IBP Journal Vol.31 No.2 2005

JOURNALVol. 32 3rd and 4th Quarters 2005, 1st Quarter 2006 No. 1

Practical Practice

ArticlesLegal Aspects of Questioned Documents:

Prosecution Side - Effective Direct Examination Justice Lucas P. Bersamin

Physical Inventory and Photographs in Drug Cases:Superfluity or Legal Necessity? Clarence Paul V. Oaminal

Critical Analysis of the Principle Involving Cases“Incapable of Pecuniary Estimation” Justice Oscar M. Herrera

Current Judicial Thinkingon Bank Negligence Antonio V. Viray

A Test Case on the Citizen Suit Provision Karen E. Baydo andof the Clean Air Act: The IBP Experience Glynda Bathan-Baterina

The New Philippine Arbitration LawSome Preliminary Observations Leslie Chen

Materials and DigestsThe Art of Cross-Examination Mario E. Ongkiko

Significant Laws and Issuances, 4th Quarter 2005 Christine V. Lao

Case Digest, 4th Quarter 2005 Tarcisio Diño

EssayDivining the Juristic Mind

of Chief Justice Artemio V. Panganiban Ismael Khan

of the Integrof the Integrof the Integrof the Integrof the Integraaaaated Bar of the Philippinested Bar of the Philippinested Bar of the Philippinested Bar of the Philippinested Bar of the Philippines

BBBBBoard of Editorsoard of Editorsoard of Editorsoard of Editorsoard of Editors

Rose Marie M. KingEditor-in Chief

Emerico O. De GuzmanManaging Editor

Rubén F. BalaneHector M. De Leon, Jr.Victoria G. Delos Reyes

Tarcisio A. DiñoJaime G. HofileñaSaklolo A. LeañoAlberto T. MuyotAmado D. Valdez

Editors

The articles published in the JOURNAL reflect the views of the authors and not of the Board ofEditors or the Integrated Bar of the Philippines.

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Copyright 2006 by The Integrated Bar of the Philippines

JOURNALof the Integrated Bar of the Philippines

CON TEN TS

This Issue ...................................................................................1

ArticlesLegal Aspects of Questioned

Documents: Prosecution Side -Effective Direct Examination ................ Justice Lucas P. Bersamin .............. 2

Physical Inventory and Photographsin Drug Cases: Superfluityor Legal Necessity? .............................. Clarence Paul V. Oaminal ............29

Critical Analysis of the PrincipleInvolving Cases “Incapable ofPecuniary Estimation” .......................... Justice Oscar M. Herrera ..............33

Current Judicial Thinkingon Bank Negligence .............................. Antonio V. Viray .............................51

A Test Case on the Citizen SuitProvision of the Clean Air Act: Karen E. Baydo andThe IBP Experience.............................. Glynda Bathan-Beterina ...............63

The New Philippine Arbitration LawSome Preliminary Observations............ Leslie Chen ....................................75

Materials and Digests

The Art of Cross Examination ................ Mario E. Ongkiko ..........................90

Significant Laws and IssuancesFourth Quarter 2005 ............................. Christine V. Lao ...........................105

Case Digest, Fourth Quarter 2005 .......... Tarsicio Diño................................ 117

EssayDivining the Juristic Mind of

Chief Justice Artemio V. Panganiban .... Ismael Khan .................................232

JOURNALof the Integrated Bar of the Philippines

1

The IBP Experience

JOURNAL of the Integrated Bar of the Philippines

THIS ISSUE

This issue offers articles and materials that focus on procedure,evidence and some legal doctrines often encountered in civil suits, for instance,cases incapable of pecuniary estimation, and actionable negligence. The articlesof Justice Lucas P. Bersamin and Justice Oscar M. Herrera should beespecially interesting to practitioners as they provide valuable insight on theBench’s views.

While the editors deliberately sought to provide “meat and potatoes”materials (such as well-known litigator Mario Ongkiko’s useful outline oncross examination), this issue also carries some articles on more greenfieldtopics - implementation of the citizen suit provision of the Clean Air Act andthe 2004 Philippine Arbitration Law.

As always, the journal includes Tarsi Diño’s case digests and ChristineLao’s summary of laws. Ismael Khan’s essay on Chief Justice ArtemioPanganiban rounds out the issue.

Prosecution Side - Effective Direct Examination

2 JOURNAL of the Integrated Bar of the Philippines

LEGAL ASPECTS OF QUESTIONED DOCUMENTS:PROSECUTION SIDE – EFFECTIVE DIRECT EXAMINATION

by

Justice Lucas P. Bersamin*

I. Source of Term Questioned Documents

According to Dr. Albert S. Osborn, the term “questioned documents,” used in connection with thespecial work of the document specialist, was taken directly from an able discussion of Palaeography, byProfessor G.L. Burr of Cornell University, in the old Universal Cyclopedia, quoted in Osborn’s first editionof the book “Questioned Document Problems: The Discovery and Proof of the Facts” (Chapter XXXIX).Osborn regarded the term to be correct and inclusive inasmuch as it did not contain any advance presumptionas to what an examination of a document might disclose and is now generally accepted as the proper descriptionof the work in this special field.

II. Authentication Applies Only toPrivate Documents as Evidence

Only private documents offered in evidence require authentication. But where the documents are notoffered as authentic, authentication is not necessary. It is enough that the documents are offered for what theyare claimed to be, as the subjects of falsification, forgery or counterfeiting.1

Generally, the manner of presenting disputed documentary evidence conforms to the followingsequence:

a) The evidence is marked;

Yet, the mere marking, identification, or authentication of documentary evidence does not meanthat it will be, or has been, offered as part of the evidence of a party. The explanation is simplythat such party may ultimately decide not to offer the evidence.

* Associate Justice, Court of Appeals; former Presiding Judge, Branch 96, Regional Trial Court, Quezon City; ProfessionalLecturer II, Philippine Judicial Academy; Lecturer/Resource Person, UP Law Center-Institute of Judicial Administration; Professorof Law, UST, Manila; Bar Reviewer, UST & Cosmopolitan Review Center, Manila; Fellow, Commonwealth Judicial EducationInstitute (Dalhousie University, Halifax, NS, Canada).1 Sec. 20, Rule 132, Rules of Court, which provides:

xxx Before any private document offered as authentic is received in evidence, its due execution and authenticity must be provedeither:(a) By anyone who saw the document executed or written; or(b) By evidence of the genuineness of the signature or handwriting of the maker.Any other private document need only be identified as that which it is claimed to be.

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If the subject disputed documentary evidence is claimed to be forged or falsified, however, it isthe Prosecution that should mark it. On the other hand, where the documentary evidence isclaimed to be authentic or genuine, it is the Defense that should have it marked.

b) The disputed documentary evidence is identified as the document which it is claimed to be (thatis, as the subject of the alleged falsification, forgery, or counterfeiting); and

c) The disputed documentary evidence is formally offered after all the Prosecution’s witnesses havetestified.2

III. The Rule on Expert Witness

In general, there are two distinct classes of cases in which expert testimony is admissible, namely:

1. Those cases in which the conclusions to be drawn by the judge depend on the existence of factswhich are not common knowledge and which are peculiarly within the knowledge of men whoseexperience or study enables them to speak with authority upon the subjects in questions.

2. Those cases in which the conclusions to be drawn from the facts stated, as well as the knowledgeof the facts themselves, depend on professional or scientific knowledge not within the range ofordinary training or intelligence.

The distinction between these two classes of cases lies in the fact that in the first class, the facts are tobe stated by the expert and the conclusion is to be drawn by the judge, but in the latter class, the expert statesthe facts and gives his conclusion in the form of an opinion which may be accepted or rejected by the judge.3

When the opinions, conclusions, or inferences drawn from the facts stated depend on specialknowledge, skill, experience, or training, not within the range of ordinary training or intelligence, they may bestated by a qualified expert.

The term opinion evidence means the testimony of a witness, given in the trial of an action, that thewitness is of the opinion that some facts pertinent to the case exist or do not exist, offered as proof of theexistence or non-existence of those facts.4

According to Rule 130, Rules of Court (1989 Revision), the opinion of the exert witness is admissibleunder the following conditions:

2 Sec. 35, Rule 132, Rules of Court.3 VII Francisco, The Revised Rules of Court in the Philippines, 1997 Edition, part 1, p. 641; citing 20 Am Jur 634.4 Id., p. 639; citing 20 Am Jur 634.



Sec. 49. Opinion of expert witness. – The opinion of a witness on a matter requiringspecial knowledge, skill, experience or training which he is shown to possess, may be receivedin evidence. (43 a)

The former provision relevant to expert opinion evidence was Sec. 43 of Rule 130, Revised Rules ofCourt (1964), as follows:

Sec. 43. Expert evidence. – The opinion of a witness regarding a question onscience, art or trade, when he is skilled therein, may be received in evidence.

Due to the present and the previous opinions being clear that the expert witness must posses thespecial knowledge, skill, experience, or training, any expert witness should first be qualified as such, in orderfor him to validly give his opinion upon the matter for which he is summoned as a witness. But the requirementof qualifying an expert witness may be dispensed with if:

a) The adverse counsel stipulates on the expert’s qualification; or

b) The court takes judicial notice of the witness’s expertise, because the judge happens to be awarethereof on account of his judicial functions.

The test in determining the qualifications of an expert is whether his knowledge may aid the court. Toqualify as an expert, a witness does not have to be shown to be infallible or possessing the highest degree of skill.5

IV. Role of the Expert Witness

Although courts are not ordinarily bound by expert testimonies, they may place whatever weight theychoose upon such testimonies in accordance with the facts of the case. The relative weight and sufficiency ofexpert testimony is peculiarly within the province of the trial court to decide, considering the ability andcharacter of the witness, his actions upon the witness stand, the weight and process of the reasoning by whichhe has supported his opinion, his possible bias in favor of the side for whom he testifies, the fact that he is apaid witness, the relative opportunities for study and observation of the matters about which he testifies, andany other matters which reserve to illuminate his statements. The opinion of the expert may not be arbitrarilyrejected; it is to be considered by the court in view of all the facts and circumstances in the case and when thecommon knowledge utterly fails, the expert opinion may be given controlling effect. The problems are left tothe discretion of the trial court whose ruling thereupon is not reviewable in the absence of an abuse of thatdiscretion.6

5 II Underhill’s Criminal Evidence, 5th Ed., pp. 780-784.6 Salomon v. Intermediate Appellate Court, 185 SCRA 352, 359 [1990].

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A finding of forgery does not depend entirely on the testimonies of handwriting experts.7

V. Handwriting Expert

One of the most frequent types of experts called to testify is the handwriting expert.

The handwriting expert is used where there is a controversy as to the identity of certain letters, indisputes regarding deeds, wills, contracts, and other legal papers, and in all kinds of forgery cases. Due tothe difficulties in forgery cases being much greater, a real expert in handwriting should be entitled to muchhigher credit than is generally given by the courts.

On whether an NBI expert may be requested by a private party to examine contested documents ornot, and on what are the effects of such examination, the Supreme Court ruled:

The fact that, in a particular litigation, an NBI expert examines certain contesteddocuments, at the request, not of a public officer or agency of the Government, but of aprivate litigant, does not necessarily nullify the examination thus made. Its purpose, presumably,to assist the court having jurisdiction over the said litigation, in the performance of its duty tosettle correctly the issues relative to said documents. Even a non-expert private individualmay examine the same, if there are facts within his knowledge which may help the court in thedetermination of said issue. Such examination, which may properly be undertaken by a non-expert private individual, does not, certainly become null and void when the examiner is anexpert and/or an officer of the NBI.8

VI. Findings of Government Expert PrevailsOver That of Hired Private Expert

Between a report on examination submitted by a private practitioner who was hired by an interestedparty and whose professional integrity has been placed in doubt, and the objective examination of a governmentagency “with accepted competence” and “cloaked” with the mantle of impartiality and neutrality,” whoseservices were required by no less than the trial court itself, the latter’s findings are entitled to full weight andcredit.9

7 Jimenez v. Commission on Encumenical Mission and Relations of the United Presbyterian Church in the USA, G.R. No. 140472,June 10, 2002.8 Sali v. Abubakar, 17 SCRA 988, 991-992 [1996].9 Co. v. Court of Appeals 193 SCRA 198, 212.1 0 People v. Pagpaguitan, G.R. No. 116599, September 27, 1999; 315 SCRA 226, 240-242; J. Quisumbing.



VII. Trial Judge May Receive and ExamineSpecimen Written at His Order;Document Expert Not Necessary

In People v. Pagpaguitan,10 the accused appealed his conviction for rape, faulting the trial judge forarrogating unto himself the task of determining the genuineness of the handwriting at the back of the picture ofthe accused and the complainant together (Exhibit 1) and the alleged letter of the complainant to him (Exhibit2) that the defense submitted to prove that he and the victim were sweethearts. The trial judge had orderedthe complainant to write a letter under his dictation which was then marked as Exhibit X for the court. Thejudge found this necessary in the interest of justice as the victim had denied having written either the letter orthe dedication at the back of the picture. It is of record that the handwriting at the back of the picture and inthe letter were very different. The trial court made the following findings after comparing Exhibit X withExhibits 1 and 2, thus:

. . . In a letter by letter comparison, the court found that the alphabets (sic) ‘g’; ‘k’;‘p’ and ‘y’ in Exhibit 2 and Exhibit X have different writing characteristics which led the courtto believe that Exhibit 2 was not written by the complainant.

The Supreme Court ruled:

Pagpaguitan now asks whether or not it is permissible or proper for the trial judge toreceive and examine a specimen writing, written at his order by a party who alleged that shewas not the writer of other documents submitted in evidence. He argues that the task ofcomparing the handwriting on the documents in question was one for experts and not thejudge. On this point, we find the judge’s comparison proper and permissible.

When a writing in issue is claimed on the one hand and denied upon the other to bethe writing of a particular person, any other writing of that person may be admitted in evidencefor the purpose of comparison with the writing in dispute.11 It is also recognized that acomparison of writing is a rational method of investigation; similarities and dissimilarities thusdisclosed have probative value in the search for truth.12 Thus, it has been held that, where acomparison is permissible, it may be made by the court, with or without the aid of expertwitnesses.13 The court may, in the exercise of its sound discretion, order a party to write orsign his signature as a basis for comparison.14 For the handwriting of a person is characteristicof the person himself.15 Once admitted, the genuineness of other offered writings alleged to

1 1 Citing University of Illinois v. Spalding, 71 N. H. 163, 51 A. 731.1 2 Citing 2 Jones, On Evidence, 1038.1 3 Citing Barnes v. US, 166 Fed. 113.1 4 Citing Hickory v. US, 151 US 303, 14 S. Ct. 334, 28 L. Ed. 170; King v. Donahue, 110 Mass. 155, 14 Am. Rep. 589.1 5 Citing Fenelon v. State, 195 Wis. 416, 217 N.W. 711.

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be the work of the same writer becomes a question for the trier of fact who may, but neednot, be assisted in this task by experts.16 Our rules on evidence having been drawn mainlyfrom American sources,17 decisions of American courts have persuasive effect. The generalrule is that where a local rule is patterned or copied from that of another country, then thedecisions of the courts in such country construing the rule are entitled to great weight ininterpreting the local rule.18 Following cited precedents, we find no reversible error on thisscore.

VIII. Standard for Gauging Relative Weightof Opinion of Handwriting Experts

The giving of more weight and credence to the testimony of the NBI handwriting expert than to thetestimony of the PCCL handwriting expert is considered warranted considering that the examination of theformer proved to be complete, thorough, and scientific.19

The standard for gauging relative weight to be given to the opinion of handwriting experts is stated asfollows:

We have held that the value of the opinion of the handwriting expert depends notupon his mere statements of whether a writing is genuine or false, but upon the assistance hemay afford in pointing out distinguishing marks, characteristics and discrepancies in and betweengenuine and false specimens of writing which would ordinarily escape notice or detectionfrom an unpracticed observer. The test of genuineness ought to be the resemblance, not theformation of letters in some other specimens but to the general character of writing, which isimpressed on it as the involuntary and unconscious result of constitution habit or otherpermanent course, and is, therefore, itself permanent.20

IX. Two Main Questions or Difficultiesthat Confront the Examiner of an Alleged Forgery

An accurate examination to determine forgery should dwell on both the differences and similarities inthe questioned signatures. There are two main questions, or difficulties, that confront the examiner of analleged forgery. The first is to determine how much and to what extent genuine writing will diverge from acertain type, and the second is how and to what extent will a more or less skillful forgery be likely to succeed

1 6 Citing US v. Woodson, 526 F. 2d 550; Forte v. Schiebe, N.W. 145 Cal. App. 2d 296, 302 P. 2d 336; State v. LeDuc, 306 N.C. 62,291 S. E. 2d 607; and US v. Magan, 575 F. 2d. 32, cert. denied. 439 US 931, 99 S. Ct. 320, 58 L. Ed. 324.1 7 Citing Philippine National Bank v. Bondoc, 14 SCRA 770 (1965).1 8 Citing US v. De Guzman, 30 Phil 417 (1915); Kepner v. US, 11 Phil. 669 (1904).1 9 Eduarte v. Court of Appeals, G.R. No. 105944, February 9, 1996; J. Francisco.2 0 Eduarte v. Court of Appeals, G.R. No. 105944, February 9, 1996; J. Francisco.



and be likely to fail in embodying the essential characteristics of a genuine writing. There we have the veryheart of the problem, for, at least in some measure, a forgery will be similar to genuine writing, and there isalso always bound to be some variation in the different examples of genuine writing by the same writer.Incorrect reasoning infers forgery from any variation or infers genuineness from any resemblance. The processof identification, therefore, must include the determination of the extent, kind, and significance of this resemblanceas well as of the variation. It then becomes necessary to determine whether the variation is due to theoperation of a different personality, or is only the expected and inevitable variation found in the genuinewriting of the same writer. It is also necessary to decide whether the resemblance is the result of a more orless skillful imitation, or is the habitual and characteristic resemblance, which naturally appears in a genuinewriting. When these two questions are correctly answered the whole problem of identification is solved.21

X. Way of Establishment Genuinenessof Standard Writing

The ways of establishing genuineness of standard writing are:

1. By the admission of the person sought to be charged with the disputed writing made at or for thepurpose of the trial or by his testimony;

2. By witnesses who saw the standards written or to whom or in whose hearing the person soughtto be charged acknowledged the writing thereof;

3. By evidence showing that the reputed writer of the standard has acquiesced in or recognized thesame, or that it has been adopted and acted upon by him in his business transactions or otherconcerns.22

XI. Trial Judge Who Can See Signatureson Questioned Document Should ExerciseIndependent Judgment on AuthenticatingTestimony of Notary PublicPreferred to Handwriting Expert

In Alcos v. Intermediate Appellate Court,23 the Supreme Court observes:

The authenticity of signatures in questioned documents has frequently been the subjectof proffered expert testimony. Such issue, however, is not a highly technical issue in the samesense that questions concerning, e.g., quantum physics or topology or molecular biology,

2 1 Causapin v. Court of Appeals, G.R. No. 107432, July 4, 1994.2 2 Security Bank and Trust Company v. Triumph Lumber and Construction Corporation, 301 SCRA 537.2 3 G.R. No. L-79317, June 28, 1988; 162 SCRA 823.

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would constitute matters of a highly technical nature. The opinion of a handwriting expert onthe genuineness of a questioned signature is certainly much less compelling upon a judge thanan opinion rendered by a specialist on a highly technical issue. The signatures on a questioneddocument can be sighted by a judge who can and should exercise independent judgment onthe issue of authenticity of such signatures. “The test of genuineness,” Chief Justice Moranstressed in his standard treaties, “ought to be the resemblance, not to the formation of theletters in some other specimen or specimens, but to the general character of writing, which isimpressed on it as the involuntary and unconscious result of constitution, habit, or otherpermanent course, and is, therefore, itself permanent.”24

We have ourselves examined the signatures of Emiliano Alcos and Cristeta EmnaceAlcos in the 2 May 1950 Deed of Sale in favor of Blas P. Cavada, Sr., and the standard orcontrol signatures. It appears to the court that there is a visible general resemblance betweenthe questioned signatures and the standard signatures, which general resemblance is particularlymarked in respect of the standard signature of Cristeta Emnace Alcos dated 27 September1945 and the 12 May 1949 signatures of Emiliano Alcos. This general resemblance issomewhat less marked when one compares the questioned signatures with the other standardsignatures of Emiliano Alcos and Cristeta Emnace Alcos, i.e., which were executed thirteen(13) years later than the questioned signatures; the general resemblance, however, is stillthere and visible. Thus, we consider that the Court of Appeals correctly rejected theunquestioning adoption by the trial court of the conclusions of one witness albeit presentedas an expert on questioned documents.

More important than the conclusions of such expert witness was the fact that theNotary Public, Atty. Delfin Mercader who had notarized the 2 May 1950 Deed of AbsoluteSale testified affirmatively and in detail that Emiliano Alcos and Cristeta Emnace Alcos hadappeared before him and had signed the said Deed of Absolute Sale. xxx

We believe and so hold that the above testimony of the Notary Public, who was notonly an instrumental witness himself but also an officer of the court, and whose act of notarizationimpressed upon the disputed Deed of Absolute Sale the full faith and credit which attaches topublic instruments, explicity identifying the signatures of Emiliano Alcos and Cristeta EmnaceAlcos in the Deed of Absolute Sale and expressly and forthrightly stating that both hadappeared before him and affixed their signatures to the said document, must be held tocontrol and prevail over the opinion or conclusion of petitioners’ expert witness, Pepito.

It may be noted further that the reality and authenticity of the Deed of Sale signed byEmiliano Alcos and Cristeta Emnace Alcos were corroborated by the series of communicationsbetween the sellers – the spouses Emiliano Alcos and the buyer Blas P. Cavada, Sr. for the

2 4 Citing 5 Moran, Comments on the Rules of Court, 434 (Nolasco ed., 1980); See People v. Bustos, 45 Phil. 9 (1983).



collection of the balance of the purchase price of P4,500.00, a P2,000.00 downpayment onwhich had been paid by the buyer and the remaining balance embodied in promissory notes.These notes were paid on installments as shown in the series of letters of notes between thesellers and the buyer and the final receipt dated 24 February 1951 covering the balance ofP800.00 signed by Cristeta Emnace Alcos.

Further corroboration of the truthfulness and authenticity of the Deed of AbsoluteSale in favor of Blas P. Cavada, Sr. may also be found in the fact that immediately after thesale to him in 1950, respondent Cavada took possession of the property he had purchasedand thereafter occupied the same publicly, continuously and adversely vis-à-vis petitionersand the rest of the world until he sold the parcels of land to private respondent Atlas over aperiod of time starting in 1953. Forthwith upon purchase, respondent Atlas took overpossession and occupation of the parcels of land involved, enclosing them by a circumferentialfence and into which Atlas introduced very extensive improvements including warehouses,large staff houses, a large hospital building, a chapel and a nurses home. The original buyer,Blas P. Cavada, Sr. paid the real estate taxes on the parcels of land involved every year from1950 up to actual sale of the various parcels of land to respondent Atlas; upon purchase andup to the present, the real property taxes on these individual parcels of land have been paidcontinuously by respondent Atlas. In contrast, petitioners never paid any real property taxeson the land here involved after 2 May 1950 and until 28 years later, when on 31 May 1979– four years after commencement of their suit in the trial court and before presentation ofevidence to support their claim of ownership – petitioners paid real property taxes on theland involved pertaining to the years 1961-1968 and 1972 –1979 in a lump-sum. This belatedpayment, however, would appear to be little more than an effort on the part of petitioners toimpart some verisimilitude to their claim.

XII. Laying the Foundations for Expert Testimony Given for the Prosecution in Trials InvolvingQuestioned Documents; the Voir Dire Examination of the Witness by the Opposing Party

Since the pertinent rule (Sec. 49, Rule 130, supra) requires a showing that the expert witness possessesthe special knowledge, skill, experience, or training that are required for the controversy, the handwritingexpert must be qualified.

Whether the witness is especially qualified to testify or is possessed of such adequate knowledge ofthe subject matter of an inquiry as will give value to his opinions and thereby render them admissible inevidence is a matter which rests largely in the discretion of the trial court.25

Questions propounded to a witness seeking to qualify as an expert should be intelligible and such thatthe answers cannot assume many different conditions. The witness cannot be asked whether he has sufficientskill and experience to give an opinion. This is not for him to conclude. He should state facts, from which the

2 5 Am Jur 656-657.

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court may determine his competency and qualification, and other witnesses may be called to testify as to hiscompetency, but such witnesses may not be called after he has been permitted to testify as an expert. Theresults of cases in which the witness had therefore testified would not be material in determining hisqualifications.26

After the witness has been sworn and his personal and other circumstances have been given for therecord, the prosecutor may proceed in the following manner:

Q. What is your business or profession?

A. I am an examiner of disputed documents.

Q. What does your work as an examiner of disputed documents consist of?

A. I examine and report matters submitted to me concerning the genuineness of documents andmatters of disputed typewriting, interlineations, erasures, matters of papers, pens, and inks.

Q. How long have you practiced your profession?

A. I have followed it as a profession since ________based in the City of Manila.

Q. Do you devote your entire time to this work?

A. Yes. After I graduated in ________- from the Disputed Documents Training Center of the_____________, and thereafter I devoted my entire time to this work.

Q. Have you had occasion to testify in courts relative to disputed documents?

A. I have testified in about a hundred cases or so in various courts of the Philippines.

Q. What further study have you made to prepare yourself as an examiner of disputed documents?

A. I have read all the books written in the English language on the subject of disputed documentsand allied subjects, microscopy, paper and paper making, ink manufacture, and photography. Ihave also provided myself with all the necessary apparatus. I have examined novel and disputedquestions of disputed documents for years. I have corresponded with and exchanged ideas andcriticisms with other experts in this specialty throughout the world. I maintain an office andlaboratory exclusively for this work.

2 6 3 Wharton’s Criminal Evidence, 11th Ed., p. 1703.



Q. Where is your office?

A. (He gives the address).

Another example was one that our esteemed fellow resource person, Atty. Mario Ongkiko, hasgraciously provided me from one of his actual cases. Although the case involved a disputed will, where it washis opposing counsel who was qualifying the document examiner, Atty. Ongkiko gave his prior permission tomy using it here. The examination of the handwriting expert in a civil matter is conducted in much the sameway as in criminal prosecution.

DIRECT EXAMINATION BY ATTY. GUSTILO (AFTER THE PERSONALCIRCUMSTANCES OF THE WITNESS WERE GIVEN)

Q- You mentioned earlier that you were Document Examiner II, with what institution are you presentlyconnected?

WITNESS

A- I am presently connected with the Philippine National Police Crime Laboratory Section at CampCrame, Quezon City.

Q- Can you please describe what your function is exactly as Document Examiner II?

A- As Document Examiner II, I examine, compare, and analyze questions pertaining to signatures,handwriting, alterations, counterfeiting, and the like. I also conduct lectures on questioneddocuments to different PNP, AFP, and other private institutions conducting seminars aboutquestioned documents on forgery . . . And as Document Examiner, I also photographed documentsfor examination, and I also verify or am asked as a technical reviewer on the examinations doneby my peers. I also conduct filed laboratory work with regard to questioned document and thatcannot be submitted to the laboratory for examination, which appears in different military andcivil courts.

That is all, Your Honor.

Q- How long have you been employed as Document Examiner II?

A- I have been employed as a Document Examiner II at the PNP Laboratory from 1981 up to thepresent, ma’am.

Q- Have you had any relevant education or background or training with respect to examining ofquestioned document?

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A- Yes, ma’am.

Q- In 1976 I was one of the participants in the course conducted by the Crime Laboratory entitled:Evidence in Asia where Questioned Document is one of its major subjects. And in 1978 up to1980 I underwent in-service training with the Crime Laboratory particularly, in the QuestionedDocument Division specializing in signatures, handwritings, alterations, and counterfeiting. Andin 1982 I was also one of the participants in the seminar entitled: Investigative Photography,where the photographing of questioned document is one of its major subjects. And then in 1997I was one of the participants in the seminar conducted by Visa and Mastercard International,held here in the Philippines. And in 1988 I also attended a seminar entitled Counterfeiting Currencyconducted by the US Secret Service, and in 1989 I also took up a course entitled: Criminalisticsconducted by the Crime Laboratory and at the same year I was given the chance by the JapanInternational Cooperative Agency Jaydah to attend a seminar and an observation course at theNational Police Research Institute for Police Sciences and the Metropolitan Police Department.That is all ma’am.

Q- In your many years of serving as Document Examiner II at the PNP, exactly how many documentshave come under your examination?

A- From 1980 up to present ma’am, I examined more or less thirty thousand documents.

COURT

Q- How many?

A- Thirty thousand documents, Your Honor.

ATTY. GUSTILO

Q- Likewise, in your years of experience, approximately, how many times have you previouslyspecifically testified in court regarding handwriting authentication report?

A- More or less three hundred times, ma’am.

ATTY. GUSTILO

Your Honor, at this juncture we wish to inquire from opposing counsel if he is willing to stipulateon the competence and on the vast experience of herein witness to make her qualify as an expertwitness for the purpose of the handwriting authentication procedure, which she conducted inrelation to this case?



ATTY. ONGKIKO

Well, a while ago the reason that a procedure was not followed and that is why we cannot accepther. . .

COURT

At any rate, the court will allow her to testify as an expert witness.xxx

Unless the opposing counsel accepts the witness as an expert upon the matter that is in issue, he maybe given by the trial court a chance to challenge the qualifications of the expert witness through a voir dire,27

before the witness goes further into the testimony. This process ensures that the remainder of the testimonyis one given by a qualified expert. Should the trial court realize after or in the course of the voir dire by theopposing counsel that the witness did not have the requisite special skill, training, or experience upon thematter in controversy, the witness may be dismissed without having to give an opinion. Otherwise, the trialcourt declares the witness as possessed of the requisite skill, training, or experience.

It seems that in the second example, the voir dire was waived by Atty. Ongkiko; hence, the trialcourt stated that it was allowing the witness to testify as an expert.

XIII. Direct Examination Following the Qualificationof the Witness as an Expert

After the lawyer has properly qualified his expert, he must proceed with the main questions. Theexamination focuses hereafter on the expert’s opinions on the questioned documents.

Where the expert will give his opinion on a matter that he himself has personally observed, he must beasked first what facts relating to the matter he has seen or observed by himself, before he is asked about hisopinion on the matter. After he has told all about the facts, the witness may give his opinion, taking these factsinto consideration.

To bring out the best that is in a witness to be used as an expert, the prosecutor should arrange toconfer with the witness before the presentation of the witness. The prosecutor should also study the terms,phrases, and words peculiar to the subject under investigation. If possible, the prosecutor should have anotherexpert sit with him to assist in framing the questions, or to suggest additional or follow-up ones during theexamination.

2 7 The voir dire is a preliminary examination (cross-examination) of the witness on his qualifications.

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In questioned documents involving handwriting and signatures, the document examiner is given inadvance of the trial the questioned documents and the exemplars, the latter being genuine handwriting andsignatures. In other cases, the examiner is given the questioned documents themselves for his own study andanalysis.

Knowledge of the genuine signature is obtained either by:

1. Seeing the person write some other documents or signatures (ex visu scriptionis);

2. Seeing documents otherwise known to him to have been written by the person in question (exscriptis olim visis); or

3. Examining, in or out of court, for the express purpose of obtaining such knowledge, the documentssaid to have been written by the person in question (ex comparatione scriptorum).28

The identification of handwriting should not rest on the apparent similarity or dissimilarity of onefeature but should be based on the examination of all the basic characteristics of the handwriting understudy.29

In the second example, the proponent of the witness continued his examination as soon as he hasqualified the witness as an expert:

ATTY. GUSTILO

May we proceed, Your Honor.

COURT

Proceed.

ATTY. GUSTILO (CONT)(TO WITNESS)

Q- Madam Witness, you appeared here this morning can you please explain why you are here?

A- I am here this morning because of the subpoena duces tecum that the Office received last 23May 2001 and by the Mission Order issued by the Crime Laboratory ordering me to appear andtestify before this Honorable Court for this particular case.

2 8 Security Bank & Trust Company v.Triumph Lumber and Construction Corporation, 301 SCRA 537.2 9 People v. Agresor, 320 SCRA 302.



Q- Do you have a copy of the said subpoena with you right now?

A- Yes, ma’am.

INTERPRETER

[At this juncture, witness is handling to her counsel a copy of the subpoena issued on Maytwenty-first (21 May 2001)].

ATTY. GUSTILO

Your Honor, we wish to have the subpoena duces tecum and ad testificandum, which wasreceived by the PNP Crime Laboratory on May 23, 2001 at 10:00 o’clock in the morning,which was addressed to the Section Chief of the Questioned Document Section to be marked asour Exhibit “1”, Your Honor.

COURT

Mark it.

ATTY. GUSTILO

Q With respect to the particulars of this subpoena Madam Witness, prior to the issuance of this.

Q. Do you have a copy of the transmittal order issued by this Honorable Court?

A Yes, ma’am.

Q. Will you please show it to us?

INTERPRETER

At this juncture, witness shows to counsel the transmittal order issued by the court dated April16, 2001.

ATTY. GUSTILO

Your Honor, Oppositors wish to have marked as Exhibit “2”, the transmittal Order issued by thisHonorable Court dated 16 April 2001 and as marked “received” by the PNP Crime Laboratoryon April 18, 2001 at 10:15 in the morning.

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COURT

Okay, mark it Exhibit “2”.

ATTY. GUSTILO (CONT)

Q. Ma’am, do you remember if any documents were actually transmitted to your office, togetherwith the transmittal order issued by this Honorable Court?

ATTY. ONGKIKO

No basis, Your Honor.

COURT

Alright, reform the question.

ATTY. GUSTILO

Q. Madam Witness, this Transmittal Order from the Honorable Court makes mention of thity-nine(39) documents, including the duplicate original of the supposed Last Will and Testament of thelate ________, do you remember if your office actually received all the documents mentioned inthis Transmittal Order?

ATTY. ONGKIKO

No basis, Your Honor. One of the safeguards in the document examination is: we have to makesure that the documents transmitted are actually the documents submitted. And we cannot assumethat this witness was the one who received that because she belongs to the same office. And so,we object to the question for lack of basis, because there is no showing that this witness was thereceiving clerk. For that matter, if she was the one who received the transmittal, Your Honor, ifa signature there appears, probably we can consider the point.

COURT

Please proceed counsel.

ATTY. GUSTILO

Q. You mentioned earlier that several documents were endorsed to you by the head of the PNPQuestioned Document Section, is that correct?



A. Yes, sir.

Q. Madam Witness, do you recall if the documents endorsed to you, pursuant to the transmittalorder of this Honorable Court dated April 16, 2001 correspond to the actual order hereon?

ATTY. ONGKIKO

There is no showing that the witness is qualified to state that, unless there is a showing that shewas the one who actually received the documents on the transmittal.

ATTY. GUSTILO

Your Honor, the witness has already established that the documents were endorsed first forexamination. We only wish to establish that the document that she actually received pursuant tosaid endorsement corresponded in the transmittal order issued by this Honorable Court.

COURT

Why don’t you just ask her what are these documents that she received?

ATTY. GUSTILO

Q. Madam Witness, what are the documents that you received pursuant to the endorsement madeto you by your superior in the Questioned Document Section?

A. These documents are a carbon original copy of the Last Will and Testament … (interrupted)

ATTY. ONGKIKO

Your Honor, the witness is reading from her report.

ATTY. GUSTILO

Yes, but she has permission. Her counsel asked permission a while ago and we refer the matterto the counsel for permission.

ATTY. ONGKIKO

My objection is to the question “what are these documents?”

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COURT:

You are now objecting to the question?

ATTY. ONGKIKO

Yes, Your Honor, because she is now reading the report not the document mentioned by theHonorable Court.

COURT

Alright, do not read the report in the transmittal.

WITNESS (CONT)

A. The documents submitted for examination handed to the Chief of the Questioned DocumentDivision were: the Last Will and Testament of the late ___________________, the Personalcheck Nos. 050440. (At this point, the documents that were submitted to the expert for herexamination, genuine and disputed, were enumerated and marked for record purposes).

xxx

ATTY. GUSTILO

Q. Madam Witness, the documents that you just showed to this Honorable Court were the onlydocuments that you received pursuant to the endorsement made to you by your superior.

WITNESS

A. Yes, sir. These are the documents submitted to the Crime Laboratory for examination.

Q. And you were the person in charge (who was) to conduct the handwriting authentication procedureon this document?

A. Yes, ma’am, this case was referred to me for examination by the Chief of the Crime LaboratorySection.

Q. Do you know in particular, whose signature was at issue in that case?



A. It is the signature of (testator)___ appearing in the Questioned Document, which is the LastWill and Testament.

Q. Are you referring to the Last Will and Testament which is previously marked Exhibit as Exhibit“3” for the Oppositors?

ATTY. GUSTILO (CONT)

I am showing to Madam Witness, the Last Will and Testament of Mr. ________ which is previouslymarked as Exhibit “3”.

Your Honor, we also wish to have sub-marked the succeeding pages of the Last Will andTestament: Exhibit “3”, Exhibit “3-a”, Exhibit “3-b”, “3-c” and “3-d”.

COURT

Mark accordingly.

ATTY. ONGKIKO

May I just make of record that the Last Will and Testament testified to by our witnesses had beenmarked as our Exhibit “L” and submarkings and they remained attached to the records of thecase.

Thank you, You Honor.

COURT

Noted.

ATTY. GUSTILO

Q. Your Honor, we also wish to make a manifestation that several duplicate original copies of theWill were submitted by petitioners initially to the Clerk of Court of the Regional Trial Court andsubsequently to this Honorable Court at the time of the institution of the Probate.

ATTY. ONGKIKO (CONT)

Your Honor, we do not confirm that, because in fact, there is again another duplicate original thatis marked as Exhibit “10”. We submitted two (2) extra copies, Your Honor, for purposes of

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comparison with Exhibits “L” and “M”, but not the original Will, which have been marked asExhibits “L” and “M”

At any rate, I believe that is the problem of Compañera.

ATTY. GUSTILO

Your Honor, in which case, may we ask the Sheriff of this Honorable Court or the Clerk of Courtto please inform us and this Honorable Court where he secured a copy of this Last Will andTestament?

COURT

There was a briefing on this matter precisely as to the source of the copy of the Last Will andTestament and we will ask the Clerk of Court about it, but since the Clerk of Court is absent ornot yet arrived, therefore, we cannot ask him. And so, it remains “reserved matter”.

ATTY. GUSTILO

Your Honor, we will be asking questions to this witness pursuant to the confirmation which is thesubsequent research made by the Clerk of Court regarding the source of Exhibit “3”, YourHonor.

ATTY. ONGKIKO

We really stated, Your Honor, we submitted additional copies for purposes of comparison, but itwas not the original Will, which we testified on. I think an examination of a document should bethe very document testified to and identified by the petitioner should be the subject of examination,not any other document, so as it is, and because we were not present, apparently somebodymade a mistake. These are only for comparison purposes, but Your Honor, if really the testimonyof this witness is to serve any purpose, but Your Honor, if really the testimony of this witness is toserve any purpose, we should have examined Exhibits “L” and “M”, which were testified to byour witness. What would be the result, Your Honor, this witness testifying another documentwhich all our witness did not identify … and so, but that is alright. Go ahead.

ATTY. GUSTILO

Q- Madam Witness, is this the Last Will and Testament which was forwarded to your office whichwas used as your basis for conducting handwriting authentication procedure?



A- Yes, ma’am this is the duplicate original of the Last Will and Testament.

Q- And in your study, how do you refer to the Last Will and Testament, bearing the Questionedsignatures, how do you refer to this document?

A- First, I examined the signatures appearing in this Last Will and Testament if the signatures of_________________ on the identified pages is … (interrupted)

COURT

Madam Witness, you are being asked how do you refer to that document marked Exhibit “3”?

WITNESS

A- This document is referred to by our office as a questioned document.

ATTY. GUSTILO

Q- As you just mentioned, in your study you referred to the Last Will and Testament-QuestionedDocument, Madam Witness, how do you refer to all the other documents which you earlieridentified before this Honorable Court, how do you refer to all the other documents which weresubmitted to your office and which were endorsed to you by your Chief of Office.

A- The other document bearing the signature of ___________________ are referred to in thereport as the standard document.

xxx

XIV. Ground Rules for Examination of the Expert Witness

I offer certain ground rules for the conduct of direct examination of the expert witness in a questioneddocuments case:

1. The examination of any expert witness does not differ from the examination of an ordinary witnessin any specific way, except as to the special rules governing the framing of hypothetical questions.

2. Latitude of the examination of the expert witness is within the discretion of the trial court.

3. There is no particular form of question, except that it should be so framed that the witness cangive an intelligent answer.

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4. Generally, leading questions are improper,30 but they are permitted during the qualification stageon preliminary matters and are often necessary in propounding hypothetical questions.

5. Such expert may be asked by either party as to the reasons on which his opinion is based, or hemay, by leave of court, give such explanation on his own account.

6. A court may suspend a trial to enable the expert witness to make an examination of persons orthings so that he may testify.

7. As a general rule, the facts upon which the expert witness bases his conclusion or opinion shallfirst be stated by him so that the trial court may determine whether the alleged facts on which theconclusions are based are real, and whether they justify the conclusion or opinion expressed.

8. Expert testimony should not be allowed to extend to the field of baseless conjecture concerningmatters not susceptible of reasonably accurate conclusions. This limitation is due to the requirementthat an expert’s opinion must be in terms of the certain or of the probable, and not of the possible.An expert witness is entitled to give his best judgment or opinion on the matter subject of theinquiry, but has no right to give answers that are mere guesses.

9. A mere supposition as to what would have happened if something had occurred that did not, orsomething had not occurred which did, or whether a certain thing could have happened undercertain circumstances, which the witness says did not exist, is ordinarily rejected as involving toolarge an element of conjecture.

10. Purely imaginary or abstract questions, assuming facts or theories for which there is no foundationin the evidence, although such questions may be permitted on cross-examination for the purposeof testing the knowledge of the witness as to the subject on which he has testified, are notallowed during the direct examination.

11. Hypothetical questions should not incorporate in them the opinions of other expert witnesses, foran opinion of an expert witness cannot be based upon the opinions expressed by other experts.Facts, and not opinions, must be assumed in the questions; otherwise, opinions might be builtupon opinions of experts, and the substantial facts driven out of the case. An opinion cannot rest,in whole or in part, on other opinions, but must rest on facts. It is essential that the testimony onwhich the expert opinion is based be taken as true.

3 0 Sec. 10, Rule 132, Rules of Court.



12. Hearsay in the form of information gained from the statements of others outside the courtroomshould not be the basis of an expert opinion. In document examination, the questioned documentshould itself be examined if its genuineness is the issue.31

XV. Methods of Examination of an Expert Witness

Experts testimony may be elicited through two methods that depend on the witness’ source ofknowledge as to the facts under inquiry.

Expert testimony may consist, therefore, of evidence by an expert:

1. Of that which he himself saw or observed; and2. Of that which is not confined to facts within his personal knowledge.

It is accepted that, as to the second, his opinion evidence may be extended to an assumed state offacts, known as the hypothetical.

XVI. Form of Question When Expert isPersonally Familiar with the Facts

As previously stated, where the expert’s opinion is based upon his personal knowledge andobservation, and not upon facts on evidence and assumed, it is not necessary that the questions should behypothetical in form.

XVII. Collective Facts Rules

If a witness was in a position to observe, he may be able to state that another person who waspresent saw stated conditions or occurrences which were visible and open to ordinary observation. Hisstatement is one of a collective fact that the witness may well know with certainty and that is in accordancewith common, everyday experience.

XVIII. Form of Questions When Expert is notPersonally Familiar with the Facts

If the expert witness has no personal knowledge of the facts upon which his opinion is based, thefacts should be given to him hypothetically, that is, they must assume the state of facts upon which his opinionis desired. Where the facts are undisputed, they must also be included in the hypothetical question. Where the

3 1 Another fitting illustration involves a medical witness who is examined as an expert, in which case his opinion becomesinadmissible if it is based upon the declarations of nurses or other physicians, made out of court.

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facts are disputed, each party must assume in his hypothetical question any state of facts which he claims hisevidence justified.32

The rule requiring the statement of hypothetical facts of an expert witness has no application toquestions calling for the conclusion of one who has personal knowledge of the subject of the inquiry. If thewitness called upon to give expert testimony is acquainted with the facts of the case, that is, if he has personalknowledge or has made personal observation, he may give his opinion upon the basis of his knowledge andobservation in response to direct interrogation, provided he is shown to have sufficient knowledge of thefacts to enable him to form an opinion entitled to be given weight by the court, and, according to the weightof authority, provided the witness first testifies to the facts in his own knowledge upon which his opinion isbased. It has been said that where witnesses of proper skill and experience have formed their judgment frompersonal examination of the subject of the controversy, their opinions are generally more worthy of confidencethan those elicited by hypothetical questions which may or may not state all the incidents and circumstancesnecessary to form a correct conclusion.33

XIX. Hypothetical Questions, in General

Where the testimony is not confined to facts within his personal knowledge, the expert witness’sopinion is elicited by a hypothetical question, that is, a question that, for the purpose of the particular trial,assumes a state of facts that has been shown by the evidence of other witnesses or by the testimony of theexpert himself.

The prosecutor presenting the expert cannot assume any facts in his hypothetical question concerningwhich no testimony has been given in the case. When his opponent objects to his hypothetical question or toan assumed fact contained therein, on the ground that a proper foundation has not been laid, it means that hishypothetical question or assumed facts in it are not supported by any evidence adduced at the trial; and suchobjection, if properly taken, will cause the hypothetical question or one or more assumed facts therein to bestricken out by the court.

Hypothetical questions may be indispensable in court litigations, as aids in the administration of justice,although there are situations in which interrogation of an expert witness by hypothetical questions is notnecessary. The great range of subjects on which the opinions of expert witnesses may be sought, and theendless variety of fact situations which may be presented, render it futile, if not impossible, to attempt to stategeneral unyielding rules as to the manner of phrasing hypothetical questions.

The hypothetical question should be framed so that it fairly and clearly states the assumed factswhich, according to the claim of interrogating counsel, have been proved, and for which there is some

3 2 VII Francisco, The Revised Rules of Court in the Philippines, 1997 Edition, Part 1, pp. 650-6513 3 Id., p. 651.



support in the evidence, and calls for an opinion of the witness which is based thereon. All the facts disclosedby the evidence material to the theory of the case, viewed from the side propounding the question, must beassumed in the hypothetical question. It is not necessary that each of the facts be proved beyond peradventure.A question that assumes any material facts not supported by the evidence is inadmissible. Hence, catch-allphrases like “Facts shown by the evidence” or “Upon all the evidence in the case” are improper.

The witness can only answer a question wherein all the specific facts are stated in the hypotheticalquestion, so that the trial court may see whether the expert’s opinion is based upon the facts which the trialcourt believes proved and upon all the material facts in the case recited in the question.

Only facts that are supported by evidence should be included. The questions should embodysubstantially all facts relating to the particular matter upon which an expert opinion is sought to be elicited, butthey need not include all the facts pertinent to the ultimate issue.34

XX. Framing the Hypothetical Question

The proponent of the expert witness frames the wording of his hypothetical question to include thefacts that he is asking the trial court to believe, and upon which he anticipates a favorable opinion.

The cross-examiner, in contrast, will assume in his hypothetical questions the facts as he claims themto be. If the record shapes up in a clear form as suggested, and an opinion is accurately expressed on thedivergent states of fact, the trial court could make its determination by deciding the truth of the controvertedbasic facts.

The examination becomes more complex where there are several possible groupings of facts, eachof which has different significance. Each grouping requires separate questions to the expert.

XXI. Nature and Scope of Hypothetical Question

The expert called as a witness has no standing or capacity in court different from that of the ordinaryfact witness. He is not, therefore, to act as judge. A question requiring a statement of his opinion should be soframed as not call upon him to determine a controverted issue of fact, or to pass upon the preponderance oftestimony; otherwise, the question invites him to usurp the function of the court and decide upon the credibilityof the witnesses and to weigh the evidence.

Thus, the question propounded to an expert should not be in this tenor: What is your opinion basedupon the testimony adduced at this trial as to the genuineness or falsity of the document in issue? This questionis objectionable because it involves the determination of the truth of the facts deposed to by the other witness

3 4 Id., p. 651.

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as well as the scientific conclusions to be drawn from those facts, a function that properly belongs to thecourt.

Asking an expert a question that requires him to assume the truth of all the testimony in the case andto give his opinion on that basis where the evidence is in direct conflict is improper. Such framing of thequestion compels the expert either to assume the truth of the impossible or to reject as false the evidence onbehalf of one of the parties.35

If a question is so framed as to call upon the expert to determine the side on which the evidencepreponderates or to reconcile conflicting statements, he is in effect asked to decide the merits of the case, afunction which is wholly beyond his province. Whatever liberality may be allowed in calling for the opinionsof experts or other witnesses, they must not usurp the province of the court by drawing conclusions of law orfact upon which the decision of the case depends.

XXII. Objection to Hypothetical Questions

The grounds for objecting to a hypothetical question may be either that the question misstates facts orthe question omits some facts.

When an objection is based on the first ground, the objector must state what facts had been misstatedin the question; and when the objection is based on the second ground, the objector must state what facts hadbeen omitted in the question.

The apprehension concerning the hypothetical question is justified only by lack of familiarity andexperience with it. It is as simple as most of the other questions asked by an attorney. All the attorney has tokeep in mind is to assume facts in evidence in the hypothetical question and to be as fair in his statement ofthose facts as he can. Upon those assumed facts the expert witness may give his opinion.

XXIII. Form of Hypothetical Questions

There is no exclusive formula, but generally speaking, a hypothetical question should state all thefacts relevant to the formation of an opinion, and then, assuming the facts stated to be true, ask the witnesswhether he is able to form an opinion therefrom, and, if so, to state such opinions.36

3 5 For instance, in a negligence case, it is improper to ask an expert medical witness the direct question as to what is the cause of theinjury complained of rather than whether the alleged negligence might have caused it.3 6 VII Francisco, The Revised Rules of Court in the Philippines, 1997 Edition, part 1, p. 651.



XXIV. Test of Competency of Hypothetical Questions

The chief test of the competency of a hypothetical question is whether it is a full and fair recital of allthe essential evidence disclosed by the record on the particular issue which is involved. Where the questionassumes facts in direct conflict with the undisputed evidence, or omits material facts upon which a determinationof the problem depends, the hypothetical question becomes misleading and it is then likely to lead the witnessto a false conclusion.37

XXV. Abstract Questions, When Permissible

Purely abstract questions, assuming facts or theories for which there is no foundation in the evidence,are not admissible as a matter of right, although such questions may be permitted on cross-examination forthe purpose of testing the knowledge of the witness as to the subject on which he has testified.38

XVI. Handwriting Expert, Although Useful, is not Indispensable toExamine and Compare Handwriting

The questioned documents are the best evidence and resort to the handwriting expert is not mandatory,provided the trial court was circumspect in relying on its own findings on whether or not the contesteddocuments (ballots) were prepared by one person. The decision itself attests that the court had taken painsand meticulous effort to examine with its naked eye the questioned documents (ballots) and handwritings andcompared them with each other. Handwriting experts, while probably useful, are not indispensable in examiningor comparing.39

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3 7 Id., p. 654.3 8 Id., 654; citing 2 Wharton’s Criminal Evidence, 11th Ed., 1179-1180.3 9 Bautista v. Judge Castro, 206 SCRA 305.

29

Superfluity or Legal Necessity?


PHYSICAL INVENTORY AND PHOTOGRAPHS IN DRUG CASES:SUPERFLUITY OR LEGAL NECESSITY?

Atty. Clarence Paul V. Oaminal*

The framers of the Republic Act 9165 have embodied a novel requisite in the conduct of arrest,search and seizures. The framers of the law have crafted it in this wise:

“Sec. 21. Custody and Disposition of Confiscated, Seized, and/or SurrenderedDangerous Drugs, Plant Sources of Dangerous Drugs, Controlled Precursors and EssentialChemicals, Instruments/Paraphernalia and/or Laboratory Equipment. – The PDEA shall takecharge and have custody of all dangerous drugs, plant sources of dangerous drugs, controlledprecursors and essential chemicals, as well as instruments/paraphernalia and/or laboratoryequipment so confiscated, seized and/or surrendered, for proper disposition in the followingmanner:

1. The apprehending team having initial custody and control of the drugs shall,immediately after seizure and confiscation, physically inventory and photograph the same inthe presence of the accused or the person/s from whom such items were confiscated and/orseized, or his/her representative or counsel, a representative from the media and theDepartment of Justice, and any elected public official who shall be required to sign the copiesof the inventory and be given a copy thereof.”

The Implementing Rules and Regulations that took effect on November 27, 2004 amplified theprovision in the following manner:

“The apprehending officer/team having initial custody and control of the drugs shall,immediately after seizure and confiscation, physically inventory and photograph the same inthe presence of the accused or the person/s from whom such items were confiscated and/orseized, or his/her representative or counsel, a representative from the media and theDepartment of Justice, and any elected public official who shall be required to sign the copiesof the inventory and be given a copy thereof: Provided, that the physical inventory andphotograph shall be conducted at the place where the search warrant is served, or at thenearest police station or at the nearest office of the apprehending officer/team, whichever ispracticable, in case of warrantless seizures; Provided further, that non-compliance with theserequirements under justifiable grounds, as long as the integrity and evidentiary value of theseized items are properly preserved by the apprehending officer/team, shall not render void

* The author is a partner in the firm of Larrabis Oaminal Talabo and is the author of a criminal law manual for officers of thePhilippine National Police.



and invalid such seizures of and custody over said items;” (2nd par., Sec 21, Article II, R.A.9165)

Therefore it is beyond contest that under the statute, whether the seizure is by virtue of a buy bustoperation (under Rule 113, Sec. 5) or by search warrant, the apprehending officer or team must make aphysical inventory and photograph the drugs that had been seized.

The distinction therein is the situs or venue of the execution of the physical inventory and taking ofphotograph. As when it is through “buy bust” it must be conducted in the nearest police station or office ofthe apprehending team, while in search warrants it must be conducted in the place where the search wasmade or warrant served.

However, the Supreme Court, through Rule 126 of the Rules of Court, has likewise embodiedcertain documentary requirements, quoted:

“Sec. 12. Delivery of property and inventory thereof to court; return and proceedingsthereon – a) The officer must forthwith deliver the property seized to the judge who issuedthe warrant, together with a true inventory thereof duly verified under oath.

b) Ten days after the issuance of the search warrant, the issuing judge shallascertain if the return has been made, and if none, shall summon the person to whom thewarrant was issued and require him to explain why no return was made. If the return hasbeen made, the judge shall ascertain whether Section 11 of this Rule has been complied withand shall require that the property seized be delivered to him. The judge shall see to it thatsubsection (a) hereof has been complied with.

c) The return on the search warrant shall be filed and kept by the custodian ofthe log book on search warrants who shall enter therein the date of the return, the result, andother actions of the judge.

A violation of this section shall constitute contempt of court”.

Therefore a law enforcement officer executing a search warrant must now comply with the followingdocumentary requirements:

1. PHYSICAL INVENTORY and taking of PHOTOGRAPHS, appended in the complaint for INQUEST; and

2. RECEIPT FOR THE PROPERTY SEIZED and INVENTORY to be submitted to the Court who issued the search warrant.

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What is the difference between the two sets of requirements?

The requirements set forth by the framers of Republic Act No. 9165 is a statutory requirement.Failure to comply therewith entails criminal liability and renders the search void.

On the other hand, unjustifiable compliance of Rule 126 courts the enmity of the court who issued thesearch warrant for CONTEMPT OF COURT.

What is the legal basis in opining that deliberate refusal to comply with Section 21 entails criminalliability and rendering the search void?

The last sentence of paragraph (a) of Section 21 states:

“Provided further, that non-compliance with these requirements under justifiablegrounds, as long as the integrity and evidentiary value of the seized items are properly preservedby the apprehending officer/team, shall not render void and invalid such seizures of andcustody over said items;”

In submission to statutory construction by inference is that the law enforcement officer is duty boundto prove that there are justifiable grounds for failure to comply with the requirements of the physical inventory.

Failure to prove justifiable grounds renders the search invalid.

This is the correct application of the law, the wisdom of the framers of the law being the intention toPROTECT the integrity and evidentiary value of the seized items.

Deliberate failure to comply with the requirements is a legal sacrilege, the fatal consequence beingthat search rendered is invalid.

Section 21 of Republic Act No. 9165 cannot be applied solitarily. It must be harmonized and giveneffect with the entirety of the law. Section 27 of the statute embodies the following penal sanctions:

“Sec. 27. Criminal Liability of a Public Officer or Employee for Misappropriation,Misapplication or Failure to Account for the Confiscated, Seized and/or SurrenderedDangerous Drugs, Plant Sources of Dangerous Drugs, Controlled Precursors and EssentialChemicals, Instruments/Paraphernalia and/or Laboratory Equipment Including the Proceedsor Properties Obtained from the Unlawful Act Committed. – The penalty of life imprisonmentto death and a fine ranging from Five hundred thousand pesos to Ten million pesos, in additionto absolute perpetual disqualification from any public office, shall be imposed upon anypublic officer or employee who misappropriates, misapplies or fails to account for confiscated,seized or surrendered dangerous drugs, plant sources of dangerous drugs, controlled



precursors and essential chemicals, instruments/paraphernalia and/or laboratory equipmentincluding the proceeds or properties obtained from the unlawful acts provided for in theAct.”

The physical inventory is the document that accounts for the seized items. It sets out the weight of theseized dangerous drugs, the other items seized, and the name and signature of the witnesses.

The deliberate refusal or failure to make the physical inventory makes the apprehending officer/teamliable for failure to account for seized dangerous drugs and/or proceeds or properties obtained from theunlawful act.

These requirements however have often not been complied with by our law enforcement officers.Why?

The Prosecutors Office that conducts the inquest has applied this proviso complacently, failing tocomprehend that the physical inventory and photograph requirements are legal necessities.

Under the new rules on inquest, specific crimes require certain documents as an integral part of thecomplaint. Examples are the death certificate for the crime of homicide or murder, and medical certificate forphysical injuries. In fact, the rules require the submission of a chemistry report in drug cases (under then R.A.6425).

The requirements under Section 21 are not merely based on whimsical notion or obsolete theory butanchored on the wisdom of PROTECTING INNOCENT PERSONS FROM DUBIOUS ANDCONCOCTED SEARCHES and the equally important reason of protecting the apprehending officers fromharassment suits for planting of evidence under Section 29 which carries the penalty of death and frominnuendos or allegations of robbery/thievery.

The Prosecutors Office under the auspices of the Department of Justice cannot be a fence setter inthe blatant transgressions of the law. The Department of Justice must formulate guidelines to ensure complianceof such statutory requirements. Its passive stance may and has been the cause of the numerous dismissals ofdrug cases before our courts.

Furthermore, the magistrates of our courts, being the citadel and bulwark of justice, must ensure thefulfillment of this rule, sanctified in the opening provision of the Bill of Rights, that “no person shall be deprivedof life, liberty or property without due process of law.”

To our law enforcement officers, the law has categorically laid the requirements, it has been ordained- we must therefore follow it. We cannot be wiser than the law.

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“Incapable of Pecuniary Estimation”


A CRITICAL ANALYSIS OF THE PRINCIPLE INVOLVING CASES“INCAPABLE OF PECUNIARY ESTIMATION”

Justice Oscar M. Herrera (ret.)1

INTRODUCTION

The issue of jurisdiction is a perennial problem in Remedial Law. One difficult area is in distinguishingcases that are capable of pecuniary estimation from those that are not. In view of the ever changing andgrowing jurisdiction of the Municipal Trial Courts over cases which, heretofore fall under the original andexclusive jurisdiction of the Regional Trial Courts,2 the usual test employed in determining whether casesare “capable or incapable of pecuniary estimation” - on the basis of the nature of the question involved in theaction - is an antiquated concept that has long lost its vitality and should yield to the later and more simple testbased on the subject of the action.

I. Determination of Jurisdiction

A basic principle in remedial law is that jurisdiction is conferred by law. The nature of the action(which is determined by the allegations of the complaint vis-à-vis the law existing law at the time of the filingof the complaint) determines whether or not a particular action falls within the jurisdiction of the court wherethe action is filed.

The allocation of jurisdiction to present-day courts in the Philippines was first drawn under Act No.136 entitled “AN ACT PROVIDING FOR THE ORGANIZATION OF COURTS IN THE PHILIPPINEISLANDS”3, viz:

Sec. 55. Jurisdiction of Courts of First Instance. - The jurisdiction of Courts ofFirst Instance shall be of two kinds:

1. Original; and

1 Consultant, Committee on Review of the Rules of Court, Supreme Court; Chairman, Department of Remedial Law, PHILJA,Supreme Court, Former Dean, Institute of Civil Law, Far Eastern University (FEU).2 Originally, Municipal Trial Courts were known as Justice of the Peace courts and Regional Trial Courts were known as Courtsof First Instance.3 Enacted June 11,1901 to take effect on June 16, 1901. The manifest purpose and object of Act No. 136 was to replace the oldjudicial system, together with its incidents and traditions drawn from Spanish sources, with a new system modeled in all its essentialcharacteristics upon the judicial system of the U.S. Any incident of the former system which conflicts with the essential principlesand settled doctrines on which the new system rests, was held to be abrogated by the law organizing the new system (Alzua vs.Johnson, 21 Phil. 308 (1913).

Act No. 136 was replaced by the Judiciary Act of 1948, which in turn was replaced by the Judiciary Reorganization Act of 1980,otherwise known as Batas Pamabansa 129, and further amended by Republic Act No. 7691 (which exapnded the jurisdiction of theMunicipal Trial Courts) and by Republic Act No. 7902 (which expanded the jurisdiction of the Court of Appeals.



2. Appellate

Sec. 56. Its original jurisdiction.-Courts of First Instance shall have originaljurisdiction:

1. In all civil actions in which the subject of litigations is not capable of pecuniaryestimation;

2. In all civil actions which involve the title to or possession of real property, or anyinterest therein, or the legality of any tax, impost, or assessment, except actions offorcible entry into, and detainer of lands or buildings, original jurisdiction of which isby this Act conferred upon courts of Justice of the Peace;

3. In all cases in which the demand, exclusive of interest, or the value of the property incontroversy, amounts to one hundred dollars or more;

4. In all actions in admiralty and maritime jurisdiction, irrespective of value of the propertyin controversy or the amount of the demand;

5. In all matters of probate, both of testate and intestate estates, appointments ofguardians, trustees and receivers, and in all actions for annulment of marriage, and inall such special cases and proceedings as are not otherwise provided for;

6. In all criminal cases in which a penalty of more than six months imprisonment or afine exceeding one hundred dollars may be imposed;

7. Said courts and their judges, or any of them, shall have power to issue writs ofinjunction, mandamus, certiorari, prohibition, quo warranto, and habeas corpus intheir respective provinces and districts, in the manner provided in the Code of CivilProcedure.

Courts of First Instance shall have appellate jurisdiction over all cases arising in justices andother inferior courts in their respective provinces.4

Upon the other hand, the law also provides:

A Justice of the Peace shall have original jurisdiction for the trial of all misdemeanorsand offenses arising within the municipality of which he is a justice, in all cases where the

4 Sec. 57 of Act, 136 , Public Laws Annotated by Guevara, Vol. 1.,page 306.

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sentence might not by law exceed six months’ imprisonment or a fine of one hundred dollars;and for the trial of all civil actions properly triable within his municipality and over whichjurisdiction has not herein been given to the Court of First Instance, in all cases in which thedemand, exclusive of interest, or the value of the property in controversy, amounts to lessthan three hundred dollars. A Justice of the Peace shall also have jurisdiction over actions forforcible entry into, and detainer of real estate, irrespective of the amount in controversy.

The jurisdiction of a Justice of the Peace in civil actions triable within his municipality,in cases in which the demand, exclusive of interest, or the value of the property in controversy,amounts to one hundred dollars or more, but to less than three hundred dollars, shall beconcurrent with that of the Court of First Instance: Provided, That the jurisdiction of aJustice of the Peace shall not extend to civil actions in which the subject litigation is notcapable of pecuniary estimation, or to those which involve the title to or possession of realestate or an interest therein, or the legality of any tax, impost, or assessment, or to actions inadmiralty, or maritime jurisdiction, or to matters of probate, the appointment of guardians,trustees, and receivers, or actions for the annulment of marriages; but the proviso shall notapply to actions of forcible entry into and detainer of lands of buildings, original jurisdiction ofwhich is hereby conferred upon courts of justices of the peace.5 (underscoring supplied)

II. Consequence of Classification

The consequences of classifying a case as incapable of pecuniary estimation would be the following:

1. The docket fee would be a flat rate and not on the basis of the value of the property. TheSupreme Court held that the determination of whether or not a case is capable of pecuniary estimation isnecessary for purposes of determining the filing fee. Determination of the nature of the action is essential inthe assessment of the filing fee. Where the action involves real property and a related claim for damages, thelegal fees shall be assessed on the basis of both (a) the value of the property and (b) the total amount ofrelated damages sought.6

2. Jurisdiction would be in the Regional Trial Court regardless of the value of the property;

3. Venue, in the absence of any law or stipulation, would be in the residence of the properplaintiff or the proper defendant at the election of the plaintiff and not where the property is situated;

4. The law on prescription of personal and not real actions shall govern.

5 Sec. 68 of Act 136, Public Laws Annotated by Guevarra, Vol. 1, page 309.6 National Steel Corporation vs. Court of Appeals, G.R. No. 123215,February 2, 1999; Emnace vs. Court of Appeals, G.R. No.126334, November 23, 2001.



Determining the nature of an action as incapable of pecuniary estimation is crucial to any action.

III. What Are the Cases Incapable of Pecuniary Estimation?

Otherwise stated, how does one determine whether a case is incapable of pecuniary estimation andtherefore falls under the original exclusive jurisdiction of the Regional Trial Court (formerly the Court of FirstInstance)?

A reading of decisions of the Supreme Court indicates that initially it is the THE NATURE OF THEQUESTION TO BE RESOLVED that is determinative of the nature of the questions raised andconsequently, the corresponding nature of the action.

1. In determining whether or not the action is one the subject matter of which is not capable ofpecuniary estimation and, therefore falls under the original and exclusive jurisdiction of the Regional TrialCourt or an action for damages in which case jurisdiction should be determined by the amount of the claim,the Supreme Court first adopted the criterion laid down in the 1968 seminal case of Lapitan vs. Scandia.7

The Supreme Court held that if the action is primarily for the recovery of a sum of money, it is capable ofpecuniary estimation. Where the basic issue is something other than the right to recover a sum of money or,is purely incidental to or as consequence of the principal relief sought like specific performance, action forsupport or for annulment of contract, it is not capable of pecuniary estimation.8

2. In Radio Communications of the Philippines, Inc. vs. Court of Appeals,9 the SupremeCourt, in holding that the case is incapable of pecuniary estimation, stated that the court has to scrutinize thefacts and the applicable laws in order to determine whether there was indeed a violation of a lease agreementthat would justify the award of rentals and damages.

3. In referring to matters beyond the competence of the Courts of the Justice of the Peaceunder Act No. 136, Justice JBL Reyes, the ponente in Lapitan vs. Scandia, referred to those cases thatwould involve “an investigation into facts that would justify one act or the other” arising from issues like thoseraised:

a. Arroz vs. Alojado, et al., L-22153, March 31, 1967 (the legality or illegality of the conveyancesought for and the determination of the validity of the money deposit made);

b. De Ursua vs. Pelayo, L-13285, April 18, 1950 (validity of a judgment); Bunayog vs. Tunas, L-12707, December 23, 1959 (validity of a mortgage);

7 24 SCRA 479.8 Lapitan vs. Scandia, 24 SCRA 479 (1968) cited in Raymundo vs. Court of Appeals, 213 SCRA 457 (1992); Singsong vs. IsabelaSawmill, 88 SCRA 639.9 G.R. No. 136109, August 1, 2002.

