Professional Documents
Culture Documents
7353
Sunday, June 06, 2010
12:13 AM
BANK OF AMERICA, NT and SA, petitioner, vs. AMERICAN REALTY CORPORATION and COURT OF
APPEALS, respondents.
Sunday, June 06, 2010
12:21 AM
SECOND DIVISION
REGALADO, J.:
The factual alpha of the present dispute was sometime in 1967 when the spouses Armando and Iluminada
Olizon obtained a loan from respondent Prudential Bank in the amount of P25,000.00 and, as security
therefor, they executed in favor of respondent bank a real estate mortgage over a parcel of land consisting
of 1,000 square meters located at Barrio Calaanan, Kalookan City and registered in their names under
Transfer Certificate of Title No. 24604 of the Registry of Deeds of Kalookan City. Unfortunately, that
transaction spawned the succeeding events hereunder chronologically narrated, eventuating in this appeal
wherein we are now expected to pen the judicial omega.
It appears from the records that the Olizon spouses failed to pay their aforestated obligation upon its
maturity, so private respondent extrajudicially foreclosed the real estate mortgage. At a public auction
thereafter held on March 11, 1975, the subject property was sold to respondent bank as the highest
bidder, pursuant to which it was issued a certificate of sale as of the same date. On March 12, 1974, the
said certificate of sale was duly annotated at the back of petitioner's Transfer Certificate of Title No.
24604.
On June 5, 1978, again due to the failure of petitioner spouses to redeem the foreclosed property within
the period of redemption, title to the property was consolidated in favor of respondent bank. 1
On January 14, 1986, respondent bank filed with the Regional Trial Court of Kalookan City a petition to
reconstitute Transfer Certificate of Title No. 24604, which was lost in the Office of the Registry of Deeds of
Kalookan City, the said proceeding being docketed as Case No. C-2746. 2
On June 11, 1986, the Regional Trial Court of Kalookan City ordered the reconstitution prayed for. As a
consequence, Transfer of Certificate of Title No. 24604 in the name of the Olizon spouses was cancelled
and, in lieu thereof, Transfer Certificate of Title No. 149858 was issued on June 5, 1987 in the name of
respondent bank.3
On November 27, 1989, respondent bank this time filed with the Regional Trial Court of Kalookan City, a
petition for the issuance of a writ of possession against petitioner spouses, docketed as LRC Case No. C-
3094, 4 and which petition was granted by the trial court on February 8, 1990. 5
On March 8, 1990, a petition, by way of opposition, was filed by petitioner spouses wherein they sought
the cancellation of the writ of possession, the nullification of the certificate of sale dated March 11, 1974,
and/or the nullification of the foreclosure proceedings. In support thereof, they alleged lack of notice of the
auction sale and lack of posting of the notice of sale as required by Section 3 of Act No. 3135, as
amended. 6
After trial, the court a quo issued an order dated July 16, 1990, with the following dispositive portion:
WHEREFORE, the Court hereby declares that:
1. The foreclosure of the real estate mortgage executed by the spouses Olizons, as well as the certificate
of sale dated March 11, 1974 as (sic) null and void;
2. The writ of possession is hereby set aside; and
3. Ordering the Register of Deeds of Caloocan City to cancel Transfer Certificate of Title No. 149858 issued
in the name of Prudential Bank and to reinstate Transfer Certificate of Title No. 24604 to (sic) spouses
Armando S. Olizon and Iluminada C. Olizon.
SO ORDERED. 7
Private respondent appealed the said decision to the Court of Appeals which rendered its questioned
decision in CA—G.R. CV No. 29482, dated September 9, 1992, with a disposition of reversal, thus:
WHEREFORE, the Decision (sic) dated July 16, 1990 of the Regional Trial Court of Caloocan in LRC Case No.
3094 is hereby REVERSED and SET ASIDE and another rendered upholding the validity of the foreclosure
sale of the real estate mortgage and the writ of possession dated February 8, 1990. 8
Petitioners have now come to us through the present petition wherein they contend that:
1. The Court of Appeals erred in reversing the trial court since there is evidence to show that the
requirements of Sec. 3, Act No. 3135, as amended, were not complied with.
2. The Court of Appeals erred in holding that petitioners had notice of the foreclosure sale.
3. The Court of Appeals erred in holding that petitioners had totally abandoned the subject property, as
this is not supported by the evidence. 9
We do not find substantial merit in the petition.
Herein petitioners are now seeking the annulment of the extrajudicial foreclosure sale conducted more
than 20 years ago, invoking therefor two grounds, namely, lack of personal notice to the mortgagors about
the foreclosure sale, and the failure of the mortgagee bank to comply with the posting requirement under
Section 3 of Act No. 3135, as amended.
It is now a well-settled rule that personal notice to the mortgagor in extrajudicial foreclosure proceedings is
not necessary. 10 Section 3 of Act No. 3135 governing extrajudicial foreclosure of real estate mortgages,
as amended by Act No. 4118, requires only the posting of the notice of sale in three public places and the
publication of that notice in a newspaper of general circulation. Hence, the lack of personal notice to the
mortgagors, herein petitioners, is not a ground to set aside the foreclosure sale.
Neither can the supposed failure of respondent bank to comply with the posting requirement as provided
under the aforesaid Section 3, under the factual ambiance and circumstances which obtained in this case,
be considered a sufficient ground for annulling the aforementioned sale. We are not unaware of the rulings
in some cases that, under normal situations, the statutory provisions governing publication of notice of
extrajudicial foreclosure sales must be strictly complied with and that failure to publish the notice of
auction sale as required by the statute constitutes a jurisdictional defect which invalidates the sale.
However, the unusual nature of the attendant facts and the peculiarity of the confluent circumstances
involved in this case require that we rule otherwise.
Petitioners' cited authority on the requisite publication of notices is not so all-embracing as to deny
justified exceptions thereto under appropriate situations. Petitioners quote this passage from Tambunting
et al. vs. Court of Appeals, et al. 11 which is not conclusive hereon for not being exactly in point, based as
it is on different facts, thus:
The rule is that statutory provisions governing publication of notice of mortgage foreclosure sales must be
strictly complied with, and that even slight deviations therefrom will invalidate the notice and render the
sale at least voidable. Interpreting Sec. 457 of the Code of Civil Procedure (reproduced in Sec. 18[c] of
Rule 39, Rules of Court and in Sec. 3 of Act No. 3135) in Campomanes vs. Bartolome and German &
Co. (38 Phil. 8081), this Court held that if a sheriff sells without the notice prescribed by the Code of Civil
Procedure induced thereto by the judgment creditor, the sale is absolutely void and no title passes. . . .
