FIRST DIVISION

[ G.R. NO. 159507, April 19, 2006 ]

ANICETO G. SALUDO, JR., PETITIONER, VS. AMERICAN EXPRESS
INTERNATIONAL, INC., AND/OR IAN T. FISH AND DOMINIC
MASCRINAS, RESPONDENTS.

DECISION

CALLEJO, SR., J.:

Before the Court is the Petition for Review on Certiorari filed by Aniceto G. Saludo, Jr.
seeking to reverse and set aside the Decision[1] dated May 22, 2003 of the Court of
Appeals in CA-G.R. SP No. 69553. The assailed decision directed the Regional Trial
Court (RTC) of Maasin City, Southern Leyte, Branch 25 thereof, to vacate and set aside
its Orders dated September 10, 2001 and January 2, 2002 in Civil Case No. R-3172, and
enjoined the presiding judge[2] thereof from conducting further proceedings in said case,
except to dismiss the complaint filed therewith on ground of improper venue. The
petition also seeks to reverse and set aside the appellate court's Resolution dated August
14, 2003 denying the motion for reconsideration of the assailed decision.

The factual and procedural antecedents are as follows:

Aniceto G. Saludo, Jr. filed a complaint for damages against the American Express
International, Inc. (AMEX) and/or its officers Ian T. Fish, Vice-President and Country
Manager, and Dominic Mascrinas, Head of Operations, with the RTC of Maasin City,
Southern Leyte. The case was raffled to Branch 25 of the said court.

The complaint alleged, inter alia, that plaintiff (herein petitioner Saludo) "is a Filipino
citizen, of legal age, and a member of the House of Representatives and a resident of
Ichon, Macrohon, Southern Leyte, Philippines." On the other hand, defendant (herein
respondent AMEX, Inc.) "is a corporation doing business in the Philippines and engaged
in providing credit and other credit facilities and allied services with office address at 4th
floor, ACE Building, Rada Street, Legaspi Village, Makati City." The other defendants
(herein respondents Fish and Mascrinas) are officers of respondent AMEX, and may be
served with summons and other court processes at their office address.

The complaint's cause of action stemmed from the alleged wrongful dishonor of
petitioner Saludo's AMEX credit card and the supplementary card issued to his daughter.
The first dishonor happened when petitioner Saludo's daughter used her supplementary
credit card to pay her purchases in the United States some time in April 2000. The second
dishonor occurred when petitioner Saludo used his principal credit card to pay his
account at the Hotel Okawa in Tokyo, Japan while he was there with other delegates from
the Philippines to attend the Congressional Recognition in honor of Mr. Hiroshi Tanaka.

The dishonor of these AMEX credit cards were allegedly unjustified as they resulted
from respondents' unilateral act of suspending petitioner Saludo's account for his failure
to pay its balance covering the period of March 2000. Petitioner Saludo denied having
received the corresponding statement of account. Further, he was allegedly wrongfully
charged for late payment in June 2000. Subsequently, his credit card and its
supplementary cards were canceled by respondents on July 20, 2000.

Petitioner Saludo claimed that he suffered great inconvenience, wounded feelings, mental
anguish, embarrassment, humiliation and besmirched political and professional standing
as a result of respondents' acts which were committed in gross and evident bad faith, and
in wanton, reckless and oppressive manner. He thus prayed that respondents be adjudged
to pay him, jointly and severally, actual, moral and exemplary damages, and attorney's
fees.

In their answer, respondents specifically denied the allegations in the complaint. Further,
they raised the affirmative defenses of lack of cause of action and improper venue. On the
latter, respondents averred that the complaint should be dismissed on the ground that
venue was improperly laid because none of the parties was a resident of Leyte. They
alleged that respondents were not residents of Southern Leyte. Moreover,
notwithstanding the claim in his complaint, petitioner Saludo was not allegedly a resident
thereof as evidenced by the fact that his community tax certificate, which was presented
when he executed the complaint's verification and certification of non-forum shopping,
was issued at Pasay City. To buttress their contention, respondents pointed out that
petitioner Saludo's complaint was prepared in Pasay City and signed by a lawyer of the
said city. Respondents prayed for the dismissal of the complaint a quo.

Thereafter, respondents filed an Opposition to Ex-Parte Motion (to Set Case for Pre-
Trial) and Motion for Preliminary Hearing (on Affirmative Defense of Improper Venue)
to which petitioner Saludo filed his Comments and/or Objections to the Affirmative
Defense of Improper Venue. He asserted that any allegation refuting his residency in
Southern Leyte was baseless and unfounded considering that he was the congressman of
the lone district thereof at the time of the filing of his complaint. He urged the court a quo
to take judicial notice of this particular fact. As a member of Congress, he possessed all
the qualifications prescribed by the Constitution including that of being a resident of his
district. He was also a member of the Integrated Bar of the Philippines-Southern Leyte
Chapter, and has been such ever since his admission to the Bar. His community tax
certificate was issued at Pasay City only because he has an office thereat and the office
messenger obtained the same in the said city. In any event, the community tax certificate
is not determinative of one's residence.

In the Order dated September 10, 2001, the court a quo denied the affirmative defenses
interposed by respondents. It found the allegations of the complaint sufficient to
constitute a cause of action against respondents. The court a quo likewise denied
respondents' affirmative defense that venue was improperly laid. It reasoned, thus:
x x x [T]he fact alone that the plaintiff at the time he filed the complaint was and still is,
the incumbent Congressman of the Lone District of Southern Leyte with residence at
Ichon, Macrohon, Southern Leyte, is enough to dispell any and all doubts about his actual
residence. As a high-ranking government official of the province, his residence there can
be taken judicial notice of. As such his personal, actual and physical habitation or his
actual residence or place of abode can never be in some other place but in Ichon,
Macrohon, Southern Leyte. It is correctly stated by the plaintiff, citing the case of Core v.
Core, 100 Phil. 321 that, "residence, for purposes of fixing venue of an action, is
synonymous with domicile. This is defined as the permanent home, the place to which,
whenever absent for business or pleasure, one intends to return, and depends on the facts
and circumstances, in the sense that they disclose intent. A person can have but one
domicile at a time. A man can have but one domicile for one and the same purpose at any
time, but he may have numerous places of residence. Venue could be at place of his
residence. (Masa v. Mison, 200 SCRA 715 [1991])[3]
Respondents sought the reconsideration thereof but the court a quo denied the same in the
Order dated January 2, 2002. They then filed with the appellate court a petition
for certiorari and prohibition alleging grave abuse of discretion on the part of the
presiding judge of the court a quo in issuing the September 10, 2001 and January 2, 2002
Orders. Upon respondents' posting of a bond, the appellate court issued on March 14,
2002 a temporary restraining order which enjoined the presiding judge of the court a quo
from conducting further proceedings in Civil Case No. R-3172.

On May 22, 2003, the appellate court rendered the assailed decision granting respondents'
petition for certiorari as it found that venue was improperly laid. It directed the court a
quo to vacate and set aside its Orders dated September 10, 2001 and January 2, 2002, and
enjoined the presiding judge thereof from further proceeding in the case, except to
dismiss the complaint.

The appellate court explained that the action filed by petitioner Saludo against
respondents is governed by Section 2, Rule 4 of the Rules of Court. The said rule on
venue of personal actions basically provides that personal actions may be commenced
and tried where plaintiff or any of the principal plaintiffs resides, or where defendant or
any of the principal defendants resides, at the election of plaintiff.

Venue was improperly laid in the court a quo, according to the appellate court, because
not one of the parties was a resident of Southern Leyte. Specifically, it declared that
petitioner Saludo was not a resident thereof. The appellate court pronounced that, for
purposes of venue, the residence of a person is his personal, actual or physical habitation,
or his actual residence or place of abode, which may not necessarily be his legal
residence or domicile provided he resides therein with continuity and consistency. [4]

The appellate court quoted the following discussion in Koh v. Court of Appeals[5] where
the Court distinguished the terms "residence" and "domicile" in this wise:
x x x [T]he term domicile is not exactly synonymous in legal contemplation with the
term residence, for it is [an] established principle in Conflict of Laws that domicile refers
to the relatively more permanent abode of a person while residence applies to a
temporary stay of a person in a given place. In fact, this distinction is very well
emphasized in those cases where the Domiciliary Theory must necessarily supplant the
Nationality Theory in cases involving stateless persons.

xxxx

"There is a difference between domicile and residence. Residence is used to indicate a

place of abode, whether permanent or temporary; domicile denotes a fixed permanent
residence to which when absent, one has the intention of returning. A man may have a
residence in one place and a domicile in another. Residence is not domicile, but domicile
is residence coupled with intention to remain for an unlimited time. A man can have but
one domicile for one and the same purpose at any time, but he may have numerous places
of residence. His place of residence generally is his place of domicile, but is not by any
means, necessarily so since no length of residence without intention of remaining will
constitute domicile."[6] (Italicized for emphasis)
In holding that petitioner Saludo is not a resident of Maasin City, Southern Leyte, the
appellate court referred to his community tax certificate, as indicated in his complaint's
verification and certification of non-forum shopping, which was issued at Pasay City.
Similarly, it referred to the same community tax certificate, as indicated in his complaint
for deportation filed against respondents Fish and Mascrinas. Under Republic Act No.
7160,[7] the community tax certificate shall be paid in the place of residence of the
individual, or in the place where the principal office of the juridical entity is located. [8] It
also pointed out that petitioner Saludo's law office, which was also representing him in
the present case, is in Pasay City. The foregoing circumstances were considered by the
appellate court as judicial admissions of petitioner Saludo which are conclusive upon him
and no longer required proof.

The appellate court chided the court a quo for stating that as incumbent congressman of
the lone district of Southern Leyte, judicial notice could be taken of the fact of petitioner
Saludo's residence thereat. No evidence had yet been adduced that petitioner Saludo was
then the congressman of Southern Leyte and actual resident of Ichon, Macrohon of the
said province.

The appellate court held that, based on his complaint, petitioner Saludo was actually
residing in Pasay City. It faulted him for filing his complaint with the court a quo when
the said venue is inconvenient to the parties to the case. It opined that under the rules, the
possible choices of venue are Pasay City or Makati City, or any place in the National
Capital Judicial Region, at the option of petitioner Saludo.

It stressed that while the choice of venue is given to plaintiff, said choice is not left to his
caprice and cannot deprive a defendant of the rights conferred upon him by the Rules of
Court.[9] Further, fundamental in the law governing venue of actions that the situs for
bringing real and personal civil actions is fixed by the rules to attain the greatest possible
convenience to the party litigants by taking into consideration the maximum accessibility
to them - i.e., to both plaintiff and defendant, not only to one or the other - of the courts
of justice.[10]

The appellate court concluded that the court a quo should have given due course to
respondents' affirmative defense of improper venue in order to avoid any suspicion that
petitioner Saludo's motive in filing his complaint with the court a quo was only to vex
and unduly inconvenience respondents or even to wield influence in the outcome of the
case, petitioner Saludo being a powerful and influential figure in the said province. The
latter circumstance could be regarded as a "specie of forum shopping" akin to that
in Investors Finance Corp. v. Ebarle[11] where the Court mentioned that the filing of the
civil action before the court in Pagadian City "was a specie of forum shopping"
considering that plaintiff therein was an influential person in the locality.

The decretal portion of the assailed Decision dated May 22, 2003 of the appellate court
reads:
UPON THE VIEW WE TAKE OF THIS CASE, THUS, the challenged orders must be,
as they hereby are, VACATED and SET ASIDE and the respondent judge, or any one
acting in his place or stead, is instructed and enjoined to desist from further proceeding in
the case, except to dismiss it. The temporary restraining order earlier issued is hereby
converted into a writ of preliminary injunction, upon the posting this time by petitioners
[herein respondents], within five (5) days from receipt of this decision, of a bond in the
amount of Five Million Pesos (P5,000,000.00), to answer for all damages that private
respondent [herein petitioner] may sustain by reason of the issuance of such injunction
should the Court finally decide that petitioners are not entitled thereto. Private
respondent, if he so minded, may refile his case for damages before the Regional Trial
Court of Makati City or Pasay City, or any of the Regional Trial Courts of the National
Capital Judicial Region. Without costs.

SO ORDERED.[12]
Petitioner Saludo sought the reconsideration of the said decision but the appellate court,
in the Resolution dated August 14, 2003, denied his motion for reconsideration. Hence,
he filed the instant petition for review with the Court alleging that:
The Court of Appeals, (Special Fourth Division), in promulgating the afore-mentioned
Decision and Resolution, has decided a question of substance in a way probably not in
accord with law or with applicable decisions of this Honorable Court.

(a) the Court of Appeals erred in not taking judicial notice of the undisputed fact that
herein petitioner is the incumbent congressman of the lone district of Southern Leyte and
as such, he is a residence (sic) of said district;

(b) the Court of Appeals erred in dismissing the complaint on the basis of improper venue
due to the alleged judicial admission of herein petitioner;

(c) the Court of Appeals in dismissing the complaint ignored applicable decisions of this
Honorable Court; and

(d) the Court of Appeals erred in deciding that herein petitioner violated the rules on
venue, and even speculated that herein petitioner's motive in filing the complaint in
Maasin City was only to vex the respondents.[13]
In gist, the sole substantive issue for the Court's resolution is whether the appellate court
committed reversible error in holding that venue was improperly laid in the court a
quo in Civil Case No. R-3172 because not one of the parties, including petitioner Saludo,
as plaintiff therein, was a resident of Southern Leyte at the time of filing of the complaint.

The petition is meritorious.

Petitioner Saludo's complaint for damages against respondents before the court a quo is a
personal action. As such, it is governed by Section 2, Rule 4 of the Rules of Courts which
reads:
SEC. 2. Venue of personal actions. - All other actions may be commenced and tried
where the plaintiff or any of the principal plaintiffs resides, or where the defendant or any
of the principal defendants resides, or in the case of a non-resident defendant where he
may be found, at the election of the plaintiff.
The choice of venue for personal actions cognizable by the RTC is given to plaintiff but
not to plaintiff's caprice because the matter is regulated by the Rules of Court. [14] The rule
on venue, like other procedural rules, is designed to insure a just and orderly
administration of justice, or the impartial and evenhanded determination of every action
and proceeding.[15] The option of plaintiff in personal actions cognizable by the RTC is
either the place where defendant resides or may be found, or the place where plaintiff
resides. If plaintiff opts for the latter, he is limited to that place. [16]

Following this rule, petitioner Saludo, as plaintiff, had opted to file his complaint with the
court a quo which is in Maasin City, Southern Leyte. He alleged in his complaint that he
was a member of the House of Representatives and a resident of Ichon, Macrohon,
Southern Leyte to comply with the residency requirement of the rule.
However, the appellate court, adopting respondents' theory, made the finding that
petitioner Saludo was not a resident of Southern Leyte at the time of the filing of his
complaint. It hinged the said finding mainly on the fact that petitioner Saludo's
community tax certificate, indicated in his complaint's verification and certification of
non-forum shopping, was issued at Pasay City. That his law office is in Pasay City was
also taken by the appellate court as negating petitioner Saludo's claim of residence in
Southern Leyte.

The appellate court committed reversible error in finding that petitioner Saludo was not a
resident of Southern Leyte at the time of the filing of his complaint, and consequently
holding that venue was improperly laid in the court a quo. In Dangwa Transportation
Co., Inc. v. Sarmiento,[17] the Court had the occasion to explain at length the meaning of
the term "resides" for purposes of venue, thus:
In Koh v. Court of Appeals, we explained that the term "resides" as employed in the rule
on venue on personal actions filed with the courts of first instance means the place of
abode, whether permanent or temporary, of the plaintiff or the defendant, as distinguished
from "domicile" which denotes a fixed permanent residence to which, when absent, one
has the intention of returning.

"It is fundamental in the law governing venue of actions (Rule 4 of the Rules of Court)
that the situs for bringing real and personal civil actions are fixed by the rules to attain the
greatest convenience possible to the parties-litigants by taking into consideration the
maximum accessibility to them of the courts of justice. It is, likewise, undeniable that the
term domicile is not exactly synonymous in legal contemplation with the term residence,
for it is an established principle in Conflict of Laws that domicile refers to the relatively
more permanent abode of a person while residence applies to a temporary stay of a
person in a given place. In fact, this distinction is very well emphasized in those cases
where the Domiciliary Theory must necessarily supplant the Nationality Theory in cases
involving stateless persons.

"This Court held in the case of Uytengsu v. Republic, 50 O.G. 4781, October, 1954,
reversing its previous stand in Larena v. Ferrer, 61 Phil. 36, and Nuval v. Guray, 52 Phil.
645, that "

"There is a difference between domicile and residence. Residence is used to indicate a

place of abode, whether permanent or temporary; domicile denotes a fixed permanent
residence to which when absent, one has the intention of returning. A man may have a
residence in one place and a domicile in another. Residence is not domicile, but domicile
is residence coupled with the intention to remain for an unlimited time. A man can have
but one domicile for one and the same purpose at any time, but he may have numerous
places of residence. His place of residence generally is his place of domicile, but is not by
any means, necessarily so since no length of residence without intention of remaining
will constitute domicile." (Italicized for emphasis)

"We note that the law on venue in Courts of First Instance (Section 2, of Rule 4, Rules of
Court) in referring to the parties utilizes the words "resides or may be found," and not "is
domiciled," thus:

"Sec. 2(b) Personal actions - All other actions may be commenced and tried where the
defendant or any of the defendants resides or may be found, or where the plaintiff or any
of the plaintiffs resides, at the election of the plaintiff." (Italicized for emphasis)

"Applying the foregoing observation to the present case, We are fully convinced that
private respondent Coloma's protestations of domicile in San Nicolas, Ilocos Norte, based
on his manifested intention to return there after the retirement of his wife from
government service to justify his bringing of an action for damages against petitioner in
the C.F.I. of Ilocos Norte, is entirely of no moment since what is of paramount
importance is where he actually resided or where he may be found at the time he brought
the action, to comply substantially with the requirements of Sec. 2(b) of Rule 4, Rules of
Court, on venue of personal actions." (Koh v. Court of Appeals, supra, pp. 304-305.)

The same construction of the word "resides" as used in Section 1, Rule 73, of the Revised
Rules of Court, was enunciated in Fule v. Court of Appeals, et al. (G.R. No. L-40502)
and Fule v. Hon. Ernani C. Paño, et al. (G.R. No. L-42670), decided on November 29,
1976. Thus, this Court, in the aforecited cases, stated:

"2. But, the far-ranging question is this: What does the term "resides" mean? Does it refer
to the actual residence or domicile of the decedent at the time of his death? We lay down
the doctrinal rule that the term "resides" connotes ex vi termini "actual residence" as
distinguished from "legal residence or domicile." This term "resides," like the terms
"residing" and "residence" is elastic and should be interpreted in the light of the object or
purposes of the statute or rule in which it is employed. In the application of venue
statutes and rules - Section 1, Rule 73 of the Revised Rules of Court is of such nature -
residence rather than domicile is the significant factor. Even where the statute uses the
word "domicile" still it is construed as meaning residence and not domicile in the
technical sense. Some cases make a distinction between the terms "residence" and
"domicile" but as generally used in statutes fixing venue, the terms are synonymous, and
convey the same meaning as the term "inhabitant." In other words, "resides" should be
viewed or understood in its popular sense, meaning, the personal, actual or physical
habitation of a person, actual residence or place of abode. It signifies physical presence in
a place and actual stay thereat. In this popular sense, the term means merely residence,
that is, personal residence, not legal residence or domicile. Residence simply requires
bodily presence as an inhabitant in a given place, while domicile requires bodily
presence in that place and also an intention to make it one's domicile. No particular length
of time of residence is required though; however, the residence must be more than
temporary."[18]
There is no dispute that petitioner Saludo was the congressman or the representative of
the lone district of Southern Leyte at the time of filing of his complaint with the court a
quo. Even the appellate court admits this fact as it states that "it may be conceded that
private respondent ever so often travels to Maasin City, Southern Leyte, because he is its
representative in the lower house."[19]

As a member of the House of Representatives, petitioner Saludo was correctly deemed by

the court a quo as possessing the requirements for the said position,[20] including that he
was then a resident of the district which he was representing, i.e., Southern Leyte.
Significantly, for purposes of election law, the term "residence" is synonymous with
"domicile," thus:
x x x [T]he Court held that "domicile" and "residence" are synonymous. The term
"residence," as used in the election law, imports not only an intention to reside in a fixed
place but also personal presence in that place, coupled with conduct indicative of such
intention. "Domicile" denotes a fixed permanent residence to which when absent for
business or pleasure, or for like reasons, one intends to return. x x x[21]
It can be readily gleaned that the definition of "residence" for purposes of election law is
more stringent in that it is equated with the term "domicile." Hence, for the said purpose,
the term "residence" imports "not only an intention to reside in a fixed place but also
personal presence in that place, coupled with conduct indicative of such
intention."[22] When parsed, therefore, the term "residence" requires two elements: (1)
intention to reside in the particular place; and (2) personal or physical presence in that
place, coupled with conduct indicative of such intention. As the Court elucidated, "the
place where a party actually or constructively has a permanent home, where he, no matter
where he may be found at any given time, eventually intends to return and remain, i.e.,
his domicile, is that to which the Constitution refers when it speaks of residence for the
purposes of election law."[23]

On the other hand, for purposes of venue, the less technical definition of "residence" is
adopted. Thus, it is understood to mean as "the personal, actual or physical habitation of a
person, actual residence or place of abode. It signifies physical presence in a place and
actual stay thereat. In this popular sense, the term means merely residence, that is,
personal residence, not legal residence or domicile. Residence simply requires bodily
presence as an inhabitant in a given place, while domicile requires bodily presence in that
place and also an intention to make it one's domicile."[24]

Since petitioner Saludo, as congressman or the lone representative of the district of

Southern Leyte, had his residence (or domicile) therein as the term is construed in
relation to election laws, necessarily, he is also deemed to have had his residence therein
for purposes of venue for filing personal actions. Put in another manner, Southern Leyte,
as the domicile of petitioner Saludo, was also his residence, as the term is understood in
its popular sense. This is because "residence is not domicile, but domicile is
residence coupled with the intention to remain for an unlimited time."

Reliance by the appellate court on Koh v. Court of Appeals[25] is misplaced. Contrary to

its holding,[26] the facts of the present case are not similar to the facts therein. In Koh, the
complaint was filed with the Court of First Instance in San Nicolas, Ilocos Norte by
plaintiff who admitted that he was a resident of Kamias, Quezon City. Save for the fact
that he grew up in San Nicolas, Ilocos Norte and that he manifested the intent to return
there after retirement, plaintiff therein had not established that he was actually a resident
therein at the time of the filing of his complaint. Neither did he establish that he had his
domicile therein because although he manifested the intent to go back there after
retirement, the element of personal presence in that place was lacking. To reiterate,
domicile or residence, as the terms are taken as synonyms, imports "not only an intention
to reside in a fixed place but also personal presence in that place, coupled with conduct
indicative of such intention."[27]

In contrast, petitioner Saludo was the congressman or representative of Southern Leyte at

the time of filing of his complaint with the court a quo. Absent any evidence to the
contrary, he is deemed to possess the qualifications for the said position, including that he
was a resident therein. And following the definition of the term "residence" for purposes
of election law, petitioner Saludo not only had the intention to reside in Southern Leyte,
but he also had personal presence therein, coupled with conduct indicative of such
intention. The latter element, or his bodily presence as an inhabitant in Southern Leyte,
was sufficient for petitioner Saludo to be considered a resident therein for purposes of
venue.

The following ratiocination of the court a quo is apt:

Residence in civil law is a material fact, referring to the physical presence of a person in a
place. A person can have two or more residences, such as a country residence and a city
residence. (Quetulio v. Ruiz, S.C. Off. Gaz. 156, Commentaries and Jurisprudence in
Civil Law, Vol. 1, page 211, Tolentino). Residence is acquired by living in a place; on
the other hand, domicile can exist without actually living in the place. The important
thing for domicile is that, once residence has been established in one place, there be an
intention to stay there permanently, even if residence is also established in some other
place.

Thus, if a person lives with his family habitually in Quezon City, he would have his
domicile in Quezon City. If he also has a house for vacation purposes in the City of
Baguio, and another house in connection with his business in the City of Manila, he
would have residence in all three places (Tolentino, Commentaries and Jurisprudence on
Civil Law, Vol. 1, Page 212, 1990 Edition) so that one[']s legal residence or domicile can
also be his actual, personal or physical residence or habitation or place of abode if he
stays there with intention to stay there permanently.
In the instant case, since plaintiff has a house in Makati City for the purpose of exercising
his profession or doing business and also a house in Ichon, Macrohon, Southern Leyte,
for doing business and/or for election or political purposes where he also lives or stays
physically, personally and actually then he can have residences in these two places.
Because it would then be preposterous to acknowledge and recognize plaintiff Aniceto G.
Saludo, Jr. as congressman of Southern Leyte without also recognizing him as actually,
personally and physically residing thereat, when such residence is required by law. [28]
The fact then that petitioner Saludo's community tax certificate was issued at Pasay City
is of no moment because granting arguendo that he could be considered a resident
therein, the same does not preclude his having a residence in Southern Leyte for purposes
of venue. A man can have but one domicile for one and the same purpose at any time,
but he may have numerous places of residence.[29]

That petitioner Saludo was the congressman or representative of the lone district of
Southern Leyte at the time of the filing of his complaint was admitted as a fact by the
court a quo. In this connection, it consequently held that, as such, petitioner Saludo's
residence in Southern Leyte, the district he was the representing, could be taken judicial
notice of. The court a quo cannot be faulted for doing so because courts are allowed "to
take judicial notice of matters which are of public knowledge, or are capable of
unquestionable demonstration, or ought to be known to judges because of their judicial
functions."[30] Courts are likewise bound to take judicial notice, without the introduction
of evidence, of the law in force in the Philippines,[31] including its Constitution.

The concept of "facts of common knowledge" in the context of judicial notice has been
explained as those facts that are "so commonly known in the community as to make it
unprofitable to require proof, and so certainly known to as to make it indisputable among
reasonable men."[32] Moreover, "though usually facts of "common knowledge" will be
generally known throughout the country, it is sufficient as a basis for judicial notice that
they be known in the local community where the trial court sits."[33] Certainly, the fact of
petitioner Saludo being the duly elected representative of Southern Leyte at the time
could be properly taken judicial notice of by the court a quo, the same being a matter of
common knowledge in the community where it sits.

Further, petitioner Saludo's residence in Southern Leyte could likewise be properly taken
judicial notice of by the court a quo. It is bound to know that, under the Constitution, one
of the qualifications of a congressman or representative to the House of Representatives
is having a residence in the district in which he shall be elected.

In fine, petitioner Saludo's act of filing his complaint with the court a quo cannot be
characterized as a "specie of forum-shopping" or capricious on his part because, under
the rules, as plaintiff, he is precisely given this option.
Finally, respondents' claim that the instant petition for review was not properly verified
by petitioner Saludo deserves scant consideration.

Section 4, Rule 7 of the Rules of Court reads:

Sec. 4. Verification. - Except when otherwise specifically required by law or rule,
pleadings need not be under oath, verified or accompanied by affidavit.

A pleading is verified by an affidavit that the affiant has read the pleading and that the
allegations therein are true and correct of his personal knowledge or based on authentic
records.

A pleading required to be verified which contains a verification based on "information

and belief," or upon "knowledge, information and belief," or lacks proper verification,
shall be treated as an unsigned pleading.
Petitioner Saludo's verification and certification of non-forum shopping states that he has
"read the contents thereof [referring to the petition] and the same are true and correct of
my own personal knowledge and belief and on the basis of the records at hand." The
same clearly constitutes substantial compliance with the above requirements of the Rules
of Court.

WHEREFORE, premises considered, the petition is GRANTED. The Decision dated

May 22, 2003 and Resolution dated August 14, 2003 of the Court of Appeals in CA-G.R.
SP No. 69553 are REVERSED and SET ASIDE. The Orders dated September 10, 2001
and January 2, 2002 of the Regional Trial Court of Maasin City, Southern Leyte, Branch
25 thereof, in Civil Case No. R-3172 are REINSTATED.

SO ORDERED.

SECOND DIVISION
[ G.R. NO. 156951, September 22, 2006 ]
REPUBLIC OF THE PHILIPPINES, PETITIONER, VS. SOUTHSIDE
HOMEOWNERS ASSOCIATION, INC. AND THE REGISTER OF DEEDS OF
PASIG, RIZAL, RESPONDENTS.

BASES CONVERSION DEVELOPMENT AUTHORITY, INTERVENOR,

DEPARTMENT OF NATIONAL DEFENSE, REPRESENTED BY HON.

SECRETARY ANGELO T. REYES, AND THE ARMED FORCES OF THE
PHILIPPINES, REPRESENTED BY CHIEF OF STAFF, AFP, GENERAL
NARCISO L. ABAYA, INTERVENORS.
 RENE A.V. SAGUISAG, MGEN.MARCIANO ILAGAN (RET.), MGEN.
PONCIANO MILLENA (RET.), BGEN. JUANITO MALTO (RET.), BGEN.
RAYMUNDO JARQUE (RET.) AND COL. DOMINADOR P. AMADOR
(RET.), PETITIONERS,

[G.R. NO. 173408]

VS.

L/T. GEN. HERMOGENES C. ESPERON, JR., RESPONDENT.

DECISION

GARCIA, J.:

Before the Court are these two petitions having, as common denominator, the issue of
ownership of a large tract of land.

In the first, a petition for review under Rule 45 of the Rules of Court and docketed
as G.R. No. 156951, the petitioner Republic of the Philippines seeks to nullify and set
aside the Decision[1] dated January 28, 2003 of the Court of Appeals (CA) in CA-G.R. CV
No. 59454, affirming the dismissal by the Regional Trial Court (RTC) of Pasig City,
Branch 71, of the Republic's complaint for declaration of nullity and cancellation of a
land title against the herein private respondent, the Southside Homeowners Association,
Inc. (SHAI).

In the second, docketed as G.R. No. 173408, petitioners Rene Saguisag and five (5)
retired military officers pray that Lt. Gen. Hermogenes C. Esperon, Jr., the present Chief
of Staff of the Armed Forces of the Philippines (AFP), be asked to show cause why he
should not be cited for contempt for having announced time and again that the military
officers and their families in the contempt action would be ousted and evicted from the
property subject of the main petition even before the issue of ownership thereof is finally
resolved by the Court.

After the private respondent SHAI had filed its Comment[2] to the petition in G.R.
No. 156951, the Bases Conversion Development Authority (BCDA), followed by the
Department of National Defense (DND) and the AFP, joined causes with the petitioner
Republic and thus sought leave to intervene. The Court, per its Resolutions dated
September 3, 2003,[3] and September 29, 2003,[4] respectively, allowed the intervention
and admitted the corresponding petitions-for-intervention.
Per Resolution of the Court dated August 09, 2006, both petitions were ordered
consolidated.

The Republic's recourse in G.R. No. 156951 is cast against the following backdrop:

On July 12, 1957, then President Carlos P. Garcia issued Proclamation No.
423[5] establishing a military reservation known as Fort William McKinley - later
renamed Fort Andres Bonifacio Military Reservation (FBMR). The
proclamation "withdr[ew] from sale or settlement and reserve[d] for military purposes,
under the administration of the Chief of Staff of the [AFP] " the [certain] parcels of the
public domain [indicated in plan Psu-2031]" situated in the several towns and a city of
what was once the Province of Rizal. On its face, the proclamation covers three (3) large
parcels of land, to wit: Parcel No. 2 (portion), Parcel No. 3 (or 3-A) and Parcel No. 4 (or
4-A). Parcel No. 3 with an area of 15,912,684 square meters and Parcel No. 4 with an
area of 7,660,128 square meters are described in the proclamation as situated inside Fort
McKinley, Rizal. Specifically mentioned as excluded from Parcel No. 4 albeit within its
boundaries are the American Battle Monument Cemetery (606,985 sq. m.), the Traffic
Circle (7,093 sq. m.) and the Diplomatic and Consular area (100,000 sq.m.).

Several presidential proclamations would later issue excluding certain defined areas from
the operation of Proclamation No. 423 and declaring them open for disposition. These are
Proclamation No. 461[6] and Proclamation No. 462, [7] both series of 1965, excluding
portions of the reservation and declaring them the AFP Officers" Village and the AFP
EM's Village, respectively, to be disposed of under Republic Act (R.A.) 274 [8] and R.A.
730[9] in relation to the Public Land Act (C.A. 141, as amended). Excluded, too, under
Proclamation No. 172 dated October 16, 1987 and to be disposed pursuant to the same
laws aforementioned, save those used or earmarked for public/quasi-public purposes, are
portions of the reservation known as Lower and Upper Bicutan, Western Bicutan and the
Signal Village, all in Taguig, Metro Manila.

In 1992, Congress enacted the Bases Conversion and Development Act (R.A. 7227, as

amended), investing the BCDA the power to own, hold and administer portions of Metro
Manila military camps that may be transferred to it by the President[10] and to dispose,
after the lapse of a number of months, portions of Fort Bonifacio.[11]

At the core of the instant proceedings for declaration of nullity of title are parcels of land
with a total area of 39.99 hectares, more or less, known as or are situated in what is
referred to as the JUSMAG housing area in Fort Bonifacio. As may be gathered from the
pleadings, military officers, both in the active and retired services, and their respective
families, have been occupying housing units and facilities originally constructed by the
AFP on the JUSMAG area.
Private respondent SHAI is a non-stock corporation organized mostly by wives of AFP
military officers. Records show that SHAI was able to secure from the Registry of Deeds
of the Province of Rizal a title - Transfer Certificate of Title (TCT) No. 15084[12] - in its
name to the bulk of, if not the entire, JUSMAG area. TCT No. 15084 particularly
describes the property covered thereby as follows:
A parcel of land (Lot 3-Y-1, Psd-76057, being a portion of Parcel 3 of plan Psu-2031)
situated in Jusmang (sic) Area, Fort Bonifacio, Province of Rizal. ... containing an area of
...(398,602) SQUARE METERS. xxx.

A parcel of land (Lot 3-Y-2, Psd-76057 as shown on subdivision Plan Psd 76057, being a
portion of parcel 3 of plan Psu-2031, LRC Rec. No.) situated in Jusmang (sic) Area, Fort
Bonifacio, Province of Rizal. ... containing an area of ... (1,320) SQUARE METERS
xxx.. (Underscoring added.)
The Rizal Registry issued TCT No. 15084 on October 30, 1991 on the basis of a
notarized Deed of Sale[13] purportedly executed on the same date by then Director
Abelardo G. Palad, Jr. (Palad, for brevity) of the Lands Management Bureau (LMB) in
favor of SHAI. The total purchase price as written in the conveying deed was
P11,997,660.00 or P30.00 per square meter.

It appears that in the process of the investigation conducted by the Department of Justice
on reported land scams at the FBMR, a copy of the aforesaid October 30, 1991 deed of
sale surfaced and eventually referred to the National Bureau of Investigation (NBI) for
examination. The results of the examination undertaken by NBI Document Examiner
Eliodoro Constantino are embodied in his Questioned Documents Report (QDR) No.
815-1093.[14] Its highlights:
QUESTIONED SPECIMENS:

1. Original copy of the Deed of Sale ... issued in favor of the Navy Officers Village
Association (NOVA) ... containing the ... signature of "ABELARDO G. PALAD, JR." ...
designated as "Q-961" ....

2. Original copy of the Deed of Sale ... issued in favor of SHAI ... containing the
signature of "ABELARDO G. PALAD, JR." ... designated as "Q-962".

xxx xxx xxx

PURPOSE OF EXAMINATION:

To determine whether or not the questioned and sample/specimen signatures

"ABELARDO G. PALAD, JR." were written by one and the same person.

FINDINGS:
Scientific comparative examination and analysis of the specimens, submitted, under
stereoscopic microscope and magnifying lens, with the aid of photographic
enlargement ... reveals that there exist fundamental, significant differences in writing
characteristics between the questioned and the standard/sample signatures "ABELARDO
G. PALAD, JR." such as in:

-The questioned signatures show slow, drawn, painstaking laborious manner in execution
of strokes; that of the standard/sample signatures show free, rapid coordinated and
spontaneous strokes in the manner of execution of letters/elements.

xxx xxx xxx

Furthermore, the questioned signature "ABELARDO G. PALAD, JR." marked "Q-961"

is a product of TRACING PROCESS by CARBON-OUTLINE METHOD.

CONCLUSION:

Based on the above FINDINGS, the questioned and the standard/sample signatures
"ABELARDO G. PALAD, JR." were not written by one and the same person.

The questioned signature "ABELARDO G. PALAD, JR." marked "Q-961" is a TRACED

FORGERY by carbon process.

REMARKS:

The other questioned Deeds of Sale containing the signatures of "ABELARDO G.

PALAD, JR." are still in the process of examination.[15]
On October 16, 1993, then President Fidel V. Ramos issued Memorandum Order No.
173[16] directing the Office of the Solicitor General (OSG) to institute action towards the
cancellation of TCT No. 15084 and the title acquired by the Navy Officer's Village
Association (NOVA) over a bigger parcel within the reservation. A month later, the OSG,
in behalf of the petitioner Republic, filed with the RTC of Pasig City the corresponding
nullification and cancellation of title suit against the private respondent SHAI. In its
complaint, docketed as Civil Case No. 63883 and eventually raffled to Branch 71 of the
court, the Republic alleged that fraud attended SHAI's procurement of TCT No. 15084. In
paragraph No. 5 of the complaint, the Republic alleged that TCT No. 15084 is void
owing, inter alia, to the following circumstances: a) the conveying deed is spurious as the
purported signature thereon of Palad is a forgery; b) there are no records with the LMB of
(i) the application to purchase and (ii) the alleged payment of the purchase price; and c)
the property in question is inalienable, being part of a military reservation established
under Proclamation No. 423.[17]
In its ANSWER with counterclaim, respondent SHAI denied the material allegations of
the complaint and countered that the impugned title as well as the October 30, 1991 Deed
of Sale are valid documents which the Republic is estopped to deny.[18] SHAI also alleged
paying in full the purchase price indicated in the deed as evidenced by Official Receipt
No. 6030203-C dated October 29, 1991.

On October 19, 1994, the case was heard on pre-trial in the course of which the Republic,
as plaintiff therein, marked (and later offered in evidence) the Deed of Sale dated October
30, 1991 as its Exhibit "A," and TCT No. 15084 as Exhibit "B." Respondent, then
defendant SHAI adopted Exhibits "A" and "B" as its Exhibits "1" and "2," respectively.
As the pre-trial order was written, it would appear that the parties agreed to limit the issue
to the due execution and genuineness of Exhs. "A" and "B."[19]

During the trial, the Republic presented as expert witness NBI Document Examiner
Eliodoro Constantino who testified on NBI QDR No. 815-1093 and asserted that the
signature of Palad in Exhibit "A" is a forgery. For his part, Palad dismissed as forged his
signature appearing in the same document and denied ever signing the same, let alone in
front of a notary public holding office outside of the LMB premises. Pressing the point,
Palad stated that he could not have had signed the conveying deed involving as it did a
reservation area which, apart from its being outside of the LMB's jurisdiction, is
inalienable in the first place. The testimony of other witnesses revolved around the
absence of bureau records respecting SHAI's application to acquire, payment of the
purchase price and Psd-76057, the plan described in TCT No. 15084. [20]

For its part, then defendant SHAI presented an opposing expert witness in the person of
Police Inspector Redencion Caimbon who brought with him PNP QDR No. 001-96 and
testified that Palad's signature in Exhibit "A" (same as Exh. "1") is genuine. Mrs.
Virginia Santos, then SHAI president, likewise testified, saying that applications to
purchase were signed and then filed with the LMB by one Engr. Eugenia Balis,
[21]
 followed by the payment in full of the contract price. Atty. Vicente Garcia, the then
Register of Deeds of Rizal, also testified about his having endorsed to Palad a letter-
inquiry he received from SHAI respecting the authenticity of TCT No. 15084. Palad's
response-letter dated January 23, 1992 (Exh. "10"), according to Atty. Garcia, is to the
effect that TCT No. 15084 must be genuine as it emanated from the Registry's office on
the basis of the October 30, 1991 Deed of Sale.[22]

On rebuttal, Palad would deny authorship of Exhibit "10" and an LMB official would
disclaim transmitting the same to Atty. Garcia.

Eventually, in a decision[23] dated October 7, 1997, the trial court rendered judgment

dismissing the Republic's complaint, to wit:
WHEREFORE, in view of the foregoing, the Complaint dated November 15, 1991 is
hereby DISMISSED without pronouncement as to costs.
The counterclaims are also DISMISSED.

SO ORDERED.
In not so many words, the trial court considered the parcels covered by the deed in
question as no longer part of the FBMR.

Therefrom, the Republic went on appeal to the CA whereat its appellate recourse was
docketed as CA-G.R. CV No. 59454.

In the herein assailed Decision[24] dated January 28, 2003, the appellate court affirmed in
toto that of the trial court.

Hence, this petition of the Republic on the threshold abstract submission that the
CA "completely ignored, overlooked and/or grossly misappreciated facts of substance
which, if duly considered, will materially affect the outcome of this case."

In its COMMENT To Petition, private respondent SHAI parlays the "what-can-be-raised"

line. It urges the dismissal of the petition on the ground that the issues raised therein,
particularly those bearing on the authenticity of Exhibit "A"/"1," are mainly questions
of fact, adding that the matter of the inalienability of the area purportedly sold is outside
the issue agreed upon during the pre-trial stage.

The desired dismissal cannot be granted on the bases of the reasons proffered above.

While the Court, in a petition for review of CA decisions under Rule 45 of the Rules of
Court, usually limits its inquiry only to questions of law, this rule is far from
absolute. Reyes v. Court of Appeals,[25] citing Floro v. Llenado,[26] for one, suggests as
much. In Floro, we wrote:
xxx There are, however, exceptional circumstances that would compel the Court to
review the finding of facts of the [CA], summarized in ... and subsequent cases as
follows: 1) when the inference made is manifestly mistaken, absurd or impossible; 2)
when there is grave abuse of discretion; 3) when the finding is grounded entirely on
speculations, surmises or conjectures; 4) when the judgment of the [CA] are based on
misapprehension of facts; 5) when the findings of facts are conflicting; 6) ...; 7) ...; 8) ...;
9) when the [CA] manifestly overlooked certain relevant facts not disputed by the parties
and which if properly considered would justify a different conclusion; and 10) when the
findings of facts ... are premised on the absence of evidence and are contradicted by the
evidence on record. (Words in bracket, added.)
To the mind of the Court, the instant case is within the purview of at least three of the
exceptions listed above, foremost of which is item #9.

Private respondent SHAI's stance about the petitioner Republic being barred from raising
the issue of inalienability since it failed to plead or assert the same at the pre-trial
proceedings is, to a degree, correct. For the general rule, as articulated in Permanent
Concrete Products, Inc. v. Teodoro,[27] is that the determination of issues at a pre-trial
conference bars the consideration of others on appeal. It should be pointed out, however,
that the rationale for such preliminary, albeit mandatory, conference is to isolate as far as
possible the trial out of the realm of surprises and back-handed maneuverings. And lest it
be overlooked, the adverted rule on the procedure to be observed in pre-trials is,
as Bergano v. Court of Appeals[28] teaches, citing Gicano v. Gegato,[29] subject to
exceptions. And without meaning to diminish the importance of the same rule, the Court
is possessed with inherent power to suspend its own rules or to except a particular case
from its operations whenever the demands of justice so require.[30]

Given the foregoing considerations, the rule to be generally observed in pre-trial

conferences hardly poses an insurmountable obstacle to tackling the question of
inalienability which, under the premises, is an issue more legal than factual. As it were,
the element of surprise is not really present here. For the issue of inalienability, which is
central to the Republic's cause of action, was raised in its basic complaint, passed upon
by the CA and, before it, by the trial court[31] and of which at least one witness (Palad)
was examined as follows:
Q: Mr. Witness you stated that the parcel of land in question at the time of the land
alleged sale was part of the ... [FBMR]. Now as part of the ...[FBRM] do you know
whether the said parcel of land can be the subject of disposition?

A: If it is part of the reservation it cannot be sold and it is already part of those

government lands that has been assigned to other government agencies that is no longer
within my jurisdiction. Meaning to say I have no more say on that because the
proclamation to the effect was reserving this for particular purpose under the DND .....
[32]
 (Words in bracket added.)
At any rate, Palad's testimony drew nary an objection from private respondent SHAI. It
even cross- examined said witness.[33] The rule obtains that the introduction of evidence
bearing on an issue not otherwise included in the pre-trial order amounts to implied
consent conferring jurisdiction on the court to try such issue.[34]

Digressing from the procedural aspects of this case, we now consider the clashing
assertions regarding the JUSMAG area. Was it, during the period material, alienable or
inalienable, as the case may be, and, therefore, can or cannot be subject of a lawful
private conveyance?

Petitioner Republic, as do the intervenors, asserts the inalienable character of the

JUSMAG area, the same having not effectively been separated from the military
reservation and declared as alienable and disposable.

The Republic's and the intervenor's parallel assertions are correct.

The President, upon the recommendation of the Secretary of Environment and Natural
Resources, may designate by proclamation any tract or tracts of land of the public domain
as reservations for the use of the Republic or any of its branches, or for quasi-public uses
or purposes.[35] Such tract or tracts of land thus reserved shall be non-alienable and shall
not be subject to sale or other disposition until again declared alienable.  [36] Consistent
with the foregoing postulates, jurisprudence teaches that a military reservation, like the
FBMR, or a part thereof is not open to private appropriation or disposition and, therefore,
not registrable,[37] unless it is in the meantime reclassified and declared as disposable and
alienable public land.[38] And until a given parcel of land is released from its classification
as part of the military reservation zone and reclassified by law or by presidential
proclamation as disposable and alienable, its status as part of a military reservation
remains,[39] even if incidentally it is devoted for a purpose other than as a military camp or
for defense. So it must be here.

There can be no quibbling that the JUSMAG area subject of the questioned October 30,
1991 sale formed part of the FBMR as originally established under Proclamation No.
423. And while private respondent SHAI would categorically say that the petitioner
Republic had not presented evidence that "subject land is within military
reservation,"[40] and even dared to state that the JUSMAG area is the private property of
the government and therefore removed from the concept of public domain per se,[41] its
own evidence themselves belie its posture. We start with its Exhibit "2" (petitioner's
Exh. "B"), a copy of TCT No. 15084, which described the area covered thereby
measuring 399,922 square meters as a "portion of Parcel 3 of plan Psu-2031 situated in
Jusmang (sic) area Fort Bonifacio." Complementing its Exhibit "2" is its Exhibit "1" -
the deed of sale - which technically described the property purportedly being conveyed to
private respondent SHAI as follows:
A PARCEL OF LAND (Lot 3-Y-1, Psd-76067, being a portion of Parcel 3 of plan Psu-
2031) situated in Jusmag (sic) area, Fort Bonifacio, Province of Rizal. Xxx (Emphasis
added) ....
As the Court distinctly notes, the disputed property, as described in private
respondent's Exhibits "1" and "2," formed part of that wide expanse under Proclamation
No. 423 which lists, as earlier stated, three (3) parcels of land of the public domain as
falling within its coverage. These include, inter alia, the entire 15,912,684-square meter
area constituting Parcel No. 3 of Plan Psu 2031 located inside the now renamed Fort
Mckinley which, to a redundant point, was declared a military reservation.

The Court has, on the issue of inalienability, taken stock of the Compilation Map of
Approved Surveys Plan inside Parcels 1, 2, 3 and 4, of plan Psu 2031[42] prepared in
September 1995 and certified by the Department of Environment and Natural Resources
(DENR). It indicates in colored ink the outlines of Parcels 2, 3 and 4 covered by
Proclamation No. 423. As there also shown, the 399,992-square meter area embraced
by SHAI's TCT No. 15084, defined in the legend by red-colored stripes, is within the
violet-colored borders of Parcel No. 3 and Parcel No. 4 of Proclamation No. 423.

Indubitably, the area covered by SHAI's TCT No. 15084 was and is still part of the
FBMR, more particularly within the 15,912,684- square meter Parcel No. 3 of the
reservation. The petitioner Republic, joined by the intervenors BCDA, DND and AFP in
this appellate proceedings, has maintained all along this thesis. Towards discharging its
burden of proving that the disputed property is part of the reservation, the petitioner
Republic need only to demonstrate that all of the 15,912,684 square meters of Parcel No.
3 of Plan Psu 2031 have been reserved for military purposes. The evidence, however, of
the fact of reservation is the law or, to be more precise, Proclamation No. 423 itself, the
contents and issuance of which courts can and should take judicial notice of under
Section 1, Rule 129 of the Rules of Court.[43]

The Republic has, since the filing of its underlying complaint, invoked Proclamation No.
423. In the process, it has invariably invited attention to the proclamation's specific area
coverage to prove the nullity of TCT No. 15084, inasmuch as the title embraced a
reserved area considered inalienable, and hence, beyond the commerce of man. In this
regard, the appellate court seemed to have glossed over, if not entirely turned a blind eye
on, certain admissions made by the private respondent, the most basic being those made
in its answer to the Republic's allegations in paragraph 5 (e) and (g) of its complaint. To
the Republic's allegations that the property covered by TCT No. 15084 was and remains
part the FBMR, SHAI's answer thereto reads:
2. It specifically denies the allegations in paragraphs ... 5 of the complaint, the truth
of the matter being that - in the Deed of Sale -, the Director of Lands Certificate (sic) that
he is "authorized under the law to sell" the subject property and that the "lots were duly
awarded by the [LBM] to the vendee.[44] ( Emphasis and word in bracket added.)
In net effect, private respondent SHAI admitted what the petitioner Republic alleged in
par. 5 (e) and (g) of the complaint, the former's denial to such allegations on the
inalienable nature of the property covered by TCT No. 15084 being in the nature of a
general denial. Under the rules on pleadings, a specific, not a general, denial is required;
a denial is not specific because it is so qualified or termed "specific" by the pleader.
[45]
 The defendant must specify each material factual allegation the truth of which he
absolutely denies and, whenever practicable, shall set forth the substance of the matters
upon which he will rely to support his denial.[46] Else, the denial will be regarded as
general and will, therefore, be regarded as an admission of a given material fact/s stated
in the complaint.

What private respondent SHAI did under the premises was to enter what, under the
Rules, is tantamount to a general denial of the Republic's averments that what SHAI's
TCT No. 15084 covers is part of the military reservation. In the process, private
respondent SHAI is deemed to admit the reality of such averment.

To be sure, the petitioner Republic, as plaintiff below, had more than sufficiently
established its claim on the inalienability of the parcels of land covered by TCT No.
15084. In fine, it had discharged the burden of proof on the issue of inalienability. Be that
as it may, the burden of evidence to disprove inalienability or, to be precise, that said
parcels of land had, for settlement purposes, effectively been withdrawn from the
reservation or excluded from the coverage of Proclamation No. 423, devolves upon the
private respondent. This is as it should be for the cogency of SHAI's claim respecting the
validity of both the underlying deed of sale (Exh. "A"/"1") and its TCT No. 15084 (Exh.
"B"/"2") rests on the postulate that what it purportedly bought from the LMB had ceased
to be part of the reserved lands of the public domain. Elsewise put, SHAI must prove that
the JUSMAG area had been withdrawn from the reservation and declared open for
disposition, failing which it has no enforceable right over the area as against the State.

Private respondent SHAI has definitely not met its burden by reason of lack of evidence.
To be sure, it has not, because it cannot even if it wanted to, pointed to any presidential
act specifically withdrawing the disputed parcels from the coverage of Proclamation No.
423. Worse still, its own Exhibit "5,"[47] a letter dated March 19, 1991 of then PA
Commanding General, M/Gen Lisandro Abadia, to one Mrs. Gabon, then President of the
SHAI, cannot but be viewed as a party's judicial admission that the disputed land has yet
to be excluded from the military reservation. The Abadia letter, with its feature dis-
serving to private respondent SHAI, reads in part as follows:
Dear Mrs. Gabon:

This is in connection with your move to make a petition to President Aquino regarding
the possible exclusion of Southside Housing Area from the military reservation and for
its eventual allotment to the ... military officers presently residing thereat. Allow me to
state that I interpose no objection .... I find it ... helpful to our officers to be provided a
portion of the Fort Bonifacio military reservation .... (Underscoring added.)
Owing to the foregoing considerations, the Court is hard put to understand how the CA
could still have found for SHAI.. The appellate court, apparently swayed by what SHAI
said in its Brief for the Appellees[48] that:
Appellant [petitioner Republic] is probably unaware that ...., then President Diosdado
Macapagal .... issued Proclamation 461 when he excluded from the operation of
Proclamation No. 423 .... an area of 2,455,810 square meters more or less.... Likewise on
October 16, 1987, then President Corazon Aquino issued Proclamation No. 172
excluding five (5) parcels of land from the operation of Proclamation No. 423 also
located at Fort Bonifacio containing an area of 4,436, 478 ..... So if we deduct the
6,892,288 [2,455,810 + 4,436,478 = 6,892,288] square meters covered by Proclamation
Nos. 461 and 172 of the areas reserved for military purposes of 7,053,143 square meters,
what is only left is 160,857 square meters or more or less 16 hectares ..... [49]
justified its holding on the alienability of the disputed land with the following
disquisition:
The foregoing admission aside, appellant's [now petitioner's] reliance on Proclamation
No. 493 [should be 423] in insisting that the land in litigation is inalienable because it is
part of the [FBMR] is too general to merit serous consideration. While it is true that,
under the said July 12, 1957 Proclamation, then President Carlos P. Garcia reserved the
area now known as Fort Bonifacio for military purposes, appellee [now respondent]
correctly calls our attention to the fact, among other matters, that numerous exceptions
thereto had already been declared through the years. The excluded areas under
Proclamation No. 461, dated September 29, 1965 and Proclamation No. 172, dated
October 16, 1987 alone already total 6,892,338 square meters. (Figures in bracket added.)
The CA's justifying line does not commend itself for concurrence.

For one, it utilizes SHAI's misleading assertion as a springboard to justify speculative

inferences. Per our count, Proclamation 423 reserved for military purposes roughly a total
area of 25,875,000 square meters, not 7,053,143. On the other hand, Proclamation Nos.
461 and 172 excluded a combined area of 6,892,338 square meters. Now then, the jump
from an acknowledgment of the disputed parcels of land having been reserved for
military purposes to a rationalization that they must have been excluded from the
reservation because 6,892,338 square meters had already been withdrawn from
Proclamation 423 is simply speculative. Needless to stress, factual speculations do not
make for proof.

Corollary to the first reason is the fact that private respondent SHAI - and quite
understandably, the appellate court - had not pointed to any proclamation, or legislative
act for that matter, segregating the property covered by TCT No. 15084 from the
reservation and classifying the same as alienable and disposable lands of the public
domain. To reiterate what we earlier said, lands of the public domain classified as a
military reservation remains as such until, by presidential fiat or congressional act, the
same is released from such classification and declared open to disposition. [50] The October
30, 1991 Deed of Sale purportedly executed by Palad, assuming for the nonce its
authenticity, could not plausibly be the requisite classifying medium converting the
JUSMAG area into a disposable parcel. And private respondent SHAI's unyielding stance
that would have the Republic in estoppel to question the transfer to it by the LMB
Director of the JUSMAG area is unavailing. It should have realized that the Republic is
not usually estopped by the mistake or error on the part of its officials or agents. [51]

Since the parcels of land in question allegedly sold to the private respondent are, or at
least at the time of the supposed transaction were, still part of the FBMR, the purported
sale is necessarily void ab initio.

The Court can hypothetically concede, as a matter of fact, the withdrawal of the
JUSMAG area from the ambit of Proclamation No. 423 and its reclassification as
alienable and disposable lands of the public domain. Still, such hypothesis would not
carry the day for private respondent SHAI. The reason therefor is basic: Article XII,
Section 3[52] of the 1987 Constitution forbids private corporations from acquiring any
kind of alienable land of the public domain, except through lease for a limited period.
While Fr. Bernas had stated the observation that the reason for the ban is not very clear
under existing jurisprudence,[53] the fact remains that private corporations, like SHAI, are
prohibited from purchasing or otherwise acquiring alienable public lands.

Even if on the foregoing score alone, the Court could write finis to this disposition. An
appropriate closure to this case could not be had, however, without delving to an extent
on the issue of the validity of the October 30, 1991 Deed of Sale which necessarily
involves the question of the authenticity of what appears to be Palad's signature thereon.

With the view we take of the case, the interplay of compelling circumstances and
inferences deducible therefrom, would, as a package, cast doubt on the authenticity of
such deed, if not support a conclusion that the deed is spurious. Consider:
1. Palad categorically declared that his said signature on the deed is a forgery. The Court
perceives no reason why he should lie, albeit respondent states, without elaboration, that
Palad's declaration is aimed at avoiding "criminal prosecution".[54] The NBI signature
expert corroborated Palad's allegation on forgery.[55] Respondent SHAI's expert witness
from the PNP, however, disputes the NBI's findings. In net effect, both experts from the
NBI and the PNP cancel each other out.

2. Palad signed the supposed deed of sale in Manila, possibly at the LMB office at Plaza
Cervantes, Binondo. Even if he acted in an official capacity, Palad nonetheless proceeded
on the same day to Pasig City to appear before the notarizing officer. The deed was then
brought to the Rizal Registry and there stamped "Received" by the entry clerk. That same
afternoon, or at 3:14 p.m. of October 30, 1991 to be precise, TCT No. 15084 was issued.
In other words, the whole conveyance and registration process was done in less than a
day. The very unusual dispatch is quite surprising. Stranger still is why a bureau head,
while in the exercise of his functions as the bureau's authorized contracting officer, has to
repair to another city just to have a deed notarized.

3. There is absolutely no record of the requisite public land application to purchase

required under Section 89 of the Public Land Act.[56] There is also no record of the deed
of sale and of documents usually accompanying an application to purchase, inclusive of
the investigation report and the property valuation. The Certification under the seal of the
LMB bearing date November 24, 1994 and issued/signed by Alberto Recalde, OIC,
Records Management Division of the LMB pursuant to a subpoena issued by the trial
court[57] attest to this fact of absence of records. Atty. Alice B. Dayrit, then Chief, Land
Utilization and Disposition Division, LMB, testified having personally looked at the
bureau record book, but found no entry pertaining to SHAI.[58]

4. In its Answer as defendant a quo, respondent SHAI states that the "deed of sale
specifically meritorious Official Receipt No. 6030203-C dated 29 October 1991, (sic) as
evidence of full payment ... of the agreed purchase price...." An official receipt (O.R.) is
doubtless the best evidence to prove payment. While it kept referring to O.R. No.
6030203 as its evidence of the required payment,[59] it failed to present and offer the
receipt in evidence. A Certification under date September 15, 1993 of the OIC Cash
Division, LMB, states that "OR # 6030203 in the amount of P11,977,000.00 supposedly
paid by [SHAI] is not among the series of [ORs] issued at any time by the National
Printing Office to the Cashier, LMB, Central Office."[60] A copy of the OR receipt is not
appended to any of the pleadings filed before the Court. We can thus validly presume that
no such OR exists or, if it does, that its presentation would be adverse to SHAI.

A contract of sale is void where the price, which appears in the document as paid has, in
fact, never been paid.[61]

5. The purchase price was, according to the witnesses for SHAI, paid in full in cash to the
cashier of the LMB the corresponding amount apparently coming in a mix of P500 and
P100 denominations. Albeit plausible, SHAI's witnesses' account taxes credulity to the
limit.
A final consideration in G.R. No. 156951. This case could not have come to pass without
the participation of a cabal of cheats out to make a dishonest buck at the expense of the
government and most likely the members of SHAI. No less than its former president (Ms.
Virginia Santos) testified that a "facilitator" did, for a fee, the necessary paper and leg
work before the LMB and the Registry of Deeds that led to the execution of the Deed of
Sale and issuance of the certificate of title in question.[62] Ms. Santos identified Eugenia
Balis, a geodetic engineer, as the "facilitator"[63] who "facilitated all these
presentation" of documents,[64] and most of the time, "directly transacted" with the LMB
and the Register of Deeds leading to acquisition of title.[65] Engr. Balis was, in the course
of Ms. Santos' testimony, directly mentioned by name for at least fifteen (15) times. Not
surprisingly, Engr. Balis did not appear in court, despite SHAI's stated intention to
present her as witness.[66]

The extent of the misappropriation of the Fort Bonifacio land involved in this and the
NOVA area litigations is, as described in the Report of the Fact-Finding Commission,
[67]
 "so epic in scale as to make the overpricing of land ... complained of in the two
hundred AFP [Retirement and Separation Benefits System] RSBS cases (P703 million)
seem like petty shoplifting in comparison."[68] The members of private respondent SHAI
may very well have paid for what they might have been led to believe as the purchase
price of the JUSMAG housing area. The sad reality, however, is that the over P11 Million
they paid, if that be the case, for a piece of real estate contextually outside the commerce
of man apparently fell into the wrong hands and did not enter the government coffers.
Else, there must be some memorials of such payment.

At bottom, this disposition is nothing more than restoring the petitioner Republic, and
eventually the BCDA, to what rightfully belongs to it in law and in fact. There is nothing
unjust to this approach.
With the foregoing disquisitions, the petition for contempt in G.R. No. 173408 need not
detain us long. As it were, the question raised by the petitioners therein respecting the
ownership of the JUSMAG area and, accordingly, of the right of the petitioning retired
military officers to remain in the housing units each may be occupying is now moot and
academic. However, contempt petitioners' expressed revulsion over the efforts of the
military establishment, particularly the AFP Chief of Staff, to oust them from their
respective dwellings, if that really be the case, even before G.R. No. 156951 could be
resolved, is understandable as it is justified. We thus end this ponencia with a reminder to
all and sundry that might is not always right; that ours is still a government of laws and
not of men, be they in the civilian or military sector. Accordingly, the Court will not treat
lightly any attempt to trifle, intended or otherwise, with its processes and proceedings. A
becoming respect to the majesty of the law and the prerogatives of the Court is a must for
the orderly administration of justice to triumph.

WHEREFORE, the petition in G.R. No. 156951 is GRANTED and the appealed CA

Decision is REVERSED and SET ASIDE. Accordingly, the Deed of Sale dated October
30, 1991 (Exh. "A"/"1") purportedly executed in favor of private respondent SHAI and
TCT No. 15084 (Exh. "B"/"2") of the Registry of Deeds of Rizal issued on the basis of
such deed are declared VOID. The Register of Deeds of Pasig or Taguig, as the case may
be, is hereby ordered to CANCEL TCT No. 15084 in the name of SHAI and the area
covered thereby is DECLARED part of the Fort Bonifacio Military Reservation, unless
the same has, in the interim, been duly excluded by law or proclamation from such
reservation. Private respondent SHAI, its members, representatives and/or their assigns
shall vacate the subject parcels of land immediately upon the finality of this decision,
subject to the provisions of Republic Act No. 7227, otherwise known as the Bases
Conversion and Development Act.

Cost against the private respondent SHAI.

Having said our piece in G.R. No. 173408, we need not speak any further thereon other
than to deny as we hereby similarly DENY the same.

SO ORDERED.

FIRST DIVISION
[ G.R. NO. 150949, June 21, 2007 ]
JUDGE DOLORES L. ESPAÑOL,* PRESIDING JUDGE, REGIONAL TRIAL
COURT, BRANCH 90, DASMARIÑAS, CAVITE, PETITIONER, VS. ATTY.
BENJAMIN S. FORMOSO AND SPOUSES BENITO SEE AND MARLY SEE,
 RESPONDENTS.

DECISION

SANDOVAL-GUTIERREZ, J.:

Before us is a Petition for Review on Certiorari assailing the Decision[1] dated September

12, 2001 and Resolution dated November 15, 2001 of the Court of Appeals in CA-G.R.
SP No. 65652.

The facts are:

On April 15, 1994, Sharcons Builders Philippines, Inc. (Sharcons) bought from
Evanswinda Morales a piece of land consisting of 33,130 square meters in Paliparan,
Dasmariñas, Cavite. The property is covered by Transfer Certificate of Title (TCT) No.
T-278479 issued in her name by the Register of Deeds of Trece Martires City.

Thus, TCT No. T-278479 in Evanswinda's name was cancelled and in lieu thereof, TCT
No. T-511462 was issued in the name of Sharcons. However, when the latter's workers
tried to fence and take possession of the lot, they were prevented by the caretaker of
spouses Joseph and Enriqueta Mapua. The caretaker claimed that spouses Mapua are the
owners of the land. Sharcons verified the status of the title and found that TCT No. T-
107163 was indeed registered in the names of spouses Mapua as early as July 13, 1979.

On January 25, 2000, Sharcons filed with the Regional Trial Court (RTC), Branch 90,
Dasmariñas, Cavite a complaint for quieting of title, docketed as Civil Case No. 2035-00.
Impleaded as defendants were spouses Mapua, Evanswinda Morales, and the Register of
Deeds of Trece Martires City.

In their answer, spouses Mapua alleged, among others, that all the documents relied upon
by Sharcons are spurious and falsified.

In the course of the proceedings, or on July 9, 2001, Judge Dolores L. Español, petitioner,
issued an Order stating that Benito See and Marly See, president and treasurer,
respectively, of Sharcons, and its counsel, Atty. Benjamin Formoso, respondents, have
used a spurious certificate of title and tax declaration when it (Sharcons) filed with the
RTC its complaint for quieting of title. Consequently, petitioner declared respondents
guilty of direct contempt of court and ordered their confinement for ten (10) days in the
municipal jail of Dasmariñas, Cavite.

Petitioner's Order is partly reproduced as follows:

From the foregoing circumstances, this Court is of the view and so holds that the instant
case is a callous and blatant imposition of lies, falsehoods, deceptions, and fraudulent
manipulations, through the extensive use of falsified documents by the plaintiff
corporation and its former counsel, Atty. Benjamin S. Formoso, defendant Evanswinda
C. Morales and even the Geodetic Engineer who connived with this private group on one
hand, and some officials and employees of the government agencies responsible for the
processing and issuance of spurious or falsified titles, on the other. Unless these
fraudulent operations are put to a complete and drastic halt, the Courts are at the mercy of
these unscrupulous people for their own personal gain.

Using the presumption that whoever is in possession and user of falsified document is the
forger thereof (Gamido v. Court of Appeals, 25 SCRA 101 [1995]), let the appropriate
falsification charges be filed against Benito See and Marly See together with Evanswinda
C. Morales. Thus, let a copy of this Order be forwarded to the National Bureau of
Investigation and the Department of Justice for their appropriate action. As regards Atty.
Benjamin S. Formoso, let a copy of this Order be forwarded to the Bar Confidant's
Office, Supreme Court. Manila.

Further, Benito See and Marly See, President and Treasurer of Sharcons Builders Phils.
Inc., respectively, and Atty. Benjamin S. Formoso, counsel for Sharcons until March 13,
2001, are declared and held in contempt for foisting falsehoods and using falsified and
spurious documents in the pursuit of their nefarious activities pursuant to the instant case
filed before this Court. Let the corresponding Warrants of Arrest be issued against the
aforesaid respondents who should serve ten (10) days of detention at the Dasmariñas
Municipal Jail, Cavite.

Likewise, the title issued to Sharcons Builders Philippines, Inc., under TCT No. T-
511462 allegedly issued on November 11, 1994, being spurious, is hereby cancelled, it
having been derived from another spurious title with TCT No. T-278479 allegedly issued
to Evanswinda C. Morales on December 29, 1989. The Declaration of Real Property No.
4736 is likewise hereby cancelled for being spurious. Let a copy of this Order be
forwarded to the Registry of Deeds for its implementation with respect to the two (2)
titles for cancellation and to the Assessor's Office of the Municipality of Dasmariñas,
Cavite, to stave off the proliferation of these spurious instruments.

WHEREFORE, in view of the foregoing, the instant case is DISMISSED WITH

PREJUDICE, whereas, the private defendant's counterclaims, which need further
substantiation, are likewise dismissed. However, the said private defendants are not
precluded from pursuing their rightful course(s) of action in the interest of justice.

SO ORDERED.
Petitioner stated that in determining the merits of Sharcons' complaint for quieting of
title, she "stumbled" upon Civil Case No. 623-92 for cancellation of title and damages
filed with the RTC, Branch 20, Imus, Cavite, presided by then Judge Lucenito N. Tagle.
[2]
 Petitioner then took judicial notice of the judge's Decision declaring that Sharcons'
TCT and other supporting documents are falsified and that respondents are responsible
therefor.

On July 12, 2001, petitioner issued warrants of arrest against respondents. They were
confined in the municipal jail of Dasmariñas, Cavite. That same day, respondents filed a
motion for bail and a motion to lift the order of arrest. But they were denied outright by
petitioner.

Respondents then filed with the Court of Appeals a petition for a writ of habeas corpus,
docketed as CA-G.R. SP No. 65652. On July 19, 2001, the Court of Appeals granted the
petition.

On September 12, 2001, the Court of Appeals promulgated its Decision, the dispositive
portion of which reads:
IN THE LIGHT OF ALL THE FOREGOING, finding the instant petition to be
meritorious, the same is hereby GRANTED. Respondent judge's July 9, 2001 Order,
insofar as it declared herein petitioners in direct contempt and ordered their incarceration
for ten (10) days, as well as the Warrant of Arrest, dated July 12, 2001, and the Order of
Commitment, dated July 13, 2001, which the respondent judge issued against the persons
of the herein petitioners, are hereby NULLIFIED and SET ASIDE.

SO ORDERED.
The Court of Appeals ruled that Judge Español erred in taking cognizance of the Decision
rendered by then Judge Tagle in Civil Case No. 623-92 since it was not offered in
evidence in Civil Case No. 2035-00 for quieting of title. Moreover, as the direct contempt
of court is criminal in nature, petitioner should have conducted a hearing. Thus, she could
have determined whether respondents are guilty as charged.

Petitioner filed a motion for reconsideration but the Court of Appeals denied the same in
its Resolution of November 15, 2001.

Hence, this petition.

The basic question before us is whether petitioner erred in ruling that respondents are
guilty of direct contempt of court for using falsified documents when Sharcons filed its
complaint for quieting of title.

The early case of In re Jones[3] defined contempt of court as "some act or conduct which
tends to interfere with the business of the court, by a refusal to obey some lawful order of
the court, or some act of disrespect to the dignity of the court which in some way tends to
interfere with or hamper the orderly proceedings of the court and thus lessens the general
efficiency of the same." It has also been described as "a defiance of the authority, justice
or dignity of the court; such conduct as tends to bring the authority and administration of
the law into disrespect or to interfere with or prejudice parties litigants or their witnesses
during litigation."[4] Simply put, it is despising of the authority, justice, or dignity of
the court.[5]

The offense of contempt traces its origin to that time in England when all courts in the
realm were but divisions of the Curia Regia, the supreme court of the monarch, and to
scandalize a court was an affront to the sovereign.[6] This concept was adopted by the
Americans and brought to our shores with modifications. In this jurisdiction, it is now
recognized that courts have the inherent power to punish for contempt on the
ground that respect for the courts guarantees the very stability of the judicial
institution.[7] Such stability is essential to the preservation of order in judicial
proceedings, to the enforcement of judgments, orders, and mandates of the courts, and,
consequently, to the very administration of justice.[8]

Rule 71 of the 1997 Rules of Civil Procedure, as amended, provides:

SEC. 1. Direct contempt punished summarily. – A person guilty of misbehavior in the
presence of or so near a court as to obstruct or interrupt the proceedings before the same,
including disrespect toward the court, offensive personalities toward others, or refusal to
be sworn or to answer as a witness, or to subscribe an affidavit or deposition when
lawfully required to do so, may be summarily adjudged in contempt by such court and
punished by a fine not exceeding two thousand pesos or imprisonment not exceeding ten
(10) days, or both, if it be a Regional Trial Court or a court of equivalent or higher rank,
or by a fine not exceeding two hundred pesos or imprisonment, not exceeding one (1)
day, or both, if it be a lower court.
In Narcida v. Bowen,[9] this Court characterized direct contempt as one done "in the
presence of or so near the court or judge as to obstruct the administration of justice." It is
a contumacious act done facie curiae and may be punished summarily without hearing.
[10]
 In other words, one may be summarily adjudged in direct contempt at the very
moment or at the very instance of the commission of the act of contumely.

Section 3, Rule 71 of the same Rules states:

SEC. 3. Indirect contempt to be punished after charge and hearing. – After a charge in
writing has been filed and an opportunity given to the respondent to comment thereon
within such period as may be fixed by the court and to be heard by himself or by counsel,
a person guilty of any of the following acts may be punished for indirect contempt:

(a) Misbehavior of an officer of court in the performance of his official duties or in his
official transactions;

(b) Disobedience of or resistance to a lawful writ, process, order, or judgment of a court,

including the act of a person who, after being dispossessed or ejected from any real
property by the judgment or process of any court of competent jurisdiction, enters or
attempts or induces another to enter into or upon such real property, for the purpose of
executing acts of ownership or possession, or in any manner disturbs the possession given
to the person adjudged to be entitled thereto;

(c) Any abuse of or any unlawful interference with the processes or proceedings of a
court not constituting direct contempt under Section 1 of this Rule;

(d) Any improper conduct tending, directly or indirectly, to impede, obstruct, or degrade
the administration of justice;

(e) Assuming to be an attorney or an officer of a court and acting as such without

authority;

(f) Failure to obey a subpoena duly served;

(g) The rescue, or attempted rescue, of a person or property in the custody of an officer
by virtue of an order or process of a court held by him.

But nothing in this section shall be so construed as to prevent the court from issuing
process to bring the respondent into court, or from holding him in custody pending such
proceedings.
Indirect or constructive contempt, in turn, is one perpetrated outside of the sitting of the
court and may include misbehavior of an officer of a court in the performance of his
official duties or in his official transactions, disobedience of or resistance to a lawful writ,
process, order, judgment, or command of a court, or injunction granted by a court or a
judge, any abuse or any unlawful interference with the process or proceedings of a court
not constituting direct contempt, or any improper conduct tending directly or indirectly to
impede, obstruct or degrade the administration of justice.[11]

We agree with petitioner that the use of falsified and forged documents is a contumacious
act. However, it constitutes indirect contempt not direct contempt. Pursuant to the above
provision, such act is an improper conduct which degrades the administration of justice.
In Santos v. Court of First Instance of Cebu, Branch VI,[12] we ruled that the imputed use
of a falsified document, more so where the falsity of the document is not apparent on its
face, merely constitutes indirect contempt, and as such is subject to such defenses as
the accused may raise in the proper proceedings. Thus, following Section 3, Rule 71, a
contemner may be punished only after a charge in writing has been filed, and an
opportunity has been given to the accused to be heard by himself and counsel.
[13]
 Moreover, settled is the rule that a contempt proceeding is not a civil action, but a
separate proceeding of a criminal nature in which the court exercises limited jurisdiction.
[14]
 Thus, the modes of procedure and the rules of evidence in contempt proceedings are
assimilated as far as practicable to those adapted to criminal prosecutions. [15] Perforce,
petitioner judge erred in declaring summarily that respondents are guilty of direct
contempt and ordering their incarceration. She should have conducted a hearing with
notice to respondents.

Petitioner, in convicting respondents for direct contempt of court, took judicial notice of
the Decision in Civil Case No. 623-92, assigned to another RTC branch, presided by then
Judge Tagle. Section 1, Rule 129 of the Revised Rules of Court provides:
SEC. 1. Judicial notice, when mandatory. – A court shall take judicial notice, without the
introduction of evidence, of the existence and territorial extent of states, their political
history, forms of government, and symbols of nationality, the law of nations, the
admiralty and maritime courts of the world and their seals, the political constitution and
history of the Philippines, the official acts of the legislative, executive and judicial
departments of the Philippines, the laws of nature, the measure of time, and the
geographical divisions.
In Gener v. De Leon,[16] we held that courts are not authorized to take judicial notice of
the contents of records of other cases even when such cases have been tried or pending in
the same court. Hence, we reiterate that petitioner took judicial notice of the Decision
rendered by another RTC branch and on the basis thereof, concluded that respondents
used falsified documents (such as land title and tax declaration) when Sharcons filed its
complaint for quieting. Verily, the Court of Appeals did not err in ruling that respondents
are not guilty of direct contempt of court.

Meanwhile, the instant petition challenging the Decision of the Court of Appeals granting
the writ of habeas corpus in favor of respondents has become moot. We recall that
respondents were released after posting the required bail as ordered by the Court of
Appeals. A writ of habeas corpus will not lie on behalf of a person who is not actually
restrained of his liberty. And a person discharged on bail is not restrained of his liberty as
to be entitled to a writ of habeas corpus.[17]

WHEREFORE, we DENY the petition. The challenged Decision and Resolution of the

Court of Appeals in CA-G.R. SP No. 65652 are AFFIRMED. No costs.

SO ORDERED.

EN BANC
[ G.R. No. 178830, July 14, 2008 ]
ROLEX SUPLICO, PETITIONER, VS. NATIONAL ECONOMIC AND
DEVELOPMENT AUTHORITY, REPRESENTED BY NEDA SECRETARY
ROMULO L. NERI, AND THE NEDA-INVESTMENT COORDINATION
COMMITTEE, DEPARTMENT OF TRANSPORTATION AND
 COMMUNICATIONS (DOTC), REPRESENTED BY DOTC SECRETARY
LEANDRO MENDOZA, INCLUDING THE COMMISSION ON
INFORMATION AND COMMUNICATIONS TECHNOLOGY, HEADED BY
ITS CHAIRMAN, RAMON P. SALES, THE TELECOMMUNICATIONS
OFFICE, BIDS AND AWARDS FOR INFORMATION AND
COMMUNICATIONS TECHNOLOGY (ICT), HEADED BY DOTC
ASSISTANT SECRETARY ELMER A. SONEJA AS CHAIRMAN, AND THE
TECHNICAL WORKING GROUP FOR ICT, AND DOTC ASSISTANT
SECRETARY LORENZO FORMOSO, AND ALL OTHER OPERATING
UNITS OF THE DOTC FOR INFORMATION AND COMMUNICATIONS
TECHNOLOGY, AND ZTE CORPORATION, AMSTERDAM HOLDINGS,
INC., AND ALL PERSONS ACTING IN THEIR BEHALF, RESPONDENTS.

[G.R. No. 179317]

AMSTERDAM HOLDINGS, INC., AND NATHANIEL SAUZ, PETITIONERS,

VS. DEPARTMENT OF TRANSPORTATION AND COMMUNICATIONS,
SECRETARY LEANDRO MENDOZA, COMMISSION ON INFORMATION
AND COMMUNICATIONS TECHNOLOGY, AND ASSISTANT SECRETARY
LORENZO FORMOSO III, RESPONDENTS.

[G.R. No. 179613]

GALELEO P. ANGELES, VICENTE C. ANGELES, JOB FLORANTE L.

CASTILLO, TRINI ANNE G. NIEVA, ROY ALLAN T. ARELLANO, CARLO
MAGNO M. REONAL, ETHEL B. REGADIO, RAENAN B. MALIG, AND
VINALYN M. POTOT, TOGETHER WITH LAWYERS AND ADVOCATES
FOR ACCOUNTABILITY, TRANSPARENCY, INTEGRITY AND GOOD
GOVERNANCE (LATIGO), PETITIONERS, VS. DEPARTMENT OF
TRANSPORTATION AND COMMUNICATIONS (DOTC), REPRESENTED
BY DOTC SECRETARY LEANDRO MENDOZA, AND ZHONG XING
EQUIPMENT (ZTE) COMPANY, LTD., AND ANY AND ALL PERSONS
ACTING ON THEIR BEHALF, RESPONDENTS.

RESOLUTION

REYES, R.T., J.:

Under consideration is the Manifestation and Motion[1] dated October 26, 2007

of the Office of the Solicitor General (OSG) which states:
 The Office of the Solicitor General (OSG) respectfully avers that in an
Indorsement dated October 24, 2007, the Legal Service of the Department of
Transportation and Communications (DOTC) has informed it of the Philippine
Government's decision not to continue with the ZTE National Broadband Network
Project (see attachment[2]).  That said, there is no more justiciable controversy for this
Honorable Court to resolve.  WHEREFORE, public respondents respectfully pray that the
present petitions be DISMISSED.
On November 13, 2007, the Court noted the OSG's manifestation and motion and
required petitioners in G.R. Nos. 178830, 179317, and 179613 to comment.

On December 6, 2007, Rolex Suplico, petitioner in G.R. No. 178830, filed his

Consolidated Reply and Opposition,[3] opposing the aforequoted OSG Manifestation and
Motion, arguing that:

66. Aside from the fact that the Notes of the Meeting Between President Gloria
Macapagal-Arroyo and Chinese President Hu Jintao held 2 October 2007 were
not attached to the 26 October 2007 Manifestation and Motion - thus depriving
petitioners of the opportunity to comment thereon - a mere verbally
requested 1st  Indorsement is not sufficient basis for the conclusion that the ZTE-
DOTC NBN deal has been permanently scrapped.

67. Suffice to state, said 1st  Indorsement is glaringly self-serving, especially without

the Notes of the Meeting Between President Gloria Macapagal-Arroyo and
Chinese President Hu Jintao to support its allegations or other proof of the
supposed decision to cancel the ZTE-DOTC NBN deal.  Public respondents can
certainly do better than that.[4]

Petitioner Suplico further argues that:

79. Assuming arguendo that some aspects of the present Petition have been
rendered moot (which is vehemently denied), this Honorable Court, consistent
with well-entrenched jurisprudence, may still take cognizance thereof. [5]

Petitioner Suplico cites this Court's rulings in Gonzales v. Chavez,[6] Rufino v. Endriga,

[7]
 and Alunan III v. Mirasol[8] that despite their mootness, the Court nevertheless took
cognizance of these cases and ruled on the merits due to the Court's symbolic function
of educating the bench and the bar by formulating guiding and controlling principles,
precepts, doctrines, and rules.
On January 31, 2008, Amsterdam Holdings, Inc. (AHI) and Nathaniel Sauz, petitioners in
G.R. No. 179317, also filed their comment expressing their sentiments, thus:

3. First of all, the present administration has never been known for candor.  The
present administration has a very nasty habit of not keeping its word. It says one
thing, but does another.

4. This being the case, herein petitioners are unable to bring themselves to feel
even a bit reassured that the government, in the event that the above-captioned
cases are dismissed, will not backtrack, re-transact, or even resurrect the now
infamous NBN-ZTE transaction.  This is especially relevant since what was
attached to the OSG's Manifestation and Motion was a mere one (1) page written
communication sent by the Department of Transportation and Communications
(DOTC) to the OSG, allegedly relaying that the Philippine Government has
decided not to continue with the NBN project "x x x due to several reasons and
constraints."

Petitioners AHI and Sauz further contend that because of the transcendental
importance of the issues raised in the petition, which among others, included the
President's use of the power to borrow, i.e., to enter into foreign loan agreements, this
Court should take cognizance of this case despite its apparent mootness.

On January 15, 2008, the Court required the OSG to file respondents' reply to
petitioners' comments on its manifestation and motion.

On April 18, 2008, the OSG filed respondents' reply, reiterating their position that for a
court to exercise its power of adjudication, there must be an actual case or controversy -
one which involves a conflict of legal rights, an assertion of opposite legal claims
susceptible of judicial resolution; the case must not be moot or academic or based on
extra-legal or other similar considerations not cognizable by a court of justice. [9]

Respondents also insist that there is no perfected contract in this case that would
prejudice the government or public interest.  Explaining the nature of the NBN Project
as an executive agreement, respondents stress that it remained in the negotiation
stage.  The conditions precedent[10] for the agreement to become effective have not yet
been complied with.

Respondents further oppose petitioners' claim of the right to information, which they
contend is not an absolute right.  They contend that the matters raised concern
executive policy, a political question which the judicial branch of government would
generally hesitate to pass upon.

On July 2, 2008, the OSG filed a Supplemental Manifestation and Motion.  Appended to
it is the Highlights from the Notes of Meeting between President Gloria Macapagal-
Arroyo and Chinese President Hu Jintao, held in XI Jiao Guesthouse, Shanghai, China, on
October 2, 2007.  In the Notes of Meeting, the Philippine Government conveyed its
decision not to continue with the ZTE National Broadband Network Project due to
several constraints.  The same Notes likewise contained President Hu Jintao's expression
of understanding of the Philippine Government decision.

We resolve to grant the motion.

Firstly, the Court notes the triple petitions to be for certiorari, prohibition and
mandamus, with application for the issuance of a Temporary Restraining Order (TRO)
and/or Preliminary Injunction.  The individual prayers in each of the three (3)
consolidated petitions are:
G.R. No. 178830

WHEREFORE, it is respectfully prayed of this Honorable Court:

1. Upon the filing of this Petition, pursuant to the second paragraph of Rule 58,
Section 5 of the Rules of Court, issue forthwith  an ex parte temporary restraining
order enjoining respondents, their subordinates, agents, representatives and any
and all persons acting on their behalf from pursuing, entering into indebtedness,
disbursing funds, and implementing the ZTE-DOTC Broadband Deal;

2. Compel respondents, upon Writ of Mandamus, to forthwith produce and furnish

petitioner or his undersigned counsel a certified true copy of the contract or
agreement covering the NBN project as agreed upon with ZTE Corporation;

3. Schedule Oral Arguments in the present case pursuant to Rule 49 in relation to

Section 2, Rule 56 of the revised Rules of Court; and,

4. Annul and set aside the award of the ZTE-DOTC Broadband Deal, and compel
public respondents to forthwith comply with pertinent provisions of law
regarding procurement of government ICT contracts and public bidding for the
NBN contract.[11]  (Emphasis supplied)

G.R. No. 179317

 WHEREFORE, petitioners Amsterdam Holdings, Inc., and Nathaniel Sauz
respectfully pray as follows:

A. upon the filing of this Petition for Mandamus and conditioned upon the posting
of a bond in such amount as the Honorable Court may fix, a temporary
restraining order and/or writ of preliminary injunction be issued directing the
Department of Transportation and Communication, the Commission on
Information and Communications Technology, all other government agencies and
instrumentalities, their officers, employees, and/or other persons acting for and
on their behalf to desist during the pendency of the instant Petition for
Mandamus from entering into any other agreements and from commencing
with any kind, sort, or specie of activity in connection with the National
Broadband Network Project;

B. the instant Petition for Mandamus be given due course; and,

C. after due consideration of all relevant issues, judgment be rendered directing

respondents to allow herein petitioners access to all agreements entered into
with the Government of China, the ZTE Corporation, and/or other entities,
government instrumentalities, and/or individuals with regard to the National
Broadband Network Project.[12]  (Emphasis supplied)

G.R. No. 179613

WHEREFORE, it is respectfully prayed of this Honorable Court to:

1. Compel respondents, upon Writ of Mandamus, to forthwith produce and furnish

petitioner or his undersigned counsel a certified true copy of the contract or
agreement covering the NBN project as agreed upon with ZTE Corporation;

2. Schedule Oral Arguments in the present case pursuant to Rule 49 in relation to

Section 2, Rule 56 of the Revised Rules of Court;

3. Annul and set aside the award of the contract for the national broadband
network to respondent ZTE Corporation, upon the ground that said contract, as
well as the procedures resorted to preparatory to the execution thereof, is
contrary to the Constitution, to law and to public policy;

4. Compel public respondent to forthwith comply with pertinent provisions of law

regarding procurement of government infrastructure projects, including public
 bidding for said contract to undertake the construction of the national broadband
network.[13]  (Emphasis supplied)

On September 11, 2007, the Court issued a TRO[14] in G.R. No. 178830, enjoining the
parties from "pursuing, entering into indebtedness, disbursing funds, and implementing
the ZTE-DOTC Broadband Deal and Project" as prayed for.  Pertinent parts of the said
Order read:
WHEREAS, the Supreme Court, on 11 September 2007, adopted a resolution in
the above-entitled case, to wit:
"G.R. No. 178830 (Rolex Suplico vs. National Economic and Development
Authority, represented by NEDA Secretary Romulo L. Neri, and the NEDA Investment
Coordination Committee, Department of Transportation and Communications (DOTC),
represented by DOTC Secretary Leandro Mendoza, including the Commission on
Information and Communications Technology, headed by its Chairman, Ramon P. Sales,
The Telecommunications Office, Bids and Awards for Information and Communications
Technology Committee (ICT), headed by DOTC Assistant Secretary Elmer A. Soneja as
Chairman, and The Technical Working Group for ICT, and DOTC Assistant Secretary
Lorenzo Formoso, and All Other Operating Units of the DOTC for Information and
Communications Technology, and ZTE Corporation, Amsterdam Holdings, Inc., and
ARESCOM, Inc.--Acting on the instant petition with prayer for temporary restraining
order and/or writ of preliminary injunction, the Court Resolved, without giving due
course to the petition, to
xxxx

(d) Issue a TEMPORARY RESTRAINING ORDER, effective immediately and continuing until
further orders from this Court, enjoining the (i) National Economic and Development
Authority, (ii) NEDA-Investment Coordination Committee, (iii) Department of
Transportation and Communications, Commission on Information and Communications
Technology, (iv) Telecommunications Office, Bids and Awards for Information and
Communications Technology Committee (ICT), (v) Technical Working Group for ICT, and
all other Operating Units of the DOTC for Information and Communications Technology,
(vi) ZTE Corporation; (vii) Amsterdam Holdings, Inc., and (viii) ARESCOM, Inc., and any
and all persons acting on their behalf from `pursuing, entering into indebtedness,
disbursing funds, and implementing the ZTE-DOTC Broadband Deal and Project' as
prayed for."
NOW THEREFORE, effective immediately and continuing until further orders from
this Court, You, Respondents (i) National Economic and Development Authority, (ii)
NEDA-Investment Coordination Committee, (iii) Department of Transportation and
Communications, Commission on Information and Communications Technology, (iv)
Telecommunications Office, Bids and Awards for Information and Communications
Technology Committee (ICT), (v) Technical Working Group for ICT, and all other
Operating Units of the DOTC for Information and Communications Technology, (vi) ZTE
Corporation; (vii) Amsterdam Holdings, Inc., and (viii) ARESCOM, Inc., and any and all
persons acting on their behalf are hereby ENJOINED from "pursuing, entering into
indebtedness, disbursing funds, and implementing the ZTE-DOTC Broadband Deal and
Project" as prayed for.[15] (Emphasis supplied.)
Petitioners in G.R. Nos. 178830 and 179613 pray that they be furnished certified
true copies of the "contract or agreement covering the NBN project as agreed upon with
ZTE Corporation."  It appears that during one of the Senate hearings on the NBN project,
copies of the supply contract[16] were readily made available to petitioners.[17] Evidently,
the said prayer has been complied with and is, thus, mooted.

When President Gloria Macapagal-Arroyo, acting in her official capacity during the
meeting held on October 2, 2007 in China, informed China's President Hu Jintao that the
Philippine Government had decided not to continue with the ZTE-National Broadband
Network (ZTE-NBN) Project due to several reasons and constraints, there is no doubt
that all the other principal prayers in the three petitions (to annul, set aside, and enjoin
the implementation of the ZTE-NBN Project) had also become moot.

Contrary to petitioners' contentions that these declarations made by officials belonging

to the executive branch on the Philippine Government's decision not to continue with
the ZTE-NBN Project are self-serving, hence, inadmissible, the Court has no alternative
but to take judicial notice of this official act of the President of the Philippines.

Section 1, Rule 129 of the Rules of Court provides:

SECTION 1. Judicial Notice,  when mandatory. -  A court shall take judicial
notice, without introduction of evidence, of the existence and territorial extent of
states, their political history, forms of government and symbols of nationality, the law of
nations, the admiralty and maritime courts of the world and their seals, the political
constitution and history of the Philippines, the official acts of
the legislative, executive and judicial departments of the Philippines, the laws of
nature, the measure of time, and the geographical divisions.  (Emphasis supplied)
Under the rules, it is mandatory and the Court has no alternative but to take
judicial notice of the official acts of the President of the Philippines, who heads the
executive branch of our government.  It is further provided in the above-quoted rule
that the court shall take judicial notice of the foregoing facts without introduction of
evidence.  Since we consider the act of cancellation by President Macapagal-Arroyo of
the proposed ZTE-NBN Project during the meeting of October 2, 2007 with the Chinese
President in China as an official act of the executive department, the Court must take
judicial notice of such official act without need of evidence.

In David v. Macapagal-Arroyo,[18] We took judicial notice of the announcement by the

Office of the President banning all rallies and canceling all permits for public assemblies
following the issuance of Presidential Proclamation No. 1017 and General Order No. 5.

In Estrada v. Desierto,[19] the Court also resorted to judicial notice in resolving the factual
ingredient of the petition.

Moreover, under Section 2, paragraph (m) of Rule 131 of the Rules of Court, the official
duty of the executive officials[20] of informing this Court of the government's decision
not to continue with the ZTE-NBN Project is also presumed to have been regularly
performed, absent proof to the contrary.  Other than petitioner AHI's unsavory
insinuation in its comment, the Court finds no factual or legal basis to disregard this
disputable presumption in the present instance.

Concomitant to its fundamental task as the ultimate citadel of justice and legitimacy is
the judiciary's role of strengthening political stability indispensable to progress and
national development.  Pontificating on issues which no longer legitimately constitute
an actual case or controversy will do more harm than good to the nation as a whole.
Wise exercise of judicial discretion militates against resolving the academic issues, as
petitioners want this Court to do.   This is especially true where, as will be further
discussed, the legal issues raised cannot be resolved without previously establishing the
factual basis or antecedents.

Judicial power presupposes actual controversies, the very antithesis    of mootness.  In

the absence of actual justiciable controversies or disputes, the Court generally opts to
refrain from deciding moot issues.  Where there is no more live subject of controversy,
the Court ceases to have a reason to render any ruling or make any pronouncement.

Kapag wala nang buhay na kaso, wala nang dahilan para magdesisyon ang Husgado.

In Republic Telecommunications Holdings, Inc. v. Santiago,[21] the lone issue tackled by

the Court of Appeals (CA) was whether the Securities Investigation and Clearing
Department (SICD) and Securities and Exchange Commission (SEC) en banc committed
reversible error in issuing and upholding, respectively, the writ of preliminary injunction.
The writ enjoined the execution of the questioned agreements between Qualcomm, Inc.
and Republic Telecommunications Holdings, Inc. (RETELCOM).  The implementation of
the agreements was restrained through the assailed orders of the SICD and the SEC en
banc which, however, were nullified by the CA decision.  Thus, RETELCOM elevated the
matter to this Court praying for the reinstatement of the writ of preliminary injunction
of the SICD and the SEC en banc.  However, before the matter was finally resolved,
Qualcomm, Inc. withdrew from the negotiating table.  Its withdrawal had thwarted the
execution and enforcement of the contracts.  Thus, the resolution of whether the
implementation of said agreements should be enjoined became no longer necessary.

Equally applicable to the present case is the Court ruling in the above-cited Republic
Telecommunications.  There We held, thus:
Indeed, the instant petition, insofar as it assails the Court of Appeals' Decision
nullifying the orders of the SEC en banc and the SICD, has been rendered moot and
academic.  To rule, one way or the other, on the correctness of the questioned orders of
the SEC en banc and the SICD will be indulging in a theoretical exercise that has no
practical worth in view of the supervening event.

The rule is well-settled that for a court to exercise its power of adjudication, there must
be an actual case or controversy - one which involves a conflict of legal rights, an
assertion of opposite legal claims susceptible of judicial resolution; the case must not be
moot or academic or based on extra-legal or other similar considerations not cognizable
by a court of justice.  Where the issue has become moot and academic, there is no
justiciable controversy, and an adjudication thereon would be of no practical use or
value as courts do not sit to adjudicate mere academic questions to satisfy scholarly
interest, however intellectually challenging.

In the ultimate analysis, petitioners are seeking the reinstatement of the writ of
injunction to prevent the concerned parties from pushing through with transactions
with Qualcomm, Inc.  Given that Qualcomm, Inc. is no longer interested in pursuing the
contracts, there is no actual substantial relief to which petitioners would be entitled and
which would be negated by the dismissal of the petition.

The Court likewise finds it unnecessary to rule whether the assailed Court of Appeals'
Decision had the effect of overruling the Court's Resolution dated 29 January 1999,
which set aside the TRO issued by the appellate court.

A ruling on the matter practically partakes of a mere advisory opinion, which falls
beyond the realm of judicial review.  The exercise of the power of judicial review is
limited to actual cases and controversies. Courts have no authority to pass upon issues
through advisory opinions or to resolve hypothetical or feigned problems.

While there were occasions when the Court passed upon issues although supervening
events had rendered those petitions moot and academic, the instant case does not fall
under the exceptional cases.  In those cases, the Court was persuaded to resolve moot
and academic issues to formulate guiding and controlling constitutional principles,
precepts, doctrines or rules for future guidance of both bench and bar.

In the case at bar, the resolution of whether a writ of preliminary injunction may be
issued to prevent the implementation of the assailed contracts calls for an appraisal of
factual considerations which are peculiar only to the transactions and parties involved in
this controversy.  Except for the determination of whether petitioners are entitled to a
writ of preliminary injunction which is now moot, the issues raised in this petition do not
call for a clarification of any constitutional principle or the interpretation of any
statutory provision.[22]
Secondly, even assuming that the Court will choose to disregard the foregoing
considerations and brush aside mootness, the Court cannot completely rule on the
merits of the case because the resolution of the three petitions involves settling factual
issues which definitely requires reception of evidence. There is not an iota of doubt
that this may not be done by this Court in the first instance because, as has been
stated often enough, this Court is not a trier of facts.

Ang pagpapasiya sa tatlong petisyon ay nangangailangan ng paglilitis na hindi

gawain ng Hukumang ito.

Respondent ZTE, in its Comment in G.R. No. 178830,[23] correctly pointed out that since
petitioner Suplico filed his petition directly with this Court, without prior factual findings
made by any lower court, a determination of pertinent and relevant facts is needed. ZTE
enumerated some of these factual issues, to wit: 
(1 Whether an executive agreement has been reached between the Philippine and
) Chinese governments over the NBN Project;
(2 Whether the ZTE Supply Contract was entered into by the Republic of the Philippines,
) through the DOTC, and ZTE International pursuant to, and as an integral part of, the executive
agreement;
(3 Whether a loan agreement for the NBN Project has actually been executed;
)
(4 Whether the Philippine government required that the NBN Project be completed
) under a Build-Operate-and-Transfer Scheme;
(5 Whether the AHI proposal complied with the requirements for an unsolicited
) proposal under the BOT Law;
(6 Whether the Philippine government has actually earmarked public finds for
) disbursement under the ZTE Supply Contract; and
(7 Whether the coverage of the NBN Project to be supplied under the ZTE Supply
) Contract is more extensive than that under the AHI proposal or such other proposal
submitted therefor.[24]
Definitely, some very specific reliefs prayed for in both G.R. Nos. 178830 and
179613 require prior determination of facts before pertinent legal issues could be
resolved and specific reliefs granted.

In G.R. No. 178830, petitioner seeks to annul and set aside the award of the ZTE-DOTC
Broadband Deal and compel public respondents to forthwith comply with pertinent
provisions of law regarding procurement of government ICT contracts and public
bidding for the NBN contract.

In G.R. No. 179613,  petitioners also pray that the Court annul and set aside the
award of the contract for the national broadband network to respondent ZTE
Corporation, upon the ground that said contract, as well as the procedures resorted to
preparatory to the execution thereof, is contrary to the Constitution, to law and to
public policy.  They also ask the Court to compel public respondent to forthwith comply
with pertinent provisions of law regarding procurement of government infrastructure
projects, including public bidding for said contract to undertake the construction of the
national broadband network.

It is simply impossible for this Court "to annul and set aside the award of the ZTE-DOTC
Broadband Deal" without any evidence to support a prior factual finding pointing to any
violation of law that could lead to such annulment order.  For sure, the Supreme Court is
not the proper venue for this factual matter to be threshed out.

Thirdly, petitioner Suplico in G.R. No. 178830 prayed that this Court order "public
respondents to forthwith comply with pertinent provisions of law regarding
procurement of government ICT contracts and public bidding for the NBN
contract."[25]   It would be too presumptuous on the part of the Court to summarily
compel public respondents to comply with pertinent provisions of law regarding
procurement of government infrastructure projects without any factual basis or prior
determination of very particular violations committed by specific government officials of
the executive branch.  For the Court to do so would amount to a breach of the norms of
comity among co-equal branches of government.  A perceived error cannot be corrected
by committing another error.  Without proper evidence, the Court cannot just presume
that the executive did not comply with procurement laws.  Should the Court allow itself
to fall into this trap, it would plainly commit grave error itself.

Magiging kapangahasan sa Hukumang ito na pilitin ang mga pinipetisyon na

tumalima sa batas sa pangongontrata ng pamahalaan kung wala pang pagtitiyak o
angkop na ebidensiya ng nagawang paglabag dito.

Let it be clarified that the Senate investigation in aid of legislation cannot be the basis of
Our decision which requires a judicial finding of facts.

Justice Antonio T. Carpio takes the view that the National Broadband Network Project
should be declared null and void.  The foregoing threefold reasons would suffice to
address the concern of Our esteemed colleague.

The Court is, therefore, constrained to dismiss the petitions and deny them due course
because of mootness and because their resolution requires reception of evidence which
cannot be done in an original petition brought before the Supreme Court.

WHEREFORE, the petitions are DISMISSED. The Temporary Restraining Order issued on

September 11, 2007 is DISSOLVED.

SO ORDERED.

THIRD DIVISION
[ G.R. No. 160236, October 16, 2009 ]
"G" HOLDINGS, INC., PETITIONER, VS. NATIONAL MINES AND ALLIED
WORKERS UNION LOCAL 103 (NAMAWU); SHERIFFS RICHARD H.
APROSTA AND ALBERTO MUNOZ, ALL ACTING SHERIFFS;
DEPARTMENT OF LABOR AND EMPLOYMENT, REGION VI, BACOLOD
DISTRICT OFFICE, BACOLOD CITY, RESPONDENTS.
 DECISION

NACHURA, J.:

Before this Court is a petition for review on certiorari under Rule 45 of the Rules of
Court assailing the October 14, 2003 Decision[1] of the Court of Appeals (CA) in CA-
G.R. SP No. 75322.

The Facts

The petitioner, "G" Holdings, Inc. (GHI), is a domestic corporation primarily engaged in
the business of owning and holding shares of stock of different companies.[2] It was
registered with the Securities and Exchange Commission on August 3, 1992. Private
respondent, National Mines and Allied Workers Union Local 103 (NAMAWU), was the
exclusive bargaining agent of the rank and file employees of Maricalum Mining
Corporation (MMC),[3] an entity operating a copper mine and mill complex at Sipalay,
Negros Occidental.[4]

MMC was incorporated by the Development Bank of the Philippines (DBP) and the
Philippine National Bank (PNB) on October 19, 1984, on account of their foreclosure of
Marinduque Mining and Industrial Corporation's assets. MMC started its commercial
operations in August 1985. Later, DBP and PNB transferred it to the National
Government for disposition or privatization because it had become a non-performing
asset.[5]

On October 2, 1992, pursuant to a Purchase and Sale Agreement[6] executed between GHI

and Asset Privatization Trust (APT), the former bought ninety percent (90%) of MMC's
shares and financial claims.[7] These financial claims were converted into three
Promissory Notes[8] issued by MMC in favor of GHI totaling P500M and secured by
mortgages over MMC's properties. The notes, which were similarly worded except for
their amounts, read as follows:

PROMISSORY NOTE

AMOUNT - Php114,715,360.00     [Php186,550,560.00 in the second

                                                         note, and Php248,734,080.00 in the
                                                         third note.]

MAKATI, METRO MANILA, PHILIPPINES, October 2, 1992

For Value Received, MARICALUM MINING CORPORATION (MMC) with postal
address at 4th Floor, Manila Memorial Park Bldg., 2283 Pasong Tamo Extension, Makati,
Metro Manila, Philippines, hereby promises to pay "G" HOLDINGS, INC., at its office at
Phimco Compound, F. Manalo Street, Punta, Sta. Ana, Manila, the amount of PESOS
ONE HUNDRED FOURTEEN MILLION, SEVEN HUNDRED FIFTEEN
THOUSAND AND THREE HUNDRED SIXTY (Php114,715,360.00) ["PESOS ONE
HUNDRED EIGHTY SIX MILLION FIVE HUNDRED FIFTY THOUSAND FIFE
HUNDRED AND SIXTY (Php186,550,560.00)" in the second note, and "PESOS TWO
HUNDRED FORTY EIGHT MILLION, SEVEN HUNDRED THIRTY FOUR
THOUSAND AND EIGHTY (Php248,734,080.00)" in the third note], PHILIPPINE
CURRENCY, on or before October 2, 2002. Interest shall accrue on the amount of this
Note at a rate per annum equal to the interest of 90-day Treasury Bills prevailing on the
Friday preceding the maturity date of every calendar quarter.

As collateral security, MMC hereby establishes and constitutes in favor of "G"

HOLDINGS, INC., its successors and/or assigns:

1. A mortgage over certain parcels of land, more particularly listed and

described in the Sheriff's Certificate of Sale dated September 7, 1984 issued
by the Ex-Officio Provincial Sheriff of Negros Occidental, Rolando V.
Ramirez, with office at Bacolod City following the auction sale conducted
pursuant to the provisions of Act 3135, a copy of which certificate of sale is
hereto attached as Annex "A" and made an integral part hereof;

2. A chattel mortgage over assets and personal properties more particularly

listed and described in the Sheriff's Certificate of Sale dated September 7,
1984 issued by the Ex-Officio Provincial Sheriff of Negros Occidental,
Rolando V. Ramirez, with office at Bacolod City following the auction
conducted pursuant to the provisions of Act 1508, a copy of which
Certificate of Sale is hereto attached as Annex "B" and made an integral
part hereof.

3. Mortgages over assets listed in APT Specific Catalogue GC-031 for MMC,
a copy of which Catalogue is hereby made an integral part hereof by way of
reference, as well as assets presently in use by MMC but which are not
listed or included in paragraphs 1 and 2 above and shall include all assets
that may hereinafter be acquired by MMC.

MARICALUM MINING CORPORATION

(Maker)

x x x x[9]
Upon the signing of the Purchase and Sale Agreement and upon the full satisfaction of
the stipulated down payment, GHI immediately took physical possession of the mine site
and its facilities, and took full control of the management and operation of MMC.[10]

Almost four years thereafter, or on August 23, 1996, a labor dispute (refusal to bargain
collectively and unfair labor practice) arose between MMC and NAMAWU, with the
latter eventually filing with the National Conciliation and Mediation Board of Bacolod
City a notice of strike.[11] Then Labor Secretary, now Associate Justice of this Court,
Leonardo A. Quisumbing, later assumed jurisdiction over the dispute and ruled in favor
of NAMAWU. In his July 30, 1997 Order in OS-AJ-10-96-014 (Quisumbing Order),
Secretary Quisumbing declared that the lay-off (of workers) implemented on May 7,
1996 and October 7, 1996 was illegal and that MMC committed unfair labor practice. He
then ordered the reinstatement of the laid-off workers, with payment of full backwages
and benefits, and directed the execution of a new collective bargaining agreement (CBA)
incorporating the terms and conditions of the previous CBA providing for an annual
increase in the workers' daily wage.[12] In two separate cases—G.R. Nos. 133519 and
138996—filed with this Court, we sustained the validity of the Quisumbing Order, which
became final and executory on January 26, 2000.[13]

On May 11, 2001, then Acting Department of Labor and Employment (DOLE) Secretary,
now also an Associate Justice of this Court, Arturo D. Brion, on motion of NAMAWU,
directed the issuance of a partial writ of execution (Brion Writ), and ordered the DOLE
sheriffs to proceed to the MMC premises for the execution of the same. [14] Much later, in
2006, this Court, in G.R. Nos. 157696-97, entitled Maricalum Mining Corporation v.
Brion and NAMAWU,[15] affirmed the propriety of the issuance of the Brion Writ.

The Brion Writ was not fully satisfied because MMC's resident manager resisted its
enforcement.[16] On motion of NAMAWU, then DOLE Secretary Patricia A. Sto. Tomas
ordered the issuance of the July 18, 2002 Alias Writ of Execution and Break-Open Order
(Sto. Tomas Writ).[17] On October 11, 2002, the respondent acting sheriffs, the members
of the union, and several armed men implemented the Sto. Tomas Writ, and levied on the
properties of MMC located at its compound in Sipalay, Negros Occidental. [18]

On October 14, 2002, GHI filed with the Regional Trial Court (RTC) of Kabankalan
City, Negros Occidental, Special Civil Action (SCA) No. 1127 for Contempt with Prayer
for the Issuance of a Temporary Restraining Order (TRO) and Writ of Preliminary
Injunction and to Nullify the Sheriff's Levy on Properties.[19] GHI contended that the
levied properties were the subject of a Deed of Real Estate and Chattel Mortgage, dated
September 5, 1996[20] executed by MMC in favor of GHI to secure the aforesaid P550M
promissory notes; that this deed was registered on February 24, 2000;[21] and that the
mortgaged properties were already extrajudicially foreclosed in July 2001 and sold to
GHI as the highest bidder on December 3, 2001, as evidenced by the Certificate of Sale
dated December 4, 2001.[22]

The trial court issued ex parte a TRO effective for 72 hours, and set the hearing on the
application for a writ of injunction.[23] On October 17, 2002, the trial court ordered the
issuance of a Writ of Injunction (issued on October 18, 2002)[24] enjoining the DOLE
sheriffs from further enforcing the Sto. Tomas Writ and from conducting any public sale
of the levied-on properties, subject to GHI's posting of a P5M bond.[25]

Resolving, among others, NAMAWU's separate motions for the reconsideration of the
injunction order and for the dismissal of the case, the RTC issued its December 4, 2002
Omnibus Order,[26] the dispositive portion of which reads:

WHEREFORE, premises considered, respondent NAMAWU Local 103's Motion for

Reconsideration dated October 23, 2002 for the reconsideration of the Order of this Court
directing the issuance of Writ of Injunction prayed for by petitioner and the Order dated
October 18, 2002 approving petitioner's Injunction Bond in the amount of P5,000,000.00
is hereby DENIED.

Respondent's Motion to Dismiss as embodied in its Opposition to Extension of

Temporary Restraining Order and Issuance of Writ of Preliminary Injunction with
Motion to Dismiss and Suspend Period to File Answer dated October 15, 2002 is likewise
DENIED.

Petitioner's Urgent Motion for the return of the levied firearms is GRANTED. Pursuant
thereto, respondent sheriffs are ordered to return the levied firearms and handguns to the
petitioner provided the latter puts [up] a bond in the amount of P332,200.00.

Respondent's lawyer, Atty. Jose Lapak, is strictly warned not to resort again to
disrespectful and contemptuous language in his pleadings, otherwise, the same shall be
dealt with accordingly.

SO ORDERED.[27]

Aggrieved, NAMAWU filed with the CA a petition for certiorari under Rule 65,

assailing the October 17, 18 and December 4, 2002 orders of the RTC.[28]

After due proceedings, on October 14, 2003, the appellate court rendered a Decision
setting aside the RTC issuances and directing the immediate execution of the Sto. Tomas
Writ. The CA ruled, among others, that the circumstances surrounding the execution of
the September 5, 1996 Deed of Real Estate and Chattel Mortgage yielded the conclusion
that the deed was sham, fictitious and fraudulent; that it was executed two weeks after the
labor dispute arose in 1996, but surprisingly, it was registered only on February 24, 2000,
immediately after the Court affirmed with finality the Quisumbing Order. The CA also
found that the certificates of title to MMC's real properties did not contain any annotation
of a mortgage lien, and, suspiciously, GHI did not intervene in the long drawn-out labor
proceedings to protect its right as a mortgagee of virtually all the properties of MMC. [29]

The CA further ruled that the subsequent foreclosure of the mortgage was irregular,
effected precisely to prevent the satisfaction of the judgment against MMC. It noted that
the foreclosure proceedings were initiated in July 2001, shortly after the issuance of the
Brion Writ; and, more importantly, the basis for the extrajudicial foreclosure was not the
failure of MMC to pay the mortgage debt, but its failure "to satisfy any money judgment
against it rendered by a court or tribunal of competent jurisdiction, in favor of any person,
firm or entity, without any legal ground or reason."[30] Further, the CA pierced the veil of
corporate fiction of the two corporations.[31] The dispositive portion of the appellate
court's decision reads:

WHEREFORE, in view of the foregoing considerations, the petition is GRANTED. The

October 17, 2002 and the December 4, 2002 Order of the RTC, Branch 61 of Kabankalan
City, Negros Occidental are hereby ANNULLED and SET ASIDE for having been
issued in excess or without authority. The Writ of Preliminary Injunction issued by the
said court is lifted, and the DOLE Sheriff is directed to immediately enforce the Writ of
Execution issued by the Department of Labor and Employment in the case "In re: Labor
Dispute in Maricalum Mining Corporation" docketed as OS-AJ-10-96-01 (NCMB-RB6-
08-96).[32]

The Issues

Dissatisfied, GHI elevated the case to this Court via the instant petition for review
on certiorari, raising the following issues:

WHETHER OR NOT GHI IS A PARTY TO THE LABOR DISPUTE BETWEEN

NAMAWU AND MMC.

II

WHETHER OR NOT, ASSUMING ARGUENDO THAT THE PERTINENT

DECISION OR ORDER IN THE SAID LABOR DISPUTE BETWEEN MMC AND
NAMAWU MAY BE ENFORCED AGAINST GHI, THERE IS ALREADY A FINAL
DEETERMINATION BY THE SUPREME COURT OF THE RIGHTS OF THE
PARTIES IN SAID LABOR DISPUTE CONSIDERING THE PENDENCY OF G.R.
NOS. 157696-97.

III
WHETHER OR NOT GHI IS THE ABSOLUTE OWNER OF THE PROPERTIES
UNLAWFULLY GARNISHED BY RESPONDENTS SHERIFFS.

IV

WHETHER OR NOT THE HONORABLE HENRY D. ARLES CORRECTLY ISSUED

A WRIT OF INJUNCTION AGAINST THE UNLAWFUL EXECUTIOIN ON GHI'S
PROPERTIES.

WHETHER OR NOT THE VALIDITY OF THE DEED OF REAL AND CHATTEL

MORTGAGE OVER THE SUBJECT PROPERTIES BETWEEN MMC AND GHI
MAY BE COLLATERALLY ATTACKED.

VI

WHETHER OR NOT, ASSUMING ARGUENDO THAT THE VALIDITY OF THE

SAID REAL AND CHATTEL MORTGAGE MAY BE COLLATERALLY
ATTACKED, THE SAID MORTGAGE IS SHAM, FICTITIOUS AND
FRAUDULENT.

VII

WHETHER OR NOT GHI IS A DISTINCT AND SEPARATE CORPORATE ENTITY

FROM MMC.

VIII

WHETHER OR NOT GHI CAN BE PREVENTED THROUGH THE ISSUANCE OF A

RESTRAINING ORDER OR INJUNCTION FROM TAKING POSSESSION OR BE
DISPOSSESSED OF ASSETS PURCHASED BY IT FROM APT.[33]

Stripped of non-essentials, the core issue is whether, given the factual circumstances
obtaining, the RTC properly issued the writ of injunction to prevent the enforcement of
the Sto. Tomas Writ. The resolution of this principal issue, however, will necessitate a
ruling on the following key and interrelated questions:

1. Whether the mortgage of the MMC's properties to GHI was a sham;

2. Whether there was an effective levy by the DOLE upon the MMC's real and
personal properties; and
 3. Whether it was proper for the CA to pierce the veil of corporate fiction between
MMC and GHI.

Our Ruling

Before we delve into an extended discussion of the foregoing issues, it is essential to take
judicial cognizance of cases intimately linked to the present controversy which had
earlier been elevated to and decided by this Court.

Judicial Notice.

Judicial notice must be taken by this Court of its Decision in Maricalum Mining
Corporation v. Hon. Arturo D. Brion and NAMAWU,[34] in which we upheld the right of
herein private respondent, NAMAWU, to its labor claims. Upon the same principle of
judicial notice, we acknowledge our Decision in Republic of the Philippines, through its
trustee, the Asset Privatization Trust v. "G" Holdings, Inc.,[35] in which GHI was
recognized as the rightful purchaser of the shares of stocks of MMC, and thus, entitled to
the delivery of the company notes accompanying the said purchase. These company
notes, consisting of three (3) Promissory Notes, were part of the documents executed in
1992 in the privatization sale of MMC by the Asset Privatization Trust (APT) to GHI.
Each of these notes uniformly contains stipulations "establishing and constituting in
favor of GHI" mortgages over MMC's real and personal properties. The stipulations were
subsequently formalized in a separate document denominated Deed of Real Estate and
Chattel Mortgage on September 5, 1996. Thereafter, the Deed was registered on February
4, 2000.[36]

We find both decisions critically relevant to the instant dispute. In fact, they should have
guided the courts below in the disposition of the controversy at their respective levels. To
repeat, these decisions respectively confirm the right of NAMAWU to its labor
claims[37] and affirm the right of GHI to its financial and mortgage claims over the real
and personal properties of MMC, as will be explained below. The assailed CA decision
apparently failed to consider the impact of these two decisions on the case at bar. Thus,
we find it timely to reiterate that: "courts have also taken judicial notice of previous cases
to determine whether or not the case pending is a moot one or whether or not a previous
ruling is applicable to the case under consideration."[38]

However, the CA correctly assessed that the authority of the lower court to issue the
challenged writ of injunction depends on the validity of the third party's (GHI's) claim of
ownership over the property subject of the writ of execution issued by the labor
department. Accordingly, the main inquiry addressed by the CA decision was whether
GHI could be treated as a third party or a stranger to the labor dispute, whose properties
were beyond the reach of the Writ of Execution dated December 18, 2001. [39]
In this light, all the more does it become imperative to take judicial notice of the two
cases aforesaid, as they provide the necessary perspective to determine whether GHI is
such a party with a valid ownership claim over the properties subject of the writ of
execution. In Juaban v. Espina,[40] we held that "in some instances, courts have also taken
judicial notice of proceedings in other cases that are closely connected to the matter in
controversy. These cases may be so closely interwoven, or so clearly interdependent, as
to invoke a rule of judicial notice." The two cases that we have taken judicial notice of
are of such character, and our review of the instant case cannot stray from the findings
and conclusions therein.

Having recognized these crucial Court rulings, situating the facts in proper perspective,
we now proceed to resolve the questions identified above.

The mortgage
was not a sham.

Republic etc., v. "G" Holdings, Inc. acknowledged the existence of the Purchase and Sale
Agreement between the APT and the GHI, and recounts the facts attendant to that
transaction, as follows:

The series of negotiations between the petitioner Republic of the Philippines, through the
APT as its trustee, and "G" Holdings culminated in the execution of a purchase and sale
agreement on October 2, 1992. Under the agreement, the Republic undertook to sell and
deliver 90% of the entire issued and outstanding shares of MMC, as well as its company
notes, to "G" Holdings in consideration of the purchase price of P673,161,280. It also
provided for a down payment of P98,704,000 with the balance divided into four tranches
payable in installment over a period of ten years."[41]

The "company notes" mentioned therein were actually the very same three (3)
Promissory Notes amounting to P550M, issued by MMC in favor of GHI. As already
adverted to above, these notes uniformly contained stipulations "establishing and
constituting" mortgages over MMC's real and personal properties.

It may be remembered that APT acquired the MMC from the PNB and the DBP. Then, in
compliance with its mandate to privatize government assets, APT sold the aforesaid
MMC shares and notes to GHI. To repeat, this Court has recognized this Purchase and
Sale Agreement in Republic, etc., v. "G" Holdings, Inc.

The participation of the Government, through APT, in this transaction is significant.

Because the Government had actively negotiated and, eventually, executed the
agreement, then the transaction is imbued with an aura of official authority, giving rise to
the presumption of regularity in its execution. This presumption would cover all related
transactional acts and documents needed to consummate the privatization sale, inclusive
of the Promissory Notes. It is obvious, then, that the Government, through APT,
consented to the "establishment and constitution" of the mortgages on the assets of MMC
in favor of GHI, as provided in the notes. Accordingly, the notes (and the stipulations
therein) enjoy the benefit of the same presumption of regularity accorded to government
actions. Given the Government consent thereto, and clothed with the presumption of
regularity, the mortgages cannot be characterized as sham, fictitious or fraudulent.

Indeed, as mentioned above, the three (3) Promissory Notes, executed on October 2,
1992, "established and constituted" in favor of GHI the following mortgages:

1. A mortgage over certain parcels of land, more particularly listed and

described in the Sheriff's Certificate of Sale dated September 7, 1984 issued
by the Ex-Officio Provincial Sheriff of Negros Occidental, Rolando V.
Ramirez, with office at Bacolod City following the auction sale conducted
pursuant to the provisions of Act 3135, a copy of which certificate of sale is
hereto attached as Annex "A" and made an integral part hereof;

2. A chattel mortgage over assets and personal properties more particularly

listed and described in the Sheriff's Certificate of Sale dated September 7,
1984 issued by the Ex-Officio Provincial Sheriff of Negros Occidental,
Rolando V. Ramirez, with office at Bacolod City following the auction
conducted pursuant to the provision of Act 1508, a copy of which
Certificate of Sale is hereto attached as Annex "B" and made an integral
part hereof.

3. Mortgages over assets listed in APT Specific catalogue GC-031 for MMC,
a copy of which Catalogue is hereby made an integral part hereof by way of
reference, as well as assets presently in use by MMC but which are not
listed or included in paragraphs 1 and 2 above and shall include all assets
that may hereinafter be acquired by MMC.[42]

It is difficult to conceive that these mortgages, already existing in 1992, almost four (4)
years before NAMAWU filed its notice of strike, were a "fictitious" arrangement
intended to defraud NAMAWU. After all, they were agreed upon long before the seeds of
the labor dispute germinated.

While it is true that the Deed of Real Estate and Chattel Mortgage was executed only on
September 5, 1996, it is beyond cavil that this formal document of mortgage was merely
a derivative of the original mortgage stipulations contained in the Promissory Notes of
October 2, 1992. The execution of this Deed in 1996 does not detract from, but instead
reinforces, the manifest intention of the parties to "establish and constitute" the mortgages
on MMC's real and personal properties.
Apparently, the move to execute a formal document denominated as the Deed of Real
Estate and Chattel Mortgage came about after the decision of the RTC of Manila in Civil
Case No. 95-76132 became final in mid-1996. This conclusion surfaces when we
consider the genesis of Civil Case No. 95-76132 and subsequent incidents thereto, as
narrated in Republic, etc. v. "G" Holdings, Inc., viz:

Subsequently, a disagreement on the matter of when installment payments should

commence arose between the parties. The Republic claimed that it should be on the
seventh month from the signing of the agreement while "G" Holdings insisted that it
should begin seven months after the fulfillment of the closing conditions.

Unable to settle the issue, "G" Holdings filed a complaint for specific performance and
damages with the Regional Trial Court of Manila, Branch 49, against the Republic to
compel it to close the sale in accordance with the purchase and sale agreement. The
complaint was docketed as Civil Case No. 95-76132.

During the pre-trial, the respective counsels of the parties manifested that the issue
involved in the case was one of law and submitted the case for decision. On June 11,
1996, the trial court rendered its decision. It ruled in favor of "G" Holdings and held:

"In line with the foregoing, this Court having been convinced that the Purchase and Sale
Agreement is indeed subject to the final closing conditions prescribed by Stipulation No.
5.02 and conformably to Rule 39, Section 10 of the Rules of Court, accordingly orders
that the Asset Privatization Trust execute the corresponding Document of Transfer
of the subject shares and financial notes and cause the actual delivery of subject
shares and notes to "G" Holdings, Inc., within a period of thirty (30) days from
receipt of this Decision, and after "G" Holdings Inc., shall have paid in full the entire
balance, at its present value of P241,702,122.86, computed pursuant to the prepayment
provisions of the Agreement. Plaintiff shall pay the balance simultaneously with the
delivery of the Deed of Transfer and actual delivery of the shares and notes.

SO ORDERED."

The Solicitor General filed a notice of appeal on behalf of the Republic on June 28, 1996.
Contrary to the rules of procedure, however, the notice of appeal was filed with the Court
of Appeals (CA), not with the trial court which rendered the judgment appealed from.

No other judicial remedy was resorted to until July 2, 1999 when the Republic, through
the APT, filed a petition for annulment of judgment with the CA. It claimed that the
decision should be annulled on the ground of abuse of discretion amounting to lack of
jurisdiction on the part of the trial court. x x x
Finding that the grounds necessary for the annulment of judgment were inexistent, the
appellate court dismissed the petition. x x x x[43]

With the RTC decision having become final owing to the failure of the Republic to
perfect an appeal, it may have become necessary to execute the Deed of Real Estate and
Chattel Mortgage on September 5, 1996, in order to enforce the trial court's decision of
June 11, 1996. This appears to be the most plausible explanation for the execution of the
Deed of Real Estate and Chattel Mortgage only in September 1996. Even as the parties
had already validly constituted the mortgages in 1992, as explicitly provided in the
Promissory Notes, a specific deed of mortgage in a separate document may have been
deemed necessary for registration purposes. Obviously, this explanation is more logical
and more sensible than the strained conjecture that the mortgage was executed on
September 5, 1996 only for the purpose of defrauding NAMAWU.

It is undeniable that the Deed of Real Estate and Chattel Mortgage was formally
documented two weeks after NAMAWU filed its notice of strike against MMC on
August 23, 1996. However, this fact alone cannot give rise to an adverse inference for
two reasons. First, as discussed above, the mortgages had already been "established and
constituted" as early as October 2, 1992 in the Promissory Notes, showing the clear intent
of the parties to impose a lien upon MMC's properties. Second, the mere filing of a notice
of strike by NAMAWU did not, as yet, vest in NAMAWU any definitive right that could
be prejudiced by the execution of the mortgage deed.

The fact that MMC's obligation to GHI is not reflected in the former's financial
statements—a circumstance made capital of by NAMAWU in order to cast doubt on the
validity of the mortgage deed—is of no moment. By itself, it does not provide a sufficient
basis to invalidate this public document. To say otherwise, and to invalidate the mortgage
deed on this pretext, would furnish MMC a convenient excuse to absolve itself of its
mortgage obligations by adopting the simple strategy of not including the obligations in
its financial statements. It would ignore our ruling in Republic, etc. v. "G" Holdings,
Inc., which obliged APT to deliver the MMC shares and financial notes to GHI. Besides,
the failure of the mortgagor to record in its financial statements its loan obligations is
surely not an essential element for the validity of mortgage agreements, nor will it
independently affect the right of the mortgagee to foreclose.

Contrary to the CA decision, Tanongon v. Samson[44] is not "on all fours" with the instant
case. There are material differences between the two cases. At issue in Tanongon was a
third-party claim arising from a Deed of Absolute Sale executed between Olizon and
Tanongon on July 29, 1997, after the NLRC decision became final and executory on
April 29, 1997. In the case at bar, what is involved is a loan with mortgage agreement
executed on October 2, 1992, well ahead of the union's notice of strike on August 23,
1996. No presumption of regularity inheres in the deed of sale in Tanongon, while the
participation of APT in this case clothes the transaction in 1992 with such a presumption
that has not been successfully rebutted. In Tanongon, the conduct of a full-blown trial led
to the finding—duly supported by evidence—that the voluntary sale of the assets of the
judgment debtor was made in bad faith. Here, no trial was held, owing to the motion to
dismiss filed by NAMAWU, and the CA failed to consider the factual findings made by
this Court in Republic, etc. v. "G" Holdings, Inc. Furthermore, in Tanongon, the claimant
did not exercise his option to file a separate action in court, thus allowing the NLRC
Sheriff to levy on execution and to determine the rights of third-party claimants.[45] In this
case, a separate action was filed in the regular courts by GHI, the third-party claimant.
Finally, the questioned transaction in Tanongon was a plain, voluntary transfer in the
form of a sale executed by the judgment debtor in favor of a dubious third-party, resulting
in the inability of the judgment creditor to satisfy the judgment. On the other hand, this
case involves an involuntary transfer (foreclosure of mortgage) arising from a loan
obligation that well-existed long before the commencement of the labor claims of the
private respondent.

Three other circumstances have been put forward by the CA to support its conclusion that
the mortgage contract is a sham. First, the CA considered it highly suspect that the Deed
of Real Estate and Chattel Mortgage was registered only on February 4, 2000, "three
years after its execution, and almost one month after the Supreme Court rendered its
decision in the labor dispute."[46] Equally suspicious, as far as the CA is concerned, is the
fact that the mortgages were foreclosed on July 31, 2001, after the DOLE had already
issued a Partial Writ of Execution on May 9, 2001.[47] To the appellate court, the timing of
the registration of the mortgage deed was too coincidental, while the date of the
foreclosure signified that it was "effected precisely to prevent the satisfaction of the
judgment awards."[48] Furthermore, the CA found that the mortgage deed itself was
executed without any consideration, because at the time of its execution, all the assets of
MMC had already been transferred to GHI.[49]

These circumstances provided the CA with sufficient justification to apply Article 1387
of the Civil Code on presumed fraudulent transactions, and to declare that the mortgage
deed was void for being simulated and fictitious.[50]

We do not agree. We find this Court's ruling in MR Holdings, Ltd. v. Sheriff
Bajar[51] pertinent and instructive:

Article 1387 of the Civil Code of the Philippines provides:

"Art. 1387. All contracts by virtue of which the debtor alienates property by gratuitous
title are presumed to have been entered into in fraud of creditors, when the donor did not
reserve sufficient property to pay all debts contracted before the donation.

Alienations by onerous title are also presumed fraudulent when made by persons against
whom some judgment has been rendered in any instance or some writ of attachment has
been issued. The decision or attachment need not refer to the property alienated, and need
not have been obtained by the party seeking rescission.

In addition to these presumptions, the design to defraud creditors may be proved in any
other manner recognized by law and of evidence."

This article presumes the existence of fraud made by a debtor. Thus, in the absence of
satisfactory evidence to the contrary, an alienation of a property will be held fraudulent if
it is made after a judgment has been rendered against the debtor making the
alienation. This presumption of fraud is not conclusive and may be rebutted by
satisfactory and convincing evidence. All that is necessary is to establish
affirmatively that the conveyance is made in good faith and for a sufficient and
valuable consideration.

The "Assignment Agreement" and the "Deed of Assignment" were executed for valuable
considerations. Patent from the "Assignment Agreement" is the fact that petitioner
assumed the payment of US$18,453,450.12 to ADB in satisfaction of Marcopper's
remaining debt as of March 20, 1997. Solidbank cannot deny this fact considering that a
substantial portion of the said payment, in the sum of US$13,886,791.06, was remitted in
favor of the Bank of Nova Scotia, its major stockholder.

The facts of the case so far show that the assignment contracts were executed in good
faith. The execution of the "Assignment Agreement" on March 20, 1997 and the "Deed of
Assignment" on December 8,1997 is not the alpha of this case. While the execution of
these assignment contracts almost coincided with the rendition on May 7, 1997 of
the Partial Judgment in Civil Case No. 96-80083 by the Manila RTC, however, there
was no intention on the part of petitioner to defeat Solidbank's claim. It bears reiterating
that as early as November 4, 1992, Placer Dome had already bound itself under a
"Support and Standby Credit Agreement" to provide Marcopper with cash flow support
for the payment to ADB of its obligations. When Marcopper ceased operations on
account of disastrous mine tailings spill into the Boac River and ADB pressed for
payment of the loan, Placer Dome agreed to have its subsidiary, herein petitioner, pay
ADB the amount of US$18,453,450.12.

Thereupon, ADB and Marcopper executed, respectively, in favor of petitioner an

"Assignment Agreement" and a "Deed of Assignment." Obviously, the assignment
contracts were connected with transactions that happened long before the rendition
in 1997 of the Partial Judgment in Civil Case No. 96-80083 by the Manila
RTC. Those contracts cannot be viewed in isolation. If we may add, it is highly
inconceivable that ADB, a reputable international financial organization, will connive
with Marcopper to feign or simulate a contract in 1992 just to defraud Solidbank for its
claim four years thereafter. And it is equally incredible for petitioner to be paying the
huge sum of US$18,453,450.12 to ADB only for the purpose of defrauding Solidbank of
the sum of P52,970,756.89.

It is said that the test as to whether or not a conveyance is fraudulent is — does it

prejudice the rights of creditors? We cannot see how Solidbank's right was prejudiced
by the assignment contracts considering that substantially all of Marcopper's
properties were already covered by the registered "Deed of Real Estate and Chattel
Mortgage" executed by Marcopper in favor of ADB as early as November 11, 1992.
As such, Solidbank cannot assert a better right than ADB, the latter being a
preferred creditor. It is basic that mortgaged properties answer primarily for the
mortgaged credit, not for the judgment credit of the mortgagor's unsecured
creditor. Considering that petitioner assumed Marcopper's debt to ADB, it follows that
Solidbank's right as judgment creditor over the subject properties must give way to that of
the former.[52]

From this ruling in MR Holdings, we can draw parallel conclusions. The execution of the
subsequent Deed of Real Estate and Chattel Mortgage on September 5, 1996 was simply
the formal documentation of what had already been agreed in the seminal transaction (the
Purchase and Sale Agreement) between APT and GHI. It should not be viewed in
isolation, apart from the original agreement of October 2, 1992. And it cannot be denied
that this original agreement was supported by an adequate consideration. The APT was
even ordered by the court to deliver the shares and financial notes of MMC in exchange
for the payments that GHI had made.

It was also about this time, in 1996, that NAMAWU filed a notice of strike to protest
non-payment of its rightful labor claims.[53] But, as already mentioned, the outcome of
that labor dispute was yet unascertainable at that time, and NAMAWU could only have
hoped for, or speculated about, a favorable ruling. To paraphrase MR Holdings, we
cannot see how NAMAWU's right was prejudiced by the Deed of Real Estate and Chattel
Mortgage, or by its delayed registration, when substantially all of the properties of MMC
were already mortgaged to GHI as early as October 2, 1992. Given this reality, the Court
of Appeals had no basis to conclude that this Deed of Real Estate and Chattel Mortgage,
by reason of its late registration, was a simulated or fictitious contract.

The importance of registration and its binding effect is stated in Section 51 of the
Property Registration Decree or Presidential Decree (P.D.) No. 1529, [54] which reads:

SECTION 51. Conveyance and other dealings by registered owner.—An owner of

registered land may convey, mortgage, lease, charge or otherwise deal with the same in
accordance with existing laws. He may use such forms, deeds, mortgages, leases or other
voluntary instrument as are sufficient in law. But no deed, mortgage, lease or other
voluntary instrument, except a will purporting to convey or effect registered land, shall
take effect as a conveyance or bind the land, but shall operate only as a contract between
the parties and as evidence of authority to the Registry of Deeds to make registration.
The act of registration shall be the operative act to convey or affect the land insofar as
third persons are concerned, and in all cases under this Decree, the registration shall be
made in the Office of the Register of Deeds for the province or the city where the land
lies.[55]

Under the Torrens system, registration is the operative act which gives validity to the
transfer or creates a lien upon the land. Further, entrenched in our jurisdiction is the
doctrine that registration in a public registry creates constructive notice to the whole
world.[56] Thus, Section 51 of Act No. 496, as amended by Section 52 of P.D. No. 1529,
provides:

SECTION 52. Constructive notice upon registration.—Every conveyance, mortgage,

lease, lien, attachment, order, judgment, instrument or entry affecting registered land
shall, if registered, filed or entered in the Office of the Register of Deeds for the province
or city where the land to which it relates lies, be constructive notice to all persons from
the time of such registering, filing or entering.

But, there is nothing in Act No. 496, as amended by P.D. No. 1529, that imposes a period
within which to register annotations of "conveyance, mortgage, lease, lien, attachment,
order, judgment, instrument or entry affecting registered land." If liens were not so
registered, then it "shall operate only as a contract between the parties and as evidence of
authority to the Registry of Deeds to make registration." If registered, it "shall be the
operative act to convey or affect the land insofar as third persons are concerned." The
mere lapse of time from the execution of the mortgage document to the moment of its
registration does not affect the rights of a mortgagee.

Neither will the circumstance of GHI's foreclosure of MMC's properties on July 31, 2001,
or after the DOLE had already issued a Partial Writ of Execution on May 9, 2001 against
MMC, support the conclusion of the CA that GHI's act of foreclosing on MMC's
properties was "effected to prevent satisfaction of the judgment award." GHI's mortgage
rights, constituted in 1992, antedated the Partial Writ of Execution by nearly ten (10)
years. GHI's resort to foreclosure was a legitimate enforcement of a right to liquidate
a bona fide debt. It was a reasonable option open to a mortgagee which, not being a party
to the labor dispute between NAMAWU and MMC, stood to suffer a loss if it did not
avail itself of the remedy of foreclosure.

The well-settled rule is that a mortgage lien is inseparable from the property mortgaged.
[57]
 While it is true that GHI's foreclosure of MMC's mortgaged properties may have had
the "effect to prevent satisfaction of the judgment award against the specific mortgaged
property that first answers for a mortgage obligation ahead of any subsequent creditors,"
that same foreclosure does not necessarily translate to having been "effected to prevent
satisfaction of the judgment award" against MMC.
Likewise, we note the narration of subsequent facts contained in the Comment of the
Office of the Solicitor General. Therein, it is alleged that after the Partial Writ of
Execution was issued on May 9, 2001, a motion for reconsideration was filed by MMC;
that the denial of the motion was appealed to the CA; that when the appeal was dismissed
by the CA on January 24, 2002, it eventually became the subject of a review petition
before this Court, docketed as G.R. No. 157696; and that G.R. No. 157696 was decided
by this Court only on February 9, 2006.

This chronology of subsequent events shows that February 9, 2006 would have been the
earliest date for the unimpeded enforcement of the Partial Writ of Execution, as it was
only then that this Court resolved the issue. This happened four and a half years after July
31, 2001, the date when GHI foreclosed on the mortgaged properties. Thus, it is not
accurate to say that the foreclosure made on July 31, 2001 was "effected [only] to prevent
satisfaction of the judgment award."

We also observe the error in the CA's finding that the 1996 Deed of Real Estate and
Chattel Mortgage was not supported by any consideration since at the time the deed was
executed, "all the real and personal property of MMC had already been transferred in
the hands of G Holdings."[58] It should be remembered that the Purchase and Sale
Agreement between GHI and APT involved large amounts (P550M) and even spawned a
subsequent court action (Civil Case No. 95-76132, RTC of Manila). Yet, nowhere in the
Agreement or in the RTC decision is there any mention of real and personal properties of
MMC being included in the sale to GHI in 1992. These properties simply served as
mortgaged collateral for the 1992 Promissory Notes.[59] The Purchase and Sale Agreement
and the Promissory Notes themselves are the best evidence that there was ample
consideration for the mortgage.

Thus, we must reject the conclusion of the CA that the Deed of Real Estate and Chattel
Mortgage executed in 1996 was a simulated transaction.

On the issue of whether there

had been an effective levy upon
the properties of GHI.

The well-settled principle is that the rights of a mortgage creditor over the mortgaged
properties are superior to those of a subsequent attaching creditor. In Cabral v.
Evangelista,[60] this Court declared that:

Defendants-appellants purchase of the mortgaged chattels at the public sheriff's sale and
the delivery of the chattels to them with a certificate of sale did not give them a superior
right to the chattels as against plaintiffs-mortgagees. Rule 39, Section 22 of the old Rules
of Court (now Rule 39, Section 25 of the Revised Rules), cited by appellants precisely
provides that "the sale conveys to the purchaser all the right which the debtor had in such
property on the day the execution or attachment was levied." It has long been settled by
this Court that "The right of those who so acquire said properties should not and can not
be superior to that of the creditor who has in his favor an instrument of mortgage
executed with the formalities of the law, in good faith, and without the least indication of
fraud. This is all the more true in the present case, because, when the plaintiff purchased
the automobile in question on August 22, 1933, he knew, or at least, it is presumed that
he knew, by the mere fact that the instrument of mortgage, Exhibit 2, was registered in
the office of the register of deeds of Manila, that said automobile was subject to a
mortgage lien. In purchasing it, with full knowledge that such circumstances existed, it
should be presumed that he did so, very much willing to respect the lien existing thereon,
since he should not have expected that with the purchase, he would acquire a better right
than that which the vendor then had." In another case between two mortgagees, we held
that "As between the first and second mortgagees, therefore, the second mortgagee has at
most only the right to redeem, and even when the second mortgagee goes through the
formality of an extrajudicial foreclosure, the purchaser acquires no more than the right of
redemption from the first mortgagee." The superiority of the mortgagee's lien over that of
a subsequent judgment creditor is now expressly provided in Rule 39, Section 16 of the
Revised Rules of Court, which states with regard to the effect of levy on execution as to
third persons that "The levy on execution shall create a lien in favor of the judgment
creditor over the right, title and interest of the judgment debtor in such property at the
time of the levy, subject to liens or encumbrances then existing."

Even in the matter of possession, mortgagees over chattel have superior, preferential and
paramount rights thereto, and the mortgagor has mere rights of redemption.[61]

Similar rules apply to cases of mortgaged real properties that are registered. Since the
properties were already mortgaged to GHI, the only interest remaining in the mortgagor
was its right to redeem said properties from the mortgage. The right of redemption was
the only leviable or attachable property right of the mortgagor in the mortgaged real
properties. We have held that —

The main issue in this case is the nature of the lien of a judgment creditor, like the
petitioner, who has levied an attachment on the judgment debtor's (CMI) real properties
which had been mortgaged to a consortium of banks and were subsequently sold to a
third party, Top Rate.

xxxx

The sheriff's levy on CMI's properties, under the writ of attachment obtained by the
petitioner, was actually a levy on the interest only of the judgment debtor CMI on those
properties. Since the properties were already mortgaged to the consortium of banks, the
only interest remaining in the mortgagor CMI was its right to redeem said properties from
the mortgage. The right of redemption was the only leviable or attachable property right
of CMI in the mortgaged real properties. The sheriff could not have attached the
properties themselves, for they had already been conveyed to the consortium of banks by
mortgage (defined as a "conditional sale"), so his levy must be understood to have
attached only the mortgagor's remaining interest in the mortgaged property — the right to
redeem it from the mortgage.[62]

xxxx

There appears in the record a factual contradiction relating to whether the foreclosure by
GHI on July 13, 2001[63] over some of the contested properties came ahead of the levy
thereon, or the reverse. NAMAWU claims that the levy on two trucks was effected on
June 22, 2001,[64] which GHI disputes as a misstatement because the levy was attempted
on July 18, 2002, and not 2001[65] What is undisputed though is that the mortgage of GHI
was registered on February 4, 2000,[66] well ahead of any levy by NAMAWU. Prior
registration of a lien creates a preference, as the act of registration is the operative act that
conveys and affects the land,[67] even against subsequent judgment creditors, such as
respondent herein. Its registration of the mortgage was not intended to defraud
NAMAWU of its judgment claims, since even the courts were already judicially aware of
its existence since 1992. Thus, at that moment in time, with the registration of the
mortgage, either NAMAWU had no properties of MMC to attach because the same had
been previously foreclosed by GHI as mortgagee thereof; or by virtue of the DOLE's levy
to enforce NAMAWU's claims, the latter's rights are subject to the notice of the
foreclosure on the subject properties by a prior mortgagee's right. GHI's mortgage right
had already been registered by then, and "it is basic that mortgaged properties answer
primarily for the mortgaged credit, not for the judgment credit of the mortgagor's
unsecured creditor."[68]

On the issue of piercing the

veil of corporate fiction.

The CA found that:

"Ordinarily, the interlocking of directors and officers in two different corporations is not
a conclusive indication that the corporations are one and the same for purposes of
applying the doctrine of piercing the veil of corporate fiction. However, when the legal
fiction of the separate corporate personality is abused, such as when the same is used for
fraudulent or wrongful ends, the courts have not hesitated to pierce the corporate veil
(Francisco vs. Mejia, 362 SCRA 738). In the case at bar, the Deed of Real Estate and
Chattel Mortgage was entered into between MMC and G Holdings for the purpose of
evading the satisfaction of the legitimate claims of the petitioner against MMC. The
notion of separate personality is clearly being utilized by the two corporations to
perpetuate the violation of a positive legal duty arising from a final judgment to the
prejudice of the petitioner's right."[69]
Settled jurisprudence[70] has it that -

"(A) corporation, upon coming into existence, is invested by law with a personality
separate and distinct from those persons composing it as well as from any other legal
entity to which it may be related. By this attribute, a stockholder may not, generally, be
made to answer for acts or liabilities of the said corporation, and vice versa. This separate
and distinct personality is, however, merely a fiction created by law for convenience and
to promote the ends of justice. For this reason, it may not be used or invoked for ends
subversive to the policy and purpose behind its creation or which could not have been
intended by law to which it owes its being. This is particularly true when the fiction is
used to defeat public convenience, justify wrong, protect fraud, defend crime,
confuse legitimate legal or judicial issues, perpetrate deception or otherwise
circumvent the law. This is likewise true where the corporate entity is being used as an
alter ego, adjunct, or business conduit for the sole benefit of the stockholders or of
another corporate entity. In all these cases, the notion of corporate entity will be
pierced or disregarded with reference to the particular transaction involved.

Given this jurisprudential principle and the factual circumstances obtaining in this case,
we now ask: Was the CA correct in piercing the veil of corporate identity of GHI and
MMC?

In our disquisition above, we have shown that the CA's finding that there was a
"simulated mortgage" between GHI and MMC to justify a wrong or protect a fraud has
struggled vainly to find a foothold when confronted with the ruling of this Court
in Republic v. "G" Holdings, Inc.

The negotiations between the GHI and the Government--through APT, dating back to
1992--culminating in the Purchase and Sale Agreement, cannot be depicted as a contrived
transaction. In fact, in the said Republic, etc., v. "G" Holdings, Inc., this Court adjudged
that GHI was entitled to its rightful claims─ not just to the shares of MMC itself, or just
to the financial notes that already contained the mortgage clauses over MMCs disputed
assets, but also to the delivery of those instruments. Certainly, we cannot impute to this
Court's findings on the case any badge of fraud. Thus, we reject the CA's conclusion that
it was right to pierce the veil of corporate fiction, because the foregoing circumstances
belie such an inference. Furthermore, we cannot ascribe to the Government, or the APT
in particular, any undue motive to participate in a transaction designed to perpetrate
fraud. Accordingly, we consider the CA interpretation unwarranted.

We also cannot agree that the presumption of fraud in Article 1387 of the Civil Code
relative to property conveyances, when there was already a judgment rendered or a writ
of attachment issued, authorizes piercing the veil of corporate identity in this case. We
find that Article 1387 finds less application to an involuntary alienation such as the
foreclosure of mortgage made before any final judgment of a court. We thus hold that
when the alienation is involuntary, and the foreclosure is not fraudulent because the
mortgage deed has been previously executed in accordance with formalities of law, and
the foreclosure is resorted to in order to liquidate a bona fide debt, it is not the alienation
by onerous title contemplated in Article 1387 of the Civil Code wherein fraud is
presumed.

Since the factual antecedents of this case do not warrant a finding that the mortgage and
loan agreements between MMC and GHI were simulated, then their separate personalities
must be recognized. To pierce the veil of corporate fiction would require that their
personalities as creditor and debtor be conjoined, resulting in a merger of the
personalities of the creditor (GHI) and the debtor (MMC) in one person, such that the
debt of one to the other is thereby extinguished. But the debt embodied in the 1992
Financial Notes has been established, and even made subject of court litigation (Civil
Case No. 95-76132, RTC Manila). This can only mean that GHI and MMC have separate
corporate personalities.

Neither was MMC used merely as an alter ego, adjunct, or business conduit for the sole
benefit of GHI, to justify piercing the former's veil of corporate fiction so that the latter
could be held liable to claims of third-party judgment creditors, like NAMAWU. In this
regard, we find American jurisprudence persuasive. In a decision by the Supreme Court
of New York[71] bearing upon similar facts, the Court denied piercing the veil of corporate
fiction to favor a judgment creditor who sued the parent corporation of the debtor,
alleging fraudulent corporate asset-shifting effected after a prior final judgment. Under a
factual background largely resembling this case at bar, viz:

In this action, plaintiffs seek to recover the balance due under judgments they obtained
against Lake George Ventures Inc. (hereinafter LGV), a subsidiary of defendant that was
formed to develop the Top O' the World resort community overlooking Lake George, by
piercing the corporate veil or upon the theory that LGV's transfer of certain assets
constituted fraudulent transfers under the Debtor and Creditor Law. We previously
upheld Supreme Court's denial of defendant's motion for summary judgment dismissing
the complaint (252 A.D.2d 609, 675 N.Y.S.2d 234) and the matter proceeded to a nonjury
trial. Supreme Court thereafter rendered judgment in favor of defendant upon its findings
that, although defendant dominated LGV, it did not use that domination to commit a
fraud or wrong on plaintiffs. Plaintiffs appealed.

The trial evidence showed that LGV was incorporated in November 1985. Defendant's
principal, Francesco Galesi, initially held 90% of the stock and all of the stock was
ultimately transferred to defendant. Initial project funding was provided through a $2.5
million loan from Chemical Bank, secured by defendant's guarantee of repayment of the
loan and completion of the project. The loan proceeds were utilized to purchase the real
property upon which the project was to be established. Chemical Bank thereafter loaned
an additional $3.5 million to LGV, again guaranteed by defendant, and the two loans
were consolidated into a first mortgage loan of $6 million. In 1989, the loan was
modified by splitting the loan into a $1.9 term note on which defendant was primary
obligor and a $4.1 million project note on which LGV was the obligor and defendant was
a guarantor.

Due to LGV's lack of success in marketing the project's townhouses and in order to

protect itself from the exercise of Chemical Bank's enforcement remedies, defendant
was forced to make monthly installments of principal and interest on LGV's behalf.
Ultimately, defendant purchased the project note from Chemical Bank for $3.1 million,
paid the $1.5 million balance on the term note and took an assignment of the first
mortgage on the project's realty. After LGV failed to make payments on the indebtedness
over the course of the succeeding two years, defendant brought an action to foreclose its
mortgage. Ultimately, defendant obtained a judgment of foreclosure and sale in the
amount of $6,070,246.50. Defendant bid in the property at the foreclosure sale and
thereafter obtained a deficiency judgment in the amount of $3,070,246.50.

Following the foreclosure sale, LGV transferred to defendant all of the shares of Top of
the World Water Company, a separate entity that had been organized to construct and
operate the water supply and delivery system for the project, in exchange for a $950,000
reduction in the deficiency judgment.

the U.S. Supreme Court of New York held—

Based on the foregoing, and accepting that defendant exercised complete domination and
control over LGV, we are at a loss as to how plaintiffs perceive themselves to have been
inequitably affected by defendant's foreclosure action against LGV, by LGV's divestiture
of the water company stock or the sports complex property, or by defendant's transfer to
LGV of a third party's uncollectible note, accomplished solely for tax purposes. It is
undisputed that LGV was, and for some period of time had been, unable to meet its
obligations and, at the time of the foreclosure sale, liens against its property
exceeded the value of its assets by several million dollars, even including the water
company and sports complex at the values plaintiffs would assign to them. In fact,
even if plaintiffs' analysis were utilized to eliminate the entire $3 million deficiency
judgment, the fact remains that subordinate mortgages totaling nearly an additional
$2 million have priority over plaintiffs' judgments.

As properly concluded by Supreme Court, absent a finding of any inequitable

consequence to plaintiffs, both causes of action pleaded in the amended complaint
must fail. Fundamentally, a party seeking to pierce the corporate veil must show
complete domination and control of the subsidiary by the parent and also that such
domination was used to commit a fraud or wrong against the plaintiff that resulted
in the plaintiff's injury ( 252 A.D.2d 609, 610, 675 N.Y.S.2d 234, supra; see, Matter of
Morris v. New York State Dept. of Taxation & Fin., 82 N.Y.2d 135, 141, 603 N.Y.S.2d
807, 623 N.E.2d 1157). Notably, "[e]vidence of domination alone does not suffice
without an additional showing that it led to inequity, fraud or malfeasance" (TNS
Holdings v. MKI Sec. Corp., 92 N.Y.2d 335, 339, 680 N.Y.S.2d 891, 703 N.E.2d 749).

xxxx

In reaching that conclusion, we specifically reject a number of plaintiffs' assertions,

including the entirely erroneous claims that our determination on the prior appeal (252
A.D.2d 609, 675 N.Y.S.2d 234, supra) set forth a "roadmap" for the proof required at trial
and mandated a verdict in favor of plaintiffs upon their production of evidence that
supported the decision's "listed facts". To the contrary, our decision was predicated upon
the existence of such evidence, absent which we would have granted summary judgment
in favor of defendant. We are equally unpersuaded by plaintiffs' continued reliance upon
defendant's December 1991 unilateral conversion of its intercompany loans with LGV
from debt to equity, which constituted nothing more than a "bookkeeping transaction"
and had no apparent effect on LGV's obligations to defendant or defendant's right to
foreclose on its mortgage.[72]

This doctrine is good law under Philippine jurisdiction.

In Concept Builders, Inc. v. National Labor Relations Commission,[73] we laid down the
test in determining the applicability of the doctrine of piercing the veil of corporate
fiction, to wit:

1. Control, not mere majority or complete control, but complete domination,

not only of finances but of policy and business practice in respect to the
transaction attacked so that the corporate entity as to this transaction had at
the time no separate mind, will or existence of its own.

2. Such control must have been used by the defendant to commit fraud or
wrong, to perpetuate the violation of a statutory or other positive legal duty,
or dishonest and, unjust act in contravention of plaintiffs legal rights; and,

3. The aforesaid control and breach of duty must proximately cause the injury
or unjust loss complained of.

xxxx
Time and again, we have reiterated that mere ownership by a single stockholder or by
another corporation of all or nearly all of the capital stock of a corporation is not, by
itself, a sufficient ground for disregarding a separate corporate personality.[74] It is basic
that a corporation has a personality separate and distinct from that composing it as well as
from that of any other legal entity to which it may be related. Clear and convincing
evidence is needed to pierce the veil of corporate fiction.[75]

In this case, the mere interlocking of directors and officers does not warrant piercing the
separate corporate personalities of MMC and GHI. Not only must there be a showing that
there was majority or complete control, but complete domination, not only of finances
but of policy and business practice in respect to the transaction attacked, so that the
corporate entity as to this transaction had at the time no separate mind, will or existence
of its own. The mortgage deed transaction attacked as a basis for piercing the corporate
veil was a transaction that was an offshoot, a derivative, of the mortgages earlier
constituted in the Promissory Notes dated October 2, 1992. But these Promissory Notes
with mortgage were executed by GHI with APT in the name of MMC, in a full
privatization process. It appears that if there was any control or domination exercised
over MMC, it was APT, not GHI, that wielded it. Neither can we conclude that the
constitution of the loan nearly four (4) years prior to NAMAWU's notice of strike could
have been the proximate cause of the injury of NAMAWU for having been deprived of
MMC's corporate assets.

On the propriety of injunction

to prevent execution by the
NLRC on the properties
of third-party claimants

It is settled that a Regional Trial Court can validly issue a Temporary Restraining Order
(TRO) and, later, a writ of preliminary injunction to prevent enforcement of a writ of
execution issued by a labor tribunal on the basis of a third-party's claim of ownership
over the properties levied upon.[76] While, as a rule, no temporary or permanent injunction
or restraining order in any case involving or growing out of a labor dispute shall be issued
by any court--where the writ of execution issued by a labor tribunal is sought to be
enforced upon the property of a stranger to the labor dispute, even upon a mere prima
facie showing of ownership of such claimant--a separate action for injunctive relief
against such levy may be maintained in court, since said action neither involves nor
grows out of a labor dispute insofar as the third party is concerned.
[77]
 Instructively, National Mines and Allied Workers' Union v. Vera[78]

Petitioners' reliance on the provision of Art. 254 of the New Labor Code (herein earlier
quoted) which prohibits injunctions or restraining orders in any case involving or
growing out of a 'labor dispute' is not well-taken. This has no application to the case at
bar. Civil Case No. 2749 is one which neither "involves" nor "grows out" of a labor
dispute. What 'involves' or 'grows out' of a labor dispute is the NLRC case between
petitioners and the judgment debtor, Philippine Iron Mines. The private respondents are
not parties to the said NLRC case. Civil Case No. 2749 does not put in issue either the
fact or validity of the proceeding in theNLRC case nor the decision therein rendered,
much less the writ of execution issued thereunder. It does not seek to enjoin the execution
of the decision against the properties of the judgment debtor. What is sought to be tried in
Civil Case No. 2749 is whether the NLRC's decision and writ of execution, above
mentioned, shall be permitted to be satisfied against properties of private respondents,
and not of the judgment debtor named in the NLRC decision and writ of execution. Such
a recourse is allowed under the provisions of Section 17, Rule 39 of the Rules of Court.

To sustain petitioners' theory will inevitably lead to disastrous consequences and lend
judicial imprimatur to deprivation of property without due process of law. Simply
because a writ of execution was issued by the NLRC does not authorize the sheriff
implementing the same to levy on anybody's property. To deny the victim of the
wrongful levy, the recourse such as that availed of by the herein private respondents,
under the pretext that no court of general jurisdiction can interfere with the writ of
execution issued in a labor dispute, will be sanctioning a greater evil than that sought to
be avoided by the Labor Code provision in question. Certainly, that could not have been
the intendment of the law creating the NLRC. For well-settled is the rule that the power
of a court to execute its judgment extends only over properties unquestionably belonging
to the judgment debtor."

Likewise, since the third-party claimant is not one of the parties to the action, he cannot,
strictly speaking, appeal from the order denying his claim, but he should file a separate
reivindicatory action against the execution creditor or the purchaser of the property after
the sale at public auction, or a complaint for damages against the bond filed by the
judgment creditor in favor of the sheriff.[79]

A separate civil action for recovery of ownership of the property would not constitute
interference with the powers or processes of the labor tribunal which rendered the
judgment to execute upon the levied properties. The property levied upon being that of a
stranger is not subject to levy. Thus, a separate action for recovery, upon a claim
and prima facie showing of ownership by the petitioner, cannot be considered as
interference.[80]

Upon the findings and conclusions we have reached above, petitioner is situated squarely
as such third-party claimant. The questioned restraining order of the lower court, as well
as the order granting preliminary injunction, does not constitute interference with the
powers or processes of the labor department. The registration of the mortgage document
operated as notice to all on the matter of the mortgagee's prior claims. Official
proceedings relative to the foreclosure of the subject properties constituted a prima
facie showing of ownership of such claimant to support the issuance of injunctive reliefs.

As correctly held by the lower court:

The subject incidents for TRO and/or Writ of Injunction were summarily heard and in
resolving the same, the Court believes, that the petitioner has a clear and unmistakable
right over the levied properties. The existence of the subject Deed of Real Estate and
Chattel Mortgage, the fact that petitioner initiated a foreclosure of said properties before
the Clerk of Court and Ex-Officio Sheriff, RTC Branch 61, Kabankalan City on July 13,
2001, the fact that said Ex-Officio Sheriff and the Clerk of Court issue a Notice of
Foreclosure, Possession and Control over said mortgaged properties on July 19, 2001 and
the fact that a Sheriff's Certificate of Sale was issued on December 3, 2001 are the basis
of its conclusion. Unless said mortgage contract is annulled or declared null and void, the
presumption of regularity of transaction must be considered and said document must be
looked [upon] as valid.

Notably, the Office of the Solicitor General also aptly observed that when the respondent
maintained that the Deed of Real Estate and Chattel mortgage was entered into in fraud
of creditors, it thereby admitted that the mortgage was not void, but merely rescissible
under Article 1381(3) of the Civil Code; and, therefore, an independent action is needed
to rescind the contract of mortgage.[81] We, however, hold that such an independent action
cannot now be maintained, because the mortgage has been previously recognized to exist,
with a valid consideration, in Republic, etc., v. "G" Holdings, Inc.

A final word

The Court notes that the case filed with the lower court involves a principal action for
injunction to prohibit execution over properties belonging to a third party not impleaded
in the legal dispute between NAMAWU and MMC. We have observed, however, that the
lower court and the CA failed to take judicial notice of, or to consider, our Decisions
in Republic, etc., v. "G" Holdings, Inc., and Maricalum Mining Corporation v. Brion and
NAMAWU, in which we respectively recognized the entitlement of GHI to the shares and
the company notes of MMC (under the Purchase and Sale Agreement), and the rights of
NAMAWU to its labor claims. At this stage, therefore, neither the lower court nor the
CA, nor even this Court, can depart from our findings in those two cases because of the
doctrine of stare decisis.

From our discussion above, we now rule that the trial court, in issuing the questioned
orders, did not commit grave abuse of discretion, because its issuance was amply
supported by factual and legal bases.

We are not unmindful, however, of the fact that the labor claims of NAMAWU,
acknowledged by this Court in Maricalum, still awaits final execution. As success fades
from NAMAWU's efforts to execute on the properties of MMC, which were validly
foreclosed by GHI, we see that NAMAWU always had, and may still have, ample
supplemental remedies found in Rule 39 of the Rules of Court in order to protect its
rights against MMC. These include the examination of the judgment obligor when
judgment is unsatisfied,[82] the examination of the obligors of judgment obligors,[83] or
even the resort to receivership.[84]

While, theoretically, this case is not ended by this decision, since the lower court is still
to try the case filed with it and decide it on the merits, the matter of whether the mortgage
and foreclosure of the assets that are the subject of said foreclosure is ended herein, for
the third and final time. So also is the consequential issue of the separate and distinct
personalities of GHI and MMC. Having resolved these principal issues with certainty, we
find no more need to remand the case to the lower court, only for the

purpose of resolving again the matter of whether GHI owns the properties that were the
subject of the latter's foreclosure.

WHEREFORE, the Petition is GRANTED. The Decision of the Court of Appeals dated

October 14, 2003 is SET ASIDE. The Omnibus Order dated December 4, 2002 of the
Regional Trial Court, Branch 61 of Kabankalan City, Negros Occidental
is AFFIRMED. No costs.

SO ORDERED.

THIRD DIVISION
[ G.R. No. 177809, October 16, 2009 ]
SPOUSES OMAR AND MOSHIERA LATIP, PETITIONERS, VS. ROSALIE
PALAÑA CHUA, RESPONDENT.

DECISION

NACHURA, J.:

Challenged in this petition for review on certiorari is the Court of Appeals (CA) Decision
in CA-G.R. SP No. 89300:[1] (1) reversing the decision of the Regional Trial Court
(RTC), Branch 274, Parañaque City in Civil Case No. 04-0052;[2] and (2) reinstating and
affirming in toto the decision of the Metropolitan Trial Court (MeTC), Branch 78, of the
same city in Civil Case No. 2001-315.[3]

First, we sift through the varying facts found by the different lower courts.

The facts parleyed by the MeTC show that respondent Rosalie Chua (Rosalie) is the
owner of Roferxane Building, a commercial building, located at No. 158 Quirino Avenue
corner Redemptorist Road, Barangay Baclaran, Parañaque City.

On July 6, 2001, Rosalie filed a complaint for unlawful detainer plus damages against
petitioners, Spouses Omar and Moshiera Latip (Spouses Latip). Rosalie attached to the
complaint a contract of lease over two cubicles in Roferxane Bldg., signed by Rosalie, as
lessor, and by Spouses Latip, as lessees thereof.

The contract of lease reads:

CONTRACT OF LEASE

KNOW ALL MEN BY THESE PRESENTS:

This Contract of Lease is entered into by and between:

ROSALIE PALAÑA CHUA, Filipino, of legal age, married with office at 2/F

JOFERXAN Building, F.B. Harrison St., Brgy. Baclaran, Parañaque City, and hereinafter
referred to as the LESSOR,

- and -

OMAR LATIEF marriage to MOSHIERA LATIEF, also both Filipino, of legal age

with address at 24 Anahan St. RGV Homes Parañaque City, and hereinafter referred to as
the LESSEES.

WITNESSETH

1. That the LESSOR is the owner of the commercial building erected at the lot of the
Toribio G. Reyes Realty, Inc. situated at 158 Quirino Ave. corner Redemptorist Road,
Barangay Baclaran in Parañaque Ctiy;

2. That LESSOR hereby leases two (2) cubicles located at the 1st & 2nd Floor, of said
building with an area of 56 square meters under the following terms and conditions, to
wit:

a. That the monthly rental of the two (2) cubicles in PESOS, SIXTY
THOUSAND (P60,000.00), Philippine Currency. However, due to unstable
power of the peso LESSEES agrees to a yearly increase of ten (10%)
percent of the monthly rental;

b. That any rental in-arrears shall be paid before the expiration of the contract
to the LESSOR;
 c. That LESSEES agree to pay their own water and electric consumptions in
the said premises;

d. That the LESSEES shall not sub-let or make any alteration in the cubicles
without a written permission from the LESSOR. Provided, however, that at
the termination of the Contract, the lessee shall return the two cubicles in its
original conditions at their expenses;

e. That the LESSEES agree to keep the cubicles in a safe and sanitary
conditions, and shall not keep any kinds of flammable or combustible
materials.

f. That in case the LESSEES fail to pay the monthly rental every time it falls
due or violate any of the above conditions shall be enough ground to
terminate this Contract of Lease. Provided, further, that, if the LESSEES
pre-terminate this Contract they shall pay the rentals for the unused month
or period by way of liquidated damages in favor of the LESSOR.

3. That this Contract of Lease is for six (6) yrs. only starting from December _____, 1999
or up to December ______, 2005.

IN WITNESS WHEREOF, the parties have hereunto affixed their hands this ___th day of
December, 1999 at City of Manila, Philippines.

(sgd.)                                                                                       (sgd.)
ROSALIE PALAÑA-CHUA                                         MOSHIERA LATIEF
        L E S S O R                                                                         L E S S E E

(sgd.)
OMAR LATIEF
LESSEE

SIGNED IN THE PRESENCE OF:

            (sgd.)                                                          (sgd.)
1. Daisy C. Ramos                                     2. Ferdinand C. Chua

Republic of the Philippines)

C i t y o f M a n i l a )s.s.

ACKNOWLEDGMENT

BEFORE ME, a Notary Public for and in the City of Manila personally appeared the
following persons:

Rosalie P. Chua with CTC No. 05769706 at Parañaque City on 2/1/99; Moshiera Latief
with CTC No. 12885654 at Parañaque City on 11/11/99; Omar Latief with CTC No.
12885653 Parañaque City on Nov. 11, 1999.

known to me and to me known to be the same persons who executed this instrument
consisting of two (2) pages duly signed by them and the two (2) instrumental witnesses
and acknowledged to me that the same is their free and voluntarily acts and deeds.

IN FAITH AND TESTIMONY WHEREOF, I have hereunto affixed my hand and

Notarial Seal this ____th day of December, 1999 at the City of Manila, Philippines.

Doc. No. _____                                                             ATTY. CALIXTRO B.
RAMOS
Page No. _____                                                                     NOTARY PUBLIC
Book No. LXV                                                             Until December 31, 2000
Series of 1999                                                                PTR # 374145-1/11/99/-Mla.
                                                                                      IBP # 00262-Life Member[4]

A year after the commencement of the lease and with Spouses Latip already occupying
the leased cubicles, Rosalie, through counsel, sent the spouses a letter demanding
payment of back rentals and should they fail to do so, to vacate the leased cubicles. When
Spouses Latip did not heed Rosalie's demand, she instituted the aforesaid complaint.

In their Answer, Spouses Latip refuted Rosalie's claims. They averred that the lease of the
two (2) cubicles had already been paid in full as evidenced by receipts showing payment
to Rosalie of the total amount of P2,570,000.00. The three (3) receipts, in Rosalie's
handwriting, read:

1. I received the amount of P2,000,000.00 (two million pesos) from [O]mar

Latip & Moshi[e]ra Latip for the payment of 2 cubicles located at 158
Quirino Ave. corner Redemptorist Rd.[,] Baclaran P[arañ]aque City.
ROFERLAND[5] Bldg. with the terms 6 yrs. Contract.

P2,000,000.00                                                                    
______(sgd.)______
CHECK # 3767924                                                                    Rosalie Chua
FAR EAST BANK

                                                                                           
______(sgd.)______
                                                                                                     Ferdinand
Chua

2. Received cash
P500,000.00
From Moshiera Latip

 (sgd.)

12/10/99            Rosalie Chua

                           Received by

3. Received cash
P70,000.00 from
Moshiera Latip
12-11-99

____(sgd.)___
Received by:[6]

Spouses Latip asseverated that sometime in October 1999, Rosalie offered for sale lease
rights over two (2) cubicles in Roferxane Bldg. Having in mind the brisk sale of goods
during the Christmas season, they readily accepted Rosalie's offer to purchase lease rights
in Roferxane Bldg., which was still under construction at the time. According to Spouses
Latip, the immediate payment of P2,570,000.00 would be used to finish construction of
the building giving them first priority in the occupation of the finished cubicles.

Thereafter, in December 1999, as soon as two (2) cubicles were finished, Spouses Latip
occupied them without waiting for the completion of five (5) other stalls. Spouses Latip
averred that the contract of lease they signed had been novated by their purchase of lease
rights of the subject cubicles. Thus, they were surprised to receive a demand letter from
Rosalie's counsel and the subsequent filing of a complaint against them.

The MeTC ruled in favor of Rosalie, viz.:

WHEREFORE, premises considered, the [Spouses Latip] and all persons claiming rights
under them are hereby ordered to VACATE the property subject of this case located at
the 1st and 2nd floors of a Roferxane Building situated at No. 158 Quirino Avenue corner
Redemptorist Road, Barangay Baclaran, Parañaque City. The [Spouses Latip] are also
ordered to PAY [Rosalie] the amount of SEVEN HUNDRED TWENTY THOUSAND
PESOS (P720,000.00) as rent arrearages for the period of December 1999 to December
2000 and thereafter to PAY [Rosalie] the amount of SEVENTY TWO THOUSAND
PESOS (P72,000.00) per month from January 2001 to December 2002, plus ten percent
(10%) increase for each and every succeeding years thereafter as stipulated in paragraph
2(a) of the Contract of Lease x x x, until the [Spouses Latip] have completely vacated the
leased premises subject of this lease. Finally[,] the [Spouses Latip] are hereby ordered to
PAY [Rosalie] the amount of TWENTY THOUSAND PESOS (P20,000.00) as attorney's
fees and TWO THOUSAND PESOS (P2,000.00) per [Rosalie's] appearance in Court as
appearance fee and to PAY the cost of this suit.

[Spouses Latip's] counterclaim is hereby DISMISSED for lack of merit.

SO ORDERED.[7]

In stark contrast, the RTC reversed the MeTC and ruled in favor of Spouses Latip. The
RTC did not give credence to the contract of lease, ruling that it was not notarized and, in
all other substantial aspects, incomplete. Further on this point, the RTC noted that the
contract of lease lacked: (1) the signature of Ferdinand Chua, Rosalie's husband; (2) the
signatures of Spouses Latip on the first page thereof; (3) the specific dates for the term of
the contract which only stated that the lease is for "six (6) y[ea]rs only starting from
December 1999 or up to December 2005"; (4) the exact date of execution of the
document, albeit the month of December and year 1999 are indicated therein; and (5) the
provision for payment of deposit or advance rental which is supposedly uncommon in big
commercial lease contracts.

The RTC believed the claim of Spouses Latip that the contract of lease was modified and
supplemented; and the entire lease rentals for the two (2) cubicles for six (6) years had
already been paid by Spouses Latip in the amount of P2,570,000.00. As to Rosalie's
claim that her receipt of P2,570,000.00 was simply goodwill payment by prospective
lessees to their lessor, and not payment for the purchase of lease rights, the RTC shot this
down and pointed out that, apart from her bare allegations, Rosalie did not adduce
evidence to substantiate this claim. On the whole, the RTC declared an existent lease
between the parties for a period of six (6) years, and already fully paid for by Spouses
Latip. Thus, Spouses Latip could not be ejected from the leased premises until expiration
of the lease period.

The RTC disposed of the appeal, viz.:

WHEREFORE, all the foregoing considered, the appealed decision of the [MeTC] dated
January 13, 2004 is reversed as judgment is hereby rendered for the [Spouses Latip] and
against [Rosalie], ordering the latter to pay the former -

(1) the sum of PhP1,000,000.00 as moral damages;

(2) the sum of PhP500,000.00 as exemplary damages;

(3) the sum of PhP250,000.00 plus PhP3,000.00 per court appearance as and for
attorney's fees; and

(4) costs of suit.

SO ORDERED.[8]

In yet another turn of events, the CA, as previously mentioned, reversed the RTC and
reinstated the decision of the MeTC. The CA ruled that the contract of lease, albeit
lacking the signature of Ferdinand and not notarized, remained a complete and valid
contract. As the MeTC had, the CA likewise found that the alleged defects in the contract
of lease did not render the contract ineffective. On the issue of whether the amount of
P2,570,000.00 merely constituted payment of goodwill money, the CA took judicial
notice of this common practice in the area of Baclaran, especially around the
Redemptorist Church. According to the appellate court, this judicial notice was bolstered
by the Joint Sworn Declaration of the stallholders at Roferxane Bldg. that they all had
paid goodwill money to Rosalie prior to occupying the stalls thereat. Thus, ruling on
Rosalie's appeal, the CA disposed of the case:

WHEREFORE, in view of the foregoing, the Petition for Review is hereby GRANTED.
The assailed decision of RTC Parañaque City Branch 274 dated September 24, 2004 is
hereby REVERSED and SET ASIDE, and the January 13, 2004 decision of the MeTC is
REINSTATED and AFFIRMED en toto.

SO ORDERED.[9]

Not surprisingly, Spouses Latip filed the present appeal.

The singular issue for our resolution is whether Spouses Latip should be ejected from the
leased cubicles.

As previously adverted to, the CA, in ruling for Rosalie and upholding the ejectment of
Spouses Latip, took judicial notice of the alleged practice of prospective lessees in the
Baclaran area to pay goodwill money to the lessor.

We disagree.

Sections 1 and 2 of Rule 129 of the Rules of Court declare when the taking of judicial
notice is mandatory or discretionary on the courts, thus:

SECTION 1. Judicial notice, when mandatory. - A court shall take judicial notice,
without the introduction of evidence, of the existence and territorial extent of states, their
political history, forms of government and symbols of nationality, the law of nations, the
admiralty and maritime courts of the world and their seals, the political constitution and
history of the Philippines, the official acts of the legislative, executive and judicial
departments of the Philippines, the laws of nature, the measure of time, and the
geographical divisions.

SEC. 2. Judicial notice, when discretionary. - A court may take judicial notice of matters
which are of public knowledge, or are capable of unquestionable demonstration or ought
to be known to judges because of their judicial functions.

On this point, State Prosecutors v. Muro[10] is instructive:

I. The doctrine of judicial notice rests on the wisdom and discretion of the courts. The
power to take judicial notice is to be exercised by courts with caution; care must be
taken that the requisite notoriety exists; and every reasonable doubt on the subject
should be promptly resolved in the negative.

Generally speaking, matters of judicial notice have three material requisites: (1) the
matter must be one of common and general knowledge; (2) it must be well and
authoritatively settled and not doubtful or uncertain; and (3) it must be known to be
within the limits of the jurisdiction of the court. The principal guide in determining
what facts may be assumed to be judicially known is that of notoriety. Hence, it can
be said that judicial notice is limited to facts evidenced by public records and facts
of general notoriety.

To say that a court will take judicial notice of a fact is merely another way of saying that
the usual form of evidence will be dispensed with if knowledge of the fact can be
otherwise acquired. This is because the court assumes that the matter is so notorious that
it will not be disputed. But judicial notice is not judicial knowledge. The mere
personal knowledge of the judge is not the judicial knowledge of the court, and he is
not authorized to make his individual knowledge of a fact, not generally or
professionally known, the basis of his action. Judicial cognizance is taken only of those
matters which are "commonly" known.

Things of "common knowledge," of which courts take judicial notice, may be matters
coming to the knowledge of men generally in the course of the ordinary experiences of
life, or they may be matters which are generally accepted by mankind as true and are
capable of ready and unquestioned demonstration. Thus, facts which are universally
known, and which may be found in encyclopedias, dictionaries or other publications, are
judicially noticed, provided they are of such universal notoriety and so generally
understood that they may be regarded as forming part of the common knowledge of every
person.[11]
We reiterated the requisite of notoriety for the taking of judicial notice in the recent case
of Expertravel & Tours, Inc. v. Court of Appeals,[12] which cited State Prosecutors:

Generally speaking, matters of judicial notice have three material requisites: (1) the
matter must be one of common and general knowledge; (2) it must be well and
authoritatively settled and not doubtful or uncertain; and (3) it must be known to be
within the limits of the jurisdiction of the court. The principal guide in determining what
facts may be assumed to be judicially known is that of notoriety. Hence, it can be said
that judicial notice is limited to facts evidenced by public records and facts of general
notoriety. Moreover, a judicially noticed fact must be one not subject to a reasonable
dispute in that it is either: (1) generally known within the territorial jurisdiction of the
trial court; or (2) capable of accurate and ready determination by resorting to sources
whose accuracy cannot reasonably be questionable.

Things of "common knowledge," of which courts take judicial notice, may be matters
coming to the knowledge of men generally in the course of the ordinary experiences of
life, or they may be matters which are generally accepted by mankind as true and are
capable of ready and unquestioned demonstration. Thus, facts which are universally
known, and which may be found in encyclopedias, dictionaries or other publications, are
judicially noticed, provided, they are such of universal notoriety and so generally
understood that they may be regarded as forming part of the common knowledge of every
person. As the common knowledge of man ranges far and wide, a wide variety of
particular facts have been judicially noticed as being matters of common knowledge. But
a court cannot take judicial notice of any fact which, in part, is dependent on the
existence or non-existence of a fact of which the court has no constructive knowledge.

From the foregoing provisions of law and our holdings thereon, it is apparent that the
matter which the appellate court took judicial notice of does not meet the requisite of
notoriety. To begin with, only the CA took judicial notice of this supposed practice to pay
goodwill money to the lessor in the Baclaran area. Neither the MeTC nor the RTC, with
the former even ruling in favor of Rosalie, found that the practice was of "common
knowledge" or notoriously known.

We note that the RTC specifically ruled that Rosalie, apart from her bare allegation,
adduced no evidence to prove her claim that the amount of P2,570,000.00 simply
constituted the payment of goodwill money. Subsequently, Rosalie attached an annex to
her petition for review before the CA, containing a joint declaration under oath by other
stallholders in Roferxane Bldg. that they had paid goodwill money to Rosalie as their
lessor. On this score, we emphasize that the reason why our rules on evidence provide for
matters that need not be proved under Rule 129, specifically on judicial notice, is to
dispense with the taking of the usual form of evidence on a certain matter so notoriously
known, it will not be disputed by the parties.
However, in this case, the requisite of notoriety is belied by the necessity of attaching
documentary evidence, i.e., the Joint Affidavit of the stallholders, to Rosalie's appeal
before the CA. In short, the alleged practice still had to be proven by Rosalie;
contravening the title itself of Rule 129 of the Rules of Court - What need not be proved.

Apparently, only that particular division of the CA had knowledge of the practice to pay
goodwill money in the Baclaran area. As was held in State Prosecutors, justices and
judges alike ought to be reminded that the power to take judicial notice must be exercised
with caution and every reasonable doubt on the subject should be ample reason for the
claim of judicial notice to be promptly resolved in the negative.

Ultimately, on the issue of whether Spouses Latip ought to be ejected from the leased
cubicles, what remains in evidence is the documentary evidence signed by both parties -
the contract of lease and the receipts evidencing payment of P2,570,000.00.

We need not be unduly detained by the issue of which documents were executed first or
if there was a novation of the contract of lease. As had been found by the RTC, the lease
contract and the receipts for the amount of P2,570,000.00 can be reconciled or
harmonized. The RTC declared:

Definitely, the parties entered into a lease agreement over two (2) cubicles of the 1 st and
2nd floors of Roferxane (Roferland) Building, a commercial building located at 158
Quirino Avenue, corner Redemptorist Road, Baclaran, Parañaque City and belonging to
[Rosalie]. The lease agreement is for a term of six (6) years commencing in December
1999 up to December 2005. This agreement was embodied in a Contract of Lease x x x.
The terms of this lease contract, however, are modified or supplemented by another
agreement between the parties executed and or entered into in or about the time of
execution of the lease contract, which exact date of execution of the latter is unclear. [13]

We agree with the RTC's holding only up to that point. There exists a lease agreement
between the parties as set forth in the contract of lease which is a complete document. It
need not be signed by Ferdinand Chua as he likewise did not sign the other two receipts
for P500,000.00 and P70,000.00, respectively, which contained only the signature of
Rosalie. Besides, it is undisputed that Rosalie owns and leases the stalls in Roferxane
Bldg.; thus, doing away with the need for her husband's consent. The findings of the three
lower courts concur on this fact.

The contract of lease has a period of six (6) years commencing in December 1999. This
fact is again buttressed by Spouses Latip's admission that they occupied the property
forthwith in December 1999, bearing in mind the brisk sales during the holiday season.

On the conflicting interpretations by the lower courts of the receipts amounting to

P2,570,000.00, we hold that the practice of payment of goodwill money in the Baclaran
area is an inadequate subject of judicial notice. Neither was Rosalie able to provide
sufficient evidence that, apart from the belatedly submitted Joint Affidavit of the
stallholders of Roferxane Bldg., the said amount was simply for the payment of goodwill
money, and not payment for advance rentals by Spouses Latip.

In interpreting the evidence before us, we are guided by the Civil Code provisions on
interpretation of contracts, to wit:

Art. 1371. In order to judge the intention of the contracting parties, their
contemporaneous and subsequent acts shall be principally considered.

Art. 1372. However general the terms of a contract may be, they shall not be understood
to comprehend things that are distinct and cases that are different from those which the
parties intended to agree.

Art. 1373. If some stipulation of any contract should admit of several meanings, it shall
be understood as bearing that import which is most adequate to render it effectual.

The RTC was already on the right track when it declared that the receipts for
P2,570,000.00 modified or supplemented the contract of lease. However, it made a
quantum leap when it ruled that the amount was payment for rentals of the two (2)
cubicles for the entire six-year period. We cannot subscribe to this finding. To obviate
confusion and for clarity, the contents of the receipts, already set forth above, are again
reproduced:

1. I received the amount of P2,000,000.00 (two million pesos) from [O]mar

Latip & Moshi[e]ra Latip for the payment of 2 cubicles located at 158
Quirino Ave. corner Redemptorist Rd.[,] Baclaran P[arañ]aque City.
ROFERLAND Bldg. with the terms 6 yrs. Contract.

P2,000,000.00                                                                    
______(sgd.)______
CHECK # 3767924                                                                    Rosalie Chua
FAR EAST BANK

                                                                                           
______(sgd.)______
                                                                                                    Ferdinand
Chua
 2. Received cash
P500,000.00
From Moshiera Latip

 (sgd.)

12/10/99            Rosalie Chua

                           Received by

3. Received cash
P70,000.00 from
Moshiera Latip
12-11-99

____(sgd.)___
Received by:[14]

There is nothing on the receipts and on record that the payment and receipt of
P2,570,000.00 referred to full payment of rentals for the whole period of the lease. All
three receipts state Rosalie's receipt of cash in varying amounts. The first receipt for
P2,000,000.00 did state payment for two (2) cubicles, but this cannot mean full payment
of rentals for the entire lease period when there are no words to that effect. Further, two
receipts were subsequently executed pointing to the obvious fact that the P2,000,000.00
is not for full payment of rentals. Thus, since the contract of lease remained operative, we
find that Rosalie's receipt of the monies should be considered as advanced rentals on the
leased cubicles. This conclusion is bolstered by the fact that Rosalie demanded payment
of the lease rentals only in 2000, a full year after the commencement of the lease.

Finally, we note that the lease ended in 2005. Consequently, Spouses Latip can be ejected
from the leased premises. They are liable to Rosalie for unpaid rentals on the lease of the
two (2) cubicles in accordance with the stipulations on rentals in the Contract of Lease.
However, the amount of P2,570,000.00, covering advance rentals, must be deducted from
this liability of Spouses Latip to Rosalie.

WHEREFORE, premises considered, the petition is hereby GRANTED. The decision

of the Court of Appeals in CA-G.R. SP No. 89300 is REVERSED. The petitioners,
spouses Omar and Moshiera Latip, are liable to respondent Rosalie Chua for unpaid
rentals minus the amount of P2,570,000.00 already received by her as advance rentals.
No costs.

SO ORDERED.
 FIRST DIVISION
[ G.R. No. 184398, February 25, 2010 ]
SILKAIR (SINGAPORE) PTE. LTD., PETITIONER, VS. COMMISSIONER
OF INTERNAL REVENUE, RESPONDENT.

DECISION

LEONARDO-DE CASTRO, J.:

Before the Court is a Petition for Review on Certiorari, assailing the May 27, 2008
Decision[1] and the subsequent September 5, 2008 Resolution[2] of the Court of Tax
Appeals (CTA) En Banc in C.T.A. E.B. No. 267. The decision dated May 27, 2008 denied
the petition for review filed by petitioner Silkair (Singapore) Pte. Ltd., on the ground,
among others, of failure to prove that it was authorized to operate in the Philippines for
the period June to December 2000, while the Resolution dated September 5, 2008
denied petitioner's motion for reconsideration for lack of merit.

The antecedent facts are as follows:

Petitioner, a foreign corporation organized under the laws of Singapore with a Philippine
representative office in Cebu City, is an online international carrier plying the Singapore-
Cebu-Singapore and Singapore-Cebu-Davao-Singapore routes.

Respondent Commissioner of Internal Revenue is impleaded herein in his official

capacity as head of the Bureau of Internal Revenue (BIR), an attached agency of the
Department of Finance which is duly authorized to decide, approve, and grant refunds
and/or tax credits of erroneously paid or illegally collected internal revenue taxes. [3]

On June 24, 2002, petitioner filed with the BIR an administrative claim for the refund of
Three Million Nine Hundred Eighty-Three Thousand Five Hundred Ninety Pesos and
Forty-Nine Centavos (P3,983,590.49) in excise taxes which it allegedly erroneously paid
on its purchases of aviation jet fuel from Petron Corporation (Petron) from June to
December 2000. Petitioner used as basis therefor BIR Ruling No. 339-92 dated
December 1, 1992, which declared that the petitioner's Singapore-Cebu-Singapore route
is an international flight by an international carrier and that the petroleum products
purchased by the petitioner should not be subject to excise taxes under Section 135 of
Republic Act No. 8424 or the 1997 National Internal Revenue Code (NIRC).

Since the BIR took no action on petitioner's claim for refund, petitioner sought judicial
recourse and filed on June 27, 2002, a petition for review with the CTA (docketed as CTA
Case No. 6491), to prevent the lapse of the two-year prescriptive period within which to
judicially claim a refund under Section 229[4] of the NIRC. Petitioner invoked its
exemption from payment of excise taxes in accordance with the provisions of Section
135(b) of the NIRC, which exempts from excise taxes the entities covered by tax treaties,
conventions and other international agreements; provided that the country of said
carrier or exempt entity likewise exempts from similar taxes the petroleum products
sold to Philippine carriers or entities. In this regard, petitioner relied on the reciprocity
clause under Article 4(2) of the Air Transport Agreement entered between the Republic
of the Philippines and the Republic of Singapore.

Section 135(b) of the NIRC provides:

SEC. 135. Petroleum Products Sold to International Carriers and Exempt Entities

or Agencies. - Petroleum products sold to the following are exempt from excise tax:

xxxx

(b) Exempt entities or agencies covered by tax treaties, conventions and other
international agreements for their use or consumption: Provided, however, That the
country of said foreign international carrier or exempt entities or agencies exempts from
similar taxes petroleum products sold to Philippine carriers, entities or agencies; x x x.

Article 4(2) of the Air Transport Agreement between the Philippines and Singapore, in
turn, provides:

ART. 4. x x x.

xxxx

(2) Fuel, lubricants, spare parts, regular equipment and aircraft stores introduced into,
or taken on board aircraft in the territory of one Contracting Party by, or on behalf of, a
designated airline of the other Contracting Party and intended solely for use in the
operation of the agreed services shall, with the exception of charges corresponding to
the service performed, be exempt from the same customs duties, inspection fees and
other duties or taxes imposed in the territory of the first Contracting Party, even when
these supplies are to be used on the parts of the journey performed over the territory of
the Contracting Party in which they are introduced into or taken on board. The materials
referred to above may be required to be kept under customs supervision and control.

In a Decision[5] dated July 27, 2006, the CTA First Division found that petitioner was
qualified for tax exemption under Section 135(b) of the NIRC, as long as the Republic of
Singapore exempts from similar taxes petroleum products sold to Philippine carriers,
entities or agencies under Article 4(2) of the Air Transport Agreement quoted above.
However, it ruled that petitioner was not entitled to the excise tax exemption for failure
to present proof that it was authorized to operate in the Philippines during the period
material to the case due to the non-admission of some of its exhibits, which were
merely photocopies, including Exhibit "A" which was petitioner's Certificate of
Registration with the Securities and Exchange Commission (SEC) and Exhibits "P," "Q"
and "R" which were its operating permits issued by the Civil Aeronautics Board (CAB) to
fly the Singapore-Cebu-Singapore and Singapore-Cebu-Davao-Singapore routes for the
period October 1999 to October 2000.

Petitioner filed a motion for reconsideration but the CTA First Division denied the same
in a Resolution[6] dated January 17, 2007.

Thereafter, petitioner elevated the case before the CTA En Banc via a petition for
review, which was initially denied in a Resolution [7] dated May 17, 2007 for failure of
petitioner to establish its legal authority to appeal the Decision dated July 27, 2006 and
the Resolution dated January 17, 2007 of the CTA First Division.

Undaunted, petitioner moved for reconsideration. In the Resolution [8] dated September

19, 2007, the CTA En Banc set aside its earlier resolution dismissing the petition for
review and reinstated the same. It also required respondent to file his comment
thereon.

On May 27, 2008, the CTA En Banc promulgated the assailed Decision and denied the
petition for review, thus:

WHEREFORE, premises considered, the instant petition is hereby DENIED for lack

of merit. The assailed Decision dated July 27, 2006 dismissing the instant petition on
ground of failure of petitioner to prove that it was authorized to operate in the
Philippines for the period from June to December 2000, is hereby AFFIRMED WITH
MODIFICATION that petitioner is further not found to be the proper party to file the
instant claim for refund.[9]

In a separate Concurring and Dissenting Opinion,[10] CTA Presiding Justice Ernesto D.

Acosta opined that petitioner was exempt from the payment of excise taxes based on
Section 135 of the NIRC and Article 4 of the Air Transport Agreement between the
Philippines and Singapore. However, despite said exemption, petitioner's claim for
refund cannot be granted since it failed to establish its authority to operate in the
Philippines during the period subject of the claim. In other words, Presiding Justice
Acosta voted to uphold in toto the Decision of the CTA First Division.

Petitioner again filed a motion for reconsideration which was denied in the Resolution
dated September 5, 2008. Hence, the instant petition for review on certiorari, which
raises the following issues:

Whether or not petitioner has substantially proven its authority to operate in the
Philippines.

II

Whether or not petitioner is the proper party to claim for the refund/tax credit of excise
taxes paid on aviation fuel.

Petitioner maintains that it has proven its authority to operate in the Philippines with
the admission of its Foreign Air Carrier's Permit (FACP) as Exhibit "B" before the CTA,
which, in part, reads:

[T]his Board RESOLVED, as it hereby resolves to APPROVE the petition of SILKAIR

(SINGAPORE) PTE LTD., for issuance of a regular operating permit (Foreign Air Carrier's
Permit), subject to the approval of the President, pursuant to Sec. 10 of R.A. 776, as
amended by P.D. 1462.[11]

Moreover, petitioner argues that Exhibits "P," "Q" and "R," which it previously filed with
the CTA, were merely flight schedules submitted to the CAB, and were not its operating
permits. Petitioner adds that it was through inadvertence that only photocopies of these
exhibits were introduced during the hearing.

Petitioner also asserts that despite its failure to present the original copy of its SEC
Registration during the hearings, the CTA should take judicial notice of its SEC
Registration since the same was already offered and admitted in evidence in similar
cases pending before the CTA.

Petitioner further claims that the instant case involves a clear grant of tax exemption to
it by law and by virtue of an international agreement between two governments.
Consequently, being the entity which was granted the tax exemption and which made
the erroneous tax payment of the excise tax, it is the proper party to file the claim for
refund.

In his Comment[12] dated March 26, 2009, respondent states that the admission in
evidence of petitioner's FACP does not change the fact that petitioner failed to formally
offer in evidence the original copies or certified true copies of Exhibit "A," its SEC
Registration; and Exhibits "P," "Q" and "R," its operating permits issued by the CAB to fly
its Singapore-Cebu-Singapore and Singapore-Cebu-Davao-Singapore routes for the
period October 1999 to October 2000. Respondent emphasizes that petitioner's failure
to present these pieces of evidence amounts to its failure to prove its authority to
operate in the Philippines.

Likewise, respondent maintains that an excise tax, being an indirect tax, is the direct
liability of the manufacturer or producer. Respondent reiterates that when an excise tax
on petroleum products is added to the cost of goods sold to the buyer, it is no longer a
tax but becomes part of the price which the buyer has to pay to obtain the article.
According to respondent, petitioner cannot seek reimbursement for its alleged
erroneous payment of the excise tax since it is neither the entity required by law nor the
entity statutorily liable to pay the said tax.

After careful examination of the records, we resolve to deny the petition.

Petitioner's assertion that the CTA may take judicial notice of its SEC Registration,
previously offered and admitted in evidence in similar cases before the CTA, is
untenable.
We quote with approval the disquisition of the CTA En Banc in its Decision dated May
27, 2008 on the non-admission of petitioner's Exhibits "A," "P," "Q" and "R," to wit:

Anent petitioner's argument that the Court in Division should have taken judicial
notice of the existence of Exhibit "A" (petitioner's SEC Certificate of Registration),
although not properly identified during trial as this has previously been offered and
admitted in evidence in similar cases involving the subject matter between the same
parties before this Court, We are in agreement with the ruling of the Court in Division,
as discussed in its Resolution dated April 12, 2005 resolving petitioner's Motion for
Reconsideration on the court's non-admission of Exhibits "A", "P", "Q" and "R", wherein
it said that:

"Each and every case is distinct and separate in character and matter although
similar parties may have been involved. Thus, in a pending case, it is not mandatory
upon the courts to take judicial notice of pieces of evidence which have been offered in
other cases even when such cases have been tried or pending in the same
court. Evidence already presented and admitted by the court in a previous case cannot
be adopted in a separate case pending before the same court without the same being
offered and identified anew.

The cases cited by petitioner concerned similar parties before the same court but do not
cover the same claim. A court is not compelled to take judicial notice of pieces of
evidence offered and admitted in a previous case unless the same are properly offered
or have accordingly complied with the requirements on the rules of evidence. In other
words, the evidence presented in the previous cases cannot be considered in this
instant case without being offered in evidence.

Moreover, Section 3 of Rule 129 of the Revised Rules of Court provides that hearing is
necessary before judicial notice may be taken by the courts. To quote said section:

Sec. 3. Judicial notice, when hearing necessary.  - During the trial, the court, on its
own initiative, or on request of a party, may announce its intention to take judicial
notice of any matter and allow the parties to be heard thereon.

After the trial, and before judgment or on appeal, the proper court, on its own initiative
or on request of a party, may take judicial notice of any matter and allow the parties to
be heard thereon if such matter is decisive of a material issue in the case.
Furthermore, petitioner admitted that Exhibit `A' have (sic) been offered and admitted
in evidence in similar cases involving the same subject matter filed before this Court.
Thus, petitioner is and should have been aware of the rules regarding the offering of any
documentary evidence before the same can be admitted in court.

As regards Exhibit[s] `P', `Q' and `R', the original copies of these documents were not
presented for comparison and verification in violation of Section 3 of Rule 130 of the
1997 Revised Rules of Court. The said section specifically provides that `when the
subject of inquiry is the contents of a document, no evidence shall be admissible other
than the original document itself x x x'. It is an elementary rule in law that documents
shall not be admissible in evidence unless and until the original copies itself are
offered or presented for verification in cases where mere copies are offered, save for
the exceptions provided for by law. Petitioner thus cannot hide behind the veil of
judicial notice so as to evade its responsibility of properly complying with the rules of
evidence. For failure of herein petitioner to compare the subject documents with its
originals, the same may not be admitted." (Emphasis Ours)

Likewise, in the Resolution dated July 15, 2005 of the Court in Division denying
petitioner's Omnibus Motion seeking allowance to compare the denied exhibits with
their certified true copies, the court a quo explained that:

"Petitioner was already given enough time and opportunity to present the
originals or certified true copies of the denied documents for comparison. When
petitioner received the resolution denying admission of the provisionally marked
exhibits, it should have submitted the originals or certified true copies for comparison,
considering that these documents were accordingly available. But instead of presenting
these documents, petitioner, in its Motion for Reconsideration, tried to hide behind the
veil of judicial notice so as to evade its responsibility of properly applying the rules on
evidence. It was even submitted by petitioner that these documents should be admitted
for they were previously offered and admitted in similar cases involving the same
subject matter and parties. If this was the case, then, there should have been no reason
for petitioner to seasonably present the originals or certified true copies for comparison,
or even, marking. x x x."

In view of the foregoing discussion, the Court en banc finds that indeed, petitioner
indubitably failed to establish its authority to operate in the Philippines for the period
beginning June to December 2000.[13]
This Court finds no reason to depart from the foregoing findings of the CTA En Banc as
petitioner itself admitted on page 9[14] of its petition for review that "[i]t was through
inadvertence that only photocopies of Exhibits `P', `Q' and `R' were introduced during
the hearing" and that it was "rather unfortunate that petitioner failed to produce the
original copy of its SEC Registration (Exhibit `A') for purposes of comparison with the
photocopy that was originally presented."

Evidently, said documents cannot be admitted in evidence by the court as the original
copies were neither offered nor presented for comparison and verification during the
trial. Mere identification of the documents and the markings thereof as exhibits do not
confer any evidentiary weight on them as said documents have not been formally
offered by petitioner and have been denied admission in evidence by the CTA.

Furthermore, the documents are not among the matters which the law mandatorily
requires the Court to take judicial notice of, without any introduction of evidence, as
petitioner would have the CTA do. Section 1, Rule 129 of the Rules of Court reads:

SECTION 1. Judicial notice, when mandatory. - A court shall take judicial notice,
without the introduction of evidence, of the existence and territorial extent of states,
their political history, forms of government and symbols of nationality, the law of
nations, the admiralty and maritime courts of the world and their seals, the political
constitution and history of the Philippines, the official acts of the legislative, executive
and judicial departments of the Philippines, the laws of nature, the measure of time,
and the geographical divisions.

Neither could it be said that petitioner's SEC Registration and operating permits from
the CAB are documents which are of public knowledge, capable of unquestionable
demonstration, or ought to be known to the judges because of their judicial functions, in
order to allow the CTA to take discretionary judicial notice of the said documents. [15]

Moreover, Section 3 of the same Rule[16] provides that a hearing is necessary before

judicial notice of any matter may be taken by the court. This requirement of a hearing is
needed so that the parties can be heard thereon if such matter is decisive of a material
issue in the case.

Given the above rules, it is clear that the CTA En Banc correctly did not admit
petitioner's SEC Registration and operating permits from the CAB which were merely
photocopies, without the presentation of the original copies for comparison and
verification. As aptly held by the CTA En Banc, petitioner cannot rely on the principle of
judicial notice so as to evade its responsibility of properly complying with the rules of
evidence. Indeed, petitioner's contention that the said documents were previously
marked in other cases before the CTA tended to confirm that the originals of these
documents were readily available and their non-presentation in these proceedings was
unjustified. Consequently, petitioner's failure to compare the photocopied documents
with their original renders the subject exhibits inadmissible in evidence.

Going to the second issue, petitioner maintains that it is the proper party to claim for
refund or tax credit of excise taxes since it is the entity which was granted the tax
exemption and which made the erroneous tax payment. Petitioner anchors its claim on
Section 135(b) of the NIRC and Article 4(2) of the Air Transport Agreement between the
Philippines and Singapore. Petitioner also asserts that the tax exemption, granted to it
as a buyer of a certain product, is a personal privilege which may not be claimed or
availed of by the seller. Petitioner submits that since it is the entity which actually paid
the excise taxes, then it should be allowed to claim for refund or tax credit.

At the outset, it is important to note that on two separate occasions, this Court has
already put to rest the issue of whether or not petitioner is the proper party to claim for
the refund or tax credit of excise taxes it allegedly paid on its aviation fuel purchases.
[17]
 In the earlier case of Silkair (Singapore) Pte, Ltd. v. Commissioner of Internal Revenue,
[18]
 involving the same parties and the same cause of action but pertaining to different
periods of taxation, we have categorically held that Petron, not petitioner, is the proper
party to question, or seek a refund of, an indirect tax, to wit:

The proper party to question, or seek a refund of, an indirect tax is the statutory
taxpayer, the person on whom the tax is imposed by law and who paid the same even if
he shifts the burden thereof to another. Section 130 (A) (2) of the NIRC provides that
"[u]nless otherwise specifically allowed, the return shall be filed and the excise tax paid
by the manufacturer or producer before removal of domestic products from place of
production." Thus, Petron Corporation, not Silkair, is the statutory taxpayer which is
entitled to claim a refund based on Section 135 of the NIRC of 1997 and Article 4(2) of
the Air Transport Agreement between RP and Singapore.

Even if Petron Corporation passed on to Silkair the burden of the tax, the additional
amount billed to Silkair for jet fuel is not a tax but part of the price which Silkair had to
pay as a purchaser.
In the second Silkair[19] case, the Court explained that an excise tax is an indirect tax
where the burden can be shifted or passed on to the consumer but the tax liability
remains with the manufacturer or seller. Thus, the manufacturer or seller has the option
of shifting or passing on the burden of the tax to the buyer. However, where the burden
of the tax is shifted, the amount passed on to the buyer is no longer a tax but a part of
the purchase price of the goods sold.

Petitioner contends that the clear intent of the provisions of the NIRC and the Air
Transport Agreement is to exempt aviation fuel purchased by petitioner as an exempt
entity from the payment of excise tax, whether such is a direct or an indirect tax.
According to petitioner, the excise tax on aviation fuel, though initially payable by the
manufacturer or producer, attaches to the goods and becomes the liability of the person
having possession thereof.

We do not agree. The distinction between a direct tax and an indirect tax is relevant to
this issue. In Commissioner of Internal Revenue v. Philippine Long Distance Telephone
Company,[20] this Court explained:

Based on the possibility of shifting the incidence of taxation, or as to who shall

bear the burden of taxation, taxes may be classified into either direct tax or indirect tax.

In context, direct taxes are those that are exacted from the very person who, it is
intended or desired, should pay them; they are impositions for which a taxpayer is
directly liable on the transaction or business he is engaged in.

On the other hand, indirect taxes are those that are demanded, in the first instance,
from, or are paid by, one person in the expectation and intention that he can shift the
burden to someone else. Stated elsewise, indirect taxes are taxes wherein the liability
for the payment of the tax falls on one person but the burden thereof can be shifted or
passed on to another person, such as when the tax is imposed upon goods before
reaching the consumer who ultimately pays for it. When the seller passes on the tax to
his buyer, he, in effect, shifts the tax burden, not the liability to pay it, to the purchaser
as part of the purchase price of goods sold or services rendered.

Title VI of the NIRC deals with excise taxes on certain goods. Section 129 reads as
follows:
 SEC. 129. Goods Subject to Excise Taxes. - Excise taxes apply to goods
manufactured or produced in the Philippines for domestic sale or consumption or for
any other disposition and to things imported. x x x.

As used in the NIRC, therefore, excise taxes refer to taxes applicable to certain specified
or selected goods or articles manufactured or produced in the Philippines for domestic
sale or consumption or for any other disposition and to things imported into the
Philippines. These excise taxes may be considered taxes on production as they are
collected only from manufacturers and producers. Basically an indirect tax, excise taxes
are directly levied upon the manufacturer or importer upon removal of the taxable
goods from its place of production or from the customs custody. These taxes, however,
may be actually passed on to the end consumer as part of the transfer value or selling
price of the goods sold, bartered or exchanged. [21]

In Maceda v. Macaraig, Jr.,[22] this Court declared:

"[I]ndirect taxes are taxes primarily paid by persons who can shift the burden
upon someone else." For example, the excise and ad valorem taxes that oil companies
pay to the Bureau of Internal Revenue upon removal of petroleum products from its
refinery can be shifted to its buyer, like the NPC, by adding them to the "cash" and/or
"selling price."

And as noted by us in the second Silkair[23] case mentioned above:

When Petron removes its petroleum products from its refinery in Limay, Bataan,
it pays the excise tax due on the petroleum products thus removed. Petron, as
manufacturer or producer, is the person liable for the payment of the excise tax as
shown in the Excise Tax Returns filed with the BIR. Stated otherwise, Petron is the
taxpayer that is primarily, directly and legally liable for the payment of the excise taxes.
However, since an excise tax is an indirect tax, Petron can transfer to its customers the
amount of the excise tax paid by treating it as part of the cost of the goods and tacking it
on the selling price.

As correctly observed by the CTA, this Court held in Philippine Acetylene Co., Inc. v.
Commissioner of Internal Revenue:
"It may indeed be that the economic burden of the tax finally falls on the
purchaser; when it does the tax becomes part of the price which the purchaser must
pay."
 Even if the consumers or purchasers ultimately pay for the tax, they are not
considered the taxpayers. The fact that Petron, on whom the excise tax is imposed, can
shift the tax burden to its purchasers does not make the latter the taxpayers and the
former the withholding agent.

Petitioner, as the purchaser and end-consumer, ultimately bears the tax burden, but this
does not transform petitioner's status into a statutory taxpayer.

Thus, under Section 130(A)(2) of the NIRC, it is Petron, the taxpayer, which has the legal
personality to claim the refund or tax credit of any erroneous payment of excise taxes.
Section 130(A)(2) states:

SEC. 130. Filing of Return and Payment of Excise Tax on Domestic Products. -

(A) Persons Liable to File a Return, Filing of Return on Removal and Payment of Tax. -

(1) Persons Liable to File a Return. - x x x

(2) Time for Filing of Return and Payment of the Tax. - Unless otherwise specifically
allowed, the return shall be filed and the excise tax paid by the manufacturer or
producer before removal of domestic products from place of production: x x x.
(Emphasis supplied.)

Furthermore, Section 204(C) of the NIRC provides a two-year prescriptive period within
which a taxpayer may file an administrative claim for refund or tax credit, to wit:

SEC. 204. Authority of the Commissioner to Compromise, Abate, and Refund or

Credit Taxes. - The Commissioner may -

xxxx

(C) Credit or refund taxes erroneously or illegally received or penalties imposed without
authority, refund the value of internal revenue stamps when they are returned in good
condition by the purchaser, and, in his discretion, redeem or change unused stamps that
have been rendered unfit for use and refund their value upon proof of destruction. No
credit or refund of taxes or penalties shall be allowed unless the taxpayer files in
writing with the Commissioner a claim for credit or refund within two (2) years after
the payment of the tax or penalty: Provided, however, That a return filed showing an
overpayment shall be considered as a written claim for credit or refund. (Emphasis
supplied.)

From the foregoing discussion, it is clear that the proper party to question, or claim a
refund or tax credit of an indirect tax is the statutory taxpayer, which is Petron in this
case, as it is the company on which the tax is imposed by law and which paid the same
even if the burden thereof was shifted or passed on to another. It bears stressing that
even if Petron shifted or passed on to petitioner the burden of the tax, the additional
amount which petitioner paid is not a tax but a part of the purchase price which it had
to pay to obtain the goods.

Time and again, we have held that tax refunds are in the nature of tax exemptions which
represent a loss of revenue to the government. These exemptions, therefore, must not
rest on vague, uncertain or indefinite inference, but should be granted only by a clear
and unequivocal provision of law on the basis of language too plain to be mistaken.
[24]
 Such exemptions must be strictly construed against the taxpayer, as taxes are the
lifeblood of the government.

In fine, we quote from our ruling in the earlier Silkair[25]  case:

The exemption granted under Section 135 (b) of the NIRC of 1997 and Article 4(2)
of the Air Transport Agreement between RP and Singapore cannot, without a clear
showing of legislative intent, be construed as including indirect taxes. Statutes granting
tax exemptions must be construed in strictissimi juris against the taxpayer and liberally
in favor of the taxing authority, and if an exemption is found to exist, it must not be
enlarged by construction.

This calls for the application of the doctrine, stare decisis et non quieta movere. Follow
past precedents and do not disturb what has been settled. Once a case has been
decided one way, any other case involving exactly the same point at issue, as in the case
at bar, should be decided in the same manner.[26]

WHEREFORE, the instant petition for review is DENIED. We affirm the assailed Decision
dated May 27, 2008 and the Resolution dated September 5, 2008 of the Court of Tax
Appeals En Banc in C.T.A. E.B. No. 267. No pronouncement as to costs.

SO ORDERED.
 SPECIAL SECOND DIVISION
[ G.R. No. 165153, August 25, 2010 ]
CARLOS DE CASTRO, PETITIONER, VS. LIBERTY BROADCASTING
NETWORK, INC. AND EDGARDO QUIOGUE, RESPONDENTS.

RESOLUTION

BRION, J.:

The respondent, Liberty Broadcasting Network, Inc. (LBNI), filed the present Motion for
Reconsideration with Motion to Suspend Proceedings, asking us, first, to set aside our
Decision[1] and, second, to suspend the court proceedings in view of the Stay Order issued
on August 19, 2005 by the Regional Trial Court (RTC) of Makati, Branch 138, in relation
to the corporate rehabilitation proceedings that LBNI initiated.

The dispositive part of our Decision reads:

WHEREFORE, premises considered, we hereby GRANT the petition. Accordingly,

we REVERSE and SET ASIDE the Decision and Resolution of the CA promulgated on
May 25, 2004 and August 30, 2004, respectively, and REINSTATE in all respects the
Resolution of the National Labor Relations Commission dated September 20, 2002. Costs
against the respondents.

SO ORDERED.[2]

The facts, as recited in our Decision, are summarized below:

The petitioner, Carlos C. de Castro, worked as a chief building administrator at LBNI. 

On May 31, 1996, LBNI dismissed de Castro on the grounds of serious misconduct,
fraud, and willful breach of the trust reposed in him as a managerial employee. 
Allegedly, de Castro committed the following acts:

1. Soliciting and/or receiving money for his own benefit from

suppliers/dealers/traders [Cristino Samarita and Jose Aying], representing
"commissions" for job contracts involving the repair, reconditioning and
replacement of parts of the airconditioning units at the company's Antipolo
Station, as well as the installation of fire exits at the [LBNI's] Technology
Centre;
 2. Diversion of company funds by soliciting and receiving on different
occasions a total of P14,000.00 in "commissions" from Aying for a job
contract in the company's Antipolo Station;

3. Theft of company property involving the unauthorized removal of one

gallon of Delo oil from the company storage room;

4. Disrespect/discourtesy towards a  co-employee, for using offensive

language against [Vicente Niguidula, the company's supply manager];

5. Disorderly behavior, for challenging Niguidula to a fight during working

hours within the company premises, thereby creating a disturbance that
interrupted the normal flow of activities in the company;

6. Threat and coercion, for threatening to inflict bodily harm on the person of
Niguidula and for coercing [Gil Balais], a subordinate, into soliciting
money in [de Castro's] behalf from suppliers/contractors;

7. Abuse of authority, for instructing Balais to collect commissions from

Aying and Samarita, and for requiring Raul Pacaldo (Pacaldo) to exact 2%
- 5% of the price of the contracts awarded to suppliers; and

8. Slander, for uttering libelous statements against Niguidula.[3]

Aggrieved, de Castro filed a complaint for illegal dismissal against LBNI with the

National Labor Relations Commission (NLRC) Arbitration Branch, National Capital
Region, praying for reinstatement, payment of backwages, damages, and attorney's fees.
[4]
 He maintained that he could not have solicited commissions from suppliers considering
that he was new in the company.[5] Moreover, the accusations were belatedly filed as the
imputed acts happened in 1995. He explained that the one gallon of Delo oil he allegedly
took was actually found in Gil Balais' room.[6] He denied threatening Vicente Niguidula,
whom he claimed verbally assaulted him and challenged him to a fight, an incident which
he reported to respondent Edgardo Quiogue, LBNI's executive vice president, and to the
Makati police.[7] De Castro alleged that prior to executing affidavits against him,
Niguidula and Balais had serious clashes with him.[8]

On April 30, 1999, the Labor Arbiter rendered a decision[9] in de Castro's favor, holding
LBNI liable for illegal dismissal.[10] The Labor Arbiter found the affidavits of LBNI's
witnesses to be devoid of merit, noting that (1) witnesses Niguidula and Balais had
altercations with de Castro prior to the execution of their respective affidavits; (2) the
affidavit of Cristino Samarita, one of the suppliers from whom de Castro allegedly asked
for commissions, stated that it was not de Castro, but Balais, who personally asked for
money; and (3) Jose Aying, another supplier, recanted his earlier affidavit.[11]
LBNI appealed the Labor Arbiter's ruling to the NLRC. Initially, the NLRC reversed the
Labor Arbiter's decision but on de Castro's motion for reconsideration, the
NLRC reinstated the Labor Arbiter's decision.[12] It ruled that the charges against de
Castro "were never really substantiated other than by `bare allegations' in the witnesses'
affidavits who were the company's employees and who had altercations with De Castro
prior to the execution of their affidavits."[13]

LBNI again appealed the NLRC's adverse decision to the Court of Appeals (CA).  On
May 25, 2004, the CA reversed the NLRC's decision and held that de Castro's dismissal
was based on valid grounds.  It ruled too that the NLRC gravely abused its discretion
when it disregarded the affidavits of all of LBNI's witnesses.[14]

In our September 23, 2008 Decision, we found that de Castro's dismissal was based on
unsubstantiated charges. Aying, a contractor, earlier executed an affidavit stating that de
Castro asked him for commission, but in his second affidavit, he recanted his statement
and exonerated de Castro.[15] The other witnesses, Niguidula and Balais, were LBNI
employees who resented de Castro.[16] We noted that de Castro had not stayed long in the
company and had not even passed his probationary period when the acts charged
allegedly took place. We found this situation contrary to common experience, since new
employees have a natural motivation to make a positive first impression on the employer,
if only to ensure that they are regularized.[17]

Thus, we ruled that the grounds that LBNI invoked for de Castro's dismissal were, at best,
doubtful, based on the evidence presented. These doubts should be interpreted in de
Castro's favor, pursuant to Article 4 of the Labor Code.[18] Between a laborer and his
employer, doubts reasonably arising from the evidence or interpretation of agreements
and writing should be resolved in the former's favor.[19]

The Motion for Reconsideration

LBNI now moves for a reconsideration of our September 23, 2008 Decision based on the
following arguments: (1) LBNI had valid legal grounds to terminate de Castro's
employment for loss of trust and confidence;[20] (2) the affidavits of LBNI's witnesses
should not have been totally disregarded;[21] and (3) LBNI is currently under
rehabilitation, hence, the proceedings in this case must be suspended. [22] LBNI points out
that it filed, with the RTC of Makati, a petition for Corporate Rehabilitation with Prayer
for Suspension of Payments (docketed as S.P. Proc. Case No. M-6126), and on August
19, 2005, the RTC issued a Stay Order directing, among others, that the -

enforcement of all claims against Liberty Telecoms, Liberty Broadcasting and

Skyphone, whether for money or otherwise and whether such enforcement is by Court
action or otherwise x  x  x  be forthwith stayed.[23]
Comment on the Motion for Reconsideration

In his comment, de Castro contends that LBNI's motion for reconsideration contains a
rehash of LBNI's earlier arguments. He avers that despite the RTC's Stay Order, it is
premature for this Court to suspend the proceedings.  If a suspension of the proceedings
is necessary, the proper venue to file the motion is with the Office of the Labor
Arbiter. [24] De Castro further posits that LBNI should have informed this Court of the
status of its Petition for Corporate Rehabilitation.[25]

THE COURT'S RULING

Except for the prayer to suspend the execution of our September 23, 2008 Decision, we
do not find LBNI's Motion for Reconsideration meritorious. Although we reject, for lack
of merit, LBNI's arguments regarding the legality of de Castro's dismissal, we suspend
the execution of our Decision in deference to the Stay Order issued by the rehabilitation
court.

The issue of illegal dismissal has already been resolved

in the Court's September 23, 2008 Decision

LBNI's motion for reconsideration merely reiterates its earlier arguments, which we have
already addressed in our September 23, 2008 Decision. LBNI has failed to offer any
substantive argument that would convince us to reverse our earlier ruling.

LBNI argues that there is no logic for it to illegally dismiss de Castro because being on
probationary employment - a fact which this Court had stated in its decision - all that the
company had to do was not to re-hire him.[26]  By this claim, LBNI has misread the
import of our ruling. The September 23, 2008 Decision declared that de Castro "had not
stayed long in the company and had not even passed his probationary period when the
acts charged allegedly took place."[27] Properly read, we found that the acts charged
against de Castro took place when he was still under probationary employment - a finding
completely different from LBNI's claim that de Castro was dismissed during his
probationary employment. On the contrary, de Castro was dismissed on the ninth month
of his employment with LBNI, and by then, he was already a regular employee by
operation of law. Article 281 of the Labor Code provides that "[p]robationary
employment shall not exceed six (6) months from the date the employee started working, 
x  x  x  [a]n employee who is allowed to work after a probationary period shall be
considered a regular employee." As a regular employee, de Castro was entitled to security
of tenure and his illegal dismissal from LBNI justified the awards of separation pay,
backwages, and damages.

The pendency of the rehabilitation proceedings does

not affect the Court's jurisdiction to resolve the case,
but merely suspends the execution of the
September 23, 2008 Decision

On October 18, 2005, while de Castro's petition was still pending before the Court, LBNI
filed a motion to suspend the proceedings, citing the Stay Order, dated August 19, 2005,
issued by the RTC of Makati, Branch 138 in S.P. Case No. M-6126. [28]  The Stay Order
read:

FOR THE REASONS GIVEN and applying Section 6 of the Interim Rules of Procedure
on Corporate Rehabilitation, x x x it is ordered that enforcement of all claims against
[LBNI] whether for money or otherwise and whether such enforcement is by Court
action or otherwise, its guarantors and sureties not solidarily liable with the
petitioner, be forthwith stayed. 

x x  x  x

SO ORDERED.[29]

LBNI's motion was denied in our Resolution of December 12, 2005 for being premature,
as de Castro then had yet to file his reply to LBNI's comment on the petition. [30] 
Thereafter, nothing was heard from LBNI regarding the Stay Order or the
rehabilitation proceedings it instituted before the RTC of Makati, Branch 138.  Even
the memorandum, dated May 4, 2006, that LBNI filed with the Court contained no
reference to the rehabilitation proceedings.[31]

The filing of a memorandum before the Court is not an empty requirement, devoid of
legal significance. In A.M. No. 99-2-04-SC, the Court declared that issues raised in
previous pleadings but not included in the memorandum shall be deemed waived or
abandoned.  Being a summation of the parties' previous pleadings, the memoranda alone
may be considered by the Court in deciding or resolving the petition.  Thus, on account of
LBNI's omission, only the issues raised in the parties' memoranda - principally, the
validity of de Castro's dismissal from LBNI - were considered by the Court in resolving
the case.

"The Court does not take judicial notice of proceedings in the various courts of justice in
the Philippines."[32]  At the time we decided the present case, we were thus not bound to
take note of and consider the pendency of the rehabilitation proceedings, as the matter
had not been properly brought to our attention.  In Social Justice Society v. Atienza,[33] we
said that:

In resolving controversies, courts can only consider facts and issues pleaded by the
parties.  Courts, as well as magistrates presiding over them are not omniscient. They can
only act on the facts and issues presented before them in appropriate pleadings. They may
not even substitute their own personal knowledge for evidence. Nor may they take notice
of matters except those expressly provided as subjects of mandatory judicial notice.

x  x x  x

The party asking the court to take judicial notice is obligated to supply the court with the
full text of the rules the party desires it to have notice of.

Notably, LBNI's memorandum was filed on May 4, 2006, more than 180 days from the
date of the initial hearing on October 5, 2005 (as set in the Stay Order of August 19,
2005).  Under Section 11, Rule 4 of the Interim Rules of Procedure on Corporate
Rehabilitation (Interim Rules), a petition for rehabilitation shall be dismissed if no
rehabilitation plan is approved by the court upon the lapse of 180 days from the date of
initial hearing.  While the Interim Rules grant extension beyond the 180-day period, no
such extension was alleged in this case; in fact, as we earlier pointed out, no mention at
all was made in LBNI's memorandum of the rehabilitation proceedings.  With the failure
of LBNI to raise rehabilitation proceedings in its memorandum, the Court had sufficient
grounds to suppose that the rehabilitation petition had been dismissed by the time the
case was submitted for decision.

Given these circumstances, the existence of the Stay Order - which would generally
authorize the suspension of judicial proceedings, even those pending before the Court -
could not have affected the Court's action on the present case.  At any rate, a stay order
simply suspends all actions for claims against a corporation undergoing rehabilitation; it
does not work to oust a court of its jurisdiction over a case properly filed before it.[34]  Our
ruling on the principal issue of the case - that de Castro had been illegally dismissed from
his employment with LBNI - thus stands.

Nevertheless, with LBNI's manifestation that it is still undergoing rehabilitation, the

Court resolves to suspend the execution of our September 23, 2008 Decision.  The
suspension shall last up to the termination of the rehabilitation proceedings, as provided
in Section 11, in relation to Section 27, Rule 4 of the Interim Rules -

Sec. 11. Period of the Stay Order. - The stay order shall be effective from the date of
its issuance until the dismissal of the petition or the termination of the rehabilitation
proceedings.

The petition shall be dismissed if no rehabilitation plan is approved by the court upon the
lapse of one hundred eighty (180) days from the date of the initial hearing. The court may
grant an extension beyond this period only if it appears by convincing and compelling
evidence that the debtor may successfully be rehabilitated. In no instance, however, shall
the period for approving or disapproving a rehabilitation plan exceed eighteen (18)
months from the date of filing of the petition.

x  x  x  x

Sec. 27. Termination of Proceedings. - In case of the failure of the debtor to submit the
rehabilitation plan, or the disapproval thereof by the court, or the failure of the
rehabilitation of the debtor because of failure to achieve the desired targets or goals as set
forth therein, or the failure of the said debtor to perform its obligations under the said
plan, or a determination that the rehabilitation plan may no longer be implemented in
accordance with its terms, conditions, restrictions, or assumptions, the court shall upon
motion, motu proprio, or upon the recommendation of the Rehabilitation Receiver,
terminate the proceedings. The proceedings shall also terminate upon the successful
implementation of the rehabilitation plan.

WHEREFORE, we DENY the Motion for Reconsideration; accordingly, our Decision

dated September 23, 2008 is hereby AFFIRMED. The National Labor Relations
Commission is, however, directed to suspend the execution of our September 23, 2008
Decision until the Stay Order is lifted or the corporate rehabilitation proceedings are
terminated. Respondent Liberty Broadcasting Network, Inc. is hereby directed to submit
quarterly reports to the National Labor Relations Commission on the status of its
rehabilitation, subject to the penalty of contempt in case of noncompliance.

SO ORDERED.

THIRD DIVISION
[ G.R. No. 185708, September 29, 2010 ]
PEOPLE OF THE PHILIPPINES, APPELLEE, VS. JUANITO CABIGQUEZ Y
ALASTRA, APPELLANT.

DECISION

VILLARAMA, JR., J.:

On appeal is the Decision[1] dated July 9, 2008 of the Court of Appeals (CA),

Mindanao Station, which affirmed the Decision[2] dated October 29, 2003 of the Regional
Trial Court (RTC) of Cagayan de Oro City, Branch 18 finding appellant Juanito Cabigquez
y Alastra (Cabigquez) and Romulo Grondiano y Soco (Grondiano) guilty beyond
reasonable doubt of robbery (Criminal Case No. 2001-816), and also convicting
appellant Cabigquez of rape (Criminal Case No. 2001-815), both crimes committed
against private complainant AAA,[3] a 43-year old widow and mother of ten (10)
children.  Grondiano decided to withdraw his appeal before the appellate court. [4] 
Hence, this review shall consider only Cabigquez's appeal.

Below are the facts, as culled from the records of both the trial and appellate courts.

In the evening of March 26, 2001, AAA and her three minor children - BBB, CCC, and
DDD[5] - slept inside AAA's small sari-sari store which was  annexed through the exterior
balcony of her house at Purok 1-A, Tablon in Cagayan de Oro City.  AAA's head was close
to the door, while a cabinet stood at her right side. She left the 50-watt incandescent
bulb on as they slept through the night.[6]

At around 3:30 a.m., March 27, 2001, AAA was awakened when clothes fell on her face. 
When she looked up, she saw a man whose face was covered with a handkerchief and
wearing a camouflage jacket and cycling shorts.  He immediately poked a gun at her. 
AAA shouted "Ayyy!," rousing her three children from sleep.[7]  Despite the cover on the
burglar's face, BBB was able to identify him as Romulo Grondiano, one of their
neighbors, based on the hanging mole located below his left eye. [8] Armed with a
stainless handgun,[9] Grondiano ordered AAA and her children to lie face down.
[10]
 Though stricken with fear, BBB noticed that Grondiano had a companion who stayed
at the balcony keeping watch.[11] Grondiano then ransacked the store, taking with him
P3,000.00 cash from the cabinet and P7,000.00 worth of grocery items.  Before he left,
Grondiano pointed the gun at AAA's back and warned them not to make any noise. [12]

As soon as Grondiano left the store, the other man entered. BBB identified the man as
appellant Juanito Cabigquez as the latter did not conceal his face. Armed with
Grondiano's gun, Cabigquez stripped AAA of her short pants and underwear, placed a
pillow on her lower abdomen and mounted her from behind. He lifted and twisted one
of her legs and pinned the other.  AAA shouted "Ayaw!" (No!), but offered no further
resistance.  Cabigquez inserted his penis into AAA's vagina, and proceeded to ravish her
in full view of her children, and even as the latter cried for mercy.  Before he left,
Cabigquez threatened to kill AAA and her children if they would tell anyone about the
incident.[13]

Afraid for their lives, AAA and her children remained prostrate on the floor even after
the two malefactors had left.  Shortly thereafter, they decided to proceed to the house
of AAA's older son, EEE, and asked for help.  AAA failed to disclose to her son the
identities of the two men.  Meanwhile, BBB, fearing retaliation from the two men,
decided not to divulge the identities of Cabigquez and Grondiano to her mother and
brother.[14]

That same morning, March 27, 2001, AAA reported the incident to the Puerto Police
Station. No criminal complaint, however, was filed since AAA was still uncertain of the
identities of the two men.  AAA was physically examined by Dr. Cristilda O. Villapañe and
Dr. Riman Ricardo, resident physicians at the Northern Mindanao Medical Center. [15] Dr.
Villapañe's examination revealed that the smear recovered from AAA's vagina was
positive for spermatozoa,[16] while Dr. Ricardo found a two-centimeter contusion on
AAA's left hand dorsum.[17]

On May 24, 2001, Cabigquez was arrested for possession of illegal drugs. [18] Grondiano
was likewise arrested on May 26, 2001 also for possession of illegal drugs. [19] With the
two men incarcerated, and now certain of their safety, BBB finally mustered the courage
to reveal the identities of Cabigquez and Grondiano to her mother. [20]

On July 18, 2001, two Informations were filed against Cabigquez and Grondiano, viz:

Criminal Case No. 2001-816 (For: Robbery)

The undersigned Assistant City Prosecutor accuses JUANITO CABIGQUEZ y ALASTRA,

alias "DODOY", and ROMULO GRONDIANO y SOCO, alias "Molok", of the crime they
committed, as follows:

That on March 27, 2001, at more or less 3:30 o'clock in the early morning in a
store located at Purok 1-A, Barangay Tablon, Cagayan de Oro City, Philippines, and
within the jurisdiction of this Honorable Court, the above-named accused, conspiring,
confederating and helping with one another, with intent to gain and violence or
intimidation of persons, did then and there wil[l]fully, unlawfully and feloniously take,
rob and carry away cash - Php3,000.00 and assorted [grocery] stocks valued
Php7,000.00 all in all amounting to Php10,000.00, owned by and belonging to one
[AAA], in the following manner: that accused Romulo Grondiano intimidated the
offended party with a gun pointed to her and her three children and ordered them to
lay on the floor with face down and then took, robbed and carried away the
aforementioned valuable personal things while Juanito Cabigquez y Alastra
acting/serving as lookout at the door of the store, to the damage and prejudice of the
offended party, in the total sum of Php10,000.00, Philippine Currency.

Contrary to and in violation to Article 294, par. 5, of the Revised Penal Code, as
amended.[21]

Criminal Case No. 2001-815 (For: Rape)

The undersigned Assistant City Prosecutor accuses, JUANITO CABIGQUEZ Y ALASTRA

ALIAS "DODOY", of the crime of RAPE that he committed as follows:

That on March 27, 2001, at more or less 3:30 o'clock or thereabout, in the early
morning, at Purok 1A, Tablon, Cagayan de Oro City, Philippines, and within the
jurisdiction of this Honorable Court, the above-named accused, armed with a gun, and
with the use thereof, by means of force, and intimidation, did then and there willfully,
unlawfully and feloniously have carnal knowledged (sic) of the offended party [AAA],
against her will [and] in the presence and full view of her children.

Contrary to and in violation to (sic) Article 266-A (Formerly under Art. 335) of the
Revised Penal Code, as amended by R.A. 8353.[22]

Both accused pleaded not guilty to the charges. [23] During the trial, Cabigquez admitted
that on the night of March 26, 2001, he slept in the house of Leonila Omilao, a neighbor
of Cabigquez and AAA.[24] He admitted that he did not have any quarrel with AAA and
found no possible reason why AAA would file the complaints and testify against him.
[25]
 Omilao herself testified that Cabigquez was in her house on the night of the incident
and even saw the latter sleeping in the kitchen. During Omilao's cross-examination,
however, the trial court noted Silvina Cabigquez, appellant's daughter, coaching Omilao
in her answers.[26]

On October 21, 2002, the trial court, on motion by the defense, ordered the National
Bureau of Investigation (NBI) in Manila to conduct a deoxyribonucleic acid (DNA)
analysis on the sperm taken from AAA's vagina.  On May 21, 2003, NBI Forensic Chemist
III Aida Viloria Magsipoc testified that the sample collected from AAA did not match
Cabigquez's DNA profile since the specimen submitted to them were mere vaginal
discharges from AAA.[27]
On October 29, 2003, the trial court rendered judgment convicting Cabigquez and
Grondiano of the crimes charged. The dispositive portion of said decision reads:

IN THE LIGHT OF ALL THE FOREGOING, the Court finds accused JUANITO
CABIGQUEZ GUILTY beyond reasonable doubt of the crime of Rape under Article 266-A
of the Revised Penal Code, punishable under Article 266-B of the same Code, and there
being one aggravating circumstance [the used (sic) of a deadly weapon (firearm)]
without a[ny] mitigating circumstance, accused JUANITO CABIGQUEZ is hereby
sentenced and is SO ORDERED to suffer the supreme penalty of Death by lethal
injection, including its accessory penalties. He is further directed and is SO ORDERED to
pay the victim the sum of FIFTY THOUSAND PESOS (P50,000.00) as indemnity, plus
another TWENTY FIVE THOUSAND PESOS (P25,000.00), as moral damages. Pursuant to
Section 22 of R.A. 7659 and Section 10 of Rule 122 of the Rules of Court, let the entire
record of this case be forwarded to the Supreme Court for automatic review.

FURTHERMORE, the Court likewise finds accused JUANITO CABIGQUEZ and ROMULO
GRONDIANO GUILTY beyond reasonable doubt of the Crime of Robbery punishable
under paragraph 5 of Article 294 of the Revised Penal Code, and [there] being no
aggravating nor mitigating circumstance, and after applying the Indeterminate Sentence
Law, accused JUANITO CABIGQUEZ and ROMULO GRONDIANO are hereby sentenced
and are SO ORDERED to serve the [penalty of] imprisonment of TWO (2) YEARS, TEN (10)
MONTHS AND TWENTY (20) DAYS OF PRISION CORRECCIONAL, as the MINIMUM, to SIX
(6) YEARS, ONE (1) MONTH AND ELEVEN (11) DAYS OF PRISION MAYOR, as the
MAXIMUM, including its accessory penalties, plus further SO ORDERED to pay the stolen
items and cash in the sum of TEN THOUSAND PESOS (P10,000.00).

SO ORDERED. Cagayan de Oro City, October 29, 2003.[28]

The records of the case were elevated to this Court on automatic review.  Pursuant to
our ruling in People v. Mateo,[29] the case was referred to the CA.

In his appeal, appellant maintained his defense of alibi and denial. He questioned the
accuracy and credibility of BBB's testimony given her failure to immediately divulge the
identity of the perpetrators after the incident. Appellant also noted that AAA's lone
interjection, while she was allegedly being raped by him, can hardly be considered as a
manifest resistance.[30] The defense also argued that the prosecution failed to establish
conspiracy since BBB did not actually see that Cabigquez was on the balcony while the
robbery was being committed.[31]
By Decision dated July 9, 2008, the CA upheld the RTC in convicting appellant of both
crimes of robbery and rape.  The CA found BBB's testimony candid and not prompted by
ill-motive. As to BBB's failure to promptly implicate Grondiano and Cabigquez for the
crimes, the appellate court ruled that this cannot be taken against her in the light of
serious threats made by said accused on their family. The alleged contradictions in the
testimonies of AAA and BBB were likewise not fatal to the case of the prosecution as
they bear no materiality to the commission of the crime. The CA also noted that the
accused were able to consummate their criminal acts without any physical resistance
from the victims who could not even cry loudly because they were ordered at gunpoint
not to make any noise.  It rejected the defense of alibi put up by Cabigquez in view of his
admission that he stayed at a house within the vicinity of AAA's store. [32]

The CA thus decreed:

WHEREFORE, premises considered, the appealed October 29, 2003 Decision of

the Regional Trial Court (RTC) of Misamis Oriental, 10th Judicial Region, Branch 18,
Cagayan de Oro City, convicting Juanito A. Cabigquez, the lone appellant before Us, for
the crimes of Robbery and Rape, is hereby AFFIRMED with MODIFICATION in that
Juanito A. Cabigquez is hereby sentenced to suffer the penalty of reclusion perpetua for
the crime of Rape.

SO ORDERED.[33]

Before this Court, appellant Cabigquez reiterates the following arguments:

I.

THE COURT A QUO GRAVELY ERRED IN CONVICTING THE ACCUSED-APPELLANT OF THE

CRIME CHARGED DESPITE THE FAILURE OF THE PROSECUTION TO PROVE THEIR GUILT
BEYOND REASONABLE DOUBT.

II.

THE COURT A QUO GRAVELY ERRED IN GIVING WEIGHT AND CREDENCE TO THE

INCREDIBLE AND INCONSISTENT TESTIMONY OF THE PROSECUTION WITNESSES.

III.
ASSUMING ARGUENDO THAT THE ACCUSED-APPELLANTS COMMITTED ROBBERY, THE
COURT A QUO GRAVELY ERRED IN ORDERING THEM TO PAY THE COMPLAINANT
P10,000.00 AS ACTUAL DAMAGES.

IV.

THE COURT A QUO GRAVELY ERRED IN FINDING THAT THERE WAS CONSPIRACY IN THE
CASE AT BAR.[34]

We sustain the ruling of the CA.

The factual findings of the RTC, as affirmed by the appellate court, indubitably prove
that appellant raped AAA even if the specimen obtained from the vaginal swabs and
submitted to the NBI failed to match appellant's DNA profile.  Rape is committed by a
man who shall have carnal knowledge of a woman through force, threat or intimidation.
[35]
  The commission of rape was clearly shown by testimonial and documentary
evidence; the defense submits that it is the identity of the perpetrator which is not duly
established.

For purposes of criminal investigation, DNA identification is indeed a fertile source of

both inculpatory and exculpatory evidence.[36] In this case, however, the result of the
DNA test is rendered inconclusive to exculpate or inculpate the appellant since the
sample tested by the NBI merely contained vaginal discharges.  In the laboratory test
earlier conducted by Dr. Villapañe on the vaginal swab obtained from AAA's genitalia,
the presence of spermatozoa was confirmed.  This notwithstanding, the totality of
evidence satisfactorily established that it was indeed appellant who raped AAA.

AAA's daughter, BBB, who witnessed the entire incident which happened inside their
store on the night in question, positively identified appellant as the one who raped her
mother against the latter's will by threatening her and her children with a handgun he
was then carrying.  BBB's unflinching and consistent testimony, when taken together
with Dr. Villapañe's findings and AAA's own declarations in court, provides sufficient
basis for the conviction of appellant for rape.

Quoted herein are the relevant portions of BBB's testimony on direct examination as to
her identification of appellant as her mother's rapist, viz:
Q  Now, [BBB], you said that you are 13 years old and you said a while ago you sworn
that you will tell the truth, can you remember that?
A   Yes, sir.

Q   Okay now, are you going to tell the truth and nothing but the truth before this
Honorable Court?
A   Yes, sir I will tell the truth.

Q   Do you know what will happen to you if you tell a lie in court?
A   Yes, sir I will be imprisoned.

Q   Do you want to be imprisoned?

A   No, sir.

Q   So, you will tell the truth nothing but the truth?
A   Yes, sir.

Q Do you know accused Romulo Grondiano?

A   Yes, sir because he is our neighbor.

xxxx

Q   Do you also know accused Juanito Cabigquez who is accused for rape and co-
accused in robbery?
A   Yes, sir he is also our neighbor.

Q   For how long have you known Juanito Cabigquez before March 27, 2001?
A   Since I came that age of reason I already knew Juanito Cabigquez.

Q   Is Juanito Cabigquez also a resident of Purok 1-A at Tablon?

A   Yes, sir.

Q   Do you also know the nickname of Juanito Cabigquez?

A   Its Dodoy.

Q   If Juanito Cabigquez is inside this courtroom, can you point to him?
A   Note: Witness pointed to a person who when asked of his name identified himself as
Juanito Cabigquez.

Q  Okay, on March 27, 2001 at about 3:30 early in the morning, do you remember
where were you?
A   I was inside our store sleeping together with our mother.

Q   Aside from you and your mother, who were other persons who were with you?
A  Together with my two (2) siblings.

xxxx

Q   Now, while you were sleeping together with your mother and your two (2) younger
 siblings at that time, what happened?

xxxx

A   The three (3) of us were awakened because of the shout of our mother.

Q   Who is that us?

A  I together with my two (2) siblings.

Q   Your mother also woke up?

A   Yes, sir.

Q   Now, after you were awakened by the shout of your mother, what did you observe, if
there was any?
A   I saw my mother knelt down and I came nearer and then I embraced her because I
thought she was dreaming but I saw Romulo Grondiano with a gun.

xxxx

Q   Alright, what happened while you saw accused Romulo Grondiano already at the
door of your store of your mother holding a gun and your mother was kneeling?
A   He ordered us to lay face down.

Q   After Romulo Grondiano ordered you to lay face down, what did you, your mother
and your two (2) siblings do?
A   I let my mother lay face down.

Q   How about you?

A   I also lay face down.

Q   How about your two (2) younger siblings?

A   They also lay face down.

Q   Alright, while the four (4) of you were lying face down, what did you observe?
A  I noticed that he had a companion who is at our balcony.

Q   How were you able to notice that he has a companion?

A   Because we had a chair made of bamboo and then if somebody or a person hit it, it
will sound.

xxxx

Q   Now, after Romulo Grondiano took all those things that you have enumerated a while
ago, where did Romulo Grondiano go?
A   He pointed a gun at my mother's back and then ordered us not to move.

xx
xx
Q   Alright, after Romulo Grondiano told you, your mother and your two (2) younger
 siblings not to move, where did Romulo Grondiano go?
A   He went to the balcony and then Juanito Cabigquez replaced him (Romulo) in going
up, he (Juanito) went inside our store.

xx
xx
Q   Alright, you testified a while ago that after Romulo Grondiano went inside your store
he passed by the balcony of your house, then co-accused Juanito Cabigquez came in, where
did Juanito Cabigquez come in?
A   He entered in our store.

Q   The same store where you, your mother and two (2) younger siblings were staying at
that time?
A   Yes, sir.

Q   How were you able to recognize that it was Juanito Cabigquez who came in?
A   Because I saw him.

Q   When you saw Juanito Cabigquez, were you still lying face down or were you already
sitting?
A   I was already lying face down.

Q   How were you able to see him?

A   Because I looked back at the door because I thought that Romulo Grondiano
already left but then I saw Juanito Cabigquez came in and replaced Romulo Grondiano.

Q   This Juanito Cabigquez who came in after Romulo Grondiano went out, is he the
same Juanito Cabigquez the co-accused for robbery and accused in rape case?
A   Yes, sir.

Q  If he is inside this courtroom, can you point him again?

A   Note: Witness pointed again to a person who when asked of his name identified
himself as Juanito Cabigquez.

Q   After Juanito Cabigquez came in inside the store, what did you observe?
A  He removed the shortpants of my mother and then he got the pillow of my mother
and placed it under her abdomen.

xxxx

Q   Now, what was the position of your mother when Juanito Cabigquez took off the
shortpants of your mother?
A   She was still lying face down.

Q   What was the position of your mother when Juanito Cabigquez put the pillow under
her abdomen?
A   She was still lying face down.
 Q   By the way, when Juanito Cabigquez entered the store, was the light still on?
A   Yes, sir.

Q   Now, you said that your mother shouted when Juanito Cabigquez came in.  My
question is, when did your mother actually shout?
A   When Juanito Cabigquez was removing the shortpants of my mother.

COURT:  (to the witness)

Q   Can you tell the Court what kind of shout your mother did?
A   My mother shouted "ay!"

PROS. M. NOLASCO: (cont'g.)

Q   Now, was Juanito able to take off the shortpants of your mother?
A   Yes, sir because it was a gartered shortpants.

Q   Now, how about the panty of your mother?

A   It was removed together with the shortpants.

Q   Now, after the shortpants and panty of your mother were taken off and the pillow
was placed under her abdomen, what next did you observe?
A   Juanito Cabigquez mounted on my mother.

Q   And then, what did Juanito do when he mounted to your mother?
A   He did a push and pull motion.

Q   How about your two (2) younger siblings, were they still awake at that time?
A   Yes, sir, they were crying.

Q   How about you?

A   I also cried.

Q   When you noticed that he (Juanito Cabigquez) entered your store, was he carrying a
gun?

xxxx

A   He was bringing a gun.

xx
xx
Q   Can you demonstrate the length of the gun that you saw?
A   The gun which Juanito Cabigquez was bringing was the same gun Romulo brought.

Q  How about your mother while Juanito Cabigquez was already mounted on her and
make a push and pull motion, what did your mother do?
A   My mother was crying.
 xxxx

Q   You said that you, your mother and your two (2) younger siblings were crying while
Juanito Cabigquez mounted on your mother and made a push and pull motion, what
happened after that?
A   He pointed his gun at the back of my mother and then told us not to tell to anybody
because they will return and kill us.

Q   Now, after Juanito Cabigquez warned you not to tell anybody otherwise they will
return and kill you, what did Juanito Cabigquez do?
A  He went up to the balcony.

xxxx

Q   How about Juanito Cabigquez, when he entered your store of your mother and raped
your mother, what was he wearing?
A   He was wearing a white t-shirt and maong pants.

COURT:  (to the witness)

Q   Was it long or short?

A   Long pants.

x x x x [37] (Emphasis supplied.)

Appellant asserts that it is significant that AAA herself did not recognize him and
his co-accused despite her familiarity with them as they were her customers in her
store.  It was pointed out that the identification of the perpetrators was supplied solely
by her daughter BBB, who should not have been given any credence in view of her
inconsistent declarations such as when she testified that when she woke up, her mother
was kneeling contrary to the latter's testimony that when clothes fell on her face, she
was awakened and that her mother shouted but a gun was pointed to her.  Moreover,
BBB saw the accused several times after the alleged crimes transpired and yet she did
not manifest any alarm even when they reported the matter to the police; it was only
after the accused were detained that their identities were revealed. In the light of
serious discrepancies in the testimonies of prosecution witnesses, appellant maintains
that BBB's identification of the perpetrators of robbery and rape was unreliable and
doubtful.[38]

We are not persuaded.

While it is true that the most natural reaction for victims of crimes is to strive to
remember the faces of their assailants and the manner in which the craven acts are
committed,[39] in this case, AAA cannot be faulted for failing to recognize appellant as
her rapist though the latter was their neighbor. It must be recalled, as narrated by AAA
and BBB, they were all still lying face down when appellant suddenly entered the store
right after his co-accused Grondiano exited through the balcony taking the loot with
him.  BBB recounted that her mother was still lying face down when appellant removed
her mother's short pants and panty, placed a pillow below her abdomen and then
proceeded to rape her.  It was BBB who had the opportunity to look at this second
person who entered their house because she looked back at the door thinking that
Grondiano (the one who first entered the store) already left, but then appellant
immediately came in after Grondiano.  Although AAA was able to shout at that time, she
could not move because she was afraid that her three children, who were already
crying, will be harmed.[40]

As to the alleged inconsistency in the position of her mother when accused Grondiano
entered their store, the same is inexistent considering that AAA was relating the exact
moment when she woke up and realized the presence of an intruder because clothes
fell on her face, while BBB who was awakened by the shout of her mother, simply
described her mother then already in a kneeling position as she woke up first.  BBB had
thought her mother was just dreaming but then she saw Grondiano already inside the
house with a gun.

Neither would BBB's delay in revealing the identities of the perpetrators to the police
taint her identification of appellant as the one who raped her mother and conspirator of
Grondiano in robbing their store. Failure to immediately reveal the identity of a
perpetrator of a felony does not affect, much less impair, the credibility of witnesses,
more so if such delay is adequately explained.[41]  BBB sufficiently explained her action in
not immediately divulging to her mother and brother nor reporting to the police whom
she saw inside their house that early morning of March 27, 2001.  She was afraid that
the assailants would make good their threat that they will return and kill their family if
they reported the incident to anybody.  But when a couple of months later appellant
and his co-accused Grondiano were arrested on drug charges, BBB finally felt it was safe
to come out in the open and inform the police of the identities of the two men who
robbed their house, one of whom subsequently raped her mother (appellant).

Appellant cannot seek acquittal on the basis of the negative result of the DNA test on
the specimen conducted by the NBI.
A positive DNA match is unnecessary when the totality of the evidence presented
before the court points to no other possible conclusion, i.e., appellant raped the private
offended party. A positive DNA match may strengthen the evidence for the prosecution,
but an inconclusive DNA test result may not be sufficient to exculpate the accused,
particularly when there is sufficient evidence proving his guilt. Notably, neither a
positive DNA match of the semen nor the presence of spermatozoa is essential in
finding that rape was committed. The important consideration in rape cases is not the
emission of semen but the penetration of the female genitalia by the male organ. [42]

Moreover, it is evident that the rape of AAA was committed in the presence and in full
view of her three minor children. Thirteen (13)-year old BBB, as well as her two minor
siblings who were present at the time when the rape was committed, was already old
enough to sense the bestiality being committed against their own mother. [43] Such
circumstance, as recited in the last portion of the Information for Criminal Case No.
2001-815 is, by itself, sufficient to qualify the rape under Article 266-B of the Revised
Penal Code,[44] as amended.  Consequently, the CA was correct in affirming the
conviction of appellant for qualified rape.

With respect to the charge of robbery, we find no merit in appellant's argument that the
prosecution failed to establish that he conspired with co-accused Grondiano in stealing
goods from private complainant's store.  He asserts that there was no proof that he was
outside the store when the crime of robbery was being committed; private complainant
and her daughter merely surmised that another person was outside the store because
of a creaking sound created by a bamboo chair, but they actually did not see that person
or if there was indeed that person.[45]

On this issue, we hold that the CA correctly ruled that conspiracy was sufficiently proven
by circumstantial evidence on record, thus:

We also find that the trial court correctly appreciated conspiracy against
Cabigquez with respect [to] the crime of robbery.  There is conspiracy when two or
more persons come to an agreement concerning the commission of a felony and decide
to commit it. Direct proof of previous agreement to commit a crime is not necessary. 
Conspiracy may be shown through circumstantial evidence, deduced from the mode
and manner in which the offense was perpetrated, or inferred upon the acts of the
accused themselves when such lead to a joint purpose and design, concerted action,
and community of interest.
Neither [AAA] nor [BBB] saw Cabigquez acting as a lookout outside the store. However,
the creaking sound coming from the balcony and the fact that [BBB] saw Cabigquez go
inside the store, as soon as Grondiano left, reasonably verify a discernment that
someone stood by outside and close to the store's entrance during the looting, and that
such person was Cabigquez.  The fact that only Grondiano concealed his face reasonably
indicates a prior agreement between the two (2) malefactors for Cabigquez to act as a
lookout in the commission of robbery.  After raping [AAA], Cabigquez also warned of
killing [AAA and her children] if they told anyone about the incident, which threat
contributed to the common sentiment of concealing both crimes of robbery and rape. 
These circumstances sufficiently establish a joint purpose and design, and a community
of interest, between Cabigquez and Grondiano, in committing the crime of robbery. [46]

On the matter of actual damages awarded by the trial court, appellant questions the
amount thereof, insisting there was no basis for the actual cost of the items taken from
the store.

We find no reversible error committed by the CA in sustaining such award.  In People v.

Martinez,[47] this Court ruled that the trial court has the power to take judicial notice of
the value of stolen goods because these are matters of public knowledge or capable of
unquestionable demonstration. Judicial cognizance, which is based on considerations of
expediency and convenience, displace evidence since, being equivalent to proof, it
fulfills the object which the evidence is intended to achieve.  Surely, matters like the
value of the appliances, canned goods and perfume are undeniably within public
knowledge and easily capable of unquestionable demonstration. [48]  Here, what is
involved are common goods for everyday use and ordinary stocks found in small sari-
sari stores like private complainant's store, i.e.,  milk, soap,  coffee, sugar, liquor and
cigarettes. The RTC was thus correct in granting the reasonable amount of P10,000.00 as
computed by the private complainant representing the value of stolen merchandise
from her store.

Further, the Court deems it proper to adjust the sums awarded as civil indemnity, moral
and exemplary damages. Applying prevailing jurisprudence, the private complainant is
entitled to P75,000.00 as civil indemnity, P75,000.00 as moral damages and P25,000.00
as exemplary damages.[49]

Lastly, the death penalty imposed on appellant was correctly modified to reclusion
perpetua,  in view of the passage of Republic Act No. 9346, entitled "An Act Prohibiting
the Imposition of Death Penalty in the Philippines."[50]  Notwithstanding the reduction of
the penalty imposed on appellant, he is not eligible for parole following Section 3 of the
said law, which provides:

SEC. 3.  Persons convicted of offenses punished with reclusion perpetua, or

whose sentences will be reduced to reclusion perpetua, by reason of this Act, shall not
be eligible for parole under Act No. 4103, otherwise known as the Indeterminate
Sentence Law, as amended.

WHEREFORE, the appeal is DISMISSED and the Decision dated July 9, 2008 of the Court
of Appeals, Mindanao Station in CA-G.R. CR-H.C. No. 00409 is AFFIRMED with
MODIFICATIONS in that the penalty of reclusion perpetua imposed on appellant in
Criminal Case No. 2001-815 for qualified rape is herein clarified as without eligibility for
parole, and the appellant is ordered to pay the private complainant P75,000.00 as civil
indemnity, P75,000.00 as moral damages and P25,000.00 as exemplary damages.

With costs against the appellant.

SO ORDERED.

THIRD DIVISION
[ G.R. No. 159230, October 18, 2010 ]
B.E. SAN DIEGO, INC., PETITIONER, VS. COURT OF APPEALS AND
JOVITA MATIAS, RESPONDENTS.