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c. Baito vs. Sarmiento, L-13105, August 25, 1960 (the relations of the parties, the right to supportcreated by the relation, etc., in actions for support);

d. De Rivera, et al. vs. Halili, L-15159, September 30,1963 (the validity or nullity of documentsupon which claims are predicated). Issues of the same nature may be raised by a party againstwhom an action for rescission has been brought, or by the plaintiff himself. (p. 482)

4. The classification above involves actions for breach of contract such as actions for rescissionor specific performance,10 i.e., an action for specific performance of a stipulation in a lease contract (RTC),such as to maintain the lessee in peaceful possession of the premises,11 an action to compel defendant toaccept the goods and pay P3,000 (RTC) (amount to be collected is but a consequence of specificperformance),12 or an action which seeks the performance of petitioner’s obligation under a written contractto make a refund but under certain specific conditions still to be proven or established. The Supreme Courtexplained that in a case for the recovery of a sum of money, such as the collection of a debt, the claim isconsidered capable of pecuniary estimation because the obligation to pay the debt is not conditioned uponany specific fact or matter. But when a party to a contract has agreed to refund to the other party a sum ofmoney upon compliance by the latter of certain conditions and only upon compliance therewith may what islegally due him under the written contract be demanded, the action is one not capable of pecuniary estimation.The payment of a sum of money is only incidental, which can only be ordered after a determination ofcertain acts the performance of which is the more basic issue to be inquired into.13

Thus, under the existing law at the time when the claim is conditioned upon any specific fact ormatter, which demands an inquiry into other factors the law then deemed to be outside the competence ofthe municipal courts (which were then not courts of record), the case was classified as a case “incapable ofpecuniary estimation” and falls under the original and exclusive jurisdiction of the Court of First Instance.

IV. Cases Involving Any Interest In Real Property As a Real Action

Generally, actions involving real property, affecting title to or the recovery of possession thereof, thepartition, condemnation, or foreclosure of mortgage on real property, are considered real actions.14 On theother hand, Section 19(2) of Batas Pambansa Blg. 129, in allocating the jurisdiction of the Regional TrialCourt, refers to real actions as civil actions, which involve the title to, or possession of real property, or anyinterest therein. The 1997 Rules of Civil Procedure followed suit by defining a real action as an actionaffecting title to or possession of real property or an interest therein. The limitation under the former rule to

1 0 Lapitan vs. Scandia, 24 SCRA 479 (1968),1 1 Armogando vs. Court of Appeals, G.R. L-80040, September 30, 1988, 166 SCRA 203 (1988).1 2 Manufacturer Distribution, Inc. vs. Yu Siu Liong, 16 SCRA 680 (1966).1 3 Ortigas & Company, Ltd, Partnership vs. Herrera.1 4 Fortune Motors vs. Court of Appeals, 178 SCRA 564 (1989) citing Comments on the Rules of Court by Moran, Vol. I, page 122.



actions for partition or condemnation of or foreclosure of mortgage on real property was removed andembraced within the broader term “any interest therein.”

The Supreme Court, in determining whether or not an action is a real action, likewise employed theprime and ultimate objective test. The Supreme Court held: “While it is true that petitioner does not directlyseek the recovery of title or possession of the property in question, his action for annulment of sale and hisclaim for damages are closely intertwined with the issue of ownership of the building which, under the law, isconsidered immovable property, the recovery of which is petitioner’s primary objective.”15

The prevalent doctrine as stressed in Fortune Motors vs. Court of Appeals16 is that “an action forthe annulment or rescission of a sale of real property does not operate to efface the fundamental and primeobjective and nature of the case, which is to recover said real property.”

In fine, for as long as the action would result in affecting title to or possession of or an interest in realproperty, then it should be classified as a real action. The concept is rendered more significant in view of theexpanded jurisdiction of the Municipal Trial Courts pursuant to R.A. No. 7691, which vested the latter withexclusive original jurisdiction in all civil actions “which involve title to, or possession of real property, orany interest therein” where the assessed value of the property or an interest therein does not exceedTwenty thousand pesos (20,000.00) or in civil actions in Metro Manila where the assessed value does\notexceed Fifty thousand pesos (P50, 000.00).17

V. Confusing Application of Criteria

The Supreme Court did not strictly adhere to the foregoing test in determining whether or not anaction is a real action. The same test applied in the seminal case of Lapitan vs. Scandia,18 was likewiseapplied to cases involving real property or an interest therein. Thus:

a. In assessing the docket fee to be paid, a complaint for annulment or rescission of sale ofparcels of land was held as not susceptible of pecuniary estimation, and, therefore, the docket fee should bebased on a flat rate, rather than the value of the parcel of land. Although eventually the result may be recoveryof land, it is the nature of the action as one for rescission of contract that is controlling.19

1 5 Sec.1, Rule 16; Punzalan, Jr. vs. Vda. De Lacsamana, 121 SCRA 336, (1983)1 6 Supra, cited in Punzalan, Jr. vs. Vda. De Lacsamana, supra.1 7 Sec. 3(3) of R.A. 7691.1 8 Supra.1 9 De Leon vs. Court of Appeals, G.R. No. 104796, March 6, 1998.

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b. An action for declaration of nullity and partition was considered as an action for specificperformance, the partition merely being merely an incident thereto. The Supreme Court held that jurisdictionis with the Regional Trial Court.20

Curiously, the Supreme Court stated that under Section 33(3) of BP Blg. 129, cases incapable ofpecuniary estimation are cognizable by the Metropolitan or Municipal Trial Courts where the assessed valueof the real property does not exceed P20,000.00 and P50,000.00 in Metro Manila.21

c. An expropriation suit was held as incapable of pecuniary estimation, and, accordingly fallsunder the jurisdiction of the Regional Trial Court, regardless of the value of the subject property. The SupremeCourt ruled that an expropriation suit does not involve the recovery of sum of money; rather, it deals with theexercise by the government of its authority and the right to take private property for public use. The SupremeCourt pointed to the two stages of expropriation of real property, namely, (1) the authority of the plaintiff toexercise the power of eminent domain and its propriety, and ends with an order of condemnation and (2) theascertainment of just compensation. The Supreme Court stressed that the primary consideration in anexpropriation suit is whether the government or any of its instrumentalities has complied with the requisites forthe taking of private property. Hence, the courts determine the authority of the government entity, the necessityof expropriation, and the observance of due process. In the main, the subject of an expropriation suit is thegovernment’s exercise of eminent domain, a matter that is incapable of pecuniary estimation. The SupremeCourt further held that the settled rule is that eminent domain cases fall under the jurisdiction of the RegionalTrial Court.22

d. It has also been held that when the suit is for breach of contract, the action is either forspecific performance or for rescission. A suit for such breach is not capable of pecuniary estimation; hencethe assessed value of the real estate subject of the said action should not be considered in computing the filingfees.23

e. The averments in the complaint reveal that the suit was primarily one for specific performanceas it was aimed to enforce a three-year lease contract, which would incidentally entitle plaintiff to monetaryawards if the court should find that the subject contract of lease was breached by defendant’s failure to payrentals due, a violation of their contract that had the effect of accelerating the payment of monthly rentals. Thesame complaint likewise implied a premature and unilateral termination of the term of the lease with theclosure of and removal all communication equipment in the leased premises. Under the circumstances, thecourt has to scrutinize the facts and the applicable laws in order to determine whether there was indeed aviolation of the lease agreement that would justify the award of rentals and damages. The prayer, therefore,

2 0 Russel vs. Vestil, G.R. No. 119347, March 17, 1999, 304 SCRA 738.2 1 Supra.2 2 Barangay San Roque vs. Pastor G.R. No. 138896 June 20, 2000, Reiterated in Bardillon vs. Barangay Masili, G.R. No. 166886,April 30, 2003.2 3 Cabutihan vs. Land Center Development Corporation, G.R. No. 146594, June 10, 2002.



for the payment of unpaid rentals in the amount of P84,000.00 plus damages consequent to the breach ismerely incidental to the main action for specific performance.24 Similarly, in Manufacturer’s Distributor’sInc.,25 the Supreme Court explained that the payment of such amounts can only be ordered as a consequenceof the specific performance primarily sought. In other words, such payment would be but an incident orconsequence of defendant’s liability for specific performance. If no such liability is judicially declared, thepayment can not be awarded. Hence, the amounts sought do not represent the value of the subject oflitigation.

f. An action for specific performance, irrespective of the amount of rentals and damages soughtto be recovered, is incapable of pecuniary estimation, hence cognizable exclusively by the Regional TrialCourt.26

g. Even if the dispute pertains to the title, possession and interest of each of the contendingparties over the contested property the assessed value of which falls within the jurisdictional range of theMTC, the court held that nonetheless, the nature of the action filed, the allegations set forth, and the reliefsprayed for, forestall its cognizance by the MTC.

The action for “Reconveyance and/or Recovery of Common Properties Illegally Disposed, withAnnulment of Sales and other Instruments of False Conveyance, with Damages, and Restraining Order” wasconsidered a case of joinder of causes of action which comprehends more than the issue of title to, possessionof, or any interest in the real property under contention but includes an action to annul contracts, reconveyanceor specific performance, and a claim for damages, which are incapable of pecuniary estimation and thusproperly within the jurisdiction of the RTC.27

VI. Cases Considered As Real Actions Regardless of Nature of Question

On the other side of the coin, the Supreme Court continued to consider the action as a real action asit did in Fortune Motors for as long as it involves title to real property or an interest therein. Thus:

a. Gumabon vs. Larin28 held that real actions, as opposed to personal actions, are thosewhich affect the title to or possession of real property. Where a contrary claim to ownership is made byan adverse party, and where the relief prayed for cannot be granted without the court deciding onthe merits the issue of ownership and title, more specifically who, as between the contending parties,would have a better right to the property, the case can only be but a real action.

24 No citation.25 Supra note 12.2 6 Radio Communications of the Philippines, Inc. vs. Court of Appeals, G.R. No. 136109, August 1, 2002.2 7 Copioso vs. Copioso, G.R. No 149243, October 28, 20022 8 G.R. No. 142523, November 27, 2002.

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b. Ouano vs. PGGT29, an action for “recovery of ownership and possession of real propertyand damages”, was held as a real action since it involves ownership and possession of real property, and thejurisdiction over the subject matter of the claim is determined by the assessed value not by the market value.Furthermore, since the assessed value of the property is less than P20, 000.00, jurisdiction is with the MTC.The damages were held merely as incidental to, or a consequence of, the main cause of action for recoveryof ownership and possession, and should thus be excluded in the determination of jurisdiction of the Court.Incidentally, the issue in said case is not merely one of “naked ownership” or “possession” but a controversialand conflicting issue of ownership as both parties are claiming ownership over the lot in question.

c. The ultimate objective test was also applied in National Steel Corporation vs. Court ofAppeals,30 where an action “for specific performance to execute deed of assignment retransferring stockcertificates” was considered an action to recover property rather than specific performance, hence the docketfee should be based on value of property to be re-transferred.

The Supreme Court cited Ruiz vs. J.M. Tuason & Co. Inc.,31 which is an action for specificperformance to compel J.M. Tuason to execute a final deed of sale of the lot in question based on compliancewith the compromise agreement. The Supreme Court held that where the primary objective and nature of theaction is to recover a parcel of land, then it is a real action.

d. Again, in the case of Spouses Huguete vs. Spouses Amarillo, which involves a complaintfor Annulment of Title, Tax Declaration, and Deed of Sale, Partition, Damages and attorneys’ fees, over aparcel of land with an assessed value of Fifteen Thousand Pesos, the Supreme Court upheld the dismissal ofthe case by the RTC on the ground that it is a real action since the principal purpose of the complaint wasto secure title to the portion of the property which the petitioners purchased from the respondents.The annulment of the Deed of Sale and of the title to the property were prayed for in the complaint becausethey were necessary before the lot may be partitioned and portion subject thereof may be conveyed topetitioners. Since the assessed value of the property is only Php15,000.00, jurisdiction is with the MTC.

The Supreme Court rejected petitioner’s argument that the action is incapable of pecuniary estimationon the ground that it is for annulment of the deed of sale and for partition. The nature of the action is notdetermined by what is stated in the caption of the complaint but by the allegations of the complaint and thereliefs prayed for. Where the ultimate objective of the plaintiffs is to obtain title to real property, itshould be filed in the proper courts having jurisdiction over the assessed value of the property subject thereof.32

The Court distinguished the case from Russel vs. Vestil in that in the said case, petitioners sought theannulment of the document entitled: Declaration of Heirs and Deed of Confirmation of Previous Oral

2 9 G.R. No. 134230, July 17, 2002.3 0 G.R. No. 123215, February 2, 1999.3 1 7 SCRA 202.3 2 G.R. No. 149554, July 1, 2003.



Partition, whereby respondents declared themselves as the only heirs to the exclusion of petitioners. Petitionersbrought the action in order for them to be recognized as heirs in the partition of the property of the deceased.It was held that the action to annul the said deed was incapable of pecuniary estimation and the consequentannulment of title and partition of the property was merely incidental to the main action.33

e. Again, in Chanliongco vs. Ramos, the Supreme Court held that a complaint filed with theRegional Trial Court that called for an interpleader to determine the ownership of the real property in questionis a real action. Specifically, it forced persons claiming an interest in the land to settle the dispute amongthemselves as to which of them owned the property. Essentially, it sought to resolve the ownership of the landand was not directed against the personal liability of any particular person. It was therefore a real action,because it affected title to or possession of real property.34

f. An action for quieting of title and nullification and cancellation of title is a real action, affectingtitle to or possession of real property, jurisdiction over which is clearly vested in the Regional Trial Court asprovided in par. (2) Section 19 of BP Blg. 129.35

In fine, under the foregoing formulation, for as long as the action would result in affecting title to, orpossession of, or an interest in real property, then it should be classified as a real action. The concept isrendered more significant in view of the expanded jurisdiction of the Municipal Trial Courts pursuant to RA.7691 vesting the latter with exclusive original jurisdiction in all civil actions “which involve title to, orpossession of real property, or any interest therein” where the assessed value of the property or aninterest therein does not exceed Twenty thousand pesos (20,000.00) or in civil actions in Metro Manilawhere the assessed value does not exceed Fifty thousand pesos (P50, 000.00)36

These concepts — that actions which affect title to real property are real actions37 and, whereprimary objective is to regain the ownership and possession of the parcel of land, it is a real action39 — wererecognized by the Court, which noted that the National Steel and the Ruiz cases both reveal prayers for

3 3 Id.3 4 Chanliongco vs. Ramos, G.R. No.144294, March 11, 2003.3 5 Heirs of Susana de Guzman Tuason vs. Court of Appeals, G.R. No. 125758, January 20, 2004; Where the petition makes out acase for reconveyance and not a mere annulment of judgment of the RTC judgment, jurisdiction over the case is with the Regional TrialCourt (Estate of the late Mercedes Jacob vs. Court of Appeals, 283 SCRA 474, 481, 482 (1997).

In real actions, whether it is the RTC or MTC that has jurisdiction over real actions depends on the location and assessed valueof the real property pursuant to RA. 7691 vesting the latter with exclusive original jurisdiction in all civil actions “which involve titleto, or possession of real property, or any interest therein” where the assessed value of the property or an interest therein does notexceed Twenty thousand pesos (20,000.00) or in civil actions in Metro Manila where the assessed value does\not exceed Fiftythousand pesos (P50, 000.00).3 6 Sec. 3(3) of RA 7691.3 7 Commodities Storage vs. Court of Appeals, G.R. No. 125008. June 19, 1997.3 8 National Steel Corp. v. Court of Appeals, G. R. No. 123215, February 2, 1999.3 9 302 SCRA 522.

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the execution of a Deed of Sale, which were not in any way connected to a contract. Hence, even ifthere were prayers for the execution of a deed of sale, the actions filed in the said cases were not for specificperformance.40

VII. Critique of Court Cases

The disturbing issue brought about by the foregoing cases is how to classify an action that involvestitle to or for recovery of possession of real property or an interest therein which requires as a basic issue thedetermination of issues other than the mere right of the parties to the real property or an interest therein orrequires “an investigation into facts that would justify one act or the other” arising from other issues.

How should the nature of the action be determined in civil actions for specific performance, annulmentor rescission of contracts involving real property, expropriation, partition, quieting of title or consolidation oftitle? In these cases, before a judgment is rendered ultimately affecting title to, or recovery of possession ofreal property, or an interest therein, the Court must first have to scrutinize the facts and the law as a conditionfor recovery. Should the action be considered as one that is incapable of pecuniary estimation because itinvolves primarily a determination of issues other than the bare right to possession or ownership of realproperty, or should it be considered as a real action since the judgment would ultimately affect the title to orrecovery of possession or an interest therein?

That an action is incapable or pecuniary estimation or a real action if it involves primarily a determinationof issues other than the bare right to possession or ownership of real property seems to be the conclusion inDe Leon, Vestil, Barangay San Roque and Copioso.

1. De Leon

In the De Leon case, the issue is whether or not the annulment of the sale of real property should beclassified as an action that is incapable of pecuniary estimation or a real action since the ultimate objective isto recover real property. The Supreme Court, however, held that although eventually the result may be therecovery of land, it is the nature of the action as one for rescission of contract that is controlling.

2. Russel vs. Vestil.

Similarly, it is clear from Russel vs. Vestil that in seeking the nullity of the partition, the prime andfundamental objective of the action is to recover title to real property or at the very least an interest therein.Any judgment therein would ultimately affect title to real property or an interest therein.

The statement in Russel vs. Vestil that even if the case is incapable of pecuniary estimation, theaction would fall under the jurisdiction of the MTC depending on the assessed value of the property, blurred

4 0 Cabutihan vs. Land Center Development Corporation, G.R. No. 146594, June 10, 2002.



the distinction between these kinds of action. The first falls under the exclusive jurisdiction of the RegionalTrial Court without regard to the value of the property. This is rather difficult to accept, since an action shouldnot be classified as incapable of pecuniary estimation and a real action at the same time. It must either be oneor the other, otherwise, more problems on venue and payment of the correct docket fee is bound to arise.

3. Barangay San Roque vs. Court of Appeals

In this case, the court declared an expropriation case as one that is not capable of pecuniary estimationand falls under the original and exclusive jurisdiction of the Regional Trial Court regardless of the value of theproperty.

Traditionally and doctrinally, expropriation proceedings have always been considered as a real action.Under section 2 (a) Rule 4 of the 1964 Rules of Court “condemnation of real property” is classified as a realaction. Conformably with BP Blg. 129, the 1997 Rules on Civil Procedure in referring to real actions as“actions affecting title to or possession of real property, deleted the enumeration of real actions, “for partitionor condemnation of, or foreclosure of mortgage on real property” and instead substituted it with an allembracing phraseology “or an interest therein.” The change in phraseology was evidently intended to broadenthe scope of “real actions” and to embrace all actions affecting an “interest” in real property. An expropriationproceeding certainly affects an interest in real property. This is in fact the prime and fundamental objective ofeminent domain proceedings. The Court’s justification that expropriation or eminent domain cases fall underthe jurisdiction of the RTC is not because it is a personal action but this was because the law conferredjurisdiction over all real actions in the CFI (now RTC), except forcible entry and unlawful detainer. This was,however, changed by R.A. 7691, which now vests the MTC with jurisdiction over real actions depending onthe assessed value of the property. Under the Court’s ruling, actions for partition of real property should alsobe categorized as an action incapable of pecuniary estimation, since the proceedings therein also involvestwo stages, viz (1) determination of the right to partition and (2) the actual partition and accounting.41

4. The Copioso court, in holding that the Municipal Trial Courts would have jurisdiction only incases involving naked possession or bare ownership, has not defined what is the scope of such cases. Whena party files an action to recover possession beyond one year or to recover ownership, invariably the issuewould demand the resolution of issues other than “naked possession” or “bare ownership”

The problem with De Leon, Vestil Barangay San Roque and Copioso is that they left very littleroom for the application of the law expanding the jurisdiction of the Municipal Trial Courts in real actions, andeven in probate, maritime and admiralty cases considering that these class of cases may also involve ascrutiny of the facts and the applicable law or the existence of certain conditions as a condition for recoverywhich appears to be the test applied in some cases in holding that the case is incapable of pecuiarsy estimation.

4 1 Miranda vs. Court of Appeals, 178 SCRA 702; Municipality of Binan vs. Garcia, 180 SCRA 576.

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The continued reliance by the Court in the 1968 case of Lapitan vs. Scandia that when the claim isconditioned upon any specific fact or matter that demands an inquiry into other factors the action should beconsidered as a case “incapable of pecuniary estimation” and falls under the original and exclusive jurisdictionof the Court of First Instance (now the RTC) and the spill over of the paradigm to actions involving title to realproperty or recovery of possession, or any interest therein, is unfortunate.

VIII. Confusing Tests In Classification of Actions

As maybe gleaned from the foregoing cases, the test in distinguishing cases which are “capable orincapable of pecuniary estimation” and its application to actions involving title to real property or recovery ofpossession, or any interest therein is not only confusing but rest on an antiquated concept that has long lost itsvitality. It is an anachronistic paradigm that has served its purpose. In view of the ever changing and growingjurisdiction of the Municipal Trial Courts over cases which heretofore fall under the original and exclusivejurisdiction of the Regional Trial Courts, there is an imperative necessity of recasting and modifying the testsemployed in Lapitan vs. Scandia and its progeny with a simpler method that would be more in keeping withan orderly administration of justice.

IX. Rationale of Classifying Cases Incapable of Pecuniary Estimation No Longer Exists

The rationale of the rule, according to Justice JBL Reyes, why cases incapable of pecuniary estimationwas vested in the Court of First Instance, is plainly that the second class of cases besides the determinationof damages, demand an inquiry into other factors which the law has deemed to be more within the competenceof Courts of First Instance, which were the lowest courts of record at the time that the first organiclaws of the Judiciary were enacted allocating jurisdiction.”42

The rationale of the rule no longer holds. The jurisdiction of the municipal courts had graduallyexpanded thru the years.43 The Municipal Trial Courts are now courts of record. They are now vested withjurisdiction over real actions, admiralty and maritime cases and probate cases and as will hereafter be shownover cases that are then considered “incapable of pecuniary estimation.”44

As now expressly provided by the 1997 Rules of Civil Procedure: “The procedure in the MunicipalTrial Courts shall be the same as in the Regional Trial Courts, except (a) where a particular provision expresslyor impliedly applies only to either of said courts, or (b) in civil cases governed by the Rule on SummaryProcedure.”

It is difficult to conceive of a real action to recover real property or an interest therein where the basicissue may not involve something more than the right to recover real property or which would not require “an

4 2 Act 136 of the Philippine Commission of June 11, 1901; Lapitan vs. Scandia, Inc., 24 SCRA 479, 481, July 31, 1968.4 3 Republic Act No. 296; The Judiciary Act of 1948; BP. 129; and R.A. 76914 4 R.A. 7691.



investigation into facts that would justify one act or the other” arising from issues raised in an action to recoverpossession or title to real property or an interest therein.

Under this formulation, the Municipal Trial Court would hardly have no occasion to exercise itsjurisdiction over real actions.

Other than cases of forcible entry and unlawful detainer, a party seeks to recover possession orownership of real property because his ownership thereto is in dispute, otherwise there is no sense in filing theaction. The issue of possession or ownership may only be resolved by a determination of the rights of theparties thereto. It is only after this issue have been resolved that the right to recover follows as a consequence.

1. Municipal Trial Courts vested with jurisdiction over cases formerly considered as actionsincapable of pecuniary estimation

Under Republic Act 7691, Section 3, which amended Section 33 of BP No. 129:

Metropolitan Trial Courts, Municipal Trial Courts, and Municipal Circuit Trial Courtsshall exercise:

(1) Exclusive original jurisdiction over civil actions and probate proceedings,testate and intestate, including the grant of provisional remedies in proper cases, where thevalue of the personal property, estate, or amount of the demand does not exceed One Hundredthousand pesos (P100,000.00), or in Metro Manila where such personal property, estate,or amount of the demand does not exceed Two hundred thousand pesos (P200,000.00),exclusive of interest, damages of whatever kind, attorney’s fees, litigation expenses and costs,.* * *

(2) Exclusive original jurisdiction over cases of forcible entry and unlawful detainer;provided, That when, in such cases, the defendant raises question of ownership in his pleadingsand the question of possession cannot be resolved without deciding the issue of ownership,the issue of ownership shall be resolved only to determine the issue of possession.

(3) Exclusive original jurisdiction in all civil actions which involve title to, orpossession of , real property, or any interest therein where the assessed value of the propertyor interest therein does not exceed twenty thousand pesos or (P20,000.00) or in civil actionsin Metro Manila where such assessed value does not exceed fifty thousand pesos(P50,000.00), exclusive of interest, damages or whatever kind, attorney’s fees, litigationexpenses and costs.* * *45

4 5 Section 33 of BP 129 as amended.

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Section 4 of Republic Act 7691 likewise provides:

Delegated Jurisdiction in Cadastral and Land Registration Cases MetropolitanTrial Courts, Municipal Trial Courts, and Municipal Circuit Trial Courts may be assigned bythe Supreme Court to hear and determine cadastral and land registration cases covering lotswhere there is no controversy, or opposition or contested lots where the value of which doesnot exceed One Hundred Thousand Pesos (P100,000.00), such value to be ascertained bythe affidavit of the claimant or by agreement of the respective claimants if there are more thanone, or from the corresponding tax declaration of the real property. Their decisions in thesecases shall be appealable in the same manner as decisions of the Regional Trial Court.46

Thus, the jurisdiction of the Municipal Trial Courts was expanded to include civil actions and probateproceedings, testate and intestate, including the grant of provisional remedies in proper cases, where thevalue of the personal property, estate, or amount of the demand does not exceed One Hundred thousandpesos (P100,000.00), or in Metro Manila where such personal property, estate, or amount of the demanddoes not exceed Two hundred thousand pesos (P200,000.00), exclusive of interest, damages of whateverkind, attorney’s fees, litigation expenses and costs.

RA 7691 transferred a certain class of actions from the Regional Trial Courts, and conferred originaland exclusive jurisdiction thereto in the Municipal Trial Courts, such as civil actions which involve title to, orpossession of, real property or any interest therein where the assessed value of the real property does notexceed P20,000.00 or P50,000.00 in Metro Manila.47

The trend now is to allow cases, which were formerly treated as actions incapable of pecuniaryestimation to be resolved by the Municipal Trial Courts, because “the claim is conditioned upon any specificfact or matter that demands an inquiry into other factors that the law then deemed to be outside the competenceof the municipal courts, which were then not courts of record.” Thus, aside from vesting Municipal TrialCourts with jurisdiction over real actions, admiralty and maritime cases and probate cases, the SupremeCourt has delegated to Municipal Trial Courts land registration cases of contested lots the value of whichdoes not exceed P100,000.00. Since these are contested cases, the issue may take various forms dependingon the position of the contending parties, which must first have to be determined before granting or denyingthe application.

Jurisdiction to annul or rescind settlements or arbitration before the Katarungan Pambarangay, whichare cases incapable of pecuniary estimation falls under the exclusive jurisdiction of the Municipal Trial Courtof the Barangay involved.

4 6 Section 34 of BP 129 as amended.4 7 Sections 1 & 3 of R.A. 7691.



The authority of Municipal Trial Courts to determine questions incapable of pecuniary estimationunder the above formulation is therefore beyond cavil.

Morever, not all actions for rescission, annulment or specific performance are incapabe ofpecuniary estimation where the complaint filed with the trial court was in the nature of a real action,although ostensibly denominated as one for specific performance. Consequently, the basis for determiningthe correct docket fees shall be the assessed value of the property, or the estimated value thereof as allegedby the claimant.48

2. Gumabon vs. Larin49 held that real actions, as so opposed to personal actions, are thosewhich affect the title to or possession of real property. Where a contrary claim to ownership is made by anadverse party, and where the relief prayed for cannot be granted without the court deciding on the merits theissue of ownership and title, more specifically, as to who, between the contending parties, would have abetter right to the property, the case can only be but a real action.

3. In Ouano vs. PGGT,50 an action for “recovery of ownership and possession of real propertyand damages” was held as a real action. If the action involves ownership and possession of real property,then jurisdiction over the subject matter of the claim is determined by the assessed value not by the marketvalue, and since the assessed value of the property is less than P20,000.00, jurisdiction is with the MTC. Thedamages were held merely as incidental to, or a consequence of, the main cause of action for recovery ofownership and possession, and should thus be excluded in the determination of jurisdiction of the Court.Incidentally, the issue in said case is not merely one of “naked ownership” or “possession” but a controversialconflict of ownership as both parties are claiming ownership over the lot in question.

In other words, even if the questions are complicated, or involves a breach of contract and the actionis for specific performance or rescission, the action would still be considered either as real or personal, andjurisdiction is determined by the value of the property. Thus if the assessed value of the property is less thanP20,000.00 jurisdiction is with the MTC.51

Ruiz vs. J.M. Tuason & Co. Inc.,52 which is an action for specific performance to compel J.M.Tuason to execute a final deed of sale of the lot in question, based on compliance with the compromiseagreement, was held as a real action. The court held that where the primary objective and nature of the actionis to recover a parcel of land, then it is a real action.

4 8 Gochan vs. Gochan, G.R. No. 146089, December 13, 2001.4 9 G.R. No. 142523, November 27, 2002.5 0 G.R. No. 134230, July 17, 2002.5 1 Russel vs. Vestil, supra.5 2 7 SCRA 202.

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The ultimate objective test was also applied in the cases of National Steel Corporation vs. Courtof Appeals,53 and Colarina vs. Court of Appeals.54 Cabutihan vs. Land Center DevelopmentCorporation55 recognized that where the action affects title to real property, it is a real action which shouldbe filed in the trial court where the property is situated.

Proposed Solution and Recommendation

Considered in the light of the foregoing, classifying cases as “incapable of pecuniary estimation” is ananachronism. Since its only purpose in vesting this class of cases in the Court of First Instance was becauseof the nature then of the Justice of the Peace Court which were not courts of record, then the reason for itsexistence has become functus oficio. It has only generated confusion. The better test would be the “ultimateobjective test” in which case jurisdiction as well as the amount of docket fee may simply be based on thevalue of the property or the value of the demand.

The distinction between actions capable and incapable of pecuniary estimation was originally conceivedto exclude these types of cases from the jurisdiction of the municipal or Justice of the Peace court becausethe latter were not courts of record and of very limited jurisdiction. A real action is a classification as tocause or foundation and is distinguished from a personal action, which may include claims that may or maynot be capable of pecuniary estimation, and affects merely the venue and amount of docket fee to be paid butnot the other class of cases cognizable by the Courts of First Instance (now Regional Trial Courts).

Cases incapable of pecuniary estimation should not include the succeeding class of cases allocated tothe RTC, such as real actions, admiralty and maritime cases, probate cases, marital and agrarian cases.Elsewise stated, insofar as the other classes of action are concerned such as real actions, its classificationshould not be based on the nature of the questions involved, but on the subject matter of recovery. Civilactions “which involve title to, or possession of real property, or any interest therein” should be classified asreal actions, regardless of the nature of the questions to be resolved as a condition for recovery. Cases notcapable of pecuniary estimation are not among the classifications of ordinary civil actions but are included insome types of personal actions.

Determining the nature of the action on the basis of the ultimate objective of the action is a clear andsimple test, instead of basing such determination on the basis of whether or not the issues are complicated.This is a tortured approach since one may overlap the other class of actions. Under the ultimate objectivetest, the determination of jurisdiction, venue and payment of the docket fee would be based on the prime andultimate objective of the action. The jurisdiction and docket fee should based on the value of the property oramount involved, if it is an action to recover personal property or sum of money. It is only when there is no

5 3 G.R. No. 123215, February 2, 1999.5 4 G.R. No. 117439, February 25, 1999.5 5 G.R. No. 146594, June 10, 2002.



issue as to the title to or possession of the property, or an interest therein, that a case may be deemed asincapable of pecuniary estimation. This would avoid the convoluted and unnecessary analysis in making apreliminary determination of the nature of the action, based on whether the issues would involve complicatedquestions of law or fact only to determine the amount of docket fee, the venue, the jurisdiction of the courtand, whether or not the action had already prescribed. After all, MTC’s are now also authorized to hear andresolve complicated questions of fact and law as a condition for recovery.

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Current Judicial Thinking of Bank Negligence


CURRENT JUDICIAL THINKING ON BANK NEGLIGENCE

Antonio V. Viray*

Introduction

In the performance of its banking functions, how should a bank conduct itself? What degree ofdiligence must a bank exercise? Is the diligence of an ordinary prudent man sufficient? What defenses areavailable to the bank if it is charged with negligence or fraud? If liability is inevitable, how can the bank at leastmitigate its liability? This paper will attempt to provide some answers to these questions.

I. Degree of Diligence Required of Banks

A. Statement of the doctrine

The time-honored, and still current, judicial doctrine on the degree of bank diligence is that everybank, in dealing with the public must exercise the highest degree of diligence, the highest degree of care orextra-ordinary diligence. The diligence of an ordinary prudent man, or ordinary diligence, is not enough. Thereasons for the strict and highest standard required are the following: (1) the business of banking is soimpressed with public interest; (2) trust and confidence of the public in general is of paramount interest, and(3) the fiduciary nature of its function.

With particular reference to deposits, the doctrine is “a bank is under obligation to treat the accountsof its depositors with meticulous care, always having in mind the fiduciary nature of their relationship,” whethersuch account consists only of a few hundred pesos or of millions of pesos.

Here are the recent pronouncements of the Supreme Court:

1. “Said ruling brings to light the fact that the banking business is affected with public interest.By the nature of its functions, a bank is under obligation to treat the accounts of its depositors ‘with meticulouscare, always having in mind the fiduciary nature of their relationship.’ As such, in dealing with its depositors,a bank should exercise its functions not only with the diligence of a good father of a family but should do sowith the highest degree of care.”1

2. “In Simex International (Manila), Inc. vs. Court of Appeals, 183 SCRA 360, 367 (1990),and Bank of the Philippine Islands vs. IAC, et. al., 206 SCRA 408, 412-413 (1992), this Court had

* The author is the Special Counsel of Metropolitan Bank & Trust Company, and the article was a paper delivered at the BankersInstitute of the Philippines seminar held on March 18, 2005.1 BPI vs. CA & Napiza, 326 SCRA 641, 657 (2000)



occasion to stress the fiduciary nature of the relationship between a bank and its depositors and the extent ofdiligence expected of the former in handling the accounts entrusted to its care, thus:

“In every case, the depositor expects the bank to treat his account with the utmost fidelity, whethersuch account consists only of a few hundred pesos or of millions. The bank must record every single transactionaccurately, down to the last centavo, and as promptly as possible. This has to be done if the account is toreflect at any given time the amount of money the depositor can dispose of as he sees fit, confident that thebank will deliver it as and to whomever he directs. A blunder on the part of bank, such as the dishonor of acheck without good reason, can cause the depositor not a little embarrassment if not also financial loss andperhaps even civil and criminal litigation.

The point is that as a business affected with public interest and because of the nature of its functions,the bank is under obligation to treat the account of its depositors with meticulous care, always having in mindthe fiduciary nature of their relationship.

“In the recent case of Philippine National Bank vs. Court of Appeals, we held that ‘a bank isunder obligation to treat the accounts of its depositors with meticulous care whether such account consistsonly of a few hundred pesos or of millions of pesos. Responsibility arising from negligence in the performanceof every kind of obligation is demandable. While petitioner’s negligence in this case may not have beenattended with malice and bad faith, nevertheless, it caused serious anxiety, embarrassment and humiliation.’Hence we ruled that the offended party in said case was entitled to recover reasonable moral damages.”2

3. “Time and again, we have stressed that banking business is so impressed with public interestwhere the trust and confidence of the public in general is of paramount importance such that the appropriatestandard of diligence must be very high, if not the highest, degree of diligence. A bank’s liability as obligor isnot merely vicarious but primary, wherein the defense of exercise of due diligence in the selection and supervisionof its employees is of no moment.

“Banks handle daily transactions involving millions of pesos. By the very nature of their work thedegree of responsibility, care and trustworthiness expected of their employees and officials is far greater thanthose of ordinary clerks and employees. Banks are expected to exercise the highest degree of diligence in theselection and supervision of their employees.”3

4. “A bank is under obligation to treat the accounts of its depositors with meticulous care,whether such account consists only of a few hundred pesos or of millions of pesos. The fact that the otherwithdrawal slips were honored and paid by respondent bank was no license for Citibank to presume that

2 PCIB vs. CA & Ford, 350 SCRA 446, 472 (2001)3 PCIB vs. CA & Ford, 350 SCRA 446, 472 (2001)

53



subsequent slips would be honored and paid immediately. By doing so, it failed in its fiduciary duty to treat theaccounts of its clients with the highest degree of care.”4

B. Cases decided enunciating doctrine

1. In PNB vs. CA & Pujol the depositor opened a checking account together with a savingsaccount under what is known as “Combination Deposit Plan” or “Combo Account” under which checksdrawn against the checking account shall be charged automatically against the savings account. The operationand effectivity of the automatic transfer arrangement (ATA) was however subject to the submission of certaindocuments, like business permit and the like. Notwithstanding the non-submission of the documentaryrequirements the bank staff already stamped on the passbook “Combo Deposit Plan” which led depositor tobelieve that the ATA was already in effect. Depositor then issued two checks which the bank dishonored forinsufficiency of funds. In the suit for damages against the bank, the Court ruled that PNB was in estoppel, i.e.,estopped to deny the existence and perfection of the ATA because by stamping “Combo Deposit Plan” onthe passbook, depositor was led to believe that the ATA was already effective. The Court ruled “that a bankis under obligation to treat the accounts of its depositors with meticulous care whether such account consistsa few hundred pesos or millions of pesos.” The Court continued that while the bank’s negligence may nothave been attended by malice or bad faith, nevertheless it caused serious anxiety, embarrassment and humiliationto the depositor which entitled her to moral damages.

2. In BPI vs. CA & Napiza6 a friend asked the depositor to deposit a US$2,500 check to thelatter’s dollar account with the understanding that the friend could withdraw the proceeds only after thecheck is cleared. For this purpose, the depositor gave his friend a duly signed “blank” withdrawal slip, but nothis passbook which depositor kept. For one reason or another, the withdrawal of US$2,541.67 WITHOUTPASSBOOK was allowed by the bank to a person who happened to be a bank employee of the samebranch. In a suit to recover the amount withdrawn the Court affirmed the decision of the Court of Appealswhich ruled that the bank committed “clear gross negligence” in allowing withdrawal without passbook andbefore the check was cleared. The Court stated that “By the nature of its functions a bank is under obligationto treat the accounts of its depositors with meticulous care, always having in mind the fiduciary nature of itsrelationship x x x a bank should exercise its functions not only with the diligence of a good father of a familybut it should do so with the highest degree of care.”

3. In Prudential Bank vs. CA & Valenzuela,7 depositor maintained current and savings accountswith automatic transfer arrangement. The bank misposted depositor’s check deposit to the savings accountfor P35,993.48 made on June 1, 1988 to another account. The mistake was corrected and credited only onJune 24, or after 23 days. In the meantime, a check issued by the depositor was dishonored for insufficiency

4 Firestone vs. CA & Luzon Dev’t Bank 353 SCRA 601, 607 (2001)6 326 SCRA 641 (2000)7 328 SCRA 264 (2000)



of funds. In awarding damages in favor of the depositor, the Court ruled “that the misposting of plaintiff’scheck deposit to another account and the delayed posting of the same x x x is a clear proof of lack ofsupervision on the part of the bank x x x while it may true that the bank’s negligence in dishonoring theproperly funded check x x x might not have been attended with malice and bad faith, x x x nevertheless, it isthe result of lack of due care and caution expected of an employee of a firm engaged in so sensitive andaccurately demanding task as banking.”

4. In Firestone Tire & Rubber Company vs. CA & Luzon Development Bank (LDB)8, acertain Fojas Arca Co. maintained a special savings account with LDB under which LDB allowed withdrawalsthrough the medium of Special Withdrawal Slip (SWS). Fojas-Arca in turn had a Franchised DealershipAgreement under which Fojas-Arca purchased on credit Firestone products paid through the SWS. Firestonein turn deposited the SWS into its account with Citibank and the latter collected from LDB. In the months ofJune to September 1978, Fojas-Arca paid Firestone four SWS. Of the four, only one was paid by LDB toCitibank and the others were returned for the reason “NO ARRANGEMENT.” But it was only in December1978 that Citibank informed Firestone about the dishonor and debited Firestone’s account. Firestone suedLDB for damages. In a rather queer decision, the Court absolved LDB from liability by stating that the SWSwere not checks, and they were not given the appearance of checks. As such the Negotiable InstrumentsLaw did not apply and LDB was under no obligation to notify Firestone about the dishonor of the SWS, forto do so would violate the secrecy of bank deposits. Citibank was not bound to accept the SWS as validmode of deposit. But having erroneously accepted them as such, Citibank and Firestone must bear the riskattendant to the acceptance of the instrument. They cannot now shift the risk and hold LDB liable for theiradmitted mistake.

But the Court did not spare words for Citibank: “A bank is under obligation to treat the account ofits depositors with meticulous care. x x x The fact that the other withdrawal slips were honored and paid byLDB was no license for Citibank to presume that subsequent slips would be honored and paid immediately.By doing so, it failed in its fiduciary duty to treat the accounts of its clients with the highest degree of care.”

C. Bank negligence cases

1. The case of Metropolitan Bank & Trust Co. (MBTC) vs. CA & Rural Bank of PadreGarcia9 exemplifies a case where moral damages were awarded because of bank negligence. In this case,MBTC received from the Central Bank (CB) a credit memo (CM) that its account was credited P304,000for the account of Rural Bank of Padre Garcia (RBPG) representing loans granted by the CB. On the basisof the CM (copy of which was presumably received by the RBPG) the President issued several checks (totalof P300,000) drawn against its account with MBTC. Two of the payees deposited their checks with PhilippineBanking Corporation, which then presented the checks to drawee MBTC for payment. MBTC dishonored

8 353 SCRA 601 (2001)9 237 SCRA 761 (1994)

55



the checks for the reason “Drawn Against Insufficient Funds” (DAIF). It turned out that the MBTC messengerreceived several CMs from the CB for various rural banks. Due to inadvertence of said messenger, the CMwas not delivered to the department in charge of the same. It was only after one week that the amount wascredited to the RBPG, account. In the meantime, checks drawn by RBPG account were dishonored asDAIF. It also appeared the MBTC officers initially said insulting remarks to the President of RBPG, althoughlater they apologized. The Court ruled that the bank must bear the blame for failing to discover the mistake ofits employee despite established procedures. Responsibility arising from negligence in the performance ofevery kind of obligation is demandable. While the bank’s negligence may not have been attended withmistake and bad faith, nevertheless it caused serious anxiety, embarrassment and humiliation to the depositor.The carelessness of the bank, aggravated by the lack of promptness in repairing the error and the arrogantattitude of the bank officer handling the account, justify the award of moral damages.

2. The negligent misrouting or misclearing of a check by a bank could be a ground for moraldamages. In Tan vs. CA & RCBC10, the client depositor of RCBC Binondo Branch bought a P30,000.00cashier’s check from PCIBank Puerto Princesa to avoid carrying cash. When he deposited the cashier’scheck at RCBC Binondo, he erroneously filled up a local check deposit slip instead of a regional checkdeposit slip. Since the cashier’s check was purchased at PCIBank Puerto Princesa, depositor should haveused a regional check deposit slip so that the check could be forwarded to PCIBank Puerto Princesa. Butsince he erroneously filled up a local check deposit slip, the check was misrouted to the local (Manila)Central Bank clearing facility. Because the check was misrouted, it was returned dishonored. RCBCimmediately debited depositor’s account for the amount of the check. It was only after 42 days from debitingthat RCBC informed the depositor about the debit. In the meantime, depositor issued checks against hisaccount which were dishonored for insufficiency of funds. In the suit for damages, RCBC raised the defensethat the erroneous use of the wrong deposit slip (local instead of regional) by the depositor was the proximatecause of the misrouting. The Court rejected this defense stating that bank transactions pass through a successionof bank personnel whose duty is to check and countercheck transactions for possible errors. In this case, theteller should not have accepted the local check deposit slip. Neither should everyone else down the line whoprocessed the same check for clearing have allowed the check to be sent to the Central Bank. Moreover, thechecks issued by the depositor were cleared more than 45 days from date of deposit of the cashier’s check.RCBC had ample time to clear the check. Said the Court: “The conclusion is inevitable that RCBC had beenremiss in the performance of its duty. The Court cited with approval the ruling in Citytrust vs. IAC (GR84281 May 1994) where client wrote his name but failed to indicate the correct account number by omittingone “0” and the bank was held liable for misposting the deposit resulting in the dishonor of a check drawnagainst the account. The Court awarded P100,000.00 moral damages.

3. Allowing withdrawal from a savings account without the presentation of the passbook wasconsidered bank negligence in the case of BPI vs. CA & Napiza11. In the case client accommodated a friend

1 0 239 SCRA 310 (1994)1 1 326 SCRA 641 (2000)



who requested him to deposit a US Continental Bank Manager’s Check for $2,500.00 to his FCD accountfor the purpose of clearing. Client gave his friend a signed blank withdrawal slip with the understanding thatas soon as the check is cleared, both of them would go to the bank to withdraw upon client’s presentation ofthe passbook. It appears that after the deposit was made the friend assigned the check to a third party, whothen authorized a representative to withdraw the amount of the check, who in collusion with one of the bank’semployees was able to withdraw the amount by presenting the pre-signed withdrawal slip but withoutpresentation of the passbook. In a suit for recovery, the bank argued that in depositing the check, clientendorsed the check at the dorsal side, and as such endorser, he warranted the validity of the check. The courtrejected this argument and ruled that taking into account the attending circumstances the application of thelaw would result in an unjustice and erosion of public trust in the banking system.

On the issue of negligence, the Court noted that the rules printed in the passbook clearly stipulatedthat withdrawal shall be allowed upon presentation of the passbook in which the amount withdrawn shall beentered by the bank. This requirement of presentation of the passbook can not be given mere lip service eventhough the person making the withdrawal is authorized by the depositor. The bank failed to exercise thediligence of a good father of a family. In total disregard of its rules, the bank’s personnel negligently handledthe client’s account. The bank failed to recover the US$2,500.

4. The failure of a bank money counter to properly count the money and use the countingmachine resulting in loss to the bank was considered reckless and gross negligence in PNB vs. CA &Flores12. Here Flores purchased two manager’s checks for P500,000 each for which he claimed he paidP1,000,040.00 including bank charges. It appears that the money counter was new at the job and issued areceipt for P1,000,040.00 when according to her she actually received only P900,040. She testified that theclient was a VIP, was in a hurry as he was continuously tapping the window, which rattled her, so much sothat she did not wait for the counting machine to finish the counting. After the manager’s checks were issued,Flores tried to encash them at the Baguio Hyatt Casino branch, but the bank refused unless the other checkwas split into five checks of P100,000 each. Flores reluctantly agreed. Back in Manila, the bank refused toencash the last P100,000.00 check. Flores filed suit to recover the P100,000.00. The Court ruled that themoney counter did not perform her duty with diligence and due care when she did not wait for the moneymachine counter to finish. Equally negligent was the supervisor for not doing anything when he noticed thatthe money counter who entertained Flores was rattled. From this unfolded facts, the so-called honest mistakeis therefore misplaced, the bank must suffer the consequences of its own negligent acts. The Court awardedP100,000 moral damages and P25,000 exemplary damages.

1 2 256 SCRA 309 (1996)

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II. Defenses Raised by Banks

A. Defense of proximate cause

Banks sometimes raise the defense that the proximate cause of the loss suffered by the client was theclient’s own act or negligence and therefore the bank should not be liable. Here are some cases illustratinghow the Court views and applies the doctrine of proximate cause.

1. Phil. Bank of Commerce vs. CA & Rommel’s Marketing13. Rommel Marketing (RMC)maintained two separate current accounts with PBC. It was the practice to accept deposit slips signed by itsPresident (Lipana) or representative. Sometimes, deposit slips were prepared in duplicate, original for thebank and duplicate for the depositor. From May 5, 1975 to July 16, 1976, Lipana entrusted cash totalingP304,979.24 to his secretary, Irene Yabut (Irene). In breach of the trust reposed on her by Lipana, Ireneprepared deposits slips in duplicate. On the original he placed the name and account number of her husbandwho maintained an account with the same branch, and the money was credited to his account. On theduplicate was written the account number of her husband but the name of the account holder was left inblank. The bank’s teller would however validate both but retain only the original. After validation, Irenewould fill up the name of RMC in the space left blank in the duplicate and change the account number to thatof RMC. In the collection suit to recover the P304,979.24, one of the issues was: what is the proximatecause of the loss, the bank’s negligence or depositor’s negligence.

The bank maintains that the proximate cause of the loss is the negligence of the depositor in entrustingcash to a dishonest employee. The depositor maintains that the proximate cause of the loss was the negligentact of the bank, through its teller, in validating both original and duplicate deposit slips, notwithstanding thefact that one slip was incomplete. The Court first defined “proximate cause” as that cause, which in thenatural and continuous sequence, unbroken by any efficient intervening cause, produces the injury, and withoutwhich, the result would not have occurred. In this case, absent the act of the teller in negligently validating theincomplete copy of the deposit slip, Irene would not have the facility to perpetuate the fraudulent scheme withimpunity. This is gross and reckless negligence, and the proximate, immediate and efficient cause of the loss.

2. In BPI vs. CA & Napiza, discussed above (supra), on the question, what was the proximatecause of the loss, the signing of a blank withdrawal slip by the client, or the negligence of the bank personnelin allowing withdrawal without passbook? The Court ruled that the proximate cause of the withdrawal andeventual loss of the amount of $2,500 x x x was its personnel’s negligence in allowing such withdrawal anddisregard of its own rules requiring presentation of the passbook.

3. The case of PCIB vs. CA & Ford14 involved four cases consolidated into one. The caserelevant to the doctrine of proximate cause is the negotiation/encashment of two crossed checks drawn by

1 3 269 SCRA 695 (1997)1 4 350 SCRA 446 (2001)



Ford against its Citibank checking account in the amounts of P5,851,706.37 and P6,311,591.73 payable tothe BIR for percentage taxes (the checks). The checks never reached the BIR which demanded paymentfrom Ford again because the supposed official receipts were spurious. After paying again the BIR, Fordsued PCIB for reimbursement.

It appears that Ford’s General Ledger Accountant prepared the checks. Instead of delivering thesame to the BIR he passed on the same to a co-conspirator, the pro-manager of PCIB San Andres Branch,who then opened a checking account in the name of a fictitious person (fictitious account) in PCIB MeralcoBranch, in connivance with its Assistant Manager. The co-conspirator then deposited a worthless Bank ofAmerica check for the same amounts as the checks. While these worthless checks were enroute to CentralBank Clearing, the worthless checks were replaced with the genuine checks. After clearing and credit of theamount of the checks to the fictitious account, the conspirators would draw checks distributing shares to theconspirators.

One of the defenses raised by PCIBank is that the proximate cause of the damage to Ford lies in itsown officers and employees who carried out the fraudulent schemes and transactions. These circumstanceswere not checked by the other officers of the company, including its controller or internal auditor. PCIBankcontends this is sheer negligence considering the enormity of the amount of the checks.

The Court defined proximate cause as that which, in the natural and continuous sequence, unbrokenby any efficient, intervening cause produces the injury, and without which the result would not have occurred.Applying the definition, the Court ruled that although the employees of Ford initiated the transactions attributableto an organized syndicate, their actions were not the proximate cause of encashing the checks. The degree ofFord’s negligence, if any, could not be characterized as the proximate cause of the injury.

The Court ruled that given these circumstances, the mere fact that the forgery were committed byFord’s confidential employees, who by virtue of his position had unusual facilities for perpetrating the fraud,does not entitle PCI Bank to shift the loss to Ford.

4. On the other hand, in the case of Moran vs. CA & Citytrust15, the Court ruled that thedepositor was at fault or his acts were the proximate cause of the loss. In this case, Spouses Moran ownedthe Wack-Wack Petron gasoline station. They regularly purchased bulk gasoline and related products andpaid by personal checks upon delivery. The Morans maintained three joint accounts with the bank, onecurrent account and savings accounts one and two. As a special privilege, being valued clients, the bankallowed them to maintain zero balance in the current account. But they gave authority to the bank toautomatically debit savings account number one covered by Pre-Authorized Transfer Account (PAT) if thecurrent account had insufficient balance. But transfers from savings account number two could only be madeupon their prior authorization. On December 12, 1983, the Morans issued two checks both payable to

1 5 230 SCRA 799 (1994)

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Petrophil, one for P50,576.00 and the other for P56,090.00 or a total of P106,666.00. Petrophil depositedthe checks with PNB on December 14, 1983. Records show that on December 14, 1983, the currentaccount had zero balance, while savings account number one covered with PAT had a balance of P26,104.30and savings account number two (without PAT) had a balance of P43,268.39. Because the balances wereinsufficient the bank dishonored the checks and as a result the credit line of the Morans with Petrophil was cutand they had to pay cash for their purchases. Six months after the incident, the Morans sued the bank fordamages.

Deciding in favor of the bank, the Court ruled that the Morans had no reason to complain; for theyalone are at fault. A drawer must remember his responsibilities everytime he issues a check. He must personallykeep track of his available balance and not rely on the bank to notify him of the necessity to fund certainchecks he previously issued. If ever he was previously given notice to fund check, these were mereaccommodations. It is not a requirement or a general banking practice, hence non-compliance can not lay thebank open to blame or rebuke.

B. Defense of contributory negligence

Banks sometimes raise the defense that the client’s own act or negligence contributed to the loss ordamage of the client. In such case, the Court sometimes pro-rates the loss or damage between the bank andthe client depending on the degree of negligence of each party.

The case of Philippine Bank of Commerce vs. CA & Rommel Marketing discussed above (PBCcase), illustrates this solomonic doctrine of contributory negligence. It will be recalled that in that case, thesecretary of the depositor prepared two copies of the deposit slips. The original where she wrote the nameof her husband as depositor and the money was deposited to her husband’s account. In the duplicate waswritten her husband’s account number but the account name was left blank. After the original deposit slip wasvalidated together with the duplicate, she would intercalate the name RMC into the account name previouslyleft blank, erase her husband’s account number and place the RMC account number. Through this schemeshe made her company believe that the money was being deposited to the company account. In the suit forrecovery filed by the depositor, the Court ruled that it can not be denied that the depositor was likewisenegligent in not checking its monthly statements. Had it done so, the company would have been alerted to theseries of frauds being committed by its secretary. The damage would definitely not have ballooned to such anamount if only the depositor had exercised even a little vigilance in its financial affairs. This omission amountsto contributory negligence which shall mitigate the damages that may be awarded to the depositor. In the end,the Court decided that the demands of substantial justice are satisfied by allocating the damage on a 60-40ratio; 60% to be borne by the bank and 40% by the depositor.

C. Theory of “Last Clear Chance”

The doctrine of “Last Clear Chance” (also referred to as “supervening negligence” or discoveredperil”) states that where both parties are negligent, but the negligent act of one is appreciably later in time than



that of the other, or when it is impossible to determine whose fault or negligence should be attributed to theincident, the one who had the last opportunity to avoid the impending harm and failed to do so is chargeablewith the consequences thereof. Stated differently, the rule would also mean that the antecedent negligence ofa person does not preclude the recovery of damages for the supervening negligence of, or for a defenseagainst liability sought by another, if the latter, who had the last fair chance, could have avoided the impendingharm by the exercise of due diligence.

In the PBC case above, assuming that the depositor was negligent in entrusting cash to its dishonestsecretary, thus providing her the opportunity to defraud her company, yet it can not be denied that the bank,thru its teller, had the last clear opportunity to avert the injury incurred by the client, simply by observing bankprocedures.

D. Doctrine of comparative negligence

Under the doctrine of Comparative Negligence, where two banks (like the presenting/collectingbank and the drawee bank) participate in the fraudulent encashment of checks, and both are negligent, bothbanks will be held liable for the damage, in the proportion to be determined by the Court. The doctrine ofComparative Negligence should be distinguished from the doctrine of Contributory Negligence which is thecase where both the bank and the client are negligent or where the negligence of the client contributed to thedamage. The doctrine of Comparative Negligence was applied in the PCIB case (supra) where the checksdrawn by Ford against its current account with Citibank payable to the BIR found its way to PCIBank, whichcleared the check. The evidence showed that the PCIB branch officers where the checks were depositedconspired to substitute the genuine Ford checks with a worthless Bank of America (BA) checks for the sameamount. When the BA checks were sent for clearing, these was substituted by the genuine checks whichwere eventually cleared by Citibank. The Court ruled that Citibank was negligent in clearing the check whenit is clearly payable to the BIR. Citibank failed to perform what was incumbent upon it, which is to ensurethat the amount of the checks should be paid only to the designated payee. The fact that Citibank did notdiscover the irregularity seasonably, constitutes negligence. Since both PCIBank and Citibank are negligent,invoking the doctrine of Comparative Negligence, the Court ruled that both PCIBank and Citibank failed intheir respective obligations and both were negligent in the selection and supervision of their employees resultingin the fraudulent encashment of the checks. Thus, the Court was constrained to hold both of them equallyliable for the loss of the proceeds of the checks.

E. The Doctrine of damnum absque injuria

The latin maxim “damnum absque injuria” was explained and applied in the case of CitytrustBanking Corporation vs. Villanueva16. Isagani C. Villanueva (Villanueva) maintained savings and current

1 6 361 SCRA 446 (2001)

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accounts with automatic transfer arrangement. When he ran out of checks, he requested for a new checkbook.But he could not remember his account number, so he expressed his predicament to a lady customer servicerepresentative who assured him that she would supply the account number. After signing the requisition slip,he gave it to her. Another customer service representative saw the requisition slip, took it and processed therequest. Upon seeing the name “Isagani Villanueva,” she copied the account number on the requisition slip.Several days later, Villanueva received his checkbook and issued a check for P50,000.00 payable to acommodities trader. The check was dishonored due to insufficiency of funds. It was later discovered that theaccount number assigned to his new checkbook was the account number of another depositor also named“Isagani Villanueva” but with a different middle initial. To resolve the matter, a bank officer sent to thecommodities trader a manager’s check for P50,000.00 before the 5:30 p.m. deadline given by the trader toVillanueva. She also called the commodities trader to explain the reason for the dishonor and apologize.

This notwithstanding, Villanueva sued for indemnification of alleged losses and P2M moral damages.The principal issue was what was the proximate cause of the injury? Was it the negligence of the bank staff inplacing the wrong account number on the requisition slip and checkbook? Or was it the negligence of Villanuevain forgetting his current account number and failing to bring his checkbook re-order slip where the accountnumber was printed, and in not verifying the account number on the new checkbook issued to him. Beforedeciding on the issue of proximate cause, the Court preferred to rule on whether or not Villanueva did in factsuffer damages. Both the trial court and the Court of Appeals ascertained that Villanueva was unable to provehis demand for compensatory damages. His evidence was found inadequate, uncorroborated, speculative,hearsay and not the best evidence. Actual damages can not be presumed but must be duly proved withreasonable certainty. This Villanueva failed to prove. While Villanueva might have suffered some form ofinconvenience and discomfort as a result of the dishonor of the check, the same could not have been so graveor intolerable as he attempts to portray or impress. Further, the bank was able to remedy the situation bydelivering a P50,000.00 manager’s check for P50,000.00 to the commodities before the 5:30 p.m. deadlineafter which his account would be closed. Verify, the alleged embarrassment or inconvenience was timely andadequately contained, corrected, mitigated, if not entirely eradicated.

In view of the foregoing, the Court found it unnecessary to deliberate on the dispute as to whether itwas the bank’s or Villanueva’s negligence which was the proximate cause of the injury, because in the firstplace, he did not sustain any compensable injury. If any damage had been suffered at all, it could be equivalentto damnum absque injuria, i.e., damage without injury, or damage or injury inflicted without injustice, orloss or damage without violation of a legal right, or a wrong done to a man for which the law provides noremedy. Villanueva’s claim for damages was denied.

F. Effect of goodwill letter

Sometimes, as a matter of damage control, a bank would send a goodwill letter somehow informingthe payee of the dishonored check that the client-drawer-depositor is a valued client and that the check wasdishonored due to operational error or similar reasons. A client could sometimes take advantage of thegoodwill letter and assert that it is an admission of guilt by the bank. Not so, said that Court in the Moran case



(supra). Here, the manager of the bank, after client’s checks were erroneously dishonored, went to thePetrophil office to personally deliver the check to replace the dishonored checks. Still later, a letter was sentby the bank to Petrophil explaining that the dishonor of the checks was due to “operational error.” The clientused this letter to prove that this was an admission of guilt. The Court ruled that it would be a mistake toconstrue the letter as an admission of guilt on the part of the bank. It knew that it was confronted by a clientwho obviously was not willing to admit any fault on his part, although the facts show otherwise. Thus the bankran the risk of losing the business of a valued client if it did not do anything to assuage his feelings. On demandof clients to clear their names, the bank considered it more prudent to send the letter. It never realized that itwould thereafter be used by the clients as one of the basis for the legal action. There was no reason for thebank to send the letter since the latter was not a client nor was it demanding any explanation. Clearly, theletter was merely intended to accommodate the request of the client and was part of the series of damagecontrol measures taken by the bank to placate the client.

Conclusion

Jurisprudence is clear, banks must exercise the HIGHEST DEGREE OF DILIGENCE, the HIGHESTDEGREE OF CARE or EXTRA-ORDINARY DILIGENCE in dealing with the public. The diligence of anordinary prudent man, or the diligence of a good father of the family, or ordinary prudent man rule, is notsufficient. Failure to exercise this highest degree of diligence will expose the bank to liability. By way ofdefense, a bank could raise the issue of proximate cause. If the client’s act or omission is the proximate causeof the loss (Moran case), the bank is free from liability. Or, to mitigate its liability, a bank could raise thecontributory negligence of the client and claim that the loss sustained be shared equally or proportionatelywith the client (Phil. Bank of Commerce vs. Rommel Marketing case). But even if there is contributorynegligence by the client, if the bank had the last clear chance to prevent the loss, the bank alone will be liable(Phil. Bank of Commerce vs. Rommel Marketing case). And where two banks are negligent or contributedto the loss, both banks may be required to share the loss under the principle of comparative negligence.(PCIB case). Finally, even if there was bank negligence, if there is no damage, the bank is not liable under thedoctrine of damnum absque injuria (Citytrust case).

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The IBP Experience


A TEST CASE ONTHE CITIZEN SUIT PROVISION OF THE CLEAN AIR ACT:

THE IBP EXPERIENCE

Karen E. Baydo and Glynda Bathan-Baterina

I. Introduction

Air pollution is choking our cities, enveloping it in unpleasant smog and causing illnesses in the youngand the elderly in urban areas. Despite the declaration in the Philippine Clean Air Act of 1999 that people“have the right to breathe clean air,” smoke-belching vehicles are a common sight. They roam the streetsspewing harmful pollutants into the air we breathe in wanton disregard of this right.

Air pollution adversely affects the public health and the economy. The relationship between exposureto air pollution and cardiovascular disease, asthma, and a host of other respiratory illnesses has been establishedby research. Children and the elderly are most vulnerable to the health impacts of air pollution. A World Bankstudy estimated that the health cost of air pollution in Metro Manila, Davao, Cebu and Baguio is more than$400 million per year. This is equivalent to about 0.6 percent of the gross domestic product of the Philippines.

Seventy percent of air pollution in Metro Manila comes from mobile sources. The number of motorvehicles in the Philippines grew from less than 1 million in the 1980s to almost 4.2 million in 2003. Vehicles inMetro Manila account for 33% of this number or about 1.4 million vehicles as of 2003.

It is for this reason that the Integrated Bar of the Philippines (IBP) is leading the effort to file citizensuits against smoke belching vehicles.

A. The Integrated Bar of the Philippines

The Integrated Bar of the Philippines is the official organization of all Philippine lawyers whose namesappear in the Roll of Attorneys of the Supreme Court. If any lawyer does not agree to join the organizationand abide by its regulations (such as payment of annual membership dues), he/she does not become, or he/she ceases to be, an IBP member. The said lawyer’s name is then subsequently removed from the Roll ofAttorneys and he loses the privilege to practice law in the Philippines.

As of May 2005, the IBP had a total of 46,053 members.

The IBP is an official organization - “official” because it was established by the State. Two laws,namely, Republic Act No. 6397 and Presidential Decree. No. 181 promulgated on September 17, 1971 andMay 4, 1973, respectively, made the creation of the IBP possible.

The IBP Experience


The IBP came into being when, on October 5, 1970, the Supreme Court created the Commission onBar Integration which was tasked “not only to ascertain the advisability of integration of the Bar, but evenmore, to serve as a common vehicle of the Court and the Bar in fashioning a blueprint for integration andputting same into actual operation.” Republic Act No. 6397, which became effective on September 17,1971, confirmed the power of the Supreme Court to adopt rules of court to effect the integration of thePhilippine Bar. Then on January 9, 1973, the Supreme Court, by a per curiam resolution, pursuant to itsconstitutional mandate, ordained the integration of the Bar in accordance with its Rule 139-A, effectiveJanuary 16, 1973. Within the next succeeding months, the IBP was organized. On February 17, 1973, localchapters of the IBP were finally formed all over the country and elections for chapter officers were held.Then, on March 17, 1973, the first batch of representatives to the IBP House of Delegates, composed of104 delegates representing the IBP Chapters nationwide, convened in Manila and elected its first set of IBPGovernors.

B. The IBP- National Committee On Legal Aid

Under its By-Laws, the IBP’s fundamental objectives are as follows:1. to elevate the standards of the legal profession;2. to improve the administration of justice; and3. to enable the Bar to discharge its public responsibility more effectively.

It is largely through the National Committee on Legal Aid (NCLA), that the IBP carries out its thirdobjective, that is, the mission to “enable the Bar to discharge its public responsibility more effectively.”

The IBP-NCLA operates and manages the IBP Legal Aid Program.

The IBP Legal Aid Program is divided into the Traditional Legal Aid and the Developmental LegalAid Programs. Traditional Legal Aid involves the rendering of legal assistance to qualified indigent clients byway of legal advice or opinion, counselling, and legal representation before courts of justice.

Developmental Legal Aid, on the other hand, involves lawyering for public interest causes. Legal aidis not given to an individual and his personal interests but to a class or a group of persons who face a commonproblem arising out of societal ills and conflicts.

It is through the Developmental Legal Aid Program that the IBP has taken the cause of the environmentand, inevitably, traversed the area of test litigation.

II. The Confluence of Environmental and Test Case Litigation:The IBP Experience

When he assumed the IBP Presidency on July 1, 2003, Attorney Jose Anselmo Cadiz, current IBPPresident, vowed to give priority to the cause of the environment, particularly, to the total and immediate

65

The IBP Experience


implementation of Republic Act No. 8749, otherwise known as the Philippine Clean Air Act of 1999 (“CleanAir Act”). To ensure the realization and success of the IBP’s environmental endeavors, President Cadizappointed Attorney Antonio Oposa, Jr., internationally-known environmental lawyer, as Chairman of theenvironmental arm of the IBP, the Committee on Environment. Attorney Oposa later on renamed the Committeeon Environment to the more pro-active sounding “National Environmental Action Team” (NEAT).

Together with Attorney Bienvenido Somera, Jr., IBP-NCLA Director and an environmental advocatehimself, IBP-NEAT Chairman Oposa embarked on a mission to finally put to test the citizen suit provisionof the Clean Air Act. The choice was deliberate: first, it would answer an environmental concern, that is,ensure the implementation of the Clean Air Act (which is an important piece of legislation for the attainment ofa clean and healthy environment); second, it would help in enriching jurisprudence through the novel issueand approach that the IBP would take to enforce the law; and third, if the action would be successful, itwould pave the way for other suits of similar nature and help in the enforcement of other environmental laws(for example, Republic Act 9003, otherwise known as the Solid Waste Management Act, which has asimilar citizen suit provision).

The IBP-NCLA and IBP-NEAT both tapped their networks of volunteer lawyers to prepare for thesuit. As will be discussed later on, it is imperative that a strategic legal approach be taken in the case. Thestakes are too high; if the case is dismissed on a technicality, it would put to naught the gains achieved by theenactment of the Clean Air Act. Indeed, a dismissal would jeopardize, in no small measure, all the efforts forthe protection of the environment.

Preparations for the planned suit involve the participation not merely of lawyers but of environmentaladvocates as well. This is not a simple legal case, but one which espouses an environmental cause. Hence,environmental groups such as the Law of Nature Foundation, Bantay Kalikasan (proponent of the BantayUsok Campaign) and Partnership for Clean Air have been encouraged to provide their technical and manpowersupport to put the case together.

