises, the Director of Posts may instruct any postmaster or other officer or employee of
the Bureau to return to the person, depositing the same in the mails, with the word
 "fraudulent" plainly written or stamped upon the outside cover thereof, any mail matter of
whatever class mailed by or addressed to such person or company or the representative or
agent of such person or company.

SECTION 1983. Deprivation of use of money order system and telegraphic transfer
service.—The Director of Posts may, upon evidence satisfactory to him that any person or
company is engaged in conducting any lottery, gift enterprise or scheme for the distribution
of money, or of any real or personal property by lot, chance, or drawing of any kind, or that
any person or company is conducting any scheme, device, or enterprise for obtaining money
or property of any kind through the mails by means of false or fraudulent pretenses,
representations, or promise, forbid the issue or payment by any postmaster of any postal
money order or telegraphic transfer to said person or company or to the agent of any such
person or company, whether such agent is acting as an individual or as a firm, bank,
corporation, or association of any kind, and may provide by regulation for the return to the
remitters of the sums named in money orders or telegraphic transfers drawn in favor of such
person or company or its agent.

The overtures were later formalized in a letter to the Postmaster General, dated October 31, 1960,
in which the Caltex, thru counsel, enclosed a copy of the contest rules and endeavored to justify its
position that the contest does not violate the anti-lottery provisions of the Postal Law. Unimpressed,
the then Acting Postmaster General opined that the scheme falls within the purview of the provisions
aforesaid and declined to grant the requested clearance. In its counsel's letter of December 7, 1960,
Caltex sought a reconsideration of the foregoing stand, stressing that there being involved no
consideration in the part of any contestant, the contest was not, under controlling authorities,
condemnable as a lottery. Relying, however, on an opinion rendered by the Secretary of Justice on
an unrelated case seven years before (Opinion 217, Series of 1953), the Postmaster General
maintained his view that the contest involves consideration, or that, if it does not, it is nevertheless
a "gift enterprise" which is equally banned by the Postal Law, and in his letter of December 10, 1960
not only denied the use of the mails for purposes of the proposed contest but as well threatened that
if the contest was conducted, "a fraud order will have to be issued against it (Caltex) and all its
representatives".

Caltex thereupon invoked judicial intervention by filing the present petition for declaratory relief
against Postmaster General Enrico Palomar, praying "that judgment be rendered declaring its 'Caltex
Hooded Pump Contest' not to be violative of the Postal Law, and ordering respondent to allow
petitioner the use of the mails to bring the contest to the attention of the public". After issues were
joined and upon the respective memoranda of the parties, the trial court rendered judgment as
follows:

In view of the foregoing considerations, the Court holds that the proposed 'Caltex Hooded
Pump Contest' announced to be conducted by the petitioner under the rules marked as
Annex B of the petitioner does not violate the Postal Law and the respondent has no right to
bar the public distribution of said rules by the mails.

The respondent appealed.

The parties are now before us, arrayed against each other upon two basic issues: first, whether the
petition states a sufficient cause of action for declaratory relief; and second, whether the proposed
"Caltex Hooded Pump Contest" violates the Postal Law. We shall take these up in seriatim.

1. By express mandate of section 1 of Rule 66 of the old Rules of Court, which was the applicable
legal basis for the remedy at the time it was invoked, declaratory relief is available to any person
"whose rights are affected by a statute . . . to determine any question of construction or validity arising
under the . . . statute and for a declaration of his rights thereunder" (now section 1, Rule 64, Revised
Rules of Court). In amplification, this Court, conformably to established jurisprudence on the matter,
laid down certain conditions sine qua non therefor, to wit: (1) there must be a justiciable controversy;
(2) the controversy must be between persons whose interests are adverse; (3) the party seeking
declaratory relief must have a legal interest in the controversy; and (4) the issue involved must be
ripe for judicial determination (Tolentino vs. The Board of Accountancy, et al., G.R. No. L-3062,
September 28, 1951; Delumen, et al. vs. Republic of the Philippines, 50 O.G., No. 2, pp. 576, 578-
579; Edades vs. Edades, et al., G.R. No. L-8964, July 31, 1956). The gravamen of the appellant's
stand being that the petition herein states no sufficient cause of action for declaratory relief, our duty
is to assay the factual bases thereof upon the foregoing crucible.

As we look in retrospect at the incidents that generated the present controversy, a number of
significant points stand out in bold relief. The appellee (Caltex), as a business enterprise of some
consequence, concededly has the unquestioned right to exploit every legitimate means, and to avail
of all appropriate media to advertise and stimulate increased patronage for its products. In contrast,
the appellant, as the authority charged with the enforcement of the Postal Law, admittedly has the
power and the duty to suppress transgressions thereof — particularly thru the issuance of fraud
orders, under Sections 1982 and 1983 of the Revised Administrative Code, against legally non-
mailable schemes. Obviously pursuing its right aforesaid, the appellee laid out plans for the sales
promotion scheme hereinbefore detailed. To forestall possible difficulties in the dissemination of
information thereon thru the mails, amongst other media, it was found expedient to request the
appellant for an advance clearance therefor. However, likewise by virtue of his jurisdiction in the
premises and construing the pertinent provisions of the Postal Law, the appellant saw a violation
thereof in the proposed scheme and accordingly declined the request. A point of difference as to the
correct construction to be given to the applicable statute was thus reached. Communications in which
the parties expounded on their respective theories were exchanged. The confidence with which the
appellee insisted upon its position was matched only by the obstinacy with which the appellant stood
his ground. And this impasse was climaxed by the appellant's open warning to the appellee that if
the proposed contest was "conducted, a fraud order will have to be issued against it and all its
representatives."

Against this backdrop, the stage was indeed set for the remedy prayed for. The appellee's insistent
assertion of its claim to the use of the mails for its proposed contest, and the challenge thereto and
consequent denial by the appellant of the privilege demanded, undoubtedly spawned a live
controversy. The justiciability of the dispute cannot be gainsaid. There is an active antagonistic
assertion of a legal right on one side and a denial thereof on the other, concerning a real — not a
mere theoretical — question or issue. The contenders are as real as their interests are substantial.
To the appellee, the uncertainty occasioned by the divergence of views on the issue of construction
hampers or disturbs its freedom to enhance its business. To the appellant, the suppression of the
appellee's proposed contest believed to transgress a law he has sworn to uphold and enforce is an
unavoidable duty. With the appellee's bent to hold the contest and the appellant's threat to issue a
fraud order therefor if carried out, the contenders are confronted by the ominous shadow of an
imminent and inevitable litigation unless their differences are settled and stabilized by a tranquilizing
declaration (Pablo y Sen, et al. vs. Republic of the Philippines, G.R. No. L-6868, April 30, 1955).
And, contrary to the insinuation of the appellant, the time is long past when it can rightly be said that
merely the appellee's "desires are thwarted by its own doubts, or by the fears of others" — which
admittedly does not confer a cause of action. Doubt, if any there was, has ripened into a justiciable
controversy when, as in the case at bar, it was translated into a positive claim of right which is actually
contested (III Moran, Comments on the Rules of Court, 1963 ed., pp. 132-133, citing: Woodward vs.
Fox West Coast Theaters, 36 Ariz., 251, 284 Pac. 350).

We cannot hospitably entertain the appellant's pretense that there is here no question of construction
because the said appellant "simply applied the clear provisions of the law to a given set of facts as
embodied in the rules of the contest", hence, there is no room for declaratory relief. The infirmity of
this pose lies in the fact that it proceeds from the assumption that, if the circumstances here
presented, the construction of the legal provisions can be divorced from the matter of their application
to the appellee's contest. This is not feasible. Construction, verily, is the art or process of discovering
and expounding the meaning and intention of the authors of the law with respect to its application to
a given case, where that intention is rendered doubtful, amongst others, by reason of the fact that
the given case is not explicitly provided for in the law (Black, Interpretation of Laws, p. 1). This is
precisely the case here. Whether or not the scheme proposed by the appellee is within the coverage
of the prohibitive provisions of the Postal Law inescapably requires an inquiry into the intended
meaning of the words used therein. To our mind, this is as much a question of construction or
interpretation as any other.

Nor is it accurate to say, as the appellant intimates, that a pronouncement on the matter at hand can
amount to nothing more than an advisory opinion the handing down of which is anathema to a
declaratory relief action. Of course, no breach of the Postal Law has as yet been committed. Yet,
the disagreement over the construction thereof is no longer nebulous or contingent. It has taken a
fixed and final shape, presenting clearly defined legal issues susceptible of immediate resolution.
With the battle lines drawn, in a manner of speaking, the propriety — nay, the necessity — of setting
the dispute at rest before it accumulates the asperity distemper, animosity, passion and violence of
a full-blown battle which looms ahead (III Moran, Comments on the Rules of Court, 1963 ed., p. 132
and cases cited), cannot but be conceded. Paraphrasing the language in Zeitlin vs. Arnebergh 59
Cal., 2d., 901, 31 Cal. Rptr., 800, 383 P. 2d., 152, cited in 22 Am. Jur., 2d., p. 869, to deny declaratory
relief to the appellee in the situation into which it has been cast, would be to force it to choose
between undesirable alternatives. If it cannot obtain a final and definitive pronouncement as to
whether the anti-lottery provisions of the Postal Law apply to its proposed contest, it would be faced
with these choices: If it launches the contest and uses the mails for purposes thereof, it not only
incurs the risk, but is also actually threatened with the certain imposition, of a fraud order with its
concomitant stigma which may attach even if the appellee will eventually be vindicated; if it abandons
the contest, it becomes a self-appointed censor, or permits the appellant to put into effect a virtual
fiat of previous censorship which is constitutionally unwarranted. As we weigh these considerations
in one equation and in the spirit of liberality with which the Rules of Court are to be interpreted in
order to promote their object (section 1, Rule 1, Revised Rules of Court) — which, in the instant
case, is to settle, and afford relief from uncertainty and insecurity with respect to, rights and duties
under a law — we can see in the present case any imposition upon our jurisdiction or any futility or
prematurity in our intervention.

The appellant, we apprehend, underrates the force and binding effect of the ruling we hand down in
this case if he believes that it will not have the final and pacifying function that a declaratory judgment
is calculated to subserve. At the very least, the appellant will be bound. But more than this, he
obviously overlooks that in this jurisdiction, "Judicial decisions applying or interpreting the law shall
form a part of the legal system" (Article 8, Civil Code of the Philippines). In effect, judicial decisions
assume the same authority as the statute itself and, until authoritatively abandoned, necessarily
become, to the extent that they are applicable, the criteria which must control the actuations not only
of those called upon to abide thereby but also of those in duty bound to enforce obedience thereto.
Accordingly, we entertain no misgivings that our resolution of this case will terminate the controversy
at hand.

It is not amiss to point out at this juncture that the conclusion we have herein just reached is not
without precedent. In Liberty Calendar Co. vs. Cohen, 19 N.J., 399, 117 A. 2d., 487, where a
corporation engaged in promotional advertising was advised by the county prosecutor that its
proposed sales promotion plan had the characteristics of a lottery, and that if such sales promotion
were conducted, the corporation would be subject to criminal prosecution, it was held that the
corporation was entitled to maintain a declaratory relief action against the county prosecutor to
determine the legality of its sales promotion plan. In pari materia, see also: Bunis vs. Conway, 17
App. Div. 2d., 207, 234 N.Y.S. 2d., 435; Zeitlin vs. Arnebergh, supra; Thrillo, Inc. vs. Scott, 15 N.J.
Super. 124, 82 A. 2d., 903.

In fine, we hold that the appellee has made out a case for declaratory relief.

2. The Postal Law, chapter 52 of the Revised Administrative Code, using almost identical terminology
in sections 1954(a), 1982 and 1983 thereof, supra, condemns as absolutely non-mailable, and
empowers the Postmaster General to issue fraud orders against, or otherwise deny the use of the
facilities of the postal service to, any information concerning "any lottery, gift enterprise, or scheme
for the distribution of money, or of any real or personal property by lot, chance, or drawing of any
kind". Upon these words hinges the resolution of the second issue posed in this appeal.

Happily, this is not an altogether untrodden judicial path. As early as in 1922, in "El Debate", Inc. vs.
Topacio, 44 Phil., 278, 283-284, which significantly dwelt on the power of the postal authorities under
the abovementioned provisions of the Postal Law, this Court declared that —

While countless definitions of lottery have been attempted, the authoritative one for this
jurisdiction is that of the United States Supreme Court, in analogous cases having to do with
the power of the United States Postmaster General, viz.: The term "lottery" extends to all
schemes for the distribution of prizes by chance, such as policy playing, gift exhibitions, prize
concerts, raffles at fairs, etc., and various forms of gambling. The three essential elements
of a lottery are: First, consideration; second, prize; and third, chance. (Horner vs. States
[1892], 147 U.S. 449; Public Clearing House vs. Coyne [1903], 194 U.S., 497; U.S. vs. Filart
and Singson [1915], 30 Phil., 80; U.S. vs. Olsen and Marker [1917], 36 Phil., 395; U.S. vs.
Baguio [1919], 39 Phil., 962; Valhalla Hotel Construction Company vs. Carmona, p.
233, ante.)