DECISION

BRION, J.:

Petitioner B. E. San Diego, Inc. (B.E. San Diego) filed before the Court a petition for
review on certiorari[1] assailing the September 25, 2002 decision[2] of the Court of
Appeals (CA) in CA-G.R. CV No. 50213. The CA decision reversed the June 22, 1995
decision[3] of the Regional Trial Court (RTC) of Malabon, Branch 74, in Civil Case No.
1421-MN.[4]  The RTC in turn granted the complaint for recovery of
possession[5] instituted by B. E. San Diego against private respondent Jovita Matias
(Matias).
 THE FACTS

B.E. San Diego alleged that it is the registered owner of a parcel of land (subject
property) located in Hernandez Street, Catmon, Malabon, covered by Transfer Certificate
of Title (TCT) No. T-134756 of the Register of Deeds of Caloocan, and delineated as Lot
No. 3, Block No. 13, with an area of 228 square meters.  B. E. San Diego claimed that
Matias has been occupying the subject property for over a year without its authority or
consent.  As both its oral and written demands to vacate were left unheeded, B. E. San
Diego filed a complaint for the recovery of possession of the subject property against
Matias on March 15, 1990 before the RTC.[6]

In her answer to the complaint, Matias alleged that she and her family have been living
on the subject property since the 1950s on the basis of a written permit issued by the local
government of Malabon in 1954.[7]  Matias stated that she and her family have introduced
substantial improvements on the subject property and have been regularly paying realty
taxes thereon.  She further claimed that she is a legitimate beneficiary of Presidential
Decree (PD) No. 1517[8] and PD No. 2016,[9] which classified the subject property as part
of the Urban Land Reform Zone (ULRZ) and an Area for Priority Development (APD).

More importantly, she questioned B. E. San Diego's claim over the subject property by
pointing out that the title relied on by B. E. San Diego (TCT No. T-134756) covers a
property located in Barrio Tinajeros, Malabon, while the subject property is actually
located in Barrio Catmon, Malabon.  Matias thus claimed that the property she is
occupying in Barrio Catmon is different from the property that B. E. San Diego seeks to
recover in the possessory action before the RTC.[10]

The RTC found no issue as to the identity of the property, ruling that the property
covered by B. E. San Diego's TCT No. T-134756, located in Barrio Tinajeros, is the same
property being occupied by Matias, located in Barrio Catmon.  The RTC took judicial
notice of the fact that Barrio Catmon was previously part of Barrio Tinajeros.  It found
that the Approved Subdivision Plan and tax declarations showed that the subject property
is located in Barrio Catmon, Malabon.  The RTC thus declared that B. E. San Diego
sufficiently proved its right to recover possession of the subject property on the basis of
its TCT No. T-134756.   As opposed to B. E. San Diego's clear right, it found Matias'
claimed of possession over the subject property as a long-time occupant and as a
beneficiary of PD Nos. 1517 and 2016 unfounded.[11]

On appeal, the CA disagreed with the RTC's findings.  It considered the discrepancy in
the location significant and declared that this should have prompted the RTC to require
an expert witness from the concerned government agency to explain the matter.  Since it
was undisputed that Matias was in actual possession of the subject property at the time of
the filing of the complaint, the CA declared that her possession should have been upheld
under Article 538 of the Civil Code.[12]  The CA also upheld Matias' possession based on
PD Nos. 1517 and 2016. [13]

As its motion for reconsideration of the CA's judgment was denied,[14] B. E. San Diego
filed the present petition for review on certiorari under Rule 45 of the Rules of Court.

THE PETITION FOR REVIEW ON CERTIORARI

B. E. San Diego contends that the CA erred in reversing the RTC's finding on the sole
basis of a discrepancy, which it claims has been explained and controverted by the
evidence it presented.  It assails the CA decision for failing to consider the following
evidence which adequately show that the property covered by its TCT No. T-134756 is
the same property occupied by Matias:

a. TCT No. T-134756 issued in the name of B. E. San Diego, covering a

property delineated as Lot No. 3, Block No. 13;
b. Approved Subdivision Plan showing Lot No. 3, Block No. 3 is situated in
Barrio Catmon, Malabon;
c. Tax Declaration No. B-005-00296 issued in the name of B. E. San Diego,
referring to a property covered by TCT No. T-134756;
d. Testimonial evidence of B. E. San Diego's witness that the property
described in TCT No. T-134756 is the same property occupied by Matias;
and
e. Judicial notice taken by the RTC of Malabon, based on public and common
knowledge, that Barrio Catmon was previously part of Barrio Tinajeros,
Malabon.

B. E. San Diego also alleges that Matias is estopped from alleging that the property she is
occupying is different from the property covered by its TCT No. T-134756.   Matias
previously moved to dismiss its complaint for recovery of possession of the subject
property (accion publiciana), raising res judicata as ground.[15]  She alleged that
the accion publiciana[16] is barred by the judgment in an earlier ejectment case,[17] as both
involved the same parties, the same subject matter, and the same cause of action.  The
ejectment case involved a parcel of land covered by TCT No. T-134756, located at
Hernandez Street, Barrio Catmon, Malabon; Matias never questioned the identity and
location of the property in that case.[18]  B. E. San Diego thus contends that Matias, by
raising the ground of res judicata, has impliedly admitted there is no difference in the
subject matter of the two actions and, thus, could no longer question the identity and
location of the subject property.

In controverting B. E. San Diego's petition, Matias relies on the same points that the CA
discussed in its decision.
 THE COURT'S RULING

The Court finds the petition meritorious.

From the errors raised in the petition, what emerges as a primary issue is the identity of
the subject matter of the case - whether the subject property that Matias occupies is
the same as the property covered by B. E. San Diego's title. Our reading of the records
discloses that the two are one and the same.

B. E. San Diego's TCT No. T-134756 refers to a property located in Barrio Tinajeros,
Malabon, but the subject property sought to be recovered from Matias is in Barrio
Catmon, Malabon.  In ruling for Matias, the CA declared that this discrepancy should
have been explained by an expert witness, which B. E. San Diego failed to present.

The Court, however, does not find the testimony of an expert witness necessary to
explain the discrepancy.  The RTC declared that the discrepancy arose from the fact that
Barrio Catmon was previously part of Barrio Tinajeros.  The RTC has authority to
declare so because this is a matter subject of mandatory judicial notice.  Section 1 of Rule
129 of the Rules of Court[19] includes geographical divisions as among matters that courts
should take judicial notice of.  Given that Barrio Tinajeros is adjacent to Barrio Catmon,
[20]
 we find it likely that, indeed, the two barrios previously formed one geographical unit.

Even without considering judicial notice of the geographical divisions within a political
unit, sufficient evidence exists supporting the RTC's finding that the subject property B.
E. San Diego seeks to recover is the Barrio Catmon property in Matias' possession.  TCT
No. T-134756 identifies a property in Barrio Tinajeros as Lot No. 3, Block No. 13.
Although B. E. San Diego's tax declaration refers to a property in Barrio Catmon, it
nevertheless identifies it also as Lot No. 3, Block No. 13, covered by the same TCT No.
T-134756.  Indeed, both title and the tax declaration share the same boundaries to identify
the property.  With this evidence, the trial court judge can very well ascertain the facts to
resolve the discrepancy, and dispense with the need for the testimony of an expert
witness.[21]

Additionally, we agree with B. E. San Diego that Matias can no longer question the
identity of the property it seeks to recover when she invoked res judicata as ground to
dismiss the accion publiciana that is the root of the present petition.  An allegation of res
judicata necessarily constitutes an admission that the subject matter of the pending suit
(the accion publiciana) is the same as that in a previous one (the ejectment case).[22] That
Matias never raised the discrepancy in the location stated in B.E. San Diego's title and the
actual location of the subject property in the ejectment suit bars her now from raising the
same.  Thus, the issue of identity of the subject matter of the case has been settled by
Matias' admission and negates the defenses she raised against B. E. San Diego's
complaint.
We then proceed to resolve the core issue of the accion publiciana -who between the
parties is entitled possession of the subject property. Notably, the judgment in the
ejectment suit that B. E. San Diego previously filed against Matias is not determinative of
this issue and will not prejudice B. E. San Diego's claim.[23]  While there may be identity
of parties and subject matter, there is no identity of cause of action between the two
cases; an action for ejectment and accion publiciana, though both referring to the issue of
possession, differ in the following manner:

First, forcible entry should be filed within one year from the unlawful dispossession of
the real property, while accion publiciana is filed a year after the unlawful dispossession
of the real property. Second, forcible entry is concerned with the issue of the right to
the physical possession of the real property; in accion publiciana, what is subject of
litigation is the better right to possession over the real property. Third, an action for
forcible entry is filed in the municipal trial court and is a summary action, while accion
publiciana is a plenary action in the RTC.[24]

B. E. San Diego anchors it right to possess based on its ownership of the subject property,
as evidenced by its title.  Matias, on the other hand, relies on (1) the 1954 permit she
secured from the local government of Malabon, (2) the Miscellaneous Sales Application,
(3) the tax declarations and realty tax payments she made annually beginning 1974, (4)
her standing as beneficiary of PD Nos. 1517 and 2016, and (5) her long possession of the
subject property since 1954 up to the present.  Unfortunately for Matias, her evidence
does not establish a better right of possession over B. E. San Diego's ownership.

The settled doctrine in property law is that no title to register land in derogation of that of
the registered owner shall be acquired by prescription or adverse possession. [25] Even if
the possession is coupled with payment of realty taxes, we cannot apply in Matias' case
the rule that these acts combined constitute proof of the possessor's claim of title. [26] 
Despite her claim of possession since 1954, Matias began paying realty taxes on the
subject property only in 1974 - when B. E. San Diego filed an ejectment case against her
husband/predecessor, Pedro Matias.[27] Considering these circumstances, we find Matias'
payment of realty taxes suspect.

Matias cannot rely on the Miscellaneous Sales Application and the local government
permit issued in her favor; neither establishes a clear right in favor of Matias over the
subject property.  A sales application, in the absence of approval by the Bureau of Lands
or the issuance of a sales patent, remains simply as an application that does not vest title
in the applicant.[28]  The local government permit contained only a statement of the local
executive that the case between the local government and B. E. San Diego was decided
by a trial court in favor of the former.[29]

The CA erroneously upheld Matias' claim of possession based on PD Nos. 1517 and
2016.  Matias is not a qualified beneficiary of these laws.  The tenants/occupants who
have a right not to be evicted from urban lands "does not include those whose presence
on the land is merely tolerated and without the benefit of contract, those who enter the
land by force or deceit, or those whose possession is under litigation." [30] At the time of
PD 1517's enactment, there was already a pending ejectment suit between B. E. San
Diego and Pedro Matias over the subject property.  "Occupants of the land whose
presence therein is devoid of any legal authority, or those whose contracts of lease were
already terminated or had already expired, or whose possession is under litigation, are not
considered `tenants' under the [PD Nos. 1517]."[31]  The RTC correctly ruled that Matias
cannot be considered a legitimate tenant who can avail the benefits of these laws no
matter how long her possession of the subject property was.

WHEREFORE, we GRANT the petition for review on certiorari, and REVERSE the

September 25, 2002 decision and May 20, 2003 resolution of the Court of Appeals in
CA-G.R. CV No. 50213.  The June 22, 1995 decision of the Regional Trial Court of
Malabon in Civil Case No. 1421-MN is REINSTATED.  Costs against the respondent.

SO ORDERED.

SECOND DIVISION
[ G.R. No. 187917, January 19, 2011 ]
METROPOLITAN BANK & TRUST COMPANY, PETITIONER, VS.
SPOUSES EDMUNDO MIRANDA AND JULIE MIRANDA, RESPONDENTS.

DECISION

NACHURA, J.:

On appeal is the June 30, 2008 Decision[1] of the Court of Appeals (CA) in CA-G.R.
CV No. 87775, affirming the June 16, 2006 Decision[2] of the Regional Trial Court (RTC) of
Santiago City, Branch 35, as well as its subsequent Resolution dated May 7, 2009,
[3]
 denying petitioner's motion for reconsideration.

Respondents, spouses Edmundo Miranda and Julie Miranda, applied for and obtained a
credit accommodation from petitioner Metropolitan Bank & Trust Company
(Metrobank).   On August 27, 1996, respondents obtained a P4,000,000.00 loan from
Metrobank and executed a real estate mortgage[4] over a parcel of land in Poblacion,
Santiago, Isabela, covered by Transfer Certificate of Title (TCT) No. 202288. Upon
respondents' request, Metrobank increased the loan from P4,000,000.00 to
P5,000,000.00.  The real estate mortgage executed on August 27, 1996 was thus
amended[5] to increase the principal amount of loan secured by the mortgage to
P5,000,000.00.

Subsequently, respondents obtained additional loans from Metrobank - P1,000,000.00

on  December 3, 1996, and P1,000,000.00 on May 8, 1997. The additional loans were
secured by mortgage[6] over lands situated in Dubinan and Mabini, Santiago, Isabela,
covered by TCT Nos. T-202288, T-180503, T-260279, and T-272664.

Respondents encountered difficulties in paying their loans. They requested for a longer
period to settle their account and further requested for the restructuring of their loans,
which requests Metrobank granted.  Respondents then signed Promissory Note (PN) No.
599773[7] for P6,400,000.00, and PN No. 599772[8] for P950,000.00, both payable on
February 24, 2002, with interest at 17.250% per annum. They also amended the deeds
of real estate mortgage they executed in favor of Metrobank to increase the amount of
loans secured by mortgage to P6,350,000.00.  The amendment was inscribed on TCT
Nos. T-202288,[9] T-260279,[10] and T-180503.[11]

On August 25, 2000, Metrobank sent respondents a demand letter [12] to settle their
overdue account of P8,512,380.15, inclusive of interest and penalties; otherwise, the
bank would initiate "the necessary legal proceedings x x x, without further
notice." Respondents, however, failed to settle their account.   Consequently,
Metrobank caused the extrajudicial foreclosure and auction sale of the mortgaged
properties on November 16, 2000. The Clerk of Court and Ex-Officio Sheriff of Santiago
City sold the mortgaged properties at public auction for the sum of P9,284,452.00 to
Metrobank, as the highest bidder.  A Certificate of Sale[13] was issued in favor of
Metrobank on November 27, 2000, which was registered with the Registry of Deeds on
November 29, 2000.

Claiming that the extrajudicial foreclosure was void, respondents filed a complaint for
Nullification of the Foreclosure Proceedings and Damages with Prayer for Temporary
Restraining Order/Injunction[14] with the RTC of Santiago City.  They alleged non-
compliance with the provisions of Presidential Decree No. 1079 [15] and Act No. 3135,
[16]
 particularly the publication requirement. Respondents further asserted that
Metrobank required them to sign blank promissory notes and real estate mortgage, and
that they were not furnished with copies of these documents.  Later, they discovered
that the terms and conditions of the promissory notes and of the mortgage were
entirely different from what was represented to them  by  the  bank.   The right  to  fix 
the  interest  rates,  they  added,  was
exclusively given to the bank.  Respondents, thus, prayed for the annulment of the
extrajudicial foreclosure proceedings.

Metrobank answered the complaint, denying its material allegations and asserting the
validity of the foreclosure proceedings. Specifically, it averred compliance with the
posting and publication requirements.  Thus, it prayed for the dismissal of the
complaint.[17]

Meanwhile, on December 20, 2001, Metrobank caused the cancellation of the TCTs in
the name of respondents and the issuance of new ones in its name.  On December 21,
2001, the Ex-Officio Sheriff executed a Final Deed of Sale.[18]

On June 16, 2006, the RTC rendered a decision[19] annulling the extrajudicial foreclosure
proceedings. The RTC reviewed the records of the foreclosure proceedings and found no
proof of publication of the sheriff's notice of sale; there was no affidavit of publication
attached to the records.  This fatal defect, it held, invalidated the auction sale and the
entire foreclosure proceedings.  The RTC further held that, when Metrobank foreclosed
the mortgaged properties, respondents' loan account was still outstanding for there was
an overpayment of interests amounting to P1,529,922.00.  Thus, the foreclosure
proceedings were without factual and legal basis.  The RTC further noted that
Metrobank consolidated its title even before the issuance of the sheriff's Final Deed of
Sale.  The trial court considered it an irregularity sufficient to invalidate the
consolidation.

The dispositive portion of the RTC decision reads:

WHEREFORE, premises considered, judgment is hereby rendered in favor of

[respondents] and against [petitioner] Metrobank as follows:

1)      DECLARING as null and void the Sheriff's Certificate of Sale, dated November 27,
2000, Exhibit "11";

2)      DECLARING as null and void the Sheriff's Final Deed of Sale, dated December 21,
2000, Exhibit "12";
3)      CANCELLING [Metrobank's] TCT Nos. T-319236 (Exhibit "13"); T-319235 over Lot 6-
B-18 (Exhibit "14"); T-T-319235 over Lot 4-F (Exhibit "15"); and T-319237 (Exhibit "16");

4)      RESTORING [respondents'] TCT Nos. T-260279 (Exhibit      "E"); T-202288 (Exhibit
"F"); T-180503 (Exhibit "G"; and T- 272664 (Annex "E"); and

5)      ORDERING x x x Metrobank to pay PHP50,000.00 as attorney's fees, and the cost of
suit.

SO ORDERED. [20]

Metrobank filed a motion for reconsideration, but the RTC denied it on July 31, 2006.

Metrobank then appealed to the CA, faulting the RTC for annulling the foreclosure
proceedings.  It insisted that the bank complied with the publication requirement. 
Metrobank also disagreed with the trial court's finding of overpayment of interests
amounting to P1,529,922.00, claiming that the applicable interest rates on respondents'
loans were 17% and not 12% as computed by the trial court.  It further asserted that a
final deed of sale is not necessary for purposes of consolidating its ownership over the
subject properties.  Finally, Metrobank assailed the award of attorney's fees for lack of
basis.

On June 30, 2008, the CA resolved Metrobank's appeal in this wise:

WHEREFORE, the appeal is DISMISSED.  The assailed decision dated June 16,
2006 of the RTC of Santiago City, Branch 35, in Civil Case No. 35-3022 is AFFIRMED.

SO ORDERED.[21]

Metrobank's motion for reconsideration also suffered the same fate, as the CA denied it
on May 7, 2009.[22]

Before us, Metrobank insists on the validity of the foreclosure proceedings. Essentially,
it argues that foreclosure proceedings enjoy the presumption of regularity, and the
party alleging irregularity has the burden of proving his claim.  Metrobank asserts that,
in this case, the presumption of regularity was not disputed because respondents failed
to prove that the notice of sale was not published as required by law.
At the outset, it must be stated that only questions of law may be raised before this
Court in a Petition for Review under Rule 45 of the Revised Rules of Civil Procedure. This
Court is not a trier of facts, and it is not the function of this Court to reexamine the
evidence submitted by the parties.[23]

It has been our consistent ruling that the question of compliance or non-compliance
with notice and publication requirements of an extrajudicial foreclosure sale is a factual
issue, and the resolution thereof by the trial court is generally binding on this Court. 
The matter of sufficiency of posting  and  publication of a notice of foreclosure sale need
not be resolved

by this Court, especially when the findings of the RTC were sustained by the CA. Well-
established is the rule that factual findings of the CA are conclusive on the parties and
carry even more weight when the said court affirms the factual findings of the trial
court.[24]

The unanimity of the CA and the trial court in their factual ascertainment that there was
non-compliance with the publication requirement bars us from supplanting their
findings and substituting them with our own.Metrobank has not shown that they are
entitled to an exception to this rule. It has not sufficiently demonstrated any special
circumstances to justify a factual review.

Metrobank makes much ado of respondents' failure to present proof of non-compliance

with the publication requirement.  It insists that respondents failed to discharge the
requisite burden of proof.

Apparently, Metrobank lost sight of our ruling in Spouses Pulido v. CA,[25] Sempio v. CA,
[26]
 and, recently, in Philippine Savings Bank v. Spouses Dionisio Geronimo and Caridad
Geronimo,[27] viz.:

While it may be true that the party alleging non-compliance with the requisite
publication has the burden of proof, still negative allegations need not be proved even if
essential to one's cause of action or defense if they constitute a denial of the existence
of a document the custody of which belongs to the other party.

It would have been a simple matter for Metrobank to rebut the allegation of non-
compliance by producing the required proof of publication.  Yet, Metrobank opted not
to rebut the allegation; it simply relied on the presumption of regularity in the
performance of official duty.

Unfortunately, Metrobank's reliance on the presumption of regularity must fail because

it did not present any proof of publication of the notice of sale.  As held by this Court
in Spouses Pulido v. Court of Appeals:[28]

[P]etitioners' reliance on the presumption of regularity in the performance of

official duties falls in the face of a serious imputation on non-compliance. The
presumption of compliance with official duty is rebutted by failure to present proof of
posting.

Further, in Philippine Savings Bank v. Spouses Dionisio Geronimo and Caridad Geronimo,
[29]
 this Court rejected a similar contention, viz.:

Petitioner's invocation of the presumption of regularity in the performance of

official duty on the part of Sheriff Castillo is misplaced. While posting the notice of sale is
part of a sheriff's official functions, the actual publication of the notice of sale cannot be
considered as such, since this concerns the publisher's business. Simply put, the sheriff
is incompetent to prove that the notice of sale was actually published in a newspaper of
general circulation.
As correctly found by the RTC and the CA, the records [30] of the foreclosure
proceedings lacked any proof of publication. This explains why Metrobank could not
present any proof of publication.

We take this occasion to reiterate that the object of a notice of sale is to inform the
public of the nature and condition of the property to be sold, and of the time, place, and
terms of the sale. Notices are given for the purpose of  securing  bidders  and preventing
a sacrifice sale of the property.

The goal of the notice requirement is to achieve a "reasonably wide publicity" of the
auction sale.  This is why publication in a newspaper of general circulation is required.
The Court has previously taken judicial notice of the "far-reaching effects" of publishing
the notice of sale in a newspaper of general circulation.  Thus, the publication of the
notice of sale was held essential to the validity of foreclosure proceedings. [31] In this
case, Metrobank failed to establish compliance with the publication requirement.  The
RTC and the CA cannot, therefore, be faulted for nullifying the foreclosure proceedings.

Metrobank next questions the authority of the RTC and the CA to take cognizance of the
records of the foreclosure proceedings as basis for annulling the auction sale. It claims
that the trial court may not take judicial notice of the records of proceedings in another
case, unless the parties themselves agreed to it.  Metrobank asserts that it did not give
its consent to the trial court's examination of the records of the extrajudicial foreclosure
proceedings.  Further, the RTC did not even set a hearing for the purpose of declaring its
intention to take judicial notice of the records of the extrajudicial proceedings, as
required by Section 3[32] of Rule 129.  Metrobank, thus, contends that the RTC exceeded
its authority in taking cognizance of the records of the extrajudicial proceedings.

We disagree.

As a rule, courts do not take judicial notice of the evidence presented in other
proceedings, even if these have been tried or are pending in the same court or before
the same judge. This rule, however, is not absolute.

In Juaban v. Espina[33] and  "G" Holdings, Inc. v. National Mines and Allied Workers Union
Local 103 (NAMAWU),[34] we held that, in some instances, courts have also taken judicial
notice of proceedings in other cases that are closely connected to the matter in
controversy. These cases may be so closely interwoven, or so clearly interdependent, as
to invoke a rule of judicial notice.

The RTC, therefore, acted well within its authority in taking cognizance of the records of
the extrajudicial foreclosure proceedings, and the CA cannot be faulted for sustaining
the RTC.

Metrobank further questions the trial court's finding of overpayment of interests. But
like the issue on compliance with the publication requirement, the issue on
overpayment of interests involves the ascertainment of facts not subject of review by
this Court. We reiterate that our jurisdiction is limited to reviewing and revising errors of
law imputed to the lower court, the latter's findings of fact being conclusive and not
reviewable by this Court.[35]

Besides, we find nothing erroneous in this factual finding of the RTC.  As explained by
the RTC in its decision:

[T]he Court notes that the original promissory notes evidencing the various loans
of the plaintiffs were not presented in court by either party; they are needed to
determine the stipulated interest rate.  The Court is thus left to determine the same
based on the testimony of the plaintiffs that the agreed interest rate is 12% per annum;
amazingly, this was not denied or refuted by the [petitioner] bank, in which case, 12%
interest rate is applied at least for the period beginning 1997 until 1999, when the loan
was renewed under the two (2) new promissory notes which indicated a higher rate of
interest of 17.250% per annum.  As mentioned above, the interest payments made by
the [respondents] were already admitted by [Metrobank] in its answer to the complaint
as well as in its comment to [respondents'] formal offer of evidence, and such interest
payments are duly reflected and contained in the passbook account of the
[respondents], Exhibit "H," "H-1" to "H-10."  But, in order to determine whether
[respondents'] account has become past due or not, as the [petitioner] bank represents,
the Court deems it necessary to undertake some mathematical computation the result
of which would decisively guide the Court to arrive at a rightful conclusion, thus:

1) Total interest payments by [respondents]

from May 7, 1997 to June 30, 1999 -         P3,332,422.00

2) Interest due

from May 7, 1997 to June 30, 1999 -         P1,802,500.00

computed as follows:

1 Total interest payments by [respondents] - P3,332,422.00

)
from May 7, 1997 to June 30, 1999
Interest due
2 from May 7, 1997 to June 30, 1999 - P1,802,500.00
)
computed as follows:
a) 1st year (P7 M x 12%), from May 7, 1997 to - P  840,000.00
May 28, 1998 
b 2nd year
)
i) from June 3, 1998 to Feb. 24, 1999 - P  560,000.00
(8 mos.)
ii) from March, 1999 to June 30, 1999 - P  402,500.00
(4 mos.)
3 Total Interest paid -  P 3,332,422.00
)
Less Interest due -   P 1,802,500.00
 Overpaid interest  - P 1,529,922.00

From the foregoing, it is evident that [respondents] overpaid interests for the period of
two (2) years, from May 1997 to June 1999, in the total amount of Php. 1,529,922.00. 
Thus, the Court is convinced that it is just and equitable that such an overpayment be
construed as advance interest payments which should be applied for the succeeding
period or year of their contract.  Otherwise, [Metrobank] would unjustly enrich itself at
the expense of [respondents].  In such a case, it was premature then for [Metrobank] to
declare [respondents'] account as past due, because at that juncture[, respondents']
loan obligation was outstanding and in declaring otherwise, [Metrobank's] action was
without basis as there was no violation of their loan contract.  Consequently, it follows
that the foreclosure proceedings subsequently held on November 26, 2000 was without
factual and legal basis, too. For, indeed, when the foreclosure proceedings in question
was conducted, [respondents'] loan account with [Metrobank], as it is said, was still
outstanding, because [respondents] were able to pay the interest due.  Therefore, the
Court is again convinced that the nullification prayed for is in order. [36]

We need not say more.

In fine, the right of a bank to foreclose a mortgage upon the mortgagor's failure to pay
his obligation must be exercised according to its clear mandate, and every requirement
of the law must be complied with, or the valid exercise of the right would end.  The
exercise of a right ends when the right disappears, and it disappears when it is abused
especially to the prejudice of others.[37]

As further declared by this Court in Philippine Savings Bank v. Spouses Dionisio

Geronimo and Caridad Geronimo:[38]

While the law recognizes the right of a bank to foreclose a mortgage upon the
mortgagor's failure to pay his obligation, it is imperative that such right be exercised
according to its clear mandate. Each and every requirement of the law must be
complied with, lest, the valid exercise of the right would end. It must be remembered
that the exercise of a right ends when the right disappears, and it disappears when it is
abused especially to the prejudice of others.

We, therefore, affirm the CA and sustain the RTC in nullifying the extrajudicial
foreclosure of real estate mortgage and sale, including Metrobank's title.
With this disquisition, we find no necessity to discuss the issue of the validity of the
consolidation of title by Metrobank.

WHEREFORE, the petition is DENIED.  The challenged Decision and Resolution of the
Court of Appeals in CA-G.R. CV No. 87775 are AFFIRMED.

FIRST DIVISION
[ G.R. No. 171406, April 04, 2011 ]
ASIAN TERMINALS, INC., PETITIONER, VS. MALAYAN INSURANCE,
CO., INC., RESPONDENT.

DECISION

DEL CASTILLO, J.:

Once the insurer pays the insured, equity demands reimbursement as no one should
benefit at the expense of another.

This Petition for Review on Certiorari[1] under Rule 45 of the Rules of Court assails the
July 14, 2005 Decision[2] and the February 14, 2006 Resolution[3] of the Court of Appeals
(CA) in CA G.R. CV No. 61798.

Factual Antecedents

On November 14, 1995, Shandong Weifang Soda Ash Plant shipped on board the vessel
MV "Jinlian I" 60,000 plastic bags of soda ash dense (each bag weighing 50 kilograms)
from China to Manila.[4] The shipment, with an invoice value of US$456,000.00, was
insured with respondent Malayan Insurance Company, Inc. under Marine Risk Note No.
RN-0001-21430, and covered by a Bill of Lading issued by Tianjin Navigation Company
with Philippine Banking Corporation as the consignee and Chemphil Albright and
Wilson Corporation as the notify party.[5]

On November 21, 1995, upon arrival of the vessel at Pier 9, South Harbor, Manila, [6] the
stevedores of petitioner Asian Terminals, Inc., a duly registered domestic corporation
engaged in providing arrastre and stevedoring services,[7] unloaded the 60,000 bags of
soda ash dense from the vessel and brought them to the open storage area of petitioner for
temporary storage and safekeeping, pending clearance from the Bureau of Customs and
delivery to the consignee.[8]  When the unloading of the bags was completed on
November 28, 1995, 2,702 bags were found to be in bad order condition.[9]

On November 29, 1995, the stevedores of petitioner began loading the bags in the trucks
of MEC Customs Brokerage for transport and delivery to the consignee. [10] On December
28, 1995, after all the bags were unloaded in the warehouses of the consignee, a total of
2,881 bags were in bad order condition due to spillage, caking, and hardening of the
contents.[11]

On April 19, 1996, respondent, as insurer, paid the value of the lost/ damaged cargoes to
the consignee in the amount of P643,600.25.[12]

Ruling of the Regional Trial Court

On November 20, 1996, respondent, as subrogee of the consignee, filed before the
Regional Trial Court (RTC) of Manila, Branch 35, a Complaint[13] for damages against
petitioner, the shipper Inchcape Shipping Services, and the cargo broker MEC Customs
Brokerage.[14]

After the filing of the Answers,[15]  trial ensued.

On June 26, 1998, the RTC rendered a Decision[16] finding petitioner liable for the
damage/loss sustained by the shipment but absolving the other defendants.  The RTC
found that the proximate cause of the damage/loss was the negligence of petitioner's
stevedores who handled the unloading of the cargoes from the vessel. [17]  The RTC
emphasized that despite the admonitions of Marine Cargo Surveyors Edgar Liceralde and
Redentor Antonio not to use steel hooks in retrieving and picking-up the bags, petitioner's
stevedores continued to use such tools, which pierced the bags and caused the spillage. [18] 
The RTC, thus, ruled that petitioner, as employer, is liable for the acts and omissions of
its stevedores under Articles 2176[19] and 2180 paragraph (4)[20] of the Civil Code.
[21]
 Hence, the dispositive portion of the Decision reads:

WHEREFORE, judgment is rendered ordering defendant Asian Terminal, Inc. to pay

plaintiff Malayan Insurance Company, Inc. the sum of P643,600.25 plus interest thereon
at legal rate computed from November 20, 1996,  the date the Complaint was filed,  until
the principal obligation is fully paid,  and the costs.

The complaint of the plaintiff against defendants Inchcape Shipping Services and MEC
Customs Brokerage, and the counterclaims of said defendants against the plaintiff are
dismissed.

SO ORDERED.[22]
Ruling of the Court of Appeals

Aggrieved, petitioner appealed[23] to the CA but the appeal was denied.  In its July 14,
2005 Decision, the CA agreed with the RTC that the damage/loss was caused by the
negligence of petitioner's stevedores in handling and storing the subject shipment.[24]  The
CA likewise rejected petitioner's assertion that it received the subject shipment in bad
order condition as this was belied by Marine Cargo Surveyors Redentor Antonio and
Edgar Liceralde, who both testified that the actual counting of bad order bags was done
only after all the bags were unloaded from the vessel and that the Turn Over Survey of
Bad Order Cargoes (TOSBOC) upon which petitioner anchors its defense was prepared
only on November 28, 1995 or after the unloading of the bags was completed.[25]  Thus,
the CA disposed of the appeal as follows:

WHEREFORE, premises considered, the appeal is DENIED.  The assailed Decision

dated June 26, 1998 of the Regional Trial Court of Manila, Branch 35, in Civil Case No.
96-80945 is hereby AFFIRMED in all respects.

  SO ORDERED.[26]

Petitioner moved for reconsideration[27] but the CA denied the same in a

Resolution[28] dated February 14, 2006 for lack of merit.

Issues

Hence, the present recourse, petitioner contending that:

1. RESPONDENT-INSURER IS NOT ENTITLED TO THE RELIEF

GRANTED AS IT FAILED TO ESTABLISH ITS CAUSE OF ACTION
AGAINST HEREIN PETITIONER SINCE, AS THE ALLEGED
SUBROGEE,  IT NEVER PRESENTED ANY VALID,  EXISTING, 
ENFORCEABLE INSURANCE POLICY OR ANY COPY THEREOF IN
COURT.

2. THE HONORABLE COURT OF APPEALS ERRED WHEN IT

OVERLOOKED THE FACT THAT THE TOSBOC & RESBOC WERE
ADOPTED AS COMMON EXHIBITS BY BOTH PETITIONER AND
RESPONDENT.

3. CONTRARY TO TESTIMONIAL EVIDENCE ON RECORD, VARIOUS

DOCUMENTATIONS WOULD POINT TO THE VESSEL'S LIABILITY
AS THERE IS, IN THIS INSTANT CASE, AN OVERWHELMING
DOCUMENTARY EVIDENCE TO PROVE THAT THE DAMAGE IN
 QUESTION WERE SUSTAINED WHEN THE SHIPMENT WAS IN
THE CUSTODY OF THE VESSEL.

4. THE HONORABLE COURT OF APPEALS ERRED WHEN IT

ADJUDGED HEREIN DEFENDANT LIABLE DUE TO [THE] FACT
THAT THE TURN OVER SURVEY OF BAD ORDER CARGOES
(TOSBOC) WAS PREPARED ONLY AFTER THE COMPLETION OF
THE DISCHARGING OPERATIONS OR ON NOVEMBER 28, 1995.
THUS, CONCLUDING THAT DAMAGE TO THE CARGOES WAS
DUE TO THE IMPROPER HANDLING THEREOF BY ATI
STEVEDORES.

5. THE HONORABLE COURT OF APPEALS ERRED IN NOT TAKING

JUDICIAL NOTICE OF THE CONTRACT FOR CARGO HANDLING
SERVICES BETWEEN PPA AND ATI AND APPLYING THE
PERTINENT PROVISIONS THEREOF AS REGARDS ATI'S
LIABILITY.[29]

In sum, the issues are: (1) whether the non-presentation of the insurance contract or
policy is fatal to respondent's cause of action; (2) whether the proximate cause of the
damage/loss to the shipment was the negligence of petitioner's stevedores; and (3)
whether the court can take judicial notice of the Management Contract between petitioner
and the Philippine Ports Authority (PPA) in determining petitioner's liability.

Petitioner's Arguments

Petitioner contends that respondent has no cause of action because it failed to present the
insurance contract or policy covering the subject shipment.[30] Petitioner argues that the
Subrogation Receipt presented by respondent is not sufficient to prove that the subject
shipment was insured and that respondent was validly subrogated to the rights of the
consignee.[31] Thus, petitioner submits that without proof of a valid subrogation,
respondent is not entitled to any reimbursement.[32]

Petitioner likewise puts in issue the finding of the RTC, which was affirmed by the CA,
that the proximate cause of the damage/loss to the shipment was the negligence of
petitioner's stevedores.[33] Petitioner avers that such finding is contrary to the
documentary evidence, i.e., the TOSBOC, the Request for Bad Order Survey (RESBOC)
and the Report of Survey.[34] According to petitioner, these documents prove that it
received the subject shipment in bad order condition and that no additional damage was
sustained by the subject shipment under its custody.[35] Petitioner asserts that although the
TOSBOC was prepared only after all the bags were unloaded by petitioner's stevedores,
this does not mean that the damage/loss was caused by its stevedores. [36]
Petitioner also claims that the amount of damages should not be more than P5,000.00,
pursuant to its Management Contract for cargo handling services with the PPA.
[37]
 Petitioner contends that the CA should have taken judicial notice of the said contract
since it is an official act of an executive department subject to judicial cognizance. [38]

Respondent's Arguments

Respondent, on the other hand, argues that the non-presentation of the insurance contract
or policy was not raised in the trial court. Thus, it cannot be raised for the first time on
appeal.[39] Respondent likewise contends that under prevailing jurisprudence, presentation
of the insurance policy is not indispensable.[40] Moreover, with or without the insurance
contract or policy, respondent claims that it should be allowed to recover under Article
1236[41] of the Civil Code.[42] Respondent further avers that "the right of subrogation has
its roots in equity - it is designed to promote and to accomplish justice and is the mode
which equity adopts to compel the ultimate payment of a debt by one who in justice,
equity and good conscience ought to pay."[43]

Respondent likewise maintains that the RTC and the CA correctly found that the
damage/loss sustained by the subject shipment was caused by the negligent acts of
petitioner's stevedores.[44]  Such factual findings of the RTC, affirmed by the CA, are
conclusive and should no longer be disturbed.[45] In fact, under Section 1[46] of Rule 45 of
the Rules of Court, only questions of law may be raised in a petition for review
on certiorari.[47]

As to the Management Contract for cargo handling services, respondent contends that
this is outside the operation of judicial notice.[48] And even if it is not, petitioner's liability
cannot be limited by it since it is a contract of adhesion.[49]

Our Ruling 

The petition is bereft of merit.

Non-presentation of the insurance contract

or policy is not fatal in the instant case

Petitioner claims that respondent's non-presentation of the insurance contract or policy

between the respondent and the consignee is fatal to its cause of action.

We do not agree.

First of all, this was never raised as an issue before the RTC.  In fact, it is not among the
issues agreed upon by the parties to be resolved during the pre-trial.[50] As we have said,
"the determination of issues during the pre-trial conference bars the consideration of other
questions, whether during trial or on appeal."[51] Thus, "[t]he parties must disclose during
pre-trial all issues they intend to raise during the trial, except those involving privileged
or impeaching matters.  x x x The basis of the rule is simple.  Petitioners are bound by the
delimitation of the issues during the pre-trial because they themselves agreed to the
same."[52]

Neither was this issue raised on appeal.[53] Basic is the rule that "issues or grounds not
raised below cannot be resolved on review by the Supreme Court, for to allow the parties
to raise new issues is antithetical to the sporting idea of fair play, justice and due
process."[54]

Besides,  non-presentation of the insurance contract or policy  is not

necessarily fatal.[55]  In Delsan Transport Lines, Inc. v. Court of Appeals,[56] we ruled that:

Anent the second issue, it is our view and so hold that the presentation in evidence of
the marine insurance policy is not indispensable in this case before the insurer may
recover from the common carrier the insured value of the lost cargo in the exercise
of its subrogatory right. The subrogation receipt, by itself, is sufficient to establish
not only the relationship of herein private respondent as insurer and Caltex, as the
assured shipper of the lost cargo of industrial fuel oil, but also the amount paid to
settle the insurance claim. The right of subrogation accrues simply upon payment
by the insurance company of the insurance claim.

The presentation of the insurance policy was necessary in the case of Home Insurance
Corporation v. CA (a case cited by petitioner) because the shipment therein (hydraulic
engines) passed through several stages with different parties involved in each stage. First,
from the shipper to the port of departure; second, from the port of departure to the M/S
Oriental Statesman; third, from the M/S Oriental Statesman to the M/S Pacific Conveyor;
fourth, from the M/S Pacific Conveyor to the port of arrival; fifth, from the port of arrival
to the arrastre operator; sixth, from the arrastre operator to the hauler, Mabuhay
Brokerage Co., Inc. (private respondent therein); and lastly, from the hauler to the
consignee. We emphasized in that case that in the absence of proof of stipulations to the
contrary, the hauler can be liable only for any damage that occurred from the time it
received the cargo until it finally delivered it to the consignee. Ordinarily, it cannot be
held responsible for the handling of the cargo before it actually received it. The insurance
contract, which was not presented in evidence in that case would have indicated the scope
of the insurer's liability, if any, since no evidence was adduced indicating at what stage in
the handling process the damage to the cargo was sustained. [57] (Emphasis supplied.)

In International Container Terminal Services, Inc. v. FGU Insurance Corporation,[58] we

used the same line of reasoning in upholding the Decision of the CA finding the arrastre
contractor liable for the lost shipment despite the failure of the insurance company to
offer in evidence the insurance contract or policy.  We explained:

Indeed, jurisprudence has it that the marine insurance policy needs to be presented in
evidence before the trial court or even belatedly before the appellate court. In Malayan
Insurance Co., Inc. v. Regis Brokerage Corp.,  the Court stated that the presentation of
the marine insurance policy was necessary, as the issues raised therein arose from the
very existence of an insurance contract between Malayan Insurance and its consignee,
ABB Koppel, even prior to the loss of the shipment. In Wallem Philippines Shipping, Inc.
v. Prudential Guarantee and Assurance, Inc., the Court ruled that the insurance contract
must be presented in evidence in order to determine the extent of the coverage. This was
also the ruling of the Court in Home Insurance Corporation v. Court of Appeals.

However, as in every general rule, there are admitted exceptions. In Delsan Transport
Lines, Inc. v. Court of Appeals, the Court stated that the presentation of the insurance
policy was not fatal because the loss of the cargo undoubtedly occurred while on board
the petitioner's vessel, unlike in Home Insurance in which the cargo passed through
several stages with different parties and it could not be determined when the damage to
the cargo occurred, such that the insurer should be liable for it.

As in Delsan, there is no doubt that the loss of the cargo in the present case occurred
while in petitioner's custody. Moreover, there is no issue as regards the provisions of
Marine Open Policy No. MOP-12763, such that the presentation of the contract itself is
necessary for perusal, not to mention that its existence was already admitted by petitioner
in open court. And even though it was not offered in evidence, it still can be considered
by the court as long as they have been properly identified by testimony duly recorded and
they have themselves been incorporated in the records of the case.[59]

Similarly, in this case, the presentation of the insurance contract or policy was not
necessary. Although petitioner objected to the admission of the Subrogation Receipt in its
Comment to respondent's formal offer of evidence on the ground that respondent failed to
present the insurance contract or policy,[60] a perusal of petitioner's Answer[61] and Pre-
Trial Brief[62] shows that petitioner never questioned respondent's right to subrogation,
nor did it dispute the coverage of the insurance contract or policy.  Since there was no
issue regarding the validity of the insurance contract or policy, or any provision thereof,
respondent had no reason to present the insurance contract or policy as evidence during
the trial.

Factual findings of the CA, affirming the

RTC, are conclusive and binding

Petitioner's attempt to absolve itself from liability must likewise fail.

Only questions of law are allowed in petitions for review on certiorari under Rule 45 of
the Rules of Court.  Thus, it is not our duty "to review, examine, and evaluate or weigh
all over again the probative value of the evidence presented,"[63] especially where the
findings of both the trial court and the appellate court coincide on the matter.[64]  As we
have often said, factual findings of the CA affirming those of the RTC are conclusive and
binding, except in the following cases: "(1) when the inference made is manifestly
mistaken, absurd or impossible; (2) when there is grave abuse of discretion; (3) when the
findings are grounded entirely on speculations, surmises or conjectures; (4) when the
judgment of the [CA] is based on misapprehension of facts; (5) when the [CA], in making
its findings, went beyond the issues of the case and the same is contrary to the admissions
of both appellant and appellee; (6) when the findings of fact are conclusions without
citation of specific evidence on which they are based; (7) when the [CA] manifestly
overlooked certain relevant facts not disputed by the parties and which, if properly
considered, would justify a different conclusion; and (8) when the findings of fact of the
[CA] are premised on the absence of evidence and are contradicted by the evidence on
record."[65]  None of these are availing in the present case.

Both the RTC and the CA found the negligence of petitioner's stevedores to be the
proximate cause of the damage/loss to the shipment.  In disregarding the contention of
petitioner that such finding is contrary to the documentary evidence, the CA had this to
say:

ATI, however, contends that the finding of the trial court was contrary to the
documentary evidence of record, particularly,  the Turn Over Survey of Bad Order
Cargoes dated November 28, 1995,  which was executed prior to the turn-over of the
cargo by the carrier to the arrastre operator ATI,  and which showed that the shipment
already contained 2,702 damaged bags.

We are not persuaded.

Contrary to ATI's assertion, witness Redentor Antonio, marine cargo surveyor of

Inchcape for the vessel Jinlian I which arrived on November 21, 1995 and up to
completion of discharging on November 28, 1995, testified that it was only after all the
bags were unloaded from the vessel that the actual counting of bad order bags was
made, thus:

xxxx

The above testimony of Redentor Antonio was corroborated by Edgar

Liceralde, marine cargo surveyor connected with SMS Average Surveyors and
Adjusters, Inc., the company requested by consignee Chemphil Albright and Wilson
Corporation to provide superintendence, report the condition and determine the final
outturn of quantity/weight of the subject shipment.  x x x

xxxx

Defendant-appellant ATI, for its part, presented its claim officer as witness who testified
that a survey was conducted by the shipping company and ATI before the shipment was
turned over to the possession of ATI and that the Turn Over Survey of Bad Order
Cargoes was prepared by ATI's Bad Order (BO) Inspector.

Considering that the shipment arrived on November 21, 1998 and the unloading
operation commenced on said date and was completed on November 26, 1998, while
the Turn Over Survey of Bad Order Cargoes, reflecting a figure of 2,702 damaged
bags, was prepared and signed on November 28, 1998 by ATI's BO Inspector and co-
signed by a representative of the shipping company,  the trial court's finding that the
damage to the cargoes was due to the improper handling thereof by ATI's
stevedores cannot be said to be without substantial support from the records. 

We thus see no cogent reason to depart from the ruling of the trial court that ATI should
be made liable for the 2,702 bags of damaged shipment. Needless to state, it is hornbook
doctrine that the assessment of witnesses and their testimonies is a matter best undertaken
by the trial court, which had the opportunity to observe the demeanor, conduct or attitude
of the witnesses.  The findings of the trial court on this point are accorded great respect
and will not be reversed on appeal, unless it overlooked substantial facts and
circumstances which, if considered, would materially affect the result of the case.

We also find ATI liable for the additional 179 damaged bags discovered upon delivery of
the shipment at the consignee's warehouse in Pasig.  The final Report of Survey executed
by SMS Average Surveyors & Adjusters, Inc., and independent surveyor hired by the
consignee,  shows that the subject shipment incurred a total of 2881 damaged bags.

The Report states that the withdrawal and delivery of the shipment took about ninety-five
(95) trips from November 29, 1995 to December 28, 1995 and it was upon completion of
the delivery to consignee's warehouse where the final count of 2881 damaged bags was
made. The damage consisted of torn/bad order condition of the bags due to spillages and
caked/hardened portions.

We agree with the trial court that the damage to the shipment was caused by the
negligence of ATI's stevedores and for which ATI is liable under Articles 2180 and 2176
of the Civil Code.  The proximate cause of the damage (i.e., torn bags, spillage of
contents and caked/hardened portions of the contents) was the improper handling of the
cargoes by ATI's stevedores, x x x

xxxx
ATI has not satisfactorily rebutted plaintiff-appellee's evidence on the negligence of
ATI's stevedores in the handling and safekeeping of the cargoes. x x x

xxxx

We find no reason to disagree with the trial court's conclusion. Indeed,  from the nature of
the [damage] caused to the shipment, i.e., torn bags, spillage of contents and hardened or
caked portions of the contents,  it is not difficult to see that the damage caused was due to
the negligence of ATI's stevedores who used steel hooks to retrieve the bags from the
higher portions of the piles thereby piercing the bags and spilling their contents,  and who
piled the bags in the open storage area of ATI with insufficient cover thereby exposing
them to the elements and [causing] the contents to cake or harden. [66]

Clearly, the finding of negligence on the part of petitioner's stevedores is supported by

both testimonial and documentary evidence.  Hence, we see no reason to disturb the
same.

Judicial notice does not apply

Finally, petitioner implores us to take judicial notice of Section 7.01,[67] Article VII of the
Management Contract for cargo handling services it entered with the PPA, which limits
petitioner's liability to P5,000.00 per package.

Unfortunately for the petitioner, it cannot avail of judicial notice.

Sections 1 and 2 of Rule 129 of the Rules of Court provide that:

SECTION 1.  Judicial notice, when mandatory. -- A court shall take judicial notice,
without the introduction of evidence, of the existence and territorial extent of states, their
political history, forms of government and symbols of nationality, the law of nations, the
admiralty and maritime courts of the world and their seals, the political constitution and
history of the Philippines, the official acts of the legislative, executive and judicial
departments of the Philippines, the laws of nature, the measure of time, and the
geographical divisions.

SEC.  2.  Judicial notice, when discretionary. -- A court may take judicial notice of
matters which are of public knowledge, or are capable of unquestionable demonstration
or ought to be known to judges because of their judicial functions.

The Management Contract entered into by petitioner and the PPA is clearly not among
the matters which the courts can take judicial notice of. It cannot be considered an official
act of the executive department.  The PPA, which was created by virtue of Presidential
Decree No. 857, as amended,[68] is a government-owned and controlled corporation in
charge of administering the ports in the country.[69] Obviously, the PPA was only
performing a proprietary function when it entered into a Management Contract with
petitioner. As such, judicial notice cannot be applied.

WHEREFORE, the petition is hereby DENIED. The assailed July 14, 2005 Decision

and the February 14, 2006 Resolution of the Court of Appeals in CA-G.R. CV No. 61798
are hereby AFFIRMED.

SO ORDERED.

FIRST DIVISION
[ G.R. No. 156686, July 27, 2011 ]
NEW SUN VALLEY HOMEOWNERS' ASSOCIATION, INC., PETITIONER,
VS. SANGGUNIANG BARANGAY, BARANGAY SUN VALLEY,
PARAÑAQUE CITY, ROBERTO GUEVARRA IN HIS CAPACITY AS
PUNONG BARANGAY AND MEMBERS OF THE SANGGUNIANG
BARANGAY, RESPONDENTS.

DECISION

LEONARDO-DE CASTRO, J.:

This is a petition for review on certiorari under Rule 45 of the Rules of Court against
the Decision[1] dated October 16, 2002 in CA-G.R. CV No. 65559 and
the Resolution[2] dated January 17, 2003, both of the Court of Appeals.

The facts are as follows:

The Sangguniang Barangay of Barangay Sun Valley (the "BSV Sangguniang

Barangay") issued BSV Resolution No. 98-096[3] on October 13, 1998, entitled
"Directing the New Sun Valley Homeowners Association to Open Rosemallow and Aster
Streets to Vehicular and Pedestrian Traffic," the pertinent portions of which read as
follows:

NOW, THEREFORE, be it resolved as it is hereby resolved by the Sangguniang

Barangay in session assembled that -

1. Pursuant to its power and authority under the Local Government Code of 1991 (Rep.
Act No. 7160), the New Sun Valley Homeowners Association (NSVHA) is hereby
directed to open Rosemallow and Aster Sts. to vehicular (private cars only) and
pedestrian traffic at all hours daily except from 11 p.m. to 5 a.m. at which time the said
streets may be closed for the sake of the security of the residents therein.

2. The Barangay government take steps to address the security concerns of the residents
of the area concerned, including the possible assignment of a barangay tanod or traffic
enforcer therein, within the limits of the authority and financial capability of the
Barangay.

3. This Resolution shall become executory within 72 hours upon receipt hereof by the
Association or any of its members.[4]

The New Sun Valley Homeowners Association, Inc. (NSVHAI), represented by its
President, Marita Cortez, filed a Petition[5] for a "Writ of Preliminary
Injunction/Permanent Injunction with prayer for issuance of TRO" with the Regional
Trial Court (RTC) of Parañaque City.  This was docketed as Civil Case No. 98-0420.
NSVHAI claimed therein that the implementation of BSV Resolution No. 98-096 would
"cause grave injustice and irreparable injury" as "[the] affected homeowners acquired
their properties for strictly residential purposes";[6] that the subdivision is a place that the
homeowners envisioned would provide them privacy and "a peaceful neighborhood, free
from the hassles of public places";[7] and that the passage of the Resolution would destroy
the character of the subdivision. NSVHAI averred that contrary to what was stated in the
BSV Resolution, the opening of the gates of the subdivision would not in any manner
ease the traffic congestion in the area, and that there were alternative routes available.
According to NSVHAI, the opening of the proposed route to all kinds of vehicles would
result in contributing to the traffic build-up on Doña Soledad Avenue, and that instead of
easing the traffic flow, it would generate a heavier volume of vehicles in an already
congested choke point.  NSVHAI went on to state that a deterioration of the peace and
order condition inside the subdivision would be inevitable; that the maintenance of peace
and order in the residential area was one of the reasons why entry and exit to the
subdivision was regulated by the Association and why the passing through of vehicles
was controlled and limited; and that criminal elements would take advantage of the
opening to public use of the roads in question.[8]

NSVHAI further contested the BSV Resolution by submitting the following arguments to
the RTC:

12. The road network inside the subdivision and drainage system is not designed to
withstand the entry of a heavy volume of vehicles especially delivery vans and trucks.
Thus, destruction of the roads and drainage system will result. The safety, health and
well-being of the residents will face continuous danger to their detriment and prejudice;
13. When the residents bought their residential properties, they also paid proportionately
for the roads and the park in then subdivision.  They have therefore an existing equity on
these roads. To open the roads to public use is a violation of the rights and interests to a
secure, peaceful and healthful environment;

14. Aside from the availability of a better route to be opened, there are other ways to ease
traffic flow. The continuous presence of traffic enforcers on all identified traffic choke
points will prevent snarls which impede smooth travel. The strict enforcement of traffic
rules and regulations should be done;

15.  There are a lot of undisciplined drivers of tricycles, jeepneys, trucks and delivery
[vans], which contribute to the traffic congestion. The barangay should require these
drivers to observe road courtesy and obedience to traffic rules[.][9]

Executive Judge Helen Bautista-Ricafort of the RTC issued a Temporary Restraining

Order[10] (TRO) in Civil Case No. 98-0420 on October 30, 1998.  Said Order provides:

Acting on the Application for Writ of Preliminary Injunction/ Permanent Injunction with
Prayer for Issuance of a Temporary Restraining Order, filed by plaintiff and considering
that there is extreme urgency, such that unless the same is issued, plaintiff would suffer
grave injustice and/or irreparable injury, let a Temporary Restraining Order issue
directing the Sangguniang Barangay as represented by Punong Barangay Roberto
Guevarra to cease and desist from the implementation of Resolution No. 98-096 or
otherwise maintain the status quo until further Orders of this Court.

This Temporary Restraining Order shall be effective for seventy two (72) hours from
issuance hereof, unless extended by another Order of this Court.

Let this case be set for special raffle and conference on November 3, 1998 at 10:30 in the
morning.

On November 3, 1998, the RTC issued another Order[11] stating that, by agreement of the

parties, the status quo shall be maintained for seventeen (17) more days, and that the case
was set for hearing on the prayer for the issuance of a writ of preliminary injunction on
November 20, 1998 at 8:30 a.m.

NSVHAI submitted an Amended Petition[12] on November 13, 1998, at about 11:10 a.m.,
wherein it claimed that the BSV Sangguniang Barangay had no jurisdiction over the
opening of Rosemallow and Aster Streets (the "subject roads").  NSVHAI likewise
attached to its Amended Petition its Position Paper[13] dated July 21, 1998, which set forth
its objection to the opening of the subject roads for public use and argued that
a Barangay Resolution cannot validly cause the opening of the subject roads because
under the law, an ordinance is required to effect such an act.[14]
The BSV Sangguniang Barangay filed its Motion to Dismiss[15] likewise on November
13, 1998.  The copy provided by petitioner to the Court indicates the time of receipt by
NSVHAI as 11:00 a.m.[16]

The RTC heard the case on November 20, 1998, as scheduled, and thereafter submitted
the matter for decision.[17]  On the same date, the RTC issued the following Order[18]:

Acting on the prayer for the issuance of a writ of preliminary injunction filed by
petitioner, it appearing that petitioner may suffer grave injustice or irreparable injury, let
a writ of preliminary injunction issue prohibiting the Sangguniang Barangay represented
by Punong Barangay Roberto Guevarra from implementing Resolution no. 98-096 until
further orders from this Court.

Petitioner is directed to file a bond in the amount of ONE HUNDRED THOUSAND

(P100,000.00) PESOS (sic) to answer for damages to defendants in the event the Court
finds petitioner is not entitled to said injunction.

The BSV Sangguniang Barangay filed on December 4, 1998 a Motion for

Reconsideration and to Dissolve Preliminary Injunction (with Memorandum of
Authorities).[19]

NSVHAI then filed an Urgent Ex-Parte Motion to Expunge on December 10, 1998,
moving to declare the above motion of the BSV Sangguniang Barangay as a mere scrap
of paper for being filed out of time and for failure to serve a copy thereof to the counsel
of petitioner.

The RTC subsequently dismissed the case in an Order[20] dated August 17, 1999, stating
as follows:

Defendant Barangay Sun Valley moves to dismiss the instant case on the grounds that the
complaint states no cause of action and the court has no jurisdiction over the subject
matter. In summary, defendant alleges that the subject streets Aster and Rosemallow
inside Sun Valley Subdivision are owned by the local government.  Such streets have
long been part of the public domain and beyond the commerce of man. In support of this,
defendant cited the case of White Plains Association, Inc. vs. Legaspi, 193 SCRA 765
wherein it was held that road lots of subdivisions constitute a part of the mandatory open
space reserved for public use; ownership of which is automatically vested in the Republic
of the Philippines although it is still registered in the name of the developer/owner, its
donation to the government is a mere formality." The power or authority to close or open
the said streets is vested in the local government units and not on homeowner's
associations, pursuant to Section 21 of the local Government Code (RA 7160) quoted as
follows: "Section 21. Closure and Opening of Roads. (a) A local government unit may,
pursuant to an ordinance, permanently or temporarily close or open any local road, alley,
park, or square falling within its jurisdiction x x x." In view thereof, Resolution No. 98-
096 was passed by the Sangguniang Barangay. Hence there is no right whatsoever on the
part of Plaintiff NSVHA entitled to the protection of the law. Further, defendant contends
that petitioner failed to exhaust administrative remedies as ordained in Sections 32 and 57
of the Local Government Code giving the city mayor the supervisory power, and the
power of review by the Sangguniang Panlungsod, respectively.

No opposition to the motion to dismiss was filed by the Plaintiff.

Same defendant seeks to reconsider the order granting the issuance of the writ of
preliminary injunction alleging that there is a pending motion to dismiss and Plaintiff has
not been able to establish an actually existing right.

Plaintiff has not filed an opposition thereto, instead it filed an urgent ex-parte motion to
expunge the motion for reconsideration on the ground that its counsel has not been
furnished with a copy of the motion for reconsideration, but the record shows that Maria
Cortez (plaintiff's representative) has received a copy of said motion.

After considering the arguments of the parties in their respective pleadings, this court
hereby resolves as follows:

1. The "Motion for Reconsideration" and the "Urgent Ex-parte Motion to

Expunge (motion for reconsideration)" are Denied being devoid of merit;
and

2. The "Motion to Dismiss" is hereby Granted for failure of the plaintiff to

exhaust the administrative remedies under Sections 32  and 57 of the Local
Government Code.

WHEREFORE, let this case be as it is hereby ordered Dismissed. The writ of preliminary
injunction is hereby lifted.[21]

NSVHAI filed a Motion for Reconsideration[22] of the above-quoted Order but this was
denied by the RTC for lack of merit in an Order[23] dated September 21, 1999.

NSVHAI raised the matter to the Court of Appeals and the case was docketed as CA-
G.R. CV No. 65559.  NSVHAI alleged that "despite the lack of the required
hearing" [24] and without any order requiring it to submit its Comment/Opposition to the
BSV Sangguniang Barangay's Motion to Dismiss or that of submitting said Motion for
resolution, Judge Bautista-Ricafort issued an Order which, to NSVHAI's complete
surprise, granted the Motion.  NSVHAI argued that the RTC gravely erred in taking
cognizance of, and thereafter ruling on, said Motion and refusing to exercise jurisdiction
over the subject matter of Civil Case No. 98-0420.  Petitioner likewise argued that the
RTC committed serious errors which, if not corrected, would cause grave or irreparable
injury to petitioner and cause a violation of law.[25]

The BSV Sangguniang Barangay, Roberto Guevarra in his capacity as Punong

Barangay, and members of the Sangguniang Barangay (hereinafter, "respondents"), in
their Appellees' Brief, argued as follows:

THE TRIAL COURT DID NOT ERR IN GRANTING DEFENDANTS-APPELLEES'

MOTION TO DISMISS DUE TO LACK OF CAUSE OF ACTION AND
JURISPRUDENCE OVER THE SUBJECT MATTER AND APPELLANT'S FAILURE
TO EXHAUST ADMINISTRATIVE REMEDIES. AS NOTED BY THE COURT, NO
OPPOSITION TO THE MOTION TO DISMISS WAS EVER FILED BY APPELLANT.

II

THE TRIAL COURT'S DISMISSAL OF THE ACTION ASSAILING ITS SUBJECT-

MATTER, BARANGAY RESOLUTION NO. 98-096, CONSISTING OF A
DIRECTIVE OF AN LGU TO A DEFIANT PRIVATE ORGANIZATION WITHIN ITS
JURISDICTION, IS JUDICIAL RECOGNITION OF THE SOLE COMPETENCE AND
WISE DISCRETION OF THE BARANGAY OVER A LOCAL TRAFFIC PROBLEM.

III

THE TRIAL COURT DID NOT COMMIT ANY SERIOUS ERROR, PROCEDURAL
OR SUBSTANTIVE, AS FOUND BY THE COURT A QUO. IT IS APPELLANT
THAT HAS COMMITTED THE ERROR OF NOT EXHAUSTING
ADMINISTRATIVE REMEDIES. HENCE, NO GRAVE OR IRREPARABLE INJURY
CAN BE CAUSED TO APPELLANT FOR IT HAS NO RIGHT TO PROTECT. [26]

Respondents claimed that Barangay Resolution No. 98-096 was simply a directive to
petitioner, "a private aggrupation of some self-seeking homeowners,"[27] and was just a
measure of internal policy among residents; that the opening of roads for traffic reasons
was "within the sole competence of the barangay to determine";[28] and the Mayor could
have chosen, as it was within his power to do so, to cause the demolition of the gates,
which were illegally built by petitioner and therefore were obstructions on the road, even
without a Barangay resolution. Respondents likewise claimed that the BSV's action
could be considered a political question, which should be essentially withdrawn from
judicial cognizance, and constitutional law doctrine provides that the courts would not
interfere with political issues unless grave abuse of discretion is shown, of which there
was none on the part of the Barangay.  Respondents argued that petitioner did not have
any actual legal right entitled to the protection of the law.[29]

Respondents attached to their Appellees' Brief six documents, labeled as Annexes "2" to
"7," all stamped "Certified True Copy" by a certain Roman E. Loreto, Legal Officer II of
Legal Department.[30]  The detailed information contained in each of the documents that
comprise respondents' Annexes "2" to "7" is copied below:

1. 1st Indorsement[31] from the Office of the Mayor of Parañaque dated May 20, 1988,
signed by Luzviminda A. Concepcion, Administrative Officer II, stating as follows:

Respectfully indorsed to Atty. Antonio G. Cruz, Municipal Attorney, of this municipality

the herein attached "Original Copies of Transfer Certificate of Title for Sun Valley Open
Space and Road Lots" with TCT Nos. 133552, 119836, and 122443 for your appropriate
actions.

2. Letter[32] dated December 27, 1990 from Francisco B. Jose, Jr., Municipal Attorney of
Parañaque, addressed to the Municipal Council Secretary, which reads:

This has reference to your request dated December 18, 1990 relative to the letter of
inquiry of the Barangay Captain of Barangay Sun Valley dated December 13, 1990.

We wish to inform you that based on the available records of our office the open space
and road lots of Sun Valley Subdivision is already owned by the Municipal Government
of Parañaque as evidenced by TCT NOS. 133552, 119836, and 122443. Copies of which
are hereto attached for your ready reference.

Considering that the Municipality of Parañaque is the registered owner of the road lots of
Sun Valley Subdivision, we are of the opinion that the roads become public in use and
ownership, and therefore, use of the roads by persons other than residents of the
Subdivision can no longer be curtailed. However, should the Municipal Government
decides to delegate its right to regulate the use of the said roads to the Sun Valley
Homeowner's Association or Sun Valley Barangay Council, such right may be
exercise[d] by said association or council.

3. Certification[33] dated October 8, 1990 issued by Francisco B. Jose, Jr. under the

letterhead of the Office of the Municipal Attorney of Parañaque, which reads:

This is to certify that based on the available records of this Office, the open space and
road lots of Sun Valley Subdivision has been donated and now owned by the
Municipality of Paranaque, as evidenced by TCT Nos. 133552, 119836, and 122443
copies of which are hereto attached.
This certification is being issued upon the request of Mr. Mario Cortez, President of Sun
Valley Homeowners Association.

4. Certification[34] dated June 13, 1994, again signed by Francisco B. Jose, Jr., of the
Office of the Municipal Attorney, providing as follows:

This is to certify that based on the available records of this Office, the only road lots in
Sun Valley Subdivision titled in the name of the Municipality of Parañaque are those
covered by Transfer Certificates of Title Nos. 133552 and 122443.

This certification is being issued upon the request of Coun. Manuel T. De Guia.

5. Certification[35] dated March 2, 1995 issued by Rodolfo O. Alora, OIC, Asst.

Municipal Legal Officer, which reads:

This is to certify that based on the available records of this Office, the open space within
Sun Valley Subdivision has already been donated to the Municipality as evidenced by
Transfer Certificate of Title No. 119836, copy of which is hereto attached.

This certification is being issued upon the request of Atty. Rex G. Rico.

6. Certification[36] dated October 26, 1998 issued by Ma. Riza Pureza Manalese, Legal

Researcher, Office of the Municipal Attorney, Parañaque City, which reads:

This is to certify that based on the available records of this Office, road lots of Sun Valley
Subdivision have already been donated to the Municipality of Paranaque as evidenced by
TCT NO. 133552, 119836,  and 122443.

This certification is being issued upon the request of MR. WILLIAM UY.

The Court of Appeals issued a Decision dated October 16, 2002 denying the appeal and
affirming the Orders of the RTC dated August 17, 1999 and September 21, 1999.  The
Court of Appeals likewise denied NSVHAI's Motion for Partial Reconsideration in
its Resolution promulgated on January 17, 2003, stating that after a thorough study of the
Motion for Reconsideration, it found no sufficient reason to deviate from its findings and
conclusion reached in its decision.

Thus, NSVHAI (hereinafter, "petitioner") went to this Court.

Arguments of Petitioner

Petitioner alleges that the decision of the Court of Appeals was based on "facts that
[were] outside of the original Petition and Amended Petition and on supposed findings of
facts that are not even evidence offered before the court a quo."[37]  Petitioner likewise
alleges that the facts used by the Court of Appeals in dismissing the case were contrary to
the records of Civil Case No. 98-0420.

Petitioner lists the following as its Questions of Law:

In sustaining the dismissal of Civil Case No. 98-0420, the Honorable Court of Appeals
sanctioned the departure of the Regional Trial Court from the accepted and usual course
of judicial proceedings

Whether or not the issuance of the Resolution promulgated January 17, 2003 and the
Decision promulgated October 16, 2002 by the Former 4th Division and the 4th Division
of the Court of Appeals sustaining the validity of dismissal of Civil Case No. 98-0420 is
not in accord with law or with the applicable decisions of this Honorable Supreme Court

Whether or not the Honorable Court of Appeals, with due respect, departed from the
accepted and usual course of judicial proceedings by making findings of fact not
supported by evidence of record[38]

Petitioner avers that the hearing for the respondents' Motion to Dismiss was set on
November 20, 1998, without indication as to time and that during the hearing on such
date, counsel for respondents moved that their Motion to Dismiss be heard over the
objection of counsel for petitioner, who explained that there was an urgency in ruling on
the prayer for the issuance of a writ of preliminary injunction in view of the expiration of
the temporary restraining order (TRO).[39]

Petitioner quotes the transcript of stenographic notes (TSN) from the November 20, 1998
hearing before the RTC in the following manner:

Atty. Herrera:

Then, Your Honor, I files [sic] a motion petitioning to dismiss this instant case, which
should be resolved first before hearing this case.

Atty. Nuñez:

Your Honor, please, with due respect to the opposing counsel, the hearing today is
supposed to be on the presentation of petitioner's evidence in support of its prayer for
preliminary injunction. In connection with the amended complaint, I guess it is a matter
of right to amend its pleading. What happened here, the amended petition was filed
before this Honorable Court on November 13 at 11:10 a.m. but I think the motion to
dismiss was filed by the respondent on November 13 at 11:20 a.m.. Therefore, it is
the right of the petitioner insofar as the case is concerned.

And therefore, this Court should proceed with the hearing on the preliminary
injunction instead of entertaining this matter. The temporary restraining order will
expire today and we have the right to be heard.

Court:

We will proceed first with the hearing (referring to the scheduled hearing of the prayer
for the issuance of the writ of preliminary injunction). (Transcript of Stenographic Notes,
November 20, 1998) (Underscoring and explanation petitioner's.)[40]

Petitioner claims that the RTC proceeded to hear the prayer for the issuance of a
preliminary injunction and no hearing was conducted on the Motion to Dismiss. 
Petitioner reiterates its earlier claim that it did not receive an order requiring it to submit
its Comment/Opposition to the Motion to Dismiss or informing it that said Motion had
been submitted for resolution.[41]

Petitioner alleges that the dismissal of Civil Case No. 98-0420 arose from the grant of
respondents' Motion to Dismiss. Petitioner claims that it filed its Amended Petition on
November 13, 1998 at 11:10 a.m., or before respondents served any responsive pleading,
or before they had filed their Motion to Dismiss on the same date at about 11:20 a.m. [42] 
Petitioner avers that the filing of said Amended Petition was a matter of right under
Section 2, Rule 10 of the 1997 Rules of Civil Procedure, and had the effect of
superseding the original petition dated October 28, 1998.  Petitioner concludes that the
Motion to Dismiss was therefore directed against a non-existing Petition.[43]

Petitioner argues that the RTC's ruling on the Motion to Dismiss is contrary to procedural
law because no hearing was conducted on said Motion to Dismiss; that said motion
violated Section 5, Rule 10 of the 1997 Rules of Civil Procedure for failing to set the time
of hearing thereof; and that instead of being resolved, said motion should have been
declared as a mere scrap of worthless paper.[44]

Petitioner claims that during the proceedings before the RTC on November 20, 1998,
both parties manifested that the Motion to Dismiss was never set for hearing, and that
when Judge Bautista-Ricafort said,  "We will proceed first with the hearing,"[45] she was
referring to the scheduled hearing of the prayer for the issuance of the writ of preliminary
injunction. Petitioner claims that it is crystal clear that it was deprived due process when
a ruling was had on the Motion to Dismiss despite the clear absence of a hearing. 
Petitioner concludes that the Court of Appeals was manifestly mistaken when it ruled that
due process was observed in the issuance of the assailed Orders of Judge Bautista-
Ricafort, despite the lack of opportunity to submit a comment or opposition to the Motion
to Dismiss and the lack of issuance of an order submitting said motion for resolution. 
Petitioner alleges that the Court of Appeals sanctioned the ruling of the RTC that violated
both substantial and procedural law. [46]

Moreover, petitioner avers that contrary to the ruling of the Court of Appeals, the RTC
had jurisdiction to hear and decide the Amended Petition, and the doctrine of exhaustion
of administrative remedies was not applicable.  This is because, according to petitioner,
such doctrine "requires that were a remedy before an administrative agency is provided,
relief must first be sought from the administrative agencies prior to bringing an action
before courts of justice."[47]  Petitioner claims that when it filed Civil Case No. 98-08420,
it did not have the luxury of time to elevate the matter to the higher authorities under
Sections 32 and 57 of the Local Government Code.  Petitioner alleges that the tenor of
BSV Resolution No. 98-096 necessitated the immediate filing of the injunction case on
October 29, 1998, to forestall the prejudicial effect of said resolution that was to take
effect two days later. Thus, petitioner claims that it had no other plain, speedy, and
adequate remedy except to file the case.[48]

Anent the question of whether the Sangguniang Barangay should have passed an

ordinance instead of a resolution to open the subject roads, petitioner alleges that the
Court of Appeals should not have relied on respondents' claim of ownership, as this led to
the erroneous conclusion that there was no need to pass an ordinance. Petitioner insists
that the supposed titles to the subject roads were never submitted to the RTC, and the
respondents merely attached certifications that the ownership of the subject roads was
already vested in the City Government of Parañaque City as Annexes to their Appellees'
Brief before the Court of Appeals.  Those annexes, according to petitioner, were not
formally offered as evidence.[49]

Petitioner avers that the records of Civil Case No. 98-0420 clearly show that there was no
proof or evidence on record to support the findings of the Court of Appeals. This is
because, allegedly, the dismissal of said case was due to the grant of a motion to dismiss,
and the case did not go to trial to receive evidence.[50]  Petitioner avers that a motion to
dismiss hypothetically admits the truth of the facts alleged in the complaint.[51]  In
adopting the annexes as basis for its findings of fact, the Court of Appeals allegedly
disregarded the rules on Evidence.

Petitioner raises the following grounds for the issuance by this Court of a temporary
restraining order and/or writ of preliminary injunction:
Sangguniang Barangay Resolution No. 98-096 is repugnant to the proprietary rights of
the affected homeowners who are members of petitioner NSVHAI, such rights
undoubtedly protected by the Constitution.

As there is no proof otherwise (except the baseless findings of fact by the Honorable
Court of Appeals) that the streets encompassed by the concerned subdivision, Sun Valley
Subdivision, are all private properties. As such, the residents of Sun Valley Subdivision
have all the right to regulate the roads and open spaces within their territorial jurisdiction.

This Honorable Supreme Court can take judicial knowledge that criminal activities such
as robbery and kidnappings are becoming daily fares in Philippine society. Residents
have invested their lifetime's savings in private subdivision since subdivision living
afford them privacy, exclusivity and foremost of all, safety. Living in a subdivision has a
premium and such premium translates into a comparatively more expensive lot because
of the safety, among others, that subdivision lifestyle offers.

But, with the enactment and intended implementation of Sangguniang Barangay

Resolution No. 98-096 to open Rosemallow and Aster Streets for public use, it is
indubitable that, instead of promoting the safety of resident of Sun Valley Subdivision,
respondents are endangering the life and property of the residents of the said subdivision
as they will now be exposed to criminal and lawless elements.

It is respectfully submitted that Sangguniang Barangay Resolution No. 98-096 has a

place only in an authoritarian government where proprietary rights and privacy are alien
concepts. Lest it be forgotten, ours is a democratic society and therefore, it should not be
ruled in a manner befitting of a despotic government.

Petitioner NSVHAI, in protection of the rights and interest of the residents of Sun Valley
Subdivision and in order to ensure that public officials will not abuse governmental
powers and use them in an oppressive and arbitrary manner, invokes the judicial power of
this Honorable Supreme Court and pray that a writ of preliminary injunction be issued
and, after hearing, be declared permanent. [52]

A perusal of the documents attached by petitioner as Annexes revealed to the Court the
following, which were not discussed in the body of the petition:

1. A letter[53] dated January 25, 2003 signed by Sonia G. Sison, President of NSVHAI, to

Mayor Joey P. Marquez, the pertinent portions of which provide:

We admit that we erred in not going to you directly because at that time, the
NSVHA received the letter-order of Brgy. Capt. Guevara two days before the effectivity
of the order.  Aside from this, there was a long holiday (long weekend prior to November
1). Thus, the Board of Governors had no other recourse but to seek a TRO and thereafter
a permanent injunction.

We now would like to seek your assistance concerning this urgent problem.  For your
information there are already two (2) gates in and out of Sun Valley Subdivision.

Under P.D. 957, the Homeowners Association is mandated to protect the interest of the
homeowners and residents especially in so far as it affects the security, comfort and the
general welfare of the homeowners.

Thank you and because of the urgency of the matter, we anticipate your prompt and
favorable action. (Emphasis ours.)

2. A letter[54] signed by Parañaque City Mayor Joey Marquez dated January 27, 2003,
addressed to Mr. Roberto Guevara, Office of the Barangay Captain, Barangay Sun
Valley, which reads in part:

This refers to your intended implementation of Barangay Sun Valley Resolution No. 98-
096 entitled, "A RESOLUTION DIRECTING THE NEW SUN VALLEY
HOMEOWNERS ASSOCIATION TO OPEN ROSEMALLOW AND ASTER
STREETS TO VEHICULAR AND PEDESTRIAN TRAFFIC."

In this regard and pursuant to the provisions of Sec. 32 of the Local Government Code of
1991 which vests upon the city mayor the right to exercise general supervision over
component barangays, to ensure that said barangays act within the scope of their
prescribed powers and functions, you are hereby directed to defer your implementation of
the subject ordinance based on the following grounds:

1. The roads subject of your resolution is a municipal road and not a barangay
road;

2. The opening or closure of any local road may be undertaken by a local

government unit pursuant to an ordinance and not through a mere resolution
as provided under Sec. 21 of the Local Government Code of 1991;

3. There is no more need to order the opening of the aforementioned roads in

view of the fact that Gelia and State Ave., have already been opened by the
subdivision to the general public to accommodate vehicular and pedestrian
traffic in the area;

4. There is a need to conduct public hearings, as in fact we shall be conducting

public hearings, on the matter to enable us to arrive at an intelligent
resolution of the issues involved.
3. A letter[55] dated January 31, 2003 addressed to Mayor Joey Marquez, signed by
counsel for respondents, wherein the latter wrote:

We regret to observe that all the reasons that you have cited in your letter as grounds for
your order of non-implementation of the Barangay Resolution have been passed upon and
decided by the Court of Appeals, which lately denied the NSVHA Motion for
Reconsideration x x x.

xxxx

The Decision of the Court of Appeals is now the subject of an appeal taken by the
NSVHA to the Supreme Court. In deference to the high Court, you would do well to
reconsider your order to the Barangay and not pre-empt the high Court on its decision. x
x x.

Arguments of Respondents

Respondents filed their Comment[56] on July 17, 2003.  They manifest that the petition is
substantially a reproduction of petitioner's brief filed with the Court of Appeals, and
consists of almost identical issues which have already been ventilated and decided upon
by the said court.

Respondents claim that the hearing held on November 20, 1998, as found by the Court of
Appeals, covered both the injunction and dismissal incidents, and that the motion to
dismiss on issues of jurisdiction was a prejudicial matter.  Respondents confirm that the
RTC said it will proceed first with the hearing, but the lower court did not specify if the
hearing was going to take up the prayer for the issuance of preliminary injunction or the
motion to dismiss. Respondents further claim that by the end of the hearing, after Atty.
Florencio R. Herrera's manifestation on the donated public roads, counsels for both
parties were asked by the court if they were submitting, and both of them answered in the
affirmative. [57]  Respondents aver that petitioner's reply to its charge of misleading the
Court was an admission that counsel had tampered without authority with the TSN, and
that the phrase "referring to the scheduled hearing of the prayer for the issuance of the
writ of preliminary injunction"[58] was said counsel's own mere footnote.

Respondents allege that the issuance of the titles in favor of Parañaque over all the roads
in Sun Valley Subdivision was an official act by the land registration office of the City of
Parañaque, and was perfectly within the judicial notice of the Courts, pursuant to Rule
129, Section 1 of the Rules of Court.[59]  Respondents likewise allege that the gates were
earlier built illegally on the roads by the Association, and while petitioner may lend a
helping hand to the barangay, it cannot control the latter's discretion as to the wisdom of
its traffic policies within the barangay.  They maintain that petitioner had no business
putting up road blocks in the first place; that this matter is purely a local government
determination; and that it is even doubtful if courts would encroach upon this
autonomous determination for local constituents of the Barangay in deference to the
doctrine of separation of powers.

Respondents claim that since the subject matter of the case is a directive of
the Barangay to the petitioner, the requirement for an ordinance would not be necessary,
as there was no legislative determination in the Barangay resolution regarding what class
of roads to open or what to close by way of general policy. [60]

Respondents contend that the Barangay Resolution was internal and temporary, passed to

solve a traffic problem.  They propose a reason why petitioner allegedly wants to control
the subject roads, as follows:

The directive of the Barangay is certainly a declaration of an intention expressed by

resolution on complaints of residents for a convenient outlet of cars and pedestrians
during certain hours of the [day] or night. This need not be the subject of an ordinance. It
is addressed to a special group of residents, and not to the general community. It refers to
particular roads and at certain hours only, not to all the roads and at all hours.

Hence, the Barangay Resolutions (sic) is but temporary in character, being a solution to a
momentary traffic problem then visualized by the Barangay and encouraged by the
MMDA. There is no legal question involved that is of any concern to the NSVHA. The
prevailing reason why the NSVHA desires to control the roads is the monetary
consideration it gains by its unilateral requirement of car stickers and of substantial fees
exacted from delivery vans and trucks for bringing in cargo into the subdivision. And yet,
the residents who, never gave their consent to this activities (sic), are busy people and
have merely tolerated this for a long time now. This tolerance did not of course give
legality to the illegal act. x x x.[61]

As regards petitioner's argument that the BSV Sangguniang Barangay should have

passed an ordinance instead of a resolution, respondents present their counter-argument
as follows:

Hence, even assuming for the sake of argument that a legal question exists on whether it
be a resolution or ordinance that should contain the Barangay directive, such an issue is
of no moment as plaintiff-appellant failed to exhaust the necessary administrative
remedies before resorting to court action, as found by the trial court and the Court of
Appeals. Section 32, R.A. 7160 (Local Government Code of 1991) provides for a remedy
from Barangay actions to the Mayor under the latter's power of general supervision. [62]

With regard to the Mayor's involvement in this case, respondents have this to say:
The Mayor's act of interfering in Barangay Sun Valley affairs stemmed out of a long-
standing political feud of the Mayor with the Punong Barangay. Its general supervision
did not extend to pure Barangay matters, which the Barangay would be x x x in a better
position to determine.

Furthermore, the general supervision of the Mayor is limited to the overseeing authority
that the Barangays act within the scope of their prescribed powers and functions. Sadly,
there is nothing in this Mayor's letter x x x that would as much as show a deviation by the
Barangay Sun Valley from any prescribed powers or function. The Mayor's directive to
the Barangay is of doubtful legality.

It was mainly the mounting traffic problem progressively experienced through the years
that prompted the Barangay to resolve to open Rosemallow and Aster Streets in
accordance with its power under Section 21 of R.A. 7160 to "temporarily open or close
any local road falling within its jurisdiction". This Resolution x x x was decided upon
after the Barangay Council made the necessary investigation and conducted hearings in
consultation with affected residents. In order to maintain some kind of cordial
relationship with the NSVHA, the Barangay by its resolution, opted to give the NSVHA
the chance to open the roads, which it earlier closed by means of arbitrarily putting up
steel gates without any apparent authority.[63]

Furthermore, respondents aver that the trial court and the appellate court have ruled that
only a local government unit (LGU), in this case the Barangay, can open or close roads,
whether they be public or private, in accordance with Section 21 of the Local
Government Code. Respondents contend that Metropolitan Manila Development
Authority v. Bel-Air Village Association, Inc.,[64] wherein the Court discussed the power
of LGUs to open and close roads, is substantially in point.[65]

After the submission of the parties' respective memoranda,[66] this case was submitted for
decision.

The issues before us are:

1. Whether or not petitioner has a right to the protection of the law that would entitle
it to injunctive relief against the implementation of BSV Resolution No. 98-096;
and

2. Whether or not petitioner failed to exhaust administrative remedies.

The Ruling of the Court    

The Court of Appeals passed upon petitioner's claims as to the validity of the dismissal in
this wise:

We do not agree. Although the Motion to Dismiss was filed on the same day, but after,
the Amended Petition was filed, the same cannot be considered as directed merely against
the original petition which Appellant already considers as non-existing. The records will
show that Appellant's Amended Petition contained no material amendments to the
original petition. Both allege the same factual circumstances or events that constitute the
Appellant's cause of action anent the Appellee's alleged violation of Appellant's propriety
rights over the subdivision roads in question. Corollarily, the allegations in Appellees'
Motion to Dismiss, as well as the grounds therefore predicated on lack of cause of action
and jurisdiction, could very well be considered as likewise addressed to Appellant's
Amended Petition.

xxxx

It bears stressing that due process simply means giving every contending party the
opportunity to be heard and the court to consider every piece of evidence presented in
their favor (Batangas Laguna Tayabas Bus Company versus Benjamin Bitanga, G.R.
Nos. 137934 & 137936[)]. In the instant case, Appellant cannot be said to have been
denied of due process. As borne by the records, while Appellees' Motion to Dismiss did
not set the time for the hearing of the motion, the day set therefore was the same date set
for the hearing of Appellant's prayer for the issuance of a writ of preliminary injunction -
that is, November 20, 1998, with the precise purpose of presenting evidence in support of
the motion to dismiss on the same said scheduled hearing date and time when Appellant
and its counsel would be present. Moreover, Appellant's predication of lack of due
hearing is belied by the fact that the hearing held on November 20, 1999 took up not only
the matter of whether or not to grant the injunction, but also tackled the jurisdictional
issue raised in Appellees' Motion to Dismiss, which issues were intertwined in both
incidents. [67]

We see no reason to depart from these findings by the Court of Appeals. Petitioner's
recourse in questioning BSV Resolution No. 98-096 should have been with the Mayor of
Parañaque City, as clearly stated in Section 32 of the Local Government Code, which
provides:

Section 32. City and Municipal Supervision over Their Respective Barangays. - The
city or municipality, through the city or municipal mayor concerned, shall exercise
general supervision over component barangays to ensure that said barangays act within
the scope of their prescribed powers and functions.

We do not see how petitioner's act could qualify as an exception to the doctrine of
exhaustion of administrative remedies.  We have emphasized the importance of applying
this doctrine in a recent case, wherein we held:

The doctrine of exhaustion of administrative remedies is a cornerstone of our judicial

system.  The thrust of the rule is that courts must allow administrative agencies to carry
out their functions and discharge their responsibilities within the specialized areas of their
respective competence. The rationale for this doctrine is obvious.  It entails lesser
expenses and provides for the speedier resolution of controversies.  Comity and
convenience also impel courts of justice to shy away from a dispute until the system of
administrative redress has been completed.[68]

It is the Mayor who can best review the Sangguniang Barangay's actions to see if it acted
within the scope of its prescribed powers and functions.  Indeed, this is a local problem to
be resolved within the local government. Thus, the Court of Appeals correctly found that
the trial court committed no reversible error in dismissing the case for petitioner's failure
to exhaust administrative remedies, as the requirement under the Local Government Code
that the closure and opening of roads be made pursuant to an ordinance, instead of a
resolution, is not applicable in this case because the subject roads belong to the City
Government of Parañaque.

Moreover, being the party asking for injunctive relief, the burden of proof was on
petitioner to show ownership over the subject roads.  This, petitioner failed to do.

In civil cases, it is a basic rule that the party making allegations has the burden of proving
them by a preponderance of evidence.  Parties must rely on the strength of their own
evidence and not upon the weakness of the defense offered by their opponent. [69]

Petitioner dared to question the barangay's ownership over the subject roads when it
should have been the one to adduce evidence to support its broad claims of exclusivity
and privacy.  Petitioner did not submit an iota of proof to support its acts of ownership,
which, as pointed out by respondents, consisted of closing the subject roads that belonged
to the then Municipality of Parañaque and were already being used by the public, limiting
their use exclusively to the subdivision's homeowners, and collecting fees from delivery
vans that would pass through the gates that they themselves had built.  It is petitioner's
authority to put up the road blocks in the first place that becomes highly questionable
absent any proof of ownership.

On the other hand, the local government unit's power to close and open roads within its
jurisdiction is clear under the Local Government Code, Section 21 of which provides:

Section 21. Closure and Opening of Roads. - (a) A local government unit may, pursuant
to an ordinance, permanently or temporarily close or open any local road, alley, park, or
square falling within its jurisdiction: Provided, however, That in case of permanent
closure, such ordinance must be approved by at least two-thirds (2/3) of all the members
of the sanggunian, and when necessary, an adequate substitute for the public facility that
is subject to closure is provided.

We quote with approval the ruling of the Court of Appeals in this regard, as follows:

Contrary, however, to Appellant's position, the above-quoted provision, which requires

the passage of an ordinance by a local government unit to effect the opening of a local
road, can have no applicability to the instant case since the subdivision road lots sought to
be opened to decongest traffic in the area - namely Rosemallow and Aster Streets - have
already been donated by the Sun Valley Subdivision to, and the titles thereto already
issued in the name of, the City Government of Parañaque since the year 1964 (Annexes
"2" to "7" of Appellees' Brief). This fact has not even been denied by the Appellant in the
proceedings below nor in the present recourse. Having been already donated or turned
over to the City Government of Parañaque, the road lots in question have since then taken
the nature of public roads which are withdrawn from the commerce of man, and hence
placed beyond the private rights or claims of herein Appellant. Accordingly, the
Appellant was not in the lawful exercise of its predicated rights when it built obstructing
structures closing the road lots in question to vehicular traffic for the use of the general
Public. Consequently, Appellees' act of passing the disputed barangay resolution, the
implementation of which is sought to be restrained by Appellant, had for its purpose not
the opening of a private road but may be considered merely as a directive or reminder to
the Appellant to cause the opening of a public road which should rightfully be open for
use to the general public.[70]

Petitioner wants this Court to recognize the rights and interests of the residents of Sun
Valley Subdivision but it miserably failed to establish the legal basis, such as its
ownership of the subject roads, which entitles petitioner to the remedy prayed for.  It
even wants this Court to take "judicial knowledge that criminal activities such as robbery
and kidnappings are becoming daily fares in Philippine society."[71]  This is absurd. The
Rules of Court provide which matters constitute judicial notice, to wit:

Rule 129
WHAT NEED NOT BE PROVED

SECTION 1. Judicial notice, when mandatory.--A court shall take judicial notice,
without the introduction of evidence, of the existence and territorial extent of states, their
political history, forms of government and symbols of nationality, the law of nations, the
admiralty and maritime courts of the world and their seals, the political constitution and
history of the Philippines, the official acts of the legislative, executive and judicial
departments of the Philippines, the laws of nature, the measure of time, and the
geographical divisions.(1a)
The activities claimed by petitioner to be part of judicial knowledge are not found in the
rule quoted above and do not support its petition for injunctive relief in any way.

As petitioner has failed to establish that it has any right entitled to the protection of the
law, and it also failed to exhaust administrative remedies by applying for injunctive relief
instead of going to the Mayor as provided by the Local Government Code, the petition
must be denied.

WHEREFORE, premises considered, the petition is hereby DENIED.  The Court of

Appeals' DECISION dated October 16, 2002 and its RESOLUTION dated January 17,
2003 in CA-G.R. CV No. 65559 are both AFFIRMED.

SO ORDERED.

EN BANC
[ G.R. No. 190793, June 19, 2012 ]
MAGDALO PARA SA PAGBABAGO, PETITIONER, VS. COMMISSION ON
ELECTIONS, RESPONDENT.

DECISION

SERENO, J.:

Before this Court is a Petition for Certiorari pursuant to Rule 37, Section 1 of the
Commission of Elections (COMELEC) Rules of Procedure, [1] in relation to Rules 64 and 65
of the Rules of Court, assailing the Resolutions dated 26 October 2009 and 4 January
2010 issued by the COMELEC in SPP Case No. 09-073 (PP). [2]

On 2 July 2009, Petitioner Magdalo sa Pagbabago (MAGDALO) filed its Petition for
Registration with the COMELEC, seeking its registration and/or accreditation as a
regional political party based in the National Capital Region (NCR) for participation in the
10 May 2010 National and Local Elections.[3] In the Petition, MAGDALO was represented
by its Chairperson, Senator Antonio F. Trillanes IV, and its Secretary General, Francisco
Ashley L. Acedillo (Acedillo).[4] The Petition was docketed as SPP No. 09-073 (PP) and
raffled to the Second Division of the COMELEC (COMELEC–Second Division). [5]
In its Order dated 24 August 2009, the COMELEC–Second Division directed MAGDALO to
cause the publication of the Petition for Registration and the said Order in three daily
newspapers of general circulation, and set the hearing thereof on 3 September 2009.
[6]
 In compliance therewith, MAGDALO caused the publication of both documents
in HATAW! No. 1 sa Balita, Saksi sa Balita and BOMBA BALITA (Saksi sa Katotohanan).[7]

On 3 September 2009, a hearing was conducted in which MAGDALO (a) established its
compliance with the jurisdictional requirements; (b) presented Acedillo as its witness;
and (c) marked its documentary evidence in support of its Petition for Registration. The
following day, MAGDALO filed its Formal Offer of Evidence.[8]

On 26 October 2009, the COMELEC–Second Division issued its Resolution denying the
Petition for Registration filed by MAGDALO.[9] The relevant portions of the assailed
Resolution read:

Magdalo Para sa Pagbabago should be refused registration in accordance with

Art. IX-C, Section 2(5) of the Constitution. It is common knowledge that the party’s
organizer and Chairman, Senator Antonio F. Trillanes IV, and some members
participated in the take-over of the Oakwood Premier Apartments in Ayala Center,
Makati City on July 27, 2003, wherein several innocent civilian personnel were held
hostage. This and the fact that they were in full battle gear at the time of the mutiny
clearly show their purpose in employing violence and using unlawful means to achieve
their goals in the process defying the laws of organized societies. x x x

x x x              x x x              x x x    

WHEREFORE, premises considered, this Petition is hereby DENIED.

SO ORDERED.[10] (Emphasis supplied.)

On 3 November 2009, MAGDALO filed a Motion for Reconsideration, which was

elevated to the COMELEC En Banc for resolution.[11]

Meanwhile, on 27 November 2009, MAGDALO filed a Manifestation of Intent to

Participate in the Party-List System of Representation in the 10 May 2010 Elections
(Manifestation of Intent), in which it stated that its membership includes “[f]ormer
members of the Armed Forces of the Philippines (AFP), Anti-Corruption Advocates,
Reform-minded citizens.”[12] Thereafter, on 30 November 2009, it filed its Amended
Manifestation, which bore the following footnote: [13]

With all due respect to the Honorable Commission, the MAGDALO PARA SA

PAGBABAGO (“MAGDALO”) manifests that the instant MANIFESTATION is being filed ex
abutanti (sic) cautelam (out of the abundance of caution) only and subject to the
outcome of the resolution of the Motion for Reconsideration filed by Magdalo in SPP
No. 09-073 (PP) from the Resolution dated 26 October 2009 of the Second Division of
the Honorable Commission denying its Petition for Registration/Accreditation as a
Political Party based in the National Capital Region [NCR], which motion is still pending
the (sic) Honorable Commission En Banc. It is not in any way intended to preempt the
ruling of the Honorable Commission but merely to preserve the possibility of pursuing
the Party’s participation in the Party-List System of Representation in the eventuality
that their Petition is approved.

Thereafter, MAGDALO filed a Manifestation and Motion for Early Resolution dated 23
December 2009, in which it clarified its intention to participate in the 10 May 2010
National and Local Elections as a party-list group.[14]

In its assailed Resolution dated 4 January 2010, the COMELEC En Banc denied the
Motion for Reconsideration filed by MAGDALO.[15]

In the instant Petition, MAGDALO argues that (a) the COMELEC Resolutions were not
based on the record or evidence presented; (b) the Resolutions preempted the decision
of the trial court in Criminal Case No. 03-2784, in which several members of the military
are being tried for their involvement in the siege of the Oakwood Premier Apartments
(Oakwood); and (c) it has expressly renounced the use of force, violence and other
forms of unlawful means to achieve its goals. Thus, MAGDALO prays for this Court to: (a)
reverse and set aside the 26 October 2009 and 4 January 2010 COMELEC Resolutions;
(b) grant its Petition for Registration; and (c) direct the COMELEC to issue a Certificate of
Registration.[16] The Petition likewise includes a prayer for the issuance of a Temporary
Restraining Order (TRO), Writ of Preliminary Mandatory Injunction and/or Injunctive
Relief to direct the COMELEC to allow MAGDALO to participate in the 10 May 2010
National and Local Elections.[17] However, this Court denied the issuance of a TRO in its
Resolution dated 2 February 2010.[18]

To support the grant of reliefs prayed for, MAGDALO puts forward the following
arguments:
 The findings of the assailed resolutions on the basis of which the Petition was
denied are based on pure speculation. The Resolutions speculated as to the alleged
motives and/or intentions of the founders of petitioner Magdalo, which claims are not
based on evidence but on mere conjecture and pure baseless presuppositions;

The assailed Resolutions effectively preempted the court trying the case. The subject
Resolutions unfairly jumped to the conclusion that the founders of the Magdalo
“committed mutiny”, “held innocent civilian personnel as hostage”, “employed violence”
and “use[d] unlawful means” and “in the process defied the laws of organized
society” purportedly during the Oakwood incident when even the court trying their
case, [Regional Trial Court, National Capital Judicial Region, Makati City], Branch 148,
has not yet decided the case against them;

– and –

The Resolution violates the constitutional presumption of innocence in favor of

founders of the Magdalo and their basic right of to [sic] due process of law. [19]

On the other hand, the COMELEC asserts that it had the power to ascertain the eligibility
of MAGDALO for registration and accreditation as a political party.[20] It contends that
this determination, as well as that of assessing whether MAGDALO advocates the use of
force, would entail the evaluation of evidence, which cannot be reviewed by this Court
in a petition for certiorari.[21]

However, MAGDALO maintains that although it concedes that the COMELEC has the
authority to assess whether parties applying for registration possess all the
qualifications and none of the disqualifications under the applicable law, the latter
nevertheless committed grave abuse of discretion in basing its determination on pure
conjectures instead of on the evidence on record.[22]

Preliminary to the examination of the substantive issues, it must be discussed whether

this case has been rendered moot and academic by the conduct of the 10 May 2010
National and Local Elections. Although the subject Petition for Registration filed by
MAGDALO was intended for the elections on even date, it specifically asked for
accreditation as a regional political party for purposes of subsequent elections.[23]

Moreover, even assuming that the registration was only for the 10 May 2010 National
and Local Elections, this case nevertheless comes under the exceptions to the rules on
mootness, as explained in David v. Macapagal-Arroyo:[24]

A moot and academic case is one that ceases to present a justiciable controversy
by virtue of supervening events, so that a declaration thereon would be of no practical
use or value. Generally, courts decline jurisdiction over such case or dismiss it on ground
of mootness.

x x x              x x x              x x x   

The “moot and academic” principle is not a magical formula that can automatically
dissuade the courts in resolving a case. Courts will decide cases, otherwise moot and
academic, if: first, there is a grave violation of the Constitution; second, the exceptional
character of the situation and the paramount public interest is involved; third, when
[the] constitutional issue raised requires formulation of controlling principles to guide
the bench, the bar, and the public; and fourth, the case is capable of repetition yet
evading review.[25] (Emphasis supplied.)

The second and fourth exceptions are clearly present in the case at bar. The instant
action brings to the fore matters of public concern, as it challenges the very notion of
the use of violence or unlawful means as a ground for disqualification from party
registration. Moreover, considering the expressed intention of MAGDALO to join
subsequent elections, as well as the occurrence of supervening events pertinent to the
case at bar, it remains prudent to examine the issues raised and resolve the arising legal
questions once and for all.

Having established that this Court can exercise its power of judicial review, the issue for
resolution is whether the COMELEC gravely abused its discretion when it denied the
Petition for Registration filed by MAGDALO on the ground that the latter seeks to
achieve its goals through violent or unlawful means. This Court rules in the negative, but
without prejudice to MAGDALO’s filing anew of a Petition for Registration.

The COMELEC has a constitutional and statutory mandate to ascertain the eligibility of
parties and organizations to participate in electoral contests. The relevant portions of
the 1987 Constitution read:
 ARTICLE VI – LEGISLATIVE DEPARTMENT

x x x             x x x              x x x    

Section 5. (1) The House of Representatives shall be composed of not more than two
hundred and fifty members, unless otherwise fixed by law, who shall be elected from
legislative districts apportioned among the provinces, cities, and the Metropolitan
Manila area in accordance with the number of their respective inhabitants, and on the
basis of a uniform and progressive ratio, and those who, as provided by law, shall be
elected through a party-list system of registered national, regional, and sectoral
parties or organizations.

x x x              x x x              x x x

ARTICLE IX – CONSTITUTIONAL COMMISSIONS

C. The Commission on Elections

x x x              x x x              x x x

Section 2. The Commission on Elections shall exercise the following powers and
functions:

x x x              x x x              x x x    

(5) Register, after sufficient publication, political parties, organizations, or coalitions

which, in addition to other requirements, must present their platform or program of
government; and accredit citizens’ arms of the Commission on Elections. Religious
denominations and sects shall not be registered. Those which seek to achieve their
goals through violence or unlawful means, or refuse to uphold and adhere to this
Constitution, or which are supported by any foreign government shall likewise be
refused registration. x x x. (Emphasis supplied.)

Echoing these constitutional provisions, Batas Pambansa Bilang 881 (BP 881), otherwise

known as the Omnibus Election Code, states:

Sec. 60. Political party. – “Political party” or “party,” when used in this Act, means
an organized group of persons pursuing the same ideology, political ideals or platforms
of government and includes its branches and divisions. To acquire juridical personality,
qualify it for subsequent accreditation, and to entitle it to the rights and privileges
herein granted to political parties, a political party shall first be duly registered with
the Commission. Any registered political party that, singly or in coalition with others,
fails to obtain at least ten percent of the votes cast in the constituency in which it
nominated and supported a candidate or candidates in the election next following its
registration shall, after notice and hearing, be deemed to have forfeited such status as a
registered political party in such constituency.

Sec. 61. Registration. – Any organized group of persons seeking registration as a national

or regional political party may file with the Commission a verified petition attaching
thereto its constitution and by-laws, platforms or program of government and such
other relevant information as may be required by the Commission. The Commission
shall after due notice and hearing, resolve the petition within ten days from the date it is
submitted for decision. No religious sect shall be registered as a political party and no
political party which seeks to achieve its goal through violence shall be entitled to
accreditation. (Emphasis supplied.)

On the other hand, Republic Act No. 7941, otherwise known as the Party-List System
Act, reads in part:

Section 2.  Declaration of policy. The State shall promote proportional

representation in the election of representatives to the House of Representatives
through a party-list system of registered national, regional and sectoral parties or
organizations or coalitions thereof, which will enable Filipino citizens belonging to
marginalized and under-represented sectors, organizations and parties, and who lack
well-defined political constituencies but who could contribute to the formulation and
enactment of appropriate legislation that will benefit the nation as a whole, to become
members of the House of Representatives. Towards this end, the State shall develop
and guarantee a full, free and open party system in order to attain the broadcast
possible representation of party, sectoral or group interests in the House of
Representatives by enhancing their chances to compete for and win seats in the
legislature, and shall provide the simplest scheme possible.

Section 3. Definition of Terms. (a) The party-list system is a mechanism of proportional

representation in the election of representatives to the House of Representatives from
national, regional and sectoral parties or organizations or coalitions thereof registered
with the Commission on Elections (COMELEC). Component parties or organizations of a
coalition may participate independently provided the coalition of which they form part
does not participate in the party-list system. (Emphasis supplied.)

Thus, to join electoral contests, a party or organization must undergo the two-step
process of registration and accreditation, as this Court explained in Liberal Party v.
COMELEC:[26]

x x x Registration is the act that bestows juridical personality for purposes of our
election laws; accreditation, on the other hand, relates to the privileged participation
that our election laws grant to qualified registered parties.

x x x              x x x              x x x    

x x x Accreditation can only be granted to a registered political party, organization or

coalition; stated otherwise, a registration must first take place before a request for
accreditation can be made. Once registration has been carried out, accreditation is the
next natural step to follow.[27] (Emphasis supplied.)

Considering the constitutional and statutory authority of the COMELEC to ascertain the
eligibility of parties or organizations seeking registration and accreditation, the pertinent
question now is whether its exercise of this discretion was so capricious or whimsical as
to amount to lack of jurisdiction. In view of the facts available to the COMELEC at the
time it issued its assailed Resolutions, this Court rules that respondent did not commit
grave abuse of discretion.

A. The COMELEC did not commit grave abuse

of discretion in taking judicial notice of the
Oakwood incident.

MAGDALO contends that it was grave abuse of discretion for the COMELEC to have
denied the Petition for Registration not on the basis of facts or evidence on record, but
on mere speculation and conjectures.[28] This argument cannot be given any merit.

Under the Rules of Court, judicial notice may be taken of matters that are of “public
knowledge, or are capable of unquestionable demonstration.”[29] Further, Executive
Order No. 292, otherwise known as the Revised Administrative Code, specifically
empowers administrative agencies to admit and give probative value to evidence
commonly acceptable by reasonably prudent men, and to take notice of judicially
cognizable facts.[30] Thus, in Saludo v. American Express,[31] this Court explained as
follows:

The concept of “facts of common knowledge” in the context of judicial notice has
been explained as those facts that are “so commonly known in the community as to
make it unprofitable to require proof, and so certainly known x x x as to make it
indisputable among reasonable men.”[32]

This Court has, in a string of cases, already taken judicial notice of the factual
circumstances surrounding the Oakwood standoff. [33] The incident involved over 300
heavily armed military officers and enlisted men – led by the founding members of
MAGDALO – who surreptitiously took over Oakwood in the wee hours of 27 July 2003.
They disarmed the security guards and planted explosive devices around the building
and within its vicinity. They aired their grievances against the administration of former
President Gloria Macapagal-Arroyo (former President Arroyo), withdrew their support
from the government, and called for her resignation, as well as that of her cabinet
members and of the top officials of the Philippine National Police (PNP) and the Armed
Forces of the Philippines (AFP). After the ensuing negotiations for these military agents
to lay down their weapons, defuse the explosives and return to the barracks, the
debacle came to a close at 11:00 p.m. on the same day.[34] That the Oakwood incident
was widely known and extensively covered by the media made it a proper subject of
judicial notice. Thus, the COMELEC did not commit grave abuse of discretion when it
treated these facts as public knowledge,[35] and took cognizance thereof without
requiring the introduction and reception of evidence thereon.

B. The COMELEC did not commit

grave abuse of discretion in finding
that MAGDALO uses violence or
unlawful means to achieve its goals.

In the instant Petition, MAGDALO claims that it did not resort to violence when it took
over Oakwood because (a) no one, either civilian or military, was held hostage; (b) its
members immediately evacuated the guests and staff of the hotel; and (c) not a single
shot was fired during the incident.[36] These arguments present a very narrow
interpretation of the concepts of violence and unlawful means, and downplays the
threat of violence displayed by the soldiers during the takeover.

Under Article IX-C, Section 2(5) of the 1987 Constitution, parties, organizations and
coalitions that “seek to achieve their goals through violence or unlawful means” shall be
denied registration. This disqualification is reiterated in Section 61 of B.P. 881, which
provides that “no political party which seeks to achieve its goal through violence shall be
entitled to accreditation.”

Violence is the unjust or unwarranted exercise of force, usually with the accompaniment
of vehemence, outrage or fury.[37] It also denotes physical force unlawfully exercised;
abuse of force; that force which is employed against common right, against the laws,
and against public liberty.[38] On the other hand, an unlawful act is one that is contrary to
law and need not be a crime, considering that the latter must still unite with evil intent
for it to exist.[39]

In the present case, the Oakwood incident was one that was attended with violence. As
publicly announced by the leaders of MAGDALO during the siege, their objectives were
to express their dissatisfaction with the administration of former President Arroyo, and
to divulge the alleged corruption in the military and the supposed sale of arms to
enemies of the state.[40] Ultimately, they wanted the President, her cabinet members,
and the top officials of the AFP and the PNP to resign. [41] To achieve these goals,
MAGDALO opted to seize a hotel occupied by civilians, march in the premises in full
battle gear with ammunitions, and plant explosives in the building. These brash methods
by which MAGDALO opted to ventilate the grievances of its members and withdraw its
support from the government constituted clear acts of violence.

The assertions of MAGDALO that no one was held hostage or that no shot was
fired[42] do not mask its use of impelling force to take over and sustain the occupation of
Oakwood. Neither does its express renunciation of the use of force, violence and other
unlawful means in its Petition for Registration and Program of Government [43] obscure
the actual circumstances surrounding the encounter. The deliberate brandishing of
military power, which included the show of force, use of full battle gear, display of
ammunitions, and use of explosive devices, engendered an alarming security risk to the
public. At the very least, the totality of these brazen acts fomented a threat of violence
that preyed on the vulnerability of civilians. The COMELEC did not, therefore, commit
grave abuse of discretion when it treated the Oakwood standoff as a manifestation of
the predilection of MAGDALO for resorting to violence or threats thereof in order to
achieve its objectives.

C. The finding that MAGDALO seeks to achieve

its goals through violence or unlawful means did
not operate as a prejudgment of Criminal
Case No. 03-2784.

MAGDALO contends that the finding of the COMELEC that the former pursues its goals
through violence or unlawful means was tantamount to an unwarranted verdict of guilt
for several crimes, which in effect, preempted the proceedings in Criminal Case No. 03-
2784 and violated the right to presumption of innocence.[44] This argument cannot be
sustained.

The power vested by Article IX-C, Section 2(5) of the Constitution and Section 61 of BP
881 in the COMELEC to register political parties and ascertain the eligibility of groups to
participate in the elections is purely administrative in character. [45] In exercising this
authority, the COMELEC only has to assess whether the party or organization seeking
registration or accreditation pursues its goals by employing acts considered as violent or
unlawful, and not necessarily criminal in nature. Although this process does not entail
any determination of administrative liability, as it is only limited to the evaluation of
qualifications for registration, the ruling of this Court in Quarto v. Marcelo[46] is
nonetheless analogously applicable:

An administrative case is altogether different from a criminal case, such that

the disposition in the former does not necessarily result in the same disposition for
the latter, although both may arise from the same set of facts.  The most that we can
read from the finding of liability is that the respondents have been found to be
administratively guilty by substantial evidence – the quantum of proof required in an
administrative proceeding. The requirement of the Revised Rules of Criminal
Procedure…that the proposed witness should not appear to be the “most guilty” is
obviously in line with the character and purpose of a criminal proceeding, and the much
stricter standards observed in these cases. They are standards entirely different from
those applicable in administrative proceedings. [47] (Emphasis supplied.)

Further, there is a well-established distinction between the quantum of proof required

for administrative proceedings and that for criminal actions, to wit:

As an administrative proceeding, the evidentiary bar against which the evidence

at hand is measured is not the highest quantum of proof beyond reasonable doubt,
requiring moral certainty to support affirmative findings. Instead, the lowest standard of
substantial evidence, that is, such relevant evidence as a reasonable mind will accept as
adequate to support a conclusion, applies.[48] (Emphasis omitted.)

In the case at bar, the challenged COMELEC Resolutions were issued pursuant to its
administrative power to evaluate the eligibility of groups to join the elections as political
parties, for which the evidentiary threshold of substantial evidence is applicable. In
finding that MAGDALO resorts to violence or unlawful acts to fulfil its organizational
objectives, the COMELEC did not render an assessment as to whether the members of
petitioner committed crimes, as respondent was not required to make that
determination in the first place. Its evaluation was limited only to examining whether
MAGDALO possessed all the necessary qualifications and none of disqualifications for
registration as a political party. In arriving at its assailed ruling, the COMELEC only had to
assess whether there was substantial evidence adequate to support this conclusion.

On the other hand, Criminal Case No. 03-2784 is a criminal action charging members of
MAGDALO with coup d’état following the events that took place during the Oakwood
siege. As it is a criminal case, proof beyond reasonable doubt is necessary. Therefore,
although the registration case before the COMELEC and the criminal case before the
trial court may find bases in the same factual circumstances, they nevertheless involve
entirely separate and distinct issues requiring different evidentiary thresholds. The
COMELEC correctly ruled thus:

It is at once apparent that that [sic] the proceedings in and the consequent
findings of the Commission (Second Division) in the subject resolution did not pre-empt
the trial and decision of the court hearing the cases of the Magdalo members. These are
two different processes. The proceedings in the Commission is [sic] a petition for
registration of Magdalo as a political party and the Commission is empowered to
ascertain facts and circumstances relative to this case. It is not criminal in nature unlike
the court case of the Magdalo founders. Thus, the Second Division did not violate the
right of the Magdalo founders to be presumed innocent until proven guilty when it
promulgated the questioned resolution. There is likewise no violation of due process.
Accreditation as a political party is not a right but only a privilege given to groups who
have qualified and met the requirements provided by law. [49]

It is unmistakable from the above reasons that the ruling of the COMELEC denying the
Petition for Registration filed by MAGDALO has not, as respondent could not have,
preempted Criminal Case No. 03-2784 or violated the right of petitioner’s members to a
presumption of innocence.
Subsequent Grant of Amnesty to the
Military Personnel involved in the
Oakwood standoff

It must be clarified that the foregoing discussion finding the absence of grave abuse of
discretion on the part of the COMELEC is based on the facts available to it at the time it
issued the assailed 26 October 2009 and 4 January 2010 Resolutions. It is crucial to
make this qualification, as this Court recognizes the occurrence of supervening events
that could have altered the COMELEC’s evaluation of the Petition for Registration filed
by MAGDALO. The assessment of the COMELEC could have changed, had these
incidents taken place before the opportunity to deny the Petition arose. In the same
manner that this Court takes cognizance of the facts surrounding the Oakwood incident,
it also takes judicial notice of the grant of amnesty in favor of the soldiers who figured in
this standoff.

This Court, in People v. Patriarca,[50] explained the concept of amnesty, to wit:

Amnesty commonly denotes a general pardon to rebels for their treason or other
high political offenses, or the forgiveness which one sovereign grants to the subjects of
another, who have offended, by some breach, the law of nations. Amnesty looks
backward, and abolishes and puts into oblivion, the offense itself; it so overlooks and
obliterates the offense with which he is charged, that the person released by amnesty
stands before the law precisely as though he had committed no offense.

x x x              x x x              x x x

In the case of People vs. Casido, the difference between pardon and amnesty is given:

“Pardon is granted by the Chief Executive and as such it is a private act which
must be pleaded and proved by the person pardoned, because the courts take no notice
thereof; while amnesty by Proclamation of the Chief Executive with the concurrence of
Congress, is a public act of which the courts should take judicial notice. x x
x”[51] (Emphasis supplied.)

Pursuant to Article VII, Section 19 of the Constitution, [52] President Benigno S. Aquino III
issued on 24 November 2010 Proclamation No. 75, [53] which reads in part:
 GRANTING AMNESTY TO ACTIVE AND FORMER PERSONNEL OF THE ARMED
FORCES OF THE PHILIPPINES, PHILIPPINE NATIONAL POLICE AND THEIR SUPPORTERS
WHO MAY HAVE COMMITTED CRIMES PUNISHABLE UNDER THE REVISED PENAL CODE,
THE ARTICLES OF WAR AND OTHER LAWS IN CONNECTION WITH THE OAKWOOD
MUTINY, THE MARINES STAND-OFF AND THE PENINSULA MANILA HOTEL INCIDENT

WHEREAS, it is recognized that certain active and former personnel of the Armed Forces
of the Philippines (AFP), the Philippine National Police (PNP) and their supporters have
or may have committed crimes punishable under the Revised Penal Code, the Articles of
War and other laws in connection with, in relation or incident to the July 27, 2003
Oakwood Mutiny, the February 2006 Marines Stand-Off and the November 29, 2007
Manila Pen Incident;

WHEREAS, there is a clamor from certain sectors of society urging the President to
extend amnesty to said AFP personnel and their supporters;

WHEREAS, Section 19, Article VII of the Constitution expressly vests the President the
power to grant amnesty;

WHEREAS, the grant of amnesty in favor of the said active and former personnel of the
AFP and PNP and their supporters will promote an atmosphere conducive to the
attainment of a just, comprehensive and enduring peace and is in line with the
Government’s peace and reconciliation initiatives;

NOW, THEREFORE, I, BENIGNO S. AQUINO III, President of the Philippines, by virtue of

the powers vested in me by Section 19, Article VII of the Philippine Constitution, do
hereby DECLARE and PROCLAIM:

SECTION 1. Grant of Amnesty. – Amnesty is hereby granted to all active and former
personnel of the AFP and PNP as well as their supporters who have or may have
committed crimes punishable under the Revised Penal Code, the Articles of War or
other laws in connection with, in relation or incident to the July 27, 2003 Oakwood
Mutiny, the February 2006 Marines Stand-Off and the November 29, 2007 Manila
Peninsula Incident who shall apply therefor; Provided that amnesty shall not cover rape,
acts of torture, crimes against chastity and other crimes committed for personal ends.

x x x              x x x              x x x 
SECTION 4. Effects. – (a) Amnesty pursuant to this proclamation shall extinguish any
criminal liability for acts committed in connection, incident or related to the July 27,
2003 Oakwood Mutiny, the February 2006 Marines Stand-Off and the November 29,
2007 Peninsula Manila Hotel Incident without prejudice to the grantee’s civil liability for
injuries or damages caused to private persons.

(b) Except as provided below, the grant of amnesty shall effect the restoration of civil
and political rights or entitlement of grantees that may have been suspended, lost or
adversely affected by virtue of any executive, administrative or criminal action or
proceedings against the grantee in connection with the subject incidents, including
criminal conviction or (sic) any form, if any.

(c) All enlisted personnel of the Armed Forces of the Philippines with the rank of up to
Technical Sergeant and personnel of the PNP with the rank of up to Senior Police Officer
3, whose applications for amnesty would be approved shall be entitled to reintegration
or reinstatement, subject to existing laws and regulations. However, they shall not be
entitled to back pay during the time they have been discharged or suspended from
service or unable to perform their military or police duties.

(d) Commissioned and Non-commissioned officers of the AFP with the rank of Master
Sergeant and personnel of the PNP with the rank of at least Senior Police Officer 4
whose application for amnesty will be approved shall not be entitled to remain in the
service, reintegration or reinstatement into the service nor back pay.

(e) All AFP and PNP personnel granted amnesty who are not reintegrated or reinstated
shall be entitled to retirement and separation benefits, if qualified under existing laws
and regulation, as of the time [of] separation, unless they have forfeited such retirement
benefits for reasons other than the acts covered by this Proclamation. Those
reintegrated or reinstated shall be entitled to their retirement and separation benefit[s]
upon their actual retirement. (Emphasis supplied.)

Thereafter, the House of Representatives and the Senate adopted Concurrent

Resolution No. 4 on 13 and 14 December 2010, respectively. [54] Relevant portions of the
Resolution partly read:
 CONCURRENT RESOLUTION CONCURRING WITH PROCLAMATION NO. 75 OF THE
PRESIDENT OF THE REPUBLIC OF THE PHILIPPINES DATED 24 NOVEMBER 2010 ENTITLED
“GRANTING AMNESTY TO ACTIVE AND FORMER PERSONNEL OF THE ARMED FORCES OF
THE PHILIPPINES, PHILIPPINE NATIONAL POLICE AND THEIR SUPPORTERS WHO MAY
HAVE COMMITTED CRIMES PUNISHABLE UNDER THE REVISED PENAL CODE, THE
ARTICLES OF WAR AND OTHER LAWS IN CONNECTION WITH THE OAKWOOD MUTINY,
THE MARINES STAND-OFF AND THE PENINSULA MANILA HOTEL INCIDENT

WHEREAS, Section 19, Article VII of the Constitution provides that the President shall
have the power to grant amnesty with the concurrence of a majority of all the Members
of Congress;

x x x              x x x              x x x

WHEREAS, both Houses of Congress share the view of the President that in order to
promote an atmosphere conducive to the attainment of a just, comprehensive and
enduing peace and in line with the Government’s peace and reconciliation initiatives,
there is a need to declare amnesty in favor of the said active and former personnel of
the AFP and PNP and their supporters;

WHEREAS, it is the sense of both House of Congress that it is imperative that an

amnesty partaking the nature proclaimed by His Excellency, the President of the
Philippines, is necessary for the general interest of the Philippines; xxx (Emphasis
supplied.)

In light of the foregoing, to still sustain the finding, based on the participation of its
members in the Oakwood incident, that MAGDALO employs violence or other harmful
means would be inconsistent with the legal effects of amnesty. Likewise, it would not be
in accord with the express intention of both the Executive and the Legislative branches,
in granting the said amnesty, to promote an atmosphere conducive to attaining peace in
line with the government’s peace and reconciliation initiatives.

Nevertheless, this Court is not unmindful of the apprehensions of the COMELEC as

regards the use of violence. Thus, should MAGDALO decide to file another Petition for
Registration, its officers must individually execute affidavits renouncing the use of
violence or other harmful means to achieve the objectives of their organization. Further,
it must also be underscored that the membership of MAGDALO cannot include military
officers and/or enlisted personnel in active service, as this act would run counter to the
express provisions of the Constitution:

ARTICLE XVI – GENERAL PROVISIONS

Section 5. (1) All members of the armed forces shall take an oath or affirmation to
uphold and defend this Constitution.

xxx                    xxx                    xxx

(3) Professionalism in the armed forces and adequate remuneration and benefits of its
members shall be a prime concern of the State. The armed forces shall be insulated
from partisan politics.

No member of the military shall engage directly or indirectly in any partisan political
activity, except to vote.

(4) No member of the armed forces in the active service shall, at any time, be appointed
or designated in any capacity to a civilian position in the Government including
government-owned or controlled corporations or any of their subsidiaries. (Emphasis
supplied.)

This Court finds that the COMELEC did not commit grave abuse of discretion in denying
the Petition for Registration filed by MAGDALO. However, in view of the subsequent
amnesty granted in favor of the members of MAGDALO, the events that transpired
during the Oakwood incident can no longer be interpreted as acts of violence in the
context of the disqualifications from party registration.

WHEREFORE, the instant Petition is DISMISSED. The 26 October 2009 and 4 January

2010 Resolutions of the Commission on Elections are hereby AFFIRMED, without
prejudice to the filing anew of a Petition for Registration by MAGDALO.

SO ORDERED.

FIRST DIVISION
[ G.R. No. 185518, April 17, 2013 ]
 SPOUSES FELIX CHINGKOE AND ROSITA CHINGKOE, PETITIONERS,
VS. SPOUSES FAUSTINO CHINGKOE AND GLORIA CHINGKOE,
RESPONDENTS.

DECISION

SERENO, C.J.:

This Petition for Review on Certiorari under Rule 45 of the Rules of Court assails the 3
July 2008 Decision of the Court of Appeals (CA) annulling the 30 March 2007 Decision
o(the Regional Trial Court (RTC) of Quezon City.[1] The RTC affirmed[2] the
Metropolitan Trial Court's (MTC) dismissal[3] of the Complaint for unlawful detainer
filed by herein respondents.

The facts, as culled from the records, are as follows:

Respondents are the registered owners of a real property covered by Transfer Certificate
of Title No. 8283[4] of the Registry of Deeds of Quezon City. They claim that sometime in
1990, out of tolerance and permission, they allowed respondent Faustino’s brother, Felix,
and his wife, Rosita, to inhabit the subject property situated at No. 58 Lopez Jaena Street,
Ayala Heights, Quezon City. Due to the intercession of their mother, Tan Po Chu,
Faustino agreed to sell the property to Felix on condition that the title shall be delivered
only after Felix and Rosita’s payment of the full purchase price, and after respondents’
settlement of their mortgage obligations with the Rizal Commercial Banking Corporation
(RCBC). After further prodding from their mother, however, and at Felix’s request,
Faustino agreed to deliver in advance an incomplete draft of a Deed of Absolute Sale,
which had not yet been notarized. While respondents themselves drafted the deed, the
parties again agreed that the document would only be completed after full payment. [5]

On 24 July 2001, respondents sent a demand letter[6] to petitioners asking them to vacate
the premises. To this date, petitioners have refused to do so, prompting respondents to
file a complaint[7] for unlawful detainer with the MTC of Quezon City. In their Answer,
petitioners presented a copy of a completed Deed of Absolute Sale dated 10 October
1994, claiming that respondents had sold the property for P3,130,000, which petitioners
had paid in full and in cash on the same day. Due to respondents’ adamant refusal to
surrender the title to them as buyers, petitioners were allegedly constrained to file an
action for specific performance with Branch 96 of the Quezon City RTC on 31 January
1995.[8]

The MTC gave weight to the Deed of Sale presented by petitioners and dismissed the
Complaint, as follows:
The defendants herein assert that “since October 1994, when they bought their property
in CASH, their stay thereat is by virtue of their absolute ownership thereof as provided
for in the Absolute Deed of Sale,” x x x. The foregoing would right away tell us that this
Court is barred from ordering the ejectment of the defendants from the premises in
question so much so that what is at stake only in cases of this nature as above stated is as
regards possession only.

With the execution of the Deed of Absolute Sale whereby the Vendors never reserved
their rights and interests over the property after the sale, and the transfer appears to be
absolute, beside the fact that the property is now under the control and custody of the
defendants, we could conclude that instant case unlawful detainer (sic) is destined to fail,
[9]
 x x x.

The RTC affirmed the findings of the MTC in toto, reasoning thus:

x x x (T)here exists a Deed presented in evidence on the sale of the subject property
entered into by the herein parties. The Deed of Sale renders weak the claim of tolerance
or permission.

Although the plaintiffs-appellants questioned the validity and authenticity of the Deed of
Sale, this will not change the nature of the action as an unlawful detainer, in the light of
our premise of the principal issue in unlawful detainer – possession de facto.[10]

The CA reversed the findings of the lower courts and ruled that a mere plea of title over
disputed land by the defendant cannot be used as sound basis for dismissing an action for
recovery of possession. Citing Refugia v. Court of Appeals, the appellate court found that
petitioners’ stay on the property was merely a tolerated possession, which they were no
longer entitled to continue. The deed they presented was not one of sale, but a “document
preparatory to an actual sale, prepared by the petitioners upon the insistence and prodding
of their mother to soothe in temper respondent Felix Chingkoe.”[11]

Petitioners now come before this Court, raising the following arguments:

a. The CA committed reversible error when it admitted and gave weight to testimony
given in a different proceeding (action for specific performance) pending before
the Regional Trial Court in resolving the issue herein (unlawful detainer); and

b. The CA committed reversible error when it ruled on the validity of a notarized

Deed of Sale in a summary ejectment action.

We deny the petition.

Anent the first argument, petitioners fault the CA for citing and giving credence to the
testimony of Tan Po Chu, who was presented as a witness in another case, the action for
specific performance filed by petitioners. The CA stated:

In the case instituted by the respondents against herein petitioner for Specific Performance
entitled “Felix Chingkoe and Rosita Chingkoe v. Faustino Chingkoe and Gloria Chingkoe,”
docketed as Civil Case No. Q-95-22865 pending before Branch 96 of the Regional Trial Court of
Quezon City, Tan Po Chu testified on 25 November 1999 to shed light on the matter once and
for all, to wit:
xxxx
Atty.
Nicolas:
Q You mentioned that this is the second copy of the deed of absolute sale, you identified
the signature appearing here as the signature of Felix, how do you know that this is the
signature of Felix?
A Well, he is my son. I am familiar with his signature and besides that he signed it in my
presence.
Q And this is the very document and not as photocopy (sic) of the second document
which you brought to Felix?
Atty. Flores:
Again, Your Honor, very leading.
Court:
I will allow.
A I am not very sure now but I think this is the real one, I think this is the one because I
saw him signed (sic) this.
Atty. Nicolas:
May I request that this be marked as Exhibit “1” and the signature of Felix be signed as
Exhibit “1-A”?
Court:
Mark.
Atty.
Flores:
Just a moment, no basis, Your Honor, please.
Atty.
Nicolas:
Your Honor, the witness said that there was a deed of absolute sale, I was asking if she
knows how much Felix paid for the property when she delivered the document.
Court:
She never testified that there was a sale, she only said that there was a deed of sale.
Atty. Nicolas:
I will reform, Your Honor.
Q When you delivered this document to Felix, what did he give you in return, if any?
A He did not give me anything, he had never paid me any single cent.
Q When you delivered the deed of sale?
A There was no payment whatsoever.
Q As far as you know, Ms. Witness, was the property paid for by Felix to Faustino?
A I swear to God, no payment, there was no payment at all, I swear.
xxxx
As clearly shown in the testimony given in open court which was above-quoted,
petitioners merely delivered to their mother a draft of the deed, which they signed to
appease her and respondent Felix Chingkoe.[12 ](Emphases supplied.)

The CA indeed quoted at length from the testimony of Tan Po Chu, and culled therefrom
the factual finding that the purported contract of sale had never been consummated
between the parties. The CA cited as basis her testimony from Civil Case No. Q-95-
22865: that she witnessed Felix signing the blank deed, and that upon its signing, there
was no payment for the property. This account directly contradicts petitioners’ claim that
payment was made simultaneously with the perfection of the contract.

Petitioners claim that the CA erroneously considered this testimony in Civil Case No. Q-
95-22865. They cite the general rule that courts are not authorized to take judicial notice
of the contents of the records of other cases. This rule, however, admits of exceptions. As
early as United States v. Claveria, this Court has stated: “In the absence of objection and
as a matter of convenience, a court may properly treat all or part of the original record of
a former case filed in its archives, as read into the record of a case pending before it,
when, with the knowledge of the opposing party, reference is made to it for that purpose
by name and number or in some other manner by which it is sufficiently designated.” [13]

We reiterated this stance in Adiarte v. Domingo,[14] in which the trial court decided the
action pending before it by taking judicial notice of the records of a prior case for a sum
of money. The Supreme Court affirmed the trial court’s dismissal of the Complaint, after
it considered evidence clearly showing that the subject matter thereof was the same as
that in the prior litigation. In a 1993 case, Occidental Land Transportation Company, Inc.
v. Court of Appeals, the Court ruled:

The reasons advanced by the respondent court in taking judicial notice of Civil Case No.
3156 are valid and not contrary to law. As a general rule, “courts are not authorized to
take judicial notice, in the adjudication of cases pending before them, of the contents of
the records of other cases, even when such cases have been tried or are pending in the
same court, and notwithstanding the fact that both cases may have been heard or are
actually pending before the same judge.” The general rule admits of exceptions as
enumerated in Tabuena v. Court of Appeals, the Court, citing U.S. v. Claveria, which We
quote:

x x x (I)n the absence of objection, and as a matter of convenience to all parties, a court
may properly treat all or any part of the original record of a case filed in its archives as
read into the record of a case pending before it, when, with the knowledge of the
opposing party, reference is made to it for that purpose, by name and number or in some
other manner by which it is sufficiently designated; or when the original record of the
former case or any part of it, is actually withdrawn from the archives by the court's
direction, at the request or with the consent of the parties, and admitted as a part of the
record of the case then pending.

It is clear, though, that this exception is applicable only when, ‘in the absence of
objection,’ ‘with the knowledge of the opposing party,’ or ‘at the request or with the
consent of the parties’ the case is clearly referred to or ‘the original or part of the
records of the case are actually withdrawn from the archives' and 'admitted as part of
the record of the case then pending.’

xxxx

And unlike the factual situation in Tabuena v. CA, the decision in Civil Case No.
3156 formed part of the records of the instant case (Civil Case No. 2728) with the
knowledge of the parties and in the absence of their objection. (Emphases supplied,
citations omitted).[15]

This doctrine was restated in Republic v. Sandiganbayan, viz: “As a matter of

convenience to all the parties, a court may properly treat all or any part of the original
record of a case filed in its archives as read into the record of a case pending before it,
when, with the knowledge of, and absent an objection from, the adverse party, reference
is made to it for that purpose, by name and number or in some other manner by which it
is sufficiently designated; or when the original record of the former case or any part of it,
is actually withdrawn from the archives at the court’s direction, at the request or with the
consent of the parties, and admitted as a part of the record of the case then
pending.”[16] (Underscoring supplied)

In the case at bar, as the CA rightly points out in its Resolution dated 28 November 2008,
[17]
 petitioners never objected to the introduction of the Transcript of Stenographic Notes
containing the testimony of Tan Po Chu, which were records of Civil Case No. Q-95-
22865. As shown by the records and as petitioners admitted in their Reply, the testimony
was already introduced on appeal before the RTC. In fact, it was petitioners themselves
who specifically cited Civil Case No. Q-95-22865, referring to it both by name and
number, purportedly to bolster the claim that they were constrained to sue, in order to
compel delivery of the title.[18]

Given these facts, the CA committed no reversible error in taking judicial notice of the
records of Civil Case No. Q-95-22865. In any case, the said testimony was not the only
basis for reversing the RTC’s Decision. Independent of the testimony, the CA – through
its perusal and assessment of other pieces of evidence, specifically the Deed of Absolute
Sale – concluded that petitioners’ stay on the premises had become unlawful.

Concerning the second issue, petitioners object to the assessment of the Deed of Sale by
the CA, claiming such a determination is improper in summary proceedings. It should be
noted that it was petitioners who introduced the Deed of Sale in evidence before the MTC
and the RTC, as evidence of their claimed right to possession over the property. They
attached the deed to their Answer as Annex “1.”19 The CA discovered that they falsified
their copy of the document denominated as Deed of Absolute Sale in this wise:

Said draft of the deed was undated and bears the signature of one witness, as can be
clearly noticed upon its very careful perusal. Notably, respondents made it appear in the
draft of the Deed of Absolute Sale that there indeed was a valid and consummated sale
when in truth and in fact, there was none. The document accomplished by the
respondents (herein petitioners) gave them some semblance, albeit highly questionable,
of ownership over the property by affixing their signatures, affixing the signature of one
Cora Hizon as witness and superimposing the signature of Jane Chan with that of one
Noralyn Collado.[20]

Batas Pambansa Blg. 129 states that when the defendant raises the question of ownership
in unlawful detainer cases and the question of possession cannot be resolved without
deciding the issue of ownership, the issue of ownership shall be resolved only to
determine the issue of possession.[21] This Court has repeatedly ruled that although the
issue in unlawful detainer cases is physical possession over a property, trial courts may
provisionally resolve the issue of ownership for the sole purpose of determining the issue
of possession.[22] “These actions are intended to avoid disruption of public order by those
who would take the law in their hands purportedly to enforce their claimed right of
possession. In these cases, the issue is pure physical or de facto possession, and
pronouncements made on questions of ownership are provisional in nature. The
provisional determination of ownership in the ejectment case cannot be clothed with
finality."[23]

Trial courts must necessarily delve into and weigh the evidence of the parties in order to
rule on the right of possession, as we have discussed in Sps. Esmaquel and Sordevilla v.
Coprada:

In unlawful detainer cases, the possession of the defendant was originally legal, as his
possession was permitted by the plaintiff on account of an express or implied contract
between them. However, defendant's possession became illegal when the plaintiff
demanded that defendant vacate the subject property due to the expiration or termination
of the right to possess under their contract, and defendant refused to heed such demand.

The sole issue for resolution in an unlawful detainer case is physical or material
possession of the property involved, independent of any claim of ownership by any of the
parties. Where the issue of ownership is raised by any of the parties, the courts may pass
upon the same in order to determine who has the right to possess the property. The
adjudication is, however, merely provisional and would not bar or prejudice an action
between the same parties involving title to the property. Since the issue of ownership was
raised in the unlawful detainer case, its resolution boils down to which of the parties'
respective evidence deserves more weight.[24] (Emphasis supplied, citations omitted.)

WHEREFORE, in view of the foregoing, we deny the instant Petition for lack of merit. 
The Decision of the Court of Appeals in CA-G.R. SP No. 100008 (dated 3 July 2008)
is AFFIRMED.

We make no pronouncement as to attorney's fees for lack of evidence.

SO ORDERED.

SECOND DIVISION
[ G.R. Nos. 173148, April 06, 2015 ]
ELSA DEGAYO, PETITIONER, VS. CECILIA MAGBANUA-DINGLASAN,
JOHNNY DINGLASAN, ASUNCION MAGBANUA-PORRAS, MARIANO
PASCUALITO AND AMADO JR., ALL SURNAMED MAGBANUA,
RESPONDENTS.

DECISION

BRION, J.:

Before us is the Petition for Review on Certiorari filed by the petitioner Elsa Degayo
(Degayo) under Rule 45 of the Rules of Court, assailing the Decision[1] dated November
7, 2005 and the Resolution[2] dated May 19, 2006 of the Court of Appeals (CA) in CA-
G.R, CV No. 62070.

The Factual Antecedents

The present case involves a property dispute, which gave rise to two civil cases for
ownership and damages between conflicting claimants over a parcel of land located on
the northeastern bank of Jalaud River. The respondents  Cecilia Magbanua-Dinglasan, 
Johnny Dinglasan, Pascualito Magbanua, Mariano Magbanua, Asuncion Magbanua-
Porras, Amado Magbanua Jr. (respondents) initiated the first civil case against Nicolas
Jarencio, Cesar Jarencio, Myrna Olmo, Fredercio Sumvilla, Herminio Sumvilla, Perpetuo
Larano and Angelo Larano, the tenants (tenants) of Lot No. 861. Degayo, on the other
hand, initiated the second civil case, which eventually reached this Court via the present
petition.
Records show that Lot No. 861 is a 36,864 sqm. parcel in the Cadastral Survey of Dingle,
Iloilo, covered by Transfer Certificate of Title (TCT) No. T-2804, registered in the name
of Degayo's deceased parents, spouses Marcelo Olmo and Rosalia Labana. Lot No.
861 used to be bounded on the southwest by the Jalaud River that serves to separate
Dingle from Pototan Iloilo.

On the other side of Jalaud River, opposite Lot No. 861, lies a 153,028 square meter
parcel of land, designated as Lot No. 7328 of the Cadastre of Pototan, Iloilo, collectively
owned by the respondents, covered under TCT No. T-84829. The Jalaud River, which
separates these parcels of land, thus flows along the northeast side of Lot 861 and the
southwest side of Lot No. 7328.

Sometime in the 1970's the Jalauad River steadily changed its course and moved
southwards towards the banks of Pototan, where Lot No. 7328 lies, leaving its old
riverbed dry. Eventually, the course of the Jalaud River encroached on Lot No. 7328. As
a result. Lot No. 7328 progressively decreased in size while the banks adjacent to
Lot No. 861 gradually increased in land area.

Degayo and the tenants believed that the area was an accretion to Lot No. 861. As a
result, her tenants, commenced cultivating and tilling that disputed area with corn and
tobacco. The area allegedly added to Lot No. 861 contains 52,528 sqm, broken down as
follows:

1. 26,106 sqm. Original abandoned river bed;

2. 26,419 sqm. resurfaced area of Lot No. 7328

The respondents, on the other hand, argued that the disputed property was an
abandoned riverbed, which should rightfully belong to them to compensate for the
erstwhile portion of Lot No. 7328, over which the Jalaud River presently runs.

On October 2, 1984, the respondents filed a complaint for ownership and damages
against the tenants, with the Regional Trial Court (RTC) of Iloilo, Branch 27,
entitled Cecilia Magbanua Dinglasan, et al. v. Nicolas Jarencio, et al, docketed as Civil
Case No. 16047. Degayo sought to intervene in Civil Case No. 16047 but her motion was
denied. Notably, Degayo never bothered to question the interlocutory order denying her
motion for intervention by filing a petition for certiorari. Instead, Degayo initiated the
present suit against the respondents for declaration of ownership with damages, also with
the RTC of Iloilo, Branch 22, docketed as Civil Case No. 18328, involving the disputed
parcel of land.

In her complaint, Degayo alleged to have acquired Lot No. 861 by inheritance by virtue
of a Quitclaim Deed and that she had been in possession of that land since 1954. She
likewise stressed that the area in dispute was an accretion to Lot No. 861.

Meanwhile, notwithstanding the previous denial of her motion to intervene in Civil Case
No. 16047, Degayo was able to participate in the proceedings therein as a witness for the
defense. In particular, during her direct examination, Degayo testified on the same
matters and raised the same arguments she alleged in her complaint in Civil Case
No. 18328, those are: that she acquired Lot No. 861 by inheritance by virtue of a
Quitclaim Deed; that she had been in possession of that land since 1954; and that
the area in dispute was an accretion to Lot No. 861

On May 7, 1996, the RTC of Iloilo, Branch 27, rendered its decision in Civil Case No.
16047, in favor of the respondents. The tenants promptly filed an appeal but they failed to
file an appeal brief, resulting to a dismissal of their appeal per resolution dated June 20,
1999.[3] The decision in Civil Case No. 16047 became final and executory on August
6, 1999.[4]

Meanwhile, in Civil Case No. 18328, the court, a quo, found in favor of Degayo and
declared the property in question as an accretion to Lot No. 861. The respondents filed a
motion for reconsideration but their motion was denied. Hence, the respondents filed an
appeal with the CA.

The CA Ruling

On November 7, 2005, the CA granted the respondents' appeal and reversed and set aside
the decision of the RTC Branch 22 in Civil Case No. 18328. In granting the appeal the
CA noted that the disputed properties are abandoned riverbeds. Being abandoned
riverbeds, the property in question rightfully belongs to the respondents as the owners of
the land now occupied by the Jalaud River.[5] The CA likewise noted that the previous
RTC Branch decision in Civil Case No. 16047 is conclusive to the title of the thing, being
an aspect of the rule on conclusiveness of judgment.[6]

Degayo sought a reconsideration of the CA Decision but the CA denied her motion in its
May 19, 2006 Resolution.[7] Aggrieved, Degayo filed the preset petition for review on
certiorari under Rule 45 with this Court.

The Petition and Comment

Degayo's petition is based on the following grounds/arguments:[8]

1. That the CA erred in declaring the disputed property as  an abandoned riverbed
and not an accretion to Lot 861;
 2. The CA erred in taking judicial notice of the RTC decision in Civil Case No.
16047, which was not even presented during the hearing of the present case;

3. The CA erred in declaring the RTC Branch 27 decision in Civil Case No. 16047
conclusive upon Degayo when she was not even a party in the said Civil Case.

In his Comment,[9] the respondents assert that the petition raised questions of fact which
are not proper issues to be raised in a petition for review on certiorari.[10] They also claim
that the essential requisites of accretion are not present.[11] Finally, the respondents claim
that the decision in Civil Case No. 16047 constitutes res judicata.[12]

THE COURT'S RULING

We deny the petition for lack of merit.

The Decision in Civil Case No. 16047

constitutes res judicata.

Res judicata literally means "a matter adjudged; a thing judicially acted upon or decided;
a thing or matter settled by judgment." It also refers to the "rule that a final judgment or
decree on the merits by a court of competent jurisdiction is conclusive of the rights of the
parties or their privies in all later suits on points and matters determined in the former
suit.[13] It rests on the principle that parties should not to be permitted to litigate the same
issue more than once; that, when a right or fact has been judicially tried and determined
by a court of competent jurisdiction, or an opportunity for such trial has been given, the
judgment of the court, so long as it remains unreversed, should be conclusive upon the
parties and those in privity with them in law or estate.[14]

This judicially created doctrine exists as an obvious rule of reason, justice, fairness,
expediency, practical necessity, and public tranquillity.[15] Moreover, public policy,
judicial orderliness, economy of judicial time, and the interest of litigants, as well as the
peace and order of society, all require that stability should be accorded judgments, that
controversies once decided on their merits shall remain in repose, that inconsistent
judicial decision shall not be made on the same set of facts, and that there be an end to
litigation which, without the doctrine of res judicata, would be endless.[16]

This principle cannot be overemphasized in light of our clogged dockets. As this Court
has aptly observed in Salud v. Court of Appeals:[17]

"The interest of the judicial system in preventing relitigation of the same dispute
recognizes that judicial resources are finite and the number of cases that can be heard by
the court is limited. Every dispute that is reheard means that another will be delayed. In
modern times when court dockets are filled to overflowing, this concern is of critical
importance. Res judicata thus conserves scarce judicial resources and promotes
efficiency in the interest of the public at large.

Once a final judgment has been rendered, the prevailing party also has an interest in the
stability of that judgment. Parties come to the courts in order to resolve controversies; a
judgment would be of little use in resolving disputes if the parties were free to ignore it
and to litigate the same claims again and again. Although judicial determinations are not
infallible, judicial error should be corrected through appeals procedures, not through
repeated suits on the same claim. Further, to allow relitigation creates the risk of
inconsistent results and presents the embarrassing problem of determining which of two
conflicting decisions is to be preferred. Since there is no reason to suppose that the
second or third determination of a claim necessarily is more accurate than the first, the
first should be left undisturbed.

In some cases the public at large also has an interest in seeing that rights and liabilities
once established remain fixed. If a court quiets title to land, for example, everyone should
be able to rely on the finality of that determination. Otherwise, many business
transactions would be clouded by uncertainty. Thus, the most important purpose of res
judicata is to provide repose for both the party litigants and the public. As the Supreme
Court has observed, "res judicata thus encourages reliance on judicial decision, bars
vexatious litigation, and frees the courts to resolve other disputes."

The doctrine of res judicata is set forth in Section 47 of Rule 39 of the Rules of Court,
which in its relevant part reads:

Sec. 47. Effect of judgments or final orders. — The effect of a judgment or final order
rendered by a court of the Philippines, having jurisdiction to pronounce the judgment or
final order, may be as follows:

xxxx

(b) In other cases, the judgment or final order is, with respect to the matter directly
adjudged or as to any other matter that could have been raised  in  relation thereto, 
conclusive  between  the  parties  and their successors in interest by title subsequent to the
commencement of the action or special proceeding, litigating for the same thing and
under the same title and in the same capacity; and

(c) In any other litigation between the same parties or their successors in interest, that
only is deemed to have been adjudged in a former judgment or final order which appears
upon its face to have been so adjudged, or which was actually and necessarily included
therein or necessary thereto.
This provision comprehends two distinct concepts of res judicata: (1) bar by former
judgment and (2) conclusiveness of judgment.

The first aspect is the effect of a judgment as a bar to the prosecution of a second action
upon the same claim, demand or cause of action.[18] In traditional terminology, this aspect
is known as merger or bar; in modern terminology, it is called claim preclusion. [19]

The second aspect precludes the relitigation of a particular fact of issue in another action
between the same parties on a different claim or cause of action. This is traditionally
known as collateral estoppel; in modern terminology, it is called issue preclusion. [20]

Conclusiveness of judgment finds application when a fact or question has been squarely
put in issue, judicially passed upon, and adjudged in a former suit by a court of competent
jurisdiction. The fact or question settled by final judgment or order binds the parties to
that action (and persons in privity with them or their successors-in-interest), and
continues to bind them while the judgment or order remains standing and unreversed by
proper authority on a timely motion or petition; the conclusively settled fact or question
furthermore cannot again be litigated in any future or other action between the same
parties or their privies and successors-in-interest, in the same or in any other court of
concurrent jurisdiction, either for the same or for a different cause of action. [21] Thus, only
the identities of parties and issues are required for the operation of the principle of
conclusiveness of judgment.[22]

While conclusiveness of judgment does not have the same barring effect as that of a bar
by former judgment that proscribes subsequent actions, the former nonetheless estops the
parties from raising in a later case the issues or points that were raised and controverted,
and were determinative of the ruling in the earlier case.[23] In other words, the dictum laid
down in the earlier final judgment or order becomes conclusive and continues to be
binding between the same parties, their privies and successors-in-interest, as long as the
facts on which that judgment was predicated continue to be the facts of the case or
incident before the court in a later case; the binding effect and enforceability of that
earlier dictum can no longer be re-litigated in a later case since the issue has already been
resolved and finally laid to rest in the earlier case.[24]

In the present case, it is beyond dispute that the judgment in Civil Case No. 16047 has
attained finality in view of the tenant's abandonment of their appeal to the CA. Moreover,
records show that that decision was adjudicated on the merits, i.e., it was rendered after a
consideration of the evidence or stipulations submitted by the parties at the trial of the
case[25] by a court which had jurisdiction over the subject matter and the parties.

We likewise find that there is an identity of parties in Civil Case No. 16047 and the
present case. There is identity of parties where the parties in both actions are the same, or
there is privity between them, or they are "successors-in-interest by title subsequent to the
commencement of the action, litigating for the same thing and under the same title and in
the same capacity.[26] Absolute identity of parties is not required, shared identity of
interest is sufficient to invoke the coverage of this principle.[27] Thus, it is enough that
there is a community of interest between a party in the first case and a party in the second
case even if the latter was not impleaded in the first case.[28]

It is not disputed that respondents were the plaintiffs in Civil Case No. 16047. Degayo,
however insists that she is not bound by the decision in Civil Case No. 16047 as she was
not made a party in that case. We, however, refuse to subscribe to this technical
interpretation of the Rules. In Torres v. Caluag,[29] we held that a real litigant may be held
bound as a party even if not formally impleaded because he had his day in court and
because her substantial rights were not prejudiced.

In that case, J. M. Tuazon & Co., Inc. (Tuason) commenced Civil Case No Q-3674 in the
Court of First Instance of Quezon City against Isidro Conisido to recover from him the
possession of a parcel of land. Conisido answered the complaint alleging, that he was
occupying the land in question as a mere tenant of Dominga Torres (Torres), who owned
both the land and the house thereon. Torres was not impleaded in the said case but she
nonetheless appeared as witness for Conisido and asserted her ownership over the
disputed property because she had purchased it from Eustaquio Alquiroz on October 20,
1951 and constructed a house thereon worth P500.00, which she had leased to Conisido
for a rental of P20.00 a month. The CFI eventually decided in favor of Tuason and that
decision became final and executory.

Subsequently, Torres filed a petition for certiorari with the Court to set aside the decision
of the CFI. In dismissing the petition, we ruled:

"x x x, it appears that Dominga Torres who, according to the defendant Conisido was the
true owner of the land in question, testified as his witness and asserted on the witness
stand that she was really the owner thereof because she had purchased it from Eustaquio
Alquiroz on October 20, 1951 and constructed a house thereon worth P500.00 which she
had leased to Conisido for a rental of P20.00 a month. In other words, petitioner herein
had really had her day in court and had laid squarely before the latter the issue of
ownership as between her, on one hand, and respondent Tuason, on the other.

xxx

In the present case, assisted heretofore, petitioner had the fullest opportunity to lay before
the court her claim but the same was overruled. The fact that she was not formally made a
party defendant in the case would appear therefore to be a mere technicality that would
not serve the interest of the administration of justice. As we have repeatedly held,
technicalities should be ignored when they do not serve the purpose of the law.
x x x"

In the present case, Degayo had the fullest opportunity to ventilate her accretion claim
Civil Case No. 16047. In her testimony, she asserted that she inherited Lot No. 861 from
her parents and that she has been in possession of that parcel of land since 1954. [30] She
further stressed that the disputed parcel of land has been occupied and tilled by her
tenants and that it was the result of the gradual and continuous deposit of the river.
[31]
 Notably, these are the same allegations that Degayo asserted in the present ease,
which have been previously considered and evaluated by the RTC Branch 27 in
Civil Case No. 16047.

Likewise, there exists a community of interest between Degayo and her tenants, who
were respondents in Civil Case No. 16047. One test to determine substantial identity of
interest would be to see whether the success or failure of one party materially affects the
other.[32] In the present case, Degayo is suing for the ownership of the disputed land.
Degayo's rights over the disputed land is predicated on the same defenses that his alleged
tenants interposed in Civil Case No. 16047, that is, their perceived rights which emanated
from the disputed accretion to Lot No. 861. The interests of Degavo and the tenants in
relation to the two cases are inextricably intertwined in that both their claims
emanate from a singular fundamental allegation of accretion.

Moreover, Degayo and the respondents are litigating the same properties subject of the
antecedent cases inasmuch as they claim better right of ownership. Degayo even admitted
this in her petition wherein she stated that "the land subject of Civil Case No. 16047 is
the same property subject of the case at bench."[33]

Notably, the ownership of the disputed parcel of land has been unequivocally settled
in Civil Case No. 16047. In ruling that the subject parcels of land belong to the
respondents, the RTC Branch 27 in Civil Case No. 16047 opined that the claim of
accretion has no valid basis.[34] What really happened was that the Jalaud River naturally
changed its course and moved southward. As a result, it abandoned its previous bed and
encroached upon a portion of Lot No. 7328. It further held that the claim of accretion
could not be sustained because the 26,419 sqm. portion is ostensibly within the metes and
bounds of Lot No. 7328, owned and registered in the name of the respondents.[35] On the
other hand, the 26,106 sqm. portion refers to an abandoned river bed, and is thus
governed by Article 461 of the Civil Code, which states that River beds which are
abandoned through the natural change in the course of the waters ipso facto belong to
the owners whose lands are occupied by the new course in proportion to the area lost.

The fact that the present cause of action is based on an accretion claim does not prevent
the application of res judicata. For, res judicata, under the concept of conclusiveness of
judgment, operates even if no absolute identity of causes of action exists. Res judicata, in
its conclusiveness of judgment concept, merely requires identity of issues. We thus agree
with the uniform view of the CA - on the application of conclusiveness of judgment to the
present case.

The CA may take judicial notice

of Civil Case No. 16047.

The taking of judicial notice is a matter of expediency and convenience for it fulfills the
purpose that the evidence is intended to achieve, and in this sense, it is equivalent to
proof.[36] Generally, courts are not authorized to "take judicial notice of the contents of the
records of other cases even when said cases have been tried or are pending in the same
court or before the same judge.[37]" While the principle invoked is considered to be the
general rule, this rule is not absolute. There are exceptions to this rule. In the case
of Tiburcio v PHHC,[38] this Court, citing Justice Moran, stated:

"In some instance, courts have taken judicial notice of proceedings in other
causes, because of their close connection with the matter in the controversy. Thus, in
a separate civil action against the administrator of an estate arising from an appeal against
the report of the committee on claims appointed in the administration proceedings of the
said estate, to determine whether or not the appeal was taken on time, the court took
judicial notice of the record of the administration proceedings. Courts have also taken
judicial notice of previous cases to determine whether or not the case pending is a
moot one or whether or not a previous ruling is applicable in the case under
consideration."

Moreover, Degayo's objection to the action of CA on this matter is merely technical

because Degayo herself repeatedly referred to the Civil Case No. 16047 in her
pleadings in Civil Case No. 18328 and even in her appellee's brief before the CA and
her petition for review before this Court. In particular, in her complaint, she stated that
her motion to intervene in Civil Case No. 16047, which was denied by the Court[39] The
existence of that case was likewise jointly stipulated by that parties in Civil Case No.
18328[40] and mentioned by the court a quo in its decision.[41] In her appellee's brief as
well, Degayo expressly referred to Civil Case No. 16047. In particular, she stated:

"The said Civil Case No. 16047 was for recovery of ownership and possession with
damages over the property subject of the instant case filed by the herein defendants-
appellants against [the tenants]"

She also referred to the decision in Civil Case No. 16047 in her appellee's brief. She
mentioned:
"In Civil Case No. 16047, the Court had ordered the deposit of 50% of the net produce of
the disputed portion that pertains to the owner, thus depriving the plaintiff of her share of
not less than Php 4,000.00 a year starting 1986, to the damage of plaintiff."

There was thus no denial of the existence and the decision in Civil Case No. 16047. In
fact, Degayo stated on record her full knowledge of Civil Case No. 16047 and clearly and
frequently referred to it in her pleadings, and sufficiently designated it by name,
parties, cause of action and docket number from the court a quo, to the CA and even
before this Court. Under the circumstances, the CA could certainly take judicial notice
of the finality of a judgment in Civil Case No. 16047. There was no sense in relitigating
issues that have already been passed upon in a previous civil case. That was all that was
done by the CA in decreeing the dismissal.

Certainly such an order is not contrary to law. As we aptly stated in Republic v. CA,
[42]
 citing Justice Edgardo L. Paras:

"A court will take judicial notice of its own acts and records in the same case, of facts
established in prior proceedings in the same case, of the authenticity of its own records of
another case between the same parties, of the files of related cases in the same court, and
of public records on file in the same court. In addition judicial notice will be taken of the
record, pleadings or judgment of a case in another court between the same parties or
involving one of the same parties, as well as of the record of another case between
different parties in the same court."

Lastly, there is another equally compelling consideration. Degayo undoubtedly had

recourse to a remedy which under the law then in force could be availed of, which is to
file a petition for certiorari with the CA. It would have served the cause of justice better,
not to mention the avoidance of needless expense on her part and the vexation to which
the respondents were subjected if she did reflect a little more on the matter.

With the conclusion that Civil Case No. 16047 constitutes res judicata on the present
case, we see no reason to engage in a discussion on the factual issues raised by the
petitioner for they have been passed upon and considered in Civil Case No. 16047.

WHEREFORE, premises considered, we DENY the petition for lack of merit. Costs

against the petitioner.

SO ORDERED.

SECOND DIVISION
[ G.R. No. 198172, January 25, 2016 ]
 REGULUS DEVELOPMENT, INC., PETITIONER, VS. ANTONIO DELA
CRUZ, RESPONDENT.

DECISION

BRION, J.:

Before us is a petition for review on certiorari filed by petitioner Regulus

Development, Inc. (petitioner) to challenge the November 23, 2010 decision[1] and
August 10, 2011 resolution[2] of the Court of Appeals (CA) in CA-G.R. SP No. 105290. CA
Associate Justice Juan Q. Enriquez, Jr. penned the rulings, concurred in by Associate
Justices Ramon M. Bato, Jr. and Florito S. Macalino.

ANTECEDENT FACTS

The petitioner is the owner of an apartment (San Juan Apartments) located at San Juan
Street, Pasay City. Antonio dela Cruz (respondent) leased two units (Unit 2002-A and
Unit 2002-B) of the San Juan Apartments in 1993 and 1994. The contract of lease for
each of the two units similarly provides a lease period of one (1) month, subject to
automatic renewals, unless terminated by the petitioner upon written notice.

The petitioner sent the respondent a letter to terminate the lease of the two subject
units. Due to the respondent's refusal to vacate the units, the petitioner filed a
complaint[3] for ejectment before the Metropolitan Trial Court (MTC) of Pasay City,
Manila, on May 1, 2001.

The MTC resolved the case in the petitioner's favor and ordered the respondent
to vacate the premises, and pay the rentals due until the respondent actually complies.
[4]

The respondent appealed to the Regional Trial Court (RTC). Pending appeal, the
respondent consigned the monthly rentals to the RTC due to the petitioner's refusal to
receive the rentals.

The RTC affirmed[5] the decision of the MTC in toto and denied the motion for
reconsideration filed by the respondent.
CA-G.R. SP No. 69504: Dismissal of Ejectment Case

In a Petition for Review filed by the respondent, the CA reversed the lower courts'
decisions and dismissed the ejectment case.[6] On March 19, 2003, the dismissal of the
case became final and executory.[7]

Orders dated July 25, 2003 and November 28, 2003 for payment of rentals due under
lease contracts

The petitioner filed a motion (to withdraw funds deposited by the defendant-appellant
as lessee)[8] praying for the withdrawal of the rentals consigned by the respondent with
the RTC.

In an order dated July 25, 2003,[9] the RTC granted the petitioner's motion. The RTC
explained that the effect of the complaint's dismissal would mean that there was no
complaint filed at all. The petitioner, however, is entitled to the amount of rentals for
the use and occupation of the subject units, as provided in the executed contracts of
lease and on the basis of justice and equity.

The court denied the respondent's motion for reconsideration[10] in an order dated
November 28, 2003.[11]

On the petitioner's motion, the RTC issued a writ of execution on December 18, 2003, to
cause the enforcement of its order dated July 25, 2003. [12]

CA-G.R. SP No. 81277: Affirmed RTC Orders

The respondent filed a petition for certiorari under Rule 65 before the CA to assail the
RTC Orders dated July 25, 2003 and November 28, 2003 (RTC orders), which granted the
petitioner's motion to withdraw funds.

The CA dismissed[13] the petition and held that the assailed RTC Orders were issued
pursuant to its equity jurisdiction, in accordance with Section 5, Rule 39,[14] and Rules
5[15] and 6[16] of Rule 135 of the Rules of Court. The respondent's motion for
reconsideration was similarly denied.

G.R. SP No. 171429: Affirmed CA Ruling on RTC Orders

The respondent filed a petition for review on certiorari before this Court to assail the
decision of the CA in CA-G.R. SP No. 81277. In a resolution dated June 7, 2006,[17] we
denied the petition for insufficiency in form and for failure to show any reversible error
committed by the CA.

Our resolution became final and executory and an entry of judgment [18] was issued.

Execution of RTC Orders

The petitioner returned to the RTC and moved for the issuance of a writ of execution to
allow it to proceed against the supersedeas bond the respondent posted, representing
rentals for the leased properties from May 2001 to October 2001, and to withdraw the
lease payments deposited by respondent from November 2001 until August 2003.
[19]
 The RTC granted the motion.[20]

The RTC issued an Alias Writ of Execution[21] dated April 26, 2007, allowing the
withdrawal of the rental deposits and the value of the supersedeas bond.

The petitioner claimed that the withdrawn deposits, supersedeas bond, and payments

directly made by the respondent to the petitioner, were insufficient to cover rentals due
for the period of May 2001 to May 2004. Hence, the petitioner filed a manifestation and
motion[22] dated October 23, 2007, praying that the RTC levy upon the respondent's
property covered by Transfer Certificate of Title (TCT) No. 136829 to satisfy the
judgment credit.

The RTC granted the petitioner's motion in an order dated June 30, 2008.[23] The
respondent filed a motion for reconsideration which was denied by the RTC in an order
dated August 26, 2008.[24]

CA-G.R. SP No. 105290: Assailed the levy of the respondent's property

On October 3, 2008, the respondent filed with the CA a Petition for Certiorari [25] with
application for issuance of a temporary restraining order. The petition sought to nullify
and set aside the orders of the RTC directing the levy of the respondent's real property.
The CA dismissed the petition. Thereafter, the respondent filed a motion for
reconsideration[26] dated November 3, 2008.
Pursuant to the order dated June 30, 2008, a public auction for the respondent's
property covered by TCT No. 136829 was held on November 4, 2008, [27] where the
petitioner was declared highest bidder. Subsequently, the Certificate of Sale [28] in favor
of the petitioner was registered.

Meanwhile, on January 7, 2010, the respondent redeemed the property with the RTC
Clerk of Court, paying the equivalent of the petitioner's bid price with legal interest. The
petitioner filed a motion to release funds[29] for the release of the redemption price paid.
The RTC granted[30] the motion.

On February 12, 2010, the respondent filed a manifestation and motion [31] before the CA
to withdraw the petition for the reason that the redemption of the property and release
of the price paid rendered the petition moot and academic.

Thereafter, the petitioner received the CA decision dated November 23, 2010, which
reversed and set aside the orders of the RTC directing the levy of the respondent's
property. The CA held that while the approval of the petitioner's motion to withdraw
the consigned rentals and the posted supersedeas bond was within the RTC's
jurisdiction, the RTC had no jurisdiction to levy on the respondent's real property.

The CA explained that the approval of the levy on the respondent's real property could
not be considered as a case pending appeal, because the decision of the MTC had
already become final and executory. As such, the matter of execution of the judgment
lies with the MTC where the complaint for ejectment was originally filed and presented.

The CA ordered the RTC to remand the case to the MTC for execution. The petitioner
filed its motion for reconsideration which was denied [32] by the CA.

THE PETITION

The petitioner filed the present petition for review on certiorari to challenge the CA
ruling in CA-G.R. SP No. 105290 which held that the RTC had no jurisdiction to levy on
the respondent's real property.

The petitioner argues: first, that the RTC's release of the consigned rentals and levy
were ordered in the exercise of its equity jurisdiction; second, that the respondent's
petition in CA-G.R. SP No. 105290 was already moot and academic with the conduct of
the auction sale and redemption of the respondent's real property; third, that the
petition in CA-G.R. SP No. 105290 should have been dismissed outright for lack of
signature under oath on the Verification and Certification against Forum Shopping.

The respondent duly filed its comment[33] and refuted the petitioner's arguments. On
the first argument, respondent merely reiterated the CA's conclusion that the RTC had
no jurisdiction to order the levy on respondent's real property as it no longer falls under
the allowed execution pending appeal. On the second argument, the respondent
contended that the levy on execution and sale at public auction were null and void,
hence the CA decision is not moot and academic. On the third argument, the
respondent simply argued that it was too late to raise the alleged formal defect as an
issue.

THE ISSUE

The petitioner poses the core issue of whether the RTC had jurisdiction to levy on the
respondent's real property.

OUR RULING

We grant the petition.

Procedural issue: Lack of notarial seal on the Verification and Certification against
Forum Shopping is not fatal to the petition.

The petitioner alleged that the assailed CA petition should have been dismissed since
the notary public failed to affix his seal on the attached Verification and Certification
against Forum Shopping.

We cannot uphold the petitioner's argument.

The lack of notarial seal in the notarial certificate[34] is a defect in a document that is
required to be executed under oath.

Nevertheless, a defect in the verification does not necessarily render the pleading fatally
defective. The court may order its submission or correction, or act on the pleading if the
attending circumstances are such that strict compliance with the Rule may be dispensed
with in order that the ends of justice may be served. [35]
Noncompliance or a defect in a certification against forum shopping, unlike in the case
of a verification, is generally not curable by its subsequent submission or correction,
unless the covering Rule is relaxed on the ground of "substantial compliance" or based
on the presence of "special circumstances or compelling reasons." [36] Although the
submission of a certificate against forum shopping is deemed obligatory, it is not
however jurisdictional.[37]

In the present case, the Verification and Certification against Forum Shopping were in
fact submitted. An examination of these documents shows that the notary public's
signature and stamp were duly affixed. Except for the notarial seal, all the requirements
for the verification and certification documents were complied with.

The rule is that courts should not be unduly strict on procedural lapses that do not really
impair the proper administration of justice. The higher objective of procedural rules is to
ensure that the substantive rights of the parties are protected. Litigations should, as
much as possible, be decided on the merits and not on technicalities. Every party-litigant
must be afforded ample opportunity for the proper and just determination of his case,
free from the unacceptable plea of technicalities. [38]

The CA correctly refused to dismiss and instead gave due course to the petition as it
substantially complied with the requirements on the Verification and Certification
against Forum Shopping.

An issue on jurisdiction prevents the petition from becoming "moot and academic."

The petitioner claims that the assailed CA petition should have been dismissed because
the subsequent redemption of the property by the respondent and the release of the
price paid to the petitioner rendered the case moot and academic.

A case or issue is considered moot and academic when it ceases to present a justiciable
controversy because of supervening events, rendering the adjudication of the case or
the resolution of the issue without any practical use or value. [39] Courts generally decline
jurisdiction over such case or dismiss it on the ground of mootness except when, among
others, the case is capable of repetition yet evades judicial review. [40]

The CA found that there is an issue on whether the RTC had jurisdiction to issue the
orders directing the levy of the respondent's property. The issue on jurisdiction is a
justiciable controversy that prevented the assailed CA petition from becoming moot and
academic.

It is well-settled in jurisprudence that jurisdiction is vested by law and cannot be

conferred or waived by the parties. "Even on appeal and even if the reviewing parties
did not raise the issue of jurisdiction, the reviewing court is not precluded from ruling
that the lower court had no jurisdiction over the case." [41]

Even assuming that the case has been rendered moot due to the respondent's
redemption of the property, the CA may still entertain the jurisdictional issue since it
poses a situation capable of repetition yet evading judicial review.

Under this perspective, the CA correctly exercised its jurisdiction over the petition.

Equity jurisdiction versus appellate jurisdiction of the RTC

The appellate jurisdiction of courts is conferred by law. The appellate court acquires
jurisdiction over the subject matter and parties when an appeal is perfected. [42]

On the other hand, equity jurisdiction aims to provide complete justice in cases where a
court of law is unable to adapt its judgments to the special circumstances of a case
because of a resulting legal inflexibility when the law is applied to a given situation. The
purpose of the exercise of equity jurisdiction, among others, is to prevent unjust
enrichment and to ensure restitution.[43]

The RTC orders which allowed the withdrawal of the deposited funds for the use and
occupation of the subject units were issued pursuant to the RTC's equity jurisdiction, as
the CA held in the petition docketed as CA-G.R. SP No. 81277.

The RTC's equity jurisdiction is separate and distinct from its appellate jurisdiction on
the ejectment case. The RTC could not have issued its orders in the exercise of its
appellate jurisdiction since there was nothing more to execute on the dismissed
ejectment case. As the RTC orders explained, the dismissal of the ejectment case
effectively and completely blotted out and cancelled the complaint. Hence, the RTC
orders were clearly issued in the exercise of the RTC's equity jurisdiction, not on the
basis of its appellate jurisdiction.
This Court takes judicial notice[44] that the validity of the RTC Orders has been upheld in
a separate petition before this Court, under G.R. SP No. 171429 entitled Antonio Dela
Cruz v. Regulus Development, Inc.

The levy of real property was ordered by the RTC in the exercise of its equity
jurisdiction.

The levy of the respondent's property was made pursuant to the RTC orders issued in
the exercise of its equity jurisdiction, independent of the ejectment case originally filed
with the MTC.

An examination of the RTC order dated June 30, 2008, directing the levy of the
respondent's real property shows that it was based on the RTC order dated July 25,
2003. The levy of the respondent's property was issued to satisfy the amounts due
under the lease contracts, and not as a result of the decision in the ejectment case.

The CA erred when it concluded that the RTC exercised its appellate jurisdiction in the
ejectment case when it directed the levy of the respondent's property.

Furthermore, the order to levy on the respondent's real property was consistent with
the first writ of execution issued by the RTC on December 18, 2003, to implement the
RTC orders. The writ of execution states that:
xxx In case of [sic] sufficient personal property of the defendant cannot be found
whereof to satisfy the amount of the said judgment, you are directed to levy [on] the
real property of said defendant and to sell the same or so much thereof in the manner
provided by law for the satisfaction of the said judgment and to make return of your
proceedings together with this Writ within sixty (60) days from receipt hereof.
(emphasis supplied)
The subsequent order of the RTC to levy on the respondent's property was
merely a reiteration and an enforcement of the original writ of execution issued.

Since the order of levy is clearly rooted on the RTC Orders, the only question that needs
to be resolved is which court has jurisdiction to order the execution of the RTC orders.

The RTC, as the court of origin, has jurisdiction to order the levy of the respondent's
real property.
Execution shall be applied for in the court of origin, in accordance with Section 1, [45] Rule
39 of the Rules of Court.

The court of origin with respect to the assailed RTC orders is the court which issued
these orders. The RTC is the court with jurisdiction to order the execution of the issued
RTC orders.

Hence, the petitioner correctly moved for the issuance of the writ of execution and levy
of the respondent's real property before the RTC as the court of origin.

WHEREFORE, we hereby GRANT the petition for review on certiorari. The decision dated

November 23, 2010, and the resolution dated August 10, 2011, of the Court of Appeals
in CA-G.R. SP No. 105290 are hereby REVERSED and SET ASIDE. The orders dated June
30, 2008, and August 26, 2008, of Branch 108 of the Regional Trial Court of Pasay City,
are hereby REINSTATED. Costs against respondent Antonio dela Cruz.

SO ORDERED.

THIRD DIVISION
[ G.R. No. 186635, January 27, 2016 ]
REPUBLIC OF THE PHILIPPINES, PETITIONER,

UNIVERSITY OF THE PHILIPPINES, OPPOSITOR, VS. SEGUNDINA

ROSARIO, JOINED BY ZUELLGATE CORPORATION, RESPONDENTS.

DECISION

PEREZ, J.:

Assailed in the present petition for review on certiorari is the Decision [1] dated
October 17, 2008 and the Resolution[2] dated February 10, 2009 of the Court of Appeals
in CA-G.R. CV No. 85519, which affirmed the Decision[3] dated January 5, 2004 of the
Regional Trial Court (RTC) of Quezon City, and in effect ordered the reconstitution of
Transfer Certificate of Title (TCT) No. 269615 in the name of respondent Segundina
Rosario (Rosario).

Factual Background

The property subject of the present controversy is located in the Diliman campus of the
University of the Philippines, and is now the site of various buildings and structures
along Commonwealth Avenue, including the PHILCOA Wet Market, the Asian Institute of
Tourism, the Philippine Social Sciences Building, the National Hydraulic Center, the UP
Sewerage Treatment Plant, the Petron Gas Station, the UP Arboretum, the Campus
Landscaping Office, the Philippine Atomic Energy Commission Building, the INNOTECH
Building, and the UP-Ayala Land TechnoHub.[4]

On November 12, 1997, respondent Rosario filed a petition for the reconstitution of TCT
No. 269615 before the Regional Trial Court of Quezon City (RTC), claiming that her title
covers lots 42-A-l, 42-A-2 and 42-A-3 of subdivision plan Psd 77362 and Psd 4558. [5] This
petition was docketed as LRC No. Q-9885 (97).

As summarized by the Court of Appeals, to support respondent Rosario's claim: [6]

[S]he presented the owner's duplicate copy of said title (TCT No. 269615) and a
certification issued by Atty. Samuel Cleofe of the Register of Deeds of Quezon City to
prove that the original copy of said title was among those burned during the fire that
razed the Quezon City Hall on 11 June 1998. In addition, she presented a sketch plan of
the subject piece of land, which was recorded in the Bureau of Lands and Tax Bill
Receipt Nos. 52768, 63268 and 442447, together with a certification issued by the City
Treasurer of Quezon City stating that she paid all the real property taxes due on the
subject piece of land. Lastly, she maintained that she is in possession of the subject
piece of land through a caretaker named Linda Salvacion.

Petitioner Republic of the Philippines (Republic) and oppositor University of the

Philippines (UP) opposed the petition. They contend that the documents presented by
respondent Rosario are of suspicious authenticity and, more importantly, that the land
supposedly covered by TCT No. 269615 is already covered by RT-58201 (192687) and
RT-107350 (192689) in the name of UP. As condensed by the Court of Appeals: [7]

xxx. The Republic presented several witnesses: 1) Benjamin Bustos, the Chief of
the reconstitution division of the Land Registration Authority (LRA), testified that based
on a land cross section using available documents, TCT No. 269615 overlapped with the
land titles registered in the name of UP; 2) Emilio Pugongan, from the LRA, testified that
TCT No. 269615 was located within the tract of land owned by UP; 3) Anthony Pulmano,
an assistant to the OIC of the Real Estate Division of Quezon City's Treasurer's Office,
testified that the City Treasurer's Office prepared a report signed by one Alfredo Cortes
stating that one of the receipts presented by petitioner Segundina to prove that she
paid realty tax was genuine but it was not validated and that Director Casiano Cristobal
told Cortes that the signature purportedly appearing in the receipt was not Cristobal's
signature; 4) Henry Pacis, a member of the survey division of the Land Management
Services of the Department of Environment and Natural Resources (DENR), testified that
he conducted a study of the survey plan submitted by petitioner Segundina, the results
of which were embodied in a certification signed by the DENR Regional Director
Mamerto Infante stating that Psd 77362 is not available in the records of the DENR; and
5) Teofista Pajara, the Chief of the Assessment Record and Management Division of
Quezon City's Treasurer's Office, testified that she studied Tax Declaration 12158 and
found that said declaration is actually in the name of Tecla Gutierrez and that a copy of
the same declaration in the name of petitioner Segundina does not exist in her files.

Oppositor UP argued that the petition for reconstitution was a collateral attack on the
land titles registered in its name and if granted, will cause it prejudice. UP presented its
records custodian who testified that TCT No. 269615 and TCT Nos. 192687 and 192689,
both in the name of UP, are overlapping.

Proceedings before the RTC

Respondent Rosario testified in support of her petition. She presented her owner's
duplicate copy of title, a Certification issued by the Register of Deeds of Quezon City to
the effect that the original copy of TCT No. 269615 was among those burned in the fire
of June 11, 1998, the supposed original of her 1980 Tax Declaration No. 12158 to show
that the land declared thereunder was covered by TCT No. 269615, as well as a sketch
plan of the subject land.

During respondent Rosario's testimony, the Republic's counsel noted that the supposed
original tax declaration presented by respondent Rosario did not match the photocopy
of the tax declaration attached in the petition as the latter did not state that the land it
described was covered by TCT No. 269615. Respondent Rosario was not able to explain
this discrepancy.[8]
Moreover, UP's counsel also noted that when respondent Rosario presented the original
microfilm copy of her sketch plan for marking, it contained the annotations "NOT FOR
REGISTRATION OR TITLING," and was for "reference only," but the photocopy presented
by her to be marked and offered in evidence did not contain said annotations. Again,
respondent Rosario failed to explain this discrepancy. [9]

For their part, the Republic and UP presented public officers of various government
agencies like the Land Registration Authority (LRA), the Department of Environment and
Natural Resources-Land Management Bureau (DENR-LMB)', the Quezon City Assessor's
Office, and the Quezon City Treasurer's Office to prove that the land supposedly covered
by TCT No. 269615 is located within the tract of land owned and registered in the name
of UP, that Psd 77362 is not available in the records of the DENR, and that Tax
Declaration No. 12158 is in the name of one Tecla Gutierrez and not in respondent
Rosario's name.

The RTC granted reconstitution. The dispositive portion of the Decision dated January 5,
2004, reads:[10]

WHEREFORE, the above premises considered, the Register of Deeds of Quezon

City is hereby ordered to reconstitute in its records the original TCT No. 269615 in the
name of the Petitioner Segundina Rosario WITHOUT PREJUDICE to an existing or better
title over the same lot covered thereby.

SO ORDERED.

The Republic and UP appealed before the Court of Appeals.

In 2004, respondent Rosario died. Respondent Zuellgate Corporation moved to

substitute or join CA-G.R. CV No. 85519, alleging that it acquired the lots covered by TCT
No. 269615 from respondent Rosario by virtue of a Deed of Absolute Sale notarized in
2003.

Proceedings before the Court of Appeals

In the Decision dated October 17, 2008, the Court of Appeals affirmed the RTC in this
wise:[11]
 WHEREFORE, in view of the foregoing, the decision of the Regional Trial Court of
Quezon City (Branch 101) in LRC Case No. Q-9885(97) ordering the reconstitution of
Transfer Certificate of Title (TCT) No. 269615 in the name of petitioner Segundina
Rosario is AFFIRMED.

SO ORDERED.

The Court of Appeals held that as the case was one for reconstitution of title, it does not
pass upon the ownership of the land covered by the lost or destroyed title, and thus, the
RTC was correct in ordering the reconstitution of TCT No. 269615 on the basis of the
owner's duplicate copy of the title presented by respondent Rosario.

The appellate court further held that the petition for reconstitution filed by respondent
Rosario cannot be said to have attacked, collaterally or otherwise, the titles of UP
because the latter failed to sufficiently prove the existence of its title over the subject
land.

Issues

In the present petition, petitioner raises the following issues:  [12]

I.

WHETHER OR NOT THE COURT OF APPEALS ERRED IN AFFIRMING THE DECISION OF

THE TRIAL COURT, WHICH ORDERED THE RECONSTITION (sic) OF TCT NO. 269615 IN
FAVOR OF SEGUNDINA ROSARIO, DESPITE THE FRAUDULENT NATURE OF SAID TCT.

II.

WHETHER OR NOT OTHER DOCUMENTS ADDUCED IN EVIDENCE BY SEGUNDINA

ROSARIO SUPPORT THE RECONSTITUION (sic) OF TCT NO. 269615 IN HER FAVOR.

III.

WHETHER OR NOT THE DECISIONS AND RESOLUTIONS OF THE TRIAL COURT AND OF
THE COURT OF APPEALS ORDERING THE RECONSTITUTION OF TCT NO. 269615 ARE
CONTRARY TO THE DECISIONS OF THE SUPREME COURT ON THE INDEFEASIBILITY OF
THE TITLES OF THE UNIVERSITY OF THE PHILIPPINES.
 Our Ruling

The petition is meritorious.

A reconstitution of title is the re-issuance of a new certificate of title lost or destroyed in

its original form and condition. Indeed, it does not pass upon the ownership of the land
covered by the lost or destroyed title. Nonetheless, in Republic of the Philippines v.
Pasicolan,[13] the Court has cautioned against treating petitions for reconstitution as a
mere ministerial task, to wit:

[G]ranting Petitions for Reconstitution is not a ministerial task. It involves diligent

and circumspect evaluation of the authenticity and relevance of all the evidence
presented, lest the chilling consequences of mistakenly issuing a reconstituted title
when in fact the original is not truly lost or destroyed.

In Cañero v. UP,[14] a petition for reconstitution was similarly filed to reconstitute TCT No.
240042, the original of which was also allegedly razed in the fire of June 11, 1998, and
for which petitioners therein also presented an alleged owner's duplicate copy. The
petition being unopposed, the RTC ordered reconstitution. Sometime later, petitioners
therein filed an action to quiet title against UP on the strength of said reconstituted title.
When the case reached this Court, we ruled that the reconstituted title and the
proceedings from which it hailed are void. We ratiocinated:

R.A. No. 26 provides for a special procedure for the reconstitution of Torrens
certificates of title that are missing but not fictitious titles or titles which are existing. It
is an absolute absurdity to reconstitute existing certificates of title that are on file and
available in the registry of deeds. If we were to sustain petitioner's stance, the
establishment of the Torrens system of land titling would be for naught, as cases dealing
with claims of ownership of registered land would be teeming like worms coming out of
the woodwork, xxx.[15]

The indefeasibility of the titles of the University of the Philippines over its landholdings
has been affirmed both by law and jurisprudence.

Clearly, the Court of Appeals erred in its observation that UP failed to sufficiently prove
the existence of its title over the subject land. UP's titles over its landholdings are
recognized and confirmed both by law and jurisprudence.
Section 22 of Republic Act No. 9500 (R.A. 9500)[16] is explicit:

SEC. 22. Land Grants and Other Real Properties of the University. —

xxxx

(b) Such parcels of land ceded by law, decree or presidential issuance to the University
of the Philippines are hereby declared to be reserved for the purposes intended. The
absolute ownership of the national university over these landholdings, including those
covered by original and transfer certificates of title in the name of the University of
the Philippines and their future derivatives, is hereby confirmed. Where the issuance
of proper certificates of title is yet pending for these landholdings, the appropriate
government office shall expedite the issuance thereof within six months from the date
of effectivity of this Act: Provided, That all registration requirements necessary for the
issuance of the said titles have been submitted and complied with[.] (Emphasis
supplied.)

In the case at bar, the Republic and UP were able to establish that TCT No. 269615
overlaps with two valid and existing certificates of title in the name of UP, namely TCT
Nos. RT-107359 (192689) and RT-58201 (192687). The LRA Report with Attached Sketch
Plan dated December 10, 1998 issued by Atty. Benjamin Bustos, Chief of the
Reconstitution Division of the LRA reads: [17]

The technical description of Lots 42-A-l, 42-A-2 and 42-A-3, all of Psd-77362,
appearing on the xerox copy of TCT No. 269615, when plotted on our Municipal Index
Sheet Nos. 4437-C and 4436-A, were found to overlap as follows:
1. Lot 42-A-l overlaps Lot 42-A-C-8 & Lot 42-C-9, (LRC)Psd-174313;
2. Lot 42-A-2 overlaps Lot 42-C-9 & Lot 42-C-10, (LRC) Psd-174313;
3. Lot 42-A-3 is totally inside Lot 42-C-10, (LRC) Psd- 174313.
Lot 42-C-8, (LRC) Psd-174313 is among three parcels of land covered bv TCT No.
192687, in the name of the University of the Philippines. Lot 42-C-9 & Lot 42-C-10,
(LRC) Psd-174313 are both covered bv TCT No. 192689, also registered in the name of
the University of the Phillippines.

For reference, see attached sketch plan SK-No. 98-08.

WHEREFORE, this report is respectfully submitted for the information of the Honorable
Court and with the recommendation that the instant petition be dismissed. (Emphasis
supplied.)

These findings were corroborated by the Official Report of OIC Regional Technical
Director Mamerto Infante of the LMB-DENR-NCR, which states:

However, per computed geographic position of Lots 42-A-l, 42-A-2 and 42-A-3,
based on the xerox copy of TCT No. 269615 submitted by your office, these lots fall on
CM 14 deg. 39" N.I21 deg. 03'E. Sec. 1 and 2 Barangay U.P. Campus, Land Use Map 1978
and overlapped Swo-13-000340 and (LRC) Psd-174313 Lots 42-C-10, 42-C-7, 42-C-8 and
42-C-9. We therefore, plotted subject lots mentioned in TCT No. 269615 in a blue print
copy of Swo-13-000340 for your reference.[18] (Emphasis supplied.)

These reports were duly offered in evidence; thus, the RTC and the Court of Appeals
should have taken judicial notice of the various jurisprudence upholding UP's
indefeasible title over its landholdings.

Citing Tiburcio, et al. v. PHHC, et al.,[19] Galvez v. Tuason,[20] People's Homesite & Housing

Corporation (PHHC) v. Mencias,[21] and Varsity Hills, Inc. v. Mariano,[22] the Court
emphasized in Heirs of Pael v. CA[23] that the titles of UP over its landholdings have
become incontrovertible so that courts are precluded from looking anew into their
validity. The Court expounded:

It is judicial notice that the legitimacy of UP's title has been settled in several
other cases decided by this Court. The case of Tiburcio, et al. vs. People 's Homesite &
Housing Corp. (PHHC), et al. was an action for reconveyance of a 430-hectare lot in
Quezon City, filed by the heirs of Eladio Tiburcio against PHHC and UP.  A portion of the
disputed land was covered by TCT No. 1356 registered in the name of PHHC and another
portion was covered by TCT No. 9462 registered in the name of UP. Affirming the
validity of TCT No. 1356 and TCT No. 9462, this Court ruled:
xxx the land in question has been placed under the operation of the Torrens
system since 1914 when it has been originally registered in the name of defendant's
predecessor-in-interest. It further appears that sometime in 1955 defendant People's
Homesite & Housing Corporation acquired from the original owner a parcel of land
embracing practically all of plaintiffs property for which Transfer Certificate of Title No.
1356 was issued in its favor, while defendant University of the Philippines likewise
acquired from the same owner another portion of land which embraces the remainder
of the property for which Transfer Certificate of Title No. 9462 was issued in its favor. It
is, therefore, clear that the land in question has been registered in the name of
defendant's predecessor-in-interest since 1914 under the Torrens system and that
notwithstanding what they now claim that the original title lacked the essential
requirements prescribed by law for their validity, they have never taken any step to
nullify said title until 1957 when they instituted the present action. In other words, they
allowed a period of 43 years before they woke up to invoke what they claim to be
erroneous when the court decreed in 1914 the registration of the land in the name of
defendants' predecessor-in-interest. Evidently, this cannot be done for under our law
and jurisprudence, a decree of registration can only be set aside within one year after
entry on the ground of fraud provided no innocent purchaser for value has acquired the
property.

Thus, this Court held that the decree of registration in the name of the predecessor-in-
interest of PHHC and UP, as well as the titles issued pursuant thereto have become
incontrovertible.

This Court again affirmed the validity and indefeasibility of UP's title in the case
of Galvez vs. Tuason, where Maximo Galvez and the heirs of Eladio Tiburcio sought the
recovery of a parcel of land in Quezon City registered under the names of Mariano
Severo, Maria Teresa Eriberta, Juan Jose, Demetrio Asuncion, Augusto Huberto, all
surnamed Tuason y de la Paz, UP, and PHHC. This is the same land subject of the
controversy in Tiburcio vs. PHHC. This Court held in Galvez that the question of
ownership of the disputed land has been thrice settled definitely and conclusively by the
courts: first, in the proceedings for the registration of the property in the name of the
Tuasons; second, in the application filed by Marcelino Tiburcio with the Court of First
Instance of Rizal for registration of the disputed property in his name which was
dismissed by said court; and third, in the action for reconveyance filed by the heirs of
Eladio Tiburcio against PHHC and UP which was also dismissed by the court, which
dismissal was affirmed by this Court in Tiburcio vs. PHHC. We held that the issue of
ownership of the property was already beyond review.

The rulings in Tiburcio vs. PHHC and Galvez vs. Tuason were reiterated by this Court
in PHHC vs. Mencias and Varsity Hills vs. Mariano.

xxxx

Finally, it should be emphasized that this Court's Decision in Tiburcio, ct al. vs. PHHC,
as well as in the subsequent cases upholding the validity and indefeasibility of the
certificate of title covering the UP Diliman Campus, precludes the courts from looking
anew into the validity of UP's title, xxx[24]

Section 1, Rule 129 of the Rules of Court[25] mandates that a court shall take judicial
notice, without the introduction of evidence, of the official acts of the legislative,
executive, and judicial departments of the Philippines. Thus, as both Congress and this
Court have repeatedly and consistently validated and recognized UP's indefeasible title
over its landholdings, the RTC and the Court of Appeals clearly erred when it faulted the
Republic and UP for presenting certified true copies of its titles signed by its records
custodian instead of either the duplicate originals or the certified true copies issued by
the Register- of Deeds of Quezon City. Indeed, the RTC and the CA should have taken
judicial notice of UP's title over its landholdings, without need of any other evidence.

It may be, as pointed out by the RTC and the Court of Appeals, that a petition for
reconstitution of title does not treat of the issue of ownership. However, in the case at
bar, as it was established that TCT No. 269615 overlaps with UP's titles, and as UP's
indefeasible titles are recognized by law and jurisprudence, adopting the myopic view of
the RTC and the Court of Appeals will only result into an unnecessary and pointless
relitigation of an issue that has already been repeatedly settled by this Court.

We remind the courts that we are duty-bound to abide by precedents, pursuant to the
time-honored principle of stare decisis et non quieta movere. In Commissioner of
Internal Revenue v. The Insular Life Assurance Co. Ltd., [26] we reiterated:

Time and again, the Court has held that it is a very desirable and necessary
judicial practice that when a court has laid down a principle of law as applicable to a
certain state of facts, it will adhere to that principle and apply it to all future cases in
which the facts are substantially the same.  Stare decisis ct non quieta movere. Stand by
the decisions and disturb not what is settled. Stare decisis simply means that for the
sake of certainty, a conclusion reached in one case should be applied to those that
follow if the facts are substantially the same, even though the parties may be different.
It proceeds from the first principle of justice that, absent any powerful countervailing
considerations, like cases ought to be decided alike. Thus, where the same questions
relating to the same event have been put forward by the parties similarly situated as in
a previous case litigated and decided by a competent court, the rule of stare decisis is a
bar to any attempt to relitigate the same issue.
The evidence presented by respondent Rosario
are of doubtful veracity and cannot justify the
reconstitution of a title covering lots already
registered in the name of UP.

The Republic and UP were able to establish that the land described in the duplicate
original of TCT No. 269615 submitted by respondent Rosario does not refer to any
technically recognized location.

In the Certification dated September 18, 1998 issued by OIC-Technical Director of the
LMB-DENR-NCR, the DENR, which is the official repository of all approved survey plans
for all parcels of land within the territorial jurisdiction of the Philippines, attested to the
non-existence of the survey plans alluded to in TCT No. 269615. The Certification
declares:[27]

CERTIFICATION

TO WHOM IT MAY CONCERN:

This is to certify that alleged plan Psd-77362, Lots 42-A-l, Lot 42-A-2 and 42-A-3, 'being a
portion of Lot 42-A, Psd 4558, situated in Culiat, Quezon City, owned by Segundina
Rosario per T.C.T. No. 269615 as submitted by the Office of the Solicitor General is NOT
[AVAILABLE] in the Technical Records and Statistics Section, Surveys Division, DENR-
NCR. It is also informed by the Director, Lands Management Bureau that their Office
has no records of the alleged plans Psd-77362 and Psd-4558 per his letter dated July 13,
1998. (Emphasis supplied.)

It is to be observed also that the sketch plan presented by respondent Rosario in open
court bore the annotations "NOT FOR REGISTRATION" and for "reference only," whereas
the photocopy submitted to the court does not contain said annotations. This
discrepancy, unexplained by respondent Rosario, coupled with the LRA Report with
Attached Sketch Plan dated December 10, 1998 and the Official Report of OIC Regional
Technical Director Mamerto Infante of the LMB-DENR-NCR, shows that something is
suspicious about the land described in TCT No. 269615. Verily, on this point alone, the
RTC and the Court of Appeals should have denied reconstitution.

The speciousness of respondent Rosario's claim becomes more apparent in view of the
evidence that, except for the year prior to the time she filed her petition for
reconstitution, there is nothing in the records of the City Treasurer's Office to support
respondent Rosario's claim that she paid the real property taxes on the land covered by
TCT No. 269615 from 1970 up to 1998, or for a period of twenty-eight (28) years.

Moreover, Teofista Pajara, Chief of the Assessment Records Management Division,

Office of the City Assessor for Quezon City, also testified that respondent Rosario's 1980
Tax Declaration No. 12158 does not exist in the assessment records maintained by her
office. She also stated that from existing records in her office, the reconstructed Tax
Declaration No. PD-12158 is in the name of one Tecla Gutierrez and refers to a different
property and certificate of title.[28]

At this point, we again remind the courts of their duty to protect the efficacy of the
Torrens system and the stability and security of land titles. In  Republic of the Phils, y.
Sps. Lagramada,[29] the Court, citing Tahanan Devt. Corp. v. CA, et al., warned that courts
must be cautious and careful in granting reconstitution of lost or destroyed titles. It is
the duty of the courts to scrutinize and verify not only all supporting documents, but
also each and every fact, circumstance, or incident related to the case.

Finally, we herein reiterate our admonition in Cañero for courts and unscrupulous

lawyers to stop entertaining bogus claims seeking to assail UP's title over its
landholdings. We repeat:

We strongly admonish courts and unscrupulous lawyers to stop entertaining

spurious cases seeking further to assail respondent UP's title. These cases open the
dissolute avenues of graft to unscrupulous land-grabbers who prey like vultures upon
the campus of respondent UP. By such actions, they wittingly or unwittingly aid the
hucksters who want to earn a quick buck by misleading the gullible to buy the
Philippine counterpart of the proverbial London Bridge. It is well past time for courts
and lawyers to cease wasting their time and resources on these worthless causes and
take judicial notice of the fact that respondent UP's title had already been validated
countless times by this Court.  Any ruling deviating from such doctrine is to be viewed
as a deliberate intent to sabotage the rule of law and will no longer be countenanced.
[30] 
(Emphasis supplied)

WHEREFORE, premises considered, the present petition is hereby GRANTED. The

Decision dated October 17, 2008 and the Resolution dated February 10, 2009 of the
Court of Appeals in C.A.-G.R. CV No. 85519, and the Decision dated January 5, 2004 of
the Regional Trial Court of Quezon City in LRC No. Q-9885(97), are REVERSED and SET
ASIDE. The petition for reconstitution in LRC No. Q-9885(97) is DISMISSED, and TCT No.
269615 in the name of Segundina Rosario is declared SPURIOUS and VOID. The Land
Registration Authority and the Register of Deeds of Quezon City are ordered not to
entertain or act on any application, conveyance, or transaction involving TCT No.
269615.

SO ORDERED.

THIRD DIVISION
[ G.R. No. 202114, November 09, 2016 ]
ELMER A. APINES, PETITIONER, VS. ELBURG SHIPMANAGEMENT
PHILIPPINES, INC., AND/OR DANILO F. VENIDA, RESPONDENTS.

DECISION

REYES, J.:

Before this Court is a petition for review on certiorari[1] under Rule 45 of the Rules
of Court filed by Elmer A. Apines (Apines) to assail the Decision [2] rendered on January
26, 2012 and Resolution[3] issued on May 30, 2012 by the Court of Appeals (CA) in CA-
G.R. SP No. 114221. The dispositive portion of the assailed decision reads:
WHEREFORE, the instant petition is hereby GRANTED and the NLRC Decision
dated December 14, 2009 and Resolution dated April 14, 2010 are SET ASIDE. The
Complaint for total and permanent disability benefits, reimbursement of medical,
hospital and transportation expenses, moral and exemplary damages, sickwage
allowance, attorney's fees and legal interest is hereby DISMISSED. In view of the
payment made to [Apines] by petitioners Elburg Shipmanagement Philippines, Inc. and
Danilo F. Venida in satisfaction of NLRC Decision dated December 14, 2009 and
Resolution dated April 14, 2010, [Apines] is hereby directed to return to petitioners
Elburg Shipmanagement Philippines, Inc. and Danilo F. Venida the amount of Three
Million Twenty[-]Nine Thousand Eighty[-]Eight Pesos [and] 92/100 (P3,029,088.92).

SO ORDERED.[4]
 The assailed Resolution[5] dated May 30, 2012 denied Apines' motion for
reconsideration.[6]

Antecedent Facts

Elburg Shipmanagement Philippines, Inc. (ESPI) is a local manning agency, with Danilo F.
Venida as representative (collectively, the respondents). Emirates Trading Agency LLC
(ETAL) is among ESPI's foreign principals.[7]

On September 11, 2007, Apines boarded ETAL's ship, M/V Bandar TBN Trans Gulf, for an
eight-month engagement as bosun.[8]

Apines claimed that sometime in the third week of September, a British surveyor was on
board the ship to inspect the cargo hold. Captain Glicerio Castañares (Capt. Castañares)
and Chief Mate Edgardo Llevares instructed Apines to put an apparatus on the top tank
of the cargo hold to check for possible leaks. Apines promptly complied with the order.
On his way up from the cargo hold, he accidentally stepped on scattered iron ore pellets
causing his left knee to strongly hit the steel railings of the ladder, and for him to slip
and fall.[9]

According to Apines, despite a sprain and swollen ankle, he was able to stand up and
walk. When the pain eventually became intolerable, Apines informed Capt. Castañares
about his condition. Apines was given analgesics. However, his request to be brought to
the nearest port for medical attention remained unheeded since the ship was still on
voyage. Further, whenever the ship reached a port, Apines was assigned as a crane
driver.[10]

On November 10, 2007, Apines consulted with an orthopedic surgeon named Dr.
Abraham George (Dr. George) when the ship reached the Port of Bahrain. Dr. George's
Medical Report[11] reads:
Symptoms: PAIN ON THE LEFT KNEE (SWELLING)

When did the sym[p]toms start: 1 MONTH+

Diagnosis: LATERAL COLLATERAL LIGAMENT SPRN

                ? MEDIAL MENISCAL INJU

Is declared:     FIT          Yes       No
                     UNFIT      Yes       No

1) The patient must attend the Doctor again on: WITH MRI REPORT

2) The seaman must go to Hospital for MRI SCAN-LEFT KNEE

3) Special Remarks: MEDICATIONS AND HINGED KNEE BRACE GIVEN

xxxx

Present History
[P]ain Left Knee since 45 days after a fall on ship at work. Now has pain on climbing at
work

Management Plan
Ref to Ortho consult
Bland diet/
Advised MRI scan of the left knee

Diagnosis
5355 GASTRITIS. MAIN*
844 SPRAIN OF KNEEA LEG*, MAIN,*
Left?? OA
8440 SPRAIN LATERAL COLL LIG, MAIN,*
LEFT KNEE
7171 DERANG ANT MED MENISCUS,zClinical,*
LEFT KNEE

Orders

xxxx

Elmetacin solution 50 ml.[12] Qty = 1, Verified

Celebrex 200 Mg. Cap,[13] Qty = 20, Verified

x x x x[14] (Emphasis ours)
 In February of 2008, Apines once again complained of pain in his left knee and
requested for a medical check-up when the ship reached Jubail, Saudi Arabia. [15] Dr.
Vicar Hussain's (Dr. Hussain) Medical Report[16] dated February 5, 2008 indicates the
following:
Sym[p]toms: PAIN ON THE LEFT KNEE (M.R.I. SCAN - LEFT KNEE RECOMMEND).

When did the sym[p]toms start: Pain & swells 14 [left] knee - 4 mth

Diagnosis: O.A. 14 [left] knee x x x

Is declared:   FIT           Yes      No     but Pt needs rest for couple of days

                   UNFIT       Yes      No

1) The patient must attend the Doctor again on: after 7 days

2) The seaman must go to Hospital for [MRI SCAN - LEFT KNEE]

3) Special Remarks: Medical & Pt needs MRI 14 [left] knee. Pt needs medication for
long time

x x x x[17] (Emphasis ours)
Apines claimed that since the pain in his left knee even worsened, he requested
for immediate repatriation.[18]

In Capt. Castañares' e-mail message[19] sent to ESPI and Capt. Nicolo Terrei on February
5, 2008, it was stated that for a week already, Apines had been unable to work due to
severe pain on his left knee. Per request, Apines had a medical check up in Jubail, Saudi
Arabia. The doctor diagnosed Apines to be suffering from arthritis. Apines insisted that it
was not merely arthritis, but the doctor was not able to determine any other ailment.
Consequently, the doctor assessed Apines to be fit for sea duty. However, due to the
worsening pain and inability to work, Apines requested to be promptly sent home to be
able to consult with a doctor on his own account. Thus, Capt. Castañares sought Apines'
repatriation to be arranged even if there was still no reliever to take the latter's place.

ESPI, however, denied that Apines had an accidental injury while on board the ship. In
the Affidavit[20] dated May 4, 2008 and e-mail message[21] sent to ESPI on November 4,
2008, Capt. Castañares stated that in the duration of Apines' stay in the ship from
September 15, 2007 to February 6, 2008, there was no report that the latter had figured
in an accident or had sustained an injury.[22]

Apines disembarked from the ship on February 7, 2008. The next day, Apines reported
to ESPI's office.[23] Teresa Mendoza (Mendoza) conducted an exit interview, and her
report is partly quoted below:
Accdg. to crew:

- [D]uring an inspection on[ ]board, [he] had an accident when he slid and his knee had a
strong contact against [the] steel railing of the ladder. He had a sprain and his ankle
went swollen for four days (Sept.) His knee started to be painful on November.
However, he can perform job on[ ]board but he [cannot] fully work and he is already
moving slowly. [He] [f]inds [it] difficult to climb on cranes due to pain in the ankle.

- attached report (No report was given by the master regarding the incident, no
evidence from Master's logbook)

xxxx

- was given pain reliever by the doctor (for arthritis and paracetamol)

- and was recommended to see doctor again after seven days but he [was] repatriated
after x x x a day.

- was reported FIT TO WORK by the doctor.[24]

The Crew De-briefing Checklist[25] signed by Apines also indicated that his
disembarkation was "for medical grounds (on his own request)."

ESPI claimed that it referred Apines to a company-designated doctor, but the latter
consulted his own physicians instead.[26]

On the other hand, Apines alleged that when he reported to ESPI's office right after his
repatriation, Mendoza and Angela Padre (Padre) informed him that since he was
declared fit to work, no assistance can be offered to him. Moreover, his unpaid salaries
shall be offset against the cost of his airfare ticket in returning to Manila. Apines, thus,
explained that he sought repatriation to undergo Magnetic Resonance Imaging (MRI)
and obtain medical treatment pursuant to the recommendations of the doctors in
Bahrain and Saudi Arabia. ESPI, however, stood its ground in denying to provide Apines
with assistance.[27]

Apines felt aggrieved by ESPI's lack of support, but his primary concern then was to
obtain prompt medical attention. Upon his inquiry, ESPI referred him to Metropolitan
Hospital, which at that time had no MRI machine. Apines thereafter proceeded to
Chinese General Hospital (CGH), where he underwent MRI scanning under the
supervision of Dr. Celestina L. Cejoco (Dr. Cejoco).[28] Dr. Cejoco's Consultation Report,
[29]
 dated February 14, 2008, included the following impressions: (1) "no acute bony
trabecular injury or fracture"; (2) "oblique inferior surface tear involving the posterior
horn of the medial meniscus"; (3) "small to moderate amount of joint effusion"; and (4)
"findings are consistent with osteoarthritis."

On February 20, 2008, Apines also consulted Dr. Patrick O. Leh (Dr. Leh), an orthopedic
surgeon in CGH. The Medical Certificate[30] issued by Dr. Leh indicated that Apines had
"degenerative osteoarthritis" and "medial meniscal tear" in his left knee. Dr. Leh
assessed that Apines "may return to work after 30 [to] 45 days," but "needs continued
medical treatment for osteoarthritis." Apines was likewise advised to undergo
meniscectomy[31] and to consult with a company-accredited orthopedic surgeon. [32]

On June 6, 2008, Apines filed before the National Labor Relations Commission (NLRC) a
Complaine[33] for total and permanent disability benefits, reimbursement of medical,
hospital and transportation expenses, moral and exemplary damages, sickness
allowance, attorney's fees and legal interest.

On June 17, 2008, Apines was admitted at the Philippine General Hospital (PGH) and
underwent arthroscopic meniscectomy on July 1, 2008. He was confined for 17 days and
was finally discharged on July 4, 2008.[34]

The Clinical Abstract[35] and Discharge Summary[36] signed by Dr. Patrick M. Dizon (Dr.

Dizon) stated that Apines had Medial Meniscal Tear. Apines complained of pain in his
left knee and difficulty in ambulation. Apines had informed the doctors that about nine
or ten months before, he had slipped and twisted his left knee while walking or going
down the stairs. Thereafter, he had persistent pain in his left knee, with associated
locking symptoms. He only took Alaxan which gave him mere partial relief. The
symptoms, however, progressed. Apines then underwent x-ray and MRI scans, and
consulted with doctors at the CGH, before having been referred to the PGH for further
management. After Apines' arthroscopic meniscectomy, he was still advised to continue
with his rehabilitation, and was prescribed to take Cephalexin for seven days.

In their Position Paper[37] filed before the NLRC, the respondents contended that Apines
was not entitled to total and permanent disability benefits based on the following
grounds: (1) Apines did not suffer any accident or injury while on board the ship as
proven by Capt. Castañares' affidavit and the e-mail exchanges between the latter and
Mendoza; (2) the medical reports issued abroad showed that Apines was fit to work; (3)
Apines disembarked from the ship on his own accord as indicated in the Exit Interview
Report and Crew De-briefing Checklist; (4) Apines failed to submit himself for post-
employment medical examination and treatment by company-designated doctors; and
(5) Apines' own physician, Dr. Leh, assessed that the former may return to work after 30
to 45 days.

Several conferences were held, but the parties failed to arrive at any settlement. [38]

Rulings of the Labor Arbiter and NLRC

In the Decision[39] dated April 21, 2009, the Labor Arbiter (LA) dismissed Apines'
complaint citing the following as reasons:
It is not enough for [Apines] to allege and prove that his injury was work-related.

He must likewise allege and prove compliance with the mandatory reporting
requirement.

[Apines] never alleged, in his position paper, that he observed the mandatory reporting
requirement. He simply states that, upon his repatriation, he reported to [ESPI] and was
informed by [Padre] and [Mendoza] that he cannot be offered of [sic] an assistance as
he was declared fit to work.

There is nothing in the position paper and further papers of [Apines] indicating
compliance with the post-employment medical examination [under the 2nd and 3rd
paragraphs of Section 20(8)(3)[40] of the 2000 Philippine Overseas Employment Agency's
Amended Standard

Terms and Conditions Governing the Employment of Filipino Seafarers On-Board Ocean-
Going Vessels].[41]
 Apines appealed the foregoing before the NLRC.[42]

On December 14, 2009, the NLRC promulgated a Decision, [43] the fallo of which is quoted
below:
WHEREFORE, premises considered, judgment is hereby rendered finding the
appeal impressed with merit. [The respondents] are hereby directed to pay [Apines]
US$62,800.00 [as] total and permanent disability compensation and sickness allowance
or its peso equivalent at the prevailing exchange rate at the time of payment plus ten
percent (10%) of such aggregate amount representing attorney's fees (US$6,280.00).
Accordingly, the decision of the [LA] dated April [21], 2009 is hereby VACATED and SET
ASIDE.

SO ORDERED.[44]
In holding Apines to be entitled to total and permanent disability benefits and
sickness allowance, the NLRC ratiocinated that:
[Apines] was operated upon on July 1, 2008 at the PGH x x x. Since his
repatriation on February 2008 until such date, he has not been able to return to work
and x x x more than 120 days [had elapsed]. x x x

We do not subscribe to [the respondents'] assertions that [Apines] has to prove that he
suffered an accident while on board and that the repatriation was of his own accord[,]
which bars his entitlement. x x x

xxxx

It does not state in [Section 20(B)(3) of the 2000 Philippine Overseas Employment
Agency's Amended Standard Terms and Conditions Governing the Employment of
Filipino Seafarers On-Board Ocean-Going Vessels] that repatriation be upon the
employer's instructions, [but] it merely mentions that it be for medical reasons. There is
also no requirement of proof of occurrence of an accident to be made by the employee
for disability to attach. What is required is that he suffered injury or illness and in this
case[,] there is [a] concrete showing that [Apines] was complaining of pain in his knee[,]
and that he made it known to his employers for which he was brought to 2 doctors for
assessment on November 2007 and February 2008.

It is noteworthy that these doctors recommended that he undergo MRI x x x[,] but it
appears that these recommendations were unheeded. It is apparent from the records
that the [respondents] chose to ignore the complaints of the seafarer [about] the pain
he was suffering [from] and the doctors' recommendations[,] and decided not to order
his medical repatriation presumably in order to avoid paying disability compensation to
him.

While it may be true that there was no compliance with the procedural requirements
under [Section 20(B)(3) of the 2000 Philippine Overseas Employment Agency's Amended
Standard Terms and Conditions Governing the Employment of Filipino Seafarers On-
Board Ocean-Going Vessels], this is not of [Apines'] own doing. x x x He was informed
that he will not be accorded any medical assistance as he [was] declared fit to work.
Thus, he was constrained to consult with other doctors [who assessed Apines] to be
suffering from a meniscal tear on his knee and required menis[c]ectomy x x x. [Apines']
assertions [sic] that he was denied medical assistance [has] credence because it is
illogical that he will seek treatment from other doctors immediately after his
disembarkation when he [can] avail of the services of the company[-]designated
physician. He arrived on February 8, 2008 and he consulted with 2 doctors for medical
treatment on February 14 and 20, 2008. The proximity of such dates further proves that
he was indeed denied of medical assistance despite his suffering and even when the
[respond nts] knew that he sought repatriation to seek medical treatment x x x.

Having suffered the injury/illness during the term of his contract, [Apines] is also
entitled to his sickness allowance and to be reimbursed [for] the expenses incurred for
his treatment. In this case, [Apines] failed to present receipts or other proofis] of his
medical expenses[, hence,] we cannot grant the same. Thus[,] he is entitled only to his
sickness allowance of US$700.00/per month for four (4) months or US$2,800.00 in
addition to his permanent and total disability compensation of US$60,000.00. [45]
In the Resolution[46] dated April 14, 2010, the NLRC denied the motion for
reconsideration[47] of the respondents.

The Proceedings before the CA

The respondents filed a Petition for Certiorari[48] before the CA. During its pendency,
Apines sought the execution of the NLRC Decision and Resolution, dated December 14,
2009 and April 14, 2010, respectively. On August 10, 2010, the respondents, with the
intent of preventing further execution proceedings, paid Apines the sum of Three
Million Twenty-Nine Thousand Eighty-Eight Pesos and 92/100 (P3,029,088.92) as full
and complete satisfaction of the NLRC's judgment award. The payment was subject to
the condition that in case of reversal or modification of the NLRC decision and
resolution by the CA, Apines shall return to the respondents whatever amount may be
due and owing.[49]

Subsequently, the CA, through the herein assailed decision and resolution, reversed the
NLRC ruling. The CA explained that:
[Apines] was unable to establish his allegation that he suffered an injury on
board [ETAL's] vessel by reason of an accident. x x x [I]t was clear that other persons
were present at the time the alleged incident transpired and who should have
witnessed the same. x x x [H]e neither reported the alleged incident to the officers on
board the vessel for documentation purposes nor did he present any other evidence to
substantiate his allegation. Not even the evaluation of the doctors who examined
[Apines] corroborated his claim that his condition was an injury caused by an accidental
fall. [Apines] himself declared that Dr. Hussain gave him medicine for pain allegedly
caused by arthritis. His own doctor seemed to agree with Dr. Hussain's findings when he
categorically pronounced [Apines'] diagnosis to be "Degenerative osteoarthritis."
Moreover, contrary to Apines' claim, his doctor did not recommend his "immediate
operation." In fact, Dr. Leh suggested that [Apines] consult with [a] company-accredited
orthopedic surgeon for opinion. In other words, a perusal of the medical certificates
submitted by [Apines] will tend to support a finding that Apines was suffering from
arthritis rather than a conclusion that his medical condition was brought about by an
accident as to qualify as work-related injury compensable under the POEA-SEC.

xxxx

[Apines] affirms that [the respondents] "referred him to Metropolitan Hospital. He

proceeded there immediately but upon inquiry, they do not conduct MRI test, instead
he was referred to [CGH]." It appears that [Apines] conveniently subjected himself to
medical assistance of his own choice solely because Metropolitan Hospital was unable
to conduct the MRI. Noticeably, there is nothing on record to show that he intended to
submit himself to a medical evaluation by the company-designated physician. [Apines]
clearly has not complied with the post-employment reporting requirements under the
POEA-SEC.

xxx

[Apines] failed to present any justification [for] his inability to submit himself to a
post-employment medical examination by a company-designated physician. Glaringly,
despite claiming that his doctor recommended his immediate operation when he went
for consultation on February 20, 2008, it was only on June 17, 2008 that [Apines] was
admitted for confinement at the PGH and the operation done on July 1, 2008. x x x

xxxx

x x x [I]n between his consultation with his doctor on February 20, 2008 and his
confinement for medical attention on June 17, 2008, [Apines] found time to file the
instant case before the [LA] on June 5, 2008. x x x [Apines] appeared well enough to
consult his own doctors, file a case x x x and undergo medical attention more than three
(3) months from his repatriation but was unjustifiably unable to submit himself for
examination by a company-designated physician.

xxxx

x x x [Apines] has not presented any disability grading even from his own doctors who
examined and operated on him. It seems to this Court then that [Apines] basically aims
to capitalize on his employer's failure to assess his disability grade when, as a matter of
fact, he has never submitted himself to the examination of the company-designated
physician before or after his operation. Plainly, there is no disability grading by any
doctor in this case. x x x.[50] (Citations omitted and emphasis ours)
Issues

Aggrieved, Apines now presents before the Court the Issues of whether or not the CA
erred in:
(1) holding that failure to comply with the 72-hour reporting requirement is fatal
and shall automatically result in the forfeiture of disability benefits; [51]

(2) denying to grant Apines total and permanent disability benefits despite his clear
inability to resume performance of active sea duties within 120 days from repatriation;
[52]
 and

(3) negating Apines' entitlement to moral and exemplary damages, as well as attorney's
fees.[53]
In support thereof, Apines reiterates his claims offered in pnor proceedings. He
emphasizes that the respondents cannot feign ignorance about his ailment, which
started while he was on board the ship. He insists that there should be no automatic
forfeiture of disability benefits even sans compliance with the 72-hour reportorial
requirement in cases when the seafarer has been rendered incapable of pursuing his
customary shipboard employment. Anent the respondents' persistent stance that the
company-designated doctor must examine the seafarer's medical condition, Apines
avers that such assessment must be done within a 120-day period from repatriation,
otherwise, the injury or illness shall be deemed to be total and permanent. He also
laments the respondents' utter refusal to render any medical assistance and pay their
contractual obligations. Accordingly, the respondents should be liable for moral and
exemplary damages, plus attorney's fees. Apines manifests, too, that he currently
remains jobless and unfit to render sea duties.

In the respondents' Comment,[54] they contend that the 72-hour reportorial requirement

is mandatory, and Apines' failure to comply therewith bars the filing of his claims for
disability benefits.

Ruling of the Court

"As a rule, only questions of law, not questions of fact, may be raised in a petition for
review on certiorari under Rule 45."[55] The Court is, thus, generally bound by the CA's
factual findings. There are, however, exceptions to the foregoing, among which is when
the CA's findings are contrary to those of the trial court or administrative body
exercising quasi-judicial functions from which the action originated. [56] The instant
petition falls under the aforementioned exception in view of the divergent factual
findings of the LA and the CA, on one hand, and the NLRC, on the other.

After a thorough re-examination of the parties' evidence, the Court finds merit in the
instant petition warranting the reinstatement of the NLRC's decision.

The issues, being inter-related, will be discussed jointly.

Review of the Facts

To properly dispose of the issues raised herein, the Court should resolve the conflicting
factual assertions of the parties anent the following: (1) occurrence of the accident,
which Apines claimed had caused his injury; (2) cause of and circumstances surrounding
Apines' repatriation; (3) conclusiveness of the medical findings of the two doctors whom
Apines had consulted in Bahrain and Saudi Arabia; (4) referral of Apines to company-
designated doctors; (5) failure of Apines to comply with the 72-hour reportorial
requirement; (6) necessity, reason and timeliness of the medical treatment rendered by
Apines' own doctors; and (7) lack of disability rating made by both the company-
designated doctors and those consulted by Apines on his own accord.

Occurrence of the accidental injury on board the ship

The respondents insist that Apines had not sustained any injury while on board ETAL's
ship. As proof thereof, Capt. Castañares' affidavit and e-mail message negating the
occurrence of an accident involving Apines were submitted. The respondents also point
out that Apines had not offered any corroborating statements anent the incident from
his colleagues who were then on board the ship. Hence, the respondents conclude that
since no documentary evidence from ESPI and its staff support Apines' factual claim of
having sustained an injury while on board the ship, then, no accident actually happened.
[57]

The evidence point to the contrary.

While no record of the injury was reflected in the ship's logbook and other documents,
the following constitute as substantial evidence to support the conclusion that Apines,
in fact, figured in an accident while he was on board.

First. In the Medical Report[58] dated November 10, 2007, Dr. George declared Apines to
be fit to work. It is, however, clear from the same report that Apines complained of pain
and swelling in his left knee, which started after a fall while he was at work about 45
days before such consultation. Dr. George also made a conditional diagnosis of Medial
Meniscal Injury, prescribed two pain relief medications, and gave Apines a hinged knee
brace. Dr. George further advised the conduct of MRI scanning and consultation with an
orthopedic doctor.

In February of 2008, Apines requested for a medical check-up. [59] Dr. Hussain indicated in
his report that Apines had pain and swelling for four months prior to the consultation.
Dr. Hussain once again recommended MRI scanning, rest for a couple of days, and
medications for a long time. Nonetheless, he assessed that Apines was fit to work. [60]

In Bahrain and Saudi Arabia, Apines was consistent in informing the doctors about when
and how he sustained his injury. On the other hand, despite rendering fit-to-work
assessments, Dr. George and Dr. Hussain's similar recommendations for MRI scanning
were implied admissions that Apines had a medical condition, albeit still undefined.
Without MRI, Dr. George and Dr. Hussain cannot make conclusive assessments of what
really ailed Apines. Note that despite the doctors' recommendations in November of
2007 and February of 2008, no MRI scan was conducted and paid for abroad by the
respondents.

Second. The day after Apines' repatnation, he reported to ESPI's office. In the Exit
Interview[61] conducted by Mendoza, Apines once again claimed that while on board the
ship, his knee hit the steel railings of the ladder. His ankle swelled in September of 2007
and by November of 2007, the pain had worsened, making it difficult for him to move
and climb cranes.

Further, the Crew De-briefing Checklist[62] signed by Apines likewise indicated that his
disembarkation was "for medical grounds (on his own request)." Whether the
repatriation was upon Apines' own initiative or not, the unalterable fact remains that he
had a medical condition, which required treatment.

Third. In the Discharge Summary[63] dated July 5, 2008, Dr. Dizon stated that according to
Apines, he slipped and twisted his left knee about nine months before meniscectomy.
Dr. Dizon confirmed the prior diagnosis of Dr. George, Dr. Cejoco and Dr. Leh that
Apines had Medial Meniscal Tear in the latter's left knee.

In precis, Apines' consistent claims about what occurred while he was on board the ship,
and the medical records showing that he had Medial Meniscal Tear substantially lend
credence to the factual assertion that indeed, he sustained an accidental injury prior to
his repatriation. Capt. Castañares' mere statements pale in comparison to the foregoing.

Fit-to-work assessments, reporting after repatriation, consultations with doctors,

surgery, and compliance with the requirements of the 2 nd and 3rd paragraphs of
Section 20(B)(3) of the 2000 Philippine Overseas Employment Agency's Amended
Standard Terms and Conditions Governing the Employment of Filipino Seafarers On-
Board Ocean-Going Vessels (2000 POEA-SEC)

The Court shall now proceed to discuss the bearing of Dr. George and Dr. Hussain's
uniform assessment that Apines was fit to work.

As mentioned above, Dr. George and Dr. Hussain both recommended MRI scanning of
Apines' left knee. Note that Dr. George made a conditional diagnosis that Apines had
osteoarthritis, albeit entertained the possibility of Medial Meniscal Tear. Hence, Capt.
Castañares' declaration that the doctors did not find any other ailment in Apines apart
from osteoarthritis deserves short shrift. The fit-to-work assessment made by Dr.
George and Dr. Hussain remained inconclusive pending the conduct of the MRI scan.
Unfortunately, the same fit-to-work assessment was used by the respondents against
Apines in denying the latter's plea for medical assistance after his repatriation. Later, the
MRl scanning was performed only after repatriation about five months from the time
Apines had sustained the accidental injury. Apines himself even paid for the scan.

Within three days from repatriation, Apines reported to ESPI's office. Mendoza
conducted an Exit Interview and made Apines sign the Crew De-briefing Checklist. The
parties now disagree as to what transpired after.

Apines claims that Mendoza and Padre infonned him that since he was declared fit to
work by the doctors abroad, ESPI cannot offer him any assistance. Further, his unpaid
salaries shall be offset against the cost of his airfare ticket in going back to Manila.
Apines insisted that he sought repatriation due to the recommendations of the doctors
abroad for him to undergo MRI scanning and obtain medical treatment. ESPI, however,
stood its ground in denying to provide Apines with assistance. [64]

The respondents, on their part, allege that they referred Apines to a company-
designated doctor. However, Apines consulted his own physicians instead. [65] Ann
Suzette B. Ong Pe (Ong Pe), Senior Patient Processor at the Marine Medical Services,
executed an affidavit attesting to the foregoing.[66]

In the herein assailed decision, the CA declared that Apines "conveniently subjected
himself to medical assistance of his own choice solely because Metropolitan Hospital
was unable to conduct the MRI."[67] The CA also stated that "there is nothing on record
to show that [Apines] intended to submit himself to a medical evaluation by the
company-designated physician."[68]

The Court disagrees.

It bears stressing that nowhere in the pleadings did the respondents specifically name
the company-designated doctor to whom Apines was referred to. Moreover, apart from
Ong Pe's affidavit, the respondents did not present any other document to establish
that Apines was actually and specifically instructed to report for a post-employment
medical examination. Apines vaguely admitted having been referred to Metropolitan
Hospital, but it was upon his insistence for medical assistance. What remains unrefuted
is that back then, the said hospital did not have MRI machines. Consequently, Apines
proceeded to the CGH, underwent MRI scanning and consulted Dr. Cejoco and Dr. Leh.
Apines paid for the medical services with his own money.

Indeed, the records do not show that Apines consulted a company-designated doctor
either for a post-employment medical assessment or treatment. However, there is
likewise no substantial evidence conclusively, proving that Apines was in fact referred to
a company-designated physician. Besides, after suffering for about five months with an
untreated injury on board ETAL's ship, securing the services of CGH for the MRI scanning
was not a matter of convenience, but of necessity. Apines merely wanted to obtain
prompt medical attention, but was repeatedly given the runaround by the respondents
even after repatriation. As aptly observed by the NLRC, "it is illogical that [Apines] will
seek treatment from other doctors immediately after his disembarkation when he [can]
avail of the services of the company[-]designated physician" and "the proximity of [the
dates of repatriation and consultations with Dr. Cejoco and Dr. Leh] further proves that
he was indeed denied of medical assistance."[69]

As indicated in the Exit Interview and Crew De-briefing Checklist, Apines promptly
reported to ESPI's office within 72-hours from repatriation. He was informed that the
cost of his fare going home shall be offset against his unpaid salaries, anthat no medical
assistance can be offered to him as he was declared fit to work by the doctors abroad.
Admittedly, Apines failed to offer documentary proofs of the respondents' denial to
assist him in his medical needs. However, Apines cannot be faulted for the said lack
since the custody of the documents, if there were any at all, pertains more to the
respondents. It would be illogical to impose upon Apines the burden to prove with
documentary evidence the negative fact that he was not referred to a company-
designated doctor.

In Interorient Maritime Enterprises, Inc., et al. v. Remo, [70] the Court emphatically ruled
that "the absence of a post-employment medical examination cannot be used to defeat
respondent's claim since the failure to subject the seafarer to this requirement was not
due to the seafarer's fault but to the inadvertence or deliberate refusal of petitioners."[71]

Considering the above, the Court finds that Apines' failure to comply with the 72-hour
reportorial requirement for the conduct of a post-employment medical examination
under the 2nd paragraph of Section 20(B)(3) of the 2000 POEA-SEC cannot result in the
automatic forfeiture of his disability benefits.

Island Overseas Transport Corporation/Pine Crest Shipping Corporation/Capt. Emmanuel

L. Regio v. Armando M. Beja,[72] on the other hand, is instructive anent when a seafarer
may be exempt from compliance with the procedure laid down in the 3 rd paragraph of
Section 20(B)(3) on the requirement of consultation with a third doctor, viz.:
A seafarer's compliance with such procedure presupposes that the company-
designated physician came up with an assessment as to his fitness or unfitness to work
before the expiration of the 120-day or 240-day periods. Alternatively put, absent a
certification from the company-designated physician, the seafarer had nothing to
contest and the law steps in to conclusively characterize his disability as total and
permanent.[73] (Emphasis ours)
In the case at bar, ESPI's records relative to the occurrence of the injury and the
events leading to and following Apines' repatriation are conspicuously scarce. Apines
claims that he was outrightly denied medical assistance on the pretext that the doctors
abroad had found him fit to work. There was unfortunately no document to establish
that denial. Similarly, no convincing paper trail exists to prove that there was in fact a
referral to a company-designated doctor either for assessment or treatment. Sans
referral to a company-designated doctor, no post-employment medical examination can
be performed on Apines by ESPI. No written fit to work or disability grading certificate
was also issued. Without the assessment of the company-designated doctor, there was
nothing for Apines' own physicians to contest rendering consultation with a third doctor
agreed upon by the parties as superfluous.

Perforce, compliance with the requirements of the 3rd paragraph of Section 20(B)(3) on

obtaining the assessment of a third doctor in case of divergent opinions of the
company-designated doctor, on one hand, and the seafarer's own physician, on the
other, cannot be imposed upon Apines.

Entitlement to total and permanent disability benefits arising from a conclusive

presumption

Having sustained an accidental injury on board the vessel, Apines is entitled to disability
benefits. To what extent, the Court shall discuss below.
At the outset, it bears noting that Apines filed his Complaint before the NLRC on June 6,
2008, 121 days from his repatriation. Before that date, no disability rating of any kind
had been issued by the respondents.

In Beja,[74] the Court clarified that:

[I]f the maritime compensation complaint was filed prior to October 6, 2008, the
rule on the 120-day period, during which the disability assessment should have been
made in accordance with Crystal Shipping, Inc. v. Natividad, that is, the doctrine then
prevailing before the promulgation of Vergara on October 6, 2008, stands; if, on the
other hand, the com.fslaint was filed from October 6, 2008 onwards, the 240-day rule
applies.[75] (Citation omitted and emphasis ours)
In the instant case, Apines filed his Complaint on June 6, 2008. Hence, the 120-
day period rule stands. Due to ESPI's failure to issue a disability rating within the 120-
day period, the presumption of Apines' entitlement to total and permanent disability
benefits arose.

The Court shall, nonetheless, tackle the necessity and timeliness of the medical services
rendered by Apines' three doctors.

After repatriation, Apines consulted Dr. Cejoco and Dr. Leh in February of 2008. Later,
Apines underwent meniscectomy at the PGH under the care of Dr. Dizon.

The respondents point out that Dr. Leh indicated in the Medical Certificate, which he
issued, that Apines can return to work after 30 to 45 days. According to the
respondents, this should cast doubt upon Apines' claim for total and permanent
disability benefits. Moreover, none of Apines' own doctors issued a disability rating.

In the herein assailed decision, the CA, relying on the medical certificates issued by the
doctors, found that Apines was merely suffering from osteoarthritis, and not from the
effects of an accidental injury. The CA likewise concluded that Apines "aims to capitalize
on his employers failure to assess his disability grade when, as a matter of fact, he has
never submitted himself to the examination of the company-designated physician before
or after his operation."[76] The CA also noted that Apines consulted Dr. Leh on February
20, 2008, but it was only on July 1, 2008 when the meniscectomy was performed. In the
intervening period, Apines did not consult with the company-designated doctor, but
found the time to see his own physicians and file his Complaint before the NLRC. [77]
In Dr. Cejoco's Consultation Report[78] dated February 14, 2008, it was stated that Apines
had "no acute bony trabecular injury or fracture," but diagnosed the latter to be
suffering from "Osteoarthritis," "oblique inferior surface tear involving the posterior
horn of the medial meniscus," and "small to moderate amount of joint effusion." Dr. Leh
confinned Dr. Cejoco's impressions, and suggested meniscectomy, with further
consultation with a company-accredited orthopedic surgeon. [79] Dr. Dizon's final
diagnosis was Medial Meniscal Tear of the left knee, which required arthroscopic
meniscectomy.[80]

A meniscus, which is a cartilage disk found in the knee, functions as a shock absorber or
cushion to minimize the stress on the articular cartilage. The articular cartilage coats the
ends of the bones, so it is present at the bottom of the femur and on top of the
shinbone or the tibia. There are two menisci. If they are not present or torn, the
articular cartilage sees an increase in stress and can trigger the onset of
osteoarthritis. That is by no means the only cause of osteoarthritis. However, it is
certainly a significant contributor.[81]

Likewise useful are the distinctions between acute, sub-acute and stress fractures.
An acute fracture "will often include an emergency room visit the day the trauma
occurred and are clearly evident on an x-ray." On the other hand, "a  sub-acute
fracture usually means that the patient had pain for some time," and "the fracture
occurred weeks or months prior but now is in the healing stage." There are also stress
fractures, which occur mainly in the lower extremities due to impact activity or
repetitive activities. Stress fractures and healing fractures become painful with weight
bearing.[82]

The Court, thus, concludes that no real incompatibility exists between the doctors'
findings of osteoarthritis and absence of acute trabecular injury, on one hand, with
Apihes' having sustained an accidental Medial Meniscal Injury in his left knee while
aboard the ship, on the other. Dr. Cejoco's impression that an acute trabecular injury
was absent did not rule out the possibility of a sub-acute or stress fracture. Further, a
tom meniscus can trigger the onset of osteoarthritis.

In Apines' case, his Medial Meniscus Tear was left undiagnosed and untreated for
almost five months from the time he had sustained an accidental injury. It took another
five months from his repatriation before he underwent arthroscopic meniscectomy.
Apines cannot be faulted for the delay. The Court takes judicial notice of the long
queues in governmental hospitals.[83] The Court also finds it logical that without any
financial assistance for medical expenses lent by ESPI, it took Apines sometime to save
up for what the surgical procedure required.

Further, the possibility that Apines' Medial Meniscal Tear triggered the onset of
osteoarthritis cannot be discounted. Under Section 32-A(16)(b) of the 2000 POEA-SEC,
for osteoarthritis to be considered as an occupational disease, the same must have been
contracted in any occupation involving minor or major injuries to the joint. Apines' case
falls within the qualification.

Relative to Dr. Leh's assessment that Apines can return to work after 30 to 45 days, the
Court finds the same as premature. Dr. Leh suggested meniscectomy and further
consultation with an orthopedic surgeon. Without having gone through the surgery yet,
Apines' fitness to return to work cannot be ascertained.

The Court likewise finds specious the CA's ruling that the lack of disability rating issued
by Apines' doctors negates his disability claims.

Due to ESPI's failure or refusal to issue a medical rating within 120 days from
repatriation, in legal contemplation, Apines' disability is conclusively presumed to be
total and permanent. Besides, in the Court's mind, it is enough that Apines obtained
medical certificates and copies of hospital records whenever he consulted with his
doctors and underwent medical procedures. The Court cannot impose upon him the
burden of knowing what the labor laws require relative to the matters which should be
explicitly stated in the medical certificates. The lack of express disability ratings even
shows that Apines did not premeditate the filing of his Complaint and that he only
procured legal services after his medical treatment.

In disability compensation claims, "what is important is that [the seafarer] was unable
to perform his customary workfor more than 120 days which constitutes permanent
total disability," since "an award of a total and permanent disability benefit would be
germane to the purpose of the benefit, which is to help the employee in making ends
meet at the time when he is unable to work."[84]

Apines underwent meniscectomy on July 1, 2008. Upon his discharge from the PGH on
July 4, 2008, Dr. Dizon prescribed home medications and recommended his continued
rehabilitation. Clearly, more than 120 days from repatriation, Apines' medical condition
remained unresolved, and he cannot yet perform, without serious discomfort and
inconvenience, the customary duties of a crane operator, to wit:
Arranging; attaching; carrying; checking (ground condition and that crane is level
on the outriggers before attempting to lift and place a load; air, water and fuel gauges);
cleaning; climbing; connecting; controlling; converting; depressing (pedals); driving (to
work sites); ensuring (the setting and securing of the crane); following (directions of
signal men); inserting; inspecting; lifting; loading and unloading; locating; lowering;
lubricating (cables, pulleys, etc.); maintaining; moving (loads); observing; operating;
placing (the correct equipment under the outrigger pads of the crane); planning;
positioning; pulling and pushing; raising; repairing; replacing; rotating; securing x x x;
stacking; starting; supplying; transferring; verifying (correctness of load) [85]
Generally, in every complaint, "opposing parties would stand poles apart and
proffer allegations as different as chalk and cheese;" hence, it is "incumbent upon the
Court to determine whether the party on whom the burden to prove lies was able to
hurdle the same."[86]

Apines hurdled the burden. The medical records, consistency of his claims, and the
circumstances before and after his repatriation overshadow the respondents' averments
anent the non-occurrence of the accidental injury and alleged unjustified non-
compliance with the 72-hour and third-doctor requirements.

In sum, the Court finds favor in Apines' claims for total and permanent disability
benefits, sickness allowance and attorney's fees. The NLRC's judgment award to Apines
in the total amount of US$69,080.00,[87] which the respondents' had conditionally
satisfied, is in order. The Court further agrees with the NLRC, which found no ample
basis to grant Apines' claims for moral and exemplary damages.

WHEREFORE, the instant petition is GRANTED. The Decision and Resolution dated

January 26, 2012 and May 30, 2012, respectively, of the Court of Appeals in CA-G.R. SP
No. 114221, which dismissed Elmer A. Apines' complaint for disability benefits and
damages, are SET ASIDE. The Decision rendered by the National Labor Relations
Commission on December 14, 2009 in NLRC LAC No. 06-000338-09, which awarded
Elmer A. Apines the total amount of US$69,080.00 as total and permanent disability
benefits, sickness allowance and attorney's fees, is REINSTATED. Legal interest is no
longer imposed on the award of US$69,080.00 in view of the satisfaction of the amount
already made on August 10, 2010.
SO ORDERED.

EN BANC
[ G.R. No. 178083, March 13, 2018 ]
FLIGHT ATTENDANTS AND STEWARDS ASSOCIATION OF THE
PHILIPPINES (FASAP), PETITIONER, VS. PHILIPPINE AIRLINES, INC.,
PATRIA CHIONG AND THE COURT OF APPEALS, RESPONDENTS.

[A.M. No. 11-10-1-SC]

IN RE: LETTERS OF ATTY. ESTELITO P. MENDOZA RE: G.R.

NO. 178083 - FLIGHT ATTENDANTS AND STEWARDS ASSOCIATION OF
THE PHILIPPINES (FASAP) VS. PHILIPPINE AIRLINES, INC., ET AL.

RESOLUTION

BERSAMIN, J.:

In determining the validity of a retrenchment, judicial notice may be taken of the

financial losses incurred by an employer undergoing corporate rehabilitation. In such a
case, the presentation of audited financial statements may not be necessary to establish
that the employer is suffering from severe financial losses.

Before the Court are the following matters for resolution, namely:
(a) Motion for Reconsideration of the Resolution of October 2, 2009 and Second Motion for
Reconsideration of the Decision of July 22, 2008 filed by respondents Philippine Airlines,
Inc. (PAL) and Patria Chiong;[1] and
(b) Motion for Reconsideration [Re: The Honorable Court's Resolution dated 13 March 2012]
[2]
 of petitioner Flight Attendants and Stewards Association of the Philippines (FASAP).
Antecedents

To provide a fitting backgrounder for this resolution, we first lay down the procedural
antecedents.

Resolving the appeal of FASAP, the Third Division of the Court[3] promulgated its
decision on July 22, 2008 reversing the decision promulgated on August 23, 2006 by the
Court of Appeals (CA) and entering a new one finding PAL guilty of unlawful
retrenchment,[4] disposing:
WHEREFORE, the instant petition is GRANTED. The assailed Decision of the Court
of Appeals in CA-G.R. SP No. 87956 dated August 23, 2006, which affirmed the
Decision of the NLRC setting aside the Labor Arbiter's findings of illegal retrenchment
and its Resolution of May 29, 2007 denying the motion for reconsideration,
are REVERSED and SET ASIDE and a new one is rendered:
1. FINDING respondent Philippine Airlines, Inc. GUILTY of illegal dismissal;

2. ORDERING Philippine Airlines, Inc. to reinstate the cabin crew personnel who were
covered by the retrenchment and demotion scheme of June 15, 1998 made effective on
July 15, 1998, without loss of seniority rights and other privileges, and to pay them full
backwages, inclusive of allowances and other monetary benefits computed from the time
of their separation up to the time of their actual reinstatement, provided that with respect
to those who had received their respective separation pay, the amounts of payments shall
be deducted from their backwages. Where reinstatement is no longer feasible because the
positions previously held no longer exist, respondent Corporation shall pay backwages
plus, in lieu of reinstatement, separation pay equal to one (1) month pay for every year of
service;

3. ORDERING Philippine Airlines, Inc. to pay attorney's fees equivalent to ten percent

(10%) of the total monetary award.

Costs against respondent PAL.

SO ORDERED.[5]
The Third Division thereby differed from the decision of the Court of Appeals (CA),
which had pronounced in its appealed decision promulgated on August 23, 2006[6] that
the remaining issue between the parties concerned the manner by which PAL had carried
out the retrenchment program.[7] Instead, the Third Division disbelieved the veracity of
PAL's claim of severe financial losses, and concluded that PAL had not established its
severe financial losses because of its non-presentation of audited financial statements. It
further concluded that PAL had implemented the retrenchment program in bad faith, and
had not used fair and reasonable criteria in selecting the employees to be retrenched.

After PAL filed its Motion for Reconsideration,[8] the Court, upon motion,[9] held oral
arguments on the following issues:
I

WHETHER THE GROUNDS FOR RETRENCHMENT WERE ESTABLISHED

II
WHETHER PAL RESORTED TO OTHER COST-CUTTING MEASURES BEFORE
IMPLEMENTING ITS RETRENCHMENT PROGRAM

III

WHETHER FAIR AND REASONABLE CRITERIA WERE FOLLOWED IN

IMPLEMENTING THE RETRENCHMENT PROGRAM

IV

WHETHER THE QUITCLAIMS WERE VALIDLY AND VOLUNTARILY

EXECUTED
Upon conclusion of the oral arguments, the Court directed the parties to explore a
possible settlement and to submit their respective memoranda.[10]

Unfortunately, the parties did not reach any settlement; hence, the Court, through the
Special Third Division,[11] resolved the issues on the merits through the resolution of
October 2, 2009 denying PAL's motion for reconsideration,[12] thus:
WHEREFORE, for lack of merit, the Motion for Reconsideration is
hereby DENIED with FINALITY. The assailed Decision dated July 22, 2008
is AFFIRMED with MODIFICATION in that the award of attorney's fees and expenses
of litigation is reduced to P2,000,000.00. The case is hereby REMANDED to the Labor
Arbiter solely for the purpose of computing the exact amount of the award pursuant to the
guidelines herein stated.

No further pleadings will be entertained.

SO ORDERED.[13]
The Special Third Division was unconvinced by PAL's change of theory in urging the
June 1998 Association of Airline Pilots of the Philippines (ALPAP) pilots' strike as the
reason behind the immediate retrenchment; and observed that the strike was a temporary
occurrence that did not require the immediate and sweeping retrenchment of around
1,400 cabin crew.

Not satisfied, PAL filed the Motion for Reconsideration of the Resolution of October 2,
2009 and Second Motion for Reconsideration of the Decision of July 22, 2008.[14]

On October 5, 2009, the writer of the resolution of October 2, 2009 Justice Consuelo
Ynares-Santiago, compulsorily retired from the Judiciary. Pursuant to A.M. No. 99-8-09-
SC,[15] G.R. No. 178083 was then raffled to Justice Presbitero J. Velasco, Jr., a Member
of the newly-constituted regular Third Division.[16] Upon the Court's subsequent
reorganization,[17] G.R. No. 178083 was transferred to the First Division where Justice
Velasco, Jr. was meanwhile re-assigned. Justice Velasco, Jr. subsequently inhibited
himself from the case due to personal reasons.[18] Pursuant to SC Administrative Circular
No. 84-2007, G.R. No. 178083 was again re-raffled to Justice Arturo D. Brion, whose
membership in the Second Division resulted in the transfer of G.R. No. 178083 to said
Division.[19]

On September 7, 2011, the Second Division denied with finality PAL's Second Motion
for Reconsideration of the Decision of July 22, 2008.[20]

Thereafter, PAL, through Atty. Estelito P. Mendoza, its collaborating counsel, sent a
series of letters inquiring into the propriety of the successive transfers of G.R.
No. 178083.[21] His letters were docketed as A.M. No. 11-10-1-SC.

On October 4, 2011, the Court En Banc issued a resolution:[22] (a) assuming jurisdiction

over G.R. No. 178083; (b) recalling the September 7, 2011 resolution of the Second
Division; and (c) ordering the re-raffle of G.R. No. 178083 to a new Member-in-Charge.

Resolving the issues raised by Atty. Mendoza in behalf of PAL, as well as the issues
raised against the recall of the resolution of September 7, 2011, the Court En
Banc promulgated its resolution in A.M. No. 11-10-1-SC on March 13, 2012,[23] in which
it summarized the intricate developments involving G.R. No. 178083, viz.:
To summarize all the developments that brought about the present dispute-expressed in a
format that can more readily be appreciated in terms of the Court en banc's ruling to
recall the September 7, 2011 ruling - the FASAP case, as it developed, was attended by
special and unusual circumstances that saw:

(a) the confluence of the successive retirement of three Justices (in a Division of five
Justices) who actually participated in the assailed Decision and Resolution;

(b) the change in the governing rules-from the A.M.s to the IRSC regime-which
transpired during the pendency of the case;

(c) the occurrence of a series of inhibitions in the course of the case (Justices Ruben
Reyes, Leonardo-De Castro, Corona, Velasco, and Carpio), and the absences of Justices
Sereno and Reyes at the critical time, requiring their replacement; notably, Justices
Corona, Carpio, Velasco and Leonardo-De Castro are the four most senior Members of
the Court;

(d) the three re-organizations of the divisions, which all took place during the pendency
of the case, necessitating the transfer of the case from the Third Division, to the First,
then to the Second Division;

(e) the unusual timing of Atty. Mendoza's letters, made after the ruling Division had
issued its Resolution of September 7, 2011, but before the parties received their copies of
the said Resolution; and

(f) finally, the time constraint that intervened, brought about by the parties' receipt on
September 19, 2011 of the Special Division's Resolution of September 7, 2011, and the
consequent running of the period for finality computed from this latter date; and the
Resolution would have lapsed to finality after October 4, 2011, had it not been recalled
by that date.

All these developments, in no small measure, contributed in their own peculiar way to the
confusing situations that attended the September 7, 2011 Resolution, resulting in the
recall of this Resolution by the Court en banc.[24]
In the same resolution of March 13, 2012, the Court En Banc directed the re-raffle of
G.R. No. 178083 to the remaining Justices of the former Special Third Division who
participated in resolving the issues pursuant to Section 7, Rule 2 of the Internal Rules of
the Supreme Court, explaining:
On deeper consideration, the majority now firmly holds the view that Section 7, Rule 2 of
the IRSC should have prevailed in considering the raffle and assignment of cases after the
2nd MR was accepted, as advocated by some Members within the ruling Division, as
against the general rule on inhibition under Section 3, Rule 8. The underlying
constitutional reason, of course, is the requirement of Section 4(3), Article VIII of the
Constitution already referred to above.

The general rule on statutory interpretation is that apparently conflicting provisions

should be reconciled and harmonized, as a statute must be so construed as to harmonize
and give effect to all its provisions whenever possible. Only after the failure at this
attempt at reconciliation should one provision be considered the applicable provision as
against the other.

Applying these rules by reconciling the two provisions under consideration, Section 3,

Rule 8 of the IRSC should be read as the general rule applicable to the inhibition of
a Member-in-Charge.This general rule should, however, yield where the inhibition
occurs at the late stage of the case when a decision or signed resolution is assailed
through an MR. At that point, when the situation calls for the review of the merits of the
decision or the signed resolution made by a ponente (or writer of the assailed ruling),
Section 3, Rule 8 no longer applies and must yield to Section 7, Rule 2 of the IRSC
which contemplates a situation when the ponente is no longer available, and calls for
the referral of the case for raffle among the remaining Members of the Division who
acted on the decision or on the signed resolution. This latter provision should rightly
apply as it gives those who intimately know the facts and merits of the case, through their
previous participation and deliberations, the chance to take a look at the decision or
resolution produced with their participation.
To reiterate, Section 3, Rule 8 of the IRSC is the general rule on inhibition, but it must
yield to the more specific Section 7, Rule 2 of the IRSC where the obtaining situation is
for the review on the merits of an already issued decision or resolution and the ponente or
writer is no longer available to act on the matter. On this basis, the ponente, on the merits
of the case on review, should be chosen from the remaining participating Justices,
namely, Justices Peralta and Bersamin.[25]
This last resolution impelled FASAP to file the Motion for Reconsideration [Re: The
Honorable Court's Resolution dated 13 March 2012], praying that the September 7, 2011
resolution in G.R. No. 178083 be reinstated.[26]

We directed the consolidation of G.R. No. 178083 and A.M. No. 11-10-1-SC on April

17, 2012.[27]

Issues

PAL manifests that the Motion for Reconsideration of the Resolution of October 2, 2009
and Second Motion for Reconsideration of the Decision of July 22, 2008 is its first
motion for reconsideration vis-a-vis the October 2, 2009 resolution, and its second as to
the July 22, 2008 decision. It states therein that because the Court did not address the
issues raised in its previous motion for reconsideration, it is re-submitting the same, viz.:
I

xxx THE HONORABLE COURT ERRED IN NOT GIVING CREDENCE TO THE

FOLLOWING COMPELLING EVIDENCE AND CIRCUMSTANCES CLEARLY
SHOWING PALS; DIRE FINANCIAL CONDITION AT THE TIME OF THE
RETRENCHMENT: (A) PETITIONER'S ADMISSIONS OF PAL'S FINANCIAL
LOSSES; (B) THE UNANIMOUS FINDINGS OF THE SECURITIES AND
EXCHANGE COMMISSION (SEC), THE LABOR ARBITER, THE NATIONAL
LABOR RELATIONS COMMISSION (NLRC) AND THE COURT OF APPEALS
CONFIRMING PAL'S FINANCIAL CRISIS; (C) PREVIOUS CASES DECIDED BY
THE HONORABLE COURT RECOGNIZING PAL'S DIRE FINANCIAL STATE;
AND (D) PAL BEING PLACED BY THE SEC UNDER SUSPENSION OF
PAYMENTS AND CORPORATE REHABILITATION AND RECEIVERSHIP

II

xxx THERE IS NO SUFFICIENT BASIS FOR THE HONORABLE COURT'S

CONCLUSION THAT PAL DID NOT EXERCISE GOOD FAITH [IN] ITS
PREROGATIVE TO RETRENCH EMPLOYEES

III

THE HONORABLE COURT'S RULING THAT PAL DID NOT USE FAIR AND
REASONABLE CRITERIA IN ASCERTAINING WHO WOULD BE RETRENCHED
IS CONTRARY TO ESTABLISHED FACTS, EVIDENCE ON RECORD AND THE
FINDINGS OF THE NLRC AND THE COURT OF APPEALS [28]
PAL insists that FASAP, while admitting PAL's serious financial condition, only
questioned before the Labor Arbiter the alleged unfair and unreasonable measures in
retrenching the employees;[29] that FASAP categorically manifested before the NLRC, the
CA and this Court that PAL's financial situation was not the issue but rather the manner
of terminating the 1,400 cabin crew; that the Court's disregard of FASAP's categorical
admissions was contrary to the dictates of fair play;[30] that considering that the Labor
Arbiter, the NLRC and the CA unanimously found PAL to have experienced financial
losses, the Court should have accorded such unanimous findings with respect and
finality;[31] that its being placed under suspension of payments and corporate
rehabilitation and receivership already sufficiently indicated its grave financial condition;
[32]
 and that the Court should have also taken judicial notice of the suspension of
payments and monetary claims filed against PAL that had reached and had been
consequently resolved by the Court.[33]

PAL describes the Court's conclusion that it was not suffering from tremendous financial
losses because it was on the road to recovery a year after the retrenchment as a
mere obiter dictum that was relevant only in rehabilitation proceedings; that whether or
not its supposed "stand-alone" rehabilitation indicated its ability to recover on its own
was a technical issue that the SEC was tasked to determine in the rehabilitation
proceedings; that at any rate, the supposed track to recovery in 1999 and the capital
infusion of $200,000,000.00 did not disprove the enormous losses it was sustaining; that,
on the contrary, the capital infusion accented the severe financial losses suffered because
the capital infusion was a condition precedent to the approval of the amended and
restated rehabilitation plan by the Securities and Exchange Commission (SEC) with the
conformity of PAL's creditors; and that PAL took nine years to exit from rehabilitation.[34]

As regards the implementation of the retrenchment program in good faith, PAL argues
that it exercised sound management prerogatives and business judgment despite its
critical financial condition; that it did not act in due haste in terminating the services of
the affected employees considering that FASAP was being consulted thereon as early as
February 17, 1998; that it abandoned "Plan 14" due to intervening events, and instead
proceeded to implement "Plan 22" which led to the recall/rehire of some of the retrenched
employees;[35] and that in selecting the employees to be retrenched, it adopted a fair and
reasonable criteria pursuant to the collective bargaining agreement (CBA) where
performance efficiency ratings and inverse seniority were basic considerations. [36]

With reference to the Court's resolution of October 2, 2009, PAL maintains that:
I

PAL HAS NOT CHANGED ITS POSITION THAT THE REDUCTION OF PAL'S
LABOR FORCE OF ABOUT 5,000 EMPLOYEES, INCLUDING THE 1,423 FASAP
MEMBERS, WAS THE RESULT OF A CONFLUENCE OF EVENTS, THE
EXPANSION OF PAL'S FLEET, THE ASIAN FINANCIAL CRISIS OF 1997, AND
ITS CONSEQUENCES ON PAL'S OPERATIONS, AND THE PILOT'S STRIKE OF
JUNE 1998, AND THAT PAL SURVIVED BECAUSE OF THE IMPLEMENTATION
OF ITS REHABILITATION PLAN (LATER "AMENDED AND RESTATED
REHABILITATION PLAN") WHICH INCLUDED AMONG ITS COMPONENT
ELEMENTS, THE REDUCTION OF LABOR FORCE

II

THE HONORABLE COURT SHOULD HAVE UPHELD PAL'S REDUCTION OF

THE NUMBER OF CABIN CREW IN ACCORD WITH ITS ENTRY INTO
REHABILITATION AND THE CONSEQUENT TERMINATION OF EMPLOYMENT
OF CABIN CREW PERSONNEL AS A VALID EXERCISE OF MANAGEMENT
PREROGATIVE

III

PAL HAS SUFFICIENTLY ESTABLISHED THE SEVERITY OF ITS FINANCIAL

LOSSES, SO AS TO JUSTIFY THE ENTRY INTO REHABILITATION AND THE
CONSEQUENT REDUCTION OF CABIN CREW PERSONNEL

IV

THE HONORABLE COURT ERRED IN HOLDING THAT THERE WAS NO

SUFFICIENT BASIS FOR PAL TO IMPLEMENT THE RETRENCHMENT OF
CABIN CREW PERSONNEL

UNDER THE CIRCUMSTANCES, THE PRIOR IMPLEMENTATION OF LESS

DRASTIC COST-CUTTING MEASURES WAS NO LONGER POSSIBLE AND
SHOULD NOT BE REQUIRED FOR A VALID RETRENCHMENT; IN ANY EVENT,
PAL HAD IMPLEMENTED LESS DRASTIC COST-CUTTING MEASURES
BEFORE IMPLEMENTING THE DOWNSIZING PROGRAM

VI

QUITCLAIMS WERE VALIDLY EXECUTED[37]

PAL contends that the October 2, 2009 resolution focused on an entirely new basis that of
PAL's supposed change in theory. It denies having changed its theory, however, and
maintains that the reduction of its workforce had resulted from a confluence of several
events, like the flight expansion; the 1997 Asian financial crisis; and the ALPAP pilots'
strike.[38] PAL explains that when the pilots struck in June 1998, it had to decide quickly
as it was then facing closure in 18 days due to serious financial hemorrhage; hence, the
strike came as the final blow.