This intended suit to test the citizen suit provision of the Clean Air Act is not merely a legal matter buta societal one—a case involving the interests not only of the participating organizations but of the entirePhilippine society. Indeed, because everyone has the right to clean air, everyone has the duty to fight for aclean and healthy environment.

III. Enforcement of the Citizen Suit Provision of the Clean Air Act: Challenges of a Test Case

A. Rationale for the Filing of the Case: The Environmental Aspect

For the last twenty years, air pollution has been one of the major environmental concerns in MetroManila. Emissions from motorized vehicles have been identified as a major contributor to increasing airpollution.

The IBP Experience


Particulate matter (PM) is the most critical pollutant of concern in Metro Manila. The major sourceof particulate matter in Metro Manila is attributed to motor vehicles, contributing about 70% of the total.Motorcycles and tricycles, mostly of the “two-stroke” type, account for 84% of PM emission from gasolinevehicles. Diesel-fueled vehicles contribute 58% of total PM emissions from motor vehicles.

According to a publication of the Asian Development Bank, exposure to PM causes “prematuredeath, aggravation of respiratory and cardiovascular disease, as indicated by increased hospital admissionsand emergency room visits, school absences, work loss days, and restricted activity days; changes in lungfunction and increased respiratory symptoms; changes to lung tissues and structure; and altered respiratorydefense mechanisms.” The World Bank estimates that, in the Philippines, exposure to PM is responsibleyearly for 2,000 premature deaths, 9,000 cases of chronic bronchitis, and 51 million days of respiratoryillness. According to a study of the World Bank, health costs attributed to PM amounted to an estimated$392 million in 2001.

To address the deteriorating air quality, the Philippine Clean Air Act of 1999 was passed to set thepolicy framework for air quality management in the Philippines. This legislation has been the key driver ofrecently-observed improvements in the quality of the air and its management in Metro Manila and the rest ofthe country. To date, the key achievements in air quality management include the discontinued use of lead ingasoline, closure of old power plants, reduction of sulfur levels in diesel fuel, establishment of an automaticand continuous ambient air quality monitoring network, setting up of private emission testing centers, andformation of an active multi-stakeholder group to address air quality issues.

But despite the passage of the Clean Air Act, smoke-belching vehicles continue to ply their trade withimpunity and in wanton disregard of the right of people to breathe clean air. Something must be done to stopthis. The law must be given teeth. If litigation is what is needed to enforce the law, then a case must be filed tospur such enforcement at the soonest possible time.

The Philippine Clean Air Act of 1999 provides the policy framework for air quality management inthe Philippines. It provides prevention and control measures for reducing pollution from stationary sources(industry), mobile sources (motor vehicles), and other pollutants (e.g., ozone-depleting substances, greenhousegases, persistent organic pollutants, and radioactive emissions).

An integrated strategy for reducing emissions from motor vehicles should be implemented. Amongthe components of the strategy are: (1) improving the quality of fuel for the transport sector, (2) setting vehicleemission standards, (3) implementing a vehicle inspection and maintenance program, (4) improving publictransport and promoting the use of non-motorized modes of transport, (5) conducting a public informationand awareness campaign, and (6) empowering ordinary citizens, through the “citizen suits” provision, toprotect their right to breathe clean air.

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The IBP Experience


The “citizen suit provision” of the Clean Air Act states:

Sec. 41. Citizen suits. –For purposes of enforcing the provisions of this Act or itsimplementing rules and regulations, any citizen may file an appropriate civil, criminal, oradministrative action in the proper courts against:

(a) Any person who violates or fails to comply with the provisions of this Act orits implementing rules and regulations; or

(b) The Department or other implementing agencies with respect to orders, rulesand regulations inconsistent with this Act; and/or

(c) Any public officer who willfully or grossly neglects the performance of an actspecifically enjoined as a duty by this Act or its implementing rules and regulations; or abuseshis authority in the performance of his duty; or, in any manner, improperly performs his dutiesunder this Act or its implementing rules and regulations: Provided, however, That no suit canbe filed until after thirty-day (30) notice has been given to the public officer and the allegedviolator concerned and no appropriate action has been taken thereon.

The court shall exempt such action from the payment of filing fees, except fees foractions not capable of pecuniary estimations, and shall, likewise, upon prima facie showingof the non-enforcement or violation complained of, exempt the plaintiff from the filing of aninjunction bond for the issuance of a preliminary injunction.

Within thirty (30) days, the court shall make a determination if the complaint herein ismalicious and/or baseless and shall accordingly dismiss the action and award attorney’s feesand damages.

As stated earlier, one of the reasons why the IBP chose to put to test the citizen suit provision of theClean Air Act is to ensure its implementation. Under Section 1, Rule LII of the Implementing Rules andRegulations (“Implementing Rules”) of the said law, it is expressly stated that the citizen suit provision wasenacted for purposes of: (a) promoting the participation of citizens in the enforcement of the Act; and (b)serving as a prod to government officials to take the necessary and appropriate action to abate and/or controlpollution.

It is very clear from the foregoing that the citizen suit provision is an empowering tool for ordinarycitizens. It “deputizes” citizens to bring actions to protect the environment. When government officials fail tofulfill their roles as implementers of the law, citizens may file a suit to “prod” them into action.

In the paper entitled “The Role of the Citizen in Environmental Enforcement” written by E. Robertsand J. Robbins, the authors discussed the overall value of citizen involvement in environmental enforcement.

The IBP Experience


They concluded that citizen participation in environmental protection, through legal action and any othermeans, is only a natural and logical matter. They said:

Citizens are one of a nation’s greatest resources for enforcing environmental lawsand regulations. They know the country’s land and natural attributes more intimately than agovernment ever will. Their number makes them more pervasive than the largest governmentagency. And because citizens work, play, and travel in the environment, each has a personalstake in its beauty, health, and permanence. Citizens are omnipresent, motivated, and uniquelyinterested in environmental quality.

A bird-watcher walking in the woods sees chemical waste flowing through a stream,traces the source to a neighboring factory, and alerts government agencies to the factory’sviolation of its emissions discharge permit…A city resident notices that municipal buses areemitting noxious fumes, sues the bus company, and wins a court order requiring the companyto place pollution control devices in the bus exhaust systems. These are just a few examplesof the many and varied influences citizens can have on the process of environmentalenforcement.

Drawing on the resources of citizens can enrich and strengthen the environmentalenforcement process in several ways….citizen participation in environmental enforcementtaps the direct, immediate connection between individuals and their environment. Citizensare uniquely knowledgeable about their own communities. Their day-to-day observationsgive them access to information about environmental conditions that the government couldnever obtain. Involving citizens in environmental enforcement encourages productive use ofthis information.

Indeed, it is the ordinary citizens who directly experience violations of environmental laws. They seesmoke-belching vehicles, breathe their noxious fumes and get sick because of the effects of the same. Theyare at the forefront of the battle. They should be given the power to seek redress for the injury caused bypollution to their health and well-being and take necessary action to abate pollution once and for all. Thecitizen suit provision of the Clean Air Act empowers them to do so.

Citizen suits allow government to share its responsibility for enforcement of environmental laws withordinary citizens. It helps increase the enforcement of these laws, without having to increase the number ofgovernment-hired enforcement personnel.

Moreover, realistically speaking, citizens should not rely too much on government for the enforcementof environmental laws. The Philippine government is plagued by graft and corruption, lack of manpower andresources worsened by a large fiscal deficit, and a host of other bureaucratic limitations. Citizens should faceup to the challenge and take a pro-active approach in fighting for a healthy and clean environment.

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The IBP Experience


The IBP, through its volunteer lawyers, hopes to lead the way in empowering the Philippine citizenryin this regard, by making use of this powerful tool of “citizen suit.” It is the IBP’s ultimate hope and expectationthat citizens will follow its lead in the future and use its “model citizen suit” for the enforcement of the Clean AirAct and other environmental laws, such as the Solid Waste Management Act.

A. Rationale for the Filing of the Case: Practical and Legal Aspects

Practical Considerations

There are practical reasons for the decision to test the citizen suit provision of the Clean Air Act.

As stated in Section 41 of the Clean Air Act, any class suit filed shall be exempt from the payment offiling fees, except fees for actions not capable of pecuniary estimations, and shall, likewise, upon prima facieshowing of the non-enforcement or violation complained of, be exempt from the filing of an injunction bondfor the issuance of a preliminary injunction.

With the latest increase in legal fees brought about by the passage of Republic Act 9227 (the basis forSupreme Court Administrative Matter 04-2-04 upgrading the legal fees in the Supreme Court and LowerCourts under Rule 141), this provision exempting any class suit based on the Clean Air Act is most welcome.It will likely encourage the citizenry to take legal action to prod official enforcement of the law.

This exemption from payment of legal fees is not, however, absolute. Under Section 6 of Rule LII ofthe Implementing Rules, the fees (that should have been due and paid at the inception of the suit) shall berecorded to enable the Court to collect the same out of the appropriate amount recovered by the plaintiff, inthe event a monetary judgment is rendered in his/her favor.

Another practical reason for engaging in a citizen suit is it would be easier to attain the desiredobjective of enforcing the law without going through a long-drawn court battle. This is because of the mandatory30-day period given to the violator to take appropriate action on the matter complained of. Under Section41 of the Clean Air Act, “no suit can be filed until after thirty-day (30) notice has been given to the publicofficer and the alleged violator concerned and no appropriate action has been taken thereon.”

It was the IBP’s experience in the enforcement of Republic Act 9003, otherwise known as the SolidWaste Management Act, that the issuance of a Notice to Sue to the violator was oftentimes enough for himor her to comply with the law. That was the IBP’s experience in Los Baños, Laguna, where the local mayorcomplied with the proper waste segregation methods mandated by the Solid Waste Management Act afterhe received a Notice to Sue from the IBP.

In 2005, the IBP acted upon five complaints of violations by vehicles of the anti-smoke belchingprovisions of the Clean Air Act. The complainant provided pictures of the smoke belching vehicles. The IBPprovided the Land Transportation Office (LTO) with vehicle plate numbers of the vehicles in the pictures and

The IBP Experience


requested for the owners’ names and addresses. The IBP then sent them Notices to Sue by registered mailand requested them to present their vehicles for inspection at the LTO emission testing center at East Avenue,Quezon City. Three of the Notices to Sue were confirmed to have been received by the addressees. Theaddress on the fourth notice was incorrect and the notice was returned to the IBP. As for the fifth Notice toSue, receipt of the letter by the vehicle owner could not be confirmed.

On the dates specified in the aforementioned Notices to Sue, three vehicles were brought to the LTOemission testing center and were tested in the presence of an IBP lawyer. All three vehicles passed theemission tests. The IBP lawyer interviewed the representatives of the vehicle owners who were presentduring the emission testing. The representatives of the vehicle owners confirmed that they had to have theirvehicles repaired in preparation for the emission testing conducted that day, to ensure that the vehicles wouldpass the emission test. Since all the vehicles passed the emission test, no suit was filed against the vehicleowners.

It must be borne in mind that the ultimate objective in all environmental efforts, whether through legalor meta-legal means, is the protection of the environment. If the threat of a lawsuit is as effective as the actuallawsuit itself in enforcing environmental laws, then the same should be encouraged. As any litigation lawyershould know, a lawsuit should as much as possible be avoided when the ultimate objective could be achievedin a less-expensive and less-litigious manner. It is another story, however, if the violator remains defiant andrefuses to take action on the act complained against. In such case, the full extent of the law should be appliedthrough actual litigation.

Legal Considerations

As stated earlier, another reason for the IBP’s decision to test the citizen suit provision is to enrichjurisprudence. There is not one case that has been filed either in the trial courts or the Supreme Court todelineate the rights of citizens with respect to Section 41 of the Clean Air Act. This is a challenge for the IBPand its group of volunteer lawyers.

The usual questions and concerns as to standing, venue, cause of action, and evidence-gatheringhave to be resolved and addressed. But there are the following inherent challenges as well, since this is a testcase—the first case of its kind in delineating the rights of citizens under the citizen suit provision of the CleanAir Act.

First, as with any test case, there is an immediate, broad impact upon the public by the mere filing ofthe case. That the main plaintiff of the case is the IBP, a high-profile organization whose members include allthe lawyers in the country, does not ensure a successful outcome. But the expectations from all sectors ofPhilippine society are high, and so the pressure to successfully litigate the case is high as well.

Second, the status quo and customary, detrimental practices are difficult to change even with thelaudable objective of implementing the Clean Air Act. There is little awareness on the part of the general

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The IBP Experience


public that what comes out of their vehicles can cause damage to their and others’ health. It can therefore beexpected that any action to change the present situation (of smoke-belching being an accepted environmentalreality in the Philippines) will be met with a lot of opposition.

Third, an unfavorable outcome of the case will create a bad precedent and may jeopardize, in nosmall measure, the gains already achieved in the area of environmental litigation. If a citizen suit at this stagewill not prosper, then the public may be discouraged to file similar suits in the future. The public must be givenhope that, indeed, the citizen suit is a powerful tool and that it can be used to enforce the law and help achievea clean and healthy environment for all of us.

The foregoing therefore renders all the more significant the challenge, to the IBP, of successfullylitigating the citizen suit and, at the same time, providing an ideal lawsuit that citizens can employ as a modelin the future.

Strategic Analysis of the Case: Inside the Minds of the Lawyers

The IBP should (1) strive to carefully and strategically prepare for the case to ensure its success andto decrease any chance for error, and (2) exert effort to have an easy-to-follow and simple case that ordinarycitizens can use as model for their own cases in the future. These twin requirements should guide the IBPvolunteer lawyers in their preparations for the case.

Parties to the Case

Party-Plaintiff

Section 41 of the Clean Air Act states that “any citizen” may file the appropriate civil, criminal, oradministrative action to enforce the provisions of the Clean Air Act. The law specifically uses the word“citizen.” A review of the Constitution and all the laws shows that when the word “citizen” is used, it refers toan individual in relation to his state or government. Thus, the implication is that only natural persons orindividuals can file under the citizen suit provision of the Clean Air Act, and not juridical persons.

The IBP, therefore cannot be a plaintiff in a citizen suit for the enforcement of the Clean Air Act. Onlyits volunteer lawyers, all members of the IBP, can and should file the citizen suit.

Party-Defendant

Section 3 of the Implementing Rules states that a citizen suit may be filed against: (1) any privatenatural or juridical person, including a government-owned and controlled corporation, who violates or fails tocomply with the provisions of the law; (2) any government agency which may issue any order or rulesinconsistent with the Act; and (3) any public officer who willfully or grossly neglects to perform the dutiesprovided for under the Act, or who abuses his authority or in any manner improperly performs his duties

The IBP Experience


under the Act and its Implementing Rules.

For purposes of filing this test case to delineate the rights of ordinary citizens under the citizen suitprovision of the Clean Air Act, the IBP has chosen to file the case against private natural or juridical personswho violate or fail to comply with the provisions of the law, particularly the emission standards set for motorvehicles.

The decision not to file against government agencies and public officers and to limit the cause ofaction to the failure to comply with standard emission requirements of motor vehicles is borne out of practicalconsiderations. The IBP’s limited resources compel it to choose its battles. It must run after those whodirectly and actually cause the pollution—the owners of vehicles which fail to comply with the emissionstandards set by the law. And inasmuch as, in an unpublished study entitled “Integrated Environmental Strategies-Philippines Project Report Metropolitan Manila,” it was estimated that 70% of air pollution in Metro Manilais caused by motor vehicles or mobile sources, it becomes imperative that the IBP act on this particular group(motor vehicles) to create an immediate impact on the state of air pollution in Metro Manila.

Cause of Action

As stated in the preceding paragraph, the test case shall be limited to addressing the violation of theemission standards set for motor vehicles by the Philippine Clean Air Act. This presupposes, however, thatthe owner of the vehicle found in violation of the law has already been given the mandatory 30-day notice totake action on the complaint against him but still fails to take action on the same.

Venue

The case will be filed in the place where one of the volunteer lawyers of the IBP resides.

Procedure and Evidence-Gathering

A citizen suit to enforce the Clean Air Act will start with roadside inspection to spot motor vehicleswhich are not complying with the emission standards set by the law. The usual sign of non-compliance issmoke-belching. At this earliest stage, evidence-gathering should already be in place.

Pictures of smoke-belching vehicles identified through their plate numbers should be taken. Affidavitsby the witnesses, particularly the ones who took the picture (and his/her companions, if any) must be prepared.

An investigation will be conducted to identify the owners of the smoke-belching vehicles. After the

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The IBP Experience


owners have been identified, Notices to Sue shall be delivered to them, as mandated by law. The Notices toSue shall contain the particular violation/s complained of and an announced intent to take action against themwithin thirty (30) days from receipt of the Notices, if they fail to remedy the smoke-belching.

After thirty (30) days, the owners of the smoke-belching vehicles must present the vehicles to theLand Transportation Office (LTO) emission testing center for inspection, which will entail actual measurementof emissions using proper devices.

Failure by the owners of smoke-belching vehicles to present the vehicles for inspection shall beconstrued as continued non-compliance with the emission standards and shall be a ground for filing suitagainst the said owners.

In mid-2005, the IBP and the LTO signed a memorandum of agreement to work together to implementa pilot program which would encourage the use of the citizen suit against owners of smoke-belching vehicles.The pilot program runs for one year and covers Metro Manila. The program will be jointly evaluated by theIBP and the LTO towards the end of the pilot phase. After considering the results of the evaluation, a jointdecision will be made whether the pilot program should be continued in Metro Manila and expanded to othercities in the Philippines. As part of the pilot program, the emission testing facilities at the LTO head office inQuezon City and at the LTO regional offices will be used. The IBP and the LTO agreed to work together todraft supplementary implementing rules and regulations or guidelines for the filing of citizen suits in the Philippinesand to institutionalize such rules and regulations or guidelines through the issuance of the appropriate regulatoryinstrument.

Damages

The Implementing Rules allows the plaintiff to allege damages arising from illness, physical injury ordamage to property as a result of air pollution against the polluting establishment (Rule LII, Section 5). Aneffort must be made to value the damage caused by the pollution released by the smoke-belching vehicle inexcess of the limits set by law. The damage referred to would include damage to health, property, and/or tothe Philippine economy. The reasons why the IBP proposes that these damages be alleged are: (1) to serveas a deterrent to violators, (2) to increase public awareness about the cost of air pollution, (3) to operationalizethe principle that “polluters must pay” (Section 2 of Clean Air Act), and (4) to testhow the courts would rulein a novel case such as this. Expert witnesses may be presented to prove the extent of the damage caused.

IV. Conclusion

The IBP will lead the way to make the citizen suit provision of the Clean Air Act a potent tool forincreased citizen participation in environmental enforcement. The public should follow this lead. It must do itsshare in environmental protection especially in ensuring that the air it breathes is clean, safe, and not perniciousto public health. Indeed, the ultimate test of whether the citizen suit provision is an effective mechanism forenvironmental law enforcement is if the public makes use of it. As a noted environmental lawyer puts it, “[t]he

The IBP Experience


effective enforcement of environmental laws, or of any other law for that matter, requires the active participation,engagement, and involvement of the community at large, the public, so to speak.”

REFERENCES:

Antonio A. Oposa, Jr. A Legal Arsenal for the Philippine Environment. 2003

Asian Development Bank. Policy Guidelines for Reducing Vehicle Emissions (Appendix on AdverseHealth and Environmental Effects from Vehicle Emissions). 2003.

Cezar Sangco. Philippine Law on Torts and Damages. Vol 1 and 2

E. Roberts and J. Robbins. The Role of the Citizen in Environmental Enforcement

Integrated Environmental Strategies-Philippines Project Report. 2003.

Moran. Civil Procedure. Vol. 1.

Vicente Francisco. Rules of Evidence.

World Bank. 2002 Philippines Environment Monitor on Air Quality. 2002. www.worldbank.org.ph/envmonitor2002.htm

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75

The New Philippine Arbitration Law - Some Preliminary Observatons


THE NEW PHILIPPINE ARBITRATION LAW –SOME PRELIMINARY OBSERVATIONS*

Leslie Chew*

Introduction

There is no doubt that since it was adopted in 1985, the UNCITRAL Model Law regime ofinternational commercial arbitration has gained tremendous ground and momentum. The momentum today iseven more significant in the sense that while many countries adopted the New York Convention very early,not all those who acceded to the New York Convention actually enacted domestic legislation that was robustenough to give effect or to facilitate, international commercial arbitration. Singapore, for example, now anoft-cited country for its economic and international reputation, acceded to the New York Convention as earlyas 1981 but its arbitration law remained rooted in the old English law model which hardly catered forinternational commercial arbitrations. This remained the case until Singapore decided not to be outdone byHong Kong (its frequent direct rival for all things commercial and sometimes political). In 1995, Singaporeenacted the International Arbitration Act (Cap. 143A) (“the Singapore Act”) which, for the first time in itslegal history, provided a comprehensive framework for international commercial arbitration based on theUNCITRAL Model Law.

The Philippines was one of the earliest countries, certainly in Asia, to have acceded to the New YorkConvention, 1958. It acceded to the Treaty in 1967. As mentioned above, like Singapore and many othercountries, the Philippines, despite having acceded to the New York Convention, did not enact specific lawsthat would facilitate international commercial arbitration. In February 2004, the Philippines eventually introducedinto their laws a new arbitration law, which included an entire part which specifically deals with internationalcommercial arbitration. The regime the Philippines adopted for its new Arbitration Law is the UNCITRALModel Law.

I. Republic Act 9285 of the Philippines

On 4 February 2004, the Republic Act 9285 (“the Republic Act”), was passed by the Senate andthe House of Representatives. The Republic Act is a consolidation of Senate Bill No. 2671 and House BillNo. 5654. President Gloria Macapagal Arroyo, approved the Republic Act on 2 April 2004. The Act bearsthe full name of Alternative Dispute Resolution Act of 2004. As the name suggests, the Republic Act seeks torevamp and to introduce into the Philippines for the first time, specific laws which would cover the lawrelating to alternative dispute resolution including international commercial arbitration. The preamble to the

* The writer acknowledges with gratitude the assistance he received from Atty. Francisco Lim (President, Philippine StockExchange; formerly Co-Managing Partner, Angara Abello Concepcion Regala & Cruz Law Offices (ACCRALAW) and Professor oflaw at both the Ateneo College of Law and Graduate School of Law of the San Beda College) by way of his invaluable critique. Thewriter remains solely responsible for the views expressed herein.



Republic Act describes it as “An Act to institutionalize the use of an Alternative Dispute Resolution system inthe Philippines and to establish the Office for Alternative Dispute Resolution, and for other purposes”.

A. Statement of Policy

The Republic Act begins with a policy statement. Section 2 of the Republic Act declares as follows:

“SEC. 2 Declaration of Policy. – It is hereby declared [that] the policy of the State[is] to actively promote party autonomy in the resolution of disputes or the freedom of theparty to make their own arrangements to resolve their disputes. To this end, the State shallencourage and actively promote the use of Alternative Dispute Resolution (ADR) as animportant means to achieve speedy and impartial justice and declog court dockets. As such,the State shall provide means for the use of ADR as an efficient tool and an alternativeprocedure for the resolution of appropriate cases. Likewise, the State shall enlist activeprivate sector participation in the settlement of disputes through ADR. This Act shall bewithout prejudice to the adoption by the Supreme Court of any ADR system, such as mediation,conciliation, arbitration or any combination thereof as a means achieving speedy and efficientmeans of resolving cases pending before all courts in the Philippines which shall be governedby such rules as the Supreme Court may approve from time to time.”

As a statement of policy, Section 2 of the Republic Act is commendable. The Republic Act is ofcourse, intended to deal with all forms of alternative dispute resolution mechanisms across the board not justinternational commercial arbitrations. It is self-evident from Section 2 that the intention of the PhilippineLegislature is to manage the resolution of domestic disputes through means alternative to the national courtsystem. Thus, Section 2 provides among other things, the desire to utilize alternative dispute resolution meansto “…achieve speedy and impartial justice and declog court dockets.”

The preamble to the Republic Act also makes clear that the Act deals with the different forms of ADRnamely mediation, commercial arbitration both domestic and international as well as construction arbitrationswithin the purview of Executive Order 1008 known as the Construction Industry Arbitration Law.

In this article, it is intended to discuss only those parts of the Republic Act which deal with internationalcommercial arbitration. Accordingly, the discussion here will focus on Chapter 4 of the Republic Act whichdeals with International Commercial Arbitration and Chapter 7 which deals with the recognition and enforcementof Foreign Arbitral Awards.

B. International Commercial Arbitration

Chapter 4 of the Republic Act which specifically deals with the law relating to International CommercialArbitrations. It is this part of the Act that would be of interest to international parties. This is the new law in the

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Philippines which gives effect to the philosophy and principles underpinning the UNCITRAL Model Law inthe Philippines.

Approximately, Chapter 4 begins by declaring the adoption of the Model Law for the Philippines.Thus, Section 19 of the Republic Act states that “International commercial arbitration shall be governed bythe Model Law on International Commercial Arbitration (the “Model Law”) adopted by the United NationsCommission on International Trade Law on June 21, 1985…”.

C. R.A. 9285 and the UNCITRAL Model Law

The first question that; immediately arises from the wording of Section 19 of the Republic Act is, towhat extent is any international commercial arbitration in the Philippines to be governed by the Model Law?Does Section 19 intend that the Model Law is to be a kind of guide for procedure or simply a ‘model’ whichparties may choose to follow and apply but are not obliged to so follow? Alternatively, does Section 19 seekto make it mandatory for the Model Law to be adopted and applicable to all international commercialarbitrations having its seat in the Philippines? These are important questions.

In order to attempt to answer the above-mentioned questions it is naturally difficult to rely entirely onthe text of the Republic Act. There are two reasons for this difficulty. First the wording of the Section doesnot make it explicit.Secondly, the Republic Act, being a new Act awaits judicial interpretation as to its constituentprovisions. It is however, perhaps useful, as the next best thing to look at other jurisdiction which haveadopted the Model Law as the basis of international commercial arbitrations. It is proposed that we look toHong Kong and Singapore Hong Kong becuase it has been a leading international commercial arbitral centerin Asia for some time. Singapore, because it is an ASEAN neighbour of the Philippines and has fairly recentlegislation on the same subject matter.

Singapore

In Singapore, the applicable law in respect of international commercial arbitrations is the InternationalArbitration Act (Cap. 143A). The Singapore Act is explicit in its reference to the application of the ModelLaw. Section 3 of the Singapore Act makes it clear that “Subject to [this] Act the Model Law…shall have theforce of law in Singapore.” In the case of the Singapore Act therefore it is clear that subject to the act itself,the Model Law forms part of the law Singapore. It leaves no doubt that the Model Law will apply tointernational commercial arbitrations having its seat in Singapore as would other laws of Singapore whichmay be applicable. There is little doubt of course, that the laws of the territorial seat of the arbitration willnecessarily apply to the arbitration if resort to local laws become necessary.

Looking at the Singapore Act, which is explicit in its declaration that the Model Law shall have theforce of law in Singapore, the immediate reaction to Section 19 of the Republic Act, is that to the extent thatit does not explicitly declare in the same manner as Section 3 of the Singapore Act, then the more reasonableinterpretation appears to be that the Model Law does not have the force of law in the Philippines.



The above-mentioned interpretation, however, would be somewhat ridiculous. Section 19 clearlystates that international commercial arbitrations are to be governed by the Model Law. It is quite clear thatif a matter is to be governed by a particular law, it would mean that the law applies for all intents andpurposes. Witness the fact that proper law clauses regularly use the phrase”… shall be governed by Englishlaw” for example. In any event, any judicial interpretation must give effect to the obvious intention of thePhilippine Congress to bring international commercial arbitrations under the purview of the UNCITRALModel Law regime. As earlier mentioned, in order to have an understanding of how the Philippines legislationmay be interpreted or applied, we should look at other jurisdictions. In this connection, apart from Singaporethe Hong Kong experience is instructive.

Hong Kong

In Hong Kong, the principal legislation with respect to arbitrations is the Arbitration Ordinance. ThisOrdinance was amended by the Arbitration (Amendment) (No. 2) Ordinance 1989 which came into forceon 6 April 1990. By the amended Hong Kong Ordinance, Part II A of the Ordinance applies to internationalarbitrations. Section 34 C of the Hong Kong Ordinance provides that “An arbitration agreement and anarbitration to which this part applies are governed by Chapters I to VII of the UNCITRAL Model Law.”Thus, we can see that the Hong Kong legislation uses the same word adopted by the legislators in thePhilippines – the word ‘governed’. Indeed, the fact that the word governed is used to mean that the ModelLaw is to apply has been taken as self-evident in Hong Kong from the very start.

The first case dealing with the application of the Model Law to international commercial arbitrationsin Hong Kong is the case of Fung Sang Trading Ltd. v. Kai Sun Sea Products & Food Co. Ltd.1 The caseraised, among others, the issue of whether an arbitration between two Hong Kong companies couldnevertheless be an international arbitration within the meaning of Article 1 of the Model Law. The Court thereapplied the Model Law as the determining or governing law to analyze the question posed by the case. Here,therefore, is the judicial application of the word ‘governed’ in the context of the application of the Model Lawas part of domestic law. While it may be said that the language used in the Singapore Act is explicit so thatthere could hardly be a doubt as to its meaning, equally the intent of Philippine legislations furthering the useof arbitration as a means of settling international commercial disputes could hardly be in doubt even whenusing the less explicit term of ‘governed’ as found in Section 19 of the Republic Act.

II. Selected Provisions in Chapter 4 of the Act

A. Travaux Preparatoire

Section 20 of the Republic Act provides that in interpreting the Model Law, regard may be had to thetravaux pareparatoire. This is not in itself an unusual provision which many States enact when adopting the

1 1992 1 HKLR 40

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Model Law regime. Another example of such a provision in the National Arbitration Law is to be found in theSingapore Act, specifically Section 4 thereof. The adoption of this type of provision by the Philippines is notsurprising. Since the Model Law is the product of international negotiation and drafting, it seems obvious thatthe thinking behind the entire exercise should be accessible to assist understanding and interpretation of theprovisions of the Model Law. Indeed, the importance of the travaux preparatoire in interpreting the ModelLaw cannot be overstated. When the Model Law was adopted on 11 Dec 1985 by the General Assembly ofthe United Nations, the resolution specifically “1. Requests the Secretary-General to transmit the text of theModel Law on International Commercial Arbitration of the United Nations Commission on InternationalTrade Law, together with the travaux preparatoire (emphasis added from the eighteenth session of theCommission, to Governments and to arbitral institutions and other interested bodies, such as chambers ofcommerce.”2 See also A Guide to The UNCITRAL Model Law on International Commercial Arbitration.3

In Singapore, the High Court had occasion to refer to Section 4 of the Singapore Act. In the case ofMitsui Engineering & Shipbuilding Co. Ltd v. Easton Graham Rush and another4, the court was referredto the travaux preparatoires of the Model Law. At page 20 of that case, the court noted that “…undersection 4(1) of the [Singapore Act] reference may be made to the documents …”of the UNCITRAL and theworking group for the preparation of the Model Law”. The court also referred to the Guide by Holtzmannand Neuhaus5 and noted in particular that “The Guide includes not only commentaries of the authors but alsothe legislative history and reports of the Commission and its working groups in respect of the Model Law”,thus affirming the importance of the reports of the working group and Commission as well as the legislativehistory of the Model Law.

One other aspect of Section 20 of the Republic Act needs to be considered. Unfortunately, theSection though dealing with interpretation does not touch upon the relationship between the Model Law andrules of arbitration such as the Rules of Arbitration and Conciliation of the International Chamber of Commerce.This tension caused confusion in Singapore for example.6 In the case of Dermajaya7 which was muchcriticized by the international arbitral community at the time, the High Court in Singapore ruled that since theUNCITRAL Arbitration Rules (which parties had opted to govern the procedure of their arbitration) wassilent on the issue of security of costs and since the Part II of the Singapore Act provided for security for coststhen, the UNCITRAL Arbitration Rules being inconsistent was excluded and provisions of the Singapore Actincorporating the Model Law applied instead. The complete ouster of the rules specifically chosen by theparties by reason of the High Court’s interpretation was plainly wrong. This was rectified by legislativeamendment to the Singapore Act in 2002. Section 15A of the Singapore Act now provides that “it is hereby

2 General Assembly Resolution 40/72 , 40 GAOR Supp. No. 53, A/40/P.533 Howard M. Holtzmann and Joseph E. Neuhaus, 1989, Kluwer, at pp. 15 to 16. The authors give number of reasons on theimportance and usefulness of the travaux preparatoire..4 [2004] 2 SLR 14, at p. 205 Supra.6 See the cases of Dermajaya Properties Sdn Bhd v. Premium Properties Sdn Bhd [2002] 2 SLR7 [2002] 2 SLR 1643



declared for the avoidance of doubt that a provision of rules of arbitration agreed to or adopted by theparties…” shall apply and be given effect to the extent that such inconsistent with a provision of the ModelLaw or this Part [of the Singapore Act] from which the parties cannot derogate.

The amendment clarified that the provisions of the Singapore Act incorporating the Model Law maybe categorized as either mandatory or non-mandatory. Where non-mandatory provisions of the SingaporeAct are concerned, the parties may, in the words of Section 15A of the Singapore Act derogate from.Conversely, where mandatory provisions are concerned the Act will override the arbitral rules parties havechosen. This, it is submitted, makes perfect sense and should have been self-evident even without legislativeclarification.

Accordingly, it is perhaps to be regretted that Section 20 of the Republic Act was not expanded tocater for this potential tension, which resulted in confusion as shown by the Singapore experience. Presently,it would mean that if the above problem should arise as it did in Singapore, the parties must await a decisionof the courts of the Philippines.

B. Commercial Arbitration

Section 21 of R.A. 9285 defines an arbitration as ‘commercial’ if it covers matters arising from allrelationships of a commercial nature, whether contractual or not. As a definition, it is doubtful if it goes anyfurther than what would, in any event, be understood by businessmen as ‘commercial’. Further, the phrase‘…whether contractual or not.’ seems unclear. Presumably, the intention is to cover relationships beyondcontractual and in that sense one could think of quasi-contractual or possibly relationships imposed by theoperation of law such as relationships which create duties in tort. If it is intended to cover tortuous liabilitiesor disputes, it is quite acceptable. The UNCITRAL regime does encompass non-contractual disputes. In theCanadian case of Canada Packers Inc. v. Terra Nova Tankers Inc.8 the Ontario Court of Justice foundthat the Model Law would apply to disputes involving torts. The scope of the definition must obviously awaitjudicial interpretation. Perhaps it would have been better for the legislators to have simply left the meaning of‘commercial’ to the business community and avoid any definition. This is the case with the Singapore Actwhere there is no definition.

Indeed, the drafters of the Model Law faced the same issue. It will be noted that the Model Law hasnot provided a definition of the word commercial’ – see Article 2 of the Model Law. The omission of adefinition in the Model Law was not accidental. On the contrary it was only done after much deliberation.Holtzman and Neuhaus noted as follows:

“In the early stages of drafting the Model Law, the Working Group recognized thedifficulties of defining the term “commercial”. Various suggestions were advanced, including

8 (1992) 11 O.R. (3d), 382

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use of the words “trade”, “commerce”, “economic transaction,” or “business” but nocomprehensive definition of the term was found. As the Secretariat noted in its commentaryon the Working Group’s final draft, conventions on international commercial arbitration donot define the word. The view appears to have been that the compound term “commercialarbitration” is widely used and has acquired a sufficiently clear meaning.9

Yet another approach, the Philippines legislators could have taken is the approach adopted by theIndian legislators when enacting the Indian Arbitration and Conciliation Act, 1996. In that Act, the draftersquite cleverly avoided precise definition but referred to general law. Thus, in Section 2(f) of the Indian Act,“international commercial arbitration” is defined to mean “an arbitration relating to disputes arising out of legalrelationships, whether contractual or not, considered as commercial under the law in force in India …[therefollows provisions somewhat similar though not identical to Article 1 of the Model Law].”

C. Legal Representation by Foreign Lawyers

Section 22 deals with the legal representation available or permissible in international commercialarbitration. It is an important provision for foreign lawyers who are regularly called upon to act for theirclients in foreign jurisdictions. Essentially, it is expected that foreign lawyers should be permitted to appearbefore international arbitral tribunals even though the lawyer is not admitted to practice in the territory of theseat of the arbitration. In many jurisdictions, there is at least a doubt as to whether the appearance of alawyer in an international commercial arbitration amounts to practicing law so as to attract the local rules withrespect to practicing at the local bar.

Section 22 of the Republic Act states as follows:

In international arbitration conducted in the Philippines, a party may be [re]presentedby any person of his choice. Provided, that such representatives, unless admitted to thepractice of law in the Philippines, shall not authorized to appear as counsel in any Philippinecourt, or any quasi-judicial body whether or not such appearance is in relation to the arbitrationin which he appears.

From a plain reading of Section 22 and bearing in mind the objectives of the Republic Act, it seemsclear that by reason of this provision a foreign lawyer (one who is not admitted to the practice of law in thePhilippines) may appear in an international commercial arbitration in the Philippines10. This avoids the prohibitionthat previously existed in countries like Singapore prior to the amendment of Singapore’s Legal Profession

9 Holtzmann and Neuhaus, supra at pp. 32-331 0 In 2003 the writer was counsel in an arbitration where there was discussion to move the seat of arbitration to the Philippines.The local counsel hinted that there may be a problem for foreign counsel appearing in an international arbitration in Manila since thePhilippines Constitution prevented non- Filipinos from practicing law in the Philippines.



Act (Cap. 161)11. Prior to the amendment, the Singapore case of Turner (East Asia) Pte Ltd v. BuildersFederal (Hong Kong)12 ruled that a foreign lawyer appearing in arbitrations in Singapore was practicing lawin Singapore and would therefore be in contravention of the Legal Profession Act (Cap. 161). The subsequentlegislative amendment, however, limited the permissible appearance of foreign counsel in arbitrations inSingapore to cases where there was no local law content. In those situations, foreign counsel was obliged toappear with local counsel. In March 2004, however, Singapore further liberalized its laws in this respect andit is now permissible for foreign lawyers to appear in all arbitrations in Singapore without restriction. InMalaysia too, the arbitration law does not deal with this issue of representation expressly thus giving rise todoubts over whether a foreign lawyer could properly appear in arbitrations in Malaysia without being admittedto practice.Happily, there is now a Malaysian case in which the court has declared that a foreign lawyerappearing in arbitration in Malaysia is not practicing law within the meaning of the Malaysian Legal ProfessionAct, 1976. This is the case of Zublin Muhibbah Joint Venture v. Government of Malaysia.13

Section 22 of the Republic Act is therefore commendable in that it avoids the uncertainty prevailingfor a time in both Malaysia and Singapore. More importantly this provision brings the Philippines into themainstream of the international arbitral community. The section states that “In international arbitration conductedin the Philippines, a party may be [re]presented by any person of his choice.” (emphasis added). It couldnot be clearer that it is intended that foreign counsel would come within the scope of “any person” particularlywhen read with the rest of the provision which negates any possibility of such person appearing in a nationalcourt or quasi-judicial body other than an international case arbitral tribunal. Any other interpretation wouldrender Section 22 meaningless.

It has been noted above that this provision is commendable. This, perhaps, requires some clarification.It is sometimes thought by States that any national law which permits lawyers who are not called to practicein the local territory would tantamount to a surrender of sovereignty and perhaps more aptly tantamount toopening the flood-gates to foreign lawyers to the detriment of the local bar. It is submitted that that is a fallacy.Firstly, by enacting a provision like Section 22 of the Republic Act, the Philippines does not in any waysurrender control of the practice of law. The permission given to foreign lawyers to ‘practice’ by appearingbefore international commercial arbitrations is limited by its definition. Secondly, by permitting foreign counselrepresentation, the Philippines immediately reassures foreign parties, more to the point, foreign investors thatthey will, in international commercial arbitrations conducted in the Philippines, have access to counsel of theirchoice even if such counsel are foreign lawyers. This is an important matter for foreigners who are engaged ina dispute in a foreign territory. Finally, foreign counsel appearing in the Philippines will invariably requireassistance of local counsel. It is not to be forgotten that in every arbitration the lex arbitri as opposed to thesubstantive law of the transaction, which parties are disputing over, will be the national law. In this case thelaw of the Philippines. No foreign counsel would be foolhardy enough to purport to act on Philippine law andwould therefore rely on local counsel. This, it is submitted, creates a welcome ‘spin-off’ for the local bar who

1 1 See Section 34A of Singapore’s Legal Profession Act (Cap. 161) – amended in March 20041 2 [1988] 2MLJ 280

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will have a new dimension to their practice in the Philippines, that of participating in international commercialarbitrations.

D. Confidentiality of Proceedings

Section 23 establishes the confidential nature of arbitration proceedings including the records, evidenceand the arbitral award. It also sets out under what circumstances this cloak of confidentiality may be lifted.Many jurisdictions including Singapore have not legislated into their law this concept of confidentiality. Thisis perhaps because in common law jurisdictions there are ample (though sometimes complicated)characterizations of arbitrations as being confidential in case law. The section is, it is submitted, useful in thelight of the continuing concerns even in common law jurisdictions as to whether arbitration proceedings andits attendant components are automatically confidential – see for example the controversy arising from theAustralian case of Esso Australia Resources Ltd and Others v. Plowman (Minister for Energy andMinerals) and Others.14

Sub-section (2) of Section 23 is important. Even with a provision which makes clear that arbitrationis intended to be confidential, it is frequently necessary to know the limits of such confidentiality. As oftenhappens, a party dissatisfied with an arbitrator or his interim findings particularly on procedural issues and ofcourse in cases where certain related court actions are being pursued, the issue arises as to how much ofwhat has been put before the court (which, in general would be putting matters into the public domain) shouldor should not be made public by say publication in the law reports and the like. This issue actually arose in thecase of Department of Economic Policy and Development of the City of Moscow v. Bankers TrustCompany and International Industrial Bank.15 The City of Moscow cases however, shows also thateven a provision such as Section 23 of the Republic Act may not be wide enough to deal with the situationenvisaged there. In the City of Moscow case, the main question was to what extent if at all the decision of theUK High Court on Section 68 (UK Arbitration Act) application should be publicized as for example in thenormal way in law reports. The UK Court of Appeal there ultimately affirmed the High Court’s decisionordering that the decision should be kept private and should not be published.16 Although Section 23 doesnot go far enough to deal with the question that arose for example, in the City of Moscow case, the provisionis nevertheless useful. The section gives the court the power in dealing with arbitration issues before it to‘issue a protective order to prevent or prohibit disclosure of documents or information containing secretprocesses, developments, research or other information where it is shown that the applicant shall be materiallyprejudiced by an authorized disclosure thereof.

1 3 [1990] 3 MLJ 125 at 126-1271 4 (1995) 128 ALR 391, (For a useful discussion of the issues surrounding confidentiality of commercial arbitrations seeArbitration International, Vol. 12, No. 3; an article by Patrick Neill QC).1 5 (2004) EWCA Civ. 3141 6 See a discussion of this case in 70 Arbitration 229-235



E. Stay of Court Proceedings

Section 24 provides that “A court…shall … refer the parties to arbitration unless it finds that thearbitration agreement is null and void, inoperative or incapable of being performed.” The language of Section24 is based on Article 8(1) of the Model law. Since the language used here follows Article 8(1), the intentionbehind the section must be to provide mandatory stay in circumstances which fall within the ambit of Section24. This is evident from the use of the use of the phrase “A court…shall…refer the parties to arbitrationunless...”. The provision does not, however, deal with the consequential elements of a stay should a courtpursuant to Section 24 stay an action before it in favour of an arbitration. Again if we were to look at otherjurisdictions on this matter we will find that in the Singapore Act, for example, there are provisions whichempower the court when granting a stay in favour of arbitration to make orders for the interim preservation ofthe parties’ rights in connection with property which is the subject-matter of the dispute and other interimorders in relation to property. In the Philippines, in the absence of similar provisions as those found in theSingapore Act, presumably, upon a stay, the Philippine court will have to exercise its inherent or other statutorypowers to deal with these matters. (The writer understands that the Supreme Court in the Philippines, will asparts of the Act indicate, be promulgating various rules for the implementation of the Act. See for example,Part B of Chapter 7 of the Act, which deals with the Recognition and Enforcement of Foreign ArbitralAwards.) No doubt too, parties may fall back on the court rules applicable in the Philippines.

The approach taken by this section is similar to those of other jurisdictions, which have similarlyadopted the UNCITRAL regime. The only ground for a court not to grant a stay in favour of the arbitrationagreement is null and void, inoperative or incapable of being performed.” The deliberate adoption of thewords found in Article 8(1) of the Model Law is natural and understandable for it is well nigh impossible todelineate the situations in which a court would find that the arbitration agreement could not be given effect to.It has always been difficult to find situations where this ‘qualification’ would have effect. That of course, is thewhole idea behind the UNCITRAL regime; that it would not be easy to avoid arbitration where parties havealready agreed to the process by prior agreement. A number of cases have considered this issue.

The courts have interpreted provisions similar to this ‘qualification’ restrictively in favour of arbitrationproceedings. In the Hong Kong case of Lucky-Goldstar International (HK) v. Ng Mook Kee Engineering,17

even though the arbitration clause referred to a non-existent arbitral institute and non-existent rules, the courtwas able to order a stay (not finding that the arbitration agreement was null and void, inoperative or incapableof performance) since the clear intention of the parties was that they would in case of dispute refer the sameto arbitration. In the Canadian case of Kaverit Steel & Crane v. Kone Corp18, it was argued that to giveeffect to the arbitration clause would result in a multiplicity of proceedings since some of the relevant partieswere not bound by the arbitration agreement. This argument was sustained in the court of first instance, i.e.stay in favor of arbitration was refused. This was overturned by the Alberta Court of Appeals thus granting

1 7 (1993) 2 HKLR 731 8 [1993] ADRLJ 108

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a stay and enforcing the arbitration agreement. Of course, the judicial attitude of the Philippine courts remainsto be seen. It is hoped that the Regional Trial Courts in the Philippines will adopt a similar approach as theother courts in other jurisdictions where the UNCITRAL regimes are applicable, to interpret the ambit ofSection 24 restrictively in favor of arbitration.

F. Bias in Favor of Arbitration

Section 25 is interesting to the extent that it expressly reinforces the desire of the Philippines to favorarbitration. Thus, the first sentence of the section states unequivocally that “in interpreting the Act, the courtshall have due regard to the policy of the law in favor of arbitration.” Couple this statement with the Declarationof Policy (favoring ADR) in Section 2 of the Act, the intent of the legislators to favor arbitration includinginternational commercial arbitration is not in doubt. The edict requiring the court to have “due regard” to thestate policy is admirable and in this writer’s view timely. Even in jurisdictions where arbitration law may besaid to have developed to a mature state, judges frequently need to be reminded of the place for arbitrationwithin the State’s legal system. In a state like the Philippines where it is perhaps not unfair to say that thepractice of international commercial arbitration is still nascent, it is useful to remind the courts as to the roleand position of arbitration.

G. Appointing Authority

Section 26 defines the Appointing Authority within the meaning of the Model Law. The section doesnot appear controversial. The Appointing Authority is defined as the person or institution named as such inthe arbitration agreement or where institutional rules are adopted by the parties, the arbitral institution. In adhoc arbitrations where there is no agreement between the parties as to who shall be the appointing authority,then Section 26 makes the National President of the Integrated Bar of the Philippines (IBP) or his dulyauthorized representative the appointing authority. In the Philippines where the Bar is generally influential asto State and public policies, it is not surprising that the default appointing powers are reposed in the leader ofthe Bar. However, it is perhaps necessary to consider whether the designation of the local bar as the appointingauthority is conducive to the promotion of international commercial arbitration in the Philippines or more tothe point the Philippines as the seat of international commercial arbitration. In the context of internationalcommercial arbitration, besides party autonomy, the principles of impartiality and transparency are crucialtowards the encouragement of one’s territory as a hub or preferred seat of international commercial arbitration.It is therefore necessary for the Philippines to monitor international perceptions towards its designation of thePresident of the local bar as the appointing authority. Certainly one of the criticisms would be that it gives riseto perception that local arbitrators or practitioners have the advantage when it comes to the appointment ofarbitrators by default. It is not suggested that the mere designation of the President of the local bar gives riseto any real concern of a preference for locals but perception is all important in international or transboundarydisputes. For these reasons, many centers which tout themselves as being international designate independentparties (independent in the sense that there is no perceived link to the local bar or other local establishment)as the appointing authority. An example is to be found in the Singapore Act where the appointing authority isthe Chairman of the Singapore International Arbitration Centre or such other person as the Chief Justice may



designate. Presently, the Chief Justice of Singapore has, by gazette notification, designated the DeputyChairman of the Singapore International Arbitration Centre (SIAC) as the appointing authority under Article11 of the Model Law. The Deputy chairman who is also a full time Chief Executive of the SIAC is anindependent professional. Although the current Deputy Chairman is a trained lawyer, he is not practicingmember of the local bar.

H. Interim and Provisional Reliefs

Sections 28 and 29 deal with interim and provisional as well as conservatory remedies, which areavailable to parties to an international commercial arbitration to which the Republic Act governs. Section 29appear to extend and widen the scope of powers found in Section 28 although it is more a case of anelaboration of the powers set out in Section 28. Section 29 specifically refers to the granting of preliminaryinjunctions but includes also the power to appoint a receiver, powers of detention and preservation andinspection of property, which is the subject matter of the arbitration. Helpfully, Section 29 makes clear thata party may seek the court’s assistance in enforcing the interim orders of an arbitral tribunal.

It is always useful to specify in an arbitration law, the availability of interim relief such as injunctions.Again, referring to a jurisdiction like Singapore which, prior to 1995, did not have a comprehensive arbitrationlaw in the form of the Singapore Act, there was at the time always a lacuna in what an arbitral tribunal is or isnot empowered to do. Thus, injunctions as a remedy, was not available under Singapore’s old arbitrationlaw, existing prior to 1995.

Section 28 and 29 of the Republic Act appears to have provided for various powers to be exercisedby the arbitral tribunal when it is constituted. The powers enumerated in these two sections are aimed atinterim and conservatory measures. Although, in both sections it is made clear that resort may be had to thecourts for ‘assistance’ in implementing or enforcing an interim measure granted by the arbitral tribunal, itwould perhaps have been even more helpful if the Republic Act made clear that orders and directions of anarbitral tribunal may be enforced in the same manner as any order or direction of a court. Nevertheless,Sections 28 and 29 are wide enough to assure a judge or court in the Philippines that he or it would have thepower to enforce orders and directions issued by an arbitral tribunal as if these were made by a court of law.The intention of Section 28 (6) and Section 29 on this matter is, it is submitted, clear. Another issue whichshould also be borne in mind and which should be brought to the attention of the court is the fact that where,as in the case of Section 28 of the Republic Act, the court and the arbitral tribunal have concurrent powers,the court should exercise its powers sparingly, thereby giving precedence to the arbitral tribunal. This was theimport of the case of Leviathan Shipping Co. Ltd. v. Sky Sailing Overseas Co. Ltd.19 There, the HongKong court also noted that the court in such cases should only exercise its power in special situations and itcited as a special situation an instance where the arbitral tribunal had no particular power sought by a party tothe arbitration. Section 28 of the Republic Act recognizes and adopts a similar approach for it states inter alia,

1 9 Unpublished, Commercial List 192-193

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“After constitution of the arbitral tribunal and during the arbitral proceedings, a request for an interim measureof protection or modification thereof, may be made with the arbitral tribunal or to the extent that arbitraltribunal has no power to act effectively, the request may be made with the Court”.

I. Place of Arbitration

Section 30 deals with the choice of the place of arbitration. This section is interesting in that in theabsence of parties agreeing or the arbitral tribunal appointing the place of arbitration, it actually fixes the placeto be in Metro Manila. This may have been necessitated by the vastness and ‘sprawling’ nature of the islandsthat make up the Philippines. In line with party autonomy, the provision does not however affect the parties’ability to agree to meet anywhere however far-flung in the archipelago or elsewhere outside the Philippines.To that extent the provision is curious.

III. Recognition and Enforcement of Foreign Arbitral Awards.

Section 42 (Chapter 7 Part B) of the Act makes the New York Convention the governing regime forthe recognition and enforcement of foreign arbitral awards. For the details therefore, one must look to theprovisions of the Convention itself. In this case, the relevant provisions are to be found in Articles IV and Vof the Convention. Section 42 of the Republic Act also provides that an application for the recognition andenforcement of a foreign arbitral award should be filed with the regional trial court in accordance with therules to be promulgated by the Supreme Court. The regional trial courts in the Philippines are courts of firstinstance and roughly equates to the High Court (exercising its original jurisdiction) in British Commonwealthcountries.

Section 43 of the Republic Act is exemplary. The section actually deals with the recognition andenforcement of non-New York convention awards. It opens the door for the recognition of non-New YorkConvention awards. Singapore has a similar provision in its domestic regime in the Arbitration Act (Cap10).20 Section 43 is however more explicit in its reference to comity and reciprocity as grounds for recognitionof such awards.

IV. Foreign Arbitral Award Not Foreign Judgment

A. Foreign Arbitral Award

The characterization of a Foreign Arbitral Award for the purposes of recognition and enforcement isto be found in Section 44 of the Republic Act.

2 0 See Section 46(3). In Singapore, if an arbitration is not governed by the International Arbitration Act (Cap 143A) then theArbitration Act (Cap 10) would. Non-New York Convention awards would therefore fall within the scope of the Arbitration Act (Cap10) since the IAA (Cap 143A) deals with Recognition and Enforcement of arbitral awards under the New York Convention only.



On reading this provision, it is perhaps not surprising if the reader should wonder at its precise intent.It is useful to set out the entire provision below:

A foreign arbitral award when confirmed by a court of a foreign country, shall be recognizedand enforced as a foreign arbitral award and not a judgment of a foreign court.

A foreign arbitral award, when confirmed by the regional trial court, shall be enforced as aforeign arbitral award and not as a judgment of a foreign court.

A foreign arbitral award, when confirmed by the regional trial court, shall be enforced in thesame manner as final and executory decisions of courts of law of the Philippines.

The first paragraph makes clear that a foreign arbitral award is not to be treated as a foreign judgmentbut a foreign arbitral award. This appears to a case of stating the obvious. It is, therefore, difficult to understandthe thinking behind the language of the paragraph. Presumably, the intention was to distinguish foreign judgmentsfrom foreign arbitral awards since in all states, save where there are reciprocal arrangements, foreign judgmentsare not enforceable in the local jurisdiction.

The combined effect of the next two paragraphs are however, clear. The provisions allow foreignarbitral awards when confirmed by a regional trial court (presumably on an application for recognition andenforcement under Section 42 – similar to the grant of leave under Section 19 read with Section 29 of theSingapore Act (Cap 143A) by the High Court in Singapore) to be enforced in the same manner as “…finaland executory decisions of the courts of law of the Philippines.”

B. Limited Grounds for Opposition

In view of the application of the Model Law under the Republic Act, Section 45 for the Republic Actpremises the right “… to oppose an application to recognition and enforcement of the arbitral award … onthose grounds enumerated under Article V of the New York Convention.” Significantly, it also makes clearthat any other ground shall be disregarded by the regional trial court.” This is extremely helpful since it is aclear direction to a court in the Philippines that no other grounds of challenge are to be entertained. Again,this will assist judges in the Philippines who will for the first time, be hearing applications dealing with aparadigm they are yet to be accustomed to.

As indicated earlier, rules upon which applications are to be made in pursuance of the Republic Act(implementing rules) have yet to be promulgated by the Supreme Court.

V. Appeals under the Act – Section 46 of the Republic Act

Appeals from court decisions on Arbitral Awards are deal with in Section 46 of the Act. Again, areproduction below of the section is useful:

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A decision of the regional trial court confirming, vacating, setting aside, modifying orcorrecting an arbitral award, may be appealed to the Court of Appeals in accordance withthe rules of procedure to be promulgated by the Supreme Court.

The losing party who appeals from judgment of the court confirming an arbitral awardshall be required by the appellant court to post counterbond executed in favor of the prevailingparty equal to the amount of the award in accordance with the rules to be promulgated by theSupreme Court.

The section prescribes that an appeal is available against the decision of the regional trial court “…confirming, vacating, setting aside, modifying or correcting an arbitral award…”. Read literally, it raises thealarming possibility of a very wide scope for appealing against arbitral awards. However, it is submitted thatthe very wide language set out above, must be read in context and in light of the fact that the only grounds ofchallenge against recognition and enforcement is on.

––– 0 –––

The Art of Cross-Examination


THE ART OF CROSS-EXAMINATION

Mario E. Ongkiko*

Introduction: What is Cross-Examination?

“Cross-examination is a ‘do it’ art, best analogized to mother’s chicken soup; a mix of experience,instinct, talent and individual style - blended with the right amount of preparation. x x x . . . I have come torealize that cross-examination is more art than science, more instinct than study, intuition than plan.” (Atty.Leonard M. Renz, The Lawyer’s Review, July 1988)

“Cross-examination is a proceeding the object of which is to weaken or disprove the case of theadversary, by breaking down his testimony in chief, by testing the recollection, veracity, accuracy, honestyand bias or prejudice of the witness, his source of information, his motives, interest and memory, and byexhibiting the improbabilities of his testimony.” (Bulacan Medical Center vs. Cruz, 65133 R, March 18,1982)

I. Know The Rules

(I.A) Rule 132 Section 6

(a) Matters stated in direct;

(b) Matters connected therewith, with sufficient fullness and freedomfor the following purposes;

(i) testing credibility of witness and his testimony, and

(ii) eliciting important facts bearing upon the issue.

(c) Allowable areas to cross;

(i) to demonstrate on cross matters testified to in direct,Example: Demonstrate how the accused fired the gun.

* The author is a partner in Ongkiko Kalaw Manhit & Acorda Law Offices.

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(ii) matters which form part of res gestae,Example: A subscribing witness to a will may be crossed examined on time,circumstances and physical condition of testator.

(iii) matters affecting probability of testimony,Example: Show that a victim who was robbed of huge money was deeplyin debt and financially in trouble.

(iv) to test witness knowledge and means of information,Example: means of observation, elements of testimonial evidence

(v) to test witness accuracy and recollectionExample: capacity to observe and recall

(vi) to test sincerity and motive,

(vii) witness’ bias or friendshipExample: acts or declarations showing bias

(viii) witness’ interest in case,Example: show his benefits

(ix) relation to parties,Example: friendly or hostile

(I.B) Not Allowed: Collateral Matters

Definition

Matters outside the controversy, or are not directly connected with principal mattersor issues in the dispute (Summerour v. Felker 29 S.E. 448, Blacks Law Dictionary).

Exception:

Only for testing credibility; but not on matters which are totally irrelevant and immaterial.

If allowed, party asking may abide by the answer and cannot be allowed to contradictanswer.



(I.C) The Issue of Relevancy

Recourse when not apparent

Comes into play when purpose is to gather facts which should have a bearing to theissue(s).

[If relevancy is not immediately apparent, counsel should request for opportunity toapproach the bench so that he can explain without alerting the witness.]

Case Example:

A witness testifies on direct that “he saw Pedro stab Peter, which caused the latter tofall down bleeding.”

Possible Cross:

(1) date/time/place where witness saw victim;

(2) how long he stayed in scene;

(3) other persons present;

(4) what instrument was used, and

(5) was victim talking to accused.

But to elicit facts not mentioned in direct, thereby making witness the witness ofexaminer – objectionable.

Case Example:

A signature expert testifies on “the genuineness of the testator’s signatures on thewill.”

Subject Allowable:

He can be examined on the bases of the expert opinion and his qualifications and experience.

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Subject not Allowable:

But he cannot be examined on the circumstances of the execution of the will, the personaltraits or reputation of the testator and the subscribing witnesses, etc.

II. Mastery of Facts

Why the Need?Examination deals with facts – not legal principles from client’s point of view; also opponent’s. By

knowing all the facts, examiner will know what questions to ask or to avoid.

“The decision to cross-examine cannot be intelligently made unless you have prepared the cross-examination in advance and have a realistic understanding of what you can expect to achieve during thecross-examination of any given witness.” (by Thomas A. Mauet, Trial Techniques, p. 238)

(II.A) Anticipate Opponent’s Evidence

One must discover before trial the identity of witnesses for the opponent and what they willlikely say.

How to Discover:

(a) Pleadings – Theory of the Case

(b) Modes of Discovery

(c) Pre-Trial Proceedings

(d) Ditto: Criminal Cases

(i) List of Witnesses in Information,

(ii) Affidavits Required in Summary Procedure



(II.B) To Cross or Not To Cross

Tests:

(i) When mandatory – If the testimony of a witness is damaging and there is agood chance of casting doubt or contradicting it with strong evidence,examination is called for.

(ii) When optional – If the direct testimony is harmless/not convincing/touchesan insignificant matter not in issue/favors the case of the examiner, then crossmay be dispensed with.

(II.C) Types of Cross-Examination

Constructive (Corroborative) – make witness agree to facts favorable to the caseof cross –examiner.

Destructive – to discredit the witness, or the testimony itself.

Limitations of Destructive Cross-Examination:

If to destroy credibility of testimony, limit cross to matters stated in direct, or thoseconnected therewith.

If to destroy credibility of witness, no such limitation; therefore permissible to askquestions not related to testimony on direct.

To Observe Witness or To Write Down Notes?

Better strategy is to listen to witness while testifying on direct and on cross examination:

- note demeanor- facial expression- direction of his gaze (at counsel?)- modulation of voice- if behavior of witness becomes so pronounced, the same may be entered into the

records for purposes of the appellate court.

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III. How to Conduct Cross

(III.A) Leading questions allowed but not “misleading ones” (Sec. 10) [directed against hostile/partial/unwilling/adverse]:

Non-Leading

“After you stabbed him, what happened?(Recall Hubert Webb’s case re: style of prosecution]

Leading

“After you stabbed him, did you run away?

(III.B) Purposes of Leading Questions:

(i) To disclose details which the witness may have purposely omitted because they areharmful to his position;

(ii) To describe the facts most helpful to the questioner’s side of the argument (or theoryof the case) and make witness agree that the facts are true.

(III.C) Leading Questions, When Allowed (See Sec. 10):

(i) On cross-examination(ii) On preliminary matters;

When is a question preliminary:

(a) questions asked of the witness at the onset of his direct examination, such as his/hername, age, civil status, residence and occupation (1 Thompson on Evidence 368).

Example:

Q1: “You are a single mother?”Q2: “You said you are a widow. Were you a widow since 2000?”

(b) preliminary background questioning.



Example:

Q1: “You grew up in a Tondo neighborhood?”Q2: “Since your elementary days?”Q3: “Until you graduated from high school?”

(c) ascertainment of competency of a witness in case it is doubted or challenged at theoutset.

Example:

Q1: “You were at the corner of Taft Avenue and Remedios St. on August 30, 2004?Q2: “At about 9 to 10 a.m.?

(d) qualifications of an expert witness.

(e) to jog the memory of a witness (but it cannot be used to place an inadmissiblestatement before the jury [US vs. Shoupe, 548 F.2d 636 (6th Circular)]

Example:

Q1: “You recall that during that party on Independence Day at Malacañang in 2003, youwere introduced to Secretary Romulo?”Q2: “You had the chance to talk to him about the deal?”

(iii) When there is difficulty in getting direct and intelligible answers from a witness who isignorant, or a child of tender years, or is of feeble mind, or a deaf-mute;

(iv) Of an unwilling or hostile witness;

(a) Ask questions to show hostility.(b) Ask permission of court.

(v) Of a witness who is an adverse party or an officer, director or managing agent of apublic or private corporation, or of a partnership or association which is an adverseparty.

(III.D) Misleading Question Not Allowed:

A “Misleading Question” is a question that contains a fact which is assumed but not proven.

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Example:

(a) “ Do you still beat your wife?”(The word “still” assumed that there was evidence a priori that the witnessbeat his wife before).

(Take out “still” and the question is a proper leading question.)

(b) “Was it the defendant who signed first before the witnesses?(Misleading because the witness stated that he was not in the room when theactual signing took place).

(It is a proper question had the witness testified that he was present duringthe signing).

(III.E) Other Improper Questions:

(a) Compound

A question that requires a single answer to more than one question.

Ex.: “Did you see and hear him?”

(b) Argumentative

A leading question that also reflects the examiner’s interpretation of the facts.

Ex.: “Why were you driving so carelessly?”

(c) Assuming facts not in evidence – A question that assumes that a disputed fact is truealthough it has not yet been established in the case.

Ex.: “After he ran the stop sign, he honked his horn, didn’t he?” (where thereis no evidence that the person referred to ran a stop sign.)

(d) Conclusionary

A question which calls for an opinion or conclusion that the witness is not qualified orpermitted to make.

Ex.: “Did your wife understand this also?” (opinion as to wife’s understanding)



(e) Cumulative

A question that has already been asked and answered. Mere repetition is allowedon cross-examination than on direct; but where it is apparent that the cross-examination is not getting anywhere, the judge may disallow the question.

(f) Harassing, Embarrassing – A trial judge has the discretion to disallow cross-examination that is unduly embarrassing (Gilbert, Evidence, Sec. 967) so the judgemay prevent irrelevant, oppressive or insulting interrogatories.

Ex.: “Are you a pedophile?”

(III.F) Tips on How/What to Cross-Examine:

(a) It has been correctly emphasized that the art of cross-examination is to know “whennot to question an adverse witness”. The converse of the foregoing rule at times isthe course that should be flowed. “Never forego a cross examination if you believethat it will produce one or more facts in your favor.”

(b) Where a witness has given “a damaging testimony against your client” and you have“no expectation of causing the witness to change or alter his testimony”, a futilecross-examination merely allows the judge to again hear the damaging testimonyagainst your client.

(c) “Never ask general questions that permit the adverse witness to give long explanatoryanswers” and that may result in the witness giving testimony that otherwise would beinadmissible. Questions on cross-examination should be definite and certain, thuscalling for a definite and certain reply.

(c.i) If counsel breaks down the subject of the inquiry into its component parts topermit questions no longer than a line of transcript and used words that everyoneunderstands, the judge will be less likely to dismiss the attorney as “some pompousfool who reads a thesaurus at night before going to bed.”

(d) “Where [one has cause to believe that the] testimony given on direct examination isfalse and fabricated and the witness has learned his or her testimony by coaching, orby heart, then the “cross-examination should call for repeated repetitions of thetestimony’, particularly if it is related to a conversation with the defendant.”

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(e) “Never, on cross-examination, ‘gild the lily’. Once you have the witness state amaterial fact in your favor, drop the subject. Otherwise, the witness may get off thehook by weakening his prior answer or by explaining it away.”

(f) “Never underestimate the knowledge and ability of the opposing counsel.” Neverattempt to show that the opposing counsel has no legal learning and does not knowthe facts of the case.

(g) On cross-examination, “never browbeat an elderly person or a young child” Nevermake fun of a witness because he is uneducated, or speaks with an accent, or hasdifficulty making himself understood. Most people despise one who tries to ingratiatehimself by belittling another.

(h) “If the direct [examination of an adverse witness] is incredible [on its face, or evensmacks of incredulity], a long and meticulous cross-examination is called for theemphasize the absurdity thereof. In such circumstances, merely because the directexamination has been damaging to your client, you should not surrender the right tocross-examination at length to bring about a grave doubt as to the veracity of thewitness or the truthfulness or accuracy of his testimony.”

(i) Never cross-examine on an issue that has no relevancy to the defense of your side ofthe case. Thus, in a prosecution for arson where the defense is that your client didnot set the fire, it is futile to cross-examine the adversary witnesses on the issue ofwhether the fire was of incendiary origin. Stick to the defense that your client did notstart the fire, irrespective of whether it was or was not of incendiary origin.

(j) The most dangerous question that one can ask a witness on cross-examination is thesimple word “WHY?”. Such a question simply allows the witness to explain morevividly his answers on direct. Questions should be phrased definitely, answerable by“yes” or “no”, as much as possible.

(k) Whatever your approach, you should never surrender control of the witness. Virtually,all cross-examinations should use short, leading questions to keep the witness undertight rein, no matter how friendly your tone of voice.

(l) Even the most hostile cross-examination does not require you to be rude oroverbearing. As Winston Churchill said, “When you have to kill a man, it costsnothing to be polite.”