Unanimity there is in all quarters, and we agree, that the elements of prize and chance are too
obvious in the disputed scheme to be the subject of contention. Consequently as the appellant
himself concedes, the field of inquiry is narrowed down to the existence of the element of
consideration therein. Respecting this matter, our task is considerably lightened inasmuch as in the
same case just cited, this Court has laid down a definitive yard-stick in the following terms —

In respect to the last element of consideration, the law does not condemn the gratuitous
distribution of property by chance, if no consideration is derived directly or indirectly from the
party receiving the chance, but does condemn as criminal schemes in which a valuable
consideration of some kind is paid directly or indirectly for the chance to draw a prize.

Reverting to the rules of the proposed contest, we are struck by the clarity of the language in which
the invitation to participate therein is couched. Thus —
 No puzzles, no rhymes? You don't need wrappers, labels or boxtops? You don't have to buy
anything? Simply estimate the actual number of liter the Caltex gas pump with the hood at
your favorite Caltex dealer will dispense from — to —, and win valuable prizes . . . ." .

Nowhere in the said rules is any requirement that any fee be paid, any merchandise be bought, any
service be rendered, or any value whatsoever be given for the privilege to participate. A prospective
contestant has but to go to a Caltex station, request for the entry form which is available on demand,
and accomplish and submit the same for the drawing of the winner. Viewed from all angles or turned
inside out, the contest fails to exhibit any discernible consideration which would brand it as a lottery.
Indeed, even as we head the stern injunction, "look beyond the fair exterior, to the substance, in
order to unmask the real element and pernicious tendencies which the law is seeking to prevent"
("El Debate", Inc. vs. Topacio, supra, p. 291), we find none. In our appraisal, the scheme does not
only appear to be, but actually is, a gratuitous distribution of property by chance.

There is no point to the appellant's insistence that non-Caltex customers who may buy Caltex
products simply to win a prize would actually be indirectly paying a consideration for the privilege to
join the contest. Perhaps this would be tenable if the purchase of any Caltex product or the use of
any Caltex service were a pre-requisite to participation. But it is not. A contestant, it hardly needs
reiterating, does not have to buy anything or to give anything of value.1awphîl.nèt

Off-tangent, too, is the suggestion that the scheme, being admittedly for sales promotion, would
naturally benefit the sponsor in the way of increased patronage by those who will be encouraged to
prefer Caltex products "if only to get the chance to draw a prize by securing entry blanks". The
required element of consideration does not consist of the benefit derived by the proponent of the
contest. The true test, as laid down in People vs. Cardas, 28 P. 2d., 99, 137 Cal. App. (Supp.) 788,
is whether the participant pays a valuable consideration for the chance, and not whether those
conducting the enterprise receive something of value in return for the distribution of the prize.
Perspective properly oriented, the standpoint of the contestant is all that matters, not that of the
sponsor. The following, culled from Corpus Juris Secundum, should set the matter at rest:

The fact that the holder of the drawing expects thereby to receive, or in fact does receive,
some benefit in the way of patronage or otherwise, as a result of the drawing; does not supply
the element of consideration. Griffith Amusement Co. vs. Morgan, Tex. Civ. App., 98 S.W.,
2d., 844" (54 C.J.S., p. 849).

Thus enlightened, we join the trial court in declaring that the "Caltex Hooded Pump Contest"
proposed by the appellee is not a lottery that may be administratively and adversely dealt with under
the Postal Law.

But it may be asked: Is it not at least a "gift enterprise, or scheme for the distribution of money, or of
any real or personal property by lot, chance, or drawing of any kind", which is equally prescribed?
Incidentally, while the appellant's brief appears to have concentrated on the issue of consideration,
this aspect of the case cannot be avoided if the remedy here invoked is to achieve its tranquilizing
effect as an instrument of both curative and preventive justice. Recalling that the appellant's action
was predicated, amongst other bases, upon Opinion 217, Series 1953, of the Secretary of Justice,
which opined in effect that a scheme, though not a lottery for want of consideration, may nevertheless
be a gift enterprise in which that element is not essential, the determination of whether or not the
proposed contest — wanting in consideration as we have found it to be — is a prohibited gift
enterprise, cannot be passed over sub silencio.

While an all-embracing concept of the term "gift enterprise" is yet to be spelled out in explicit words,
there appears to be a consensus among lexicographers and standard authorities that the term is
commonly applied to a sporting artifice of under which goods are sold for their market value but by
way of inducement each purchaser is given a chance to win a prize (54 C.J.S., 850; 34 Am. Jur.,
654; Black, Law Dictionary, 4th ed., p. 817; Ballantine, Law Dictionary with Pronunciations, 2nd ed.,
p. 55; Retail Section of Chamber of Commerce of Plattsmouth vs. Kieck, 257 N.W., 493, 128 Neb.
13; Barker vs. State, 193 S.E., 605, 56 Ga. App., 705; Bell vs. State, 37 Tenn. 507, 509, 5 Sneed,
507, 509). As thus conceived, the term clearly cannot embrace the scheme at bar. As already noted,
there is no sale of anything to which the chance offered is attached as an inducement to the
purchaser. The contest is open to all qualified contestants irrespective of whether or not they buy
the appellee's products.

Going a step farther, however, and assuming that the appellee's contest can be encompassed within
the broadest sweep that the term "gift enterprise" is capable of being extended, we think that the
appellant's pose will gain no added comfort. As stated in the opinion relied upon, rulings there are
indeed holding that a gift enterprise involving an award by chance, even in default of the element of
consideration necessary to constitute a lottery, is prohibited (E.g.: Crimes vs. States, 235 Ala 192,
178 So. 73; Russell vs. Equitable Loan & Sec. Co., 129 Ga. 154, 58 S.E., 88; State ex rel. Stafford
vs. Fox-Great Falls Theater Corporation, 132 P. 2d., 689, 694, 698, 114 Mont. 52). But this is only
one side of the coin. Equally impressive authorities declare that, like a lottery, a gift enterprise comes
within the prohibitive statutes only if it exhibits the tripartite elements of prize, chance and
consideration (E.g.: Bills vs. People, 157 P. 2d., 139, 142, 113 Colo., 326; D'Orio vs. Jacobs, 275 P.
563, 565, 151 Wash., 297; People vs. Psallis, 12 N.Y.S., 2d., 796; City and County of Denver vs.
Frueauff, 88 P., 389, 394, 39 Colo., 20, 7 L.R.A., N.S., 1131, 12 Ann. Cas., 521; 54 C.J.S., 851,
citing: Barker vs. State, 193 S.E., 605, 607, 56 Ga. App., 705; 18 Words and Phrases, perm. ed.,
pp. 590-594). The apparent conflict of opinions is explained by the fact that the specific statutory
provisions relied upon are not identical. In some cases, as pointed out in 54 C.J.S., 851, the terms
"lottery" and "gift enterprise" are used interchangeably (Bills vs. People, supra); in others, the
necessity for the element of consideration or chance has been specifically eliminated by statute. (54
C.J.S., 351-352, citing Barker vs. State, supra; State ex rel. Stafford vs. Fox-Great Falls Theater
Corporation, supra). The lesson that we derive from this state of the pertinent jurisprudence is,
therefore, that every case must be resolved upon the particular phraseology of the applicable
statutory provision.

Taking this cue, we note that in the Postal Law, the term in question is used in association with the
word "lottery". With the meaning of lottery settled, and consonant to the well-known principle of legal
hermeneutics noscitur a sociis — which Opinion 217 aforesaid also relied upon although only insofar
as the element of chance is concerned — it is only logical that the term under a construction should
be accorded no other meaning than that which is consistent with the nature of the word associated
therewith. Hence, if lottery is prohibited only if it involves a consideration, so also must the term "gift
enterprise" be so construed. Significantly, there is not in the law the slightest indicium of any intent
to eliminate that element of consideration from the "gift enterprise" therein included.

This conclusion firms up in the light of the mischief sought to be remedied by the law, resort to the
determination thereof being an accepted extrinsic aid in statutory construction. Mail fraud orders, it
is axiomatic, are designed to prevent the use of the mails as a medium for disseminating printed
matters which on grounds of public policy are declared non-mailable. As applied to lotteries, gift
enterprises and similar schemes, justification lies in the recognized necessity to suppress their
tendency to inflame the gambling spirit and to corrupt public morals (Com. vs. Lund, 15 A. 2d., 839,
143 Pa. Super. 208). Since in gambling it is inherent that something of value be hazarded for a
chance to gain a larger amount, it follows ineluctably that where no consideration is paid by the
contestant to participate, the reason behind the law can hardly be said to obtain. If, as it has been
held —

Gratuitous distribution of property by lot or chance does not constitute "lottery", if it is not
resorted to as a device to evade the law and no consideration is derived, directly or indirectly,
from the party receiving the chance, gambling spirit not being cultivated or stimulated
thereby. City of Roswell vs. Jones, 67 P. 2d., 286, 41 N.M., 258." (25 Words and Phrases,
perm. ed., p. 695, emphasis supplied).

we find no obstacle in saying the same respecting a gift enterprise. In the end, we are persuaded to
hold that, under the prohibitive provisions of the Postal Law which we have heretofore examined, gift
enterprises and similar schemes therein contemplated are condemnable only if, like lotteries, they
involve the element of consideration. Finding none in the contest here in question, we rule that the
appellee may not be denied the use of the mails for purposes thereof.

Recapitulating, we hold that the petition herein states a sufficient cause of action for declaratory
relief, and that the "Caltex Hooded Pump Contest" as described in the rules submitted by the
appellee does not transgress the provisions of the Postal Law.

ACCORDINGLY, the judgment appealed from is affirmed. No costs.

Concepcion, C.J., Reyes, J.B.L., Barrera, Dizon, Regala, Makalintal, Bengzon, J.P., Zaldivar and
Sanchez, JJ., concur.
 Republic of the Philippines
SUPREME COURT
Manila

SECOND DIVISION

G.R. No. L-30061 February 27, 1974

THE PEOPLE OF THE PHILIPPINES, plaintiff-appellees,
vs.
JOSE JABINAL Y CARMEN, defendant-appellant.
Office of the Solicitor General Felix V. Makasiar and Solicitor Antonio M. Martinez for plaintiff-
appellee.
Pedro Panganiban y Tolentino for defendant-appellant.

ANTONIO, J.:p
Appeal from the judgment of the Municipal Court of Batangas (provincial capital), Batangas, in
Criminal Case No. 889, finding the accused guilty of the crime of Illegal Possession of Firearm and
Ammunition and sentencing him to suffer an indeterminate penalty ranging from one (1) year and
one (1) day to two (2) years imprisonment, with the accessories provided by law, which raises in
issue the validity of his conviction based on a retroactive application of Our ruling in People v. Mapa.1

The complaint filed against the accused reads:

That on or about 9:00 o'clock, p.m., the 5th day of September, 1964, in the poblacion,
Municipality of Batangas, Province of Batangas, Philippines, and within the
jurisdiction of this Honorable Court, the above-named accused, a person not
authorized by law, did then and there wilfully, unlawfully and feloniously keep in his
possession, custody and direct control a revolver Cal. .22, RG8 German Made with
one (1) live ammunition and four (4) empty shells without first securing the necessary
permit or license to possess the same.

At the arraignment on September 11, 1964, the accused entered a plea of not guilty, after which trial
was accordingly held.

The accused admitted that on September 5, 1964, he was in possession of the revolver and the
ammunition described in the complaint, without the requisite license or permit. He, however, claimed
to be entitled to exoneration because, although he had no license or permit, he had an appointment
as Secret Agent from the Provincial Governor of Batangas and an appointment as Confidential Agent
from the PC Provincial Commander, and the said appointments expressly carried with them the
authority to possess and carry the firearm in question.

Indeed, the accused had appointments from the above-mentioned officials as claimed by him. His
appointment from Governor Feliciano Leviste, dated December 10, 1962, reads:

Reposing special trust and confidence in your civic spirit, and trusting that you will be
an effective agent in the detection of crimes and in the preservation of peace and
order in the province of Batangas, especially with respect to the suppression of
trafficking in explosives, jueteng, illegal cockfighting, cattle rustling, robbery and the
detection of unlicensed firearms, you are hereby appointed a SECRET AGENT of the
undersigned, the appointment to take effect immediately, or as soon as you have
qualified for the position. As such Secret Agent, your duties shall be those generally
of a peace officer and particularly to help in the preservation of peace and order in
this province and to make reports thereon to me once or twice a month. It should be
clearly understood that any abuse of authority on your part shall be considered
sufficient ground for the automatic cancellation of your appointment and immediate
separation from the service. In accordance with the decision of the Supreme Court in
G.R. No. L-12088 dated December 23, 1959, you will have the right to bear a firearm,
particularly described below, for use in connection with the performance of your
duties.