PAL posits that its business decision to downsize was far from being a hasty, knee-jerk
reaction; that the reduction of cabin crew personnel was an integral part of its corporate
rehabilitation, and, such being a management decision, the Court could not supplant the
decision with its own judgment' and that the inaccurate depiction of the strike as a
temporary disturbance was lamentable in light of its imminent financial collapse due to
the concerted action.[39]

PAL submits that the Court's declaration that PAL failed to prove its financial losses and
to explore less drastic cost-cutting measures did not at all jibe with the totality of the
circumstances and evidence presented; that the consistent findings of the Labor Arbiter,
the NLRC, the CA and even the SEC, acknowledging its serious financial difficulties
could not be ignored or disregarded; and that the challenged rulings of the Court
conflicted with the pronouncements made in Garcia v. Philippine Airlines, Inc.[40] and
related cases[41] that acknowledged PAL's grave financial distress.

In its comment,[42] FASAP counters that a second motion for reconsideration was a

prohibited pleading; that PAL failed to prove that it had complied with the requirements
for a valid retrenchment by not submitting its audited financial statements; that PAL had
immediately terminated the employees without prior resort to less drastic measures; and
that PAL did not observe any criteria in selecting the employees to be retrenched.

FASAP stresses that the October 4, 2011 resolution recalling the September 7, 2011
decision was void for failure to comply with Section 14, Article VIII of the 1987
Constitution; that the participation of Chief Justice Renato C. Corona who later on
inhibited from G.R. No. 178083 had further voided the proceedings; that the 1987
Constitution did not require that a case should be raffled to the Members of the Division
who had previously decided it; and that there was no error in raffling the case to Justice
Brion, or, even granting that there was error, such error was merely procedural.

The issues are restated as follows:

Procedural

IS THE RESOLUTION DATED OCTOBER 4, 2011 IN A.M. NO. 11-10-1-SC

(RECALLING THE SEPTEMBER 7, 2011 RESOLUTION) VOID FOR FAILURE TO
COMPLY WITH SECTION 14, RULE VIII OF THE 1987 CONSTITUTION?
 II

MAY THE COURT ENTERTAIN THE SECOND MOTION FOR

RECONSIDERATION FILED BY THE RESPONDENT PAL?
Substantive

I
DID PAL LAWFULLY RETRENCH THE 1,400 CABIN CREW PERSONNEL?
A

DID PAL PRESENT SUFFICIENT EVIDENCE TO PROVE THAT IT INCURRED

SERIOUS FINANCIAL LOSSES WHICH JUSTIFIED THE DOWNSIZING OF ITS
CABIN CREW?

DID PAL OBSERVE GOOD FAITH IN IMPLEMENTING THE RETRENCHMENT

PROGRAM?

DID PAL COMPLY WITH SECTION 112 OF THE PAL-FASAP CBA IN

SELECTING THE EMPLOYEES TO BE RETRENCHED?
III

ASSUMING THAT PAL VALIDLY IMPLEMENTED ITS RETRENCHMENT

PROGRAM, DID THE RETRENCHED EMPLOYEES SIGN VALID QUITCLAIMS?
Ruling of the Court

After a thorough review of the records and all previous dispositions,

we GRANT the Motion for Reconsideration of the Resolution of October 2, 2009 and
Second Motion for Reconsideration of the Decision of July 22, 2008 filed by PAL and
Chiong; and DENY the Motion for Reconsideration [Re: The Honorable Court's
Resolution dated 13 March 2012][43] of FASAP.

Accordingly, we REVERSE the July 22, 2008 decision and the October 2, 2009
resolution; and AFFIRM the decision promulgated on August 23, 2006 by the CA.

The resolution of October 4, 2011 was a valid issuance of the Court

The petitioner urges the Court to declare as void the October 4, 2011 resolution
promulgated in A.M. No. 11-10-1-SC for not citing any legal basis in recalling the
September 7, 2011 resolution of the Second Division.

The urging of the petitioner is gravely flawed and mistaken.

The requirement for the Court to state the legal and factual basis for its decisions is found
in Section 14, Article VIII of the 1987 Constitution, which reads:
Section 14. No decision shall be rendered by any court without expressing therein clearly
and distinctly the facts and the law on which it is based.
The constitutional provision clearly indicates that it contemplates only a decision, which
is the judgment or order that adjudicates on the merits of a case. This is clear from the
text and tenor of Section 1, Rule 36 of the Rules of Court, the rule that implements the
constitutional provision, to wit:
Section 1. Rendition of judgments and final orders. A judgment or final order
determining the merits of the case shall be in writing personally and directly prepared
by the judge, stating clearly and distinctly the facts and the law on which it is based,
signed by him, and filed with the clerk of court.
The October 4, 2011 resolution did not adjudicate on the merits of G.R. No. 178083. We
explicitly stated so in the resolution of March 13, 2012. What we thereby did was instead
to exercise the Court's inherent power to recall orders and resolutions before they attain
finality. In so doing, the Court only exercised prudence in order to ensure that the Second
Division was vested with the appropriate legal competence in accordance with and under
the Court's prevailing internal rules to review and resolve the pending motion for
reconsideration. We rationalized the exercise thusly:
As the narration in this Resolution shows, the Court acted on its own pursuant to its
power to recall its own orders and resolutions before their finality. The October 4,
2011 Resolution was issued to determine the propriety of the September 7, 2011
Resolution given the facts that came to light after the ruling Division's examination
of the records. To point out the obvious, the recall was not a ruling on the merits
and did not constitute the reversal of the substantive issues already decided upon by
the Court in the FASAP case in its previously issued Decision (of July 22, 2008) and
Resolution (of October 2, 2009). In short, the October 4, 2011 Resolution was not meant
and was never intended to favor either party, but to simply remove any doubt about the
validity of the ruling Division's action on the case. The case, in the ruling Division's
view, could be brought to the Court en banc since it is one of "sufficient importance"; at
the very least, it involves the interpretation of conflicting provisions of the IRSC with
potential jurisdictional implications.

At the time the Members of the ruling Division went to the Chief Justice to recommend a
recall, there was no clear indication of how they would definitively settle the unresolved
legal questions among themselves. The only matter legally certain was the looming
finality of the September 7, 2011 Resolution if it would not be immediately recalled by
the Court en banc by October 4, 2011. No unanimity among the Members of the ruling
Division could be gathered on the unresolved legal questions; thus, they concluded that
the matter is best determined by the Court en banc as it potentially involved questions of
jurisdiction and interpretation of conflicting provisions of the IRSC. To the extent of the
recommended recall, the ruling Division was unanimous and the Members communicated
this intent to the Chief Justice in clear and unequivocal terms. [44] (Bold underscoring for
emphasis)
It should further be clear from the same March 13, 2012 resolution that the factual
considerations for issuing the recall order were intentionally omitted therefrom in
obeisance to the prohibition against public disclosure of the internal deliberations of the
Court.[45]

Still, FASAP assails the impropriety of the recall of the September 7, 2011 resolution. It
contends that the raffle of G.R. No. 178083 to the Second Division had not been
erroneous but in "full and complete consonance with Section 4(3) Article VIII of the
Constitution;"[46] and that any error thereby committed was only procedural, and thus a
mere "harmless error" that did not invalidate the prior rulings made in G.R. No. 178083.
[47]

The contention of FASAP lacks substance and persuasion.

The Court carefully expounded in the March 13, 2012 resolution on the resulting
jurisdictional conflict that arose from the raffling of G.R. No. 178083 resulting from the
successive retirements and inhibitions by several Justices who at one time or another had
been assigned to take part in the case. The Court likewise highlighted the importance of
referring the case to the remaining Members who had actually participated in the
deliberations, for not only did such participating Justices intimately know the facts and
merits of the parties' arguments but doing so would give to such Justices the opportunity
to review their decision or resolution in which they had taken part. As it turned out, only
Justice Diosdado M. Peralta and Justice Lucas P. Bersamin were the remaining Members
of the Special Third Division, and the task of being in charge procedurally fell on either
of them.[48] As such, it is fallacious for FASAP to still insist that the previous raffle had
complied with Section 4(3), Article VIII of the 1987 Constitution just because the
Members of the Division actually took part in the deliberations.

FASAP is further wrong to insist on the application of the harmless error rule. The rule is
embodied in Section 6, Rule 51 of the Rules of Court, which states:
Section 6. Harmless error. No error in either the admission or the exclusion of evidence
and no error or defect in any ruling or order or in anything done or omitted by the trial
court or by any of the parties is ground for granting a new trial or for setting aside,
modifying, or otherwise disturbing a judgment or order, unless refusal to take such action
appears to the court inconsistent with substantial justice. The court at every stage of the
proceedings must disregard any error or defect which does not affect the substantial
rights of the parties.
The harmless error rule obtains during review of the things done by either the trial court
or by any of the parties themselves in the course of trial, and any error thereby found does
not affect the substantial rights or even the merits of the case. The Court has had
occasions to apply the rule in the correction of a misspelled name due to clerical error;
[49]
 the signing of the decedents' names in the notice of appeal by the heirs;[50] the trial
court's treatment of the testimony of the party as an adverse witness during cross-
examination by his own counsel;[51] and the failure of the trial court to give the plaintiffs
the opportunity to orally argue against a motion.[52] All of the errors extant in the
mentioned situations did not have the effect of altering the dispositions rendered by the
respective trial courts. Evidently, therefore, the rule had no appropriate application
herein.

The Court sees no justification for the urging of FASAP that the participation of the late
Chief Justice Corona voided the recall order. The urging derives from FASAP's failure to
distinguish the role of the Chief Justice as the Presiding Officer of the Banc. In this
regard, we advert to the March 13, 2012 resolution, where the Court made the following
observation:
A final point that needs to be fully clarified at this juncture, in light of the allegations of
the Dissent is the role of the Chief Justice in the recall of the September 7, 2011
Resolution. As can be seen from the xxx narration, the Chief Justice acted only on
the recommendation of the ruling Division, since he had inhibited himself from
participation in the case long before. The confusion on this matter could have been
brought about by the Chief Justice's role as the Presiding Officer of the Court en
banc (particularly in its meeting of October 4, 2011), and the fact that the four most
senior Justices of the Court (namely, Justices Corona, Carpio, Velasco and
Leonardo-De Castro) inhibited from participating in the case. In the absence of any
clear personal malicious participation, it is neither correct nor proper to hold the
Chief Justice personally accountable for the collegial ruling of the Court en banc.
[53]
 (Bold underscoring supplied for emphasis)
To reiterate, the Court, whether sitting En Banc or in Division, acts as a collegial body.
By virtue of the collegiality, the Chief Justice alone cannot promulgate or issue any
decisions or orders. In Complaint of Mr. Aurelio Indencia Arrienda Against SC Justices
Puna, Kapunan, Pardo, Ynares Santiago,[54] the Court has elucidated on the collegial
nature of the Court in relation to the role of the Chief Justice, viz.:
The complainant's vituperation against the Chief Justice on account of what he perceived
was the latter's refusal "to take a direct positive and favorable action" on his letters of
appeal overstepped the limits of proper conduct. It betrayed his lack of understanding of a
fundamental principle in our system of laws. Although the Chief Justice is primus inter
pares, he cannot legally decide a case on his own because of the Court's nature as a
collegial body. Neither can the Chief Justice, by himself, overturn the decision of the
Court, whether of a division or the en banc.

There is only one Supreme Court from whose decisions all other courts are required to
take their bearings. While most of the Court's work is performed by its three divisions,
the Court remains one court-single, unitary, complete and supreme. Flowing from this is
the fact that, while individual justices may dissent or only partially concur, when the
Court states what the law is, it speaks with only one voice. Any doctrine or principle of
law laid down by the court may be modified or reversed only by the Court en banc.[55]
Lastly, any lingering doubt on the validity of the recall order should be dispelled by the
fact that the Court upheld its issuance of the order through the March 13, 2012 resolution,
whereby the Court disposed:
WHEREFORE, premises considered, we hereby confirm that the Court en banc has
assumed jurisdiction over the resolution of the merits of the motions for
reconsideration of Philippine Airlines, Inc., addressing our July 22, 2008 Decision
and October 2, 2009 Resolution; and that the September 7, 2011 ruling of the
Second Division has been effectively recalled. This case should now be raffled either to
Justice Lucas P. Bersamin or Justice Diosdado M. Peralta (the remaining members of the
case) as Member-in-Charge in resolving the merits of these motions.

xxxx

The Flight Attendants and Stewards Association of the Philippines' Motion for
Reconsideration of October 17, 2011 is hereby denied; the recall of the September 7,
2011 Resolution was made by the Court on its own before the ruling's finality
pursuant to the Court's power of control over its orders and resolutions. Thus, no
due process issue ever arose.

SO ORDERED.
II

PAL's Second Motion for Reconsideration of the Decision of July 22, 2008 could be

allowed in the higher interest of justice

FASAP asserts that PAL's Second Motion for Reconsideration of the Decision of July 22,
2008 was a prohibited pleading; and that the July 22, 2008 decision was not anymore
subject to reconsideration due to its having already attained finality.

FASAP's assertions are unwarranted.

With the Court's resolution of January 20, 2010 granting PAL's motion for leave to file a
second motion for reconsideration,[56] PAL's Second Motion for Reconsideration of the
Decision of July 22, 2008 could no longer be challenged as a prohibited pleading. It is
already settled that the granting of the motion for leave to file and admit a second motion
for reconsideration authorizes the filing of the second motion for reconsideration.
[57]
 Thereby, the second motion for reconsideration is no longer a prohibited pleading, and
the Court cannot deny it on such basis alone.[58]
Nonetheless, we should stress that the rule prohibiting the filing of a second motion for
reconsideration is by no means absolute. Although Section 2, Rule 52 of the Rules of
Court disallows the filing of a second motion for reconsideration,[59] the Internal Rules of
the Supreme Court (IRSC) allows an exception, to wit:
Section 3. Second motion for reconsideration. The Court shall not entertain a second
motion for reconsideration, and any exception to this rule can only be granted in the
higher interest of justice by the Court en banc upon a vote of at least two-thirds of
its actual membership. There is reconsideration "in the higher interest of justice" when
the assailed decision is not only legally erroneous, but is likewise patently unjust and
potentially capable of causing unwarranted and irremediable injury or damage to the
parties. A second motion for reconsideration can only be entertained before the
ruling sought to be reconsidered becomes final by operation of law or by the Court's
declaration.

In the Division, a vote of three Members shall be required to elevate a second motion for
reconsideration to the Court en banc.
The conditions that must concur in order for the Court to entertain a second motion for
reconsideration are the following, namely:

1. The motion should satisfactorily explain why granting the same would be in
the higher interest of justice;

2. The motion must be made before the ruling sought to be reconsidered

attains finality;

3. If the ruling sought to be reconsidered was rendered by the Court through

one of its Divisions, at least three members of the Division should vote to
elevate the case to the Court En Banc; and

4. The favorable vote of at least two-thirds of the Court En Banc's actual

membership must be mustered for the second motion for reconsideration to
be granted.[60]

Under the IRSC, a second motion for reconsideration may be allowed to prosper upon a
showing by the movant that a reconsideration of the previous ruling is necessary in the
higher interest of justice. There is higher interest of justice when the assailed decision is
not only legally erroneous, but is likewise patently unjust and potentially capable of
causing unwarranted and irremediable injury or damage to the parties.[61]

PAL maintains that the July 22, 2008 decision contravened prevailing
jurisprudence[62] that had recognized its precarious financial condition;[63] that the decision
focused on PAL's inability to prove its financial losses due to its failure to submit audited
financial statements; that the decision ignored the common findings on the serious
financial losses suffered by PAL made by the Labor Arbiter, the NLRC, the CA and even
the SEC;[64] and that the decision and the subsequent resolution denying PAL's motion for
reconsideration would negate whatever financial progress it had achieved during its
rehabilitation.[65]

These arguments of PAL sufficed to show that the assailed decision contravened settled
jurisprudence on PAL's precarious financial condition. It cannot be gainsaid that there
were other businesses undergoing rehabilitation that would also be bound or negatively
affected by the July 22, 2008 decision. This was the higher interest of justice that the
Court sought to address, which the dissent by Justice Leonen is adamant not to accept.
[66]
 Hence, we deemed it just and prudent to allow PAL's Second Motion for
Reconsideration of the Decision of July 22, 2008.

It is timely to note, too, that the July 22, 2008 decision did not yet attain finality. The
October 4, 2011 resolution recalled the September 7, 2011 resolution denying PAL's first
motion for reconsideration. Consequently, the July 22, 2008 decision did not attain
finality.

The dissent by Justice Leonen nonetheless proposes a contrary view that both the July 22,
2008 decision and the October 2, 2009 resolution had become final on November 4, 2009
upon the lapse of 15 days following PAL's receipt of a copy of the resolution. To him, the
grant of leave to PAL to file the second motion for reconsideration only meant that the
motion was no longer prohibited but it did not stay the running of the reglementary
period of 15 days. He submits that the Court's grant of the motion for leave to file the
second motion for reconsideration did not stop the October 2, 2009 resolution from
becoming final because a judgment becomes final by operation of law, not by judicial
declaration.[67]

The proposition of the dissent is unacceptable.

In granting the motion for leave to file the second motion for reconsideration, the Court
could not have intended to deceive the movants by allowing them to revel in some hollow
victory. The proposition manifestly contravened the basic tenets of justice and fairness.

As we see it, the dissent must have inadvertently ignored the procedural effect that a
second motion for reconsideration based on an allowable ground suspended the running
of the period for appeal from the date of the filing of the motion until such time that the
same was acted upon and granted.[68] Correspondingly, granting the motion for leave to
file a second motion for reconsideration has the effect of preventing the challenged
decision from attaining finality. This is the reason why the second motion for
reconsideration should present extraordinarily persuasive reasons. Indeed, allowing pro
forma motions would indefinitely avoid the assailed judgment from attaining finality.[69]
By granting PAL's motion for leave to file a second motion for reconsideration, the Court
effectively averted the July 22, 2008 decision and the October 2, 2009 resolution from
attaining finality. Worthy of reiteration, too, is that the March 13, 2012 resolution
expressly recalled the September 7, 2011 resolution.

Given the foregoing, the conclusion stated in the dissent that the Banc was divested of the
jurisdiction to entertain the second motion for reconsideration for being a "third motion
for reconsideration;"[70] and the unfair remark in the dissent that "[t]he basis of the
supposed residual power of the Court En Banc to, take on its own, take cognizance of
Division cases is therefore suspect"[71] are immediately rejected as absolutely legally and
factually unfounded.

To start with, there was no "third motion for reconsideration" to speak of. The September
11, 2011 resolution denying PAL's second motion for reconsideration had been recalled
by the October 4, 2011 resolution. Hence, PAL's motion for reconsideration remained
unresolved, negating the assertion of the dissent that the Court was resolving the second
motion for reconsideration "for the second time."[72]

Also, the dissent takes issue against our having assumed jurisdiction over G.R.
No. 178083 despite the clear reference made in the October 4, 2011 resolution to Sections
3(m) and (n), Rule 2 of the IRSC. Relying largely on the Court's construction of Section
4(3), Article VIII of the 1987 Constitution in Fortich v. Corona,[73] the dissent opines that
the Banc could not act as an appellate court in relation to the decisions of the Division;
[74]
 and that the Banc could not take cognizance of any case in the Divisions except upon a
prior consulta from the ruling Division pursuant to Section 3(m), in relation to Section
3(1), Rule 2 of the IRSC.[75]

The Court disagrees with the dissent's narrow view respecting the residual powers of
the Banc.

Fortich v. Corona, which has expounded on the authority of the Banc to accept cases
from the Divisions, is still the prevailing jurisprudence regarding the construction of
Section 4(3), Article VIII of the 1987 Constitution. However, Fortich v. Corona does not
apply herein. It is notable that Fortich v. Corona sprung from the results of the voting on
the motion for reconsideration filed by the Sumilao Farmers. The vote ended in an
equally divided Division ("two-two"). From there, the Sumilao Farmers sought to elevate
the matter to the Banc based on Section 4(3), Article VIII because the required three-
member majority vote was not reached. However, the factual milieu in Fortich v.
Corona is not on all fours with that in this case.

In the March 13, 2012 resolution, the Court recounted the exigencies that had prompted
the Banc to take cognizance of the matter, to wit:
On September 28, 2011, the Letters dated September 13 and 20, 2011 of Atty. Mendoza
to Atty. Vidal (asking that his inquiry be referred to the relevant Division Members who
took part on the September 7, 2011 Resolution) were "NOTED" by the regular Second
Division. The Members of the ruling Division also met to consider the queries posed by
Atty. Mendoza. Justice Brion met with the Members of the ruling Division (composed of
Justices Brion, Peralta, Perez, Bersamin, and Mendoza), rather than with the regular
Second Division (composed of Justices Carpio, Brion, Perez, and Sereno), as the former
were the active participants in the September 7, 2011 Resolution.

In these meetings, some of the Members of the ruling Division saw the problems pointed
out above, some of which indicated that the ruling Division might have had no authority
to rule on the case. Specifically, their discussions centered on the application of A.M. No.
99-8-09-SC for the incidents that transpired prior to the effectivity of the IRSC, and on
the conflicting rules under the IRSC - Section 3, Rule 8 on the effects of inhibition and
Section 7, Rule 2 on the resolution of MRs.

A.M. No. 99-8-09-SC indicated the general rule that the re-raffle shall be made among
the other Members of the same Division who participated in rendering the decision or
resolution and who concurred therein, which should now apply because the ruling on the
case is no longer final after the cast had been opened for review on the merits. In other
words, after acceptance by the Third Division, through Justice Velasco, of the 2nd MR,
there should have been a referral to raffle because the excepting qualification that the
Clerk of Court cited no longer applied; what was being reviewed were the merits of the
case and the review should be by the same Justices who had originally issued the original
Decision and the subsequent Resolution, or by whoever of these Justices are still left in
the Court, pursuant to the same A.M. No. 99-8-09-SC.

On the other hand, the raffle to Justice Brion was made by applying AC No. 84-2007 that
had been superseded by Section 3, Rule 8 of the IRSC. Even the use of this IRSC
provision, however, would not solve the problem, as its use still raised the question of the
provision that should really apply in the resolution of the MR: should it be Section 3,
Rule 8 on the inhibition of a Member-in-Charge, or Section 7, Rule 2 of the IRSC on the
inhibition of the ponente when an MR of a decision and a signed resolution was filed.
xxx

xxxx  xxxx  xxxx

A comparison of these two provisions shows the semantic sources of the seeming
conflict: Section 7, Rule 2 refers to a situation where the ponente has retired, is no longer
a Member of the Court, is disqualified, or has inhibited himself from acting on the case;
while Section 3, Rule 8 generally refers to the inhibition of a Member-in-Charge who
does not need to be the writer of the decision or resolution under review.
Significantly, Section 7, Rule 2 expressly uses the word ponente (not Member-in-Charge)
and refers to a specific situation where the ponente (or the writer of the Decision or the
Resolution) is no longer with the Court or is otherwise unavailable to review the decision
or resolution he or she wrote. Section 3, Rule 8, on the other hand, expressly uses the
term Member-in-Charge and generally refers to his or her inhibition, without reference to
the stage of the proceeding when the inhibition is made.

Under Section 7, Rule 2, the case should have been re-raffled and assigned to anyone of
Justices Nachura (who did not retire until June 13, 2011), Peralta, or Bersamin, either (1)
after the acceptance of the 2nd MR (because the original rulings were no longer final); or
(2) after Justice Velasco's inhibition because the same condition existed, i.e., the need for
a review by the same Justices who rendered the decision or resolution. As previously
mentioned, Justice Nachura participated in both the original Decision and the subsequent
Resolution, and all three Justices were the remaining Members who voted on the October
2, 2009 Resolution. On the other hand, if Section 3, Rule 8 were to be solely applied after
Justice Velasco's inhibition, the Clerk of Court would be correct in her assessment and
the raffle to Justice Brion, as a Member outside of Justice Velasco's Division, was
correct.

These were the legal considerations that largely confronted the ruling Division in late
September 2011 when it deliberated on what to do with Atty. Mendoza's letters.

The propriety of and grounds for the recall of the September 7, 2011 Resolution

Most unfortunately, the above unresolved questions were even further compounded in the
course of the deliberations of the Members of the ruling Division when they were
informed that the parties received the ruling on September 19, 2011, and this ruling
would lapse to finality after the 15th day, or after October 4, 2011.

Thus, on September 30, 2011 (a Friday), the Members went to Chief Justice Corona and
recommended, as a prudent move, that the September 7, 2011 Resolution be recalled at
the very latest on October 4, 2011, and that the case be referred to the Court en banc for a
ruling on the questions Atty. Mendoza asked. The consequence, of course, of a failure to
recall their ruling was for that Resolution to lapse to finality. After finality, any recall for
lack of jurisdiction of the ruling Division might not be understood by the parties and
could lead to a charge of flip-flopping against the Court. The basis for the referral is
Section 3(n), Rule 2 of the IRSC, which provides:

RULE 2.

OPERATING STRUCTURES
Section 3. Court en banc matters and cases. - The Court en banc shall act on the
following matters and cases:
xxxx

(n) cases that the Court en banc deems of sufficient importance to merit its attention[.]
Ruling positively, the Court en banc duly issued its disputed October 4, 2011 Resolution
recalling the September 7, 2011 Resolution and ordering the re-raffle of the case to a new
Member-in-Charge. Later in the day, the Court received PAL's Motion to Vacate (the
September 7, 2011 ruling) dated October 3, 2011. This was followed by FASAP's MR
dated October 17, 2011 addressing the Court Resolution of October 4, 2011. The FASAP
MR mainly invoked the violation of its right to due process as the recall arose from the
Court's ex parte consideration of mere letters from one of the counsels of the parties.

As the narration in this Resolution shows, the Court acted on its own pursuant to its
power to recall its own orders and resolutions before their finality. The October 4, 2011
Resolution was issued to determine the propriety of the September 7, 2011 Resolution
given the facts that came to light after the ruling Division's examination of the records.
To point out the obvious, the recall was not a ruling on the merits and did not constitute
the reversal of the substantive issues already decided upon by the Court in the FASAP
case in its previously issued Decision (of July 22, 2008) and Resolution (of October 2,
2009). In short, the October 4, 2011 Resolution was not meant and was never intended to
favor either party, but to simply remove any doubt about the validity of the ruling
Division's action on the case. The case, in the ruling Division's view, could be brought to
the Court en banc since it is one of "sufficient importance"; at the very least, it involves
the interpretation of conflicting provisions of the IRSC with potential jurisdictional
implications.

At the time the Members of the ruling Division went to the Chief Justice to recommend a
recall, there was no clear indication of how they would definitively settle the unresolved
legal questions among themselves. The only matter legally certain was the looming
finality of the September 7, 2011 Resolution if it would not be immediately recalled by
the Court en banc by October 4, 2011. No unanimity among the Members of the ruling
Division could be gathered on the unresolved legal questions; thus, they concluded that
the matter is best determined by the Court en banc as it potentially involved questions of
jurisdiction and interpretation of conflicting provisions of the IRSC. To the extent of the
recommended recall, the ruling Division was unanimous and the Members communicated
this intent to the Chief Justice in clear and unequivocal terms. [76] (Bold scoring supplied
for emphasis)
It is well to stress that the Banc could not have assumed jurisdiction were it not for the
initiative of Justice Arturo V. Brion who consulted the Members of the ruling Division as
well as Chief Justice Corona regarding the jurisdictional implications of the successive
retirements, transfers, and inhibitions by the Members of the ruling Division. This move
by Justice Brion led to the referral of the case to the Banc in accordance with Section
3(1), Rule 2 of the IRSC that provided, among others, that any Member of the Division
could request the Court En Banc to take cognizance of cases that fell under paragraph
(m). This referral by the ruling Division became the basis for the Banc to issue its
October 4, 2011 resolution.

For sure, the Banc, by assuming jurisdiction over the case, did not seek to act as appellate
body in relation to the acts of the ruling Division, contrary to the dissent's position.[77] The
Banc's recall of the resolution of September 7, 2011 should not be so characterized,
considering that the Banc did not thereby rule on the merits of the case, and did not
thereby reverse the July 22, 2008 decision and the October 2, 2009 resolution. The
referral of the case to the Banc was done to address the conflict among the provisions of
the IRSC that had potential jurisdictional implications on the ruling made by the Second
Division.

At any rate, PAL constantly raised in its motions for reconsideration that the ruling
Division had seriously erred not only in ignoring the consistent findings about its
precarious financial situation by the Labor Arbiter, the NLRC, the CA and the SEC, but
also in disregarding the pronouncements by the Court of its serious fiscal condition. To
be clear, because the serious challenge by PAL against the ruling of the Third Division
was anchored on the Third Division's having ignored or reversed settled doctrines or
principles of law, only the Banc could assume jurisdiction and decide to either affirm,
reverse or modify the earlier decision. The rationale for this arrangement has been
expressed in Lu v. Lu Ym[78] thuswise:
It is argued that the assailed Resolutions in the present cases have already become final,
since a second motion for reconsideration is prohibited except for extraordinarily
persuasive reasons and only upon express leave first obtained; and that once a judgment
attains finality, it thereby becomes immutable and unalterable, however unjust the result
of error may appear.

The contention, however, misses an important point. The doctrine of immutability of

decisions applies only to final and executory decisions. Since the present cases may
involve a modification or reversal of a Court-ordained doctrine or principle, the judgment
rendered by the Special Third Division may be considered unconstitutional, hence, it can
never become final. It finds mooring in the deliberations of the framers of the
Constitution:
On proposed Section 3(4), Commissioner Natividad asked what the effect would be of a
decision that violates the proviso that "no doctrine or principle of law laid down by the
court in a decision rendered en banc or in division may be modified or reversed except by
the court en banc." The answer given was that such a decision would be invalid.
Following up, Father Bernas asked whether the decision, if not challenged, could become
final and binding at least on the parties. Romulo answered that, since such a decision
would be in excess of jurisdiction, the decision on the case could be reopened
anytime. (emphasis and underscoring supplied)
A decision rendered by a Division of this Court in violation of this constitutional
provision would be in excess of jurisdiction and, therefore, invalid. Any entry of
judgment may thus be said to be "inefficacious" since the decision is void for being
unconstitutional.

While it is true that the Court en banc exercises no appellate jurisdiction over its
Divisions, Justice Minerva Gonzaga-Reyes opined in Firestone and concededly
recognized that "[t]he only constraint is that any doctrine or principle of law laid down by
the Court, either rendered en banc or in division, may be overturned or reversed only by
the Court sitting en banc."

That a judgment must become final at some definite point at the risk of occasional error
cannot be appreciated in a case that embroils not only a general allegation of "occasional
error" but also a serious accusation of a violation of the Constitution, viz., that doctrines
or principles of law were modified or reversed by the Court's Special Third Division
August 4, 2009 Resolution.

The law allows a determination at first impression that a doctrine or principle laid down
by the court en banc or in division may be modified or reversed in a case which would
warrant a referral to the Court En Banc. The use of the word "may" instead of "shall"
connotes probability, not certainty, of modification or reversal of a doctrine, as may be
deemed by the Court. Ultimately, it is the entire Court which shall decide on the
acceptance of the referral and, if so, "to reconcile any seeming conflict, to reverse or
modify an earlier decision, and to declare the Court's doctrine."

The Court has the power and prerogative to suspend its own rules and to exempt a case
from their operation if and when justice requires it, as in the present circumstance where
movant filed a motion for leave after the prompt submission of a second motion for
reconsideration but, nonetheless, still within 15 days from receipt of the last assailed
resolution.[79]
Lastly, the dissent proposes that a unanimous vote is required to grant PAL's Second
Motion for Reconsideration of the Decision of July 22, 2008.[80] The dissent justifies the
proposal by stating that "[a] unanimous court would debate and deliberate more fully
compared with a nonunanimous court."[81]

The radical proposal of the dissent is bereft of legal moorings. Neither the 1987
Constitution nor the IRSC demands such unanimous vote. Under Section 4(2), Article
VIII of the 1987 Constitution, decisions by the Banc shall be attained by a "concurrence
of a majority of the Members who actually took part in the deliberations on the issues in
the case and voted thereon." As a collegial body, therefore, the Court votes after
deliberating on the case, and only a majority vote is required,[82] unless the 1987
Constitution specifies otherwise. In all the deliberations by the Court, dissenting and
concurring opinions are welcome, they being seen as sound manifestations of "the license
of individual Justices or groups of Justices to separate themselves from "the Court's"
adjudication of the case before them,"[83] thus:
[C]oncurring and dissenting opinions serve functions quite consistent with a collegial
understanding of the Court. Internally within the Court itself-dissent promotes and
improves deliberation and judgment. Arguments on either side of a disagreement test the
strength of their rivals and demand attention and response. The opportunity for challenge
and response afforded by the publication of dissenting and concurring opinions is a close
and sympathetic neighbor of the obligation of reasoned justification.

Externally for lower courts, the parties, and interested bystanders-concurring and
dissenting opinions are important guides to the dynamic "meaning" of a decision by the
Court. From a collegial perspective, dissenting and concurring opinions offer grounds for
understanding how individual Justices, entirely faithful to their Court's product, will
interpret that product. The meaning each Justice brings to the product of her Court will
inevitably be shaped by elements of value and judgment she brings to the interpretive
endeavor; her dissent from the Court's conclusions in the case in question is likely to be
dense with insight into these aspects of her judicial persona.[84]
III

PAL implemented a valid retrenchment program

Retrenchment or downsizing is a mode of terminating employment initiated by the

employer through no fault of the employee and without prejudice to the latter, resorted to
by management during periods of business recession, industrial depression or seasonal
fluctuations or during lulls over shortage of materials. It is a reduction in manpower, a
measure utilized by an employer to minimize business losses incurred in the operation of
its business.[85]

Anent retrenchment, Article 298[86] of the Labor Code provides as follows:

Article 298. Closure of Establishment and Reduction of Personnel. - The employer may
also terminate the employment of any employee due to the installation of labor saving
devices, redundancy, retrenchment to prevent losses or the closing or cessation of
operation of the establishment or undertaking unless the closing is for the purpose of
circumventing the provisions of this Title, by serving a written notice on the workers and
the Ministry of Labor and Employment at least one (1) month before the intended date
thereof. In case of termination due to the installation of labor saving devices or
redundancy, the worker affected thereby shall be entitled to a separation pay equivalent to
at least his one (1) month pay or to at least one (1) month pay for every year of service,
whichever is higher. In case of retrenchment to prevent losses and in cases of closure or
cessation of operations of establishment or undertaking not due to serious business losses
or financial reverses, the separation pay shall be equivalent to one (1) month pay or to at
least one-half (1/2) month pay for every year of service, whichever is higher. A fraction
of at least six (6) months shall be considered one (1) whole year.
Accordingly, the employer may resort to retrenchment in order to avert serious business
losses. To justify such retrenchment, the following conditions must be present, namely:
1. The retrenchment must be reasonably necessary and likely to prevent business losses;

2. The losses, if already incurred, are not merely de minimis, but substantial, serious,
actual and real, or, if only expected, are reasonably imminent;

3. The expected or actual losses must be proved by sufficient and convincing evidence;

4. The retrenchment must be in good faith for the advancement of its interest and not to
defeat or circumvent the employees' right to security of tenure; and

5. There must be fair and reasonable criteria in ascertaining who would be dismissed and
who would be retained among the employees, such as status, efficiency, seniority,
physical fitness, age, and financial hardship for certain workers. [87]
Based on the July 22, 2008 decision, PAL failed to: (1) prove its financial losses because
it did not submit its audited financial statements as evidence; (2) observe good faith in
implementing the retrenchment program; and (3) apply a fair and reasonable criteria in
selecting who would be terminated.

Upon a critical review of the records, we are convinced that PAL had met all the
standards in effecting a valid retrenchment.

PAL's serious financial losses were duly established

PAL was discharged of the burden to prove serious financial losses in view of
FASAP's admission

PAL laments the unfair and unjust conclusion reached in the July 22, 2008 decision to the
effect that it had not proved its financial losses due to its non-submission of audited
financial statements. It points out that the matter of financial losses had not been raised as
an issue before the Labor Arbiter, the NLRC, the CA, and even in the petition in G.R.
No. 178083 in view of FASAP's admission of PAL having sustained serious losses; and
that PAL's having been placed under rehabilitation sufficiently indicated the financial
distress that it was suffering.

It is quite notable that the matter of PAL's financial distress had originated from the
complaint filed by FASAP whereby it raised the sole issue of "Whether or not
respondents committed Unfair Labor Practice."[88] FASAP believed that PAL, in
terminating the 1,400 cabin crew members, had violated Section 23, Article VII and
Section 31, Article IX of the 1995-2000 PAL-FASAP CBA. Interestingly, FASAP
averred in its position paper therein that it was not opposed to the retrenchment program
because it understood PAL's financial troubles; and that it was only questioning
the manner and lack of standard in carrying out the retrenchment, thus:
At the outset, it must be pointed out that complainant was never opposed to the
retrenchment program itself, as it understands respondent PAL's financial troubles. In
fact, complainant religiously cooperated with respondents in their quest for a workable
solution to the company-threatening problem. Attached herewith as Annexes "A" to "D"
are the minutes of its meetings with respondent PAL's representatives showing
complainant's active participation in the deliberations on the issue.

What complainant vehemently objects to are the manner and the lack of criteria or
standard by which the retrenchment program was implemented or carried out, despite the
fact that there are available criteria or standard that respondents could have utilized or
relied on in reducing its workforce. In adopting a retrenchment program that was
fashioned after the evil prejudices and personal biases of respondent Patria Chiong,
respondent PAL grossly violated at least two important provisions of its CBA with
complainant - Article VII, Section 23 and Article IX, Sections 31 and 32. [89]
These foregoing averments of FASAP were echoed in its reply[90] and
memorandum[91] submitted to the Labor Arbiter.

Evidently, FASAP's express recognition of PAL's grave financial situation meant that
such situation no longer needed to be proved, the same having become a judicial
admission[92] in the context of the issues between the parties. As a rule, indeed,
admissions made by parties in the pleadings, or in the course of the trial or other
proceedings in the same case are conclusive, and do not require further evidence to prove
them.[93] By FASAP's admission of PAL's severe financial woes, PAL was relieved of its
burden to prove its dire financial condition to justify the retrenchment. Thusly, PAL
should not be taken to task for the non-submission of its audited financial statements in
the early part of the proceedings inasmuch as the non-submission had been rendered
irrelevant.

Yet, the July 22, 2008 decision ignored the judicial admission and unfairly focused on the
lack of evidence of PAL's financial losses. The Special Third Division should have
realized that PAL had been discharged of its duty to prove its precarious fiscal situation
in the face of FASAP's admission of such situation. Indeed, PAL did not have to submit
the audited financial statements because its being in financial distress was not in issue at
all.

Nonetheless, the dissent still insists that PAL should be faulted for failing to prove its
substantial business losses, and even referred to several decisions of the Court [94] wherein
the employers had purportedly established their serious business losses as a requirement
for a valid retrenchment.
Unfortunately, the cases cited by the dissent obviously had no application herein because
they originated from either simple complaints of illegal retrenchment, or unfair labor
practice, or additional separation pay.[95]

LVN Pictures originated from a complaint for unfair labor practice (ULP) based on
Republic Act No. 874 (Industrial Peace Act). The allegations in the complaint concerned
interference, discrimination and refusal to bargain collectively. The Court pronounced
therein that the employer (LVN Pictures) did not resort to ULP because it was able to
justify its termination, closure and eventual refusal to bargain collectively through the
financial statements showing that it continually incurred serious financial losses. Notably,
the Court did not interfere with the closure and instead recognized LVN's management
prerogative to close its business and dismiss its employees.

North Davao Mining was a peculiar case, arising from a complaint for additional
separation pay, among others. The Court therein held that separation pay was not
required if the reason for the termination was due to serious business losses. It clarified
that Article 283 (now Art. 298) governed payment of separation benefits in case of
closure of business not due to serious business losses. When the reason for the closure
was serious business losses, the employer shall not be required to grant separation pay to
the terminated employees.

In Manatad, the complaint for illegal dismissal was based on the allegation that the
retrenchment program was illegal because the employer was gaining profits. Hence, the
core issue revolved around the existence (or absence) of grave financial losses that would
justify retrenchment.

In the cited cases, the employers had to establish that they were incurring serious
business losses because it was the very issue, if not intricately related to the main issue
presented in the original complaints. In contrast, the sole issue herein as presented by
FASAP to the Labor Arbiter was the "manner of retrenchment," not the basis for
retrenchment. FASAP itself, in representation of the retrenched employees, had admitted
in its position paper, as well as in its reply and memorandum submitted to the Labor
Arbiter the fact of serious financial losses hounding PAL. In reality, PAL was not remiss
by not proving serious business losses. FASAP's admission of PAL's financial distress
already established the latter's precarious financial state.

Judicial notice could be taken of the financial losses incurred; the presentation of
audited financial statements was not required in such circumstances

The July 22, 2008 decision recognized that PAL underwent corporate rehabilitation. In
seeming inconsistency, however, the Special Third Division refused to accept that PAL
had incurred serious financial losses, observing thusly:
The audited financial statements should be presented before the Labor Arbiter who
is in the position to evaluate evidence. They may not be submitted belatedly with the
Court of Appeals, because the admission of evidence is outside the sphere of the
appellate court's certiorari jurisdiction. Neither can this Court admit in evidence audited
financial statements, or make a ruling on the question of whether the employer incurred
substantial losses justifying retrenchment on the basis thereof, as this Court is not a trier
of facts. Even so, this Court may not be compelled to accept the contents of said
documents blindly and without thinking.

xxxx

In the instant case, PAL failed to substantiate its claim of actual and imminent substantial
losses which would justify the retrenchment of more than 1,400 of its cabin crew
personnel. Although the Philippine economy was gravely affected by the Asian
financial crisis, however, it cannot be assumed that it has likewise brought PAL to
the brink of bankruptcy. Likewise, the fact that PAL underwent corporate
rehabilitation does not automatically justify the retrenchment of its cabin crew
personnel.[96] (Emphasis supplied)
Indeed, that a company undergoes rehabilitation sufficiently indicates its fragile financial
condition. It is rather unfortunate that when PAL petitioned for rehabilitation the term
"corporate rehabilitation" still had no clear definition. Presidential Decree No. 902-A,
[97]
 the law then applicable, only set the remedy.[98] Section 6(c) and (d) of P.D. No. 902-A
gave an insight into the precarious state of a distressed corporation requiring the
appointment of a receiver or the creation of a management committee, viz.:
xxxx

c) To appoint one or more receivers of the property, real and personal, which is the
subject of the action pending before the Commission in accordance with the pertinent
provisions of the Rules of Court in such other cases whenever necessary in order to
preserve the rights of the parties-litigants and/or protect the interest of the investing
public and creditors: Provided, however, That the Commission may, in appropriate
cases, appoint a rehabilitation receiver of corporations, partnerships or other associations
not supervised or regulated by other government agencies who shall have, in addition to
the powers of a regular receiver under the provisions of the Rules of Court, such
functions and powers as are provided for in the succeeding paragraph d)
hereof: Provided, further, That the Commission may appoint a rehabilitation receiver of
corporations, partnerships or other associations supervised or regulated by other
government agencies, such as banks and insurance companies, upon request of the
government agency concerned: Provided, finally, That upon appointment of a
management committee, rehabilitation receiver, board or body, pursuant to this
Decree, all actions for claims against corporations, partnerships or associations
under management or receivership pending before any court, tribunal, board or
body shall be suspended accordingly.
d) To create and appoint a management committee, board, or body upon petition or motu
propio to undertake the management of corporations, partnerships or other associations
not supervised or regulated by other government agencies in appropriate cases when
there is imminent danger of dissipation, loss, wastage or destruction of assets or
other properties of paralyzation of business operations of such corporations or
entities which may be prejudicial to the interest of minority stockholders, parties-
litigants or the general public: Provided, further, That the Commission may create or
appoint a management committee, board or body to undertake the management of
corporations, partnerships or other associations supervised or regulated by other
government agencies, such as banks and insurance companies, upon request of the
government agency concerned.

The management committee or rehabilitation receiver, board or body shall have the
power to take custody of, and control over, all the existing assets and property of such
entities under management; to evaluate the existing assets and liabilities, earnings and
operations of such corporations, partnerships or other associations; to determine the best
way to salvage and protect the interest of the investors and creditors; to study,
review and evaluate the feasibility of continuing operations and restructure and
rehabilitate such entities if determined to be feasible by the Commission. It shall report
and be responsible to the Commission until dissolved by order of the Commission:
Provided, however, That the Commission may; on the basis of the findings and
recommendation of the management committee, or rehabilitation receiver, board or body,
or on its own findings; determine that the continuance in business of such
corporation or entity would not be feasible or profitable nor work to the best
interest of the stockholders, parties-litigants, creditors, or the general public, order
the dissolution of such corporation entity and its remaining assets liquidated
accordingly. The management committee or rehabilitation receiver, board or body may
overrule or revoke the actions of the previous management and board of directors of the
entity or entities under management notwithstanding any provision of law, articles of
incorporation or by-laws to the contrary.

The management committee, or rehabilitation receiver, board or body shall not be subject
to any action, claim or demand for, or in connection with, any act done or omitted to be
done by it in good faith in the exercise of its functions, or in connection with the exercise
of its power herein conferred. (Bold underscoring supplied for emphasis)
After having been placed under corporate rehabilitation and its rehabilitation plan having
been approved by the SEC on June 23, 2008, PAL's dire financial predicament could not
be doubted. Incidentally, the SEC's order of approval came a week after PAL had sent out
notices of termination to the affected employees. It is thus difficult to ignore the fact that
PAL had then been experiencing difficulty in meeting its financial obligations long
before its rehabilitation.
Moreover, the fact that airline operations were capital intensive but earnings were volatile
because of their vulnerability to economic recession, among others.[99] The Asian
financial crisis in 1997 had wrought havoc among the Asian air carriers, PAL included.
[100]
 The peculiarities existing in the airline business made it easier to believe that at the
time of the Asian financial crisis, PAL incurred liabilities amounting to
P90,642,933,919.00, which were way beyond the value of its assets that then only stood
at P85,109,075,351.

Also, the Court cannot be blind and indifferent to current events affecting the
society[101] and the country's economy,[102] but must take them into serious consideration in
its adjudication of pending cases. In that regard, Section 2, Rule 129 of the Rules of
Court recognizes that the courts have discretionary authority to take judicial notice of
matters that are of public knowledge, or are capable of unquestionable demonstration, or
ought to be known to judges because of their judicial functions.[103] The principle is based
on convenience and expediency in securing and introducing evidence on matters that are
not ordinarily capable of dispute and are not bona fide disputed.[104]

Indeed, the Labor Arbiter properly took cognizance of PAL's substantial financial losses
during the Asian financial crisis of 1997.[105] On its part, the NLRC recognized the grave
financial distress of PAL based on its ongoing rehabilitation/receivership.[106] The CA
likewise found that PAL had implemented a retrenchment program to counter its
tremendous business losses that the strikes of the pilot's union had aggravated. [107] Such
recognitions could not be justly ignored or denied, especially after PAL's financial and
operational difficulties had attracted so much public attention that even President Estrada
had to intervene in order to save PAL as the country's flag carrier.[108]

The Special Third Division also observed that PAL had submitted a "stand-alone"
rehabilitation program that was viewed as an acknowledgment that it could "undertake
recovery on its own and that it possessed enough resources to weather the financial
storm." The observation was unfounded considering that PAL had been constrained to
submit the "stand-alone" rehabilitation plan on December 7, 1998 because of the lack of a
strategic partner.[109]

We emphasize, too, that the presentation of the audited financial statements should not
the sole means by which to establish the employer's serious financial losses. The
presentation of audited financial statements, although convenient in proving the unilateral
claim of financial losses, is not required for all cases of retrenchment. The evidence
required for each case of retrenchment really depends on the particular circumstances
obtaining. The Court has cogently opined in that regard:
That petitioners were not able to present financial statements for years prior to 2005
should not be automatically taken against them. Petitioner BEMI was organized and
registered as a corporation in 2004 and started business operations in 2005 only. While
financial statements for previous years may be material in establishing the financial
trend for an employer, these are not indispensable in all cases of retrenchment. The
evidence required for each case of retrenchment will still depend on its particular
circumstances. In fact, in Revidad v. National Labor Relations Commission, the Court
declared that "proof of actual financial losses incurred by the company is not a
condition sine qua non for retrenchment," and retrenchment may be undertaken by
the employer to prevent even future losses:
In its ordinary connotation, the phrase "to prevent losses" means that retrenchment or
termination of the services of some employees is authorized to be undertaken by the
employer sometime before the anticipated losses are actually sustained or realized. It is
not, in other words, the intention of the lawmaker to compel the employer to stay his
hand and keep all his employees until after losses shall have in fact materialized. If such
an intent were expressly written into the law, that law may well be vulnerable to
constitutional attack as unduly taking property from one man to be given to another.
[110]
 (Bold underscoring supplied for emphasis)
In short, to require a distressed corporation placed under rehabilitation or receivership to
still submit its audited financial statements may become unnecessary or superfluous.

Under P.D. No. 902-A, the SEC was empowered during rehabilitation proceedings to
thoroughly review the corporate and financial documents submitted by PAL. Hence, by
the time when the SEC ordered PAL's rehabilitation, suspension of payments and
receivership, the SEC had already ascertained PAL's serious financial condition, and the
clear and imminent danger of its losing its corporate assets. To require PAL in the
proceedings below to still prove its financial losses would only trivialize the SEC's order
and proceedings. That would be unfortunate because we should not ignore that the SEC
was then the competent authority to determine whether or not a corporation experienced
serious financial losses. Hence, the SEC's order- presented as evidence in the proceedings
below - sufficiently established PAL's grave financial status.

Finally, PAL argues that the Special Third Division should not have deviated from the
pronouncements made in Garcia v. Philippine Airlines, Inc., Philippine Airlines, Inc. v.
Kurangking, Philippine Airlines v. Court of Appeals, Philippine Airlines v. Zamora,
Philippine Airlines v. PALEA, and Philippine Airlines v. National Labor Relations
Commission, all of which judicially recognized PAL's dire financial condition.

The argument of PAL is valid and tenable.

Garcia v. Philippine Airlines, Inc. discussed the unlikelihood of reinstatement pending

appeal because PAL had been placed under corporate rehabilitation, explaining that
unlike the ground of substantial losses contemplated in a retrenchment case, the state of
corporate rehabilitation was judicially pre-determined by a competent court and not
formulated for the first time by the employer, viz.:
While reinstatement pending appeal aims to avert the continuing threat or danger to the
survival or even the life of the dismissed employee and his family, it does not
contemplate the period when the employer-corporation itself is similarly in a judicially
monitored state of being resuscitated in order to survive.

The parallelism between a judicial order of corporation rehabilitation as a justification for

the non-exercise of its options, on the one hand, and a claim of actual and imminent
substantial losses as ground for retrenchment, on the other hand, stops at the red line on
the financial statements. Beyond the analogous condition of financial gloom, as discussed
by Justice Leonardo Quisumbing in his Separate Opinion, are more salient distinctions.
Unlike the ground of substantial losses contemplated in a retrenchment case, the state of
corporate rehabilitation was judicially pre-determined by a competent court and not
formulated for the first time in this case by respondent.

More importantly, there are legal effects arising from a judicial order placing a
corporation under rehabilitation. Respondent was, during the period material to the case,
effectively deprived of the alternative choices under Article 223 of the Labor Code, not
only by virtue of the statutory injunction but also in view of the interim relinquishment of
management control to give way to the full exercise of the powers of the rehabilitation
receiver. Had there been no need to rehabilitate, respondent may have opted for actual
physical reinstatement pending appeal to optimize the utilization of resources. Then
again, though the management may think this Wise, the rehabilitation receiver may
decide otherwise, not to mention the subsistence of the injunction on claims. [111]
In Philippine Airlines v. Kurangking, Philippine Airlines v. Court of Appeals, Philippine
Airlines v. PALEA and Philippine Airlines v. National Labor Relations Commission, the
Court uniformly upheld the suspension of monetary claims against PAL because of the
SEC's order placing it under receivership. The Court emphasized the need to suspend the
payment of the claims pending the rehabilitation proceedings in order to enable the
management committee/receiver to channel the efforts towards restructuring and
rehabilitation. Philippine Airlines v. Zamora reiterated this rule and deferred to the prior
judicial notice taken by the Court in suspending the monetary claims of illegally
dismissed employees.[112]

Through these rulings, the Court consistently recognized PAL's financial troubles while
undergoing rehabilitation and suspension of payments. Considering that the ruling related
to conditions and circumstances that had occurred during the same period as those
obtaining in G.R. No. 178083, the Court cannot take a different view.

It is also proper to indicate that the Court decided the other cases long before the
promulgation of the assailed July 22, 2008 decision. Hence, the Special Third Division
should not have regarded the financial losses as an issue that still required determination.
Instead, it should have just simply taken judicial notice of the serious financial losses
being suffered by PAL.[113] To still rule that PAL still did not prove such losses certainly
conflicted with the antecedent judicial pronouncements about PAL's dire financial state.
As such, we cannot fathom the insistence by the dissent that the Court had not taken
judicial notice but merely "recognized" that PAL was under corporate rehabilitation.
Judicial notice is the cognizance of certain facts that judges may properly take and act on
without proof because they already know them. It is the manner of recognizing and
acknowledging facts that no longer need to be proved in court. In other words, when the
Court "recognizes" a fact, it inevitably takes judicial notice of it.

For sure, it would not have been the first time that the Court would have taken judicial
notice of the findings of the SEC and of antecedent jurisprudence recognizing the fact of
rehabilitation by the employer. The Court did so in the 2002 case of Clarion Printing
House, Inc. v. National Labor Relations Commission,[114] to wit:
Sections 5 and 6 of Presidential Decree No. 902-A (P.D. 902-A) ("REORGANIZATION
OF THE SECURITIES AND EXCHANGE COMMISSION WITH ADDITIONAL
POWERS AND PLACING SAID AGENCY UNDER THE ADMINISTRATIVE
SUPERVISION OF THE OFFICE OF THE PRESIDENT"), as amended, read:
SEC. 5. In addition to the regulatory and adjudicative functions of THE SECURITIES
AND EXCHANGE COMMISSION over corporations, partnerships and other forms of
associations registered with it as expressly granted under existing laws and decrees, it
shall have original and exclusive jurisdiction to hear and decide cases involving:

xxx xxx xxx

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

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

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

xxx xxx xxx

(c) To appoint one or more receivers of the property, real and personal, which is the subject
of the action pending before the Commission in accordance with the provisions of the Rules
of Court in such other cases whenever necessary in order to preserve the rights of the
parties-litigants and/or protect the interest of the investing public and creditors:
Provided, however, That the Commission may in appropriate cases, appoint a
rehabilitation receiver of corporations, partnerships or other associations not
supervised or regulated by other government agencies who shall have, in addition to
powers of the regular receiver under the provisions of the Rules of Court, such
functions and powers as are provided for in the succeeding paragraph (d) hereof: ...
(d) To create and appoint a management committee, board or body upon petition or motu
propio to undertake the management of corporations, partnership or other associations not
supervised or regulated by other government agencies in appropriate cases when there is
imminent danger of dissipation, loss, wastage or destruction of assets or other properties
or paralization of business operations of such corporations or entities which may be
prejudicial to the interest of minority stockholders, parties-litigants of the general
public: ... (Emphasis and underscoring supplied).
From the above-quoted provisions of P.D. No. 902-A, as amended, the appointment of a
receiver or management committee by the SEC presupposes a finding that, inter alia, a
company possesses sufficient property to cover all its debts but "foresees the
impossibility of meeting them when they respectively fall due" and "there is imminent
danger of dissipation, loss, wastage or destruction of assets of other properties or
paralization of business operations."

That the SEC, mandated by law to have regulatory functions over corporations,
partnerships or associations, appointed an interim receiver for the EYCO Group of
Companies on its petition in light of, as quoted above, the therein enumerated "factors
beyond the control and anticipation of the management" rendering it unable. to meet its
obligation as they fall due, and thus resulting to "complications and problems ... to arise
that would impair and affect [its] operations ..." shows that CLARION, together with the
other member-companies of the EYCO Group of Companies, was suffering business
reverses justifying, among other things, the retrenchment of its employees.

This Court in fact takes judicial notice of the Decision of the Court of Appeals dated June
11, 2000 in CA-G.R. SP No. 55208, "Nikon Industrial Corp., Nikolite Industrial Corp.,
et al. (including CLARION), otherwise known as the EYCO Group of Companies v.
Philippine National Bank, Solidbank Corporation, et al., collectively known and referred
as the 'Consortium of Creditor Banks,'" which was elevated to this Court via Petition for
Certiorari and docketed as G.R. No. 145977, but which petition this Court dismissed by
Resolution dated May 3, 2005:
Considering the joint manifestation and motion to dismiss of petitioners and respondents
dated February 24, 2003, stating that the parties have reached a final and comprehensive
settlement of all the claims and counterclaims subject matter of the case and accordingly,
agreed to the dismissal of the petition for certiorari, the Court Resolved to DISMISS the
petition for certiorari (Underscoring supplied).
The parties in G.R. No. 145977 having sought, and this Court having granted, the
dismissal of the appeal of the therein petitioners including CLARION, the CA decision
which affirmed in toto the September 14, 1999 Order of the SEC, the dispositive portion
of which SEC Order reads:
WHEREFORE, premises considered, the appeal is as it is hereby, granted and the Order
dated 18 December 1998 is set aside. The Petition to be Declared in State of Suspension
of payments is hereby disapproved and the SAC Plan terminated. Consequently, all
committee, conservator/receivers created pursuant to said Order are dissolved and
discharged and all acts and orders issued therein are vacated.

The Commission, likewise, orders the liquidation and dissolution of the appellee

corporations. The case is hereby remanded to the hearing panel below for that purpose.

xxx xxx xxx (Emphasis and underscoring supplied).

has now become final and executory. Ergo, the SEC's disapproval of the EYCO Group of
Companies' "Petition for the Declaration of Suspension of Payment ..." and the order for
the liquidation and dissolution of these companies including CLARION, must be deemed
to have been unassailed.

That judicial notice can be taken of the above-said case of Nikon Industrial Corp. et al. v.
PNB et al., there should be no doubt.

As provided in Section 1, Rule 129 of the Rules of Court:

SECTION 1. Judicial notice, when mandatory. - A court shall take judicial notice,
without the introduction of evidence, of the existence and territorial extent of states, their
political history, forms of government and symbols of nationality, the law of nations, the
admiralty and maritime courts of the world and their seals, the political constitution and
history of the Philippines, the official acts of the legislative, executive
and judicial departments of the Philippines, the laws of nature, the measure of time, and
the geographical divisions. (Emphasis and underscoring supplied)
which Mr. Justice Edgardo L. Paras interpreted as follows:
A court will take judicial notice of its own acts and records in the same case, of facts
established in prior proceedings in the same case, of the authenticity of its own records of
another case between the same parties, of the files of related cases in the same court,
and of public records on file in the same court. In addition judicial notice will be taken
of the record, pleadings or judgment of a case in another court between the same parties
or involving one of the same parties, as well as of the record of another case between
different parties in the same court. Judicial notice will also be taken of court personnel.
(Emphasis and underscoring supplied)
In fine, CLARION's claim that at the time it terminated Miclat it was experiencing
business reverses gains more light from the SEC's disapproval of the EYCO Group of
Companies' petition to be declared in state of suspension of payment, filed before
Miclat's termination, and of the SEC's consequent order for the group of companies'
dissolution and liquidation.[115]
At any rate, even assuming that serious business losses had not been proved by PAL, it
would still be justified under Article 298 of the Labor Code to retrench employees to
prevent the occurrence of losses or its closing of the business, provided that the projected
losses were not merely de minimis, but substantial, serious, actual, and real, or, if only
expected, were reasonably imminent as perceived objectively and in good faith by the
employer.[116] In the latter case, proof of actual financial losses incurred by the employer
would not be a condition sine qua non for retrenchment,[117] viz.:
Third, contrary to petitioner's asseverations, proof of actual financial losses incurred by
the company is not a condition sine qua non for retrenchment. Retrenchment is one of the
economic grounds to dismiss employees, which is resorted to by an employer primarily to
avoid or minimize business losses. The law recognize this under Article 283 of the Labor
Code xxx

xxxx

In its ordinary connotation, the phrase "to prevent losses" means that retrenchment or
termination of the services of some employees is authorized to be undertaken by the
employer sometime before the anticipated losses are, actually sustained or realized. It is
not, in other words, the intention of the lawmaker to compel the employer to stay his
hand and keep all his employees until after losses shall have in fact materialized. If such
an intent were expressly written into the law, that law may well be vulnerable to
constitutional attack as unduly taking property from one man to be given to another.

At the other end of the spectrum, it seems equally clear that not every asserted possibility
of loss is sufficient legal warrant for the reduction of personnel. In the nature of things,
the possibility of incurring the losses is constantly present, in greater or lesser degree, in
the carrying on of business operations, since some, indeed many, of the factors which
impact upon the profitability or viability of such operations may be substantially outside
the control of the employer.

On the bases of these consideration, it follows that the employer bears the burden to
prove his allegation of economic or business reverses with clear and satisfactory
evidence, it being in the nature of an affirmative defense. As earlier discussed, we are
fully persuaded that the private respondent has been and is besieged by a continuing
downtrend in both its business operations and financial resources, thus amply justifying
its resort to drastic cuts in personnel and costs.[118]
B

PAL retrenched in good faith

The employer is burdened to observe good faith in implementing a retrenchment

program. Good faith on its part exists when the retrenchment is intended for the
advancement of its interest and is not for the purpose of defeating or circumventing the
rights of the employee under special laws or under valid agreements. [119]

The July 22, 2008 decision branded the recall of the retrenched employees and the
implementation of "Plan 22" instead of "Plan 14" as badges of bad faith on the part of
PAL. On the other hand, the October 2, 2009 resolution condemned PAL for changing its
theory by attributing the cause of the retrenchment to the ALPAP pilots' strike.
PAL refutes the adverse observations, and maintains that its position was clear and
consistent - that the reduction of its labor force was an act of survival and a less drastic
measure as compared to total closure and liquidation that would have otherwise resulted;
that downsizing had been an option to address its financial losses since 1997;[120] that the
reduction of personnel was necessary as an integral part of the means to ensure the
success of its corporate rehabilitation plan to restructure its business; [121] and that the
downsizing of its labor force was a sound business decision undertaken after an
assessment of its financial situation and the remedies available to it. [122]

A hard look at the records now impels the reconsideration of the July 22, 2008 decision
and the resolution of October 2, 2009.

PAL could not have been motivated by ill will or bad faith when it decided to terminate
FASAP's affected members. On the contrary, good faith could be justly inferred from
PAL's conduct before, during and after the implementation of the retrenchment plan.

Notable in this respect was PALs candor towards FASAP regarding its plan to implement
the retrenchment program. This impression is gathered from PAL's letter dated February
11, 1998 inviting FASAP to a meeting to discuss the matter, thus:
Roberto D. Anduiza
President
Flight Attendants' and Stewards' Association of the Philippines (FASAP)
xxxx

Mr. Anduiza:

Due to critical business losses and in view of severe financial reverses, Philippine
Airlines must undertake drastic measures to strive at survival. In order to meet maturing
obligations amidst the present regional crisis, the Company will implement major cost-
cutting measures in its fleet plan, operating budget, routes and frequencies. These moves
include the closure of stations, downsizing of operations and reducing the workforce
through layoff/retrenchment or retirement.

In this connection, the Company would like to meet with the Flight Attendants' and
Stewards' Association of the Philippines (FASAP) to discuss the implementation of the
lay-off/retrenchment or retirement of FASAP-covered employees. The meeting shall be
at the Allied Bank Center (8th Floor-Board Room) on February 12, 1998 at 4:00 p.m.

This letter serves as notice in compliance with Article 283 of the Labor Code, as
amended and DOLE Orders Nos[.] 9 and 10, Series of 1997.

Very truly yours,

(Sgd.)
JOSE ANTONIO GARCIA
President & Chief Operating Officer[123]
The records also show that the parties met on several occasions[124] to explore cost-cutting
measures, including the implementation of the retrenchment program. PAL likewise
manifested that the retrenchment plan was temporarily shelved while it implemented
other measures (like termination of probationary cabin attendant, and work-rotations).
[125]
 Obviously, the dissent missed this part as it stuck to the belief that PAL did not
implement other cost-cutting measures prior to retrenchment.[126]

Given PAL's dire financial predicament, it becomes understandable that PAL was
constrained to finally implement the retrenchment program when the ALPAP pilots strike
crippled a major part of PAL's operations.[127]

In Rivera v. Espiritu,[128] we observed that said strike wrought "serious losses to the
financially beleaguered flag carrier;" that "PAL's financial situation went from bad to
worse;" and that "[f]aced with bankruptcy, PAL adopted a rehabilitation plan and
downsized its labor force by more than one-third." Such observations sufficed to show
that retrenchment became a last resort, and was not the rash and impulsive decision that
FASAP would make it out to be now.

As between maintaining the number of its flight crew and PAL's survival, it was
reasonable for PAL to choose the latter alternative. This Court cannot legitimately force
PAL as a distressed employer to maintain its manpower despite its dire financial
condition. To be sure, the right of PAL as the employer to reasonable returns on its
investments and to expansion and growth is also enshrined in the 1987 Constitution.
[129]
 Thus, although labor is entitled to the right to security of tenure, the State will not
interfere with the employer's valid exercise of its management prerogative.

Moreover, PAL filed its Petition for Appointment of Interim Rehabilitation Receiver and
Approval of a Rehabilitation Plan with the SEC on June 19, 1998, before the
retrenchment became effective.[130] PAL likewise manifested that:
xxx The Rehabilitation Plan and Amended Rehabilitation Plan submitted by PAL in
pursuance of its corporate rehabilitation, and which obtained the joint approval of PAL's
creditors and the SEC, had as a primary component, the downsizing of PAL's labor
force by at least 5,000, including the 1,400 flight attendants. As conceptualized by a
team of industry experts, the cutting down of operations and the consequent
reduction of work force, along with the restructuring of debts with significant
"haircuts" and the capital infusion of Mr. Lucio Tan amounting to US$200 million,
were the key components of PAL's rehabilitation. The Interim Rehabilitation Receiver
was replaced by a Permanent Rehabilitation Receiver on June 7, 1999. [131] (Bold
underscoring supplies tor emphasis)
Being under a rehabilitation program, PAL had no choice but to implement the measures
contained in the program, including that of reducing its manpower. Far from being an
impulsive decision to defeat its employees' right to security of tenure, retrenchment
resulted from a meticulous plan primarily aimed to resuscitate PAL's operations.

Good faith could also be inferred from. PAL's compliance with the basic requirements
under Article 298 of the Labor Code prior to laying-off its affected employees. Notably,
the notice of termination addressed to the Department of Labor and Employment (DOLE)
identified the reasons behind the massive termination, as well as the measures PAL had
undertaken to prevent the situation, to wit:
June 15, 1998

HON. MAXIMO B. LIM

THE REGIONAL DIRECTOR
Department of Labor and Employment
Regional Office No. NCR

Dear Sir:

This is to inform you that Philippine Air Lines, Inc. (PAL) will be implementing a
retrenchment program one (1) month from notice hereof in order to prevent bankruptcy.

PAL is forced to take this action because of continuous losses it has suffered over the
years which losses were aggravated by the PALEA strike in October 1996, peso
depreciation, Asian currency crisis, causing a serious drop in our yield and the
collapse of passenger traffic in the region. Specifically, PAL suffered a net loss of
P2.18 Billion during the fiscal year 1995-1996, P2.50 Billion during the fiscal year
1996-1997 and P8.08 Billion for the period starting April 1, 1997 to March 31, 1998.

These uncontrolled heavy losses have left PAL with no recourse but to reduce its fleet
and its flight frequencies both in the domestic and international sectors to ensure its
survival.

In an effort to avoid a reduction of personnel, PAL has resorted to other measures,

such as freeze on all hiring, no salary increase for managerial and confidential staff
(even for promotions), reduction of salaries of senior management personnel, freeze
on staff movements, pre-termination of temporary staff contracts and negotiations
with foreign investors. But all these measures failed to avert the continued losses.

Finally, all the efforts of PAL to preserve the employment of its personnel were
shattered by the illegal strike of its pilots which has cause irreparable damage to the
company's cash flow. Consequently, the company is now no longer able to meet its
maturing obligations and is not about to go into default in all its major loans. It is
presently under threat of receiving a barrage of suits from its creditors who will go
after the assets of the corporation.

Under the circumstances, PAL is left with no recourse but to reduce its fleet and its flight
frequencies both in the domestic and international sectors to ensure its survival.
Consequently, a reduction of personnel is inevitable.

All affected employees in the attached list will be given the corresponding benefits which
they may be entitled to.

Very truly yours,

(Sgd)
JOSE ANTONIO GARCIA
President & Chief Operating Officer[132]
As regards the observation made in the decision of July 22, 2008 to the effect that the
recall of the flight crew members indicated bad faith, we hold to the contrary.

PAL explained how the recall process had materialized, as follows:

During this time, the Company was slowly but steadily recovering. Its finances were
improving and additional planes were flying. Because of the Company's steady recovery,
necessity dictated more employees to man and service the additional planes and flights.
Thus, instead of taking in new hires, the Company first offered employment to employees
who were previously retrenched. A recall/rehire plan was initiated.

The recall/rehire plan was a success. A majority of retrenched employees were

recalled/rehired and went back to work including the members of petitioner union. In the
process of recall/rehire, many employees who could not be recalled for various reasons
(such as, among others, being unfit for the job or the employee simply did not want to
work for the Company anymore) decided to accept separation benefits and executed,
willingly and voluntarily, valid quitclaims. Those who received separation packages
included a good number of the members of the petitioner union.[133]
Contrary to the statement in the dissent that the implementation of Plan 22 instead of Plan
14 indicated bad faith,[134] PAL reasonably demonstrated that the recall was devoid of bad
faith or of an attempt on its part to circumvent its affected employees' right to security of
tenure. Far from being tainted with bad faith, the recall signified PAL's reluctance to part
with the retrenched employees. Indeed, the prevailing unfavorable conditions had only
compelled it to implement the retrenchment.

The rehiring of previously retrenched employees should not invalidate a retrenchment

program, the rehiring being an exercise of the employer's right to continue its business.
Thus, we pointed out in one case:
We likewise cannot sustain petitioners' argument that their dismissal was illegal on the
basis that Lapanday did not actually cease its operation, or that they have rehired some of
the dismissed employees and even hired new set of employees to replace the retrenched
employees.

The law acknowledges the right of every business entity to reduce its workforce if such
measure is made necessary or compelled by economic factors that would otherwise
endanger its stability or existence. In exercising its right to retrench employees, the firm
may choose to close all, or a part of, its business to avoid further losses or mitigate
expenses. In Caffco International Limited v. Office of the Minister-Ministry of Labor and
Employment, the Court has aptly observed that -
Business enterprises today are faced with the pressures of economic recession, stiff
competition, and labor unrest. Thus, businessmen are always pressured to adopt certain
changes and programs in order to enhance their profits and protect their investments.
Such changes may take various forms. Management may even choose to close a branch, a
department, a plant, or a shop.
In the same manner, when Lapanday continued its business operation and eventually
hired some of its retrenched employees and new employees, it was merely exercising its
right to continue its business. The fact that Lapanday chose to continue its business does
not automatically make the retrenchment illegal. We reiterate that in retrenchment, the
goal is to prevent impending losses or further business reversals - it therefore does not
require that there is an actual closure of the business. Thus, when the employer
satisfactorily proved economic or business losses with sufficient supporting evidence and
have complied with the requirements mandated under the law to justify retrenchment, as
in this case, it cannot be said that the subsequent acts of the employer to rehire the
retrenched employees or to hire new employees constitute bad faith. It could have been
different if from the beginning the retrenchment was illegal and the employer
subsequently hired new employees or rehired some of the previously dismissed
employees because that would have constituted bad faith. Consequently, when Lapanday
continued its operation, it was merely exercising its prerogative to streamline its
operations, and to rehire or hire only those who are qualified to replace the services
rendered by the retrenched employees in order to effect more economic and efficient
methods of production and to forestall business losses. The rehiring or reemployment of
retrenched employees does not necessarily negate the presence or imminence of losses
which prompted Lapanday to retrench.

In spite of overwhelming support granted by the social justice provisions of our

Constitution in favor of labor, the fundamental law itself guarantees, even during the
process of tilting the scales of social justice towards workers and employees, "the right of
enterprises to reasonable returns of investment and to expansion and growth." To hold
otherwise would not only be oppressive and inhuman, but also counter-productive and
ultimately subversive of the nation's thrust towards a resurgence in our economy which
would ultimately benefit the majority of our people. Where appropriate and where
conditions are in accord with law and jurisprudence, the Court has authorized valid
reductions in the workforce to forestall business losses, the hemorrhaging of capital, or
even to recognize an obvious reduction in the volume of business which has rendered
certain employees redundant.[135]
Consequently, we cannot pass judgment on the motive behind PAL's initiative to
implement "Plan 22" instead of "Plan 14." The prerogative thereon belonged to the
management alone due to its being in the best position to assess its own financial
situation and operate its own business. Even the Court has no power to interfere with
such exercise of the prerogative.

PAL used fair and reasonable criteria in selecting the employees to be retrenched
pursuant to the CBA

The July 22, 2008 decision agreed with the holding by the CA that PAL was not
obligated to consult with FASAP on the standards to be used in evaluating the
performance of its employees. Nonetheless, PAL was found to be unfair and
unreasonable in selecting the employees to be retrenched by doing away with the concept
of seniority, loyalty, and past efficiency by solely relying on the employees' 1997
performance rating; and that the retrenchment of employees due to "other reasons,"
without any details or specifications, was not allowed and had no basis in fact and in law.
[136]

PAL contends that it used fair and reasonable criteria in accord with Sections 23, 30 and
112 of the 1995-2000 CBA;[137] that the NLRC's use of the phrase "other reasons" referred
to the varied grounds (i.e. excess sick leaves, previous service of suspension orders,
passenger complains, tardiness, etc.) employed in conjunction with seniority in selecting
the employees to be terminated;[138] that the CBA did not require reference to performance
rating of the previous years, but to the use of an efficiency rating for a single year; [139] and
that it adopted both efficiency rating and inverse seniority as criteria in the selection
pursuant to Section 112 of the CBA.[140]

PAL's contentions are meritorious.

In selecting the employees to be dismissed, the employer is required to adopt fair and
reasonable criteria, taking into consideration factors like: (a) preferred status; (b)
efficiency; and (c) seniority, among others.[141] The requirement of fair and reasonable
criteria is imposed on the employer to preclude the occurrence of arbitrary selection of
employees to be retrenched. Absent any showing of bad faith, the choice of who should
be retrenched must be conceded to the employer for as long as a basis for the
retrenchment exists.[142]
We have found arbitrariness in terminating the employee under the guise of a
retrenchment program wherein the employer discarded the criteria it adopted in
terminating a particular employee;[143] when the termination discriminated the employees
on account of their union membership without regard to their years of service;[144] the
timing of the retrenchment was made a day before the employee may be regularized;
[145]
 when the employer disregarded altogether the factor of seniority and choosing to
retain the newly hired employees;[146] that termination only followed the previous
retrenchment of two non-regular employees;[147] and when there is no appraisal or criteria
applied in the selection.[148]

On the other hand, we have considered as valid the retrenchment of the employee based
on work efficiency,[149] or poor performance;[150] or the margins of contribution of the
consultants to the income of the company;[151] or absenteeism, or record of disciplinary
action, or efficiency and work attitude;[152] or when the employer exerted efforts to solicit
the employees' participation in reviewing the criteria to be used in selecting the workers
to be laid off.[153]

In fine, the Court will only strike down the retrenchment of an employee as capricious,
whimsical, arbitrary, and prejudicial in the absence of a clear-cut and uniform guideline
followed by the employer in selecting him or her from the work pool. Following this
standard, PAL validly implemented its retrenchment program.

PAL resorted to both efficiency rating and inverse seniority in selecting the employees to
be subject of termination. As the NLRC keenly pointed out, the "ICCD Masterank 1997
Ratings - Seniority Listing" submitted by PAL sufficiently established the criteria for the
selection of the employees to be laid off. To insist on seniority as the sole basis for the
selection would be unwarranted, it appearing that the applicable CBA did not establish
such limitation. This counters the statement in the dissent that the retrenchment program
was based on unreasonable standards without regard to service, seniority, loyalty and
performance.[154]

In this connection, we adopt the following cogent observations by the CA on the matter
for being fully in accord with law and jurisprudence:
FASAP insists that several CBA provisions have been violated by the retrenchment. They
are the provisions on seniority, performance appraisal, reduction in personnel and
downgrading and permanent OCARs. Seniority and performance stand out because these
were the main considerations of PAL in selecting workers to be retrenched. Under the
CBA, seniority is defined "to mean a measure of a regular Cabin Attendant's claim in
relation to other regular Cabin Attendants holding similar positions, to preferential
consideration whatever the Company exercises its right to promote to a higher paying
position of lay-off of any Cabin Attendant." Seniority, however, is not the sole
determinant of retention. This is clear under Article XIII on performance appraisal
of the CBA provisions.
Under the CBA, several factors are likewise taken into consideration like
performance and professionalism in addition to the seniority factor. However, the
criteria for performance and professionalism are not indicated in the CBA but are
to be formulated by PAL in consultation with FASAP. Where there is retrenchment,
cabin attendants who fail to attain at least 85% of the established criteria shall be
demoted progressively. Domestic cabin attendants, the occupants of lowest rung of
the organizational hierarchy, are to be retrenched once they fail to meet the
required percentage.

We have painstakingly examined the records and We find no indication that these
provisions have been grossly disregarded as to taint the retrenchment with illegality.
PAL relied on specific categories of criteria, such as merit awards, physical
appearance, attendance and checkrides, to guide its selection of employees to be
removed. We do not find anything legally objectionable in the adoption of the
foregoing norms. On the contrary, these norms are most relevant to the nature of
cabin attendant's work.

However, the contention of FASAP that these criteria required its prior conformity
before adoption is not supported by Section 30, Article VIII of the CBA. Note should
be taken that this provision only mandates PAL to "meet and consult" the
Association (FASAP) in the formulation of the Performance and Professionalism
Appraisal System. By the ordinary import of this provision, PAL is only required to
confer with FASAP; it is not at all required to forge an addendum to the CBA,
which will concretize the appraisal system as basis for retrenchment or retention. [155]
To require PAL to further limit its criteria would be inconsistent with jurisprudence and
the principle of fairness. Instead, we hold that for as long as PAL followed a rational
criteria defined or set by the CBA and existing laws and jurisprudence in determining
who should be included in the retrenchment program, it sufficiently met the standards of
fairness and reason in its implementation of its retrenchment program.

The retrenched employees signed valid quitclaims

The July 22, 2008 decision struck down as illegal the quitclaims executed by the
retrenched employees because of the mistaken conclusion that the retrenchment had been
unlawfully executed.

We reverse.

In EDI Staffbuilders International, Inc. v. National Labor Relations Commission,[156] we

laid down the basic contents of valid and effective quitclaims and waivers, to wit:
In order to prevent disputes on the validity and enforceability of quitclaims and waivers
of employees under Philippine laws, said agreements should contain the following:
1. A fixed amount as full and final compromise settlement;

2. The benefits of the employees if possible with the corresponding amounts, which the

employees are giving up in consideration of the fixed compromise amount;

3. A statement that the employer has dearly explained to the employee in English,
Filipino, or in the dialect known to the employees - that by signing the waiver or
quitclaim, they are forfeiting or relinquishing their right to receive the benefits which are
due them under the law; and

4. A statement that the employees signed and executed the document voluntarily, and
had fully understood the contents of the document and that their consent was freely
given without any threat, violence, duress, intimidation, or undue influence exerted on
their person.[157] (Bold supplied for emphasis)
The release and quitclaim signed by the affected employees substantially satisfied the
aforestated requirements. The consideration was clearly indicated in the document in the
English language, including the benefits that the employees would be relinquishing in
exchange for the amounts to be received. There is no question that the employees who
had occupied the position of flight crew knew and understood the English language.
Hence, they fully comprehended the terms used in the release and quitclaim that they
signed.

Indeed, not all quitclaims are per se invalid or against public policy. A quitclaim is
invalid or contrary to public policy only: (1) where there is clear proof that the waiver
was wrangled from an unsuspecting or gullible person; or (2) where the terms of
settlement are unconscionable on their face.[158] Based on these standards, we uphold the
release and quitclaims signed by the retrenched employees herein.

WHEREFORE, the Court:

(a) GRANTS the Motion for Reconsideration of the Resolution of October 2, 2009 and

Second Motion for Reconsideration of the Decision of July 22, 2008 filed by the
respondents Philippine Airlines, Inc. and Patria Chiong;

(b) DENIES the Motion for Reconsideration (Re: The Honorable Court's Resolution

dated March 13, 2012) filed by the petitioner Flight Attendants and Stewards Association
of the Philippines;

(c) SETS ASIDE the decision dated July 22, 2008 and resolution dated October 2, 2009;
and
(d) AFFIRMS the decision of the Court of Appeals dated August 23, 2006.

No pronouncement on costs of suit.

SO ORDERED.

SECOND DIVISION
[ A.C. No. 11774 (Formerly CBD Case No. 14-4186), March
21, 2018 ]
READY FORM INCORPORATED, COMPLAINANT, VS. ATTY. EGMEDIO
J. CASTILLON, JR., RESPONDENT.

DECISION

CAGUIOA, J:

Before this Court is an administrative complaint[1] filed with the Commission on

Bar Discipline of the Integrated Bar of the Philippines (CBD-IBP) by Complainant Ready
Form, Inc. (Ready Form) against Respondent Atty. Egmedio J. Castillon, Jr. (Atty.
Castillon), for his alleged violation of Rules 1.01, 1.02, and 1.03 of Canon 1 of the Code
of Professional Responsibility when he allegedly used Ready Form's Income Tax Return
(ITR) in filing a Petition for Suspension and Blacklisting [2] (Petition for Blacklisting) against
Ready Form before the National Printing Office (NPO).

The Factual Antecedents

Ready Form was one of the companies who participated in a public bidding conducted
by the NPO on October 17, 2008. Thereafter, the NPO Bids and Awards Committee
(NPO-BAC) required all bidders to re-submit their eligibility documents, which includes
the bidders' past ITRs and financial documents stamp received by the Bureau of Internal
Revenue (BIR).[3] After reviewing these submissions, the NPO-BAC imposed a suspension
of one (1) year against Ready Form effective from December 22, 2008 to December 21,
2009[4] due to the supposed misrepresentation and misdeclaration it committed when it
submitted alleged false ITRs and financial statements for the calendar year 2007.
Subsequently, on September 18, 2009, Eastland Printink Corporation (Eastland) filed a
Petition for Blacklisting with the NPO against Ready Form, wherein Eastland alleged that
Ready Form had committed other violations, such as (1) misrepresentation, when it also
filed with the NPO false ITRs for the year 2006, (2) unlawfully soliciting printing jobs and
services from various local government offices or agencies, and (3) undermining the
authority and jurisdiction of the NPO by disseminating letters which suggested that the
NPO no longer has exclusive jurisdiction over printing services. [5] As Eastland's counsel,
Atty. Castillon signed the Petition on behalf of his client.

The NPO then asked both parties to file position papers in relation to the Petition for
Blacklisting. Eastland filed a position paper[6] which stated that:
The figures declared by respondent in its financial statement submitted to the
Securities and Exchange Commission indicate that (sic) a total net sale of
P78,639,134.73, but respondent net sales with NPO alone yielded P80,063.932, (sic) or a
discrepancy of P1,424,797.27. The figures speak for themselves where false statements
and/or information were clearly resorted to by the respondent. These documents are
material for eligibility requirements which bespeak of respondent's deliberate act of
misrepresentation.

The respondent has intentionally and consciously falsified its Financial Statement and
Income Tax Return for 2006 by stating and declaring the reduced and wrong amount of
annual net sales to gainfully reduce payment of taxes due the government.

It has been a pattern of respondent in reporting the reduced and incorrect net sales for
two (2) years in a row. It did in 2006 and 2007. In fact, it was duly reflected in its 2006
and 2007 falsified Financial Statements submitted before the Securities and Exchange
Commission.[7]
On December 1, 2009, the NPO issued a Resolution[8] suspending and blacklisting
Ready Form for a period of five (5) years after finding, among others, that:
Respondent (sic) 2006 Financial Statement contains false information; hence, it is
a falsified document. As part of its eligibility requirements, respondent submitted to
NPO its 2006 Financial Statement (earlier submitted to the Securities and Exchange
Commission in compliance with its reportorial requirements) which contains false
information. Evidently, the same is (sic) fictitious, false and falsified document.

Respondent intentionally reported the reduced amount of its net sales for 2006 in its
Financial Statement by declaring only Seventy Eight Million Six Hundred Thirty Nine
Thousand One Hundred Thirty Four and Seventy Three Centavos (P78,639,134.73).
However, its net sales alone in NPO reached Eighty Million Sixty Three Thousand Nine
Hundred Thirty Two and Twenty Nine Centavos (P80,063,932.29). The under
declaration was not only conscious and deliberate but also it was purposely done by
respondent two (2) years in a row solely intended to evade payment of correct taxes
due to government.

Its (sic) worth recalling that in 2007, respondent also under declared its nets (sic) sales
by stating in its 2007 Financial Statement the amount of Seventy Four Million Three
Hundred Seventy Seven Thousand Five Hundred Ninety Three Pesos and Twenty Three
Centavos (P74,377,593.23). But in truth and in fact, its net sales for NPO alone hit One
Hundred Seven Million Three Hundred One Thousand Twelve Pesos and Ninety Four
Centavos (P107,301,012.94). In fact, the respondent was suspended for one (1) year
from 22 December 2008 up to 22 December 2009 for that reason. An appeal was filed
by respondent to the Office of the Press Secretary. However, the appeal was dismissed
and the imposition of administrative sanction of one (1) year was affirmed. The same
has already become final and executory since respondent neither filed a motion for
reconsideration nor a Petition for Review to the Court of Appeals timely filed.
[9]
 (Emphasis and underscoring in the original)
On April 4, 2014, Ready Form filed a Complaint-Affidavit (Complaint) before the
CBD-IBP praying that Atty. Castillon be disbarred due to allegedly violating Rules 1.01,
1.02, and 1.03 of Canon 1 of the Code of Professional Responsibility, alleging as a
ground therefor Atty. Castillon's supposed unlawful use of Ready Form's ITRs.
Complainant alleges that this is in violation of Sections 4 and 278 of Republic Act No.
8424,[10] otherwise known as the National Internal Revenue Code (NIRC), which state
that:
SEC. 4. Power of the Commissioner to Interpret Tax Laws and to Decide Tax
Cases. - The power to interpret the provisions of this Code and other tax laws shall be
under the exclusive and original jurisdiction of the Commissioner, subject to review by
the Secretary of Finance.

The power to decide disputed assessments, refunds of internal revenue taxes, fees or
other charges, penalties imposed in relation thereto, or other matters arising under this
Code or other laws or portions thereof administered by the Bureau of Internal Revenue
is vested in the Commissioner, subject to the exclusive appellate jurisdiction of the
Court of Tax Appeals.
xxxx

SEC. 278. Procuring Unlawful Divulgence of Trade Secrets.  Any person who causes or
procures an officer or employee of the Bureau of Internal Revenue to divulge any
confidential information regarding the business, income or inheritance of any taxpayer,
knowledge of which was acquired by him in the discharge of his official duties, and
which it is unlawful for him to reveal, and any person who publishes or prints in any
manner whatever, not provided by law, any income, profit, loss or expenditure
appearing in any income tax return, shall be punished by a fine of not more than Two
thousand pesos (P2,000), or suffer imprisonment of not less than six (6) months nor
more than five (5) years, or both. (Emphasis and italics in the original)
Complainant further alleges that Atty. Castillon's supposed act was in violation of
Section 30.1 of the Implementing Rules and Regulations of Republic Act No. 9184 [11] or
the Government Procurement Reform Act which mandates that the Bids and Awards
Committee concerned shall use a non discretionary "pass/fail" criterion in determining
the eligibility of bidding documents submitted to it. The said section states that:
30.1 The BAC shall open the first bid envelopes in public to determine each bidder's
. compliance with the documents required to be submitted for eligibility and for the
technical requirements, as prescribed in this IRR. For this purpose, the BAC shall check the
submitted documents of each bidder against a checklist of required documents to ascertain
if they are all present, using a non discretionary "pass/fail" criterion, as stated in the
Instructions to Bidders. If a bidder submits the required document, it shall be rated
"passed" for that particular requirement. In this regard, bids that fail to include any
requirement or are incomplete or patently insufficient shall be considered as "failed."
Otherwise, the BAC shall rate the said first bid envelope as "passed."
During the mandatory conference of the case before the CBD-IBP, the parties
agreed to limit the issue on whether or not Atty. Castillon's act of attaching Ready
Form's audited financial statements in the Petition for Blacklisting he filed with the NPO
constitutes a violation of Sections 4 and 238 of the NIRC. [12] Consequently, the answer to
the said question also determines whether Atty. Castillon violated Rules 1.01, 1.02, and
1.03 of Canon 1 of the Code of Professional Responsibility.

Atty. Castillon, in his position paper submitted to the CBD-IBP, stressed that what was
submitted in support of the Petition for Blacklisting with the NPO was Ready Form's
audited financial statements which were acquired from the Securities and Exchange
Commission (SEC). Atty. Castillon categorically denied that he acquired, much less
attached, an ITR of complainant Ready Form.[13]

After due proceedings, Commissioner Maria Editha A. Go-Biñas (Commissioner Go-

Biñas) rendered a Report and Recommendation[14] on July 21, 2016, absolving Atty.
Castillon from the charges filed by Ready Form. Commissioner Go-Biñas found that
Ready Form's claims were unfounded, as there is no proof that Atty. Castillon procured
Ready Form's ITR, or that he used it in the Petition for Blacklisting. The dispositive
portion of Commissioner Go-Biñas' Report and Recommendation reads as follows:
WHEREFORE, IN VIEW OF THE FOREGOING, it is most respectfully recommended
that the instant case be dismissed for utter lack of merit. [15]
On September 23, 2016, the IBP Board of Governors passed a Resolution
adopting the findings of fact and recommendation of Commissioner Go-Biñas and
resolved to dismiss the complaint, thus:
RESOLVED to ADOPT the findings of fact and recommendation of the
Investigating Commissioner dismissing the complaint. [16]
The Court's Ruling

After a judicious examination of the records and submission of the parties, the Court
finds no compelling reason to diverge from the factual findings of Commissioner Go-
Biñas as adopted by IBP Board of Governors.

Ready Form's central issue against Atty. Castillon is that he allegedly violated the law,
particularly the NIRC, when he supposedly attached a copy of its ITR for 2006 when he
filed the Petition for Blacklisting. A perusal of the records will reveal, however, that what
Atty. Castillon attached in the Petition for Blacklisting is Ready Form's audited financial
statement for the year 2006 and not the latter's ITR. Ready Form harps on the fact that
the following paragraphs, which mentions Ready Form's ITR, were in the Petition for
Blacklisting signed by Atty. Castillon:[17]
4. The aforecited suspension was brought about by the misrepresentation and
misdeclaration committed by herein respondent on its Income Tax Return and Financial
Statement and other documents submitted before this Office covering the period 2007;

5. Previous to the said violation, respondent had committed acts of similar nature in
their Income Tax Returns and Financial Statements and other documents submitted
before this office covering the year 2006, among other things, which underscores a
deliberate scheme of submitting false declarations. A photocopy of the 2006 Financial
Statement is hereto attached and marked as Annexes "B" and made integral part
hereof.[18]
Ready Form repeatedly made an issue out of the fact that its ITR was mentioned
in the Petition for Blacklisting, and later on in the Position Paper filed by Eastland, both
signed by Atty. Castillon. They did not, however, offer proof to substantiate its claims
that its ITR was attached to the Petition for Blacklisting despite the clear and express
statement therein that only its audited financial statement, which is available to the
public through the SEC, was attached thereto. During the mandatory conference, it was
clear that only an audited financial statement was attached by Atty. Castillon. Ready
Form only wants the IBP, and consequently this Court, to hold that Atty. Castillon used
confidential information by doing such act:
ATTY. MISON [counsel for Ready Form]:
This is Annex "G" to the complaint. Also paragraph 5 if I may mention, previous to this a
photocopy of the 2006 Financial Statement is hereto attached and marked as Annex "B" so that is
admitted?
ATTY. CASTILLON:
That Financial Statement no ITR as mentioned previously.
ATTY. MISON:
But the premise of the paragraph it made mentioned (sic) of that.
ATTY. CASTILLON:
There is that phrase, Your Honor, but meaning attaching ITR there really was none, Your
Honor.
xxxx
COMM. BINAS:
If any of these pleadings that you have there and the cases, I'm sure you have the files,
right?
ATTY. MISON:
Yes.
COMM. BINAS:
Did you notice any attachment about the ITR as submitted by the respondent? Because I'm
sure it should have been an annexed (sic) there or ........
ATTY. MISON:
Well, Your Honor, if the Commission should take somehow judicial notice that the financial
statement is attached to the ITR, the ITR merely contains the summary, the total amount but the
details of the total amount appearing in the Income Tax Return, they are all reflected in the
Financial Statement. Meaning, the Financial Statements contains the details while the ITR itself is
just a summary. So, you cannot say, o (sic) I just filed the financial statement I did not file the ITR.
But all the information appearing on the Financial Statement necessarily appears in the ITR.
xxxx
COMM. BINAS:
So, as of now the complainant is pounding on the fact that there was this use of
confidential data.
ATTY. MISON:
Yes, Your Honor.
COMM. BINAS:
That is the meat of the complaint.
ATTY. MISON:
Yes, Your Honor. Violation and not only that, Section 4, Your Honor, where no person has
the power to interpret even to make allegations that base (sic) on financial statements falsified,
 they have usurp (sic) the power exclusively vested to the BIR and the Court of Tax Appeals, Section
4 of R.A. 8424 and Section 278 of R.A. 8424.
COMM. BINAS:
So, insofar as the complainant is concerned the act of using the confidential tax data
emanated from the fact that he submitted the financial statement.
ATTY. MISON:
Yes, Your Honor. And we contend, Your Honor, that the financial statement contains a
more detailed figures vis-a-vis the income tax return. [19]
Clearly, therefore, the complainant wants this Court to penalize the respondent
for using a publicly-available document to support allegations in a pleading signed by
him. This, the Court refuses to do.

The Court takes judicial notice[20] of the fact that audited financial statements submitted
by corporations, as required by Section 141 of the Corporation Code, are made available
to the public by the SEC. Hence, the Court fails to see how Atty. Castillon violated any
law when he attached a copy of Ready Form's audited financial statements in the
Petition for Blacklisting he filed with the NPO.

Thus, the Court agrees with Commissioner Go-Biñas when she correctly said:
He who alleges should prove his case in a very clear and convincing manner.

An individual should not be allowed to claim relief just because a lawyer is aiding or

was hired by an opponent. To do so would create more injustice and lead to an even
more erroneous practice.

"While courts will not hesitate to mete out proper disciplinary punishment upon lawyers
who fail to live up to their sworn duties, they will on the other hand, protect them from
the unjust accusations of dissatisfied litigants. The success of a lawyer in his profession
depends most entirely on his reputation. Anything which will harm his good name is to
be deplored. Private persons and particularly disgruntled opponents, may not,
therefore, be permitted to use the courts as vehicles through which to vent their
rancor on members of the Bar" (Santos vs. Dichoso, Adm. Case No. 1825, August 22,
1978).[21] (Emphasis in the original)
All told, the Court finds that the evidence adduced is wholly insufficient to
support the allegations against Atty. Castillon. As such, the Court fails to see how Atty.
Castillon had violated Rules 1.01, 1.02, and 1.03 of Canon 1 of the Code of Professional
Responsibility. Hence, the Court affirms the IBP's recommendation to dismiss the
Complaint.
WHEREFORE, premises considered, the Complaint filed by Ready Form, Inc. against Atty.
Egmedio J. Castillon, Jr. is hereby DISMISSED for lack of merit.

SO ORDERED.

EN BANC
[ G.R. No. 235935, February 06, 2018 ]
REPRESENTATIVES EDCEL C. LAGMAN, TOMASITO S. VILLARIN,
EDGAR R. ERICE, TEDDY BRAWNER BAGUILAT, JR., GARY C.
ALEJANO, AND EMMANUEL A. BILLONES, PETITIONERS, VS. SENATE
PRESIDENT AQUILINO PIMENTEL III, SPEAKER PANTALEON D.
ALVAREZ, EXECUTIVE SECRETARY SALVADOR C.
MEDIALDEA,DEFENSE SECRETARY DELFIN N. LORENZANA, BUDGET
SECRETARY BENJAMIN E. DIOKNO AND ARMED FORCES OF THE
PHILIPPINES CHIEF OF STAFF GENERAL REY LEONARDO
GUERRERO, RESPONDENTS.

[G.R. No. 236061]

EUFEMIA CAMPOS CULLAMAT, NOLI VILLANUEVA, RIUS VALLE,

ATTY. NERI JAVIER COLMENARES, DR. MARIA CAROLINA P.
ARAULLO, RENATO M. REYES, JR. CRISTINA E. PALABAY, BAYAN
MUNA PARTYLIST REPRESENTATIVE CARLOS ISAGANI T. ZARATE,
GABRIELA WOMEN'S PARTY REPRESENTATIVES EMERENCIANA A.
DE JESUS AND ARLENE D. BROSAS, ANAKPAWIS REPRESENTATIVE
ARIEL B. CASILAO, ACT TEACHERS' REPRESENTATIVES ANTONIO L.
TINIO,AND FRANCISCA L. CASTRO, AND KABATAAN PARTYLIST
REPRESENTATIVE SARAH JANE I. ELAGO, PETITIONERS, VS.
PRESIDENT RODRIGO DUTERTE, SENATE PRESIDENT AQUILINO
PIMENTEL III, HOUSE SPEAKER PANTALEON ALVAREZ, EXECUTIVE
SECRETARY SALVADOR MEDIALDEA, DEFENSE SECRETARY DELFIN
LORENZANA, ARMED FORCES OF THE PHILIPPINES CHIEF-OF-STAFF
GEN. REY LEONARDO GUERRERO, PHILIPPINE NATIONAL POLICE
DIRECTOR-GENERAL RONALD DELA ROSA, RESPONDENTS.

[G.R. No. 236145]

LORETTA ANN P. ROSALES, PETITIONER, VS. PRESIDENT RODRIGO R.
DUTERTE, REPRESENTED BY EXECUTIVE SECRETARY SALVADOR C.
MEDIALDEA, MARTIAL LAW ADMINISTRATOR SECRETARY DELFIN
N. LORENZANA, MARTIAL LAW IMPLEMENTER GENERAL REY L.
GUERRERO, AND PHILIPPINE NATIONAL POLICE DIRECTOR
GENERAL RONALD M. DELA ROSA, AND THE CONGRESS OF THE
PHILIPPINES, CONSISTING OF THE SENATE OF THE PHILIPPINES
REPRESENTED BY SENATE PRESIDENT AQUILINO Q. PIMENTEL III,
AND THE HOUSE OF REPRESENTATIVES, REPRESENTED BY HOUSE
SPEAKER PANTALEON D. ALVAREZ, RESPONDENTS.

[G.R. No. 236155]

CHRISTIAN S. MONSOD, DINAGAT ISLANDS REPRESENTATIVE

ARLENE J. BAG-AO, RAY PAOLO J. SANTIAGO, NOLASCO RITZ LEE B.
SANTOS III, MARIE HAZEL E. LAVITORIA, NICOLENE S. ARCAINA,
AND JOSE RYAN S. PELONGCO, PETITIONERS, VS. SENATE
PRESIDENT AQUILINO PIMENTEL III, SPEAKER PANTALEON D.
ALVAREZ, EXECUTIVE SECRETARY SALVADOR C. MEDIALDEA,
DEPARTMENT OF NATIONAL DEFENSE (DND) SECRETARY DELFIN N.
LORENZANA, DEPARTMENT OF THE INTERIOR AND LOCAL
GOVERNMENT (DILG) SECRETARY (OFFICER-IN-CHARGE) EDUARDO
M. AÑO, ARMED FORCES OF THE PHILIPPINES (AFP) CHIEF OF STAFF
GENERAL REY LEONARDO GUERRERO, PHILIPPINE NATIONAL
POLICE (PNP) CHIEF DIRECTOR GENERAL RONALD M. DELA ROSA,
NATIONAL SECURITY ADVISER HERMOGENES C. ESPERON, JR.,
RESPONDENTS.

DECISION

TIJAM, J.:

Safety from external danger is the most powerful director of national conduct.
Even the ardent love of liberty will, after a time, give way to its dictates. - Alexander
Hamilton

There is an ongoing rebellion in the Philippines. NPA rebels, Maute rebels, ASG rebels,
BIFF rebels, Islamic fundamentalists and other armed groups are on the loose. They are
engaged in armed conflict with government forces; they seek to topple the government;
and they sow terror and panic in the community. To ignore this reality and to claim
that these are non-existent is to court consequences that endanger public safety.

A state of martial law is not the normative state. Neither does it take a perpetual form.
It is an extraordinary power premised on necessity meant to protect the Republic from
its enemies. Territorial and temporal limitations germane to the Constitutional
prerequisites of the existence or persistence of actual rebellion or invasion and the needs
of public safety severely restrict the declaration of martial law, or its extensions. The
government can lift the state of martial law once actual rebellion no longer persists and
that public safety is amply ensured. Should the government, through its elected
President and the Congress, fail in their positive duties prescribed by the Constitution or
transgress any of its safeguards, any citizen is empowered to question such acts before
the Court. When its jurisdiction is invoked, the Court is not acting as an institution
superior to that of the Executive or the Congress, but as the champion of the
Constitution ordained by the sovereign Filipino people. For, after all, a state of martial
law, awesome as it is perceived to be, does not suspend the operations of the
Constitution which defines and limits the powers of the government and guarantees the
bill of rights to every person.

The Case

These are consolidated petitions,[1] filed under the third paragraph, Section 18 of Article
VII of the Constitution, assailing the constitutionality of the extension of the
proclamation of martial law and suspension of the privilege of the writ of habeas
corpus in the entire Mindanao for one year from January 1 to December 31, 2018.
Petitioners in G.R. No. 235935 alternatively, but not mandatorily, invoke the Court's
expanded jurisdiction under Section 1 of Article VIII of the Constitution. Petitioners in
G.R. Nos. 235935, 236061 and 236155 pray for a temporary restraining order (TRO)
and/or writ of preliminary injunction to enjoin respondents from implementing the one-
year extension.

The Antecedents

On May 23, 2017, President Rodrigo Roa Duterte issued Proclamation No. 216,
[2]
 declaring a state of martial law and suspending the privilege of the writ of habeas
corpus in the whole of Mindanao for a period not exceeding sixty (60) days, to address
the rebellion mounted by members of the Maute Group and Abu Sayyaf Group (ASG).
On May 25, 2017, within the 48-hour period set in Section 18, Article VII of the
Constitution, the President submitted to the Senate and the House of Representatives
his written Report, citing the events and reasons that impelled him to issue
Proclamation No. 216. Thereafter, the Senate adopted P.S. Resolution No. 388 [3] while
the House of Representatives issued House Resolution No. 1050, [4] both expressing full
support to the Proclamation and finding no cause to revoke the same.

Three separate petitions[5] were subsequently filed before the Court, challenging the
sufficiency of the factual basis of Proclamation No. 216. In a Decision rendered on July 4,
2017, the Court found sufficient factual bases for the Proclamation and declared it
constitutional.

On July 18, 2017, the President requested the Congress to extend the effectivity of
Proclamation No. 216. In a Special Joint Session on July 22, 2017, the Congress adopted
Resolution of Both Houses No. 2[6] extending Proclamation No. 216 until December 31,
2017.

In a letter[7] to the President, through Defense Secretary Delfin N. Lorenzana (Secretary

Lorenzana), the Armed Forces of the Philippines (AFP) Chief of Staff, General Rey
Leonardo Guerrero (General Guerrero), recommended the further extension of martial
law and suspension of the privilege of the writ of habeas corpus in the entire Mindanao
for one year beginning January 1, 2018 "for compelling reasons based on current
security assessment." On the basis of this security assessment, Secretary Lorenzana
wrote a similar recommendation to the President "primarily to ensure total eradication
of DAESH-inspired Da'awatul Islamiyah Waliyatul Masriq (DIWM), other like-minded
Local/Foreign Terrorist Groups (L/FTGs) and Armed Lawless Groups (ALGs), and the
communist terrorists (CTs) and their coddlers, supporters and financiers, and to ensure
speedy rehabilitation, recovery and reconstruction efforts in Marawi, and the
attainment of lasting peace, stability, economic development and prosperity in
Mindanao."[8]

Acting on said recommendations, the President, in a letter[9] dated December 8, 2017,

asked both the Senate and the House of Representatives to further extend the
proclamation of martial law and the suspension of the privilege of the writ of habeas
corpus in the entire Mindanao for one year, from January 1, 2018 to December 31,
2018, or for such period as the Congress may determine. Urging the Congress to grant
the extension based on the "essential facts" he cited, the President wrote:
 A further extension of the implementation of Martial Law and suspension of the
privilege of the writ of habeas corpus in Mindanao will help the AFP, the Philippine
National Police (PNP), and all other law enforcement agencies to quell completely and
put an end to the on-going rebellion in Mindanao and prevent the same from escalating
to other parts of the country. Public safety indubitably requires such further extension,
not only for the sake of security and public order, but more importantly to enable the
government and the people of Mindanao to pursue the bigger task of rehabilitation and
the promotion of a stable socio-economic growth and development. [10]
Attached to the President's written request were the letters of Secretary
Lorenzana[11] and General Guerrero[12] recommending the one-year extension.

On December 13, 2017, the Senate and the House of Representatives, in a joint session,
adopted Resolution of Both Houses No. 4[13] further extending the period of martial law
and suspension of the privilege of the writ of habeas corpus in the entire Mindanao for
one year, from January 1, 2018 to December 31, 2018. In granting the President's
request, the Congress stated:
WHEREAS, the President informed the Congress of the Philippines of the
remarkable progress made during the period of Martial Law, but nevertheless reported
the following essential facts, which as Commander-in-Chief of all armed forces of the
Philippines, he has personal knowledge of: First, despite the death of Hapilon and the
Maute brothers, the remnants of their groups have continued to rebuild their
organization through the recruitment and training of new members and fighters to carry
on the rebellion; Second, the Turaifie Group has likewise been monitored to be planning
to conduct bombings, notably targeting the Cotabato area; Third, the Bangsamoro
Islamic Freedom Fighters continue to defy the government by perpetrating at least
fifteen (15) violent incidents during the Martial Law period in Maguindanao and North
Cotabato; Fourth, the remnants of the Abu Sayyaf Group in Basilan, Sulu, Tawi-tawi, and
Zamboanga Peninsula remain a serious security concern; and last, the New People's
Army took advantage of the situation and intensified their decades-long rebellion
against the government and stepped up terrorist acts against innocent civilians and
private entities, as well as guerrilla warfare against the security sector and public and
government infrastructure, purposely to seize political power through violent means
and supplant the country's democratic form of government with Communist rule.

WHEREAS, Section 18, Article VII of the 1987 Constitution authorizes the Congress of the
Philippines to extend, at the initiative of the President, such proclamation or suspension
for a period to be determined by the Congress of the Philippines, if the invasion or
rebellion shall persist and public safety requires it;

WHEREAS, on December 13, 2017, after thorough discussion and extensive debate, the
Congress of the Philippines in a Joint Session by two hundred forty (240) affirmative
votes comprising the majority of all its Members, has determined that rebellion persists,
and that public safety indubitably requires the further extension of the Proclamation of
Martial Law and the Suspension of the Privilege of the Writ of Habeas Corpus in the
Whole of Mindanao; Now, therefore, be it Resolved by the Senate and the House of
Representatives in a Joint Session Assembled, To further extend Proclamation No. 216,
Series of 2017, entitled "Declaring a State of Martial Law and Suspending the Privilege of
the Writ of Habeas Corpus in the Whole of Mindanao" for a period of one (1) year from
January 1, 2018 to December 31, 2018.[14]
The Parties' Arguments

A. Petitioners' case

Based on their respective petitions and memoranda and their oral arguments before
this Court on January 16, 2018 and January 17, 2018, petitioners' arguments are
summarized as follows:

(a) The petitioners' failure to attach the Congress' Joint Resolution approving the
extension is not fatal to the consolidated petitions. Such failure is justified by the non-
availability of the Resolution at the time the petition was filed. In any case, the Rules on
Evidence allow the Court to take judicial notice of the Resolution as an official act of the
legislative.[15]

(b) The doctrine of presidential immunity does not apply in a sui generis proceeding
under Section 18, Article VII as such immunity pertains only to civil and criminal liability.
[16]
 In this proceeding, the President is not being held personally liable for damages, or
threatened with any punishment. If at all, he is being held to account for non-
compliance with a constitutional requirement.[17]

(c) The principle of conclusiveness of judgment is not a bar to raising the issue of the
sufficiency of the factual basis of the extension, being different from the factual and
legal issues raised in the earlier case of Lagman v. Medialdea.[18] At any rate, the Court's
decision in Lagman is transitory considering the volatile factual circumstances.
[19]
 Commissioner Joaquin G. Bernas (Fr. Bernas) emphasized during the deliberations on
the 1987 Constitution that the evaluation of the Supreme Court in a petition which
assails such factual situation would be "transitory if proven wrong by subsequent
changes in the factual situation."[20]

(d) As to the scope and standards of judicial review, petitioners in G.R. No. 236145
assert that the standard for scrutiny for the present petitions is sufficiency of factual
basis, not grave abuse of discretion. The former is, by constitutional design, a stricter
scrutiny as opposed to the latter. Moreover, the Court is allowed to look into facts
presented before it during the pendency of the litigation. This includes, for example,
admissions made by the Solicitor General and the military during oral arguments, as
they attempted to show compliance with the constitutional requirements. [21]

In contrast, petitioners in G.R. No. 235935 argue that the standard to be used in

determining the sufficiency of the factual basis for the extension is limited to the
sufficiency of the facts and information contained in the President's letter dated
December 8, 2017 requesting for the extension and its annexes. [22]

(e) As to the quantum of proof, petitioners in G.R. No. 236061 insist that clear and
convincing evidence is necessary to establish sufficient factual basis for the extension of
martial law instead of the "probable cause" standard set in Lagman. In comparison to
the initial exercise of the extraordinary powers of proclamation of martial law and the
suspension of the privilege of the writ of habeas corpus, their extension must have had
the benefit of sufficient time to gather additional information not only on the factual
situation of an actual rebellion, but also the initial exercise of the Executive during its
initial implementation.[23] Petitioners further argue that given its critical role in the
system of checks and balance, the Court should review not only the sufficiency of the
factual basis of the re-extension but also its accuracy. [24]

(f) As to the onus of showing sufficiency of the factual bases for extending martial law,
petitioners in G.R. Nos. 235935 and 236145 contend that the President bears the same.
Petitioners in G.R. No. 236155, however, argues that both the President and the
Congress bear the burden of proof.

(g) In relation to the Court's power to review the sufficiency of the factual basis for the
proclamation of martial law or any extension thereof, the military cannot withhold
information from the Court on the basis of national security especially since it is the
military itself that classifies what is "secret" and what is not. The Court's power to
review in this case is a specific and extraordinary mandate of the Constitution that
cannot be defeated and limited by merely invoking that the information sought is
"classified."[25]

(h) The Congress committed grave abuse of discretion for precipitately and perfunctorily
approving the extension of martial law despite the absence of sufficient factual basis.
[26]
 In G.R. No. 235935, petitioners impute grave abuse of discretion specifically against
the "leadership and supermajority" of both Chambers of Congress, arguing that the
extension was approved with inordinate haste as the Congress' deliberation was unduly
constricted to an indecent 3 hours and 35 minutes. The three-minute period of
interpellation (excluding the answer) under the Rules of the Joint Session of Congress
was inordinately short compared to the consideration of ordinary legislation on second
reading. Further, a member of Congress was only allowed a minute to explain his/her
vote, and although a member who did not want to explain could yield his/her allotted
time, the explanation could not exceed three minutes.[27] Petitioners in G.R. No. 236061
highlighted the limited time given to the legislators to interpellate the AFP Chief, the
Defense Secretary and other resource persons and criticized the Congress' Joint
Resolution for not specifying its findings and justifications for the re-extension. [28]

(i) The Constitution allows only a one-time extension of martial law and/or suspension
of the privilege of the writ of habeas corpus, not a series of extensions amounting to
perpetuity. As regards the Congress' discretion to determine the period of the
extension, the intent of the Constitution is for such to be of short duration given that
the original declaration of martial law was limited to only sixty (60) days. [29] In addition,
the period of extension of martial law should satisfy the standards of necessity and
reasonableness. Congress must exercise its discretion in a stringent manner considering
that martial law is an extraordinary power of last resort.[30]

(j) The one-year extension of the proclamation of martial law and suspension of the
privilege of the writ of habeas corpus lacked sufficient factual basis because there is no
actual rebellion in Mindanao. The Marawi siege and the other grounds under
Proclamation No. 216 that were used as the alleged bases to justify the extension have
already been resolved and no longer persist.[31] In his letter of request for further
extension, the President admits that the Maute rebellion has already been quelled and
the extension is to prevent the scattered rebels from gathering and consolidating their
strength.[32] Moreover, the President himself had announced the liberation of Marawi
and the cessation of armed combat.[33]
(k) The President and his advisers' justifications, which were principally based on
"threats of violence and terrorism," "security concerns" and "imminent danger to public
safety," do not amount to actual invasion or rebellion as to justify the extension of
martial law. They merely constitute "imminent danger." Since the framers of the 1987
Constitution removed the phrase "imminent danger" as one of the grounds for declaring
martial law, the President can no longer declare or extend martial law on the basis of
mere threats of an impending rebellion.[34]

(l) The extension should not be allowed on the basis of alleged NPA attacks because this
reason was not cited in the President's original declaration. [35]

(m) The alleged rebellion in Mindanao does not endanger public safety. The threat to
public safety contemplated under Section 18, Article VII of the Constitution is one where
the government cannot sufficiently or effectively govern, as when the courts or
government offices cannot operate or perform their functions. [36]

(n) Martial law should be operative only in a "theater of war" as intended by the drafters
of the Constitution. For a "theater of war" to exist, there must be an area where actual
armed conflict occurs which necessitate military authorities to take over the functions of
government due to the breakdown, inability or difficulty of the latter to function. The
insurrection must have assumed the status of a public and territorial war, and the
conditions must show that government agencies within the local territory can no longer
function.[37] Without any of the four objectives that comprise the second element of
rebellion,[38] the acts of "regrouping", "consolidation of forces", "recruitment" and
"planning" stages, or the continuing commission of the crimes of terrorism, robbery,
murder, extortion, as cited by the President in his December 8, 2017 letter, cannot be
said to be the "theater of war" referred to by the framers of the Constitution. [39]

(o) There is no need to extend martial law to suppress or defeat remnants of vanquished
terrorist groups, as these may be quelled and addressed using lesser extraordinary
powers (i.e., calling out powers) of the President. Moreover, respondent General
Guerrero failed to state during the oral arguments what additional powers are granted
to the military by virtue of the proclamation and suspension and instead limited himself
to the "effects" of martial law. Respondents simply failed to demonstrate how martial
law powers were used. In short, there is no necessity for martial law. [40]
In their Memorandum, petitioners in G.R. No. 236145 propounded two tests (i.e.,
proportionality and suitability) in determining whether the declaration or extension of
martial law is required or necessitated by public safety. The Proportionality Test requires
that the situation is of such gravity or scale as to demand resort to the most extreme
measures. Petitioners cited AFP's own admission that there are only 537 out of 8,813
barangays or 6.09% that are currently being controlled by rebel groups in Mindanao. On
the other hand, the Suitability Test requires that the situation is such that the
declaration of martial law is the correct tool to address the public safety problem.
Considering that the AFP Chief of Staff could not cite what martial law powers they used
in the past, and what martial law powers they intend to use moving forward, the
present circumstances fail both tests.[41]

(p) Petitioners in G.R. No. 235935 allege that martial law and the suspension of the writ
trigger the commission of human rights violations and suppression of civil liberties. In
fact, the implementation of the same resulted to intensified human rights violations in
Mindanao.[42] In support of the same allegations, petitioners in G.R. No. 236061 attached
a letter-report from Salinlahi on human rights violations committed as a consequence of
martial law in Mindanao. They emphasize that martial law is a scare tactic, one that is
not intended for the armed groups mentioned but actually against the dissenters of the
government's policies.[43]

(q) Finally, in support of their prayer for a TRO or a writ of preliminary injunction,
petitioners in G.R. No. 235935 allege that they are Representatives to Congress, sworn
to defend the Constitution, with the right to challenge the constitutionality of the
subject re-extension. They claim that petitioner Villarin, who is a resident of Davao City,
is personally affected and gravely prejudiced by there-extension as it would spawn
violations of civil liberties of Mindanaoans like him, a steadfast critic of the Duterte
administration. They also assert that the injunctive relief will foreclose further
commission of human rights violations and the derogation of the rule of law in
Mindanao.[44] Petitioners in G.R. No. 236061 likewise prays for a TRO or writ of
preliminary injunction in order to protect their substantive rights and interests while the
case is pending before this Court.[45]

B. Respondents' case

Respondents, through the Office of the Solicitor General, argue that:

a) Petitioners' failure to submit the written Joint Resolution extending the martial law
and suspension of the privilege of the writ of habeas corpus is fatal since it is
indispensable to the Court's exercise of its review power. [46]

b) The Cullamat and Rosales Petitions were filed against the President in violation of the
doctrine of presidential immunity from suit.[47]

c) The Court already ruled in Lagman that there is actual rebellion in Mindanao. Thus,
the principle of conclusiveness of judgment pursuant to Section 47(c), [48] Rule 39 of the
Rules of Court bars the petitioners from relitigating the same issue.[49]

d) Given that the Court had already declared in Lagman that there is rebellion in
Mindanao, the onus lies on the petitioners to show that the rebellion has been
completely quelled.[50]

e) The invocation of this Court's expanded jurisdiction under Section 1, Article VIII of the
Constitution is misplaced. As held in Lagman,[51] the "appropriate proceeding" in Section
18, Article VII does not refer to a petition for certiorari filed under Section 1 or 5 of
Article VIII, as it is not the proper tool to review the sufficiency of the factual basis of the
proclamation or extension.[52]

f) Petitioners failed to allege that rebellion in Mindanao no longer exists, which is a

condition precedent for the filing of the instant petition. They only pointed out the
President's announcement regarding the liberation of Marawi from "terrorist influence."
They did not mention the rebellion being waged by DAESH-inspired Da'awatul
Islamahiyah Waliyatul Masriq (DIWM), other like-minded Local/Foreign Terrorist Groups
(L/FTGs) and Armed Lawless Groups (ALGs), remnants of the groups of Hapilon and
Maute, the Turaifie Group, the Bangsamoro Islamic Freedom Fighters (BIFF), the ASG,
and the New People's Army (NPA), as cited in the President's December 8, 2017 letter to
Congress.[53]

g) The determination of the sufficiency of the factual basis to justify the extension of
martial law became the duty of Congress after the President's request was transmitted.
The question raised had assumed a political nature that can only be resolved by
Congress.[54]

h) The manner in which Congress approved the extension is a political question, outside
the Court's judicial authority to review. Congress has full discretion on how to go about
the debates and the voting. The Constitution itself allows the Congress to determine the
rules of its proceedings. The Court does not concern itself with parliamentary rules,
which may be waived or disregarded by the legislature. [55]

i) Proclamation No. 216 and the subsequent extensions granted by Congress enjoy the
presumption of constitutionality, which petitioners failed to overcome by proving that
the extension is without basis. The presumption cannot be ignored, especially since the
Court held in Lagman, that it considers only the information and data available to the
President prior to or at the time of the declaration and will not undertake an
independent investigation beyond the pleadings. [56]

j) Even if the Court were to entertain the allegation of grave abuse of discretion on the
part of Congress in approving the one-year extension, the same is without merit. Both
houses of Congress gave due consideration to the facts relayed by the President which
showed that rebellion persists in Mindanao and that public safety requires the
extension. The extension was approved because of the stepped-up terrorist attacks
against innocent civilians and private entities. [57]

k) The period for deliberation on the President's request for further extension was not
unduly constricted. The extension or revocation of martial law cannot be equated with
the process of ordinary legislation. Given the time-sensitive nature of martial law or its
extension, the time cap was necessary in the interest of expediency. Furthermore, an
explanation of one's vote in the deliberation process is not a constitutional requirement.
[58]

l) The Constitution does not limit the period for which Congress can extend the
proclamation and the suspension, nor does it prohibit Congress from granting further
extension. The 60-day period imposed on the President's initial proclamation of martial
law does not similarly apply to the period of extension. The clause "in the same manner"
must be understood as referring to the manner by which Congress may revoke the
proclamation or suspension, i.e., Congress must also observe the same manner of
voting: "voting jointly, by a vote of at least a majority of all its Members in regular or
special session." Furthermore, in the absence of any express or implied prohibition in
the Constitution, the Court cannot prevent Congress from granting further extensions. [59]

m) The burden to show sufficiency of the factual basis for the extension of martial law is
not with the President. Section 18, Article VII of the Constitution states that the
extension of martial law falls within the prerogative of Congress. [60]

n) Even assuming that the burden of proof is on the President or Congress, such burden
has been overcome. Although the leadership of the Mautes was decimated in Marawi,
the rebellion in Mindanao persists as the surviving members of the militant group have
not laid down their arms. The remnants remain a formidable force to be reckoned with,
especially since they have established linkage with other rebel groups. With the
persistence of rebellion in the region, the extension of martial law is, therefore, not just
for preventive reasons. The extension is premised on the existence of an ongoing
rebellion. That the rebellion is ongoing is beyond doubt. [61]

o) In the context of the Revised Penal Code, even those who are merely participating or
executing the commands of others in a rebellion, as coddlers, supporters and financiers,
are guilty of the crime of rebellion.[62]

p) As a crime without predetermined boundaries, the rebellion in various parts of

Mindanao justified the extension of martial law, as well as the suspension of the
privilege of the writ of habeas corpus.[63]

q) Under the Constitution, the extension of martial law and the suspension of the
privilege of the writ of habeas corpus are justified as long as there is rebellion and public
safety requires it. The provision does not require that the group that started the
rebellion should be the same group that should continue the uprising. Thus, the violence
committed by other groups, such as the BIFF, AKP, ASG, DI Maguid, and DI Toraype
(Turaifie) should be taken into consideration in determining whether the rebellion has
been completely quelled, as they are part of the rebellion. [64]

r) The President has the sole prerogative to choose which of the extraordinary
commander-in-chief powers to use against the rebellion plaguing Mindanao. Thus,
petitioners cannot insist that the Court impose upon the President the proper measure
to defeat a rebellion. In light of the wide array of information in the hands of the
President, as well as the extensive coordination between him and the armed forces
regarding the situation in Mindanao, it would be an overreach for the Court to encroach
on the President's discretion.[65]

s) Among the differences between the calling out power of the President and the
imposition of martial law is that, during the latter, the President may ask the armed
forces to assist in the execution of civilian functions, exercise police power through the
issuance of General or Special Orders, and facilitate the mobilization of the reserve
force, among others.[66]

t) While the Anti-Terrorism Council (ATC) has powers that can be used to fight terrorism,
the ATC, however, becomes relevant only in cases of terrorism. Thus, for the purpose of
involving itself during a state of martial law, the ATC must first associate an act of
rebellion with terrorism, as rebellion is only one of the means to commit terrorism. [67]

u) The phrase "theater of war" in relation to martial law should be understood in a

traditional Groatian sense, which connotes that "war" is "an idea of multitude" and not
limited to the concept between two nations in armed disagreement. [68] Nevertheless,
the Constitution does not require the existence of a "theater of war" for a valid
proclamation or extension of martial law.[69]

v) There is no need to show the magnitude of rebellion, as placing the requirement of

public safety on a scale will prevent the application of laws and undermine the
Constitution.[70]

w) The alleged human rights violations are irrelevant in the determination of whether
Congress had sufficient factual basis to further extend martial law and suspend the
privilege of the writ of habeas corpus. As ruled in Lagman, petitioners' claim of alleged
human rights violations should be resolved in a separate proceeding and should not be
taken cognizance of by the Court.[71] Moreover, the alleged human rights violations are
unsubstantiated and contradicted by facts. According to the AFP Human Rights Office,
no formal complaints were filed in their office against any member or personnel of the
AFP for human rights violations during the implementation of martial law in Mindanao.
The online news articles cited in the Cullamat Petition have no probative value, as
settled in Lagman.

x) Martial law does not automatically equate to curtailment and suppression of civil
liberties and individual freedom. A state of martial law does not suspend the operation
of the Constitution, including the Bill of Rights. The Constitution lays down safeguards to
protect human rights during martial law. Civil courts are not supplanted. The suspension
of the writ of habeas corpus applies only to persons judicially charged for rebellion or
offenses inherent or directly connected with the invasion. Any person arrested or
detained shall be judicially charged within three days. Various statutes also exist to
protect human rights during martial law, such as, but not limited to, Republic Act (R.A.)
No. 7483 on persons under custodial investigation, R.A. No. 9372 on persons detained
for the crime of terrorism, and R.A. No. 9745 on the non-employment of physical or
mental torture on an arrested individual.[72]

y) A temporary restraining order (TRO) or a writ of preliminary injunction to restrain the

implementation or the extension of martial law is not provided in the Constitution.
Although there are remedies anchored on equity, a TRO and an injunctive relief cannot
override, prevent, or diminish an express power granted to the President by no less than
the Constitution. If a TRO or injunctive writ were to be issued, it would constitute an
amendment of the Charter tantamount to judicial legislation, as it would fashion a
shortcut remedy other than the power of review established in the Constitution. [73]

z) Petitioners' allegations do not meet the standard proof required for the issuance of
injunctive relief. Neither can the application for injunctive relief be supported by the
claim that an injunction will foreclose further violations of human rights, as injunction is
not designed to protect contingent or future rights. Petitioners also failed to show that
the alleged human rights violations are directly attributable to the President's
imposition of martial law and suspension of the privilege of the writ of habeas corpus.[74]

Ruling of the Court

Procedural Issues:

Failure to attach Resolution of Both Houses No. 4 is not fatal to the petitions.

Section 1,[75] Rule 129 of the Rules of Court provides that a court can take judicial notice
of the official acts of the legislative department without the introduction of evidence.

"Judicial notice is the cognizance of certain facts that judges may properly take and act
on without proof because these facts are already known to them; it is the duty of the
court to assume something as matters of fact without need of further evidentiary
support."[76]

Resolution of Both Houses No. 4 is an official act of Congress, thus, this Court can take
judicial notice thereof. The Court also notes that respondents annexed a copy of the
Resolution to their Consolidated Comment.[77] Hence, We see no reason to consider
petitioners' failure to submit a certified copy of the Resolution as a fatal defect that
forecloses this Court's review of the petitions.

The President should be dropped as party respondent

Presidential privilege of immunity from suit is a well-settled doctrine in our

jurisprudence. The President may not be sued during his tenure or actual incumbency,
and there is no need to expressly grant such privilege in the Constitution or law. [78] This
privilege stems from the recognition of the President's vast and significant functions
which can be disrupted by court litigations. As the Court explained in Rubrico v.
Macapagal-Arroyo, et al.:[79]
It will degrade the dignity of the high office of the President, the Head of State, if
he can be dragged into court litigations while serving as such. Furthermore, it is
important that he be freed from any form of harassment, hindrance or distraction to
enable him to fully attend to the performance of his official duties and functions. Unlike
the legislative and judicial branch, only one constitutes the executive branch and
anything which impairs his usefulness in the discharge of the many great and important
duties imposed upon him by the Constitution necessarily impairs the operation of the
Government.[80]
Accordingly, in David, the Court ruled that it was improper to implead former
President Gloria Macapagal-Arroyo in the petitions assailing the constitutionality of
Presidential Proclamation No. 1017, where she declared a state of national emergency,
and General Order No. 5, where she called upon the AFP and the Philippine National
Police (PNP) to prevent and suppress acts of terrorism and lawless violence in the
country.

It is, thus, clear that petitioners in G.R. Nos. 236061 and 236145 committed a procedural
misstep in including the President as a respondent in their petitions.

The Congress is an indispensable party to the consolidated petitions.

Of the four petitions before the Court, only G.R. No. 236145 impleaded the Congress as
party-respondent.

Section 7, Rule 3 of the Rules of Court requires that "parties in interest without whom
no final determination can be had of an action shall be joined as plaintiffs or
defendants." In Marmo, et al. v. Anacay,[81] the Court explained that:
 [A] party is indispensable, not only if he has an interest in the subject matter of
the controversy, but also if his interest is such that a final decree cannot be made
without affecting this interest or without placing the controversy in a situation where
the final determination may be wholly inconsistent with equity and good conscience. He
is a person whose absence disallows the court from making an effective, complete, or
equitable determination of the controversy between or among the contending parties.
[82]
 (Citation omitted)
In these consolidated petitions, petitioners are questioning the constitutionality
of a congressional act, specifically the approval of the President's request to extend
martial law in Mindanao. Petitioners in G.R. No. 235935 and 236155 have also put in
issue the manner in which the Congress deliberated upon the President's request for
extension. Clearly, therefore, it is the Congress as a body, and not just its leadership,
which has interest in the subject matter of these cases. Consequently, it was
procedurally incorrect for petitioners in G.R. Nos. 235935, 236061 and 236155 to
implead only the Senate President and the House Speaker among the respondents.

Arguably, Senator Aquilino Pimentel III and House Speaker Pantaleon Alvarez can be
said to have an interest in these cases, as representatives of the Senate and the House
of Representatives, respectively. However, considering that one of their main
contentions is that the "supermajority" of the Congress gravely abused their discretion
when they allegedly railroaded the adoption of Resolution of Both Houses No. 4, it
stands to reason and the requirements of due process that petitioners in G.R.
Nos. 235935 and 236061 should have impleaded the Congress as a whole. [83] Needless to
say, the entire body of Congress, and not merely the respective leaders of its two
Houses, will be directly affected should We strike down the extension of martial law.
Thus, We hold that in cases impugning the extension of martial law for lack of sufficient
factual basis, the entire body of the Congress, composed of the Senate and the House of
Representatives, must be impleaded, being an indispensable party thereto.

It is true that a party's failure to implead an indispensable party is not per se a ground
for the dismissal of the action, as said party may be added, by order of the court on
motion of the party or motu propio, at any stage of the action or at such times as are
just. However, it remains essential - as it is jurisdictional - that an indispensable party be
impleaded before judgment is rendered by the court, as the absence of such
indispensable party renders all subsequent acts of the court null and void for want of
authority to act, not only as to the absent parties but even as to those present.
[84]
 Joining indispensable parties into an action is mandatory, being a requirement of due
process. In their absence, the judgment cannot attain real finality. [85]

We are, thus, unprepared to trivialize the necessity to implead the entire Congress as
party-respondent in this proceeding, especially considering that the factual scenario and
the concomitant issues raised herein are novel and unprecedented.

Nevertheless, inasmuch as the Congress was impleaded as a respondent in G.R. No.

236145 and the OSG has entered its appearance and argued for all the respondents
named in the four consolidated petitions, the Court finds that the "essential" and
"jurisdictional" requirement of impleading an indispensable party has been substantially
complied with.

The Court is not barred by the doctrine of  conclusiveness of judgment from
examining  the persistence of rebellion in Mindanao

Citing the doctrine of conclusiveness of judgment, respondents contend that petitioners

could no longer raise the issue of the existence of rebellion in Mindanao, in light of this
Court's ruling in Lagman[86] and Padilla v. Congress.[87]

Reliance on the doctrine of conclusiveness of judgment is misplaced.

Conclusiveness of judgment, a species of the principle of res judicata, bars the re-
litigation of any right, fact or matter in issue directly adjudicated or necessarily involved
in the determination of an action before a competent court in which judgment is
rendered on the merits.[88] In order to successfully apply in a succeeding litigation the
doctrine of conclusiveness of judgment, mere identities of parties and issues is required.

In this case, despite the addition of new petitioners, We find that there is substantial
identity of parties between the present petitions and the earlier Lagman case given
their privity or shared interest in either protesting or supporting martial law in
Mindanao. It is settled that for purposes of res judicata, only substantial identity of
parties is required and not absolute identity. There is substantial identity of parties
when there is community of interest between a party in the first case and a party in the
second case even if the latter was not impleaded in the first case. [89]

As to the second requirement, We do not find that there is identity of issues between
the Lagman[90] and Padilla[91] cases, on one hand, and the case at bar.
In Padilla, petitioners sought to require the Congress to convene in a joint session to
deliberate whether to affirm or revoke Presidential Proclamation No. 216, and to vote
thereon. After consideration of the arguments of the parties, We ruled that under
Section 18, Article VII of the 1987 Constitution, the Congress is only required to vote
jointly to revoke the President's proclamation of martial law and/or suspension of the
privilege of the writ of habeas corpus. We clarified that there is no constitutional
requirement that Congress must conduct a joint session for the purpose of concurring
with the President's declaration of martial law.

In Lagman, the constitutionality of Proclamation No. 216 was the primary issue raised
before Us. We held that the Proclamation was constitutional as the President had
sufficient factual basis in declaring martial law and suspending the privilege of the writ
of habeas corpus in Mindanao. We found that based on the facts known to the
President and the events that transpired before and at the time he issued the
Proclamation, he had probable cause to believe that a rebellion was or is being
committed, and reasonable basis to conclude that public safety was endangered by the
widespread atrocities perpetrated by the rebel groups.

In contrast, the consolidated petitions at hand essentially assail the Congress' act of
approving the President's December 8, 2017 request and extending the declaration of
martial law in Mindanao from January 1 to December 31, 2018. In support of their case,
petitioners argue that rebellion no longer persists in Mindanao and that public safety is
not endangered by the existence of mere "remnants" of the Maute group, ASG, DAESH-
inspired DIWM members.

Although there are similarities in the arguments of petitioners in the

earlier Lagman case and the petitions at bar, We do not find that petitioners are seeking
to re-litigate a matter already settled in the Lagman case with respect to the existence
of rebellion. A reading of the consolidated petitions reveals that petitioners do not
contest the existence of violence committed by various armed groups in Mindanao, to
wit:
LAGMAN PETITION (G.R. No. 235935)
43. It is very unfortunate that in their contrived efforts to justify the extension of
martial law in Mindanao, President Duterte and his military and police advisers with the
support of partisans in the Congress have molded the so-called remnants or residue,
miniscule as they are, into apparent menacing ogres.
xxxx

53. A litany of alleged "skirmishes" does not necessarily constitute armed public uprising
against the government.

54. They may only indicate banditry, lawless violence and terroristic acts of remnants or
residure of vanquished combatants.
CULLAMAT PETITION (G.R. No. 236061)
58. The question now therefore is, the instant case, does the actual rebellion
being perpetrated by the armed groups enumerated in the 08 December 2017 letter of
President Duterte to the House of Representatives and the Senate, compromise public
safety that would warrant the imposition of martial law?
ROSALES PETITION (G.R. No. 236145)
67. In short, the bases (for the extension of martial law in Mindanao) were: first,
the supposed continuous rebuilding of the remaining members of the Daesh-inspired
DIWM, who are "in all probability, ... presently regrouping and consolidating their
forces" or are, at the very least, continuing their efforts and activities "geared towards
the conduct of intensified atrocities and armed public uprisings"; second, the supposed
"plan" by members of the Turaifie group to conduct bombings; third, the supposed
continuing acts of violence of the Bangsamoro Islamic Freedom Fighters; fourth, the
continuous commission of acts of terrorism by members of the Abu Sayaff Group;
and fifth, the intensification of the "decades-long rebellion" by the New People's Army
(NPA).

68. With all due respect, and without diminishing the threat posed by any of the
foregoing, none of these constitute actual rebellion or actual invasion. Moreover, it
mistakes the distinction between the need for military force which is effected through
the use of the calling out powers of the President, on one hand, and the need for
imposing martial law on the civilian population, on the other.

69. Since the five (5) identified groups were/are in the "regrouping", "[consolidation] of
forces", "recruitment", "planning" stages, or are continuing the commission of crimes
(terrorism, robbery, murder, extortion) without any of the four (4) objectives that
comprise the second element of rebellion, there cannot be said to be a "theater of war"
already contemplated by the framers of the Constitution as would cripple the normal
operation of civilian law.
 MONSOD PETITION (G.R. No. 236155)
72. There is no indication that "public safety requires" the further imposition of
martial law. The instances cited as justification for the extension requested do not
demonstrate gravity such that ordinary powers and resources of the government cannot
address these. What Marawi needs at this point is effective and responsive
rehabilitation in an atmosphere of freedom and cooperation. It does not need martial
law to rise from the ashes of war and turmoil.

73. At most, these incidents show several protracted incidents of violence and
lawlessness that is well within the powers and authority of the government armed
forces and police force to suppress without resort to extraordinary powers, which the
government has been continuously doing for decades as well. Martial law is neither a
commensurate measure to address these incidents, nor preventive measure to thwart
the spread of lawless violence in the country. The mere invocation, therefore, of
rebellion or invasion, will not be the sufficient factual basis for the declaration of martial
law or the suspension of the privilege of the writ of habeas corpus if it cannot be
factually demonstrated that it is actually happening and necessitated by the
requirements of public safety in a theater of war.
From the foregoing, it appears that petitioners merely question the gravity and
extent of these occurrences as to necessitate the continued implementation of martial
law in Mindanao. In other words, the issue put forth by petitioners in the
earlier Lagman case, which this Court already settled, refers to the existence of a state
of rebellion which would trigger the President's initial declaration of martial law,
whereas the factual issue in the case at bar refers to the persistence of the same
rebellion in Mindanao which would justify the extension of martial law.

That petitioners are not barred from questioning the alleged persistence of the rebellion
in these consolidated petitions is also supported by the transitory nature of the Court's
judgment on the sufficiency of the factual basis for a declaration of martial law. The
following exchange during the deliberations of the 1986 Constitutional Commission is
instructive:
MR. BENGZON. I would like to ask for clarification from the Committee, and I
would like to address this to Commissioner Bernas.

Suppose there is a variance of decision between the Supreme Court and Congress,
whose decision shall prevail?
FR. BERNAS. The Supreme Court's decision prevails.

MR. BENGZON. If Congress, decides to recall before the Supreme Court issues its
decision, does the case become moot?

FR. BERNAS. Yes, Madam President.

MR. BENGZON. And if the Supreme Court promulgates its decision ahead of Congress,
Congress is foreclosed because the Supreme Court has 30 days within which to look into
the factual basis. If the Supreme Court comes out with the decision one way or the
other without Congress having acted on the matter, is Congress foreclosed?

FR. BERNAS. The decision of the Supreme Court will be based on its assessment of the
factual situation. Necessarily, therefore, the judgment of the Supreme Court on that is
a transitory judgment because the factual situation can change. So, while the decision
of the Supreme Court may be valid at that certain point of time, the situation may
change so that Congress should be authorized to do something about it.

MR. BENGZON. Does the Gentleman mean the decision of the Supreme Court then
would just be something transitory?

FR. BERNAS. Precisely.

MR. BENGZON. It does not mean that if the Supreme Court revokes or decides against
the declaration of martial law, the Congress can no longer say, "no, we want martial
law to continue" because the circumstances can change.

FR. BERNAS. The Congress can still come in because the factual situation can change.
Verily, the Court's review in martial law cases is largely dependent on the existing
factual scenario used as basis for its imposition or extension. The gravity and scope of
rebellion or invasion, as the case may be, should necessarily be re-examined, in order to
make a justiciable determination on whether rebellion persists in Mindanao as to justify
an extension of a state of martial law.

The Court's power to review the extension of martial law is limited solely to the
determination of the sufficiency of the factual basis thereof.
Section 1, Article VIII of the Constitution pertains to the Court's judicial power to settle
actual controversies involving rights which are legally demandable and enforceable, and
to determine whether or not there has been grave abuse of discretion amounting to
lack or excess of jurisdiction on the part of any branch or instrumentality of the
Government. The first part is to be known as the traditional concept of judicial power
while the latter part, an innovation of the 1987 Constitution, became known as the
court's expanded jurisdiction. Under its expanded jurisdiction, courts can now delve into
acts of any branch or instrumentality of the Government traditionally considered as
political if such act was tainted with grave abuse of discretion.

In seeking the Court's review of the extension of Proclamation No. 216 on the strength
of the third paragraph of Section 18, Article VII of the Constitution, petitioners in G.R.
No. 235935 alternately invoke the Court's expanded (certiorari) jurisdiction under
Section 1, Article VIII.

In Lagman,[92] We emphasized that this Court's jurisdiction under the third paragraph of
Section 18, Article VII is special and specific, different from those enumerated in
Sections 1[93] and 5[94] of Article VIII. It was further stressed therein that the standard of
review in a petition for certiorari is whether the respondent has committed any grave
abuse of discretion amounting to lack or excess of jurisdiction in the performance of his
or her functions, whereas under Section 18, Article VII, the Court is tasked to review the
sufficiency of the factual basis of the President's exercise of emergency powers. Hence,
the Court concluded that a petition for certiorari pursuant to Section 1 or Section 5 of
Article VIII is not the proper tool to review the sufficiency of the factual basis of the
proclamation of martial law or the suspension of the privilege of the writ of habeas
corpus. We held that to apply the standard of review in a petition for certiorari will
emasculate the Court's constitutional task under Section 18, Article VII, which was
precisely meant to provide an additional safeguard against possible martial law abuse
and limit the extent of the powers of the Commander-in-Chief.

With regard to the extension of the proclamation of martial law or the suspension of the
privilege of the writ, the same special and specific jurisdiction is vested in the Court to
review, in an appropriate proceeding filed by any citizen, the sufficiency of the factual
basis thereof. Necessarily, and by parity of reasoning, a certiorari petition invoking the
Court's expanded jurisdiction is not the proper remedy to review the sufficiency of the
factual basis of the Congress' extension of the proclamation of martial law or suspension
of the privilege of the writ.
Furthermore, as in the case of the Court's review of the President's proclamation of
martial law or suspension of the privilege of the writ, the Court's judicial review of the
Congress' extension of such proclamation or suspension is limited only to a
determination of the sufficiency of the factual basis thereof. By its plain language, the
Constitution provides such scope of review in the exercise of the Court's sui
generis authority under Section 18, Article VII, which is principally aimed at balancing (or
curtailing) the power vested by the Constitution in the Congress to determine whether
to extend such proclamation or suspension.

Substantive Issues

Congressional check on the exercise of martial law and suspension powers

Under the 1935[95] and 1973[96] Constitutions, the Congress had no power to review or

limit the Executive's exercise of the authority to declare martial law or to suspend the
privilege of the writ of habeas corpus. Borne of the country's martial law experience
under the Marcos regime, such power was subsequently established in the 1987
Constitution as part of a system of checks and balance designed to forestall any
potential abuse of an extraordinary power lodged in the President as Commander-in-
Chief of the country's armed forces.

The 1987 Constitution grants the Congress the power to shorten or extend the
President's proclamation of martial law or suspension of the privilege of the writ
of habeas corpus. Section 18, Article VII of the 1987 Constitution, in pertinent part,
states:
Section 18. The President shall be the Commander-in-Chief of all armed forces of
the Philippines and whenever it becomes necessary, he may call out such armed forces
to prevent or suppress lawless violence, invasion or rebellion. In case of invasion or
rebellion, when the public safety requires it, he may, for a period not exceeding sixty
days, suspend the privilege of the writ of habeas corpus or place the Philippines or any
part thereof under martial law. Within forty-eight hours from the proclamation of
martial law or the suspension of the privilege of the writ of habeas corpus, the President
shall submit a report in person or in writing to the Congress. The Congress, voting
jointly, by a vote of at least a majority of all its Members in regular or special session,
may revoke such proclamation or suspension, which revocation shall not be set aside
by the President. Upon the initiative of the President, the Congress may, in the same
manner, extend such proclamation or suspension for a period to be determined by the
Congress, if the invasion or rebellion shall persist and public safety requires it.

The Congress, if not in session, shall, within twenty-four hours following such
proclamation or suspension, convene in accordance with its rules without need of a call.
(Emphasis ours)
Congressional check on the President's martial law and suspension powers thus
consists of:
First. The power to review the President's proclamation of martial law or
suspension of the privilege of the writ of habeas corpus, and to revoke such
proclamation or suspension. The review is "automatic in the sense that it may be
activated by Congress itself at any time after the proclamation or suspension is
made."[97] The Congress' decision to revoke the proclamation or suspension cannot be
set aside by the President.

Second. The power to approve any extension of the proclamation or suspension, upon

the President's initiative, for such period as it may determine, if the invasion or rebellion
persists and public safety requires it.
Joint executive and legislative act

When approved by the Congress, the extension of the proclamation or suspension, as

described during the deliberations on the 1987 Constitution, becomes a "joint executive
and legislative act" or a "collective judgment" between the President and the Congress:
THE PRESIDENT. Commissioner Azcuna is recognized.

MR. AZCUNA. Thank you, Madam President.

I would like to offer an amendment to Section 15, line 7 of page 7. After the word "or,"
insert a comma (,) and add the phrase: AT THE INSTANCE OF THE PRESIDENT, so that the
amended portion will read: "may revoke such proclamation or suspension which
revocation shall not be set aside by the President, or AT THE INSTANCE OF THE
PRESIDENT extend the same if the invasion or rebellion shall persist and public safety
requires it.

May we know the reaction of the Committee? The reason for this Madam President, is
that the extension should not merely be an act of Congress but should be requested by
the President. Any extension of martial law or suspension of the privilege of the writ
of habeas corpus should have the concurrence of both the President and Congress. Does
the Committee accept my amendment?

MR. REGALADO. The Committee accepts that amendment because it will, at the same
time solve the concern of Commissioner Suarez, aside from the fact that this will now be
a joint executive and legislative act.

xxxx

MR. OPLE. May I just pose a question to the Committee in connection with the Suarez
amendment? Earlier Commissioner Regalado said that that [sic] point was going to be
a collective judgment between the President and the Congress. Are we departing from
that now in favor of giving Congress the plenipotentiary power to determine the period?

FR. BERNAS. Not really, Madam President, because Congress would be doing this in
consultation with the President, and the President would be outvoted by about 300
Members.

MR. OPLE. Yes, but still the idea is to preserve the principle of collective judgment of
that point upon the expiration of the 60 days when, upon his own initiative, the
President seeks for an extension of the proclamation of martial law or the suspension of
the privilege of the writ.

FR. BERNAS. Yes, the participation of the President is there but by giving the final
decision to Congress, we are also preserving the idea that the President may not revoke
what Congress has decided upon.[98] (Emphasis ours)
At the core of the instant petitions is a challenge to the "joint executive and
legislative act," embodied in the President's December 8, 2017 initiative and in the
latter's Resolution of Both Houses No. 4, which further extended the implementation of
martial law and the suspension of the privilege of the writ of habeas corpus in the entire
Mindanao for one year, from January 1 to December 31, 2018. Petitioners assail not
only the sufficiency of the factual basis of this extension, but also the manner in which it
was approved.

The manner in which Congress deliberated on the President's request for extension is
not subject to judicial review

Petitioners question the manner that the Congress approved the extension of martial
law in Mindanao and characterized the same as done with undue haste. Petitioners
premised their argument on the fact that the Joint Rules adopted by both Houses, in
regard to the President's request for further extension, provided for an inordinately
short period for interpellation of resource persons and for explanation by each Member
after the voting is concluded.

The assailed provisions refer to Section 7 of Rule V and Section 14 of Rule VIII of the
Rules of the Joint Session of Congress on the Call of the President to Further Extend the
Period of Proclamation No. 216, Series of 2017, which provide:
Rule V (CONSIDERATION OF THE LETTER OF THE PRESIDENT DATED DECEMBER
9, 2017 CALLING UPON THE CONGRESS OF THE PHILIPPINES TO FURTHER EXTEND THE
PROCLAMATION OF MARTIAL LAW AND THE SUSPENSION OF THE PRIVILEGE OF THE
WRIT OF HABEAS CORPUS IN THE WHOLE OF MINDANAO FOR A PERIOD OF ONE YEAR,
FROM 01 JANUARY 2018 TO 31 DECEMBER 2018, OR FOR SUCH OTHER PERIOD OF
TIME AS THE CONGRESS MAY DETERMINE, IN ACCORDANCE WITH SECTION 18,
ARTICLE VII OF THE 1987 CONSTITUTION)
Section 7. Any Member of the Congress may interpellate the resource persons for
not more than three minutes excluding the time of the answer of the resource persons.

xxxx
Rule VIII (VOTING ON THE MOTION TO FURTHER EXTEND THE PERIOD OF THE
PROCLAMATION OF MARTIAL LAW AND THE SUSPENSION OF THE PRIVILEGE OF THE
WRIT OF HABEAS CORPUS)
Section 14. After the conclusion of voting, the Senate President and the Speaker
of the House shall forthwith announce the results of the voting. Thereafter, any
Member of the Congress who wishes to explain his/her vote may consume a maximum
of one (1) minute: Provided, that a Member who does not want to explain may yield
his/her allotted time to another Member of the same House: Provided, further, that any
Member of the Congress shall be allowed a maximum of three (3) minutes.
No less than the Constitution, under Section 16 of Article VI, grants the Congress
the right to promulgate its own rules to govern its proceedings, to wit:
Section 16. (3) ) Each House may determine the rules of its proceedings, punish
its Members for disorderly behavior, and, with the concurrence of two-thirds of all its
Members, suspend or expel a Member. A penalty of suspension, when imposed, shall
not exceed sixty days. (Emphasis ours)
In Pimentel, Jr., et. al. v. Senate Committee of the Whole,[99] this constitutionally-
vested authority is recognized as a grant of full discretionary authority to each House of
Congress in the formulation, adoption and promulgation of its own rules. As such, the
exercise of this power is generally exempt from judicial supervision and interference,
except on a clear showing of such arbitrary and improvident use of the power as will
constitute a denial of due process.

This freedom from judicial interference was explained in the 1997 case of Arroyo v. De
Venecia,[100] wherein the Court declared that:
But the cases, both here and abroad, in varying forms of expression, all deny to
the courts the power to inquire into allegations that, in enacting a law, a House of
Congress failed to comply with its own rules, in the absence of showing that there was a
violation of a constitutional provision or the rights of private individuals. [101]
In other words, the Court cannot review the rules promulgated by Congress in
the absence of any constitutional violation. Petitioners have not shown that the above-
quoted rules of the Joint Session violated any provision or right under the Constitution.

Construing the full discretionary power granted to the Congress in promulgating its
rules, the Court, in the case of Spouses Dela Paz (Ret.) v. Senate Committee on Foreign
Relations, et al.[102] explained that the limitation of this unrestricted power deals only
with the imperatives of quorum, voting and publication. It should be added that there
must be a reasonable relation between the mode or method of proceeding established
by the rule and the result which is sought to be attained. [103]

The rules in question do not pertain to quorum, voting or publication. Furthermore,

deliberations on extending martial law certainly cannot be equated to the consideration
of regular or ordinary legislation. The Congress may consider such matter as urgent as to
necessitate swift action, or it may take its time investigating the factual situation. This
Court cannot engage in undue speculation that members of Congress did not review and
study the President's request based on a bare allegation that the time allotted for
deliberation was too short.[104]

Legislative rules, unlike statutory laws, do not have the imprints of permanence and
obligatoriness during their effectivity. In fact, they may be revoked, modified or waived
at the pleasure of the body adopting them. Being merely matters of procedure, their
observance are of no concern to the courts.[105] Absent a showing of "violation of a
constitutional provision or the rights of private individuals," the Court will not intrude
into this legislative realm. Constitutional respect and a becoming regard for the
sovereign acts of a coequal branch prevents the Court from prying into the internal
workings of the Congress.[106]

Furthermore, it has not escaped this Court's attention that the rules that governed the
Joint Session were in fact adopted, without objection, by both Houses of Congress on
December 13, 2017.[107] So also, the Transcript of the Plenary Proceedings of the Joint
Session showed that Members of Congress were, upon request, granted extension of
their time to interpellate.

Congress has the power to extend and determine the period of martial law and the
suspension of the privilege of the writ of habeas corpus

Section 18, Article VII of the 1987 Constitution provides:

SECTION 18. The President shall be the Commander-in-Chief of all armed forces
of the Philippines and whenever it becomes necessary, he may call out such armed
forces to prevent or suppress lawless violence, invasion or rebellion. In case of invasion
or rebellion, when the public safety requires it, he may, for a period not exceeding sixty
days, suspend the privilege of the writ of habeas corpus or place the Philippines or any
part thereof under martial law. Within forty-eight hours from the proclamation of
martial law or the suspension of the privilege of the writ of habeas corpus, the President
shall submit a report in person or in writing to the Congress. The Congress, voting
jointly, by a vote of at least a majority of all its Members in regular or special session,
may revoke such proclamation or suspension, which revocation shall not be set aside by
the President. Upon the initiative of the President, the Congress may, in the same
manner, extend such proclamation or suspension for a period to be determined by the
Congress, if the invasion or rebellion shall persist and public safety requires it.

The Congress, if not in session, shall, within twenty-four hours following such
proclamation or suspension, convene in accordance with its rules without any need of a
call.

The Supreme Court may review, in an appropriate proceeding filed by any citizen, the
sufficiency of the factual basis of the proclamation of martial law or the suspension of
the privilege of the writ or the extension thereof, and must promulgate its decision
thereon within thirty days from its filing.

A state of martial law does not suspend the operation of the Constitution, nor supplant
the functioning of the civil courts or legislative assemblies, nor authorize the conferment
of jurisdiction on military courts and agencies over civilians where civil courts are able to
function, nor automatically suspend the privilege of the writ.

The suspension of the privilege of the writ shall apply only to persons judicially charged
for rebellion or offenses inherent in or directly connected with the invasion.

During the suspension of the privilege of the writ, any person thus arrested or detained
shall be judicially charged within three days, otherwise he shall be released. (Emphasis
ours)
The provision is indisputably silent as to how many times the Congress, upon the
initiative of the President, may extend the proclamation of martial law or the
suspension of the privilege of habeas corpus. Such silence, however, should not be
construed as a vacuum, flaw or deficiency in the provision. While it does not specify the
number of times that the Congress is allowed to approve an extension of martial law or
the suspension of the privilege of the writ of habeas corpus, Section 18, Article VII is
clear that the only limitations to the exercise of the congressional authority to extend
such proclamation or suspension are that the extension should be upon the President's
initiative; that it should be grounded on the persistence of the invasion or rebellion and
the demands of public safety; and that it is subject to the Court's review of the
sufficiency of its factual basis upon the petition of any citizen.

A cardinal rule in statutory construction is that when the law is clear and free from any
doubt or ambiguity, there is no room for construction or interpretation, but only for
application.[108] Thus, whenever there is a determination that the invasion or rebellion
persists and public safety requires the extension of martial law or of the suspension of
the privilege of the writ, the Congress may exercise its authority to grant such extension
as may be requested by the President, even if it be subsequent to the initial extension.

Section 18, Article VII did not also fix the period of the extension of the proclamation
and suspension. However, it clearly gave the Congress the authority to decide on its
duration; thus, the provision states that that the extension shall be "for a period to be
determined by the Congress." If it were the intention of the framers of the Constitution
to limit the extension to sixty (60) days, as petitioners in G.R. No. 235935 theorize, they
would not have expressly vested in the Congress the power to fix its duration.

The Court cannot accept said petitioners' argument that the 60-day limit can be
deduced from the following clause in Section 18, Article VII: "the Congress may, in the
same manner, extend such proclamation or suspension." The word "manner" means a
way a thing is done[109] or a mode of procedure;[110] it does not refer to a period or length
of time. Thus, the clause should be understood to mean that the Congress must observe
the same manner of voting required for the revocation of the initial proclamation or
suspension, as mentioned in the sentence preceding it, i.e. "voting jointly, by a vote of
at least a majority of all its Members in regular or special session." This is clear from the
records of the 1986 Constitutional Commission:
MR. REGALADO. x x x

So I will repeat from line 26: "The Congress, voting jointly, by a vote of at least a
majority of all its Members in regular or special session, may revoke such proclamation
or suspension, which revocation shall not be set aside by the President. Upon the
initiative of the President, CONGRESS MAY extend SUCH PROCLAMATION for a period to
be determined by Congress..."

MR. AZCUNA. Madam President.

THE PRESIDENT. Commissioner Azcuna is recognized.

MR. AZCUNA. May I suggest the insertion of the words CONGRESS MAY IN THE SAME
MANNER, so as to emphasize that will also be Congress voting jointly and there would
also be a need of at least majority vote of all its Members for extension.

THE PRESIDENT. Does the Committee accept the amendment?

MR. REGALADO. Yes, the amendment is accepted it makes the provision clearer.
[111]
 (Emphasis ours)
United States Supreme Court Justice Antonin Scalia, in his book entitled "Reading
the Law: The Interpretation of Legal Texts,"[112] succinctly explained the dangers of
construction that departs from the text of a statute, particularly as to the allocation of
powers among the branches of government. He stated:
Some judges, however, refuse to yield the ancient judicial prerogative of making
the law, improvising on the text to produce what they deem socially desirable results-
usually at the behest of an advocate for one party to a dispute. The judges are also
prodded by interpretative theorists who avow that courts are "better able to discern
and articulate basic national ideals than are the people's politically responsible
representatives". On this view, judges are to improvise "basic national ideals of
individual liberty and fair treatment, even when the content of these ideals is not
expressed as a matter of positive law in the written Constitution."

To the extent that people give this view any credence, the notion that judges may (even
should) improvise on constitutional and statutory text enfeebles the democratic polity.
As Justice John Marshall Harlan warned in the 1960s, an invitation to judicial lawmaking
results inevitably in "a lessening, on the one hand, of judicial independence and, on the
other, of legislative responsibility, thus polluting the bloodstream of our system of
government." Why these alarming outcomes? First, when judges fashion law rather
than fairly derive it from governing texts, they subject themselves to intensified political
pressures - in the appointment process, in their retention, and in the arguments made
to them. Second, every time a court constitutionalizes a new sliver of law - as by finding
a "new constitutional right" to do this, that, or the other - that sliver becomes
thenceforth untouchable by the political branches. In the American system, a legislature
has no power to abridge a right that has been authoritatively held to be part of the
Constitution - even if that newfound right does not appear in the text. Over the past 50
years especially, we have seen the judiciary incrementally take control of larger and
larger swaths of territory that ought to be settled legislatively.

It used to be said that judges do not "make" law - they simply apply it. In the 20th
century, the legal realists convinced everyone that judges do indeed make law. To the
extent that this was true, it was knowledge that the wise already possessed and the
foolish could not be trusted with. It was true, that is, that judges did not really "find" the
common law but invented it over time. Yet this notion has been stretched into a belief
that judges "make" law through judicial interpretation of democratically enacted
statutes. Consider the following statement by John P. Dawson, intended to apply to
statutory law:
It seems to us inescapable that judges should have a part in creating law creating
it as they apply it. In deciding the multifarious disputes that are brought before them,
we believe that judges in any legal system invariably adapt legal doctrines to new
situations and thus give them new content.
Now it is true that in a system such as ours, in which judicial decisions have
a stare decisis effect, a court's application of a statute to a "new situation" can be said to
establish the law applicable to that situation that is, to pronounce definitively whether
and how the statute applies to that situation. But establishing this retail application of
the statute is probably not what Dawson meant by "creating law," "adapting legal
doctrines," and "giving them new content." Yet beyond that retail application, good
judges dealing with statutes do not make law. They do not "give new content" to the
statute, but merely apply the content that has been there all along, awaiting application
to myriad factual scenarios. To say that they "make law" without this necessary
qualification is to invite the taffy-like stretching of words - or the ignoring of words
altogether. (Emphasis ours)
Even on the assumption that there is a gap in our Constitution anent the
frequency and period of the Congress' extension, and there is a need for this Court to
exercise its power to interpret the law, We undertake the same in such a way as to
reflect the will of the drafters of the Constitution. "While We may not read into the law
a purpose that is not there, We nevertheless have the right to read out of it the reason
for its enactment."[113] We refer thus to the Constitutional Commission's deliberations on
the matter, viz:
MR. SUAREZ. Thank you, Madam President. I concur with the proposal of
Commissioner Azcuna but may I suggest that we fix a period for the duration of the
extension, because it could very well happen that the initial period may be shorter than
the extended period and it could extend indefinitely. So if Commissioner Azcuna could
put a certain limit to the extended period, I would certainly appreciate that, Madam
President.

xxxx

MR. SUAREZ. Thank you Madam President. May we suggest that on line 7, between the
words "same" and "if", we insert the phrase FOR A PERIOD OF NOT MORE THAN SIXTY
DAYS, which would equal the initial period for the first declaration just so it will keep
going.

THE PRESIDENT. What does the Committee say?

MR. REGALADO. May we request a clarification from Commissioner Suarez on this

proposed amendment? This extension is already a joint act upon the initiative of the
President and with the concurrence of the Congress. It is assumed that they have
already agreed not only on the fact of extension but on the period of extension. If we
put It at 60 days only, then thereafter, they have to meet again to agree jointly on a
further extension.

MR. SUAREZ. That is precisely intended to safeguard the interests and protect the lives
of citizens.
MR. REGALADO. In the first situation where the President declares martial law, there
had to be a prescribed period because there was no initial concurrence requirement.
And if there was no concurrence, the martial law period ends at 60 days. Thereafter, if
they intend to extend the same suspension of the privilege of the writ or the
proclamation of martial law, it is upon the initiative of the President this time, and with
the prior concurrence of Congress. So, the period of extension has already been taken
into account by both the Executive and the Legislative, unlike the first situation where
the President acted alone without prior concurrence. The reason for the limitation in
the first does not apply to the extension.

MR. SUAREZ. We are afraid of a situation that may develop where the extended period
would be even longer than the initial period, Madam President. It is only reasonable to
suggest that we have to put a restriction on the matter of the exercise of this right
within a reasonable period.

MR. REGALADO. Madam President, following that is the clause "extend the same if the
invasion or rebellion shall persist and public safety requires it." That by itself suggests a
period within which the suspension shall be extended, if the invasion is still going on.
But there is already the cut-off 60-day period. Do they have to meet all over again and
agree to extend the same?

MR. SUAREZ. That is correct. I think the two of them must have to agree on the period;
but it is theoretically possible that when the President writes a note to the Congress,
because it would be at the instance of the President that the extension would have to
be granted by Congress, it is possible that the period for the extension may be there. It
is also possible that it may not be there. That is the reason why we want to make it clear
that there must by a reasonable period for the extension. So, if my suggestion is not
acceptable to the Committee, may I request that a voting be held on it Madam
President.

FR. BERNAS. Madam President, may I just propose something because I see the
problem. Suppose we were to say: "or extend the same FOR A PERIOD TO BE
DETERMINED BY CONGRESS" - that gives Congress a little flexibility on just how long
the extension should be.

xxxx
THE PRESIDENT. Is that accepted by Commissioner Suarez?

MR. SUAREZ. Yes, Madam President.

MR. OPLE. May I just pose a question to the Committee in connection with the Suarez
amendment? Earlier Commissioner Regalado said that that point was going to be a
collective judgment between the President and the Congress. Are we departing from
that now in favor of giving Congress the plenipotentiary power to determine the period?

FR. BERNAS. Not really, Madam President, because Congress would be doing this in
consultation with the President, and the President would be outvoted by 300 Members.

MR. OPLE. Yes, but still the idea is to preserve the principle of collective judgment of
that point upon the expiration of the 60 days when, upon his own initiative, the
President seeks for an extension of the proclamation of martial law or the suspension of
the privilege of the writ.

FR. BERNAS. Yes, the participation of the President, is that when we put all of these
encumbrances on the President and Commander-in-Chief during an actual invasion and
rebellion, given an intractable Congress that may be dominated by opposition parties,
we may be actually impelling the President to use the sword of Alexander to cut the
Gordian knot by just declaring a revolutionary government that sets him free to deal
with the invasion or the insurrection. That is the reason I am in favor of the present
formulation. However, if Commissioner Suarez insists on his amendment, I do not think I
will stand in the way.

Thank you, Madam President.

MR. SUAREZ. We will accept the committee suggestion, subject to style later on.

xxxx

MR. PADILLA. According to Commissioner Concepcion, our former Chief Justice, the
declaration of martial law or the suspension of the privilege of the writ of habeas
corpus is essentially an executive act. If that be so, and especially under the following
clause: "if the invasion or rebellion shall persist and public safety requires it," I do not
see why the period must be determined by the Congress. We are turning a purely
executive act to a legislative act.

FR. BERNAS. I would believe what the former Chief Justice said about the initiation being
essentially an executive act, but what follows after the initiation is something that is
participated in by Congress.

MR. CONCEPCION. If I may add a word. The one who will do the fighting is the executive
but, of course, it is expected that if the Congress wants to extend, it will extend for the
duration of the fighting. If the fighting goes on, I do not think it is fair to assume that the
Congress will refuse to extend the period, especially since in this matter the Congress
must act at the instance of the executive. He is the one who is supposed to know how
long it will take him to fight. Congress may reduce it, but that is without prejudice to
his asking for another extension, if necessary. [114] (Emphasis ours)
Commissioner Jose E. Suarez's proposal to limit the extension to 60 days was not
adopted by the majority of the Commission's members. The framers evidently gave
enough flexibility on the part of the Congress to determine the duration of the
extension. Plain textual reading of Section 18, Article VII and the records of the
deliberation of the Constitutional Commission buttress the view that as regards the
frequency and duration of the extension, the determinative factor is as long as "the
invasion or rebellion persists and public safety requires" such extension.

The President and the Congress had sufficient factual basis to extend Proclamation
No. 216

Section 18, Article VII of the 1987 Constitution requires two factual bases for the
extension of the proclamation of martial law or of the suspension of the privilege of the
writ of habeas corpus: (a) the invasion or rebellion persists; and (b) public safety
requires the extension.

A. Rebellion persists

Rebellion, as applied to the exercise of the President's martial law and suspension
powers, is as defined under Article 134 of the Revised Penal Code, [115] viz:
Art. 134. Rebellion or insurrection; How committed. - The crime of rebellion or
insurrection is committed by rising publicly and taking arms against the Government for
the purpose of removing from the allegiance to said Government or its laws, the
territory of the Philippine Islands or any part thereof, of any body of land, naval or other
armed forces, depriving the Chief Executive or the Legislature, wholly or partially, of any
of their powers or prerogatives.
Rebellion thus exists when "(1) there is a (a) public uprising and (b) taking arms
against the Government; and (2) the purpose of the uprising or movement is either (a)
to remove from the allegiance to the Government or its laws: (i) the territory of the
Philippines or any part thereof; or (ii) any body of land, naval, or other armed forces; or
(b) to deprive the Chief Executive or Congress, wholly or partially, of any of their powers
and prerogatives."[116]

The President issued Proclamation No. 216 in response to the series of attacks launched
by the Maute Group and other rebel groups in Marawi City. The President reported to
the Congress that these groups had publicly taken up arms for the purpose of removing
Mindanao from its allegiance to the Government and its laws and establishing a
DAESH/ISIS wilayat or province in Mindanao.

In Lagman,[117] the Court sustained the constitutionality of Proclamation No. 216,

holding that the President had probable cause to believe that actual rebellion exists and
public safety required the Proclamation. The Court held:
A review of the aforesaid facts similarly leads the Court to conclude that the
President, in issuing Proclamation No. 216, had sufficient factual bases tending to show
that actual rebellion exists. The President's conclusion, that there was an armed public
uprising, the culpable purpose of which was the removal from the allegiance of the
Philippine Government a portion of its territory and the deprivation of the President
from performing his powers and prerogatives, was reached after a tactical consideration
of the facts. In fine, the President satisfactorily discharged his burden of proof.

After all, what the President needs to satisfy is only the standard of probable cause for a
valid declaration of martial law and suspension of the privilege of the writ of habeas
corpus. x x x
On July 22, 2017, upon the President's initiative, Congress extended Proclamation
No. 216 until December 31, 2017.

The ensuing question, therefore, is whether the rebellion persists as to satisfy the first
condition for the extension of martial law or of the suspension of the privilege of the
writ of habeas corpus.
The word "persist" means "to continue to exist," "to go on resolutely or stubbornly in
spite of opposition, importunity or warning," or to "carry on." [118] It is the opposite of the
words "cease," "discontinue," "end," "expire," "finish," "quit," "stop" and
"terminate."[119]

The reasons cited by the President in his request for further extension indicate that the
rebellion, which caused him to issue Proclamation No. 216, continues to exist and its
"remnants" have been resolute in establishing a DAESH/ISIS territory in Mindanao,
carrying on through the recruitment and training of new members, financial and
logistical build-up, consolidation of forces and continued attacks. Thus, in his December
8, 2017 letter to Congress, the President stated:
First, despite the death of Hapilon and the Maute brothers, the remnants of their
Groups have continued to rebuild their organization through the recruitment and
training of new members and fighters to carry on the rebellion. You will please note that
at least one hundred eighty-five (185) persons listed in the Martial Law Arrest Orders
have remained at-large and, in all probability, are presently regrouping and
consolidating their forces.

More specifically, the remnants of DAESH-inspired DIWM members and their allies,
together with their protectors, supporters and sympathizers, have been monitored in
their continued efforts towards radicalization/recruitment, financial and logistical build-
up, as well as in their consolidation/reorganization in Central Mindanao, particularly in
the provinces of Maguindanao and North Cotabato and also in Sulu and Basilan. These
activities are geared towards the conduct of intensified atrocities and armed public
uprisings in support of their objective of establishing the foundation of a global Islamic
caliphate and of a Wilayat not only in the Philippines but also in the whole of
Southeast Asia.

xxxx

Fourth, the remnants of the Abu Sayyaf Group (ASG) in Basilan, Sulu, Tawi-Tawi and
Zamboanga Peninsula remain as a serious security concern. Reports indicate that this
year they have conducted at least forty-three (43) acts of terrorism, including attacks
using Improvised Explosive Devices (IEDs), harassments, and kidnappings which have
resulted in the killing of eight (8) civilians, three (3) of whom were mercilessly
beheaded.[120] (Emphasis ours)
 In recommending the one-year extension of Proclamation No. 216 to the
President, AFP General Guerrero cited, among others, the continued armed resistance
of the DAESH-inspired DIWM and their allies, thus:
1. The DAESH-Inspired DIWM groups and allies continue to visibly offer armed
resistance in other parts of Central, Western and Eastern Mindanao in spite of the
neutralization of their key leaders and destruction of their forces in Marawi City;
[121]
 (Emphasis ours)
The data presented by the AFP during the oral arguments bolstered the
President's cause for extension and clarified what the government remains up against in
the aftermath of the Marawi crisis. According to the AFP:
The Dawlah Islamiyah is the Daesh-affiliate organization in the Philippines
responsible for the Marawi Siege. It is comprised of several local terrorist groups that
pledged allegiance to Daesh leader Abu Bakr AlBaghdadi.

xxxx

After the successful Marawi Operation, the Basilan-based ASG is left with 74 members;
the Maute Group with 30 members; the Maguid Group has 11; and the Turaifie Group
has 22 members with a total of 166 firearms.

However, manpower increased by more or less 400, with almost the same strength that
initially stormed Marawi City, through clandestine and decentralized recruitment of the
Daesh-inspired groups at their respective areas of concentration.

ASG Basilan-based recruited more or less 43 new members in Basilan; more or

less 250 by the Maute Group in the Lanao provinces; 37 by the Maguid Group in
Sarangani and Sultan Kudarat, and more or less 70 by the Turaifie Group in
Maguindanao. These newly recruited personalities were motivated by clannish culture
as they are relatives of terrorist personalities; revenge for their killed relatives/parents
during the Marawi operations; financial gain as new recruits were given an amount
ranging from PhP15,000.00 to 50,000.00; and, as radicalized converts.

These newly recruited members are undergoing trainings in tactics, marksmanships and
bombing operations at the different areas of Mount Cararao Complex, Butig, and
Piagapo all of Lanao Del Sur. Recruits with high potentials [sic] were given instruction on
IED-making and urban operations.

Furthermore, the situation has become complicated with the influx of Foreign Terrorist
Fighters (FTFs), capitalizing on the porous maritime boundaries in Southern Philippines,
in the guise as tourists and business men. As of this period, 48 FTFs were monitored
joining the Daesh-inspired groups, particularly the Maute Group in Lanao and Turaifie
Group in Central Mindanao. The closeness of these two groups is predominant
with @Abu DAR who has historically established link with Turaifie.

On Dawlah Islamiyah-initiated violent incidents, these have increased to 100% for the

2nd Semester.[122] (Emphasis ours)
The AFP's data also showed that Foreign Terrorist Fighters (FTFs) are now acting
as instructors to the new members of the Dawlah Islamiyah. [123]

These accounts ineluctably show that the rebellion that spawned the Marawi crisis
persists, and that its remaining members have regrouped, substantially increased in
number, and are no less determined to turn Mindanao into a DAESH/ISIS territory.

Petitioners in G.R. No. 235935 argue that "remnants" or a residue of a rebel group

cannot possibly mount a rebellion. The argument, however, fails to take into account
the 185 persons identified in the Martial Law Arrest Orders who are still at large; the
400 new members whom said remnants were able to recruit; the influx of 48 FTFs who
are training the new recruits in their ways of terrorism; and the financial and logistical
build-up which the group is currently undertaking with their sympathizers and
protectors. It likewise fails to consider that the new Dawlah Islamiyah members number
nearly the same as the group that initially stormed Marawi City, and while the
government succeeded in vanquishing 1,010 rebels following the siege, [124] it took
several months to accomplish this even under martial law. Thus, it will be imprudent nay
reckless to downplay or dismiss the capacity of said remnants to relentlessly pursue
their objective of establishing a seat of DAESH/ISIS power in Mindanao.

Petitioners in G.R. Nos. 236061 and 236155 have asserted that the rebellion no longer
persists as the President himself had announced the liberation of Marawi City, and
armed combat has ceased therein. Petitioners in G.R. No. 236061 added that Col.
Romeo Brawner, Deputy Commander of the Joint Task Force Ranao, was also quoted as
saying that the Maute-ISIS problem was about to be over. The statements, however,
were admittedly made on October 17, 2017,[125] nearly two months before the
President's request for extension in December 2017. Such declaration does not preclude
the occurrence of supervening events as the AFP discovered through their
monitoring[126] efforts. It is not inconceivable that remnants of the Dawlah Islamiyah
would indeed regroup, recruit new members and build up its arsenal during the
intervening period. The termination of a rebellion is a matter of fact. Rebellion does not
cease to exist by estoppel on account of the President's or the AFP's previous
pronouncements. Furthermore, it is settled that rebellion is in the nature of a continuing
crime.[127] Thus, members of the Dawlah Islamiyah who evaded capture did not cease to
be rebels.

So also, it does not necessarily follow that with the liberation of Marawi, the
DAESH/ISIS-inspired rebellion no longer exists. Secretary Lorenzana, during the
Congress' Joint Session on December 13, 2017, explained that while the situation in
Marawi has substantially changed, the rebellion has not ceased but simply moved to
other places in Mindanao, thus:
Senator Drilon. Meaning, the question that we raised, Mr. President, are the
declarations of the President, His Excellency, and the secretary of national defense
changed since the time that the situation was described on October 23 of this year? Has
the situation changed or is it the same situation today that the Marawi City has been
liberated from terrorists [sic] influence that there has been a termination of combat
operations in Marawi City?

Hon. Lorenzana. May I answer that, Mr. President. Mr. President, the situation in
Marawi has substantially changed from the time that our troops were fighting the ISIS-
inspired Maute Group and that's the reason why there is now this post-conflict need
assessment as being conducted in Marawi. However, as situations developed later on,
the ISIS-inspired other groups in Mindanao are also active like the BIFF in Central
Mindanao and also in some other parts of the BaSulTa islands.

Now, the reports now, Mr. President, is that they are actively recruiting again,
recruiting actively, recruiting some of the Muslim youths in the area and that is what we
are saying that the rebellion has not stopped. It just moved to another place.

xxxx

Representative Tinio. x x x

Mr. Speaker, hindi po ba sinabi ni Presidente sa kanyang sulat that the AFP has achieved
remarkable progress in putting the rebellion under control at hindi po ba sinabi
ni Executive Secretary na substantially neutralized na raw and Maute-Daesh? Pwede po
bang ipaliwanag ito ng mga resource persons?

The Speaker. The panel may respond.

Hon. Lorenzana. Mr. President, ang sagot po doon sa G. Congressman ay ganito - ang

sinasabi po naming substantially reduced na iyong strength or clear na iyong Marawi of
any terrorists ay Marawi lang po iyon. It does not include the whole of, the other parts
of Mindanao that are also subject to the influence of these terroristic groups. Sabi nga
ng Supreme Court ay, ang nangyayari sa Marawi ay nag-spill over na rin sa ibang Iugar
doon sa Mindanao kaya nga sinustain nila iyong declaration ng Martial Law.

x x x x[128] (Emphasis ours)
In Lagman, We recognized that "rebellion is not confined within predetermined
bounds," and "for the crime of rebellion to be consummated, it is not required that all
armed participants should congregate in one place x x x and publicly rise in arms against
the government for the attainment of their culpable purpose." We held that the
grounds on which the armed public uprising actually took place should not be the
measure of the extent, scope or range of the actual rebellion when there are other
rebels positioned elsewhere, whose participation did not necessarily involve the
publicity aspect of rebellion, as they may also be considered as engaged in the crime of
rebellion.

In a similar vein, the termination of armed combat in Marawi does not conclusively
indicate that the rebellion has ceased to exist. It will be a tenuous proposition to confine
rebellion simply to a resounding clash of arms with government forces. As noted
in Aquino, Jr. v. Enrile,[129] modern day rebellion has other facets than just the taking up
of arms, including financing, recruitment and propaganda, that may not necessarily be
found or occurring in the place of the armed conflict, thus:
x x x The argument that while armed hostilities go on in several provinces in
Mindanao there are none in other regions except in isolated pockets in Luzon, and that
therefore there is no need to maintain martial law all over the country, ignores the
sophisticated nature and ramifications of rebellion in a modem setting. It does not
consist simply of armed clashes between organized and identifiable groups on fields of
their own choosing. It includes subversion of the most subtle kind, necessarily
clandestine and operating precisely where there is no actual fighting. Underground
propaganda, through printed news sheets or rumors disseminated in whispers;
recruitment of armed and ideological adherents, raising of funds, procurement of arms
and material, fifth-column activities including sabotage and intelligence-all these are
part of the rebellion which by their nature are usually conducted far from the battle
fronts. x x x.[130]
Furthermore, as We explained in Lagman, "(t)he crime of rebellion consists of
many acts. It is a vast movement of men and a complex net of intrigues and plots." Thus:
Acts committed in furtherance of rebellion[,] though crimes in themselves[,] are
deemed absorbed in one single crime of rebellion. Rebellion absorbs "other acts
committed in its pursuance." Direct assault, murder, homicide, arson, robbery,
kidnapping just to name a few, are absorbed in the crime of rebellion if committed in
furtherance of rebellion; "[i]t cannot be made a basis of a separate charge."
Jurisprudence also teaches that not only common crimes may be absorbed in rebellion
but also "offenses under special laws [such as Presidential Decree No. 1829] which are
perpetrated in furtherance of the political offense". "All crimes, whether punishable
under a special law or general law, which arc mere components or ingredients, or
committed in furtherance thereof, become absorbed in the crime of rebellion and
cannot be isolated and charged as separate crimes in themselves." (Citations omitted)
In any case, Secretary Lorenzana has stressed that notwithstanding the
termination of armed combat in Marawi, clashes between the rebels and government
forces continue to take place in other parts of Mindanao. Thus, during an interpellation
at the December 13, 2017 Joint Session in Congress, he stated:
Senator Pangilinan. x x x

It would have been a very different situation altogether if the fighting was still ongoing.
If there is still that siege, then we can see that the situation is extreme and therefore,
we can proceed with an extension.

xxxx

Hon. Lorenzana. Mr. President, may I reply to the good senator.

Sir, maybe your perception here is not as bad as what is happening on the ground, but
the troops report otherwise.

You know, wala na sigurong bakbakan diyan sa Marawi, but there are still clashes
almost everyday in other parts of Mindanao. The clash with the BJFF in Central
Mindanao continues almost everyday. Iyong mga engkwentro din sa mga ibang lugar
sa Eastern Mindanao with the CPP-NPA ay nandoon pa rin. Basilan, Jolo ay ongoing pa
rin iyan.

x x x x[131] (Emphasis ours)
During the oral arguments, AFP General Guerrero also confirmed that there were
actually armed encounters with the remnants of the DAESH/ISIS-inspired DIWM.[132]

Accordingly, it would be error to conclude that the rebellion ceased to exist upon the
termination of hostilities in Marawi.

Other rebel groups

The extension has also been challenged on the ground that it did not refer to the same
rebellion under Proclamation No. 216.

It is true that the Bangsamoro Islamic Freedom Fighters (BIFF), the Turaifie Group and
the New People's Army (NPA) were not expressly mentioned either in Proclamation No.
216 or in the President's Report to Congress after he issued the Proclamation. However,
in Lagman, the government clearly identified the BIFF, based in the Liguasan Marsh,
Maguindanao, as one of the four ISIS-linked rebel groups that had formed an alliance for
the unified mission of establishing an ISIS territory in Mindanao, led by ASG-Basilan
leader, Isnilon Hapilon, who had been appointed emir of all ISIS forces in the Philippines.
The other three rebel groups were the ASG from Basilan, Ansarul Khilafah Philippines
(AKP), also known as the Maguid Group, from Saranggani and Sultan Kudarat, and the
Maute Group from Lanao del Sur.

Furthermore, while it named only the Maute Group and the ASG, the President's Report
made express reference to "lawless armed groups" as perpetrators of the Marawi siege
resolved to unseat the duly-constituted government and make Mindanao a DAESH/ISIS
province. The Report also indicated, as additional reasons for the Proclamation, the
"extensive networks or linkages of the Maute Group with foreign and local armed
groups" and the "network and alliance-building activities among terrorist groups, local
criminals, and lawless armed men" in Mindanao. [133] Thus, though not specifically
identified in the Proclamation or the President's Report, the BIFF and the Turaifie Group
are deemed to have been similarly alluded to.

Indeed, absolute precision cannot be expected from the President who would have to
act quickly given the urgency of the situation. Under the circumstances, the actual
rebellion and attack, more than the exact identity of all its perpetrators, would be his
utmost concern. The following pronouncement in Lagman, thus, finds relevance:
Neither should the Court expect absolute correctness of the facts stated in the
proclamation and in the written Report as the President could not be expected to verify
the accuracy and veracity of all facts reported to him due to the urgency of the
situation. To require precision in the President's appreciation of facts would unduly
burden him and therefore impede the process of his decision-making. Such a
requirement will practically necessitate the President to be on the ground to confirm
the correctness of the reports submitted to him within a period that only the
circumstances obtaining would be able to dictate. Such a scenario, of course, would not
only place the President in peril but would also defeat the very purpose of the grant of
emergency powers upon him, that is, to borrow the words of Justice Antonio T. Carpio
in Fortun, to "immediately put an end to the root cause of the emergency". Possibly, by
the time the President is satisfied with the correctness of the facts in his possession, it
would be too late in the day as the invasion or rebellion could have already escalated to
a level that is hard, if not impossible, to curtail.
In the same vein, to require the President to render a meticulous and
comprehensive account in his Proclamation or Report will be most tedious and will
unduly encumber his efforts to immediately quell the rebellion.

The efforts of the Turaifie Group and its allies[134] in the ISIS-inspired[135] BIFF to wrest
control of Mindanao continued even as the government was able to put the Marawi
crisis under control.

In his December 8, 2017 letter to the Congress, the President stated:

Second, the Turaifie Group has likewise been monitored to be planning to
conduct bombings, notably targeting the Cotabato area. Turaitie is said to be Hapilon's
potential successor as Amir of DAESH Wilayat in the Philippines and the Southeast Asia.
[136]

Furthermore, as the AFP reported during the oral arguments, the BIFF "continues
to inflict violence and sow terror in central Mindanao," and as one of the AFP's primary
targets for disbandment, "the group will likely continue its hostile operations in a bid to
retaliate, fight for its relevance and demonstrate its resiliency." [137]

The AFP has likewise confirmed that the Turaifie Group is one of several terrorist groups
responsible for the Marawi siege, and that it has so far successfully recruited 70 new
members in its unwavering pursuit of a DAESH/ISIS wilayat in Mindanao.
The Court, thus, finds that the government has sufficiently established the persistence
of the DAESH/ISIS rebellion.

The inclusion of the rebellion of the New People's Army (NPA) as basis for the further
extension of martial law in Mindanao will not render it void. Undeniably, the NPA aims
to establish communist rule in the country while the DAESH/ISIS-inspired rebels intend
to make Mindanao the seat of ISIS power in Southeast Asia. It is obvious, however, that
even as they differ in ideology, they have the shared purpose of overthrowing the duly
constituted government. The violence the NPA has continued to commit in Mindanao,
as revealed by the Executive, hardly distinguish its rebels from the architects of the
Marawi siege. Both have needlessly and violently caused the death of military forces
and civilians, and the destruction of public and private property alike. Thus, in his
request for the further extension of Proclamation No 216, the President informed the
Congress that:
Last, but certainly not the least, while the government was preoccupied with
addressing the challenges posed by the DAESH-inspired DIWM and other Local Terrorist
Groups (LTGs), the New People's Army (NPA) took advantage of the situation and
intensified their decades-long rebellion against the government and stepped up terrorist
attacks against innocent civilians and private entities, as well as guerilla warfare against
the security sector and public government infrastructure, purposely to seize political
power through violent means and supplant the country's democratic form of
government with Communist rule.

This year, the NPA has perpetrated a total of at least three hundred eight-five (385)
atrocities (both terrorism and guerilla warfare) in Mindanao, which resulted in forty-one
(41) Killed-in-Action and sixty-two (62) Wounded-in-Action (WIA) on the part of
government forces. On the part of the civilians, these atrocities resulted in the killing of
twenty-three (23) and the wounding of six (6) persons. The most recent was the ambush
in Talakag, Bukidnon on 09 November 2017, resulting in the killing of one (1) PNP
personnel and the wounding of three (3) others, as well as the killing of a four (4)-
month-old infant and the wounding of two (2) civilians.

Apart from these, at least fifty-nine (59) arson incidents have been carried out by the
NPA in Mindanao this year, targeting businesses and private establishments and
destroying an estimated P2.2 billion-worth of properties. Of these, the most significant
were the attack on Lapanday Food Corporation in Davao City on 09 April 2017 and the
burning of facilities and equipment of Mil-Oro Mining and Frasec Ventures Corporation
in Mati City, Davao Oriental on 06 May 2017, which resulted in the destruction of
properties valued at P1.85 billion and P109 million, respectively. [138] (Emphasis ours)
Given the scale of the attacks perpetrated by the communist rebels, it is far from
unreasonable for the President to include their rebellion in his request for the further
extension of martial law in Mindanao. The NPA's "intensified" insurgence clearly bears a
significant impact on the security of Mindanao and the safety of its people, which were
the very reasons for the martial law proclamation and its initial extension.

It will also be noted that when Proclamation No. 216 was issued, the Government and
the NPA were undergoing peace negotiations. Thus, the President could not have
included the NPA's rebellion in the Proclamation even granting he had cause to do so.
The Office of the Solicitor General declared during the oral arguments that because of
the peace negotiations, the NPA was "not explicitly included" as a matter of comity.
[139]
 The Executive's data showed that despite the peace talks, the NPA continued its
hostilities and intensified its tactical offensives, prompting the President to terminate
the peace negotiations on November 23, 2017. In his December 8, 2017 letter to
Congress, the President wrote:
As a direct result of these atrocities on the part of the NPA, I was constrained to
issue Proclamation No. 360 on 23 November 2017 declaring the termination of peace
negotiations with the National Democratic Front-Communist Party of the Philippines-
New People's Army (NDF-CPP-NPA) effective immediately. I followed this up with
Proclamation No. 374 on 05 December 2017, where I declared the CPP-NPA as a
designated/identified terrorist organization under the Terrorism Financing Prevention
and Suppression Act of 2012, and the issuance of a directive to the Secretary of Justice
to file a petition in the appropriate court praying to proscribe the NDF-CPP-NPA as a
terrorist organization under the Human Security Act of 2007. [140]
It is readily apparent that the inclusion of the NPA's rebellion in the President's
request for extension was precipitated by these turn of events, as well as the magnitude
of the atrocities attributed to the communist rebels. It would make no sense to exclude
or separate the communist rebellion from the continued operation of martial law in
Mindanao when it also persists in the same region. Thus, the Court finds that the
President's decision to add the NPA's "intensified" insurgence to the DAESH/ISIS
rebellion, as further basis to request for the extension, was not uncalled for.

In any event, seeking the concurrence of the Congress to use martial law to quell the
NPA's rebellion, instead of issuing a new martial law proclamation for the same purpose,
appears to be more in keeping with the Constitution's aim of preventing the
concentration of the martial law power in the President. The extension granted by the
Congress upon the President's request has become a joint action or a "collective
judgment"[141] between the Executive and the Legislature, thereby satisfying one of the
fundamental safeguards  established under Section 18, Article VII of the 1987
Constitution.

B. Public safety requires the extension

In Lagman, the Court defined "public safety" as follows:

Public safety, which is another component element for the declaration of martial
law, "involves the prevention of and protection from events that could endanger the
safety of the general public from significant danger, injury/harm, or damage, such as
crimes or disasters." Public safety is an abstract term; it does not take any physical
form. Plainly, its range, extent or scope could not be physically measured by metes and
bounds. (Emphasis ours)
The question, therefore, is whether the acts, circumstances and events upon
which the extension was based posed a significant danger, injury or harm to the general
public. The Court answers in the affirmative.

The following events and circumstances, as disclosed by the President, the Defense
Secretary and the AFP, strongly indicate that the continued implementation of martial
law in Mindanao is necessary to protect public safety:

(a) No less than 185 persons in the Martial Law Arrest Orders have remained at large.
Remnants of the Hapilon and Maute groups have been monitored by the AFP to be
reorganizing and consolidating their forces in Central Mindanao, particularly in
Maguindanao, North Cotabato, Sulu and Basilan, and strengthening their financial and
logistical capability.[142]

(b) After the military operation in Marawi City, the Basilan-based ASG, the Maute Group,
the Maguid Group and the Turaifie Group, comprising the DAESH-affiliate Dawlah
Islamiyah that was responsible for the Marawi siege, was left with 137 members and a
total of 166 firearms. These rebels, however, were able to recruit 400 new members,
more or less, in Basilan, the Lanao Provinces, Sarangani, Sultan Kudarat and
Maguindanao.[143]
(c) The new recruits have since been trained in marksmanship, bombing and tactics in
different areas in Lanao del Sur. Recruits with great potential are trained in producing
Improvised Explosive Devices (IEDs) and urban operations. These new members are
motivated by their clannish culture, being relatives of terrorists, by revenge for relatives
who perished in the Marawi operations, by money as they are paid P15,000.00 to
P50,000.00, and by radical ideology.[144]

(d) 48 FTFs have joined said rebel groups and are acting as instructors to the recruits.
[145]
 Foreign terrorists from Southeast Asian countries, particularly from Indonesia and
Malaysia, will continue to take advantage of the porous borders of the Philippines and
enter the country illegally to join the remnants of the DAESH/ISIS-inspired rebel groups.
[146]

(e)In November 2017, 15 Indonesian and Malaysian DAESH-inspired FTFs entered

Southern Philippines to augment the remnants of the Maguid group in Saragani
province. In December 2017, 16 Indonesian DAESH-inspired FTFs entered the Southern
Philippines to augment the ASG-Basilan and Maute groups in the Lanao province. In
January 2018, an unidentified Egyptian DAESH figure was monitored in the Philippines.
[147]

(f) At least 32 FTFs were killed in the Marawi operations. [148] Other. FTFs attempted to
enter the main battle area in Marawi, but failed because of checkpoints set up by
government forces.[149]

(g) "The DAESH-inspired DIWM groups and their allies continue to visibly offer armed
resistance in other parts of Central, Western and Eastern Mindanao in spite of the
neutralization of their key leaders and destruction of their forces in Marawi
City."[150] There were actually armed encounters with the remnants of said groups. [151]

(h) "Other DAESH-inspired and like-minded threat groups such as the BIFF, AKP, DI-
Maguid, DI-Toraype, and the ASG remain capable of staging similar atrocities and violent
attacks against vulnerable targets in Mindanao, including the cities of Davao, Cagayan
de Oro, General Santos, Zamboanga and Cotabato."[152]

(i) The Turaifie group conducts roadside bombings and attacks against government
forces, civilians and populated areas in Mindanao. [153] The group. plans to set off
bombings in Cotabato.[154]
(j) The Maute Group, along with foreign terrorists, were reported to be planning to
bomb the cities of Zamboanga, Iligan, Cagayan de Oro and Davao.[155]

(k) The remaining members of the ASG-Basilan have initiated five violent attacks that
killed two civilians.[156]

(l) In 2017, the remnants of the ASG in Basilan, Sulu, Tawi-Tawi and Zamboanga
Peninsula, conducted 43 acts of violence, including IED attacks and kidnapping which
resulted in the killing of eight innocent civilians, three of whom were mercilessly
beheaded.[157] Nine kidnap victims are still held in captivity.[158]

(m) Hapilon's death fast-tracked the unification of the Sulu and Basilan-based ASG to
achieve the common goal of establishing a DAESH/ISIS wilayat in Mindanao. This likely
merger may spawn retaliatory attacks such as IED bombings, in urban areas, particularly
in the cities of Zamboanga, Isabela and Lamitan. [159]

(n) By AFP's assessment, the ISIS' regional leadership may remain in the Southern
Philippines and with the defeat of ISIS in many parts of Syria and Iraq, some hardened
fighters from the ASEAN may return to this region to continue their fight. The AFP also
identified four potential leaders who may replace Hapilon as emir or leader of the ISIS
forces in the Philippines. It warned that the Dawlah Islamiyah will attempt to replicate
the Marawi siege in other cities of Mindanao and may conduct terrorist attacks in Metro
Manila and Davao City as the seat of power of the Philippine Government. With the
spotlight on terrorism shifting from the Middle East to Southeast Asia following the
Marawi siege, the AFP likewise indicated that the influx of FTFs in the Southern
Philippines will persist. The AFP further referred to possible lone-wolf attacks and
atrocities from other DAESH-inspired rebel groups in vulnerable cities like Cagayan de
Oro, Cotabato, Davao, General Santos, Iligan and Zamboanga.[160]

The rising number of these rebel groups, their training in and predilection to terrorism,
and their resoluteness in wresting control of Mindanao from the government, pose a
serious danger to Mindanao. The country had been witness to these groups' capacity
and resolve to engage in combat with the government forces, resulting in severe
casualties among both soldiers and civilians, the displacement of thousands of Marawi
residents, and considerable damage to their City. In a short period after the Marawi
crisis was put under control, said rebel groups have managed to increase their number
by 400, almost the same strength as the group that initially stormed Marawi. Their
current number is now more than half the 1,010 rebels in Marawi which had taken the
AFP five months to neutralize. To wait until a new battleground is chosen by these rebel
groups before We consider them a significant threat to public safety is neither sound
nor prudent.

(o) Furthermore, in 2017 alone, the BIFF initiated 116 hostile acts in North Cotabato,
Sultan Kudarat and Maguindanao, consisting of ambuscade, firing, arson, IED attacks
and grenade explosions. 66 of these violent incidents were committed during the
martial law period and by the AFP's assessment, the group will continue to inflict
violence and sow terror in central Mindanao. [161]

(p) In 2017, the ASG, which is the predominant local terrorist group in the Southern
Philippines based in Tawi-Tawi, Sulu, Basilan and Zamboanga, with its 519 members,
503 firearms, 66 controlled barangays and 345 watch-listed personalities, had
perpetrated a total of 13 acts of kidnapping against 37 individuals, 11 of whom
(including 7 foreigners) remain in captivity. Their kidnap-for-ransom activities for last
year alone have amassed a total of P61.2 million.[162]

(q) Mindanao remains the hotbed of communist rebellion considering that 47% of its
manpower, 48% of its firearms, 51% of its controlled barangays and 45% of its guerrilla
fronts are in this region.[163] Of the 14 provinces with active communist insurgency, 10
are in Mindanao. Furthermore, the communist rebels' Komisyon Mindanao (KOMMID) is
now capable of sending augmentation forces, particularly "Party Cadres," in Northern
Luzon.[164]

(r) The hostilities initiated by the communist rebels have risen by 65% from 2016 to
2017 despite the peace talks.[165] In 2017 alone, they perpetrated 422 atrocities in
Mindanao, including ambush, raids, attacks, kidnapping, robbery, bombing, liquidation,
landmine/IED attacks, arson and sabotage, that resulted in the death of 47 government
forces and 31 civilians.[166] An ambush in Bukidnon in November 2017 killed one PNP
personnel, two civilians and a four-month old baby. 59 incidents of arson committed by
the Communist rebels against business establishments in Mindanao last year alone
destroyed P2.378 billion worth of properties. Moreover, the amount they extorted from
private individuals and business establishments from 2015 to the first semester of 2017
has been estimated at P2.6 billion.[167]
(s) Among the most significant attacks by the communist rebels on business
establishments took place in April and May 2017 when they burned the facilities of
Lapanday Food Corporation in Davao City and those of Mil-Oro Mining and Frasec
Ventures Corporation in Mati City, Davao Oriental, which resulted in losses amounting
to P1.85 billion and P109 million, respectively. According to the AFP, business
establishments in the area may be forced to shut down due to persistent NPA attacks
just like in Surigao del Sur.[168]

(t) By AFP's calculation, the aforesaid rebel groups (excluding the 400 newly recruited
members of the Dawlah Islamiyah) are nearly 2,781-men strong, equipped with 3,211
firearms and control 537 barangays in Mindanao.

The magnitude of the atrocities already perpetrated by these rebel groups reveals their
capacity to continue inflicting serious harm and injury, both to life and property. The
sinister plans of attack, as uncovered by the AFP, confirm this real and imminent threat.
The manpower and armaments these groups possess, the continued radicalization and
recruitment of new rebels, the financial and logistical build-up cited by the President,
and more importantly, the groups' manifest determination to overthrow the
government through force, violence and terrorism, present a significant danger to public
safety.

In Lagman, the Court recognized that the President, as Commander-in-Chief, has

possession of intelligence reports, classified documents and other vital information
which he can rely on to properly assess the actual conditions on the ground, thus:
It is beyond cavil that the President can rely on intelligence reports and classified
documents. "It is for the President as [C]ommander-in-[C]hief of the Armed Forces to
appraise these [classified evidence or documents/]reports and be satisfied that the
public safety demands the suspension of the writ." Significantly, respect to these so-
called classified documents is accorded even "when [the] authors of or witnesses to
these documents may not be revealed."

In fine, not only does the President have a wide array of information before him, he also
has the right, prerogative, and the means to access vital, relevant, and confidential data,
concomitant with his position as Commander-in-Chief of the Armed Forces.
As his December 8, 2017 letter to the Congress would show, the President's
request for further extension had been based on the security assessment of the AFP and
the PNP. Notably, the President also acknowledged that the grounds or "essential facts"
cited in his letter were of his "personal knowledge" as Commander-in-Chief of the
armed forces. The President's request to Congress also referred to the monitoring
activities that led to the Executive's findings, which the AFP confirmed during the
January 17, 2018 oral argument.

According to Executive Secretary Salvador Medialdea, the President made his request to
the Congress after a careful personal evaluation of the reports from the Martial Law
Administrator, Martial Law Implementor, the PNP, the National Security Adviser and the
National Intelligence Coordinating Agency (NICA), as well as information gathered from
local government officials and residents of Mindanao. [169]

On December 12, 2017, the AFP separately gave the Senate and the House of
Representatives a briefing on the Executive Department's basis for requesting the
further extension of Proclamation No. 216.[170]

At the Joint Session, of the Congress held on December 13, 2017 Executive Secretary
Salvador Medialdea, Defense Secretary Delfin Lorenzana, AFP General Guerrero, PNP
Chief Ronald Dela Rosa, the head of the NICA, the National Security Adviser, as well as
the Secretaries of the Department of Justice, the Department of Public Works and
Highways, Department of Labor and Employment, Transportation and Communication,
and the Chairman of the Task Force Bangon Marawi, were present and sworn in as
resource persons.[171] Secretary Medialdea highlighted to the Congress the reasons cited
by the President in his request, and during the course of the session, he, Secretary
Lorenzana, AFP General Guerrero and Senior Deputy Executive Secretary Menardo
Guevarra responded to interpellations from a number of Senators and Representatives
on the propriety and necessity of further extending martial law in Mindanao.

The Joint Session also provided an occasion for the Representative from the Second
District of Lanao del Sur to confirm the recruitment activities of the "remnants" of the
Maute and Hapilon groups, thus:
Representative Papandayan. x x x

Kami po sa Lanao del Sur, ako ay umuwi last week, aking kinausap ang aking

mga barangay at mga barangay chairman sa aming distrito. Pinahanap ko kung
mayroon pang natitirang remnants o mga kasamahan ng Maute at saka Hapilon. Ang
mga barangay chairman po ay nag-report sa akin na mayroon po at sila po ay nagre-
recruit ngayon, na nag-aalok din sila ng pera sa mga nare-recruit nila.[172]
 Following its deliberation on the request for further extension, the Congress, in
joint session, resolved to further extend Proclamation No. 216 for one year, with 240
members voting for, and 27 against,[173] the President's initiative. In approving the
extension, Congress agreed with the factual considerations of the Executive, as can be
gleamed from the 4th and 6th Whereas clauses of Resolution of Both Houses No. 4.

The information upon which the extension of martial law or of the suspension of the
privilege of the writ of habeas corpus shall be based principally emanate from and are in
the possession of the Executive Department. Thus, "the Court will have to rely on the
fact-finding capabilities of the [E]xecutive [D]epartment; in turn, the Executive
Department will have to open its findings to the scrutiny of the Court." [174]

The Executive Department did open its findings to the Court when the AFP gave its
"briefing" or "presentation" during the oral arguments, presenting data, which had been
vetted by the NICA, "based on intelligence reports gathered on the ground," from
personalities they were able to capture and residents in affected areas, declassified
official documents, and intelligence obtained by the PNP. [175] According to the AFP, the
same presentation, save for updates, was given to the Congress. [176] As it stands, the
information thus presented has not been challenged or questioned as regards its
reliability.

The facts as provided by the Executive and considered by Congress amply establish that
rebellion persists in Mindanao and public safety is significantly endangered by it. The
Court, thus, holds that there exists sufficient factual basis for the further extension
sought by the President and approved by the Congress in its Resolution of Both Houses
No. 4.

Necessarily, We do not see the merit to the petitioners' theory in the Cullamat petition
that the extent of threat to public safety as would justify the declaration or extension of
the proclamation of martial law and the suspension of the privilege of the writ must be
of such level that the government cannot sufficiently govern, nor assure public safety or
deliver government services. Petitioners posit that only in this scenario may martial law
be constitutionally permissible.

Restrained caution must be exercised in adopting petitioners' theory for several

reasons. To begin with, a hasty adoption of the suggested scale, level or extent of threat
to public safety is to supplant into the plain text of the Constitution. An interpretation of
the Constitution precedes from the fundamental postulate that the Constitution is the
basic and paramount law to which all other laws must conform and to which all persons,
including the highest officials of the land, must defer. [177] The consequent duty of the
judiciary then is to determine conflicting claims of authority under the Constitution and
to establish for the parties in an actual controversy the rights which that instrument
secures and guarantees to them.[178] This must be so considering that the Constitution is
the mother of all laws, sufficient and complete in itself. For the Court to categorically
pronounce which kind of threat to public safety justifies the declaration or extension of
martial law and which ones do not, is to improvise on the text of the Constitution ideals
even when these ideals are not expressed as a matter of positive law in the written
Constitution.[179] Such judicial improvisation finds no justification.

For another, if the Court were to be successful in disposing of its bounden duty to
allocate constitutional boundaries, the Constitutional doctrines the Court produces must
necessarily remain steadfast no matter what may be the tides of time. [180] The adoption
of the extreme scenario as the measure of threat to public safety as suggested by
petitioners is to invite doubt as to whether the proclamation of martial law would be at
all effective in such case considering that enemies of the State raise unconventional
methods which change over time. It may happen that by the time government loses all
capability to dispose of its functions, the enemies of the government might have already
been successful in removing allegiance therefrom. Any declaration then of martial law
would be of no useful purpose and such could not be the intent of the Constitution.
Instead, the requirement of public safety as it presently appears in the Constitution
admits of flexibility and discretion on the part of the Congress.

So too, when the President and the Congress ascertain whether public safety requires
the declaration and extension of martial law, respectively, they do so by calibrating not
only the present state of public safety but the further repercussions of the actual
rebellion to public safety in the future as well. Thus, as persuasively submitted by Fr.
Bernas in his Amicus Curiae Brief[181] in Fortun v. Gloria Macapagal-Arroyo:[182]
From all these it is submitted that the focus on public safety adds a nuance to the
meaning of rebellion in the Constitution which is not found in the meaning of the same
word m Article 134 of the Penal Code. The concern of the Penal Code, after all, is to
punish acts of the past. But the concern of the Constitution is to counter threat to
public safety both in the present and in the future arising from present and past
acts. Such nuance, it is submitted, gives to the President a degree of flexibility for
determining whether rebellion constitutionally exists as basis for martial law even if
facts cannot obviously satisfy the requirements of the Penal Code whose concern is
about past acts. To require that the President must first convince herself that there can
be proof beyond reasonable doubt of the existence of rebellion as defined in the Penal
Code and jurisprudence can severely restrict the President's capacity to safeguard public
safety for the present and the future and can defeat the purpose of the Constitution.
(Emphasis ours)
The requirement of the Constitution is therefore adequately met when there is
sufficient factual basis to hold that the present and past acts constituting the actual
rebellion are of such character that endanger and will endanger public safety. This
permissive approach is sanctioned not only by an acknowledgment that the Congress is
and should be allowed flexibility but also because the Court is without the luxury of time
to determine accuracy and precision.

No necessity to impose tests on the choice and manner of the President's exercise of
military powers

We refuse to be tempted by petitioner Rosales' prodding that We set two tests in

reviewing the constitutionality of a declaration or extension of martial law. In her
memorandum,[183] she clarifies the two tests, as follows:
1. Proportionality Test requires that a situation is of such gravity or scale as to
demand resort to the most extreme of measures, i.e. a situation where the ordinary
police powers of the State are no longer sufficient to restore, secure or preserve public
safety; and

2. Suitability Test requires that a situation is such that the declaration of martial law is
the correct tool to address safety problem.
It is sufficient to state that this Court already addressed the same argument in
Our decision in Lagman. The determination of which among the Constitutionally given
military powers should be exercised in a given set of factual circumstances is a
prerogative of the President. The Court's power of review, as provided under Section 18,
Article VII do not empower the Court to advise, nor dictate its own judgment upon the
President, as to which and how these military powers should be exercised.

Safeguards against abuse

Martial law is a law of necessity. "Necessity creates the conditions for martial law and at
the same time limits the scope of martial law." [184] Thus, when the need for which
Proclamation No. 216 was further extended no longer exists, the President can lift the
martial law imposition even before the end of the one-year period. Under the same
circumstances, the Congress itself may pass a resolution pre-terminating the extension.
This power emanates from the Congress' authority, granted under the Constitution, to
approve the extension and to fix its duration. The power to determine the period of the
extension necessarily includes the power to shorten it. Furthermore, considering that
this Court's judgment on the constitutionality of an extension is "transitory," or "valid at
that certain point of time," any citizen may petition the Court to review the sufficiency
of the factual basis for its continued implementation should the President and the
Congress fail or refuse to lift the imposition of martial law. During the deliberations on
the 1987 Constitution, it was explained:
FR. BERNAS. The decision of the Supreme Court will be based on its assessment
of the factual situation. Necessarily, therefore, the judgment of the Supreme Court on
that is a transitory judgment because the factual situation can change. So, while the
decision of the Supreme Court may be valid at that certain point of time, the situation
may change so that Congress should be authorized to do something about it.
[185]
 (Emphasis ours)
Petitioners fear that the one-year extension of martial law will only intensify the
human rights violations committed by government forces against civilians. To place a
territory under martial law is undeniably an immense power, and like all other powers,
it may be abused.[186] However, the possibility of abuse and even the country's martial
law experience under the Marcos regime did not prevent the framers of the 1987
Constitution from including it among the Commander-in-Chief powers of the President.
This is in recognition of the fact that during critical times when the security or survival of
the state is greatly imperiled, an equally vast and extraordinary measure should be
available for the President to protect and defend it.

Nevertheless, cognizant of such possibility of abuse, the framers of the 1987

Constitution endeavored to institute a system of checks and balances to limit the
President's exercise of the martial law and suspension powers, and to establish
safeguards to protect civil liberties. Thus, pursuant to Section 18, Article VII of the 1987
Constitution:
(a) The President may declare martial law or suspend of the privilege of the writ
of the privilege of habeas corpus only when there is an invasion or rebellion and public
safety requires such declaration or suspension.

(b) The President's proclamation or suspension shall be for a period not exceeding 60
days.

(c) Within 48 hours from the proclamation or suspension, the President must submit a
Report in person or in writing to Congress.

(d) The Congress, voting jointly and by a vote of at least a majority of all its Members,
can revoke the proclamation or suspension.

(e) The President cannot set aside the Congress' revocation of his proclamation or
suspension.

(f) The President cannot, by himself, extend his proclamation or suspension. He should
ask the Congress' approval.

(g) Upon such initiative or request from the President, the Congress, voting jointly and
by a vote of at least a majority of all its Members, can extend the proclamation or
suspension tor such period as it may determine.

(i) The extension of the proclamation or suspension shall only be approved when the
invasion or rebellion persists and public safety requires it.

(j) The Supreme Court may review the sufficiency of the factual basis of the
proclamation or suspension, or the extension thereof, in an appropriate proceeding filed
by any citizen.

(k) The Supreme Court must promulgate its decision within 30 days from the filing of the
appropriate proceeding.

(l) Martial law does not suspend the operation of the Constitution.

Accordingly, the Bill of Rights[187] remains effective under a state of martial law. Its
implementers must adhere to the principle that civilian authority is supreme over the
military and the armed forces is the protector of the people. [188] They must also abide by
the State's policy to value the dignity of every human person and guarantee full respect
for human rights.[189]

(m) Martial law does not supplant the functioning of the civil courts or legislative
assemblies, nor authorize the conferment of jurisdiction on military courts and agencies
over civilians where civil courts are able to function.

(n) The suspension of the privilege of the writ applies only to persons judicially charged
for rebellion or offenses inherent in or directly connected with invasion.

(o) Finally, during the suspension of the privilege of the writ, any person thus arrested or
detained should be judicially charged within three days, otherwise he should be
released.
As Commissioner De Los Reyes explained during the deliberations on the 1987
Constitution:
MR. DE LOS REYES. May I explain my vote, Madam President.

My vote is yes. The power of the President to impose martial law is doubtless of a very
high and delicate nature. A free people are naturally jealous of the exercise of military
power, and the power to impose martial law is certainly felt to be one of no ordinary
magnitude. But as presented by the Committee, there are many safeguards: 1) it is
limited to 60 days; 2) Congress can revoke it; 3) the Supreme Court can still review as to
the sufficiency of the actual basis; and 4) it does not suspend the operation of the
Constitution. To repeat what I have quoted when I interpellated Commissioner
Monsod, it is said that the power to impose martial law is dangerous to liberty and
may be abused. All powers may be abused if placed in unworthy hands. But it would
be difficult, we think, to point out any other hands in which this power will be more
safe [sic] and at the same time equally effectual. When citizens of the State are in arms
against each other and the constituted authorities are unable to execute the laws, the
action of the President must be prompt or it is of little value. I vote yes. [190] (Emphasis
ours)
Human rights violations and abuses in the implementation of martial law and
suspension powers cannot by any measure be condoned. The Court lauds petitioners'
vigilance to make sure that the abuses of the past are not repeated and perceived
abuses of the present will not go unnoticed. However, as the Court settled in Lagman,
alleged human rights violations committed during the implementation of martial law or
the suspension of the privilege of the writ of habeas corpus should be resolved in a
separate proceeding. It, thus, bears noting some of the remedies, requirements and
penalties imposed under existing laws, meant to address abuses by arresting or
investigating public officers.
In Lacson v. Perez,[191] the Court had occasion to rule:
Moreover, petitioners' contention in G.R. No. 147780 (Lacson Petition), 147781
(Defensor-Santiago Petition), and 147799 (Lumbao Petition) that they are under
imminent danger of being arrested without warrant do not justify their resort to the
extraordinary remedies of mandamus and prohibition, since an individual subject to
warrantless arrest is not without adequate remedies in the ordinary course of law. Such
an individual may ask for a preliminary investigation under Rule 112 of the Rules of
Court, where he may adduce evidence in his defense, or he may submit himself to
inquest proceedings to determine whether or not he should remain under custody and
correspondingly be charged in court. x x x Should the detention be without legal ground,
the person arrested can charge the arresting officer with arbitrary detention. All this is
without prejudice to his filing an action for damages against the arresting officer under
Article 32 of the Civil Code. Verily, petitioners have a surfeit of other remedies which
they can avail themselves of, thereby making the prayer for prohibition
and mandamus improper at this time (Sections 2 and 3, Rule 65, Rules of Court). [192]
R.A. No. 7438,[193] which defines the rights of persons arrested, detained or under
custodial investigation, imposes the following penalties on errant arresting or
investigating officers:
Section 4. Penalty Clause. - (a) Any arresting public officer or employee, or any
investigating officer, who fails to inform any person arrested, detained or under
custodial investigation of his right to remain silent and to have competent and
independent counsel preferably of his own choice, shall suffer a fine of six thousand
pesos (P6,000.00) or a penalty of imprisonment of not less than eight (8) years but not
more than ten (10) years, or both. The penalty of perpetual absolute disqualification
shall also be imposed upon the investigating officer who has been previously convicted
of a similar offense.

The same penalties shall be imposed upon a public officer or employee, or anyone
acting upon orders of such investigating officer or in his place, who fails to provide a
competent and independent counsel to a person arrested, detained or under custodial
investigation for the commission of an offense if the latter cannot afford the services of
his own counsel.

(b) Any person who obstructs, prevents or prohibits any lawyer, any member of the
immediate family of a person arrested, detained or under custodial investigation, or any
medical doctor or priest or religious minister chosen by him or by any member of his
immediate family or by his counsel, from visiting and conferring privately with him, or
from examining and treating him, or from ministering to his spiritual needs, at any hour
of the day or, in urgent cases, of the night shall suffer the penalty of imprisonment of
not less than four (4) years nor more than six (6) years, and a fine of four thousand
pesos (P4,000.00).
Under R.A. No. 9372 or the Human Security Act of 2007, rebellion may be
subsumed in the crime of terrorism; it is one of the means by which terrorism can be
committed.[194] R.A. No. 9372 imposes specific penalties for failure of the law
enforcement personnel to deliver the suspect to the proper judicial authority within the
prescribed period, for violating the rights of the detainee, and for using torture in the
interrogation or investigation of a detainee, viz:
SEC. 20. Penalty for Failure to Deliver Suspect to the Proper Judicial Authority
within Three Days. - The penalty of ten (10) years and one day to twelve (12) years of
imprisonment shall be imposed upon any police or law enforcement personnel who has
apprehended or arrested, detained and taken custody of a person charged with or
suspected of the crime of terrorism or conspiracy to commit terrorism and fails to
deliver such charged or suspected person to the proper judicial authority within the
period of three days.

xxxx

SEC. 22. Penalty for Violation of the Rights of a Detainee. - Any police or law
enforcement personnel, or any personnel of the police or other law enforcement
custodial unit that violates any of the aforesaid rights of a person charged with or
suspected of the crime of terrorism or the crime of conspiracy to commit terrorism shall
be guilty of an offense and shall suffer the penalty of ten (10) years and one day to
twelve (12) years of imprisonment.

Unless the police or law enforcement personnel who violated the rights of a detainee or
detainees as stated above is duly identified, the same penalty shall be imposed on the
police officer or hear or leader of the law enforcement unit having custody of the
detainee at the time the violation was done.

xxxx

SEC. 25. Penalty for Threat, Intimidation, Coercion, or Torture in the Investigation and
Interrogation of a Detained Person. - Any person or persons who use threat,
intimidation, or coercion, or who inflict physical pain or torment, or mental, moral, or
psychological pressure, which shall vitiate the free-will of a charged or suspected person
under investigation and interrogation for the crime of terrorism or the crime of
conspiracy to commit terrorism shall be guilty of an offense and shall suffer the penalty
of twelve (12) years and one day to twenty (20) years of imprisonment.

When death or Serious permanent disability of said detained person occurs as a

consequence of the use of such threat, intimidation, or coercion, or as a consequence of
the infliction on him of such physical pain or torment, or as a consequence of the
infliction on him of such mental, moral, or psychological pressure, the penalty shall be
twelve (12) years and one day to twenty (20) years of imprisonment.
R.A. No. 9372 also gave the Commission on Human Rights the following authority
and duty:
SEC. 55. Role of the Commission on Human Rights. - The Commission on Human
Rights shall give the highest priority to the investigation and prosecution of violations of
civil and political rights of persons in relation to the implementation of this Act; and for
this purpose, the Commission shall have the concurrent jurisdiction to prosecute public
officials, law enforcers, and other persons who may have violated the civil and political
rights of persons suspected of, or detained for the crime of terrorism or conspiracy to
commit terrorism.
R.A. No. 9745 or the Anti-Torture Act of 2009 provides that: "Torture and other
cruel, inhuman and degrading treatment or punishment as criminal acts shall apply to all
circumstances. A state of war or a threat of war, internal political instability, or any
other public emergency, or a document or any determination comprising an 'order of
battle' shall not and can never be invoked as a justification for torture and other cruel,
inhuman and degrading treatment or punishment."[195]

The same law also expressly prohibits secret detention places, solitary
confinement, incommunicado or other similar forms of detention, where torture may be
carried out with impunity. For this purpose, it requires the Philippine National Police
(PNP), the Armed Forces of the Philippines (AFP) and other law enforcement agencies
concerned to make an updated list of all detention centers and facilities under their
respective jurisdictions with the corresponding data on the prisoners or detainees
incarcerated or detained therein such as, among others, names, date of arrest and
incarceration, and the crime or offense committed. The list is to be made available to
the public at all times.[196]
R.A. No. 9745 likewise defined the following rights of a torture victim in the institution
of a criminal complaint for torture:
(a) To have a prompt and an impartial investigation by the CHR and by agencies
of government concerned such as the Department of Justice (DOJ), the Public Attorney's
Office (PAO), the PNP, the National Bureau of Investigation (NBI) and the AFP. A prompt
investigation shall mean a maximum period of sixty (60) working days from the time a
complaint for torture is filed within which an investigation report and/or resolution shall
be completed and made available. An appeal whenever available shall be resolved
within the same period prescribed herein,

(b) To have sufficient government protection against all forms of harassment; threat
and/or intimidation as a consequence of the filing of said complaint or the presentation
of evidence therefor. In which case, the State through its appropriate agencies shall
afford security in order to ensure his/her safety and all other persons involved in the
investigation and prosecution such as, but not limited to, his/her lawyer, witnesses and
relatives; and

(c) To be accorded sufficient protection in the manner by which he/she testifies and
presents evidence in any fora in order to avoid further trauma.
It further imposes the following penalties on perpetrators of torture as defined
therein:
Section 14. Penalties. - (a) The penalty of reclusion perpetua shall be imposed
upon the perpetrators of the following acts:

(1) Torture resulting in the death of any person;

(2) Torture resulting in mutilation;

(3) Torture with rape;

(4) Torture with other forms of sexual abuse and, in consequence of torture, the victim
shall have become insane, imbecile, impotent, blind or maimed for life; and

(5) Torture committed against children.

(b) The penalty of reclusion temporal shall be imposed on those who commit any act of
mental/psychological torture resulting in insanity, complete or partial amnesia, fear of
becoming insane or suicidal tendencies of the victim due to guilt, worthlessness or
shame.

(c) The penalty of prision correccional shall be imposed on those who commit any act of
torture resulting in psychological, mental and emotional harm other than those
described in paragraph (b) of this section.

(d) The penalty of prision mayor in its medium and maximum periods shall be imposed
if, in consequence of torture, the victim shall have lost the power of speech or the
power to hear or to smell; or shall have lost an eye, a hand, a foot, an arm or a leg; or
shall have lost the use of any such member; or shall have become permanently
incapacitated for labor.

(e) The penalty of prision mayor in its minimum and medium periods shall be imposed if,
in consequence of torture, the victim shall have become deformed or shall have lost any
part of his/her body other than those aforecited, or shall have lost the use thereof, or
shall have been ill or incapacitated for labor for a period of more than ninety (90) days.

(f) The penalty of prision correccional in its maximum period to prision mayor in its
minimum period shall be imposed if, in consequence of torture, the victim shall have
been ill or incapacitated for labor for mare than thirty (30) days but not more than
ninety (90) days.

(g) The penalty of prision correccional in its minimum and medium period shall be
imposed if, in consequence of torture, the victim shall have been ill or incapacitated for
labor for thirty (30) days or less.

(h) The penalty of arresto mayor shall be imposed for acts constituting cruel, inhuman or
degrading treatment or punishment as defined in Section 5 of this Act.

(i) The penalty of prision correccional shall be imposed upon those who establish,
operate and maintain secret detention places and/or effect or cause to effect solitary
confinement, incommunicado or other similar forms of prohibited detention as
provided in Section 7 of this Act where torture may be carried out with impunity.

(j) The penalty of arresto mayor shall be imposed upon the responsible officers or
personnel of the AFP, the PNP and other law enforcement agencies for failure to
perform his/her duty to maintain, submit or make available to the public an updated list
of detention centers and facilities with the corresponding data on the prisoners or
detainees incarcerated or detained therein, pursuant to Section 7 of this Act.
This Court has likewise promulgated rules aimed at enforcing human rights. In
A.M. No. 07-9-12-SC,[197] this Court made available the remedy of a writ of amparo to
any person whose right to life, liberty and security is violated or threatened with
violation by an unlawful act or omission of a public official or employee, or of a private
individual or entity. Similarly, in A. M. No. 08-1-16-SC, [198] this Court also crafted the rule
on the writ of habeas data to provide a remedy for any person whose right to privacy in
life, liberty or security is violated or threatened by an unlawful act or omission of a
public official or employee, or of a private individual or entity engaged in the gathering,
collecting or storing of data or information regarding the person, family, home and
correspondence of the aggrieved party.

It also bears to note that the Philippines, is a signatory to the Universal Declaration of
Human Rights (UDHR),[199] which is embodied in the International Bill of Human Rights.
[200]
 As such, it recognizes that everyone has the right to liberty and security of one's
person.[201] That no one shall be subjected to arbitrary arrest or detention; or that no
one shall be deprived of his liberty except on such grounds and in accordance with such
procedure as are established by law, are just among the thirty (30) articles, mentioned
in the UDHR setting forth the human rights and fundamental freedoms to which all men
and women, everywhere in the world, are entitled, without any discrimination.

Significantly, during the Congress' December 13, 2017 Joint Session, the Executive
Department, through Secretary Lorenzana, made an express commitment to submit a
monthly report to the Congress regarding the extended implementation of martial law
in Mindanao.[202] Although not required under Section 18, Article VII of the 1987
Constitution, the submission of such report' is an ideal complement to the system of
checks and balance instituted therein. It will clearly assist the Congress in evaluating the
need to maintain or shorten the period of extension of martial law in Mindanao; it will
also serve as an additional measure to check on possible abuses or human rights
violations in the Executive's enforcement of martial law.

Petitioners failed to comply with the requisites for the issuance of an injunctive writ

The purpose of a preliminary injunction under Section 3, Rule 58 of the Rules of Court,
[203]
 is to prevent threatened or continuous irremediable injury to some of the parties
before their claims can be thoroughly studied and adjudicated. [204] Its sole aim is to
preserve the status quo until the merits of the case can be heard fully.[205] Status quo is
the last actual, peaceable and uncontested situation which precedes a controversy.
[206]
 By jurisprudence, to be entitled to an injunctive writ, petitioners have the burden to
establish the following requisites: (1) a right in esse or a clear and unmistakable right to
be protected; (2) a violation of that right(3) that there is an urgent and permanent act
and urgent necessity for the writ to prevent serious damage; [207] and (4) no other
ordinary, speedy, and adequate remedy exists to prevent the infliction of irreparable
injury.[208]

Petitioners anchored their prayer for the issuance of an injunctive writ on respondents'
gross transgressions of the Constitution when they extended the martial law in
Mindanao for one year. The Lagman petition likewise alleges that petitioner Villarin, a
Davao City resident, is personally prejudiced by the extension or martial law in
Mindanao "which would spawn violations of civil liberties of Mindanaoans like petitioner
Villarin who is a steadfast critic of the Duterte administration and of the brutalities
committed by police and military forces".

These grounds, however, cannot carry the day for the petitioners. Basic is the rule that
mere allegation is not evidence and is not equivalent to proof. [209] These allegations
cannot constitute a right in esse, as understood in jurisprudence. A right in esse is a clear
and unmistakable right to be protected,[210] one clearly founded on or granted by law or
is enforceable as a matter of law.[211] The existence of a right to be protected, and the
acts against which the writ is to be directed are violative of said right must be
established.[212]

The alleged violations of the petitioners' civil liberties do not justify the grant of
injunctive relief. The petitioners failed to prove that the alleged violations are directly
attributable to the imposition of martial law. They likewise failed to establish the nexus
between the President's exercise of his martial law powers and their unfounded
apprehension that the imposition "will target civilians who have no participation at all in
any armed uprising or struggle". Incidentally, petitioners failed to state what the "civil
liberties" specifically refer to, and how the extension of martial law in Mindanao would
threaten these "civil liberties" in derogation of the rule of law. Evidently, petitioners'
right is doubtful or disputed, and can hardly be considered a clear legal right, sufficient
for the grant of an injunctive writ.
In Dynamic Builders & Construction Co. (PHIL.), Inc. v. Hon. Ricardo P. Presbitero, Jr., et.
al.,[213] this Court held that no automatic issuance of an injunctive relief will result by the
mere allegation of a constitutionally protected right. We explained, thus:
Mere allegation or invocation that constitutionally protected rights were violated
will not automatically result in the issuance of injunctive relief. The plaintiff or the
petitioner should discharge the burden to show a clear and compelling breach of a
constitutional provision. Violations of constitutional provisions are easily alleged, but
trial courts should scrutinize diligently and deliberately the evidence showing the
existence of facts that should support the conclusion that a constitutional provision is
clearly and convincingly breached. In case of doubt, no injunctive relief should issue. In
the proper cases, the aggrieved party may then avail itself of special civil actions and
elevate the matter.[214]
Indeed, this Court cannot rely on speculations, conjectures or guesswork, but
must depend upon competent proof and on the basis of the best evidence obtainable
under the circumstances.[215] We emphasize that the grant or denial of an injunctive writ
cannot be properly resolved by suppositions, deductions, or even presumptions, with no
basis in evidence, for the truth must have to be determined by the procedural rules of
admissibility and proof. In The Executive Secretary v. Court of Appeals,[216] this Court
stressed the indispensability of establishing the requirements for injunctive writ:
To be entitled to a preliminary injunction to enjoin the enforcement of a law
assailed to be unconstitutional, the party must establish that it will suffer irreparable
harm in the absence of injunctive relief and must demonstrate that it is likely to succeed
on the merits, or that there are sufficiently serious questions going to the merits and the
balance of hardships tips decidedly in its favor. The higher standard reflects judicial
deference toward "legislation or regulations developed through presumptively reasoned
democratic processes." Moreover, an injunction will alter, rather than maintain,
the status quo, or will provide the movant with substantially all the relief sought and
that relief cannot be undone even if the defendant prevails at a trial on the merits.
Considering that injunction is an exercise of equitable relief and authority, in assessing
whether to issue a preliminary injunction, the courts must sensitively assess all the
equities of the situation, including the public interest. In litigations between
governmental and private parties, courts go much further both to give and withhold
relief in furtherance of public interest than they are accustomed to go when only private
interests are involved. Before the plaintiff may be entitled to injunction against future
enforcement, he is burdened to show some substantial hardship. [217] (Citations omitted
and italics in the original)
 Incidentally, there is nothing in the Constitution, nor in any law which supports
petitioners' theory. Such purported human right violations cannot be utilized as ground
either to enjoin the President from exercising the power to declare martial law, or the
Congress in extending the same. To sanction petitioners' plea would result into judicial
activism, thereby going against the principle of separation of powers.

As discussed above, petitioners are not left without any recourse. Such transgressions
can be addressed in a separate and independent court action.[218] Recall that the
imposition of martial law does not result in suspending the operation of the
Constitution, nor supplant the functioning of the civil courts nor authorize the
conferment of jurisdiction on military courts and agencies over civilians where civil
courts are able to function. Hence, petitioners can lodge a complaint-affidavit before the
prosecutor's office or file a direct complaint before the appropriate courts against erring
parties.

A Final Word

The imperative necessity of .Martial Law as a tool of the government for self-
preservation is enshrined in the 1935, 1973 and 1987 Constitutions. It earned a bad
reputation during the Marcos era and apprehensions still linger in the minds of doubtful
and suspicious individuals. Mindful of its importance and necessity, the Constitution has
provided for safeguards against its abuses.

Martial law is a constitutional weapon against enemies of the State. Thus, Martial law is
not designed to oppress or abuse law abiding citizens of this country.

Unfortunately, the enemies of the State have employed devious, cunning and
calculating means to destabilize the government. They are engaged in an
unconventional, clandestine and protracted war to topple the government. The enemies
of the State are not always quantifiable, not always identifiable and not visible at all
times. They have mingled with ordinary citizens in the community and have unwittingly
utilized them in the recruitement, surveillance and attack against government forces.
Inevitably, government forces have arrested, injured and even killed these ordinary
citizens complicit with the enemies.

Admittedly, innocent civilians have also been victimized in the cross fire as unintended
casualties of this continuing war.
These incidents, however, should not weaken our resolve to defeat the enemies of the
State. In these exigencies, We cannot afford to emasculate, dilute or diminish the
powers of government if in the end it would lead to the destruction of the State and
place the safety of our citizens in peril and their interest in harm's way.

WHEREFORE, the Court FINDS sufficient factual bases for the issuance of Resolution of

Both Houses No. 4 and DECLARES it as CONSTITUTIONAL. Accordingly, the consolidated
Petitions are hereby DISMISSED.

SO ORDERED.

SECOND DIVISION
[ G.R. No. 195908, August 15, 2018 ]
JOSE A. BERNAS AND THE WHARTON RESOURCES GROUP
(PHILIPPINES), INC., PETITIONERS, V. THE ESTATE OF FELIPE YU
HAN YAT, REPRESENTED BY HERO T. YU, RESPONDENT.

[G.R. No. 195910, August 15, 2018]

FELOMENA S. MEJIA (DULY SUBSTITUTED BY HEIRS CARMELITA S.

PONGOL AND MAGDALENA S. TUMAMBING), PETITIONERS, V. FELIPE
YU HAN YAT, RESPONDENT.

D E C I SI O N

CAGUIOA, J:

These are consolidated Petitions for Review on Certiorari (Petitions) under Rule
45 of the Rules of Court assailing the Decision [1] of the Court of Appeals (CA)
Seventeenth Division dated December 14, 2010 in CA-G.R. CV No. 82681 and the
Resolution[2] dated February 28, 2011 denying the Motion for Reconsideration filed by
the petitioners.

Facts

The present case involves a parcel of land known as Lot 824-A-4 (subject property),
covered by Transfer Certificate of Title (TCT) No. RT-28758 (30627) PR-9639 (TCT
No. 30627), located at Brgy. Matandang Balara, Quezon City, consisting of 30,000
square meters, more or less, which is part of Lot 824 of the Piedad Estate containing an
area of 147,072 square meters registered in the name of respondent Felipe Yu Han Yat
(Yu Han Yat).[3]

Yu Han Yat subdivided the subject property into 60 lots under Subdivision Plan Psd-13-
018013, duly approved by the Bureau of Lands on August 13, 1991, as part of his plan to
develop and convert the subject property.[4] As a consequence, TCT No. 30627 was
cancelled and derivative titles, namely TCT Nos. 47294 to 47353 (Yu Han Yat TCTs),
were issued in his name.[5]

To finance his plan of developing the subject property, Yu Han Yat applied for loans with
several banks using some[6] of the Yu Han Yat TCTs as security. However, when the
mortgage instruments[7] were presented for registration, the Register of Deeds of Quezon
City refused to record the same on the ground that the Yu Han Yat TCTs overlapped with
the boundaries covered by another title: TCT No. 336663 registered in the name of
Esperanza Nava (Nava).[8] However, in Consulta No. 2038[9] issued on October 15, 1992,
the Land Registration Authority (LRA) reversed the action taken by the Register of
Deeds, and ordered the registration of the mortgage instruments on Yu Han Yat's TCTs.
[10]

Meanwhile, petitioners Jose A. Bernas (Bernas) and Felomena S. Mejia (Mejia) claimed
ownership over the subject property. They claim that Nava was the registered owner of a
parcel of land covered by TCT No. 336663 until she sold parts of the said lot to Mejia
and Gregorio Galarosa (Galarosa).[11] On September 15, 1986, Mejia executed with Nava
a Deed of Sale with Right of Redemption by virtue of which Mejia acquired the real
property covered by TCT No. 336663, subject to Nava's right to redeem the same.
[12]
 When Nava failed to redeem the property, Mejia then filed a petition for consolidation
of title under her name. The petition was granted in a Decision dated June 28, 1990 in
Civil Case No. Q-90-5211 rendered by Branch 85 of the Regional Trial Court (RTC) of
Quezon City.[13]

Since TCT No. 336663 bore the annotation "subject to verification," the Register of
Deeds of Quezon City referred the matter to the LRA for consultation. In a Resolution
dated March 15, 1991, in LRA Consulta No. 1890,[14] the LRA upheld the registrability of
TCT No. 336663 in the name of Mejia. In LRA Consulta No. 1890, the LRA reasoned
that a court decision is needed to categorically determine that the titles from which TCT
No. 336663 were derived were spurious before it could order that the encumbrance was
not registrable. Thus:

In his letter of January 22, 1991, the herein petitioner [Register of Deeds of Quezon City]
elevated en consulta to this authority the registrability of the deed of sale with right of
redemption executed by Nava in favor of Mejia, it appearing that Nava's title, Transfer
Certificate of Title no. 336663. contains a memorandum that the same is subject to
verification by the Verification Committee on Questionable Titles which was annotated
thereon pursuant to Ministry of Justice Opinion No. 239 dated November 4, 1982. The
only issue, therefore, to be resolved is whether or not the deed of sale with right of
redemption may be registered.

xxxx

Considering that the findings of the Verification Committee that the Dominga Sumulong
title was fabricated and non-existent cannot justify the suspension of registration of deeds
affecting titles derived from Sumulong's reconstituted title and that this Office will be
pre-empting the court's judgment on the matter if it were to suspend registration of
documents involving titles it has administratively determined to be fabricated, there
appears to be no more constraint in the registration of the deed of sale with right of
redemption. This is especially true in this case where the court has already ordered the
consolidation of ownership in favor of Felomena S. Mejia and directed the Register of
Deeds to cancel Transfer Certificate of Title No. 336663 and issue, in lieu thereof, a
transfer certificate of title in the name of Mejia.[15] (Underscoring omitted)

Hence, by virtue of the said Resolution, the Deed of Sale with Right of Redemption was
annotated on the title of the subject property.

On February 21, 1992, Bernas, for and on behalf of Wharton Resources Group
(Philippines), Inc. (Wharton), entered into a Memorandum of Agreement[16] with Mejia
whereby the latter agreed to sell to Wharton the parcel of land covered by TCT No.
336663. Subsequently, a Deed of Sale[17] was entered into between Mejia and Wharton
conveying to the latter the subject property.

In April 1992, Bernas discovered that there was another title covering about three
hectares which overlapped a portion of the property registered under TCT No. 336663.
[18]
 This other title, TCT No. 30627, indicated Yu Han Yat as the registered owner
pursuant to subdivision plan Psd-2498 of a parcel of land located in Bayanbayanan,
Marikina.[19]

On June 24, 1992, Bernas filed an Affidavit of Adverse Claim on Yu Han Yat's TCTs,
claiming that a Deed of Sale was executed between himself, for and on behalf of
Wharton, and Mejia over the realty covered by TCT No. 336663 which overlaps portions
covered by Yu Han Yat's TCTs.[20]

On the basis of this adverse claim filed by Bernas, the Register of Deeds of Quezon City
refused to record the subject mortgages affecting the Yu Han Yat TCTs. This prompted
Yu Han Yat to file another consulta with the LRA which, in a Resolution dated October
15, 1992, ordered the registration of the mortgage to the properties.[21]
Afterwards, on September 18, 1992, Yu Han Yat filed a Petition for Quieting of
Title[22] before the RTC of Quezon City docketed as Civil Case No. Q-92-13609 against
the Estate of Nava (represented by Antonio N. Crismundo), Galarosa, Mejia, Bernas, and
the Register of Deeds of Quezon City (Estate of Nava, et al.). [23] Mejia then filed an
Answer with Compulsory Counterclaims[24] and claimed, among others that, (a) Yu Han
Yat's title, TCT No. 30627, was invalid because it originated from TCT No. 8047, which
was issued on the basis of a spurious subdivision plan, Psd-2498; (b) Psd-2498 was
spurious because it represents to cover a parcel of land located in Barrio Bayanbayanan,
Marikina, whereas the actual location of Lot 824 Piedad Estate was in Caloocan City and
Quezon City; and (c) the registrability of Mejia's rights and ownership over the subject
property was sustained by the LRA in LRA Consulta No. 1890.[25] Bernas also filed an
Answer with Application for Injunctive Relief[26] dated December 10, 1992 to restrain Yu
Han Yat from undertaking development works on the subject property.

On December 20, 1993, the RTC issued an Order[27] granting Bernas' application for
preliminary injunction. The RTC, in the said Order, stated that:

This Court finds the respondents to have amply proven their entitlement to the relief.
Petitioner in this case has failed to convince this Court to act otherwise. The Court takes
notice of a number of allegations brought up by petitioner's witness in the person of Atty.
Bustos, however, the short of it all is that the respondents' title which is traced back from
the title of Dominga Sumulong remains valid and subsisting insofar as the lot in question
is concerned. Under the decisions rendered in Civil Case No. Q-11962 of then Court of
First Instance of Rizal, Branch 9, Quezon City entitled Zaida M. Santos vs. Dominga
Sumulong and in Civil Case No. 11180 entitled Pilar Ibanez Vda. De Suzuaregui et al., vs
Constitutional Hills Deverlopment (sic) Corporation, Dominga Sumulong, et al.; it is
stated therein that the title of Dominga Sumulong is not wholly null and void but only
insofar as the lots involved are concerned which does not particularly refer to the lot in
question in the instant case.[28]

On August 12, 1994, Yu Han Yat filed an Amended Petition[29] dated August 9, 1994 to
implead Wharton, in view of the fact that the latter was the beneficial owner of the
subject property and that Bernas was only its agent.[30] On October 3, 1994, Bernas and
Wharton filed an Amended Answer to Amended Petition[31] dated September 29, 1994,
adding the following affirmative defenses: (a) that Yu Han Yat's Amended Petition stated
no cause of action because petitioners are innocent purchasers for value; and (b) although
there was an annotation in TCT No. 336663 that the same was "subject to verification,"
the registrability of the title was nevertheless upheld in LRA Consulta No. 1890. The
Amended Answer likewise interposed a cross-claim against Mejia for possible breach of
her Memorandum of Agreement with Bernas.[32]

Trial ensued, and on March 15, 2004, the RTC issued a Decision[33] ruling in favor of the
Estate of Nava, et al., and Wharton. The trial court reasoned as follows:
Based on the records and evidence presented[,] the properties subject of the controversy
are TCT No. 30627 of the petitioner (Exhibit "G") and TCT No. 336663 (Exhibit "6" for
Mejia as adopted by Bernas). Details underlying the procurement of those titles from the
parties were quite overwhelming. But the history of how such titles came about does not
convince the court to grant the relief sought by the petitioner.

Careful reading of the amended petition shows the evident objective of the claim – that is
to nullify the respondents' title (TCT 336663) (Rollo, page 276, Volume 1) that runs to
the very core of challenging the indefeasibility of Torrens title seeking succor under the
guise of a petition for quieting of title.

Undeniably, the amended petition admits that petitioner's title overlaps with TCT No.
336663 (paragraphs 7 and 14, Amended Petition, Rollo, pages 212-21 A, Volume 1). The
petition likewise cited Consulta No. 2038 (Exhibit "O") of the Land Registration
Authority, from which petitioner wanted to conclude that TCT No. 336663 is of doubtful
authenticity. The petitioner, however, contradicted himself when in his Memorandum he
conceded that the findings of the Land Registration Commission is not binding upon this
court. This leads to a point where the Government, through the Solicitor General, filed a
nullification and cancellation proceedings (sic) (Exhibit "JJ") against Esperanza Nava
from whom respondents Bernas and Mejia derived title to TCT No. 336663. The case
was cited by petitioner in the petition and he jumped into conclusion that it constituted
full knowledge upon respondents that indeed TCT No. 336663 is void and ineffective
(Paragraphs 17 and 18, Amended Petition, Rollo, page 275, Volume 1) without evidence
of a decision from Branch 102 of the Regional Trial Court of Quezon City which heard
the case. It was in stark contrast to the evidence presented by respondent Galarosa that
the court ordered the Government to submit proof of service of summonses within ten
(10) (sic) from completion lest the court will be constrained to dismiss or archive the case
(Exhibit "17"). The records do not account up to this time on the progress of said case.
What is apparent is the similar action filed by the Government against Amado R. Santos,
the predecessor-in-interest of Esperanza Nava for nullification and cancellation
proceedings of titles that included the latter's title. The case docketed as Civil Case No.
Q-52834 before Branch 95 of this jurisdiction was dismissed for lack of merit (Exhibit
"16" for Galarosa).

The very import of these pieces of evidence is that the petition misleads the court into
believing that TCT No. 336663 has been decisively concluded to be void and ineffective.
While it is true that TCT No. 336663 bears an annotation which reads: "This title is
subject to verification by the LRC Verification Committee on questionable titles, plans[,]
decrees and other documents" (Exhibit "KK-1" Exhibit "8-Galarosa"), this court has yet
to await a final decision or decree that would indeed declare the questioned title null and
void. Proof of which is incumbent upon the petitioner.
It is worthy to note that respondent Bernas' Memorandum quickly pointed out that
petitioner's title which was based on plan PS 2498 (sic) referred to a parcel of land
located in Bayanbayanan, Marikina, Metro Manila (Exhibit "I-Mejia" and Exhibit "E"-
Petitioner) which is poles apart from respondents' title that covered a land in Matandang
Balara, Quezon City. Petitioner did not present convincing evidence to overturn such fact
except to plainly state that "the person who prepared the Survey Plan may have been
confused as to the Property's (sic) exact location". Although petitioner went on to prove
that his property covered by TCT No. 30627 was in Quezon City as he presented
Commonwealth Act No. 502 (Exhibit "A"). Nowhere in said evidence proved that
Bayanbayanan, Marikina was set to form part of the boundaries of Quezon City under
Section 3 thereof. Simply put, the petitioner utterly failed to discharge the burden of
proving the sustainability of his posture.

It is a well entrenched rule that in an action for quieting of title, the petition must prove
legal or equitable title to the land as the far reaching implication of which is quieting
titled lands and putting to stop forever any question of legality of the registration in the
certificate or questions that may arise therefrom. To allow the petitioner to nullify the
title of the respondents to the property in question would mean an obvious collateral
attack which is not permitted under the principle of indefeasibility of a Torrens title. "A
certificate of title cannot be subject to collateral attack and can be altered modified
or cancelled only in a direct proceeding in accordance with law." (Virginia Calalang
vs. Register of Deeds of Quezon City, et. al., G.R. No. 76265, March 11, 1994)
[34]
 (Emphasis in the original)

Aggrieved, Yu Han Yat appealed the above Decision of the RTC to the CA.

In its Decision, the CA granted Yu Han Yat's appeal and held that: (a) the petition for
quieting of title, and the petition for annulment of title are essentially the same; and (b)
Bernas and Mejia's title was void as they source their ownership from Dominga
Sumulong's title to the property which had been declared as null and void by the CA in
previous cases. The CA also awarded actual damages, moral damages, exemplary
damages, and attorney's fees in favor of Yu Han Yat. Herein petitioners Bernas, Mejia,
and Wharton[35] sought reconsideration of the CA Decision, but the same was denied by
the CA on February 28, 2011.

Hence, this appeal.

ISSUES

For resolution of the Court are the following issues:

(a) Whether petitioners complied with Rule 45 of the 1997 Rules of Civil Procedure
when they filed the Petitions dated April 15, 2011 and April 20, 2011;
   
 (b) Whether the filing of the Petitions constituted forum shopping; whether Petitions
are barred by res judicata;
   
(c) Whether Yu Han Yat's Amended Petition constitutes a collateral attack on the validity
of the title of petitioners (and their predecessors-in-interest) over the property subject of
TCT No. 336663;
   
(d) Whether the CA ruling that the property covered by respondent's title is the same as
the property subject of TCT No. 336663 is supported by the evidence on record;
   
(e) Whether the case of Manotok, et al. v. Barque[36] (Manotok) applies;
   
(f) Whether the CA erred when it took judicial notice of proceedings in other cases
before it;
   
(g) Whether Yu Han Yat's alleged payment of real property tax constitutes proof of
ownership or superior title over the property covered by TCT No. 336663; and
   
(h) Whether petitioners are liable to the estate of Yu Han Yat (respondent) for damages
and attorney's fees.

THE COURT'S RULING

On whether petitioners complied with Rule

45 of the 1997 Rules of Civil Procedure when they
filed the Petitions dated April 15, 2011 and April
20, 2011

Before delving into the substantive issues raised by petitioners, the Court deems it proper
to first discuss the procedural issue raised by respondent in its Comment — that the Court
should have dismissed the case because the Petition raised questions of fact which are
outside the province of an appeal through Rule 45.

It is true that, as a general rule, the Court is not a trier of facts, and that petitions under
Rule 45 of the Rules of Court should only raise questions of law.[37] This rule, however, is
subject to the following exceptions:

(1) the conclusion is grounded on speculations, surmises or conjectures;

(2) the inference is manifestly mistaken, absurd or impossible;
(3) there is grave abuse of discretion;
(4) the judgment is based on a misapprehension of facts;
(5) the findings of fact are conflicting;
(6) there is no citation of specific evidence on which the factual findings are based;
(7) the findings of absence of fact are contradicted by the presence of evidence on
record;
(8) the findings of the CA are contrary to those of the trial court;
 (9) the CA manifestly overlooked certain relevant and undisputed facts that, if properly
considered, would justify a different conclusion;
(10) the findings of the CA are beyond the issues of the case; and
(11) such findings are contrary to the admissions of both parties. [38]

Some of the exceptions are present in this case. The rulings alone of the RTC and the CA
were contradictory, to the point that they differ on their rulings on each of the issues
presented in this case. Further, and as will be discussed in detail later on, the CA
committed grave abuse of discretion in arriving at certain factual findings and legal
conclusions. The Court must perforce conduct a judicious examination of the records to
arrive at a just conclusion for this case.

On whether the filing of the Petitions

constituted forum shopping, and whether the
Petitions are barred by res judicata

Respondent claims that petitioners violated the rule against forum shopping when
petitioner Bernas failed to inform the Court that a similar case was pending because
Mejia had filed an appeal of the assailed CA Decision subsequent to the filing by Bernas.
This failure supposedly constitutes a violation of Section 5, Rule 7 of the Rules of Court,
which states that:

SECTION 5. Certification against forum shopping. — The plaintiff or principal party

shall certify under oath in the complaint or other initiatory pleading asserting a claim for
relief, or in a sworn certification annexed thereto and simultaneously filed therewith: (a)
that he has not theretofore commenced any action or filed any claim involving the same
issues in any court, tribunal or quasi-judicial agency and, to the best of his knowledge, no
such other action or claim is pending therein; (b) if there is such other pending action or
claim, a complete statement of the present status thereof; and (c) if he should thereafter
learn that the same or similar action or claim has been filed or is pending, he shall
report that fact within five (5) days therefrom to the court wherein his aforesaid
complaint or initiatory pleading has been filed.

Failure to comply with the foregoing requirements shall not be curable by mere
amendment of the complaint or other initiatory pleading but shall be cause for the
dismissal of the case without prejudice, unless otherwise provided, upon motion and after
hearing. The submission of a false certification or non-compliance with any of the
undertakings therein shall constitute indirect contempt of court, without prejudice to the
corresponding administrative and criminal actions. If the acts of the party or his counsel
clearly constitute willful and deliberate forum shopping, the same shall be ground for
summary dismissal with prejudice and shall constitute direct contempt, as well as a cause
for administrative sanctions. (Emphasis and underscoring supplied)
In addition, respondent also asserts that since the heirs of Esperanza Nava (Heirs of
Nava) did not appeal the CA Decision, then the same constitutes res judicata as regards
petitioners Bernas and Mejia. Thus, the case should be dismissed.

Respondent's assertions fail to convince. Petitioners did not commit forum shopping by
filing separate appeals. In Young v. Spouses Sy,[39] the Court held that there is forum
shopping where there exist:

(a) identity of parties, or at least such parties as represent the same interests in both
actions;
   
(b) identity of rights asserted and relief prayed for, the relief being founded on the same
facts; and
   
(c) the identity of the two preceding particulars is such that any judgment rendered in
the pending case, regardless of which party is successful would amount to res judicata.[40]

While there was identity of rights asserted and relief prayed for, there was no identity of
parties in the case at bar. Granted that both Mejia and Bernas trace their title from Nava,
this does not, by itself, make their interests identical. Bernas' and Mejia's interests remain
separate, and a judgment on one will not amount to res judicata on the other as, for
instance, Bernas could, and did, raise the defense that he was an innocent purchaser for
value of the subject property and thus should not be bound by any adverse judgment
should Mejia's title be found defective. The same reasoning applies to respondent's
assertion that Mejia's and Bernas' claims were now barred by res judicata because the
Heirs of Nava did not appeal. The heirs of Nava hold an interest separate from Mejia's
and Bernas', and the latter could not be adversely affected by the fact that the Heirs of
Nava no longer filed an appeal.

On whether Yu Han Yat's Amended

Petition constitutes a collateral attack on the
validity of the title of petitioners (and their
predecessors-in-interest) over the property subject
of TCT No. 336663

Bernas and Mejia claim that the CA erred when it upheld as valid the petition for quieting
of title filed by Yu Han Yat. They claim that the petition for quieting of title was a
collateral attack, as opposed to a direct attack, on TCT No. 336663, which is proscribed
under the principle of indefeasibility of Torrens titles.

