CIRCUMFERENTIAL ROAD-5; A brief history

The C-5 is a circumferential road, together with the circumferential roads

1, 2, 3, 4 and 6. These roads are part of an infrastructure plan laid out during the

American colonial regime. Of these circumferential roads, only C-5 will pass

through Paranaque, Las Pinas, and Cavite.

Circumferential Road 5, also known as C-5 (or C-5 Road) is a beltway which stretches Metro Manila. It is one of the circumferential roads which surround the metropolis, running through the eastern portion of Metro Manila and effectively serving as a reliever road for Circumferential Road 4, better known as Epifanio de los Santos Avenue (EDSA).

C-5 as a whole is better known by four names: the Taguig and Makati portions as Carlos P. Garcia Avenue, the Pasig portion as E. Rodriguez Jr. Avenue, the Libis portion as Boni Serrano Avenue and the Loyola Heights portion as Katipunan Avenue. In addition, C-5 also has other names in addition to those used on the four major stretches of the road. However, when taken collectively, the entire road is called C-5. Of the entire stretch, 32.5 kilometers are fully developed, covering Malabon and Caloocan going all the way to Quezon City-Taguig/Pateros-Paranaque-Las Pinas.

The national road has been renamed in 1996 by virtue of a law passed by

Congress. Republic Act 8224 signed on November 6, 1996 is in honor of the

President from Bohol who served the Republic from March 23, 1957 to

December 30, 1961.

In a parallel issuance of the Metro Manila Development Authority (MMDA),

Memorandum Circular 4, addressed to all mayors of Metro Manila, all concerned

district engineers of the Department of Public Works and Highways (DPWH),the

Philippine National Police and MMDA officials and employees stated that

henceforth all street signages and informatory or directional traffic signs to be

installed in all road intersections along the stretch of C-5 shall bear the subject

street name.

ON AMENDMENTS

The 1987 Constitution defines the allocations of the powers of the two

houses of Congress respecting all revenue appropriations by mandating that the

appropriations bill “shall originate exclusively in the House, but the Senate may

propose or concur with amendments.” (Article VI, Section24, The 1987 Philippine

Constitution).

In fact, the supreme Court in Tolentino vs. Secretary of Finance (235

SCRA 630, 1994), has affirmed this power of the Senate to amend a revenue bill

when it ruled that “xxx once the House has approved a revenue bill and passed it

on to the Senate, the Senate can completely overhaul it, by amendments of parts

or by amendments by substitution, and come out with one completely different

from what the House has approved.”

Over the years, the senate has faithfully followed this procedure when it

receives the GAA bill from the House. Referring to the 2008 GAA, Senate

President Enrile at the hearing on August 25, 2009 said:

“THE CHAIRMAN: xxx So in this particular case when the proposed General Appropriations bill arrived in the Senate, we expose it to public hearing and then the Chairman of the Finance Committee submitted a committee report for the consideration for the Chamber. And, during that period, we debate the contents of the proposed Appropriations Law and we come to the period of committee amendments and thereafter, the Senators are entitled to propose, if they want to propose, any individual amendments to that particular measure just like any other measure that comes to the Senate. And during this period, given the complexity and the voluminous nature of the Appropriations Law, it has been the practice of the Senate to ask the Senators to submit their individual amendments to the LBRMO which is the focal point of study for the budget in the Senate, the National Appropriations bill. And in this particular case, that was done. The Senators were notified to submit their

individual amendments in order to expedite the work on the passage of the Appropriations bill and that is why, in this particular case, Senator Villar’s office submitted their amendments through the LBRMO, through Atty. Doblon.”

Republic of the Philippines SUPREME COURT Manila

EN BANC

G.R. No. 115455 August 25, 1994

ARTURO M. TOLENTINO, petitioner, vs. THE SECRETARY OF FINANCE and THE COMMISSIONER OF INTERNAL REVENUE, respondents.

G.R. No. 115525 August 25, 1994

JUAN T. DAVID, petitioner, vs. TEOFISTO T. GUINGONA, JR., as Executive Secretary; ROBERTO DE OCAMPO, as Secretary of Finance; LIWAYWAY VINZONS-CHATO, as Commissioner of Internal Revenue; and their AUTHORIZED AGENTS OR REPRESENTATIVES, respondents.

G.R. No. 115543 August 25, 1994

RAUL S. ROCO and the INTEGRATED BAR OF THE PHILIPPINES, petitioners, vs. THE SECRETARY OF THE DEPARTMENT OF FINANCE; THE COMMISSIONERS OF THE BUREAU OF INTERNAL REVENUE AND BUREAU OF CUSTOMS, respondents.

G.R. No. 115544 August 25, 1994

PHILIPPINE PRESS INSTITUTE, INC.; EGP PUBLISHING CO., INC.; PUBLISHING CORPORATION; PHILIPPINE JOURNALISTS, INC.; JOSE L. PAVIA; and OFELIA L. DIMALANTA, petitioners, vs. HON. LIWAYWAY V. CHATO, in her capacity as Commissioner of Internal Revenue; HON. TEOFISTO T. GUINGONA, JR., in his capacity as Executive Secretary; and HON. ROBERTO B. DE OCAMPO, in his capacity as Secretary of Finance, respondents.

G.R. No. 115754 August 25, 1994

CHAMBER OF REAL ESTATE AND BUILDERS ASSOCIATIONS, INC., (CREBA), petitioner, vs. THE COMMISSIONER OF INTERNAL REVENUE, respondent.

G.R. No. 115781 August 25, 1994

KILOSBAYAN, INC., JOVITO R. SALONGA, CIRILO A. RIGOS, ERME CAMBA, EMILIO C. CAPULONG, JR., JOSE T. APOLO, EPHRAIM TENDERO, FERNANDO SANTIAGO, JOSE ABCEDE, CHRISTINE TAN, FELIPE L.

GOZON, RAFAEL G. FERNANDO, RAOUL V. VICTORINO, JOSE CUNANAN, QUINTIN S. DOROMAL, MOVEMENT OF ATTORNEYS FOR BROTHERHOOD, INTEGRITY AND NATIONALISM, INC. ("MABINI"), FREEDOM FROM DEBT COALITION, INC., PHILIPPINE BIBLE SOCIETY, INC., and WIGBERTO TAÑADA, petitioners, vs. THE EXECUTIVE SECRETARY, THE SECRETARY OF FINANCE, THE COMMISSIONER OF INTERNAL REVENUE and THE COMMISSIONER OF CUSTOMS, respondents.

G.R. No. 115852 August 25, 1994

PHILIPPINE AIRLINES, INC., petitioner, vs. THE SECRETARY OF FINANCE, and COMMISSIONER OF INTERNAL REVENUE, respondents.

G.R. No. 115873 August 25, 1994

COOPERATIVE UNION OF THE PHILIPPINES, petitioners, vs. HON. LIWAYWAY V. CHATO, in her capacity as the Commissioner of Internal Revenue, HON. TEOFISTO T. GUINGONA, JR., in his capacity as Executive Secretary, and HON. ROBERTO B. DE OCAMPO, in his capacity as Secretary of Finance, respondents.

G.R. No. 115931 August 25, 1994

PHILIPPINE EDUCATIONAL PUBLISHERS ASSOCIATION, INC., and ASSOCIATION OF PHILIPPINE BOOK-SELLERS,petitioners, vs. HON. ROBERTO B. DE OCAMPO, as the Secretary of Finance; HON. LIWAYWAY V. CHATO, as the Commissioner of Internal Revenue and HON. GUILLERMO PARAYNO, JR., in his capacity as the Commissioner of Customs,respondents.

Arturo M. Tolentino for and in his behalf.

Donna Celeste D. Feliciano and Juan T. David for petitioners in G.R. No. 115525.

Roco, Bunag, Kapunan, Migallos and Jardeleza for petitioner R.S. Roco.

Villaranza and Cruz for petitioners in G.R. No. 115544.

Carlos A. Raneses and Manuel M. Serrano for petitioner in G.R. No. 115754.

Salonga, Hernandez & Allado for Freedon From Debts Coalition, Inc. & Phil. Bible Society.

Estelito P. Mendoza for petitioner in G.R. No. 115852.

Panganiban, Benitez, Parlade, Africa & Barinaga Law Offices for petitioners in G.R. No. 115873.

R.B. Rodriguez & Associates for petitioners in G.R. No. 115931.

Reve A.V. Saguisag for MABINI.

MENDOZA, J.:

The value-added tax (VAT) is levied on the sale, barter or exchange of goods and properties as well as on the sale or exchange of services. It is equivalent to 10% of the gross selling price or gross value in money of goods or properties sold, bartered or exchanged or of the gross receipts from the sale or exchange of services. Republic Act No. 7716 seeks to widen the tax base of the existing VAT system and enhance its administration by amending the National Internal Revenue Code.

These are various suits for certiorari and prohibition, challenging the constitutionality of Republic Act No. 7716 on various grounds summarized in the resolution of July 6, 1994 of this Court, as follows:

I. Procedural Issues:

A. Does Republic Act No. 7716 violate Art. VI, § 24 of the Constitution?

B. Does it violate Art. VI, § 26(2) of the Constitution?

C. What is the extent of the power of the Bicameral Conference Committee?

II. Substantive Issues:

A. Does the law violate the following provisions in the Bill of Rights (Art. III)?

1. §1

2. § 4

3. § 5

4. § 10

B. Does the law violate the following other provisions of the Constitution?

1. Art. VI, § 28(1)

2. Art. VI, § 28(3)

These questions will be dealt in the order they are stated above. As will presently be explained not all of these questions are judicially cognizable, because not all provisions of the Constitution are self executing and, therefore, judicially enforceable. The other departments of the government are equally charged with the enforcement of the Constitution, especially the provisions relating to them.

I. PROCEDURAL ISSUES

The contention of petitioners is that in enacting Republic Act No. 7716, or the Expanded Value-Added Tax Law, Congress violated the Constitution because, although H. No. 11197 had originated in the House of Representatives, it was not passed by the Senate but was simply consolidated with the Senate version (S. No. 1630) in the Conference Committee to produce the bill which the President signed into law. The following provisions of the Constitution are cited in support of the proposition that because Republic Act No. 7716 was passed in this manner, it did not originate in the House of Representatives and it has not thereby become a law:

Art. VI, § 24: All appropriation, revenue or tariff bills, bills authorizing increase of the public debt, bills of local application, and private bills shall originate exclusively in the House of Representatives, but the Senate may propose or concur with amendments.

Id., § 26(2): No bill passed by either House shall become a law unless it has passed three readings on separate days, and printed copies thereof in its final form have been distributed to its Members three days before its passage, except when the President certifies to the necessity of its immediate enactment to meet a public calamity or emergency. Upon the last reading of a bill, no amendment thereto shall be allowed, and the vote thereon shall be taken immediately thereafter, and the yeas andnays entered in the Journal.

It appears that on various dates between July 22, 1992 and August 31, 1993, several bills 1 were introduced in the House of Representatives seeking to amend certain provisions of the National Internal Revenue Code relative to the value-added tax or VAT. These bills were referred to the House Ways and Means Committee which recommended for approval a substitute measure, H. No. 11197, entitled

AN ACT RESTRUCTURING THE VALUE-ADDED TAX (VAT) SYSTEM TO WIDEN ITS TAX BASE AND ENHANCE ITS ADMINISTRATION, AMENDING FOR THESE PURPOSES SECTIONS 99, 100, 102, 103, 104, 105, 106, 107, 108 AND 110 OF TITLE IV, 112, 115 AND 116 OF TITLE V, AND 236, 237 AND 238 OF TITLE IX, AND REPEALING SECTIONS 113 AND 114 OF TITLE V, ALL OF THE NATIONAL INTERNAL REVENUE CODE, AS AMENDED

The bill (H. No. 11197) was considered on second reading starting November 6, 1993 and, on November 17, 1993, it was approved by the House of Representatives after third and final reading.

It was sent to the Senate on November 23, 1993 and later referred by that body to its Committee on Ways and Means.

On February 7, 1994, the Senate Committee submitted its report recommending approval of S. No. 1630, entitled

AN ACT RESTRUCTURING THE VALUE-ADDED TAX (VAT) SYSTEM TO WIDEN ITS TAX BASE AND ENHANCE ITS ADMINISTRATION, AMENDING FOR THESE PURPOSES SECTIONS 99, 100, 102, 103, 104, 105, 107, 108, AND 110 OF TITLE IV, 112 OF TITLE V, AND 236, 237, AND 238 OF TITLE IX,

AND REPEALING SECTIONS 113, 114 and 116 OF TITLE V, ALL OF THE NATIONAL INTERNAL REVENUE CODE, AS AMENDED, AND FOR OTHER PURPOSES

It was stated that the bill was being submitted "in substitution of Senate Bill No. 1129, taking into consideration P.S. Res. No. 734 and H.B. No. 11197."

On February 8, 1994, the Senate began consideration of the bill (S. No. 1630). It finished debates on the bill and approved it on second reading on March 24, 1994. On the same day, it approved the bill on third reading by the affirmative votes of 13 of its members, with one abstention.

H. No. 11197 and its Senate version (S. No. 1630) were then referred to a conference committee which, after meeting four times (April 13, 19, 21 and 25, 1994), recommended that "House Bill No. 11197, in consolidation with Senate Bill No. 1630, be approved in accordance with the attached copy of the bill as reconciled and approved by the conferees."

The Conference Committee bill, entitled "AN ACT RESTRUCTURING THE VALUE-ADDED TAX (VAT) SYSTEM, WIDENING ITS TAX BASE AND ENHANCING ITS ADMINISTRATION AND FOR THESE PURPOSES AMENDING AND REPEALING THE RELEVANT PROVISIONS OF THE NATIONAL INTERNAL REVENUE CODE, AS AMENDED, AND FOR OTHER PURPOSES," was thereafter approved by the House of Representatives on April 27, 1994 and by the Senate on May 2, 1994. The enrolled bill was then presented to the President of the Philippines who, on May 5, 1994, signed it. It became Republic Act No. 7716. On May 12, 1994, Republic Act No. 7716 was published in two newspapers of general circulation and, on May 28, 1994, it took effect, although its implementation was suspended until June 30, 1994 to allow time for the registration of business entities. It would have been enforced on July 1, 1994 but its enforcement was stopped because the Court, by the vote of 11 to 4 of its members, granted a temporary restraining order on June 30, 1994.

First. Petitioners' contention is that Republic Act No. 7716 did not "originate exclusively" in the House of Representatives as required by Art. VI, §24 of the Constitution, because it is in fact the result of the consolidation of two distinct bills, H. No. 11197 and S. No. 1630. In this connection, petitioners point out that although Art. VI, SS 24 was adopted from the American Federal Constitution, 2 it is notable in two respects: the verb "shall originate" is qualified in the Philippine Constitution by the word "exclusively" and the phrase "as on other bills" in the American version is omitted. This means, according to them, that to be considered as having originated in the House, Republic Act No. 7716 must retain the essence of H. No. 11197.

This argument will not bear analysis. To begin with, it is not the law — but the revenue bill — which is required by the Constitution to "originate exclusively" in the House of Representatives. It is important to emphasize this, because a bill originating in the House may undergo such extensive changes in the Senate that the result may be a rewriting of the whole. The possibility of a third version by the conference committee will be discussed later. At this point, what is important to note is that, as a result of the Senate action, a distinct bill may be produced. To insist that a revenue statute — and not only the bill which initiated the legislative process culminating in the enactment of the law — must substantially be the same as the House bill would be to deny the Senate's power not only to "concur with amendments" but also to "propose amendments." It would be to

violate the coequality of legislative power of the two houses of Congress and in fact make the House superior to the Senate.

The contention that the constitutional design is to limit the Senate's power in respect of revenue bills in order to compensate for the grant to the Senate of the treaty-ratifying power 3 and thereby equalize its powers and those of the House overlooks the fact that the powers being compared are different. We are dealing here with the legislative power which under the Constitution is vested not in any particular chamber but in the Congress of the Philippines, consisting of "a Senate and a House of Representatives." 4 The exercise of the treaty-ratifying power is not the exercise of legislative power. It is the exercise of a check on the executive power. There is, therefore, no justification for comparing the legislative powers of the House and of the Senate on the basis of the possession of such nonlegislative power by the Senate. The possession of a similar power by the U.S. Senate 5 has never been thought of as giving it more legislative powers than the House of Representatives.

In the United States, the validity of a provision (§ 37) imposing an ad valorem tax based on the weight of vessels, which the U.S. Senate had inserted in the Tariff Act of 1909, was upheld against the claim that the provision was a revenue bill which originated in the Senate in contravention of Art. I, § 7 of the U.S. Constitution. 6 Nor is the power to amend limited to adding a provision or two in a revenue bill emanating from the House. The U.S. Senate has gone so far as changing the whole of bills following the enacting clause and substituting its own versions. In 1883, for example, it struck out everything after the enacting clause of a tariff bill and wrote in its place its own measure, and the House subsequently accepted the amendment. The U.S. Senate likewise added 847 amendments to what later became the Payne-Aldrich Tariff Act of 1909; it dictated the schedules of the Tariff Act of 1921; it rewrote an extensive tax revision bill in the same year and recast most of the tariff bill of 1922. 7 Given, then, the power of the Senate to propose amendments, the Senate can propose its own version even with respect to bills which are required by the Constitution to originate in the House.

It is insisted, however, that S. No. 1630 was passed not in substitution of H. No. 11197 but of another Senate bill (S. No. 1129) earlier filed and that what the Senate did was merely to "take [H. No. 11197] into consideration" in enacting S. No. 1630. There is really no difference between the Senate preserving H. No. 11197 up to the enacting clause and then writing its own version following the enacting clause (which, it would seem, petitioners admit is an amendment by substitution), and, on the other hand, separately presenting a bill of its own on the same subject matter. In either case the result are two bills on the same subject.

Indeed, what the Constitution simply means is that the initiative for filing revenue, tariff, or tax bills, bills authorizing an increase of the public debt, private bills and bills of local application must come from the House of Representatives on the theory that, elected as they are from the districts, the members of the House can be expected to be more sensitive to the local needs and problems. On the other hand, the senators, who are elected at large, are expected to approach the same problems from the national perspective. Both views are thereby made to bear on the enactment of such laws.

Nor does the Constitution prohibit the filing in the Senate of a substitute bill in anticipation of its receipt of the bill from the House, so long as action by the Senate as a body is withheld pending receipt of the House bill. The Court cannot, therefore, understand the alarm expressed over the fact that on March 1, 1993, eight months before the House passed H. No. 11197, S. No. 1129 had been filed in the Senate. After all it does not appear that the Senate ever considered it. It was only after the Senate had received H. No. 11197 on November 23, 1993 that the process of legislation in respect of it began with the referral to the Senate Committee on Ways and Means of H. No. 11197 and the submission by the Committee on February 7, 1994 of S. No. 1630. For that matter, if the question were simply the priority in the time of filing of bills, the fact is that it was in the House that a bill (H. No. 253) to amend the VAT law was first filed on July 22, 1992. Several other bills had been filed in the House before S. No. 1129 was filed in the Senate, and H. No. 11197 was only a substitute of those earlier bills.

Second. Enough has been said to show that it was within the power of the Senate to propose S. No. 1630. We now pass to the next argument of petitioners that S. No. 1630 did not pass three readings on separate days as required by the Constitution 8 because the second and third readings were done on the same day, March 24, 1994. But this was because on February 24, 1994 9 and again on March 22, 1994, 10 the President had certified S. No. 1630 as urgent. The presidential certification dispensed with the requirement not only of printing but also that of reading the bill on separate days. The phrase "except when the President certifies to the necessity of its immediate enactment, etc." in Art. VI, § 26(2) qualifies the two stated conditions before a bill can become a law: (i) the bill has passed three readings on separate days and (ii) it has been printed in its final form and distributed three days before it is finally approved.

In other words, the "unless" clause must be read in relation to the "except" clause, because the two are really coordinate clauses of the same sentence. To construe the "except" clause as simply dispensing with the second requirement in the "unless" clause (i.e., printing and distribution three days before final approval) would not only violate the rules of grammar. It would also negate the very premise of the "except" clause: the necessity of securing the immediate enactment of a bill which is certified in order to meet a public calamity or emergency. For if it is only the printing that is dispensed with by presidential certification, the time saved would be so negligible as to be of any use in insuring immediate enactment. It may well be doubted whether doing away with the necessity of printing and distributing copies of the bill three days before the third reading would insure speedy enactment of a law in the face of an emergency requiring the calling of a special election for President and Vice-President. Under the Constitution such a law is required to be made within seven days of the convening of Congress in emergency session. 11

That upon the certification of a bill by the President the requirement of three readings on separate days and of printing and distribution can be dispensed with is supported by the weight of legislative practice. For example, the bill defining the certiorari jurisdiction of this Court which, in consolidation with the Senate version, became Republic Act No. 5440, was passed on second and third readings in the House of Representatives on the same day (May 14, 1968) after the bill had been certified by the President as urgent. 12

There is, therefore, no merit in the contention that presidential certification dispenses only with the requirement for the printing of the bill and its distribution three days before its passage but not with the requirement of three readings on separate days, also.

It is nonetheless urged that the certification of the bill in this case was invalid because there was no emergency, the condition stated in the certification of a "growing budget deficit" not being an unusual condition in this country.

It is noteworthy that no member of the Senate saw fit to controvert the reality of the factual basis of the certification. To the contrary, by passing S. No. 1630 on second and third readings on March 24, 1994, the Senate accepted the President's certification. Should such certification be now reviewed by this Court, especially when no evidence has been shown that, because S. No. 1630 was taken up on second and third readings on the same day, the members of the Senate were deprived of the time needed for the study of a vital piece of legislation?

The sufficiency of the factual basis of the suspension of the writ of habeas corpus or declaration of martial law under Art. VII, § 18, or the existence of a national emergency justifying the delegation of extraordinary powers to the President under Art. VI, § 23(2), is subject to judicial review because basic rights of individuals may be at hazard. But the factual basis of presidential certification of bills, which involves doing away with procedural requirements designed to insure that bills are duly considered by members of Congress, certainly should elicit a different standard of review.

Petitioners also invite attention to the fact that the President certified S. No. 1630 and not H. No. 11197. That is because S. No. 1630 was what the Senate was considering. When the matter was before the House, the President likewise certified H. No. 9210 the pending in the House.

Third. Finally it is contended that the bill which became Republic Act No. 7716 is the bill which the Conference Committee prepared by consolidating H. No. 11197 and S. No. 1630. It is claimed that the Conference Committee report included provisions not found in either the House bill or the Senate bill and that these provisions were "surreptitiously" inserted by the Conference Committee. Much is made of the fact that in the last two days of its session on April 21 and 25, 1994 the Committee met behind closed doors. We are not told, however, whether the provisions were not the result of the give and take that often mark the proceedings of conference committees.

Nor is there anything unusual or extraordinary about the fact that the Conference Committee met in executive sessions. Often the only way to reach agreement on conflicting provisions is to meet behind closed doors, with only the conferees present. Otherwise, no compromise is likely to be made. The Court is not about to take the suggestion of a cabal or sinister motive attributed to the conferees on the basis solely of their "secret meetings" on April 21 and 25, 1994, nor read anything into the incomplete remarks of the members, marked in the transcript of stenographic notes by ellipses. The incomplete sentences are probably due to the stenographer's own limitations or to the incoherence that sometimes characterize conversations. William Safire noted some such lapses in recorded talks even by recent past Presidents of the United States.

In any event, in the United States conference committees had been customarily held in executive sessions with only the conferees and their staffs in attendance. 13 Only in November 1975 was a new rule adopted requiring open sessions. Even then a majority of either chamber's conferees may vote in public to close the meetings. 14

As to the possibility of an entirely new bill emerging out of a Conference Committee, it has been explained:

Under congressional rules of procedure, conference committees are not expected to make any material change in the measure at issue, either by deleting provisions to which both houses have already agreed or by inserting new provisions. But this is a difficult provision to enforce. Note the problem when one house amends a proposal originating in either house by striking out everything following the enacting clause and substituting provisions which make it an entirely new bill. The versions are now altogether different, permitting a conference committee to draft essentially a new bill. . . . 15

The result is a third version, which is considered an "amendment in the nature of a substitute," the only requirement for which being that the third version be germane to the subject of the House and Senate bills. 16

Indeed, this Court recently held that it is within the power of a conference committee to include in its report an entirely new provision that is not found either in the House bill or in the Senate bill. 17 If the committee can propose an amendment consisting of one or two provisions, there is no reason why it cannot propose several provisions, collectively considered as an "amendment in the nature of a substitute," so long as such amendment is germane to the subject of the bills before the committee. After all, its report was not final but needed the approval of both houses of Congress to become valid as an act of the legislative department. The charge that in this case the Conference Committee acted as a third legislative chamber is thus without any basis. 18

Nonetheless, it is argued that under the respective Rules of the Senate and the House of Representatives a conference committee can only act on the differing provisions of a Senate bill and a House bill, and that contrary to these Rules the Conference Committee inserted provisions not found in the bills submitted to it. The following provisions are cited in support of this contention:

Rules of the Senate

Rule XII:

§ 26. In the event that the Senate does not agree with the House of Representatives on the provision of any bill or joint resolution, the differences shall be settled by a conference committee of both Houses which shall meet within ten days after their composition.

The President shall designate the members of the conference committee in accordance with subparagraph (c), Section 3 of Rule III.

Each Conference Committee Report shall contain a detailed and sufficiently explicit statement of the changes in or amendments to the subject measure, and shall be signed by the conferees.

The consideration of such report shall not be in order unless the report has been filed with the Secretary of the Senate and copies thereof have been distributed to the Members.

(Emphasis added)

Rules of the House of Representatives

Rule XIV:

§ 85. Conference Committee Reports. — In the event that the House does not agree with the Senate on the amendments to any bill or joint resolution, the differences may be settled by conference committees of both Chambers.

The consideration of conference committee reports shall always be in order, except when the journal is being read, while the roll is being called or the House is dividing on any question. Each of the pages of such reports shall be signed by the conferees. Each report shall contain a detailed, sufficiently explicit statement of the changes in or amendments to the subject measure.

The consideration of such report shall not be in order unless copies thereof are distributed to the Members: Provided, That in the last fifteen days of each session period it shall be deemed sufficient that three copies of the report, signed as above provided, are deposited in the office of the Secretary General.

(Emphasis added)

To be sure, nothing in the Rules limits a conference committee to a consideration of conflicting provisions. But Rule XLIV, § 112 of the Rules of the Senate is cited to the effect that "If there is no Rule applicable to a specific case the precedents of the Legislative Department of the Philippines shall be resorted to, and as a supplement of these, the Rules contained in Jefferson's Manual." The following is then quoted from the Jefferson's Manual:

The managers of a conference must confine themselves to the differences committed to them. . . and may not include subjects not within disagreements, even though germane to a question in issue.

Note that, according to Rule XLIX, § 112, in case there is no specific rule applicable, resort must be to the legislative practice. The Jefferson's Manual is resorted to only as supplement. It is common place in Congress that conference committee reports include new matters which, though germane, have not been committed to the committee. This practice was admitted by Senator Raul S. Roco, petitioner in G.R. No. 115543, during the oral argument in these cases. Whatever, then, may be provided in the Jefferson's Manual must be considered to have been modified by the legislative practice. If a change is desired in the practice it must be sought in Congress since this question is not covered by any constitutional provision but is only an internal rule of each house. Thus, Art. VI, § 16(3) of the Constitution provides that "Each House may determine the rules of its proceedings. . . ."

This observation applies to the other contention that the Rules of the two chambers were likewise disregarded in the preparation of the Conference Committee Report because the Report did not contain a "detailed and sufficiently explicit statement of changes in, or amendments to, the subject measure." The Report used brackets and capital letters to indicate the changes. This is a standard practice in bill-drafting. We cannot say that in using these marks and symbols the Committee violated the Rules of the Senate and the House. Moreover, this Court is not the proper forum for the enforcement of these internal Rules. To the contrary, as we have already ruled, "parliamentary rules are merely procedural and with their observance the courts have no concern." 19 Our concern is with the procedural requirements of the Constitution for the enactment

of laws. As far as these requirements are concerned, we are satisfied that they have been faithfully observed in these cases.

Nor is there any reason for requiring that the Committee's Report in these cases must have undergone three readings in each of the two houses. If that be the case, there would be no end to negotiation since each house may seek modifications of the compromise bill. The nature of the bill, therefore, requires that it be acted upon by each house on a "take it or leave it" basis, with the only alternative that if it is not approved by both houses, another conference committee must be appointed. But then again the result would still be a compromise measure that may not be wholly satisfying to both houses.

Art. VI, § 26(2) must, therefore, be construed as referring only to bills introduced for the first time in either house of Congress, not to the conference committee report. For if the purpose of requiring three readings is to give members of Congress time to study bills, it cannot be gainsaid that H. No. 11197 was passed in the House after three readings; that in the Senate it was considered on first reading and then referred to a committee of that body; that although the Senate committee did not report out the House bill, it submitted a version (S. No. 1630) which it had prepared by "taking into consideration" the House bill; that for its part the Conference Committee consolidated the two bills and prepared a compromise version; that the Conference Committee Report was thereafter approved by the House and the Senate, presumably after appropriate study by their members. We cannot say that, as a matter of fact, the members of Congress were not fully informed of the provisions of the bill. The allegation that the Conference Committee usurped the legislative power of Congress is, in our view, without warrant in fact and in law.

Fourth. Whatever doubts there may be as to the formal validity of Republic Act No. 7716 must be resolved in its favor. Our cases 20 manifest firm adherence to the rule that an enrolled copy of a bill is conclusive not only of its provisions but also of its due enactment. Not even claims that a proposed constitutional amendment was invalid because the requisite votes for its approval had not been obtained 21 or that certain provisions of a statute had been "smuggled" in the printing of the bill 22 have moved or persuaded us to look behind the proceedings of a coequal branch of the government. There is no reason now to depart from this rule.

No claim is here made that the "enrolled bill" rule is absolute. In fact in one case 23 we "went behind" an enrolled bill and consulted the Journal to determine whether certain provisions of a statute had been approved by the Senate in view of the fact that the President of the Senate himself, who had signed the enrolled bill, admitted a mistake and withdrew his signature, so that in effect there was no longer an enrolled bill to consider.

But where allegations that the constitutional procedures for the passage of bills have not been observed have no more basis than another allegation that the Conference Committee "surreptitiously" inserted provisions into a bill which it had prepared, we should decline the invitation to go behind the enrolled copy of the bill. To disregard the "enrolled bill" rule in such cases would be to disregard the respect due the other two departments of our government.

Fifth. An additional attack on the formal validity of Republic Act No. 7716 is made by the Philippine Airlines, Inc., petitioner in G.R. No. 11582, namely, that it violates Art. VI, § 26(1) which provides that "Every bill passed by Congress shall embrace only one subject which shall be expressed in the title thereof." It is contended that neither H. No. 11197 nor S. No. 1630 provided for removal of

exemption of PAL transactions from the payment of the VAT and that this was made only in the Conference Committee bill which became Republic Act No. 7716 without reflecting this fact in its title.

The title of Republic Act No. 7716 is:

AN ACT RESTRUCTURING THE VALUE- ADDED TAX (VAT) SYSTEM, WIDENING ITS TAX BASE AND ENHANCING ITS ADMINISTRATION, AND FOR THESE PURPOSES AMENDING AND REPEALING THE RELEVANT PROVISIONS OF THE NATIONAL INTERNAL REVENUE CODE, AS AMENDED, AND FOR OTHER PURPOSES.

Among the provisions of the NIRC amended is § 103, which originally read:

§ 103. Exempt transactions. — The following shall be exempt from the value-added tax:

. . . .

(q) Transactions which are exempt under special laws or international agreements to which the Philippines is a signatory. Among the transactions exempted from the VAT were those of PAL because it was exempted under its franchise (P.D. No. 1590) from the payment of all "other taxes . . . now or in the near future," in consideration of the payment by it either of the corporate income tax or a franchise tax of 2%.

As a result of its amendment by Republic Act No. 7716, § 103 of the NIRC now provides:

§ 103. Exempt transactions. — The following shall be exempt from the value-added tax:

. . . .

(q) Transactions which are exempt under special laws, except those granted under Presidential Decree Nos. 66, 529, 972, 1491, 1590. . . .

The effect of the amendment is to remove the exemption granted to PAL, as far as the VAT is concerned.

The question is whether this amendment of § 103 of the NIRC is fairly embraced in the title of Republic Act No. 7716, although no mention is made therein of P.D. No. 1590 as among those which the statute amends. We think it is, since the title states that the purpose of the statute is to expand the VAT system, and one way of doing this is to widen its base by withdrawing some of the exemptions granted before. To insist that P.D. No. 1590 be mentioned in the title of the law, in addition to § 103 of the NIRC, in which it is specifically referred to, would be to insist that the title of a bill should be a complete index of its content.

The constitutional requirement that every bill passed by Congress shall embrace only one subject which shall be expressed in its title is intended to prevent surprise upon the members of Congress and to inform the people of pending legislation so that, if they wish to, they can be heard regarding it. If, in the case at bar, petitioner did not know before that its exemption had been withdrawn, it is

not because of any defect in the title but perhaps for the same reason other statutes, although published, pass unnoticed until some event somehow calls attention to their existence. Indeed, the title of Republic Act No. 7716 is not any more general than the title of PAL's own franchise under P.D. No. 1590, and yet no mention is made of its tax exemption. The title of P.D. No. 1590 is:

AN ACT GRANTING A NEW FRANCHISE TO PHILIPPINE AIRLINES, INC. TO ESTABLISH, OPERATE, AND MAINTAIN AIR-TRANSPORT SERVICES IN THE PHILIPPINES AND BETWEEN THE PHILIPPINES AND OTHER COUNTRIES.

The trend in our cases is to construe the constitutional requirement in such a manner that courts do not unduly interfere with the enactment of necessary legislation and to consider it sufficient if the title expresses the general subject of the statute and all its provisions are germane to the general subject thus expressed. 24

It is further contended that amendment of petitioner's franchise may only be made by special law, in view of § 24 of P.D. No. 1590 which provides:

This franchise, as amended, or any section or provision hereof may only be modified, amended, or repealed expressly by a special law or decree that shall specifically modify, amend, or repeal this franchise or any section or provision thereof.

This provision is evidently intended to prevent the amendment of the franchise by mere implication resulting from the enactment of a later inconsistent statute, in consideration of the fact that a franchise is a contract which can be altered only by consent of the parties. Thus in Manila Railroad Co. v. Rafferty, 25 it was held that an Act of the U.S. Congress, which provided for the payment of tax on certain goods and articles imported into the Philippines, did not amend the franchise of plaintiff, which exempted it from all taxes except those mentioned in its franchise. It was held that a special law cannot be amended by a general law.

In contrast, in the case at bar, Republic Act No. 7716 expressly amends PAL's franchise (P.D. No. 1590) by specifically excepting from the grant of exemptions from the VAT PAL's exemption under P.D. No. 1590. This is within the power of Congress to do under Art. XII, § 11 of the Constitution, which provides that the grant of a franchise for the operation of a public utility is subject to amendment, alteration or repeal by Congress when the common good so requires.

