ARIS (PETITIONER) VS NLRC (RESPONDENTS)

FACTS:

Petitioner assails the constitutionality of the amendment introduced by Section 12 of Republic Act No.
6715 to Article 223 of the Labor Code of the Philippines (PD No. 442, as amended) allowing execution
pending appeal of the reinstatement aspect of a decision of a labor arbiter that reinstates a dismissed or
separated employee and of Section 2 of the NLRC Interim Rules on Appeals under R.A. No. 6715 that
states the same. It also questions the validity of the Transitory Provision (Section 17) of the said Interim
Rules.

- On 11 April 1988, private respondents, who were employees of petitioner requested for a
grievance conference by reason of the management’s failure to attend to their complaints
concerning their working surroundings which had become hazardous.
- As none was arranged, and believing that their appeal would be pointless, they grouped
together after the end of their work and they marched directly to the management's office
to protest its long silence.
- After the protest private respondents were dismissed for violation of company rules and
regulations/, more specifically of the provisions on security and public order and on inciting
or participating in illegal strikes or concerted actions.
- Private respondents immediately filed a complaint for illegal dismissal against petitioner.
- After due trial, Labor Arbiter Felipe Garduque III handed down a decision:
“respondent Aris (Phils.), Inc. is hereby ordered to reinstate the complainants within ten
(10) days to their former respective positions or any substantial equivalent positions if
already filled up, without loss of seniority right and privileges.” SO ORDERED.
- On 19 July 1989, complainants filed a Motion for Issuance of a Writ of Execution (a judicial
order that a judgment be enforced) in accordance to the above-quoted Section 12 of R.A.
No. 6715.
- On 29 August 1989, petitioner filed an Opposition to the motion for execution alleging that
Section 12 of R.A. No. 6715 on execution pending appeal cannot be applied retroactively to
cases pending at that time because it does not expressly provide that it shall be given
retroactive effect and to give retroactive effect to Section 12 thereof to pending cases
would not only result in the imposition of an additional obligation on petitioner but would
also dilute its right to appeal since it would be burdened with the consequences of
reinstatement without the benefit of a final judgment.

ISSUE: W/N the provision under Section 12 of R.A. No. 6715 (Art. 233) dated March 21, 1989 is
constitutional.

RULING: YES. Petition was dismissed for lack of merit because the issue concerning Section 17 of the
NLRC Interim Rules does not deserve a measure of attention. The reference to it in the Order of the
Labor Arbiter was unnecessary since the procedure of the appeal proper is not involved in this case.
Moreover, the questioned interim rules of the NLRC can validly be given retroactive effect. They are
remedial in character, promulgated pursuant to the authority vested upon it under Article 218(a) of the
Labor Code of the Philippines, as amended. Settled is the rule that procedural laws may be given
retroactive effect. There are no vested rights in rules of procedure. A remedial statute may be made
applicable to cases pending at the time of its enactment.

RATIONALE: Presumption against unconstitutionality. The validity of the questioned law is not only
supported and sustained by the foregoing considerations. As contended by the Solicitor General, it is a
valid exercise of the police power of the State. Certainly, if the right of an employer to freely discharge
his employees is subject to regulation by the State, basically in the exercise of its permanent police
power on the theory that the preservation of the lives of the citizens is a basic duty of the State, that is
more vital than the preservation of corporate profits. Then, by and pursuant to the same power, the
State may authorize an immediate implementation, pending appeal, of a decision reinstating a
dismissed or separated employee since that saving act is designed to stop, although temporarily since
the appeal may be decided in favor of the appellant, a continuing threat or danger to the survival or
even the life of the dismissed or separated employee and its family.

Laws are presumed constitutional. To justify nullification of a law, there must be a clear and
unequivocal breach of the Constitution, not a doubtful and argumentative implication; a law shall not be
declared invalid unless the conflict with the constitution is clear beyond reasonable doubt.
Section 12 of R.A. No. 6715, ART. 223. Appeal.

Article 223. Appeal. - Decisions, awards, or orders of the Labor Arbiter are final and executory
unless appealed to the Commission by any or both parties within ten (10) calendar days from receipt of
such decisions, awards, or orders. Such appeal may be entertained only on any of the following grounds:

"(a) If there is prima facie (accepted as correct until proved otherwise) evidence of abuse of discretion
on the part of the Labor Arbiter;

"(b) If the decision, order or award was secured through fraud or coercion, including graft and
corruption;

"(c) If made purely on questions of law; and

"(d) If serious errors in the findings of facts are raised which would cause grave or irreparable damage or
injury to the appellant.

In any event, the decision of the Labor Arbiter reinstating a dismissed or separated employee, in so far
as the reinstatement aspect is concerned, shall immediately be executory, even pending appeal. The
employee shall either be admitted back to work under the same terms and conditions prevailing prior to
his dismissal or separation or, at the option of the employer, merely reinstated in the payroll. The
posting of a bond by the employer shall not stay the execution for reinstatement provided therein.

Sections 2 and 17 of the "NLRC Interim Rules On Appeals Under R.A. No. 6715, Amending the Labor
Code"

Section 2. Order of Reinstatement and Effect of Bond. - In so far as the reinstatement aspect is
concerned, the decision of the Labor Arbiter reinstating a dismissed or separated employee shall
immediately be executory even pending appeal. The employee shall either be admitted back to work
under the same terms and conditions prevailing prior to his dismissal or separation, or, at the option of
the employer, merely be reinstated in the payroll. The posting of a bond by the employer shall not stay
the execution for reinstatement.

Section 17. Transitory provision. - Appeals filed on or after March 21, 1989, but prior to the effectivity of
these Interim Rules must conform to the requirements as herein set forth or as may be directed by the
Commission.

Article. 218. Powers of the Commission. - The Commission shall have the power and authority:

(a) To promulgate rules and regulations governing the hearing and disposition of cases before it and
its regional branches, as well as those pertaining to its internal functions and such rules and
regulations as may be necessary to carry out the purposes of this Code; (As amended by Section
10, Republic Act No. 6715, March 21, 1989).
JOVENCIO LIM and TERESITA LIM, Petitioners, v. THE PEOPLE OF THE PHILIPPINES

FACTS: This case talks about the constitutionality of PD 818, a decree which amended Article 315 of the
Revised Penal Code by increasing the penalties for estafa committed by means of bouncing checks, is
being challenged in this petition for certiorari, for being violative of the due process clause, the right to
bail and the provision against cruel, degrading or inhuman punishment enshrined under the
Constitution.

- In December 1991, petitioner spouses issued to private respondent two postdated checks,
namely, Metrobank check no. 464728 in the amount of P365,750 and Metrobank check no.
464743 in the amount of P429,000. Check no. 464728 was dishonored because of having
insufficient funds while check no. 464743 was not presented for payment upon request as
promised by the petitioners.
- When petitioners revoked their promise to cover the amount of check no. 464728, the
private respondent filed a complaint-affidavit before the City Prosecutor of Quezon City
charging petitioner spouses with the crime of estafa under Article 315, par. 2 (d) of the
Revised Penal Code, as amended by PD 818.
- On February 16, 2001, the City Prosecutor issued a resolution finding probable cause against
petitioners and recommending the filing of an information for estafa with no bail
recommended. SO ORDERED.
- On July 18, 2001, petitioners filed an Urgent Motion to Quash Information, Warrant of
Arrest and motion for bail but were denied by the trial court. Petitioner Jovencio Lim was
arrested by virtue of the warrant of arrest issued by the trial court and was detained at the
Quezon City Jail. However, petitioner Teresita Lim remained at large.
- On August 22, 2001, petitioners filed the instant petition for certiorari arguing that PD 818
violates the constitutional provisions on due process, bail and imposition of cruel, and
degrading or inhuman punishment.

ISSUE: Whether or not PD 818 violates Sections 1 and 19 of Article III of the Constitution.

RULING: No, this argument is without merit. Petitioners claims are incorrect and must be rejected.
Publication is an indispensable part of due process, is imperative to the validity of laws, presidential
decrees and executive orders. (PD 818 was published in the Official Gazette on December 1, 1975.)

With the foregoing considerations in mind, this Court upholds the constitutionality of PD 818.

“when a law is questioned before the Court, the presumption is in favor of its constitutionality. To justify
its nullification, there must be a clear and unmistakable breach of the Constitution, not a doubtful and
argumentative one. The burden of proving the invalidity of a law rests upon to those who challenge it. In
this case, petitioners failed to present clear and convincing proof to defeat the presumption of
constitutionality of PD 818.”

WHEREFORE, the petition is hereby DISMISSED.

SO ORDERED.

Remains at large - hasn't been captured yet.

Complaint-Affidavit - the affidavit of complaint is a statement alleging that a person has committed an
offense.

Bouncing Check - a check that cannot be processed because the account holder has nonsufficient funds

ARTICLE III

BILL OF RIGHTS

Section 1. No person shall be deprived of life, liberty, or property without due process of law, nor shall
any person be denied the equal protection of the laws.

Section 19. (1) Excessive fines shall not be imposed, nor cruel, degrading or inhuman punishment
inflicted. Neither shall the death penalty be imposed, unless, for compelling reasons involving heinous
crimes, the Congress hereafter provides for it. Any death penalty already imposed shall be reduced to
reclusion perpetua.
G.R. No. 90501 August 5, 1991

ARIS (PHIL.) INC., Petitioner, vs. NATIONAL LABOR RELATIONS COMMISSION, LABOR ARBITER FELIPE
GARDUQUE III, LEODEGARIO DE GUZMAN, LILIA PEREZ, ROBERTO BESTAMONTE, AIDA OPENA,
REYNALDO TORIADO, APOLINARIO GAGAHINA, RUFINO DE CASTRO, FLORDELIZA RAYOS DEL SOL, STEVE
SANCHO, ESTER CAIRO, MARIETA MAGALAD, and MARY B. NADALA, Respondents.

Cesar C. Cruz & Partners for petitioner.

Zosimo Morillo for respondent Rayos del Sol.

Banzuela, Flores, Miralles, Raneses, Sy & Associates for private respondents.