Petitioners are mistaken. The CA was correct in holding that the petition for quieting of
title filed by Yu Han Yat was not a collateral attack on TCT No. 336663, and was, in fact,
a direct attack on the same. In Villarica Pawnshop v. Spouses Gernale,[41] the issue before
the Court was whether litis pendentia was present when there were two pending cases
between the same parties: one for quieting of title, and another for annulment and
cancellation of title. Ruling in the affirmative, the Court held that:

Civil Case No. 438-M-2002 is for quieting of title and damages, while Civil Case No.
502-M-2002 is for annulment and cancellation of titles and damages. The two cases are
different only in the form of action, but an examination of the allegations in both
cases reveals that the main issue raised, which is ownership of the land, and the
principal relief sought, which is cancellation of the opposing parties' transfer
certificates of title, are substantially the same. The evidence required to substantiate
the parties' claims is likewise the same. The proceedings in Civil Case No. 502-M-2002
would entail the presentation of essentially the same evidence, which should be adduced
in Civil Case No. 438-M-2002. As cited by the CA, this Court held in Stilianopulos v.
City of Legaspi that:

The underlying objectives or reliefs sought in both the quieting-of-title and the
annulment-of-title cases are essentially the same — adjudication of the ownership of the
disputed lot and nullification of one of the two certificates of title. Thus, it becomes
readily apparent that the same evidence of facts as those considered in the quieting-of-
title case would also be used in this petition.

The subject cases are so intimately related to each other that the judgment that may be
rendered in one, regardless of which party would be successful, would amount to res
judicata in the other.[42] (Emphasis and underscoring supplied)

The pronouncement above does not mean that in all instances, cases for quieting of title
and for annulment of title are essentially the same, as the CA incorrectly held in its
assailed Decision.[43] However, petitioners are mistaken in their conclusion that the action
filed by Yu Han Yat was a collateral attack just because it was denominated as a "petition
for quieting of title" instead of a "petition for annulment of title."

The test is not the name of the action, but the ultimate objective of the same and the relief
sought therein. Applying the said test in this case, the petition for quieting of title filed by
Yu Han Yat was a direct attack on the petitioners' title as the petition specifically sought
to annul TCT No. 336663 in the name of Nava.[44] Thus, even as petitioners correctly
claim that in assailing the validity of a Torrens title, there must be a direct proceeding
expressly instituted for the purpose, the fact of the matter is that the petition for quieting
of title was exactly that proceeding as it was filed precisely to question the validity of
TCT No. 336663.

On whether the Court of Appeals' ruling

that the property covered by respondent's title is
the same as the property subject of TCT No.
336663 is supported by the evidence on record
Petitioners question the following findings of the CA:

We have scoured and scrutinized the records of the case and found that petitioner-
appellant's title was derived from a valid title while respondents-appellees failed to prove
that their title were derived from a valid one. Furthermore, petitioner-appellant was able
to show how he acquired the subject property from his immediate predecessors and was
able to account for the previous major transactions involving Lot 824, its subdivision and,
finally, until it was transferred to him.

It is incorrect to state that TCT No. 30627, is a transfer from Original Title (sic) No.
8047, when it is clear that it came from Original Title No. 614, pursuant to Decree No.
6667. It is of judicial notice that OCT No. 614, embraces many lots involving the Piedad
Estate which are located in Quezon City.

It is clearly typographical error that, as stated, TCT No. 8047 is a transfer from TCT No.
3633/T-R because the technical description therein does not correspond to technical
description stated in TCT No. 8047, but it instead corresponds to the technical description
stated in TCT No. 36633 (sic), after its subdivision.

On respondent-appellee Bernas' claim that TCT 8047 was a transfer from TCT No. 3633,
which involved a different property, We have scrutinized the same and it is apparent that
TCT 8047, (sic) would show that the one who made such certification used a different
typewriter as the entry "3633/T-R," appears to be different from the typewritten
description of the property which used carbon paper. Likewise, it was certified that the
title contains two pages, however, for unknown reasons, the second page was not
presented; thus, the Court has no way of checking whether there are encumbrances that
may be annotated therein which would trace that how (sic) TCT 8047 came to be.[45]

They contend that the CA Decision was not based on the evidence on record, and that
TCT No. 30627 allegedly covers a property different from the one covered by TCT No.
336663 from which they derive their claims.

Petitioners' contention is without merit. Prescinding from the CA's justifications as to the
use of a different typewriter, a careful scrutiny of the voluminous records of this case
would reveal that the CA was ultimately correct that Yu Han Yat was able to establish
better title over the subject property. Simply put, the CA was correct in holding that it
was Yu Han Yat who was able to account for the previous major transactions involving
the property and was able to show how he acquired the subject property from his
immediate predecessors. To be sure, Yu Han Yat painstakingly traced his title, complete
with documentary and testimonial evidence, in the following manner:

1. Petitioner's title, TCT No. RT28758 (30627) PR-[9]639 (Exh. "G") was issued on
March 9, 1956, being a transfer from TCT No. 8047 in the name of Bienvenido A. Tan,
Jr. (Exh. "1-Galarosa"). Both petitioner's title and that of Mr. Tan, Jr. have the following
technical descriptions, to wit:

"A parcel of land (Lot 824-A-4 of the subd. plan Psd-22842 being a portion of Lot 824-A
described on plan Psd-2498 (LRC Rec. No.), situated in Q. City, bounded on the N., by
Lot 9471 on the E., by Lots 824-A-1, 824-A-2, 824-A-3 of the subd. plans on the SE. by
Tuason Estates; on the W., by Lot 824-B of plan Psd-2498. Beginning at a point marked
"1" on plan, being S. 85 deg. 22'E., 3255.54 from LM No. 16, Piedad Estate; thence N.1
deg,. 42'W., 290.30 m. to pt. 2; thence E., 115.00 m. to pt. 3; thence S. 0 deg. 08'E.,
248.64 m. to pt. 4; thence S. 68 deg, 47'W., 114.78 m. to pt. of beginning; containing an
area of THIRTY THOUSAND (30,000) SQ.M. more or less All pts. referred to are
indicated on the plan and are marked on the ground pts. 1 & 2 are marked by Old PLS
Cyl, Cone, Mons. & the pt. 3 & 4 by PLS Cyl, Cone. Mons. bearings true; declination 0
deg. 45'E., date of the subd. survey Nov. 4, 1947."

xxxx

3. The validity and regularity of petitioner's title is borne out by the fact that it can be
traced back to the title of Juan Porciuncula issued prior to 1930. Porciuncula's title is TCT
No. T-10849 covering "Lot 824 of the 'PIEDAD ESTATE SUBDIVISION' Case No.
5975 of the Court of Land Registration" (Exh. "R" and "R-1" TSN Lara, 4 April 1995
page 68) the original of which was presented in Court and identified by Mr. Lara of the
Pasig Registry. Due to the document's old age, the same had to be placed in a plastic
sheet to prevent further deterioration, as mere holding would break the document. In fact,
the edges of the document, including the portion on which the date where the title's
issuance should have appeared, have been torn to small pieces.

4. On 21 November 1931, an entry written in Spanish was made at the back of TCT No.
10849 to record the subdivision of the lot into Lot 824-A consisting of 60,012 sq. meters,
and Lot 824-B with an area of 87,060 sq. meters, pursuant to Subdivision Plan Psd-2498.
At the same time, the entry recorded the sale of Lot 824-A to Castor B. Cruz for the sum
of P1,220.00. The date of the deed of sale was 20 August 1930. (Exh "R-2") As a result
of the sale to Castor B. Cruz, TCT No. T-10849 was cancelled and replaced by TCT No.
T-20897 and T-20898 (Exh. "R-3" TSN Lara, 4 April 1995 page 103).

5. While TCT No. 20897 could not be found in the Registration Book (T-84-A) of the
Pasig Registry and was listed as missing after the titles were inventoried (TSN Lara, 4
April 1995 pages 87, 88), the Index Card of Porciuncula shows that TCT No. T-10849
was replaced by TCT No. 20897 and 20898 (Exh. "S" and "S-1"). Likewise, the Index
Card of Castor Cruz shows that TCT No. 20897 was issued in his name for Lot 824-A.
(Exh. "U" and "U-1")
6. On 9 February 1939, TCT No. 20897 was cancelled by TCT No. [366633] issued in
the name of Sps. Juan M. Ruiz and Conchita O. Baradi (Exh. "V"). The cancellation and
issuance of a new title was occasioned by the sale of Lot 824-A by Castor B. Cruz to the
said spouses which sale was registered in the Primary Entry Book (Exh. "W") under
Entry No. 5445 (Exh. "W-1", TSN Lara, 4 April 1995 pages 112-114). The cancellation
of Castor B. Cruz' TCT No. 20897 and the issuance of TCT No. T-[36633] were also
recorded in the Index Card of the former. (Exh. "U-1").

7. As described in the TCT No. [36633] in the name of the Spouses Ruiz, the parcel of
land covered by the title is as follows:

"A parcel of land (Lot No. 824-A of the subdivision plan Psd-2498, being a portion of
Lot No. 824, described on the original plan of the Piedad Estate, G.L.R.C. Record No.
5975), situated in the Municipality of Caloocan, Province of Rizal. Bounded on the N.,
by the property of Juan Porciuncula (Lot No. 947 of the subdivision plan No. 2507) on
the E. by Lot No. 823 of Piedad Estate; on the SE by property of Tuason Estate; and on
the W. by property of Juan Porciuncula (Lot 824-B of the subdivision plan). Beginning at
a point marked "1" on the plan, being N. 89 deg. 33'E 3486.40 m. from L.M. No. 16,
Piedad Estate, thence S. 0 deg. 04'E., I, 196.40 m. to point "2"; thence S. 68 deg. 47' W.,
259.15 m. to point "3"; thence N. 1 deg. 42' W., 290.30 m. to point "4"; thence 250.00 m.
to the point of beginning; containing an area of sixty thousand and twelve square meters
(60,012) more or less. All points referred to are indicated on the plan and on the ground
points 1 and 2 are marked by old points and points 3 and 4 by P.L.S. concrete monuments
to 15 x 60 centimeters. Bearings true, declination 0 deg. 48' E., date of original survey,
July 1 to December 14, 1907, and that of the subdivision survey, June 11-13, 1927--/"
(Exh "V"; Exh. "2"-Galarosa)

8. On 6 October 1948, a Subdivision Plan was recorded on the Spouses Ruiz' TCT No.
[36633]. Under the Subdivision Plan, Lot 824-1 was subdivided into four lots, namely:
Lots 824-A-1, 824-A-2, 824-A-3 and 824-A-4. The same annotation mentioned Lot 824-
A-4 to have been sold to Bienvenido A. Tan, Jr. for the sum of P8,000.00 pursuant to a
Deed of Sale dated 12 July 1948 (please see also Exh "CC"). As a result, TCT No. 36633
was cancelled and in lieu thereof, TCT Nos. 8044, 8045, 8046 and 8047 were issued
(Exh. "2-a"-Galarosa).

9. TCT No. 8047 for Lot 824-A-4 appears to have been directly issued in the name of
Bienvenido A. Tan, Jr. (Exh. "1" and "2-a"-Galarosa). This is the same title that was
cancelled when TCT No. 30627 in favor of petitioner was issued on 9 March 1956 (Exh.
"G") pursuant to a Deed of Sale dated 6 March 1956 executed by Bienvenido A. Tan, Jr.
in favor of Felipe Yu Han Yat for the sum of P30,000.00 (Exh. "BB").[46]
Petitioners, on the other hand, argue that their title does not cover the same property and
that even assuming that both titles cover the same property, Yu Han Yat still allegedly
failed to prove that his title was superior over theirs.

Both arguments of petitioners fail to convince.

First, petitioners' argument that Yu Han Yat's title, TCT No. 30627, does not cover the
same property as their title, TCT No. 336663, is because TCT No. 30627 came from TCT
No. 8047 which, in turn, bears an annotation that it is "a transfer from TCT No. 3633/T-
R," a title that covers a property situated in Murphy, Quezon City.[47] They point out that,
in contrast, TCT No. 336663 covers a parcel of land located in Piedad Estate in Quezon
City.[48] The CA dismissed this contention and ruled that the annotation that TCT No.
8047 is "a transfer from TCT No. 3633/T-R" was a clear typographical error "because the
technical description therein does not correspond to [the] technical description stated in
TCT No. 8047, but it instead corresponds to the technical description stated in TCT No.
36633, after its subdivision."[49] The CA attributed the typographical error to the "use of a
different typewriter," which ruling is being vigorously contested by the petitioners.
According to them, the difference in the technical descriptions between those stated in (a)
TCT Nos. 8047 and 336663 and (b) TCT No. 3633/T-R should be construed to mean that
"there was an error in transferring the technical description from the latter to the former."

The Court agrees with the CA. Both TCT No. 30627 and TCT No. 336663 cover the
same property as shown by their respective technical descriptions stating that the parcel
of land covered is Lot 824 of the Piedad Estate.[50] The fact that TCT No. 8047, from
which TCT No. 30627 was derived, bears an annotation that it was a transfer from TCT
No. 3633/T-R which covers a property in Murphy, Quezon City casts little doubt on the
title of Yu Han Yat.

The Court is more inclined to uphold the view that the error lies in the annotation in TCT
No. 8047 that it was "a transfer from TCT No. 3633/T-R," as compared with petitioners'
theory that the error was in the entire technical descriptions contained in TCT Nos. 8047
and TCT No. 336663. It is notable that TCT No. 8047 was, in truth, a transfer from TCT
No. 336663, as shown by the meticulous narration of Yu Han Yat quoted above. To
repeat, records show that TCT No. 336663, in the name of Spouses Ruiz, was cancelled
when the lot was subdivided into four lots: Lot 824-A-1, Lot 824-A-2, Lot 824-A-3, and
Lot 824-A-4. TCT No. 336663 was cancelled, and TCT Nos. 8044, 8045, 8046,
and 8047 were issued in lieu of the same. TCT No. 8047 was then cancelled when the lot
was sold to Yu Han Yat in 1956. In other words, the error occurred in encoding that TCT
No. 8047 was "a transfer from TCT No. 3633/T-R" instead of "from TCT No. 36633." As
Yu Han Yat convincingly argued:

It defies logic to believe such a preposterous claim – that there is greater likelihood of an
error occurring in copying the technical description, rather than to consider more likely a
typographical error occurring in typing TCT No. 3633/T-R instead of TCT No. 336663
(sic). A technical description is a lengthy narration which would be improbable to be
erroneously transferred from one title to another, if good faith is to be presumed in the
performance of one's duty. On the other hand, the confusing similarity in the numbers
appearing on the title (TCT No. 3633/T-R and TCT No. 336663 [sic]) is more susceptible
to being interchanged.[51]

Thus, the Court quotes with approval the following disquisition by the CA:

Moreover, We cannot close our eyes to the fact that TCT No. 30627 (transfer from TCT
No. 8047) was issued on March 9, 1956, while TCT No. 336663 (transfer from TCT
116925/T-588) was issued only on October 28, 1985. Thus, as between two certificates of
title issued to different persons covering the same land in whole or in part, the earlier in
date must prevail, and that is, TCT No. 30627, under [Yu Han Yat]'s title. [52]

It is well established in jurisprudence that where there are two certificates of title
covering the same land, the earlier in date must prevail as between the parties claiming
ownership over it. As early as the 1915 case of Legarda vs. Saleeby,[53] the Court already
said that:

The question, who is the owner of land registered in the name of two different persons,
has been presented to the courts in other jurisdictions. In some jurisdictions, where the
"torrens" system has been adopted, the difficulty has been settled by express statutory
provision. In others it has been settled by the courts. Hogg, in his excellent discussion of
the "Australian Torrens System," at page 823, says: "The general rule is that in the case
of two certificates of title, purporting to include the same land, the earlier in date
prevails, whether the land comprised in the latter certificate be wholly, or only in
part, comprised in the earlier certificate. (Oelkers vs. Merry, 2 Q. S. C. R., 193;
Miller vs. Davy, 7 N. Z. R., 155; Lloyd vs. May-field, 7 A. L. T. (V.) 48;
Stevens vs. Williams, 12 V. L. R., 152; Register of Titles vs. Esperance Land Co., 1 W.
A. R., 118.)" Hogg adds however that, "if it can be clearly ascertained by the ordinary
rules of construction relating to written documents, that the inclusion of the land in the
certificate of title of prior date is a mistake, the mistake may be rectified by holding the
latter of the two certificates of title to be conclusive." (See Hogg on the "Australian
Torrens System," supra, and cases cited. See also the excellent work of Niblack in his
"Analysis of the Torrens System," page 99.) Niblack, in discussing the general question,
said: "Where two certificates purport to include the same land the earlier in date
prevails [x x x] In successive registrations, where more than one certificate is issued
in respect of a particular estate or interest in land, the person claiming under the
prior certificate is entitled to the estate or interest; and that person is deemed to
hold under the prior certificate who is the holder of, or whose claim is derived
directly or indirectly from the person who was the holder of the earliest certificate
issued in respect thereof. While the acts in this country do not expressly cover the case
of the issue of two certificates for the same land, they provide that a registered owner
shall hold the title, and the effect of this undoubtedly is that where two certificates
purport to include the same registered land, the holder of the earlier one continues
to hold the title" (p. 237).

xxxx

We have decided, in case of double registration under the Land Registration Act that the
owner of the earliest certificate is the owner of the land. That is the rule between original
parties. May this rule be applied to successive vendees of the owners of such certificates?
Suppose that one or the other of the parties, before the error is discovered, transfers his
original certificate to an "innocent purchaser." The general rule is that the vendee of
land has no greater right, title, or interest than his vendor; that he acquires the right
which his vendor had, only. Under that rule the vendee of the earlier certificate
would be the owner as against the vendee of the owner of the later certificate.
[54]
 (Emphasis and underscoring supplied)

Verily, it is undoubtedly clear that between the parties in this case, it is Yu Han Yat who
has shown that he has better title over the subject property for having presented the
earlier title.[55] The contention that Bernas (on behalf of Wharton) and Mejia were
"innocent purchasers" is thus immaterial, for even if it is assumed that they are indeed
such, they still could not acquire a better right than their transferor — Nava — whose
title was issued much later than Yu Han Yat's transferor.

Another evidentiary contention by Bernas purportedly establishing his better right to the
subject property was that TCT No. T-10849, issued before 1930 to Juan Porciuncula,
which was the origin of Yu Han Yat's title, was based on subdivision plan Psd-2498. In
turn, Psd-2498 indicates that it is a subdivision plan of a lot located in "Bayanbayanan,
Mariquina."[56] Supposedly, this establishes that the land covered by Yu Han Yat's title is
different from the one covered by his title. With regard to this issue, the CA ruled that:

While it is true that, under PS 2498 (sic), it was stated that the property is located in
Bayanbayanan, Mariquina, however, it must be noted that at the time the survey was
conducted on June 11-13, 1927, the property was still under the Province of Rizal and
that Quezon City was only created pursuant to Commonwealth Act No. 502, and
approved on October 12, 1939. However, subsequent subdivision of Lot 824 would
reveal that the property is located at Quezon City.[57]

Bernas asserts that the above ruling of the CA was not supported by evidence on record
and was bereft of factual basis nor based on established facts.
The Court, however, agrees with the resolution of the CA. The CA was justified in taking
judicial notice when Quezon City was established. Section 1, Rule 129 of the Rules of
Court states:

SECTION 1. Judicial notice, when mandatory. — A court shall take judicial notice,
without the introduction of evidence, of the existence and territorial extent of states, their
political history, forms of government and symbols of nationality, the law of nations, the
admiralty and maritime courts of the world and their seals, the political constitution and
history of the Philippines, the official acts of the legislative, executive and judicial
departments of the Philippines, the laws of nature, the measure of time, and the
geographical divisions. (Emphasis supplied)

The CA correctly held that the Quezon City was established only in 1939, upon the
enactment of Commonwealth Act No. 502, the city's charter. Hence, when the survey for
Psd-2498 was conducted in 1927, Quezon City did not as yet exist. Further, the property
in question has always been referred to as part of the Piedad Estate. In turn,
Commonwealth Act No. 502 defined the boundaries of Quezon City as follows:

SECTION 3. Boundaries. — The boundaries and limits of the territory of said city are
established and prescribed as follows: Beginning at a point marked "1" which is
identical to Boundary Monument No. 1 of Piedad Estate; to point "2", which is
Boundary Monument No. 2 of Piedad Estate; thence downstream following the Arroyo
between Payatas Estate and Mariquina Estate to point "3", which is the junction of the
Arroyo and Mariquina River; thence downstream following Mariquina River to point "4",
which is the crossing of Mariquina by the old Rosario Road; thence westward following
the old Rosario Road to point "5", which is the south-easternmost corner of Wack Wack
Golf and Country Club; thence following the road along the south boundary of the Wack
Wack [Golf] and Country Club to point "6" where the said road crosses the creek which
is the source of Salapan Creek; thence downstream following the Salapan Creek to point
"7", which is the junction of Salapan Creek and Dario River; thence southward following
the Salapan River to its intersection with the east boundary of the City of Manila to point
"8"; thence north-westward following the east boundary of the City of Manila to point
"9" near La Loma Cabaret, which is a corner of the boundary of the City of Manila near
the entrance to the North Cemetery; thence northward following the boundary of the City
of Manila to point "10", which is the northeast corner of said City; thence westward along
said City of Manila boundary at a distance of 100 meters to point "11"; thence northward
paralleling the Novaliches Road at a distance of 100 meters from the property line on the
side of said road to point "12", which is at a distance of 100 meters north of the crossing
of Samson Street (road connecting Balintawak Monument with Bonifacio Monument);
thence eastward paralleling Samson Street and the Circumferential Road at a distance of
100 meters on the northside of said street and road to point "13", which is the center of
the Culiat Creek; thence upstream following the Culiat Creek to point "14", which is the
junction of Pasong Tamo River and Culiat Creek; thence upstream following Pasong
Tamo River to point "15", which is the junction of Pasong Tamo River and Pinagpatayan
Buaya Creek; thence to the point of beginning. (Emphasis and underscoring supplied)

In Porciuncula v. Adamos,[58] the Court notably observed that the Piedad Estate is

"located in barrio Bayanbayanan, Caloocan, Rizal (now Diliman, Quezon City)." [59] As
Yu Han Yat noted, the history of Bayanbayanan, Caloocan may have caused the
misdescription of municipality in Psd-2498:[60]

While it is true that the subdivision plan of Lot 824 (Psd 2498) of the Piedad Estate
shows that it is located in the Barrio of Bayanbayanan, Municipality of Marikina, a
deeper understanding and analysis of the history of the subject property will reveal that
the misdescription in the subdivision plan is nothing more than a product of confusion
between Bayanbayanan, Marikina and Bayanbayanan, Caloocan.

x x x A reading of the documents would reveal that the source of the insidious claim by
the petitioners that the property is located in Bayanbayanan, Marikina stems from an
erroneous reference in Psd 2498 dated June 11-13, 1927 made by a certain Engr. Sixto
Fernando. The said survey indicates that the location of Lot 824, Piedad Estate containing
a total area of 147,072 square meters to be in Bayanbayanan, Marikina. When Quezon
City was created by virtue of Commonwealth Act No. 502, the boundaries and limits of
the city would show that Piedad Estate indeed became part of it, to wit:

Sec. 3. Boundaries. — The boundaries and limits of the territory of said city are
established and prescribed as follows: Beginning at a point marked "1" which is
identical to Boundary Monument No. 1 of Piedad Estate; to point "2", which is
Boundary Monument No. 2 of Piedad Estate; thence downstream following the
Arroyo between Payatas Estate and Mariquina Estate to point "3", which is the
junction of the Arroyo and Mariquina River; thence downstream following
Mariquina River to point "4", which is the crossing of Mariquina by the old Rosario
Road; thence westward following the old Rosario Road to point "5", x x x.
(Emphasis in the original)

x x x It is apparent that Engr. Sixto Fernando, while making the subdivision plan Psd
2498 in 1927 mistook the portion of respondent's property to be in Bayanbayanan,
Marikina.

x x x The "Marikina mistake" appears in only one document, as against several evidence
showing that respondent's property is in Quezon City. The inadvertent mention that
Felipe Yu Han Yat's property (and the entire Lot 824) is located in Bayanbayanan,
Mariquina appears in one and only one document and that is in Psd-2498. Except for this
mistake in the designation of municipality, all other data in the survey plan Psd-2498 are
consistent with the property being in Piedad Estate, Matandang Balara, Quezon City.
x x x Further, as stated above, the technical description in respondent's TCT 28758
(30627) PR-9639, referred to the same survey plan, Psd-2498 and went on further to
state that the property is located in Quezon City. The said Transfer Certificate of
Title where the above cited technical description was mentioned, was prepared by
no less than the Register of Deeds. This is a conclusive proof that if at all, the
erroneous reference to Bayanbayanan, Mariquina in Psd-2498 was rectified by the
Register of Deeds himself, when he prepared the title and correctly described the
location of the property to be in Quezon City. Noting further the fact that in doing
so, he was using as basis the same Psd-2498.[61] (Emphasis supplied)

The foregoing disquisition persuades the Court that the annotation that Psd-2498 pertains
to a parcel land in "Bayanbayanan, Mariquina" was indeed a mere inadvertent error.

To be sure, the above factual findings arrived at by the CA are all based on a painstaking
review of the voluminous records of this case. The ultimate truth revealed by the
evidence on record is that TCT No. 8047 was a transfer from TCT No. 336663, contrary
to the annotation that it was "a transfer from TCT No. 3633/T-R." Likewise, the CA
correctly took judicial notice of the fact that Quezon City was not yet established at the
time the survey for Psd-2498 was conducted. Therefore, the Court so holds that Yu Han
Yat's title, TCT No. 30627, and Mejia and Bernas' title, TCT No. 336663, cover the same
property.

On whether the case of Manotok, et al. v.

Barque applies

Petitioner Mejia argues that the CA erred in ruling in favor of Yu Han Yat, when it did
not inquire as to how the latter was able to trace his title from valid alienation by the
government pursuant to the provisions of Act No. 1120, or the Friar Lands Act, because
Piedad Estate was considered a friar land. Mejia argues that the CA fell short of the
yardstick laid down in the case of Alonso v. Cebu Country Club,[62] (Alonso) where the
Court held:

Section 18 of Act No. 1120 or the Friar Lands Act unequivocally provides: "No lease or
sale made by the Chief of the Bureau of Public Lands (now the Director of Lands) under
the provisions of this Act shall be valid until approved by the Secretary of the Interior
(now, the Secretary of Natural Resources). Thus, petitioners' claim of ownership must fail
in the absence of positive evidence showing the approval of the Secretary of Interior.
Approval of the Secretary of the Interior cannot simply be presumed or inferred from
certain acts since the law is explicit in its mandate. This is the settled rule as enunciated
in Solid State Multi-Products Corporation vs. Court of Appeals and reiterated in Liao vs.
Court of Appeals.[63]

Likewise, in the case of Manotok,[64] the Court held that:

It must be borne in mind that the disputed property is part of the "Friar Lands" over
which the Government holds title and are not public lands but private or patrimonial
property of the Government and can be alienated only upon proper compliance with the
requirements of Act No. 1120 or the Friar Lands Act.

xxxx

It was thus primordial for the respondent to prove its acquisition of its title by clear and
convincing evidence in view of the nature of the land. In fact, it is essential for both
respondent and petitioners to establish that it had become private property. Both parties
failed to do so. As we have held earlier, petitioners have not succeeded to prove their
claim of ownership over the subject property.[65]

Mejia's assertion on this ground fails. In the case of Alonso, the Court needed to ascertain
both parties' compliance with the Friar Lands Act because the plaintiffs claim was
precisely hinged on the alleged sale by the government of the land in question to
Francisco Alonso. On the other hand, the Court in Manotok needed to check the parties'
compliance with the Friar Lands Act because each of the parties questioned the petition
for administrative reconstitution filed by the other. Hence, the Court needed to ascertain
which of the parties actually held a valid claim to the lands in question, so that it could
accordingly grant reconstitution.

The instances present in Alonso and Manotok do not exist in the case at bar. The issue of
whether there was a valid transfer from the government to either of the parties was never
raised in the proceedings in the trial court or upon initial appeal. Mejia only raised the
issue of compliance with the Friar Lands Act only upon her motion for reconsideration
with the CA, and eventually upon appeal to this Court. Mejia is precluded from doing
this, as it is well settled in jurisprudence that an issue which was neither averred in the
complaint nor raised during the trial in the court below cannot be raised for the first time
on appeal as it would be offensive to the basic rules of fair play, justice and due process.
[66]
 As Yu Han Yat correctly argued:

Certainly, the issue of whether an inquiry was made as to how the respondent's
predecessors-in-interest may trace their title to a valid alienation by the government under
the provisions of Act No. 1120 was not among those raised before the trial court and the
Court of Appeals. If it were so, respondent would have presented evidence to show
that he measures up to the yardstick laid down by the Supreme Court in
the Manotok case. It must be recalled that the only primordial issue between the parties
in this case is whose title is genuine and authentic based on the respective evidence
presented. This was how the Honorable Court of Appeals simplified the otherwise
convoluted and antagonistic theories of ownership between the parties. But insofar as the
alienation by the government of the property in question under the provisions of Act No.
1120 is concerned, that was never put in issue both in the trial court and in the Court of
Appeals.[67] (Emphasis supplied)

To emphasize, points of law, theories, issues and arguments not brought to the attention
of the trial court ought not to be considered by a reviewing court, as these cannot be
raised for the first time on appeal.[68] Issues raised for the first time on appeal and not
raised timely in the proceedings in the lower court are barred by estoppel. [69] To consider
the alleged facts and arguments belatedly raised would amount to trampling on the basic
principles of fair play, justice, and due process.[70] As such, the Court so holds that the
principles under Alonso and Manotok are inapplicable in the case at bar.

On whether the Court of Appeals erred

when it took judicial notice of proceedings in other
cases before it

In further ruling in favor of Yu Han Yat, the CA held that TCT No. 336663, or the Nava
TCT, was null and void by taking judicial notice of other cases decided by it, specifically
the case of CA-G.R. No. 77666, titled "Heirs of Dominga Sumulong y Roxas, represented
by Wilfredo Sumulong Torres v. Hon. Demetrio B. Macapagal, Sr., Presiding Judge,
RTC, Branch 79, Quezon City, et al."[71] In the said case, the CA invalidated TCT No.
56809 registered in the name of Dominga Sumulong for being improperly reconstituted:
As TCT No. 336663 originated from TCT No. 56809, the CA concluded that Bernas' and
Mejia's title were also null and void because of the "legal principle that the spring cannot
rise higher from its source."[72]

Petitioners decried the act of the CA of taking judicial notice of a previous case decided
by it, and argued that the CA committed a serious error of law.

The Court rules in favor of petitioners on this ground. It is well settled that, as a general
rule,

courts are not authorized to take judicial notice, in the adjudication of cases pending
before them, of the contents of the records of other cases, even when such cases have
been tried or are pending in the same court, and notwithstanding the fact that both cases
may have been heard or are actually pending before the same judge.[73]

It is true that the said rule admits of exceptions, namely:

(a) In the absence of objection, and as a matter of convenience to all parties, a court
may properly treat all or any part of the original record of a case filed in its archives as read
into the record of a case pending before it, when, with the knowledge of the opposing
party, reference is made to it for that purpose, by name and number or in some other
manner by which it is sufficiently designated; or
(b) when the original record of the former case or any part of it, is actually withdrawn
 from the archives by the court's direction, at the request or with the consent of the parties,
and admitted as a part of the record of the case then pending. [74]

Neither of these exceptions, however, exists in this case. The parties were not informed,
much less their consent taken, of the fact that the CA would take judicial notice of these
cases. Thus, the CA erred in taking judicial notice of the records of CA-G.R. No. 77666
in the process of adjudicating this case.

Nevertheless, despite this error, the result remains that Yu Han Yat is the rightful owner
of the subject property in light of the Court's ruling above that there is an overlap between
the properties covered by the two TCTs in question, and that the evidence showing Yu
Han Yat's title to be earlier means that Yu Han Yat holds better title.

In view of such ruling, the Court no longer sees the need to tackle the issue of whether
Yu Han Yat's payment of real property taxes constitutes proof of ownership or superior
title over the subject property. In any event, the Court has consistently ruled that:

Although tax declarations or realty tax payment of property are not conclusive evidence
of ownership, nevertheless, they are good indicia of possession in the concept of owner
for no one in his right mind would be paying taxes for a property that is not in his actual
or at least constructive possession. They constitute at least proof that the holder has a
claim of title over the property. The voluntary declaration of a piece of property for
taxation purposes manifests not only one's sincere and honest desire to obtain title to the
property and announces his adverse claim against the State and all other interested
parties, but also the intention to contribute needed revenues to the Government. Such an
act strengthens one's bona fide claim of acquisition of ownership. [75]

On whether petitioners are liable to

respondent for damages and attorney's fees

The CA awarded to Yu Han Yat the following amounts in the form of damages:

(a) P1,630,514.17 as actual damages;

(b) P100,000.00 as moral damages;
(c) P100,000.00 as exemplary damages, and
(d) Attorney's Fees in the amount of P272,868.25

As to the actual damages, the CA held that petitioners were liable therefor because Yu
Han Yat deserved adequate compensation for the duly substantiated losses suffered by
him to protect his interest over the property. The CA also awarded moral damages to Yu
Han Yat because of the supposed wrongful issuance by the RTC of the preliminary
injunction, and the refusal of the Housing and Land Use Regulatory Board (HLURB) to
issue a License to Sell to Yu Han Yat due to the pendency of the case. Exemplary
damages were likewise awarded by the CA by way of example or correction for the
public good. Finally, the CA awarded attorney's fees because Yu Han Yat was
supposedly forced by the petitioners to incur expenses in litigation to protect his interest.

Contrary to the ruling of the CA, the Court finds no basis in awarding the above damages
to Yu Han Yat. In ABS-CBN Broadcasting Corp. v. Court of Appeals,[76] the Court held
that in the absence of malice or bad faith in the prosecution of the case, the award of
damages is unavailing:

There is no adequate proof that ABS-CBN was inspired by malice or bad faith. It was
honestly convinced of the merits of its cause after it had undergone serious negotiations
culminating in its formal submission of a draft contract. Settled is the rule that the
adverse result of an action does not per se make the action wrongful and subject the actor
to damages, for the law could not have meant to impose a penalty on the right to litigate.
If damages result from a person's exercise of a right, it is damnum absque injuria.[77]

In the same way, the Court believes that petitioners were honestly convinced of the
validity of their claim to the subject property. As subsequent holders of the same through
a sale, both Mejia and Bernas (and consequently, Wharton) were expected to insist on
their supposed ownership over the property in question. Consequently, the Court deems it
proper to delete the award of damages in favor of respondent.

WHEREFORE, the consolidated Petitions are hereby DENIED. The Court of Appeals

Decision dated December 14, 2010, and the Resolution dated February 28, 2011 in CA-
G.R. CV No. 82681 are AFFIRMED WITH MODIFICATION. The Court deletes the
award of actual, moral, and exemplary damages, and attorney's fees in favor of
respondent.

SO ORDERED.

Carpio (Chairperson),[*] Perlas-Bernabe, A. Reyes, Jr., and J. Reyes, Jr., JJ., concur.

SECOND DIVISION
[ G.R. No. 221732, August 23, 2017 ]
FERNANDO U. JUAN, PETITIONER, V. ROBERTO U. JUAN
(SUBSTITUTED BY HIS SON JEFFREY C. JUAN) AND LAUNDROMATIC
CORPORATION, RESPONDENTS.

DECISION

PERALTA, J.:
 For this Court's resolution is the Petition for Review on Certiorari under Rule 45
of the Rules of Court dated January 25, 2016, of petitioner Fernando U. Juan that seeks
to reverse and set aside the Decision[1] dated May 7, 2015 and Resolution[2] dated
December 4, 2015 of the Court of Appeals (CA) dismissing his appeal for failure to
comply with the requirements of Section 13, Rule 44 and Section 1, Rule 50 of the Rules
of Court.

The facts follow.

Respondent Roberto U. Juan claimed that he began using the name and mark "Lavandera
Ko" in his laundry business on July 4, 1994. He then opened his laundry store at No. 119
Alfaro St., Salcedo St., Makati City in 1995. Thereafter, on March 17, 1997, the National
Library issued to him a certificate of copyright over said name and mark. Over the years,
the laundry business expanded with numerous franchise outlets in Metro Manila and
other provinces. Respondent Roberto then formed a corporation to handle the said
business, hence, Laundromatic Corporation (Laundromatic) was incorporated in 1997,
while "Lavandera Ko" was registered as a business name on November 13, 1998 with the
Department of Trade and Industry (DTI). Thereafter, respondent Roberto discovered that
his brother, petitioner Fernando was able to register the name and mark "Lavandera Ko"
with the Intellectual Property Office (IPO) on October 18, 2001, the registration of which
was filed on June 5, 1995. Respondent Roberto also alleged that a certain Juliano
Nacino (Juliano) had been writing the franchisees of the former threatening them with
criminal and civil cases if they did not stop using the mark and name "Lavandera Ko." It
was found out by respondent Roberto that petitioner Fernando had been selling his own
franchises.

Thus, respondent Roberto filed a petition for injunction, unfair competition, infringement
of copyright, cancellation of trademark and name with/and prayer for TRO and
Preliminary Injunction with the Regional Trial Court (RTC) and the case was raffled off
at Branch 149, Makati City. The RTC issued a writ of preliminary injunction against
petitioner Fernando in Order dated June 10, 2004. On July 21, 2008, due to the death of
respondent Roberto, the latter was substituted by his son, Christian Juan (Christian). Pre-
trial conference was concluded on July 13, 2010 and after the presentation of evidence of
both parties, the RTC rendered a Resolution dated September 23, 2013, dismissing the
petition and ruling that neither of the parties had a right to the exclusive use or
appropriation of the mark "Lavandera Ko" because the same was the original mark and
work of a certain Santiago S. Suarez (Santiago). According to the RTC, the mark in
question was created by Suarez in 1942 in his musical composition called, "Lavandera
Ko" and both parties of the present case failed to prove that they were the originators of
the same mark. The dispositive portion of the RTC's resolution reads as follows:
WHEREFORE, premises considered, this court finds both the plaintiff-Roberto and
defendant-Fernando guilty of making misrepresentations before this court, done under
oath, hence, the Amended Petition and the Answer with their money claims prayed for
therein are hereby DISMISSED.

Therefore, the Amended Petition and the Answer are hereby DISMISSED for no cause of
action, hence, the prayer for the issuance of a writ of injunction is hereby DENIED for
utter lack of merit; and the Writ of Preliminary Injunction issued on June 10, 2004 is
hereby LIFTED AND SET ASIDE.

Finally, the National Library is hereby ordered to cancel the Certificate of Registration
issued to Roberto U. Juan on March 17, 1997 over the word "Lavandera Ko," under
certificate no. 97-362. Moreover, the Intellectual Property Office is also ordered to cancel
Certificate of Registration No. 4-1995-102749, Serial No. 100556, issued on October 18,
2001, covering the work LAVANDERA KO AND DESIGN, in favor of Fernando U.
Juan.

The two aforesaid government agencies are hereby requested to furnish this Court of the
copy of their cancellation.

Cost de oficio.

SO ORDERED.[3]

Herein petitioner elevated the case to the CA through a notice of appeal. In his appeal,
petitioner contended that a mark is different from a copyright and not interchangeable.
Petitioner Fernando insisted that he is the owner of the service mark in question as he was
able to register the same with the IPO pursuant to Section 122 of R.A. No. 8293.
Furthermore, petitioner Fernando argued that the RTC erred in giving credence to the
article of information it obtained from the internet stating that the Filipino folk song
"Lavandera Ko" was a composition of Suarez in 1942 rather than the actual pieces of
evidence presented by the parties. As such, according to petitioner, such information
acquired by the RTC is hearsay because no one was presented to testify on the veracity of
such article.

Respondent Roberto, on the other hand, contended that the appeal should be dismissed
outright for raising purely questions of law. He further raised as a ground for the
dismissal of the appeal, the failure of the petitioner to cite the page references to the
record as required in Section 13, paragraphs (a), (c), (d) and (f) of Rule 44 of the Rules of
Court and petitioner's failure to provide a statement of facts. Respondent also argued that
assuming that the Appellant's Brief complied with the formal requirements of the Rules
of Court, the RTC still did not err in dismissing the petitioner's answer with counterclaim
because he cannot be declared as the owner of "Lavandera Ko," since there is prior use of
said mark by another person.

The CA, in its Decision dated May 7, 2015, dismissed the petitioner's appeal based on
technical grounds, thus:

WHEREFORE, premises considered, the instant appeal is DISMISSED for failure to

comply with the requirements of Section 13, Rule 44 and Section 1, Rule 50 of the Rules
of Court.

SO ORDERED.[4]

Hence, the present petition after the denial of petitioner Fernando's motion for
reconsideration. Petitioner Fernando raises the following issues:

A.

WHETHER OR NOT THE DISMISSAL OF THE APPEAL BY THE COURT OF

APPEALS ON PURELY TECHNICAL GROUNDS WAS PROPER CONSIDERING
THAT THE CASE BEFORE IT CAN BE RESOLVED BASED ON THE BRIEF
ITSELF.

B.

WHETHER OR NOT A MARK IS THE SAME AS A COPYRIGHT.

C.

WHETHER OR NOT FERNANDO U. JUAN IS THE OWNER OF THE MARK

"LAVANDERA KO."

D.

WHETHER OR NOT AN INTERNET ARTICLE IS SUPERIOR THAN ACTUAL

EVIDENCE SUBMITTED BY THE PARTIES.[5]

According to petitioner Fernando, the CA should have considered that the rules are there
to promote and not to defeat justice, hence, it should have decided the case based on the
merits and not dismiss the same based on a mere technicality. The rest of the issues are
similar to those that were raised in petitioner's appeal with the CA.

In his Comment[6] dated April 22, 2016, respondent Roberto insists that the CA did not
commit an error in dismissing the appeal considering that the formal requirements
violated by the petitioner in the Appellant's Brief are basic, thus, inexcusable and that
petitioner did not proffer any valid or substantive reason for his non-compliance with the
rules. He further argues that there was prior use of the mark "Lavandera Ko" by another,
hence, petitioner cannot be declared the owner of the said mark despite his subsequent
registration with the IPO.

The petition is meritorious.

Rules of procedure must be used to achieve speedy and efficient administration of justice
and not derail it.[7] Technicality should not be allowed to stand in the way of equitably
and completely resolving the rights and obligations of the parties. [8] It is, [thus] settled
that liberal construction of the rules may be invoked in situations where there may be
some excusable formal deficiency or error in a pleading, provided that the same does not
subvert the essence of the proceeding and it at least connotes a reasonable attempt at
compliance with the rules.[9] In Aguam v. CA,[10] this Court ruled that:

x x x Technicalities, however, must be avoided. The law abhors technicalities that impede
the cause of justice. The court's primary duty is to render or dispense justice. "A litigation
is not a game of technicalities." "Law suits, unlike duels, are not to be won by a rapier's
thrust. Technicality, when it deserts its proper office as an aid to justice and becomes its
great hindrance and chief enemy, deserves scant consideration from courts." Litigations
must be decided on their merits and not on technicality. Every party litigant must be
afforded the amplest opportunity for the proper and just determination of his cause, free
from the unacceptable plea of technicalities. Thus, dismissal of appeals purely on
technical grounds is frowned upon where the policy of the court is to encourage hearings
of appeals on their merits and the rules of procedure ought not to be applied in a very
rigid, technical sense; rules of procedure are used only to help secure, not override
substantial justice. It is a far better and more prudent course of action for the court to
excuse a technical lapse and afford the parties a review of the case on appeal to attain the
ends of justice rather than dispose of the case on technicality and cause a grave injustice
to the parties, giving a false impression of speedy disposal of cases while actually
resulting in more delay, if not a miscarriage of justice.

In this case, this Court finds that a liberal construction of the rules is needed due to the
novelty of the issues presented. Besides, petitioner had a reasonable attempt at complying
with the rules. After all, the ends of justice are better served when cases are determined
on the merits, not on mere technicality.[11]

The RTC, in dismissing the petition, ruled that neither of the parties are entitled to use the
trade name "Lavandera Ko" because the copyright of "Lavandera Ko", a song composed
in 1942 by Santiago S. Suarez belongs to the latter. The following are the RTC's reasons
for such ruling:
The resolution of this Court - NO ONE OF THE HEREIN PARTIES HAS THE RIGHT
TO USE AND ENJOY "LAVANDERA KO"!

Based on the date taken from the internet - References: CCP encyclopedia of Philippine
art, vol. 6 http://www.himig.coin.ph (http://kahimyang.info /
kauswagan/articles/1420/today - in - philippine -history this information was gathered:
"In 1948, Cecil Lloyd established the first Filipino owned record company, the Philippine
Recording System, which featured his rendition of Filipino folk songs among them the
"Lavandera ko" (1942) which is a composition of Santiago S. Suarez". Thus, the herein
parties had made misrepresentation before this court, to say the least, when they declared
that they had coined and created the subject mark and name. How can the herein parties
have coined and created the subject mark and work when these parties were not yet born;
when the subject mark and work had been created and used in 1942.

The heirs of Mr. Santiago S. Suarez are the rightful owners of subject mark and work -
"Lavandera ko".

Therefore, the writ of injunction issued in the instant case was quite not proper, hence the
same shall be lifted and revoked. This is in consonance with the finding of this court of
the origin of the subject mark and work, e.g., a music composition of one Santiago S.
Suarez in 1942.

Moreover, Section 171.1 of R.A. 8293 states: "Author" is the natural person who has
created the work." And, Section 172.1 of R.A. No. 8293 provides: Literary and artistic
works, hereinafter referred to as "works", are original intellectual creations in the literary
and artistic domain protected from the moment of their creation and shall include in
particular:

(d) Letters;

(f) Musical compositions, with or without words;”

Thus, the subject mark and work was created by Mr. Santiago S. Suarez, hence, the
subject mark and work belong to him, alone.

The herein parties are just false claimants, done under oath before this court (paragraph 4
of Roberto's affidavit, Exhibit A TRO, page 241, Vol. I and paragraph 2 of Fernando's
affidavit, Exhibit 26 TRO, page 354, Vol. I), of the original work of Mr. Santiago S.
Suarez created in 1942.

Furthermore, Section 21 of R.A. 8293 declares: "Patentable Inventions - any technical

solution of a problem in any field of human activity which is new, involves an inventive
step and is industrially applicable shall be patentable. It may be, or may relate to, a
product, or process, or an improvement of any of the foregoing." Thus, the herein subject
mark and work can never be patented for the simple reason that it is not an invention. It is
a title of a music composition originated from the mind of Mr. Santiago S. Suarez in
1942.

Thus, the proper and appropriate jurisprudence applicable to this instant case is the
wisdom of the High Court in the case of Pearl & Dean (Phil.), Incorporation v. Shoemart,
Incorporated (G.R. No. 148222, August 15, 2003), the Supreme Court ruled: "The scope
of a copyright is confined to literary and artistic works which are original intellectual
creations in the literary and artistic domain protected from the moment of their creation."
The Supreme Court concluded: "The description of the art in a book, though entitled to
the benefit of copyright, lays no foundation for an exclusive claim to the art itself. The
object of the one is explanation; the object of the other is use. The former may be secured
by copyright. The latter can only be secured, if it can be secured at all, by letters patent."
(Pearl & Dean v. Shoemart, supra., citing the case of Baker v. Selden, 101 U.S. 99; 1879
U.S. Lexis 1888; 25 L. Ed. 841; 11 Otto 99, October, 1879 Term).

It is noted that the subject matter of Exhibit "5" (Annex 5) Of Fernando (IPO certificate
of registration) and Exhibit B of Roberto (Certificate of Copyright Registration) could not
be considered as a literary and artistic work emanating from the creative mind and/or
hand of the herein parties for the simple reason that the subject work was a creation of the
mind of Mr. Santiago S. Suarez in 1942. Thus, neither of the herein parties has an
exclusive right over the subject work "Lavandera Ko" for the simple reason that herein
parties were not the maker, creator or the original one who conceptualized it. Section
171.1 defines the author as the natural person who has created the work. (R.A. No. 8293).
Therefore, it can be said here, then and now, that said registrations of the word
"Lavandera Ko" by the herein parties cannot be protected by the law, Republic Act No.
8293. Section 172.2 (R.A. No. 8293) is quite crystal clear on this point, it declares:
"Works are protected by the sole fact of their creation, irrespective of their mode or form
of expressions, as well as of their content, quality and purpose." Herein parties were not
the creators of the subject word. It was a creation of Santiago S. Suarez in 1942.

Finally, in the case of Wilson Ong Ching Kian Chuan v. Court of Appeals and Lorenzo
Tan (G.R. No. 130360, August 15, 2001), the Supreme Court ruled: "A person to be
entitled to a copyright must be the original creator of the work. He must have created it
by his own skill, labor and judgment without directly copying or evasively imitating the
work of another." Again, herein parties, both, miserably failed to prove and establish on
how they have created this alleged work before registering it with the National Library
and the Intellectual Property Office, hence their claim of ownership of the word
"Lavandera Ko" is not conclusive or herein parties are both great pretenders and
imitators. Therefore, it is hereby declared that registration with the IPO by Fernando is
hereby cancelled, for one and many others stated herein, because of the admission of
Fernando that he coined the name from the lyrics of a song popularized in the 1950's by
singer Ruben Tagalog. Admission is admissible without need of evidence. (Section 4,
Rule 129 of the Revised Rules of Court).

Considering that herein parties had made misrepresentations before this court, hence,
both the herein parties came to this court with unclean hands. Thus, no damage could be
awarded to anyone of the herein parties.[12]

The above ruling is erroneous as it confused trade or business name with copyright.

The law on trademarks, service marks and trade names are found under Part III of
Republic Act (R.A.) No. 8293, or the Intellectual Property Code of the Philippines, while
Part IV of the same law governs copyrights.

"Lavandera Ko," the mark in question in this case is being used as a trade name or
specifically, a service name since the business in which it pertains involves the rendering
of laundry services. Under Section 121.1 of R.A. No. 8293, "mark" is defined as any
visible sign capable of distinguishing the goods (trademark) or services (service mark) of
an enterprise and shall include a stamped or marked container of goods. As such, the
basic contention of the parties is, who has the better right to use "Lavandera Ko" as a
service name because Section 165.2[13] of the said law, guarantees the protection of trade
names and business names even prior to or without registration, against any unlawful act
committed by third parties. A cause of action arises when the subsequent use of any third
party of such trade name or business name would likely mislead the public as such act is
considered unlawful. Hence, the RTC erred in denying the parties the proper
determination as to who has the ultimate right to use the said trade name by ruling that
neither of them has the right or a cause of action since "Lavandera Ko" is protected by a
copyright.

By their very definitions, copyright and trade or service name are different. Copyright is
the right of literary property as recognized and sanctioned by positive law. [14] An
intangible, incorporeal right granted by statute to the author or originator of certain
literary or artistic productions, whereby he is invested, for a limited period, with the sole
and exclusive privilege of multiplying copies of the same and publishing and selling
them.[15] Trade name, on the other hand, is any designation which (a) is adopted and used
by person to denominate goods which he markets, or services which he renders, or
business which he conducts, or has come to be so used by other, and (b) through its
association with such goods, services or business, has acquired a special significance as
the name thereof, and (c) the use of which for the purpose stated in (a) is prohibited
neither by legislative enactment nor by otherwise defined public policy.[16]

Section 172.1 of R.A. 8293 enumerates the following original intellectual creations in the
literary and artistic domain that are protected from the moment of their creation, thus:
172.1 Literary and artistic works, hereinafter referred to as "works", are original
intellectual creations in the literary and artistic domain protected from the moment of
their creation and shall include in particular:

(a) Books, pamphlets, articles and other writings;

(b) Periodicals and newspapers;
(c) Lectures, sermons, addresses, dissertations prepared for oral delivery, whether or not
reduced in writing or other material form;
(d) Letters;
(e) Dramatic or dramatico-musical compositions; choreographic works or entertainment
in dumb shows;
(f) Musical compositions, with or without words;
(g) Works of drawing, painting, architecture, sculpture, engraving, lithography or other
works of art; models or designs for works of art;
(h) Original ornamental designs or models for articles of manufacture, whether or not
registrable as an industrial design, and other works of applied art;
(i) Illustrations, maps, plans, sketches, charts and three-dimensional works relative to
geography, topography, architecture or science;
(j) Drawings or plastic works of a scientific or technical character;
(k) Photographic works including works produced by a process analogous to
photography; lantern slides;
(l) Audiovisual works and cinematographic works and works produced by a process
analogous to cinematography or any process for making audio-visual recordings;
(m) Pictorial illustrations and advertisements;
(n) Computer programs; and
(o) Other literary, scholarly, scientific and artistic works.

As such, "Lavandera Ko," being a musical composition with words is protected under the
copyright law (Part IV, R.A. No. 8293) and not under the trademarks, service marks and
trade names law (Part III, R.A. No. 8293).

In connection therewith, the RTC's basis or source, an article appearing in a website, [17] in
ruling that the song entitled "Lavandera Ko" is protected by a copyright, cannot be
considered a subject of judicial notice that does not need further authentication or
verification. Judicial notice is the cognizance of certain facts that judges may properly
take and act on without proof because these facts are already known to them. [18] Put
differently, it is the assumption by a court of a fact without need of further traditional
evidentiary support. The principle is based on convenience and expediency in securing
and introducing evidence on matters which are not ordinarily capable of dispute and are
not bona fide disputed.[19] In Spouses Latip v. Chua,[20] this Court expounded on the nature
of judicial notice, thus:
Sections 1 and 2 of Rule 129 of the Rules of Court declare when the taking of judicial
notice is mandatory or discretionary on the courts, thus:

SECTION 1. Judicial notice, when mandatory. - A court shall take judicial notice,
without the introduction of evidence, of the existence and territorial extent of states, their
political history, forms of government and symbols of nationality, the law of nations, the
admiralty and maritime courts of the world and their seals, the political constitution and
history of the Philippines, the official acts of the legislative, executive and judicial
departments of the Philippines, the laws of nature, the measure of time, and the
geographical divisions.

SEC. 2. Judicial notice, when discretionary. - A court may take judicial notice of matters
which are of public knowledge, or are capable of unquestionable demonstration or ought
to be known to judges because of their judicial functions.

On this point, State Prosecutors v. Muro is instructive:

I. The doctrine of judicial notice rests on the wisdom and discretion of the courts. The
power to take judicial notice is to be exercised by courts with caution; care must be taken
that the requisite notoriety exists; and every reasonable doubt on the subject should be
promptly resolved in the negative.

Generally speaking, matters of judicial notice have three material requisites: (1) the
matter must be one of common and general knowledge; (2) it must be well and
authoritatively settled and not doubtful or uncertain; and (3) it must be known to be
within the limits of the jurisdiction of the court. The principal guide in determining what
facts may be assumed to be judicially known is that of notoriety. Hence, it can be said
that judicial notice is limited to facts evidenced by public records and facts of general
notoriety.

To say that a court will take judicial notice of a fact is merely another way of saying that
the usual form of evidence will be dispensed with if knowledge of the fact can be
otherwise acquired. This is because the court assumes that the matter is so notorious that
it will not be disputed. But judicial notice is not judicial knowledge. The mere personal
knowledge of the judge is not the judicial knowledge of the court, and he is not
authorized to make his individual knowledge of a fact, not generally or professionally
known, the basis of his action. Judicial cognizance is taken only of those matters which
are "commonly" known.

Things of "common knowledge," of which courts take judicial notice, may be matters
coming to the knowledge of men generally in the course of the ordinary experiences of
life, or they may be matters which are generally accepted by mankind as true and are
capable of ready and unquestioned demonstration. Thus, facts which are universally
known, and which may be found in encyclopedias, dictionaries or other publications, are
judicially noticed, provided they are of such universal notoriety and so generally
understood that they may be regarded as forming part of the common knowledge of every
person.

We reiterated the requisite of notoriety for the taking of judicial notice in the recent case
of Expertravel & Tours, Inc. v. Court of Appeals, which cited State Prosecutors:

Generally speaking, matters of judicial notice have three material requisites: (1) the
matter must be one of common and general knowledge; (2) it must be well and
authoritatively settled and not doubtful or uncertain; and (3) it must be known to be
within the limits of the jurisdiction of the court. The principal guide in determining what
facts may be assumed to be judicially known is that of notoriety. Hence, it can be said
that judicial notice is limited to facts evidenced by public records and facts of general
notoriety. Moreover, a judicially noticed fact must be one not subject to a reasonable
dispute in that it is either: (1) generally known within the territorial jurisdiction of the
trial court; or (2) capable of accurate and ready determination by resorting to sources
whose accuracy cannot reasonably be questionable.

Things of "common knowledge," of which courts take judicial notice, may be matters
coming to the knowledge of men generally in the course of the ordinary experiences of
life, or they may be matters which are generally accepted by mankind as true and are
capable of ready and unquestioned demonstration. Thus, facts which are universally
known, and which may be found in encyclopedias, dictionaries or other publications, are
judicially noticed, provided, they are such of universal notoriety and so generally
understood that they may be regarded as forming part of the common knowledge of every
person. As the common knowledge of man ranges far and wide, a wide variety of
particular facts have been judicially noticed as being matters of common knowledge. But
a court cannot take judicial notice of any fact which, in part, is dependent on the
existence or non-existence of a fact of which the court has no constructive knowledge.

The article in the website cited by the RTC patently lacks a requisite for it to be of
judicial notice to the court because such article is not well and authoritatively settled and
is doubtful or uncertain. It must be remembered that some articles appearing in the
internet or on websites are easily edited and their sources are unverifiable, thus, sole
reliance on those articles is greatly discouraged.

Considering, therefore, the above premise, this Court deems it proper to remand the case
to the RTC for its proper disposition since this Court cannot, based on the records and
some of the issues raised by both parties such as the cancellation of petitioner's certificate
of registration issued by the Intellectual Property Office, make a factual determination as
to who has the better right to use the trade/business/service name, "Lavandera Ko."
WHEREFORE, the Petition for Review on Certiorari under Rule 45 of the Rules of
Court dated January 25, 2016, of petitioner Fernando U. Juan is GRANTED.
Consequently, the Decision dated May 7, 2015 and Resolution dated December 4, 2015
of the Court of Appeals are REVERSED and SET ASIDE. This Court,
however, ORDERS the REMAND of this case to the RTC for its prompt disposition.

SO ORDERED.

EN BANC
[ G.R. No. 207342, November 07, 2017 ]
GOVERNMENT OF HONGKONG SPECIAL ADMINISTRATIVE REGION,
REPRESENTED BY THE PHILIPPINE DEPARTMENT OF JUSTICE,
PETITIONER, V. JUAN ANTONIO MUÑOZ, RESPONDENT.

RESOLUTION

BERSAMIN, J.:

Under the  rule of specialty in international law, a Requested State shall surrender
to a Requesting State a person to be tried only for a criminal offense specified in their
treaty of extradition. Conformably with the dual criminality rule embodied in the
extradition treaty between the Philippines and the Hong Kong Special Administrative
Region (HKSAR), however, the Philippines as the Requested State is not bound to
extradite the respondent to the jurisdiction of the HKSAR as the Requesting State for the
offense of accepting an advantage as an agent considering that the extradition treaty is
forthright in providing that surrender shall only be granted for an offense coming within
the descriptions of offenses in its Article 2 insofar as the offenses are punishable by
imprisonment or other form of detention for more than one year, or by a more severe
penalty according to the laws of both parties.

For consideration and resolution is the petitioner's motion for reconsideration [1] to seek
the review and reversal of the decision promulgated on August 16, 2016, [2] whereby the
Court affirmed the amended decision of the Court of Appeals (CA) promulgated on
March 1, 2013 in CA-G.R. CV No. 88610, and accordingly denied the petition for review
on certiorari.[3] We thereby held that respondent Juan Antonio Muñoz could only be
extradited to and tried by the HKSAR for seven (7) counts of conspiracy to defraud, but
not for the other crime of accepting an advantage as an agent. This, because conspiracy
to defraud was a public sector offense, but accepting an advantage as an agent dealt with
private sector bribery; hence, the dual criminality rule embodied in the treaty of
extradition has not been met.

The Court DENIES the petitioner's motion for reconsideration for its lack of merit
considering that the basic issues being thereby raised were already passed upon and no
substantial arguments were presented to warrant the reversal of the decision promulgated
on August 16, 2016.

Article 2 of the RP-Hong Kong treaty provides that surrender of the extraditee by the
Requested State to the Requesting State shall only be for an offense coming within any of
the descriptions of the offenses therein listed insofar as the offenses are punishable by
imprisonment or other form of detention for more than one year, or by a more severe
penalty according to the laws of both parties. The provision expresses the dual
criminality rule. The determination of whether or not the offense concerned complied
with the dual criminality rule rests on the Philippines as the requested party. Hence, the
Philippines must carefully ascertain the exact nature of the offenses involved in the
request, and thereby establish that the surrender of Muñoz for trial in the HKSAR will be
proper. On its part, the HKSAR as the requesting party should prove that the offense is
covered by the RP-Hong Kong Treaty, and punishable in our jurisdiction.

A perusal of the motion for reconsideration shows that the petitioner has lifted from the
dissenting opinion the arguments it now advances to support its insistence that Muñoz
must also be extradited for the crime of accepting an advantage as an agent. In the last
paragraph of the motion for reconsideration, the petitioner cites the
ruling supposedly handed down by the Court of Final Appeal of the HKSAR in the case
of B v. The Commissioner of the Independent Commission Against Corruption to the
effect that the term agent in Section 9 of the HKSAR's Prevention of Bribery
Ordinance (POBO) also covered public servants in another jurisdiction. [4] On the basis of
such supposed ruling, the petitioner prays that the exclusion of the crime of accepting an
advantage as an agent be reversed; and that the Court should hold Muñoz to be
extraditable also for such crime.

The petitioner's prayer cannot be granted. To grant it would be to take judicial notice of
the ruling in B v. The Commissioner of the Independent Commission Against Corruption.
Like all other courts in this jurisdiction, however, the Court is not at liberty to take
judicial notice of the ruling without contravening our own rules on evidence under which
foreign judgments and laws are not considered as matters of a public or notorious nature
that proved themselves.

Verily, foreign judgments and laws, if relevant, have to be duly alleged and competently
proved like any other disputed fact. Noveras v. Noveras[5] explains why:
x x x Justice Herrera explained that, as a rule, "no sovereign is bound to give effect
within its dominion to a judgment rendered by a tribunal of another country." This means
that the foreign judgment and its authenticity must be proven as facts under our rules on
evidence, together with the alien's applicable national law to show the effect of the
judgment on the alien himself or herself. The recognition may be made in an action
instituted specifically for the purpose or in another action where a party invokes the
foreign decree as an integral aspect of his claim or defense.

xxxx

Under Section 24 of Rule 132, the record of public documents of a sovereign authority or
tribunal may be proved by: (1) an official publication thereof or (2) a copy attested by the
officer having the legal custody thereof. Such official publication or copy must be
accompanied, if the record is not kept in the Philippines, with a certificate that the
attesting officer has the legal custody thereof. The certificate may be issued by any of the
authorized Philippine embassy or consular officials stationed in the foreign country in
which the record is kept, and authenticated by the seal of his office. The attestation must
state, in substance, that the copy is a correct copy of the original, or a specific part
thereof, as the case may be, and must be under the official seal of the attesting officer.

Section 25 of the same Rule states that whenever a copy of a document or record is
attested for the purpose of evidence, the attestation must state, in substance, that the copy
is a correct copy of the original, or a specific part thereof, as the case may be. The
attestation must be under the official seal of the attesting officer, if there be any, or if he
be the clerk of a court having a seal, under the seal of such court.[6]

Worthy to remind in this regard is that the power to take judicial notice is to be exercised
by the courts of the Philippines with caution, and every reasonable doubt should be
resolved in the negative.[7]

Furthermore, the courts in the Philippines lacked expertise on the laws of the HKSAR.
This precisely necessitated the hearing before the trial court to receive the opinion
testimonies of qualified experts on the laws of the HKSAR. The experts were Clive
Stephen Grossman, the Senior Counsel of the Hong Kong Bar Association, and Ian
Charles McWalters, the Senior Assistant Director of Public Prosecutions in the
Department of Justice of the HKSAR. Not surprisingly, said legal experts shared the
opinion that the offense defined in Section 9 of the POBO was a private sector offense.
The CA thus decided against the petitioner's position. To extradite Muñoz also for the
crime for accepting an advantage as an agent would be devoid of justification if the
Philippines did not have an equivalent crime of accepting an advantage as an agent.

At the time when the ruling in B v. The Commissioner of the Independent Commission
Against Corruption was supposedly handed down on January 28, 2010 by the Court of
Final Appeal of the HKSAR, this case was already pending consideration on appeal by
the CA. The CA promulgated the assailed amended decision on March 1, 2013 upon
Muñoz's motion for reconsideration in order to declare that he could not be extradited for
the crime of accepting an advantage as an agent due to non-compliance with the dual
criminality rule. All throughout this time, the petitioner did not seasonably and properly
apprise the CA of the relevant case law in its jurisdiction. It was only in the motion for
reconsideration that the petitioner apprised the Court of the ruling, but mentioned only
the title of the case. The petitioner did not attempt to prove the ruling as a fact.

The petitioner's belatedness in bringing the ruling to our attention was another proof of
the ruling's lack of relevance and applicability herein.

It is also notable that the petitioner did not present an official publication of the ruling or
at least a copy of it attested by the proper office or officer having legal custody (if
attestation was the rule in that jurisdiction). As a consequence, the ruling was not also
shown to be a public document under the laws of the HKSAR.

ACCORDINGLY, the Court DENIES the motion for reconsideration with finality.

SO ORDERED.

FIRST DIVISION
[ G.R. No. 210766, January 08, 2018 ]
MARIA CONCEPCION N. SINGSON A.K.A. CONCEPCION N. SINGSON,
PETITIONER, VS. BENJAMIN L. SINGSON, RESPONDENT.

DECISION

DEL CASTILLO, J.:

Assailed in this Petition for Review on Certiorari[1] are the August 29, 2013 Decision[2] of
the Court of Appeals (CA) and its January 6, 2014 Resolution[3] in CA-G.R. CV No.
96662, which reversed and set aside the November 12, 2010 Decision[4] of the Regional
Trial Court (RTC) of Parañaque City, Branch 260, in Civil Case No. 07-0070.

Factual Antecedents

On Februruy 27, 2007, Maria Concepcion N. Singson a.k.a. Concepcion N. Singson

(petitioner) filed a Petition[5] for declaration of nullity of marriage based on Article 36 of
the Family Code of the Philippines[6] (Family Code). This was docketed as Civil Case No.
07-0070.

It was alleged therein that on July 6, 1974, petitioner and Benjamin L. Singson
(respondent) were married before the Rev. Fr. Alfonso L. Casteig at St. Francis Church,
Mandaluyong, Rizal; that said marriage produced four children, all of whom are now of
legal age; that when they started living together, petitioner noticed that respondent was
"dishonest, unreasonably extravagant at the expense of the family's welfare, extremely
vain physically and spiritually,"[7] and a compulsive gambler; that respondent was
immature, and was unable to perform his paternal duties; that respondent was also
irresponsible, an easy-going man, and guilty of infidelity; that respondent's abnormal
behavior made him completely unable to render any help, support, or assistance to her;
and that because she could expect no help or assistance at all from respondent she was
compelled to work doubly hard to support her family as the sole breadwinner.

Petitioner also averred that at the time she filed this Petition, respondent was confined at
Metro Psych Facility,[8] a rehabilitation institution in Pasig City; and that respondent's
attending psychiatrist, Dr. Benita Sta. Ana-Ponio (Dr. Sta. Ana-Ponio), made the
following diagnosis on respondent:
Based on history, mental status examination and observation, he is diagnosed to be
suffering from Pathological Gambling as manifested by:

a. preoccupation with gambling, thinking of ways to get money with which to gamble as
seen in his stealing and pawning jewelries and appliances[;]

b. needs to gamble with increasing amounts of money in order to achieve the desired
effect[;]

c. lies to family members or others to conceal the extent of [his] involvement with
gambling[;]

d. committed illegal acts such as forging the signature of his wife, issuing bouncing
checks in order to finance his gambling[;]

e. has jeopardized his relationship with his wife, lost the respect of his children, lost a
good career in banking because of gambling[;]

f. [relies] on his parents, his wife, and siblings to provide money to relieve a desperate
financial situation caused by gambling[;]

While he apparently had Typhoid fever that resulted [in] behavioral changes as a young
boy, it would be difficult to say that the psychotic episodes he manifested in 2003 and
2006 [are] ethologically related to the general medical condition that occurred in his
childhood.
Furthermore, [respondent] manifests an enduring pattern of behavior that deviates
markedly from the expectations of our culture as manifested in the following areas:

a. his ways of perceiving and interpreting [his own] self, other people, and events[;]

b. his emotional response[;]

c. his poor impulse control[;]

Such pattern is inflexible and pervasive and has led to significant impairment in social,
occupational and interpersonal relationship. In [respondent's] case, this has persisted for
several years, and can be traced back [to] his adolescence since he started gambling while
in high school. He is therefore diagnosed to be suffering from Personality Disorder.

All these[,] put together, [hinder respondent] from performing his marital obligations.[9]
Petitioner moreover asserted that respondent came from a "distraught" family and had a
"dysfunctional" childhood;[10] that respondent had all the love, care, and protection of his
parents as the youngest child for some time; but that these parental love, care and
protection were, however, transferred to his youngest brother who was born when
respondent was almost five years old; and that these factors caused respondent emotional
devastation from which he never recovered.

Petitioner added that unknown to her, respondent even as a high school student, was
already betting on jai alai. She also claimed that she tried to adjust to respondent's
personality disorders, but that she did not attain her goal.

Finally, petitioner claimed that she and respondent did not enter into any ante-nuptial
agreement to govern their property relations as husband and wife and that they had no
conjugal assets or debts.

On June 19, 2007, respondent filed his Answer.[11]

Traversing petitioner's allegations, respondent claimed that "psychological incapacity"

must be characterized by gravity, juridical antecedence, and incurability, which are not
present in the instant case because petitioner's allegations are not supported by facts.

Respondent further averred that it was not true that he failed to render any help, support
or assistance to petitioner and their family; that the family home where petitioner and
their children are living was in fact his own capital property; that his shortcomings as
mentioned by petitioner do not pertain to the most grave or serious cases of personality
disorders that would satisfy the standards required to obtain a decree of nullity of
marriage; that petitioner's complaint is nothing more than a complaint of a woman with
an unsatisfactory marriage who wants to get out of it; that contrary to petitioner's claim
that he is a good-for-nothing fellow, he has a college degree in business administration,
and is a bank employee, and, that it was money problem, and not his alleged personality
disorder, that is the wall that divided him and petitioner.

Respondent also claimed that petitioner failed to lay the basis for the conclusions of the
psychiatrist to the effect that he is suffering from pathological gambling and personality
disorder; that petitioner's allegation that he came from a distraught family and that he
suffered emotional devastation is vague, and bereft of particular details, and even
slanderous; and that assuming that he had not acted the way petitioner expected him to
conduct himself, his actions and behavior are not psychological illnesses or personality
disorders, but simply physical illnesses of the body, akin to hypertension and allied
sicknesses, and that these physical illnesses are not at all incurable psychiatric disorders
that were present at the time of his marriage with petitioner.

Respondent furthermore claimed that he and petitioner had conjugal assets and debts; that
the land where their family home is built came from his earnings, hence the family home
is their conjugal property; that he and petitioner also have a house and lot in Tagaytay
City, as well as bank accounts that are in petitioner's name only; and he and petitioner
also have investments in shares of stocks, cars, household appliances, furniture, and
jewelry; and that these are conjugal assets because they came from petitioner's salaries
and his (respondent's) own inheritance money.

Respondent moreover alleged that before the filing of the present Petition, petitioner had
caused him to be admitted into the Metro Psych Facility for treatment; that on account of
his confinement and treatment in this psychiatric facility, he has incurred medical
expenses and professional medical fees; and that since it is petitioner who manages all
their finances and conjugal assets it stands to reason that he should be awarded "spousal
support."

On July 25, 2007, the RTC issued its Pre-Trial Order.[12]

Trial thereafter ensued. Petitioner's witnesses included herself, her son, Jose Angelo
Singson (Jose), and Dr. Sta. Ana-Ponio.

On February 23, 2010, petitioner filed her Formal Offer of Evidence which included a
photocopy of the marriage contract; the birth certificates of their four children; her son
Jose's Judicial Affidavit dated April 2, 2008; a photocopy of Dr. Sta. Ana-Ponio's Judicial
Affidavit dated June 25, 2008; Clinical Summary of respondent issued by Dr. Sta. Ana-
Ponio dated February 11, 2007 (Clinical Summary); her (petitioner's) own Judicial
Affidavit dated April 2, 2008; a photocopy of Transfer Certificate of Title (TCT) No.
179751 registered in the names of the parties' four children:. and a notarized document
entitled "Summary of Sources and Uses of Funds for the period November 1999 to
March 31, 2008" executed by petitioner and described as a detailed summary of expenses
paid for with the proceeds of respondent's share in the sale of the latter's house in
Magallanes Village.[13]

Respondent filed his Comment thereon.[14]

On March 29, 2010, the RTC admitted petitioner's exhibits.[15]

On May 13, 2010, respondent filed a Motion to Dismiss[16] "on the ground that
the totality of evidence presented by petitioner did not establish [his] psychological
incapacity x x x to comply with the essential marital obligations x x x".[17] Petitioner filed
her Opposition[18] thereto, and respondent tendered his Comment thereon.[19]

On May 17, 2010, the RTC denied respondent's Motion to Dismiss and stood pat on its
March 29, 2010 Order.[20]

During the September 30, 2010 hearing, respondent's counsel manifested that his client
was waiving the right to present countervailing evidence. Respondent's counsel also
moved that the Petition at bar be submitted for decision on the basis of the evidence
already on the record. The RTC thus declared the case submitted for decision. [21]

Ruling of the Regional Trial Court

In its Decision of November 12, 2010, the RTC granted the Petition and declared the
marriage between petitioner and respondent void ab initio on the ground of the latter's
psychological incapacity. The RTC disposed thus -
WHEREFORE, in view of the foregoing considerations, the petition is GRANTED.
Judgment is hereby rendered[:]

1. DECLARING null and void ab initio the marriage between MARIA

CONCEPCION N. SINGSON a.k.a. CONCEPCION N.
SINGSON and BENJAMIN L. SINGSON solemnized on JULY 6, 1974 in
Mandaluyong City or any other marriage between them on the ground of
psychological incapacity of the respondent.

2. ORDERING the Local Civil Registrar of Mandaluyong City and the

National Statistics Office to cancel the marriage between the petitioner and
the respondent as appearing in the Registry of Marriage.

There are no other issues in this case.

Let copies of this Decision be furnished the Local Civil Registrars of Mandaluyong City
and Para[ñ]aque City, the Office of the Solicitor General, the Office of the Civil Register
General (National Statistics Office) and the Office of the City Prosecutor, Parañaque
City.

SO ORDERED.[22]
The RTC ruled that the requisites warranting a finding of psychological incapacity under
Article 36 of the Family Code are present in the instant case because the totality of
evidence showed that respondent is suffering from a psychological condition that is
grave, incurable, and has juridical antecedence.

The RTC also found that the ·combined testimonies of petitioner and Dr. Sta. Ana-Ponio
convincingly showed that respondent is psychologically incapacitated to perform the
essential marital obligations; that respondent's inability to perform his marital obligations
as set out in Articles 68 to 71 of the Family Code, was essentially due to a psychological
abnormality arising from a pathological and utterly irresistible urge to gamble.

The RTC cited "[Dr. Sta. Ana-Ponio's] findings [which] reveal that respondent is
suffering from Personality Disorder known as Pathological Gambling."[23] It ruled that
it has been shown that this personality disorder was present at the time of celebration of
marriage but became manifest only later; that because of this personality disorder
respondent had already jeopardized his relationship with his family; and that respondent's
psychological disorder hinders the performance of his obligations as a husband and as a
father.

Lastly, the RTC found that the only property owned in common by the spouses was
donated in favor of the parties' children as evidenced by TCT No. 179751 - a fact not at
all controverted, in view of respondent's waiver of his right to present evidence.

Respondent moved for reconsideration of this verdict.

But in its Order dated January 6, 2011,[24] the RTC denied respondent's motion for
reconsideration. It reiterated that the expert witness had adequately established that
respondent is suffering from "Pathological Gambling Personality Disorder" which is
grave, permanent, and has juridical antecedence.

On February 4, 2011, respondent filed a Notice of Appeal[25] which was given due course
by the RTC in its Order[26] dated February 28, 2011.

Ruling of the Court of Appeals

In its Decision of August 29, 2013, the CA overturned the RTC, and disposed as follows:
WHEREFORE, the appeal is GRANTED. The Decision dated 12 November 2010 issued
by the Regional Trial Court, Branch 260, Parañaque City in Civil Case No. 07-0070,
declaring the marriage between Maria Concepcion N. Singson and Benjamin L. Singson
null and void ab initio, is REVERSED AND SET ASIDE. Instead, the Petition for
Declaration of Nullity of Marriage is DISMISSED.

SO ORDERED.[27]
The CA held that the totality of evidence presented by petitioner failed to establish
respondent's alleged psychological incapacity to perform the essential marital obligations,
which in this case, was not at all proven to be grave or serious, much less incurable, and
furthermore was not existing at the time of the marriage. What is more, the CA declared
that any doubt should be resolved in favor of the existence and continuation of the
marriage, and against its dissolution and nullity, in obedience to the mandate of the
Constitution and statutory laws; and that in this case, petitioner failed to discharge the
burden of proving that respondent is suffering from a serious or grave psychological
disorder that completely disables or incapacitates him from understanding and
discharging the essential obligations of the marital union.

According to the CA, psychological incapacity is the downright or utter incapacity or

inability to take cognizance of and to assume the basic marital obligations. The CA did
not go along with the RTC, which placed heavy reliance on Dr. Sta. Ana-Ponio's finding
that respondent was psychologically incapacitated to perform the essential marital
obligations due to a personality disorder known as pathological gambling. The CA held
that, contrary to petitioner's claim that respondent's pathological gambling was grave or
serious, the evidence in fact showed that the latter was truly capable of carrying out the
ordinary duties of a married man because he had a job, had provided money tor the
family from the sale of his own property, and he likewise provided the land on which the
family home was built, and he also lives in the family home with petitioner and their
children.

On top of these, the CA ruled that it is settled that mere difficulty, refusal or neglect in
the performance of marital obligations, or ill will on the part of a spouse, is different from
incapacity rooted in some debilitating psychological condition or illness; that the
evidence at bar showed that respondent's alleged pathological gambling arose after the
marriage; that in fact petitioner admitted that she was not aware of any gambling by
respondent before they got married; that petitioner moreover acknowledged that
respondent was a kind and a caring person when he was courting her; that petitioner
likewise admitted that respondent also brought petitioner to the hospital during all four
instances when she gave birth to their four children.

In other words, the CA found that respondent's purported pathological gambling was not
proven to be incurable or permanent since respondent has been undergoing treatment
since 2003 and has been responding to the treatment.

Petitioner moved for reconsideration[28] of the CA's Decision. But her motion was denied
by the CA in its Resolution of January 6, 2014.[29]
 Issue

Hence, the instant recourse with petitioner raising the following question -
[WHETHER] THE [CA] ERRED IN REVERSING THE DECISION OF THE [RTC]. [30]
Petitioner's Arguments

In praying for the reversal of the assailed CA Decision and Resolution, and in asking for
the reinstatement of the RTC Decision, petitioner argues in her Petition, [31] Reply,[32]  and
Memorandmr[33] that respondent's psychological incapacity had been duly proved in
court, including its juridical antecedence, incurability, and gravity.

First, petitioner maintains that respondent failed to perform the marital duties of mutual
love, respect and support; that Dr. Sta. Ana-Ponio's expert findings are corroborated by
the testimonies of petitioner end her son Jose both of whom demonstrated that
respondents psychological incapacity is grave or serious rendering him incapable to
perform the essential marital obligations; that for his part, respondent had adduced no
proof that he (respondent) is capable of carrying out the ordinary duties required in a
marriage for the reason that everything that the family had saved and built had been
squandered by respondent; and that respondent's confinement at the rehabilitation facility
is itself proof of the gravity or seriousness of his psychological incapacity.

Second, petitioner contends that respondent's psychological incapacity preceded the

marriage, as shown in Dr. Sta. Ana-Ponio's Clinical Summary, which pointed out that
such psychological incapacity, which included pathological gambling, can be traced back
when respondent was already betting on jai alai even in high school, and this was not
known to his family; that the Clinical Summary was based on information provided not
only by petitioner) but by respondent's sister, and by respondent himself; that such
juridical antecedence was neither questioned nor overthrown by countervailing evidence;
and that the root cause could be traced back to respondent's flawed relationship with his
parent which developed into a psychological disorder that existed before the marriage.

Third, petitioner insists that this Court can take judicial notice of the fact that personality
disorders are generally incurable and permanent, and must continuously be treated
medically; that in this case  the Clinical Summary had pointed out that respondent's
understanding of his gambling problem is only at the surface level; and that in point of
tact Dr. St.a. Ana-Ponio had affirmed that personality disorders are incurable.

Respondent's Arguments

In his Comment[34] and Memorandum,[35] respondent counters that the assailed CA

Decision should be affirmed. He argues that. the grounds cited by petitioner are the self-
same grounds raised  by petitioner before the RTC and the CA; that petitioner's evidence
indeed failed to prove convincingly that he (respondent) is psychologically incapacitated
to comply with the essential marital obligations, hence there is no basis to declare the
parties' marriage void ab initio.

Our Ruling

The Petition will not succeed.

It is axiomatic that the validity of marriage and the unity of the family are enshrined in
our Constitution and statutory laws, hence any doubts attending the same are to be
resolved in favor of the continuance and validity of the marriage and that the burden of
proving the nullity of the same rests at all times upon the petitioner.[36] "The policy of the
Constitution is to protect and strengthen the family as the basic social institution, and
marriage as the foundation of the family. Because of this, the Constitution decrees
marriage as legally inviolable and protects it from dissolution at the whim of the
parties."[37]

Article 1 of the Family Code describes marriage as "a special contract of permanent
union between a man and a woman entered into in accordance with law for the
establishment of conjugal and family life" and as "the foundation of the family and an
inviolable social institution."

In the instant case, petitioner impugns the inviolability of this social institution by suing
out pursuant to Article 36 of the Family Code, which provides that:
Art. 36. A marriage contracted by any party who, at the time of the celebration, was
psychologically incapacitated to comply with the essential marital obligations of
marriage, shall likewise be void even if such incapacity becomes manifest only after its
solemnization. (As amended by Executive Order 227)
Petitioner's case will thus be examined in light of the well-entrenched case law rulings
interpreting and construing the quoted Article, to wit:
'Psychological incapacity,' as a ground to nullify a marriage under Article 36 of the
Family Code, should refer to no less than a mental - not merely physical - incapacity that
causes a party to be truly incognitive of the basic marital covenants that concomitantly
must be assumed and discharged by the parties to the marriage which, as so expressed in
Article 68 of the Family Code, among others, include their mutual obligations to live
together, observe love respect and fidelity and render help and support. There is hardly
any doubt that the intendment of the law has been to confine the meaning of
'psychological incapacity' to the most serious cases of personality disorders clearly
demonstrative of an utter insensitivity or inability to give meaning and significance to the
marriage. In Santos v. CA (Santos), the Court first declared that psychological incapacity
must be characterized by: (a) gravity (i.e., it must be grave and serious such that the party
would be incapable of carrying out the ordinary duties required in a marriage); (b)
juridical antecedence (i.e., it must be rooted in the history of the party antedating the
marriage, although the overt manifestations may emerge only after the marriage); and (c)
incurability (i.e., it must be incurable, or even if it were otherwise, the cure would be
beyond the means of the party involved). The Court laid down more definitive guidelines
in the interpretation and application of Article 36 of the Family Code in Republic of the
Phils. v. CA, x x x [also known as the Molina guidelines]. These guidelines incorporate
the basic requirements that the Court established in Santos.[38]
In setting aside the RTC's ruling, the CA in this case held that petitioner failed to prove
that respondent was psychologically incapacitated to comply with the essential marital
obligations because she failed to establish that such incapacity was grave and serious, and
that it existed at the time of the marriage, and that it is incurable. We agree.

At the outset, this Court is constrained to peruse the records because of the conflicting
findings between the trial court and the appellate court.[39] We thus did peruse and review
the records, and we are satisfied that the CA correctly found that respondent has the
capability and ability to perform his duties as a husband and father as against the RTC's
rather general statement that respondent's psychological or personality disorder hinders
the performance of his basic obligations as a husband and a father.

We agree with the CA that the evidence on record does not establish that respondent's
psychological incapacity was grave and serious as defined by jurisprudential parameters
since "[respondent] had a job; provided money for the family from the sale of his
property; provided the land where the family home was built on; and lived in the family
home with petitioner-appellee and their children."[40]

Upon the other hand, petitioner herself testified that respondent had a job as the latter
"was working at a certain point."[41] This is consistent with the information in Dr. Sta.
Ana-Ponio's Clinical Summary and testimony, which were both included in petitioner's
formal offer of evidence, respecting the parties' relationship history that petitioner and
respondent met at the bank where petitioner was applying for a job and where respondent
was employed as a credit investigator prior to their courtship and their marriage. [42]

It is significant to note moreover that petitioner also submitted as part of her evidence a
notarized summary dated February 18, 2010 which enumerated expenses paid for by the
proceeds of respondent's share in the sale of his parents' home in Magallanes, Makati City
which amounted to around P2.9 million. Although petitioner was insinuating that this
amount was insufficient to cover the family expenses from 1999 to 2008, we note that she
admitted under oath that the items for their family budget, such as their children's
education, the payments for association dues, and for electric bills came from this money.

And no less significant is petitioner's admission that respondent provided the land upon
which the family home was built, thus -
[Respondent's counsel to the witness, petitioner]
Q: Does [respondent] [own] any real property?
A: No.
Q: He does not [own] any real property?
A: No.
Q: Showing to you Transfer Certificate of Title No. 413513 of the Register of Deeds of Rizal
which has been transferred with the Register of Deeds of Parañaque and is now re-
numbered as S-25470, which is in the name of [respondent], Filipino, of legal age, single.
xxxx
[COURT to the witness, petitioner]
Q: Who owned this property?
A: Based on the document, it's Benjamin Singson.
Q: Where is this property located?
A: It is located in United Parañaque.
Q: Where in United Parañaque?
A: No. 2822 Daang Hari.
Q: Are you staying in that property?
A: We are staying in that property.
xxxx
[Respondent's counsel to the witness, petitioner]
Q: How about the house there, in the United Parañaque [property], who owns it?
A: It was donated to the children.
xxxx
[COURT to the witness, petitioner]
Q: Based on the document, who is the registered owner?
A: It says there, [respondent], Your Honor.
Q: Who owns it now?
A: The children because it was donated [to them].[43]
What's more, petitioner and respondent likewise lived together as husband and wife since
their  marriage on July 6, 1974 (and in the company of their four children, too). In fact,
shunting aside the time that respondent was under treatment at the Metro Psych Facility,
petitioner did not allege any instance when respondent failed to live with them.

To the foregoing, we ought to add the fact that petitioner herself admitted, that
respondent likewise brought her to the hospital during all four instances that she gave
birth to their children.[44]

By contrast, petitioner did not proffer any convincing proof that respondent's mere
confinement at the rehabilitation center confirmed the gravity of the latters psychological
incapacity.

Neither does petitioner's bare claim that respondent is a pathological gambler, is

irresponsible, and is unable to keep a job, necessarily translate into unassailable proof
that respondent is psychologically incapacitated to perform the essential marital
obligations. It is settled that "[ps]ychological incapacity under Article 36 of the Family
Code contemplates an incapacity or inability to take cognizance of and to assume basic
marital obligations, and is not merely the difficulty, refusal, or neglect in the performance
of marital obligations or ill will."[45] [I]t is not enough to prove that a spouse failed to
meet his responsibility and duty as a married person; it is essential that he or she must be
shown to be incapable of doing so because of some psychological, not physical,
illness."[46]

Nor can Dr. Sta. Ana-Ponio's testimony in open court and her Clinical Summary be taken
for gospel truth in regard to the charge that respondent is afflicted with utter inability to
appreciate his marital obligations. That much is clear from the following testimony -
[Petitioner's counsel to the witness, Dr. Sta. Ana-Ponio]
Q: Madam witness, do you know the respondent in this case, Benjamin Singson?
A: Yes. [S]ir, [respondent] has been my patient since 2003, during his first admission and
again [in] 2006, [S]ir.
Q: So, he was confined twice in your facility, [M]adam witness?
A: Yes, [S]ir.
Q: Why was he confined, Madam witness?
A: He was initially confined because of problems with gambling and subsequently because
of [behavioral] problem, [S]ir.
xxxx
Q: What was the cause of his second confinement, Madam [W]itness?
A: Initially, he was able to cope after discharged. However, [in] September of 2006, he
knocked on the doors of the maids in the middle of the night. And in one occasion, he
got his car in the garage and drove out bumping the car parked right across the garage
and he [also kept] taking things out from his cabinet. And if the maids would clean
[these], he [would] immediately take them out again. So, he was brought to the facility
in October because of his uncontrolled behavior, [S]ir.
xxxx
Q: So, what [were] your clinical findings on the state of the respondent, Benjamin Singson,
Madam witness?
A: Based on history, mental status examination and observations during his stay, I found
that [respondent] is suffering from pathological gambling. Also, with his history of
typhoid fever when he was younger, it is difficult to attribute the behavioral changes
that he manifested in 2003 and 2006. Aside from pathological gambling, [respondent] is
suffering from a personality disorder, [S]ir.
Q: What are the results or symptoms of this personality disorder with [regard] to
[respondent's dealings] with other people, with his wife and his family, [M]adam
witness?
A: Your Honor, may I read from my report to refresh my memory.
COURT:Go ahead.
A: Because of his maladaptive behavior, [respondent] sees [sic] his problems which
[makes] his personal[,] family[,] and social life[,] and even his vocational pleasure
[suffer]. He was pre-occupied with gambling, thinking of ways to get money with
which to gamble as seen in his stealing and pawning jewelries and appliances. He needs
to gamble with increasing amounts of money in order to achieve his desired effects into
gambling, [S]ir.
COURT:Your findings, Dr. are incorporated in your report?
A: Yes, Your Honor.
xxxx
[Cross examination of Dr. Sta. Ana-Ponio by respondent's counsel]
Q: Who were the ones who made the examination, Madam witness?
A: I made the examination, [S]ir, and also the psychologist did the psychological testing,
[S]ir.
Q: Now, in your opinion as an expert witness, Madam witness, which we would like to
request [from] this Honorable Court, later on, that you present your credentials as
expert witness, you concluded that the respondent is suffering from personality
disorder?
A: Yes, [S]ir.
Q: What does this mean in layman's language, [M]adam witness?
A: Personality disorder is a maladaptive pattern of behavior that has distracted his ability
to perform his functions as a married man to his wife, as a father to his children and as a
person who is supposed to be employed productively, [S]ir.[47]
Furthermore, "[h]abitual drunkenness, gambling and failure to find a job, [while
undoubtedly negative traits, are nowhere nearly the equivalent of 'psychological
incapacity'], in the absence of [incontrovertible] proof that these are manifestations of an
incapacity rooted in some debilitating psychological condition or illness."[48]

We now turn to the second point. Again in view of the contrasting findings of the trial
court and appellate court,[49] we take recourse to the records to assist us in evaluating the
respective postures  taken by the parties.

Here again, well-entrenched is the rule that "there must be proof of a natal or supervening
disabling factor that effectively incapacitated the respondent spouse from complying 
with the basic marital obligations x x x."[50] "A cause has to be shown and linked  with the
manifestations of the psychological incapacity."[51]

Again we agree with the CA that the RTC did not clearly or correctly lay down the bases
or premises for this particular finding relative to respondent's psychological incapacity,
thus:
Second, there is also sufficient evidence to prove that the respondent's inabilities to
perform his marital obligations was a result of not mere intentional refusal on his part
but are caused by psychological abnormality. Such psychological incapacity of the
respondent has been shown as already present at the time of celebration of marriage but
became manifest only after the solemnization. x x x.[52]
As heretofore mentioned, the medical basis or evidence adverted to by the RTC did not
specifically identify the root cause of respondent's alleged psychological incapacity. In
fact, Dr. Sta. Ana-Ponio did not point to a definite or a definitive cause, viz. "with his
history of typhoid fever when he was younger, it is difficult to attribute the behavioral
changes that he manifested in 2003 and 2006."[53] Besides, Dr. Sta. Ana-Ponio admitted
that it was not she herself, but another psychologist who conducted the tests. [54] And this
psychologist was not presented by petitioner. More than that, Dr. Sta. Ana-Ponio's
testimony regarding respondent's alleged admission that he was allegedly betting on jai
alai when he was still in high school is essentially hearsay as no witness having personal
knowledge of that fact was called to the witness stand. And, although Dr. Sta. Ana-Ponio
claimed to have interviewed respondent's sister in connection therewith, the latter did
testify in court. And we are taught that "[t]he stringency by which the Court assesses the
sufficiency of psychological evaluation reports is necessitated by the pronouncement in
our Constitution that marriage is an inviolable institution protected by the State."[55]

Equally bereft of merit is petitioner's claim that respondent's alleged psychological

incapacity could be attributed to the latter's family or childhood, which are circumstances
prior to the parties' marriage; no evidence has been adduced to substantiate this fact. Nor
is there basis for upholding petitioner's contention that respondent's family was
"distraught" and that respondent's conduct was "dysfunctional"; again, there is no
evidence to attest to this. These are very serious charges which must be substantiated by
clear evidence which, unfortunately, petitioner did not at all adduce. Indeed, Dr. Sta.
Ana-Ponio did not make a specific finding that this was the origin of respondent's alleged
inability to appreciate marital obligations.

Needless to say, petitioner cannot lean upon her son Jose's testimony that his father's
psychological incapacity existed before or at the time of marriage. It has been held that
the parties' child is not a very reliable witness in an Article 36 case as "he could not have
been there when the spouses were married and could not have been expected to know
what was happening between his parents until long after his birth."[56]

To support her Article 36 petition, petitioner ought to have adduced convincing,

competent and trustworthy evidence to establish the cause of respondent's alleged
psychological incapacity and that the same antedated their marriage. [57] If anything,
petitioner failed to successfully dispute the CA's finding that she was not aware of any
gambling by respondent before they got married and that respondent was a kind and
caring person when he was courting her.[58]

Against this backdrop, we must uphold the CA's declaration that petitioner failed to prove
that respondent's alleged psychological incapacity is serious or grave and that it is
incurable or permanent.

To be sure, this Court cannot take judicial notice of petitioner's assertion that "personality
disorders are generally incurable" as this is not a matter that courts are mandated to take
judicial notice under Section 1, Rule 129 of the Rules of Court.[59]

"Unless the evidence presented clearly reveals a situation where the parties or one of
them, by reason of a grave and incurable psychological illness existing at the time the
marriage was celebrated, was incapacitated to fulfill the obligations of marital life (and
thus could not then have validly entered into a marriage), then we are compelled to
uphold the indissolubility of the marital tie."[60] This is the situation here.
WHEREFORE, the Petition is DENIED. The August 29, 2013 Decision and January 6,
2014 Resolution of the Court of Appeals in CA-G.R. CV No. 96662 are AFFIRMED.

SO ORDERED.

SECOND DIVISION
[ G.R. No. 239088, April 03, 2019 ]
SPOUSES JOHN T. SY AND LENY N. SY, AND VALENTINO T. SY,
PETITIONERS, VS. MA. LOURDES DE VERA-NAVARRO AND BENJAEMY
HO TAN LANDHOLDINGS, INC., HEREIN REPRESENTED BY GRACE T.
MOLINA, IN HER CAPACITY AS CORPORATE SECRETARY,
RESPONDENTS.

DECISION

CAGUIOA, J:

Before the Court is a Petition for Review on Certiorari[1] (Petition) under Rule 45 of the
Rules of Court filed by petitioners Spouses John T. Sy (petitioner John) and Leny N. Sy
(collectively, petitioners Sps. Sy), and Valentino T. Sy (petitioner Valentino), assailing
the Decision[2] dated November 23, 2017 (assailed Decision) and Resolution [3] dated April
20, 2018 (assailed Resolution) of the Court of Appeals - Cagayan de Oro City (CA)
Special Twenty-Second Division, and Former Special Twenty-Second Division,
respectively, in CA G.R. CV No. 04016-MIN, which reversed the Decision[4] dated
October 8, 2014 issued by the Regional Trial Court of Zamboanga City, Branch 12
(RTC) in Civil Case No. 6333.

The Facts and Antecedent Proceedings

As narrated by the CA in the assailed Decision, the essential facts and antecedent
proceedings of the instant case are as follows:

This case stems from a Complaint filed by petitioners Sps. Sy against respondents Ma.
Lourdes De Vera-Navarro (respondent De Vera-Navarro) and Benjaemy Ho Tan
Landholdings, Inc. (respondent BHTLI) before the RTC for Declaration of Nullity of
Deed of Absolute Sale, Cancellation of Transfer Certificate of Titles, Recovery of
Ownership, and Damages, docketed as Civil Case No. 6333.
In their Complaint, it is alleged that petitioner John was one of the coowners of a parcel
of land and the four-storey building found therein situated at Rizal Street, Barangay Zone
IV, Zamboanga City, covered by Transfer Certificate of Title No. (TCT) T-171,105
(subject property).[5] Petitioners Sps. Sy alleged that the subject property has a market
value of more than P40,000,000.00.

The controversy arose when on May 31, 2006, petitioner John, for himself and in
representation of his co-owners, borrowed P3,720,000.00 from respondent De Vera-
Navarro, secured by a Real Estate Mortgage Contract (Mortgage Contract) over the
subject property. Such Mortgage Contract was annotated on TCT T-171,105 on June 2,
2006.[6] Petitioners Sps. Sy then alleged that immediately after the execution of the
Mortgage Contract, as per usual practice, respondent De Vera-Navarro asked petitioner
John to execute an undated Deed of Absolute Sale with a stated consideration in the
amount of P5,000,000.00, supposedly for the purpose of providing additional security for
the loan.[7] Petitioners Sps. Sy also claimed that petitioner John and respondent De Vera-
Navarro verbally agreed that the mode of payment for the said loan would be respondent
De Vera-Navarro's collection of rental payments from the tenants of the subject property
in the total amount of P70,000.00 per month for five years.

Afterwards, on March 22, 2011, to the surprise of petitioner John, he was informed by
respondent BHTLI through a letter from its representative that the ownership of the
subject property had been transferred to respondent De Vera-Navarro; that a TCT, i.e.,
TCT T-199,288,[8] was issued in favor of respondent De Vera-Navarro; and that
respondent BHTLI was demanding that the petitioners Sps. Sy vacate the subject
property.

Upon learning this, on March 24, 2011, one of the co-owners, petitioner Valentino,
caused the annotation of an adverse claim on TCT T-199,288.[9] Such annotation of
adverse claim was carried over to TCT T-129-2011001530.[10]

Thereafter, on March 30, 2011, a Deed of Absolute Sale was executed by respondent De
Vera-Navarro in favor of respondent BHTLI. The records reveal that on July 21, 2011, a
new title, i.e., TCT T-129-2011001530,[11] was issued in favor of respondent BHTLI.

In the main, petitioners Sps. Sy claimed that they are the rightful owners of the subject
property since the undated Deed of Absolute Sale executed purportedly between
petitioner John and respondent De Vera-Navarro is allegedly null and void, and that,
despite the execution of the Deed of Absolute Sale dated March 30, 2011 by respondent
De Vera-Navarro in favor of respondent BHTLI, the latter has no right to own the
property as it was allegedly not a buyer in good faith.

On the other hand, respondent De Vera-Navarro, while admitting the existence of the
Mortgage Contract to secure the P3,720,000.00 loan agreement with petitioners Sps. Sy,
alleged that the amount remained unpaid and that John even obtained additional loans
reaching more or less P10,500,000.00. Further, respondent De Vera-Navarro claimed that
on February 6, 2007, petitioner John sold to her the subject property by virtue of the
undated Deed of Absolute Sale. It must be noted that this is the same undated Deed of
Absolute Sale identified by petitioners Sps. Sy, the difference being that respondent De
Vera-Navarro claimed that the said Deed was executed only on February 6, 2007 and not
immediately after the execution of the Mortgage Contract on May 31, 2006, as alleged by
petitioners Sps. Sy. Respondent De Vera-Navarro also alleged that the undated Deed of
Absolute Sale is, for all intents and purposes, a legitimate contract of sale, while
petitioners Sps. Sy alleged that there was no real contract of sale between the parties and
that the said Deed was merely intended to provide added security to the Mortage
Contract.

For its part, respondent BHTLI alleged that it is a buyer in good faith since the sale
between it and respondent De Vera-Navarro over the subject property was supposedly
consummated on March 14, 2011, or 10 days prior to the annotation of the adverse claim
on March 24, 2011. Since it was supposedly not aware of any infirmity involving the
subject property, respondent BHTLI alleged that it should be treated as a buyer in good
faith.

The Ruling of the RTC

On October 8, 2014, the RTC issued a Decision[12] declaring the purported Deed of

Absolute Sale between petitioner John and respondent De Vera-Navarro an equitable
mortgage and thus null and void. The dispositive portion of the said Decision reads as
follows:
WHEREFORE, all the foregoing premises considered, judgment is hereby rendered in
favor of the plaintiffs as against the defendants, in the following manner:

1. Declaring the Deed of Absolute Sale dated February 6, 2007

between the plaintiff John T. Sy and defendant Ma. Lourdes De
Vera-Navarro as an equitable mortgage and not a document of sale;

2. Directing the plaintiffs to pay defendant Navarro the sum of

P5,000,000.00 representing their unpaid loan to said defendant
within 30 days from the date the herein judgment becomes final and
executory with 6% interest per annum compounded until full
payment is made to be reckoned from February 6, 2007, otherwise,
the ownership of the property covered under TCT No. T-199,288
shall be vested finally on the defendant Navarro for all intents and
purposes;
 3. Directing the Register of Deeds for the City of Zamboanga, upon
full payment of the sum of P5,000,000.00 plus interest by plaintiffs
to defendant Navarro as above directed, to cancel TCT No. T-
199,288 in the name of defendant Ma. Lourdes De Vera-Navarro
and to restore TCT No. T-171-105 in the names of the plaintiffs;

4. Declaring the Deed of Absolute Sale dated March 30, 2011 executed
by defendant Navarro in favor of defendant Benjaemy Ho Tan
Landholdings, Inc., as null and void and directing the Register of
Deeds of the City of Zamboanga to cause the immediate cancellation
of the resulting title thereof in the name of defendant Benjaemy
under TCT No. T-129-2011001530;

5. Ordering defendant Ma. Lourdes De Vera-Navarro to return to

defendant Benjaemy the purchase price of P13,000,000.00 plus the
sum of P1,800,000.00 in reimbursements for the expenses of the
transfer of the title in the name of said defendant;

6. Ordering defendant Navarro to pay plaintiffs the sum of P50,000.00

representing moral damages; P50,000.00 in exemplary damages;
P20,000.00 in attorney's fees plus P2,000.00 per appearance of
plaintiffs counsels in court; and, P30,000.00 in litigation expenses;

7. Ordering defendants to jointly and severally pay the costs of this

suit.

SO ORDERED.[13]
In the main, the RTC held that there was really no intention on the part of the parties to
enter into a contract of sale over the subject property and that the undated Deed of
Absolute Sale was merely an additional security for the loan obtained by petitioner John
from respondent De Vera-Navarro.[14] Further, the RTC pointed out that, instead of a valid
contract of sale, what transpired between the parties was an equitable mortgage due to
the existence of certain circumstances which jurisprudence identifies as badges of an
equitable mortgage, i.e., (1) the Deed of Absolute Sale is not dated; (2) the consideration
of P5,000,000.00 is grossly inadequate; and (3) petitioners Sps. Sy continue to be in
actual possession of the subject property despite the supposed sale.[15]

Furthermore, the RTC held that respondent BHTLI cannot be considered a buyer in good
faith because there was a notice of adverse claim and because petitioners Sps. Sy were
still in the possession of the subject property which should have alerted respondent
BHTLI to inquire and investigate regarding the possible defects in the title of the seller of
the subject property.[16]
Respondents De Vera-Navarro and BHTLI filed their respective Motions for
Reconsideration on October 22, 2014 and October 26, 2014, respectively. On October 28,
2014, petitioners Sps. Sy filed their Comment/Opposition to respondents De Vera-
Navarro and BHTLI's Motions for Reconsideration with Partial Motion for
Reconsideration.[17] In an Order[18] dated November 24, 2014, the RTC denied the
Motions for Reconsideration of respondents De Vera-Navarro and BHTLI, and the Partial
Motion for Reconsideration of the petitioners Sps. Sy.

On December 11, 2014, petitioners Sps. Sy filed an appeal with the CA. Respondent
BHTLI likewise filed an appeal with the CA. In its Resolution[19] dated May 19, 2016,
respondent De Vera-Navarro's appeal was deemed abandoned and dismissed for failure to
file an appellant's brief within the prescribed period.

The Ruling of the CA

In the assailed Decision[20] dated November 23, 2017, the CA reversed the rulings of the
RTC and denied the appeal of petitioners Sps. Sy, while granting the appeal of
respondent BHTLI. The dispositive portion of the said Decision reads:
WHEREFORE, premises considered, the appeal of the Spouses John and Leny Sy
is DENIED while the appeal of Benjaemy Ho Tan Landholdings is GRANTED. The
Decision dated October 8, 2014 of the Regional Trial Court, Branch 12, Zamboanga City
in Civil Case No. 6333 is SET ASIDE. Perforce, another Judgment is hereby
rendered DISMISSING the Complaint of Spouses John T. Sy and Leny N. Sy against
Ma. Lourdes De Vera-Navarro and Benjaemy Ho Tan Landholdings, Inc. in Civil Case
No. 6333 for lack of merit. No pronouncement as to costs.

SO ORDERED.[21]
Contrary to the findings of the RTC, the CA held that the undated Deed of Absolute Sale
between petitioner John and respondent De Vera-Navarro was indeed a contract of sale
because the records are supposedly bereft of any evidence indicative that there was an
equitable mortgage.[22] Further, the CA posited that the transaction involved in the instant
case is in fact a dacion en pago.[23] Lastly, the CA also held that respondent BHTLI was a
buyer in good faith as there was supposedly no showing that respondent BHTLI was
aware of any irregularity as to the title covering the subject property.[24]

On December 21, 2017, the petitioners Sps. Sy filed their Motion for
Reconsideration[25] dated December 18, 2017, which was subsequently denied by the CA
in the assailed Resolution[26] dated April 20, 2018.

Hence, the instant appeal via Petition for Review on Certiorari under Rule 45 of the
Rules of Court.[27]

On June 13, 2018, respondent BHTLI filed its Comment/Opposition[28] to the instant
Petition, to which petitioners Sps. Sy filed their Reply to Respondents'
Comments/Opposition[29] dated October 8, 2018.

Issue

Stripped to its core, the critical question to be resolved by the Court is whether the CA
erred when it held in the assailed Decision dated November 23, 2017 and assailed
Resolution dated April 20, 2018 that the transaction between petitioner John and
respondent De Vera-Navarro was a valid contract of sale and not an equitable mortgage,
and that respondent BHTLI was a buyer in good faith, reversing the previous ruling of the
RTC.

The Court's Ruling

The instant Petition is meritorious.

The purported contract of sale between petitioner John and respondent De Vera-Navarro
is an equitable mortgage and not a legitimate contract of sale.

At the heart of the assailed CA Decision is the view that petitioners Sps. Sy failed to
provide sufficient evidence that an equitable mortgage exists in the instant case.

The applicable law, jurisprudence, and the evidence on record clearly belie the CA's
conclusion.

An equitable mortgage is defined as one which although lacking in some formality, or

form or words, or other requisites demanded by a statute, nevertheless reveals the
intention of the parties to charge real property as security for a debt, and contains nothing
impossible or contrary to law. Its essential requisites are: (1) that the parties entered
into a contract denominated as a contract of sale; and (2) that their intention was to
secure an existing debt by way of a mortgage.[30]

Article 1602 of the Civil Code states that a contract shall be presumed to be an equitable
mortgage, in any of the following cases:
(1) When the price of a sale with right to repurchase is unusually inadequate;
(2) When the vendor remains in possession as lessee or otherwise;
(3) When upon or after the expiration of the right to repurchase another instrument extending
the period of redemption or granting a new period is executed;
(4) When the purchaser retains for himself a part of the purchase price;
(5) When the vendor binds himself to pay the taxes on the thing sold;
(6) In any other case where it may be fairly inferred that the real intention of the parties is that
the transaction shall secure the payment of a debt or the performance of any other
obligation.
Article 1604 of the Civil Code, in turn, provides that the abovementioned badges of an
equitable mortgage apply to a contract purporting to be an absolute sale, such as in the
instant case.

At this juncture, it must be stressed that the RTC, after an exhaustive trial and
appreciation of the evidence presented by the parties, concluded that the supposed
contract of sale entered between petitioner John and respondent De Vera-Navarro is in
fact an equitable mortgage.

The factual findings of the trial court, its calibration of the testimonies of the witnesses,
and its assessment of their probative weight are given high respect, if not conclusive
effect, unless the trial court ignored, misconstrued, misunderstood or misinterpreted
cogent facts and circumstances of substance, which, if considered, will alter the outcome
of the case. The trial court is in the best position to ascertain and measure the sincerity
and spontaneity of witnesses through its actual observation of the witnesses' manner of
testifying, demeanor and behavior while in the witness box.

Upon examination of the records of the instant case, the Court finds that there was no
reason for the CA to reverse the RTC's correct finding that an equitable mortgage exists
in the instant case.

Jurisprudence consistently shows that the presence of even one of the circumstances
enumerated in Article 1602 suffices to convert a purported contract of sale into an
equitable mortgage.[31] The existence of any of the circumstances defined in Article 1602
of the New Civil Code, not the concurrence nor an overwhelming number of such
circumstances, is sufficient for a contract of sale to be presumed an equitable mortgage.
[32]

In fact, the Court has previously ruled that when in doubt, courts are generally inclined to
construe a transaction purporting to be a sale as an equitable mortgage, which involves a
lesser transmission of rights and interests over the property in controversy.[33]

Applying the foregoing to the instant case, the Court finds that the presence of at least
four badges of an equitable mortgage creates a very strong presumption that the
purported contract of sale entered between petitioner John and respondent De Vera-
Navarro is an equitable mortgage.

First, it is not disputed by any party that the supposed vendor of the subject property,
petitioner John, remains to be in possession of the subject property despite purportedly
selling the latter to respondent De Vera-Navarro. It is uncanny for a supposed buyer to
desist from taking possession over property which he/she has already purchased.

Second, the purchase price of the purported sale indicated in the undated Deed of
Absolute Sale is inadequate.

According to the Rules of Court, Rule 129, Section 2, a court may take judicial notice of
matters which are of public knowledge. In fact, the Court has previously held that trial
courts can take judicial notice of the general increase in rentals of real estate especially of
the business establishments.[34]

In the instant case, the RTC took judicial notice of the public knowledge that similar
establishments located at the commercial center of Zamboanga City have a value of
around P20,000,000.00. Thus, the P5,000,000.00 purchase price supposedly agreed upon
by the parties is grossly inadequate.[35]

The inadequacy of the purchase price is even confirmed by the acts of respondent De
Vera-Navarro herself. As noted by the RTC, respondent De Vera-Navarro was able to
mortgage the subject property with Landbank of the Philippines for an amount of
P13,000,000.00. Respondent De Vera-Navarro also sold the subject property to
respondent BHTLI for the same amount of P13,000,000.00.[36]

Hence, the Court cannot accept the CA's finding that the inadequacy of the purchase price
is not supported by any evidence on record.

Third, the evidence on record shows that respondent De Vera-Navarro retained for
herself the supposed purchase price. Aside from the testimony of petitioner John that no
consideration was paid at all for the supposed contract of sale, the RTC also noted that no
proof was presented by respondent De Vera-Navarro that she actually parted with the
sum of P5,000,000.00 in favor of petitioner John pursuant to the undated Deed of
Absolute Sale.

Fourth, from the evidence presented by petitioners Sps. Sy, it is established that the real
intention of the parties is for the purported contract of sale to merely secure the payment
of their debt owing to respondent De Vera Navarro.

According to testimonies of petitioners Sps. Sy given under oath in open court, during the
execution of the Mortgage Contract in favor of respondent De Vera-Navarro on May 31,
2006, petitioner John, right then and there, was immediately asked to sign an undated
Deed of Absolute Sale in favor of respondent De Vera-Navarro as it was agreed upon that
such Deed was to be used as mere additional security to the Mortgage Contract. [37]

The CA's hesitance in accepting the foregoing testimonies just because they are parol
evidence and that the undated Deed of Absolute Sale is unequivocal on paper in stating
that a sale was intended by the parties is misplaced. As the Court previously held,
x x x a document which appears on its face to be a sale-absolute x x x may be proven by
the vendor x x x to be one of a loan with mortgage. In this case, parol evidence becomes
competent and admissible to prove that the instrument was in truth and in fact given
merely as a security for the payment of a loan. And upon proof of the truth of such
allegations, the court will enforce the agreement or understanding in consonance with the
true intent of the parties at the time of the execution of the contract. Sales with a right to
repurchase are not favored.[38]
It must also be stressed that the nomenclature given by the parties to the contract is not
conclusive of the nature and legal effects thereof. Even if a document appears on its face
to be a sale, the owner of the property may prove that the contract is really a loan with
mortgage, and that the document does not express the true intent of the parties. [39]

Hence, bearing in mind the jurisprudential rule that the courts are generally inclined to
construe a transaction purporting to be a sale as an equitable mortgage, it was incumbent
upon respondent De Vera-Navarro to rebut the petitioners Sps. Sy's testimonies and
substantiate the claim that there was indeed a legitimate contract of sale between the
parties.

In this regard, it must be emphasized that all the documentary evidence of respondent De
Vera-Navarro supporting her claims were not admitted into evidence; the Formal Offer of
Evidence of De Vera-Navarro was ordered expunged by the RTC in its Order[40] dated
April 11, 2014. According to the Rules of Court[41] and jurisprudence,[42] evidence not
formally offered has no probative value and must be excluded by the court. Thus, the
expunction of the evidence presented by respondent De Vera-Navarro completely negates
the CA's finding that respondent De Vera-Navarro was able to present evidence that the
parties really intended to enter into a contract of sale covering the subject property.

In any case, even if the documentary evidence presented by respondent De Vera-Navarro

were considered, her contention of a valid contract of sale still fails to convince. The
evidence presented by respondent De Vera-Navarro center mainly on the fact that the
UNDATED Deed of Absolute Sale was properly notarized. However, as held previously
by the Court, the notarization of a document does not guarantee its validity because it is
not the function of the notary public to validate an instrument that was never intended by
the parties to have any binding legal effect on them. Neither is the notarization of a
document conclusive of the nature of the transaction conferred by the said document, nor
is it conclusive of the true agreement of the parties thereto.[43]

Therefore, to reiterate, established jurisprudence provides that the presence of even one of
the circumstances enumerated in Article 1602 suffices to convert a purported contract of
sale into an equitable mortgage,[44] and that courts are inclined to construe a transaction
purporting to be a sale as an equitable mortgage, as it involves a lesser transmission of
rights and interests over the subject property.[45] Bearing that in mind, the concurrence of
four badges of equitable mortgage, which in fact is a majority of the six circumstances
identified under Article 1602 of the Civil Code, creates the very strong presumption of
the existence of an equitable mortgage in the instant case.
With respondent De Vera-Navarro miserably failing to controvert this presumption,
especially considering the expunction of her evidence from the records of the case, the
Court indubitably finds that the purported contract of sale entered into by petitioner John
and respondent De Vera-Navarro is in truth and in fact an equitable mortgage. Hence,
with the undated Deed of Absolute Sale being null and void, as it is in fact an equitable
mortgage, the prevailing agreement governing petitioner John and respondent De Vera-
Navarro is the loan agreement secured by the Mortgage Contract entered into by the
parties.

Respondent BHTLI is NOT a buyer in good faith.

Consequently, since the purported contract of sale between petitioner John and
respondent De Vera-Navarro was in fact an equitable mortgage, the sale of the subject
property to respondent BHTLI by respondent De Vera Navarro was correctly adjudged
by the RTC to be null and void, considering that the latter had absolutely no right and
capacity to sell the subject property.

Respondent BHTLI contends that since it is an innocent purchaser for value, supposedly
having no knowledge on any infirmity on the sale at the time of its transaction with
respondent De Vera-Navarro, the sale should still be upheld with respect to respondent
BHTLI.

Respondent BHTLI's contention lacks merit.

Jurisprudence holds that he who alleges that he is a purchaser of registered land is

burdened to prove such statement. Such burden is not discharged by simply invoking the
ordinary presumption of good faith.[46] In the instant case, the Court finds that respondent
BHTLI failed to discharge such burden. Instead of showing good faith on the part of
respondent BHTLI, the incontrovertible facts establish respondent BHTLI's status as a
buyer in bad faith.

The Court has held that actual lack of knowledge of the flaw in title by one's transferor is
not enough to constitute a buyer in good faith where there are circumstances that should
put a party on guard, such as the presence of occupants in the subject property. [47] Again,
it is not disputed that petitioners Sps. Sy have been in continuing possession of the
subject property. Yet, this fact did not prompt respondent BHTLI to investigate further
as to the contract of sale it entered with respondent De Vera-Navarro.

Further, respondent BHTLI cannot seriously feign ignorance of any infirmity,

considering that prior to its entering into the Deed of Absolute Sale dated March 30, 2011
with respondent De Vera-Navarro, petitioner Valentino had already caused on March 24,
2011 the annotation of an adverse claim on TCT T-199,288.
Therefore, contrary to the CA's findings m its assailed Decision, respondent BHTLI is not
a buyer in good faith.

All in all, with the Court's finding that the purported contract of sale between petitioner
John and respondent De Vera-Navarro is an equitable mortgage and not a legitimate
contract of sale, and that respondent BHTLI is not a buyer in good faith, the Court finds
merit in the instant Petition.

WHEREFORE, the appeal is hereby GRANTED. The Decision dated November 23,

2017 and Resolution dated April 20, 2018 of the Court of Appeals in CA-G.R. CV No.
04016-MIN are REVERSED. Accordingly, the Decision dated October 8, 2014 issued
by the Regional Trial Court of Zamboanga City, Branch 12 in Civil Case No. 6333
is REINSTATED WITH MODIFICATIONS, to be read as follows:
WHEREFORE, all the foregoing premises considered, judgment is hereby rendered in
favor of the plaintiffs as against the defendants, in the following manner:

1. Declaring the Deed of Absolute Sale dated February 6, 2007 between

plaintiff John T. Sy and defendant Ma. Lourdes De Vera-Navarro as an
equitable mortgage and not a document of sale;

2. Declaring the Deed of Absolute Sale dated March 30, 2011 executed by
defendant Ma. Lourdes De Vera Navarro in favor of defendant Benjaemy
Ho Tan Landholdings, Inc. as null and void and directing the Register of
Deeds of the City of Zamboanga to cause the immediate cancellation of the
resulting title thereof in the name of Benjaemy Ho Tan Landholdings, Inc.
under TCT No. T-129-2011001530;

3. Directing the Register of Deeds for the City of Zamboanga to cancel TCT
No. T-199,288 in the name of defendant Ma. Lourdes De Vera-Navarro and
to restore TCT No. T-171-105 in the names of the plaintiffs with all its
original annotations prior to the annotation of the sale to defendant Ma.
Lourdes De Vera-Navarro and the cancellation of TCT No. T- 171-105;

4. Ordering defendant Ma. Lourdes De Vera-Navarro to return to defendant

Benjaemy Ho Tan Landholdings,  Inc. the purchase price of
P13,000,000.00 plus the sum of P1,800,000.00 in reimbursements for the
expenses of the transfer of the title in the name of said defendant;

5. Ordering defendant Ma. Lourdes De Vera-Navarro to pay plaintiffs the sum

of P50,000.00 representing moral damages; P50,000.00 in exemplary
damages; P20,000.00 in attorney's fees plus P2,000.00 per appearance of
plaintiffs counsel in court; and P30,000.00 in litigation expenses;
 6. Ordering defendants to jointly and severally pay the costs of this suit.

SO ORDERED.

EN BANC
[ G.R. No. 230642, September 10, 2019 ]
OSCAR B. PIMENTEL, ERROL B. COMAFAY, JR., RENE B. GOROSPE,
EDWIN R. SANDOVAL, VICTORIA B. LOANZON, ELGIN MICHAEL C.
PEREZ, ARNOLD E. CACHO, AL CONRAD B. ESPALDON, ED VINCENT S.
ALBANO, LEIGHTON R. SIAZON, ARIANNE C. ARTUGUE, CLARABEL
ANNE R. LACSINA, KRISTINE JANE R. LIU, ALYANNA MARL C.
BUENVIAJE, IANA PATRICIA DULA T. NICOLAS, IRENE A. TOLENTINO
AND AUREA I. GRUYAL, PETITIONERS, VS. LEGAL EDUCATION
BOARD, AS REPRESENTED BY ITS CHAIRPERSON, HON. EMERSON B.
AQUENDE, AND LEB MEMBER HON. ZENAIDA N. ELEPAÑO,
RESPONDENTS;

ATTYS. ANTHONY D. BENGZON, FERDINAND M. NEGRE, MICHAEL Z.

UNTALAN; JONATHAN Q. PEREZ, SAMANTHA WESLEY K. ROSALES,
ERIKA M. ALFONSO, KRYS VALEN O. MARTINEZ, RYAN CEAZAR P.
ROMANO, AND KENNETH C. VARONA, RESPONDENTS-IN-
INTERVENTION;

APRIL D. CABALLERO, JEREY C. CASTARDO, MC WELLROE P.

BRINGAS, RHUFFY D. FEDERE, CONRAD THEODORE A. MATUTINO
AND NUMEROUS OTHERS SIMILARLY SITUATED, ST. THOMAS MORE
SCHOOL OF LAW AND BUSINESS, INC., REPRESENTED BY ITS
PRESIDENT RODOLFO C. RAPISTA, FOR HIMSELF AND AS FOUNDER,
DEAN AND PROFESSOR, OF THE COLLEGE OF LAW, JUDY MARIE
RAPISTA-TAN, LYNNART WALFORD A. TAN, IAN M. ENTERINA, NEIL
JOHN VILLARICO AS LAW PROFESSORS AND AS CONCERNED
CITIZENS, PETITIONERS-INTERVENORS;

[G.R. No. 242954]

FRANCIS JOSE LEAN L. ABAYATA,GRETCHEN M. VASQUEZ, SHEENAH

S. ILUSTRISMO, RALPH LOUIE SALAÑO, AIREEN MONICA B. GUZMAN,
DELFINO ODIAS, DARYL DELA CRUZ, CLAIRE SUICO, AIVIE S.
PESCADERO, NIÑA CHRISTINE DELA PAZ, SHEMARK K. QUENIAHAN,
AL JAY T. MEJOS, ROCELLYN L. DAÑO,* MICHAEL ADOLFO, RONALD
A. ATIG, LYNNETTE C. LUMAYAG, MARY CHRIS LAGERA, TIMOTHY
B. FRANCISCO, SHEILA MARIE C. DANDAN, MADELINE C. DELA PEÑA,
DARLIN R. VILLAMOR, LORENZANA L. LLORICO, AND JAN IVAN M.
SANTAMARIA, PETITIONERS, VS. HON. SALVADOR MEDIALDEA,
EXECUTIVE SECRETARY, AND LEGAL EDUCATION BOARD, HEREIN
REPRESENTED BY ITS CHAIRPERSON, EMERSON B. AQUENDE,
RESPONDENTS.

DECISION

REYES, J. JR., J.:

On the principal grounds of encroachment upon the rule-making power of the Court
concerning the practice of law, violation of institutional academic freedom and violation
of a law school aspirant's right to education, these consolidated Petitions for Prohibition
(G.R. No. 230642) and Certiorari and Prohibition (G.R. No. 242954) under Rule 65 of
the Rules of Court assail as unconstitutional Republic Act (R.A.) No. 7662, [1] or the Legal
Education Reform Act of 1993, which created the Legal Education Board (LEB). On the
same principal grounds, these petitions also particularly seek to declare as
unconstitutional the LEB issuances establishing and implementing the nationwide law
school aptitude test known as the Philippine Law School Admission Test or the
PhiLSAT.

The Antecedents

Prompted by clamors for the improvement of the system of legal education on account of
the poor performance of law students and law schools in the bar examinations, [2] the
Congress, on December 23, 1993, passed into law R.A. No. 7662 with the following
policy statement:
SEC. 2. Declaration of Policies. - It is hereby declared the policy of the State to uplift the
standards of legal education in order to prepare law students for advocacy, counselling,
problem-solving, and decision-making, to infuse in them the ethics of the legal
profession; to impress on them the importance, nobility and dignity of the legal
profession as an equal and indispensable partner of the Bench in the administration of
justice and to develop social competence.

Towards this end, the State shall undertake appropriate reforms in the legal education
system, require proper selection of law students, maintain quality among law schools, and
require legal apprenticeship and continuing legal education.
R.A. No. 7662 identifies the general and specific objectives of legal education in this
manner:
SEC. 3. General and Specific Objective of Legal Education. -

(a) Legal education in the Philippines is geared to attain the following objectives:

(1) to prepare students for the practice of law;

(2) to increase awareness among members of the legal profession of the needs of the poor,
deprived and oppressed sectors of society;
(3) to train persons for leadership;
(4) to contribute towards the promotion and advancement of justice and the improvement of its
administration, the legal system and legal institutions in the light of the historical and
contemporary development of law in the Philippines and in other countries.

(b) Legal education shall aim to accomplish the following specific objectives:

(1) to impart among law students a broad knowledge of law and its various fields and of legal
institutions;
(2) to enhance their legal research abilities to enable them to analyze, articulate and apply the
law effectively, as well as to allow them to have a holistic approach to legal problems and
Issues;
(3) to prepare law students for advocacy, [counseling], problem-solving and decision-making,
and to develop their ability to deal with recognized legal problems of the present and the
future;
(4) to develop competence in any field of law as is necessary for gainful employment or
sufficient as a foundation for future training beyond the basic professional degree, and to
develop in them the desire and capacity for continuing study and self improvement;
(5) to inculcate in them the ethics and responsibilities of the legal profession; and
(6) to produce lawyers who conscientiously pursue the lofty goals of their profession and to
fully adhere to its ethical norms.
For these purposes, R.A. No. 7662 created the LEB, an executive agency which was
made separate from the Department of Education, Culture and Sports (DECS), but
attached thereto solely for budgetary purposes and administrative support.[3] The
Chairman and regular members of the LEB are to be appointed by the President for a
term of five years, without reappointment, from a list of at least three nominees prepared,
with prior authorization from the Court, by the Judicial and Bar Council (JBC).[4]

Section 7 of R.A. No. 7662 enumerates the powers and functions of the LEB as follows:
SEC. 7. Powers and Functions. - For the purpose of achieving the objectives of this Act,
the Board shall have the following powers and functions:

(a) to administer the legal education system in the country in a manner consistent with the
provisions of this Act;

(b) to supervise the law schools in the country, consistent with its powers and functions
as herein enumerated;
(c) to set the standards of accreditation for law schools taking into account, among others,
the size of enrollment, the qualifications of the members of the faculty, the library and
other facilities, without encroaching upon the academic freedom of institutions of higher
learning;

(d) to accredit law schools that meet the standards of accreditation;

(e) to prescribe minimum standards for law admission and minimum qualifications and
compensation to faculty members;

(f) to prescribe the basic curricula for the course of study aligned to the requirements for
admission to the Bar, law practice and social consciousness, and such other courses of
study as may be prescribed by the law schools and colleges under the different levels of
accreditation status;

(g) to establish a law practice internship as a requirement for taking the Bar which a law
student shall undergo with any duly accredited private or public law office or firm or
legal assistance group anytime during the law course for a specific period that the Board
may decide, but not to exceed a total of twelve (12) months. For this purpose, the Board
shall prescribe the necessary guidelines for such accreditation and the specifications of
such internship which shall include the actual work of a new member of the Bar[;]

(h) to adopt a system of continuing legal education. For this purpose, the Board may
provide for the mandatory attendance of practicing lawyers in such courses and for such
duration as the Board may deem necessary; and

(i) to perform such other functions and prescribe such rules and regulations necessary for
the attainment of the policies and objectives of this Act.
On the matter of accreditation of law schools, R.A. No. 7662 further elaborates:
SEC. 8. Accreditation of Law Schools. - Educational institutions may not operate a law
school unless accredited by the Board. Accreditation of law schools may be granted only
to educational institutions recognized by the Government.

SEC. 9. Withdrawal or Downgrading of Accreditation. - The [LEB] may withdraw or

downgrade the accreditation status of a law school if it fails to maintain the standards set
for its accreditation status.

SEC. 10. Effectivity of Withdrawal or Downgrading of Accreditation. - The withdrawal

or downgrading of accreditation status shall be effective after the lapse of the semester or
trimester following the receipt by the school of the notice of withdrawal or downgrading
unless, in the meantime, the school meets and/or upgrades the standards or corrects the
deficiencies upon which the withdrawal or downgrading of the accreditation status is
based.
Bar Matter No. 979-B
Re: Legal Education

In July 2001, the Court's Committee on Legal Education and Bar Matters (CLEBM),
through its Chairperson, Justice Jose C. Vitug, noted several objectionable provisions of
R.A. No. 7662 which "go beyond the ambit of education of aspiring lawyers and into the
sphere of education of persons duly licensed to practice the law profession." [5]

In particular, the CLEBM observed:

x x x [U]nder the declaration of policies in Section 2 of [R.A. No. 7662], the State "shall
x x x require apprenticeship and continuing legal education." The concept of continuing
legal education encompasses education not only of law students but also of members of
the legal profession. [This] implies that the [LEB] shall have jurisdiction over the
education of persons who have finished the law course and are already licensed to
practice law[, in violation of the Supreme Court's power over the Integrated Bar of the
Philippines].

x x x Section 3 provides as one of the objectives of legal education increasing "awareness

among members of the legal profession of the needs of the poor, deprived and oppressed
sectors of the society." Such objective should not find a place in the law that primarily
aims to upgrade the standard of schools of ·law as they perform the task of educating
aspiring lawyers. Section 5, paragraph 5 of Article VIII of the Constitution also provides
that the Supreme Court shall have the power to promulgate rules on "legal assistance to
the underprivileged" and hence, implementation of [R.A. No. 7662] might give rise to
infringement of a constitutionally mandated power.

x x x [Section 7(e) giving the LEB the power to prescribe minimum standards for law
admission and Section 7(h) giving the LEB the power to adopt a system of continuing
legal education and for this purpose, the LEB may provide for the mandatory attendance
of practicing lawyers in such courses and for such duration as the LEB may deem
necessary] encroach upon the Supreme Court's powers under Section 5, paragraph 5 of
Article VIII of the Constitution. Aside from its power over the Integrated Bar of the
Philippines, the Supreme Court is constitutionally mandated to promulgate rules
concerning admission to the practice of law.[6]
While the CLEBM saw the need for the LEB to oversee the system of legal education, it
cautioned that the law's objectionable provisions, for reasons above-cited, must be
removed.[7]

Relative to the foregoing observations, the CLEBM proposed the following amendments
to R.A. No. 7662:
SEC. 2. Declaration of Policies. - It is hereby declared the policy of the State to uplift the
standards of legal education in order to prepare law students for advocacy, counseling,
problem-solving, and decision-making; to infuse in them the ethics of the legal
profession; to impress upon them the importance, nobility and dignity of the legal
profession as an equal and indispensable partner of the Bench in the administration of
justice; and, to develop socially-committed lawyers with integrity and competence.

Towards this end, the State shall undertake appropriate reforms in the legal education
system, require proper selection of law students, provide for legal apprenticeship, and
maintain quality among law schools.

xxxx

SEC. 3. General and Specific Objectives of Legal Education. x x x

xxxx

2.) to increase awareness among law students of the needs of the poor, deprived and
oppressed sectors of society;

xxxx

SEC. 7. Power and functions. - x x x

(a) to regulate the legal education system in accordance with its powers and functions
herein enumerated;

(b) to establish standards of accreditation for law schools, consistent with academic
freedom and pursuant to the declaration of policy set forth in Section 2 hereof;

(c) to accredit law schools that meet the standards of accreditation;

(d) to prescribe minimum standards for admission to law schools including a system of
law aptitude examination;

(e) to provide for minimum qualifications for faculty members of law schools;

(f) to prescribe guidelines for law practice internship which the law schools may establish
as part of the curriculum; and

(g) to perform such other administrative functions as may be necessary for the attainment
of the policies and objectives of this Act.[8] (Underscoring supplied)

xxxx
In a Resolution[9] dated September 4, 2001, the Court approved the CLEBM's explanatory
note and draft amendments to R.A. No. 7662. The Senate and the House of
Representatives were formally furnished with a copy of said Resolution. This,
notwithstanding, R.A. No. 7662 remained unaltered.

LEB Issuances

In 2003, the Court issued a resolution authorizing the JBC to commence the nomination
process for the members of the LEB. In 2009, the LEB was constituted with the
appointment of Retired Court of Appeals Justice Hilarion L. Aquino as the first
Chairperson and followed by the appointment of LEB members, namely, Dean Eulogia
M. Cueva, Justice Eloy R. Bello, Jr., Dean Venicio S. Flores and Commission on Higher
Education (CHED) Director Felizardo Y. Francisco. Despite the passage of the enabling
law in 1993, the LEB became fully operational only in June 2010.

Acting pursuant to its authority to prescribe the minimum standards for law schools, the
LEB issued Memorandum Order No. 1, Series of 2011 (LEBMO No. 1-2011) providing
for the Policies and Standards of Legal Education and Manual of Regulation for Law
Schools.

Since then, the LEB had issued several orders, circulars, resolutions, and other issuances
which are made available through their website:

A. Orders

Number Title/Subject
LEBMO No. Additional Rules in the Operation of the Law Program
2
LEBMO No. Policies, Standards and, Guidelines for the Accreditation of Law Schools to Offer
3-2016 and Operate Refresher Courses
LEBMO No. Supplemental to [LEBMO] No. 3, Series of 2016
4-2016
LEBMO No. Guidelines for the [Prerequisite] Subjects in the Basic Law Courses
5-2016
LEBMO No. Reportorial Requirements for Law Schools
6-2016
LEBMO No. Policies and Regulations for the Administration of a Nationwide Uniform Law
7-2016 School Admission Test for Applicants to the Basic Law Courses in All Law
Schools in the Country
LEBMO No. Policies, Guidelines and Procedures Governing Increases in Tuition and Other
8-2016 School Fees, and, Introduction of New Fees by Higher, Education Institutions for
the Law Program
LEBMO No. Policies and Guidelines on the Conferment of Honorary Doctor of Laws Degrees
9-2017
LEBMO No. Guidelines on the Adoption of Academic/School Calendar
10-2017
LEBMO No. Additional Transition Provisions to [LEBMO] No. 7, Series of 2016, on PhiLSAT
11-2017
LEBMO No. LEB Service/Transaction Fees
12-2018
LEBMO No. Guidelines
13-2018   in the Conduct of Summer Classes
LEBMO No. Policy and Regulations in Offering Elective Subjects
14-2018
LEBMO No. Validation of the Licenses of, and the Law Curriculum/Curricula for the Basic
15-2018 Law Courses in use by Law Schools and Graduate Schools of Law
LEBMO No. Policies, Standards and Guidelines for the Academic Law Libraries of Law
16-2018 Schools
LEBMO No. Supplemental Regulations on the Minimum Academic Requirement of Master of
17-2018 Laws Degree for Deans and Law Professors/Lecturers/Instructors in Law Schools
LEBMO No. Guidelines on Cancellation or Suspension of Classes in All Law Schools
18-2018
LEBMO No. Migration of the Basic Law Course to Juris Doctor
19-2018
LEBMO No. Discretionary Admission in the AY 2019-2020 of Examinees Who Rated Below
20-2019 the Cut-off/Passing Score but Not Less than 45% in the Philippine Law School
Admission Test Administered on April 7, 2019

B. Memorandum Circulars

Number Title/Subject
LEBMC No. New Regulatory Issuances
1
LEBMC No. Submission of Schedule of Tuition and Other School Fees
2
LEBMC No. Submission of Law School Information Report
3
LEBMC No. Reminder to Submit Duly Accomplished LSIR Form
4
LEBMC No. Offering of the Refresher Course for AY 2017-2018
5
LEBMC No. Applications for LEB Certification Numbers
6
LEBMC No. Application of Transitory Provision Under [LEBMO] No. 7 Series of 2017 and
7 [LEBMO] No. 11, Series of 2017 in the Admission of Freshmen Law Students in
Basic Law Courses in Academic Year 2017-2018
LEBMC No. Guidelines for Compliance with the Reportorial Requirements Under [LEBMO]
8 No. 7, Series of 2016 for Purposes of the Academic Year 2017-2018
LEBMC No. Observance of Law Day and Philippine National Law Week
9
LEBMC No. September 21, 2017 Suspension of Classes
10
LEBMC No. Law Schools Authorized to Offer the Refresher Course in the Academic Year
11 2016-2017
LEBMC No. Law Schools Authorized to Offer the Refresher Course in the Academic Year
12 2017-2018
LEBMC No. Legal Research Seminar of the Philippine Group of Law Librarians on April 4-6,
13 2018
LEBMC No. CSC Memorandum Circular No. 22, s.2016
14
LEBMC No. Law Schools Authorized to Offer the Refresher Course in the Academic Year
15 2018-2019
LEBMC No. Clarification to [LEBMO] No. 3, Series of 2016
16
LEBMC No. Updated List of Law Schools Authorized to Offer the Refresher Course in the
17 Academic Year 2018-2019
LEBMC No. PHILSAT Eligibility Requirement for Freshmen in the Academic Year 2018-
18 2019
LEBMC No. Guidelines for the Limited Conditional Admission/Enrollment in the 1st Semester
19 of the Academic Year 2018-2019 Allowed for Those Who Have Not Taken the
PhiLSAT
LEBMC No. Updated List of Law Schools Authorized to Offer the Refresher Course in the
20 Academic Year 2018-2019
LEBMC No. Adjustments/Corrections to the Requirements for Law Schools to be Qualified to
21 Conditionally Admit/Enroll Freshmen Law Students in AY 2018-2019
LEBMC No. Advisory on who should take the September 23, 2018 PhiLSAT
22
LEBMC No. Collection of the PhiLSAT Certificate of Eligibility/Exemption by Law Schools
23 from Applicants for Admission
LEBMC No. Observance of the Philippine National Law Week
24
LEBMC No. Competition Law
25
LEBMC No. Scholarship Opportunity for Graduate Studies for Law Deans, Faculty Members
26 and Law Graduates with the 2020-2021 Philippine Fulbright Graduate Student
Program
LEBMC No. Advisory on April 7, 2019 PhiLSAT and Conditional [Enrollment] for Incoming
27 Freshmen/1st Year Law Students
LEBMC No. April 25-26, 2019 Competition Law Training Program
28
LEBMC No. Detailed Guidelines for Conditional Enrollment Permit Application
29
LEBMC No. Law Schools Authorized to Offer Refresher Course in AY 2019-2020
30
LEBMC No. Law Schools Authorized to Offer Refresher Course in AY 2019-2020
31
LEBMC No. Reminders concerning Conditionally Enrolled Freshmen Law Students in AY
40 2019-2020

C. Resolutions and Other Issuances

Number Title/Subject
Resolution No. 16 Reportorial Requirement for Law Schools with Small Students Population
Resolution No.7, Declaring a 3-Year Moratorium in the Opening of New Law Schools
Series of 2010
Resolution No. 8, Administrative Sanctions
Series of 2010
Resolution No. A Resolution Providing for Supplementary Rules to the Provisions of
2011-21 LEBMO No. 1 in regard to Curriculum and Degrees Ad Eundem
Resolution No. A Resolution Eliminating the Requirement of Special, Orders for Graduates
2012-02 of the Basic Law Degrees and Graduate Law Degrees and Replacing them
with a Per Law School Certification Approved by the Legal Education Board
Resolution No. Ethical Standards of Conduct for Law Professors
2013-01
Resolution No. Prescribing Rules on the Ll.M. Staggered Compliance Schedule and the
2014-02 Exemption from the Ll.M. Requirement
Resolution No. Prescribing the Policy and Rules in the Establishment of a Legal Aid Clinic
2015-08 in Law Schools
Order Annual Law Publication Requirements
Chairman Restorative Justice to be Added as Elective Subject
Memorandum
          
The PhiLSAT
under LEBMO
No. 7-2016,
LEBMO No. 11-  
2017, LEBMC
No. 18-2018, and
related issuances

As above-enumerated, among the orders issued by the LEB was Memorandum Order No.
7, Series of 2016 (LEBMO No. 7-2016) pursuant to its power to "prescribe the minimum
standards for law admission" under Section 7(e) of R.A. No. 7662.

The policy and rationale of LEBMO No. 7-2016 is to improve the quality of legal
education by requiring all those seeking admission to the basic law course to take and
pass a nationwide uniform law school admission test, known as the PhiLSAT. [10]
The PhiLSAT is essentially an aptitude test measuring the examinee's communications
and language proficiency, critical thinking, verbal and quantitative reasoning.[11] It was
designed to measure the academic potential of the examinee to pursue the study of law.
[12]
 Exempted from the PhiLSAT requirement were honor graduates who were granted
professional civil service eligibility and who are enrolling within two years from their
college graduation.[13]

Synthesizing, the key provisions of LEBMO No. 7-2016 are as follows:

(1) The policy and rationale of requiring PhiLSAT is to improve the quality of legal
education. The PhiLSAT shall be administered under the control and supervision of the
LEB;[14]

(2) The PhiLSAT is an aptitude test that measures the academic potential of the examinee
to pursue the study of law;[15]

(3) A qualified examinee is either a graduate of a four-year bachelor's degree; expecting

to graduate with a four-year bachelor's degree at the end of the academic year when the
PhiLSAT was administered; or a graduate from foreign higher education institutions with
a degree equivalent to a four-year bachelor's degree. There is no limit as to the number of
times a qualified examinee may take the PhiLSAT;[16]

(4) The LEB may designate an independent third-party testing administrator;[17]

(5) The PhiLSAT shall be administered at least once a year, on or before April 16, in
testing centers;[18]

(6) The testing fee shall not exceed the amount of P1,500.00 per examination; [19]

(7) The cut-off or passing score shall be 55% correct answers, or such percentile score as
may be prescribed by the LEB;[20]

(8) Those who passed shall be issued a Certificate of Eligibility while those who failed
shall be issued a Certificate of Grade;[21]

(9) Passing the PhiLSAT is required for admission to any law school. No applicant shall
be admitted for enrollment as a first year student in the basic law course leading to a
degree of either Bachelor of Laws or Juris Doctor unless he has passed the PhiLSAT
taken within two years before the start of the study;[22]

(10) Honor graduates granted professional civil service eligibility who are enrolling
within two years from college graduation are exempted from taking and passing the
PhiLSAT for purposes of admission to the basic law course;[23]
(11) Law schools, in the exercise of academic freedom, can prescribe additional
requirements for admission;[24]

(12) Law schools shall submit to LEB reports of first year students admitted and enrolled,
and their PhiLSAT scores, as well as the subjects enrolled and the final grades received
by every first year student;[25]

(13) Beginning academic year 2018-2019, the general average requirement (not less than
80% or 2.5) for admission to basic law course under Section 23 of LEBMO No. 1-2011 is
removed;[26]

(14) In academic year 2017-2018, the PhiLSAT passing score shall not be enforced and
the law schools shall have the discretion to admit in the basic law course, applicants who
scored less than 55% in the PhiLSAT, provided that the law dean shall submit a
justification for the admission and the required report;[27] and

(15) Law schools, in violation of LEBMO No. 7-2016, shall be administratively

sanctioned as prescribed in Section 32[28] of LEBMO No. 2-2013[29] and/or fined up to
P10,000.00.[30]
Effective for the academic year 2017 to 2018, no applicant to law school was allowed
admission without having taken and passed the PhiLSAT. The first PhiLSAT
examination was held on April 16, 2017 in seven pilot sites: Baguio City, Metro Manila,
Legazpi City, Cebu City, Iloilo City, Davao City, and Cagayan de Oro. A total of 6,575
out of 8,074 examinees passed the first-ever PhiLSAT. For the first PhiLSAT, the passing
grade was adjusted by the LEB from 55% to 45% by way of consideration.

Since the PhiLSAT was implemented for the first time and considering further that there
were applicants who failed to take the PhiLSAT because of the inclement weather last
April 16, 2017, the LEB issued Memorandum Order No. 11, Series of 2017 (LEBMO No.
11-2017).

Under LEBMO No. 11-2017, those who failed to take the first PhiLSAT were allowed to
be admitted to law schools for the first semester of academic year 2017 to 2018 for
justifiable or meritorious reasons and conditioned under the following terms:
2. Conditions - x x x

a. The student shall take the next scheduled PhiLSAT;

b. If the student fails to take the next scheduled PhiLSAT for any reason, his/her
conditional admission in the law school shall be automatically revoked and barred from
enrolling in the following semester;
c. If the student takes the next scheduled PhiLSAT but scores below the passing or cut-
off score, his/her conditional admission shall also be revoked and barred from enrolling
in the following semester, unless the law school expressly admits him/her in the exercise
of the discretion given under Section/Paragraph 14 of LEBMO No. 7, Series of 2016,
subject to the requirements of the same provision;

d. The student whose conditional admission and enrol[l]ment is subsequently revoked

shall not be entitled to the reversal of the school fees assessed and/or refund of the school
fees paid; and

e. The student shall execute under oath, and file with his/her application for a Permit for
Conditional Admission/Enrol[l]ment, an UNDERTAKING expressly agreeing to the
foregoing conditions.[31]
The conditional admission and enrollment under LEBMO No. 11-2017 and the transitory
provision provided in LEBMO No. 7-2016 were subsequently clarified by the LEB
through its Memorandum Circular No. 7, Series of 2017 (LEBMC No. 7-2017).

On September 24, 2017 and April 8, 2018, the second and third PhiLSATs were
respectively held.

On October 26, 2017, the LEB issued a Memorandum reminding law schools, law
students, and other interested persons that the passing of the PhiLSAT is required to be
eligible for admission/enrollment in the basic law course for academic year 2017 to 2018.
It was also therein clarified that the discretion given to law schools to admit those who
failed the PhiLSAT during the initial year of implementation is only up to the second
semester of academic year 2017-2018.

Because of the confusion as to whether conditional admission for academic year 2018 to
2019 may still be allowed, the LEB issued Memorandum Circular No. 18, Series of
2018 (LEBMC No. 18-2018). Under LEBMC No. 18-2018, it was clarified that the
conditional admission was permitted only in academic year 2017 to 2018 as part of the
transition adjustments in the initial year of the PhiLSAT implementation. As such, by
virtue of LEBMC No. 18-2018, the conditional admission of students previously allowed
under LEBMO No. 11-2017 was discontinued.

Nevertheless, on July 25, 2018, the LEB issued Memorandum Circular No. 19, Series of
2018 (LEBMC No. 19-2018) allowing limited conditional admission/enrollment in the
first semester of academic year 2018 to 2019 for those applicants who have never
previously taken the PhiLSAT. Those who have taken the PhiLSAT and scored below the
cut-off score were disqualified. In addition, only those law schools with a passing rate of
not less than 25%, are updated in the reportorial requirement and signified its intention to
conditionally admit applicants were allowed to do so. The limited enrollment was subject
to the condition that the admitted student shall take and pass the next PhiLSAT on
September 23, 2018, otherwise the conditional enrollment shall be nullified. Non-
compliance with said circular was considered a violation of the minimum standards for
the law program for which law schools may be administratively penalized.

The fourth PhiLSAT then pushed through on September 23, 2018.

The Petitions

Days before the scheduled conduct of the first-ever PhiLSAT on April 16, 2017,
petitioners Oscar B. Pimentel (Pimentel), Errol B. Comafay (Comafay), Rene B. Gorospe
(Gorospe), Edwin R. Sandoval (Sandoval), Victoria B. Loanzon (Loanzon), Elgin
Michael C. Perez (Perez), Arnold E. Cacho (Cacho), Al Conrad B. Espaldon (Espaldon)
and Ed Vincent S. Albano (Albano) [as citizens, lawyers, taxpayers and law professors],
with their co-petitioners Leighton R. Siazon (Siazon), Arianne C. Artugue (Artugue),
Clarabel Anne R. Lacsina (Lacsina) and Kristine Jane R. Liu (Liu) [as citizens, lawyers
and taxpayers], Alyanna Mari C. Buenviaje (Buenviaje) and Iana Patricia Dula T. Nicolas
(Nicolas) [as citizens intending to take up law] and Irene A. Tolentino (Tolentino) and
Aurea I. Gruyal (Gruyal) [as citizens and taxpayers] filed their Petition for Prohibition,
[32]
 docketed as G.R. No. 230642, principally seeking that R.A. No. 7662 be declared
unconstitutional and that the creation of the LEB be invalidated together with all its
issuances, most especially the PhiLSAT, for encroaching upon the rule-making power of
the Court concerning admissions to the practice of law;[33] They prayed for the issuance of
a temporary restraining order (TRO) to prevent the LEB from conducting the PhiLSAT.

Respondents-in-intervention Attys. Anthony D. Bengzon (Bengzon), Ferdinand M. Negre

(Negre), Michael Z. Untalan (Untalan), Jonathan Q. Perez (Perez), Samantha Wesley K.
Rosales (Rosales), Erika M. Alfonso (Alfonso), Krys Valen O. Martinez (Martinez),
Ryan Ceazar P. Romano (Romano), and Kenneth C. Varona (Varona) [as citizens and
lawyers] moved to intervene and prayed for the dismissal of the Petition for Prohibition.
[34]

On February 12, 2018, petitioners-in-intervention April D. Caballero (Caballero), Jerey

C. Castardo (Castardo), MC Wellroe P. Bringas (Bringas), Rhuffy D. Federe (Federe)
and Conrad Theodore A. Matutino (Matutino) [as graduates of four-year college course
and applicants as first year law students], St. Thomas More School of Law and Business,
Inc., [as an educational stock corporation] and Rodolfo C. Rapista (Rapista), Judy Marie
Rapista-Tan (Rapista-Tan), Lynnart Walford A. Tan (Tan), Ian M. Enterina (Enterina)
and Neil John Villarico (Villarico) [as citizens and law professors] intervened and joined
the Petition for Prohibition of Pimentel, et al., seeking to declare R.A. No. 7662 and the
PhiLSAT as unconstitutional.[35]

Thereafter, a Petition for Certiorari and Prohibition, docketed as G.R. No. 242954, was

filed by petitioners Francis Jose Lean L. Abayata (Abayata), Gretchen M. Vasquez
(Vasquez), Sheenah S. Ilustrismo (Ilustrismo), Ralph Louie Salaño (Solaño), Aireen
Monica B. Guzman (Guzman) and Delfino Odias (Odias) [as law students who failed to
pass the PhiLSAT], Daryl Dela Cruz (Dela Cruz), Claire Suico (Suico), Aivie S.
Pescadero (Pescadero), Niña Christine Dela Paz (Dela Paz), Shemark K. Queniahan
(Queniahan), Al Jay T. Mejos (Mejos), Rocellyn L. Daño (Daño), Michael Adolfo
(Adolfo), Ronald A. Atig (Atig), Lynette C. Lumayag (Lumayag), Mary Chris Lagera
(Lagera), Timothy B. Francisco (Francisco), Sheila Marie C. Dandan (Dandan), Madeline
C. Dela Peña (Dela Peña), Darlin R. Villamor (Villamor), Lorenzana Llorico (Llorico)
and Jan Ivan M. Santamaria (Santamaria) [as current law students who failed to take the
PhiLSAT] seeking to invalidate R.A. No. 7662 or, in the alternative, to declare as
unconstitutional the PhiLSAT. They also sought the issuance of a TRO to defer the
holding of the aptitude test.[36]

These Petitions were later on consolidated by the Court and oral arguments thereon were
held on March 5, 2019.

Temporary Restraining Order

On March 12, 2019, the Court issued a TRO[37] enjoining the LEB from implementing
LEBMC No. 18-2018 and, thus, allowing those who have not taken the PhiLSAT prior to
the academic year 2018 to 2019, or who have taken the PhiLSAT, but did not pass, or
who are honor graduates in college with no PhiLSAT Exemption Certificate, or honor
graduates with expired PhiLSAT Exemption Certificates to conditionally enroll as
incoming freshmen law students for the academic year 2019 to 2020 under the same
terms as LEBMO No. 11-2017.

Subsequently, the LEB issued Memorandum Circular No. 27, Series of 2019 (LEBMC

No. 27-2019) stating that the PhiLSAT scheduled on April 7, 2019 will proceed and
reiterated the requirements that must be complied with for the conditional enrollment for
the academic year 2019 to 2020.

The Parties' Arguments

In G.R. No. 230642

Petitioners in G.R. No. 230642 argue that R.A. No. 7662 and the PhiLSAT are offensive
to the Court's power to regulate and supervise the legal profession pursuant to Section
5(5), Article VIII[38] of the Constitution and that the Congress cannot create an
administrative office that exercises the Court's power over the practice of law. They also
argue that R.A. No. 7662 gives the JBC additional functions to vet nominees for the LEB
in violation of Section 8(5), Article VIII[39] of the Constitution.

In their Memorandum, petitioners also question the constitutionality of the LEB's powers
under Section 7(c)[40] and 7(e)[41] to prescribe the qualifications and compensation of
faculty members and Section 7(h)[42] on the LEB's power to adopt a system of continuing
legal education as being repugnant to the Court's rule-making power concerning the
practice of law. They also argue that the PhiLSAT violates the academic freedom of law
schools and the right to education.

Petitioners-in-intervention meanwhile contend that the PhiLSAT violates the right to

liberty and pursuit of happiness of the student-applicants. They posit that the PhiLSAT
violates the equal protection clause as it is an arbitrary form of classification not based on
substantial distinctions. They also argue that the PhiLSAT violates the right of all citizens
to quality and accessible education, violates academic freedom, and is an unfair academic
requirement. It is also their position that the PhiLSAT violates due process as it interferes
with the right of every person to select a profession or course of study. They also argue
that R.A. No. 7662 constitutes undue delegation of legislative powers.

In G.R. No. 242954

Petitioners in G.R. No. 242954 argue that certiorari and prohibition are proper remedies
either under the expanded or traditional jurisdiction of the Court. They also invoke the
doctrine of transcendental importance.

Substantively, they contend that R.A. No. 7662, specifically Section 3(a)(2) [43] on the
objective of legal education to increase awareness among members of the legal
profession, Section 7(e) on law admission, 7(g)[44] on law practice internship, and 7(h) on
adopting a system of continuing legal education, and the declaration of policy on
continuing legal education[45] infringe upon the power of the Court to regulate admission
to the practice of law. They profess that they are not against the conduct of law school
admission test per se, only that the LEB cannot impose the PhiLSAT as the power to do
so allegedly belongs to the Court.[46]

It is also their contention that the PhiLSAT violates academic freedom as it interferes
with the law school's exercise of freedom to choose who to admit. According to them, the
LEB cannot issue penal regulations, and the consequent forfeiture of school fees and the
ban on enrollment for those who failed to pass the PhiLSAT violate due process.

The Comments

Procedurally, the Office of the Solicitor General (OSG), representing the LEB, argues
that certiorari and prohibition are not proper to assail the constitutionality of R.A. No.
7662 either under the traditional or expanded concept of judicial power. For the OSG,
R.A. No. 7662 was enacted pursuant to the State's power to regulate all educational
institutions, and as such, there could be no grave abuse of discretion. It also claims that
the Congress is an indispensable party to the petitions.
Substantively, the OSG contends that the Court's power to regulate admission to the
practice of law does not include regulation of legal education. It also defends Section 7(e)
on the LEB's power to prescribe minimum standards for law admission as referring to
admission to law schools; Section 7(g) on the LEB's power to establish a law practice
internship as pertaining to the law school curriculum which is within the power of the
LEB to regulate; and 7(h) on the LEB's power to adopt a system of continuing legal
education as being limited to the training of lawyer-professors.[47] Anent the argument
that R.A. No. 7662 gives the JBC additional functions not assigned to it by the Court, the
OSG points out that the Court had actually authorized the JBC to process the applications
for membership to the LEB making this a non-issue.

In defending the validity of the PhiLSAT, the OSG advances the argument that the
PhiLSAT is the minimum standard for entrance to law schools prescribed by the LEB
pursuant to the State's power to regulate education. The OSG urges that the PhiLSAT is
no different from the National Medical Admission Test (NMAT) which the Court already
upheld as a valid exercise of police power in the seminal case of Tablarin v. Gutierrez.[48]

It is also the position of the OSG that neither the PhiLSAT nor the provisions of R.A. No.
7662 violate academic freedom because the standards for entrance to law school, the
standards for accreditation, the prescribed qualifications of faculty members, and the
prescribed basic curricula are fair, reasonable, and equitable admission and academic
requirements.

For their part, respondents in-intervention contend that R.A. No. 7662 enjoys the
presumption of constitutionality and that the study of law is different from the practice of
law.

In its Comment to the Petition-in-Intervention, the OSG dismisses as speculative the

argument that the PhiLSAT is anti-poor, and adds that the Court has no competence to
rule on whether the PhiLSAT is an unfair or unreasonable requirement, it being a
question of policy.

Respondents-in-intervention, for their part, argue that the right of the citizens to
accessible education means that the State shall make quality education accessible only to
those qualified enough, as determined by fair, reasonable, and equitable admission and
academic requirements. They dispute the claimed intrusion on academic freedom as law
schools are not prevented from selecting who to admit among applicants who have
passed the PhiLSAT. They stress that the right to education is not absolute and may be
regulated by the State, citing Calawag v. University of the Philippines Visayas.[49]

By way of Reply, petitioners-in-intervention emphasize that the doctrine in Tablarin[50] is

inapplicable as medical schools are not the same as law schools. They further aver that
the decline in enrollment as a result of the implementation of the PhiLSAT is not
speculative.[51]

The Issues

After a careful consideration of the issues raised by the parties in their pleadings and
refined during the oral arguments, the issues for resolution are synthesized as follows:
I. Procedural Issues:

A. Remedies of certiorari and prohibition; and

B. Requisites of judicial review and the scope of the Court's review in the
instant petitions.

II. Substantive Issues:

A. Jurisdiction over legal education;

B. Supervision and regulation of legal education as an exercise of police

power;

1. Reasonable supervision and regulation

2. Institutional academic freedom

3. Right to education

C. LEB's powers under R.A. No. 7662 vis-a-vis the Court's jurisdiction over

the practice of law; and

D. LEB's powers under R.A. No. 7662 vis-a-vis the academic freedom of law

schools and the right to education.

The Rulings of the Court

I.
Procedural Issues

A.
Remedies of Certiorari and Prohibition
The propriety of the remedies of certiorari and prohibition is assailed on the ground that
R.A. No. 7662 is a legislative act and not a judicial, quasi-judicial, or ministerial
function. In any case, respondents argue that the issues herein presented involve purely
political questions beyond the ambit of judicial review.

The Court finds that petitioners availed of the proper remedies.

The 1935[52] and 1973[53] Constitutions mention, but did not define, "judicial power." In
contrast, the 1987 Constitution lettered what judicial power is and even "expanded" its
scope.

As constitutionally defined under Section 1, Article VIII of the 1987 Constitution,

[54]
 judicial power is no longer limited to the Court's duty to' settle actual controversies
involving rights which are legally demandable and enforceable, or the power of
adjudication, but also includes, the duty to determine whether or not there has been grave
abuse of discretion amounting to lack or excess of jurisdiction on the part of any branch
or instrumentality of the Government. This innovation under the 1987 Constitution later
on became known as the Court's traditional jurisdiction and expanded jurisdiction,
respectively.[55]

The expanded scope of judicial review mentions "grave abuse of discretion amounting to
lack or excess of jurisdiction" to harbinger the exercise of judicial review; while petitions
for certiorari[56] and prohibition[57] speak of "lack or excess of jurisdiction or grave abuse
of discretion amounting to lack or excess of jurisdiction." Petitions for certiorari and
prohibition as it is understood under Rule 65 of the Rules of Court are traditionally
regarded as supervisory writs used as a means by superior or appellate courts, in the
exercise of their supervisory jurisdiction, to keep subordinate courts within the bounds of
their jurisdictions. As such, writs of certiorari and prohibition correct only errors of
jurisdiction of judicial and quasi-judicial bodies.[58]

However, considering the commonality of the ground of "grave abuse of discretion," a

Rule 65 petition, as a procedural vehicle to invoke the Court's expanded jurisdiction, has
been allowed.[59] After all, there is grave abuse of discretion when an act is done contrary
to the Constitution, the law or jurisprudence, or is executed whimsically, capriciously or
arbitrarily, out of malice, ill will, or personal bias.[60] In Spouses Imbong v. Ochoa, Jr.,
[61]
 the Court emphasized that certiorari, prohibition and mandamus are appropriate
remedies to raise constitutional issues.

That it is a legislative act which is being assailed is likewise not a ground to deny the
present petitions.

For one, the 1987 Constitution enumerates under Section 5(2)(a), Article VIII,[62] the
Court's irreducible powers which expressly include the power of judicial review, or the
power to pass upon the constitutionality or validity of any treaty, international or
executive agreement, law, presidential decree, proclamation, order, instruction,
ordinance, or regulation.

For another, the Court's expanded jurisdiction, when invoked, permits a review of acts
not only by a tribunal, board, or officer exercising judicial, quasi-judicial or ministerial
functions, but also by any branch or instrumentality of the Government. "Any branch or
instrumentality of the Government" necessarily includes the Legislative and the
Executive, even if they are not exercising judicial, quasi-judicial or ministerial functions.
[63]
 As such, the Court may review and/or prohibit or nullify, when proper, acts of
legislative and executive officials, there being no plain, speedy, or adequate remedy in
the ordinary course of law.[64]

The power of judicial review over congressional action, in particular, was affirmed
in Francisco, Jr. v. The House of Representatives,[65] wherein the Court held:
There is indeed a plethora of cases in which this Court exercised the power of judicial
review over congressional action. Thus, in Santiago v. Guingona, Jr., this Court ruled
that it is well within the power and jurisdiction of the Court to inquire whether the
Senate or its officials committed a violation of the Constitution or grave abuse of
discretion in the exercise of their functions and prerogatives. In Tañada v. Angara,
where petitioners sought to nullify an act of the Philippine Senate on the ground that it
contravened the Constitution, it held that the petition raised a justiciable controversy and
that when an action of the legislative branch is alleged to have seriously infringed the
Constitution, it becomes not only the right but in fact the duty of the judiciary to
settle the dispute. In Bondoc v. Pineda, [this Court] declared null and void a resolution
of the House of Representatives withdrawing the nomination, and rescinding the election,
of a congressman as a member of the House Electoral Tribunal for being violative of
Section 17, Article VI of the Constitution. In Coseteng v. Mitra, it held that the resolution
of whether the House representation in the Commission on Appointments was based on
proportional representation of the political parties as provided in Section 18, Article VI of
the Constitution is subject to judicial review. In Daza v. Singson, it held that the act of the
House of Representatives in removing the petitioner from the Commission on
Appointments is subject to judicial review. In Tañada v. Cuenco, it held that although
under the Constitution, the legislative power is vested exclusively in Congress, this
does not detract from the power of the courts to pass upon the constitutionality of
acts of Congress. In Angara v. Electoral Commission, it exercised its power of judicial
review to determine which between the Electoral Commission and the National
Assembly had jurisdiction over an electoral dispute concerning members of the latter.
(Internal citations omitted; emphases supplied)
This was reiterated in Villanueva v. Judicial and Bar Council,[66] as follows:
With respect to the Court, however, the remedies of certiorari and prohibition are
necessarily broader in scope and reach, and the writ of certiorari or prohibition may be
issued to correct errors of jurisdiction committed not only by a tribunal, corporation,
board or officer exercising judicial, quasi-judicial or ministerial functions but also to set
right, undo and restrain any act of grave abuse of discretion amounting to lack or excess
of jurisdiction by any branch or instrumentality of the Government, even if the latter does
not exercise judicial, quasi-judicial or ministerial functions. This application is expressly
authorized by the text of the second paragraph of Section 1, supra.

Thus, petitions for certiorari and prohibition are appropriate remedies to raise

constitutional issues and to review and/or prohibit or nullify the acts of legislative
and executive officials. (Internal citation omitted; emphasis supplied)
Consistently, in Samahan ng mga Progresibong Kabataan (SPARK) v. Quezon City,
[67]
 the remedies of certiorari and prohibition were regarded as proper vehicles to assail
the constitutionality of curfew ordinances, and in Agcaoili v. Fariñas,[68] to question the
contempt powers of the Congress in the exercise of its power of inquiry in aid of
legislation.

The consistency in the Court's rulings as to the propriety of the writs of certiorari and
prohibition under Rule 65 of the Rules of Court to correct errors of jurisdiction
committed not only by a tribunal, corporation, board or officer exercising judicial, quasi-
judicial or ministerial functions, but also to correct, undo, or restrain any act of grave
abuse of discretion on the part of the legislative and the executive, propels the Court to
treat the instant petitions in the same manner.

B.
Requisites for Judicial Review

The power of judicial review is tritely defined as the power to review the constitutionality
of the actions of the other branches of the government.[69] For a proper exercise of its
power of review in constitutional litigation, certain requisites must be satisfied: (1) an
actual case or controversy calling for the exercise of judicial power; (2) the person
challenging the act must have "standing" to challenge; (3) the question of
constitutionality must be raised at the earliest possible opportunity; and (4) the issue of
constitutionality must be the very lis mota of the case.[70]

These requisites are effective limitations on the Court's exercise of its power of review
because judicial review in constitutional cases is quintessentially deferential, owing to the
great respect that each co-equal branch of the Government affords to the other.

Of these four requisites, the first two, being the most essential,[71] deserve an extended
discussion in the instant case.

1. Actual Case or Controversy

Fundamental in the exercise of judicial power, whether under the traditional or expanded
setting, is the presence of an actual case or controversy.[72] An actual case or controversy
is one which involves a conflict of legal rights and an assertion of opposite legal claims
susceptible of judicial resolution. The case must not be moot or academic, or based on
extra-legal or other similar considerations not cognizable by a court of justice.

To be justiciable, the controversy must be definite and concrete, touching on the legal
relations of parties having adverse legal interests. It must be shown from the pleadings
that there is an active antagonistic assertion of a legal right, on the one hand, and a denial
thereof on the other. There must be an actual and substantial controversy and not merely
a theoretical question or issue. Further, the actual and substantial controversy must admit
specific relief through a conclusive decree and must not merely generate an advisory
opinion based on hypothetical or conjectural state of facts.[73]

Closely associated with the requirement of an actual or justiciable case or controversy is

the ripening seeds for adjudication. Ripeness for adjudication has a two-fold aspect: first,
the fitness of the issues for judicial decision; and second, the hardship to the parties
entailed by withholding court consideration. The first aspect requires that the issue must
be purely legal and that the regulation subject of the case is a "final agency action." The
second aspect requires that the effects of the regulation must have been felt by the
challenging parties in a concrete way.[74]

To stress, a constitutional question is ripe for adjudication when the challenged

governmental act has a direct and existing adverse effect on the individual challenging it.
[75]
 While a reasonable certainty of the occurrence of a perceived threat to a constitutional
interest may provide basis for a constitutional challenge, it is nevertheless still required
that there are sufficient facts to enable the Court to intelligently adjudicate the issues. [76]

In this regard, the Court's pronouncement in Philippine Association of Colleges and

Universities (PACU) v. Secretary of Education[77] deserves reiteration:
It should be understandable, then, that this Court should be doubly reluctant to
consider petitioner's demand for avoidance of the law aforesaid, [e]specially where,
as respondents assert, petitioners suffered no wrong - nor allege any - from the
enforcement of the criticized statute.
It must be evident to any one that the power to declare a legislative enactment void is one
which the judge, conscious of the fallibility of human judgment, will shrink from
exercising in any case where he can conscientiously and with due regard to duty and
official oath decline the responsibility. x x x

When a law has been long treated as constitutional and important rights have become
dependent thereon, the Court may refuse to consider an attack on its validity. x x x

As a general rule, the constitutionality of a statute will be passed on only if, and to the
extent that, it is directly and necessarily involved in a justiciable controversy and is
essential to the protection of the rights of the parties concerned. x x x

xxxx

It is an established principle that to entitle a private individual immediately in danger of

sustaining a direct injury as the result of that action and it is not sufficient that he has
merely a general [interest] to invoke the judicial power to determine the validity of
executive or legislative action he must show that he has sustained or [has an] interest
common to all members of the public. x x x

Courts will not pass upon the constitutionality of a law upon the complaint of one who
fails to show that he is injured by its operation. x x x

The power of courts to declare a law unconstitutional arises only when the interests of
litigants require the use of that judicial authority for their protection against actual
interference, a hypothetical threat being insufficient. x x x

Bona fide suit. - Judicial power is limited to the decision of actual cases and
controversies. The authority to pass on the validity of statutes is incidental to the decision
of such cases where conflicting claims under the Constitution and under a legislative act
assailed as contrary to the Constitution are raised. It is legitimate only in the last resort,
and as necessity in the determination of real, earnest, and vital controversy between
litigants. x x x
xxxx

An action, like this, is brought for a positive purpose, nay, to obtain actual and
positive relief. x x x Courts do not sit to adjudicate mere academic questions to
satisfy scholarly interest therein, however intellectually solid the problem may be.
This is [e]specially true where the issues "reach constitutional dimensions, for then
there comes into play regard for the court's duty to avoid decision of constitutional
issues unless avoidance becomes evasion." x x x (Internal citations omitted; emphases
supplied)
Ultimately, whether an actual case is present or not is determinative of whether the
Court's hand should be stayed when there is no adversarial setting and when the
prerogatives of the co-equal branches of the Government should instead be respected.

As ruled in Republic v. Roque: [78]

A perusal of private respondents' petition for declaratory relief would show that they have
failed to demonstrate how they are left to sustain or are in immediate danger to sustain
some direct injury as a result of the enforcement of the assailed provisions of RA 9372.
Not far removed from the factual milieu in the Southern Hemisphere cases, private
respondents only assert general interests as citizens, and taxpayers and infractions which
the government could prospectively commit if the enforcement of the said law would
remain untrammelled. As their petition would disclose, private respondents' fear of
prosecution was solely based on remarks of certain government officials which were
addressed to the general public. They, however, failed to show how these remarks
tended towards any prosecutorial or governmental action geared towards the
implementation of RA 9372 against them. In other words, there was no particular,
real or imminent threat to any of them. As held in Southern Hemisphere:
Without any justiciable controversy, the petitions have become pleas for declaratory
relief, over which the Court has no original jurisdiction. Then again, declaratory actions
characterized by "double contingency," where both the activity the petitioners intend to
undertake and the anticipated reaction to it of a public official are merely theorized, lie
beyond judicial review for lack of ripeness.

The possibility of abuse in the implementation of RA 9372 does not avail to take the
present petitions out of the realm of the surreal and merely imagined. Such possibility is
not peculiar to RA 9372 since the exercise of any power granted by law may be abused.
Allegations of abuse must be anchored on real events before courts may step in to settle
actual controversies involving rights which are legally demandable and enforceable.
(Internal citations omitted; emphasis supplied)
Concededly, the Court had exercised the power of judicial review by the mere enactment
of a law or approval of a challenged action when such is seriously alleged to have
infringed the Constitution. In Pimentel, Jr. v. Aguirre:[79]
First, on prematurity. According to the Dissent, when "the conduct has not yet occurred
and the challenged construction has not yet been adopted by the agency charged with
administering the administrative order, the determination of the scope and
constitutionality of the executive action in advance of its immediate adverse effect
involves too remote and abstract an inquiry for the proper exercise of judicial function."

This is a rather novel theory - that people should await the implementing evil to befall on
them before they can question acts that are illegal or unconstitutional. Be it remembered
that the real issue here is whether the Constitution and the law are contravened by Section
4 of AO 372, not whether they are violated by the acts implementing it. In the
unanimous en banc case Tañada v. Angara, this Court held that when an act of the
legislative department is seriously alleged to have infringed the Constitution, settling the
controversy becomes the duty of this Court. By the mere enactment of the questioned
law or the approval of the challenged action, the dispute is said to have ripened into
a judicial controversy even without any other overt act. Indeed, even a singular
violation of the Constitution and/or the law is enough to awaken judicial duty. Said
the Court:
In seeking to nullify an act of the Philippine Senate on the ground that it contravenes the
Constitution, the petition no doubt raises a justiciable controversy. Where an action of
the legislative branch is seriously alleged to have infringed the Constitution, it
becomes not only the right but in fact the duty of the judiciary to settle the dispute.
The question thus posed is judicial rather than political. The duty (to adjudicate)
remains to assure that the supremacy of the Constitution is upheld. Once a controversy as
to the application or interpretation of a constitutional provision is raised before this Court
x x x, it becomes a legal issue which the Court is bound by constitutional mandate to
decide.

xxxx

As this Court has repeatedly and firmly emphasized in many cases, it will not shirk,
digress from or abandon its sacred duty and authority to uphold the Constitution in
matters that involve grave abuse of discretion brought before it in appropriate cases,
committed by any officer, agency, instrumentality or department of the government.
In the same vein, the Court also held in Tatad v. Secretary of the Department of Energy:
x x x Judicial power includes not only the duty of the courts to settle actual controversies
involving rights which are legally demandable and enforceable, but also the duty to
determine whether or not there has been grave abuse of discretion amounting to lack or
excess of jurisdiction on the part of any branch or instrumentality of government. The
courts, as guardians of the Constitution, have the inherent authority to determine whether
a statute enacted by the legislature transcends the limit imposed by the fundamental law.
Where the statute violates the Constitution, it is not only the right but the duty of the
judiciary to declare such act unconstitutional and void.
By the same token, when an act of the President, who in our constitutional scheme is a
coequal of Congress, is seriously alleged to have infringed the Constitution and the laws,
as in the present case, settling the dispute becomes the duty and the responsibility of the
courts. (Internal citations omitted; emphases supplied)
In Spouses Imbong v. Ochoa,[80] the Court took cognizance of the petitions despite posing
a facial challenge against the entire law as the petitions seriously alleged that fundamental
rights have been violated by the assailed legislation:
In this case, the Court is of the view that an actual case or controversy exists and that
the same is ripe for judicial determination. Considering that the RH Law and its
implementing rules have already taken effect and that budgetary measures to carry
out the law have already been passed, it is evident that the subject petitions present
a justiciable controversy. As stated earlier, when an action of the legislative branch
is seriously alleged to have infringed the Constitution, it not only becomes a right,
but also a duty of the Judiciary to settle the dispute.

xxxx

Facial Challenge

The OSG also assails the propriety of the facial challenge lodged by the subject petitions,
contending that the RH Law cannot be challenged "on its face" as it is not a speech
regulating measure.
The Court is not persuaded.

In United States (US) constitutional law, a facial challenge, also known as a First
Amendment Challenge, is one that is launched to assail the validity of statutes concerning
not only protected speech, but also all other rights in the First Amendment. These include
religious freedom, freedom of the press, and the right of the people to peaceably
assemble, and to petition the Government for a redress of grievances. After all, the
fundamental right to religious freedom, freedom of the press and peaceful assembly are
but component rights of the right to one's freedom of expression, as they are modes which
one's thoughts are externalized.

In this jurisdiction, the application of doctrines originating from the U.S. has been
generally maintained, albeit with some modifications. While this Court has withheld
the application of facial challenges to strictly penal statutes, it has expanded its
scope to cover statutes not only regulating free speech, but also those involving
religious freedom, and other fundamental rights. The underlying reason for this
modification is simple. For unlike its counterpart in the U.S., this Court, under its
expanded jurisdiction, is mandated by the Fundamental Law not only to settle
actual controversies involving rights which are legally demandable and enforceable,
but also to determine whether or not there has been a grave abuse of discretion
amounting to lack or excess of jurisdiction on the part of any branch or
instrumentality of the Government. Verily, the framers of Our Constitution
envisioned a proactive Judiciary, ever vigilant with its duty to maintain the
supremacy of the Constitution.

Consequently, considering that the foregoing petitions have seriously alleged that
the constitutional human rights to life, speech and religion and other fundamental
rights mentioned above have been violated by the assailed legislation, the Court has
authority to take cognizance of these kindred petitions and to determine if the RH
Law can indeed pass constitutional scrutiny. To dismiss these petitions on the simple
expedient that there exist no actual case or controversy, would diminish this Court as a
reactive branch of government, acting only when the Fundamental Law has been
transgressed, to the detriment of the Filipino people. (Internal citations omitted; emphases
supplied)[81]
Likewise in Belgica v. Ochoa,[82] the Court held that the requirement of an actual case or
controversy is satisfied by the antagonistic positions taken by the parties:
The requirement of contrariety of legal rights is clearly satisfied by the antagonistic
positions of the parties on the constitutionality of the "Pork Barrel System." Also, the
questions in these consolidated cases are ripe for adjudication since the challenged funds
and the provisions allowing for their utilization-such as the 2013 GAA for the PDAF, PD
910 for the Malampaya Funds and PD 1869, as amended by PD 1993, for the Presidential
Social Fund - are currently existing and operational; hence, there exists an immediate or
threatened injury to petitioners as a result of the unconstitutional use of these public
funds.
1(a). Scope of Judicial Review

To determine whether petitioners presented an actual case or controversy, or have

seriously alleged that R.A. No. 7662 suffers from constitutional infirmities to trigger the
Court's power of judicial review, resort must necessarily be had to the pleadings filed.

Petitioners in G.R. No. 230642 allege that R.A. No. 7662 and the LEB issuances relative
to the admission and practice of law encroach upon the powers of the Court. [83] It is their
position that the powers given to the LEB are directly related to the Court's powers. [84] In
particular, they argue that the LEB's power to adopt a system of continuing legal
education under Section 7(h) of R.A. No. 7662 falls within the authority of the Court.
[85]
 In their Memorandum, they additionally argue that the LEB's powers to prescribe the
qualifications and compensation of faculty members under Section 7(c) and 7(e) of R.A.
No. 7662, Sections 50-51 of LEBMO No. 1, and Resolution No. 2014-02 intrude into the
Court's rule-making power relative to the practice of law.[86] They also argue that the
PhiLSAT violates the academic freedom of law schools and the right to education. [87] It is
their contention that the LEB is without power to impose sanctions.[88] They also question
the authority of the LEB Chairperson and Members to act in a hold-over capacity.[89]

For their part, petitioners-in-intervention allege that the PhiLSAT requirement resulted to
a reduced number of law student enrollees for St. Thomas More School of Law and
Business, Inc. and constrained said law school to admit only students who passed the
PhiLSAT which is against their policy of admitting students based on values.[90] Their co-
petitioners are students who either applied for law school, failed to pass the PhiLSAT, or,
were conditionally enrolled. Thus, they argue that Section 7(e) of R.A. No. 7662 and the
PhiLSAT violate the law school's academic freedom.

Petitioners in G.R. No. 242954 allege that they are current law students who failed to
pass and/or take the PhiLSAT, and who are therefore threatened with the revocation of
their conditional enrollment and stands to be barred from enrolling. Twelve of the 23
petitioners in G.R. No. 242954 were not allowed to enroll for failure to pass and/or take
the PhiLSAT.

It is their argument that the LEB's power under Section 7(e) of R.A. No. 7662 to
prescribe minimum standards for law admission, Section 7(g) to establish a law practice
internship, Section 7(h) to adopt a system of continuing legal education, and Section 3(a)
(2) on the stated objective of legal education to increase awareness among members of
the legal profession of the needs of the poor, deprived and oppressed sectors of society
usurp the Court's rule-making powers concerning admission to the practice of law. [91] In
addition, they argue that the PhiLSAT issuances violate academic freedom, and that the
LEB is not authorized to revoke conditional enrollment nor is it authorized to forfeit
school fees and impose a ban enrollment which are penal sanctions violative of the due
process clause. They also argue that the classification of students to those who have
passed or failed the PhiLSAT for purposes of admission to law school is repugnant to the
equal protection clause.

The petitions therefore raise an actual controversy insofar as they allege that R.A. No.
7662, specifically Section 2, paragraph 2, Section 3(a)(2), Section 7(c), (e), (g), and (h) of
R.A. No. 7662 infringe upon the Court's power to promulgate rules concerning the
practice of law and upon institutional academic freedom and the right to quality
education. Necessarily, a review of the LEB issuances when pertinent to these assailed
provisions of R.A. No. 7662 shall also be undertaken.

2. Legal Standing

Inextricably linked with the actual case or controversy requirement is that the party
presenting the justiciable issue must have the standing to mount a challenge to the
governmental act.

By jurisprudence, standing requires a personal and substantial interest in the case such
that the petitioner has sustained, or will sustain, direct injury as a result of the violation of
its rights,[92] thus:
Legal standing or locus standi is the "right of appearance in a court of justice on a given
question." To possess legal standing, parties must show "a personal and substantial
interest in the case such that [they have] sustained or will sustain direct injury as a result
of the governmental act that is being challenged." The requirement of direct injury
guarantees that the party who brings suit has such personal stake in the outcome of
the controversy and, in effect, assures "that concrete adverseness which sharpens
the presentation of issues upon which the court depends for illumination of difficult
constitutional questions."[93] (Emphasis supplied)
The rule on standing admits of recognized exceptions: the over breadth doctrine, taxpayer
suits, third-party standing and the doctrine of transcendental importance.[94]

Petitioners-in-intervention Caballero, Castardo, Bringas, Federe and Matutino, being

graduates of a four-year college course and applicants as first year law students, as well
as petitioners Abayata, Vasquez, Ilustrismo, Salaño, Guzman and Odias, as law students
who failed to pass the PhiLSAT and were denied admission to law school for the
academic year 2018 to 2019, and petitioners Dela Cruz, Suico, Pescadero, Dela Paz,
Queniahan, Mejos, Daño, Adolfo, Atig, Lumayag, Lagera, Francisco, Dandan, Dela Peña,
Villamor, Llorico and Santamaria, being law students who were conditionally enrolled,
possess the requisite standing to challenge the constitutionality of Section 7(e) of R.A.
No. 7662 and the implementing LEB issuances, as they were, in fact, required to take the
PhiLSAT, or to comply with the terms of the conditional enrollment and failing which,
were denied admission as regular students to law school.
Petitioner-in-intervention St. Thomas More School of Law and Business, Inc., likewise
sufficiently alleges injury that it has sustained in the form of reduced number of enrollees
due to the PhiLSAT requirement and the curtailment of its discretion on who to admit in
its law school. Under the specific and concrete facts available in this case, these
petitioners have demonstrated that they were, or tend to be directly and substantially,
injured.

Meanwhile, petitioners Pimentel, Comafay, Gorospe, Sandoval, Loanzon, Perez, Cacho,

Espaldon, Albano, Siazon, Artugue, Lacsina, Liu, Buenviaje, Nicolas, Tolentino, and
Gruyal; and petitioners-in intervention Rapista, Rapista-Tan, Tan, Enterina and Villarico
commonly anchor their standing to challenge R.A. No. 7662 and the PhiLSAT as
citizens.

Standing as a citizen has been upheld by this Court in cases where a petitioner is able to
craft an issue of transcendental importance or when paramount public interest is
involved.[95]

Legal standing may be extended to petitioners for having raised a "constitutional issue of
critical significance."[96] Without a doubt, the delineation of the Court's rule-making
power vis-a-vis the supervision and regulation of legal education and the determination of
the reach of the State's supervisory and regulatory power in the context of the guarantees
of academic freedom and the right to education are novel issues with far-reaching
implications that deserve the Court's immediate attention. In taking cognizance of the
instant petitions, the Court is merely exercising its power to promulgate rules towards the
end that constitutional rights are protected and enforced.[97]

Now, to the core substantive issues.

II.
Substantive Issues

A.
Jurisdiction Over Legal Education

Petitioners in G.R. No. 230642 argue that the Court's power to promulgate rules

concerning the admission to the practice of law necessarily includes the power to do
things related to the practice of law, including the power to prescribe the requirements for
admission to the study of law. In support, they point to Sections 6[98] and 16,[99] Rule 138
of the Rules of Court. They contend that the Congress cannot create an administrative
body, like the LEB, that exercises this rule-making power of the Court. They emphasize
that the LEB belongs to the Executive department, and, as such, is not linked or
accountable to the Court nor placed under the Court's regulation and supervision.
For their part, petitioners in G.R. No. 242954 maintain that the Court exercises authority
over the legal profession which includes the admission to the practice of law, to the
continuing requirements for and discipline of lawyers.[100] According to them, the rule-
making power of the Court is plenary in all cases regarding the admission to and
supervision of the practice of law. They argue that the Court's power to admit members to
the practice of law extends to admission to legal education because the latter is a
preparatory process to the application for admission to the legal profession, which
"residual power" of the Court can be inferred from Sections 5[101] and 6, Rule 138 of the
Rules of Court. They also emphasize that under Sections 1[102] and 2[103] of Rule 138-A,
non-lawyers are allowed to have limited practice of law and are held to answer by the
Court under the same rules on privileged communication and standard of conduct
pursuant to Sections 3[104] and 4[105] of Rule 138-A.[106]

Contrary to petitioner's claims, the Court has no primary and direct jurisdiction over legal
education. Neither the history of the Philippine legal education nor the Rules of Court
invoked by petitioners support their argument. The supervision and regulation of legal
education is an Executive function.
               
1. Regulation and
    supervision of
legal education
had been
historically and  
consistently
exercised by the
political
departments

Legal education in the Philippines was institutionalized in 1734, with the establishment
of the Faculty of Civil Law in the University of Santo Tomas with Spanish as the medium
of instruction. Its curriculum was identical to that adopted during the time in the
universities in Europe[107] and included subjects on Civil Law, Canon Law, ecclesiastical
discipline and elements of Natural Law.[108]

In 1901, Act No. 74 was passed centralizing the public school system, and establishing
the Department of Public Instruction headed by the General Superintendent.[109] The
archipelago was then divided into school divisions and districts for effective management
of the school system. It was through Act No. 74 that a Trade School[110] and a Normal
School[111] in Manila and a School of Agriculture in Negros were established.[112]

In 1908, the legislature approved Act No. 1870 which created the University of the
Philippines (UP). However, English law courses were not offered until 1910 when the
Educational Department Committee of the Young Men's Christian Association (YMCA),
through the efforts of Justice George Malcolm, offered law courses in the English
language. In 1911, UP adopted these classes by formally establishing its College of Law,
[113]
 with its first graduates being students who studied at YMCA.[114] The curriculum
adopted by the UP College of Law became the model of the legal education curriculum
of the other law schools in the country.[115]

Private schools were formally regulated in 1917 with the passage of Act No.
2706[116] which made obligatory the recognition and inspection of private schools and
colleges by the Secretary of Public Instruction, so as to maintain a standard of efficiency
in all private schools and colleges[117] in the country. As such, the Secretary of Public
Instruction was authorized to inspect schools and colleges to determine efficiency of
instruction and to make necessary regulations. Likewise, under Act No. 2706, the
Secretary of Public Instruction was specifically authorized to prepare and publish, from
time to time, in pamphlet form, the minimum standards required of law schools and other
schools giving instruction of a technical or professional character.[118]

In 1924, a survey of the Philippine education and of all educational institutions, facilities
and agencies was conducted through Act No. 3162, which created the Board of
Educational Survey. Among the factual findings of the survey was that schools at that
time were allowed to operate with almost no supervision at all. This led to the conclusion
that a great majority of schools from primary grade to the university are money-making
devices of persons who organize and administer them. Thus, it was recommended that
some board of control be· organized under legislative control to supervise their
administration.[119] It was further recommended that legislation be enacted to prohibit the
opening of any school without the permission of the Secretary of Public Instruction. The
grant of the permission was, in turn, predicated upon a showing that the school is
compliant with the proper standards as to the physical structure, library and laboratory
facilities, ratio of student to teacher and the qualifications of the teachers. [120]

Consistent with these statutory precursors, the 1935 Constitution expressed in no

uncertain terms that "[a]ll educational institutions shall be under the supervision and
subject to regulation by the State."[121]

This was followed by several other statutes such as the Commonwealth Act No.
578[122] which vests upon teachers, professors, and persons charged with the supervision
of public or duly-recognized private schools, colleges and universities the status of
"persons in authority" and Republic Act No. 139[123] which created the Board of
Textbooks, mandating all public schools to use only the books approved by the Board
and allowing all private schools to use textbooks of their choice, provided it is not against
the law or public policy or offensive to dignity.[124]

In 1947, the Department of Instruction was changed to the Department of Education.

[125]
 During this period, the regulation and supervision of public and private schools
belonged to the Bureau of Public and Private Schools. The regulation of law schools in
particular was undertaken by the Bureau of Private Schools through a special consultant
who acted as a supervisor of the law schools and as a national coordinator of the law
deans.[126]

The Department of Education, through its Bureau of Private Schools, issued a Manual of
Instructions for Private Schools which contained the rules and regulations pertaining to
the qualifications of the faculty and deans, faculty load and library holdings of private
learning institutions.[127] Meantime, a Board of National Education was created[128] with
the task of formulating, implementing and enforcing general educational policies and
coordinating the offerings and functions of all educational institutions. The Board of
National Education was later renamed as the National Board of Education. [129] In 1972,
the Department of Education became the Department of Education and Culture, [130] and
was later on renamed as the Ministry of Education and Culture in 1978.[131]

Meanwhile, the 1973 Constitution remained consistent in mandating that all educational
institutions shall be under the supervision of and subject to regulation by the State.[132]

With the passage of Batas Pambansa Bilang 232[133] (B.P. Blg. 232) or the Education Act
of 1982, the regulatory rules on both formal and non-formal systems in public and private
schools in all levels of the entire educational system were codified. The National Board
of Education was abolished, and instead, a Ministry of Education, Culture and Sports
(MECS) was organized to supervise and regulate educational institutions. Part and parcel
of the MECS' authority to supervise and regulate educational institutions is its authority
to recognize or accredit educational institutions of all levels.[134]

Accordingly, the MECS was given the authority over public and private institutions of
higher education, as well as degree-granting programs, in all post-secondary public and
private educational institutions.[135] In particular, a Board of Higher Education[136] was
established as an advisory body to the Minister of Education, Culture and Sports with the
functions of making policy recommendations on the planning and management of the
integrated system of higher education and recommending steps to improve the
governance of the higher education system. Apart from the Board of Higher Education, a
Bureau of Higher Education was also established to formulate and evaluate programs and
educational standards for higher education[137] and to assist the Board of Higher
Education. Law schools were placed, under the jurisdiction of the Bureau of Higher
Education.[138]

The MECS later became the DECS in 1987 under Executive Order No. 117[139] (E.O. No.
117). Nevertheless, the power of the MECS to supervise all educational institutions
remained unchanged.[140]

The Administrative Code[141] also states that it shall be the State that shall protect and
promote the right of all citizens to quality education at all levels, and shall take
appropriate steps to make such education accessible to all; and that the DECS shall be
primarily responsible for the formulation, planning, implementation, and coordination of
the policies, plans, programs and projects in the areas of formal and non-formal
education. The Administrative Code also empowered the Board of Higher Education to
create technical panels of experts in the various disciplines including law, to undertake
curricula development.[142] As will be discussed hereunder, the 1987 Constitution
crystallized the power of the State to supervise and regulate all educational institutions.
[143]

               

2. DECS Order No.
    27-1989 was the
 
precursor of R.A.
No. 7662

Pursuant to its mandate under B.P. Blg. 232, the DECS promulgated DECS Order No.
27, Series of 1989 (DECS Order No. 27-1989),[144] in close coordination with the
Philippine Association of Law Schools, the Philippine Association of Law Professors and
the Bureau of Higher Education. DECS Order No. 27-1989 specifically outlined the
policies and standards for legal education, and superseded all existing policies and
standards related to legal education. These policies were made applicable beginning
school year 1989 to 1990.

"Legal education" was defined in DECS Order No. 27-1989 as an educational program
including a clinical program appropriate and essential in the understanding and
application of law and the administration of justice. It is professional education after
completion of a required pre-legal education at the college level. For state colleges and
universities, the operation of their law schools was to depend on their respective charters,
and for private colleges and universities, by the rules and regulations issued by the
DECS. Nevertheless, it was made clear under DECS Order No. 27-1989 that the
administration of a law school shall be governed primarily by the law school's own
policies and the provisions thereof apply only suppletorily.[145]

Likewise, in generally permissive terms, DECS Order No. 27-1989 prescribed the
preferred qualifications and functions of a law dean, as well as the preferred
qualifications, conditions of employment and teaching load of law faculty members. It
also prescribed the general inclusions to the law curriculum, but gave the law schools the
prerogative to design its own curriculum. The DECS also drew a model law curriculum,
thus, revising the 122-unit curriculum prescribed in 1946 by the Office of Private
Education, as well as the 134-unit curriculum prescribed in 1963. The law schools were
also given the option to maintain a legal aid clinic as part of its law curriculum. It also
prescribed the need for law schools to have relevant library resources. Applicants for a
law course are required to comply with the specific requirements for admission by the
Bureau of Higher Education and the Court.

Such was the state of the regulation of legal education until the enactment of R.A. No.
7662 in 1993. In 1994, R.A. No. 7722[146] was passed creating the Commission on Higher
Education (CHED) tasked to supervise tertiary degree programs. Except for the
regulation and supervision of law schools which was to be undertaken by the LEB under
R.A. No. 7662, the structure of DECS as embodied in E.O. No. 117 remained practically
unchanged.

Due to the fact that R.A. No. 7662 was yet to be implemented with the organization of
the LEB, the CHED, meanwhile, assumed the function of supervising and regulating law
schools. For this purpose, the CHED constituted a Technical Panel for Legal Education
which came up with a Revised Policies and Standards for Legal Education, which,
however, was unpublished.
               
3. Legal education is
    a mere composite
 
of the educational
system

As recounted, the historical development of statutes on education unerringly reflects the

consistent exercise by the political departments of the power to supervise and regulate all
levels and areas of education, including legal education.

Legal education is but a composite of the entire Philippine education system. It is perhaps
unique because it is a specialized area of study. This peculiarity, however, is not reason in
itself to demarcate legal education and withdraw it from the regulatory and supervisory
powers of the political branches.

Notwithstanding, petitioners maintain that legal education, owing to its specialized

"legal" nature and being preparatory to the practice of law, should fall within the
regulation and supervision of the Court itself. Petitioners in G.R. No. 242954 went as far
as professing that they are not against the creation of an administrative body that will
supervise and regulate law schools, only that such body should be placed under the
Court's supervision and control.

Two principal reasons militate against such proposition:

First, it assumes that the Court, in fact, possesses the power to supervise and regulate
legal education as a necessary consequence of its power to regulate the admission to the
practice of law. This assumption, apart from being manifestly contrary to the above-
recounted history of legal education in the Philippines, is likewise devoid of legal
anchorage.
Second, the Court exercises only judicial functions and it cannot, and must not, arrogate
upon itself a power that is not constitutionally vested to it, lest the Court itself violates the
doctrine of separation of powers. For the Court to void R.A. No. 7662 and thereafter, to
form a body that regulates legal education and place it under its supervision and control,
as what petitioners suggest, is to demonstrate a highly improper form of judicial activism.
               
4. Court's exclusive
    rule-making
power covers the
 
practice of law
and not the study
of law

The Constitution lays down the powers which the Court can exercise. Among these is the
power to promulgate rules concerning admission to the practice of law.

The rule-making power of the Supreme Court had been uniformly granted under the
1935, the 1973 and the 1987 Constitutions. The complexion of the rule-making power,
however, changes with the promulgation of these organic laws.

Under the 1935 Constitution, existing laws on pleading, practice and procedure were
repealed and were instead converted as the Rules of Court which the Court can alter and
modify. The Congress, on the other hand, was given the power to repeal, alter or
supplement the rules on pleading, practice and procedure, and the admission to the
practice of law promulgated by the Court.[147]

This power to promulgate rules concerning pleading, practice and procedure, and
admission to the practice of law is in fact zealously guarded by the Court.

Thus, in Philippine Lawyers Association v. Agrava,[148] the Court asserted its "exclusive"

and constitutional power with respect to the admission to the practice of law and when
the act falls within the term "practice of law," the Rules of Court govern.[149]

In In Re: Petition of A.E. Garcia,[150] the Court withheld from the executive the power to
modify the laws and regulations governing admission to the practice of law as the
prerogative to promulgate rules for admission to the practice of law belongs to the Court
and the power to repeal, alter, or supplement such rules is reserved only to the Congress.

Even then, the character of the power of the Congress to repeal, alter, or supplement the
rules concerning pleading, practice, and procedure, and the admission to the practice of
law under the 1935 Constitution was held not to be absolute and that any law passed by
the Congress on the matter is merely permissive, being that the power concerning
admission to the practice of law is primarily a judicial function.

The 1973 Constitution is no less certain in reiterating the Court's power to promulgate
rules concerning pleading, practice, and procedure in all courts and the admission to the
practice of law. As observed in Echegaray v. Secretary of Justice,[151] the 1973
Constitution further strengthened the independence of the judiciary by giving it the
additional power to promulgate rules governing the integration of the Bar.[152]

The ultimate power to promulgate rules on pleading, practice, and procedure, the
admission to the practice of law, and the integration of the Bar remains to be with the
Court under the 1973 Constitution even when the power of the Batasang Pambansa to
pass laws of permissive and corrective character repealing, altering, or supplementing
such rules was retained.

The 1987 Constitution departed from the 1935 and the 1973 organic laws in the sense
that it took away from the Congress the power to repeal, alter, or supplement the rules
concerning pleading, practice, and procedure, and the admission to the practice of law,
and the integration of the Bar and therefore vests exclusively and beyond doubt, the
power to promulgate such rules to the Court, thereby supporting a "stronger and more
independent judiciary."[153]

While the 1935 and 1973 Constitutions "textualized a power-sharing scheme" between
the legislature and the Court in the enactment of judicial rules,[154] the 1987 Constitution
"textually altered the power-sharing scheme" by deleting the Congress' subsidiary and
corrective power.[155]

Accordingly, the Court's exclusive power of admission to the Bar has been interpreted as
vesting upon the Court the authority to define the practice of law,[156] to determine who
will be admitted to the practice of law,[157] to hold in contempt any person found to be
engaged in unauthorized practice of law,[158] and to exercise corollary disciplinary
authority over members of the Bar.[159]

The act of admitting, suspending, disbarring and reinstating lawyers in the practice of law
is a judicial function because it requires "(1) previously established rules and principles;
(2) concrete facts, whether past or present, affecting determinate individuals; and (3)
decision as to whether these facts are governed by the rules and principles." [160]

Petitioners readily acknowledge that legal education or the study of law is not the practice
of law, the former being merely preparatory to the latter. In fact, the practice of law has a
settled jurisprudential meaning:
The practice of law is not limited to the conduct of cases or litigation in court; it
embraces the preparation of pleadings and other papers incident to actions and social
proceedings, the management of such actions and proceedings on behalf of clients before
judges and courts, and in addition, conveying. In general, all advice to clients, and all
action taken for them in matters connected with the law corporation services, assessment
and condemnation services contemplating an appearance before a judicial body, the
foreclosure of a mortgage, enforcement of a creditor's claim in bankruptcy and
insolvency proceedings, and conducting proceedings in attachment, and in matters of
estate and guardianship have been held to constitute law practice as the preparation and
drafting of legal instruments, where the work done involves the determination by the
trained legal mind of the legal effect of facts and conditions.

Practice of law under modern conditions consists in no small part of work performed
outside of any court and having no immediate relation to proceedings in court. It
embraces conveyancing, the giving of legal advice on a large variety of subjects, and the
preparation and execution of legal instruments covering an extensive field of business
and trust relations and other affairs. Although these transactions may have no direct
connection with court proceedings, they are always subject to become involved in
litigation. They require in many aspects a high degree of legal skill, a wide experience
with men and affairs, and great capacity for adaptation to difficult and complex
situations. These customary functions of an attorney or counselor at law bear an intimate
relation to the administration of justice by the courts. No valid distinction, so far as
concerns the question set forth in the order, can be drawn between that part of the work of
the lawyer which involved appearance in court and that part which involves advice and
drafting of instruments in his office. It is of importance to the welfare of the public that
these manifold customary functions be performed by persons possessed of adequate
learning and skill, of sound moral character, and acting at all times under the heavy trust
obligations to clients which rests upon all attorneys.[161] (Internal citations omitted)
The definition of the practice of law, no matter how broad, cannot be further enlarged as
to cover the study of law.
               
5. The Court
    exercises judicial
 
power only
   
Section 12, Article VIII of the 1987 Constitution clearly provides that "[t]he Members of
the Supreme Court and of other courts established by law shall not be designated to any
agency performing quasi-judicial or administrative functions." The Court exercises
judicial power only and should not assume any duty alien to its judicial functions, the
basic postulate being the separation of powers. As early as Manila Electric Co. v. Pasay
Transportation Co.,[162] the Court already stressed:
The Supreme Court of the Philippine Islands represents one of the three divisions of
power in our government. It is judicial power and judicial power only which is
exercised by the Supreme Court. Just as the Supreme Court, as the guardian of
constitutional rights, should not sanction usurpations by any other department of the
government, so should it as strictly confine its own sphere of influence to the powers
expressly or by implication conferred on it by the Organic Act. The Supreme Court and
its members should not and cannot be required to exercise any power or to perform
any trust or to assume any duty not pertaining to or connected with the
administering of judicial functions. (Emphases supplied)
Neither may the regulation and supervision of legal education be justified as an exercise
of the Court's "residual" power. A power is residual if it does not belong to either of the
two co-equal branches and which the remaining branch can, thus, exercise consistent with
its functions. Regulation and supervision of legal education is primarily exercised by the
Legislative and implemented by the Executive, thus, it cannot be claimed by the
judiciary.

It is with studied restraint that the Court abstains from exercising a power that is not
strictly judicial, or that which is not expressly granted to it by the Constitution. [163] This
judicial abstention is neither avoidance nor dereliction - there is simply no basis for the
Court to supervise and regulate legal education.

Court supervision over legal education is nevertheless urged[164] to the same extent as the
Court administers, supervises and controls the Philippine Judicial Academy (PHILJA).
[165]
 The parallelism is mislaid because the PHILJA is intended for judicial education.
[166]
 It particularly serves as the "training school for justices, judges, court personnel,
lawyers and aspirants to judicial posts."[167] Court supervision over judicial education is
but consistent with the Court's power of supervision over all courts and the personnel
thereof.[168]

Still, petitioners insist that the Court actually regulated legal education through Sections
5, 6, and 16 of Rule 138 and Sections 1, 2, 3, and 4 of Rule 138-A of the 1997 Rules of
Court. On the contrary, the Rules of Court do not intend nor provide for direct and actual
Court regulation over legal education. At most, the Rules of Court are reflective of the
inevitable relationship between legal education and the admissions to the bar.
               
6. The Rules of
    Court do not
support the
argument that the
 
Court directly and
actually regulates
legal education
   
While the power of the Court to promulgate rules concerning admission to the practice of
law exists under the 1935 Constitution and reiterated under the 1973 and 1987
Constitutions, the Court has not promulgated any rule that directly and actually regulates
legal education.
Instead, the 1964 Rules of Court concerned only the practice of law, admission to the bar,
admission to the bar examination, bar examinations, and the duties, rights and conduct of
attorneys. The 1997 Rules of Court is no different as it contained only the rules on
attorneys and admission to the bar under Rule 138, the law student practice rule under
Rule 138-A, the integrated bar in Rule 139-A and disbarment and discipline of attorneys
in Rule 139-B.[169]

In the exercise of its power to promulgate rules concerning the admission to the practice
of law, the Court has prescribed the subjects covered by, as well as the qualifications of
candidates to the bar examinations. Only those bar examination candidates who are found
to have obtained a passing grade are admitted to the bar and licensed to practice law.
[170]
 The regulation of the admission to the practice of law goes hand in hand with the
commitment of the Court and the members of the Philippine Bar to maintain a high
standard for the legal profession. To ensure that the legal profession is maintained at a
high standard, only those who are known to be honest, possess good moral character, and
show proficiency in and knowledge of the law by the standard set by the Court by passing
the bar examinations honestly and in the regular and usual manner are admitted to the
practice of law.[171]

Thus, under the 1997 Rules of Court, admission to the bar requires: (1) furnishing
satisfactory proof of educational, moral, and other qualifications; (2) passing the bar
examinations;[172] and (3) taking the lawyer's oath,[173] signing the roll of attorneys and
receiving from the clerk of court a certificate of the license to practice. [174] An applicant
for admission to the bar must have these qualifications: (1) must be a citizen of the
Philippines; (2) must at least be 21 years of age; (3) must be of good moral character; (4)
must be a resident of the Philippines; (5) must produce satisfactory evidence of good
moral character; and (6) no charges against the applicant, involving moral turpitude, have
been filed or are pending in any court in the Philippines.[175] It is beyond argument that
these are the requisites and qualifications for admission to the practice of law and not for
admission to the study of law.

In turn, to be admitted to the bar examinations, an applicant must first meet the core
academic qualifications prescribed under the Rules of Court.

6(a). Sections 5, 6, and 16, Rule 138

Section 5 provides that the applicant should have studied law for four years and have
successfully completed all the prescribed courses. This section was amended by Bar
Matter No. 1153,[176] to require applicants to "successfully [complete] all the prescribed
courses for the degree of Bachelor of Laws or its equivalent, in a law school or university
officially recognized by the Philippine Government, or by the proper authority in foreign
jurisdiction where the degree has been granted." Bar Matter No. 1153 further provides
that a Filipino citizen who is a graduate of a foreign law school shall be allowed to take
the bar examinations only upon the submission to the Court of the required certifications.

In addition to the core courses of civil law, commercial law, remedial law, criminal law,
public and private international law, political law, labor and social legislation, medical
jurisprudence, taxation, and legal ethics, Section 5 was further amended by A.M. No. 19-
03-24-SC or the Revised Law Student Practice Rule dated June 25, 2019 to include
Clinical Legal Education as a core course that must be completed by an applicant to the
bar examinations.

Notably, Section 5, Rule 138 of the Rules of Court, as amended, is not directed to law
schools, but to those who would like to take the bar examinations and enumerates the
academic competencies required of them. The Court does not impose upon law schools
what courses to teach, or the degree to grant, but prescribes only the core academic
courses which it finds essential for an applicant to be admitted to the bar. Law schools
enjoy the autonomy to teach or not to teach these courses. In fact, the Court even extends
recognition to a degree of Bachelor of Laws or its equivalent obtained abroad or that
granted by a foreign law school for purposes of qualifying to take the Philippine Bar
Examinations, subject only to the submission of the required certifications. Section 5
could not therefore be interpreted as an exercise of the Court's regulatory or supervisory
power over legal education since, for obvious reasons, its reach could not have possibly
be extended to legal education in foreign jurisdictions.

In similar fashion, Section 6, Rule 138 of the Rules of Court requires that an applicant to
the bar examinations must have completed a four-year high school course and a
bachelor's degree in arts or sciences. Again, this requirement is imposed upon the
applicant to the bar examinations and not to law schools. These requirements are merely
consistent with the nature of a law degree granted in the Philippines which is a
professional, as well as a post-baccalaureate degree.

It is a reality that the Rules of Court, in prescribing the qualifications in order to take the
bar examinations, had placed a considerable constraint on the courses offered by law
schools. Adjustments in the curriculum, for instance, is a compromise which law schools
apparently are willing to take in order to elevate its chances of graduating future bar
examinees. It is in this regard that the relationship between legal education and
admissions to the bar becomes unmistakable. This, however, does not mean that the
Court has or exercises jurisdiction over legal education. Compliance by law schools with
the prescribed core courses is but a recognition of the Court's exclusive jurisdiction over
admissions to the practice of law - that no person shall be allowed to take the bar
examinations and thereafter, be admitted to the Philippine Bar without having taken and
completed the required core courses.

Section 16, Rule 138 of the Rules of Court, on the other hand, provides that those who
fail the bar examinations for three or more times must take a refresher course. Similarly,
this is a requirement imposed upon the applicant. The Court does not impose that a law
school should absolutely include in its curriculum a refresher course.

6(b). Revised Law Student Practice Rule

Neither does Rule 138-A of the Rules of Court as amended by A.M. No. 19-03-24-SC on
law student practice manifest the Court's exercise of supervision or regulation over legal
education. The three-fold rationale of the law student practice rule is as follows:
1. [T]o ensure that there will be no miscarriage of justice as a result of incompetence or
inexperience of law students, who, not having as yet passed the test of professional
competence, are presumably not fully equipped to act [as] counsels on their own;

2. [T]o provide a mechanism by which the accredited law school clinic may be able to
protect itself from any potential vicarious liability arising from some culpable action by
their law students; and

3. [T]o ensure consistency with the fundamental principle that no person is allowed to
practice a particular profession without possessing the qualifications, particularly a
license, as required by law.[177]
Consistently, the Revised Law Student Practice Rule is primordially intended to ensure
access to justice of the marginalized sectors and to regulate the law student practitioner's
limited practice of law pursuant to the Court's power to promulgate rules on pleading,
practice, and procedure in all courts, the Integrated Bar, and legal assistance to the
underprivileged.

In allowing the law student and in governing the conduct of the law student practitioner,
what the Court regulates and supervises is not legal education, but the appearance and
conduct of a law student before any trial court, tribunal, board, or officer, to represent
indigent clients of the legal clinic - an activity rightfully falling under the definition of
practice of law. Inasmuch as the law student is permitted to act for the legal clinic and
thereby to practice law, it is but proper that the Court exercise regulation and supervision
over the law student practitioner. Necessarily, the Court has the power to allow their
appearance and plead their case, and hereafter, to regulate their actions.

In all, the Rules of Court do not support petitioners' argument that the Court regulates and
supervises legal education. To reiterate, the Rules of Court are directed not towards legal
education or law schools, but towards applicants for admission to the bar and applicants
for admission to the bar examinations - consistent with the Court's power to promulgate
rules concerning admission to the practice of law, the same being fundamentally a
judicial function.

Having, thus, established that the regulation and supervision of legal education do not fall
within the competence of the Court and is, instead, a power exercised by the political
departments, the Court now proceeds to determine the extent of such police power in
relation to legal education.

B.
Reasonable Supervision and Regulation of Legal
Education as an Exercise of Police Power

The term police power was first used[178] in jurisprudence in 1824 in Gibbons v.
Ogden[179] where the U.S. Supreme Court, through Chief Justice Marshall, held that the
regulation of navigation by steamboat operators for purposes of interstate commerce was
a power reserved to and exercised by the Congress, thus, negating state laws interfering
with the exercise of that power. Likewise often cited is Commonwealth v. Alger[180] which
defined police power as "the power vested in legislature by the [C]onstitution, to make,
ordain, and establish all manner of wholesome and reasonable laws, statutes, and
ordinances, either with penalties or without, not repugnant to the [C]onstitution, as they
shall judge to be for the good and welfare of the Commonwealth, and of the subjects of
the same."

Closer to home, early Philippine jurisprudence pertain to police power as the power to
promote the general welfare and public interest;[181] to enact such laws in relation to
persons and property as may promote public health, public morals, public safety and the
general welfare of each inhabitant;[182] to preserve public order and to prevent offenses
against the state and to establish for the intercourse of [citizens] those rules of good
manners and good neighborhood calculated to prevent conflict of rights.[183]

In Ermita-Malate Hotel and Motel [Operators] Association, Inc. v. City Mayor of

Manila,[184] the nature and scope of police power was reaffirmed as embracing the power
to prescribe regulations to promote the health, morals, education, good order, safety, or
the general welfare of the people. It is negatively defined as the authority to enact
legislation that may interfere with personal liberty or property in order to promote the
general welfare[185] and the State's inherent power to prohibit all that is hurtful to the
comfort, safety, and welfare of society,[186] and flows from the recognition that salus
populi est suprema lex.[187] It is described as the most essential, insistent and
illimitable[188] of the powers of the State. It is co-existent with the concept of the State and
is the very foundation and one of its cornerstones,[189] and therefore even precedes the
written Constitution.
               
1. Enactment of
    education laws is
an exercise of  
police power
   
The State has a "high responsibility for [the] education of its citizens"[190] and has an
interest in prescribing regulations to promote the education, and consequently, the
general welfare of the people.[191] The regulation or administration of educational
institutions, especially on the tertiary level, is invested with public interest. [192] Thus, the
enactment of education laws, implementing rules and regulations and issuances of
government agencies is an exercise of the State's police power. [193]

As a professional educational program, legal education properly falls within the

supervisory and regulatory competency of the State. The legislative history of the
Philippine legal educational system earlier recounted evinces that the State, through
statutes enacted by the Congress and administrative regulations issued by the Executive,
consistently exercises police power over legal education.

The exercise of such police power, however, is not absolute.

               
2. Supervisory and
    regulatory
exercise, not  
control
   
The 1935[194] and 1973[195] Constitutions plainly provide that all educational institutions
shall be under the supervision of and subject to regulation by the State. These reflect in
express terms the police power already inherently possessed by the State. Making express
an already inherent power is not a superfluous exercise, but is rather consequential in
case of conflict between express powers. As elucidated in Philippine Association of
Colleges and Universities:[196]
In this connection we do not share the belief that [now Article XIV, Section 4(1)] has
added new power to what the State inherently possesses by virtue of the police power. An
express power is necessarily more extensive than a mere implied power. For instance, if
there is conflict between an express individual right and the express power to control
private education it cannot off-hand be said that the latter must yield to the former -
conflict of two express powers. But if the power to control education is merely implied
from the police power, it is feasible to uphold the express individual right[.] x x x
The 1987 Constitution under Section 4(1), Article XIV, even when expressly recognizing
the complementary roles played by the public and private schools in education, reiterated
that these educational institutions are subject to State supervision and regulation, thus:
SEC. 4.(1) The State recognizes the complementary roles of public and private
institutions in the educational system and shall exercise reasonable supervision and
regulation of all educational institutions. (Emphasis supplied)
As much as possible, the words of the Constitution are understood in the sense they have
in common use. What it says according to the text of the provision to be construed
compels acceptance and negates the power of the courts to alter it, based on the postulate
that the framers and the people mean what they say.[197]
As worded, the Constitution recognizes that the role of public and private schools in
education is complementary in relation to each other, and primordial in relation to the
State as the latter is only empowered to supervise and regulate. The exercise of police
power in relation to education must be compliant with the normative content of Section
4(1), Article XIV of the 1987 Constitution.[198] The exercise of police power over
education must merely be supervisory and regulatory.

The State's supervisory and regulatory power is an auxiliary power in relation to

educational institutions, be it a basic, secondary or higher education. This must
necessarily be so since the right and duty to educate, being part and parcel of youth-
rearing, do not inure to the State at the first instance. Rather, it belongs essentially and
naturally to the parents,[199] which right and duty they surrender by delegation to the
educational institutions. As held in Samahan ng mga Progresibong Kabataan (SPARK)
v. Quezon City,[200] the right and duty of parents to rear their children being a natural and
primary right connotes the parents' superior right over the State in the upbringing of their
children. The responsibility to educate lies with the parents and guardians as an inherent
right,[201] over which the State assumes a supportive role.[202] Withholding from the State
the unqualified power to control education also serves a practical purpose - it allows for a
degree of flexibility and diversity essential to the very reason of education to rear socially
responsible and morally upright youth and to enable them, also, to come in contact with
challenging ideas.

In this sense, when the Constitution gives the State supervisory power, it is understood
that what it enjoys is a supportive power, that is, the power of oversight [203] over all
educational institutions. It includes the authority to check, but not to interfere.

In addition to supervision, educational institutions are likewise made subject to State

regulation. Dispensing a regulatory function means imposing requirements, setting
conditions, prescribing restrictions, and ensuring compliance. In this regard, the political
departments are vested with ample authority to set minimum standards to be met by all
educational institutions.[204]

Starkly withheld from the State is the power to control educational institutions.
Consequently, in no way should supervision and regulation be equated to State control. It
is interesting to note that even when a suggestion had been made during the drafting of
the 1935 Constitution that educational institutions should be made "subject to the laws of
the State," the proponent of the amendment had no totalitarian intentions,[205] and the
proposal was not meant to curtail the liberty of teaching,[206] thus:
I think it only insures the efficient functioning of educational work and does not limit
liberty of administrators of schools. The gentleman will notice that my amendment does
not tend to curtail which he used in asking the question [sic]. I want the power of the
State to be supervisory as supervision in educational parlance should be of the
constructive type in the matter of help rather than obstruction.[207] (Emphasis
supplied)               
3. Reasonable
    exercise  
   
To be valid, the supervision and regulation of legal education as an exercise of police
power must be reasonable and not repugnant to the Constitution.[208]

As held in Social Justice Society v. Atienza, Jr.,[209] the exercise of police power, in order
to be valid, must be compliant with substantive due process:
[T]he State, x x x may be considered as having properly exercised [its] police power only
if the following requisites are met: (1) the interests of the public generally, as
distinguished from those of a particular class, require its exercise[;] and (2) the means
employed are reasonably necessary for the accomplishment of the purpose and not
unduly oppressive upon individuals. In short, there must be a concurrence of a lawful
subject and a lawful method. (Emphases supplied)
In Philippine Association of Service Exporters, Inc. v. Drilon,[210] the Court held that:
Notwithstanding its. extensive sweep, police power is not without its own limitations. For
all its awesome consequences, it may not be exercised arbitrarily or unreasonably.
Otherwise, and in that event, it defeats the purpose for which it is exercised, that is, to
advance the public good. (Emphasis supplied)
Obviating any inference that the power to regulate means the power to control, the 1987
Constitution added the word "reasonable" before the phrase supervision and regulation.

The import of the word "reasonable" was elaborated in Council of Teachers,[211] as

follows:
x x x Section 4(1) was a provision added by the Framers to crystallize the State's
recognition of the importance of the role that the private sector plays in the quality of the
Philippine education system. Despite this recognition, the Framers added the second
portion of Section 4[1] to emphasize that the State, in the exercise of its police power,
still possesses the power of supervision over private schools. The Framers were explicit,
however, that this supervision refers to external governance, as opposed to internal
governance which was reserved to the respective school boards, thus:
Madam President, Section 2(b) introduces four changes: one, the addition of the word
"reasonable" before the phrase "supervision and regulation"; two, the addition of the
word "quality" before the word "education"; three, the change of the wordings in the
1973 Constitution referring to a system of education, requiring the same to be relevant to
the goals of national development, to the present expression of "relevant to the needs of
the people and society"; and four, the explanation of the meaning of the expression
"integrated system of education" by defining the same as the recognition and
strengthening of the complementary roles of public and private educational institutions as
separate but integral parts of the total Philippine educational system.
When we speak of State supervision and regulation, we refer to the external
governance of educational institutions, particularly private educational institutions as
distinguished from the internal governance by their respective boards of directors or
trustees and their administrative officials. Even without a provision on external
governance, the State would still have the inherent right to regulate educational
institutions through the exercise of its police power. We have thought it advisable to
restate the supervisory and regulatory functions of the State provided in the 1935 and
1973 Constitutions with the addition of the word "reasonable." We found it necessary to
add the word "reasonable" because of an obiter dictum of our Supreme Court in a
decision in the case of Philippine Association of Colleges and Universities vs. The
Secretary of Education and the Board of Textbooks in 1955. In that case, the court said,
and I quote:
It is enough to point out that local educators and writers think the Constitution provides
for control of education by the State.

The Solicitor General cites many authorities to show that the power to regulate means
power to control, and quotes from the proceedings of the Constitutional Convention to
prove that State control of private education was intended by organic law.
The addition, therefore, of the word 'reasonable' is meant to underscore the sense of
the committee, that when the Constitution speaks of State supervision and
regulation, it does not in any way mean control. We refer only to the power of the
State to provide regulations and to see to it that these regulations are duly followed
and implemented. It does not include the right to manage, dictate, overrule and prohibit.
Therefore, it does not include the right to dominate. (Emphases in the original;
underscoring supplied)
The addition of the word "reasonable" did not change the texture of police power that the
State exercises over education. It merely emphasized that State supervision and
regulation of legal education cannot amount to control.
               
4. Academic freedom
 
       
Fundamental in constitutional construction is that the Constitution is to be interpreted as a
whole, and that all provisions bearing upon a particular subject are to be brought into
view and to be so interpreted as to effectuate the purposes of the Constitution. [212]

Accordingly, the reasonable supervision and regulation clause is not a stand-alone

provision, but must be read in conjunction with the other Constitutional provisions
relating to education which include, in particular, the clause on academic freedom.

Section 5(2), Article XIV of the 1987 Constitution, provides:

(2) Academic freedom shall be enjoyed in all institutions of higher learning.
This guarantee is not peculiar to the 1987 Constitution. A similar· provision was found in
the 1973 Constitution providing that: "All institutions of higher learning shall enjoy
academic freedom."[213] Both the 1973 and 1987 Constitutions provide for a broader scope
of academic freedom compared to the 1935 Constitution which limits the guarantee of
academic freedom only to universities of higher learning established by the State. [214]

In fact, academic freedom is not a novel concept. This can be traced to the freedom of
intellectual inquiry championed by Socrates, lost and replaced by thought control during
the time of Inquisition, until the movement back to intellectual liberty beginning the
16th century, most particularly flourishing in German universities.[215]

Academic freedom has traditionally been associated as a narrow aspect of the broader
area of freedom of thought, speech, expression and the press. It has been identified with
the individual autonomy of educators to "investigate, pursue, [and] discuss free from
internal and external interference or pressure."[216] Thus, academic freedom of faculty
members, professors, researchers, or administrators is defended based on the freedom of
speech and press.[217]

Academic freedom is enjoyed not only by members of the faculty, but also by the
students themselves, as affirmed in Ateneo de Manila University v. Judge Capulong:[218]
x x x. After protracted debate and ringing speeches, the final version which was none too
different from the way it was couched in the previous two (2) Constitutions, as found in
Article XIV, Section 5(2) states: "Academic freedom shall be enjoyed in all institutions
of higher learning." In anticipation of the question as to whether and what aspects of
academic freedom are included herein, ConCom Commissioner Adolfo S. Azcuna
explained: "Since academic freedom is a dynamic concept, we want to expand the
frontiers of freedom, especially in education, therefore, we shall leave it to the courts to
develop further the parameters of academic freedom."

More to the point, Commissioner Jose Luis Martin C. Gascon asked: "When we speak of
the sentence 'academic freedom shall be enjoyed in all institutions of higher learning,' do
we mean that academic freedom shall be enjoyed by the institution itself?" Azcuna
replied: "Not only that, it also includes x x x" Gascon finished off the broken thought,
"the faculty and the students." Azcuna replied: "Yes."
Jurisprudence has so far understood academic freedom of the students as the latter's right
to enjoy in school the guarantees of the Bill of Rights. For instance, in Villar v.
Technological Institute of the Philippines[219] and in Non v. Dames II,[220] it was held that
academic standards cannot be used to discriminate against students who exercise their
rights to peaceable assembly and free speech, in Malabanan v. Ramento,[221] it was ruled
that the punishment must be commensurate with the offense, and in Guzman v. National
University,[222] which affirmed the student's right to due process.

Apart from the academic freedom of teachers and students, the academic freedom of the
institution itself is recognized and constitutionally guaranteed.
The landmark case of Garcia v. The Faculty Admission Committee, Loyola School of
Theology[223] elucidates how academic freedom is enjoyed by institutions of higher
learning:
[I]t is to be noted that the reference is to the "institutions of higher learning" as the
recipients of this boon. It would follow then that the school or college itself is possessed
of such a right. It decides for itself its aims and objectives and how best to attain
them. It is free from outside coercion or interference save possibly when the
overriding public welfare calls for some restraint. It has a wide sphere of autonomy
certainly extending to the choice of students. This constitutional provision is not to be
construed in a niggardly manner or in a grudging fashion. That would be to frustrate its
purpose, nullify its intent. Former President Vicente G. Sinco of the University of the
Philippines, in his Philippine Political Law, is similarly of the view that it "definitely
grants the right of academic freedom to the university as an institution as distinguished
from the academic freedom of a university professor." He cited the following from Dr.
Marcel Bouchard, Rector of the University of Dijon, France, President of the conference
of rectors and vice-chancellors of European universities: "It is a well-established fact, and
yet one which sometimes tends to be obscured in discussions of the problems of freedom,
that the collective liberty of an organization is by no means the same thing as the freedom
of the individual members within it; in fact, the two kinds of freedom are not even
necessarily connected. In considering the problems of academic freedom one must
distinguish, therefore, between the autonomy of the university, as a corporate body, and
the freedom of the individual university teacher." Also: To clarify further the distinction
between the freedom of the university and that of the individual scholar, he says: The
personal aspect of freedom consists in the right of each university teacher - recognized
and effectively guaranteed by society - to seek and express the truth as he personally sees
it, both in his academic work and in his capacity as a private citizen. Thus the status of
the individual university teacher is at least as important, in considering academic
freedom, as the status of the institutions to which they belong and through which they
disseminate their learning. (Internal citations omitted; emphasis supplied)
Garcia also enumerated the internal conditions for institutional academic freedom, that
is, the academic staff should have de facto control over: (a) the admission and
examination of students; (b) the curricula for courses of study; (c) the appointment and
tenure of office of academic staff; and (d) the allocation of income among the different
categories of expenditure.[224]

Reference was also made to the influential language of Justice Frankfurter's concurring
opinion in Sweezy v. New Hampshire,[225] describing it as the "business of the university"
to provide a conducive atmosphere for speculation, experimentation, and creation where
the four essential freedoms of the university prevail: the right of the university to
determine for itself on academic grounds (a) who may teach; (b) what may be taught; (c)
how it shall be taught; and (d) who may be admitted to study.
               
4(a) State's supervisory  
. and regulatory
    power over legal
education in
relation to
academic freedom
   
The rule is that institutions of higher learning enjoy ample discretion to decide for itself
who may teach, what may be taught, how it shall be taught and who to admit, being part
of their academic freedom. The State, in the exercise of its reasonable supervision and
regulation over education, can only impose minimum regulations.

At its most elementary, the power to supervise and regulate shall not be construed as
stifling academic freedom in institutions of higher learning. This must necessarily be so
since institutions of higher learning are not mere walls within which to teach; rather, it is
a place where research, experiment, critical thinking, and exchanges are secured. Any
form of State control, even at its most benign and disguised as regulatory, cannot
therefore derogate the academic freedom guaranteed to higher educational institutions. In
fact, this non-intrusive relation between the State and higher educational institutions is
maintained even when the Constitution itself prescribes certain educational "thrusts" or
directions.[226]

This attitude of non-interference is not lost in jurisprudence. To cite an example, due

regard for institutional academic freedom versus State interference was recognized
in Lupangco v. Court of Appeals,[227] the commendable purpose of the Philippine
Regulation Commission of ensuring the integrity of the examination notwithstanding:
Another evident objection to Resolution No. 105 is that it violates the academic
freedom of the schools concerned. Respondent PRC cannot interfere with the
conduct of review that review schools and centers believe would best enable their
enrolees to meet the standards required before becoming a full-[f]ledged public
accountant. Unless the means or methods of instruction are clearly found to be
inefficient, impractical, or riddled with corruption, review schools and centers may
not be stopped from helping out their students. x x x (Emphasis supplied)
Similarly, in University of the Philippines v. Civil Service Commission,[228] the Court
upheld the university's academic freedom to choose who should teach and held that the
Civil Service Commission had no authority to dictate to the university the outright
dismissal of its personnel. Nothing short of marked arbitrariness,[229] or grave abuse of
discretion[230] on the part of the schools, or overriding public welfare[231] can therefore
justify State interference with the academic judgment of higher educational institutions.
As held in Ateneo de Manila University v. Judge Capulong,[232] "[a]s corporate entities,
educational institutions of higher learning are inherently endowed with the right to
establish their policies, academic and otherwise, unhampered by external controls or
pressure."
5. Right to education

Apart from the perspective of academic freedom, the reasonable supervision and
regulation clause is also to be viewed together with the right to education. The 1987
Constitution speaks quite elaborately on the right to education. Section 1, Article XIV
provides:
SEC. 1. The State shall protect and promote the right of all citizens to quality education at
all levels and shall take appropriate steps to make such education accessible to all.
The normative elements of the general right to education under Section 1, Article XIV,
are (1) to protect and promote quality education; and (2) to take appropriate steps towards
making such quality education accessible.

"Quality" education is statutorily defined as the appropriateness, relevance and excellence

of the education given to meet the needs and aspirations of the individual and society. [233]

In order to protect and promote quality education, the political departments are vested
with the ample authority to set minimum standards to be met by all educational
institutions. This authority should be exercised within the parameters of reasonable
supervision and regulation. As elucidated in Council of Teachers:[234]
While the Constitution indeed mandates the State to provide quality education, the
determination of what constitutes quality education is best left with the political
departments who have the necessary knowledge, expertise, and resources to
determine the same. The deliberations of the Constitutional Commission again are very
instructive:
Now, Madam President, we have added the word "quality" before "education" to
send appropriate signals to the government that, in the exercise of its supervisory
and regulatory powers, it should first set satisfactory minimum requirements in all
areas curriculum, faculty, internal administration, library, laboratory class and
other facilities, et cetera, and it should see to it that satisfactory minimum
requirements are met by all educational institutions, both public and private.

When we speak of quality education we have in mind such matters, among others,
as curriculum development, development of learning resources and instructional
materials, upgrading of library and laboratory facilities, innovations in educational
technology and teaching methodologies, improvement of research quality, and
others. Here and in many other provisions on education, the principal focus of attention
and concern is the students. I would like to say that in my view there is a slogan when we
speak of quality of education that I feel we should be aware of, which is, "Better than
ever is not enough." In other words, even if the quality of education is good now, we
should attempt to keep on improving it. (Emphases and underscoring supplied)
On the other hand, "accessible" education means equal opportunities to education
regardless of social and economic differences. The phrase "shall take appropriate steps"
signifies that the State may adopt varied approaches in the delivery of education that are
relevant and responsive to the needs of the people and the society. This is why, towards
this end, the State shall:
(1) Establish, maintain, and support a complete, adequate, and integrated system of education
relevant to the needs of the people and society;
(2) Establish and maintain a system of free public education in the elementary and high
school levels. Without limiting the natural right of parents to rear their children, elementary
education is compulsory for all children of school age;
(3) Establish and maintain a system of scholarship grants, student loan programs, subsidies,
and other incentives which shall be available to deserving students in both public and
private schools, especially to the underprivileged;
(4) Encourage non-formal, informal, and indigenous learning systems, as well as self-
learning, independent, and out-of-school study programs particularly those that respond
to community needs; and
(5) Provide adult citizens, the disabled, and out-of-school youth with training in civics,
vocational efficiency, and other skills.[235] (Emphases supplied)
The deliberations of the framers in this regard are instructive:
MR. GASCON: When we speak of education as a right, what we would like to
emphasize is that education should be equally accessible to all regardless of social
and economic differences. So we go into the issue of providing opportunities to such
an education, recognizing that there are limitations imposed on those who come from the
poorer social classes because of their inability to continue education. [236] x x x (Emphasis
supplied)
And further, as follows:
This is why when we speak of education as a right, it means very clearly that
education should be accessible to all, regardless of social and economic differences,
meaning, educational opportunities should be provided through a system of free
education, at least, up to the secondary level. And recognizing the limits of our
financial resources, tertiary education should still be afforded and provided
availability to those who are poor and deserving. That is why when we say that
education is a right, it imposes a correlative duty on the part of the State to provide it to
the citizens. Making it a right shows that education is recognized as an important function
of the State. Education is not merely a social service to be provided by the State. The
proposed provision recognizes that a right to education is a right to acquire a decent
standard of living, and that, therefore, the State cannot deprive anyone of this right in the
same manner that the right to life, the right to liberty and property cannot be taken away
without due process of law.[237] (Emphasis supplied)
The element of accessibility under the Constitution, thus, pertains to both the elimination
of discrimination especially against disadvantaged groups and to the financial duty of the
State for, after all, the right to education is part and parcel of social justice. The objective
is to make quality education accessible by appropriate means.

Apart from the Constitution, the right to education is also recognized in international
human rights law under various instruments to which the Philippines is a state signatory
and to which it is concomitantly bound.
For instance, Article 13(2)[238] of the International Covenant on Economic, Social and
Cultural Rights (ICESCR) recognizes the right to receive an education with the following
interrelated and essential features; (a) availability; (b) accessibility; (c) acceptability; and
(d) adaptability.[239]

In particular, accessibility is understood as giving everyone, without discrimination,

access to educational institutions and programs. Accessibility has three overlapping
dimensions:
(1) Non-discrimination - education must be accessible to all, especially the most vulnerable
groups, in law and fact, without discrimination on any of the prohibited grounds x x x;
(2) Physical accessibility - education has to be within safe physical reach, either by attendance
at some reasonably convenient geographic location ([e.g.] a neighborhood school) or [via]
modern technology ([e.g.] access to a "distance learning" programme); [and]
(3) Economic accessibility - education has to be affordable to all. This dimension of
accessibility is subject to the differential wording of [A]rticle 13(2) in relation to primary,
secondary and higher education: whereas primary education shall be available "free to all",
States parties are required to progressively introduce free secondary and higher education[.]
[240]

Pertinent to higher education, the elements of quality and accessibility should also be
present as the Constitution provides that these elements should be protected and
promoted in all educational institutions.

Nevertheless, the right to receive higher education is not absolute.

               
5(a) Right to education
. is subject to fair,
    reasonable, and
equitable
 
admission and
academic
requirements
   
Article 26(1)[241] of the Universal Declaration of Human Rights provides that "[t]echnical
and professional education shall be made generally available and higher education shall
be equally accessible to all on the basis of merit[,]" while the ICESCR provides that
"[h]igher education shall be made equally accessible to all, on the basis of capacity, by
every appropriate means, and in particular by the progressive introduction of free
education[.]"[242] Thus, higher education is not to be generally available, but accessible
only on the basis of capacity.[243] The capacity of individuals should be assessed by
reference to all their relevant expertise and experience.[244]

The right to receive higher education must further be read in conjunction with the right of
every citizen to select a profession or course of study guaranteed under the Constitution.
In this regard, the provisions of the 1987 Constitution under Section 5(3), Article XIV are
more exacting:
SEC. 5. x x x

xxxx

(3) Every citizen has a right to select a profession or course of study, subject to fair,
reasonable, and equitable admission and academic requirements.
There is uniformity in jurisprudence holding that the authority to set the admission and
academic requirements used to assess the merit and capacity of the individual to be
admitted and retained in higher educational institutions lie with the institutions
themselves in the exercise of their academic freedom.

In Ateneo de Manila University v. Judge Capulong,[245] the Court ruled:

Since Garcia v. Loyola School of Theology, we have consistently upheld the salutary
proposition that admission to an institution of higher learning is discretionary upon a
school, the same being a privilege on the part of the student rather than a right.
While under the Education Act of 1982, students have a right "to freely choose their
field of study, subject to existing curricula and to continue their course therein up to
graduation," such right is subject, as all rights are, to the established academic and
disciplinary standards laid down by the academic institution.

"For private schools have the right to establish reasonable rules and regulations for the
admission, discipline and promotion of students. This right x x x extends as well to
parents x x x as parents are under a social and moral (if not legal) obligation, individually
and collectively, to assist and cooperate with the schools."

Such rules are "incident to the very object of incorporation and indispensable to the
successful management of the college. The rules may include those governing student
discipline." Going a step further, the establishment of rules governing university-student
relations, particularly those pertaining to student discipline, may be regarded as vital, not
merely to the smooth and efficient operation of the institution, but to its very survival.

Within memory of the current generation is the eruption of militancy in the academic
groves as collectively, the students demanded and plucked for themselves from the
panoply of academic freedom their own rights encapsulized under the rubric of "right to
education" forgetting that, in Hohfeldian terms, they have a concomitant duty, and that is,
their duty to learn under the rules laid down by the school. (Citation in the original
omitted; emphases supplied)
In Villar v. Technological Institute of the Philippines,[246] the Court similarly held:
xxxx

2. What cannot be stressed too sufficiently is that among the most important social,
economic, and cultural rights is the right to education not only in the elementary and high
school grades but also on the college level. The constitutional provision as to the State
maintaining "a system of free public elementary education and, in areas where finances
permit, establish and maintain a system of free public education" up to the high school
level does not per se exclude the exercise of that right in colleges and universities. It is
only at the most a reflection of the lack of sufficient funds for such a duty to be
obligatory in the case of students in the colleges and universities. As far as the right
itself is concerned, not the effectiveness of the exercise of such right because of the
lack of funds, Article 26 of the Universal Declaration of Human Rights provides:
"Everyone has the right to education. Education shall be free, at least in the
elementary and fundamental stages. Elementary education shall be compulsory.
Technical and professional education shall be made generally available and higher
education shall be equally accessible to all on the basis of merit."

3. It is quite clear that while the right to college education is included in the social
economic, and cultural rights, it is equally manifest that the obligation imposed on
the State is not categorical, the phrase used being "generally available" and higher
education, while being "equally accessible to all should be on the basis of merit." To
that extent, therefore, there is justification for excluding three of the
aforementioned petitioners because of their marked academic deficiency.

4. The academic freedom enjoyed by "institutions of higher learning" includes the

right to set academic standards to determine under what circumstances failing
grades suffice for the expulsion of students. Once it has done so, however, that
standard should be followed meticulously. It cannot be utilized to discriminate against
those students who exercise their constitutional rights to peaceable assembly and free
speech. If it does so, then there is a legitimate grievance by the students thus prejudiced,
their right to the equal protection clause being disregarded. (Emphases supplied)
Likewise, in Calawag:[247]
Lastly, the right to education invoked by Calawag cannot be made the basis for issuing a
writ of preliminary mandatory injunction. In Department of Education, Culture and
Sports v. San Diego, we held that the right to education is not absolute. Section 5(e),
Article XIV of the Constitution provides that "[e]very citizen has a right to select a
profession or course of study, subject to fair, reasonable, and equitable admission and
academic requirements." The thesis requirement and the compliance with the
procedures leading to it, are part of the reasonable academic requirements a person
desiring to complete a course of study would have to comply with. (Citation in the
original omitted; emphasis supplied)
The deliberations of the framers on the qualifications to the right to education are also
illuminating:
MR. NOLLEDO: Thank you, Madam President. Before I ask questions directed to the
chairman and members of the committee, I would like to warmly congratulate them for a
job well-done. The committee report to my mind, Madam President, is excellent and I
hope it will not, in the course of amendments, suffer from adulteration. With respect to
page 1, lines 12-13: "Education is the right of every citizen of the Philippines," I agree
with this statement, but when we talk of the right, I understand from the chairman that it
is compellable and from Commissioner Guingona, that it is enforceable in court. Suppose
a student of a private school is not allowed to enroll by reason of misconduct or that
his stay in the school is considered by the administration of that school to be
undesirable, does he have a right to enforce his right to education under this
situation?

MR. GUINGONA: Madam President, the right to education, like any other right, is
not absolute. As a matter of fact, Article XXVI of the Universal Declaration of Human
Rights, when it acknowledges the right to education, also qualifies it when at the end of
the provision, it say, "on the basis of merit." Therefore, the student may be subject to
certain reasonable requirements regarding admission and retention and this is so
provided in the draft Constitution. We admit even of discrimination. We have accepted
this in the Philippines, and I suppose in the United States there are schools that can
refuse admission to boys because they are supposed to be exclusively for girls. And
there are schools that may refuse admission to girls because they are exclusively for
boys. There may even be discrimination to accept a student who has a contagious
disease on the ground that it would affect the welfare of the other students. What I
mean is that there could be reasonable qualifications, limitations or restrictions to this
right, Madam President.

MR. GASCON: May I add, Madam President.

MR. NOLLEDO: Yes, the Commissioner may.

MR. GASCON: When we speak of education as a right, what we would like to

emphasize is that education should be equally accessible to all regardless of social and
economic differences. So we go into the issue of providing opportunities to such an
education, recognizing that there are limitations imposed on those who come from the
poorer social classes because of their inability to continue education.

However, in the same light, this right to education is subject to the right of

educational institutions to admit students upon certain conditions such as ability to
pay the required entrance examination fee and maintaining a respectable school
record. When we speak of this right of schools as far as maintaining a certain degree
or quality of students, these conditions must be reasonable and should not be used
just to impose certain unfair situations on the students.

MR. GUINGONA: Madam President, may I add.

There is already established jurisprudence about this. In the United States, in the case of
[Lesser] v. Board of Education of New York City, 239, NYS 2d 776, the court held that
the refusal of a school to admit a student who had an average of less than 85 percent
which is the requirement for that school was lawful.

In the Philippines, we have the case of Padriguilan [sic] v. Manila Central

University where refusal to retain the student was because of the alleged deficiency in a
major subject and this was upheld by our Supreme Court. There is also the case
of Garcia v. Loyola School of Theology, wherein Garcia, a woman, tried to continue
studying in this school of theology.[248] (Citation in the original omitted; emphases
supplied)
Extant from the foregoing is that while there is a right to quality higher education, such
right is principally subject to the broad academic freedom of higher educational
institutions to impose fair, reasonable, and equitable admission and academic
requirements. Plainly stated, the right to receive education is not and should not be taken
to mean as a right to be admitted to educational institutions.

With the basic postulates that jurisdiction over legal education belongs primarily and
directly to the political departments, and that the exercise of such police power must be in
the context of reasonable supervision and regulation, and must be consistent with
academic freedom and the right to education, the Court now proceeds to address whether
the assailed provisions of R.A. No. 7662 and the corresponding LEB issuances fall
within, the constitutionally-permissible supervision and regulation of legal education.

C.
LEB's Powers Under R.A. No. 7662 vis-a-vis the
Court's Jurisdiction Under Article VIII, Section
5(5) of the Constitution
               
1. Section 3(a)(2) on
    increasing
awareness among
 
members of the
legal profession
   
One of the general objectives of legal education under Section 3(a)(2) of R.A. No. 7662
is to "increase awareness among members of the legal profession of the needs of the
poor, deprived and oppressed sectors of society[.]" This objective is reiterated by the
LEB in LEBMO No. 1-2011, Section 7, Article II, as follows:
SEC. 7. (Section 3 of the law) General and Specific Objectives of Legal Education.

a) Legal education in the Philippines is geared to attain the following objectives:

xxxx
(2) to increase awareness among members of the legal profession of the needs of the
poor, deprived and oppressed sectors of society[.] (Emphasis supplied)
The plain language of Section 3(a)(2) of R.A. No. 7662 and Section 7(2) of LEBMO No.
1-2011 are clear and need no further interpretation. This provision goes beyond the scope
of R.A. No. 7662, i.e., improvement of the quality of legal education, and, instead delves
into the training of those who are already members of the bar. Likewise, this objective is
a direct encroachment on the power of the Court to promulgate rules concerning the
practice of law and legal assistance to the underprivileged and should, thus, be voided on
this ground. As aptly observed by the CLEBM and which the Court had approved:
In the same vein Section 3 provides as one of the objectives of legal education increasing
"awareness among members of the legal profession of the needs of the poor, deprived and
oppressed sectors of the society." Such objective should not find a place in the law that
primarily aims to upgrade the standard of schools of law as they perform the task of
educating aspiring lawyers. Section 5, paragraph 5 of Article VIII of the Constitution also
provides that the Supreme Court shall have the power to promulgate rules on "legal
assistance to the underprivileged" and hence, implementation of [R.A. No. 7662] might
give rise to infringement of a constitutionally mandated power.[249]               
2. Section 2, par. 2
    and Section 7(g)
on legal
apprenticeship
and law practice  
internship as a
requirement for
taking the bar
   
Towards the end of uplifting the standards of legal education, Section 2, par. 2 of R.A.
No. 7662 mandates the State to (1) undertake appropriate reforms in the legal education
system; (2) require proper selection of law students; (3) maintain quality among law
schools; and (4) require legal apprenticeship and continuing legal education.

Pursuant to this policy, Section 7(g) of R.A. No. 7662 grants LEB the power to establish
a law practice internship as a requirement for taking the bar examinations:
SEC. 7. Powers and Functions. - x x x x

xxxx

(g) to establish a law practice internship as a requirement for taking the Bar, which
a law student shall undergo with any duly accredited private or public law office or firm
or legal assistance group anytime during the law course for a specific period that the
Board may decide, but not to exceed a total of twelve (12) months. For this purpose, the
Board shall prescribe the necessary guidelines for such accreditation and the
specifications of such internship which shall include the actual work of a new member of
the Bar.
This power is mirrored in Section 11(g) of LEBMO No. 1-2011:
SEC. 11. (Section 7 of the law) Powers and Functions. - For the purpose of achieving the
objectives of this Act, the Board shall have the following powers and functions:

xxxx

g) to establish a law practice internship as a requirement for taking the Bar which a
law student shall undergo with any duly accredited private or public law office or firm or
legal assistance group anytime during the law course for a specific period that the Board
may decide, but not to exceed a total of twelve (12)months. For this purpose, the Board
shall prescribe the necessary guidelines for such accreditation and the specifications of
such internship which shall include the actual work of a new member of the Bar[.]
It is clear from the plain text of Section 7(g) that another requirement, i.e., completion of
a law internship program, is imposed by law for taking the bar examinations. This
requirement unduly interferes with the exclusive jurisdiction of the Court to promulgate
rules concerning the practice of law and admissions thereto.

The jurisdiction to determine whether an applicant may be allowed to take the bar
examinations belongs to the Court. In fact, under the whereas clauses of the Revised Law
Student Practice Rule, the Court now requires the completion of clinical legal education
courses, which may be undertaken either in a law clinic or through an externship, as a
prerequisite to take the bar examinations, thus:
Whereas, to produce practice-ready lawyers, the completion of clinical legal education
courses must be a prerequisite to take the bar examinations as provided in Section 5 of
Rule 138.
Under Section 7(g), the power of the LEB is no longer confined within the parameters of
legal education, but now dabbles on the requisites for admissions to the bar examinations,
and consequently, admissions to the bar. This is a direct encroachment upon the Court's
exclusive authority to promulgate rules concerning admissions to the bar and should,
therefore, be struck down as unconstitutional.

Further, and as will be discussed hereunder, the LEB exercised this power in a manner
that forces upon law schools the establishment of a legal apprenticeship program or a
legal aid clinic, in violation of the schools' right to determine for themselves their
respective curricula.
               
3. Section 2, par. 2  
    and Section 7(h)
on continuing
legal education of
practicing lawyers
    
Petitioners in G.R. No. 230642 argue that the power given to the LEB to adopt a system
of continuing legal education implies that the LEB exercises jurisdiction not only over
the legal education of those seeking to become lawyers, but also over those who are
already lawyers which is a function exclusively belonging to the Court.[250] Respondent,
on the other hand, maintains that the LEB's power to adopt a system of continuing legal
education is different from the mandatory continuing legal education required of all
members of the bar.[251] Respondent explains that the continuing legal education under
R.A. No. 7662 is limited to the training of lawyer-professors and not to the practice of the
legal profession.[252]

The questioned power of the LEB to adopt a system of continuing legal education
appears in Section 2, par. 2 and Section 7(h) of R.A. No. 7662:
SEC. 2. Declaration of Policies. - x x x

xxxx

Towards this end, the State shall undertake appropriate reforms in the legal education
system, require proper selection of law students, maintain quality among law schools, and
require legal apprenticeship and continuing legal education.

xxxx

SEC. 7. Powers and Functions. - x x x

xxxx

(h) to adopt a system of continuing legal education. For this purpose, the [LEB] may
provide for the mandatory attendance of practicing lawyers in such courses and for
such duration as the [LEB] may deem necessary; x x x (Emphases supplied)
This power is likewise reflected in Section 11(h) of LEBMO No. 1-2011, as follows:
SEC. 11. (Section 7 of the law) Powers and Functions. - For the purpose of achieving the
objectives of this Act, the Board shall have the following powers and functions:

xxxx

h) to adopt a system of continuing legal education. For this purpose, the Board may
provide for the mandatory attendance of practicing lawyers in such courses and for
such duration as the Board may deem necessary[.] x x x (Emphasis supplied)
By its plain language, the clause "continuing legal education" under Section 2, par. 2, and
Section 7(h) of R.A. No. 7662 unduly give the LEB the power to supervise the legal
education of those who are already members of the bar. Inasmuch as the LEB is
authorized to compel mandatory attendance of practicing lawyers in such courses and for
such duration as the LEB deems, necessary, the same encroaches upon the Court's power
to promulgate rules concerning the Integrated Bar which includes the education of
"lawyer-professors" as teaching of law is practice of law. The mandatory continuing legal
education of the members of the bar is, in fact, covered by B.M. No. 850 or the Rules on
Mandatory Continuing Legal Education (MCLE) dated August 22, 2000 which requires
members of the bar, not otherwise exempt, from completing, every three years, at least 36
hours of continuing legal education activities approved by the MCLE Committee directly
supervised by the Court.

As noted by the CLEBM:

Thus, under the declaration of policies in Section 2 of [R.A. No. 7662], the State "shall
undertake appropriate reforms in the legal education system, require the proper selection
of law students, maintain quality among law schools and require apprenticeship and
continuing legal education["]. The concept of continuing legal education encompasses
education not only of law students but also of members of the legal profession. Its
inclusion in the declaration of policies implies that the [LEB] shall have jurisdiction over
the education of persons who have finished the law course and are already licensed to
practice law. Viewed in the light of Section 5, paragraph 5 of Article VIII of the
Constitution that vests the Supreme Court with powers over the Integrated Bar of the
Philippines, said portion of Section 2 of [R.A. No. 7662] risks a declaration of
constitutional infirmity.[253] (Underscoring supplied)               
4. Section 7(e) on
    minimum
standards for law
admission and the  
PhiLSAT
issuances
   
Of the several powers of the LEB under R.A. No. 7662, its power to prescribe minimum
standards for law admission under Section 7(e) received the strongest objection from the
petitioners. Section 7(e), provides:
SEC. 7. Powers and Functions. - x x x

xxxx

(e) to prescribe minimum standards for law admission and minimum qualifications

and compensation of faculty members; (Emphasis supplied)
Petitioners argue that the power to prescribe the minimum standards for law admission
belongs to the Court pursuant to its rule-making power concerning the admission to the
practice of law; Thus, Section 7(e) of R.A. No. 7662 which gives the LEB the power to
prescribe the minimum standards for law admission is allegedly unconstitutional as it
violates the doctrine of separation of powers. Necessarily, according to the petitioners,
the PhiLSAT which was imposed by the LEB pursuant to Section 7(e) of R.A. No. 7662
is likewise void.

The Court finds no constitutional conflict between its rule-making power and the power
of the LEB to prescribe the minimum standards for law admission under Section 7(e) of
R.A. No. 7662. Consequently, the PhiLSAT, which intends to regulate admission to law
schools, cannot be voided on this ground.
               
4(a) LEB's power to
. prescribe
    minimum
standards for
"law admission"
pertain to  
admission to legal
education and not
to the practice of
law
   
Much of the protestation against the LEB's exercise of the power to prescribe the
minimum standards for law admission stems from the interpretation extended to the
phrase "law admission." For petitioners, "law admission" pertains to the practice of law,
the power over which belongs exclusively to the Court.

The statutory context and the intent of the legislators do not permit such interpretation.

Basic is the rule in statutory construction that every part of the statute must be interpreted
with reference to the context, that is, every part must be read together with the other
parts, to the end that the general intent of the law is given primacy.[254] As such, a law's
clauses and phrases cannot be interpreted as isolated expressions nor read in truncated
parts, but must be considered to form a harmonious whole.[255]

Accordingly, the LEB's power under Section 7(e) of R.A. No. 7662 to prescribe the
minimum standards for law admission should be read with the State policy behind the
enactment of R.A. No. 7662 which is fundamentally to uplift the standards of legal
education and the law's thrust to undertake reforms in the legal education system.
Construing the LEH's power to prescribe the standards for law admission together with
the LEB's other powers to administer, supervise, and accredit law schools, leads to the
logical interpretation that the law circumscribes the LEB's power to prescribe admission
requirements only to those seeking enrollment to a school or college of law and not to the
practice of law.