(Emphasis supplied.)
At any rate, respondent Court of Appeals has this commendable ratiocination on the aforestated twin
errors assigned by petitioners:
The decisive issue which must be resolved is whether or not the statutory requirements of notice have
been complied with in this case. Section 12 of the mortgage contract reads:
"12. All correspondence relative to this mortgage, including demand letters, summonses, subpoenas or
notifications of any judicial or extrajudicial action shall be sent to the Mortgagor at No. 82 Naval Street,
Malabon, Rizal or at the address that may hereafter be given in writing by the Mortgagor to the Mortgagee.
The mere act of sending any correspondence by mail or by personal delivery to the said address shall be
valid and effective notice to the Mortgagor for all legal purposes, and . . . shall not excuse or relieve the
mortgagor from the effects of such notice." (Emphasis supplied.)
The foregoing stipulation is the law between petitioner and oppositors-spouses and should be complied
with faithfully.
That the mortgagors were actually notified by appellant bank of the foreclosure proceedings is shown by
its letters to the Olizons before the actual sale at public auction of the subject property, to wit: (1) Letter
dated January 16, 1973 of Atty. Octavio D. Fule, Legal Officer of appellant bank to the Olizons informing
the latter that their failure to pay their obligations will constrain appellant bank to institute appropriate
legal action against them; (2) Letter dated January 31, 1974 of Atty. Octavio D. Fule, Legal Officer of
appellant bank, informing the Olizons that Prudential Bank has filed foreclosure proceedings under Act
3135, as amended.
xxx xxx xxx
Furthermore, notice of sale was duly published in accordance with law and furnished the Olizons. The
evidence presented during the trial of the case show that the then Clerk of Court, Emma Ona, sent a
printed letter dated February 18, 1974 informing the Olizons that appellant bank had filed an application to
foreclosure their real estate mortgage and the public auction of the mortgaged parcel of land was sent on
March 11, 1974, together with a copy of the Notice of Sale. The document is more than ten (10) years old
and the absence of a registry receipt in the case folder of the foreclosure records of the Sheriff of the City
of Caloocan, does not indicate that the Olizons did not receive a copy of the aforesaid notice of sale, it
being presumed that the sheriff performed her duties and that foreclosure proceedings are regular. . . .
(Citations omitted.) 12
Furthermore, unlike the situation in previous cases 13 where the foreclosure sales were annulled by
reason of failure to comply with the notice requirement under Section 3 of Act No. 3135, as amended,
what is allegedly lacking here is the posting of the notice in three public places, and not the publication
thereof in a newspaper of general circulation.
We take judicial notice of the fact that newspaper publications have more far-reaching effects than posting
on bulletin boards in public places. There is a greater probability that an announcement or notice
published in a newspaper of general circulation, which is distributed nationwide, shall have a readership of
more people than that posted in a public bulletin board, no matter how strategic its location may be, which
caters only to a limited few. Hence, the publication of the notice of sale in the newspaper of general
circulation alone is more than sufficient compliance with the notice-posting requirement of the law. By
such publication, a reasonably wide publicity had been effected such that those interested might attend
the public sale, and the purpose of the law had been thereby subserved.
The object of a notice of sale is to inform the public of the nature and condition of the property to be sold,
and of the time, place and terms of the sale. Notices are given for the purpose of securing bidders and to
prevent a sacrifice of the property. If these objects are attained, immaterial errors and mistakes will not
affect the sufficiency of the notice; but if mistakes or omissions occur in the notices of sale, which are
calculated to deter or mislead bidders, to depreciate the value of the property, or to prevent it from
bringing a fair price, such mistakes or omissions will be fatal to the validity of the notice, and also to the
sale made pursuant thereto. 14
In the instant case, the aforesaid objective was attained since there was sufficient publicity of the sale
through the newspaper publication. There is completely no showing that the property was sold for a price
far below its value as to insinuate any bad faith, nor was there any showing or even an intimation of
collusion between the sheriff who conducted the sale and respondent bank. This being so, the alleged non-
compliance with the posting requirement, even if true, will not justify the setting aside of the sale.
Moreover, herein petitioners failed to discharge the burden of proving by convincing evidence their
allegation that there was actually no compliance with the posting requirement. The foreclosure proceeding
has in its favor the presumption of regularity, 15 and the burden of evidence to rebut the same is on
petitioners. Where the allegation is an essential part of the cause of action or defense in a civil case,
whether posited in an affirmative or negative form, the burden of evidence thereon lies with the
pleader. 16 Besides, the fact alone that there was no certificate of posting attached to the sheriff's records
of the extrajudicial foreclosure sale is not sufficient to prove the lack of posting, especially in this case
where the questioned act and the record thereof are already 16 years old. It is quite unfair to now shift to
respondent bank the burden of proving the fact of posting considering the length of time that has elapsed,
aside from the fact that the sheriff who conducted the public sale and who was responsible for the posting
of the notice of sale is already out of the country, with the records being silent on his present whereabouts
or the possibility of his returning here.
Indeed, even on equitable considerations alone, the presumption of regularity in the performance of
official duty must stand. As aptly found by the Court of Appeals:
. . . It is not a matter of lack of compliance with the requirements of the law, rather, it is a matter of
unavailability of certain documents due to the loss thereof, considering that more than sixteen (16) years
had lapsed from the date of the extra-judicial foreclosure of the real estate mortgage. Indeed, the
presumption of regularity in the performance of official duty by the sheriff, more particularly, compliance
with the provisions of Act 3135, as amended, has not been overturned by the Olizons. 17
Nor are these all that we wish to expound hereon, for this is one case where we find the necessity for the
application of the equitable principle of estoppel by laches in order to avoid an injustice.
Laches has been defined as the failure or neglect, for an unreasonable and unexplained length of time, to
do that which by exercising due diligence could nor should have been done earlier; it is negligence or
omission to assert a right within a reasonable time, warranting a presumption that the party entitled to
assert it either has abandoned it or declined to assert it. 18
In the case at bar, petitioners are already considered estopped through laches from questioning the
regularity of the sale as well as the ownership of the land in question. It is evident from the records that
the petition to annul the foreclosure sale was filed by herein petitioners only after 16 long years from the
date of sale and only after a transfer certificate of title over the subject property had long been issued to
respondent bank. Herein petitioners failed to advance any justification for their prolonged inaction. It
would be inequitable to allow petitioners, after the lapse of an almost interminable period of time, to
defeat an otherwise indefeasible title by the simple and dubious expedient of invoking a purported
irregularity in the foreclosure proceedings.