DAVIDE, JR., J.:

Petitioner assails the constitutionality of the amendment introduced by Section 12 of Republic Act No.
6715 to Article 223 of the Labor Code of the Philippines (PD No. 442, as amended) allowing execution
pending appeal of the reinstatement aspect of a decision of a labor arbiter reinstating a dismissed or
separated employee and of Section 2 of the NLRC Interim Rules on Appeals under R.A. No. 6715
implementing the same. It also questions the validity of the Transitory Provision (Section 17) of the said
Interim Rules.

The challenged portion of Section 12 of Republic Act No. 6715, which took effect on 21 March 1989,
reads as follows:

SEC 12. Article 223 of the same code is amended to read as follows:

ART. 223. Appeal.

xxx xxx xxx

In any event, the decision of the Labor Arbiter reinstating a dismissed or separated employee, in so far
as the reinstatement aspect is concerned, shall immediately be executory, even pending appeal. The
employee shall either be admitted back to work under the same terms and conditions prevailing prior to
his dismissal or separation or, at the option of the employer, merely reinstated in the payroll. The
posting of a bond by the employer shall not stay the execution for reinstatement provided therein.

This is a new paragraph ingrafted into the Article. Sections 2 and 17 of the "NLRC Interim Rules On
Appeals Under R.A. No. 6715, Amending the Labor Code", which the National Labor Relations
Commission (NLRC) promulgated on 8 August 1989, provide as follows:

Section 2. Order of Reinstatement and Effect of Bond. - In so far as the reinstatement aspect is
concerned, the decision of the Labor Arbiter reinstating a dismissed or separated employee shall
immediately be executory even pending appeal. The employee shall either be admitted back to work
under the same terms and conditions prevailing prior to his dismissal or separation, or, at the option of
the employer, merely be reinstated in the payroll.

The posting of a bond by the employer shall not stay the execution for reinstatement.

xxx xxx xxx

Section 17. Transitory provision. - Appeals filed on or after March 21, 1989, but prior to the effectivity of
these Interim Rules must conform to the requirements as herein set forth or as may be directed by the
Commission.

The antecedent facts and proceedings which gave rise to this petition are not disputed:

On 11 April 1988, private respondents, who were employees of petitioner, aggrieved by management's
failure to attend to their complaints concerning their working surroundings which had become
detrimental and hazardous, requested for a grievance conference. As none was arranged, and believing
that their appeal would be fruitless, they grouped together after the end of their work that day with
other employees and marched directly to the management's office to protest its long silence and
inaction on their complaints. On 12 April 1988, the management issued a memorandum to each of the
private respondents, who were identified by the petitioner's supervisors as the most active participants
in the rally requiring them to explain why they should not be terminated from the service for their
conduct. Despite their explanation, private respondents were dismissed for violation of company rules
and regulations, more specifically of the provisions on security and public order and on inciting or
participating in illegal strikes or concerted actions. Private respondents lost no time in filing a complaint
for illegal dismissal against petitioner and Mr. Gavino Bayan with the regional office of the NLRC at the
National Capital Region, Manila, which was docketed therein as NLRC-NCR-00-0401630-88.

After due trial, Labor Arbiter Felipe Garduque III handed down on 22 June 1989 a decision' the
dispositive portion of which reads:

ACCORDINGLY, respondent Aris (Phils.), Inc. is hereby ordered to reinstate within ten (10) days from
receipt hereof, herein complainants Leodegario de Guzman, Rufino de Castro, Lilia M. Perez, Marieta
Magalad, Flordeliza Rayos del Sol, Reynaldo Toriado, Roberto Besmonte, Apolinario Gagahina, Aidam
(sic) Opena, Steve C. Sancho Ester Cairo, and Mary B. Nadala to their former respective positions or any
substantial equivalent positions if already filled up, without loss of seniority right and privileges but with
limited backwages of six (6) months except complainant Leodegario de Guzman. All other claims and
prayers are hereby denied for lack of merit. virtual law library

SO ORDERED.

On 19 July 1989, complainants (herein private respondents) filed a Motion For Issuance of a Writ of
Execution 2 pursuant to the above-quoted Section 12 of R.A. No. 6715. On 21 July 1989, petitioner filed
its Appeal. 3 On 26 July 1989, the complainants, except Flor Rayos del Sol, filed a Partial Appeal. 4 On 10
August 1989, complainant Flor Rayos del Sol filed a Partial Appeal. 5 On 29 August 1989, petitioner filed
an Opposition 6 to the motion for execution alleging that Section 12 of R.A. No. 6715 on execution
pending appeal cannot be applied retroactively to cases pending at the time of its effectivity because it
does not expressly provide that it shall be given retroactive effect 7 and to give retroactive effect to
Section 12 thereof to pending cases would not only result in the imposition of an additional obligation
on petitioner but would also dilute its right to appeal since it would be burdened with the consequences
of reinstatement without the benefit of a final judgment. In their Reply 8filed on 1 September 1989,
complainants argued that R.A. No. 6715 is not sought to be given retroactive effect in this case since the
decision to be executed pursuant to it was rendered after the effectivity of the Act. The said law took
effect on 21 March 1989, while the decision was rendered on 22 June 1989. Petitioner submitted a
Rejoinder to the Reply on 5 September 1989.

On 5 October 1989, the Labor Arbiter issued an Order granting the motion for execution and the
issuance of a partial writ of execution 10as far as reinstatement of herein complainants is concerned in
consonance with the provision of Section 2 of the rules particularly the last sentence thereof.

In this Order, the Labor Arbiter also made reference to Section 17 of the NLRC Interim Rules in this wise:

Since Section 17 of the said rules made mention of appeals filed on or after March 21, 1989, but prior to
the effectivity of these interim rules which must conform with the requirements as therein set forth
(Section 9) or as may be directed by the Commission, it obviously treats of decisions of Labor Arbiters
before March 21,1989. With more reason these interim rules be made to apply to the instant case since
the decision hereof (sic) was rendered thereafter. 11

Unable to accept the above Order, petitioner filed the instant petition on 26 October 1989 12 raising the
issues adverted to in the introductory portion of this decision under the following assignment of errors:

A. THE LABOR ARBITER A QUO AND THE NLRC, IN ORDERING THE REINSTATEMENT OF THE PRIVATE
RESPONDENTS PENDING APPEAL AND IN PROVIDING FOR SECTION 2 OF THE INTERIM RULES,
RESPECTIVELY, ACTED WITHOUT AND IN EXCESS OF JURISDICTION SINCE THE BASIS FOR SAID ORDER
AND INTERIM RULE, i.e., SECTION 12 OF R.A. 6715 IS VIOLATIVE OF THE CONSTITUTIONAL GUARANTY OF
DUE PROCESS IT BEING OPPRESSIVE AND UNREASONABLE.

B. GRANTING ARGUENDO THAT THE PROVISION IN(SIC) REINSTATEMENT PENDING APPEAL IS VALID,
NONETHELESS, THE LABOR ARBITER A QUO AND THE NLRC STILL ACTED IN EXCESS AND WITHOUT
JURISDICTION IN RETROACTIVELY APPLYING SAID PROVISION TO PENDING LABOR CASES.

In Our resolution of 7 March 1989, We required the respondents to comment on the petition.
Respondent NLRC, through the Office of the Solicitor General, filed its Comment on 20 November 1989.
13Meeting squarely the issues raised by petitioner, it submits that the provision concerning the
mandatory and automatic reinstatement of an employee whose dismissal is found unjustified by the
labor arbiter is a valid exercise of the police power of the state and the contested provision "is then a
police legislation." As regards the retroactive application thereof, it maintains that being merely
procedural in nature, it can apply to cases pending at the time of its effectivity on the theory that no one
can claim a vested right in a rule of procedure. Moreover, such a law is compatible with the
constitutional provision on protection to labor.

On 11 December 1989, private respondents filed a Manifestation 14 informing the Court that they are
adopting the Comment filed by the Solicitor General and stressing that petitioner failed to comply with
the requisites for a valid petition for certiorari under Rule 65 of the Rules of Court.

On 20 December 1989, petitioner filed a Rejoinder 15 to the Comment of the Solicitor General. In the
resolution of 11 January 1990, 16 We considered the Comments as respondents' Answers, gave due
course to the petition, and directed that the case be calendared for deliberation.

In urging Us to declare as unconstitutional that portion of Section 223 of the Labor Code introduced by
Section 12 of R.A. No. 6715, as well as the implementing provision covered by Section 2 of the NLRC
Interim Rules, allowing immediate execution, even pending appeal, of the reinstatement aspect of a
decision of a labor arbiter reinstating a dismissed or separated employee, petitioner submits that said
portion violates the due process clause of the Constitution in that it is oppressive and unreasonable. It
argues that a reinstatement pending appeal negates the right of the employer to self-protection for it
has been ruled that an employer cannot be compelled to continue in employment an employee guilty of
acts inimical to the interest of the employer; the right of an employer to dismiss is consistent with the
legal truism that the law, in protecting the rights of the laborer, authorizes neither the oppression nor
the destruction of the employer. For, social justice should be implemented not through mistaken
sympathy for or misplaced antipathy against any group, but even-handedly and fairly. 17

To clinch its case, petitioner tries to demonstrate the oppressiveness of reinstatement pending appeal
by portraying the following consequences: (a) the employer would be compelled to hire additional
employees or adjust the duties of other employees simply to have someone watch over the reinstated
employee to prevent the commission of further acts prejudicial to the employer, (b) reinstatement of an
undeserving, if not undesirable, employee may demoralize the rank and file, and (c) it may encourage
and embolden not only the reinstated employees but also other employees to commit similar, if not
graver infractions.

These rationalizations and portrayals are misplaced and are purely conjectural which, unfortunately,
proceed from a misunderstanding of the nature and scope of the relief of execution pending appeal.

Execution pending appeal is interlinked with the right to appeal. One cannot be divorced from the other.
The latter may be availed of by the losing party or a party who is not satisfied with a judgment, while the
former may be applied for by the prevailing party during the pendency of the appeal. The right to
appeal, however, is not a constitutional, natural or inherent right. It is a statutory privilege of statutory
origin 18 and, therefore, available only if granted or provided by statute. The law may then validly
provide limitations or qualifications thereto or relief to the prevailing party in the event an appeal is
interposed by the losing party. Execution pending appeal is one such relief long recognized in this
jurisdiction. The Revised Rules of Court allows execution pending appeal and the grant thereof is left to
the discretion of the court upon good reasons to be stated in a special order. 19 chanrobles virtual law
library

Before its amendment by Section 12 of R.A. No. 6715, Article 223 of the Labor Code already allowed
execution of decisions of the NLRC pending their appeal to the Secretary of Labor and Employment. In
authorizing execution pending appeal of the reinstatement aspect of a decision of the Labor Arbiter
reinstating a dismissed or separated employee, the law itself has laid down a compassionate policy
which, once more, vivifies and enhances the provisions of the 1987 Constitution on labor and the
working-man.