Reference may also be made to DECS Order No. 27-1989, as the immediate precursor of
R.A. No. 7662, as to what is sought to be regulated when the law speaks of "law
admission" requirements.
Section 1, Article VIII of DECS Order No. 27-1989 is clear that the admission
requirement pertains to enrollment in a law course, or law school, or legal education,
thus:
Article VIII
Admission, Residence and Other Requirements

SEC. 1. No applicant shall be enrolled in the law course unless he complies with
specific requirements for admission by the Bureau of Higher Education and the
Supreme Court of the Philippines, for which purpose he must present to the registrar
the necessary credentials before the end of the enrollment period. (Emphases supplied)
This contemporary interpretation suffice in itself to hold that the phrase "law admission"
pertains to admission to the study of law or to legal education, and not to the practice of
law. Further support is nevertheless offered by the exchanges during the Senate
interpellations, wherein it was assumed that the phrase "minimum standards for law
admission" refers to the requirements that the student must fulfill before being admitted
to law school. This assumption was not corrected by the bill's sponsor.[256]
               
4(b) Section 7(e) of
. R.A. No. 7662 is
    reasonable
 
supervision and
regulation
   
Section 7(e) of R.A. No. 7662, insofar as it gives the LEB the power to prescribe the
minimum standards for law admission is faithful to the reasonable supervision and
regulation clause. It merely authorizes the LEB to prescribe minimum requirements not
amounting to control.

Emphatically, the law allows the LEB to prescribe only the minimum standards and it did
not, in any way, impose that the minimum standard for law admission should be by way
of an exclusionary and qualifying exam nor did it prevent law schools from imposing
their respective admission requirements.

Thus, under LEBMO No. 1-2011, the minimum standards for admission to law schools as
implemented by the LEB are: (1) completion of a four-year high school course; and (2)
completion of a course for a bachelor's degree in arts or sciences. [257] Again, these
requirements are but consistent with the nature of the law course in the Philippines as
being both a professional and post-baccalaureate education.

As the facts disclose, however, the LEB later on introduced the PhiLSAT as an additional
prerequisite for admission to law school.
               
4(c) Pursuant to
. Section 7(e), LEB
    is authorized to
administer an
aptitude test as a  
minimum
standard for law
admission
   
Evident from the Senate deliberations that, in prescribing the minimum standards for law
admission, an aptitude test may be administered by the LEB although such is not made
mandatory under the law. Thus:
Senator Tolentino: x x x

I will proceed to another point, Mr. President. I have taught law for more than 25 years in
private schools and in the University of the Philippines as well. There is one thing I have
noticed in all these years of teaching and that is, many students in the law school are not
prepared or apt by inclination or by ability to become lawyers. I see that the objectives of
the legal education that are provided for in this bill do not provide for some mechanism
of choosing people who should take up the law course.

As it is now, because of our democratic principles, anybody who wants to become a

lawyer, who can afford the tuition fee, or who has the required preparatory course, can be
admitted into the law school. And yet, while studying law, many of these students - I
would say there are about 30 or 40 percent of students in private schools - should not be
taking up law but some other course because, simply, they do not have the inclination,
they do not have the aptitude or the ability to become lawyers.

Can that be provided for in this bill, Madam Sponsor? Would it contravene really our
principles of democracy where everybody should be free to take the course that he wants
to take? Or should the State be able to determine who should be able or who should be
allowed to take a particular course, in this case of law?

Senator Shahani: Mr. President, there are those aptitude tests which are being taken
when the student is in high school to somehow guide the guidance councilors [sic]
into the aptitude of the students. But the talent or the penchant for the legal
profession is not one of those subjects specifically measured. I think what is
measured really is who is, more or less, talented for an academic education as
against a vocational education. But maybe, a new test will have to be designed to
really test the aptitude of those who would like to enter the law school. x x x

Senator Tolentino: x x x

Many parents want to see their children become lawyers. But they do not consider the
aptitude of these children, and they waste money and time in making these children take
up law when they really are not suited to the law course. My real concern is whether by
legislation, we can provide for selection of those who should be allowed to take up
law, and not everybody would be allowed to take up law. x x x

xxxx

Senator Shahani: Mr. President, of course, the right to education is a constitutional

right, and I think one cannot just categorically deny a student - especially if he is
bright - entrance to a law school. I think I would stand by what I had previously
said that an aptitude examination will have to be specially designed. It is not in
existence yet. x x x[258] (Emphases supplied)
This matter was amplified in second reading:
Senator Angara: x x x

Senator Tolentino asked why there is an omission on the requirements for admission to
law school. I think [Senator Shahani] has already answered that, that the [LEB] may
prescribe an aptitude test for that purpose. Just as in other jurisdictions, they
prescribe a law admission test for prospective students of law. I think the board may
very well decide to prescribe such a test, although it is not mandatory under this
bill.[259] (Emphasis and underscoring supplied)
The lawmakers, therefore, recognized and intended that the LEB be vested with authority
to administer an aptitude test as a minimum standard for law admission. The presumption
is that the legislature intended to enact a valid, sensible, and just law and one which
operates no further than may be necessary to effectuate the specific purpose of the law.
[260]
 This presumption has not been successfully challenged by petitioners.

It also bears to note that the introduction of a law aptitude examination was actually
supported by the Court when it approved the CLEBM's proposed amendment to Section
7(e), as follows:
SEC. 6. Section 7 of the same law is hereby amended to read as follows:

"SEC. 7. Power and Functions. - x x x

xxxx

d). to prescribe minimum standards for ADMISSION TO LAW

SCHOOLS INCLUDING A SYSTEM OF LAW APTITUDE EXAMINATION x x x[.]"
(Underscoring supplied)
And further in Bar Matter No. 1161[261] when the Court referred to the LEB the conduct of
a proposed law entrance examination.
               
4(d) PhiLSAT, as an  
. aptitude exam, is
    reasonably related
to the
improvement of
legal education
   
Having settled that the LEB has the power to administer an aptitude test, the next issue to
be resolved is whether the exercise of such power, through the PhiLSAT, was reasonable.

Indeed, an administrative regulation is susceptible to attack for unreasonableness.

In Lupangco v. Court of Appeals,[262] the Court held:
It is an [axiom] in administrative law that administrative authorities should not act
arbitrarily and capriciously in the issuance of rules and regulations. To be valid,
such rules and regulations must be reasonable and fairly adapted to secure the end
in view. If shown to bear no reasonable relation to the purposes for which they are
authorized to be issued, then they must be held to be invalid. (Emphasis supplied)
To determine whether the PhiLSAT constitutes a valid exercise of police power, the same
test of reasonableness, i.e., the concurrence of a lawful subject and lawful means, is
employed. Petitioners argue that the PhiLSAT is unreasonable because: it is not a
conclusive proof of the student's aptitude;[263] it entails unreasonable examination and
travel expenses and burdensome documentary requirements;[264] applying for PhiLSAT
exemption is inconvenient;[265] it is redundant to existing law school entrance exams;
[266]
 and it is not supported by scientific study.[267]

Unfortunately, these grounds are not only conclusions of fact which beg the presentation
of competent evidence, but also necessarily go into the wisdom of the PhiLSAT which
the Court cannot inquire into. The Court's pronouncement as to the reasonableness of the
PhiLSAT based on the grounds propounded by petitioners would be an excursion into the
policy behind the examinations - a function which is administrative rather than judicial.

Petitioners also argue that there is no reasonable relation between improving the quality
of legal education and regulating access thereto. The Court does not agree.

The subject of the PhiLSAT is to improve the quality of legal education. It is indubitable
that the State has an interest in prescribing regulations promoting education and thereby
protecting the common good. Improvement of the quality of legal education, thus, falls
squarely within the scope of police power. The PhiLSAT, as an aptitude test, was the
means to protect this interest.
               
4(e) Tablarin  
. sustained the
    conduct of an
admission test as a
legitimate exercise
 of the State's
regulatory power
   
Moreover, by case law, the Court already upheld the validity of administering an aptitude
test as a reasonable police power measure in the context of admission standards into
institutions of higher learning.

In Tablarin, the Court upheld not only the constitutionality of Section 5(a) of R.A. No.
2382, or the Medical Act of 1959, which gave the Board of Medical Education (BME)
the power to prescribe requirements for admission to medical schools, but also MECS
Order No. 52, Series of 1985 (MECS Order No. 52-1985) issued by the BME which
prescribed NMAT.

Using the rational basis test, the Court upheld the constitutionality of the NMAT as
follows:
Perhaps the only issue that needs some consideration is whether there is some
reasonable relation between the prescribing of passing the NMAT as a condition for
admission to medical school on the one hand, and the securing of the health and
safety of the general community, on the other hand. This question is perhaps most
usefully approached by recalling that the regulation of the practice of medicine in all
its branches has long been recognized as a reasonable method of protecting the
health and safety of the public. That the power to regulate and control the practice of
medicine includes the power to regulate admission to the ranks of those authorized to
practice medicine, is also well recognized. Thus, legislation and administrative
regulations requiring those who wish to practice medicine first to take and pass medical
board examinations have long ago been recognized as valid exercises of governmental
power. Similarly, the establishment of minimum medical educational requirements - i.e.,
the completion of prescribed courses in a recognized medical school - for admission to
the medical profession, has also been sustained as a legitimate exercise of the regulatory
authority of the state. What we have before us in the instant case is closely related;
the regulation of access to medical schools. MECS Order No. 52, s. 1985, as noted
earlier, articulates the rationale of regulation of this type: the improvement of the
professional and technical quality of the graduates of medical schools, by upgrading the
quality of those admitted to the student body of the medical schools. That upgrading is
sought by selectivity in the process of admission, selectivity consisting, among other
things, of limiting admission to those who exhibit in the required degree the aptitude
for medical studies and eventually for medical practice. The need to maintain, and the
difficulties of maintaining, high standards in our professional schools in general, and
medical schools in particular, in the current stage of our social and economic
development, are widely known.

We believe that the government is entitled to prescribe an admission test like the
NMAT as a means for achieving its stated objective of "upgrading the selection of
applicants into [our] medical schools" and of "improv[ing] the quality of medical
education, in the country." Given the widespread use today of such admission tests in,
for instance, medical schools in the United States of America the Medical College
Admission Test [MCAT] and quite probably in other countries with far more developed
educational resources than our own, and taking into account the failure or inability of the
petitioners to even attempt to prove otherwise, we are entitled to hold that the NMAT
is reasonably related to the securing of the ultimate end of legislation and regulation
in this area. That end, it is useful to recall, is the protection of the public from the
potentially deadly effects of incompetence and ignorance in those who would
undertake to treat our bodies and minds for disease or trauma.[268] (Emphases
supplied)
The Court reached its conclusion that NMAT is a valid exercise of police power because
the method employed, i.e., regulation of admissions to medical education is reasonably
related to the subject, i.e., the protection of the public by ensuring that only those
qualified are eventually allowed to practice medicine.

The necessity of State intervention to ensure that the medical profession is not infiltrated
by those unqualified to take care of the life and health of patients was likewise the reason
why the Court in Department of Education, Culture and Sports v. San Diego[269] upheld
the "three-flunk" rule in NMAT:
We see no reason why the rationale in the [TabIarin] case cannot apply to the case at bar.
The issue raised in both cases is the academic preparation of the applicant. This may be
gauged at least initially by the admission test and, indeed with more reliability, by the
three-flunk rule. The latter cannot be regarded any less valid than the former in the
regulation of the medical profession.

There is no need to redefine here the police power of the State. Suffice it to repeat that
the power is validly exercised if (a) the interests of the public generally, as distinguished
from those of a particular class, require the interference of the State, and (b) the means
employed are reasonably necessary to the attainment of the object sought to be
accomplished and not unduly oppressive upon individuals.

In other words, the proper exercise of the police power requires the concurrence of a
lawful subject and a lawful method.

The subject of the challenged regulation is certainly within the ambit of the police
power. It is the right and indeed the responsibility of the State to insure that the
medical profession is not infiltrated by incompetents to whom patients may
unwarily entrust their lives and health.

The method employed by the challenged regulation is not irrelevant to the purpose
of the law nor is it arbitrary or oppressive. The three-flunk rule is intended to
insulate the medical schools and ultimately the medical profession from the
intrusion of those not qualified to be doctors. (Emphases supplied)
Tablarin recognized that State intervention was necessary, and therefore was allowed,
because of the need to meet the goal of promoting public health and safety.

In similar vein, the avowed purpose of the PhiLSAT is to improve the quality of legal
education by evaluating and screening applicants to law school. As elucidated, the State
has an interest in improving the quality of legal education for the protection of the
community at-large, and requiring an entrance test is reasonably related to that interest. In
other words, the State has the power and the prerogative to impose a standardized test
prior to entering law school, in the same manner and extent that the State can do so in
medical school when it prescribed the NMAT.

In all, the Court finds no constitutional conflict between the Court's rule-making power
concerning admissions to the practice of law and on the LEB's power to prescribe
minimum standards for law admission under Section 7(e) of R.A. No. 7662.

Further, pursuant to its power under Section 7(e), the Court affirms the LEB's authority to
initiate and administer an aptitude test, such as the PhiLSAT, as a minimum standard for
law admission. Thus, the PhiLSAT, insofar as it functions as an aptitude exam that
measures the academic potential of the examinee to pursue the study of law to the end
that the quality of legal education is improved is not per se unconstitutional.

However, there are certain provisions of the PhiLSAT that render its operation
exclusionary, restrictive, and qualifying which is contrary to its design as an aptitude
exam meant to be used as a tool that should only help and guide law schools in gauging
the aptness of its applicants for the study of law. These provisions effectively and
absolutely exclude applicants who failed to pass the PhiLSAT from taking up a course in
legal education, thereby restricting and qualifying admissions to law schools. As will be
demonstrated, these provisions of the PhiLSAT are unconstitutional for being manifestly
violative of the law schools' exercise of academic freedom, specifically the autonomy to
determine for itself who it shall allow to be admitted to its law program.

D.
LEB's Powers vis-a-vis Institutional Academic
Freedom and the Right to Education
               
1.    PhiLSAT
 
       
Paragraphs 7, 9, 11, and 15 of LEBMO No. 7-2016, provide:
xxxx

7. Passing Score - The cut-off or passing score for the PhiLSAT shall be FIFTY-
FIVE PERCENT (55%) correct answers, or such percentile score as may be
prescribed by the LEB.

xxxx

9. Admission Requirement - All college graduates or graduating students applying for

admission to the basic law course shall be required to pass the PhiLSAT as a
requirement for admission to any law school in the Philippines. Upon the effectivity
of this memorandum order, no applicant shall be admitted for enrollment as a first
year student in the basic law courses leading to a degree of either Bachelor of Laws
or Juris Doctor unless he/she has passed the PhiLSAT taken within 2 years before
the start of studies for the basic law course and presents a valid [Certificate of
Eligibility] as proof thereof.

xxxx

11. Institutional Admission Requirements - The PhiLSAT shall be without prejudice to

the right of a law school in the exercise of its academic freedom to prescribe or
impose additional requirements for admission, such as but not limited to:

a. A score in the PhiLSAT higher than the cut-off or passing score set by the
LEB;

b. Additional or supplemental admission tests to measure the competencies

and/or personality of the applicant; and

c. Personal interview of the applicant.

xxxx

15. Sanctions - Law schools violating this Memorandum Order shall [be] imposed
the administrative sanctions prescribed in Section 32 of LEBMO No. 2, Series of
2013 and/or fine of up to Ten Thousand Pesos (P10,000) for each infraction. (Emphases
supplied)
Without doubt, the above provisions exclude and disqualify those examinees who fail to
reach the prescribed passing score from being admitted to any law school in the
Philippines. In mandating that only applicants who scored at least 55% correct answers
shall be admitted to any law school, the PhiLSAT actually usurps the right and duty of
the law school to determine for itself the criteria for the admission of students and
thereafter, to apply such criteria on a case-by-case basis. It also mandates law schools to
absolutely reject applicants with a grade lower than the prescribed cut-off score and those
with expired PhiLSAT eligibility. The token regard for institutional academic freedom
comes into play, if at all, only after the applicants had been "pre-selected" without the
school's participation. The right of the institutions then are constricted only in providing
"additional" admission requirements, admitting of the interpretation that the preference of
the school itself is merely secondary or supplemental to that of the State which is
antithetical to the very principle of reasonable supervision and regulation.

The law schools are left with absolutely no discretion to choose its students at the first
instance and in accordance with its own policies, but are dictated to surrender such
discretion in favor of a State-determined pool of applicants, under pain of administrative
sanctions and/or payment of fines. Mandating law schools to reject applicants who failed
to reach the prescribed PhiLSAT passing score or those with expired PhiLSAT eligibility
transfers complete control over admission policies from the law schools to the LEB. As
Garcia tritely emphasized: "[c]olleges and universities should [not] be looked upon as
public utilities devoid of any discretion as to whom to admit or reject. Education,
especially higher education, belongs to a different, and certainly higher category." [270]
               
1(a) Comparison of
. PhiLSAT with
 
    NMAT and LSAT
   
Respondent urges the Court to treat the PhiLSAT in the same manner that the Court
treated the NMAT in Tablarin. Petitioners oppose on the ground that the PhiLSAT and
the NMAT are different because there is a Constitutional body, i.e., the Court, tasked to
regulate the practice of law while there is none with respect to the practice of medicine.

The Court treats the PhiLSAT differently from the NMAT for the fundamental reason
that these aptitude exams operate differently.

For one, how these exams allow the schools to treat the scores therein obtained is
different.

While both exams seem to prescribe a "cut-off" score, the NMAT score is evaluated by
the medical schools in relation to their own cut-off scores. Unlike the PhiLSAT score, the
NMAT score is not the sole determining factor on whether or not an examinee may be
admitted to medical school. The NMAT score is only meant to be one of the bases for
evaluating applicants for admission to a college of medicine.

Medical schools further enjoy the discretion to determine how much weight should be
assigned to an NMAT score relative to the schools' own admissions policy. Different
medical schools may therefore set varying acceptable NMAT scores. Different medical
schools may likewise assign different values to the NMAT score. This allows medical
schools to consider the NMAT score along with the other credentials of the applicant.
The NMAT score does not constrain medical schools to accept pre-selected applicants; it
merely provides for a tool to evaluate all applicants.
Obtaining a low NMAT percentile score will not immediately and absolutely disqualify
an applicant from being admitted to medical school. Obtaining a high NMAT percentile
score only increases an applicant's options for medical schools. Taking the NMAT, thus,
expands the applicant's options for medical schools; it does not limit them.

For another, medical schools are not subjected to sanctions in case they decide to admit
an applicant pursuant to their own admissions policy. In fact, at some point,[271] there was
even no prescribed cut-off percentile score for the NMAT, and instead it was stressed that
a student may enroll in any school, college or university upon meeting the latter's specific
requirements and reasonable regulations.[272] Also, the issuance of a certificate of
eligibility for admission to a college of medicine had been transferred to. the medical
schools, thus, rightfully giving the responsibility for and accountability of determining
eligibility of students for admission to the medical program to the schools concerned.[273]

Similar to the NMAT, the Law School Admission Test (LSAT) is only one of the several
criteria for evaluation for law school admission. It is just one of the methods that law
schools may use to differentiate applicants for law school. The American Bar Association
actually allows a law school to use an admission test other than the LSAT and it does not
dictate the particular weight that a law school should give to the results of the LSAT in
deciding whether to admit an applicant.[274]

In contrast, the PhiLSAT score itself determines whether an applicant may be admitted to
law school or not, the PhiLSAT being strictly a pass or fail exam. It excludes those who
failed to reach the prescribed cut-off score from being admitted to any law school. It
qualifies admission to law school not otherwise imposed by the schools themselves. The
PhiLSAT, as presently crafted, employs a totalitarian scheme in terms of student
admissions. This leaves the consequent actions of the applicant-student and the school
solely dependent upon the results of the PhiLSAT.
               
1(b) Balancing State
. interest with
    institutional
 
academic
freedom     
   
Thus far, it is settled that the PhiLSAT, when administered as an aptitude test, is
reasonably related to the State's unimpeachable interest in improving the quality of legal
education. This aptitude test, however, should not be exclusionary, restrictive, or
qualifying as to encroach upon institutional academic freedom. Moreover, in the exercise
of their academic freedom to choose who to admit, the law schools should be left with the
discretion to determine for themselves how much weight should the results of the
PhiLSAT carry in relation to their individual admission policies. At all times, it is
understood that the school's exercise of such academic discretion should not be gravely
abused, arbitrary, whimsical, or discriminatory.

With the conclusion that the PhiLSAT, when administered as an aptitude test, passes the
test of reasonableness, there is no reason to strike down the PhiLSAT in its entirety.
Instead, the Court takes a calibrated approach and partially nullifies LEBMO No. 7-2016
insofar as it absolutely prescribes the passing of the PhiLSAT and the taking thereof
within two years as a prerequisite for admission to any law school which, on its face, run
directly counter to institutional academic freedom. The rest of LEBMO No. 7-2016,
being free from any taint of unconstitutionality, should remain in force and effect,
especially in view of the separability clause[275] therein contained.
               
1(c) PhiLSAT and the
. right to education  
       
Anent the argument that the PhiLSAT transgresses petitioners' right to education and
their right to select a profession or course of study, suffice to state that the PhiLSAT is a
minimum admission standard that is rationally related to the interest of the State to
improve the quality of legal education and, accordingly, to protect the general
community. The constitutionality of the PhiLSAT, therefore, cannot be voided on the
ground that it violates the right to education as stated under Section 1, Article XIV of the
Constitution. The Court's pronouncement in Tablarin[276] again resonates with
significance:
Turning to Article XIV, Section 1, of the 1987 Constitution, we note that once more,
petitioners have failed to demonstrate that the statute and regulation they assail in fact
clash with that provision. On the contrary, we may note - x x x - that the statute and the
regulation which petitioners attack are in fact designed to promote "quality education" at
the level of professional schools. When one reads Section 1 in relation to Section 5(3) of
Article XIV, as one must, one cannot but note that the latter phrase of Section 1 is not to
be read with absolute literalness. The State is not really enjoined to take appropriate steps
to make quality education "accessible to all" who might for any number of reasons wish
to enroll in a professional school, but rather merely to make such education accessible to
all who qualify under "fair, reasonable and equitable admission and academic
requirements."
2. Other LEB
    issuances on law
 
admission
   
Apart from the PhiLSAT, the LEB also imposed additional requirements for admission to
law schools under LEBMO No. 1-2011, specifically:
Article III
Prerequisites and Program Specification
SEC. 15. Prerequisites to admission to Law School. - x x x

xxxx

Where the applicant for admission into a law school is a graduate of a foreign institution
or school following a different course and progression of studies, the matter shall be
referred to the Board that shall determine the eligibility of the candidate for
admission to law school.

SEC. 16. Board Prerequisites for Admission to the Ll.B. or J.D. Program. - The Board
shall apply Section 6 of Rule 138 in the following wise: An applicant for admission to the
Ll.B. or J.D. program of studies must be a graduate of a bachelor's degree and must have
earned at least eighteen (18) units in English, six (6) units in Mathematics, and
eighteen (18) units of social science subjects.

SEC. 17. Board Prerequisites for Admission to Graduate Programs in Law. - Without

prejudice to other requirements that graduate schools may lay down, no applicant shall
be admitted for the Master of Laws (Ll.M.) or equivalent master's degree in law or
juridical science, without an Ll.B. or a J.D. degree. Admission of non-Members of the
Philippine Bar to the master's degree shall be a matter of academic freedom vested in the
graduate school of law. The candidate for the doctorate degree in juridical science, or
doctorate in civil law or equivalent doctorate degree must have completed a Master of
Laws (Ll.M.) or equivalent degree.

Graduate degree programs in law shall have no bearing on membership or non-

membership in the Philippine Bar.[277] (Emphases supplied)
Further, LEBMO No. 1-2011, Article V, provides:
xxxx

SEC. 23. No student who has obtained a general average below 2.5 or 80 in the college
course required for admission to legal studies may be admitted to law school. Exceptions
may be made by the Dean in exceptionally meritorious cases, after having informed the
Board.[278]
These provisions similarly encroach upon the law school's freedom to determine for itself
its admission policies. With regard to foreign students, a law school is completely bereft
of the right to determine for itself whether to accept such foreign student or not, as the
determination thereof now belongs to the LEB.

Similarly, the requirement that an applicant obtain a specific number of units in English,
Mathematics, and Social Science subjects affects a law school's admission policies
leaving the latter totally without discretion to admit applicants who are deficient in these
subjects or to allow such applicant to complete these requirements at a later time. This
requirement also effectively extends the jurisdiction of the LEB to the courses and units
to be taken by the applicant in his or her pre-law course. Moreover, such requirement is
not to be found under Section 6, Rule 138 of the Rules of Court as this section simply
requires only the following from an applicant to the bar exams:
SEC. 6. Pre-Law. - No applicant for admission to the bar examination shall be admitted
unless he presents a certificate that he has satisfied the Secretary of Education that, before
he began the study of law, he had pursued and satisfactorily completed in an authorized
and recognized university or college, requiring for admission thereto the completion of a
four-year high school course, the course of study prescribed therein for a bachelor's
degree in arts or sciences with any of the following subjects as major or field of
concentration: political science, logic, english, spanish, history and economics.
Likewise, in imposing that only those with a basic degree in law may be admitted to
graduate programs in law encroaches upon the law school's right to determine who may
be admitted. For instance, this requirement effectively nullifies the option of admitting
non-law graduates on the basis of relevant professional experience that a law school,
pursuant to its own admissions policy, may otherwise have considered.

The required general weighted average in the college course suffers the same infirmity
and would have been struck down had ·it not been expressly repealed by the LEB
because of the PhiLSAT.[279]
               
3. Section 7(c) and
7(e) on the
minimum  
qualifications of
faculty members

The LEB is also empowered under Section 7(c) to set the standards of accreditation
taking into account, among others, the "qualifications of the members of the faculty" and
under Section 7(e) of R.A. No. 7662 to prescribe "minimum qualifications and
compensation of faculty members[.]"

Relative to the power to prescribe the minimum qualifications of faculty members, LEB
prescribes under LEBMO No. 1-2011 the following:
[PART I]
Article V
Instructional Standards

SEC. 20. The law school shall be headed by a properly qualified dean, maintain a
corps of professors drawn from the ranks of leading and acknowledged
practitioners as well as academics and legal scholars or experts in juridical
science[.] x x x
xxxx

PART III
QUALIFICATIONS AND CURRICULUM

Article I
Faculty Qualifications

SEC. 50. The members of the faculty of a law school should, at the very least, possess
a L1.B. or a J.D. degree and should be members of the Philippine Bar. In the exercise
of academic freedom, the law school may also ask specialists in various fields of law with
other qualifications, provided that they possess relevant doctoral degrees, to teach
specific subjects.

Within a period of five (5) years of the promulgation of the present order, members
of the faculty of schools of law shall commence their studies in graduate schools of
law.

Where a law school offers the J.D. curriculum, a qualified Ll.B. graduate who is a
member of the Philippine Bar may be admitted to teach in the J.D. course and may wish
to consider the privilege granted under Section 56 hereof.

SEC. 51. The dean should have, aside from complying with the requirements above,
at least a Master of Laws (Ll.M.) degree or a master's degree in a related field, and
should have been a Member of the Bar for at least 5 years prior to his appointment
as dean.

SEC. 52. The dean of a graduate school of law should possess at least a doctorate
degree in law and should be an acknowledged authority in law, as evidenced by
publications and membership in learned societies and organizations; members of
the faculty of a graduate school of law should possess at least a Master of Laws
(Ll.M.) degree or the relevant master's or doctor's degrees in related fields.

Aside from the foregoing, retired justices of the Supreme Court, the Court of Appeals, the
Sandiganbayan and the Court of Tax Appeals may serve as deans of schools of law,
provided that they have had teaching experience as professors of law and provided
further that, with the approval of the Legal Education Board, a graduate school of law
may accredit their experience in the collegiate appellate courts and the judgments they
have penned towards the degree [ad eundem] of Master of Laws.[280] (Emphases supplied)
Thus, under LEBMO No. 1-2011, a law faculty member must have an Ll.B or J.D. degree
and must, within a period of five years from the promulgation of LEBMO No. 1-2011, or
from June 14, 2011 to June 14, 2016, commence studies in graduate school of law.
The mandatory character of the requirement of a master's degree is underscored by the
LEB in its Resolution No. 2014-02, a "sequel rule" to Section 50 of LEBMO No. 1-2011,
which provides that:
xxxx

1. Members of the law faculty are required to be holders of the degree of

Master of Laws. It is the responsibility of the law deans to observe and
implement this rule.

2. The law faculty of all law schools shall have the following percentage of
holders of the master of laws degree:

2.1. School Year- 2017-2018-20%

2.2. School Year- 2018-2019 - 40%
2.3. School Year- 2019-2020-60%
2.4. School Year- 2020-2021-80%

3. In computing the percentage, those who are exempted from the rule shall be
included.

4. Exempted from this requirement of a master's degree in law are the

following:

The Incumbent or Retired Members of the:

3.1. Supreme Court;

3.2. Court of Appeals, Sandiganbayan and Court of Tax Appeals;
3.3. Secretary of Justice and Under-Secretaries of Justice, Ombudsman, Deputy Ombudsmen,
Solicitor General and Assistant Solicitors General
3.4. Commissioners of the National Labor Relations Commission who teach Labor Laws;
3.5. Regional Trial Court Judges;
3.6. DOJ State and Regional State Prosecutors and Senior Ombudsman Prosecutors who teach
Criminal Law and/or Criminal Procedure;
3.7. Members of Congress who are lawyers who teach Political Law, Administrative Law,
Election Law, Law on Public Officers and other related subjects;
3.8. Members of Constitutional Commissions who are Lawyers;
3.9. Heads of bureaus who are lawyers who teach the law subjects which their respective
bureaus are implementing;
3.10.Ambassadors, Ministers and other [D]iplomatic Officers who are lawyers who teach
International Law or related subjects;
3.11.Those who have been teaching their subjects for 10 years or more upon recommendation of
their deans; and
3.12.Other lawyers who are considered by the Board to be experts in any field of law provided
they teach the subjects of their expertise.
 5. The following are the sanctions for non-compliance with the foregoing
rules:

4.1. If a law school is non-compliant with these rules for the first time beginning School Year
2017-2018, the Board shall downgrade its Recognition status to Permit status;
4.2. If a law school under a Permit status should remain non-compliant with these rules in
succeeding school years, the Board shall downgrade the Permit status to Phase-Out
status;
4.3. If a law school which is under Phase-Out status remains non-compliant with these rules in
succeeding school years, the Board shall order its closure to take effect at the end of the
school year.

6.
7. If a law school under sanction shall become compliant, its Recognition
status shall be restored. (Emphases supplied)

xxxx
And under LEBMO No. 2:
SEC. 31. Unfitness to Continue Operating a Law Program. A law school which is
operated below quality standards of a law school is unfit to continue operating a law
program.

xxxx

2) A law school is substandard if the result of the inspection and evaluation of the law
school and its facilities by members of the Board or its staff shows that the law school
has serious deficiencies including a weak faculty as indicated, among others, by the fact
that most of the members are neophytes in the teaching of law[.] x x x

xxxx

SEC. 32. The imposable administrative sanctions are the following:

a) Termination of the law program (closing the law school);

b) Phase-out of the law program;
c) Provisional cancellation of the Government Recognition and putting the law program
of the substandard law school under Permit Status.
This master of laws degree requirement is reiterated in LEBMO No. 17, Series of
2018 (Supplemental Regulations on the Minimum Academic Requirement of Master of
Laws Degree for Deans and Law Professors/Lecturers/Instructors in Law Schools), as
follows:
xxxx

B) For Members of the Law Faculty

SEC. 6. For purposes of determining compliance with the minimum academic
requirement of a Ll.M. degree for the members of the law faculty in law schools
required under Section 50 of LEBMO No. 1, Series of 2011 and Resolution No. 2014-02,
the required percentage of holders of Ll.M. shall be computed based on the aggregate
units of all courses/subjects offered during the semester by the law school.

SEC. 7. Within thirty (30) days upon completion the effectivity this of this memorandum
[sic], the President of the HEI and the Dean of each law school shall jointly submit to
the LEB separate certification of the total teaching assignments/load for the
1st Semester and 2nd Semester of the Academic Year 2017-2018 in the prescribed
matrix form containing the names of every faculty member, his/her highest
academic law degree, qualification for , exemption from the Ll.M. requirement, if
applicable, courses/subjects assigned to teach, and academic weight of each
course/subject, and a disclosure whether or not the law school is compliant with the
prescribed percentage of Ll.M. holders for faculty members. Thereafter, the same
certification shall be submitted for every regular semester not later than 45 days from the
start of the semester.

xxxx

SEC. 12. Law schools failing to meet the prescribed percentage of its faculty
members required to have Ll.M. degrees shall be imposed the appropriate
administrative sanction specified under Resolution No. 2014-02. (Emphases supplied)
To be sure, under its supervisory and regulatory power, the LEB can prescribe the
minimum qualifications of faculty members. This much was affirmed by the Court when
it approved the CLEBM's proposal to revise the powers of LEB under R.A. No. 7662, but
nevertheless retaining the LEB's power to "provide for minimum qualifications for
faculty members of law schools." As worded, the assailed clauses of Section 7(c) and 7(e)
insofar as they give LEB the power to prescribe the minimum qualifications of faculty
members are in tune with the reasonable supervision and regulation clause and do not
infringe upon the academic freedom of law schools.

Moreover, this minimum qualification can be a master of laws degree. In University of

the East v. Pepanio,[281] the Court held that the requirement of a masteral degree, albeit
for tertiary education teachers, is not unreasonable. Thus:
The requirement of a masteral degree for tertiary education teachers is not
unreasonable. The operation of educational institutions involves public interest. The
government has a right to ensure that only qualified persons, in possession of
sufficient academic knowledge and teaching skills, are allowed to teach in such
institutions. Government regulation in this field of human activity is desirable for
protecting, not only the students, but the public as well from ill-prepared teachers,
who are lacking in the required scientific or technical knowledge. They may be
required to take an examination or to possess postgraduate degrees as prerequisite
to employment. (Emphasis supplied)
This was reiterated in Son v. University of Santo Tomas,[282] as follows:
As early as in 1992, the requirement of a Master's degree in the undergraduate program
professor's field of instruction has been in place, through DECS Order 92 (series of 1992,
August 10, 1992) or the Revised Manual of Regulations for Private Schools. Article IX,
Section 44, paragraph [1(a)] thereof provides that college faculty members must have a
master's degree in their field of instruction as a minimum qualification for teaching in a
private educational institution and acquiring regular status therein.

DECS Order 92, Series of 1992 was promulgated by the DECS in the exercise of its
[rule]-making power as provided for under Section 70 of Batas Pambansa Blg. 232,
otherwise known as the Education Act of 1982. As such, it has the force and effect of
law. In University of the East v. Pepanio, the requirement of a masteral degree for tertiary
education teachers was held to be not unreasonable but rather in accord with the public
interest.

xxxx

From a strict legal viewpoint, the parties are both in violation of the law: respondents, for
maintaining professors without the mandated masteral degrees, and for petitioners,
agreeing to be employed despite knowledge of their lack of the necessary qualifications.
Petitioners cannot therefore insist to be employed by UST since they still do not possess
the required master's degrees; the fact that UST continues to hire and maintain professors
without the necessary master's degrees is not a ground for claiming illegal dismissal, or
even reinstatement. As far as the law is concerned, respondents are in violation of the
CHED regulations for continuing the practice of hiring unqualified teaching personnel;
but the law cannot come to the aid of petitioners on this sole ground. As between the
parties herein, they are in pari delicto.

xxxx

The minimum requirement of a master's degree in the undergraduate teacher's field of

instruction has been cemented in DECS Order 92, Series of 1992. Both petitioners and
respondents have been violating it. The fact that government has not cracked down on
violators, or that it chose not to strictly implement the provision, does not erase the
violations committed by erring educational institutions, including the parties herein; it
simply means that government will not punish these violations for the meantime. The
parties cannot escape its concomitant effects, nonetheless. And if respondents knew the
overwhelming importance of the said provision and the public interest involved - as they
now fiercely advocate to their favor - they should have complied with the same as soon as
it was promulgated.
xxxx

In addition, the Court already held in Herrera-Manaoisi v. St. Scholastica's College that -

Notwithstanding the existence of the SSC Faculty Manual, Manaois still cannot legally
acquire a permanent status of employment. Private educational institutions must still
supplementarily refer to the prevailing standards, qualifications, and conditions set by the
appropriate government agencies (presently the Department of Education, the
Commission on Higher Education, and the Teclmical Education and Skills Development
Authority). This limitation on the right of private schools, colleges, and universities to
select and determine the employment status of their academic personnel has been
imposed by the state in view of the public interest nature of educational institutions, so as
to ensure the quality and competency of our schools and educators. (Internal citations
omitted)
Thus, the masteral degree required of law faculty members and dean, and the doctoral
degree required of a dean of a graduate school of law are, in fact, minimum reasonable
requirements. However, it is the manner by which the LEB had exercised this power
through its various issuances that prove to be unreasonable.

On this point, the amicus curiae, Dean Sedfrey M. Candelaria, while admitting that the
masteral degree requirement is a "laudable aim" of the LEB, nevertheless adds that the
LEB-imposed period of compliance is unreasonable given the logistical and financial
obstacles:
The masteral degree requirement is a laudable aim of LEB, but the possibility of meeting
the LEB period of compliance is unreasonable and unrealistic in the light of logistical and
financial considerations confronting the deans and professors, including the few law
schools offering graduate degrees in law.

To illustrate, to the best of my knowledge there are no more than six (6) graduate schools
of law around the country to service potential applicants. Those who have opted for
graduate studies in law find it very costly to fly to the venue. While one or two programs
may have been delivered outside the provider's home school venue to reach out to
graduate students outside the urban centers, pedagogical standards are often
compromised in the conduct of the modules. This is even aggravated by the fact that very
few applicants can afford to go into full-time graduate studies considering that most
deans and professors of law are in law practice. Perhaps, LEB should work in
consultation with PALS in designing a cost-effective but efficient delivery system of any
graduate program in law, [especially] for deans and law professors.[283]
Further, the mandatory character of the master of laws degree requirement, under pain of
downgrading, phase-out and closure of the law school, is in sharp contrast with the
previous requirement under DECS Order No. 27-1989 which merely prefer faculty
members who are holders of a graduate law degree, or its equivalent. The LEB's authority
to review the strength or weakness of the faculty on the basis of experience or length of
time devoted to teaching violates an institution's right to set its own faculty standards.
The LEB also imposed strict reportorial requirements that infringe on the institution's
right to select its teachers which, for instance, may be based on expertise even with little
teaching experience. Moreover, in case a faculty member seeks to be exempted, he or she
must prove to the LEB, and not to the concerned institution, that he or she is an expert in
the field, thus, usurping the freedom of the institution to evaluate the qualifications of its
own teachers on an individual basis.

Also, while the LEB requires of faculty members and deans to obtain a master of laws
degree before they are allowed to teach and administer a law school, respectively, it is
ironic that the LEB, under Resolution No. 2019-406, in fact considers the basic law
degrees of Ll.B. or J.D. as already equivalent to a doctorate degree in other non-law
academic disciplines for purposes of "appointment/promotion, ranking, and
compensation."

In this connection, the LEB also prescribes who may or may not be considered as full-
time faculty, the classification of the members of their faculty, as well as the faculty load,
including the regulation of work hours, all in violation of the academic freedom of law
schools. LEBMO No. 2 provides:
SEC. 33. Full-time and Part-time Faculty. There are two general kinds of faculty
members, the full-time and part-time faculty members.

a) A full-time faculty member is one:

1) Who possesses the minimum qualification of a member of the faculty as prescribed in

Sections 50 and 51 of LEBMO No. 1;

2) Who devotes not less than eight (8) hours of work for the law school;

3) Who has no other occupation elsewhere requiring regular hours of work, except when
permitted by the higher education institution of which the law school is a part; and

4) Who is not teaching full-time in any other higher education institution.

b) A part-time faculty member is one who does not meet the qualifications of a full-time
professor as enumerated in the preceding number.

SEC. 34. Faculty Classification and Ranking. Members of the faculty may be classified,
in the discretion of the higher education institution of which the law school is a part,
according to academic proceeding, training and scholarship into Professor, Associate
Professor, Assistant Professor, and Instructor.

Part-time members of the faculty may be classified as Lecturers, Assistant Professorial

Lecturers, Associate Professorial Lecturers and Professorial Lecturers. The law schools
shall devise their scheme of classification and promotion not inconsistent with these
rules.

SEC. 35. Faculty Load. Generally, no member of the faculty should teach more than 3
consecutive hours in any subject nor should he or she be loaded with subjects
requiring more than three preparations or three different subjects (no matter the
number of units per subject) in a day.

However, under exceptionally meritorious circumstances, the law deans may allow
members of the faculty to teach 4 hours a day provided that there is a break of 30 minutes
between the first 2 and the last 2 hours. (Emphases supplied)
The LEB is also allowed to revoke permits or recognitions given to law schools when the
LEB deems that there is gross incompetence on the part of the dean and the corps of
professors or instructors under Section 41.2(d) of LEBMO No. 1-2011, thus:
SEC. 41.2. Permits or recognitions may be revoked, or recognitions reverted to permit
status for just causes including but not limited to:

a) fraud or deceit committed by the institution in connection with its application to the
Board;

b) the unauthorized operation of a school of law or a branch or an extension of a law

school;

c) mismanagement or gross inefficiency in the operation of a law school;

d) gross incompetence on the part of the dean and the corps of professors or
instructors;

e) violation of approved standards governing institutional operations, announcements and

advertisements;

f) transfer of the school of law to a site or location detrimental to the interests of the
students and inimical to the fruitful and promising study of law;

g) repeated failure of discipline on the part of the student body; and

h) other grounds for the closure of schools and academic institutions as provided for in
the rules and regulations of the Commission on Higher Education.[284] (Emphasis
supplied)
In this regard, the LEB is actually assessing the teaching performance of faculty members
and when such is determined by the LEB as constituting gross incompetence, the LEB
may mete out penalties, thus, usurping the law school's right to determine for itself the
competence of its faculty members.
               
4. Section 2, par. 2
and Section 7(g)
on legal
 
apprenticeship
and legal
internship

While the clause "legal apprenticeship" under Section 2, par. 2 and Section 7(g) on legal
internship, as plainly worded, cannot immediately be interpreted as encroaching upon
institutional academic freedom, the manner by which LEB exercised this power through
several of its issuances undoubtedly show that the LEB controls and dictates upon law
schools how such apprenticeship and internship programs should be undertaken.

Pursuant to its power under Section 7(g), the LEB passed Resolution No. 2015-
08 (Prescribing the Policy and Rules in the Establishment of a Legal Aid Clinic in Law
Schools) wherein it classified legal aid clinics into three types: (1) a legal aid clinic which
is an outreach project of a law school; (2) a legal aid clinic which entitles the
participating student to curricular credits; and (3) a legal aid clinic that entitles the
participating student to avail of the privileges under Rule 138-A of the Rules of Court.

Pertinent to the third type, the LEB requires the law schools to comply with the following
rules:
xxxx

b) Implementing Rules

(1) A LAC should be established by the law school.

(2) The law school should formulate its Clinical Legal Education Program and submit it
to the Legal Education board for its assessment and evaluation.

(3) If Legal Education Board finds the Clinical Legal Education Program to be proper
and in order it shall endorse it to the Supreme Court for its approval.

(4) Once approved by the Supreme Court, fourth (4th) year law students in that law school
enrolled in it shall be allowed to practice law on a limited manner pursuant to the provisions
of Rule 138-A of the Rules of Court. (Emphasis supplied)
Further, Section 24(c), Article IV of LEBMO No. 2 prescribes the activities that should
be included in the law school's apprenticeship program, as follows:
Article IV
Law School: Administrative Matters and Opening of Branches or Extension Classes

SEC. 24. Administrative Matters.

xxxx

c) Apprenticeship Program. The apprenticeship program should be closely supervised by

the Dean or a member of the faculty assigned by the Dean to do the task. The
apprenticeship program should at least include any of the following activities:

1) Preparation of legal documents

2) Interviewing clients
3) Courtroom observation and participation
4) Observation and assistance in police investigations, inquests and preliminary investigations
5) Legal counseling
6) Legal assistance to detention prisoners
7) For working students, participation in the legal work of the legal section or office of the
employer-entity x x x (Emphasis supplied)
Relatedly, Section 59(d) of LEBMO No. 1-2011, provides:
Article IV
Grading System

SEC. 59. Grading System. - The law school, in the exercise of academic freedom, shall
devise its own grading system provided that on the first day of classes, the students are
apprised of the grading system and provided further that the following are observed:

xxxx

(d) When apprenticeship is required and the student does not complete the mandated
number of apprenticeship hours, or the person supervising the apprenticeship program
deems the performance of the student unsatisfactory, the dean shall require of the student
such number of hours more in apprenticeship as will fulfill the purposes of the
apprenticeship program.[285] (Emphasis supplied)
These provisions unduly interfere with the discretion of a law school regarding its
curriculum, particularly its apprenticeship program. Plainly, these issuances are beyond
mere supervision and regulation.

III.
Conclusion

In general, R.A. No. 7662, as a law meant to uplift the quality of legal education, does
not encroach upon the Court's jurisdiction to promulgate rules under Section 5(5), Article
VIII of the Constitution. It is well-within the jurisdiction of the State, as an exercise of its
inherent police power, to lay down laws relative to legal education, the same being
imbued with public interest.

While the Court is undoubtedly an interested stakeholder in legal education, it cannot

assume jurisdiction where it has none. Instead, in judicial humility, the Court affirms that
the supervision and regulation of legal education is a political exercise, where judges are
nevertheless still allowed to participate not as an independent branch of government, but
as part of the sovereign people.

Nevertheless, inasmuch as the power to promulgate rules concerning the protection and
enforcement of constitutional rights, pleading, practice, and procedure in all courts, the
admission to the practice of law, the Integrated Bar, and legal assistance to the
underprivileged is settled as belonging exclusively to the Court, certain provisions and
clauses of R.A. No. 7662 which, by its plain language and meaning, go beyond legal
education and intrude upon the Court's exclusive jurisdiction suffer from patent
unconstitutionality and should therefore be struck down.

Moreover, the exercise of the power to supervise and regulate legal education is
circumscribed by the normative contents of the Constitution itself, that is, it must be
reasonably exercised. Reasonable exercise means that it should not amount to control and
that it respects the Constitutionallyguaranteed institutional academic freedom and the
citizen's right to quality and accessible education. Transgression of these limitations
renders the power and the exercise thereof unconstitutional.

Accordingly, the Court recognizes the power of the LEB under its charter to prescribe
minimum standards for law admission. The PhiLSAT, when administered as an aptitude
test to guide law schools in measuring the applicants' aptness for legal education along
with such other admissions policy that the law school may consider, is such minimum
standard.

However, the PhiLSAT presently operates not only as a measure of an applicant's

aptitude for law school. The PhiLSAT, as a pass or fail exam, dictates upon law schools
who among the examinees are to be admitted to any law program. When the PhiLSAT is
used to exclude, qualify, and restrict admissions to law schools, as its present design
mandates, the PhiLSAT goes beyond mere supervision and regulation, violates
institutional academic freedom, becomes unreasonable and therefore, unconstitutional. In
striking down these objectionable clauses in the PhiLSAT, the State's inherent power to
protect public interest by improving legal education is neither emasculated nor
compromised. Rather, the institutional academic freedom of law schools to determine for
itself who to admit pursuant to their respective admissions policies is merely protected. In
turn, the recognition of academic discretion comes with the inherent limitation that its
exercise should not be whimsical, arbitrary, or gravely abused.

In similar vein, certain LEB issuances which exceed the powers granted under its charter
should be nullified for being ultra vires.

As in all levels and areas of education, the improvement of legal education indeed
deserves serious attention. The parties are at a consensus that legal education should be
made relevant and progressive. Reforms for a more responsive legal education are
constantly introduced and are evolving. The PhiLSAT, for instance, is not a perfect
initiative. Through time and a better cooperation between the LEB and the law schools in
the Philippines, a standardized and acceptable law admission examination may be
configured. The flaws which the Court assessed to be unconstitutional are meanwhile
removed, thereby still allowing the PhiLSAT to develop into maturity. It is, thus, strongly
urged that recommendations on how to improve legal education, including tools for
screening entrants to law school, reached possibly through consultative summits, be taken
in careful consideration in further issuances or legislations.

WHEREFORE, the petitions are PARTLY GRANTED.

The jurisdiction of the Legal Education Board over legal education is UPHELD.

The Court further declares:

As CONSTITUTIONAL:

1. Section 7(c) of R.A. No. 7662 insofar as it gives the Legal Education Board the
power to set the standards of accreditation for law schools taking into account,
among others, the qualifications of the members of the faculty without
encroaching upon the academic freedom of institutions of higher learning; and

2. Section 7(e) of R.A. No. 7662 insofar as it gives the Legal Education Board the
power to prescribe the minimum requirements for admission to legal education
and minimum qualifications of faculty members without encroaching upon the
academic freedom of institutions of higher learning.

As UNCONSTITUTIONAL for encroaching upon the power of the Court:

1. Section 2, par. 2 of R.A. No. 7662 insofar as it unduly includes "continuing legal
education" as an aspect of legal education which is made subject to Executive
supervision and control;

2. Section 3(a)(2) of R.A. No. 7662 and Section 7(2) of LEBMO No. 1-2011 on the
objective of legal education to increase awareness among members of the legal
profession of the needs of the poor, deprived and oppressed sectors of society;

3. Section 7(g) of R.A. No. 7662 and Section 11(g) of LEBMO No. 1-2011 insofar as
it gives the Legal Education Board the power to establish a law practice internship
as a requirement for taking the Bar; and
 4. Section 7(h) of R.A. No. 7662 and Section 11(h) of LEBMO No. 1-2011 insofar as
it gives the Legal Education Board the power to adopt a system of mandatory
continuing legal education and to provide for the mandatory attendance of
practicing lawyers in such courses and for such duration as it may deem necessary.

As UNCONSTITUTIONAL for being ultra vires:

1. The act and practice of the Legal Education Board of excluding, restricting, and
qualifying admissions to law schools in violation of the institutional academic
freedom on who to admit, particularly:

a. Paragraph 9 of LEBMO No. 7-2016 which provides that all college

graduates or graduating students applying for admission to the basic law
course shall be required to pass the PhiLSAT as a requirement for
admission to any law school in the Philippines and that no applicant shall
be admitted for enrollment as a first year student in the basic law courses
leading to a degree of either Bachelor of Laws or Juris Doctor unless he/she
has passed the PhiLSAT taken within two years before the start of studies
for the basic law course;

b. LEBMC No. 18-2018 which prescribes the passing of the PhiLSAT as a

prerequisite for admission to law schools; Accordingly, the temporary
restraining order issued on March 12, 2019 enjoining the Legal Education
Board from implementing LEBMC No. 18-2018 is made PERMANENT.
The regular admission of students who were conditionally admitted and
enrolled is left to the discretion of the law schools in the exercise of their
academic freedom; and

c. Sections 15, 16, and 17 of LEBMO No. 1-2011;

2. The act and practice of the Legal Education Board of dictating the qualifications
and classification of faculty members, dean, and dean of graduate schools of law
in violation of institutional academic freedom on who may teach, particularly:

a. Sections 41.2(d), 50, 51, and 52 of LEBMO No. 1-2011;

b. Resolution No. 2014-02;

 c. Sections 31(2), 33, 34, and 35 of LEBMO No. 2;

d. LEBMO No. 17-2018; and

3. The act and practice of the Legal Education Board of dictating the policies on
the establishment of legal apprenticeship and legal internship programs in
violation of institutional academic freedom on what to teach, particularly:

e. Resolution No. 2015-08;

f. Section 24(c) of LEBMO No. 2; and

g. Section 59(d) of LEBMO No. 1-2011.

SO ORDERED.

FIRST DIVISION
[ G.R. No. 205752, October 01, 2019 ]
IN RE: PETITION FOR ADOPTION OF JAN AUREL MAGHANOY
BULAYO WITH APPLICATION FOR CHANGE OF NAME OF ADOPTEE
FROM "JAN AUREL MAGHANOY BULAYO" TO "JAN AUREL BULAYO
KIMURA,"

SPOUSES MARY JANE B. KIMURA AND YUICHIRO KIMURA,

PETITIONERS.

DECISION

BERSAMIN, C.J.:

The petitioners implore us to determine whether or not the illegitimate child of

the spouse of an adopting alien falls within the ambit of the clause "relative by
consanguinity or affinity within the fourth civil degree" contained in Section 7 (b)(i) and
(iii), Article III, of Republic Act No. 8552, otherwise known as the Domestic Adoption Act
of 1998, which pertinently provides:
 SEC. 7. Who May Adopt. - The following may adopt:

xxxx

(b) Any alien possessing the same qualifications as above stated for Filipino nationals:
Provided, That his/her country has diplomatic relations with the Republic of the
Philippines, that he/she has been living in the Philippines for at least three (3)
continuous years prior to the filing of the application for adoption and maintains such
residence until the adoption decree is entered, that he/she has been certified by his/her
diplomatic or consular office or any appropriate government agency that he/she has the
legal capacity to adopt in his/her country, and that his/her government allows the
adoptee to enter his/her country as his/her adopted son/daughter: Provided, further,
That the requirements on residency and certification of the alien's qualification to
adopt in his/her country may be waived for the following:

(i) a former Filipino citizen who seeks to adopt a relative within the fourth (4th) degree
of consanguinity or affinity; or

(ii) one who seeks to adopt the legitimate son/daughter of his/her Filipino spouse; or

(iii) one who is married to a Filipino citizen and seeks to adopt jointly with his/her
spouse a relative within the fourth (4th) degree of consanguinity or affinity of the
Filipino spouses; x x x. (Bold underscoring supplied for emphasis)

The Case

This appeal seeks to reverse and undo the judgment and order by the Regional Trial
Court (RTC), Branch 33, in Davao City on February 14, 2012[1] and January 22, 2013,
[2]
 respectively, dismissing their petition for the adoption of the minor Jan Aurel
Maghanoy Bulayo (Jan Aurel) in SP. Proc. No. 10, 718-2010, and denying their motion
for reconsideration.

Antecedents

The antecedent facts are as follows:

 Spouses Mary Jane B. Kimura, a Filipino national, and Yuichiro Kimura, a Japanese
national, got married on June 12, 2004.

Prior thereto, petitioner Mary Jane gave birth to her son Jan Aurel on November 24,
1997. However, she was not married to her son's biological father, Jun Baldoza, thus
making Jan Aurel her illegitimate child. Her last communication with the minor's father
was when she was four (4) months pregnant with [Jan Aurel]. From then on, she has no
knowledge of his whereabouts.

On March 15, 2009, petitioners filed a joint petition for adoption of Jan Aurel seeking,
among others, to have him declared as their legitimate son, enjoying the rights and
observing the duties of an adopted child as provided by law.

During trial, petitioners presented the Department of Social Welfare and Development
Minor's Case Study and Home Study Report which recommended approval of said
petition.

Likewise, petitioners presented the following documents to show that they are in
possession of full civil capacity and legal rights to adopt, of good moral character, have
not been convicted of any crime involving moral turpitude, and emotionally and
psychologically capable of caring for children, x x x.[3]

Specifically, the petitioners presented the following documents to support their petition
for adoption, namely; (1) the marriage contract of the petitioners; (2) the permanent
registration in Japan of petitioner Yuichiro Kimura (Yuichiro); (3) the medical certificates
issued to the petitioners; (4) the neuro-psychological reports for the petitioners; (5) the
certificates of attendance in adoption orientation conducted by Department of Social
Welfare and Development (DSWD); (6) the NBI clearances issued to the petitioners; (7)
the police clearances of the petitioners; (8) the Prosecutor's clearances issued to the
petitioners; (9) the court clearances of the petitioners; (10) the income tax return of
Yuichiro; (11) the certificate of employment Yuichiro.

Nonetheless, on February 14, 2012, the RTC denied the petition for adoption because
Yuichiro, being a Japanese citizen, did not comply with the requirements laid down
under Section 7 of R.A. No. 8552 and Section 7 of Administrative Matter No. 02-6-02-SC.
[4]
 The RTC observed that Yuichiro was not exempt from the residency and certification
requirements under Section 7(b) of R.A. No. 8552 because Jan Aurel was the illegitimate
child of co-petitioner Mary Jane Kimura (Mary Jane).[5]

Hence, this direct appeal by petition for review on certiorari.

Issues

The petitioners hereby raise the following questions of law, to wit:

(1) Whether or not an illegitimate child is within the fourth degree of

consanguinity or affinity in the contemplation of Section 7(b)(iii) of R.A. No. 8552;

(2) Whether or not an illegitimate child is contemplated in Section 7(b)(ii) of R.A. No.
8552; and,

(3) Whether or not the existence of diplomatic relations between the Philippines and
Japan is within judicial notice of the courts.[6]

Decisive is the correct interpretation of Section 7(b)(i) and (iii) of R.A. No. 8552,
particularly the clause "a relative within the fourth degree of consanguinity or affinity"?

Ruling of the Court

The appeal has merit.

I.
Section 7(b)(i) and (iii) of R.A. 8552 should
extend and apply even to illegitimate children

In contending that the RTC should have granted their petition for adoption, the
petitioners emphasize that they are exempt from the requirements for the reason that
Jan Aurel was a relative by consanguinity within the fourth civil degree of Mary Jane.
They insist that Section 7 necessarily includes all relatives – whether legitimate or
illegitimate – within the fourth degree of consanguinity or affinity; that an illegitimate
child is a relative within the first degree of consanguinity of the biological mother or
father; that excluding an illegitimate child from the contemplation of Section 7(b)(i) and
(iii) of R.A. No. 8552 is tantamount to saying that it is easier for an alien spouse to jointly
adopt with the Filipino spouse the latter's cousin, a relative within the fourth degree, or
the nephew or niece, a relative. within the third degree of consanguinity or affinity,
[7]
 than the Filipino spouse's own biological child.

The petitioners' insistence is upheld.

A relative is either a "kinsman" or "a person connected with another by blood or

affinity."[8] Under the Civil Code, the degree of relationship is determined as follows:

Relationship

ARTICLE 963. Proximity of relationship is determined by the number of generations.

Each generation forms a degree.

ARTICLE 964. A series of degrees forms a line, which may be either direct or collateral.

A direct line is that constituted by the series of degrees among ascendants and
descendants.

xxxx

ARTICLE 965. The direct line is either descending or ascending.

xxxx

ARTICLE 966. In the line, as many degrees are counted as there are generations or
persons, excluding the progenitor.

In the direct line, ascent is made to the common ancestor. Thus, the child is one degree
removed from the parent, two from the grandfather, and three from the great-
grandparent.

Pursuant to the foregoing, an illegitimate child is a relative within the first civil degree of
consanguinity of his biological mother. Unlike a nephew and niece, an illegitimate child
belongs to the direct maternal lineage, which is never uncertain, [9] and which is not as
remote as the nephew and niece. The word "child" referred to in Article 966 of the Civil
Code is used in a general term and is without qualification. This is so because the
provision contemplates blood relation, not status. When the provision does not
distinguish between legitimate and illegitimate relatives, we, too, must not. Let us
adhere to the Latin maxim that declares: ubi lex non distinguit, nec nos distinguera
debemus (where the law does not distinguish, nor the interpreter must distinguish).

To put more clarity on the legislative intent, we refer to the deliberations on Senate Bill
No. 1523 (now, R.A. No. 8552) in identifying who can adopt and who may be
adopted under Section 7(b), Article III, of R.A. No. 8552, to wit:

The President. x x x

In respect to former Filipino citizen referred to in line 2 of page 6-- meaning the
exception where aliens may adopt-- why are relatives here limited to those by
consanguinity and it does not include those who are so by affinity?

Senator Santiago. This is a reflection of a native cultural bias, or prejudice in favor of

blood relations. This is a peculiarly Asian world view.

The President. So, the committee has no intention of expanding this to include relatives
by affinity.

Senator Santiago. If there are reasonable grounds for advancing an argument, the
committee would be happy to consider it.

The President. Up to what degree of relatives by consanguinity or affinity, up to what

degree?

Senator Santiago. Generally, in trial courts, this phrase is construed in an open-ended

way. As long as there is a tie of consanguinity, no matter how remote, then it falls
under the coverage of this exception.

The President. Is that the clear intention of this provision?

Senator Santiago. Yes, Mr. President.

xxxx

Senator Maceda. x x x

Now, I support the stand of the Senate President on the question of consanguinity or
affinity, especially if this former Filipino citizen is probably going to leave again. If the
idea is, as stated, to try to encourage more adoptions, especially for those who have
some relations, the matter of allowing relatives by consanguinity or affinity within the
fourth degree, in my opinion, should be allowed.

So if the Senate President will propose that amendment, I shall certainly support it.

Now, still on page 6 (b) and (c), I see the difference here. It says:

"(b) One who seeks to adopt the legitimate child OR CHILDREN of his or her
Filipino spouse; [or]

"(c) One who is married to a Filipino citizen and seeks to adopt jointly with his or her
spouse a relative by consanguinity of the latter."

This is basically the same except, probably, the difference is the joint adoption. Would
that be correct?

Senator Santiago. Under paragraph (b), the subject is only the legitimate child. But
under paragraph (c), the subject is a bigger group, because it covers relatives by
consanguinity who do not necessarily have to be children.

Senator Maceda. Exactly, Mr. President. On the other hand, a legitimate child is also
within the ambit of relative by consanguinity. Is that not correct?

Senator Santiago. That is correct, Mr. President.

x x x x[10] (Emphasis supplied)

GONZALES AMENDMENTS
May the Chair offer this amendment? In line 3, delete the semicolon (;) and add the
following phrase: OR, AFFINITY WITHIN THE FOURTH CIVIL DEGREE.

Senator Santiago. May I please just clarify? It would now read: "...who seeks to adopt
a relative by consanguinity OR AFFINITY WITHIN THE FOURTH CIVIL DEGREE." So the
limitation on civil degree will apply to both consanguinity and affinity?

The President. That is correct. That is the intention of the amendment.

Senator Santiago. I am delighted to accept the amendment, Mr. President.

The President. Is there any objection? [Silence] There being none, the amendment is

approved.[11]

Although Senate Bill No. 1523 originally indicated that the exception should only cover
relatives by consanguinity, the lawmakers were in agreement during the period of
individual amendments to include the phrase "or affinity within the fourth civil
degree" in order to expand the coverage to more children or relatives under the
preferential exception embodied in Section 7. The reason was stated in Section 2 of the
law, which declares that it is the State's policy "to ensure that every child remains under
the care and custody of his/her parent(s) and be provided with love, care,
understanding and security towards the full and harmonious development of his/her
personality."

R.A. No. 8552 undoubtedly intended to include Jan Aurel, the biological child of Mary
Jane, in the term "relatives" under Section 7(b)(iii) because he was her relative within
the first civil degree. Finding otherwise would engender a situation where the alien
adopter would be able to undergo a speedy and less expensive adoption process by
being able to adopt, say, his Filipina spouse's nephew or niece instead of the Filipino
spouse's own child.

It is relevant to note that the Office of the Solicitor General (OSG) joins the petitioners'
position, and emphasizes that "if the law exempts the alien adopter from residency and
certification requirements if he/she will adopt the brother/sister, nephew/niece or
cousin of his/her Filipino spouse (who are within the 4 th civil degree of consanguinity or
affinity), then there is no reason to exclude the application of the said exemption if the
adoptee is the illegitimate child of the said Filipino spouse." [12]

At any rate, had the legislators intended that only the legitimate children were
contemplated by Section 7(b)(i) and (iii), then Congress should have been written the
law as explicitly. Indeed, Congress did so in Section 7(b)(ii) [13] by including the term
"legitimate" to describe the children contemplated by that clause. Section 7(b)(i) and
(iii) clearly covered both legitimate and illegitimate relatives as long as they were within
the fourth civil degree of consanguinity or affinity.

II
Courts may take judicial notice
of the existence of diplomatic relations
between the Philippines and Japan

The petitioners assert that their petition for adoption has indicated the existence of the
diplomatic relations between Philippines and Japan, but they did not anymore prove the
same during the trial because the existence of such diplomatic relations was within the
judicial notice of the courts.[14]

The OSG has not refuted the petitioners' assertion.

Section 1 and Section 2, Rule 129 of the Rules of Court state:

Section 1. Judicial notice, when mandatory. — A court shall take judicial notice,
without the introduction of evidence, of the existence and territorial extent of states,
their political history, forms of government and symbols of nationality, the law of
nations, the admiralty and maritime courts of the world and their seals, the political
constitution and history of the Philippines, the official acts of legislative, executive and
judicial departments of the Philippines, the laws of nature, the measure of time, and the
geographical divisions. (1a)

Section 2. Judicial notice, when discretionary. — A court may take judicial notice of
matters which are of public knowledge, or are capable to unquestionable
demonstration, or ought to be known to judges because of their judicial functions.

The courts of the Philippines are bound to take judicial notice of the existence of the
diplomatic relations between our country and Japan pursuant to both Section 1 and
Section 2, supra. Diplomatic relations form part of the official acts of the Executive
Department of our Government. They are also matters of public knowledge.

There is no dispute, indeed, that the Philippines and Japan have had a long history of
diplomatic relations.[15] In 1888, Japan already established a diplomatic office in Manila,
and expanded it as a Consulate General in 1919. Eventually, Japan declared its office in
Manila an embassy in 1943 during the Japanese occupation of the country. Both
countries were also signatories to the Vienna Convention on Diplomatic Relations, an
indication that they wished to have a more prominent diplomatic presence in each
other by sending of diplomatic missions. This further shows that both countries, being
signatories to the Vienna Convention, aimed to have the representation of the interests
of the sending state and promoting friendly relations with the receiving state. [16] The
countless efforts to maintain their diplomatic relations no longer required the
presentation of proof of the existence of diplomatic relations.

WHEREFORE, the Court GRANTS the petition for review

on certiorari; REVERSES and SETS ASIDE the judgment and order rendered, respectively,
on February 14, 2012 and January 22, 2013 by the Regional Trial Court, Branch 33, in
Davao City in SP. Proc. No. 10, 718-2010; GRANTS the petition for
adoption; DECLARES that henceforth, JAN AUREL MAGHANOY BULAYO, is freed from all
legal obligations of obedience and maintenance with respect to his biological father, and
shall be, to all intents and purposes, the child of the Spouses Mary Jane B. Kimura and
Yuichiro Kimura, with his surname to be changed to KIMURA.

Let a copy of this decision be each furnished to the Office of the Solicitor General; the
Department of Social Welfare and Development, Regional Office, Region XI, in Davao
City; and the Local Civil Registrar of Davao City.

No pronouncement on costs of suit.

SO ORDERED.

FIRST DIVISION
[ G.R. No. 184398, February 25, 2010 ]
 SILKAIR (SINGAPORE) PTE. LTD., PETITIONER, VS. COMMISSIONER
OF INTERNAL REVENUE, RESPONDENT.

DECISION

LEONARDO-DE CASTRO, J.:

Before the Court is a Petition for Review on Certiorari, assailing the May 27, 2008
Decision[1] and the subsequent September 5, 2008 Resolution[2] of the Court of Tax
Appeals (CTA) En Banc in C.T.A. E.B. No. 267. The decision dated May 27, 2008 denied
the petition for review filed by petitioner Silkair (Singapore) Pte. Ltd., on the ground,
among others, of failure to prove that it was authorized to operate in the Philippines for
the period June to December 2000, while the Resolution dated September 5, 2008
denied petitioner's motion for reconsideration for lack of merit.

The antecedent facts are as follows:

Petitioner, a foreign corporation organized under the laws of Singapore with a Philippine
representative office in Cebu City, is an online international carrier plying the Singapore-
Cebu-Singapore and Singapore-Cebu-Davao-Singapore routes.

Respondent Commissioner of Internal Revenue is impleaded herein in his official

capacity as head of the Bureau of Internal Revenue (BIR), an attached agency of the
Department of Finance which is duly authorized to decide, approve, and grant refunds
and/or tax credits of erroneously paid or illegally collected internal revenue taxes. [3]

On June 24, 2002, petitioner filed with the BIR an administrative claim for the refund of
Three Million Nine Hundred Eighty-Three Thousand Five Hundred Ninety Pesos and
Forty-Nine Centavos (P3,983,590.49) in excise taxes which it allegedly erroneously paid
on its purchases of aviation jet fuel from Petron Corporation (Petron) from June to
December 2000. Petitioner used as basis therefor BIR Ruling No. 339-92 dated
December 1, 1992, which declared that the petitioner's Singapore-Cebu-Singapore route
is an international flight by an international carrier and that the petroleum products
purchased by the petitioner should not be subject to excise taxes under Section 135 of
Republic Act No. 8424 or the 1997 National Internal Revenue Code (NIRC).

Since the BIR took no action on petitioner's claim for refund, petitioner sought judicial
recourse and filed on June 27, 2002, a petition for review with the CTA (docketed as CTA
Case No. 6491), to prevent the lapse of the two-year prescriptive period within which to
judicially claim a refund under Section 229[4] of the NIRC. Petitioner invoked its
exemption from payment of excise taxes in accordance with the provisions of Section
135(b) of the NIRC, which exempts from excise taxes the entities covered by tax treaties,
conventions and other international agreements; provided that the country of said
carrier or exempt entity likewise exempts from similar taxes the petroleum products
sold to Philippine carriers or entities. In this regard, petitioner relied on the reciprocity
clause under Article 4(2) of the Air Transport Agreement entered between the Republic
of the Philippines and the Republic of Singapore.

Section 135(b) of the NIRC provides:

SEC. 135. Petroleum Products Sold to International Carriers and Exempt Entities

or Agencies. - Petroleum products sold to the following are exempt from excise tax:

xxxx

(b) Exempt entities or agencies covered by tax treaties, conventions and other
international agreements for their use or consumption: Provided, however, That the
country of said foreign international carrier or exempt entities or agencies exempts from
similar taxes petroleum products sold to Philippine carriers, entities or agencies; x x x.

Article 4(2) of the Air Transport Agreement between the Philippines and Singapore, in
turn, provides:

ART. 4. x x x.

xxxx

(2) Fuel, lubricants, spare parts, regular equipment and aircraft stores introduced into,
or taken on board aircraft in the territory of one Contracting Party by, or on behalf of, a
designated airline of the other Contracting Party and intended solely for use in the
operation of the agreed services shall, with the exception of charges corresponding to
the service performed, be exempt from the same customs duties, inspection fees and
other duties or taxes imposed in the territory of the first Contracting Party, even when
these supplies are to be used on the parts of the journey performed over the territory of
the Contracting Party in which they are introduced into or taken on board. The materials
referred to above may be required to be kept under customs supervision and control.

In a Decision[5] dated July 27, 2006, the CTA First Division found that petitioner was
qualified for tax exemption under Section 135(b) of the NIRC, as long as the Republic of
Singapore exempts from similar taxes petroleum products sold to Philippine carriers,
entities or agencies under Article 4(2) of the Air Transport Agreement quoted above.
However, it ruled that petitioner was not entitled to the excise tax exemption for failure
to present proof that it was authorized to operate in the Philippines during the period
material to the case due to the non-admission of some of its exhibits, which were
merely photocopies, including Exhibit "A" which was petitioner's Certificate of
Registration with the Securities and Exchange Commission (SEC) and Exhibits "P," "Q"
and "R" which were its operating permits issued by the Civil Aeronautics Board (CAB) to
fly the Singapore-Cebu-Singapore and Singapore-Cebu-Davao-Singapore routes for the
period October 1999 to October 2000.

Petitioner filed a motion for reconsideration but the CTA First Division denied the same
in a Resolution[6] dated January 17, 2007.

Thereafter, petitioner elevated the case before the CTA En Banc via a petition for
review, which was initially denied in a Resolution [7] dated May 17, 2007 for failure of
petitioner to establish its legal authority to appeal the Decision dated July 27, 2006 and
the Resolution dated January 17, 2007 of the CTA First Division.

Undaunted, petitioner moved for reconsideration. In the Resolution [8] dated September

19, 2007, the CTA En Banc set aside its earlier resolution dismissing the petition for
review and reinstated the same. It also required respondent to file his comment
thereon.

On May 27, 2008, the CTA En Banc promulgated the assailed Decision and denied the
petition for review, thus:

WHEREFORE, premises considered, the instant petition is hereby DENIED for lack

of merit. The assailed Decision dated July 27, 2006 dismissing the instant petition on
ground of failure of petitioner to prove that it was authorized to operate in the
Philippines for the period from June to December 2000, is hereby AFFIRMED WITH
MODIFICATION that petitioner is further not found to be the proper party to file the
instant claim for refund.[9]
In a separate Concurring and Dissenting Opinion,[10] CTA Presiding Justice Ernesto D.
Acosta opined that petitioner was exempt from the payment of excise taxes based on
Section 135 of the NIRC and Article 4 of the Air Transport Agreement between the
Philippines and Singapore. However, despite said exemption, petitioner's claim for
refund cannot be granted since it failed to establish its authority to operate in the
Philippines during the period subject of the claim. In other words, Presiding Justice
Acosta voted to uphold in toto the Decision of the CTA First Division.

Petitioner again filed a motion for reconsideration which was denied in the Resolution
dated September 5, 2008. Hence, the instant petition for review on certiorari, which
raises the following issues:

Whether or not petitioner has substantially proven its authority to operate in the
Philippines.

II

Whether or not petitioner is the proper party to claim for the refund/tax credit of excise
taxes paid on aviation fuel.

Petitioner maintains that it has proven its authority to operate in the Philippines with
the admission of its Foreign Air Carrier's Permit (FACP) as Exhibit "B" before the CTA,
which, in part, reads:

[T]his Board RESOLVED, as it hereby resolves to APPROVE the petition of SILKAIR

(SINGAPORE) PTE LTD., for issuance of a regular operating permit (Foreign Air Carrier's
Permit), subject to the approval of the President, pursuant to Sec. 10 of R.A. 776, as
amended by P.D. 1462.[11]

Moreover, petitioner argues that Exhibits "P," "Q" and "R," which it previously filed with
the CTA, were merely flight schedules submitted to the CAB, and were not its operating
permits. Petitioner adds that it was through inadvertence that only photocopies of these
exhibits were introduced during the hearing.

Petitioner also asserts that despite its failure to present the original copy of its SEC
Registration during the hearings, the CTA should take judicial notice of its SEC
Registration since the same was already offered and admitted in evidence in similar
cases pending before the CTA.

Petitioner further claims that the instant case involves a clear grant of tax exemption to
it by law and by virtue of an international agreement between two governments.
Consequently, being the entity which was granted the tax exemption and which made
the erroneous tax payment of the excise tax, it is the proper party to file the claim for
refund.

In his Comment[12] dated March 26, 2009, respondent states that the admission in
evidence of petitioner's FACP does not change the fact that petitioner failed to formally
offer in evidence the original copies or certified true copies of Exhibit "A," its SEC
Registration; and Exhibits "P," "Q" and "R," its operating permits issued by the CAB to fly
its Singapore-Cebu-Singapore and Singapore-Cebu-Davao-Singapore routes for the
period October 1999 to October 2000. Respondent emphasizes that petitioner's failure
to present these pieces of evidence amounts to its failure to prove its authority to
operate in the Philippines.

Likewise, respondent maintains that an excise tax, being an indirect tax, is the direct
liability of the manufacturer or producer. Respondent reiterates that when an excise tax
on petroleum products is added to the cost of goods sold to the buyer, it is no longer a
tax but becomes part of the price which the buyer has to pay to obtain the article.
According to respondent, petitioner cannot seek reimbursement for its alleged
erroneous payment of the excise tax since it is neither the entity required by law nor the
entity statutorily liable to pay the said tax.

After careful examination of the records, we resolve to deny the petition.

Petitioner's assertion that the CTA may take judicial notice of its SEC Registration,
previously offered and admitted in evidence in similar cases before the CTA, is
untenable.

We quote with approval the disquisition of the CTA En Banc in its Decision dated May
27, 2008 on the non-admission of petitioner's Exhibits "A," "P," "Q" and "R," to wit:

Anent petitioner's argument that the Court in Division should have taken judicial
notice of the existence of Exhibit "A" (petitioner's SEC Certificate of Registration),
although not properly identified during trial as this has previously been offered and
admitted in evidence in similar cases involving the subject matter between the same
parties before this Court, We are in agreement with the ruling of the Court in Division,
as discussed in its Resolution dated April 12, 2005 resolving petitioner's Motion for
Reconsideration on the court's non-admission of Exhibits "A", "P", "Q" and "R", wherein
it said that:

"Each and every case is distinct and separate in character and matter although
similar parties may have been involved. Thus, in a pending case, it is not mandatory
upon the courts to take judicial notice of pieces of evidence which have been offered in
other cases even when such cases have been tried or pending in the same
court. Evidence already presented and admitted by the court in a previous case cannot
be adopted in a separate case pending before the same court without the same being
offered and identified anew.

The cases cited by petitioner concerned similar parties before the same court but do not
cover the same claim. A court is not compelled to take judicial notice of pieces of
evidence offered and admitted in a previous case unless the same are properly offered
or have accordingly complied with the requirements on the rules of evidence. In other
words, the evidence presented in the previous cases cannot be considered in this
instant case without being offered in evidence.

Moreover, Section 3 of Rule 129 of the Revised Rules of Court provides that hearing is
necessary before judicial notice may be taken by the courts. To quote said section:

Sec. 3. Judicial notice, when hearing necessary.  - During the trial, the court, on its
own initiative, or on request of a party, may announce its intention to take judicial
notice of any matter and allow the parties to be heard thereon.

After the trial, and before judgment or on appeal, the proper court, on its own initiative
or on request of a party, may take judicial notice of any matter and allow the parties to
be heard thereon if such matter is decisive of a material issue in the case.

Furthermore, petitioner admitted that Exhibit `A' have (sic) been offered and admitted
in evidence in similar cases involving the same subject matter filed before this Court.
Thus, petitioner is and should have been aware of the rules regarding the offering of any
documentary evidence before the same can be admitted in court.
As regards Exhibit[s] `P', `Q' and `R', the original copies of these documents were not
presented for comparison and verification in violation of Section 3 of Rule 130 of the
1997 Revised Rules of Court. The said section specifically provides that `when the
subject of inquiry is the contents of a document, no evidence shall be admissible other
than the original document itself x x x'. It is an elementary rule in law that documents
shall not be admissible in evidence unless and until the original copies itself are
offered or presented for verification in cases where mere copies are offered, save for
the exceptions provided for by law. Petitioner thus cannot hide behind the veil of
judicial notice so as to evade its responsibility of properly complying with the rules of
evidence. For failure of herein petitioner to compare the subject documents with its
originals, the same may not be admitted." (Emphasis Ours)

Likewise, in the Resolution dated July 15, 2005 of the Court in Division denying
petitioner's Omnibus Motion seeking allowance to compare the denied exhibits with
their certified true copies, the court a quo explained that:

"Petitioner was already given enough time and opportunity to present the
originals or certified true copies of the denied documents for comparison. When
petitioner received the resolution denying admission of the provisionally marked
exhibits, it should have submitted the originals or certified true copies for comparison,
considering that these documents were accordingly available. But instead of presenting
these documents, petitioner, in its Motion for Reconsideration, tried to hide behind the
veil of judicial notice so as to evade its responsibility of properly applying the rules on
evidence. It was even submitted by petitioner that these documents should be admitted
for they were previously offered and admitted in similar cases involving the same
subject matter and parties. If this was the case, then, there should have been no reason
for petitioner to seasonably present the originals or certified true copies for comparison,
or even, marking. x x x."

In view of the foregoing discussion, the Court en banc finds that indeed, petitioner
indubitably failed to establish its authority to operate in the Philippines for the period
beginning June to December 2000.[13]

This Court finds no reason to depart from the foregoing findings of the CTA En Banc as
petitioner itself admitted on page 9[14] of its petition for review that "[i]t was through
inadvertence that only photocopies of Exhibits `P', `Q' and `R' were introduced during
the hearing" and that it was "rather unfortunate that petitioner failed to produce the
original copy of its SEC Registration (Exhibit `A') for purposes of comparison with the
photocopy that was originally presented."

Evidently, said documents cannot be admitted in evidence by the court as the original
copies were neither offered nor presented for comparison and verification during the
trial. Mere identification of the documents and the markings thereof as exhibits do not
confer any evidentiary weight on them as said documents have not been formally
offered by petitioner and have been denied admission in evidence by the CTA.

Furthermore, the documents are not among the matters which the law mandatorily
requires the Court to take judicial notice of, without any introduction of evidence, as
petitioner would have the CTA do. Section 1, Rule 129 of the Rules of Court reads:

SECTION 1. Judicial notice, when mandatory. - A court shall take judicial notice,
without the introduction of evidence, of the existence and territorial extent of states,
their political history, forms of government and symbols of nationality, the law of
nations, the admiralty and maritime courts of the world and their seals, the political
constitution and history of the Philippines, the official acts of the legislative, executive
and judicial departments of the Philippines, the laws of nature, the measure of time,
and the geographical divisions.

Neither could it be said that petitioner's SEC Registration and operating permits from
the CAB are documents which are of public knowledge, capable of unquestionable
demonstration, or ought to be known to the judges because of their judicial functions, in
order to allow the CTA to take discretionary judicial notice of the said documents. [15]

Moreover, Section 3 of the same Rule[16] provides that a hearing is necessary before

judicial notice of any matter may be taken by the court. This requirement of a hearing is
needed so that the parties can be heard thereon if such matter is decisive of a material
issue in the case.

Given the above rules, it is clear that the CTA En Banc correctly did not admit
petitioner's SEC Registration and operating permits from the CAB which were merely
photocopies, without the presentation of the original copies for comparison and
verification. As aptly held by the CTA En Banc, petitioner cannot rely on the principle of
judicial notice so as to evade its responsibility of properly complying with the rules of
evidence. Indeed, petitioner's contention that the said documents were previously
marked in other cases before the CTA tended to confirm that the originals of these
documents were readily available and their non-presentation in these proceedings was
unjustified. Consequently, petitioner's failure to compare the photocopied documents
with their original renders the subject exhibits inadmissible in evidence.

Going to the second issue, petitioner maintains that it is the proper party to claim for
refund or tax credit of excise taxes since it is the entity which was granted the tax
exemption and which made the erroneous tax payment. Petitioner anchors its claim on
Section 135(b) of the NIRC and Article 4(2) of the Air Transport Agreement between the
Philippines and Singapore. Petitioner also asserts that the tax exemption, granted to it
as a buyer of a certain product, is a personal privilege which may not be claimed or
availed of by the seller. Petitioner submits that since it is the entity which actually paid
the excise taxes, then it should be allowed to claim for refund or tax credit.

At the outset, it is important to note that on two separate occasions, this Court has
already put to rest the issue of whether or not petitioner is the proper party to claim for
the refund or tax credit of excise taxes it allegedly paid on its aviation fuel purchases.
[17]
 In the earlier case of Silkair (Singapore) Pte, Ltd. v. Commissioner of Internal Revenue,
[18]
 involving the same parties and the same cause of action but pertaining to different
periods of taxation, we have categorically held that Petron, not petitioner, is the proper
party to question, or seek a refund of, an indirect tax, to wit:

The proper party to question, or seek a refund of, an indirect tax is the statutory
taxpayer, the person on whom the tax is imposed by law and who paid the same even if
he shifts the burden thereof to another. Section 130 (A) (2) of the NIRC provides that
"[u]nless otherwise specifically allowed, the return shall be filed and the excise tax paid
by the manufacturer or producer before removal of domestic products from place of
production." Thus, Petron Corporation, not Silkair, is the statutory taxpayer which is
entitled to claim a refund based on Section 135 of the NIRC of 1997 and Article 4(2) of
the Air Transport Agreement between RP and Singapore.

Even if Petron Corporation passed on to Silkair the burden of the tax, the additional
amount billed to Silkair for jet fuel is not a tax but part of the price which Silkair had to
pay as a purchaser.

In the second Silkair[19] case, the Court explained that an excise tax is an indirect tax
where the burden can be shifted or passed on to the consumer but the tax liability
remains with the manufacturer or seller. Thus, the manufacturer or seller has the option
of shifting or passing on the burden of the tax to the buyer. However, where the burden
of the tax is shifted, the amount passed on to the buyer is no longer a tax but a part of
the purchase price of the goods sold.

Petitioner contends that the clear intent of the provisions of the NIRC and the Air
Transport Agreement is to exempt aviation fuel purchased by petitioner as an exempt
entity from the payment of excise tax, whether such is a direct or an indirect tax.
According to petitioner, the excise tax on aviation fuel, though initially payable by the
manufacturer or producer, attaches to the goods and becomes the liability of the person
having possession thereof.

We do not agree. The distinction between a direct tax and an indirect tax is relevant to
this issue. In Commissioner of Internal Revenue v. Philippine Long Distance Telephone
Company,[20] this Court explained:

Based on the possibility of shifting the incidence of taxation, or as to who shall

bear the burden of taxation, taxes may be classified into either direct tax or indirect tax.

In context, direct taxes are those that are exacted from the very person who, it is
intended or desired, should pay them; they are impositions for which a taxpayer is
directly liable on the transaction or business he is engaged in.

On the other hand, indirect taxes are those that are demanded, in the first instance,
from, or are paid by, one person in the expectation and intention that he can shift the
burden to someone else. Stated elsewise, indirect taxes are taxes wherein the liability
for the payment of the tax falls on one person but the burden thereof can be shifted or
passed on to another person, such as when the tax is imposed upon goods before
reaching the consumer who ultimately pays for it. When the seller passes on the tax to
his buyer, he, in effect, shifts the tax burden, not the liability to pay it, to the purchaser
as part of the purchase price of goods sold or services rendered.

Title VI of the NIRC deals with excise taxes on certain goods. Section 129 reads as
follows:

SEC. 129. Goods Subject to Excise Taxes. - Excise taxes apply to goods

manufactured or produced in the Philippines for domestic sale or consumption or for
any other disposition and to things imported. x x x.

As used in the NIRC, therefore, excise taxes refer to taxes applicable to certain specified
or selected goods or articles manufactured or produced in the Philippines for domestic
sale or consumption or for any other disposition and to things imported into the
Philippines. These excise taxes may be considered taxes on production as they are
collected only from manufacturers and producers. Basically an indirect tax, excise taxes
are directly levied upon the manufacturer or importer upon removal of the taxable
goods from its place of production or from the customs custody. These taxes, however,
may be actually passed on to the end consumer as part of the transfer value or selling
price of the goods sold, bartered or exchanged. [21]

In Maceda v. Macaraig, Jr.,[22] this Court declared:

"[I]ndirect taxes are taxes primarily paid by persons who can shift the burden
upon someone else." For example, the excise and ad valorem taxes that oil companies
pay to the Bureau of Internal Revenue upon removal of petroleum products from its
refinery can be shifted to its buyer, like the NPC, by adding them to the "cash" and/or
"selling price."

And as noted by us in the second Silkair[23] case mentioned above:

When Petron removes its petroleum products from its refinery in Limay, Bataan,
it pays the excise tax due on the petroleum products thus removed. Petron, as
manufacturer or producer, is the person liable for the payment of the excise tax as
shown in the Excise Tax Returns filed with the BIR. Stated otherwise, Petron is the
taxpayer that is primarily, directly and legally liable for the payment of the excise taxes.
However, since an excise tax is an indirect tax, Petron can transfer to its customers the
amount of the excise tax paid by treating it as part of the cost of the goods and tacking it
on the selling price.

As correctly observed by the CTA, this Court held in Philippine Acetylene Co., Inc. v.
Commissioner of Internal Revenue:
"It may indeed be that the economic burden of the tax finally falls on the
purchaser; when it does the tax becomes part of the price which the purchaser must
pay."
Even if the consumers or purchasers ultimately pay for the tax, they are not
considered the taxpayers. The fact that Petron, on whom the excise tax is imposed, can
shift the tax burden to its purchasers does not make the latter the taxpayers and the
former the withholding agent.
Petitioner, as the purchaser and end-consumer, ultimately bears the tax burden, but this
does not transform petitioner's status into a statutory taxpayer.

Thus, under Section 130(A)(2) of the NIRC, it is Petron, the taxpayer, which has the legal
personality to claim the refund or tax credit of any erroneous payment of excise taxes.
Section 130(A)(2) states:

SEC. 130. Filing of Return and Payment of Excise Tax on Domestic Products. -

(A) Persons Liable to File a Return, Filing of Return on Removal and Payment of Tax. -

(1) Persons Liable to File a Return. - x x x

(2) Time for Filing of Return and Payment of the Tax. - Unless otherwise specifically
allowed, the return shall be filed and the excise tax paid by the manufacturer or
producer before removal of domestic products from place of production: x x x.
(Emphasis supplied.)

Furthermore, Section 204(C) of the NIRC provides a two-year prescriptive period within
which a taxpayer may file an administrative claim for refund or tax credit, to wit:

SEC. 204. Authority of the Commissioner to Compromise, Abate, and Refund or

Credit Taxes. - The Commissioner may -

xxxx

(C) Credit or refund taxes erroneously or illegally received or penalties imposed without
authority, refund the value of internal revenue stamps when they are returned in good
condition by the purchaser, and, in his discretion, redeem or change unused stamps that
have been rendered unfit for use and refund their value upon proof of destruction. No
credit or refund of taxes or penalties shall be allowed unless the taxpayer files in
writing with the Commissioner a claim for credit or refund within two (2) years after
the payment of the tax or penalty: Provided, however, That a return filed showing an
overpayment shall be considered as a written claim for credit or refund. (Emphasis
supplied.)

From the foregoing discussion, it is clear that the proper party to question, or claim a
refund or tax credit of an indirect tax is the statutory taxpayer, which is Petron in this
case, as it is the company on which the tax is imposed by law and which paid the same
even if the burden thereof was shifted or passed on to another. It bears stressing that
even if Petron shifted or passed on to petitioner the burden of the tax, the additional
amount which petitioner paid is not a tax but a part of the purchase price which it had
to pay to obtain the goods.

Time and again, we have held that tax refunds are in the nature of tax exemptions which
represent a loss of revenue to the government. These exemptions, therefore, must not
rest on vague, uncertain or indefinite inference, but should be granted only by a clear
and unequivocal provision of law on the basis of language too plain to be mistaken.
[24]
 Such exemptions must be strictly construed against the taxpayer, as taxes are the
lifeblood of the government.

In fine, we quote from our ruling in the earlier Silkair[25]  case:

The exemption granted under Section 135 (b) of the NIRC of 1997 and Article 4(2)
of the Air Transport Agreement between RP and Singapore cannot, without a clear
showing of legislative intent, be construed as including indirect taxes. Statutes granting
tax exemptions must be construed in strictissimi juris against the taxpayer and liberally
in favor of the taxing authority, and if an exemption is found to exist, it must not be
enlarged by construction.

This calls for the application of the doctrine, stare decisis et non quieta movere. Follow
past precedents and do not disturb what has been settled. Once a case has been
decided one way, any other case involving exactly the same point at issue, as in the case
at bar, should be decided in the same manner.[26]

WHEREFORE, the instant petition for review is DENIED. We affirm the assailed Decision
dated May 27, 2008 and the Resolution dated September 5, 2008 of the Court of Tax
Appeals En Banc in C.T.A. E.B. No. 267. No pronouncement as to costs.

SO ORDERED.

SECOND DIVISION
[ G.R. No. 187917, January 19, 2011 ]
 METROPOLITAN BANK & TRUST COMPANY, PETITIONER, VS.
SPOUSES EDMUNDO MIRANDA AND JULIE MIRANDA, RESPONDENTS.

DECISION

NACHURA, J.:

On appeal is the June 30, 2008 Decision[1] of the Court of Appeals (CA) in CA-G.R.
CV No. 87775, affirming the June 16, 2006 Decision[2] of the Regional Trial Court (RTC) of
Santiago City, Branch 35, as well as its subsequent Resolution dated May 7, 2009,
[3]
 denying petitioner's motion for reconsideration.

Respondents, spouses Edmundo Miranda and Julie Miranda, applied for and obtained a
credit accommodation from petitioner Metropolitan Bank & Trust Company
(Metrobank).   On August 27, 1996, respondents obtained a P4,000,000.00 loan from
Metrobank and executed a real estate mortgage[4] over a parcel of land in Poblacion,
Santiago, Isabela, covered by Transfer Certificate of Title (TCT) No. 202288. Upon
respondents' request, Metrobank increased the loan from P4,000,000.00 to
P5,000,000.00.  The real estate mortgage executed on August 27, 1996 was thus
amended[5] to increase the principal amount of loan secured by the mortgage to
P5,000,000.00.

Subsequently, respondents obtained additional loans from Metrobank - P1,000,000.00

on  December 3, 1996, and P1,000,000.00 on May 8, 1997. The additional loans were
secured by mortgage[6] over lands situated in Dubinan and Mabini, Santiago, Isabela,
covered by TCT Nos. T-202288, T-180503, T-260279, and T-272664.

Respondents encountered difficulties in paying their loans. They requested for a longer
period to settle their account and further requested for the restructuring of their loans,
which requests Metrobank granted.  Respondents then signed Promissory Note (PN) No.
599773[7] for P6,400,000.00, and PN No. 599772[8] for P950,000.00, both payable on
February 24, 2002, with interest at 17.250% per annum. They also amended the deeds
of real estate mortgage they executed in favor of Metrobank to increase the amount of
loans secured by mortgage to P6,350,000.00.  The amendment was inscribed on TCT
Nos. T-202288,[9] T-260279,[10] and T-180503.[11]

On August 25, 2000, Metrobank sent respondents a demand letter [12] to settle their
overdue account of P8,512,380.15, inclusive of interest and penalties; otherwise, the
bank would initiate "the necessary legal proceedings x x x, without further
notice." Respondents, however, failed to settle their account.   Consequently,
Metrobank caused the extrajudicial foreclosure and auction sale of the mortgaged
properties on November 16, 2000. The Clerk of Court and Ex-Officio Sheriff of Santiago
City sold the mortgaged properties at public auction for the sum of P9,284,452.00 to
Metrobank, as the highest bidder.  A Certificate of Sale[13] was issued in favor of
Metrobank on November 27, 2000, which was registered with the Registry of Deeds on
November 29, 2000.

Claiming that the extrajudicial foreclosure was void, respondents filed a complaint for
Nullification of the Foreclosure Proceedings and Damages with Prayer for Temporary
Restraining Order/Injunction[14] with the RTC of Santiago City.  They alleged non-
compliance with the provisions of Presidential Decree No. 1079 [15] and Act No. 3135,
[16]
 particularly the publication requirement. Respondents further asserted that
Metrobank required them to sign blank promissory notes and real estate mortgage, and
that they were not furnished with copies of these documents.  Later, they discovered
that the terms and conditions of the promissory notes and of the mortgage were
entirely different from what was represented to them  by  the  bank.   The right  to  fix 
the  interest  rates,  they  added,  was
exclusively given to the bank.  Respondents, thus, prayed for the annulment of the
extrajudicial foreclosure proceedings.

Metrobank answered the complaint, denying its material allegations and asserting the
validity of the foreclosure proceedings. Specifically, it averred compliance with the
posting and publication requirements.  Thus, it prayed for the dismissal of the
complaint.[17]

Meanwhile, on December 20, 2001, Metrobank caused the cancellation of the TCTs in
the name of respondents and the issuance of new ones in its name.  On December 21,
2001, the Ex-Officio Sheriff executed a Final Deed of Sale.[18]

On June 16, 2006, the RTC rendered a decision[19] annulling the extrajudicial foreclosure
proceedings. The RTC reviewed the records of the foreclosure proceedings and found no
proof of publication of the sheriff's notice of sale; there was no affidavit of publication
attached to the records.  This fatal defect, it held, invalidated the auction sale and the
entire foreclosure proceedings.  The RTC further held that, when Metrobank foreclosed
the mortgaged properties, respondents' loan account was still outstanding for there was
an overpayment of interests amounting to P1,529,922.00.  Thus, the foreclosure
proceedings were without factual and legal basis.  The RTC further noted that
Metrobank consolidated its title even before the issuance of the sheriff's Final Deed of
Sale.  The trial court considered it an irregularity sufficient to invalidate the
consolidation.

The dispositive portion of the RTC decision reads:

WHEREFORE, premises considered, judgment is hereby rendered in favor of

[respondents] and against [petitioner] Metrobank as follows:

1)      DECLARING as null and void the Sheriff's Certificate of Sale, dated November 27,
2000, Exhibit "11";

2)      DECLARING as null and void the Sheriff's Final Deed of Sale, dated December 21,
2000, Exhibit "12";

3)      CANCELLING [Metrobank's] TCT Nos. T-319236 (Exhibit "13"); T-319235 over Lot 6-
B-18 (Exhibit "14"); T-T-319235 over Lot 4-F (Exhibit "15"); and T-319237 (Exhibit "16");

4)      RESTORING [respondents'] TCT Nos. T-260279 (Exhibit      "E"); T-202288 (Exhibit
"F"); T-180503 (Exhibit "G"; and T- 272664 (Annex "E"); and

5)      ORDERING x x x Metrobank to pay PHP50,000.00 as attorney's fees, and the cost of
suit.

SO ORDERED. [20]

Metrobank filed a motion for reconsideration, but the RTC denied it on July 31, 2006.

Metrobank then appealed to the CA, faulting the RTC for annulling the foreclosure
proceedings.  It insisted that the bank complied with the publication requirement. 
Metrobank also disagreed with the trial court's finding of overpayment of interests
amounting to P1,529,922.00, claiming that the applicable interest rates on respondents'
loans were 17% and not 12% as computed by the trial court.  It further asserted that a
final deed of sale is not necessary for purposes of consolidating its ownership over the
subject properties.  Finally, Metrobank assailed the award of attorney's fees for lack of
basis.

On June 30, 2008, the CA resolved Metrobank's appeal in this wise:

WHEREFORE, the appeal is DISMISSED.  The assailed decision dated June 16,
2006 of the RTC of Santiago City, Branch 35, in Civil Case No. 35-3022 is AFFIRMED.

SO ORDERED.[21]

Metrobank's motion for reconsideration also suffered the same fate, as the CA denied it
on May 7, 2009.[22]

Before us, Metrobank insists on the validity of the foreclosure proceedings. Essentially,
it argues that foreclosure proceedings enjoy the presumption of regularity, and the
party alleging irregularity has the burden of proving his claim.  Metrobank asserts that,
in this case, the presumption of regularity was not disputed because respondents failed
to prove that the notice of sale was not published as required by law.

At the outset, it must be stated that only questions of law may be raised before this
Court in a Petition for Review under Rule 45 of the Revised Rules of Civil Procedure. This
Court is not a trier of facts, and it is not the function of this Court to reexamine the
evidence submitted by the parties.[23]

It has been our consistent ruling that the question of compliance or non-compliance
with notice and publication requirements of an extrajudicial foreclosure sale is a factual
issue, and the resolution thereof by the trial court is generally binding on this Court. 
The matter of sufficiency of posting  and  publication of a notice of foreclosure sale need
not be resolved

by this Court, especially when the findings of the RTC were sustained by the CA. Well-
established is the rule that factual findings of the CA are conclusive on the parties and
carry even more weight when the said court affirms the factual findings of the trial
court.[24]

The unanimity of the CA and the trial court in their factual ascertainment that there was
non-compliance with the publication requirement bars us from supplanting their
findings and substituting them with our own.Metrobank has not shown that they are
entitled to an exception to this rule. It has not sufficiently demonstrated any special
circumstances to justify a factual review.

Metrobank makes much ado of respondents' failure to present proof of non-compliance

with the publication requirement.  It insists that respondents failed to discharge the
requisite burden of proof.

Apparently, Metrobank lost sight of our ruling in Spouses Pulido v. CA,[25] Sempio v. CA,
[26]
 and, recently, in Philippine Savings Bank v. Spouses Dionisio Geronimo and Caridad
Geronimo,[27] viz.:

While it may be true that the party alleging non-compliance with the requisite
publication has the burden of proof, still negative allegations need not be proved even if
essential to one's cause of action or defense if they constitute a denial of the existence
of a document the custody of which belongs to the other party.

It would have been a simple matter for Metrobank to rebut the allegation of non-
compliance by producing the required proof of publication.  Yet, Metrobank opted not
to rebut the allegation; it simply relied on the presumption of regularity in the
performance of official duty.

Unfortunately, Metrobank's reliance on the presumption of regularity must fail because

it did not present any proof of publication of the notice of sale.  As held by this Court
in Spouses Pulido v. Court of Appeals:[28]

[P]etitioners' reliance on the presumption of regularity in the performance of

official duties falls in the face of a serious imputation on non-compliance. The
presumption of compliance with official duty is rebutted by failure to present proof of
posting.

Further, in Philippine Savings Bank v. Spouses Dionisio Geronimo and Caridad Geronimo,
[29]
 this Court rejected a similar contention, viz.:

Petitioner's invocation of the presumption of regularity in the performance of

official duty on the part of Sheriff Castillo is misplaced. While posting the notice of sale is
part of a sheriff's official functions, the actual publication of the notice of sale cannot be
considered as such, since this concerns the publisher's business. Simply put, the sheriff
is incompetent to prove that the notice of sale was actually published in a newspaper of
general circulation.
 As correctly found by the RTC and the CA, the records [30] of the foreclosure
proceedings lacked any proof of publication. This explains why Metrobank could not
present any proof of publication.

We take this occasion to reiterate that the object of a notice of sale is to inform the
public of the nature and condition of the property to be sold, and of the time, place, and
terms of the sale. Notices are given for the purpose of  securing  bidders  and preventing
a sacrifice sale of the property.

The goal of the notice requirement is to achieve a "reasonably wide publicity" of the
auction sale.  This is why publication in a newspaper of general circulation is required.
The Court has previously taken judicial notice of the "far-reaching effects" of publishing
the notice of sale in a newspaper of general circulation.  Thus, the publication of the
notice of sale was held essential to the validity of foreclosure proceedings. [31] In this
case, Metrobank failed to establish compliance with the publication requirement.  The
RTC and the CA cannot, therefore, be faulted for nullifying the foreclosure proceedings.

Metrobank next questions the authority of the RTC and the CA to take cognizance of the
records of the foreclosure proceedings as basis for annulling the auction sale. It claims
that the trial court may not take judicial notice of the records of proceedings in another
case, unless the parties themselves agreed to it.  Metrobank asserts that it did not give
its consent to the trial court's examination of the records of the extrajudicial foreclosure
proceedings.  Further, the RTC did not even set a hearing for the purpose of declaring its
intention to take judicial notice of the records of the extrajudicial proceedings, as
required by Section 3[32] of Rule 129.  Metrobank, thus, contends that the RTC exceeded
its authority in taking cognizance of the records of the extrajudicial proceedings.

We disagree.

As a rule, courts do not take judicial notice of the evidence presented in other
proceedings, even if these have been tried or are pending in the same court or before
the same judge. This rule, however, is not absolute.

In Juaban v. Espina[33] and  "G" Holdings, Inc. v. National Mines and Allied Workers Union
Local 103 (NAMAWU),[34] we held that, in some instances, courts have also taken judicial
notice of proceedings in other cases that are closely connected to the matter in
controversy. These cases may be so closely interwoven, or so clearly interdependent, as
to invoke a rule of judicial notice.

The RTC, therefore, acted well within its authority in taking cognizance of the records of
the extrajudicial foreclosure proceedings, and the CA cannot be faulted for sustaining
the RTC.

Metrobank further questions the trial court's finding of overpayment of interests. But
like the issue on compliance with the publication requirement, the issue on
overpayment of interests involves the ascertainment of facts not subject of review by
this Court. We reiterate that our jurisdiction is limited to reviewing and revising errors of
law imputed to the lower court, the latter's findings of fact being conclusive and not
reviewable by this Court.[35]

Besides, we find nothing erroneous in this factual finding of the RTC.  As explained by
the RTC in its decision:

[T]he Court notes that the original promissory notes evidencing the various loans
of the plaintiffs were not presented in court by either party; they are needed to
determine the stipulated interest rate.  The Court is thus left to determine the same
based on the testimony of the plaintiffs that the agreed interest rate is 12% per annum;
amazingly, this was not denied or refuted by the [petitioner] bank, in which case, 12%
interest rate is applied at least for the period beginning 1997 until 1999, when the loan
was renewed under the two (2) new promissory notes which indicated a higher rate of
interest of 17.250% per annum.  As mentioned above, the interest payments made by
the [respondents] were already admitted by [Metrobank] in its answer to the complaint
as well as in its comment to [respondents'] formal offer of evidence, and such interest
payments are duly reflected and contained in the passbook account of the
[respondents], Exhibit "H," "H-1" to "H-10."  But, in order to determine whether
[respondents'] account has become past due or not, as the [petitioner] bank represents,
the Court deems it necessary to undertake some mathematical computation the result
of which would decisively guide the Court to arrive at a rightful conclusion, thus:

1) Total interest payments by [respondents]

from May 7, 1997 to June 30, 1999 -         P3,332,422.00

2) Interest due
from May 7, 1997 to June 30, 1999 -         P1,802,500.00

computed as follows:

1 Total interest payments by [respondents] - P3,332,422.00

)
from May 7, 1997 to June 30, 1999
Interest due
2 from May 7, 1997 to June 30, 1999 - P1,802,500.00
)
computed as follows:
a) 1st year (P7 M x 12%), from May 7, 1997 to - P  840,000.00
May 28, 1998 
b 2nd year
)
i) from June 3, 1998 to Feb. 24, 1999 - P  560,000.00
(8 mos.)
ii) from March, 1999 to June 30, 1999 - P  402,500.00
(4 mos.)
3 Total Interest paid -  P 3,332,422.00
)
Less Interest due -   P 1,802,500.00
Overpaid interest  - P 1,529,922.00

From the foregoing, it is evident that [respondents] overpaid interests for the period of
two (2) years, from May 1997 to June 1999, in the total amount of Php. 1,529,922.00. 
Thus, the Court is convinced that it is just and equitable that such an overpayment be
construed as advance interest payments which should be applied for the succeeding
period or year of their contract.  Otherwise, [Metrobank] would unjustly enrich itself at
the expense of [respondents].  In such a case, it was premature then for [Metrobank] to
declare [respondents'] account as past due, because at that juncture[, respondents']
loan obligation was outstanding and in declaring otherwise, [Metrobank's] action was
without basis as there was no violation of their loan contract.  Consequently, it follows
that the foreclosure proceedings subsequently held on November 26, 2000 was without
factual and legal basis, too. For, indeed, when the foreclosure proceedings in question
was conducted, [respondents'] loan account with [Metrobank], as it is said, was still
outstanding, because [respondents] were able to pay the interest due.  Therefore, the
Court is again convinced that the nullification prayed for is in order. [36]

We need not say more.

In fine, the right of a bank to foreclose a mortgage upon the mortgagor's failure to pay
his obligation must be exercised according to its clear mandate, and every requirement
of the law must be complied with, or the valid exercise of the right would end.  The
exercise of a right ends when the right disappears, and it disappears when it is abused
especially to the prejudice of others.[37]

As further declared by this Court in Philippine Savings Bank v. Spouses Dionisio

Geronimo and Caridad Geronimo:[38]

While the law recognizes the right of a bank to foreclose a mortgage upon the
mortgagor's failure to pay his obligation, it is imperative that such right be exercised
according to its clear mandate. Each and every requirement of the law must be
complied with, lest, the valid exercise of the right would end. It must be remembered
that the exercise of a right ends when the right disappears, and it disappears when it is
abused especially to the prejudice of others.

We, therefore, affirm the CA and sustain the RTC in nullifying the extrajudicial
foreclosure of real estate mortgage and sale, including Metrobank's title.

With this disquisition, we find no necessity to discuss the issue of the validity of the
consolidation of title by Metrobank.

WHEREFORE, the petition is DENIED.  The challenged Decision and Resolution of the
Court of Appeals in CA-G.R. CV No. 87775 are AFFIRMED.

SECOND DIVISION
[ G.R. No. 237714, November 12, 2018 ]
REPUBLIC OF PHILIPPINES, PETITIONER, VS. SCIENCE PARK OF THE
PHILIPPINES, INC., HEREIN REPRESENTED BY ITS EXECUTIVE VICE-
PRESIDENT AND GENERAL MANAGER, MR. RICHARD ALBERT I.
OSMOND, RESPONDENT.

DECISION

PERLAS-BERNABE, J.:
 Before the Court is a petition for review on certiorari[1] assailing the
Decision[2] dated October 12, 2017 and the Resolution[3] dated February 9, 2018 of the
Court of Appeals (CA) in CA-G.R. CV No. 108099, which affirmed the Decision [4] dated
August 10, 2016 of the Municipal Circuit Trial Court of Malvar-Balete, Batangas (MCTC)
in Land Registration Case (LRC) No. N-129, granting respondent Science Park of the
Philippines, Inc.'s (SPPI) application for original registration in accordance with
Presidential Decree No. (PD) 1529,[5] otherwise known as the "Property Registration
Decree."

The Facts

On November 20, 2014, SPPI filed with the MCTC an Application [6] for original
registration of a 7,691-square meter (sq. m.) parcel of land denominated as Lot 5809,
Psc-47, Malvar Cadastre, located in Barangay Luta Norte, Malvar, Batangas (subject
land).[7] SPPI claimed that: (a) the subject land formed part of the alienable and
disposable land of the public domain; (b)  it and its predecessors-in-interest have been in
open, continuous, exclusive, and notorious possession and occupation under a bona fide
claim of ownership prior to June 12, 1945;[8] (c) the subject land is not mortgaged or
encumbered, nor claimed or possessed by any person other than itself; [9] and (d) it
bought the land from Cenen D. Torizo (Cenen) as evidenced by a Deed of Absolute
Sale[10] dated October 17, 2013.

To prove its claim that the subject land formed part of the alienable and disposable land
of the public domain, SPPI presented a certification[11] dated February 26, 2016 issued by
the Department of Environment and Natural Resources (DENR) – Community
Environment and Natural Resources Office of Batangas City (CENRO) stating that the
land is within the alienable and disposable zone under Project No. 39, Land Classification
(LC) Map No. 3601, based on DENR Administrative Order No. 97-37 (DAO 97-37) issued
by then DENR Secretary Victor O. Ramos on December 22, 1997, [12] as well as certified
photocopies[13] of LC Map No. 3601 and DAO 97-37.[14]

On the other hand, to support its claim of possession in the concept of owner prior to
June 12, 1945, it presented documentary and testimonial evidence that: (a)  the subject
land was previously owned by Gervacio Lat (Gervacio), [15] who held a 1955 tax
declaration in his name;[16] (b) Gervacio was assisted by his tenant in cultivating the land
and harvesting the crops thereon;[17] (c)  Gervacio was succeeded by his daughter,
Ambrocia Lat, who sold the subject land to Spouses Raymundo Linatoc and Maria Reyes
(Sps. Linatoc) through a "Kasulatan ng Bilihang Patuluyan ng Lupa" dated April 25,
1968;[18] (d) after Sps. Linatoc's demise, their heirs executed an "Extrajudicial Settlement
of Estate with Waiver and Renunciation of Rights" on June 4, 1995, waiving their rights,
interests, and participation in the subject land in favor of Ernesto Linatoc (Ernesto);
[19]
 (e) Ernesto subsequently sold the same land to Cenen on March 13, 2012 by virtue of
a "Kasulatan ng Ganap na Bilihan;"[20] and (f)  the subject land is now owned by SPPI
which purchased the same from Cenen.[21]

The MCTC Decision

In a Decision[22] dated August 10, 2016, the MCTC granted SPPI's application for original
registration, holding that it was able to establish that: (a)  it has been in open,
continuous, exclusive, and notorious possession and occupation of the subject land in
the concept of owner even prior to June 12, 1945, tacked to the possession of its
predecessors-in-interest; and (b)  the land is alienable and disposable per verification by
the forester of the DENR CALABARZON Region, CENRO, Batangas City from the land
classification map issued pursuant to DAO 97-37.[23] While the legal custodian of the
DENR's official records, Chief of the Records Management and Documentation Division,
Jane G. Bautista (Ms. Bautista),[24] was not presented to identify the certified copy of
DAO 97-37 presented before the court, the MCTC took judicial notice of the authenticity
of DAO 97-37 on the basis of a stipulation in LRC No. N-127[25] (a land registration case
filed by SPPI involving a different parcel of land previously heard and decided by the
same MCTC) between the same handling Government Prosecutor [26] and the same
counsel for the applicant, to dispense with the presentation of Ms. Bautista. [27]

Petitioner the Republic of the Philippines, herein represented by the Office of the
Solicitor General (petitioner), moved for reconsideration but was denied in an
Order[28] dated October 14, 2016.[29] Hence, it appealed[30] to the CA, arguing that the
MCTC erred in granting SPPI's application for land registration despite the latter's failure
to prove that: (a)  the subject land forms part of the alienable and disposable land of the
public domain since no DENR official had confirmed that DAO 97-37 was authentic and
still in force at the time;[31] and (b)  it and its predecessors-in-interest were in open,
continuous, and exclusive possession of the subject land under a bona fide claim of
ownership prior to June 12, 1945, since the earliest possession was shown to have
started only in 1955, and it failed to identify its predecessors prior to that time. [32]

The CA Ruling
In a Decision[33] dated October 12, 2017, the CA affirmed the MCTC Ruling. It declared
that the land is alienable and disposable, and held that the MCTC properly took judicial
notice of DAO 97-37 in view of the acquiescence of the handling Government
Prosecutor after the trial judge announced that the parties in LRC No. N-127 had already
stipulated on dispensing with the presentation of Ms. Bautista, and after satisfying
himself that the copy of DAO 97-37 presented was certified. [34] It also ruled that SPPI
adequately proved through testimonial and documentary evidence that it and its
predecessors-in-interest had been in open, public, adverse, continuous, and
uninterrupted possession of the subject land in the concept of owner since June 12,
1945.[35]

Petitioner sought reconsideration[36] but was denied in a Resolution[37] dated February 9,

2018; hence, this petition.

The Issue Before the Court

The essential issue in this case is whether or not the CA was correct in upholding the
MCTC's grant of SPPI's application for land registration.

The Court's Ruling

In an application for land registration, it is elementary that the applicant has the burden
of proving, by clear, positive, and convincing evidence that its alleged possession and
occupation were of the nature and duration required by law.[38]

In the instant case, SPPI essentially asked the MCTC for judicial confirmation of its
imperfect title pursuant to Section 14 (1) of PD 1529, which provides:

Section 14. Who may apply.  — The following persons may file in the proper Court
of First Instance an application for registration of title to land, whether personally or
through their duly authorized representatives:

(1 Those who by themselves or through their predecessors-in-interest have been in

) open, continuous, exclusive and notorious possession and occupation of alienable and
disposable lands of the public domain under a bona fide claim of ownership since June 12,
 1945, or earlier.

Under the said provision, the applicants for registration of title must sufficiently
establish that: (a) the land or property forms part of the disposable and alienable lands
of the public domain at the time of the filing of the application for registration; (b) it and
its predecessors-in-interest have been in open, continuous, exclusive, and notorious
possession and occupation of the same; and (c) the possession is under a bona fide
claim of ownership since June 12, 1945, or earlier.[39]

Verily, the applicant has the burden of overcoming the presumption that the State owns
the land applied for, and proving that the land has already been classified as alienable
and disposable as of the time of the filing of the application.[40] To prove the alienability
and disposability of the land sought to be registered, an application for original
registration must be accompanied by two (2) documents, i.e., (1) a copy of
the original classification approved by the DENR Secretary and certified as a true copy by
the legal custodian of the DENR's official records; and (2) a certificate of land
classification status issued by the CENRO or the Provincial Environment and Natural
Resources Office (PENRO) of the DENR based on the land classification approved by the
DENR Secretary.[41]

In the present case, petitioner maintains that SPPI failed to prove that the subject land is
within the alienable and disposable portion of the public domain since DAO 97-37 was
never properly identified in court, and the MCTC should not have taken judicial notice of
the record of other cases even when the said other cases have been heard or pending in
the same court.[42]

Judicial notice is the cognizance of certain facts which judges may properly take and act
on without proof because they already know them.[43] Section 3, Rule 129 of the Rules of
Court pertinently provides:

Section 3. Judicial notice, when hearing necessary. — During the trial, the court,
on its own initiative, or on request of a party, may announce its intention to take judicial
notice of any matter and allow the parties to be heard thereon.

"As a general rule, courts are not authorized to take judicial notice of the contents of
the records of other cases, even when such cases have been tried or are pending in the
same court, and notwithstanding the fact that both cases may have been tried or are
actually pending before the same judge. However, this rule is subject to the exception
that in the absence of objection and as a matter of convenience to all parties, a court
may properly treat all or any part of the original record of the case filed in its archives as
read into the records of a case pending before it, when with the knowledge of
the opposing party, reference is made to it, by name and number or in some  other
manner by which it is sufficiently designated. Thus, for said exception to apply, the party
concerned must be given an opportunity to object before the court could take judicial
notice of any record pertaining to other cases pending before it." [44]

As correctly ruled by the CA, the conditions necessary for the exception to be applicable
were established in this case. Notably, the handling Government Prosecutor (a) did not
object to the dispensation of the testimony of the DENR legal custodian of official
records, Ms. Bautista, in view of the similar stipulation between him and the same
counsel of SPPI in LRC No. N-127 previously heard and decided by the MCTC,
[45]
 and (b) satisfied himself that the copy of DAO 97-37 presented was duly certified by
Ms. Bautista. Only then was the photocopy of the certified copy duly marked as exhibit.
[46]

Moreover, contrary to petitioner's protestation,[47] the land sought to be registered need

not have been declared alienable and disposable since June 12, 1945 or earlier in order
for the applicant for registration to secure the judicial confirmation of its title. Such
contention had already been declared as absurd and unreasonable in Republic v.
Naguit.[48] Registration under Section 14 (1) of PD 1529 is based on possession and
occupation of the alienable and disposable land of the public domain since June 12,
1945 or earlier, without regard to whether the land was susceptible to
private  ownership at that time.  "The applicant needs only to show that the land had
already been declared alienable and disposable at any time prior to the filing of the
application for registration,"[49] which SPPI was able to do.

However, notwithstanding the alienability and disposability of the subject land, the
Court finds that SPPI failed to present convincing evidence that its alleged possession
and occupation were of the nature and duration required by law.

For purposes of land registration under Section 14 (1) of PD 1529, proof of specific acts
of ownership must be presented to substantiate the claim of open, continuous,
exclusive, and notorious possession and occupation of the land subject of the
application. Actual possession consists in the manifestation of acts of dominion over it
of such a nature as a party would actually exercise over his own property. [50] Possession
is: (a) open when it is patent, visible, apparent, notorious, and not
clandestine; (b) continuous when uninterrupted, unbroken, and not intermittent or
occasional; (c)  exclusive  when the adverse possessor can show exclusive dominion over
the land and an appropriation of it to his own use and benefit; and (d) notorious  when
it is so conspicuous that it is generally known and talked of by the public or the people
in the neighborhood.[51]

To prove that it and its predecessors-in-interest have been in possession and occupation
of the subject land since June 12, 1945 or earlier, SPPI presented, among others, the
testimony of Nelia Linatoc-Cabalda (Nelia). Nelia, who was born in 1936, claimed to
have known of Gervacio's ownership and cultivation of the subject land when she was
about seven (7) years old, or around 1943, as she and other children her age would
frequent the subject land where they played and gathered fruits. [52] However, such
testimony was insufficient to establish possession in the nature and character required
by law that would give right to ownership. In a number of cases, the Court has
repeatedly held that to prove open, continuous, exclusive, and notorious possession and
occupation in the concept of owner, the claimant must show the nature [53] and extent of
cultivation[54] on the subject land, or the number of crops planted or the volume of the
produce harvested from the crops supposedly planted thereon; [55] failing in which, the
supposed planting and harvesting of crops in the land being claimed only amounted to
mere casual cultivation which is not the nature of possession and occupation required
by law. Consequently, SPPI failed to satisfy the requisite exclusivity and notoriety of its
claimed possession and occupation of the subject land because exclusive dominion and
conspicuous possession thereof were not established.

Furthermore, SPPFs evidence were insufficient to prove that its possession and
occupation were for the duration required by law. The earliest tax declaration in
Gervacio's name presented by SPPI, i.e., Tax Declaration (TD) No. 6243, dates back to
1955[56] only, short of the requirement that possession and occupation under a bona fide
claim of ownership should be since June 12, 1945 or earlier. That TD No. 6243 cancels a
prior tax declaration, i.e., TD 1052, would not help SPPI's cause in view of the absence
of any evidence (a)  identifying Gervacio or any other prior possessor as the declared
owner under TD 1052, and (b)  indicating its effectivity date. Thus, the Court cannot
subscribe to the CA's conclusion that it can be "reasonably assumed that before the
issuance of [TD] No. 6243, the subject [land] had already been occupied by [Gervacio] or
other prior claimants."[57] The payment of realty taxes and declaration of the subject
land in the name of Gervacio in 1955 gives rise to the presumption that he claimed
ownership and possession thereof only in that year.[58]

In sum, the Court finds that SPPI's unsubstantiated and self-serving assertions of
possession and occupation do not constitute the well-nigh incontrovertible evidence of
possession and occupation of the subject land of the nature and duration required by
Section 14 (1) of PD 1529. Accordingly, the CA erred in affirming the MCTC's grant of
SPPI's application for original registration of its imperfect title over the subject land.

WHEREFORE, the petition is GRANTED. A new judgment is hereby entered REVERSING

and SETTING ASIDE the Decision dated October 12, 2017 and the Resolution dated
February 9, 2018 of the Court of Appeals in CA-G.R. CV No. 108099, and
accordingly, DENYING respondent Science Park of the Philippines, Inc.'s (SPPI)
application for original registration of the subject land.

SO ORDERED.

THIRD DIVISION
[ G.R. NO. 157847, August 25, 2005 ]
REPUBLIC OF THE PHILIPPINES, REPRESENTED BY THE AIR
TRANSPORTATION OFFICE (ATO), PETITIONER, VS. LEODIGARIO
SARABIA, HERMENIGILDO DE LA CRUZ, DELIA REBUTAR, MILDRED
ROSE, ANITA DE LA CRUZ, ERLINDA LUCERIO, GEORGIE DE LA
CRUZ, FELMA DE LA CRUZ, FELINO DE LA CRUZ, TERESITA SAMSON,
AND EVANGELINE COLOMER, RESPONDENTS.

DECISION

GARCIA, J.:

Before the Court is this petition for review on certiorari under Rule 45 of the Rules of
Court, assailing the decision[1] dated November 18, 2002 of the Court of Appeals in CA-
G.R. CV No. 66124, which affirmed the November 26, 1999 decision of the Regional
Trial Court at Aklan, Branch 5, in an expropriation case thereat filed by the petitioner.
The affirmed decision of the trial court dispositively reads:
WHEREFORE, judgment is hereby rendered:

1. Fixing the amount of P800.00 per square meter as just compensation to be

paid by plaintiff to defendants for the taking of the subject property
indicated as Lot 6068-A in the Sketch Plan (Annex B, complaint)
containing an area of 4,901 square meters which is a portion of the bigger
parcel of land covered by Original Certificate of Title No. P-15596. The
aggregate amount shall earn legal interest of 6% per annum commencing
from November 11, 1999 until the finality of this Decision, thereafter, 12%
interest per annum from the finality of the Decision on the remaining
unpaid amount until full payment.

2. Ordering the defendants to withdraw the amount of P50,000.00 deposited

provisionally with the Land Bank Kalibo Branch, Kalibo, Aklan, by the Air
Transportation Office under Savings Account No. 0452-1084-45 to be
deducted therefrom the costs of P10,600.00 and balance shall be deducted
from the aggregate amount of the just compensation; and

3. Declaring the plaintiff's lawful right to retain possession of the subject

property and to appropriate it for the public purpose it was intended for, i.e.,
the operations of the airport control tower, Kalibo crash fire rescue station,
airport terminal and headquarters of the PNP Aviation Security, upon full
payment of the just compensation thereat as fixed in paragraph 1 hereof.

Plaintiff is directed to pay the costs of P9,600.00 representing the Commissioners' fees
equivalent to P800.00 per session for each commissioner, and P1,000.00 to Mr. Remegio
M. Bautista as the designated secretary of the commissioners.

SO ORDERED.[2]
Sometime in 1956, the Air Transportation Office (ATO) took possession and control of
some 4,901 square-meter portion of Lot 6068, a 10,468 square-meter lot located at Pook
Kalibo, Aklan. Lot 6068 is covered by Original Certificate of Title No. P-15596 of the
Register of Deeds of Aklan in the names of the private respondents who are heirs of the
late Segundo De la Cruz.

Initially, the ATO utilized the subject occupied portion of Lot 6068 as an airport parking
area. In time, several structures were erected thereon, including the control tower, the
Kalibo crash fire rescue station, the Kalibo airport terminal and the headquarters of the
PNP Aviation Security Group.

In 1995, stores and restaurants made of light materials were constructed on the area
outside the 4,901 square-meter portion occupied by ATO. In 1997, private respondents
filed a complaint for Recovery of Possession with Damages before the Municipal Trial
Court of Kalibo. The case, docketed as Civil Case No. 1644, is now pending in said
court. ATO intervened in that case and alleged that the occupants of the stores and
restaurants are its lessees.

Petitioner assured private respondents that they would be paid the fair market value of the
subject land. However, the parties did not agree on the amount of compensation therefor.

On June 25, 1998, petitioner Republic of the Philippines, represented by the Air
Transportation Office, filed with the Regional Trial Court at Aklan an action for the
expropriation of the entire Lot 6068, thereat docketed as Civil Case No. 5543.

On August 6, 1999, the trial court appointed three (3) commissioners to ascertain the just
compensation for the subject property.

Upon conduct of ocular inspection and hearing, the commissioners submitted a report to
the trial court with the following recommendation:
NOW THEREFORE, after a brief discussion and in consideration of the premises herein
above presented, the Commissioners hereby recommends (sic) and fix the value of 4,901
sq. m. at P800.00 pesos per square meter and the remaining area of 5,567 square meters
at P500.00 per square meter as offered by the defendants.
On pre-trial, petitioner submitted a sketch plan of Lot 6068, showing the relative location
of the 4,901 square-meter portion it actually occupied.

During the hearing of September 3, 1999, the trial court directed petitioner to present
evidence to prove that the remaining portion not actually and physically occupied by the
government is still needed for public purpose. However, petitioner countered that there is
no need to present evidence thereon considering that almost one-half (1/2) of the entire
property subject of the case has already been in fact occupied and devoted to public
purpose.

The trial court ignored petitioner's posturing and issued an order[3] disposing, as follows:
WHEREFORE, the Court finds and so holds that the additional area consisting of 5,567
square meters or Lot 6068-B (unshaded portion in Annex "B"- Complaint) is not needed
by the plaintiff for public use or purpose, but only the shaded portion, Lot 6068-A,
containing an area of 4,901 square meters.

SO ORDERED.
Eventually, in a decision dated November 26, 1999,[4] the trial court adopted the
aforestated commissioner's report which fixed the just compensation for the 4,901 square-
meter portion of Lot 6068 at P800.00 per square meter, the current market value of the
property in 1999.
In so adjudging, the trial court relied on Republic vs. Honorable Lucerito Tagle, et al.,
[5]
 and thus fixed the just compensation for the 4,901 square-meter portion based on the
current market value not at the time of the taking which was in 1956, but at the time of
the issuance of the writ of possession on November 11, 1999. To the trial court, the date
of the issuance of the writ has to be considered in fixing the just compensation because
the same signified petitioner's proper acquisition and taking of the property which
involves not only physical possession but also the legal right to possess and own the
same.

Unable to accept the trial court's decision for allegedly being contrary to law and
established jurisprudence, petitioner Republic filed a notice of appeal and record on
appeal, which the trial court approved on January 18, 2000. Hence, the entire records of
the case were transmitted to the Court of Appeals, whereat the Republic's appeal was
docketed as CA-G.R. CV No. 66124.

In the herein assailed decision[6] dated November 18, 2002, the Court of Appeals
AFFIRMED the appealed decision of the trial court, thus:
WHEREFORE, premises considered, the assailed decision dated November 26, 1999 of
the Regional Trial Court, Branch 5, Kalibo, Aklan in Civil Case No. 5543 is hereby
AFFIRMED.

SO ORDERED.
In its decision, the appellate court placed emphasis on the alleged failure of petitioner
prove that the "taking" of the occupied 4,901 square-meter portion of Lot 6068 occurred
in 1956. More specifically, it ruled:
Granting that indeed plaintiff-appellant's possession took place in 1956, said possession
pertained to a "portion" of said lot. The admission of plaintiff-appellant that the
encroachment covered a wider and wider area as time passed, puts into issue the character
of said possession. Was it "taking" in the sense of expropriation?

The expropriation of real property does not include mere physical entry or occupation of
land. The physical entry and occupation of the property in 1956 should include all the
rights that may be exercised by an owner of the subject property. Plaintiff-appellant failed
to show that it intended to acquire physical possession but also the legal right to possess
and ultimately to own the subject property.

Disconsolately, the assailed decision reveals inaction of plaintiff-appellant in proving its

present claim which should have been done the earliest possible opportunity. It was stated
that:
The plaintiff, despite receipt of copy of aforesaid report and the expiration of the
prescribed period to file any comment thereto, opted not to file any pleading relative
thereto. Upon the other hand, the defendants interposed no objection to said report.
Hence, there appears no error in the lower court's ruling that the "taking" for the purposes
of fixing just compensation be considered on November 11, 1999, the date of the
issuance of the writ of possession, as well as the lower court's adherence to the
recommendation of the commissioners.
Petitioner moved for a reconsideration of the appellate court's decision but its motion was
denied by said court in its resolution of April 1, 2003.

Hence, petitioner's present recourse.

As we see it, the sole question presented herein involves the precise time at which just
compensation should be fixed: whether as of the time of actual taking of possession by
the expropriating entity, as insisted by petitioner Republic, or at the issuance of the writ
of possession pursuant to the expropriation proceedings, as maintained by the
respondents and sustained by both the trial court and the Court of Appeals.

Before going any further, however, we take exception to the appellate court's finding that
evidence is wanting on the fact of petitioner's taking possession of the disputed 4,901
square-meter portion in 1956.

Petitioner contends that contrary to what the appellate court found, the taking of the
property in 1956 or at least a wide portion thereof, was adequately established.

We agree with petitioner Republic that sufficient evidence exists to prove that the taking
occurred sometime in 1956.

As borne by the records, private respondents' Answer and Pre-Trial Brief contain
irrefutable admissions. Thus, in their Answer,[7] respondents declared, among others, as
follows:
1. That they admit each and every allegation in paragraphs 1,2,3,4,5 and 6 of the
complaint. They admit that the portion of the land sought to be expropriated which is
indicated by the white shaded of the sketch plan which is attached as ANNEX "B" of the
complaint with an area of 4,901 square meters, more or less, has been in the possession of
the plaintiff since 1956 up to the present.
Significantly, paragraph 6 of the complaint[8] which is among those admitted by the
respondents, reads:

6. The subject property has been in possession and control of ATO since 1956 and was
initially devoted to parking area. At present, several structures, are erected on the area,
to wit: the control tower, Kalibo crash fire rescue station, the Kalibo airport terminal
and the headquarters of the Philippine National Police (PNP) Aviation Security Group.
Also, a part of the lot is leased to concessionaires selling local products and souvenir
items. The remaining portion is intended for the expansion and other improvement of
the airport.
Besides, respondents no less averred in their Pre-Trial Brief: [9]
I. BRIEF STATEMENT OF THE RESPONDENTS' CLAIM

1. That the defendants are the owners of that certain parcel of land
located at Pook, Kalibo, Aklan, Philippines, which is covered by
Original Certificate Title No. T-1559-6. A portion of the land has
been occupied by the plaintiff for many years now which portion
of land is indicated on the sketch plan which is marked Annex
"B" of the complaint.

xxx           xxx            xxx

I1. ADMISSION

xxx           xxx            xxx

2. That this land has been in the possession of the plaintiff for many
years now without paying any rental to the defendants. (Emphasis
supplied)

xxx           xxx            xxx

Surely, private respondents' admissions in their Answer and Pre-Trial Brief are judicial
admissions which render the taking of the lot in 1956 conclusive or even immutable. And
well-settled is the rule that an admission, verbal or written, made by a party in the course
of the proceedings in the same case, does not require proof.[10] A judicial admission is an
admission made by a party in the course of the proceedings in the same case, for purposes
of the truth of some alleged fact, which said party cannot thereafter disprove. [11] Indeed,
an admission made in the pleading cannot be controverted by the party making such
admission and are conclusive as to him, and that all proofs submitted by him contrary
thereto or inconsistent therewith should be ignored whether objection is interposed by a
party or not.[12]

This Court is thus convinced that the taking of the occupied 4,901 square-meter portion
of Lot 6068 occurred in 1956.

In the context of the State's inherent power of eminent domain, there is a "taking" when
the owner is actually deprived or dispossessed of his property; where there is a practical
destruction or a material impairment of the value of his property; or when he is deprived
of the ordinary use thereof.[13] There is a "taking" in this sense when the expropriator
enters private property not only for a momentary period but for a more permanent
duration, for the purpose of devoting the property to a public use in such a manner as to
oust the owner and deprive him of all beneficial enjoyment thereof.[14] After all,
ownership "is nothing without the inherent rights of possession, control and enjoyment".
Where, as here, the owner is deprived of the ordinary and beneficial use of his property or
of its value by its being diverted to public use, there is taking within the constitutional
sense.[15]

This brings us to the issue of when the just compensation for the property taken should be
reckoned.

Petitioner argues, and rightly so, that the just compensation fixed by the trial court based
on the market value of the property after the commencement of the expropriation
proceedings contradicts established jurisprudence that the value of the property as it was
when the government took possession of the land represents its true value.

In a long line of cases, we have consistently ruled that compensation for property
expropriated must be determined as of the time the expropriating authority takes
possession thereof and not as of the institution of the proceedings.[16]

So it is that in Republic vs. Lara, et al,[17] this Court, quoting from its earlier decision
in Provincial Government vs. Caro,[18] ruled:
The value of the property should be fixed as of the date when it was taken and not the
date of the filing of the proceedings. For where property is taken ahead of the filing of the
condemnation proceedings, the value thereof may be enhanced by the public purpose for
which it is taken; the entry by the plaintiff upon the property may have depreciated its
value thereby; or, there may have been a natural increase in the value of the property
from the time it is taken to the time the complaint is filed, due to general economic
conditions. The owner of private property should be compensated only for what he
actually loses; it is not intended that his compensation shall extend beyond his loss or
injury. And what he loses is only the actual value of his property at the time it is taken.
This is the only way the compensation to be paid can be truly just; i.e., "just" not only to
the individual whose property is taken, "but to the public, which is to pay for it" xxx.
The instant case is akin to that of Jose Ma. Ansaldo vs. Francisco S. Tantuico, Jr. and
Baltazar Aquino,[19] decided 1990, where two (2) lots of private ownership were taken by
the government and used for the widening of a road more than 40 years without the
benefit of any action of eminent domain or agreement with its owners, albeit without
protest by the latter. In a decision in that case, penned by then Chief Justice Andres
Narvasa, this Court, citing the earlier case of Republic vs. PNB,[20] wrote:
Normally, of course, where the institution of an expropriation action precedes the taking
of the property subject thereof, the just compensation is fixed as of the time of the filing
of the complaint. This is so provided by the Rules of Court, the assumption of possession
by the expropriator ordinarily being conditioned on its deposits with the National or
Provincial Treasurer of the value of the property as provisionally ascertained by the court
having jurisdiction of the proceedings.

There are instances, however, where the expropriating agency takes over the property
prior to the expropriation suit, as in this case - although, to repeat, the case at bar is quite
extraordinary in that possession was taken by the expropriator more than 40 years prior to
suit. In these instances, this Court has ruled that the just compensation shall be
determined as of the time of taking, not as of the time of filing of the action of eminent
domain.

xxx           xxx            xxx

"...(W)hen plaintiff takes possession before the institution of the condemnation

proceedings, the value should be fixed as of the time of the taking of said possession, not
of filing of the complaint and the latter should be the basis for the determination of the
value, when the taking of the property involved coincides with or is subsequent to, the
commencement of the proceedings. Indeed, otherwise, the provision of Rule 69, Section
3, directing that compensation 'be determined as of the date of the filing of the complaint'
would never be operative.
We are not, however, in accord with petitioner's assertion that the just compensation for
the entire Lot 6068 should be fixed in the amount based on its assessed value in 1956.
There is nothing on record that petitioner occupied the remaining 5,567 square-meter
portion of Lot 6068, neither did it ever present proof that said unoccupied portion is
necessary for public use, except for its self-serving allegation that said portion is needed
for the expansion and other improvement of the airport.

WHEREFORE, the petition is PARTIALLY GRANTED. The November 18, 2002

decision of the Court of Appeals in CA-G.R CV No. 66124 is MODIFIED in the
sense that the computation of just compensation for the 4,901 square-meter portion of Lot
6860 should be based on its fair market value in 1956.

SO ORDERED.

SECOND DIVISION
[ G.R. NO. 154430, June 16, 2006 ]
SPS. JOSE N. BINARAO AND PRECIOSISIMA BINARAO, PETITIONERS,
VS. PLUS BUILDERS, INC., RESPONDENT.

DECISION
SANDOVAL-GUTIERREZ, J.:

For our resolution is the instant petition for review on certiorari under Rule 45 of
the 1997 Rules of Civil Procedure, as amended, assailing the Decision [1] dated July 19,
2002, of the Court of Appeals in CA-G.R. CV No. 68921, entitled “Sps. Jose N. Binarao
and Preciosisima Binarao v. Plus Builders, Inc.”

The facts are:

Bahayang Pag-asa, Inc., and its sister corporation, Delfin Hermanos, Inc., are the owners
and developers of Bahayang Pag-asa Subdivision in Cavite City.  Plus Builders, Inc.,
herein respondent, is in charge of the construction and sale of the houses therein.  

On April 19, 1990, spouses Jose and Preciosisima N. Binarao, petitioners, purchased a
house and lot in Bahayang Pag-asa Subdivision for a total price of P327,491.95.

Petitioner Jose Binarao executed an Affidavit of Undertaking on Equity whereby he

agreed to pay respondent P96,791.95 in the following manner: P5,000.00 upon signing
of the contract, and the remaining P91,791.95 within 15 days thereafter.

However, petitioners failed to comply with their undertaking, prompting respondent’s

counsel to send them a demand letter. 

On July 6, 1998, petitioners paid respondent P20,000.00, leaving a balance of

P65,571.22 payable in three installments.

On March 10, 1999, respondent’s counsel sent petitioners another demand letter, but
they refused to pay.

Consequently, respondent filed with the Metropolitan Trial Court (MTC), Branch 25,
Manila a complaint for a sum of money against petitioners, docketed as Civil Case No.
163822-CV.

On June 11, 2001, the MTC rendered a Decision[2] in favor of respondent, thus:
WHEREFORE, premises considered, judgment is hereby rendered in favor of the
plaintiff Plus Builders, Inc. and against defendants Spouses Jose and Preciosisima
Binarao ordering the latter jointly and severally to pay the former the sum of
P65,571.75, plus interest thereon at the stipulated rate of 16% per annum computed
from March 22, 1990, and a sum equivalent to 25% of the amount due as liquidated
damages until the same is fully paid, and the sum equivalent to 25% of the unpaid
balance as and by way of attorney’s fees and the costs of suit.

SO ORDERED.
On appeal, the Regional Trial Court, Branch 7, Manila, rendered a
Decision[3] dated November 23, 2001, affirming in toto  the MTC Decision, holding that
petitioners, in their answer, did not deny respondent’s allegation in its complaint that
they have still an outstanding balance of P65,571.22.

Petitioners filed a motion for reconsideration but was denied by the RTC in an
Order[4] dated January 15, 2002.

Petitioners then filed with the Court of Appeals a petition for review.

On July 19, 2002, the Appellate Court rendered a Decision affirming in toto  the RTC
Decision.

The Court of Appeals held:

x x x Section 11, Rule 8 of the 1997 Rules of Court states:

Sec. 11. Allegations not specifically denied deemed admitted. – Material averment in the
complaint, other than those as to the amount of unliquidated damages, shall be
deemed admitted when not specifically denied.  Allegations of usury in a complaint to
recover usurious interest are deemed admitted if not denied under oath.
And, Section 10, Rule 8 of the 1997 Rules of Court, as to the manner of making
denials, provides:
Sec. 10. Specific denial. – A defendant must specify each material allegation of
fact the truth of which he does not admit and, whenever practicable, shall set forth the
substance of the matters upon which he relies to support his denial.  Where a defendant
desires to deny only a part of an averment, he shall specify so much of it as is true and
material and shall deny only the remainder.  Where a defendant is without knowledge
or information sufficient to form a belief as to the truth of a material averment made in
the complaint, he shall so state, and this shall have the effect of a denial.
In the instant case, petitioners did not deny the allegations as stipulated in
paragraph 4 of the complaint of herein respondent corporation.  In fact, petitioners
even admitted the allegations thereon. xxx 

Petitioners, in their answer, specifically paragraph 1 thereof, stated:

1. Defendants admit paragraphs 1 and 4 of the complaint.

While it is true that paragraph 7 of petitioners’ answer to the complaint qualified the
fact that they didn’t sign any payment plan, this qualification however neither denies
nor negates the other facts, as admitted, that were stated in paragraph 4 of the
complaint which actually states three facts: (1) that petitioner paid the amount of
P20,000.00 to respondent; (2) that petitioner still has a balance of P65,571.22; and (3)
that such unpaid balance is to be paid in three (3) agreed payment plan.  What is denied
by petitioners in paragraph 7 of their answer, if at all, is the fact that there is no agreed
payment plan.  But, as to the fact, to repeat, that petitioners still owe P65,571.22, as
balance after payment of P20,000.00, is admitted by petitioners as this fact is never
denied by them.

Such admission, being made in the pleading, is considered as judicial admission.  Being
so, the allegations, statements, or admissions contained in the pleading are conclusive
as against the pleader, in this case, petitioners.  By admitting therefore that petitioners
still owe P65,571.22 to respondent corporation, such is conclusive to petitioners. 
Petitioners, on the other hand, may be relieved, as provided for in Section 2, Rule 129 of
the Rules of Court, of the effects of such admission in their pleading if they can show
that the admission had been made through    palpable mistake.  However, petitioners
failed to show any palpable mistake on their part.

xxx

WHEREFORE, premises considered, the instant petition is hereby DISMISSED for

lack of merit.  The assailed Order dated January 15, 2002 of the Regional Trial Court,
Branch 7, Manila, and its Decision dated November 23, 2001 in Civil Case No. 01-
101401, are hereby AFFIRMED in toto.

SO ORDERED.
Hence, this petition for review raising this basic issue:
WHETHER OR NOT PETITIONERS ADMITTED ABSOLUTELY IN THEIR ANSWER
THEIR LIABILITY UNDER THE PROPOSED PAYMENT PLAN DATED 06 JULY 1998.
 Petitioners contend that they did not agree to pay respondent  P96,791.95 and
that they did not admit in their answer they are liable to respondent.

Respondent maintains that petitioners’ admission of liability in their answer binds them.

The petition lacks merit.

Sec. 4, Rule 129 of the Revised Rules of Court provides:

“Sec. 4. Judicial admissions. – An admission, verbal or written, made by a party in
the course of the proceedings in the same case, does not require proof.  The admission
may be contradicted only by showing that it was made through palpable mistake or that
no such admission was made.”
A party may make judicial admissions in (a) the pleadings, (b) during the trial,
either by verbal or written manifestations or stipulations, or (c) in other stages of the
judicial proceeding.[5] 

Here, petitioners admitted in their answer the allegation in paragraph 4 of respondent’s

complaint. As correctly ruled by the Court of Appeals, petitioners admitted that: (a) they
paid the amount of P20,000.00; (b) they still have a balance of P65,571.72; and (c) the
unpaid balance is to be paid in three installments. It is well-settled that judicial
admissions cannot be contradicted by the admitter who is the party himself [6] and binds
the person who makes the same, and absent any showing that this was made thru
palpable mistake (as in this case) , no amount of rationalization can offset  it.[7] 

WHEREFORE, the petition is DENIED.  The assailed Decision dated July 19, 2002 of the
Court of Appeals in CA-G.R. CV No. 68921 is AFFIRMED.

Costs against petitioners.

SO ORDERED.

THIRD DIVISION
[ G.R. No. 158144, July 31, 2008 ]
ST. MARY'S FARM, INC., PETITIONER, VS. PRIMA REAL PROPERTIES,
INC., RODOLFO A. AGANA, JR., AND THE REGISTER OF DEEDS OF LAS
PIÑAS, METRO MANILA RESPONDENTS.
 DECISION

NACHURA, J.:

This is a petition for review of the decision[1] of the Court of Appeals (CA)
affirming in toto the decision[2] of the Regional Trial Court (RTC), Branch 254, Las Piñas
City, which dismissed for lack of merit the complaint for annulment of sale.

The factual antecedents of the case, as narrated by the RTC, are as follows:
[I]t appears that herein plaintiff was the registered owner of an originally twenty-
five thousand five hundred ninety-eight (25,598) square meters of land situated at Bo.
Pugad Lawin, Las Piñas City under Transfer Certificate of Title No. S-1648 (11521-A) of
the Registry of Deeds of Las Piñas City.

In compliance with a final court decision in Civil Case No. 87-42915 of the Regional Trial
Court, Branch XL of Manila, plaintiff passed and approved on 27 June 1988 a board
resolution authorizing defendant Rodolfo A. Agana to cede to T.S. Cruz Subdivision four
thousand (4,000) square meters of the land covered by the aforecited Transfer
Certificate of Title No. S-1648 (11521-A). Allegedly, after the consummation of this
transaction, defendant Rodolfo A. Agana did not return to plaintiff the borrowed
aforementioned title and[,] instead, allegedly forged a board resolution of the plaintiff
corporation supposedly to the effect that plaintiff had authorized him to sell the
remaining twenty-one thousand five hundred ninety-eight (21,598) square meters of
the subject property. A series of transactions thereafter took place between defendant
Rodolfo A. Agana and defendant Prima Real Properties, Inc. (Prima) which transactions
culminated to the signing on 5 September 1988 of an absolute deed of sale transferring
the ownership of the subject land from herein plaintiff to herein defendant Prima. After
the consummation of the sale, defendant Prima effected the cancellation of Transfer
Certificate of Title No. S-1648 (11521-A) in the name of plaintiff and in lieu thereof
another Transfer Certificate of Title No. T-6175 in the name of defendant Prima was
issued by defendant Alejandro R. Villanueva in his capacity as Register of Deeds of Las
Piñas City.

Subsequent developments had it that on 6 October 1988, defendant Prima duly

purchased from T.S. Cruz Subdivision the aforementioned four thousand (4,000) square
meters portion of the subject property which development thereafter led to the
cancellation of the aforementioned Transfer Certificate of Title No. T-6175 and the
issuance by the Registry of Deeds of Las Piñas City of two separate titles both in the
name of defendant Prima, Transfer Certificate of Title No. 7863 covering the
aforementioned four thousand square meters and Transfer Certificate of Title No. T-
7864 covering the herein twenty-one thousand five hundred ninety-eighty (21,598)
square meter subject property.

In its complaint which was amended twice, the second amendment even needed the
intervention of the Court of Appeals in a petition for certiorari and mandamus after the
same was denied admission by Hon. N.C. Perello, Presiding Judge of the then Assisting
Court of Makati, [Muntinlupa], Metro Manila, herein plaintiff alleged inter alia that the
authorization certified to by Antonio V. Agcaoili, Corporate Secretary of the plaintiff and
used by defendant Rodolfo A. Agana in selling the subject property to defendant Prima
was a forgery as the board of directors of the plaintiff never enacted a resolution
authorizing herein defendant Rodolfo A. Agana to sell herein subject property to
defendant Prima or to anyone else for that matter. Plaintiff further claimed that
defendant Prima in collusion with defendant Rodolfo A. Agana acted maliciously and in
bad faith in relying on the forged authority without taking any step to verify the same
with the plaintiff as owner of the subject property. According to plaintiff, the deed of
absolute sale entered into between defendants Prima and Rodolfo A. Agana being the
result of fraudulent transaction was void thereby, among others, causing damage to the
plaintiff. For canceling Transfer Certificate of Title No. S-1648 (11521-A) knowing fully
well that the authorization to sell [to] defendant Rodolfo A. Agana was a forgery,
defendant Alejandro R. Villanueva was likewise made liable for damages.

On the other hand, defendant Prima separately with defendant Rodolfo A. Agana in
their respective answers, sought and insisted constantly on the dismissal of the
complaint based solidly on the ground that Venice B. Agana and Ma. Natividad A.
Villacorta who filed in behalf of the plaintiff the original complaint and the amended and
the second amended complaints as well, respectively, lacked legal capacity to sue
because they were not authorized therefor by the board of directors of the plaintiff.
Furthermore, defendant Prima argued that it acted in good faith when it relied solely on
the face of the purported authorization of defendant Rodolfo A. Agana and entered into
the deed of absolute sale and paid in full the purchase price of PhP2,567,760.00 of the
subject property. This fact, according to defendant Prima, made it a buyer in good faith
and for value. To cap its argument, defendant Prima in adopting the defense of
defendant Rodolfo A. Agana asserted that even assuming that the authorization of
defendant Rodolfo A. Agana was forged when plaintiff, through its President, Marcelino
A. Agana, Jr. (brother of Rodolfo) accepted/received part of the aforestated purchase
price knowing fully well the same to be the proceeds of the sale of the subject property,
plaintiff has been precluded as it is now estopped from asking for rescission of the deed
of absolute sale and reconveyance of the subject property. [3]
After due hearing, the trial court rendered judgment on April 7, 2000, dismissing
the complaint for annulment of sale with damages filed by the petitioner. [4]

The trial court found that the respondent was a buyer in good faith and for value,
relying on the authority of Rodolfo A. Agana to sell the property in behalf of the
petitioner company, as evidenced by a notarized board resolution. As such, the trial
court ruled that the petitioner was bound by the acts of its agent and must necessarily
bear whatever damage may have been caused by this alleged breach of trust.

On appeal, the CA affirmed in toto.

Thus, petitioner filed the instant petition raising the following errors:
I

The Court of Appeals gravely erred in ruling that Respondent Agana was duly authorized
by Petitioner under the Certification dated June 30, 1988 (Exhibits "D" and "3") to enter
into the sale of the subject property with Respondent Prima Real.

(A) There is no proof of the Certification's authenticity and due execution;

(B) There is clear and convincing evidence that the Certification was forged.

(C) Even assuming that the Certification was authentic and duly executed, it was not
sufficient in form and by its terms to authorize Respondent Agana to sell the subject
property or receive payment on behalf of Petitioner.

II

The Court of Appeals gravely erred in not holding that Respondent Prima Real was the
author of its own damage by not making reasonable and prudent inquiries into the fact,
nature and extent of Respondent Agana's authority, and by causing the issuance of
checks in the name of Respondent Agana.
 The petition must fail.

A cursory reading of the issues reveals that these are factual matters which are not
within the province of the Court to look into, save only in exceptional circumstances
which are not present in the case at bar. Well settled is the rule that in petitions for
review on certiorari under Rule 45, only questions of law must be raised.[5] As a matter
of procedure, the Court defers and accords finality to the factual findings of trial courts,
especially when, as in the case at bar, such findings are affirmed by the appellate court.
This factual determination, as a matter of long and sound appellate practice, deserves
great weight and shall not be disturbed on appeal. It is not the function of the Court to
analyze and weigh all over again the evidence or premises supportive of the factual
holding of the lower courts.[6]

Petitioner insists that "the sale of the realty entered into between respondent Agana,
purportedly on behalf of the petitioner, and respondent Prima is null and void for lack of
authority on the part of respondent Agana to sell the property." [7] The board resolution
allegedly granting Rodolfo Agana the authority to sell in behalf of the company, as
certified by Corporate Secretary Atty. Antonio V. Agcaoili, is alleged to be a forgery. Ma.
Natividad A. Villacorta, who served as assistant to Marcelino A. Agana, Jr., the President
of St. Mary's Farm, Inc., in 1988 testified that the board of directors did not hold any
meeting on June 27, 1988; that, in fact, the signature of Atty. Antonio Agcaoili was not
genuine; and that said document was merely presented to the notary public for
notarization without Atty. Agcaoili appearing before him.

Despite this insistence, we find no cogent reason to deviate from the findings and
conclusions of the respondent court affirming those of the trial court on this matter.
Anent the forged signature of Atty. Agcaoili, the CA did not err in not giving evidentiary
weight to the findings of the Document Examiner of the National Bureau of Investigation
(NBI) on the ground that the findings were not really conclusive. In the first place, the
procedure for the investigation of questionable handwriting was not properly followed.
There is nothing on record that will conclusively show that the alleged standard sample
signatures of Atty. Antonio Agcaoili, which were submitted to the NBI and made the
basis of comparison, were the genuine signatures of the same Atty. Antonio Agcaoili.
Moreover, the examiner testified that it was possible to have variations in the standard
signatures of Atty. Agcaoili, caused by certain factors such as passage of time, pressure
and physical condition of the writer which may have decisive influences on his
handwriting's characteristics. [8] Thus, in the instant case, it cannot readily be concluded
that a particular signature appearing in those documents is not genuine for lack of
proper identification and a more accurate comparison of signatures. Mere allegation of
forgery is not evidence and the burden of proof lies in the party making the
allegation. [9] Unfortunately, in the case at bar, the petitioner failed to discharge this
burden.

Further challenging the due execution of the board resolution bearing the Secretary's
Certification, petitioner wants us to consider the same as inadmissible on the ground
that Atty. Agcaoili did not appear before a notary public for notarization. We do not
agree, because in the past, we have already held that the non-appearance of the party
before the notary public who notarized the deed does not necessarily nullify or render
the parties' transaction void ab initio.[10] However, the non-appearance of the party
exposes the notary public to administrative liability which warrants sanction by the
Court. This fact notwithstanding, we agree with the respondent court that it is not
enough to overcome the presumption of the truthfulness of the statements contained
in the board resolution. To overcome the presumption, there must be sufficient, clear
and convincing evidence as to exclude all reasonable controversy as to the falsity of the
certificate.[11] In the absence of such proof, the document must be upheld. Notarization
converts a private document into a public document, making it admissible in court
without further proof of its authenticity.[12]

On the basis of this notarized board resolution, respondent had every reason to rely on
Rodolfo Agana's authority to sell the subject property. Undeniably then, the respondent
is an innocent purchaser for value in good faith. Our pronouncement in Bautista v.
Silva[13] is instructive:
A buyer for value in good faith is one who buys property of another, without
notice that some other person has a right to, or interest in such property and pays full
and fair price for the same, at the time of such purchase, or before he has notice of the
claim or interest of some other persons in the property. He buys the property with the
well-founded belief that the person from whom he receives the thing had title to the
property and capacity to convey it.

To prove good faith, a buyer of registered and titled land need only show that he relied
on the face of the title to the property. He need not prove that he made further inquiry
for he is not obliged to explore beyond the four corners of the title. Such degree of
proof of good faith, however, is sufficient only when the following conditions
concur: first, the seller is the registered owner of the land; second, the latter is in
possession thereof; and third, at the time of the sale, the buyer was not aware of any
claim or interest of some other person in the property, or of any defect or restriction in
the title of the seller or in his capacity to convey title to the property. [14]
All the conditions enumerated in the aforementioned case are present in the
case at bar, enough for us to consider Prima as a buyer in good faith. Prima Real
Properties, Inc. is a company engaged in the buying and selling of real properties. As
borne out by the records, respondent exerted efforts to verify the true background of
the subject property. Rodolfo Agana presented to respondent the (1) notarized board
resolution which stated that at a special meeting held on June 27, 1988, the board of
directors authorized Mr. Rodolfo A. Agana, Treasurer, to sell the subject property
covered by Transfer Certificate of Title (TCT) No. S-1648;[15] (2) a separate Certification
by the petitioner's president, Marcelino A. Agana, Jr., authorizing its Treasurer, Rodolfo
Agana, to sell said property;[16] and, (3) TCT No. T-1648 of the subject property.
Convinced that Rodolfo Agana had the authority to sell on behalf of the company after
being presented all these documents, the sale between the parties was thereby
consummated. A deed of sale was executed on September 5, 1988  [17] and the full
consideration of P2,567,760.00 for the subject property was paid. [18]

It is of no moment that the checks were made payable to Rodolfo Agana and not to the
company which, according to the petitioner, should have alerted the respondent to
inquire further into the extent of Agana's authority to transfer the subject property. This
was no longer necessary considering that respondent had every reason to rely on
Rodolfo Agana's authority to sell, evidenced by the notarized Certification. As explained
in the Bautista case:
When the document under scrutiny is a special power of attorney that is duly
notarized, we know it to be a public document where the notarial acknowledgment
is prima facie evidence of the fact of its due execution. A buyer presented with such a
document would have no choice between knowing and finding out whether a forger
lurks beneath the signature on it. The notarial acknowledgment has removed that
choice from him and replaced it with a presumption sanctioned by law that the affiant
appeared before the notary public and acknowledged that he executed the document,
understood its import and signed it. In reality, he is deprived of such choice not because
he is incapable of knowing and finding out but because, under our notarial system, he
has been given the luxury of merely relying on the presumption of regularity of a duly
notarized SPA. And he cannot be faulted for that because it is precisely that fiction of
regularity which holds together commercial transactions across borders and time.
In sum, all things being equal, a person dealing with a seller who has [in his] possession
title to the property but whose capacity to sell is restricted, qualifies as a buyer in good
faith if he proves that he inquired into the title of the seller as well as into the latter's
capacity to sell; and that in his inquiry, he relied on the notarial acknowledgment found
in the seller's duly notarized special power of attorney. He need not prove anything
more for it is already the function of the notarial acknowledgment to establish the
appearance of the parties to the document, its due execution and authenticity. [19]
Aside from the pertinent documents presented, respondent also relied on the
confirmation and certification of the Register of Deeds of Las Piñas City and Mr. Timoteo
S. Cruz, owner of the land likewise sold by Rodolfo Agana for the petitioner, with similar
authorization by the petitioner and signed by the corporate secretary Atty. Agcaoili.
Agana acted as petitioner's authorized agent and had full authority to bind the company
in that transaction with Cruz.

Contrary to the allegations of the petitioner that respondent Agana's authority was only
limited to negotiate and not to sell the subject property, suffice it to state that the
board resolution further averred that he was "authorized and empowered to sign any
and all documents, instruments, papers or writings which may be required and
necessary for this purpose to bind the Corporation in this undertaking."  [20] The
certification of the President, Marcelino Agana, Jr. also attests to this fact. With this
notarized board resolution, respondent Agana, undeniably, had the authority to cede
the subject property, carrying with it all the concomitant powers necessary to
implement said transaction. On the strength of the deed of absolute sale executed
pursuant to such authority, title over the land in petitioner's name was cancelled and a
new certificate of title - TCT No. T-6175[21] - was already issued in the name of Prima Real
Properties, Inc.

Thus, it is too late in the day to have the sale voided, notwithstanding the retraction
made by Rodolfo Agana in his Comment[22] on the Petition filed with this Court. Therein,
he admits that he acted solely and without proper authority of the corporation. Agana
states that he wishes to end once and for all the rift that had occurred in the
corporation; and in order to buy peace for all the parties and for himself, he is willing to
return the money paid by Prima so that ownership of the property can be returned to
the petitioner. In light of this admission that Agana had no authority, petitioner posits
that there is justifiable reason for the Court to re-visit or evaluate the facts of the case
anew.
Unfortunately, the Court cannot give weight to this magnanimous gesture of Agana;
neither will the Court lend credence to Agana's assertion that he acted solely and
without proper authority from the corporation, inasmuch as it was raised for the very
first time in this Court and only after 8 years from the inception of the case. In all the
pleadings filed by respondent Agana in court, he was steadfast in his position that he
had authority to sell the subject property. A judicial admission conclusively binds the
party making it. He cannot thereafter take a position contradictory to, or inconsistent
with his pleadings. Acts or facts admitted do not require proof and cannot be
contradicted unless it is shown that the admission was made through palpable mistake
or that no such admission was made.[23] In the instant case, there is no proof of these
exceptional circumstances. Clearly, the retraction was merely an afterthought on the
part of respondent Agana with the intention to end the rift in the family corporation.

Considering all the foregoing, it cannot be gainsaid that respondent Prima is an innocent
purchaser in good faith and for value.

WHEREFORE, the petition is DENIED. The decision of the Court of Appeals is AFFIRMED.

SO ORDERED.

SECOND DIVISION
[ G.R. No. 151952, March 25, 2009 ]
THE PEOPLE OF THE PHILIPPINES, PLAINTIFF-APPELLEE, VS.
HERACLEO ABELLO Y FORTADA, ACCUSED-APPELLANT.

BRION, J.:

We review in this appeal the decision of the Court of Appeals in CA-G.R. CR No. 23746,
[1]
 which affirmed with modification the joint decision of the Regional Trial Court (RTC),
Branch 170, Malabon City, in Criminal Case Nos. 19623-MN, 19624-MN and 19625-
MN.[2]

Appellant Heracleo Abello y Fortada (Abello) stands convicted of one (1) count of

violation of paragraph 2, Article 266-A of the Revised Penal Code (RPC), as amended;
[3]
 and two (2) counts of violation of sexual abuse under Republic Act (R.A.) No. 7610
(Child Abuse Law). For these crimes, he was sentenced to suffer imprisonment of twelve
(12) years of prision mayor, as minimum, to twenty (20) years of reclusion temporal, and
two reclusion perpetuas, respectively.

The following Informations (all dated July 8, 1998) were filed against the appellant:
Criminal Case No. 19623-MN

That on or about the 8th day of July 1998, in Navotas, Metro Manila, and within the
jurisdiction of this Honorable Court, the above-named accused, being a step-father (sic)
of victim AAA,[4] with lewd design and by means of force and intimidation, did then and
there willfully, unlawfully and feloniously putting his penis inside the mouth of said
AAA, against her will and without her consent.

CONTRARY TO LAW.[5]

Criminal Case No. 19624-MN

That on or about the 30th day of June 1998, in Navotas, Metro Manila, and within the
jurisdiction of this Honorable Court, the above-named accused, being a step-father (sic)
of victim AAA, a (sic) years old, and Polio Striken (sic), with lewd design by means of
violence and intimidation, did then and there willfully, unlawfully and feloniously
mashing her breast, against her will and without her consent.[6]

CONTRARY TO LAW.

Criminal Case No. 19625-MN

That on or about the 2nd day of July 1998, in Navotas, Metro Manila, and within the
jurisdiction of this Honorable Court, the above-named accused, being a step-father (sic)
of victim AAA, a (sic) 21 years old, and Polio Striken (sic), with lewd design by means
of violence and intimidation, did then and there willfully, unlawfully and feloniously
mashing her breast, against her will and without her consent.[7]

CONTRARY TO LAW.
Abello, with the assistance of counsel, pleaded not guilty to these charges. The cases
were jointly tried since they arose from similar incidents involving the same parties.
[8]
 The prosecution relied on testimony of the victim, AAA, who identified Abello as the
perpetrator of the rape and sexual abuses against her. Abello's defense was confined to
his denial of the accusations.

The Background Facts

The RTC summarized the facts as follows:

The victim in these cases is twenty-one (21) year old AAA. She contracted polio when
she was seven (7) months old. She was not able to study on account of her difficulty in
walking. Hence, she could only read and write her name including that of her friends.

On June 30, 1998 at around 4:00 o'clock (sic) in the early morning, AAA was sleeping in
their house in Kalyeng Impiyerno, Navotas, Metro Manila along with her sister-in-law
and nephew. She was suddenly awakened when Abello ... mashed her breast. Come July
2, 1999 at around 3:00 a.m. Abello again mashed the breast of AAA practically under the
same previous situation while the latter was sleeping. In these two occasions AAA was
able to recognize Abello because of the light coming from outside which illuminated the
house. Then on July 8, 1998, at around 2:00 a.m., Abello this time placed his soft penis
inside the mouth of AAA. The latter got awaken when Abello accidentally kneeled on her
right hand. AAA exclaimed "Aray" forcing the accused to hurriedly enter his room. He
was nevertheless seen by AAA. The victim on the same date reported the incident to her
sister-in-law and mother.

Amidst the accusation of raping and twice sexually abusing AAA, Abello interposed the
defense of denial. In all of the instances, Abello claimed that he merely stepped on the
victim at the sala on his way to his room after retiring home.
The RTC found Abello guilty under the three Informations. The dispositive portion of the
decision states:
WHEREFORE, premises considered, judgment is hereby rendered as follows:

1. In Criminal Case No. 19623-MN, the Court finds accused Heracleo

Abello y Fortada guilty beyond reasonable doubt of the crime of Violation
of Paragraph 2, Article 226-A, Republic Act [No.] 8353 and hereby
sentences him to suffer an indeterminate penalty of Seven (7) Years
of prision mayor, as minimum, to Thirteen (13) Years of reclusion
temporal, as maximum;[9]

2. In Criminal Case Nos. 19624-MN and 19625-MN, the Court finds

accused Heracleo Abello y Fortada guilty beyond reasonable doubt of two
(2) counts of Violation of Section 5, Article III of Republic Act [No.]
7610 and hereby sentences him in each of the two cases to suffer an
indeterminate penalty of Four (4) Years of prision correctional (sic), as
minimum, to Twelve (12) Years and One (1) Day of prision mayor, as
maximum.[10] [Emphasis theirs]

The CA affirmed Abello's conviction on appeal but modified the penalties imposed. The
dispositive portion of its decision reads:
WHEREFORE, the appealed judgement (sic) is hereby AFFIRMED subject to the
following MODIFICATIONS:

1. In Criminal Case No. 19623-MN, appellant is hereby sentenced to suffer an

indeterminate penalty of twelve (12) years of prision mayor, as minimum,
 to twenty (20) years of reclusion temporal, as maximum; Appellant is
further ordered to pay complainant, AAA, moral damages in the amount of
P50,000.00

2. In Criminal Case Nos. 19624-MN and 19625-MN, appellant is hereby

sentenced to suffer the penalty of reclusion perpetua in each of the two
cases.[11]

The Issues

Abello contends in his Brief that:[12]

1. The court a quo erred in not absolving the accused-appellant of the crime

of violation of paragraph 2, Article 266-A of the Revised Penal Code, as
amended;

2. The court a quo has committed an error in not exculpating the accused-

appellant of the crime of violation of Section 5, Article III of R.A. No.
7610.[13]

He emphasizes that it was impossible for him to have committed these crimes
considering that: (a) he is AAA's stepfather who has a healthy sexual relationship with
her mother; (b) AAA was not alone during these alleged incidents; and (c) AAA admitted
that she was asleep when these incidents happened making it likely that she could have
just dreamed of them.

The Office of the Solicitor General maintains the correctness of Abello's conviction on
the basis of AAA's positive and candid narration covering the elements constituting the
crimes of rape by sexual assault and sexual abuse.

Our Ruling

We affirm Abello's conviction on all three charges.

Determining the guilt or innocence of an accused, based solely on the victim's testimony,
is not an easy task in reviewing convictions for rape and sexual abuse cases. For one,
these crimes are usually committed in private so that only the two direct parties can attest
to what happened; thus, the testimonies are largely uncorroborated as to the exact details
of the rape, and are usually in conflict with one another. With this in mind, we exercise
utmost care in scrutinizing the parties' testimonies to determine who of them is
believable. Oftentimes, we rely on the surrounding circumstances as shown by the
evidence, and on common human experience.
We carefully reviewed AAA's testimony in light of the issues Abello raised in his appeal,
and in light of matters he did not raise but which materially affect his innocence or
culpability. After due consideration, we find no reason to doubt the veracity of AAA's
testimony and her version of the events that led to the filing of the present charges.

In her testimony, AAA positively and unequivocally narrated the details of her rape and
sexual abuse she suffered in Abello's hands, as follows:
Q: Do you remember any unusual incident that happened on June 30, 1999, inside your
mother's house at around 4:00 o'clock (sic)?

A: I remembered on that date that he hold (sic) my breast, sir.

Q: Who hold (sic) your breast?

A: He is the one, sir. (Witness pointed to the accused.)

Q: What else did he do to you at that time?

A: That was again repeated on July 2 more or less 3:00 o'clock (sic), sir.

Q: What did he do to you on July 2 at 3:00 o'clock (sic)?

A: The same he mashed my breast, sir.

Q: Was that repeated?

A: On July 8 at around 2:00 o'clock in the morning, sir.

Q: What happened then?

A: He placed his penis on (sic) my mouth, sir.

Q: While his penis was inside your mouth, what else was he doing to you?

A: He suddenly entered the room of my mother because I saw him and I was sure that it
was him who was doing that to me, sir.

Q: When was that when the accused placed his penis inside your mouth?

A: I was sleeping at that time, sir.

Q: Were you awaken (sic)?

A: Yes, sir.

Q: When you were awakened, what did you see?

A: His organ was in my mouth while I was sleeping, I got awaken (sic) because I felt
pain after he accidentally kneeled on my right hand and because of that I cried "aray," x x
x

xxx

Q: So, it cannot take one minute or thirty seconds that the penis of the accused was
inserted on (sic) your mouth open?

A: I notice that my mouth was open, Your Honor.

Q: So, you were not sure whether it lasted for one second or one minute?

A: It lasted for one second, Your Honor.

Q: And you were awakened?

A: Yes, Your Honor.

Q: How do you know that it was the penis of the accused?

A: I saw it, Your Honor.

Q: Whom did you see?

A: Him, you honor.

Q: While the penis was inside your mouth, were you sleeping or awaken already?

A: I got awaken because of the placement of his penis on (sic) my mouth, sir.

Q: Was his penis soft or hard?

A: I got hold of it, Your honor.

xxx

Q: How were you able to hold the penis?

A: I hold (sic) the penis to push it out on (sic) my mouth, Your honor.[14]
We note that both the RTC and CA found AAA's testimony to be positive, direct, and
categorical, while the RTC found the defense's version too strained to be believed for
being contrary to human experience; the RTC refused to accept the claim that Abello was
prosecuted for rape and sexual abuse simply because he stepped with his knees on her
stepdaughter's hand.[15] A material point we noted is that Abello could not say why AAA
would falsely accuse him.[16] The substance and tenor of the testimony and the element of
motivation are critical points for us since a straightforward, categorical and candid
narration by the victim deserves credence if no ill motive can be shown driving her to
falsely testify against the accused.[17]

Our consideration of Abello's defense of denial and his other arguments lead us to reject
them for the following reasons:

First, the issue of his credibility is reduced to a choice between the offended party's
positive testimony and the denial of the accused. In this case, AAA categorically and
unmistakably identified Abello as her rapist and sexual abuser;[18] the identification was
positive because the scene was illuminated by a light coming from outside the parties'
house at the time of the incidents.[19] She also testified that during the rape, she saw
Abello suddenly enter the room of her mother after she yelped in pain when he stepped
with his knee on her hand.[20] Settled jurisprudence tells us that the mere denial of one's
involvement in a crime cannot take precedence over the positive testimony of the
offended party.[21]

Abello likewise admitted that in the wee hours of the mornings of June 30, July 2, and
July 8, 1998, he passed by the sala of their house where AAA and her companions were
sleeping.[22] This admission shows that he had the opportunity and the means to commit
these crimes in terms of his location and close proximity to AAA who, together with her
companions, were then sleeping.

Second, we flatly reject Abello's argument that his relationship with AAA insulates him
from the crimes charged. Our judicial experience tells us that in handling these types of
cases, the relationship between the offender and the offended party has never been an
obstacle to the commission of the crime against chastity. Although alarming to admit, this
kind and degree of relationship is now quite common in these types of crimes. Studies
show a rising incidence of family and domestic violence where 98.8% of the victims are
women; an estimated 26.7% of these cases involve sexual abuse, while 33% involve
incest committed against children.[23] In these cases, the male spouse, the father of the
victim, or close male relatives, have been identified as frequent abusers. [24]

Third, we find the claim that AAA could have just dreamed of the incidents complained
of, to be preposterous. It is highly unlikely that a woman in her right mind would expose
and declare herself a victim of rape and sexual abuse, when she would thereby open
herself to the humiliating experience of a public trial and to the possible social stigma of
being a victim of rape and sexual abuse. In the normal course, a woman will not expose
herself to these risks unless she is certain of what happened and she seeks to obtain
justice against the perpetrator. We note in this regard AAA's categorical testimony that
she filed the criminal charges because she did not know what to do; she thus reported the
incidents to her mother and sister-in-law who thereafter sought police assistance. [25]

The record also shows that AAA lived a sheltered life cared for by her relatives because
of her polio.[26] Unless the contrary is shown, it is highly unusual for her to have the
worldly sophistication to invent or fabricate the charges she made, particularly one made
against her stepfather. A charge against one's stepfather, too, is unusual in our socio-
cultural context because of the respect we give our elders, and is only understandable if
there is a deeply felt cause for complaint. We particularly note that no imputation has
been made at any time in the case that AAA is not normal, save for her physical
disability, or has a strained relationship with her stepfather prior to the acts charged.

Based on these considerations and in the absence of clear indications of errors in giving
credence to AAA's testimony, we find no reason to disturb the factual findings of the
RTC and the CA.

Rape by sexual assault

R.A. No. 8353 which took effect on October 22, 1997 introduced into the Philippine legal
system the concept of rape by sexual assault. This amendment not only reclassified rape
as a crime against persons, but also expanded the definition of rape from the traditional
concept of a sexual intercourse committed by a man against an unwilling woman.

The second paragraph of Article 266-A of the RPC, as amended defines rape by sexual
assault as committed by any person who, under any of the circumstance mentioned in
paragraph 1 ... shall commit an act of sexual assault by inserting his penis into another
person's mouth or anal orifice, or any instrument or object, into the genital or anal
orifice of another person.

The elements of rape by sexual assault are:

(1)That the offender commits an act of sexual assault;

(2)That the act of sexual assault is committed by any of the following means:

(a) By inserting his penis into another person's mouth or anal orifice; or

xxx
(3) That the act of sexual assault is accomplished under any of the following
circumstances:

(a) By using force or intimidation;

(b) When a woman is deprived of reason or otherwise unconscious;

x x x[27]
AAA's testimony covers the commission of the sexual assault through the insertion of
Abello's male organ into her mouth; AAA also consistently identified Abello as the
perpetrator of the sexual assault. These statements satisfy the first and second elements of
the rape.

Her testimony that she was roused from sleep with Abello's male organ inserted in her
mouth, goes into the third element of the crime.[28] In this respect, we observe that both
the RTC and the CA failed to notice the variance between the allegations in the
Information for rape and that proven at the trial on the mode of committing the offense.
The Information alleges "force and intimidation" as the mode of commission, while AAA
testified during the trial that she was asleep at the time it happened and only awoke to
find Abello's male organ inside her mouth.

This variance is not fatal to Abello's conviction for rape by sexual assault. In People v.
Corpuz, [29] we ruled that a variance in the mode of commission of the offense is binding
upon the accused if he fails to object to evidence showing that the crime was committed
in a different manner than what was alleged. In the present case, Abello did not object to
the presentation of evidence showing that the crime charged was committed in a different
manner than what was stated in the Information. Thus, the variance is not a bar to
Abello's conviction of the crime charged in the Information.

Acts of lasciviousness

Abello was convicted of two (2) counts of sexual abuse under Section 5 (b), Article III of
R.A. No. 7610, which defines and penalizes acts of lasciviousness committed against a
child:
Section 5. Child Prostitution and Other Sexual Abuse. - Children, whether male or
female, who for money, profit, or any other consideration or due to the coercion or
influence of any adult, syndicate or group, indulge in sexual intercourse or lascivious
conduct, are deemed to be children exploited in prostitution and other sexual abuse.

xxx

(b) Those who commit the act of sexual intercourse or lascivious conduct with a child
exploited in prostitution or subject to other sexual abuse; Provided, That when the victims
is under twelve (12) years of age, the perpetrators shall be prosecuted under Article 335,
paragraph 3, for rape and Article 336 of Act No. 3815, as amended, the Revised Penal
Code, for rape or lascivious conduct, as the case may be: Provided, That the penalty for
lascivious conduct when the victim is under twelve (12) years of age shall be reclusion
temporal in its medium period; and
The essential elements of this provision are:

1. The accused commits the act of sexual intercourse or lascivious conduct.

2. The said act is performed with a child exploited in prostitution or subjected

to other sexual abuse.

3. The child whether male or female, is below 18 years of age. [30]

Paragraph (h), Section 2 of the Implementing Rules and Regulations of R.A.

7610[31] (implementing rules) defines lascivious conduct as a crime committed through
the intentional touching, either directly or through the clothing of the genitalia, anus,
groin, breast, inner thigh or buttocks with the intent to abuse, humiliate, harass, degrade,
or arouse or gratify the sexual desire of any person, among others. Records show that
AAA duly established this element when she positively testified that Abello fondled her
breasts on two separate occasions while she slept.

The second element requires that the lascivious conduct be committed on a child who is
either exploited in prostitution or subjected to other sexual abuse. This second element
requires evidence proving that: (a) AAA was either exploited in prostitution or subjected
to sexual abuse and (b) she is a child as defined under R.A. No. 7610.

In Olivarez v. Court of Appeals,[32] we explained that the phrase, "other sexual abuse" in
the above provision covers not only a child who is abused for profit, but also one who
engages in lascivious conduct through the coercion or intimidation by an adult. In the
latter case, there must be some form of compulsion equivalent to intimidation which
subdues the free exercise of the offended party's will.[33]

In the present case, the prosecution failed to present any evidence showing that force or
coercion attended Abello's sexual abuse on AAA; the evidence reveals that she was
asleep at the time these crimes happened and only awoke when she felt her breasts being
fondled. Hence, she could have not resisted Abello's advances as she was unconscious at
the time it happened. In the same manner, there was also no evidence showing that
Abello compelled her, or cowed her into silence to bear his sexual assault, after being
roused from sleep. Neither is there evidence that she had the time to manifest conscious
lack of consent or resistance to Abello's assault.
More importantly, AAA cannot be considered a child under Section
3(a) of R.A. No. 7610 which reads:
(a) "Children" refers to person below eighteen (18) years of age or those over but are
unable to fully take care of themselves or protect themselves from abuse, neglect, cruelty,
exploitation or discrimination because of a physical or mental disability or condition;
[Emphasis supplied]
The implementing rules elaborated on this definition when it defined a "child" as one
who is below 18 years of age or over said age who, upon evaluation of a qualified
physician, psychologist or psychiatrist, is found to be incapable of taking care of
herself fully because of a physical or mental disability or condition or of protecting
herself from abuse.

While the records show that the RTC, the CA and the investigating prosecutor who filed
the corresponding Informations, considered AAA's polio as a physical disability that
rendered her incapable of normal function, no evidence was in fact presented showing the
prosecution's compliance with the implementing rules. Specifically, the prosecution did
not present any evidence, testimonial or documentary, of any medical evaluation or
medical finding from a qualified physician, psychologist or psychiatrist attesting that
AAA's physical condition rendered her incapable of fully taking care of herself or of
protecting herself against sexual abuse. Under the circumstances, we cannot consider
AAA a child under Section 3(a) of R.A. No. 7610.

In arriving at this conclusion, we consider that since R.A. No. 7610 is a special law
referring to a particular class in society, the prosecution must show that the victim truly
belongs to this particular class to warrant the application of the statute's provisions. Any
doubt in this regard we must resolve in favor of the accused.

From another perspective, we also note that no evidence has been adduced showing that
AAA's physical disability prevented her from resisting Abello's attacks; the evidence only
reveals that Abello took advantage of the opportunity presented to him (i.e., that AAA
and her companions who were then asleep) to commit the sexual abuses; this inference is
supported by the fact that he stopped his sexual assault when AAA started to awaken. It
can also be reasonably deduced from these circumstances that Abello sought to commit
the sexual abuses with impunity -- without AAA's knowledge and without any
interference on her part.

In light of these conclusions, we cannot hold Abello liable under R.A. No. 7610.
However, we still find him liable for acts of lasciviousness under Article 336 of the RPC,
as amended.

In Olivarez, we emphasized that the character of the crime is not determined by the
caption or preamble of the information or from the specification of the provision of law
alleged to have been violated; the crime committed is determined by the recital of the
ultimate facts and circumstances in the complaint or information.[34] In the present case,
although the two Informations wrongly designated R.A. No. 7610 as the law violated; the
allegations therein sufficiently constitute acts punishable under Article 336 of the RPC
whose elements are:

1. That the offender commits any act of lasciviousness;

2. That the offended party is another person of either sex; and

3. That it is done under any of the following circumstances:

a. By using force or intimidation; or

b. When the offended party is deprived of reason or otherwise

unconscious; or

c. When the offended party is under 12 years of age or is demented.[35]

The presence of the first and second elements of the offense has been earlier discussed,
albeit in the consideration of a charge under R.A. No. 7610. The prosecution established
these elements through AAA's testimony that her breasts were fondled while she was
asleep. While she did not actually see Abello fondling her (as the fondling was done
while she was asleep and stopped when she awakened), she related that she identified
Abello because she saw him enter her mother's room immediately after she felt her
breasts fondled and after he stepped with his knees on her hand.[36] AAA also testified that
Abello was illuminated by a light coming from outside their house.[37] Further, the
perpetrator could only be Abello as the only other occupants of the house at the time were
her mother, her sister-in-law and her young nephew who were all asleep. [38] The third
element was proven by her testimony that, on two occasions, Abello mashed her breasts
while she was sleeping.[39]

As we discussed above, the Informations alleged the element of violence and intimidation
as the mode of committing the sexual abuses, contrary to what the prosecution
established during the trial that AAA was asleep on the two occasions when the offenses
were committed. Pursuant to our above discussions citing Corpuz,[40] the deficiencies in
the allegations will not relieve Abello of liability under the circumstances of this case.

The Penalty

The three Informations all alleged the stepfather-stepdaughter relationship between AAA
and Abello. Relationship as an alternative circumstance under Article 15 of the RPC, as
amended, and is an aggravating circumstance in crimes against chastity and in rape.
[41]
 This modifying circumstance, however, was not duly proven in the present case due to
the prosecution's failure to present the marriage contract between Abello and AAA's
mother. If the fact of marriage came out in the evidence at all, it was via an admission by
Abello of his marriage to AAA's mother. This admission, however, is inconclusive
evidence to prove the marriage to AAA's mother,[42] as the marriage contract still remains
the best evidence to prove the fact of marriage.[43] This stricter requirement is only proper
as relationship is an aggravating circumstance that increases the imposable penalty, and
hence must be proven by competent evidence.

Rape by sexual assault is penalized by prision mayor which has a range of six (6) years
and one (1) day to twelve (12) years. Applying the Indeterminate Sentence Law, the
minimum of the indeterminate penalty shall be within the full range of the penalty that is
one degree lower than prision mayor, in this case, prision correccional which has a range
of penalty from six (6) months and one (1) day to six (6) years. In the absence of any
mitigating or aggravating circumstance, the maximum of the indeterminate penalty shall
be taken within the medium period of prision mayor, or eight (8) years and one (1) day to
ten (10) years.[44] Hence, Abello may be sentenced to suffer an indeterminate penalty
ranging from six (6) months and one (1) day to six (6) years of prision correccional, as
minimum, to eight (8) years and one (1) day to ten (10) years, as maximum, for the crime
of rape.

The imposable penalty for acts of lasciviousness under Article 336 of the RPC, as
amended, is prision correccional. Under Scale No. 1 of Article 71 of this law, one degree
lower from prision correccional is arresto mayor which has a range of penalty from one
(1) month and one (1) day to six (6) months. Applying the Indeterminate Sentence Law,
the minimum of the indeterminate penalty shall be taken from the full range of arresto
mayor. Absent any mitigating or aggravating circumstance in the case, the maximum of
the indeterminate penalty shall be taken from the medium period of prision
correccional or two (2) years, four (4) months and one (1) day to four (4) years and two
(2) months. Accordingly, Abello may be meted an indeterminate penalty ranging from
one (1) month and one (1) day to six (6) months of arresto mayor, as minimum, to two
(2) years, four (4) months and one (1) day to four (4) years and two (2) months of prision
correccional, as maximum, for each count of acts of lasciviousness.

The Civil Liability

A victim of rape by sexual assault is entitled to an award of P30,000 as civil indemnity

and P30,000 as moral damages.[45] Civil indemnity is separate and distinct from the award
of moral damages which is automatically granted in rape cases. [46] Moral damages are
additionally awarded without need of further pleading or proof; it is presumed that the
victim necessarily suffered injury due to the odiousness of the crime.[47]

For acts of lasciviousness, AAA is awarded P20,000 as civil indemnity and P30,000 as
moral damages for each count in line with existing jurisprudence.[48]
The Court further awards exemplary damages in the amount of P25,000 for the rape
through sexual assault committed upon AAA and P2,000 for each count of acts of
lasciviousness.[49] Article 2230 of the Civil Code allows an award of exemplary damages
when the crime is committed with one or more aggravating circumstances.

Although not alleged in the Informations (as now required by Sections 8 and 9, Rule 110
of the 2000 Revised Rules of Criminal Procedure),[50] the aggravating circumstance of
dwelling was nonetheless proven during the trial when AAA testified that she was
sexually abused by Abello while she was asleep in their house. [51]

Additionally, Article 266-B of the RPC, as amended, recognizes knowledge by

the offender of the mental disability, emotional disorder and/or physical handicap of the
offended party at the time of the commission of the crime, as a qualifying circumstance.
Again, this knowledge by Abello of AAA's polio was duly proven during the trial; this
matter was not alleged in the Information.[52]

These aggravating and qualifying circumstances of dwelling and Abello's knowledge of

AAA's physical disability may be appreciated in awarding the victim exemplary damages
in line with our ruling in People v. Catubig[53] where we held that the presence of an
aggravating circumstance, whether ordinary or qualifying, entitles the offended party to
an award of exemplary damages.

WHEREFORE, premises considered, the decision dated January 3, 2002 of the Court of
Appeals in CA-G.R. CR No. 23746 is AFFIRMED with the
following MODIFICATIONS in that:

(1) In Criminal Case No. 19623, we find appellant Heracleo

Abello y Fortada GUILTY of rape by sexual assault defined and penalized under Articles
266-A and 266-B of the Revised Penal Code, as amended. We sentence him to suffer an
indeterminate prison term of six (6) years of prision correccional, as minimum, to ten
(10) years of prision mayor, as maximum. He is ORDERED to pay AAA P30,000.00 as
civil liability; P30,000.00 as moral damages and P25,000.00 as exemplary damages;

(2) In Criminal Case Nos. 19624-MN and 19625-MN, we find appellant Heracleo

Abello y Fortada GUILTY of acts of lasciviousness, defined and penalized under Article
336 of the Revised Penal Code, as amended. For each count, he is sentenced to an
indeterminate prison term of six (6) months of arresto mayor, as minimum, to four (4)
years and two (2) months of prision correccional, as maximum. He is
further ORDERED to pay AAA the amounts of P20,000.00 as civil indemnity;
P30,000.00 as moral damages and P2,000.00 as exemplary damages, in each case.

SO ORDERED.
 SECOND DIVISION
[ G.R. No. 177361, February 01, 2010 ]
ARMANDO VIDAR @ "RICKY", NORBERTO BUTALON,(†) SONNY
MARBELLA @ "SPIKE" AND JOHN DOES AND PETER DOES,
PETITIONERS, VS. PEOPLE OF THE PHILIPPINES, RESPONDENT.

DECISION

DEL CASTILLO, J.:

A person is killed, either by reason or on occasion of the robbery. To sustain a

conviction for robbery with homicide, the prosecution must prove the following
elements: (1) taking of personal property belonging to another; (2) with intent to gain;
(3) with the use of violence or intimidation against a person; and (4) on the occasion or
by reason of the robbery, the crime of homicide, as used in its generic sense, was
committed. A conviction requires certitude that the robbery is the malefactor's main
purpose and objective, and the killing is merely incidental to the robbery. The intent to
rob must precede the taking of human life, but the killing may occur before, during, or
after the robbery.[1]

In the instant case, the prosecution satisfactorily proved that the crime committed by
the petitioners was robbery with homicide.

Factual Antecedents

It was early evening of April 30, 2001, when army officer, Sgt. Julio D. Dioneda
(Dioneda), was brutally murdered and valuables taken from his house located at Sitio
Burabod, Barangay Poblacion, Bacon District, Sorsogon City.

Consequently, a criminal charge for Robbery with Homicide against herein petitioners
Armando Vidar @ Ricky (Vidar), Norberto Butalon (Butalon), Sonny Marbella @ Spike
(Marbella), and several Does was filed under an Information [2] which reads:

The undersigned accuses ARMANDO VIDAR @ "Ricky" of Sto. Domingo, Pto. Diaz,
Sorsogon, NORBERTO BUTALON, of Maslog, Legaspi City, and SONNY MARBELLA @
"Spike" of Lungib, Pilar, Sorsogon and several other JOHN DOES and PETER DOES, of the
crime of ROBBERY WITH HOMICIDE, defined and penalized under Article 294 par. 1 of
the Revised Penal Code, committed as follows:

That on or about the 30th day of April 2001, at about 7:00 o'clock in the evening
at Sitio Burabod, Barangay Poblacion, Bacon District, Sorsogon City, Philippines and
within the jurisdiction of this Honorable Court, the above named accused, conspiring
and confederating together and helping one another, armed with firearms, did then and
there willfully, unlawfully and feloniously and with intent to gain, enter the dwelling of
one Sgt. Julio D. Dioneda and once inside, took therefrom at gunpoint a Cal. 45 pistol, a
wallet containing P1,000.00 cash, a crash helmet and a motorcycle all belonging to the
said Sgt. Julio D. Dioneda; that on the occasion of the said robbery and for the purpose
of enabling them to take, steal and carry away the items above mentioned with ease,
herein accused, in pursuance of their conspiracy, did then and there, willfully, unlawfully
and feloniously, with treachery and taking advantage of their superior number and
strength and with intent to kill, attack, assault and repeatedly shot the said Sgt. Julio D.
Dioneda, inflicting upon him multiple gunshot wounds that caused his instantaneous
death, to the damage and prejudice of his legal heirs.

CONTRARY TO LAW.

Sorsogon City, Sorsogon, July 8, 2002.

Petitioners, assisted by their counsel de parte, pleaded not guilty to the crime of
Robbery with Homicide as charged in the Information. After pre-trial was terminated,
trial on the merits followed.

The antecedent facts of this case as recounted by the prosecution witnesses Florecita
Dioneda (Florecita) and Niña Dioneda Elemanco (Niña) that led to the conviction of the
petitioners are as follows:

At about 7:00 o'clock in the evening of April 30, 2001, Florecita, wife of the victim, and
her sister-in-law Niña, were inside the former's house at Burabod, Poblacion, Bacon
District, Sorsogon City. They were watching television when three armed men suddenly
barged inside. One of them, later identified as Marbella, poked a gun at Florecita while
the other two ransacked the house taking a wallet, crash helmet and a .45 caliber
firearm with its magazine. These items belong to Dioneda who was then taking a bath
outside the house. Florecita and Niña followed the three men when the latter went out.
At the yard, they saw the three men together with more or less 10 other persons
surrounding Dioneda who was lying facing the ground. Despite Florecita's pleas not to
kill her husband, Marbella and Vidar still fired a volley of shots causing Dioneda's
instantaneous death. The three then boarded Dioneda's motorcylcle and fled the area.

Niña corroborated the material details of the robbery and the killing and testified
further that she could not forget the faces of the three malefactors as she was very sure
that they were the ones who barged inside the house and later killed her brother.

Petitioners vehemently denied the accusations against them. Marbella averred that he
does not know Dioneda and that he was in his house in Lungib, Pilar, Sorsogon on April
30, 2001 while Vidar asserted that he has no knowledge of the killing of Dioneda.
Butalon, on the other hand, professed his innocence, claiming that he also does not
know Dioneda and that he was in his house at Omoroy, Legaspi City on April 30, 2001.
Collectively, they alleged that the possible motive behind the charge against them is
that they were known members of the New People's Army (NPA).

Ruling of the Regional Trial Court

The Regional Trial Court of Sorsogon, Branch 52, relying on the credible and positive
testimonies of the prosecution witnesses, rejected the defense interposed by the
petitioners and accordingly rendered a Decision[3] on September 2, 2004 finding all of
them guilty of the crime of robbery with homicide. The dispositive portion of said
Decision reads:

WHEREFORE-, premises considered, the Court finds accused Armando Vidar @

"Ricky", Norberto Butalon, and Sonny Marbella @ "Spike" guilty beyond reasonable
doubt of the crime of Robbery with Homicide, defined and penalized under Article 294
of the Revised Penal Code with the aggravating circumstance of treachery, and applying
the provision of Art. 63, par. 1 of the Revised Penal Code, in relation to Article 294 par. 1
of the Revised Penal Code, the Court hereby sentences each one of them to suffer the
maximum penalty of DEATH and to pay jointly and severally, the heirs of the victim the
amount of P50,000.00 as civil indemnity and the further sum of P5,500.00 as actual
damages, the sum of P50,000.00 as moral damages, the amount of P3,336,768.00 as
unearned income and the amount of P50,000.00 as exemplary damages without
subsidiary imprisonment in case of insolvency and to pay the costs.

The Clerk of Court is hereby ordered to transmit the records of this case to the
Honorable Supreme Court for automatic review, and to prepare the Mittimus
immediately.

The Warden of the Bureau of Jail Management and Penology (BJMP) Sorsogon City
and/or Legaspi City is hereby ordered to deliver the accused to the National
Penitentiary, Muntinlupa City, with proper escort and security immediately.

SO ORDERED.

Ruling of the Court of Appeals

On appeal, petitioners raised the following errors:

The Honorable Court a quo erred in finding the accused-appellants guilty of the crime of
robbery with homicide despite the insufficiency of evidence for the prosecution to
support the same.

II

The Honorable Court a quo erred in not finding that robbery and homicide were
committed in furtherance of rebellion as admitted both by the prosecution and the
defense witnesses that the victim was killed by reason of his being a member of the
Philippine Army and in the performance of his duty and the assailants are members of
the New People's Army (NPA) of which the accused- appellants are also members even
up to the time of their arrest.

On December 18, 2006, the Court of Appeals (CA) rendered its Decision [4] finding the
appeal to be unmeritorious. The appellate court gave credence to the eyewitnesses'
account of the victim's death and the identity of herein petitioners.

Accordingly, the CA affirmed the findings of the trial court but modified the penalty
imposed from Death to reclusion perpetua. The decretal portion of the decision reads:

WHEREFORE, the judgment of the Regional Trial Court of Sorsogon City, Branch
52, dated September 2, 2004 convicting the accused-appellants ARMANDO VIDAR alias
"RICKY", NORBERTO BUTALON, SONNY MARBELLA alias "SPIKE" of the crime of Robbery
with Homicide is affirmed. Considering, however, the repeal of R.A 7659 with the
passage of Republic Act No. 9346 on June 24, 2006 prohibiting the imposition of the
death penalty, in lieu of the trial court's imposition of the death penalty, each of the
accused-appellants is hereby sentenced to suffer reclusion perpetua. They are further
directed to indemnify the heirs of the victim the amount of P50, 000.00 as civil
indemnity, P50,000.00 as moral damages, P50,000.00 as exemplary damages, P5,500.00
as actual damages and P2,224,512.00 for the victim's loss of earning capacity.

SO ORDERED.[5]

Hence, this petition.

On August 8, 2007, we issued a Resolution[6] treating the instant petition as petitioners'

Supplemental Brief and notified the Office of the Solicitor General (OSG) that it may file
a supplemental brief within 30 days from notice thereof, if it so desires. The OSG filed a
Manifestation[7] (in lieu of Supplemental Brief) that it had already exhaustively argued all
the issues relevant to the case in its Appellee's Brief [8] dated October 17, 2005.

Petitioners' Arguments

Petitioners contend that the appellate court erred in affirming the decision of the trial
court despite the absence of proof adduced before the court below establishing beyond
reasonable doubt that they committed the crime of robbery with homicide. They
maintain that the delay of almost a year in filing formal charges against them cast
serious doubt on the intention and motive of the complainant. They aver that while the
incident took place on April 30, 2001, formal charges against them were filed only in
February 2002.

Respondent's Arguments

In refuting petitioners' contention, the OSG representing the respondent, reiterated the
ruling of the court a quo and sought the affirmation of the assailed decision.

Our Ruling

Petitioners' arguments are bereft of merit. The delay did not greatly weaken the
credibility of the testimonies of the prosecution witnesses. In the light of the
circumstances obtaining in the case at bar, we believe that the delay in reporting to the
police authorities the attendant facts of the crime for which the petitioners have been
charged is consistent with normal human behavior considering that after a tragic
incident, the last thing that the bereaved would want is to provoke further reprisals
from the perpetrators of the felonious act. Although there is a natural tendency to seek
the ends of justice for the treacherous killing of a dearly departed, personal safety takes
priority as dictated by our culture. Moreover, considering private complainant's honest
belief that petitioners are known to be members of the NPA, the fear of reprisal from
them was ever present which caused her momentary silence. After all, delay in
reporting the occurrence of a crime or other unusual event in rural areas is well known.
[9]
 Others reveal the perpetrator of the crime only after the lapse of one year or so to
make sure that the possibility of a threat to his life or to his loved ones is already
diminished if not totally avoided. In People v. Gornes[10] we held that:

It is true that the charge against the appellant was initiated only three and a half
years after the commission of the crime. However, the fact of delay alone does not work
against the witness.

Thus, the fact of delay attributed to the prosecution witnesses cannot be taken against
them.[11] What is important is that their testimonies regarding the incident bear the
earmarks of truth and dependability.

One thing which bolsters the prosecution witnesses' credibility is the fact that they had
no motive to prevaricate against the petitioners. They were not actuated by improper
motive to fabricate the facts and to foist a very serious offense against them. Where
there is no evidence, as in this case, to indicate that the prosecution witnesses were
actuated by improper motive, the presumption is that they were not so actuated and
that their testimonies are entitled to full faith and credit. [12] For personal motive on the
part of a witness to testify against the accused to be appreciated as showing bias, its
presence should be supported by satisfactory proof.[13] Aside from their bare allegation,
petitioners miserably failed in this regard. On the contrary, we are not prepared to
disbelieve the prosecution witnesses' testimonies on their vital points substantiating the
circumstances of time and place of the offense charged against petitioners.

Petitioners likewise contend that their identification by the prosecution witnesses was
attended with irregularity considering that they were identified merely from among the
four photographs presented at Camp Escudero. They posit that this manner of
identification provides an incredible suggestive procedure.
We beg to disagree.

In ascertaining whether an out-of-court identification is positive or derivative, the Court

has adopted the totality of circumstances test wherein the following factors are taken
into consideration: 1) the witness's opportunity to view the criminal at the time of the
crime; 2) the witness's degree of attention at that time; 3) the accuracy of any prior
description given by the witness; 4) the level of certainty demonstrated by the witness
at the identification; 5) the length of time between the crime and the identification; and
6) the suggestiveness of the identification procedure. [14]

We have scrutinized with great caution the witnesses' manner of identifying

petitioners vis-a-vis the foregoing factors and we discern nothing irregular that would
result in an erroneous identification.

At the outset, it must be stressed that the prosecution witnesses had an unobstructed
view of the petitioners' appearance who were not donning masks to hide their faces
when the latter barged inside the house. There is no indication that darkness prevailed
inside the house so as to have an obscure view at the time. They even testified that one
of the petitioners even poked a gun at them while the others were ransacking the
house. Thus even for a while, there was a frontal confrontation between petitioners and
the witnesses, giving the latter an opportunity to take a good look at petitioners.
Nothing in the records allows the presence of any distraction that would have disrupted
the witnesses' attention during the occurrence of the incident. Niña even described to
the policemen the physical appearance of petitioners though no cartographic sketch
was presented.[15] Experience dictates, precisely because of the unusual acts of violence
committed right before witnesses' eyes, that they remember with a high degree of
reliability the identity of criminals.[16] Though a considerable length of time had elapsed,
the witnesses never wavered in their identification of petitioners. They cannot forget
their faces.

It is worth mentioning also that the identification of petitioners was effectively admitted
when petitioners failed to dispute the same before the lower courts. The in-court
identification of the petitioners later on dispels any doubt as to the correctness of their
identities. As we held in People v. Rivera:[17]

Even assuming arguendo that the appellant Alfonso Rivera's out-of-court

identification was tainted with irregularity, his subsequent identification in court cured
any flaw that may have attended it. Without hesitation, the two prosecution witnesses,
Renato Losaria and Juanito Baylon identified the appellant as one of the assailants.
In People v. Timon, the accused were identified through a show-up. The accused
assailed the process of identification because no other suspect was presented in a police
line-up. We ruled that a police line-up is not essential in identification and upheld the
identification of the accused through a show-up. We also held that even
assuming arguendo that the out-of-court identification was defective, the defect was
cured by the subsequent positive identification in court for the `inadmissibility of a
police line-up identification x x x should not necessarily foreclose the admissibility of an
independent in-court identification.

Moreover, the burden is on petitioners to prove that their mug shot identification was
unduly suggestive. There is no evidence that the authorities had supplied or even
suggested to the witnesses that petitioners were the suspected gunmen. We, therefore,
fail to see any flaw that would invalidate the eyewitnesses' identification. As aptly
observed by the CA:

Both Florecita Dioneda and Niña Elemanco gave a credible eyewitness' account of
the victim's x x x death [by gunshots] in the hands of accused-appellant. Their testimony
[sic] giving details of a startling and shocking incident that cannot easily be fabricated
deserves credence and full probative weight for it indicates sincerity and truthfulness in
the narration of events. Both of these witnesses had a good look at the victim's
assailants, who did not at any time during the incident attempt to conceal their faces.
Accused-appellant MARBELLA even stood less [than] a meter from Florecita Dioneda as
he pointed a gun at her while another accused-appellant even [etched] upon her a
distinct impression of his baldness as repeatedly mentioned by her during her
testimony. As there is nothing to indicate that these two principal witnesses were
moved by improper motives, their positive declarations on the witness stand deserve
full faith and credit.[18]

The fact that the prosecution witnesses are related to the victim will not necessarily
taint their testimonies. The weight of testimony of witnesses is neither impaired nor in
any way affected by their relationship to the victim when there is no showing of
improper motive on their part.[19] Relationship per se of a witness with the victim of the
crime does not necessarily mean that the witness is biased. [20] These prosecution
witnesses are the most aggrieved parties, being the victim's widow and sister. Thus,
their motive of putting the killers behind bars cannot be considered improper. [21] It
would be unnatural for a relative who is interested in avenging the crime to implicate
persons other than the real culprit lest the guilty go unpunished. [22]
Deeply entrenched in our jurisprudence is the rule that the assessment of the credibility
of witnesses is a domain best left to the trial court judge because of his unique
opportunity to observe their deportment and demeanor on the witness stand; a vantage
point denied appellate courts - and when his findings have been affirmed by the Court
of Appeals, these are generally binding and conclusive upon this Court. [23]

Significantly, in the pleadings filed before the trial court and in the appellate court,
petitioners were steadfast in their position that the crime was committed in furtherance
of rebellion, obviously to escape criminal liability for the present charge. This is judicial
admission that they indeed committed the crime. A judicial admission conclusively binds
the party making it. He cannot thereafter take a position contradictory to or inconsistent
with his pleading. Acts or facts admitted do not require proof and cannot be
contradicted unless it is shown that the admission was made through palpable mistake
or that no such admission was made.[24] Moreover, when a party adopts a certain theory
in the court below, he is not allowed to change his theory on appeal, for to allow him to
do so would not only be unfair to the other party but would also be offensive to the
basic rules of fair play, justice and due process.[25]

Treachery was also duly proven. The deadly and successive actions of the petitioners did
not allow the victim any opportunity to defend himself. The victim was innocently taking
a bath totally unaware of the planned attack against him. Or while he may have realized
a possible danger to his person, the attack was executed in such a manner as to make
defense, not to say counter attack, impossible. The suddenness of the assault, without
the slightest provocation from him who was unarmed and with nary an opportunity to
repel the aggression or defend himself, ineluctably qualified the crime with alevosia.[26]

The twin defenses of denial and alibi raised by petitioners must necessarily fail in view of
the positive identification made by the prosecution witnesses. Alibi and denial are
inherently weak defenses and must be brushed aside when the prosecution has
sufficiently and positively ascertained the identity of the accused. [27] And it is only
axiomatic that positive testimony prevails over negative testimony. [28]

The testimonies of the prosecution witnesses thus established beyond reasonable doubt
the elements of robbery with homicide, namely: 1) the taking of personal property was
committed with violence or intimidation against persons; 2) the property taken belongs
to another; 3) the taking was done with animo lucrandi; and 4) by reason of the robbery
or on the occasion thereof, the crime of homicide which is therein used in a generic
sense, was committed.[29]

As to damages, we find the amounts awarded by the trial court as modified by the CA
with respect to the amount of the loss of earning capacity to have been duly
substantiated and warranted. We see no cogent reason to reverse the same.

Finally, we take note that petitioner Butalon died before final judgment. According to
the written report of the Penal Superintendent,[30] Butalon died at the New Bilibid Prison
Hospital on October 21, 2004. Thus, consistent with our ruling in People v.
Bayotas[31] that the death of an accused pending appeal of his conviction extinguishes
his criminal liability as well as the civil liability based solely thereon, we declare the
dismissal of the petition of the late Norberto Butalon.

WHEREFORE, the petition for review is DENIED. The challenged Decision of the Court of

Appeals in CA-G.R. CR H.C. No. 00554 dated December 18, 2006 is AFFIRMED with
MODIFICATION that the petition of Norberto Butalon is dismissed, his criminal and civil
liability having been extinguished by reason of his death.

SO ORDERED.

FIRST DIVISION
[ G.R. No. 181829, September 01, 2010 ]
PEOPLE OF THE PHILIPPINES, APPELLEE, VS. SATURNINO
VILLANUEVA, APPELLANT.

DECISION

DEL CASTILLO, J.:

On appeal is the November 5, 2007 Decision[1] of the Court of Appeals (CA) in CA-
G.R. CR-H.C. No. 02210 which affirmed with modification the November 28, 2003
Decision[2] of the Regional Trial Court (RTC) of Tayug, Pangasinan, Branch 51.  The CA
found appellant Saturnino Villanueva guilty beyond reasonable doubt of three counts of
qualified rape and sentenced him to suffer the penalty of reclusion perpetua  and to pay
his victim the amounts of P75,000.00 as civil indemnity, P75,000.00 as moral damages,
and P25,000.00 as exemplary damages, for each count.

Factual Antecedents:

On November 6, 2002, three Informations were filed against appellant for the crime of
rape.  The accusatory portions of the Informations read:

Crim. Case No. T-3157:

That on or about the 9th day of June, 2002, at dawn, x x x, province of Pangasinan,

Philippines, and within the jurisdiction of this Honorable Court, the above-named
accused who is the father of complainant, armed with a bladed weapon, by means of
force, threat and intimidation, did then and there willfully, unlawfully and feloniously
have sexual intercourse with one "AAA," [3] a minor 12 years of age, against her will and
consent, to the damage and prejudice of said "AAA."

CONTRARY to Article 335 of the Revised Penal Code, as amended by Republic Act 8353.
[4]

Crim. Case No. T-3158:

That on or about the 27th day of September, 1999, in the evening, at x x x, province of

Pangasinan, Philippines, and within the jurisdiction of this Honorable Court, the above-
named accused who is the father of complainant, armed with a bladed weapon, by
means of force, threat and intimidation, did then and there willfully, unlawfully and
feloniously have sexual intercourse with one "AAA," a minor 9 years of age, against her
will and consent, to the damage and prejudicie of said "AAA."

CONTRARY to Article 335 of the Revised Penal Code, as amended by Republic Act 8353.
[5]

Crim. Case No. T-3159:

That on or about the 28th day of September, 1999, at dawn, at x x x, province of

Pangasinan, Philippines, and within the jurisdiction of this Honorable Court, the above-
named accused who is the father of complainant, armed with a bladed weapon, by
means of force, threat and intimidation, did then and there willfully, unlawfully and
feloniously have sexual intercourse with one "AAA," a minor 9 years of age, against her
will and consent, to the damage and prejudice of said "AAA."

CONTRARY to Article 335 of the Revised Penal Code, as amended by Republic Act 8353.
[6]

When arraigned on November 14, 2002, appellant pleaded not guilty to all charges. [7]

During pre-trial, the parties stipulated that the appellant is the father of "AAA."  It was
likewise agreed that "AAA" was below 12 years of age when the rape incidents
happened.[8]  "AAA's" birth and medical certificates were likewise marked as Exhibits "A"
and "C," respectively.[9]

Thereafter, the cases were tried jointly.[10]

Version of the Prosecution

The prosecution presented "AAA" as its witness.  "AAA" narrated that when she was
about 4 years old, her mother left her in the care of her father, herein appellant.  Since
then, she had been living with her father.

"AAA" claimed that appellant sexually abused her on September 27 and 28, 1999 and on
June 9, 2002. During her testimony, "AAA" narrated that:

PROS. ULANDAY:
Q Will you please state your name, age and other personal circumstances?

WITNESS
:
A I am "AAA," 13 years old, out-of-school youth, presently residing at x x x [11]

xxxx

PROS. ULANDAY:

Q Madam Witness, do you still remember September 27, 1999?

A Yes, sir.

Q Why do you remember that particular date?

A That was the birthday of my father and the date when he touched me, sir.

xxxx
Q Who rape[d] you?
A My papa, sir. Witness pointed to the accused.

xxxx
PROS. ULANDAY:

Q You claimed that your father touched and used you.  How did he begin in
touching you?
A He tied me, sir.

xxxx

Q What part of your body was x x x tied by your father?

A My mouth, sir.

Q What other parts of your body, if there [are] any?

A My hands and my feet, sir.

PROS. ULANDAY:
My witness is crying, your Honor.[12]

xxxx

Q Now, after your father tied you on September 27, 1999, what did he do, if
there's any?
A He raped me, sir.

COURT:
Q What do you mean by x x x saying he raped you?

xxxx
A He undressed me, sir.

xxxx

COURT:
And we make of record that [witness is now] in tears. [13]

xxxx
PROS. ULANDAY:

Q Madam Witness, during the last hearing you uttered the word "incua na." 
What do you mean by that?
A He inserted his penis into my vagina, sir.

Q How long a time did your father [insert] his penis into your vagina?
A About two minutes, sir.

Q At early dawn of September 28, 1999, what happened if any, between you and
 your father?
A The same, sir.

Q What do you mean by the same?

A That he inserted his penis into my vagina, sir.

Q Before your father inserted his penis into your vagina, what did he do, if there
was any?
A He first undressed me, sir.

Q While he was undressing you what were you doing, if any?

A I failed to do any, sir.

Q Why did you fail to do any?

A Because I was afraid, sir.

Q Why were you afraid at the time?

A Because he threatened me, sir.

Q How did he [threaten] you?

A That if I would report the matter to anyone he would kill the person to whom I
will report, sir.

Q Do you remember June 9, 2002 at 3:00 o'clock dawn?

A Yes, sir.

Q Why do you remember that particular date?

A Because he again raped me, sir.

Q Who raped you?

A My father, sir.

Q In what particular place [were] you raped?

A In our house, sir.

xxxx
Q You claimed that you were raped by your father, how did he rape you?
A He undressed me, sir.

Q What else did he do aside from undressing you?

A He poked a knife at me, sir.

Q And after poking a knife at you, what happened next, if any?

A Then he touched (kinuti) me, sir.

Q What part of your body was touched by your father?

A My vagina, sir.

Q How did he touch your vagina?

 A He inserted his penis into my vagina, sir.

Q What happened when he inserted his penis into your vagina?

A I cried, sir.[14]

Q:  You have no idea about what?

A:  I do not know how to come to this court, sir. [20]

After the presentation of "AAA's" testimony, the prosecution rested its case.

Version of the Defense

The defense presented appellant as its first witness.  In his testimony, appellant
admitted that "AAA" is his daughter.[15]  He also admitted that on September 27 and 28,
1999 and June 9, 2002, he was living in the same house as "AAA." [16]  However, when
asked regarding the rape charges filed against him by his daughter, appellant denied the
same.  Thus:

Q And this daughter of your[s] now charge you [with] rape in Crim. Case Nos. T-
3157/3158/3159 for allegedly having sexual intercourse with her against her will and consent.
What can you say against these charges by your daughter?
A [Those are] not true, sir.[17]

The defense next presented Marcelino Villanueva (Marcelino) who testified that he is
the father of the appellant.[18]  He claimed that "AAA" filed the rape cases against
appellant because the latter forbade her to entertain suitors. [19]  Marcelino also alleged
that after appellant was incarcerated, "AAA" eloped with her 20-year old boyfriend and
that "AAA" only separated from her boyfriend when she was brought under the care of
the Department of Social Welfare and Development.[20] When asked how old "AAA" was
when she allegedly eloped with her boyfriend, Marcelino answered that "AAA" was only
13 years old.[21]

Ruling of the Regional Trial Court

The trial court lent credence to the testimony of "AAA."  However, it noted that
although it was agreed upon during the pre-trial that "AAA" was a minor below 12 years
of age, the fact remains that "AAA" was 12 years, six months and 19 days when she was
ravished by the appellant on June 9, 2002.[22]  The court below also observed that "AAA
has always been a pathetic child of oppression, abuse and neglect" and that "[h]er
innocence, tender age, dependence [on appellant] for survival, and her virtual
orphanhood sufficed to qualify every sexual molestation perpetrated by her father as
rape x x x."[23]

The dispositive portion of the Decision reads:

WHEREFORE, finding the accused SATURNINO VILLANUEVA guilty beyond

reasonable doubt of three counts of rape, defined and penalized by Article 266-A of the
Revised Penal Code, perpetrated against [his] daughter on September 27, 1999,
September 28, 1999 and June 9, 2002, x x x and as mandated by Article 266-B, same
Code, the Court hereby sentences him to suffer the penalty of DEATH for each offense,
to indemnify the complainant "AAA" for damages in the amount of P50,000.00  per
[count], and to pay the costs.

SO ORDERED.[24]

Ruling of the Court of Appeals

In his brief filed before the appellate court, appellant claimed that the prosecution failed
to present evidence that would overcome the presumption of his innocence.  Appellant
also alleged that the trial court erred in lending credence to the unrealistic and
unnatural testimony of "AAA."[25]  He claimed that it was unusual for "AAA" not to offer
any resistance to the advances allegedly made by him considering that he was
unarmed.  According to the appellant, "AAA" should have struggled or at least offered
some resistance because she was not completely helpless. [26]  Appellant also suggested
that "AAA" must have been coached because initially, she did not know the acts which
constitute rape.  However, during the succeeding hearings, "AAA" allegedly testified in
detail the bestial acts committed against her.[27]

Moreover, appellant argued that the prosecution failed to formally offer in evidence the
medical certificate and to present the doctor who conducted the medical examination
to testify on his findings.[28]  Likewise, "AAA's" birth certificate was not formally offered. 
Neither did the Municipal Civil Registrar who allegedly prepared the same take the
witness stand.  Thus appellant claimed that assuming he was indeed guilty of the crimes
charged, he should only be held liable for simple rape and not qualified rape because
the minority of the victim was not duly established. [29]  Further, with the passage of
Republic Act No. 9346, appellant should not be sentenced to death. [30]

On the other hand, appellee maintained that "AAA's" credibility was beyond
doubt[31] and that it was unnecessary to offer proof of resistance where the assailant
exercised moral ascendancy against his victim, as in this case. [32]  Appellee insisted that
the crimes committed were three counts of qualified, and not simple, rape considering
that "AAA" was a minor and the offender was her father, [33] and that the parties had
already stipulated during pre-trial as regards the age of the victim. [34]

On November 5, 2007, the appellate court rendered its Decision disposing thus:

WHEREFORE, premises considered, the Decision dated 28 November 2003 of the

Regional Trial Court of Tayug, Pangasinan, Branch 51 in Crim. Case Nos. T-3157, T-
3158 and T-3159 finding accused-appellant Saturnino Villanueva guilty beyond
reasonable doubt of three (3) counts of qualified rape under Articles 266-A and 266-B
is AFFIRMED with the MODIFICATION that pursuant to Republic Act No. 9346, the
penalty of death imposed on appellant is reduced to reclusion perpetua for each count
of qualified rape, without eligibility for parole under Act No. 4103, as amended. 
Further, accused-appellant is ordered to pay the private complainant/victim ["AAA"], for
each count of qualified rape, the amounts of Php 75,000.00 as civil indemnity, Php
75,000.00 as moral damages and Php 25,000.00 as exemplary damages.

SO ORDERED.[35]

The appellate court found no reason to reverse the findings of the trial court on the
credibility of "AAA."[36]  Although there were occasions when "AAA" would not
immediately answer the questions propounded to her, the CA opined that it was
because she was either distressed in recounting her horrible experiences or in tears. [37] 
The appellate court likewise considered the fact that "AAA" was only 13 years old when
she testified on her harrowing experiences.[38]

The appellate court likewise brushed aside appellant's contention that "AAA" did not
offer any resistance.  According to the CA, appellant's moral ascendancy over "AAA"
substitutes for violence or intimidation.[39]

The CA also concluded that even without the medical certificate, appellant could still be
held liable for three counts of rape.  His conviction could rest exclusively on the credible
testimony of "AAA" and the medical certificate would only be corroborative evidence.
[40]
  Anent the birth certificate, the CA recalled that during pre-trial, the minority of the
victim and her relationship with the appellant had already been stipulated upon. Hence,
the said elements have been sufficiently alleged in the Informations and proven during
trial.[41]

Finally, the CA held that appellant's denial is intrinsically weak and self-serving especially
considering "AAA's" credible and straightforward testimony. [42]

Our Ruling

Both the appellant and the appellee opted not to file their supplemental briefs. [43]

The appeal is partly meritorious.

At the outset, we must state that we entertain no doubt that appellant thrice raped his
daughter, "AAA."  We examined the records and we find "AAA's" testimony convincing
and straightforward.  We therefore have no reason to reverse or modify the findings of
the trial court on the credibility of the victim's testimony, more so in this case where the
said findings were affirmed by the CA.

We also agree with the ruling of the appellate court that appellant could be convicted of
rape even without the medical certificate.  "In rape cases, the accused may be convicted
solely on the testimony of the victim, provided the testimony is credible, natural,
convincing, and consistent with human nature and the normal course of things." [44]  As
stated above, "AAA's" testimony was credible and convincing.  As such, appellant's
conviction could rest solely on it. The medical certificate would only serve as
corroborative evidence.

We, however, agree with the appellant that both the medical certificate and "AAA's"
birth certificate, although marked as exhibits during the pre-trial, should not have been
considered by the trial court and the CA because they were not formally offered in
evidence.  Section 34, Rule 132 of the Rules of Court explicitly provides: "The court shall
consider no evidence which has not been formally offered.  The purpose for which the
evidence is offered must be specified."

In this case, we note that after the marking of the exhibits during pre-trial, the
prosecution did not formally offer the said medical certificate or birth certificate in
evidence.  In fact, the prosecution rested its case after presenting the testimony of
"AAA" without formally offering any documentary exhibit at all.

Our ruling in Heirs of Pedro Pasag v. Parocha[45] is instructive, thus:

 The rule on formal offer of evidence is not a trivial matter. Failure to make a
formal offer within a considerable period of time shall be deemed a waiver to submit it.
Consequently, as in this case, any evidence that has not been offered shall be excluded
and rejected.

xxxx

The Rules of Court [provide] that `the court shall consider no evidence which has not
been formally offered.'  A formal offer is necessary because judges are mandated to rest
their findings of facts and their judgment only and strictly upon the evidence offered by
the parties at the trial.  Its function is to enable the trial judge to know the purpose or
purposes for which the proponent is presenting the evidence.  On the other hand, this
allows opposing parties to examine the evidence and object to its admissibility. 
Moreover, it facilitates review as the appellate court will not be required to review
documents not previously scrutinized by the trial court.

xxxx

Thus, the trial court is bound to consider only the testimonial evidence presented and
exclude the documents not offered.  Documents which may have been identified and
marked as exhibits during pre-trial or trial but which were not formally offered in
evidence cannot in any manner be treated as evidence.  Neither can such
unrecognized proof be assigned any evidentiary weight and value. It must be stressed
that there is a significant distinction between identification of documentary evidence
and its formal offer.  The former is done in the course of the pre-trial, and trial is
accompanied by the marking of the evidence as an exhibit; while the latter is done only
when the party rests its case.  The mere fact that a particular document is identified and
marked as an exhibit does not mean that it has already been offered as part of the
evidence.  It must be emphasized that any evidence which a party desires to submit for
the consideration of the court must formally be offered by the party; otherwise, it is
excluded and rejected.[46]

We reiterated the above ruling in Dizon v. Court of Tax Appeals[47] where one of the
issues presented was whether the Court of Tax Appeals and the CA gravely abused their
discretion "in allowing the admission of the pieces of evidence which were not formally
offered" by the Bureau of Internal Revenue.[48]  In finding the case impressed with merit,
the Court held that:
 Under Section 8 of RA 1125, the CTA is categorically described as a court of
record.  As cases filed before it are litigated de novo, party-litigants shall prove every
minute aspect of their cases. Indubitably, no evidentiary value can be given the pieces of
evidence submitted by the BIR, as the rules on documentary evidence require that these
documents must be formally offered before the CTA. x x x

xxxx

x x x [T]he presentation of the BIR's evidence is not a mere procedural technicality which
may be disregarded considering that it is the only means by which the CTA may
ascertain and verify the truth of BIR's claims against the Estate.  The BIR's failure to
formally offer these pieces of evidence, despite CTA's directives, is fatal to its cause. 
Such failure is aggravated by the fact that not even a single reason was advanced by the
BIR to justify such fatal omission.  This, we take against the BIR.[49]

We are not unaware that there is an exception to the above-stated rule. In People v.
Mate,[50] Silvestre Mate (Mate) was charged with the crime of "Kidnapping for Ransom
with Murder and Frustrated Murder."[51] During arraignment, he entered a plea of
"guilty."  The court then propounded clarificatory questions to determine whether the
accused understood the consequences of his plea.  Immediately thereafter, the trial
court promulgated its decision finding the accused guilty as charged and sentenced him
to death.[52]  It was only after the rendition of the judgment that the trial court
conducted hearings for the reception of the prosecution's evidence. [53]

From the prosecution's evidence, it would appear that during the investigation, Mate
voluntarily made extra-judicial statements as contained in Exhibits "A," "B," and "J." 
Also, after his conviction, he appeared as witness for the prosecution against his co-
accused where he affirmed his extra-judicial statements in Exhibits "A," "B," and "J." 
However, the state prosecutor failed to formally offer said exhibits.

In debunking the defense's contentions that the trial court erred in rendering a
judgment of conviction on Mate even before the prosecution could present its evidence,
and in considering the exhibits which were not formally offered, the Court held thus:

The defense contends that the trial court committed a serious error in rendering
judgment of conviction immediately after Mate had pleaded guilty to the crime charged
on the basis of his plea of guilty and before receiving any evidence.  While the trial court
committed an error in rendering judgment immediately after the accused had pleaded
guilty, and, thereafter, conducted hearings for the reception of the evidence for the
prosecution, such an irregularity, is insufficient to justify the setting aside of the
judgment of conviction, considering that it is supported by the judicial and extra-judicial
confessions of the accused and by other evidence. x x x

xxxx

The defense questions also the failure of the state prosecutor Cornelio Melendres to
make a formal offer of his exhibits, although they have been marked and identified.
Such an oversight appears trivial because the entire evidence for the prosecution is
recorded.  Even without the exhibits which have been incorporated into the records of
the case, the prosecution can still establish the case because the witnesses properly
identified those exhibits and their testimonies are recorded.

Exhibits "A", "B", and "J" are all admissible against Mate because it appears with clarity
that he voluntarily and spontaneously gave those narrations without compulsion from
anybody.  In fact, . . . when he testified against Ben Bohol he affirmed those narrations
again.[54]

In Mato v. Court of Appeals,[55] we concretized the above ruling by holding that

evidence, although not formally offered in evidence, may be "admitted and considered
by the trial court provided the following requirements are present, viz:  first, the same
must have been duly identified by testimony duly recorded and, second, the same must
have been incorporated in the records of the case."[56]  In Ramos v. Dizon,[57] we deemed
the exhibits to have been incorporated into the records because they had been
"presented and marked during the pre-trial of the case."[58]  Likewise, the first requisite
was deemed satisfied because one of the parties therein explained the contents of the
exhibits when interrogated by the respondents' counsel. [59]

In the instant case, we find the rulings espoused in People v. Mate,[60] Mato v. Court of
Appeals,[61]  and Ramos v. Dizon[62] not applicable.  Thus, we find that both the trial court
and the CA erred in allowing the admission of "AAA's" medical certificate and birth
certificate.  The records would show that the lone witness for the prosecution did not
identify the said exhibits or explain their contents.  When "AAA" was placed on the
witness stand, she merely stated that she was 13 years old.  No reference was ever
made to her birth certificate.  The same is true with the medical certificate.  After the
marking during the pre-trial, the prosecution did not refer to it in any stage of the
proceedings.  Neither did it present the doctor who prepared the same.

Moreover, appellant's admission during the pre-trial that "AAA" was a minor below 12
years of age[63] would not help the prosecution's case.  First, the trial court found this
admission inaccurate as in fact, "AAA" was already above 12 years of age when the rape
incident transpired on June 9, 2002.  Second and more important, appellant's admission
during pre-trial is not admissible as it violates  Section 2, Rule 118 of the Rules of Court
which explicitly provides that:  "All agreements or admissions made or entered during
the pre-trial conference shall be reduced in writing and signed by the accused and his
counsel, otherwise they cannot be used against the accused. x x x." In People v. Chua Uy,
[64]
 we held that:

Even granting for the sake of argument that RAMON admitted during the pre-trial
that Exhibits "D" to "D-4", inclusive, and Exhibit "E" contained methamphetamine
hydrochloride, the admission cannot be used in evidence against him because the Joint
Order was not signed by RAMON and his counsel.  Section 4 of Rule 118 of the Rules of
Court expressly provides:

SEC. 4.  Pre-trial agreements must be signed.  No agreement or admission made

or entered during the pre-trial conference shall be used in evidence against the accused
unless reduced to writing and signed by his counsel.

Put in another way, to bind the accused the pre-trial order must be signed not only by
him but his counsel as well.  The purpose of this requirement is to further safeguard the
rights of the accused against improvident or unauthorized agreements or admissions
which his counsel may have entered into without his knowledge, as he may have waived
his presence at the pre-trial conference; eliminate any doubt on the conformity of the
accused of the facts agreed upon.

In this case, records would show that the Pre-trial Order was not signed by both
appellant and his counsel.

In view of the foregoing, we find that the prosecution did not present any satisfactory
evidence to prove "AAA's" minority.  "In the prosecution of criminal cases, x x x, nothing
but proof beyond reasonable doubt of every fact necessary to constitute the crime with
which an accused is charged must be established.  Qualifying circumstances or special
qualifying circumstances must be proved with equal certainty and clearness as the crime
itself; otherwise, there can be no conviction of the crime in its qualified form.  As a
qualifying circumstance of the crime of rape, the concurrence of the victim's minority
and her relationship to the accused-appellant must be both alleged and proven beyond
reasonable doubt."[65]

In view of the foregoing, we find appellant guilty only of three counts of simple
rape[66] the penalty for which is reclusion perpetua for each count. Accordingly, the
awards of civil indemnity must be reduced to P50,000.00 and moral damages to
P50,000.00.  Finally, the award of exemplary damages is proper. "Exemplary damages
may be awarded in criminal cases as part of civil liability if the crime was committed
with one or more aggravating circumstances.  Relationship as an alternative
circumstance under Article 15 of the Revised Penal Code is considered aggravating in
the crime of rape."[67]  In this case, the aggravating circumstance of relationship was duly
established. Appellant himself admitted when he testified in open court that he is
"AAA's" father.  However, the award of P25,000.00 as exemplary damages must be
increased to P30,000.00 in line with prevailing jurisprudence. [68]

WHEREFORE, we find appellant Saturnino Villanueva GUILTY of three counts of simple

rape and accordingly sentence him to suffer the penalty of reclusion perpetua and to
indemnify his victim "AAA" the amounts of P50,000.00 as civil indemnity, P50,000.00 as
moral damages, and P30,000.00 as exemplary damages, for each count.

SO ORDERED.

FIRST DIVISION
[ G.R. No. 170575, June 08, 2011 ]
SPOUSES MANUEL AND FLORENTINA DEL ROSARIO, PETITIONERS,
VS. GERRY ROXAS FOUNDATION, INC., RESPONDENT.

DECISION

DEL CASTILLO, J.:

The allegations in the complaint and the reliefs prayed for are the determinants
of the nature of the action[1] and of which court has jurisdiction over the action.[2]
This Petition for Review on Certiorari assails the April 26, 2005 Decision[3] of the Court of
Appeals (CA) in CA-G.R. SP No. 87784 which dismissed the Petition for Review before it. 
Also assailed is the CA Resolution[4] dated November 15, 2005 denying the Motion for
Reconsideration thereto.

Factual Antecedents

The  controversy  between  petitioners Manuel  and  Florentina Del Rosario

and respondent Gerry Roxas Foundation Inc. emanated from a Complaint for Unlawful
Detainer filed by the former against the latter, the surrounding circumstances relative
thereto as summarized by the CA in its assailed Decision are as follows:

The petitioner Manuel del Rosario appears to be the registered owner of Lot 3-A
of Psd-301974 located in Roxas City which is described in and covered by Transfer
Certificate of Title No. T-18397 of the Registry of Deeds for the City of Roxas.

Sometime in 1991, the respondent, as a legitimate foundation, took possession and

occupancy of said land by virtue of a memorandum of agreement entered into by and
between it and the City of Roxas. Its possession and occupancy of said land is in the
character of being lessee thereof.

In February and March 2003, the petitioners served notices upon the respondent to
vacate the premises of said land.  The respondent did not heed such notices because it
still has the legal right to continue its possession and occupancy of said land. [5]

On July 7, 2003, petitioners filed a Complaint[6] for Unlawful Detainer against the

respondent before the Municipal Trial Court in Cities (MTCC) of Roxas City, docketed as
Civil Case No. V-2391.  Said complaint contains, among others, the following significant
allegations:

3. Plaintiffs are the true, absolute and registered owner[s] of a parcel of land,
situated at Dayao, Roxas City and covered by and described in Transfer Certificate of
Title No. 18397 issued to the plaintiffs by the Register of Deeds for Roxas City as
evidenced by a xerox copy thereof which is hereto attached as Annex "A".

4.  Sometime in 1991, without the consent and authority of the plaintiffs, defendant
took full control and possession of the subject property, developed the same and use[d]
it for commercial purposes.

x  x  x  x

7.  Plaintiffs have allowed the defendant for several years, to make use of the land
without any contractual or legal basis.  Hence, defendant's possession of the subject
property is only by tolerance.

8.  But [plaintiffs'] patience has come to its limits.  Hence, sometime in the last quarter
of 2002, plaintiffs made several demands upon said defendant to settle and/or pay
rentals for the use of the property.

x  x  x  x

10.  Notwithstanding receipt of the demand letters, defendant failed and refused, as it
continues to fail and refuse to pay reasonable monthly rentals for the use and
occupancy of the land, and to vacate the subject premises despite the lapse of the
fifteen-day period specified in the said demand letters.  Consequently, defendant is
unlawfully withholding possession of the subject property from the plaintiffs, who are
the owners thereof.[7]

Upon service of summons, respondent filed its Answer[8] dated July 31, 2003 where it
averred that:

3.  The defendant ADMITS the allegations set forth in paragraph 4 of the
Complaint to the effect that the defendant "took full control and possession of the
subject property, developed the same" and has been using the premises in accordance
with its agreements with the City of Roxas and the purposes of the defendant
corporation without any objection or opposition of any kind on the part of the plaintiffs
for over twenty-two long years; the defendant specifically DENIES the allegations
contained in the last part of this paragraph 4 of the Complaint that the defendant has
used the property leased for commercial purposes, the truth of the matter being that
the defendant has used and [is] still using the property only for civic non-profit
endeavors hewing closely to purposes of the defendant Gerry Roxas Foundation
Inc., inter alia,  devoted to general welfare, protection, and upliftment of the people of
Roxas City, Capiz, and in Panay Island, and elsewhere in the Philippines; that the
Foundation has spent out of its own funds for the compliance of its avowed aims and
purposes, up to the present, more than P25M, and that all the improvements, including
a beautiful auditorium built in the leased premises of the Foundation "shall accrue to
the CITY (of Roxas), free from any compensation whatsoever, upon the expiration of this
Lease" (Memorandum of Agreement, Annex "2" hereof), eighteen (18) years hence;

xxxx

5. The defendant specifically DENIES the allegations set forth in paragraph 7 of the
Complaint, the truth being that the defendant took possession of the subject property
by virtue of Memorandums of Agreement, photo-copies of which are hereto attached as
Annexes "1" and "2" and made integral parts hereof, entered into by defendant and the
City of Roxas, which is the true and lawful owner thereof; thus, the possession of the
subject property by the defendant foundation is lawful, being a lessee thereof;

xxxx

8. The defendant ADMITS the allegations set forth in paragraph 10 of the Complaint that
defendant refused to pay monthly rental to the plaintiffs and to vacate the premises,
but specifically DENIES the rest of the allegations thereof, the truth being that
defendant has no obligation whatsoever, to the plaintiffs, as they are neither the
owners or lessors of the land occupied by defendant;

xxxx

As and by way of -

AFFIRMATIVE DEFENSE

The defendant repleads the foregoing allegations, and avers further that:

12. The plaintiffs have no cause of action against defendant.

The leased property does not belong to the plaintiffs.  The property covered by Transfer
Certificate of Title No. T-18397, [is] occupied by the [defendant] as [lessee] of the City of
Roxas since 1991, the latter having acquired it by purchase from the plaintiffs way back
on February 19, 1981, as evidenced by the Deed of Absolute Sale which is hereto
attached as Annex "3" and made an integral part hereof.  While, admittedly, the said
certificate of title is still in the name of the plaintiffs, nevertheless, the ownership of the
property covered therein has already transferred to the City of Roxas upon its delivery
to it.  Article 1496 of the Civil Code provides that, ownership of the thing sold is acquired
by the vendee from the moment it is delivered to him in any of the ways specified in
articles 1497 to 1501, or in any other manner signifying an agreement that the
possession is transferred from the vendor to the vendee.  It is also provided under
Article 1498 of the Civil Code that, when the sale is made through a public instrument,
the execution thereof shall be equivalent to the delivery of the thing, which is the object
of the contract, if from the deed the contrary does not appear or cannot clearly be
inferred.  Upon execution of the Deed of Absolute Sale (Annex "3"), the plaintiffs have
relinquished ownership of the property subject thereof in favor of the vendee, City of
Roxas.  Necessarily, the possession of the property subject of the said Deed of Absolute
Sale now pertains to the City of Roxas and the plaintiffs have no more right, whatsoever,
to the possession of the same.  It is defendant foundation by virtue of the
Memorandums of Agreement (Annexes "1" and "2" hereof), which has the legal right to
have possession of the subject property;[9]

After the MTCC issued an Order setting the case for preliminary conference, respondent
filed on October 20, 2003 a Motion to Resolve its Defenses on Forum Shopping and Lack
of Cause of Action.  Records show that before the instant case was filed, the City of
Roxas had already filed a case against petitioners for "Surrender of Withheld Duplicate
Certificate Under Section 107, [Presidential Decree No.] 1529" docketed as Special Case
No. SPL-020-03 with the Regional Trial Court (RTC) of Roxas City.  Subsequently, on
October 27, 2003, petitioners filed their Opposition to the said Motion.

Ruling of the Municipal Trial Court in Cities

On November 24, 2003, the MTCC issued an Order[10] resolving the respondent's

Motion.  In the said Order, the MTCC held that:

The plaintiffs [have] no cause of action against herein defendant.  The defendant
is the lessee of the City of Roxas of the parcel of land in question.  There has been no
previous contractual relationship between the plaintiffs Del Rosarios and the defendant
Gerry Roxas Foundation, Inc. affecting the title of the land leased by the [Gerry] Roxas
Foundation.  The Gerry Roxas Foundation, Inc. has not unlawfully withheld the
possession of the land it is leasing from its lessor.  Its right to the physical possession of
the land leased by it from the City of Roxas subsists and continues to subsist until the
termination of the contract of lease according to its terms and pursuant to law.

The defendant had presented as its main defense that the property was already sold by
the plaintiffs to the present lessor of the property, the City of Roxas thru a Deed of
Absolute Sale dated February 19, 1981 executed by herein [plaintiff] spouses as
vendors.

Plaintiffs had not directly and specifically shown that the purported Deed of Absolute
Sale does not exist; rather, they contend that said document is merely defective. They
had not even denied the signatories to the said Contract of Sale; specifically the
authenticity of the spouses-plaintiffs signatures; all that plaintiffs did merely referred to
it as null and void and highly questionable without any specifications.

When the parties' pleadings fail to tender any issue of fact, either because all the factual
allegations have been admitted expressly or impliedly; as when a denial is a general
denial; there is no need of conducting a trial, since there is no need of presenting
evidence anymore.  The case is then ripe for judicial determination, either through a
judgment on the pleadings (Rules of Court, Rule 34) or by summary judgment under
Rule 35, Rules of Court.

In the instant case, plaintiffs alleged that sometime in 1991, without the consent and
authority of the plaintiffs, defendant took full control and possession of the subject
property, developed the same and use[d] it for commercial purposes. x x x for so many
years, plaintiffs patiently waited for someone to make representation to them regarding
the use of the subject property, but the same never happened.  Plaintiff[s] have allowed
the defendant for several years, to make use of the land without any contractual or legal
basis.  Hence, defendant's possession of the subject property is only by tolerance.

xxxx

Defendant admits the allegations of the plaintiffs that the defendant "took full control
and possession of the subject property, developed the same" and has been using the
premises in accordance with its agreements with the City of Roxas and the purposes of
the defendant corporation without any objection or opposition of any kind on the part
of the plaintiffs for over twenty-two long years.

That the defendant's possession of the subject property is by virtue of a contract of

lease entered into by the defendant foundation with the City of Roxas which is the true
and lawful owner, the latter having acquired said property by virtue of a Deed of
Absolute Sale as early as February 19, 1981, long before the defendant foundation's
occupation of the property.  In Alcos v. IAC 162 SCRA 823 (1988), Buyer's immediate
possession and occupation of the property was deemed corroborative of the
truthfulness and authenticity of the deed of sale.

WHEREFORE, although this Court finds the defense on forum shopping interposed by
the defendant to be untenable and unmeritorious, and hence, denied; this Court still
finds the pleadings filed by the plaintiffs-spouses to be without a cause of action and
hence, dismisses this instant complaint.  With cost against the plaintiffs.

SO ORDERED.[11]

Ruling of the Regional Trial Court

On appeal, the RTC of Roxas City, Branch 17 rendered a Decision[12] dated July 9, 2004
affirming the MTCC Order.

Ruling of the Court of Appeals

Aggrieved, petitioners filed with the CA a Petition for Review. However, the CA, in a
Decision[13] dated April 26, 2005, dismissed the petition and affirmed the assailed
Decision of the RTC.

Petitioners timely filed a Motion for Reconsideration[14] which was, however, denied in a

Resolution[15] dated November 15, 2005.

Issues

Still undaunted, petitioners now come to this Court on a Petition for Review
on Certiorari raising the following issues:

I. Whether x x x in determining if there is a case for unlawful detainer, a court

should limit itself in interpreting a single phrase/allegation in the complaint; and,

II.  Whether x x x there exists an unlawful detainer in this case. [16]

Our Ruling

The petition is bereft of merit.

The allegations in petitioner's Complaint constitute judicial admissions. 

Petitioners alleged in their Complaint before the MTCC, among others, that: (1)
sometime in 1991, without their consent and authority, respondent took full control and
possession of the subject property, developed the same and used it for commercial
purposes; and (2) they allowed the respondent for several years, to make use of the
land without any contractual or legal basis.  Petitioners thus conclude that respondent's
possession of subject property is only by tolerance.

Section 4, Rule 129 of the Rules of Court provides that:

Sec. 4.  Judicial admissions. -  An admission, verbal or written, made by a party in

the course of the proceedings in the same case, does not require proof.  x x x

"A judicial admission is one so made in pleadings filed or in the progress of a trial as to
dispense with the introduction of evidence otherwise necessary to dispense with some
rules of practice necessary to be observed and complied with." [17]  Correspondingly,
"facts alleged in the complaint are deemed admissions of the plaintiff and binding upon
him."[18] "The allegations, statements or admissions contained in a pleading are
conclusive as against the pleader."[19]

In this case, petitioners judicially admitted that respondents took control and possession
of subject property without their consent and authority and that respondent's use of
the land was without any contractual or legal basis.

Nature of the action is determined by the judicial admissions in the Complaint.

In Spouses Huguete v. Spouses Embudo,[20]  citing Cañiza v. Court of Appeals,[21]  this Court

held that "what determines the nature of an action as well as which court has
jurisdiction over it are the allegations of the complaint and the character of the relief
sought."

This Court, in Sumulong v. Court of Appeals,[22] differentiated the distinct causes of

action in forcible entry vis-à-vis unlawful detainer, to wit:

Forcible entry and unlawful detainer are two distinct causes of action defined in
Section 1, Rule 70 of the Rules of Court. In forcible entry, one is deprived of physical
possession of any land or building by means of force, intimidation, threat, strategy, or
stealth. In unlawful detainer, one unlawfully withholds possession thereof after the
expiration or termination of his right to hold possession under any contract, express or
implied. In forcible entry, the possession is illegal from the beginning and the only issue
is who has the prior possession de facto. In unlawful detainer, possession was originally
lawful but became unlawful by the expiration or termination of the right to possess and
the issue of rightful possession is the one decisive, for in such action, the defendant is
the party in actual possession and the plaintiff's cause of action is the termination of the
defendant's right to continue in possession.[23]

"The words `by force, intimidation, threat, strategy or stealth' shall include every
situation or condition under which one person can wrongfully enter upon real property
and exclude another, who has had prior possession, therefrom." [24]  "The foundation of
the action is really the forcible exclusion of the original possessor by a person who has
entered without right."[25]

"The act of going on the property and excluding the lawful possessor therefrom
necessarily implies the exertion of force over the property, and this is all that is
necessary."[26]  The employment of force, in this case, can be deduced from petitioners'
allegation that respondent took full control and possession of the subject property
without their consent and authority.

"`Stealth,' on the other hand, is defined as any secret, sly, or clandestine act to avoid
discovery and to gain entrance into or remain within residence of another without
permission,"[27] while strategy connotes the employment of machinations or artifices to
gain possession of the subject property.[28]  The CA found that based on the petitioners'
allegations in their complaint, "respondent's entry on the land of the petitioners was by
stealth x x x."[29]  However, stealth as defined requires a clandestine character which is
not availing in the instant case as the entry of the respondent  into the property appears
to be with the knowledge of the petitioners as shown by petitioners' allegation in their
complaint that "[c]onsidering the personalities behind the defendant foundation and
considering further that it is plaintiff's nephew, then the vice-mayor, and now the Mayor
of the City of Roxas Antonio A. del Rosario, although without any legal or contractual
right, who transacted with the foundation, plaintiffs did not interfere with the activities
of the foundation using their property."[30]  To this Court's mind, this allegation if true,
also illustrates strategy.
Taken in its entirety, the allegations in the Complaint establish a cause of action for
forcible entry, and not for unlawful detainer.

"In forcible entry, one is deprived of physical possession of any land or building by
means of force, intimidation, threat, strategy, or stealth."[31] "[W]here the defendant's
possession of the property is illegal ab initio," the summary action for forcible entry
(detentacion) is the remedy to recover possession.[32]

In their Complaint, petitioners maintained that the respondent took possession and
control of the subject property without any contractual or legal basis. [33] Assuming that
these allegations are true, it hence follows that respondent's possession was illegal from
the very beginning. Therefore, the foundation of petitioners' complaint is one for
forcible entry - that is "the forcible exclusion of the original possessor by a person who
has entered without right."[34]  Thus, and as correctly found by the CA, there can be no
tolerance as petitioners alleged that respondent's possession was illegal at the
inception.[35]

Corollarily, since  the deprivation  of  physical possession,  as  alleged in

petitioners' Complaint and as earlier discussed, was attended by strategy and force, this
Court finds that the proper remedy for the petitioners was to file a Complaint for
Forcible Entry and not the instant suit for unlawful detainer.

Petitioners should have filed a Complaint for Forcible Entry within the reglementary one-
year period from the time of dispossession.

Petitioners likewise alleged in their Complaint that respondent took possession and
occupancy of subject property in 1991.  Considering that the action for forcible entry
must be filed within one year from the time of dispossession, [36] the action for forcible
entry has already prescribed when petitioners filed their Complaint in 2003.  As a
consequence, the Complaint failed to state a valid cause of action against the
respondent.

In fine, the MTCC properly dismissed the Complaint, and the RTC and the CA correctly
affirmed said order of dismissal.

WHEREFORE, the petition is DENIED.  The Decision dated April 26, 2005 and the
Resolution dated November 15, 2005 of the Court of Appeals in CA-G.R. SP No. 87784
are AFFIRMED.

SO ORDERED.

THIRD DIVISION
[ G.R. No. 174720, September 07, 2011 ]
LANDOIL RESOURCES CORPORATION, PETITIONER, VS. AL RABIAH
LIGHTING COMPANY, RESPONDENT.

DECISION

PERALTA, J.:

Assailed in the instant petition for review on certiorari  filed by petitioner are the
Decision[1] dated August 14, 2003 and the Resolution[2] dated August 29, 2006 of the
Court of Appeals issued in CA-G.R. CV No. 52003.

 The facts, as borne by the records, are as follows:

 Respondent Al Rabiah Lighting Company (Al Rabiah) is a foreign corporation existing

under the laws of Kuwait. Defendant Construction Consortium, Inc. (CCI) and petitioner
Landoil Resources Corporation (Landoil) are both domestic corporations organized
under the Philippines Laws.

On December 20, 1981, CCI and respondent Al Rabiah entered into a Sub-Contract
Agreement[3] wherein respondent was assigned to carry out the electrical works of
Kuwait Oil Company's New Industrial Training Centre project in Ahmadi, Kuwait in the
total amount of Three Hundred Forty- Three Thousand Five Hundred Kuwaiti Dinar.
Respondent started carrying out its work as agreed upon. Later, the project owner had
withdrawn the principal contract which led to the termination of petitioner's and CCI's
services.[4] Consequently, respondent's works were stopped before being completed.

On September 12, 1982, petitioner, through its Regional Managing Director for
Operations Robert J. Brown, sent a letter[5] to respondent through Mr. Said Y. Al Imam,
confirming that based on the July progress billing, petitioner owed respondent the sum
of KD 21,930,317 which was already due and proposed the payment of 12% interest on
the overdue account until payment has been made.

In a letter dated June 4, 1983, petitioner informed respondent that the Prime Contractor
Al Fahd Company had already terminated its contract; that petitioner agreed to pay
respondent 12% interest per year on the unpaid bills of completed works. The letter was
signed by both Robert Brown and Gerald Love.[6]

On June 9, 1983, petitioner acknowledged its indebtedness to respondent in the

amount of KD 91,580.059, plus general overtime pay of KD 8,126 and promised to pay it
in installments.[7]

As petitioner failed to pay respondent any part of the amount due, together with the
contractual interest of 12%, the latter referred their dispute to the Commercial Kully
Court of Kuwait for arbitration as provided under the Sub-Contract Agreement. The
parties were duly notified of the scheduled sessions of arbitration, but only respondent
and its counsel appeared thereat.[8]

On April 14, 1984, the Arbitrator rendered its award as follows:

The court decides that Land Oil Resources Company (Construction Consortium
Incorporation) is indebted to [Al] Rabiah Lighting Company by KD 108,368.860 and that
it is compelled to pay this sum in settlement of the account of the contract concluded
between them on 20th December, 1981. The said sum includes also the contractual
interest until the date of issue of this Award. [9]

Respondent then filed with the Regional Trial Court (RTC) of Makati, an action [10] for
Enforcement of Foreign Judgment Plus Damages against defendant CCI and petitioner.
The case was raffled off to Branch 64 and was docketed as Civil Case No. 11578.

In its Answer,[11] petitioner admitted the existence of the Sub-Contract Agreement, but

claimed to have no knowledge as to its genuineness and due execution. By way of
Special and Affirmative Defenses, petitioner argued among others that respondent had
no cause of action; respondent's claims had been paid, set-off or extinguished; the
Commercial Kully Court of Kuwait did not acquire jurisdiction over petitioner; and the
arbitral award was contrary to public policy, hence, illegal. Petitioner also alleged that
since it had not been paid by its principal contractor the value of the corresponding
accomplishments done by respondent, respondent's cause of action had not yet
accrued; and that the termination of the contract by the primary contractor occurred
without the fault or negligence of petitioner and defendant CCI, nor were they
responsible for force majeure under the contract.

On the other hand, defendant CCI, in its Answer,[12] specifically denied the Sub-Contract
Agreement for lack of knowledge, claiming that it was not a party to the contract and
that G.W. Love was not an employee nor authorized to act for and in behalf of CCI; and
that the Commercial Kully Court of Kuwait did not acquire jurisdiction over it and the
arbitral award was contrary to public policy.

After trial, the RTC rendered its Decision[13] dated July 31, 1995, the dispositive portion
of which reads:

WHEREFORE, in view of the foregoing, this Court finds the petition of plaintiff AL
RABIAH Company to be well-taken, and judgment is hereby rendered finding defendants
Landoil Resources Corporation and Construction Consortium solidarily liable to plaintiff
Al Rabiah Lighting Company in the sum indicated in Arbitral Award with legal interest
thereon from July 1984 (Certification of Non-occurrence of Appeal) until payment is
made. Defendants are likewise ordered to pay to plaintiff the sum of P250,000.00 as
attorney's fees and P100,000.00 as exemplary damages.

SO ORDERED.[14]

In resolving the main issue of whether the RTC can validly set aside the foreign arbitral
award rendered against petitioner and defendant CCI on the bases of the defenses
raised in the parties' respective Answers, the RTC ruled in the negative. The RTC found
that petitioner and CCI were estopped from claiming that they were not parties to the
Sub-Contract Agreement. Petitioner's Answer alleged that it admitted the existence of
the sub-contract agreement, although claimed that "it has no knowledge as to its
genuineness and due execution"; that such lack of knowledge was belied or negated by
petitioner's own allegations in its Answer acknowledging indebtedness to respondent.
The RTC found that petitioner's letter dated September 12, 1982 to respondent
confirmed that it owed respondent the sum of KD 21,930,317 and anticipated that
payment would be made in early October 1982, together with the other due accounts.
This letter was submitted as respondent's Exhibit "C" and the RTC noted that this letter
was among the documents submitted by respondent to the foreign arbitrator in support
of its claim against petitioner and CCI.
The RTC said that while it appeared in the Sub-Contract Agreement that the contracting
parties were CCI and respondent, however, in paragraph VIII thereof, petitioner Landoil
appeared together with CCI as the First Party to whom notices shall be sent. The RTC
then concluded that the inclusion of petitioner as first party to whom the notices shall
be sent and the conduct exhibited by petitioner led to the inevitable conclusion that the
two defendants, petitioner and CCI, were the parties with whom respondent entered
into the sub-contract agreement; and that this conclusion was even strengthened by the
fact that as between the two defendants, petitioner and CCI, there existed a "pooling
agreement" for undertaking projects abroad pursuant to Presidential Decree (PD) 929.
Since petitioner and CCI were the parties with whom respondent contracted, they were
bound by the terms of the agreement, including the referral of their dispute to
arbitration in accordance with the Rules and Regulations of the State of Kuwait.