Although a sale under a power contained in a mortgage or trust deed has been defectively executed and
the mortgagor has the right to disaffirm the same, he may, by laches or by acts amounting to an estoppel
or ratification, cure the defect and render the sale valid. 19 Where a sale under a power is voidable at the
election of the mortgagor for some irregularity — such as that the mortgagee purchased without authority,
or that there was an inadequacy in the price obtained, a want of sufficient or proper notice, or the like —
the mortgagor must institute proceedings for avoidance within apt and reasonable time, or his laches will
bar him of relief. 20 Thus, a party seeking to set aside a foreclosure sale made under a power of sale must
bring his action without unreasonable delay. The court generally will refuse to grant relief when there has
been great and unreasonable delay, amounting to laches, in seeking its aid. 21
Besides, it has been said that in seeking to set aside a foreclosure sale, the moving party must act
promptly after he becomes aware of the facts on which he bases his complaint, and in this connection,
notice of an irregularity may be presumed from the fact that the mortgagor has knowledge of the sale, as
he is thereby put on inquiry, and is bound to use diligence in discovering any defects in the
proceedings. 22 Having failed to do so, petitioners cannot now be heard on their much belated plaints.
Moreover, it is an entrenched doctrine in our jurisdiction that registration in a public registry is notice to
the whole world. The record is a constructive notice of its contents as well as of all interest, legal and
equitable, included therein. All persons are charged with knowledge of what it contains. 23 Therefore, in
the case at bar, the annotation of the certificate of sale on petitioners' Transfer Certificate of Title No.
24604 and the filing of the affidavit of consolidation with the Register of Deeds constituted constructive
notice of both acts to herein petitioners. Consequently, as early as March 11, 1974 24 when the certificate
of sale was annotated at the back of their title, petitioners were already charged with knowledge of the
foreclosure sale, yet they still failed or refused to take the necessary steps to protect their rights over the
subject property.
It also bears stressing that petitioners entered their appearance in the Regional Trial Court of Kalookan
City where the petition for reconstitution of Transfer Certificate of Title No. 24604 was filed by respondent
bank, as shown by said court's order dated June 11, 1986. 25 It was then incumbent on petitioners to have
filed an objection or opposition to the reconstitution if they sincerely believed that the property rightfully
belongs to them. Significantly, petitioners neither moved for the reconsideration of nor appealed from the
order of the lower court granting reconstitution of title in the name of respondent bank.
Finally, the negligence or omission to assert a right within a reasonable time warrants not only a
presumption that the party entitled to assert it either had abandoned it or declined to assert it, but also
casts doubt on the validity of the claim of ownership. Such neglect to assert a right taken in conjunction
with the lapse of time, more or less great, and other circumstances causing prejudice to the adverse party,
operates as a bar in a court of equity. 26 In the present case, at no time after the debt became due and
demandable and the mortgage property had been foreclosed, or even thereafter, did petitioners offer to
pay their mortgage obligation to redeem their property. Petitioners' collective acts are, therefore,
indicative of their acquiescence to and acknowledgment of the validity of the foreclosure proceedings and
the sale, as well as a recognition of respondent bank's just and legal title over the property acquired
thereby.
We, therefore, cannot but concur in these observations of respondent Court:
The evidence on record, likewise show that after the foreclosure proceedings in 1974, the Olizons had
totally abandoned actual ownership over the subject property in favor of appellant bank, leaving it to
appellant bank to pay the real estate taxes over the subject property. In fact, in the reconstitution of the
owner's title in Case No. C-2746, while the Olizons entered their appearance before the Regional Trial
Court of Caloocan, they did not oppose the petition of appellant bank, despite the fact that the certificate
of sale and final deed of sale as well as consolidation of the ownership were submitted as evidence by
appellant bank in the reconstitution process. It was only after they noticed the lack of certain documents in
the possession of the sheriff that they thought of raising technicalities. . . . 27
WHEREFORE, the instant petition is DENIED for lack of merit and the assailed judgment of respondent
Court of Appeals is hereby AFFIRMED in toto.
SO ORDERED.
Narvasa, Padilla, Puno and Mendoza, JJ., concur.
#Footnotes
* The word "Spouses" (or the abbreviation "Sps."), stated before the names of petitioners in the title of this
case during the proceedings in the two lower courts, has been eliminated from the caption here as it is
neither indicative of an official position nor an accepted honorific.
1 Decision, CA-G.R. CV No. 29482, 1-2; Rollo, 21-22.
2 See Exhibit N-1, Folder of Exhibits, LRC Case No. C-3094, Regional Trial Court, Branch 120, Kalookan
City.
3 Original Record, 7.
4 Ibid., 1-4.
5 Ibid., 23.
6 Ibid., 43-45.
7 Ibid., 80-82; per Judge Arturo A. Romero.
8 Rollo, 26. Justice Jorge S. Imperial, ponente, with Justices Serafin E. Camilon and Cancio C. Garcia,
concurring.
9 Ibid., 11.
10 Cortes, et al. vs. Intermediate Appellate Court, et al., G.R. No. 73678, July 21, 1989, 175 SCRA 545;
Cruz, et al. vs. Court of Appeals, et al., G.R. No. 90369, October 31, 1990, 191 SCRA 170;Gravina, et al. vs.
Court of Appeals, et al., G.R. No. 97070, March 19, 1993, 220 SCRA 178.
11 L-48278, November 8, 1988, 167 SCRA 16; Rollo, 96.
12 Rollo, 24-25.
13 Tambunting, et al. vs. Court of Appeals, et al., supra; Masantol Rural Bank, Inc. vs. Court of Appeals, et
al., G.R. Nos. 97132 and 70937, December 10, 1991, 204 SCRA 752.
14 Bacon vs. Northwestern Mut. L. Ins. Co., 131 U.S. 258, 33 L. Ed 128, 9 S Ct 787; State ex rel. Raulerson
vs. Sloan, 134 Fla 632, 14 So 128.
15 Philippine National Bank vs. Adul, etc., et al., G.R. No. 52823, November 2, 1982, 118 SCRA 110.
16 See Industrial Finance Corporation vs. Tobias, L-41555, July 27, 1977, 78 SCRA 28.
17 Rollo, 26.
18 Tejido, et al. vs. Zamacoma, et al., G.R. No. 63048, August 7, 1985, 138 SCRA 78, citing Tijam, et al. vs.
Sibonghanoy, et al., No. L-21450, April 15, 1963, 23 SCRA 29; Sotto vs. Teves, et al., L-38018, October 31,
1978, 86 SCRA 154.