(m) Ask only leading questions. This principle is one of the golden rules of cross-examination. Attorneys who deviate from it are often presumed by their colleagues



(and the judges) to be at best inexperienced and at worst, incompetent.

(n) Do not ask a question if you do not know the answer. Once again, the attorneymaintains control of the witness and the subject matter by inquiring about only whatthe attorney chooses to hear. Counsel will be hurt far less by following thiscommandment than by disregarding it.

Exceptions:

(n.i) Sometimes you do not care what answer the witness gives because youhave a sworn statement with which to impeach the witness.

(n.ii) Other times, you may have considered all possible answers that the witnesscould give to a question and know that no matter which way the witness squirms,you can use the answer to emphasize the points you want to make.

(o) Listen to the answer. It is obviously senseless to argue with the proposition thatwhen one asks a question, one should listen to the answer. However, this fifthcommandment does require some expansion: Listen to and watch the answer andthen follow up what you hear and see.

The attorney must not only hear what the witness says, but also, observe the facialexpressions and body language of the witness, as well as, the reaction to the answerby the judge, clerks, marshals, court reporter and spectators. Then the follow-upquestions must take into account all of these responses.

(o.i.) If someone constantly looks toward the prosecutor during cross-examination,it may indicate that the witness is looking for coaching or support. The witnessshould be questioned about those gestures. In short, if you only listen to the witness’answer and do not carefully watch the witness as well, you may miss valuable “tells”that could lead to a more fruitful cross-examination.

(p) Do not quarrel with the witness. If the point of the examination is that the witness isa liar, or if the witness is acting slick, arrogant, or hostile, counsel often can highlightthese qualities by prodding the witness to display them more fully to the judge. Thenthe attorney can confront the witness directly with his or her inappropriate behavior.

(q) Do not allow the witness to repeat direct testimony. Do not premise your questionby a repetition of the direct testimony, specially a damaging direct.

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Exceptions:

(q.i) But the skilled examiner may have a witness repeat certain parts of the directthat are consistent with the defense theory of the case; that sound stupid or implausible;or that are key gems in terms of the tone or the choice of words which the examinerwill want to highlight in his memorandum. (closing argument)

(q.ii) One of the favorites cited in Wellman’s book on cross-examination is asfollows: After setting the stage by questioning the witness on his lack of opportunityto observe and his inattentiveness to the fight between the defendant and the allegedvictim, the defense attorney continues further and asked what he should not haveasked; “How can you say my client bit off the victim’s nose if you did not see him doit?” The damning response was “Because I saw him spit it out.”

IV. How to Impeach Adverse Witness (Sec. 11)

(IV.A) By contradictory evidence,

(IV.B) By evidence that his general reputation for truth, honesty or integrity is bad, or

(IV.C) By evidence that he has made, at other times, statements inconsistent with his presenttestimony (but not by evidence of particular wrongful acts).

Exception:

Conviction of an offense, by examination or record of judgment.

Other Modes of Impeachment

- By involving him in contradiction during cross-examination (distinguish from10a)

- By showing the impossibility or improbability of his testimony.

- By proving action or conduct of the witness inconsistent with his testimony, e.g.,failure to make outcry in a Rape case.

- By showing bias, interest or hostile feeling against the adverse party.



Impeach by Evidence of Inconsistent Statement (See IV C)

“Laying the Predicate” [Sec. 13]

Requirements:

(i) state time/place and persons present when the contrary statement was made;

(ii) ask if the witness made the contrary statement;

(iii) if so, he must be allowed to explain them – if in writing, must be shown towitness before questioning on the same.

V. How to Cross Different Types of Witnesses

(V.A) A Child Witness

“[Remember] The child witness is the most difficult to cross-examine. Whether it beeyewitness testimony of an injury to a playmate, or fond memories of a deceased parentkilled in an air crash, or auto accident, the impact is the same. You come face to face with achild of tender years and a sympathetic and approving court.”

Treat the witness tenderly; no loud voice; no threatening gesture. Try the“constructive” type of cross.

(V.B.) Any Expert on Handwriting, Ballistics, Medico Legal, DNA, etc.

One of the common mistakes that experts make is not being intimately familiar withthe facts. Courts are less forgiving of experts than they are of lay witnesses. All you need todo is catch the expert in one significant mistake to cast doubt on all his opinions. If you canmaster the facts, you will have your first significant strategic advantage. Thus:

Rule 1: Know your prey.

“This requires research and study. One of your goals should be to know theexpert as well as she knows herself.” That means more than getting the experts’ self-serving curriculum vitae. Experts are creatures of public record. Know that record.Prior depositions and writings are the most likely source of useful information, but donot ignore the lesser known sources of information such as non-published reports,affidavits, articles or new pieces about the expert, academic records and litigationinvolving the expert. [Recall Jose Pidal Handwriting]

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Rule 2: The only way to beat an expert is to be a better expert.

Besides knowing the case, you also must learn that field of specializedknowledge that the expert wants to bring to bear. Difficult? Yes. Impossible? No.By reading voraciously on the field, by consulting your experts, you, too, will becomean expert in the field.

Rule 3. Advance preparation makes a winner.

Always get an advance copy of the expert’s file. As more and morejurisdictions limit the number of depositions and/or their length, it becomes evenmore important that the litigator make every minute of cross-examination count.Getting the file in advance allows you to walk into the deposition with a plan, savethe client money, and take a potential strategic advantage away from the expert.

Rule 4. Take the time you need to get it right.

It’s no good amassing all of this information if you don’t put it to good use.You have to study it, work on it, prepare a plan, and then execute that plan. Readthrough that file until you know it.

Rule 5: Don’t plan to ask, plan to attack.

As a judge once said, “Challenging an expert and questioning his expertise isthe lifeblood of our legal system. It is the only way a judge or court can decidewhom to trust.” Accordingly, your plan should be to destroy the expert in thedeposition. Accordingly, your deposition should be your trial cross-examination,,with the added advantage that you get to take chances in a deposition that youwould not want to take for the first time in front of the court.”

If you hurt the expert in the deposition, then expect him to change his opinions attrial.

(V.C) The Accomplice Witness

Convictions in criminal cases are often based, at least in substantial part, on thetestimony of accomplice witnesses – admitted criminals who participated in the crimes allegedand who, when caught, opted to testify against other defendants in exchange for money andpromises of leniency.

There is no magic formula for cross-examining these rogues. As with any trial



technique, success depends on a combination of good ideas, quick reflexes, hard work andmore hard work. The goal of any cross-examination is to establish facts from which to argueyour client’s case on summation.

Consider that the witness usually is someone who on direct examination has admittedto at least two key vulnerabilities. He is a criminal, and he has struck a deal to testify for thegovernment to save himself from prosecution or a long prison term. In addition, the traitor isoften a documented liar as well, Thus, the cross-examiner may aggressively attack thewitness’ character and elicit his motives for testifying, his interest on the outcome, his priorcriminal conduct and his past, all with little risk of engaging the court’s sympathy for theaccomplice.

The witness’ deal, his self-interest in testifying against others, his hope for leniency,and his perceived need to please the prosecutor all undermine his objectivity and credibility.Eliciting these facts on cross-examination lets you argue in summation that the turncoat willsay anything, regardless of its truth, if it will benefit him or win his freedom.

A particularly effective way to undermine the accomplice’s testimony is to point outways that it is inconsistent with the witness’ prior testimony or statements.

Although cross-examining the accomplice witness can be crucial to the outcome of atrial, there may be times when the most effective cross is no cross. You may represent a clientin a multi defendant case, for instance, in which the witness on direct has said nothing damagingabout your client. Then you can make the point quite well by asking the witness two or threequestions such as “You don’t even know my client, do you?” and “You certainly have noknowledge that he was involved in any conspiracy, isn’t that correct?”

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Significant Laws and Legal Issuances Fourth Quarter 2005


SIGNIFICANT LAWS AND LEGAL ISSUANCES4th Quarter 2005

Christine V. Lao*

Significant laws and legal issuances in the last quarter of 2005 amplified various reforms beingundertaken in the justice sector to improve efficiency in dispute resolution and better administration of justice,particularly in the area of anti-money laundering and tax evasion. Banking and securities regulators havelikewise issued guidelines, rules and opinions pursuant to policy reforms to which they are committed. Othersignificant issuances include a new rent control law, new rules from the Department of Agrarian Reform andregulations on human resources and labor relations.

I. Speedy Justice and Efficient and Effective Dispute Resolution

A.M. No. 05-8-26-SC: Amendment of Rules 112 and 114 of the Revised Rules on Criminal Procedureby Removing the Conduct of Preliminary Investigation from Judges of the First Level Courts

Consistent with assisting first-level court judges address case backlogs in their dockets, such judgesare no longer obliged to conduct preliminary investigation.1 The corresponding amendments to the Rules onCriminal Procedure took effect on 3 October 2005. All preliminary investigations pending during their issuanceshould have terminated by 31 December 2005.

Administrative Order No. 59-2005: Directing the Participation of All Judges of the Regional TrialCourts and First Level Trial Courts in Places Where There are Philippine Mediation Center Units andJustice Reform Initiatives Support Model Courts

The Supreme Court declared June 2005 a Settlement Period for all regional trial courts and first levelcourts in selected jurisdictions.2 Courts in these areas were enjoined to audit and inventory cases in theirdockets and select for mediation at least 20 cases that had not undergone mediation or had undergonemediation but were not settled and were undergoing trial.3 The Administrative Order emphasized theconfidentiality of mediation and conciliation proceedings. No report regarding the proceedings could be

* Consultant, Law and Policy Reform, Asian Development Bank.1 Officers who are now authorized to conduct preliminary investigations are provincial or city prosecutors and their assistants,national and regional state prosecutors, and other officers that may be authorized by law.2 Metro Manila, Cebu City, Mandaue City, Lapu-Lapu City, Davao City, Digos City, Tagum and Panabo of Davao Del Norte,Cagayan de Oro City, San Fernando Pampanga, Angeles City, Guagua and Macabebe, and Bacolod City, Silay, Talisay, Bago and LaCarlota.3 Parties of the chosen cases were asked to appear before the Philippine Mediation Center Units for mediation. Those cases thathad undergone mediation but were not settled were referred for Judicial Dispute Resolution. Courts were likewise enjoined toschedule for both Court-Annexed Mediation (CAM) and Judicial Dispute Resolution (JDR) at least one case in the morning andanother case in the afternoon during the settlement period.



prepared unless settlement was reached. If settlement was reached, a compromise agreement was executedand submitted to the referring court for approval and rendition of judgment.

Revised Rules of Procedure Governing Construction Arbitration

The Revised Rules of Procedure Governing Construction Arbitration took effect on 28 November2005. Under the Revised Rules, the Construction Industry Arbitration Commission (CIAC)’s original andexclusive jurisdiction includes construction disputes – including disputes involving government and privatecontracts – that arise from, or are connected with contracts entered into by parties involved in construction inthe Philippines, whether the dispute arose before or after the completion of the contract, or after the abandonmentor breach thereof.4 The Revised Rules make clear that CIAC continues to exercise original and exclusivejurisdiction over construction disputes although the arbitration is deemed commercial pursuant to Section 21of Republic Act No. 9285.

A party may invoke CIAC jurisdiction without need for it and the other party to enter into a submissionagreement if a construction contract contains an arbitration clause. Such a clause, like a submission to arbitrationof a construction dispute, shall be deemed an agreement to submit an existing or future controversy to CIACjurisdiction notwithstanding a reference to a different arbitration institution or arbitral body in the contract orthe submission.5

Foreign arbitrators not accredited by CIAC may be appointed as co-arbitrator or chairperson of anarbitral tribunal for a construction dispute under certain conditions.6 Likewise, technical or legal experts maybe utilized if requested by any party or if deemed necessary by the Arbitral Tribunal. If requested by any orboth parties, the Arbitral Tribunal needs to confirm such appointment before the appointment is issued.7

II. Strengthening Capacity to Administer Justice in Anti-Money Laundering and Tax Evasion Cases

A.M. No. 05-11-04-SC: Rules of Procedure in Cases of Civil Forfeiture, Asset Prevention and Freezingof Monetary Instrument, Property or Proceeds Representing, Involving or Relating to an UnlawfulActivity or Money Laundering Offense Under Republic Act No. 9160 as Amended

4 Revised Rules of Procedure Construction Arbitration, Rule 2, sec. 2.1. The Rules provide that the CIAC jurisdiction mayinclude, but is not limited to, violation of specifications for materials and workmanship; violations of terms of agreement; interpretationand/or application of contractual provisions; issues relating to amount of damages and penalties; commencement time and delays;maintenance and defects; payment default of employer or contractor; and changes in contract cost. (Rule 2, sec. 2.1.1) The

Rules describe construction disputes as including those between or among parties to or who are otherwise bound by anarbitration agreement directly, or by reference, whether such parties are project owner, contractor, subcontractor, fabricator, projectmanager, design professional, consultant, quantity surveyor, bondsman or issuer of an insurance policy in a construction project(Rule 2, sec. 2.2).5 Revised Rules of Procedure Governing Construction Arbitration, Rule 4, sec. 4.1. An arbitration agreement or submission toarbitration should be in writing. It need not be signed by the parties, as long as it is clearly intended that the parties agree to submita present or future controversy arising from a construction contract to arbitration. It may be in the form of exchange of letters sent bypost or by telefax, telex, telegrams, e-mail or other modes of communication. (Rule 4, sec. 4.1.2)

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The Rule, which took effect on 15 December 2005, covers civil forfeiture in the regional trial court;the trial court’s issuance of an asset preservation order; and petitions for freeze orders in the Court ofAppeals.

Civil forfeiture

The Anti-Money Laundering Council (AMLC), represented by the Office of the Solicitor General,may institute actions for civil forfeiture and all other remedial proceedings in favor of the Republic of thePhilippines, of any monetary instrument, property or proceeds representing, involving or relating to an unlawfulactivity or a money laundering offense. A petition for civil forfeiture should be filed in any regional trial courtof the judicial region where the monetary instrument, property or proceeds is located.8 It is unnecessary forthere to be a prior criminal charge, pendency of or conviction for money laundering in order for a petition forcivil forfeiture to commence or be resolved.9 The court shall grant the petition if there is preponderance ofevidence in favor of the petitioner and declare the monetary instrument, property or proceeds forfeited to theState, or order respondent to pay an amount equal to the value of the monetary instrument or property.10 Thecourt’s order on the contested claim may be appealed to the Court of Appeals.11

It should be noted that rules on amicable settlement, mediation and other alternative modes of disputeresolution should not apply to civil forfeiture cases.12 Likewise notable is the fact that the Rule excepts fromthe hearsay rule a memorandum, report, record or data compilation of acts, events, conditions, opinions ordiagnoses made by electronic, optical or other similar means at or near the time of or from transmission orsupply of information by a person with knowledge as a regular practice and kept in the normal course ofconduct of a business activity, as shown by the testimony of the custodian or other qualified witness.13

6 Rule 9, sec. 9.4 provides that foreign arbitrators not accredited by CIAC may be appointed as a co-arbitrator or chairperson ofan arbitra tribunal under the following conditions: (a) the dispute is a construction dispute in which one party is an international party—one whose place of business is outside the Philippines; and (b) the foreign arbitrator to be appointed is not a Philippine nationaland is not of the same nationality as the international party in dispute.7 Revised Rules of Procedure Governing Construction Arbitration , Rule 15, sec. 15.1.8 Where all or any portion of the monetary instrument, property or proceeds is located outside the Philippines, the petition maybe filed in the regional trial court in Manila or the judicial region where any portion of the monetary instrument, property or proceedsis located, at the petitioner’s option. (Sections 2-3)9 A.M. No. 05-11-04-SC, sec. 27.1 0 A.M. No. 05-11-04-SC, sec. 32. A person who has not been impleaded or who has not intervened claiming an interest in theproperty subject of the petition, may apply by verified petition for a declaration that the same legitimately belongs to him, and forthe segregation or exclusion of the corresponding property. The petition should be filed with the court that rendered the forfeitureorder within 15 days from the date of finality of the order of forfeiture. Otherwise, the forfeiture order shall be executory and bar other claims. A.M. No. 05-11-04-SC, sec. 35.1 1 A.M. No. 05-11-04-SC, sec. 42.1 2 A.M. No. 05-11-04-SC, sec. 26.1 3 A.M. No. 05-11-04-SC, sec. 30.



Issuance of asset privatization order

The judge may issue ex parte an asset preservation order upon determining that probable causeexists that certain monetary instruments, property or proceeds are related to an unlawful activity defined assuch under Republic Act No. 9160, based on the allegations of a verified petition sufficient in form andsubstance, with a prayer for the issuance of an asset preservation order.14 The order immediately prohibitsany transaction, withdrawal, deposit, transfer, removal, conversion, concealment or other disposition of thesubject property for 20 days from the dates of service to respondent and upon each covered institution orgovernment agency.15 It is enforceable anywhere in the Philippines.16

The Rule also provides guidelines in serving the asset preservation order and receivership of theproperty being preserved.17

Freeze orders in the Court of Appeals

The AMLC, through the Solicitor General’s Office may file, ex parte, in the name and on behalf ofthe Republic of the Philippines, a verified petition for a freeze order on any monetary instrument, property orproceeds relating to or involving an unlawful activity defined under Section 3(i) of Republic Act No. 9160 asamended by Republic Act No. 9194. The petition should be accompanied by a sworn certification againstforum shopping personally signed by an authorized official of the Anti-Money Laundering Council.18 The ruleprohibits disclosure of the petition and provides procedures to ensure confidentiality.19

If the Court is satisfied that there exists probable cause that the subject property are related to orinvolved in an anti-money laundering activity, it shall issue ex parte the freeze order. The freeze order will beeffective immediately for 20 days. Within that period, the court will conduct a summary hearing with notice to

1 4 A.M. No. 05-11-04-SC, sec. 11.1 5 A.M. No. 05-11-04-SC, sec. 11. The order shall be served personally by the sheriff or proper officer designated by the court. Ifpersonal service is not practicable, the order shall be served in any other manner which the court may deem expedient. Whenauthorized by the court, service may be effected upon respondent or any person acting in his behalf, and upon the treasurer of otherresponsible officer of the covered institution, or the head of the covered government agency, by fax or e-mail. In such cases, the dateof transmission shall be deemed to be prima facie the date of service. (sec. 14)1 6 A.M. No. 05-11-04-SC, sec. 14. Within the 20-day period, a hearing will be scheduled where the respondent may show goodcause why the order should be lifted. (sec. 12) The respondent or the party whose personal or real property has been preservedpursuant to the order may raise in motion or in the comment or opposition the grounds for its discharge. The following grounds forthe discharge of the order may be raised: (1) The order was improperly or irregularly issued or enforced; (2) any of the material allegations in the petition or any of the contents of any attachment to the petition or its verification is false; and (3) the specific personalor real property ordered preserved is not in any manner connected with the alleged unlawful activity defined in section 3(i) ofRepublic Act No. 9160 as amended by Republic Act No. 9194. No counterbond to discharge the asset preservation order shall beallowed except for compelling reasons. (sec. 17)1 7 A.M. No. 05-11-04-SC, secs. 18-21.1 8 A.M. No. 05-11-04-SC, secs. 44-45.1 9 A.M. No. 05-11-04-SC, secs. 47-49.

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the parties to determine whether or not to modify or lift the freeze order or extend its effectivity. Extensionsnot exceeding six months may be granted for good cause shown, and upon petitioner’s motion.20

After the summary hearing, the Court of Appeals shall remand the case and transmit the records tothe regional trial court for consolidation with the pending civil forfeiture proceeding.21 Decisions of the Courtof Appeals may be appealed to the Supreme Court under Rule 45. However, the appeal shall not stay theenforcement of the decision or order, unless the Supreme Court so directs.22

A.M. No. 05-11-07-CTA: Revised Rules of the Court of Tax Appeals

The Revised Rules of the Court of Tax Appeals23 took effect on 15 December 2005. The RevisedRules set out the exclusive appellate jurisdiction of the Court en banc24 as well as the jurisdiction of the Courtin Divisions.25

The Revised Rules provide that the Court, acting in divisions, has exclusive original jurisdiction overall criminal offenses arising from violations of the National Internal Revenue Code or Tariff and CustomsCode, as well as other laws administered by the Bureau of Internal Revenue or Bureau of Customs, wherethe principal amount of taxes and fees, exclusive of charges and penalties claimed, is P1,000,000 or more.26

The Court, acting in Divisions, likewise has original jurisdiction in tax collection cases involving final andexecutory assessments for taxes, fees, charges and penalties, where the principal amount of taxes and fees,exclusive of charges and penalties claimed, is P1,000,000 or more.27 Consequently, the Revised Rules setout not only the procedure in civil cases handled by the Court in exercise of its appellate jurisdiction en bancand in division,28 but also the procedure in criminal cases handled by the Court.29

2 0 Such motion should be filed before the expiration of the original 20-day period. (A.M. No. 05-11-04-SC, sec. 51)2 1 A.M. No. 05-11-04-SC, sec. 56.2 2 A.M. No. 05-11-04-SC, sec. 57.2 3 The Revised Rules provide that the Court of Tax Appeals, composed of a presiding justice and five associate justices appointedby the President, may exercise its power en banc or in two Divisions of three justices each. (A.M. No. 05-11-07-CTA , Rule 2, sec.1) Sessions of the Court in Divisions require the attendance of at least two justices of the Court in order to constitute a quorum, andthe presence at the deliberation and the affirmative vote of at least two justices is required for the pronouncementof a judgment or final resolution of the Court through a division (A.M. No. 05-11-07-CTA, Rule 2, sec. 4)2 4 A.M. No. 05-11-07-CTA, Rule 4, sec. 2 (2005).2 5 A.M. No. 05-11-07-CTA, Rule 4, sec. 3 (2005).2 6 Note that, “[t]he criminal action and the corresponding civil action for the recovery of civil liability for taxes and penalties shallbe deemed jointly instituted in the same proceeding. The filing of the criminal action shall necessarily carry with it the filing of the civilaction. No right to reserve the filing of such civil action separately from the criminal action shall be allowed or recognized.” A.M. No.05-11-07-CTA, Rule 9, sec. 11.2 7 A.M. No. 05-11-07-CTA, Rule 4, sec. 3 (b), (c).2 8 A.M. No. 05-11-07-CTA,, Rule 8.2 9 A.M. No. 05-11-07-CTA, Rule 9. For criminal cases falling under the exclusive original jurisdiction of the Court, the RevisedRules has reproduced provisions of the rules of criminal procedure found in Rules 110



The Revised Rules provide that Rules 18 and 118 of the Rules of Court on pre-trial, as amplified inA.M. No. 03-1-09-SC, applies to all cases falling within the original jurisdiction of the Court. However,parties are prohibited from compromising the criminal liability or submit the case to mediation, arbitration orany other mode of alternative dispute resolution.30

During trial, the Court is empowered under the Revised Rules, to receive evidence in all cases fallingwithin the original jurisdiction of the Court in Division, and in appeals in both civil and criminal cases wherethe Court grants a new trial.31 Evidence may be taken by a justice 32or by a court official.33

III. Procedures, Guidelines and Opinions of Banking and Securities Regulators

BSP Circular No. 505, Series of 2005: Branching Policy and Guidelines

The Bangko Sentral ng Pilipinas (BSP) has amended the Branching Policy and Guidelines found inthe Manual of Regulations for Banks. The Circular, which intends to address overbanking in certain areas,covers the establishment, relocation, voluntary closure and sale of local branches of domestic banks, includinglocally incorporated subsidiaries of foreign banks, took effect on 6 January 2006.34

Under the Circular, only one branch application may be submitted at any time by banks with less thanP100 million unimpaired capital accounts. Banks with at least P100 million unimpaired capital accounts may

– 114 of the Rules of Court. The Revised Rules has likewise adopted key provisions of the Rules of Court with respect to appealsof criminal cases filed with the Court.3 0 A.M. No. 05-11-07-CTA, Rule 11, sec. 1.3 1 A.M. No. 05-11-07-CTA, Rule 12, sec. 2.3 2 A.M. No. 05-11-07-CTA, Rule 12, sec. 3.3 3 A.M. No. 05-11-07-CTA, Rule 12, sec. 4. Reception of evidence by a court official shall cost P500 for each day of actual session.(A.M. No. 05-11-07-CTA, Rule 17, sec. 1)3 4 The revised Guidelines define “branch” as “any office or place of business in the Philippines outside the head office at whichdeposits are regularly received or withdrawn.” Stand-alone automated teller machines or cash acceptance machines and ad hoc telleringbooth are not considered branches. Convenience banking centers, express banking centers, representative offices, sales or serviceoutlets and banking kiosks may be considered branches subject to branching/application rules if manned by at least three officers oremployees at any time, and if they receive or accept deposits. Bank offices that will not accept deposits or act as a branch as definedunder the Guidelines may be allowed to be established without prior BSP approval, provided that the head of the bank’s branchesdepartment (with the rank of Vice President or higher) submits a certifications to the appropriate Supervising and ExaminingDepartment that the office shall neither accept deposits nor service withdrawals. The certification should be submitted not later thanfive banking days from the date the office is opened. (sec.1)The establishment of foreign banks’ branches in the Philippines continue to be governed by sec. x121 of the Manual of Regulation ofBanks. Circular No. 505, sec. 1.

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be allowed a maximum of five branch applications (including approved but unopened branches) at anytime.35 Branches may be established anywhere in the Philippines except in the following cities and municipalitiesin Metro Manila: Makati, Mandaluyong, Manila, Paranaque, Pasay, Pasig, Quezon, and San Juan.36 BSPmay decide to disapprove an otherwise qualified branch application if in its determination the application willlead to an overbanking situation in the specific market. The BSP’s disapproval shall be subject to the MonetaryBoard’s confirmation.

The Circular provides prerequisites for the grant of authority to establish a branch or banking officeand provides for the assignment of theoretical capital to be deducted from existing qualifying capital in orderto determine compliance with the 10 percent risk-based capital adequacy ratio.37 The Circular likewiseprovides that banks may be authorized to solicit and accept deposits outside bank premises, provided theminimum requirement is met; no major supervisory concerns exist that affect safety and soundness; and thearea of operations are within one-hour normal travel time by land or sea from any head office or branch—except in remote areas where more than one hour normal travel time may be allowed.38

SEC Memorandum Circular No. 2, Series of 2006

The Securities and Exchange Commission (SEC) has required all non-stock, non-profit corporations,including non-government organizations that intend to engage in microfinance activities in the Philippines, tostate in the purpose clause of their Articles of Incorporation that they shall conduct microfinance operationspursuant to the Social Reform and Poverty Alleviation Act (Republic Act No. 8425). Likewise, they shouldinclude the phrase “microfinance operations pursuant to Republic Act No. 8425” in the purpose box of theirGeneral Information Sheet. Non-stock, non-profit corporations already engaged in microfinance operations

3 5 Other capital accounts requirements are as follows:- Rural and local cooperative banks shall be allowed to establish a branch only if their unimpaired capital accounts is at least 10million. - A qualified rural bank or local cooperative bank with unimpaired capital accounts of at least P10 million but less than P50million may establish a branch anywhere except in NCR, which branch should be located at an area that can be reached from its headoffice within two-hours’ normal travel time by land or sea public transport.- A rural bank with unimpaired capital accounts of at least P50 million but less than P100 million may establish branches in anyisland group where the head office is located, except in NCR.- A large rural bank with at least P100 million unimpaired capital accounts may establish branches anywhere in the Philippinesexcept in NCR. A qualified bank with unimpaired capital accounts at least equivalent to the minimum capital required for thrift bankswith head office in the NCR may establish branches anywhere except in Makati, Manaluyong, Manila, Paranaque, Pasay, Pasig,Quezon City and San Juan Metro Manila.3 6 However, branches of microfinance-oriented banks, micro-finance oriented branches of regular banks, and branches that caterprimarily to the credit needs of Barangay Micro-Business Enterprises registered under Republic Act No. 9178 may be establishedanywhere subject to compliance with the minimum capital requirements and the following conditions: (a) a microfinance-orientedbank with a head office outside the National Capital Region (NCR) may establish a branch in the NCR after it has put up the minimumcapital required for a thrift bank with a head office in NCR; and (b) a bank with a head office outside NCR may be allowed to establisha microfinance-oriented branch in NCR only after it has put up the minimum capital required for a thrift bank with a head office in theNCR.3 7 If the applicant’s risk-based capital adequacy ratio after deducting the assigned capital is less than 10 percent, its applicationshall not be processed unless it infused the amount necessary to maintain its risk-based capital adequacy ratio to at least 10 percent.BSP Circular No. 505, Series of 2005, sec. 1.3 8 BSP Circular No. 505, Series of 2005, sec. 2.



need to amend their Articles of Incorporation and GIS within 30 days from 2 February 2006, the date onwhich the relevant SEC Memorandum took effect.

SEC Memorandum Circular No .7, Series of 2005

The SEC has issued guidelines on mutual fund companies’ evaluation of foreign investments. Underthe Guidelines, such investments are limited to the following bonds and other evidence of indebtedness andequity securities:

Bonds and other evidence of indebtedness

1. Those issued and unconditionally guaranteed by the government of any foreign country witha credit rating that is at least at par with the rating of the Republic of the Philippines’ bonds;

2. Those registered and traded in an organized market in another country whose issue andissuer/borrower received a credit rating of Aaa or AAA from a reputable international creditrating agency; and

3. Those issued and unconditionally guaranteed by supranationals (or international organizationswhose membership transcends national boundaries or interests) that have received a minimumlong-term credit rating of Aaa or AAA from a reputable international credit rating agency.39

Equity securities

Those traded in an organized exchange in another country and possess all the following qualities:

1. The issuer has a track record of profitable operations for the preceding three consecutiveyears or of consistent dividend declarations for the same periods;

2. The equities have the following Return on Equity

Grade Maximum DescriptionExposure(Percentage ofAllocated Fund for Equity)

A 100% Stocks with ROEs 25 percent better than the last three-year average ROE of the Phisix

B 50% Stocks with ROEs at par with the three-year averageROE of the Phisix

C 25% Stocks with ROEs below the 75% to 100 percent rangeof the three-year average ROE of the Phisix

D 20% Stocks with ROEs equivalent to 50% but less than75% of the last three-year average ROE of the Phisix

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3. The issuer fully complies with its obligations of continuing disclosure and the other requirementsof the securities laws and regulations in force in its jurisdiction and which laws and regulationsare not substantially different from those enforced in the Philippines; and

4. Such other tradable foreign investment as SEC may allow in the future, subject to suchrestrictions or limitations that it may impose.40

The Guidelines provide that the purchase and sale of foreign securities by mutual fund companiesshall be made only through a distributor or underwriter duly authorized or licensed by the government of theissuer of such securities.

SEC Opinion No. 05-01: Reclassification of Paid-in Surplus (4 January 2005)

The Securities and Exchange Commission received a query regarding whether or not a corporationmay increase its authorized capital stock by increasing its par value, decreasing the number of shares, andreclassifying additional paid-in capital to paid-up capital of the corporation. The foregoing arrangement wasdescribed as a “reverse stock split”— “the pro rata combination of all the outstanding shares of a specifiedclass into smaller number of shares of that class by an amendment to articles stating the effect on outstandingshares.”

The SEC ruled that a reorganized enterprise may be relieved of charges against its income byconverting additional paid-in capital into paid-in capital of the corporation, on the condition that if the existingenterprise were continued, the same result would have been attained even without organization.41 Thisconstitutes an exception to the general rule that additional paid-in capital may only be declared as stockdividend and should not be used to relieve income of the current or future years of charges chargeable againstincome.

SEC Opinion No. 04-47: Declaration of Dividends and Compensation (24 January 2005)

The SEC was queried whether or not a corporation can set aside from its retained earnings anamount to pay the entire unpaid subscription of one of its subscribers. The SEC ruled that unpaid subscriptions,including delinquent stocks, may be settled by cash dividends which the corporation may wish to declare inaccordance with Section 43 of the Corporation Code. It noted, however, that Section 43 of the Corporation

3 9 For items 2 and 3, it is essential that the issuer fully complies with the obligation of continuing disclosure and the otherrequirements of the securities laws and regulations in force in the place of issuance of the instruments.4 0 Financial instruments shall be considered tradable if its quoted two-way prices are readily and regularly available from anexchange, dealer, broker, industry, group, pricing service or regulatory agency and those prices represent actual and regularly occurringmarket transactions on an arm’s length basis.4 1 Such fact, and the conversion of additional paid-in capital to paid-in capital, should be fully disclosed and formally approved asin reorganization, and the articles of incorporation should be amended to reflect the changes in the capital structure. There should beno impairment of legal capital and no prejudice caused to stockholders and creditors. Taxes and SEC fees corresponding to the issuanceof shares should be paid.



Code provides that the cash dividend due shall first be applied to the unpaid balance, while stock dividendsshould be withheld until the unpaid balance is fully paid. Therefore, should a corporation’s board of directorsdecide to declare dividends out of the unrestricted retained earnings which shall be payable in cash, such cashdividends may be applied as payment of the unpaid subscription of all delinquent shares. This, in effect,restricts the delinquent stockholder’s right to dividends, until full payment of the unpaid subscription.

IV. Real Property

Republic Act No. 9341: An Act Establishing Reforms in the Regulation of Rent for Certain ResidentialUnits, Providing the Mechanisms Therefor and for Other Purposes (Rent Control Act of 2005)

The Rent Control Act of 2005, which took effect on 5 January 2006, prohibits a lessor of a coveredresidential unit from increasing the rent by more than 10 percent annually as long as the unit is occupied by thesame lessee.42 It also prohibits the lessor from demanding more than one month advance rent. He likewisecannot demand more than two months deposit, which deposit shall be kept in a bank under the lessor’saccount name during the entire duration of the lease. Interest that accrues thereon should be returned to thelessee upon expiration of the lease. 43

The law prohibits lessees from assigning the lease or subleasing the whole or any portion of theresidential unit, without the written consent of the owner or lessor.44 Lessees who do so without the owner’sor lessor’s consent may be ejected.45

Any person found guilty of violating the law will be fined not less than P5,000 nor more than P15,000,or face imprisonment of not less than one month and one day to not more than 6 months. (sec.12)

Administrative Order No. 02, series of 2005 issued by the Department of Land Reform: Rules andProcedures Governing the Acquisition of Agricultural Lands Subject of Voluntary Offer to Sell andCompulsory Acquisition and Those Covered Under Executive Order No. 407.

4 2 Rep. Act No. 9341, sec. 3. Covered residential units include all residential units in the National Capital Region and other highlyurbanized cities, where the total monthly rent as of the date of effectiveness of the law, did not exceed P10,000; and all residential unitsin other areas the total monthly rent for each of which did not exceed P5,000.(Rep. Act No. 9341, sec. 11) Rent-to-own schemes areexempted from the Act. (Rep. Act No. 9341, sec. 9)4 3 However, if the lessee fails to settle rent, electric, telephone, water or other utility bills, or destroys any house components andaccessories, the deposit and interest shall be forfeited in favor of the lessor, in the amount commensurate to the damage caused by thelessee. (Rep. Act No. 9341, sec. 5.)4 4 Rep. Act No. 9341, sec. 6.4 5 Rep. Act No. 9341, sec. 7. Other grounds for ejectment include: arrears in payment of rent for a total of three months; legitimateneed of the owner or lessor to repossess his property for his or her own use or for the use of any immediate member of his or herfamily as a residential unit; need of the lessor to make necessary repairs on the leased premises that is the subject of an existing orderof condemnation by appropriate authorities; and expiration of the period specified under the lease contract. (Rep. Act No. 9341, sec.7) However, lessors and their successors in interest may not eject a lessee on the ground that the leased premises have been sold ormortgaged to a third person, regardless of whether or not the lease or mortgage is registered. (Rep. Act No. 9341, sec.8)

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The Department of Land Reform has issued and Administrative Order setting forth when and howlandowners may voluntarily offer their private agricultural lands for coverage under the Comprehensive AgrarianReform Law (Rep. Act No. 6657).46 The Order provides the manner in which compensation for the land isdetermined, and states that landowners (other than banks and financial institutions) who voluntarily offer theirlands for sale will receive an additional five percent cash payment. The Order took effect 26 May 2005.

V. Rules and Procedures Relating to Human Resources and Labor Relations

Amendments to Sections 9b and 18 of Wage Order No. RB IV-B-01and Rules Implementing Wage Order No. RB-IV-B-01

Wage Order No. RB IV-B-01 increased the minimum wage rates for all minimum wage workers andemployees in the private sector within the covered region.47 An amendment to the Wage Order, which tookeffect on 17 June 2005, defined “New Business Establishments” to include non-profit institutions establishedwithin two years from the time the Wage Order takes effect, based on the latest registration with the appropriategovernment agency such as SEC, DTI, COA and Mayor’s Office.

Rules implementing the Wage Order have also been issued. These Rules took effect on 17 June2005.48 Under the Implementing Rules, wage increases granted by an employer in an organized establishmentwithin three months prior to the Order’s effectiveness shall be credited as compliance with the prescribedincrease if expressly provided in a CBA. In unorganized establishments, wage increases granted within threemonths prior to the Order’s effectiveness shall be credited as compliance.49

Any person, association or other entity that refuses or fails to pay the prescribed increase shall bepunished by a fine not less than P25,000 or imprisonment of not more than four years or both. Moreover,persons convicted under the order shall not be entitled to the benefits provided under the Probation Law. Ifthe violation is committed by a corporation, trust or firm, partnership, association or other entity, imprisonmentshall be imposed on its responsible officers. The employers concerned shall be ordered to pay an amountequivalent to double the unpaid benefits owing to the employees, but payment of such indemnity shall notabsolve the employer from criminal liability.50

4 6 Applications for Voluntary Offer to Sell (VOS) involving landholdings with an aggregate area of five hectares and below perlandowner shall not be accepted. Landholdings that were issued patents under the “Handlog Titulo” program of DENR shall generallynot be subject of acquisition and distribution. Lands proclaimed as settlement areas and awarded to settlers or beneficiaries under theresettlement program earlier implemented shall not be subject to acquisition and redistribution.4 7 Region IV-B covers Occidental Mindoro, Oriental Mindoro, Marinduque, Romblon, Palawan Provinces, and the cities ofCalapan and Puerto Princesa.4 8 Rules Implementing Wage Order No. RB-IV-B-01, Rule V, sec. 11.4 9 Rules Implementing Wage Order No. RB-IV-B-01, Rule IV, sec. 1.5 0 Rules Implementing Wage Order No. RB-IV-B-01, Rule V, sec. 3.



Distressed establishments, new business establishments, those adversely affected by calamities andretail/service establishments regularly employing not more than 10 workers are exempt from the Order.51

Criteria for full or partial exemption are found in the Implementing Rules, as are the documents required to besubmitted in order to avail the exemption.52

Department of Labor and Employment Order No. 40 E-05 (Series of 2005), Amending Rule IX, Bookof the Omnibus Rules Implementing the Labor Code of the Philippines, as Amended by DepartmentOrder No. 40-03, Series of 2003

Department Order No. 40 E-05 amended the rules implementing the Labor Code provisions regardingappeals from a Med-Arbiter’s decision to the Secretary of Labor. The amendments took effect 11 January2006.53

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5 1 Rules Implementing Wage Order No. RB-IV-B-01, Rule III, sec. 1.5 2 Rules Implementing Wage Order No. RB-IV-B-01, Rule III, sec. 3. Applications for exemption shall be filed not later than 75days from the publication of these Rules Implementing Wage Order RB-IVB-01. Date of mailing shall be the date of filing. In the caseof new business establishments, applications shall be filed not later than 60 days from the registration date. (Rules ImplementingWage Order RB-IVB-01, Rule III, sec. 5)5 3 An appeal needs to be filed within ten days from receipt by the parties of a copy. The appeal should be under oath, shall consistof a memorandum of appeal specifically stating the grounds relied upon by the appellant with the supporting argument and evidence.Where no appeal is filed within the ten-day period, “the decision/order shall become final and executory and the Med-Arbiter shallenter this fact into the records of the case.” (Dep. Ord. No. 40 E-05, sec. 1)The memorandum of appeal should be filed in the Regional Office where the petition originated. A copy should be furnished thecontending unions and the employer. Within 24 hours from receipt of the appeal, the Regional Director shall cause the transmittal,together with the entire records of the case, to the Office of the Secretary of Labor.A reply to the appeal may be filed by any party to the petition within 10 days from receipt of the memorandum of appeal. It shallbe filed directly with the Office of the Secretary. The Secretary shall decide the appeal within 15 days from receipt of the entire recordof the petition. The Secretary’s decision shall become final and executory after 10 days from receipt by the parties, and no motion forreconsideration shall be entertained.Within 48 hours from notice of receipt of decision by the parties and finality of the decision, the records of the case will be remandedto the Regional Office for implementation. Implementation shall not be stayed unless restrained by the appropriate court.

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SUBJECT GUIDE AND DIGESTS4th Quarter 2005

Tarcisio Diño

AGRARIAN REFORM

COMPREHENSIVE AGRARIAN REFORM PROGRAM

PRELIMINARY CONSIDERATION

Definition of Terms

Agrarian Dispute. Section 3(d) of Republic Act No. 6657, otherwise known as the “ComprehensiveAgrarian Reform Law of 1988” (CARL). Defined as “any controversy relating to tenurial arrangements,whether leasehold, tenancy, stewardship or, otherwise, over lands devoted to agriculture, including disputesconcerning farmworkers’ associations or representation of persons in negotiating, fixing, maintaining, changing,or seeking to arrange terms or conditions of such tenurial arrangements. It includes any controversy relatingto compensation of lands acquired under the CARL and other terms and conditions of transfer of ownershipfrom landowners to farmworkers, tenants and other agrarian reform beneficiaries, whether the disputantsstand in the proximate relation of farm operator and beneficiary, landowner and tenant, or lessor and lessee.”(Heirs of Magpily v. De Jesus, G.R. No. 167748, 8 November 2005).

Tenants - defined as persons who in themselves and with the aid available from within their immediate

farm households cultivate the land belonging to or possessed by another, with the latter’s consent; for purposesof production, sharing the produce with the landholder under the share tenancy system, or paying to thelandholder a price certain or ascertainable in produce or money or both under the leasehold tenancysystem. (Id.).

Coverage

Right of Retention. Retention Limit. It serves to mitigate the effects of compulsory land acquisitionby balancing the rights of the landowner and the tenant and by implementing the doctrine that social justicewas not meant to perpetrate an injustice against the landowner. A retained area is land which is not supposedto leave the landowner’s dominion. For as long as the area to be retained is compact or contiguous and doesnot exceed the retention ceiling of five (5) hectares, a landowner’s choice of the area to be retained mustprevail. Administrative Order No. 4, series of 1991, supplies the details for the exercise of a landowner’sretention rights and recognizes no limit to the prerogative of the landowner, although he is persuaded to retainother lands instead to avoid dislocation of farmers. Therefore, there is no legal and practical basis to order thecommencement of the administrative proceedings for the placement of respondent Arrastia’s land under theCARP since her property’s land area falls below the retention limit. (Id.; Danan v. Court of Appeals, G.R.No. 132759, 25 October 2005).

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AGRICULTURAL LEASEHOLD SYSTEM

Leasehold Contract or Relations

Tenancy Relationship. Essential requisites: (1) the parties are the landowner and the tenant oragricultural lessee; (2) the subject matter of the relationship is an agricultural land; (3) there is consent betweenthe parties to the relationship; (4) the purpose of the relationship is to bring about agricultural production; (5)there is personal cultivation on the part of the tenant or agricultural lessee; and, (6) the harvest is sharedbetween the landowner and the tenant or agricultural lessee. All these requisites must concur in order tocreate a tenancy relationship between the parties. (Id.). The absence of one or more requisites will not makethe alleged tenant a de facto tenant. A tenancy relationship cannot be presumed. There must be evidence toprove it and all its indispensable elements. (Heirs of Magpily v. De Jesus, supra).

Certifications issued by administrative agencies and/or officials concerning the presence or the absenceof a tenancy relationship are merely preliminary or provisional and are not binding on the courts. (Deloso v.Sps. Marapao, G.R. No. 144244, 11 November 2005). Respondents’ occupancy and continued possessionof the subject lots, upon their “honest belief and impression” that they are tenants does not make them de juretenants. (Rimasug v. Martin, G.R. No. 160118, 22 November 2005). Unless a person establishes his statusas a de jure tenant, he is not entitled to security of tenure. (Id.).

TERMINATION OF LEASEHOLD RELATIONS

Tenure of Leasehold Relations. Section 7 of Republic Act (RA) No. 3844, otherwise known as the“Code of Agrarian Reforms of the Philippines,” as amended, provides that once there is a leasehold relationship,the landowner cannot eject the agricultural tenant from the land unless authorized by the court for causesprovided by law. (Heirs of Tan, Sr. v. Pollescas, G.R. No. 145568, 17 November 2005).

Extinguishment of Leasehold Relations. Only in the instances stated in Sections 8 and 28 of RANo. 3844, as amended. For Section 9 (Severance of Relationship) and Section 10 of RA No. 3844 toapply, the existence of a tenancy relationship between the previous landowner and the subsequent landownermust in the first place be proven. Section 36 of this law enumerates the grounds for dispossession of thetenant’s landholding. For non-payment of the lease rental to be a valid ground to dispossess the agriculturallessee of the landholding, the amount of the lease rental must first of all be lawful. If the amount of lease rentalclaimed exceeds the limit allowed by law, non-payment of lease rental cannot be a ground to dispossess theagricultural lessee of the landholding. (Id.).

DEPARTMENT OF AGRARIAN REFORM (DAR)

Under Section 17 of Executive Order No. 229, the DAR is vested with quasi-judicial power andexclusive original jurisdiction to determine and adjudicate agrarian reform matters, as well as other mattersinvolving the implementation of agrarian reform laws, except those falling under the exclusive original jurisdiction

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of the DENR and the Department of Agriculture. (Heirs of de la Cruz v. Heirs of Cruz, G.R. No. 162890,November 22, 2005; Sps. Garcia v. Atty. Bala, A.C. No. 5039, November 25, 2005)

The DAR Secretary had the authority to withdraw the CLOA upon a finding that the same is contrary

to law and DAR orders, circulars and memoranda. The resolution of such issues by the DAR Secretary willentail the application and implementation of agrarian reform laws, inclusive of P.D. No. 946 as well as theimplementing orders, circulars and rules and regulations issued by the DAR. On the issue of who may be orshall be declared as the owner-cultivator of the landholding, P.D. No. 27 and other agrarian reform laws,DAR Memorandum Circular No. 19, Series of 1978 as amended by DAR Administrative Order No. 14,Series of 1988, and DAR Memorandum Circular No. 8, Series of 1980 will apply. On the issue of whetherthe petitioners sold their tenancy rights over the landholding and barred them from asserting their rights, eitherby pari delicto, prescription or laches, the DAR Secretary will apply P.D. No. 27 and the rulings in Torresv. Ventura and Corpus v. Grospe, reiterated in Siacor v. Gigantana. On the issue of whether the petitionerswere denied of their right to substantive and procedural due process, the DAR Secretary will take intoaccount, inter alia, Administrative Order No. 3, Series of 1990. (Heirs of de la Cruz v. Heirs of Cruz,G.R. No. 162890, 22 November 2005).

Matters involving strictly the administrative implementation of the CARL of 1988 and other agrarianlaws as enunciated by pertinent rules shall be the exclusive prerogative of and cognizable by the Secretary ofthe DAR. (Ramos v. Martinez, Sr., G.R. No. 161973, 11 November 2005). Under P.D. No. 27 and otheragrarian reform laws (including RA No. 6657), the DAR Secretary is vested with the administrative authority:[i] to issue and correct or recall the CLT issued under Section 24 of R.A. No. 6657; [ii] to approve andexecute CLOAs on which are based the TCT to be issued by the Register of Deeds; [iii] to approve ordisapprove the conversion, restructuring or readjustment of agricultural lands into residential, commercial,industrial, and other non-agricultural uses. (Heirs of de la Cruz v. Heirs of Cruz, supra). The DARAB hasno jurisdiction over the orders, resolutions, or other administrative circulars of the DAR Secretary in theexercise of its administrative powers. In case the DAR Secretary denies their petition, the petitioners mayappeal to the Office of the President, and in case of an adverse ruling, a petition for review with the CA underRule 43 of the 1997 Rules of Civil Procedure. (Id.; Sps. Garcia v. Atty. Bala, A.C. No. 5039, 25 November2005).

DEPARTMENT OF AGRARIAN REFORM ADJUDICATION BOARD(DARAB)

Primary and Exclusive Original Jurisdiction. Under Section 50 of the CARL, as well as Section34 of Executive Order No. 129-A, the DARAB has primary and exclusive jurisdiction, both original andappellate, to determine and adjudicate all agrarian disputes involving the implementation of the ComprehensiveAgrarian Reform Program (CARP) under the CARL and other agrarian laws and their implementing rulesand regulations. However, for the DARAB to have jurisdiction over a case, there must exist a tenancyrelationship between the parties. (Heirs of de la Cruz v. Heirs of Cruz, supra).

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The issues of whether the petitioner was a bona fide tenant or agricultural lessee and whether he hada right to redeem the landholding under the CARL are within the exclusive jurisdiction of the ProvincialAgrarian Reform Adjudicators (PARAD) and the DARAB on appeal. (Ramos v. Martinez, Sr., supra).However, for the DARAB to have jurisdiction in such cases, they must relate to an agrarian dispute betweenlandowner and tenants to whom CLOAs have been issued by the DAR Secretary. The cases involving theissuance, correction and cancellation of the CLOAs by the DAR in the administrative implementation ofagrarian reform laws, rules and regulations to parties who are not agricultural tenants or lessees are within thejurisdiction of the DAR and not of the DARAB. (Id.).

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CIVIL LAW

THE FAMILY CODE OF THE PHILIPPINES (the “Family Code”)

CIVIL CODE OF THE PHILIPPINES (the “Civil Code”)

PRELIMINARY TITLE

HUMAN RELATIONS

Principle of Abuse of Rights (Article 19 of the Civil Code). Sets certain standards which must beobserved not only in the exercise of one’s rights but also in the performance of one’s duties: Every personmust act with justice; give everyone his due; and observe honesty and good faith. (Manuel v. People, G.R.No. 165842, 29 November 2005).

Article 20 of the Civil Code speaks of the general sanctions of all other provisions of law which do

not especially provide for its own sanction. When a right is exercised in a manner which does not conform tothe standards set forth in the said provision and results in damage to another, a legal wrong is therebycommitted for which the wrongdoer must be responsible. If the provision does not provide a remedy for itsviolation, an action for damages under either Article 20 or Article 21 of the Civil Code would be proper. (Id.).In this case involving the crime of bigamy, the Court sustained the award of P200,000.00 for moral damagesto private complainant as she was an innocent victim of the petitioner’s perfidy, chicanery and heartlessdeception - the fraud consisting not of a single act alone, but a continuous series of acts before, during andafter his marriage with the private complainant. That private complainant did not sustain any physical injuriesis not a bar to an award for moral damages. (Id.).

Unjust Enrichment. The doctrine of quantum meruit prevents undue enrichment based on theequitable postulate that it is unjust for a person to retain benefit without paying for it. However, since there isa perfected oral contract between petitioner and respondent, this contract for FMD should be enforced.(Philippine National Bank v. Shellink Planners, Inc., G.R. No. 154428, 20 October 2005). See alsoTAXATION, Remedies.

MARRIAGE

Requisites of Marriage

Article 26 of the Family Code. History. Interpretation. Paragraph 2 of Article 26 should beinterpreted to include cases involving parties who, at the time of the celebration of the marriage were Filipinocitizens, but later on, tone of them becomes naturalized as a foreign citizen and obtains a divorce decree. TheFilipino spouse should likewise be allowed to remarry as if the other party were a foreigner at the time of thesolemnization of the marriage. The reckoning point is not the citizenship of the parties at the time of the

Case Digest


celebration of the marriage, but their citizenship at the time a valid divorce is obtained abroad by the alienspouse. However, the following requisites must be established: [i] the allegation that one of the spouses wasnaturalized as a foreign national; [ii] the foreign divorce decree, and its conformity to the foreign law allowingit; [iii] the foreign law allowing such divorce decree; and, [iv] the divorce decree allows his former wife toremarry, as specifically required in Article 26. Otherwise, there would be no evidence sufficient to declarethat the party pleading is capacitated to enter into another marriage. (Republic v. Orbecido III, G.R. No.154380, 5 October 2005).

Void and Voidable Marriages Psychological Incapacity. The totality of the evidence in this case does not support a finding that

petitioner is psychologically incapacitated to fulfill his marital obligations. Psychological incapacity, as a groundfor the declaration of nullity of a marriage, must be characterized by juridical antecedence, gravity and incurability.Sexual infidelity, by itself, is not sufficient proof that petitioner is suffering from psychological incapacity. Itmust be shown that the acts of unfaithfulness are manifestations of a disordered personality which makepetitioner completely unable to discharge the essential obligations of marriage. (Villalon v. Villalon, G.R.No. 167206, 18 November 2005).

THE FAMILY

Suit Between Members of the Same Family. A complaint in ordinary civil actions involving membersof the same family must contain an allegation that earnest efforts toward a compromise have been madepursuant to Article 222 of the Civil Code (now Article 151 of the Family Code). Otherwise, the complaintmay be dismissed under Section 1(j), Rule 16 of the Rules of Court. But, a complaint otherwise defective onthat score may be cured by the introduction of evidence effectively supplying the necessary averments. Anaction for revival of judgment of a dormant decision rendered in an original action can hardly be the kind ofsuit contemplated in Article 222 of the Code. (Santos v. Court of Appeals, G.R. No. 134787, 15 November2005).

Family Home (Article 155 of the Family Code). Exempt from execution, forced sale, or attachment,except for, among other things, debts incurred prior to the constitution of the family home. The family homeis deemed constituted as such only upon the effectivity of the Family Code on 03 August 1988. (Gomez v.Sta. Ines, G.R. No. 132537, 14 October 2005). The claim for exemption should be set up and proved to theSheriff before the sale of the property at public auction. Failure to do so would estop the party from laterclaiming the exemption. (Honrado v. Court of Appeals, G.R. No. 166333, 25 November 2005).

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PROPERTY RELATIONS BETWEEN HUSBAND AND WIFE

CONJUGAL PARTNERSHIP OF GAINS

If a contract entered into by one spouse involving a conjugal property lacks the consent of the otherspouse, is it automatically void for that reason alone? Article 173 of the Civil Code expressly classifies acontract executed by the husband without the consent of the wife as merely annullable at the instance of thewife during the marriage and within ten years from the transaction mentioned. In this case, Contract to SellNo. 2491-V was entered into by the wife. It lacked the consent of her husband, who was out of the countryat the time of the execution of the contract. There is no express provision in the Civil Code governing asituation where the husband is absent and his absence incapacitates him from administering the conjugalpartnership property. However, Article 167, 168 and 169 of the Civil Code are illuminating. While thehusband is the recognized administrator of the conjugal property under the Civil Code, there are instanceswhen the wife may assume administrative powers or ask for the separation of property. In the abovementionedinstances, the wife must be authorized either by the court or by the husband. Where the husband is absentand incapable of administering the conjugal property, the wife must be expressly authorized by the husbandor seek judicial authority to assume powers of administration. Thus, any transaction entered by the wifewithout the court or the husband’s authority is unenforceable in accordance with Article 1317 of the CivilCode. That is the status to be accorded Contract to Sell No. 2491-V. Being an unenforceable contract, it issusceptible to ratification. After being informed of the execution of the contract, the husband continuedremitting payments for the satisfaction of the obligation under Contract to Sell No. 2491-V. These actsconstitute ratification of the contract. Such ratification cleanses the contract from all its defects from themoment it was constituted. (Fabrigas v. San Francisco del Monte, Inc., G.R. No. 152346, 25 November2005).

PROPERTY, OWNERSHIP, AND ITS

MODIFICATIONS

OWNERSHIP

Right of Accession

Builder in Good Faith (Article 448 of the Civil Code). The owner of the land on which anything hasbeen built, sown or planted in good faith shall have the right to appropriate as his own the building, planting orsowing, after payment to the builder, planter or sower of the necessary and useful expenses, and in the propercase, expenses for pure luxury or mere pleasure. The owner of the land may also oblige the builder, planteror sower to purchase and pay the price of the land, unless its value is considerably more than that of thestructures, in which case the builder in good faith shall pay reasonable rent. (Carrascoso, Jr. v. Court OfAppeals, G.R. No. 123672, 14 December 2005).

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If the parties cannot come to terms over the conditions of the lease, the court must fix the termsthereof. (Sps. Rasdas v. Estenor, G.R.No. 157605, 13 December 2005). The choice belongs to the ownerof the land, a rule that accords with the principle of accession, i.e., that the accessory follows the principaland not the other way around. However, the landowner cannot refuse to exercise either option and compelinstead the owner of the building to remove it from the land. (Rosales v. Castelltort, G.R. No. 157044, 5October 2005). If the owner chooses to sell his land, the builder, planter or sower must purchase the land,otherwise the owner may remove the improvements thereon. The builder, planter or sower, however, is notobliged to purchase the land if its value is considerably more than the building, planting or sowing. In suchcase, the builder, planter or sower must pay rent to the owner of the land. (Id.).

Builder in Bad Faith. (Article 449 of the Civil Code) The builder in bad faith on the land of anotherloses what is built without right to indemnity. (Sps. Rasdas, supra; Carrascoso, Jr., supra).

CO-OWNERSHIP

Co-owner’s Right to Sell Undivided Share in Property Under Co-ownership (Article 493 of theCivil Code). The sale to Angel affects only Placida’s pro indiviso share in the property, and Angel gets onlywhat corresponds to Placida’s share in the partition of the property owned in common. Since a co-owner isentitled to sell his undivided share, a sale of the entire property by one co-owner without the consent of theother co-owners is not null and void; only the rights of the co-owner/seller are transferred, thereby makingthe buyer a co-owner of the property. (Cuizon v. Remoto, G.R. No. 143027, 11 October 2005).

Right of Redemption. (Articles 1620, 1623 and 1088 of the Civil Code). The right of legal redemptionpertains to Placida’s original co-owners, and their respective heirs. The written notification should come fromthe vendor or prospective vendor, and not from any other person. (Id.).

QUIETING OF TITLE

Not an Action for Quieting of Title. Petitioner seeks for a judgment declaring him the absoluteowner of the donated property, a plea which necessarily includes the revocation of the deed of donation inquestion. A declaration of petitioner’ absolute ownership appears legally possible only when the deed ofdonation is contextually declared revoked. Respondent barangay traces its claim of ownership over thedisputed property to a valid donation which is yet to be effectively revoked. Such rightful claim does notconstitute a cloud on the supposed title of petitioner over the same property removable by an action to quiettitle.Withal, the remedy afforded in Article 476 of the Civil Code is unavailing until the donation shall have firstbeen revoked in due course under Article 764 or Article 1144 of the Code. (Dolar v. Barangay Lublub,G.R. No. 152663, 18 November 2005).

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POSSESSION

Concept. In general terms, possession is the holding of a thing or the enjoyment of a right, whetherby material occupation or by the fact that the right or property is subjected to the will of the claimant. Thegathering of the products of and the act of planting on the land were held to constitute occupation, possessionand cultivation. (Go v. Bacaron, G.R. No. 159048, 11 October 2005). Possession acquired in good faithdoes not lose this character except in the case and from the moment facts exist which show that the possessoris not unaware that he possesses the thing improperly or wrongfully. (Rosales v. Castelltort, supra).

EASEMENTS OR SERVITUDESLEGAL EASEMENTS

Easement of Right-of-way. (Private Development Corporation of the Philippines v. Court ofAppeals, G.R. No. 136897, 22 November 2005).

DIFFENT MODES OF ACQUIRING OWNERSHIP

DONATION

Revocation. Under the terms of the deed of donation, the barangay had five (5) years from theexecution of the conveying deed within which to introduce and complete the contemplated development ofthe donated area. Following Article 764 of the Civil Code, petitioner had four (4) years from September1986, which to seek the revocation of the subject donation on the ground of breach of contract. (Dolar v.Barangay Lublub, supra).

PRESCRIPTION

The action for annulment of a voidable contract shall be brought within four years (Article 1391 ofthe Civil Code). It cannot be argued in this case that martial law has the effects of a force majeure, which, inturn, works to suspend the running of the prescriptive period for the main case filed with the trial court.(Philippine Free Press, Inc. v. Court of Appeals, G.R. No. 132864, 24 October 2005).

An action to revoke a donation (Article 764 of the Civil Code) prescribes after four (4) years fromnon-compliance by the donee with any of the conditions set forth in the deed of donation. (Dolar v. BarangayLublub, supra).

Under Art. 1140 of the Civil Code, actions to recover movables prescribe in eight years from thetime the possession thereof is lost. (Sps.Calo v. Sps. Tan, G.R. No. 151266, 29 November 2005).

Actions based upon a written contract should be brought within ten years from the time the right ofaction accrues. This accrual refers to the cause of action, which is defined as the act or the omission by whicha party violates the right of another. (Philippine Shell Petroleum Corporation v. John Bordman Ltd. of

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Iloilo, Inc., G.R. No. 159831, 14 October 2005). Claim for Damages Based on Over-billing. Not an actionfor quasi-delict which prescribes in four years. It is elementary that a quasi-delict, as a source of an obligation,occurs only when there is no preexisting contractual relation between the parties. The action of respondentfor specific performance was founded on short deliveries, which had arisen from its Contract of Sale withpetitioner, and from which resulted the former’s obligation in the present case. (Id.).

An action to foreclose a real estate mortgage prescribes in ten years. The running of the period,however, may be interrupted. (Nuñez v. GSIS Family Bank, G.R. No. 163988, 17 November 2005;Development Bank of the Philippines v. Prudential Bank, G.R. No. 143772, 22 November 2005).

Prescription does not apply in this case. If a person claiming to be the owner thereof is in actualpossession of the property, the right to seek reconveyance, which in effect seeks to quiet title to the property,does not prescribe. One who is in actual possession of a piece of land claiming to be the owner thereof maywait until his possession is disturbed or his title is attacked before taking steps to vindicate his right, the reasonfor the rule being, that his undisturbed possession gives him a continuing right to seek the aid of a court ofequity to ascertain and determine the nature of the adverse claim of a third party and its effect on his own title,which right can be claimed only by one who is in possession. (Cuizon v. Remoto, supra).

Prescription does not run against the government. When the government is the real part in interest,and is proceeding mainly to assert its own rights and recover its own property, there can be no defense on theground of laches or limitation. (Herce, Jr.v. Municipality of Cabuyao, G.R. No. 166645, 11 November2005).

OBLIGATIONS AND CONTRACTS

OBLIGATIONS

Nature and Effect of Obligations

Fortuitous Event. The exempting circumstance of caso fortuito may be availed only when: [i] thecause of the unforeseen and unexpected occurrence was independent of the human will; [ii] it was impossibleto foresee the event which constituted the caso fortuito or, if it could be foreseen, it was impossible to avoid;[iii] the occurrence must be such as to render it impossible to perform an obligation in a normal manner and[iv] the person tasked to perform the obligation must not have participated in any course of conduct thataggravated the accident. In fine, human agency must be entirely excluded as the proximate cause or contributorycause of the injury or loss. In a vehicular accident, for example, a mechanical defect will not release thedefendant from liability if it is shown that the accident could have been prevented had he properly maintainedand taken good care of the vehicle. (Perla Compania de Seguros, Inc. v. Sps. Sarangaya, G.R. No.147746, 25 October 2005).

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Different Kinds of Obligations

Conditional Obligation (Art. 1181 of the Civil Code). (Sps. Aguilar v. Citytrust FinanceCorporation, G.R. No. 159592, 25 October 2005).

Reciprocal Obligations. Rescission of (Article 1191 of the Civil Code). The right of rescission of aparty to an obligation is predicated on a breach of faith by the other party who violates the reciprocitybetween them. A contract of sale is a reciprocal obligation. (Carrascoso, Jr., supra).

Extinguishment of Obligations

Loss of the Thing Due. As owners of the fishing vessel, it was incumbent upon the spouses to insureit against loss. Thus, when the vessel sank before the chattel mortgage could be foreclosed, uninsured as it is,its loss must be borne by the spouses Cheng. (Allied Banking Corporation v. Cheng Yong, G.R. No.151040, 6 October 2005).

Legal Compensation. The requisites for legal compensation are provided in Article 1279 of theCivil Code. (Nadela v. Engineering and Construction Corporation of Asia, G.R. No. 145259, 25 October2005)

Novation. In order that an obligation may be extinguished by another which substitutes the same, itis imperative that it be so declared in unequivocal terms, or that the old and the new obligations be on everypoint incompatible with each other. The test of incompatibility is whether the two obligations can standtogether, each one having its independent existence. If they cannot, they are incompatible and the latterobligation novates the first. (Fabrigas v. San Francisco del Monte, Inc., supra). No novation in this case.(Trade & Investment Development Corporation of the Philippines v. Roblett Industrial ConstructionCorporation, G.R. No. 139290, 11 November 2005).

CONTRACTS

Freedom of Contract. The contracting parties may establish such stipulations, clauses, terms andconditions as they may deem convenient, provided these are not contrary to law, morals, good customs,public order or public policy. Obligations arising from contracts have the force of law between the contractingparties and should be complied with in good faith. Petitioner was free to decide on the manner of payment,either in cash or installment. Since he opted to purchase the land on installment basis, he consented to theimposition of interest on the contract price. He cannot now unilaterally withdraw from it by disavowing theobligation created by the stipulation in the contract. The rationale behind having to pay a higher sum on theinstallment is to compensate the vendor for waiting a number of years before receiving the total amount due. Therefore, the stipulated 24% annual interest on the price of the parcel of land purchased by petitioner fromrespondent on installment basis is hereby declared valid and binding. (Bortikey v.AFP Retirement andSeparation Benefits System, G.R. No. 146708, 13 December 2005).

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Contract of Adhesion. So-called because its terms are prepared by only one party while the otherparty merely affixes his signature signifying his adhesion thereto. Such characterization does not automaticallyrender a contract void. They are as binding as ordinary contracts. Parties who enter into such contracts arefree to reject the stipulations entirely. (Fabrigas v. San Francisco del Monte, Inc., supra).

Escalation Clause. (Creser Precision Systems, Inc. v. Commission On Audit [En Banc], G.R.Nos. 143803, 17 November 2005).

Form of Contracts. To be a written contract, all the terms must be in writing, so that a contractpartly in writing and partly oral is in legal effect an oral contract. (Sps. Ramos v. Sps. Heruela, G.R. No.145330, 14 October 2005). The requirement that contracts where the amount involved exceeds P500.00must appear in writing is only for convenience. At all events, a check, the entries of which are no doubt inwriting, could prove a loan transaction. (Sps. Tan v. Villapaz, G.R. No. 160892, 22 November 2005).

REFORMATION OF INSTRUMENTS Ultimately, it is the intention of the parties that determines whether a contract is one of sale or of

mortgage. Because respondent has more than sufficiently established that the assailed Contract is in fact anequitable mortgage rather than an absolute sale, he is allowed to avail himself of the remedy of reformation ofcontracts. (Go v. Bacaron, supra).

INTERPRETATION OF CONTRACTS

In interpreting a contract, its provisions should be read not in isolation but in relation to each otherand in their entirety so as to render them effective, having in mind the intention of the parties and the purposeto be achieved. (Manila International Airport Authority v. Hon. Gingoyon, G.R. No. 155879, 2 December2005).

Article 1377 of the Civil Code. The party who draws up the contract, in which obscure words orphrases appear, bears the responsibility for causing the ambiguity or obscurity, and hence, these must beconstrued against him. This is in line with Section 17, Rule 130 of the Revised Rules of Court. (Horrigan v.Troika Commercial, Inc., G.R. No. 148411, 29 November 2005).

UNENFORCEABLE CONTRACTS

Ratification of Contract. Article 1393 of the Civil Code is concerned only with the act which passes for ratification of contract, not the reason which actuated the ratifying person to act the way he did. (Philippine Free Press, Inc. v. Court of Appeals, supra).