Dissatisfied, petitioner appealed the RTC Decision to the CA. After the submission of the
parties' respective briefs, the case was submitted for resolution.

On August 14, 2003, the CA issued its assailed Decision which dismissed the appeal and
affirmed the RTC decision.

The CA ruled, among others, that petitioner was already estopped from claiming that it
was not a party to the Sub-Contract Agreement as the agreement itself mentioned
petitioner Landoil as one of the contracting parties and that petitioner had made
representations in the past, binding itself for the overdue accounts in favor of
respondent.

Petitioner's motion for reconsideration was denied in a Resolution dated August 29,
2006.

Hence, this petition wherein petitioner raises the following issues:

(a) whether a Philippine Court, in enforcing a foreign judgment that has become
final and executory, has the jurisdiction to alter, amend or expand such final foreign
judgment;

(b) Whether a foreign judgment may be enforced against a party other than the party
decreed and held liable therein; and
(c) Whether Estoppel was properly appreciated in this case. [15]

Petitioner contends that as appearing in the dispositive portion of the foreign arbitral
award, there is only one defendant adjudged liable to respondent, i.e., Land Oil
Resources Company (Construction Consortium Incorporation); thus, the party against
whom the Writ of Execution may be directed. Petitioner claims that it is not the same as
Land Oil Resources Company (Construction Consortium Incorporation) as its Articles of
Incorporation does not indicate any such appellation; that it was not a party to the
proceedings before the foreign arbitrator as it is a different entity. Thus, enforcing an
award against a non-party such as petitioner would be executing on properties owned
by a third person other than the judgment debtor; and that to allow the same would
amount to a deprivation of property without due process of law. Petitioner avers that
the RTC and the CA erred and committed grave abuse of discretion in amending and
modifying the foreign arbitral award so as to include petitioner which is a corporation
different from the entity adjudged liable in the foreign arbitral award.

We are not convinced.

As correctly found by the CA, petitioner's argument that the party adjudged liable under
the foreign arbitral award was a different entity from it was only raised for the first time
in petitioner's motion for reconsideration filed with it; thus, could not be entertained.
We quote with approval what the CA said when it denied petitioner's motion for
reconsideration in this wise:

The defendant mainly argues that it was never a party to the subcontract
agreement. We find its argument meritless, because it is now too late for the defendant
to claim that the party adjudged liable under the foreign arbitral award was a different
entity. Moreover, we note that this is the first time that the defendant raises such
defense. It is settled in jurisprudence that an issue cannot be raised for the first time on
appeal. With more reason should we disallow and disregard the issue if it is initially
raised in a motion for reconsideration of the decision of the appellate court.

From the outset of the case, the defendant's stance has always been to deny any
participation in the sub-contract agreement between Construction Consortium Inc. and
the plaintiff and, in the alternative, to bewail the failure of the arbitral award to spell out
the factual distinctions between its liability and that of the Construction Consortium Inc.
for they were separate and distinct entities. Thus, this is the first time that it asserts that
it was not the defendant in the case before the Commercial Kully Court of the State of
Kuwait. The defendant thus asserts the existence of a third corporation against whom
the arbitral award was supposedly rendered, Landoil Resources Company (Construction
Consortium Incorporated). Not only is the Court precluded from entertaining such first-
time issue but we also frown upon the apparent self-contradiction. We note that the
defendant had, in the course of this case, repeatedly affirmed that it was the same party
as the defendant against whom the foreign judgment had been rendered. In its Answer
to the Complaint, it stated that:

12. The award directs the Landoil to pay and makes Construction Consortium
Incorporated liable. x x x

Likewise, in its appeal brief, it also acknowledged being the defendant against whom the
arbitral award was being enforced, thuswise:

x x x the foreign judgment subject of the case before the court a quo is an arbitral
award rendered by the Commercial Kully Court of the State of Kuwait on April 14, 1984,
compelling defendant CCI and defendant appellant to pay the sum of KD 108,368.860 in
settlement of the contract allegedly concluded between them and plaintiff-appellee,
which included a 10% contractual interest until the time of said award. [16]

Indeed, petitioner had never claimed in the RTC that it was not the party referred to in
the foreign arbitral award. On the contrary, petitioner's Answer with Counterclaim filed
in the RTC even established its knowledge and participation in the Sub-Contract
Agreement. Under the heading of Special and Affirmative Defenses, petitioner alleged,
among others that:

6. plaintiff's claims have been paid, set-off, or extinguished.

xxxx

14. That under the Sub-Contract, Annex "A" of the complaint, it is provided as follows:

14.1 FIRST PARTY agrees to pay SECOND PARTY at monthly intervals based on
actual monthly progress accomplishment, plus 50% on material on Site less 5%
retention and less advance payments, to be paid within 15 days of FIRST PARTY'S receipt
from Client subject to any changes imposed by the Client in approving the monthly
Valuation Certificate. Details of any such modifications will be available to the Sub-
Contractor insofar as they affect his previously agreed valuation amount.

Defendant has not been paid by its principal contractor the payment/value of the
corresponding accomplishments done by plaintiff and that, therefore, plaintiff's cause of
action against answering defendant has not accrued;

15. That in any event, the alleged claim was discharged on September 12, 1983 by
assignment to plaintiff in the full amount of the true and actual measure and valuation
calculated upon termination of the contract by the Primary Contractor;

16. In any event, the termination of the contract of the primary contractor occurred
without the fault or negligence of the defendants; neither was it responsible for
the force majeure under the terms of the contract."[17]

Moreover, in petitioner's Memorandum of Authorities on the Invalidity and

Unenforceability of the Foreign Judgment [18] filed with the RTC, it again made admission
that it was the party referred to in the foreign arbitral award, thus:

xxxx

Likewise, the foreign arbitral award rendered judgment against both defendants by
placing the name of defendant LANDOIL RESOURCES COMPANY (sic corporation) and
thereafter enclosed in parenthesis the name of the other defendant Construction
Consortium, Inc. without however specifying the specific liabilities of either of the
defendants. Being corporations, defendants have legal personalities separate and
distinct from each other and as such must be taken distinctly and separately from one
another x x x[19]

Section 4, Rule 129 of the Rules of Court provides:

Sec. 4. Judicial admissions. - An admission, verbal or written, made by a party in

the course of the proceedings in the same case, does not require proof. The admission
may be contradicted only by showing that it was made through palpable mistake or that
no such admission was made.

A party may make judicial admissions in (a) the pleadings; (b) during the trial, either by
verbal or written manifestations or stipulations; or (c) in other stages of the judicial
proceeding.[20] It is well-settled that judicial admissions cannot be contradicted by the
admitter who is the party himself[21] and binds the person who makes the same, and
absent any showing that this was made thru palpable mistake, no amount of
rationalization can offset it.[22]

Finally, we find no reversible error committed by the CA in affirming the RTC decision
finding petitioner estopped from denying its participation and liability under the Sub-
Contract Agreement and the enforcement of the foreign arbitral award against it. We
find apropos what the CA said in this wise:

Defendant-appellant cannot deny its participation in the Subcontract. The

agreement itself mentioned Landoil as one of the contracting parties. Specifically, a
perusal of the Subcontract Agreement reveals in Article 8, Section 1 thereof that:

8.1 All notices to a party hereto shall be sent as follows:

FIRST PARTY: LANDOIL RESOURCES CORPORATION

CONSTRUCTION CONSORTIUM INCORPORATED

P.O. Box 49393

Omariyah,
Kuwait

For the attention

of Or delivered
To:               K.O.C. Project Manager
                    Project Office of Ahmadi

SECONDARY PARTY: AL RABIAH LIGHTING COMPANY W.L.I.

P.O. Box 22015
Sarat
Kuwait

For the attention

of Or delivered
To:               Mr. Said Y. Al Imam

Further, it is of record that on September 12, 1982, Landoil, thru its Regional Marketing
Director Robert J. Brown, wrote to plaintiff Al Rabiah confirming that Landoil owes Al
Rabiah the sum of KD21,930.317 and that said sum was due on August 22, 1982. It was
further acknowledged in said letter that inasmuch as the sum cannot be paid
immediately, an interest at the rate of 12% on the overdue amount shall be paid until
the principal amount can be satisfied. Landoil signified that it expected to pay such
amount by October 1982 together with other due accounts. This letter is part of the
evidence on record and was not refuted by defendant-appellant Landoil.

The foregoing persuades this Court of Landoil's participation in the Subcontract

Agreement. It is apparent that Landoil is named as a first party to the subject Agreement
and it represented itself as an obligor in the September 12, 1982 letter acknowledging
overdue accounts in favor of Al Rabiah.

Moreover, notwithstanding its denial, defendant-appellant did allege in Paragraph 14 of

its Answer to the Complaint a quo that:

14. x x x x

Defendant had not been paid by its principal contractor the payment/value of the
corresponding accomplishments done by plaintiff and that therefore, plaintiff's cause of
action against answering defendant has not accrued. (RTC Records, p. 43)

Such statement impliedly admits defendant-appellant's liability under the Subcontract

Agreement, but raises as a special defense that plaintiff-appellee's action is allegedly
premature, as Landoil itself had not received any payment from its principal contractor.

Thus, Landoil's argument, that it is a distinct corporation from CCI and cannot be
accountable for breaches made by such other corporation, must fail. We find that
Landoil itself is a party to the Subcontract Agreement and has made representations in
the past binding itself to Al Rabiah for overdue accounts in favor of the latter. Under the
doctrine of estoppels, an admission or representation is rendered conclusive upon the
person making it, and cannot be denied or disproved as against the person relying
thereof. (Ayala Corporation v. Ray Burton Development Corporation, 294 SCRA 48). [23]

Petitioner is indeed barred from adopting an inconsistent position, attitude, or course of

conduct that would cause loss or injury to respondent. [24]

WHEREFORE, the petition for review is DENIED. The Decision dated August 14, 2003 and
the Resolution dated August 29, 2006 of the Court of Appeals are hereby AFFIRMED.

SO ORDERED.

THIRD DIVISION
[ G.R. No. 159328, October 05, 2011 ]
HEIRS OF ANTONIO FERAREN, REPRESENTED BY ANTONIO
FERAREN, JR., JUSTINA FERAREN-TABORA, LEAH FERAREN-
HONASAN, ELIZABETH MARIE CLAIRE FERAREN-ARRASTIA, MA.
TERESA FERAREN-GONZALES, JOHANNA MICHELYNNE FERAREN
YABUT, SCHELMA ANTONETTE FERAREN-MENDOZA AND JUAN
MIGUEL FERAREN YABUT, PETITIONERS, VS. COURT OF APPEALS
(FORMER 12TH DIVISION) AND CECILIA TADIAR, RESPONDENTS.

DECISION

PERALTA, J.:

Before the Court is a petition for review on certiorari under Rule 45 of the Rules
of Court seeking the reversal and setting aside of the May 21, 2003 Decision [1]  and the
July 17, 2003 Resolution[2]  of the Court of Appeals (CA) in CA-G.R. SP No. 71372. The
assailed CA Decision reversed and set aside the Decisions of the Municipal Trial Court
(MTC) of San Fernando City, La Union, Branch 2 in Civil Case No. 3463 [3]  and the
Regional Trial Court (RTC) of San Fernando City, La Union, Branch 26 in Civil Case No.
6617,[4]  while the questioned CA Resolution denied petitioners' Motion for
Reconsideration.

The factual and procedural antecedents of the case are as follows:

On May 25, 1999, herein private respondent Celia Tadiar (Celia) filed with the MTC of
San Fernando, La Union a Complaint for Unlawful Detainer against herein petitioners
Heirs of Antonio Feraren. In said Complaint, Celia alleged that she and her three
brothers are co-owners of a 1,200 square meter parcel of land located in
the poblacion of San Fernando City in La Union; that on September 21, 1960, the said lot
was sold by their father to the spouses Antonio and Justina Feraren (Spouses Feraren)
on pacto de retro; it was stipulated that the right to repurchase may be exercised within
ten years; on August 31, 1970, Celia and her co-heirs re-acquired the subject property;
thereafter, the lot was leased on a month-to-month basis to the Spouses Feraren who
have constructed a residential house thereon; that sometime in March 1992, Celia and
her co-heirs informed the Spouses Feraren of their intention to terminate their lease
contract; the Spouses Feraren, in turn, offered to sell them their house or buy the
subject lot, which offers were declined by Celia and her co-heirs and, instead, allowed
the Spouses Feraren to continue renting the property; after the death of Antonio in
1995, herein petitioners requested Celia and her co-heirs to extend the lease until June
30, 1997 and even volunteered to temporarily vacate the said property; Celia and her
co-heirs agreed and they did not even increase the rentals; nonetheless, petitioners
failed to comply with their commitment to temporarily vacate; they continued to stay
within the premises of the subject property and refused to vacate the same
notwithstanding repeated demands from Celia and her co-heirs. [5]

In their Answer, herein petitioners contended that a 128-square-meter portion of the lot
being claimed by private respondent is their property; even before the Spouses Feraren
entered into a contract of sale with pacto de retro with the father of Celia, the former
were already in possession of the remaining portion of the subject property on the
strength of a lease contract executed in their favor by the latter in 1949; their
construction of a residential house on the subject property was by virtue of a right
granted under the said contract of lease; petitioners were very much willing to vacate
the disputed lot but only upon payment of the value of all the improvements that they
have legally introduced as builders in good faith on the said lot, which includes the
house presently standing thereon as well as the concrete fence surrounding the said
house; in the alternative, they offered to buy the parcel of land subject of the complaint.
[6]

For failure of the parties to arrive at an amicable settlement, the MTC, in its Order [7] 
dated November 3, 2000, directed them to submit their position papers and other
evidence within ten (10) days from receipt of a copy of the said Order.

Private respondent did not file a position paper.

On the other hand, petitioners filed their Position Paper[8]  on March 15, 2001.
Petitioners alleged therein that their parents are builders in good faith having built their
house on the lot in question during the time that they were the owners of the disputed
lot.

On June 15, 2001, the MTC rendered its Decision dismissing the complaint for unlawful
detainer. The trial court gave credence to petitioners' contention that their parents built
the house in controversy on the subject lot while they were the owners of the said lot.
As such, the MTC held that as long as private respondent refuses to reimburse
petitioners of the value of the improvements they have introduced on the lot in
question, they (petitioners) may not be compelled to vacate the same.

On appeal, the RTC of San Fernando City, La Union, in its Decision dated January 28,
2002, affirmed in toto the judgment of the MTC.

Private respondent then filed a petition for review with the CA.

On May 21, 2003, the CA promulgated its presently assailed Decision, the dispositive
portion of which reads as follows:

WHEREFORE, premises considered, the judgment rendered by the Municipal Trial

Court of San Fernando City, La Union in Civil Case No. 3463 and the Decision rendered
by the Regional Trial Court of La Union in the same case are both REVERSED and SET
ASIDE. A new judgment is hereby rendered:

1. Declaring the respondents not entitled to reimbursement for the cost of their
residential house built on the land owned by the petitioner; and

2. Directing the respondents to vacate the premises and restore possession thereof to
the petitioner.

SO ORDERED.[9]

The CA based its Decision on its finding that the subject residential house was built
during the time petitioners' parents were lessees of the lot in question.

Petitioners filed a Motion for Reconsideration, but the same was denied by the CA via its
Resolution dated July 17, 2003.

Hence, the present petition with the following assignment of errors:

 I

THE HONORABLE COURT OF APPEALS ERRED IN HOLDING THAT THE PETITIONERS

ADMITTED IN THEIR ANSWER THAT THEIR RESIDENTIAL HOUSE WAS CONSTRUCTED
DURING THE LIFETIME OF THE LEASE CONTRACT AND NOT DURING THE 10-YEAR
PERIOD WHEN THE LOT WHERE IT STOOD WAS SOLD UNDER PACTO DE RETRO TO THE
PETITIONERS' PARENTS AS SHOWN BY UNREBUTTED EVIDENCE.

II

THE RESPONDENT COURT ERRED IN REVERSING THE DECISIONS OF THE REGIONAL TRIAL
COURT AND THE MUNICIPAL TRIAL COURT OF SAN FERNANDO CITY, LA UNION.[10]

Petitioners allege in the instant petition that the house presently standing on the
subject parcel of land is different from the house built on the same lot in 1949.
Petitioners insist on their claim that the house built at the time that their parents were
lessees of the subject property in 1949 was demolished to give way to the construction
of the present house which was erected sometime in the late 1960's when the said lot
was then owned by their parents by virtue of the pacto de retro sale executed in the
latter's favor on September 21, 1960.

The Court finds the petition unmeritorious.

At the outset, the Court notes that the issues raised in the present petition are
essentially questions of fact. It is fundamental that a petition for review
on certiorari filed with this Court under Rule 45 of the Rules of Court shall, as a general
rule, raise only questions of law and that this Court is not duty-bound to analyze again
and weigh the evidence introduced in and considered by the tribunals below. [11] 
However, there are recognized exceptions to this rule, to wit:

(a) When the findings are grounded entirely on speculation, surmises, or 
conjectures;

(b) When the inference made is manifestly mistaken, absurd, or impossible;

(c)  When there is grave abuse of discretion;

(d)  When the judgment is based on a misapprehension of facts;

(e)  When the findings of facts are conflicting;

(f)  When in making its findings the CA went beyond the issues of the case, or its findings
are contrary to the admissions of both the appellant and the appellee;

(g)  When the CA’s findings are contrary to those by the trial court;

(h) When the findings are conclusions without citation of specific evidence on which
they are based;

(i)  When the facts set forth in the petition as well as in the petitioner’s main and reply
briefs are not disputed by the respondent;

(j)  When the findings of fact are premised on the supposed absence of evidence and
contradicted by the evidence on record; or

(k) When the CA manifestly overlooked certain relevant facts not disputed by the
parties, which, if properly considered, would justify a different conclusion. [12]

In the present case, the findings of the MTC and the RTC are contrary to those made by
the CA. The RTC affirmed the findings of the MTC that the subject house which is
presently standing on the disputed parcel of land was built at the time that the
ownership of the said lot was in the name of petitioners' parents. The CA, on the other
hand, ruled that the abovementioned house was constructed when petitioners' parents
were in possession of the lot in question as lessees. Thus, this Court's review of such
findings is warranted.

A careful review of the records and the evidence presented in the instant case shows
that the CA did not commit error in finding that the house in question was built at the
time petitioners' parents possessed the subject lot as lessees.

Firstly, the Court agrees with the CA that petitioners' Position Paper and the affidavits of
its witnesses should not have been considered by the trial courts since these were filed
beyond the 10-day reglementary period required under Section 10, Rule 70 of the Rules
of Court and Section 9 of the Revised Rule on Summary Procedure. [13]  Petitioners do not
dispute the appellate court's finding that they submitted their position paper and
affidavits more than three months after the deadline set by the abovementioned rules.
In this regard, this Court, in Teraña v. De Sagun,[14]  held as follows:

x x x  By its express terms, the purpose of the RSP [Revised Rule on Summary
Procedure] is to “achieve an expeditious and inexpensive determination” of the cases
they cover, among them, forcible entry and unlawful detainer cases. To achieve this
objective, the RSP expressly prohibit[s] certain motions and pleadings that could cause
delay, among them, a motion for extension of time to file pleadings, affidavits or any
other paper. If the extension for the filing of these submissions cannot be allowed, we
believe it illogical and incongruous to admit a pleading that is already filed late.
Effectively, we would then allow indirectly what we prohibit to be done directly. It is for
this reason that in Don Tino Realty Development Corporation v. Florentino [G.R. No.
134222, September 10, 1999, 314 SCRA 197], albeit on the issue of late filing of an
answer in a summary proceeding, we stated that “[t]o admit a late answer is to put a
premium on dilatory measures, the very mischief that the rules seek to redress.”

The strict adherence to the reglementary period prescribed by the RSP is due to the
essence and purpose of these rules. The law looks with compassion upon a party who
has been illegally dispossessed of his property. Due to the urgency presented by this
situation, the RSP provides for an expeditious and inexpensive means of reinstating the
rightful possessor to the enjoyment of the subject property. This fulfills the need to
resolve the ejectment case quickly. x x x [15]

As noted by the CA, petitioners did not even bother to file a motion  asking the trial
court to admit their position paper which was belatedly filed. Indeed, the record is
barren of any evidence to show that petitioners, at least, tried to offer any explanation
or justification for such delay. They simply ignored the Rules. This Court has previously
held that technical rules may be relaxed only for the furtherance of justice and to
benefit the deserving.[16]  Moreover, rules of procedure do not exist for the convenience
of the litigants.[17]  These rules are established to provide order to and enhance the
efficiency of our judicial system.[18]  They are not to be trifled with lightly or overlooked
by the mere expedience of invoking "substantial justice." [19]  In a long line of decisions,
this Court has repeatedly held that, while the rules of procedure are liberally construed,
the provisions on reglementary periods are strictly applied, indispensable as they are to
the prevention of needless delays, and are necessary to the orderly and speedy
discharge of judicial business.[20]  In the instant case, petitioners' complete disregard of
the Rules of Court and of the Revised Rule on Summary Procedure only shows that they
are not deserving of their relaxation. Hence, the  MTC erred in admitting petitioners'
position paper and taking the same into consideration in rendering its judgment.

In any case, the Court finds no error in the ruling of the CA that petitioners' statement in
their  Answer, that their parents built the subject residential house  as lessees under the
authority given to them by private respondent's father in their contract of lease
executed in 1949, is a judicial admission. Under Section 4, Rule 129 of the Rules of
Court,[21]  petitioners may not contradict this judicial admission unless they are able to
show that it was made through palpable mistake or that no such admission was made.
In the instant case, petitioners' subsequent claim in their Position Paper that their house
was built during the time that their parents were the owners of the disputed lot is  a
direct contradiction of their judicial admission in their Answer. However, petitioners
failed to prove that such admission was made through palpable mistake or that no such
admission was made. Hence, they may not contradict the same.

Aside from the abovementioned admission made by petitioners in their Answer, there is
nothing in the said Answer which claims that the subject house was constructed when
petitioners' parents were the owners of the disputed lot. Neither was there any
allegation nor even a hint that a house was first built on the lot in question in 1949 and
that the same was demolished in the late 1960s to give way to the construction of the
house which is presently standing on the disputed lot.

Thus, it appears from all indications that petitioners' claims and allegations in their
Position Paper contradicting their admission in their Answer are mere afterthought
subsequent to realizing that they could not recover the full value of the house based on
their acknowledgment that the same was erected at the time that their parents were
lessees of the disputed parcel of land.

At this juncture, it would not be amiss to reiterate that the rights of a lessee, like
petitioners in the present case, are governed by Article 1678 of the Civil Code, which
reads:

Art. 1678. If the lessee makes, in good faith, useful improvements which are
suitable to the use for which the lease is intended, without altering the form or
substance of the property leased, the lessor upon the termination of the lease shall pay
the lessee one-half of the value of the improvements at that time. Should the lessor
refuse to reimburse said amount, the lessee may remove the improvements, even
though the principal thing may suffer damage thereby. He shall not, however, cause any
more impairment upon the property leased than is necessary.
With regard to ornamental expenses, the lessee shall not be entitled to any
reimbursement, but he may remove the ornamental objects, provided no damage is
caused to the principal thing, and the lessor does not choose to retain them by paying
their value at the time the lease is extinguished.

Hence, under Article 1678, the lessor has the option of paying one-half of the value of
the improvements that the lessee made in good faith, which are suitable to the use for
which the lease is intended, and which have not altered the form and substance of the
land. On the other hand, the lessee may remove the improvements should the lessor
refuse to reimburse.[22]

It appears, nonetheless, that in her Complaint, private respondent prayed for the
demolition of petitioners' residential house constructed on the subject lot. It is, thus,
clear that private respondent does not want to appropriate the improvements. As such,
petitioners cannot compel her to reimburse to them one-half of the value of their
house. The sole right of petitioners under Article 1678 then is to remove the
improvements without causing any more damage upon the property leased than is
necessary.

WHEREFORE, the instant petition is DENIED. The assailed Decision and Resolution of the
Court of Appeals are AFFIRMED.

SO ORDERED.

THIRD DIVISION
[ G.R. No. 180157, February 08, 2012 ]
EQUITABLE CARDNETWORK, INC., PETITIONER, VS. JOSEFA
BORROMEO CAPISTRANO, RESPONDENT.

DECISION

ABAD, J.:
 This case is about the sufficiency of the defendant's allegations in the answer
denying the due execution and genuineness of the plaintiff's actionable documents and
the kind of evidence needed to prove forgery of signature.

The Facts and the Case

Petitioner Equitable Cardnetwork, Inc. (ECI) alleged in its complaint that in September
1997 respondent Josefa B. Capistrano (Mrs. Capistrano) applied for membership at the
Manila Yacht Club (MYC) under the latter's widow-membership program.  Since the MYC
and ECI had a credit card sponsorship agreement in which the Club would solicit for ECI
credit card enrollment among its members and dependents, Mrs. Capistrano allegedly
applied for and was granted a Visa Credit Card by ECI.

ECI further alleged that Mrs. Capistrano authorized her daughter, Valentina C. Redulla
(Mrs. Redulla), to claim from ECI her credit card and ATM application form. [1]  Mrs.
Redulla signed the acknowledgment receipt[2] on behalf of her mother, Mrs. Capistrano.
After Mrs. Capistrano got hold of the card, she supposedly started using it.  On
November 24, 1997 Mrs. Redulla personally issued a P45,000.00 check as partial
payment of Mrs. Capistrano's account with ECI.  But Mrs. Redulla's check bounced upon
deposit.

Because Mrs. Capistrano was unable to settle her P217,235.36 bill, ECI demanded
payment from her.  But she refused to pay, prompting ECI to file on February 30, 1998 a
collection suit against her before the Regional Trial Court (RTC) of Cebu City.

Answering the complaint, Mrs. Capistrano denied ever applying for MYC membership
and ECI credit card; that Mrs. Redulla was not her daughter; and that she never
authorized her or anyone to claim a credit card for her. Assuming she applied for such a
card, she never used it.  Mrs. Redulla posed as Mrs. Capistrano and fooled ECI into
issuing the card to her. Consequently, the action should have been brought against Mrs.
Redulla.  Mrs. Capistrano asked the court to hold ECI liable to her for moral and
exemplary damages, attorney's fees, and litigation expenses.

After trial, the RTC[3] ruled that, having failed to deny under oath the genuineness and
due execution of ECI's actionable documents that were attached to the complaint, Mrs.
Capistrano impliedly admitted the genuineness and due execution of those documents. 
In effect she admitted: 1) applying for membership at the MYC;[4] 2) accomplishing the
MYC membership information sheet[5] which contained a request for an ECI Visa
card; 3) holding herself liable for all obligations incurred in the use of such
card; 4) authorizing Mrs. Redulla to receive the Visa card issued in her name;
[6]
 5) applying for an ATM Card with ECI; [7] and 6) using the credit card in buying
merchandise worth P217,235.36 as indicated in the sales slips.

The RTC said that when an action is founded upon written documents, their
genuineness and due execution shall be deemed admitted unless the defendant
specifically denies them under oath and states what he claims to be the facts. [8]  A mere
statement that the documents were procured by fraudulent representation does not
raise any issue as to their genuineness and due execution.[9]  The RTC rejected Mrs.
Capistrano's argument that, having verified her answer, she should be deemed to have
denied those documents under oath.  The RTC reasoned that she did not, in her
verification, deny signing those documents or state that they were false or fabricated.

The RTC added that respondent Mrs. Capistrano could no longer raise the defense of
forgery since this had been cut-off by her failure to make a specific denial.  Besides, said
the RTC, Mrs. Capistrano failed to present strong and convincing evidence that her
signatures on the document had been forged.  She did not present a handwriting expert
who could attest to the forgery.  The trial court ordered Mrs. Capistrano to pay ECI's
claim of P217,235.36 plus interests, attorney's fees and litigation expenses.  Mrs.
Capistrano appealed the decision to the Court of Appeals (CA).

On May 10, 2007 the CA reversed the trial court's decision and dismissed ECI's
complaint.[10]  The CA ruled that, although Mrs. Capistrano's answer was somewhat
infirm, still she raised the issue of the genuineness and due execution of ECI's
documents during trial by presenting evidence that she never signed any of them.  Since
ECI failed to make a timely objection to its admission, such evidence cured the
vagueness in her answer.  Further, the CA ruled that Mrs. Capistrano sufficiently proved
by evidence that her signatures had been forged.

The Issues Presented

The issues presented are:

1.   Whether or not the CA correctly ruled that, although Mrs. Capistrano failed to make
an effective specific denial of the actionable documents attached to the complaint, she
overcame this omission by presenting parol evidence to which ECI failed to object; and
2.   Whether or not the CA correctly ruled that Mrs. Capistrano presented clear and
convincing evidence that her signatures on the actionable documents had been forged.

Ruling of the Court

One. An answer to the complaint may raise a negative defense which consists in
defendant's specific denial of the material fact that plaintiff alleges in his complaint,
which fact is essential to the latter's cause of action. [11]  Specific denial has three modes. 
Thus:

1)  The defendant must specify each material allegation of fact the truth of which
he does not admit and whenever practicable set forth the substance of the matters on
which he will rely to support his denial;

2)  When the defendant wants to deny only a part or a qualification of an averment in
the complaint, he must specify so much of the averment as is true and material and
deny the remainder; and

3)  When the defendant is without knowledge and information sufficient to form a belief
as to the truth of a material averment made in the complaint, he shall so state and this
shall have the effect of a denial.

But the rule that applies when the defendant wants to contest the documents attached
to the claimant's complaint which are essential to his cause of action is found in Section
8, Rule 8 of the Rules of Court, which provides:

SECTION 8. How to contest such documents. --When an action or defense is

founded upon a written instrument, copied in or attached to the corresponding pleading
as provided in the preceding Section, the genuineness and due execution of the
instrument shall be deemed admitted  unless the adverse party, under oath, specifically
denies them, and sets forth what he claims to be the facts; but the requirement of an
oath does not apply when the adverse party does not appear to be a party to the
instrument or when compliance with an order for an inspection of the original
instrument is refused.

To determine whether or not respondent Mrs. Capistrano effectively denied the

genuineness and due execution of ECI's actionable documents as provided above, the
pertinent averments of the complaint and defendant Capistrano's answer are here
reproduced.

ECI's complaint:

3. That sometime in 1997, defendant applied for membership, as widow of a deceased

member of the Manila Yacht Club;

4. That in connection with her application for membership in the Manila Yacht Club,
defendant applied for and was granted a Manila Yacht Club Visa Card in accordance
with Credit Card Sponsorship Agreement entered into between the plaintiff and the
Manila Yacht Club wherein Manila Yacht Club shall solicit applications for the Manila
Yacht Club Visa Cards from Manila Yacht Club members and dependents.  Copy of the
Manila Yacht Club Information Sheet is hereto attached as Annex "A";

Mrs. Capistrano's answer:

3. She specifically denies paragraph[s] 3 and 4 of the complaint for want of sufficient
knowledge to form a belief as to the veracity of the allegations contained therein and
for the reasons stated in her special and affirmative defenses.

xxxx

ECI's complaint:

     5. That defendant authorized her daughter, Mrs. Valentina Redulla to get the said
credit card including her ATM application form from the plaintiff which enabled the
defendant to avail of the cash advance facility with the use of said card; Copy of the
authorization letter, application form and acknowledgment receipt showing that
Valentina C. Redulla received the said credit card are hereto attached as Annexes "B",
"C", and "D", respectively;

Mrs. Capistrano's answer:

4. She specifically denies paragraph 5 of the complaint for want of sufficient knowledge
to form a belief as to the allegations contained therein.  She never authorized any
person to get her card.  Valentina Redulla is not her daughter.
xxxx

ECI's complaint:

6. That with the use of the said Manila Yacht Club Visa Card, defendant could purchase
goods and services from local and accredited stores and establishments on credit and
could make cash advances from ATM machines since it is the plaintiff who pays first the
said obligations and later at a stated period every month, the plaintiff will send a
statement of account to defendant showing how much she owes the plaintiff for the
payments it previously made on her behalf. Copy of the monthly statement of accounts
for the months of November and December 1997 are hereto attached as Annexes "E"
and "F", respectively;

Mrs. Capistrano's answer:

5. She specifically denies paragraph 6 of the complaint for want of sufficient knowledge
to form a belief as to the veracity of the allegations contained therein and for the
reasons as stated in her special and affirmative defenses.

xxxx

ECI's complaint:

7. That it is the agreement of the parties that in the event that an account is overdue,
interest at 1.75% per month and service charge at 1.25% will be charged to the
defendant;

Mrs. Capistrano's answer:

6. She specifically denies paragraph 7 of the complaint for want of sufficient knowledge
to form a belief as to the veracity of the allegations contained therein.

xxxx

ECI's complaint:

8. That on November 24, 1997, defendant's daughter, Mrs. Valentina C. Redulla issued
Solidbank Check No. 0127617 dated November 24, 1997 in the amount of P45,000.00 in
partial payment of defendant's account with the plaintiff;

9. That when the said check was deposited in the bank, the same was dishonored for the
reason "Account Closed."  Copy of said said check is hereto attached as Annex "G";

Mrs. Capistrano's answer:

7. She denies paragraph[s] 8 and 9 for want of sufficient knowledge to form a belief as
to the veracity of the allegations contained therein and for the reasons aforestated.  It is
quite peculiar that herein defendant's alleged account would be paid with a personal
check of somebody not related to her.

xxxx

ECI's complaint:

10.   That defendant has an unpaid principal obligation to the plaintiff in the amount of
P217,235.326;

Mrs. Capistrano's answer:

8. She denies paragraph 10 for want of sufficient knowledge as to the veracity of the
allegations contained therein and for the reasons stated in her special and affirmative
defenses. Granting ex gratia argumenti that defendant did indeed apply for a card, still,
she vehemently denies using the same to purchase goods from any establishment on
credit.

xxxx

ECI's complaint

11.   That plaintiff made demands on the defendant to pay her obligation but despite
said demands, defendant has failed and refused to pay her obligation and still fails and
refuses to pay her obligation to the plaintiff and settle her obligation, thus, compelling
the plaintiff to file the present action and hire the services of counsel for the amount of
P53,998.84 and incur litigation expenses in the amount of P30,000.00;
12.   That it is further provided as one of the terms and conditions in the issuance of the
Manila Yacht Club Card that in the event that collection is enforced through court action,
25% of the amount due of P53,998.84 will be charged as attorney's fees and P53,998.84
will be charged as liquidated damages;

Mrs. Capistrano's answer

9. She denies paragraph[s] 11 and 12 for want of sufficient knowledge to form a belief as
to the veracity of the allegations therein. If ever there was any demand sent to herein
defendant the same would have been rejected on valid and lawful grounds. Therefore,
any damage or expense, real or imaginary, incurred or sustained by the plaintiff should
be for its sole and exclusive account.

xxxx

Further, Mrs. Capistrano's special and affirmative defenses read as follows:

10.   Defendant repleads by reference all the foregoing allegations which are relevant
and material hereto.

11.   Defendant denies having applied for membership with the Equitable Cardnetwork,
Inc. as a widow of a deceased member of the Manila Yacht Club.

12.   She has never authorized anyone to get her alleged card for the preceding reason. 
Therefore, being not a member, she has no obligation, monetary or otherwise to herein
plaintiff.

13.   Plaintiff has no cause of action against herein answering defendant.

14.   This Valentina C. Redulla is not her daughter. In all modesty, defendant being a
member of one of the prominent families of Cebu and being a board member of the
Borromeo Brothers Estate whose holdings include Honda Cars Cebu as well as other
prestigious establishments, it would be totally uncalled for if she would not honor a
valid obligation towards any person or entity.

15.   She surmises that this Valentina Redulla has been posing as Josefa Capistrano. 
Therefore, plaintiff's cause of action should have been directed towards this Redulla.

16.   Even granting for the sake of argument that herein answering defendant did indeed
authorized somebody to pick up her card, still, she never made any purchases with the
use thereof.  She, therefore, vehemently denies having used the card to purchase any
merchandise on credit.

In substance, ECI's allegations, supported by the attached documents, are that Mrs.
Capistrano applied through Mrs. Redulla for a credit card and that the former used it to
purchase goods on credit yet Mrs. Capistrano refused to pay ECI for them.   On the other
hand, Mrs. Capistrano denied these allegations "for lack of knowledge" as to their truth.
[12]
  This mode of denial is by itself obviously ineffectual since a person must surely know
if he applied for a credit card or not, like a person must know if he is married or not.  He
must also know if he used the card and if he did not pay the card company for his
purchases.  A person's denial for lack of knowledge of things that by their nature he
ought to know is not an acceptable denial.

In any event, the CA ruled that, since ECI did not object on time to Mrs. Capistrano's
evidence that her signatures on the subject documents were forged, such omission
cured her defective denial of their genuineness and due execution.  The CA's ruling on
this point is quite incorrect.

True, issues not raised by the pleadings may be tried with the implied consent of the
parties as when one of them fails to object to the evidence adduced by the other
concerning such unimpleaded issues.[13]  But the CA fails to reckon with the rule that a
party's admissions in the course of the proceedings, like an admission in the answer of
the genuineness and true execution of the plaintiff's actionable documents, can only be
contradicted by showing that defendant made such admission through palpable
mistake.[14]  Here, Mrs. Capistrano never claimed palpable mistake in the answer she
filed.

It is of no moment that plaintiff ECI failed to object to Mrs. Capistrano's evidence at the
trial that the subject documents were forgeries.  As the Court ruled in Elayda v. Court of
Appeals,[15] the trial court may reject evidence that a party adduces to contradict a
judicial admission he made in his pleading since such admission is conclusive as to him. 
It does not matter that the other party failed to object to the contradictory evidence so
adduced.
Notwithstanding the above, the Court holds that the CA correctly ordered the dismissal
of ECI's action since, contrary to the RTC's finding, Mrs. Capistrano effectively denied the
genuineness and due execution of ECI's actionable documents.  True, Mrs. Capistrano
denied ECI's actionable documents merely "for lack of knowledge" which denial, as
pointed out above, is inadequate since by their nature she ought to know the truth of
the allegations regarding those documents.  But this inadequacy was cured by her quick
assertion that she was also denying the allegations regarding those actionable
documents "for the reasons as stated in her special and affirmative defenses."

In the "Special and Affirmative Defenses" section of her answer, Mrs. Capistrano in fact
denied ECI's documented allegations that she applied for a credit card, was given one,
and used it.  She said:

11.   Defendant denies having applied for membership with the Equitable
Cardnetwork, Inc. as a widow of a deceased member of the Manila Yacht Club.

12.   She has never authorized anyone to get her alleged card for the preceding reason. 
Therefore, being not a member, she has no obligation, monetary or otherwise to herein
plaintiff.

Neither the RTC nor the CA can ignore Mrs. Capistrano's above additional reasons
denying ECI's allegations regarding its actionable documents.  Such reasons form part of
her answer.  Parenthetically, it seems that, when Mrs. Capistrano denied the
transactions with ECI "for lack of knowledge," it was her way of saying that such
transactions took place without her knowing.  And, since Mrs. Capistrano in fact verified
her claim that she had no part in those transactions, she in effect denied under oath the
genuineness and due execution of the documents supporting them.  For this reason, she
is not barred from introducing evidence that those documents were forged.

Two. Here, apart from presenting an officer who identified its documents, ECI presented
no other evidence to support its claim that Mrs. Capistrano did business with it.  On the
other hand, the evidence for the defense shows that it was not likely for Mrs. Capistrano
to have applied for a credit card since she was already 81 years old, weak, bedridden,
and suffering from senility at the time in question.[16]  What is more, she had been
staying in Cagayan de Oro under the care of his son Mario; whereas she made the
alleged cash advances and purchases using the credit card in different malls in Cebu
City, Bohol, and Muntinlupa City.[17]
Further, as the CA found, Mrs. Capistrano's specimen signatures on a Deed of Sale, [18] an
Extra-judicial Settlement of Estate of Deceased Person, [19] a Waiver of Rights,[20] and a
handwritten note,[21] executed at about the time in question, clearly varied from the
signatures found on ECI's documents.[22]  The testimony of a handwriting expert, while
useful, is not indispensable in examining or comparing handwritings or signatures. [23] 
The matter here is not too technical as to preclude the CA from examining the
signatures and ruling on whether or not they are forgeries. The Court finds no reason to
take exception from the CA's finding.

WHEREFORE, the Court DISMISSES the petition and AFFIRMS the order of the Court of

Appeals in CA-G.R. CV 79424 dated May 10, 2007 that directed the dismissal of the
complaint against respondent Josefa B. Capistrano.

SO ORDERED.

THIRD DIVISION
[ G.R. Nos. 180631-33, February 22, 2012 ]
PHILIPPINE CHARTER INSURANCE CORPORATION, PETITIONER, VS.
CENTRAL COLLEGES OF THE PHILIPPINES AND DYNAMIC PLANNERS
AND CONSTRUCTION CORPORATION, RESPONDENTS.

DECISION

MENDOZA, J.:

This is a petition for review on certiorari under Rule 45 of the 1997 Rules of Civil
Procedure challenging the June 29, 2007 Decision[1] and November 19, 2007
Resolution[2] of the Court of Appeals (CA) in the consolidated cases CA-G.R. SP Nos.
90361, 90383 and 90384.

THE FACTS

On May 16, 2000, Central Colleges of the Philippines (CCP), an educational institution,
contracted the services of  Dynamic Planners and Construction Corporation (DPCC) to be
its general contractor for the construction of its five (5)-storey school building at No. 39
Aurora Boulevard, Quezon City, with a total contract price of P248,000,000.00.  As
embodied in a Contract Agreement,[3] the construction of the entire building would be
done in two phases with each phase valued at P124,000,000.00.

To guarantee the fulfillment of the obligation, DPCC posted three (3) bonds, all issued by
the Philippine Charter Insurance Corporation (PCIC), namely: (1) Surety Bond No. PCIC-
45542, dated June 25, 2003, amounting to P7,031,460.74;[4] (2) Performance Bond No.
PCIC-45541[5] in the amount of P2,929,775.31 which was subsequently increased to
P6,199,999.99 through Bond Endorsement No. E-2003/12527; [6] and (3) Performance
Bond No.  PCIC-46172 for P692,890.74.[7]  All the bonds were callable on demand and set
to expire on October 30, 2003.

The Phase 1 of the project was completed without issue.  Thereafter, CCP paid DPCC
P14,880,000.00 or 12% of the agreed price of P124,000,000.00 with a check dated
March 14, 2002 as downpayment for the Phase 2 of the project.

The Phase 2 of the project, however, encountered numerous delays. When CCP audited
DPCC on July 25, 2003, only 47% of the work to be done was actually finished.

Thus, in a letter dated October 29, 2003 addressed to DPCC and PCIC, CCP informed
them of the breach in the contract and its plan to claim on the construction bonds. 
Pertinent portions of the letter are herein quoted:

You are both hereby NOTIFIED that the Bonds referred to above for the faithful
performance of a Contract, dated 16 May 2000 for the construction of CCP EXTENSION
BLDG. (Phase 2) at 39 Aurora Blvd., Quezon City, Metro Manila and the Variation Order
No. 2 has been breached by the CONTRACTOR for which reason, the CENTRAL COLLEGES
OF THE PHILIPPINES, as owner, hereby gives NOTICE that it will file an action on the said
performance and surety bonds.[8]

On November 6, 2003, CCP notified DPCC and PCIC that only 51% of the project was
completed, which was way behind the construction schedule, prompting it to declare
the occurrence of default against DPCC. It formally requested PCIC to remit the
proceeds of the bonds.[9]

On November 14, 2003, DPCC wrote PCIC confirming the finding that Phase 2 was only
51% finished and, at the same time, requesting for the extension of its performance and
surety bonds because the supposed revision of the plans would require more days. [10]

In a letter dated November 21, 2003, CCP notified PCIC that because of DPCC’s inability
to complete the project on time, it decided to terminate its contract with the latter and
to continue the construction on its own.  The full text of the letter is herein reproduced:

We acknowledge the receipt of your letter dated November 14, 2003 and we are
in the process of compiling the documents you requested.  The said documents will be
submitted as soon as possible.

Furthermore, we would like to reiterate that your principal, the Dynamic Planners &
Construction Corporation has breached the Contract of Agreement dated May 16, 2000
by having completed only an estimated 51% of the construction of the 5-storey CCP
Extension Building, Phase 2 and has therefore failed to perform the work within the
agreed schedule.

In view thereof, as stated in our earlier letter of 6 November 2003, we were compelled
to declare the occurrence of a default on the part of your principal, and have terminated
their contract.  Please remit to us the proceeds of the captioned Bonds within the
earliest possible time.

The Central Colleges of the Philippines will complete the construction of the 5-storey
CCP Extension Building, Phase 2 on its own.[11]

Meanwhile, on December 5, 2003, PCIC informed DPCC that it had approved its request
for extension of the bonds.[12]

Eventually, negotiations to continue on with the construction between CCP and DPCC
reached a dead end.  CCP hired another contractor to work on the school site.

On August 13, 2004, CCP sent a letter to PCIC of its final demand for the payment of
P13,924,351.47 as indicated in the bonds. [13]

On August 20, 2004, PCIC denied CCP’s claims against the three bonds. [14]

Thus, on October 28, 2004, CCP filed a complaint with request for arbitration before the
Construction Industry Arbitration Commission (CIAC) against DPCC and PCIC. [15]  In its
complaint, CCP prayed that CIAC hold DPCC and PCIC, jointly and severally liable, against
the following bonds:

1. Under Surety Bond No. 45542, the amount of Php7,031,460.74 plus legal
interest from the date of demand until full payment thereof;

2. Under Performance Bond Nos. PCIC-45541 [Bond Endorsement Nos. E-2003/12527]

and PCIC-46172, the amount of Php6,892,890.73 plus legal interest from the date of
demand until full payment thereof; and

3. Php100,000.00 as and for attorney’s fees.[16]

In their Answer,[17] DPCC and PCIC denied any liability and proffered that CCP unlawfully
withheld the materials, equipment, formworks and scaffoldings left at the premises
amounting to P4,232,264.12.

On June 3, 2005, the CIAC rendered a decision in favor of CCP.  It gave the following
reasons:

1. Claimant was legally justified in terminating the Contract;

2. On the issue of whether claimant faithfully complied with its contractual obligation in
respect of (a) the release of the downpayment, (b) the delivery of the drawings for
construction, and (c) the payment of progress billings, there is no record that Dynamic
protested the delay in the delivery of the site, the delay in the submission of technical
plans and demanded as a result thereof the corresponding adjustment of the Contract
Period or the Contract Price.  The issue of delay in the reduction of the down payment is
moot since Dynamic acquiesced in the reduction of the down payment from 15% to 12%
and the issue of payment of the 12th progress billing arose as a consequence of a
legitimate issue as to the percentage of completion of the work by Dynamic as of August
2003.

3. Dynamic’s percentage of accomplishment as of the date of the termination of the

Contract was 57.33% at P71,089,200.

4. The original Contract Price was P124,000,000.  To this amount shall be added the
price of Variation Order No. 2 of P13,857,814.87 or an adjusted Contract Price of
P137,857,814.87.  Deducting P110,000,792.87, the overpayment to Dynamic is
P27,779,022.00.  However, Claimant is entitled to an award not exceeding the amount
of its claims in its Complaint and in the Terms of Reference.

5. Dynamic failed to produce evidence to show that it was not paid the balance of the
Contract Price for Phase 1 of the Project.

6. Surety is liable to Claimant under the Performance and Surety Bonds it issued in favor
of Claimant.  The liability of Surety is to indemnify Claimant for the un-recouped down
payment [which] shall not exceed P7,031,460.74 under the Surety Bond and for not
more than P6,892,890.73 under the Performance Bonds.

7. If Surety is obliged to pay these amounts to Claimant, it is entitled, on its cross-claim,

to indemnity from Dynamic.

8. Claimant’s claims under the Surety and Performance Bonds are not time-barred.

9. Surety is not barred by estoppel from denying liability under the Surety and
Performance Bonds.

10. Claimant’s request to Dynamic to extend the term of these bonds, Dynamic’s
request to Surety to extend their terms and Surety’s grant of the extension requested
have no adverse legal effect upon the rights and obligations of the parties.

11. The contractual time-bar embodied in the bonds is valid and binding.

12. Dynamic is entitled to its claims for the payment of P1,732,264.14 for materials and
of P2,500,000.00 for the equipment, formworks and scaffolding left at the site.

13. The claims for payment of moral, exemplary and temperate damages and for
attorney’s fees are denied.

14. The parties shall bear their own cost of arbitration. [18]

Thus, CIAC disposed of the case finding DPCC liable to pay CCP P7,031,460.74 from the
Surety Bond representing the unrecouped downpayment and P6,892,890.73 from its
Performance Bond for a total of P13,924,351.47.  The CIAC likewise ordered CCP to pay
DPCC P1,732,264.12 corresponding to the construction materials left at the site and
P2,500,000.00 for the cost of equipment, formworks and scaffoldings appropriated by
CCP or a total of P4,232,264.12.  The fallo reads:

WHEREFORE, award is hereby made against Respondent Dynamic Planners and

Construction Corporation and Respondent Philippine Charter Insurance Corporation,
ordering them, jointly and severally, to pay Claimant, Central Colleges of the Philippines
the amount of P7,031,460.74 under the Surety Bond as un-recouped down payment,
and the amount of P6,892,890.73 under the Performance Bond or the total amount of
P13,924,351.47.

Award is likewise made against Claimant, Central Colleges of the Philippines, ordering
the latter to pay Respondent Dynamic Planners and Construction Corporation, the
amount of P1,732,264.12 for the latter’s materials left at the Project Site and the
amount of P2,500,000.00 as the cost of its equipment, formworks and scaffoldings
which were appropriated by the former or the total amount of P4,232,264.12.

Offsetting the amount due claimant Central Colleges of the Philippines from Respondent
Dynamic Planners and Construction Corporation and that due the latter from the
former, there is a net amount of P9,692,087.37 which Respondent Dynamic Planners
and Construction Corporation is hereby ordered to pay Claimant Central Colleges of the
Philippines with interest at the rate of 6% per annum from the date of this Final Award
and 12% per annum from the time this Final Award becomes final and executory and
until it is fully paid in accordance with Eastern Shipping Lines, Inc. vs. Court of Appeals
(1994) 234 SCRA 78.

The joint and several liability of Respondent Philippine Charter Insurance Corporation
with Respondent Dynamic Planners and Construction Corporation is accordingly
reduced to P9,692,087.37.  In the event of payment by Respondent Philippine Charter
Insurance Corporation, the latter is entitled to indemnity from its co-Respondent
Dynamic Planners and Construction Corporation up to the full amount of such payment. 
In the event of delay in making payment to indemnify Respondent Philippine Charter
Insurance Corporation, Respondent Dynamic Planners Charter Insurance Corporation
shall pay interest at the rate of 21% per annum in accordance with the Indemnity
Agreement between them.

All other claims, counterclaims and cross-claims not otherwise determined in this Final
Award are deemed denied for lack of merit.
SO ORDERED.[19]

All the parties appealed the CIAC decision to the CA.  PCIC’s appeal was docketed as CA-
G.R. SP No. 90361;[20]  CCP’s appeal was docketed as CA-G.R. SP No. 90383;[21] and
DPCC’s appeal was docketed as CA-G.R. SP No. 90384.[22]  Eventually, the cases were
consolidated.[23]

On June 29, 2007, the CA modified CIAC’s earlier decision.[24]  The CA found that DPCC
was already in delay for managing to complete only 51% of the construction work
necessary to finish the Phase 2 of the project.  It held that due to DPCC’s inexcusable
delay, CCP was legally within its rights to terminate the contract with it.  It likewise did
not give weight to PCIC’s defense that Bond No. 46172 was already released because
the said issue was never raised before the CIAC and was raised for the first time on
appeal.[25]  The CA, however, deleted the award of cost of the materials, equipment,
formworks and scaffoldings allegedly left by DPCC at the work site for its failure to prove
the actual costs of said materials.[26]  It added, “In any event, the cost of such materials,
equipment, formworks and scaffoldings cannot be deducted from Philippine Charter’s
liability on the bond, as the credit does not belong to the latter but to Dynamic.” [27] 
Accordingly, the decretal portion of the CA decision reads:

WHEREFORE, the Final Award, dated 03 June 2005, of the Construction Industry
Arbitration Commission (CIAC) in CIAC Case No. 36-2004 is AFFIRMED with
MODIFICATION, in that the award to Dynamic Planners and Construction Corporation of
its counterclaim for materials, equipment, formworks and scaffoldings left at the work
site in the total amount of P4,232,264.12 is DELETED.

Philippine Charter Insurance Corporation and Dynamic Planners and Construction

Corporation are ORDERED jointly and severally to pay Central Colleges of the Philippines
the total amount of P13,924,351.47 under Surety Bond No. PCIC-45542, Performance
Bond No. PCIC-45541 (as modified by Bond Endorsement No. E-2003/12527), and
Performance Bond No. PCIC-46172.  Said amount shall bear interest at the rate of 6%
per annum from the date of demand made on 29 October 2003.  However, for any
amount not yet paid after the date of the finality of this decision, the rate of interest on
the payable amount shall be increased to 12% per annum from the date when this
decision becomes final and executory until it is fully paid.

SO ORDERED.[28]
PCIC moved for the reconsideration of the said decision, but the CA disposed of it with a
denial in its November 19, 2007 Resolution.

Hence, this petition.[29]

In its Memorandum,[30] PCIC submits the following issues for resolution:

1st Issue: Whether or not the CA grossly erred in sustaining the CIAC award
finding petitioner liable to respondent CCP under the performance bonds and the
surety bond?

2nd Issue: Whether or not the CA grossly erred in upholding the CIAC award
pronouncing respondent CCP as rightfully and justifiably entitled to terminate the
contract agreement?

3rd Issue: Whether or not the CA grossly erred in deleting the counterclaim of

respondent DPCC covering the costs of materials, equipment, formworks and
scaffoldings left at site and in denying petitioner to benefit from the counterclaim? [31]

PCIC argues that the CA erred in sustaining the award of P692,890.74 representing
Performance Bond PCIC-46172 because the obligation guaranteed by said performance
bond was already completed, therefore, no liability should attach against the said bond.
[32]

In this regard, the petitioner has a point.

Although this particular issue was not expressly raised in the parties’ Terms of
Reference,[33] nevertheless, the issue on Performance Bond PCIC- 46172 was extensively
discussed during the arbitral tribunal’s hearing of February 21, 2005.  To accurately
reflect what transpired on said hearing, relevant portions of the transcript of
stenographic notes are herein quoted:

ATTY. G. Q. ENRIQUEZ:[34]

I am calling your attention to Bond PCIC-45542.

MR. CRISPINO P. REYES:[35]

 You are calling my attention where?

ATTY. G. Q. ENRIQUEZ:

In the terms of Reference, can we please get the copy of that so that we can be
reminded?

ATTY. B.G. FAJARDO:

There are only two, Counsel-the Performance and the Surety Bond.

ATTY. G. Q. ENRIQUEZ:

Performance Bond in the amount of-

MR. CRISPINO P. REYES:

We’re interested in 45542 and we’re interested in 45541.  What we’re no longer
interested in, we have to be candid to this Honorable Tribunal, we are no longer
interested, [we] no longer want to collect on Performance Bond 46172.

ATTY. A.V. CAMARA:[36]

At this point in time, we would like to be of record that although that Bond 46172
covering the amount of P692,890.74 per their declaration had already been satisfied
that is why only two bonds now are being…

ATTY. J.N. RABOCA:

May I make a qualification with that, your Honor? It’s not that it was satisfied. 
It’s that the Claimant is not claiming anymore because all the works under this bond
were already accomplished.

ATTY. G. Q. ENRIQUEZ:

Yes, because you have already a Certificate of Acceptance.

ATTY. J.N. RABOCA:

 Correct.

ATTY. G. Q. ENRIQUEZ:

So, we’re just narrowing down into two bonds.

ATTY. A.V. CAMARA:

The two bonds.

ATTY. G. Q. ENRIQUEZ:

Okay.

ATTY. A.V. CAMARA:

Then therefore the liability on 46172 should be released.  They are only covered
by the pleadings especially the Complaint.

MR. CRISPINO P. REYES:

We do not dispute this.[37]  [Emphases supplied]

It is clear from the testimony of Crispino P. Reyes, CCP’s President, that the school no
longer wants to collect on Performance Bond PCIC 46172 (with a value of P692,890.74). 
This statement before the arbitral tribunal is a judicial admission effectively settling the
issue with respect to PCIC 46172.   Section 4, Rule 129 of the Rules of Court provides:

Sec. 4. Judicial admissions. – An admission, verbal or written, made by a party in

the course of the proceedings in the same case, does not require proof. The admission
may be contradicted only by showing that it was made through palpable mistake or that
no such admission was made.

A party may make judicial admissions in (a) the pleadings; (b) during the trial, either by
verbal or written manifestations or stipulations; or (c) in other stages of the judicial
proceeding.[38] It is an established principle that judicial admissions cannot be
contradicted by the admitter who is the party himself [39] and binds the person who
makes the same, and absent any showing that this was made thru palpable mistake, no
amount of rationalization can offset it.[40]
Since CCP, through its President, judicially admitted that it is no longer interested in
pursuing PCIC-46172, the scope of its claim will just be confined to Surety Bond No.
PCIC-45542 and Performance Bond No. PCIC-45541.

PCIC claims that DPCC was already in default as early as September 4, 2003, [41] hence,
the ten-day reglementary period to file a claim on the bonds should have been reckoned
from such date and filed on September 14, 2003.  PCIC claims that CCP notified them
only on October 29, 2003 which is already beyond the limitation that any claim on the
bonds should be presented in writing within ten (10) days from the expiration of the
bond or from the occurrence of the default or failure of the principal, whichever is
earliest.[42]

The Court finds itself unable to agree.  Article 1169 of the New Civil Code provides:

Art.  1169.  Those obliged to deliver or to do something incur in delay from the
time the obligee judicially or extrajudicially demands from them the fulfillment of their
obligation.

The civil law concept of delay or default commences from the time the obligor demands,
judicially or extrajudicially, the fulfillment of the obligation from the obligee.   In legal
parlance, demand is the assertion of a legal or procedural right. [43]  Hence, DPCC
incurred delay from the time CCP called its attention that it had breached the contract
and extrajudicially demanded the fulfillment of its commitment against the bonds.

It is the obligor’s culpable delay, not merely the time element, which gives the obligee
the right to seek the performance of the obligation.  As such, CCP’s cause of action
accrued from the time that DPCC became in culpable delay as contemplated in the
surety and performance bonds.  In fact, Surety Bond PCIC-45542,[44] Performance Bond
PCIC-45541[45] and PCIC-46172 each specified how claims should be made against it:

Surety Bond PCIC-45542[46]

The liability of PHILIPPINE CHARTER INSURANCE CORPORATION, under this bond will
expire on October 30, 2003;  Furthermore, it is hereby agreed and understood that
PHILIPPINE CHARTER INSURANCE CORPORATION will not be liable for any claim not
presented to it in writing within FIFTEEN (15) DAYS from the expiration of this bond, and
that the Obligee hereby waives its right to claim or file any court action against the
surety after the termination of FIFTEEN (15) DAYS from the time its cause of action
accrues.

Performance Bond PCIC-45541[47] and PCIC-46172:[48]

The liability of PHILIPPINE CHARTER INSURANCE CORPORATION, under this bond will
expire on October 30, 2003;  Furthermore, it is hereby agreed and understood that
PHILIPPINE CHARTER INSURANCE CORPORATION will not be liable for any claim not
presented to it in writing within TEN (10) DAYS from the expiration of this bond or from
the occurrence of the default or failure of the Principal, whichever is the earliest, and
the Obligee hereby waives its right to file any claims against the Surety after termination
of the period of ten (10) DAYS above mentioned after which time this bond shall
definitely terminate and be deemed absolutely cancelled.

Thus, DPCC became in default on October 29, 2003 when CCP informed it in writing of
the breach of the contract agreement and demanded the fulfillment of its obligation
against the bonds.  Consequently, the November 6, 2003 letter that CCP sent to PCIC
properly complied with the notice of claim requirement set forth in the said bonds.

Upon notice of default of obligor DPCC, PCIC’s liability, as surety, was already attached. 
A surety under Article 2047 of the New Civil Code solidarily binds itself with the principal
debtor to assure the fulfillment of the obligation:

Art. 2047. By guaranty a person, called the guarantor, binds himself to the
creditor to fulfill the obligation of the principal debtor in case the latter should fail to do
so.

If a person binds himself solidarily with the principal debtor, the provisions of Section 4,
Chapter 3, Title I of this Book shall be observed. In such case the contract is called a
suretyship. [Emphasis supplied]

The case of Asset Builders Corporation v. Stronghold Insurance Company, Inc. [49] explains
how a surety agreement works:

As provided in Article 2047, the surety undertakes to be bound solidarily with the
principal obligor.  That undertaking makes a surety agreement an ancillary contract as it
presupposes the existence of a principal contract.  Although the contract of a surety is in
essence secondary only to a valid principal obligation, the surety becomes liable for the
debt or duty of another although it possesses no direct or personal interest over the
obligations nor does it receive any benefit therefrom. [50] Let it be stressed that
notwithstanding the fact that the surety contract is secondary to the principal
obligation, the surety assumes liability as a regular party to the undertaking. [51]

Stronghold Insurance Company, Inc. v. Republic-Asahi Glass Corporation,

[52]
 reiterating the ruling in Garcia v. Court of Appeals, [53] expounds on the nature of the
surety’s liability:

X x x. The surety’s obligation is not an original and direct one for the performance of his
own act, but merely accessory or collateral to the obligation contracted by the
principal.  Nevertheless, although the contract of a surety is in essence secondary only
to a valid principal obligation, his liability to the creditor or promisee of the principal is
said to be direct, primary and absolute; in other words, he is  directly and equally
bound with the principal.

Suretyship, in essence, contains two types of relationship – the principal relationship

between the obligee and the obligor, and the accessory surety relationship between the
principal and the surety.  In this arrangement, the obligee accepts the surety’s solidary
undertaking to pay if the obligor does not pay.  Such acceptance, however, does not
change in any material way the obligee’s relationship with the principal obligor.
Neither does it make the surety an active party to the principal obligee-obligor
relationship.  Thus, the acceptance does not give the surety the right to intervene in
the principal contract.  The surety’s role arises only upon the obligor’s default, at
which time, it can be directly held liable by the obligee for payment as a solidary
obligor.[54] [Emphases supplied]

Having acted as a surety, PCIC is duty bound to perform what it has guaranteed on its
surety and performance bonds, all of which are callable on demand, occasioned by its
principal’s default.

PCIC also proffers that CCP did not file any claim against the bonds after its extension. [55]

The Court is not persuaded.  CCP need not file another claim as to the supposed
extended bonds because the October 29, 2003 letter was sufficient notice to PCIC and
DPCC of the latter’s default and its intention to proceed against the surety and
performance bonds.  Moreover, the extension of the bonds was only approved and
relayed by PCIC to DPCC on December 5, 2003 or after the October 29, 2003 Notice of
Default.

As to whether CCP was legally warranted in terminating the contract with DPCC for its
failure to comply with its obligation, the Court affirms the CA’s disquisition.  The option
to terminate the contract is clearly apparent in the parties’ agreement.  Specifically,
Article 16 of the Contract Agreement provides:

ARTICLE 16
Termination

16.1 The OWNER shall have the right to terminate this CONTRACT after giving fifteen
(15) days notice in writing for any of the following causes:

16.1.1. Substantial failure on the part of the CONTRACTOR in fulfilling its

obligation;

16.1.2. Assignment or sub-contracting of any of the works herein by the CONTRACTOR

without approval by the OWNER;

16.1.3 The CONTRACTOR is willfully violating any of the material conditions, stipulations
and covenants of this CONTRACT and/or the attachments hereto.  In the event of
termination of this CONTRACT pursuant to the above, any amount owing to the
CONTRACTOR at the time of such termination for services already rendered and/or
materials delivered and taken over by the OWNER shall be withheld by the OWNER
pending the determination of value of damages sustained by the OWNER by reason of
such termination and payment of such damages by the CONTRACTOR.

The Court also finds nothing improper in the deletion by the CA of the award of actual
damages in favor of DPCC. Actual or compensatory damages means the adequate
compensation for pecuniary loss suffered and for profits the obligee failed to obtain.  To
be entitled to actual or compensatory damages, it is basic that there must be pleading
and proof of actual damages suffered.[56] Equally vital to the fact that the amount of loss
must be capable of proof, such loss must also be actually proven with a reasonable
degree of certainty, premised upon competent proof or the best evidence obtainable.
[57]
 The burden of proof of the damage suffered is, consequently, imposed on the party
claiming it[58] who, in turn, should present the best evidence available in support of his
claim. It could include sales and delivery receipts, cash and check vouchers and other
pieces of documentary evidence of the same nature pertaining to the items he is
seeking to recover.  In the absence of corroborative evidence, it has been held that self-
serving statements of account are not sufficient basis for an award of actual damages.
[59]
  Moreover, a claim for actual damages cannot be predicated on flimsy, remote,
speculative, and insubstantial proof.[60]  Thus, courts are required to state the factual
bases of the award.[61]

In this case, DPCC was not able to establish that it is entitled to the actual damages that
it prayed for in its counterclaim.  As the CA put it, “while Dynamic (DPCC) presented
receipts issued by its suppliers of materials, equipment, formworks and scaffoldings, it
failed to prove that the items in the receipts correspond to the items allegedly left at the
work site.”[62]     Besides, the Court cannot grant a relief in its favor because DPCC did not
appeal the decision of the CA.

WHEREFORE, the petition is PARTLY GRANTED.   The June 29, 2007 Decision of the
Court of Appeals in CA-G.R. SP Nos. 90361, 90383 and 90384 is MODIFIED to read as
follows:

Philippine Charter Insurance Corporation and Dynamic Planners and Construction

Corporation are ordered to, jointly and severally, pay Central Colleges of the Philippines
the total amount of P13,231,460.73 under Surety Bond No. PCIC-45542 and
Performance Bond No. PCIC-45541 (as modified by Bond Endorsement No. E-
2003/12527). Said amount shall bear interest at the rate of 6% per annum from the date
of demand made on October 29, 2003.  For any amount not yet paid after the date of
the finality of this decision, however, the rate of interest on the payable amount shall be
increased to 12% per annum from the date when this decision becomes final and
executory until it is fully paid.

SO ORDERED.

Velasco, Jr., (Chairperson), Peralta, Abad, and Perlas-Bernabe, JJ., concur.

SECOND DIVISION
[ G.R. No. 185568, March 21, 2012 ]
COMMISSIONER OF INTERNAL REVENUE, PETITIONER, VS. PETRON
CORPORATION, RESPONDENT.
 DECISION

SERENO, J.:

This is a Petition for Review on Certiorari under Rule 45 of the 1997 Rules of Civil
Procedure filed by the Commissioner of Internal Revenue (CIR) assailing the
Decision[1] dated 03 December 2008 of the Court of Tax Appeals En Banc (CTA En Banc)
in CTA EB No. 311. The assailed Decision reversed and set aside the Decision [2] dated 04
May 2007 of the Court of Tax Appeals Second Division (CTA Second Division) in CTA Case
No. 6423, which ordered respondent Petron Corporation (Petron) to pay deficiency
excise taxes for the taxable years 1995 to 1998, together with surcharges and
delinquency interests imposed thereon.

Respondent Petron is a corporation engaged in the production of petroleum products

and is a Board of Investment (BOI) – registered enterprise in accordance with the
provisions of  the Omnibus Investments Code of 1987 (E.O. 226) under Certificate of
Registration Nos. 89-1037 and D95-136.[3]

The Facts

The CTA En Banc in CTA EB Case No. 311 adopted the findings of fact by the CTA Second
Division in CTA Case No. 6423. Considering that there are no factual issues in this case,
we likewise adopt the findings of fact by the CTA En Banc, as follows:

As culled from the records and as agreed upon by the parties in their Joint
Stipulation of Facts and Issues, these are the facts of the case.

During the period covering the taxable years 1995 to 1998, petitioner (herein
respondent Petron) had been an assignee of several Tax Credit Certificates (TCCs) from
various BOI-registered entities for which petitioner utilized in the payment of its excise
tax liabilities for the taxable years 1995 to 1998. The transfers and assignments of the
said TCCs were approved by the Department of Finance’s One Stop Shop Inter-Agency
Tax Credit and Duty Drawback Center (DOF Center), composed of representatives from
the appropriate government agencies, namely, the Department of Finance (DOF), the
Board of Investments (BOI), the Bureau of Customs (BOC) and the Bureau of Internal
Revenue (BIR).
Taking ground on a BOI letter issued on 15 May 1998 which states that ‘hydraulic oil,
penetrating oil, diesel fuels and industrial gases are classified as supplies and considered
the suppliers thereof as qualified transferees of tax credit,’ petitioner acknowledged and
accepted the transfers of the TCCs from the various BOI-registered entities.

Petitioner’s acceptance and use of the TCCs as payment of its excise tax liabilities for the
taxable years 1995 to 1998, had been continuously approved by the DOF as well as the
BIR’s Collection Program Division through its surrender and subsequent issuance by the
Assistant Commissioner of the Collection Service of the BIR of the Tax Debit Memos
(TDMs).

On January 30, 2002, respondent [herein petitioner CIR] issued the assailed Assessment
against petitioner for deficiency excise taxes for the taxable years 1995 to 1998, in the
total amount of P739,003,036.32, inclusive of surcharges and interests, based on the
ground that the TCCs utilized by petitioner in its payment of excise taxes have been
cancelled by the DOF for having been fraudulently issued and transferred, pursuant to
its EXCOM Resolution No. 03-05-99. Thus, petitioner, through letters dated August 31,
1999 and September 1, 1999, was required by the DOF Center to submit copies of its
sales invoices and delivery receipts showing the consummation of the sale transaction
to certain TCC transferors.

Instead of submitting the documents required by the respondent, on February 27, 2002,
petitioner filed its protest letter to the ‘Assessment’ on the grounds, among others, that:

a. The BIR did not comply with the requirements of Revenue Regulations 12-99 in
issuing the “assessment” letter dated January 30, 2002, hence, the assessment made
against it is void;

b. The assignment/transfer of the TCCs to petitioner by the TCC holders was submitted
to, examined and approved by the concerned government agencies which processed
the assignment in accordance with law and revenue regulations;

c. There is no basis for the imposition of the 50% surcharge in the amount of
P159,460,900.00 and interest penalties in the amount of P260,620,335.32 against it;

d. Some of the items included in the ‘assessment’ are already pending litigation and are
subject of the case entitled ‘Commissioner of Internal Revenue vs. Petron Corporation,’
C.A. GR SP No. 55330 (CTA Case No. 5657) and hence, should no longer be included in
the ‘assessment’; and

e. The assessment and collection of alleged excise tax deficiencies sought to be collected
by the BIR against petitioner through the January 30, 2002 letter are already barred by
prescription under Section 203 of the National Internal Revenue Code.

On 27 March 2002, respondent, through Assistant Commissioner Edwin R. Abella served

a Warrant of Distraint and/or Levy on petitioner to enforce payment of the
P739,003,036.32 tax deficiencies.

Respondent allegedly served the Warrant of Distraint and/or Levy against petitioner
without first acting on its letter-protest. Thus, construing the Warrant of Distraint
and/or Levy as the final adverse decision of the BIR on its protest of the assessment,
petitioner filed the instant petition before this Honorable Court [referring to the CTA
Second Division] on April 2, 2002.

On April 30, 2002, respondent filed his Answer, raising the following as his Special
Affirmative Defenses:
6. In a post-audit conducted by the One-Stop Inter-Agency Tax Credit and Duty
Drawback Center (Center) of the Department of Finance (DOF), pursuant to the Center’s
Excom Resolution No. 03-05-99, it was found that TCCs issued to Alliance Thread Co.,
Inc., Allstar Spinning, Inc., Diamond Knitting Corp., Fiber Technology Corp., Filstar Textile
Industrial Corp., FLB International Fiber Corp., Jantex Philippines, Inc., Jibtex Industrial
Corp., Master Colour System Corp. and Spintex International, Inc. were fraudulently
obtained and were fraudulently transferred to petitioner. As a result of said findings, the
TCCs and the Tax Debit Memos (TDMs) issued by the Center to petitioner against said
TCCs were cancelled by the DOF;

7. Prior to the cancellation of the aforesaid TCCs and TDMs, petitioner had utilized the
same in the payment of its excise tax liabilities. With such cancellation, the TCCs and
TDMs have no value in money or money’s worth and, therefore, the excise taxes for
which they were used as payment are now deemed unpaid;

8. The cancellation by the DOF of the aforesaid TCCs and TDMs has the presumption of
regularity upon which respondent may validly rely;
9. Petitioner was informed by the DOF of the post-audit conducted on the TCCs and was
given the opportunity to submit documents showing that the TCCs were transferred to
it in payment of petroleum products allegedly delivered by it to the TCC transferors
upon which the TCC transfers were approved, with the admonition that failure to
submit the required documents would result in the cancellation of the transfers.
Petitioner was also informed of the cancellation of the TCCs and TDMs and the reason
for their cancellation;

10. Since petitioner is deemed not to have paid its excise tax liabilities, a pre-assessment
notice is not required under Section 228 of the Tax Code;

11. The letter dated January 20, 2002 (should be January 30, 2002), demanding payment
of petitioner’s excise tax liabilities explicitly states the basis for said demand, i.e., the
cancellation of the TCCs and TDMs;
12. The government is never estopped from collecting legitimate taxes due to the error
committed by its agents (Visayas Cebu Terminal Inc., vs. Commissioner of Internal
Revenue, 13 SCRA 257; Atlas Consolidated Mining and Development Corporation vs.
Commissioner of Internal Revenue, 102 SCRA 246). The acceptance by the Bureau of
Internal Revenue of the TCCs fraudulently obtained and fraudulently transferred to
petitioner as payment of its excise tax liabilities turned out to be a mistake after the
post-audit was conducted. Hence, said payments were void and the excise taxes may be
validly collected from petitioner.

13. As found in the post-audit, petitioner and the TCC transferors committed fraud in
the transfer of the TCCs when they made appear (sic) that the transfers were in
consideration for the delivery of petroleum products by petitioner to the TCCs
transferors, for which reason said transfers were approved by the Center, when in fact
there were no such deliveries;

14. Petitioner used the TCCs fraudulently obtained and fraudulently transferred in the
payment of excise taxes declared in its excise tax returns with intent to evade tax to the
extent of the value represented by the TCCs, thereby rendering the returns fraudulent;

15. Since petitioner wilfully filed fraudulent returns, it is liable for the 50% surcharge
and 20% annual interest imposed under Sections 248 and 249 of the Tax Code;

16. Since petitioner wilfully filed fraudulent returns with intent to evade tax, the
prescriptive period to collect the tax is ten (10) years from the discovery of the fraud
pursuant to Section 222 of the Tax Code; and

17. The case pending in the Court of Appeals (CA-G.R. Sp. No. 55330 [CTA Case No.
5657]), and the case at bar have distinct causes of action. The former involves the
invalid transfers of the TCCs to petitioner on the theory that it is not a qualified
transferee thereof, while the latter involves the fraudulent procurement of said TCCs
and the fraudulent transfers thereof to petitioner.

However, on November 12, 2002, respondent filed a Manifestation informing this Court
that on May 29, 2002, it had reduced the amount of deficiency excise taxes to
P720,923,224.74 as a result of its verification that some of the TCCs which formed part
of the original “Assessment” were already included in a case previously filed with this
Court. In effect, the amount of deficiency excise taxes is recomputed as follows:

Transfe Basic Tax Surcharge Interest Total

ror
Alliance P12,078,823. P P P
Thread Co. Inc. 00 6,039,411.50 16,147,293.21 34,265,527.21
Allstar 37,265,310.0 18,632,655.0 49,781,486.9 105,679,451.
Spinning, Inc. 0 0 5 95
Diamon 36,764,587.0 18,382,293.5 49,264,758.3 104,411,638.
d Knitting 0 0 5 85
Corporation
Fiber 25,300,911.0 12,650,455.5 34,295,655.9 72,247,022.4
Technology 0 0 0 0
Corp.
Filstar 40,767,783.0 20,383,891.5 54,802,550.1 115,954,224.
Textile Corp. 0 0 6 66
FLB 25,934,695.0 12,967,347.5 34,977,257.1 73,879,299.6
International 0 0 4 4
Fiber Corp.
Jantex 12,036,192.0 6,018,096.00 15,812,547.2 33,866,835.2
Philippines, Inc. 0 4 4
Jibtex 15,506,302.0 7,753,151.00 20,610,319.5 43,869,772.5
Industrial Corp. 0 2 2
Master 33,333,536.0 16,666,768.0 44,822,167.0 94,822,471.0
Colour system 0 0 6 6
Corp.
Spintex 14,912,408.0 7,456,204.00 19,558,368.7 41,926,980.7
International 0 1 1
Inc.
Total P253,900,54 P126,950,27 P340,072,40 P720,923,22
7.00 3.50 4.24 4.74

During the pendency of the case, but after respondent had already submitted his Formal
Offer of Evidence for this Court’s consideration, he filed an ‘Urgent Motion to Reopen
Case’ on August 24, 2004 on the ground that additional evidence consisting of
documents presented to the Center in support of the TCC transferor’s claims for tax
credit as well as document supporting the applications for approval of the transfer of
the TCCs to petitioner, must be presented to prove the fraudulent issuance and transfer
of the subject TCCs. Respondent submits that it is imperative on his part to do so
considering that, without necessarily admitting that the evidence presented in the case
of Pilipinas Shell Petroleum Corporation vs. Commissioner of Internal Revenue, to prove
fraud is not clear and convincing, he may suffer the same fate that had befallen upon
therein respondent when this Court held, among others, that ‘there is no clear and
convincing evidence that the Tax Credit Certificates (TCCs) transferred to Shell (for
brevity) and used by it in the payment of excise taxes, were fraudulently issued to the
TCC transferors and were fraudulently transferred to Shell.’

An ‘Opposition to Urgent Motion to Reopen Case’ was filed by petitioner on September

3, 2004 contending that to sustain respondent’s motion would ‘smack of procedural
disorder and spawn a reversion of the proceedings. While litigation is not a game of
technicalities, it is a truism that every case must be presented in accordance with the
prescribed procedure to insure an orderly administration of justice.’

On October 4, 2004, this Court resolved to grant respondent’s Motion and allowed
respondent to present additional evidence in support of his arguments, but deferred the
resolution of respondent’s original Formal Offer of Evidence until after the respondent
has terminated his presentation of evidence. Subsequent to this Court’s Resolution,
respondent then filed on October 20, 2004, a Request for the Issuance of Subpoena
Duces Tecum to the Executive Director of the Center or his duly authorized
representative, and on October 21, 2004, a Subpoena Ad Testificandum to Ms. Elizabeth
R. Cruz, also of the Center.

Petitioner filed a ‘Motion for Reconsideration (Re: Resolution dated October 4, 2004)’
on October 27, 2004, with respondent filing his ‘Opposition’ on November 4, 2004, and
petitioner subsequently filing its ‘Reply to Opposition’ on December 20, 2004.
Petitioner’s motion was denied by this Court in a Resolution dated February 28, 2005 for
lack of merit.

On March 18, 2005, petitioner filed an ‘Urgent Motion to Revert Case to the First
Division’ with respondent’s ‘Manifestation’ filed on April 6, 2005 stating that ‘the
question of which Division of this Honorable Court shall hear the instant case is an
internal matter which is better left to the sound discretion of this Honorable Court
without interference by a party litigant’. On April 28, 2005, this Court denied the Motion
of petitioner for lack of merit.

On November 7, 2005, the Court finally resolved respondent’s ‘Formal Offer of

Evidence’ filed on May 7, 2004 and ‘Supplemental Formal Offer of Evidence’ filed on
August 25, 2005. On November 22, 2005, respondent filed a ‘Motion for Partial
Reconsideration’ of the Court’s Resolution to admit Exhibits 31 and 31-A on the ground
that he already submitted and offered certified true copies of said exhibits, which the
Court granted in its Resolution on January 19, 2006.

However, on February 10, 2006, respondent filed a ‘Motion to Amend Formal Offer of
Evidence’ praying that he be allowed to amend his formal offer since some exhibits
although attached thereto were inadvertently not mentioned in the Formal Offer of
Evidence. Petitioner’s ‘Opposition’ was filed on March 14, 2006. This Court granted
respondent’s motion in the Resolution dated April 24, 2006 and considering that the
parties already filed their respective Memoranda, this case was then considered
submitted for decision.

On May 16, 2006, however, respondent filed an ‘Omnibus Motion’ praying that this
Court take judicial notice of the fact that the TCCs issued by the Center, including the
TCCs in this instant case, contained the standard ‘Liability Clause’ and that the case be
consolidated with CTA Case No. 6136, on the ground that both cases involve the same
parties and common questions of law or fact. An ‘Opposition/Comment on Omnibus
Motion’ was filed by petitioner on June 26, 2006, and ‘Reply to Opposition/Comment’
was filed by respondent on July 17, 2006.

In a Resolution promulgated on September 1, 2006, this Court granted respondent’s

motion only insofar as taking judicial notice of the fact that each of the dorsal side of the
TCCs contains the subject ‘liability clause’, but denied respondent’s motion to
consolidate considering that C.T.A. Case No. 6136 was already submitted for decision on
April 24, 2006.[4]
 The Ruling of the Court of Tax Appeals–Second Division
(CTA Case No. 6423)

On 04 May 2007, the CTA Second Division promulgated a Decision in CTA Case No. 6423,
the dispositive portion of which reads:

WHEREFORE, premises considered, the instant Petition for Review is hereby

DENIED for lack of merit. Accordingly, petitioner is ORDERED TO PAY the respondent
the reduced amount of SIX HUNDRED MILLION SEVEN HUNDRED SIXTY NINE
THOUSAND THREE HUNDRED FIFTY THREE AND 95/100 PESOS (P600,769,353.95),
representing petitioner’s deficiency excise taxes for the taxable years 1995 to 1998,
recomputed as follows:

Transfe Basic Tax 25% 20% Interest Total

ror Surcharge
Alliance P12,078,823. P3,019,705. P13,456,077. P28,554,606.
Thread Co. Inc. 00 75 68 43
Allstar 37,265,310.0 9,316,327.5 41,484,572.4 88,066,209.9
Spinning, Inc. 0 0 6 6
Diamon 36,764,587.0 9,191,146.7 41,053,965.2 87,009,699.0
d Knitting 0 5 9 4
Corporation
Fiber 25,300,911.0 6,325,227.7 28,579,713.2 60,205,852.0
Technology 0 5 5 0
Corp.
Filstar 40,767,783.0 10,191,945. 45,668,791.8 96,628,520.5
Textile Corp. 0 75 0 5
FLB 25,934,695.0 6,483,673.7 29,147,714.2 61,566,083.0
International 0 5 8 3
Fiber Corp.
Jantex 12,036,192.0 3,009,048.0 13,177,122.7 28,222,362.7
Philippines, Inc. 0 0 0 0
Jibtex 15,506,302.0 3,876,575.5 17,175,266.2 36,558,143.7
Industrial Corp. 0 0 7 7
Master 33,333,536.0 8,333,384.0 37,351,805.8 79,018,725.8
Colour system 0 0 8 8
Corp.
Spintex 14,912,408.0 3,728,102.0 16,298,640.5 34,939,150.5
International 0 0 9 9
Inc.
Total P253,900,54 P63,475,136 P283,393,67 P600,769,35
 7.00 .75 0.20 3.95

In addition, petitioner is ORDERED TO PAY the respondent TWENTY FIVE PERCENT

(25%) LATE PAYMENT SURCHARGE AND TWENTY PERCENT (20%) DELIQUENCY
INTEREST per annum on the amount of SIX HUNDRED MILLION SEVEN HUNDRED SIXTY
NINE THOUSAND THREE HUNDRED FIFTY THREE & 95/100 PESOS (P600,769,353.95),
computed from June 27, 2002 until the amount is fully paid.

SO ORDERED.[5]

The CTA Second Division held Petron liable for deficiency excise taxes on the ground
that the cancellation by the DOF of the TCCs previously issued to and utilized by
respondent to settle its tax liabilities had the effect of nonpayment of the latter’s excise
taxes. These taxes corresponded to the value of the TCCs Petron used for payment. The
CTA Second Division ruled that payment can only occur if the instrument used to
discharge an obligation represents its stated value.[6] It further ruled that Petron’s
acceptance of the TCCs was considered a contract entered into by respondent with the
CIR and subject to post-audit,[7] which was considered a suspensive condition governed
by Article 1181 of the Civil Code.[8]

Further, the CTA Second Division found that the circumstances pertaining to the
issuance of the subject TCCs and their transfer to Petron “brim with fraud.” [9] Hence, the
said court concluded that since the TCCs used by Petron were found to be spurious,
respondent was deemed to have not paid its excise taxes and ought to be liable to the
CIR in the amount of P600,769,353.95 plus 25% interests and 20% surcharges. [10]

Petron filed a Motion for Reconsideration[11] of the Decision of the CTA Second Division,
which denied the motion in a Resolution dated 14 August 2007. [12] The court reiterated
its conclusion that the TCCs utilized by Petron to pay the latter’s excise tax liabilities did
not result in payment after these TCCs were found to be fraudulent in the post-audit by
the DOF. The CTA Second Division also affirmed its ruling that Petron was liable for a
25%  late payment surcharge and 20% surcharges under Section 248 [13] of the National
Internal Revenue Code (NIRC) of 1997.[14]

Aggrieved, Petron appealed the Decision to the CTA En Banc through a Petition for
Review, which was docketed as CTA EB No. 311. In its Petition, Petron alleged that the
Second Division erred in holding respondent liable to pay the amount of ?
600,769,353.95 in deficiency excise taxes with penalties and interests covering the
taxable years 1995-1998. Petron prayed that the said Decision be reversed and set
aside, and that CIR be enjoined from collecting the contested excise tax deficiency
assessment.[15]

The CTA En Banc summed up into one issue the grounds relied upon by Petron in its
Petition for Review, as follows:

Whether or not the Second Division erred in holding petitioner liable for the
amount of P600,769,353.95 as deficiency excise taxes for the years 1995-1998, including
surcharges and interest, plus 25% surcharge and 20% delinquency interest per annum
from June 27, 2002 until the amount is fully paid.[16]

The Ruling of the Court of Tax Appeals En Banc

(CTA EB Case No. 311)

On 03 December 2008, the CTA En Banc promulgated a Decision, which reversed and set
aside the CTA Second Division on 04 May 2007. The former absolved Petron from any
deficiency excise tax liability for taxable years 1995 to 1998. Its ruling in favor of  Petron
was anchored on this Court’s pronouncements in Pilipinas Shell Petroleum Corp. v.
Commissioner of Internal Revenue (Shell), [17] which found that the factual background
and legal issues therein were similar to those in the present case.

In resolving the issues, the CTA En Banc adopted the main points in Shell, which it
quoted at length as basis for deciding the appeal in favor of  Petron. The gist of the main
points of Shell cited by the said court is as follows:

a) The issued TCCs are immediately valid and effective and are not subject to a
post-audit as a suspensive condition[18]

b) A TCC is subject only to the following conditions:

i) Post-audit in the event of a computational discrepancy
ii) A reduction for any outstanding account with the BIR and/or BOC
iii) A revalidation of the TCC if not utilized within one year from issuance or date of
utilization[19]
c) A transferee of a TCC should only be a BOI-registered firm under the
Implementing Rules and Regulations of Executive Order (E.O.) No. 226. [20]

d) The liability clause in the TCCs provides only for the solidary liability of the transferee
relative to its transfer in the event it is a party to the fraud. [21]

e) A transferee can rely on the Center’s approval of the TCCs’ transfer and subsequent
acceptance as payment of the transferee’s excise tax liability. [22]

f) A TCC cannot be cancelled by the Center, as it was already cancelled after the
transferee had applied it as payment for the latter’s excise tax liabilities. [23]

The CTA En Banc also found that Petron had no participation in or knowledge of the
fraudulent issuance and transfer of the subject TCCs. In fact, the parties made a joint
stipulation on this matter in CTA Case No. 6423 before the CTA Second Division. [24]

In resolving the issue of whether the government is estopped from collecting taxes due
to the fault of its agents, the CTA En Banc quoted Shell as follows:

While we agree with respondent that the State in the performance of

government function is not estopped by the neglect or omission of its agents, and
nowhere is this truer than in the field of taxation, yet this principle cannot be applied to
work injustice against an innocent party.[25] (Emphasis supplied.)

Finally, the CTA En Banc ruled that Petron was considered an innocent transferee of the
subject TCCs and may not be prejudiced by a re-assessment of excise tax liabilities that
respondent has already settled, when due, with the use of the TCCs. [26] Petron is thus
considered to have not fraudulently filed its excise tax returns. Consequently, the
assessment issued by the CIR against it had no legal basis. [27] The dispositive portion of
the assailed 03 December 2008 Decision of the CTA En Banc reads:

WHEREFORE, the instant petition for Review is hereby GRANTED. Accordingly,

the May 4, 2007 Decision and August 14, 2007 Resolution of the CTA Second Division in
CTA Case No. 6423 entitled, “Petron Corporation, petitioner vs. Commissioner of Internal
Revenue, respondent”, are hereby REVERSED and SET ASIDE. In addition, the demand
and collection of the deficiency excise taxes of PETRON in the amount of
P600,769,353.95 excluding penalties and interest covering the taxable years 1995 to
1998 are hereby CANCELLED and SET ASIDE, and respondent-Commissioner of Internal
Revenue is hereby ENJOINED from collecting the said amount from PETRON.

SO ORDERED.[28]
The CIR moved for the reconsideration of the CTA En Banc Decision, but the motion was
denied in a Resolution dated 14 August 2007.[29]

The Issues

The CIR appealed the Decision of the CTA En Banc by filing a Petition for Review on
Certiorari under Rule 45 of the Rules of Court.[30] Petitioner assails the Decision by
raising the following issues:

THE COURT OF TAX APPEALS COMMITTED REVERSIBLE ERROR IN HOLDING THAT

RESPONDENT PETRON IS NOT LIABLE FOR ITS EXCISE TAX LIABILITIES FROM 1995 TO
1998.

ARGUMENTS

THE CTA EN BANC ERRED IN FINDING THAT RESPONDENT PETRON WAS NOT SHOWN TO
HAVE PARTICIPATED IN THE FRAUDULENT ACTS. THE FINDING OF THE CTA SECOND
DIVISION THAT THE TAX CREDIT CERTIFICATES WERE FRAUDULENTLY TRANSFERRED BY
THE TRANSFEROR-COMPANIES TO RESPONDENT IS SUPPORTED BY SUBSTANTIAL
EVIDENCE. RESPONDENT WAS INVOLVED IN THE PERPETRATION OF FRAUD IN THE TCCS’
TRANSFER AND UTILIZATION.

II

RESPONDENT CANNOT VALIDLY CLAIM THE RIGHT OF INNOCENT TRANSFEREE FOR

VALUE. AS ASSIGNEE/TRANSFEREE OF THE TCCS, RESPONDENT MERELY SUCCEEDED TO
THE RIGHTS OF THE TCC ASSIGNORS/TRANSFERORS. ACCORDINGLY, IF THE TCCS
ASSIGNED TO RESPONDENT WERE VOID, IT DID NOT ACQUIRE ANY VALID TITLE OVER
THE TCCS.

III

THE GOVERNMENT IS NOT ESTOPPED FROM COLLECTING TAXES DUE TO THE MISTAKES
OF ITS AGENTS.

IV
RESPONDENT IS LIABLE FOR 25% SURCHARGE AND 20% INTEREST PER ANNUM
PURSUANT TO THE PROVISIONS OF SECTIONS 248 AND 249 OF THE NIRC. MOREOVER,
SINCE RESPONDENT’S RETURNS WERE FALSE, THE ASSESSMENT PRESCRIBES IN TEN (10)
YEARS FROM THE DISCOVERY OF THE FALSITY THEREOF PURSUANT TO SECTION 22 OF
THE SAME CODE.[31]

The Court’s Ruling

We DENY the CIR’s Petition for lack of merit.

Article 21 of E.O. 226 defines a tax credit as follows:

ARTICLE 21. “Tax credit” shall mean any of the credits against taxes and/or duties
equal to those actually paid or would have been paid to evidence which a tax credit
certificate shall be issued by the Secretary of Finance or his representative, or the Board,
if so delegated by the Secretary of Finance. The tax credit certificates including those
issued by the Board pursuant to laws repealed by this Code but without in any way
diminishing the scope of negotiability under their laws of issue are transferable under
such conditions as may be determined by the Board after consultation with the
Department of Finance. The tax credit certificate shall be used to pay taxes, duties,
charges and fees due to the National Government; Provided, That the tax credits issued
under this Code shall not form part of the gross income of the grantee/transferee for
income tax purposes under Section 29 of the National Internal Revenue Code and are
therefore not taxable: Provided, further, That such tax credits shall be valid only for a
period of ten (10) years from date of issuance.

Under Article 39 (j) of the Omnibus Investment Code of 1987, [32] tax credits are granted
to entities registered with the Bureau of Investment (BOI) and are given for taxes and
duties paid on raw materials used for the manufacture of their export products.

A TCC is defined under Section 1 of  Revenue Regulation (RR) No. 5-2000, issued by the
BIR on 15 August 2000, as follows:

B. Tax Credit Certificate — means a certification, duly issued to the taxpayer

named therein, by the Commissioner or his duly authorized representative, reduced in a
BIR Accountable Form in accordance with the prescribed formalities, acknowledging
that the grantee-taxpayer named therein is legally entitled a tax credit, the money value
of which may be used in payment or in satisfaction of any of his internal revenue tax
liability (except those excluded), or may be converted as a cash refund, or may
otherwise be disposed of in the manner and in accordance with the limitations, if any, as
may be prescribed by the provisions of these Regulations.

RR 5-2000 prescribes the regulations governing the manner of issuance of  TCCs and the
conditions for their use, revalidation and transfer. Under the said regulation, a TCC may
be used by the grantee or its assignee in the payment of its direct internal revenue tax
liability.[33] It may be transferred in favor of an assignee subject to the following
conditions: 1) the TCC transfer must be with prior approval of the Commissioner or the
duly authorized representative; 2) the transfer of a TCC should be limited to one
transfer only; and 3) the transferee shall strictly use the TCC for the payment of the
assignee’s direct internal revenue tax liability and shall not be convertible to cash. [34] A
TCC is valid only for 10 years subject to the following rules: (1) it must be utilized within
five (5) years from the date of issue; and (2) it must be revalidated thereafter or be
otherwise considered invalid.[35]

The processing of a TCC is entrusted to a specialized agency called the “One-Stop-Shop

Inter-Agency Tax Credit and Duty Drawback Center” (“Center”), created on 07 February
1992 under Administrative Order (A.O.) No. 226. Its purpose is to expedite the
processing and approval of tax credits and duty drawbacks. [36] The Center is composed
of a representative from the DOF as its chairperson; and the members thereof are
representatives of the Bureau of Investment (BOI), Bureau of Customs (BOC) and Bureau
of Internal Revenue (BIR), who are tasked to process the TCC and approve its application
as payment of an assignee’s tax liability.[37]

A TCC may be assigned through a Deed of Assignment, which the assignee submits to
the Center for its approval. Upon approval of the deed, the Center will issue a DOF Tax
Debit Memo (DOF-TDM),[38] which will be utilized by the assignee to pay the latter’s tax
liabilities for a specified period. Upon surrender of the TCC and the DOF-TDM, the
corresponding Authority to Accept Payment of Excise Taxes (ATAPET) will be issued by
the BIR Collection Program Division and will be submitted to the issuing office of the BIR
for acceptance by the Assistant Commissioner of Collection Service. This act of the BIR
signifies its acceptance of the TCC as payment of the assignee’s excise taxes.

Thus, it is apparent that a TCC undergoes a stringent process of verification by various

specialized government agencies before it is accepted as payment of an assignee’s tax
liability.

In the case at bar, the CIR disputes the ruling of the CTA En Banc, which found Petron to
have had no participation in the fraudulent procurement and transfer of the TCCs.
Petitioner believes that there was substantial evidence to support its allegation of a
fraudulent transfer of the TCCs to Petron.[39] The CIR further contends that respondent
was not a qualified transferee of the TCCs, because the latter did not supply petroleum
products to the companies that were the assignors of the subject TCCs. [40]

The CIR bases its contentions on the DOF’s post-audit findings stating that, for the
periods covering 1995 to 1998, Petron did not deliver fuel and other petroleum
products to the companies (the transferor companies) that had assigned the subject
TCCs to respondent. Petitioner further alleges that the findings indicate that the
transferor companies could not have had such a high volume of export sales declared to
the Center and made the basis for the issuance of the TCCs assigned to Petron. [41] Thus,
the CIR impugns the CTA En Banc ruling that respondent was a transferee in good faith
and for value of the subject TCCs.[42]

Not finding merit in the CIR’s contention, we affirm the ruling of the CTA En Banc finding
that Petron is a transferee in good faith and for value of the subject TCCs.

From the records, we observe that the CIR had no allegation that there was a deviation
from the process for the approval of the TCCs, which Petron used as payment to settle
its excise tax liabilities for the years 1995 to 1998.

The CIR quotes the CTA Second Division and urges us to affirm the latter’s Decision,
which found Petron to have participated in the fraudulent issuance and transfer of the
TCCs. However, any merit in the position of petitioner on this issue is negated by the
Joint Stipulation it entered into with Petron in the proceedings before the said Division.
As correctly noted by the CTA En Banc, herein parties jointly stipulated before the
Second Division in CTA Case No. 6423 as follows:

13. That petitioner (Petron) did not participate in the procurement and issuance
of the TCCs, which TCCs were transferred to Petron and later utilized by Petron in
payment of its excise taxes.[43]

This stipulation of fact by the CIR amounts to an admission and, having been made by
the parties in a stipulation of facts at pretrial, is treated as a judicial admission. Under
Section 4, Rule 129 of the Rules of Court, a judicial admission requires no proof. [44]  The
Court cannot lightly set it aside, especially when the opposing party relies upon it and
accordingly dispenses with further proof of the fact already admitted. The exception
provided in Rule 129, Section 4 is that an admission may be contradicted only by a
showing that it was made through a palpable mistake, or that no such admission was
made. In this case, however, exception to the rule does not exist.

We agree with the pronouncement of the CTA En Banc that Petron has not been shown
or proven to have participated in the alleged fraudulent acts involved in the transfer and
utilization of the subject TCCs. Petron had the right to rely on the joint stipulation that
absolved it from any participation in the alleged fraud pertaining to the issuance and
procurement of the subject TCCs. The joint stipulation made by the parties consequently
obviated the opportunity of the CIR to present evidence on this matter, as no proof is
required for an admission made by a party in the course of the proceedings. [45] Thus, the
CIR cannot now be allowed to change its stand and renege on that admission.

Moreover, a close examination of  the arguments proffered by the CIR in their Petition
calls for a reevaluation of the sufficiency of evidence in the case. The CIR seeks to
persuade this Court to believe that there is substantial evidence to prove that Petron
committed a misrepresentation, because the petroleum products were delivered not to
the transferor but to other companies.[46] Thus, the TCCs assigned by the transferor
companies to Petron were fraudulent. Clearly, a recalibration of the sufficiency of
evidence presented by the CIR is needed for a different conclusion to be reached.

The fundamental rule is that the scope of our judicial review under Rule 45 of the Rules
of Court is confined only to errors of  law and does not extend to questions of fact.[47] It
is basic that where it is the sufficiency of evidence that is being questioned, there is a
question of fact.[48] Evidently, the CIR does not point out any specific provision of law
that was wrongly interpreted by the CTA En Banc in the latter’s assailed Decision.
Petitioner anchors it contention on the alleged existence of the sufficiency of evidence it
had proffered to prove that Petron was involved in the perpetration of fraud in the
transfer and utilization of the subject TCCs, an allegation that the CTA En Banc failed to
consider. We have consistently held that it is not the function of this Court to analyze or
weigh the evidence all over again, unless there is a showing that the findings of the
lower court are totally devoid of support or are glaringly erroneous as to constitute
palpable error or grave abuse of discretion.[49] Such an exception does not obtain in the
circumstances of this case.
The CIR claims that Petron was not an innocent transferee for value, because the TCCs
assigned to respondent were void. Petitioner based its allegations on the post-audit
report of the DOF, which declared that the subject TCCs were obtained through fraud
and, thus, had no monetary value.[50] The CIR adds that the TCCs were subject to a post-
audit by the Center to complete the payment of the excise tax liability to which they
were applied. Petitioner further contends that the Liability Clause of the TCCs makes the
transferee or assignee solidarily liable with the original grantee for any fraudulent act
pertinent to their procurement and transfer. The CIR assails the contrary ruling of the
CTA En Banc, which confined the solidary liability only to the original grantee of the
TCCs. Thus, petitioner believes that the correct interpretation of the Liability Clause in
the TCCs makes Petron and the transferor companies or the original grantee solidarily
liable for any fraudulent act or violation of the pertinent laws relating to the transfers of
the TCCs. [51]

We are not persuaded by the CIR’s position on this matter.

The Liability Clause of the TCCs reads:

Both the TRANSFEROR and the TRANSFEREE shall be jointly and severally liable
for any fraudulent act or violation of the pertinent laws, rules and regulations relating to
the transfer of this TAX CREDIT CERTIFICATE.

The scope of this solidary liability, as stated in the TCCs, was clarified by this Court
in Shell, as follows:

The above clause to our mind clearly provides only for the solidary liability
relative to the transfer of the TCCs from the original grantee to a transferee. There is
nothing in the above clause that provides for the liability of the transferee in the event
that the validity of the TCC issued to the original grantee by the Center is impugned or
where the TCC is declared to have been fraudulently procured by the said original
grantee. Thus, the solidary liability, if any, applies only to the sale of the TCC to the
transferee by the original grantee. Any fraud or breach of law or rule relating to the
issuance of the TCC by the Center to the transferor or the original grantee is the latter's
responsibility and liability. The transferee in good faith and for value may not be
unjustly prejudiced by the fraud committed by the claimant or transferor in the
procurement or issuance of the TCC from the Center. It is not only unjust but well-nigh
violative of the constitutional right not to be deprived of one's property without due
process of law. Thus, a re-assessment of tax liabilities previously paid through TCCs by a
transferee in good faith and for value is utterly confiscatory, more so when surcharges
and interests are likewise assessed.

A transferee in good faith and for value of a TCC who has relied on the Center's
representation of the genuineness and validity of the TCC transferred to it may not be
legally required to pay again the tax covered by the TCC which has been belatedly
declared null and void, that is, after the TCCs have been fully utilized through settlement
of internal revenue tax liabilities. Conversely, when the transferee is party to the fraud
as when it did not obtain the TCC for value or was a party to or has knowledge of its
fraudulent issuance, said transferee is liable for the taxes and for the fraud committed
as provided for by law.[52] (Emphasis supplied.)

We also find that the post-audit report, on which the CIR based its allegations, does not
have the effect of a suspensive condition that would determine the validity of the TCCs.

We held in Petron v. CIR (Petron),[53] which is on all fours with the instant case, that TCCs
are valid and effective from their issuance and are not subject to a post-audit as a
suspensive condition for their validity. Our ruling in Petron finds guidance from our
earlier ruling in Shell, which categorically states that a TCC is valid and effective upon its
issuance and is not subject to a post-audit. The implication on the instant case of the
said earlier ruling is that Petron has the right to rely on the validity and effectivity of the
TCCs that were assigned to it. In finally determining their effectivity in the settlement of
respondent’s excise tax liabilities, the validity of those TCCs should not depend on the
results of the DOF’s post-audit findings. We held thus in Petron:

As correctly pointed out by Petron, however, the issue about the immediate
validity of TCCs and the use thereof in payment of tax liabilities and duties are not
matters of first impression for this Court. Taking into consideration the definition and
nature of tax credits and TCCs, this Court's Second Division definitively ruled in the
aforesaid Pilipinas Shell case that the post audit is not a suspensive condition for the
validity of TCCs, thus:

Art. 1181 tells us that the condition is suspensive when the acquisition of rights or
demandability of the obligation must await the occurrence of the condition. However,
Art. 1181 does not apply to the present case since the parties did NOT agree to a
suspensive condition. Rather, specific laws, rules, and regulations govern the subject
TCCs, not the general provisions of the Civil Code. Among the applicable laws that cover
the TCCs are EO 226 or the Omnibus Investments Code, Letter of Instructions No. 1355,
EO 765, RP-US Military Agreement, Sec. 106 (c) of the Tariff and Customs Code, Sec. 106
of the NIRC, BIR Revenue Regulations (RRs), and others. Nowhere in the aforementioned
laws does the post-audit become necessary for the validity or effectivity of the TCCs.
Nowhere in the aforementioned laws is it provided that a TCC is issued subject to a
suspensive condition.
xxx      xxx      xxx

. . . (T)he TCCs are immediately valid and effective after their issuance. As aptly pointed
out in the dissent of Justice Lovell Bautista in CTA EB No. 64, this is clear from the
Guidelines and instructions found at the back of each TCC, which provide:

1. This Tax Credit Certificate (TCC) shall entitle the grantee to apply the tax credit against
taxes and duties until the amount is fully utilized, in accordance with the pertinent tax
and customs laws, rules and regulations.

xxx      xxx      xxx

4. To acknowledge application of payment, the One-Stop-Shop Tax Credit Center shall

issue the corresponding Tax Debit Memo (TDM) to the grantee.

The authorized Revenue Officer/Customs Collector to which payment/utilization was

made shall accomplish the Application of Tax Credit at the back of the certificate and
affix his signature on the column provided."

The foregoing guidelines cannot be clearer on the validity and effectivity of the TCC to
pay or settle tax liabilities of the grantee or transferee, as they do not make the
effectivity and validity of the TCC dependent on the outcome of a post-audit. In fact, if
we are to sustain the appellate tax court, it would be absurd to make the effectivity of
the payment of a TCC dependent on a post-audit since there is no contemplation of the
situation wherein there is no post-audit. Does the payment made become effective if no
post-audit is conducted? Or does the so-called suspensive condition still apply as no law,
rule, or regulation specifies a period when a post-audit should or could be conducted
with a prescriptive period? Clearly, a tax payment through a TCC cannot be both
effective when made and dependent on a future event for its effectivity. Our system of
laws and procedures abhors ambiguity.

Moreover, if the TCCs are considered to be subject to post-audit as a suspensive

condition, the very purpose of the TCC would be defeated as there would be no
guarantee that the TCC would be honored by the government as payment for taxes. No
investor would take the risk of utilizing TCCs if these were subject to a post-audit that
may invalidate them, without prescribed grounds or limits as to the exercise of said
post-audit.

The inescapable conclusion is that the TCCs are not subject to post-audit as a suspensive
condition, and are thus valid and effective from their issuance. [54]

In addition, Shell and Petron recognized an exception that holds the transferee/assignee

liable if proven to have been a party to the fraud or to have had knowledge of the
fraudulent issuance of the subject TCCs. As earlier mentioned, the parties entered into a
joint stipulation of facts stating that Petron did not participate in the procurement or
issuance of those TCCs. Thus, we affirm the CTA En Banc’s ruling that respondent was an
innocent transferee for value thereof.

On the issue of estoppel, petitioner contends that the TCCs, which the Center had
continually approved as payment for respondent’s excise tax liabilities, were
subsequently found to be void. Thus, the CIR insists that the government is not
estopped from collecting from Petron the excise tax liabilities that had accrued to the
latter as a result of the voidance of these TCCs. Petitioner argues that the State should
not be prejudiced by the neglect or omission of government employees entrusted with
the collection of taxes.[55]

We are not persuaded by the CIR’s argument.

We recognize the well-entrenched principle that estoppel does not apply to the
government, especially on matters of taxation. Taxes are the nation’s lifeblood through
which government agencies continue to operate and with which the State discharges its
functions for the welfare of its constituents.[56] As an exception, however, this general
rule cannot be applied if it would work injustice against an innocent party. [57]

Petron, in this case, was not proven to have had any participation in or knowledge of 
the CIR’s allegation of  the fraudulent transfer and utilization of  the subject TCCs.
Respondent’s status as a transferee in good faith and for value of these TCCs has been
established and even stipulated upon by petitioner. [58] Respondent was thereby
provided ample protection from the adverse findings subsequently made by the Center.
[59]
 Given the circumstances, the CIR’s invocation of the non-applicability of estoppel in
this case is misplaced.

On the final issue it raised, the CIR contends that a 25% surcharge and a 20% interest
per annum must be imposed upon Petron for respondent’s excise tax liabilities as
mandated under Sections 248 and 249 of the National Internal Revenue Code (NIRC).
[60]
 Petitioner considers the tax returns filed by respondent for the years 1995 to 1998 as
fraudulent on the basis of the post-audit finding that the TCCs were void. It argues that
the prescriptive period within which to lawfully assess Petron for its tax liabilities has
not prescribed under Section 222 (a)[61] of the Tax Code. The CIR explains that
respondent’s assessment on 30 January 2002 of respondent’s deficiency excise tax for
the years 1995 to 1998 was well within the ten-year prescription period. [62]

In the light of the main ruling in this case, we affirm the CTA En Banc Decision finding
Petron to be an innocent transferee for value of the subject TCCs. Consequently, the Tax
Returns it filed for the years 1995 to 1998 are not considered fraudulent. Hence, the CIR
had no legal basis to assess the excise taxes or any penalty surcharge or interest
thereon, as respondent had already paid the appropriate excise taxes using the subject
TCCs.

WHEREFORE, the CIR’s Petition is DENIED for lack of merit. The CTA En Banc Decision
dated 03 December 2008 in CTA EB No. 311 is hereby AFFIRMED in toto. No
pronouncement as to costs.

SO ORDERED.

THIRD DIVISION
[ G.R. No. 171995, April 18, 2012 ]
STEELCASE, INC., PETITIONER, VS. DESIGN INTERNATIONAL
SELECTIONS, INC., RESPONDENT.

DECISION

MENDOZA, J.:
 This is a petition for review on certiorari under Rule 45 assailing the March 31,
2005 Decision[1] of the Court of Appeals (CA) which affirmed the May 29, 2000 Order[2] of
the Regional Trial Court, Branch 60, Makati City (RTC), dismissing the complaint for sum
of money in Civil Case No. 99-122 entitled “Steelcase, Inc. v. Design International
Selections, Inc.”

The Facts

Petitioner Steelcase, Inc. (Steelcase) is a foreign corporation existing under the laws of

Michigan, United States of America (U.S.A.), and engaged in the manufacture of office
furniture with dealers worldwide.[3] Respondent Design International Selections,
Inc. (DISI) is a corporation existing under Philippine Laws and engaged in the furniture
business, including the distribution of furniture. [4]

Sometime in 1986 or 1987, Steelcase and DISI orally entered into a dealership
agreement whereby Steelcase granted DISI the right to market, sell, distribute, install,
and service its products to end-user customers within the Philippines.  The business
relationship continued smoothly until it was terminated sometime in January 1999 after
the agreement was breached with neither party admitting any fault. [5]

On January 18, 1999, Steelcase filed a complaint[6] for sum of money against DISI
alleging, among others, that DISI had an unpaid account of US$600,000.00.  Steelcase
prayed that DISI be ordered to pay actual or compensatory damages, exemplary
damages, attorney’s fees, and costs of suit.

In its Answer with Compulsory Counterclaims[7] dated February 4, 1999, DISI sought the
following: (1) the issuance of a temporary restraining order (TRO) and a writ of
preliminary injunction to enjoin Steelcase from selling its products in the Philippines
except through DISI; (2) the dismissal of the complaint for lack of merit; and (3) the
payment of actual, moral and exemplary damages together with attorney’s fees and
expenses of litigation.  DISI alleged that the complaint failed to state a cause of action
and to contain the required allegations on Steelcase’s capacity to sue in the Philippines
despite the fact that it (Steelcase) was doing business in the Philippines without the
required license to do so.  Consequently, it posited that the complaint should be
dismissed because of Steelcase’s lack of legal capacity to sue in Philippine courts.

On March 3, 1999, Steelcase filed its Motion to Admit Amended Complaint [8] which was
granted by the RTC, through then Acting Presiding Judge Roberto C. Diokno, in its
Order[9] dated April 26, 1999.  However, Steelcase sought to further amend its complaint
by filing a Motion to Admit Second Amended Complaint[10] on March 13, 1999.

In his Order[11] dated November 15, 1999, Acting Presiding Judge Bonifacio Sanz Maceda
dismissed the complaint, granted the TRO prayed for by DISI, set aside the April 26,
1999 Order of the RTC admitting the Amended Complaint, and denied Steelcase’s
Motion to Admit Second Amended Complaint.  The RTC stated that in requiring DISI to
meet the Dealer Performance Expectation and in terminating the dealership agreement
with DISI based on its failure to improve its performance in the areas of business
planning, organizational structure, operational effectiveness, and efficiency, Steelcase
unwittingly revealed that it participated in the operations of DISI.  It then concluded that
Steelcase was “doing business” in the Philippines, as contemplated by Republic Act
(R.A.) No. 7042 (The Foreign Investments Act of 1991), and since it did not have the
license to do business in the country, it was barred from seeking redress from our courts
until it obtained the requisite license to do so. Its determination was further bolstered
by the appointment by Steelcase of a representative in the Philippines. Finally, despite a
showing that DISI transacted with the local customers in its own name and for its own
account, it was of the opinion that any doubt in the factual environment should be
resolved in favor of a pronouncement that a foreign corporation was doing business in
the Philippines, considering the twelve-year period that DISI had been distributing
Steelcase products in the Philippines.

Steelcase moved for the reconsideration of the questioned Order but the motion was
denied by the RTC in its May 29, 2000 Order.[12]

Aggrieved, Steelcase elevated the case to the CA by way of appeal, assailing the
November 15, 1999 and May 29, 2000 Orders of the RTC.  On March 31, 2005, the CA
rendered its Decision affirming the RTC orders, ruling that Steelcase was a foreign
corporation doing or transacting business in the Philippines without a license.  The CA
stated that the following acts of Steelcase showed its intention to pursue and continue
the conduct of its business in the Philippines: (1) sending a letter to Phinma, informing
the latter that the distribution rights for its products would be established in the near
future and directing other questions about orders for Steelcase products to Steelcase
International; (2) cancelling orders from DISI’s customers, particularly Visteon, Phils.,
Inc. (Visteon); (3) continuing to send its products to the Philippines through
Modernform Group Company Limited (Modernform), as evidenced by an Ocean Bill of
Lading; and (4) going  beyond the mere appointment of DISI as a dealer by making
several impositions on management and operations of DISI.  Thus, the CA ruled that
Steelcase was barred from access to our courts for being a foreign corporation doing
business here without the requisite license to do so.

Steelcase filed a motion for reconsideration but it was denied by the CA in its Resolution
dated March 23, 2006.[13]

Hence, this petition.

The Issues

Steelcase filed the present petition relying on the following grounds:

THE COURT OF APPEALS COMMITTED REVERSIBLE ERROR WHEN IT FOUND THAT

STEELCASE HAD BEEN “DOING BUSINESS” IN THE PHILIPPINES WITHOUT A LICENSE.

II

THE COURT OF APPEALS COMMITTED REVERSIBLE ERROR IN NOT FINDING THAT

RESPONDENT WAS ESTOPPED FROM CHALLENGING STEELCASE’S LEGAL CAPACITY TO
SUE, AS AN AFFIRMATIVE DEFENSE IN ITS ANSWER.

The issues to be resolved in this case are:

(1) Whether or not Steelcase is doing business in the Philippines without a license; and

(2) Whether or not DISI is estopped from challenging the Steelcase’s legal capacity to
sue.

The Court’s Ruling

The Court rules in favor of the petitioner.

Steelcase is an unlicensed foreign

corporation NOT doing business
in the Philippines

Anent the first issue, Steelcase argues that Section 3(d) of R.A. No. 7042 or the Foreign
Investments Act of 1991 (FIA) expressly states that the phrase “doing business” excludes
the appointment by a foreign corporation of a local distributor domiciled in the
Philippines which transacts business in its own name and for its own account.  Steelcase
claims that it was not doing business in the Philippines when it entered into a dealership
agreement with DISI where the latter, acting as the former’s appointed local distributor,
transacted business in its own name and for its own account.  Specifically, Steelcase
contends that it was DISI that sold Steelcase’s furniture directly to the end-users or
customers who, in turn, directly paid DISI for the furniture they bought.  Steelcase
further claims that DISI, as a non-exclusive dealer in the Philippines, had the right to
market, sell, distribute and service Steelcase products in its own name and for its own
account.  Hence, DISI was an independent distributor of Steelcase products, and not a
mere agent or conduit of Steelcase.

On the other hand, DISI argues that it was appointed by Steelcase as the latter’s
exclusive distributor of Steelcase products.  DISI likewise asserts that it was not allowed
by Steelcase to transact business in its own name and for its own account as Steelcase
dictated the manner by which it was to conduct its business, including the management
and solicitation of orders from customers, thereby assuming control of its operations.
DISI further insists that Steelcase treated and considered DISI as a mere conduit, as
evidenced by the fact that Steelcase itself directly sold its products to customers located
in the Philippines who were classified as part of their “global accounts.”  DISI cited other
established circumstances which prove that Steelcase was doing business in the
Philippines including the following: (1) the sale and delivery by Steelcase of furniture to
Regus, a Philippine client, through Modernform, a Thai corporation allegedly controlled
by Steelcase; (2) the imposition by Steelcase of certain requirements over the
management and operations of DISI; (3) the representations made by Steven Husak as
Country Manager of Steelcase; (4) the cancellation by Steelcase of orders placed by
Philippine clients; and (5) the expression by Steelcase of its desire to maintain its
business in the Philippines. Thus, Steelcase has no legal capacity to sue in Philippine
Courts because it was doing business in the Philippines without a license to do so.

The Court agrees with the petitioner.

The rule that an unlicensed foreign corporations doing business in the Philippine do not
have the capacity to sue before the local courts is well-established.  Section 133 of the
Corporation Code of the Philippines explicitly states:

Sec. 133. Doing business without a license. - No foreign corporation transacting

business in the Philippines without a license, or its successors or assigns, shall be
permitted to maintain or intervene in any action, suit or proceeding in any court or
administrative agency of the Philippines; but such corporation may be sued or
proceeded against before Philippine courts or administrative tribunals on any valid
cause of action recognized under Philippine laws.

The phrase “doing business” is clearly defined in Section 3(d) of R.A. No. 7042 (Foreign
Investments Act of 1991), to wit:

d) The phrase “doing business” shall include soliciting orders, service contracts,
opening offices, whether called “liaison” offices or branches; appointing representatives
or distributors domiciled in the Philippines or who in any calendar year stay in the
country for a period or periods totalling one hundred eighty (180) days or more;
participating in the management, supervision or control of any domestic business, firm,
entity or corporation in the Philippines; and any other act or acts that imply a continuity
of commercial dealings or arrangements, and contemplate to that extent the
performance of acts or works, or the exercise of some of the functions normally incident
to, and in progressive prosecution of, commercial gain or of the purpose and object of
the business organization: Provided, however, That the phrase “doing business” shall
not be deemed to include mere investment as a shareholder by a foreign entity in
domestic corporations duly registered to do business, and/or the exercise of rights as
such investor; nor having a nominee director or officer to represent its interests in such
corporation; nor appointing a representative or distributor domiciled in the Philippines
which transacts business in its own name and for its own account; (Emphases
supplied)

This definition is supplemented by its Implementing Rules and Regulations, Rule I,

Section 1(f) which elaborates on the meaning of the same phrase:

f.  “Doing business” shall include soliciting orders, service contracts, opening
offices, whether liaison offices or branches; appointing representatives or distributors,
operating under full control of the foreign corporation, domiciled in the Philippines or
who in any calendar year stay in the country for a period totalling one hundred
eighty [180] days or more; participating in the management, supervision or control of any
domestic business, firm, entity or corporation in the Philippines; and any other act or
acts that imply a continuity of commercial dealings or arrangements, and contemplate
to that extent the performance of acts or works, or the exercise of some of the
functions normally incident to and in progressive prosecution of commercial gain or of
the purpose and object of the business organization.

The following acts shall not be deemed “doing business” in the Philippines:

1.  Mere investment as a shareholder by a foreign entity in domestic corporations duly

registered to do business, and/or the exercise of rights as such investor;

2.  Having a nominee director or officer to represent its interest in such corporation;

3.  Appointing a representative or distributor domiciled in the Philippines which

transacts business in the representative's or distributor's own name and account;

4.  The publication of a general advertisement through any print or broadcast media;

5.  Maintaining a stock of goods in the Philippines solely for the purpose of having the
same processed by another entity in the Philippines;

6.  Consignment by a foreign entity of equipment with a local company to be used in the
processing of products for export;

7.  Collecting information in the Philippines; and

8.  Performing services auxiliary to an existing isolated contract of sale which are not on
a continuing basis, such as installing in the Philippines machinery it has manufactured or
exported to the Philippines, servicing the same, training domestic workers to operate it,
and similar incidental services. (Emphases supplied)

From the preceding citations, the appointment of a distributor in the Philippines is not
sufficient to constitute “doing business” unless it is under the full control of the foreign
corporation.  On the other hand, if the distributor is an independent entity which buys
and distributes products, other than those of the foreign corporation, for its own name
and its own account, the latter cannot be considered to be doing business in the
Philippines.[14]  It should be kept in mind that the determination of whether a foreign
corporation is doing business in the Philippines must be judged in light of the attendant
circumstances.[15]

In the case at bench, it is undisputed that DISI was founded in 1979 and is independently
owned and managed by the spouses Leandro and Josephine Bantug. [16]  In addition to
Steelcase products, DISI also distributed products of other companies including carpet
tiles, relocatable walls and theater settings. [17]  The dealership agreement between
Steelcase and DISI had been described by the owner himself as:

xxx basically a buy and sell arrangement whereby we would inform Steelcase of

the volume of the products needed for a particular project and Steelcase would, in turn,
give ‘special quotations’ or discounts after considering the value of the entire package. 
In making the bid of the project, we would then add out profit margin over Steelcase’s
prices.  After the approval of the bid by the client, we would thereafter place the orders
to Steelcase.  The latter, upon our payment, would then ship the goods to the
Philippines, with us shouldering the freight charges and taxes. [18] [Emphasis supplied]

This clearly belies DISI’s assertion that it was a mere conduit through which Steelcase
conducted its business in the country.  From the preceding facts, the only reasonable
conclusion that can be reached is that DISI was an independent contractor, distributing
various products of Steelcase and of other companies, acting in its own name and for its
own account.

The CA, in finding Steelcase to be unlawfully engaged in business in the Philippines, took
into consideration the delivery by Steelcase of a letter to Phinma informing the latter
that the distribution rights for its products would be established in the near future, and
also its cancellation of orders placed by Visteon. The foregoing acts were apparently
misinterpreted by the CA.  Instead of supporting the claim that Steelcase was doing
business in the country, the said acts prove otherwise. It should be pointed out that no
sale was concluded as a result of these communications.  Had Steelcase indeed been
doing business in the Philippines, it would have readily accepted and serviced the orders
from the abovementioned Philippine companies.  Its decision to voluntarily cease to sell
its products in the absence of a local distributor indicates its refusal to engage in
activities which might be construed as “doing business.”

Another point being raised by DISI is the delivery and sale of Steelcase products to a
Philippine client by Modernform allegedly an agent of Steelcase. Basic is the rule in
corporation law that a corporation has a separate and distinct personality from its
stockholders and from other corporations with which it may be connected. [19]  Thus,
despite the admission by Steelcase that it owns 25% of Modernform, with the remaining
75% being owned and controlled by Thai stockholders,[20] it is grossly insufficient to
justify piercing the veil of corporate fiction and declare that Modernform acted as the
alter ego of Steelcase to enable it to improperly conduct business in the Philippines. 
The records are bereft of any evidence which might lend even a hint of credence to
DISI’s assertions.  As such, Steelcase cannot be deemed to have been doing business in
the Philippines through Modernform.

Finally, both the CA and DISI rely heavily on the Dealer Performance Expectation
required by Steelcase of its distributors to prove that DISI was not functioning
independently from Steelcase because the same imposed certain conditions pertaining
to business planning, organizational structure, operational effectiveness and efficiency,
and financial stability.  It is actually logical to expect that Steelcase, being one of the
major manufacturers of office systems furniture, would require its dealers to meet
several conditions for the grant and continuation of a distributorship agreement. The
imposition of minimum standards concerning sales, marketing, finance and operations is
nothing more than an exercise of sound business practice to increase sales and
maximize profits for the benefit of both Steelcase and its distributors.  For as long as
these requirements do not impinge on a distributor’s independence, then there is
nothing wrong with placing reasonable expectations on them.

All things considered, it has been sufficiently demonstrated that DISI was an
independent contractor which sold Steelcase products in its own name and for its own
account.  As a result, Steelcase cannot be considered to be doing business in the
Philippines by its act of appointing a distributor as it falls under one of the exceptions
under R.A. No. 7042.

DISI is estopped from challenging

Steelcase’s legal capacity to sue 

Regarding the second issue, Steelcase argues that assuming arguendo that it had been
“doing business” in the Philippines without a license, DISI was nonetheless estopped
from challenging Steelcase’s capacity to sue in the Philippines.  Steelcase claims that
since DISI was aware that it was doing business in the Philippines without a license and
had benefited from such business, then DISI should be estopped from raising the
defense that Steelcase lacks the capacity to sue in the Philippines by reason of its doing
business without a license.

On the other hand, DISI argues that the doctrine of estoppel cannot give Steelcase the
license to do business in the Philippines or permission to file suit in the Philippines.  DISI
claims that when Steelcase entered into a dealership agreement with DISI in 1986, it
was not doing business in the Philippines.  It was after such dealership was put in place
that it started to do business without first obtaining the necessary license.  Hence,
estoppel cannot work against it.  Moreover, DISI claims that it suffered as a result of
Steelcase’s “doing business” and that it never benefited from the dealership and, as
such, it cannot be estopped from raising the issue of lack of capacity to sue on the part
of Steelcase.

The argument of Steelcase is meritorious.

If indeed Steelcase had been doing business in the Philippines without a license, DISI
would nonetheless be estopped from challenging the former’s legal capacity to sue.

It cannot be denied that DISI entered into a dealership agreement with Steelcase and
profited from it for 12 years from 1987 until 1999.  DISI admits that it complied with its
obligations under the dealership agreement by exerting more effort and making
substantial investments in the promotion of Steelcase products.  It also claims that it
was able to establish a very good reputation and goodwill for Steelcase and its products,
resulting in the establishment and development of a strong market for Steelcase
products in the Philippines. Because of this, DISI was very proud to be awarded the
“Steelcase International Performance Award” for meeting sales objectives, satisfying
customer needs, managing an effective company and making a profit. [21]

Unquestionably, entering into a dealership agreement with Steelcase  charged DISI with
the knowledge that Steelcase was not licensed to engage in business activities in the
Philippines. This Court has carefully combed the records and found no proof that, from
the inception of the dealership agreement in 1986 until September 1998, DISI even
brought to Steelcase’s attention that it was improperly doing business in the Philippines
without a license.  It was only towards the latter part of 1998 that DISI deemed it
necessary to inform Steelcase of the impropriety of the conduct of its business without
the requisite Philippine license.  It should, however, be noted that DISI only raised the
issue of the absence of a license with Steelcase after it was informed that it owed the
latter US$600,000.00 for the sale and delivery of its products under their special credit
arrangement.

By acknowledging the corporate entity of Steelcase and entering into a dealership

agreement with it and even benefiting from it, DISI is estopped from questioning
Steelcase’s existence and capacity to sue.  This is consistent with the Court’s ruling
in Communication Materials and Design, Inc. v. Court of Appeals [22] where it was written:

Notwithstanding such finding that ITEC is doing business in the country,

petitioner is nonetheless estopped from raising this fact to bar ITEC from instituting this
injunction case against it.

A foreign corporation doing business in the Philippines may sue in Philippine Courts
although not authorized to do business here against a Philippine citizen or entity who
had contracted with and benefited by said corporation. To put it in another way, a
party is estopped to challenge the personality of a corporation after having
acknowledged the same by entering into a contract with it. And the doctrine of
estoppel to deny corporate existence applies to a foreign as well as to domestic
corporations. One who has dealt with a corporation of foreign origin as a corporate
entity is estopped to deny its corporate existence and capacity: The principle will be
applied to prevent a person contracting with a foreign corporation from later taking
advantage of its noncompliance with the statutes chiefly in cases where such person has
received the benefits of the contract.

The rule is deeply rooted in the time-honored axiom of Commodum ex injuria sua non
habere debet — no person ought to derive any advantage of his own wrong. This is as
it should be for as mandated by law, “every person must in the exercise of his rights
and in the performance of his duties, act with justice, give everyone his due, and
observe honesty and good faith.”

Concededly, corporations act through agents, like directors and officers. Corporate
dealings must be characterized by utmost good faith and fairness. Corporations cannot
just feign ignorance of the legal rules as in most cases, they are manned by
sophisticated officers with tried management skills and legal experts with practiced eye
on legal problems. Each party to a corporate transaction is expected to act with utmost
candor and fairness and, thereby allow a reasonable proportion between benefits and
expected burdens. This is a norm which should be observed where one or the other is a
foreign entity venturing in a global market.
xxx

By entering into the "Representative Agreement" with ITEC, petitioner is charged with
knowledge that ITEC was not licensed to engage in business activities in the country, and
is thus estopped from raising in defense such incapacity of ITEC, having chosen to ignore
or even presumptively take advantage of the same.[23] (Emphases supplied)

The case of Rimbunan Hijau Group of Companies v. Oriental Wood Processing

Corporation[24] is likewise instructive:

Respondent’s unequivocal admission of the transaction which gave rise to the

complaint establishes the applicability of estoppel against it. Rule 129, Section 4 of the
Rules on Evidence provides that a written admission made by a party in the course of
the proceedings in the same case does not require proof. We held in the case of Elayda
v. Court of Appeals, that an admission made in the pleadings cannot be controverted by
the party making such admission and are conclusive as to him. Thus, our consistent
pronouncement, as held in cases such as Merril Lynch Futures v. Court of Appeals, is
apropos:

The rule is that a party is estopped to challenge the personality of a corporation

after having acknowledged the same by entering into a contract with it. And the
‘doctrine of estoppel to deny corporate existence applies to foreign as well as to
domestic corporations;’ “one who has dealt with a corporation of foreign origin as a
corporate entity is estopped to deny its existence and capacity.” The principle “will be
applied to prevent a person contracting with a foreign corporation from later taking
advantage of its noncompliance with the statutes, chiefly in cases where such person
has received the benefits of the contract . . .”

All things considered, respondent can no longer invoke petitioner’s lack of capacity to
sue in this jurisdiction. Considerations of fair play dictate that after having contracted
and benefitted from its business transaction with Rimbunan, respondent should be
barred from questioning the latter’s lack of license to transact business in the
Philippines.

In the case of Antam Consolidated, Inc. v. CA, this Court noted that it is a common ploy
of defaulting local companies which are sued by unlicensed foreign corporations not
engaged in business in the Philippines to invoke the latter’s lack of capacity to sue. This
practice of domestic corporations is particularly reprehensible considering that in
requiring a license, the law never intended to prevent foreign corporations from
performing single or isolated acts in this country, or to favor domestic corporations who
renege on their obligations to foreign firms unwary enough to engage in solitary
transactions with them. Rather, the law was intended to bar foreign corporations from
acquiring a domicile for the purpose of business without first taking the steps necessary
to render them amenable to suits in the local courts. It was to prevent the foreign
companies from enjoying the good while disregarding the bad.

As a matter of principle, this Court will not step in to shield defaulting local companies
from the repercussions of their business dealings. While the doctrine of lack of
capacity to sue based on failure to first acquire a local license may be resorted to in
meritorious cases, it is not a magic incantation. It cannot be called upon when no
evidence exists to support its invocation or the facts do not warrant its application. In
this case, that the respondent is estopped from challenging the petitioners’ capacity to
sue has been conclusively established, and the forthcoming trial before the lower court
should weigh instead on the other defenses raised by the respondent. [25] (Emphases
supplied)

As shown in the previously cited cases, this Court has time and again upheld the
principle that a foreign corporation doing business in the Philippines without a license
may still sue before the Philippine courts a Filipino or a Philippine entity that had
derived some benefit from their contractual arrangement because the latter is
considered to be estopped from challenging the personality of a corporation after it had
acknowledged the said corporation by entering into a contract with it. [26]

In Antam Consolidated, Inc. v. Court of Appeals, [27] this Court had the occasion to draw
attention to the common ploy of invoking the incapacity to sue of an unlicensed foreign
corporation utilized by defaulting domestic companies which seek to avoid the suit by
the former.  The Court cannot allow this to continue by always ruling in favor of local
companies, despite the injustice to the overseas corporation which is left with no
available remedy.

During this period of financial difficulty, our nation greatly needs to attract more foreign
investments and encourage trade between the Philippines and other countries in order
to rebuild and strengthen our economy.  While it is essential to uphold the sound public
policy behind the rule that denies unlicensed foreign corporations doing business in the
Philippines access to our courts, it must never be used to frustrate the ends of justice by
becoming an all-encompassing shield to protect unscrupulous domestic enterprises
from foreign entities seeking redress in our country.  To do otherwise could seriously
jeopardize the desirability of the Philippines as an investment site and would possibly
have the deleterious effect of hindering trade between Philippine companies and
international corporations.

WHEREFORE, the March 31, 2005 Decision of the Court of Appeals and its March 23,
2006 Resolution are hereby REVERSED and SET ASIDE. The dismissal order of the
Regional Trial Court dated November 15, 1999 is hereby set aside.  Steelcase’s Amended
Complaint is hereby ordered REINSTATED and the case is REMANDED to the RTC for
appropriate action.

SO ORDERED.

FIRST DIVISION
[ G.R. No. 182864, January 12, 2015 ]
EASTERN SHIPPING LINES, INC., PETITIONER, VS. BPI/MS INSURANCE
CORP., & MITSUI SUMITOMO INSURANCE CO., LTD., RESPONDENTS.

DECISION

PEREZ, J.:

Before this Court is a Petition for Review on Certiorari[1] of the Decision[2] of the Second
Division of the Court of Appeals in CA-G.R. CV No. 88744 dated 31 January 2008,
modifying the Decision of the Regional Trial Court (RTC) by upholding the liability of
Eastern Shipping Lines, Inc. (ESLI) but absolving Asian Terminals, Inc. (ATI) from
liability and deleting the award of attorney’s fees.

The facts gathered from the records follow:

On 29 December 2004, BPI/MS Insurance Corporation (BPI/MS) and Mitsui Sumitomo

Insurance Company Limited (Mitsui) filed a Complaint[3] before the RTC of Makati City
against ESLI and ATI to recover actual damages amounting to US$17,560.48 with legal
interest, attorney’s fees and costs of suit.

In their complaint, BPI/MS and Mitsui alleged that on 2 February 2004 at Yokohama,
Japan, Sumitomo Corporation shipped on board ESLI’s vessel M/V “Eastern Venus 22”
22 coils of various Steel Sheet weighing 159,534 kilograms in good order and condition
for transportation to and delivery at the port of Manila, Philippines in favor of consignee
Calamba Steel Center, Inc. (Calamba Steel) located in Saimsim, Calamba, Laguna as
evidenced by a Bill of Lading with Nos. ESLIYMA001. The declared value of the
shipment was US$83,857.59 as shown by an Invoice with Nos. KJGE-03-1228-NT/KE3.
The shipment was insured with the respondents BPI/MS and Mitsui against all risks
under Marine Policy No. 103-GG03448834.

On 11 February 2004, the complaint alleged that the shipment arrived at the port of
Manila in an unknown condition and was turned over to ATI for safekeeping. Upon
withdrawal of the shipment by the Calamba Steel’s representative, it was found out that
part of the shipment was damaged and was in bad order condition such that there was a
Request for Bad Order Survey. It was found out that the damage amounted to
US$4,598.85 prompting Calamba Steel to reject the damaged shipment for being unfit for
the intended purpose.

On 12 May 2004 at Kashima, Japan, Sumitomo Corporation again shipped on board

ESLI’s vessel M/V “Eastern Venus 25” 50 coils in various Steel Sheet weighing 383,532
kilograms in good order and condition for transportation to and delivery at the port of
Manila, Philippines in favor of the same consignee Calamba Steel as evidenced by a Bill
of Lading with Nos. ESLIKSMA002. The declared value of the shipment was
US$221,455.58 as evidenced by Invoice Nos. KJGE-04-1327-NT/KE2. The shipment
was insured with the respondents BPI/MS and Mitsui against all risks under Marine
Policy No. 104-GG04457785.

On 21 May 2004, ESLI’s vessel with the second shipment arrived at the port of Manila
partly damaged and in bad order. The coils sustained further damage during the discharge
from vessel to shore until its turnover to ATI’s custody for safekeeping.

Upon withdrawal from ATI and delivery to Calamba Steel, it was found out that the
damage amounted to US$12,961.63. As it did before, Calamba Steel rejected the
damaged shipment for being unfit for the intended purpose.

Calamba Steel attributed the damages on both shipments to ESLI as the carrier and ATI
as the arrastre operator in charge of the handling and discharge of the coils and filed a
claim against them. When ESLI and ATI refused to pay, Calamba Steel filed an insurance
claim for the total amount of the cargo against BPI/MS and Mitsui as cargo insurers. As a
result, BPI/MS and Mitsui became subrogated in place of and with all the rights and
defenses accorded by law in favor of Calamba Steel.

Opposing the complaint, ATI, in its Answer, denied the allegations and insisted that the
coils in two shipments were already damaged upon receipt from ESLI’s vessels. It
likewise insisted that it exercised due diligence in the handling of the shipments and
invoked that in case of adverse decision, its liability should not exceed P5,000.00
pursuant to Section 7.01, Article VII[4] of the Contract for Cargo Handling Services
between Philippine Ports Authority (PPA) and ATI.[5] A cross-claim was also filed
against ESLI.

On its part, ESLI denied the allegations of the complainants and averred that the damage
to both shipments was incurred while the same were in the possession and custody of
ATI and/or of the consignee or its representatives. It also filed a cross-claim against ATI
for indemnification in case of liability.[6]

To expedite settlement, the case was referred to mediation but it was returned to the trial
court for further proceedings due to the parties’ failure to resolve the legal issues as noted
in the Mediator’s Report dated 28 June 2005.[7]

On 10 January 2006, the court issued a Pre-Trial Order wherein the following stipulations
were agreed upon by the parties:

1. Parties admitted the capacity of the parties to sue and be sued;

2. Parties likewise admitted the existence and due execution of the Bill of
Lading covering various steel sheets in coil attached to the Complaint as
Annex A;

3. Parties admitted the existence of the Invoice issued by Sumitomo

Corporation, a true and faithful copy of which was attached to the
Complaint as Annex B;

4. Parties likewise admitted the existence of the Marine Cargo Policy issued
by the Mitsui Sumitomo Insurance Company, Limited, copy of which was
attached to the Complaint as Annex C;

5. [ATI] admitted the existence and due execution of the Request for Bad
Order Survey dated February 13, 2004, attached to the Complaint as Annex
D;

6. Insofar as the second cause of action, [ESLI] admitted the existence and
due execution of the document [Bill of Lading Nos. ESLIKSMA002,
Invoice with Nos. KJGE-04-1327-NT/KE2 and Marine Cargo Policy
against all risks on the second shipment] attached to the Complaint as
Annexes E, F and G;

7. [ATI] admitted the existence of the Bill of Lading together with the
Invoices and Marine Cargo Policy. [It] likewise admitted by [ATI] are the
 Turn Over Survey of Bad Order Cargoes attached to the Complaint as
Annexes H, H-1 and J.[8]

The parties agreed that the procedural issue was whether there was a valid subrogation in
favor of BPI/MS and Mitsui; and that the substantive issues were, whether the shipments
suffered damages, the cause of damage, and the entity liable for reparation of the
damages caused.[9]

Due to the limited factual matters of the case, the parties were required to present their
evidence through affidavits and documents. Upon submission of these evidence, the case
was submitted for resolution.[10]

BPI/MS and Mitsui, to substantiate their claims, submitted the Affidavits of (1) Mario A.
Manuel (Manuel),[11] the Cargo Surveyor of Philippine Japan Marine Surveyors and
Sworn Measurers Corporation who personally examined and conducted the surveys on
the two shipments; (2) Richatto P. Almeda,[12] the General Manager of Calamba Steel
who oversaw and examined the condition, quantity, and quality of the shipped steel coils,
and who thereafter filed formal notices and claims against ESLI and ATI; and (3) Virgilio
G. Tiangco, Jr.,[13] the Marine Claims Supervisor of BPI/MS who processed the insurance
claims of Calamba Steel. Along with the Affidavits were the Bills of Lading[14] covering
the two shipments, Invoices,[15] Notices of Loss of Calamba Steel,[16] Subrogation Form,
[17]
 Insurance Claims,[18] Survey Reports,[19] Turn Over Survey of Bad Order
Cargoes[20] and Request for Bad Order Survey.[21]

ESLI, in turn, submitted the Affidavits of Captain Hermelo M. Eduarte,[22] Manager of the

Operations Department of ESLI, who monitored in coordination with ATI the discharge
of the two shipments, and Rodrigo Victoria (Rodrigo),[23] the Cargo Surveyor of R & R
Industrial and Marine Services, Inc., who personally surveyed the subject cargoes on
board the vessel as well as the manner the ATI employees discharged the coils. The
documents presented were the Bills of Lading, Secretary’s Certificate[24] of PPA, granting
ATI the duty and privilege to provide arrastre and stevedoring services at South Harbor,
Port of Manila, Contract for Cargo Handling Services,[25] Damage Report[26] and Turn
Over Report made by Rodrigo.[27] ESLI also adopted the Survey Reports submitted by
BPI/MS and Mitsui.[28]

Lastly, ATI submitted the Affidavits of its Bad Order Inspector Ramon Garcia (Garcia)
[29]
 and Claims Officer Ramiro De Vera.[30] The documents attached to the submissions
were the Turn Over Surveys of Bad Cargo Order,[31] Requests for Bad Order Survey,
[32]
 Cargo Gatepasses issued by ATI,[33] Notices of Loss/Claims of Calamba Steel[34] and
Contract for Cargo Handling Services.[35]
On 17 September 2006, RTC Makati City rendered a decision finding both the ESLI and
ATI liable for the damages sustained by the two shipments. The dispositive portion reads:

WHEREFORE, judgment is hereby rendered in favor of [BPI/MS and Mitsui] and

against [ESLI Inc.] and [ATI], jointly and severally ordering the latter to pay [BPI/MS
and Mitsui] the following:

1. Actual damages amounting to US$17,560.48 plus 6% legal interest per

annum commencing from the filing of this complaint, until the same is fully
paid;

2. Attorney’s fees in a sum equivalent to 20% of the amount claimed;

3. Costs of suit.[36]

Aggrieved, ESLI and ATI filed their respective appeals before the Court of Appeals on
both questions of fact and law.[37]

Before the appellate court, ESLI argued that the trial court erred when it found BPI/MS
has the capacity to sue and when it assumed jurisdiction over the case. It also questioned
the ruling on its liability since the Survey Reports indicated that the cause of loss and
damage was due to the “rough handling of ATI’s stevedores during discharge from vessel
to shore and during loading operation onto the trucks.” It invoked the limitation of
liability of US$500.00 per package as provided in Commonwealth Act No. 65 or the
Carriage of Goods by Sea Act (COGSA).[38]

On the other hand, ATI questioned the capacity to sue of BPI/MS and Mitsui and the
award of attorney’s fees despite its lack of justification in the body of the decision. ATI
also imputed error on the part of the trial court when it ruled that ATI’s employees were
negligent in the ruling of the shipments. It also insisted on the applicability of the
provision of COGSA on limitation of liability.[39]

In its Decision,[40] the Court of Appeals absolved ATI from liability thereby modifying
the decision of the trial court. The dispositive portions reads:

WHEREFORE, the appeal of ESLI is DENIED, while that of ATI is GRANTED. The
assailed Judgment dated September 17, 2006 of Branch 138, RTC of Makati City in Civil
Case No. 05-108 is hereby MODIFIED absolving ATI from liability and deleting the
award of attorney’s fees. The rest of the decision is affirmed. [41]

Before this Court, ESLI seeks the reversal of the ruling on its liability.

At the outset, and notably, ESLI included among its arguments the attribution of liability
to ATI but it failed to implead the latter as a party to the present petition. This non-
inclusion was raised by BPI/MS and Mitsui as an issue[42] in its
Comment/Opposition[43] and Memorandum:[44]

For reasons known only to [ESLI], it did not implead ATI as a party respondent in this
case when it could have easily done so. Considering the nature of the arguments raised by
petitioner pointing to ATI as solely responsible for the damages sustained by the subject
shipments, it is respectfully submitted that ATI is an indispensable party in this case.
Without ATI being impleaded, the issue of whether ATI is solely responsible for the
damages could not be determined with finality by this Honorable Court. ATI certainly
deserves to be heard on the issue but it could not defend itself because it was not
impleaded before this Court. Perhaps, this is the reason why [ESLI] left out ATI in this
case so that it could not rebut while petitioner puts it at fault.[45]

ESLI in its Reply[46] put the blame for the non-exclusion of ATI to BPI/MS and Mitsui:

[BPI/MS and Mitsui] claim that herein [ESLI] did not implead [ATI] as a party
respondent in the Petition for Review on Certiorari it had filed. Herein Petitioner submits
that it is not the obligation of [ESLI] to implead ATI as the same is already the look out
of [BPI/MS and Mitsui]. If [BPI/MS and Mitsui] believe that ATI should be made liable,
they should have filed a Motion for Reconsideration with the Honorable Court of
Appeals. The fact that [BPI/MS and Mitsui] did not even lift a finger to question the
decision of the Honorable Court of Appeals goes to show that [BPI/MS and Mitsui] are
not interested as to whether or not ATI is indeed liable.[47]

It is clear from the exchange that both [ESLI] and [BPI/MS and Mitsui] are aware of the
non-inclusion of ATI, the arrastre operator, as a party to this review of the Decision of
the Court of Appeals. By blaming each other for the exclusion of ATI, [ESLI] and
[BPI/MS and Mitsui] impliedly agree that the absolution of ATI from liability is final and
beyond review. Clearly, [ESLI] is the consequential loser. It alone must bear the proven
liability for the loss of the shipment. It cannot shift the blame to ATI,
the arrastre operator, which has been cleared by the Court of Appeals. Neither can it
argue that the consignee should bear the loss.

Thus confined, we go to the merits of the arguments of ESLI.

First Issue: Liability of ESLI

ESLI bases of its non-liability on the survey reports prepared by BPI/MS and Mitsui’s
witness Manuel which found that the cause of damage was the rough handling on the
shipment by the stevedores of ATI during the discharging operations.[48] However,
Manuel does not absolve ESLI of liability. The witness in fact includes ESLI in the
findings of negligence. Paragraphs 3 and 11 of the affidavit of witness Manuel attribute
fault to both ESLI and ATI.

3. The vessel M.V. “EASTERN VENUS” V 22-S carrying the said shipment of 22 coils
of various steel sheets arrived at the port of Manila and discharged the said shipment on
or about 11 February 2004 to the arrastre operator [ATI]. I personally noticed that the 22
coils were roughly handled during their discharging from the vessel to the pier of [ATI]
and even during the loading operations of these coils from the pier to the trucks that will
transport the coils to the consignees’s warehouse. During the aforesaid operations, the
employees and forklift operators of [ESLI] and [ATI] were very negligent in the
handling of the subject cargoes.

xxxx

11. The vessel M.V. “EASTERN VENUS” V 25-S carrying the said shipment of 50 coils
of various steel sheets arrived at the port of Manila and discharged the said shipment on
or about 21 May 2004 to the arrastre operator [ATI]. I personally noticed that the 50
coils were roughly handled during their discharging from the vessel to the pier of [ATI]
and even during the loading operations of these coils from the pier to the trucks that will
transport the coils to the consignees’s warehouse. During the aforesaid operations, the
employees and forklift operators of [ESLI] and [ATI] were very negligent in the
handling of the subject cargoes.[49] (Emphasis supplied).

ESLI cannot rely only on parts it chooses. The entire body of evidence should determine
the liability of the parties. From the statements of Manuel, [ESLI] was negligent, whether
solely or together with ATI.

To further press its cause, ESLI cites the affidavit of its witness Rodrigo who stated that
the cause of the damage was the rough mishandling by ATI’s stevedores.

The affidavit of Rodrigo states that his functions as a cargo surveyor are, (1) getting hold
of a copy of the bill of lading and cargo manifest; (2) inspection and monitoring of the
cargo on-board, during discharging and after unloading from the vessel; and (3) making a
necessary report of his findings. Thus, upon arrival at the South Harbor of Manila of the
two vessels of ESLI on 11 February 2004 and on 21 May 2004, Rodrigo immediately
boarded the vessels to inspect and monitor the unloading of the cargoes. In both
instances, it was his finding that there was mishandling on the part of ATI’s stevedores
which he reported as the cause of the damage.[50]

Easily seen, however, is the absence of a crucial point in determining liability of either or
both ESLI and ATI – lack of determination whether the cargo was in a good order
condition as described in the bills of lading at the time of his boarding. As Rodrigo
admits, it was also his duty to inspect and monitor the cargo on-board upon arrival of the
vessel. ESLI cannot invoke its non-liability solely on the manner the cargo was
discharged and unloaded. The actual condition of the cargoes upon arrival prior to
discharge is equally important and cannot be disregarded. Proof is needed that the cargo
arrived at the port of Manila in good order condition and remained as such prior to its
handling by ATI.

Common carriers, from the nature of their business and on public policy considerations,
are bound to observe extraordinary diligence in the vigilance over the goods transported
by them. Subject to certain exceptions enumerated under Article 1734[51] of the Civil
Code, common carriers are responsible for the loss, destruction, or deterioration of the
goods. The extraordinary responsibility of the common carrier lasts from the time the
goods are unconditionally placed in the possession of, and received by the carrier for
transportation until the same are delivered, actually or constructively, by the carrier to the
consignee, or to the person who has a right to receive them.[52]

In maritime transportation, a bill of lading is issued by a common carrier as a contract,

receipt and symbol of the goods covered by it. If it has no notation of any defect or
damage in the goods, it is considered as a “clean bill of lading.” A clean bill of lading
constitutes prima facie evidence of the receipt by the carrier of the goods as therein
described.[53]

Based on the bills of lading issued, it is undisputed that ESLI received the two shipments
of coils from shipper Sumitomo Corporation in good condition at the ports of Yokohama
and Kashima, Japan. However, upon arrival at the port of Manila, some coils from the
two shipments were partly dented and crumpled as evidenced by the Turn Over Survey of
Bad Order Cargoes No. 67982 dated 13 February 2004[54] and Turn Over Survey of Bad
Order Cargoes Nos. 68363[55] and 68365[56] both dated 24 May 2004 signed by ESLI’s
representatives, a certain Tabanao and Rodrigo together with ATI’s representative
Garcia. According to Turn Over Survey of Bad Order Cargoes No. 67982, four coils and
one skid were partly dented and crumpled prior to turnover by ESLI to ATI’s possession
while a total of eleven coils were partly dented and crumpled prior to turnover based on
Turn Over Survey Bad Order Cargoes Nos. 68363 and 68365.

Calamba Steel requested for a re-examination of the damages sustained by the two
shipments. Based on the Requests for Bad Order Survey Nos. 58267[57] and
58254[58] covering the first shipment dated 13 and 17 February 2004, four coils were
damaged prior to turnover. The second Request for Bad Order Survey No. 58658[59] dated
25 May 2004 also affirmed the earlier findings that eleven coils on the second shipment
were damaged prior to turnover.

In Asian Terminals, Inc., v. Philam Insurance Co., Inc.,[60] the Court based its ruling on
liability on the Bad Order Cargo and Turn Over of Bad Order. The Receipt bore a
notation “B.O. not yet t/over to ATI,” while the Survey stated that the said steel case was
not opened at the time of survey and was accepted by the arrastre in good order. Based on
these documents, packages in the Asian Terminals, Inc. case were found damaged while
in the custody of the carrier Westwind Shipping Corporation.

Mere proof of delivery of the goods in good order to a common carrier and of their
arrival in bad order at their destination constitutes a prima facie case of fault or
negligence against the carrier. If no adequate explanation is given as to how the
deterioration, loss, or destruction of the goods happened, the transporter shall be held
responsible.[61] From the foregoing, the fault is attributable to ESLI. While no longer an
issue, it may be nonetheless state that ATI was correctly absolved of liability for the
damage.

Second Issue: Limitation of Liability

ESLI assigns as error the appellate court’s finding and reasoning that the package
limitation under the COGSA[62] is inapplicable even if the bills of lading covering the
shipments only made reference to the corresponding invoices. Noticeably, the invoices
specified among others the weight, quantity, description and value of the cargoes, and
bore the notation “Freight Prepaid” and “As Arranged.”[63] ESLI argues that the value of
the cargoes was not incorporated in the bills of lading[64] and that there was no evidence
that the shipper had presented to the carrier in writing prior to the loading of the actual
value of the cargo, and, that there was a no payment of corresponding freight. [65] Finally,
despite the fact that ESLI admits the existence of the invoices, it denies any knowledge
either of the value declared or of any information contained therein.[66]

According to the New Civil Code, the law of the country to which the goods are to be
transported shall govern the liability of the common carrier for their loss, destruction or
deterioration.[67] The Code takes precedence as the primary law over the rights and
obligations of common carriers with the Code of Commerce and COGSA applying
suppletorily.[68]

The New Civil Code provides that a stipulation limiting a common carrier’s liability to
the value of the goods appearing in the bill of lading is binding, unless the shipper or
owner declares a greater value.[69] In addition, a contract fixing the sum that may be
recovered by the owner or shipper for the loss, destruction, or deterioration of the goods
is valid, if it is reasonable and just under the circumstances, and has been fairly and freely
agreed upon.[70]

COGSA, on the other hand, provides under Section 4, Subsection 5 that an amount
recoverable in case of loss or damage shall not exceed US$500.00 per package or per
customary freight unless the nature and value of such goods have been declared by
the shipper before shipment and inserted in the bill of lading.
In line with these maritime law provisions, paragraph 13 of bills of lading issued by ESLI
to the shipper specifically provides a similar restriction:

The value of the goods, in calculating and adjusting any claims for which the Carrier may
be liable shall, to avoid uncertainties and difficulties in fixing value, be deemed to the
invoice value of the goods plus ocean freight and insurance, if paid, Irrespective of
whether any other value is greater or less, and any partial loss or damage shall be
adjusted pro rata on the basis of such value; provided, however, that neither the Carrier
nor the ship shall in any event be or become liable for any loss, non-delivery or
misdelivery of or damage or delay to, or in connection with the custody or transportation
of the goods in an amount exceeding $500.00 per package lawful money of the United
States, or in case of goods not shipped in packages, per customary freight unit, unless the
nature of the goods and a valuation higher than $500.00 is declared in writing by the
shipper on delivery to the Carrier and inserted in the bill of lading and extra freight is
paid therein as required by applicable tariffs to obtain the benefit of such higher
valuation. In which case even if the actual value of the goods per package or unit exceeds
such declared value, the value shall nevertheless be deemed to be the declared value and
any Carrier’s liability shall not exceed such declared value and any partial loss or damage
shall be adjusted pro-rata on the basis thereof. The Carrier shall not be liable for any loss
or profit or any consequential or special damage and shall have the option of replacing
any lost goods and replacing o reconditioning any damage goods. No oral declaration or
agreement shall be evidence of a value different from that provided therein.[71]

xxxx

Accordingly, the issue whether or not ESLI has limited liability as a carrier is determined
by either absence or presence of proof that the nature and value of the goods have been
declared by Sumitomo Corporation and inserted in the bills of lading.

ESLI contends that the invoices specifying the weight, quantity, description and value of
the cargo in reference to the bills of lading do not prove the fact that the shipper complied
with the requirements mandated by the COGSA. It contends that there must be an
insertion of this declaration in the bill of lading itself to fall outside the statutory
limitation of liability.

ESLI asserts that the appellate court erred when it ruled that there was compliance with
the declaration requirement even if the value of the shipment and fact of payment were
indicated on the invoice and not on the bill of lading itself.

There is no question about the declaration of the nature, weight and description of the
goods on the first bill of lading.

The bills of lading represent the formal expression of the parties’ rights, duties and
obligations. It is the best evidence of the intention of the parties which is to be deciphered
from the language used in the contract, not from the unilateral post facto assertions of one
of the parties, or of third parties who are strangers to the contract.[72] Thus, when the
terms of an agreement have been reduced to writing, it is deemed to contain all the terms
agreed upon and there can be, between the parties and their successors in interest, no
evidence of such terms other than the contents of the written agreement. [73]

As to the non-declaration of the value of the goods on the second bill of lading, we see no
error on the part of the appellate court when it ruled that there was a compliance of the
requirement provided by COGSA. The declaration requirement does not require that all
the details must be written down on the very bill of lading itself. It must be emphasized
that all the needed details are in the invoice, which “contains the itemized list of goods
shipped to a buyer, stating quantities, prices, shipping charges,” and other details which
may contain numerous sheets.[74] Compliance can be attained by incorporating the
invoice, by way of reference, to the bill of lading provided that the former containing the
description of the nature, value and/or payment of freight charges is as in this case duly
admitted as evidence.

In Unsworth Transport International (Phils.), Inc. v. Court of Appeals,[75] the Court held

that the insertion of an invoice number does not in itself sufficiently and convincingly
show that petitioner had knowledge of the value of the cargo. However, the same
interpretation does not squarely apply if the carrier had been advised of the value of the
goods as evidenced by the invoice and payment of corresponding freight charges. It
would be unfair for ESLI to invoke the limitation under COGSA when the shipper in fact
paid the freight charges based on the value of the goods. In Adams Express Company v.
Croninger,[76] it was said: “Neither is it conformable to plain principles of justice that a
shipper may understate the value of his property for the purpose of reducing the rate,
and then recover a larger value in case of loss. Nor does a limitation based upon an
agreed value for the purpose of adjusting the rate conflict with any sound principle of
public policy.” Conversely, but for the same reason, it is unjust for ESLI to invoke the
limitation when it is informed that the shipper paid the freight charges corresponding to
the value of the goods.

Also, ESLI admitted the existence and due execution of the Bills of Lading and the
Invoice containing the nature and value of the goods on the second shipment. As written
in the Pre-Trial Order,[77] the parties, including ESLI, admitted the existence and due
execution of the two Bills of Lading[78] together with the Invoice on the second
shipment with Nos. KJGE-04-1327-NT/KE2[79] dated 12 May 2004. On the first
shipment, ESLI admitted the existence of the Invoice with Nos. KJGE-031228-
NT/KE3[80] dated 2 February 2004.

The effect of admission of the genuineness and due execution of a document means that
the party whose signature it bears admits that he voluntarily signed the document or it
was signed by another for him and with his authority.[81]

A review of the bill of ladings and invoice on the second shipment indicates that the
shipper declared the nature and value of the goods with the corresponding payment of the
freight on the bills of lading. Further, under the caption “description of packages and
goods,” it states that the description of the goods to be transported as “various steel sheet
in coil” with a gross weight of 383,532 kilograms (89.510 M3). On the other hand, the
amount of the goods is referred in the invoice, the due execution and genuineness of
which has already been admitted by ESLI, is US$186,906.35 as freight on board with
payment of ocean freight of US$32,736.06 and insurance premium of US$1,813.17.
From the foregoing, we rule that the non- limitation of liability applies in the present
case.

We likewise accord the same binding effect on the contents of the invoice on the first
shipment.

ESLI contends that what was admitted and written on the pre-trial order was only the
existence of the first shipment’ invoice but not its contents and due execution. It invokes
admission of existence but renounces any knowledge of the contents written on it. [82]

Judicial admissions are legally binding on the party making the admissions. Pre-trial
admission in civil cases is one of the instances of judicial admissions explicitly provided
for under Section 7, Rule 18 of the Rules of Court, which mandates that the contents of
the pre-trial order shall control the subsequent course of the action, thereby, defining and
limiting the issues to be tried. In Bayas v. Sandiganbayan,[83] this Court emphasized that:

Once the stipulations are reduced into writing and signed by the parties and their
counsels, they become binding on the parties who made them. They become judicial
admissions of the fact or facts stipulated. Even if placed at a disadvantageous position, a
party may not be allowed to rescind them unilaterally, it must assume the consequences
of the disadvantage.[84]
Moreover, in Alfelor v. Halasan,[85] this Court declared that:

A party who judicially admits a fact cannot later challenge that fact as judicial admissions
are a waiver of proof; production of evidence is dispensed with. A judicial admission also
removes an admitted fact from the field of controversy. Consequently, an admission
made in the pleadings cannot be controverted by the party making such admission and are
conclusive as to such party, and all proofs to the contrary or inconsistent therewith should
be ignored, whether objection is interposed by the party or not. The allegations,
statements or admissions contained in a pleading are conclusive as against the pleader. A
party cannot subsequently take a position contrary of or inconsistent with what was
pleaded.[86] (Citations omitted)
The admission having been made in a stipulation of facts at pre-trial by the parties, it
must be treated as a judicial admission. Under Section 4, of Rule 129 of the Rules of
Court, a judicial admission requires no proof.[87]

It is inconceivable that a shipping company with maritime experience and resource like
the ESLI will admit the existence of a maritime document like an invoice even if it has no
knowledge of its contents or without having any copy thereof.

ESLI also asserts that the notation “Freight Prepaid” and “As Arranged,” does not prove
that there was an actual declaration made in writing of the payment of freight as required
by COGSA. ESLI did not as it could not deny payment of freight in the amount indicated
in the documents. Indeed, the earlier discussions on ESLI’s admission of the existence
and due execution of the invoices, cover and disprove the argument regarding actual
declaration of payment. The bills of lading bore a notation on the manner of payment
which was “Freight Prepaid” and “As Arranged” while the invoices indicated the amount
exactly paid by the shipper to ESLI.

WHEREFORE, we DENY the Petition for Review on Certiorari. The Decision dated

31 January 2008 and Resolution dated 5 May 2008 of the Second Division of the Court of
Appeals in CA-G.R. CV. No. 88744 are hereby AFFIRMED.

SO ORDERED.

THIRD DIVISION
[ G.R. No. 218902, October 17, 2016 ]
HELEN EDITH LEE TAN, PETITIONER, VS. PEOPLE OF THE
PHILIPPINES, RESPONDENT.

DECISION

PEREZ, J.:

Assailed in this Petition for Review on Certiorari under Rule 45 of the Rules of Court
are the Decision[1] and the Resolution[2] dated 7 November 2013 and 30 June 2015,
respectively, of the Sandiganbayan in Criminal Case No. 25674. The questioned Decision
found herein petitioner Helen Edith Lee Tan (Tan), President/Proprietor of International
Builders Corporation (IBC),[3] together with her co-accused therein, namely: Rene
Mondejar (Mondejar), Municipal Mayor; Francisco Tolentino (Tolentino), Sangguniang
Bayan Secretary; Ildefonso Espejo (Espejo), Sangguniang Bayan Member; Margarita
Gumapas (Gumapas), Sangguniang Bayan Member; Manuel Piolo (Piolo), Sangguniang
Bayan Member; and Roberto Velasco (Velasco), Sangguniang Bayan Member; all of
Maasin, Iloilo City, guilty beyond reasonable doubt of Violation of Section 3(e) of
Republic Act (R.A.) No. 3019,[4] as amended. Each of them was meted with the penalty
of imprisonment of six (6) years and one (1) month, as minimum, to 10 years, as
maximum, as well as perpetual disqualification to hold public office.[5] The questioned
Resolution, on the other hand, denied for lack of merit the separate Motions for
Reconsideration of petitioner and Mondejar, as well as the joint Motion for
Reconsideration of Tolentino, Gumapas, Velasco and Espejo.[6]

The antecedents of this case are:

To protect Barangay Naslo in Maasin, Iloilo City, from the dangers posed by the Tigum
River, which usually overflows during the rainy season, its Sangguniang
Barangay enacted on 16 June 1996 Resolution No. 9[7] requesting the IBC to rechannel
the path of the Tigum River and, after the temporary river control is replenished, to
extract whatever surplus of sand and gravel supply, as payment for its services. [8] A day
after, or on 17 June 1996, the Municipal Development Council (MDC) of Maasin, Iloilo
City, adopted a similar resolution, i.e., Resolution No. 9,[9] also requesting the IBC to
perform the rechanneling of the Tigum River path because it has the necessary equipment
for that kind of work, as well as the Department of Environment and Natural Resources
(DENR) to issue the Environmental Clearance Certificate (ECC) in connection with the
implementation of the project.[10] With these in view, the Sangguniang Bayan of Maasin,
Iloilo City, enacted on 21 June 1996 the questioned (1) Resolution No. 30-A[11] strongly
endorsing the resolutions of Barangay Naslo and MDC; and (2) Resolution No. 30-
B[12] authorizing Mondejar to exercise his emergency powers to negotiate with the IBC
for the rechanneling of the Tigum River path.[13]

On 27 June 1996, pursuant to the aforesaid Sangguniang Bayan resolutions, the

Municipality of Maasin, Iloilo City, through Mondejar, entered into a Memorandum of
Agreement (MOA)[14] with the IBC, through petitioner Tan, for the rechanneling of the
Tigum River path. Per the said MOA, the parties agreed that the IBC will do the
rechanneling for no monetary considerations whatsoever, except that it can get the
surplus supply of sand and gravel taken out therefrom after the necessary dike has been
established, as what has been provided for in the alleged Resolution No. 30-A, on
account of financial constraints since the municipality has already exhausted all its
resources due to a series of calamities.[15]

Soon thereafter, Criminal Complaints for Falsification under Article 171 of the Revised
Penal Code (RPC) and for Violation of Section 3(e) of R.A. 3019 were filed before the
Office of the Ombudsman-Visayas (OMB-Visayas) against the local officials involved in
the project of rechanneling the Tigum River path, including petitioner Tan.[16] The case
was docketed as OMB-VIS-CRIM-98-0372.

The alleged Falsification was committed by Mondejar, Arnaldo Partisala (Partisala),

[17]
 Tolentino, Espejo, Gumapas, Piolo, and Velasco when they made it appear in the
Minutes of the Regular Session of the Sangguniang Bayan of Maasin, Iloilo City, held on
21 June 1996, that Resolution No. 30-A and Resolution No. 30-B were deliberated,
approved and/or enacted by the Sangguniang Bayan on the said date. Allegedly, no such
resolutions were passed and/or enacted by the said body on that date. It was argued that
this was done to give Mondejar legal basis or authority to enter into a MOA with the IBC,
through petitioner Tan, for the supposed rechanneling of the Tigum River path. In reality,
however, such MOA is a grant of an authority for the IBC to engage into massive
quarrying activities in the area even without the required permit. As the argument ran, all
the local officials involved in the project of rechanneling the Tigum River path, in
conspiracy with petitioner Tan, indubitably committed also a Violation of Section 3(e) of
R.A. 3019 inasmuch as they gave unwarranted benefits, advantage and displayed
manifest partiality in favor of the IBC. They entered into a contract that is grossly
disadvantageous to the government, particularly to the Municipality of Maasin, Iloilo
City, as it has been deprived of the revenues, which could have been collected from the
IBC out of the hauling activities of the latter for sand and gravel if there was no such
MOA.[18]

On 31 May 1999, the OMB-Visayas, through Special Prosecution Officer II Raul V.

Cristoria, issued a Resolution[19] recommending the (1) dismissal of the charge against the
local officials involved in the project of rechanneling the Tigum River path, except for
Mondejar, Partisala, Tolentino, Espejo, Gumapas, Piolo and Velasco, for insufficiency of
evidence; (2) filing of separate Informations for Falsification under Article 171 of the
RPC and for Violation of Section 3(e) of R.A. 3019 against the afore-named public
officials before the Sandiganbayan; and (3) inclusion of petitioner Tan as one of the
accused in the Information for Violation of Section 3(e) of R.A. 3019.[20]

Upon review, the OMB, through Graft Investigation Officer II Julita M. Calderon, issued
a Memorandum dated 16 September 1999[21] approving the Resolution dated 31 May
1999 of the OMB-Visayas, thus, approving the filing of the Informations against the
mentioned individuals. The said OMB Memorandum was later approved by the Acting
Ombudsman Margarito P. Gervacio, Jr. on 17 September 1999.[22]

Accordingly, two separate Informations were filed against Mondejar, Partisala,

Tolentino, Espejo, Gumapas, Piolo and Velasco, before the Sandiganbayan, to wit: (1)
for Violation of Section 3(e) of R.A. 3019 docketed as Criminal Case No.
25674, [23] where petitioner Tan was included as one of the accused; and (2) for
Falsification under Article 171 of the RPC docketed as Criminal Case No. 25675. [24]

The Information docketed as Criminal Case No. 25674 charging Mondejar, Partisala,
Tolentino, Espejo, Gumapas, Piolo, Velasco and petitioner Tan with Violation of Section
3(e) of R.A. 3019, by giving the latter unwarranted benefits, advantage and preference,
to the damage and prejudice of the government, reads:

That on or about the 27th day of June 1996, and for sometime prior or subsequent thereto,
in the Municipality of Maasin, Province of Iloilo, Philippines and within the jurisdiction
of this Honorable Court, above-named accused [Mondejar, Partisala, Tolentino, Espejo,
Gumapas, Piolo and Velasco], public officers, having been duly elected, appointed and
qualified to such public positions above-mentioned, in such capacity and committing the
offense in relation to Office, and while in the performance of their official functions,
conniving, confederating and mutually helping with each other and with [herein
petitioner Tan], a private individual and President/Proprietor of [IBC] Iloilo City
with deliberate intent, with manifest partiality and evident bad faith, did then and
there willfully, unlawfully and feloniously make it appear that Resolution No. 30-B,
series of 1996, was validly enacted by the Sangguniang Bayan of Maasin, Iloilo,
authorizing Mayor [Mondejar] to exercise his emergency powers as in fact accused
[Mondejar], entered into a [MOA] with [petitioner Tan] of IBC authorizing the said
IBC to engage in massive quarrying in the guise of rechan[n]eling the Tigum River
in Maasin, Iloilo, thus accused in the performance of their official functions had
given unwarranted benefits, advantage and preference to [petitioner Tan] and
themselves, to the damage and prejudice of the government, particularly the Municipality
of Maasin.

CONTRARY TO LAW.[25] (Emphasis and italics supplied)

Criminal Case No. 25674 and Criminal Case No. 25675[26] were eventually consolidated.

Upon arraignment, petitioner Tan and her co-accused in Criminal Case No. 25674, except
for Partisala, who still remains at large, pleaded NOT GUILTY to the charge. [27] The
parties then entered into a Joint Stipulation of Facts, which states, among others:

1. That at the time material in the Information, accused were public officials
holding the following official positions in the government:

a. [MONDEJAR] - Municipal Mayor, Maasin, Iloilo;

b. [TOLENTINO] - S. B. Member, Maasin, Iloilo;
c. [ESPEJO] - S. B. Member, Maasin, Iloilo;
d. [GUMAPAS] - S. B. Member, Maasin, Iloilo;
e. [PIOLO] - S. B. Member, Maasin, Iloilo;
f. [VELASCO] - S. B. Member, Maasin, Iloilo;

While [herein petitioner Tan] was the President of [IBC].

 2. That on 27 June 1996 a [MOA] was entered into between the
Municipality of Maasin, Iloilo represented by Mayor [Mondejar] as the
First Party and [IBC] represented by [petitioner Tan] as the Second
Party, for the Rechanneling of the Tigum River path at Barangay
Naslo, Maasin, Iloilo.

3. That Resolution No. 9 Series of 1996 was passed by Barangay Naslo,

Maasin, Iloilo, relative to the rechanneling of the Tigum River Path at
Barangay Naslo.

4. That Resolution No. 9 was also passed by the Members of the [MDC] of
Maasin, Iloilo endorsing the rechanneling of the said River Path.
[28]
 (Emphasis and underscoring supplied.)

xxx         xxx         xxx

Thereafter, the Sandiganbayan jointly tried Criminal Case No. 25674 and Criminal Case
No. 25675.

The prosecution presented eight witnesses, namely, Jose S. Navarra (Navarra), [29] Imelda
Maderada (Maderada),[30] Soledad R. Sucaldito (Sucaldito),[31] Rogelio T. Trinidad
(Trinidad),[32] Elisa L. Trojillo (Trojillo),[33] Darell A. Cabanero (Cabanero),[34] Dr.
Vicente Albacete (Dr. Albacete)[35] and Ernie Jesus Lee Malaga (Malaga).[36] All together,
their testimonies tend to establish that (1) the accused public officials falsified the
Minutes of the Regular Session of the Sangguniang Bayan of Maasin, Iloilo City, held on
21 June 1996 by making it appear that the body enacted on that date Resolution No. 30-A
and Resolution No. 30-B, which resolutions led to the signing of the MOA between
Mondejar and petitioner Tan for the alleged rechanneling of the Tigum River path; and
(2) the quarrying activities of petitioner Tan's IBC at the Tigum River in the guise of
rechanneling the same.[37]

After the prosecution's formal offer of documentary evidence was admitted by the
Sandiganbayan in its Order dated 23 May 2006 over the objection of petitioner Tan and
her co-accused,[38] the latter separately filed Demurrers to Evidence (with prior leave of
court), which were denied in a Resolution dated 16 March 2007. They moved for its
reconsideration but it was again denied in a Resolution dated 22 January 2008. [39]

Petitioner Tan and her co-accused then proceeded in presenting themselves as witnesses,
together with Rolando B. Sison (Sison),[40] Engineer Juan Rentoy, Jr. (Engr. Rentoy, Jr.)
[41]
 and Abner Tudela (Tudela).[42] Their testimonies as a whole tend to prove, among
others, that (1) the old flood control system of Barangay Naslo, Maasin, Iloilo City, was
almost destroyed by the previous typhoons that hit the community; thus, there is a great
need to construct or build another flood control system and, that is, the rechanneling of
the Tigum River path since that river always inundated Barangay Naslo during the rainy
season; (2) resolutions were passed by both the Sangguniang Barangay of Barangay
Naslo and the MDC requesting the IBC to do the rechanneling since the latter has the
necessary equipment for that kind of work; (3) the resolutions of Sangguniang
Barangay of Barangay Naslo and the MDC were endorsed by the Sangguniang Bayan of
Maasin, Iloilo City, via Resolution No. 30-A; and Resolution No. 30-B authorized
Mondejar to exercise his emergency powers to negotiate with the IBC for the
rechanneling of the Tigum River path, which resolutions were validly enacted by the
body on 21 June 1996; (4) pursuant thereto, the Municipality of Maasin, Iloilo City,
through Mondejar, and the IBC, through petitioner Tan, entered into a MOA for the
rechanneling of the Tigum River path; and (5) the IBC was able to rechannel the Tigum
River path.[43]

Petitioner Tan and her co-accused subsequently made a formal offer of evidence, which
was admitted by the Sandiganbayan in its Order dated 13 January 2011 despite the
objection of the prosecution.[44]

Thereafter, the prosecution presented Shirlito A. Reyes (Reyes)[45] and Sucaldito as

rebuttal witnesses. On 20 July 2012, the prosecution submitted its supplemental offer of
evidence, which the Sandiganbayan admitted in its Order dated 21 September 2012 over
the objection of petitioner Tan.[46]

Once the parties submitted their respective Memoranda, the Sandiganbayan accordingly
rendered a joint Decision on 7 November 2013 in Criminal Case No. 25674 and in
Criminal Case No. 25675, which dispositive portion reads:

WHEREFORE, premises considered, the Court hereby rules as follows:

1. In Criminal Case No. 25674, the Court finds the accused [MONDEJAR],

[TOLENTINO], [ESPEJO], [GUMAPAS], [PIOLO], [VELASCO] and [HEREIN
PETITIONER TAN] GUILTY beyond reasonable doubt of the offense of [Violation of
Section 3 (e) of [RA 3019], as amended, and sentences each of them to suffer an
indeterminate penalty of six (6) years and one (1) month[,] as minimum[,] to ten (10)
years[,] as maximum; and to suffer perpetual disqualification from public office. Insofar
as [PARTISALA] is concerned, since he is still at large up to the present, let the case
be ARCHIVED and let an alias warrant of arrest issue against him.

2. In Criminal Case No. 25675, the Court finds the accused [MONDEJAR],
[TOLENTINO], [ESPEJO], [GUMAPAS], [PIOLO] and [VELASCO] GUILTY beyond
reasonable doubt of Falsification defined under Article 171 of the [RPC] and sentences
each of them to suffer the penalty of imprisonment of six (6) months [and] one (1) day
of prision correccional[,] as minimumf,] to eight (8) years and one (1) day ofprision
mayor[,] as maximum in the absence of any mitigating and aggravating circumstance in
accordance with the provisions of the Indeterminate Sentence Law; to pay a fine of Five
Thousand Pesos ([P]5,000.00); and to further suffer temporary absolute disqualification
and that of perpetual special disqualification from the right of suffrage. Insofar as
[PARTISALA] is concerned, since he is still at large up to the present, let the case
be ARCHIVED and let an alias warrant of arrest issue against him.[47] (Emphasis partly
in the original and partly supplied; italics supplied)

In arriving at such conclusion (in Criminal Case No. 25674), the Sandiganbayan
elucidated, thus:

To be convicted of [Violation of Section 3 (e) of [RA 3019], the prosecution must prove
the following:

1) The accused must be a public officer discharging administrative, judicial or official

functions;

2) He must have acted with manifest partiality, evident bad faith or inexcusable
negligence; and

3) That his action caused any undue injury to any party, including the government, or
giving any private party unwarranted benefits, advantage or preference in the discharge of
his functions.

The first element has been established as the accused public officials have stipulated on
their public functions. [Herein petitioner Tan], on the other hand, is charged in
conspiracy with the public officials.

The second element is likewise present x x x It was established by the prosecution that
the SB never passed Resolution No. 30-B authorizing accused Mondejar to exercise his
emergency powers and for him to carry out emergency measures relative to the
rechanneling of the Tigum River. This means that accused Mondejar did not have the
authority to enter into a MOA with the IBC for the rechanneling of the Tigum River.
Knowing this, the accused public officials falsified Exh. "F" [Minutes of the 21 June
1996 Sangguniang Bayan Session] thereby making it appear that the SB gave such
authority to accused Mondejar. This act was done in evident bad faith as they deliberately
covered-up an illegal act thus justifying the extraction of sand and gravel by the IBC at
the Tigum River. Without such act by the accused, IBC would not have any right to haul
any and all "excess" sand and gravel from the said site x x x

As to third element, it was shown by the prosecution that the only way for the IBC to
legally extract sand and gravel from the Tigum River was if it could secure a quarrying
permit from the provincial government of Iloilo. This is stated clearly in Provincial
Ordinance No. 11 of the Sangguniang Panlalawigan of Iloilo dated [14 August 1995] x x
x

The municipality of Maasin, through its Mayor and the SB, did not have the authority to
issue quarrying permit. What the accused were able to accomplish through the MOA was
to allow IBC to engage in quarrying activities without having to go through the trouble of
securing a quarrying permit on the justification that IBC was performing a service for the
townspeople by constructing a temporary dike and by rechanneling the Tigum River and
that the extraction of sand and gravel as its compensation for services rendered.

In effect, the accused public officers and the IBC owner [petitioner] Tan effectively
bypassed the provincial government and circumvented the requirement for a quarrying
permit, with all its conditions and limitations. By so doing, the accused gave unwarranted
favor or unwarranted benefit to [petitioner] Tan, the owner of the IBC, in the exercise of
their official functions x x x

x x x Worse the MOA did not put in necessary safeguards to prevent any abuses by the
IBC. It did not require the municipality to supervise the construction of the dike and the
rechanneling of the river nor did it require monitoring of the sand and gravel being
extracted by the IBC thereby giving IBC unfettered discretion in its implementation of
the MOA and allowing indiscriminate quarrying in the area.[48]

Aggrieved, petitioner Tan moved for its reconsideration[49] but it was denied for lack of
merit in the questioned Resolution dated 30 June 2015.

The Sandiganbayan held that:

Contrary to [herein petitioner] Tan's argument, the prosecution has proven her

complicity by her act of signing the MOA ostensibly dated 28 June 1996 but was
actually executed sometime after September 1997 which act indicates a common
purpose to make it appear that accused Mondejar had the authority to enter into
said MOA with [petitioner] Tan's IBC. While such finding had not been expressly
stated in the assailed Decision, such is necessarily implied from the finding that the
falsified Minutes was executed only sometime in 1997.
 x x x x         x x x x         x x x x

The Information states that unwarranted benefit was given [petitioner] Tan by the act of
the accused public officers in making it appear that Resolution No. 30-B series of 1996
was passed authorizing accused Mondejar to exercise his emergency powers and that, in
fact, Mondejar did enter into a MOA with [petitioner] Tan of IBC authorizing it to
engage in massive quarrying in the guise of rechanneling the Tigum River. These are the
ultimate facts that go into the sufficiency of the Information and which the prosecution
had proven beyond reasonable doubt. The discussion by the Court that the acts of the
accused had the effect of circumventing the rules on securing a quarry permit and that the
MOA unduly benefited [petitioner] Tan's IBC are mere details that go into the whys and
the hows of the authority granted [petitioner] Tan's IBC. Verily, an Information only
needs to state the ultimate facts constituting the offense, not the finer details of why and
how the illegal acts alleged amounted to undue injury or damage or unwarranted benefit.
[50]
 (Emphasis supplied.)

Hence, this Petition by petitioner Tan raising the following grounds: (1) the

Sandiganbayan Decision is void on its face for non-compliance with Section 14, Article
VTII of the Constitution; (2) the Information in Criminal Case No. 25674, in regard
petitioner Tan, is void as it does not conform to the OMB-Visayas Resolution finding no
probable cause to charge the latter with Falsification of Resolution No. 30-B of
the Sangguniang Bayan of Maasin, Iloilo City; (3) the Information does not allege an
offense constitutive of violation of Section 3(e) of R.A. 3019 with regard to petitioner
Tan who is a private individual; (4) The Sandiganbayan Decision imputes to the accused
public officials in Criminal Case No. 25674, including petitioner Tan, the grant of
unwarranted benefits to the IBC as the latter was able to quarry in the Tigum River
without any permit from the provincial government of Iloilo, which fact is not alleged in
the Information, much less supported by any evidence, thus, in violation of petitioner
Tan's constitutional right to be informed of the nature and cause of the accusations
against her, making the entire proceedings void; (5) the Sandiganbayan Decision violated
petitioner Tan's right to due process and even the fundamental rules of evidence as it
appreciated the evidence presented in Criminal Case No. 25675 (for Falsification) in
convicting the latter in Criminal Case No. 25674 (for Violation of Section 3(e) of R.A.
3019) even though such evidence was never offered in the latter case; (6) both the
Sandiganbayan Decision and Resolution contain no finding of the commission of any act
by petitioner Tan, either by herself or in conspiracy with her co-accused in Criminal Case
No. 25674, that established beyond reasonable doubt the violation of each and every
element of the offense punishable under Section 3(e) of R.A. 3019 in relation to Section
4(b) of the same law; and (7) the Sandiganbayan Decision and Resolution were rendered
in violation of the Constitution, thus, merits reversal and the petitioner deserves an
acquittal.[51]
With the foregoing arguments, the main issue to be resolved in the present recourse is
whether the Sandiganbayan erred in finding petitioner Tan guilty beyond reasonable
doubt of Violation of Section 3(e) of R.A. 3019 in conspiracy with the accused public
officials of Maasin, Iloilo City.

The Petition is meritorious.

Section 3(e) of R.A. 3019, under which petitioner Tan is charged, provides:

Section 3. Corrupt practices of public officers. In addition to acts or omissions of public

officers already penalized by existing law, the following shall constitute corrupt practices
of any public officer and are hereby declared to be unlawful:

xxxx

(e) Causing any undue injury to any party, including the Government, or giving any
private party any unwarranted benefits, advantage or preference in the discharge of his
official, administrative or judicial functions through manifest partiality, evident bad faith
or gross inexcusable negligence. This provision shall apply to officers and employees of
offices or government corporations charged with the grant of licenses or permits or other
concessions.

In Rivera v. People,[52] this Court held that to justify an indictment under this section;, the
existence of the following elements must be established: (1) the accused must be a public
officer discharging administrative, judicial or official functions; (2) that the accused must
have acted with manifest partiality, evident bad faith or gross inexcusable negligence;
and (3) the action of the accused caused undue injury to any party, including the
government, or gave any private party unwarranted benefits, advantage or preference in
the discharge of the functions of the accused.[53]

There are two ways by which a public official violates Section 3(e) of R.A. 3019 in the
performance of his functions, to wit: (1) by causing undue injury to any party, including
the Government; or (2) by giving any private party any unwarranted benefit, advantage or
preference. The accused may be charged under either mode or both. The disjunctive term
"or" connotes that either act qualifies as a violation of Section 3(e) of R.A. 3019. [54]

Private persons, when acting in conspiracy with public officers, may be indicted and, if
found guilty, held liable for the pertinent offenses under Section 3 of R.A. 3019,
including (e) thereof. This is in consonance with the avowed policy of the anti-graft law
to repress certain acts of public officers and private persons alike constituting graft or
corrupt practices act or which may lead thereto.[55]
Thus, for a private person to be charged with and convicted of Violation of certain
offenses under Section 3 of R.A. 3019, which in this case (e), it must be satisfactorily
proven that he/she has acted in conspiracy with the public officers in committing the
offense; otherwise, he/she cannot be so charged and convicted thereof.

In conspiracy, the act of one is the act of all; thus, it is never presumed. Like the physical
acts constituting the crime itself, the elements of conspiracy must be proven beyond
reasonable doubt.[56] To establish conspiracy, direct proof of an agreement concerning the
commission of a felony and the decision to commit it is not necessary. It may be inferred
from the acts of the accused before, during or after the commission of the crime which,
when taken together, would be enough to reveal a community of criminal design, as the
proof of conspiracy is frequently made by evidence of a chain of circumstances. [57] While
direct proof is not essential to establish conspiracy, it must be established by positive
and conclusive evidence. And conviction must be founded on facts, not on mere
inferences and presumptions.[58]

In this case, petitioner Tan was charged with and convicted of Violation of Section 3(e)
of R.A. 3019 because of the alleged conspiracy between her and her co-accused public
officials of Maasin, Iloilo City, in committing the said offense. But, a perusal of the
Sandiganbayan Decision showed no instance how petitioner Tan could have conspired
with her co-accused public officials. Petitioner Tan, thus, raised this point in her Motion
for Reconsideration. The Sandiganbayan, however, in disposing the same, simply stated:

x x x the prosecution has proven her complicity by her act of signing the MOA
ostensibly dated 28 June 1996 but was actually executed sometime after September
1997 which act indicates a common purpose to make it appear that accused
Mondejar had the authority to enter into said MOA with [petitioner] Tan's
IBC. While such finding had not been expressly stated in the assailed Decision, such is
necessarily implied from the finding that the falsified Minutes was executed only
sometime in 1997.

It can be gleaned from the aforesaid Sandiganbayan disposition that their only basis in
declaring that the MOA was actually executed sometime after September 1997 was their
finding that the falsified Minutes of the Regular Session of the Sangguniang Bayan of
Maasin, Iloilo City, was executed only sometime in 1997. To the mind of this Court, this
is a patently erroneous conclusion.

There was no iota of evidence ever presented by the prosecution in Criminal Case No.
25674 that would prove that the MOA entered into between Mondejar and petitioner Tan
was actually executed on a date other than 27 January 1996. There was also nothing on
the face of the MOA that would show any irregularity in its execution. To note, the MOA
signed by petitioner Tan dated 27 June 1996 was duly notarized on 28 June 1996. Section
30 of Rule 132 of the Rules of Criminal Procedure provides:

SECTION 30. Proof of notarial document. - Every instrument duly acknowledged or

proved and certified as provided by law, may be presented in evidence without further
proof, the certificate of acknowledgement being prima facie evidence of the execution of
the instrument or document involved. (Italics supplied)

The notarization of a document carries considerable legal effect. Notarization of a

private document converts such document into a public one, and renders it
admissible in court without further proof of its authenticity. [59] With that notarial act,
the MOA became a public document. As such, it is a perfect evidence of the fact which
gives rise to its execution and of its date so long as the act which the officer witnessed
and certified to or the date written by him is not shown to be false.[60] To overcome the
presumption, the rules require not just a preponderance of evidence, but evidence that is
"clear and convincing" as to exclude all reasonable controversy as to the falsity of the
certificate. In the absence of such proof, the document must be upheld. [61]

Further, in the parties' Joint Stipulation of Facts before the Sandiganbayan, one of facts
they agreed on was:

2. That on 27 June 1996 a Memorandum of Agreement was entered into

between the Municipality of Maasin, Iloilo represented by Mayor Rene
Mondejar as the First Party, International Builders Corporation (IBC)
represented by Helen Edith Lee Tan as the Second Party, for the
Rechanneling of the Tigum River path at Barangay Naslo, Maasin, Iloilo.

As the aforesaid Joint Stipulation of Facts was reduced into writing and signed by the
parties and their counsels, thus, they are bound by it and the same becomes judicial
admissions of the facts stipulated.[62] Section 4, Rule 129 of the Rules of Court states:

Section 4. Judicial Admissions. An admission, verbal or written, made by a party in the

course of the proceedings in the same case, does not require proof. The admission may be
contradicted only by showing that, it was made through palpable mistake or that no such
admission was made.

A party may make judicial admissions in (a) the pleadings, (b) during the trial, either by
verbal or written manifestations or stipulations, or (c) in other stages of the judicial
proceeding. It is well-settled that judicial admissions cannot be contradicted by the
admitter who is the party himself and binds the person who makes the same, and absent
any showing that this was made thru palpable mistake, as in this case, no amount of
rationalization can offset it.[63] Also, in Republic of the Philippines v. D
Guzman[64] citing Alfelor v. Halasan,[65] this Court held that "a party who judicially admits
a fact cannot later challenge that fact as judicial admissions are a waiver of
proof; production of evidence is dispensed with. A judicial admission also removes an
admitted fact from the field of controversy."

With the foregoing, the Sandiganbayan is precluded from ruling that the MOA was
actually executed sometime in September 1997 as it would run counter to the stipulated
fact of the parties that it was entered into on 27 June 1996, which stipulation was not
shown to have been made through palpable mistake.

Having established that the MOA was entered into on 27 June 1996 and not in September
1997 as what the Sandiganbayan would make it appear, petitioner Tan's act of signing the
same did not in anyway prove that she had conspired with her co-accused public officials
in committing the offense charged. To repeat, there is nothing in the MOA that would
apprise petitioner Tan of any irregularity or illegality that led to its execution. More so,
the prosecution did not even present evidence in Criminal Case No. 25674 to prove that
petitioner Tan (1) has knowledge that Resolution No. 30-B was a product of a falsified
document, i.e., Minutes of the Regular Session of the Sangguniang Bayan of Maasin,
Iloilo City, and that Mondejar has no authority to enter into a MOA with her; and that (2)
despite knowledge thereof, still entered into a MOA with Mondejar. It also bears
stressing that none of those who testified for the prosecution ever linked petitioner Tan to
the alleged falsification committed by the accused public officials of Maasin, Iloilo City.
In fact, petitioner Tan was not among those charged with Falsification.

Since petitioner Tan's conviction was based on the presence of conspiracy, which the
prosecution was not able to prove beyond reasonable doubt, her conviction of the offense
charged must be reversed.

WHEREFORE, premises considered, the present Petition is hereby GRANTED. The

Sandiganbayan Decision and Resolution dated 7 November 2013 and 30 June 2015,
respectively, in Criminal Case No. 25674 insofar as petitioner Tan is concerned are
hereby REVERSED and SET ASIDE. Accordingly, petitioner Tan
is ACQUITTED from the charge of Violation of Section 3(e) of Republic Act No. 3019.

SO ORDERED.

SECOND DIVISION
[ G.R. No. 214406, February 06, 2017 ]
 BP OIL AND CHEMICALS INTERNATIONAL PHILIPPINES, INC.,
PETITIONER, VS. TOTAL DISTRIBUTION & LOGISTIC SYSTEMS, INC.,
RESPONDENTS.

DECISION

PERALTA, J.:

Before this Court is the Petition for Review on Certiorari under Rule 45, dated
November 10, 2014 of petitioner BP Oil and Chemicals International Philippines, Inc. (BP
Oil) that seeks to reverse and set aside the Decision[1] dated April 30, 2014 of the Court
of Appeals (CA) which, in turn, reversed and set aside the Decision [2] dated January 21,
2011 of the Regional Trial Court (RTC), Branch 148, Makati City, in a case for a collection
of sum of money.

The antecedent facts follow.

A Complaint for Sum of Money was filed by petitioner BP Oil against respondent Total
Distribution & Logistic Systems, Inc. (TDLSI) on April 15, 2002, seeking to recover the
sum of P36,440,351.79 representing the total value of the moneys, stock and accounts
receivables that TDLSI has allegedly refused to return to BP Oil.

The allegations of the parties, as summarized by the RTC, are as follows:

According to the allegations in the complaint, the defendant entered into an
Agency Agreement (the Agreement) with BP Singapore on September 30, 1997,
whereby it was given the right to act as the exclusive agent of the latter for the sales and
distribution of its industrial lubricants in the Philippines. The agency was for a period of
five years from 1997 to 2002. In return, the defendant was supposed to meet the target
sales volume set by BP Singapore for each year of the Agreement. As agreed in the
Supplemental Agreement they executed on January 6, 1998, the defendant was
supposed to deposit the proceeds of the sales it made to a depositary account that the
defendant will open for the purpose. On April 27, 1998, BP Singapore assigned its rights
under the Agreement to the plaintiff effective March ls 1998.

When the defendant did not meet its target sales volume for the first year of the
Agreement, the plaintiff informed the defendant that it was going to appoint other
distributors to sell the BP's industrial lubricant products in the Philippines. The
defendant did not object to the plan of the plaintiff but asked for P10,000,000.00 as
compensation for the expenses. The plaintiff did not agree to the demand made by the
defendant.

On August 19, 1999, the defendant through its lawyer, wrote the plaintiff a letter where
it demanded that it be paid damages in the amount of P40,000,000.00 and announced
that it was withholding remittance of the sales until it was paid by the plaintiff. On
September 1, 1999, the plaintiff wrote the defendant back to give notice that it was
terminating the Agreement unless the defendant rectified the breaches it committed
within a period of 30 days. The plaintiff also demanded that the defendant pay the
plaintiff its outstanding obligations and return the unsold stock in its possession.

On October 11, 1999, the plaintiff gave the defendant formal notice of [sic] that it was
terminating the Agreement after it did not hear from the defendant. The plaintiff would
find out that the defendant had filed a request for arbitration with the Philippine
Dispute Resolution Center, Inc. (PDRCI).

On October 9, 2000, the plaintiff, through Mr. Lau Hock Lee, sent the defendant another
letter to reiterate its demand for the defendant to return the unremitted collections and
stocks in its possession.

On April 30, 2001, the defendant, through Mr. Miguel G. de Asis, its Chief Finance
Officer, wrote the plaintiff a letter admitting that as of the said date, it had in its
possession collections against sales in the amount of P27,261,305.75, receivables in the
amount of P8,767,656.26 and stocks valued at P1,155,000.00.

On July 9, 2001, the law firm of Siguion Reyna Montecillo & Ongsiako sent the
defendant a formal demand letter for the payment of the total amount of
P36,440,351.79 representing the total amount of the collections, receivables and stocks
that defendant should have returned to the plaintiff as of May 31, 2001. The amount
was based on a summary of account prepared by Ms. Aurora B. Osanna, plaintiffs
Business Development Supervisor.

On April 15, 2002, the plaintiff filed the instant complaint for collection against the
defendant. The defendant initially filed a Motion to Dismiss the complaint on the ground
for [sic] lack of cause of action because of the existence of an arbitration agreement, as
well as a previously filed arbitration proceeding between the parties. This Court denied
the defendant's Motion to Dismiss for lack of merit in its Order dated February 21, 2003.
The Motion for Reconsideration filed by the defendant was likewise denied by this Court
on April 30, 2003. The Defendant went up to the Court of Appeals to question the denial
of its Motion to Dismiss via a Petition for Certiorari and Prohibition.

On June 9, 2003, the Defendant filed its Answer Ad Cautelam with Compulsory

Counterclaim Ad Cautelam.

In its answer, the defendant alleged that it was appointed as the exclusive agent of the
plaintiff to sell BP brand industrial lubricants in the Philippines. The agency was to last
for five years from signing of the Agreement, or until September 29, 2001. As the
exclusive agent of BP products, the defendant was tasked to promote, market,
distribute and sell the BP products supplied the plaintiff.

The defendant further alleged that it did not fail to meet the sales target for Year I.
Delays on the part of the plaintiff in shipping the products moved the commencement
of the Agreement from January 1997 to August 1997, making the stipulated sales target
no longer applicable.

On June 8, 1999, the plaintiff unexpectedly informed the defendant of its intention to
assume more control of Philippine operations, including the appointment of a full-time
representative in the Philippines and new distributors. No reason was given for this
policy change.

Although the defendant pointed out to the plaintiff that the appointment of a new
distributor would violate the Agency Agreement, the plaintiff ignored the defendant's
protests and affirmed that it would proceed with taking over control of the distribution
in the Philippines of BP products and with appointing additional distributors.

While business proceeded, the defendant's counsel, Atty. Eugeniano E. Perez III, sent
the plaintiff a letter dated August 19, 1999 pointing out, among others, that: a) The
plaintiffs plan to take over the lubricant business and appoint other distributors was in
breach of the Agency Agreement; b) the defendant incurred losses because of the
plaintiffs non-compliance with the Agreement and lack of support; and c) the defendant
would be carrying on the business would be withholding any funds to be collected
pending compliance with the demand.
Instead of heeding the consequences of its proposed illegal acts, the plaintiffs took steps
to take over the distribution of BP Products in the Philippines and to appoint new agents
for this purpose. Even before the termination of the Agreement, the plaintiff cut off the
supply of BP products to the defendant, and even tried to sell directly to the defendant's
customers, without the defendant's knowledge. To protect its rights, and pursuant to
the arbitration clause under the Agreement, the defendant filed a Request for
Arbitration before the Philippine Dispute Resolution Center, Inc. (PDRCI) on 5 October
1999.

By way of affirmative defenses, the defendant argued that: 1.) it has the right to retain
in pledge objects subject of the agency until it is indemnified by the plaintiff for the
damages it suffered under Article 1914 in relation to Articles 1912 and 1913 of the Civil
Code; 2.) the complaint is dismissible on the ground of lack of cause of action for being
prematurely filed and/or litis pendencia because the issue in the case is already a sub-
issue in the arbitration proceedings; and 3.) the action should be stayed in accordance
with Republic Act No. 876.

On March 21, 2004, the Court of Appeals came out with its Decision affirming this
Court's denial of the defendant's Motion to Dismiss after the defendant filed it
Answer Ad Cautelam. The Court of Appeals also denied the defendant's Motion for
Reconsideration on August 16, 2004. The Decision of the Court of Appeals sustaining
this Court attained finality with the denial by the Supreme Court on November 10, 2004
of the Petition for Review on Certiorari filed by the defendant as well as its Motion for
Reconsideration from the said denial.

In light of the finality of the decision of the Court of Appeals, the defendant lost its right
to invoke the pendency of the arbitration proceedings as part of its affirmative defenses.
The defendant is therefore left with only one affirmative defense to the complaint of the
plaintiff, and this is the right of retention given to an agent under Article 1912, 1913 and
1914 of the Civil Code.

This makes the issue to be resolved by this Court uncomplicated: 1) whether the plaintiff
has the right to collect the amount of P36,440,351.79 from the defendant together with
legal interest computed from September 1, 1999, attorney's fees and costs of suit; and
2) whether the defendant is justified hi retaining the amounts and stocks in its
possession by virtue of the aforementioned provisions of the Civil Code on agency. [3]
 In its Decision dated January 21, 2011, the RTC ruled in favor of the petitioner,
the dispositive portion of which reads as follows:
WHEREFORE, premises considered, judgment is hereby rendered, granting the
claim of the plaintiff and directing the defendant to pay the plaintiff the sum of:

(1) Thirty-Six Million Nine Hundred Forty-Three Thousand Eight Hundred Twenty-Nine
Pesos and Thirteen Centavos (P36,943,829.13) for the value of the stocks and the
moneys received and retained by the defendant in its possession pursuant to the
Agreement with legal interest computed at 6% per annum from July 19, 2001 up to the
finality of this decision and at 12% per annum from finality of this decision up to the
date of payment.

(2) Attorney's fees in the amount of One Million Five Hundred Thousand Pesos
(PI,500,000.00) and costs of suit amounting to Four Hundred Thirty-Nine Thousand Eight
Hundred Forty Pesos (P439,840.00).

SO ORDERED.[4]
After the respondent elevated the case to the CA, the latter court reversed and
set aside the decision of the RTC and found in favor of the respondent in its Decision
dated April 30, 2014, thus:
WHEREFORE, the instant appeal is GRANTED. The assailed Decision dated January
21, 2011 of the Regional Trial Court of Makati City, Branch 148 is REVERSED and SET
ASIDE. The instant complaint is DISMISSED.

SO ORDERED.[5]
The CA ruled, among others, that the admission made by respondent in Exhibit
"J," that it was withholding moneys, receivables and stocks respectively valued at
P27,261,305.75, P8,767,656.26 and P1,155,000.00 from petitioner, has no evidentiary
weight, thus, petitioner was not able to preponderantly establish its claim.

Hence, the present petition where petitioner states the following grounds:
THE COURT OF APPEALS COMMITTED SERIOUS ERROR OF LAW IN RENDERING ITS
DECISION AS WELL AS IN DENYING BP OIL'S MOTION FOR RECONSIDERATION.
SPECIFICALLY:

THE COURT OF APPEALS ERRED IN NOT RULING THAT TDLSI HAS MADE A JUDICIAL
ADMISSION THAT IT HAS POSSESSION OF THE STOCKS, MONEYS AND RECEIVABLES THAT
BP OIL SEEKS TO RECOVER IN THE COMPLAINT BELOW, CONSIDERING THAT:
a. EXHIBIT "J" QUALIFIES AS AN ACTIONABLE DOCUMENT WHOSE AUTHENTICITY
AND DUE EXECUTION WERE DEEMED ADMITTED BY TDLSI FOLLOWING ITS FAILURE TO
SPECIFICALLY DENY THE SAME UNDER OATH IN ITS ANSWER.

b. REGARDLESS OF WHETHER EXHIBIT "J" MAY BE CONSIDERED AS AN ACTIONABLE

DOCUMENT, THE FACT REMAINS THAT TDLSI HAD ACTUALLY ADMITTED PREPARING
AND SENDING THE SAME TO BP OIL IN ITS ANSWER.
i. NO RESERVATION WAS EVER MADE BY TDLSI REGARDING THE AUTHENTICITY
OF ITS CONTENTS AND NO WITNESS WAS EVER PRESENTED BY TDLSI TO DISOWN ITS
DUE EXECUTION.

ii. ASIDE FROM BEING SELF-SERVING, THE ANSWER TO WRITTEN INTERROGATORIES

GIVEN BY TDLSI'S MR. MIGUEL DE ASIS AND CITED IN THE DECISION AS A BASIS TO
NEGATE TDLSI'S ADMISSION OF EXHIBIT "J" WAS NEVER OFFERED IN EVIDENCE. THE
COURT OF APPEALS SHOULD NOT HAVE EVEN CONSIDERED THE SAME IN RENDERING
ITS DECISION.
c. THE RIGHT OF RETENTION INVOKED BY TDLSI IN ITS ANSWER CARRIES WITH IT
THE ADMISSION: (i) THAT BP OIL IS ENTITLED TO THE STOCKS, MONEYS AND
RECEIVABLES SUBJECT OF THE COMPLAINT BELOW, AND (ii) THAT TDLSI IS
WITHHOLDING THE SAME FROM BP OIL.
II

THE COURT OF APPEALS SERIOUSLY ERRED IN NOT RULING THAT WITH OR WITHOUT
EXHIBIT "J," BP OIL HAS MET THE QUANTUM OF PROOF REQUIRED BY LAW TO PROVE
ITS CLAIM.
a.   CIVIL  CASES  ONLY  REQUIRE  A PREPONDERANCE OF EVIDENCE AND BP OIL
HAS DISCHARGED ITS BURDEN OF MEETING THIS STANDARD OF PROOF.

b. THE REFUSAL OF THE COURT TO GIVE WEIGHT TO SOME OF THE PIECES OF EVIDENCE
PRESENTED BY BP OIL HAS NO LEGAL BASIS.

c. THE DENIAL OF TDLSI'S DEMURRER TO EVIDENCE SHOWS THAT BP OIL HAS MADE
OUT A PRIMA FACIE CASE IN SUPPORT OF ITS CLAIMS AGAINST TDLSI AND TDLSFS
FAILURE TO CONTROVERT THIS PRIMA FACIE CASE JUSTIFIES A RULING IN FAVOR OF BP
OIL.
 According to petitioner, Exhibit "J" qualifies as an actionable document whose
authenticity and due execution were deemed admitted by respondent or TDLSI
following its failure to specifically deny the same under oath. Petitioner insists that it has
met the quantum of proof required by law.

In its Comment dated March 24, 2015, respondent reiterates the ruling of the CA that
Exhibit "J" is not an actionable document and cannot be considered a judicial admission
on its part.

The petition is devoid of any merit.

The Rules of Court require that only questions of law should be raised in petitions filed
under Rule 45.[6] This court is not a trier of facts. It will not entertain questions of fact as
the factual findings of the appellate courts are "final, binding[,] or conclusive on the
parties and upon this [c]ourt"[7] when supported by substantial evidence.[8] Factual
findings of the appellate courts will not be reviewed nor disturbed on appeal to this
court.[9]

This Court's Decision in Cheesman v. Intermediate Appellate Court [10] distinguished

questions of law from questions of fact:
As distinguished from a question of law - which exists "when the doubt or
difference arises as to what the law is on a certain state of facts" - "there is a question of
fact when the doubt or difference arises as to the truth or the falsehood of alleged
facts;" or when the "query necessarily invites calibration of the whole evidence
considering mainly the credibility of witnesses, existence and relevancy of specific
surrounding circumstances, their relation to each other and to the whole and the
probabilities of the situation."[11]

Seeking recourse from this court through a petition for review on certiorari under Rule
45 bears significantly on the manner by which this court shall treat findings of fact and
evidentiary matters. As a general rule, it becomes improper for this court to consider
factual issues: the findings of fact of the trial court, as affirmed on appeal by the Court
of Appeals, are conclusive on this court. "The reason behind the rule is that [this] Court
is not a trier of facts and it is not its duty to review, evaluate, and weigh the probative
value of the evidence adduced before the lower courts." [12]
 However, these rules do admit exceptions. [13] Over time, the exceptions to these
rules have expanded. At present, there are 10 recognized exceptions that were first
listed in Medina v. Mayor Asistio, Jr.:[14]
(1) When the conclusion is a finding grounded entirely on speculation, surmises
or conjectures; (2) When the inference made is manifestly mistaken, absurd or
impossible; (3) Where there is a grave abuse of discretion; (4) When the judgment is
based on a misapprehension of facts; (5) When the findings of fact are conflicting; (6)
When the Court of Appeals, in making its findings, went beyond the issues of the case
and the same is contrary to the admissions of both appellant and appellee; (7) The
findings, of the Court of Appeals are contrary to those of the trial court; (8) When the
findings of fact are conclusions without citation of specific evidence on which they are
based; (9) When the facts set forth in the petition as well as in the petitioner's main and
reply briefs are not disputed by the respondents; and (10) The finding of fact of the
Court of Appeals is premised on the supposed absence of evidence and is contradicted
by the evidence on record.[15]
A close reading of the present petition shows that what this Court is being asked
to resolve is, what should prevail - the findings of facts of the RTC or the findings of facts
of the CA on the alleged misapprehension of facts of the RTC. The findings of facts of
both Courts are obviously conflicting, hence, the need for this Court to rule on the
present petition.

On the issue of whether Exhibit "J" is an actionable document, the CA ruled:

Here, plaintiff-appellee relies heavily on its Exhibit "J", defendant-appellant's
purported letter dated April 30, 2001, which it alleged to be an "actionable document"
which defendant-appellant failed to deny under oath. It does amounts to a judicial
admission on the part of defendant-appellant that it has possession of its stocks,
moneys and receivables belonging to plaintiff-appellee.

xxxx

Here, the purported April 30, 2001 letter is not an actionable document per se. The
present complaint is an action for collection of sum of money arising from the
termination of the Agency Agreement between the parties. Plaintiff-appellee's cause of
action is primarily based on the alleged non-payment of outstanding debts of
defendant-appellant as well as the unremitted collections/payments and unsold stocks,
despite demand. In other words, plaintiff-appellee's cause of action is not based solely
on the April 30, 2001 letter allegedly stating the "present value of stocks, collections and
accounts receivables" of defendant-appellant. Clearly, said document is not an
actionable document contemplated in Section 7, Rule 8 of the 1997 Rules of Court but is
merely evidentiary in nature. As such, there was no need for defendant-appellant to
deny its genuineness and due execution under oath. We thus cannot sustain plaintiff-
appellee's contention that the aforesaid Exhibit "J" amounted to a judicial admission
because it's due execution and authenticity was never denied under oath by defendant
appellant.

Verily, an admission is any statement of fact made by a party against its interest or
unfavorable to the conclusion for which he contends or is inconsistent with the facts
alleged by him. To be admissible, an admission must (a) involve matters of fact, and not
of law; (b) be categorical and definite; (c) be knowingly and voluntarily made; and (d) be
adverse to the admitter's interests, otherwise it would be self-serving and inadmissible.

In this case, the alluded Exhibit "J" was introduced in evidence by plaintiff-appellee
alleging in its Complaint that:
"18. Under date of 30 April 2001, TDLSI wrote BP Oil a letter admitting that the
following stocks, collections and accounts receivable were still in their possession as of
even date:
Amount
collected against P27,261,305.75  
sales
Accounts
8,767,656.26  
Receivable
Estimated
1,155,000.00  
Value of Stocks
A copy of the 30 April 2001 letter of TDLSI is hereto attached as Annex "J" and
made an integral part hereof."
In its Answer Ad Cautelam with Compulsory Counterclaim Ad Cautelam,
defendant-appellant TDLSI averred, viz.:
"17. Paragraph 18 is admitted, with qualification [that] TDLSI's letter dated 30
April 2001 was prepared and sent to BP Oil solely on the latter's representations that
the figures were being sought only to negotiate a settlement of the parties' dispute and
end the pending arbitration. Instead, in shocking bad faith, BP Oil refused to settle and
made TDLSI's letter the basis of the instant Complaint."
Hence, while defendant-appellant admitted said Exhibit "J", it nevertheless
qualified and limited said admission to, merely, the existence thereof. In fact, in its
Comment to Plaintiffs Exhibits, defendant clearly stated:
 "(9) EXH. "J" - only the existence of the letter sent by Defendant to Plaintiff dated
April 30, 2001, signed by Miguel de Asis and addressed to Hok Lee Hau, is admitted. The
contents as well as the factual basis thereof, are not admitted. Besides, the
circumstances leading to the sending of this letter were thoroughly explained by Miguel
de Asis in his answer to Plaintiffs written interrogatories."
xxxx

Evidently, the afore-quoted letter does not, in any way, categorically declare that the
figures stated therein are still in [the] possession of or, in the hands of, defendant-
appellant TDLSI. The "present value" of the accounts receivables, collections and stocks
is one thing, the "value in possession or on hand" of said accounts is another.

Sans the above-discussed Exhibit "J", therefore, this Court is not convinced that plaintiff-
appellee BP Oil was able to preponderantly establish its claim against defendant-
appellant TDLSI in the amount of P36,440,351.79 for the value of the moneys, stock and
accounts receivables which the latter allegedly refused to deliver to the former. As aptly
argued by defendant-appellant TDLSI, the purported Acknowledgment Receipts and
Delivery Receipts presented by plaintiff-appellee BP Oil the purpose of which is "to
prove that TDLSI, through its General manager, Mr. Ivor Williams, acknowledged receipt
and delivery of the stocks" are totally baseless since the same were never signed as
having been "received by" said Mr. Ivor Williams. Hence, without the latter's signature,
the purpose for which said documents were offered becomes nil.
The above findings of the CA are partially correct.

Exhibit "J" reads as follows:

Mr. Lau,

Some considerable time has passed since either party had the opportunity to review
their respective position (sic) on the disagreement between us. It was pleasing to note
that a discussion has now started between us again and you give the impression that a
settlement is a better solution for both parties than to continue through the legal route.

The present value of stocks, collections and accounts receivable was requested. As of
today, we can state the following:
Amount
Collected against P27,261,305.75  
Sales
Accounts 8,767,656.26  
receivables
Estimated
P1,155,000.00  
Value of Stocks
Please note that the stock value is estimated because the drums are no longer
sealable due to their condition. However, this is not significant in number.
To the mind of the Court, Exh. "J" is not an actionable document but is an
evidence that may be admissible and; hence, need not be denied under oath. Sections 7
and 8 of the 1997 Rules of Court provide:
Section 7. Action or defense based on document. — Whenever an action or
defense is based upon a written instrument or document, the substance of such
instrument or document shall be set forth in the pleading, and the original or a copy
thereof shall be attached to the pleading as an exhibit, which shall be deemed to be a
part of the pleading, or said copy may with like effect be set forth in the pleading.

Section 8. How to contest such documents. - When an action or defense is founded upon
a written instrument, copied in or attached to the corresponding pleading as provided in
the preceding Section, the genuineness and due execution of the instrument shall be
deemed admitted unless the adverse party, under oath, specifically denied them, and
sets forth what he claims to be the facts, but the requirement of an oath does not apply
when the adverse party does not appear to be a party to the instrument or when
compliance with an order for an inspection of the original instrument is refused.
A document, therefore, is actionable when an action or defense is grounded
upon such written instrument or document. The complaint filed by petitioner is an
action for collection of sum of money arising from the termination of the Agency
Agreement with TDLSI. The CA, therefore, was correct when it stated that petitioner's
cause of action is primarily based on the alleged non-payment of outstanding debts of
respondent as well as the unremitted collections/payments and unsold stocks, despite
demand. Thus, petitioner's cause of action is not based solely on the April 30, 2001
letter allegedly stating the "present value of stocks, collections and accounts
receivables" of TDLSI. Noteworthy is the denial of respondent TDLSI's Demurrer to
Evidence by the RTC because it clearly discussed petitioner's cause of action and the
sufficiency of the evidence it presented, thus:
Upon consideration of the pleadings and arguments filed by the parties, the
Court is convinced to DENY the demurrer.

The record shows that the plaintiff presented sufficient evidence that will
preponderantly establish its claim against the defendant. Among the evidence
presented which might prove the claim or right to relief of the plaintiff against the
defendant include (1) the purchase orders of TDLSI's third party customers; (2) original
approved copies of the requests for approval sent by TDLSI to BP Oil from May 21, 1998
to August 14, 1999; (3) TDLSI invoices covering the products subject of the purchase
orders and requests for approval; and (4) The sales invoices issued by BP Oil to TDLSI to
its customers.

The aforesaid evidence presented was to the mind of the Court contain pertinent facts
and such evidence will prove that the plaintiff has a cause of action against the
defendant. As correctly pointed out by the plaintiff, TDLSI cannot premise its demurrer
on any supposed lack of proof of delivery by BP Oil of certain moneys and receivables.
The allegations in the complaint, as well as the evidence presented by BP Oil, establish
that generated as they were by the sales made by TDLSI, the moneys and receivables
have always been in TDLSI's possession and it is the obligation of the latter to deliver
them to BP Oil.

The Court is of the view that the better way to weigh and decide this case based on
merits is for the defendant to present its own evidence to refute the plaintiffs
allegations. It is better that the defendant be given a day in court to prove its defenses
in a full-blown trial.

The Court cannot just dismiss the case on the ground that upon the facts and law
presented by the plaintiff it was not able to show a right to relief when in fact the
evidence presented, testimonial and documentary, show otherwise and its claim
appears to be meritorious. To ensure that justice would be served and that the case be
decided on its real merits upon a careful review and appreciation of facts and evidence
presented it would be best that defendant should instead present its own defenses in a
formal trial and not just to dismiss the case allegedly in the absence of clear proof that
plaintiff has no right to the reliefs prayed for.

Moreover, the Court noted that this case has been prolonged for so long and this Court
can no longer allow any more delay to this case.

WHEREFORE, premises considered, the Demurrer to Evidence is hereby DENIED for lack
of merit.[16]
It is basic that whoever alleges a fact has the burden of proving it because a mere
allegation is not evidence.[17] In civil cases, the burden of proof is on the party who
would be defeated if no evidence is given on either side. [18] The RTC's denial of TDLSI's
Demurrer to Evidence shows and proves that petitioner had indeed laid a prima
facie case in support of its claim. Having been ruled that petitioner's claim is
meritorious, the burden of proof, therefore, was shifted to TDLSI to controvert
petitioner's prima facie case.

The CA, however, ruled that while TDLSI admitted Exhibit "J", it nevertheless qualified
and limited said admission to, merely, the existence thereof, thus, without Exhibit "J"
the same court was not convinced that petitioner was able to preponderantly establish
its claim against TDLSI in the amount of P3 6,440,3 51.79 for the value of the moneys,
stock and accounts receivables which TDLSI allegedly refused to deliver to petitioner.
This is erroneous. The fact is, TDLSI indeed admitted the existence of Exhibit "J." Thus,
Exhibit "J" can be considered as an admission against interest. Admissions against
interest are those made by a party to a litigation or by one in privity with or identified in
legal interest with such party, and are admissible whether or not the declarant is
available as a witness.[19] An admission against interest is the best evidence that affords
the greatest certainty of the facts in dispute, based on the presumption that no man
would declare anything against himself unless such declaration is true. [20] It is fair to
presume that the declaration corresponds with the truth, and it is his fault if it does not.
[21]
 No doubt, admissions against interest may be refuted by the declarant. [22] In this case,
however, respondent failed to refute the contents of Exhibit "J."

Be that as it may, the qualification made by respondent in the admission of Exhibit "J" is
immaterial as the contents thereof were merely corroborative of the other pieces of
evidence presented by petitioner and that respondent failed in its defense, to present
evidence to defeat the claim of petitioner. As aptly ruled by the RTC:
After going over the allegations and the evidence presented by the parties, the
Court finds as it did in its Order denying the Demurrer to Evidence of the defendant that
the plaintiff presented sufficient evidence that will preponderantly establish its claim
against the defendant. The Court notes that apart from not presenting any evidence in
support of its defense, the defendant did not really put up any serious defense to
defeat the claim of the plaintiff, and its only remaining defense consisting of the right
of retention given to agents under Articles 1912, 1913 and 1914 of the Civil Code, even
if proven to exist, will not negate the finding that the plaintiff is entitled to the value
of the moneys and stocks in the defendant's possession.

To the mind of the court, the evidence presented by the plaintiff, unrebutted by any
evidence on the part of the defendant and even aided by the admissions made by the
defendant in its letter dated April 30, 2001 to the plaintiff (Exhibit "J"), proves that the
plaintiff has a cause of action for the payment of the amount of Thirty-Six Million Nine
Hundred Forty-Three Thousand Eight Hundred Twenty-Nine Pesos and Thirteen
Centavos (P36,943,829.13) for the value of the stocks and the moneys received and
retained by the defendant in its possession pursuant to the Agreement with legal
interest computed at 6% per annum from July 19, 2001, when formal demand (Exhibit
"L") was made by the plaintiff for the liquidated amount of P36,943,829.13, up to the
finality of this decision up to the date of payment thereof.

Considering that the plaintiff was compelled to engage in litigation for almost 10 years,
it must also be indemnified for the costs of suit corresponding to filing fees in the
amount of P429,840.00 and attorney's fees equivalent to P1,500,000.00. [23]
Section 1,[24] Rule 133 of the Rules of Court mandates that in civil cases, the party
having the burden of proof must establish his case by a preponderance of evidence. By
preponderance of evidence, according to Raymundo v. Lunaria,[25] [means] that the
evidence as a whole adduced by one side is superior to that of the other. It refers to the
weight, credit and value of the aggregate evidence on either side and is usually
considered to be synonymous with the term "greater weight of evidence" or "greater
weight of the credible evidence." It is evidence which is more convincing to the court as
worthy of belief than that which is offered in opposition thereto.

Upon close analysis, therefore, this Court is inclined to believe the findings of the RTC
that petitioner was able to prove its case by a preponderance of evidence and that
respondent failed to disprove petitioner's claim. As such, the CA gravely erred in
reversing the decision of the RTC.

A modification, however, must be made as to the rate of interest applied by the RTC.
The RTC ordered the respondent to pay the amount adjudged "with legal interest
computed at 6% per annum from July 19, 2001 up to the finality of the decision and at
12% per annum from finality of the decision up to the date of payment." Now, the
interest imposed should be 12% per annum from July 19, 2001 until June 30, 2013 and
6% per annum from July 1, 2013 until full satisfaction per decision of this Court
in Secretary of the Department of Public Works and Highways, et al. v. Spouses Heracleo
and Ramona Tecson[26] which set forth the following guidelines:
In summary, the interest rates applicable to loans and forbearance of money, in
the absence of an express contract as to such rate of interest, for the period of 1940 to
present are as follows:
Law, Rule and Date of Interest  
 Regulations, BSP Issuances Effectivity Rate
 
Act No. 2655 May 1, 1916 6%  
July 29,
CB Circular No. 416 12%  
1974
December
CB Circular No. 905 12%  
22, 1982
CB Circular No. 799 July 1, 2013 6%  
It is important to note, however, that interest shall be compounded at the time
judicial demand is made pursuant to Article 2212[27] of the Civil Code of the Philippines,
and sustained in Eastern Shipping Lines v. Court of Appeals,[28] then later on in Nacar v.
Gallery Frames,[29] save for the reduction of interest rate to 6% for loans or forbearance
of money, thus:

1. When the obligation is breached, and it consists in the payment of a sum of

money, i.e., a loan or forbearance of money, the interest due should be that which may
have been stipulated in writing. Furthermore, the interest due shall itself earn legal
interest from the time it is judicially demanded. In the absence of stipulation, the rate of
interest shall be 6% per annum to be computed from default, i.e., from judicial or
extrajudicial demand under and subject to the provisions of Article 1169 of the Civil
Code.[30]
WHEREFORE, the Petition for Review on Certiorari under Rule 45 of the Rules of
Court dated November 10, 2014 of BP Oil and Chemicals International Philippines, Inc.
is GRANTED. Consequently, the Decision dated April 30, 2014 of the Court of Appeals
is REVERSED and SET ASIDE and the Decision dated January 21, 2011 of the Regional
Trial Court, Branch 148, Makati City is AFFIRMED and REINSTATED, with
the MODIFICATION that the interest imposed should be 12% per annum from July 19,
2001 until June 30, 2013 and 6% per annum from July 1, 2013 until fully paid.

SO ORDERED.

SECOND DIVISION
[ G.R. No. 216491, August 23, 2017 ]
THE HEIRS OF PETER DONTON, THROUGH THEIR LEGAL
REPRESENTATIVE, FELIPE G. CAPULONG, PETITIONERS, VS. DUANE
STIER AND EMILY MAGGAY, RESPONDENTS.

DECISION
PERLAS-BERNABE, J.:

Assailed in this petition for review on certiorari[1] are the Decision[2] dated June

13, 2014 and the Resolution[3] dated January 21, 2015 rendered by the Court of Appeals
(CA) in CA-G.R. CV No. 97138, which affirmed the Decision[4] dated December 14, 2009
and the Order[5] dated May 4, 2011 of the Regional Trial Court of Quezon City, Branch
215 (RTC) dismissing the complaint for annulment of title and reconveyance of property
with damages originally filed by now-deceased[6] Peter Donton (Donton), the
predecessor of herein petitioners Heirs of Peter Donton (petitioners), for insufficiency of
evidence.

The Facts

The subject matter of this case is a parcel of land with improvements located at No. 33,
Don Jose Street, Murphy, Cubao, Quezon City, consisting of 553.60 square meters,
[7]
 more or less (subject property). It was previously covered by Transfer Certificate of
Title (TCT) No. N-137480[8] of the Registry of Deeds of Quezon City under the name of
Donton until its registration in the names of respondents Duane Stier (Stier) and Emily
Maggay (Maggay; collectively, respondents) under TCT No. N-225996. [9]

Sometime in June 2001, while Donton was in the United States, he discovered that
herein respondents took possession and control of the subject property, as well as the
management of his business operating thereat.[10] Donton's lawyers in the Philippines
made demands upon respondents to vacate the subject property and to cease and
desist from operating his business, but to no avail.[11] Thus, Donton was forced to return
to the Philippines, where he learned that respondents, through alleged fraudulent
means, were able to transfer the ownership of the subject property in their names.
[12]
 Accordingly, his title, TCT No. N-137480, had been cancelled and a new one, TCT No.
N-225996, had been issued in respondents' names.

Hence, he filed the instant complaint[13] for annulment of title and reconveyance of

property with damages against respondents and the Register of Deeds of Quezon City,
alleging that the signature on the Deed of Absolute Sale [14] dated July 16, 2001, by virtue
of which he purportedly sold the subject property to respondents, was a forgery. [15] He
denied signing or executing the document in favor of respondents, especially
considering that on the date of its purported execution, i.e., July 16, 2001, he was
allegedly still in the United States, having departed from the Philippines on June 27,
2001 and returned only on August 30, 2001.[16] He averred that respondents conspired
with the employees of the Registry of Deeds of Quezon City to defraud him, and that
Stier is an American citizen and a non-resident alien who is, therefore, not allowed by
law to own any real property in the Philippines.[17] Accordingly, he prayed that TCT No.
N-225996 in respondents' names be annulled and cancelled; that a new title be issued in
his name as the rightful owner of the subject property; and that respondents be ordered
to pay him P1,000,000.00 as moral damages, P200,000.00 as exemplary damages,
P200,000.00 as attorney's fees, and P200,000.00 as litigation expenses. [18]

In their Answer with Counterclaim,[19] respondents claimed that the subject property

had been lawfully transferred to them, asserting that on September 11, 1995, Donton
executed an Occupancy Agreement[20] whereby he acknowledged that Stier had been
residing thereat since January 5, 1995; that Stier had extended a loan to him in the
amount of P3,000,000.00 on July 5, 1997, secured by a mortgage over the subject
property and its improvements; and that until full payment thereof, Donton allowed
Stier to occupy the same. Respondents likewise claimed that Donton executed a Special
Power of Attorney (SPA) dated September 11, 1995 in favor of Stier, giving him full
authority to sell, mortgage, or lease the subject property. [21] Unfortunately, Donton
failed to pay his obligation to Stier; thus, they initially executed a "unilateral contract of
sale"[22] dated June 25, 2001 over the subject property. Eventually, however, they
executed the Deed of Absolute Sale dated July 16, 2001. As such, respondents argued
that Donton cannot feign ignorance of the sale of the subject property to them. By way
of counterclaim, respondents prayed for the awards of moral damages in the amount of
P1,000,000.00, exemplary damages in the amount of P200,000.00, and P400,000.00 as
attorney's fees, and litigation expenses.[23]

During trial, Donton presented the findings of Rosario C. Perez (Perez), Document
Examiner II of the Philippine National Police (PNP) Crime Laboratory in Camp Crame,
who, after comparing the alleged signature of Donton on the Deed of Absolute Sale to
his standard ones,[24] found "significant divergences in the manner of execution, line
quality, stroke structure, and other individual handwriting characteristics" between
them, and concluded that they were not written by one and the same person. [25] Perez
herself testified on the results of her examination.

In an Order[26] dated February 9, 2004, the RTC allowed the substitution of petitioners as

plaintiffs after Donton passed away on November 22, 2003.
On the other hand, respondents waived[27] their right to present their evidence.

The RTC Ruling

In a Decision[28] dated December 14, 2009, the RTC dismissed the complaint on the
ground of insufficiency of evidence,[29] finding that the Deed of Absolute Sale, being a
public and notarial document, enjoys the presumption of regularity, and thus cannot be
simply defeated by Danton's bare allegation of forgery of his signature thereon. [30]

Likewise, the RTC refused to give probative weight to the expert testimony offered by
Perez after the latter admitted that she conducted the examination of the sample
signatures not by virtue of a court order, but at the instance of Donton and the Criminal
Investigation and Detection Group (CIDG).[31] She also admitted that she did not know
the source of the documents procured by the CIDG that she used in her examination. On
this score, the RTC held that the forensic examination and testimony of Perez were self-
serving,[32] further explaining that it was not bound to accept the findings of a
handwriting expert.[33] Therefore, the same cannot be used to invalidate the Deed of
Absolute Sale and the title issued to respondents.

Petitioners moved[34] to set aside the RTC Decision, which the RTC treated as a motion
for reconsideration and which it subsequently denied in an Order [35] dated May 4, 2011.
In denying petitioners' motion, the RTC reiterated the disquisitions in its Decision and
added that petitioners failed to prove that Stier is an American citizen. [36] It explained
that the only evidence that petitioners presented was a Certification [37] from the Bureau
of Immigration (BOI) certifying that one Duane Otto Stier, an American citizen, visited
the Philippines on September 2, 2001 and left on October 6, 2001. As such, the RTC
reasoned that the same was not sufficient to prove Stier's citizenship; at most, it merely
proved the alleged travel of the latter.[38] Similarly, petitioners failed to show that Stier is
married, as alleged in the complaint. With respect to petitioners' contention that
Maggay had no capacity to acquire real property, the RTC found the same to be bereft
of probative value, being merely an opinion.[39] Finally, the allegation that Donton was in
the United States from June 27, 2001 until August 30, 2001, and therefore not in the
Philippines on July 16, 2001 at the time of the execution of the sale lost its credibility in
the face of his admission that he was in the Philippines in the last week of July 2001. [40]

Aggrieved, petitioners appealed[41] to the CA.

 The CA Ruling

In a Decision[42] dated June 13, 2014, the CA denied the appeal and affirmed the assailed
RTC Decision and Order, finding that petitioners failed to substantiate their allegation
that Donton's signature on the Deed of Absolute Sale was forged. [43] It held that the
aforesaid document was notarized and therefore enjoys the presumption of validity,
which can only be overturned by clear and convincing evidence. [44] Further, upon
examination of Donton's passport stamps, which petitioners offered in evidence to
prove that Donton could not have signed the Deed of Absolute Sale on July 16, 2001, the
CA held that although he departed from the Philippines on June 27, 2001, there was no
entry stamp of his admittance to the United States sometime between said date and
August 30, 2001, the date of his return to the Philippines. [45]

As regards the findings and testimony of Perez, the CA held that "[n]otwithstanding
Perez's expert testimony that the questioned signature and the standard signatures [of
Donton] were not signed by the same person," [46] the RTC was correct in declaring her
testimony as self-serving. It considered that Perez did not know the source of the
documents, and that it was the CIDG that provided her with Donton's standard
signatures. She admitted that she had no actual knowledge of whether the documents
given to her for examination came from Donton, and that she merely proceeded to
examine them without verifying the source.[47] Thus, the source of the documents being
unverified, it cannot be concluded that the signatures thereon are the genuine
signatures of Donton.

Finally, the CA sustained the RTC in ruling that petitioners failed to substantiate their
allegation that Stier is an American citizen and married, and that Maggay had no
capacity to purchase real property. On this score, the CA quoted with approval the RTC's
findings that the BOI-issued Certification procured and presented in evidence by
petitioners was insufficient to prove Stier's alleged American citizenship, and that there
was dearth of evidence to further prove their allegation that he is married, or that
Maggay had no capacity to purchase real property.[48]

Petitioners' motion for reconsideration[49] was denied in a Resolution[50] dated January

21, 2015; hence, this petition.

The Issue Before the Court

The issue for the Court's consideration is whether or not the CA erred in ruling that
petitioners failed to discharge the burden of proof required to be entitled to the reliefs
prayed for in this case, namely, the annulment of title and reconveyance of property
with damages.

The Court's Ruling

The petition is partly meritorious.

At the outset, the Court deems it necessary to underscore that a reexamination of

factual findings cannot be done acting on a petition for review on certiorari because the
Court is not a trier of facts but reviews only questions of law. [51] Thus, in petitions for
review on certiorari, only questions of law may generally be put into issue.

This rule, however, admits of exceptions, such as when the findings of fact are
premised on the supposed absence of evidence and contradicted by the evidence on
record and when the Court of Appeals manifestly overlooked certain relevant facts
not disputed by the parties, which, if properly considered, would justify a different
conclusion.[52] Finding a confluence of certain exceptions in this case, the general rule
that only legal issues may be raised in a petition for review on certiorari under Rule 45
of the Rules of Court does not apply, and the Court retains the authority to pass upon
the evidence presented and draw conclusions therefrom. [53]

In civil cases, basic is the rule that the party making allegations has the burden of
proving them by a preponderance of evidence. Preponderance of evidence is the
weight, credit, and value of the aggregate evidence on either side and is usually
considered to be synonymous with the term "greater weight of the evidence" or
"greater weight of the credible evidence." It is a phrase which, in the last analysis,
means probability of the truth, or evidence which is more convincing to the court as
worthier of belief than that which is offered in opposition thereto. [54]

The main thrust of petitioners' contention in this case is that Donton's signature on the
Deed of Absolute Sale is a forgery. They maintain that it was not possible for him to
have signed the said document considering that he was not in the Philippines on July 16,
2001, the date of execution and notarization thereof, he being in the United States at
the time. To bolster this argument, they offered in evidence, among others, the
immigration stamps on Donton's passport,[55] showing that the latter departed from the
Philippines on June 20, 2001 and returned on August 30, 2001.
However, as the courts a quo have aptly opined, the foregoing immigration stamps
are insufficient to prove that Donton was physically absent from the country to have
been able to appear before the notary public on July 16, 2001, the date of the
acknowledgment of the Deed of Absolute Sale. It is well to point out, as the RTC did,
that petitioners failed to prove Donton's arrival or entry in the United States, where he
alleged to have gone, and his departure therefrom to return to the Philippines on
August 30, 2001. Without evidence of such admittance to and departure from the
United States between June 27, 2001 and August 30, 2001, the Court cannot discount
the possibility that Donton may have returned to the Philippines anytime between those
dates to execute the Deed of Absolute Sale. This is especially so in light of his own
admission in the complaint that he returned to the Philippines "sometime in the last
week of July 2001"[56] allegedly to ascertain the truth and veracity of the information he
received that the subject property had been transferred to respondents. These
inconsistencies heavily militate against him, effectively tainting his credibility as a
witness and rendering doubtful the veracity of his testimony.

Furthermore, forgery, as a rule, cannot be presumed and must be proved by clear,

positive and convincing evidence, and the burden of proof lies on the party alleging
forgery - in this case, petitioners. The fact of forgery can only be established by a
comparison between the alleged forged signature and the authentic and genuine
signature of the person whose signature is theorized to have been forged. [57] Pertinently,
Section 22, Rule 132 of the Revised Rules of Court provides:
Section. 22. How genuineness of handwriting proved. - The handwriting of a
person may be proved by any witness who believes it to be the handwriting of such
person because he has seen the person write, or has seen writing purporting to be his
upon which the witness has acted or been charged, and has thus acquired knowledge of
the handwriting of such person. Evidence respecting the handwriting may also be
given by a comparison, made by the witness or the court, with writings admitted or
treated as genuine by the party against whom the evidence is offered, or proved to be
genuine to the satisfaction of the judge. (Emphasis supplied)
In Gepulle-Garbo v. Spouses Garabato,[58] the Court explained the factors involved
in the examination and comparison of handwritings in this wise:
x x x [T]he authenticity of a questioned signature cannot be determined solely
upon its general characteristics, similarities or dissimilarities with the genuine signature.
Dissimilarities as regards spontaneity, rhythm, pressure of the pen, loops in the strokes,
signs of stops, shades, etc., that may be found between the questioned signature and
the genuine one are not decisive on the question of the former's authenticity. The result
of examinations of questioned handwriting, even with the benefit of aid of experts and
scientific instruments, is, at best, inconclusive. There are other factors that must be
taken into consideration. The position of the writer, the condition of the surface on
which the paper where the questioned signature is written is placed, his state of mind,
feelings and nerves, and the kind of pen and/or paper used, play an important role on
the general appearance of the signature. Unless, therefore, there is, in a given case,
absolute absence, or manifest dearth, of direct or circumstantial competent evidence on
the character of a questioned handwriting, much weight should not be given to
characteristic similarities, or dissimilarities, between that questioned handwriting and
an authentic one.[59]
To prove forgery, petitioners offered in evidence the findings and testimony given
by expert witness Perez, who declared that she found "significant divergences in the
manner of execution, line quality, stroke structure and other individual handwriting
characteristics" between the signature that appears on the Deed of Absolute Sale and
the standard signatures of Donton, thereby concluding that they were not written by
one and the same person.[60] On cross-examination, however, Perez admitted that she
had no actual knowledge of the source of the specimen signatures given to her for
examination, as it was the CIDG personnel who provided her with the same. [61] Thus, as
the CA correctly observed, Perez's findings deserve little or no probative weight at all,
considering that the signatures which she used for comparison came from an unverified
source. Perforce, petitioners are left with no conclusive evidence to prove their
allegation that Donton's signature on the Deed of Absolute Sale was forged.

It bears stressing that the opinion of handwriting experts are not necessarily binding
upon the court, the expert's function being to place before the court data upon which
the court can form its own opinion. This principle holds true especially when the
question involved is mere handwriting similarity or dissimilarity, which can be
determined by a visual comparison of specimens of the questioned signatures with
those of the currently existing ones. A finding of forgery does not depend entirely on the
testimonies of handwriting experts, because the judge must conduct an independent
examination of the questioned signature in order to arrive at a reasonable conclusion as
to its authenticity.[62]

In fine, the Court, therefore, upholds the findings of the courts a quo in this respect.

Be that as it may, the Court, however, differs from the findings of the courts a quo with
respect to Stier's citizenship. More than the Certification [63] issued by the BOI, which
clearly states that Stier is an American citizen, the records contain other documents
validating the information. For instance, in paragraph 1[64] of respondents' Answer with
Counterclaim,[65] they admitted paragraphs 1, 2, and 3 of the Complaint insofar as their
personal circumstances are concerned, and paragraph 2 of the Complaint states:
"2. Defendant DUANE STIER is of legal age, married, an American citizen, a non-
resident alien with postal address at Blk. 5, Lot 27, A, B, Phase 1, St. Michael Home
Subd., Binangonan, Rizal; x x x"[66] (Emphases supplied)
Similarly, one of the attachments to the Manifestation [67] filed by respondents
before the RTC is an Affidavit[68] executed by Stier himself, stating:

"I, DUANE STIER, of legal age, married, American citizen x x x"[69] (Emphasis

supplied)

The foregoing statements made by Stier are admissions against interest and are

therefore binding upon him. An admission against interest is the best evidence which
affords the greatest certainty of the facts in dispute since no man would declare
anything against himself unless such declaration is true. Thus, an admission against
interest binds the person who makes the same, and absent any showing that this was
made through palpable mistake, no amount of rationalization can offset it,[70] especially
so in this case where respondents failed to present even one piece of evidence in their
defense.[71]

Hence, the courts a quo erred in ruling that Stier's American citizenship was not
established in this case, effectively rendering the sale of the subject property as to him
void ab initio, in light of the clear proscription under Section 7, Article XII of the
Constitution against foreigners acquiring real property in the Philippines, to wit:
Section 7. Save in cases of hereditary succession, no private lands shall be
transferred or conveyed except to individuals, corporations, or associations qualified to
acquire or hold lands of the public domain.
Thus, lands of the public domain, which include private lands, may be transferred
or conveyed only to individuals or entities qualified to acquire or hold private lands or
lands of the public domain. Aliens, whether individuals or corporations, have been
disqualified from acquiring lands of the public domain as well as private lands. [72]

In light of the foregoing, even if petitioners failed to prove that Donton's signature on
the Deed of Absolute Sale was a forgery, the sale of the subject property to Stier is in
violation of the Constitution; hence, null and void ab initio. A contract that violates the
Constitution and the law is null and void and vests no rights and creates no obligations.
It produces no legal effect at all.[73] Furthermore, Stier is barred from recovering any
amount that he paid for the subject property, the action being proscribed by the
Constitution.[74]

Nevertheless, considering that petitioners failed to prove their allegation that Maggay,
the other vendee, had no capacity to purchase the subject property, the sale to her
remains valid but only up to the extent of her undivided one-half share therein.
[75]
 Meanwhile, the other undivided one-half share, which pertained to Stier, shall revert
to Donton, the original owner, for being the subject of a transaction void ab initio.
Consequently, the Deed of Absolute Sale, together with TCT No. N-225996 issued in
respondents' favor, must be annulled only insofar as Stier is concerned, without
prejudice, however, to the rights of any subsequent purchasers for value of the subject
property.

WHEREFORE, the petition is PARTLY GRANTED. The Decision dated June 13, 2014 and
the Resolution dated January 21, 2015 of the Court of Appeals in CA-G.R. CV No. 97138,
which affirmed the dismissal of the complaint filed by petitioners on the ground of
insufficiency of evidence, are hereby REVERSED and SET ASIDE, and a NEW ONE is
entered: (1) annulling the Deed of Absolute Sale dated July 16, 2001 insofar as
respondent Duane Stier is concerned; (2) annulling Transfer Certificate of Title No. N-
225996 insofar as respondent Duane Stier is concerned; and (3) directing the Registry of
Deeds of Quezon City to issue a new title in the name of Peter Donton and Emily
Maggay, all without prejudice to the rights of any subsequent purchasers for value of
the subject property.

SO ORDERED.

FIRST DIVISION
[ G.R. No. 201665, August 30, 2017 ]
EDISON (BATAAN) COGENERATION CORPORATION, PETITIONER, V.
COMMISSIONER OF INTERNAL REVENUE, RESPONDENT.

[G.R. No. 201668, August 30, 2017]

REPUBLIC OF THE PHILIPPINES, REPRESENTED BY THE

COMMISSIONER OF INTERNAL REVENUE, PETITIONER, V. EDISON
 (BATAAN) COGENERATION CORPORATION, RESPONDENT.

DECISION

DEL CASTILLO, J.:[*]

The findings and conclusions of the tax court are accorded great weight because
of its expertise on the subject.[1]

Before us are consolidated Petitions for Review on Certiorari[2] under Rule 45 of the

Rules of Court assailing the January 30, 2012 Decision[3] and the April 17, 2012
Resolution[4] of the Court of Tax Appeals (CTA) in CTA EB Case Nos. 766 and 769.

Factual Antecedents

On February 2, 2004, Edison (Bataan) Cogeneration Corporation [EBCC] received from

the Commissioner of Internal Revenue (CIR) a Formal Letter of Demand and Final
Assessment Notice dated January 23, 2004 assessing EBCC of deficiency income tax,
Value Added Tax (VAT), withholding tax on compensation, Expanded Withholding Tax
(EWT) and Final Withholding Tax (FWT) for taxable year 2000 in the total amount of
P84,868,390.16, broken down as follows:

Deficiency Tax
 
Amount
     
Income P65,571,268.01
Tax 168,866.15
Value-Added Tax 128,087.84
Withholding Tax 79,066.13
on Compensation 18,921,102.03
 
Expanded P84,868 390.16[5]
Withholding Tax
Final Withholding
Tax
TOTAL

On March 3, 2004, EBCC filed with the CIR a letter-protest dated March 2, 2004 and
furnished the CIR with the required documents.[6]

Due to the inaction of the CIR, EBCC elevated the matter to the CTA via a Petition for
Review, docketed as CTA Case No. 7104 and raffled to the Second Division of the CTA.
While the case was pending, EBCC availed itself of the Tax Amnesty Program under
Republic Act (RA) No. 9480.[7] Thus, in a November 7, 2008 Resolution, the CTA
Second Division deemed the Petition partially withdrawn and the case closed and
terminated with regard to EBCC's deficiency income tax and VAT for the year 2000. [8]

On March 18, 2009, the CTA Second Division issued a Resolution setting aside the
assessments against EBCC for deficiency income tax and VAT for the taxable year 2000
in view of its availment of the Tax Amnesty Program.[9]

Ruling of the Court of Tax Appeals Former Second Division

On November 30, 2010, the CTA Former Second Division rendered a Decision[10] partly
granting the Petition. After reviewing the evidence on record, the CTA Former Second
Division found EBCC to have paid the correct amount of EWT and withholding tax on
compensation of its employees.[11] Thus, the CTA Former Second Division cancelled and
set aside the assessments for the deficiency EWT and the deficiency withholding tax on
compensation.[12] As to the deficiency FWT, the CTA Former Second Division found
EBCC liable to pay FWT in a reduced amount of P2,232,146.91.[13] The CTA Former
Second Division agreed with EBCC that it was not liable for the deficiency FWT
assessment of P7,707,504.96 on interest payments on loan agreements with Ogden Power
International Holdings, Inc. (Ogden) for taxable year 2000 since its liability for interest
payment became due and demandable only on June 1, 2002.[14] Likewise cancelled and
set aside were the deficiency tax assessments on loan interest payment of EBCC to
Philippine National Bank and Security Bank Corporation in the amounts of P346,988.77
and P387,411.46, respectively, as these had already been remitted by EBCC. [15] Thus:

WHEREFORE, premises considered, the instant Petition for Review is hereby PARTLY
GRANTED. Accordingly, the assessments for deficiency withholding tax on
compensation in the amount of P128,087.84 and expanded withholding tax in the amount
of P79,066.13 for taxable year 2000 are hereby CANCELLED and SET ASIDE.

As regards the deficiency final withholding tax assessment against petitioner for taxable
year 2000, the same is hereby AFFIRMED, with modification. Accordingly, petitioner is
hereby ORDERED TO PAY respondent Commissioner of Internal Revenue the amount
of TWO MILLION TWO HUNDRED THIRTY TWO [THOUSAND] ONE HUNDRED
FORTY SIX AND 91/100 (P2,232,146.91), representing deficiency final withholding
tax, computed, as follows:

FW P10,227,62
T Due per 2.72
Assessment
Les P734,400.
s: 23
Substantiat
ed FWT on
interest on
syndicated
loans
FW 7,707,504 8,441,905.1
T on .96 9
interest on
foreign loan
from Ogden
Basi P
c deficiency 1,785,717.53
FWT
Add 446,429.38
: 25%
Surcharge
Tot P2,232,146.
al 91
Deficiency
FWT

In addition, petitioner is ordered to pay:

1) deficiency interest at the rate of twenty percent (20%) per annum on the basic
deficiency final withholding tax of P1,785,717.53 computed from January 25, 2001 until
full payment thereof: pursuant to Section 249(B) of the NIRC of 1997, as amended; and

2) delinquency interest at the rate of twenty percent (20%) per annum on the total
deficiency final withholding tax of P2,232,146.91, and on the deficiency interest which
have accrued as afore-stated in paragraph 1 hereof, computed from January 23, 2004 until
full payment thereof, pursuant to Section 249(C) of the NIRC of 1997 as amended.

SO ORDERED.[16]

The CIR filed a Motion for Reconsideration while EBCC filed a Motion for Partial
Reconsideration and/or Clarification.[17]

On April 7, 2011, the CTA Former Second Division issued a Resolution [18] denying both
Motions.[19]

Both parties appealed to the CTA En Banc.

Ruling of the Court of Tax Appeals En Banc

On January 30, 2012, the CTA En Banc denied both appeals. It sustained the findings of
the CTA Former Second Division that the assessment over EBCC's FWT on interest
payments arising from its loan from Ogden was without basis as EBCC had no obligation
to withhold any taxes on the interest payment for the year 2000.[20] Under Revenue
Regulation (RR) No. 02-98, the obligation to withhold only accrues when the loan is paid
or becomes payable or when it becomes due, demandable or legally enforceable,
whichever comes first.[21] In this case, the obligation to withhold the interest over the loan
only commenced on June 1, 2002.[22] As to the alleged interest payments on the
syndicated loans in dollars, the CTA En Banc noted that EBCC failed to present
sufficient evidence to prove the remittance of its payment.[23] Thus, the CTA En
Banc adopted the computation of the CTA Former Second Division.[24]

On April 17, 2012, the CTA En Banc denied the CIR’s Motion for Reconsideration and
EBCC's Motion for Partial Reconsideration.[25]

Issues

Hence, the instant consolidated Petitions under Rule 45 of the Rules of Court, with the
following issues:

G.R. No. 201665

I.

Whether the CTA En Banc erred in not recognizing [the CIR's] judicial admission that
she reduced her assessment for deficiency FWT for taxable year 2000 from
[P]10,227,622[.]72 to [P]7,384,922.52.

II.

Whether [EBCC] is raising a question of fact before the Honorable Court. [26]

G.R. No. 201668

I.

Whether x x x EBCC is liable for deficiency final withholding tax for the year 2000.

II.

Whether x x x Revenue Regulation No. 12-01 should be applied in this case. [27]

G.R. No. 201665
EBCC's Arguments

EBCC insists that it was not liable for any deficiency taxes for the year 2000 since it had
already remitted the amount of P2,842,630.20 as payment for its FWT for 2000, and that
no proof of such payment was necessary considering the CIR's admission in her
Memorandum[28] that the original assessment of P10,227,622.72 was reduced to
P7,384,992.52.[29]

The CIR's Arguments

The CIR, however, denies that she made any judicial admission of payment and
maintains that in the absence of evidence of payment, EBCC was liable to pay the
deficiency assessment as the party who alleges payment bears the burden of proving the
same.[30] Moreover, the CIR claims that the issue raised by EBCC is a question of fact,
which is not allowed in a Petition for Review on Certiorari under Rule 45 of the Rules of
Court.[31]

G.R. No. 201668

The CIR's Arguments

As to the cancellation of the assessments against EBCC's FWT on its intercorporate loan
from Ogden, the CIR argues that the assessment enjoys the presumption of validity and
may only be disproved by evidence to the contrary.[32] The CIR contends that EBCC was
liable to pay the interest from the date of the execution of the contract on January 5,
2000, not from the date of the first payment on June 1, 2002, as the loan agreement
clearly indicated that the interest was to be paid separately from the principal. [33] In
addition, the CIR calls for the retroactive application of RR No. 12-01, [34] which provides
that the withholding of final tax commences "at the time an income payment is paid or
payable, or the income payment is accrued or recorded as an expense or asset, whichever
is applicable in the payor's book, whichever comes first," on the ground that EBCC
omitted a material fact and acted in bad faith when it refused to present documents on its
interest payments to show the exact date of payment.[35] In fact, based on the loan
agreement, the CIR claims that the payment for the first interest period was due on
January 4, 2001, not June 1, 2002.[36]

EBCC's Arguments

EBCC, on the other hand, asserts that it was not required to withhold FWT at the end of
taxable year 2000 as the interest payment became due and demandable only on June 1,
2002.[37] And even if the first payment were due on January 4, 2001, such fact would not
give rise to any liability for FWT in the year 2000 under RR No. 02-98.[38] As to the
retroactive application of RR No. 12-01, EBCC contends that this is the first time that
such issue was brought up as it was not raised before the CTA. [39] In addition, to allow
the retroactive application of the RR No. 12-01 would be a clear violation of EBCC's
right to due process as the Formal Letter of Demand was issued pursuant to the
provisions of RR No. 02-98.[40] Lastly, EBCC also points out that the issues of whether
EBCC withheld certain facts or whether it acted in bad faith are factual in nature, which
are not allowed in a Petition under Rule 45 of the Rules of Court.[41]

Our Ruling

The Petitions lack merit.

G.R. No. 201665

The CIR made no judicial admission that

EBCC remitted the amount of P2,842,630.20 as
payment for its FWT for the year 2000.

Section 4 of Rule 129 of the Rules of Court states:

SEC. 4. Judicial Admissions. - An admission, verbal or written, made by a party in the

course of the proceedings in the same case, does not require proof. The admission may be
contradicted only by showing that it was made through palpable mistake or that no such
admission was made.

In this case, EBCC claims that the CTA En Banc erred in failing to consider the judicial
admission made by the CIR in her Memorandum that EBCC remitted FWT in the amount
of P2,842,630.20.

We do not agree.