II. SUBSTANTIVE ISSUES

A. Claims of Press Freedom, Freedom of Thought and Religious Freedom

The Philippine Press Institute (PPI), petitioner in G.R. No. 115544, is a nonprofit organization of newspaper publishers established for the improvement of journalism in the Philippines. On the other hand, petitioner in G.R. No. 115781, the Philippine Bible Society (PBS), is a nonprofit organization engaged in the printing and distribution of bibles and other religious articles. Both petitioners claim violations of their rights under § § 4 and 5 of the Bill of Rights as a result of the enactment of the VAT Law.

The PPI questions the law insofar as it has withdrawn the exemption previously granted to the press under § 103 (f) of the NIRC. Although the exemption was

subsequently restored by administrative regulation with respect to the circulation income of newspapers, the PPI presses its claim because of the possibility that the exemption may still be removed by mere revocation of the regulation of the Secretary of Finance. On the other hand, the PBS goes so far as to question the Secretary's power to grant exemption for two reasons: (1) The Secretary of Finance has no power to grant tax exemption because this is vested in Congress and requires for its exercise the vote of a majority of all its members 26 and (2) the Secretary's duty is to execute the law.

§ 103 of the NIRC contains a list of transactions exempted from VAT. Among the transactions previously granted exemption were:

(f) Printing, publication, importation or sale of books and any newspaper, magazine, review, or bulletin which appears at regular intervals with fixed prices for subscription and sale and which is devoted principally to the publication of advertisements.

Republic Act No. 7716 amended § 103 by deleting ¶ (f) with the result that print media became subject to the VAT with respect to all aspects of their operations. Later, however, based on a memorandum of the Secretary of Justice, respondent Secretary of Finance issued Revenue Regulations No. 11-94, dated June 27, 1994, exempting the "circulation income of print media pursuant to § 4 Article III of the 1987 Philippine Constitution guaranteeing against abridgment of freedom of the press, among others." The exemption of "circulation income" has left income from advertisements still subject to the VAT.

It is unnecessary to pass upon the contention that the exemption granted is beyond the authority of the Secretary of Finance to give, in view of PPI's contention that even with the exemption of the circulation revenue of print media there is still an unconstitutional abridgment of press freedom because of the imposition of the VAT on the gross receipts of newspapers from advertisements and on their acquisition of paper, ink and services for publication. Even on the assumption that no exemption has effectively been granted to print media transactions, we find no violation of press freedom in these cases.

To be sure, we are not dealing here with a statute that on its face operates in the area of press freedom. The PPI's claim is simply that, as applied to newspapers, the law abridges press freedom. Even with due recognition of its high estate and its importance in a democratic society, however, the press is not immune from general regulation by the State. It has been held:

The publisher of a newspaper has no immunity from the application of general laws. He has no special privilege to invade the rights and liberties of others. He must answer for libel. He may be punished for contempt of court. . . . Like others, he must pay equitable and nondiscriminatory taxes on his business. . . . 27

The PPI does not dispute this point, either.

What it contends is that by withdrawing the exemption previously granted to print media transactions involving printing, publication, importation or sale of newspapers, Republic Act No. 7716 has singled out the press for discriminatory treatment and that within the class of mass media the law discriminates against print media by giving broadcast media favored treatment. We have carefully examined this argument, but we are unable to find a differential treatment of the press by the law, much less any censorial motivation for its enactment. If the press is now required to pay a value-added tax on its transactions, it is not

because it is being singled out, much less targeted, for special treatment but only because of the removal of the exemption previously granted to it by law. The withdrawal of exemption is all that is involved in these cases. Other transactions, likewise previously granted exemption, have been delisted as part of the scheme to expand the base and the scope of the VAT system. The law would perhaps be open to the charge of discriminatory treatment if the only privilege withdrawn had been that granted to the press. But that is not the case.

The situation in the case at bar is indeed a far cry from those cited by the PPI in support of its claim that Republic Act No. 7716 subjects the press to discriminatory taxation. In the cases cited, the discriminatory purpose was clear either from the background of the law or from its operation. For example, in Grosjean v. American Press Co., 28 the law imposed a license tax equivalent to 2% of the gross receipts derived from advertisements only on newspapers which had a circulation of more than 20,000 copies per week. Because the tax was not based on the volume of advertisement alone but was measured by the extent of its circulation as well, the law applied only to the thirteen large newspapers in Louisiana, leaving untaxed four papers with circulation of only slightly less than 20,000 copies a week and 120 weekly newspapers which were in serious competition with the thirteen newspapers in question. It was well known that the thirteen newspapers had been critical of Senator Huey Long, and the Long-dominated legislature of Louisiana respondent by taxing what Long described as the "lying newspapers" by imposing on them "a tax on lying." The effect of the tax was to curtail both their revenue and their circulation. As the U.S. Supreme Court noted, the tax was "a deliberate and calculated device in the guise of a tax to limit the circulation of information to which the public is entitled in virtue of the constitutional guaranties." 29 The case is a classic illustration of the warning that the power to tax is the power to destroy.

In the other case 30 invoked by the PPI, the press was also found to have been singled out because everything was exempt from the "use tax" on ink and paper, except the press. Minnesota imposed a tax on the sales of goods in that state. To protect the sales tax, it enacted a complementary tax on the privilege of "using, storing or consuming in that state tangible personal property" by eliminating the residents' incentive to get goods from outside states where the sales tax might be lower. The Minnesota Star Tribune was exempted from both taxes from 1967 to 1971. In 1971, however, the state legislature amended the tax scheme by imposing the "use tax" on the cost of paper and ink used for publication. The law was held to have singled out the press because (1) there was no reason for imposing the "use tax" since the press was exempt from the sales tax and (2) the "use tax" was laid on an "intermediate transaction rather than the ultimate retail sale." Minnesota had a heavy burden of justifying the differential treatment and it failed to do so. In addition, the U.S. Supreme Court found the law to be discriminatory because the legislature, by again amending the law so as to exempt the first $100,000 of paper and ink used, further narrowed the coverage of the tax so that "only a handful of publishers pay any tax at all and even fewer pay any significant amount of tax." 31The discriminatory purpose was thus very clear.

More recently, in Arkansas Writers' Project, Inc. v. Ragland, 32 it was held that a law which taxed general interest magazines but not newspapers and religious, professional, trade and sports journals was discriminatory because while the tax did not single out the press as a whole, it targeted a small group within the press. What is more, by differentiating on the basis of contents (i.e., between general interest and special interests such as religion or sports) the law became "entirely incompatible with the First Amendment's guarantee of freedom of the press."

These cases come down to this: that unless justified, the differential treatment of the press creates risks of suppression of expression. In contrast, in the cases at bar, the statute applies to a wide range of goods and services. The argument that, by imposing the VAT only on print media whose gross sales exceeds P480,000 but not more than P750,000, the law discriminates 33 is without merit since it has not been shown that as a result the class subject to tax has been unreasonably narrowed. The fact is that this limitation does not apply to the press along but to all sales. Nor is impermissible motive shown by the fact that print media and broadcast media are treated differently. The press is taxed on its transactions involving printing and publication, which are different from the transactions of broadcast media. There is thus a reasonable basis for the classification.

The cases canvassed, it must be stressed, eschew any suggestion that "owners of newspapers are immune from any forms of ordinary taxation." The license tax in the Grosjean case was declared invalid because it was "one single in kind, with a long history of hostile misuse against the freedom of the press." 34 On the other hand, Minneapolis Star acknowledged that "The First Amendment does not prohibit all regulation of the press [and that] the States and the Federal Government can subject newspapers to generally applicable economic regulations without creating constitutional problems." 35

What has been said above also disposes of the allegations of the PBS that the removal of the exemption of printing, publication or importation of books and religious articles, as well as their printing and publication, likewise violates freedom of thought and of conscience. For as the U.S. Supreme Court unanimously held in Jimmy Swaggart Ministries v. Board of Equalization, 36 the Free Exercise of Religion Clause does not prohibit imposing a generally applicable sales and use tax on the sale of religious materials by a religious organization.

This brings us to the question whether the registration provision of the law, 37 although of general applicability, nonetheless is invalid when applied to the press because it lays a prior restraint on its essential freedom. The case of American Bible Society v. City of Manila 38 is cited by both the PBS and the PPI in support of their contention that the law imposes censorship. There, this Court held that an ordinance of the City of Manila, which imposed a license fee on those engaged in the business of general merchandise, could not be applied to the appellant's sale of bibles and other religious literature. This Court relied on Murdock v. Pennsylvania, 39 in which it was held that, as a license fee is fixed in amount and unrelated to the receipts of the taxpayer, the license fee, when applied to a religious sect, was actually being imposed as a condition for the exercise of the sect's right under the Constitution. For that reason, it was held, the license fee "restrains in advance those constitutional liberties of press and religion and inevitably tends to suppress their exercise." 40

But, in this case, the fee in § 107, although a fixed amount (P1,000), is not imposed for the exercise of a privilege but only for the purpose of defraying part of the cost of registration. The registration requirement is a central feature of the VAT system. It is designed to provide a record of tax credits because any person who is subject to the payment of the VAT pays an input tax, even as he collects an output tax on sales made or services rendered. The registration fee is thus a mere administrative fee, one not imposed on the exercise of a privilege, much less a constitutional right.

For the foregoing reasons, we find the attack on Republic Act No. 7716 on the ground that it offends the free speech, press and freedom of religion guarantees

of the Constitution to be without merit. For the same reasons, we find the claim of the Philippine Educational Publishers Association (PEPA) in G.R. No. 115931 that the increase in the price of books and other educational materials as a result of the VAT would violate the constitutional mandate to the government to give priority to education, science and technology (Art. II, § 17) to be untenable.

B. Claims of Regressivity, Denial of Due Process, Equal Protection, and Impairment of Contracts

There is basis for passing upon claims that on its face the statute violates the guarantees of freedom of speech, press and religion. The possible "chilling effect" which it may have on the essential freedom of the mind and conscience and the need to assure that the channels of communication are open and operating importunately demand the exercise of this Court's power of review.

There is, however, no justification for passing upon the claims that the law also violates the rule that taxation must be progressive and that it denies petitioners' right to due process and that equal protection of the laws. The reason for this different treatment has been cogently stated by an eminent authority on constitutional law thus: "[W]hen freedom of the mind is imperiled by law, it is freedom that commands a momentum of respect; when property is imperiled it is the lawmakers' judgment that commands respect. This dual standard may not precisely reverse the presumption of constitutionality in civil liberties cases, but obviously it does set up a hierarchy of values within the due process clause." 41

Indeed, the absence of threat of immediate harm makes the need for judicial intervention less evident and underscores the essential nature of petitioners' attack on the law on the grounds of regressivity, denial of due process and equal protection and impairment of contracts as a mere academic discussion of the merits of the law. For the fact is that there have even been no notices of assessments issued to petitioners and no determinations at the administrative levels of their claims so as to illuminate the actual operation of the law and enable us to reach sound judgment regarding so fundamental questions as those raised in these suits.

Thus, the broad argument against the VAT is that it is regressive and that it violates the requirement that "The rule of taxation shall be uniform and equitable [and] Congress shall evolve a progressive system of taxation." 42 Petitioners in G.R. No. 115781 quote from a paper, entitled "VAT Policy Issues: Structure, Regressivity, Inflation and Exports" by Alan A. Tait of the International Monetary Fund, that "VAT payment by low-income households will be a higher proportion of their incomes (and expenditures) than payments by higher-income households. That is, the VAT will be regressive." Petitioners contend that as a result of the uniform 10% VAT, the tax on consumption goods of those who are in the higher-income bracket, which before were taxed at a rate higher than 10%, has been reduced, while basic commodities, which before were taxed at rates ranging from 3% to 5%, are now taxed at a higher rate.

Just as vigorously as it is asserted that the law is regressive, the opposite claim is pressed by respondents that in fact it distributes the tax burden to as many goods and services as possible particularly to those which are within the reach of higher-income groups, even as the law exempts basic goods and services. It is thus equitable. The goods and properties subject to the VAT are those used or

consumed by higher-income groups. These include real properties held primarily for sale to customers or held for lease in the ordinary course of business, the right or privilege to use industrial, commercial or scientific equipment, hotels, restaurants and similar places, tourist buses, and the like. On the other hand, small business establishments, with annual gross sales of less than P500,000, are exempted. This, according to respondents, removes from the coverage of the law some 30,000 business establishments. On the other hand, an occasional paper 43 of the Center for Research and Communication cities a NEDA study that the VAT has minimal impact on inflation and income distribution and that while additional expenditure for the lowest income class is only P301 or 1.49% a year, that for a family earning P500,000 a year or more is P8,340 or 2.2%.

Lacking empirical data on which to base any conclusion regarding these arguments, any discussion whether the VAT is regressive in the sense that it will hit the "poor" and middle-income group in society harder than it will the "rich," as the Cooperative Union of the Philippines (CUP) claims in G.R. No. 115873, is largely an academic exercise. On the other hand, the CUP's contention that Congress' withdrawal of exemption of producers cooperatives, marketing cooperatives, and service cooperatives, while maintaining that granted to electric cooperatives, not only goes against the constitutional policy to promote cooperatives as instruments of social justice (Art. XII, § 15) but also denies such cooperatives the equal protection of the law is actually a policy argument. The legislature is not required to adhere to a policy of "all or none" in choosing the subject of taxation. 44

Nor is the contention of the Chamber of Real Estate and Builders Association (CREBA), petitioner in G.R. 115754, that the VAT will reduce the mark up of its members by as much as 85% to 90% any more concrete. It is a mere allegation. On the other hand, the claim of the Philippine Press Institute, petitioner in G.R. No. 115544, that the VAT will drive some of its members out of circulation because their profits from advertisements will not be enough to pay for their tax liability, while purporting to be based on the financial statements of the newspapers in question, still falls short of the establishment of facts by evidence so necessary for adjudicating the question whether the tax is oppressive and confiscatory.

Indeed, regressivity is not a negative standard for courts to enforce. What Congress is required by the Constitution to do is to "evolve a progressive system of taxation." This is a directive to Congress, just like the directive to it to give priority to the enactment of laws for the enhancement of human dignity and the reduction of social, economic and political inequalities (Art. XIII, § 1), or for the promotion of the right to "quality education" (Art. XIV, § 1). These provisions are put in the Constitution as moral incentives to legislation, not as judicially enforceable rights.

At all events, our 1988 decision in Kapatiran 45 should have laid to rest the questions now raised against the VAT. There similar arguments made against the original VAT Law (Executive Order No. 273) were held to be hypothetical, with no more basis than newspaper articles which this Court found to be "hearsay and [without] evidentiary value." As Republic Act No. 7716 merely expands the base of the VAT system and its coverage as provided in the original VAT Law, further debate on the desirability and wisdom of the law should have shifted to Congress.

Only slightly less abstract but nonetheless hypothetical is the contention of CREBA that the imposition of the VAT on the sales and leases of real estate by virtue of contracts entered into prior to the effectivity of the law would violate the

constitutional provision that "No law impairing the obligation of contracts shall be passed." It is enough to say that the parties to a contract cannot, through the exercise of prophetic discernment, fetter the exercise of the taxing power of the State. For not only are existing laws read into contracts in order to fix obligations as between parties, but the reservation of essential attributes of sovereign power is also read into contracts as a basic postulate of the legal order. The policy of protecting contracts against impairment presupposes the maintenance of a government which retains adequate authority to secure the peace and good order of society. 46

In truth, the Contract Clause has never been thought as a limitation on the exercise of the State's power of taxation save only where a tax exemption has been granted for a valid consideration. 47 Such is not the case of PAL in G.R. No. 115852, and we do not understand it to make this claim. Rather, its position, as discussed above, is that the removal of its tax exemption cannot be made by a general, but only by a specific, law.

The substantive issues raised in some of the cases are presented in abstract, hypothetical form because of the lack of a concrete record. We accept that this Court does not only adjudicate private cases; that public actions by "non-Hohfeldian" 48 or ideological plaintiffs are now cognizable provided they meet the standing requirement of the Constitution; that under Art. VIII, § 1, ¶ 2 the Court has a "special function" of vindicating constitutional rights. Nonetheless the feeling cannot be escaped that we do not have before us in these cases a fully developed factual record that alone can impart to our adjudication the impact of actuality 49 to insure that decision-making is informed and well grounded. Needless to say, we do not have power to render advisory opinions or even jurisdiction over petitions for declaratory judgment. In effect we are being asked to do what the Conference Committee is precisely accused of having done in these cases — to sit as a third legislative chamber to review legislation.

We are told, however, that the power of judicial review is not so much power as it is duty imposed on this Court by the Constitution and that we would be remiss in the performance of that duty if we decline to look behind the barriers set by the principle of separation of powers. Art. VIII, § 1, ¶ 2 is cited in support of this view:

Judicial power includes the duty of the courts of justice to settle actual controversies involving rights which are legally demandable and enforceable, and 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.

To view the judicial power of review as a duty is nothing new. Chief Justice Marshall said so in 1803, to justify the assertion of this power in Marbury v. Madison:

It is emphatically the province and duty of the judicial department to say what the law is. Those who apply the rule to particular cases must of necessity expound and interpret that rule. If two laws conflict with each other, the courts must decide on the operation of each. 50

Justice Laurel echoed this justification in 1936 in Angara v. Electoral Commission:

And when the judiciary mediates to allocate constitutional boundaries, it does not assert any superiority over the other

departments; it does not in reality nullify or invalidate an act of the legislature, but only asserts the solemn and sacred obligation assigned to it by the Constitution 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. 51

This conception of the judicial power has been affirmed in several cases 52 of this Court following Angara.

It does not add anything, therefore, to invoke this "duty" to justify this Court's intervention in what is essentially a case that at best is not ripe for adjudication. That duty must still be performed in the context of a concrete case or controversy, as Art. VIII, § 5(2) clearly defines our jurisdiction in terms of "cases," and nothing but "cases." That the other departments of the government may have committed a grave abuse of discretion is not an independent ground for exercising our power. Disregard of the essential limits imposed by the case and controversy requirement can in the long run only result in undermining our authority as a court of law. For, as judges, what we are called upon to render is judgment according to law, not according to what may appear to be the opinion of the day.

_______________________________

In the preceeding pages we have endeavored to discuss, within limits, the validity of Republic Act No. 7716 in its formal and substantive aspects as this has been raised in the various cases before us. To sum up, we hold:

(1) That the procedural requirements of the Constitution have been complied with by Congress in the enactment of the statute;

(2) That judicial inquiry whether the formal requirements for the enactment of statutes — beyond those prescribed by the Constitution — have been observed is precluded by the principle of separation of powers;

(3) That the law does not abridge freedom of speech, expression or the press, nor interfere with the free exercise of religion, nor deny to any of the parties the right to an education; and

(4) That, in view of the absence of a factual foundation of record, claims that the law is regressive, oppressive and confiscatory and that it violates vested rights protected under the Contract Clause are prematurely raised and do not justify the grant of prospective relief by writ of prohibition.

WHEREFORE, the petitions in these cases are DISMISSED.

Bidin, Quiason, and Kapunan, JJ., concur.

THE TESTIMONY OF ATTY. YOLANDA DOBLON

COMMITTEE OF THE WHOLE (P.S. RESOLUTION NO. 706) Mhulep VI-2 October 6, 2009 12:41p.m. (p. 128)

MS. DOBLON. . . . Your Honor, as I testified on August 25, 2009, I could not remember the exact words when it was said to me. But what I am sure is

that immediately after it was given to me, I went down to our office and reflected

the instruction that was given. And aside from that, there is only one C-5 project

in the General Appropriations Bill and that refers to the C-5 that was – what we

incorporated. The instruction was to add to an existing item and there’s only one

existing item that refers to C-5.

MR. FRANCISCO. So, the phrase “construction of C-5 Road Extension from SLEX to Sucat Road including ROW or Right-of-Way,” where did this

description come from?

MS. DOBLON. It comes from the General Appropriations Bill which is part of what was forwarded to us by the House. That is the original title.

MR. FRANCISCO. Yes. But according to you, Engr. Adriano dictated or enumerated to you a proposed amendment to the 2008 National Budget in the

amount of P200 million which you described based on your testimony and the

documents that you submitted as “Construction of C-5 Road Extension from

SLEX to Sucat Road including ROW or Right-of-Way.”

MS. DOBLON. Yes, Your Honor.

MR. FRANCISCO. So, where did this description come from?

MS. DOBLON. The description comes from the General Appropriations Bill.

MR. FRANCISCO. So, what was the description that was enumerated or dictated to you by Engr. Adriano?

MS. DOBLON. As I have said in our August 25 testimony that I gave is that I could no longer remember the exact wording that was given to me. But

one thing that I am sure is that – that is what he wanted us to do is to increase

the allocation for the C-5. And the C-5, there’s only one C-5 in the General

Appropriations Bill. That is the construction of C-5 Road Extension from SLEX to

Sucat Road including ROW.

THE CHAIRMAN. Just a minute, ha. Under my oath as a Senator, I would like to confirm, I was the Chairman of the Finance Committee of the

Senate during the year 2008. And normally in budget hearings, when we finish

the consideration of the budgets of all the departments and agencies of

government, instead of going through the entire budget to amend it line by line,

we request the – as a matter of fact, in the Senate, that we request the senators

to submit their amendments in writing.

Now, I instructed Atty. Doblon to get all the amendments of the senators if

they had any amendments. And I remember that she told me that Senator Villar

submitted his amendments.

And that’s why Atty. Doblon, I suppose, went to the Senate President then

– was he the Senate President then, Yolly? He was the Senate President then –

MS. DOBLON. Yes, sir.

THE CHAIRMAN. … to get the amendment of the Senate President.

MS. DOBLON. Sir, may I add. In the August 25 testimony, I really said, “Actually, what was mentioned – I’m not really very sure how it was relayed to

me. But what I know is it is a C-5 Project.”

And in the testimony of Mr. Adriano, “Ang amin pong intention ay

magdagdag ng pondo doon sa original na nakalagay sa GAA.”

So, what is originally included is the C-5 and that was the intention. And

from that testimony of Mr. Adriano, we closely adhere to the instruction of the

office of Senator Villar. The intention was to add and that is what we give when

we provide the 200 million.

MR. FRANCISCO. If that is so the case, Madam Witness, why did you not just add 200 million or 400 million to the 200 million already allocated in the

General Appropriations Bill?

MS. DOBLON. Because of us, whether we present it as an additional to 200 to make it 400 or present it in a separate line item, it is just the same, an

addition.

If you will note in the General Appropriations Bill, there are similar entries

like that, not only in the 2008 but even in previous years. We don’t consider it as

a double entry but an addition.

MR. FRANCISCO. So, let us make this very, very clear, ha?

MS. DOBLON. Yes.

MR. FRANCISCO. In the General Appropriations Bill for the year 2008, there was an appropriation of P200 million for the construction of the C-5 Road

Extension, South Luzon Expressway to Sucat Road including right-of-way.

THE CHAIRMAN. That was the presidential proposal.

MR. FRANCISCO. Yes, Your Honor.

Now, what you’re saying now is that there was an instruction for you to

add to this P200 million.

MS. DOBLON. Yes, Your Honor.

MR. FRANCISCO. And that instruction came from?

MS. DOBLON. The office of Senator Villar which was relayed to me by Mr. Adriano.

MR. FRANCISCO. Okay. Now, instead of adding – You said that the instruction was to add P200 million and not P400 million. Is that correct?

MS. DOBLON. Two hundred million pesos.

MR. FRANCISCO. Two hundred million pesos. And instead of adding this P200 million to the item in the General Appropriations Bill of 200 million for

the same project, you –

MS. DOBLON. We presented it on a separate line.

MR. FRANCISCO. You presented it in a separate line.

MS. DOBLON. Yes, Your Honor.

MR. FRANCISCO. And this separate line is P200 million for the construction of the C-5 Road Extension from SLEX to Sucat Road including right-

of-way.

MS. DOBLON. Yes, Your Honor.

MR. FRANCISCO. So, after the General Appropriations Bill passed the Senate, there were two similar entries in the General Appropriations Bill both for

P200 million for the construction of the C-5 Road Extension from SLEX to Sucat

Road including right-of-way, is that a correct statement?

MS. DOBLON. Yes, Your Honor. There are two – one is the amendment and the other one is the one that was included in the General Appropriations Bill

and another one is our amendment.

THE CHAIRMAN. Incidentally, if I may interject, this corrects the impression that there is a double insertion. There was only one insertion or

amendment.

I guess the reason why the amendment of Senator Villar was not added to

the original budget allocation given by the President in its original submission of

the budget to Congress was to differentiate that original submission of the

President from the amendment of Senator Villar.

MS. DOBLON. Yes, sir, that’s true. We have to separate it because it would be easier for us to monitor that the amendment is carried.

Second is that in case the original amendment would be cut, then the

amendment of the Senator would be taken – we will ensure that it is carried.

SEN. LACSON. Clarification, Mr. Chairman.

THE CHAIRMAN. The gentleman from Cavite.

SEN. LACSON. It may not be a double insertion, I agree with the Chair. But it is obviously a redundant appropriation.

THE CHAIRMAN. Correct.

SEN. LACSON. Because the original 200 million in the National Expenditure Program or the President’s budget is already there and the

amendment introduced by the staff or the office of Senator Villar pertains to the

same stretch of roadonly it used the old or the new name of the street, di ba,

Carlos P. Garcia instead of C-5 Road Extension, is that correct?

MS. DOBLON. Yes, Your Honor, because we maintained the – When the General Appropriations Bill was submitted to the Senate, it is still – the name was

the construction of the C-5 Extension. And because that was the intention, we

maintained it in the Senate amendment.

SEN. LACSON. That is correct. But when the amendment was introduced, the amendment used or the proposed amendment used Carlos P.

Garcia Avenue or Blvd. to Sucat Road Paranaque, is that correct?

MS. DOBLON. The P. Garcia was used at the Bicameral to reflect the new name under an R.A.

SEN. LACSON. But when Senator Villar introduced the amendment, what is the name of the street that he used in the amendment?

MhSantos VII-2 October 6, 2009 12:51p.m. (p. 135)

MS. DOBLON. …He was adding to the existing line item in the General Appropriations Bill which is the construction of C5 Extension from SLEX to Sucat

Road.

SEN. LACSON. But was it introduced as an addition or additional appropriation to the original 200 million?

MS. DOBLON. It was introduced as an additional appropriation.

SEN. LACSON. Is it specifically mentioned in the amendment, in the proposed amendments?

MS. DOBLON. Sir, when we were discussing, it was an addition but we presented it separately.

SEN. LACSON. How could you introduce it as a separate appropriation when it is actually in addition to an existing or a proposed appropriation by the

Office of the President? It should be an additional amount of 200 million.

MS. DOBLON. To make it 400.

SEN. LACSON. To make it 400.

MS. DOBLON. Sir, as I have said, that we have presented it separately because at our end it is just an addition. It has the same project title. If you look

at it, it will be 200 plus 200.

SEN. LACSON. So it should have been introduced before the Bicam as additional 200 million to the original 200 million to make it 400. In other words,

the amendment should be, instead of 200 million, the amendment should be 400

million.

MS. DOBLON. Yes, sir.

SEN. LACSON. And not as a separate item of another 200 million.

MS. DOBLON. That’s one way of adding it. You add 200… Kasi, sir, ganito ho ‘yon.

SEN. LACSON. Oo nga eh.

MS. DOBLON. Ang ano namin is we have to monitor the amendments of the senators.

SEN. LACSON. Okay.

MS. DOBLON. And it is easier for us to monitor it if we put it on a separate line item.

SEN. LACSON. But you can still monitor if it is introduced, if it is an amendment introduced by a senator as an additional 200 million to the original

200 million. We can still monitor and identify the proponent.

MS. DOBLON. Sir, because if you will note that the urgent infrastructure including local road projects are amendments of the senators.

SEN. LACSON. Yes.

MS. DOBLON. So duon ho namin isinalin lahat ng amendments ng mga senators.

SEN. LACSON. Ang problema, the original proposal coming from the Office of the President napunta sa ibang item, hindi ba, hindi na duon sa urgent

infrastructure including local projects. Napunta sa ibang item eh. Ibang page

nga 536 eh, sa General Appropriations Act. ‘Yung amendment as introduced by

Senator Villar which the Senate adopted in Plenary nasa page 646.

TESTIMONY OF SEC. EBDANE AND SEC. ANDAYA COMMITTEE ON FINANCE JOINT WITH THE COMMITTEE ON PUBLIC WORKS L.Sapida VII-2 September 29, 2008 12:39P.M. 3 SEN ARROYO. Next slide. What is finished are those in the red lines, from somewhere in Caloocan going up to the red line and ends in – somewhere in Paranaque and Las Pinas. Are we agreed on that?

MR. EBDANE. Your Honor, there are still some… SEN ARROYO. No, no. I will go to what has not been fully developed. In

fact, you go to the next slide. (addressing the staff). All right. The red lines are those that have already been developed, while

the green lines are those that are not yet fully developed. Are we agreed on that? MR. EBDANE. Yes, Your Honor. SEN. ARROYO. All right. So we are now talking about that undeveloped

portion. We will not talk about the one in Malabon area but talk about only about the one in Sucat, Paranaque and Cavite portion. That’s on the right side of the slide. Now can you have the enlargement? Now can you put the colored portion? (addressing the staff). The first 200 million which was submitted by Malacanang to the House, did I understand you correctly that that would be spent, among others, for the flyover in the Sucat Road? That’s the first 200 million. L.Sapida VII-2 September 29, 2008 12:39P.M.

MR.EBDANE. Yes, Your Honor. Actually, we need 300 for that. We still

need 100. SEN. ARROYO. So that’s ongoing? MR. EBDANE. Yes, Your Honor. SEN. ARROYO. The money has been released? MR. EBDANE. Opo, opo. SEN. ARROYO. All right. Go ahead. Now, for the additional 200, which was appropriated by the Senate. Which

is the center of the controversy now, because this is an insertion of the senate—now, if I understood your testimony in answer to the question of Senator Roxas and Senator Legarda, that road will extend from the flyover over Sucat Road all the way down to the Coastal road. Up to that extent, are we agreed?

MR. EBDANE. Yes, Your Honor.

SEN. ARROYO. All right. So the 200 million was spent first for the Flyover I in Sucat which was- it is ongoing?

MR. EBDANE. Yes. Your Honor. SEN. ARROYO. The one in the Coastal Road which is the second 200

million, nothing has been spent there yet? MR. EBDANE. Yes, Your Honor.

L.Sapida VII-2 September 29, 2008 12:39P.M. SEN. ARROYO. However, the 200 million that was an insertion, will go to that project if it is released, the Coastal Road? MR. EBDANE. Actually, we requested that we spend that money on that site, Your Honor. SEN. ARROYO. This one for the Coastal Road? MR. EBDANE. Yes, Your Honor. SEN. ARROYO. May I ask Secretary Andaya why the amount has not been released? The second – your are not listening (addressing Secretary Andaya). For the second-because my time will be up eh. The additional 200 million, according to Secretary Ebdane, has not been released, So may I ask why it has not been released? MR. ANDAYA. Wala hong nagre-request. SEN. ARROYO. An if I may follow your testimony, the request will have to come from the Senate President and the Chair of the Finance Committee? …../las mhSantos VIII-2 September 29, 2008 12:49P.M. 1 SEN. ARROYO. ….and the chair of the Finance Committee. MR. ANDAYA. That’s one of the documents. SEN ARROYO. No, no, I’m basing it on this… MR. ANDAYA. Yes, Mr. Chairman. SEN ARROYO. So far, no request from the Senate President, no request from the Chair of the Finance Committee? MR. ANDAYA. None, none. SEN. ARROYO. So as of now, what has has spent is for the flyover in Sucat, but the Coastal Road has not yet been started because there has been no request for the release, Secretary Andaya? MR. ANDAYA. That’s correct.

SEN. ARROYO. Now, this is not really yours but—next page. The problem is that there is an allegation. – Secretary Ebdane, please look at this very carefully. I don’t think Secretary Andaya is involved in this. There is an allegation that the first 200 million for the Sucat Road is that one, inside the red line, red circle, and the black circle is the other 200 million. So 200 red circle, another 200 the black circle mhSantos VIII-2 September 29, 2008 12:49P.M. 2 circle. So may I ask you whether this allegation, this is the center of the controversy, is correct or not? MR. EBDANE. Sir, if I do that, I’ll go to jail. So it cannot happen, no, Your Honor. SEN. ARROYO. So in other words, it cannot be for the same project, for the same flyover Sucat Road? MR. EBDANE. Yes, Your Honor. And even if it may have been described that way, we still have to request for clearance and we would rather have it realigned to other sites along the project. SEN. ARROYO. Next slide. So what happens now? There are two different projects, two different allocations. Can we agree on that, Secretary Ebdane?

MR. EBDANE. I would welcome that, Your Honor.

SEN. ARROYO. If it is released? MR. EBDANE. If it will be released, Your Honor. SEN. ARROYO. Now, I supposed that… this is the heart of the

controversy. So much has been talked, so much discussion when the simple fact is what appears now on the screen, two projects, two different locations. And what has been, what is ongoing is the one in flyover 1, Sucat Road; while the one in the Coastal Road which goes to Cavite has even been started, no monies has been released, Secretary Ebdane?

COMMITTEE ON FINANCE JOINT WITH THE COMMITTEE ON PUBLIC WORKS mhSantos VIII-2 September 29, 2008 12:49P.M. 3

MR. EBDANE. That’s right, Your Honor. SEN. ARROYO. So with this, I wanted to put this PowerPoint presentation

because so much talk has been going on about corruption. Corruption in the Senate because it is in the Senate that there was an insertion.

THE CHAIRMAN. The Senator has three more minutes.

SEN. ARROYO. In fact, I need not proceed anymore. I will allow…If

Senator Cayetano would like to interject, then I will give him my time. SEN. CAYETANO (A). Mr. Chairman, I’ll just take one question from the

time of Senator Arroyo while the map is there. Secretary, sinabi n’yo puwedeng mag-reallign? Ang nakalagay kasi sa

budget, c-5 to SLEX, Sucat ‘no? Meaning kung four billion ang project, sometimes while we put in the budget a nomenclature like that para kahit saan diyan sa strip na ‘yan puwede n’yong gawin. Depende sa program of work n’yo, tama po ba?

MR. EBDANE. Yes, Your Honor. SEN. CAYETANO (A). Meaning, it is better for the Department to have

that flexibility. MR. EBDANE. Opo, opo. SEN. CAYETANO (A). Meaning po, ang na-insert ni… kung na-insert or

na-propose ng Senado is 300 instead of 200 million,

THE TESTIMONY OF SECRETARY ANDAYA

Committee on Finance Joint with the Committee on Public Works, 29 September

2008 10:19 am p. 44-46

Sen Lacson: -- the second 200 million, you also stated na – and you took the matter with te President during the Tuesday’s Cabinet meeting, the day

following our Monday’s DBCC, ‘di ba?

Mr. Andaya: Correct.

Sen. Lacson: Eto yung sinasabi ninyo doon – eto mga media releases nyo na ito. Please correct me if I’m wrong ha. After the DBCC hearing, Secretary

Andaya was quoted as saying, “I repeat, the President did notask for this. This

was approved by Congress. We only proposed (referring to the budget) and in

our proposal, there was no double insertion.” Sa proposal ninyo, walang double

insertion. Okay? Do you confirm that statement?