19 55 Am. Jur. 2d, Ratification and Estoppel, 750.
20 55 Am. Jur. 2d, Laches, 751.
21 59 C.J.S., Mortgages, 1059.
22 59 C.J.S., Mortgages, 1060.
23 People vs. Reyes, G.R. Nos. 74226-27, July 27, 1989, 175 SCRA 597.
24 Exhibit A, Folder of Exhibits, LRC Case No. C-3094, Regional Trial Court, Branch 120, Kalookan City.
25 Exhibit N-1, ibid., id.
26 Guerrero, et al. vs. Court of Appeals, et al., L-35250, November 29, 1983, 126 SCRA 109; Villamor, et al.
vs. Court of Appeals, et al., L-41508, June 27, 1988, 162 SCRA 574.
27 Rollo, 26.
** Additional member in lieu of Associate Justice Ma. Alicia Austria-Martinez per Special Order No. 568 dated February 12, 2009.
**** In lieu of Associate Justice Consuelo Ynares-Santiago per Special Order No. 563 dated February 12, 2009.
1 Penned by Associate Justice Ruben T. Reyes (now a retired member of this Court), with Associate
Justices Rebecca de Guia-Salvador and Fernanda Lampas Peralta, concurring; rollo, pp. 27-45.
2 Rollo, p. 100.
3 Id. at 101.
4 Id. at 72-73.
5 Id. at 48-53.
6 Id. at 198.
7 Id. at 44.
8 Id. at 46-47.
9 Id. at 326.
10 Emphasis supplied.
11 Rollo, pp. 329-331.
12 Id. at 332-334.
13 Id. at 265.
14 Id. at 332.
15 Id. at 149.
16 Id. at 150-161.
17 Id. at 272-273.
18 Ruiz, et al. v. Sheriff of Manila, et al., 145 Phil. 111, 114 (1970).
19 Olizon v. Court of Appeals, G.R. No. 107075, September 1, 1994, 236 SCRA 148, 156.
20 Id. at 155.
21 Perez v. Perez, G.R. No. 143768, March 28, 2005, 454 SCRA 72, 81.
22 Id.
23 Fortune Motors (Phils.) Inc. v. Metropolitan Bank and Trust Co., 332 Phil. 844 (1996); Bonnevie, et al. v.
Court of Appeals, et al., 210 Phil. 100 (1983).
24 Revising and Consolidating All Laws and Decrees Regulating Publication of Judicial Notices,
Advertisements for Public Bidding, Notices of Auction Sales and Other Similar Notices.
25 Supra note 23
26 Sec. 2 of P.D. No. 1079 provides:
SECTION 2. The executive judge of the court of first instance shall designate a regular working day and a
definite time each week during which the said judicial notices or advertisements shall be distributed
personally by him for publication to qualified newspapers or periodicals as defined in the preceding
section, which distribution shall be done by raffle: Provided, That should the circumstances require that
another day be set for the purpose, he shall notify in writing the editors and publishers concerned at least
three (3) days in advance of the designated date: Provided, further, That the distribution of the said
notices by raffle shall be dispensed with in case only one newspaper or periodical is in operation in a
particular province or city. (Emphasis supplied.)
27 Rollo, pp. 327-328, 332-333.
28 Id. at 331, 336.
29 Fortune Motors (Phils.) Inc. v. Metropolitan Bank and Trust Co., supra note 23 at 850.
PHILIPPINE NATIONAL BANK, PETITIONER, VS. SPOUSES TOMAS CABATINGAN AND AGAPITA
EDULLANTES REPRESENTED BY RAMIRO DIAZ AS THEIR ATTORNEY-IN-FACT, RESPONDENTS.
(2008)
Sunday, June 06, 2010
12:27 AM
FIRST DIVISION
PHILIPPINE NATIONAL BANK, PETITIONER, VS. SPOUSES TOMAS CABATINGAN AND AGAPITA
EDULLANTES REPRESENTED BY RAMIRO DIAZ AS THEIR ATTORNEY-IN-FACT, RESPONDENTS.
RESOLUTION
CORONA, J.:
Respondent spouses Tomas Cabatingan and Agapita Edullantes obtained two loans, secured by a real
estate mortgage,[1] in the total amount of P421,200[2] from petitioner Philippine National Bank. However,
they were unable to fully pay their obligation despite having been granted more than enough time to do
so.[3] Thus, on September 25, 1991, petitioner extrajudicially foreclosed on the mortgage pursuant to Act
3135.[4]
Thereafter, a notice of extrajudicial sale[5] was issued stating that the foreclosed properties would be sold
at public auction on November 5, 1991 between 9:00 a.m. and 4:00 p.m. at the main entrance of the office
of the Clerk of Court on San Pedro St., Ormoc City.
Pursuant to the notice, the properties were sold at public auction on November 5, 1991. The auction began
at 9:00 a.m. and was concluded after 20 minutes with petitioner as the highest bidder.[6]
On March 16, 1993, respondent spouses filed in the Regional Trial Court (RTC) of Ormoc City, Branch 12 a
complaint for annulment of extrajudicial foreclosure of real estate mortgage and the November 5, 1991
auction sale.[7] They invoked Section 4 of Act 3135 which provides:
Section 4. The sale shall be made at public auction, between the hours of nine in the morning
and four in the afternoon, and shall be under the direction of the sheriff of the province, the
justice or auxiliary justice of peace of the municipality in which such sale has to be made, or of a
notary public of said municipality, who shall be entitled to collect a fee of Five pesos for each day of
actual work performed, in addition to his expenses. (emphasis supplied)
Petitioners claimed that the provision quoted above must be observed strictly. Thus, because the public
auction of the foreclosed properties was held for only 20 minutes (instead of seven hours as required by
law), the consequent sale was void.
On November 4, 2004, the RTC issued an order[8] annulling the November 5, 1991 sale at public auction.
It held:
[T]he rationale behind the holding of auction sale between the hours of 9:00 in the morning and 4:00
in the afternoon of a particular day as mandated in Section 4 of Act 3135 is to give opportunity to
more would-be bidders to participate in the auction sale thus giving the judgment-debtor more
opportunity to recover the value of his or her property subject of the auction sale.
Petitioner moved for reconsideration but it was denied in an order dated February 7, 2005.[9]Hence, this
petition.
The issue here is whether a sale at public auction, to be valid, must be conducted the whole day from 9:00
a.m. until 4:00 p.m. of the scheduled auction day.