These provisions are the quintessence of the aspirations of the workingman for recognition of his role in
the social and economic life of the nation, for the protection of his rights, and the promotion of his
welfare. Thus, in the Article on Social Justice and Human Rights of the Constitution, 20 which principally
directs Congress to give highest priority to the enactment of measures that protect and enhance the
right of all people to human dignity, reduce social, economic, and political inequalities, and remove
cultural inequities by equitably diffusing wealth and political power for the common good, the State is
mandated to afford full protection to labor, local and overseas, organized and unorganized, and
promote full employment and equality of employment opportunities for all; to guarantee the rights of
all workers to self-organization, collective bargaining and negotiations, and peaceful concerted
activities, including the right to strike in accordance with law, security of tenure, human conditions of
work, and a living wage, to participate in policy and decision-making processes affecting their rights and
benefits as may be provided by law; and to promote the principle of shared responsibility between
workers and employers and the preferential use of voluntary modes in settling disputes. Incidentally, a
study of the Constitutions of various nations readily reveals that it is only our Constitution which
devotes a separate article on Social Justice and Human Rights. Thus, by no less than its fundamental law,
the Philippines has laid down the strong foundations of a truly just and humane society. This Article
addresses itself to specified areas of concern labor, agrarian and natural resources reform, urban land
reform and housing, health, working women, and people's organizations and reaches out to the
underprivileged sector of society, for which reason the President of the Constitutional Commission of
1986, former Associate Justice of this Court Cecilia Muñoz-Palma, aptly describes this Article as the
"heart of the new Charter." These duties and responsibilities of the State are imposed not so much to
express sympathy for the workingman as to forcefully and meaningfully underscore labor as a primary
social and economic force, which the Constitution also expressly affirms with equal intensity. 22 Labor is
an indispensable partner for the nation's progress and stability.

If in ordinary civil actions execution of judgment pending appeal is authorized for reasons the
determination of which is merely left to the discretion of the judge, we find no plausible reason to
withhold it in cases of decisions reinstating dismissed or separated employees. In such cases, the poor
employees had been deprived of their only source of livelihood, their only means of support for their
family their very lifeblood. To Us, this special circumstance is far better than any other which a judge, in
his sound discretion, may determine. In short, with respect to decisions reinstating employees, the law
itself has determined a sufficiently overwhelming reason for its execution pending appeal.

The validity of the questioned law is not only supported and sustained by the foregoing considerations.
As contended by the Solicitor General, it is a valid exercise of the police power of the State. Certainly, if
the right of an employer to freely discharge his employees is subject to regulation by the State, basically
in the exercise of its permanent police power on the theory that the preservation of the lives of the
citizens is a basic duty of the State, that is more vital than the preservation of corporate profits. 23 Then,
by and pursuant to the same power, the State may authorize an immediate implementation, pending
appeal, of a decision reinstating a dismissed or separated employee since that saving act is designed to
stop, although temporarily since the appeal may be decided in favor of the appellant, a continuing
threat or danger to the survival or even the life of the dismissed or separated employee and its family.
The charge then that the challenged law as well as the implementing rule are unconstitutional is
absolutely baseless. Laws are presumed constitutional. 24 To justify nullification of a law, there must be
a clear and unequivocal breach of the Constitution, not a doubtful and argumentative implication; a law
shall not be declared invalid unless the conflict with the constitution is clear beyond reasonable doubt.
25 In Parades, et al. vs. Executive Secretary 26 We stated:

2. For one thing, it is in accordance with the settled doctrine that between two possible constructions,
one avoiding a finding of unconstitutionality and the other yielding such a result, the former is to be
preferred. That which will save, not that which will destroy, commends itself for acceptance. After all,
the basic presumption all these years is one of validity. The onerous task of proving otherwise is on the
party seeking to nullify a statute. It must be proved by clear and convincing evidence that there is an
infringement of a constitutional provision, save in those cases where the challenged act is void on its
face. Absent such a showing, there can be no finding of unconstitutionality. A doubt, even if well-
founded, does not suffice. Justice Malcolm's aphorism is apropos: To doubt is to sustain. 27

The reason for this:

... can be traced to the doctrine of separation of powers which enjoins on each department a proper
respect for the acts of the other departments. ... The theory is that, as the joint act of the legislative and
executive authorities, a law is supposed to have been carefully studied and determined to be
constitution before it was finally enacted. Hence, as long as there is some other basis that can be used
by the courts for its decision, the constitutionality of the challenged law will not be touched upon and
the case will be decided on other available grounds. 28

The issue concerning Section 17 of the NLRC Interim Rules does not deserve a measure of attention. The
reference to it in the Order of the Labor Arbiter of 5 October 1989 was unnecessary since the procedure
of the appeal proper is not involved in this case. Moreover, the questioned interim rules of the NLRC,
promulgated on 8 August 1989, can validly be given retroactive effect. They are procedural or remedial
in character, promulgated pursuant to the authority vested upon it under Article 218(a) of the Labor
Code of the Philippines, as amended. Settled is the rule that procedural laws may be given retroactive
effect. 29 There are no vested rights in rules of procedure. 30 A remedial statute may be made
applicable to cases pending at the time of its enactment. 31chanrobles virtual law library

WHEREFORE, the petition is hereby DISMISSED for lack of merit. Costs against petitioner.

SO ORDERED.
G.R. No. 149276. September 27, 2002

JOVENCIO LIM and TERESITA LIM, Petitioners, v. THE PEOPLE OF THE PHILIPPINES, THE REGIONAL
TRIAL COURT OF QUEZON CITY, BRANCH 217, THE CITY PROSECUTOR OF QUEZON CITY, AND WILSON
CHAM, Respondents.

DECISION

CORONA, J.:

The constitutionality of PD 818, a decree which amended Article 315 of the Revised Penal Code by
increasing the penalties for estafa committed by means of bouncing checks, is being challenged in this
petition for certiorari, for being violative of the due process clause, the right to bail and the provision
against cruel, degrading or inhuman punishment enshrined under the Constitution.

The antecedents of this case, as gathered from the parties pleadings and documentary proofs, follow.

In December 1991, petitioner spouses issued to private respondent two postdated checks, namely,
Metrobank check no. 464728 dated January 15, 1992 in the amount of P365,750 and Metrobank check
no. 464743 dated January 22, 1992 in the amount of P429,000. Check no. 464728 was dishonored upon
presentment for having been drawn against insufficient funds while check no. 464743 was not
presented for payment upon request of petitioners who promised to replace the dishonored check.

When petitioners reneged on their promise to cover the amount of check no. 464728, the private
respondent filed a complaint-affidavit before the Office of the City Prosecutor of Quezon City charging
petitioner spouses with the crime of estafa under Article 315, par. 2 (d) of the Revised Penal Code, as
amended by PD 818.

On February 16, 2001, the City Prosecutor issued a resolution finding probable cause against petitioners
and recommending the filing of an information for estafa with no bail recommended. On the same day,
an information for the crime of estafa was filed with Branch 217 of the Regional Trial Court of Quezon
City against petitioners. The case was docketed as Criminal Case No. Q-01-101574. Thereafter, the trial
court issued a warrant for the arrest of herein petitioners, thus:It appearing on the face of the
information and from supporting affidavit of the complaining witness and its annexes that probable
cause exists, that the crime charged was committed and accused is probably guilty thereof, let a warrant
for the arrest of the accused be issued.

No Bail Recommended.

SO ORDERED.

On July 18, 2001, petitioners filed an Urgent Motion to Quash Information and Warrant of Arrest which
was denied by the trial court. Likewise, petitioners motion for bail filed on July 24, 2001 was denied by
the trial court on the same day. Petitioner Jovencio Lim was arrested by virtue of the warrant of arrest
issued by the trial court and was detained at the Quezon City Jail. However, petitioner Teresita Lim
remained at large.

On August 22, 2001, petitioners filed the instant petition for certiorari imputing grave abuse of
discretion on the part of the lower court and the Office of the City Prosecutor of Quezon City, arguing
that PD 818 violates the constitutional provisions on due process, bail and imposition of cruel, degrading
or inhuman punishment.

In a resolution dated February 26, 2002, this Court granted the petition of Jovencio Lim to post bail
pursuant to Department of Justice Circular No. 74 dated November 6, 2001 which amended the 2000
Bail Bond Guide involving estafa under Article 315, par. 2 (d), and qualified theft. Said Circular
specifically provides as follows:

xxx xxx xxx

3) Where the amount of fraud is P32,000.00 or over in which the imposable penalty is reclusion
temporal to reclusion perpetua, bail shall be based on reclusion temporal maximum, pursuant to Par. 2
(a) of the 2000 Bail Bond Guide, multiplied by P2,000.00, plus an additional of P2,000.00 for every
P10,000.00 in excess of P22,000.00; Provided, however, that the total amount of bail shall not exceed
P60,000.00.
In view of the aforementioned resolution, the matter concerning bail shall no longer be discussed. Thus,
this decision will focus on whether or not PD 818 violates Sections 1 and 19 of Article III of the
Constitution, which respectively provide:

Section 1. No person shall be deprived of life, liberty or property without due process of law, nor shall
any person be denied the equal protection of the laws.

xxx

Section 19 (1) Excessive fines shall not be imposed, nor cruel, degrading or inhuman punishment
inflicted. x x x.