By virtue hereof, you may qualify and enter upon the performance of your duties by taking your
oath of office and filing the original thereof with us.

Very truly yours,

(Sgd.) FELICIANO
LEVISTE
Provincial Governor
FIREARM AUTHORIZED TO CARRY:
Kind: — ROHM-Revolver
Make: — German
SN: — 64
Cal:— .22

On March 15, 1964, the accused was also appointed by the PC Provincial Commander of Batangas
as Confidential Agent with duties to furnish information regarding smuggling activities, wanted
persons, loose firearms, subversives and other similar subjects that might affect the peace and order
condition in Batangas province, and in connection with these duties he was temporarily authorized
to possess a ROHM revolver, Cal. .22 RG-8 SN-64, for his personal protection while in the
performance of his duties.

The accused contended before the court a quo that in view of his above-mentioned appointments
as Secret Agent and Confidential Agent, with authority to possess the firearm subject matter of the
prosecution, he was entitled to acquittal on the basis of the Supreme Court's decision in People vs.
Macarandang2 and People vs. Lucero.3 The trial court, while conceding on the basis of the evidence
of record the accused had really been appointed Secret Agent and Confidential Agent by the
Provincial Governor and the PC Provincial Commander of Batangas, respectively, with authority to
possess and carry the firearm described in the complaint, nevertheless held the accused in its
decision dated December 27, 1968, criminally liable for illegal possession of a firearm and
ammunition on the ground that the rulings of the Supreme Court in the cases
of Macarandang and Lucero were reversed and abandoned in People vs. Mapa, supra. The court
considered as mitigating circumstances the appointments of the accused as Secret Agent and
Confidential Agent.

Let us advert to Our decisions in People v. Macarandang, supra, People v. Lucero,

supra, and People v. Mapa, supra. In Macarandang, We reversed the trial court's judgment of
conviction against the accused because it was shown that at the time he was found to possess a
certain firearm and ammunition without license or permit, he had an appointment from the Provincial
Governor as Secret Agent to assist in the maintenance of peace and order and in the detection of
crimes, with authority to hold and carry the said firearm and ammunition. We therefore held that while
it is true that the Governor has no authority to issue any firearm license or permit, nevertheless,
section 879 of the Revised Administrative Code provides that "peace officers" are exempted from
the requirements relating to the issuance of license to possess firearms; and Macarandang's
appointment as Secret Agent to assist in the maintenance of peace and order and detection of
crimes, sufficiently placed him in the category of a "peace officer" equivalent even to a member of
the municipal police who under section 879 of the Revised Administrative Code are exempted from
the requirements relating to the issuance of license to possess firearms. In Lucero, We held that
under the circumstances of the case, the granting of the temporary use of the firearm to the accused
was a necessary means to carry out the lawful purpose of the batallion commander to effect the
capture of a Huk leader. In Mapa, expressly abandoning the doctrine in Macarandang, and by
implication, that in Lucero, We sustained the judgment of conviction on the following ground:

The law is explicit that except as thereafter specifically allowed, "it shall be unlawful
for any person to ... possess any firearm, detached parts of firearms or ammunition
therefor, or any instrument or implement used or intended to be used in the
manufacture of firearms, parts of firearms, or ammunition." (Sec. 878, as amended
by Republic Act No. 4, Revised Administrative Code.) The next section provides that
"firearms and ammunition regularly and lawfully issued to officers, soldiers, sailors, or
marines [of the Armed Forces of the Philippines], the Philippine Constabulary, guards
in the employment of the Bureau of Prisons, municipal police, provincial governors,
lieutenant governors, provincial treasurers, municipal treasurers, municipal mayors,
and guards of provincial prisoners and jails," are not covered "when such firearms are
in possession of such officials and public servants for use in the performance of their
official duties." (Sec. 879, Revised Administrative Code.)

The law cannot be any clearer. No provision is made for a secret agent. As such he
is not exempt. ... .

It will be noted that when appellant was appointed Secret Agent by the Provincial Government in
1962, and Confidential Agent by the Provincial Commander in 1964, the prevailing doctrine on the
matter was that laid down by Us in People v. Macarandang (1959) and People v. Lucero (1958). Our
decision in People v. Mapa reversing the aforesaid doctrine came only in 1967. The sole question in
this appeal is: Should appellant be acquitted on the basis of Our rulings in Macarandang and Lucero,
or should his conviction stand in view of the complete reversal of
the Macarandang and Lucero doctrine in Mapa? The Solicitor General is of the first view, and he
accordingly recommends reversal of the appealed judgment.

Decisions of this Court, although in themselves not laws, are nevertheless evidence of what the laws
mean, and this is the reason why under Article 8 of the New Civil Code "Judicial decisions applying
or interpreting the laws or the Constitution shall form a part of the legal system ... ." The interpretation
upon a law by this Court constitutes, in a way, a part of the law as of the date that law originally
passed, since this Court's construction merely establishes the contemporaneous legislative intent
that law thus construed intends to effectuate. The settled rule supported by numerous authorities is
a restatement of legal maxim "legis interpretatio legis vim obtinet" — the interpretation placed upon
the written law by a competent court has the force of law. The doctrine laid down
in Lucero and Macarandang was part of the jurisprudence, hence of the law, of the land, at the time
appellant was found in possession of the firearm in question and when he arraigned by the trial court.
It is true that the doctrine was overruled in the Mapa case in 1967, but when a doctrine of this Court
is overruled and a different view is adopted, the new doctrine should be applied prospectively, and
should not apply to parties who had relied on the old doctrine and acted on the faith thereof. This is
especially true in the construction and application of criminal laws, where it is necessary that the
punishability of an act be reasonably foreseen for the guidance of society.

It follows, therefore, that considering that appellant conferred his appointments as Secret Agent and
Confidential Agent and authorized to possess a firearm pursuant to the prevailing doctrine
enunciated in Macarandang and Lucero, under which no criminal liability would attach to his
possession of said firearm in spite of the absence of a license and permit therefor, appellant must
be absolved. Certainly, appellant may not be punished for an act which at the time it was done was
held not to be punishable.

WHEREFORE, the judgment appealed from is hereby reversed, and appellant is acquitted, with
costs de oficio.

Zaldivar (Chairman), Barredo, Fernandez and Aquino, JJ., concur.

Fernando, J., took no part.

Footnotes

1 L-22301, August 30, 1967, 20 SCRA 1164.

2 106 Phil. (1959), 713.

3 103 Phil. (1958), 500.

 THIRD DIVISION

G.R. No. 136921 April 17, 2001

LORNA GUILLEN PESCA, petitioner

vs.
ZOSIMO A PESCA, respondent.

VITUG, J.:

Submitted for review is the decision of the Court of Appeals, promulgated on 27 May 1998, in C.A.
G.R. CV. No. 52374, reversing the decision of the Regional Trial Court ("RTC") of Caloocan City,
Branch 130, which has declared the marriage between petitioner and respondent to be null and
void ab initio on the ground of psychological incapacity on the part of respondent.

Petitioner Lorna G. Pesca and respondent Zosimo A. Pesca first met sometime in 1975 while on
board an inter-island vessel bound for Bacolod City. After a whirlwind courtship, they got married on
03 March 1975. Initially, the young couple did not live together as petitioner was still a student in
college and respondent, a seaman, had to leave the country on board an ocean-going vessel barely
a month after the marriage. Six months later, the young couple established their residence in Quezon
City until they were able to build their own house in Caloocan City where they finally resided. It was
blissful marriage for the couple during the two months of the year that they could stay together -
when respondent was on vacation. The union begot four children, 19-year old Ruhem, 17-year old
Rez, 11-year old Ryan, and 9-year old Richie.

It started in 1988, petitioner said, when she noticed that respondent surprisingly showed signs of
"psychological incapacity" to perform his marital covenant. His "true color" of being an emotionally
immature and irresponsible husband became apparent. He was cruel and violent. He was a habitual
drinker, staying with friends daily from 4:00 o'clock in the afternoon until 1:00 o'clock in the morning.
When cautioned to stop or, to at least, minimize his drinking, respondent would beat, slap and kick
her. At one time, he chased petitioner with a loaded shotgun and threatened to kill her in the presence
of the children. The children themselves were not spared from physical violence.

Finally, on 19 November 1992, petitioner and her children left the conjugal abode to live in the house
of her sister in Quezon City as they could no longer bear his violent ways. Two months later,
petitioner decided to forgive respondent, and she returned home to give him a chance to change.
But, to her dismay, things did not so turn out as expected. Indeed, matters became worse.

On the morning of 22 March 1994, about eight o'clock, respondent assaulted petitioner for about half
an hour in the presence of the children. She was battered black and blue. She submitted herself to
medical examination at the Quezon City General Hospital, which diagnosed her injuries as
contusions and abrasions. Petitioner filed a complaint with the barangay authorities, and a case was
filed against respondent for slight physical injuries. He was convicted by the Metropolitan Trial Court
of Caloocan City and sentenced to eleven days of imprisonment.

This time, petitioner and her children left the conjugal home for good and stayed with her sister.
Eventually, they decided to rent an apartment. Petitioner sued respondent before the Regional Trial
Court for the declaration of nullity of their marriage invoking psychological incapacity. Petitioner
likewise sought the custody of her minor children and prayed for support pendente lite .

Summons, together with a copy of the complaint, was served on respondent on 25 April 1994 by
personal service by the sheriff. As respondent failed to file an answer or to enter his appearance
within the reglementary period, the trial court ordered the city prosecutor to look into a possible
collusion between the parties. Prosecutor Rosa C. Reyes, on 03 August 1994, submitted her report
to the effect that she found no evidence to establish that there was collusion between the
parties. 1âwphi1.nêt
On 11 January 1995, respondent belatedly filed, without leave of court, an answer, and the same,
although filed late, was admitted by the court. In his answer, respondent admitted the fact of his
marriage with petitioner and the birth of their children. He also confirmed the veracity of Annex "A"
of the complaint which listed the conjugal property. Respondent vehemently denied, however, the
allegation that he was psychologically incapacitated.

On 15 November 1995, following hearings conducted by it, the trial court rendered its decision
declaring the marriage between petitioner and respondent to be null and void ab initio on the basis
of psychological incapacity on the part of respondent and ordered the liquidation of the conjugal
partnership.

Respondent appealed the above decision to the Court of Appeals, contending that the trial court
erred, particularly, in holding that there was legal basis to declare the marriage null and void and in
denying his motion to reopen the case.

The Court of Appeals reversed the decision of the trial court and declared the marriage between
petitioner and respondent valid and subsisting. The appellate court said:

"Definitely the appellee has not established the following: That the appellant showed signs
of mental incapacity as would cause him to be truly incognitive of the basic marital covenant,
as so provided for in Article 68 of the Family Code; that the incapacity is grave, has preceded
the marriage and is incurable; that his incapacity to meet his marital responsibility is because
of a psychological, not physical illness; that the root cause of the incapacity has been
identified medically or clinically, and has been proven by an expert; and that the incapacity
is permanent and incurable in nature.

"The burden of proof to show the nullity of marriage lies in the plaintiff and any doubt should
be resolved in favor of the existence and continuation of the marriage and against its
dissolution and nullity."1

Petitioner, in her plea to this Court, would have the decision of the Court of Appeals reversed on the
thesis that the doctrine enunciated in Santos vs. Court of Appeals,2 promulgated on 14 January 1995,
as well as the guidelines set out in Republic vs. Court of Appeals and Molina,3 promulgated on 13
February 1997, should have no retroactive application and, on the assumption that the Molina ruling
could be applied retroactively, the guidelines therein outlined should be taken to be merely advisory
and not mandatory in nature. In any case, petitioner argues, the application of
the Santos and Molina dicta should warrant only a remand of the case to the trial court for further
proceedings and not its dismissal.

Be that as it may, respondent submits, the appellate court did not err in its assailed decision for there
is absolutely no evidence that has been shown to prove psychological incapacity on his part as the
term has been so defined in Santos.

Indeed, there is no merit in the petition.