Petitioner contends that the RTC erred in interpreting Section 4 of Act 3135. The law only prohibits the
conduct of a sale at any time before nine in the morning and after four in the afternoon. Thus, a sale held
within the intervening period (i.e., at any time between 9:00 a.m. and 4:00 p.m.), regardless of duration, is
valid.
We note that neither the previous rule (Administrative Order No. 3)[10] nor the current rules (A.M. No. 99-
10-05-O, as amended, and the guidelines for its enforcement, Circular No. 7-2002)[11] governing the
conduct of foreclosure proceedings provide a clear answer to the question at hand.
Statutes should be sensibly construed to give effect to the legislative intention.[12] Act 3135 regulates the
extrajudicial sale of mortgaged real properties[13] by prescribing a procedure which effectively safeguards
the rights of both debtor and creditor. Thus, its construction (or interpretation) must be equally and
mutually beneficial to both parties.
Section 4 of Act 3135 provides that the sale must take place between the hours of nine in the
morning and four in the afternoon. Pursuant to this provision, Section 5 of Circular No. 7-2002 states:
The word "between" ordinarily means "in the time interval that separates."[17] Thus, "between the hours
of nine in the morning and four in the afternoon" merely provides a time frame within which an auction
sale may be conducted. Therefore, a sale at public auction held within the intervening period provided by
law (i.e., at any time from 9:00 a.m. until 4:00 p.m.) is valid, without regard to the duration or length of
time it took the auctioneer to conduct the proceedings.
In this case, the November 5, 1991 sale at public auction took place from 9:00 a.m. to 9:20 a.m. Since it
was conducted within the time frame provided by law, the sale was valid.
WHEREFORE, the petition is hereby GRANTED. The November 4, 2004 and February 7, 2005 orders of
the Regional Trial Court of Ormoc City, Branch 12 in Civil Case No. 3111-0 areREVERSED and SET ASIDE.
SO ORDERED.
Puno, C.J., (Chairperson), Carpio, Azcuna, and Leonardo-De Castro, JJ., concur.
Year Amount
1973 P 46,200
1977 375,000
TOTAL P 421,200
[3] While petitioner failed to explain how respondent spouses' obligation ballooned to P1,990,421.21 at the time of foreclosure (excluding interest at 28% p.a., penalties and other bank
charges, attorney's fees and expenses for foreclosure), respondent spouses failed to contest petitioner's claim. Thus, they are deemed to have admitted such as the amount of their
liability to petitioner.
[4] An Act to Regulate the Sale of Property under Special Powers Inserted In or Annexed to Real Estate Mortgages. See also Administrative Order No. 3 dated October 19, 1984. (This
[6] On March 22, 1992, a certificate of sale was issued to petitioner. This certificate was registered in the Registry of Deeds of the Province of Leyte on May 22, 1992. However, it
appears (based on the records of this case) that no writ of possession was issued to petitioner.
[8] Penned by Judge Francisco C. Gedorio, Jr. Annex "A" of the petition. Rollo, pp. 29-31.
[12] See Cosico, Jr. v. National Labor Relations Commission, 338 Phil. 1080, 1089 (1997).
[13] Luna v. Encarnacion, 92 Phil. 531, 534 (1952).
Sec. 4. The Sheriff to whom the application for extra-judicial foreclosure of mortgage was raffled shall do
the following:
"Upon extra-judicial petition for sale under Act 3135/1508 filed _________ against (name and address of
Mortgagor/s) to satisfy the mortgage indebtedness which as of ____________ amounts to P __________,
excluding penalties, charges, attorney's fees and expenses of foreclosure, the undersigned or his duly
authorized deputy will sell at public auction on (date of sale) _____ at 10:00 A.M. or soon thereafter at
the main entrance of the ________ (place of sale) to the highest bidder, for cash or manager's check and in
Philippine Currency, the following property with all its improvements, to wit:"
"(Description of Property)"
"All sealed bids must be submitted to the undersigned on the above stated time and date."
"In the event the public auction should not take place on the said date, it shall be held on ________________,
____________ without further notice."
_______________ (date)
"SHERIFF"
SECOND DIVISION
METROPOLITAN BANK AND TRUST COMPANY, PETITIONER, VS. SPS. ELMOR V. BANCE AND
ROSARIO J. BANCE, RESPONDENTS.
DECISION
QUISUMBING, J.:
Challenged in this petition for review are the Decision [1] and Resolution [2] dated October 29, 2004 and
March 3, 2005, respectively, of the Court of Appeals in CA-G.R. SP No. 78162, which had annulled the
Order [3] dated September 11, 2000 of the Regional Trial Court (RTC) of Manila, Branch 4, in LRC Cad.
Record No. 278.
The antecedent facts, as culled from the records, are as follows:
Respondents Elmor and Rosario Bance obtained several loans in the amount of P24,150,954.84 from
petitioner Metropolitan Bank and Trust Company, Tutuban Branch.[4] As security for the loans,
respondents mortgaged their properties in Binondo and Tondo, Manila, covered by Condominium
Certificate of Title No. 20040 and Transfer Certificates of Title Nos. 179657 and 179711.[5] Respondents
failed to pay their obligations, prompting petitioner to institute extrajudicial foreclosure proceedings over
the mortgage.
During the public auction held on October 2, 1998, petitioner emerged as the highest and winning bidder.
It was issued a Certificate of Sale [6] which was registered in the Registry of Deeds of Manila on May 3,
1999. [7] On April 5, 2000, petitioner demanded from respondents the surrender and possession of the
properties, [8] but the latter failed and refused to do so.
In the meantime, respondents, on May 2, 2000, instituted Civil Case No. 00-97252 in the RTC of Manila,
Branch 32, and sought the declaration of nullity of promissory notes, real estate mortgages, agreements,
continuing surety agreement, extrajudicial foreclosure proceedings, notices, publications, certificates of
sales and the corresponding entries on titles to the subject properties with prayer for temporary
restraining order (TRO) and issuance of writs of preliminary injunction and damages.[9] RTC Branch 32
immediately issued a TRO [10] dated May 15, 2000 enjoining petitioner from consolidating the titles of the
subject properties; from committing acts giving effect to the subject certificates of sales and all documents
thereto; and from committing acts of dispossession of the subject properties against respondents.