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ESTOPPEL

Estoppel by Laches - the failure or neglect for an unreasonable length of time to do that which, by theexercise of due diligence, could or should have been done earlier. Negligence or omission to assert a rightwithin a reasonable time warrants a presumption that the party has abandoned or declined the right. In thiscase, petitioner alleges that respondent is estopped from claiming short deliveries as it asserted its right aftertwenty-five years from initial deliveries. HELD: Respondent cannot be held guilty of delay in asserting its rightduring the time it did not yet know of the short deliveries. The facts in the present case show that after thediscovery of the short deliveries, it immediately sought to recover the undelivered fuel from petitioner.(Philippine Shell Petroleum Corporation v. John Bordman Ltd. of Iloilo, Inc., supra; Fabrigas v. SanFrancisco del Monte, Inc., supra).

Estoppel in Pais or Equitable Estoppel - arises when one, by his acts, representations or admissionsor by his silence when he ought to speak out, intentionally or through culpable negligence, induces another tobelieve certain facts to exist and such other rightfully relies and acts on such belief so that he will be prejudicedif the former is permitted to deny the existence of such facts. The real office of the equitable norm of estoppelis limited to supplying deficiency in the law but should not supplant positive law. The requisites for the existenceof a tenancy relationship are explicit in the law and these elements cannot be done away with by conjectures.(Rimasug v. Martin, G.R. No. 160118, 22 November 2005).

Under the doctrine of estoppel, petitioners cannot now be permitted to assail the Decision of the trialcourt – which turned out to be adverse to them – and insist that it should have conducted further reception ofevidence before rendering its judgment on the case. (Manotok Realty, Inc. v. CLT Realty DevelopmentCorporation, G.R. No. 123346, 29 November 2005).

Petitioner cannot contradict himself by saying first that respondents had agreed to transfer to him theownership over the property, only to say later that what respondents granted to him was the right to possessthe property. Petitioner is bound by the statements he made while the case was being heard in the lowercourts. (Roman Catholic Archbishop of Caceres v. Heirs of Abella, G.R. No. 143510, 23 November2005).

It may be that the stipulations have the force of law between the contracting parties. However, aparty’s subsequent acts or conduct may be viewed as working to effectively modify his rights and obligationsflowing from the contract or, in estopping that party from invoking such provision to resist the other party’sclaims that may be adverse thereto. Estoppel precludes one from denying or asserting, by his own deed orrepresentation, anything contrary to that established as the truth in legal contemplation. (R-II Builders, Inc. v.Construction Industry Arbitration Commission, G.R. No. 152545, 15 November 2005).

Petitioner’s disavowal of any proprietary interest in the Bulletin shares is conclusive upon him. Hence,his prayer that he be declared the owner of the said shares, together with all the cash and stock dividendswhich have accrued thereto since October 15, 1987, and that the PCGG be ordered to return the cash

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deposit of P8,174,470.32 to Bulletin has no legal basis and should perforce be denied. (Republic v. EstateHans Menzi, G.R. No. 152578, 23 November 2005).

The alleged Certification stating that respondent received the fuel oil in good condition (in the natureof a contract of adhesion) did not estop the respondent from claiming short deliveries. Reliance on contractsof adhesion cannot be favored when the facts and circumstances warrant the contrary. (Philippine ShellPetroleum Corporation v. John Bordman Ltd. of Iloilo, Inc., supra).

Estoppel and Jurisdiction of Courts. The pivotal element of laches is absent in this case. Hence,the general rule that the question of jurisdiction of a court may be raised at any stage of the proceedings mustapply. (Mangaliag v. Hon. Catubig-Pastoral, G.R. No. 143951, 25 October 2005).

SALES

Nature and Form of Contract

Gross Inadequacy of Purchase Price does not per se affect a contract of sale. Following Article1470 of the Civil Code, petitioner must first prove ”a defect in the consent”. Having failed to do so,its case for annulment contract of sale on ground gross inadequacy of price must fall. (Philippine Free Press,Inc. v. Court of Appeals, supra).

Contract of Sale. Contract to Sell. Conditional Sale. Article 1458 of the Civil Code provides thata contract of sale may be absolute or conditional. A contract of sale is absolute: [i] when title to the propertypasses to the vendee upon delivery of the thing sold; [ii] when there is no stipulation in the contract that titleto the property remains with the seller until full payment of the purchase price; and, [iii] if there is no stipulationgiving the vendor the right to cancel unilaterally the contract the moment the vendee fails to pay within a fixedperiod. In a conditional sale, as in a contract to sell, ownership remains with the vendor and does not pass tothe vendee until full payment of the purchase price. The full payment of the purchase price partakes of asuspensive condition, and non-fulfillment of the condition prevents the obligation to sell from arising. (Sps.Ramos v. Sps. Heruela, supra). In a contract of sale, the title passes to the vendee upon the delivery of thething sold; whereas in a contract to sell, ownership is not transferred upon delivery of the property but uponfull payment of the purchase price. In the former, the vendor has lost and cannot recover ownership until andunless the contract is resolved or rescinded; whereas in the latter, title is retained by the vendor until the fullpayment of the price, such payment being a positive suspensive condition and failure of which is not a breachbut an event that prevents the obligation of the vendor to convey title from becoming effective. (Carrascoso,Jr. v. Court of Appeals, supra).

In a conditional contract of sale, if the suspensive condition is fulfilled, the contract of sale is therebyperfected, such that if there had already been previous delivery of the property subject of the sale to thebuyer, ownership thereto automatically transfers to the buyer by operation of law without any further acthaving to be performed by the seller. In a contract to sell, upon fulfillment of the suspensive condition,

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ownership will not automatically transfer to the buyer although the property may have been previously deliveredto him. The prospective seller still has to convey title to the prospective buyer by entering into a contract ofabsolute sale. (Id.).

Having titled their contract as “Contract to Sell Lot and House” and specified that the vendor shall

only execute a deed of absolute sale on the date of the final payment by vendee, the parties truly intendedtheir contract to that of a contract to sell. Consequentially, the ownership of the property remained with theMonesets even after petitioner has paid the down payment and took possession of the property. Petitionerstopped paying installments upon failure of the Monesets to deliver the TCT. Petitioner did not file an actionfor specific performance; neither did she consign payment of the remaining balance as proof of her willingnessand readiness to comply with her part of the obligation. The perfected contract to sell imposed on the vendeethe obligation to pay the balance of the purchase price. There being an obligation to pay the price, the vendeeshould have made the proper tender of payment and consignation of the price in court as required by law. Consignation of the amounts due in court is essential in order to extinguish the vendee’s obligation to pay thebalance of the purchase price. Since there is no indication in the records that petitioner even attempted tomake the proper consignation of the amounts due, the obligation on the part of the Monesets to transferownership never acquired obligatory force. (Ursal v. Court of Appeals, G.R. No. 142411, 14 October2005). Indeed, it is the Monesets who first breached their obligation towards petitioner and are guilty offraud against her. It cannot be denied however that petitioner is also not without fault. She sat on her rightsand never consigned the full amount of the property. She therefore cannot ask to be declared the owner ofthe property, this late, especially since the same has already passed hands several times, neither can shequestion the mortgage constituted on the property years after title has already passed to another person byvirtue of a deed of absolute sale. (Ursal v. Court of Appeals, G.R. No. 142411, 14 October 2005).

Obligations of the Vendor

Ownership of the thing sold is acquired only from the delivery thereof, either actual or constructive.Article 1498 of the Civil Code provides that when the sale is made through a public instrument, the executionthereof shall be equivalent to the delivery of the thing which is the object of the contract, if from the deed thecontrary does not appear or cannot clearly be inferred. The execution of the public instrument, even withoutactual delivery of the thing, transfers the ownership from the vendor to the vendee, who may thereafterexercise the rights of an owner over the same. (Ilao-Quianay v. Mapile, G.R. No. 154087, 25 October2005).

Double Sale of Real Property. Article 1544 of the Civil Code is the rule on double sale of immovableand transfers ownership to (1) the first registrant in good faith; (2) then, the first possessor in good faith; and(3) finally, the buyer who in good faith presents the oldest title. (Sps. Ulep v. Court of Appeals, G.R. No.125254, 11 October 2005). An “innocent purchaser for value” or any equivalent phrase shall be deemed toinclude, under the Torrens System, the innocent lessee, mortgagee, and other encumbrancer for value. (ExpressCredit Financing Corporation v. Sps. Velasco, G.R. No. 156033, 20 October 2005).

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The governing principle is primus tempore, potior jure (first in time, stronger in right). Knowledgegained by the first buyer of the second sale cannot defeat the first buyer’s rights except where the secondbuyer registers in good faith the second sale ahead of the first, as provided by the aforequoted provision ofthe Civil Code. Such knowledge of the first buyer does not bar him from availing of his rights under the law,among them to register first his purchase as against the second buyer. In converso, knowledge gained by thesecond buyer of the first sale defeats his rights even if he is first to register the second sale, since suchknowledge taints his prior registration with bad faith. This is the price exacted by the same provision of theCivil Code for the second buyer to be able to displace the first buyer; before the second buyer can obtainpriority over the first, he must show that he acted in good faith throughout (i.e. ignorance of the first sale andof the first buyer’s rights) from the time of acquisition until the title is transferred to him by registration, or,failing registration, by delivery of possession. (Sps. Ulep v. Court of Appeals, supra).

To fulfill the requirement of good faith, it is imperative for a mortgagee of the land, in the possessionof persons not the mortgagor, to inquire and investigate into the rights or title of those in possession. It is truethat a person dealing with the owner of registered land is not bound to go beyond the certificate of title. Hemay rely on the notices of the encumbrances on the property annotated on the certificate of title or absenceof any annotation. However, being in the business of construction and selling townhouses and extendingcredit to the public, the Garcia spouses (the mortgagors) had greater charge than ordinary buyers orencumbrancers for value. It is standard in their business, as a matter of due diligence required of banks andfinancing companies, to ascertain whether the property being offered as security for the debt has alreadybeen sold to another to prevent injury to prior innocent buyers. They also have the resources to ascertain anyencumbrances over the properties they are dealing with. Petitioner was neither a mortgagee nor a purchaserin good faith and as such, could not acquire good title to the property as against the former transferee. (Id.).

Registration is not a requirement for validity of the contract as between the parties, for the effect ofregistration serves chiefly to bind third persons. Petitioners are not third persons within the contemplation ofthe registration rule. The conveyance shall not be valid against any person unless registered, except (1) thegrantor, (2) his heirs and devisees, and (3) third persons having actual notice or knowledge thereof. Petitionersare both related to the original owner of the property, Placida. Petitioner is an heir of Placida, while Salvadoris Encarnacion’s husband. Hence, registration is not required to bind petitioners. Furthermore, where theparty has knowledge of a prior existing interest which is unregistered at the time he acquired a right to thesame land, his knowledge of that prior unregistered interest has the effect of registration as to him. (Cuizonv. Remoto, supra).

Warranties of Vendor. (Goodyear Philippines, Inc. v. Sy, G.R. No. 154554, 9 November 2005).The breach of an express warranty makes the seller liable for damages. Requisites to establish an expresswarranty in a contract of sale: [i] the express warranty must be an affirmation of fact or any promise by theseller relating to the subject matter of the sale; [ii] the natural tendency of such affirmation or promise is toinduce the buyer to purchase the thing; and [iii] the buyer purchases the thing relying on such affirmation orpromise thereon. (Carrascoso, Jr. v. Court of Appeals, supra).

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Implied Warranties of a Seller: [i], the vendor has a right to sell the thing at the time that its ownershipis to pass to the vendee, as a result of which the latter shall from then on have and enjoy the legal and peacefulpossession of the thing; and, [ii] the thing shall be free from any charge or encumbrance not declared orknown to the vendee. Here, the petitioner did not breach the implied warranty against hidden encumbrances. The subject vehicle that had earlier been stolen by a third party was subsequently recovered by the authoritiesand restored to petitioner, its rightful owner. Whether Sy had knowledge of the loss and subsequent recovery,the fact remained that the vehicle continued to be owned by petitioner, free from any charge or encumbrancewhatsoever. (Goodyear Philippines, Inc. v. Sy, supra).

The Maceda Law (RA 6552) recognizes in conditional sales of all kinds of real estate the right of theseller to cancel the contract upon non-payment of an installment by the buyer, which is simply an event thatprevents the obligation of the vendor to convey title from acquiring binding force. It also provides the right ofthe buyer on installments in case he defaults in the payment of succeeding installments. Here, there wasneither a notice of cancellation nor demand for rescission by notarial act to the vendee. The vendor could goto court to demand judicial rescission in lieu of a notarial act of rescission. However, an action for reconveyanceis not an action for rescission. There being no valid rescission of the contract to sell, the action for reconveyanceis premature. (Sps. Ramos v. Sps. Heruela, supra).

Rescission Under the Maceda Law. Section 4 is applicable to instances where less than two yearsinstallments were paid. The cancellation of the contract under Section 4 is a two-step process: [i] the sellershould extend the buyer a grace period of at least sixty (60) days from the due date of the installment; [ii] atthe end of the grace period, the seller shall furnish the buyer with a notice of cancellation or demand forrescission through a notarial act, effective thirty (30) days from the buyer’s receipt thereof. A mere notice orletter, short of a notarial act, would not suffice. Del Monte did not comply with this requirement. Instead, DelMonte applied the automatic rescission clause of the contract which is void under Section 7 in relation toSection 4 of R.A. 6552. (Fabrigas v. San Francisco del Monte, Inc., supra).

ASSIGNMENT OF CREDIT

Assignment of Credit (Article 1625 of the New Civil Code). An assignment of credit, right or actionmust appear in a public document to bind third persons. (Spouses Alfredo v. PCI Leasing and Finance,Inc., G.R. No. 139233, 11 November 2005).

AGENCY

Existence of Agency. The key to unlocking the issue of whether petitioners are solidarily liable withLines & Spaces. (Amon Trading Corporation v. Court of Appeals, G.R. No.158585, 13 December2005).

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LEASE

Lease. (Horrigan v. Troika Commercial, Inc., supra).

GUARANTY

Excussion is not a pre-requisite to secure judgment against a guarantor. The guarantor can still demanddeferment of the execution of the judgment against him until after the assets of the principal debtor shall havebeen exhausted. Also, the benefit of excussion may be waived. Under the trust receipt dated 30 September1981, petitioner waived excussion when he agreed that his “liability in [the] guaranty shall be DIRECT ANDIMMEDIATE, without any need whatsoever on xxx [the] part [of respondent bank] to take any steps orexhaust any legal remedies xxx.” The clear import of this stipulation is that petitioner waived the benefit ofexcussion under his guarantee. (Tupaz IV v. Court of Appeals, G.R. No. 145578, 18 November 2005).

SURETY

Surety Bond for Counter-guarantee. The liability of a surety is determined strictly on the basis ofthe terms and conditions set out in the surety agreement. In this case, the contract denominated as a “GuaranteeAgreement,” was actually a surety because its terms were clear and left no doubt as to the intention of theparties. Although a surety contract is secondary to the principal obligation, the liability of the surety is direct,primary and absolute; or equivalent to that of a regular party to the undertaking. A surety becomes liable tothe debt and duty of the principal obligor even without possessing a direct or personal interest in the obligationsconstituted by the latter. (International Finance Corporation v. Imperial Textile Mills, Inc,, G.R. No.160324, 15 November 2005). As a surety, Paramount is liable to petitioner solidarily with Roblett. Assolidary debtors, it is not necessary that Roblett fail to pay before Paramount could be made liable. It isenough that petitioner demanded payment from Paramount for liability to attach. (Trade & InvestmentDevelopment Corporation of the Philippines v. Roblett Industrial Construction Corporation, supra).

PLEDGE, MORTGAGE AND ANTICHRESIS

PROVISIONS COMMON TO PLEDGE AND MORTGAGE

Essential Requisites (Article 2085 (2) of the Civil Code). In a contract of pledge or mortgage, it isessential that the pledgor or mortgagor should be the absolute owner of the thing pledged or mortgaged.Article 2085 (3) further mandates that the person constituting the pledge or mortgage must have the freedisposal of his property, and in the absence thereof, that he be legally authorized for the purpose. In this case,Litex had neither absolute ownership, free disposal nor the authority to freely dispose of the articles. Litexcould not have subjected them to a chattel mortgage. Their inclusion in the mortgage was void and had nolegal effect. There being no valid mortgage, there could also be no valid foreclosure or valid auction sale.Thus, DBP could not be considered either as a mortgagee or as a purchaser in good faith. (DevelopmentBank of the Philippines v. Prudential Bank, supra).

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MORTGAGE

Obligation Secured by Mortgage. Article 2126 of the Civil Code. (Allied Banking Corporationv. Cheng Yong, supra).

Mortgage and Mortgagor’s Liability for Labor Claims. Responsibility for the liabilities of amortgagor towards its employees cannot be transferred via an auction sale to a purchaser who is also themortgagee-creditor of the foreclosed assets and chattels. The mortgage constitutes a lien on the determinateproperties of the employer-debtor, because it is a specially preferred credit to which the worker’s monetary claimsis deemed subordinate. (Barayoga v. Asset Privatization Trust, G.R. No. 160073, 24 October 2005).

PNB’s financial claim against BISUDECO was transferred to APT pursuant to Administrative OrderNo. 14, Series of 1987. Thereafter, APT foreclosed the assets and chattels of BISUDECO for failure to payoutstanding loan obligations to PNB/APT. In April 1991, the properties were sold at public auction to APT,as the highest bidder. The duties and liabilities of BISUDECO, including its monetary liabilities to its employees,were not all automatically assumed by APT as purchaser of the foreclosed properties at the auction sale. Any assumption of liability must be specifically and categorically agreed upon. Unless expressly assumed,labor contracts like collective bargaining agreements are not enforceable against the transferee of an enterprise. Labor contracts are in personam and thus binding only between the parties. Furthermore, the liabilities ofthe previous owner to its employees are not enforceable against the buyer or transferee, unless: [i] the latterunequivocally assumes them; or [ii] the sale or transfer was made in bad faith. Thus, APT cannot be heldresponsible for the monetary claims of petitioners who had been dismissed even before it actually took overBISUDECO’s assets. (Id.).

No succession of employment rights and obligations can be said to have taken place between thetwo. Between the employees of BISUDECO and APT, there is no privity of contract that would make thelatter a substitute employer that should be burdened with the obligations of the corporation. To rule otherwisewould unduly impose upon APT an unwarranted assumption of accounts not contemplated in ProclamationNo. 50 or in the Deed of Transfer between the national government and PNB. (Id.).

Under the principle of absorption, a bona fide buyer or transferee of all, or substantially all, theproperties of the seller or transferor is not obliged to absorb the latter’s employees. The most that the purchasingcompany may do, for reasons of public policy and social justice, is to give preference of reemployment to theselling company’s qualified separated employees, who in its judgment are necessary to the continued operationof the business establishment. (Id.).

Relevant to this transfer of assets is Article 110 of the Labor Code, as amended by Republic Act No.6715 (Worker’s preference in case of bankruptcy). Under Articles 2241 and 2242 of the Civil Code, amortgage credit is a special preferred credit that enjoys preference with respect to a specific/determinateproperty of the debtor. On the other hand, the worker’s preference under Article 110 of the Labor Code isan ordinary preferred credit. While this provision raises the worker’s money claim to first priority in the order

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of preference established under Article 2244 of the Civil Code, the claim has no preference over specialpreferred credits. (Id.).

The right of employees to be paid benefits due them from the properties of their employer cannot

have any preference over the latter’s mortgage credit. Being a mortgage credit, APT’s lien on BISUDECO’smortgaged assets is a special preferred lien that must be satisfied first before the claims of the workers.Furthermore, workers’ claims for unpaid wages and monetary benefits cannot be paid outside of a bankruptcyor judicial liquidation proceedings against the employer. The application of Article 110 of the Labor Code iscontingent upon the institution of those proceedings, during which all creditors are convened, their claimsascertained and inventoried, and their preferences determined. (Id.).

As a mere transferee of the mortgage credit and later as the purchaser in a public auction ofBISUDECO’s foreclosed properties, APT cannot be held liable for petitioners’ claims against BISUDECO:illegal dismissal, unpaid back wages and other monetary benefits. (Id.).

Under Articles 2241 and 2242 of the Civil Code, a mortgage credit is a special preferred credit that

enjoys preference with respect to a specific/determinate property of the debtor. On the other hand, theworker’s preference under Article 110 of the Labor Code is an ordinary preferred credit. While this provisionraises the worker’s money claim to first priority in the order of preference established under Article 2244 ofthe Civil Code, the claim has no preference over special preferred credits. (Id.).

Mortgagee in Good Faith. Banks cannot merely rely on certificates of title in ascertaining the status

of mortgaged properties; as their business is impressed with public interest, they are expected to exercisemore care and prudence in their dealings than private individuals. The rule that persons dealing with registeredlands can rely solely on the certificate of title does not apply to banks. (Ursal v. Court of Appeals, supra).

Equitable Mortgage. The instances in which a contract of sale is presumed to be an equitablemortgage are enumerated in Article 1602 of the Civil Code. Here, the contract, which purports to be anabsolute deed of sale, should be deemed an equitable mortgage for the following reasons: [i] the considerationhas been proven to be unusually inadequate; [ii] the supposed vendor has remained in possession of theproperty even after the execution of the instrument; and, [iii] the alleged seller has continued to pay the realestate taxes on the property. Petitioner indeed paid the realty taxes on the property for the years 1980 to1997. The records show that the payments were all simultaneously made only on 31 October 1997, evidentlyin the light of the Complaint respondent had filed before the trial court on 5 March 1997. On the other hand,respondent continued to pay for the realty taxes due on the property for the years 1995, 1996 and 1997. Thatthe parties intended to enter into an equitable mortgage is bolstered by respondent’s continued payment ofthe real property taxes subsequent to the alleged sale. Payment of those taxes is a usual burden attached toownership. Coupled with continuous possession of the property, it constitutes evidence of great weight thata person under whose name the realty taxes were declared has a valid and rightful claim over the land. (Gov. Bacaron, supra).

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EXTRA-CONTRACTUAL OBLIGATIONSQUASI-DELICTS

In every tort case filed under Article 2176 of the Civil Code, the plaintiff has to prove by apreponderance of evidence: (1) the damages suffered by the plaintiff; (2) the fault or negligence of the defendantor some other person for whose act he must respond; and, (3) the connection of cause and effect betweenthe fault or negligence and the damages incurred. (Child Learning Center, Inc. v. Tagario, G.R. No. 150920,25 November 2005).

Negligence or fault of the defendant was established by circumstantial evidence and the applicationof the doctrine of res ipsa loquitur in the following cases: [i] a vehicular accident resulting in death, injury topersons and damage to property (Macalinao v. Ong, G.R. No. 146635, 14 December 2005); [ii] injury toa child while in the premises of the school (Child Learning Center, Inc. v. Tagario, supra); and [iii] burningof a building. (Perla Compania de Seguros, Inc. v. Sps. Sarangaya, supra).

Res ipsa loquitur is a Latin phrase which literally means “the thing or the transaction speaks for

itself.” It relates to the fact of an injury that sets out an inference to the cause thereof or establishes theplaintiff’s prima facie case. The doctrine rests on inference and not on presumption. The facts of the occurrencewarrant the supposition of negligence and they furnish circumstantial evidence of negligence when directevidence is lacking. The doctrine provides a means by which a plaintiff can pin liability on a defendant who,if innocent, should be able to explain the care he exercised to prevent the incident complained of. Thus, it isthe defendant’s responsibility to show that there was no negligence on his part. (Id.).

Requisites for the application of res ipsa loquitur:: [i] The accident is of a kind which ordinarily doesnot occur in the absence of someone’s negligence; [ii] It is caused by an instrumentality within the exclusivecontrol of the defendant or defendants; and [iii] The possibility of contributing conduct which would make theplaintiff responsible is eliminated. (Macalinao v. Ong, supra). There exists a fourth requisite under Americanjurisprudence, that is, that the defendant fails to offer any explanation tending to show that the injury wascaused by his or her want of due care. In consonance with the effect of the doctrine, the burden of provingdue care at the time in question shifts to respondents. (Id.).

Article 2180 of the Civil Code states that employers shall be liable for the damage caused by theiremployees. The liability is imposed on all those who by their industry, profession or other enterprise haveother persons in their service or supervision. Nowhere does it state that the liability is limited to employers inthe transportation business. (Id). The employer’s liability is solidary with the employee pursuant to Article2176 in relation to Art. 2180 of the Civil Code. Whenever an employee’s negligence causes damage or injuryto another, there instantly arises a presumption juris tantum that the employer failed to exercise diligentissimipatris families in the selection (culpa in eligiendo) or supervision (culpa in vigilando) of its employees. Toavoid liability for a quasi-delict committed by his employee, an employer must overcome the presumption bypresenting convincing proof that he exercised the care and diligence of a good father of a family in: [i] theselection; and, [ii] supervision of his employee. (Id.).

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Due Diligence in the Selection of Employees. The employer is required to examine its employeesas to their qualifications, experience and service records. (Perla Compania de Seguros, Inc. v. Sps.Sarangaya, supra). Due Diligence in Their Supervision - requires the formulation of rules and regulations for theguidance of employees and the issuance of proper instructions as well as actual implementation and monitoring ofconsistent compliance with the rules. Admonitions to drive carefully without the corresponding guidelines andmonitoring of the employee do not satisfy the due diligence required by law. (Macalinao v. Ong, supra).

Article 2180 of the Civil Code makes no distinction whatsoever whether the claimant is an employeeor a third person relative to the employer. The claim under Article 2180 is not precluded by prior claims withthe government agencies concerned based on compulsory coverage. (Id.).

However, the allegation of exercise of the due diligence of a good father of a family in the selectionand supervision of its employees is not a defense where the employer is being held responsible under Article2176 of the Civil Code, premised on the fact of its own fault or negligence. (Child Learning Center, Inc. v.Tagario, supra).

DAMAGES

ACTUAL OR COMPENSATORY

Actual

Must be duly proved. (Republic v. Estate Hans Menzi, supra).

Attorney’s Fees and Expenses of Litigation

As Liquidated Damages. The stipulation on attorney’s fees contained in the Deed constitutes whatis known as a penal clause. Such a stipulation has been upheld as binding between the parties so long as itdoes not contravene the law, morals, public order or public policy. The Court has upheld the reasonablenessof penalties in the form of attorney’s fees consisting of ten percent (10%) of the principal debt plus interest. Inthis case, however, the Court made an exception. Ten percent (10%) of the principal debt plus interest andpenalty charges would exceed the principal amount, thus making the attorney’s fees manifestly exorbitant.Accordingly, the Court reduced the same to ten percent (10%) of the principal debt only. (Trade & InvestmentDevelopment Corporation of the Philippines v. Roblett Industrial Construction Corporation, supra).

In the Nature of an Indemnity. An award of attorney’s fees, being an exception from the policy ofnot putting a premium or a penalty on the right to litigate, has since been limited to the grounds specified bylaw. Article 2208 of the Civil Code enumerates the instances where attorney’s fees and expenses of litigationcan be recovered. (Trade & Investment Development Corporation of the Philippines v. Roblett IndustrialConstruction Corporation, supra). While attorney’s fees are recoverable when exemplary damages areawarded, the former may also be granted when the court deems it just and equitable. The grant of attorney’s

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fees depends on the circumstances of each case and lies within the discretion of the court. They may beawarded when a party is compelled to litigate or to incur expenses to protect its interest by reason of anunjustified act by the defendant. (Philippine Shell Petroleum Corporation v. John Bordman Ltd. of Iloilo,Inc., supra; Sps. Aguilar v. Citytrust Finance Corporation, supra; Sps. Tan v. Bantegui, G.R. No.154027, 24 October 2005).

The courts still have the power to reduce the amount of attorney’s fees whether intended as anindemnity or a penalty, if the same is iniquitous or unconscionable. (Cagungun v. Planters DevelopmentBank, supra; Sps. Garcia v. Atty. Bala, A.C. No. 5039, 25 November 2005; Philippine Shell PetroleumCorporation v. John Bordman Ltd. of Iloilo, Inc.,supra).

The reasons or grounds for the award of attorney’s fees must be set forth in the decision of the court,

with an express finding of facts and law that would bring the case within the exception. The matter of attorney’sfees cannot be touched once and only in the fallo of the decision, else, the award should be thrown out forbeing speculative and conjectural. (De los Santos v. Jebsen Maritime, Inc., G.R. No. 154185, 22 November2005; Spouses Alfredo v. PCI Leasing and Finance, Inc., supra).

Legal Interest

Rules with respect to the manner of computing legal interest: (a) When an obligation is breached, regardless of its source, i.e., law, contracts, quasi-contracts,

delicts or quasi-delicts, the contravenor can be held liable for damages. (b) With regard particularly to an award of interest in the concept of actual and compensatory

damages, the rate of interest, as well as the accrual thereof, is imposed, as follows:

[i] When the obligation is breached, and it consists in the payment of a sum ofmoney, i.e., a loan or forbearance of money, the interest due should be that whichmay have been stipulated in writing. Furthermore, the interest due shall itself earnlegal interest from the time it is judicially demanded. In the absence of stipulation, therate of interest shall be 12% per annum to be computed from default, i.e., fromjudicial or extrajudicial demand under and subject to the provisions of Article 1169of the Civil Code. [ii] When an obligation, not constituting a loan or forbearance of money, isbreached, an interest on the amount of damages awarded may be imposed at thediscretion of the court at the rate of 6% per annum. No interest, however, shall beadjudged on unliquidated claims or damages except when or until the demand canbe established with reasonable certainty. Accordingly, where the demand is establishedwith reasonable certainty, the interest shall begin to run from the time the claim is

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made judicially or extrajudicially (Art. 1169, Civil Code) but when such certaintycannot be so reasonably established at the time the demand is made, the interestshall begin to run only from the date the judgment of the court is made (at which timequantification of damages may be deemed to have been reasonably ascertained).The actual base for the computation of legal interest shall, in any case, be on theamount finally adjudged.

[iii] When the judgment of the court awarding a sum of money becomes finaland executory, the rate of legal interest, whether the case falls under paragraph 1 orparagraph 2, above, shall be 12% per annum from such finality until its satisfaction,this interim period being deemed to be by then an equivalent to a forbearance ofcredit.

Interest on a monetary obligation that is due and demandable should commence from the time demand

is first made, whether judicial or extra-judicial. Although the obligation of Paramount had already arisen, thedelay of four years in the performance thereof is attributable to the failure of Philguarantee to inform it of thedevelopments in the negotiations with Roblett. Hence, it is but fair that interest for that period be not countedagainst Paramount as the delay cannot be said to have been caused by its downright refusal to pay petitioner.Instead, the interest should commence from the date of judicial demand, or on 5 June 1990. (Trade &Investment Development Corporation of the Philippines v. Roblett Industrial Construction Corporation,supra; Tupaz IV v. Court of Appeals, supra; Sps. Ramos v. Sps. Heruela, supra).

Moral Damages

Concept. Moral damages are recoverable upon sufficient proof of moral suffering, mental anguish,fright or serious anxiety. The claimant should satisfactorily show the existence of the factual basis of damages.No exemplary damages can be awarded in the absence of moral or actual damages. (Philippine LongDistance Telephone Company, Inc. v. Paguio, G.R. No. 152689, 12 October 2005). While no proof ofpecuniary loss is necessary in order that moral, temperate, nominal, and exemplary damages may beadjudicated, proof of damage or injury should nonetheless be adduced. Moral damages are designed tocompensate the claimant for actual injury suffered and not to impose a penalty on the wrongdoer. (Republicv. Estate Hans Menzi, supra; Sps. Aguilar v. Citytrust Finance Corporation, supra).

In Quasi-Delict Resulting in Personal Injuries and Death. Respondents postulated that since itwas Macalinao who sustained physical injuries and died, he was the one who suffered pain, not petitioners -so moral damages are not recoverable by the petitioners. HELD: The relatives of the victim who incurredphysical injuries in a quasi-delict are not proscribed from recovering moral damages in meritorious cases. Tohold otherwise would give rise to the ridiculous scenario where a defendant may be compelled to pay moraldamages in a quasi-delict causing physical injuries but will be relieved from doing so should those sameinjuries cause the victim’s death. (Macalinao v. Ong, supra).

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In Bigamy. Moral damages may be awarded in favor of the offended party only in criminal casesenumerated in Article 2219, paragraphs 1, 3, 4, 5 and 7 of the Civil Code and analogous cases. The lawdoes not intend that moral damages should be awarded in all cases where the aggrieved party has sufferedmental anguish, fright, moral anxieties, besmirched reputation, wounded feelings, moral shock, social humiliationand similar injury arising out of an act or omission of another. But, in this case the award for moral damagesin favor of the private complainant was sustained. (Manuel v. People, supra).

In Breach of Contract. Moral damages are recoverable only if the defendant has acted fraudulentlyor in bad faith, or is found guilty of gross negligence amounting to bad faith, or in wanton disregard of hiscontractual obligations. Requisites: [i] evidence of besmirched reputation or physical, mental or psychologicalsuffering sustained by the claimant; [ii] a culpable act or omission factually established; [iii] proof that thewrongful act or omission of the defendant is the proximate cause of the damages sustained by the claimant;and [iv] the case is predicated on any of the instances expressed or envisioned by Article 2219 and Article2220 of the Civil Code. There is no hard-and-fast rule in the determination of what would be a fair amount ofmoral damages since each case must be governed by its own peculiar facts. The yardstick should be that it isnot palpably and scandalously excessive. (Cagungun v. Planters Development Bank, G.R. No. 158674,17 October 2005).

Nominal Damages

Justified especially when common sense dictates that a pecuniary loss has indeed been suffered, butis incapable of precise computation. They are adjudicated, not for the purpose of indemnifying respondentsfor any loss suffered, but for vindicating or recognizing their right to a property that has been violated orinvaded. (Sps. Tan v. Bantegui, supra).

Temperate Demages

Temperate damages (Art. 2224 of the Civil Code) in the amount of P15,000 was awarded, sincepecuniary loss was present but its amount could not be proven with certainty. (People v. Quirol, G.R. No.149259, 20 October 2005).

Exemplary Damages

Imposed as a corrective measure when the guilty party has acted in a wanton, fraudulent, reckless,oppressive, or malevolent manner. These damages are awarded in accordance with the sound discretion ofthe court. Absent any showing of bad faith on the part of petitioner, exemplary damages cannot be imposedupon it. (Philippine Shell Petroleum Corporation v. John Bordman Ltd. of Iloilo, Inc., supra). The lawallows the grant of exemplary damages to set an example for the public good. It may be granted in quasi-delicts if the defendant acted with gross negligence. Gross negligence has been defined as negligencecharacterized by the want of even slight care, acting or omitting to act in a situation where there is duty to act,not inadvertently but willfully and intentionally, with a conscious indifference to consequences insofar as other

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persons may be affected. In this case, the award of P10,000.00 as exemplary damages by the trial court wasdeemed insufficient, thus the Court increased it to P25,000.00. (Macalinao v. Ong, G.R. No. 146635, 14December 2005). The award of exemplary damages is warranted by the failure of respondent bank toprevent the unauthorized withdrawals from petitioners’ deposits and its failure to properly apply the latter’sdeposits to their loan. (Cagungun v. Planters Development Bank, supra). Exemplary Damages were alsoawarded in a case where DBP’s fraudulent attempt to prevent Prudential Bank from asserting its rightssmacked of bad faith, if not deceit. (Development Bank of the Philippines v. Prudential Bank, supra).

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COMMERCIAL LAW

CORPORATION LAW

Corporate Entity

Residence of a Corporation - the place where its principal office is located, as stated in its Articles ofIncorporation. (Hyatt Elevators and Escalators Corporation v. Goldstar Elevators, Phils., Inc., G.R.No. 161026, 24 October 2005).

Piercing the Veil. To disregard the corporate existence, the plaintiff must prove: (1) control by theindividual owners, not mere majority or complete stock ownership, resulting in complete domination not onlyof finances but of policy and business practice in respect to a transaction so that the corporate entity, as to thistransaction, had at that time no separate mind, will or existence of its own; (2) such control must have beenused by the defendant to commit fraud or wrong, to perpetuate the violation of a statutory or other positivelegal duty, or a dishonest and unjust act in contravention of the plaintiff’s legal right; and, (3) the control andbreach of duty must proximately cause the injury or unjust loss complained of. The absence of these elementsprevents piercing the corporate veil. (Child Learning Center, Inc. v. Tagario, G.R. No. 150920, 25November 2005).

Stocks and Stockholders

Stock Certificate. Transfer of Stock. Requisites for valid transfer. Section 63 of the CorporationCode of the Philippines (“the Corporation Code”). The delivery of a duly indorsed stock certificate is sufficientto transfer ownership of shares of stock in stock corporations. Such mode of transfer is valid between theparties. The fact that the stock certificates covering the shares registered under the names of Campos,Cojuangco and Zalamea were found in Menzi’s possession, however, does not necessarily prove that thelatter owned the shares. A stock certificate is merely a tangible evidence of ownership of shares of stock. Itspresence or absence does not affect the right of the registered owner to dispose of the shares covered by thestock certificate. In order to bind third persons, the transfer must be recorded in the books of thecorporation. (Republic v. Estate Hans Menzi, G.R. No. 152578, 23 November 2005).

The absence of a deed of assignment is not a fatal flaw which renders the transfer invalid. Theexecution of a deed of sale does not necessarily make the transfer effective. The delivery of the stockcertificate duly indorsed by the owner is the operative act that transfers the shares. The absence of deliveryis a fatal defect which is not cured by mere execution of a deed of assignment. (Id.).

Stockholder. It is possible for a business to be wholly owned by one individual. The validity of itsincorporation is not affected when such individual gives nominal ownership of only one share of stock to eachof the other four incorporators. This is not necessarily illegal. But, this is valid only between or among theincorporators privy to the agreement. It does bind the corporation which, at the time the agreement is made,

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was non-existent. Thus, incorporators continue to be stockholders of a corporation unless, subsequent to theincorporation, they have validly transferred their subscriptions to the real parties in interest. As between thecorporation on the one hand, and its shareholders and third persons on the other, the corporation looks onlyto its books for the purpose of determining who its shareholders are. (Nautica Canning Corporation v.Yumul, G.R. No. 164588, 19 October 2005).

In the case at bar, Yumul held one share of stock of Naolutica in his name, although allegedly held in

trust for Dee. Nautica’s Articles of Incorporation and By-laws, as well as the General Information Sheetfiled with the SEC indicated that Yumul was an incorporator and subscriber of one share. Even granting thatthere was an agreement between Yumul and Dee whereby the former is holding the share in trust for Dee, thesame is binding only as between them. The contents of the articles of incorporation bind the corporation andits stockholders. Its contents cannot be disregarded considering that it was the basic document which legallytriggered the creation of the corporation. (Id.).

Other than petitioners’ self-serving assertion that the beneficial ownership belongs to Dee, they failed

to show that the subscription was transferred to Dee after Nautica’s incorporation. From the corporation’svantage point therefore, Yumul is its stockholder with one share. Furthermore, the conduct of the parties alsoconstitutes sufficient proof of Yumul’s status as a stockholder. On 4 April 1995, Yumul was elected duringthe regular annual stockholders’ meeting as a Director of Nautica’s Board of Directors. Thereafter, he waselected as president of Nautica. Thus, Nautica and its stockholders knowingly held respondent out to thepublic as an officer and a stockholder of the corporation. (Id.).

As a stockholder, Yumul has the right to inspect the books and records of Nautica, pursuant to

Section 74 of the Corporation Code. (Id.).

Directors and Officers

Liability for Corporate Debts. A corporation, being a juridical entity, may act only through itsdirectors, officers, and employees. Debts incurred by these individuals, acting as such corporate agents, arenot theirs but the direct liability of the corporation they represent. As an exception, directors or officers arepersonally liable for the corporation’s debts only if they so contractually agree or stipulate. (Tupaz IV v.Court of Appeals, G.R. No. 145578, 18 November 2005).

In trust receipt 1, petitioners signed as “Vice-Pres-Treasurer” and “Vice-Pres-Operations” of ElOro Corporation. By so signing, petitioners did not bind themselves personally liable for El Oro Corporation’sobligation. (Id.). For trust receipt 2, however, petitioner signed alone and did so in his personal capacity.Hence, petitioner bound himself personally liable for El Oro Corporation’s debts. But the stipulation “wejointly and severally agree and undertake” did not make the corporate officer solidarily liable with thecorporation. In such cases, the corporate officer is liable as guarantor only. Had there been more than onesignatory to the trust receipt, the solidary liability would exist between the guarantors. (Id.).

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Qualification. Section 23 of the Corporation Code requires that every director must own at leastone share of the capital stock of the corporation of which he is a director. Before one may be electedpresident of the corporation, he must be a director. Since Yumul was elected as Nautica’s Director and asPresident thereof, it follows that he must have owned at least one share of the corporation’s capital stock.(Nautica Canning Corporation v. Yumul, supra).

NonStock Corporations It does not follow that because respondent is registered as a nonstock corporation and thus exists for

a purpose other than profit, the company can no longer make any profits. Earning profits is merely itssecondary, not primary, purpose. In fact, it may not lawfully engage in any business activity for profit, for todo so would change or contradict its nature as a non-profit entity. It may, however, invest its corporate fundsin order to earn additional income for paying its operating expenses and meeting benefit claims. Any excessprofit it obtains as an incident to its operations can only be used, whenever necessary or proper, for thefurtherance of the purpose for which it was organized. (Republic v. Sunlife Assurance Company of Canada,G.R. No. 158085, 14 October 2005).

Securities and Exchange Commission (SEC)

Case Not Ripe for Decision. Since the Republic is yet to be heard, the case was not yet ripe fordecision when Republic Act No. 8799 took effect; therefore, the SEC lost jurisdiction over thecase. (International Broadcasting Corporation v. Jalandoon, supra).

TRUST RECEIPTS TRANSACTIONS

Trust Receipt Transactions (PD 115). In a trust receipt transaction, the goods are released by theentruster, who owns or holds absolute title or security interests over the said goods, to the entrustee on thelatter’s execution and delivery to the entruster of a trust receipt. The trust receipt evidences the absolute titleor security interest of the entruster over the goods. As a consequence of the release of the goods and theexecution of the trust receipt, a two-fold obligation is imposed on the entrustee, namely: (a) to hold thedesignated goods, documents or instruments in trust for the purpose of selling or otherwise disposing of them;and, (b) to turn over to the entruster either the proceeds thereof to the extent of the amount owing to theentruster or as appears in the trust receipt, or the goods, documents or instruments themselves if they areunsold or not otherwise disposed of, in accordance with the terms and conditions specified in the trustreceipt. In the case of goods, they may also be released for other purposes substantially equivalent to: [i] theirsale or the procurement of their sale; [ii] their manufacture or processing with the purpose of ultimate sale, inwhich case the entruster retains his title over the said goods whether in their original or processed form untilthe entrustee has complied fully with his obligation under the trust receipt; or, [iii] the loading, unloading,shipment or transshipment or otherwise dealing with them in a manner preliminary or necessary to their sale.Thus, in a trust receipt transaction, the release of the goods to the entrustee, on his execution of a trust

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receipt, is essentially for the purpose of their sale or is necessarily connected with their ultimate or subsequentsale. (Development Bank of the Philippines v. Prudential Bank, G.R. No. 143772, 22 November 2005).

COOPERATIVES

Mutual Life Insurance Company - is a cooperative that promotes the welfare of its own members. Itdoes not operate for profit, but for the mutual benefit of its member-policyholders. They receive their insuranceat cost, while reasonably and properly guarding and maintaining the stability and solvency of the company. The economic benefits filter to the cooperative members. Either equally or proportionally, they are distributedamong members in correlation with the resources of the association utilized. (Republic v. Sunlife AssuranceCompany of Canada, supra).

The distinguishing feature of a cooperative enterprise is the mutuality of cooperation among its member-

policyholders united for that purpose. So long as respondent meets this essential feature, it does not evenhave to use and carry the name of a cooperative to operate its mutual life insurance business. Assuming forthe sake of argument that registration is mandatory, it cannot deprive respondent of its tax exemption privilegemerely because it failed to register. The nature of its operations is clear; its purpose well-defined. Exemptionwhen granted cannot prevail over administrative convenience. (Id.).

The member-policyholders constitute “both insurer and insured” who “contribute, by a system ofpremiums or assessments, to the creation of a fund from which all losses and liabilities are paid.” The premiumspooled into this fund are earmarked for the payment of their indemnity and benefit claims. (Id.).

The so-called “dividend” that is received by member-policyholders is not a portion of profits set

aside for distribution to the stockholders in proportion to their subscription to the capital stock of a corporationfor the following reasons: [i] a mutual company has no capital stock to which subscription is necessary; thereare no stockholders to speak of, but only members; and, [ii] the amount they receive does not partake of thenature of a profit or income. The quasi-appearance of profit will not change its character. It remains anoverpayment, a benefit to which the member-policyholder is equitably entitled. (Id.).

History and Benefits of the Cooperative System. The whole cooperative system, with its verticaland horizontal linkages — from the market cooperative of agricultural products to cooperative rural banks,consumer cooperatives and cooperative insurance — was envisioned to offer considerable economicopportunities to people who joined cooperatives. As an effective instrument in redistributing income andwealth, cooperatives were promoted primarily to support the agrarian reform program of the government. Inorder to strengthen the cooperative movement, Presidential Decree (PD) 175 was signed into law in 1973.(Id.).

Under PD 175, the cooperative referred only to an organization composed primarily of small producers

and consumers who voluntarily joined to form a business enterprise that they themselves owned, controlled,and patronized. The Bureau of Cooperatives Development — under the Department of Local Government

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and Community Development (later Ministry of Agriculture) — had the authority to register, regulate andsupervise only the following cooperatives: (1) barrio associations involved in the issuance of certificates ofland transfer; (2) local or primary cooperatives composed of natural persons and/or barrio associations; (3)federations composed of cooperatives that may or may not perform business activities; and, (4) unions ofcooperatives that did not perform any business activities. Respondent does not fall under any of the above-mentioned types of cooperatives required to be registered under PD 175. (Id.).

When the Cooperative Code was enacted years later, all cooperatives that were registered under

PD 175 and previous laws were also deemed registered with the CDA. Since respondent was not requiredto be registered under the old law on cooperatives, it follows that it was not required to be registered evenunder the new law. (Id.).

Furthermore, only cooperatives to be formed or organized under the Cooperative Code needed

registration with the CDA. Respondent already existed before the passage of the new law on cooperatives. It was not even required to organize under the Cooperative Code, not only because it performed a differentset of functions, but also because it did not operate to serve the same objectives under the new law —particularly on productivity, marketing and credit extension. (Id.).

The insurance against losses of the members of a cooperative referred to in Article 6(7) of the

Cooperative Code is not the same as the life insurance provided by respondent to member-policyholders. The former is a function of a service cooperative, the latter is not. Cooperative insurance under the Code islimited in scope and local in character. It is not the same as mutual life insurance. (Id.).

The provisions of the Insurance Code relative to the organization and operation of an insurance

company also apply to cooperative insurance entities organized under the Cooperative Code. The latter law,however, does not apply to respondent, which already existed as a cooperative company engaged in mutuallife insurance prior to the passage of that law. The statutes prevailing at the time of its organization andmutualization were the Insurance Code and the Corporation Code, which imposed no registration requirementwith the CDA. (Id.).

INSURANCE A stock insurance company doing business in the Philippines may “alter its organization and transform

itself into a mutual insurance company.” Respondent has been mutualized or converted from a stock lifeinsurance company to a nonstock mutual life insurance corporation pursuant to Section 266 of the InsuranceCode of 1978. (Republic v. Sunlife Assurance Company of Canada, G.R. No. 158085, 14 October2005)

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SHIPPING

THE SHIP MORTGAGE DECREE OF 1978 (P.D. No. 1521).

Maritime Lien on Necessaries. Under P.D. No. 1521 or the Ship Mortgage Decree of 1978, thefollowing are the requisites for maritime liens on necessaries to exist: [i] the “necessaries” must have beenfurnished to and for the benefit of the vessel; [ii] the “necessaries” must have been necessary for the continuationof the voyage of the vessel; [iii] the credit must have been extended to the vessel; [iv] there must be necessityfor the extension of the credit; and, (5) the necessaries must be ordered by persons authorized to contract onbehalf of the vessel. P.D. No. 1521 was enacted “to accelerate the growth and development of the shippingindustry” and “to extend the benefits accorded to overseas shipping under Presidential Decree No. 214 todomestic shipping.” (Crescent Petroleum, Ltd. v. M/V “Lok Maheshwari”, G.R. No. 155014, 11 November2005).

Admiralty Jurisdiction. Maritime Contracts. Case for the satisfaction of unpaid supplies furnishedby a foreign supplier in a foreign port to a vessel of foreign registry that is owned, chartered and sub-chartered by foreign entities. Under Batas Pambansa Bilang 129, as amended by Republic Act No. 7691,RTCs exercise exclusive original jurisdiction “(i)n all actions in admiralty and maritime where the demand orclaim exceeds two hundred thousand pesos (P200,000) or in Metro Manila, where such demand or claimexceeds four hundred thousand pesos (P400,000).” Two (2) tests have been used to determine whether acase involving a contract comes within the admiralty and maritime jurisdiction of a court - the locational testand the subject matter test. (Id.). Articles 579 and 584 [of the Code of Commerce] provide a method ofcollecting or enforcing not only the liens created under Section 580 but also for the collection of any kind oflien whatsoever. In the Philippines, an action in rem against a vessel for the purpose of enforcing liens may bebrought under Article 580 of the Code of Commerce. The procedural law is to be found in Article 584 of thesame Code. The result is that in the Philippines any vessel – even though it be a foreign vessel – found in anyport of this Archipelago may be attached and sold under the substantive law which defines the right, and theprocedural law contained in the Code of Commerce by which this right is to be enforced. (Id.).

Various tests used in the U.S. to determine whether a maritime lien exists. (Id.).

“Free-In and Free-Out Stowed and Trimmed” (FIOST) arrangement. (Sangyong Corporation v.Unimarine Shipping Lines, Inc., G.R. No. 162727, 18 November 2005).

ANTI-DUMPING LAW

Republic Act (R.A.) No. 7843, the Anti-Dumping Law. (Villanueva v. Secretary of Justice, G.R.No. 162187, 18 November 2005).

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BANKS

Degree of Diligence Imposed on Banks. Fiduciary responsibility of depository banks. The bankwas grossly negligent when it allowed fund to be withdrawn through falsified withdrawal slips without petitioners’authority and knowledge and its failure to comply with petitioners’ instruction to apply their deposits on theirloan. (Cagungun v. Planters Development Bank, G.R. No. 158674, 17 October 2005)

Negligence (Article 1172 of the Civil Code) - resulting in the dishonor of respondent’s checksconstitutes actionable negligence in law. The bank’s wrongful act caused injury to respondent. Credit is veryimportant to businessmen, and its loss or impairment needs to be recognized and compensated. (PrudentialBank v. Lim, G.R. No. 136371, 11 November 2005).

BOT LAW

Republic Act No. 6957 or the Build, Operate and Transfer Law. (Metropolitan Manila DevelopmentAuthority v. Trackworks Rail Transit Advertising, Vending and Promotions, Inc., G.R. No. 167514, 25October 2005).

CREDIT CARDS

Inspect Airwarn Support System - system utilized by petitioner as a protection both for the companyand the cardholders against the fraudulent use of their charge cards. Once a card suspected of unauthorizeduse is placed in the system, the person to whom the card is tendered must verify the identity of the holder. Ifthe true identity of the card owner is established, the card is honored and the charges are approved. Otherwise, the card is revoked or confiscated. (American Express International, Inc. v. Cordero, G.R.No. 138550, 14 October 2005).

CONDOMINIUM PROJECT

Membership Dues, Assessments for Operating Expenses, Capital Expenditures and OtherSpecial Assessments on Members. Collection thereof by condominium corporations does not fall within thedefinition of business as provided in the LGC – and not subject to business tax under the LGC. (Yamane v.BA Lepanto Condominium Corporation, G.R. No. 154993, 25 October 2005).

The creation of the condominium corporation is sanctioned by Republic Act No. 4726, otherwiseknown as the Condominium Act. Under the law, a condominium is an interest in real property consisting of aseparate interest in a unit in a residential, industrial or commercial building and an undivided interest in common,directly or indirectly, in the land on which it is located and in other common areas of the building. To enablethe orderly administration over these common areas which are jointly owned by the various unit owners, theCondominium Act permits the creation of a condominium corporation, which is specially formed for thepurpose of holding title to the common area, in which the holders of separate interests shall automatically be

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members or shareholders, to the exclusion of others, in proportion to the appurtenant interest of their respectiveunits. In line with the authority of the condominium corporation to manage the condominium project, it maybe authorized, in the deed of restrictions, “to make reasonable assessments to meet authorized expenditures,each condominium unit to be assessed separately for its share of such expenses in proportion (unless otherwiseprovided) to its owner’s fractional interest in any common areas”. Even though the corporation is empoweredto levy assessments or dues from the unit owners, these amounts collected are not intended for the incurrenceof profit by the corporation or its members, but to shoulder the multitude of necessary expenses that arisefrom the maintenance of the condominium project. (Id.).

NEGOTIABLE INSTRUMENTS

Forgery. (Sanchez v. Far East Bank and Trust Company, G.R. No. 155309, 15 November 2005).

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CRIMINAL LAW

THE REVISED PENAL CODE (RPC)

FELONIES AND CIRCUMSTANCES WHICH AFFECTCRIMINAL LIABILITY

FELONIES

Definition. Felonies are committed by means of: (a) deceit (dolo) or (b) fault (culpa). There is deceitwhen the act is performed with deliberate intent. Since a felony by dolo is classified as an intentional felony,it is deemed voluntary. For one to be criminally liable for a felony by dolo, there must be a confluence of bothan evil act and an evil intent. Actus non facit reum, nisi mens sit rea. Malice is a mental state or conditionprompting the doing of an overt act without legal excuse or justification from which another suffers injury. Thereis a legal presumption in law that every man intends the natural or probable consequence of his voluntary act inthe absence of proof to the contrary, and such presumption must prevail unless a reasonable doubt exists from aconsideration of the whole evidence. (Manuel v. People, G.R. No. 165842, 29 November 2005).

In the present case, the prosecution proved that the petitioner was married in 1975, and such marriage

was not judicially declared a nullity; hence, the marriage is presumed to subsist. The prosecution also provedthat the petitioner married the private complainant in 1996, long after the effectivity of the Family Code. Thepetitioner is presumed to have acted with malice or evil intent when he married the private complainant. As ageneral rule, mistake of fact or good faith of the accused is a valid defense in a prosecution for a felony bydolo; such defense negates malice or criminal intent. However, ignorance of the law is not an excuse becauseeveryone is presumed to know the law. Ignorantia legis neminem excusat. (Id.)

Conspiracy as a Mode of Committing a Felony. Conspiracy is present when one concurs withthe criminal design of another, indicated by the performance of an overt act leading to the crime committed.Direct proof of an agreement concerning the commission of a felony and the decision to commit it is notnecessary to establish conspiracy. It may be inferred from the acts of the accused before, during or after thecommission of the crime which, when taken together, would be enough to reveal a community of criminaldesign, as the proof of conspiracy is perhaps most frequently made by evidence of a chain of circumstances. Once established, all the conspirators are criminally liable as co-principals regardless of the degree ofparticipation of each of them, for in contemplation of the law the act of one is the act of all. (Domingo v.Sandiganbayan, G.R. No. 149175, 25 October 2005; People v. Quirol, G.R. No. 149259, 20 October 2005).

CRIMES AND PENALTIES

CRIMES AGAINST PROPERTY

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SWINDLING AND OTHER DECEITS

Estafa thru falsification of official and commercial documents. Conspiracy. (Bolotaulo v.Sandiganbayan [En Banc], G.R. No. 52341-46, 25 November 2005).

By means of false pretenses or fraudulent acts under Article 315, Paragraph 2(a) of the RPC. Elements:[i] there must be a false pretense, fraudulent act or fraudulent means; [ii] such false pretense, fraudulent act orfraudulent means must be made or executed prior to or simultaneously with the commission of the fraud; [iii]the offended party must have relied on the false pretense, fraudulent act, or fraudulent means, that is, he wasinduced to part with his money or property because of the false pretense, fraudulent act, or fraudulent means;and, [v] as a result thereof, the offended party suffered damage. Said elements were established in this casewhere petitioner fraudulently offered to sell to private complainant his rights over the subject property althoughsuch rights had been lost by virtue of the cancellation of his Deed of Conditional Sale with the GSIS. Relyingon petitioner’s misrepresentations, private complainant paid him P150,000.00 as consideration but she wasnever able to gain possession of the property given petitioner’s refusal to vacate the same. (Lorenzo v.People, G.R. No. 152335, 19 December 2005).

CRIMES AGAINST PUBLIC INTEREST

FORGERIES

Falsification of Private Document. (Article 171 (6) of the RPC). Elements: [i] there be an alteration(change) or intercalation (insertion) on a document; [ii] it was made on a genuine document; [iii] the alterationor intercalation has changed the meaning of the document; and, [iv] the changes made the document speaksomething false. When these are committed by a private individual on a private document the violation wouldfall under paragraph 2, Article 172 of the same code, but there must be, in addition to the aforesaid elements,independent evidence of damage or intention to cause the same to a third person. Penalty. (Garcia v. Courtof Appeals, G.R. No. 128213, 13 December 2005).

OTHER FALSITIES

Perjury. (Article 183 of the RPC). It is the deliberate making of untruthful statements upon anymaterial matter, before a competent person authorized to administer oath, in cases in which the law requiressuch oath. Elements: [i] The accused made a statement under oath or executed an affidavit upon a materialmatter; [ii] the statement or affidavit was made before a competent officer, authorized to receive and administeroath; [iii] in that statement or affidavit, the accused made a willful and deliberate assertion of a falsehood; and,[iv] the sworn statement or affidavit containing the falsity is required by law or made for a legal purpose. Thefelony is consummated when the false statement is made. As to the third requisite, good faith or lack of maliceis a defense. (Asturias v. Attys. Serrano and Samson, A.C. No. 6538, 25 November 2005; Villanueva v.Secretary of Justice, G.R. No. 162187, 18 November 2005).

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The term “material matter” is the main fact subject of the inquiry, or any circumstance which tends toprove that fact, or any fact or circumstance which tends to corroborate or strengthen the testimony related tothe subject of the inquiry, or which legitimately affects the credence of any witness who testified. (Villanuevav. Secretary of Justice, supra).

A conviction for perjury cannot be sustained merely upon the contradictory sworn statements of theaccused. The prosecution must prove which of the two statements is false and must show the statement to befalse by other evidence than the contradicting statement. (Id.).

A mere assertion of a false objective fact, a falsehood, is not enough. The assertion must be deliberate

and willful. In perjury, being a felony by dolo, there must be malice on the part of the accused. Willfully meansintentionally; with evil intent and legal malice, with the consciousness that the alleged perjurious statement isfalse with the intent that it should be received as a statement of what was true in fact. It is equivalent to“knowingly.” “Deliberately” implies meditated as distinguished from inadvertent acts. It must appear that theaccused knows his statement to be false or as consciously ignorant of its truth. Perjury cannot be willfulwhere the oath is according to belief or conviction as to its truth. A false statement of a belief is not perjury. Bona fide belief in the truth of a statement is an adequate defense. A false statement which is obviously theresult of an honest mistake is not perjury. (Id.).

CRIMES COMMITTED BY PUBLIC OFFICERS

MALVERSATION OF PUBLIC FUNDS OR PROPERTY

Malversation through Falsification of Commercial Documents (Articles 217 and 171 [8], inrelation to Article 48 of the RPC). Essential elements: [I] The offender is a public officer; [ii] he has thecustody or control of funds or property by reason of the duties of his office; [iii] the funds or propertyinvolved are public funds or property for which he is accountable; and, [iv] he has appropriated, taken ormisappropriated, or has consented to, or through abandonment or negligence, permitted the taking by anotherperson of, such funds or property. (People v. Uy , G.R. No. 157399, 17 November 2005).

Appellant points out that the information alleges willful and intentional commission of the actscomplained of, while the judgment found him guilty of inexcusable negligence amounting to malice. He insiststhat he could not be convicted under the allegations in the information without violating his constitutional rightto due process and to be informed of the accusation against him. HELD: Malversation may be committedeither through a positive act of misappropriation of public funds or property or, passively, through negligenceby allowing another to commit such misappropriation. To sustain a charge of malversation, there must eitherbe criminal intent or criminal negligence and while the prevailing facts of a case may not show that deceitattended the commission of the offense, it will not preclude the reception of evidence to prove the existenceof negligence because both are equally punishable in Article 217 of the RPC. Malversation involves breachof public trust, and whether it is committed through deceit or negligence, the law makes it punishable andprescribes a uniform penalty therefor. Even when the information charges willful malversation, conviction

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for malversation through negligence may still be adjudged if the evidence ultimately proves thatmode of commission of the offense. (Id.).

CRIMES AGAINST HONOR

Grave Oral Defamation. To say that Daylinda is a thief is grave oral defamation. Every defamatoryimputation is presumed to be malicious, even if it be true, if no good intention and justifiable motive for makingit is shown. (Cañal Sr. v. People, G.R. No. 163181, 19 October 2005).

Libel. The penalty of imprisonment imposed against Brillante should be re-examined andreconsidered. The circumstances surrounding the writing of the open letter on which the libelous publicationswere based warrant the imposition of the penalty of fine only, instead of both imprisonment and fine, inaccordance with Art. 355 of the RPC. The intensely feverish passions evoked during the election period in1988 must have agitated petitioner into writing his open letter. While petitioner failed to prove all the elementsof qualified privileged communication under paragraph 1, Article 354 of the RPC, incomplete privilege shouldbe appreciated in his favor, especially considering the wide latitude traditionally given to defamatory utterancesagainst public officials in connection with or relevant to their performance of official duties or against publicfigures in relation to matters of public interest involving them. (Brillante v. Court of Appeals, G.R. Nos.118757 & 121571, 11 November 2005).

Paragraph 3, Article 360 of the RPC. It was clearly stated in the information that the newspaper ispublished in Makati City but circulated throughout the country, which allegation accordingly vests jurisdictionover the offense charged in the RTC of Makati City. (Banal III v. Hon. Panganiban, G.R. No. 167474, 15November 2005).

CRIMES AGAINST CIVIL STATUS OF PERSONSILLEGAL MARRIAGES

Bigamy (Article 349 of the RPC). History of provision. The phrase “or before the absent spousehad been declared presumptively dead by means of a judgment rendered in the proper proceedings” wasincorporated in the RPC because the drafters of the law were of the impression that “in consonance with thecivil law which provides for the presumption of death after an absence of a number of years, the judicialdeclaration of presumed death like annulment of marriage should be a justification for bigamy”. Elements: [i]the accused has been legally married; and, [ii] he/she contracts a subsequent marriage without the formermarriage having been lawfully dissolved. The felony is consummated on the celebration of the second orsubsequent marriage. It is essential that the alleged second marriage, having all the essential requirements,would be valid were it not for the subsistence of the first marriage. The judicial declaration of nullity of aprevious marriage is a defense. (Manuel v. People, supra).

It was the burden of the petitioner to prove his defense that when he married the private complainant

in 1996, he was of the well-grounded belief that his first wife was already dead, as he had not heard from her

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for more than 20 years since 1975. He should have adduced in evidence a decision of a competent courtdeclaring the presumptive death of his first wife as required by Article 349 of the RPC, in relation to Article41 of the Family Code. Such judicial declaration also constitutes proof that the petitioner acted in good faith,and would negate criminal intent on his part when he married the private complainant and, as a consequence,he could not be held guilty of bigamy in such case. (Id.).

The Court rejects petitioner’s contention that the requirement of instituting a petition for declaration

of presumptive death under Article 41 of the Family Code is designed merely to enable the spouse present tocontract a valid second marriage and not for the acquittal of one charged with bigamy. Such provision wasdesigned to harmonize civil law and Article 349 of the RPC and put to rest the confusion spawned by therulings of the Court and comments of eminent authorities on Criminal Law. (Id.).

The petitioner’s sole reliance on Article 390 of the Civil Code as basis for his acquittal for bigamy ismisplaced. The presumption of death of the spouse who had been absent for seven years, it being unknownwhether or not the absentee still lives, is created by law and arises without any necessity of judicialdeclaration. Article 41 of the Family Code, however, amended the foregoing rules on presumptive death.With the effectivity of the Family Code, the period of seven years under the first paragraph of Article 390 ofthe Civil Code was reduced to four consecutive years. Before the spouse present may contract a subsequentmarriage, he or she must institute summary proceedings for the declaration of the presumptive death of theabsentee spouse, without prejudice to the effect of the reappearance of the absentee spouse. (Id.).

The words “proper proceedings” in Article 349 of the Revised Penal Code can only refer to those

authorized by law such as Articles 390 and 391 of the Civil Code which refer to the administration orsettlement of the estate of a deceased person. (Id.).

Under Article 238 of the Family Code, a petition for a declaration of the presumptive death of an absent

spouse under Article 41 of the Family Code may be filed under Articles 239 to 247 of the same Code. (Id.).

CRIMES AGAINST CHASTITY

Acts of Lasciviousness (Article 336 of the RPC). Elements: (1) the offender commits any act oflasciviousness or lewdness; and, (2) under any of the following circumstances: (a) using force or intimidation,(b) the offended party is deprived of reason or otherwise unconscious, or, (c) the offended party is under 12years of age. (Orquinaza v. People, G.R. No.165596, 17 November 2005).

OTHER PENAL LAWS

BATAS PAMBANSA (BP) BLG. 22

Elements of Violation of BP Blg. 22: [i] making, drawing and issuing any check to apply on accountor for value; [ii] knowledge of the maker, drawer or issuer that at the time of issue he does not have sufficient

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funds in or credit with the drawee bank for the payment of the check in full upon its presentment; and, [iii]subsequent dishonor of the check by the drawee bank for insufficiency of funds or credit, or dishonor of thecheck for the same reason had not the drawer, without any valid cause, ordered the bank to stop payment.While petitioner alleges to have paid private respondent the amount of the checks, he failed to specify if hehad done so within five banking days from receiving notice of the checks’ dishonor and to present anyevidence of such payment. (Ruiz v. People, G.R. No. 160893, 18 November 2005).

Defense of Good Faith. Such claim is immaterial, the offense being malum prohibitum. The gravamenof the offense is the issuance of a bad check or any check that is dishonored upon its presentment forpayment and putting them in circulation. Whether malice and intent attended such issuance is unimportant.The law includes all checks drawn against banks, either as a deposit, a guarantee, an evidence of a pre-existing debt or as a mode of payment. It is a crime classified as malum prohibitum. The law is broadenough to include, within its coverage, the making and issuing of a check by one who has no account with abank, or where such account was already closed when the check was presented for payment. Consideringthat the law imposes a penal sanction on one who draws and issues a worthless check against insufficientfunds or a closed account in the drawee bank, there is, likewise, every reason to penalize a person whoindulges in the making and issuing of a check on an account belonging to another with the latter’sconsent, which account has been closed or has no funds or credit with the drawee bank. (Id.).

Whether a person is an accommodation party is a question of intent. When the intent of the parties

does not appear on the face of the check, it must be ascertained in the light of the surrounding facts andcircumstances. Invariably, the tests applied are the purpose test and the proceeds test. Under both tests,the petitioner is not an accommodation party. And, even assuming she was such party, this circumstance isnot a defense to a charge for violation of BP Blg. 22. What the law punishes is the issuance itself of abouncing check and not the purpose for which it was issued or of the terms and conditions relating toits issuance. The mere act of issuing a worthless check, whether merely as an accommodation, iscovered by B.P. 22. Hence, the agreement surrounding the issuance of a check is irrelevant to the prosecutionand conviction of the petitioner. (Id.).

Penalty. Administrative Circular (AC) No. 13-2001 clarifying A.C. No. 12-2000: The clear tenorand intention of AC No. 12-2000 is not to remove imprisonment as an alternative penalty, but to lay down arule of preference in the application of the penalties provided for in BP Blg. 22. AC No. 12-2000 establishesa rule of preference in the application of the penal provisions of BP Blg. 22 such that where the circumstancesof both the offense and the offender clearly indicate good faith or a clear mistake of fact without taint ofnegligence, the imposition of a fine alone should be considered as the more appropriate penalty. Thedetermination of whether the circumstances warrant the imposition of a fine alone rests solely upon theJudge. Should the Judge decide that imprisonment is the more appropriate penalty, AC No. 12-2000 oughtnot to be deemed a hindrance. (Id; Josef v. People, G.R. No. 146424, 18 November 2005).