We shall deal first with the issue of whether PD 818 was enacted in contravention of Section 19 of
Article III of the Constitution. In this regard, the impugned provision of PD 818 reads as follows:

SECTION 1. Any person who shall defraud another by means of false pretenses or fraudulent acts as
defined in paragraph 2(d) of Article 315 of the Revised Penal Code, as amended by Republic Act No.
4885, shall be punished by:

1st. The penalty of reclusion temporal if the amount of the fraud is over 12,000 pesos but does not
exceed 22,000 pesos, and if such amount exceeds the later sum, the penalty provided in this paragraph
shall be imposed in its maximum period, adding one year for each additional 10,000 pesos but the total
penalty which may be imposed shall in no case exceed thirty years. In such cases, and in connection with
the accessory penalties which may be imposed under the Revised Penal Code, the penalty shall be
termed reclusion perpetua;

2nd. The penalty of prision mayor in its maximum period, if the amount of the fraud is over 6,000 pesos
but does not exceed 12,000 pesos.

3rd. The penalty of prision mayor in its medium period, if such amount is over 200 pesos but does not
exceed 6,000 pesos; and

4th. By prision mayor in its minimum period, if such amount does not exceed 200 pesos.

Petitioners contend that, inasmuch as the amount of the subject check is P365,750, they can be
penalized with reclusion perpetua or 30 years of imprisonment. This penalty, according to petitioners, is
too severe and disproportionate to the crime they committed and infringes on the express mandate of
Article III, Section 19 of the Constitution which prohibits the infliction of cruel, degrading and inhuman
punishment.

Settled is the rule that a punishment authorized by statute is not cruel, degrading or disproportionate to
the nature of the offense unless it is flagrantly and plainly oppressive and wholly disproportionate to the
nature of the offense as to shock the moral sense of the community. It takes more than merely being
harsh, excessive, out of proportion or severe for a penalty to be obnoxious to the Constitution.2 Based
on this principle, the Court has consistently overruled contentions of the defense that the penalty of fine
or imprisonment authorized by the statute involved is cruel and degrading.

In People vs. Tongko,3 this Court held that the prohibition against cruel and unusual punishment is
generally aimed at the form or character of the punishment rather than its severity in respect of its
duration or amount, and applies to punishments which never existed in America or which public
sentiment regards as cruel or obsolete. This refers, for instance, to those inflicted at the whipping post
or in the pillory, to burning at the stake, breaking on the wheel, disemboweling and the like. The fact
that the penalty is severe provides insufficient basis to declare a law unconstitutional and does not, by
that circumstance alone, make it cruel and inhuman.

Petitioners also argue that while PD 818 increased the imposable penalties for estafa committed under
Article 315, par. 2 (d) of the Revised Penal Code, it did not increase the amounts corresponding to the
said new penalties. Thus, the original amounts provided for in the Revised Penal Code have remained
the same notwithstanding that they have become negligible and insignificant compared to the present
value of the peso.

This argument is without merit. The primary purpose of PD 818 is emphatically and categorically stated
in the following:
WHEREAS, reports received of late indicate an upsurge of estafa (swindling) cases committed by means
of bouncing checks;

WHEREAS, if not checked at once, these criminal acts would erode the peoples confidence in the use of
negotiable instruments as a medium of commercial transaction and consequently result in the
retardation of trade and commerce and the undermining of the banking system of the country;

WHEREAS, it is vitally necessary to arrest and curb the rise in this kind of estafa cases by increasing the
existing penalties provided therefor.

Clearly, the increase in the penalty, far from being cruel and degrading, was motivated by a laudable
purpose, namely, to effectuate the repression of an evil that undermines the countrys commercial and
economic growth, and to serve as a necessary precaution to deter people from issuing bouncing checks.
The fact that PD 818 did not increase the amounts corresponding to the new penalties only proves that
the amount is immaterial and inconsequential. What the law sought to avert was the proliferation of
estafa cases committed by means of bouncing checks. Taking into account the salutary purpose for
which said law was decreed, we conclude that PD 818 does not violate Section 19 of Article III of the
Constitution.

Moreover, when a law is questioned before the Court, the presumption is in favor of its
constitutionality. To justify its nullification, there must be a clear and unmistakable breach of the
Constitution, not a doubtful and argumentative one.4 The burden of proving the invalidity of a law rests
on those who challenge it. In this case, petitioners failed to present clear and convincing proof to defeat
the presumption of constitutionality of PD 818.

With respect to the issue of whether PD 818 infringes on Section 1 of Article III of the Constitution,
petitioners claim that PD 818 is violative of the due process clause of the Constitution as it was not
published in the Official Gazette. This claim is incorrect and must be rejected. Publication, being an
indispensable part of due process, is imperative to the validity of laws, presidential decrees and
executive orders.5 PD 818 was published in the Official Gazette on December 1, 1975.

With the foregoing considerations in mind, this Court upholds the constitutionality of PD 818.

WHEREFORE, the petition is hereby DISMISSED.

SO ORDERED.
[G.R. No. L-630. November 15, 1947.]

ALEXANDER A. KRIVENKO, Petitioner-Appellant, v. THE REGISTER OF DEEDS, CITY OF MANILA,

Respondent-Appellee.

Gibbs, Gibbs, Chuidian & Quasha for Petitioner-Appellant.

First Assistant Solicitor General Reyes and Solicitor Carreon for Respondent-Appellee.

Marcelino Lontok appeared as amicus curiæ.

SYLLABUS

1. CONSTITUTIONAL LAW; JUDICIAL POLICY; CONSTITUTIONAL QUESTION SHOULD BE AVOIDED IF

POSSIBLE. — The rule that a court should not pass upon a constitutional question if its decision may be
made to rest upon other grounds, does not mean that to avoid a constitutional question, the court may
decline to decide the case upon the merits. In the instant case, the only issue is a constitutional question
which is unavoidable if the case is to be decided upon the merits. And the court cannot avoid rendering
its decision simply because it has to avoid the constitutional question. It cannot, for instance, grant
appellant’s motion withdrawing his appeal only because the constitutional issue should be avoided.
Whether that motion should be, or should not be, granted, is a question involving different
considerations.

2. ID.; APPEAL; WITHDRAWAL OF APPEAL DISCRETIONARY UPON THE COURT AFTER BRIEFS ARE
PRESENTED. — Withdrawal of appeal after briefs are presented, may or may not be granted in the
discretion of the court, according to the rules. In the instant case, withdrawal was denied because under
the circumstances, particularly the circular of the Department of Justice issued while this case was
pending before this Court and ordering all registers of deeds to accept for registration all transfers of
residential lots to aliens, together with the circumstance that probably a similar question may never
come up again before this Court, the effect of the withdrawal would be offensive to the opinion reached
by a majority of the members of the Court after long and exhaustive deliberations on the constitutional
question. To allow the withdrawal under such circumstances is equivalent to tolerating an offense to the
constitution, offense which may be permanent.

3. CLASSIFICATION OF LANDS OF THE PUBLIC DOMAIN UNDER THE CONSTITUTION. — When section 1,
Article XIII, of the Constitution, with reference to lands of the public domain, makes mention of only
agricultural, timber and mineral lands, it undoubtedly means that all lands of the public domain are
classified into said three groups, namely, agricultural, timber and mineral. And this classification finds
corroboration in the circumstance that at the time of the adoption of the Constitution, that was the
basic classification existing in the public laws and judicial decision in the Philippines, and the term
"public agricultural lands" under said classification has always been construed as referring to those lands
that were neither timber nor mineral, and as including residential lands. It may safely be presumed,
therefore, that what the members of the Constitutional Convention had in mind when they drafted the
Constitution was this well-known classification and its technical meaning then prevailing.

There seems to be no question among members of this Court that the phrase "public agricultural lands"
appearing in section 1 of Article XIII of the Constitution includes residential lands. And this is in
conformity with a legislative interpretation given after the adoption of the Constitution. Well known is
the rule that "where the Legislature has revised a statute after a Constitution has been adopted, such a
revision is to be regarded as a legislative construction that the statute so revised conforms to the
Constitution." Soon after the Constitution was adopted, the National Assembly revised the Public Land
Law and passed Commonwealth Act No. 141, and sections 58, 59 and 60 thereof permit the sale of
residential lots to Filipino citizens or to associations or corporations controlled by such citizens, which is
equivalent to a solemn declaration that residential lots are considered as agricultural lands, for, under
the Constitution, only agricultural lands may be alienated.

Furthermore, prior to the Constitution, under section 24 of Public Land Act No. 2874, aliens could
acquire public agricultural lands used for industrial or residential purposes, but after the Constitution
and under section 23 of Commonwealth Act No. 141, the right of aliens to acquire such kind of lands is
completely stricken out, undoubtedly in pursuance of the constitutional limitation. And, again, prior to
the Constitution, under section 57 of Public Land Act No. 2874, land of the public domain suitable for
residence or industrial purposes could be sold or leased to aliens, but after the Constitution and under
section 60 of Commonwealth Act No. 141, such land may only be leased, but not sold, to aliens, and the
lease granted shall only be valid while the land is used for the purposes referred to. The exclusion of sale
in the new Act is undoubtedly in pursuance of the constitutional limitation, and this again is another
legislative construction that the term "public agricultural land" includes land for residence purposes.

The legislative interpretation is also in harmony with the interpretation given by the Executive
Department of the Government. Way back in 1939, Secretary of Justice Jose Abad Santos rendered an
opinion holding that under the Constitution, the phrase "public agricultural lands" includes residential
lands.

4. PRIVATE AGRICULTURAL LANDS UNDER THE CONSTITUTION. — Under section 2 of Article XIII of the
Constitution, "natural resources, with the exception of public agricultural land, shall not be alienated,"
and with respect to public agricultural lands, their alienation is limited to Filipino citizens. But this
constitutional purpose of conserving agricultural resources in the hands of Filipino citizens may easily be
defeated by the Filipino citizens themselves who may transfer their agricultural lands in favor of aliens. It
is partly to prevent this result that section 5 is included in Article XIII, which reads: "Save in cases of
hereditary succession, no private agricultural land shall be transferred or assigned except to individuals,
corporations, or associations qualified to acquire or hold lands of the public domain the Philippines."
This constitutional provision closes the only remaining avenue through which agricultural resources may
leak into aliens’ hands. It would certainly be futile to prohibit the alienation of public agricultural lands
to aliens if, after all, they may be freely so alienated upon their becoming private agricultural lands in
the hands of Filipino citizens. Undoubtedly, as above indicated, section 5 is intended to insure the policy
of nationalization contained in section 1. both sections must, therefore, be read together for they have
the same purpose and the same subject matter. It must be noticed that the persons against whom the
prohibition is directed in section 5 are the very same persons who under section 1 are disqualified to
acquire or hold lands of the public domain in the Philippines. And the subject matter of both sections is
the same, namely, the non-transferability of agricultural land to aliens. Since "agricultural land" under
section 1 includes residential lots, the same technical meaning should be attached to "agricultural land"
under section 5. It is a rule of statutory construction that a word or phrase repeated in a statute will
bear the same meaning throughout the statute, unless a different intention appears. The only difference
between "agricultural land" under section 1 and "agricultural land" under section 5, is that the former is
public and the latter, private. But such difference refers to ownership and not to the class of land. The
lands are the same in both sections, and, for the conservation of the national patrimony, what is
important is the nature or class of the property regardless of whether it is owned by the State or by its
citizens.