On June 23, 2000, petitioner filed with Branch 4 of the RTC of Manila a petition [11] for the issuance of a
writ of possession, docketed as LRC Cad. Record No. 278. RTC Branch 4, on September 11, 2000, granted
the petition and ordered the issuance of the writ. [12] The writ was implemented in March 2001, 2002, and
July 2003. [13]
Meanwhile, RTC Branch 32, on October 20, 2000, issued a preliminary prohibitory and mandatory
injunctive order [14] against petitioner. But for failure of respondents to post a bond, RTC Branch 32
recalled and set aside the order, [15] and accordingly dismissed the case. [16] Upon reconsideration,
however, RTC Branch 32 ordered the issuance of the writ. [17] Petitioner sought reconsideration, but it was
denied.
On July 22, 2003, respondents filed a petition [18] with the Court of Appeals seeking to annul the
September 11, 2000 Order of RTC Branch 4 on the ground of extrinsic fraud. On October 29, 2004, the
Court of Appeals ruled that petitioner employed extrinsic fraud when it deliberately withheld the true
nature of its claims against respondents in foreclosing the mortgage and securing the writ. It also added
that petitioner failed to state in the certification of non-forum shopping attached to the petition for the
issuance of the writ, the pendency of Civil Case No. 00-97252 in RTC Branch 32. In conclusion, it declared
the foreclosure of mortgage null and void and annulled the September 11, 2000 Order of RTC Branch
4. [19] The dispositive portion of the Court of Appeals’ decision reads:
WHEREFORE, the petition is hereby GRANTED. The Order of respondent court dated September 11,
2000 is hereby ANNULLED.
SO ORDERED. [20]
Petitioner sought reconsideration, but it was denied. Hence, this petition, ascribing the following errors to
the Court of Appeals:
I.
…THE COURT OF APPEALS ERRED IN GIVING DUE COURSE TO RESPONDENTS SPOUSES BANCE’S
PETITION FOR ANNULMENT OF THE SEPTEMBER 11, 2000 ORDER OF THE REGIONAL TRIAL COURT OF
MANILA BRANCH IV (04) INSTITUTED UNDER RULE 47 OF THE 1997 REVISED RULES OF CIVIL
PROCEDURE CONSIDERING THAT A WRIT OF POSSESSION CASE FILED UNDER ACT NO. 3135, AS
AMENDED, IS NOT AN ORDINARY ACTION.
II.
…THE COURT OF APPEALS ERRED IN ANNULLING THE SEPTEMBER 11, 2000 ORDER OF THE
REGIONAL TRIAL COURT OF MANILA BRANCH IV (04) GRANTING THE WRIT OF POSSESSION TO
PETITIONER METROBANK ON THE GROUND THAT PETITIONER METROBANK COMMITTED EXTRINSIC
OR COLLATERAL FRAUD UNDER SECTION 2, RULE 47 OF THE 1997 REVISED RULES OF CIVIL
PROCEDURE.
III.
IV.
…THE COURT OF APPEALS ERRED IN FINDING PETITIONER BANK GUILTY OF FORUM SHOPPING WHEN
IT FILED A PETITION FOR ISSUANCE OF A WRIT OF POSSESSION BEFORE [THE] REGIONAL TRIAL
COURT OF MANILA BRANCH IV WHEN THERE WAS A PENDING ACTION ON THE SAME SUBJECT MATTER
BEFORE REGIONAL TRIAL COURT OF MANILA, BRANCH XXXII. [22]
Simply, the issues are: (1) Did the Court of Appeals err in annulling the writ of possession issued by RTC
Branch 4? (2) Is petitioner guilty of forum shopping?
Anent the first issue, petitioner contends that the Court of Appeals erred in annulling the writ of possession
on the ground of extrinsic fraud. It avers that a petition for the issuance of the writ is ex parte in nature;
hence, respondents need not be notified of the proceedings therein. It further argues that since there is
already a pending civil case for declaration of nullity of mortgage, etc., the Court of Appeals should not
have ruled on the validity of the loan documents and foreclosure proceedings. It adds that respondents, in
instituting the annulment of judgment case, failed to pursue the proper remedy provided under Section
8 [23] of Act No. 3135, [24] as amended.
Respondents counter that petitioner employed extrinsic fraud when it secured the writ because it
deliberately withheld from them the foreclosure of the mortgage and institution of the petition for the
issuance of the writ. They add that a petition for the issuance of the writ is an ordinary action, hence, they
must be notified of the true nature of petitioner’s claims against them. They also contend that the writ
was irregularly issued because petitioner was not required to post the bond mandated in Section 7 [25] of
Act No. 3135, as amended.
First, no extrinsic fraud was employed by petitioner in not informing respondents of the institution of the
writ of possession case. A petition for the issuance of the writ, under Section 7 of Act No. 3135, as
amended, is not an ordinary action filed in court, by which one party “sues another for the enforcement
or protection of a right, or prevention or redress of a wrong.†[26] It is in the nature of an ex
parte motion which the court hears only one side. It is taken or granted at the instance and for the benefit
of one party, and without notice to or consent by any party adversely affected.[27] Accordingly, upon the
filing of a proper motion by the purchaser in a foreclosure sale, and the approval of the corresponding
bond, the writ of possession issues as a matter of course and the trial court has no discretion on this
matter. [28]
Second, the writ of possession was not irregular despite the fact that petitioner did not post a bond. The
posting of a bond as a condition for the issuance of the writ of possession becomes necessary only if it is
applied for within one year from the registration of the sale with the register of deeds, i.e., during the
redemption period inasmuch as ownership has not yet vested on the creditor-mortgagee. After the one-
year period, and no redemption was made, the mortgagor loses all interest over it.[29] In this case,
respondents were already stripped of their rights over the properties when they failed to redeem the same
within one year from May 3, 1999, the date of registration of the sale. [30] Hence, when petitioner applied
for the writ after the expiration of the redemption period there was even more reason to issue the writ.
Third, the Court of Appeals, in CA-G.R. SP No. 78162, need not delve on any alleged defect or irregularity
in the foreclosure, inasmuch as the only issue therein was the propriety of the issuance of the
writ. [31] Any question regarding the validity of the mortgage or its foreclosure cannot be a legal ground
for refusing the issuance of the writ. [32] If only to stress the writ’s ministerial character, we have, in
several cases, [33] disallowed injunctions prohibiting its issuance, just as we have held that the issuance of
the writ may not be stayed by a pending action for annulment of mortgage or the foreclosure itself.
Fourth, respondents failed to pursue the proper remedy. Under Section 8 of Act No. 3135, as amended, in
case it is disputed that the writ of possession was irregularly issued, the mortgagor may file with the trial
court that issued the writ a petition to set aside the sale and to cancel the writ of possession within 30
days after the purchaser-mortgagee was given possession. [34] Based on the records, the subject
properties were turned over to petitioner on March 19, 2001, sometime in 2002 and July 2003.