The term "psychological incapacity," as a ground for the declaration of nullity of a marriage under
Article 36 of the Family Code, has been explained by the Court, in Santos and reiterated in Molina.
The Court, in Santos, concluded:

"It should be obvious, looking at all the foregoing disquisitions, including, and most
importantly, the deliberations of the Family Code Revision Committee itself, that the use of
the phrase 'psychological incapacity' under Article 36 of the Code has not been meant to
comprehend all such possible cases of psychoses as, likewise mentioned by some
ecclesiastical authorities, extremely low intelligence, immaturity, and like circumstances
(cited in Fr. Artemio Balumad's 'Void and Voidable Marriages in the Family Code and their
Parallels in Canon Law,' quoting form the Diagnostic Statistical Manuel of Mental Disorder
by the American Psychiatric Association; Edward Hudson's 'Handbook II for Marriage Nullity
Cases'). Article 36 of the Family. Code cannot be taken and construed independently of, but
must stand in conjunction with, existing precepts in our law on marriage. Thus correlated,
'psychological incapacity' should refer to no less than a mental (not physical) incapacity that
causes a party to be truly incognitive of the basic marital covenants that concomitantly must
be assumed and discharged by the parties to the marriage which, as so expressed by Article
68 of the Family Code, include their mutual obligations to live together, observe love, respect
and fidelity and render help and support. There is hardly any doubt that the intendment of the
law has been to confine the meaning of 'psychological incapacity' to the most serious cases
of personality disorders clearly demonstrative of an utter insensitivity or inability to give
 meaning and significance to the marriage. This psychologic condition must exist at the time
the marriage is celebrated."

The- "doctrine of stare decisis," ordained in Article 8 of the Civil Code, expresses that judicial
decisions applying or interpreting the law shall form part of the legal system of the Philippines. The
rule follows the settled legal maxim - "legis interpretado legis vim obtinet" - that the interpretation
placed upon the written law by a competent court has the force of law.3 The interpretation or
construction placed by the courts establishes the contemporaneous legislative intent of the law. The
latter as so interpreted and construed would thus constitute a part of that law as of the date the
statute is enacted. It is only when a prior ruling of this Court finds itself later overruled, and a different
view is adopted, that the new doctrine may have to be applied prospectively in favor of parties who
have relied on the old doctrine and have acted in good faith in accordance therewith5 under the
familiar rule of "lex prospicit, non respicit."

The phrase "psychological incapacity ," borrowed from Canon law, is an entirely novel provision in
our statute books, and, until the relatively recent enactment of the Family Code, the concept has
escaped jurisprudential attention. It is in Santos when, for the first time, the Court has given life to
the term. Molina, that followed, has additionally provided procedural guidelines to assist the courts
and the parties in trying cases for annulment of marriages grounded on psychological
incapacity. Molina has strengthened, not overturned, Santos.

At all events, petitioner has utterly failed, both in her allegations in the complaint and in her evidence,
to make out a case of psychological incapacity on the part of respondent, let alone at the time of
solemnization of the contract, so as to warrant a declaration of nullity of the marriage. Emotional
immaturity and irresponsibility, invoked by her, cannot be equated with psychological incapacity.

The Court reiterates its reminder that marriage is an inviolable social institution and the foundation
of the family6 that the State cherishes and protects. While the Court commisserates with petitioner
in her unhappy marital relationship with respondent, totally terminating that relationship, however,
may not necessarily be the fitting denouement to it. In these cases, the law has not quite given up,
neither should we.

WHEREFORE, the herein petition is DENIED. No costs.

SO ORDERED.

Vitug, J.C.; Melo, J.A.R; Panganiban, A.V.; Gonzaga-Reyes, M.P.; Sandoval-Gutierez, A., Concur.

Footnotes:

1
Rollo. pp. 42-43

2
240 SCRA 20.

3
268 SCRA 198.

4
People vs. Jabinal, 55 SCRA 607

5
Unciano Paramedical College, Inc. vs. Court of Appeals, 221 SCRA 285; Tanada vs.
Guingona, 235 SCRA 507; Columbia Pictures, Inc., vs. Court of Appeals, 261 SCRA 144.

6
See Section 2, Article XV, 1987 Constitution.
 Republic of the Philippines
SUPREME COURT
Manila

FIRST DIVISION

G.R. No. L-50999 March 23, 1990

JOSE SONGCO, ROMEO CIPRES, and AMANCIO MANUEL, petitioners,

vs
NATIONAL LABOR RELATIONS COMMISSION (FIRST DIVISION), LABOR ARBITER FLAVIO
AGUAS, and F.E. ZUELLIG (M), INC., respondents.

Raul E. Espinosa for petitioners.

Lucas Emmanuel B. Canilao for petitioner A. Manuel.

Atienza, Tabora, Del Rosario & Castillo for private respondent.

MEDIALDEA, J.:

This is a petition for certiorari seeking to modify the decision of the National Labor Relations
Commission in NLRC Case No. RB-IV-20840-78-T entitled, "Jose Songco and Romeo Cipres,
Complainants-Appellants, v. F.E. Zuellig (M), Inc., Respondent-Appellee" and NLRC Case No. RN-
IV-20855-78-T entitled, "Amancio Manuel, Complainant-Appellant, v. F.E. Zuellig (M), Inc.,
Respondent-Appellee," which dismissed the appeal of petitioners herein and in effect affirmed the
decision of the Labor Arbiter ordering private respondent to pay petitioners separation pay equivalent
to their one month salary (exclusive of commissions, allowances, etc.) for every year of service.

The antecedent facts are as follows:

Private respondent F.E. Zuellig (M), Inc., (hereinafter referred to as Zuellig) filed with the Department
of Labor (Regional Office No. 4) an application seeking clearance to terminate the services of
petitioners Jose Songco, Romeo Cipres, and Amancio Manuel (hereinafter referred to as petitioners)
allegedly on the ground of retrenchment due to financial losses. This application was seasonably
opposed by petitioners alleging that the company is not suffering from any losses. They alleged
further that they are being dismissed because of their membership in the union. At the last hearing
of the case, however, petitioners manifested that they are no longer contesting their dismissal. The
parties then agreed that the sole issue to be resolved is the basis of the separation pay due to
petitioners. Petitioners, who were in the sales force of Zuellig received monthly salaries of at least
P40,000. In addition, they received commissions for every sale they made.

The collective Bargaining Agreement entered into between Zuellig and F.E. Zuellig Employees
Association, of which petitioners are members, contains the following provision (p. 71, Rollo):

ARTICLE XIV — Retirement Gratuity

Section l(a)-Any employee, who is separated from employment due to old age,
sickness, death or permanent lay-off not due to the fault of said employee shall
receive from the company a retirement gratuity in an amount equivalent to one (1)
month's salary per year of service. One month of salary as used in this paragraph
shall be deemed equivalent to the salary at date of retirement; years of service shall
be deemed equivalent to total service credits, a fraction of at least six months being
considered one year, including probationary employment. (Emphasis supplied)

On the other hand, Article 284 of the Labor Code then prevailing provides:

Art. 284. Reduction of personnel. — The termination of employment of any employee

due to the installation of labor saving-devices, redundancy, retrenchment to prevent
losses, and other similar causes, shall entitle the employee affected thereby to
separation pay. In case of termination due to the installation of labor-saving devices
or redundancy, the separation pay shall be equivalent to 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 other similar causes, 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. (Emphasis supplied)

In addition, Sections 9(b) and 10, Rule 1, Book VI of the Rules Implementing the Labor Code provide:

xxx

Sec. 9(b). Where the termination of employment is due to retrechment initiated by the
employer to prevent losses or other similar causes, or where the employee suffers
from a disease and his continued employment is prohibited by law or is prejudicial to
his health or to the health of his co-employees, the employee shall be entitled to
termination pay equivalent at least to his one month salary, or to one-half
month pay for every year of service, whichever is higher, a fraction of at least six (6)
months being considered as one whole year.

xxx

Sec. 10. Basis of termination pay. — The computation of the termination pay of an
employee as provided herein shall be based on his latest salary rate, unless the same
was reduced by the employer to defeat the intention of the Code, in which case the
basis of computation shall be the rate before its deduction. (Emphasis supplied)

On June 26,1978, the Labor Arbiter rendered a decision, the dispositive portion of which reads (p.
78, Rollo):

RESPONSIVE TO THE FOREGOING, respondent should be as it is hereby, ordered

to pay the complainants separation pay equivalent to their one month salary
(exclusive of commissions, allowances, etc.) for every year of service that they have
worked with the company.

SO ORDERED.

The appeal by petitioners to the National Labor Relations Commission was dismissed for lack of
merit.

Hence, the present petition.

On June 2, 1980, the Court, acting on the verified "Notice of Voluntary Abandonment and Withdrawal
of Petition dated April 7, 1980 filed by petitioner Romeo Cipres, based on the ground that he wants
"to abide by the decision appealed from" since he had "received, to his full and complete satisfaction,
his separation pay," resolved to dismiss the petition as to him.

The issue is whether or not earned sales commissions and allowances should be included in the
monthly salary of petitioners for the purpose of computation of their separation pay.

The petition is impressed with merit.

Petitioners' position was that in arriving at the correct and legal amount of separation pay due them,
whether under the Labor Code or the CBA, their basic salary, earned sales commissions and
allowances should be added together. They cited Article 97(f) of the Labor Code which includes
commission as part on one's salary, to wit;

(f) 'Wage' paid to any employee shall mean the remuneration or earnings, however
designated, capable of being expressed in terms of money, whether fixed or
ascertained on a time, task, piece, or commission basis, or other method of
calculating the same, which is payable by an employer to an employee under a written
or unwritten contract of employment for work done or to be done, or for services
rendered or to be rendered, and includes the fair and reasonable value, as
determined by the Secretary of Labor, of board, lodging, or other facilities customarily
furnished by the employer to the employee. 'Fair reasonable value' shall not include
any profit to the employer or to any person affiliated with the employer.

Zuellig argues that if it were really the intention of the Labor Code as well as its implementing rules
to include commission in the computation of separation pay, it could have explicitly said so in clear
and unequivocal terms. Furthermore, in the definition of the term "wage", "commission" is used only
as one of the features or designations attached to the word remuneration or earnings.
Insofar as the issue of whether or not allowances should be included in the monthly salary of
petitioners for the purpose of computation of their separation pay is concerned, this has been settled
in the case of Santos v. NLRC, et al., G.R. No. 76721, September 21, 1987, 154 SCRA 166, where
We ruled that "in the computation of backwages and separation pay, account must be taken not only
of the basic salary of petitioner but also of her transportation and emergency living allowances." This
ruling was reiterated in Soriano v. NLRC, et al., G.R. No. 75510, October 27, 1987, 155 SCRA 124
and recently, in Planters Products, Inc. v. NLRC, et al., G.R. No. 78524, January 20, 1989.

We shall concern ourselves now with the issue of whether or not earned sales commission should
be included in the monthly salary of petitioner for the purpose of computation of their separation pay.

Article 97(f) by itself is explicit that commission is included in the definition of the term "wage". It has
been repeatedly declared by the courts that where the law speaks in clear and categorical language,
there is no room for interpretation or construction; there is only room for application (Cebu Portland
Cement Co. v. Municipality of Naga, G.R. Nos. 24116-17, August 22, 1968, 24 SCRA 708; Gonzaga
v. Court of Appeals, G.R.No. L-2 7455, June 28,1973, 51 SCRA 381). A plain and unambiguous
statute speaks for itself, and any attempt to make it clearer is vain labor and tends only to obscurity.
How ever, it may be argued that if We correlate Article 97(f) with Article XIV of the Collective
Bargaining Agreement, Article 284 of the Labor Code and Sections 9(b) and 10 of the Implementing
Rules, there appears to be an ambiguity. In this regard, the Labor Arbiter rationalized his decision in
this manner (pp. 74-76, Rollo):

The definition of 'wage' provided in Article 96 (sic) of the Code can be correctly be
(sic) stated as a general definition. It is 'wage ' in its generic sense. A careful perusal
of the same does not show any indication that commission is part of salary. We can
say that commission by itself may be considered a wage. This is not something novel
for it cannot be gainsaid that certain types of employees like agents, field personnel
and salesmen do not earn any regular daily, weekly or monthly salaries, but rely
mainly on commission earned.

Upon the other hand, the provisions of Section 10, Rule 1, Book VI of the
implementing rules in conjunction with Articles 273 and 274 (sic) of the Code
specifically states that the basis of the termination pay due to one who is sought to
be legally separated from the service is 'his latest salary rates.

x x x.

Even Articles 273 and 274 (sic) invariably use 'monthly pay or monthly salary'.

The above terms found in those Articles and the particular Rules were intentionally
used to express the intent of the framers of the law that for purposes of separation
pay they mean to be specifically referring to salary only.

.... Each particular benefit provided in the Code and other Decrees on Labor has its
own pecularities and nuances and should be interpreted in that light. Thus, for a
specific provision, a specific meaning is attached to simplify matters that may arise
there from. The general guidelines in (sic) the formation of specific rules for particular
purpose. Thus, that what should be controlling in matters concerning termination pay
should be the specific provisions of both Book VI of the Code and the Rules. At any
rate, settled is the rule that in matters of conflict between the general provision of law
and that of a particular- or specific provision, the latter should prevail.