If, as conceded by all the members of this Court, residential lands of the public domain should be
considered as agricultural lands to be protected as part of the national patrimony, there can be no
reason why residential lands of private ownership should not deserve the same consideration and
protection. There is absolutely no difference in nature, character, value or importance to the nation
between a residential land of the public domain and a residential land of private ownership, and,
therefore, both should equally be considered as agricultural lands to be protected as part of the national
patrimony. Specially is this so where, as indicated above, the prohibition as to the alienation of public
residential lots may become superfluous if the same prohibition is not equally applied to private
residential lots. Indeed, the prohibition as to private residential lands will eventually become more
important, for time will come when, in view of the constant disposition of public lands in favor private
individuals, almost all, if not all, the residential lands of the public domain shall have become private
residential lands.

The constitutional intent is made more patent and is strongly implemented by an Act of the National
Assembly passed soon after the Constitution was approved. We are referring again to Commonwealth
Act No. 141. Prior to the Constitution, there were in the Public Land Act No. 2874 provisions contained
in section 120 and 121 thereof which granted to aliens the right to acquire private agricultural lands only
by way of reciprocity. Then came the Constitution, and Commonwealth Act No. 141 was passed
containing sections 122 and 123 which strike out completely the right of reciprocity granted to aliens.
This, undoubtedly, is to conform to the absolute policy contained in section 5 of Article XIII of the
Constitution, which, in prohibiting the alienation of private agricultural lands to aliens, grants them no
right of reciprocity.
5. EFFECT UPON THE SPIRIT OF THE CONSTITUTION OF NOT CONSIDERING RESIDENTIAL LANDS AS
AGRICULTURAL LANDS. — If the term "private agricultural lands" is to be construed as not including
residential lots or lands not strictly agricultural, the result would be that aliens may freely acquire and
possess not only residential lots and houses for themselves but entire subdivisions, and whole towns
and cities, and that they may validly buy and hold in their names lands of any area for building homes,
factories, industrial plants, fisheries, hatcheries, schools, health and vacation resorts, markets, golf
courses, playgrounds, airfields, and a host of other uses and purposes that are not, in appellant’s words,
strictly agricultural. That this is obnoxious to the conservative spirit of the Constitution is beyond
question.

DECISION

MORAN, C.J. :

Alexander A. Krivenko, alien, bought a residential lot from the Magdalena Estate, Inc., in December of
1941, the registration of which was interrupted by the war. In May, 1945, he sought to accomplish said
registration but was denied by the register of deeds of Manila on the ground that, being an alien, he
cannot acquire land in this jurisdiction. Krivenko then brought the case to the fourth branch of the Court
of First Instance of Manila by means of a consulta, and that court rendered judgment sustaining the
refusal of the register of deeds, from which Krivenko appealed to this Court.

There is no dispute as to these facts. The real point in issue is whether or not an alien under our
Constitution may acquire residential land.

It is said that the decision of the case on the merits is unnecessary, there being a motion to withdraw
the appeal which should have been granted outright, and reference is made to the ruling laid down by
this Court in another case to the effect that a court should not pass upon a constitutional question if its
judgment may be made to rest upon other grounds. There is, we believe, a confusion of ideas in this
reasoning. It cannot be denied that the constitutional question is unavoidable if we choose to decide
this case upon the merits. Our judgment cannot to be made to rest upon other grounds if we have to
render any judgment at all. And we cannot avoid our judgment simply because we have to avoid a
constitutional question. We cannot, for instance, grant the motion withdrawing the appeal only because
we wish to evade the constitutional issue. Whether the motion should be, or should not be, granted, is a
question involving different considerations not to be stated.

According to Rule 52, section 4, of the Rules of Court, it is discretionary upon this Court to grant a
withdrawal of appeal after the briefs have been presented. At the time the motion for withdrawal was
filed in this case, not only had the briefs been presented, but the case had already been voted and the
majority decision was being prepared. The motion for withdrawal stated no reason whatsoever, and the
Solicitor General was agreeable to it. While the motion was pending in this Court, came the new circular
of the Department of Justice, instructing all register of deeds to accept for registration all transfers of
residential lots to aliens. The herein respondent-appellee was naturally one of the registers of deeds to
obey the new circular, as against his own stand in this case which had been maintained by the trial court
and firmly defended in this Court by the Solicitor General. If we grant the withdrawal, the result would
be that petitioner-appellant Alexander A. Krivenko wins his case, not by a decision of this Court, but by
the decision or circular of the Department of Justice, issued while this case was pending before this
Court. Whether or not this is the reason why appellant seeks the withdrawal of his appeal and why the
Solicitor General readily agrees to that withdrawal, is now immaterial. What is material and indeed very
important, is whether or not we should allow interference with the regular and complete exercise by
this Court of its constitutional functions, and whether or not after having held long deliberations and
after having reached a clear and positive conviction as to what the constitutional mandate is, we may
still allow our conviction to be silenced, and the constitutional mandate to be ignored or misconceived,
with all the harmful consequences that might be brought upon the national patrimony. For it is but
natural that the new circular be taken full advantage of by many, with the circumstance that perhaps
the constitutional question may never come up again before this court, because both vendors and the
vendees will have no interest but to uphold the validity of their transactions, and very unlikely will the
register of deeds venture to disobey the orders of their superior. Thus, the possibility for this court to
voice its conviction in a future case may be remote, with the result that our indifference of today might
signify a permanent offense to the Constitution.

All these circumstances were thoroughly considered and weighed by this Court for a number of days and
the legal result of the last vote was a denial of the motion withdrawing the appeal. We are thus
confronted, at this state of the proceedings, with our duty to decide the case upon the merits, and by so
doing, the constitutional question becomes unavoidable. We shall then proceed to decide that question.

Article XIII, section 1, of the Constitution is as follows:

"Article XIII. — Conservation and utilization of natural resources.

"SECTION 1. All agricultural, timber, and mineral lands of the public domain, waters, minerals, coal,
petroleum, and other mineral oils, all forces of potential energy, and other natural resources of the
Philippine belong to the State, and their disposition, exploitation, development, or utilization shall be
limited to citizens of the Philippines, or to corporations or associations at least sixty per centum of the
capital of which is owned by such citizens, subject to any existing right, grant, lease, or concession at the
time of the inauguration of the Government established under this Constitution. Natural resources, with
the exception of public agricultural land, shall not be alienated, and no license, concession, or lease for
the exploitation, development, or utilization of any of the natural resources shall be granted for a period
exceeding twenty-five years, renewable for another twenty-five years, except as to water rights for
irrigation, water supply, fisheries, or industrial uses other than the development of water ’power’ in
which cases beneficial use may be the measure and the limit of the grant."

The scope of this constitutional provision, according to its heading and its language, embraces all lands
of any kind of the public domain, its purpose being to establish a permanent and fundamental policy for
the conservation and utilization of all natural resources of the Nation. When, therefore, this provision,
with reference to lands of the public domain are classified into said three groups, namely, agricultural,
timber and mineral. And this classification finds corroboration in the circumstance that at the time of
the adoption of the Constitution, that was the basic classification existing in the public laws and judicial
decisions in the Philippines, and the term "public agricultural lands" under said classification had then
acquired a technical meaning that was well-known to the members of the Constitutional Convention
who were mostly members of the legal profession.

As early as 1908, in the case of Mapa v. Insular Government (10 Phil., 175, 182), this Court said that the
phrase "agricultural public lands" as defined in the Act of Congress of July 1, 1902, which phrase is also
to be found in several sections of the Public Land Act (No. 926), means "those public lands acquired
from Spain which are neither mineral nor timber lands." This definition has been followed in a long line
of decisions of this Court. (See Montano v. Insular Government, 12 Phil., 572; Santiago v. Insular
Government, 12 Phil., 593; Ibañez de Aldecoa v. Insular Government, 13 Phil., 159; Ramos v. Director of
Lands, 39 Phil., 175; Jocson v. Government of the Philippines, 40 Phil., 10.) And with respect to
residential lands, it has been held that since they are neither mineral nor timber lands, of necessity they
must be classified as agricultural. In Ibañez de Aldecoa v. Insular Government (13 Phil., 159, 163), this
Court said:

"Hence, any parcel of land or building lot is susceptible of cultivation, and may be converted into a field,
and planted with all kinds of vegetation; for this reason, where land is not mining or forestall in its
nature, it must necessarily be included within the classification of agricultural land, not because it is
actually used for the purposes of agriculture, but because it was originally agricultural and may again
become so under other circumstances; besides, the Act of Congress contains only three classifications,
and makes no special provision with respect to building lots or urban lands that have ceased to be
agricultural land."

In other words, the Court ruled that in determining whether a parcel of land is agricultural, the test is
not only whether it is actually agricultural, but also its susceptibility to cultivation for agricultural
purposes. But whatever the test might be, the fact remains that at the time the Constitution was
adopted, lands of the public domain were classified in our laws and jurisprudence into agricultural,
mineral, and timber, and that the term "public agricultural lands" was construed as referring to those
lands that were not timber or mineral, and as including residential lands. It may safely be presumed,
therefore, that what the members of the Constitutional Convention had in mind when they drafted the
Constitution was this well-known classification and its technical meaning then prevailing.