A careful reading of the Memorandum reveals that the alleged remittance of the amount
of P2,842,630.20 was based on a Memorandum Report prepared by the revenue officers
recommending the denial of EBCC's protest, which was issued prior to EBCC's filing of
its Petition for Review before the CTA. In fact, there was no mention of such remittance
in the Joint Stipulations of Facts and Issues by the parties and in the Answer filed by the
CIR. Thus, we find no error on the part of the CTA En Banc in not considering such
statement as a judicial admission.

Besides, the CTA Former Second Division, in its April 7, 2011 Resolution already
explained how it computed EBCC's deficiency FWT, to wit:

It must be emphasized that the assessment for deficiency FWT against [EBCC] in the
amount of P10,227,622.72 is composed of FWT on Interest Payments on Syndicated
Loan in Dollars in the amount of P2,520,117.76 and FWT on Interest on Loan Agreement
with Ogden Power International Holdings, Inc. (Ogden) in the amount of P7,707,504.96.
Since [EBCC] presented documentary evidence in support of its Petition for Review
assailing respondent's assessments, the Court considered said documentary evidence in
deciding the instant case. In other words, the Court did not consider outright the alleged
withholding remittances of P12,842,630.20 as a deduction to [EBCC's] FWT liability, but
first examined the supporting documents presented by [EBCC].

At the risk of being repetitive, although we found that [EBCC] is not liable to pay FWT
on interest payment on loan from Ogden in the amount of P7,707,504.96; however, as
regards the deficiency assessment of FWT on Interest Payments on Syndicated Loan in
Dollars, in the amount of P2,520,117.76, the Court found that petitioner failed to present
proof of withholding and/or remittance of FWT on its interest payments to UCPB and
Sung Hung Kai Bank. Likewise, BIR Forms No. 2306 (Certificates of Final Income Tax
Withheld), pertaining to petitioner's alleged interest payments to First Metro Investment
Corporation and United Overseas Bank/Westmont Bank, were not considered by the
Court for reasons stated in our Decision dated November 30, 2010.

Therefore, [EBCC's] contention that the amount of P2,842,630.20 should still be

deducted from the deficiency assessment, as found by this Court in the amount of
P1,785,717.53 is misplaced. As heretofore discussed, out of P2,520,117.76 deficiency
FWT assessment on Interest Paid on Syndicated Loan in US Dollars, [EBCC] was able to
substantiate FWT remittance in the total amount of P734,400.23 only. Thus, we found
[EBCC] liable to pay basic deficiency FWT for the year 2000 in the amount of
P1,785,717.53.[42]

Moreover, considering that EBCC filed the Petition for Review before the CTA to
question the deficiency tax assessment issued by the CIR, it was incumbent upon EBCC
to prove that the deficiency tax assessment bad no legal or factual basis or that it had
already paid or remitted the deficiency tax assessment as it is the taxpayer that has the
burden of proof to impugn the validity and correctness of the disputed deficiency tax
assessment.[43] In addition, it is a basic rule in evidence that the person who alleges
payment has the burden of proving that payment has indeed been made.[44] More so, in
cases filed before the CTA, which are litigated de novo, party-litigants must prove every
minute aspect of their case.[45]

G.R. No. 201668

RR No.02-98 provides that the term

payable refers to the date the obligation becomes
due, demandable or legally enforceable.

Section 2.57.4 of Revenue Regulations No. 2-98 provides:

SEC. 2.57.4. Time of Withholding. - The obligation of the payor to deduct and withhold
the tax under Section 2.57 of these regulations arises at the time an income is paid or
payable, whichever comes first, the term 'payable' refers to the date the obligation
becomes due, demandable or legally enforceable.

In this case, the CIR insists that EBCC was liable to pay the interest from the date of the
execution of the contract on January 5, 2000, not from the date of the first payment on
June 1, 2002.

We are not convinced.

EBCC's loan agreement with Ogden stated that:

3. Repayment and Interest

3.1 The BORROWER shall repay the Loan to the LENDER (or as it may in writing
direct) in sixteen (16) consecutive semi-annual [installments] of US DOLLARS EIGHT
HUNDRED and EIGHTY ONE THOUSAND and TWO HUNDRED and FIFTY
(US$881,250.00) commencing on 1 June 2002 and thereafter on June 1 and December 1
of each year.

3.2 Interest shall accrue on the Loan from the date hereof until the date of repayment at a
rate equal to the 90-day LIBOR rate plus 2.5%, subject to review every 90 days.

3.3 Notwithstanding the provisions of Clause 3.2 above, if the BORROWER fails to
make payment of an amount due on a payment date, the BORROWER shall pay
additional interest on such past due and unpaid amount from the due date until the date of
payment at the rate of ½% per month.

3.4 The interest payable to the LENDER shall be exclusive of withholding tax and/or any
other similar taxes which shall be to the account of the BORROWER. Every payment to
the LENDER hereunder shall be net of any present or future tax assessment or other
governmental charge imposed by any taxing authority of any jurisdiction.[46]

Clearly, EBCC's liability for interest payment became due and demandable starting June
1, 2002. And considering that under RR No. 02-98, the obligation of EBCC to deduct or
withhold tax arises at the time an income is paid or payable, whichever comes first, and
considering further that under the said RR, the term "payable" refers to the date the
obligation becomes due, demandable or legally enforceable, we find no error on the part
of the CTA En Banc in ruling that EBCC had no obligation to withhold any taxes on the
interest payment for the year 2000 as the obligation to withhold only commenced on June
1, 2002, and thus cancelling the assessment for deficiency FWT on interest payments
arising from EBCC's loan from Ogden.
Neither do we find any reason for the retroactive application of RR No. 12-01, which
provides that the withholding of final tax commences "at the time an income payment is
paid or payable, or the income payment is accrued or recorded as an expense or asset,
whichever is applicable in the payor's book, whichever comes first." To begin with, this
issue was never raised before the CTA. Thus, we cannot rule on this matter now. It is a
settled rule that issues not raised below cannot be pleaded for the first time on appeal
because a party is not allowed to change his theory on appeal; to do so would be unfair to
the other party and offensive to rules of fair play, justice and due process. [47]

Moreover, as aptly pointed out by EBCC, whether it omitted to state a material fact or
acted in bad faith in failing to present documents on its interest payments to show the
exact date of payment is a factual issue, which is not allowed under Rule 45.

In any case, even if the first payment was due on January 4, 2001 as claimed by the CIR,
EBCC would still not be liable, as the tax assessment pertained to taxable year 2000 and
not 2001.

All told, we find no reason to reverse the January 30, 2012 Decision and the April 17,
2012 Resolution of the CTA in CTA EB Case Nos. 766 and 769.

We need not belabor that "findings and conclusions of the CTA are accorded the highest
respect and will not be lightly set aside because by [its] very nature x x x, it is dedicated
exclusively to the resolution of tax problems and has accordingly developed an expertise
on the subject."[48]

WHEREFORE, the Petitions are hereby DENIED. The assailed January 30, 2012

Decision and the April 17, 2012 Resolution of the Court of Tax Appeals in CTA EB Case
Nos. 766 and 769 are hereby AFFIRMED.

SO ORDERED.

THIRD DIVISION
[ G.R. No. 191652, September 13, 2017 ]
TEAM IMAGE ENTERTAINMENT, INC., AND FELIX S. CO,
PETITIONERS, V. SOLAR TEAM ENTERTAINMENT, INC., RESPONDENT.

[G.R. No. 191658, September 13, 2017]

SOLAR TEAM ENTERTAINMENT, INC., PETITIONER, V. TEAM IMAGE

 ENTERTAINMENT, INC., AND FELIX S. CO, RESPONDENTS.

DECISION

LEONEN, J.:

A judgment upon a compromise is rendered based on the parties' reciprocal concessions.

With all the more reason should a judgment upon a compromise be complied with in
good faith considering that the parties themselves crafted its terms.

These are consolidated Petitions for Review on Certiorari assailing the December 10,
2009 Decision[1] and March 17, 2010 Resolution[2] of the Court of Appeals in CA-G.R. SP
No. 104961. The Court of Appeals held that both parties—Team Image Entertainment,
Inc. (Team Image) and Solar Team Entertainment, Inc. (Solar Team)—violated the
Compromise Agreement they had entered into in connection with a civil case for
accounting[3] filed before Branch 59, Regional Trial Court, Makati City. Team Image was
specifically ordered to pay Solar Team P2,000,000.00 in liquidated damages for failing to
settle its monetary obligation to Solar Team within the period provided in the
Compromise Agreement.[4] Further, the Court of Appeals allowed Team Image to
suspend payments under the Compromise Agreement because Solar Team failed to
withdraw the complaint-in-intervention it had earlier filed against Team Image's
President, Felix S. Co (Co), contrary to their agreement to dismiss all actions they had
filed against each other.[5]

Solar Team owned movies, films, telenovelas, television series, programs, and coverage
specials that it aired over block times in several television stations.[6] It derived profits by
selling advertising spots to interested business enterprises.[7]

On April 24, 1996, Solar Team entered into a Marketing Agreement with Team Image,
[8]
 which agreed to act as Solar Team's exclusive marketing agent by selling advertising
spots to business enterprises on behalf of Solar Team.[9]

According to Solar Team, Team Image breached their Marketing Agreement by failing to
disclose the names of the entities to which Team Image sold advertising spots. Further,
Team Image allegedly represented itself as the owner of Solar Team's television
programs, series, and telenovelas, hence collecting the proceeds of the sale without
remitting them to Solar Team. For these reasons, Solar Team demanded that Team Image
render an accounting of all the transactions the latter had entered into pursuant to the
Marketing Agreement and that it remit all the proceeds it had received in selling Solar
Team's television programs, series, and telenovelas.[10]
When Team Image refused to render an accounting, Solar Team filed against Team
Image and its President, Co, a Complaint for Accounting and Damages before the
Regional Trial Court of Makati.[11] The case was raffled to Branch 59, presided by Judge
Winlove M. Dumayas (Judge Dumayas).[12]

On January 17, 2002, the trial court rendered a Decision,[13] finding that Team Image
breached the Marketing Agreement. According to the trial court, Team Image only had
the authority to sell advertisement spots on behalf of Solar Team, not to collect any sales
proceeds. Thus, it ordered Team Image to render an accounting of all its transactions and
collections under the Marketing Agreement. The dispositive portion of this Decision
read:

WHEREFORE, judgment is hereby rendered in favor of [Solar Team] and against [Team
Image and Felix S. Co]. as follows:

a. Ordering [Team Image and Felix S. Co] jointly and severally to

immediately render an accounting within fifteen (15) days from receipt of
this decision, on all its sales and collections on the television properties of
[Solar Team] mentioned in Annex "A" of the complaint, from date of the
agency agreement (Exhibit "A") on April 24, 1996 until the filing of the
complaint;

b. Directing [Team Image and Felix S. Co] jointly and severally to make
available to [Solar Team] or its authorized representatives) accountant[s] or
auditors, within fifteen (15) days from receipt hereof, all their books of
accounts and records on all their sales and collections on [Solar Team's]
aforesaid television properties[; and]

c. Ordering [Team Image and Felix S. Co] jointly and severally to pay [Solar
Team] the sum of Php50,000.00 for attorney's fee; and Php200,000.00 for
moral, exemplary[,] nominal and temperate damages; and cost[s] of suit.

SO ORDERED.[14]

More than a year after or on April 28, 2003, Solar Team and Team Image entered into a
Compromise Agreement,[15] submitting it to the trial court for approval. In essence, the
parties agreed on the payment terms and their division of receivables from the media
company VTV Corporation, which had purchased advertising spots from Team Image as
Solar Team's marketing agent. For purposes of accounting and auditing these receivables,
the parties hired SyCip Gorres Velayo and Company (SGV and Co.) as auditor.
With respect to other business ventures that the parties may have jointly undertaken,
paragraph 18 of the Compromise Agreement stated that the parties must submit a
certification of the existence of these receivables:

18. To further assure each one of them, both parties shall within ten (10) days from the
date of execution of this agreement, submit to one another, certification and/or reasonable
and available proof of the existence of said receivables.[16]

The parties likewise agreed to waive all their claims against each other and to cause the
provisional dismissal of all the criminal and civil actions that they had filed against each
other. Paragraphs 21 and 22 of the Compromise Agreement provided:

21. This agreement constitutes the final repository of all the prior understanding
agreements and contracts of the parties and shall operate as total waiver and discharge of
any or all claims, counterclaims, causes of action, claims and demands of whatever kind
and nature which each may have against the other, including their respective heirs[,]
assigns[,] and successors-in-interest arising out of any of all matters, cause or thing,
whether directly or indirectly, related with the Marketing Agency Agreement dated 24
April 1996.

22. By virtue hereof, the parties have agreed, as they hereby agree to immediately
provisionally dismiss all actions, whether civil or criminal, they may have filed against
the other, and after SGV shall have finally completed the audit and accounting tasked
upon it, the results of which is final and binding upon the parties, all said civil and/or
criminal actions shall be permanently dismissed by the parties.[17]

Further, the parties agreed to the immediate issuance of a writ of execution and payment
of liquidated damages in case of breach of the Compromise Agreement. Paragraph 24 of
the Compromise Agreement stated:

24. In the event SGV shall have made a final determination of the respective
accountability of the parties and any of the parties fail to comply with the same, or in the
event any of the parties is remiss or reneges from [its] commitment/s as specified in this
Agreement or breaches the warranties and/or representation as contained herein, then the
aggrieved party shall be entitled to an immediate issuance of a writ of execution to
enforce compliance thereof and the guilty party shall pay the innocent party the sum of
P2 Million Pesos by way of liquidated damages and/or penalty and shall, likewise,
shoulder all the expenses in enforcing this compromise agreement by a writ of execution.
Moreover, the innocent party shall have the right to invoke the principle of reciprocity of
obligations in contracts as provided for by law.[18]
Finding the provisions of the Compromise Agreement not contrary to law, morals, or
public policy, the trial court approved and rendered judgment based on the Compromise
Agreement in its Decision[19] dated April 30, 2003.

The parties subsequently filed motions for issuance of a writ of execution on account of
the other's alleged violation of the Compromise Agreement.

The first motion for issuance of a writ of execution was filed by Team Image on April 26,
2004.[20] Team Image prayed that the trial court allow it to suspend payments to Solar
Team under the Compromise Agreement due to the alleged failure of Solar Team's Chief
Executive Officer, William Tieng (Tieng), to collect receivables from VTV Corporation.
In addition, Solar Team allegedly failed to submit to Team Image a certification on the
existence of the receivables from VTV Corporation, in violation of paragraph 18 of the
Compromise Agreement.

In its Order[21] dated April 29, 2004, the trial court allowed Team Image to suspend
payments to Solar Team '"until after [the trial court] shall have resolved [the April 26,
2004 motion for issuance of a writ of execution]."[22] The trial court subsequently issued a
Writ of Execution on May 28, 2004.[23] However, in its Order[24] dated November 23,
2004, the trial court granted Solar Team's Motion for Reconsideration; thus, it set aside
its previous order allowing suspension of payment and quashed the writ of execution. The
dispositive portion of the November 23, 2004 Order read:

ORDER

Finding the Motion for Reconsideration filed by [Solar Team] to be impressed with merit,
the same is hereby GRANTED.

Accordingly, the Order of the Court dated April 30, 2004 is hereby RECONSIDERED
and set aside and the Writ of Execution dated May 28, 2004 is hereby QUASHED. [25]

Team Image moved to reconsider the November 23, 2004 Order.[26]

In the meantime, on October 6, 2005, Team Image filed a second motion[27] for issuance
of a writ of execution and suspension of payments (October 6, 2005 Motion) due to Solar
rerun's alleged violation of paragraphs 21 and 22 of the Compromise Agreement.
According to Team Image, Solar Team failed to cause the dismissal of its complaint-in-
intervention in a collection case filed against Team Image,[28] with Solar Team actively
participating in the civil case after the execution of the Compromise Agreement.

In its Order[29] dated November 3, 2005, the trial court granted the October 6, 2005
Motion, issuing a writ of execution to enforce payment by Solar Team of P2,000,000.00
in liquidated damages and allowing Team Image to suspend payments to Solar Team.
The dispositive portion of the November 3, 2005 Order read:

WHEREFORE, premises considered, the Court hereby . . . GRANTS [Team Image's]

motion for the issuance of a writ of execution along with their prayer for an order
allowing suspension of payment and Orders [Solar Team] to comply with paragraphs 21
and 22 of the compromise agreement executed by the parties herein.

Accordingly, let a writ of execution be issued against [Solar Team] to enforce payment of
the sum of P2 Million Pesos as liquidated damages pursuant to paragraph 24 of the
compromise agreement.

SO ORDERED.[30]

Solar Team moved for a partial reconsideration of the November 3, 2005 Order. [31]

On December 6, 2005, Solar Team filed its own motion[32] for issuance of a writ of
execution due to Team Image's alleged violation of paragraph 20 of the Compromise
Agreement.[33] Solar Team claimed that Team Image failed to submit documents
necessary for the auditing and accounting of receivables to SGV and Co., the appointed
auditor under the Compromise Agreement.

Meanwhile, in its Order[34] dated April 7, 2006, the trial court denied both Team Image's
Motion for Reconsideration of the November 23, 2004 Order and Solar Team's Motion
for Partial Reconsideration of the November 3, 2005 Order. The trial court found that
Team Image filed the Motion for Reconsideration beyond the reglementary period. As for
Solar Team, the trial court found that it had failed to comply with its obligation to cause
the dismissal of all pending cases that it had filed against Team Image. Hence, Solar
Team was ordered to pay Team Image P2,000,000.00 in liquidated damages per
paragraph 24 of the Compromise Agreement. The dispositive portion of the April 7, 2006
Order read:

WHEREFORE, premises considered, this Court resolves to DENY [Team Image's]

Motion for Reconsideration dated August 22, 2005 from the Order of this Court dated
November 23, 2004. [Solar Team's] Motion for Partial Reconsideration dated November
19, 2005 from the Order of this Court dated November 3, 2005 is, likewise, DENIED for
lack of merit.

SO ORDERED.[35]

On December 5, 2007, Team Image filed before the trial court its third motion[36] for
issuance of writ of execution with prayer for suspension of payments (December 5, 2007
Motion). Team Image argued that Solar Team's Tieng violated anew paragraphs 21 and
22 of the Compromise Agreement by failing to cause the dismissal of the criminal cases
he had earlier filed against Team Image's Co. On December 18, 2007, Team Image filed
an Omnibus Motion[37] with prayer for issuance of a writ of execution and suspension of
payments (December 18, 2007 Omnibus Motion), this time, for Solar Team's Tieng to
return to Team Image a total of P25,862,750.00. This amount allegedly included the
collections in excess of the P26,000,000.00 fixed in the Compromise Agreement; the
P2,891,226.97 supposedly collected by a certain Ma. Fe Barreiro (Barreiro)[38] without
Solar Team's authority but actually redounded to Tieng's benefit; and a total of
P8,500,000.00 in post-dated checks still in possession of Tieng. Thus, Team Image
reiterated its prayer for the trial court to implement the November 3, 2005 Order directing
Solar Team to pay Team Image liquidated damages.[39]

In its Order[40] dated January 9, 2008, the trial court ordered the implementation of the
November 3, 2005 Order to enforce payment of liquidated damages by Solar Team for
failure to cause the dismissal of its complaint-in-intervention in the collection case filed
against Team Image. A Writ of Execution[41] was subsequently issued on January 16,
2008, directing the sheriff to implement the November 3, 2005 Order.

Two (2) days after or on January 18, 2008, Solar Team filed a motion to defer the
implementation of the January 16, 2008 Writ of Execution.[42] Solar Team likewise filed a
motion to hold in abeyance the implementation of the Letters of Garnishment issued
pursuant to the January 16, 2008 Writ of Execution.[43]

Acting on Team Image's December 5, 2007 Motion and December 18, 2007 Omnibus
Motion in the Order[44] dated January 21, 2008, the trial court directed Solar Team,
through Tieng, to cause the dismissal of the criminal cases filed against Co pursuant to
paragraphs 21 and 22 of the Compromise Agreement.

Further, the trial court found that Tieng indeed had excess collections from VTV
Corporation. In his complaint for sum of money filed against VTV Corporation, Tieng
allegedly admitted that he had collected P22,971,572.03 from VTV Corporation, an
amount which exceeded the P10,275,547.48 disclosed in paragraph 4 of the Compromise
Agreement.[45]

The trial court likewise found that contrary to Solar Team's representation in paragraph 5
of the Compromise Agreement,[46] the P2,891,226.97 supposedly collected by Barreiro
without Solar Team's authority actually redounded to Tieng's benefit.[47]

Based on these findings, the trial court ordered Solar Team to return the excess amounts
and incorrect charges and to pay Team Image a total of P8,000,000.00 in liquidated
damages for breaching four (4) warranties made in the Compromise Agreement. The
dispositive portion of the January 21, 2008 Order read:
WHEREFORE, PREMISES CONSIDERED, this Court hereby grants [Team Image and
Felix S. Co's] 1) Motion for the issuance of writ of execution for violation of paragraphs
21 and 22 of the compromise agreement with prayer for an order allowing continuance of
suspension of payment of obligation/s, if any, as per paragraph 24 thereof dated
December 5, 2007; and 2) Omnibus motion for the issuance of an order directing William
Tieng to return to [Team Image and Felix S. Co]; (a) overpayment under the compromise
agreement (b) marketing commission falsely charged against the share of [Team Image
and Felix S. Co] in the VTV operations and (c) for writ of execution and suspension of
payment, if any dated December 18, 2007.

Accordingly, [Team Image and Felix S. Co] are hereby authorized to suspend payment of
their obligation, if any, pursuant to paragraph 24 of the compromise agreement and that:

ON THE FIRST MOTION

a) William Tieng is hereby ordered to dismiss and/or cause the dismissal of Criminal Case Nos.
07-1235 and 07-1236 now pending before the Regional Trial Court of Parañaque City, Metro
Manila; and
b) Let a writ of execution issue to enforce the payment to [Team Image and Felix S. Co] the sum
of TWO MILLION (PhP2,000,000.00) PESOS as liquidated damages on account of William
Tieng's breach of warranties and representations under paragraphs 21 and 22 of the
compromise agreement.

ON THE SECOND MOTION

a) William Tieng is hereby ordered to pay/return to [Team Image and Felix S. Co] the sum of
TWENTY[-]FIVE MILLION EIGHT HUNDRED SIXTY[-]TWO THOUSAND SEVEN
HUNDRED FIFTY and 00/100 (PhP25,862,750.00) PESOS broken down as:
PhP17,362,750.00 cash amount received by William Tieng and PhP8,500,000.00, total
amount of checks still in the possession of William Tieng;
b) William Tieng is hereby ordered to turn over to [Solar Team] the amount of TWO
MILLION EIGHT HUNDRED NINETY[-] ONE THOUSAND TWO HUNDRED
TWENTY[-]SIX and 97/100 (Php2,891,226.97) PESOS and for SGV to pay [Team Image
and Felix S. Co's] share thereon;
c) Let a writ of execution issue to enforce payment of the sum of FOUR MILLION
(Php4,000,000.00) PESOS by way of liquidated damages on account of TIENG's aforesaid
two (2) breaches of warranty and representation under the first ground hereof and; and
another FOUR MILLION (PhP4,000,000.00) PESOS by way of liquidated damages on
account of TIENG's aforesaid two (2) breaches of warranty and representation under the
second ground her of or a total of EIGHT MILLION (PhP8,000,000.00) PESOS, all
pursuant to paragraph 24 of the Compromise Agreement.

SO ORDERED.[48]
A Motion for Reconsideration of the January 21, 2008 Order was filed by Solar Team.
[49]
 When the trial court ordered the deputy sheriff to deliver the garnished amount to
Team Image through a certified bank check, Solar Team likewise filed a Motion for
Reconsideration.[50]

In its Omnibus Order[51] dated May 19, 2008, the trial court acted on Team Image's
December 18, 2007 Omnibus Motion. According to the trial court, the only remedy
allowed under the Compromise Agreement is the filing of a motion for issuance of a writ
of execution and that the orders allowing Team Image to suspend payments were merely
temporary and did not exonerate or release Team Image and Co from their obligation.
[52]
 It then found that Team Image and Co were "clearly in default in the payment of their
obligation"[53] under the Compromise Agreement. Therefore, the trial court set aside all its
previous orders that allowed Team Image to suspend payments, i.e., the November 3,
2005 and January 21, 2008 Orders.

Furthermore, acting on Solar Team's Motion for Reconsideration, the trial court reversed
and set aside its January 21, 2008 Order where it declared that Solar Team made excess
collections from VTV Corporation. The trial court reversed itself, and said that it was
"premature to declare that there was overpayment made to [Solar Team] or William
Tieng"[54] because the appointed auditor, SGV and Co., had not yet finalized the required
audit.

Nevertheless, the trial court reiterated that Solar Team violated the Compromise
Agreement when it failed to cause the dismissal of the complaint in intervention it had
filed against Team Image. The trial court ordered Solar Team to pay Team Image
P2,000,000.00 in liquidated damages and to deposit the amount before the Office of the
Clerk of Court of the Regional Trial Court of Makati.

The dispositive portion of the May 19, 2008 Omnibus Order read:

WHEREFORE, PREMISES CONSIDERED, this Court hereby resolves the parties'

motions, as follows:

1. [Solar Team's] Urgent Omnibus Motion dated January 18, 2008 praying
that:

1) the implementation of the Writ of Execution dated January 10, 2008 be held in abeyance is
hereby DENIED for being moot and academic;
   
2) a Writ of Execution be issued against [Team Image] to enforce payment of the sum of TWO
MILLION (Php2,000,000.00) PESOS and the unpaid obligation of [Team Image] pursuant to
paragraph 24 of the compromise agreement is GRANTED, The previous Orders of this Court
allowing suspension of payment are hereby RECONSIDERED AND SET ASIDE;
 2.
3. [Solar Team's] Urgent Motion dated January 21, 2008 praying that the
Letters of Garnishment be recalled and/or their implementation be held in
abeyance is hereby DENIED for being moot and academic;

4. [Solar Team's] Motion for Reconsideration dated January 28, 2008 is

hereby GRANTED. The Order dated January 21, 2008 is hereby
RECONSIDERED and SET ASIDE;

5. [Solar Team's] Omnibus Motion dated March 27, 2008 seeking that [Solar
Team] be allowed to deposit the amount of P2 Million Pesos to the Office
of the Clerk of Court - Regional Trial Court of Makati City is GRANTED.

6. Finally, [Team Image and Felix S. Co's] prayer to cite [Solar Team's
William Tieng] and his counsels for direct contempt is hereby DENIED for
lack of merit.

Accordingly, [Solar Team] is hereby ordered to deposit the amount of P2 Million Pesos
to the Office of the Clerk of Court - Regional Trial Court of Makati City within ten (10)
days from receipt of this Order, the same will be released only after final determination of
the obligations of [Team Image and Felix S. Co] pursuant to the compromise agreement
and after the issue on the violation of the same agreement by [Solar Team] for its failure
to cause the dismissal of Civil Case No. 97-024 has been resolved with finality.

On the other hand, [Team Image and Felix S. Co] are hereby ordered to pay [Solar Team]
as follows:

1) the sum of TWO MILLION (Php2,000,000.00) PESOS as liquidated damages for their
failure to pay [Solar Team] the value of the dishonored checks despite its demand after
the April 30, 2004 Order allowing the suspension of payment to [Solar Team] was set
aside by the November 23, 2004 Order of this Court.

2) the sum of EIGHT MILLION FIVE HUNDRED THOUSAND (P8,500,000.00)

PESOS representing the value of the seventeen (17) dishonored checks which has
remained unpaid as provided under paragraph 7 of the compromise agreement.

Let a writ of execution issue against [Team Image and Felix S. Co] to enforce the
payment of the sum of TWO MILLION (Php2,000,000.00) PESOS as liquidated
damages and EIGHT MILLION FIVE HUNDRED THOUSAND (P8,500,000.00)
PESOS representing the value of the said seventeen (17) dishonored checks or a total of
TEN MILLION FIVE HUNDRED THOUSAND (P10,500,000.00), pursuant to
paragraphs 7 and 24 of the compromise agreement.

SO ORDERED.[55]
Team Image filed a Motion for Reconsideration of the May 19, 2008 Omnibus Order,
which the trial court denied in its August 8, 2008 Order,[56] the dispositive portion of
which read:

WHEREFORE, premises considered, this Court resolves to DENY [Solar Team's]

Motion to Consider [Team Image and Felix S. Co's] Motion for Reconsideration as Not
Filed dated July 2, 2008. [Team Image and Felix S. Co's] Motion for Reconsider[a]tion
dated June 17, 2008 is likewise DENIED for utter lack of merit.

Accordingly, let the Writ as ordered by this Court to be issued per its Order dated May
19, 2008 be now issued and implemented in the manner provided for under Rule 39,
Section 8 of the Rules of Court and according to its aforesaid terms.

SO ORDERED.[57]

Team Image filed a Petition for Certiorari before the Court of Appeals to assail the May
19, 2008 and August 8, 2008 Orders of the trial court.[58]

The issue for the Court of Appeals' resolution was whether or not the trial court gravely
abused its discretion:

First, in ordering the Clerk of Court to keep in the trial court's custody the deposited
P2,000,000.00 in liquidated damages instead of ordering Solar Team Entertainment, Inc.
to pay the amount directly to Team Image Entertainment, Inc.;

Second, in disallowing Team Image Entertainment, Inc. from suspending payments

because the Compromise Agreement allegedly did not allow suspension of payments;

Third, in ruling that a criminal case cannot be the subject of a compromise;

Fourth, in refusing to rule on whether or not Solar Team Entertainment, Inc.'s William
Tieng made excess collections from VTV Corporation; and

Finally, in holding that only a maximum of P2,000,000.00 in liquidated damages may be

claimed under the Compromise Agreement regardless of the number of violations.[59]

On the first action, the Court of Appeals held that the trial court gravely abused its
discretion in ordering the Clerk of Court to keep in custodia legis the P2,000,000.00
liquidated damages deposited by Solar Team for its failure to dismiss the complaint-in-
intervention it had filed against Team Image. By keeping this amount in court custody
instead of ordering the Clerk of Court to deliver it to Team Image, the trial court
allegedly stayed the execution of a final and executory judgment.[60]
On the second action, the Court of Appeals ruled that the Compromise Agreement
allowed for suspension of payments, paragraph 24[61] of which stated that the "principle of
reciprocity" under the Civil Code applied to the parties. The Court of Appeals stated that
Team Image was not obliged to pay its monetary obligations under the Compromise
Agreement since Solar Team violated several of its provisions such as submitting the
required certification of receivables and dismissing the cases earlier filed against Team
Image.[62]

Nevertheless, the Court of Appeals found that the trial court November 23, 2004 Order
which allowed the suspension of Team Image's payments was merely temporary. When
the trial court set aside this Order, Team Image should have resumed paying its
obligations to Solar Team until November 3, 2005, when the trial court granted Team
Image's second motion to suspend payments. By failing to resume its payment in the
interim, Team Image and Co were in default from November 23, 2004 to November 3,
2005.[63]

On the third action, the Court of Appeals said that criminal liability cannot be the subject
of a compromise; hence, Solar Team cannot be deemed to have violated the Compromise
Agreement when it failed to cause the dismissal of the criminal cases against Co. [64]

On the fourth action, the Court of Appeals refused to resolve the issue of grave abuse of
discretion because doing so would allegedly preempt the proceedings before Branch 57,
Regional Trial Court, Makati City where Solar Team sued VTV Corporation for
P18,617,915.81 in advertising spot fees.[65]

On the last action, the Court of Appeals held that only a maximum of P2,000,000.00 in
liquidated damages may be paid under the Compromise Agreement, paragraph 24[66] of
which still maintained that liquidated damages are payable in case of failure to comply
with "commitments" and in case of "breaches [of] warranties." The use of plural
"commitments" and "breaches," observed the Court of Appeals, meant that P2,000,000.00
is payable for collective breaches of the Compromise Agreement. In the words of the
Court of Appeals, "the totality of infractions or the number of violations would not be
relevant and liquidated damages would be pegged at Two Million (P2,000,000.00) Pesos
for the total violations."[67]

In its December 10, 2009 Decision,[68] the Court of Appeals partly granted Team Image's
Petition for Certiorari, disposing the case in this wise:

WHEREFORE, premises considered, the petition is PARTLY GRANTED and

resolved as follows:

The implementation of the Writ of Execution dated January 10, 2008 is AFFIRMED.
The payment by [Team Image] of TWO MILLION (Php2,000,000.00) PESOS pursuant
to paragraph 24 of the Compromise Agreement for its failure to settle its obligation
within the period from November 23, 2004 to November 3, 2005 is AFFIRMED.

The suspension of payment granted in the Order dated November 3, 2005 STAYS until

respondent Solar Team Entertainment, Inc. withdraws the complaint-in-intervention in
Civil Case No. 97-024 before Branch 137, Regional Trial Court of Makati City.

The denial of the recall of the issued Letters of Garnishment is AFFIRMED.

The order to deposit the amount of P2 Million Pesos to the Office of the Clerk of Court
Regional Trial Court of Makati City is REVERSED and SET ASIDE. The garnished
amount of Two (P2M) Million pesos representing liquidated damages is ordered released
from the custody of the Clerk of Court of the Regional Trial Court of Makati City and
delivered to [Team Image].

The reversal of the order which requires [Solar Team's] William Tieng to cause the
dismissal of Criminal Case Nos. 07-1235 and 07-1236 is AFFIRMED.

The reversal of the order requiring [Solar Team's] William Tieng to pay the sum of TWO
MILLION (Php2,000,000.00) PESOS as liquidated damages on account of its failure to
dismiss Crim. Case Nos. 07-1235 and 07-1236 is AFFIRMED.

The reversal of the order requiring [Solar Team's] William Tieng to return the sum of
TWENTY[-]FIVE MILLION EIGHT HUNDRED SIXTY[-]TWO THOUSAND SEVEN
HUNDRED FIFTY and 00/100 PESOS (PhP25,862,750.00) on account of [Solar Team's]
alleged admission in its pleading in Civil Case No. 05-603 despite the pendency of the
SGV audit is AFFIRMED.

The reversal of the order requiring [Solar Team's] William Tieng to turn over the amount
of TWO MILLION EIGHT HUNDRED NINETY[-]ONE THOUSAND TWO
HUNDRED TWENTY[-]SIX and 97/100 (Php2,891,226.97) PESOS to [Solar Team]
is AFFIRMED.

The reversal of the order requiring [Solar Team's] William Tieng to pay a total of EIGHT
MILLION PESOS (PhP8,000,000.00) PESOS, pursuant to paragraph 24 of the
Compromise Agreement for alleged breaches of warranty and representation
is AFFIRMED.

SO ORDERED.[69]

Team Image and Solar Team filed their separate Motions for Reconsideration, [70] both of
which were denied in the Resolution[71] dated March 17, 2010.
Separate Petitions for Review on Certiorari were filed by Team Image and Co[72] and
Solar Team.[73] The Petitions were thereafter consolidated.[74] Comments[75] and
Replies[76] had likewise been tiled by the parties.

The issues for this Court's resolution are the following:

First, whether or not the Court of Appeals erred in finding no grave abuse of discretion
on the part of the trial court when the latter declared Team Image Entertainment, Inc. in
default for failing to resume payments from November 23, 2004 to November 3, 2005;

Second, whether or not the Court of Appeals erred in finding no grave abuse of discretion
on the part of the trial court when the latter declared Solar Team Entertainment, Inc. to
have violated the Compromise Agreement for failing to withdraw the complaint-in-
intervention it had earlier filed in a collection case against Team Image Entertainment,
Inc.;

Third, whether or not the Court of Appeals erred in finding no grave abuse of discretion
on the part of the trial court when the latter declared that Solar Team Entertainment, Inc.
did not violate the Compromise Agreement for failing to cause the dismissal of the
criminal cases for estafa filed by Solar Team Entertainment, Inc.'s William Tieng against
Team Image Entertainment, Inc.'s Felix S. Co;

Fourth, whether or not the Court of Appeals erred in finding no grave abuse of discretion
in the trial court's reversal of its earlier order that required Solar Team Entertainment,
Inc.'s William Tieng to turn over P25,862,750.00. to Team Image Entertainment, Inc. as
overpayments and P2,891,226.97 to Solar Team Entertainment, Inc. as amounts collected
by William Tieng from VTV Corporation; and,

Finally, whether or not only a maximum of P2,000,000.00 in liquidated damages may be

awarded under the Compromise Agreement.

On the first issue, Team Image argues that the Court of Appeals erred in affirming the
trial court's May 19, 2008 Order declaring Team Image to have defaulted in paying its
obligation under the Compromise Agreement. Team Image maintains that the trial court,
in its own November 3, 2005 Order, stated that Team Image was entitled to suspend
payments under the Compromise Agreement because Solar Team did not withdraw the
complaint-in-intervention it had earlier filed against Team Image. Team Image's liability
under the Compromise Agreement, if any, only became due and demandable on April 7,
2006 when the trial court set aside the November 3, 2005 Order, not on February 19,
2005 as erroneously found by the trial court in its subsequent May 19, 2008 Order.[77]

On the second issue, Team Image maintained that Solar Team violated the Compromise
Agreement because the latter failed to withdraw the complaint-in-intervention it had filed
in ABC v. Team Image, a collection case against Team Image. The trial court's November
3, 2005 and April 7, 2006 Orders that ordered Solar Team to withdraw its complaint-in-
intervention were affirmed on certiorari by the Court of Appeals in CA-G.R. SP No.
94102 and on appeal by this Court in G.R. No. 183848. While Solar Team filed a Motion
for Reconsideration in G.R. No. 183848, the Motion was already denied with finality.
Thus, Solar Team's argument that it cannot withdraw its complaint-in-intervention
pending the resolution of its Motion for Reconsideration "rest[s] on a shaky and slim
foundation[.]"[78]

On the third issue, Team Image argues that the Court of Appeals erred in declaring that
criminal liability cannot be the subject of a compromise. Team Image maintains that there
was nothing in the Compromise Agreement which was contrary to law, morals, or public
policy. Further, courts encourage judgments based on compromise, the only exceptions
being matters relating to: (a) civil status of persons; (b) the validity of a marriage or a
legal separation; (c) any ground for legal separation; (d) future support; (e) the
jurisdiction of courts; and, (f) future legitime.[79] Paragraph 24 of the Compromise
Agreement that required Solar Team to dismiss all cases it had filed against Team Image
and Co does not fall within these exceptions. Consequently, Solar Team must cause the
dismissal of the criminal cases it filed against Team Image and Co per paragraph 24 of
the Compromise Agreement.[80]

On the fourth issue, Team Image maintains that the Court of Appeals erred in affirming
the reversal of trial court's earlier Orders requiring Solar Team's Tieng to turn over a total
of P25,862,750.00 in excess collections from VTV Corporation to Team Image for equal
division among the parties. Team Image argues that contrary to Solar Team and Tieng's
representation in paragraph 4 of the Compromise Agreement, Tieng collected more than
P10,275,547.48 from VTV Corporation. Specifically, Tieng received P22,971,527.03
from VTV Corporation as he alleged in his Complaint in Civil Case No. 05-603 pending
before Branch 57 of the trial court. In addition, the P2,891,226.97 supposedly collected
by Barreiro without Solar Team's authority actually redounded to the benefit of Tieng;
hence, the amount should likewise be returned for equal distribution between Solar Team
and Team Image.[81]

On the fifth issue, Team Image argues that the Court of Appeals erred in affirming the
reversal by the trial court of its earlier Order for Solar Team to pay a total of
P8,000,000.00 in liquidated damages: According to Team Image, it is clear from
paragraph 24 of the Compromise Agreement that a writ of execution may issue for every
violation of the Compromise Agreement. Hence, for every writ of execution, a
corresponding award of liquidated damages to the aggrieved party must be paid. Team
Image contends that the maximum amount of P2,000,000.00 in liquidated damages
allowed to be awarded would "result in a serious crisis whereby one party will contravene
and/or breach with impunity any of [its] representations and warranties, and worst, even
all of them, with only a relatively small amount of penalty compared [to] the actual
amount which is the subject matter of the entire compromise agreement."[82]

Arguing on the first issue, Solar Team counters that Team Image defaulted in its
payments under the Compromise Agreement as was earlier found by the trial court.
Between November 23, 2004, when the trial court set aside its initial order allowing
suspension of payments, and November 3, 2005, when the trial court again allowed
suspension of payments, there was an almost one (1)-year period when Team Image
should have resumed its payments to Solar Team. Team Image, thus, defaulted in its
payments during this almost one (1)-year period and the Court of Appeals correctly
affirmed the November 3, 2005 and April 7, 2006 Orders directing Team Image to pay
Solar Team P2,000,000.00 in liquidated damages for violation of the Compromise
Agreement.[83]

On the second issue, Solar Team maintains that it did not violate the Compromise
Agreement when it failed to withdraw the complaint-in intervention it had filed in ABC
v. Team Image. Solar Team alleges that the issue of whether or not it indeed violated the
Compromise Agreement is currently pending before this Court in a Petition for Review
docketed as Solar Team v. Hon. Dumayas, G.R. No. 183848. Consequently, the Court of
Appeals should not have resolved this issue in deference to this Court's ''supreme
authority."[84]

On the third issue, Solar Team echoes the Court of Appeals' pronouncement that criminal
liability cannot be the subject of a compromise. A crime being a violation of public law,
the aggrieved party is the public in general, not a private individual. Consequently,
neither Team Image nor Solar Team, both being private entities, may agree to cause the
dismissal of the criminal cases they filed against each other because they are both mere
witnesses, not parties, in the criminal cases.[85]

On the fourth issue, Solar Team maintains that Team Image's claim of overpayments is
premature considering that the appointed auditing firm, SGV and Co., has not yet
finalized its accounting report as required under paragraph 24 of the Compromise
Agreement. Further, Tieng's supposed admission that he received P22,971,572.03 from
VTV Corporation was, at best, an extrajudicial admission not made in the present case.
This admission cannot be used against him and the Court of Appeals correctly affirmed
the trial court orders that set aside the earlier directives for Solar Team to return Team
Image's alleged overpayments.[86]

On the fifth issue, Solar Team reiterates the Court of Appeals' pronouncement that only a
maximum of P2,000,000.00 in liquidated damages may be awarded based on the
Compromise Agreement. Solar Team argues that nothing in the Compromise Agreement
provided that each breach would correspond to an award of liquidated damages.
Furthermore, paragraph 24 used "breaches of warranties" and "commitments,'' meaning,
"there can be as many orders of compliance as there are proven breaches," [87] but only a
maximum of P2,000,000.00 in liquidated damages, regardless of the number of supposed
breaches, may be awarded.[88]

This Court partially grants the respective Petitions for Review on Certiorari filed by

Team Image and Solar Team.

Under the Compromise Agreement, Team Image acknowledged and agreed to pay a total
of P26,000,000,00 representing marketing commissions collectible from VTV
Corporation. Team Image also agreed to pay half of the professional fees of SGV and
Co., the auditing firm hired to determine the final amounts payable by the parties under
the Compromise Agreement. The specific payment terms were provided in paragraphs 6
to 9 of the Compromise Agreement:

6. After crediting for the moment the amount of P7,384,320.51 mentioned in paragraph 4
hereof, as having been collected by William Tieng from VTV, the parties agree that there
remains, for the moment, a balance of EIGHTEEN MILLION SIX HUNDRED
FIFTEEN THOUSAND SIX HUNDRED SEVENTY[-]NINE AND 49/100 PESOS
(P18,615,679.49) which Felix Co [and/or Team Image] agree to jointly and severally pay
William Tieng in the following manner and schedule:

P3,267,000.00 - by a 50[-]day postdated check from date of signing, which amount Felix
Co [and/or Team Image] represent to be his own collectibles from Duty Free Philippines,
Inc. The encashment of said check shall not be dependent upon Felix Co's/[Team
Image's] ability to collect from Duty Free Philippines, Inc.

P349,428.37 - to be withdrawn from the joint account of William Tieng and Felix S. Co
with Philippine Bank of Communications; Provided, That, Felix S. Co shall jointly sign a
withdrawal slip or document to effect or authorize the withdrawal thereof.

P983,826.06 to be taken from the earlier collections of SGV deposited with International
Exchange Bank; Provided, That Felix S. Co and William Tieng shall jointly sign a
withdrawal slip or document for the withdrawal of the same,

The total of the above sums is FOUR MILLION SIX HUNDRED THOUSAND TWO
HUNDRED FIFTY[-]FOUR AND 43/100 (P4,600,254.43).

7. Felix Co/[Team Image] shall jointly and severally pay and liquidate the remaining
balance of FOURTEEN MILLION FIFTEEN THOUSAND FOUR HUNDRED
TWENTY[-]FIVE AND 06/100 PESOS (P14,015,425.06) in the following manner:
P1,015,425.06 - on or before 60 days from date of signing this agreement; Provided,
That, Felix Co/[Team Image] shall issue the corresponding postdated check therefor; and

P13,000,000.00 - to be paid in twenty[-]six (26) equal monthly installments of

P500,000.00 each beginning 30 July 2003 and every 30th of the month thereafter until
fully liquidated, Provided, That, Felix Co/[Team Image] shall issue the corresponding
postdated checks therefor.

8. Felix Co/[Team Image] likewise agree, to jointly and severally immediately reimburse
William Tieng, upon the execution of this agreement, fifty percent (50%) of the amount
of TWO HUNDRED SEVENTY[-]EIGHT THOUSAND SIX HUNDRED SEVENTY
PESOS (P278,670.00) which the latter had paid to Sycip Gorres & Velayo (SGV), by
way of the latter's professional fee or the sum of One Hundred Thirty[]Nine Thousand
Three Hundred Thirty[-]Five (P139,335) Pesos.

9. Felix Co further agrees to recompense William Tieng the amount of P600,000.00,

subject matters of I.S. No. 99-F-3526 and P2,225,244.59, subject matter of I.S. No. 99-F-
3525, both of the Office of the City Prosecutor, Parañaque City, Metro Manila, or the
total amount of P2,825,244.59 by way of postdated checks in five (5) equal monthly
installments of P565,048.92 each installments, the same to commence on 15 July 2003
and every 15th day of the month thereafter, Provided, That, the parties agree to submit
these accounts to SGV for the final determination of the nature of the consideration of
these checks, i.e., whether or not the same represent over-payment on the capital
contribution of Felix S. Co into Solar Team Entertainment, Inc. (STEI) to purchase TV
programs/materials owned by Solar Entertainment Corporation and/or from other
suppliers and/or personal indebtedness of Felix S. Co to William Tieng, Provided, That,
SGV shall finish said accounting or on before 01 July 2003, and, Provided, Finally,
that, in the event SGV shall determine before the due date of any of the five (5) postdated
checks herein mentioned, that said amounts of the two (2) aforementioned checks are
over payment on the capital contribution of Felix Co, then Felix S. Co shall have the right
to stop the payment of the checks which have not been presented for payment and
William Tieng shall immediately return to Felix S. Co the amount/s of the check/s so far
encashed.[89]

The table below summarizes Team Image's monetary obligations and the periods or
conditions required for their performance:

Basis under the

Period or condition required for
Obligation Compromise
performance of obligation
Agreement
Payment of P3,267,000.00 Fifty (50) days from date of signing Paragraph 6
through a postdated check the Compromise Agreement
Withdrawal of P349,428.37 from No period or condition provided, i.e., Paragraph 6
the joint account of William a pure obligation demandable at
Tieng and Felix S. Co once[90]
Withdrawal of P983,826.06 from Upon the joint signing of a Paragraph 6
earlier collections of SGV and Co. withdrawal slip by William Tieng and
Felix S. Co or any document
authorizing the withdrawal
Payment of P1,015,425.06 On or before 60 days from date of Paragraph 7
signing the Compromise Agreement
Payment of P13,000,000.00 To be paid in twenty-six (26) equal Paragraph 7
monthly installments of P500,000.00
each beginning 30 July 2003 and
every 30th of the month thereafter
until fully liquidated
Reimburse William Tieng Immediately, i.e., upon the execution Paragraph 8
P139,335.00 representing 50% of of the Compromise Agreement on
SGV and Co.'s professional fees April 28, 2003
A total of P2,825,244.59 By way of postdated checks in five Paragraph 9
representing the amounts subject (5) equal monthly installments of
matters of I.S. No. 99-F-3526 and P565,048.92 each installments, the
I.S. No. 99-F-3525, both of the same to commence on 15 July 2003
Office of the City Prosecutor, and every 15th day of the month
Parañaque City, Metro Manila thereafter

Based on the periods and conditions provided in paragraphs 6 to 9, except for the
payment of P13,000,000.00, Team Image should have already performed its monetary
obligations under the Compromise Agreement by April 26, 2004, when it filed its first
motion for issuance of writ of execution and suspension of payment. For instance, 50
days from the signing of the Compromise Agreement on April 28, 2003 would fall on
June 17, 2003. Hence, by June 17, 2003, Team Image should have already paid Solar
Team P3,267,000.00 in post-dated checks. Another obligation would be for Team Image
to pay Solar Team P1,015,425.06 within 60 days from the signing of the Compromise
Agreement, the 60th day being June 27, 2003.[91] There is no proof, however, that Team
Image complied with these obligations within the required periods. That Team Image
filed a motion for suspension of payments further demonstrates that it had not fully paid
its obligations under the Compromise Agreement.

While it is true that the trial court granted the Motion for Suspension of Payments in its
April 29, 2004 Order, this Order was subsequently set aside on November 23, 2004. Until
the trial court granted Team Image's second motion for suspension of payments on
November 3, 2005, Team Image had almost a year to resume payments. However, Team
Image did not do so. The Court of Appeals, therefore, correctly held that Team Image
was in default for failure to resume payments under the Compromise Agreement. Team
Image violated paragraphs 6 to 9 of the Compromise Agreement.
 II

Paragraphs 21 and 22 of the Compromise Agreement are again provided below:

21. This agreement constitutes the final repository of all the prior understanding
agreements and contracts of the parties and shall operate as total waiver and discharge of
any or all claim, counterclaims, causes of action, claims and demands of whatever kind
and nature which each may have against the other, including their respective heirs[,]
assigns[,] and successors-in-interest arising out of any of all matters, cause or thing,
whether directly or indirectly, related with the Marketing Agency Agreement dated 24
April 1996.

22. By virtue hereof, the parties have agreed, as they hereby agree to immediately
provisionally dismiss all actions, whether civil or criminal, they may have filed against
the other, and after SGV shall have finally completed the audit and accounting tasked
upon it, the results of which is final and binding upon the parties, all said civil and/or
criminal actions shall be permanently dismissed by the parties.

Paragraph 22 requires both Team Image and Solar Team to "immediately provisionally
dismiss all actions, whether civil or criminal, they may have filed against each other."
They shall cause the permanent dismissal of the actions "after [SGV and Co.] shall have
finally completed the audit and accounting tasked upon it."

When the Compromise Agreement was executed on April 28, 2003, there was a pending
collection case filed by ABC Television against Team Image when Solar Team filed a
complaint-in-intervention. It does not appear that Solar Team filed a motion to dismiss
the complaint-in-intervention it had filed against Team Image; hence, Solar Team
violated paragraph 22 of the Compromise Agreement.

That the term "provisional dismissal," in its technical sense, only applies to criminal
cases[92] is not an argument for Solar Team to refuse to withdraw the complaint-in-
intervention. It does not appear that Team Image and Solar Team meant to use the term in
its technical sense. Considering that the parties agreed in paragraph 21 that the
Compromise Agreement "shall operate as total waiver and discharge of any or all claims,
counterclaims, causes of action, claims and demands of whatever kind and nature which
each may have against the other," the parties intended to terminate all the cases they filed
against each other.

The pendency of the Motion for Reconsideration filed by Solar Team in Solar Team v.
Hon. Dumayas, G.R. No. 183848, may no longer be invoked because it had already been
denied with finality. Even if G.R. No. 183848 remained active, it originated from a
Petition for Certiorari questioning the interlocutory Order of November 3, 2005, a suit
that can proceed separately from the main case.[93] It merely continued the certiorari
proceedings before the Court of Appeals; hence, this Court need not await the resolution
of G.R. No. 183848 before resolving whether or not Solar Team violated the
Compromise Agreement for failing to withdraw its complaint-in-intervention against
Team Image.

III

However, despite paragraphs 21 and 22 of the Compromise Agreement, Solar Team

cannot be deemed to have violated it for failing to cause the dismissal of the criminal
cases for estafa Tieng filed against Co. It is settled that criminal liability cannot be the
subject of a compromise.[94] "[A] criminal case is committed against the People, and the
offended party may not waive or extinguish the criminal liability that the law imposes for
its commission."[95] This explains why "a compromise is not one of the grounds
prescribed by the Revised Penal Code for the extinction of criminal liability."[96]

None of the cases cited by Team Image supports its argument that criminal liability may
be subject of a compromise. Chavez v. Presidential Commission on Good
Government[97] and Benedicto v. Board of Administrators,[98] ironically cited by Team
Image, are both clear that compromise is encouraged only
in civil cases. Chavez explicitly stated that "[w]hile a compromise in civil suits is
expressly authorized by law, there is no similar general sanction as regards criminal
liability."[99]

Team Image confused the Presidential Commission on Good Government's power to

grant criminal immunity[100] with the act of compromising criminal liability. Granting
criminal immunity is allowed because no criminal case has yet been filed in court, and
therefore, there is no criminal liability to compromise. On the other hand, compromising
criminal liability presupposes that a criminal case has already been filed in court, the
dismissal of which is already based on the sound discretion of the trial court.[101] In other
words, the dismissal cannot be automatic, regardless of the agreement between the
private complainant and the accused to dismiss the case. As discussed, the real offended
party in a criminal case is the State and the outcome of the criminal case cannot be based
on the will of the private complainant who is a mere witness for the prosecution.

The cases involved here are cases not under the jurisdiction of the Presidential
Commission on Good Government. Chavez and Benedicto, therefore, do not apply.

All told, the Court of Appeals correctly found no grave abuse of discretion on the part of
the trial court when it held that Team Image and Solar Team cannot agree on the
dismissal of the criminal cases. Solar Team did not violate the Compromise Agreement
when Tieng failed to cause the dismissal of the criminal cases for estafa he had filed
against Co.
 IV

Furthermore, it was premature for Team Image to claim that it made overpayments to
Solar Team when Tieng allegedly admitted to receiving from VTV Corporation the
amount of P22,971,572.03, significantly more than the P10,275,547.48 provided in
paragraph 4 of the Compromise Agreement.

Paragraphs 3, 4, and 5 of the Compromise Agreement provide:

3. The parties agree that William Tieng is entitled to initially receive the amount of
TWENTY[-]SIX MILLION PESOS (P26,000,000.00), Philippine Currency, as stipulated
and embodied in their handwritten memorandum of agreement executed on 05 May 1998,
out of the sales and collections made by [Team Image]/Felix S. Co as marketing agent of
[Solar Team]. This is so because, [Team Image]/Felix S. Co have admitted having earlier
collected at least the sum of at least P26M, hence, to equalize the sharing of Felix S. Co
and William Tieng on the proceeds of the sales. William Tieng should also receive the
sum of at least P26M.

4. William Tieng acknowledges that VTV had made payments in the total sum of TEN
MILLION TWO HUNDRED SEVENTY[-]FIVE THOUSAND FIVE HUNDRED
FORTY[-]SEVEN AND 48/100 PESOS (10,275,547[.]48) Philippine Currency, from the
contracts with VTV for the airing over IBC-13 of the TV programs/materials belonging
to either Solar Entertainment Corporation, or Solar Films, Inc., or Solar Team
Entertainment, Inc., out of which, TWO MILLION EIGHT HUNDRED NINETY[-]ONE
THOUSAND TWO HUNDRED TWENTY[-]SIX AND 97/100 (P2,891,226.97) was
collected and paid to Ma. Fe Barriero as what she represented to be marketing
commissions, thus leaving a balance of SEVEN MILLION THREE HUNDRED
EIGHTY[-]FOUR THOUSAND THREE HUNDRED TWENTY AND 51/100
(P7,384,320.51). An accounting shall he made by VTV to determine how much of this
amount of P7,384,320.51, pertain to programs/materials owned by [Solar Team]. Upon
such determination, the amount pertaining to the programs/materials owned by [Solar
Team] (which company is owned 50/50 by Felix Co and William Tieng) shall be credited
to it and shall be credited to William Tieng as part of the amount he is entitled to receive
stated and referred to in paragraph 3 hereof:

5. William Tieng represents and warrants that the aforesaid sum of P2,891,226.97 which
is charged as marketing commissions are unauthorized collections which, did not redound
to the benefit of the parties from their joint operation as stated in the paragraph
immediately preceding, but to the personal gain and advantage of their marketing agent,
Maria Fe Barriero, hence, earnest efforts shall be exerted by said William Tieng to collect
the same from the offending party. After said collection or in the event that said amount
shall be proved to have redounded to the benefit of said William Tieng, then William
Tieng shall turn-over the said amount to [Solar Team] and thereafter SGV shall
determine the share of Felix S. Co thereon which shall be paid immediately to the latter.
[102]

Under paragraphs 4 and 5 of the Compromise Agreement, there must first be an audit and
accounting by SGV and Co. before there can be a final determination of the share of
Team Image from the collectibles from VTV Corporation. There is no showing that SGV
and Co. had already completed its audit and accounting when Team Image filed a motion
for the issuance of a writ of execution.

The supposed admission of Tieng in Civil Case No. 05-603 that he received
P22,971,572.03 is not a judicial admission contemplated under Rule 129, Section 4 of the
Rules of Court.[103] Rule 129, Section 4 requires that the admission be made in the same
case. The admission of Tieng was made in a different case. Therefore, the admission in
Civil Case No. 05-603 cannot be made basis to contend that Tieng misrepresented the
amounts he stated in paragraph 4 of the Compromise Agreement. The Court of Appeals
correctly held that it was premature for Team Image to claim overpayments.

Paragraph 24 of the Compromise Agreement is reiterated below:

24. In the event SGV shall have made a final determination of the respective
accountability of the parties and any of the parties fail to comply with the same, or in the
event any of the parties is remiss or reneges from [its] commitment/s as specified in this
Agreement or breaches the warranties and/or representation as contained herein, then the
aggrieved party shall be entitled to an immediate issuance of a writ of execution to
enforce compliance thereof and the guilty party shall pay the innocent party the sum of
P2 Million Pesos by way of liquidated damages and/or penalty and shall, likewise,
shoulder all the expenses in enforcing this compromise agreement by a writ of execution.
Moreover, the innocent party shall have the right to invoke the principle of reciprocity of
obligations in contracts as provided for by law.[104]

Paragraph 24 of the Compromise Agreement gives two (2) classifications of the possible
violations of the Compromise Agreement. The first is "in the event" where the appointed
auditing firm, SGV and Co., would have made a final determination of the
accountabilities of the parties and any of the parties fails to pay its respective
accountabilities based on the audit. The second is ''in the event" where "any of the parties
is remiss or reneges from [its] commitment/s as specified in this Agreement or breaches
the warranties and/or representation as contained herein." That these are the only two (2)
classifications of violations is inferable from the use of the phrase "in the event," a
comma, and the word "or" to separate these two (2) instances. In other words, all
obligations that require SGV and Co.'s final accounting fall under the first classification.
All other obligations fall under the second classification.
Given the foregoing, the payment of liquidated damages is based on these two (2)
"events" or classifications of violation. Since there are only two (2) classifications of
violations immediately preceding the provision on the payment of P2,000,000.00
liquidated damages, only a maximum of P4,000,000.00 may be paid under paragraph 24.

The obligations under the Compromise Agreement that require SGV and Co.'s final
determination are found in paragraphs 9, [105] 13,[106] 15,[107] 16,[108] 17,[109] 19,[110] 22,[111] and
24.[112] Violations of these paragraphs fall under the first "event” or classification.
Violations of all other paragraphs fall under the second "event” or classification.

As previously discussed, Team Image violated paragraphs 6 and 7 of the Compromise

Agreement by failing to pay its monetary obligations under these paragraphs. For these
violations, Team Image must pay Solar Team P2,000,000.00 in liquidated damages. As
for Solar Team, it violated paragraph 22 the Compromise Agreement for failure to
withdraw the complaint-in-intervention it had earlier filed against Team Image. Hence,
Solar Team must pay Team Image P2,000,000.00 in liquidated damages.

VI

Articles 1279 and 1281 of the Civil Code provide:

Article 1279. In order that compensation may be proper, it is necessary:

(1) That each one of the obligors be bound principally, and that he be at the same time a
principal creditor of the other;

(2) That both debts consist in a sum of money, or if the things due are consumable, they
be of the same kind, and also of the same quality if the latter has been stated;

(3) That the two debts be due;

(4) That they be liquidated and demandable;

(5) That over neither of them there be any retention or controversy, commenced by third
persons and communicated in due time to the debtor.

Article 1281. Compensation may be total or partial. When the two debts are of the same
amount, there is a total compensation.

Considering that the parties are equally liable to each other in the amount of
P2,000,000.00, this Court confirms that the amounts are set off by operation of law.[113]

VII
However, this Court recalls that in the May 19, 2008 Omnibus Order, Judge Dumayas
directed Solar Team to deposit with Office of the Clerk of Court Regional Trial Court of
Makati City the amount of P2,000,000.00 representing liquidated damages for Solar
Team's failure to withdraw the complaint-in-intervention it had filed against Team Image.
Judge Dumayas added that the amount “will be released only after final determination of
the obligations of [Team Image and Co] pursuant to the compromise agreement and after
the issue on the violation of the same agreement by [Solar Team] for its failure to
[withdraw the complaint-in-intervention] has been resolved with finality.”[114]

As held by the Court of Appeals, it was grave abuse of discretion for Judge Dumayas to
keep the P2,000,000.00 in custodia legis. Upon approval, a judgment upon a compromise
is immediately executory, not even subject to appeal.[115] Ordering the deposit of the
P2,000,000.00 with the Office of the Clerk of Court effectively stayed the execution of an
immediately executory judgment. It is highly irregular. Nowhere in the law or the Rules
of Court is such deposit allowed.

Additionally, the complexity of resolving the present petitions could have been avoided
had Judge Dumayas properly managed the case for accounting. For this reason, adding
the highly irregular order of deposit, this matter is referred to the Office of the Court
Administrator to be docketed as a separate administrative matter against Judge Dumayas.
Judge Dumayas is to show cause why he should not be disciplinarily dealt with for: first,
in issuing the May 19, 2008 Omnibus Order which directed the deposit of P2,000,000.00
before the Office of the Clerk of Court-Regional Trial Court, Makati City; and, second,
for reversing himself, on several occasions, on the issues of whether or not Team Image
was entitled to suspend payments to Solar Team and whether or not the criminal cases
may be dismissed based on the Compromise Agreement.

WHEREFORE, the Petitions for Review on Certiorari filed by Team Image

Entertainment, Inc. and Solar Team Entertainment, Inc. are PARTIALLY
GRANTED and the Court of Appeals December 10, 2009 Decision in CA-G.R. SP No,
104961 is MODIFIED as follows:

The implementation of the Writ of Execution dated January 10, 2008 is AFFIRMED;

Team Image Entertainment, Inc. is LIABLE to Solar Team Entertainment, Inc. in the
amount of P2,000,000.00 pursuant to paragraph 24 of the Compromise Agreement for its
failure to settle its obligation within the period from November 23, 2004 to November 3,
2005;

Solar Team Entertainment, Inc. is LIABLE to Team Image Entertainment, Inc. in the
amount of P2,000,000.00 pursuant to paragraph 24 of the Compromise Agreement for its
failure to withdraw earlier the complaint in intervention it filed in Civil Case No. 97-024
pending before Branch 137, Regional Trial Court of Makati City;
Considering that Team Image Entertainment, Inc. and Solar Team Entertainment, Inc. are
concurrently liable to each other in equal amounts, the compensation of their liabilities
takes effect by operation of law. The order for Solar Team Entertainment, Inc. to deposit
the amount of P2,000,000.00 to the Office of the Clerk of Court - Regional Trial Court of
Makati City is REVERSED and SET ASIDE. The garnished amount of P2,000,000.00
representing liquidated damages is ordered released from the custody of the Clerk of
Court of the Regional Trial Court of Makati City and must be returned to Solar Team
Entertainment, Inc.;

The reversal of the order which requires William Tieng to cause the dismissal of Criminal
Case Nos. 07-1235 and 07-1236 is AFFIRMED;

The reversal of the order requiring William Tieng to pay the sum of P2,000,000.00 as
liquidated damages on account of his failure to dismiss Criminal Case Nos. 07-1235 and
07-1236 is AFFIRMED;

The reversal of the order requiring William Tieng to return the sum of P25,862,750.00 on
account of Solar Team Entertainment, Inc.'s alleged admission in its pleading in Civil
Case No. 05-603 despite the pendency of the SyCip Gorres Velayo and Co. audit
is AFFIRMED;

The reversal of the order requiring William Tieng to turn over the amount of
P2,891,226.97 to Solar Team Entertainment, Inc. is AFFIRMED;

The reversal of the order requiring William Tieng to pay a total of P8,000,000.00 as
liquidated damages for alleged breaches of warranty and representation is AFFIRMED;
and

Finally, the issuance of the May 19, 2008 Omnibus Order is REFERRED to the Office
of the Court Administrator to be docketed as a regular administrative matter against
Presiding Judge Winlove M. Dumayas of Branch 59, Regional Trial Court, Makati City.

SO ORDERED.

THIRD DIVISION
[ G.R. No. 183004, December 06, 2017 ]
ALFONSO DIGAN, TIBALDO BUELTA, BERNARDO MARIANO,
SANTIAGO ACQUIDAN, FERNANDO AGNNO, JOHNNY ORIE AND
FELIMON GACETA (DECEASED) REP. BY HIS WIFE LOLITA GACETA,
PETITIONERS, V. NOEMI MALINES, RESPONDENT.
 DECISION

MARTIRES, J.:

This petition for review on certiorari seeks to reverse and set aside the 3 January 2008
Decision[1] and 20 May 2008 Resolution[2] of the Court of Appeals (CA) in CA-G.R. SP
No. 98012, which reversed and set aside the 4 October 2006 decision[3] of the Department
of Agrarian Reform Arbitration Board (DARAB) Central Office in DARAB Case Nos.
9319 & 13535, and reinstated the 13 November 2003 decision of the Provincial
Adjudicator (PA) in DARAB Case No. 1-03297-03-I.S. (the second DARAB case).

THE FACTS

Modesta Paris (Paris) was the owner of three (3) parcels of agricultural land situated in
the Municipality of Cervantes, Ilocos Sur, with an aggregate area of 318,876 square
meters (31.89 hectares). The three (3) parcels of land were registered under Transfer
Certificates of Title (TCT) Nos. T-1420, T-3244, and T-3245 with respective land areas
of 228,444 square meters (22.84 hectares), 45,216 square meters (4.52 hectares), and
45,216 square meters (4.52 hectares).[4]

In 1972, the landholdings of Paris were placed under the coverage of Operation Land
Transfer (OLT) pursuant to Presidential Decree (P.D.) No. 27. In December 1972, the
landholdings of Paris were consolidated and then subdivided into six (6) lots. Sometime
in 1976, the Department of Agrarian Reform (DAR) identified herein petitioners as
among the qualified farmer beneficiaries of the landholdings of Paris.[5]

On 29 November 1978, Paris sold to respondent Noemi Malines (Malines) and Jones
Melecio (Melecio) one of the six lots from her landholdings containing an area of 52,419
square meters or 5.2 hectares (subject land), with Malines acquiring 45,668.25 square
meters or 4.567 hectares and Melecio acquiring 6,750.75 square meters or 0.675 hectare.
Petitioners gave their consent to the said sale by virtue of a Joint Affidavit of Waiver,
[6]
 dated 31 October 1978. On 12 December 1978, TCT No. T-16519 covering the subject
land was issued in favor of the respondents.[7]

Later, unknown to Malines and Melecio, the Register of Deeds (RD) of Ilocos Sur
cancelled TCT No. T-16519. Thereafter, Emancipation Patents[8] (EP) covering the
subject land were issued to the petitioners on 11 May 1989, which were subsequently
registered with the RD of Ilocos Sur on 8 November 1989, to wit:

TCT No. EP 1211 441 sqm Tibaldo Buelta

TCT No. EP 1213 524 sqm Fernando Agnno
TCT No. EP 1217 1,552 sqm Bernardo Mariano
TCT No. EP 1225 1,238 sqm Johnny Orie
TCT No. EP 1231 804 sqm Alfonso A. Digan
TCT No. EP 1240 7,381 sqm Felimon Gaceta
TCT No. EP 1246 1,023 sqm Santiago Acquidan

The First DARAB Case

Upon discovery of the cancellation of their title, and the issuance of EPs covering the
subject land in favor of petitioners, Malines and Melecio filed a Petition for the
Cancellation of the EPs[9] issued to the petitioners before the Provincial Agrarian Reform
Adjudication Board (PARAD) in Vigan City, Ilocos Sur. The case was docketed as
DARAB Case No. 85-98-I.S.

In the said petition, Malines and Melecio alleged, among others, that the sale of the
subject land was with the consent of the petitioners who consented to the said conveyance
through a joint affidavit of waiver; that their respective shares in the subject land forms
part of their retained area under either P.D. No. 27 or Republic Act (R.A.) No. 6657; that
they were never informed of the taking of the subject land in grave violation of their
constitutional right to due process; that they did not receive any sum from the petitioners
or from the Land Bank of the Philippines (LBP) as compensation for the subject land; and
that the EPs issued to herein petitioners were null and void considering that no Certificate
of Land Transfer (CLT) were previously issued in their favor.

In their Answer,[10] herein petitioners admitted that no CLT was issued in their favor prior
to the issuance of the EPs. They further averred that Malines and Melecio, just like them,
had been identified as farmer beneficiaries of the subject land as evidenced by the lot
description[11] therefor. They however impugned the validity of the sale of the subject
land alleging that the same was executed to undermine the intent and provisions of P.D.
No. 27 and the letters of instruction, memoranda, and directives in relation thereto.

On 15 December 1998, the PA rendered a decision[12] dismissing the petition for

cancellation. The PA ruled that the validity and regularity of the issuance of the
questioned EPs must be maintained based on the presumption of regularity in the
performance of official duties. It further opined that the sale of the subject land was done
to subvert the intent and purpose of the agrarian reform laws. The dispositive portion of
the said decision reads:

WHEREFORE, premises considered, judgment is rendered DISMISSING the instant

case, and directing the private respondents to pay their respective amortizations. [13]

Malines and Melecio moved for the reconsideration of the PA's decision. [14] The motion
for reconsideration was given due course and the case was re-docketed as DARAB Case
No. 148-156-99-1.S.[15] On 17 August 1999, however, the motion was denied for the
movants' failure to appear at the scheduled hearing for their presentation of additional
evidence.[16]

On 28 December 1999, only Malines elevated an appeal before the DARAB Central
Office.[17] The appeal was docketed as DARAB Case No. 9319.

The Second DARAB Case

During the pendency of DARAB Case No. 9319, Malines filed before the PARAD a
Petition for Declaration of Nullity and/or Cancellation of the subject EPs.[18] The petition
was docketed as DARAB Case No. 1-03-297-03- I.S. Malines raised petitioners' failure
to pay their respective amortizations as an additional ground for the cancellation of the
questioned EPs. It pointed out that the LBP issued a certification,[19] dated 11 March
2003, to the effect that it did not receive any Land Transfer Claim Folder in the name of
Malines.

In its 13 November 2003 decision,[20] the PA disqualified petitioners from being

beneficiaries of the DAR's OLT program for their failure to pay their respective
amortizations. Consequently, the PA ordered the cancellation of the EPs issued in their
names.

Petitioners moved for reconsideration, but the same was denied by the PA in its order,
dated 13 January 2004.[21]

On 28 January 2004, petitioners filed their notice of appeal.[22] The appeal was docketed
as DARAB Case No. 13535.

On 26 February 2004, petitioners filed a motion for the consolidation of DARAB Case
No. 9319 and DARAB Case No. 13535.[23] The DARAB Central Office granted the
motion for consolidation in its Order,[24] dated 9 November 2005.

The DARAB Central Office Ruling

In its decision, dated 4 October 2006, the DARAB Central Office affirmed the PA's 15
December 1998 decision insofar as it dismissed the first DARAB case. It likewise
dismissed the second DARAB case, thereby reversing the PA's 13 November 2003
decision therein.

The DARAB ruled that there was no violation of the right to due process when no notice
of coverage of the subject land was served to Malines and Melecio. It reasoned that at the
time the subject land was placed under the OLT coverage, it was still under the
ownership of Paris and, as such, separate notices to Malines or Melecio were no longer
necessary. It further ruled under DAR Memorandum Circular No. 8, Series of 1974, that
the transfer of ownership of tenanted rice and/or corn lands after 21 October 1972, except
to actual tenant-farmers or tillers, is prohibited. Thus, the sale of the subject land is void
having been executed in violation of the provisions of P.D. No. 27.

As to the allegation of failure to pay the amortizations, the Board pointed out that upon
the coverage of the subject landholding under the OLT, the farmer-beneficiaries may no
longer be required to pay the landowner their lease-rentals as they were to pay instead the
amortization to the LBP. And even assuming that the farmer-beneficiaries indeed failed
to pay the value of the subject land, the proper remedy would be to ask for the payment
of just compensation from the DAR or the LBP and not for the cancellation of the subject
EPs.

The dispositive portion of the decision reads:

WHEREFORE, premises considered, the decision dated 15 December 1998 is

MODIFIED, dismissing the petition for cancellation of EP. As to the decision dated 13
November 2003, the same is REVERSED and SET ASIDE and a new judgment is
entered DISMISSING the petition.

SO ORDERED.[25]

Aggrieved, Malines filed a petition for review before the CA.[26]

The CA Ruling

In its assailed decision, the CA reversed the DARAB Central Office's 4 October 2006
decision and reinstated the PA's 13 November 2003 decision in the second DARAB case.

In finding for Malines, the CA ruled that the subject land is exempt from OLT coverage
because it is part of her and Melecio's retained areas considering that it is less than seven
(7) hectares in land area, pursuant to DAR Memorandum Circular No. 2-14, Series of
1973. The appellate court likewise noted that no evidence was presented to show that
Malines was notified of the taking of her property. Thus, her right to due process of the
law was violated. The dispositive portion of the assailed decision provides:

WHEREFORE, the impugned Decision of the public respondent dated October 4, 2006 is
REVERSED and SET ASIDE. The Decision of the Provincial Adjudicator dated
November 13, 2003 is REINSTATED.

No costs.

SO ORDERED.[27]
Petitioners moved for reconsideration, but the same was denied by the CA in its
resolution, dated 20 May 2008.

Hence, this present petition raising the following:

THE ISSUES

WHETHER OR NOT THE FINDINGS OF THE HONORABLE COURT OF

APPEALS REVERSING AND SETTING ASIDE THE DECISION OF PUBLIC
RESPONDENT DEPARTMENT OF AGRARIAN REFORM ADJUDICATION
BOARD (DARAB) SOLELY ON REASON THAT THE SUBJECT
AGRICULTURAL LAND IS PART OF THE LANDOWNER'S RETAINED AREA
WHERE IN TRUTH AND IN FACT, AND RECORDS WOULD ATTEST THAT
NO ORDER HAS BEEN ISSUED BY THE DAR, NEITHER WAS THERE AN
APPLICATION FOR RETENTION.

II

WHETHER OR NOT THE HONORABLE COURT OF APPEALS ERRED IN

NOT TAKING COGNIZANCE THAT: (1) UPON COVERAGE OF THE
SUBJECT PROPERTY UNDER OPERATION LAND TRANSFER
RESPONDENTS, WHO ACQUIRED THE SAME TWO (2) YEARS AFTER ITS
COVERAGE CAN STILL EXERCISE THE RIGHT OF RETENTION; AND (2)
THE EMANCIPATION PATENTS HAVE BECOME INDEFEASIBLE ONE (1)
YEAR FROM THE DATE OF ISSUANCE.

III

WHETHER OR NOT THE HONORABLE COURT OF APPEALS ERRED IN

NOT TAKING COGNIZANCE THAT AT THE TIME OF COVERAGE OF THE
SUBJECT LAND UNDER OPERATION LAND TRANSFER THE PROPERTY
SUBJECT OF CONTROVERSY WAS STILL OWNED BY THE PREVIOUS
OWNER MODESTA PARIS, HENCE, PETITIONERS HEREIN HAS VESTED
RIGHTS PROTECTED BY THE GOVERNMENT PARAMOUNT OVER THE
RIGHTS OF HEREIN RESPONDENTS WHO ACQUIRED THE SAME TWO (2)
YEARS AFTER THE DAR HAS PLACED THE PROPERTY UNDER ITS
PROGRAM.

IV
WHETHER OR NOT THE HONORABLE COURT OF APPEALS ERRED IN
FINDING THAT THERE WAS A VIOLATION OF DUE PROCESS OF LAW
WHEN THE SUBJECT AGRICULTURAL LAND WAS PLACED UNDER THE
OPERATION LAND TRANSFER PURSUANT TO PRESIDENTIAL DECREE
NO. 27.[28]

THE COURT'S RULING

The errors assigned by the petitioners could be summarized into a singular issue -
whether the appellate court erred in ordering the cancellation of their respective EPs.

The Court affirms the result of the 03 January 2008 Decision but for reasons entirely
different from those advanced by the appellate court.

Malines could not Claim any

Right of Retention

P.D. No. 27, issued on 21 October 1972, covers tenanted rice and corn lands. It
proclaimed the entire country as a land reform area and decreed the emancipation of
tenants from bondage of the soil. Upon its issuance, the tenant-farmer was deemed owner
of a portion of the land he tills constituting a family-sized farm of five (5) hectares, if not
irrigated, and three (3) hectares, if irrigated.

To further protect the rights of tenant-farmers, P.D. No. 27 decreed that titles to land
acquired pursuant to it or the land reform program shall not be transferable except by
hereditary succession or to the Government in accordance with its provisions and other
pertinent laws and regulations.

P.D. No. 27 also provided a mechanism to mitigate the effects of compulsory land
acquisition. To strike a balance between the rights of the landowners and the tenant,
landowners covered by P.D. No. 27 were given the right to retain a portion of their lands
provided that such retained portion shall not exceed seven (7) hectares, and provided
further that the said landowner was cultivating or will cultivate such retained land as of
21 October 1972.

The appellate court ruled that the OLT coverage over the subject land violated Malines'
right of retention considering that the subject land or at least her share thereof was below
the retention limit.

The Court disagrees.

In the first place, Malines, as well as Melecio, could not be the landowner referred to in
P.D. No. 27 or the several letters of instruction issued in relation thereto. From the
wordings of P.D. No. 27, the "landowner" referred to pertains to a person identified to be
the owner of tenanted rice or corn land as of 21 October 1972. This is only logical
considering that tenanted rice and corn lands were deemed acquired by the Government
in favor of the tenant-farmers as of the date of the issuance of P.D. No. 27, and any
transfer of ownership thereof is void. As such, it would not be possible to have a new
"landowner" after 21 October 1972, except if such land was acquired by hereditary
succession.

Thus, under P.D. No. 27, the right of retention may only be claimed and exercised by the
landowner identified to be such as of 21 October 1972, and/or any of his heirs who
inherited such agricultural lands after the said date. Consequently, Malines and Melecio,
who were neither the owners of the subject land when P.D. No. 27 was issued nor were
the heirs of the landowner thereof, could not claim the right of retention. Therefore, the
Court finds erroneous the ruling of the CA that respondents' right of retention was
violated.

The direct sale of the subject land in

favor of Malines and Melecio is valid.

It is settled that an appeal, once accepted by this Court, throws the entire case open to
review. This Court has the authority to review matters not specifically raised or assigned
as error by the parties, if their consideration is necessary in arriving at a just resolution of
the case.[29] Furthermore, although not a trier of facts, this Court may analyze, review, and
even reverse findings of facts if there is compelling reason to do so, such as when the
factual findings of the trying court or body are in conflict with those of the appellate
court, or there was a misapprehension of facts, or when the inference drawn from such
facts was manifestly mistaken.[30]

After a thorough review of the records, the Court finds that the PA, the DARAB Central
Office, and the CA overlooked and misapprehended an admitted fact crucial to the
resolution of this case.

As previously discussed, P.D. No. 27 prohibited the transfer of rice and corn lands. Thus,
in a plethora of cases,[31] the Court struck down contracts of sale involving tenanted rice
and corn lands executed after 21 October 1972, in violation of the provisions of P.D. No.
27.

Nevertheless, not all conveyances involving tenanted rice and corn lands are prohibited.
To achieve its purpose, P.D. No. 27 laid down a system for the purchase by tenant-
farmers of the lands they were tilling. In furtherance, the DAR issued several
memorandum circulars (MC) which recognized the validity of a direct sale between the
landowner and the tenant-beneficiary under a direct payment scheme (DPS) and at liberal
terms and subject to conditions.[32] Among these regulations are MC Nos. 2 and 2-A,
series of 1973, and MC No. 8, series of 1974. MC No. 2-A, which amended MC No. 2,
provides the following explicit prohibition, among others:

h. Transfer of ownership after October 21, 1972, except to the actual tenant-farmer

tiller. If transferred to him, the cost should be that prescribed by Presidential Decree No.
27. (emphasis supplied)

On the other hand, MC No. 8, series of 1974, which repealed and/or modified MC Nos. 2
and 2-A and other circulars or memoranda inconsistent with it, provided that:

4. No act shall be done to undermine or subvert the intent and provisions of Presidential
Decrees, Letters of Instructions, Memoranda and Directives, such as the following and/or
similar acts:

xxxx

f) Transferring ownership to tenanted rice and/or corn lands after October 21,
1972, except to the actual tenant-farmers or tillers but in strict conformity to the
provisions of Presidential Decree No. 27 and the requirements of the
DAR. (emphasis supplied)

In fine, the general rule is that any transfer of ownership over tenanted rice and/or corn
lands after 21 October 1972 to persons other than the heirs of the landowner, via
hereditary succession, is prohibited. However, when the conveyance was made in favor
of the actual tenant-tiller thereon, such sale is valid.[33]

It is not disputed that ownership over the subject land was transferred by Paris to Malines
and Melecio sometime in 1978 or after 21 October 1972. Apparently, judging from this
fact alone, the subject transaction is void. However, a reading of petitioners' answer to the
petition in the first DARAB case would reveal that this is not the case. In the said answer,
petitioners admitted that Malines and Melecio were among those identified as qualified
beneficiaries, and were in possession, of the subject land, albeit with the caveat that the
sale to them was made to circumvent the provisions of P.D. No. 27, to wit:

X.

That petitioner[s] Jose Melecio and Noemi Malines had been identified as Farmer
Beneficiaries being in possession and cultivation of the land particularly Lot No. 4.0
and Lot No. 4-1 respectively, attached hereto and form an integral part and marked as
Annex[es] "D-1" and "D-2" are the Survey PSD-014230 (OLT) Lot Description;
[34]
 (emphasis supplied)
Such admission, having been made in a pleading, is conclusive as against the pleader -
the petitioners in this case.[35] It may be contradicted only by showing that it was made
through palpable mistake or that no such admission was made.[36] Unfortunately for the
petitioners, they failed to contradict their admission.

Clearly, Malines and Melecio being qualified beneficiaries and actual tillers of the
subject land, the sale thereof to them is valid. Indeed, the sale of the subject land
emancipated Malines and Melecio from the bondage of the soil they were tilling. The
very purpose of P.D. No. 27 was therefore achieved. Consequently, the subject land,
having been acquired in a valid sale pursuant to P.D. No. 27, could no longer be bound
by separate EPs in favor of other persons.

Petitioners had already abandoned

whatever right they may have had
over the subject land.

Another factor which militates against the claim of petitioners is the joint affidavit of
waiver they executed. The petitioners never denied its genuineness and its due execution
on 31 October 1978, or prior to the execution of the sale of the subject land. In the said
affidavit, the petitioners jointly declared:

3. That the owner of said rice land/land-lord-lessor Mrs. Modesta Paris offered by written
notice, dated September 20, 1978, to sell to us said rice land by written notice served to
us individually;

4. That we hereby manifest and voluntarily through this Joint Affidavit of Waiver that we
are not interested to buy said rice land, and that the rice land described above could be
offered to other persons, or outside buyers.

Under Section 22 of R.A. No. 6657 in relation to DAR Administrative Order (AO) No.
02-94, abandonment disqualifies the beneficiary of the lots awarded under P.D. No. 27.
[37]
 Abandonment has been defined as the willful failure of the beneficiary, together with
his farm household, to cultivate, till, or develop his land to produce any crop, or to use
the land for any specific economic purpose continuously for a period of two calendar
years.[38] For abandonment to exist, the following requisites must concur: (1) a clear intent
to abandon; and (2) an external act showing such intent.[39] What is critical in
abandonment is intent which must be shown to be deliberate and clear. The intent must
be established by the factual failure to work on the landholding absent any valid reason as
well as a clear intent, which is shown as a separate element. [40]

In Buensuceso v. Perez,[41] the Court had the occasion to rule that an agrarian reform
beneficiary who allowed and acquiesced to the execution of a contract of leasehold in
favor of another person over the agricultural land awarded to him effectively surrenders
his rights over the said land. His act of signing the lease contract, even as a witness,
constitutes the external act of abandonment. As in the aforementioned case, the
petitioners' execution of the affidavit of waiver demonstrated their clear intent to abandon
and surrender their rights over the subject land. Their acts of signing the waiver likewise
constituted the external act of abandonment. Thus, they are disqualified to be
beneficiaries of the subject land.

Emancipation Patents issued in favor

of the petitioners may still be
cancelled.

Petitioners insist that the EPs issued to them had already become indefeasible after the
lapse of one (1) year from their issuance and, thus, could no longer be cancelled.

The argument is misplaced.

Mere issuance of an EP does not put the ownership of the agrarian reform beneficiary
beyond attack and scrutiny. EPs issued to such beneficiaries may be corrected and
cancelled for violations of agrarian laws, rules and regulations.[42] Under DAR AO No.
02-94, the grounds for the cancellation of registered EPs include:

1. Misuse or diversion of financial and support services extended to the ARB;

(Section 37 of RA No. 6657)

2. Misuse of the land; (Section 22 of RA No. 6657)

3. Material misrepresentation of the ARB's basic qualifications as provided under

Section 22 of RA No. 6657, PD No. 27, and other agrarian laws;

4. Illegal conversion by the ARB; (cf. Section 73, paragraphs C and E of RA No.
6657)

5. Sale, transfer, lease or other forms of conveyance by a beneficiary of the right to

use or any other usufructuary right over the land acquired by virtue of being a
beneficiary, in order to circumvent the provisions of Section 73 of RA No. 6657,
PD No. 27, and other agrarian laws;

6. Default in the obligation to pay an aggregate of three (3) consecutive

amortizations in case of voluntary land transfer/direct payment scheme, except in
cases of fortuitous events and force majeure;

7. Failure of the ARBs to pay for at least three (3) annual amortizations to the LBP,
except in cases of fortuitous events and force majeure; (Section 26 of RA No.
6657)
 8. Neglect or abandonment of the awarded land continuously for a period of two (2)
calendar years x x x; (Section 22 of RA No. 6657)

9. The land is found to be exempt/excluded from P.D. No. 27/EO No. 228 or CARP
coverage or to be part of the landowner's retained area as determined by the
Secretary or his authorized representative; and

10. Other grounds that will circumvent laws related to the implementation of agrarian
reform program.

To recall, petitioners abandoned whatever right they may have over the subject land when
they executed a joint affidavit of waiver on 31 October 1978. This alone is sufficient
ground for the cancellation of the EPs registered in their names.

Similarly, petitioners' EPs could be cancelled considering that their issuance circumvents
laws related to the implementation of the agrarian reform program. Ownership over the
subject land had already been transferred to qualified farmer beneficiaries when it was
sold in 1978, in accordance with the provisions of P.D. No. 27 and its implementing
rules. Since it has not been shown that said acquisition is tainted by any irregularity,
Malines and Melecio's respective titles to the subject land must be respected. The subject
land cannot, therefore, be awarded to other farmer-beneficiaries because it is no longer
available for distribution under P.D. No. 27, and to do so would defeat the very purpose
of the agrarian reform law. The EPs of the petitioners, which covers land already
conveyed to qualified farmer-beneficiaries through a valid sale, have been irregularly
issued and must perforce be declared null and void.

Inasmuch as the Court commiserates with the petitioners' plight, their prayers could not
be granted. Sustaining the validity of the subject EPs despite its glaring irregularity and in
spite of the fact that the same covers land already legally conveyed to qualified tenants-
tillers thereof would unjustly and unduly deprive the latter of their property. Justice is in
every case for the deserving, and it must be dispensed with in the light of established
facts, the applicable law, and existing jurisprudence.[43]

WHEREFORE, the assailed Decision, dated 3 January 2008, of the Court of Appeals in
CA-G.R. SP No. 98012 which affirmed the 13 November 2003 Decision of the Provincial
Adjudicator in DARAB Case No. 1-03-297-03-I.S. is AFFIRMED insofar as it ordered
the cancellation of the Emancipation Patents issued in favor of the petitioners.

SO ORDERED.

SECOND DIVISION
[ G.R. No. 228799, January 10, 2018 ]
 MACTAN ROCK INDUSTRIES, INC. AND ANTONIO TOMPAR,
PETITIONERS, VS. BENFREI S. GERMO, RESPONDENT.

DECISION

PERLAS-BERNABE, J.:

Assailed in this petition for review on certiorari[1] are the Decision[2] dated August

8, 2016 and the Resolution[3] dated October 14, 2016 of the Court of Appeals (CA) in CA-
G.R. CV No. 104431, which affirmed the Decision[4] dated January 14, 2015 of the
Regional Trial Court of Muntinlupa City, Branch 276 (RTC) in Civil Case No. 11-029,
finding petitioners Mactan Rock Industries, Inc. (MRII) and Antonio Tompar (Tompar)
solidarily liable to pay respondent Benfrei S. Germo (Germo) the amount of
P4,499,412.84 plus interest, damages, and attorney's fees.

The Facts

This case stemmed from a Complaint[5] for sum of money and damages filed by Germo
against MRII – a domestic corporation engaged in supplying water, selling industrial
maintenance chemicals, and water treatment and chemical cleaning services [6] – and its
President/Chief Executive Officer (CEO), Tompar. The complaint alleged that on
September 21, 2004, MRII, through Tompar, entered into a Technical Consultancy
Agreement (TCA)[7] with Germo, whereby the parties agreed, inter alia, that: (a) Germo
shall stand as MRII's marketing consultant who shall take charge of negotiating,
perfecting sales, orders, contracts, or services of MRII, but there shall be no employer-
employee relationship between them; and (b) Germo shall be paid on a purely
commission basis, including a monthly allowance of P5,000.00. [8]

On May 2, 2006 and during the effectivity of the TCA, Germo successfully negotiated
and closed with International Container Terminal Services, Inc. (ICTSI) a supply contract
of 700 cubic meters of purified water per day. Accordingly, MRII commenced supplying
water to ICTSI on February 22,  2007, and in tum, the latter religiously paid MRII the
corresponding monthly fees.[9] Despite the foregoing, MRII allegedly never paid Germo
his rightful commissions amounting to P2,225,969.56 as of December 2009, inclusive of
interest.[10] Initially, Germo filed a complaint before the National Labor Relations
Commission (NLRC), but the same was dismissed for lack of jurisdiction due to the
absence of employer-employee relationship between him and MRII. He then filed a civil
case before the Regional Trial Court of Muntinlupa, Branch 256, but the same was
dismissed without prejudice to its re-filing due to his counsel's failure to mark all his
documentary evidence at the pre-trial conference. [11] Hence, Germo filed the instant
complaint praying that MRII and Tompar be made to pay him the amounts of
P2,225,969.56 as unpaid commissions with legal interest from the time they were due
until fully paid, P1,000,000.00 as moral damages, P1,000,000.00 as exemplary damages,
and the costs of suit.[12]

In their Answer,[13] MRII and Tompar averred, among others, that: (a) there was no

employer-employee relationship between MRII and Germo as the latter was hired as a
mere consultant; (b) Germo failed to prove that the ICTSI account materialized through
his efforts as he did not submit the required periodic reports of his negotiations with
prospective clients; and (c) ICTSI became MRII's client through the efforts of a certain Ed
Fornes.[14] Further, MRII and Tompar claimed that Germo should be made to pay them
litigation expenses and attorney's fees as they were compelled to litigate and engage
the services of counsel to protect their interest. [15]

Due to MRII, Tompar, and their counsel's multiple absences at the various schedules for
pre-trial conference, the RTC considered them as "in default," thereby allowing Germo
to present his evidence ex-parte.[16]

The RTC Ruling

In a Decision[17] dated January 14, 2015, the RTC ruled in Germo's favor, and accordingly,
ordered MRII and Tompar to solidarily pay him the amounts of: (a) P4,499,412.84
representing Germo's unpaid commissions from February 2007 until March 2012 with
legal interest from judicial demand until fully satisfied; (b) P100,000.00 as moral
damages; (c) P100,000.00 as exemplary damages; and (d) P50,000.00 as attorney's fees.
[18]

The RTC found that MRII and Germo validly entered into a TCA whereby the latter shall
act as the former's marketing consultant, to be paid on a commission basis. [19] It also
found that MRII's contract with ICTSI was made possible through Germo's negotiation
and marketing skills, and as such, the latter should be paid the commissions due to him.
In this regard, Germo presented various sales invoices spanning the period of February
2007 to March 2012, wherein he should have been paid commissions in the amount of
P4,499,412.84.[20] Further, based on the evidence presented and in order to deter those
who intend to negate the fulfillment of an obligation to the prejudice of another, the
RTC found it appropriate to award Germo moral damages, exemplary damages, and
attorney's fees in the foregoing amounts.[21] Finally, the RTC imposed a lien equivalent to
the appropriate legal fees on the monetary awards in Germo's favor, noting that the
latter litigated the instant suit as an indigent.[22]

Aggrieved, MRII and Tompar appealed[23] to the CA, this time claiming, among others,
that: (a) the jurisdiction over the case lies before the NLRC as the same is a monetary
dispute arising from an employer-employee relationship; and (b) Germo had no legal
personality to pursue the instant case since he only signed the TCA as a representative
of another entity.[24]

The CA Ruling

In a Decision[25] dated August 8, 2016, the CA affirmed the RTC ruling.[26] It held that
Germo had sufficiently proven through the required quantum of evidence that: (a) he
and MRII, through Tompar, entered into a TCA and thus, the provisions thereof are
binding between them; (b) MRII's contract with ICTSI was realized through Germo's
efforts; and (c) MRII failed to pay Germo the commissions due to him pursuant to the
TCA and the ICTSI contract.[27]

Anent MRII and Tompar's additional arguments, the CA held that the same constitutes a
new case theory, which cannot be introduced for the first time on appeal. The CA
further pointed out that such new theory is directly contradictory to the judicial
admissions they made in their Answer,[28] which are already binding on them.[29]

Undaunted, MRII and Tompar moved for reconsideration,[30] but the same was denied in
a Resolution[31] dated October 14, 2016; hence, this petition.[32]

The Issue Before the Court

The issue for the Court's resolution is whether or not the CA correctly upheld MRII and
Tompar's solidary liability to Germo.

The Court's Ruling

The petition is partly meritorious.

In the instant petition, MRII and Tompar insist, among others that: (a) the regular courts
have no jurisdiction over the case as the present dispute involves an employment
dispute cognizable by the NLRC; and (b) Germo had no legal personality to pursue the
case as he signed the TCA not in his personal capacity, but as a representative of
another entity.[33]

Such insistence is untenable.

As aptly pointed out by the CA, the foregoing constitutes a new theory raised for the
first time on appeal, considering that in their Answer[34] before the RTC, MRII and
Tompar admitted, inter alia, the: (a) lack of employer-employee relationship between
MRII and Germo as the latter was hired as a mere consultant; and (b) genuineness,
authenticity, and due execution of the TCA, among other documents proving Germo's
claims.[35] "As a rule, a party who deliberately adopts a certain theory upon which the 
case is tried and decided by the lower court, will not be permitted to change theory on
appeal. Points of law, theories, issues and arguments not brought to the attention of the
lower court need not be, and ordinarily will not be, considered by a reviewing court, as
these cannot be raised for the first time at such late stage. It would be unfair to the
adverse party who would have no opportunity to present further evidence material to
the new theory, which it could have done had it been aware of it at the time of the
hearing before the trial court."[36] While this rule admits of an exception,[37] such is not
applicable in this case.

More importantly, MRII and Tompar's statements in their Answer constitute judicial
admissions,[38] which are legally binding on them.[39] Case law instructs that even if such
judicial admissions place a party at a disadvantageous position, he may not be allowed
to rescind them unilaterally and that he must assume the consequences of such
disadvantage,[40] as in this case.

As to the merits of the case, the courts a quo correctly found that: (a)  Germo entered
into a valid and binding TCA with MRII where he was engaged as a marketing
consultant; (b) aside from the P5,000.00 monthly allowance, Germo was going to be
paid on a purely commission basis; (c) during the effectivity of the TCA and in the
performance of his duties as marketing consultant of MRII, Germo successfully brokered
MRII's contract of services with ICTSI, obviously resulting in revenues in MRII's
favor; (d) despite the foregoing and demands from Germo, MRII refused to pay Germo's
rightful commission fees; and (e) MRII's refusal to pay Germo resulted – or at the very
least, contributed to – Germo's financial hardships. In light of the foregoing, the courts a
quo correctly found MRII liable to Germo for the various monetary obligations as stated
in their respective rulings. Time and again, it has been consistently held that the factual
findings of the trial court, especially when affirmed by the CA, deserve great weight and
respect and will not be disturbed on appeal unless it appears that there are facts of
weight and substance that were overlooked or misinterpreted and that would materially
affect the disposition of the case;[41] none of which are present insofar as this matter is
concerned.

Be that as it may, the Court finds that the courts a quo erred in concluding that Tompar,
in his capacity as then-President/CEO of MRII, should be held solidarily liable with MRII
for the latter's obligations to Germo. It is a basic rule that a corporation is a juridical
entity which is vested with legal and personality separate and distinct from those acting
for and in behalf of, and from the people comprising it. As a general rule, directors,
officers, or employees of a corporation cannot be held personally liable for the
obligations incurred by the corporation, unless it can be shown that such
director/officer/employee is guilty of negligence or bad faith, and that the same was
clearly and convincingly proven. Thus, before a director or officer of a corporation can
be held personally liable for corporate obligations, the following requisites must
concur: (1) the complainant must allege in the complaint that the director or officer
assented to patently unlawful acts of the corporation, or that the officer was guilty of
gross negligence or bad faith; and (2) the complainant must clearly and convincingly
prove such unlawful acts, negligence or bad faith.[42] In this case, Tompar's assent to
patently unlawful acts of the MRII or that his acts were tainted by gross negligence or
bad faith was not alleged in Germo's complaint, much less proven in the course of trial.
Therefore, the deletion of Tompar's solidary liability with MRII is in order.

Further, the Court deems it proper to adjust the interests imposed on the monetary
awards in Germo's favor. To recapitulate, he was awarded the amounts of
P4,499,412.84 representing his unpaid commissions from February 2007 to March 2012,
P100,000.00 as moral damages, P100,000.00 as exemplary damages, and P50,000.00 as
attorney's fees. Pursuant to prevailing jurisprudence, his unpaid commissions shall earn
legal interest at the rate of twelve percent (12%) per annum from judicial
demand, i.e., the filing of the complaint on February 28, 2011 until June 30, 2013, and
thereafter, at the rate of six percent (6%) per annum from July 1, 2013 until the finality
of this Decision. Thereafter, all monetary awards due to him shall then earn legal
interest at the rate of six percent (6%) per annum from the finality of this ruling until
fully paid.[43]

Finally, since Germo litigated the instant suit as an indigent party as defined in Section
21, Rule 3[44] of the Rules of Court, it is only proper that the appropriate filing fees be
considered as a lien on the monetary awards due to him, pursuant to the second
paragraph of Section 19, Rule 141[45] of the same Rules.

WHEREFORE, the petition is PARTLY GRANTED. The Decision dated August 8, 2016 and

the Resolution dated October 14, 2016 of the Court of Appeals in CA-G.R. CV No. 104431
are hereby AFFIRMED with MODIFICATION, DELETING petitioner Antonio Tompar's
solidary liability with petitioner Mactan Rock Industries, Inc. (MRII). Accordingly, MRII is
solely liable to respondent Benfrei S. Germo (Germo) for the following
amounts: (a) P4,499,412.84 representing his unpaid commissions from February 2007 to
March 2012 with legal interest at the rate of twelve percent (12%) per annum from
judicial demand, i.e., the filing of the complaint on February 28, 2011 until June 30,
2013, and thereafter, at the rate of six percent (6%) per annum from July 1, 2013 until
the finality of this Decision; (b) P100,000.00 as moral damages; (c) P100,000.00 as
exemplary damages; and (d) P50,000.00 as attorney's fees. The total monetary awards
shall then earn legal interest at the rate of six percent (6%) per annum from the finality
of this ruling until fully paid.

Finally, let the appropriate filing fees be considered as a lien on the monetary awards
due to Germo, who litigated the instant case as an indigent party, in accordance with
Section 19, Rule 141 of the Rules of Court.

SO ORDERED.

THIRD DIVISION
[ G.R. No. 200401, January 17, 2018 ]
METRO RAIL TRANSIT DEVELOPMENT CORPORATION, PETITIONER,
V. GAMMON PHILIPPINES, INC., RESPONDENT.
 DECISION

LEONEN, J.:

This resolves a Petition for Review on Certiorari[1] assailing the Court of Appeals

October 14, 2011 Decision[2] and January 25, 2012 Resolution[3] in CA-GR. SP No. 98569.
The assailed Decision affirmed the Construction Industry Arbitration Commission (CIAC)
Decision,[4] which awarded Gammon Philippines, Inc. (Gammon) its monetary claims for
lost profits and reimbursements for engineering services, design work, and site de-
watering and clean up, due to breach of contract.[5] The assailed Resolution denied
Metro Rail Transit Development Corporation's (MRT) Motion for Reconsideration. [6]

This case involves MRT's MRT-3 North Triangle Description Project (Project), covering
54 hectares of land, out of which 16 hectares were allotted for a commercial center. Half
of the commercial center would be used for a podium structure (Podium), which was
meant to provide the structure for the Project's Leasable Retail Development and to serve
as the maintenance depot of the rail transit system.[7]

Parsons Interpro JV (Parsons) was the Management Team authorized to oversee the
construction’s execution.[8]

On April 30, 1997, Gammon received from Parsons an invitation to bid for the complete
concrete works of the Podium. The scope of the work involved supplying the necessary
materials, labor, plants, tools, equipment, facilities, supervision, and services for the
construction of Level 1 to Level 4 of the Podium. [9]

On May 30, 1997, Gammon submitted three (3) separate bids and several clarifications
on certain provisions of the Instruction to Bidders and the General Conditions of
Contract.[10]

Gammon won the bid. On August 27, 1997, Parsons issued a Letter of Award and Notice
to Proceed (First Notice to Proceed) to Gammon.[11] It was accompanied by the formal
contract documents. The First Notice to Proceed stated:

We are pleased to inform [you] that you have been awarded the work on the construction
of the Podium Structure for the MRT-3 EDSA-North Triangle Development Project. The
formal contract document, which is the product of a series of discussions and
negotiation[,] is herewith attached for your signature.
The Work includes the furnishing of labor, supervision, materials, plant, equipment and
other facilities and appurtenances necessary to perform all the works in accordance with
contract document, approved drawings, specifications and your over-all Breakdown of
Lump Sum Bid (marked Exhibit ''A") amounting to ONE BILLION FOUR HUNDRED
ONE MILLION SIX HUNDRED SEVENTY[-]TWO THOUSAND NINETY[-] FIVE
PESOS (P1,401,672,095.00). It is understood that due to the existing squatters in the
Area, the work shall be divided in two (2) separate geographical areas designated as
Phase I and Phase II - but shall be treated as one contract and still totaling to
P1,401,672,095.00. Further, this award is predicated on the commitments contained in
the attached comfort letter (marked Exhibit "B") issued by Gammon Construction
Limited, your associate company overseas and receipt of the duly signed letter from the
Chief Executive of Gammon Construction Limited that is expected within seven days
from the date hereof.
....

You may, therefore, proceed with the work at Phase I starting seven (7) days from receipt
of this Notice or from the time that Site is dewatered and cleaned up, whichever is the
later. It is further understood that Gammon agrees to continue Phase II at the price stated
above and the starting time thereof will depend on the completion by others of the
footings in time to allow construction of the superstructure in accordance with Gammon's
Tender Programme dated 13 August 1997.
....

Please signify your concurrence by signing the appropriate space below and in the
accompanying contract documents and return to Parsons-Interpro the originals. We will
send to you a complete set of documents as soon as it is signed by the Owner. [12]

In a Letter dated September 2, 1997 (First Letter), Gammon signed and returned the First
Notice to Proceed without the contract documents.[13] The First Letter stated:

MRT 3 North Triangle Development

Superstructure Contract
Letter of Award/Notice to Proceed

We return herewith the original copy of the above[-]mentioned letter which we have
countersigned dated 28 August '97. (Please note that Mr. Salagdo's signature is missing).

The contract documentation submitted under cover of your letter is being reviewed now,
and should be signed and returned to you tomorrow. The Letter of Comfort has now been
signed by the Chief Executive of Gammon Construction Ltd., and is being returned this
week.
We confirm that we mobilised resources to site on Friday, 29 August '97 to pump out
floodwater. Cleaning up of mud and debris will follow on this week.

During this mobilisation phase, our Site Manager is Mr. Ferdinand Fabro who we
introduced to you during the Preconstruction meeting last Thursday, 28 August '97.

We enclose herewith a copy of our Mobilisation Programme dated 1 September '97 (4 x

A3 sheets) which includes Design activities, Mobilisation activities, initial Construction
activities, key plant and formwork items.

Our Design Team have now relocated to our office in Makati, and are continuing with
preparation of shop drawings of all slabs.

We will submit a project organisation chart shortly but in the meantime, we confirm that
the following senior [Gammon Philippines, Inc.] staff are now allocated to the project:

....

As soon as layout of temporary facilities has been agreed with you, establishment will
commence in the very limited space allocated ...

We have today received ... drawings marked "For Construction", and unless we hear from
you to the contrary, we will proceed to procure materials for, plan and construct walls
and columns based on these drawings. However, please note that the 3 sheets of
construction notes have not been issued. We therefore request issue of these drawings. In
addition, there are fifteen 'Requests for Information' (RFIs) which were forwarded to you
yesterday - these cover queries which affect both design of slabs and construction of
walls, columns and beams. In particular, we urgently need instructions to clarify the
reinforcement specification generally, and connectors/splicing of column reinforcement.

Finally, our Performance Bond and Advance Payment Bond are being prepared now - we
hope to submit these by end of this week.[14]

In a Letter dated September 3, 1997 (Second Letter), Gammon transmitted to Parsons a

signed Letter of Comfort to guarantee its obligations in the Project.[15]

However, in a Letter dated September 8, 1997, MRT wrote Gammon that it would need
one (1) or two (2) weeks before it could issue the latter the Formal Notice to Proceed: [16]

Re: Contract for LRT3 North Triangle Podium Structure

Gentlemen:
Due to current developments in the Philippines' foreign exchange rate and the
concomitant soaring interest rates, Metro Rail Transit Development Corp. (MRTDC) will
need a week or two to estimate the possible effects and repercussions on the
above[-]mentioned project before MRTDC, through the Chairman of the Board, will
issue the formal Notice to proceed to your company. When these possible effects and
repercussions are analysed and decided upon by our Board, hopefully within the week,
we shall notify you at once.[17]

On September 9, 1997, Gammon transmitted the contract documents to Parsons. [18]

In a facsimile transmission sent on the same day, Parsons directed Gammon "to hold any
further mobilization activities."[19]

In a Letter dated September 10, 1997, Gammon stated:

''A NOTICE OF AWARD & NOTICE TO PROCEED addressed to Gammon Philippines

Inc. (GPI) was issued by your Project Managers, Parsons Interpro JV dated 27th August
1997 and has been signed, accepted and an original returned to them by our authorised
people, therefore a contract exists between MTRDC and GPI.

The formal contract document has been issued to us for final review and has been signed
and returned to your Project Managers.

In accordance with the NOA & NTP Gammon Construction Ltd. have provided you with
the required letter of guarantee in respect of fulfillment by GCL of GPI's obligations
under the Contract in the event of GPI's insolvency.

By the [Notice of Award] & [Notice to Proceed] [Gammon] were (sic) required to
proceed with the work starting seven days from receipt of that Notice and it was agreed
we would commence dewatering of the flooded site and clean up immediately, under a
Change Order, and that the construction period would run from the date of achieving the
clean up of the site. It was anticipated that these clean up works would take 11 days.

We are therefore bound by these commitments."[20]

On September 11, 1997, Gammon sent Parsons a facsimile to confirm if all requirements
in the contract documents were temporarily suspended pending the clarification of the
scope and programming of the Project.[21]

In a facsimile transmission dated September 12, 1997, Parsons confirmed "the temporary
suspension of all [the] requirements under the contract except the re-design of the project
floor slabs and the site de-watering and clean up."[22]
Thereafter, MRT decided to downscale the Podium's construction and to proceed with the
Project's conceptual redesign.[23]

Upon Parson's request order, Gammon studied and discussed with MRT the best option
to phase the work.[24]

On November 7, 1997, Gammon presented to MRT the sequencing and phasing of the
work.[25]

MRT decided to adopt Gammon's recommendation to construct the Podium up to Level 2

only. [26]

Due to these revisions on the scope of work, MRT also decided to re design the Level 2
slab, which it perceived would be exposed to more load stresses from prolonged exposure
to elements and the weight of heavy construction equipment. MRT asked Gammon to re-
design.[27]

On February 18, 1998, Parsons issued Gammon a Notice of Award and Notice to Proceed
(Second Notice to Proceed) for the engineering services based on the redesigned plan.
[28]
 The Second Notice to Proceed stated:

This Notice to Proceed is for the work to be rolled-in into a Lump Sum Contract. In the
event that this contract will not be finalized in the near future, any and all expenses that
are necessary and directly incurred by you in connection therewith shall be reimbursed
based on actual cost plus a negotiated fee.[29]

Gammon signed the Second Notice to Proceed on March 11, 1998 with qualification:

The Contractor refers to the Notice of Award and Notice to Proceed dated 27 August
1997, and understands that this Notice to Proceed effectively lifts the suspension of work
notified in MRTDC letter dated 8 September 1997, in respect of the design activities only
for all of the Level 2 slab and that part of the Level 3 slab over the Depot Maintenance
Shop and office area . . . ; and that the existing Notice of Award dated 27 August 1997 is
still valid.[30]

On March 3, 1998, Gammon submitted to Parsons a Revised Lump Sum Price Proposal
of P1,044,055,102.00[31] for the construction of the Podium up to Level 2, including the
design of the floor slab at Level 2.[32] At this time, Gammon had already started its
engineering services pursuant to the Second Notice to Proceed.[33]

In its Letter dated March 6, 1998, Gammon sent Parsons a breakdown of the Revised
Extra Contract Expenses it allegedly incurred in connection with the works' suspension
amounting to P17,241,505.16. [34]
In its Letter dated March 11, 1998, Gammon notified Parsons of its revised Breakdown of
Lump Sum Price worth P1,062,986,607.00.[35]

On April 2, 1998, MRT issued in favor of Gammon another Notice of Award and Notice
to Proceed (Third Notice to Proceed).[36]

In its Letter dated April 8, 1998, Gammon acknowledged receipt of the Third Notice to
Proceed and requested clarification of certain items.[37]

On April 22, 1998, Parsons wrote Gammon, stating that "since the building ha[d] been
revised . . . structural changes [would] be needed and quantities may change." [38]

On April 29, 1998, Gammon wrote Parsons, confirming its readiness to start mobilization
and requesting clarification of "urgent issues requiring resolution."[39]

In its Letter dated May 7, 1998, Parsons informed Gammon that MRT was temporarily
rescinding the Third Notice to Proceed, noting that it remained unaccepted by Gammon.
[40]

On June 11, 1998, Gammon received from Parsons the Contract for the Construction and
Development of the Superstructure, MRT-3 North Triangle - Amended Notice to Proceed
dated June 10, 1998 (Fourth Notice to Proceed).[41]

The terms of the Fourth Notice to Proceed were different from those of the First and the
Third Notices to Proceed. The Fourth Notice to Proceed also expressly cancelled the First
and Third Notices to Proceed.[42]

On June 19, 1998, Gammon qualifiedly accepted the Fourth Notice to Proceed.[43]

MRT treated Gammon's qualified acceptance as a new offer. In a Letter dated June 22,
1998, MRT rejected Gammon's qualified acceptance and informed Gammon that the
contract would be awarded instead to Filsystems if Gammon would not accept the Fourth
Notice to Proceed within five (5) days.[44]

In a Letter dated July 8, 1998, Gammon wrote MRT, acknowledging the latter's intent to
grant the Fourth Notice to Proceed to another party despite having granted the First
Notice to Proceed to Gammon. Thus, it notified MRT of its claims for reimbursement for
costs, losses, charges, damages, and expenses it had incurred due to the rapid
mobilization program in response to MRT's additional work instructions, suspension
order, ongoing discussions, and the consequences of its award to another party. [45]

In a Letter dated July 15, 1998, MRT expressed its disagreement with Gammon and its
amenability to discussing claims for reimbursement.[46]
In a Letter dated July 23, 1998, Gammon notified Parsons of its claim for payment of all
costs, damages, and expenses due to MRT's suspension order and the consequences of its
award of the contract to another party.[47]

In a Letter dated August 7, 1998, MRT informed Gammon that it was willing to
reimburse Gammon for its cost in participating in the bid amounting to about 5% of
Gammon's total claim of more or less P121,000,000.00.[48]

In a Letter dated August 11, 1998, Gammon replied that MRT's offer was not enough to
cover the expenses it had incurred for the Project and that it was willing to send MRT
additional information necessary for the evaluation of its claims.[49]

In a Letter dated August 24, 1998, Parsons requested Gammon for additional supporting
documents to its claims.[50]

Gammon wrote several communications to MRT to follow up on its evaluation request. [51]

On July 1, 1999, Gammon filed a Notice of Claim before CIAC against MRT. [52]

On August 18, 1999, CIAC issued an Order directing MRT to file its Answer and submit
the names of its nominees to the Arbitral Tribunal.[53]

MRT filed a Motion to Dismiss, arguing that CIAC had no jurisdiction to arbitrate the
dispute. This Motion was denied and this matter was elevated to this Court.
[54]
 In Gammon v. Metro Rail Transit Development Corporation,[55] this Court held that
CIAC had jurisdiction over the case.[56]

Thus, on October 19, 2006, MRT filed its Answer with Compulsory Counterclaim,
[57]
 paragraph 77 of which read:

77. To begin with, MRTDC is willing to pay GAMMON the total amount of
P5,493,639.27 representing the sum of P4,821,261.91 and P672,377.36, which comprise
GAMMON's claim for cost of the engineering and design services and site de-watering
and clean-up works, respectively.[58]

On November 2, 2006, the Arbital Tribunal was formed. On December 11, 2006, a
preliminary conference was set to finalize the Terms of Reference, which would regulate
the conduct of the proceedings. The parties agreed that they would simultaneously submit
their witnesses' affidavits on January 19, 2007.[59]

On March 27, 2007, CIAC ruled:[60]

WHEREFORE, judgment is hereby rendered and AWARD is made on the monetary

claims of Claimant as follows:
 P4,821,261.9 for Engineering services design work
672,377.36 for site de-watering and clean up
   
P5,493,639.27 Total claim under issue #1
   
P53,149,330.35 as a reasonable estimate of the profit it had lost by reason
of Respondent's breach of contract in awarding the construction to a different
contractor.
   
P58,642,969.62 - TOTAL DUE THE CLAIMANT

SO ORDERED.[61]

MRT assailed the CIAC Decision before the Court of Appeals. However, the Court of
Appeals affirmed the CIAC Decision:

WHEREFORE, premises considered, the instant petition IS DENIED. The assailed order
of the CIAC dated March 8, 2007 is AFFIRMED.[62]

Thus, MRT filed the instant Petition for Review.[63] It argues that Gammon was not
entitled to CIAC's award considering that there is no perfected contract between MRT
and Gammon[64] and that Gammon's claim for lost profits was based only on an
unsubstantiated and self-serving assertion of its employee.[65] Additionally, it contends
that the claim for reimbursements for engineering services, design work, site de-watering,
and clean-up was not supported by official receipts. It also avers that it is not estopped
from contradicting its alleged judicial admission of liability for reimbursements in the
amount of P5,493,639.27,[66] and further states that it is entitled to attorney's fees.[67]

Gammon filed its Comment,[68] insisting that there is a perfected contract between them.
[69]
 It argues that this Court determined the perfection of the contract in Gammon v. Metro
Rail Transit Development Corporation,[70] and thus, the doctrine of the law of the case
applies. [71] Gammon asserts that its claim for lost profits was sufficiently
substantiated[72] and that it has proven its entitlement to the reimbursements.[73] It avers
that damages may be proved not only by official receipts, but also through other
documentary evidence, such as invoices and debit notes.[74]

Gammon further claims that MRT is bound by its implied admission of its liability for the
reimbursements in its Answer with Compulsory Counterclaim. It points out that MRT
mentioned the exact amount it was willing to pay and that it did not state that it would
pay only the proved amount.[75] It argues that MRT is raising factual issues and that
CIAC's factual findings on the existence of the contract and the amount of damages ought
to be respected.[76]
In its Reply,[77] MRT argues that the doctrine of the law of the case does not apply as the
issue in Gammon was CIAC's jurisdiction and not the existence of the contract.[78] It
reiterates that no contract was perfected because MRT withdrew its offer to Gammon
before Gammon returned the contract documents.[79] Thus, Gammon's acceptance only
came after the offer had been withdrawn and nothing that could have been accepted
remained.[80]

MRT reasons that the loss of profits was not proven with a reasonable degree of certainty
because Gammon's witness is not an expert witness.[81] Moreover, it emphasizes that the
finding in National Housing Authority v. First Limited Construction Corporation[82] of
10% profit as the standard practice in the construction industry is merely obiter dictum,
and thus, cannot operate as a precedent for construction-related cases. [83]

MRT further claims that invoices and debit memos are not sufficient proof of payment to
entitle Gammon to reimbursements because an invoice is a mere detailed statement of the
items and their prices and charges, while a debit memo is only an advice to the receiver
of an outstanding debt.[84]

MRT avers that the alleged admission in its Answer with Compulsory Counterclaim
should be construed as extending only to those "supported by official receipts."[85] It
reiterates that "[j]udicial admissions cannot supplant the requirements of law ... that
actual or compensatory damages ... must be duly proven."[86] Moreover, MRT asserts that
its offer to pay is not an admission of liability but only "an attempt to settle the issue and
avoid litigation." [87] It argues that the exact amount of P5,493,639.27 was mentioned in
the Answer with Compulsory Counterclaim as it was the amount claimed by Gammon,
which MRT offered to pay, if proven.[88]

It further asserts that the findings of CIAC and of the Court of Appeals are all contrary to
evidence on record or are premised on speculation, surmises, and conjectures, and thus,
are serious errors of law properly re-examinable by this Court.[89]

For this Court's resolution are the following issues:

First, whether or not there is a perfected contract between petitioner Metro Rail Transit
Development Corporation and respondent Gammon Philippines, Inc.;

Second, whether the doctrine of the law of the case in Gammon v. Metro Rail Transit
Development Corporation[90] applies;

Third, whether or not petitioner Metro Rail Transit Development Corporation is bound by
its allegation in its Answer with Compulsory Counterclaim that it was "willing to pay
GAMMON the total amount of P5,493,639.27 representing the sum of P4,821,261.91 and
P672,377.36, which comprise GAMMON's claim for cost of the engineering and design
services and site de-watering and clean-up works, respectively";[91] and

Finally, whether or not respondent Gammon Philippines, Inc.'s claims for actual
damages, reimbursement of amounts, and lost profits were sufficiently proven.

This Court denies the Petition.

CIAC was created under Executive Order No. 1008[92] to establish an arbitral machinery
that will settle expeditiously problems arising from, or connected with, contracts in the
construction industry.[93]

Its jurisdiction includes construction disputes between or among parties to an arbitration

agreement, or those who are otherwise bound by the latter, directly or by reference.
[94]
 Thus, any project owner, contractor, subcontractor, fabricator, or project manager of a
construction project who is bound by an arbitration agreement in a construction contract
is under CIAC's jurisdiction in case of any dispute.[95]

CIAC is a quasi-judicial body exercising quasi-judicial powers.

A quasi-judicial agency is a government body, not part of the judiciary or the legislative
branch, which adjudicates disputes and creates rules which affect private parties' rights.
[96]
 It is created by an enabling statute, and thus, its existence continues beyond the
resolution of a dispute and is independent from the will of the parties. Its powers are
limited to those expressly granted or necessarily implied in the enabling law.[97]

Quasi-judicial or administrative adjudicatory power has been defined as the power: "(1)
to hear and determine questions of fact to which legislative policy is to apply, and (2) to
decide in accordance with the standards laid down by the law itself in enforcing and
administering the same law."[98]

Arbitration under a quasi-judicial body is similar to commercial arbitration in that its

factual findings are generally accorded respect and finality.

However, commercial arbitration is conducted by ad-hoc bodies created by stipulation of

parties for the purpose of settling disputes concerning their private or proprietary
interests. In general, the findings in commercial arbitration are respected to uphold the
autonomy of arbitral awards.[99]

On the other hand, quasi-judicial agencies were created for a speedier resolution of
controversies on matters of state interest that require specialized knowledge and
expertise.[100]
CIAC exercises quasi-judicial powers over arbitration disputes concerning construction
contracts. Thus, its findings are accorded respect because it comes with the presumption
that CIAC is technically proficient in efficiently and speedily resolving conflicts in the
construction industry.

Thus, under the Construction Industry Arbitration Law, arbitral awards are binding and
shall be final and unappealable, except on pure questions of law:

Section 19. Finality of Awards. — The arbitral award shall be binding upon the parties. It
shall be final and inappealable except on questions of law which shall be appealable to
the Supreme Court.

Initially, CIAC decisions are appealable only to this Court. However, when the Rules of
Court were enacted, appeals from CIAC decisions became appealable to the Court of
Appeals under Rule 43:[101]

Section 1. Scope. — This Rule shall apply to appeals from judgments or final orders of
the Court of Tax Appeals and from awards, judgments, final orders or resolutions of or
authorized by any quasi-judicial agency in the exercise of its quasi-judicial functions.
Among these agencies are the Civil Service Commission, Central Board of Assessment
Appeals, Securities and Exchange Commission, Office of the President, Land
Registration Authority, Social Security Commission, Civil Aeronautics Board, Bureau of
Patents, Trademarks and Technology Transfer, National Electrification Administration,
Energy Regulatory Board, National Telecommunications Commission, Department of
Agrarian Reform under Republic Act No. 6657, Government Service Insurance System,
Employees Compensation Commission, Agricultural Inventions Board, Insurance
Commission, Philippine Atomic Energy Commission, Board of Investments,
Construction Industry Arbitration Commission, and voluntary arbitrators authorized by
law.

Section 2. Cases Not Covered. — This Rule shall not apply to judgments or final orders
issued under the Labor Code of the Philippines.

While Rule 43 petitions may pertain to questions of fact, questions of law, or both
questions of law and fact, it has been established that factual findings of CIAC may not
be reviewed on appeal.[102] In CE Construction v. Araneta,[103] this Court explained that
appeals from CIAC may only raise questions of law:

This is not to say that factual findings of CIAC arbitral tribunals may now be assailed
before the Court of Appeals. Section 3's statement "whether the appeal involves questions
of fact, of law, or mixed questions of fact and law" merely recognizes variances in the
disparate modes of appeal that Rule 43 standardizes: that there were those that enabled
questions of fact, there were those that enabled questions of law, and there were those
that enabled mixed questions fact and law. Rule 43 emphasizes that though there may
have been variances, all appeals under its scope are to be brought before the Court of
Appeals. However, in keeping with the Construction Industry Arbitration Law, any
appeal from CIAC Arbitral Tribunals must remain limited to questions of law.

Hi-Precision Steel Center, Inc. v. Lim Kim Steel Builders, Inc. explained the wisdom
underlying the limitation of appeals to pure questions of law:

Section 19 makes it crystal clear that questions of fact cannot be raised in proceedings
before the Supreme Court — which is not a trier of facts — in respect of an arbitral
award rendered under the aegis of the CIAC. Consideration of the animating purpose of
voluntary arbitration in general, and arbitration under the aegis of the CIAC in particular,
requires us to apply rigorously the above principle embodied in Section 19 that the
Arbitral Tribunal's findings of fact shall be final and unappealable.

Voluntary arbitration involves the reference of a dispute to an impartial body, the

members of which are chosen by the parties themselves, which parties freely consent in
advance to abide by the arbitral award issued after proceedings where both parties had the
opportunity to be heard. The basic objective is to provide a speedy and inexpensive
method of settling disputes by allowing the parties to avoid the formalities, delay,
expense and aggravation which commonly accompany ordinary litigation, especially
litigation which goes through the entire hierarchy of courts. [The Construction Industry
Arbitration Law] created an arbitration facility to which the construction industry in the
Philippines can have recourse. The [Construction Industry Arbitration Law] was enacted
to encourage the early and expeditious settlement of disputes in the construction industry,
a public policy the implementation of which is necessary and important for the realization
of national development goals.

Consistent with this restrictive approach, this Court is duty-bound to be extremely

watchful and to ensure that an appeal does not become an ingenious means for
undermining the integrity of arbitration or for conveniently setting aside the conclusions
arbitral processes make. An appeal is not an artifice for the parties to undermine the
process they voluntarily elected to engage in. To prevent this Court from being a party to
such perversion, this Court's primordial inclination must be to uphold the factual findings
of arbitral tribunals:

Aware of the objective of voluntary arbitration in the labor field, in the construction
industry, and in any other area for that matter, the Court will not assist one or the other or
even both parties in any effort to subvert or defeat that objective for their private
purposes. The Court will not review the factual findings of an arbitral tribunal upon the
artful allegation that such body had "misapprehended the facts" and will not pass upon
issues which are, at bottom, issues of fact, no matter how cleverly disguised they might
be as "legal questions." The parties here had recourse to arbitration and chose the
arbitrators themselves; they must have had confidence in such arbitrators. The Court will
not, therefore, permit the parties to relitigate before it the issues of facts previously
presented and argued before the Arbitral Tribunal, save only where a very clear showing
is made that, in reaching its factual conclusions, the Arbitral Tribunal committed an error
so egregious and hurtful to one party as to constitute a grave abuse of discretion resulting
in lack or loss of jurisdiction. Prototypical examples would be factual conclusions of the
Tribunal which resulted in deprivation of one or the other party of a fair opportunity to
present its position before the Arbitral Tribunal, and an award obtained through fraud or
the corruption of arbitrators. Any other, more relaxed, rule would result in setting at
naught the basic objective of a voluntary arbitration and would reduce arbitration to a
largely inutile institution.

Thus, even as exceptions to the highly restrictive nature of appeals may be contemplated,
these exceptions are only on the narrowest of grounds. Factual findings of CIAC arbitral
tribunals may be revisited not merely because arbitral tribunals may have erred, not even
on the already exceptional grounds traditionally available in Rule 45 Petitions. Rather,
factual findings may be reviewed only in cases where the CIAC arbitral tribunals
conducted their affairs in a haphazard, immodest manner that the most basic integrity of
the arbitral process was imperiled.[104] (Emphasis in the original, citations omitted)

Thus, CIAC's factual findings on construction disputes are final, conclusive, and not
reviewable by this Court on appeal. The only exceptions are when:

(1) [T]he award was procured by corruption, fraud or other undue means; (2) there was
evident partiality or corruption of the arbitrators or of any of them; (3) the arbitrators
were guilty of misconduct in refusing to postpone the hearing upon sufficient cause
shown, or in refusing to hear evidence pertinent and material to the controversy; (4) one
or more of the arbitrators were disqualified to act as such under section nine of Republic
Act No. 876 and willfully refrained from disclosing such disqualifications or of any other
misbehavior by which the rights of any party have been materially prejudiced; or (5) the
arbitrators exceeded their powers, or so imperfectly executed them, that a mutual, final
and definite award upon the subject matter submitted to them was not made.[105] (Citation
omitted)

Necessarily, before petitioner may raise any question of fact, it must prove that the above
circumstances exist in the case at bar.

This Court rules that there is a perfected contract between MRT and Gammon.

MRT argues that there was no perfected contract between the parties as Gammon only
accepted MRT's offer after MRT had already revoked it.[106] MRT claims that it withdrew
its offer to Gammon in its September 8, 1997 Letter, when it suspended the Project to
review the foreign exchange rates and interest rates.[107] It emphasizes that while Gammon
had already then returned the First Notice to Proceed, it did not return the contract
documents until September 12, 1997.[108] By then, MRT had already withdrawn the First
Notice to Proceed, and the parties were already renegotiating the contract's cause and
object.[109]

On the other hand, Gammon maintains that there was a perfected contract between the
parties. It insists that MRT did not withdraw or modify its offer before Gammon signed
and returned the First Notice to Proceed and the contract documents. It claims that the
contract was not cancelled and was only temporarily and partially suspended, and this did
not affect its perfection. [110]

The Court of Appeals affirmed CIAC 's finding that the contract was perfected when the
contract documents were returned to MRT on September 9, 1997. It found that the
contract was merely suspended and not terminated when MRT was studying the effects
of the foreign exchange rates and interests on the Project.[111] Moreover, it noted that
MRT found it necessary to expressly cancel the First Notice to Proceed, implying that a
contract was perfected.[112]

This Court rules that there is a perfected contract between the parties. Article 1305 of the
Civil Code states:

Article 1305. A contract is a meeting of minds between two persons whereby one binds
himself, with respect to the other, to give something or to render some service.

Article 1315. Contracts are perfected by mere consent, and from that moment the parties
are bound not only to the fulfillment of what has been expressly stipulated but also to all
the consequences which, according to their nature, may be in keeping with good faith,
usage and law.

The requisites of a valid contract are provided for in Article 1318 of the Civil Code:

(1) Consent of the contracting parties;

(2) Object certain which is the subject matter of the contract;
(3) Cause of the obligation which is established.

A contract is perfected when both parties have consented to the object and cause of the
contract. There is consent when the offer of one party is absolutely accepted by the other
party.[113] The acceptance of the other party may be express or implied.[114] However, the
offering party may impose the time, place, and manner of acceptance by the other party,
and the other party must comply.[115]
Thus, there are three (3) stages in a contract: negotiation, perfection, and consummation.

Negotiation refers to the time the parties signify interest in the contract up until the time
the parties agree on its terms and conditions. The perfection of the contract occurs when
there is a meeting of the minds of the parties such that there is a concurrence of offer and
acceptance, and all the essential elements of the contract—consent, object and cause—are
present. The consummation of the contract covers the period when the parties perform
their obligations in the contract until it is finished or extinguished.[116]

To determine when the contract was perfected, the acceptance of the offer must be
unqualified, unconditional, and made known to the offeror.[117] Before knowing of the
acceptance, the offeror may withdraw the offer.[118] Moreover, if the offeror imposes the
manner of acceptance to be done by the offerree, the offerree must accept it in that
manner for the contract to be binding.[119] If the offeree accepts the offer in a different
manner, it is not effective, but constitutes a counter-offer, which the offeror may accept
or reject.[120] Thus, in Malbarosa v. Court of Appeals:[121]

Under Article 1319 of the New Civil Code, the consent by a party is manifested by the
meeting of the offer and the acceptance upon the thing and the cause which are to
constitute the contract. An offer may be reached at any time until it is accepted. An offer
that is not accepted does not give rise to a consent. The contract does not come into
existence. To produce a contract, there must be acceptance of the offer which may be
express or implied but must not qualify the terms of the offer. The acceptance must be
absolute, unconditional and without variance of any sort from the offer.

The acceptance of an offer must be made known to the offeror. Unless the offeror knows
of the acceptance, there is no meeting of the minds of the parties, no real concurrence of
offer and acceptance. The offeror may withdraw its offer and revoke the same before
acceptance thereof by the offeree. The contract is perfected only from the time an
acceptance of an offer is made known to the offeror. If an offeror prescribes the exclusive
manner in which acceptance of his offer shall be indicated by the offeree, an acceptance
of the offer in the manner prescribed will bind the offeror. On the other hand, an attempt
on the part of the offeree to accept the offer in a different manner does not bind the
offeror as the absence of the meeting of the minds on the altered type of acceptance. An
offer made inter praesentes must be accepted immediately. If the parties intended that
there should be an express acceptance, the contract will be perfected only upon
knowledge by the offeror of the express acceptance by the offeree of the offer. An
acceptance which is not made in the manner prescribed by the offeror is not effective but
constitutes a counter-offer which the offeror may accept or reject. The contract is not
perfected if the offeror revokes or withdraws its offer and the revocation or withdrawal of
the offeror is the first to reach the offeree. The acceptance by the offeree of the offer after
knowledge of the revocation or withdrawal of the offer is inefficacious. The termination
of the contract when the negotiations of the parties terminate and the offer and acceptance
concur, is largely a question of fact to be determined by the trial court.[122] (Citations
omitted)

In bidding contracts, this Court has ruled that the award of the contract to the bidder is an
acceptance of the bidder's offer. Its effect is to perfect a contract between the bidder and
the contractor upon notice of the award to the bidder.[123] Thus, in Valencia v.
Rehabilitation Finance Corp.:[124]

With respect to the first argument, it is worthy of notice that the proposal submitted by
petitioner consisted of several items, among which are: (a) one for P389,980, for the
"complete construction of the office building" in question, ... ; (b) another for P358,480,
for the "complete construction of the office building only", . .. ; (c) a third one for
P18,900, for the "electrical installations only", . . . ; and (d) a fourth item for P12,600, for
the "plumbing installations only" ...

Each one of these items was complete in itself, and, as such, it was distinct, separate and
independent from the other items. The award in favor of petitioner herein, implied,
therefore, neither a modification of his offer nor a partial acceptance thereof It was an
unqualified acceptance of the fourth item of his bid, which item constituted a complete
offer or proposal on the part of petitioner herein. The effect of said acceptance was to
perfect a contract, upon notice of the award to petitioner herein.[125] (Emphasis supplied)

Likewise, in Central Bank of the Philippines v. Court of Appeals:[126]

As We see it then, contrary to the contention of the Bank, the provision it is citing may
not be considered as determinative of the perfection of the contract here in question. Said
provision only means that as regards the violation of any particular term or condition to
be contained in the formal contract, the corresponding action therefor cannot arise until
after the writing has been fully executed. Thus, after the Proposal of respondent was
accepted by the Bank thru its telegram and letter both dated December 10, 1965 and
respondent in turn accepted the award by its letter of December 15, 1965, both parties
became bound to proceed with the subsequent steps needed to formalize and consummate
their agreement. Failure on the part of either of them to do so, entitles the other to
compensation for the resulting damages. To such effect was the ruling of this Court in
Valencia vs. RFC 103 Phil. 444. We held therein that the award of a contract to a bidder
constitutes an acceptance of said bidder's proposal and that "the effect of said
acceptance was to perfect a contract, upon notice of the award to (the bidder)" . .. We
further held therein that the bidder's "failure to (sign the corresponding contract) did not
relieve him of the obligation arising from the unqualified acceptance of his offer. Much
less did it affect the existence of a contract between him and respondent" . . .

It is neither just nor equitable that Valencia should be construed to have sanctioned a one-
sided view of the perfection of contracts in the sense that the acceptance of a bid by a
duly authorized official of a government-owned corporation, financially and otherwise
autonomous both from the National Government and the Bureau of Public Works, insofar
as its construction contracts are concerned, binds only the bidder and not the corporation
until the formal execution of the corresponding written contract.[127] (Emphasis supplied)

Thus, the award of a contract to a bidder perfects the contract. [128] Failure to sign the
physical contract does not affect the contract's existence or the obligations arising from
it. [129]

Applying this principle to the case at bar, this Court finds that there is a perfected
contract between the parties. MRT has already awarded the contract to Gammon, and
Gammon's acceptance of the award was communicated to MRT before MRT rescinded
the contract.

The Invitation to Bid issued to Gammon stated that MRT "will select the Bidder that
[MRT] judges to be the most suitable, most qualified, most responsible and responsive,
and with the most attractive Price and will enter into earnest negotiations to finalize and
execute the Contract."[130]

On May 30, 1997, Gammon tendered its bids.[131]

In a Letter dated July 14, 1997, Gammon submitted another offer to MRT in response to
the latter's invitation to submit a final offer considering the fluctuation in foreign
exchange rates and an odd-and-even vehicle restriction plan.[132]

Parsons thereafter issued the First Notice to Proceed,[133] which stated:

We are pleased to inform [you] that you have been awarded the work on the construction
of the Podium Structure for the MRT-3 EDSA North Triangle Development Project. The
formal contract document, which is the product of a series of discussions and negotiation
is herewith attached for your signature.

The Work includes the furnishing of labor, supervision, materials, plant, equipment and
other facilities and appurtenances necessary to perform all the works in accordance with
contract document, approved drawings, specifications and your over-all Breakdown of
Lump Sum Bid (marked Exhibit "A") amounting to ONE BILLION FOUR HUNDRED
ONE MILLION SIX HUNDRED SEVENTY[-]TWO THOUSAND NINETY[-]FIVE
PESOS (P1,401,672,095.00). It is understood that due to the existing squatters in the
Area, the work shall be divided in two (2) separate geographical areas designated as
Phase I and Phase II - but shall be treated as one contract and still totalling to
P1,401,672,095.00. Further, this award is predicated on the commitments contained in
the attached comfort letter (marked Exhibit "B'') issued by Gammon Construction
Limited, your associate company overseas and receipt of the duly signed letter from the
Chief Executive of Gammon Construction Limited that is expected within seven days
from the date hereof.

....

You may, therefore, proceed with the work at Phase I starting seven (7) days from receipt
of this Notice or from the time that Site is dewatered and cleaned up, whichever is
later. It is further understood that Gammon agrees to continue Phase II at the price stated
above and the starting time thereof will depend on the completion by others of the
footings in time to allow construction of the superstructure in accordance with Gammon's
Tender Programme dated 13 August 1997.

....

Please signify your concurrence by signing the appropriate space below and in the
accompanying contract documents and return to Parsons-Interpro the originals. We will
send to you a complete set of documents as soon as it is signed by the Owner.
[134]
 (Emphasis supplied)

In its First Letter, Gammon signed and returned the First Notice to Proceed to signify its
consent to its prestations.[135]

In its Second Letter, Gammon transmitted to Parsons the signed Letter of Comfort to
guarantee its obligations in the Project.[136]

On September 9, 1997, Gammon returned to Parsons the contract documents. [137]

MRT argues that the return of the contract documents occurred after it had already
revoked its offer, i.e., after it sent its September 8, 1997 Letter, which stated:

Re: Contract for LRT3 North Triangle Podium Structure

Gentlemen:

Due to current developments in the Philippines' foreign exchange rate and the
concomitant soaring interest rates, Metro Rail Transit Development Corp. (MRTDC) will
need a week or two to estimate the possible effects and repercussions on the
above[-]mentioned project before MRTDC, through the Chairman of the Board, will
issue the formal Notice to proceed to your company. When these possible effects and
repercussions are analysed and decided upon by our Board, hopefully within the week,
we shall notify you at once.[138]
However, MRT had already accepted the offered bid of Gammon and had made known to
Gammon its acceptance when it awarded the contract and issued it the First Notice to
Proceed on August 27, 1997.

The First Notice to Proceed clearly laid out the object and the cause of the contract. In
exchange for P1,401,672,095.00, Gammon was to furnish "labor, supervision, materials,
plant, equipment and other facilities and appurtenances necessary to perform all the
works in accordance with [its bid]."[139]

This acceptance is also manifested in the First Notice to Proceed when it authorized
Gammon to proceed with the work seven (7) days from its receipt or from the time the
site is de-watered and cleaned up.

Thus, Gammon's receipt of the First Notice to Proceed constitutes the acceptance that is
necessary to perfect the contract.

The First Notice to Proceed stated that the award "is predicated on the commitments
contained in the ... comfort letter ... issued by Gammon Construction Limited,"
Gammon's associate company overseas.[140] It also required that Gammon signify its
concurrence by signing and returning the First Notice to Proceed and the accompanying
contract documents. [141]

Assuming that this constitutes a counter-offer from MRT, this Court rules that Gammon
sufficiently complied with these requirements such that the perfection of the contract
cannot be affected. Gammon returned the signed First Notice to Proceed on September 2,
1997. It transmitted to Parsons the signed Letter of Comfort to guarantee its obligations
in the Project on September 3, 1997.[142] The signed contract documents were returned on
September 9, 1997.[143]

Gammon manifested its unqualified acceptance of the First Notice to Proceed on

September 2, 1997 in its First Letter:

MRT 3 North Triangle Development

Superstructure Contract
Letter of Award/Notice to Proceed

We return herewith the original copy of the above mentioned letter which we have
countersigned dated 28 August '97. (Please note that Mr. Salagdo 's signature is missing).

The contract documentation submitted under cover of your letter is being reviewed now,
and should be signed and returned to you tomorrow. The Letter of Comfort has now been
signed by the Chief Executive of Gammon Construction Ltd., and is being returned this
week.
We confirm that we mobilised resources to site on Friday, 29 August '97 to pump out
floodwater. Cleaning up of mud and debris will follow on this week.

During this mobilisation phase, our Site Manager is Mr. Ferdinand Fabro who we
introduced to you during the Preconstruction Meeting last Thursday, 28 August '97.

We enclose herewith a copy of our Mobilisation programme dated 1 September '97 (4 x

A3 sheets) which includes Design activities, Mobilisation activities, initial Construction
activities, key plant and formwork items.

Our Design Team have now relocated to our office in Makati, and are continuing with
preparation of shop drawings of all slabs.

We will submit a project organisation chart shortly but in the meantime, we confirm that
the following senior [Gammon Philippines, Inc.] staff are now allocated to the project:

....

As soon as layout of temporary facilities has been agreed with you, establishment will
commence in the very limited space allocated ...

We have today received ... drawings marked "For Construction", and unless we hear from
you to the contrary, we will proceed to procure materials for, plan and construct walls
and columns based on these drawings. However, please note that the 3 sheets of
construction notes have not been issued. We therefore request issue of these drawings. In
addition, there are fifteen 'Requests for Information' (RFIs) which were forwarded to you
yesterday these cover queries which affect both design of slabs and construction of walls,
columns and beams. In particular, we urgently need instructions to clarify the
reinforcement specification generally, and connectors/splicing of column reinforcement.

Finally, our Performance Bond and Advance Payment Bond are being prepared now - we
hope to submit these by the end of the week.[144]

This First Letter shows that Gammon fully consented to the contents and accepted the
prestations of the First Notice to Proceed. Gammon's acceptance is also manifested in its
undertakings to mobilize resources, to prepare the Performance and Advance Payment
Bonds, and to procure materials necessary for the Project. All that remained was the
formality of returning the contract documents and the Letter of Comfort, which
eventually was complied with by Gammon. Thus, there is already mutual consent on the
object of the contract and its consideration, and an absolute acceptance of the offer.

In any case, this Court has ruled that the meeting of the minds need not always be put in
writing, and the fact that the documents have not yet been signed or notarized does not
mean that the contract has not been perfected.[145] A binding contract may exist even if the
signatures have not yet been affixed because acceptance may be express or implied. [146]

Thus, the parties have become bound to consummate the contract such that the failure by
one party to comply with its obligations under the contract entitles the other party to
damages. Clearly, Gammon was expected to comply with the award when it signified its
concurrence. Thus, it is not just or equitable for the perfection of the contract to be one
(1)-sided such that the contract only binds Gammon but not MRT just because the
contract documents were not yet returned before MRT suspended the contract. [147]

Moreover, this Court rules that MRT did not revoke its offer when it temporarily
suspended the First Notice to Proceed.

MRT's September 8, 1997 Letter stated, thus:

Due to current developments in the Philippines' foreign exchange rate and the
concomitant soaring interest rates, Metro Rail Transit Development Corp. (MRTDC) will
need a week or two to estimate the possible effects and repercussions on the
above[-]mentioned project before MRTDC, through the Chairman of the Board, will
issue the formal Notice to Proceed to your company. When these possible effects and
repercussions are analysed and decided upon by our Board, hopefully within the week,
we shall notify you at once.[148]

Thereafter, Parsons directed Gammon to hold any further mobilization activities in a

facsimile transmission dated September 9, 1997. [149]

On September 11, 1997, Gammon sent Parsons a facsimile to confirm if all requirements
in the contract documents were temporarily suspended pending the clarification of the
scope and programming of the Project.[150]

In a facsimile transmission dated September 12, 1997, Parsons confirmed "the temporary
suspension of all the requirements under the contract except the re-design of the project
floor slabs and the site de watering and clean up":[151]

With reference to your fax of September 11, 1997 this will confirm the temporary
suspension of all requirements under the terms of the contract until such time as
clarification of scope has been received from the owner. The only exception to this
suspension is the re-design of the project[']s floor slabs and the site de-watering and clean
up.[152] (Emphasis supplied)

The wording of these communications indicates that the contract is still binding though
on hold. Gammon was informed that the contract was temporarily suspended. When a
contract is suspended temporarily, it provisionally ceases to be operative until the
occurrence of a condition or situation that warrants the lifting of the suspension of the
contract.[153]

It is different from a cancellation of a contract which terminates the contract such that it
does not become operative again.

The usage of the words "temporary suspension" is clear. It is a settled rule that when the
words in a contract are clear and leave no doubt on the parties' intentions, the literal
meaning shall control.[154] Thus, the above communications cannot be interpreted to mean
that the contract has been cancelled or rescinded.

This is bolstered by MRT's express cancellation of the contract on June 10, 1998 in its
Fourth Notice to Proceed:

This notice formally cancels documents referred to as Notice of Award, Notice to

Proceed issued on August 27, 1997, which was received by [Gammon Philippines, Inc.]
on August 28, 1997 and April 2, 1998, which was received by [Gammon Philippines,
Inc.] on April 8, 1998.[155]

It can be implied that prior to the Fourth Notice to Proceed, the First and Third Notices to
Proceed were not cancelled and were still valid and subsisting.

Furthermore, MRT's Second Notice to Proceed issued on February 18, 1998 for
engineering services based on the redesigned plan was signed by Gammon on March 11,
1998 with a qualification:[156]

The Contractor refers to the 'Notice of Award' and 'Notice to Proceed' dated 27 August
1997, and understands that this 'Notice to Proceed' effectively lifts the suspension of
work notified in Metro Rail Transit Development Corporation letter dated 8 September
1997, in respect of the design activities only for all of the Level 2 slab and that part of the
Level 3 slab over the Depot Maintenance Shop and office area . . . ; and that the existing
'Notice of Award' dated 27 August 1997 is still valid.[157] (Emphasis supplied)

MRT did not contest Gammon's notice of receipt of the First Notice to Proceed,
expressing that it was still valid and was not cancelled.

Additionally, when the parties were discussing the change of plans, MRT did not mention
that no contract was executed between them. Instead, it sought to modify its terms and
conditions. Thus, Gammon was made to believe that the First Notice to Proceed was in
force and effect, albeit temporarily suspended.

Given these circumstances, it cannot be said that no contract was perfected between the
parties.
 II

The parties argue on the application of Gammon v. Metro Rail Transit Development
Corporation[158] on the contract's perfection.

MRT claims that this Court's ruling in Gammon did not determine that a contract was
perfected as to warrant the application of the doctrine of the law of the case. [159] It argues
that the issue in Gammon was CIAC's jurisdiction over the Notice of Claim, not the
existence of the contract.[160] MRT insists that the ruling was limited only to the
preliminary question of whether or not there is an arbitration agreement between the
parties to give CIAC jurisdiction over the dispute.[161] It was a preliminary finding
supported by limited evidence and not the result of an actual trial.[162]

However, Gammon claims that Gammon already determined that there is a perfected

contract, and thus, the doctrine of the law of the case applies. It insists that without the
perfected contract, which contains the provision for arbitration, CIAC would not have
acquired jurisdiction over the case. This is shown in that the existence of a contract
between the parties was not an issue submitted by the parties in the arbitration
proceedings. Thus, CIAC could not have ruled on it.[163]

The Court of Appeals affirmed that there was a perfected contract because MRT alleged
in Gammon that the contract was novated or abandoned. It found that this was an implied
admission that the contract was perfected considering that there was nothing to novate or
abandon if there had been no perfected contract. The perfection of the contract was
further confirmed by this Court's ruling in Gammon that the contract was merely
modified.[164]

In Gammon v. Metro Rail Transit Development Corporation,[165] this Court held:

Although there is considerable disagreement concerning the foregoing facts, specifically

whether Gammon undertook certain works on the Project and whether a re-bidding for
the downgraded podium structure was indeed conducted, the Court does not need to make
its own factual findings before it can resolve the main question of whether the CIAC's
jurisdiction was properly invoked. The resolution of this question necessarily involves a
two-pronged analysis, first, of the requisites for invoking the jurisdiction of the CIAC,
and second, of the scope of arbitrable issues covered by CIAC's jurisdiction.

EO 1008 expressly vests in the CIAC original and exclusive jurisdiction over disputes
arising from or connected with construction contracts entered into by parties that have
agreed to submit their dispute to voluntary arbitration . . .

....
In this case, the parties submitted themselves to the jurisdiction of the CIAC by virtue of
the arbitration clause in the [General Conditions of Contract], which provides:

....

MRTDC, however, contends that the contract between the parties was novated by
subsequent [Notices of Award]/[Notices to Proceed] which changed the design of the
podium structure and reduced the contract price.

We do not agree. Novation is defined as the extinguishment of an obligation by the

substitution or change of the obligation by a subsequent one which terminates the first,
either by changing the object or principal conditions; substituting the person of the
debtor; or subrogating a third person in the rights of the creditor. In order tha[t] an
obligation may be extinguished by another which substitutes the same, it is imperative
that it be so declared in unequivocal terms, or that the old and the new obligations be on
every point incompatible with each other.

Novation cannot be presumed. The animus novandi, whether partial or total, must appear
by the express agreement of the parties, or by their acts that are too clear and unequivocal
to be mistaken. Further, novation may either be extinctive or modificatory. It is extinctive
when an old obligation is terminated by the creation of a new one that takes the place of
the former. It is merely modificatory when the old obligation subsists to the extent that it
remains compatible with the amendatory agreement.

We have carefully gone over the records of this case and are convinced that the redesign
of the podium structure and the reduction in the contract price merely modified the
contract. These modifications were even anticipated by the [General Conditions of
Contract] as it expressly states that changes may be made on the works without
invalidating the contract, thus:

....

By these terms, the parties evidently agreed that should changes need to be made on the
Project plans, such changes shall not annul or extinguish the contract. Thus, it can fairly
be concluded that the revisions in the design of the Project and the reduction of the
contract price were intended to merely modify the agreement and not to supplant the
same.

Parenthetically, while the [Notices of Award]/[Notices to Proceed] adverted to the

execution of a formal contract for the Project, no such formal contract appears to have
been executed. Instead, the [Notices of Award]/[Notices to Proceed] issued by MRTDC
in favor of Gammon denominated the agreement as "Contract No. 4.251.001 for the
Construction and Development of the Superstructure MRT 3 North Triangle'' and
consistently referred to the [General Conditions of Contract] as one of the controlling
documents with regard to the transaction.

In fact, as mentioned by the CIAC in its assailed Order dated August 18, 1999, the
[Notice of Award]/[Notice to Proceed] dated June 10, 1998 makes reference to the
[General Conditions of Contract]. The June 10, 1998 [Notice of Award]/[Notice to
Proceed] states:

A formal contract for the Work is in process and will be available for signature as soon as
possible. Pending the execution of the contract, the General conditions, and the Drawings
and Specifications included with the Bid Documents (as originally issued and only as
applicable to the current scope of work), all of which are incorporated herein by this
reference, shall apply in this Notice ...

A similar reference to the [General Conditions of Contract] appears in the April 2, 1998
[Notice of Award]/[Notice to Proceed]. Thus, even granting that, as the Court of Appeals
ruled, the August 27, 1997 [Notice of Award]/[Notice to Proceed] had been novated by
the April 2, 1998 [Notice of Award]/[Notice to Proceed] and that, in turn, the latter was
rescinded by MRTDC, the arbitration clause in the [General Conditions of Contract]
remained in force.

At any rate, the termination of the contract prior to a demand for arbitration will generally
have no effect on such demand, provided that the dispute in question either arose out of
the terms of the contract or arose when a broad contractual arbitration clause was still in
effect. The Court of Appeals, therefore, erred in ruling that there must be a subsisting
contract before the jurisdiction of the CIAC may properly be invoked. The jurisdiction of
the CIAC is not over the contract but the disputes which arose therefrom, or are
connected thereto, whether such disputes arose before or after the completion of the
contract, or after the abandonment or breach thereof.

It may even be added that issues regarding the rescission or termination of a construction
contract are themselves considered arbitrable issues under Sec. 2, Art. IV of the Rules of
Procedure Governing Construction Arbitration, the Rules which were in force at the time
the present controversy arose. . . .

This brings us to the question of whether the dispute in this case falls within the scope of
the arbitration clause.

....

The arbitration clause in the [General Conditions of Contract] submits to the jurisdiction
of the CIAC all disputes, claims or questions subject to arbitration under the contract. The
language employed in the arbitration clause is such as to indicate the intent to include all
controversies that may arise from the agreement as determined by the CIAC Rules. It is
broad enough to encompass all issues save only those which EO 1008 itself
excludes, i.e., employer-employee relationship issues. Under these Rules, the amount of
damages and penalties is a general category of arbitrable issues under which Gammon's
claims may fall.[166] (Emphasis supplied, citations omitted)

This Court rules that the doctrine of the law of the case applies in this case.

There is a distinction between the agreement to arbitrate and the contract which may be
the subject matter of the dispute between the parties. While the agreement to arbitrate
may be in the same subject matter contract, it is a separate agreement in itself.

Under the Construction Industry Arbitration Law, CIAC acquires jurisdiction when the
parties agree to submit the matter to voluntary arbitration.

Section 4. Jurisdiction. — The CIAC shall have original and exclusive jurisdiction over
disputes arising from, or connected with, contracts entered into by parties involved in
construction in the Philippines, whether the dispute arises before or after the completion
of the contract, or after the abandonment or breach thereof. These disputes may involve
government or private contracts. For the Board to acquire jurisdiction, the parties to a
dispute must agree to submit the same to voluntary arbitration.

The jurisdiction of the CIAC may include but is not limited to violation of specifications
for materials and workmanship; violation of the terms of agreement; interpretation and/or
application of contractual time and delays; maintenance and defects; payment, default of
employer or contractor and changes in contract cost.

Excluded from the coverage of this law are disputes arising from employer-employee
relationships which shall continue to be covered by the Labor Code of the Philippines.
(Emphasis supplied)

In Ormoc Sugarcane Planters' Association, Inc. v. Court of Appeals,[167] this Court

discussed that "an agreement to arbitrate is a contract" in itself:

Except where a compulsory arbitration is provided by statute, the first step toward the
settlement of a difference by arbitration is the entry by the parties into a valid agreement
to arbitrate. An agreement to arbitrate is a contract, the relation of the parties is
contractual, and the rights and liabilities of the parties are controlled by the law of
contracts. In an agreement for arbitration, the ordinary elements of a valid contract must
appear, including an agreement to arbitrate some specific thing, and an agreement to
abide by the award, either in express language or by implication. (Citation omitted)
Thus, in Gammon v. Metro Rail Transit Development Corporation,[168] this Court ruled
that CIAC does not have jurisdiction over construction contracts. Rather, it has
jurisdiction over the dispute arising from or connected to construction contracts, such that
it still acquires jurisdiction even if the contract has been breached, abandoned,
terminated, or rescinded.[169]

On the basis of this ruling, this Court concluded that CIAC has jurisdiction over the
dispute between MRT and Gammon. Their contract need not be valid or in force before
CIAC may arbitrate the matter, so long as there is an agreement to arbitrate.

Thus, the agreement to arbitrate is separate from the construction contract entered into by
parties.

Nonetheless, the doctrine of the law of the case applies in the case at bar.
While Gammon did not expressly state that the contract was perfected, it concluded that
both the construction contract and the arbitration contract existed between the parties.

The doctrine of the law of the case applies when in a particular case, an appeal to a court
of last resort has resulted in a determination of a question of law. The determined issue
will be deemed to be the law of the case such that it will govern a case through all its
subsequent stages.[170] Thus, after ruling on the legal issue and remanding the case to a
lower court for further proceedings, the determined legal issue can no longer be passed
upon and determined differently in another appeal in the same case.

In Presidential Decree No. 1271 Committee v. De Guzman:[171]

The doctrine of the "law of the case" provides that questions of law previously
determined by a court will generally govern a case through all its subsequent stages
where "the determination has already been made on a prior appeal to a court of last
resort." In People v. Olarte:

Suffice it to say that our ruling in Case L-13027, rendered on the first appeal, constitutes
the law of the case, and, even if erroneous, it may no longer be disturbed or modified
since it has become final long ago. A subsequent reinterpretation of the law may be
applied to new cases but certainly not to an old one finally and conclusively determined.

'Law of the case' has been defined as the opinion delivered on a former appeal. More
specifically, it means that whatever is once irrevocably established as the controlling
legal rule of decision between the same parties in the same case continues to be the law
of the case, whether correct on general principles or not, so long as the facts on which
such decision was predicated continue to be the facts of the case before the court.
As a general rule a decision on a prior appeal of the same case is held to be the law of the
case whether that decision is right or wrong, the remedy of the party being to seek a
rehearing.

....

It is thus clear that posterior changes in the doctrine of this Court [cannot] retroactively
be applied to nullify a prior final ruling in the same proceeding where the prior
adjudication was had, whether the case should be civil or criminal in nature.

If an appellate court has determined a legal issue and has remanded it to the lower court
for further proceedings, another appeal in that same case should no longer differently
determine the legal issue previously passed upon. Similar to res judicata, it is a refusal to
reopen what has already been decided.[172] (Citations omitted)

The legal issue determined in Gammon is the jurisdiction of CIAC. However, this
determination was arrived at after this Court found that the parties entered into a
construction contract with an agreement to arbitrate.

This is indicated when Gammon determined that there is no novation of the contract

between MRT and Gammon as to deprive CIAC of jurisdiction. It ruled that there is
merely a modification, not an annulment or extinguishment, of the contract; thus:

We have carefully gone over the records of this case and are convinced that the redesign
of the podium structure and the reduction in the contract price merely modified the
contract. These modifications were even anticipated by the [General Conditions of
Contract] as it expressly states that changes may be made on the works without
invalidating the contract, thus:

....

By these terms, the parties evidently agreed that should changes need to be made on the
Project plans, such changes shall not annul or extinguish the contract. Thus, it can fairly
be concluded that the revisions in the design of the Project and the reduction of the
contract price were intended to merely modify the agreement and not to supplant the
same.[173] (Emphasis supplied)

While this Court's determination on the perfection of the contract is not categorical and
its finding that the CIAC's jurisdiction is not over the contract but rather over the disputes
that arise from it, the existence of a contract, albeit terminated or rescinded, is still
contemplated:
At any rate, the termination of the contract prior to a demand for arbitration will generally
have no effect on such demand, provided that the dispute in question either arose out of
the terms of the contract or arose when a broad contractual arbitration clause was still in
effect. The Court of Appeals, therefore, erred in ruling that there must be a subsisting
contract before the jurisdiction of the CIAC may properly be invoked. The jurisdiction of
the CIAC is not over the contract but the disputes which arose therefrom, or are
connected thereto, whether such disputes arose before or after the completion of the
contract, or after the abandonment or breach thereof.

It may even be added that issues regarding the rescission or termination of a construction
contract are themselves considered arbitrable issues under Sec. 2, Art. IV of the Rules of
Procedure Governing Construction Arbitration, the Rules which were in force at the time
the present controversy arose. . . . [174] (Emphasis supplied, citations omitted)

Thus, the doctrine of the law of the case applies. The current appeal can no longer bring
the existence of the contract into issue.

III

MRT seeks to question the award of lost profits and reimbursements in favor of
Gammon.

As to the reimbursement award for engineering services, design work, site de-watering,
and clean-up, CIAC awarded the reimbursement claims on account of MRT's allegation
in paragraph 77 of its Answer with Compulsory Counterclaim, thus:

77. To begin with, MRTDC is willing to pay GAMMON the total amount of
P5,493,639.27 representing the sum of P4,821,261.91 and P672,377.36, which comprise
GAMMON's claim for cost of the engineering and design services and site de-watering
and clean-up works, respectively.[175]

CIAC ruled that as MRT had already admitted its liability for the claims, it was bound by
this admission.[176] This finding was also affirmed by the Court of Appeals, which ruled
that there was no showing that the admission was made by palpable mistake. It also noted
that MRT did not amend its Answer.[177]

MRT argues that while it expressed its willingness to pay Gammon the reimbursements,
it only applies to those supported by official receipts.[178] Gammon was allegedly aware
that it had to substantiate its claims, as proven by its inclusion of the reimbursement
amount in the issues to be resolved by CIAC in the Terms of Reference and its
presentation of proof for its claims.[179] MRT also insists that its judicial admission is not
conclusive because an answer is a mere statement of fact that the filing party is expected
to prove; it is not evidence.[180] The trial court is still given leeway to consider evidence
especially when the parties agreed to submit the issue for the court's resolution.[181]

MRT avers that judicial admissions cannot supplant the requirement that actual damages
must be duly proven. It further asserts that an offer to pay is not an admission of liability
under Rule 130, Section 27 of the Rules of Court. The admission was made only as an
attempt to settle the issue and to avoid litigation. It explains that the exact amount of
P5,493,639.27 was mentioned in the Answer with Compulsory Counterclaim because it
was the amount Gammon was claiming and which MRT offered to pay, if proven.[182]

On the other hand, Gammon claims that MRT is bound by its allegation in its Answer
with Compulsory Counterclaim. It argues that MRT failed to show that its admission was
made by palpable mistake.[183] MRT even mentioned the exact amount it was willing to
pay. It did not state that it would pay only the amount proved or present any evidence to
contradict its admission.[184] Gammon asserts that although the amount was included as an
issue in the Terms of Reference, this only meant that MRT can present contrary evidence
without needing to prove that the admissions were made through palpable mistake.[185]

This Court rules that MRT is bound by its judicial admission.

Rule 129, Section 4 of the Revised Rules of Court provides:

Section 4. Judicial admissions. An admission, verbal or written, made by a party in the

course of the proceedings in the same case, does not require proof. The admission may be
contradicted only by showing that it was made through palpable mistake or that no such
admission was made.

Judicial admissions may be made by a party in his or her pleadings, during the trial,
through verbal or written manifestations, or in other stages of the judicial
proceeding. [186] They are binding such that no matter how much the party rationalizes it,
the party making the admission cannot contradict himself or herself unless it is shown
that the admission was made through a palpable mistake.[187]

In this case, MRT alleges that it is willing to pay Gammon the total amount of
P5,493,639.27, which comprises the latter's claim for cost of engineering and design
services, and de-watering and clean-up works.[188]

MRT's allegation was not qualified. It neither stated that Gammon must first present
proof of its claims for the cost of engineering and design services, and of de-watering and
clean-up works nor amended the Answer with Compulsory Counterclaim to either correct
this allegation or to qualify that Gammon must first present official receipts. Thus, CIAC
correctly held that MRT is bound by this admission and is estopped from denying its
representation.
 IV.A

MRT is likewise asserting that the evidence presented by Gammon to prove its
entitlement to actual damages is not sufficient.

Actual damages are provided for under Article 2199 of the Civil Code:

Article 2199. Except as provided by law or by stipulation, one is entitled to an adequate

compensation only for such pecuniary loss suffered by him as he has duly proved. Such
compensation is referred to as actual or compensatory damages.

Actual damages constitute compensation for sustained measurable losses. [189] It must be
proven "with a reasonable degree of certainty, premised upon competent proof or the best
evidence obtainable."[190] It is never presumed or based on personal knowledge of the
court.[191]

In International Container Terminal Services, Inc. v. Chua:[192]

"Actual damages are compensation for an injury that will put the injured party in the
position where it was before the injury. They pertain to such injuries or losses that are
actually sustained and susceptible of measurement.... Basic is the rule that to recover
actual damages, not only must the amount of loss be capable of proof; it must also
be actually proven with a reasonable degree of certainty, premised upon competent
proof or the best evidence obtainable."

....

This Court has, time and again, emphasized that actual damages cannot be presumed and
courts, in making an award, must point out specific facts which could afford a basis for
measuring whatever compensatory or actual damages are borne. An award of actual
damages is "dependent upon competent proof of the damages suffered and the actual
amount thereof. The award must be based on the evidence presented, not on the personal
knowledge of the court; and certainly not on flimsy, remote, speculative and
unsubstantial proof." [193] (Emphasis in the original, citations omitted)

Although official receipts are the best evidence of payment, this Court has acknowledged
that actual damages may be proved by other forms of documentary evidence, including
invoices.

In MCC Industrial Sales Corporation v. Ssangayong Corporation,[194] this Court did not

award actual damages because the claimant failed to substantiate its claims with official
receipts.[195]
In G.Q. Garments, Inc. v. Miranda,[196] this Court held that an allegation of a witness must
be supported by receipts or other documentary proofs to prove the claim of actual
damages.[197]

In Gonzales v. Camarines Sur II Electric Cooperative, Inc.,[198] this Court noted that

petitioners did not back up its claims of actual damages by documentary proof such as a
receipt or an invoice.[199]

For lost profits, Article 2200 of the Civil Code provides:

Article 2200. Indemnification for damages shall comprehend not only the value of the
loss suffered, but also that of the profits which the obligee failed to obtain.

This Court has ruled that the award of unrealized profits cannot be based on the sole
testimony of the party claiming it. In Producers Bank of the Philippines v. Court of
Appeals:[200]

In the case at bar, actual damages in the form of unrealized profits were awarded on the
basis of the sole testimony of private respondent Salvador Chua, to wit:

....

However, other than the testimony of Salvador Chua, private respondents failed to
present documentary evidence which is necessary to substantiate their claim for actual or
compensatory damages. In order to recover this kind of damages, the injured party must
prove his case, thus:

When the existence of a loss is established, absolute certainty as to its amount is not
required. The benefit to be derived from a contract which one of the parties has
absolutely failed to perform is of necessity to some extent, a matter of speculation, but
the injured party is not to be denied for that reason alone. He must produce the best
evidence of which his case is susceptible and if that evidence warrants the inference that
he has been damaged by the loss of profits which he might with reasonable certainty have
anticipated but for the defendant's wrongful act, he is entitled to recover. (Cerreno vs.
Tan Chuco, 28 Phil. 312 [1914] quoted in Central Bank of the Philippines vs. Court of
Appeals, 63 SCRA 431 [1975])

Applying the foregoing test to the instant case, the Court finds the evidence of private
respondents •insufficient to be considered within the purview of "best evidence." The
bare assertion of private respondent Salvador Chua that he lost an average of P18,000.00
per month is inadequate if not speculative and should be admitted with extreme caution
especially because it is not supported by independent evidence. Private respondents could
have presented such evidence as reports on the average actual profits earned by their
gasoline business, their financial statements, and other evidence of profitability which
could aid the court in arriving with reasonable certainty at the amount of profits which
private respondents failed to earn. Private respondents did not even present any
instrument or deed evidencing their claim that they have transferred their right to operate
their gasoline station to their relatives. We cannot, therefore, sustain the award of
P18,000.00 a month as unrealized profits commencing from October 16, 1984 because
this amount is not amply justified by the evidence on record.[201]

IV.B

As to the reimbursement award for engineering services, design work, site de-watering,
and clean-up, MRT argues that it was not supported by sufficient documentary evidence
as only 2% of the claims have official receipts.[202] It argues that invoice, debit notes, and
summaries are not proof of payment. An invoice is a mere detailed statement of the
items, price, and charges of the things invoiced[203] while a debit memo is merely an
advice to the receiver of an outstanding debt.[204]

Gammon nonetheless insists that it was able to prove its entitlement to the
reimbursements.[205] It avers that official receipts are not the only documentary evidence
to prove the claim of damages. Invoices and debit notes are allowed. Debit notes do not
require an official receipt as additional documentation.[206]

The Court of Appeals found that there are sufficient bases for the award of Gammon's
reimbursement claims.[207] It ruled that MRT failed to prove that the evidence was
insufficient and that Gammon's computations were erroneous.[208] It found that Gammon
provided the best available documentary evidence, through invoices, debit notes, and
official receipts.[209]

IV.C

MRT likewise questions the award of lost profits in favor of Gammon.

Gammon presented evidence of its claim for lost profits by presenting as witness
Francisco Delos Santos (Delos Santos), the Planning and Estimating Engineer of
Gammon since 1996. He was responsible for the preparation of proposals, "negotiations,
mobilization, and meetings with and among the parties involved in the Project."[210]

Delos Santos testified that "the average competitive percentage of profit in the
construction industry, in Gammon's experience, [was] 5% and [that] the Net Cost
Estimate was properly set at P65,194,050.93."[211]

CIAC granted the award of lost profits based on Delos Santos' testimony. [212] The Court of
Appeals affirmed this finding and found that the award for lost profits was not grounded
on pure speculation as "documentary evidence is not absolutely necessary ... to prove a
claim for lost profit."[213] It found that Delos Santos was competent to testify on the
matter.[214] In any case, it ruled that CIAC shall act without regard to technicalities or
legal forms, in accordance with justice and equity and the merits of the case. [215] It also
noted CIAC's finding that this Court upheld as reasonable 18% as expected profit
estimate.[216]

MRT contests this finding and argues that Delos Santos is not an expert witness. [217] It
claims that Delos Santos' testimony was not sufficient because there is no proof of his
experience, and his functions consist only of preparing project proposals, negotiations,
mobilization, and meetings with and among the parties in the Project.[218] It holds that
Delos Santos' testimony was bare, insufficient, self-serving, and unsubstantiated by
independent evidence, like audited financial statements or other reports on past projects.
[219]

MRT also avers that the 5% lost profits should not be based on the last net estimate of the
contract cost because it must be based on the contract price agreed upon. It argues that
basing it on the revised scope of work and a greatly increased foreign exchange rate
would unjustly enrich Gammon.[220]

On the other hand, Gammon insists that its claim for lost profits was sufficiently
substantiated. It asserts that there need not be absolute certainty in its amount to be able
to recover lost profits.[221] It argues that "lost profits cannot be denied in a construction
contract on the ground of business uncertainty."[222] It also holds that loss of profits can be
proven on the basis of experience and the industry standard by which it can be calculated,
if there is any.[223]

Gammon asserts that MRT did not refute the 5% amount given by Delos Santos or
quantify how much Gammon is actually entitled to. It notes that MRT presented no
evidence contrary to what was testified and that this Court has accepted. 10% profit as the
standard industry practice in the construction business.[224]

This Court affirms the findings of CIAC and of the Court of Appeals.

MRT is raising questions of fact. Questions of fact are not proper in a Petition for Review
under Rule 45. This Court can no longer entertain factual issues, unless there are
compelling and cogent reasons, as when the findings were ''drawn from a vacuum or
arbitrarily reached, or are grounded entirely on speculation or conjectures, are conflicting
or are premised on the supposed evidence and contradicted by the evidence on record or
when the inference made is manifestly mistaken or absurd."[225]

The findings of fact in the case at bar was arrived at by CIAC, a quasi-judicial body, the
jurisdiction of which is confined to construction disputes. "[F]indings of fact of
administrative agencies and quasi-judicial bodies, which have acquired expertise because
their jurisdiction is confined to specific matters, are generally accorded not only respect,
but finality when affirmed by the Court of Appeals."[226]

Moreover, arbitration proceedings are not bound by the technical rules of evidence in
judicial proceedings. Arbitrators are to ascertain the facts in each case by all reasonable
means without regard to technicalities of law or procedure.[227]

Thus, under Section 13.5 of the CIAC Revised Rules of Procedure Governing
Construction Arbitration:

Section 13.5 Evidence. — The parties may offer such evidence as they desire and shall
produce such additional documents and witnesses as the Arbitral Tribunal may deem
necessary to clear understanding of facts issues for a judicious determination of the
dispute(s). The Arbitral Tribunal shall act according to justice and equity and merits of
the case, without regard to technicalities or legal forms and need not be bound by any
technical rule of evidence. Evidence shall be taken in the presence of the Arbitral
Tribunal and all of the parties, except where any of the parties is absent, or has waived
his right to be present.

13.5.1 Order to produce documentary evidence.  Upon motion of either or both of the
parties, or on its own initiative, the Arbitral Tribunal may direct any person, board, body,
tribunal, or government office, agency or instrumentality, or corporation to produce real
or documentary evidences necessary for the proper adjudication of the issues.
   
13.5.2 Order to give testimony. The Arbitral Tribunal may, likewise, direct any person to
give testimony at any proceedings for arbitration.

Thus, the findings of fact of CIAC are binding, respected, and final. They are not
reviewable by this Court, especially when affirmed by the Court of Appeals. [228] "A
review of the CIAC's findings of fact would have had the effect of 'setting at naught the
basic objective of a voluntary arbitration and would reduce arbitration to a largely inutile
institution."'[229]

The only exceptions subject to this rule were laid out in Uniwide Sales Realty and
Resources Corp. v. Titan-Ikeda Construction and Development Corporation:[230]

As a rule, findings of fact of administrative agencies and quasi-judicial bodies, which

have acquired expertise because their jurisdiction is confined to specific matters, are
generally accorded not only respect, but also finality, especially when affirmed by the
Court of Appeals. In particular, factual findings of construction arbitrators are final and
conclusive and not reviewable by this Court on appeal. This rule, however admits of
certain exceptions.
In David v. Construction Industry and Arbitration Commission, we ruled that, as
exceptions, factual findings of construction arbitrators may be reviewed by this Court
when the petitioner proves affirmatively that: (1) the award was procured by corruption,
fraud or other undue means; (2) there was evident partiality or corruption of the
arbitrators or of any of them; (3) the arbitrators were guilty of misconduct in refusing to
hear evidence pertinent and material to the controversy; (4) one or more of the arbitrators
were disqualified to act as such under Section nine of Republic Act No. 876 and willfully
refrained from disclosing such disqualifications or of any other misbehavior by which the
rights of any party have been materially prejudiced; or (5) the arbitrators exceeded their
powers, or so imperfectly executed them, that a mutual, final and definite award upon the
subject matter submitted to them was not made.

Other recognized exceptions are as follows: (1) when there is a very clear showing of
grave abuse of discretion resulting in lack or loss of jurisdiction as when a party was
deprived of a fair opportunity to present its position before the Arbitral Tribunal or when
an award is obtained through fraud or the corruption of arbitrators, (2) when the findings
of the Court of Appeals are contrary to those of the CIAC, and (3) when a party is
deprived of administrative due process.[231] (Citations omitted)

However, petitioner failed to prove that any of these exceptions are present in the case at
bar. Thus, this Court will no longer disturb CIAC's factual findings, which were affirmed
by the Court of Appeals.

WHEREFORE, the petition is DENIED. The Court of Appeals October 14, 2011
Decision and January 25, 2012 Resolution in CA-G.R. SP No. 98569 are
hereby AFFIRMED.

SO ORDERED.

SECOND DIVISION
[ G.R. No. 223321, April 02, 2018 ]
ROGELIO M. FLORETE, SR., THE ESTATE OF THE LATE TERESITA F.
MENCHAVEZ, REPRESENTED BY MARY ANN THERESE F.
MENCHAVEZ, ROSIE JILL F. MENCHAVEZ, MA. ROSARIO F.
MENCHAVEZ, CRISTINE JOY F. MENCHAVEZ, AND EPHRAIM
MENCHAVEZ, AND DIANE GRACE F. MENCHAVEZ, PETITIONERS, V.
MARCELINO M. FLORETE, JR. AND MA. ELENA F. MUYCO,
RESPONDENTS.

DECISION
PERALTA, J.:

Before us is a petition for review on certiorari seeking to nullify the

Decision[1] dated August 3, 2015 of the Court of Appeals in CA-G.R. SP No. 07673, as well
as the Resolution[2] dated February 19, 2016 denying the motion for reconsideration
thereof.

On October 7, 1966, Marsal & Co., Inc. (Marsal) was organized as a close corporation by
Marcelino Sr., Salome, Rogelio, Marcelino Jr., Ma. Elena, and Teresita (all surnamed
Florete). Since its incorporation, the Articles of Incorporation (AOI) had been
amended[3] several times to increase its authorized capital stocks of P500,000.00 to
P5,000,000.00. Notwithstanding the amendments, paragraph 7 of their AOI which
provides for the procedure in the sale of the shares of stocks of a stockholder remained
the same, to wit:

SEVENTH. - x x x Any stockholder who desires to sell his share of stock in the company
must notify in writing the Board of Directors of the company of his intention to sell. The
Board of Directors upon receipt of such notice must immediately notify all stockholders
of record within five days upon receipt of the letter of said stockholder. Any stockholder
of record has the preemptive right to buy any share offered for sale by any stockholder of
the company on book value base[d] on the balance sheet approved by the Board of
Directors. The aforementioned preemptive right must be exercised by any stockholder of
the company within ten (10) days upon his receipt of the written notice sent to him by the
Board of Directors of the offer to sell. Any sale or transfer in violation of the above terms
and conditions shall be null and void. The above terms and conditions must be printed at
the back of the stock certificate.[4]

And as of June 1, 1982, the capital profile of Marsal was as follows:

Name Shareholdings
Marcelino M.
7,569 shares
Florete, Sr.
Rogelio M. Florete 3,489 shares
Ma. Elena F. Muyco 3,489 shares
Marcelino M.
3,489 shares
Florete, Jr.
Teresita F.
3,464 shares[5]
Menchavez

On September 19, 1989, Teresita Florete Menchavez died. In 1992, Ephraim Menchavez,
Teresita's husband, filed a Petition for Issuance of Letters of Administration [6] over her
estate. An Amended Opposition was filed by petitioner Rogelio Florete, Sr. and Marsal,
represented by petitioner as President thereof, with Atty. Raul A. Muyco, the husband of
respondent Ma. Elena, as counsel, on the ground of Ephraim's incompetency. Ephraim,
however, was later granted letters of administration. In 1995, Ephraim, the special
administrator, entered into a Compromise Agreement and Deed of Assignment[7] with
petitioner Rogelio ceding all the shareholdings of Teresita in various corporations owned
and controlled by the Florete family, which included the 3,464 shares in Marsal
corporation, as well as her shares, interests and participation as heir in all the real and
personal properties of her parents to petitioner Rogelio. A Motion to Approve
Compromise Agreement and Deed of Assignment was filed by respondent Ephraim,
through counsel Atty. Henry Villegas, with the conformity of Atty. Raul Muyco, the
oppositors' counsel. The motion was granted and approved by the Probate Court in its
Order[8] dated February 14, 1995.

On October 3, 1990, Marcelino Florete Sr., patriarch of the Florete family, died. An
intestate proceeding to settle his estate was filed by petitioner Rogelio, who was later
appointed as administrator of the estate. Petitioner Rogelio filed a project of partition
enumerating herein all the properties of the estate of Marcelino Sr. in accordance with the
inventory earlier filed with the intestate court. In the Order[9] dated May 16, 1995, the
court approved the project of partition adjudicating to petitioner Rogelio one-half (½)
share of the whole estate; and to respondents Ma. Elena and Marcelino Jr., the undivided
one-fourth (¼) share each of the enumerated properties. In the same Order, the Probate
Court had noted the sale of all the shares of the late Teresita which she inherited from her
deceased parents to petitioner Rogelio.[10]

On February 21, 2012, respondents Marcelino Jr. and Ma. Elena filed with the Regional
Trial Court (RTC), Branch 39, Iloilo City, a case[11] for annulment/rescission of sale of
shares of stocks and the exercise of their preemptive rights in Marsal corporation and
damages against petitioners Rogelio Florete, Sr. and the estate of the late Teresita F.
Menchavez, herein represented by her heirs, namely, Mary Ann Therese Menchavez,
Christine Joy F. Menchavez, Ma. Rosario F. Menchavez, Diane Grace Menchavez, Rosie
Jill F. Menchavez, and Ephraim Menchavez. Respondents claimed that the sale of
Teresita's 3,464 Marsal shares of stocks made by petitioner estate to petitioner Rogelio
was void ab initio as it violated paragraph 7 of Marsal's AOI since the sale was
made sans written notice to the Board of Directors who was not able to notify
respondents in writing of the petitioner estate and heirs' intention to sell and convey the
Marsal shares and depriving respondents of their preemptive rights.

On April 26, 2013, the RTC, as a Special Commercial Court, dismissed the complaint.
[12]
 It found that the sale of Teresita's Marsal shares of stocks to petitioner Rogelio, being
one of the incorporators and stockholders of Marsal at the time of sale, was not a sale to a
third party or outsider as would justify the restriction on transfer of shares in the AOI.
The RTC also found that laches and estoppel had already set in as respondents' inaction
for 17 years constituted a neglect for an unreasonable time to question the same; and that
respondents could not feign ignorance of the transactions as they knew of the same and
yet they did not do anything at that time.

Respondents filed with the CA a petition for review under, Rule 43 with prayer for the
issuance of a temporary restraining order and/or writ of preliminary injunction.
Petitioners filed their Comment thereto.

On August 3, 2015, the CA rendered its assailed Decision, the decretal portion of which
reads:

WHEREFORE, in view of the foregoing, the instant appeal is GRANTED, the Decision
dated April 26, 2013 of the Regional Trial Court, 6th Judicial Region, Branch 39, Iloilo
City, in SCC Case No. 12-049 for Annulment/Rescission of Sale of Shares of Stocks,
Pre-Emptive Rights and Damages is hereby REVERSED and SET ASIDE. Let a new one
be entered declaring the conveyance of 3,464 Marsal shares of respondents in favor of
Rogelio M. Florete Sr., NULL and VOID, in violation of Paragraph 7 of Marsal's Articles
of Incorporation.[13]

In so ruling, the CA found that Teresita's 3,464 Marsal shares of stocks were conveyed by
petitioner estate to petitioner Rogelio in a Compromise Agreement and Deed of
Assignment without first offering them to the existing stockholders as provided under
paragraph 7 of the AOI; that since the AOI is considered a contract between the
corporation and its stockholders, the sale of Teresita's shares in favor of petitioner
Rogelio constituted a breach of contract on the part of petitioner estate, hence, null and
void; and that it is inconsequential whether the transfer was made to one of the existing
stockholders of the closed corporation. Anent Atty. Muyco's acting as counsel of
petitioner Rogelio and Marsal in Teresita's intestate proceedings and who was presumed
to have transmitted to respondents his knowledge regarding the sale of Teresita's Marsal
shares to petitioner Rogelio, the CA ruled that the notice acquired from a third person
even if true was not the notice meant under paragraph 7 of the AOI; and that Atty. Muyco
admitted that he did not know of petitioner Rogelio's plan of acquiring Teresita's shares.
A void contract has no effect from the beginning, thus, the action for its nullity even if
filed 17 years later after its execution, cannot be barred by prescription for it is
imprescriptible; and the defense of laches is unavailing as it had been jurisprudentially
provided that courts should never apply the doctrine of laches earlier than the expiration
of time limited for the commencement of action at law.

Petitioners filed a motion for reconsideration, which was denied by the CA in a

Resolution dated February 19, 2016.

Hence, this petition filed by petitioners alleging the following assignment of errors:

I
THE COURT OF APPEALS GRIEVOUSLY ERRED IN REFUSING TO RULE ON
WHETHER OR NOT THE VERY INVALIDATION CLAUSE IN THE SUBJECT
SHARE TRANSFER RESTRICTION IS VOID FROM WHICH NO CAUSE OF
ACTION MAY ORIGINATE.

II

THE COURT OF APPEALS GRIEVOUSLY ERRED IN REFUSING TO RULE ON

WHETHER OR NOT THE SUBJECT SHARE TRANSFER RESTRICTION CAN BE
ENFORCED IN LIGHT OF THE CORPORATION CODE PROVISION WHICH
RECOGNIZES AS VALID ONLY SUCH RESTRICTIONS IN A CLOSE
CORPORATION AS DEFINED IN THE CODE, WHICH SUBJECT CORPORATION
IS NOT.

III

THE COURT OF APPEALS GRIEVOUSLY ERRED IN NOT RULING THAT

ASSUMING ARGUENDO THE SUBJECT SHARE TRANSFER RESTRICTIONS
ARE VALID, THE SAME CANNOT BE APPLIED TO THE QUESTIONED
TRANSFER OR SALE OF STOCK. IT NOT BEING A SALE TO OUTSIDERS,
AMONG OTHER MATTERS.

IV

THE COURT OF APPEALS GRIEVOUSLY ERRED IN NOT RULING THAT

RESPONDENTS' CAUSE OF ACTION, IF ANY, IS BARRED BY PRESCRIPTION.

THE COURT OF APPEALS GRIEVOUSLY ERRED IN NOT RULING THAT

RESPONDENTS' CAUSE OF ACTION, IF ANY, IS BARRED BY LACHES.

VI

THE COURT OF APPEALS GRIEVOUSLY ERRED IN NOT RULING THAT

RESPONDENTS ARE ESTOPPED BY THEIR DEEDS OR CONDUCT FROM
PURSUING THEIR CLAIM.

VII

THE COURT OF APPEALS GRIEVOUSLY ERRED IN NOT RULING THAT

RESPONDENTS' CAUSE OF ACTION, IF ANY, IS BARRED BY RES JUDICATA.[14]
The pivotal issue for resolution is whether the CA erred in ruling that the sale of
Teresita's 3,464 Marsal shares of stocks made by petitioner estate of Teresita to petitioner
Rogelio was in violation of paragraph 7 of Marsal's Article of Incorporation and hence
null and void and must be annulled or rescinded.

We rule in the affirmative.

The issue raised is factual. As a rule, the re-examination of the evidence proffered by the
contending parties during the trial of the case is not a function that this Court normally
undertakes inasmuch as the findings of fact of the Court of Appeals are generally binding
and conclusive on the Supreme Court.[15] The jurisdiction of this Court in a petition for
review on certiorari under Rule 45 of the Revised Rules of Court is limited to reviewing
only errors of law. A reevaluation of factual issues by this Court is justified when the
findings of fact complained of are devoid of support by the evidence on record, or when
the assailed judgment is based on misapprehension of facts, which we find in the case at
bar.

Preliminarily, petitioners' claim that Marsal is not a close corporation deserves scant
consideration as they had already admitted that it is. In his Affidavit[16] filed in this case,
petitioner Rogelio alleged, among others:

10. That MARSAL & CO., INC. is a close family corporation, the stockholder of which
are now three, since Teresita Menchavez is already dead, and so is our father Marcelino
Florete, Sr. x x x.

and in his Answer with Compulsory Counterclaim, [17] he stated:

2. That answering defendant admits the allegations set forth in paragraphs 5, 6, 7, 8, 9,

10, 11,12, 13, 14, 15 of the complaint; [18]

xxxx

16. That MARSAL & CO., INC., being a close family corporation, the presence of the
said provision of pre-emptive right did not invalidate the acquisition by one stockholder
of the share of another stockholder who exercised his pre-emptive right in view of the
knowledge of the same by the other stockholders and their inaction which is equivalent to
consent and acquiescence to the said acquisition.[19]

The allegations under paragraph 6 of the complaint which petitioner Rogelio admitted
stated:
6. MARSAL is a close corporation duly organized and registered with the Securities and
Exchange Commission (SEC) on 07 October 1966 with the authorized capital stock of
Five Hundred Thousand Pesos (P500,000.00). x x x.

7. As close corporation, all stocks issued by MARSAL are subject to restrictions on

transfer. x x x[20]

Petitioners judicially admitted that Marsal is a close corporation. Section 4, Rule 129 of
the Revised Rules of Court provides:

Sec. 4. Judicial admissions. An admission, verbal or written, made by a party in the

course of the proceedings in the same case, does not require proof. The admission may be
contradicted only by showing that it was made through palpable mistake or that no such
admission was made.

A party may make judicial admissions in (a) the pleadings, (b) during the trial, either by
verbal or written manifestations or stipulations, or (c) in other stages of the judicial
proceeding.[21] In Alfelor v. Halasan,[22] we held that:

A party who judicially admits a fact cannot later challenge that fact as judicial admissions
are a waiver of proof; production of evidence is dispensed with. A judicial admission also
removes an admitted fact from the field of controversy. Consequently, an admission
made in the pleadings cannot be controverted by the party making such admission and are
conclusive as to such party, and all proofs to the contrary or inconsistent therewith should
be ignored, whether objection is interposed by the party or not. The allegations,
statements or admissions contained in a pleading are conclusive as against the pleader. A
party cannot subsequently take a position contrary of or inconsistent with what was
pleaded.[23]

As Marsal is a close corporation, it is allowed under the Corporation Code to provide for
restrictions on the transfer of its stocks. We quote the pertinent provisions of the Code as
follows:

Sec. 97. Articles of incorporation. - The articles of incorporation of a close corporation

may provide:

1. For a classification of shares or rights and the qualifications for owning or holding the
same and restrictions on their transfers as may be stated therein, subject to the provisions
of the following section;

xxxx
Sec. 98. Validity of restrictions on transfer of shares. - Restrictions on the right to
transfer shares must appear in the articles of incorporation and in the by-laws as well as
in the certificate of stock; otherwise, the same shall not be binding on any purchaser
thereof in good faith. Said restrictions shall not be more onerous than granting the
existing stockholders or the corporation the option to purchase the shares of the
transferring stockholder with such reasonable terms, conditions or period stated therein.
If upon the expiration of said period, the existing stockholders or the corporation fails to
exercise the option to purchase, the transferring stockholder may sell his shares to any
third person.

The AOI of Marsal provides for the procedure for the sale of shares of stock of a
stockholder which we quote again for easy reference, to wit:

SEVENTH. x x x Any stockholder who desires to sell his share of stock in the company
must notify in writing the Board of Directors of the company of his intention to sell. The
Board of Directors upon receipt of such notice must immediately notify all stockholders
of record within five days upon receipt of the letter of said stockholder. Any stockholder
of record has the preemptive right to buy any share offered for sale by any stockholder of
the company on book value based on the balance sheet approved by the Board of
Directors. The aforementioned preemptive right must be exercised by any stockholder of
the company within 10 days upon his receipt of the written notice sent to him by the
Board of Directors of the offer to sell. Any sale or transfer in violation of the above terms
and conditions shall be null and void. The above terms and conditions must be printed at
the back of the stock certificate.[24]

Thus, the stockholder seller must notify in writing the Board of Directors of his intention
to sell, who, in turn, must notify all the stockholders of records within 5 days upon
receipt of such letter, and the stockholder must exercise the preemptive right within ten
days from notice of the Board, otherwise, the sale shall be null and void. Here, Teresita's
3,464 Marsal shares were sold by petitioner estate to petitioner Rogelio in a Compromise
Agreement and Deed of Assignment they entered into which was approved by the
Probate Court. The CA found that such sale of stocks was null and void as it violated
Paragraph 7 of their AOI.

We do not agree.

While it would appear that petitioner estate of Teresita, through its administrator Ephraim
and petitioner Rogelio, did not comply with the procedure on the sale of Teresita's Marsal
shares as stated under paragraph 7 of the AOI, however, it appeared in the records that
respondents had nonetheless been informed of such sale to which they had already given
their consent thereto as shown by the following circumstances:
First. Teresita died on September 19, 1989. Her husband Ephraim filed a petition for
letters of administration of her estate in 1992, and alleged the following:

xxxx

6. That the herein petitioner, as one of the legal heirs of the deceased, Teresita Florete
Menchavez, had on several occasions, requested decedent's brothers and sisters to make a
settlement and liquidation of the estate left by the said deceased Teresita Florete
Menchavez and to deliver it to all the legal heirs what is due to each and every one of
them, but this has not been done. x x x[25]

Petitioner Rogelio filed an Opposition thereto which was later amended to include
MARSAL & CO., INC. as represented by its President, herein petitioner. Notably, Atty.
Raul A. Muyco was the oppositors' counsel and he is also the husband of respondent Ma.
Elena. Subsequently, a Compromise Agreement and Deed of Assignment was entered
into between petitioner estate through Ephraim and petitioner Rogelio with respect to
Teresita's shares of stocks in various corporations which included the 3,464 shares in
Marsal. A Motion to Approve Compromise Agreement and Deed of Assignment was
filed by administrator Ephraim, through counsel, with the conformity of Atty. Muyco
which was approved by the probate court. It bears stressing that Atty. Muyco was not
only acting as counsel of petitioner Rogelio but also of Marsal. Thus, it would be
impossible for Atty. Muyco, who had the duty to protect Marsal's interest in the intestate
proceedings of Teresita's estate, not to have informed respondents of such compromise
agreement since they are the stockholders and Board of Directors of Marsal who would
be deprived of their preemptive right to the Marsal shares.

Second. The sale of all of Teresita's shares which she inherited from her deceased parents
which were sold to petitioner Rogelio, and which included the 3,464 Marshal shares, had
also been made known to respondents in the intestate proceedings to settle the estate of
Marcelino Florete, Sr., who died on October 3, 1990. Petitioner Rogelio was later
appointed as the administrator of the estate. In the Order dated May 16, 1995, the probate
court stated, among others, that:

x x x The said deceased left the following heirs, namely :

Rogelio M. Florete, Ma. Elena Florete Muyco and Marcelino Florete Jr.

Further the deceased had a daughter by the name of Teresita Florete-Menchavez who
predeceased him, having died on September 8, 1989 in the City of Iloilo leaving the
following heirs;

xxxx
On February 24, 1995, this Court has noted, as prayed by the counsel for the petitioner, of
the sale by Ephraim Menchavez, the special administrator of the intestate estate of the
late Teresita F. Menchavez, of all the shares of the late Teresita F. Menchavez inherited
from her deceased parents Marcelino and Salome Florete, to Rogelio M. Florete.

xxxx

On May 5, 1995, no other heirs aside from those mentioned earlier have appeared in
court to file their claim with regard to the property owned by the late Marcelino Florete,
Sr. This Court, therefore, declared that Marcelino Florete, Sr. who died intestate in the
City of Iloilo on October 3, 1990 had left only the following heirs, namely; 1. Rogelio M.
Florete, 2. Ma. Elena Florete Muyco; 3. Marcelino Florete Jr.; 4. Teresita Florete-
Menchavez. The last named heir predeceased the decedent and left the following
children, namely; 1. Mary Ann Therese Menchavez; 2. Christine Joy Menchavez; 3.
Rosie Jill Menchavez; 4. Diane Grace Menchavez; and 5. Ma. Rosario Menchavez.

All the shares of Teresita F. Menchavez, however, which she inherited from her parents
were sold by Ephraim Menchavez, the special administrator of the estate of Teresita
Menchavez, to petitioner Rogelio M. Florete. The sale was duly approved by the intestate
court.

As stated earlier, on April 27, 1995, the administrator, through counsel, filed a Project of
Partition enumerating therein all the properties of the estate in accordance with the
inventory filed before this Court on March 3, 1995, which properties are enumerated as
follows:

I. REAL PROPERTIES

 x x x x

II. PERSONAL PROPERTIES

 x x x x 

This court hereby adjudicates the above-mentioned properties to the following heirs:

1. Rogelio M. Florete, married to Imelda Florete, the one half share of the whole estate;

2. Ma. Elena Florete Muyco, married to Raul Muyco, the undivided ¼ share of the above-
enumerated properties;

3. Marcelino M. Florete, Jr., married to Susan Florete, the undivided ¼ share of all the
properties as above enumerated.
This proceeding is hereby considered closed and terminated.

Furnish the Register of Deeds of the province of Iloilo and the province of Rizal with
copies of this Order.[26]

There was already substantial compliance with paragraph 7 of the AOI when respondents
obtained actual knowledge of the sale of Teresita's 3,464 Marsal shares to petitioner
Rogelio as early as 1995. In fact, respondents had already given their consent and
conformity to such sale by their inaction for 17 years despite knowledge of the sale.
Moreover, they had already waived the procedure of the stockholder's sale of stocks as
provided under Paragraph 7 of the AOI. In People v. Judge Donato,[27] We explained the
doctrine of waiver as follows:

Waiver is defined as "a voluntary and intentional relinquishment or abandonment of a

known existing legal right, advantage, benefit, claim or privilege, which except for such
waiver the party would have enjoyed; the voluntary abandonment or surrender, by a
capable person, of a right known by him to exist, with the intent that such right shall be
surrendered and such person forever deprived of its benefit; or such conduct as warrants
an inference of the relinquishment of such right; or the intentional doing of an act
inconsistent with claiming it."

As to what rights and privileges may be waived, the authority is settled:

x x x the doctrine of waiver extends to rights and privileges of any character, and, since
the word "waiver" covers every conceivable right, it is the general rule that a person may
waive any matter which affects his property, and any alienable right or privilege of which
he is the owner or which belongs to him or to which he is legally entitled, whether
secured by contract, conferred with statute, or guaranteed by constitution, provided such
rights and privileges rest in the individual, are intended for his sole benefit, do not
infringe on the rights of others, and further provided the waiver of the right or privilege is
not forbidden by law, and does not contravene public policy; and the principle is
recognized that everyone has a right to waive, and agree to waive, the advantage of a law
or rule made solely for the benefit and protection of the individual in his private capacity,
if it can be dispensed with and relinquished without infringing on any public right, and
without detriment to the community at large x x x.[28]

Moreover, Section 99 of the Corporation Code provides for the effects of transfer of
stock in breach of qualifying conditions, to wit:

Sec. 99. Effects of issuance or transfer of stock in breach of qualifying conditions. -

xxxx
3. If a stock certificate of any close corporation conspicuously shows a restriction on
transfer of stock of the corporation, the transferee of the stock is conclusively presumed
to have notice of the fact that he has acquired stock in violation of the restriction, if such
acquisition violates the restriction.

4. Whenever any person to whom stock of a close corporation has been issued or
transferred has, or is conclusively presumed under this section to have, notice either (a)
that he is a person not eligible to be a holder of stock of the corporation, or (b) that
transfer of stock to him would cause the stock of the corporation to be held by more than
the number of persons permitted by its articles of incorporation to hold stock of the
corporation, or (c) that the transfer of stock is in violation of a restriction on transfer of
stock, the corporation may, at its option, refuse to register the transfer of stock in the
name of the transferee.

5. The provisions of subsection (4) shall not applicable if the transfer of stock, though
contrary to subsections (1), (2) of (3), has been consented to by all the stockholders of the
close corporation, or if the close corporation has amended its articles of incorporation in
accordance with this Title.

Clearly, under the above-quoted provision, even if the transfer of stocks is made in
violation of the restrictions enumerated under Section 99, such transfer is still valid if it
has been consented to by all the stockholders of the close corporation and the corporation
cannot refuse to register the transfer of stock in the name of the transferee. In this case,
We find that the sale of Teresita's 3,464 Marsal shares had already been consented to by
respondents as We have discussed, and may be registered in the name of petitioner
Rogelio.

We find that there is indeed no violation of paragraph 7 of Marsal's Articles of

Incorporation. We need not discuss the other issues raised in the petition.

WHEREFORE, premises considered, the petition for review is GRANTED. The

Decision dated August 3, 2015 and the Resolution dated February 19, 2016 rendered by
the Court of Appeals in CA-G.R. SP No. 07673 are hereby REVERSED and SET
ASIDE.

SO ORDERED.

FIRST DIVISION
[ G.R. No. 189590, April 23, 2018 ]
REPUBLIC OF THE PHILIPPINES, PETITIONER, V. HON.
SANDIGANBAYAN, ROMEO G. PANGANIBAN, FE L. PANGANIBAN,
 GERALDINE L. PANGANIBAN, ELSA P. DE LUNA AND PURITA P.
SARMIENTO, RESPONDENTS.

DECISION

LEONARDO-DE CASTRO,[*] J.:

This Petition for Certiorari under Rule 65 of the Rules Court, as amended, seeks

the nullification and setting aside of the portion of the Resolutions dated March 18,
2009[1] and July 31, 2009[2] of the Sandiganbayan in Civil Case No. 0192, entitled
"Republic of the Philippines v. Romeo Gatdula Panganiban, et al." The Resolution dated
March 18, 2009 partly granted the Demurrer to Evidence filed by private respondents
Romeo Panganiban (Romeo), Fe Labunos Panganiban (Fe), Geraldine Labunos
Panganiban (Geraldine), Elsa Panganiban De Luna (Elsa), and Purita Panganiban
Sarmiento (Purita) (Romeo, et al.); while the Resolution dated July 31, 2009 denied
petitioner Republic of the Philippines' (Republic) motion for reconsideration thereto.

The Facts of the Case

On September 27, 2004, petitioner Republic, through the Office of the Ombudsman
(Ombudsman), filed before public respondent Sandiganbayan a petition[3] for the
forfeiture of unlawfully acquired properties of private respondents Romeo, et al.,
including Geraldine Labunos Panganiban, pursuant to Section 2 of Republic Act No.
1379, entitled "An Act Declaring Forfeiture In Favor Of The State Any Property Found
To Have Been Unlawfully Acquired By Any Public Officer Or Employee And Providing
For The Proceedings Therefor." Particularly, petitioner Republic sought the forfeiture of
five real properties described[4] as follows, which are claimed to be valued at not less than
Forty Million Seven Hundred Sixty-Six Thousand Three Hundred Pesos
(P40,766,300.00):

Acquisition
  Description Annex(es)
Cost/Value
       
a. Residential House and Lot covered by, and P1,280,000.00 "D & E"
described under, TCT No. 307495 in the name of
Spouses Romeo G. Panganiban and Fe L.
Panganiban, consisting of 256 square meters,
located at Grand Villas, Batong Malake, Los Banos,
Laguna [hereinafter referred to as the "Los Baños
Property"] x x x.
       
 b. Commercial Four-Storey Building and Lots P2,000,000.00 "F, G, H &
covered by Tax Declarations (sic) No. (sic) 1999- I"
25-003-00041 and 1999-25-003-00042, and
described under TCT No. 150693 and TCT No.
150694, [in the name of Romeo Panganiban]
located at Regional St., Sta. Cruz, Laguna
[hereinafter referred to as the "Sta. Cruz
Property"] x x x.
       
c. Residential House and Lot located at No. P24,800,000.00 "J & K"
430 San Bartolome St., Ayala Alabang Village,
Muntinlupa City covered by, and described under,
TCT No. 1577 and Tax Declaration (RPA Form) No.
126-00-009-39-012-0000 [in the name of Elsa P. De
Luna, hereinafter referred to as the "Ayala
Alabang Property"].
       
d. Three-bedroom House and Lot located at P12,540,300.00 "L"
No. 2840 Heritage Drive, Pasadena, Los Angeles,
California, [registered in the name of "Fe
Panganiban and Geraldine Panganiban,"
hereinafter referred to as the  "Los Angeles
Property"].
 
e. Residential Lot, consisting of 200 square P146,000.00 "M" & "N"
meters, located at Barangay Callos, Sta. Cruz,
Laguna, covered by Tax Declaration No. 1999-25-
007-01027 and described under TCT No. T-110804
[declared in the name of "Spouses Romeo and Fe
Panganiban," hereinafter referred to as
the "Callos-Sta. Cruz Property"].

as well as such other additional properties amounting to, or in the value of, Ten Million
Two Hundred Thirty-Six Thousand Seven Hundred Seventy-One Pesos and Sixty
Centavos (P10,236,771.60).

In seeking the forfeiture of the aforementioned properties, petitioner Republic alleged

that private respondent Romeo owned the same and that they were unlawfully acquired
during his incumbency as Regional Director at the Department of Public Works and
Highways.[5] Private respondents Fe (Romeo's wife), Elsa and Purita (Romeo's sisters),
including Geraldine (Romeo's daughter), were made party respondents to the forfeiture
case on the basic premise that they were holding said properties for and on behalf of
private respondent Romeo.
Petitioner Republic anchored its prayer for forfeiture on the fact that private respondent
Romeo's networth in 1986 per his Statement of Assets, Liabilities and Networth (SALN)
was only P455,000.00; but in his 2001 SALN, it had already ballooned
to P13,208,590.50. The bloat could not be explained by private respondent Romeo's
Service Record showing the total amount of government salary that he earned from
January 1, 1986 to December 31, 2001 to be just P2,516,818.90 - which is
P10,236,771.60[6] less than his stated networth by the end of 2001.

And juxtaposed with the supposed value of the five real properties, i.e., P40,766,300.00,
the latter is way out of proportion to private respondent Romeo's 15-year accumulated
income of P2,516,818.90. Petitioner Republic also took note of the fact that private
respondent Romeo made eight foreign travels between 1999 and 2004; while his wife,
private respondent Fe, made 28 travels abroad during the same period.

Petitioner Republic concluded that the discrepancy of P10,236,771.60,[7] plus the

aggregate P40,766,300.00 value of the five real properties, all constituted ill-gotten
wealth.

Thus, the Republic prayed –

1. Before hearing, a writ be issued commanding respondents to show cause why their
assets, more particularly enumerated in paragraph 5 hereof amounting to at least FORTY
MILLION SEVEN HUNDRED SIXTY-SIX THOUSAND THREE HUNDRED PESOS
(P40,766,300.00), and such other additional properties amounting, or the value of which
is equivalent to, TEN MILLION TWO HUNDRED THIRTY-SIX THOUSAND SEVEN
HUNDRED SEVENTY-ONE AND 60/100 PESOS (P10,236,771.60) or a total of at least
FIFTY-ONE MILLION THREE THOUSAND SEVENTY-ONE AND 60/100 PESOS
(P51,003,071.60), which are in excess of respondent Romeo G. Panganiban's lawful and
legitimate income, should not be forfeited in favor of the government; and

2. After trial, the above-described real properties enumerated in paragraph 5 hereof

amounting to at least FORTY MILLION SEVEN HUNDRED SIXTY-SIX THOUSAND
THREE HUNDRED PESOS (P40,766,300.00), and such other additional properties
amounting, or the value of which is equivalent to, TEN MILLION TWO HUNDRED
THIRTY-SIX THOUSAND SEVEN HUNDRED SEVENTY-ONE AND 60/100 PESOS
(P10,236,771.60), be declared forfeited in favor of the petitioner.[8]

In his Answer, private respondent Romeo denied the allegations, and averred that his wife
and his sisters had the financial capacity to purchase the real estate properties registered
in their names; and that private respondent Fe contributed substantially to the family
income as a business owner. He disavowed any personal participation in the purchase of
the Ayala Alabang and Los Angeles properties. But he admitted that the Los Angeles
property was actually purchased by his daughter Geraldine and his wife.[9]
Private respondents Fe, Elsa, and Purita filed a Joint Answer echoing the same denial and
special and affirmative defenses raised by private respondent Romeo.

Geraldine, however, did not file any Answer; thus, she was declared in default by the
Sandiganbayan.

Upon the conclusion of the presentation of petitioner Republic's evidence-in-chief, it filed

its Formal Offer of Exhibits.[10]

EXHIBIT DESCRIPTION PURPOSE

A Original copy of Romeo G. Panganiban's 1. To prove that
service record dated April 28, 2005 respondent Romeo was a
B Certified photocopy of Romeo G. public officer and held various
Panganiban's appointment dated March 8, 2000 positions in the government
C Certified photocopy of Romeo G. until he was dismissed from
Panganiban's Panunumpa sa Katungkulan dated office by virtue of the Court of
March 22, 2000 Appeals decision in a case for
grave misconduct and
dishonesty; and

2. As part of the testimony

of Eduardo Dimaculangan,
who checked, verified, and
certified the documents.
D Original copy of Analytical Presentation of 1. To show that there
the Net Worth of Romeo G. Panganiban in Relation are great disparities between
to his Income from Employment in Government respondent Romeo's lawful
and Assets Declared income and the increase in his
assets;

2. To prove that respondent

Romeo has acquired assets
during his incumbency, the
amount of which is
manifestly out of proportion
to his salary and other
lawful income; and

3. As part of the testimony

of David Lucero, who
prepared the document and
is the Associate Graft
Investigating Officer IV of
the Office of the
Ombudsman.
E Certified photocopy of Romeo G. 1. To prove the
Panganiban's SALN dated December 31, 2001 disparities in respondent
Romeo's lawful income and
the increase in his reported
properties;

2. As part of the testimony

of Rolando M. Bone, who
certified the document and
is the Chief of the Records
Division of DPWH, Central
Office; and

3. Respondents admitted the

existence, authenticity, and
due execution of the
document.
F Certified photocopy of TCT T-307495 which 1. To prove the
is the land title of Saccay Grand Villas house and lot acquisition by respondent
in Los Banos, Laguna Romeo of the Saccay Grand
G Certified photocopy of Deed of Absolute Villas property under the
Sale dated June 28, 1994 executed by Crescent name of Spouses Romeo and
Holdings Corporation in favor of Spouses Fe Panganiban for
Panganiban P1,280,000.00 on September
9,1994;

2. To prove that as of March

2005, the title of Saccay
Grand Villas property is in
the name of respondents
Romeo and Fe;

3. As part of the testimony

of Chona Undasan, Records
Officer III of the Registry of
Deeds of Calamba, Laguna;
and

4. Respondents admitted the

existence, authenticity, and
due execution of these
documents.
H Certified photocopy of Declaration of Real 1. To prove that the
Property of Spouses Romeo and Fe Panganiban tax declaration of the Saccay
with Property Index No. 023-11-005-27-270 (246) Grand Villas Property is in the
I Certified photocopy of Declaration of Real name of Spouses Romeo and
Property of Spouses Romeo and Fe Panganiban Fe and that they are paying
with Property Index No. 023-11-005-27-270 (246) the real estate tax of said
and Tax Declaration No. 005-3621 property;
J Certified photocopy of Declaration of Real
Property of Spouses Romeo and Fe Panganiban 2. As part of the testimony
with Property Index No. 023-11-005-27-270 (246) of Noel L. Veracruz,
and Tax Declaration No. 005-3395 Provincial Assessor of
K Certified photocopy of Declaration of Real Laguna; and
Property of Spouses Romeo and Fe Panganiban
with Property Index No. 023-11-005-27-270 (246) 3. Respondents admitted
and Tax Declaration No. 005-4509 that it is a faithful
reproduction of its original.
L Certified photocopy of Declaration of Real
Property of Spouses Romeo and Fe Panganiban
with Property Index No. 023-11-005-27-270 (246)
and Tax Declaration No. 005-4195
M Certified photocopy of Deed of Sale 1. To prove that the
executed by Walfrido T. Hicban in favor of Romeo two parcels of land situated in
Panganiban dated June 2, 1994 Regidor St., Sta. Cruz, Laguna
N Certified photocopy of TCT No. T-150693 and covered by a Deed of Sale
in the name of Romeo Panganiban dated June 21, was sold to respondent
1994 Romeo on June 2, 1994 for
P200,000.00;

2. As part of the testimony

of Atty. Julius Hidalgo,
Register of Deeds of Sta.
Cruz, Laguna; and

3. Respondents admitted
its existence, due
execution, and authenticity
O Certified photocopy of Declaration of Real 1. To prove that the
Property of Romeo Panganiban with Property lot covered by TCT T-150693
Index No. 023-25-003-01-023 and Tax Declaration located in Regidor St., Sta.
No. 0294 Cruz, Laguna is declared in the
P Certified photocopy of Declaration of Real name of respondent Romeo
Property of Romeo Panganiban with Property for tax purposes;
Index No. 023-25-003-01-023 and Tax Declaration
No. 0041 2. As part of the testimony
Q Certified photocopy of Declaration of Real of Noel L. Veracruz,
Property of Romeo Panganiban with Property Provincial Assessor of
Index No. 023-25-003-01-023 and Tax Declaration Laguna; and
No. 0041
 3. Respondent admitted that
R Certified photocopy of TCT No. T-150694 in 1. To prove that the
the name of Romeo Panganiban dated June 21, property in Regidor St., Sta.
1994 Cruz, Laguna is in the name of
respondent Romeo and it was
issued on June 21, 1994;

2. As part of the testimony

of Atty. Julius Hidalgo,
Register of Deeds of Sta.
Cruz, Laguna; and

3. Respondent admitted its

existence, authenticity, and
due execution.
S Certified photocopy of Declaration of Real 1. To prove that the
Property of Romeo Panganiban with Property other lot covered by TCT T-
Index No. 023-25-003-01-024 and Tax Declaration 150694 located in Regidor St.,
No. 0295 Sta. Cruz, Laguna is declared in
T Certified photocopy of Declaration of Real the name of respondent
Property of Romeo Panganiban with Property Romeo for tax purposes;
Index No. 023-25-003-01-024 and Tax Declaration
No. 0042 2. As part of the testimony
of Noel L. Veracruz,
Provincial Assessor of
Laguna; and

3. Respondent admitted that

it is a faithful reproduction
of the original
U Certified photocopy of Declaration of Real 1. As part of the
Property of Romeo Panganiban with Property testimony of Noel L. Veracruz;
Index No. 023-25-003-01-024 and Tax Declaration and
No. 0042
V Certified photocopy of Declaration of Real 2. Respondent admitted its
Property of Romeo Panganiban with Property existence, authenticity, and
Index No. 023-25-003-01-024-1001 and Tax due execution.
Declaration No. 0043
W Original copy of a letter addressed to the 1. To prove the
Office of Special Prosecutor, Office of the existence of building permits
Ombudsman dated April 6, 2005 from Engr. Pablo issued to Fe Panganiban of
M. Magpily, Jr., Municipal Engineer, Office of the Regidor St., Sta. Cruz, Laguna,
 Municipal Engineer and Building Official, for a three-storey commercial
Municipality of Sta. Cruz, Province of Laguna building;
X Highlighted portion of the certified
photocopy of record of Building Permit No. 94- 2. The estimated
0111 granted to Fe Panganiban dated August 5, construction cost of the
1994 three-storey building is
Y Certified photocopy of record of Building P2,150,000.00; and
Permit Application of Fe Panganiban
3. This building was not
reported by respondent
Romeo in his SALNs.
Z NONE  
AA Photocopy of Property Profile in the name 1. To prove that the
of Fe and Geraldine Panganiban with address at house and lot at 2840
2840 Heritage Drive, Pasadena, California, USA Heritage Drive, Pasadena,
BB Photocopy of Sales Coraparables California, USA was acquired
indicating the name of Fe and Geraldine by the family of respondent
Panganiban with address at 2840 Heritage Drive, Romeo on May 24, 2000 in
Pasadena, California, USA the name of Fe and Geraldine
Panganiban, the latter being
22 years old at the time of the
sale;

2. Respondent admitted
the purchase in his
counter-affidavit dated
October 17, 2003 and
submitted to the Office of
the Ombudsman
CC Certified photocopy of TCT No. T-110804 1. To prove that
dated June 16, 1988 in the name of Spouses respondent Romeo owns a
Romeo and Fe Panganiban 200 sq. m. lot in Sta. Cruz,
Laguna;

2. As part of the testimony

of Atty. Julius Hidalgo,
Register of Deeds of Sta.
Cruz, Laguna; and

3. Respondent admitted the

existence, authenticity, and
due execution of the
document
DD Certified photocopy of Declaration of Real 1. To prove that the
Property of Spouses Romeo and Fe Panganiban 200 sq. m. lot in Bagumbayan,
 with Tax Declaration No. 25669 Sta. Cruz, Laguna covered by
EE Certified photocopy of Declaration of Real TCT No. T-110804 is in the
Property of Spouses Romeo and Fe Panganiban name of Spouses Romeo and
with Tax Declaration No. 0922 Fe Panganiban for tax
FF Certified photocopy of Declaration of Real purposes;
Property of Spouses Romeo and Fe Panganiban
with Tax Declaration No. 0989 2. As part of the testimony
GG Certified photocopy of Declaration of Real of Noel L. Veracruz,
Property of Spouses Romeo and Fe Panganiban Provincial Assessor of
with Tax Declaration No. 01027 Laguna; and

3. Admitted as faithful
reproduction of the original
HH Certified true copy of SALN of Romeo G. 1. To prove that these
Panganiban as of Dec. 31, 1986 are the existing records of
II Certified true copy of SALN of Romeo G. SALN of respondent Romeo in
Panganiban as of Dec. 31, 1987 the Office of the Ombudsman;
JJ Certified true copy of SALN of Romeo G.
Panganiban as of Dec. 31, 1988 2. These SALNs were
KK Certified true copy of SALN of Romeo G. attached to an undated letter
Panganiban as of Dec. 31, 1989 of respondent Romeo to
LL Certified true copy of SALN of Romeo G. Atty. Ferwin Macabenta,
Panganiban as of Dec. 31, 1990 Graft Investigation Officer
of the Office of the
MM Certified true copy of SALN of Romeo G.
Ombudsman and a member
Panganiban as of Dec. 31, 1991
of the OMB Task Force of
NN Certified true copy of SALN of Romeo G.
Public Works and
Panganiban as of Dec. 31, 1992 Highways. The letter was
submitted in connection
with OMB Case No. 0-93-
9030 entitled Anonymous v.
Romeo Panganiban; and

3. As part of the testimony

of Jesus Salvador, Records
Officer of the Office of the
Ombudsman
OO Certified true copy of SALN of Romeo G. 1. To show that there
Panganiban as of Dec. 31, 1993 has been a pattern of
substantial increases in the net
worth of respondent Romeo
from 1986 to 2001;

2. As part of the records of

preliminary investigation;
 and

3. As one of the basis of

Exhibit "D," the Analytical
Presentation of the Net
Worth of Romeo
Panganiban.
PP Certified true copy of SALN of Romeo G. 1. To prove that there
Panganiban as of Dec. 31, 1994 is substantial increases in
QQ Certified true copy of SALN of Romeo G. respondent Romeo's net
Panganiban as of Dec. 31, 1995 worth, which is not
RR Certified true copy of SALN of Romeo G. proportionate to the increase
Panganiban as of Dec. 31, 1996 in his salary. These exhibits
SS Certified true copy of SALN of Romeo G. were the basis of the
Panganiban as of Dec. 31, 1997 computations in Exhibit D;
TT Certified true copy of SALN of Romeo G.
Panganiban as of Dec. 31, 1998 2. As part of the testimony
of Eduardo Dimaculangan,
Human Resource
Management Officer of
DPWH Central Office; and

3. To prove that
Dimaculangan verified and
reviewed these documents
which are under his custody
and forms part of the
personnel records of
respondent Romeo at the
DPWH Central Office
UU Certified true copy of SALN of Romeo G. 1. As part of the
Panganiban as of Dec. 31, 1999 testimony of Sofia G. Salinas,
VV Certified true copy of SALN of Romeo G. Records Officer of DPWH
Panganiban as of Dec. 31, 2000 Regional Office IV-A, EDSA,
Quezon City

2. To prove the substantial

increase in the networth of
respondent Romeo which
are not proportionate to the
increase in his salary; and

3. Respondent admitted the

existence, authenticity, and
 due execution of these
WW Certified true copy of SALN of Romeo G. 1. As part of the
Panganiban as of Dec. 31, 2002 testimony of Rolando M.
Bone, Chief of the Records
Division of DPWH, Central
Office;

2. To prove the substantial

increases in the networth of
respondent Romeo which
are not proportionate to the
increase in his salary;

3. Respondent admitted the

existence, authenticity, and
due execution of these
documents
XX Certified true copy of SALN of Purita P. 1. As part of the
Sarmiento as of Dec. 31, 2001 testimony of Arnel Larrobis of
YY Certified true copy of SALN of Purita P. OMB-Luzon;
Sarmiento as of Dec. 31, 2002
ZZ Certified true copy of SALN of Purita P. 2. To prove that respondent
Sarmiento as of Dec. 31, 2003 Purita, sister of respondent
Romeo, never declared the
Saccay Grand Villas
property in her SALN
despite their claim that she
purchased it from her
brother Romeo in December
1994
AAA Photocopy of certification dated March 1. As part of the
31, 2005 issued by Joseph Garret L. Suyao, Section testimony of Joseph Garret L.
Head-Collections, Home Cable Suyao;

2. To prove that the cable

subscription of the house
at 430 San Bartolome St.,
Ayala Alabang Village,
Muntinlupa is in the name
of respondent Fe
Panganiban, wife of
respondent Romeo
BBB Original copy of certification dated March 1. To prove that the
 21, 2005 issued by Elias S. Olasiman, Bureau of travel records of respondent
Immigration Spouses Romeo and Fe were
CCC Attachment list of Exhibit BBB prepared and certified by an
DDD Original copy of certification dated March authorized officer;
21, 2005 issued by Elias S. Olasiman, Bureau of
Immigration 2. To prove that respondent
EEE Attachment list of Exhibit DDD Fe used the address of the
Ayala Alabang property in
her travel records;

3. To prove that within

January 1, 1992 to March
15, 2005, respondent Romeo
had a total of 28 travels,
while his wife, respondent
Fe, had a total of 60 travels
within January 1, 1993 to
March 2005;

4. Respondent stipulated on
the above manifestations
made by the prosecution;
and

5. As part of the testimony

of Elias Olasiman
FFF Certified Declaration of Spouses 1. As part of the
Panganiban Declaration photocopy of of Real testimony of Noel L. Veracruz,
Property Romeo and Fe with Tax No. 2236 Provincial Assessor of Laguna;
GGG Certified Declaration of Spouses
Panganiban Declaration photocopy of of Real 2. To prove that the
Property Romeo and Fe with Tax No. 01517 following properties are
HHH Certified photocopy of Declaration of Real declared in the name of
Property of Spouses Romeo and Fe Panganiban Spouses Romeo and Fe for
with Property Index No. 023-11-005-27-238 and tax purposes:
Tax Declaration No. 005-4637;
III Certified photocopy of Declaration of Real
a. Lot No. 2217 situated at
Brgy. Calios, Sta. Cruz,
Property of Spouses Romeo and Fe Panganiban
Laguna;
with Property Index No. 023-11-005-27-238 and
Tax Declaration No. 005-431
b. Lot and house covered by
JJJ Certified photocopy of Declaration of Real TCT 341189 situated at
Property of Spouses Romeo and Fe Panganiban Batong Malake, Los Banos,
with Tax Declaration No. 15382 Laguna,
KKK Certified photocopy of Declaration of Real
Property of Spouses Romeo and Fe Panganiban
 with Tax Declaration No. 2465
LLL Certified photocopy of Declaration of Real
Property of Spouses Romeo and Fe Panganiban
with Tax Declaration No. 1487
MMM Certified photocopy of Declaration of Real
Property of Spouses Romeo and Fe Panganiban
with Tax Declaration No. 1534
NNN Certified photocopy of Declaration of Real
Property of Spouses Romeo and Fe Panganiban
with Tax Declaration No. 01518
OOO Certified photocopy of Declaration of Real
Property of Spouses Romeo and Fe Panganiban
with Tax Declaration No. 24975 c. Lot No. 2219-E situated
PPP Certified photocopy of Declaration of Real at Brgy. Calios, Sta. Cruz,
Property of Spouses Romeo and Fe Panganiban Laguna; and
with Tax Declaration No. 0923
QQQ Certified photocopy of Declaration of Real 3. Respondent admitted all
Property of Spouses Romeo and Fe Panganiban the documents as faithful
with Tax Declaration No. 0990 reproduction of the original
RRR Certified photocopy of Declaration of Real
Property of Spouses Romeo and Fe Panganiban
with Tax Declaration No. 01028
SSS Duplicate original copy of undated letter 1. To prove that
from respondent Romeo addressed to Atty. J. respondent Romeo submitted
Celrin M. Macavinta, GIO I, Member, OMB Task copies of his SALNs attached
Force on Public Works and Highways to the original copy of the
letter. The SALNs submitted
cover the years 1986 to 1992;
and

2. As part of the testimony

of Jesus G. Salvador
TTT Original copy of memorandum for Melchor 1. As part of the
Arthur H. Carandang, OIC-Asst. Ombudsman, FIRO testimony of David Lucero,
from David A. Lucero, AGIO I dated March 19, 2004 Associate Graft Investigation
Officer IV of the Office of the
Ombudsman; and

2. To prove that a fact-

finding investigation was
conducted by the Fact-
Finding and Intelligence
Bureau of the Office of the
Ombudsman
 UUU Original copy of a letter dated July 23, 1. As part of the
2003 addressed to respondent Romeo G. testimony of Januario G.
Panganiban from Atty. Virgilio T. Pablico, Chief, Mendoza who testified that
Special Investigation Branch, Anti-fraud and respondent Romeo's sister,
Commercial Crimes Division, PNP CIDG respondent Elsa, actually
VVV Original copy of a letter dated July 23, resides in her house at
2003 addressed to respondent Elsa P. De Luna Moonwalk, Paranaque and
from Atty. Virgilio T. Pablico, Chief, Special not in Ayala Alabang, and that
Investigation Branch, Anti-fraud and Commercial Januario Mendoza personally
Crimes Division, PNP CIDG delivered Exhibit to
WWW Original copy of memorandum for C. Lo respondent Elsa;
dated July 24, 2003 from Januario G. Mendoza,
Crime Investigator II, DY Legal Office, CIDG 2. To prove that the CIDG
conducted an investigation
on respondent Romeo's
properties; and

3. To prove that the house

and lot in Ayala Alabang
is actually purchased,
owned, and is being used
by respondent Romeo

Public respondent Sandiganbayan admitted all of petitioner Republic's documentary

exhibits except Exhibit "AA," or the Property Profile in the name of Fe and Geraldine
Panganiban with address at No. 2840 Heritage Drive, Pasadena, Los Angeles,
California; and Exhibit "BB," or the Sales Comparables indicating the name of Fe and
Geraldine Panganiban with address at No. 2840 Heritage Drive, Pasadena, Los Angeles,
California – both for being mere photocopies.[11]

Thereafter, private respondents Romeo, et al., filed a Demurrer to Evidence with leave of

court seeking the dismissal of the petition on the ground that petitioner Republic failed to
sufficiently prove that private respondent Romeo unlawfully acquired the five real
properties and other amounts subject of the forfeiture proceeding. In addition, they
argued that petitioner Republic failed to refute the legitimate and legally binding
ownership of private respondent Purita of the Los Baños Property, and private respondent
Elsa of the Ayala Alabang Property.[12]

The Ruling of the Sandiganbayan

In a Resolution dated March 18, 2009, the Sandiganbayan partly granted the demurrer to
evidence, the dispositive portion of which reads:
WHEREFORE, premises considered, the Demurrer to Evidence is partly granted in that
for the property listed in pages 5 and 6 of the petition, there is a need to present
countervailing evidence by the respondents with respect to the property described in par
(a)[13] - the Residential House and Lot covered by TCT No. 307495 in the name of
spouses Romeo G. Panganiban and Fe L. Panganiban and par (b)[14] - the Commercial
three-storey Bldg. covered by TCT No. 150693 and TCT No. 150694.

Respondents are likewise directed to present proofs to fully explain how they were able
to finance the many foreign travels specified in paragraphs 8 and 9 of the Petition.

With respect to the other properties[15] alleged in the Petition, We accord affirmative relief
to the prayer in Respondents' Demurrer to Evidence and hereby dismiss the Petition
insofar as the same are concerned.[16]

The Sandiganbayan made the following findings:

Let us first tackle the Residential House and Lot located at No. 430 San Bartolome
St., Ayala Alabang Village, Muntinlupa City covered by, and described under, TCT
No. 1577 and Tax Declaration No. 126-00-009-39-012-0000 with a value of P24,800,
[000].00 x x x. The said property is in the name of Elsa P. de Luna widow under TCT
No. 1577 (Exh. "8") and was acquired through a Deed of Absolute Sale from spouses
Jose and Concepcion Singson as early as September 29, 1999 (Exh. "4"). The only
evidence adduced by the plaintiff to support its claim that the said property belonged to
respondent Romeo Panganiban was that his wife Fe Panganiban has listed the property in
her travel documents as her address, and that there was a [S]ky [C]able account with the
same address of the said property in the name of respondent's] wife Fe Panganiban. We
can not sustain the assertion of the plaintiff. Those facts can not defeat the ownership of
the property evidenced by a Torrens Title, and a Deed of Absolute Sale from the former
owner. The usage of the said premises [by Romeo and Fe] is not unnatural considering
that the public respondent and his wife Fe Panganiban are residing in Callos, Sta. Cruz,
Laguna, and respondent Elsa Panganiban de Luna is the sister of Romeo Panganiban.
Being siblings it is natural and proper for the brother and sister to make things convenient
for each other.

Petitioner would also asseverate that the property located in Los Angeles California - that
is a three-bedroom house and lot at 2840 Heritage Drive, Pasadena, Los Angeles,
California, U.S.A. with a value of Twelve Million Five Hundred Forty Thousand Three
Hundred Pesos (P12,540,300.00) x x x is respondent Romeo Panganiban's property in
excess of his lawful income. As proof of its claim, petitioner presented Exhibit "AA"
which is a mere photocopy of Property Profile in the name of Fe and Geraldine
Panganiban, and Exh. "BB" which is a photocopy of Sales Comparables indicating the
name of Fe and Geraldine Panganiban with the allegation that there was an admission by
the public respondent of supposed purchase in his counter-affidavit. Since we denied
admission of Exhibits "AA" and "BB", and the alleged counter-affidavit was not even
marked by the petitioner as its exhibit, We can not rule and resolve that this property was
acquired by the [private] respondent while he was a public [officer] and even before or
after he was a public officer. Petition for forfeiture of property must be supported and
sustained by evidence admissible under the Rules of Court just like any other case. The
Courts ruling denying the admission of Exhs. "AA" and "BB" was not even
questioned by the petitioner.

With respect to the Residential House and Lot covered by and described under TCT No.
307495 in the name of spouses Romeo and Fe Panganiban consisting of 256 sq. meters
located at Grand Villas, Batong Malake, Los Baños, Laguna x x x, We resolve there is a
need for respondent Romeo Panganiban to explain the circumstances surrounding the
same. If as appearing in Exhibit "1" of the defense that the same has been sold to
respondent Purita Sarmiento even as early as December 1994, We can not understand
why up to the present the same has not been transferred in the name of the vendee. The
consideration of the Deed of Absolute Sale between Crescent Holdings Corp. and
spouses Romeo and Fe Panganiban amounted to One Million Two Hundred Eighty
Thousand (P1,280,000.00) pesos which could be considered a considerable amount at
that time, it is, we feel, unnatural and not in accordance with human behavior why up to
the time the petition for forfeiture was filed, there has been no move on the part of the
respondent Purita Sarmiento, the supposed transferee of the property from Romeo and Fe
Panganiban, to effect the eventual transfer in her name of the property.

Let us now consider the three-storey commercial bldg. and the lots on which it is located.
Per proof of the petitioner, the three-storey building is sitting on two lots with areas of 64
and 84 sq. meters with a valuation of P2.15 million (Exhs. "X" and "Y" with their sub-
markings). And while the two (2) lots purchased from Walfrido T. Hicban had only a
consideration of P200,000.00, they were acquired in June 1994 (Exh. "M") at a time
when the gross salary of respondent Romeo Panganiban was only P147,768 (Exh. "D").
the petitioner has driven its point that unless sufficiently explained by the respondents,
the circumstances would warrant forfeiture of the property.

We find the residential lot consisting of 200 sq. meters covered by TCT No. T-110804
in the names of spouses Romeo Panganiban and Fe Labunas upon which the
petitioner placed the value at P146,000 can be very well acquired by the salaries and
income of respondent Romeo Panganiban. In petitioner's Exh. "DD", the market value
was only P16,000.00 in the year 1989, and in Exh. "EE" it was only P40,000.00 in the
year 1994, while in Exh. "FF" in the year 1997 the market value was only P110,000.00.
Lastly, in Exh. "GG" Tax Declaration for the year 2000, the market value was pegged at
P146,000.00.
For the many foreign travels made by the respondents we rule and hold that the
respondents should be made to explain how they were able to finance the same.
[17]
 (Emphases supplied.)

Petitioner Republic moved for the partial reconsideration of the Resolution on the
following arguments: (i) relative to the Ayala Alabang property, the Sandiganbayan
failed to appreciate the testimony of an investigator of the Philippine National Police
(PNP) Criminal Investigation and Detection Group (CIDG) that private respondent Elsa
admitted that the subject property really belonged to private respondent Romeo; (ii) as to
the Los Angeles property, the Sandiganbayan overlooked the fact that if private
respondent Fe co-owned the Los Angeles property, then it would similarly make private
respondent Romeo a co-owner thereof being the spouse of Fe; and (iii) the finding that
the value of Callos-Sta. Cruz property was well within the means of private respondent
Romeo to procure it deserved closer examination.[18]

On July 31, 2009, the Sandiganbayan denied petitioner Republic's partial motion for
reconsideration.[19]

Hence, the instant petition for certiorari under Rule 65 of the Rules of Court, as

amended.

The Issue

Petitioner Republic raises the following issues for this Court's consideration, to wit:

6.1 PUBLIC RESPONDENT ACTED WITH GRAVE ABUSE OF DISCRETION

WHEN IT CONSIDERED IN FAVOR OF ROMEO, FE AND ELSA A PURPORTED
CERTIFICATE OF TITLE AND AN ALLEGED DEED OF SALE WHICH WERE
NOT FORMALLY OFFERED IN EVIDENCE, AND DISREGARDED THE
UNREBUTTED EVIDENCE THAT ROMEO AND FE ARE THE BENEFICIAL
OWNERS OF THE SUBJECT PROPERTY IN AYALA ALABANG.

6.2 PUBLIC RESPONDENT ACTED WITH GRAVE ABUSE OF DISCRETION

WHEN IT DISREGARDED THE JUDICIAL ADMISSION OF ROMEO IN HIS
ANSWER TO THE PETITION THAT THE PROPERTY IN PASADENA, LOS
ANGELES, CALIFORNIA WAS JOINTLY ACQUIRED BY HIS DAUGHTER
GERALDINE AND WIFE FE, MAKING HIM A CO-OWNER.

6.3 PUBLIC RESPONDENT ACTED WITH GRAVE ABUSE OF DISCRETION

WHEN IT PREMATURELY RULED THAT THE SUBJECT PROPERTY IN STA.
CRUZ, LAGUNA CAN BE VERY WELL ACQUIRED BY ROMEO WITH HIS
SALARIES AND INCOME.[20]
 The Court's Ruling

The petition is partly granted.

Procedural Matter

We note at the outset that petitioner Republic instituted the wrong mode of review of
public respondent Sandiganbayan's assailed resolutions. Forfeiture proceedings filed
under Republic Act No. 1379 are civil in nature,[21] thus, the proper mode of review being
a petition for review on certiorari under Rule 45 of the Rules of Court, as amended, and
not a special civil action of certiorari under Rule 65 thereof.[22]

This Court has previously explained in Condes v. Court of Appeals[23] the nature and
purpose of a demurrer to evidence, to wit:

A demurrer to evidence is a motion to dismiss on the ground of insufficiency of evidence

and is filed after the plaintiff rests his case. It is an objection by one of the parties in an
action, to the effect that the evidence which his adversary produced, is insufficient in
point of law, whether true or not, to make out a case or sustain the issue. The question in
a demurrer to evidence is whether the plaintiff, by his evidence in chief, has been able to
establish a prima facie case. (Citation omitted.)

And an order granting demurrer to evidence is a judgment on the merits.[24] Section 1,

Rule 45 of the Rules of Court, as amended, provides –

SECTION 1. Filing of petition with Supreme Court. - A party desiring to appeal

by certiorari from a judgment, final order or resolution of the Court of Appeals, the
Sandiganbayan, the Court of Tax Appeals, the Regional Trial Court or other courts,
whenever authorized by law, may file with the Supreme Court a verified petition for
review on certiorari. The petition x x x shall raise only questions of law, which must be
distinctly set forth x x x.

Nevertheless, considering that rules of procedure are subservient to substantive rights,

and in order to finally write finis to this prolonged litigation, the Court hereby dispenses
with the foregoing lapses in the broader interest of justice. The Court has repeatedly
favored the resolution of disputes on the merits, rather than on procedural defects,
[25]
 especially where the case is undeniably ingrained with immense public interest, public
policy and/or deep historical repercussions, certiorari is allowed notwithstanding the
existence and availability of the remedy of appeal.[26] We thus take cognizance of this
case and settle with finality the issues raised.

Substantive Matters
Going into the propriety of the Resolutions dated March 18, 2009 and July 31, 2009
issued by public respondent Sandiganbayan, the following guidelines will be the
yardstick by which this Court shall evaluate the action taken by the latter on the demurrer
to evidence filed by herein private respondents Romeo, et al., to wit:

A demurrer to evidence may be issued when, upon the facts and the law, the plaintiff has
shown no right to relief. Where the plaintiffs evidence, together with such inferences
and conclusions as may reasonably be drawn therefrom does not warrant recovery
against the defendant, a demurrer to evidence should be sustained. A demurrer to
evidence is likewise sustainable when, admitting every proven fact favorable to the
plaintiff and indulging in his favor all conclusions fairly and reasonably inferable
therefrom, the plaintiff has failed to make out one or more of the material elements
of his case, or when there is no evidence to support an allegation necessary to his
claim. It should be sustained where the plaintiffs evidence is prima facie insufficient for
recovery.[27] (Citations omitted.)

Ayala Alabang Property

Petitioner Republic argues that public respondent Sandiganbayan put much stock on
private respondent Elsa's Certificate of Title and Deed of Sale, which had not been
formally offered in evidence as private respondent Romeo, et al., had not even
commenced presenting their evidence yet. Hence, public respondent Sandiganbayan
should not have considered the two documents in resolving the demurrer to evidence
pursuant to Section 34, Rule 132 of the Rules of Court, as amended, which states that
"the court shall consider no evidence which has not been formally offered." It also asserts
that in Tan v. Bantegui,[28] this Court held that "the incontrovertible nature of a certificate
of title applies only when the issue involved is the validity of the original and not of the
transfer." In this case, public respondent Sandiganbayan considered a transfer certificate
of title as an absolute and indefeasible evidence of ownership.

Petitioner Republic also insists that from Yuchengco v. Sandiganbayan,[29] even if a

respondent is not the registered owner of a property if it could be shown by
preponderance of evidence that the property is ill-gotten and that he/she is the beneficial
owner, thus, the subject property could still be forfeited in favor of the State.[30] It insists
that private respondents Romeo and Fe are the actual and beneficial owners of the Ayala
Alabang property.

Lastly, petitioner Republic avers that public respondent Sandiganbayan merely

speculated when it ruled that "being siblings, it is natural and proper for the brother and
sister to make things convenient for each other";[31] that speculation should not be allowed
to supplant hard evidence; and that private respondents Romeo, et al., should present
evidence to show that it was really private respondent Elsa who purchased the Ayala
Alabang property, and she lent it to her brother.
Private respondents Romeo, et al., counters that, "the petitioner's evidence as to the usage
by private respondents Romeo and Fe Panganiban of the same property cannot defeat the
ownership documents of [private respondent] Ms. Elsa P. de Luna,"[32] which
documents, i.e., Revised Tax Declaration Form and Deed of Absolute Sale, were attached
to the Petition for Forfeiture as Annexes "J" and "K", respectively, and made integral
parts thereof. They also countered that the testimonial evidence given by its witness
Januario Mendoza – to the effect that when he went to a residence in Moonwalk Village
in Paranaque City to serve a letter of invitation to private respondent Elsa, the latter
admitted to him that the residential property in Ayala Alabang is actually owned by
private respondents Romeo and Fe – is of doubtful veracity because witness Mendoza
narrated that when he was ushered inside the house at Moonwalk Village, private
respondent Elsa walked towards him, which is improbable because private respondent
Elsa has been wheelchair-bound since before the petition for forfeiture was filed.

In dismissing the forfeiture complaint as to the Ayala Alabang property, public

respondent Sandiganbayan held that the evidence adduced by petitioner Republic – travel
documents of private respondent Fe and the Sky Cable account documents both listing
such property as the latter's given address – failed to defeat the presumed ownership of
private respondent Elsa whose name appears on the TCT and the Deed of Absolute Sale
pertaining to the subject property.

We agree with public respondent Sandiganbayan that the facts of the case fail to
substantiate the assertion that the real owners of the Ayala Alabang property are private
respondents Romeo and Fe, especially when contrasted with the Deed of Absolute Sale,
Revised Tax Declaration Form and the Transfer Certificate of Title all stating therein that
the owner is one Elsa P. De Luna.

While it is true that public respondent Sandiganbayan incorrectly made mention of

Exhibits "4" (Deed of Absolute Sale) and "8" (Transfer Certificate of Title) of the private
respondents, however, a certified true copy of the same Deed, including the Revised Tax
Declaration Form covering the subject property were earlier attached to the Petition for
Forfeiture and made integral parts thereof; and a copy of the title was attached as Annex
"3" of the Joint Answer of private respondents Fe, Elsa and Purita.

Again, Section 1, Rule 33 of the Rules of Court, as amended, provides that:

Section 1. Demurrer to evidence. — After the plaintiff has completed the presentation of
his evidence, the defendant may move for dismissal on the ground that upon
the facts and the law the plaintiff has shown no right to relief. If his motion is denied,
he shall have the right to present evidence. If the motion is granted but on appeal the
order of dismissal is reversed he shall be deemed to have waived the right to present
evidence. (Emphasis supplied.)
From above, what should be resolved in a demurrer to evidence is whether or not the
plaintiff is entitled to the relief based on the facts and the law. The evidence to be
considered pertains to the merits of the case, which does not include technical aspects
thereof, i.e., capacity to sue. But, the plaintiff’s evidence is not the sole basis in resolving
a demurrer to evidence. The "facts," contemplated by the rule should include all the
means sanctioned by the Rules of Court in ascertaining matters in judicial
proceedings, i.e., judicial admissions, matters of judicial notice, stipulations made during
the pre-trial and trial, admissions, and presumptions, the only exclusion being the
defendant's evidence.[33]

Section 4, Rule 129 of the Rules of Court, as amended, provides:

Section 4. Judicial admissions. — An admission, verbal or written, made by a party in

the course of the proceedings in the same case, does not require proof. The admission
may be contradicted only by showing that it was made through palpable mistake or that
no such admission was made.

In Republic v. Sandigabayan,[34] this Court settled that judicial admissions may be made:

(a) in the pleadings filed by the parties; (b) in the course of the trial either by verbal or
written manifestations or stipulations; or (c) in other stages of judicial proceedings, as in
the pre-trial of the case.

Hence, in the instant case, facts pleaded in the petition and answer/joint answer are
deemed admissions of petitioner Republic and private respondents Romeo, et al.,
respectively, who are not permitted to contradict them or subsequently take a position
contrary to or inconsistent with such admissions.[35]

Though the title to the property was initially filed in court through the Joint Answer,
however, petitioner Republic failed to refute the same, and even marked it during pre-
trial. Hence, petitioner Republic already admitted its genuineness and due execution.
Such judicial admission was correctly considered by public respondent Sandiganbayan in
resolving the demurrer to evidence. When the due execution and genuineness of an
instrument are deemed admitted because of the adverse party's failure to make a specific
verified denial thereof, the instrument need not be presented formally in evidence for it
may be considered an admitted fact.[36]

As to the cable television subscription and travel documents wherein private respondent
Fe used the Ayala Alabang property as her given address, what they simply proved is that
private respondent Fe resides in the said property, nothing more. They are not sufficient
to prove that private respondents Romeo and Fe are the actual and beneficial owners of
the property, much less that they unlawfully acquired it.

Los Angeles Property

Petitioner Republic argues that private respondent Romeo already admitted in
his Answer that the Los Angeles property was jointly acquired by his wife and daughter,
private respondent Fe and Geraldine, respectively.[37] It insists that the existence of the
said property and the fact that his wife is a co-owner does not require proof pursuant to
Section 4, Rule 129 of the Rules of Court, as amended and Republic v. Sandiganbayan.[38]

Petitioner Republic reasons that whether the property relation of private respondents
Romeo and Fe is governed by the system of absolute community of property or conjugal
partnership of gains, private respondent Romeo stands as a co-owner of his wife's interest
in the Los Angeles property.[39]

Petitioner Republic concludes that it was premature of public respondent Sandiganbayan

to conclude that private respondent Romeo had no participation in the purchase of the
said property, which is his defense that he needed to prove during trial. [40]

Private respondents Romeo, et al., on the other hand, simply insists that any admission
on the ownership of the Los Angeles property that may have been made (in the
answer/joint answer) is not sufficient basis to find that the said property belonged to
private respondent Romeo, much less illegally acquired by him.

Public respondent Sandiganbayan ordered the dismissal of the petition for forfeiture as to
the Los Angeles property on the ground that the two documentary evidence, Annexes
"AA" and "BB," though formally offered by petitioner Republic, were mere photocopies;
therefore, inadmissible in evidence. And that the latter failed to formally offer the.
counter-affidavit[41] of private respondent Romeo.

In this instance, this Court disagrees with public respondent Sandiganbayan.

As similarly discussed above, the admission of private respondent Romeo in his Answer
that the Los Angeles property was bought by his wife, private respondent Fe, and his
daughter, Geraldine, is a judicial admission that necessarily formed part of the facts of the
case, which did not require proof to be sufficiently considered in the resolution of the
demurrer to evidence.

Moreover, the denial by private respondent Romeo of his ownership of the subject
property is pregnant with an admission, i.e., that he has an interest in his wife's share in
the property by virtue of their marital union. This is a negative pregnant, which is a form
of negative expression which carries with it an affirmation or at least an implication of
some kind favorable to the adverse party.[42]

In his Answer, private respondent Romeo alleged that, "respondent reiterates that he had
no participation whatsoever in the purchase of that residential house and lot located at
No. 2840 Heritage Drive, Pasadena, Los Angeles, as the same was actually purchased by
his daughter, Geraldine, who is U.S. based, together with her mother, Fe."[43] On the
other hand, private respondent Fe claimed in her Joint Answer that, she "vehemently
denies that the residential house and lot located at No. 2840 Heritage Drive, Pasadena,
Los Angeles, belongs to respondent Romeo Panganiban as the same was actually
purchased by her daughter, Geraldine, who is U.S. based, and that her name as co-
owner of the property was indicated to enable Geraldine to secure approval for a loan to
finance [the] purchase of the property."[44]

Although private respondents Romeo and Fe aver that the former had nothing to do in the
transaction, the fact that they are spouses makes the Los Angeles property part of their
property regime, be it an absolute community or conjugal property of gains. Article 91 of
the Family Code states that unless otherwise provided in this Chapter or in the marriage
settlements, the community property shall consist of all the property owned by the
spouses at the time of the celebration of the marriage or acquired thereafter.

On the other hand, Articles 106, 116, and 117 of the Family Code provide what
constitutes the conjugal property of the spouses.

Art. 106. Under the regime of conjugal partnership of gains, the husband and wife place
in a common fund the proceeds, products, fruits and income from their separate
properties and those acquired by either or both spouses through their efforts or by chance,
and, upon dissolution of the marriage or of the partnership, the net gains or benefits
obtained by either or both spouses shall be divided equally between them, unless
otherwise agreed in the marriage settlements.

Art. 116. All property acquired during the marriage, whether the acquisition appears to
have been made, contracted or registered in the name of one or both spouses, is presumed
to be conjugal unless the contrary is proved.

Art. 117. The following are conjugal partnership properties:

(1) Those acquired by onerous title during the marriage at the expense of the common
fund, whether the acquisition be for the partnership, or for only one of the spouses;

(2) Those obtained from the labor, industry, work or profession of either or both of the
spouses;

(3) The fruits, natural, industrial, or civil, due or received during the marriage from the
common property, as well as the net fruits from the exclusive property of each spouse;

(4) The share of either spouse in the hidden treasure which the law awards to the finder or
owner of the property where the treasure is found;
(5) Those acquired through occupation such as fishing or hunting;

(6) Livestock existing upon the dissolution of the partnership in excess of the number of
each kind brought to the marriage by either spouse; and

(7) Those which are acquired by chance, such as winnings from gambling or betting.
However, losses therefrom shall be borne exclusively by the loser-spouse.

Just as public respondent Sandiganbayan gave weight to the admission of private

respondents Romeo, et al., as to the registered owners on the certificate of title to the
Ayala Alabang property, then it should have accorded the same credence to their
admission as to the owners of the Los Angeles property, otherwise, the application of the
rules on evidence is arbitrary and tantamount to grave abuse of discretion. Based on the
evidence on record, the Los Angeles property is co-owned in equal shares by private
respondent Fe and Geraldine, and by law, the half share therein of respondent Fe is
deemed to pertain to both private respondents Romeo and Fe as spouses.

And as a consequence of Our reversal of the resolution granting the demurrer to

evidence vis-à-vis one-half of the Los Angeles property, or that portion pertaining to the
undivided share of private respondent Fe, private respondents Romeo, et al., are deemed
to have waived the right to present countervailing evidence that such one-half was not
unlawfully acquired.[45]

Callos-Sta. Cruz Laguna Property

Petitioner Republic argues that private respondents Romeo and Fe did not deny the
acquisition of the said property in their Answers; thus, they now have the burden to show
that the same was not unlawfully acquired.[46]

Private respondents Romeo, et al., counter-argue that petitioner Republic's very own
evidence show the value of the subject property to be well within private respondent
Romeo and Fe's financial capacity to purchase; therefore, it has not been proved to have
been unlawfully acquired.

This Court finds that public respondent Sandiganbayan correctly dismissed the petition
for forfeiture with respect to the Callos-Sta. Cruz property. Petitioner Republic's pieces of
documentary evidence failed to sufficiently prove that the subject property was
unlawfully acquired, or that private respondent Romeo could not have afforded the said
property.

Further, petitioner Republic claims that the assailed resolutions deserve closer

examination, without actually stating upon what ground public respondent
Sandiganbayan abused its discretion in granting the demurrer to evidence concerning the
Callos-Sta. Cruz property. Where a petition for certiorari under Rule 65 of the Rules of
Court, as amended, alleges grave abuse of discretion, the petitioner should establish that
the respondent court or tribunal acted in a capricious, whimsical, arbitrary or despotic
manner in the exercise of its jurisdiction as to be equivalent to lack of jurisdiction. This is
so because "grave abuse of discretion" is well-defined and not an amorphous concept that
may easily be manipulated to suit one's purpose.

Conclusion

This Court finds that the pieces of evidence adduced by petitioner Republic vis-à-vis the
Ayala Alabang and Callos-Sta. Cruz properties are wholly insufficient to support the
allegations of the petition for forfeiture in Civil Case No. 0192. Thus, for failure of
petitioner Republic to show any right to the relief sought, this Court partly affirms the
assailed resolutions.

WHEREFORE, the petition is PARTLY GRANTED. The portion of the Resolutions

dated March 18, 2009 and July 31, 2009 by public respondent Sandiganbayan in Civil
Case No. 0192 dismissing the petition for forfeiture as to the three-bedroom house and lot
property located at No. 2840 Heritage Drive, Pasadena, Los Angeles, California
is ANNULLED and SET ASIDE, but only as to one-half portion of said property.
Pursuant to Section 1, Rule 33 of the Rules of Court, as amended, private respondents
Romeo Panganiban, et al., are deemed to have waived the right to present evidence
relative thereto. In all other respect, the said Resolutions are AFFIRMED.

SO ORDERED.

THIRD DIVISION
[ G.R. No. 226587, November 21, 2018 ]
DONABELLE V. GONZALES-SALDANA, PETITIONER, VS. SPOUSES
GORDON R. NIAMATALI AND AMY V. NIAMATALI, RESPONDENTS.

DECISION

J. REYES, JR., J.:

Assailed in this petition for review on certiorari are the March 31, 2016
Decision[1] and August 10, 2016 Resolution[2] of the Court of Appeals (CA) in CA-G.R. CV
No. 05172, which reversed and set aside the March 11, 2014 Decision [3] of the Regional
Trial Court, Kalibo, Aklan, Branch 6 (RTC) in Civil Case No. 7720, a case for recovery of
sum of money.