On its part, the NLRC ruled (p. 110, Rollo):

From the aforequoted provisions of the law and the implementing rules, it could be
deduced that wage is used in its generic sense and obviously refers to the basic wage
rate to be ascertained on a time, task, piece or commission basis or other method of
calculating the same. It does not, however, mean that commission, allowances or
analogous income necessarily forms part of the employee's salary because to do so
would lead to anomalies (sic), if not absurd, construction of the word "salary." For
what will prevent the employee from insisting that emergency living allowance, 13th
month pay, overtime, and premium pay, and other fringe benefits should be added to
the computation of their separation pay. This situation, to our mind, is not the real
intent of the Code and its rules.

We rule otherwise. The ambiguity between Article 97(f), which defines the term 'wage' and Article
XIV of the Collective Bargaining Agreement, Article 284 of the Labor Code and Sections 9(b) and 10
of the Implementing Rules, which mention the terms "pay" and "salary", is more apparent than real.
Broadly, the word "salary" means a recompense or consideration made to a person for his pains or
industry in another man's business. Whether it be derived from "salarium," or more fancifully from
"sal," the pay of the Roman soldier, it carries with it the fundamental idea of compensation for
services rendered. Indeed, there is eminent authority for holding that the words "wages" and "salary"
are in essence synonymous (Words and Phrases, Vol. 38 Permanent Edition, p. 44 citing Hopkins
vs. Cromwell, 85 N.Y.S. 839,841,89 App. Div. 481; 38 Am. Jur. 496). "Salary," the etymology of
which is the Latin word "salarium," is often used interchangeably with "wage", the etymology of which
is the Middle English word "wagen". Both words generally refer to one and the same meaning, that
is, a reward or recompense for services performed. Likewise, "pay" is the synonym of "wages" and
"salary" (Black's Law Dictionary, 5th Ed.). Inasmuch as the words "wages", "pay" and "salary" have
the same meaning, and commission is included in the definition of "wage", the logical conclusion,
therefore, is, in the computation of the separation pay of petitioners, their salary base should include
also their earned sales commissions.

The aforequoted provisions are not the only consideration for deciding the petition in favor of the
petitioners.

We agree with the Solicitor General that granting, in gratia argumenti, that the commissions were in
the form of incentives or encouragement, so that the petitioners would be inspired to put a little more
industry on the jobs particularly assigned to them, still these commissions are direct remuneration
services rendered which contributed to the increase of income of Zuellig . Commission is the
recompense, compensation or reward of an agent, salesman, executor, trustees, receiver, factor,
broker or bailee, when the same is calculated as a percentage on the amount of his transactions or
on the profit to the principal (Black's Law Dictionary, 5th Ed., citing Weiner v. Swales, 217 Md. 123,
141 A.2d 749, 750). The nature of the work of a salesman and the reason for such type of
remuneration for services rendered demonstrate clearly that commission are part of petitioners'
wage or salary. We take judicial notice of the fact that some salesmen do not receive any basic
salary but depend on commissions and allowances or commissions alone, are part of petitioners'
wage or salary. We take judicial notice of the fact that some salesman do not received any basic
salary but depend on commissions and allowances or commissions alone, although an employer-
employee relationship exists. Bearing in mind the preceeding dicussions, if we adopt the opposite
view that commissions, do not form part of wage or salary, then, in effect, We will be saying that this
kind of salesmen do not receive any salary and therefore, not entitled to separation pay in the event
of discharge from employment. Will this not be absurd? This narrow interpretation is not in accord
with the liberal spirit of our labor laws and considering the purpose of separation pay which is, to
alleviate the difficulties which confront a dismissed employee thrown the the streets to face the harsh
necessities of life.

Additionally, in Soriano v. NLRC, et al., supra, in resolving the issue of the salary base that should
be used in computing the separation pay, We held that:

The commissions also claimed by petitioner ('override commission' plus 'net deposit incentive')
are not properly includible in such base figure since such commissions must be earned by actual
market transactions attributable to petitioner.

Applying this by analogy, since the commissions in the present case were earned by actual market
transactions attributable to petitioners, these should be included in their separation pay. In the
computation thereof, what should be taken into account is the average commissions earned during
their last year of employment.

The final consideration is, in carrying out and interpreting the Labor Code's provisions and its
implementing regulations, the workingman's welfare should be the primordial and paramount
consideration. This kind of interpretation gives meaning and substance to the liberal and
compassionate spirit of the law as provided for in Article 4 of the Labor Code which states that "all
doubts in the implementation and interpretation of the provisions of the Labor Code including its
implementing rules and regulations shall be resolved in favor of labor" (Abella v. NLRC, G.R. No.
71812, July 30,1987,152 SCRA 140; Manila Electric Company v. NLRC, et al., G.R. No. 78763, July
12,1989), and Article 1702 of the Civil Code which provides that "in case of doubt, all labor legislation
and all labor contracts shall be construed in favor of the safety and decent living for the laborer.

ACCORDINGLY, the petition is hereby GRANTED. The decision of the respondent National Labor
Relations Commission is MODIFIED by including allowances and commissions in the separation pay
of petitioners Jose Songco and Amancio Manuel. The case is remanded to the Labor Arbiter for the
proper computation of said separation pay.
SO ORDERED. Narvasa (Chairman), Cruz, Gancayco and Griño-Aquino, JJ., concur.
 Republic of the Philippines
SUPREME COURT
Manila

EN BANC

G.R. No. 189600 June 29, 2010

MILAGROS E. AMORES, Petitioner,

vs.
HOUSE OF REPRESENTATIVES ELECTORAL TRIBUNAL and EMMANUEL JOEL J.
VILLANUEVA,Respondents.

DECISION

CARPIO MORALES, J.:

Via this petition for certiorari, Milagros E. Amores (petitioner) challenges the Decision of May 14,
2009 and Resolution No. 09-130 of August 6, 2009 of the House of Representatives Electoral
Tribunal (public respondent), which respectively dismissed petitioner’s Petition for Quo Warranto
questioning the legality of the assumption of office of Emmanuel Joel J. Villanueva (private
respondent) as representative of the party-list organization Citizens’ Battle Against Corruption
(CIBAC) in the House of Representatives, and denied petitioner’s Motion for Reconsideration.

In her Petition for Quo Warranto1 seeking the ouster of private respondent, petitioner alleged that,
among other things, private respondent assumed office without a formal proclamation issued by the
Commission on Elections (COMELEC); he was disqualified to be a nominee of the youth sector of
CIBAC since, at the time of the filing of his certificates of nomination and acceptance, he was already
31 years old or beyond the age limit of 30 pursuant to Section 9 of Republic Act (RA) No. 7941,
otherwise known as the Party-List System Act; and his change of affiliation from CIBAC’s youth
sector to its overseas Filipino workers and their families sector was not effected at least six months
prior to the May 14, 2007 elections so as to be qualified to represent the new sector under Section
15 of RA No. 7941.

Not having filed his Answer despite due notice, private respondent was deemed to have entered a
general denial pursuant to public respondent’s Rules.2

As earlier reflected, public respondent, by Decision of May 14, 2009,3 dismissed petitioner’s Petition
for Quo Warranto, finding that CIBAC was among the party-list organizations which the COMELEC
had partially proclaimed as entitled to at least one seat in the House of Representatives through
National Board of Canvassers (NBC) Resolution No. 07-60 dated July 9, 2007. It also found the
petition which was filed on October 17, 2007 to be out of time, the reglementary period being 10
days from private respondent’s proclamation.

Respecting the age qualification for youth sectoral nominees under Section 9 of RA No. 7941, public
respondent held that it applied only to those nominated as such during the first three congressional
terms after the ratification of the Constitution or until 1998, unless a sectoral party is thereafter
registered exclusively as representing the youth sector, which CIBAC, a multi-sectoral organization,
is not.

In the matter of private respondent’s shift of affiliation from CIBAC’s youth sector to its overseas
Filipino workers and their families sector, public respondent held that Section 15 of RA No. 7941 did
not apply as there was no resultant change in party-list affiliation.

Her Motion for Reconsideration having been denied by Resolution No. 09-130 dated August 6,
2009,4 petitioner filed the present Petition for Certiorari.5

Petitioner contends that, among other things, public respondent created distinctions in the
application of Sections 9 and 15 of RA No. 7941 that are not found in the subject provisions, fostering
interpretations at war with equal protection of the laws; and NBC Resolution No. 07-60, which was
a partial proclamation of winning party-list organizations, was not enough basis for private
respondent to assume office on July 10, 2007, especially considering that he admitted receiving his
own Certificate of Proclamation only on December 13, 2007.
In his Comment,6 private respondent avers in the main that petitioner has not substantiated her
claims of grave abuse of discretion against public respondent; and that he became a member of the
overseas Filipinos and their families sector years before the 2007 elections.

It bears noting that the term of office of party-list representatives elected in the May, 2007 elections
will expire on June 30, 2010. While the petition has, thus, become moot and academic, rendering of
a decision on the merits in this case would still be of practical value.7

The Court adopts the issues framed by public respondent, to wit: (1) whether petitioner’s Petition for
Quo Warranto was dismissible for having been filed unseasonably; and (2) whether Sections 9 and
15 of RA No. 7941 apply to private respondent.

On the first issue, the Court finds that public respondent committed grave abuse of discretion in
considering petitioner’s Petition for Quo Warranto filed out of time. Its counting of the 10-day
reglementary period provided in its Rules8 from the issuance of NBC Resolution No. 07-60 on July
9, 2007 is erroneous.

To be sure, while NBC Resolution No. 07-60 partially proclaimed CIBAC as a winner in the May,
2007 elections, along with other party-list organizations,9 it was by no measure a proclamation of
private respondent himself as required by Section 13 of RA No. 7941.

Section 13. How Party-List Representatives are Chosen. Party-list representatives shall be
proclaimed by the COMELEC based on the list of names submitted by the respective parties,
organizations, or coalitions to the COMELEC according to their ranking in said list.

AT ALL EVENTS, this Court set aside NBC Resolution No. 07-60 in Barangay Association for
National Advancement and Transparency v. COMELEC10 after revisiting the formula for allocation
of additional seats to party-list organizations.

Considering, however, that the records do not disclose the exact date of private respondent’s
proclamation, the Court overlooks the technicality of timeliness and rules on the merits. Alternatively,
since petitioner’s challenge goes into private respondent’s qualifications, it may be filed at anytime
during his term.

Qualifications for public office are continuing requirements and must be possessed not only at the
time of appointment or election or assumption of office but during the officer's entire tenure. Once
any of the required qualifications is lost, his title may be seasonably challenged.11

On the second and more substantial issue, the Court shall first discuss the age requirement for youth
sector nominees under Section 9 of RA No. 7941 reading:

Section 9. Qualifications of Party-List Nominees. No person shall be nominated as party-list

representative unless he is a natural-born citizen of the Philippines, a registered voter, a resident of
the Philippines for a period of not less than one (1)year immediately preceding the day of the election,
able to read and write, a bona fide member of the party or organization which he seeks to represent
for at least ninety (90) days preceding the day of the election, and is at least twenty-five (25) years
of age on the day of the election.

In case of a nominee of the youth sector, he must at least be twenty-five (25) but not more than thirty
(30) years of age on the day of the election. Any youth sectoral representative who attains the age
of thirty (30) during his term shall be allowed to continue in office until the expiration of his term.
(Emphasis and underscoring supplied.)

The Court finds no textual support for public respondent’s interpretation that Section 9 applied only
to those nominated during the first three congressional terms after the ratification of the Constitution
or until 1998, unless a sectoral party is thereafter registered exclusively as representing the youth
sector.

A cardinal rule in statutory construction is that when the law is clear and free from any doubt or
ambiguity, there is no room for construction or interpretation. There is only room for application.12

As the law states in unequivocal terms that a nominee of the youth sector must at least be twenty-
five (25) but not more than thirty (30) years of age on the day of the election, so it must be that a
candidate who is more than 30 on election day is not qualified to be a youth sector nominee. Since
this mandate is contained in RA No. 7941, the Party-List System Act, it covers ALL youth sector
nominees vying for party-list representative seats.
As petitioner points out, RA No. 7941 was enacted only in March, 1995. There is thus no reason to
apply Section 9 thereof only to youth sector nominees nominated during the first three congressional
terms after the ratification of the Constitution in 1987. Under this interpretation, the last elections
where Section 9 applied were held in May, 1995 or two months after the law was enacted. This is
certainly not sound legislative intent, and could not have been the objective of RA No. 7941.

There is likewise no rhyme or reason in public respondent’s ratiocination that after the third
congressional term from the ratification of the Constitution, which expired in 1998, Section 9 of RA
No. 7941 would apply only to sectoral parties registered exclusively as representing the youth sector.
This distinction is nowhere found in the law. Ubi lex non distinguit nec nos distinguire debemus.
When the law does not distinguish, we must not distinguish.13

Respecting Section 15 of RA No. 7941, the Court fails to find even an iota of textual support for
public respondent’s ratiocination that the provision did not apply to private respondent’s shift of
affiliation from CIBAC’s youth sector to its overseas Filipino workers and their families sector as there
was no resultant change in party-list affiliation. Section 15 reads:

Section 15. Change of Affiliation; Effect. Any elected party-list representative who changes
his political party or sectoral affiliation during his term of office shall forfeit his seat: Provided, That if
he changes his political party orsectoral affiliation within six (6) months before an election, he shall
not be eligible for nomination as party-list representative under his new party or organization.
(emphasis and underscoring supplied.)