"Certain expressions which appear in Constitutions, . . . are obviously technical; and where such words
have been in use prior to the adoption of a Constitution, it is presumed that its framers and the people
who ratified it have used such expressions in accordance with their technical meaning." (11 Am. Jur.,
sec. 66, p. 683.) Also Calder v. Bull, 3 Dall. [U. S. ], 386; 1 Law. ed., 648; Bronson v. Syverson, 88 Wash.,
264; 152 P., 1039.)
"It is a fundamental rule that, in construing constitutions, terms employed therein shall be given the
meaning which had been put upon them, and which they possessed, at the time of the framing and
adoption of the instrument. If a word has acquired a fixed, technical meaning in legal and constitutional
history, it will be presumed to have been employed in that sense in a written Constitution." (McKinney
v. Barker, 180 Ky., 526; 203 S. W., 303; L. R. A., 1918E, 581.)

"Where words have been long used in a technical sense and have been judicially construed to have a
certain meaning, and have been adopted by the legislature as having a certain meaning prior to a
particular statute in which they are used, the rule of construction requires that the words used in such
statute should be construed according to the sense in which they have been so previously used,
although the sense may vary from the strict literal meaning of the words." (II Sutherland, Statutory
Construction, p. 758.)

Therefore, the phrase "public agricultural lands" appearing in section 1 of Article XIII of the Constitution
must be construed as including residential lands, and this is in conformity with a legislative
interpretation given after the adoption of the Constitution. Well known is the rule that "where the
Legislature has revised a statute after a Constitution has been adopted, such a revision is to be regarded
as a legislative construction that the statute so revised conforms to the Constitution." (59 C. J., 1102.)
Soon after the Constitution was adopted, the National Assembly revised the Public Land Law and passed
Commonwealth Act No. 141, and sections 58, 59 and 60 thereof permit the sale of residential lots to
Filipino citizens or to associations or corporations controlled by such citizens, which is equivalent to a
solemn declaration that residential lots are considered as agricultural lands, for, under the Constitution,
only agricultural lands may be alienated.

It is true that in section 9 of said Commonwealth Act No. 141, "alienable or disposable public lands"
which are the same "public agricultural lands" under the Constitution, are classified into agricultural,
residential, commercial, industrial and for other purposes. This simply means that the term "public
agricultural lands" has both a broad and a particular meaning. Under its broad or general meaning, as
used in the Constitution, it embraces all lands that are neither timber nor mineral. This broad meaning is
particularized in section 9 of Commonwealth Act No. 141 which classifies "public agricultural lands" for
purposes of alienation or disposition, into lands that are strictly agricultural or actually devoted to
cultivation for agricultural purposes; lands that are residential; commercial; industrial; or lands for other
purposes. The fact that these lands are made alienable or disposable under Commonwealth Act No. 141,
in favor of Filipino citizens, is a conclusive indication of their character as public agricultural lands under
said statute and under the Constitution.

It must be observed, in this connection, that prior to the Constitution, under section 24 of Public Land
Act No. 2874, aliens could acquire public agricultural lands used for industrial or residential purposes,
but after the Constitution and under section 23 of Commonwealth Act No. 141, the right of aliens to
acquire such kind of lands is completely stricken out, undoubtedly in pursuance of the constitutional
limitation. And, again, prior to the Constitution, under section 57 of Public Land Act No. 2874, land of
the public domain suitable for residence or industrial purposes could be sold or leased to aliens, but
after the Constitution and under section 60 of Commonwealth Act No. 141, such land may only be
leased, but not sold, to aliens, and the lease granted shall only be valid while the land is used for the
purposes referred to. The exclusion of sale in the new Act is undoubtedly in pursuance of the
constitutional limitation, and this again is another legislative construction that the term "public
agricultural land" includes land for residence purposes.

Such legislative interpretation is also in harmony with the interpretation given by the Executive
Department of the Government. Way back in 1939, Secretary of Justice Jose Abad Santos, in answer to a
query as to "whether or not the phrase ’public agricultural lands’ in section 1 of Article XII (now XIII) of
the Constitution may be interpreted to include residential, commercial, and industrial lands for purposes
of their disposition," rendered the following short, sharp and crystal-clear opinion:

"Section 1, Article XII (now XIII) of the Constitution classifies lands of the public domain in the Philippines
into agricultural, timber and mineral. This is the basic classification adopted since the enactment of the
Act of Congress of July 1, 1902, known as the Philippine Bill. At the time of the adoption of the
Constitution of the Philippines, the term ’agricultural public lands’ and, therefore, acquired a technical
meaning in our public laws. The Supreme Court of the Philippines in the leading case of Mapa v. Insular
Government, 10 Phil., 175, held that the phrase ’agricultural public lands’ means those public lands
acquired from Spain which are neither timber nor mineral lands. This definition has been followed by
our Supreme Court in many subsequent cases. . . ."

"Residential, commercial, or industrial lots forming part of the public domain must have to be included
in one or more of these classes. Clearly, they are neither timber nor mineral, of necessity, therefore,
they must be classified as agricultural.

"Viewed from another angle, it has been held that in determining whether lands are agricultural or not,
the character of the land is the test (Odell v. Durant, 62 N. W., 524; Lorch v. Missoula Brick & Tile Co.,
123 p. 25). In other words, it is the susceptibility of the land to cultivation for agricultural purposes by
ordinary farming methods which determines whether it is agricultural or not (State v. Stewart, 190 p.
129).

"Furthermore, as said by the Director of Lands, no reason is seen why a piece of land, which may be sold
to a person if he is to devote it to agricultural, cannot be sold to him if he intends to use it as a site for
his home."

This opinion is important not alone because it comes from a Secretary of Justice who later became the
Chief Justice of this Court, but also because it was rendered by a member of the cabinet of the late
President Quezon who actively participated in the drafting of the constitutional provision under
consideration. (2 Aruego, Framing of the Philippine Constitution, p. 598.) And the opinion of the Quezon
administration was reiterated by the Secretary of Justice under the Osmeña administration, and it was
firmly maintained in this Court by the Solicitor General of both administrations.

It is thus clear that the three great departments of the Government — judicial, legislative and executive
— have always maintained that lands of the public domain are classified into agricultural, mineral and
timber, and that agricultural lands include residential lots.

Under section 1 of Article XIII of the Constitution, "natural resources, with the exception of public
agricultural land, shall not be alienated," and with respect to public agricultural lands, their alienation is
limited to Filipino citizens. But this constitutional purpose conserving agricultural resources in the hands
of Filipino citizens may easily be defeated by the Filipino citizens themselves who may alienate their
agricultural lands in favor of aliens. It is partly to prevent this result that section 5 is included in Article
XIII, and it reads as follows:

"Sec. 5. Save in cases of hereditary succession, no private agricultural land will be transferred or
assigned except to individuals, corporations, or associations qualified to acquire or hold lands of the
public domain in the Philippines."cralaw virtua1aw library

This constitutional provision closes the only remaining avenue through which agricultural resources may
leak into aliens’ hands. It would certainly be futile to prohibit the alienation of public agricultural lands
to aliens if, after all, they may be freely so alienated upon their becoming private agricultural lands in
the hands of Filipino citizens. Undoubtedly, as above indicated, section 5 is intended to insure the policy
of nationalization contained in section 1. Both sections must, therefore, be read together for they have
the same purpose and the same subject matter. It must be noticed that the persons against whom the
prohibition is directed in section 5 are the very same persons who under section 1 are disqualified "to
acquire or hold lands of the public domain in the Philippines." And the subject matter of both sections is
the same, namely, the non transferability of "agricultural land" to aliens. Since "agricultural land" under
section 1 includes residential lots, the same technical meaning should be attached to "agricultural land"
under section 5. It is a rule of statutory construction that "a word or phrase repeated in a statute will
bear the same meaning throughout the statute, unless a different intention appears." (II Sutherland,
Statutory Construction, p. 758.) The only difference between "agricultural land" under section 1, and
"agricultural land" under section 5, is that the former is public and the latter private. But such difference
refers to ownership and not to the class of land. The lands are the same in both sections, and, for the
conservation of the national patrimony, what is important is the nature or class of the property
regardless of whether it is owned by the State or by its citizens.

Reference is made to an opinion rendered on September 19, 1941, by the Hon. Teofilo Sison, then
Secretary of Justice, to the effect that residential lands of the public domain may be considered as
agricultural lands, whereas residential lands of private ownership cannot be so considered. No reason
whatsoever is given in the opinion for such a distinction, and no valid reason can be adduced for such a
discriminatory view, particularly having in mind that the purpose of the constitutional provision is the
conservation of the national patrimony, and private residential lands are as much an integral part of the
national patrimony as the residential lands of the public domain. Specially is this so where, as indicated
above, the prohibition as to the alienable of public residential lots would become superfluous if the
same prohibition is not equally applied to private residential lots. Indeed, the prohibition as to private
residential lands will eventually become more important, for time will come when, in view of the
constant disposition of public lands in favor of private individuals, almost all, if not all, the residential
lands of the public domain shall have become private residential lands.

It is maintained that in the first draft of section 5, the words "no land of private ownership" were used
and later changed into "no agricultural land of private ownership," and lastly into "no private
agricultural land" and from these changes it is argued that the word "agricultural" introduced in the
second and final drafts was intended to limit the meaning of the word "land" to land actually used for
agricultural purposes. The implication is not accurate. The wording o the first draft was amended for no
other purpose than to clarify concepts and avoid uncertainties. The words "no land" of the first draft,
unqualified by the word "agricultural," may be mistaken to include timber and mineral lands, and since
under section 1, this kind of lands can never be private, the prohibition to transfer the same would be
superfluous. Upon the other hand, section 5 had to be drafted in harmony with section 1 to which it is
supplementary, as above indicated. Inasmuch as under section 1, timber and mineral lands can never be
private, and the only lands that may become private are agricultural lands, the words "no land of private
ownership" of the first draft can have no other meaning than "private agricultural land." And thus the
change in the final draft is merely one of words in order to make its subject matter more specific with a
view to avoiding the possible confusion of ideas that could have arisen from the first draft.

If the term "private agricultural lands" is to be construed as not including residential lots or lands not
strictly agricultural, the result would be that "aliens may freely acquire and possess not only residential
lots and houses for themselves but entire subdivisions, and whole towns and cities," and that "they may
validly buy and hold in their names lands of any area for building homes, factories, industrial plants,
fisheries, hatcheries, schools, health and vacation resorts, markets, golf courses, playgrounds, airfields,
and a host of other uses and purposes that are not, in appellant’s words, strictly agricultural." (Solicitor
General’s Brief, p. 6.) That this is obnoxious to the conservative spirit of the Constitution is beyond
question.