Mr. Andaya: Yes.

Sen. Lacson. And then further, he stated that, “He discussed the double entry in passing with President Gloria Macapagal Arroyo during a Cabinet

meeting on Tuesday. She (referring to the President) made sure that it will not be

released. We assured her that it will not be released. Secretary Andaya even said that the President impounded the release of the 200 million redundant appropriation or double netry.” Would you confirm that statement?

Mr. Andaya. Yes.

Sen. Lacson: In other words, the second 200 million has not been released and you have no intention of releasing the second 200 million as proposed by Senate President Villar during the period of amendments, individual

amendments, sa Finance Committee Chairman as mentioned earlier by senator

Enrile.

Mr. Andaya: Opo, totoo po yon na-

xxx

THE TESTIMONY OF FORMER BUDGET SECRETARY DIOKNO

Committee on Finance Joint with the Committee on Public Works, 29 September

2008 10:19 am p. 47-49

The Chairman. With your permission, Mr. Senator, since Secretay Diokno is here, at the request of Senator Legarda, there was also a double insertion,

double allocation in the 2000 budget. I think at that time, you were the Budget

Secretary. I just would like to know howthe Budget Office handled this? This is in

connection with San Miguel- Constancia-Igcawayan-Cabano Road, San Lorenzo.

Of course, the amount is not that much, 1,500,000 national artertial secondary

and local roads and bridges.

And then, another amount-same amount, San Miguel-Constancia-

Igcawayan-Cabano Toad, San Lorenzo, 1,500,000 national arterial secondary

and local roads and bridges. This appeared in the 2000 General Appropriation

bill. How did the Budget Office handled this at that time?

Mr. Diokno. I would have to check. That was 8 years ago, Your Honor. I have to-

The Chairman. Yes. So- that’s why I said, this is phenomenon is not new.

Mr. Diokno. But this is, Your Honor, the procedure here really is to-and this was already brought up by Senator Roxas, there is a statement of difference.

It will be very transparent, whether there has been a double entry or not, or

double appropriation. And so it’s a matter of bringing it up with the President and

saying should we veto this or should we allow it and, maybe at that time, the

decision was just allow it because the cost of the project maybe-more than 2

million that was appropriated.

But I think the elegant procedure here, if there was a request from the

Senate President, was to just add 200 million to the original request of the

President. So there will be no confusion whatsoever. Because this is 100 pages

apart, the first 200 million. The second 200 million was about 200 pages apart.

The other comment I have here, if you may allow me is that, I’m surprised that there was a decision to impound the 200 million because the total project cost, I understand is, at least 2 billion. So why are you impounding the 200 million-

The Chairman. Four billion-the total C5 constructioncost is 4.29 billion, I think. Correct, Mr. secretary?

Mr. Ebdane. Your Honor, its actually 4.449 billion.

Mr.Andaya. So because-

The Chairman. So 4.449 billion of which 1 billion had already been released plus these two amounts now of-aggregate of 400 million.

Mr. Diokno. Because, Your Honor, why would you impound the 200 million which were already in the 2008 budget and then the following year, now in

the 2009 budget, there’s an additional request for 250 milloin.

Sen. Lacson: One hundred eighty seven-

Mr. Diokno. I think that’s the way it should have been done. If it’s a two projects under CP Garcia, that’s the way it should be done, the way it was done

in the 2009 proposal. There’s a total and then A and B-two projects. But the way

it was done here, it’stwo separate-practically the same nomenclature, except for

CP Garcia and the other one, C5.

OPENING STATEMENT OF SENATOR MIRIAM DEFENSOR-SANTIAGO

DELIVERED DURING THE HEARING OF THE COMMITTEES ON FINANCE AND PUBLIC WORKS ON 29 SEPTEMBER 2008 (10:19 AM P. 16 TO 19, MHBALAGNE II-1)

Sen Defensor-Santiago: As one of the Vice Chairpersons of the Senate Committee on Finance, I would like to make, with your indulgence, an opening

statement which is actually a point of order or a point of information. The bad

practice of congressional insertions is actually a poor copy of a very bad practice

of the United States Congress. But in the U.S. Congress, what we in the

Philippines call congressional initiative or congressional insertion, in America, is

called an “earmark.”

If you watched the Obama-McCain debate, first round on TV, you would

have noticed that they spent several minutes debating the question of earmarks,

and that earmarks has been a particular issue with respect to Vice President ial

candidate Sarah Palin.

First of all, I think we have to educate our TV audience on what is the

meaning of a congressional insertion or a congressional initiative. Here is how an

“earmark” is defined. For congressional insertion and congressional initiative, on

one hand, an earmark, on the other hand are the same. Congressional earmarks

are often defined loosely as anonymously authored guarantees of national funds

to particular recipients in appropriations-related documents.

In America, the Federal Office of Management and Budget defines it in

this manner, “Earmarks are funds provided by Congress for projects or programs

where the congressional direction, which is found either in a bill, that is to say in

the budget or the language of the Bicam Conference Committee Report,

circumvents Executive Branch merit-based or competitive allocation processes or

specifies the location or recipient or otherwise curtails the ability of the Executive

branch to manage critical aspects of the funds allocation process.”

So you can see from this definition alone by the Federal Office of

Management and Budget, understandably it is part of the Executive Branch, that

this definition frowns on the practice of earmarking.

And finally, since we have heard from the Executive Branch, let’s look at

how the Legislative branch in America defines an earmark. Here is the definition

by the Congressional Research Service, the public policy research arm of the

U.S. Congress. “Earmarks are provisions associated with legislation which are

either appropriations or general legislation”—meaning to say, budget or not –

“that specify certain congressional spending priorities or in revenue bills that

apply to a very limited number of individuals or entities. Earmark may appear in

the legislative text or report language,“ that is to say in the Bicam Conference

Committee Report on the budgetand the joint explanatory statement

accompanying a conference report.

So earmarks or congressional initiatives, which we are probing today in

aid of legislation, are constituting a major issue in the American presidential

elections, no less, that should underscore the significance of our proceedings

today. As a result of the earmark controversy, in 2006, the Senate and the House

passed their separate versions of the 2006 Legislative Transparency and

Accountability Act. The Senate Bill or the Senate version provided:

• All Senate bills or conference report should include a list of all earmarks in the measure.

• Members of the Congress who propose an earmark should be identified

• Earmark should be accompanied by an explanation of its essential government purpose.

• All bills or conference reports including the list of earmarks should be available to the Senate and to the general public on the Internet for at

least 24 hours before its consideration.

• Senators should be given the right to remove earmarks from any bill that moves on to the floor. An earmark could be removed from legislation with

the support of a certain number of senators without striking down the

entire bill.”

xxx

THE TESTIMONY OF CARMELITA BACOD, FORMER REVENUE DISTRICT OFFICER OF PARANAQUE CITY

(CFDRIZ IV-2 September 22, 2009 12:23 AM 2)

Pertaining to Barangay san Dionisio found on page 9 of the 1998 Revised Zonal

Valuation? Is that your testimony?

MS. BACOD. Yes.

MR. FRANCISCO. And you were telling the- it is because you did not

know that Sucat Road and Dr. A. Santos Avenue are one and the same? Is that

it?

MS. BACOD. May I take- Your Honor, may I take a look at my first—the

first certification which I- the 4,000.

MR. FRANCISCO. Witness looking over the certification dated June 25,

2002.

MS. BACOD. The first certification which I issued on June25 is classified

as general purpose. So Sucat Road is a long road and somewhere along that

road it’s not—some area is commercial, some area residential, some area is …

So along that area, some area is commercial, some area residential, some area

is- what do you mean it’s for general purpose, it’s not fully developed. So that’s

the reason why it’s 3,000. So some are commercial so it’s 30,000. Where’s the

other certification? Is there another certification? No more.

MR. FRANCISCO. Let us go back to this June 25, 2002 certification. You

issues a certification that the zonal valuation of this property covered by original

certificate of title No. 0-363 located in Barangay San Dionisio is P3,000 per

square meter based on the…..

(CFDRIZ IV-2 September 22, 2009 12:23 AM 3)

Revised Zonal Valuation of 1998, and you told the Committee that if the street is

not specified in the request for certification, then you use the caption “All Other

Streets” in the Revised Zonal valuation, is that right?

MS. BACOD. Yes, Your Honor.

MR. FRANCISCO. So that is why, for this certification dated June 25,

2002, you used “All Other Streets, then General Purpose 3,000 per square

meter.” And that is correct?

MS. BACOD. Okay, no question about it.

MR. FRANCISCO: Now, let us go back to the certification dated June 17,

2003. This certification states that the property is located along Sucat Road in

barangay San Dionisio, Panaque City, correct?

MS. BACOD. Uh-huh.

MR. FRANCISCO. And you testified earlier that you did not know that

Sucat Road is the former name of Dr. A. Santos Avenue. Is that correct?

(CFDRIZ IV-2 September 22, 2009 12:23 AM 4)

MS. BACOD. Ah, no, no. Sucat Road That’s the one whe turn from the

expressway, you turn left, go straight, that’s the Sucat Road, that’s the San

Dionisio, that’s the Sucat Road.

MR. FRANCISCO. No, from the expressway that is…..

MS. BACOD. Turn left, that is Sucat Road.

SEN. LACSON. Turn left depending on where you’re coming from. If

you’re coming from San Pablo, you turn left. If you’re coming from Quezon City,

you turn right.

MS. BACOD. Ah, yes, that’s San Dionisio, the Sucat Road. Okay, that’s

already Sucat Road.

MR. FRANCISCO. That is Sucat Road and you were telling the Honorable

Committee that- no, let me again ask you. Is Sucat Road found in this listing of

streets and subdivision on page 9 of the Revised Zonal Valuation of 1998?

MS. BACOD. No, it’s not here.

MR. FRANCISCO. It is not there.

MS. BACOD. Yes, I must correct that. I know Sucat Road is Don A.

Santos Avenue because I was mistaken because every time I come from the

office I pass by that way from the office—from Coastal Road, I pass that way

from the office along Coastal Road. I am mistaken because yung my way from

San Pablo that’s yung going left, that’s the Sucat Road.

(CFDRIZ IV-2 September 22, 2009 12:23 AM 5)

MR. FRANCISCO. Okay, So you are confirming now to the Honorable

Committee that you knew in 2003 that Sucat Road is also Dr. A. Santos Avenue?

MS. BACOD. Yes, Your Honor.

MR. FRANCISCO. Now, if we go by this listing of streets found on page 9

of the Revised Zonal Valuation of 1998, will you state, for the record, what is the

zonal valuation of properties in Dr. A. Santos. Avenue, San Dionisio?

MS. BACOD. Four thousand five hundred.

MR. FRANCISCO. Four thousand five hundred?

MS. BAOD. Yes, Your Honor.

MR. FRANCISCO. Okay, It’s 4,500 per square meter.

MS. BACOD. Yes, Your Honor.

MR. FRANCISCO. And in this particular instance, since the street is

specified, you’re supposed to apply the zonal valuation pertaining to the street

listed in the Revised Zonal valuation of 1998?

MS. BACOD. Yes, Your Honor.

MR. FRANCISCO. And that is P4,500?

MS.BACOD. Yes, Your Honor.

MR. FRANCISCO. Right. And P4,500 per square meter, right?

MS.BACOD. Yes, Your Honor.

(CFDRIZ IV-2 September 22, 2009 12:23 AM 6)

MR. FRANCISCO. Only. In this certification dated June 17, 2003, the

zonal valuation is listed at 30,000 per square meter?

MS. BACOD. Yes, Your Honor.

MR. FRANCISCO. Based on the Revised Zonal Valuation of 1998.

MS. BACOD. Yes.

MR. FRANCISCO. Right?

MS. BACOD. Yes, Your Honor.

MR. FRANCISCO. But you will agree with me that there is no entry in the

Revised Zonal Valuation of 1998 particularly page 9 pertaining to Barangay San

Dionisio which reads, “Sucat Road, Barangay San Dionisio, P30,000 per square

meter.”

MS. BACOD. Yes, Your Honor.

MR. FRANCISCO. And you cannot recall how this certification was

obtained from your office, right?

MS. BACOD. This certification was obtained from-I issued the certification.

MR. FRANCISCO. Yes, but you cannot recall the circumstances when you

issued that certification.

MS. BACOD. No, I cannot recall who requested the certification and the

purpose why they requested this certification.

(CFDRIZ IV-2 September 22, 2009 12:23 AM 7)

MR. FRANCISCO. And it was possible that this certification was

prepare3d by your assistant and you signed it. Is that what you’re telling the

Honorable Committee?

MS. BACOD. Maybe, maybe.

MR. FRANCISCO. But if you are to make another certification and you

were asked for the zonal valuation of San Dionisio, Sucat Road, Barangay San

Dionisio, what will you state?

MS. BACOD. I will state the same facts as contained in the same

certification.

MR. FRANCISCO. Which is?

MS. BACOD. That the zonal value of the same property will still be 30,000

per square meter.

MR. FRANCISCO. Even if that is not found in the Revised Zonal Valuation

of 1998.

MS. BACOD. Ye3s, because in this page 9 of san Dionisio…/cfd

(GUINHAWA V-1 September 22, 2009 12:33 AM 1)

MS. BACOD. ….in this page 9 of San Dionisio, evem if the zonal value of

Don Antonio vaenue- the zonal value is 4,500, it is residential. But we have-on

page 9, we have commercial/ residential valuation of P30,000. And for sure my

basis for classifying this property as commercial/regular is the tax declaration

presented to us as issued by the Assessor’s Office classifying the same property

as commercial/residential as to its actual use, Your Honor.

MR. FRANCISCO. Okay, Now you’re telling the Honorable Committee that

you used as basis this 30,000 per square meter.

MS. BACOD. Yes.

MR. FRANCISCO. ….. zonal valuation of commercial properties

pertaining to a different street. Can you read for the record that street?

MS. BACOD. “B. Aquino Avenue, vicinity is A. Bonifacio; classification-

commercial/residential. The zonal valuation is 30,000 per square meter.”

MR. FRANCISCO. Okay. And you will confirm to the Honorable

Committee that that street is not Sucat Road or Dr. A Santos Avenue, right?

MS. BACOD. Yes.

(GUINHAWA V-1 September 22, 2009 12:33 AM 2)

MR. FRANCISCO. In fact, that commercial area at A. Bonifacio is about

two kilometers from the entrance of Sucat Road at Barangay San Dionisio, right?

MS. BACOD. Yes, but it’s still under Barangay San Dionisio.

MR. FRANCISCO. Yes. And can you point out where in this Department

Order No. 16-98, or can you point out any other- any law, any circular, any

department order which authorized you to do that?

MS. BACOD. There is a regulation but I can’t remember. If you may allow

me to just ask—we will just ask people from the BIR now if they can make

research for me.

MR. FRANCISCO. Okay, Now you used the zonal valuation of a different

street which is commercial…..

MS. BACOD. Within, yes.

MR. FRANCISCO. ….Within Barangay San Dionisio but not-but a few

kilometers from the actual location of the property.

MS. BACOD. Yes, yes.

MR. FRANCISCO. That’s what you did.

MS. BACOD. Yes, Your Honor.

MR. FRANCISCO. Now. Can you state for the record why did you do

that?

TESTIMONY OF DPWH SPECIAL AGENT CARLOS BACOLOD COMMITTEE OF THE WHOLE (P.S. RESOLUTION NO.706) LPamorca V-1 Octorber 1, 2009 11:01 A.M. 3

THE CHAIRMAN. Kaya nga, isa ka, oo. Hindi naman isang araw lang yung kuwan mo duon, ginamit mo para mamili. Pag namili ka ng lupa matagal-

tagal yon, eh, kahit isang lote lang. Namili ka ng apat na lote, palagay ko

buwanan yon bago mo natapos. Eh hindi kami maniniwala na hindi mo alam ang

kundisyon nuong lugar na kung saan mo binili yung mga lupa dahil matagal

mong pinupuntahan yang lugar na yan, kinakausap yung may-ari at nine-

negotiate yung presyo. Kaya huwag kang- huwag—sasabihin mo sa amin kung

ano ang pangyayari. Hindi ka naman parurusahan dito eh. Pag nagsinungaling

ka at natuklasang nagsinungaling ka ay ikukulong ka rito. Sige.

SEN. HONASAN. Mr. Chairman……

THE CHAIRMAN. O, please.

SEN. HONASAN. ….if I may proceed ‘no.

Mr. Bacolod, ngayon tatanungin kita. Ano ang trabaho – ano yung pwesto

mo bago mamatay yung boss mo?

MR. BACOLOD. Special Agent II, Your Honor.

SEN. HONASAN. Special Agent. Iba yun sa Special Investigator?

MR. BACOLOD. Iba yun, Your Honor.

SEN. HONASAN. Okay. Yung dating special investigator, yung boss mo na namatay?

MR. BACOLOD. Yes, sir.

SEN. HONASAN. Ano ang trabaho ng special investigator at special agent sa mga ganitong uri ng transaction as far as DPWH is concerned?

LPamorca V-1 Octorber 1, 2009 11:01 A.M. 4

MR. BACOLOD. In layman po, sir, ako po yung kanyang utusan.

SEN. HONASAN. Yun, okay.

MR. BACOLOD. Utusan n’ya ako sa trabaho na yun – yung do that, do that, do that, ganuon.

SEN. HONASAN. Okay, okay, naiintindihan natin yun. So ano ang mga kautusan na ayon sa tungkulin, ha, ng isang special agent ang ginawa mo? Ano

ang mga iniutos saiyo na may kinalaman sa transaction na ito nuong mga

panahon na iyon? At itutuloy ko na, ha, para isang buhos na lang ano. Nuong

mamatay siya, sino na ngayon ang nag-uutos sa ‘yo? Naging Special

Investigator ka na?

MR. BACOLOD. Yung pinaka-chief namin, Your Honor. Meron kasi kaming legal officer, eh.

SEN. HONASAN. Okay. So ito na ngayon ang nag-uutos sa ‘yo?

MR. BACOLOD. Yon nga.

SEN. HONASAN. So pwede bang ipaliwanag mo kung ano ang ginawa mo nuong special agent ka, tapos namatay yung boss mo sa special investigator.

Nuong mag-assume ka special investigator, ano ang mga kautusan na ibinigay

sa ‘yo na ginawa mo na may kinalaman sa transaction na ito?

MR. BACOLOD. Basically, ginampanan ko yung trabaho ng dating amo ko, yung magne-negotiate, mag-o-offer po sa mga affected

LPamorca V-1 Octorber 1, 2009 11:01 A.M. 5 Property owners at magre-request po ng zonal valuation sa BIR. At pag naayos

na po ang mga dokumento, magkakaroon po ng Deed of Sale, magpi-

pirmahan…

SEN. HONASAN. Okay, dahandahanin natin ito para maintindihan ko. Pag sinabi mong ayos na yung dokumento, ano ang ibig sabihin ng ayos na ang

dokumento?

MR. BACOLOD. Ang may-ari po nakapagsubmit na siya ng mga list of necessary documents. Pag kumpleto na po yun, iyon na po, ginagawa na po

namin yung Deed of Sale.

SEN. HONAHAN. Okay. Detalyehin natin ito ha para malinaw.

MR. BACOLOD. Yes Sir.

SEN. HONASAN. Ano itong mga necessary documents?

MR. BACOLOD. Puwede bang makuha yung kodigo ko, Your Honor?

SEN. HONASAN. Sige lang, sige lang.

THE CHAIRMAN. Tax declaration, di ba?

MR. BACOLOD. Eto. Actually, Your Honor, meron kaming checklist of documents per Department Order 185, Series of 2002.

THE CHAIRMAN. O, sige.

SEN. HONASAN. Mr. Chairman - - Mr. Bacolod, meron ka kamong checklist?

LPamorca V-1 Octorber 1, 2009 11:01 A.M. 6

MR. BACOLOD. Yeah.

SEN. HONASAN. Yeah, okay. So ibig sabihin n’yan pag may checklist, ito yung detalyado…

MR. BACOLOD. Mga necessary documents.

SEN. HONASAN. Ayon, necessary, at kasama ito duon sa sinasabi mong mga kautusan na ibinigay sa ‘yo na gagawin mo?

MR. BACOLOD. Yes, sir.

SEN. HONASAN. Okay. Sige, please proceed.

MR. BACOLOD. Usually, ang mga dokumento na hinihingi namin yung titulo, tax declaration, tax clearance, tapos yung parcellary plan na kami po ang

magpo-provide ho ng parcellary plan. At ang iba dito ay more on office function

na, yung tinatawag naming na certification from the planning service na talagang

tinamaan yan. Kasi ang magbibigay ng certification na tinamaan, yung aming

isang division, kung sino ang may hawak ng project. Yun ang magbibigay ng

certificate ng isang project engineer bago namin patakbuhin yan, at isang

certification po na walang kaso yung lupa. Tapos, yon na po.

SEN HONASAN. Okay, pag kumpleto na at ayos na yung mga dokumento batay dito sa checklist, pipirma ka na?

LPamorca V-1 Octorber 1, 2009 11:01 A.M. 7 SEN. HONASAN. At ano ang ibig sabihin nuong pirma mo?

MR. BACOLOD. Ang pirma naming ho bilang witness ho. Dalawa kaming pipirma, tapos naka-attach na yung mga documents. Pag nakapirma kaming

witness, ako at saka yung Boss ko, aakyat na pos a accounting for funding, then

pag may funding na aakyat na po sa assistant regional director namin, then sa

regional director namin.

SEN. HONASAN. Okay. Thank you, Mr. Bacolod.

MR. FRANCISCO. Thank you, Your Honor.

Mr. Bacolod, ito yung Las Pinas-Paranaque link road, hindi ba?

MR. BACOLOD. Yes.

MR. FRANCISCO. Pamilyar ka dito?

MR. BACOLOD. Opo.

MR. FRAMCISCO. Ito yung Quirino Avenue, ito yung Sucat Road, di ba?

MR. BACOLOD. Opo.

MR. FRANCISCO. Now noong 1999, sabi mo nga utusan ka lang noong Boss mo, yung special investigator, ‘di ba?

MR. BACOLOD. Yeah.

DETERMINATION OF JUST COMPENSATION

The amount of just compensation is totally determined by the government

using the valuation of the properties and guided by existing laws and regulations

ordained by the government.

It is the government that fixes the valuation of properties. The

government is guided by the provisions of Republic Act 8974 and Administrative

Order 50 in assessing the value of the property and the amounts to be paid to

owners of properties taken for public use. In brief, the said regulations provide

that the “size, shape and location” of the affected property are among the factors

to be considered in the determination of just compensation. The pertinent

sections of the aforesaid law states:

X X X

Section 1. Declaration of Policy. - Article III,

Section 9 of the Constitution states that private

property shall not be taken for public use without just

compensation. Towards this end, the State shall

ensure that owners of real property acquired for

national government infrastructure projects are

promptly paid just compensation.SEC. 2. National

Government Projects. - The term “national

government projects” shall refer to all national

government infrastructure, engineering works and

service contracts, including projects undertaken by

government-owned and controlled corporations, all

projects covered by Republic Act No. 6957, as

amended by Republic Act No. 7718, otherwise known

as the Build-Operate-and-Transfer Law, and other

related and necessary activities, such as site

acquisition, supply and/or installation of equipment

and materials, implementation, construction,

completion, operation, maintenance, improvement,

repair, and rehabilitation, regardless of the source of

funding

X X X

Sec. 4. Guidelines for Expropriation

Proceedings. - Whenever it is necessary to acquire

real property for the right-of-way or location for any

national government infrastructure project through

expropriation, the appropriate implementing agency

shall initiate the expropriation proceedings before the

proper court under the following guidelines:

(a) Upon the filing of the complaint, and after

due notice to the defendant, the implementing agency

shall immediately pay the owner of the property the

amount equivalent to the sum of (1) one hundred

percent (100%) of the value of the property based on

the current relevant zonal valuation of the Bureau of

Internal Revenue (BIR); and (2) the value of the

improvements and/or structures as determined under

Section 7 hereof;

(b) In provinces, cities, municipalities and other

areas where there is no zonal valuation, the BIR is

hereby mandated within the period of sixty (60) days

from the date of the expropriation case, to come up

with a zonal valuation for said area; and

(c) In case the completion of a government

infrastructure project is of utmost urgency and

importance, and there is no existing valuation of the

area concerned, the implementing agency shall

immediately pay the owner of the property its

proffered value taking into consideration the

standards prescribed in Section 5 hereof.

Upon compliance with the guidelines above-

mentioned, the court shall immediately issue to the

implementing agency an order to take possession of

the property and start the implementation of the

project.

Before the court can issue a writ of possession,

the implementing agency shall present to the court a

certificate of availability of funds from the proper

official concerned.

In the event that the owner of the property

contests the implementing agency’s proffered value,

the court shall determine the just compensation to be

paid the owner within sixty (60) days from the date of

filing of the expropriation case. When the decision of

the court becomes final and executory, the

implementing agency shall pay the owner the

difference between the amount already paid and the

just compensation as determined by the court.

Sec. 5. Standards for the Assessment of the

Value of the Land Subject of Expropriation

Proceedings or Negotiated Sale. - In order to facilitate

the determination of just compensation, the court may

consider, among other well-established factors, the

following relevant standards:

(a) The classification and use for which the property is

suited;

(b) The developmental costs for improving the land;

(c) The value declared by the owners;

(d) The current selling price of similar lands in the

vicinity;

(e) The reasonable disturbance compensation for the

removal and/or demolition of certain improvement on

the land and for the value of improvements thereon;

(f) This size, shape or location, tax declaration and

zonal valuation of the land;

(g) The price of the land as manifested in the ocular

findings, oral as well as documentary evidence

presented; and

(h) Such facts and events as to enable the affected

property owners to have sufficient funds to acquire

similarly-situated lands of approximate areas as those

required from them by the government, and thereby

rehabilitate themselves as early as possible.

Sec. 6. Guidelines for Negotiated Sale. -

Should the implementing agency and the owner of the

property agree on a negotiated sale for the acquisition

of right-of-way, site or location for any national

government infrastructure project, the standards

prescribed under Section 5 hereof shall be used to

determine the fair market value of the property,

subject to review and approval by the head of the

agency or department concerned.

X X X

Under law, should the government expropriate private property, the

landowner has to be compensated for his land based on the current zonal

valuation, which is around 40% lower than current market value. The zonal

valuation is determined by the Assessor’s Office, which is a government office.

This valuation is the basis for the Real Estate Tax and Capital Gains Tax.

In the specific case of Brittany Corporation when a property in Paranaque

was taken by the government for its road construction and extension project, the

realty involved has a 56.11 meter frontage along Sucat Avenue. It is a prime

property and therefore, more expensive and costs larger just compensation.

Republic of the Philippines

SUPREME COURT Manila

THIRD DIVISION

G.R. No. 76490 October 6, 1995

ISAGANI SABINIANO, petitioner, vs. THE HON. COURT OF APPEALS

and PEOPLE OF THE PHILIPPINES, respondents.

G.R. No. 76558 October 6, 1995

RODOLFO MARTINEZ, petitioner, vs. THE HON. COURT OF APPEALS and PEOPLE OF THE PHILIPPINES, respondents.

VITUG, J.:

These two petitions for review on certiorari, consolidated pursuant to this Court's resolution of 17 May 1995, 1were spawned by the 26th August 1986 decision 2 of the Court of Appeals affirming in toto the judgment of the then Court of First Instance of Rizal, Branch XVIII, in Quezon City, 3 disposing of Criminal Case No. Q-2655 thereat in this wise:

WHEREFORE, the Court finds the accused Delfin Mamboyo, Vedasto Martinez, Isagani Sabiniano , Pedro Velasco and Rodolfo Martinez, guilty beyond reasonable doubt of the crime of Estafa thru Falsification of Public Document, and there being neither mitigating nor aggravating circumstances, sentences each of the accused to an indeterminate penalty of TWO (2) YEARS, FOUR (4) MONTHS and ONE (1) DAY of Prision Correccional as MINIMUM to TEN (10) YEARS and ONE (1) DAY ofPrision Mayor as MAXIMUM, to pay a fine of P5,000.00 each, and to indemnify the Republic of the Philippines the amount of P9,775.00, with interest at the legal rate, and to pay the costs. Without subsidiary imprisonment.

SO ORDERED. 4 (Emphasis supplied.)

Petitioners Isagani Sabiniano (in G.R. No. 76490) and Rodolfo Martinez (in G.R. No. 76558) were charged, along with Delfin Mamboyo, Vedasto Martinez and Pedro Velasco, with the crime of malversation of public funds through falsification of public document in an information that read:

That in or about and during the period comprising the month of July 1968 and/or immediately thereafter, in Quezon City, Philippines, accused Delfin Mamboyo, Vedasto Martinez, Isagani Sabiniano and Rodolfo Martinez, then employed as Chief

Accountant, Auditor, Chief Budget and Fiscal Division, and Casual Employee, respectively, of the Bureau of Lands, conspiring and confederating with their co-accused, Pedro Velasco, a public officer then employed as Cashier III of the Bureau of Lands, who by reason of the duties of his office is accountable for public funds, did then and there, wilfully, unlawfully and feloniously, with intent of gain, falsify two (2) vouchers in the total amount of P9,775.00 in favor of one EUTIQUIO HEDROSELLO, purportedly for expenses incurred for surveillance work, making it appear that such work and the expenses were duly authorized, said accused knowing fully well that EUTIQUIO HEDROSELLO had no such authority nor such amount actually expended, and said accused, pursuant to their conspiracy, prepared and approved the corresponding Treasury Warrants in payment of said amount, and thereafter encashed said Treasury Warrants, misappropriating and converting the amount they received for their own personal use and benefit, to the damage and prejudice of the Republic of the Philippines in the aforestated amount, Philippine Currency.

CONTRARY TO LAW. 5

Condensed hereunder are the material facts of the case found by the trial court.

On 18 July 1968, the Bureau of Lands processed two traveling expense vouchers in the amounts of P4,890.00 and P4,885.00 for surveillance work that was said to have been undertaken by a certain Eutiquio Hedrosello. The vouchers indicated that due approval for payment was given by Laureano Romero, confidential aide of then Vice-President and, concurrently, Secretary of Agriculture and Natural Resources Fernando Lopez, and Cresencio Balasbas, the Assistant Chief of the Administrative Services of the Bureau. The vouchers described the character of the expenses to be in —

Payment of expenses incurred as under cover work from April 1 to May 15, 1967 for the surveillance conducted by one as per instruction from the office of the Secretary regarding land anomalies in the Bureau of Lands in hiring private car or jeepney while the suspect is under surveillance in every places (sic) the latter goes and treating witnesses in the amount of . . . (Exh. "A"). 6

The accounting division accordingly prepared Treasury Warrant No. BO2.285.701 in the sum of P9,775.00. The treasury warrant was signed by Vedasto Martinez, as auditor, and petitioner Sabiniano, as chief of the budget and fiscal division. Petitioner Rodolfo Martinez, a casual employee of the Bureau of Lands, approached Pedro Velasco, the Bureau's cashier in its office at the Casman Building in Quezon City, and asked the latter to encash the treasury warrant. Since Velasco had then no available cash, his help was instead sought by petitioner Martinez to have the treasury warrant encashed at the Bureau of Treasury. Velasco agreed but, not knowing the payee (Eutiquio Hedrosello) personally, he asked petitioner Martinez to endorse the warrant. Velasco then introduced petitioner Martinez to the teller who, in turn, asked Velasco to likewise endorse the warrant. 7 The warrant was thereupon encashed.

Vice-President Lopez meanwhile had heard about rampant anomalies in the incurrence of "travel expenses" in the Bureau of Lands which prompted him to request the National Bureau of Investigation to look into the matter. The investigation ultimately triggered, among other things, the filing of charges against the several accused in Criminal Case No. Q-2655.

The issues, according to the trial court, could be seen to focus on the following questions: "(1) Were the vouchers (Exhs. 'A' and 'B'), including the originals which disappeared, falsified? (2) Was there conspiracy among the accused in this case? (3) What crime was committed — malversation thru falsification or only estafa thru falsification?" 8

Responding to the issues in seriatim, the trial court , after noting the disappearance of the originals of the vouchers, held that the vouchers had indeed been falsified and that the signature of Romero and Balasbas were forgeries. In concluding that all the accused should be held equally guilty, the trial court felt that the evident "inclination of Vedasto Martinez, Sabiniano and Mamboyo to hurriedly process the vouchers in the face of irregularities, and the cooperation extended by Velasco to encash the warrant" sufficed to indicate that they were all in conspiracy with one another. It would be difficult, observed the court, to perceive how Rodolfo Martinez, a mere casual employee, "could have engineered such an operation without the cooperation of his co-accused."

The trial court ruled that the crime committed was estafa thru falsification of public document, instead ofmalversation thru falsification of a public document, because "misappropriation of funds for which a public official is not accountable constitutes estafa rather than malversation." 9

An appeal was interposed by all the accused to the Court of Appeals which affirmed, in due course, the decision of the trial court. 10 Petitioners Isagani Sabiniano and Rodolfo Martinez are now before this Court seeking a further review of their conviction.

G.R. No. 76490

Petitioner Sabiniano, in praying for his acquittal, avers that his alleged participation, i.e., affixing his signature on the treasury warrant, was part of his official duties and one that he had to perform in this case particularly in obedience to an order issued by a superior. He asserts that there was no other evidence on record that could possibly link him to a conspiracy with his co-accused.

There is merit in petitioner's plea.

Apart from petitioner's signature on the treasury warrant, nothing else of real substance was submitted to show petitioner's alleged complicity in the crime. A mere signature or approval appearing on a voucher, check or warrant is not enough to sustain a finding of conspiracy among public officials and employees charged with defraudation. Proof, not mere conjectures or assumptions, should be proffered to indicate that the accused had taken part in, to use this Court's words in Arias vs. Sandiganbayan, the "planning, preparation and perpetration of the alleged conspiracy to defraud the government" for, otherwise, any "careless use of the conspiracy theory (can) sweep into jail even innocent persons who may have (only) been made unwitting tools by the criminal minds" really responsible for that irregularity. 11 In the recent case of Magsuci v. Sandiganbayan, 12 involving an accusation for estafa through falsification of public documents, where the accused not only co-signed a check but also noted an accomplishment report and signed the disbursement voucher with the usual certification on the lawful incurrence of the expenses to be paid, the Court held:

Fairly evident, however, is the fact that the actions taken by Magsuci involved the very functions he had to discharge in the

performance of his official duties. There has been no intimation at all that he had foreknowledge of any irregularity committed by either or both Engr. Enriquez and Ancla. Petitioner might have indeed been lax and administratively remiss in placing too much reliance on the official reports submitted by his subordinate (Engineer Enriquez), but for conspiracy to exist, it is essential that there must be a conscious design to commit an offense. Conspiracy is not the product of negligence but of intentionality on the part of cohorts. (Emphasis supplied.)

Here, in fact, the two vouchers supporting the treasury warrant bore what appeared to petitioner to be the legitimate signatures of both Cresencio T. Balasbas, the Assistant Chief of the Administrative Services Division of the Bureau of Lands, 13 and Laureano Romero, in the office of the Secretary of Agriculture and Natural Resources. 14 Petitioner had no reason to doubt the authenticity of the authorization given by two senior officials imprinted on the vouchers. Conformably with Lands Memorandum Order No. 261-5 on the routing of vouchers for payment either by cash, PNB check or treasury warrant, 15 he signed the warrant after the chief accountant and the auditor had affixed their own signatures.