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ANTI-GRAFT AND CORRUPT PRACTICES ACT(Republic Act [RA] No. 3019)

Violation of Section 3(e) of RA 3019

Elements: [i] the accused is a public officer or a private person charged in conspiracy with the former;[ii] he or she causes undue injury to any party, whether the government or a private party; [iii] said publicofficer commits the prohibited acts during the performance of his or her official duties or in relation to his orher public positions; [iv] such undue injury is caused by giving unwarranted benefits, advantage or preferenceto such parties; and, [v] the public officer has acted with manifest partiality, evident bad faith, or grossinexcusable negligence. (Peralta v. Desierto, G.R. No. 153152, 19 October 2005; Diamante III v.Sandiganbayan, G.R. No. 147911, 14 October 2005).

Three Modes by which the offense may be committed: [i] manifest partiality, [ii] evident bad faith;and, [iii] inexcusable negligence - which are distinct and different from each other. Proof of the existence ofany of these modes would suffice. The use of the three phrases “manifest partiality,” “evident bad faith” and“inexcusable negligence” in the same Information does not mean that it thereby charges three distinct offensesbut only implies that the offense charged may have been committed through any of the modes provided by thelaw. (Soriquez v. Sandiganbayan, G.R. No. 153526, 25 October 2005).

The third element of the offense penalized in Section 3 (e) is satisfied when the questioned conduct

causes undue injury to any party, including the government, or gives any unwarranted benefit, advantage orpreference. Proof of the extent or quantum of damage is thus not essential, it being sufficient that the injurysuffered or benefit received can be perceived to be substantial enough and not merely negligible. Theprosecution’s evidence satisfactorily demonstrated that petitioner allowed Atlantic Erectors to collect andreceive the net amount of P12,697,197.61, despite the breach of contract committed by it. Indubitably, thegovernment suffered undue injury and losses. (Id.).

Violation of Section 3(h) of R.A. No. 3019

Essential elements: (1) the accused is a public officer; (2) he has a direct or indirect financial orpecuniary interest in any business, contract or transaction; and, (3) he either: [i] intervenes or takes part in hisofficial capacity in connection with such interest; or, [ii] is prohibited from having such interest by the Constitutionor by law. There are two modes by which a public officer who has a direct or indirect financial or pecuniaryinterest in any business, contract, or transaction may violate Section 3(h) of R.A. 3019: (a) when the publicofficer intervenes or takes part in his official capacity in connection with his financial or pecuniary interest inany business, contract or transaction; and, (b) when he is prohibited from having such an interest by theConstitution or by law. (Domingo v. Sandiganbayan, supra).

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LABOR LAW

LABOR CODE OF THE PHILIPPINES

CONDITIONS OF EMPLOYMENT

WAGES

Minimum Wage. R.A. No. 6727, known as the Wage Rationalization Act, provides for the statutoryminimum wage rate of all workers and employees in the private sector. Exemption. Section 4 of the Actprovides that for a retail/service establishment to be exempted from the coverage of the minimum wage law,it must be shown that the establishment: [i] is regularly employing not more than ten (10) workers; and, [ii]had applied for exemptions with and as determined by the appropriate Regional Board in accordance withthe applicable rules and regulations issued by the Commission. In this case, the petitioners did not show thatthey had applied for such exemption and that the same was granted. (C. Planas Commercial v. NationalLabor Relations Commission, G.R. No. 144619, 11 November 2005).

Labor-only Contracting (paragraph 4, Article 106 of the Labor Code; Rule VIII-A, Book III,Section 4 [f] of the Omnibus Rules Implementing the Labor Code). An arrangement where the contractor orsubcontractor merely recruits, supplies or places workers to perform a job, work or service for a principal. In labor-only contracting, the following elements are present: [i] the contractor or subcontractor does nothave substantial capital or investment to actually perform the job, work or service under its own account andresponsibility; and, [ii] the employees recruited, supplied or placed by such contractor or subcontractor, areperforming activities which are directly related to the main business of the principal. In such case, the lawcreates an employee-employer relationship so that labor laws may not be circumvented. The principal employerbecomes solidarily liable with the labor-only contractor for all the rightful claims of the employees. Thelabor-only contractor is considered merely as an agent of the employer, the employer having been made bylaw responsible to the employees of the labor-only contractor, as if such employees had been directly employedby it. (Acevedo v. Advanstar Company, Inc., G.R. No. 157656, 11 November 2005).

Permissible Job Contracting or Subcontracting - refers to an arrangement whereby a principal agreesto put out or farm out with the contractor or subcontractor the performance or completion of a specific job,work or service within a definite or predetermined period, regardless of whether such job, work or service isto be performed or completed within or outside the premises of the principal. The following conditionsconcur: [i] the contractor or subcontractor carries on a distinct and independent business and undertakes toperform the job, work or service on its own account and under its own responsibility according to its ownmanner and method, and free from the control and direction of the principal in all matters connected with theperformance of the work, except as to the results thereof; [ii] the contractor or subcontractor has substantialcapital or investment; and, [iii] the agreement between the principal and contractor or subcontractor assuresthe contractual employees entitlement to all labor and occupational safety and health standards, free exerciseof the right to self-organization, security of tenure, and social and welfare benefits. It is not enough to show

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substantial capitalization or investment in the form of tools, equipment, etc. to determine whether one is anindependent contractor. Other factors that may be considered include the following: whether or not thecontractor is carrying on an independent business; the nature and extent of the work; the skill required; theterm and duration of the relationship; the right to assign the performance of specified pieces of work; thecontrol and supervision of the work to another; the employer’s power with respect to the hiring, firing andpayment of the contractor’s workers; the control of the premises; the duty to supply premises, tools, appliances,materials and labor; and the mode and manner or terms of payment. (Id.).

HEALTH, SAFETY AND SOCIAL WELFARE BENEFITS

Permanent disability is the inability of a worker to perform his job for more than 120 days, regardlessof whether or not he loses the use of any part of his body. The law does not require that the illness should beincurable. What is important is that he was unable to perform his customary work for more than 120 dayswhich constitutes permanent total disability. (Crystal Shipping, Inc. v. Natividad, G.R. No. 154798, 20October 2005).

Total disability means the disablement of an employee to earn wages in the same kind of work ofsimilar nature that he was trained for, or accustomed to perform, or any kind of work which a person of hismentality and attainments could do. It does not mean absolute helplessness. In disability compensation, it isnot the injury which is compensated, but rather it is the incapacity to work resulting in the impairment of one’searning capacity. (Id.).

Disability Disability Benefits. (De los Santos v. Jebsen Maritime, Inc., supra; Degamo v. AvantgardeShipping Corp., supra).

The company-designated physician who must proclaim the existence and grade of the seafarer’sdisability need not be accredited with the POEA. There is no provision requiring accreditation by the POEAof such physician. (Rivera v. Wallem Maritime Services, Inc., G.R. No. 160315, 11 November 2005).

Compensable Disease. Listed Occupational Disease. Even if the “Takayasu’s Disease” is not

listed, perhaps for being rare and still mysterious, there can be no question that being associated with PTB,which is a listed occupational disease, the death of petitioner’s husband is compensable under Annex A of theAmended Rules on Employees Compensation. (Jacang v. Employees’ Compensation Commission, G.R.No. 151893, 20 October 2005).

LABOR RELATIONS

NATIONAL LABOR RELATIONS COMMISSION

One of the inherent powers of courts which should apply in equal force to quasi-judicial bodies is toamend and control its processes so as to make them conformable to law and justice. This includes the right

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to reverse itself, especially when in its opinion it has committed an error or mistake in judgment and adherenceto its decision would cause injustice. (Mauricio v. National Labor Relations Commission, G.R. No. 164635,17 November 2005).

Appeal

Appeal from Decisions, Awards or Orders of the Labor Arbiter. Appeal Bond. The requirementof a cash or surety bond for the perfection of an appeal from the Labor Arbiter’s monetary award is not onlymandatory but jurisdictional as well, and non-compliance therewith is fatal and has the effect of rendering theaward final and executory. The filing of the motion to reduce bond shall not stop the running of the period toperfect appeal. Payment of the appeal bond is an indispensable and jurisdictional requisite and not a meretechnicality of law or procedure. (Stolt-Nielsen Marine Services, Inc. v. National Labor RelationsCommission, G.R. No. 147623, 13 December 2005; Bacarra v. National Labor Relations Commission,G.R. No. 162445, 20 October 2005;Universal Robina Corporation v. Catapang, supra).

LABOR ORGANIZATION

Certification Election. (St. James School of Quezon City v. Samahang Manggagawa Sa St. JamesSchool of Quezon City, G.R. No. 151326).

POST EMPLOYMENT

TERMINATION OF EMPLOYMENT

Security of Tenure. Regular Employee. Test in determining whether one is a regular employee.(Universal Robina Corporation v. Catapang, G.R. No. 164736, 14 October 2005).

TERMINATION BY EMPLOYER

Employer-Employee Relationship. (Baron Express v. Umianito, supra).

Just Causes

Serious Misconduct. Acts of Dishonesty and Disloyalty of Employee. For misconduct or improperbehavior to be a just cause for dismissal: [i] it must be serious; [ii] it must relate to the performance of theemployee’s duties; and, (c) it must show that the employee has become unfit to continue working for theemployer. (Lopez v. National Labor Relations Commission, G.R. No. 167385, 13 December 2005). Inthe instant case, the alleged misconduct of the employee barely falls within the situation contemplated by thelaw. Her absence for 16 days was justified considering that she had just delivered a child, which can hardlybe considered a forbidden act, a dereliction of duty; much less does it imply wrongful intent. The employerharps on the alleged concealment by the employee of her pregnancy. This argument, however, begs the

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question as to how one can conceal a full-term pregnancy. The employee’s failure to formally inform heremployer of her pregnancy can not be considered as grave misconduct directly connected to her work as toconstitute just cause for her separation. (Lakpue Drug, Inc. v. Belga, G.R. No. 166379, 20 October 2005).In another case, under the pertinent company rule the dishonesty of an employee to be a valid cause fordismissal must relate to ore involve the misappropriation or malversation of the club funds, or cause ortend to cause prejudice to the employer. The record indicates that the fund which was accumulated from aportion of the tips given by the golfers and was allegedly misappropriated by the respondent as the purportedcustodian thereof, did not belong to the employer but to the forced savings of its locker room personnel. Hence, the claim that the petitioners’ interest was prejudiced has no factual basis. (Villamor Golf Club v.Pehid, G.R. No. 166152, 4 October 2005).

Violation of Company Rules. Company policies and regulations are, unless shown to be grosslyoppressive or contrary to law, generally valid and binding and must be complied with by the parties unlessfinally revised or amended, unilaterally or preferably through negotiation. However, while an employee maybe validly dismissed for violation of a reasonable company rule or regulation, an act allegedly in breachthereof must clearly and convincingly fall within the express intendment of such order. Here, the employeedisobeyed his employer’s rules and abused his authority by requiring other employees to work in remodelinghis house and by lending money with high interest rates to his subordinates. (Picar v. Shangri-la Hotel, G.R.No.146367, 14 December 2005).

Willful Disobedience. Disobedience, as a just cause for termination, must be willful or intentional. Willfulness is characterized by a wrongful and perverse mental attitude rendering the employee’s act inconsistentwith proper subordination. In the instant case, the memoranda were given to the employee two days after shehad given birth. It was thus physically impossible for said employee to report for work and explain herabsence, as ordered. (Lakpue Drug, Inc., supra). To be a valid cause for dismissal, the following twinelements must concur: [i] the employee’s assailed conduct must have been willful, that is, characterized by awrongful and perverse attitude; and, [ii] the order violated must have been reasonable, lawful, made knownto the employee and must pertain to the duties which he had been engaged to discharge. In this case, itappears that the alleged company procedure for leaving the ignition key of the company’s vehicles withinoffice premises was not even made known to Hermosa. Petitioners failed to prove Hermosa willfully disobeyedthe said company procedure. At any rate, dismissal was too harsh a penalty for the omission imputed to him.(Micro Sales Operation Network v. National Labor Relations Commission, G.R. No. 155279, 11 October2005).

Gross and Habitual Neglect of Duties. This cause includes gross inefficiency, negligence andcarelessness. Habitual neglect implies repeated failure to perform one’s duties for a period of time. Here, theemployee’s repeated and habitual infractions, committed despite several warnings, constitute gross misconduct. Habitual absenteeism without leave constitute gross negligence and is sufficient to justify termination of anemployee. (Challenge Socks Corporation v. Court of Appeals, G.R. No. 165268, 8 November 2005).An employee’s past misconduct and present behavior must be taken together in determining the proper

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imposable penalty. The totality of infractions or the number of violations committed during the period ofemployment shall be considered in determining the penalty to be imposed upon an erring employee. (Id.).

An unsatisfactory rating can be a just cause for dismissal only if it amounts to gross and habitualneglect of duties. Gross negligence implies a want or absence of or failure to exercise slight care or diligence,or the entire absence of care. It evinces a thoughtless disregard of consequences without exerting any effortto avoid them. (Eastern Overseas Employment Center, Inc. v. Bea, G.R. No. 143023, 29 November2005).

Loss of Confidence. An employer may terminate an employee based on fraud or willful breach ofthe trust reposed in him by his employer or duly-authorized representative. This is premised on the fact thatan employee concerned holds a position of trust and confidence - where an employee or official of thecompany is entrusted with responsibility involving delicate matters, such as the custody, handling or care ofthe employer’s property. (Amadeo Fishing Corporation v. Nierra, G.R. No. 163099, 4 October 2005;Lakpue Drug, Inc., supra). This cause does not require proof beyond reasonable doubt. The law requiresonly that there be at least some basis to justify it. There must be some evidence to substantiate the claim andform a legal basis for loss of confidence. (Ramatek Philippines, Inc. v. de los Reyes, G.R. No. 139526, 25October 2005). When petitioner contracted with Gopez, he in effect engaged in a business that competedwith that of his employer. He cannot serve himself and his employer at the same time all at the expense of thelatter. (Lopez v. National Labor Relations Commission, supra).

Position of Trust and Confidence. Example: the petitioner is a sales representative, reposed withmanagerial duties in overseeing the respondent’s business in his assigned area. (Alcazaren v. UnivetAgricultural Products, Inc., G.R. No. 149628, 22 November 2005). However, as an assistant cashier,Belga’s primary function was to assist the cashier in such duties as preparation of deposit slips, provisionalreceipts, post-dated checks, etc. These functions are essentially clerical. For while ostensibly, the documentsthat Belga prepares as Assistant Cashier pertain to her employer’s property, her work does not call forindependent judgment or discretion. Belga simply prepares the documents as instructed by her superiorssubject to the latter’s verification or approval. (Lakpue Drug, Inc.,supra).

Abandonment. De Castro was not merely suspended. He was dismissed for alleged abandonmentof work. To constitute abandonment as a just cause for dismissal, there must be: (a) absence without justifiablereason; and, (b) a clear intention, as manifested by some overt act, to sever the employer-employee relationship.(Micro Sales Operation Network v. National Labor Relations Commission, supra; Baron Express v.Umianito, G.R. No. 156969, 11 November 2005; Philippine Long Distance Telephone Company, Inc.v. Tiamson, G.R. No. 164684-85, 11 November 2005).

Management Prerogative to Discipline Employees. The employer may not be compelled to continueto employ such a person whose continuance in the service would patently be inimical to his employer’sinterest. The law, in protecting the rights of workers, authorizes neither oppression nor self-destruction of theemployer. (Id.). In general, management has the prerogative to discipline its employees and to impose

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appropriate penalties on erring workers pursuant to company rules and regulations. Terminating an employmentis one of petitioner’s prerogatives. (Challenge Socks Corporation, supra; Durban Apartments Corporationv. Catacutan, G.R. No. 167136, 14 December 2005; Philippine Long Distance Telephone Company,Inc. v. Paguio, G.R. No. 152689, 12 October 2005; Cadiz v. Court of Appeals, G.R. No. 153784, 25October 2005; Lopez v. National Labor Relations Commission, supra).

Fact of Dismissal. In the case of Basinillo, petitioners rely solely on his purported unsworn statementalleging he was never dismissed. However, not having been sworn to, the said document has no probativevalue. While the Court is liberal in the conduct of proceedings for labor cases, proof of authenticity as acondition for the admission of documents is nonetheless required. (Id.). Petitioners failed to present evidenceof Basinillo’s continuous contribution to SSS or uninterrupted pay slips to prove he remained under thecompany’s employ. Hence, the complaint for illegal dismissal filed by Basinillo stands and speaks for itself.Once a case for illegal dismissal is filed, the burden is on the employer to prove that the termination was forvalid cause. Petitioners failed to discharge this burden persuasively. (Id.).

Authorized Causes

Redundancy or Retirement. The employer must comply with the following requisites to ensure thevalidity of the redundancy program: [i] a written notice served on both the employees and the Department ofLabor and Employment (DOLE) at least one month prior to the intended date of retrenchment; [ii] paymentof separation pay equivalent to at least one month pay or at least one month pay for every year of service,whichever is higher; [iii] good faith in abolishing the redundant positions; and, [iv] fair and reasonable criteriain ascertaining what positions are to be declared redundant and accordingly abolished. (Becton DickinsonPhils. v. National Labor Relations Commission, G.R. Nos. 159969 &160116, 15 November 2005). Theemployees’ actual knowledge of the termination of DAP’s distributorship agreement with IDP is not sufficientto replace the formal and written notice required by the law. In the written notice, the employees are informedof the specific date of the termination, at least a month prior to the date of effectivity, to give them sufficienttime to make necessary arrangements. (Id.).

Disease. Article 284 of the Labor Code. Section 8, Rule I, Book VI of the Omnibus RulesImplementing the Labor Code). For a dismissal on the ground of disease to be considered valid, two requisitesmust concur: (a) the employee suffers from a disease which cannot be cured within six months and hiscontinued employment is prohibited by law or prejudicial to his health or to the health of his co-employees;and, (b) a certification to that effect must be issued by a competent public health authority. The burden ofproving the validity of the dismissal rests on the employer. As such, the employer must prove that the requisitesfor a valid dismissal due to a disease have been complied with. In the absence of the required certification bya competent public health authority, this Court has ruled against the validity of the employee’s dismissal.

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Requirements

Substantive Requirement. The validity of the petitioner’s dismissal hinges on the satisfaction of thetwo substantive requirements for a lawful termination of an employee’s services, to wit: (1) the employee wasaccorded due process, basic of which are opportunity to be heard and to defend himself; and, (2) thedismissal must be for any of the causes provided in Article 282 of the Labor Code. (Alcazaren v. UnivetAgricultural Products, Inc., supra).

Procedural Requirements. The procedure for terminating an employee is found in Book VI, Rule I,

Section 2(d) of the Omnibus Rules Implementing the Labor Code: Standards of due process: requirementsof notice. In all cases of termination of employment, the following standards of due process shall be substantiallyobserved for termination of employment based on just causes: [i] a written notice served on the employeespecifying the ground or grounds for termination, and giving to said employee reasonable opportunity withinwhich to explain his side; [ii] a hearing or conference during which the employee concerned, with the assistanceof counsel if the employee so desires, is given opportunity to respond to the charge, present his evidence orrebut the evidence presented against him; and, [iii] a written notice of termination served on the employeeindicating that upon due consideration of all the circumstances, grounds have been established to justify histermination. The foregoing notices shall be served on the employee’s last known address. (Electro SystemIndustries Corporation v. National Labor Relations Commission, G.R. No. 165282, 5 October 2005;Manly Express, Inc. v. Payong, Jr., G.R. No. 167462, 25 October 2005; Lakpue Drug, Inc., supra).

The first notice must inform outright the employee that an investigation will be conducted on thecharges particularized therein which, if proven, will result to his dismissal. Such notice must not only containa plain statement of the charges of malfeasance or misfeasance but must categorically state the effect on hisemployment if the charges are proven to be true. In this case, the first notice issued by petitioner fell short ofthe requirement of the law because it merely referred to the section of the company rule allegedly violated byprivate respondent. The notice failed to specify the penalty for the charges which is dismissal, and to indicatethe precise act or omission which constituted as the ground for which dismissal is sought. (Electro SystemIndustries Corporation v. National Labor Relations Commission, supra).

There is no showing that private respondent was actually served with the required two notices. The

first notice did not bear the signature of private respondent. In the second notice, there was a notation thatprivate respondent refused to sign. This notation is not sufficient proof that petitioner attempted to serve thesecond notice to private respondent. In sum, other than petitioner’s bare assertions that private respondentwas furnished with copies of the notices and that he attended the hearing on the charges, it presented no otherproof to establish the same. A notation in the notice that the employee refused to sign is not sufficient proofthat the employer attempted to serve the notice to the employee. (Id.).

The employer’s compliance with the second requirement (the notice of termination) does not curethe initial defect of the absence of the proper written charge required by law. (Amadeo Fishing Corporation

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v. Nierra, supra; Electro System Industries Corporation v. National Labor Relations Commission,supra).

Substantial Requirement Without Procedural Requirement. The validity of a termination can existindependently of the procedural infirmity in the dismissal. (DAP Corporation v. Court of Appeals, G.R.No. 165811, 14 December 2005). (a) Dismissal for Just Cause. Where the dismissal is for a just cause, thelack of statutory due process should not nullify the dismissal, or render it illegal, or ineffectual. However, theemployer should indemnify the employee for the violation of his statutory rights in the form of nominal damages. The amount of such damages is addressed to the sound discretion of the court, taking into account therelevant circumstances. In the case at bar, the amount of P30,000.00 as nominal damages is reasonable. Thisindemnity in the form of nominal damages shall be in lieu of the payment of backwages. (Durban ApartmentsCorporation v. Catacutan, supra). If the dismissal is based on a just cause under Article 282, but theemployer failed to comply with the notice requirement, the sanction to be imposed upon him should betempered because the dismissal process was, in effect, initiated by an act imputable to the employee. (DAPCorporation v. Court of Appeals, supra).

(b) Dismissal for Authorized Cause. If the dismissal is based on an authorized cause under Article283, but the employer failed to comply with the notice requirement, the sanction should be stiffer becausethe dismissal process was initiated by the employer’s exercise of his management prerogative. The amount ofP50,000.00 is sufficient under the circumstances as indemnity for the violation of respondent’s statutoryrights. As provided in Article 283 of the Labor Code, respondent is likewise entitled to separation payequivalent to at least her one month pay or to at least one month pay for every year of service, whichever ishigher. (Id.).

When the dismissal is not motivated by bad faith, or where the petitioners-officers have not acted in

wanton, oppressive or malevolent manner, there can be no judgment against them for moral or exemplarydamages. In the same vein, the individual petitioners may not be held solidarily liable with the petitionercorporation, since there is no showing that petitioners Odango and Ymbong had a direct hand in the dismissalof the private respondents, enough to attribute to them (petitioners) a patently unlawful act while acting for thecorporation. (Amadeo Fishing Corporation v. Nierra, supra; Electro System Industries Corporation v.National Labor Relations Commission, supra).

The Serrano doctrine, which awarded full backwages to “ineffectual dismissal cases” where anemployee dismissed for cause was denied due process, has been abandoned by the Court’s ruling in Agabonv. National Labor Relations Commission. In that case, the Court held that a violation of an employee’sstatutory right to two notices prior to the termination of employment for just cause entitles such dismissedemployee to nominal damages, absent sufficient evidence to support an award for actual or moraldamages. (Id.).

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Reinstatement and Other Privileges

Article 279 of the Labor Code. An employee unjustly dismissed from work shall be entitled toreinstatement without loss of seniority rights and other privileges and to his full back wages, inclusive ofallowances, and to his other benefits or their monetary equivalent computed from the time his compensationwas withheld from him up to the time of his actual reinstatement. (Casol v. Purefoods Corporation, G.R.No. 166550, 18 November 2005; Lakpue Drug, Inc. v. Belga, supra).

However, the employer should not be made to pay the employee’s backwages, where the dismissalis for a just cause but lacks compliance with the procedural requirements.(Electro System IndustriesCorporation v. National Labor Relations Commission, supra)..

Termination by Employee

Resignation. (Acevedo v. Advanstar Company, Inc., supra).

Release and Quitclaim. Compromise Agreement. Not per se invalid or against public policy, except:[i] where there is clear proof that the waiver was wangled from an unsuspecting or gullible person; or, [ii]where the terms of settlement are unconscionable on their face. In these cases, the law will step in to annulthe questionable transactions. Such quitclaim and release agreements are regarded as ineffective to bar theworkers from claiming the full measure of their legal rights. (C. Planas Commercial v. National LaborRelations Commission, supra). Here, it could not be said that the amount of the settlement is unconscionable. In any event, no deception has been established that would justify the annulment of private respondents’quitclaims. (Id.).

The ruling on the validity and binding effect of releases and quitclaims apply not only to rank-and-fileworkers but also to those who hold top positions in their employer company. There is no nexus betweenintelligence, or even the position which the employee held in the company when it concerns the pressurewhich the employer may exert upon the free will of employee who is asked to sign a release andquitclaim. (Becton Dickinson Phils. v. National Labor Relations Commission, supra).

PRESCRIPTION OF OFFENSESAND CLAIMS

Money Claims. POEA Circular No. 55, Series of 1996 became effective only on 1 January 1997while the employment contract between the parties was entered earlier on 8 November 1994. The earlierstandard employment contract issued by the POEA did not have a provision on prescription of claims. Hence, the applicable provision in this case is Article 291 of the Labor Code.

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Article 291 covers all money claims from employer-employee relationship and is broader in scopethan claims arising from a specific law. It is not limited to money claims recoverable under the Labor Code,but applies also to claims of overseas contract workers. Article 291 provides that all money claims arisingfrom employer-employee relations shall be filed within three years from the time the cause of action accrued,otherwise, these shall be forever barred. (Degamo v. Avantgarde Shipping Corp., G.R. No. 154460, 22November 2005).

PHILIPPINE OVERSEAS EMPLOYMENT ADMINISTRATION(POEA)

POEA was created primarily to undertake a systematic program for overseas employment of Filipinoworkers and to protect their rights to fair and equitable employment practices. To ensure that overseasworkers, including seafarers on board ocean-going vessels, are amply protected, the POEA is authorized toformulate employment standards in accordance with welfare objectives of the overseas employment program.(De los Santos v. Jebsen Maritime, Inc., G.R. No. 154185, 22 November 2005).

POEA Standard Employment Contract (POEA-SEC). Under POEA rules, all employers andprincipals are required to adopt the POEA-SEC without prejudice to their adoption of terms and conditionsover and above the minimum prescribed by that agency. (Id.).

POEA-SEC should not be made to continue to apply to domestic employment involving a Filipinoseaman on board an inter-island vessel. The Delos Santos’ POEA-approved employment contract was fora definite term of one (1) month only fixed to coincide with the pre-determined one-month long Philippines-Japan-Philippines conduction-voyage run. After the lapse of the said period, his employment under thePOEA-approved contract may be deemed as functus oficio and Delos Santos’ employment pursuant theretoconsidered automatically terminated, there being no mutually-agreed renewal or extension of the expiredcontract. A seaman need not physically disembarked from a vessel at the expiration of his employmentcontract to have such contract considered terminated. (Id.).

Complaint for illegal dismissal, payment of salaries, refund of placement fee, damages and attorney’sfees filed with the Office of the Labor Arbiter. (JSS Indochina Corporation v. Ferrer, G.R. No. 156381,14 October 2005).

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LAND LAW

PUBLIC LAND ACT(COMMONWEALTH ACT [CA] NO. 161)

JUDICIAL CONFIRMATION OF IMPERFECTOR INCOMPLETE TITLE

Who May Apply. Applicants for registration of title must prove the following: [i] that the land formspart of the disposable and alienable lands of the public domain; and, [ii] that they have been in open, continuous,exclusive, and notorious possession and occupation of the same under a bona fide claim of ownership eithersince time immemorial, or since June 12, 1945. (Republic v. Enciso, G.R. No. 160145, 11 November2005). When the legal conditions are complied with, the possessor of the land — by operation of law —acquires a right to a government grant, without necessitating the issuance of a certificate of title. (Republic v.Estonilo, G.R. No. 157306, 25 November 2005). Respondents, as applicants, have the burden of provingthat they have an imperfect title to Lot 4318. Even the absence of opposition from the government does notrelieve them of this burden. Thus, it was erroneous for the trial and the appellate courts to hold that the failureof the government to dislodge respondents, judicially or extrajudicially, from the subject land since 1954already amounted to a title. (Id.).

Applicants for judicial confirmation of imperfect titles must present specific acts of ownership tosubstantiate their claims; they cannot simply offer general statements that are mere conclusions of law ratherthan factual evidence of possession. While the tax declarations were issued under the names of respondents’predecessors-in-interest, the earliest one presented was issued only in 1954. (Id.).

Reclaimed disposable lands of the public domain may only be leased and not sold to private parties.

These lands remained sui generis, as the only alienable or disposable lands of the public domain which thegovernment could not sell to private parties except if the legislature passes a law authorizing such sale.Reclaimed lands retain their inherent potential as areas for public use or public service. The ownership oflands reclaimed from foreshore areas is rooted in the Regalian doctrine, which declares that all lands andwaters of the public domain belong to the State. On 7 November 1936, the National Assembly approved thePublic Land Act, compiling all the existing laws on lands of the public domain. This remains to this day theexisting and applicable general law governing the classification and disposition of lands of the public domain.(Republic v. Enciso, supra).

Under Sections 83, 86, 87 and 53 of the Public Land Act, only a positive act of the President isneeded to segregate a piece of land for a public purpose. While Section 53 grants authority to the Director ofLands — through the Solicitor General — to file a petition against claimants of the reserved land, the filing ofthat petition is not mandatory. The Director of Lands is required to file a petition only “whenever in theopinion of the President public interest requires it.” (Id.).

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Land that has not been acquired from the government, either by purchase or by grant, belongs to theState as part of the public domain. For this reason, imperfect titles to agricultural lands are subjected torigorous scrutiny before judicial confirmation is granted. In the same manner, persons claiming the protectionof “private rights” in order to exclude their lands from military reservations must show by clear and convincingevidence that the pieces of property in question have been acquired by a legal method of acquiring publiclands. (Republic v. Estonilo, supra).

THE LAND REGISTRATIN ACT (ACT NO. 496)

PROPERTY RGISTRATION DECREE (P.D. NO. 1529)

ORIGINAL REGISTRATION

ORIGINAL REGISTRATION PROCEEDINGS

Certificate of Title

Registered Land Not Subject to Prescription. Section 46 of Act No. 496, now section 47 of P.D.No. 1529, expressly provides that no title to registered land in derogation of the title of the registered ownershall be acquired by prescription or by adverse possession. A land already decreed and registered in anordinary registration proceedings cannot again be the subject of adjudication. (Herce, Jr. v. Municipality ofCabuyao, G.R. No. 166645, 11 November 2005).

Certificate of Title Not Subject to Collateral Attack. Section 48 of P.D. No. 1529 provides thata certificate of title shall not be subject to collateral attack. It cannot be altered, modified, or cancelled exceptin a direct proceeding in accordance with law. An action is a direct attack on a title when the object of theaction or proceeding is to nullify the title, and thus challenge the judgment pursuant to which the title wasdecreed. The attack is direct when the object of an action or proceeding is to annul or set aside such judgment,or enjoin its enforcement. On the other hand, the attack is indirect or collateral when, in an action to obtain adifferent relief, an attack on the judgment is nevertheless made as an incident thereof. In the present case, theattack on the title is definitely merely collateral as the relief being sought by private respondents in their actionwas recovery of possession. The attack on the validity of private respondents’ certificate of title was merelyraised as a defense in petitioners’ Answer filed with the trial court. (Caraan v. Court of Appeals, G.R. No.140752, 11 November 2005).

The fundamental principle in land registration is that a certificate of title serves as evidence of anindefeasible and incontrovertible title to the property in favor of the person whose name appears therein. Itbecomes the best proof of ownership of a parcel of land. One who deals with property registered under theTorrens system may rely on the title and need not go beyond the same. It is only when the acquisition of thetitle is attended with fraud or bad faith that the doctrine finds no application. (Federated Realty Corporationv. Court of Appeals, G.R. No. 127967, 14 December 2005; Herce, Jr. v. Municipality of Cabuyao,supra; Cuizon v. Remoto, G.R. No. 143027, 11 October 2005).

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Failing to abide by the mandatory requirements of a proceeding in personam, the transferees of landcannot acquire a better title than that of the original owner. The incontrovertible nature of a certificate of titleapplies only when the issue involved is the validity of the original and not of the transfer. Subsequent titlesissued to the prejudice of the rightful owner will produce no legal effects whatsoever. (Sps. Tan v. Bantegui,G.R. No. 154027, 24 October 2005). The reconstitution would not constitute a collateral attack on petitioners’title which was irregularly and illegally issued in the first place. Wrongly reconstituted certificates of titlesecured through fraud and misrepresentation cannot be the source of legitimate rights and benefits. (ManotokIV v. Heirs of Barque, G.R. Nos. 162335 & 162605, December 12, 2005).

Private respondents having presented TCT No. RT-71061, which is the reconstituted title of TCTNo. 214949, they have thus proven their allegation of ownership over the subject property. The burden ofproof then shifted to petitioners who must establish by preponderance of evidence their allegation that theyhave a better right over the subject property.

The purpose of the legislature in creating the Court of Land Registration was to bring the land titles of

the Philippine under one comprehensive and harmonious system, the cardinal features of which are indefeasibilityof title and the intervention of the State as a prerequisite to the creation and transfer of titles and interest, withthe resultant increase in the use of land as a business asset by reason of the greater certainty and security oftitle. The Court of Land Registration does not create or vest a title. It simply confirms a title alreadycreated and already vested, rendering it forever indefeasible.

The Land Registration Act now the Property Registration Decree, as well as the Cadastral Act,

protects only the holders of a title in good faith and cannot be used as a shield for frauds or that one shouldenrich himself at the expense of another. One cannot conceal under the cloak of its provisions to perpetratefraud and obtain a better title than what he really and lawfully owns. Thus, if he secures a certificate of title bymistake or obtain more land than what he really owns, the certificate of title should be cancelled or corrected.

Who May Own Disposable Public Land

The sales application filed by the respondent is valid. (Taguinod v. Dalupang, G.R. No. 166883, 23November 2005).

Adverse Possession and Prescription. Petitioners’ defense that they have a better right over thesubject land because they had been in open, public, adverse, continuous, and uninterrupted possession in theconcept of owner for more than 30 years must be struck down. Section 47 of PD No. 1529 provides that notitle to registered land in derogation of the title of the registered owner shall be acquired by prescription oradverse possession. (Caraan v. Court of Appeals, supra; Republic v. Enciso, supra).

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SUBSEQUENT REGISTRATION

ADMINISTRATIVE RECONSTITUTION OF TITLE

The Land Registration Authority (LRA) has the jurisdiction to act on petitions for administrativereconstitution. (Manotok IV v. Heirs of Barque, supra).

REPUBLIC ACT (RA) No. 26

JUDICIAL RECONSTITUTION OF TITLE

Reconstitution of Transfer Tertificates of Title (TCT) – based on the owner’s duplicate certificate oftitle. When respondents filed the petition for reconstitution, they submitted in support thereof the owner’sduplicate certificate of title, real estate tax receipts and tax declaration. Plainly, the same should have morethan sufficed as sources for the reconstitution pursuant to Section 3 of RA No. 26, which explicitly mandatesthat the reconstitution shall be made following the hierarchy of sources as enumerated by law. In addition,Section 12 of the same law requires that the petition shall be accompanied with a plan and technical descriptionof the property only if the source of the reconstitution is Section 3(f) of RA No. 26. (Id.).

Since respondents’ source of reconstitution is the owner’s duplicate certificate of title, there is noneed for the reconstituting officer to require the submission of the plan, much less deny the petition on theground that the submitted plan appears to be spurious. By enumerating the hierarchy of sources to be usedfor the reconstitution, it is the intent of the law to give more weight and preference to the owner’s duplicatecertificate of title over the other enumerated sources. (Id.).

ACT NO. 3135EXTRAJUDICIAL FORECLOSURE OF MORTGAGE

Extra-judicial Foreclosure Proceedings. In extrajudicial foreclosure sales, personal notice of theauction sale is not necessary as publication of the notice in a newspaper is more than sufficient compliancewith the rules. Extant rules do not require that a mortgagee be so notified, albeit such notification is arequirement under certain circumstances with respect to the mortgagor. Act No. 3135, as amended, whichgoverns the extrajudicial foreclosure of mortgages on real properties, sets forth publication requirements.Nothing is mentioned in the said provision about the public auction of a real estate being held on two differentdates. (LBC Bank v. Marquez, A. M. No. P-04-1918, 16 December 2005).

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LEGAL AND JUDICIAL ETHICS

LAWYERS

THE LAWYER AND SOCIETY

The Legal Profession. The practice of law is considered a privilege bestowed by the State on thosewho show that they possessed and continue to possess the legal qualifications for it. Lawyers are expectedto maintain at all times a high standard of legal proficiency and morality, including honesty, integrity and fairdealing. They must perform their fourfold duty to society, the legal profession, the courts and their clients, inaccordance with the values and norms of the legal profession as embodied in the Code of ProfessionalResponsibility. (Sps. Garcia v. Atty. Bala, A.C. No. 5039, 25 November 2005).

A lawyer must be imbued with a knowledge of rules and procedures, especially elementaryones. Unnecessary delays can be avoided when lawyers are diligent and faithful in performing their duties.(Jehan Shipping Corporation v. National Food Authority, G.R. No. 159750, 14 December 2005).

The lawyer must encourage his clients to avoid, end or settle a controversy if it will admit of a fairsettlement. (Pineda v. Atty. Macapagal, A.C. No. 6026, 29 November 2005).

THE LAWYER AND THE COURTS

The Court does not regard with favor lawyers who try to delay the execution of cases which arealready final and executory. The Court has disciplined counsels who engage in such behavior. In their zeal toprotect the interests of their clients, lawyers must not overreach their commitment to the extent of frustratingthe ends of justice. (DSM Construction and Development Corporation v. Court Of Appeals, G.R. No. 166993, 19 December 2005).

A lawyer should, at all times, comply with what the court lawfully requires. Here, respondent continuedto disregard the final order of the CA finding her liable for the P900,000 she received from complainant. Herrefusal to comply with the CA’s order is a willful disobedience to its lawful orders and must not be leftunpunished. (Frias V. Atty. Lozada [En Banc], A. C. No. 6656, 13 December 2005).

The Court admonished counsel in this case for making a wrong citation of a decided case. (Heirs ofTan, Sr. v. Pollescas, G.R. No. 145568, November 17, 2005). In another case, the Court admonishedcounsel to refrain from misquoting or misrepresenting the text a Court decision. (Barayoga v. AssetPrivatization Trust, G.R. No. 160073, 24 October 2005).

THE LAWYER AND THE CLIENT

Entire Devotion to Client. A member of the legal profession owes his client entire devotion to his

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genuine interest, warm zeal in the maintenance and defense of his rights and exertion of his utmost learningand ability. (Pineda v. Atty. Macapagal, supra). A lawyer has the duty to give adequate attention and timeto every case he accepts. A lawyer impliedly warrants that he possesses the necessary diligence, learning andskill to handle each case. He should exert his best judgment and exercise reasonable and ordinary care anddiligence in the pursuit or defense of his client’s cause. In the present case, counsel was negligent in handlingthe civil case which led to its dismissal. In the libel suit, counsel failed to file an appeal brief; hence, the lowercourt’s decision convicting complainant of libel became final and executory. The failure of a lawyer to file anappeal brief constitutes inexcusable negligence. (Id.).

Candor. Respondent lacked candor in dealing with his client. He not only omitted to apprise himof the status of the cases; worse, he avoided any meeting with his client. He failed to keep the latter informedof the status of the cases and to respond to request for information. This is tantamount to unjustifiable denialof his client’s right to be fully informed of the developments in and the status of the case. (Id.).

Abuse of Client’s Confidence. Lawyer’s act of borrowing money from a client violates Canon16.04 of the Code of Professional Responsibility. A lawyer’s act of asking a client for a loan is very unethical. It comes within those acts considered as abuse of client’s confidence. (Frias V. Atty. Lozada, supra).

Conflicting Interest. Canon 15.03 of the Code of Professional Responsibility. A lawyer may not,without being guilty of professional misconduct, act as counsel for a person whose interest conflicts with thatof his present or former client. He may not undertake to discharge conflicting duties any more than he mayrepresent antagonistic interests. The test of conflict of interest is whether the acceptance of a new relation willprevent an attorney from the full discharge of his duty of undivided fidelity and loyalty to his client or invitesuspicion of unfaithfulness or double-dealing in its performance. The conflict exists if the acceptance of thenew retainer will require the attorney to perform an act which will injuriously affect his first client in any matterin which he represented him and also whether he will be called upon in his new relation to use against the firstclient any knowledge acquired through their connection. (id.; Bildner v. Atty. Lokin, Jr. Adm. Case No.6554, 14 December 2005).

Lawyer-Client Relationship. The relation of attorney and client is in many respects one of agency,and the general rules of ordinary agency apply to such relation. With that ostensible representation andwithout any evidence to show that complainant or his co-heirs withdrew such authority from respondent, thelatter himself can even claim the certificates of titles and other documents with regard to the homesteadpatents. (Uytengsu III v. Atty. Baduel, Adm. Case No. 5134, 14 December 2005).

Clients are bound by the actions of their counsel in the conduct of their case. If it were otherwise, anda lawyer’s mistake or negligence was admitted as a reason for the opening of a case, there would be no endto litigation so long as counsel had not been sufficiently diligent or experienced or learned. However, this ruleadmits certain exceptions: [i] where reckless or gross negligence of counsel deprives the client of due processof law; [ii] when its application will result in outright deprivation of the client’s liberty or property; or [iii]where the interests of justice so require. (Sps. Friend v. Union Bank of the Philippines, G.R. No. 165767,

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29 November 2005; GCP-Manny Transport Services, Inc. v. Hon. Principe, G.R. No. 141484, 11November 2005).

Respondent collected her full commission even before the transaction between complainant and SanDiego was completed. This unmasked respondent’s greed which she now wants us so badly to ignore. Herintegrity was placed in serious doubt the moment her promised commission started motivating her everymove. Her behavior was, sad to say, simply distasteful. (Frias V. Atty. Lozada, supra).

Change of Attorney. Before a counsel of record may be considered relieved of his responsibility assuch counsel on account of withdrawal, it is necessary that Section 26, Rule 138 of the Rules of Court shouldbe observed. Unless said procedure is complied with, the counsel of record is regarded as the counsel whoshould be served with copies of the judgments, orders and pleadings and who should be held responsible forthe case. A lawyer’s withdrawal as counsel must be made in a formal petition filed in the case, without which,notice of judgment rendered in the case served on the counsel of record, is, for all legal purposes, notice tothe client, the date of receipt of which is considered the starting point from which the period of appealprescribed by law shall begin to run. (GCP-Manny Transport Services, Inc. v. Hon. Principe, supra).

Gross Negligence. The delay incurred by counsel for petitioner employees in filing the petition forcertiorari before the CA was inexcusable. (De la Cruz v. Golar Maritime Services, Inc., G.R. No. 141277,16 December 2005).

SUSPENSION OR DISBARMENT

Disbarment. Ordinarily, the Court views with disfavor the submission of new evidence on appeal. This, however, is a disbarment proceeding where procedural rules governing ordinary civil actions are generallynot applied, its sole purpose being to determine whether a member of the bar deserves to remain inpractice. (Baltazar v. Atty. Dimalanta, A.C. No. 5424, 11 October 2005). The burden of proof inadministrative complaints against lawyers rests on the complainant who must establish his charge by clear,convincing and satisfactory proof. (Asturias v. Attys. Serrano and Samson, A.C. No. 6538, 25 November2005; Uytengsu III v. Atty. Baduel, supra).

Personal knowledge is not a requisite for filing a disbarment complaint. Section 1, Rule 139-B.Personal knowledge is required, not of the complainant, but of her witnesses, if there are any. (Bildner v.Atty. Lokin, Jr., supra).

Integrated Bar of the Philippines (IBP). Review and Decision by the IBP Board of Governors.The notice of resolution referred to in Section 12, Rule 139-B, paragraph (c) of the Rules of Court refers notto an unofficial information that may be gathered by the parties, nor to any letter from the IBP Board Chairmanor even of the Board, but to the official notice of resolution that is supposed to be issued by the IBP Board,copy of which is given to all parties and transmitted to this Court. Motion for reconsideration is allowed.(Bildner v. Atty. Lokin, Jr., supra).

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JUDGES

PERFORM OFFICIAL DUTIESHONESTLY, AND WITH IMPARTIALITY

AND DILIGENCE

ADJUDICATIVE RESPONSIBILITIES

Dispose of the Court’s Business Promptly and Decide Cases Within Three Months (Section15[1], Article VIII of the 1987 Constitution. Rule 3.05 of Cannon 3 of the Code of Judicial Conduct). Thefailure of judges to render judgments within the said period constitutes gross inefficiency and warrants theimposition of administrative sanction. (Re: Cases Left Undecided, A.M. No. 98-12-394-RTC, 20 October2005; Re: Judicial Audit Conducted in the Regional Trial Court, Branch 54, Lapu-Lapu City, A.M.No. 05-8-539-, 11 November 2005; Sevilla v. Judge Quintin, A.M. No. MTJ-05-1603, 25 October2005; Wong Jan Realty, Inc. v. Judge Español, A.M. No. RTJ-01-1647, 13 October 2005).

Supreme Court Administrative Circular No. 1 dated 28 January 1988, requires all magistrates to act

promptly on all motions and interlocutory matters pending before their courts. Administrative Circular No. 3-99 dated 15 January 1999 further requires judges to scrupulously observe the periods prescribed by theConstitution in the adjudication and resolution of all cases or matters submitted to their courts. (Report onthe Judicial Audit Conducted in the RTC, Branch 18, Tagaytay City, A.M. No. 04-9-512-RTC, 13December 2005).

Administrative Circular No. 10-94, reiterating Administrative Circular No. 1 issued on 28 January1988 requires all trial judges to conduct a physical inventory of cases at the time of their assumption of officeand every semester thereafter on the 30th of June and 31st of December of the year. Administrative CircularNo. 17-94 authorizes trial judges to devote one week at the end of each semester for the audit and inventoryduring which period trials need not be scheduled. (Report on the Judicial Audit, A.M. MTJ-05-1573, 12October 2005).

Under Administrative Circular No. 28 issued on 3 July 1989, when the parties failed to file therequired memorandum, the case should have been considered submitted for decision upon the expiration ofthe period for filing, and the respondent should have disposed of the case within three months therefromwithout waiting anymore for the memorandum. (Id.).

In the judge’s illness, he can seek from the Court extensions of time to render decisions or resolutions.(Re: Cases Left Undecided, A.M. No. 98-12-394-RTC, supra; Arles v. Judge Beldia, A.M. OCA-IPINo. 96-237-RTJ, 29 November 2005; Re: Judicial Audit Conducted in the Regional Trial Court,supra).

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Gross Inefficiency. Proper penalty for undue delay in rendering a decision. (Prosecutor Visbal v.Judge Sescon, A.M. No. RTJ-04-1890, 11 October 2005; Atty. Adalim-White v. Judge Bugtas, A.M.No. RTJ-02-1738, 17 November 2005).

AVOID IMPROPRIETYAND THE APPEARANCE OF IMPROPRIETY

IN ALL ACTICITIES

The judge should not only act fairly, independently and honestly, but should also be perceived to befair, independent and honest. A judge, like Caesar’s wife, must not only be above suspicion, but he must alsoappear to be above suspicion. (Dayuno v. Judge Barillo [En Banc], A.M. No. MTJ-05-1579, 11 October2005).

Gross Ignorance of the Law. While judges should not be held to answer criminally, civilly oradministratively for every erroneous decision rendered by him in good faith, it is imperative that they beconversant with basic legal principles. Rule 1.01, Canon 1 of the Code of Judicial Conduct requires them tobe the embodiment of competence, integrity, and independence. (Barcena v. Gingoyon, supra). A judge iscalled upon to exhibit more than just a cursory acquaintance with statutes and procedural rules. It is imperativethat he be conversant with basic legal principles and be aware of well-settled authoritative doctrines. (Atty.Adalim-White v. Judge Bugtas, supra). Illustrative cases of gross ignorance of the law: [i] respondent judgedismissed the criminal case for rape on the strength of a compromise agreement that consisted not in marriagebetween the offended party and the accused but in monetary consideration between the offended party andher mother and the accused. In cases of rape, only the marriage of the offender with the offended party shallextinguish the criminal action or remit the penalty already imposed. (Report on the Judicial Audit, A.M.MTJ-05-1573, supra); [ii] dismissal by the respondent judge of a criminal case, based on the affidavit ofdesistance executed by one who is not a party or witness in the case. (Id.); [iii] rendering a one-page decisionwithout stating the facts and the law on which it is based. (Id.); [iv] granting defense counsel’s belated verbal“manifestation” to file a demurrer to evidence. (Sevilla v. Judge Quintin, A.M. No. MTJ-05-1603, 25October 2005); [v] giving due course to the prosecution’s notice of appeal after sustaining the demurrer toevidence. (Barcena v. Gingoyon, A.M. No. RTJ-03-1794, 25 October 2005).

Bias and Partiality. Respondent judge officially issued a notice of conference, complete with a casetitle, requiring complainant to appear before his sala for a conference concerning what turned out to be a non-existing case. Respondent judge thus created the impression that his clerk of court held undue sway in theaffairs of his court. (Dayuno v. Judge Barillo [En Banc], A.M. No. MTJ-05-1579, 11 October 2005).Bias and partiality of a judge must be proven by clear and convincing evidence. Mere suspicion that a judgeis bias or partial is not enough. (Ramatek Philippines, Inc. v. de los Reyes, G.R. No. 139526, 25 October2005; Wong Jan Realty, Inc. v. Judge Español, A.M. No. RTJ-01-1647, 13 October 2005).

Inhibition. While disqualification of judges based on specific grounds provided by the Rules of Courtand the Code of Judicial Ethics is compulsory, inhibition partakes of voluntariness on their part. (Id.).

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Mandatory Inhibition. Rule 137 of the Rules of Court mandatorily disqualifies a judge or judicialofficer to sit in any case in which: (a) he, or his wife or child, is pecuniarily interested as heir, legatee, creditoror otherwise; (b) he is related to either party within the sixth degree of consanguinity or affinity, or to counselwithin the fourth degree, computed according to the rules of civil law; (c) he has been executor, administrator,guardian, trustee or counsel; or, (d) he has presided in any inferior court when his ruling or decision is thesubject of review, without the written consent of all parties in interest, signed by them and entered upon therecord. Where the accused is the estranged wife of respondent judge, it is mandatory for respondent toinhibit himself from the case. (Kilat v. Judge Macias, A.M. No. RTJ-05-1960, 25 October 2005).

Gross Misconduct. Solely on the basis of complainant’s and her witnesses’ sworn statement,respondent judge declared the existence of a prima facie case. And on very same day, he conducted ex-parte and concluded the preliminary investigation thereby issuing a warrant for herein complainant’s arrest.In all, herein complainant appeared to have been proceeded against, arrested and then detained withoutbeing given the chance to be heard thru his counter-affidavit and other supporting documents. In fact, thearrest came before the party was officially notified of the charges against him. (Dayuno v. Judge Barillo [EnBanc], A.M. No. MTJ-05-1579, 11 October 2005). Sanctions. Under Section 8 of A.M. No. 01-8-10-SC, amending Rule 140 of the Rules of Court on the Discipline of Justices and Judges, dated 11 September2001, gross misconduct constituting violations of the Code of Judicial Conduct are classified as seriouscharges punishable by dismissal from service, suspension from office for more than three (3) but not exceedingsix (6) months, or a fine of more than P20,000 but not exceeding P40,000. While the penalty of dismissalmay very well be imposed on respondent judge, the Court finds that a fine in the amount of P40,000.00 is anappropriate penalty. For, apart from the fact that this is respondent judge’s first administrative case in histwenty (20) years of service in the Judiciary, there is no indication that, in the commission of the specific actscomplained of, he perverted his office for monetary or other valuable consideration. (Id.; Letter DatedNovember 12, 2004 of Judge Malingan, A.M. No. MTJ-05-1586, 20 October 2005).

Shall Not Influence the Outcome of a Litigation Pending in Another Court or Administrative Agency.(Jabon v. Judge Usman, Adm. No. RTJ-02-1713, 25 October 2005).

Calling the complainant a “greedy and usurer Chinese woman,” tagging her lawyer as “lazy andnegligent” while branding her own clerk of court as “equally lazy and incompetent” is not a language befittingthe esteemed position of a magistrate of the law. (Cua Shuk Yin v. Judge Perello, A.M. No. RTJ-05-1961,11 November 2005).

ADMINISTRATIVE CHARGES AGAINST JUDGES

Must be supported at least by substantial evidence, or such relevant evidence as a reasonable mindmight accept as adequate to support a conclusion. (Kilat v. Judge Macias, supra). The burden of proof thatrespondent committed the act complained of rests on the complainant. If the complainant fails in this, thecharge must be dismissed. (Barcena v. Gingoyon, supra). In the absence of fraud, dishonesty and corruption,the acts of a judge in his judicial capacity are not subject to disciplinary action. Thus, he cannot be subjected

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to liability – civil, criminal or administrative – for any of his official acts, no matter how erroneous, as long ashe acts in good faith. Only judicial errors tainted with fraud, dishonesty, gross ignorance, bad faith or deliberateintent to do an injustice will be administratively sanctioned. (Cua Shuk Yin v. Judge Perello, supra). Failureto interpret the law or to properly appreciate the evidence presented does not necessarily render a judgeadministratively liable. Where judicial recourse is still available, the filing of an administrative complaint againsta judge is not an appropriate remedy. Disciplinary proceedings and criminal actions do not complement,supplement or substitute judicial remedies, whether ordinary or extraordinary. An inquiry into a judge’s civil,criminal and/or administrative liability may be made only after the available remedies have been exhaustedand decided with finality. (Estrada v. Judge Himalaloan, A.M. No. MTJ-05-1617, 18 November 2005;Wong Jan Realty, Inc. v. Judge Español, supra).

Death of Respondent in an Administrative Case During its Pendency, such as: [i] before the respondentcould submit a comment on the complaint; [ii] before an investigation could be conducted; [iii] before theinvestigating judge or the OCA could make a finding on the culpability of the respondent; [iv] the investigationhad already been terminated, the investigating judge and the OCA had already made a finding on the chargeand recommended respondent’s suspension and dismissal from the service, respectively; but the respondentdied while his case was being deliberated upon by the Court. In all these instances, the Court ordered thedismissal of the cases and did not see it fit to impose a penalty on the respondents. (Report on the JudicialAudit, A.M. MTJ-05-1573, 12 October 2005).

––– 0 –––

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POLITICAL LAW

POWERS OF GOVERNMENT

TAXING POWER

VAT Reform Law (Republic Act No. 9337). Challenge to the validity of a tax measure in light of “theclear and present danger doctrine” - if it poses a clear and present danger to the deprivation of life, liberty orproperty of the taxpayer without due process of law. (ABAKADA Guro Party List v. Executive Secretary[En Banc], G.R. No. 168056, 18 October 2005).

EMINENT DOMAIN

Eminent Domain. It is the authority and right of the State to take private property for public useupon observance of due process of law and payment of just compensation. Any arm of the State thatexercises such power must wield the same with circumspection and utmost regard for procedural requirements.Title to the property expropriated shall pass from the owner to the expropriator only upon full payment of justcompensation. (Federated Realty Corporation v. Court of Appeals, G.R. No. 127967, 14 December2005).

The 1987 Constitution explicitly provides for the exercise of the power of eminent domain overprivate properties upon payment of just compensation. The constitutional restraints are public use and justcompensation. Here, the expropriated property has been shown to be for the continued utilization by theNational Irrigation Administration (NIA) of irrigation canal and access road, which property has assumed apublic character upon its expropriation. Just Compensation – defined. (Yujuico v. Hon. Atienza, G.R. No.164282, 12 October 2005).

The unpaid landowner can not recover possession of property taken for public use even when no

requisite expropriation proceedings were first instituted. The landowner was merely given the relief ofrecovering compensation for his property computed at its market value at the time it was taken and appropriatedby the State. (Palileo v. National Irrigation Administration, G.R. No.148574, 11 October 2005). However,in this case the judgment sought to be satisfied has long attained finality and the expropriated property hasbeen utilized as a school site for five (5) years now; yet, the awarded just compensation has not been fullypaid. These circumstances merit the relaxation of the technical rules of procedure to ensure that substantialjustice will be served. (Yujuico v. Hon. Atienza, supra).

Eminent Domain and Local Government Units (LGUs). LGUs may exercise the power of eminentdomain, subject to the limitation embodied under the law. There are two relevant laws to consider, the LGCand Republic Act No. 7279 or the “Urban Development and Housing Act of 1992” (UDHA). (Antoniov. Hon. Geronimo, G.R. No. 124779, 29 November 2005).

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Section 19 of the LGC establishes how a local government unit may expropriate private property.The Sangguniang Bayan may exercise the power to expropriate private properties, subject to the followingrequisites, all of which must concur: [i] an ordinance is enacted by the local legislative council authorizing thelocal chief executive, in behalf of the local government unit, to exercise the power of eminent domain orpursue expropriation proceedings over a particular private property; [ii] the power of eminent domain isexercised for public use, purpose or welfare, or for the benefit of the poor and the landless; [iii] there ispayment of just compensation, as required under Section 9, Article III of the Constitution, and other pertinentlaws; and, [iv] a valid and definite offer has been previously made to the owner of the property sought to beexpropriated, but said offer was not accepted. A local government unit cannot authorize an expropriation ofprivate property through a mere resolution of its lawmaking body. (Id.).

Priorities in the Acquisition of Land. Modes of Land Acquisition. The UDHA governs the localexpropriation of property for purposes of urban land reform and housing, particularly, Sections 9 and 10thereof. (Antonio v. Hon. Geronimo, G.R. No. 124779, 29 November 2005).

Just Compensation. It means not only the correct determination of the amount to be paid to theowner of the land but also the payment of the land within a reasonable time from its taking. While theprevailing doctrine is that the non-payment of just compensation does not entitle the private landowner torecover possession of the expropriated lots, however, in cases where the government failed to pay justcompensation within five (5) years from the finality of judgment in the expropriation proceedings, the ownersconcerned shall have the right to recover possession of their property. Given the above ruling, the reversionof the expropriated property to the petitioner would prove not to be a remote prospect should respondentsand the City they represent insist on trudging on their intransigent course. (Yujuico v. Hon. Atienza, supra).

Expropriation Proceedings - the procedure to enforce the state’s right of eminent domain, are governedby Rule 67 of the Rules of Court. There are two stages in every action for expropriation: [i] condemnation ofthe property after determination that its acquisition is for public purpose; and, [ii] the ascertainment of justcompensation. During the condemnation stage, the court may either issue an order of expropriation, declaringthat the plaintiff has a lawful right to take the property sought to be condemned for public use or purpose, oran order of dismissal, if it appears that the expropriation is not for some public use. (Tiongson v. NationalHousing Authority, G.R. No. 166964, 11 October 2005).

P.D. No. 552, which took effect in 1974, has provided for the period upon which all actions against

the NIA for compensation must be instituted. P.D. No. 552 added the following paragraph to Republic ActNo. 3601 (An Act Creating the National Irrigation Administration). (Palileo v. National IrrigationAdministration, supra).

The Republic cannot base its right to the subject lot solely on the alleged presence of a government

structure therein. The law provides for a strict procedure for expropriation which the State must follow lest itviolates the constitutionally enshrined principle that private property shall not be taken for public use without

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just compensation. (Federated Realty Corporation v. Court of Appeals, G.R. No. 127967, 14 December2005).

Assuming that the Republic had indeed paid the deposit or made full payment of just compensation,in regular order this should have led to the cancellation of title or at least, the annotation of the lien in favor ofthe government on the certificate of title covering the subject lot. The registration with the Registry of Deedsof the Republic’s interest arising from the exercise of its power of eminent domain is in consonance withSection 88 of the Land Registration Act (now Section 85 of the Property Registration Decree). Until FRC’stitle is annulled in a proper proceeding, the Republic has no enforceable right over the subject property. Neither military operational integrity nor national defense vests title to property in favor of the government. (Id.).

BILL OF RIGHTS

Equal Protection Clause

Class Legislation. Discriminating against some and favoring others is prohibited, but classificationon a reasonable basis and not made arbitrarily or capriciously is permitted. To be reasonable, the classificationmust: [i] be based on substantial distinctions which make real differences; (b) be germane to the purpose ofthe law; (c) not be limited to existing conditions only; and, (d) apply equally to each member of theclass. (Beltran v. Secretary of Health [En Banc], G.R. No. 133640, 25 November 2005).

Republic Act No. 7719 or “The National Blood Services Act of 1994” was enacted to instill publicconsciousness of the importance and benefits of voluntary blood donation, safe blood supply and properblood collection from healthy donors. To do this, the Legislature decided to order the phase out of commercialblood banks to improve the Philippine blood banking system, to regulate the supply and proper collection ofsafe blood, and so as not to derail the implementation of the voluntary blood donation program of thegovernment. In lieu of commercial blood banks, non-profit blood banks or blood centers, in strict adherenceto professional and scientific standards to be established by the DOH, shall be set in place. To effectuate itspolicy, a classification was made between nonprofit blood banks/centers and commercial blood banks. Thisclassification was deemed to be valid and reasonable by the Court. (Id.).

Due Process

The essence of due process is to be found in the reasonable opportunity to be heard and to submitany evidence one may have in support of one’s defense. Where the opportunity to be heard, either throughverbal arguments or pleadings, is accorded, and the party can “present its side” or defend its “interest in duecourse,” there is no denial of procedural due process. (Sps. Friend v. Union Bank of the Philippines, G.R.No. 165767, 29 November 2005; Tiongson v. National Housing Authority, G.R. No. 166964, 11 October2005; Philippine Rabbit Bus Lines, Inc. v. Goimco, Sr., G.R. No. 135507, 29 November 2005; Cañal,Sr. v. People, G.R. No. 163181, 19 October 2005; Philippine Amusement and Gaming Corporation v.

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Angara, G.R. No. 142937, 15 November 2005; Teston v. Development Bank of the Philippines, G.R.No. 144374, 11 November 2005).

Due Process and Taxes. The exercise of the power of taxation constitutes a deprivation of propertyunder the due process clause, and the taxpayer’s right to due process is violated when arbitrary or oppressivemethods are used in assessing and collecting taxes. (Yamane v. BA Lepanto Condominium Corporation,G.R. No. 154993, 25 October 2005; (ABAKADA Guro Party List v. Executive Secretary, supra).

Procedural Due Process in Labor Cases. (Challenge Socks Corporation v. Court of Appeals,G.R. No. 165268, 8 November 2005).

Due Process in Criminal Cases. (Cañal, Sr. v. People, G.R. No. 163181, 19 October 19 2005).

Due Process and the State. Introduction of additional evidence by the prosecution. Petitioner cannotclaim denial of due process because he will have the opportunity to contest the evidence adduced against himand to prove his defenses after the prosecution concludes the presentation of its evidence. The prosecutorwas remiss in the performance of his responsibilities. He gravely abused his discretion by resting the casewithout adducing evidence for the State and without ensuring that petitioner had signed the Joint Stipulationof Facts before it was submitted to the Sandiganbayan. As a result, the State was denied due process. Inlight of the foregoing, the Sandiganbayan was therefore correct in allowing the State to adduce additionalevidence. The State should not be prejudiced and deprived of its right to prosecute cases simply because ofthe ineptitude or nonchalance of the Special Prosecutor. (Valencia v. Sandiganbayan, G.R. No. 165996,17 October 2005).

Rights to Speedy Disposition of Cases

The peoples’ right to a speedy disposition of cases is a right enshrined in the Constitution. A judge’sfailure to decide, resolve and act on cases with dispatch constitutes gross inefficiency which warrants theimposition of administrative sanctions. (Re: Report on the Judicial Audit and Physical Inventory of Casesin MCTC Sara-Ajuy-Lemery, Iloilo, A.M. No. 05-10-299-MCTC, 14 December 2005; Republic of thePhilippines v. “G” Holdings, Inc., G.R. No. 141241, 22 November 2005).

Republic Act No. 8493 or the “Speedy Trial Act of 1998” sets the time limit for the arraignment andtrial of a case. These however do not preclude justifiable postponements and delay when so warranted bythe situation. The right to a speedy trial is deemed violated only when: [i] the proceedings are attended byvexatious, capricious, and oppressive delays; [ii] when unjustified postponements are asked for and secured;and, [iii] when without cause or justifiable motive a long period of time is allowed to elapse without the partyhaving his case tried. (Domondon v. Sandiganbayan, G.R. No. 166606, 29 November 2005).

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Rights of the Accused

During Custodial Investigation. Paragraph 1, Section 12, Article III of the 1987 Constitutionrefers to “custodial” investigation where a suspect has already been taken into police custody, or otherwisedeprived of his freedom of action in any significant manner, and the investigating officers begin to ask questionsto elicit information and confessions or admissions from the suspect. The protective mantle of the Constitutionalprovision also does not extend to admissions or confessions made to a private individual, or to a verbaladmission made to a radio announcer who was not part of the investigation, or even to a mayor approachedas a personal confidante and not in his official capacity. A videotaped interview showing the accused unburdeninghis guilt willingly, openly and publicly in the presence of newsmen is not covered by the provision. In so ruling,however, the Court warned trial courts to take extreme caution in further admitting similar confessions becauseof the distinct possibility that the police, with the connivance of unscrupulous media practitioners, may attemptto legitimize coerced extrajudicial confessions and place them beyond the exclusionary rule by having anaccused admit an offense on television. Neither does the constitutional provision on custodial investigationextend to a spontaneous statement, not elicited through questioning by the authorities, but given in an ordinarymanner whereby the accused orally admits having committed the crime, nor to a person undergoing an auditexamination because an audit examiner is not a law enforcement officer. (People v. Uy, G.R. No. 157399,17 November 2005).

Here, apellant’s statement was taken during the administrative investigation of the audit team of theNational Power Corporation (NPC) and before he was taken into custody. As such, the inquest was still ageneral inquiry into an unsolved offense at the time and there was, as yet, no specific suspect. (Id.).

Police Custody. Appellant cannot claim that he was in police custody because he was confined atthe time at the Philippine Heart Center and he gave this statement to NPC personnel, not to police authorities. Thefact that an NBI investigation was being contemporaneously conducted at the time the sworn statement wastaken will not extricate appellant from his predicament. The essence of the constitutional safeguard is protectionfrom coercion. The interview where the sworn statement is based was conducted by NPC personnel for theNPC’s administrative investigation. Any investigation conducted by the NBI is a proceeding separate, distinctand independent from the NPC inquiry and should not be confused or lumped together with the latter. Althoughthe constitutional protection covers not only confessions but admissions as well, the ruling is qualified with thestatement that what is being eschewed is the evil of “extorting” a confession from the mouth of the personbeing interrogated. “Extortion” is an act or practice of taking or obtaining anything from a person by illegaluse of fear, whether by force, threats or any undue exercise of power. In this case, there is nothing on recordto support appellant’s claim that his statements were extorted from him. (Id.).

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THE LEGISLATIVE DEPARTMENT

Delegation of Legislative Power.Congress may validly delegate to administrative agencies the authority to promulgate rules and

regulations to implement a given legislation and effectuate its policies. The test to determine whether a statuteconstitutes an undue delegation of legislative power is to inquire whether the statute was complete in all itsterms and provisions when it left the hands of the Legislature so that nothing was left to the judgment of theadministrative body or any other appointee or delegate of the Legislature. The National Blood Services Actof 1994 is complete in itself. By its provisions, it has conferred the power and authority to the Secretary ofHealth as to its execution, to be exercised under and in pursuance of the law. The power to ascertain theexistence of facts and conditions upon which the Secretary may effect a period of extension for said phase-out can be delegated by Congress. The true distinction between the power to make laws and discretion as toits execution is illustrated by the fact that the delegation of power to make the law necessarily involves adiscretion as to what it shall be, and, conferring an authority or discretion as to its execution should beexercised under and in pursuance of the law. The first cannot be done; to the latter no valid objection can bemade. (Beltran v. Secretary of Health [En Banc], G.R. No. 133640, 25 November 2005).