Respondents should have assailed the writ within 30 days therefrom, but they failed to do so.
On the issue of forum shopping, respondents contend that petitioner’s filing of the petition for the
issuance of a writ of possession constitutes forum shopping because there is already a pending case in
RTC Branch 32 involving the subject properties. Petitioner, on the other hand, avers that it was not duty
bound to disclose to respondents the pendency of the writ of possession case and a certificate of non-
forum shopping is not required in a petition for the issuance of the writ under Section 7 of Act No. 3135, as
amended because it is not a complaint or initiatory pleading.
Petitioner is correct. Insofar as LRC Cad. Record No. 278 and Civil Case No. 00-97252 are concerned, there
is no forum shopping. The essence of forum shopping is the filing of multiple suits involving the same
parties for the same cause of action, either simultaneously or successively, for the purpose of obtaining
favorable judgment. It exists where the elements of litis pendentia are present or where a final judgment
in one case will amount to res judicata in another. Since the issuance of a writ of possession is a ministerial
function and summary in nature, it cannot be said to be a judgment on the merits but simply an incident in
the transfer of title. [35] Hence, regardless of whether or not there is a pending suit for annulment of the
mortgage or the foreclosure itself, petitioner is entitled to the writ, subject however to the final outcome of
the case. [36]
Moreover, a certificate of non-forum shopping, as provided in Section 5, [37] Rule 7 of the 1997 Rules of
Civil Procedure, is required only in complaints or other initiatory pleadings, and a petition or motion for the
issuance of the writ under Section 7 of Act No. 3135, as amended, is not a complaint or an initiatory
pleading. [38] Indeed, any insignificant lapse in the certification of non-forum shopping filed by petitioner
does not render the writ irregular for no verification and certification on non-forum shopping need be
attached to the motion at all. [39]
WHEREFORE, the instant petition is GRANTED. The challenged Decision and Resolution dated October
29, 2004 and March 3, 2005, respectively, of the Court of Appeals in CA-G.R. SP No. 78162 are
hereby REVERSED AND SET ASIDE. Costs against the respondents.
SO ORDERED.
[1] Rollo, pp. 31-42. Penned by Associate Justice Eloy R. Bello, Jr., with Associate Justices Regalado E.
Maambong and Lucenito N. Tagle concurring.
[2] Id. at 43-44. Penned by Associate Justice Regalado E. Maambong, with Associate Justices Elvi John S. Asuncion and Lucenito N. Tagle concurring.
[13] Id. at 152-155. As to the property with Condominium Certificate of Title No. 20040, the Notice to Vacate was served on February 21, 2001 and possession was turned over to
petitioner on March 19, 2001. On the other hand, the Notice to Vacate the property with TCT Nos. 179657 and 179711 was served upon the occupants on March 22, 2001. The property
with TCT No. 179711 was voluntarily turned over to petitioner in 2002, but as to TCT No. 179657, possession was turned over to petitioner sometime in July 2003, after the latter has
secured a “break-open†order from the said court which issued the writ.
[23] SEC. 8. The debtor may, in the proceedings in which possession was requested, but not later than thirty days after the purchaser was given possession, petition
that the sale be set aside and the writ of possession cancelled, specifying the damages suffered by him, because the mortgage was not violated or the sale was not
made in accordance with the provisions hereof, and the court shall take cognizance of this petition in accordance with the summary procedure provided for in section one hundred
and twelve of Act Numbered four hundred and ninety-six and if it finds the complaint of the debtor justified, it shall dispose in his favor of all or part of the bond furnished by the person
who obtained possession. Either of the parties may appeal from the order of the judge in accordance with section fourteen of Act Numbered Four hundred and ninety-six; but the order
of possession shall continue in effect during the pendency of the appeal. (Emphasis supplied.)
[24] An Act to Regulate the Sale of Property under Special Powers Inserted in or Annexed to Real Estate Mortgages, approved on March 6, 1924 (as amended by Act No. 4118, approved
on December 7, 1933).
[25] SEC. 7. In any sale made under the provisions of this Act, the purchaser may petition the Court of First Instance of the province or place where the property or any part thereof is
situated, to give him possession thereof during the redemption period, furnishing bond in an amount equivalent to the use of the property for a period of twelve months, to indemnify
the debtor in case it be shown that the sale was made without violating the mortgage or without complying with the requirements of this Act. Such petition shall be made under oath
and filed in form of an ex parte motion in registration or cadastral proceedings if the property is registered, or in special proceedings in the case of property registered under the
Mortgage Law or under section one hundred and ninety-four of the Administrative Code, or of any other real property, encumbered with a mortgage duly registered in the office of any
register of deeds in accordance with any existing law, and in each case the clerk of the court shall, upon the filing of such petition, collect the fees specified in paragraph eleven of
section one hundred and fourteen of Act Numbered Four hundred and ninety-six, as amended by Act Numbered Twenty-eight hundred sixty-six, and the court shall, upon approval of
the bond, order that a writ of possession issue, addressed to the sheriff of the province in which the property is situated, who shall execute said order immediately. (Emphasis
supplied.)
[26] De Vera v. Agloro, G.R. No. 155673, January 14, 2005, 448 SCRA 203, 215.
[27] Arquiza v. Court of Appeals, G.R. No. 160479, June 8, 2005, 459 SCRA 753, 766.
[28] Yulienco v. Court of Appeals, G.R. No. 141365, November 27, 2002, 393 SCRA 143, 153.
[29] Espiridion v. Court of Appeals, G.R. No. 146933, June 8, 2006, 490 SCRA 273, 278.
[31] See Vda. de Zaballero v. Court of Appeals, G.R. No. 106958, February 9, 1994, 229 SCRA 810, 814.
[33] Chailease Finance Corporation v. Ma, G.R. No. 151941, August 15, 2003, 409 SCRA 250, 253; Yulienco v. Court of Appeals, supra at 154.
[34] Ong v. Court of Appeals, G.R. No. 121494, June 8, 2000, 333 SCRA 189, 196.