Petitioner's helplessness in the situation could be gleaned from his testimony; hence —

Q. So you did not inquire upon the position of Eutiquio Hedrosillo (sic) at the time you signed Exh. C?

A. I did not inquire on the position of Eutiquio Hedrosillo (sic) already at that time because in the face of the voucher it says he was an undercover agent of the office of the Secretary and that it was already certified no less than by four officials who are duty-bound to scrutinize and to process all the legalities of the claim itself as embodied in the voucher.

Q. But would you not agree with me as a prudent accountable officer you would investigate or inquire upon the position of Eutiquio Hedrosillo (sic)?

A. In fact, when the voucher came to . . .

Q. Did you not inquire?

A. I did not inquire anymore because inquiry would only be misunderstood in that they may say I am asking for something also.

xxx xxx xxx

Q. Attorney, your authority to sign treasury warrant came from the Director of Lands?

A. Yes, sir.

Q. And that the authority states that it is in the interest of the public?

A. Yes.

Q. That interest of the public means that you safeguard the funds or properties of the Bureau of Lands, is it not? I withdraw that. That you can refuse to have your name be placed on the face of the treasury warrant?

A. When the accounting department has already certified as to the availability of funds, together with other points, and the auditor has already allowed in audit that everything is proper and legal, the only instance where I will not sign the warrant is if it does not correspond to the voucher either in the name or in the amount.

Q. You mean to say your signature appears as ministerial?

A. There is no other meaning of that, your honor, even if you will read my authority to sign. Other officials in the bureau had already made the proper examination as even to the supporting vouchers and to do so again to make everything that will require the same examination would be translated that I am trying to ask something from the claimant. 16

Given all the circumstances, we find for petitioner Isagani Sabiniano and, accordingly, must decree his acquittal.

G.R. No. 76558

Prefatorily, petitioner Rodolfo Martinez and his co-accused filed a motion for the reconsideration of the decision of the appellate court . After its denial, they filed with this Court a motion for an extension of thirty days within which to file a petition for review on certiorari. On 05 January 1987, the Court granted the motion with a warning that no further extension would be granted. 17 Due to the death of their counsel, Atty. Juan B. Soliven, the Court granted them a new thirty-day period. 18 The period expired without a petition for review being filed. The Court thus issued on 21 September 1987 a resolution declaring that the judgment sought to be reviewed had so become, as to them, final and executory. 19

Petitioner Martinez forthwith filed a motion for the reconsideration of the 21 September 1987 resolution. 20 The motion was granted. 21 On 11 February 1988, said petitioner interposed the instant petition for review oncertiorari. 22

Petitioner contends that the Court of Appeals erred: (a) in adopting the conclusion of the trial court of his being the forger of the questioned traveling expense vouchers; (b) in not considering his having acted in good faith and merely in obedience to an order of a superior; (c) in holding the alleged conspiracy among the accused to have been established by clear and positive evidence; and (d) in affirming his conviction for the complex crime of estafa through falsification of public documents instead of acquitting him for lack of proof beyond reasonable doubt.

We find no merit in the petition.

Enough evidence has been adduced by the prosecution to warrant petitioner's conviction. Assessing the evidence, the trial court stated:

It is undisputed that the vouchers were presented to the accounting office by Rodolfo Martinez, a brother of Vedasto Martinez. The possession by Rodolfo Martinez of the falsified voucher gives rise to the presumption of his authorship of the falsification where it was made to appear that Hedrosello, Romero and Balasbas affixed their signatures thereon. Balasbas was not produced in Court as he is now deceased, but when investigated by the NBI, he denied having signed the vouchers in question (Exh. "Q"). At that investigation Rodolfo Martinez declined to give any statement, but when Balasbas was no longer available, Rodolfo Martinez now conveniently point's to Balasbas as the person who handed the vouchers to him, who asked him to accompany Hedrosello to the National Treasury and to ask Velasco to assist in the encashment of the warrant. The version of Martinez that it was Balasbas who introduced Hedrosello to him who asked him to bring the vouchers to Casman Building, and later instructed him to encash the warrant appear incredible. Rodolfo Martinez was not employed directly under the office of Balasbas. He was rather detailed to the office of the NBI Assistant Director Tandoc. He has never performed that task before for Balasbas. Martinez does not claim that the persons introduced to him as Hedrosello is the very same Hedrosello who testified in Court. Martinez would therefore in effect impute the criminal act to Balasbas. Yet in the investigation conducted by the NBI, Martinez remained silent. The fact that Martinez was in possession of the treasury warrant raises the presumption that he was the author of the falsified vouchers which were the basis for the issuance of Exhibit "C". Thus, the unexplained possession of a counterfeit note gives rise to the presumption that the possessor was guilty of the counterfeiting of notes (Peo. Co Pao, 58 Phil. 545). The possessor of stolen property is presumed to be the principal (U.S. vs. Soriano, 9 Phil. 441). 23

The Court of Appeals , seconding the findings of the trial court, held:

As to Rodolfo Martinez, the unrefuted evidence points to him as the one who brought the two forged vouchers to the Accounting Division of the Bureau of Lands, had them processed and the corresponding treasury warrant issued and finally encashed the same with the connivance of the Bureau of Lands cashier, Pedro Velasco. How he figured in the anomaly, Martinez points to his superior Cresencio Balasbas who allegedly instructed him to follow up the invalid vouchers or treasury warrant. This defense is, however, hardly plausible since the record reveals that his superior was not Balasbas, but Mr. Tandoc, the Deputy Director of the NBI who was then working for the Director of the Bureau of Lands (tsn, Feb. 24, 1977, p. 19). Martinez' testimony further shows that his messengerial task was confined between the NBI and the Bureau of Lands Offices only (tsn,id., p. 16); in other words, external, not internal, office communications. What Martinez also had failed to satisfactorily explain is his role in the encashment of the treasury warrant. If, as alleged, Hedrosillo (sic) was present in the encashment of his treasury warrant at the National Treasury and the PNB, why did Martinez and Velasco intervene in the process? Was Martinez (sic) incompetent in encashing his treasury warrant?

Evidence is devoid in this regard. And, why was the proceeds of the treasury warrant not delivered to Hedrosillo (sic), after all, he was the payee therein and was allegedly present at the time of the encashment? 24

It is settled that in the absence of satisfactory explanation, one who is found in possession of, and who has used, a forged document is the forger and therefore guilty of falsification. 25 Petitioner's self-serving allegation that, after encashing the warrant, he turned the money over to Balasbas, 26 has not been corroborated, let alone independently established.

The courts below correctly convicted petitioner of estafa thru falsification of public documents instead ofmalversation thru falsification of public documents, the crime for which he was charged in the information. Estafa is included as a less serious offense than, and cognate to, malversation. 27 There being no proof of any mitigating or aggravating circumstance, the penalty decreed by the courts below is within the statutory range.

WHEREFORE, (a) in G.R. No. 76490, the conviction of petitioner Isagani Sabiniano is REVERSED AND SET ASIDE, and he is ACQUITTED of the crime charged, with costs de oficio; and in G.R. No. 76558, the questioned decision of the Court of Appeals is AFFIRMED, with costs against petitioner Rodolfo Martinez.

SO ORDERED.

Feliciano, and Romero, JJ., concur.

Melo, J., is on leave.

Footnotes

1 Rollo of G.R. No. 76558, p. 130.

2 Penned by Associate Justice Jorge R. Coquia and concurred in by Associate Justices Bienvenido C. Ejercito and Antonio M. Martinez.

3 Presided by Judge Ernani Cruz Paño.

4 Records, p. 39.

5 Records, pp. 4-5.

6 Records, p. 22.

7 Exh. C-3.

8 Records, pp. 28-29.

9 Records, p. 37.

10 Records, pp. 395, 405, 417, 418 and 434.

11 Arias v. Sandiganbayan, 180 SCRA 309, 316, 312-313.

12 240 SCRA 13.

13 According to petitioner Sabiniano, he signed the vouchers for the Director of Lands (TSN, January 14, 1976, p. 15.).

14 Exhs. A and B.

15 Exh. 8.

16 TSN, 14 January 1976, pp. 16-23.

17 Rollo of G.R. No. 76558, p. 5.

18 Ibid., p. 9.

19 Ibid., p. 13.

20 Ibid., p. 16.

21 Ibid., p. 18.

22 His brother, Auditor Vedasto Martinez, filed his own petition for review on certiorari which was docketed as G.R. No. 76559. On 22 January 1987, the petition was denied by the Court it appearing that the petition did not raise any question of law but sought merely the "review and reversal of the factual conclusions of the Court of Appeals and the Trial Court " and that no argument of substance had been adduced therein to warrant reversal of the appellate court's judgment. Petitioner Vedasto Martinez moved for the reconsideration of the 22 January 1987 Resolution but on 06 October 1987, the Court denied the same. Hence, on 29 October 1987, the questioned decision became final and executory as to petitioner Vedasto Martinez.

23 Records, pp. 29-31.

24 Rollo of G.R. No. 76558, pp. 42-43.

25 Pecho v. Sandiganbayan, 238 SCRA 116, 138 citing People v. Sendaydiego, 81 SCRA 120 and Alarcon v. Court of Appeals, 19 SCRA 688.

26 TSN, February 24, 1977, pp. 5-14.

27 Delfin v. Court of Appeals, 13 SCRA 366, 369.

Republic of the Philippines SUPREME COURT

Manila

EN BANC

G.R. No. 81563 December 19, 1989

AMADO C. ARIAS , petitioner, vs. THE SANDIGANBAYAN, respondent.

G.R. No. 82512 December 19, 1989

CRESENCIO D. DATA, petitioner, vs. THE SANDIGANBAYAN, respondent.

Paredes Law Office for petitioner.

GUTIERREZ, JR., J.:

The facts of this case are stated in the dissenting opinion of Justice Carolina C. Griño-Aquino which follows this majority opinion. The dissent substantially reiterates the draft report prepared by Justice Griño-Aquino as a working basis for the Court's deliberations when the case was being discussed and for the subsequent votes of concurrence or dissent on the action proposed by the report.

There is no dispute over the events which transpired. The division of the Court is on the conclusions to be drawn from those events and the facts insofar as the two petitioners are concerned. The majority is of the view that Messrs. Arias and Data should be acquitted on grounds of reasonable doubt. The Court feels that the quantum of evidence needed to convict petitioners Arias and Data beyond reasonable doubt, as co-conspirators in the conspiracy to cause undue injury to the Government through the irregular disbursement and expenditure of public funds, has not been satisfied.

In acquitting the petitioners, the Court agrees with the Solicitor-General 1 who, in 80 pages of his consolidated manifestation and motion, recommended that Messrs. Arias and Data be acquitted of the crime charged, with costs de oficio. Earlier, Tanodbayan Special Prosecutor Eleuterio F. Guerrero had also recommended the dropping of Arias from the information before it was filed.

There is no question about the need to ferret out and convict public officers whose acts have made the bidding out and construction of public works and highways synonymous with graft or criminal inefficiency in the public eye. However, the remedy is not to indict and jail every person who may have ordered the project, who signed a document incident to its construction, or who had a hand somewhere in its implementation. The careless use of the conspiracy theory may sweep into jail even innocent persons who may have been made unwitting tools by the criminal minds who engineered the defraudation.

Under the Sandiganbayan's decision in this case, a department secretary, bureau chief, commission chairman, agency head, and all chief auditors would

be equally culpable for every crime arising from disbursements which they have approved. The department head or chief auditor would be guilty of conspiracy simply because he was the last of a long line of officials and employees who acted upon or affixed their signatures to a transaction. Guilt must be premised on a more knowing, personal, and deliberate participation of each individual who is charged with others as part of a conspiracy.

The records show that the six accused persons were convicted in connection with the overpricing of land purchased by the Bureau of Public Works for the Mangahan Floodway Project. The project was intended to ease the perennial floods in Marikina and Pasig, Metro Manila.

The accused were prosecuted because 19,004 square meters of "riceland" in Rosario, Pasig which had been assessed at P5.00 a square meter in 1973 were sold as residential land" in 1978 for P80.00 a square meter. The land for the floodway was acquired through negotiated purchase,

We agree with the Solicitor-General that the assessor's tax valuation of P5.00 per square meter of land in Rosario, Pasig, Metro Manila is completely unrealistic and arbitrary as the basis for conviction.

Herein lies the first error of the trial court.

It must be stressed that the petitioners are not charged with conspiracy in the falsification of public documents or preparation of spurious supporting papers. The charge is causing undue injury to the Government and giving a private party unwarranted benefits through manifest partiality, evident bad faith, or inexcusable negligence.

The alleged undue injury in a nutshell is the Government purchase of land in Pasig, Rizal for P80.00 a square meter instead of the P5.00 value per square meter appearing in the tax declarations and fixed by the municipal assessor, not by the landowner.

The Sandiganbayan , without any clear factual basis for doing so has assumed that the P5.00 per square meter value fixed by the assessor in the tax declarations was the correct market value of the Mangahan property and if the Government purchased the land for P80.00 a square meter, it follows that it must have suffered undue injury.

The Solicitor General explains why this conclusion is erroneous:

1. No undue injury was caused to the Government

a. The P80.00 per square rneter acquisition cost is just fair and reasonable.

It bears stress that the Agleham property was acquired through negotiated purchase. It was, therefor, nothing more than an ordinary contract of sale where the purchase price had to be arrived at by agreement between the parties and could never be left to the discretion of one of the contracting parties (Article 1473, New Civil Code). For it is the essence of a contract of sale that there must be a meeting of the minds between the seller and the buyer upon the thing which is the object of the contract and upon the price (Article 1475, New Civil Code). Necessarily, the parties have to negotiate the reasonableness of the price, taking into consideration such

other factors as location, potentials, surroundings and capabilities. After taking the foregoing premises into consideration, the parties have, thus, arrived at the amount of P80.00 per square meter as the fair and reasonable price for the Agleham property.

It bears stress that the prosecution failed to adduce evidence to prove that the true and fair market value in 1978 of the Agleham property was indeed P5.00 per square meter only as stated by the assessor in the tax declaration (Exhibit W). On the contrary, the prosecution's principal witness Pedro Ocol, the Assistant Municipal Assessor of Pasig, admitted that the purchase price of P80.00 per square meter paid for the Agleham property as stated in the Deed of Sale (Exhibit G) is reasonable (tsn, August 19,1983, p. 20) and fair (Ibid, p. 76); that 'the value of lands within the town of Pasig ranges from P80.00 to P500.00' (Ibid, p. 21); that the Agleham property is "around 300 meters" from Ortigas Avenue, "adjacent to the existing Leongson [Liamson] Subdivision ... and near Eastland Garment Building" (Ibid, pp. 12-13); that said property is surrounded by factories, commercial establishments and residential subdivisions (Ibid, pp. 73-74); that the P5.00 per square meter assessed valuation of the Agleham property appearing on the tax declaration (Exhibit W) was based on actual use only (lbid, pp. 26-27), it being the uniform rate for all ricefields in Pasig irrespective of their locations (Ibid, pp. 72-74) and did not take into account the existence of many factories and subdivisions in the area (Ibid., pp. 25-27, 72-74), and that the assessed value is different from and always lower than the actual market value (Ibid, pp. 22-23). (At pp. 256-259, Rollo)

A negotiated purchase may usually entail a higher buying price than one arrived at in the course of expropriation proceedings.

In Export Processing Zone Authority v. Dulay (149 SCRA 305, 310 [1987]) we struck down the martial law decree that pegged just compensation in eminent domain cases to the assessed value stated by a landowner in his tax declaration or fixed by the municipal assessor, whichever is lower. Other factors must be considered. These factors must be determined by a court of justice and not by municipal employees.

In the instant case, the assessor's low evaluation, in the fixing of which the landowner had no participation, was used for a purpose infinitely more weighty than mere expropriation of land. It forms the basis for a criminal conviction.

The Court is not prepared to say that P80.00 to P500.00 a square meter for land in Pasig in 1978 would be a fair evaluation. The value must be determined in eminent domain proceedings by a competent court. We are certain, however, that it cannot be P5.00 a square meter. Hence, the decision, insofar as it says that the "correct" valuation is P5.00 per square meter and on that basis convicted that petitioners of causing undue injury, damage, and prejudice to the Government because of gross overpricing, is grounded on shaky foundations.

There can be no overpricing for purposes of a criminal conviction where no proof adduced during orderly proceedings has been presented and accepted.

The Court's decision, however, is based on a more basic reason. Herein lies the principal error of the respondent court.

We would be setting a bad precedent if a head of office plagued by all too common problems-dishonest or negligent subordinates, overwork, multiple assignments or positions, or plain incompetence is suddenly swept into a conspiracy conviction simply because he did not personally examine every single detail, painstakingly trace every step from inception, and investigate the motives of every person involved in a transaction before affixing, his signature as the final approving authority.

There appears to be no question from the records that documents used in the negotiated sale were falsified. A key tax declaration had a typewritten number instead of being machine-numbered. The registration stampmark was antedated and the land reclassified as residential instead of ricefield. But were the petitioners guilty of conspiracy in the falsification and the subsequent charge of causing undue in injury and damage to the Government?

We can, in retrospect, argue that Arias should have probed records, inspected documents, received procedures, and questioned persons. It is doubtful if any auditor for a fairly sized office could personally do all these things in all vouchers presented for his signature. The Court would be asking for the impossible. All heads of offices have to rely to a reasonable extent 'on their subordinates and on the good faith of those prepare bids, purchase supplies, or enter into negotiations. If a department secretary entertains important visitors, the auditor is not ordinarily expected to call the restaurant about the amount of the bill, question each guest whether he was present at the luncheon, inquire whether the correct amount of food was served and otherwise personally look into the reimbursement voucher's accuracy, propriety, and sufficiency. There has to be some added reason why he should examine each voucher in such detail. Any executive head of even small government agencies or commissions can attest to the volume of papers that must be signed. There are hundreds of document , letters and supporting paper that routinely pass through his hands. The number in bigger offices or departments is even more appalling.

There should be other grounds than the mere signature or approval appearing on a voucher to sustain a conspiracy charge and conviction.

Was petitioner Arias part of the planning, preparation, and perpetration of the alleged conspiracy to defraud the government?

Arias joined the Pasig office on July 19, 1978. The negotiations for the purchase of the property started in 1977. The deed of sale was executed on April 20, 1978. Title was transferred to the Republic on June 8, 1978. In other words, the transaction had already been consummated before his arrival. The pre-audit, incident to payment of the purchase, was conducted in the first week of October, 1978. Arias points out that apart from his signature linking him to the signature on the voucher, there is no evidence transaction. On the contrary, the other co-accused testified they did not know him personally and none approached him to follow up the payment.

Should the big amount of P1,520,320.00 have caused him to investigate . gate the smallest detains of the transaction?

Yes, if the land was really worth only P5.00 a square meter. However, if land in Pasig was already worth P80.00 a square meter at the time, no warning bell of intuition would have sounded an inner alarm. Land along Ortigas Avenue on the way to Pasig is now worth P20,000.00 to P30,000.00 a square meter. The falsification of the tax declaration by changing "riceland" to "residential' was done before Arias was assigned to Pasig besides, there is no such thing as "riceland"

in inner Metro Manila. Some lots in outlying or easily flooded areas may still be planted to rice or kangkong but this is only until the place is dedicated to its real purpose which is commercial, industrial, or residential. If the Sandiganbayan is going to send somebody to jail for six years, the decision should be based on firmer foundation.

The Sandiganbayan asked why Arias kept the documents from October, 1978 to June 23, 1982. Arias explained that the rules of the Commission on Audit require auditors to keep these d documents and under no circumstance to relinquish custody to other persons. Arias was auditor of the Bureau of Public Works in Pasig up to September 1, 1981. The seven months delay in the formal turnover of custody to the new auditor was explained by prosecution witness Julito Pesayco, who succeeded him as auditor and who took over the custody of records in that office.

The main reason for the judgment of conviction, for the finding of undue injury and damage to the Government is the alleged gross overprice for the land purchased for the floodway project. Assuming that P80.00 is indeed exorbitant, petitioner Arias cites his testimony as follows:

Q In conducting the pre-audit, did you determine the reasonableness of the price of the property?

A In this case, the price has been stated, the transaction had been consummated and the corresponding Transfer Certificate of little had been issued and transferred to the government of the Philippines. The auditors have no more leeway to return the papers and then question the purchase price.

Q Is it not a procedure in your office that before payment is given by the government to private individuals there should be a pre-audit of the papers and the corresponding checks issued to the vendor?

A Correct, Your Honor, but it depends on the kind of transaction there is.

Q Yes, but in this particular case, the papers were transferred to the government without paying the price Did you not consider that rather odd or unusual? (TSN, page 17, April 27,1987).

A No, Your Honor.

Q Why not?

A Because in the Deed of Sale as being noted there, there is a condition that no payments will be made unless the corresponding title in the payment of the Republic is committed is made.

Q In this case you said that the title is already in the name of the government?

A Yes, Your Honor. The only thing we do is to determine whether there is an appropriation set aside to cover the said specification. As of the price it is under the sole authority of the proper officer making the sale.

Q My point is this. Did you not consider it unusual for a piece of property to be bought by the government; the sale was consummated; the title was issued in favor of the government without the price being paid first to the seller?

A No, Your Honor. In all cases usually, payments made by the government comes later than the transfer.

Q That is usual procedure utilized in road right of way transaction?

A Yes, Your Honor. (TSN, p. 18, April 27,1987).

Q And of course as auditor, 'watch-dog' of the government there is also that function you are also called upon by going over the papers . . . (TSN, page 22, April 27,1987). I ... vouchers called upon to determine whether there is any irregularity as at all in this particular transaction, is it not?

A Yes, Ma'am.

Q And that was in fact the reason why you scrutinized also, not only the tax declaration but also the certification by Mr. Jose and Mr. Cruz?

A As what do you mean of the certification, ma'am?

Q Certification of Mr. Jose and Mr. Cruz in relation to PD No. 296, A They are not required documents that an auditor must see. (TSN, page 23, April 27,1987).

and continuing:

A ... The questioning of the purchase price is now beyond the authority of the auditor because it is inasmuch as the amount involved is beyond his counter-signing authority. (TSN, page 35, April 27, 1987). (At pp. 15-16, Petition. Underlinings supplied by petitioner)

The Solicitor General summarizes the participation of petitioner Data as follows:

As regards petitioner Data's alleged participation, the evidence on record shows that as the then District Engineer of the Pasig Engineering District he created a committee, headed by Engr. Priscillo Fernando with Ricardo Asuncion, Alfonso Mendoza, Ladislao Cruz, Pedro Hucom and Carlos Jose, all employees of the district office, as members, specifically to handle the Mangahan

Floodway Project, gather and verify documents, conduct surveys, negotiate with the owners for the sale of their lots, process claims and prepare the necessary documents; he did not take any direct and active part in the acquisition of land for the Mangahan floodway; it was the committee which determined the authenticity of the documents presented to them for processing and on the basis thereof prepared the corresponding deed of sale; thereafter, the committee submitted the deed of sale together with the supporting documents to petitioner Data for signing; on the basis of the supporting certified documents which appeared regular and complete on their face, petitioner Data, as head of the office and the signing authority at that level, merely signed but did not approve the deed of sale (Exhibit G) as the approval thereof was the prerogative of the Secretary of Public Works; he thereafter transmitted the signed deed of sale with its supporting documents to Director Anolin of the Bureau of Public Works who in turn recommended approval thereof by the Secretary of Public Works; the deed of sale was approved by the Asst. Secretary of Public Works after a review and re-examination thereof at that level; after the approval of the deed of sale by the higher authorities the covering voucher for payment thereof was prepared which petitioner Data signed; petitioner Data did not know Gutierrez and had never met her during the processing and payment of her claims (tsn, February 26, 1987, pp. 10-14, 16-24, 31-32). (At pp. 267-268, Rollo.)

On the alleged conspiracy, the Solicitor General argues:

It is respectfully submitted that the prosecution likewise has not shown any positive and convincing evidence of conspiracy between the petitioners and their co-accused. There was no direct finding of conspiracy. Respondent Court's inference on the alleged existence of conspiracy merely upon the purported 'pre-assigned roles (of the accused) in the commission of the (alleged) illegal acts in question is not supported by any evidence on record. Nowhere in the seventy- eight (78) page Decision was there any specific allusion to some or even one instance which would link either petitioner Arias or Data to their co-accused in the planning, preparation and/or perpetration, if any, of the purported fraud and falsifications alleged in the information That petitioners Data and Arias happened to be officials of the Pasig District Engineering Office who signed the deed of sale and passed on pre-audit the general voucher covering the subject sale, respectively, does hot raise any presumption or inference, that they were part of the alleged plan to defraud the Government, as indeed there was none. It should be remembered that, as aboveshown, there was no undue injury caused to the Government as the negotiated purchase of the Agleham property was made at the fair and reasonable price of P80.00 per square meter.

That there were erasures and superimpositions of the words and figures of the purchase price in the deed of sale from P1,546,240.00 to P1,520,320.00 does not prove conspiracy. It may be noted that there was a reduction in the affected area from the estimated 19,328 square meters to 19,004 square meters as approved by the Land Registration Commission, which resulted in the corresponding reduction in the purchase price from

P1,546,240.00 to Pl,520,320.00. The erasures in the deed of sale were simple corrections that even benefited the Government.

Moreover, contrary to the respondent Court's suspicion, there was nothing irregular in the use of the unapproved survey plan/technical description in the deed of sale because the approval of the survey plan/ technical description was not a prerequisite to the approval of the deed of sale. What is important is that before any payment is made by the Government under the deed of sale the title of the seller must have already been cancelled and another one issued to the Government incorporating therein the technical description as approved by the Land Registration Commission, as what obtained in the instant case. (At pp. 273-275, Rollo)

We agree with the counsel for the People. There is no adequate evidence to establish the guilt of the petitioners, Amado C. Arias and Cresencio D. Data, beyond reasonable doubt. The inadequate evidence on record is not sufficient to sustain a conviction.

WHEREFORE, the questioned decision of the Sandiganbayan insofar as it convicts and sentences petitioners Amado C. Arias and Cresencio D. Data is hereby SET ASIDE. Petitioners Arias and Data are acquitted on grounds of reasonable doubt. No costs.

SO ORDERED.

Fernan, C.J., Narvasa, Melencio-Herrera, Cruz, Paras, Gancayco, Bidin, Cortes and Medialdea, JJ., concur.

Separate Opinions

GRIÑO-AQUINO, J., dissenting:

The lone issue in these consolidated petitions for review is whether the Sandiganbayan committed a reversible error in convicting the petitioners, Amado C. Arias and Cresencio D. Data, of having violated Section 3, paragraph (e), of the Anti Graft and Corrupt Practices Act, in connection with the scandalous overpricing of land purchased by the Government as right of way for its Mangahan Floodway Project in Pasig, Rizal. The pertinent provision of the Anti-Graft Law reads as follows:

SEC. 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:

x x x x x x x x x

(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.

The amended information against them, to which they pleaded not guilty, alleged:

That on or about the period covering April, 1978 to October 1978, in Rosario, Pasig, Metro Manila, Philippines, and with the jurisdiction of this Honorable Court, accused Cresencio D. Data, being then the district Engineer of the province of Rizal, Ministry of Public Works, and as such, headed and supervised the acquisition of private lands for the right-of-way of the Mangahan Floodway Project of the Government at Sitio Mangahan, Rosario, Pasig, Metro Manila; accused Priscillo G. Fernando, then the Supervising Engineer of the Office of the District Engineer of Rizal, Ministry of Public Works who acted as assistant of accused Cresencio D. Data in the Mangahan Floodway Project; accused Ladislao G. Cruz, then the Senior Engineer of the Office of the District Engineer of Rizal, Ministry of Public Works, who was charged with the acquisition of lots needed for the Mangahan Floodway Project; accused Carlos L. Jose then the Instrumentman of the office of the District Engineer of Rizal, Ministry of Public Works who acted as the surveyor of the Mangahan Floodway Project; accused Claudio H. Arcaya, then the Administrative Officer I of the Rizal District Engineer's Office, Ministry of Public Works who passed upon all papers and documents pertaining to private lands acquired by the Government for the Mangahan Floodway Project; and accusedAmado C. Arias , then the Auditor of Rizal Engineering District, Pasig, Metro Manila, who passed upon and approved in audit the acquisition as well as the payment of lands needed for the Mangahan Floodway Project all taking advantage of their public and official positions, and conspiring, confederating and confabulating with accused Natividad C. Gutierrez, the attorney-in-fact of Benjamin Agleham, who is the registered owner of a parcel of land situated at Rosario, Pasig, Metro Manila and covered by Original Certificate of Title No. 0097, with accused Ladislao G. Cruz, Carlos L. -Jose and Claudio Arias, acting with evident bad faith, while accused Cresencio D. Data, Priscillo G. Fernando and Amado C. Arias acting with manifest partiality in the discharge of their official public and/or administrative functions, did then and there wilfully, unlawfully and feloniously cause undue injury, damage and prejudice to the Government of the Republic of the Philippines by causing, allowing and/or approving the illegal and irregular disbursement and expenditure of public funds in favor of and in the name of Benjamin P. Agleham in the amount of P1,520,320.00 under General Voucher No. 8-047, supported by a certification, dated September 14, 1978, which was purportedly issued by the Municipal Treasurer of Pasig, and certified xerox copies of Tax Declarations Nos. 47895 and A-018-0091 1, both in the name of Benjamin P. Agleham, and an alleged owner's copy of Tax Declaration No. 49948, in the name of the Republic of the Philippines, saidsupporting documents having been falsified by the accused to make it appear that the land mentioned in the above-stated supporting papers is a residential land with a market value of P80.00 per square meter and that 19,004 square meters thereof were transferred in the name of the Government of the Republic of the Philippines under Tax Declaration No. 49948, when in truth and in fact, the afore-stated land is actually a riceland with a true and

actual market value of P5.00 per square meter only and Tax Declaration No. 49948 was truly and officially registered in the names of spouses Moises Javillonar and Sofia San Andres, not in the name of the Government, and refers to a parcel of land at Sagad, Pasig, Metro Manila; that the foregoing falsities were committed by the accused to conceal the fact that the true and actual pace of the 19,004 square meters of land of Benjamin P. Agleham, which was acquired in behalf of the Government by way of negotiated purchase by the accused officials herein for the right of way of the Mangahan Floodway project at an overprice of P1,520,320.00 was P92,020.00 only; and finally, upon receipt of the overpriced amount, the accused misappropriated, converted and misapplied the excess of the true and actual value of the above-mentioned land, i.e., P1,428,300.00 for their own personal needs, uses and benefits, to the damage and prejudice of the Government in the amount of P1,428,300.00. (pp. 2931, Rollo of G.R. No. 81563.)

Priscillo Fernando did not face trial for he has remained at large, his present whereabouts being unknown (p. 48, Sandiganbayan Decision, p. 75, Rollo of G.R. No. 81563).

In 1975, the Bureau of Public Works initiated the Mangahan Floodway Project to ease the perennial floods affecting the towns of Marikina and Pasig, Metro Manila. The project would traverse the northern and southern portions of Ortigas Avenue in Pasig, Metro Manila (Exhibits A and A-1). An announcement was published in leading newspapers advising affected property owners to file their applications for payment at the District Engineer's Office (p. 29, Sandiganbayan Decision, p. 56, Ibid.).

The implementation of the Mangahan Floodway Project was entrusted to the Pasig Engineering District headed by the District Engineer, Cresencio Data. He formed a committee composed of Supervising Civil Engineer Priscillo Fernando, as over-all in charge, Alfonso Mendoza and Pedro Hucom for acquisition of improvements, and Instrumentman Carlos Jose for surveys (p. 26, Sandiganbayan Decision, p. 53, Ibid.). The team was tasked to notify lot owners affected by the project of the impending expropriation of their properties and to receive and process applications for payment.

The reclassification of all lands around the Mangahan Floodway Project was suspended in 1975 by order of the President (p. 45, Sandiganbayan Decision, p. 72, Ibid.). Implementing that order, a memorandum was sent to Data on August 27,1976, by Public Works Director Desiderio Anolin, directing that all affected lands covered by the Mangahan Floodway Project shall be excluded from reevaluation and reassessment (Annex A, Exh. DD, Counter-Affidavit of Data, p. 70, Sandiganbayan Decision, P. 97, Ibid).

Among the lots affected was a 19,004-square-meter portion of a 30,169-square-meter riceland in Pasig registered in the name of Benjamin Agleham under Original Certificate of Title No. 0097 issued on May 5, 1977 (Exh. H). The land was previously owned by Andrea Arabit and Evaristo Gutierrez, parents of the accused Natividad Gutierrez.

After Agleham acquired the 3-hectare land in 1973 from the Gutierrez spouses, he had it subdivided into three (3) lots under plan (LRC) Psd-278456 which was approved by the Land Registration Commission on June 1, 1978 (Entry No. 27399/12071, Exh. H). Lot 1, with an area of 19,004 square meters, is the portion

that Agleham, through Natividad Gutierrez, sold to the Government in 1978 for the Mangahan Floodway Project.

On December 15, 1973, Agleham's property, classified as a "ricefield" with an area of 3.2 hectares, was declared for taxation under Tax Declaration No. 28246 (Exh-Y). Its assessed value was P4,800 or P0.15 per square meter (p. 10, Sandiganbayan Decision, p. 37, Ibid.). On February 27, 1978, another Tax Declaration No. 47895 (Exh. Y-1) was issued for the same ricefield" with a revised area of 30,169 square meters. The declared market value was P150,850 (or P5 per square meter), and the assessed value was P60,340.

Ten months later, or on December 15, 1978, Tax Declaration No. 47895 was cancelled and replaced by Tax Declaration No. A018- 00911 (Exh. Y-2) wherein the market value of the same "ricefield," jumped to P301,690 (P10 per square meter). Its assessed value was fixed at P120,680. The description and value of the property, according to Pedro Ocol, the assistant Municipal Assessor of Pasig, was based on the actual use of the property (riceland) not on its potential use (p. 13, Sandiganbayan Decision, p. 40, Ibid.). The valuation was based on a compilation of sales given to the Municipal Assessor's office by the Register of Deeds, from which transactions the Assessor obtained the average valuation of the properties in the same vicinity (p. 14, Sandiganbayan Decision, p. 41, Ibid.).

Among those who filed an application for payment (Exhs. FF and FF-1) at the District Engineer's Office was the accused, Natividad Gutierrez, who was armed with a Special Power of Attorney allegedly executed on February 24,1978 by Benjamin Agleham in her favor (Exhs. C and C-1). She submitted a falsified xerox copy of Tax Declaration No. 47895 (Exh. B) bearing a false date: December 15,1973 (instead of February 27, 1978) and describing Agleham's 30,169-square-meter property as "residential" (instead of riceland), with a fair market value of P2,413,520 or P80 per square meter (instead of P150,845 at P5 per square meter). Its assessed value appeared to be P724,056 (instead of P60,340). Gutierrez submitted Agleham's Original Certificate of Title No. 0097 (Exh. H-1), the technical description of the property, and a xerox copy of a "Sworn Statement of the True Current and Fair Market Value of Real Property" required under P.D. No. 76 (Exh. 1). The xerox copy of Tax Declaration No. 47895 was supposedly certified by the Municipal Treasurer of Pasig, Alfredo Prudencio.