An administrative agency such as the Bureau of Internal Revenue or even the Department of Financecannot amend an act of Congress. Whatever administrative regulations they may adopt under legislativeauthority must be in harmony with the provisions of the law they are intended to carry into effect. They cannotwiden or diminish its scope. (ABAKADA Guro Party List v. Executive Secretary, supra).

Congress granted the Secretary of Finance the authority to ascertain the existence of a fact, namely,whether by 31 December 2005, the value-added tax collection as a percentage of GDP of the previous yearexceeds two and four-fifth percent (24/5%) or the national government deficit as a percentage of GDP of theprevious year exceeds one and one-half percent (1½%). If either of these two instances has occurred, theSecretary of Finance, by legislative mandate, must submit such information to the President. Then the 12%VAT rate must be imposed by the President effective 1 January 2006. Congress does not abdicate its functionsor unduly delegate power when it describes what job must be done, who must do it, and what is the scope ofhis authority; in our complex economy that is frequently the only way in which the legislative process can goforward. There is no undue delegation of legislative power but only of the discretion as to the execution of alaw. This is constitutionally permissible. (Id.).

Origination of Revenue Bills From the House of Representatives

Article VI, Section 24 of the Constitution speaks of origination of certain bills from the House ofRepresentatives. Origination simply means that the initiative for filing revenue, tariff, or tax bills, bills authorizingan increase of the public debt, private bills and bills of local application must come from the House ofRepresentatives on the theory that, elected as they are from the districts, the members of the House can be

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expected to be more sensitive to the local needs and problems. On the other hand, the senators, who areelected at large, are expected to approach the same problems from the national perspective. (Id.).

After the House bills as approved on third reading are duly transmitted to the Senate, the latter can

propose or concur with amendments. Both views are thereby made to bear on the enactment of such laws.The Court finds that the subject provisions found in the Senate bill are within the purview of such constitutionalprovision. (Id).

Conference Committee. (Id.).

Commission on Appointments. Even if the Commission on Appointments is composed of membersof Congress, the exercise of its powers is executive and not legislative. The Commission on Appointmentsdoes not legislate when it exercises its power to give or withhold consent to presidential appointments.(Pimentel v. Executive Secretary Ermita, G.R. No. 164978, 13 October 2005).

EXECUTIVE DEPARTMENT

The President of the Philippines

Power to Appoint Cabinet Secretaries (Not the Undersecretaries) in an Acting Capacity Withoutthe Consent of the Commission on Appointments While Congress is in Session. The law expresslyallows the President to make such acting appointments. The President may even appoint in an acting capacitya person not yet in the government service, as long as the President deems that person competent. (Id.).

The power to appoint is essentially executive in nature, and the legislature may not interfere with theexercise of this power except in those instances when the Constitution expressly allows it to interfere. Thescope of the legislature’s interference in the executive’s power to appoint is limited to the power to prescribethe qualifications to an appointive office. However, Congress cannot appoint a person to an office in theguise of prescribing qualifications to that office. Neither may Congress impose on the President the duty toappoint any particular person to an office. Congress, through a law, cannot impose on the President theobligation to appoint automatically the undersecretary as her temporary alter ego. An alter ego, whethertemporary or permanent, holds a position of great trust and confidence. Congress, in the guise of prescribingqualifications to an office, cannot impose on the President who her alter ego should be. EO 292, whichdevotes a chapter to the President’s power of appointment. (Id.).

Ad Interim Appointment distinguished from appointments in an acting capacity. (Id.).

Foreign Borrowings. The Constitution allocates to the President the exercise of the foreign borrowingpower “subject to such limitations as may be provided under law.” The presidential prerogative may beexercised by the President’s alter ego, who in this case is the Secretary of Finance. (Sps. Constantino, Jr.v. Hon. Cuisia [En Banc], G.R. No. 106064, 13 October 2005).

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Section 1 of Republic Act (RA) No. 245 empowers the Secretary of Finance with the approval ofthe President and after consultation of the Monetary Board, “to borrow from time to time on the credit of theRepublic of the Philippines such sum or sums as in his judgment may be necessary, and to issue thereforevidences of indebtedness of the Philippine Government.” While the President wields the borrowing power,it is the Secretary of Finance who normally carries out its thrusts. (Id.).

Apart from the Constitution, R.A. No. 245 establishes the parameters by which the alter ego may

act in behalf of the President with respect to the borrowing power. This law expressly provides that theSecretary of Finance may enter into foreign borrowing contracts. This law neither amends nor goes contraryto the Constitution but merely implements the subject provision in a manner consistent with the structure ofthe Executive Department and the alter ego doctrine. (Id.).

JUDICIAL DEPARTMENT

Judicial Review. Where questions of constitutional significance are raised, the Court can exercise itspower of judicial review only if the following requisites are complied: [i] an actual case before the Courtcalling for the exercise of judicial review; [ii] the question before the Court must be ripe for adjudication; [iii]the person challenging the validity of the act must have standing to challenge; [iv] the question of constitutionalitymust have been raised at the earliest opportunity; and [v] the issue of constitutionality must be the very lismota of the case. As there are factual issues still waiting to be threshed out at the level of the administrativeagency, there is no actual case calling for the exercise of judicial review. The requisite that the constitutionalityof the assailed proviso in question be the very lis mota of the case is absent. (Allied Banking Corporationv. Quezon City [En Banc], G.R. No. 154126, 11 October 2005).

Legal Standing - denotes a personal and substantial interest in the case such that the party hassustained or will sustain direct injury as a result of the act that is being challenged. The term “interest” meansmaterial interest as distinguished from a mere incidental interest. (Herce, Jr.v. Municipality of Cabuyao,G.R. No. 166645, 11 November 2005).

Taxpayers’ Suit. The recent trend on locus standi has veered towards a liberal treatment in taxpayer’ssuits. The prevailing doctrines in taxpayer’s suits are to allow taxpayers to question contracts entered into bythe national government or government owned and controlled corporations allegedly in contravention of law.A taxpayer is allowed to sue where there is a claim that public funds are illegally disbursed, or that publicmoney is being deflected to any improper purpose, or that there is wastage of public funds through theenforcement of an invalid or unconstitutional law. (Sps. Constantino, Jr. v. Hon. Cuisia [En Banc], G.R.No. 106064, 13 October 2005; Pimentel v. Executive Secretary Ermita, G.R. No. 164978, 13 October2005). Suit by Lawmakers. (ABAKADA Guro Party List v. Executive Secretary, supra).

Transcendental Importance. A ruling on the issues of this case will not only determine the validity

or invalidity of the subject pre-termination and bond-conversion of foreign debts but also create a precedentfor other debts or debt-related contracts executed or to be executed in behalf of the President of the Philippines

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by the Secretary of Finance. Considering the reported Philippine debt of P3.80 trillion as of November2004, the foreign public borrowing component of which reached P1.81 trillion in November, equivalent to47.6% of total government borrowings, the importance of the issues raised and the magnitude of the publicinterest involved are indubitable. The Court’s cognizance of this petition is also based on the considerationthat the determination of the issues presented will have a bearing on the state of the country’s economy, itsinternational financial ratings, and perhaps even the Filipinos’ way of life. Seen in this light, the transcendentalimportance of the issues herein presented cannot be doubted. (Sps. Constantino, Jr. v. Hon. Cuisia,supra).

Ripeness/Actual Case Dimension. The allegation that respondents waived the Philippines’ right to

repudiate void and fraudulently contracted loans by executing the debt-relief agreements is, on many levels,not justiciable. (Id.). Anticipatory threat to constitutional liberties. (ABAKADA Guro Party List v. ExecutiveSecretary, supra).

Doctrine of Exhaustion of Administrative Remedies - requires that resort be first made to theadministrative authorities in cases falling under their jurisdiction to allow them to carry out their functions anddischarge their responsibilities within the specialized areas of their competence. This is because theadministrative agency concerned is in the best position to correct any previous error committed in its forum.Established exceptions to the applicability of the doctrine: [i] when the question raised is purely legal; [ii]when the administrative body is in estoppel; [iii] when the act complained of is patently illegal; [iv] when thereis urgent need for judicial intervention; [v] when the claim involved is small; [vi] when irreparable damage willbe suffered; [vii] when there is no other plain, speedy and adequate remedy; [viii] when strong public interestis involved; [ix] when the subject of the controversy is private land; and, [x] in quo warranto proceedings.(Morcal v. Laviña, G.R. No. 166753, 29 November 2005).

Judicial Heirarchy. Although the Court, the Regional Trial Courts and the Court of Appeals haveconcurrent jurisdiction to issue writs of certiorari, prohibition, mandamus, quo warranto, habeas corpusand injunction, such concurrence does not give the petitioner unrestricted freedom of choice of courtforum. Generally, a direct recourse to the Court is highly improper, for it violates the established policy ofstrict observance of the judicial hierarchy of courts. An exception to this rule is when the redress desiredcannot be obtained in the appropriate courts, and exceptional and compelling circumstances are present, asillustrated by the following cases: [i] Chavez v. Romulo on the citizens’ right to bear arms; [ii] Governmentof the United States of America v. Purganan on bail in extradition proceedings; [iii] Commission onElections v. Quijano-Padilla on a government contract on the modernization and computerization of thevoters’ registration list; [iv] Buklod ng Kawaning EIIB v. Zamora on the status and existence of a publicoffice; [v] Fortich v. Corona on the so-called “Win-Win Resolution” of the Office of the President whichmodified the approval of the conversion to agro-industrial area of a 144-hectare land; and, [vi] cases involvingwarring factual allegations. For this reason, litigants are required to repair to the trial courts at the firstinstance to determine the truth or falsity of these contending allegations on the basis of the evidence of theparties. Cases which depend on disputed facts for decision cannot be brought immediately before appellatecourts as they are not triers of facts. Therefore, a strict application of the rule of hierarchy of courts is notnecessary when the cases brought before the appellate courts do not involve factual but legal questions.

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Here, petitioners submit a pure question of law involving the interpretation and application of paragraph 2 ofAdministrative Circular No. 09-94. This legal question and in order to avoid further delay are compellingenough reasons to allow petitioners’ invocation of this Court’s jurisdiction in the first instance. (Mangaliag v.Hon. Catubig-Pastoral, G.R. No. 143951, 25 October 2005).

Judicial Clemency. In respondent’s case, certain significant factors spur the Court to consider hispresent plea for judicial clemency and reexamine with compassion the penalty imposed on him: [i] 35 yearsof government service; [ii] this is his first and only administrative offense; [iii] he demonstrated sincererepentance; [iv] he was dismissed from the service more than ten (10) years ago and “has come to terms withreality and learned (his) lesson”; and, [v] his regressing physical condition caused by various illnesses and oldage necessitate financial support. The Court allows him to find gainful employment in the government serviceas a consultant. He was likewise granted his monetary benefits (if any) for his long service in the governmentas this will aid him in his daily sustenance and medical needs. (Junio v. Judge Rivera, Jr., A.M. No. MTJ-91-565, 5 October 2005).

Decisions of courts. In case of any ambiguity or uncertainty in the dispositive portion of a decision,the body of the opinion may be referred to for purposes of construing the dispositive part of the judgment. The dispositive part of the decision must find support in the body of the decision spelling out the ratiodecidendi. (Galang v. Court of Appeals, G.R. No. 139448, 11 October 2005).

Statutory Construction. Where the interpretation of a statute according to its exact and literalimport would lead to mischievous results or contravene the clear purpose of the legislature, it should beconstrued according to its spirit and reason, disregarding as far as necessary the letter of the law. A statutemay therefore be extended to cases not within the literal meaning of its terms, so long as they come within itsspirit or intent. (Republic v. Orbecido III, G.R. No. 154380, 5 October 2005).

ELECTION LAWS

Cancellation of the certificate of candidacy on the ground of material misrepresentation. (In TheMatter Of The Petition For Disqualification Of Tess Dumpit-Michelena [En Banc], G.R. No. 163619-20, 17 November 2005).

Procedure for the Disposition of Contested Election Returns (Section 20 of RA No. 7166). (Espidolv. Commission on Elections, G.R. No. 164922, 11 October 2005).

Pre-proclamation Controversy is defined as referring “to any question pertaining to or affecting the

proceedings of the board of canvassers which may be raised by any candidate or by any registered politicalparty or coalition of political parties before the board or directly with the Commission, or any matter raisedunder Sections 233, 234, 235 and 236 in relation to the preparation, transmission, receipt, custodyand appreciation of the election returns.” (Id.).

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Granting arguendo that the objections interposed by private respondent Tabag were not proper fora pre-proclamation controversy, nonetheless, the MBC should have made written rulings thereon. UnderSection 20 of RA No. 7166, the board of canvassers is mandated to grant an objecting party 24 hours fromthe time of the presentation of the oral objection to submit its evidence. Thereafter, the other party is alsogiven 24 hours to submit its opposition. If no opposition has been filed, the board shall rule on the objectionsand enter its ruling in the prescribed form and authenticate the same with the signatures of the members of theboard. (Id.).

The COMELEC is with authority to annul any canvass and proclamation illegally made. The fact thata candidate illegally proclaimed has assumed office is not a bar to the exercise of such power. It is also truethat as a general rule, the proper remedy after the proclamation of the winning candidate for the positioncontested would be to file a regular election protest or quo warranto. This rule, however, admits of exceptionsand one of those is where the proclamation was null and void. (Id.).

CIVIL SERVICE

Court Personnel. Clerk of Court. (Re: Report on the Judicial Audit and Physical Inventory ofCases in MCTC Sara-Ajuy-Lemery, Iloilo, A.M. No. 05-10-299-MCTC, 14 December 2005). Monthlyphysical inventory of cases. (Re:Judicial Audit Conducted in the Regional Trial Court, Branch 54,Lapu-Lapu City, A.M. No. 05-8-539-, 11 November 2005). Accountability for court exhibits. (Office ofthe Court Administrator v. Carriedo [En Banc], A.M. No. P-04-1921, 20 October 2005). General Fundand the Judiciary Development Fund (JDF). (Office of the Court Administrator v. Ramos [En Banc],A.M.No. P-05-19966, 20 October 2005; Report on the Financial Audit Conducted at the MCTC-Mabalacat,A.M. No. P-05-1989, 20 October 2005).

Other Court Personnel. [i] Administrative Circular No. 09-99. Prohibiting smoking and selling/buying of goods within court houses and offices. (Adjar v. Develos, A.M. No. P-05-2056, 18 November2005).

[ii] Muslim Office hours. (Re: Request of Muslim Employees in the DifferentCourts in Iligan City (Re: Office Hours) En Banc, A.M. No. 02-2-10-SC, 14December 2005).

[iii] Process Servers. (Alvarez v. Bulao, A.M. No. P-05-2090, 18 November2005).

[iv] Conduct Unbecoming of an employee of the Judiciary. (Court Employeesof the Municipal Circuit Court v. Sy, A.M. No. P-93-808, 25 November 2005;Alleged Removal of Bailbond, A.M. No. P-05-1994, 12 October 2005). UtilityWorker. (Alleged Removal of Bailbond, A.M. No. P-05-1994, 12 October 2005).For writing a letter of demand to an alleged obligor on the request of the alleged

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obligee and for availing of the franking privilege extended to courts in sending theletter, respondent court stenographer is administratively liable for conduct prejudicialto the best interest of the service and violation of the franking privilege providedunder Presidential Decree No. 26. (Ramos v. Esteban, A.M. No. P-05-2013, 20October 2005).

[v] Habitual Tardiness (Re: Habitual Tardiness of Ms. Asilo, A.M. No. 05-9-555-RTC, 14 October 2005; Re:Habitual Tardiness of Mrs. Calingao, A.M.No. P-05-2080, 5 October 2005).

[vi] Dishonesty. Ramiterre made it appear that the proper procedure wasfollowed in LRC Case No. 181 by attaching the order, which he knew to bequestionable and reported that the case was already terminated. This constitutesdishonesty, for which Ramiterre must be dismissed from the service. Dishonesty isa grave offense punishable by dismissal for the first offense. (RE: Alleged Anomalythat transpired in LRC Case No. 181 tried before RTC, BRANCH 31,Cabarroguis, Quirino, A. M. No. P-04-1779, 25 November 2005). Falsificationof daily time records amounts to dishonesty - a grave offense, which carries theextreme penalty of dismissal from the service with forfeiture of retirement benefitsexcept accrued leave credits, and perpetual disqualification for reemployment ingovernment service. (Re: Falsification of Daily Time Records, A.M. No. P-05-2086, 20 October 2005).

[vii] Habitual Absenteeism and Absence Without Official Leave. (JudgeFlorendo v. Cadano [En Banc], A.M. No. P-05-1983, 20 October 2005).

[viii] Loafing - defined under Civil Service Rules as frequent unauthorized absencesfrom duty during regular hours. (Re: Findings of Irregularity on the Bundy Cardsof Personnel, A.M. No. 04-11-671-RTC, .14 October 2005)

[ix] Willful failure to pay just debt. (Orasa v. Seva, A. M. No. P-03-1669, 5October 2005).

Other Civil Service Personnel. A person illegally dismissed from the office is not thereby exoneratedfrom the obligation to take steps for his own protection and may not, for an unreasonable length of time,acquiesce to the order of removal and then seek for his reinstatement. In case of unreasonable delay, he maybe held to have abandoned title to the office and any right to recover its emoluments. (Civil ServiceCommission v. Sebastian [En Banc], G.R. No. 161733, 11 October 2005).

Civil Service Commission (CSC). Procedure in administrative cases against non-presidentialappointees. Jurisdiction, duty and authority of the CSC to administer the civil service system, protect its

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integrity by removing from its list of eligibles those who falsified their qualifications. This is an integral part ofits duty, authority and power as provided in Article IX-B, Sec. 3 of the Constitution. This is to be distinguishedfrom ordinary proceedings intended to discipline a bona fide member of the system, for acts or omissionsthat constitute violations of the law or the rules of the service. (Civil Service Commission v. Albao [EnBanc], G.R. No. 155784, 13 October 2005).

Primarily Confidential Position. It is the nature of the position which finally determines whether aposition is primarily confidential, policy-determining or highly technical. Dismissal on loss of trust and confidenceis not valid since the employees concerned are not confidential employees. (Philippine Amusement andGaming Corporation v. Angara, G.R. No. 142937, 15 November 2005).

SANDIGANBAYAN

Constitutionality of the P.D. No. 1486, as amended, creating the Sandiganbayan. Validly constituted.(Bolotaulo v. Sandiganbayan [En Banc], G.R. No. 52341-46, 25 November 2005).

The general rule is that the factual findings of the Sandiganbayan are conclusive upon the SupremeCourt. (Domingo v. Sandiganbayan, G.R. No. 149175, 25 October 2005; Soriquez v. Sandiganbayan,G.R. No. 153526, 25 October 2005; Public Estates Authority v. Bolinao Security and InvestigatingService, Inc., G.R. No. 158812, 5 October 2005).

GOVERNMENT CONTRACTS

Public Bidding. Legal implications of the “right to reject any or all bids” in an invitation to bid. TheNational Accounting and Auditing Manual. (Public Estates Authority v. Bolinao Security and InvestigatingService, Inc., G.R. No. 158812, 5 October 2005).

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REMEDIAL LAW

JURISDICTION OF COURTS

CIVIL CASES

Jurisdiction Over the Subject Matter of an Action. The jurisdiction of the court or tribunal overthe subject matter of the action is determined exclusively by the Constitution and the law. It cannot beconferred by the voluntary act or agreement of the parties; it cannot be acquired through or waived, enlargedor diminished by their act or omission. Neither is it conferred by the acquiescence of the court. The jurisdictionover the nature of an action and the subject matter thereof is not affected by the theories set up by thedefendant in an answer or motion to dismiss. (Ramos v. Martinez, Sr., G.R. No. 161973, 11 November2005). The nature of the action and the jurisdiction of the court is to be determined from the material allegationsof the complaint as well as the character of the relief prayed for irrespective of whether or not the plaintiff isentitled to such relief. (Id.; Metro Properties, Inc. v. Magallanes Village Association, Inc., G.R. No.146987, 19 October 2005; Rimasug v. Martin, G.R. No. 160118, 22 November 2005). Once jurisdictionis vested, the same is retained up to the end of the litigation. The Metropolitan Trial Court (MeTC) does notlose its jurisdiction over an ejectment case by the simple expedient of a party raising as a defense therein thealleged existence of a tenancy relationship between the parties. (Heirs of Magpily v. De Jesus, G.R. No.167748, 8 November 2005).

Docket Fees and Jurisdiction. Guidelines: [i] it is not the filing of the complaint or appropriateinitiatory pleading but the payment of the prescribed docket fee that vests a trial court with jurisdiction overthe subject-matter or nature of the action. Where the filing of the initiatory pleading is not accompanied bypayment of the docket fee, the court may allow payment of the fee within a reasonable time but in no casebeyond the applicable prescriptive or reglementary period; [ii] the same rule applies to permissive counterclaims,third-party claims and similar pleadings, which shall not be considered filed until and unless the filing feeprescribed therefor is paid; [iii] where the trial court acquires jurisdiction over a claim by the filing of theappropriate pleading and payment of the prescribed filing fee but, subsequently, the judgment awards a claimnot specified in the pleading, or if specified the same has been left for determination by the court, the additionalfiling fee therefor shall constitute a lien on the judgment. While the payment of the prescribed docket fee is ajurisdictional requirement, even its non-payment at the time of filing does not automatically cause the dismissalof the case, as long as the fee is paid within the applicable prescriptive or reglementary period. (PhilippineAmusement and Gaming Corporation v. Lopez, A. M. No. RTJ-04-1848, 25 October 2005).

Section 33, paragraph 2 of Batas Pambansa Blg. 129, as amended by RA No. 7691, vestsMeTCs, Municipal Trial Courts (MTCs), and Municipal Circuit Trial Courts with exclusive original jurisdictioncases for forcible entry and unlawful detainer. Upon the other hand, Section 50 of the CARL vests the DARwith primary jurisdiction over all agrarian reform matters and exclusive jurisdiction over all matters involvingthe implementation of agrarian reform. (Rimasug v. Martin, supra). When a tenancy is merely averred as aspecial and affirmative defense to a complaint for unlawful detainer, the MTC does not automatically lose its

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jurisdiction over the said action. The MTC is duty-bound to conduct a preliminary conference and, if necessary,to receive evidence to determine if such tenancy relationship had, in fact, been shown to be the real issue. The MTC may even opt to conduct a hearing on the special and affirmative defense of the defendant,although under the Rules on Summary Procedure, such a hearing is not a matter of right. If it is shown duringthe hearing or conference that, indeed, tenancy is the issue, the MTC should dismiss the case for lack ofjurisdiction. (Id.).

Estoppel. Except in some instances, estoppel does not apply to confer jurisdiction to the court ortribunal that has no jurisdiction over the nature of the action. (Ramos v. Martinez, Sr., supra; Heirs of de laCruz v. Heirs of Cruz, G.R. No. 162890, 22 November 2005).

CRIMINAL CASES

Jurisdiction Over the Subject Matter - cannot be conferred upon the court by the accused, byexpress waiver or otherwise, since such jurisdiction is conferred by the sovereign authority which organizedthe court. An objection based on the ground that the court lacks jurisdiction over the offense charged may beraised or considered motu propio by the court at any stage of the proceedings or on appeal. (Fukuzume v.People, G.R. No. 143647, 11 November 2005). Lack of Jurisdiction over the offense charged (Section 9 ofRule 117 of the Rules) could be raised through a motion to dismiss when it is no longer timely to file a motionto quash. A claim of immunity from prosecution arising from an immunity statute or agreement is a jurisdictionalquestion. A statutory grant of immunity enjoins the prosecution of a criminal action and thus deprives the courtof jurisdiction to proceed. (Tanchanco v. Sandiganbayan, G.R. Nos. 141675-96, 25 November 2005).

Venue is an essential element of jurisdiction. For the court to acquire jurisdiction over the offense, itshould have been committed or any one of its essential ingredients took place within the territorial jurisdictionof the court. Furthermore, the jurisdiction of a court over the criminal case is determined by the allegations inthe complaint or information. And once it is so shown, the court may validly take cognizance of the case. However, if the evidence adduced during the trial show that the offense was committed somewhere else, thecourt should dismiss the action for want of jurisdiction. (Fukuzume, supra).

RETROACTIVE EFFECT OF PROCEDURAL RULES

The proceeding in this case was initiated by the filing of the complaint around six months afterManchester was promulgated on 7 May 1987, and about fifteen months before Sun Insurance came out on13 February 1989. Statutes and rules regulating the procedure of courts are considered as applicable toactions pending and unresolved at the time of their passage. Procedural laws and rules are retroactive in thatsense and to that extent. Such retroactive application does not violate any right of a person adversely affected.The reason is that as a general rule, no vested right may attach to, nor arise from procedural laws and rules. (Sps.Calo v. Sps. Tan, G.R. No. 151266, 29 November 2005). .

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NEW RULES OF COURT(hereafter “the Rules”)

CIVIL ACTIONS

ORDINARY CIVIL ACTIONS

GENERAL PROVISIONS

Construction. Procedural rules should not be enforced blindly, especially if mechanical applicationwould defeat the higher ends that animates our civil procedure—the just, speedy and inexpensive dispositionof every action and proceeding. The Supreme Court (“the Court”) has repeatedly upheld—and utilized thediscretion to nonetheless take cognizance of petitions raised on an erroneous mode of appeal and insteadtreat these petitions in the manner as they should have been appropriately filed. (Yamane v. BA LepantoCondominium Corporation, G.R. No. 154993, 25 October 2005).

CAUSE OF ACTION

Elements: (1) a right in favor of the plaintiff by whatever means and under whatever law it arises or iscreated; (2) an obligation on the part of the named defendant to respect or not to violate the right; and, (3) anact or omission on the part of the defendant violative of the right of the plaintiff or constituting a breach of anobligation to the latter. A cause of action in a contract arises upon its breach or violation. Therefore, theperiod of prescription commences, not from the date of the execution of the contract, but from the occurrenceof the breach. No right of action is given where no injury is sustained. (Uytengsu III v. Atty. Baduel, Adm.Case No. 5134, 14 December 2005).

The nature of the product in this case is a major factor in determining when the cause of action

accrued. The delivery of fuel oil requires the buyer’s dependence upon the seller for the correctness of thevolume. When fuel is delivered in drums, a buyer readily assumes that the agreed volume can be, and actuallyis, contained in those drums. Here, the cause of action arose not when the product was initially delivered tothe respondent but when the latter discovered the short deliveries with certainty. Prior to the discovery, thelatter had no indication that it was not getting what it was paying for. (Philippine Shell Petroleum Corporationv. John Bordman Ltd. of Iloilo, Inc., G.R. No. 159831, 14 October 2005; Goodyear Philippines, Inc. v.Sy, G.R. No. 154554, 9 November 2005).

PARTIES TO CIVIL ACTIONS

Substitution of Party. (Yujuico v. Hon. Atienza, G.R. No. 164282, 12 October 2005).

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VENUE

Personal Actions (Section 2, Rule 4 of the Rules). When the plaintiff is a corporation, the complaintshould be filed in the location of its principal office as indicated in its articles of incorporation. (Hyatt Elevatorsand Escalators Corporation v. Goldstar Elevators, Phils., Inc., G.R. No. 161026, 24 October 2005).

KINDS OF PLEADINGS

Answer. Affirmative Allegations. (Republic v. Estate Hans Menzi, G.R. No. 152578, 23 November2005).

PARTS OF A PLEADING

Certification Against Forum-Shopping (hereafter “Certification/s”). The rule requires strictcompliance. However, under justifiable circumstances, the Court does allow substantial compliance. (HeavyliftManila, Inc. v. Court of Appeals, G.R. No. 154410, 20 October 2005). The belated filing of Certification/s is permitted in exceptional circumstances. A petition should be given due course when this incorporates aCertification without evidence that the person signing it was an authorized signatory and the petitionersubsequently submits a secretary’s certificate attesting to the signatory’s authority in its motion forreconsideration. (China Banking Corporation v. Mondragon International Philippines, Inc., G.R. No.164798, 17 November 2005). Sufficiency of Board Resolution designating a signatory for the Certification.(Id.). Certification signed by only one of two or more petitioners is defective, unless he was duly authorizedby his co-petitioner. However, the said ruling applies when the co-parties are being sued in their individualcapacities. (Micro Sales Operation Network v. National Labor Relations Commission, G.R. No. 155279,11 October 2005).

Verification and Certification signed by petitioner’s Managing Head for Corporate and Legal ServicesDepartment – sufficient, considering that the person is in the best position to ascertain the truthfulness and thecorrectness of the allegations in the petition and the status of any suit involving the company. (PhilippineAmusement and Gaming Corporation v. Angara, G.R. No. 142937, 15 November 2005).

Affidavit of Service. The non-attachment thereof is not fatal to the petition since the registry receiptsattached to the petition clearly show that copies of the petition were served on the respondents, and the latterfiled their comment thereon. (Id.).

MANNER OF MAKING ALLEGATIONS IN PLEADINGS

The complaint must contain a concise statement of the ultimate or essential facts constituting theplaintiff’s cause of action. Failure to make a sufficient allegation of a cause of action in the complaint “warrantsits dismissal. (Goodyear Philippines, Inc., supra).

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AMENDED ANDSUPPLEMENTAL PLEADINGS

As a Matter of Right (Section 2, Rule 10 of the Rules). Before the filing of any responsive pleading,a party has the absolute right to amend his pleading, regardless of whether a new cause of action or changein theory is introduced. A motion to dismiss is not the responsive pleading contemplated by this provision. Aplaintiff may file an amended complaint even after the original complaint was ordered dismissed, providedthat the order of dismissal is not yet final. (Bautista v. Maya-Maya Cottages, Inc., G.R. No. 148361, 29November 2005).

Section 3, Rule 10 of the Rules amended the former rule by deleting the phrase “or that the cause ofaction or defense is substantially altered.” Under this new provision, the amendment may now substantiallyalter the cause of action or defense. This should only be true, however, when despite a substantial change oralteration in the cause of action or defense, the amendments sought to be made shall serve the higher interestsof substantial justice, and prevent delay and equally promote the laudable objective of the rules which is tosecure a just, speedy and inexpensive disposition of every action and proceeding. (Philippine Amusementand Gaming Corporation, supra).

Amendment to Conform to or Authorize Presentation of Evidence (Section 5, Rule 10 of theRules). When there is an objection on the evidence presented because it is not within the issues made by thepleadings, an amendment must be made before accepting such evidence. If no amendment is made, theevidence objected to cannot be considered. (Cagungun v. Planters Development Bank, G.R. No. 158674,17 October 2005).

FILING AND SERVICE OF PLEADINGS, JUDGMENTSAND OTHER PAPERS

Service of Judgment. Copy of the decision of the trial court was sent by registered mail to thelawyer, who was then the counsel of record of a party litigant, at said lawyer’s given address of record - butthe same was not received by him because he moved to another address without informing the court thereof.HELD: There is sufficient service of the decision. When a party is represented by counsel in an action incourt, notices of all kinds including motions, pleadings and orders must be served on the counsel ofrecord. Where service was made on the counsel of record at his given address, notice sent to petitioner itselfis not even necessary. (GCP-Manny Transport Services, Inc. v. Hon. Principe, G.R. No. 141484, 11November 2005).

MOTIONS

The general rule is that the three-day notice requirement in motions under Sections 4 and 5 of Rule15 of the Rules is mandatory. But when the adverse party has actually had the opportunity to be heard, andhas indeed been heard through pleadings filed in opposition to the motion, the purpose behind the rule is

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deemed duly served. The requirements of due process are substantially complied with. (Jehan ShippingCorporation v. National Food Authority, G.R. No. 159750, 14 December 2005).

Under Section 2 of Rule 15, motions may be made in open court or in the course of a hearing or trialin the presence of the other party who has the opportunity to object thereto. (Serag v. Court of Appeals,G.R. No. 163818, 20 October 2005).

Under Section 3 of Rule 15, a motion shall state the relief sought to be obtained. Here, the firstmotion for extension is fatally defective for failure to include a prayer or relief; no period for extension wassought in the motion. As a result, it is pro forma or a mere scrap of paper and of no legal effect which the CAmay ignore. (Marcial v. Hi-Cement Corporation, G.R. No. 144900, 18 November 2005).

MOTION TO DISMISS

Grounds. (1) That the pleading asserting the claim states no cause of action. The question of whetherthe complaint states a cause of action is determined by its averments regarding the acts committed by thedefendant. The test is: admitting the truth of the facts alleged, can the court render a valid judgment inaccordance with the prayer? To be taken into account are only the material allegations in the complaint;extraneous facts and circumstances or other matters aliunde are not considered. The court may consider —in addition to the complaint — the appended annexes or documents, other pleadings of the plaintiff, oradmissions in the records. (Goodyear Philippines, Inc. v. Sy, supra).

Stare Decisis. When a court has laid down a principle of law as applicable to a certain state of facts,it will adhere to that principle and apply it to all future cases in which the facts are substantially the same. Aconclusion reached in one case should be applied to those that follow if the facts are substantially the same,even though the parties may be different. Thus, where the same questions relating to the same event havebeen put forward by parties similarly situated as in a previous case litigated and decided by a competentcourt, the rule of stare decisis is a bar to any attempt to relitigate the same issue. (Ty v. Banco FilipinoSavings & Mortgage Bank, G.R. No. 144705, 15 November 2005).

Law of the Case. When an appellate court passes on a question and remands the case to the lowercourt for further proceedings, the question there settled becomes the law of the case upon subsequent appeal. It further means that whatever is once irrevocably established as the controlling legal rule or decision betweenthe same parties in the same case continues to be the law of the case, whether correct on general principlesor not, so long as the facts on which such decision was predicated continue to be the facts of the case beforethe court. As a rule, a decision on a prior appeal of the same case is held to be the law of the case whetherthat question is right or wrong, the remedy of the party deeming himself aggrieved being to seek arehearing. (Sps. Bañes v. Lutheran Church in the Philippines, G.R. No. 142308, 15 November 2005).

Litis Pendentia. Requisites as a ground for the dismissal of an action: [i] identity of parties, or at leastsuch parties represent the same interests in both actions; [ii] identity of rights asserted and relief prayed for,

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the relief being founded on the same facts; and [iii] the identity with respect to the two preceding particularsin the two cases is such that any judgment that may be rendered in the pending case, regardless of whichparty is successful, would amount to res judicata in the other case. (Ssangyong Corporation v. UnimarineShipping Lines, Inc., G.R. No. 162727, 18 November 2005). The identity of parties does not mean totalidentity of parties in both cases. The inclusion of new parties in the second action does not remove the casefrom the operation of the rule of litis pendentia. What is primordial is that the primary litigants in the firstcase are also parties in the second action. (Id.).

Res Judicata. The resolution of the issues raised in the case filed in the RTC of Cebu City, most

particularly the basic question of the validity of the auction sale, regardless of which party is successful, wouldconstitute res judicata to the case filed in the RTC of Makati City. This is because the judgment in the Cebucourt would determine which party was at fault for the non-delivery of the subject cargoes. The petitionerassailed the January 3, 1994 and February 15, 1996 Orders of the Cebu RTC in Civil Case No. CEB-14219 via a petition for certiorari in CA-G.R. SP No. 42137. The CA dismissed the petition on the groundthat it was filed long after the prescribed period therefor. The petition for review on certiorari filed by thepetitioner in the Court (G.R. No. 141611), was denied due course. The Resolution of the Court had longbecome final and executory. The petition, in this case is, in effect, and for all intents and purposes, a re-litigation of the issue raised in CA-G.R. SP No. 42137: whether Civil Case No. CEB-14219 should bedismissed and Civil Case No. 93-2279 should proceed to trial. (Id.).

Res judicata is not a nullifying factor, such that the final judgment in the former action works to nullifythe proceedings in the subsequent action where the doctrine is invoked. In context, res judicata is a rule ofpreclusion to the end that facts or issues settled by final judgment should not be tried anew. Section 1, Rule16 of the Rules lists res judicata as among the grounds for a motion to dismiss or as a defense to defeat aclaim, but the same must be pleaded at the earliest opportunity, either in a motion to dismiss or in the answer.Else, the defense or objection on that ground is deemed waived. (Santos v. Court of Appeals, G.R. No.134787, 15 November 2005).

DISMISSAL OF ACTIONS

Dismissal of Counterclaim. (Palileo v. National Irrigation Administration, G.R. No.148574, 11October 2005).

PRE-TRIAL

Notice of Pre-Trial - stating the date, time and place of pre-trial is mandatory. Its absence will renderthe pre-trial and subsequent proceedings void. (Agulto v. Tecson, G.R. No. 145276, 29 November 2005).

Prior to Section 3, Rule 18 of the Rules, the rule was that a notice of pre-trial had to be served on theparty affected separately from his counsel, and the same could be served directly on him or through hiscounsel. Otherwise, the proceedings were null and void. Under this provision of the 1997 Rules of Civil

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Procedure, the notice of pre-trial should be served on counsel. The counsel served with notice is chargedwith the duty of notifying the party he represents. It is only when a party has no counsel that the notice of pre-trial is required to be served personally on him. Thus, the present rule simplifies the procedure in the sensethat notice of pre-trial is served on counsel, and service is made on a party only if he has no counsel. It doesnot, however, dispense with notice of pre-trial. (Id.).

The failure of a party to appear at the pre-trial has adverse consequences. If the absent party is the

plaintiff, then he may be declared non-suited and his case dismissed. If it is the defendant who fails to appear,then the plaintiff may be allowed to present his evidence ex parte and the court to render judgment on thebasis thereof. (Id.; Lorenzo v. People, G.R. No. 152335, 19 December 2005).

DEPOSITIONS

Deposition is chiefly a mode of discovery, the primary function of which is to supplement the pleadingsfor the purpose of disclosing the real points of dispute between the parties and affording an adequate factualbasis during the preparation for trial. It may be taken with leave of court after jurisdiction has been obtainedover any defendant or over property that is the subject of the action; or, without such leave, after an answerhas been served. (Dulay v. Dulay, G.R. No. 158857, 11 November 2005).

Depositions Taken in Foreign Countries. May be taken: [i] on notice before a secretary of embassyor legation, consul general, consul, vice consul, or consular agent of the Republic of the Philippines; [ii] beforesuch person or officer as may be appointed by commission or under letters rogatory; or, [iii] before anyperson authorized to administer oaths as stipulated in writing by the parties. Letters rogatory are requeststo foreign tribunals. Commissions are directives to officials of the issuing jurisdiction. (Id.).

CONSOLIDATION OR SEVERANCE

Consolidation of Actions (Section 1, Rule 31 of the 1997). A court may order several actionspending before it to be tried together where they arise from the same act, event or transaction, involve thesame or like issues, and depend largely or substantially on the same evidence, provided that the court hasjurisdiction over the cases to be consolidated and that a joint trial will not give one party an undue advantageor prejudice the substantial rights of any of the parties. The purpose of this rule is to avoid multiplicity of suitsto guard against oppression or abuse, to prevent delays, to clear congested dockets, to simplify the work ofthe trial court. Consolidation of actions is addressed to the sound discretion of the court and its action inconsolidating will not be disturbed in the absence of manifest abuse of discretion. (Teston v. DevelopmentBank of the Philippines, G.R. No. 144374, 11 November 2005; Philippine Ports Authority v. Pier 8Arrastre & Stevedoring Services, Inc., G.R. No. 147861, 18 November 2005).

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TRIAL BY COMMISSIONER

Hearing Upon Report. (Manotok Realty, Inc. v. CLT Realty Development Corporation, G.R.No. 123346, 29 November 2005).

SUMMARY JUDGMENTS

In proceedings for summary judgment, the court is merely expected to act chiefly on the basis ofwhat is in the records of the case and that the hearing contemplated in the Rules is not de riguer as itspurpose is merely to determine whether the issues are genuine or not, and not to receive evidence on theissues set up in the pleadings. (Philippine Amusement and Gaming Corporation, supra).

JUDGMENTS, FINAL ORDERS AND ENTRY THEREOF

Finality of Judgment. After a judgment becomes final, no additions can be made thereto and nothingcan be done therewith except its execution. It can no longer be disturbed no matter how erroneous it may be.Here, the orders sought to be implemented have long become final and executory. But petitioner continued tofile one motion after another to block the execution of the final orders of the courts in an attempt to frustratethe ends of justice. Thus, what should have been a simple implementation of said orders spanned over aperiod of more than twenty years, with nine judges of the Regional Trial Court (RTC) and several justices ofthe Court and the Court of Appeals (CA), many of them already retired from the service, presiding over thecase. If left unexecuted, the final judgment would be nothing but a phyrric victory for privaterespondents. (Natalia Realty,Inc. v. Hon. Rivera, G.R. No. 164914, 5 October 2005).

Once a judgment attains finality it becomes immutable and unalterable. It may no longer be modifiedin any respect, even if the modification is meant to correct what is perceived to be an erroneous conclusion offact or law, and regardless of whether the modification is attempted to be made by the court rendering it or bythe Court. (Manotok Realty, Inc., supra). It may no longer be amended or corrected by the court, exceptfor clerical errors or mistakes and only in a few exceptional cases. A judgment that has attained finalityconstitutes the ultimate adjudication of the rights and obligations of the parties and becomes valid and bindingupon them and their successors in interest. (Sps. Balanoba v. Madriaga, G.R. No. 160109, 22 November2005). The only recognized exceptions are the corrections of clerical errors or the making of the so-callednunc pro tunc entries, in which case no prejudice to any party, and, of course, where the judgment is void.(Cervantes v. Court of Appeals, G.R. No. 166755, 18 November 2005). This is the principle of immutabilityof final judgment that is subject to only few exceptions. On the other hand, the jurisdiction of the court toexecute its judgment continues even after the judgment has become final for the purpose of enforcement ofjudgment. (Roman Catholic Archbishop of Caceres v. Heirs of Abella, G.R. No. 143510, 23 November2005). One of the exceptions to the principle of immutability of final judgments is the existence of superveningevents. Supervening events refer to facts which transpire after judgment has become final and executory orto new circumstances which developed after the judgment has acquired finality, including matters which the

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parties were not aware of prior to or during the trial as they were not yet in existence at that time. (Id.). Seealso FORCIBLE ENTRY AND UNLAWFUL DETAINER.

NEW TRIAL OR RECONSIDERATION

Second Motion for Reconsideration. The second paragraph of Section 5, Rule 37 of the Rulesmeans that any party — whether the winning or the losing litigant — is prohibited from filing a second motionfor reconsideration. What is proscribed is a second motion for reconsideration of a “judgment or final order.”(Sps. Balanoba, supra).

The requirement of notice under Sections 4 and 5 of Rule 15 in connection with motion for new trialor reconsideration (Section 2, Rule 37 of the Rules) is mandatory. Absence of such notice renders the motiona worthless piece of paper which the clerk of court has no right to receive and which the court has noauthority to act upon. The running of the period to appeal is not tolled by their filing or pendency. (Nuñez v.GSIS Family Bank, G.R. No. 163988, 17 November 2005).

Newly Discovered Evidence. The Court cannot consider the alleged newly-discovered evidenceconsisting of the DOJ and Senate Fact-Finding Committee Reports invoked by petitioners herein. Suchcommittee reports cannot override the decisions of the trial courts and the CA upholding the validity ofrespondents’ titles in these cases. The said decisions were rendered after the opposing parties have beenaccorded due process. It bears stressing that the courts have the constitutional duty to adjudicate legaldisputes properly brought before them. The DOJ and Senate, or any other agencies of the Government forthat matter, have clearly distinguishable roles from that of the Judiciary. (Manotok Realty, Inc., supra).

RELIEF FROM JUDGMENTS, ORDERSAND OTHER PROCEEDINGS

Petition for Relief from Judgment. Sections 2 and 3, Rule 38 of the Rules provide that a petition forrelief may be granted upon a showing that: [i] through fraud, accident, mistake or excusable negligence, aparty has been prevented from taking an appeal; and, [ii] the party has a good and substantial cause of actionor defense. The above requisites notwithstanding, relief from judgment is premised on equity. It is an act ofgrace which is allowed only in exceptional cases. (Yujuico v. Hon. Atienza, supra). The inability to perfectan appeal in due time by reason of failure of a counsel’s clerk to notify the handling lawyer is not a pardonableoversight which would warrant relief under Rule 38. (Id.).

EXECUTION, SATISFACTION AND EFFECT OF JUDGMENT

No Appeal from and Order of Execution (Section 1, paragraph (f) of Rule 41 of the Rules). Theaggrieved party may instead file a special civil action for certiorari under Rule 65, if proper. (ManilaInternational Airport Authority v. Hon. Gingoyon, G.R. No. 155879, 2 December 2005). While there isno appeal from execution of judgment, appeal lies in case of irregular implementation of the writ. As a rule,

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“irregular execution” means the failure of the writ to conform to the decree of the decision executed. (Galangv. Court of Appeals, G.R. No. 139448, 11 October 2005).

Decision involving accounting and payment of sums of money. Under Section 2 of Rule 32, the

court may order a reference to a commissioner when the taking of an account becomes necessary to carryout a judgment or an order. If the parties stipulate that the commissioner’s findings of fact shall be final, onlyquestions of law may be entertained afterwards. (Id.).

Final judgment affirmed by the Court. Any court or tribunal that entertains baseless actions designedto thwart the execution of final judgments acts with grave abuse of discretion tantamount to lack of jurisdiction.(DSM Construction and Development Corporation v. Court Of Appeals, G.R. No. 166993, 19 December2005).

Proper procedure in the enforcement of execution of judgments for money (Section 9, Rule 39of the Rules). (Miramar Fish Co., Inc. v. Jalon, A.M. No. 04-1904, 25 October 2005). Money judgmentsare enforceable only against property unquestionably belonging to the judgment debtor. A third person adverselyaffected by the mistaken levy of his property to answer for another man’s debt may validly assail such levythrough the remedies of: [i] terceria - to determine whether the sheriff has rightly or wrongly taken hold of theproperty not belonging to the judgment debtor or obligor; and, [ii] an independent “separate action” tovindicate their claim of ownership and/or possession over the foreclosed property. If a “separate action” isthe recourse, the third-party claimant must institute in a forum of competent jurisdiction an action, distinct andseparate from the action in which the judgment is being enforced, even before or without need of filing a claimin the court that issued the writ. (Gomez v. Sta. Ines, G.R. No. 132537, 14 October 2005).

Issuance, Form and Content of Writ of Execution. A writ of execution must substantially conformto the dispositive portion of the promulgated decision. The writ cannot vary or go beyond the terms of thejudgment. If it does, it becomes null and void. (Suyat v. Hon. Gonzales-Tesoro, G.R. No. 162277, 7December 2005; DSM Construction and Development Corporation, supra).

Exempt from Execution – [i] Laborer’s Wages (Article 1708 of the Civil Code) favors only laboringmen or women whose work is manual; (Sps. Balanoba, supra); [ii] Family home. (Honrado v. Court ofAppeals, G.R. No. 166333, 25 November 2005).

APPEALS FROM THE RTC

Rule 41 of the Rules. Modes of Appeal. Ordinary Appeal. (Nuñez v. GSIS Family Bank, supra).The Solicitor General filed a notice of appeal on behalf of the Republic on June 28, 1996. Contrary to therules of procedure, however, the notice of appeal was filed with the CA, not with the trial court whichrendered the judgment appealed from. (Republic of the Philippines v. “G” Holdings, Inc., G.R. No.141241, 22 November 2005).

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PETITION FOR REVIEW FROM THE RTCTO THE CA

There is wider latitude on the part of the CA to refuse cognizance over a petition for review underRule 42 than it would have over an ordinary appeal under Rule 41. Under Section 13, Rule 41, the statedgrounds for the dismissal of an ordinary appeal prior to the transmission of the case records are when theappeal was taken out of time or when the docket fees were not paid. On the other hand, Section 6, Rule 42provides that in order that the CA may allow due course to the petition for review, it must first make a primafacie finding that the lower court has committed an error that would warrant the reversal or modification ofthe decision under review. There is no similar requirement of a prima facie determination of error in the caseof ordinary appeal, which is perfected upon the filing of the notice of appeal in due time. (Yamane v. BALepanto Condominium Corporation, supra).

The reckoning date for filing the motion for extension to file petition for review with the CA is the datewhen petitioner received the order of the denial of his motion for reconsideration pursuant to Section 1, Rule42 of the Rules to the effect that a party desiring to appeal from a decision of the RTC rendered in theexercise of its appellate jurisdiction may file a verified petition for review with the CA within fifteen (15) daysfrom notice of the decision sought to be reviewed or of the denial of petitioner’s motion for new trial orreconsideration filed in due time after judgment.” (Marcial v. Hi-Cement Corporation, supra).

APPEALS FROM THE COURT OF TAX APPEALSAND QUASI-JUCIAL AGENCIES TO THE CA

Rule 43 of the Rules governs appeals to the CA from decisions and final orders or resolutions of theCourt of Tax Appeals or quasi-judicial agencies in the exercise of their quasi-judicial functions. The Departmentof Justice (DOJ) is not one of those agencies whose decisions, orders or resolutions are appealable to theCA under Rule 43. A preliminary investigation is not a quasi-judicial proceeding, and the DOJ is not a quasi-judicial agency exercising a quasi-judicial function when it reviews the findings of a public prosecutor regardingthe presence of probable cause. (Santos v. Go, G.R. No. 156081, 19 October 2005).

Contents of the Petition (Section 6, Rule 43 of the Rules). A petition for review shall state in full thenames of the parties to the case. The court or agency which rendered the decision or resolution is not to beimpleaded either as petitioner or respondent. The parties in the proceedings before an agency or in the lowercourt are the parties in a petition for review in the CA. (Civil Service Commission v. Sebastian [En Banc],G.R. No. 161733, 11 October 2005; Basmayor v. Atencio, [En Banc], G.R. No. 160573, 19 October2005).

In resolving appeals from quasi judicial agencies such as the DARAB, the CA has the discretion: [i]to give due course to the petition; and, [ii] to have the original records of the proceedings under reviewtransmitted to it. (Deloso v. Sps. Marapao, G.R. No. 144244, 11 November 2005).

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PROCEDURE IN THE CAORDINARY APPEALS

The perfection of an appeal in the manner and within the period permitted by law is not only mandatory,but also jurisdictional. The rules on periods for filing appeals are to be observed religiously. (De la Cruz v.Golar Maritime Services, Inc., G.R. No. 141277, 16 December 2005; Philippine Rabbit Bus Lines, Inc.v. Goimco, Sr., G.R. No. 135507, 29 November 2005).

Appellant’s Brief (Section 7, Rule 44 of the Rules) must be filed within 45 days from receipt ofnotice. Save for the most persuasive of reasons, strict compliance with the rules is enjoined. (Cruz v. Courtof Appeals, G.R.No. 156894, 2 December 2005).

Issues not previously ventilated cannot be raised for the first time on appeal, much less when firstproposed in the reply to the comment on the petition for review (Sps. Rasdas v. Estenor, G.R. No. 157605,13 December 2005); or ventilated for the first time only in a motion for reconsideration or on appeal.(Prudential Bank v. Lim, G.R. No. 136371, 11 November 2005).

The Rules allow only a 15-day extension for filing a petition for review and petitioner’s counselcannot assume that his request for a 20-day extension will be granted. (Philippine Amusement and GamingCorporation v. Angara, supra).

Amended Motion for Extension. The CA should have acted on the amended motion for extensionand also considered it in the resolution of petitioner’s motion for reconsideration. (Marcial v. Hi-CementCorporation, supra).

APPEAL BY CERTIORARI TO THE COURT

This mode of appeal to the Court under Rule 45 covers the judgments, orders or resolutions of theCA, the Sandiganbayan, the RTC or any authorized court and should raise only pure question of law - thereason being that the Court is not a trier of facts. (Santos v. Go, supra; Ruiz v. People, G.R. No. 160893,18 November 2005; Becton Dickinson Phils. v. National Labor Relations Commission, G.R. Nos. 159969&160116, 15 November 2005; Prudential Bank v. Lim, supra; Manotok Realty, Inc., supra; Republicv. Estate Hans Menzi, supra; Cadiz v. Court of Appeals, G.R. No. 153784, 25 October 2005; SpousesOcampo v. First Metro Leasing and Finance Corporation, G.R. No. 145821, 29 November 2005;Baron Express v. Umianito, G.R. No. 156969, 11 November 2005). If the issues raised by the petitionerare factual or mixed questions of fact and of law (not purely questions of law) - they are not cognizable by theCourt in a petition for review under Rule 45. (Basmayor v. Atencio, supra).

Where the findings of fact of the trial courts are affirmed by the CA, the same are accorded the

highest degree of respect and, generally, will not be disturbed on appeal. Such findings are binding andconclusive on the Court. (Development Bank of the Philippines v. Prudential Bank, G.R. No. 143772,

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22 November 2005; Manotok Realty, Inc. v. CLT Realty Development Corporation, supra; PrudentialBank v. Lim, supra; Local Superior of the Servants of Charity, Inc. v. Jody King Construction &Development Corporation, G.R. No. 141715, 12 October 2005; Nadela v. Engineering and ConstructionCorporation of Asia, G.R. No. 145259, 25 October 2005; Sps. Friend v. Union Bank of the Philippines,G.R. No. 165767, 29 November 2005; Garcia v. Court of Appeals, G.R. No. 128213, 13 December2005). Moreover, findings of facts of quasi-judicial bodies like the NLRC, which are affirmed by the CA indue course, are conclusive on the Court. (Acevedo v. Advanstar Company, Inc., G.R. No. 157656, 11November 2005; Villanueva v. Secretary of Justice, G.R. No. 162187, 18 November 2005; UniversalRobina Corporation v. Catapang, G.R. No. 164736, 14 October 2005; Santos v. Manalili, G.R. No.157812, 22 November 2005; Manotok IV v. Heirs of Barque, G.R. Nos. 162335 & 162605, 12 December2005). This doctrine applies with greater force in labor cases inasmuch as factual questions are mainly for thelabor tribunals to resolve. In the present case, the POEA Adjudication Office and the NLRC have alreadydetermined the factual issues. (Eastern Overseas Employment Center, Inc. v. Bea, G.R. No. 143023, 29November 2005).

Exceptions to the above rule: The Court will not review unless there are exceptional circumstances,viz.: (a) where the conclusion is a finding grounded entirely on speculation, surmise and conjectures; (b)where the information made is manifestly mistaken; (c) where there is grave abuse of discretion; (d) wherethe judgment is based on a misapplication of facts, and the findings of facts of the trial court and the appellatecourt are contradicted by the evidence on record; and (e) when certain material facts and circumstances hadbeen overlooked by the trial court which, if taken into account, would alter the result of the case. (Cuizon v.Remoto, G.R. No. 143027, 11 October 2005). Instances where factual issues may be resolved by theCourt: (1) the conclusion is a finding grounded entirely on speculation, surmise and conjecture; (2) the inferencemade is manifestly mistaken; (3) there is grave abuse of discretion in the appreciation of facts; (4) the judgmentis based on a misapprehension of facts or stipulations that had not been disputed by the parties; (5) thefindings of fact are conflicting; (6) the CA went beyond the issues of the case and its findings are contrary tothe admissions of both appellant and appellees; (7) the findings of fact of the CA are contrary to those of thetrial court; (8) said findings of fact are conclusions without citation of specific evidence on which they arebased; (9) the facts set forth in the petition as well as in the petitioner’s main and reply briefs are not disputedby the respondents; and, (10) the findings of fact of the CA are premised on the supposed absence ofevidence and contradicted by the evidence on record. (Spouses Alfredo v. PCI Leasing and Finance,Inc., G.R. No. 139233, 11 November 2005; Philippine Long Distance Telephone Company, Inc. v.Tiamson, G.R. No. 164684-85, 11 November 2005; Alcazaren v. Univet Agricultural Products, Inc., G.R.No. 149628, 22 November 2005; Acevedo v. Advanstar Company, Inc.,supra); Cadiz v. Court ofAppeals, G.R. No. 153784, 25 October 2005; Deloso v. Sps. Marapao, supra; R-II Builders, Inc. v.Construction Industry Arbitration Commission, G.R. No. 152545, 15 November 2005; Republic v.Enciso, G.R. No. 160145, 11 November 2005; Sps. Ulep v. Court of Appeals, G.R. No. 125254, 11October 2005; American Express International, Inc. v. Cordero, G.R. No. 138550, 14 October 2005;Trade & Investment Development Corporation of the Philippines v. Roblett Industrial ConstructionCorporation, G.R. No. 139290, 11 November 2005; International Finance Corporation v. ImperialTextile Mills, Inc., G.R. No. 160324, 15 November 2005; Republic v. Estonilo, G.R. No. 157306, 25

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November 2005; Mamsar Enterprises Agro-Industrial Corporation v. Varley Trading, Inc., G.R. No.142729, 29 November 2005; Danan v. Court of Appeals, G.R. No. 132759, 25 October 2005; ChildLearning Center, Inc. v. Tagario, G.R. No. 150920, 25 November 2005; Local Superior of the Servantsof Charity, Inc. v. Jody King Construction & Development Corporation, supra; Philippine ShellPetroleum Corporation v. John Bordman Ltd. of Iloilo, Inc., supra; Ilao-Quianay v. Mapile, G.R. No.154087, 25 October 2005). In the interest of substantial justice, the Court delved into both the factual andthe legal issues raised in the present case. (Macalinao v. Ong, G.R. No. 146635, 14 December 2005).

Question of Law. There is a question of law when the issue does not call for an examination of theprobative value of evidence presented, the truth or falsehood of facts being admitted and the doubt concernsthe correct application of law and jurisprudence on the matter. When there is no dispute as to fact, thequestion of whether or not the conclusion drawn therefrom is correct is a question of law. In cases of motionsto dismiss on ground of lack of jurisdiction, the allegations in the complaint are deemed admitted. Thus, thehypothetical admission in a motion to dismiss of the facts alleged in the complaint renders them beyonddispute and forecloses any issue of fact for purposes of the motion. (Gomez v. Sta. Ines, supra). And thequestion of whether the conclusion drawn therefrom for purposes of applying the law on jurisdiction isaccurate or correct is a question of law. (Basmayor v. Atencio, supra).

Question of Fact – There is a question of fact when the doubt or controversy arises as to the truthor falsity of the alleged facts or when the query invites calibration of the whole evidence considering mainlythe credibility of the witnesses, the existence and relevancy of specific surrounding circumstances as well astheir relation to each other and to the whole, and the probability of the situation. (Ruiz v. People, supra;Local Superior of the Servants of Charity, Inc. v. Jody King Construction & Development Corporation,supra). The following are factual Issues: [i] the ownership of the subject property, the existence of deceitcommitted by petitioners on respondent, and petitioners’ knowledge or direct participation in the Contract toSell (Santos v. Go, supra); [ii] whether the TCTs issued are valid (Manotok Realty, Inc. v. CLT RealtyDevelopment Corporation, supra); [iii] the CA’s finding that petitioners freely executed the deed of mortgage(Sps. Ocampo v. First Metro Leasing and Finance Corporation, supra); [iv] the matter of actual damagesadjudged by the trial court and affirmed by the CA; [v] whether petitioner is a tenant of the landholding (Delosov. Sps. Marapao, supra); [vi] the extent of added variation cost (R-II Builders, Inc. v. ConstructionIndustry Arbitration Commission, supra); [vii] whether Cueva was effectively absent (Basmayor v. Atencio,supra); [viii] re-evaluation of the facts and evidence (Lorenzo v. People, supra); [ix] validity of respondent’stermination of employment on the alleged ground of redundancy (Becton Dickinson Phils. v. NationalLabor Relations Commission, supra); [x] issues relating to termination of employment. (Eastern OverseasEmployment Center, Inc. v. Bea, supra).

Points of law, theories, issues and arguments not brought to the attention of the lower court need not be, and ordinarily will not be, considered by a reviewing court, as these cannot be raised forthe first time on appeal. Exceptions to this rule: [i] issues of lack of jurisdiction, though not raised below, maybe considered by the reviewing court as they may be raised at any stage; [ii] the reviewing court may alsoconsider an issue not properly raised during trial when there is plain error; [iii] it may entertain such arguments

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when there are jurisprudential developments affecting the issues, or when the issues raised present a matter ofpublic policy. (Sps. Ulep v. Court of Appeals, supra).

The Department of Justice is not a court. (Santos v. Go, supra).

Under Rule 45 of the Rules of Court, only judgments or final orders or resolutions of lower courts,whenever authorized by law, are appealable by petition for review to the Court. Since the assailed resolutionis neither a judgment nor a final order of the Sandiganbayan, the proper course of action should have been aspecial civil action for certiorari before the Court under Rule 65. Diamante’s case should have taken itsregular course, and if the Sandiganbayan issued an unfavorable verdict, he could have appealed in the mannerauthorized by law. (Diamante III v. Sandiganbayan, G.R. No. 147911, 14 October 2005). Diamanteavailed of a wrong remedy in assailing the resolution of the Sandiganbayan. Though this petition is captioned“Petition for Certiorari,” its body conforms to a petition for review on certiorari under Rule 45. Sinceresolutions of the Ombudsman on preliminary investigations in criminal cases are not appealable to the Court,the instant petition for review on certiorari under Rule 45 merits outright dismissal. (Id.).

The “errors” which are reviewable by the Court in a petition for review on certiorari from a decisionof the CA are only those allegedly committed by said court. It is the burden of the party seeking review of adecision of the CA or other lower tribunals to distinctly set forth in her petition for review, not only theexistence of questions of law fairly and logically arising therefrom, but also questions substantial enough tomerit consideration, or show that there are special and important reasons warranting the review that sheseeks. If these are not shown prima facie in the petition, the Court will summarily dismiss the petition aslacking in merit. It should be stressed that a review by certiorari under Rule 45 is a matter ofdiscretion. (Basmayor v. Atencio, supra).

Form and Content. The petition for certiorari shall be verified, contain the full names and actualaddresses of all the petitioners and respondents, accompanied by a certified true copy of the subject decision,order or resolution and other documents relevant or pertinent thereto, and be submitted with the certificationof non-forum shopping signed by the principal. Petitioners’ inadvertence to state the names and addresses ofthe other petitioners is a minor defect. The Court also accepted the explanation on petitioners’ failure toincorporate the Labor Arbiter’s decision. (Heavylift Manila, Inc. v. Court of Appeals, supra).

The decisions, final orders or resolutions of the CA in any case — regardless of the nature of theaction or proceeding involved — may be appealed to the Court through a petition for review. This remedy isa continuation of the appellate process over the original case. It is basic that where Rule 45 is available, and infact availed of as a remedy, recourse under Rule 65 cannot be allowed either as an add-on or as a substitute forappeal. (Pagoda Philippines, Inc. v. Universal Canning, Inc., G.R. No. 160966, 11 October 2005).

Petitioner received a copy of the CA decision on 11 September 1995. Going by the Rules, petitioner

had only fifteen (15) days therefrom within which to move for a reconsideration. However, instead of amotion for reconsideration, what petitioner filed on 22 September 1995 was a motion for extension of time.

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The very motion for reconsideration itself was in fact filed only on 11 October 1995, or 30 days later frompetitioner’s receipt of the copy of the appellate court’s decision, a fatal procedural lapse. The rule is that theperiod for filing a motion for reconsideration is non-extendible. Hence, the appellate court’s denial of petitioner’smotion for reconsideration is justified, precisely because petitioner’s earlier motion for extension of time didnot suspend/toll the running of the 15-day reglementary period for filing a motion for reconsideration. Underthe circumstances, the CA decision has already attained finality when petitioner filed its motion forreconsideration. It follows that the same decision was already beyond the review jurisdiction of the Court.(Apex Mining Co., Inc. v. Commissioner of Internal Revenue, G.R. No. 122472, 20 October 2005).

ANNULMENT OFJUDGMENTS OR FINAL ORDERS AND RESOLUTIONS

Petition for Annulment of Judgment. Rule 47 is a new provision of the Rules albeit the remedytherein provided has long been given imprimatur by the courts. It covers only the judgments or final ordersand resolutions in civil actions of RTC and not those of the Securities and Exchange Commission. Section 9of Batas Pambansa Blg. 129, as amended, vests in the CA exclusive jurisdiction over actions for annulmentof judgments of RTC. An action for annulment of judgment is a remedy in law independent of the case wherethe judgment sought to be annulled is rendered. (Galang v. Court of Appeals, supra). Annulment of judgmentis a recourse equitable in character, allowed only in exceptional cases as where there is no available or otheradequate remedy. (Ramos v. Judge Combong, G.R. No. 144273, 20 October 2005).

Section 2 of Rule 47 explicitly provides only two grounds for annulment of judgment: [i] extrinsicfraud and [ii] lack of jurisdiction. (Id.).

Based on Section 3 of Rule 47 (period within which to bring an action for annulment of judgmentbased on extrinsic fraud), petitioners should have filed an annulment of judgment within four years fromdiscovery of the alleged fraudulent acts committed by private respondents. While Rule 47 does not explicitlyrequire that a statement of material dates should accompany the petition, nevertheless, there must be amanifest showing in the petition that it was filed within the four-year period. (Id.).

Extrinsic Fraud. Exists when there is a fraudulent act committed by the prevailing party outside ofthe trial of the case, whereby the defeated party was prevented from presenting fully his side of the case byfraud or deception practiced on him by the prevailing party. The overriding consideration when extrinsicfraud is alleged is that the fraudulent scheme of the prevailing litigant prevented a party from having his day incourt. (Id.).

PROVISIONAL REMEDIES

PRELIMINARY ATTACHMENT

Grounds Upon Which Attachment May Issue (Section 1 [d] and [e], Rule 57 of the Rules). Theallegations in the affidavit of merit in this case, even on the assumption they are all true, cannot be considered

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as falling within sub-paragraphs (d) and (e). The first three assert, in essence, that PNCC has failed to pay itsdebt and is offering for sale its assets knowing that it does not have enough to pay its obligations. A fraudulentintent cannot be inferred from a debtor’s inability to pay or comply with obligations. Also, the fact that PNCChas insufficient assets to cover its obligations is no indication of fraud even if PNCC attempts to sell thembecause it is quite possible that PNCC was entering into a bona fide good faith sale where at least fairmarket value for the assets will be received. In such a situation, Marubeni would not be in a worse positionthan before as the assets will still be there but just liquidated. Also, that the Financial Statements do not reflectthe loan obligation cannot be construed as a scheme to defraud creditors. (Philippine National ConstructionCorporation v. Hon. Dy, G.R. No. 156887, 3 October 2005).

As to the last two paragraphs, these merely stated that while PNCC continued to receive revenues

from toll charges and other loan obligations, the debt to Marubeni remained unpaid. Again, no fraud can bededuced from these acts. While these may be sufficient averments to be awarded damages once substantiatedby competent evidence and for which a writ of execution will issue, they are not sufficient to obtain the harshprovisional remedy of preliminary attachment which requires more than mere deliberate failure to pay a debt.(Id.).

What was missing and should have been alleged in the affidavit of merit was that the disposition of

assets was attended by the so-called “badges of fraud,” i.e., inadequate consideration, fictitious sale, etc.Mere general averments render the writ defective and the court that ordered its issuance acted with graveabuse of discretion tantamount to excess of jurisdiction. (Id.).

Proceedings Where Property Claimed by Third Person (Section 14, Rule 57 of the Rules). Theremedy is identical to that granted to strangers in a proceeding on preliminary attachment or execution ofjudgments. A stranger to an action where property in which he claims to have a right is attached must resortto the remedies available under the Rules of Court. The only exception to this rule is when the sheriff mistakenlylevies on properties in which the defendant has no interest. In such an event, a summary hearing is held uponapplication to determine if he has taken hold of property not belonging to the judgment debtor. (Floridov.Shemberg Marketing Corporation, G.R. No. 146400, 25 October 2005).

PRELIMINARY INJUNCTION

Temporary Restraining Order. As an Executive Judge, respondent may issue ex-parte a temporaryrestraining order effective for seventy-two (72) hours only. Beyond that period, respondent should haveconducted a summary hearing to determine whether the ex-parte TRO she issued should be extended forseventeen (17) more days, the period within which the application for preliminary injunction is to be heardand resolved. In the event the application for preliminary injunction is denied or not resolved within the 20-day period, the TRO is deemed automatically vacated. As it is, respondent’s February 7, 2000 status quoante Order was in full force and effect for more than two (2) years, or until the date the CA, on complainant’srecourse thereto, eventually reversed and set aside said Order. (Wong Jan Realty, Inc. v. Judge Español,A.M. No. RTJ-01-1647, 13 October 2005).