What is clear is that the wording of Section 15 covers changes in both political party and sectoral
affiliation. And the latter may occur within the same party since multi-sectoral party-list organizations
are qualified to participate in the Philippine party-list system. Hence, a nominee who changes his
sectoral affiliation within the same party will only be eligible for nomination under the new sectoral
affiliation if the change has been effected at least six months before the elections. Again, since the
statute is clear and free from ambiguity, it must be given its literal meaning and applied without
attempted interpretation. This is the plain meaning rule or verba legis, as expressed in the maxim
index animi sermo or speech is the index of intention.14

It is, therefore, beyond cavil that Sections 9 and 15 of RA No. 7941 apply to private respondent.

The Court finds that private respondent was not qualified to be a nominee of either the youth sector
or the overseas Filipino workers and their families sector in the May, 2007 elections.

The records disclose that private respondent was already more than 30 years of age in May, 2007,
it being stipulated that he was born in August, 1975.15 Moreover, he did not change his sectoral
affiliation at least six months before May, 2007, public respondent itself having found that he shifted
to CIBAC’s overseas Filipino workers and their families sector only on March 17, 2007.161avvphi1

That private respondent is the first nominee of CIBAC, whose victory was later upheld, is of no
moment. A party-list organization’s ranking of its nominees is a mere indication of preference, their
qualifications according to law are a different matter.

It not being contested, however, that private respondent was eventually proclaimed as a party-list
representative of CIBAC and rendered services as such, he is entitled to keep the compensation
and emoluments provided by law for the position until he is properly declared ineligible to hold the
same.17

WHEREFORE, the petition is GRANTED. The Decision dated May 14, 2009 and Resolution No. 09-
130 dated August 6, 2009 of the House of Representatives Electoral Tribunal are SET ASIDE.
Emmanuel Joel J. Villanueva is declared ineligible to hold office as a member of the House of
Representatives representing the party-list organization CIBAC.

SO ORDERED.

CONCHITA CARPIO MORALES

Associate Justice

WE CONCUR:

(No Part)
RENATO C. CORONA*
Chief Justice
 ANTONIO T. CARPIO PRESBITERO J. VELASCO, JR.
Associate Justice Associate Justice

(No Part)
ARTURO D. BRION
ANTONIO EDUARDO B. NACHURA*
Associate Justice
Associate Justice

TERESITA J. LEONARDO-DE
DIOSDADO M. PERALTA
CASTRO
Associate Justice
Associate Justice

LUCAS P. BERSAMIN ROBERTO A. ABAD

Associate Justice Associate Justice

MARIANO C. DEL CASTILLO MARTIN S. VILLARAMA, JR.

Associate Justice Associate Justice

JOSE PORTUGAL PEREZ JOSE CATRAL MENDOZA

Associate Justice Associate Justice

CERTIFICATION

Pursuant to Section 13, Article VIII of the Constitution, I hereby certify that the conclusions in the
above Decision had been reached in consultation before the case was assigned to the writer of the
opinion of the Court.

RENATO C. CORONA
Chief Justice

Footnotes

* No part.

1
Rollo, pp. 104-113.

2
Id. at 33.

3
Id. at 32-45.

4
Id. at 46-47.

5
Id. at 3-31.

6
Id. at 176-187.

7
Vide Malaluan v. Commission on Elections, G.R. No. 120193, March 6, 1996, 254 SCRA
397, 403-404.

8
Rule 17 of the 2004 Rules of public respondent provides:

Rule 17. Quo Warranto. – A verified petition for quo warranto contesting the election
of a Member of the House of Representatives on the ground of ineligibility or of
disloyalty to the Republic of the Philippines shall be filed by any voter within ten (10)
days after the proclamation of the winner. xxx

9
Vide rollo, pp. 93-94.

10
G.R. Nos. 179271 & 179295, April 21, 2009, 586 SCRA 210.

11
Vide Frivaldo v. COMELEC, G.R. No. 87193, June 23, 1989, 174 SCRA 245, 255.
12
Twin Ace Holdings Corporation v. Rufina and Company, G.R. No. 160191, June 8, 2006,
490 SCRA 368, 376.

13
Vide Adasa v. Abalos, G.R. No. 168617, February 19, 2007, 516 SCRA 261, 280;
Philippine Free Press, Inc. v. Court of Appeals, G.R. No. 132864, October 24, 2005, 473
SCRA 639, 662.

14
Vide Padua v. People, G.R. No. 168546, July 23, 2008, 559 SCRA 519, 531.

15
Vide rollo, p. 33.

16
Vide rollo, p. 43.

17
Vide Malaluan v. COMELEC, supra note 7 at 407.
 Republic of the Philippines
SUPREME COURT
Manila

EN BANC

G.R. No. 74851 December 9, 1999

RIZAL COMMERCIAL BANKING CORPORATION, petitioner,

vs.
INTERMEDIATE APPELLATE COURT AND BF HOMES, INC., respondents.

RESOLUTION

MELO, J.:

On September 14, 1992, the Court passed upon the case at bar and rendered its decision, dismissing
the petition of Rizal Commercial Banking Corporation (RCBC), thereby affirming the decision of the
Court of Appeals which canceled the transfer certificate of title issued in favor of RCBC, and
reinstating that of respondent BF Homes.

This will now resolve petitioner's motion for reconsideration which, although filed in 1992 was not
deemed submitted for resolution until in late 1998. The delay was occasioned by exchange of
pleadings, the submission of supplemental papers, withdrawal and change of lawyers, not to speak
of the case having been passed from one departing to another retiring justice. It was not until May
3, 1999, when the case was re-raffled to herein ponente, but the record was given to him only
sometime in the late October 1999.

By way of review, the pertinent facts as stated in our decision are reproduced herein, to wit:

On September 28, 1984, BF Homes filed a "Petition for Rehabilitation and for
Declaration of Suspension of Payments" (SEC Case No. 002693) with the Securities
and Exchange Commission (SEC).

One of the creditors listed in its inventory of creditors and liabilities was RCBC.

On October 26, 1984, RCBC requested the Provincial Sheriff of Rizal to extra-
judicially foreclose its real estate mortgage on some properties of BF Homes. A notice
of extra-judicial foreclosure sale was issued by the Sheriff on October 29, 1984,
scheduled on November 29, 1984, copies furnished both BF Homes (mortgagor) and
RCBC (mortgagee).

On motion of BF Homes, the SEC issued on November 28, 1984 in SEC Case No.
002693 a temporary restraining order (TRO), effective for 20 days, enjoining RCBC
and the sheriff from proceeding with the public auction sale. The sale was
rescheduled to January 29, 1985.

On January 25, 1985, the SEC ordered the issuance of a writ of preliminary injunction
upon petitioner's filing of a bond. However, petitioner did not file a bond until January
29, 1985, the very day of the auction sale, so no writ of preliminary injunction was
issued by the SEC. Presumably, unaware of the filing of the bond, the sheriffs
proceeded with the public auction sale on January 29, 1985, in which RCBC was the
highest bidder for the properties auctioned.

On February 5, 1985, BF Homes filed in the SEC a consolidated motion to annul the
auction sale and to cite RCBC and the sheriff for contempt. RCBC opposed the motion

Because of the proceedings in the SEC, the sheriff withheld the delivery to RCBC of
a certificate of sale covering the auctioned properties.

On February 13, 1985, the SEC in Case No. 002693 belatedly issued a writ of
preliminary injunction stopping the auction sale which had been conducted by the
sheriff two weeks earlier.
 On March 13, 1985, despite SEC Case No. 002693, RCBC filed with the Regional
Trial Court, Br. 140, Rizal (CC 10042) an action for mandamus against the provincial
sheriff of Rizal and his deputy to compel them to execute in its favor a certificate of
sale of the auctioned properties.

In answer, the sheriffs alleged that they proceeded with the auction sale on January
29, 1985 because no writ of preliminary injunction had been issued by SEC as of that
date, but they informed the SEC that they would suspend the issuance of a certificate
of sale to RCBC.

On March 18, 1985, the SEC appointed a Management Committee for BF Homes.

On RCBC's motion in the mandamus case, the trial court issued on May 8, 1985 a
judgment on the pleadings, the dispositive portion of which states:

WHEREFORE, petitioner's Motion for Judgment on the pleadings is

granted and judgment is hereby rendered ordering respondents to
execute and deliver to petitioner the Certificate of the Auction Sale of
January 29, 1985, involving the properties sold therein, more
particularly those described in Annex "C" of their Answer." (p.
87, Rollo.)

On June 4, 1985, B.F. Homes filed an original complaint with the IAC pursuant to
Section 9 of B.P. 129 praying for the annulment of the judgment, premised on the
following:

. . .: (1) even before RCBC asked the sheriff to extra-judicially foreclose

its mortgage on petitioner's properties, the SEC had already assumed
exclusive jurisdiction over those assets, and (2) that there was
extrinsic fraud in procuring the judgment because the petitioner was
not impleaded as a party in the mandamus case, respondent court did
not acquire jurisdiction over it, and it was deprived of its right to be
heard. (CA Decision, p. 88, Rollo).

On April 8, 1986, the IAC rendered a decision, setting aside the decision of the trial
court, dismissing the mandamus case and suspending issuance to RCBC of new land
titles, "until the resolution of case by SEC in Case No. 002693," disposing as follows:

WHEREFORE, the judgment dated May 8, 1985 in Civil Case No.

10042 is hereby annulled and set aside and the case is hereby
dismissed. In view of the admission of respondent Rizal Commercial
Banking Corporation that the sheriff's certificate of sale has been
registered on BF Homes' TCT's . . . (here the TCTs were enumerated)
the Register of Deeds for Pasay City is hereby ordered to suspend the
issuance to the mortgagee-purchaser, Rizal Commercial Banking
Corporation, of the owner's copies of the new land titles replacing them
until the matter shall have been resolved by the Securities and
Exchange Commission in SEC Case No. 002693.

(p. 257-260, Rollo; also pp. 832-834, 213 SCRA 830 [1992]; Emphasis in the original.)

On June 18, 1986, RCBC appealed the decision of the then Intermediate Appellate Court (now, back
to its old revered name, the Court of Appeals) to this Court, arguing that:

1. Petitioner did not commit extrinsic fraud in excluding private

respondent as party defendant in Special Civil Case No. 10042 as
private respondent was not indispensable party thereto, its
participation not being necessary for the full resolution of the issues
raised in said case.

2. SEC Case No. 2693 cannot be invoked to suspend Special Civil

Case No. 10042, and for that matter, the extra-judicial foreclosure of
the real estate mortgage in petitioner's favor, as these do not constitute
actions against private respondent contemplated under Section 6(c) of
Presidential Decree No. 902-A.
 3. Even assuming arguendo that the extra-judicial sale constitute an
action that may be suspended under Section 6(c) of Presidential
Decree No. 902-A, the basis for the suspension thereof did not exist
so as to adversely affect the validity and regularity thereof.

4. The Regional Trial court had jurisdiction to take cognizable of

Special Civil Case No. 10042.

5. The Regional Trial court had jurisdiction over Special Civil Case No.
10042.

(p.
5, Rollo.)

On November 12, 1986, the Court gave due course to the petition. During the pendency of the case,
RCBC brought to the attention of the Court an order issued by the SEC on October 16, 1986 in Case
No. 002693, denying the consolidated Motion to Annul the Auction Sale and to cite RCBC and the
Sheriff for Contempt, and ruling as follows:

WHEREFORE, the petitioner's "Consolidated Motion to Cite Sheriff

and Rizal Commercial Banking Corporation for Contempt and to Annul
Proceedings and Sale," dated February 5, 1985, should be as is,
hereby DENIED.

While we cannot direct the Register of Deeds to allow the consolidation

of the titles subject of the Omnibus Motion dated September 18, 1986
filed by the Rizal Commercial Banking Corporation, and therefore,
denies said Motion, neither can this Commission restrain the said bank
and the Register of Deeds from effecting the said consolidation.

SO ORDERED.

(p. 143, Rollo.)

By virtue of the aforesaid order, the Register of Deeds of Pasay City effected the transfer of title over
subject pieces of property to petitioner RCBC, and the issuance of new titles in its name. Thereafter,
RCBC presented a motion for the dismissal of the petition, theorizing that the issuance of said new
transfer certificates of title in its name rendered the petition moot and academic.