The documents supporting Agleham's claim were "examined" by the Administrative Officer, accused Claudio Arcaya, who, after initiating them, turned them over to accused Ladislao G. Cruz, A Deed of Absolute Sale for Lot 1 (19,004 square meters valued at P80 per square meter) was prepared by Cruz who also initialed the supporting documents and transmitted them to District Engr. Data.

On April 20,1978, the Deed of Absolute Sale (Exhs. G and G-1) was signed by Data and Gutierrez (as attorney-in-fact of Agleham). Thereafter, Data sent the papers to Director Desiderio Anolin of the Bureau of Public Works who recommended to the Assistant Secretary of Public Works the approval of the Deed of Sale (Exh. G-1). Afterwards, the documents were returned to Data's office for the transfer of title to the Government. On June 8, 1978, the sale was registered and Transfer Certificate of Title No. T-12071 (Exh. T) was issued in the name of the Government.

General Voucher (Exh. S) No. 85-2-7809-52 dated "9/29/78" for the amount of P1,520,320 bore fourth certifications of. (1) Cruz as Senior Civil Engineer; (2) Priscillo G. Fernando as Supervising Civil Engineer II; (3) Cresencio Data as

District Engineer II and (4) Cesar V. Franco as Project Acting Accountant (p. 56, Sandiganbayan Decision, p. 83, Ibid.).

On October 23, 1978, the voucher and its supporting documents were pre-audited and approved for payment by the accused, Amado C. Arias, as auditor of the Engineering District. The next day, October 24, 1978, sixteen (16) PNB checks with Serial Nos. 188532 to 188547, inclusive (Exhs. X to X-1 5), for the total sum of Pl,520,320.00 were issued to Gutierrez as payment for Agleham's 19,004-square-meter lot.

In October, 1979, an investigation was conducted by the Ministry of National Defense on the gross overpricing of Agleham's property. During the investigation, sworn statements were taken from Alfredo Prudencio, Municipal Treasurer of Pasig (Exh. AA), Pedro Ocol, Assistant Municipal Assessor of Pasig (Exh. BB), and the accused Claudio Arcaya (Exh. EE). Prudencio denied having issued or signed the certification dated September 14,1978 (Exh. J), attesting that Agleham's property covered by Tax Declaration No. 47895 had a market value of P2,413,520 and that the taxes had been paid from 1975 to 1978. Prudencio also impugned the initial (purporting to be that of his subordinate Ruben Gatchalian, Chief of the Land Tax Division) that was affixed below Prudencio's typewritten name in Exhibit J. Both Prudencio and Gatchalian disowned the typewritten certification. They declared that such certifications are usually issued by their office on mimeographed forms (Exh. J-1).

Assistant Municipal Assessor Pedro Ocol produced and Identified the original or genuine Tax Declaration No. 47895 dated February 27, 1978, and a certified copy thereof (Exh. Y-1). Therein, Agleham's property of 30,169 square meters was classified as a "ricefield" and appraised at P5 per square meter, with an assessed value of P60,340 and a market value of PI 50,850. Ocol testified that the supposed xerox copy of Tax Declaration No. 47895 (Exh. B), which Gutierrez submitted as one of the supporting documents of the general voucher (Exh. S), was fake, because of the following tell-tale signs:

(1) the tax declaration number was typewritten, not machine numbered as in the genuine tax declaration, Exhibit Y;

(2) the stampmark of registration was antedated to December 15, 1973 in the fake, instead of the correct date February 27, 1978-- in the genuine tax declaration;

(3) the classification of the property was "residential," instead of "ricefield" which is its classification in the genuine document; and

(4) the lot was over priced at P80 per square meter in the fake tax declaration, instead of the appraised value of only P5 per square meter appearing in the genuine declaration.

Also found to be fake was Tax Declaration No. 49948 in the name of the Republic of the Philippines (Exhs. K and K-1). The genuine Tax Declaration No. 49948 (Exhs. U and V-2) was actually filed on October 18, 1978 in the names of the spouses Moises Javillonar and Sofia Andres, for their 598-square-meters' residential property with a declared market value of P51,630.

The Agleham deed of sale was pre-audited by the auditor of the Rizal Engineering District, Amado Arias , who approved the payment of Pl,520,320 to Gutierrez without questioning the fact that the amount of the purchase price therein had been altered, i.e., "snow-flaked (sic) and later superimposed by the

amount of P1,520,320 in words and figures" (p. 71, Sandiganbayan Decision, p. 98, Ibid.), nor checking the veracity of the supporting documents listed at the back of the General Voucher (Exh. S), numbering fifteen (15) in all, among which were:

(1) the fake Tax Declaration No. 47895 showing that the value of the land was P80 per square meter (Exh. B);

(2) fake Tax Declaration No. 49948 In the name of the Republic of the Philippines (Exh. K)

(3) the forged certification of Municipal Treasurer Prudencio that the fair market value of 'the land was P100 per square meter (Exh. J);

(4) a false certification (Exh. D) dated September 19, 1978 signed by accused Cruz, Jose, and Fernando, certifying that the Agleham property was upon ocular inspection by them, found to be "residential;"

(5) a falsely dated certification where the original date was erased and a false date (February 15, 1978) was superimposed (Exh.E), issued by Engr. Fernando pursuant to DPWTC Circular No. 557, certifying that he had examined the real estate tax receipts of the Agleham property for the last three (3) years;

(6) the technical description of the land (Exhs. F and F-1) attached to the deed of sale dated April 20, 1978 was not an approved technical description for the subdivision survey executed by Geodetic Engineer Cipriano C. Caro was verified and approved by the Land Registration Commission on May 28,1978 only. There were "substantial variations" noted by the Sandiganbayan between the approved technical description and the technical description of the land in the deed of sale (p. 61, Sandiganbayan Decision, p. 88, Ibid.);

(7) the special power of attorney dated February 24, 1978, supposedly given to Gutierrez by Agleham (Exhs. C, C-1) bore a fictitious residence certificate Agleham (p. 64, Sandiganbayan Decision, p. 91, Ibid.); and

(8) the fake Sworn Statement on the Current and Fair Market Value of Real Properties (Exh. Z) dated October 1, 1973, contained a forged signature of Agleham, presumably made by Gutierrez herself The Sandiganbayan observed that Agleham's supposed signature "appears to be identical to accused Gutierrez' signatures in the General Voucher (Exh. S), in the release and Quitclaim which she signed in favor of Agleham on July 20, 1983 (Exh. CC), and in her affidavits (Exhs. FF and FF-1)." (pp. 64-65, Sandiganbayan Decision, pp. 91-92, Ibid.).

After payment of the Agleham claim, all the supporting documents were kept by Arias. Even after he had been replaced by Julito Pesayco on September 1, 1981, as auditor of the Rizal Engineering District, he did not turn over the documents to Pesayco. It was only on June 23, 1982, after this case had been filed in the Sandiganbayan and the trial had begun, that Arias delivered them to Pesayco (Exh. T-1).

After a trial lasting nearly six years, the Sandiganbayan rendered a 78-page decision on November 16, 1987, whose dispositive portion reads as follows:

WHEREFORE, judgment is hereby rendered finding accused Natividad G. Gutierrez, Cresencio D. Data, Ladislao G. Cruz, Carlos L. Jose, Claudio H. Arcaya and Amado C. Arias GUILTY beyond reasonable doubt of the violation of Section 3, paragraph

(e) of Republic Act No. 3019, as ascended, otherwise known as the Anti-Graft and Corrupt Practices Act, and hereby sentences each of them to suffer the penalty of imprisonment for THREE (3) YEARS, as minimum to SIX (6) YEARS, as maximum; to further suffer perpetual disqualification from public office; to indemnify jointly and severally, the Government of the Republic of the Philippines in the amount of P1,425,300, and to pay their proportional costs of this action. (p. 104, Rollo of G.R. No. 81563.)

Both Arias and Data appealed.

Arias anchors his petition for review of the Sandiganbayan's decision (G.R. No. 81563) on his contention that the court's findings that he conspired with his co-accused and that he was grossly negligent are based on misapprehension of facts, speculation, surmise, and conjecture.

Data's main defense is that the acquisition of the Agleham property was the work of the committee of Prescillo Fernando iii which he did not take an active part, and that the price which the government paid for it was reasonable. Hence, it uttered no jury in the transaction.

In his consolidated brief or comment for the State, the Solicitor General recommends the acquittal of the petitioners because the Agleham property was allegedly not grossly overpriced.

After deliberating on the petitions in these cases, we find no error in the decision under review. The Sandiganbayan did not err in finding that the petitioners conspired with their co-accused to cause injury to the Government and to unduly favor the lot owner, Agleham.

A conspiracy need not be proved by direct evidence of the acts charged, but may and generally must be proven by a number of indefinite acts, conditions and circumstances (People vs. Maralit, G.R. No. 71143, Sep. 19,1988; People vs. Roca, G.R. No. 77779, June 27, 1988).

This case presents a conspiracy of silence and inaction where chiefs of office who should have been vigilant to protect the interest of the Government in the purchase of Agleham's two-hectare riceland, accepted as gospel truth the certifications of their subordinates, and approved without question the million-peso purchase which, by the standards prevailing in 1976-78, should have pricked their curiosity and prompted them to make inquiries and to verify the authenticity of the documents presented to them for approval. The petitioners kept silent when they should have asked questions they looked the other way when they should have probed deep into the transaction.

Since it was too much of a coincidence that both petitioners were negligent at the same time over the same transaction, the Sandiganbayan was justified in concluding that they connived and conspired to act in that manner to approve the illegal transaction which would favor the seller of the land and defraud the Government.

We cannot accept Arias ' excuse that because the deed of sale had been signed and the property transferred to the Government which received a title in its name, there was nothing else for him to do but approve the voucher for payment. The primary function of an auditor is to prevent irregular, unnecessary, excessive or extravagant expenditures of government funds.

The auditorial function of an auditor, as a representative of the Commission on Audit, comprises three aspects: (1) examination; (2) audit: and (3) settlement of the accounts, funds, financial transactions and resources of the agencies under their respective audit jurisdiction (Sec. 43, Government Auditing Code of the Phil.). Examination, as applied to auditing, means "to probe records, or inspect securities or other documents; review procedures, and question persons, all for the purpose of arriving at an opinion of accuracy, propriety, sufficiency, and the like." (State Audit Code of the Philippines, Annotated by Tantuico, 1982 Ed., p. 57.)

Arias admitted that he did not check or verify the papers supporting the general voucher that was submitted to him for payment of Pl,520,320 to Agleham or his attorney-in-fact, Natividad Gutierrez. Arias did not question any person for the purpose of determining the accuracy and integrity of the documents submitted to him and the reasonableness of the price that the Government was paying for the less than two-hectare riceland. We reject his casuistic explanation that since his subordinates had passed upon the transaction, he could assume that it was lawful and regular for, if he would be a mere rubber stamp for his subordinates, his position as auditor would be useless and unnecessary.

We make the same observation concerning District Engineer Cresencio Data who claims innocence because he allegedly did not take any direct and active participation in the acquisition of the Agleham property, throwing the blame on the committee which he created, composed of Fernando, Asuncion, Mendoza, Cruz, Hucom and Jose that negotiated with the property owners for the purchase of properties on the path of the Mangahan Floodway Project. He in effect would hide under the skirt of the committee which he himself selected and to which he delegated the task that was assigned to his office to identify the lots that would be traversed by the floodway project, gather and verify documents, make surveys, negotiate with the owners for the price, prepare the deeds of sale, and process claims for payment. By appointing the committee, he did not cease to be responsible for the implementation of the project. Under the principle of command responsibility, he was responsible for the manner in which the committee performed its tasks for it was he who in fact signed the deed of sale prepared by the committee. By signing the deed of sale and certifications prepared for his signature by his committee, he in effect, made their acts his own. He is, therefore, equally guilty with those members of the committee (Fernando, Cruz and Jose) who accepted the fake tax declarations and made false certifications regarding the use and value of the Agleham property.

The Solicitor General has pointed out that Data signed, but did not approve, the deed of sale of Agleham's property because the approval thereof was the prerogative of the Secretary of Public Works. It should not be overlooked, however, that Data's signature on the deed of sale was equivalent to an attestation that the transaction was fair, honest and legal. It was he who was charged with the task of implementing the Mangahan Floodway Project within his engineering district.

We find no merit in the Solicitor General's argument that the Agleham riceland was not overpriced because the price of P80 per square meter fixed in the deed of sale was reasonable, hence, the petitioners are not guilty of having caused undue injury and prejudice to the Government, nor of having given unwarranted benefits to the property owner and/or his attorney-in-fact, Gutierrez. He further argues that the valuation in the owner's genuine tax declaration may not be used as a standard in determining the fair market value of the property because PD Nos. 76 and 464 (making it mandatory in expropriation cases to fix the price at the value of the property as declared by the owner, or as determined by the

assessor, whichever is lower), were declared null and void by this Court in the case of Export Processing Zone Authority (EPZA) vs. Dulay, 149 SCRA 305, and other related cases.

That argument is not well taken because PD Nos. 76 and 464 (before they were nullified) applied to the expropriation of property for public use. The acquisition of Agleham's riceland was not done by expropriation but through a negotiated sale. In the course of the negotiations, there was absolutely no allegation nor proof that the price of P80 per square meter was its fair market value in 1978, i.e., eleven (11) years ago. What the accused did was to prove the value of the land through fake tax declarations (Exhs. B, F, K), false certifications (Exhs. J, D and E) and a forged sworn statement on the current and fair market value of the real property (Exh. Z) submitted by the accused in support of the deed of sale. Because fraudulent documents were used, it may not be said that the State agreed to pay the price on the basis of its fairness, for the Government was in fact deceived concerning the reasonable value of the land.

When Ocol testified in 1983 that P80 was a reasonable valuation for the Agleham's land, he did not clarify that was also its reasonable value in 1975, before real estate values in Pasig soared as a result of the implementation of the Mangahan Floodway Project. Hence, Ocol's testimony was insufficient to rebut the valuation in Agleham's genuine 1978 Tax Declaration No. 47895 that the fair valuation of the riceland then was only P5 per square meter. A Tax Declaration is a guide or indicator of the reasonable value of the property (EPZA vs. Dulay, supra).

The petitioner's partiality for Agleham/Gutierrez may be inferred from their having deliberately closed their eyes to the defects and irregularities of the transaction in his favor and their seeming neglect, if not deliberate omission, to check, the authenticity of the documents presented to them for approval. Since partiality is a mental state or predilection, in the absence of direct evidence, it may be proved by the attendant circumstance instances.

WHEREFORE, I vote to affirm in toto the decision of the Sandiganbayan in SB Crim. Case No. 2010, with costs against the petitioners, Amado Arias and Cresencio Data.

Feliciano, Padilla, Sarmiento, and Regalado, JJ., concur.

Separate Opinions

GRIÑO-AQUINO, J., dissenting:

The lone issue in these consolidated petitions for review is whether the Sandiganbayan committed a reversible error in convicting the petitioners, Amado C. Arias and Cresencio D. Data, of having violated Section 3, paragraph (e), of the Anti Graft and Corrupt Practices Act, in connection with the scandalous overpricing of land purchased by the Government as right of way for its Mangahan Floodway Project in Pasig, Rizal. The pertinent provision of the Anti-Graft Law reads as follows:

SEC. 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:

x x x x x x x x x

(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.

The amended information against them, to which they pleaded not guilty, alleged:

That on or about the period covering April, 1978 to October 1978, in Rosario, Pasig, Metro Manila, Philippines, and with the jurisdiction of this Honorable Court, accused Cresencio D. Data, being then the district Engineer of the province of Rizal, Ministry of Public Works, and as such, headed and supervised the acquisition of private lands for the right-of-way of the Mangahan Floodway Project of the Government at Sitio Mangahan, Rosario, Pasig, Metro Manila; accused Priscillo G. Fernando, then the Supervising Engineer of the Office of the District Engineer of Rizal, Ministry of Public Works who acted as assistant of accused Cresencio D. Data in the Mangahan Floodway Project; accused Ladislao G. Cruz, then the Senior Engineer of the Office of the District Engineer of Rizal, Ministry of Public Works, who was charged with the acquisition of lots needed for the Mangahan Floodway Project; accused Carlos L. Jose then the Instrumentman of the office of the District Engineer of Rizal, Ministry of Public Works who acted as the surveyor of the Mangahan Floodway Project; accused Claudio H. Arcaya, then the Administrative Officer I of the Rizal District Engineer's Office, Ministry of Public Works who passed upon all papers and documents pertaining to private lands acquired by the Government for the Mangahan Floodway Project; and accusedAmado C. Arias , then the Auditor of Rizal Engineering District, Pasig, Metro Manila, who passed upon and approved in audit the acquisition as well as the payment of lands needed for the Mangahan Floodway Project all taking advantage of their public and official positions, and conspiring, confederating and confabulating with accused Natividad C. Gutierrez, the attorney-in-fact of Benjamin Agleham, who is the registered owner of a parcel of land situated at Rosario, Pasig, Metro Manila and covered by Original Certificate of Title No. 0097, with accused Ladislao G. Cruz, Carlos L. -Jose and Claudio Arias , acting with evident bad faith, while accused Cresencio D. Data, Priscillo G. Fernando and Amado C. Arias , acting with manifest partiality in the discharge of their official public and/or administrative functions, did then and there wilfully, unlawfully and feloniously cause undue injury, damage and prejudice to the Government of the Republic of the Philippines by causing, allowing and/or approving the illegal and irregular disbursement and expenditure of public funds in favor of and in the name of Benjamin P. Agleham in the amount of P1,520,320.00 under General Voucher No. 8-047, supported by a certification, dated September 14, 1978, which was purportedly issued by the Municipal Treasurer of Pasig, and certified xerox copies of Tax Declarations Nos. 47895 and A-018-0091 1, both in the name of Benjamin P. Agleham, and an alleged owner's copy of Tax Declaration No. 49948, in the name

of the Republic of the Philippines, saidsupporting documents having been falsified by the accused to make it appear that the land mentioned in the above-stated supporting papers is a residential land with a market value of P80.00 per square meter and that 19,004 square meters thereof were transferred in the name of the Government of the Republic of the Philippines under Tax Declaration No. 49948, when in truth and in fact, the afore-stated land is actually a riceland with a true and actual market value of P5.00 per square meter only and Tax Declaration No. 49948 was truly and officially registered in the names of spouses Moises Javillonar and Sofia San Andres, not in the name of the Government, and refers to a parcel of land at Sagad, Pasig, Metro Manila; that the foregoing falsities were committed by the accused to conceal the fact that the true and actual pace of the 19,004 square meters of land of Benjamin P. Agleham, which was acquired in behalf of the Government by way of negotiated purchase by the accused officials herein for the right of way of the Mangahan Floodway project at an overprice of P1,520,320.00 was P92,020.00 only; and finally, upon receipt of the overpriced amount, the accused misappropriated, converted and misapplied the excess of the true and actual value of the above-mentioned land, i.e., P1,428,300.00 for their own personal needs, uses and benefits, to the damage and prejudice of the Government in the amount of P1,428,300.00. (pp. 2931, Rollo of G.R. No. 81563.)

Priscillo Fernando did not face trial for he has remained at large, his present whereabouts being unknown (p. 48, Sandiganbayan Decision, p. 75, Rollo of G.R. No. 81563).

In 1975, the Bureau of Public Works initiated the Mangahan Floodway Project to ease the perennial floods affecting the towns of Marikina and Pasig, Metro Manila. The project would traverse the northern and southern portions of Ortigas Avenue in Pasig, Metro Manila (Exhibits A and A-1). An announcement was published in leading newspapers advising affected property owners to file their applications for payment at the District Engineer's Office (p. 29, Sandiganbayan Decision, p. 56, Ibid.).

The implementation of the Mangahan Floodway Project was entrusted to the Pasig Engineering District headed by the District Engineer, Cresencio Data. He formed a committee composed of Supervising Civil Engineer Priscillo Fernando, as over-all in charge, Alfonso Mendoza and Pedro Hucom for acquisition of improvements, and Instrumentman Carlos Jose for surveys (p. 26, Sandiganbayan Decision, p. 53, Ibid.). The team was tasked to notify lot owners affected by the project of the impending expropriation of their properties and to receive and process applications for payment.

The reclassification of all lands around the Mangahan Floodway Project was suspended in 1975 by order of the President (p. 45, Sandiganbayan Decision, p. 72, Ibid.). Implementing that order, a memorandum was sent to Data on August 27,1976, by Public Works Director Desiderio Anolin, directing that all affected lands covered by the Mangahan Floodway Project shall be excluded from reevaluation and reassessment (Annex A, Exh. DD, Counter-Affidavit of Data, p. 70, Sandiganbayan Decision, P. 97, Ibid).

Among the lots affected was a 19,004-square-meter portion of a 30,169-square-meter riceland in Pasig registered in the name of Benjamin Agleham under Original Certificate of Title No. 0097 issued on May 5, 1977 (Exh. H). The land

was previously owned by Andrea Arabit and Evaristo Gutierrez, parents of the accused Natividad Gutierrez.

After Agleham acquired the 3-hectare land in 1973 from the Gutierrez spouses, he had it subdivided into three (3) lots under plan (LRC) Psd-278456 which was approved by the Land Registration Commission on June 1, 1978 (Entry No. 27399/12071, Exh. H). Lot 1, with an area of 19,004 square meters, is the portion that Agleham, through Natividad Gutierrez, sold to the Government in 1978 for the Mangahan Floodway Project.

On December 15, 1973, Agleham's property, classified as a "ricefield" with an area of 3.2 hectares, was declared for taxation under Tax Declaration No. 28246 (Exh-Y). Its assessed value was P4,800 or P0.15 per square meter (p. 10, Sandiganbayan Decision, p. 37, Ibid.). On February 27, 1978, another Tax Declaration No. 47895 (Exh. Y-1) was issued for the same ricefield" with a revised area of 30,169 square meters. The declared market value was P150,850 (or P5 per square meter), and the assessed value was P60,340.

Ten months later, or on December 15, 1978, Tax Declaration No. 47895 was cancelled and replaced by Tax Declaration No. A018- 00911 (Exh. Y-2) wherein the market value of the same "ricefield," jumped to P301,690 (P10 per square meter). Its assessed value was fixed at P120,680. The description and value of the property, according to Pedro Ocol, the assistant Municipal Assessor of Pasig, was based on the actual use of the property (riceland) not on its potential use (p. 13, Sandiganbayan Decision, p. 40, Ibid.). The valuation was based on a compilation of sales given to the Municipal Assessor's office by the Register of Deeds, from which transactions the Assessor obtained the average valuation of the properties in the same vicinity (p. 14, Sandiganbayan Decision, p. 41, Ibid.).

Among those who filed an application for payment (Exhs. FF and FF-1) at the District Engineer's Office was the accused, Natividad Gutierrez, who was armed with a Special Power of Attorney allegedly executed on February 24,1978 by Benjamin Agleham in her favor (Exhs. C and C-1). She submitted a falsified xerox copy of Tax Declaration No. 47895 (Exh. B) bearing a false date: December 15,1973 (instead of February 27, 1978) and describing Agleham's 30,169-square-meter property as "residential" (instead of riceland), with a fair market value of P2,413,520 or P80 per square meter (instead of P150,845 at P5 per square meter). Its assessed value appeared to be P724,056 (instead of P60,340). Gutierrez submitted Agleham's Original Certificate of Title No. 0097 (Exh. H-1), the technical description of the property, and a xerox copy of a "Sworn Statement of the True Current and Fair Market Value of Real Property" required under P.D. No. 76 (Exh. 1). The xerox copy of Tax Declaration No. 47895 was supposedly certified by the Municipal Treasurer of Pasig, Alfredo Prudencio.

The documents supporting Agleham's claim were "examined" by the Administrative Officer, accused Claudio Arcaya, who, after initiating them, turned them over to accused Ladislao G. Cruz, A Deed of Absolute Sale for Lot 1 (19,004 square meters valued at P80 per square meter) was prepared by Cruz who also initialed the supporting documents and transmitted them to District Engr. Data.

On April 20,1978, the Deed of Absolute Sale (Exhs. G and G-1) was signed by Data and Gutierrez (as attorney-in-fact of Agleham). Thereafter, Data sent the papers to Director Desiderio Anolin of the Bureau of Public Works who recommended to the Assistant Secretary of Public Works the approval of the Deed of Sale (Exh. G-1). Afterwards, the documents were returned to Data's

office for the transfer of title to the Government. On June 8, 1978, the sale was registered and Transfer Certificate of Title No. T-12071 (Exh. T) was issued in the name of the Government.

General Voucher (Exh. S) No. 85-2-7809-52 dated "9/29/78" for the amount of P1,520,320 bore fourth certifications of. (1) Cruz as Senior Civil Engineer; (2) Priscillo G. Fernando as Supervising Civil Engineer II; (3) Cresencio Data as District Engineer II and (4) Cesar V. Franco as Project Acting Accountant (p. 56, Sandiganbayan Decision, p. 83, Ibid.).

On October 23, 1978, the voucher and its supporting documents were pre-audited and approved for payment by the accused, Amado C. Arias , as auditor of the Engineering District. The next day, October 24, 1978, sixteen (16) PNB checks with Serial Nos. 188532 to 188547, inclusive (Exhs. X to X-1 5), for the total sum of Pl,520,320.00 were issued to Gutierrez as payment for Agleham's 19,004-square-meter lot.

In October, 1979, an investigation was conducted by the Ministry of National Defense on the gross overpricing of Agleham's property. During the investigation, sworn statements were taken from Alfredo Prudencio, Municipal Treasurer of Pasig (Exh. AA), Pedro Ocol, Assistant Municipal Assessor of Pasig (Exh. BB), and the accused Claudio Arcaya (Exh. EE). Prudencio denied having issued or signed the certification dated September 14,1978 (Exh. J), attesting that Agleham's property covered by Tax Declaration No. 47895 had a market value of P2,413,520 and that the taxes had been paid from 1975 to 1978. Prudencio also impugned the initial (purporting to be that of his subordinate Ruben Gatchalian, Chief of the Land Tax Division) that was affixed below Prudencio's typewritten name in Exhibit J. Both Prudencio and Gatchalian disowned the typewritten certification. They declared that such certifications are usually issued by their office on mimeographed forms (Exh. J-1).

Assistant Municipal Assessor Pedro Ocol produced and Identified the original or genuine Tax Declaration No. 47895 dated February 27, 1978, and a certified copy thereof (Exh. Y-1). Therein, Agleham's property of 30,169 square meters was classified as a "ricefield" and appraised at P5 per square meter, with an assessed value of P60,340 and a market value of PI 50,850. Ocol testified that the supposed xerox copy of Tax Declaration No. 47895 (Exh. B), which Gutierrez submitted as one of the supporting documents of the general voucher (Exh. S), was fake, because of the following tell-tale signs:

(1) the tax declaration number was typewritten, not machine numbered as in the genuine tax declaration, Exhibit Y;

(2) the stampmark of registration was antedated to December 15, 1973 in the fake, instead of the correct date February 27, 1978-- in the genuine tax declaration;

(3) the classification of the property was "residential," instead of "ricefield" which is its classification in the genuine document; and

(4) the lot was over priced at P80 per square meter in the fake tax declaration, instead of the appraised value of only P5 per square meter appearing in the genuine declaration.

Also found to be fake was Tax Declaration No. 49948 in the name of the Republic of the Philippines (Exhs. K and K-1). The genuine Tax Declaration No. 49948 (Exhs. U and V-2) was actually filed on October 18, 1978 in the names of

the spouses Moises Javillonar and Sofia Andres, for their 598-square-meters' residential property with a declared market value of P51,630.

The Agleham deed of sale was pre-audited by the auditor of the Rizal Engineering District, Amado Arias , who approved the payment of Pl,520,320 to Gutierrez without questioning the fact that the amount of the purchase price therein had been altered, i.e., "snow-flaked (sic) and later superimposed by the amount of P1,520,320 in words and figures" (p. 71, Sandiganbayan Decision, p. 98, Ibid.), nor checking the veracity of the supporting documents listed at the back of the General Voucher (Exh. S), numbering fifteen (15) in all, among which were:

(1) the fake Tax Declaration No. 47895 showing that the value of the land was P80 per square meter (Exh. B);

(2) fake Tax Declaration No. 49948 In the name of the Republic of the Philippines (Exh. K)

(3) the forged certification of Municipal Treasurer Prudencio that the fair market value of 'the land was P100 per square meter (Exh. J);

(4) a false certification (Exh. D) dated September 19, 1978 signed by accused Cruz, Jose, and Fernando, certifying that the Agleham property was upon ocular inspection by them, found to be "residential;"

(5) a falsely dated certification where the original date was erased and a false date (February 15, 1978) was superimposed (Exh.E), issued by Engr. Fernando pursuant to DPWTC Circular No. 557, certifying that he had examined the real estate tax receipts of the Agleham property for the last three (3) years;

(6) the technical description of the land (Exhs. F and F-1) attached to the deed of sale dated April 20, 1978 was not an approved technical description for the subdivision survey executed by Geodetic Engineer Cipriano C. Caro was verified and approved by the Land Registration Commission on May 28,1978 only. There were "substantial variations" noted by the Sandiganbayan between the approved technical description and the technical description of the land in the deed of sale (p. 61, Sandiganbayan Decision, p. 88, Ibid.);

(7) the special power of attorney dated February 24, 1978, supposedly given to Gutierrez by Agleham (Exhs. C, C-1) bore a fictitious residence certificate Agleham (p. 64, Sandiganbayan Decision, p. 91, Ibid.); and

(8) the fake Sworn Statement on the Current and Fair Market Value of Real Properties (Exh. Z) dated October 1, 1973, contained a forged signature of Agleham, presumably made by Gutierrez herself The Sandiganbayan observed that Agleham's supposed signature "appears to be Identical to accused Gutierrez' signatures in the General Voucher (Exh. S), in the release and Quitclaim which she signed in favor of Agleham on July 20, 1983 (Exh. CC), and in her affidavits (Exhs. FF and FF-1)." (pp. 64-65, Sandiganbayan Decision, pp. 91-92, Ibid.).

After payment of the Agleham claim, all the supporting documents were kept by Arias . Even after he had been replaced by Julito Pesayco on September 1, 1981, as auditor of the Rizal Engineering District, he did not turn over the documents to Pesayco. It was only on June 23, 1982, after this case had been filed in the Sandiganbayan and the trial had begun, that Arias delivered them to Pesayco (Exh. T-1).

After a trial lasting nearly six years, the Sandiganbayan rendered a 78-page decision on November 16, 1987, whose dispositive portion reads as follows:

WHEREFORE, judgment is hereby rendered finding accused Natividad G. Gutierrez, Cresencio D. Data, Ladislao G. Cruz, Carlos L. Jose, Claudio H. Arcaya and Amado C. Arias GUILTY beyond reasonable doubt of the violation of Section 3, paragraph (e) of Republic Act No. 3019, as ascended, otherwise known as the Anti-Graft and Corrupt Practices Act, and hereby sentences each of them to suffer the penalty of imprisonment for THREE (3) YEARS, as minimum to SIX (6) YEARS, as maximum; to further suffer perpetual disqualification from public office; to indemnify jointly and severally, the Government of the Republic of the Philippines in the amount of P1,425,300, and to pay their proportional costs of this action. (p. 104, Rollo of G.R. No. 81563.)

Both Arias and Data appealed.

Arias anchors his petition for review of the Sandiganbayan's decision (G.R. No. 81563) on his contention that the court's findings that he conspired with his co-accused and that he was grossly negligent are based on misapprehension of facts, speculation, surmise, and conjecture.

Data's main defense is that the acquisition of the Agleham property was the work of the committee of Prescillo Fernando iii which he did not take an active part, and that the price which the government paid for it was reasonable. Hence, it uttered no jury in the transaction.

In his consolidated brief or comment for the State, the Solicitor General recommends the acquittal of the petitioners because the Agleham property was allegedly not grossly overpriced.

After deliberating on the petitions in these cases, we find no error in the decision under review. The Sandiganbayan did not err in finding that the petitioners conspired with their co-accused to cause injury to the Government and to unduly favor the lot owner, Agleham.

A conspiracy need not be proved by direct evidence of the acts charged, but may and generally must be proven by a number of indefinite acts, conditions and circumstances (People vs. Maralit, G.R. No. 71143, Sept. 19,1988; People vs. Roca, G.R. No. 77779, June 27, 1988).

This case presents a conspiracy of silence and inaction where chiefs of office who should have been vigilant to protect the interest of the Government in the purchase of Agleham's two-hectare riceland, accepted as gospel truth the certifications of their subordinates, and approved without question the million-peso purchase which, by the standards prevailing in 1976-78, should have pricked their curiosity and prompted them to make inquiries and to verify the authenticity of the documents presented to them for approval. The petitioners kept silent when they should have asked questions they looked the other way when they should have probed deep into the transaction.

Since it was too much of a coincidence that both petitioners were negligent at the same time over the same transaction, the Sandiganbayan was justified in concluding that they connived and conspired to act in that manner to approve the illegal transaction which would favor the seller of the land and defraud the Government.

We cannot accept Arias ' excuse that because the deed of sale had been signed and the property transferred to the Government which received a title in its name, there was nothing else for him to do but approve the voucher for payment. The primary function of an auditor is to prevent irregular, unnecessary, excessive or extravagant expenditures of government funds.

The auditorial function of an auditor, as a representative of the Commission on Audit, comprises three aspects: (1) examination; (2) audit: and (3) settlement of the accounts, funds, financial transactions and resources of the agencies under their respective audit jurisdiction (Sec. 43, Government Auditing Code of the Phil.). Examination, as applied to auditing, means "to probe records, or inspect securities or other documents; review procedures, and question persons, all for the purpose of arriving at an opinion of accuracy, propriety, sufficiency, and the like." (State Audit Code of the Philippines, Annotated by Tantuico, 1982 Ed., p. 57.)

Arias admitted that he did not check or verify the papers supporting the general voucher that was submitted to him for payment of Pl,520,320 to Agleham or his attorney-in-fact, Natividad Gutierrez. Arias did not question any person for the purpose of determining the accuracy and integrity of the documents submitted to him and the reasonableness of the price that the Government was paying for the less than two-hectare riceland. We reject his casuistic explanation that since his subordinates had passed upon the transaction, he could assume that it was lawful and regular for, if he would be a mere rubber stamp for his subordinates, his position as auditor would be useless and unnecessary.