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Grounds for Issuance of Preliminary Injunction (Section 3 of Rule 58 of the Rules). Two requisiteconditions: [i] the right to be protected exists prima facie; and, [ii] the acts sought to be enjoined are violativeof that right. It must be proven that the violation sought to be prevented would cause an irreparable injustice.(Metropolitan Manila Development Authority v. Trackworks Rail Transit Advertising, Vending andPromotions, Inc., G.R. No. 167514, 25 October 2005; Civil Service Commission v. Court of Appeals[En Banc], G.R. No. 159696, 17 November 2005). In the present controversy, the assailed Order of theCA does not state the basis for the issuance of a writ of preliminary injunction. Nevertheless, in the interest ofjustice and fair play, the Court scrutinized the records of the case and found sufficient grounds for the grant ofthe injunctive Writ. It appears that private respondent has raised a prima facie defense of lack of due process.Prior to the finality of the CSC Decision dismissing private respondent, he has a clear and unmistakable rightto his current position in the police service. The right to employment, oftentimes the lowly employee’s onlynoble source of bread and butter, is entitled to protection by the State. The immediate implementation of thenot yet final penalty of dismissal from the service would surely cause private respondent (and his family)irreparable damage – deprivation of his salary and benefits as a policeman which are his family’s only sourceof income. (Id.). Neither the Administrative Code nor the CSC rules deprive courts of their power to grantrestraining orders or preliminary injunctions to stay the execution of CSC decisions pending appeal. Issuanceof a preliminary injunction, when proper, is expressly authorized by Section 2 of Rule 58 of the Rules. Thatthe CA saw it fit to issue the questioned Writ to protect the rights of private respondent in the interim waswithin the reasonable exercise of its judicial discretion. (Id.).

Injunction is a preservative remedy aimed to protect the complainant’s substantive rights and interests

during the pendency of the principal action. It is to be resorted to only when there is a pressing necessity toavoid injurious consequences that cannot be remedied under any standard of compensation. Injunction, likeother equitable remedies, should be issued only at the instance of a suitor who has sufficient interest in or titleto the right or the property sought to be protected. It is proper only when the plaintiff appears to be entitledto the relief demanded in the complaint. The existence of the right and the violation thereof must be alleged inthe complaint and must constitute at least a prima facie showing of a right to the final relief. While a clearshowing of the right is necessary, its existence need not be conclusively established. In fact, the evidencerequired to justify the issuance of a writ of preliminary injunction in the hearing thereon need not be conclusiveor complete. The evidence need only be a “sampling” intended to give the court an idea of the justification forthe preliminary injunction, pending judgment on the merits. Thus, to be entitled to the writ, respondents areonly required to show that they have the ostensible right to the final relief prayed for in their complaint.(Metropolitan Manila Development Authority, supra).

In the case at bar, TRACKWORKS sufficiently established a right to be protected by a writ of

preliminary injunction. The contract with the MRTC vested it the exclusive right to undertake advertising andpromotional activities at the MRT 3 structure. If not restrained, the dismantling of, and prohibition from,installing advertisements at the MRT 3 will cause irreparable injury to TRACKWORKS. This is especiallyso because TRACKWORKS is generally not entitled to recover damages resulting from acts of publicofficers done in their official capacity and in the honest belief that they have such power. Unless bad faith isclearly proven, TRACKWORKS will be left without recourse even if petitioner is later declared without

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authority to prohibit the posting of billboards and streamers at the MRT 3 structure. Indeed, prudencedictates that the status quo be preserved until the merits of the case can be heard fully. Moreover, theissuance of a writ of preliminary injunction pending determination of the case is proper becauseTRACKWORKS successfully raised the issue of petitioner’s power to effect the dismantling of the disputedcommercial advertisements. (Id.).

The general rule that a statute or ordinance enjoys the presumption of validity and as such cannot berestrained by injunction, finds no application here. Even if the validity of the law itself is assailed, courts arenot precluded from issuing an injunctive writ against the enforcement of the challenged statute. When thepetitioner assailing a statute has made out a case of unconstitutionality strong enough to overcome, in themind of the judge, the presumption of validity, in addition to a showing of a clear legal right to the remedysought, the court should issue a writ of preliminary injunction. A law need not be declared unconstitutionalfirst before a preliminary injunction against its enforcement may be granted. (Id.).

REPLEVIN

Replevin. (Spouses Alfredo v. PCI Leasing and Finance, Inc., supra).

SPECIAL CIVIL ACTIONS

CERTIORARI, PROHIBITION AND MANDAMUS

CERTIORARI

A petition for certiorari under Rule 65 is the proper remedy to correct errors of jurisdiction and graveabuse of discretion tantamount to lack or excess of jurisdiction committed by a lower court. Where arespondent does not have the legal power to determine the case and yet he does so, he acts without jurisdiction;where, being clothed with power to determine the case, the respondent oversteps his authority as determinedby law, he is performing a function in excess of jurisdiction. (Yu v. Court of Appeals, G.R. No. 154115, 29November 2005; Republic of the Philippines v. “G” Holdings, Inc., supra).

There is grave abuse of discretion where the public respondent acts in a capricious, whimsical,arbitrary or despotic manner in the exercise of its judgment as to be said to be equivalent to lack of jurisdiction.Mere abuse of discretion is not enough. In declaring that the documents are irrelevant and inadmissible evenbefore they were formally offered, much less presented before it, the trial court acted in excess of itsdiscretion. (Yu v. Court of Appeals, supra). Grave abuse of discretion amounting to lack or excess ofjurisdiction in this case was made manifest by the fact that the appellate court not only took cognizance of thecase and issued the assailed restraining order; It eventually decided the case in petitioner’s favor as wellnotwithstanding the dearth of any basis for doing so. (DSM Construction and Development Corporationv. Court Of Appeals, supra; Civil Service Commission v. Court of Appeals, supra).

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When and Where Filed (Section 4, Rule 65 of the Rules). The 60-day period must be considerednon-extendible, except where a good and sufficient reason can be shown to warrant an extension. (LandBank of the Philippines v. Hon. Saludanes, G.R. No. 146581, 13 December 2005; Air France Philippinesv. Judge Leachon, G.R. No. 134113, 12 October 2005).

Motion for Reconsideration Before Recourse to the Special Civil Action of Certiorari (Section

1, Rule 65 of the Rules). The “plain” and “adequate remedy” referred to in this provision is a motion forreconsideration of the assailed Order or Resolution, the filing of which is an indispensable condition to thefiling of a special civil action for certiorari, subject to certain exceptions, to wit: [i] where the order is a patentnullity, as where the court a quo has no jurisdiction; [ii] where the questions raised in the certiorari proceedingshave been duly raised and passed upon by the lower court, or are the same as those raised and passed uponin the lower court; [iii] where there is an urgent necessity for the resolution of the question and any furtherdelay would prejudice the interests of the Government or of the petitioner or the subject matter of the actionis perishable; [iv] where, under the circumstances, a motion for reconsideration would be useless; [v] wherepetitioner was deprived of due process and there is extreme urgency for relief; [vi] where, in a criminal case,relief from an order of arrest is urgent and the granting of such relief by the trial court is improbable; [vii]where the proceedings in the lower court are a nullity for lack of due process; [viiii] where the proceedingswas ex parte or in which the petitioner had no opportunity to object; and [ix] where the issue raised is onepurely of law or public interest is involved. (Cervantes v. Court of Appeals, supra; Philippine PortsAuthority v. Pier 8 Arrastre & Stevedoring Services, Inc., supra). Certiorari as a special civil action willnot lie unless a motion for reconsideration is filed before the respondent tribunal. The invocation of “publicinterest” will not justify the non-observance of settled rules. Such phrase is not a magic incantation thatobliterates willful disregard of time-honored jurisprudence that afford the tribunals, boards or offices, anopportunity to rectify the errors and mistakes it may have committed before resort to a petition for certiorarican be had. (Metropolitan Manila Development Authority v. Trackworks Rail Transit Advertising,Vending and Promotions, Inc., supra).

A writ of certiorari is a prerogative writ, never demandable as a matter of right, never issued except

in the exercise of judicial discretion. Hence, he who seeks a writ of certiorari must apply for it only in themanner and strictly in accordance with the provisions of the law and the Rules. Petitioner may not arrogate tohimself the determination of whether a motion for reconsideration is necessary or not. To dispense with therequirement of filing a motion for reconsideration, petitioner must show a concrete, compelling, and validreason for doing so, which petitioner failed to do. (Cervantes v. Court of Appeals, supra).

MANDAMUS

Ordinarily, mandamus will not prosper to compel a discretionary act. However, the writ shall issue ininstances of gross abuse of discretion, manifest injustice or palpable excess of authority, equivalent to denialof a settled right to which petitioner is entitled; and when there is no other plain, speedy and adequateremedy. The judge’s decision to refuse to act on account of some disqualification is not conclusive, and hiscompetency may be determined on an application for mandamus to compel him to act. (Pagoda Philippines,

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Inc. v. Universal Canning, Inc., supra). Mandamus may be resorted to compel the enactment and approvalof the necessary appropriation ordinance and the corresponding disbursement of municipal funds thereforeto satisfy a final money judgment rendered against an LGU. (Yujuico v. Hon. Atienza, supra).

Moot. A motion is considered moot when it no longer presents a justiciable controversy because theissues involved have become academic or dead. Courts will not determine a moot question in which nopractical relief can be granted. However, the Court will decide a question otherwise moot and academic if itis capable of repetition, yet evading review. (Serag v. Court of Appeals, supra).

PROHIBITION

As a rule, the writ of prohibition will not lie to enjoin acts already done. However, as an exception tothe rule on mootness, courts will decide a question otherwise moot if it is capable of repetition yet evadingreview. In the present case, the mootness of the petition does not bar its resolution. The question of theconstitutionality of the President’s appointment of department secretaries in an acting capacity while Congressis in session will arise in every such appointment. (Pimentel v. Executive Secretary Ermita, G.R. No.164978, 13 October 2005).

FORCIBLE ENTRY AND UNLAWFUL DETAINER

Forcible Entry

Definition. There is forcible entry or desahucio when one is deprived of physical possession of landor building by means of force, intimidation, threat, strategy or stealth. In such cases, the possession is illegalfrom the beginning and the basic inquiry centers on who has the prior possession de facto. In filing forcibleentry cases, two allegations are mandatory for the municipal court to acquire jurisdiction: [i] the plaintiff mustallege prior physical possession of the property, and [ii] he must also allege that he was deprived of hispossession by any of the means provided for in Section 1, Rule 70 of the Rules, i.e., by force, intimidation,threat, strategy or stealth. In the resolution thereof, what is important is determining who is entitled to thephysical possession of the property. Indeed, any of the parties who can prove prior possession de facto mayrecover such possession even from the owner himself since such cases proceed independently of any claim ofownership and the plaintiff needs merely to prove prior possession de facto and undue deprivation thereof. (Sps.Bañes v. Lutheran Church in the Philippines, supra).

Force. The presence of such men in the subject property restricting petitioners’ mobility constitutesforce contemplated by Section 1, Rule 70 of the Rules of Court. Regardless of the actual condition of the titleto the property, the party in peaceable quiet possession shall not be thrown out by a strong hand, violence orterror. The owner who has title over the property cannot take the law into his own hands to regain possessionof said property. (Id.).

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Judgment (Section 17, Rule 70). The portion thereof which awards reasonable compensation forthe use and occupancy of the premises refers to unlawful detainer cases and not to forcible entry suits. (Id.).

Unlawful Detainer

Possession by tolerance is lawful, but such possession becomes unlawful when the possessor bytolerance refuses to vacate upon demand made by the owner. A person who occupies the land of another atthe latter’s tolerance or permission, without any contract between them, is necessarily bound by an impliedpromise to vacate upon demand, failing which, a summary action for ejectment is the proper remedy. (Heirsof Magpily v. De Jesus, supra).

Judgment

Immediately Executory. Under Section 19, Rule 70 of the Rules, a judgment on a forcible entry anddetainer action is immediately executory to avoid further injustice to a lawful possessor, and the court’s dutyto order the execution is practically ministerial. Once the RTC decides on the appeal, such decision isimmediately executory under Section 21, Rule 70, without prejudice to an appeal, via a petition for review,before the CA or the Court. (Ho v. Lacsa, G.R. No. 142664, 5 October 2005). Such judgment, however,may be stayed by the defendant only by: [i] perfecting an appeal; [ii] filing a supersedeas bond; and [iii]making a periodic deposit of the rental or the reasonable compensation for the use and occupation of theproperty during the pendency of the appeal. These requisites must concur. Thus, even if the defendant hadappealed and filed a supersedeas bond but failed to pay the accruing rentals, the appellate court could, uponmotion of the plaintiff with notice to the defendant, and upon proof of such failure, order the immediateexecution of the appealed decision without prejudice to the appeal taking its course. (Antonio v. Hon.Geronimo, G.R. No. 124779, 29 November 2005).

Exception. Jurisprudence is replete with cases which provide for the exceptions to the rule citedabove. These are the existence of fraud, accident, mistake or excusable negligence which prevented thedefendant from making the monthly deposit, or the occurrence of supervening events which have broughtabout a material change in the situation of the parties and would make the execution inequitable or wherethere is compelling urgency for the execution because it is not justified by the prevailing circumstances. (Id.).

Supervening Event: [i] The finality of the decision in the quieting of title case constitutes a supervening

event that justifies the non-enforcement of the judgment in the forcible entry case. In this case, the newcircumstance which developed after the finality of the judgment in the forcible entry is the fact that the decisionin the case for quieting of title had also attained finality and conclusively resolved the issue of ownership overthe subject land, and the concomitant right of possession thereof. Verily, to grant execution of the judgment inthe forcible entry case would work injustice on respondents who had been conclusively declared the ownersand rightful possessors of the disputed land. (Roman Catholic Archbishop of Caceres v. Heirs of Abella,supra). [ii] Expropriation by LGU of the property subject of the ejectment case which makes execution ofthe ejectment decision unjust and impractical. (Antonio v. Hon. Geronimo, supra).

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Appeal from Judgment

The remedy to obtain reversal or modification of the judgment on the merits in the instant case isappeal. This holds true even if the error ascribed to the court rendering the judgment is its lack of jurisdictionover the subject matter, or the exercise of power in excess thereof, or grave abuse of discretion in the findingsof fact or of law set out in the decision. The existence and availability of the right of appeal prohibits the resortto certiorari because one of the requirements for the latter remedy is that “there should be no appeal.”Certiorari is not and cannot be made a substitute for an appeal where the latter remedy is available but waslost through fault or negligence. Thus, the filing of the petition for certiorari did not prevent the RTC decisionfrom becoming final and executory. (Bugarin v. Palisoc, G.R. No. 157985, 2 December 2005).

The filing of a petition for certiorari with the CA is not the proper mode of appeal from the RTCOrder which is a final order. Since the ejectment case was filed with the MTC and reviewed by the RTC,petitioners should have filed a petition for review under Rule 45 of the Rules of Court, and not a petition forcertiorari. A petition for certiorari cannot be a substitute for an appeal (or a petition for review in ejectmentcase) from a lower court decision. The failure to perfect an appeal renders the final order of the trial courtfinal and executory. (Ho v. Lacsa, supra).

Preliminary Injunction

A preliminary injunction may be granted even if not prayed for as long as the requisites therefor arepresent. More so if it is prayed for. Section 21, Rule 70 of the Rules presupposes that the defendant in aforcible entry or unlawful detainer case is unsatisfied with the judgment of the RTC and decides to appeal toa superior court. It authorizes the RTC to immediately issue a writ of execution without prejudice to theappeal taking its due course. On appeal the appellate court may stay the said writ should circumstances sorequire. The proceedings in an ejectment case may be suspended in whatever stage it may be found. Forcibleentry and unlawful detainer distinguished. It is only where there has been forcible entry that, as a matter ofpublic policy, the right to physical possession should be immediately set at rest in favor of the prior possessionregardless of the fact that the other party might ultimately be found to have superior claim to the premisesinvolved; thereby discourage any attempt to recover possession thru force, strategy or stealth and withoutresorting to the courts. (Benedicto v. Court of Appeals, G.R. No. 157604, 19 October 2005).

Even if RTC judgments in unlawful detainer cases are immediately executory, preliminary injunctionmay still be granted. There need only be clear showing that there exists a right to be protected and that theacts against which the writ is to be directed violate said right. In this case, the petition for review filed with theCA raises substantial issues meriting serious consideration. Chua’s putative right to continued possession ofthe premises stands to be violated if the adverse judgment of the RTC were to be fully executed. Hence, thecomplete execution of the RTC judgment could be held in abeyance, through a writ of preliminary injunction,until final resolution of the main controversy. (Id.).

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SPECIAL PROCEEDINGS

SPECIAL ADMINISTRATOR

The appointment of a special administrator lies in the sound discretion of the probate court. Whenappointed, a special administrator is regarded not as a representative of the agent of the parties suggesting theappointment, but as the administrator in charge of the estate, and, in fact, as an officer of the court. As suchofficer, he is subject to the supervision and control of the probate court and is expected to work for the bestinterests of the entire estate, especially its smooth administration and earliest settlement. The principal objectof appointment of temporary administrator is to preserve the estate until it can pass into hands of person fullyauthorized to administer it for the benefit of creditors and heirs. (Heirs of Castillo v. Lacuata-Gabriel, 11November 2005).

The new Rules have broadened the basis for the appointment of a special administrator, and such

appointment is allowed when there is delay in granting letters testamentary or administration by any cause,e.g., parties cannot agree among themselves. Nevertheless, the discretion to appoint a special administratoror not lies in the probate court. (Id.).

Section 6, Rule 78 of the Rules refers to the appointment of regular administrators of estates;

Section 1, Rule 80, on the other hand, applies to the appointment of a special administrator. Theappointment of special administrators is not governed by the rules regarding the appointment of regularadministrators. The provisions as to the prior or preferred right of certain persons to the appointment ofadministrator under Section 1, Rule 81, as well as the provisions as to causes for removal of an executor oradministrator under Section 2, Rule 83, do not apply to the selection or removal of special administrator.(Heirs of Castillo v. Lacuata-Gabriel, 11 November 2005).

THE REVISED RULES ONCRIMINAL PROCEDURE (RRCP)

PROSECUTION OF OFFENSES

Who Must Prosecute Criminal Actions (Section 5, Rule 110 of the RRCP). Respondent’s act ofallowing the presentation of the defense witnesses in the absence of the public prosecutor or a private prosecutordesignated for the purpose is a clear transgression of the Rules which could not be rectified by subsequentlygiving the prosecution a chance to cross-examine the witnesses. (SPO Soberano v. People, G.R. No. 154629,5 October 2005).

Formal Amendment of Information. Section 14, Rule 110 of the RRCP. An amendment is only inform when it merely adds specifications to eliminate vagueness in the information and not to introduce newand material facts, and merely states with additional precision something which is already contained in the

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original information and which, therefore, adds nothing essential for conviction for the crime charged. (BanalIII v. Hon. Panganiban, G.R. No. 167474, 15 November 2005).

Amendment or Substitution (Section 14 of Rule 110) in relation to the rule on Discharge of Accusedto be a State Witness (Section 17 of Rule 119). An amendment of the information made before plea, whichexcludes some or one of the accused, must be made only upon motion by the prosecutor, with notice to theoffended party and with leave of court, in compliance with Section 14, Rule 110. This rule does not qualifythe grounds for the exclusion of the accused. Thus, said provision applies with equal force when the exclusionis sought on the usual ground of lack of probable cause, or when it is for utilization of the accused as statewitness, or on some other ground. (SPO Soberano v. People, supra).

At this level, the procedural requirements of Section 17, Rule 119 on the need for the prosecution topresent evidence and the sworn statement of each state witness at a hearing in support of the discharge donot yet come into play. This is because the determination of who should be criminally charged in court isessentially an executive function, not a judicial one. The prosecution of crimes appertains to the executivedepartment of government whose principal power and responsibility is to see that our laws are faithfullyexecuted. A necessary component of this power to execute our laws is the right to prosecute their violators. Theright to prosecute vests the prosecutor with a wide range of discretion – the discretion of whether, what andwhom to charge, the exercise of which depends on a smorgasbord of factors which are best appreciated byprosecutors. By virtue of the trial court having granted the prosecution’s motion for reinvestigation, theformer is deemed to have deferred to the authority of the prosecutorial arm of the Government. Havingbrought the case back to the drawing board, the prosecution is thus equipped with discretion — wide and farreaching – regarding the disposition thereof.(Id.).

The situation is different in cases when an accused is retained in the information but his discharge as

state witness is sought thereafter by the prosecution before it rests its case, in which event, the proceduralrequirements of Section 17, Rule 119 apply. Otherwise stated, when no amendment to the information isinvolved as a by-product of reinvestigation and trial proceeds thereafter, the discharge of the accused fallssquarely and solely within the ambit of Section 17, Rule 119. (Id.).

Witness Protection Program (WPP). Section 3 of Republic Act No. 6981 enumerates therequirements before a person may be admitted to the WPP. It does not state that if an accused cannot beadmitted to the WPP, he cannot be discharged as a witness for the state. Dumlao’s being a law enforcementofficer and, thus, disqualified to be under the WPP, do not in any way prohibit him to be discharged from theinformation. (Id.).

PRELIMINARY INVESTIGATION

Preliminary investigations. (Ora v. Judge Almajar, A.M. No. MTJ-05-1599, 14 October 2005).

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Probable Cause. Defined. (Villanueva v. Secretary of Justice, G.R. No. 162187, 18 November2005; Fuentes, Jr. v. Office of the Ombudsman, G.R. No. 164865, 11 November 2005). The determinationof probable cause during a preliminary investigation is a function of the government prosecutor. Nonetheless,the Court may exercise its certiorari power when the government prosecutor unreasonably refuses to file aninformation even if clearly warranted by the evidence. This certiorari power was recognized in Socrates v.Sandiganbayan, which enumerated the remedies of the offended party or complainant, as follows: [i] to filean action for mandamus in case of grave abuse of discretion; [ii] to lodge a new complaint against theoffenders before the ombudsman and request the conduct of a new examination as required by law; [iii] toinstitute administrative charges against the erring prosecutor, a criminal complaint under Article 208 of theRPC, or a civil action for damages under Article 27 of the Civil Code; [iv] to secure the appointment ofanother prosecutor; or, [v] to institute another criminal action if no double jeopardy is involved.(Villanuevav. Mayor Ople, G.R. No. 165125, 18 November 2005).

Ombudsman (OMB). In case of conflict between the conclusion of the OMB and the Prosecutor,the former’s decision shall prevail since the Office of the Prosecutor is under the supervision and control ofthe Ombudsman. (Diamante III v. Sandiganbayan, supra). Without good and compelling reasons, theCourt cannot interfere in the exercise by the OMB of its investigatory and prosecutory powers. The onlyground upon which it may entertain a review of the OMB’s Resolution is grave abuse of discretion. (Peraltav. Desierto, G.R. No. 153152, 19 October 2005). The remedy from resolutions of the Ombudsman inpreliminary investigations of criminal cases is a petition for certiorari under Rule 65. The remedy of aggrievedparties from resolutions of the OMB finding probable cause in criminal cases or non-administrative cases,when tainted with grave abuse of discretion, is to file an original action for certiorari with this Court and notwith the CA. By availing of the wrong remedy, the petition should be dismissed outright. Nevertheless, theCourt considered the present petition as one filed under Rule 65 of the Rules since a perusal of the contentsreveals that petitioner is imputing grave abuse of discretion on the part of the OMB. (Dr. Osorio v. Hon.Desierto, G.R. No. 156652, 13 October 2005).

DOJ. Motion for Reconsideration of DOJ Resolution on Appeal from Public Prosecutor’s Findingson Preliminary Investigation (Section 13 of DOJ Circular No. 70). Petitioner filed such motion. Thereafter, itbehooved the RTC to suspend the proceedings until after the Secretary of Justice had resolved such motionwith finality. The Secretary of Justice may resolve the said motion despite the arraignment of the petitioners:Action on the petition. (Serag v. Court of Appeals, supra).

ARREST

When Warrant of Arrest May Issue. Respondent judge issued a warrant of arrest against hereincomplainant upon her mere non-appearance during the first date scheduled for the preliminary investigationof the case. Respondent judge cannot coerce a party into attending the preliminary investigation. An accusedcan waive his right to be present thereat, and cannot be compelled to attend the same. Certainly, a warrant ofarrest may not be issued simply to secure his presence. (Ora v. Judge Almajar, supra).

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TRIAL

Admission of Additional Evidence - is addressed to the sound discretion of the trial court. In thefurtherance of justice, the court may grant the parties the opportunity to adduce additional evidence bearingupon the main issue in question. Here, the Court sustained the order of the trial court allowing the prosecutionto present additional evidence after it had offered its evidence and rested its case and after the defense fileda motion to dismiss. While the prosecution had rested, the trial was not yet terminated and the case was stillunder the control and jurisdiction of the court. (Valencia v. Sandiganbayan, G.R. No. 165996, 17 October2005).

Right to Present Evidence. The absence of a party during trial constitutes waiver of his right topresent evidence and cross-examine the opponent’s witnesses. Although a defendant who answered thecomplaint but fails to appear at the scheduled trial cannot be declared in default, the trial may proceedwithout his presence. And if the absence of a party during the hearing was due to his own fault, he cannotlater on complain that he was deprived of his day in court. The Rules of Court requires only that the motionbe heard; it does not direct the court to order the filing of comments or oppositions to the motion before themotion is resolved. During the hearing on the motion, the opposition to the motion and the arguments of theparties may be ventilated; thereafter, the court may rule on the motion. Petitioners and their counsel shouldhave known the significance of the hearing dates since petitioners themselves chose one of the hearing datesand the hearing dates were accordingly fixed with due notice to all the parties. (Sps.Calo v. Sps. Tan,supra).

While trial courts have the discretion to admit or exclude evidence, such power is exercised onlywhen the evidence has been formally offered. For a long time, the Court has recognized that during the earlystages of the development of proof, it is impossible for a trial court judge to know with certainty whetherevidence is relevant or not, and thus the practice of excluding evidence on doubtful objections to its materialityshould be avoided. In the instant case, the insurance application and the insurance policy were yet to bepresented in court and formally offered before it. Private respondent was merely asking for the issuance ofsubpoena duces tecum and subpoena ad testificandum when the trial court issued the assailed Order.Even assuming that the documents would eventually be declared inadmissible, the trial court was not then ina position to make a declaration to that effect at that point. The trial court barred the production of the subjectdocuments prior to the assessment of its probable worth. The assailed Order was not a mere ruling on theadmissibility of evidence; it was a ruling affecting the proper conduct of trial. (Yu v. Court of Appeals,supra).

Motion for Postponement. As a rule, the grant or denial of a motion for postponement is addressedto the sound discretion of the court which should always be predicated on the consideration that more thanthe mere convenience of the courts or of the parties, the ends of justice and fairness should be served thereby.This discretion must be exercised wisely. In considering motions for postponements, two things must beborne in mind: [i] the reason for the postponement; and, [ii] the merits of the movant. That complainant didnot object to the continued postponement of the hearing of the cases for close to three (3) years does not,

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however, extenuate respondent judge. (Sevilla v. Judge Quintin, A.M. No. MTJ-05-1603, 25 October2005).

Demurrer to Evidence (Section 23, Rule 119 of the RRCP) in relation to the rule on Offer ofEvidence (Section 34, Rule 132). A demurrer to evidence is an objection by one of the parties in an action,to the effect that the evidence which his adversary produced is insufficient in point of law, whether true or not,to make out a case or sustain the issue. The party demurring challenges the sufficiency of the whole evidenceto sustain a verdict. The court, in passing upon the sufficiency of the evidence raised in a demurrer, is merelyrequired to ascertain whether there is competent or sufficient evidence to sustain the indictment or tosupport a verdict of guilt. (Soriquez v. Sandiganbayan, G.R. No. 153526, 25 October 2005). A demurrerto evidence or a motion for leave to file the same must be filed after the prosecution rests its case. But beforeevidence may be admitted, the rules require that the same be formally offered, otherwise, it cannot be consideredby the court. A prior formal offer of evidence concludes the case for the prosecution and determines thetimeliness of the filing of a demurrer to evidence. The motion to dismiss for insufficiency of evidence filed bythe accused after the conclusion of the cross-examination of the witness for the prosecution, is prematurebecause the latter is still in the process of presenting evidence. Until such time that the prosecution closed itsevidence, the defense cannot be considered to have seasonably filed a demurrer to evidence or a motion forleave to file the same. (Valencia v. Sandiganbayan, supra). The motion for leave of court to file demurrer toevidence should be filed within a non-extendible period of five (5) days after the prosecution has rested itscase, specifically stating the grounds relied upon by the defense. (Sevilla v. Judge Quintin, supra).

If petitioner disagrees with the denial of his motion for leave to file demurrer to evidence, his remedyis not to file a petition for certiorari but to proceed with the presentation of his evidence and to appeal anyadverse decision that may be rendered by the trial court. The last sentence of Section 23, Rule 119 of theRules provides that “the order denying a motion for leave of court to file demurrer to evidence or the demurreritself shall not be reviewable by appeal or certiorari before judgment.” (Id.).

APPEAL

How Appeal Taken (Section 3, Rule 122 of the RRCP). The proper remedy of the petitioner fromthe decision of the RTC on appeal from an MTC decision was to file a petition for review under Rule 42 ofthe Rules, in which the petitioner may raise errors of facts or law, or both, committed by the RTC. If theaggrieved party fails to file such petition within the period therefor, the RTC decision becomes final andexecutory, beyond the jurisdiction of the CA or even by the Court to reverse or modify. (Ruiz v. People,supra).

When Appeal to be Taken (Section 6, Rule 122 of the RRCP). By Private Offended Party. The timefor filing by Motion for reconsideration of the civil aspect of the RTC judgment by the private offendedparty should be counted from the date he received the trial court’s Decision — not from the date of notice tothe public prosecutor. (Id.; Sanchez v. Far East Bank and Trust Company, G.R. No. 155309, 15 November2005).

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Direct Appeals to the Court. People v. Mateo and Court Resolution dated September 19, 1995modified pertinent provisions of the RRCP insofar as they provide for direct appeals from the RTC to theCourt in cases where the penalty imposed is death, reclusion perpetua or life imprisonment. The Courtresolved on February 2, 2005 to transfer the case to the CA for appropriate action and disposition. (Peoplev. Gasacao, G.R. No. 168445, 11 November 2005).

EVIDENCE

RULES OF ADMISSIBILITY

DOCUMENTARY EVIDENCE

Best Evidence Rule. By admitting that the originals were in his possession and even producing themin open court, petitioner cured whatever flaw might have existed in the prosecution’s evidence. By petitioner’sown admission, five of the original checks were lost, thus rendering the photocopies thereof admissible asexceptions to the Best Evidence Rule. (Josef v. People, G.R. No. 146424, 18 November 2005).

Secondary Evidence. What was marked and submitted to the court was the photocopy. Consideringthat counsel for petitioners admitted that the photocopy of the land title is a faithful reproduction of the originalthereof, stipulated with private respondents’ counsel that what will be marked and submitted to the trial courtas Exhibit A is the photocopy, and the lack of objection on such ground which is then deemed a waiverthereof, the admission into evidence of the photocopy of the said title was absolutely correct. (Caraan v.Court of Appeals, G.R. No. 140752, 11 November 2005).

Parole Evidence Rule. Rule 130, Section 9 of the Rules. Applied to promissory note. (Allied BankingCorporation v. Cheng Yong, G.R. No. 151040, 6 October 2005).

TESTIMONIAL EVIDENCE

Qualification of Witnesses

Marital Disqualification Rule (Section 22, Rule 130 of the Rules). Exception. In prosecution for acrime committee by one spouse against the other. (Alvarez v. Ramirez, G.R. No. 143439, 14 October2005).

Expert Witness. Courts are not bound by expert testimonies. The opinion of an expert should beconsidered by the court in view of all the facts and circumstances of the case. (Ilao-Quianay v. Mapile,supra; Philippine Shell Petroleum Corporation v. John Bordman Ltd. of Iloilo, Inc., supra).

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Admissions and Confessions

Admission by Conspirator (Section 27, Rule 130 of the Rules) applies only to extrajudicial acts ordeclarations but not to testimony given on the witness stand at the trial where the defendant has the opportunityto cross-examine the declarant. (Bolotaulo v. Sandiganbayan [En Banc], G.R. No. 52341-46, 25 November2005).

Admissions. As a general rule, facts alleged in a party’s pleading are deemed admissions of thatparty and binding upon it, but this is not an absolute and inflexible rule. An Answer is a mere statement of factwhich the party filing it expects to prove, but it is not evidence. (Rosales v. Castelltort, G.R. No. 157044, 5October 2005).

Testimonial Knowledge

A witness can testify only to those facts which he knows of his own knowledge. (Philippine FreePress, Inc. v. Court of Appeals, G.R. No. 132864, 24 October 2005).

Hearsay. Evidence of statement made or a testimony is hearsay if offered against a party who has noopportunity to cross-examine the witness. Hearsay evidence is excluded precisely because the party againstwhom it is presented is deprived of or is bereft of opportunity to cross-examine the persons to whom thestatements or writings are attributed. Allegations of duress or coercion should, like fraud, be viewed withutmost caution. They should not be laid lightly at the door of men whose lips had been sealed by death. (Id.;Uytengsu III v. Atty. Baduel, supra; People v. Uy, G.R. No. 157399, 17 November 2005).

Exceptions to the Hearsay Rule.

(a) Declaration Against Interest. (Philippine Free Press, Inc.,supra).

(b) Testimony or Deposition at a Former Proceeding. (Ilao-Quianay v. Mapile, supra).

(c) Independently Relevant Statements. Where, regardless of the truth or falsity of a statement, thefact that it has been made is relevant, the hearsay rule does not apply, and the statement may be shown.Evidence as to the making of such statement is not secondary but primary, for the statement itself mayconstitute a fact in issue, or be circumstantially relevant as to the existence of such a fact. (Id.).

BURDEN OF PROOF

Lies on the party who makes the allegations. (Uytengsu III v. Atty. Baduel, supra).

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PRESENTATION OF EVIDENCE

Authentication and Proof of Documents

Public Document. Notarized document carries the evidentiary weight conferred upon it with respectto its due execution, and documents acknowledged before a notary public have in their favor the presumptionof regularity. (Sps. Ulep v. Court of Appeals, supra; Cuizon v. Remoto, supra; People v. Uy, supra).

Official Records. (Palileo v. National Irrigation Administration, G.R. No.148574, 11 October2005; Herce, Jr. v. Municipality of Cabuyao, G.R. No. 166645, 11 November 2005).

OFFER AND OBJECTION

The pieces of evidence considered by the court a quo to arrive at its decision were documentsattached as annexes to the various pleadings filed by the parties. Documents attached to the pleadings formpart thereof and may be considered as evidence even if not formally introduced as evidence. The court mayand should consider as evidence documents attached to the pleadings filed by the parties and made a partthereof, without necessity of introducing them expressly as evidence when their authenticity and due executionhave not been denied under oath. (Republic of the Philippines v. “G” Holdings, Inc., supra).

Tender of Excluded Evidence. Before tender of excluded evidence is made, the evidence musthave been formally offered before the court. And before formal offer of evidence is made, the evidence musthave been identified and presented before the court. (Yu v. Court of Appeals, supra).

OTHERS

Positive Identification. The lone eyewitness need not know the name of the assailant or know himpersonally to establish that the latter committed the crime charged. (Guiyab v. People, G.R. No. 152527, 20October 2005).

Affidavits - being self-serving, must be received with caution. This is because the adverse party is notafforded any opportunity to test their veracity. There must be some other relevant evidence to corroboratesuch affidavits. (Philippine Long Distance Telephone Company, Inc. v. Tiamson, supra).

Alibi. Despite corroboration, is still an inherently weak defense and cannot prevail over a positiveidentification from a witness found credible by the trial court. (People v. Quirol, G.R. No. 149259, 20October 2005).

Credibility of Witness. Question on the credibility of witness based on alleged unnatural behaviour.(People v. Quirol, G.R. No. 149259, 20 October 2005). As a rule, appellate courts will not interfere withthe judgment of the trial court in passing upon the credibility of a witness, unless there appears in the record

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some fact or circumstance of weight and influence which has been overlooked, or the significance of whichhas been misinterpreted or misapprehended. (Guiyab v. People, supra).

KATARUNGANG PAMBARANGAY LAW

Barangay Conciliation. Pre-condition to filing of complaint in court under the LGC. Subject Matterfor Amicable Settlement; Exception Thereto. (Pascual v. Pascual, G.R. No. 157830, 17 November 2005).Where the parties are not actual residents in the same city or municipality or adjoining barangays, there is norequirement for them to submit their dispute to the Lupon, as provided for in Section 6 vis a vis Sections 2and 3 of P.D. 1508 (Katarungang Pambarangay Law) or Sections 408-409 of the LGC, which tookeffect on January 1, 1992. The express statutory requirement of actual residency is not applicable to theattorney-in-fact of a party. (Id.).

Petitioner and respondent executed an Agreement settling their dispute, which was approved by theLupon. Respondent did not repudiate the Agreement; hence, it had the force and effect of a final judgment.The settlement of the parties may be enforced by the Lupon, through the punong barangay, within six (6)months; and if the settlement is not enforced after the lapse of said period, it may be enforced by an action inthe proper city or municipal court, as provided in Section 417 of the LGC. The respondent failed to complywith her obligation under the Agreement of repaying the back rentals and the current rentals for the house. Hence, the petitioner had the right to enforce the Agreement against the respondent and move for her evictionfrom the premises. However, instead of filing a motion before the Lupon for the enforcement of the Agreement,or (after six months), an action in the MeTC for the enforcement of the settlement, the petitioner filed anaction against respondent for unlawful detainer and the collection of unpaid rentals, inclusive of those alreadydue before the Agreement was executed. HELD: Petitioner’s complaint for unlawful detainer is prematureand may be dismissed for failure to exhaust all administrative remedies. (Berba v. Pablo, G.R. No. 160032,11 November 2005).

COURT RECORDS AND GENERAL DUTIESOF CLERKS AND STENOGRAPHERS

Transcription of Stenographic Notes. Fees to be uniformly collected by stenographers fortranscription of stenographic notes. (Atty. Opeña v. Luna, Adm. Matter No. P-02-1549, 16 December2005). Administrative Circular No. 24-90, which requires them to transcribe stenographic notes within twenty(20) days from the date the notes were taken. (SPO2 Alcover, Sr. v. Bacatan, A.M. No. P-05-2043, 7December 2005).

––– 0 –––

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TAXATION

THE NATIONAL INTERNAL REVENUE CODE OF 1997(NIRC)

REMEDIES

Recovery of Tax Erroneously or Illegally Collected

Two (2)-Year Prescriptive Period within which a taxpayer may claim for tax refund or tax credit. Thestatute of limitations component of Section 230 of the NIRC applies to suits for the recovery of internalrevenue taxes or sums erroneously, excessively, illegally or wrongfully collected. This provision does notapply in this case where PNB paid advance income tax in 1991 and requested in 1997 for issuance of a taxcredit certificate on the balance of its advance income tax payment to be applied to future income tax liabilities,in view of its inability to carry-over the remaining amount of such advance payment to the four (4) succeedingtaxable years, not having incurred income tax liability during that period. This is not a simple case of excesspayment as to be automatically covered by the two (2)-year limitation in Section 230 of the NIRC.(Commissioner of Internal Revenue v. Philippine National Bank, G.R. No. 161997, 15 October 2005).

Revenue Regulation No. 10-77 governing the method of computing corporate quarterly income tax

on a cumulative basis, particularly, Section 7 thereof does not apply to PNB’s advance payment which arenot “quarterly payments” reflected in the adjusted final return, but a lump sum payment to cover future taxobligations. Neither can such advance lump sum payment be considered overpaid income tax for a giventaxable year, so that the carrying forward of any excess or overpaid income tax for a given taxable year islimited to the succeeding taxable year only. At the time payment was made, BIR was put on due notice ofPNB’s intention to apply the entire amount to its future tax obligations. (Id.).

Availment of a tax credit due for reasons other than the erroneous or wrongful collection of taxes mayhave a different prescriptive period. Absent any specific provision in the NIRC or special laws, that periodwould be ten (10) years under Article 1144 of the Civil Code. Even if the two (2)-year prescriptive period,if applicable, had already lapsed, the same is not jurisdictional and may be suspended for reasons of equityand other special circumstances. From a moral standpoint, the Government would be enriching itself of thisamount at the expense of the taxpayer. (Id.).

Principle of Unjust Enrichment and Equitable Considerations. The amount over which tax creditis claimed was theoretically booked as advance income tax payment. PNB remitted the P180 Million inquestion as a measure of goodwill and patriotism, a gesture noblesse oblige, to help the cash-strappednational government. It would thus be unfair to leave respondent PNB to suffer losing millions of pesosadvanced by it for future tax liabilities. The cut becomes all the more painful when it is considered that PNB’sfailure to apply the balance of such advance income tax payment from 1992 to 1996 was due to businessdownturn experienced by the bank so that it incurred no tax liability for the period. Upon basic considerations

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of equity and fairness, respondent’s request for issuance of a tax credit certificate should not be subject to thetwo (2)-year limitation in Section 230 of the NIRC. (Id.).

Statute of LimitationsUpon Assessment and Collection

(1) Three-Year Prescriptive Period (Section 203 of the NIRC, as amended). The period for theBureau of Internal Revenue (BIR) to assess and collect an internal revenue tax is limited to three (3) years,counted from the date of actual filing of the return or from the last date prescribed by law for the filing of suchreturn, whichever comes later. Such statute of limitations may be suspended in the following instances: (a) ifthe taxpayer executes a valid waiver thereof, as provided in paragraphs (b) and (d) of Section 223 of theNIRC, as amended; (b) in specific instances enumerated in Section 224 of the same Code, which include arequest for reinvestigation granted by the BIR Commissioner; and, (c) by the principle of estoppel, where ataxpayer is not allowed to raise the defense of prescription against the efforts of the Government to collect thetax assessed against it. (Bank of the Philippine Islands v. Commissioner of Internal Revenue, G.R. No.139736, 17 October 2005).

(2) Ten-Year Prescriptive Period (Section 223). The three-year prescriptive period does not applyin any of the following instances: [i] the taxpayer filed a false return; [ii] the taxpayer filed a fraudulent returnwith intent to evade tax; or, [iii] the taxpayer failed to file a return. Instead, the period within which to assesstax is ten (10) years from discovery by the BIR of the falsity, fraud, or omission; and any tax so assessed maybe collected by levy upon real property within three years following the assessment of the tax. (Commissionerof Internal Revenue v. Tulio, G.R. No. 139858, 15 October 2005).

Waiver of the Statute of Limitation. Requisites for a valid Waiver of the Statute of Limitations: [i]in writing; [ii] agreed to by both the Commissioner and the taxpayer; [iii] before the expiration of the ordinaryprescriptive periods for assessment and collection; and, [iv] for a definite period beyond the ordinaryprescriptive periods for assessment and collection. The period agreed upon can still be extended by subsequentwritten agreement, provided that it is executed prior to the expiration of the first period agreed upon. RevenueMemorandum Order (RMO) No. 20-90 on 04 April 1990 lays down in detail the procedure for the properexecution of such a waiver. (Bank of the Philippine Islands, supra).

Requests for a Reinvestigation. Distinction between a request for reconsideration and a request forreinvestigation. Revenue Regulations (RR) No. 12-85, issued on 27 November 1985 by the Secretary ofFinance governs the procedure for protesting an assessment and distinguishes between the two types ofprotest. The act of filing a request for reinvestigation alone does not suspend the period. The BIR Commissionermust first grant the request for reinvestigation as a requirement for suspension of the statute of limitations. Theburden of proof that the taxpayer’s request for reinvestigation had been actually granted shall be on respondentBIR Commissioner. The grant may be expressed in communications with the taxpayer or implied from theactions of the respondent BIR Commissioner or his authorized BIR representatives in response to the requestfor reinvestigation. (Id.).

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In this case, BPI did not execute a Waiver of the Statute of Limitations. The protest letter of BPI wasin the nature of a request for reconsideration, rather than a request for reinvestigation. It merely required areview of existing evidence and the legal basis for the assessment. Consequently, Section 224 of the NIRC,as amended, on the suspension of the running of the statute of limitations should not apply. Moreover, evengranting that the protest of BPI was a request for reinvestigation, there was no showing that it was granted bythe BIR Commissioner and that actual reinvestigation had been conducted. (Id.).

The waiver of the statute of limitations, whether on assessment or collection, should not be construedas a waiver of the right to invoke the defense of prescription but, rather, an agreement between the taxpayerand the BIR to extend the period to a date certain, within which the latter could still assess or collect taxesdue. The waiver does not mean that the taxpayer relinquishes the right to invoke prescription unequivocally.(Id.).

When the BIR validly issues an assessment, within either the three-year or ten-year period, whichever

is appropriate, then the BIR has another three years after the assessment within which to collect the nationalinternal revenue tax due thereon by distraint, levy, and/or court proceeding. The assessment of the tax isdeemed made and the three-year period for collection of the assessed tax begins to run on the date theassessment notice had been released, mailed or sent by the BIR to the taxpayer. Distraint and levy proceedingsare validly begun or commenced by the issuance of the Warrant and service thereof on the taxpayer. (Id.).

The statute of limitations on assessment and collection of taxes is for the protection of the taxpayerand, thus, shall be construed liberally in his favor. (Id.).

VALUE-ADDED TAX

VAT Reform Law. (ABAKADA v. Executive Secretary [En Banc], G.R. No. 168056, 18 October2005).

Contractual stipulation on payment of VAT. (R-II Builders, Inc. v. Construction Industry ArbitrationCommission, G.R. No. 152545, 15 November 2005).

CORPORATE INCOME TAX

Excess Quarterly Income Tax Payment. Under Section 76 of the NIRC, a taxable corporationwith excess quarterly income tax payments may apply for either a tax refund or a tax credit, but not both. Failure to indicate a choice, however, will not bar a valid request for a refund, should this option be chosen bythe taxpayer later on. (Philam Asset Management, Inc. v. Commissioner of Internal Revenue, G.R. Nos.156637/162004, 14 December 2005).

The carry-over option under Section 76 is permissive. A corporation that is entitled to a tax refund

or a tax credit for excess payment of quarterly income taxes may carry over and credit the excess income

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taxes paid in a given taxable year against the estimated income tax liabilities of the succeeding quarters. Oncechosen, the carry-over option shall be considered irrevocable for that taxable period, and no application fora tax refund or issuance of a tax credit certificate shall then be allowed. (Id.).

A taxpayer that wants a cash refund shall make a written request for it, and the ITR showing theexcess expanded withholding tax credits shall then be examined by the BIR. For the grant of refund, RRs12-94 and 6-85 state that all pertinent accounting records should be submitted by the taxpayer. Theserecords, however, actually refer only to (1) the withholding tax statements; (2) the ITR of the present quarterto which the excess withholding tax credits are being applied; and (3) the ITR of the quarter for the previoustaxable year in which the excess credits arose. To stress, these regulations implementing the law do notrequire the proffer of the FAR for the taxable year following the period to which the tax credits are beingapplied. (Id.).

PERCENTAGE TAX

Section 121 of the Code (now Section 123 of the NIRC) exempts cooperative companies from the5 percent percentage tax on insurance premiums. Section 199 also exempts from the DST, policies ofinsurance or annuities made or granted by cooperative companies. Being a cooperative, respondent is thusexempt from both types of taxes. While RA 8424 amending the Tax Code has deleted the income tax of 10percent imposed upon the gross investment income of mutual life insurance companies — domestic andforeign — the provisions of Section 121 and 199 remain unchanged. (Republic v. Sunlife Assurance Companyof Canada, G.R. No. 158085, October 14, 2005)

DOCUMENTARY STAMP TAX (Id.).

LOCAL GOVERNMENT CODE (LGC)

REAL PROPERTY TAX

The proviso directing that the real property tax be based on the actual amount reflected in the deedof conveyance or the prevailing BIR zonal value is invalid, not only because it mandates an exclusive rule indetermining the fair market value but, more so, because it departs from the established procedures stated inthe Local Assessment Regulations No. 1-92 and unduly interferes with the duties statutorily placed upon thelocal assessor by completely dispensing with his analysis and discretion which the LGC and the regulationsrequire to be exercised. An ordinance that adopts a method of assessment or appraisal of real propertycontrary to the LGC, its Implementing Rules and Regulations and the Local Assessment Regulations No. 1-92 issued by the Department of Finance is ultra vires and void. (Allied Banking Corporation v. QuezonCity [En Banc], G.R. No. 154126, 11 October 2005).

Real properties shall be appraised at the current and fair market value prevailing in the locality wherethe property is situated and classified for assessment purposes on the basis of its actual use. “Fair market

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value” is the price at which a property may be sold by a seller who is not compelled to sell and bought by abuyer who is not compelled to buy, taking into consideration all uses to which the property is adapted andmight in reason be applied. The criterion established by the statute contemplates a hypothetical sale. Hence,the buyers need not be actual and existing purchasers.

Assessors, in fixing the value of real property, have to consider all the circumstances and elements of

value, and must exercise prudent discretion in reaching conclusions. In this regard, Local AssessmentRegulations No. 1-92 establishes the guidelines to assist assessors in classifying, appraising and assessingreal property. It suggests three approaches in estimating the fair market value: (1) The Sales Analysis orMarket Data Approach. Under this approach, the price paid in actual market transactions is considered bytaking into account valid sales data accumulated from among the various sources stated in Sections 202,203, 208, 209, 210, 211 and 213 of the LGC. (2) The Income Capitalization Approach. Here, the value ofan income-producing property is no more than the return derived from it. An analysis of the income producedis necessary in order to estimate the sum which might be invested in the purchase of the property. (3) TheReplacement or Reproduction Cost Approach. This is a factual approach used exclusively in appraisingman-made improvements such as buildings and other structures, based on such data as materials and laborcosts to reproduce a new replica of the improvement. (Id.).

The assessor uses any or all of these approaches in analyzing the data gathered to arrive at the

estimated fair market value to be included in the ordinance containing the schedule of fair market values.Given these different approaches to guide the assessor, it can readily be seen that the LGC did not intend tohave a rigid rule for the valuation of property, which is affected by a multitude of circumstances which no rulecould foresee or provide for.

Using the consideration appearing in the deed of conveyance to assess or appraise real properties is

not only illegal since “the appraisal, assessment, levy and collection of real property tax shall not be let to anyprivate person,” but it will completely destroy the fundamental principle in real property taxation – that realproperty shall be classified, valued and assessed on the basis of its actual use regardless of where located,whoever owns it, and whoever uses it. Necessarily, allowing the parties to a private sale to dictate the fairmarket value of the property will dispense with the distinctions of actual use stated in the LGC and in theregulations.

The invalidity of the assessment or appraisal system adopted by the proviso is not cured even if the

proviso mandates the comparison of the stated consideration as against the prevailing BIR zonal value,whichever is higher, because an integral part of that system still permits valuing real property in disregard of its“actual use.”

There is also nothing in the LGC or the regulations showing the congressional intent to require an

immediate adjustment of taxes on the basis of the latest market developments as, in fact, real propertyassessments may be revised and/or increased only once every three (3) years. Consequently, the real property

Case Digest


tax burden should not be interpreted to include those beyond what the LGC or the regulations expressly andclearly state.

Still another consequence of the proviso is to provide a chilling effect on real property owners or

administrators to enter freely into contracts reflecting the increasing value of real properties in accordancewith prevailing market conditions. While the LGC provides that the assessment of real property shall not beincreased oftener than once every three (3) years, the questioned part of the proviso subjects the real propertyto a tax based on the actual amount appearing on the deed of conveyance or the current approved zonalvaluation of the Bureau of Internal Revenue prevailing at the time of sale, cession, transfer and conveyance,whichever is higher. As such, any subsequent sale during the three-year period will result in a real propertytax higher than the tax assessed at the last prior conveyance within the same period. To save on taxes, realproperty owners or administrators are forced to hold on to the property until after the said three-year periodhas lapsed. Should they nonetheless decide to sell within the said three-year period, they are compelled todispose the property at a price not exceeding that obtained from the last prior conveyance in order to avoida higher tax assessment. In these two scenarios, real property owners are effectively prevented from obtainingthe best price possible for their properties and unduly hampers the equitable distribution of wealth.

Further, there is nothing in the Charter of Quezon City and the Quezon City Revenue Code of 1993

that authorize public respondents to appraise property at the consideration stated in the deed of conveyance.There is nothing in the Local Government Code, the implementing rules and regulations, the local assessmentregulations, the Quezon City Charter, the Quezon City Revenue Code of 1993 and the “Whereas” clauses ofthe 1995 Ordinance from which this Court can draw, at the very least, an intimation of this state interest. Assuch, the proviso must be stricken down for being contrary to public policy and for restraining trade.

A word on the applicability of the doctrine in this decision. It applies only in the determination of real

estate tax payable by owners or administrators of real property. (Allied Banking Corporation v. QuezonCity [En Banc], G.R. No. 154126, 11 October 2005).

AUCTION SALE

Auction Sale of land to satisfy alleged delinquencies in the payment of real estate taxes derogates orimpinges on property rights and due process. Thus, the steps prescribed by law for the sale, particularly thenotices of delinquency and of sale, must be followed strictly. Failure to observe those steps invalidates thesale. Here, the tax sale did not conform to the requirements prescribed under Presidential Decree (PD) No.464, otherwise known as the Real Property Tax Code, such as the notice of delinquency or of sale requiredto be given to either the delinquent owner or to his/her representative. (Sps. Tan v. Bantegui, G.R. No.154027, 24 October 2005).

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BUSINESS TAXES

Whether the City of Makati may collect business taxes on condominium corporations. Theassessment appears to be based solely on the Corporation’s collection of assessments from unit owners,such assessments being utilized to defray the necessary expenses for the Condominium Project and thecommon areas. There is no contemplation of business, no orientation towards profit in this case. The assailedtax assessment has no basis under the LGC or the Makati Revenue Code, and the insistence of the city in itscollection of the void tax constitutes an attempt at deprivation of property without due process of law.(Yamane v. BA Lepanto Condominium Corporation, G.R. No. 154993, 25 October 2005).

It is essential that the local treasurer be required to explain to the taxpayer with sufficient particularitythe basis of the tax, so as to leave no doubt in the mind of the taxpayer as to the specific tax involved. (Id.).

TAX COURTS

The RTC, in deciding an appeal taken from a denial of a protest by a local treasurer under Section195 of the LGC, exercises “original jurisdiction.” As a matter of law, and that the proper remedy of thecorporation from the RTC judgment is an ordinary appeal under Rule 41 to the Court of Appeals. However,the Court made this pronouncement subject to two important qualifications: [i] in this particular case, thereare significant reasons for the Court to overlook the procedural error and ultimately uphold the adjudicationof the jurisdiction exercised by the Court of Appeals in this case; and, [ii] the doctrinal weight of thepronouncement is confined to cases and controversies that emerged prior to the enactment of Republic Act(RA) No. 9282, the law which expanded the jurisdiction of the Court of Tax Appeals (CTA). (Yamane v. BALepanto Condominium Corporation, G.R. No. 154993, 25 October 2005).

Section 7(a)(3) of RA No. 9282. provides that the CTA exercises exclusive appellate jurisdiction toreview on appeal decisions, orders or resolutions of the Regional Trial Courts in local tax cases originaldecided or resolved by them in the exercise of their originally or appellate jurisdiction. However, RA No. 9282 would not apply to this case because it arose prior to the effectivity of that law. To declare otherwisewould be to institute a jurisdictional rule derived not from express statutory grant, but from implication. Thejurisdiction of a court to take cognizance of a case should be clearly conferred and should not be deemed toexist on mere implications. (Id.).

The ordinary courts, and not the tax court, has jurisdiction over BIR money claims based onassessments that have become final and executory. (Commissioner of Internal Revenue v. Tulio, G.R. No.139858, 15 October 2005).

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Divining the Juristic Mind of Chief Justice Artemio V. Panganiban


DIVINING THE JURISTIC MIND OFCHIEF JUSTICE ARTEMIO V. PANGANIBAN

Ismael G. Khan, Jr. *

A serious guessing game which preoccupies many lawyers is to divine the juristic philosophy of theleading and influential members of the Supreme Court. The ability to burrow into their minds to uncover theirconcealed thoughts is therefore considered the apotheosis of legal scholarship that could result in rich dividendsfor one’s law practice. Academics and law practitioners would plumb a particular magistrate’s decisions,articles, speeches and lectures in the hope of isolating key elements of thought that could provide a clue to hisbiases, leanings, and predispositions. It is, in effect, a mind game of letting a man define himself through hiswritings, and thus become predictable in his actions and opinions. While there are those who will deride this“discovery procedure” as pompous sophistry, there are just as many others who will swear that it works.

But, obviously, not with the last Chief Justice – Hilario G. Davide, Jr. – who would be the first one todeny the possibility that such an enterprise could bear fruit even as he set down his vision for the Judiciary inhis now famous Davide Watch. Justice Artemio V. Panganiban found this out himself the hard way. In hisbook, Leadership by Example, he attempted to divine “The Juridical Thought of Chief Justice Davide.”He promptly ran into a stonewall. Davide has not written a book, or article even remotely hinting at his legalphilosophy or juristic thoughts. Hence, the only way to discern what that might be was to analyze the decisionsand separate opinions that Davide had penned as a Supreme Court magistrate. But even as he deeplyanalyzed some of the major ponencias of his predecessor, then Justice Panganiban had to be content withmerely dissecting Davide’s style and approach in writing his decisions.1 In fact, it might be risky – evenfoolhardy – to presume that justices of the Supreme Court can be neatly classified as to which school ofjuridical philosophy they belong. This view is shared by other justices who dismiss such attempts as purehogwash. Justice Camilo D. Quiason, for example, observed that no judge “nurses a conscious effort inpromoting any theory of law. At times, the facts and the law involved in a case do not leave room for theappreciation of any legal theory.”2

Chief Justice Panganiban, however, hues to a contrary view. He believes “that every leader musthave a well-defined philosophy; otherwise, he would leave his followers adrift in a sea of uncertainties andmoral vacuum.”3 When he took his oath on the 21st of December, 2006 as the 21st Chief Justice of thePhilippines, the former newsboy from the impoverished Manila district of Sampaloc laid down his twinmantra of a reformed judiciary and a revitalized legal profession that will be the instrument for safeguardingthe liberty and nurturing the prosperity of our people, while upholding the rule of law and the

* The writer is Assistant Court Administrator and Chief, Public Information Office of the Supreme Court.1 A. Panganiban, Leadership by Example, pp. 59-72 (1989).2 C. Quiason, The Juristic Thought of Chief Justice Andres R. Narvasa: Odyssey and Legacy, p. 301 (1998).3 A. Panganiban, op. cit., p. 60.

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independence of the judiciary even as he vowed to finish the judicial reform program initiated by Davide. Inexpounding his vision of promoting the people’s liberty while promoting their prosperity, he has been emphaticin saying that he will resolve any doubt as to the constitutionality of actions by the political branches involvingthe liberty of the people in favor of civil liberties. As we shall soon see, this is far from being a motherhoodstatement composed of weasel words to pontificate on a grandiloquent jural design. In fact, it is the core ofhis juridical philosophy which will guide his thoughts and actions during a period of less than twelve months inwhich he will serve as primus inter pares of the highest court in the land.4 These are the standards on whichChief Justice Panganiban is staking his stewardship of the Supreme Court and as the leader of the entirejudiciary comprising more than 2,000 justices and judges and 26,000 employees.

Hidden in Plain Sight

So, by what device do we probe the mind of Chief Justice Panganiban and, hopefully, divine patternsof thought and behavior that will give us an intelligent clue as to how he will decide a given set of facts on thebasis of existing law and current jurisprudence?

We are fortunate that there is a wealth of material that we can plumb for this extraordinary mind gamethat will test our own capacity for a nuanced appreciation of how the mental faculties of the Chief Justiceprocess legal and factual elements. For one thing, he has already written ten books corresponding to the tenyears that he has been a sitting justice. As a way of marking his yearly anniversary on the Court, reckonedfrom the date of his appointment by President Fidel V. Ramos on October 10, 1995, he writes a book thatserves as his report card on the major activities of the High Tribunal which involve his active participation.Again, there are the 1,070 full-length decisions that he had penned for the Court this past decade, as well as83 separate or dissenting opinions, as well as the thousands of unsigned, minute resolutions that he haddrafted for the Court’s promulgation. One of the little mysteries in the Court is how Chief Justice Panganibanhas achieved all these and, still, not be saddled with a backlog of undecided cases. It is truly a source ofwonder that he has no pending case that is more than two years old, counted from the date of the lastpleading. Thus, observed from this vantage point, one may justly conclude that his leanings and predilections,inner beliefs, biases and prejudices, and thought processes are, in fact, hidden in plain sight.

That he walked the talk has been more than amply demonstrated in the first 100 days of his magistracy.

The Supreme Court’s decisions in the constitutional cases upholding the right of Congress to compelthe appearance of public officials concerning inquiries “in aid of legislation”5 and the nullification of the so-

4 “Liberty and Prosperity,“ a speech delivered by the Chief Justice before the Joint Meeting of the Financial Executives Instituteof the Philippines (FINEX), the Makati Business Club, the Management Association of the Philippines, the Philippine Chamber ofCommerce and Industry (PCCI), the Federation of Filipino-Chinese Chambers of Commerce, and the Japanese and EuropeanChambers of Commerce on February 15, 2006, at the Hotel Intercontinental inMakati City.5 Senate vs. Ermita, GR 169777, April 20, 2006. It is worth pointing out that, beginning with this case, consolidated petitionswhich assail the validity or constitutionality of an issuance of a government official or agency, the petitioner which is the most directly



called calibrated pre-emptive response as a threat to the right of the people to peaceful assembly for theredress of their grievances have further burnished the Court’s image as truly the Court of Last Resort inprotecting civil liberties and even-handed balancing of the separation of powers which underpin our republicanform of government. No less significant is the fact that these are unanimous decisions which attest to thequalities of moral and intellectual leadership brought to bear by the Chief Justice during the fast-tracking ofthese cases.

He has likewise taken an active and forceful lead in decisions which impact the economic life of thepeople in pursuit of his “prosperity” theme. As proof, he was successful in convincing the Court to reverse ayear-old decision which declared the Mining Law unconstitutional.6 The crux of his impassioned argument:The Constitution should be read in broad, life-giving strokes. It should not be used to strangulateeconomic growth or to serve narrow, parochial interests. Rather, it should be construed to grant thePresident and Congress sufficient discretion and reasonable leeway to enable them to attract foreigninvestments and expertise, as well as to secure for our people and our posterity the blessings ofprosperity and peace.7 His decision in this case, a 246-page ponencia, holds the record for sheer length inthe 104-year history of the Supreme Court, and actualizes his judicial philosophy of deferring to the Presidentand Congress in matters affecting the economic parameters and policies of the country.

Fearful Forecasts?

The same development appears to be in the offing for two controversial and hot-button constitutionalissues that have suddenly occupied center stage in the people’s consciousness. I refer to the death penaltyand the people’s initiative in proposing changes to our Constitution which will be observing the 20th year of itsadoption next year, i.e., on February 2, 2007.

Chief Justice Panganiban is eminently predictable in how he will be expected to decide should any ofthese issues reach the Supreme Court. In an “ambush” interview by the Media in Baguio City, he reiteratedhis opinion that he deemed the Death Penalty Law (RA 7659) as an invalid piece of legislation. As to beexpected, the reaction was mixed. He was both praised and excoriated for expressing what he thought of thedeath penalty. In fact, that is an opinion which he has consistently maintained since 1997, initially propoundedin People vs. Echegaray8 that the Death Penalty Law is unconstitutional. His position that Congress was notable to demonstrate compelling reasons for restoring capital punishment and that many of the “heinous”crimes listed in the law are in fact not heinous is an open secret. In his 1998 book, Battles in the Supreme

affected by the issuance shall be first in the order of enumeration of the titles of the petitions irrespective of their docket numbers ordates of filing. It is expected that this will deter grandstanding lawyers and civil rights groups from trying to upstage each other, thusdecongesting the Court’s docket.6 La Bugal-B’Laan Tribal Assn. vs. Ramos, 421 SCRA 148, Jan. 27, 2004.7 Resolution dated December 1, 2004, p. 3, per Panganiban, J.8 267 SCRA 6829 270 SCRA 106. His observations, written, 1997, have been widely publicized in the Talk of the Town featureof the Sunday Philippine Daily Inquirer issue of April 16, 2006.

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Court, for example, he wrote: “The battle over the constitutionality of the Death Penalty Law and its life-quenching companion, the Lethal Injection Law, will continue to haunt the Court. I believe that the dissenterswill remain ever vigilant in their stand to uphold the Constitution and the primacy of life. I further believe that,eventually, the dissenters will win – either because the Court will change its mind about the constitutionalityof RA 7659, or Congress will repeal or modify it.” Prophetic, indeed, as current events tend to be leaning inthat direction. He is quick to reassure everyone, however, that he is bound by the majority ruling that the lawis constitutional even as he has persevered in voting against the death penalty because of his belief in “thetranscendental value of life.” One suspects that even his casual acquaintances vicariously share his anguisheverytime the death penalty is imposed.

On the matter of the “people’s initiative”, his prospective resolution of this issue can be gleaned fromhis dissents in Santiago vs. COMELEC9 and PIRMA vs. COMELEC10 wherein he opined that “the rulingof the majority unduly restricted the people’s right to amend the Constitution through their own initiative.” Heconcluded, “initiative, like referendum and recall, is a new and treasured feature of the Filipino constitutionalsystem. All three are constitutional legacies of the world-admired EDSA people power. Like elections andplebiscites, they are hallowed expressions of popular sovereignty. They are sacred democratic rights of ourpeople to be used as their final weapons against political excesses, opportunism, inaction, oppression andmisgovernance; as well as their reserve instruments to exact transparency, accountability and faithfulnessfrom their chosen leaders. While, on the one hand, their misuse and abuse must be resolutely struck down,on the other, their legitimate exercise should be carefully nurtured and zealously protected.”

There you have it. We know where he is coming from and where he is headed. It is a pity that ChiefJustice Artemio V. Panganiban’s magistracy is all too brief which renders what ever lessons are to be learnedfrom this article limited in its application. But he hit the ground running at full speed, works double-time, maybe too transparent for his own good. However, there is little doubt in my mind that his mark will be indeliblyetched on the seal of the Supreme Court and the Judiciary in a way that history will remember him as one ofthe greatest Chief Justices of the Philippines.

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9 270 SCRA 106. His observations, written, 1997, have been widely publicized in the Talk of the Town feature of the SundayPhilippine Daily Inquirer issue of April 16, 2006.1 0 Resolution, GR 129754, Sept. 23, 1997



Jose Anselmo I. CadizChairman

Feliciano M. BautistaVice Chairman and Governor for Central Luzon

Romulo R. RiveraGovernor for Northern Luzon

Jose Amor M. AmoradoGovernor for Southern Luzon

Alicia A. Risos-VidalGovernor for Greater Manila

Felimon C. Abelita IIIGovernor for Bicolandia

Manuel P. LegaspiGovernor for Eastern Visayas

J.B. Jovy C. BernabeGovernor for Western Visayas

Bernard L. DagcutaGovernor for Eastern Mindanao

Rogelio V. GarciaGovernor for Western Mindanao

IBP Board of Governors IBP Board of Governors IBP Board of Governors IBP Board of Governors IBP Board of Governors NaNaNaNaNational Officerstional Officerstional Officerstional Officerstional Officers

Jose Anselmo I. CadizNational President

Feliciano M. BautistaExecutive Vice President

Ma. Teresa M. TrinidadNational Secretary

Ester Sison CruzNational Treasurer

Jaime M. VibarExecutive Director-Operations

Llewellyn L. LlanilloExecutive Director-Planning

Tomas N. PradoAssistant National Secretary

Maria Teresita C. Sison GoAssistant National Treasurer

Bienvenido I. Somera, Jr.National Director for Legal Aid

Rogelio A. VinluanNational Director for Bar Discipline

Orlando E. MendiolaGeneral Counsel

Rose Marie M. KingEditor-in-Chief, IBP Journal

Emerico O. De GuzmanManaging Editor, IBP Journal

Antonio A. Oposa, Jr.Chairman, National Environmental Action Team

IBP Journal Vol.31 No.2 2005

Documents

Transcript of IBP Journal Vol.31 No.2 2005