In the decision sought to be reconsidered, a greatly divided Court (Justices Gutierrez, Nocon, and
Melo concurred with the ponente, Justice Medialdea; Chief Justice Narvasa, Justices Bidin,
Regalado, and Bellosillo concurred only in the result; while Justice Feliciano dissented and was
joined by Justice Padilla, then Justice, now Chief Justice Davide, and Justice Romero; Justices
Griño-Aquino and Campos took no part) denied petitioner's motion to dismiss, finding basis for
nullifying and setting aside the TCTs in the name of RCBC. Ruling on the merits, the Court upheld
the decision of the Intermediate Appellate Court which dismissed the mandamus case filed by RCBC
and suspended the issuance of new titles to RCBC. Setting aside RCBC's acquisition of title and
nullifying the TCTs issued to it, the Court held that:

. . . whenever a distressed corporation asks the SEC for rehabilitation

and suspension of payments, preferred creditors may no longer assert
such preference, but . . . stand on equal footing with other creditors.
Foreclosure shall be disallowed so as not to prejudice other creditors,
or cause discrimination among them. If foreclosure is undertaken
despite the fact that a petition, for rehabilitation has been filed, the
certificate of sale shall not be delivered pending rehabilitation.
Likewise, if this has also been done, no transfer of title shall be effected
also, within the period of rehabilitation. The rationale behind PD 902-
A, as amended to effect a feasible and viable rehabilitation. This
cannot be achieved if one creditor is preferred over the others.

In this connection, the prohibition against foreclosure attaches as soon

as a petition for rehabilitation is filed. Were it otherwise, what is to
prevent the petitioner from delaying the creation of a Management
Committee and in the meantime dissipate all its assets. The sooner
the SEC takes over and imposes a freeze on all the assets, the better
for all concerned.
(pp. 265-266, Rollo; also p. 838, 213 SCRA 830 [1992].)

Then Justice Feliciano (joined by three other Justices), dissented and voted to grant the petition. He
opined that the SEC acted prematurely and without jurisdiction or legal authority in enjoining RCBC
and the sheriff from proceeding with the public auction sale. The dissent maintain that Section 6 (c)
of Presidential Decree 902-A is clear and unequivocal that, claims against the corporations,
partnerships, or associations shall be suspended only upon the appointment of a management
committee, rehabilitation receiver, board or body. Thus, in the case under consideration, only upon
the appointment of the Management Committee for BF Homes on March 18, 1985, should the
suspension of actions for claims against BF Homes have taken effect and not earlier.

In support of its motion for reconsideration, RCBC contends:

The restraining order and the writ of preliminary injunction issued by the Securities
and Exchange Commission enjoining the foreclosure sale of the properties of
respondent BF Homes were issued without or in excess of its jurisdiction because it
was violative of the clear provision of Presidential Decree No. 902-A, and are
therefore null and void; and

Petitioner, being a mortgage creditor, is entitled to rely solely on its security and to
refrain from joining the unsecured creditors in SEC Case No. 002693, the petition for
rehabilitation filed by private respondent.

We find the motion for reconsideration meritorious.

The issue of whether or not preferred creditors of distressed corporations stand on equal footing with
all other creditors gains relevance and materiality only upon the appointment of a management
committee, rehabilitation receiver, board, or body. Insofar as petitioner RCBC is concerned, the
provisions of Presidential Decree No. 902-A are not yet applicable and it may still be allowed to
assert its preferred status because it foreclosed on the mortgage prior to the appointment of the
management committee on March 18, 1985. The Court, therefore, grants the motion for
reconsideration on this score.

The law on the matter, Paragraph (c), Section 6 of Presidential Decree 902-A, provides:

Sec. 6. In order to effectively exercise such jurisdiction, the Commission shall posses
the following powers:

c) To appoint one or more receivers of the property, real and personal, which is the
subject of the action pending before the Commission in accordance with the pertinent
provisions of the Rules of Court in such other cases whenever necessary to preserve
the rights of the parties litigants to and/or protect the interest of the investing public
and creditors; Provided, however, that the Commission may, in appropriate cases,
appoint a rehabilitation receiver of corporations, partnerships or other associations
not supervised or regulated by other government agencies who shall have, in addition
to the powers of a regular receiver under the provisions of the Rules of Court, such
functions and powers as are provided for in the succeeding paragraph (d)
hereof: Provided, finally, That upon appointment of a management committee
rehabilitation receiver, board or body, pursuant to this Decree, all actions for claims
against corporations, partnerships or associations under management or
receivership, pending before any court, tribunal, board or body shall be suspended
accordingly. (As amended by PDs No. 1673, 1758 and by PD No. 1799. Emphasis
supplied.)

It is thus adequately clear that suspension of claims against a corporation under rehabilitation is
counted or figured up only upon the appointment of a management committee or a rehabilitation
receiver. The holding that suspension of actions for claims against a corporation under rehabilitation
takes effect as soon as the application or a petition for rehabilitation is filed with the SEC — may, to
some, be more logical and wise but unfortunately, such is incongruent with the clear language of the
law. To insist on such ruling, no matter how practical and noble, would be to encroach upon
legislative prerogative to define the wisdom of the law — plainly judicial legislation.

It bears stressing that the first and fundamental duty of the Court is to apply the law. When the law
is clear and free from any doubt or ambiguity, there is no room for construction or interpretation. As
has been our consistent ruling, where the law speaks in clear and categorical language, there is no
occasion for interpretation; there is only room for application (Cebu Portland Cement Co. vs.
Municipality of Naga, 24 SCRA-708 [1968]).
 Where the law is clear and unambiguous, it must be taken to mean exactly what it
says and the court has no choice but to see to it that its mandate is obeyed (Chartered
Bank Employees Association vs. Ople, 138 SCRA 273 [1985]; Luzon Surety Co., Inc.
vs. De Garcia, 30 SCRA 111 [1969]; Quijano vs. Development Bank of the
Philippines, 35 SCRA 270 [1970]).

Only when the law is ambiguous or of doubtful meaning may the court interpret or construe its true
intent. Ambiguity is a condition of admitting two or more meanings, of being understood in more than
one way, or of referring to two or more things at the same time. A statute is ambiguous if it is
admissible of two or more possible meanings, in which case, the Court is called upon to exercise
one of its judicial functions, which is to interpret the law according to its true intent.

Furthermore, as relevantly pointed out in the dissenting opinion, a petition for rehabilitation does nor
always result in the appointment of a receiver or the creation of a management committee. The SEC
has to initially determine whether such appointment is appropriate and necessary under the
circumstances. Under Paragraph (d), Section 6 of Presidential Decree No. 902-A, certain situations
must be shown to exist before a management committee may be created or appointed, such as;

1. when there is imminent danger of dissipation, loss, wastage or

destruction of assets or other properties; or

2. when there is paralization of business operations of such

corporations or entities which may be prejudicial to the interest of
minority stockholders, parties-litigants or to the general public.

On the other hand, receivers may be appointed whenever:

1. necessary in order to preserve the rights of the parties-litigants;

and/or

2. protect the interest of the investing public and creditors. (Section 6

(c), P.D. 902-A.)

These situations are rather serious in nature, requiring the appointment of a management committee
or a receiver to preserve the existing assets and property of the corporation in order to protect the
interests of its investors and creditors. Thus, in such situations, suspension of actions for claims
against a corporation as provided in Paragraph (c) of Section 6, of Presidential Decree No. 902-A is
necessary, and here we borrow the words of the late Justice Medialdea, "so as not to render the
SEC management Committee irrelevant and inutile and to give it unhampered "rescue efforts" over
the distressed firm" (Rollo, p. 265).

Otherwise, when such circumstances are not obtaining or when the SEC finds no such imminent
danger of losing the corporate assets, a management committee or rehabilitation receiver need not
be appointed and suspension of actions for claims may not be ordered by the SEC. When the SEC
does not deem it necessary to appoint a receiver or to create a management committee, it may be
assumed, that there are sufficient assets to sustain the rehabilitation plan and, that the creditors and
investors are amply protected.

Petitioner additionally argues in its motion for reconsideration that, being a mortgage creditor, it is
entitled to rely on its security and that it need not join the unsecured creditors in filing their claims
before the SEC appointed receiver. To support its position, petitioner cites the Court's ruling in the
case of Philippine Commercial International Bank vs. Court of Appeals, (172 SCRA 436 [1989]) that
an order of suspension of payments as well as actions for claims applies only to claims of unsecured
creditors and cannot extend to creditors holding a mortgage, pledge, or any lien on the property.

Ordinarily, the Court would refrain from discussing additional matters such as that presented in
RCBC's second ground, and would rather limit itself only to the relevant issues by which the
controversy may be settled with finality.

In view, however, of the significance of such issue, and the conflicting decisions of this Court on the
matter, coupled with the fact that our decision of September 14, 1992, if not clarified, might mislead
the Bench and the Bar, the Court resolved to discuss further.

It may be recalled that in the herein en banc majority opinion (pp. 256-275, Rollo, also published
as RCBC vs. IAC, 213 SCRA 830 [1992]), we held that:
 . . . whenever a distressed corporation asks the SEC for rehabilitation and suspension
of payments, preferred creditors may no longer assert such preference, but . . . stand
on equal footing with other creditors. Foreclosure shall be disallowed so as not to
prejudice other creditors, or cause discrimination among them. If foreclosure is
undertaken despite the fact that a petition for rehabilitation has been filed, the
certificate of sale shall not be delivered pending rehabilitation. Likewise, if this has
also, been done, no transfer of title shall be effected also, within the period of
rehabilitation. The rationale behind PD 902-A, as amended, is to effect a feasible and
viable rehabilitation. This cannot be achieved if one creditor is preferred over the
others.

In this connection, the prohibition against foreclosure attaches as soon as a petition

for rehabilitation is filed. Were it otherwise, what is to prevent the petitioner from
delaying the creation of a Management Committee and in the meantime dissipate all
its assets. The sooner the SEC takes over and imposes a freeze on all the assets,
the better for all concerned.

(pp. 265-266, Rollo; also p. 838, 213 SCRA 830 [1992] Emphasis supplied)

The foregoing majority opinion relied upon BF Homes, Inc. vs. Court of Appeals (190 SCRA 262
[1990] — per Cruz, J.: First Division) where it held that "when a corporation threatened by bankruptcy
is taken over by a receiver, all the creditors should stand on an equal footing. Not anyone of them
should be given preference by paying one or some of them ahead of the others. This is precisely the
reason for the suspension of all pending claims against the corporation under receivership. Instead
of creditors vexing the courts with suits against the distressed firm, they are directed to file their
claims with the receiver who is a duly appointed officer of the SEC (pp. 269-270; emphasis in the
original). This ruling is a reiteration of Alemar's Sibal & Sons, Inc. vs. Hon. Jesus M. Elbinias (pp.
99-100; 186 SCRA 94 [1991] — per Fernan, C.J.: Third Division).

Taking the lead from Alemar's Sibal & Sons, the Court also applied this same ruling in Araneta vs.
Court of Appeals(211 SCRA 390 [1992] — per Nocon, J.: Second Division).

All the foregoing cases departed from the ruling of the Court in the much earlier case of PCIB vs.
Court of Appeals(172 SCRA 436 [1989] — per Medialdea, J.: First Division) where the Court
categorically ruled that:

SEC's order for suspension of payments of Philfinance as well as for all actions of
claims against Philfinance could only be applied to claims of unsecured creditors.
Such order can not extend to creditors holding a mortgage, pledge or any lien on the
property unless they give up the property, security or lien in favor of all the creditors
of Philfinance . . .

(p. 440. Emphasis supplied)

Thus, in BPI vs. Court of Appeals (229 SCRA 223 [1994] — per Bellosilio, J.: First Division) the Court
explicitly stared that ". . . the doctrine in the PCIB Case has since been abrogated. In Alemar's Sibal
& Sons v. Elbinias, BF Homes, Inc. v. Court of Appeals, Araneta v. Court of Appeals and RCBC v.
Court of Appeals, we already ruled that whenever a distressed corporation asks SEC for
rehabilitation and suspension of payments, preferred creditors may no longer assert such
preference, but shall stand on equal footing with other creditors . . ." (pp. 227-228).

It may be stressed, however, that of all the cases cited by Justice Bellosillo in BPI, which abandoned
the Court's ruling in PCIB, only the present case satisfies the constitutional requirement that "no
doctrine or principle of law laid down by the court in a decision rendered en banc or in division may
be modified or reversed except by the court sitting en banc" (Sec 4, Article VIII, 1987 Constitution).
The rest were division decisions.

It behooves the Court, therefore, to settle the issue in this present resolution once and for all, and
for the guidance of the Bench and the Bar, the following rules of thumb shall are laid down:

1. All claims against corporations, partnerships, or associations that are pending before any court,
tribunal, or board, without distinction as to whether or not a creditor is secured or unsecured, shall
be suspended effective upon the appointment of a management committee, rehabilitation receiver,
board, or body in accordance which the provisions of Presidential Decree No. 902-A.