We make the same observation concerning District Engineer Cresencio Data who claims innocence because he allegedly did not take any direct and active participation in the acquisition of the Agleham property, throwing the blame on the committee which he created, composed of Fernando, Asuncion, Mendoza, Cruz, Hucom and Jose that negotiated with the property owners for the purchase of properties on the path of the Mangahan Floodway Project. He in effect would hide under the skirt of the committee which he himself selected and to which he delegated the task that was assigned to his office to Identify the lots that would be traversed by the floodway project, gather and verify documents, make surveys, negotiate with the owners for the price, prepare the deeds of sale, and process claims for payment. By appointing the committee, he did not cease to be responsible for the implementation of the project. Under the principle of command responsibility, he was responsible for the manner in which the committee performed its tasks for it was he who in fact signed the deed of sale prepared by the committee. By signing the deed of sale and certifications prepared for his signature by his committee, he in effect, made their acts his own. He is, therefore, equally guilty with those members of the committee (Fernando, Cruz and Jose) who accepted the fake tax declarations and made false certifications regarding the use and value of the Agleham property.

The Solicitor General has pointed out that Data signed, but did not approve, the deed of sale of Agleham's property because the approval thereof was the prerogative of the Secretary of Public Works. It should not be overlooked, however, that Data's signature on the deed of sale was equivalent to an attestation that the transaction was fair, honest and legal. It was he who was charged with the task of implementing the Mangahan Floodway Project within his engineering district.

We find no merit in the Solicitor General's argument that the Agleham riceland was not overpriced because the price of P80 per square meter fixed in the deed of sale was reasonable, hence, the petitioners are not guilty of having caused

undue injury and prejudice to the Government, nor of having given unwarranted benefits to the property owner and/or his attorney-in-fact, Gutierrez. He further argues that the valuation in the owner's genuine tax declaration may not be used as a standard in determining the fair market value of the property because PD Nos. 76 and 464 (making it mandatory in expropriation cases to fix the price at the value of the property as declared by the owner, or as determined by the assessor, whichever is lower), were declared null and void by this Court in the case of Export Processing Zone Authority (EPZA) vs. Dulay, 149 SCRA 305, and other related cases.

That argument is not well taken because PD Nos. 76 and 464 (before they were nullified) applied to the expropriation of property for public use. The acquisition of Agleham's riceland was not done by expropriation but through a negotiated sale. In the course of the negotiations, there was absolutely no allegation nor proof that the price of P80 per square meter was its fair market value in 1978, i.e., eleven (11) years ago. What the accused did was to prove the value of the land through fake tax declarations (Exhs. B, F, K), false certifications (Exhs. J, D and E) and a forged sworn statement on the current and fair market value of the real property (Exh. Z) submitted by the accused in support of the deed of sale. Because fraudulent documents were used, it may not be said that the State agreed to pay the price on the basis of its fairness, for the Government was in fact deceived concerning the reasonable value of the land.

When Ocol testified in 1983 that P80 was a reasonable valuation for the Agleham's land, he did not clarify that was also its reasonable value in 1975, before real estate values in Pasig soared as a result of the implementation of the Mangahan Floodway Project. Hence, Ocol's testimony was insufficient to rebut the valuation in Agleham's genuine 1978 Tax Declaration No. 47895 that the fair valuation of the riceland then was only P5 per square meter. A Tax Declaration is a guide or indicator of the reasonable value of the property (EPZA vs. Dulay, supra).

The petitioner's partiality for Agleham/Gutierrez may be inferred from their having deliberately closed their eyes to the defects and irregularities of the transaction in his favor and their seeming neglect, if not deliberate omission, to check, the authenticity of the documents presented to them for approval. Since partiality is a mental state or predilection, in the absence of direct evidence, it may be proved by the attendant circumstance instances.

WHEREFORE, I vote to affirm in toto the decision of the Sandiganbayan in SB Crim. Case No. 2010, with costs against the petitioners, Amado Arias and Cresencio Data.

Feliciano, Padilla, Sarmiento and Regalado, JJ., concur.

Footnotes

1 The Solicitor General was assisted by Assistant Solicitor General Zoilo A. Andi and Solicitor Luis F. Simon.

692 F2d 1321 Daniels v. Twin Oaks Nursing Home

Bob DANIELS, As Administrator of the Estate of Isaac Gaston

Daniels, deceased, Plaintiff-Appellant, Cross-Appellee,

v.

TWIN OAKS NURSING HOME, a Corporation, and Mediplex

Incorporated, a Corporation, Defendants-Appellees,

Cross-Appellants.

No. 81-7652.

United States Court of Appeals,

Eleventh Circuit.

Dec. 6, 1982.

Rehearing and Rehearing En Banc

Denied Jan. 26, 1983.

Powell & Powell, Andalusia, Ala., A.B. Powell, III, Champ Lyons, Jr., Coale,

Helmsing, Lyons & Sims, Mobile, Ala., for plaintiff-appellant, cross-appellee.

Davis Carr, Mobile, Ala., for Mediplex, Inc.

Appeals from the United States District Court for the Southern District of

Alabama.

Before GODBOLD, Chief Judge, and ANDERSON, Circuit Judge, and

HOFFMAN*, District Judge.

GODBOLD, Chief Judge:

1

Plaintiff brought suit under 42 U.S.C. Sec. 1983 and asserted a pendent state

law negligence claim as administrator of the estate of his father, Isaac Daniels,

for Daniels' wrongful death. Daniels disappeared while under the care of the

defendant nursing home and has not been seen since. In a trial conducted before

a magistrate with the consent of the parties pursuant to 28 U.S.C. Sec. 636(c)

the jury returned a verdict of $1 million, but the magistrate entered a judgment

n.o.v. and granted a new trial in the alternative that the judgment is reversed. We

affirm the judgment n.o.v.

I. The facts

2

Isaac Daniels was committed to an Alabama state mental hospital in 1970 at

the age of 69 because he was senile and could not be stopped from wandering

into strangers' houses. As his only mental problem was senility, Daniels was

transferred in 1973 to the Twin Oaks Nursing Home, a private institution in

Mobile, Alabama. After a trial period of two years Daniels was formally turned

over to the nursing home on a permanent basis, under contract with the state.

3

Nurses' notes document that Daniels had a persistent tendency to wander off

from the nursing home. During a six-month period in 1974, for example, Daniels

succeeded in leaving the home five separate times. He usually was found in the

neighborhood, but on one occasion in 1974 he walked into woods that were

adjacent to the home and was found on the other side of a swamp located in the

midst of the woods. Facts concerning the size and nature of the woods and

swamp were not fully developed. All we know is that the woods were dense and

that the swampy area was described as the size of a city block and as 200 yards

long and the width of the courtroom. We do not know the nature of the swamp or

the size of the wooded area. Other instances of leaving the home, both

attempted and successful, continued to occur through 1978.

4

Because of Daniels' peripatetic tendency the nursing home began to restrain

him regularly when he could not be watched. The means of restraint were

tranquilizers and a "Posey vest," a cloth vest with straps that tie the patient to a

bed or chair. On the morning of June 6, 1979, when Daniels was last seen, he

was restrained in a Posey vest and was checked at hourly intervals up until

11:00. At approximately 11:45 a.m., however, it was discovered that Daniels was

missing. Employees of the nursing home searched the surrounding

neighborhood and the woods adjacent to the home but to no avail. Radio and

television stations were notified. The next evening a team of four policemen

with search dogs were called in, and they searched the woods and swamp for

two to three hours. Neither Daniels nor his body was then found or has ever been

found. One year later a state probate court appointed plaintiff to administer

Daniels' estate, an act that plaintiff contends, and defendant does not challenge,

conclusively establishes Daniels' death.

5

Plaintiff brought suit in federal court under 42 U.S.C. Sec. 1983 charging that

the nursing home's negligence caused Daniels' death in violation of due process

and that the nursing home was a state actor.1 Plaintiff also brought a pendent

state law negligence claim. The case was tried by a U.S. magistrate with the

consent of the parties pursuant to 28 U.S.C. Sec. 636(c). The parties agreed that

the state and federal theories of action were identical, and so the case was

submitted to the jury under a single negligence instruction. The magistrate

denied defendant's motion for directed verdict, and the jury found for the plaintiff

and awarded $1 million in damages. The magistrate entered a judgment n.o.v.,

reasoning as to the state law negligence action that Alabama's rule of evidence

against drawing an inference from an inference made the evidence insufficient to

submit the case to the jury, and as to the federal claim that there was not the

requisite abuse of power necessary to state a constitutional cause of action. In

the alternative the magistrate ordered a new trial on the ground of excessive

damages.

6

On appeal plaintiff objects to the three post-verdict rulings just summarized.

Defendant contends that the judgment can be sustained on the ground that there

was insufficient evidence under the federal standard to support the verdict. We

affirm on the basis of the latter ground.

II. Sufficiency of the evidence

7

Plaintiff's case rested entirely upon circumstantial evidence. There is no direct

evidence of negligence or of the cause of death. Plaintiff contends that the jury

could be properly allowed to infer negligence from the fact that Daniels could

have left the nursing home only by passing a nurses' station, and that the jury

could infer that this negligence proximately caused Daniels' death because he

was infirm and senile.

A. Federal or state standard

8

The magistrate ruled that Alabama's rule against pyramiding inferences,

i.e., that one inference cannot be based upon another, see e.g., Malone

Freight Lines, Inc. v. McCardle, 277 Ala. 100, 107, 167 So.2d 274 (1964), was

controlling on the federal court under Erie R.R. Co. v. Tompkins, 304 U.S. 64, 58

S.Ct. 817, 82 L.Ed. 1188 (1938), and therefore a judgment must be entered for

defendant on the state law cause of action.

9

The magistrate erred in this ruling because Alabama's rule against pyramiding

inferences is no more than a rule concerning the sufficiency of the evidence and

therefore is a matter of federal law. Boeing Co. v. Shipman, 411 F.2d 365, 368-

70 (5th Cir.1969) (en banc), settled that under Erie federal law controls questions

of the sufficiency of the evidence in state law claims.2 According to federal law

there is no prohibition against pyramiding inferences; instead all inferences are

permissible so long as they are reasonable. Fenner v. General Motors Corp., 657

F.2d 647, 650-51 (5th Cir.1981), cert. denied, 455 U.S. 942, 102 S.Ct. 1435, 71

L.Ed.2d 653 (1982); Cora Pub, Inc. v. Continental Casualty Co., 619 F.2d 482,

486 (5th Cir.1980).

10

Defendant contends that Alabama's rule against drawing one inference from

another inference is analogous to the doctrine of res ipsa loquitur in that it

determines when a case can be proved by circumstantial evidence, and that

because res ipsa is a matter of state law, Kicklighter v. Nails by Jannee, Inc., 616

F.2d 734, 738-40 (5th Cir.1980), so should be the rule against pyramiding

inferences. State doctrines of res ipsa loquitur are respected in federal court

because the doctrine has assumed the status of a substantive rule of law,

affecting plaintiff's burden of proof or production of evidence, The Doctrine of Res

Ipsa Loquitur in Alabama, 26 Ala.L.Rev. 433, 444-58 (1974). There is no

authority or rationale to support the contention that the rule against pyramiding

inferences has assumed this same substantive law status or that it is any more

than a rule concerning sufficiency of the evidence. Even if there were some

doubt, the issue is settled by Equitable Life Assurance Society v. Fry, 386 F.2d

239 (5th Cir.1967). There the appellants contended that a jury verdict could not

be upheld because, inter alia, it necessarily involved "pyramiding of inferences."

Id. at 241. The court held that "the test to be applied in diversity cases to

determine the sufficiency of the evidence for submission of a case to a jury is a

matter of federal law," id. at 245, and held that the inferences drawn by the jury

were reasonable under federal standards, id. at 245-48.

11

B. The federal standard of allowable inferences

12

Defendant contends that the judgment can be sustained even if a federal

standard is applied, because the inferences necessarily drawn by the jury were

not reasonable or allowable ones. Defendant cites cases such as Smith v.

General Motors Corp., 227 F.2d 210 (5th Cir.1955), and McNamara v. American

Motors Corp., 247 F.2d 445 (5th Cir.1957), for the proposition that if the inference

"is only a guess or a possibility, or is no more probable than one of several

others," then a verdict must be directed for defendant. Smith, supra, 227 F.2d at

213.3 There are two distinct thoughts in this statement. The first is that an

inference is not reasonable if it is "only a guess or a possibility," for such

an inference is not based on the evidence but is pure conjecture and

speculation. This proposition is undoubtedly sound. See, e.g., Green v.

Reynolds Metals Co., 328 F.2d 372 (5th Cir.1964). The second proposition is

that, even though an inference supporting the verdict is a reasonable one, it

cannot stand if there are other equally probable inferences; that is, where a case

is proved by circumstantial evidence the court must find that the preponderance

of evidence supports the plaintiff, and if there are two or more equally probable

inferences only one of which supports the plaintiff a verdict must be directed for

the defendant. This rule of equally probable inferences is no longer sound.

13

In Planters Manufacturing Co. v. Protection Mutual Insurance Co., 380 F.2d

869 (5th Cir.), cert. denied, 389 U.S. 930, 88 S.Ct. 293, 19 L.Ed.2d 282 (1967),

the rule of equally probable inferences was rejected. The court explained that the

rule was based on the Supreme Court's precedent in Pennsylvania R.R. v.

Chamberlin, 288 U.S. 333, 53 S.Ct. 391, 77 L.Ed. 819 (1932), which had been

superseded by Lavender v. Kurn,327 U.S. 645, 66 S.Ct. 740, 90 L.Ed. 916

(1946).4 Id. 380 F.2d at 872-74. The court held that

14

it is immaterial that evidence may equally support an inconsistent inference, if

in fact fairminded men might draw from the evidence the inference sought by the

[opponent to a directed verdict].... The question, then, is whether [the] evidence

... constitutes a basis from which the jury might with reason have inferred [for the

plaintiff], and it is no answer to that question to say that a conflicting inference

might with equal probability have been drawn therefrom.

15

Id. at 878. Accord, Continental Ore Co. v. Union Carbide Corp., 370 U.S. 690,

696, 82 S.Ct. 1404, 1409, 8 L.Ed.2d 777 (1962) (we are bound "to give the

[plaintiff] the benefit of all inferences which the evidence fairly supports even

though contrary inferences might reasonably be drawn"). See generally, 9 Wright

& Miller, Federal Practice and Procedure, Sec. 2528 at 563-68 (1971).5

16

Smith v. General Motors, supra, and similar cases were decided at a time

when state law controlled the sufficiency of the evidence in diversity cases.

Under the modern case law applying a federal standard, a verdict based on

circumstantial evidence is not infirm simply because the evidence supports an

equally probable inference to the contrary. It is the jury that chooses among

allowable inferences. The standard for determining whether an inference is

allowable is generally whether it is a reasonable one, that is, whether it is

one that "reasonable and fair-minded men in the exercise of impartial

judgment" might draw from the evidence. Boeing Company v. Shipman,

supra, 411 F.2d at 375. An inference is not unreasonable simply because it is

based in part on conjecture, for an inference by definition is at least partially

conjectural. Helene Curtis Industries, Inc. v. Pruitt, 385 F.2d 841, 851 (5th

Cir.1967), cert. denied, 391 U.S. 913, 88 S.Ct. 1806, 20 L.Ed.2d 652 (1968). Yet

a jury will not be allowed to engage in a degree of speculation and conjecture

that renders its finding a guess or mere possibility. Id. Such an inference is infirm

because it is not based on the evidence. Unavoidably, "[i]n deciding how much

the jury can speculate ... [t]he line of demarcation which we are required to walk

is ephemeral." Id.

C. The inferences in this case

17

Applying these principles to the facts of this case, we hold that the verdict

cannot stand because a finding that negligence of the nursing home proximately

caused Daniels' death is a product of too great a degree of speculation and

conjecture based on the evidence in this record.

18

First, with respect to negligence, there was sufficient evidence from which a

jury could infer that Daniels exited the home through negligence of the

defendant. An exit door was kept unlocked, and a nurses' station that had to be

passed in order to exit was required to be attended. No trace of Daniels was

found in the home. Thus, the evidence supports inferences that he exited through

this door and did so because of the home's negligence in either failing to keep

the station attended or failing to monitor the exit properly.

19

As to the fact of death, the evidence permitted the jury to find that Daniels is no

longer living.6 Here the direct evidence ends. It is unknown whether Daniels

exited alone or accompanied by or taken by someone else. We assume,

however, that based upon the prior history of escapes and wandering the jury

could infer that Daniels exited on his own and wandered away from the home.

There is no direct evidence of where he went or of the cause of death; these

facts must be inferentially determined. Plaintiff concedes that the bare fact of

disappearance, plus presumed death, is insufficient to support an inference of

proximate cause of death. But plaintiff points to circumstantial evidence that he

contends is sufficient to support two theories of death either of which might have

been accepted by the jury and both of which are within the foreseeable risks of

wandering from the home.

20

First, plaintiff observes that Daniels was taking heart medication as near as six

weeks prior to his disappearance and suggests that a jury could infer that Daniels

died as the result of failure to take his medication. But there is no evidence in the

record concerning the purpose of the medication indicating that it was vital or life-

sustaining. The jury was not even told what Daniels' heart ailment was beyond a

statement that the medicine he was taking was usually given for "some coronary

insufficiency or an angina-like syndrome."7 A reasonable and fair-minded juror

could not draw from this evidence a conclusion that Daniels died from his heart

condition as a consequence of not receiving medication for that condition.

21

Plaintiff's second theory is that the jury could infer that Daniels wandered into

the woods adjacent to the nursing home and perished from exposure or accident.

In the midst of the woods is the swamp. Possibly the jury might infer that Daniels

in his infirm and senile condition died from exposure or accident in the woods if

there were sufficient evidence that he went into the woods, but the evidence is

insufficient to support this preliminary finding. The evidence that Daniels might

have wandered into the woods consists of this: during a prior escape he had

entered the woods; the woods are adjacent to the home; and his body was never

discovered elsewhere. We examine this circumstantial evidence to determine

whether it is strong enough to support a rational inference that Daniels wandered

into the woods.

22

Daniels' prior excursion into the woods gives insubstantial support to this

inference. Of the seven or eight instances where Daniels left the home in the

past, he only once went into the woods.8 In all other instances Daniels went into

the surrounding residential neighborhood; he exhibited a particular preference for

a nearby cemetery. More important, however, is that the only prior incident of

going into the woods was remote in time, occurring five years prior to Daniels'

final disappearance. This does not establish a habit or propensity or substantial

likelihood of his wandering into the woods on the date of his disappearance.

23

The proximity of the woods and the fact that Daniels was never discovered,

while consistent with the theory that Daniels wandered into the woods, suggest

only that disappearance in the woods was one possibility. Daniels might have

disappeared in any one of a number of ways. To mention only a few, a passing

motorist might have given him a ride out of town, he might have been the victim

of violent crime, or he might have gone into an abandoned building and died from

natural causes unrelated to his wandering. Because there is no evidence

concerning the character of the surrounding neighborhood tending to negate

these other possibilities, the mere possibility that he wandered into the woods is

too speculative to be the basis for a jury verdict.

24

Furthermore, the bare possibility suggested by the proximity of the woods and

Daniels' disappearance is "at war with uncontradicted ... facts." Fenner v.

General Motors, supra, 657 F.2d at 650-51. There was no ready access into the

woods. A fence surrounding three sides of the nursing home separated the home

from the woods. In addition, there was uncontradicted testimony from an

employee who searched the woods that after going in 10 to 15 feet the thickness

of the woods made it hard to proceed without breaking limbs. As the district court

acknowledged, the woods were "nearly impenetrable." In his earlier venture into

the woods Daniels made it through to the far side of the swamp, but the jury did

not know whether five years earlier the woods were as penetrable or

impenetrable as when Daniels disappeared. The wooded area was searched

with no success by a team of four policemen with trained dogs for a period of two

to three hours, and the assistant administrator of the home searched it on several

occasions.9 Plaintiff asserts that there was never a thorough search of the

woods, but there is no evidence indicating that these efforts were insufficient.

25

In conclusion, a careful analysis shows Daniels' prior excursion into the woods

to be the only evidence that tends to give real substance to the possibility of

disappearance in the woods. In the circumstances of this case, however, where

this event occurred five years earlier as only one incident in a number of

wanderings, this evidence is so slight and remote as to amount to at most a

scintilla of evidence. Without any greater indication of how Daniels disappeared

and of what caused his death an inference of proximate cause remains too

speculative to be one supported by "substantial evidence." Boeing, supra, 411

F.2d at 374.

26

We do not reach our conclusion on the strength of inferences contrary to the

verdict. This is not a case where the evidence supports conflicting inferences.

Instead, this is a case where there is no evidence beyond a mere scintilla that

tells us what happened to Daniels; it is this lack of evidence that keeps the case

from the jury and requires a directed verdict against the party with the burden of

proof. We do not require that the cause of death be identified with scientific

precision. See Alman Brothers Farms & Feed Mill, Inc. v. Diamond Laboratories,

Inc., 437 F.2d 1295, 1301 (5th Cir.1971). However, the evidence must support an

explanation of the cause of death that is sufficiently articulated that the jury is not

permitted to engage in an unallowable degree of speculation. Plaintiff's

explanations are not supported by the evidence.

27

Cases cited by plaintiff do not contradict our holding. In other cases where a

nursing home or similar institution was held liable for a patient who wandered

away and died, the body was found and the cause of death was ascertainable;

therefore the only litigated issue was the negligence of the home, not proximate

cause. See Krestview Nursing Home, Inc. v. Synowiec, 317 So.2d 94

(Fla.App.1975), cert. denied, 333 So.2d 463 (1976); Milton v. State, 293 So.2d

645 (La.Ct.App.1974). See generally, Liability of Hospital or Sanitarium for Injury

or Death of Patient as a Result of His Escape or Attempted Escape, 70 A.L.R.2d

347 (1960); Patient Tort Liability of Rest, Convalescent or Nursing Homes, 83

A.L.R.3d 871, at Sec. 7, "Wandering Away" (1978). Plaintiff erroneously attempts

to rely on the doctrine of res ipsa loquitur. This doctrine may be used only to

prove negligence, not proximate cause. Georgia Power Co. v. Edmonds, 233

Ala. 273, 275, 171 So. 256, 258 (1936); Alabama Power Co. v. Bryant, 226 Ala.

251, 254, 146 So. 602, 605 (1933).

28

Judge Hoffman agrees with this opinion with respect to the granting of

judgment n.o.v., that is, the merits of the state law claim. He has, however, filed a

special concurring opinion, expressing his view that the claim brought under 42

U.S.C. Sec. 1983 does not present a substantial federal claim and should have

been dismissed. With no substantial federal claim stated, in his view, the court

lacked jurisdiction to hear the state wrongful death claim.

29

Chief Judge Godbold is of the view that the Sec. 1983 claim was not subject to

dismissal since prior decisions did not "inescapably render the claim[s] frivolous."

Curtis v. Taylor, 625 F.2d 645, 649-50 (5th Cir.1980); Jackson v.

Stinchcomb, 635 F.2d 462, 471 (5th Cir.1981). Judge Anderson concurs in this

view but dissents on the merits of the state law claim and has filed a dissenting

opinion on that issue.

30

The judgment is AFFIRMED.

ANDERSON, Circuit Judge, dissenting:

31

I agree with all of Chief Judge Godbold's opinion for the majority, except his

conclusion that there is not sufficient evidence to support the jury finding of

proximate cause. I would conclude that the jury might reasonably infer that the

defendant's negligence in permitting Daniels to wander off was a proximate

cause of his death. Daniels was a 78 year old senile man who was on heart

medication and tranquilizers at the time. The record in this case contains

evidence amply justifying the inference that Daniels was unable to cope with the

real world environment outside the nursing home, and that it would pose a risk to

Daniels' health and safety to thrust him alone into the outside world. If the cause

of Daniels' death was exposure to the elements in the nearby woods or swamp,

the defendant's negligence would clearly be a contributing proximate cause, as

the majority impliedly concedes. If Daniels died of a heart attack or some other

natural cause and if his failure to take his medicines and/or exposure to the

outside world precipitated his death, then defendant's negligence would be a

contributing proximate cause. The majority concedes that the jury properly found

that Daniels left the nursing home as a result of defendant's negligence, and that

Daniels died. I submit that the jury could reasonably infer that defendant's

negligence was a proximate cause of the death. Of course, I agree that it is

conceivable that Daniels could have died from natural causes unrelated to his

failure to take his medications, and unrelated to the dangers and shock he

inevitably experienced in being thrust upon the outside world for the first time in

nine years without food, money or shelter and without even a rudimentary

intelligence which he had lost to senility; however, I respectfully dissent from the

majority's conclusion that no "reasonable and fair-minded" jury could reasonably

infer that the foregoing dangers created by defendant were a contributing

proximate cause of Daniels' death. In this regard, I agree with the court below

which held:

32

When a senile 78-year-old who cannot bathe or dress himself wanders out of a

nursing home adjacent to nearly impenetrable woods with a swamp in the

middle, and he is never seen again, it would be logical to believe that the fact of

wandering caused his death. Certainly there is no evidence leading to a contrary

or competing inference, so we do not simply choose one among several arguable

inferences.

33

R. 94 (footnote omitted).

HOFFMAN, District Judge, concurring specially:

34

Plaintiff, Bob Daniels, as administrator of the estate of the decedent, Isaac

Daniels, asserts two claims in this non-diversity action. The first is a claim under

42 U.S.C. Sec. 1983 in which the plaintiff alleges that the defendants deprived

Isaac Daniels of the right to life as guaranteed by the Constitution of the United

States, while acting under color of law, by failing to properly supervise and

provide safe care for him. The second claim is a pendent state law negligence

claim for the wrongful death of Isaac Daniels which, under Alabama law, is

limited to a recovery for punitive damages.

35

The case was tried by a magistrate and, upon an agreement of the parties that

the federal and state theories of recovery were identical, both claims were

submitted to the jury under a single negligence instruction. The jury returned a

single general verdict for the plaintiff, awarding $1 million. The magistrate,

however, entered a judgment n.o.v., and in the alternative, granted a new trial on

the ground that damages were excessive.

36

Judge Godbold, in this appeal, affirms the granting of the judgment n.o.v. on

the ground that there was insufficient evidence under the federal standard to

support the jury's verdict. I agree with Judge Godbold's opinion as to the granting

of judgment n.o.v. I concur specially, however, because in my opinion the 42

U.S.C. Sec. 1983 claim does not present a substantial federal claim and as such

the section 1983 claim should have been dismissed. Since no substantial federal

claim was presented, the court lacked jurisdiction to hear the state negligent

wrongful death claim.

37

A federal court has jurisdiction to hear a pendent state claim only when the

court is presented with a substantial federal question and the state and federal

claims derive from a common nucleus of operative fact. United Mine Workers v.

Gibbs, 383 U.S. 715, 725, 86 S.Ct. 1130, 1138, 16 L.Ed.2d 218 (1966); Jackson

v. Stinchcomb, 635 F.2d 462, 470 (5th Cir.1981). If a substantial federal claim is

not presented, the court does not have pendent jurisdiction to hear a related

state claim. See also Gellert v. Eastern Airlines, Inc., 688 F.2d 723 (11th

Cir.1982). A claim is insubstantial if it lacks merit or if prior decisions clearly

foreclose the matter. See Jackson v. Stinchcomb, supra, at 471; Florida East

Coast Railway Co. v. United States, 519 F.2d 1184, 1194 n. 26 (5th Cir.1975).

The question of whether pendent jurisdiction is proper normally will be resolved

on the pleadings, but if jurisdiction is assumed the question should remain open

throughout the litigation. United Mine Workers v. Gibbs, supra, at 727, 86 S.Ct. at

1139. Thus, if it appears from the pleadings that a substantial federal question is

not presented, the court does not have jurisdiction to hear the pendent state

claim, or if it appears during the trial that the federal claim is insubstantial the

pendent claim must then be dismissed.

38

It is my opinion that the plaintiff in this case failed to present a substantial

federal question and thus the court lacked jurisdiction to hear either the federal or

state claim.1

39

A claim for relief under 42 U.S.C. Sec. 19832 must embody two essential

elements. First, the conduct complained of must have deprived the plaintiff of a

right, privilege, or immunity secured by the Constitution or laws of the United

States. Second, the conduct complained of must have been committed by a

person acting under color of law. Parratt v. Taylor, 451 U.S. 527, 535, 101 S.Ct.

1908, 1912, 68 L.Ed.2d 420 (1981);3 Adickes v. S.H. Kress & Co., 398 U.S. 144,

150, 90 S.Ct. 1598, 1604, 26 L.Ed.2d 142 (1970). These two elements are

jurisdictional requisites for a section 1983 action, thus if the plaintiff fails as to

either the court cannot hear the suit. See Polk County v. Dodson, 454 U.S. 312,

315, 102 S.Ct. 445, 448, 70 L.Ed.2d 509 (1981). The plaintiff, in the present

case, has not satisfied either of the requirements for a section 1983 claim.

40

I. CONSTITUTIONAL DEPRIVATION?

41

First, the plaintiff has not complained of conduct involving a deprivation of

constitution magnitude. The plaintiff alleges that the defendant nursing home

deprived Isaac Daniels of life by negligently failing to properly supervise and

provide safe care for him. Presumably, the plaintiff is claiming that the

defendant's conduct violated the fourteenth amendment's protection against

deprivation of life without due process of law. There cannot, of course, be a

constitutional right to life without more.

42

On several occasions the Supreme Court has warned that section 1983

imposes liability for violations of rights protected by the Constitution, and not for

violations of duties of care arising out of tort law. See, e.g., Baker v. McCollan,

443 U.S. at 146, 99 S.Ct. at 2695; Estelle v. Gamble, 429 U.S. 97, 104-06, 97

S.Ct. 285, 291-92, 50 L.Ed.2d 251 (1976); Paul v. Davis,424 U.S. 693, 698-701,

96 S.Ct. 1155, 1159-1160, 47 L.Ed.2d 405 (1976). To warrant section 1983 relief,

the defendant's actions must amount to a constitutional violation. See Baker v.

McCollan, supra. While some conduct may clearly be violative of tort law, it may

not be a constitutional injury, and the proper remedy is not a section 1983 claim

but a suit in state court under traditional tort principles. Id. at 146, 99 S.Ct. at

2695. See also Shillingford v. Holmes, 634 F.2d 263 (5th Cir.1981).

43

Even if I were to assume that the defendant nursing home may have been

negligent and as such its conduct was wrongful, the conduct was only tortious

and did not constitute a constitutional deprivation. My opinion is based on

previous decisions of this court and other courts. In Williams v. Kelley, 624 F.2d

695 (5th Cir.1980), cert. denied, 451 U.S. 1019, 101 S.Ct. 3009, 69 L.Ed.2d 391

(1981), the Fifth Circuit addressed whether negligent wrongful death stated a

deprivation of a constitutional right cognizable in a section 1983 claim. In

Williams the decedent died as a result of a choke hold placed on him by a police

custodial officer while the officer was attempting to restrain him. 624 F.2d at 696.

The mother of the decedent sued the officers involved under section 1983 for

wrongful death. Id. at 697. The court concluded that the allegations did not state

a deprivation of a federal right and thus the requirements for a section 1983 suit

had not been met. Id. at 697-98.4

44

More recently in Hull v. City of Duncanville, 678 F.2d 582 (5th Cir.1982), the

Fifth Circuit continued the Williams v. Kelley analysis and applied it to a section

1983 suit for injuries arising out of a train-vehicle collision. The father of the

injured minor sued the city under section 1983 for depriving "the minor without

due process of law of the minor's right to be free from permanently-disabling

injuries." 678 F.2d at 583. The action was based upon the city's failure to enforce

its train traffic speed limit, and its negligent failure to maintain the crossing and

traffic signals. Id. at 583-84. The court found that the actions pleaded may

constitute a tort, but did not establish a constitutional violation actionable under

section 1983. Id. at 584-85.5

45

Additionally, dicta in Supreme Court cases leads me to the conclusion that this

type of negligent wrongful death claim does not state a constitutional violation. In

Paul v. Davis, 424 U.S. 693, 96 S.Ct. 1155, 47 L.Ed.2d 405 (1976), Justice

Rehnquist, writing for the majority, cautioned against opening up section 1983 to

such litigation. He stated:

46

If [plaintiff's] view is to prevail, .... it would be difficult to see why the survivors

of an innocent bystander mistakenly shot by a policeman or negligently killed by

a sheriff driving a government vehicle, would not have claims equally cognizable

under Sec. 1983.

47

424 U.S. at 698, 96 S.Ct. at 1159. The caution was reiterated in Parratt v.

Taylor, 451 U.S. 527, 101 S.Ct. 1908, 68 L.Ed.2d 420 (1981), when Justice

Rehnquist stated:

48

To accept respondent's argument that the conduct of the state officials in this

case constituted a violation of the Fourteenth Amendment would almost

necessarily result in turning every alleged injury which may have been inflicted by

a state official acting under "color of law" into a violation of the Fourteenth

Amendment cognizable under Sec. 1983. It is hard to perceive any logical

stopping place to such a line of reasoning. Presumably, under this rationale any

party who is involved in nothing more than an automobile accident with a state

official could allege a constitutional violation under Sec. 1983. Such reasoning

"would make of the Fourteenth Amendment a font of tort law to be superimposed

upon whatever systems may already be administered by the States." Paul v.

Davis, 424 U.S. 693, 701, 96 S.Ct. 1155, 1160, 47 L.Ed.2d 405 (1976). We do

not think that the drafters of the Fourteenth Amendment intended the

Amendment to play such a role in our society.

49

451 U.S. at 544, 101 S.Ct. at 1917. Similarly, Justice Powell stated in his

concurrence in Parratt:

50

[Section 1983] was enacted to deter real abuses by state officials in the

exercise of governmental powers. It would make no sense to open the federal

courts to lawsuits where there has been no affirmative abuse of power, merely a

negligent deed by one who happens to be acting under color of state law.

51

451 U.S. at 549, 101 S.Ct. at 1920.

52

For the above stated reasons, I believe that the conduct of the defendant

nursing home, which the plaintiff bases his section 1983 claim upon, clearly does

not amount to a constitutional deprivation.

53

II. STATE ACTION?

54

Second, the conduct of the defendant nursing home that the plaintiff complains

of does not constitute state action.6 The plaintiff focuses on several factors in

arguing that the nursing home's conduct is state action. The plaintiff relies on the

fact that the nursing home receives substantial funding from the state and that

nursing homes are regulated by the state. Additionally, the plaintiff points to the

contract between the defendant and the state that provided for the care of

Daniels. According to the plaintiff, these factors evidence an interdependence

and symbiotic relationship between the nursing home and the state. The plaintiff

argues, also, that in caring for Daniels the nursing home was carrying out an

inherently and exclusively government function, and thus there was state action.

55

The actions of a private party can be so closely associated with the state as to

constitute state action. A private party will be subject to suit under section 1983 if

the conduct allegedly causing the deprivation of a federal right is "fairly

attributable to the state." Lugar v. Edmondson Oil Co., --- U.S. ----, 102 S.Ct.