One of the fundamental principles underlying the provision of Article XIII of the Constitution and which
was embodied in the report of the Committee on Nationalization and Preservation of Lands and other
Natural Resources of the Constitutional Convention, is "that lands, minerals, forests, and other natural
resources constitute the exclusive heritage of the Filipino nation. They should, therefore, be preserved
for those under the sovereign authority of that nation and for their posterity." (2 Aruego, Framing of the
Filipino Constitution, p. 595.) Delegate Ledesma, Chairman of the Committee on Agricultural
Development of the Constitutional Convention, in a speech delivered in connection with the national
policy on agricultural lands, said: "The exclusion of aliens from the privilege of acquiring public
agricultural lands and of owning real estate is a necessary part of the Public Land Laws of the Philippines
for the Filipinos." (Italics ours.) And, of the same tenor was the speech of Delegate Montilla who said:
"With the complete nationalization of our lands and natural resources it is to be understood that our
God-given birthright should be one hundred per cent in Filipino hands . . . Lands and natural resources
are immovables and as such can be compared to the vital organs of a person’s body, the lack of
possession of which may cause instant death or the shortening of life. . . . If we do not completely
nationalize these two of our most important belongings, I am afraid that the time will come when we
shall be sorry for the time we were born. Our independence will be just a mockery, for what kind of
independence are we going to have if a part of our country is not in our hands but in those of
foreigners?" (Italics ours.) Professor Aruego says that since the opening days of the Constitutional
Convention one of its fixed and dominating objectives was the conservation and nationalization of the
natural resources of the country. (2 Aruego, Framing of the Philippine Constitution, p. 592.) This is
ratified by the members of the Constitutional Convention who are now members of this Court, namely,
Mr. Justice Perfecto, Mr. Justice Briones, and Mr. Justice Hontiveros. And, indeed, if under Article XIV,
section 8, of the Constitution, an alien may not even operate a small jitney for hire, it is certainly not
hard to understand that neither is he allowed to own a piece of land.

This constitutional intent is made more patent and is strongly implemented by an act of the National
Assembly passed soon after the Constitution was approved. We are referring again to Commonwealth
Act No. 141. Prior to the Constitution, there were in the Public Land Act No. 2874 sections 120 and 121
which granted aliens the right to acquire private lands only by way of reciprocity. Said section reads as
follows:

"SEC. 120. No land originally acquired in any manner under the provisions of this Act, nor any
permanent improvement on such land, shall be encumbered, alienated, or transferred, except to
persons, corporations, associations, or partnerships who may acquire lands of the public domain under
this Act; to corporations organized in the Philippine Islands authorized therefor by their charters, and,
upon express authorization by the Philippine Legislature, to citizens of countries the laws of which grant
to citizens of the Philippine Islands the same right to acquire, hold, lease, encumber, dispose of, or
alienate land, or permanent improvements thereon, or any interest therein, as to their own citizens,
only in the manner and to the extent specified in such laws, and while the same are in force, but not
thereafter.

"SEC. 121. No land originally acquired in any manner under the provisions of the former Public Land Act
or of any other Act, ordinance, royal order, royal decree, or any other provision of law formerly in force
in the Philippine Islands with regard to public lands, terrenos baldios y realengos, or lands of any other
denomination that were actually or presumptively of the public domain, or by royal grant or in any other
form, nor any permanent improvement on such land, shall be encumbered, alienated, or conveyed,
except to persons, corporations, or associations who may acquire land of the public domain under this
Act; to corporate bodies organized in the Philippine Islands whose charters may authorize them to do
so, and, upon express authorization by the Philippine Legislature, to citizens of the countries the laws of
which grant to citizens of the Philippine Islands the same right to acquire, hold, lease, encumber,
dispose of, or alienate land or permanent improvements thereon or any interest therein, as to their own
citizens, and only in the manner and to the extent specified in such laws, and while the same are in
force, but not thereafter: Provided, however, That this prohibition shall not be applicable to the
conveyance or acquisition by reason of hereditary succession duly acknowledged and legalized by
competent courts, nor to lands and improvements acquired or held for industrial or residence purposes,
while used for such purposes: Provided, further, That in the event of the ownership of the lands and
improvements mentioned in this section and in the last preceding section being transferred by judicial
decree to persons, corporations or associations not legally capacitated to acquire the same under the
provisions of this Act, such persons, corporations, or associations shall be obliged to alienate said lands
or improvements to others so capacitated within the precise period of five years, under the penalty of
such property reverting to the Government in the contrary case." (Public Land Act, No, 2874.)

It is to be observed that the phase "no land" used in these section refers to all private lands, whether
strictly agricultural, residential or otherwise, there being practically no private land which had not been
acquired by any of the means provided in said two sections. Therefore, the prohibition contained in
these two provisions was, in effect, that no private land could be transferred to aliens except "upon
express authorization by the Philippine Legislature, to citizens of the Philippine Islands the same right to
acquire, hold, lease, encumber, dispose of, or alienate land." In other words, aliens were granted the
right to acquire private land merely by way of reciprocity. Then came the Constitution and
Commonwealth Act No. 141 was passed, section 122 and 123 of which read as follows:

"SEC. 122. No land originally acquired in any manner under the provisions of this Act, nor any
permanent improvement on such land, shall be encumbered, alienated, or transferred, except to
persons, corporations, associations, or partnerships who may acquire lands of the public domain under
this Act or to corporations organized in the Philippines authorized therefor by their charters.

"SEC. 123. No land originally acquired in any manner under the provisions of any previous Act,
ordinance, royal order, royal decree, or any other provision of law formerly in force in the Philippines
with regard to public lands, terrenos baldios y realengos, or lands of any other denomination that were
actually or presumptively of the public domain, or by royal grant or in any other form, nor any
permanent improvement on such land, shall be encumbered, alienated, or conveyed, except to persons,
corporations or associations who may acquire land of the public domain under this Act or to corporate
bodies organized in the Philippines whose charters authorize them to do so: Provided, however, That
this prohibition shall not be applicable to the conveyance or acquisition by reason of hereditary
succession duly acknowledged and legalized by competent courts: Provided, further, That in the event of
the ownership of the lands and improvements mentioned in this section and in the last preceding
section being transferred by judicial decree to persons, corporations or associations not legally
capacitated to acquire the same under the provisions of this Act, such persons, corporations, or
associations shall be obliged to alienate said lands or improvements to others so capacitated within the
precise period of five years; otherwise, such property shall revert to the Government."

These two sections are almost literally the same as sections 120 and 121 of Act No. 2874, the only
difference being that in the new provisions, the right to reciprocity granted to aliens is completely
stricken out. This, undoubtedly, is to conform to the absolute policy contained in section 5 of Article XIII
of the Constitution which, in prohibiting the alienation of private agricultural lands to aliens, grants
them no right of reciprocity. This legislative construction carries exceptional weight, for prominent
members of the National Assembly who approved the new Act had been members of the Constitutional
Convention.

It is said that the lot in question does not come within the purview of sections 122 and 123 of
Commonwealth Act No. 141, there being no proof that the same had been acquired by one of the
means provided in said provisions. We are not, however, deciding the instant case under the provisions
of the Public Land Act, which have to refer to lands that had been formerly of the public domain,
otherwise their constitutionality may be doubtful. We are deciding the instant case under section 5 of
Article XIII of the Constitution which is more comprehensive and more absolute in the sense that it
prohibits the transfer to aliens of any private agricultural land including residential land whatever its
origin might have been.

And, finally, on June 14, 1947, the Congress approved Republic Act No. 133 which allows mortgage of
"private real property" of any kind in favor of aliens but with a qualification consisting of expressly
prohibiting aliens to bid or take part in any sale of such real property as a consequence of the mortgage.
This prohibition makes no distinction between private lands that are strictly agricultural and private
lands that are residential or commercial. The prohibition embraces the sale of private lands of any kind
in favor of aliens, which is again a clear implementation and a legislative interpretation of the
constitutional prohibition. Had the Congress been of opinion that private residential lands may be sold
to aliens under the Constitution, no legislative measure would have been found necessary to authorize
mortgage which would have been deemed also permissible under the Constitution. But clearly it was the
opinion of the Congress that such sale is forbidden by the Constitution and it was such opinion that
prompted the legislative measure intended to clarify that mortgage is not within the constitutional
prohibition.

It is well to note at this juncture that in the present case we have no choice. We are construing the
Constitution as it is and not as we may desire it to be. Perhaps the effect of our construction is to
preclude aliens, admitted freely into the Philippines from owning sites where they may build their
homes. But if this is the solemn mandate of the Constitution, we will not attempt to compromise it even
in the name of amity or equity. We are satisfied, however, that aliens are not completely excluded by
the Constitution from the use of lands for residential purposes. Since their residence in the Philippines is
temporary, they may be granted temporary rights such as a lease contract which is not forbidden by the
Constitution. Should they desire to remain here forever and share our fortunes and misfortunes, Filipino
citizenship is not impossible to acquire.

For all the foregoing, we hold that under the Constitution aliens may not acquire private or public
agricultural lands, including residential lands, and, accordingly, judgment is affirmed, without costs.
COMMISSIONER OF INTERNAL REVENUE, Petitioner, v. ESSO STANDARD EASTERN, INC. and THE
COURT TAX APPEALS, Respondents.

SYLLABUS

1. TAXATION; INCOME TAX; OVERPAYMENT THEREOF BY MISTAKE; RIGHT OF PAYOR TO

REIMBURSEMENT ARISES FROM THE MOMENT PAYMENT IS MADE AND NOT FROM THE TIME THAT THE
PAYEE ADMITS THE OBLIGATION TO REIMBURSE. — As early as July 15, 1960, the Government already
had in its hands the sum of P221,033.00 representing excess income tax payment. Having been paid and
received by mistake, that sum unquestionably belonged to ESSO, and the Government had the
obligation to return it to ESSO. That acknowledgment of the erroneous payment came some four (4)
years afterwards in nowise negates or detracts from its actuality. The obligation to return money
mistakenly paid arises from the moment that payment is made, and not from the time that the payee
admits the obligation to reimburse. The obligation of the payee to reimburse an amount paid to him
results from the mistake, not from the payee’s confession of the mistake or recognition of the obligation
to reimburse. In other words, since the amount of P221,033.00 belonging to ESSO was already in the
hands of the Government as of July, 1960, although the latter hand not right whatever to the amount
and indeed was bound to return it to ESSO, it was neither legally nor logically possible for ESSO
thereafter to be considered a debtor of the Government in that amount of P221,033.00; and whatever
other obligation ESSO might subsequently incur in favor of the Government would have to be reduced
by that sum, in respect of which no interest could be charged.