2. Secured creditors retain their preference over unsecured creditors, but enforcement of such
preference is equally suspended upon the appointment of a management committee, rehabilitation
receiver, board, or body. In the event that the assets of the corporation, partnership, or association
are finally liquidated, however, secured and preferred credits under the applicable provisions of the
Civil Code will definitely have preference over unsecured ones.

In other words, once a management committee, rehabilitation receiver, board or body is appointed
pursuant to P.D. 902-A, all actions for claims against a distressed corporation pending before any
court, tribunal, board or body shall be suspended accordingly.

This suspension shall not prejudice or render ineffective the status of a secured creditor as compared
totally unsecured creditor P.D. 902-A does not state anything to this effect. What it merely provides
is that all actions for claims against the corporation, partnership or association shall be suspended.
This should give the receiver a chance to rehabilitate the corporation if there should still be a
possibility of doing so. (This will be in consonance with Alemar's BF Homes, Araneta, and RCBC
insofar as enforcing liens by preferred creditors are concerned.)

However, in the event that rehabilitation is no longer feasible and claims against the distressed
corporation would eventually have to be settled, the secured creditors shall enjoy preference over
the unsecured creditors (still maintaining PCIB ruling), subject only to the provisions of the Civil Code
on Concurrence and Preferences of Credit (our ruling in State Investment House, Inc. vs. Court of
Appeals, 277 SCRA 209 [1997]).

The Majority ruling in our 1992 decision that preferred creditors of distressed corporations shall, in a
way, stand an equal footing with all other creditors, must be read and understood in the light of the
foregoing rulings. All claims of both a secured or unsecured creditors, without distinction on this
score, are suspended once a management committee is appointed. Secured creditors, in the
meantime, shall not be allowed to assert such preference before the Securities and Exchange
Commission. It may be stressed, however, that this shall only take effect upon the appointment of a
management committee, rehabilitation receiver, board, or body, as opined in the dissent.

In fine, the Court grants the motion for reconsideration for the cogent reason that suspension of
actions for claims commences only from the time a management committee or receiver is appointed
by the SEC. Petitioner RCBC, therefore, could have rightfully, as it did, move for the extrajudicial
foreclosure of its mortgage on October 26, 1984 because a management committee was not
appointed by the SEC until March 18, 1985.

WHEREFORE, petitioner's motion for reconsideration is hereby GRANTED. The decision, dated
September 14, 1992 is vacated, the decision of Intermediate Appellate Court in AC-G.R. No. SP-
06313 REVERSED and SET ASIDE, and the judgment of the Regional Trial Court National Capital
Judicial Region, Branch 140, in Civil Case No. 10042 REINSTATED.

SO ORDERED.

Davide, Jr., C.J., Bellosillo, Puno, Vitug, Kapunan, Mendoza, Quisumbing, Purisima, Pardo, Buena,
Gonzaga-Reyes, Ynares-Santiago and De Leon, Jr., JJ., concur.

Panganiban, J., please see separate (concuring) opinion.

Separate Opinions

PANGANIBAN, J., separate opinion;

The issue as to when suspension of payments takes effect upon a petition of a distressed corporation
is a contentious one. The ponencia in the case under consideration, Rizal Commercial Banking
Corporation (RCBC) v. Immediate Appellate Court, 1 has ruled that "the prohibition against
foreclosure attaches as soon as a petition for rehabilitation is filed. Were it otherwise, what is to
prevent the [creditors] from delaying the creation of the Management Committee and in the
meantime [seizing] all [the debtor's] assets. The sooner the SEC takes over and imposes a freeze
on all the assets, the better for all concerned." 2

Suspension Takes Effect Only Upon

Constitution of Management Committee

A Dissent debunking the quoted ruling was written by the esteemed Justice Florentino P. Feliciano
as follows:
 I understand the above quoted portion of the ponencia to be saying that suspension
of actions for claims against the corporation which applies for rehabilitation takes
effect as soon as the application or a petition for rehabilitation is filed with the SEC.

I would point out with respect, that the actual language used in Section 6 (c) and (d)
of P.D. No. 902-A, as amended, does not support the position taken in the ponencia.
The pertinent provision of Section 6 (c) is as follows:

Sec. 6. In order to effectively exercise such jurisdiction, the

commission shall possess the following powers:

xxx xxx xxx

c) To appoint one or more receivers of the property, real and personal,

which is the subject of the action pending before the Commission in
accordance with the pertinent provisions of the Rules of Court in such
cases whenever necessary to preserve the rights of the parties-
litigants to and/or protect the interest of the investing public and
creditors; Provided, however, That the Commission may, in
appropriate cases, appoint a rehabilitation receiver of corporations,
partnerships or other associations not supervised or regulated by other
government agencies who shall have, in addition to the powers of a
regular receiver under the provisions of the Rules of Court, such
functions and powers as are provided for in the succeeding paragraph
(d) hereof; Provided, further, that the Commission may appoint a
rehabilitation receiver of corporations, partnerships or other
associations supervised or regulated by other government agencies,
such as banks and insurance companies, upon request of the
government agency concerned; Provided, finally, that upon
appointment of a management committee, rehabilitation receiver,
board or body pursuant to this Decree, all actions for claims against
corporations, partnerships or associations under management or
receivership pending before any court, tribunal, board or body shall be
suspended accordingly.

It should be pointed out that the appointment of a management committee or a

rehabilitation receiver is not ordinarily effected immediately upon the filing of an
application for suspension of payments and for rehabilitation. The reason is that the
SEC must first determine whether the jurisdictional requirements for the appointment
of a management committee are present. There are at least two (2) sets of
requirements: (a) the requirements in respect of the petition for declaration of
suspension of payments; and (b) the requirements concerning the petition for creation
and appointment of a management committee.

xxx xxx xxx

As already noted, SEC took just about six (6) months after the filing of the petition of
B.F. Homes to decide to create and appoint a management committee. Only upon
such appointment of the management committee did the proviso in Section 6 (c)
which decrees suspension of actions for claims against the petitioning corporation
take effect.

It is only then that the SEC determines that the circumstances warranting, under the
statute, the appointment of a management committee do exist, i.e., that there is
"imminent danger of dissipation, loss, wastage or destruction of assets — or
paralization of business operations — which [would] be prejudicial to the interest of
minority stockholders, parties litigant or the general public." Only when such
circumstances have been determined to exist is there justification for suspending
actions for claims against the corporation so placed under SEC management. The
authority of the SEC to suspend or freeze the judicial enforcement of claims against
a corporation is an extraordinary authority, most especially where credits secured by
specific liens on property, like real estate mortgages, are involved; such authority
cannot lightly be assumed to have arisen simply because the corporation on its own
initiative goes to the SEC and there seeks shelter from its lawful creditors. 3

The foregoing Dissent found jural expression in a later case, Barotac Sugar Mills, Inc. v. Court of
Appeals, 4 penned by then Associate, now Chief Justice Hilario G. Davide Jr.:
 The appointment of a management committee or rehabilitation receiver may only take
place after the filing with the SEC of an appropriate petition for suspension of
payments. This is clear from a reading of sub-paragraph (d) of Section 5 and sub-
paragraph (d) of Section 6 P.D. No. 902-A, as amended by P.D. Nos. 1653 and 1758
....

xxx xxx xxx

The conclusion then is inevitable that pursuant to the underscored proviso in sub-
paragraph (c) of the aforementioned Section 6, taken together with sub-paragraph (d)
of Section 6, a court action is ipso jure suspended only upon the appointment of a
management committee or a rehabilitation receiver.

As a member of the then First Division which promulgated Barotac, I concurred in the aforequoted
ruling. To repeat, Barotac and Justice Feliciano's Dissent are clearly supported by Section 6,
paragraph (c) of presidential Decree 902-A. It is basic in statutory construction that in the absence
of doubt or ambiguity, there is no necessity for construction or interpretation of the law, as in this
case. Where the law speaks in clear and categorical language, there is no room for interpretation.
There is only room for application. 5

SEC Retains Power to

Issue Injunctive Relief

Left unsaid in RCBC, Barotac and even in the present Resolution, however, is the existence of two
competing economic interests in the determination of the issue. On the one hand, there is the
creditor; on the other, the corporation and its stockholders. Under the RCBC ponencia of Justice
Medialdea, an unscrupulous company can seek shelter in a petition for suspension of payments in
order to evade or at least unfairly delay the payment of just obligations. This course of action would
clearly prejudice its creditors, who would be barred from judicially enforcing their rightful claims,
simply because a petition for suspension has been filed. Indeed, to paraphrase Justice Medialdea,
what is to prevent the debtor from delaying the creation of the management committee, in the
meantime dissipating all its assets?

On the other hand, if the bare ruling of Barotac were to be applied strictly, a distressed company
would be exposed to grave danger that may precipitate its untimely demise, the very evil sought to
be avoided by a suspension of payments. Notably, the appointment of a management committee
takes place only after several months, even years, from submission of the petition. The appointment
entails hearings and the submission of documentary evidence to determine whether the requisites
for suspension of payments have been met. By the time a management committee or receiver is
appointed, creditors, upon knowledge of the application for suspension of payments, will have
feasted on the distressed corporation.

Money lenders will demand satisfaction of their credits by precipitately foreclosing on their
mortgages. Particularly vulnerable are liquid assets which can be attached and rendered useless.
Payrolls will be frozen and suppliers will lose faith in the company. Verily, the distressed company's
credit standing would be zero-rated. Indeed, after the vultures' feast, the remaining corporate carcass
can no longer be resurrected into a viable enterprise. When this happens, there will be no more
company left to rehabilitate, thus rendering ineffectual the very law which was enacted precisely to
effect such rehabilitation. In the business world, bridge liquidity and credit are sometimes even more
important than profits.

The prudent way to avoid the disastrous consequence of a strict application of said law is to call
attention to the power of the SEC to issue injunctive reliefs. Herein movant (RCBC) raises the issue
of the validity of the restraining order and the writ of preliminary injunction later issued by the
Securities and Exchange Commission (SEC) prior to the appointment of the management
committee. It contends that the issuance of the injunctive reliefs effectively results, the suspension
of actions against the petitioning distressed corporation.

Movant is thus saying that the SEC has no jurisdiction to issue injunctive reliefs in favor of the
distressed corporation petitioning for suspension of payments prior to the appointment of a
management committee I disagree.

Sec. 5(d) of PD 902-A clearly enumerates the cases over which the SEC has original and exclusive
jurisdiction to hear and decide:
 Sec. 5. In addition to the regulatory and adjudicative functions of the Securities and
Exchange Commission over corporations, partnerships and other forms of
associations registered with it as expressly granted under existing laws and decrees,
it shall have original and exclusive jurisdiction to hear and decide cases involving:

xxx xxx xxx

d) Petitions of corporations, partnerships or associations to be declared in the state

of suspension of payments in cases where the corporation, partnership or association
possesses sufficient property to cover all its debts but foresees the impossibility of
meeting them when they respectively fall due or in cases where the corporation,
partnership or association has no sufficient assets to cover its liabilities, but is under
the management of a Rehabilitation Receiver or Management Committee created
pursuant to this Decree.

Sec. 6 (a) of said Decree goes on further to say:

Sec. 6. In order to effectively exercise such jurisdiction, the Commission shall possess
the following powers:

a) To issue preliminary or permanent injunctions, whether prohibitory or mandatory,

in all cases in which it has jurisdiction, and in which cases the pertinent provisions of
the Rules of Court shall apply;

xxx xxx xxx

Thus, it is obvious from the above-quoted provisions that the SEC acquires jurisdiction over the
distressed companies upon the submission of a petition for suspension of payments. And when the
legal requirements are complied with, it has the authority to issue injunctive reliefs for the effective
exercise of its jurisdiction. I would like to emphasize that this power to issue restraining orders or
preliminary injunctions, upon the prayer of the petitioning corporation, may be the only buffer that
could save a company from being feasted on by any vulture-creditor prior to the appointment of a
management committee or a rehabilitation receiver.

WHEREFORE, I vote to GRANT the Motion for Reconsideration, subject to the caveat that the
Securities and Exchange Commission, in meritorious cases, may issue injunctive reliefs.

Footnotes

1 213 SCRA 830, September 14, 1992. (Concurring unqualifiedly with Justice
Medialdea's ponencia were Gutierrez Jr., Nocon, and Melo, JJ.; concurring in the result were
Narvasa, CJ, Bidin, Regalado and Bellosillo, JJ.; dissenting were Feliciano, Padilla, Davide
Jr. and Romero, JJ.; Cruz, Griño-Aquino and Campos, JJ., did not take part in the voting.)

2 Ibid., p. 838.

3 Ibid., pp. 839-844.

4 275 SCRA 497, July 15, 1997. (With the concurrence of Narvasa, CJ; Melo, Francisco and
Panganiban, JJ., of the Court's First Division).

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