2744, 2754, 73 L.Ed.2d 482 (1982); Rendell-Baker v. Kohn, --- U.S. ----, 102

S.Ct. 2764, 2770, 73 L.Ed.2d 418 (1982). The state must be shown to be

sufficiently connected with the particular aspect of the defendant's conduct

complained of so that the defendant is treated as a state actor and the

defendant's act is treated as that of the state. See Lugar v. Edmondson Oil Co.,

102 S.Ct. at 2754-55; Blum v. Yaretsky, --- U.S. ----, 102 S.Ct. 2777, 2786, 73

L.Ed.2d 534 (1982). See also Sims v. Jefferson Downs, 611 F.2d 609, 611 (5th

Cir.1980). A number of different factors or tests have been articulated which can

be looked to in determining whether conduct of a private party is fairly attributable

to the state.7

56

The complaining party can demonstrate that "there is a sufficiently close nexus

[or symbiotic relationship ] between the State and the challenged action of the

regulated entity so that the action of the latter may be fairly treated as that of the

state itself." Jackson v. Metropolitan Edison Co.,419 U.S. 345, 351, 95 S.Ct. 449,

453, 42 L.Ed.2d 477 (1974) (emphasis added). See also Burton v. Wilmington

Parking Authority, 365 U.S. 715, 81 S.Ct. 856, 6 L.Ed.2d 45 (1961); Sims v.

Jefferson Downs, 611 F.2d at 611. The plaintiff may also demonstrate that the

state exercised its coercive power or provided significant encouragement such

that the defendant's act was coerced by the state. Adickes v. S.H. Kress &

Co., 398 U.S. 144, 170, 90 S.Ct. 1598, 1615, 26 L.Ed.2d 142 (1970). Last, the

plaintiff may demonstrate that the private defendant exercised some power

delegated to it by the state which is "traditionally exclusively reserved to the

State." Jackson v. Metropolitan Edison Co., 419 U.S. at 352-53, 95 S.Ct. at 454-

55. See also, Flagg Bros., Inc. v. Brooks, 436 U.S. 149, 157-61, 98 S.ct. 1729,

1733-36, 56 L.Ed.2d 185. Considering all of the factors in this case that may be

evidence of state action, in my opinion, there is no state action.

57

I believe the Supreme Court decision in Blum v. Yaretsky, --- U.S. ----, 102

S.Ct. 2777, 73 L.Ed.2d 534 (1982), controls this case and directs a finding of no

state action.8 In Blum v. Yaretsky, the Supreme Court considered whether a

nursing home was a state actor when decisions were made regarding the

transfer of Medicare patients. 102 S.Ct. at 2781-82. The challenged transfers

primarily involved decisions of a utilization review committee to move Medicare

patients from "skilled nursing facilities" to less expensive "health related

facilities." Id. at 2781, 2786. The nursing home took care of Medicare patients

and the state paid the medical expenses of more than 90% of the patients. The

state also subsidized the operating and capital costs of the facility. Id. at 2789.

The nursing home was licensed and regulated by the state, and subject to on-site

inspections by state medical review teams. Id. at 2788 n. 21, 2789. The Supreme

Court considered all the factors and concluded that there was no state action.

The Court stated:

58

But accepting all of these assertions as true, we are nonetheless unable to

agree that the State is responsible for the decisions challenged by respondents.

As we have previously held, privately owned enterprises providing services that

the State would not necessarily provide, even though they are extensively

regulated, do not fall within the ambit of Burton. Jackson v. Metropolitan Edison

Co., 419 U.S. 345, 357-358, 95 S.Ct. 449, 456-57, 42 L.Ed.2d 477. That

programs undertaken by the State result in substantial funding of the activities of

a private entity is no more persuasive than the fact of regulation of such an entity

in demonstrating that the State is responsible for decisions made by the entity in

the course of its business.

59

Id. at 2789 (emphasis added). The Court specifically concluded that nursing

homes do not perform a function that falls within the exclusive prerogative of the

state. Id. at 2789-90. The Court stated:

60

We are also unable to conclude that the nursing homes perform a function that

has been "traditionally the exclusive prerogative of the State." Jackson v.

Metropolitan Edison Co., supra, at 353, 95 S.Ct., at 454.... Even if respondents'

characterization of the State's duties were correct, however, it would not follow

that decisions made in the day-to-day administration of a nursing home are the

kind of decisions traditionally and exclusively made by the sovereign for and on

behalf of the public. Indeed, respondents make no such claim, nor could they.

61

Id. (emphasis added).

62

In Blum the Supreme Court likened the nursing home situation to the public

defender situation in Polk County v. Dodson, 454 U.S. 312, 102 S.Ct. 445, 70

L.Ed.2d 509 (1981).9 Blum v. Yaretsky, 102 S.Ct. at 2788. The Court explained:

63

This case, therefore, is not unlike Polk County v. Dodson, ... in which the

question was whether a public defender acts "under color of" state law within the

meaning of 42 U.S.C. Sec. 1983 when representing an indigent defendant in a

state criminal proceeding. Although the public defender was employed by the

State and appointed by the State to represent the respondent, we concluded that

"[t]his assignment entailed functions and obligations in no way dependent on

state authority."... The decisions made by the public defender in the course of

representing his client were framed in accordance with professional canons of

ethics, rather than dictated by any rule of conduct imposed by the State. The

same is true of nursing home decisions to discharge or transfer particular

patients because the care they are receiving is medically inappropriate.

64

102 S.Ct. at 2788.

65

Although not involving a nursing home, another case the Supreme Court

decided along with Blum v. Yaretsky, directs a finding of no state action in this

case. In Rendell-Baker v. Kohn, --- U.S. ----, 102 S.Ct. 2764, 73 L.Ed.2d 418

(1982), the Supreme Court addressed whether a privateschool was a state actor

when it discharged certain employees. Theschool was a non-profit institution in

Brookline, Massachusetts, that specialized in giving high school instruction to

students with drug, alcohol, or behavioral problems, or other special needs. 102

S.Ct. at 2755-67. Students were referred to the school by the Brookline or

Boston schoolcommittees, or by the Drug Rehabilitation Division of the

Massachusetts Department of Mental Health. The school had a contract with the

BostonSchool Committee requiring it to carry out the individualized plans

developed for each student. The school also had a contract with the State Drug

Rehabilitation Division. During the years pertinent to the case, theschool had

approximately 50 students, most having been referred to theschool, and none

paying tuition. Public funds provided at least 90% of theschool's operating budget

and the school was regulated by the public authorities. Id. The Supreme Court

followed the same analysis it applied in Blum v. Yaretsky, supra, considered all of

the factors, and concluded that there was no state action. Id. at 2770-72. In

referring to the contracts the Court stated, "Acts of such private contractors do

not become acts of the government by reason of their significant or even total

engagement in performing public contracts." Id. at 2771. The Court also

specifically concluded that there was no "public function" or "symbiotic

relationship" involved. Id. at 2772.

66

In my opinion, considering the results in Blum v. Yaretsky, supra, Rendell-

Baker v. Kohn, supra, Polk County v. Dodson, supra, and other cases, the facts

of the present case clearly indicate that there is no state action.

67

For the reasons discussed above, I believe the decisions of the district court

and the magistrate that there was a constitutional deprivation and that there was

state action were erroneous. Since the plaintiff did not allege any deprivation

amounting to a violation of a federal right, and the activities of the defendant did

not involve any state action, the plaintiff did not present a substantial federal

question and the district court was without jurisdiction to consider the section

1983 claim or the pendent state claim.

68

Nevertheless, I join in the views of Chief Judge Godbold on the merits of the

pendent state action.

*

Honorable Walter E. Hoffman, U.S. District Judge for the Eastern District of

Virginia, sitting by designation

1

Neither the State of Alabama nor any agency was sued but only the private

nursing home. Mediplex Corp., the second named defendant, is the parent

corporation of Twin Oaks Nursing Home. The jury found against only the nursing

home. No issues concerning the parent corporation are raised on appeal, and

therefore we refer to only the defendant nursing home

2

We are bound by this case and others of the former Fifth Circuit cited in this

opinion and handed down prior to October 1, 1981. Bonner v. City of

Prichard,661 F.2d 1206, 1209 (11th Cir.1981) (en banc)

3

The court in Smith also said that "a case can go to the jury only if 'the

circumstantial evidence amounts to a preponderance of all reasonable inferences

that can be drawn from the circumstances in the evidence to the end that the

evidence is not reasonably susceptible of two equally reasonable inferences.' "

Id. at 216

4

In Chamberlin the Court stated that in "a case ... where proven facts give equal

support to each of two inconsistent inferences ... judgment, as a matter of law,

must go against the party [with the burden of proof]." 288 U.S. at 339, 53 S.Ct. at

393. In Lavender the Court said that where there is "a reasonable basis in the

record for inferring [for the plaintiff] ... [i]t is no answer to say that the jury's verdict

involved speculation and conjecture. Whenever facts are in dispute or the

evidence is such that fairminded men may draw different inferences, a measure

of speculation and conjecture is required on the part of those whose duty it is to

settle the dispute by choosing what seems to them to be the most reasonable

inference." 327 U.S. at 652, 66 S.Ct. at 743. See also, Tennant v. Peoria & Pekin

Union R. Co., 321 U.S. 29, 34-35, 64 S.Ct. 409, 412-413, 88 L.Ed. 520 (1944)

5

This unequivocal rejection of the equally probable inference rule survives despite

the subsequent en banc decision in Boeing Co. v. Shipman, supra. In Boeing the

former Fifth Circuit undertook to establish the federal standard for sufficiency of

the evidence in civil cases. The court stated that the Planters court had

incorrectly relied on Lavender because Lavender was an FELA case where the

standard for submission to the jury was statutorily weaker than the standard in

ordinary civil cases. The court therefore "reject[ed] the Planters principle." 411

F.2d at 370-73

Boeing's rejection of the "Planters principle" did not affect the aspect of Planters

that disapproved the equally probable inferences rule. This latter aspect of

Planters survives. First, Boeing did not address this aspect of Planters or this

aspect of the Supreme Court FELA cases on which Planters relied. The aspect of

Lavender and other FELA cases that the court took issue with in Boeing was that

any evidence of negligence, even the slightest, would send the case to the jury.

Id. at 370-71. Nowhere in Boeing is there an indication that the equally probable

inferences rule was at issue or was considered. Therefore, in Boeing the court

addressed only what quantum of evidence would make an inference reasonable,

not whether the jury is allowed to choose between two equally probable, yet

reasonable, inferences.

Second, the equally probable inferences rule of old cases such as Smith v.

General Motors, supra, is inconsistent with the standard of sufficiency adopted in

Boeing. In Boeing the court held that a verdict should be directed only if "the facts

and inferences point so strongly and overwhelmingly in favor of one party that the

Court believes that reasonable men could not arrive at a contrary verdict." Id. at

374 (emphasis added). This does not allow a rule where a verdict is directed

simply because a contrary inference is equally likely. The contrary inference must

be "so strong and overwhelming" that the inference in favor of plaintiff is

unreasonable. Moreover, in Boeing the court expressly stated that "it is the

function of the jury as the traditional finder of the facts, and not the Court, to

weigh conflicting evidence and inferences." Id. at 375 (emphasis added).

Third, the former Fifth Circuit has frequently rejected the equally probable

inferences rule in cases following Boeing. See Alman Brothers Farms & Feed

Mill, Inc. v. Diamond Laboratories, Inc., 437 F.2d 1295, 1301 (5th Cir.1971);

Tucker v. Bethlehem Steel Corp., 445 F.2d 390, 392 (5th Cir.1971) ("Given an

apparent evidentiary basis for the verdict ... the appellate court's function is

exhausted, 'it being immaterial that the court might draw a contrary inference or

feel that another conclusion is more reasonable.' "); Callon Petroleum Co. v. Big

Chief Drilling Co., 548 F.2d 1174, 1180 (5th Cir.1977) ("It should be left to the ...

jury ... to resolve such conflicting inferences."); Nunez v. Superior Oil Co., 572

F.2d 1119, 1124 (5th Cir.1978) (" 'the choice between permissible inferences is

for the trier of facts' "); Southway Theatres v. Georgia Theatre Co., 672 F.2d 485,

495 (5th Cir.1982) (Unit B) (" 'Where more than one reasonable inference can

reasonably be drawn from the proof, it is for the jury to determine the proper one.'

"). But see Prudential Insurance Co. v. Schroeder, 414 F.2d 1316, 1319 (5th

Cir.1969).

6

The magistrate ruled that the probate judge's opening of Daniels' estate for

administration was an adjudication of the fact of death not subject to collateral

attack. We do not decide the validity of this ruling, for no objection was made in

the district court nor has the issue been raised on appeal

7

The evidence concerning the heart medication consisted solely of the following

testimony by a psychiatrist who examined Daniels' records:

Q: Now, do your records reflect as of ... some six or seven weeks before he

disappeared whether or not Mr. Daniels was taking any medication ...?

A: According to this note, he was taking Peritrate

....

Q: What is Peritrate, please sir?

A: Its primary purpose is a coronary vasodilator; it's to dilate the blood vessels in

the heart; it's usually given for some coronary insufficiency or an angina-like

syndrome.

8

Later that same day he escaped again and was seen heading in the direction of

the woods

9

The assistant administrator testified that he was "pretty confident that [Daniels]

had not been in there" because there was no evidence of trampled brush tending

to show prior passage, whereas he could see where he had passed during

his search because he left trampled brush

1

Even where the district court has pendent jurisdiction, it is discretionary with the

court whether to exercise the pendent jurisdiction. United Mine Workers v. Gibbs,

383 U.S. at 726, 86 S.Ct. at 1139; Jackson v. Stinchcomb, 635 F.2d at 472. In

deciding whether to exercise pendent jurisdiction there are several factors the

court should weigh. See United Mine Workers v. Gibbs, 383 U.S. at 725-26, 86

S.Ct. at 1138-39. The justification for exercising pendent jurisdiction lies in

weighing the considerations of (1) judicial economy; (2) convenience and

fairness to the litigants; (3) avoiding needless decisions of state law as a matter

of comity, and to promote justice between the parties by procuring for them a

surer-footed reading of the applicable law; (4) whether the state issues

predominate in terms of proof, scope of the issues, or comprehensiveness of the

remedy sought; and (5) the likelihood of jury confusion in treating divergent legal

theories of relief. Id. See also Jackson v. Stinchcomb, 635 F.2d at 472-73. If after

considering these factors, the balance is against the court exercising pendent

jurisdiction, it should not hear the pendent claim. See United Mine Workers v.

Gibbs, supra. Additionally, if the federal claims are dismissed before trial, even

though not insubstantial, the state claims should be dismissed as well. Id. at 726,

86 S.Ct. at 1138

In the present case, even assuming a substantial federal claim was presented, it

was an abuse of discretion for the court to exercise its pendent jurisdiction. After

weighing all the factors listed above, the balance falls unquestionably on the side

of refraining from exercising pendent jurisdiction.

2

42 U.S.C. Sec. 1983 provides:

Every person who, under color of any statute, ordinance, regulation, custom, or

usage, of any State or Territory, subjects, or causes to be subjected, any citizen

of the United States or other person within the jurisdiction thereof to the

deprivation of any rights, privileges, or immunities secured by the Constitution

and laws, shall be liable to the party injured in an action at law, suit in equity, or

other proper proceeding for redress.

3

Parratt v. Taylor involved a section 1983 claim alleging a negligent deprivation of

property. The Supreme Court allowed the claim based upon the allegation of

simple negligence because section 1983 does not contain a "state-of-mind"

requirement. 451 U.S. at 531-35, 101 S.Ct. at 1910-12. The Court went on to

point out, however, that the fourteenth amendment protects only against

deprivations occurring "without due process of law." Id. at 531, 101 S.Ct. at 1910.

The Court held that the plaintiff had not been deprived of property without due

process because the State of Nebraska provided a tort claims procedure that

satisfied the due process of law requirement of the fourteenth amendment. Id. at

535-44, 101 S.Ct. at 1912-17

The courts that have attempted to implement the Parratt decision, have thus far

been unable to reach a concensus as to the full meaning and reach of the

decision. See, e.g., Pantoja v. City of Gonzales, 538 F.Supp. 335

(N.D.Cal.1982); Howse v. DeBerry Correctional Institute, 537 F.Supp. 1177

(M.D.Tenn.1982); Starstead v. City of Superior, 533 F.Supp. 1365

(W.D.Wis.1982). The present case at first blush appears to be one that may be

impacted by Parratt, since it involves a simple negligence section 1983 claim,

however, a thorough reading of Parratt and prior Supreme Court cases clearly

reveals that this court does not need to address whether the Parratt analysis and

holding applies. Before the Parratt analysis is reached and an exploration of the

relationship between the defendant's state-of-mind and liability under section

1983 is necessary, the plaintiff must first establish the basic elements of a

section 1983 claim. Parratt v. Taylor, 451 U.S. at 535, 101 S.Ct. at 1912; Baker

v. McCollan, 443 U.S. 137, 139-40, 99 S.Ct. 2689, 2692-93, 61 L.Ed.2d 433

(1979). See also Shillingford v. Holmes, 634 F.2d 263, 265 (5th Cir.1981). If the

basic elements of a section 1983 claim are not established initially, as is the case

here, it is not necessary to decide whether Parratt applies because a valid claim

has not been stated. Accord, Hull v. City of Duncanville, 678 F.2d 582, 584-85

(5th Cir.1982). See also Major v. Benton, 647 F.2d 110, 112-13 (10th Cir.1981).

See Baker v. McCollan, supra. The state-of-mind of the defendant, however, may

be relevant as to the first element of a section 1983 claim; whether a

constitutional violation occurred in the first place. Baker v. McCollan, supra, at

140 n. 1, 99 S.Ct. at 2692 n. 1.

4

See Major v. Benton, 647 F.2d 110 (10th Cir.1981). See also Bowers v.

DeVito, 686 F.2d 616 (7th Cir.1982)

5

In Williams v. Kelly, 624 F.2d 695 (5th Cir.1980), and Hull v. City of

Duncanville, 678 F.2d 582 (5th Cir.1981), the court applied the "abuse of

government power" standard in arriving at its conclusion that there was no

constitutional violation. In Williams v. Kelly, the court stated:

Section 1983 plaintiffs must prove both (1) deprivation of a federal constitutional

or legal right, ... which (2) resulted from "the sort of abuse of government power

that is necessary to raise an ordinary tort by a government agent to the stature of

a violation of the Constitution." ... This latter element renders federal rights

protection far less extensive than that afforded by the common law of battery and

negligence....

The deceased's interest in life plainly was of constitutional dimension. U.S.

Const. amend. XIV, Sec. 1. We thus must ask whether defendants' conduct--

independent of its lawfulness or unlawfulness at state law--was sufficiently

egregious as to be "constitutionally" tortious.... [T]he constitutionality of

defendants' conduct rests on

such factors as the need for the application of force, the relationship between the

need and the amount of force that was used, the extent of injury inflicted, and

whether force was applied in a good faith effort to maintain or restore discipline

or maliciously and sadistically for the very purpose of causing harm.

624 F.2d at 697 (emphasis added) (citations omitted). See also Shillingford v.

Holmes, 634 F.2d 263, 265 (5th Cir.1981).

The plaintiff argues that this abuse of government power test does not survive

Parratt v. Taylor, 451 U.S. 527, 101 S.Ct. 1908, 68 L.Ed.2d 420 (1981), since

Parratt allowed a section 1983 claim based on a negligent deprivation of

property. This argument ignores language in Baker v. McCollan, 443 U.S. 137,

140 n. 1, 99 S.Ct. 2689, 2692 n. 1, 61 L.Ed.2d 433 (1979), where the Supreme

Court pointed out that the defendant's state of mind can be relevant as to

whether a constitutional violation occurred. Additionally, Hull v. City of

Duncanville was a post-Parratt case in which the Fifth Circuit discussed Parratt

and applied the abuse of government power standard.

Even without the abuse of government power standard, I do not believe the

plaintiff in the present case has stated a constitutional violation.

6

In Lugar v. Edmondson Oil Co., --- U.S. ----, 102 S.Ct. 2744, 73 L.Ed.2d 482

(1982), the Supreme Court held that conduct which satisfies the "state action"

requirement of the fourteenth amendment also satisfies the "under color of state

law" requirement of section 1983. 102 S.Ct. at 2753

7

See Lugar v. Edmondson Oil Co., 102 S.Ct. at 2754-55; Blum v. Yaretsky, 102

S.Ct. at 2785-86

8

See also Greco v. Orange Memorial Hospital Corp., 513 F.2d 873 (5th Cir.1975);

Trageser v. Libbie Rehabilitation Center, Inc., 590 F.2d 87 (4th Cir.1978); Musso

v. Suriano, 586 F.2d 59 (7th Cir.1978), cert. denied, 440 U.S. 971, 99 S.Ct. 1534,

59 L.Ed.2d 788 (1979)

9

The reasoning in Polk County v. Dodson dealing with the "under color of law"

requirement of section 1983 is equally applicable to cases where "state action" is

the issue. Blum v. Yaretsky, 102 S.Ct. at 2788 n. 20

Louis & Diederich, Inc. v. Cambridge European Imports, Inc. (1987) 189

Cal.App.3d 1574 , 234 Cal.Rptr. 889

[No. H000950. Court of Appeals of California, Sixth Appellate District. March 5,

1987.]

LOUIS & DIEDERICH, INC., Plaintiff and Respondent, v. CAMBRIDGE

EUROPEAN IMPORTS, INC., et al., Defendants and Respondents; LARRY

MILLER et al., Third Party Claimants and Appellants.

(Opinion by Brauer, J., with Agliano, P. J., and Capaccioli, J., concurring.)

COUNSEL

Mount & Kraw, James E. Lewis, Jr., George M. Kraw, E. Paul Atkins, Donohue,

McElroy Atkins, Samuel D. O'Brien and Mercant & O'Brien for Third Party

Claimants and Appellants.

Gerald Z. Marer, John F. Schuck, John H. Coward, Dunbar, Coward & Moore

and Dunbar, Maddigan, Coward & Moore for Plaintiff and Respondent.

No appearance for Defendant and Respondent.

OPINION

BRAUER, J.

As a provisional remedy in the course of his lawsuit against a car dealer

(Cambridge European Imports, Inc.) for nondelivery of a new Ferrari which had

been paid for in full, plaintiff Louis & Diederich, Inc. (Louis) obtained an order

giving him the right to attach a Mercedes-Benz on the dealer's showroom floor.

This order provided that the dealer continue to offer the Mercedes for sale to the

public and pay Louis the proceeds from any sale. In compliance with the order,

the dealer turned over to Louis the pink slip on the Mercedes. Unbeknownst to

Louis, however, the dealer had already applied for a duplicate pink slip from the

Department of Motor Vehicles (DMV) in the process of selling the Mercedes to

another. The car changed hands several times before Louis was able to run it to

earth in the possession of one Larry Miller. The appeal before us now is taken

from an order directing Miller to deliver the Mercedes to Louis. We are asked to

assess the competing interests of Louis and Miller and to determine whether

substantial evidence supports the order of the court. We find that Miller was a

bona fide purchaser, who gave value for the Mercedes with no knowledge of

Louis's claim. As such, his interest is superior to that of Louis; he is therefore

rightfully in possession. Accordingly we will reverse the court's order.

The Facts

The Mercedes

Before launching into our factual discussion, we are obliged to take a moment to

comment upon one aspect of this case where utter confusion reigns. The vehicle

identified on the pink slip held by Louis, and on the DMV documents evidencing

the subsequent transfers, is a 1984 MBZ 500 SEC, ID# WDB 1260441A040136.

Yet there is not one single court order in the record, of the many that were

issued, which refers to the Mercedes by that year, model and ID number. [189

Cal.App.3d 1579]

Louis maintains resolutely that the car was a 1983 rather than a 1984 Mercedes

SEC. Indeed there is some evidence to support this assertion, in the form of two

certified DMV documents, both filed before Louis entered the picture. The first is

a certificate showing pollution control work done on a 1983 MBZ with the above

ID number, on February 28, 1984. The second is a "Verification of Vehicle,"

prepared by the dealer and dated February 29, 1984, verifying that a 1983 MBZ

SEC bore the ID number listed above on a metal plate visible through the

windshield.

A representative of Louis submitted a declaration in which he states that he saw

a Mercedes 500 SELfn. 1 on the dealer's showroom floor. Upon inspecting this

car he found that the ID number on the pink slip in his possession corresponded

to the number on the car door, but that the plate visible through the windshield

bore an entirely different ID number. On the other hand, an interim owner of the

car thought that the ID number on his pink slip had matched the one easily visible

through the car's windshield.

Several of the court's various orders in these proceedings refer to an SEL model

Mercedes. Of these, one recites an ID number different again from both ID

numbers viewed by Louis's representative, one includes the right number but

specifically refers to the vehicle as a sedan rather than a coupe, one transposes

several digits in the ID number, and one omits a digit. The orders which identify

the vehicle correctly as an SEC model consistently list the ID number with one

digit missing. Some refer to a 1983 Mercedes and others to a 1984.

While we cannot ignore these discrepancies, we do not feel it necessary to dwell

upon their possible meaning or effect. For our purposes all we need know is this:

Both Louis and Miller lay claim to the vehicle in Miller's possession. Each bases

his claim upon a DMV certificate of ownership describing a 1984 MBZ 500 SEC,

ID# WDB 1260441A040136. Whether the car is actually a 1983 model or

whether it bears a second ID number in addition to the one on the pink slip need

not concern us. Furthermore, questions regarding the validity of the succession

of orders improperly identifying the car are moot, since we reverse the order

before us now. For the sake of clarity we will proceed on the assumption that

there is only one Mercedes, that it is a 1984 SEC, and that it found its way into

Miller's possession in the following manner.

Louis's Interest

The Mercedes's journey began on January 26, 1984, when it was shipped [189

Cal.App.3d 1580] from Germany to the American dealer, Cambridge European

Imports, Inc. (Cambridge). It was purchased on February 18, 1984, by Syufy

Enterprises (Syufy) for $41,000. The DMV issued its certificate of ownership to

Syufy on April 10, 1984. On August 16, 1984, Syufy countersigned the pink slip,

and apparently returned it and the car to Cambridge on or around that date. fn. 2

Meanwhile, Louis had entered into a contract with Cambridge on May 21, 1984,

to purchase a 1984 Ferrari 308 GTSi for the price of $55,956.00. Louis paid the

full purchase price but the vehicle was never delivered. On September 20, 1984,

Louis filed a complaint against Cambridge, and against its President Craig Wood

(Wood), for breach of contract, negligent misrepresentation, and intentional

misrepresentation. On September 26, 1984, the first of a series of orders issued,

namely an ex parte right to attach order and order for issuance of a writ of

attachment. This order gave Louis the right to attach property of Cambridge

totalling $55,956, and in particular named the Mercedes as the subject of the

ordered writ of attachment. The order noted that the Mercedes was to remain on

the showroom floor.

After a hearing on October 24, 1984, a further order issued, on November 2,

1984, adding a Porsche to the writ of attachment, fn. 3 providing that proceeds

from the sale of either of these cars be paid to Louis, and directing that

Cambridge turn over to Louis documentation of his title to the Mercedes. Shortly

after this November 2 order, Cambridge delivered to Louis the pink slip which

had been endorsed by Syufy.

There followed an abortive attempt by Louis to perfect his security interest in the

Mercedes. On November 14, 1984, Louis sent the orders filed September 26 and

November 2 to the Santa Clara County Sheriff, requesting that the sheriff file a

notice of the attachment with the DMV. The sheriff duly forwarded its "Attachment

Lien Notice" to the DMV, however omitting a letter in the vehicle ID number. The

notice was returned on November 27, 1984, with a notation that there was no

record of such a vehicle.

On December 26, 1984, the parties, through their counsel, entered into a

stipulation. Cambridge and Wood promised to use their best efforts to sell the

Mercedes, while at the same time ordering for Louis a 1985 Ferrari with the same

accessories contained in the original contract for the 1984 Ferrari. If the

Mercedes sold, the funds were to be held in trust and applied to the purchase of

the Ferrari. If the Ferrari was not delivered by February 1, 1985, Louis would be

entitled to judgment against Cambridge on his complaint. [189 Cal.App.3d 1581]

The Ferrari did not arrive, and judgment was entered against Cambridge on

February 5, 1985. On February 8, 1985, an order was filed directing that

Cambridge and Wood transfer the Mercedes to the sheriff pursuant to a Writ of

Execution issued the same day as the judgment. fn. 4 At this point, however, the

Mercedes had long since been transferred to another, namely Gene Cochran,

whose story we take up next.

The Sale to Cochran

In June of 1984, in response to an ad placed by Cambridge in the Wall Street

Journal, Gene Cochran visited the Cambridge showroom. Eventually he decided

to purchase, sight unseen, a new 1984 Mercedes SEC, to be delivered from

Germany. On June 6, 1984, he gave Cambridge his check for $35,821,

representing the European price of the car, with the understanding that additional

fees would be charged for shipping, conversion, and dealer profit. The car was to

be delivered within 90 days.

By October, the car had not yet arrived. In October and November, Cochran

performed some accounting services for Cambridge at Cambridge's place of

business. One day during this time he saw Wood's wife, Paula Wood, driving a

Mercedes SEC of the same color he had ordered. He was told by Wood that this

was his car. He was shown a pink slip, but could not remember the name on it.

The Woods assured him that they would do "the DMV work" and he executed a

power of attorney to Paula Wood for this purpose. Paula Wood also possessed a

similar power of attorney from Syufy. It was agreed that the balance of the

purchase price, approximately $8,000, would be in the form of a credit for

accounting services rendered by Cochran. Cochran took possession of the

Mercedes some time in November of 1984.

This transaction is reflected in the following documents filed with the DMV: 1) an

"Application for a Duplicate Ownership Certificate," signed by Paula Wood for

Syufy; 2) a "Release of Ownership" on the reverse side of this application, dated

November 1, 1984, showing Syufy as the releasing owner, Cochran as the new

owner and Cambridge as the dealer. Both Syufy's and Cochran's signatures are

by Paula Wood. The purchase price is listed as $45,000; 3) an

"Ownership/Registration" from in the name of Gene Cochran bearing an

issuance date of November 1, 1984; 4) a "Bill of Sale," dated November 1, 1984,

indicating no price and signed by Cambridge as seller; 5) a "Report of Sale"

dated November 1, 1984, signed by Cochran himself as purchaser. [189

Cal.App.3d 1582]

A registration card was issued by the DMV on February 28, 1985, showing

Cochran as the registered owner. By then Cochran had already been in touch

with John Perrins, an automobile broker located in Sacramento. According to

Cochran, Perrins had contacted him "approximately mid-January." Perrins had

"some dealings with Cambridge" and had a buyer interested in purchasing a 500

SEC. This sale did not materialize, however, because the parties could not agree

on price.

Some time in mid-March of 1985, Cochran received "a DMV type of thing that

something was going on." In response to this, he called Louis's attorney, who

informed him that the Mercedes was, in Cochran's words, "in security" for Louis.

Around this time Perrins produced another prospective buyer, Larry Miller, who

looked at the car at Cochran's house and agreed to pay $42,000 for it. Shortly

thereafter, two officers from the sheriff's department appeared at Cochran's

house and announced that they were there to seize the car. Cochran told them

he was the legal owner and asked them to verify ownership with the DMV. They

did so, found that title was in Cochran's name, apologized to him and left. A "Non

Service Return," issued by the sheriff and dated March 25, 1985, indicates that

the sheriff was unable to effect service of an execution levy on defendant

Cambridge European Imports at Cochran's address, for the reason that "Vehicle

Not Registered to Deft."

The deal with Miller was then consummated and the Mercedes changed hands

once again.

The Sale to Miller

Larry Miller declared, under penalty of perjury, that on or about the last week in

March he saw an ad in the San Jose Mercury for a 1984 MBZ 500 SEC, with a

Sacramento phone number for John Perrins. He called Perrins who told him the

car was on consignment from Cochran and directed him to Cochran's house.

Miller went to Cochran's house, inspected the vehicle and verified that Cochran

had the registration card and pink slip. On April 1, 1985, Miller purchased the car

from Perrins. The Perrins/Miller contract was then purchased by Morris Plan.

The following documents evidence this transaction: 1) a security agreement of

Morris Plan dated April 1, 1985, showing Miller as buyer and Perrins as

dealer/seller of a 1984 MBZ 500 SEC, for a sales price of $42,000, including a

downpayment of $8,000 in the form of a trade-in by Miller of a 1978 MBZ 280

CE; 2) a DMV "Notice of Sale" showing Miller as the buyer and Perrins as the

seller of a 1984 MBZ 500 SEC; 3) a DMV "Notice of Sale" showing Perrins as

buyer and Miller as seller of a 1978 MBZ 280 CE; 4) a[189 Cal.App.3d

1583] printout of a DMV vehicle registration record showing Larry Miller as the

buyer of the Mercedes, with a transfer date of April 1, 1985.

On May 22, 1985, Louis obtained a supplemental order which directed

Cambridge, Wood and now Cochran to deliver the Mercedes to the sheriff. fn.

5 Louis then learned that the car had been sold to Miller and sought an additional

order adding Miller to the order directing transfer. Instead, on May 28, 1985, the

court issued a temporary restraining order enjoining wood, Cambridge, Cochran

and Miller from selling the car or removing it from the state, and an order

directing Cochran and Miller to appear and show cause why they should not be

ordered to transfer the Mercedes to the sheriff.

Cochran was deposed under an order of examination procedure held June 12,

1985. Hearing on the TRO/OSC was held on July 11, 1985, whereupon the court

found that "Plaintiff is entitled to possession of the property." On July 12, 1985, a

written order was filed directing that Miller deliver the Mercedes to Louis. This

order was modified on July 16, 1985, to add that the sheriff seize the vehicle

should Miller fail to deliver it voluntarily. Cochran, Miller, and Morris Plan filed

appeals from the transfer order. fn. 6 Execution of the order was stayed pending

determination of these appeals.

Issues

The argument made by all appellants is this: Louis did not perfect his security

interest in the Mercedes so as to give notice to the world of his claim.

Subsequent purchasers and encumbrancers without actual notice are entitled to

rely upon the state of the title as represented by the title documents. Therefore

Miller, who had no knowledge of Louis's interest, took clear title to the

Mercedes. fn. 7

Louis does not contend that he perfected his security interest. He argues instead

that the order must be affirmed because there was substantial evidence in the

record to support an implied finding that both Cochran and Miller knew of the

defect in title brought about by Louis's claim and were thus not bona fide

purchasers.

Since our focus will be upon whether the order was supported by substantial

evidence, we first set forth the appropriate standard of review. [189 Cal.App.3d

1584]

Standard of Review

[1] Our task when reviewing the sufficiency of the evidence "begins and ends

with a determination as to whether there is any substantial evidence,

contradicted or uncontradicted, which will support the conclusion reached by the

[trier of fact]." (Crawford v. Southern Pacific Co. (1935) 3 Cal.2d 427, 429 [45

P.2d 183].) We "have no power to judge of the effect or value of the evidence, to

weigh the evidence, to consider the credibility of the witnesses, or to resolve

conflicts in the evidence or in the reasonable inferences that may be drawn

therefrom." (Overton v. Vita-Food Corp. (1949) 94 Cal.App.2d 367, 370 [210 P.2d

757].)

[2] Louis correctly points out that he is entitled to the benefit of all reasonable

inferences which can be drawn from the evidence before the trial court. [3]

Further, these inferences may be based on circumstantial evidence: "[¶] The

inferences to be drawn from circumstantial evidence are for the [trial court's]

determination and if conflicting inferences may reasonably be drawn from the

evidence which inference is to be drawn lies in the [trial court's] discretion.