2. ID.; TAX LAWS; INTERPRETATION THEREOF; LEGISLATIVE INTENT PREVAILS WHERE LITERAL
INTERPRETATION OF THE STATUTE RESULTS IN ABSURDITY. — In Interpreting a statute, "Nothing is
better settled than that courts are not to give words a meaning which would lead to absurd or
unreasonable consequences. That is a principle that goes back to In re Allen (2 Phil. 630) decided on
October 29, 1903, where it was held that a literal interpretation is to be rejected if it would be unjust or
lead to absurd results." "Statutes should receive a sensible construction, such as will give effect to the
legislative intention and so as to avoid an unjust or absurd conclusion."

DECISION

NARVASA, J.:

In two (2) cases appealed to it 1 by the private respondent, hereafter simply referred to as ESSO, the
Court of Tax Appeals rendered judgment, 2 sustaining the decisions of the Commissioner of Internal
Revenue excepted to, save "the refund-claim . . . in the amount of P39,787.94 as overpaid interest"
which it ordered refunded to ESSO.

Reversal of this decision is sought by the Commissioner by a petition for review on certiorari filed with
this Court. He ascribes to the Tax Court one sole error: "of applying the tax credit for overpayment of
the 1959 income tax of . . . ESSO, granted by the petitioner (Commissioner), to . . . (ESSO’S) basic 1960
deficiency income tax liability . . . and imposing the 1-1/2% monthly interest 3 only on the remaining
balance thereof in the sum of P146,961.00" 4 (instead of the full amount of the 1960 deficiency liability
in the amount of P367,994.00). 5 Reversal of the same judgment of the Court of Tax Appeals is also
sought by ESSO in its own appeal (docketed as G.R. Nos. L-28508-09); but in the brief filed by it in this
case, it indicates that it will not press its appeal in the event that "the instant petition for review be
denied and that judgment be rendered affirming the decision of the Court of Tax Appeals."

The facts are simple enough and are quite quickly recounted.

ESSO overpaid its 1959 income tax by P221,033.00. It was accordingly granted a tax credit in this amount
by the Commissioner on August 5, 1964. However, ESSO’s payment of its income tax for 1960 was found
to be short by P367,994.00. So, on July 10, 1964, the Commissioner wrote to ESSO demanding payment
of the deficiency tax, together with interest thereon for the period from April 18, 1961 to April 18, 1964.
On August 10, 1964, ESSO paid under protest the amount alleged to be due, including the interest as
reckoned by the Commissioner. It protested the computation of interest, contending it was more than.
that properly due. It claimed that it should not have been required to pay interest on the total amount
of the deficiency tax, P367,994.00, but only on the amount of P146,961.00 — representing the
difference between said deficiency, P367,994.00, and ESSO’s earlier overpayment of P221,033.00 (for
which it had been granted a tax credit). ESSO thus asked for a refund.
The Internal Revenue Commissioner denied the claim for refund. ESSO appealed to the Court of Tax
Appeals. As aforestated, that Court ordered payment to ESSO of its "refund-claim x x in the amount of
P39,787.94 as overpaid interest. Hence, this appeal by the Commissioner.

The CTA justified its award of the refund as follows:

". . . In the letter of August 5, 1964, . . . (the Commissioner) admitted that . . (ESSO) had overpaid its
1959 income tax by P221,033.00. Accordingly . . (the Commissioner) granted to . . (ESSO) a tax credit of
P221,033.00. In short, the said sum of P221,033.00 of (ESSO’s) money was in the Government’s hands at
the latest on July 15, 1960 when it (ESSO) paid in full its second installment of income tax for 1959. On
July 10, 1964 x x (the Commissioner) claimed that for 1960, . . . (ESSO) underpaid its income tax by
P367,994.00. However, instead of deducting from P367,994.00 the tax credit of P221,033.00 which . . .
(the Commissioner) had already admitted was due . . . (ESSO), . . . (the Commissioner) still insists in
collecting the interest on the full amount of P367,994.00 for the period April 18, 1961 to April 18, 1964
when the Government had already in its hands the sum of P221,033.00 of . . . (ESSO’s) money even
before the latter’s income tax for 1960 was due and payable. If the imposition of interest does not
amount to a penalty but merely a just compensation to the State for the delay in paying the tax, and for
the concomitant use by the taxpayer of funds that rightfully should be in the Government’s hand (Castro
v. Collector, G.R. No. L-1274, Dec. 28, 1962), the collection of the interest on the full amount of
P367,994.00 without deducting first the tax credit of P221,033.00, which has long been in the hands of
the Government, becomes erroneous, illegal and arbitrary.

". . . (ESSO) could hardly be charged of delinquency in paying P221,033.00 out of the deficiency income
tax of P367,994.00, for which the State should be compensated by the payment of interest because the
said amount of P221,033.00 was already in the coffers of the Government. Neither could . . . (ESSO) be
charged for the concomitant use of funds that rightfully belong to the Government because as early as
July 15, 1960, it was the Government that was using . . . (ESSO’s) funds of P221,033.00. In the
circumstances, we find it unfair and unjust for . . . (the Commissioner) to exact the interest on the said
sum of P221,033.00 which, after all, was paid to and received by the Government even before the
incidence of the deficiency income tax of P367,994.00. (Itogon-Suyoc Mines, Inc. v. Commissioner, C.T.A.
Case No. 1327, Sept. 30, 1965). On the contrary, the Government should be the first to blaze the trail
and set the example of fairness and honest dealing in the administration of tax laws.

"Accordingly, we hold that the tax credit of P221,033.00 for 1959 should first be deducted from the
basic deficiency tax of P367,994.00 for 1960 and the resulting difference of P146,961.00 would be
subject to the 18% interest prescribed by Section 51 (d) of the Revenue Code. According to the prayer of
. . . (ESSO) . . . (the Commissioner) is hereby ordered to refund to . . . (ESSO) the amount of P39,787.94
as overpaid interest in the settlement of its 1960 income tax liability. However, as the collection of the
tax was not attended with arbitrariness because . . . (ESSO) itself followed . . . (the Commissioner’s)
manner of computing the tax in paying the sum of P213,189.93 on August 10, 1964, the prayer of . . .
(ESSO) that it be granted the legal rate of interest on its overpayment of P39,787.94 from August 10,
1964 to the time it is actually refunded is denied. (See Collector of Internal Revenue v. Binalbagan
Estate, Inc., G.R. No. L-12752, Jan. 30, 1965)."

The Commissioner’s position is that income taxes are determined and paid on an annual basis, and that
such determination and payment of annual taxes are separate and independent transactions; and that a
tax credit could not be so considered until it has been finally approved and the taxpayer duly notified
thereof. Since in this case, he argues, the tax credit of P221,033.00 was approved only on August 5,
1964, it could not be availed of in reduction of ESSO’s earlier tax deficiency for the year 1960; as of that
year, 1960, there was as yet no tax credit to speak of, which would reduce the deficiency tax liability for
1960. In support of his position, the Commissioner invokes the provisions of Section 51 of the Tax Code
pertinently reading as follows:

"(c) Definition of deficiency. As used in this Chapter in respect of tax imposed by this Title, the term
`deficiency’ means:

(1) The amount by which the tax Imposed by this Title exceeds the amount shown as the tax by the
taxpayer upon his return; but the amount so shown on the return shall first be increased by the
amounts previously assessed (or collected without assessment) as a deficiency, and decreased by the
amount previously abated, credited, returned, or otherwise in respect of such tax; . . .
x x x

(d) Interest on deficiency. — Interest upon the amount determined as deficiency shall be assessed at the
same time as the deficiency and shall be paid upon notice and demand from the Commissioner of
Internal Revenue; and shall be collected as a part of the tax, at the rate of six per centum per annum
from the date prescribed for the payment of the tax (or, if the tax is paid in installments, from the date
prescribed for the payment of the first installment) to the date the deficiency is assessed; Provided, That
the amount that may be collected as interest on deficiency shall in no case exceed the amount
corresponding to a period of three years, the present provision regarding prescription to the contrary
notwithstanding."

The fact is that, as respondent Court of Tax Appeals has stressed, as early as July 15, 1960, the
Government already had in its hands the sum of P221,033.00 representing excess payment. Having been
paid and received by mistake, as petitioner Commissioner subsequently acknowledged, that sum
unquestionably belonged to ESSO, and the Government had the obligation to return it to ESSO. That
acknowledgment of the erroneous payment came some four (4) years afterward in nowise negates or
detracts from its actuality. The obligation to return money mistakenly paid arises from the moment that
payment is made, and not from the time that the payee admits the obligation to reimburse. The
obligation of the payee to reimburse an amount paid to him results from the mistake, not from the
payee’s confession of the mistake or recognition of the obligation to reimburse. In other words, since
the amount of P221,033.00 belonging to ESSO was already in the hands of the Government as of July,
1960, although the latter hand not right whatever to the amount and indeed was bound to return it to
ESSO, it was neither legally nor logically possible for ESSO thereafter to be considered a debtor of the
Government in that amount of P221,033.00; and whatever other obligation ESSO might subsequently
incur in favor of the Government would have to be reduced by that sum, in respect of which no interest
could be charged. To interpret the words of the statute in such a manner as to subvert these truisms
simply can not and should not be countenanced. "Nothing is better settled than that courts are not to
give words a meaning which would lead to absurd or unreasonable consequences. That is a principle
that goes back to In re Allen (2 Phil. 630) decided on October 29, 1903, where it was held that a literal
interpretation is to be rejected if it would be unjust or lead to absurd results." 6 "Statutes should receive
a sensible construction, suck as will give effect to the legislative intention and so as to avoid an unjust or
absurd conclusion." 7

WHEREFORE, the petition for review is DENIED, and the Decision of the Court of Tax Appeals dated
October 28, 1967 subject of the petition is AFFIRMED, without pronouncement as to costs.