The Antecedents

Sometime in January 2002, respondent-spouses Gordon and Amy Niamatali

(respondent-spouses), then residing in the United States of America, made known to
petitioner Donabelle Gonzales-Saldana (petitioner) their intention to acquire real
properties in Metro Manila. Petitioner, who was then working in the Department of
Labor and Employment (DOLE), informed them that a certain parcel of land located in
Las Piñas City would be sold in a public auction conducted by the DOLE Sheriff's Office. [4]

Thereafter, respondent-spouses asked petitioner to participate in the public auction on

their behalf. Consequently, on January 30, 2002, they remitted US$60,000.00 or
P3,000,000.00 to petitioner's bank account for the purchase of the Las Piñas property. In
March 2002, however, respondent spouses received from petitioner photocopies of
Transfer Certificates of Title (TCT) Nos. 105904 and 223102 covering properties located
in Manila and Parañaque contrary to their agreement that petitioner would purchase
the Las Piñas property. Petitioner explained to them that the auction sale of the Las
Piñas property did not push through because of a third-party claim, but the judgment
creditor agreed to sell to her the Parañaque and Manila properties which were also
levied on execution. Upon their return to the Philippines in July 2002, petitioner brought
respondent-spouses to the Las Piñas property but it was locked up and a signboard was
posted, on which the words "Future Home of Lutheran School and Community Center"
were written. Thus, respondent-spouses informed petitioner that they were no longer
interested in acquiring the Las Piñas property and asked for the return of the
P3,000,000.00, to which petitioner acceded. She even sent to respondent-spouses a
letter wherein she acknowledged receipt of the P3,000,000.00 and promised to return
said amount on or before September 14, 2002.[5]

In her Answer, petitioner averred that the public bidding of the Las Piñas property was
cancelled because of a third-party claim. The DOLE Sheriff's Office, however, informed
her that other properties of the losing party would be put up in a public auction. Thus,
petitioner asked respondentspouses whether they were interested in buying the
properties located in Manila and Parañaque, but the latter did not respond. In good
faith, and thinking that it would be beneficial for respondent-spouses, petitioner
requested her friend, Alninia L. Austria (Austria), to participate in the bidding of the
Manila and Parañaque properties. In both auctions, Austria was declared the winning
bidder. In July 2002, however, respondent-spouses told petitioner that they were no
longer interested in buying the Las Piñas property. She then told them that she would
return their money but she had to sell first the Manila and Parañaque properties. [6]

Despite several demands from respondent-spouses, petitioner failed to return the

P3,000,000.00. Thus, on March 6, 2006, respondent-spouses filed a case for collection of
sum of money, moral damages and attorney's fees against petitioner. [7]

The RTC Ruling

In a Decision dated March 11, 2014, the RTC ruled that respondent spouses'
documentary evidence, with the exception of the printouts of the e-mail
correspondence between the parties, failed to comply with the Best Evidence Rule. It
declared that the uncertified photocopies of the bank transfer, showing the remittance
of P3,000,000.00 to petitioner's account, were inadmissible as respondent-spouses
failed to prove the loss of the original thereof It noted that respondent Amy even
testified that she could have secured the original copy from her bank, but she neglected
to do so. As regards the acknowledgment receipt or promissory note allegedly executed
by petitioner, the trial court adjudged that it was also inadmissible because it was a
private document executed without the intervention of a notary public and no witness
was presented to prove that petitioner signed the document. The fallo reads:
WHEREFORE, in view of the foregoing, for failure of plaintiffs to present
preponderance of evidence to support the allegations in the Complaint, the instant case
is ordered DISMISSED. The counterclaim is likewise dismissed. [8]
Aggrieved, respondent-spouses filed an appeal before the CA.

The CA Ruling

In a Decision, dated March 31, 2016, the CA held that respondent spouses need not
prove the fact that they sent money to petitioner because the latter's admission that the
amount of P3,000,000.00 was transmitted to her, having been made in her Answer,
could be treated as a judicial admission. It pronounced that petitioner's admission was
sufficient to prove that she received money from the respondent-spouses even without
the documents presented by the latter. The appellate court added that petitioner was
legally bound to return the P3,000,000.00 which she received from respondent-spouses
considering that the purchase of the Las Piñas property did not materialize. It disposed
the case in this wise:
 WHEREFORE, the appeal is GRANTED. The Decision of the Regional Trial Court,
Branch 6 of Kalibo, Aklan in Civil Case No. 7720 is REVERSED and SET ASIDE. A new one is
entered ordering defendant-appellee Donabelle Gonzales-Saldana to pay plaintiffs-
appellants the amount of three million pesos (PhP 3,000,000.00) with interest at six
percent (6%) per annum from default until the finality of this Decision. From finality until
full satisfaction, the total amount due shall likewise earn interest at six percent (6%) per
annum until fully paid.

SO ORDERED.[9]
Petitioner moved for reconsideration, but the same was denied by the CA on
August 10, 2016. Hence, this petition for review on certiorari wherein petitioner raises
the following assignment of errors:
WHETHER OR NOT THE HONORABLE COURT OF APPEALS ERRED IN CONSIDERING
THAT RESPONDENTS HAD ESTABLISHED THEIR CASE BY PREPONDERANCE OF EVIDENCE
BASED ON INADMISSIBLE EVIDENCE;

WHETHER OR NOT THE HONORABLE COURT OF APPEALS ERRED IN APPLYING THE RULES
ON JUDICIAL ADMISSION;

WHETHER OR NOT THE HONORABLE COURT OF APPEALS ERRED IN ADMITTING THE

ISSUE OF UNJUST ENRICHMENT WHICH WAS RAISED FOR THE FIRST TIME ON APPEAL;

WHETHER OR NOT THE HONORABLE COURT OF APPEALS ERRED IN APPLYING THE

PRINCIPLE OF UNJUST ENRICHMENT; [and]

WHETHER OR NOT THE HONORABLE COURT OF APPEALS ERRED IN RULING THAT

INTEREST WAS DUE TO RESPONDENTS.[10]
Simply put, the issues to be resolved are 1) Whether the statements in
petitioner's Answer could be considered judicial admissions; 2) Whether petitioner
should return the P3,000,000.00 she received from respondent spouses for the
purchase of the Las Piñas property; and 3) Whether petitioner is liable for the payment
of interest on the amount due.

Petitioner argues that the allegations in her Answer are not admissions, but are actually
defenses to show that the complaint states no cause of action; that the alleged
admission, with respect to her receipt of P3,000,000.00 from respondent-spouses, was
taken out of context because it actually pertains to the fact that the money remitted
was intended for the borrowed money from respondent-spouses; that the obligation to
return the money is demandable only upon sale of the Manila and Parañaque
properties, thus, the principle of unjust enrichment was not applicable; and that no
interest was due because she did not enter into a contract of loan with respondent-
spouses and there was no agreement for the payment of interest. [11]

In their Comment,[12] respondent-spouses counter that petitioner should return the

amount of P3,000,000.00 considering that since 2002, she has not informed them of the
status of the property in Las Piñas; that a complaint for recovery of money is proper
even if the contract between the parties is not a contract of loan; and that legal interest
must be imposed on the amount due from petitioner because she already incurred in
delay.

In her Reply,[13] petitioner contends that she no longer informed respondent-spouses of

the status of the Las Piñas property because the latter had already abandoned their
claim thereto and opted for the return of their money; and that the award of interest is
not proper because the transaction between the parties is not a contract of loan and
payment of monetary interest is allowed only if there was an express stipulation for the
payment of interest and the agreement for the payment of interest was reduced in
writing.

The Court's Ruling

The petition lacks merit.

Statements in the Answer constitute judicial admissions which bind petitioner.

A judicial admission is an admission, verbal or written, made by a party in the course of

the proceedings in the same case, which dispenses with the need for proof with respect
to the matter or fact admitted. It may be contradicted only by showing that it was made
through palpable mistake or that no such admission was made. [14]

A party who judicially admits a fact cannot later challenge [the] fact as judicial
admissions are a waiver of proof; production of evidence is dispensed with. A judicial
admission also removes an admitted fact from the field of controversy. Consequently,
an admission made in the pleadings cannot be controverted by the party making such
admission and is cannot be controverted by the party making such admission and is
conclusive as to such party, and all proofs to the contrary or inconsistent therewith
should be ignored, whether objection is interposed by the party or not. The allegations,
statements or admissions contained in a pleading are conclusive as against the pleader.
A party cannot subsequently take a position contrary to or inconsistent with what was
pleaded.[15]

Petitioner argues that the allegations in her Answer are not admissions, but are actually
defenses to show that the complaint states no cause of action; and that the alleged
admission, with respect to her receipt of the P3,000,000.00 from respondent-spouses,
was taken out of context because in that narration, she actually denied persuading
respondent-spouses to remit money for the purchase of the Las Piñas property.

A perusal, however, of petitioner's Answer leads to the conclusion that her arguments
are just a futile attempt to sow confusion in an otherwise indisputable case. In her
Answer, petitioner made the following statements:
xxxx

4. Defendant denies the allegations contained in items 4, 5, 6, and 7, [of the] complaint,
that defendant proposed and convinced the plaintiffs, the truth of the matter being
that:
xxxx

f. Plaintiff knew what they were venturing into, the defendant fully explaining to them
the procedures. On their own accord, the plaintiffs sent money via bank-to-bank
transaction, contrary to their claim that plaintiffs caused to debit and remit the
amount of US$60,000.00 to defendant's account only upon the instruction of the
[defendant]. It cannot be overemphasized that the defendant is junior to the plaintiffs
and that she has no power to direct order on what to do with their money. x x x

xxxx

20. The complaint states no cause of action.

a. x x x Plaintiffs may have sent money to defendant but not in the form of loan. The
money was sent to invest in properties, primarily Las Piñas City. The money sent was
used to purchase properties for the plaintiffs, however, it happened that the plaintiffs
were not satisfied with the purchase, as such, as an afterthought, plaintiffs wanted to
get back the money from defendant. (Emphases supplied)[16]
 From the foregoing, it is incontrovertible that petitioner does not even deny that
she received P3,000,000.00 from respondent-spouses. What she simply denies is the
allegation that it was because of her insistence that respondent-spouses remitted
money to her account. Petitioner, however, fails to realize that whether or not she
persuaded respondent-spouses to purchase the Las Piñas property is beside the point.
To resolve the controversy between the parties, the issue simply boils down to whether
petitioner received P3,000,000.00 from respondent-spouses and as can be gleaned from
her Answer, petitioner admitted such fact. She failed to prove that the admission was
made through palpable mistake or that no such admission was made. Her arguments,
therefore, are mere desperate attempts to escape liability.

There is an implied agency between petitioner and respondent-spouses.

By the contract of agency, a person binds himself to render some service or to do

something in representation or on behalf of another, with the consent or authority of
the latter.[17] Agency may be express, or implied from the acts of the principal, from his
silence or lack of action, or his failure to repudiate the agency, knowing that another
person is acting on his behalf without authority.[18] Acceptance by the agent may also be
express, or implied from his acts which carry out the agency, or from his silence or
inaction according to the circumstances.[19]

A contract of agency may be inferred from all the dealings between petitioner and
respondent-spouses. The question of whether an agency has been created is ordinarily a
question which may be established in the same way as any other fact, either by direct or
circumstantial evidence. The question is ultimately one of intention. [20] In this case,
respondent-spouses communicated with petitioner as regards the purchase of the Las
Piñas property and they remitted P3,000,000.00 to petitioner's account for such
purpose. For her part, petitioner made inquiries with the DOLE Sheriff's Office and even
talked to the judgment creditor for the purchase of the said property. Also, she received
P3,000,000.00 from respondent-spouses to finalize the transaction. Thus, it is beyond
dispute that an implied agency existed between petitioner and respondent-spouses for
the purpose of purchasing the Las Piñas property.

Petitioner, however, acted beyond the scope of her authority. It is worthy to note that it
was petitioner who introduced to respondent-spouses the idea of participating in the
auction sale of the Las Piñas property.[21] When the parties came to an agreement as to
the purchase of the said property, petitioner was then unaware of other properties
which were going to be sold on auction. As a result, the parties never agreed on a
substitute property to be purchased in case the bidding of the Las Piñas property failed
to materialize. As it happened, the Las Piñas property could not be auctioned on
account of a third-party claim. Thus, when petitioner was informed that certain
properties in Manila and Parañaque were to be auctioned for the same judgment
creditor, she proceeded to participate in the bidding and decided not to wait for
respondent-spouses' approval.[22] It was only after the sale that petitioner informed
respondent-spouses that she already settled for the Manila and Parañaque properties,
worth more than P3,000,000.00 in valuation. [23] Thus, even though petitioner may have
been motivated by good intentions and by a sincere belief that the purchase of the
Manila and Parañaque properties would benefit respondent-spouses, it cannot be
gainsaid that she acted outside the scope of the authority given to her, i.e., to purchase
the Las Piñas property. Hence, petitioner's failure to fulfill her obligation entitles
respondent-spouses to the return of the P3,000,000.00 which they remitted to her
account.

Petitioner is liable for the payment of compensatory interest.

The kinds of interest that may be imposed in a judgment are the monetary interest and
the compensatory interest. In this regard, the Court has expounded in Siga-an v.
Villanueva:[24]
Interest is a compensation fixed by the parties for the use or forbearance of
money. This is referred to as monetary interest. Interest may also be imposed by law or
by courts as penalty or indemnity for damages. This is called compensatory interest. The
right to interest arises only by virtue of a contract or by virtue of damages for delay or
failure to pay the principal loan on which interest is demanded.

Article 1956 of the Civil Code, which refers to monetary interest, specifically mandates
that no interest shall be due unless it has been expressly stipulated in writing. As can be
gleaned from the foregoing provision, payment of monetary interest is allowed only if:
(1) there was an express stipulation for the payment of interest; and (2) the agreement
for the payment of interest was reduced in writing. The concurrence of the two
conditions is required for the payment of monetary interest. Thus, we have held that
collection of interest without any stipulation therefor in writing is prohibited by law.

xxxx
There are instances in which an interest may be imposed even in the absence of express
stipulation, verbal or written, regarding payment of interest. Article 2209 of the Civil
Code states that if the obligation consists in the payment of a sum of money, and the
debtor incurs delay, a legal interest of 12% per annum may be imposed as indemnity for
damages if no stipulation on the payment of interest was agreed upon. Likewise, Article
2212 of the Civil Code provides that interest due shall earn legal interest from the time
it is judicially demanded, although the obligation may be silent on this point.

All the same, the interest under these two instances may be imposed only as a penalty
or damages for breach of contractual obligations. It cannot be charged as a
compensation for the use or forbearance of money. In other words, the two instances
apply only to compensatory interest and not to monetary interest.
Clearly and contrary to petitioner's assertion, the interest imposed by the CA is
not monetary interest because aside from the fact that there is no use or forbearance of
money involved in this case, the subject interest was not one which was agreed upon by
the parties in writing. Further, the appellate court, after citing Eastern Shipping Lines,
Inc. v. Court of Appeals,[25] wherein the Court synthesized the rules on the award of
interest, imposed an interest of 6% per annum which finds application in transactions
involving the payment of indemnities in the concept of damages arising from breach or
a delay in the performance of obligations in general. Hence, there can be no other
conclusion than that the interest imposed by the appellate court is in the nature of
compensatory interest.

As a form of damages, compensatory interest is due only if the obligor is proven to have
failed to comply with his obligation.[26] In this case, petitioner's principal obligation was
to purchase the Las Piñas property for respondent-spouses. Consequently, when she
was informed that the auction sale of the Las Piñas property would have to be
cancelled, petitioner should have simply returned the P3,000,000.00 to respondent-
spouses instead of purchasing the Manila and Parañaque properties without the latter's
knowledge and consent. Moreover, she insists that she would return such amount only
after she successfully sells the Manila and Parañaque properties. Contrary to petitioner's
argument, however, the obligation to return the amount is not dependent upon the sale
of the Manila and Parañaque properties. The obligation to return the money is a
consequence of her failure to comply with her principal obligation, the breach thereof
entitles respondent-spouses to the payment of interest at the rate of 6% per annum,
which, as pronounced in Eastern Shipping Lines and subsequently reiterated in Nacar v.
Gallery Frames,[27] is the rate of interest applicable in transactions involving the payment
of indemnities in the concept of damages arising from the breach or a delay in the
performance of obligations in general.[28] The payment of interest should be reckoned
from the date of filing of the Complaint or on March 6, 2006. [29]

WHEREFORE, the petition is DENIED. The March 31, 2016 Decision and August 10, 2016
Resolution of the Court of Appeals in CA-G.R. CV No. 05172 are AFFIRMED with
MODIFICATION in that the amount of P3,000,000.00 shall earn interest at the rate of 6%
per annum from the date of filing of the Complaint on March 6, 2006 until the Decision
becomes final and executory.

An interest of 6% per annum shall be further imposed on the amount from the finality of
the Decision until its satisfaction.

SO ORDERED.

EN BANC
[ G.R. No. 230642, September 10, 2019 ]
OSCAR B. PIMENTEL, ERROL B. COMAFAY, JR., RENE B. GOROSPE,
EDWIN R. SANDOVAL, VICTORIA B. LOANZON, ELGIN MICHAEL C.
PEREZ, ARNOLD E. CACHO, AL CONRAD B. ESPALDON, ED VINCENT S.
ALBANO, LEIGHTON R. SIAZON, ARIANNE C. ARTUGUE, CLARABEL
ANNE R. LACSINA, KRISTINE JANE R. LIU, ALYANNA MARL C.
BUENVIAJE, IANA PATRICIA DULA T. NICOLAS, IRENE A. TOLENTINO
AND AUREA I. GRUYAL, PETITIONERS, VS. LEGAL EDUCATION
BOARD, AS REPRESENTED BY ITS CHAIRPERSON, HON. EMERSON B.
AQUENDE, AND LEB MEMBER HON. ZENAIDA N. ELEPAÑO,
RESPONDENTS;

ATTYS. ANTHONY D. BENGZON, FERDINAND M. NEGRE, MICHAEL Z.

UNTALAN; JONATHAN Q. PEREZ, SAMANTHA WESLEY K. ROSALES,
ERIKA M. ALFONSO, KRYS VALEN O. MARTINEZ, RYAN CEAZAR P.
ROMANO, AND KENNETH C. VARONA, RESPONDENTS-IN-
INTERVENTION;

APRIL D. CABALLERO, JEREY C. CASTARDO, MC WELLROE P.

BRINGAS, RHUFFY D. FEDERE, CONRAD THEODORE A. MATUTINO
AND NUMEROUS OTHERS SIMILARLY SITUATED, ST. THOMAS MORE
 SCHOOL OF LAW AND BUSINESS, INC., REPRESENTED BY ITS
PRESIDENT RODOLFO C. RAPISTA, FOR HIMSELF AND AS FOUNDER,
DEAN AND PROFESSOR, OF THE COLLEGE OF LAW, JUDY MARIE
RAPISTA-TAN, LYNNART WALFORD A. TAN, IAN M. ENTERINA, NEIL
JOHN VILLARICO AS LAW PROFESSORS AND AS CONCERNED
CITIZENS, PETITIONERS-INTERVENORS;

[G.R. No. 242954]

FRANCIS JOSE LEAN L. ABAYATA,GRETCHEN M. VASQUEZ, SHEENAH

S. ILUSTRISMO, RALPH LOUIE SALAÑO, AIREEN MONICA B. GUZMAN,
DELFINO ODIAS, DARYL DELA CRUZ, CLAIRE SUICO, AIVIE S.
PESCADERO, NIÑA CHRISTINE DELA PAZ, SHEMARK K. QUENIAHAN,
AL JAY T. MEJOS, ROCELLYN L. DAÑO,* MICHAEL ADOLFO, RONALD
A. ATIG, LYNNETTE C. LUMAYAG, MARY CHRIS LAGERA, TIMOTHY
B. FRANCISCO, SHEILA MARIE C. DANDAN, MADELINE C. DELA PEÑA,
DARLIN R. VILLAMOR, LORENZANA L. LLORICO, AND JAN IVAN M.
SANTAMARIA, PETITIONERS, VS. HON. SALVADOR MEDIALDEA,
EXECUTIVE SECRETARY, AND LEGAL EDUCATION BOARD, HEREIN
REPRESENTED BY ITS CHAIRPERSON, EMERSON B. AQUENDE,
RESPONDENTS.

DECISION

REYES, J. JR., J.:

On the principal grounds of encroachment upon the rule-making power of the Court
concerning the practice of law, violation of institutional academic freedom and violation
of a law school aspirant's right to education, these consolidated Petitions for Prohibition
(G.R. No. 230642) and Certiorari and Prohibition (G.R. No. 242954) under Rule 65 of
the Rules of Court assail as unconstitutional Republic Act (R.A.) No. 7662, [1] or the Legal
Education Reform Act of 1993, which created the Legal Education Board (LEB). On the
same principal grounds, these petitions also particularly seek to declare as
unconstitutional the LEB issuances establishing and implementing the nationwide law
school aptitude test known as the Philippine Law School Admission Test or the
PhiLSAT.

The Antecedents

Prompted by clamors for the improvement of the system of legal education on account of
the poor performance of law students and law schools in the bar examinations, [2] the
Congress, on December 23, 1993, passed into law R.A. No. 7662 with the following
policy statement:
SEC. 2. Declaration of Policies. - It is hereby declared the policy of the State to uplift the
standards of legal education in order to prepare law students for advocacy, counselling,
problem-solving, and decision-making, to infuse in them the ethics of the legal
profession; to impress on them the importance, nobility and dignity of the legal
profession as an equal and indispensable partner of the Bench in the administration of
justice and to develop social competence.

Towards this end, the State shall undertake appropriate reforms in the legal education
system, require proper selection of law students, maintain quality among law schools, and
require legal apprenticeship and continuing legal education.
R.A. No. 7662 identifies the general and specific objectives of legal education in this
manner:
SEC. 3. General and Specific Objective of Legal Education. -

(a) Legal education in the Philippines is geared to attain the following objectives:

(1) to prepare students for the practice of law;

(2) to increase awareness among members of the legal profession of the needs of the poor,
deprived and oppressed sectors of society;
(3) to train persons for leadership;
(4) to contribute towards the promotion and advancement of justice and the improvement of its
administration, the legal system and legal institutions in the light of the historical and
contemporary development of law in the Philippines and in other countries.

(b) Legal education shall aim to accomplish the following specific objectives:

(1) to impart among law students a broad knowledge of law and its various fields and of legal
institutions;
(2) to enhance their legal research abilities to enable them to analyze, articulate and apply the
law effectively, as well as to allow them to have a holistic approach to legal problems and
Issues;
(3) to prepare law students for advocacy, [counseling], problem-solving and decision-making,
and to develop their ability to deal with recognized legal problems of the present and the
future;
(4) to develop competence in any field of law as is necessary for gainful employment or
sufficient as a foundation for future training beyond the basic professional degree, and to
develop in them the desire and capacity for continuing study and self improvement;
(5) to inculcate in them the ethics and responsibilities of the legal profession; and
(6) to produce lawyers who conscientiously pursue the lofty goals of their profession and to
fully adhere to its ethical norms.
For these purposes, R.A. No. 7662 created the LEB, an executive agency which was
made separate from the Department of Education, Culture and Sports (DECS), but
attached thereto solely for budgetary purposes and administrative support.[3] The
Chairman and regular members of the LEB are to be appointed by the President for a
term of five years, without reappointment, from a list of at least three nominees prepared,
with prior authorization from the Court, by the Judicial and Bar Council (JBC).[4]

Section 7 of R.A. No. 7662 enumerates the powers and functions of the LEB as follows:
SEC. 7. Powers and Functions. - For the purpose of achieving the objectives of this Act,
the Board shall have the following powers and functions:

(a) to administer the legal education system in the country in a manner consistent with the
provisions of this Act;

(b) to supervise the law schools in the country, consistent with its powers and functions
as herein enumerated;

(c) to set the standards of accreditation for law schools taking into account, among others,
the size of enrollment, the qualifications of the members of the faculty, the library and
other facilities, without encroaching upon the academic freedom of institutions of higher
learning;

(d) to accredit law schools that meet the standards of accreditation;

(e) to prescribe minimum standards for law admission and minimum qualifications and
compensation to faculty members;

(f) to prescribe the basic curricula for the course of study aligned to the requirements for
admission to the Bar, law practice and social consciousness, and such other courses of
study as may be prescribed by the law schools and colleges under the different levels of
accreditation status;

(g) to establish a law practice internship as a requirement for taking the Bar which a law
student shall undergo with any duly accredited private or public law office or firm or
legal assistance group anytime during the law course for a specific period that the Board
may decide, but not to exceed a total of twelve (12) months. For this purpose, the Board
shall prescribe the necessary guidelines for such accreditation and the specifications of
such internship which shall include the actual work of a new member of the Bar[;]

(h) to adopt a system of continuing legal education. For this purpose, the Board may
provide for the mandatory attendance of practicing lawyers in such courses and for such
duration as the Board may deem necessary; and

(i) to perform such other functions and prescribe such rules and regulations necessary for
the attainment of the policies and objectives of this Act.
On the matter of accreditation of law schools, R.A. No. 7662 further elaborates:
SEC. 8. Accreditation of Law Schools. - Educational institutions may not operate a law
school unless accredited by the Board. Accreditation of law schools may be granted only
to educational institutions recognized by the Government.

SEC. 9. Withdrawal or Downgrading of Accreditation. - The [LEB] may withdraw or

downgrade the accreditation status of a law school if it fails to maintain the standards set
for its accreditation status.

SEC. 10. Effectivity of Withdrawal or Downgrading of Accreditation. - The withdrawal

or downgrading of accreditation status shall be effective after the lapse of the semester or
trimester following the receipt by the school of the notice of withdrawal or downgrading
unless, in the meantime, the school meets and/or upgrades the standards or corrects the
deficiencies upon which the withdrawal or downgrading of the accreditation status is
based.
Bar Matter No. 979-B
Re: Legal Education

In July 2001, the Court's Committee on Legal Education and Bar Matters (CLEBM),
through its Chairperson, Justice Jose C. Vitug, noted several objectionable provisions of
R.A. No. 7662 which "go beyond the ambit of education of aspiring lawyers and into the
sphere of education of persons duly licensed to practice the law profession." [5]

In particular, the CLEBM observed:

x x x [U]nder the declaration of policies in Section 2 of [R.A. No. 7662], the State "shall
x x x require apprenticeship and continuing legal education." The concept of continuing
legal education encompasses education not only of law students but also of members of
the legal profession. [This] implies that the [LEB] shall have jurisdiction over the
education of persons who have finished the law course and are already licensed to
practice law[, in violation of the Supreme Court's power over the Integrated Bar of the
Philippines].

x x x Section 3 provides as one of the objectives of legal education increasing "awareness

among members of the legal profession of the needs of the poor, deprived and oppressed
sectors of the society." Such objective should not find a place in the law that primarily
aims to upgrade the standard of schools of ·law as they perform the task of educating
aspiring lawyers. Section 5, paragraph 5 of Article VIII of the Constitution also provides
that the Supreme Court shall have the power to promulgate rules on "legal assistance to
the underprivileged" and hence, implementation of [R.A. No. 7662] might give rise to
infringement of a constitutionally mandated power.

x x x [Section 7(e) giving the LEB the power to prescribe minimum standards for law
admission and Section 7(h) giving the LEB the power to adopt a system of continuing
legal education and for this purpose, the LEB may provide for the mandatory attendance
of practicing lawyers in such courses and for such duration as the LEB may deem
necessary] encroach upon the Supreme Court's powers under Section 5, paragraph 5 of
Article VIII of the Constitution. Aside from its power over the Integrated Bar of the
Philippines, the Supreme Court is constitutionally mandated to promulgate rules
concerning admission to the practice of law.[6]
While the CLEBM saw the need for the LEB to oversee the system of legal education, it
cautioned that the law's objectionable provisions, for reasons above-cited, must be
removed.[7]

Relative to the foregoing observations, the CLEBM proposed the following amendments
to R.A. No. 7662:
SEC. 2. Declaration of Policies. - It is hereby declared the policy of the State to uplift the
standards of legal education in order to prepare law students for advocacy, counseling,
problem-solving, and decision-making; to infuse in them the ethics of the legal
profession; to impress upon them the importance, nobility and dignity of the legal
profession as an equal and indispensable partner of the Bench in the administration of
justice; and, to develop socially-committed lawyers with integrity and competence.

Towards this end, the State shall undertake appropriate reforms in the legal education
system, require proper selection of law students, provide for legal apprenticeship, and
maintain quality among law schools.

xxxx

SEC. 3. General and Specific Objectives of Legal Education. x x x

xxxx

2.) to increase awareness among law students of the needs of the poor, deprived and
oppressed sectors of society;

xxxx

SEC. 7. Power and functions. - x x x

(a) to regulate the legal education system in accordance with its powers and functions
herein enumerated;

(b) to establish standards of accreditation for law schools, consistent with academic
freedom and pursuant to the declaration of policy set forth in Section 2 hereof;

(c) to accredit law schools that meet the standards of accreditation;

(d) to prescribe minimum standards for admission to law schools including a system of
law aptitude examination;

(e) to provide for minimum qualifications for faculty members of law schools;

(f) to prescribe guidelines for law practice internship which the law schools may establish
as part of the curriculum; and

(g) to perform such other administrative functions as may be necessary for the attainment
of the policies and objectives of this Act.[8] (Underscoring supplied)

xxxx
In a Resolution[9] dated September 4, 2001, the Court approved the CLEBM's explanatory
note and draft amendments to R.A. No. 7662. The Senate and the House of
Representatives were formally furnished with a copy of said Resolution. This,
notwithstanding, R.A. No. 7662 remained unaltered.

LEB Issuances

In 2003, the Court issued a resolution authorizing the JBC to commence the nomination
process for the members of the LEB. In 2009, the LEB was constituted with the
appointment of Retired Court of Appeals Justice Hilarion L. Aquino as the first
Chairperson and followed by the appointment of LEB members, namely, Dean Eulogia
M. Cueva, Justice Eloy R. Bello, Jr., Dean Venicio S. Flores and Commission on Higher
Education (CHED) Director Felizardo Y. Francisco. Despite the passage of the enabling
law in 1993, the LEB became fully operational only in June 2010.

Acting pursuant to its authority to prescribe the minimum standards for law schools, the
LEB issued Memorandum Order No. 1, Series of 2011 (LEBMO No. 1-2011) providing
for the Policies and Standards of Legal Education and Manual of Regulation for Law
Schools.

Since then, the LEB had issued several orders, circulars, resolutions, and other issuances
which are made available through their website:

A. Orders

Number Title/Subject
LEBMO No. Additional Rules in the Operation of the Law Program
2
LEBMO No. Policies, Standards and, Guidelines for the Accreditation of Law Schools to Offer
3-2016 and Operate Refresher Courses
LEBMO No. Supplemental to [LEBMO] No. 3, Series of 2016
4-2016
LEBMO No. Guidelines for the [Prerequisite] Subjects in the Basic Law Courses
5-2016
LEBMO No. Reportorial Requirements for Law Schools
6-2016
LEBMO No. Policies and Regulations for the Administration of a Nationwide Uniform Law
7-2016 School Admission Test for Applicants to the Basic Law Courses in All Law
Schools in the Country
LEBMO No. Policies, Guidelines and Procedures Governing Increases in Tuition and Other
8-2016 School Fees, and, Introduction of New Fees by Higher, Education Institutions for
the Law Program
LEBMO No. Policies and Guidelines on the Conferment of Honorary Doctor of Laws Degrees
9-2017
LEBMO No. Guidelines on the Adoption of Academic/School Calendar
10-2017
LEBMO No. Additional Transition Provisions to [LEBMO] No. 7, Series of 2016, on PhiLSAT
11-2017
LEBMO No. LEB Service/Transaction Fees
12-2018
LEBMO No. Guidelines
13-2018   in the Conduct of Summer Classes
LEBMO No. Policy and Regulations in Offering Elective Subjects
14-2018
LEBMO No. Validation of the Licenses of, and the Law Curriculum/Curricula for the Basic
15-2018 Law Courses in use by Law Schools and Graduate Schools of Law
LEBMO No. Policies, Standards and Guidelines for the Academic Law Libraries of Law
16-2018 Schools
LEBMO No. Supplemental Regulations on the Minimum Academic Requirement of Master of
17-2018 Laws Degree for Deans and Law Professors/Lecturers/Instructors in Law Schools
LEBMO No. Guidelines on Cancellation or Suspension of Classes in All Law Schools
18-2018
LEBMO No. Migration of the Basic Law Course to Juris Doctor
19-2018
LEBMO No. Discretionary Admission in the AY 2019-2020 of Examinees Who Rated Below
20-2019 the Cut-off/Passing Score but Not Less than 45% in the Philippine Law School
Admission Test Administered on April 7, 2019

B. Memorandum Circulars

Number Title/Subject
LEBMC No. New Regulatory Issuances
1
LEBMC No. Submission of Schedule of Tuition and Other School Fees
2
LEBMC No. Submission of Law School Information Report
3
LEBMC No. Reminder to Submit Duly Accomplished LSIR Form
4
LEBMC No. Offering of the Refresher Course for AY 2017-2018
5
LEBMC No. Applications for LEB Certification Numbers
6
LEBMC No. Application of Transitory Provision Under [LEBMO] No. 7 Series of 2017 and
7 [LEBMO] No. 11, Series of 2017 in the Admission of Freshmen Law Students in
Basic Law Courses in Academic Year 2017-2018
LEBMC No. Guidelines for Compliance with the Reportorial Requirements Under [LEBMO]
8 No. 7, Series of 2016 for Purposes of the Academic Year 2017-2018
LEBMC No. Observance of Law Day and Philippine National Law Week
9
LEBMC No. September 21, 2017 Suspension of Classes
10
LEBMC No. Law Schools Authorized to Offer the Refresher Course in the Academic Year
11 2016-2017
LEBMC No. Law Schools Authorized to Offer the Refresher Course in the Academic Year
12 2017-2018
LEBMC No. Legal Research Seminar of the Philippine Group of Law Librarians on April 4-6,
13 2018
LEBMC No. CSC Memorandum Circular No. 22, s.2016
14
LEBMC No. Law Schools Authorized to Offer the Refresher Course in the Academic Year
15 2018-2019
LEBMC No. Clarification to [LEBMO] No. 3, Series of 2016
16
LEBMC No. Updated List of Law Schools Authorized to Offer the Refresher Course in the
17 Academic Year 2018-2019
LEBMC No. PHILSAT Eligibility Requirement for Freshmen in the Academic Year 2018-
18 2019
LEBMC No. Guidelines for the Limited Conditional Admission/Enrollment in the 1st Semester
19 of the Academic Year 2018-2019 Allowed for Those Who Have Not Taken the
PhiLSAT
LEBMC No. Updated List of Law Schools Authorized to Offer the Refresher Course in the
20 Academic Year 2018-2019
LEBMC No. Adjustments/Corrections to the Requirements for Law Schools to be Qualified to
21 Conditionally Admit/Enroll Freshmen Law Students in AY 2018-2019
LEBMC No. Advisory on who should take the September 23, 2018 PhiLSAT
22
LEBMC No. Collection of the PhiLSAT Certificate of Eligibility/Exemption by Law Schools
23 from Applicants for Admission
LEBMC No. Observance of the Philippine National Law Week
24
LEBMC No. Competition Law
25
LEBMC No. Scholarship Opportunity for Graduate Studies for Law Deans, Faculty Members
26 and Law Graduates with the 2020-2021 Philippine Fulbright Graduate Student
Program
LEBMC No. Advisory on April 7, 2019 PhiLSAT and Conditional [Enrollment] for Incoming
27 Freshmen/1st Year Law Students
LEBMC No. April 25-26, 2019 Competition Law Training Program
28
LEBMC No. Detailed Guidelines for Conditional Enrollment Permit Application
29
LEBMC No. Law Schools Authorized to Offer Refresher Course in AY 2019-2020
30
LEBMC No. Law Schools Authorized to Offer Refresher Course in AY 2019-2020
31
LEBMC No. Reminders concerning Conditionally Enrolled Freshmen Law Students in AY
40 2019-2020

C. Resolutions and Other Issuances

Number Title/Subject
Resolution No. 16 Reportorial Requirement for Law Schools with Small Students Population
Resolution No.7, Declaring a 3-Year Moratorium in the Opening of New Law Schools
Series of 2010
Resolution No. 8, Administrative Sanctions
Series of 2010
Resolution No. A Resolution Providing for Supplementary Rules to the Provisions of
2011-21 LEBMO No. 1 in regard to Curriculum and Degrees Ad Eundem
Resolution No. A Resolution Eliminating the Requirement of Special, Orders for Graduates
2012-02 of the Basic Law Degrees and Graduate Law Degrees and Replacing them
with a Per Law School Certification Approved by the Legal Education Board
Resolution No. Ethical Standards of Conduct for Law Professors
2013-01
Resolution No. Prescribing Rules on the Ll.M. Staggered Compliance Schedule and the
2014-02 Exemption from the Ll.M. Requirement
Resolution No. Prescribing the Policy and Rules in the Establishment of a Legal Aid Clinic
2015-08 in Law Schools
Order Annual Law Publication Requirements
Chairman Restorative Justice to be Added as Elective Subject
Memorandum
          
The PhiLSAT  
under LEBMO
No. 7-2016,
LEBMO No. 11-
2017, LEBMC
No. 18-2018, and
related issuances

As above-enumerated, among the orders issued by the LEB was Memorandum Order No.
7, Series of 2016 (LEBMO No. 7-2016) pursuant to its power to "prescribe the minimum
standards for law admission" under Section 7(e) of R.A. No. 7662.

The policy and rationale of LEBMO No. 7-2016 is to improve the quality of legal
education by requiring all those seeking admission to the basic law course to take and
pass a nationwide uniform law school admission test, known as the PhiLSAT. [10]

The PhiLSAT is essentially an aptitude test measuring the examinee's communications

and language proficiency, critical thinking, verbal and quantitative reasoning.[11] It was
designed to measure the academic potential of the examinee to pursue the study of law.
[12]
 Exempted from the PhiLSAT requirement were honor graduates who were granted
professional civil service eligibility and who are enrolling within two years from their
college graduation.[13]

Synthesizing, the key provisions of LEBMO No. 7-2016 are as follows:

(1) The policy and rationale of requiring PhiLSAT is to improve the quality of legal
education. The PhiLSAT shall be administered under the control and supervision of the
LEB;[14]

(2) The PhiLSAT is an aptitude test that measures the academic potential of the examinee
to pursue the study of law;[15]

(3) A qualified examinee is either a graduate of a four-year bachelor's degree; expecting

to graduate with a four-year bachelor's degree at the end of the academic year when the
PhiLSAT was administered; or a graduate from foreign higher education institutions with
a degree equivalent to a four-year bachelor's degree. There is no limit as to the number of
times a qualified examinee may take the PhiLSAT;[16]

(4) The LEB may designate an independent third-party testing administrator;[17]

(5) The PhiLSAT shall be administered at least once a year, on or before April 16, in
testing centers;[18]

(6) The testing fee shall not exceed the amount of P1,500.00 per examination; [19]
(7) The cut-off or passing score shall be 55% correct answers, or such percentile score as
may be prescribed by the LEB;[20]

(8) Those who passed shall be issued a Certificate of Eligibility while those who failed
shall be issued a Certificate of Grade;[21]

(9) Passing the PhiLSAT is required for admission to any law school. No applicant shall
be admitted for enrollment as a first year student in the basic law course leading to a
degree of either Bachelor of Laws or Juris Doctor unless he has passed the PhiLSAT
taken within two years before the start of the study;[22]

(10) Honor graduates granted professional civil service eligibility who are enrolling
within two years from college graduation are exempted from taking and passing the
PhiLSAT for purposes of admission to the basic law course;[23]

(11) Law schools, in the exercise of academic freedom, can prescribe additional
requirements for admission;[24]

(12) Law schools shall submit to LEB reports of first year students admitted and enrolled,
and their PhiLSAT scores, as well as the subjects enrolled and the final grades received
by every first year student;[25]

(13) Beginning academic year 2018-2019, the general average requirement (not less than
80% or 2.5) for admission to basic law course under Section 23 of LEBMO No. 1-2011 is
removed;[26]

(14) In academic year 2017-2018, the PhiLSAT passing score shall not be enforced and
the law schools shall have the discretion to admit in the basic law course, applicants who
scored less than 55% in the PhiLSAT, provided that the law dean shall submit a
justification for the admission and the required report;[27] and

(15) Law schools, in violation of LEBMO No. 7-2016, shall be administratively

sanctioned as prescribed in Section 32[28] of LEBMO No. 2-2013[29] and/or fined up to
P10,000.00.[30]
Effective for the academic year 2017 to 2018, no applicant to law school was allowed
admission without having taken and passed the PhiLSAT. The first PhiLSAT
examination was held on April 16, 2017 in seven pilot sites: Baguio City, Metro Manila,
Legazpi City, Cebu City, Iloilo City, Davao City, and Cagayan de Oro. A total of 6,575
out of 8,074 examinees passed the first-ever PhiLSAT. For the first PhiLSAT, the passing
grade was adjusted by the LEB from 55% to 45% by way of consideration.

Since the PhiLSAT was implemented for the first time and considering further that there
were applicants who failed to take the PhiLSAT because of the inclement weather last
April 16, 2017, the LEB issued Memorandum Order No. 11, Series of 2017 (LEBMO No.
11-2017).

Under LEBMO No. 11-2017, those who failed to take the first PhiLSAT were allowed to
be admitted to law schools for the first semester of academic year 2017 to 2018 for
justifiable or meritorious reasons and conditioned under the following terms:
2. Conditions - x x x

a. The student shall take the next scheduled PhiLSAT;

b. If the student fails to take the next scheduled PhiLSAT for any reason, his/her
conditional admission in the law school shall be automatically revoked and barred from
enrolling in the following semester;

c. If the student takes the next scheduled PhiLSAT but scores below the passing or cut-
off score, his/her conditional admission shall also be revoked and barred from enrolling
in the following semester, unless the law school expressly admits him/her in the exercise
of the discretion given under Section/Paragraph 14 of LEBMO No. 7, Series of 2016,
subject to the requirements of the same provision;

d. The student whose conditional admission and enrol[l]ment is subsequently revoked

shall not be entitled to the reversal of the school fees assessed and/or refund of the school
fees paid; and

e. The student shall execute under oath, and file with his/her application for a Permit for
Conditional Admission/Enrol[l]ment, an UNDERTAKING expressly agreeing to the
foregoing conditions.[31]
The conditional admission and enrollment under LEBMO No. 11-2017 and the transitory
provision provided in LEBMO No. 7-2016 were subsequently clarified by the LEB
through its Memorandum Circular No. 7, Series of 2017 (LEBMC No. 7-2017).

On September 24, 2017 and April 8, 2018, the second and third PhiLSATs were
respectively held.

On October 26, 2017, the LEB issued a Memorandum reminding law schools, law
students, and other interested persons that the passing of the PhiLSAT is required to be
eligible for admission/enrollment in the basic law course for academic year 2017 to 2018.
It was also therein clarified that the discretion given to law schools to admit those who
failed the PhiLSAT during the initial year of implementation is only up to the second
semester of academic year 2017-2018.

Because of the confusion as to whether conditional admission for academic year 2018 to
2019 may still be allowed, the LEB issued Memorandum Circular No. 18, Series of
2018 (LEBMC No. 18-2018). Under LEBMC No. 18-2018, it was clarified that the
conditional admission was permitted only in academic year 2017 to 2018 as part of the
transition adjustments in the initial year of the PhiLSAT implementation. As such, by
virtue of LEBMC No. 18-2018, the conditional admission of students previously allowed
under LEBMO No. 11-2017 was discontinued.

Nevertheless, on July 25, 2018, the LEB issued Memorandum Circular No. 19, Series of
2018 (LEBMC No. 19-2018) allowing limited conditional admission/enrollment in the
first semester of academic year 2018 to 2019 for those applicants who have never
previously taken the PhiLSAT. Those who have taken the PhiLSAT and scored below the
cut-off score were disqualified. In addition, only those law schools with a passing rate of
not less than 25%, are updated in the reportorial requirement and signified its intention to
conditionally admit applicants were allowed to do so. The limited enrollment was subject
to the condition that the admitted student shall take and pass the next PhiLSAT on
September 23, 2018, otherwise the conditional enrollment shall be nullified. Non-
compliance with said circular was considered a violation of the minimum standards for
the law program for which law schools may be administratively penalized.

The fourth PhiLSAT then pushed through on September 23, 2018.

The Petitions

Days before the scheduled conduct of the first-ever PhiLSAT on April 16, 2017,
petitioners Oscar B. Pimentel (Pimentel), Errol B. Comafay (Comafay), Rene B. Gorospe
(Gorospe), Edwin R. Sandoval (Sandoval), Victoria B. Loanzon (Loanzon), Elgin
Michael C. Perez (Perez), Arnold E. Cacho (Cacho), Al Conrad B. Espaldon (Espaldon)
and Ed Vincent S. Albano (Albano) [as citizens, lawyers, taxpayers and law professors],
with their co-petitioners Leighton R. Siazon (Siazon), Arianne C. Artugue (Artugue),
Clarabel Anne R. Lacsina (Lacsina) and Kristine Jane R. Liu (Liu) [as citizens, lawyers
and taxpayers], Alyanna Mari C. Buenviaje (Buenviaje) and Iana Patricia Dula T. Nicolas
(Nicolas) [as citizens intending to take up law] and Irene A. Tolentino (Tolentino) and
Aurea I. Gruyal (Gruyal) [as citizens and taxpayers] filed their Petition for Prohibition,
[32]
 docketed as G.R. No. 230642, principally seeking that R.A. No. 7662 be declared
unconstitutional and that the creation of the LEB be invalidated together with all its
issuances, most especially the PhiLSAT, for encroaching upon the rule-making power of
the Court concerning admissions to the practice of law;[33] They prayed for the issuance of
a temporary restraining order (TRO) to prevent the LEB from conducting the PhiLSAT.

Respondents-in-intervention Attys. Anthony D. Bengzon (Bengzon), Ferdinand M. Negre

(Negre), Michael Z. Untalan (Untalan), Jonathan Q. Perez (Perez), Samantha Wesley K.
Rosales (Rosales), Erika M. Alfonso (Alfonso), Krys Valen O. Martinez (Martinez),
Ryan Ceazar P. Romano (Romano), and Kenneth C. Varona (Varona) [as citizens and
lawyers] moved to intervene and prayed for the dismissal of the Petition for Prohibition.
[34]

On February 12, 2018, petitioners-in-intervention April D. Caballero (Caballero), Jerey

C. Castardo (Castardo), MC Wellroe P. Bringas (Bringas), Rhuffy D. Federe (Federe)
and Conrad Theodore A. Matutino (Matutino) [as graduates of four-year college course
and applicants as first year law students], St. Thomas More School of Law and Business,
Inc., [as an educational stock corporation] and Rodolfo C. Rapista (Rapista), Judy Marie
Rapista-Tan (Rapista-Tan), Lynnart Walford A. Tan (Tan), Ian M. Enterina (Enterina)
and Neil John Villarico (Villarico) [as citizens and law professors] intervened and joined
the Petition for Prohibition of Pimentel, et al., seeking to declare R.A. No. 7662 and the
PhiLSAT as unconstitutional.[35]

Thereafter, a Petition for Certiorari and Prohibition, docketed as G.R. No. 242954, was

filed by petitioners Francis Jose Lean L. Abayata (Abayata), Gretchen M. Vasquez
(Vasquez), Sheenah S. Ilustrismo (Ilustrismo), Ralph Louie Salaño (Solaño), Aireen
Monica B. Guzman (Guzman) and Delfino Odias (Odias) [as law students who failed to
pass the PhiLSAT], Daryl Dela Cruz (Dela Cruz), Claire Suico (Suico), Aivie S.
Pescadero (Pescadero), Niña Christine Dela Paz (Dela Paz), Shemark K. Queniahan
(Queniahan), Al Jay T. Mejos (Mejos), Rocellyn L. Daño (Daño), Michael Adolfo
(Adolfo), Ronald A. Atig (Atig), Lynette C. Lumayag (Lumayag), Mary Chris Lagera
(Lagera), Timothy B. Francisco (Francisco), Sheila Marie C. Dandan (Dandan), Madeline
C. Dela Peña (Dela Peña), Darlin R. Villamor (Villamor), Lorenzana Llorico (Llorico)
and Jan Ivan M. Santamaria (Santamaria) [as current law students who failed to take the
PhiLSAT] seeking to invalidate R.A. No. 7662 or, in the alternative, to declare as
unconstitutional the PhiLSAT. They also sought the issuance of a TRO to defer the
holding of the aptitude test.[36]

These Petitions were later on consolidated by the Court and oral arguments thereon were
held on March 5, 2019.

Temporary Restraining Order

On March 12, 2019, the Court issued a TRO[37] enjoining the LEB from implementing
LEBMC No. 18-2018 and, thus, allowing those who have not taken the PhiLSAT prior to
the academic year 2018 to 2019, or who have taken the PhiLSAT, but did not pass, or
who are honor graduates in college with no PhiLSAT Exemption Certificate, or honor
graduates with expired PhiLSAT Exemption Certificates to conditionally enroll as
incoming freshmen law students for the academic year 2019 to 2020 under the same
terms as LEBMO No. 11-2017.

Subsequently, the LEB issued Memorandum Circular No. 27, Series of 2019 (LEBMC

No. 27-2019) stating that the PhiLSAT scheduled on April 7, 2019 will proceed and
reiterated the requirements that must be complied with for the conditional enrollment for
the academic year 2019 to 2020.

The Parties' Arguments

In G.R. No. 230642

Petitioners in G.R. No. 230642 argue that R.A. No. 7662 and the PhiLSAT are offensive
to the Court's power to regulate and supervise the legal profession pursuant to Section
5(5), Article VIII[38] of the Constitution and that the Congress cannot create an
administrative office that exercises the Court's power over the practice of law. They also
argue that R.A. No. 7662 gives the JBC additional functions to vet nominees for the LEB
in violation of Section 8(5), Article VIII[39] of the Constitution.

In their Memorandum, petitioners also question the constitutionality of the LEB's powers
under Section 7(c)[40] and 7(e)[41] to prescribe the qualifications and compensation of
faculty members and Section 7(h)[42] on the LEB's power to adopt a system of continuing
legal education as being repugnant to the Court's rule-making power concerning the
practice of law. They also argue that the PhiLSAT violates the academic freedom of law
schools and the right to education.

Petitioners-in-intervention meanwhile contend that the PhiLSAT violates the right to

liberty and pursuit of happiness of the student-applicants. They posit that the PhiLSAT
violates the equal protection clause as it is an arbitrary form of classification not based on
substantial distinctions. They also argue that the PhiLSAT violates the right of all citizens
to quality and accessible education, violates academic freedom, and is an unfair academic
requirement. It is also their position that the PhiLSAT violates due process as it interferes
with the right of every person to select a profession or course of study. They also argue
that R.A. No. 7662 constitutes undue delegation of legislative powers.

In G.R. No. 242954

Petitioners in G.R. No. 242954 argue that certiorari and prohibition are proper remedies
either under the expanded or traditional jurisdiction of the Court. They also invoke the
doctrine of transcendental importance.

Substantively, they contend that R.A. No. 7662, specifically Section 3(a)(2) [43] on the
objective of legal education to increase awareness among members of the legal
profession, Section 7(e) on law admission, 7(g)[44] on law practice internship, and 7(h) on
adopting a system of continuing legal education, and the declaration of policy on
continuing legal education[45] infringe upon the power of the Court to regulate admission
to the practice of law. They profess that they are not against the conduct of law school
admission test per se, only that the LEB cannot impose the PhiLSAT as the power to do
so allegedly belongs to the Court.[46]

It is also their contention that the PhiLSAT violates academic freedom as it interferes
with the law school's exercise of freedom to choose who to admit. According to them, the
LEB cannot issue penal regulations, and the consequent forfeiture of school fees and the
ban on enrollment for those who failed to pass the PhiLSAT violate due process.

The Comments

Procedurally, the Office of the Solicitor General (OSG), representing the LEB, argues
that certiorari and prohibition are not proper to assail the constitutionality of R.A. No.
7662 either under the traditional or expanded concept of judicial power. For the OSG,
R.A. No. 7662 was enacted pursuant to the State's power to regulate all educational
institutions, and as such, there could be no grave abuse of discretion. It also claims that
the Congress is an indispensable party to the petitions.

Substantively, the OSG contends that the Court's power to regulate admission to the
practice of law does not include regulation of legal education. It also defends Section 7(e)
on the LEB's power to prescribe minimum standards for law admission as referring to
admission to law schools; Section 7(g) on the LEB's power to establish a law practice
internship as pertaining to the law school curriculum which is within the power of the
LEB to regulate; and 7(h) on the LEB's power to adopt a system of continuing legal
education as being limited to the training of lawyer-professors.[47] Anent the argument
that R.A. No. 7662 gives the JBC additional functions not assigned to it by the Court, the
OSG points out that the Court had actually authorized the JBC to process the applications
for membership to the LEB making this a non-issue.

In defending the validity of the PhiLSAT, the OSG advances the argument that the
PhiLSAT is the minimum standard for entrance to law schools prescribed by the LEB
pursuant to the State's power to regulate education. The OSG urges that the PhiLSAT is
no different from the National Medical Admission Test (NMAT) which the Court already
upheld as a valid exercise of police power in the seminal case of Tablarin v. Gutierrez.[48]

It is also the position of the OSG that neither the PhiLSAT nor the provisions of R.A. No.
7662 violate academic freedom because the standards for entrance to law school, the
standards for accreditation, the prescribed qualifications of faculty members, and the
prescribed basic curricula are fair, reasonable, and equitable admission and academic
requirements.

For their part, respondents in-intervention contend that R.A. No. 7662 enjoys the
presumption of constitutionality and that the study of law is different from the practice of
law.
In its Comment to the Petition-in-Intervention, the OSG dismisses as speculative the
argument that the PhiLSAT is anti-poor, and adds that the Court has no competence to
rule on whether the PhiLSAT is an unfair or unreasonable requirement, it being a
question of policy.

Respondents-in-intervention, for their part, argue that the right of the citizens to
accessible education means that the State shall make quality education accessible only to
those qualified enough, as determined by fair, reasonable, and equitable admission and
academic requirements. They dispute the claimed intrusion on academic freedom as law
schools are not prevented from selecting who to admit among applicants who have
passed the PhiLSAT. They stress that the right to education is not absolute and may be
regulated by the State, citing Calawag v. University of the Philippines Visayas.[49]

By way of Reply, petitioners-in-intervention emphasize that the doctrine in Tablarin[50] is

inapplicable as medical schools are not the same as law schools. They further aver that
the decline in enrollment as a result of the implementation of the PhiLSAT is not
speculative.[51]

The Issues

After a careful consideration of the issues raised by the parties in their pleadings and
refined during the oral arguments, the issues for resolution are synthesized as follows:
I. Procedural Issues:

A. Remedies of certiorari and prohibition; and

B. Requisites of judicial review and the scope of the Court's review in the
instant petitions.

II. Substantive Issues:

A. Jurisdiction over legal education;

B. Supervision and regulation of legal education as an exercise of police

power;

1. Reasonable supervision and regulation

2. Institutional academic freedom

3. Right to education
 C. LEB's powers under R.A. No. 7662 vis-a-vis the Court's jurisdiction over
the practice of law; and

D. LEB's powers under R.A. No. 7662 vis-a-vis the academic freedom of law

schools and the right to education.

The Rulings of the Court

I.
Procedural Issues

A.
Remedies of Certiorari and Prohibition

The propriety of the remedies of certiorari and prohibition is assailed on the ground that
R.A. No. 7662 is a legislative act and not a judicial, quasi-judicial, or ministerial
function. In any case, respondents argue that the issues herein presented involve purely
political questions beyond the ambit of judicial review.

The Court finds that petitioners availed of the proper remedies.

The 1935[52] and 1973[53] Constitutions mention, but did not define, "judicial power." In
contrast, the 1987 Constitution lettered what judicial power is and even "expanded" its
scope.

As constitutionally defined under Section 1, Article VIII of the 1987 Constitution,

[54]
 judicial power is no longer limited to the Court's duty to' settle actual controversies
involving rights which are legally demandable and enforceable, or the power of
adjudication, but also includes, the duty to determine whether or not there has been grave
abuse of discretion amounting to lack or excess of jurisdiction on the part of any branch
or instrumentality of the Government. This innovation under the 1987 Constitution later
on became known as the Court's traditional jurisdiction and expanded jurisdiction,
respectively.[55]

The expanded scope of judicial review mentions "grave abuse of discretion amounting to
lack or excess of jurisdiction" to harbinger the exercise of judicial review; while petitions
for certiorari[56] and prohibition[57] speak of "lack or excess of jurisdiction or grave abuse
of discretion amounting to lack or excess of jurisdiction." Petitions for certiorari and
prohibition as it is understood under Rule 65 of the Rules of Court are traditionally
regarded as supervisory writs used as a means by superior or appellate courts, in the
exercise of their supervisory jurisdiction, to keep subordinate courts within the bounds of
their jurisdictions. As such, writs of certiorari and prohibition correct only errors of
jurisdiction of judicial and quasi-judicial bodies.[58]

However, considering the commonality of the ground of "grave abuse of discretion," a

Rule 65 petition, as a procedural vehicle to invoke the Court's expanded jurisdiction, has
been allowed.[59] After all, there is grave abuse of discretion when an act is done contrary
to the Constitution, the law or jurisprudence, or is executed whimsically, capriciously or
arbitrarily, out of malice, ill will, or personal bias.[60] In Spouses Imbong v. Ochoa, Jr.,
[61]
 the Court emphasized that certiorari, prohibition and mandamus are appropriate
remedies to raise constitutional issues.

That it is a legislative act which is being assailed is likewise not a ground to deny the
present petitions.

For one, the 1987 Constitution enumerates under Section 5(2)(a), Article VIII,[62] the
Court's irreducible powers which expressly include the power of judicial review, or the
power to pass upon the constitutionality or validity of any treaty, international or
executive agreement, law, presidential decree, proclamation, order, instruction,
ordinance, or regulation.

For another, the Court's expanded jurisdiction, when invoked, permits a review of acts
not only by a tribunal, board, or officer exercising judicial, quasi-judicial or ministerial
functions, but also by any branch or instrumentality of the Government. "Any branch or
instrumentality of the Government" necessarily includes the Legislative and the
Executive, even if they are not exercising judicial, quasi-judicial or ministerial functions.
[63]
 As such, the Court may review and/or prohibit or nullify, when proper, acts of
legislative and executive officials, there being no plain, speedy, or adequate remedy in
the ordinary course of law.[64]

The power of judicial review over congressional action, in particular, was affirmed
in Francisco, Jr. v. The House of Representatives,[65] wherein the Court held:
There is indeed a plethora of cases in which this Court exercised the power of judicial
review over congressional action. Thus, in Santiago v. Guingona, Jr., this Court ruled
that it is well within the power and jurisdiction of the Court to inquire whether the
Senate or its officials committed a violation of the Constitution or grave abuse of
discretion in the exercise of their functions and prerogatives. In Tañada v. Angara,
where petitioners sought to nullify an act of the Philippine Senate on the ground that it
contravened the Constitution, it held that the petition raised a justiciable controversy and
that when an action of the legislative branch is alleged to have seriously infringed the
Constitution, it becomes not only the right but in fact the duty of the judiciary to
settle the dispute. In Bondoc v. Pineda, [this Court] declared null and void a resolution
of the House of Representatives withdrawing the nomination, and rescinding the election,
of a congressman as a member of the House Electoral Tribunal for being violative of
Section 17, Article VI of the Constitution. In Coseteng v. Mitra, it held that the resolution
of whether the House representation in the Commission on Appointments was based on
proportional representation of the political parties as provided in Section 18, Article VI of
the Constitution is subject to judicial review. In Daza v. Singson, it held that the act of the
House of Representatives in removing the petitioner from the Commission on
Appointments is subject to judicial review. In Tañada v. Cuenco, it held that although
under the Constitution, the legislative power is vested exclusively in Congress, this
does not detract from the power of the courts to pass upon the constitutionality of
acts of Congress. In Angara v. Electoral Commission, it exercised its power of judicial
review to determine which between the Electoral Commission and the National
Assembly had jurisdiction over an electoral dispute concerning members of the latter.
(Internal citations omitted; emphases supplied)
This was reiterated in Villanueva v. Judicial and Bar Council,[66] as follows:
With respect to the Court, however, the remedies of certiorari and prohibition are
necessarily broader in scope and reach, and the writ of certiorari or prohibition may be
issued to correct errors of jurisdiction committed not only by a tribunal, corporation,
board or officer exercising judicial, quasi-judicial or ministerial functions but also to set
right, undo and restrain any act of grave abuse of discretion amounting to lack or excess
of jurisdiction by any branch or instrumentality of the Government, even if the latter does
not exercise judicial, quasi-judicial or ministerial functions. This application is expressly
authorized by the text of the second paragraph of Section 1, supra.

Thus, petitions for certiorari and prohibition are appropriate remedies to raise

constitutional issues and to review and/or prohibit or nullify the acts of legislative
and executive officials. (Internal citation omitted; emphasis supplied)
Consistently, in Samahan ng mga Progresibong Kabataan (SPARK) v. Quezon City,
[67]
 the remedies of certiorari and prohibition were regarded as proper vehicles to assail
the constitutionality of curfew ordinances, and in Agcaoili v. Fariñas,[68] to question the
contempt powers of the Congress in the exercise of its power of inquiry in aid of
legislation.

The consistency in the Court's rulings as to the propriety of the writs of certiorari and
prohibition under Rule 65 of the Rules of Court to correct errors of jurisdiction
committed not only by a tribunal, corporation, board or officer exercising judicial, quasi-
judicial or ministerial functions, but also to correct, undo, or restrain any act of grave
abuse of discretion on the part of the legislative and the executive, propels the Court to
treat the instant petitions in the same manner.

B.
Requisites for Judicial Review

The power of judicial review is tritely defined as the power to review the constitutionality
of the actions of the other branches of the government.[69] For a proper exercise of its
power of review in constitutional litigation, certain requisites must be satisfied: (1) an
actual case or controversy calling for the exercise of judicial power; (2) the person
challenging the act must have "standing" to challenge; (3) the question of
constitutionality must be raised at the earliest possible opportunity; and (4) the issue of
constitutionality must be the very lis mota of the case.[70]

These requisites are effective limitations on the Court's exercise of its power of review
because judicial review in constitutional cases is quintessentially deferential, owing to the
great respect that each co-equal branch of the Government affords to the other.

Of these four requisites, the first two, being the most essential,[71] deserve an extended
discussion in the instant case.

1. Actual Case or Controversy

Fundamental in the exercise of judicial power, whether under the traditional or expanded
setting, is the presence of an actual case or controversy.[72] An actual case or controversy
is one which involves a conflict of legal rights and an assertion of opposite legal claims
susceptible of judicial resolution. The case must not be moot or academic, or based on
extra-legal or other similar considerations not cognizable by a court of justice.

To be justiciable, the controversy must be definite and concrete, touching on the legal
relations of parties having adverse legal interests. It must be shown from the pleadings
that there is an active antagonistic assertion of a legal right, on the one hand, and a denial
thereof on the other. There must be an actual and substantial controversy and not merely
a theoretical question or issue. Further, the actual and substantial controversy must admit
specific relief through a conclusive decree and must not merely generate an advisory
opinion based on hypothetical or conjectural state of facts.[73]

Closely associated with the requirement of an actual or justiciable case or controversy is

the ripening seeds for adjudication. Ripeness for adjudication has a two-fold aspect: first,
the fitness of the issues for judicial decision; and second, the hardship to the parties
entailed by withholding court consideration. The first aspect requires that the issue must
be purely legal and that the regulation subject of the case is a "final agency action." The
second aspect requires that the effects of the regulation must have been felt by the
challenging parties in a concrete way.[74]

To stress, a constitutional question is ripe for adjudication when the challenged

governmental act has a direct and existing adverse effect on the individual challenging it.
[75]
 While a reasonable certainty of the occurrence of a perceived threat to a constitutional
interest may provide basis for a constitutional challenge, it is nevertheless still required
that there are sufficient facts to enable the Court to intelligently adjudicate the issues. [76]
In this regard, the Court's pronouncement in Philippine Association of Colleges and
Universities (PACU) v. Secretary of Education[77] deserves reiteration:
It should be understandable, then, that this Court should be doubly reluctant to
consider petitioner's demand for avoidance of the law aforesaid, [e]specially where,
as respondents assert, petitioners suffered no wrong - nor allege any - from the
enforcement of the criticized statute.
It must be evident to any one that the power to declare a legislative enactment void is one
which the judge, conscious of the fallibility of human judgment, will shrink from
exercising in any case where he can conscientiously and with due regard to duty and
official oath decline the responsibility. x x x

When a law has been long treated as constitutional and important rights have become
dependent thereon, the Court may refuse to consider an attack on its validity. x x x

As a general rule, the constitutionality of a statute will be passed on only if, and to the
extent that, it is directly and necessarily involved in a justiciable controversy and is
essential to the protection of the rights of the parties concerned. x x x

xxxx

It is an established principle that to entitle a private individual immediately in danger of

sustaining a direct injury as the result of that action and it is not sufficient that he has
merely a general [interest] to invoke the judicial power to determine the validity of
executive or legislative action he must show that he has sustained or [has an] interest
common to all members of the public. x x x

Courts will not pass upon the constitutionality of a law upon the complaint of one who
fails to show that he is injured by its operation. x x x

The power of courts to declare a law unconstitutional arises only when the interests of
litigants require the use of that judicial authority for their protection against actual
interference, a hypothetical threat being insufficient. x x x

Bona fide suit. - Judicial power is limited to the decision of actual cases and
controversies. The authority to pass on the validity of statutes is incidental to the decision
of such cases where conflicting claims under the Constitution and under a legislative act
assailed as contrary to the Constitution are raised. It is legitimate only in the last resort,
and as necessity in the determination of real, earnest, and vital controversy between
litigants. x x x
xxxx

An action, like this, is brought for a positive purpose, nay, to obtain actual and
positive relief. x x x Courts do not sit to adjudicate mere academic questions to
satisfy scholarly interest therein, however intellectually solid the problem may be.
This is [e]specially true where the issues "reach constitutional dimensions, for then
there comes into play regard for the court's duty to avoid decision of constitutional
issues unless avoidance becomes evasion." x x x (Internal citations omitted; emphases
supplied)
Ultimately, whether an actual case is present or not is determinative of whether the
Court's hand should be stayed when there is no adversarial setting and when the
prerogatives of the co-equal branches of the Government should instead be respected.

As ruled in Republic v. Roque: [78]

A perusal of private respondents' petition for declaratory relief would show that they have
failed to demonstrate how they are left to sustain or are in immediate danger to sustain
some direct injury as a result of the enforcement of the assailed provisions of RA 9372.
Not far removed from the factual milieu in the Southern Hemisphere cases, private
respondents only assert general interests as citizens, and taxpayers and infractions which
the government could prospectively commit if the enforcement of the said law would
remain untrammelled. As their petition would disclose, private respondents' fear of
prosecution was solely based on remarks of certain government officials which were
addressed to the general public. They, however, failed to show how these remarks
tended towards any prosecutorial or governmental action geared towards the
implementation of RA 9372 against them. In other words, there was no particular,
real or imminent threat to any of them. As held in Southern Hemisphere:
Without any justiciable controversy, the petitions have become pleas for declaratory
relief, over which the Court has no original jurisdiction. Then again, declaratory actions
characterized by "double contingency," where both the activity the petitioners intend to
undertake and the anticipated reaction to it of a public official are merely theorized, lie
beyond judicial review for lack of ripeness.

The possibility of abuse in the implementation of RA 9372 does not avail to take the
present petitions out of the realm of the surreal and merely imagined. Such possibility is
not peculiar to RA 9372 since the exercise of any power granted by law may be abused.
Allegations of abuse must be anchored on real events before courts may step in to settle
actual controversies involving rights which are legally demandable and enforceable.
(Internal citations omitted; emphasis supplied)
Concededly, the Court had exercised the power of judicial review by the mere enactment
of a law or approval of a challenged action when such is seriously alleged to have
infringed the Constitution. In Pimentel, Jr. v. Aguirre:[79]
First, on prematurity. According to the Dissent, when "the conduct has not yet occurred
and the challenged construction has not yet been adopted by the agency charged with
administering the administrative order, the determination of the scope and
constitutionality of the executive action in advance of its immediate adverse effect
involves too remote and abstract an inquiry for the proper exercise of judicial function."
This is a rather novel theory - that people should await the implementing evil to befall on
them before they can question acts that are illegal or unconstitutional. Be it remembered
that the real issue here is whether the Constitution and the law are contravened by Section
4 of AO 372, not whether they are violated by the acts implementing it. In the
unanimous en banc case Tañada v. Angara, this Court held that when an act of the
legislative department is seriously alleged to have infringed the Constitution, settling the
controversy becomes the duty of this Court. By the mere enactment of the questioned
law or the approval of the challenged action, the dispute is said to have ripened into
a judicial controversy even without any other overt act. Indeed, even a singular
violation of the Constitution and/or the law is enough to awaken judicial duty. Said
the Court:
In seeking to nullify an act of the Philippine Senate on the ground that it contravenes the
Constitution, the petition no doubt raises a justiciable controversy. Where an action of
the legislative branch is seriously alleged to have infringed the Constitution, it
becomes not only the right but in fact the duty of the judiciary to settle the dispute.
The question thus posed is judicial rather than political. The duty (to adjudicate)
remains to assure that the supremacy of the Constitution is upheld. Once a controversy as
to the application or interpretation of a constitutional provision is raised before this Court
x x x, it becomes a legal issue which the Court is bound by constitutional mandate to
decide.

xxxx

As this Court has repeatedly and firmly emphasized in many cases, it will not shirk,
digress from or abandon its sacred duty and authority to uphold the Constitution in
matters that involve grave abuse of discretion brought before it in appropriate cases,
committed by any officer, agency, instrumentality or department of the government.
In the same vein, the Court also held in Tatad v. Secretary of the Department of Energy:
x x x Judicial power includes not only the duty of the courts to settle actual controversies
involving rights which are legally demandable and enforceable, but also the duty to
determine whether or not there has been grave abuse of discretion amounting to lack or
excess of jurisdiction on the part of any branch or instrumentality of government. The
courts, as guardians of the Constitution, have the inherent authority to determine whether
a statute enacted by the legislature transcends the limit imposed by the fundamental law.
Where the statute violates the Constitution, it is not only the right but the duty of the
judiciary to declare such act unconstitutional and void.
By the same token, when an act of the President, who in our constitutional scheme is a
coequal of Congress, is seriously alleged to have infringed the Constitution and the laws,
as in the present case, settling the dispute becomes the duty and the responsibility of the
courts. (Internal citations omitted; emphases supplied)
In Spouses Imbong v. Ochoa,[80] the Court took cognizance of the petitions despite posing
a facial challenge against the entire law as the petitions seriously alleged that fundamental
rights have been violated by the assailed legislation:
In this case, the Court is of the view that an actual case or controversy exists and that
the same is ripe for judicial determination. Considering that the RH Law and its
implementing rules have already taken effect and that budgetary measures to carry
out the law have already been passed, it is evident that the subject petitions present
a justiciable controversy. As stated earlier, when an action of the legislative branch
is seriously alleged to have infringed the Constitution, it not only becomes a right,
but also a duty of the Judiciary to settle the dispute.

xxxx

Facial Challenge

The OSG also assails the propriety of the facial challenge lodged by the subject petitions,
contending that the RH Law cannot be challenged "on its face" as it is not a speech
regulating measure.

The Court is not persuaded.

In United States (US) constitutional law, a facial challenge, also known as a First
Amendment Challenge, is one that is launched to assail the validity of statutes concerning
not only protected speech, but also all other rights in the First Amendment. These include
religious freedom, freedom of the press, and the right of the people to peaceably
assemble, and to petition the Government for a redress of grievances. After all, the
fundamental right to religious freedom, freedom of the press and peaceful assembly are
but component rights of the right to one's freedom of expression, as they are modes which
one's thoughts are externalized.

In this jurisdiction, the application of doctrines originating from the U.S. has been
generally maintained, albeit with some modifications. While this Court has withheld
the application of facial challenges to strictly penal statutes, it has expanded its
scope to cover statutes not only regulating free speech, but also those involving
religious freedom, and other fundamental rights. The underlying reason for this
modification is simple. For unlike its counterpart in the U.S., this Court, under its
expanded jurisdiction, is mandated by the Fundamental Law not only to settle
actual controversies involving rights which are legally demandable and enforceable,
but also to determine whether or not there has been a grave abuse of discretion
amounting to lack or excess of jurisdiction on the part of any branch or
instrumentality of the Government. Verily, the framers of Our Constitution
envisioned a proactive Judiciary, ever vigilant with its duty to maintain the
supremacy of the Constitution.

Consequently, considering that the foregoing petitions have seriously alleged that
the constitutional human rights to life, speech and religion and other fundamental
rights mentioned above have been violated by the assailed legislation, the Court has
authority to take cognizance of these kindred petitions and to determine if the RH
Law can indeed pass constitutional scrutiny. To dismiss these petitions on the simple
expedient that there exist no actual case or controversy, would diminish this Court as a
reactive branch of government, acting only when the Fundamental Law has been
transgressed, to the detriment of the Filipino people. (Internal citations omitted; emphases
supplied)[81]
Likewise in Belgica v. Ochoa,[82] the Court held that the requirement of an actual case or
controversy is satisfied by the antagonistic positions taken by the parties:
The requirement of contrariety of legal rights is clearly satisfied by the antagonistic
positions of the parties on the constitutionality of the "Pork Barrel System." Also, the
questions in these consolidated cases are ripe for adjudication since the challenged funds
and the provisions allowing for their utilization-such as the 2013 GAA for the PDAF, PD
910 for the Malampaya Funds and PD 1869, as amended by PD 1993, for the Presidential
Social Fund - are currently existing and operational; hence, there exists an immediate or
threatened injury to petitioners as a result of the unconstitutional use of these public
funds.
1(a). Scope of Judicial Review

To determine whether petitioners presented an actual case or controversy, or have

seriously alleged that R.A. No. 7662 suffers from constitutional infirmities to trigger the
Court's power of judicial review, resort must necessarily be had to the pleadings filed.

Petitioners in G.R. No. 230642 allege that R.A. No. 7662 and the LEB issuances relative
to the admission and practice of law encroach upon the powers of the Court. [83] It is their
position that the powers given to the LEB are directly related to the Court's powers. [84] In
particular, they argue that the LEB's power to adopt a system of continuing legal
education under Section 7(h) of R.A. No. 7662 falls within the authority of the Court.
[85]
 In their Memorandum, they additionally argue that the LEB's powers to prescribe the
qualifications and compensation of faculty members under Section 7(c) and 7(e) of R.A.
No. 7662, Sections 50-51 of LEBMO No. 1, and Resolution No. 2014-02 intrude into the
Court's rule-making power relative to the practice of law.[86] They also argue that the
PhiLSAT violates the academic freedom of law schools and the right to education. [87] It is
their contention that the LEB is without power to impose sanctions.[88] They also question
the authority of the LEB Chairperson and Members to act in a hold-over capacity.[89]

For their part, petitioners-in-intervention allege that the PhiLSAT requirement resulted to
a reduced number of law student enrollees for St. Thomas More School of Law and
Business, Inc. and constrained said law school to admit only students who passed the
PhiLSAT which is against their policy of admitting students based on values.[90] Their co-
petitioners are students who either applied for law school, failed to pass the PhiLSAT, or,
were conditionally enrolled. Thus, they argue that Section 7(e) of R.A. No. 7662 and the
PhiLSAT violate the law school's academic freedom.
Petitioners in G.R. No. 242954 allege that they are current law students who failed to
pass and/or take the PhiLSAT, and who are therefore threatened with the revocation of
their conditional enrollment and stands to be barred from enrolling. Twelve of the 23
petitioners in G.R. No. 242954 were not allowed to enroll for failure to pass and/or take
the PhiLSAT.

It is their argument that the LEB's power under Section 7(e) of R.A. No. 7662 to
prescribe minimum standards for law admission, Section 7(g) to establish a law practice
internship, Section 7(h) to adopt a system of continuing legal education, and Section 3(a)
(2) on the stated objective of legal education to increase awareness among members of
the legal profession of the needs of the poor, deprived and oppressed sectors of society
usurp the Court's rule-making powers concerning admission to the practice of law. [91] In
addition, they argue that the PhiLSAT issuances violate academic freedom, and that the
LEB is not authorized to revoke conditional enrollment nor is it authorized to forfeit
school fees and impose a ban enrollment which are penal sanctions violative of the due
process clause. They also argue that the classification of students to those who have
passed or failed the PhiLSAT for purposes of admission to law school is repugnant to the
equal protection clause.

The petitions therefore raise an actual controversy insofar as they allege that R.A. No.
7662, specifically Section 2, paragraph 2, Section 3(a)(2), Section 7(c), (e), (g), and (h) of
R.A. No. 7662 infringe upon the Court's power to promulgate rules concerning the
practice of law and upon institutional academic freedom and the right to quality
education. Necessarily, a review of the LEB issuances when pertinent to these assailed
provisions of R.A. No. 7662 shall also be undertaken.

2. Legal Standing

Inextricably linked with the actual case or controversy requirement is that the party
presenting the justiciable issue must have the standing to mount a challenge to the
governmental act.

By jurisprudence, standing requires a personal and substantial interest in the case such
that the petitioner has sustained, or will sustain, direct injury as a result of the violation of
its rights,[92] thus:
Legal standing or locus standi is the "right of appearance in a court of justice on a given
question." To possess legal standing, parties must show "a personal and substantial
interest in the case such that [they have] sustained or will sustain direct injury as a result
of the governmental act that is being challenged." The requirement of direct injury
guarantees that the party who brings suit has such personal stake in the outcome of
the controversy and, in effect, assures "that concrete adverseness which sharpens
the presentation of issues upon which the court depends for illumination of difficult
constitutional questions."[93] (Emphasis supplied)
The rule on standing admits of recognized exceptions: the over breadth doctrine, taxpayer
suits, third-party standing and the doctrine of transcendental importance.[94]

Petitioners-in-intervention Caballero, Castardo, Bringas, Federe and Matutino, being

graduates of a four-year college course and applicants as first year law students, as well
as petitioners Abayata, Vasquez, Ilustrismo, Salaño, Guzman and Odias, as law students
who failed to pass the PhiLSAT and were denied admission to law school for the
academic year 2018 to 2019, and petitioners Dela Cruz, Suico, Pescadero, Dela Paz,
Queniahan, Mejos, Daño, Adolfo, Atig, Lumayag, Lagera, Francisco, Dandan, Dela Peña,
Villamor, Llorico and Santamaria, being law students who were conditionally enrolled,
possess the requisite standing to challenge the constitutionality of Section 7(e) of R.A.
No. 7662 and the implementing LEB issuances, as they were, in fact, required to take the
PhiLSAT, or to comply with the terms of the conditional enrollment and failing which,
were denied admission as regular students to law school.

Petitioner-in-intervention St. Thomas More School of Law and Business, Inc., likewise
sufficiently alleges injury that it has sustained in the form of reduced number of enrollees
due to the PhiLSAT requirement and the curtailment of its discretion on who to admit in
its law school. Under the specific and concrete facts available in this case, these
petitioners have demonstrated that they were, or tend to be directly and substantially,
injured.

Meanwhile, petitioners Pimentel, Comafay, Gorospe, Sandoval, Loanzon, Perez, Cacho,

Espaldon, Albano, Siazon, Artugue, Lacsina, Liu, Buenviaje, Nicolas, Tolentino, and
Gruyal; and petitioners-in intervention Rapista, Rapista-Tan, Tan, Enterina and Villarico
commonly anchor their standing to challenge R.A. No. 7662 and the PhiLSAT as
citizens.

Standing as a citizen has been upheld by this Court in cases where a petitioner is able to
craft an issue of transcendental importance or when paramount public interest is
involved.[95]

Legal standing may be extended to petitioners for having raised a "constitutional issue of
critical significance."[96] Without a doubt, the delineation of the Court's rule-making
power vis-a-vis the supervision and regulation of legal education and the determination of
the reach of the State's supervisory and regulatory power in the context of the guarantees
of academic freedom and the right to education are novel issues with far-reaching
implications that deserve the Court's immediate attention. In taking cognizance of the
instant petitions, the Court is merely exercising its power to promulgate rules towards the
end that constitutional rights are protected and enforced.[97]
Now, to the core substantive issues.

II.
Substantive Issues

A.
Jurisdiction Over Legal Education

Petitioners in G.R. No. 230642 argue that the Court's power to promulgate rules

concerning the admission to the practice of law necessarily includes the power to do
things related to the practice of law, including the power to prescribe the requirements for
admission to the study of law. In support, they point to Sections 6[98] and 16,[99] Rule 138
of the Rules of Court. They contend that the Congress cannot create an administrative
body, like the LEB, that exercises this rule-making power of the Court. They emphasize
that the LEB belongs to the Executive department, and, as such, is not linked or
accountable to the Court nor placed under the Court's regulation and supervision.

For their part, petitioners in G.R. No. 242954 maintain that the Court exercises authority
over the legal profession which includes the admission to the practice of law, to the
continuing requirements for and discipline of lawyers.[100] According to them, the rule-
making power of the Court is plenary in all cases regarding the admission to and
supervision of the practice of law. They argue that the Court's power to admit members to
the practice of law extends to admission to legal education because the latter is a
preparatory process to the application for admission to the legal profession, which
"residual power" of the Court can be inferred from Sections 5[101] and 6, Rule 138 of the
Rules of Court. They also emphasize that under Sections 1[102] and 2[103] of Rule 138-A,
non-lawyers are allowed to have limited practice of law and are held to answer by the
Court under the same rules on privileged communication and standard of conduct
pursuant to Sections 3[104] and 4[105] of Rule 138-A.[106]

Contrary to petitioner's claims, the Court has no primary and direct jurisdiction over legal
education. Neither the history of the Philippine legal education nor the Rules of Court
invoked by petitioners support their argument. The supervision and regulation of legal
education is an Executive function.
               
1. Regulation and  
    supervision of
legal education
had been
historically and
consistently
exercised by the
political
 departments

Legal education in the Philippines was institutionalized in 1734, with the establishment
of the Faculty of Civil Law in the University of Santo Tomas with Spanish as the medium
of instruction. Its curriculum was identical to that adopted during the time in the
universities in Europe[107] and included subjects on Civil Law, Canon Law, ecclesiastical
discipline and elements of Natural Law.[108]

In 1901, Act No. 74 was passed centralizing the public school system, and establishing
the Department of Public Instruction headed by the General Superintendent.[109] The
archipelago was then divided into school divisions and districts for effective management
of the school system. It was through Act No. 74 that a Trade School[110] and a Normal
School[111] in Manila and a School of Agriculture in Negros were established.[112]

In 1908, the legislature approved Act No. 1870 which created the University of the
Philippines (UP). However, English law courses were not offered until 1910 when the
Educational Department Committee of the Young Men's Christian Association (YMCA),
through the efforts of Justice George Malcolm, offered law courses in the English
language. In 1911, UP adopted these classes by formally establishing its College of Law,
[113]
 with its first graduates being students who studied at YMCA.[114] The curriculum
adopted by the UP College of Law became the model of the legal education curriculum
of the other law schools in the country.[115]

Private schools were formally regulated in 1917 with the passage of Act No.
2706[116] which made obligatory the recognition and inspection of private schools and
colleges by the Secretary of Public Instruction, so as to maintain a standard of efficiency
in all private schools and colleges[117] in the country. As such, the Secretary of Public
Instruction was authorized to inspect schools and colleges to determine efficiency of
instruction and to make necessary regulations. Likewise, under Act No. 2706, the
Secretary of Public Instruction was specifically authorized to prepare and publish, from
time to time, in pamphlet form, the minimum standards required of law schools and other
schools giving instruction of a technical or professional character.[118]

In 1924, a survey of the Philippine education and of all educational institutions, facilities
and agencies was conducted through Act No. 3162, which created the Board of
Educational Survey. Among the factual findings of the survey was that schools at that
time were allowed to operate with almost no supervision at all. This led to the conclusion
that a great majority of schools from primary grade to the university are money-making
devices of persons who organize and administer them. Thus, it was recommended that
some board of control be· organized under legislative control to supervise their
administration.[119] It was further recommended that legislation be enacted to prohibit the
opening of any school without the permission of the Secretary of Public Instruction. The
grant of the permission was, in turn, predicated upon a showing that the school is
compliant with the proper standards as to the physical structure, library and laboratory
facilities, ratio of student to teacher and the qualifications of the teachers. [120]

Consistent with these statutory precursors, the 1935 Constitution expressed in no

uncertain terms that "[a]ll educational institutions shall be under the supervision and
subject to regulation by the State."[121]

This was followed by several other statutes such as the Commonwealth Act No.
578[122] which vests upon teachers, professors, and persons charged with the supervision
of public or duly-recognized private schools, colleges and universities the status of
"persons in authority" and Republic Act No. 139[123] which created the Board of
Textbooks, mandating all public schools to use only the books approved by the Board
and allowing all private schools to use textbooks of their choice, provided it is not against
the law or public policy or offensive to dignity.[124]

In 1947, the Department of Instruction was changed to the Department of Education.

[125]
 During this period, the regulation and supervision of public and private schools
belonged to the Bureau of Public and Private Schools. The regulation of law schools in
particular was undertaken by the Bureau of Private Schools through a special consultant
who acted as a supervisor of the law schools and as a national coordinator of the law
deans.[126]

The Department of Education, through its Bureau of Private Schools, issued a Manual of
Instructions for Private Schools which contained the rules and regulations pertaining to
the qualifications of the faculty and deans, faculty load and library holdings of private
learning institutions.[127] Meantime, a Board of National Education was created[128] with
the task of formulating, implementing and enforcing general educational policies and
coordinating the offerings and functions of all educational institutions. The Board of
National Education was later renamed as the National Board of Education. [129] In 1972,
the Department of Education became the Department of Education and Culture, [130] and
was later on renamed as the Ministry of Education and Culture in 1978.[131]

Meanwhile, the 1973 Constitution remained consistent in mandating that all educational
institutions shall be under the supervision of and subject to regulation by the State.[132]

With the passage of Batas Pambansa Bilang 232[133] (B.P. Blg. 232) or the Education Act
of 1982, the regulatory rules on both formal and non-formal systems in public and private
schools in all levels of the entire educational system were codified. The National Board
of Education was abolished, and instead, a Ministry of Education, Culture and Sports
(MECS) was organized to supervise and regulate educational institutions. Part and parcel
of the MECS' authority to supervise and regulate educational institutions is its authority
to recognize or accredit educational institutions of all levels.[134]
Accordingly, the MECS was given the authority over public and private institutions of
higher education, as well as degree-granting programs, in all post-secondary public and
private educational institutions.[135] In particular, a Board of Higher Education[136] was
established as an advisory body to the Minister of Education, Culture and Sports with the
functions of making policy recommendations on the planning and management of the
integrated system of higher education and recommending steps to improve the
governance of the higher education system. Apart from the Board of Higher Education, a
Bureau of Higher Education was also established to formulate and evaluate programs and
educational standards for higher education[137] and to assist the Board of Higher
Education. Law schools were placed, under the jurisdiction of the Bureau of Higher
Education.[138]

The MECS later became the DECS in 1987 under Executive Order No. 117[139] (E.O. No.
117). Nevertheless, the power of the MECS to supervise all educational institutions
remained unchanged.[140]

The Administrative Code[141] also states that it shall be the State that shall protect and
promote the right of all citizens to quality education at all levels, and shall take
appropriate steps to make such education accessible to all; and that the DECS shall be
primarily responsible for the formulation, planning, implementation, and coordination of
the policies, plans, programs and projects in the areas of formal and non-formal
education. The Administrative Code also empowered the Board of Higher Education to
create technical panels of experts in the various disciplines including law, to undertake
curricula development.[142] As will be discussed hereunder, the 1987 Constitution
crystallized the power of the State to supervise and regulate all educational institutions.
[143]

               

2. DECS Order No.
    27-1989 was the
 
precursor of R.A.
No. 7662

Pursuant to its mandate under B.P. Blg. 232, the DECS promulgated DECS Order No.
27, Series of 1989 (DECS Order No. 27-1989),[144] in close coordination with the
Philippine Association of Law Schools, the Philippine Association of Law Professors and
the Bureau of Higher Education. DECS Order No. 27-1989 specifically outlined the
policies and standards for legal education, and superseded all existing policies and
standards related to legal education. These policies were made applicable beginning
school year 1989 to 1990.

"Legal education" was defined in DECS Order No. 27-1989 as an educational program
including a clinical program appropriate and essential in the understanding and
application of law and the administration of justice. It is professional education after
completion of a required pre-legal education at the college level. For state colleges and
universities, the operation of their law schools was to depend on their respective charters,
and for private colleges and universities, by the rules and regulations issued by the
DECS. Nevertheless, it was made clear under DECS Order No. 27-1989 that the
administration of a law school shall be governed primarily by the law school's own
policies and the provisions thereof apply only suppletorily.[145]

Likewise, in generally permissive terms, DECS Order No. 27-1989 prescribed the
preferred qualifications and functions of a law dean, as well as the preferred
qualifications, conditions of employment and teaching load of law faculty members. It
also prescribed the general inclusions to the law curriculum, but gave the law schools the
prerogative to design its own curriculum. The DECS also drew a model law curriculum,
thus, revising the 122-unit curriculum prescribed in 1946 by the Office of Private
Education, as well as the 134-unit curriculum prescribed in 1963. The law schools were
also given the option to maintain a legal aid clinic as part of its law curriculum. It also
prescribed the need for law schools to have relevant library resources. Applicants for a
law course are required to comply with the specific requirements for admission by the
Bureau of Higher Education and the Court.

Such was the state of the regulation of legal education until the enactment of R.A. No.
7662 in 1993. In 1994, R.A. No. 7722[146] was passed creating the Commission on Higher
Education (CHED) tasked to supervise tertiary degree programs. Except for the
regulation and supervision of law schools which was to be undertaken by the LEB under
R.A. No. 7662, the structure of DECS as embodied in E.O. No. 117 remained practically
unchanged.

Due to the fact that R.A. No. 7662 was yet to be implemented with the organization of
the LEB, the CHED, meanwhile, assumed the function of supervising and regulating law
schools. For this purpose, the CHED constituted a Technical Panel for Legal Education
which came up with a Revised Policies and Standards for Legal Education, which,
however, was unpublished.
               
3. Legal education is
    a mere composite
 
of the educational
system

As recounted, the historical development of statutes on education unerringly reflects the

consistent exercise by the political departments of the power to supervise and regulate all
levels and areas of education, including legal education.

Legal education is but a composite of the entire Philippine education system. It is perhaps
unique because it is a specialized area of study. This peculiarity, however, is not reason in
itself to demarcate legal education and withdraw it from the regulatory and supervisory
powers of the political branches.

Notwithstanding, petitioners maintain that legal education, owing to its specialized

"legal" nature and being preparatory to the practice of law, should fall within the
regulation and supervision of the Court itself. Petitioners in G.R. No. 242954 went as far
as professing that they are not against the creation of an administrative body that will
supervise and regulate law schools, only that such body should be placed under the
Court's supervision and control.

Two principal reasons militate against such proposition:

First, it assumes that the Court, in fact, possesses the power to supervise and regulate
legal education as a necessary consequence of its power to regulate the admission to the
practice of law. This assumption, apart from being manifestly contrary to the above-
recounted history of legal education in the Philippines, is likewise devoid of legal
anchorage.

Second, the Court exercises only judicial functions and it cannot, and must not, arrogate
upon itself a power that is not constitutionally vested to it, lest the Court itself violates the
doctrine of separation of powers. For the Court to void R.A. No. 7662 and thereafter, to
form a body that regulates legal education and place it under its supervision and control,
as what petitioners suggest, is to demonstrate a highly improper form of judicial activism.
               
4. Court's exclusive
    rule-making
power covers the
 
practice of law
and not the study
of law

The Constitution lays down the powers which the Court can exercise. Among these is the
power to promulgate rules concerning admission to the practice of law.

The rule-making power of the Supreme Court had been uniformly granted under the
1935, the 1973 and the 1987 Constitutions. The complexion of the rule-making power,
however, changes with the promulgation of these organic laws.

Under the 1935 Constitution, existing laws on pleading, practice and procedure were
repealed and were instead converted as the Rules of Court which the Court can alter and
modify. The Congress, on the other hand, was given the power to repeal, alter or
supplement the rules on pleading, practice and procedure, and the admission to the
practice of law promulgated by the Court.[147]
This power to promulgate rules concerning pleading, practice and procedure, and
admission to the practice of law is in fact zealously guarded by the Court.

Thus, in Philippine Lawyers Association v. Agrava,[148] the Court asserted its "exclusive"

and constitutional power with respect to the admission to the practice of law and when
the act falls within the term "practice of law," the Rules of Court govern.[149]

In In Re: Petition of A.E. Garcia,[150] the Court withheld from the executive the power to
modify the laws and regulations governing admission to the practice of law as the
prerogative to promulgate rules for admission to the practice of law belongs to the Court
and the power to repeal, alter, or supplement such rules is reserved only to the Congress.

Even then, the character of the power of the Congress to repeal, alter, or supplement the
rules concerning pleading, practice, and procedure, and the admission to the practice of
law under the 1935 Constitution was held not to be absolute and that any law passed by
the Congress on the matter is merely permissive, being that the power concerning
admission to the practice of law is primarily a judicial function.

The 1973 Constitution is no less certain in reiterating the Court's power to promulgate
rules concerning pleading, practice, and procedure in all courts and the admission to the
practice of law. As observed in Echegaray v. Secretary of Justice,[151] the 1973
Constitution further strengthened the independence of the judiciary by giving it the
additional power to promulgate rules governing the integration of the Bar.[152]

The ultimate power to promulgate rules on pleading, practice, and procedure, the
admission to the practice of law, and the integration of the Bar remains to be with the
Court under the 1973 Constitution even when the power of the Batasang Pambansa to
pass laws of permissive and corrective character repealing, altering, or supplementing
such rules was retained.

The 1987 Constitution departed from the 1935 and the 1973 organic laws in the sense
that it took away from the Congress the power to repeal, alter, or supplement the rules
concerning pleading, practice, and procedure, and the admission to the practice of law,
and the integration of the Bar and therefore vests exclusively and beyond doubt, the
power to promulgate such rules to the Court, thereby supporting a "stronger and more
independent judiciary."[153]

While the 1935 and 1973 Constitutions "textualized a power-sharing scheme" between
the legislature and the Court in the enactment of judicial rules,[154] the 1987 Constitution
"textually altered the power-sharing scheme" by deleting the Congress' subsidiary and
corrective power.[155]
Accordingly, the Court's exclusive power of admission to the Bar has been interpreted as
vesting upon the Court the authority to define the practice of law,[156] to determine who
will be admitted to the practice of law,[157] to hold in contempt any person found to be
engaged in unauthorized practice of law,[158] and to exercise corollary disciplinary
authority over members of the Bar.[159]

The act of admitting, suspending, disbarring and reinstating lawyers in the practice of law
is a judicial function because it requires "(1) previously established rules and principles;
(2) concrete facts, whether past or present, affecting determinate individuals; and (3)
decision as to whether these facts are governed by the rules and principles." [160]

Petitioners readily acknowledge that legal education or the study of law is not the practice
of law, the former being merely preparatory to the latter. In fact, the practice of law has a
settled jurisprudential meaning:
The practice of law is not limited to the conduct of cases or litigation in court; it
embraces the preparation of pleadings and other papers incident to actions and social
proceedings, the management of such actions and proceedings on behalf of clients before
judges and courts, and in addition, conveying. In general, all advice to clients, and all
action taken for them in matters connected with the law corporation services, assessment
and condemnation services contemplating an appearance before a judicial body, the
foreclosure of a mortgage, enforcement of a creditor's claim in bankruptcy and
insolvency proceedings, and conducting proceedings in attachment, and in matters of
estate and guardianship have been held to constitute law practice as the preparation and
drafting of legal instruments, where the work done involves the determination by the
trained legal mind of the legal effect of facts and conditions.

Practice of law under modern conditions consists in no small part of work performed
outside of any court and having no immediate relation to proceedings in court. It
embraces conveyancing, the giving of legal advice on a large variety of subjects, and the
preparation and execution of legal instruments covering an extensive field of business
and trust relations and other affairs. Although these transactions may have no direct
connection with court proceedings, they are always subject to become involved in
litigation. They require in many aspects a high degree of legal skill, a wide experience
with men and affairs, and great capacity for adaptation to difficult and complex
situations. These customary functions of an attorney or counselor at law bear an intimate
relation to the administration of justice by the courts. No valid distinction, so far as
concerns the question set forth in the order, can be drawn between that part of the work of
the lawyer which involved appearance in court and that part which involves advice and
drafting of instruments in his office. It is of importance to the welfare of the public that
these manifold customary functions be performed by persons possessed of adequate
learning and skill, of sound moral character, and acting at all times under the heavy trust
obligations to clients which rests upon all attorneys.[161] (Internal citations omitted)
The definition of the practice of law, no matter how broad, cannot be further enlarged as
to cover the study of law.
               
5. The Court
    exercises judicial
 
power only
   
Section 12, Article VIII of the 1987 Constitution clearly provides that "[t]he Members of
the Supreme Court and of other courts established by law shall not be designated to any
agency performing quasi-judicial or administrative functions." The Court exercises
judicial power only and should not assume any duty alien to its judicial functions, the
basic postulate being the separation of powers. As early as Manila Electric Co. v. Pasay
Transportation Co.,[162] the Court already stressed:
The Supreme Court of the Philippine Islands represents one of the three divisions of
power in our government. It is judicial power and judicial power only which is
exercised by the Supreme Court. Just as the Supreme Court, as the guardian of
constitutional rights, should not sanction usurpations by any other department of the
government, so should it as strictly confine its own sphere of influence to the powers
expressly or by implication conferred on it by the Organic Act. The Supreme Court and
its members should not and cannot be required to exercise any power or to perform
any trust or to assume any duty not pertaining to or connected with the
administering of judicial functions. (Emphases supplied)
Neither may the regulation and supervision of legal education be justified as an exercise
of the Court's "residual" power. A power is residual if it does not belong to either of the
two co-equal branches and which the remaining branch can, thus, exercise consistent with
its functions. Regulation and supervision of legal education is primarily exercised by the
Legislative and implemented by the Executive, thus, it cannot be claimed by the
judiciary.

It is with studied restraint that the Court abstains from exercising a power that is not
strictly judicial, or that which is not expressly granted to it by the Constitution. [163] This
judicial abstention is neither avoidance nor dereliction - there is simply no basis for the
Court to supervise and regulate legal education.

Court supervision over legal education is nevertheless urged[164] to the same extent as the
Court administers, supervises and controls the Philippine Judicial Academy (PHILJA).
[165]
 The parallelism is mislaid because the PHILJA is intended for judicial education.
[166]
 It particularly serves as the "training school for justices, judges, court personnel,
lawyers and aspirants to judicial posts."[167] Court supervision over judicial education is
but consistent with the Court's power of supervision over all courts and the personnel
thereof.[168]

Still, petitioners insist that the Court actually regulated legal education through Sections
5, 6, and 16 of Rule 138 and Sections 1, 2, 3, and 4 of Rule 138-A of the 1997 Rules of
Court. On the contrary, the Rules of Court do not intend nor provide for direct and actual
Court regulation over legal education. At most, the Rules of Court are reflective of the
inevitable relationship between legal education and the admissions to the bar.
               
6. The Rules of
    Court do not
support the
argument that the
 
Court directly and
actually regulates
legal education
   
While the power of the Court to promulgate rules concerning admission to the practice of
law exists under the 1935 Constitution and reiterated under the 1973 and 1987
Constitutions, the Court has not promulgated any rule that directly and actually regulates
legal education.

Instead, the 1964 Rules of Court concerned only the practice of law, admission to the bar,
admission to the bar examination, bar examinations, and the duties, rights and conduct of
attorneys. The 1997 Rules of Court is no different as it contained only the rules on
attorneys and admission to the bar under Rule 138, the law student practice rule under
Rule 138-A, the integrated bar in Rule 139-A and disbarment and discipline of attorneys
in Rule 139-B.[169]

In the exercise of its power to promulgate rules concerning the admission to the practice
of law, the Court has prescribed the subjects covered by, as well as the qualifications of
candidates to the bar examinations. Only those bar examination candidates who are found
to have obtained a passing grade are admitted to the bar and licensed to practice law.
[170]
 The regulation of the admission to the practice of law goes hand in hand with the
commitment of the Court and the members of the Philippine Bar to maintain a high
standard for the legal profession. To ensure that the legal profession is maintained at a
high standard, only those who are known to be honest, possess good moral character, and
show proficiency in and knowledge of the law by the standard set by the Court by passing
the bar examinations honestly and in the regular and usual manner are admitted to the
practice of law.[171]

Thus, under the 1997 Rules of Court, admission to the bar requires: (1) furnishing
satisfactory proof of educational, moral, and other qualifications; (2) passing the bar
examinations;[172] and (3) taking the lawyer's oath,[173] signing the roll of attorneys and
receiving from the clerk of court a certificate of the license to practice. [174] An applicant
for admission to the bar must have these qualifications: (1) must be a citizen of the
Philippines; (2) must at least be 21 years of age; (3) must be of good moral character; (4)
must be a resident of the Philippines; (5) must produce satisfactory evidence of good
moral character; and (6) no charges against the applicant, involving moral turpitude, have
been filed or are pending in any court in the Philippines.[175] It is beyond argument that
these are the requisites and qualifications for admission to the practice of law and not for
admission to the study of law.

In turn, to be admitted to the bar examinations, an applicant must first meet the core
academic qualifications prescribed under the Rules of Court.

6(a). Sections 5, 6, and 16, Rule 138

Section 5 provides that the applicant should have studied law for four years and have
successfully completed all the prescribed courses. This section was amended by Bar
Matter No. 1153,[176] to require applicants to "successfully [complete] all the prescribed
courses for the degree of Bachelor of Laws or its equivalent, in a law school or university
officially recognized by the Philippine Government, or by the proper authority in foreign
jurisdiction where the degree has been granted." Bar Matter No. 1153 further provides
that a Filipino citizen who is a graduate of a foreign law school shall be allowed to take
the bar examinations only upon the submission to the Court of the required certifications.

In addition to the core courses of civil law, commercial law, remedial law, criminal law,
public and private international law, political law, labor and social legislation, medical
jurisprudence, taxation, and legal ethics, Section 5 was further amended by A.M. No. 19-
03-24-SC or the Revised Law Student Practice Rule dated June 25, 2019 to include
Clinical Legal Education as a core course that must be completed by an applicant to the
bar examinations.

Notably, Section 5, Rule 138 of the Rules of Court, as amended, is not directed to law
schools, but to those who would like to take the bar examinations and enumerates the
academic competencies required of them. The Court does not impose upon law schools
what courses to teach, or the degree to grant, but prescribes only the core academic
courses which it finds essential for an applicant to be admitted to the bar. Law schools
enjoy the autonomy to teach or not to teach these courses. In fact, the Court even extends
recognition to a degree of Bachelor of Laws or its equivalent obtained abroad or that
granted by a foreign law school for purposes of qualifying to take the Philippine Bar
Examinations, subject only to the submission of the required certifications. Section 5
could not therefore be interpreted as an exercise of the Court's regulatory or supervisory
power over legal education since, for obvious reasons, its reach could not have possibly
be extended to legal education in foreign jurisdictions.

In similar fashion, Section 6, Rule 138 of the Rules of Court requires that an applicant to
the bar examinations must have completed a four-year high school course and a
bachelor's degree in arts or sciences. Again, this requirement is imposed upon the
applicant to the bar examinations and not to law schools. These requirements are merely
consistent with the nature of a law degree granted in the Philippines which is a
professional, as well as a post-baccalaureate degree.

It is a reality that the Rules of Court, in prescribing the qualifications in order to take the
bar examinations, had placed a considerable constraint on the courses offered by law
schools. Adjustments in the curriculum, for instance, is a compromise which law schools
apparently are willing to take in order to elevate its chances of graduating future bar
examinees. It is in this regard that the relationship between legal education and
admissions to the bar becomes unmistakable. This, however, does not mean that the
Court has or exercises jurisdiction over legal education. Compliance by law schools with
the prescribed core courses is but a recognition of the Court's exclusive jurisdiction over
admissions to the practice of law - that no person shall be allowed to take the bar
examinations and thereafter, be admitted to the Philippine Bar without having taken and
completed the required core courses.

Section 16, Rule 138 of the Rules of Court, on the other hand, provides that those who
fail the bar examinations for three or more times must take a refresher course. Similarly,
this is a requirement imposed upon the applicant. The Court does not impose that a law
school should absolutely include in its curriculum a refresher course.

6(b). Revised Law Student Practice Rule

Neither does Rule 138-A of the Rules of Court as amended by A.M. No. 19-03-24-SC on
law student practice manifest the Court's exercise of supervision or regulation over legal
education. The three-fold rationale of the law student practice rule is as follows:
1. [T]o ensure that there will be no miscarriage of justice as a result of incompetence or
inexperience of law students, who, not having as yet passed the test of professional
competence, are presumably not fully equipped to act [as] counsels on their own;

2. [T]o provide a mechanism by which the accredited law school clinic may be able to
protect itself from any potential vicarious liability arising from some culpable action by
their law students; and

3. [T]o ensure consistency with the fundamental principle that no person is allowed to
practice a particular profession without possessing the qualifications, particularly a
license, as required by law.[177]
Consistently, the Revised Law Student Practice Rule is primordially intended to ensure
access to justice of the marginalized sectors and to regulate the law student practitioner's
limited practice of law pursuant to the Court's power to promulgate rules on pleading,
practice, and procedure in all courts, the Integrated Bar, and legal assistance to the
underprivileged.
In allowing the law student and in governing the conduct of the law student practitioner,
what the Court regulates and supervises is not legal education, but the appearance and
conduct of a law student before any trial court, tribunal, board, or officer, to represent
indigent clients of the legal clinic - an activity rightfully falling under the definition of
practice of law. Inasmuch as the law student is permitted to act for the legal clinic and
thereby to practice law, it is but proper that the Court exercise regulation and supervision
over the law student practitioner. Necessarily, the Court has the power to allow their
appearance and plead their case, and hereafter, to regulate their actions.

In all, the Rules of Court do not support petitioners' argument that the Court regulates and
supervises legal education. To reiterate, the Rules of Court are directed not towards legal
education or law schools, but towards applicants for admission to the bar and applicants
for admission to the bar examinations - consistent with the Court's power to promulgate
rules concerning admission to the practice of law, the same being fundamentally a
judicial function.

Having, thus, established that the regulation and supervision of legal education do not fall
within the competence of the Court and is, instead, a power exercised by the political
departments, the Court now proceeds to determine the extent of such police power in
relation to legal education.

B.
Reasonable Supervision and Regulation of Legal
Education as an Exercise of Police Power

The term police power was first used[178] in jurisprudence in 1824 in Gibbons v.
Ogden[179] where the U.S. Supreme Court, through Chief Justice Marshall, held that the
regulation of navigation by steamboat operators for purposes of interstate commerce was
a power reserved to and exercised by the Congress, thus, negating state laws interfering
with the exercise of that power. Likewise often cited is Commonwealth v. Alger[180] which
defined police power as "the power vested in legislature by the [C]onstitution, to make,
ordain, and establish all manner of wholesome and reasonable laws, statutes, and
ordinances, either with penalties or without, not repugnant to the [C]onstitution, as they
shall judge to be for the good and welfare of the Commonwealth, and of the subjects of
the same."

Closer to home, early Philippine jurisprudence pertain to police power as the power to
promote the general welfare and public interest;[181] to enact such laws in relation to
persons and property as may promote public health, public morals, public safety and the
general welfare of each inhabitant;[182] to preserve public order and to prevent offenses
against the state and to establish for the intercourse of [citizens] those rules of good
manners and good neighborhood calculated to prevent conflict of rights.[183]
In Ermita-Malate Hotel and Motel [Operators] Association, Inc. v. City Mayor of
Manila,[184] the nature and scope of police power was reaffirmed as embracing the power
to prescribe regulations to promote the health, morals, education, good order, safety, or
the general welfare of the people. It is negatively defined as the authority to enact
legislation that may interfere with personal liberty or property in order to promote the
general welfare[185] and the State's inherent power to prohibit all that is hurtful to the
comfort, safety, and welfare of society,[186] and flows from the recognition that salus
populi est suprema lex.[187] It is described as the most essential, insistent and
illimitable[188] of the powers of the State. It is co-existent with the concept of the State and
is the very foundation and one of its cornerstones,[189] and therefore even precedes the
written Constitution.
               
1. Enactment of
    education laws is
an exercise of  
police power
   
The State has a "high responsibility for [the] education of its citizens"[190] and has an
interest in prescribing regulations to promote the education, and consequently, the
general welfare of the people.[191] The regulation or administration of educational
institutions, especially on the tertiary level, is invested with public interest. [192] Thus, the
enactment of education laws, implementing rules and regulations and issuances of
government agencies is an exercise of the State's police power. [193]

As a professional educational program, legal education properly falls within the

supervisory and regulatory competency of the State. The legislative history of the
Philippine legal educational system earlier recounted evinces that the State, through
statutes enacted by the Congress and administrative regulations issued by the Executive,
consistently exercises police power over legal education.

The exercise of such police power, however, is not absolute.

               
2. Supervisory and
    regulatory
exercise, not  
control
   
The 1935[194] and 1973[195] Constitutions plainly provide that all educational institutions
shall be under the supervision of and subject to regulation by the State. These reflect in
express terms the police power already inherently possessed by the State. Making express
an already inherent power is not a superfluous exercise, but is rather consequential in
case of conflict between express powers. As elucidated in Philippine Association of
Colleges and Universities:[196]
In this connection we do not share the belief that [now Article XIV, Section 4(1)] has
added new power to what the State inherently possesses by virtue of the police power. An
express power is necessarily more extensive than a mere implied power. For instance, if
there is conflict between an express individual right and the express power to control
private education it cannot off-hand be said that the latter must yield to the former -
conflict of two express powers. But if the power to control education is merely implied
from the police power, it is feasible to uphold the express individual right[.] x x x
The 1987 Constitution under Section 4(1), Article XIV, even when expressly recognizing
the complementary roles played by the public and private schools in education, reiterated
that these educational institutions are subject to State supervision and regulation, thus:
SEC. 4.(1) The State recognizes the complementary roles of public and private
institutions in the educational system and shall exercise reasonable supervision and
regulation of all educational institutions. (Emphasis supplied)
As much as possible, the words of the Constitution are understood in the sense they have
in common use. What it says according to the text of the provision to be construed
compels acceptance and negates the power of the courts to alter it, based on the postulate
that the framers and the people mean what they say.[197]

As worded, the Constitution recognizes that the role of public and private schools in
education is complementary in relation to each other, and primordial in relation to the
State as the latter is only empowered to supervise and regulate. The exercise of police
power in relation to education must be compliant with the normative content of Section
4(1), Article XIV of the 1987 Constitution.[198] The exercise of police power over
education must merely be supervisory and regulatory.

The State's supervisory and regulatory power is an auxiliary power in relation to

educational institutions, be it a basic, secondary or higher education. This must
necessarily be so since the right and duty to educate, being part and parcel of youth-
rearing, do not inure to the State at the first instance. Rather, it belongs essentially and
naturally to the parents,[199] which right and duty they surrender by delegation to the
educational institutions. As held in Samahan ng mga Progresibong Kabataan (SPARK)
v. Quezon City,[200] the right and duty of parents to rear their children being a natural and
primary right connotes the parents' superior right over the State in the upbringing of their
children. The responsibility to educate lies with the parents and guardians as an inherent
right,[201] over which the State assumes a supportive role.[202] Withholding from the State
the unqualified power to control education also serves a practical purpose - it allows for a
degree of flexibility and diversity essential to the very reason of education to rear socially
responsible and morally upright youth and to enable them, also, to come in contact with
challenging ideas.

In this sense, when the Constitution gives the State supervisory power, it is understood
that what it enjoys is a supportive power, that is, the power of oversight [203] over all
educational institutions. It includes the authority to check, but not to interfere.
In addition to supervision, educational institutions are likewise made subject to State
regulation. Dispensing a regulatory function means imposing requirements, setting
conditions, prescribing restrictions, and ensuring compliance. In this regard, the political
departments are vested with ample authority to set minimum standards to be met by all
educational institutions.[204]

Starkly withheld from the State is the power to control educational institutions.
Consequently, in no way should supervision and regulation be equated to State control. It
is interesting to note that even when a suggestion had been made during the drafting of
the 1935 Constitution that educational institutions should be made "subject to the laws of
the State," the proponent of the amendment had no totalitarian intentions,[205] and the
proposal was not meant to curtail the liberty of teaching,[206] thus:
I think it only insures the efficient functioning of educational work and does not limit
liberty of administrators of schools. The gentleman will notice that my amendment does
not tend to curtail which he used in asking the question [sic]. I want the power of the
State to be supervisory as supervision in educational parlance should be of the
constructive type in the matter of help rather than obstruction.[207] (Emphasis
supplied)               
3. Reasonable
    exercise  
   
To be valid, the supervision and regulation of legal education as an exercise of police
power must be reasonable and not repugnant to the Constitution.[208]

As held in Social Justice Society v. Atienza, Jr.,[209] the exercise of police power, in order
to be valid, must be compliant with substantive due process:
[T]he State, x x x may be considered as having properly exercised [its] police power only
if the following requisites are met: (1) the interests of the public generally, as
distinguished from those of a particular class, require its exercise[;] and (2) the means
employed are reasonably necessary for the accomplishment of the purpose and not
unduly oppressive upon individuals. In short, there must be a concurrence of a lawful
subject and a lawful method. (Emphases supplied)
In Philippine Association of Service Exporters, Inc. v. Drilon,[210] the Court held that:
Notwithstanding its. extensive sweep, police power is not without its own limitations. For
all its awesome consequences, it may not be exercised arbitrarily or unreasonably.
Otherwise, and in that event, it defeats the purpose for which it is exercised, that is, to
advance the public good. (Emphasis supplied)
Obviating any inference that the power to regulate means the power to control, the 1987
Constitution added the word "reasonable" before the phrase supervision and regulation.

The import of the word "reasonable" was elaborated in Council of Teachers,[211] as

follows:
x x x Section 4(1) was a provision added by the Framers to crystallize the State's
recognition of the importance of the role that the private sector plays in the quality of the
Philippine education system. Despite this recognition, the Framers added the second
portion of Section 4[1] to emphasize that the State, in the exercise of its police power,
still possesses the power of supervision over private schools. The Framers were explicit,
however, that this supervision refers to external governance, as opposed to internal
governance which was reserved to the respective school boards, thus:
Madam President, Section 2(b) introduces four changes: one, the addition of the word
"reasonable" before the phrase "supervision and regulation"; two, the addition of the
word "quality" before the word "education"; three, the change of the wordings in the
1973 Constitution referring to a system of education, requiring the same to be relevant to
the goals of national development, to the present expression of "relevant to the needs of
the people and society"; and four, the explanation of the meaning of the expression
"integrated system of education" by defining the same as the recognition and
strengthening of the complementary roles of public and private educational institutions as
separate but integral parts of the total Philippine educational system.

When we speak of State supervision and regulation, we refer to the external

governance of educational institutions, particularly private educational institutions as
distinguished from the internal governance by their respective boards of directors or
trustees and their administrative officials. Even without a provision on external
governance, the State would still have the inherent right to regulate educational
institutions through the exercise of its police power. We have thought it advisable to
restate the supervisory and regulatory functions of the State provided in the 1935 and
1973 Constitutions with the addition of the word "reasonable." We found it necessary to
add the word "reasonable" because of an obiter dictum of our Supreme Court in a
decision in the case of Philippine Association of Colleges and Universities vs. The
Secretary of Education and the Board of Textbooks in 1955. In that case, the court said,
and I quote:
It is enough to point out that local educators and writers think the Constitution provides
for control of education by the State.

The Solicitor General cites many authorities to show that the power to regulate means
power to control, and quotes from the proceedings of the Constitutional Convention to
prove that State control of private education was intended by organic law.
The addition, therefore, of the word 'reasonable' is meant to underscore the sense of
the committee, that when the Constitution speaks of State supervision and
regulation, it does not in any way mean control. We refer only to the power of the
State to provide regulations and to see to it that these regulations are duly followed
and implemented. It does not include the right to manage, dictate, overrule and prohibit.
Therefore, it does not include the right to dominate. (Emphases in the original;
underscoring supplied)
The addition of the word "reasonable" did not change the texture of police power that the
State exercises over education. It merely emphasized that State supervision and
regulation of legal education cannot amount to control.
               
4. Academic freedom
 
       
Fundamental in constitutional construction is that the Constitution is to be interpreted as a
whole, and that all provisions bearing upon a particular subject are to be brought into
view and to be so interpreted as to effectuate the purposes of the Constitution. [212]

Accordingly, the reasonable supervision and regulation clause is not a stand-alone

provision, but must be read in conjunction with the other Constitutional provisions
relating to education which include, in particular, the clause on academic freedom.

Section 5(2), Article XIV of the 1987 Constitution, provides:

(2) Academic freedom shall be enjoyed in all institutions of higher learning.
This guarantee is not peculiar to the 1987 Constitution. A similar· provision was found in
the 1973 Constitution providing that: "All institutions of higher learning shall enjoy
academic freedom."[213] Both the 1973 and 1987 Constitutions provide for a broader scope
of academic freedom compared to the 1935 Constitution which limits the guarantee of
academic freedom only to universities of higher learning established by the State. [214]

In fact, academic freedom is not a novel concept. This can be traced to the freedom of
intellectual inquiry championed by Socrates, lost and replaced by thought control during
the time of Inquisition, until the movement back to intellectual liberty beginning the
16th century, most particularly flourishing in German universities.[215]

Academic freedom has traditionally been associated as a narrow aspect of the broader
area of freedom of thought, speech, expression and the press. It has been identified with
the individual autonomy of educators to "investigate, pursue, [and] discuss free from
internal and external interference or pressure."[216] Thus, academic freedom of faculty
members, professors, researchers, or administrators is defended based on the freedom of
speech and press.[217]

Academic freedom is enjoyed not only by members of the faculty, but also by the
students themselves, as affirmed in Ateneo de Manila University v. Judge Capulong:[218]
x x x. After protracted debate and ringing speeches, the final version which was none too
different from the way it was couched in the previous two (2) Constitutions, as found in
Article XIV, Section 5(2) states: "Academic freedom shall be enjoyed in all institutions
of higher learning." In anticipation of the question as to whether and what aspects of
academic freedom are included herein, ConCom Commissioner Adolfo S. Azcuna
explained: "Since academic freedom is a dynamic concept, we want to expand the
frontiers of freedom, especially in education, therefore, we shall leave it to the courts to
develop further the parameters of academic freedom."

More to the point, Commissioner Jose Luis Martin C. Gascon asked: "When we speak of
the sentence 'academic freedom shall be enjoyed in all institutions of higher learning,' do
we mean that academic freedom shall be enjoyed by the institution itself?" Azcuna
replied: "Not only that, it also includes x x x" Gascon finished off the broken thought,
"the faculty and the students." Azcuna replied: "Yes."
Jurisprudence has so far understood academic freedom of the students as the latter's right
to enjoy in school the guarantees of the Bill of Rights. For instance, in Villar v.
Technological Institute of the Philippines[219] and in Non v. Dames II,[220] it was held that
academic standards cannot be used to discriminate against students who exercise their
rights to peaceable assembly and free speech, in Malabanan v. Ramento,[221] it was ruled
that the punishment must be commensurate with the offense, and in Guzman v. National
University,[222] which affirmed the student's right to due process.

Apart from the academic freedom of teachers and students, the academic freedom of the
institution itself is recognized and constitutionally guaranteed.

The landmark case of Garcia v. The Faculty Admission Committee, Loyola School of
Theology[223] elucidates how academic freedom is enjoyed by institutions of higher
learning:
[I]t is to be noted that the reference is to the "institutions of higher learning" as the
recipients of this boon. It would follow then that the school or college itself is possessed
of such a right. It decides for itself its aims and objectives and how best to attain
them. It is free from outside coercion or interference save possibly when the
overriding public welfare calls for some restraint. It has a wide sphere of autonomy
certainly extending to the choice of students. This constitutional provision is not to be
construed in a niggardly manner or in a grudging fashion. That would be to frustrate its
purpose, nullify its intent. Former President Vicente G. Sinco of the University of the
Philippines, in his Philippine Political Law, is similarly of the view that it "definitely
grants the right of academic freedom to the university as an institution as distinguished
from the academic freedom of a university professor." He cited the following from Dr.
Marcel Bouchard, Rector of the University of Dijon, France, President of the conference
of rectors and vice-chancellors of European universities: "It is a well-established fact, and
yet one which sometimes tends to be obscured in discussions of the problems of freedom,
that the collective liberty of an organization is by no means the same thing as the freedom
of the individual members within it; in fact, the two kinds of freedom are not even
necessarily connected. In considering the problems of academic freedom one must
distinguish, therefore, between the autonomy of the university, as a corporate body, and
the freedom of the individual university teacher." Also: To clarify further the distinction
between the freedom of the university and that of the individual scholar, he says: The
personal aspect of freedom consists in the right of each university teacher - recognized
and effectively guaranteed by society - to seek and express the truth as he personally sees
it, both in his academic work and in his capacity as a private citizen. Thus the status of
the individual university teacher is at least as important, in considering academic
freedom, as the status of the institutions to which they belong and through which they
disseminate their learning. (Internal citations omitted; emphasis supplied)
Garcia also enumerated the internal conditions for institutional academic freedom, that
is, the academic staff should have de facto control over: (a) the admission and
examination of students; (b) the curricula for courses of study; (c) the appointment and
tenure of office of academic staff; and (d) the allocation of income among the different
categories of expenditure.[224]

Reference was also made to the influential language of Justice Frankfurter's concurring
opinion in Sweezy v. New Hampshire,[225] describing it as the "business of the university"
to provide a conducive atmosphere for speculation, experimentation, and creation where
the four essential freedoms of the university prevail: the right of the university to
determine for itself on academic grounds (a) who may teach; (b) what may be taught; (c)
how it shall be taught; and (d) who may be admitted to study.
               
4(a) State's supervisory
. and regulatory
    power over legal
education in  
relation to
academic freedom
   
The rule is that institutions of higher learning enjoy ample discretion to decide for itself
who may teach, what may be taught, how it shall be taught and who to admit, being part
of their academic freedom. The State, in the exercise of its reasonable supervision and
regulation over education, can only impose minimum regulations.

At its most elementary, the power to supervise and regulate shall not be construed as
stifling academic freedom in institutions of higher learning. This must necessarily be so
since institutions of higher learning are not mere walls within which to teach; rather, it is
a place where research, experiment, critical thinking, and exchanges are secured. Any
form of State control, even at its most benign and disguised as regulatory, cannot
therefore derogate the academic freedom guaranteed to higher educational institutions. In
fact, this non-intrusive relation between the State and higher educational institutions is
maintained even when the Constitution itself prescribes certain educational "thrusts" or
directions.[226]

This attitude of non-interference is not lost in jurisprudence. To cite an example, due

regard for institutional academic freedom versus State interference was recognized
in Lupangco v. Court of Appeals,[227] the commendable purpose of the Philippine
Regulation Commission of ensuring the integrity of the examination notwithstanding:
Another evident objection to Resolution No. 105 is that it violates the academic
freedom of the schools concerned. Respondent PRC cannot interfere with the
conduct of review that review schools and centers believe would best enable their
enrolees to meet the standards required before becoming a full-[f]ledged public
accountant. Unless the means or methods of instruction are clearly found to be
inefficient, impractical, or riddled with corruption, review schools and centers may
not be stopped from helping out their students. x x x (Emphasis supplied)
Similarly, in University of the Philippines v. Civil Service Commission,[228] the Court
upheld the university's academic freedom to choose who should teach and held that the
Civil Service Commission had no authority to dictate to the university the outright
dismissal of its personnel. Nothing short of marked arbitrariness,[229] or grave abuse of
discretion[230] on the part of the schools, or overriding public welfare[231] can therefore
justify State interference with the academic judgment of higher educational institutions.
As held in Ateneo de Manila University v. Judge Capulong,[232] "[a]s corporate entities,
educational institutions of higher learning are inherently endowed with the right to
establish their policies, academic and otherwise, unhampered by external controls or
pressure."

5. Right to education

Apart from the perspective of academic freedom, the reasonable supervision and
regulation clause is also to be viewed together with the right to education. The 1987
Constitution speaks quite elaborately on the right to education. Section 1, Article XIV
provides:
SEC. 1. The State shall protect and promote the right of all citizens to quality education at
all levels and shall take appropriate steps to make such education accessible to all.
The normative elements of the general right to education under Section 1, Article XIV,
are (1) to protect and promote quality education; and (2) to take appropriate steps towards
making such quality education accessible.

"Quality" education is statutorily defined as the appropriateness, relevance and excellence

of the education given to meet the needs and aspirations of the individual and society. [233]

In order to protect and promote quality education, the political departments are vested
with the ample authority to set minimum standards to be met by all educational
institutions. This authority should be exercised within the parameters of reasonable
supervision and regulation. As elucidated in Council of Teachers:[234]
While the Constitution indeed mandates the State to provide quality education, the
determination of what constitutes quality education is best left with the political
departments who have the necessary knowledge, expertise, and resources to
determine the same. The deliberations of the Constitutional Commission again are very
instructive:
Now, Madam President, we have added the word "quality" before "education" to
send appropriate signals to the government that, in the exercise of its supervisory
and regulatory powers, it should first set satisfactory minimum requirements in all
areas curriculum, faculty, internal administration, library, laboratory class and
other facilities, et cetera, and it should see to it that satisfactory minimum
requirements are met by all educational institutions, both public and private.

When we speak of quality education we have in mind such matters, among others,
as curriculum development, development of learning resources and instructional
materials, upgrading of library and laboratory facilities, innovations in educational
technology and teaching methodologies, improvement of research quality, and
others. Here and in many other provisions on education, the principal focus of attention
and concern is the students. I would like to say that in my view there is a slogan when we
speak of quality of education that I feel we should be aware of, which is, "Better than
ever is not enough." In other words, even if the quality of education is good now, we
should attempt to keep on improving it. (Emphases and underscoring supplied)
On the other hand, "accessible" education means equal opportunities to education
regardless of social and economic differences. The phrase "shall take appropriate steps"
signifies that the State may adopt varied approaches in the delivery of education that are
relevant and responsive to the needs of the people and the society. This is why, towards
this end, the State shall:
(1) Establish, maintain, and support a complete, adequate, and integrated system of education
relevant to the needs of the people and society;
(2) Establish and maintain a system of free public education in the elementary and high
school levels. Without limiting the natural right of parents to rear their children, elementary
education is compulsory for all children of school age;
(3) Establish and maintain a system of scholarship grants, student loan programs, subsidies,
and other incentives which shall be available to deserving students in both public and
private schools, especially to the underprivileged;
(4) Encourage non-formal, informal, and indigenous learning systems, as well as self-
learning, independent, and out-of-school study programs particularly those that respond
to community needs; and
(5) Provide adult citizens, the disabled, and out-of-school youth with training in civics,
vocational efficiency, and other skills.[235] (Emphases supplied)
The deliberations of the framers in this regard are instructive:
MR. GASCON: When we speak of education as a right, what we would like to
emphasize is that education should be equally accessible to all regardless of social
and economic differences. So we go into the issue of providing opportunities to such
an education, recognizing that there are limitations imposed on those who come from the
poorer social classes because of their inability to continue education. [236] x x x (Emphasis
supplied)
And further, as follows:
This is why when we speak of education as a right, it means very clearly that
education should be accessible to all, regardless of social and economic differences,
meaning, educational opportunities should be provided through a system of free
education, at least, up to the secondary level. And recognizing the limits of our
financial resources, tertiary education should still be afforded and provided
availability to those who are poor and deserving. That is why when we say that
education is a right, it imposes a correlative duty on the part of the State to provide it to
the citizens. Making it a right shows that education is recognized as an important function
of the State. Education is not merely a social service to be provided by the State. The
proposed provision recognizes that a right to education is a right to acquire a decent
standard of living, and that, therefore, the State cannot deprive anyone of this right in the
same manner that the right to life, the right to liberty and property cannot be taken away
without due process of law.[237] (Emphasis supplied)
The element of accessibility under the Constitution, thus, pertains to both the elimination
of discrimination especially against disadvantaged groups and to the financial duty of the
State for, after all, the right to education is part and parcel of social justice. The objective
is to make quality education accessible by appropriate means.

Apart from the Constitution, the right to education is also recognized in international
human rights law under various instruments to which the Philippines is a state signatory
and to which it is concomitantly bound.

For instance, Article 13(2)[238] of the International Covenant on Economic, Social and
Cultural Rights (ICESCR) recognizes the right to receive an education with the following
interrelated and essential features; (a) availability; (b) accessibility; (c) acceptability; and
(d) adaptability.[239]

In particular, accessibility is understood as giving everyone, without discrimination,

access to educational institutions and programs. Accessibility has three overlapping
dimensions:
(1) Non-discrimination - education must be accessible to all, especially the most vulnerable
groups, in law and fact, without discrimination on any of the prohibited grounds x x x;
(2) Physical accessibility - education has to be within safe physical reach, either by attendance
at some reasonably convenient geographic location ([e.g.] a neighborhood school) or [via]
modern technology ([e.g.] access to a "distance learning" programme); [and]
(3) Economic accessibility - education has to be affordable to all. This dimension of
accessibility is subject to the differential wording of [A]rticle 13(2) in relation to primary,
secondary and higher education: whereas primary education shall be available "free to all",
States parties are required to progressively introduce free secondary and higher education[.]
[240]

Pertinent to higher education, the elements of quality and accessibility should also be
present as the Constitution provides that these elements should be protected and
promoted in all educational institutions.

Nevertheless, the right to receive higher education is not absolute.

               
5(a) Right to education
. is subject to fair,
    reasonable, and
equitable
 
admission and
academic
requirements
   
Article 26(1)[241] of the Universal Declaration of Human Rights provides that "[t]echnical
and professional education shall be made generally available and higher education shall
be equally accessible to all on the basis of merit[,]" while the ICESCR provides that
"[h]igher education shall be made equally accessible to all, on the basis of capacity, by
every appropriate means, and in particular by the progressive introduction of free
education[.]"[242] Thus, higher education is not to be generally available, but accessible
only on the basis of capacity.[243] The capacity of individuals should be assessed by
reference to all their relevant expertise and experience.[244]

The right to receive higher education must further be read in conjunction with the right of
every citizen to select a profession or course of study guaranteed under the Constitution.
In this regard, the provisions of the 1987 Constitution under Section 5(3), Article XIV are
more exacting:
SEC. 5. x x x

xxxx

(3) Every citizen has a right to select a profession or course of study, subject to fair,
reasonable, and equitable admission and academic requirements.
There is uniformity in jurisprudence holding that the authority to set the admission and
academic requirements used to assess the merit and capacity of the individual to be
admitted and retained in higher educational institutions lie with the institutions
themselves in the exercise of their academic freedom.

In Ateneo de Manila University v. Judge Capulong,[245] the Court ruled:

Since Garcia v. Loyola School of Theology, we have consistently upheld the salutary
proposition that admission to an institution of higher learning is discretionary upon a
school, the same being a privilege on the part of the student rather than a right.
While under the Education Act of 1982, students have a right "to freely choose their
field of study, subject to existing curricula and to continue their course therein up to
graduation," such right is subject, as all rights are, to the established academic and
disciplinary standards laid down by the academic institution.

"For private schools have the right to establish reasonable rules and regulations for the
admission, discipline and promotion of students. This right x x x extends as well to
parents x x x as parents are under a social and moral (if not legal) obligation, individually
and collectively, to assist and cooperate with the schools."

Such rules are "incident to the very object of incorporation and indispensable to the
successful management of the college. The rules may include those governing student
discipline." Going a step further, the establishment of rules governing university-student
relations, particularly those pertaining to student discipline, may be regarded as vital, not
merely to the smooth and efficient operation of the institution, but to its very survival.

Within memory of the current generation is the eruption of militancy in the academic
groves as collectively, the students demanded and plucked for themselves from the
panoply of academic freedom their own rights encapsulized under the rubric of "right to
education" forgetting that, in Hohfeldian terms, they have a concomitant duty, and that is,
their duty to learn under the rules laid down by the school. (Citation in the original
omitted; emphases supplied)
In Villar v. Technological Institute of the Philippines,[246] the Court similarly held:
xxxx

2. What cannot be stressed too sufficiently is that among the most important social,
economic, and cultural rights is the right to education not only in the elementary and high
school grades but also on the college level. The constitutional provision as to the State
maintaining "a system of free public elementary education and, in areas where finances
permit, establish and maintain a system of free public education" up to the high school
level does not per se exclude the exercise of that right in colleges and universities. It is
only at the most a reflection of the lack of sufficient funds for such a duty to be
obligatory in the case of students in the colleges and universities. As far as the right
itself is concerned, not the effectiveness of the exercise of such right because of the
lack of funds, Article 26 of the Universal Declaration of Human Rights provides:
"Everyone has the right to education. Education shall be free, at least in the
elementary and fundamental stages. Elementary education shall be compulsory.
Technical and professional education shall be made generally available and higher
education shall be equally accessible to all on the basis of merit."

3. It is quite clear that while the right to college education is included in the social
economic, and cultural rights, it is equally manifest that the obligation imposed on
the State is not categorical, the phrase used being "generally available" and higher
education, while being "equally accessible to all should be on the basis of merit." To
that extent, therefore, there is justification for excluding three of the
aforementioned petitioners because of their marked academic deficiency.

4. The academic freedom enjoyed by "institutions of higher learning" includes the

right to set academic standards to determine under what circumstances failing
grades suffice for the expulsion of students. Once it has done so, however, that
standard should be followed meticulously. It cannot be utilized to discriminate against
those students who exercise their constitutional rights to peaceable assembly and free
speech. If it does so, then there is a legitimate grievance by the students thus prejudiced,
their right to the equal protection clause being disregarded. (Emphases supplied)
Likewise, in Calawag:[247]
Lastly, the right to education invoked by Calawag cannot be made the basis for issuing a
writ of preliminary mandatory injunction. In Department of Education, Culture and
Sports v. San Diego, we held that the right to education is not absolute. Section 5(e),
Article XIV of the Constitution provides that "[e]very citizen has a right to select a
profession or course of study, subject to fair, reasonable, and equitable admission and
academic requirements." The thesis requirement and the compliance with the
procedures leading to it, are part of the reasonable academic requirements a person
desiring to complete a course of study would have to comply with. (Citation in the
original omitted; emphasis supplied)
The deliberations of the framers on the qualifications to the right to education are also
illuminating:
MR. NOLLEDO: Thank you, Madam President. Before I ask questions directed to the
chairman and members of the committee, I would like to warmly congratulate them for a
job well-done. The committee report to my mind, Madam President, is excellent and I
hope it will not, in the course of amendments, suffer from adulteration. With respect to
page 1, lines 12-13: "Education is the right of every citizen of the Philippines," I agree
with this statement, but when we talk of the right, I understand from the chairman that it
is compellable and from Commissioner Guingona, that it is enforceable in court. Suppose
a student of a private school is not allowed to enroll by reason of misconduct or that
his stay in the school is considered by the administration of that school to be
undesirable, does he have a right to enforce his right to education under this
situation?

MR. GUINGONA: Madam President, the right to education, like any other right, is
not absolute. As a matter of fact, Article XXVI of the Universal Declaration of Human
Rights, when it acknowledges the right to education, also qualifies it when at the end of
the provision, it say, "on the basis of merit." Therefore, the student may be subject to
certain reasonable requirements regarding admission and retention and this is so
provided in the draft Constitution. We admit even of discrimination. We have accepted
this in the Philippines, and I suppose in the United States there are schools that can
refuse admission to boys because they are supposed to be exclusively for girls. And
there are schools that may refuse admission to girls because they are exclusively for
boys. There may even be discrimination to accept a student who has a contagious
disease on the ground that it would affect the welfare of the other students. What I
mean is that there could be reasonable qualifications, limitations or restrictions to this
right, Madam President.

MR. GASCON: May I add, Madam President.

MR. NOLLEDO: Yes, the Commissioner may.

MR. GASCON: When we speak of education as a right, what we would like to

emphasize is that education should be equally accessible to all regardless of social and
economic differences. So we go into the issue of providing opportunities to such an
education, recognizing that there are limitations imposed on those who come from the
poorer social classes because of their inability to continue education.

However, in the same light, this right to education is subject to the right of

educational institutions to admit students upon certain conditions such as ability to
pay the required entrance examination fee and maintaining a respectable school
record. When we speak of this right of schools as far as maintaining a certain degree
or quality of students, these conditions must be reasonable and should not be used
just to impose certain unfair situations on the students.

MR. GUINGONA: Madam President, may I add.

There is already established jurisprudence about this. In the United States, in the case of
[Lesser] v. Board of Education of New York City, 239, NYS 2d 776, the court held that
the refusal of a school to admit a student who had an average of less than 85 percent
which is the requirement for that school was lawful.

In the Philippines, we have the case of Padriguilan [sic] v. Manila Central

University where refusal to retain the student was because of the alleged deficiency in a
major subject and this was upheld by our Supreme Court. There is also the case
of Garcia v. Loyola School of Theology, wherein Garcia, a woman, tried to continue
studying in this school of theology.[248] (Citation in the original omitted; emphases
supplied)
Extant from the foregoing is that while there is a right to quality higher education, such
right is principally subject to the broad academic freedom of higher educational
institutions to impose fair, reasonable, and equitable admission and academic
requirements. Plainly stated, the right to receive education is not and should not be taken
to mean as a right to be admitted to educational institutions.

With the basic postulates that jurisdiction over legal education belongs primarily and
directly to the political departments, and that the exercise of such police power must be in
the context of reasonable supervision and regulation, and must be consistent with
academic freedom and the right to education, the Court now proceeds to address whether
the assailed provisions of R.A. No. 7662 and the corresponding LEB issuances fall
within, the constitutionally-permissible supervision and regulation of legal education.
 C.
LEB's Powers Under R.A. No. 7662 vis-a-vis the
Court's Jurisdiction Under Article VIII, Section
5(5) of the Constitution
               
1. Section 3(a)(2) on
    increasing
awareness among
 
members of the
legal profession
   
One of the general objectives of legal education under Section 3(a)(2) of R.A. No. 7662
is to "increase awareness among members of the legal profession of the needs of the
poor, deprived and oppressed sectors of society[.]" This objective is reiterated by the
LEB in LEBMO No. 1-2011, Section 7, Article II, as follows:
SEC. 7. (Section 3 of the law) General and Specific Objectives of Legal Education.

a) Legal education in the Philippines is geared to attain the following objectives:

xxxx

(2) to increase awareness among members of the legal profession of the needs of the
poor, deprived and oppressed sectors of society[.] (Emphasis supplied)
The plain language of Section 3(a)(2) of R.A. No. 7662 and Section 7(2) of LEBMO No.
1-2011 are clear and need no further interpretation. This provision goes beyond the scope
of R.A. No. 7662, i.e., improvement of the quality of legal education, and, instead delves
into the training of those who are already members of the bar. Likewise, this objective is
a direct encroachment on the power of the Court to promulgate rules concerning the
practice of law and legal assistance to the underprivileged and should, thus, be voided on
this ground. As aptly observed by the CLEBM and which the Court had approved:
In the same vein Section 3 provides as one of the objectives of legal education increasing
"awareness among members of the legal profession of the needs of the poor, deprived and
oppressed sectors of the society." Such objective should not find a place in the law that
primarily aims to upgrade the standard of schools of law as they perform the task of
educating aspiring lawyers. Section 5, paragraph 5 of Article VIII of the Constitution also
provides that the Supreme Court shall have the power to promulgate rules on "legal
assistance to the underprivileged" and hence, implementation of [R.A. No. 7662] might
give rise to infringement of a constitutionally mandated power.[249]               
2. Section 2, par. 2  
    and Section 7(g)
on legal
apprenticeship
and law practice
internship as a
 requirement for
taking the bar
   
Towards the end of uplifting the standards of legal education, Section 2, par. 2 of R.A.
No. 7662 mandates the State to (1) undertake appropriate reforms in the legal education
system; (2) require proper selection of law students; (3) maintain quality among law
schools; and (4) require legal apprenticeship and continuing legal education.

Pursuant to this policy, Section 7(g) of R.A. No. 7662 grants LEB the power to establish
a law practice internship as a requirement for taking the bar examinations:
SEC. 7. Powers and Functions. - x x x x

xxxx

(g) to establish a law practice internship as a requirement for taking the Bar, which
a law student shall undergo with any duly accredited private or public law office or firm
or legal assistance group anytime during the law course for a specific period that the
Board may decide, but not to exceed a total of twelve (12) months. For this purpose, the
Board shall prescribe the necessary guidelines for such accreditation and the
specifications of such internship which shall include the actual work of a new member of
the Bar.
This power is mirrored in Section 11(g) of LEBMO No. 1-2011:
SEC. 11. (Section 7 of the law) Powers and Functions. - For the purpose of achieving the
objectives of this Act, the Board shall have the following powers and functions:

xxxx

g) to establish a law practice internship as a requirement for taking the Bar which a
law student shall undergo with any duly accredited private or public law office or firm or
legal assistance group anytime during the law course for a specific period that the Board
may decide, but not to exceed a total of twelve (12)months. For this purpose, the Board
shall prescribe the necessary guidelines for such accreditation and the specifications of
such internship which shall include the actual work of a new member of the Bar[.]
It is clear from the plain text of Section 7(g) that another requirement, i.e., completion of
a law internship program, is imposed by law for taking the bar examinations. This
requirement unduly interferes with the exclusive jurisdiction of the Court to promulgate
rules concerning the practice of law and admissions thereto.

The jurisdiction to determine whether an applicant may be allowed to take the bar
examinations belongs to the Court. In fact, under the whereas clauses of the Revised Law
Student Practice Rule, the Court now requires the completion of clinical legal education
courses, which may be undertaken either in a law clinic or through an externship, as a
prerequisite to take the bar examinations, thus:
Whereas, to produce practice-ready lawyers, the completion of clinical legal education
courses must be a prerequisite to take the bar examinations as provided in Section 5 of
Rule 138.
Under Section 7(g), the power of the LEB is no longer confined within the parameters of
legal education, but now dabbles on the requisites for admissions to the bar examinations,
and consequently, admissions to the bar. This is a direct encroachment upon the Court's
exclusive authority to promulgate rules concerning admissions to the bar and should,
therefore, be struck down as unconstitutional.

Further, and as will be discussed hereunder, the LEB exercised this power in a manner
that forces upon law schools the establishment of a legal apprenticeship program or a
legal aid clinic, in violation of the schools' right to determine for themselves their
respective curricula.
               
3. Section 2, par. 2
    and Section 7(h)
on continuing
 
legal education of
practicing lawyers
   
Petitioners in G.R. No. 230642 argue that the power given to the LEB to adopt a system
of continuing legal education implies that the LEB exercises jurisdiction not only over
the legal education of those seeking to become lawyers, but also over those who are
already lawyers which is a function exclusively belonging to the Court.[250] Respondent,
on the other hand, maintains that the LEB's power to adopt a system of continuing legal
education is different from the mandatory continuing legal education required of all
members of the bar.[251] Respondent explains that the continuing legal education under
R.A. No. 7662 is limited to the training of lawyer-professors and not to the practice of the
legal profession.[252]

The questioned power of the LEB to adopt a system of continuing legal education
appears in Section 2, par. 2 and Section 7(h) of R.A. No. 7662:
SEC. 2. Declaration of Policies. - x x x

xxxx

Towards this end, the State shall undertake appropriate reforms in the legal education
system, require proper selection of law students, maintain quality among law schools, and
require legal apprenticeship and continuing legal education.

xxxx

SEC. 7. Powers and Functions. - x x x

xxxx

(h) to adopt a system of continuing legal education. For this purpose, the [LEB] may
provide for the mandatory attendance of practicing lawyers in such courses and for
such duration as the [LEB] may deem necessary; x x x (Emphases supplied)
This power is likewise reflected in Section 11(h) of LEBMO No. 1-2011, as follows:
SEC. 11. (Section 7 of the law) Powers and Functions. - For the purpose of achieving the
objectives of this Act, the Board shall have the following powers and functions:

xxxx

h) to adopt a system of continuing legal education. For this purpose, the Board may
provide for the mandatory attendance of practicing lawyers in such courses and for
such duration as the Board may deem necessary[.] x x x (Emphasis supplied)
By its plain language, the clause "continuing legal education" under Section 2, par. 2, and
Section 7(h) of R.A. No. 7662 unduly give the LEB the power to supervise the legal
education of those who are already members of the bar. Inasmuch as the LEB is
authorized to compel mandatory attendance of practicing lawyers in such courses and for
such duration as the LEB deems, necessary, the same encroaches upon the Court's power
to promulgate rules concerning the Integrated Bar which includes the education of
"lawyer-professors" as teaching of law is practice of law. The mandatory continuing legal
education of the members of the bar is, in fact, covered by B.M. No. 850 or the Rules on
Mandatory Continuing Legal Education (MCLE) dated August 22, 2000 which requires
members of the bar, not otherwise exempt, from completing, every three years, at least 36
hours of continuing legal education activities approved by the MCLE Committee directly
supervised by the Court.

As noted by the CLEBM:

Thus, under the declaration of policies in Section 2 of [R.A. No. 7662], the State "shall
undertake appropriate reforms in the legal education system, require the proper selection
of law students, maintain quality among law schools and require apprenticeship and
continuing legal education["]. The concept of continuing legal education encompasses
education not only of law students but also of members of the legal profession. Its
inclusion in the declaration of policies implies that the [LEB] shall have jurisdiction over
the education of persons who have finished the law course and are already licensed to
practice law. Viewed in the light of Section 5, paragraph 5 of Article VIII of the
Constitution that vests the Supreme Court with powers over the Integrated Bar of the
Philippines, said portion of Section 2 of [R.A. No. 7662] risks a declaration of
constitutional infirmity.[253] (Underscoring supplied)               
4. Section 7(e) on  
    minimum
standards for law
 admission and the
PhiLSAT
issuances
   
Of the several powers of the LEB under R.A. No. 7662, its power to prescribe minimum
standards for law admission under Section 7(e) received the strongest objection from the
petitioners. Section 7(e), provides:
SEC. 7. Powers and Functions. - x x x

xxxx

(e) to prescribe minimum standards for law admission and minimum qualifications

and compensation of faculty members; (Emphasis supplied)
Petitioners argue that the power to prescribe the minimum standards for law admission
belongs to the Court pursuant to its rule-making power concerning the admission to the
practice of law; Thus, Section 7(e) of R.A. No. 7662 which gives the LEB the power to
prescribe the minimum standards for law admission is allegedly unconstitutional as it
violates the doctrine of separation of powers. Necessarily, according to the petitioners,
the PhiLSAT which was imposed by the LEB pursuant to Section 7(e) of R.A. No. 7662
is likewise void.

The Court finds no constitutional conflict between its rule-making power and the power
of the LEB to prescribe the minimum standards for law admission under Section 7(e) of
R.A. No. 7662. Consequently, the PhiLSAT, which intends to regulate admission to law
schools, cannot be voided on this ground.
               
4(a) LEB's power to
. prescribe
    minimum
standards for
"law admission"
pertain to  
admission to legal
education and not
to the practice of
law
   
Much of the protestation against the LEB's exercise of the power to prescribe the
minimum standards for law admission stems from the interpretation extended to the
phrase "law admission." For petitioners, "law admission" pertains to the practice of law,
the power over which belongs exclusively to the Court.

The statutory context and the intent of the legislators do not permit such interpretation.
Basic is the rule in statutory construction that every part of the statute must be interpreted
with reference to the context, that is, every part must be read together with the other
parts, to the end that the general intent of the law is given primacy.[254] As such, a law's
clauses and phrases cannot be interpreted as isolated expressions nor read in truncated
parts, but must be considered to form a harmonious whole.[255]

Accordingly, the LEB's power under Section 7(e) of R.A. No. 7662 to prescribe the
minimum standards for law admission should be read with the State policy behind the
enactment of R.A. No. 7662 which is fundamentally to uplift the standards of legal
education and the law's thrust to undertake reforms in the legal education system.
Construing the LEH's power to prescribe the standards for law admission together with
the LEB's other powers to administer, supervise, and accredit law schools, leads to the
logical interpretation that the law circumscribes the LEB's power to prescribe admission
requirements only to those seeking enrollment to a school or college of law and not to the
practice of law.

Reference may also be made to DECS Order No. 27-1989, as the immediate precursor of
R.A. No. 7662, as to what is sought to be regulated when the law speaks of "law
admission" requirements.

Section 1, Article VIII of DECS Order No. 27-1989 is clear that the admission
requirement pertains to enrollment in a law course, or law school, or legal education,
thus:
Article VIII
Admission, Residence and Other Requirements

SEC. 1. No applicant shall be enrolled in the law course unless he complies with
specific requirements for admission by the Bureau of Higher Education and the
Supreme Court of the Philippines, for which purpose he must present to the registrar
the necessary credentials before the end of the enrollment period. (Emphases supplied)
This contemporary interpretation suffice in itself to hold that the phrase "law admission"
pertains to admission to the study of law or to legal education, and not to the practice of
law. Further support is nevertheless offered by the exchanges during the Senate
interpellations, wherein it was assumed that the phrase "minimum standards for law
admission" refers to the requirements that the student must fulfill before being admitted
to law school. This assumption was not corrected by the bill's sponsor.[256]
               
4(b) Section 7(e) of
. R.A. No. 7662 is
    reasonable
 
supervision and
regulation
   
Section 7(e) of R.A. No. 7662, insofar as it gives the LEB the power to prescribe the
minimum standards for law admission is faithful to the reasonable supervision and
regulation clause. It merely authorizes the LEB to prescribe minimum requirements not
amounting to control.

Emphatically, the law allows the LEB to prescribe only the minimum standards and it did
not, in any way, impose that the minimum standard for law admission should be by way
of an exclusionary and qualifying exam nor did it prevent law schools from imposing
their respective admission requirements.

Thus, under LEBMO No. 1-2011, the minimum standards for admission to law schools as
implemented by the LEB are: (1) completion of a four-year high school course; and (2)
completion of a course for a bachelor's degree in arts or sciences. [257] Again, these
requirements are but consistent with the nature of the law course in the Philippines as
being both a professional and post-baccalaureate education.

As the facts disclose, however, the LEB later on introduced the PhiLSAT as an additional
prerequisite for admission to law school.
               
4(c) Pursuant to
. Section 7(e), LEB
    is authorized to
administer an
aptitude test as a  
minimum
standard for law
admission
   
Evident from the Senate deliberations that, in prescribing the minimum standards for law
admission, an aptitude test may be administered by the LEB although such is not made
mandatory under the law. Thus:
Senator Tolentino: x x x

I will proceed to another point, Mr. President. I have taught law for more than 25 years in
private schools and in the University of the Philippines as well. There is one thing I have
noticed in all these years of teaching and that is, many students in the law school are not
prepared or apt by inclination or by ability to become lawyers. I see that the objectives of
the legal education that are provided for in this bill do not provide for some mechanism
of choosing people who should take up the law course.

As it is now, because of our democratic principles, anybody who wants to become a

lawyer, who can afford the tuition fee, or who has the required preparatory course, can be
admitted into the law school. And yet, while studying law, many of these students - I
would say there are about 30 or 40 percent of students in private schools - should not be
taking up law but some other course because, simply, they do not have the inclination,
they do not have the aptitude or the ability to become lawyers.

Can that be provided for in this bill, Madam Sponsor? Would it contravene really our
principles of democracy where everybody should be free to take the course that he wants
to take? Or should the State be able to determine who should be able or who should be
allowed to take a particular course, in this case of law?

Senator Shahani: Mr. President, there are those aptitude tests which are being taken
when the student is in high school to somehow guide the guidance councilors [sic]
into the aptitude of the students. But the talent or the penchant for the legal
profession is not one of those subjects specifically measured. I think what is
measured really is who is, more or less, talented for an academic education as
against a vocational education. But maybe, a new test will have to be designed to
really test the aptitude of those who would like to enter the law school. x x x

Senator Tolentino: x x x

Many parents want to see their children become lawyers. But they do not consider the
aptitude of these children, and they waste money and time in making these children take
up law when they really are not suited to the law course. My real concern is whether by
legislation, we can provide for selection of those who should be allowed to take up
law, and not everybody would be allowed to take up law. x x x

xxxx

Senator Shahani: Mr. President, of course, the right to education is a constitutional

right, and I think one cannot just categorically deny a student - especially if he is
bright - entrance to a law school. I think I would stand by what I had previously
said that an aptitude examination will have to be specially designed. It is not in
existence yet. x x x[258] (Emphases supplied)
This matter was amplified in second reading:
Senator Angara: x x x

Senator Tolentino asked why there is an omission on the requirements for admission to
law school. I think [Senator Shahani] has already answered that, that the [LEB] may
prescribe an aptitude test for that purpose. Just as in other jurisdictions, they
prescribe a law admission test for prospective students of law. I think the board may
very well decide to prescribe such a test, although it is not mandatory under this
bill.[259] (Emphasis and underscoring supplied)
The lawmakers, therefore, recognized and intended that the LEB be vested with authority
to administer an aptitude test as a minimum standard for law admission. The presumption
is that the legislature intended to enact a valid, sensible, and just law and one which
operates no further than may be necessary to effectuate the specific purpose of the law.
[260]
 This presumption has not been successfully challenged by petitioners.

It also bears to note that the introduction of a law aptitude examination was actually
supported by the Court when it approved the CLEBM's proposed amendment to Section
7(e), as follows:
SEC. 6. Section 7 of the same law is hereby amended to read as follows:

"SEC. 7. Power and Functions. - x x x

xxxx

d). to prescribe minimum standards for ADMISSION TO LAW

SCHOOLS INCLUDING A SYSTEM OF LAW APTITUDE EXAMINATION x x x[.]"
(Underscoring supplied)
And further in Bar Matter No. 1161[261] when the Court referred to the LEB the conduct of
a proposed law entrance examination.
               
4(d) PhiLSAT, as an
. aptitude exam, is
    reasonably related
to the  
improvement of
legal education
   
Having settled that the LEB has the power to administer an aptitude test, the next issue to
be resolved is whether the exercise of such power, through the PhiLSAT, was reasonable.

Indeed, an administrative regulation is susceptible to attack for unreasonableness.

In Lupangco v. Court of Appeals,[262] the Court held:
It is an [axiom] in administrative law that administrative authorities should not act
arbitrarily and capriciously in the issuance of rules and regulations. To be valid,
such rules and regulations must be reasonable and fairly adapted to secure the end
in view. If shown to bear no reasonable relation to the purposes for which they are
authorized to be issued, then they must be held to be invalid. (Emphasis supplied)
To determine whether the PhiLSAT constitutes a valid exercise of police power, the same
test of reasonableness, i.e., the concurrence of a lawful subject and lawful means, is
employed. Petitioners argue that the PhiLSAT is unreasonable because: it is not a
conclusive proof of the student's aptitude;[263] it entails unreasonable examination and
travel expenses and burdensome documentary requirements;[264] applying for PhiLSAT
exemption is inconvenient;[265] it is redundant to existing law school entrance exams;
[266]
 and it is not supported by scientific study.[267]
Unfortunately, these grounds are not only conclusions of fact which beg the presentation
of competent evidence, but also necessarily go into the wisdom of the PhiLSAT which
the Court cannot inquire into. The Court's pronouncement as to the reasonableness of the
PhiLSAT based on the grounds propounded by petitioners would be an excursion into the
policy behind the examinations - a function which is administrative rather than judicial.

Petitioners also argue that there is no reasonable relation between improving the quality
of legal education and regulating access thereto. The Court does not agree.

The subject of the PhiLSAT is to improve the quality of legal education. It is indubitable
that the State has an interest in prescribing regulations promoting education and thereby
protecting the common good. Improvement of the quality of legal education, thus, falls
squarely within the scope of police power. The PhiLSAT, as an aptitude test, was the
means to protect this interest.
               
4(e) Tablarin
. sustained the
    conduct of an
admission test as a
 
legitimate exercise
of the State's
regulatory power
   
Moreover, by case law, the Court already upheld the validity of administering an aptitude
test as a reasonable police power measure in the context of admission standards into
institutions of higher learning.

In Tablarin, the Court upheld not only the constitutionality of Section 5(a) of R.A. No.
2382, or the Medical Act of 1959, which gave the Board of Medical Education (BME)
the power to prescribe requirements for admission to medical schools, but also MECS
Order No. 52, Series of 1985 (MECS Order No. 52-1985) issued by the BME which
prescribed NMAT.

Using the rational basis test, the Court upheld the constitutionality of the NMAT as
follows:
Perhaps the only issue that needs some consideration is whether there is some
reasonable relation between the prescribing of passing the NMAT as a condition for
admission to medical school on the one hand, and the securing of the health and
safety of the general community, on the other hand. This question is perhaps most
usefully approached by recalling that the regulation of the practice of medicine in all
its branches has long been recognized as a reasonable method of protecting the
health and safety of the public. That the power to regulate and control the practice of
medicine includes the power to regulate admission to the ranks of those authorized to
practice medicine, is also well recognized. Thus, legislation and administrative
regulations requiring those who wish to practice medicine first to take and pass medical
board examinations have long ago been recognized as valid exercises of governmental
power. Similarly, the establishment of minimum medical educational requirements - i.e.,
the completion of prescribed courses in a recognized medical school - for admission to
the medical profession, has also been sustained as a legitimate exercise of the regulatory
authority of the state. What we have before us in the instant case is closely related;
the regulation of access to medical schools. MECS Order No. 52, s. 1985, as noted
earlier, articulates the rationale of regulation of this type: the improvement of the
professional and technical quality of the graduates of medical schools, by upgrading the
quality of those admitted to the student body of the medical schools. That upgrading is
sought by selectivity in the process of admission, selectivity consisting, among other
things, of limiting admission to those who exhibit in the required degree the aptitude
for medical studies and eventually for medical practice. The need to maintain, and the
difficulties of maintaining, high standards in our professional schools in general, and
medical schools in particular, in the current stage of our social and economic
development, are widely known.

We believe that the government is entitled to prescribe an admission test like the
NMAT as a means for achieving its stated objective of "upgrading the selection of
applicants into [our] medical schools" and of "improv[ing] the quality of medical
education, in the country." Given the widespread use today of such admission tests in,
for instance, medical schools in the United States of America the Medical College
Admission Test [MCAT] and quite probably in other countries with far more developed
educational resources than our own, and taking into account the failure or inability of the
petitioners to even attempt to prove otherwise, we are entitled to hold that the NMAT
is reasonably related to the securing of the ultimate end of legislation and regulation
in this area. That end, it is useful to recall, is the protection of the public from the
potentially deadly effects of incompetence and ignorance in those who would
undertake to treat our bodies and minds for disease or trauma.[268] (Emphases
supplied)
The Court reached its conclusion that NMAT is a valid exercise of police power because
the method employed, i.e., regulation of admissions to medical education is reasonably
related to the subject, i.e., the protection of the public by ensuring that only those
qualified are eventually allowed to practice medicine.

The necessity of State intervention to ensure that the medical profession is not infiltrated
by those unqualified to take care of the life and health of patients was likewise the reason
why the Court in Department of Education, Culture and Sports v. San Diego[269] upheld
the "three-flunk" rule in NMAT:
We see no reason why the rationale in the [TabIarin] case cannot apply to the case at bar.
The issue raised in both cases is the academic preparation of the applicant. This may be
gauged at least initially by the admission test and, indeed with more reliability, by the
three-flunk rule. The latter cannot be regarded any less valid than the former in the
regulation of the medical profession.

There is no need to redefine here the police power of the State. Suffice it to repeat that
the power is validly exercised if (a) the interests of the public generally, as distinguished
from those of a particular class, require the interference of the State, and (b) the means
employed are reasonably necessary to the attainment of the object sought to be
accomplished and not unduly oppressive upon individuals.

In other words, the proper exercise of the police power requires the concurrence of a
lawful subject and a lawful method.

The subject of the challenged regulation is certainly within the ambit of the police
power. It is the right and indeed the responsibility of the State to insure that the
medical profession is not infiltrated by incompetents to whom patients may
unwarily entrust their lives and health.

The method employed by the challenged regulation is not irrelevant to the purpose
of the law nor is it arbitrary or oppressive. The three-flunk rule is intended to
insulate the medical schools and ultimately the medical profession from the
intrusion of those not qualified to be doctors. (Emphases supplied)
Tablarin recognized that State intervention was necessary, and therefore was allowed,
because of the need to meet the goal of promoting public health and safety.

In similar vein, the avowed purpose of the PhiLSAT is to improve the quality of legal
education by evaluating and screening applicants to law school. As elucidated, the State
has an interest in improving the quality of legal education for the protection of the
community at-large, and requiring an entrance test is reasonably related to that interest. In
other words, the State has the power and the prerogative to impose a standardized test
prior to entering law school, in the same manner and extent that the State can do so in
medical school when it prescribed the NMAT.

In all, the Court finds no constitutional conflict between the Court's rule-making power
concerning admissions to the practice of law and on the LEB's power to prescribe
minimum standards for law admission under Section 7(e) of R.A. No. 7662.

Further, pursuant to its power under Section 7(e), the Court affirms the LEB's authority to
initiate and administer an aptitude test, such as the PhiLSAT, as a minimum standard for
law admission. Thus, the PhiLSAT, insofar as it functions as an aptitude exam that
measures the academic potential of the examinee to pursue the study of law to the end
that the quality of legal education is improved is not per se unconstitutional.

However, there are certain provisions of the PhiLSAT that render its operation
exclusionary, restrictive, and qualifying which is contrary to its design as an aptitude
exam meant to be used as a tool that should only help and guide law schools in gauging
the aptness of its applicants for the study of law. These provisions effectively and
absolutely exclude applicants who failed to pass the PhiLSAT from taking up a course in
legal education, thereby restricting and qualifying admissions to law schools. As will be
demonstrated, these provisions of the PhiLSAT are unconstitutional for being manifestly
violative of the law schools' exercise of academic freedom, specifically the autonomy to
determine for itself who it shall allow to be admitted to its law program.

D.
LEB's Powers vis-a-vis Institutional Academic
Freedom and the Right to Education
               
1.    PhiLSAT
 
       
Paragraphs 7, 9, 11, and 15 of LEBMO No. 7-2016, provide:
xxxx

7. Passing Score - The cut-off or passing score for the PhiLSAT shall be FIFTY-
FIVE PERCENT (55%) correct answers, or such percentile score as may be
prescribed by the LEB.

xxxx

9. Admission Requirement - All college graduates or graduating students applying for

admission to the basic law course shall be required to pass the PhiLSAT as a
requirement for admission to any law school in the Philippines. Upon the effectivity
of this memorandum order, no applicant shall be admitted for enrollment as a first
year student in the basic law courses leading to a degree of either Bachelor of Laws
or Juris Doctor unless he/she has passed the PhiLSAT taken within 2 years before
the start of studies for the basic law course and presents a valid [Certificate of
Eligibility] as proof thereof.

xxxx

11. Institutional Admission Requirements - The PhiLSAT shall be without prejudice to

the right of a law school in the exercise of its academic freedom to prescribe or
impose additional requirements for admission, such as but not limited to:

a. A score in the PhiLSAT higher than the cut-off or passing score set by the
LEB;
 b. Additional or supplemental admission tests to measure the competencies
and/or personality of the applicant; and

c. Personal interview of the applicant.

xxxx

15. Sanctions - Law schools violating this Memorandum Order shall [be] imposed
the administrative sanctions prescribed in Section 32 of LEBMO No. 2, Series of
2013 and/or fine of up to Ten Thousand Pesos (P10,000) for each infraction. (Emphases
supplied)
Without doubt, the above provisions exclude and disqualify those examinees who fail to
reach the prescribed passing score from being admitted to any law school in the
Philippines. In mandating that only applicants who scored at least 55% correct answers
shall be admitted to any law school, the PhiLSAT actually usurps the right and duty of
the law school to determine for itself the criteria for the admission of students and
thereafter, to apply such criteria on a case-by-case basis. It also mandates law schools to
absolutely reject applicants with a grade lower than the prescribed cut-off score and those
with expired PhiLSAT eligibility. The token regard for institutional academic freedom
comes into play, if at all, only after the applicants had been "pre-selected" without the
school's participation. The right of the institutions then are constricted only in providing
"additional" admission requirements, admitting of the interpretation that the preference of
the school itself is merely secondary or supplemental to that of the State which is
antithetical to the very principle of reasonable supervision and regulation.

The law schools are left with absolutely no discretion to choose its students at the first
instance and in accordance with its own policies, but are dictated to surrender such
discretion in favor of a State-determined pool of applicants, under pain of administrative
sanctions and/or payment of fines. Mandating law schools to reject applicants who failed
to reach the prescribed PhiLSAT passing score or those with expired PhiLSAT eligibility
transfers complete control over admission policies from the law schools to the LEB. As
Garcia tritely emphasized: "[c]olleges and universities should [not] be looked upon as
public utilities devoid of any discretion as to whom to admit or reject. Education,
especially higher education, belongs to a different, and certainly higher category." [270]
               
1(a) Comparison of
. PhiLSAT with
 
    NMAT and LSAT
   
Respondent urges the Court to treat the PhiLSAT in the same manner that the Court
treated the NMAT in Tablarin. Petitioners oppose on the ground that the PhiLSAT and
the NMAT are different because there is a Constitutional body, i.e., the Court, tasked to
regulate the practice of law while there is none with respect to the practice of medicine.
The Court treats the PhiLSAT differently from the NMAT for the fundamental reason
that these aptitude exams operate differently.

For one, how these exams allow the schools to treat the scores therein obtained is
different.

While both exams seem to prescribe a "cut-off" score, the NMAT score is evaluated by
the medical schools in relation to their own cut-off scores. Unlike the PhiLSAT score, the
NMAT score is not the sole determining factor on whether or not an examinee may be
admitted to medical school. The NMAT score is only meant to be one of the bases for
evaluating applicants for admission to a college of medicine.

Medical schools further enjoy the discretion to determine how much weight should be
assigned to an NMAT score relative to the schools' own admissions policy. Different
medical schools may therefore set varying acceptable NMAT scores. Different medical
schools may likewise assign different values to the NMAT score. This allows medical
schools to consider the NMAT score along with the other credentials of the applicant.
The NMAT score does not constrain medical schools to accept pre-selected applicants; it
merely provides for a tool to evaluate all applicants.

Obtaining a low NMAT percentile score will not immediately and absolutely disqualify
an applicant from being admitted to medical school. Obtaining a high NMAT percentile
score only increases an applicant's options for medical schools. Taking the NMAT, thus,
expands the applicant's options for medical schools; it does not limit them.

For another, medical schools are not subjected to sanctions in case they decide to admit
an applicant pursuant to their own admissions policy. In fact, at some point,[271] there was
even no prescribed cut-off percentile score for the NMAT, and instead it was stressed that
a student may enroll in any school, college or university upon meeting the latter's specific
requirements and reasonable regulations.[272] Also, the issuance of a certificate of
eligibility for admission to a college of medicine had been transferred to. the medical
schools, thus, rightfully giving the responsibility for and accountability of determining
eligibility of students for admission to the medical program to the schools concerned.[273]

Similar to the NMAT, the Law School Admission Test (LSAT) is only one of the several
criteria for evaluation for law school admission. It is just one of the methods that law
schools may use to differentiate applicants for law school. The American Bar Association
actually allows a law school to use an admission test other than the LSAT and it does not
dictate the particular weight that a law school should give to the results of the LSAT in
deciding whether to admit an applicant.[274]

In contrast, the PhiLSAT score itself determines whether an applicant may be admitted to
law school or not, the PhiLSAT being strictly a pass or fail exam. It excludes those who
failed to reach the prescribed cut-off score from being admitted to any law school. It
qualifies admission to law school not otherwise imposed by the schools themselves. The
PhiLSAT, as presently crafted, employs a totalitarian scheme in terms of student
admissions. This leaves the consequent actions of the applicant-student and the school
solely dependent upon the results of the PhiLSAT.
               
1(b) Balancing State
. interest with
    institutional
 
academic
freedom     
   
Thus far, it is settled that the PhiLSAT, when administered as an aptitude test, is
reasonably related to the State's unimpeachable interest in improving the quality of legal
education. This aptitude test, however, should not be exclusionary, restrictive, or
qualifying as to encroach upon institutional academic freedom. Moreover, in the exercise
of their academic freedom to choose who to admit, the law schools should be left with the
discretion to determine for themselves how much weight should the results of the
PhiLSAT carry in relation to their individual admission policies. At all times, it is
understood that the school's exercise of such academic discretion should not be gravely
abused, arbitrary, whimsical, or discriminatory.

With the conclusion that the PhiLSAT, when administered as an aptitude test, passes the
test of reasonableness, there is no reason to strike down the PhiLSAT in its entirety.
Instead, the Court takes a calibrated approach and partially nullifies LEBMO No. 7-2016
insofar as it absolutely prescribes the passing of the PhiLSAT and the taking thereof
within two years as a prerequisite for admission to any law school which, on its face, run
directly counter to institutional academic freedom. The rest of LEBMO No. 7-2016,
being free from any taint of unconstitutionality, should remain in force and effect,
especially in view of the separability clause[275] therein contained.
               
1(c) PhiLSAT and the
. right to education  
       
Anent the argument that the PhiLSAT transgresses petitioners' right to education and
their right to select a profession or course of study, suffice to state that the PhiLSAT is a
minimum admission standard that is rationally related to the interest of the State to
improve the quality of legal education and, accordingly, to protect the general
community. The constitutionality of the PhiLSAT, therefore, cannot be voided on the
ground that it violates the right to education as stated under Section 1, Article XIV of the
Constitution. The Court's pronouncement in Tablarin[276] again resonates with
significance:
Turning to Article XIV, Section 1, of the 1987 Constitution, we note that once more,
petitioners have failed to demonstrate that the statute and regulation they assail in fact
clash with that provision. On the contrary, we may note - x x x - that the statute and the
regulation which petitioners attack are in fact designed to promote "quality education" at
the level of professional schools. When one reads Section 1 in relation to Section 5(3) of
Article XIV, as one must, one cannot but note that the latter phrase of Section 1 is not to
be read with absolute literalness. The State is not really enjoined to take appropriate steps
to make quality education "accessible to all" who might for any number of reasons wish
to enroll in a professional school, but rather merely to make such education accessible to
all who qualify under "fair, reasonable and equitable admission and academic
requirements."
2. Other LEB
    issuances on law
 
admission
   
Apart from the PhiLSAT, the LEB also imposed additional requirements for admission to
law schools under LEBMO No. 1-2011, specifically:
Article III
Prerequisites and Program Specification

SEC. 15. Prerequisites to admission to Law School. - x x x

xxxx

Where the applicant for admission into a law school is a graduate of a foreign institution
or school following a different course and progression of studies, the matter shall be
referred to the Board that shall determine the eligibility of the candidate for
admission to law school.

SEC. 16. Board Prerequisites for Admission to the Ll.B. or J.D. Program. - The Board
shall apply Section 6 of Rule 138 in the following wise: An applicant for admission to the
Ll.B. or J.D. program of studies must be a graduate of a bachelor's degree and must have
earned at least eighteen (18) units in English, six (6) units in Mathematics, and
eighteen (18) units of social science subjects.

SEC. 17. Board Prerequisites for Admission to Graduate Programs in Law. - Without

prejudice to other requirements that graduate schools may lay down, no applicant shall
be admitted for the Master of Laws (Ll.M.) or equivalent master's degree in law or
juridical science, without an Ll.B. or a J.D. degree. Admission of non-Members of the
Philippine Bar to the master's degree shall be a matter of academic freedom vested in the
graduate school of law. The candidate for the doctorate degree in juridical science, or
doctorate in civil law or equivalent doctorate degree must have completed a Master of
Laws (Ll.M.) or equivalent degree.
Graduate degree programs in law shall have no bearing on membership or non-
membership in the Philippine Bar.[277] (Emphases supplied)
Further, LEBMO No. 1-2011, Article V, provides:
xxxx

SEC. 23. No student who has obtained a general average below 2.5 or 80 in the college
course required for admission to legal studies may be admitted to law school. Exceptions
may be made by the Dean in exceptionally meritorious cases, after having informed the
Board.[278]
These provisions similarly encroach upon the law school's freedom to determine for itself
its admission policies. With regard to foreign students, a law school is completely bereft
of the right to determine for itself whether to accept such foreign student or not, as the
determination thereof now belongs to the LEB.

Similarly, the requirement that an applicant obtain a specific number of units in English,
Mathematics, and Social Science subjects affects a law school's admission policies
leaving the latter totally without discretion to admit applicants who are deficient in these
subjects or to allow such applicant to complete these requirements at a later time. This
requirement also effectively extends the jurisdiction of the LEB to the courses and units
to be taken by the applicant in his or her pre-law course. Moreover, such requirement is
not to be found under Section 6, Rule 138 of the Rules of Court as this section simply
requires only the following from an applicant to the bar exams:
SEC. 6. Pre-Law. - No applicant for admission to the bar examination shall be admitted
unless he presents a certificate that he has satisfied the Secretary of Education that, before
he began the study of law, he had pursued and satisfactorily completed in an authorized
and recognized university or college, requiring for admission thereto the completion of a
four-year high school course, the course of study prescribed therein for a bachelor's
degree in arts or sciences with any of the following subjects as major or field of
concentration: political science, logic, english, spanish, history and economics.
Likewise, in imposing that only those with a basic degree in law may be admitted to
graduate programs in law encroaches upon the law school's right to determine who may
be admitted. For instance, this requirement effectively nullifies the option of admitting
non-law graduates on the basis of relevant professional experience that a law school,
pursuant to its own admissions policy, may otherwise have considered.

The required general weighted average in the college course suffers the same infirmity
and would have been struck down had ·it not been expressly repealed by the LEB
because of the PhiLSAT.[279]
               
3. Section 7(c) and  
7(e) on the
minimum
 qualifications of
faculty members

The LEB is also empowered under Section 7(c) to set the standards of accreditation
taking into account, among others, the "qualifications of the members of the faculty" and
under Section 7(e) of R.A. No. 7662 to prescribe "minimum qualifications and
compensation of faculty members[.]"

Relative to the power to prescribe the minimum qualifications of faculty members, LEB
prescribes under LEBMO No. 1-2011 the following:
[PART I]
Article V
Instructional Standards

SEC. 20. The law school shall be headed by a properly qualified dean, maintain a
corps of professors drawn from the ranks of leading and acknowledged
practitioners as well as academics and legal scholars or experts in juridical
science[.] x x x

xxxx

PART III
QUALIFICATIONS AND CURRICULUM

Article I
Faculty Qualifications

SEC. 50. The members of the faculty of a law school should, at the very least, possess
a L1.B. or a J.D. degree and should be members of the Philippine Bar. In the exercise
of academic freedom, the law school may also ask specialists in various fields of law with
other qualifications, provided that they possess relevant doctoral degrees, to teach
specific subjects.

Within a period of five (5) years of the promulgation of the present order, members
of the faculty of schools of law shall commence their studies in graduate schools of
law.

Where a law school offers the J.D. curriculum, a qualified Ll.B. graduate who is a
member of the Philippine Bar may be admitted to teach in the J.D. course and may wish
to consider the privilege granted under Section 56 hereof.

SEC. 51. The dean should have, aside from complying with the requirements above,
at least a Master of Laws (Ll.M.) degree or a master's degree in a related field, and
should have been a Member of the Bar for at least 5 years prior to his appointment
as dean.

SEC. 52. The dean of a graduate school of law should possess at least a doctorate
degree in law and should be an acknowledged authority in law, as evidenced by
publications and membership in learned societies and organizations; members of
the faculty of a graduate school of law should possess at least a Master of Laws
(Ll.M.) degree or the relevant master's or doctor's degrees in related fields.

Aside from the foregoing, retired justices of the Supreme Court, the Court of Appeals, the
Sandiganbayan and the Court of Tax Appeals may serve as deans of schools of law,
provided that they have had teaching experience as professors of law and provided
further that, with the approval of the Legal Education Board, a graduate school of law
may accredit their experience in the collegiate appellate courts and the judgments they
have penned towards the degree [ad eundem] of Master of Laws.[280] (Emphases supplied)
Thus, under LEBMO No. 1-2011, a law faculty member must have an Ll.B or J.D. degree
and must, within a period of five years from the promulgation of LEBMO No. 1-2011, or
from June 14, 2011 to June 14, 2016, commence studies in graduate school of law.

The mandatory character of the requirement of a master's degree is underscored by the

LEB in its Resolution No. 2014-02, a "sequel rule" to Section 50 of LEBMO No. 1-2011,
which provides that:
xxxx

1. Members of the law faculty are required to be holders of the degree of

Master of Laws. It is the responsibility of the law deans to observe and
implement this rule.

2. The law faculty of all law schools shall have the following percentage of
holders of the master of laws degree:

2.1. School Year- 2017-2018-20%

2.2. School Year- 2018-2019 - 40%
2.3. School Year- 2019-2020-60%
2.4. School Year- 2020-2021-80%

3. In computing the percentage, those who are exempted from the rule shall be
included.

4. Exempted from this requirement of a master's degree in law are the

following:

The Incumbent or Retired Members of the:

 3.1. Supreme Court;
3.2. Court of Appeals, Sandiganbayan and Court of Tax Appeals;
3.3. Secretary of Justice and Under-Secretaries of Justice, Ombudsman, Deputy Ombudsmen,
Solicitor General and Assistant Solicitors General
3.4. Commissioners of the National Labor Relations Commission who teach Labor Laws;
3.5. Regional Trial Court Judges;
3.6. DOJ State and Regional State Prosecutors and Senior Ombudsman Prosecutors who teach
Criminal Law and/or Criminal Procedure;
3.7. Members of Congress who are lawyers who teach Political Law, Administrative Law,
Election Law, Law on Public Officers and other related subjects;
3.8. Members of Constitutional Commissions who are Lawyers;
3.9. Heads of bureaus who are lawyers who teach the law subjects which their respective
bureaus are implementing;
3.10.Ambassadors, Ministers and other [D]iplomatic Officers who are lawyers who teach
International Law or related subjects;
3.11.Those who have been teaching their subjects for 10 years or more upon recommendation of
their deans; and
3.12.Other lawyers who are considered by the Board to be experts in any field of law provided
they teach the subjects of their expertise.

5. The following are the sanctions for non-compliance with the foregoing
rules:

4.1. If a law school is non-compliant with these rules for the first time beginning School Year
2017-2018, the Board shall downgrade its Recognition status to Permit status;
4.2. If a law school under a Permit status should remain non-compliant with these rules in
succeeding school years, the Board shall downgrade the Permit status to Phase-Out
status;
4.3. If a law school which is under Phase-Out status remains non-compliant with these rules in
succeeding school years, the Board shall order its closure to take effect at the end of the
school year.

6.
7. If a law school under sanction shall become compliant, its Recognition
status shall be restored. (Emphases supplied)

xxxx
And under LEBMO No. 2:
SEC. 31. Unfitness to Continue Operating a Law Program. A law school which is
operated below quality standards of a law school is unfit to continue operating a law
program.

xxxx

2) A law school is substandard if the result of the inspection and evaluation of the law
school and its facilities by members of the Board or its staff shows that the law school
has serious deficiencies including a weak faculty as indicated, among others, by the fact
that most of the members are neophytes in the teaching of law[.] x x x

xxxx

SEC. 32. The imposable administrative sanctions are the following:

a) Termination of the law program (closing the law school);

b) Phase-out of the law program;
c) Provisional cancellation of the Government Recognition and putting the law program
of the substandard law school under Permit Status.
This master of laws degree requirement is reiterated in LEBMO No. 17, Series of
2018 (Supplemental Regulations on the Minimum Academic Requirement of Master of
Laws Degree for Deans and Law Professors/Lecturers/Instructors in Law Schools), as
follows:
xxxx

B) For Members of the Law Faculty

SEC. 6. For purposes of determining compliance with the minimum academic

requirement of a Ll.M. degree for the members of the law faculty in law schools
required under Section 50 of LEBMO No. 1, Series of 2011 and Resolution No. 2014-02,
the required percentage of holders of Ll.M. shall be computed based on the aggregate
units of all courses/subjects offered during the semester by the law school.

SEC. 7. Within thirty (30) days upon completion the effectivity this of this memorandum
[sic], the President of the HEI and the Dean of each law school shall jointly submit to
the LEB separate certification of the total teaching assignments/load for the
1st Semester and 2nd Semester of the Academic Year 2017-2018 in the prescribed
matrix form containing the names of every faculty member, his/her highest
academic law degree, qualification for , exemption from the Ll.M. requirement, if
applicable, courses/subjects assigned to teach, and academic weight of each
course/subject, and a disclosure whether or not the law school is compliant with the
prescribed percentage of Ll.M. holders for faculty members. Thereafter, the same
certification shall be submitted for every regular semester not later than 45 days from the
start of the semester.

xxxx

SEC. 12. Law schools failing to meet the prescribed percentage of its faculty
members required to have Ll.M. degrees shall be imposed the appropriate
administrative sanction specified under Resolution No. 2014-02. (Emphases supplied)
To be sure, under its supervisory and regulatory power, the LEB can prescribe the
minimum qualifications of faculty members. This much was affirmed by the Court when
it approved the CLEBM's proposal to revise the powers of LEB under R.A. No. 7662, but
nevertheless retaining the LEB's power to "provide for minimum qualifications for
faculty members of law schools." As worded, the assailed clauses of Section 7(c) and 7(e)
insofar as they give LEB the power to prescribe the minimum qualifications of faculty
members are in tune with the reasonable supervision and regulation clause and do not
infringe upon the academic freedom of law schools.

Moreover, this minimum qualification can be a master of laws degree. In University of

the East v. Pepanio,[281] the Court held that the requirement of a masteral degree, albeit
for tertiary education teachers, is not unreasonable. Thus:
The requirement of a masteral degree for tertiary education teachers is not
unreasonable. The operation of educational institutions involves public interest. The
government has a right to ensure that only qualified persons, in possession of
sufficient academic knowledge and teaching skills, are allowed to teach in such
institutions. Government regulation in this field of human activity is desirable for
protecting, not only the students, but the public as well from ill-prepared teachers,
who are lacking in the required scientific or technical knowledge. They may be
required to take an examination or to possess postgraduate degrees as prerequisite
to employment. (Emphasis supplied)
This was reiterated in Son v. University of Santo Tomas,[282] as follows:
As early as in 1992, the requirement of a Master's degree in the undergraduate program
professor's field of instruction has been in place, through DECS Order 92 (series of 1992,
August 10, 1992) or the Revised Manual of Regulations for Private Schools. Article IX,
Section 44, paragraph [1(a)] thereof provides that college faculty members must have a
master's degree in their field of instruction as a minimum qualification for teaching in a
private educational institution and acquiring regular status therein.

DECS Order 92, Series of 1992 was promulgated by the DECS in the exercise of its
[rule]-making power as provided for under Section 70 of Batas Pambansa Blg. 232,
otherwise known as the Education Act of 1982. As such, it has the force and effect of
law. In University of the East v. Pepanio, the requirement of a masteral degree for tertiary
education teachers was held to be not unreasonable but rather in accord with the public
interest.

xxxx

From a strict legal viewpoint, the parties are both in violation of the law: respondents, for
maintaining professors without the mandated masteral degrees, and for petitioners,
agreeing to be employed despite knowledge of their lack of the necessary qualifications.
Petitioners cannot therefore insist to be employed by UST since they still do not possess
the required master's degrees; the fact that UST continues to hire and maintain professors
without the necessary master's degrees is not a ground for claiming illegal dismissal, or
even reinstatement. As far as the law is concerned, respondents are in violation of the
CHED regulations for continuing the practice of hiring unqualified teaching personnel;
but the law cannot come to the aid of petitioners on this sole ground. As between the
parties herein, they are in pari delicto.

xxxx

The minimum requirement of a master's degree in the undergraduate teacher's field of

instruction has been cemented in DECS Order 92, Series of 1992. Both petitioners and
respondents have been violating it. The fact that government has not cracked down on
violators, or that it chose not to strictly implement the provision, does not erase the
violations committed by erring educational institutions, including the parties herein; it
simply means that government will not punish these violations for the meantime. The
parties cannot escape its concomitant effects, nonetheless. And if respondents knew the
overwhelming importance of the said provision and the public interest involved - as they
now fiercely advocate to their favor - they should have complied with the same as soon as
it was promulgated.

xxxx

In addition, the Court already held in Herrera-Manaoisi v. St. Scholastica's College that -

Notwithstanding the existence of the SSC Faculty Manual, Manaois still cannot legally
acquire a permanent status of employment. Private educational institutions must still
supplementarily refer to the prevailing standards, qualifications, and conditions set by the
appropriate government agencies (presently the Department of Education, the
Commission on Higher Education, and the Teclmical Education and Skills Development
Authority). This limitation on the right of private schools, colleges, and universities to
select and determine the employment status of their academic personnel has been
imposed by the state in view of the public interest nature of educational institutions, so as
to ensure the quality and competency of our schools and educators. (Internal citations
omitted)
Thus, the masteral degree required of law faculty members and dean, and the doctoral
degree required of a dean of a graduate school of law are, in fact, minimum reasonable
requirements. However, it is the manner by which the LEB had exercised this power
through its various issuances that prove to be unreasonable.

On this point, the amicus curiae, Dean Sedfrey M. Candelaria, while admitting that the
masteral degree requirement is a "laudable aim" of the LEB, nevertheless adds that the
LEB-imposed period of compliance is unreasonable given the logistical and financial
obstacles:
The masteral degree requirement is a laudable aim of LEB, but the possibility of meeting
the LEB period of compliance is unreasonable and unrealistic in the light of logistical and
financial considerations confronting the deans and professors, including the few law
schools offering graduate degrees in law.

To illustrate, to the best of my knowledge there are no more than six (6) graduate schools
of law around the country to service potential applicants. Those who have opted for
graduate studies in law find it very costly to fly to the venue. While one or two programs
may have been delivered outside the provider's home school venue to reach out to
graduate students outside the urban centers, pedagogical standards are often
compromised in the conduct of the modules. This is even aggravated by the fact that very
few applicants can afford to go into full-time graduate studies considering that most
deans and professors of law are in law practice. Perhaps, LEB should work in
consultation with PALS in designing a cost-effective but efficient delivery system of any
graduate program in law, [especially] for deans and law professors.[283]
Further, the mandatory character of the master of laws degree requirement, under pain of
downgrading, phase-out and closure of the law school, is in sharp contrast with the
previous requirement under DECS Order No. 27-1989 which merely prefer faculty
members who are holders of a graduate law degree, or its equivalent. The LEB's authority
to review the strength or weakness of the faculty on the basis of experience or length of
time devoted to teaching violates an institution's right to set its own faculty standards.
The LEB also imposed strict reportorial requirements that infringe on the institution's
right to select its teachers which, for instance, may be based on expertise even with little
teaching experience. Moreover, in case a faculty member seeks to be exempted, he or she
must prove to the LEB, and not to the concerned institution, that he or she is an expert in
the field, thus, usurping the freedom of the institution to evaluate the qualifications of its
own teachers on an individual basis.

Also, while the LEB requires of faculty members and deans to obtain a master of laws
degree before they are allowed to teach and administer a law school, respectively, it is
ironic that the LEB, under Resolution No. 2019-406, in fact considers the basic law
degrees of Ll.B. or J.D. as already equivalent to a doctorate degree in other non-law
academic disciplines for purposes of "appointment/promotion, ranking, and
compensation."

In this connection, the LEB also prescribes who may or may not be considered as full-
time faculty, the classification of the members of their faculty, as well as the faculty load,
including the regulation of work hours, all in violation of the academic freedom of law
schools. LEBMO No. 2 provides:
SEC. 33. Full-time and Part-time Faculty. There are two general kinds of faculty
members, the full-time and part-time faculty members.

a) A full-time faculty member is one:

1) Who possesses the minimum qualification of a member of the faculty as prescribed in
Sections 50 and 51 of LEBMO No. 1;

2) Who devotes not less than eight (8) hours of work for the law school;

3) Who has no other occupation elsewhere requiring regular hours of work, except when
permitted by the higher education institution of which the law school is a part; and

4) Who is not teaching full-time in any other higher education institution.

b) A part-time faculty member is one who does not meet the qualifications of a full-time
professor as enumerated in the preceding number.

SEC. 34. Faculty Classification and Ranking. Members of the faculty may be classified,
in the discretion of the higher education institution of which the law school is a part,
according to academic proceeding, training and scholarship into Professor, Associate
Professor, Assistant Professor, and Instructor.

Part-time members of the faculty may be classified as Lecturers, Assistant Professorial

Lecturers, Associate Professorial Lecturers and Professorial Lecturers. The law schools
shall devise their scheme of classification and promotion not inconsistent with these
rules.

SEC. 35. Faculty Load. Generally, no member of the faculty should teach more than 3
consecutive hours in any subject nor should he or she be loaded with subjects
requiring more than three preparations or three different subjects (no matter the
number of units per subject) in a day.

However, under exceptionally meritorious circumstances, the law deans may allow
members of the faculty to teach 4 hours a day provided that there is a break of 30 minutes
between the first 2 and the last 2 hours. (Emphases supplied)
The LEB is also allowed to revoke permits or recognitions given to law schools when the
LEB deems that there is gross incompetence on the part of the dean and the corps of
professors or instructors under Section 41.2(d) of LEBMO No. 1-2011, thus:
SEC. 41.2. Permits or recognitions may be revoked, or recognitions reverted to permit
status for just causes including but not limited to:

a) fraud or deceit committed by the institution in connection with its application to the
Board;

b) the unauthorized operation of a school of law or a branch or an extension of a law

school;

c) mismanagement or gross inefficiency in the operation of a law school;

d) gross incompetence on the part of the dean and the corps of professors or
instructors;

e) violation of approved standards governing institutional operations, announcements and

advertisements;

f) transfer of the school of law to a site or location detrimental to the interests of the
students and inimical to the fruitful and promising study of law;

g) repeated failure of discipline on the part of the student body; and

h) other grounds for the closure of schools and academic institutions as provided for in
the rules and regulations of the Commission on Higher Education.[284] (Emphasis
supplied)
In this regard, the LEB is actually assessing the teaching performance of faculty members
and when such is determined by the LEB as constituting gross incompetence, the LEB
may mete out penalties, thus, usurping the law school's right to determine for itself the
competence of its faculty members.
               
4. Section 2, par. 2
and Section 7(g)
on legal
 
apprenticeship
and legal
internship

While the clause "legal apprenticeship" under Section 2, par. 2 and Section 7(g) on legal
internship, as plainly worded, cannot immediately be interpreted as encroaching upon
institutional academic freedom, the manner by which LEB exercised this power through
several of its issuances undoubtedly show that the LEB controls and dictates upon law
schools how such apprenticeship and internship programs should be undertaken.

Pursuant to its power under Section 7(g), the LEB passed Resolution No. 2015-
08 (Prescribing the Policy and Rules in the Establishment of a Legal Aid Clinic in Law
Schools) wherein it classified legal aid clinics into three types: (1) a legal aid clinic which
is an outreach project of a law school; (2) a legal aid clinic which entitles the
participating student to curricular credits; and (3) a legal aid clinic that entitles the
participating student to avail of the privileges under Rule 138-A of the Rules of Court.

Pertinent to the third type, the LEB requires the law schools to comply with the following
rules:
xxxx

b) Implementing Rules

(1) A LAC should be established by the law school.

(2) The law school should formulate its Clinical Legal Education Program and submit it
to the Legal Education board for its assessment and evaluation.

(3) If Legal Education Board finds the Clinical Legal Education Program to be proper
and in order it shall endorse it to the Supreme Court for its approval.

(4) Once approved by the Supreme Court, fourth (4th) year law students in that law school
enrolled in it shall be allowed to practice law on a limited manner pursuant to the provisions
of Rule 138-A of the Rules of Court. (Emphasis supplied)
Further, Section 24(c), Article IV of LEBMO No. 2 prescribes the activities that should
be included in the law school's apprenticeship program, as follows:
Article IV
Law School: Administrative Matters and Opening of Branches or Extension Classes

SEC. 24. Administrative Matters.

xxxx

c) Apprenticeship Program. The apprenticeship program should be closely supervised by

the Dean or a member of the faculty assigned by the Dean to do the task. The
apprenticeship program should at least include any of the following activities:

1) Preparation of legal documents

2) Interviewing clients
3) Courtroom observation and participation
4) Observation and assistance in police investigations, inquests and preliminary investigations
5) Legal counseling
6) Legal assistance to detention prisoners
7) For working students, participation in the legal work of the legal section or office of the
employer-entity x x x (Emphasis supplied)
Relatedly, Section 59(d) of LEBMO No. 1-2011, provides:
Article IV
Grading System

SEC. 59. Grading System. - The law school, in the exercise of academic freedom, shall
devise its own grading system provided that on the first day of classes, the students are
apprised of the grading system and provided further that the following are observed:

xxxx
(d) When apprenticeship is required and the student does not complete the mandated
number of apprenticeship hours, or the person supervising the apprenticeship program
deems the performance of the student unsatisfactory, the dean shall require of the student
such number of hours more in apprenticeship as will fulfill the purposes of the
apprenticeship program.[285] (Emphasis supplied)
These provisions unduly interfere with the discretion of a law school regarding its
curriculum, particularly its apprenticeship program. Plainly, these issuances are beyond
mere supervision and regulation.

III.
Conclusion

In general, R.A. No. 7662, as a law meant to uplift the quality of legal education, does
not encroach upon the Court's jurisdiction to promulgate rules under Section 5(5), Article
VIII of the Constitution. It is well-within the jurisdiction of the State, as an exercise of its
inherent police power, to lay down laws relative to legal education, the same being
imbued with public interest.

While the Court is undoubtedly an interested stakeholder in legal education, it cannot

assume jurisdiction where it has none. Instead, in judicial humility, the Court affirms that
the supervision and regulation of legal education is a political exercise, where judges are
nevertheless still allowed to participate not as an independent branch of government, but
as part of the sovereign people.

Nevertheless, inasmuch as the power to promulgate rules concerning the protection and
enforcement of constitutional rights, pleading, practice, and procedure in all courts, the
admission to the practice of law, the Integrated Bar, and legal assistance to the
underprivileged is settled as belonging exclusively to the Court, certain provisions and
clauses of R.A. No. 7662 which, by its plain language and meaning, go beyond legal
education and intrude upon the Court's exclusive jurisdiction suffer from patent
unconstitutionality and should therefore be struck down.

Moreover, the exercise of the power to supervise and regulate legal education is
circumscribed by the normative contents of the Constitution itself, that is, it must be
reasonably exercised. Reasonable exercise means that it should not amount to control and
that it respects the Constitutionallyguaranteed institutional academic freedom and the
citizen's right to quality and accessible education. Transgression of these limitations
renders the power and the exercise thereof unconstitutional.

Accordingly, the Court recognizes the power of the LEB under its charter to prescribe
minimum standards for law admission. The PhiLSAT, when administered as an aptitude
test to guide law schools in measuring the applicants' aptness for legal education along
with such other admissions policy that the law school may consider, is such minimum
standard.

However, the PhiLSAT presently operates not only as a measure of an applicant's

aptitude for law school. The PhiLSAT, as a pass or fail exam, dictates upon law schools
who among the examinees are to be admitted to any law program. When the PhiLSAT is
used to exclude, qualify, and restrict admissions to law schools, as its present design
mandates, the PhiLSAT goes beyond mere supervision and regulation, violates
institutional academic freedom, becomes unreasonable and therefore, unconstitutional. In
striking down these objectionable clauses in the PhiLSAT, the State's inherent power to
protect public interest by improving legal education is neither emasculated nor
compromised. Rather, the institutional academic freedom of law schools to determine for
itself who to admit pursuant to their respective admissions policies is merely protected. In
turn, the recognition of academic discretion comes with the inherent limitation that its
exercise should not be whimsical, arbitrary, or gravely abused.

In similar vein, certain LEB issuances which exceed the powers granted under its charter
should be nullified for being ultra vires.

As in all levels and areas of education, the improvement of legal education indeed
deserves serious attention. The parties are at a consensus that legal education should be
made relevant and progressive. Reforms for a more responsive legal education are
constantly introduced and are evolving. The PhiLSAT, for instance, is not a perfect
initiative. Through time and a better cooperation between the LEB and the law schools in
the Philippines, a standardized and acceptable law admission examination may be
configured. The flaws which the Court assessed to be unconstitutional are meanwhile
removed, thereby still allowing the PhiLSAT to develop into maturity. It is, thus, strongly
urged that recommendations on how to improve legal education, including tools for
screening entrants to law school, reached possibly through consultative summits, be taken
in careful consideration in further issuances or legislations.

WHEREFORE, the petitions are PARTLY GRANTED.

The jurisdiction of the Legal Education Board over legal education is UPHELD.

The Court further declares:

As CONSTITUTIONAL:

1. Section 7(c) of R.A. No. 7662 insofar as it gives the Legal Education Board the
power to set the standards of accreditation for law schools taking into account,
among others, the qualifications of the members of the faculty without
encroaching upon the academic freedom of institutions of higher learning; and
 2. Section 7(e) of R.A. No. 7662 insofar as it gives the Legal Education Board the
power to prescribe the minimum requirements for admission to legal education
and minimum qualifications of faculty members without encroaching upon the
academic freedom of institutions of higher learning.

As UNCONSTITUTIONAL for encroaching upon the power of the Court:

1. Section 2, par. 2 of R.A. No. 7662 insofar as it unduly includes "continuing legal
education" as an aspect of legal education which is made subject to Executive
supervision and control;

2. Section 3(a)(2) of R.A. No. 7662 and Section 7(2) of LEBMO No. 1-2011 on the
objective of legal education to increase awareness among members of the legal
profession of the needs of the poor, deprived and oppressed sectors of society;

3. Section 7(g) of R.A. No. 7662 and Section 11(g) of LEBMO No. 1-2011 insofar as
it gives the Legal Education Board the power to establish a law practice internship
as a requirement for taking the Bar; and

4. Section 7(h) of R.A. No. 7662 and Section 11(h) of LEBMO No. 1-2011 insofar as
it gives the Legal Education Board the power to adopt a system of mandatory
continuing legal education and to provide for the mandatory attendance of
practicing lawyers in such courses and for such duration as it may deem necessary.

As UNCONSTITUTIONAL for being ultra vires:

1. The act and practice of the Legal Education Board of excluding, restricting, and
qualifying admissions to law schools in violation of the institutional academic
freedom on who to admit, particularly:

a. Paragraph 9 of LEBMO No. 7-2016 which provides that all college

graduates or graduating students applying for admission to the basic law
course shall be required to pass the PhiLSAT as a requirement for
admission to any law school in the Philippines and that no applicant shall
be admitted for enrollment as a first year student in the basic law courses
leading to a degree of either Bachelor of Laws or Juris Doctor unless he/she
has passed the PhiLSAT taken within two years before the start of studies
for the basic law course;

b. LEBMC No. 18-2018 which prescribes the passing of the PhiLSAT as a

prerequisite for admission to law schools; Accordingly, the temporary
restraining order issued on March 12, 2019 enjoining the Legal Education
 Board from implementing LEBMC No. 18-2018 is made PERMANENT.
The regular admission of students who were conditionally admitted and
enrolled is left to the discretion of the law schools in the exercise of their
academic freedom; and

c. Sections 15, 16, and 17 of LEBMO No. 1-2011;

2. The act and practice of the Legal Education Board of dictating the qualifications
and classification of faculty members, dean, and dean of graduate schools of law
in violation of institutional academic freedom on who may teach, particularly:

a. Sections 41.2(d), 50, 51, and 52 of LEBMO No. 1-2011;

b. Resolution No. 2014-02;

c. Sections 31(2), 33, 34, and 35 of LEBMO No. 2;

d. LEBMO No. 17-2018; and

3. The act and practice of the Legal Education Board of dictating the policies on
the establishment of legal apprenticeship and legal internship programs in
violation of institutional academic freedom on what to teach, particularly:

e. Resolution No. 2015-08;

f. Section 24(c) of LEBMO No. 2; and

g. Section 59(d) of LEBMO No. 1-2011.

SO ORDERED.

SECOND DIVISION
[ G.R. No. 201193, June 10, 2019 ]
 TRANQUILINO AGBAYANI, PETITIONER, V. LUPA REALTY HOLDING
CORPORATION, RESPONDENT.

RESOLUTION

CAGUIOA, J:

Before the Court is a Petition for Review on Certiorari[1] (Petition) under Rule 45

of the Rules of Court assailing the Decision [2] dated September 14, 2011 (CA Decision)
and the Resolution[3] dated March 9, 2012 (CA Resolution) of the Court of Appeals[4] (CA)
in CA-G.R. CV No. 93912. The CA Decision reversed and set aside the Decision [5] dated
June 15, 2009 rendered by the Regional Trial Court, Branch 7, Aparri, Cagayan (RTC) in
Civil Case No. 07-532. The CA Decision also dismissed the complaint of petitioner
Tranquilino Agbayani (Tranquilino) as well as the third-party complaint of respondent
Lupa Realty Holding Corporation (Lupa Realty), fourth-party complaint of Moriel Urdas
(Moriel) and the counterclaims. The CA Resolution denied the motion for
reconsideration filed by Tranquilino.

The Facts and Antecedent Proceedings

The CA Decision narrates the factual antecedents as follows:

The property subject of the instant case is a 91,899-square meter parcel of land, situated
in Barrio Sinungan, Sta. Ana, Cagayan, originally registered under OCT No. P-46041 in
the name of x x x Tranquilino Agbayani (Tranquilino), pursuant to Free Patent No.
587747 on 7 June 1979.

On 11 October 1999, Tranquilino, who was by then already residing in America, filed
a Complaint for Reivindicacion, Cancellation of Title and Document with Damages
against Lupa Realty Holding Corporation (Lupa Realty), through his brother, Kennedy
Agbayani, and his nephew, Vernold Malapira (Vernold). We note that Vernold is also
written as "Bernold" in other parts of the record, and is admitted to be the same "Bernard"
referred to in the Complaint and in the Special Power of Attorney as having been
authorized by Tranquilino to file the instant case.

The Complaint alleged that sometime in April 1999, [Vernold] went to the Office of the
Municipal Treasurer of Sta. Ana, Cagayan to pay the real estate taxes on the subject
property, but was told that Lupa Realty was already the new owner thereof and that the
tax declaration had already been transferred to its name. Tranquilino further alleged that
upon verifying with the Registry of Deeds for Cagayan, [Vernold] discovered that the
subject property was already registered in the name of Lupa Realty under TCT No. T-
109129 pursuant to a Deed of Absolute Sale purportedly executed by Tranquilino on 29
October 1997 in favor of Lupa Realty, in consideration of the sum of P425,500.00.

In his complaint, Tranquilino denied having executed said Deed of Absolute Sale,

insisting that his signature thereon must be a forgery because he was in America on 29
October 1997. Accordingly, [he] prayed for the cancellation of Lupa Realty's TCT No. T-
109129 and the reinstatement of OCT No. P-46041 in his name, plus damages.

In its Answer, Lupa Realty countered that contrary to the allegation of Tranquilino that he
never sold the subject property, he sold the same to his brother, Nonito Agbayani
(Nonito), as shown by a notarized Deed of Absolute Sale executed on 21 January 1992.
In turn, Nonito sold the subject property to Moriel Urdas (Moriel) in a notarized Deed of
Absolute Sale, dated 30 May 1997. According to Lupa Realty, it acquired the subject
property not from Tranquilino but from Moriel by way of a notarized Deed of Absolute
Sale, dated 29 October 1997.

Lupa Realty further insisted that it was an innocent purchaser for value and in good faith.
Lupa Realty explained that it was Moriel and his mother who registered the sale in the
Registry of Deeds, as shown by the Affidavit executed by Moriel's mother. According to
Lupa Realty, it had no idea that Moriel and his mother had used a falsified deed of sale
with Tranquilino's forged signature in registering the sale. Thus, Lupa Realty filed a
third-party complaint against Moriel to enforce the latter's warranty of a valid title and
peaceful possession against the claims of third persons.

In his Answer to the Third-Party Complaint, Moriel denied having caused the registration
of the sale to Lupa Realty, and denied having prepared the falsified deed of sale that was
used in transferring the title to Lupa Realty. Moriel insisted that contrary to Lupa Realty's
assertions, it was actually the latter's personnel who registered the sale.

Moriel laid the blame squarely on Tranquilino for having entrusted his original certificate
of title to his brother Nonito, thereby making it possible for the latter to fraudulently
transfer the property to an innocent third person like Moriel. Thus, Moriel filed a Fourth-
Party Complaint against Nonito, praying that if it turns out that Tranquilino really did not
sell the subject property to Nonito, the latter should be made liable for whatever liability
may be adjudged against [Moriel].

In his Answer (to the Fourth-Party Complaint), Nonito admitted to having signed

the Deed of Absolute Sale in favor of Moriel, but qualified that the execution of the same
was "attended by undue pressure considering that at that time, [Nonito] was of confused
state of mind brought about by the numerous unfortunate events that beset his family."
According to Nonito, it was Moriel who prepared the Deed of Absolute Sale, which
[Nonito] mistakenly believed to be merely one of mortgage to secure a loan that he had
obtained from Moriel. Accordingly, Nonito prayed that the fourth-party complaint against
him be dismissed and that the Deed of Absolute Sale in favor of Moriel be nullified.

Curiously, during trial, despite Tranquilino's insistence that his signature on the deed of
sale in favor of Lupa Realty was forged, he did not present a handwriting expert to prove
the alleged forgery. Neither did Tranquilino present any evidence controverting Lupa
Realty's allegations that he had sold the property to his brother Nonito, who, in turn,
transferred the property to Moriel, and the latter eventually transferred the same to Lupa
Realty.

Instead, Tranquilino presented only his nephew, Vernold, and his tenants, Felino Rizaldo
(Felino) and Florante Ruiz (Florante). [Vernold] testified on the matters contained in
the Complaint; i.e., about how he discovered that the land is now registered in the name
of Lupa Realty. While Felino and Florante both testified that they were instituted as
tenants in the property by the family of Tranquilino since 1992 and no one has ever
disturbed them in their possession thereof.

On the other hand, Lupa Realty presented its former employee, Demetria Balisi
[(Demetria)], who testified that she was one of the two witnesses to the deed of sale
between Lupa Realty and Moriel.

Demetria further testified that because the OCT was in the name of Tranquilino and not
Moriel, Lupa Realty had asked for proof of Moriel's ownership thereof, and the latter
submitted to them the deed of sale between Tranquilino and Nonito, and the deed of sale
between Nonito and Moriel. We note that Tranquilino's counsel admitted in open court
the existence of the deed of sale between Tranquilino and Nonito.

Demetria acknowledged that none of the deeds of conveyances between Tranquilino and
Nonito; between Nonito and Moriel; and between Moriel and Lupa Realty - was used in
registering the transfer of the subject property to Lupa Realty. According to Demetria, it
was Moriel's mother who processed the registration, and this was further confirmed by
Moriel's mother in an affidavit stating that they "were able to secure at (their) own ways
and means a new Title of the subject property in favor of [Lupa Realty]."

To prove that Nonito really sold the subject property to him, Moriel presented Onorio
Rumbaoa [(Onorio)], who testified that he was the agent of the sale between Nonito and
Moriel. Onorio testified that both Nonito and Moriel are his townmates and he arranged
for the two to meet when Nonito wanted to sell the subject property. According to
Onorio, when he remarked to Nonito that the OCT was not in his name, Nonito showed
him the deed of sale executed by Tranquilino to prove that he (Nonito) already own[ed]
the subject property. Onorio testified that after Moriel agreed to purchase the property,
the three of them (Nonito, Moriel and Onorio) went to the notary public where they
signed the deed of sale, with Onorio as witness. Moriel corroborated the testimony of
Onorio with regard to the details of the sale to him of the subject property by Nonito.

Finally, Nonito testified that he only borrowed money from Moriel and denied having
sold the subject property to him. According to Nonito, he gave Moriel a collateral for the
purported loan but it was not the subject property. When asked on cross-examination
what the collateral was, Nonito could not say. When asked how Moriel came into
possession of the OCT in Tranquilino's name, Nonito also could not say.

After due proceedings, the trial court rendered a decision with the following disposition:

"WHEREFORE, premises considered, the Court declares and Orders that:

1. OCT (sic) No. P-109129 in the name of Lupa Realty is null and void, hence, the
Register of Deeds, Tuguegarao, Cagayan is ordered to immediately cancel the same;

2. TCT (sic) No. T-46041 in the name of the plaintiff is reinstated and the property
subject of the same is reconveyed to the plaintiff;

3. Defendant shall pay plaintiff attorney's fees in the amount of P30,000.00;

4. Third Party Defendant Moriel Urdas shall pay Defendant/Third Party Plaintiff Lupa
Realty the amount of P551,394 plus legal interest from the time the Third Party
complaint was filed until full satisfaction of this judgment;

5. Fourth Party Defendant Nonito Agbayani pays Third Party Defendant/Fourth Party
Plaintiff Moriel Urdas the amount of P286,698.32 plus legal interest from the time the
Fourth Party complaint was filed up to full satisfaction of this judgment;

6. For the same reason that the Court allows the plaintiff to collect attorney's fees from
the Defendant, the 3rd party defendant is likewise adjudged to pay the Third Party plaintiff
reasonable attorney's fees in the amount of P30,000.00. Likewise 4th party plaintiff is
entitled to collect from the 4th party defendant the amount of P30,000.00 by way of
attorney's fees.

The other damages sought in the 3rd party and 4th party complaints as well as the parties'
respective counter claims are denied for lack of merit.

SO ORDERED."

Hence, [the] appeal by [Lupa Realty to the CA.] [6]

Ruling of the CA
The CA in its Decision dated September 14, 2011 granted the appeal. The CA held that
the conclusions reached by the RTC are not in accord with law and the evidence on
record; therefore, the reversal of the trial court's decision is warranted. [7]

The CA ruled that Tranquilino failed to discharge his burden to present clear and
convincing evidence to overthrow the presumption of regularity in the execution on
January 21, 1992 of the Deed of Absolute Sale (1992 DAS) in favor of his brother Nonito
and to prove his allegation of forgery regarding his signature.[8] According to the CA,
Tranquilino's insistence that he could not have signed the 1992 DAS because he was in
America at that time[9] was insufficient.[10] Further, the CA stated that the fact that there is
a Deed of Absolute Sale (1997 DAS) purportedly executed by Tranquilino on October 29,
1997 in favor of Lupa Realty, which Moriel and his mother used in registering the sale to
Lupa Realty, is not sufficient in itself to invalidate Transfer Certificate of Title (TCT) No.
T-109129 in the name of Lupa Realty.[11]

In fine, the CA ruled in favor of the dismissal of Tranquilino's complaint based on the
lack of evidence regarding his forgery allegation and its postulation that his action for
declaration of nullity of the 1997 DAS is not the direct proceeding required by law to
attack a Torrens certificate of title since it cannot be collaterally attacked. [12]

The dispositive portion of the CA Decision states:

WHEREFORE, the Decision, dated 15 June 2009, of the Regional Trial Court, Branch 7,
Aparri, Cagayan, in Civil Case No. 07-532 is REVERSED and SET ASIDE.
Tranquilino Agbayani's complaint, as well as Lupa Realty's third-party complaint, Moriel
Urdas' fourth-party complaint, and all parties' counterclaims, are DISMISSED.

SO ORDERED.[13]

Tranquilino filed a motion for reconsideration, which was denied by the CA in its
Resolution[14] dated March 9, 2012.

Hence, the instant Rule 45 Petition. Lupa Realty filed its Comment[15] dated October 8,
2012. Tranquilino filed a Reply[16] dated June 28, 2013.

The Issues

The Petition raises the following issues:

1. whether the CA erred in reversing the RTC Decision that declared the nullity of TCT
No. T-109129 in the name of Lupa Realty;
2. whether the CA erred in reversing the RTC Decision on the ground that the RTC erred
in ordering the cancellation of the TCT under Lupa Realty's name because the action filed
by Tranquilino constitutes a collateral attack on a Torrens title; and

3. whether the CA erred in recognizing and protecting Lupa Realty's right as an innocent
purchaser for value (IPV).

The Court's Ruling

The Petition is meritorious.

Rule 45 of the Rules of Court on Appeal by Certiorari to the Supreme Court mandates
that: the petition shall raise only questions of law;[17] this mode of review is not a matter
of right, but of sound judicial discretion; and it will be granted only when there are
special and important reasons therefor.[18] A Rule 45 review is warranted when there is
finding by the Court that the court a quo has decided a question of substance in a way
probably not in accord with law or with the applicable decisions of the Court.[19]

While only questions of law may be raised in a Rule 45 certiorari petition, there are
admitted exceptions, which includes the instance when there is conflict in the findings of
fact of the trial court and the CA. The instant case falls under this exception.

The RTC found that the 1992 DAS between Tranquilino and Nonito was established by
preponderance of evidence to be a falsified document;[20] the 1997 DAS between
Tranquilino and Lupa Realty was also falsified;[21] and Lupa Realty was not an IPV.[22] On
the other hand, the CA ruled that the 1992 DAS was valid because Tranquilino was
unable to prove that his signature therein was forged.[23] The CA did not, however, rule
squarely on whether the 1997 DAS was falsified[24] and whether Lupa Realty was an IPV.
[25]

Given the conflict in the findings of the RTC and the CA, a review of the facts is
justified.

Tranquilino posits that both the 1992 DAS in favor of Nonito and the 1997 DAS in favor
of Lupa Realty, which Tranquilino purportedly executed, are spurious and false.

As to the 1997 DAS (Exh. "F"[26]), which is purportedly a unilateral sale in favor of Lupa
Realty and signed only by Tranquilino, he reproduces the following portion of the RTC
Decision in support of his argument regarding its falsity:

"What really boggles the mind of the court is the existence of the Deed of Sale (Exh. "F")
dated Oct. 29, 1997 allegedly executed between Tranquilino Agbayani and LUpa Relaty
(sic) and which was registered and instrumental for the cancellation of OCT No. P-4601
[sic] and the issuance of TCT No. T-109129. Worst, a careful study of said deed of sale
and the Deed of Sale executed by and between Moriel Urdas and Lupa Realty would
reveal that the two deeds, although allegedly executed and notarized on different dates,
have the same Doc. No., Book No., Page No., and series. The defendant [Lupa Realty]
cannot feign ignorance and innocence on the existence of the Deed of Sale (Exh. "F"). It
is a corporation whose business is, as apparent in its business name, mainly concerns real
estate, thus, it is incredible that it would entirely leave the transfer of the title into the
hands of Moriel Urdas and his mother. It is expected that it would exert due diligence in
its transactions, it being in the realty business. Defendant having uttered a Deed of Sale
(Exh. "F"), which plaintiff has established by preponderance of evidence to have been
falsified and which Defendant impliedly admitted in its Answer and Third Party
Complaint as indeed falsified when it claimed that its title was derived from the Deed of
Sale executed in its favor by Third Party Defendant Moriel Urdas, Defendant cannot
[n]ow claim it was an innocent purchaser for value.

The operative act in the cancellation of TCT [sic] No. 4604 [sic] and the issuance of the
TCT No. 109129 in favor of the defendant was the presentation with the Register of
Deeds of falsified Deed of Sale allegedly executed by Tranquilino Agbayani in favor of
Lupa Realty."[27]

The CA justified the validity of the sale to Lupa Realty and its TCT in this wise:

On the other hand, Lupa Realty presented sufficient proof of its lawful acquisition of the
subject property. The deeds of sale between Tranquilino and Nonito; between Nonito and
Moriel; and between Moriel and Lupa Realty show the legal tie that bind the parties and
legally conveyed the subject property to Lupa Realty.

The fact that there is a Deed of Sale between Tranquilino and Lupa Realty that Moriel
and his mother used in registering the sale is not sufficient in itself to invalidate TCT No.
T-109129 in the name of Lupa Realty.[28]

The "DEED ABSOLUTE SALE" (DAS Moriel-Lupa Realty; Exh. 2 Lupa"[29]) by and
between Moriel and Lupa Realty with "29 day of Oct 1997'' as date of execution, which
bears both the signatures of "Roberto P. Alingog" with "CTC No. 7968352, Issued at
Cauayan, Isa[bela], Issued on 01/22/97" and "Moriel C. Urdas" (but the acknowledgment
does not reflect Moriel's name but the name of "Luzviminda Urdas" (Moriel's spouse)
without the specifics of her CTC information) bears the following notarial information:
"Doc. No. 47; Page No. 10, Book No. 11; Series of 1997."[30]

On the other hand, the "DEED ABSOLUTE SALE" (1997 DAS; Exh. "F"[31]) also bears
"29 day of Oct 1997" as date of execution; the name of "Roberto P. Alingog" with "CTC
No. 7968352, Issued at Cauayan, Isa[bela], Issued on 01/22/97" in the acknowledgment
portion, together with Tranquilino Agbayani and the specifics of his CTC, but Roberto P.
Alingog is not a signatory thereto; and the following notarial information: "Doc. No. 47;
Page No. 10, Book No. 11; Series of 1997."[32]

The Court notes that the 1997 DAS contains this recital: "Their right thereto being duly
registered in accordance with the Land Registration Act and evidenced by Original
Certificate of Title No. P-26619 with Homestead Patent No. 119163."[33] It must be
noted that Tranquilino's title is Original Certificate of Title (OCT) No. P-46041 with Free
Patent No. 587747.[34]

In both documents, the Notary Public's name is illegible. However, the following entries
below the signature of the Notary Public are almost identical:

DAS Moriel-Lupa Realty:[35] 1997 DAS[36]

   
Notary Public Notary Public
   
Until Dec. 31. 1997 Until Dec. 31, 1997
PTR No. 5445937 S PTR No. 5445937- S
Issued at Ilagan, Isabela Issued at ILAGAN, ISABELA
Issued on January 8, 1997 Issued on JAN. 8, 1997

The Court agrees with the RTC that it is indeed mind boggling how two distinct
documents which were supposedly notarized on the same date by one Notary Public have
identical notarial details, i.e., document number, page number, book number and year
series. Indeed, one of them must be fake or false.

Based on all the facts narrated, it is the 1997 DAS which is sham or spurious. As noted
above, these are: (1) the similarity of its notarial details' with those of the DAS Moriel-
Lupa Realty; (2) the recital that it pertained to the land covered by "Original Certificate
of Title No. P-26619 with Homestead Patent No. 119163" and not to Tranquilino's OCT
No. P-46041 with Free Patent No. 587747; (3) the inclusion of Lupa Realty, represented
by its President, Roberto P. Alingog, as a party and the CTC details of Roberto P.
Alingog, but who is not made a signatory thereto; (4) the identity of its date of execution
with that of the DAS Moriel-Lupa Realty; and (5) the identity of the notary public's
details in both 1997 DAS and the DAS Moriel-Lupa Realty.

In addition, the Court does not lose sight of the fact that there is uncontested evidence
that Tranquilino could not have signed the 1997 DAS because he had left for California,
U.S.A. in April, 1989.[37]

It is likewise significant to note the fact that Lupa Realty did not even have the 1997
DAS marked and offered as its evidence is a very strong indication of its falsity. In the
Formal Offer of Documentary Exhibits of Lupa Realty, the 1997 DAS was not marked
and offered as one of its exhibits.[38] If the 1997 DAS was truly executed by Tranquilino
and is genuine, why did not Lupa Realty have it marked and offered as its documentary
exhibit? The answer is obvious: because Lupa Realty wanted to distance itself therefrom
because it might be accused as being complicit with Moriel and/or his mother in
falsifying the 1997 DAS.

In People v. Sendaydiego,[39] the Court stated the rule that if a person had in his
possession a falsified document and he made use of it (uttered it), taking advantage of it
and profiting therefrom, the presumption is that he is the material author of the
falsification.[40] Pursuant to Re: Fake Decision Allegedly in G.R. No. 75242,[41] the
simulation of a public or official document, done in a manner as to easily lead to error as
to its authenticity, constitutes the crime of falsification.[42] Under Rule 132, Section 19(b),
documents acknowledged before a notary public except last wills and testaments are
public documents. Further, it is presumed that "evidence willfully suppressed would be
adverse if produced."[43]

Article 1409(2) of the Civil Code provides that contracts "which are absolutely simulated
or fictitious" are inexistent and void from the beginning. It is also provided in Article
1346 that "[a]n absolutely simulated or fictitious contract is void."

Justice Eduardo P. Caguioa discusses the concept and requisites of simulation in the
following manner:

x x x Simulation is the declaration of a fictitious intent manifested deliberately and in

accordance with the agreement of the parties in order to produce for the purpose of
deceiving others the appearance of a transaction which does not exist or which is
different from their true agreement.[44] Simulation involves a defect in the declaration of
the will. x x x Simulation requires the following: (1) A deliberate declaration contrary to
the will of the parties; (2) Agreement of the parties to the apparently valid act; and (3)
The purpose is to deceive or to hide from third persons although it is not necessary that
the purpose be illicit or for purposes of fraud. The above three requisites must concur in
order that simulation may exist. x x x[45]

The three requisites are present in the 1997 DAS. There is a deliberate declaration that
Tranquilino sold the subject land to Lupa Realty, which is contrary to their will. The
agreement appears on its face to be a valid act. The purpose is to deceive third persons
into believing that there was such a sale between Tranquilino and Lupa Realty. The
purpose, in this case, is evidently tainted with fraud.

Since the 1997 DAS is void, its registration is likewise void pursuant to Section 53 of
Presidential Decree No. (PD) 1529 (the Property Registration Decree), which provides
that "any subsequent registration procured by the presentation of a forged duplicate
certificate of title, or a forged deed or other instrument, shall be null and void." The
registration of the 1997 DAS being null and void, it follows that TCT T-109129 in the
name of Lupa Realty is also null and void. Being null and void, it should be cancelled.

Moreover, the Court is perplexed why the Registry of Deeds for the Province of Cagayan
allowed the registration of the 1997 DAS.

While the Court has held that registration is a mere ministerial act by which a deed,
contract or instrument is sought to be inscribed in the records of the Office of the Register
of Deeds and annotated at the back of the certificate of title covering the land subject of
the deed, contract or instrument and is not a declaration by the state that such an
instrument is a valid and subsisting interest in land; it is merely a declaration that the
record of the title appears to be burdened with such instrument, according to the priority
set forth in the certificate,[46] and that no valid objection can be interposed to the
registration of a document by the Register of Deeds who finds nothing defective or
irregular on its face upon an examination thereof,[47] the fact of the matter is that the 1997
DAS is not regular on its face because, as duly noted above, it pertained to the land
covered by OCT No. P-26619 with Homestead Patent No. 119163. Presented with the
1997 DAS that has reference to an OCT different from that of Tranquilino's title and to a
Homestead Patent instead of a Free Patent, the Register of Deeds concerned should not
have allowed its registration because of the obvious or patent irregularity appearing on
the face of the 1997 DAS.

From the foregoing, the CA erred when it ruled that the TCT of Lupa Realty is valid.

With the declaration by the Court that the 1997 DAS is sham or spurious and the TCT in
the name of Lupa Realty is null and void, does it follow that the sale of the subject land to
Lupa Realty is also null and void? In other words, can Lupa Realty be nonetheless
declared as the lawful owner of the subject land despite the finding that the TCT issued in
his favor is void?

The resolution of this issue hinges on the validity of the 1992 DAS. If the 1992 DAS
between Tranquilino and Nonito is valid, then Nonito could have validly sold the subject
land to Moriel and Moriel could have thereafter validly sold it to Lupa Realty. The
invalidity of Lupa Realty's TCT does not necessarily render invalid its right of ownership
over the subject land if the sales preceding the sale to it by Moriel are valid.

As to the 1992 DAS, Tranquilino argues that the unqualified admission made during the
pre-trial proceedings in the RTC by Nonito, through his counsel on record, Atty.
Frederick Aquino, that there was no such sale between Tranquilino and Nonito is a
judicial admission that it is spurious, which dispenses with the need to present proof of
the matter of fact already admitted.[48] The Pre-Trial Order dated April 22, 2003 states:
"Atty. Aquino denied that Tranquilino Agbayani executed a Deed of Absolute Sale in
favor of Nonito Agbayani. According to Atty. Aquino there was no such sale." [49]

Regarding admissions by counsel of a party during the preliminary conference, Camitan

v. Fidelity Investment Corporation[50] is instructive:

x x x Unfortunately for petitioners, their counsel admitted the genuineness of the owner's
duplicate copy of the TCT presented by Fidelity during the preliminary conference at the
CA. The following exchange is revealing:

J. MARTIN:

Counsel for the private respondent, will you go over the owner's copy and manifest
to the court whether that is a genuine owner's copy?

ATTY. MENDOZA:

Yes, Your Honor.

J. MARTIN:

Alright. Make it of record that after examining the owner's copy of TCT NO. (T-
12110) T-4342, counsel for the private respondent admitted that the same appears to
be a genuine owner's copy of the transfer certificate of title. x x x

xxxx

The foregoing transcript of the preliminary conference indubitably shows that counsel for
petitioners made a judicial admission and failed to refute that admission during the said
proceedings despite the opportunity to do so. A judicial admission is an admission, verbal
or written, made by a party in the course of the proceedings in the same case, which
dispenses with the need for proof with respect to the matter or fact admitted. It may be
contradicted only by a showing that it was made through palpable mistake or that no such
admission was made.[51]

On the other hand, American jurisprudence sets the following parameters on judicial
admissions:

A judicial admission is a formal statement, either by party or his or her attorney, in course
of judicial proceeding which removes an admitted fact from field of controversy. It is a
voluntary concession of fact by a party or a party's attorney during judicial proceedings.

Judicial admissions are used as a substitute for legal evidence at trial. Admissions made
in the course of judicial proceedings or judicial admissions waive or dispense with, the
production of evidence, and the actual proof of facts by conceding for the purpose of
litigation that the proposition of the fact alleged by the opponent is true. x x x

A judicial admission is a deliberate, clear, unequivocal statement of a party about a

concrete fact within that party's peculiar knowledge, not a matter of law. x x x In order to
constitute a judicial admission, the statement must be one of fact, not opinion. To be a
judicial admission, a statement must be contrary to an essential fact or defense asserted
by the person giving the testimony; it must be deliberate, clear and unequivocal x x x.

Judicial admissions are evidence against the party who made them, and are considered
conclusive and binding as to the party making the judicial admission. A judicial
admission bars the admitting party from disputing it. x x x

A judicial admission of fact may carry with it an admission of other facts necessarily
implied from it.

xxxx

Judicial admissions may occur at any point during the litigation process. An admission in
open court is a judicial admission. x x x [52]

The admission by Nonito's counsel during the pre-trial proceedings before the RTC that
there was no sale between Tranquilino and Nonito qualifies as a judicial admission
because the statement is a deliberate, clear, unequivocal statement of a party's attorney
during judicial proceedings in open court about a concrete or essential fact within that
party's peculiar knowledge. Since such statement is a judicial admission, it does not
require proof according to Section 4, Rule 129 of the Rules of Court, which provides:

SEC. 4. Judicial admissions. - An admission, verbal or written, made by a party in the

course of the proceedings in the same case, does not require proof. The admission may be
contradicted only by showing that it was made through palpable mistake or that no such
admission was made.

Moreover, there was no palpable mistake on the part of Nonito's counsel in making the
admission because in the offer of Nonito's testimony on December 2, 2008, he stated that
"the land was the property in suit was never sold to him [Nonito] by his brother
Tranquilino Agbayani."[53] That is not all. The admission by Nonito himself, on cross-
examination by Tranquilino's counsel, that Tranquilino was in the United States at the
time of the purported transaction[54] supports the statement of the counsel of Nonito that
there was no sale between Tranquilino and Nonito.

Since there is judicial admission that there was no sale of the subject land between
Tranquilino and Nonito, affirmed anew during oral testimony by Nonito himself, then
there is no question that the 1992 DAS is void. The three requisites of a simulated
contract are existent. There is a deliberate declaration that Tranquilino sold the subject
land to Nonito, which is contrary to their will because there was no sale between them.
The agreement appears on its face to be a valid act. The purpose is to deceive third
persons into believing that there was such a sale between them.

Consequently, the CA committed egregious error when it made the finding that the 1992
DAS is valid. Given that Tranquilino did not sell the subject land to Nonito, it could not
have been sold by Nonito to Moriel and Moriel could not, in turn, have sold it to Lupa
Realty.

Lupa Realty's argument that Tranquilino's action for declaration of nullity of the 1997
DAS is not the direct proceeding required by law to attack a Torrens certificate of title
since it cannot be collaterally attacked, upheld by the CA, is untenable.

In deference to the conclusiveness and indefeasibility of Torrens titles, a certificate of

title shall not be subject to collateral attack pursuant to Section 48 of PD 1529.

As to what constitutes a direct attack on a Torrens title, the Court observed in Firaza, Sr.
v. Spouses Ugay:[55]

The attack is considered direct when the object of an action is to annul or set aside such
proceeding, or enjoin its enforcement. Conversely, an attack is indirect or collateral
when, in an action to obtain a different relief an attack on the proceeding is nevertheless
made as an incident thereof. Such action to attack a certificate of title may be an
original action or a counterclaim, in which a certificate of title is assailed as void. x x
x[56]

Here, there is a direct attack on Lupa Realty's TCT.

Firstly, the Complaint filed by Tranquilino before the RTC is captioned: "For:
Reivindicacion, Cancellation of Title and Document with Damages."[57]

Secondly, the Complaint alleged:

7. That the "Deed Absolute Sale" [or 1997 DAS] (Annex "B") is a falsified document and
the signature purporting to be that of the plaintiff in said document is a forgery for the
reason that he never sold the land in suit to anybody; that he never signed said document;
that he never received P425,500.00 from the defendant; that he never appeared before
Notary Public Agustin Ladera in Cauayan, Isabela on October 29, 1997 because on that
date he was in the United States of America.
8. That as a consequence, the ''Deed Absolute Sale" (Annex "B") should be declared null
and void and that Transfer Certificate of Title No. T-109129 (in the name of the
defendant) should also be declared null and void, and cancelled and that Original
Certificate of Title No. P-46041 in the name of the plaintiff should be revived and
reinstated.[58]

Thirdly, the Complaint prayed that judgment be rendered for Tranquilino declaring,
among others, the nullity and ordering the cancellation of TCT No. T-109129 (in the
name of Lupa Realty) and ordering the revival and reinstatement of OCT No. P-46041 in
the name of Tranquilino.[59]

The foregoing clearly show that the Complaint purposefully sought the cancellation of
Lupa Realty's TCT, which is a direct attack thereon.

With the pronouncement that there could not have been a valid sale of the subject land to
Lupa Realty, the latter cannot qualify as an IPV. Also, the Court totally agrees with the
RTC that:

x x x [Lupa Realty] is a corporation whose business is, as apparent in its business name,
mainly concern[ed with] real estate, thus, it is incredible that it would entirely leave the
transfer of the title into the hands of Moriel x x x and his mother. It is expected that it
would exert due diligence in its transactions, it being in the realty business. x x x[60]

Evidently, in allowing the falsified 1997 DAS to cause the cancellation of Tranquilino's
OCT and the issuance of a TCT in its name, Lupa Realty acted in bad faith.

WHEREFORE, the Petition is hereby GRANTED. The Decision dated September 14,

2011 and the Resolution dated March 9, 2012 of the Court of Appeals in CA-G.R. CV
No. 93912 are REVERSED and SET ASIDE. The Decision dated June 15, 2009
rendered by the Regional Trial Court, Branch 7, Aparri, Cagayan in Civil Case No. 07-
532 is REINSTATED with modifications: with respect to no. 1: "OCT No. P-109129 in
the name of Lupa Realty ..." should instead read "TCT No. T-109129 in the name of
Lupa Realty ..." and no. 2: "TCT No. T-46041 in the name of the plaintiff ..." should
instead read "OCT No. P-46041 in the name of the plaintiff ..."

SO ORDERED.

FIRST DIVISION
[ G.R. No. 234419, December 05, 2019 ]
HEIRS OF THE LATE SPOUSES VICTOR L. MONTEVILLA AND
RESTITUTA C. MONTEVILLA, REPRESENTED BY ATTY. ANITA C.
 MONTEVILLA, PETITIONERS. VS. SPOUSES LEO A. VALLENA AND
MELBA G. VALLENA, RESPONDENTS.

DECISION

REYES, J. JR., J.:

This is an unlawful detainer case of an unregistered property.

The Case

The petition assails the March 16, 2017 Decision[1] and September 7, 2017
Resolution[2] of the Court of Appeals (CA) in CA-G.R. SP No. 143742, which reversed the
July 7, 2015 Regional Trial Court (RTC) Decision[3] in Civil Case No. 7001. The RTC
affirmed the July 8, 2014 Municipal Circuit Trial Court (MCTC) Decision [4] in Civil Case
068.

The Facts

Petitioners (the Montevillas) are the heirs of Victor L. Montevilla (Victor) and Restituta
C. Montevilla (spouses Montevilla), who left their children several parcels of land and
one of which is Lot No. 1 (Lot 1) in Dimasalang, Masbate, covered by Tax Declaration No.
3007.[5]

In 1961, Victor sold a portion of Lot 1, measuring 58 square meters, to Benigno Zeta
(Benigno), who sold it to Roman Manlangit (Roman). The latter sold the lot to Jose
Vallena (Jose), father of respondent Leo Vallena (Leo). [6]

At the back of Jose's land was a vacant lot owned by Victor. In 1993, [7] respondent
spouses Leo and Melba Vallena (spouses Vallena) sought permission from Jorge
Montevilla[8] (Jorge), one of Victor's heirs, to use a portion of the vacant lot, measuring
40 square meters, as storage for their patis business. Jorge agreed on condition that the
structure would be made of light materials. However, when the business prospered,
spouses Vallena built a two-storey concrete building without the Montevilla's
knowledge, consent, and in defiance of their agreement.[9]

On May 17, 1994, the administrator of spouses Montevilla's estate, Anita C. Montevilla
(Anita), called spouses Vallena's attention on the illegal structure. However, Anita and
her sister underwent verbal abuse and threat from Leo. The Montevillas demanded
payment of P1,000.00 as monthly rent beginning May, 1994, and to vacate the lot. The
demand was unheeded, prompting the Montevillas to file a civil action for ejectment on
April 10, 1995.[10]

For their part, spouses Vallena denied the Montevilla's allegations. They alleged that
Victor sold to Benigno a 58-square meter lot and a 36-square meter lot, or a total of 94
square meters. Benigno sold the 94-square meter lot to Roman, who eventually sold it
to Jose. They averred that there is a private document wherein Victor sold to Jose a 4-
square meter lot, bringing a total of98 square meters in Jose's name. [11]

They asserted that they have been in possession of the contested lot since 1982 up to
the present without interruption. Tax Declaration No. 0020 in Jose's name was issued in
1990 because Jose or his successors-in-interest were in actual physical possession of the
land.[12] The tax declaration indicated 98 square meters.[13] However, spouses Vallena
were unable to present the documents of sale because they were either burned or
misplaced during Jose's lifetime.[14]

The MCTC Decision

On July 8, 2014, the MCTC rendered a decision in Montevilla's favor. The MCTC held that
spouses Vallena failed to produce the original documents of sale to prove that Jose
acquired the contested lot. They presented photocopies of the acknowledgement
receipts pertaining to the sale between Victor and Benigno, and Victor and Jose. The
MCTC explained that since the validity of the sale was questioned, it is incumbent upon
spouses Vallena to produce the original documents for examination of its genuineness
and due execution. The MCTC was suspicious of the receipts' integrity, because it
observed that Victor's signatures appear to be too similar despite the 20-year gap in
their execution. The MCTC expounded that it is natural for a person's handwriting to
change or deteriorate over time. The MCTC further observed that only one typewriter
was used in the document's preparation.[15]

Moreover, the MCTC elucidated that even if the court accepted the photocopies as
evidence in place of the originals, they were not evidence of sale of the contested lot,
because they lack one of the elements of a valid contract. The elements of a contract
are consent, object, and consideration. The MCTC found the second element to be
lacking, because the photocopied acknowledgement receipts did not sufficiently
describe the object of the sale: (1) the location of the property was not specified; (2)
there is a blot on the figure representing the dimension of the lot, forcing any reader to
guess the size of the lot; and (3) the lot was labelled as swamp land at the back of the
house of Jose Vallena, without specific area indicated. The receipts did not fulfill the
requirement of the law on certainty of the object of a contract. Hence, there was no
perfected and valid contract of sale.[16]

The MCTC declared that the Montevillas own the 40-square meter lot, ordered spouses
Vallena to vacate and remove all its improvements on the subject lot, and to pay
P200.00 as monthly rent from April 1995 until the lot is vacated and P10,000.00 as cost
of litigation.[17] Aggrieved, spouses Vallena appealed to the RTC.

The RTC Decision

On July 7, 2015, the RTC affirmed the MCTC decision. [18] Spouses Vallena raised the issue
of lack of certificate to file action from the barangay and special power of attorney of
Anita as representative of the Montevillas. The RTC resolved that the reconstituted
records showed copies of the said documents.[19]

The RTC discussed that in unlawful detainer, it is must be shown that the possession was
initially lawful and later turned unlawful upon the expiration of the right to possess. The
Montevillas allowed spouses Vallena to occupy the contested lot and build a structure
of light materials. Their occupation was by mere tolerance, Which ended when the
Montevillas discovered that they violated the condition by building a concrete building.
[20]
 Thus, the RTC sustained the MCTC's ruling.[21]

Spouses Vallena moved for reconsideration, which the RTC denied in its October 28,
2015 Order.[22] Unperturbed, they elevated the matter before the CA.

The CA Decision

On March 16, 2017, the CA reversed the RTC decision, and dismissed the complaint for
lack of merit.[23]

On the procedural aspect, the CA did not give credence to spouses Vallena's arguments.
The CA clarified that the absence or belated filing of a special power of attorney is not a
ground for the dismissal of a complaint. It is not even necessary in this case, because as
one of the heirs of spouses Montevilla and a co-owner of the contested lot, Anita may,
by herself, bring an action for the recovery of the co-owned property without the
necessity of joining all the co-owners. It is presumed that the action was brought for the
benefit of all co-owners.[24]

The CA also pointed out, that non referral of a case for barangay conciliation, when
required by the law, is not jurisdictional and may be waived if not timely raised. Here,
spouses Vallena raised the issue only on appeal to the RTC, and failed to include it in
their answer and position paper or motion to dismiss. Therefore, they have waived the
issue.[25]

On the substantive aspect, the CA elucidated that in ejectment, the plaintiff must prove
prior physical possession to recover the property, even against an owner. Otherwise,
the plaintiff has no right of action, even if he/she is the owner of the property. [26]

Here, the Montevillas claim ownership of the lot without offering any evidence. On the
other hand, spouses Vallena proved that their occupation was the result of Jose's
acquisition of the lot. The CA found spouses Vallena's version more credible. The CA
reasoned that tax declarations and payment of realty tax are indications of possession in
the concept of an owner, although they are not conclusive proof. The CA rationalized
that no one in his right mind would be paying realty taxes that is not in his/her actual or
constructive possession. Hence, the CA ruled in spouses Vallena's favor and dismissed
the complaint.[27]

The Montevillas moved for reconsideration, which the CA denied in its September 7,
2017 Resolution. Unconvinced, the Montevillas filed the present petition under Rule 45.
The Montevillas alleged that: (1) the affidavits of Jorge and Anita, the demand letter,
and the affidavit of the boundary lot owners are proof that the spouses Vallena are
occupying the contested lot out of their tolerance; (2) prior physical possession need
not be proved in unlawful detainer; (3) the CA should not have entertained the issue on
tax declaration and payment of realty taxes, which were raised for the first time on
appeal; and (4) the findings of fact of the trial courts are given weight on appeal because
of their position to examine the evidence.[28]

In their Comment,[29] spouses Vallena essentially argued that the issues raised in the
petition are not questions of law and should not be entertained by the Court.

In their Reply,[30] the Montevillas reiterated the contentions raised in their Petition.

The Issue Presented

Whether or not the CA committed an error in reversing the RTC decision, and in ruling
that spouses Vallena have the right of possession over the 40-square meter lot.

The Court's Ruling

The petition has merit.

The general rule in a petition for review on certiorari under Rule 45 of the Rules of Court
is that only questions of law should be raised. In Republic v. Heirs of Eladio Santiago,
[31]
 the Court enumerated that one of the exceptions to the general rule is when the CA's
findings are contrary to those of the trial court. Considering the different findings of fact
and conclusions of law of the MCTC, RTC, and the CA, the Court shall entertain this
petition, which involves a re-assessment of the evidence presented. In resolving the
issue of possession, the Court will provisionally determine the issue of ownership since
both parties claim to be the owners.

In its decision, the CA held that the Montevillas did not offer evidence of prior physical
possession.[32]

The Court disagrees. Section 4, Rule 129 of the Rules of Court on judicial admission
states that an admission, verbal or written, made by the party in the course of the
proceedings in the same case, does not require proof.

Here, the spouses Vallena admitted in their pleadings that Victor was the original owner
and alleged seller of the contested 40-square meter lot. [33] Their admission means that
they recognize that Victor had prior possession of the lot before he allegedly sold it to
them. A seller must have exercised acts of ownership, such as physical possession and
acts of administration, before entering into a transaction over his property. With
spouses Vallena's judicial admission, the Montevillas need not prove prior physical
possession, because upon Victor's death, his rights, including the right of possession,
over the contested lot were transmitted to his heirs by operation of law.

The CA did not uphold the MCTC's finding that the alleged contract of sale is imperfect
and invalid.[34]

To this, the Court differs. It is an established rule that findings of fact of the trial courts
are entitled to great weight and credence since they are in the best position to evaluate
the evidence. Here, the MCTC had the first opportunity to scrutinize spouses Vallena's
documentary exhibits[35] on the alleged sale, namely: (1) Exhibit 4, a photocopy of the
May 2, 1961 deed of sale between Victor and Benigno; (2) Exhibit 5, a photocopy of the
December 4, 1963 acknowledgement receipt of payment between Victor and Benigno;
and (3) Exhibit 6, a photocopy of the January 3, 1982 acknowledgment receipt of
payment between Victor and Jose. The MCTC resolved that since the validity of Jose's
acquisition is in question, spouses Vallena should have produced the original documents
to examine its genuineness and due execution.

The Court sustains the MCTC's ruling. Section 3, Rule 130 of the Rules of Court on best
evidence rule states that when the subject of inquiry is the contents of a document, no
evidence shall be admissible other than the original document itself.

Here, spouses Vallena presented photocopies of the alleged deed of sale and alleged
acknowledgment receipts. They claim that the original copies were misplaced, missing,
lost, or burned,[36] but they were unable to state with certainty the circumstances
surrounding its disappearance. Importantly, they failed to prove that the original
documents existed in the first place. Without the original documents, spouses Vallena
failed to prove that Jose bought the contested lot partly from Victor and partly from
Roman.

The Court also noticed that the deed of sale and one of the acknowledgement receipts
pertain to a sale between Victor and Benigno. The deed of sale specified that Victor sold
a lot, measuring 58 square meters, to Benigno for P210.00. The two documents show
that a transaction took place between them, and nowhere does Jose's name appear in
these documents. These documents do not prove that Victor and Jose or Benigno and
Jose entered into a contract of sale.

As for the other acknowledgement receipt allegedly between Victor and Jose, the Court
also upholds the MCTC ruling that even if the court accepts the photocopies as
evidence, they are not sufficient evidence of a contract of sale for lack of one of the
elements - certainty of object under Article 1318 [37] of the New Civil Code of the
Philippines. Since spouses Vallena were unable to prove that Jose bought the contested
lot from Victor, their main defense crumbles.

The Court reviewed Exhibit 7 (spouses Vallena's Joint Affidavit [38] and found that they
failed to indicate with certainty the size of the land that Victor and Roman allegedly sold
to Jose. Spouses Vallenas' Answer[39] and Position Paper[40] also contain ambiguous
allegations on the exact measurement of the lot allegedly sold. The Position Paper
states the following:
The area which was sold to Benigno Zita was only 58 [s]quare [m]eters with an
additional area having 2 meters in length and a blurred or not readable width which
could either be 8, 5 or 3 meters and assuming that it was only 3 meters by, 12 meters
or 36 [s]quare [m]eters to be added to 58 square meters, the total area of which will be
94 [s]quare [m]eters.

In a private instrument, the late Victor L. Montevilla also sold a portion of land with no
specific area and tax declaration for P2,000.00, Exhibit "6" for the defendants
and granting without admitting that the area was only 4 square meters, then the total
area will be 98 square meters x x x.[41] (Emphases supplied)
If spouses Vallena do not know the exact size of the land which Jose allegedly
bought from Victor and Roman, how can they convince the Court to grant them
possession of the contested lot? It is precisely for this reason that the original copies of
the documents of sale must be presented in the trial court.

On the other hand, the Court evaluated the Montevilla's documentary exhibits and
found that they support their claim of ownership, prior possession, and tolerance as to
spouses Vallena's occupation of the contested lot.

First, Exhibit "E" (Jorge's Affidavit[42]) narrated that in 1993, spouses Vallena approached
him and sought permission from him to occupy the contested lot to be used as storage
for their patis business. Considering that they were all government employees and Jose
was the godfather of Jorge's nephew, the latter granted permission on condition that
spouses Vallena would build a temporary structure with nipa thatches as roofing.
Spouses Vallena also assured him that they would demolish the structure upon demand.

The Court observed that spouses Vallena did not deny that there was indeed
a patis business operating on the contested lot. They claimed that they were only the
caretakers; of Ambrocio Gaviola (Gaviola), Jr.'s business. [43] However, spouses Vallena
did not present proof that Gaviola owns the business. Thus, the Court does not give
credence to their unsubstantiated and self-serving claim.

Second, Exhibits "I" (June 19, 1995 Certification[44] of Alejandro A. Tamayo [Tamayo] as
the Municipal Assessor of Dimasalang, Masbate) and "J" (Sketch Plan[45] issued by
Tamayo) reveal that Tamayo conducted an ocular inspection on May 20, 1995 on
Victor's property in Poblacion, Dimasalang, Masbate, covered by Tax Declaration 3007.
The exhibits contained Tamayo's certification that Victor's property consisted of 2,134
square meters, and he sold a total of 957 square meters to different buyers. Jose's name
was not among the buyers listed. The remaining area left is 1,177 square meters, which
was identified as Lot 10.

Tamayo also certified that Lot 7, (measuring 98 square meters) and covered by Tax
Declaration 0020, was declared in Jose's name upon Leo's request during the tax
mapping operation in 1990, but he did not present any document of conveyance from
the actual owner, Victor, to support his claim of ownership to the lot. Tamayo also
categorically stated that the June 19, 1995 Certification superseded the April 24, 1995
Certification that he issued.

Third, Exhibit "K" (Tamayo's affidavit dated November 3, 1997) [46] reiterated the
contents of Exhibits "I" and "J," which were issued after he conducted an ocular
inspection on Victor's property. He clarified that his June 19, 1995 Certification nullified
the April 24, 1995 Certification, which stated that Victor's property consisted of 100
square meters. He also stated that Tax Declaration 4983 was issued anew in Victor's
name on June 25, 1997, showing that his property measured 1,177 square meters.

Fourth, Exhibit "O" (Anita's Affidavit)[47] corroborated Jorge's narration on when and how
he permitted spouses Vallena to occupy the contested lot for their patis business. She
discovered the illegal structure on May 17, 1994 when she went home to pay the realty
tax of their parents' property. She had been diligently paying the realty taxes in advance
for the succeeding years.

Anita's affidavit disclosed that during the ocular inspection, Tamayo was accompanied
by Barangay Chairman Bibiano Inocencio, Arlin Mitra, Nardito Tinay, Carlos Legazpi,
Jorge Montevilla, and other lot buyers. Tamayo borrowed the deeds of sale between
Victor and the buyers, which became the basis of his inspection. [48]

The Court thinks that the presence of the owners and occupants of the land surrounding
the contested lot makes Tamayo's sketch plan, certification, and affidavit credible. Any
undue influence, intimidation, or threat during the conduct of the inspection would be
blocked by these witnesses. Further, the Court observed that spouses Vallena did not
present any deed of sale to prove to Tamayo that Jose owned the contested lot and
they inherited it from him. The ocular inspection was a good opportunity for spouses
Vallena to prove to the Montevillas and to their neighbors that they are the rightful
owners and possessors of the contested lot, however, they failed to grab that
opportunity because they had no evidence to support their claim.

Fifth, Exhibits "H" to "H-3" (Deeds of Sale between Victor and Manuel Tigpos, Carlos
Legazpi, Arlin Mitra and Lucio Abad),[49] substantiate Anita's affidavit, Tamayo's sketch
plan, certification, and affidavit as to the portions that were sold by Victor. The buyers in
the deeds are Jose's neighbors and lot owners surrounding the contested lot.

The Court emphasizes that spouses Vallena did not present any deed of sale; thus, the
Court is unconvinced with their allegation that Jose acquired the contested lot from
Victor or from Roman.

Sixth, Exhibit "N" (Joint Affidavit of Arlin Mitra, Nardito Tinay, Lucio Abad and Carlos
Legazpi),[50] executed by the boundary lot owners and neighbors of spouses Vallena,
affirmed that they bought their respective lots from Victor. They verified that after the
sale, Victor's remaining area was 1,177 square meters, covered by Tax Declaration 4983.
They confirmed that Tamayo indeed conducted an ocular inspection on May 20, 1995,
and he measured all the lots bought from Victor.

Seventh, Exhibits "M"-"M3" (real estate tax receipts)[51] paid by Anita prove that he
Montevillas had been paying the real property taxes on the 1,177 square-meter lot.
While payment of realty tax is not conclusive proof of ownership or possession, it, is a
good indication of ownership or possession because no one would be willing to spend
for something that he/she does not own or possess.

Lastly, Exhibits "A," "D" and "D-2" (Declarations of Real Property)[52] further support the
Montevillas claim that their father owned the 1,177 square-meter lot, of which the
contested lot is part of.

In civil case, the quantum of evidence required is preponderance of evidence. In Aba v.

Attys. De Guzman, Jr.,[53] the Court defined and discussed this concept.
Preponderance of evidence means that the evidence adduced by one side is, as a
whole, superior to or has greater weight than that of the other. It means evidence which
is more convincing to the court as worthy of belief than that which is offered in
opposition thereto. Under Section 1 of Rule 133, in determining whether or not there is
preponderance of evidence, the court may consider the following: (a) all the facts and
circumstances of the case; (b) the witnesses' manner of testifying, their intelligence,
their means and opportunity of knowing the facts to which they are testifying, the
nature of the facts to which they testify, the probability or improbability of their
testimony; (c) the witnesses' interest or want of interest, and also their personal
credibility so far as the same may ultimately appear in the trial; and (d) the number of
witnesses, although it does not mean that preponderance is necessarily with the greater
number. (Citation omitted)
Here, the Montevillas presented 15 exhibits,[54] while the Vallenas submitted nine
exhibits.[55] More than just having a greater number of exhibits, the Montevillas
sufficiently prove their claim that they are in prior possession of the contested lot
because their parents owned it and possessed it. The affidavits of two of the Montevilla
heirs, the affidavits of the boundary lot owners, Tamayo's sketch plan, certification, and
affidavit all prove that Victor did not sell the contested lot to Jose and remained with
the Montevillas. These pieces of evidence also support the allegation that spouses
Vallena's occupation was by mere tolerance of the Montevillas. It is not just the
quantity, but foremost the quality of evidence that determines who has preponderance
of evidence. Thus, the Montevillas have satisfactorily substantiated their version in this
long-time unresolved land dispute.

On the other hand, spouses Vallena's main defense that Jose bought the contested lot
partly from Victor and partly from Roman was unproven due to non-presentation of the
original documents of sale. Since their most important piece of evidence was struck
down, there is nothing left for their defense. Therefore, they have no right of possession
over the 40-square meter contested lot.

WHEREFORE, premises considered, the petition is GRANTED. The Court of Appeals

Decision dated March 16, 2017 and the Resolution dated September 7, 2017 in CA-G.R.
SP No. 143742 are REVERSED. The Regional Trial Court Decision dated July 7, 2015 in
Civil Case No. 7001 is REINSTATED.

SO ORDERED.