[Citations.] It is equally true that a reasonable inference drawn from

circumstantial evidence may be believed as against direct evidence to the

contrary." (Halstead v. Paul (1954) 129 Cal.App.2d 339, 341 [277 P.2d 43].)

[4] Since circumstantial evidence is itself the result of an inferential process

(People v. Goldstein (1956)139 Cal.App.2d 146, 152 [293 P.2d 495]), it follows

that a judgment or order may be supported by substantial evidence based upon

inferences drawn from inferences, even though there is opposing direct

testimony. (Vaccarezza v. Sanguinetti (1945) 71 Cal.App.2d 687, 698 [163 P.2d

470].)

While this is true as an abstract proposition, in practice the cases have held that

such evidence can support a judgment only "where the first inference is properly

drawn from sufficient evidence, and the second inference is not too remote."

(Witkin, Cal. Evidence (2d ed. 1966) § 1134, p. 1052.) Otherwise, "the building of

inference upon inference may often result in a progressive weakening of logical

sequence, and lead to an ultimate conclusion which is untenable on the basis of

the facts proven." (Savarese v. State Farm etc. Ins. Co (1957) 150 Cal.App.2d

518, 520 [310 P.2d 142].)

[5] An inference must be the product of logic and reason. (Evid. Code, §

600, subd. (b).) fn. 8 It must rest on the evidence, on probability rather

than [189 Cal.App.3d 1585] on speculative possibility or conjecture.

(Marshall v. Parkes (1960) 181 Cal.App.2d 650, 655 [5 Cal.Rptr. 657].) And it

Must comport with physical laws and human experience. (Traxler v. Thompson

(1970) 4 Cal.App.3d 278 [84 Cal.Rptr. 211].)

[6] Louis makes much of what he characterizes as a deficient record on appeal,

consisting only of "a partial clerk's transcript" which allegedly omits "much

evidence which was before the trial court and which could have further supported

the trial court's orders." He mentions "numerous declarations and affidavits

presented to the trial court on Louis' behalf." He fails, however, to inform us

which evidence in particular we are lacking and how this evidence might have

supported the order. We find the following documents referred to, but not

contained in, the record: the complaint of Louis v. Cambridge; the Writ of

Execution issued February 8, 1985; and the Supplemental Order of May 22,

1985, adding Cochran to the order directing transfer of the Mercedes. Obviously

these documents are not evidentiary in nature. Nor are they, in our view, in any

way helpful to support the challenged order. The one piece of evidence we do

find lacking is the pink slip issued to Cochran by the DMV. In the process of

transferring the vehicle to Miller, the pink slip presumably would have been sent

to the DMV in exchange for a new certificate issued to the transferee; therefore,

its absence is not surprising. Moreover, Cochran's registration card, which

contains the same ownership information, is part of the record.

We agree that it is the responsibility of the appellants to provide a record on

appeal that clearly demonstrates error. (Ballard v. Uribe (1986) 41 Cal.3d

564 [224 Cal.Rptr. 664, 715 P.2d 624].) In the absence of information identifying

evidence missing in the record, however, we cannot simply presume, as Louis

asks us to do, "that the trial court was provided with a sufficient showing to

validate its ... order." (County of Los Angeles v. Surety Ins. Co. (1984) 152

Cal.App.3d 16, 23 [199 Cal.Rptr. 351].) We therefore proceed with our analysis

on the basis of the record before us.

The Status of the Parties

The parties generally agree that Louis's status is that of a creditor with an

unperfected security interest in the Mercedes. fn. 9 Since Louis's collateral

remained part of the dealer's inventory, the Commercial Code, rather than the

Vehicle Code governs the manner of perfecting the security interest. (Cal. U.

Com. Code, § 9302, subd. (3)(b), 9401; Veh. Code, § 5907.) [7] Under either

code, however, Miller will prevail if he purchased the [189 Cal.App.3d

1586] Mercedes for value without knowledge of Louis's security interest--in other

words, if he was a bona fide purchaser. fn. 10 (Cal. U. Com. Code, § 9301; T & O

Mobile homes, Inc. v. United California Bank (1985) 40 Cal.3d 441 [220 Cal.Rptr.

627, 709 P.2d 430]; Ferraro v. Pacific Fin. Corp. (1970) 8 Cal.App.3d 339 [87

Cal.Rptr. 226].)

[8] Division 9 of the Commercial Code "sets out a comprehensive scheme for the

regulation of security interests in personal property." (Off. com. to Cal. U. Com.

Code, § 9101.) The principal test to determine whether a transaction comes

under Division 9 is this: was the transaction intended to have effect as security?

(Off. com. 1, 5 9102.) A security interest is created and becomes enforceable

when 1) the debtor has signed a security agreement, 2) value has been given,

and 3) the debtor has rights in the collateral. (Cal. U. Com. Code, § 9203.) All of

these conditions prevailed when Louis and Cambridge signed the stipulation, on

October 30, 1984, providing that a writ of attachment issue but that Cambridge

retain possession of the Mercedes.

[9] We find no merit in Cochran's argument that Cambridge had no ownership

interest in the Mercedes which it could pledge as security. Syufy released its

interest completely by delivering the car and the endorsed and dated pink slip to

Cambridge in August. (Veh. Code, § 5600, 5602; Laureano v. Christensen

(1971) 18 Cal.App.3d 515 [95 Cal.Rptr. 872].) Cambridge was not required to

make any DMV filing until it transferred ownership to another. (Veh. Code, §

5906.) In the interim Cambridge owned the car.

A security interest survives a sale of the collateral, unless the secured party

consented to the sale. (Cal. U. Com. Code, § 9306.) To be effective against a

purchaser, however, the security interest must have been "perfected" prior to the

purchase. Perfection is accomplished by filing a financial statement with the

Secretary of State, or by possession of the collateral, neither of which occurred

here. (Cal. U. Com. Code, § 9302.)

An unperfected security interest is subordinate to the rights of "a person who is

not a secured party and who is a ... buyer not in the ordinary course of business

to the extent that he gives value and receives delivery of the [189 Cal.App.3d

1587] collateral without knowledge of the security interest and before it is

perfected." (Cal. U. Com. Code, § 9301, subd. (1)(c).)

[10] A "buyer in ordinary course" is one who buys "from a person in the business

of selling goods of that kind." (Cal. U. Com. Code, § 1201, subd. (9).) Miller did

not buy from a dealer; he is therefore a buyer "not in the ordinary course of

business" under section 9301. fn. 11 He gave value and took possession of the

car. The critical factor therefore is whether he had knowledge of Louis's security

interest.

[11] Under the Commercial Code, a person has "knowledge" of a fact when "he

has actual knowledge of it." (Cal. U. Com. Code, § 1201, subd. (25)(a), italics

added.) This definition is embodied in the concept of "good faith." Good faith is

"honesty in fact in the conduct or transaction concerned." (Cal. U. Com. Code, §

1201, subd. (19).) The good faith of a buyer is therefore to be determined by

what he actually knew, rather than what a reasonable man should have known

from all the circumstances. (Cal. Commercial Law: I (Cont.Ed.Bar 1966) § 14.3,

p. 626.) The actual knowledge test presumes of course that the registration and

ownership documents do not reveal a defect in title. (See, e.g., Morris Plan Co. v.

Moody (1968) 266 Cal.App.2d 28 [72 Cal.Rptr. 123], where it was held that

plaintiff "should have known" of a title problem because the seller did not produce

the pink slip.) fn. 12

[12] In regard to registration of motor vehicles, California is a "full title" state. This

means that a buyer who has no actual knowledge of a defect in title is entitled to

rely upon the information reflected on the registration and ownership certificates,

without further inquiry. (T & O Mobile Homes, Inc. v. United California Bank,

supra, 40 Cal.3d 441.) In T & O, the Morgans purchased a mobilehome for

approximately $17,000, obtained financing through Bank, and gave Bank a

security interest in the mobilehome. Bank mailed the properly endorsed

certificate of title to the DMV, requesting issuance of a new certificate showing it

as legal owner. By mistake, a certificate [189 Cal.App.3d 1588] was issued to

the Morgans which did not disclose Bank's interest. Morgans then quickly sold to

T & O, who purchased the mobilehome for a bargain price of $7,000 cash, but

with no actual knowledge of Bank's security interest. Our Supreme Court held

that even though Bank had created constructive notice of its lien by depositing its

application with the DMV, thus technically perfecting its security interest, the full

title presumption nonetheless prevailed where the certificate of ownership did not

reveal the interest. "[A]n examination of the general perfection provisions of the

UCC and the special 'full title' registration scheme for security interests in motor

vehicles supports the proposition advanced by T & O. The interest of a bona fide

purchaser must prevail over a technically perfected security interest which is not

disclosed on the vehicle certificate of ownership." Id, at p. 454.)

[13a] Applying T & O to our case, it appears that even if Louis had perfected his

security interest in the manner required by the Commercial Code, Miller would

take clear title if he had no knowledge in fact of Louis's interest. fn. 13

The trial court's order, directing that Miller transfer the Mercedes to Louis,

necessarily implies a finding that Miller was not a bona fide purchaser. We turn

now to the record to determine whether there was any substantial evidence to

support such a finding.

The Evidence

First, the evidence regarding Cochran's knowledge of the claim against the

Mercedes is not relevant for our purposes, except insofar as his knowledge was

actually imparted to Miller at the time Miller purchased. Nor can Miller's status be

tainted by Cambridge's obvious fraud upon Louis in the course of selling to

Cochran. Where a merchant is entrusted with goods "for the purpose of sale,

obtaining offers to purchase, locating a buyer, or the like," he can pass clear title

even where the sale is accomplished by fraud. (Cal. U. Com. Code, § 2403,

subd. (2).)

With the inquiry thus narrowed, the evidence is scant indeed which bears upon

the issue of Miller's actual knowledge of Louis's claim. Direct evidence, in the

form of Miller's declaration, established he inspected the vehicle, verified [189

Cal.App.3d 1589] that the registration card and pink slip were in the name of

Gene Cochran, purchased the car and filed his notice of sale with the DMV, all

"without any knowledge of any claims to said automobile by plaintiff or any other

person or company." It is undisputed that at the time Miller purchased, the pink

slip and registration card both bore the name of Gene Cochran, and no other.

[14] This constitutes prima facie evidence of ownership. (Getz v. Whisenant

(1949) 93 Cal.App.2d 182, 185 [208 P.2d 708].) [13b] Nor can it be contended, in

light of T & O and the Commercial Code "actual knowledge" standard, that the

price Miller paid should have put him on notice; in any event his purchase price

was commensurate with what both Syufy and Cochran had paid.

Louis contends that there was evidence of the following to support the conclusion

that "Miller knew someone other than Cochran had a superior ownership interest

in the Mercedes":

1) Cochran told Miller about the sheriff's attempt to seize the car.

2) Cochran told Perrins of the sheriff's visit.

3) Miller did not have a written contract with Cochran and did not pay a deposit

before receiving the car.

4) Miller only got an endorsed duplicate pink slip.

5) Miller knew the Mercedes had two different ID numbers.

Points 2, 3 and 4 can be quickly disposed of. Even if there were evidence that

Cochran told Perrins, there is none that Perrins told Miller. As Miller did not deal

directly with Cochran but only through Perrins, it is hardly surprising that no

written agreement was executed between persons who were not contracting with

each other, and that no deposit passed from one to the other. And as previously

indicated, a duplicate pink slip is a statute-authorized title document and

therefore hardly suspicion arousing. And even if these facts were sufficient,

which they are not, to put a reasonable person on inquiry, they do not by any

stretch of imagination establish actual knowledge on Miller's part of the existence

of Louis's security interest.

As to the first and most important point, namely that Cochran had told Miller

about the sheriff's attempt to seize the car, the evidence taken from Cochran's

deposition is as follows:

"Q. [by Mr. Coward, counsel for Louis] Did you ever tell Mr. Miller about your

meeting with the sheriff and the claimed lien on the car?

"Ms. Faber [counsel for Cochran]: When you say "claimed lien" is this your

characterization? [189 Cal.App.3d 1590]

"Q. (by Mr. Coward) Did the sheriff tell you there was a lien on the vehicle?

"A. The sheriff told me they were there to seize the vehicle. They then told me

that it was my vehicle and I had nothing to worry about and apologized for

coming.

"Q. Did you tell Mr. Miller about that meeting or that discussion?

"A. I might have. I don't recall.

"Q. What makes you think you might have?

"A. I don't recall. It was an embarrassing situation. Sheriff come to my house

when I had company. They come in, they make a phone call, they apologize for

being there, they do a DMV on me or whatever they call it. They said it's a

misunderstanding, I'm sorry about the inconvenience. Beyond that, I--just one of

those things that happened. Cambridge was in financial trouble. I figured

something was involved there.

"Q. My question was did you ever tell Mr. Miller about that discussion?

"A. I don't recall.

"Q. Did you ever tell Mr. Perrin about that meeting or discussion?

"A. I don't recall.

* * *

"Q. Can you tell me why you didn't tell Mr. Miller about your meeting with the

sheriff?

"Ms. Faber: He didn't say he didn't tell him. He doesn't recall.

"Q. [by Mr. Coward] Did you tell Mr. Perrin about your meeting with the sheriff?

"A. I don't recall.

"Q. I take it by that you don't know whether you discussed or you don't know

whether you didn't? [189 Cal.App.3d 1591]

"A. I discussed it with many people in a manner of, can you believe that, the

sheriff came to my house and disrupted my household without any prior warning.

And then tell me we're very sorry for the misunderstanding which leads me to

believe I had everything done properly. As I now find out in retrospect looking

back, maybe I should have gone a little further with it.

"Q. Gone a little further with what?

"A. With maybe telling somebody that there was a problem there. But I was

unaware of any problem on the car."

In response to the question: "Did you tell Mr. Miller about that meeting?," the

answer "I might have," standing alone, could conceivably sustain a finding, but

that rejoinder was immediately followed by "I don't recall." Further probing by

counsel produced nothing but Cochran's steadfast assertion of total lack of

recollection. What he said in effect was: "I have no memory whatever as to

whether or not I told Miller, therefore it is possible, as everything is, that I did." No

finding can be predicated on the absence of evidence. But even if Miller had

been told of the sheriff's visit, no inference may be drawn that he thereby

acquired knowledge of the existence of Louis's security interest. In fact, the story

would tend to establish the opposite: that the sheriff had proved to his

satisfaction, after checking the records, that Cochran was indeed the legal

owner. Nor can Cochran's knowledge of the existence of a claim by Louis, as a

result of his telephone conversation with Louis's attorney, be imputed to Miller.

Cochran testified unequivocally that he did not tell Miller of this conversation.

Finally we come to the matter of the two ID numbers. Here again, we are asked

to accept as substantial evidence inference drawn upon inference. The only

direct evidence regarding a car with two ID numbers was that of Louis's

representative, William Fischer. In October of 1984 Fischer went to Cambridge's

showroom and saw a dark blue Mercedes model SEL (not SEC) which bore two

different ID numbers, one on the dashboard and one on the door. The number on

the door was the same as that on the pink slip endorsed by Syufy. On the other

hand, Cochran believed that the number on his pink slip had matched the one

visible through the car's windshield.

Even if one assumes that the car Fischer saw was the car here in issue, there is

absolutely no evidence that Miller checked Cochran's pink slip against the ID

number visible through the windshield or against any ID number on the car. We

express no opinion as to whether verifying the vehicle ID number is the usual

custom and practice when purchasing a used car. But even if Miller had checked,

it is conjectural that he would have formed the conclusion of title defect rather

than making another supposition such[189 Cal.App.3d 1592] as manufacturer's

error. We are in the realm of speculation, not evidence. (Marshall v. Parkes,

supra, 181 Cal.App.2d 650, 655.) At best, we may conceivably infer awareness

of facts occasioning a raised eyebrow but not knowledge as required by T & O.

[15] Substantial evidence is said to be evidence which has "probative force,"

which is "'"such relevant evidence as a reasonable man might accept as

adequate to support a conclusion."'" (Traxler v. Thompson, supra, 4 Cal.App.3d

278, 285.) [13c] The trial court's implied conclusion that Miller had actual

knowledge of Louis's claim at the time of his purchase is not supported by

substantial evidence.

The order is reversed. Costs of appeal are to be borne by Louis.

Agliano, P. J., and Cappaccioli, J., concurred.

FN 1. The SEL model is a four-door sedan; the SEC is a two-door coupe.

FN 2. Louis maintains in his brief that Syufy returned the car upon discovering

that it was a 1983 rather than a 1984 model. Syufy is not a party to this lawsuit,

however, and there is no evidence in the record to support this assertion.

FN 3. The Porsche is the subject of another lawsuit.

FN 4. The writ of execution in the record, while referring to the judgment entered

on February 5, 1985, bears an issuance date of April 30, 1985.

FN 5. This order is not contained in the record.

FN 6. Morris Plan was granted standing to do so by stipulation of all parties.

FN 7. Since we decide the appeal on the basis of this argument, we do not find it

necessary to address certain ancillary issues raised by appellants, namely:

whether Cambridge and Wood were agents of Louis or of Cochran, whether the

court exceeded its authority under Code of Civil Procedure section 708.205 when

it directed Miller to deliver the Mercedes, or whether Perrins was an intervening

owner.

FN 8. Evidence Code section 600: "(b) An inference is a deduction of fact that

may logically and reasonably be drawn from another fact or group of facts found

or otherwise established in the action."

FN 9. We note that Cochran argues first that Louis did not acquire a security

interest, and in the alternative that if he did, it was unperfected.

FN 10. There was no evidence whatsoever that Morris Plan had any knowledge

of Louis's security interest. Under the Commercial Code, the concept of good

faith purchaser for value includes an encumbrancer who gives value with no

knowledge of a prior interest. (Cal. U. Com. Code, § 1201, subds. (32) and (33).)

Moreover, Morris Plan perfected its interest whereas Louis did not. (Cal. U. Com.

Code, § 9312, subd. (5)(a).) Therefore Morris Plan's interest in the Mercedes

would be superior to Louis's even if it were shown that Miller was not a bona fide

purchaser. Our holding today, however, obviates the need to focus upon this

issue.

FN 11. On the other hand, Cochran, who bought from Cambridge, may have

been a buyer in ordinary course to the extent that he gave new value. As such he

would be entitled to the additional protection of section 9307, taking the

Mercedes "free of a security interest created by his seller even though the

security interest is perfected and even though the buyer knows of its existence,"

as long as he did not know that the sale was "in violation of the ownership rights

or security interest of a third party." (Cal. U. Com. Code, § 1201, subd. (9).)

FN 12. Cases cited by Louis for the proposition that an objective test should

apply here are inapposite. In Sierra Financial Corp. v. Brookes-Farrar Co.

(1971) 15 Cal.App.3d 698 [93 Cal.Rptr. 422], the buyers actually knew of the

security interest; the question was whether they were nonetheless buyers "in

ordinary course." People v. Brumley (1966) 242 Cal.App.2d 124 [51 Cal.Rptr.

131] was a criminal case concerning defendant's "guilty knowledge" that goods

he received were stolen.

FN 13. We are certainly not unsympathetic to Louis's plight. Had he submitted a

timely and errorfree notice to the DMV to establish his rights in the vehicle as

against subsequent purchasers, chances are that even this would have availed

him nothing, since Cambridge had already applied for a duplicate pink slip before

delivering the original to Louis. The statutory scheme simply provides no means

of protection for a secured creditor who deals unwittingly with a fraud worker; in

fact the ease with which a duplicate ownership certificate can be obtained

facilitates the kind of fraud perpetrated by Cambridge here. The Legislature may

wish to take note of this problem.

DIVESTMENT AND DISCLOSURE BY PUBLIC OFFICIALS

Constitutional provision on disclosure

Article 6, Section 12 of the Constitution

All Members of the Senate and the House of

Representatives shall, upon assumption of office, make a full disclosure of their financial and business interests. They shall notify the House concerned of a potential conflict of interest that

may arise from the filing of a proposed legislation of which they are

authors. (emphasis, supplied)

Constitutional provision of divestment

Article 7, Section 13 of the Constitution

The President, Vice-President, the Members of the Cabinet,

and their deputies or assistants shall not, unless otherwise provided

in this Constitution, hold any other office or employment during their

tenure. They shall not, during said tenure, directly or indirectly,

practice any other profession, participate in any business, or be

financially interested in any contract with, or in any franchise, or

special privilege granted by the Government or any subdivision,

agency, or instrumentality thereof, including government-owned or

controlled corporations or their subsidiaries. They shall strictly avoid

conflict of interest in the conduct of their office.

X x x (emphasis supplied)

The Rule X, Section 1 of the Implementing Rules of RA 6713 provides

that:

Section 1. (a) An official or employee shall avoid conflict of interest

at all times.

(b) Conflict of Interest occurs:

(1) When the official or employee is:

a) a substantial stockholder; or

b) a member of the Board of Directors; or

c) an officer of the corporation; or

d) an owner or has substantial interest in a business; or

e) a partner in a partnership; and

(2) The interest of such corporation or business, or his rights

or duties therein, are opposed to or affected by the

faithful performance of official duty.

(c) A substantial stockholder is any person who owns, directly or

indirectly, shares of stock sufficient to elect a director of a

corporation. This term shall also apply to the parties to a voting

trust.

(d) A voting trust means an agreement in writing between one or

more stockholders of a stock corporation for the purpose of

conferring upon a trustee or trustees the right to vote and the

other rights pertaining the shares for certain periods and subject

to such other conditions provided for in the Corporation Law.

Section 2.

(a) When a conflict of interest arises, the official or employee

involved shall resign from his position in any private business

enterprise within thirty (30) days from his assumption of office

and/or divest himself of his share-holdings interest within sixty

(60) days from such assumption. For those who are already in

the service, and conflict of interest arises, the officer or

employee must resign from his position in the private business

enterprise and/or divest himself of his shareholdings or interest

within the periods herein-above provided, reckoned from the

date when the conflict of interest had arisen. The same rule

shall apply where the public official or employee is a partner in a

partnership.

(b) If the conditions in Section 1 (b) concur, divestment shall be

mandatory for any official or employee even if he has resigned

from his position in any private business enterprise.

(c) Divestment shall be to a person or persons other than his

spouse and relatives within the fourth civil degree of

consanguinity or affinity.

(d) The requirements for divestment shall not apply to those

specifically authorized by law and those who served the

government in an honorary capacity nor to laborers and casual

or temporary workers.

The most recent issue on divestment: The Case of Jose Concepcion

(former Secretary of Trade and Industry)

Concepcion allegedly divested himself of his shares in RFM

through various legal and corporate means, but the shares nevertheless

seem to have ended up in the hands of his children.

If indeed Concepcion’s children were beneficiaries of the

divestment then the divestment could be unlawful because under the

Code of Conduct and Ethical Standards, divestment cannot be made to

the public officer’s spouse and relatives within the fourth civil degree of

consanguinity or affinity.

Divestment and Disclosure, Its Various Meanings (Black’s Law and Websters

Dictionaries)

Divestment

- in property law, the cutting short of an interest prior to its normal

termination

Divestiture

– in anti-trust law, the order of court to a defendant (e.g. corporation) to

divest itself of property, securities or other assets

Disclosure

– act of disclosing, revelation

Compulsory disclosure

– term with variety of meanings; may refer to court order compelling

disclosure of matters within scope of discovery rules;

- may also refer to obligation of public officers or candidates for public

office to reveal assets and income from private sources

Full disclosure

– term used in variety of legal contexts, e.g. a fiduciary who participates in

a transaction for his own benefit is required to fully reveal the details of such

- in consumer law, the obligation to reveal all details of a transaction to

the consumer

THE RULES OF THE SENATE COMMITTEE ON ETHICS AND PRIVILEGES WAS TAILOR-FIT FOR SENATOR MANNY VILLAR

1. Regular meetings of the Committee

Under the new Rules, a new statement was introduced which states that

the Chairperson may set and call additional meetings on such other dates that he

may deem necessary to expedite the proceedings.

2. Processing of sworn and verified complaints-

The new Rules have provisions regarding the determination that the

complaint has complied both in form and substance. While the old one has none.

3. Preliminary inquiry

a. Report-

Old Rules state that when the preliminary inquiry is completed, the

Chairman shall make a confidential oral or written report to the committee

on findings and recommendations.

However, the new Rules provide that after the completion of the

preliminary inquiry and declared close by the chairperson, he or she shall

make a report on its findings and his recommendations to the committee.

b. Committee Action

Under the old Rules, “as soon as practicable following submission

of the report on the preliminary inquiry, the committee shall determine

whether there is substantial credible evidence which provides substantial

cause for the committee to conclude that a violation within the jurisdiction

of the committee has occurred.”

But the new Rules states that “within 10 days from the date of the

submission of the report on the preliminary inquiry, the committee shall

determine whether there is substantial credible evidence which

provides substantial cause for the committee to conclude that a

violation within the jurisdiction of the committee has occurred.”

4. Preliminary conference

The new Rules contain provisions on preliminary conference while the old

has none.

5. Swearing of witnesses

The old Rules states that “All witnesses who testify at adjudicatory

hearings shall be sworn unless the Presiding Officer, for good cause, decided

that a witness does not have to be sworn.”

While the new provides that “All witnesses who testify at adjudicatory

hearings shall be sworn or required to take an oath before the taking of their

testimonies.”

6. Right to counsel

Under the old Rules;

“Any witness at an adjudicatory hearing may be accompanied

by counsel of his or her own choosing, who shall per permitted to

advise the witness of his or her legal rights during the testimony.”

The new Rules states;

“Any witness at an adjudicatory hearing may be accompanied by

counsel of his or her own choice, who shall be permitted to advise the

witness of his or her legal rights during the testimony with prior permission

of the chairperson. However, lack of counsel of any witness may not be

used to defeat the purpose for which he or she was ordered to testify by

the committee. In cases where a witness fails to obtain the services of a

counsel his/her own choice (de parte), the committee may assign any

lawyer from the Senate Legal Department to serve as the witness’ counsel

de oficio.

7. Transcripts of stenographic notes

As regards corrections, the old Rules provide that;

“Any questions arising with respect to the processing and

correction of transcripts shall be decided by the chairman and vice

chairman, acting jointly.”

While the new Rules provide that;

“Any questions arising with respect to the processing and

correction of transcripts shall be decided by the chairperson.”

As to printing, the old Rules state that “Except for a record of hearing which

is closed to the public, each transcript shall be printed as soon as practicable

after receipt of the corrected version.”

While the new Rules state “Except for a record of hearing which is closed

to the public, each transcript shall be printed within 24 hours after receipt of the

corrected version.”

8. Committee report

The new Rules state that “Within 30 days session days from the

declaration of the chairperson of the termination of the adjudicatory hearing,

the committee, upon a majority of vote of the members, shall adopt a committee

report.”

The old Rules have no such provision.

9. Broadcasting and news coverage of committee proceedings

The old Rules provide that;

“Any witness served with a subpoena by the committee may

request not to be photographed at any hearing or to give evidence or

testimony while the broadcasting, reproduction, or coverage of that

hearing, by radio, television, still photography or other methods are

occurring. At the request of any such witness who does not wish to be

subjected to radio, television, still photography, or other methods of

coverage, and subject to the approval of the committee, all senses shall

be covered and all microphones used for coverage turned off.

As compared with the new Rules which states;

“To fully document the proceedings of the committee, audio- video

overage of the proceedings shall be allowed except in cases where the

chairperson and/or the committee had declared otherwise.

Any witness in any of the proceedings of the committee may

request not to be photographed or to give evidence or testimony while the

broadcasting, reproduction or coverage of that hearing, by radio,

television, still photography or other methods are taking place.”

THE MAJOR CHANGES IN THE RULES OF THE SENATE COMMITTEE ON

ETHICS AND PRIVILEGES WHICH NECESSITATED THE REPUBLICATION

OF THE SAME

1.

Sec. 17. PROCESSING OF SWORN AND VERIFIED

COMPLAINTS. – After the Committee receives a sworn or verified

complaint against any Member of the Senate, it shall give notice to the

respondent that it will determine within five (5) days from receipt of the

complaint whether the complaint has complied both in form and in

substance with Section 11 (CHANGED TO SECTION 16) of this Rule:

A. If it is determined that a complaint against any

Member of the Senate failed to substantially comply with the

requirements set forth in Section 11 (CHANGED TO SECTION 16)

of this Rule it shall be returned to the complainant with a statement

explaining how the complainant failed to comply under these Rules.

B. The complainant may opt to amend or modify his

complaint after the committee’s initial determination of

noncompliance with Section 11(CHANGED TO SECTION 16) of

this Rule and subsequently re-file the same with the Committee. If

such re-filed complaint has been determined to have substantially

complied with the requirements herein provided, the Committee

shall continue with the processing of the complaint under this Rule.

2.

Sec. 21. PRELIMINARY INQUIRY. - When the information is

presented to the Committee pursuant to Section 15 and Section 16

(CHANGED TO SECTION 19) (A), (B) & (C) of Rule 2 or upon direct

referral from the floor under Section 20 (A) of this Rule, the information or

privilege speech shall be immediately transmitted to the Chairperson so

he may conduct a preliminary inquiry.

3.

Sec. 22. BASIS FOR PRELIMINARY INQUIRY – The Committee

shall promptly commence preliminary inquiry whenever it has received

either:

A. A sworn statement or verified complaint that the

Committee has determined to have complied with he requirements

of Rule 2;

B. Unsworn allegations or information that have caused

the Committee to determine, in accordance with Rule 3, that an

initial review must be conducted; or

C. After a direct referral from the floor under Section 15

(CHANGED TO SECTION 20) (A) I of the same rule.

REPUBLICATION OF THE RULES OF THE COMMITTEE OF THE WHOLE IS MANDATORY CONSIDERING THAT IT INVOLVES A PENAL PROVISION

GENERAL RULE: PUBLICATION OF OFFICIAL/STATUTORY DOCUMENTS IN THE PHILIPPINES

As a general rule, administrative rules and regulations does not require

publication, however if it provides for sanctions or penalties, its publication

becomes a necessity for its effectivity. Publication is an essential requirement of

dues process. In Tanada vs. Tuvera, The court held that all statute including

those of local application shall be published as condition for their effectivity,

which shall begin 15 days after publication unless a different effectivity date is

fixed by the legislature. The publication must be full or no publication at all since

its purpose is to inform the public of the content of the laws. Citing Tanada Vs.

Tuvera, December 29, 1986, the Supreme Court Held in Gatbonton vs. (NLRC

G.R. NO. 146779) January 26, 2006 , to wit:

X X X

It must be noted however, that respondent published said rules and regulations only on February 23, 1999. In Tañada vs. Tuvera it was ruled that:

… all statutes, including those of local application and

private laws, shall be published as a condition for their effectivity, which shall begin fifteen days after publication unless a different effectivity is fixed by the legislature.

Covered by this rule are presidential decrees and executive

orders promulgated by the President in the exercise of legislative powers whenever the same are validly delegated by the legislature or, at present, directly conferred by the Constitution. Administrative rules and regulations must also be published if their purpose is to enforce or implement existing law pursuant also to a valid delegation.

Interpretative regulations and those merely internal in nature,

that is, regulating only the personnel of the administrative agency and not the public, need not be published. Neither is publication required of the so-called letters of instructions issued by administrative superiors concerning the rules or guidelines to be followed by their subordinates in the performance of their duties.

… We agree that the publication must be in full or it is no

publication at all since its purpose is to inform the public of the contents of the laws. (Emphasis supplied)

The Mapua Rules is one of those issuances that should be published for its effectivity, since its purpose is to enforce and implement R.A. No. 7877, which is a law of general application. In fact, the Mapua Rules itself explicitly required

publication of the rules for its effectivity, as provided in Section 3, Rule IV (Administrative Provisions), which states that “[T]hese Rules and Regulations to implement the Anti-Sexual Harassment Act of 1995 shall take effect fifteen (15) days after publication by the Committee.” Thus, at the time of the imposition of petitioner’s preventive suspension on January 11, 1999, the Mapua Rules were not yet legally effective, and therefore the suspension had no legal basis.

THE RULES OF THE SENATE COMMITTEE OF THE WHOLE WAS PUBLISHED BUT HAS BEEN AMENDED, CORRECTED AND CHANGED THAT A REPUBLICATION IS NEEDED.

The Rules of the Senate Committee on Ethics is an administrative rule

promulgated by the Senate pursuant to its constitutionally delegated right to

discipline its members. It was duly published but it was subsequently subject to

corrections which though not substantial was nonetheless a factor in considering

the incompleteness of the rules.

The requirement of publication necessitates a “complete” reproduction of

any statute, laws, rules and regulations of penal character in printed form. In

other words, it must be the statute in final form. Any omission or lack of

completeness will warrant a negation of compliance with due process, hence, it is

deemed as if there has been no publication at all.

As was held in the cited case of Tanada vs. Tuvera, Publication must be in

full or it is no publication at all since its purpose is to inform the public of the

contents of the laws. As correctly pointed out by the petitioners, the mere

mention of the number of the presidential decree, the title of such decree, its

whereabouts (e.g., “with Secretary Tuvera”), the supposed date of effectivity, and

in a mere supplement of the Official Gazette cannot satisfy the publication

requirement. Any amendment or correction therefore requires a new publication

of the rules in full. The said measure will only become effective after it is duly

published together with the correction and its effectivity shall not be retroactive.

Its applicability shall be constrained to any procedure occurring after its effectivity

date which is the latest publication.

FURTHER ARGUMENTS STRENGTHENING

WHY REPUBLICATION IS REQUIRED

The Senate Committee of the Whole Rules was published. A number of

minor amendments were introduced, however. The same were not published or

the corrected new rules were never published.

Note that the Rules of the Senate Committee of the Whole while at face

value look like a guide to procedure, it actually is an issuance governing

discipline. Necessarily, it must be pointed out a discipline rule contains sets of

penal provisions.

Aside from the general arguments presented, thus, there is a need to

republish the Rules of the Ethics Committee or of the SCOW in the perspective

of giving due process to Senator Villar and which did not happen. This is one

reason why Senator Villar and the Minority Bloc did not attend the Whole

hearings.

Furthermore, for future issues that may come to the Senate for decision,

under the questioned Rules, the witnesses would be at a loss as to what

provisions would apply to them when they appear and testify at the said

hearings.

As may be remembered, in one of their hearings, as opined by the

Senate Legal Counsel in his opinion, “the purpose of publication is to notify all

persons who may be affected by the rules.” How then can the Senate so

blatantly ignore the rights of witnesses and future witnesses who are called to

said hearings or future hearings?

The rules as revised should have been republished so that “fair notice”

should have been given to all third parties affected by the proceedings of the

Committee of the Whole.

It can be argued that the Disciplinary Rules of the Senate Committee on

Ethics and Privileges cannot be applied to SMBV because there was no full

publication of the Rules. To apply the Rules to the case of SMBV would violate

the requirements of due process since he was not fully and completely informed

of the contents thereof.

J. Cruz:

Laws must come out in the open in the clear light of the sun instead of skulking in the shadows with their dark, deep secrets. Mysterious pronouncements and rumored rules cannot be recognized as binding unless their existence and contents are confirmed by a valid publication intended to make full disclosure and give proper notice to the people. The furtive law is like a scabbarded saber that cannot faint, parry or cut unless the naked blade is drawn.

All stated, sans the republication, even the Senate Report maybe a

document void ab initio.