[37] SEC. 5. Certification against forum shopping. – The plaintiff or principal party shall certify under oath in the complaint or other initiatory pleading asserting a claim for relief, or in
a sworn certification annexed thereto and simultaneously filed therewith: (a) that he has not theretofore commenced any action or filed any claim involving the same issues in any
court, tribunal or quasi-judicial agency and, to the best of his knowledge, no such other action or claim is pending therein; (b) if there is such other pending action or claim, a complete
statement of the present status thereof; and (c) if he should thereafter learn that the same or similar action or claim has been filed or is pending, he shall report that fact within five (5)
days therefrom to the court wherein his aforesaid complaint or initiatory pleading has been filed.
Failure to comply with the foregoing requirements shall not be curable by mere amendment of the
complaint or other initiatory pleading but shall be cause for the dismissal of the case without prejudice,
unless otherwise provided, upon motion and after hearing. The submission of a false certification or non-
compliance with any of the undertakings therein shall constitute indirect contempt of court, without
prejudice to the corresponding administrative and criminal actions. If the acts of the party or his counsel
clearly constitute willful and deliberate forum shopping, the same shall be ground for summary dismissal
with prejudice and shall constitute direct contempt, as well as a cause for administrative sanctions.
[38] Ancheta v. Metropolitan Bank & Trust Company, Inc., G.R. No. 163410, September 16, 2005, 470 SCRA 157, 164.
THIRD DIVISION
YNARES-SANTIAGO,
Chairperson,
- versus- AUSTRIA-MARTINEZ,
CHICO-NAZARIO,
NACHURA, and
REYES, JJ.
July 4, 2008
x- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -x
DECISION
CHICO-NAZARIO, J.:
Before this Court is a Petition for Review on Certiorari[1] under Rule 45 of the Revised Rules of Court
filed by petitioner China Banking Corporation (CBC) seeking the reversal and setting aside of the
Decision[2] dated 25 March 2004 and Resolution[3] dated 10 August 2004 of the Court of Appeals in
CA-G.R. SP No. 67399. The assailed Decision of the appellate court annulled and set aside: (1) the
Order[4] dated 31 August 2001 of the Regional Trial Court (RTC), Branch 65,Makati City, in L.R.C.
Case No. M-4184, granting the ex parte petition of CBC for a writ of possession over the
condominium unit covered by Condominium Certificate of Title (CCT) No. 69096; (2) the Writ of
Possession[5] dated 3 September 2001 issued by the RTC Branch Clerk of Court commanding the
Sheriff to place CBC in possession of the said condominium unit and eject all its present occupants;
and (3) the Notices to Vacate[6] dated 17 October 2001 and 22 October 2001 of the Sheriff
addressed, respectively, to Primetown Property Group, Inc. (PPGI) and respondent spouses Tobias
L. Lozada and Erlina P. Lozada (spousesLozada), directing them to vacate the said property within
five days from receipt of the notices.
There is hardly any dispute as to the antecedent facts of the instant Petition.
On 25 June 1995, the spouses Lozada entered into a Contract to Sell[7] with PPGI. PPGI, the
developer of Makati Prime City Condominium TownhomesProject (Project), agreed to sell to the
spouses Lozada Unit No. 402 of Cluster 1 of the Project, a two-bedroom residential unit with an area
of 42.90 square meters, covered by CCT No. 34898, for the total price of P1,444,014.04, payable as
follows:
About six months later, or on 7 December 1995, PPGI, represented by its President Kenneth T. Yap
and Treasurer Gilbert Y. Yap, and with Mortgage Clearance[8] from the Housing and Land Use Regulatory
Board (HLURB), executed two Deeds of Real Estate Mortgage[9] in favor of CBC to secure the credit
facilities granted by CBC to PPGI in the combined maximum amount of P37,000,000.00. The real estate
mortgages covered 51 units of the Project, including Unit No. 402.
PPGI availed itself of the said credit facilities and incurred a total principal obligation
of P29,067,708.10 to CBC. When PPGI failed to pay its indebtedness despite repeated demands,
CBC filed with the Clerk of Court and Ex Officio Sheriff of the Makati City RTC a Petition for
Extrajudicial Foreclosure[10] of the real estate mortgages on 31 July 1998. The Petition was
docketed as Foreclosure No. 98-098. A Notice of Sheriff’s Sale[11] was issued on 7 August
1998 setting the public auction of the foreclosed properties on 11 September 1998 at 10:00
a.m. The said Notice was published in Metro Profile on 11, 18 and 25 August 1998.[12] The public
auction sale took place as scheduled at which CBC was the highest bidder, offering the amount
of P30,000,000.00 for the foreclosed properties. The Certificate of Sale[13] of the foreclosed
properties was subsequently issued in favor of CBC on 15 October 1998.
On 25 April 2000, CBC Chief Executive Officer Peter S. Dee executed an Affidavit of
Consolidation[14] stating that 21 of the 51 foreclosed properties had been either “released by take-out by
certain buyers” or partially redeemed; the period for redemption of the remaining foreclosed properties
(which included Unit No. 402) had already expired without having been redeemed; the titles to the
remaining foreclosed properties had already been consolidated in the name of CBC; and for said reason,
the Registry of Deeds of Makati City was requested to issue the corresponding CCTs in the name of
CBC. Pursuant to the Affidavit of Consolidation, the Registry of Deeds of Makati City cancelled CCT No.
34898, covering Unit No. 402, and registered in the name of PPGI, and issued in its place CCT No.
69096[15] in the name of CBC on 12 May 2000.
It appears that a few months prior to the foreclosure of the real estate mortgages, PPGI, through its
Senior Manager Salvador G. Prieto, Jr., sent a letter[16]dated 30 March 1998 to
respondent Erlina P. Lozada (Erlina) in the following tenor:
This refers to your purchase of Unit 402, Cluster 1 of Makati Prime City, a project
of Primetown Property Group, Inc. (“PPGI”), the development of which has been partially
financed by China Banking Corporation.
We refer to Section 18 of Presidential Decree No. 957, otherwise known as “The Subdivision and
Condominium Buyer’s Protective Decree”. Section 18 states:
SECTION 18. Mortgages. No mortgage on any unit or lot shall be made by the owner or
developer without prior written approval of the Authority. Such approval shall not be granted
unless it is shown that the proceeds of the mortgage loan shall be used for the development of
the condominium or subdivision project and effective measures have been provided to ensure
such utilization. The loan value of each lot or unit covered by the mortgage shall be
determined and the buyer thereof, if any, shall be notified before the release of the loan. The
buyer may, at his option, pay his installment for the lot or unit directly to the mortgagee who
shall apply the payments to the corresponding mortgage indebtedness secured by the
particular lot or unit being paid for, with a view to enabling said buyer to obtain title over the
lot or unit promptly after full payment thereto.
In view of the foregoing, we hereby direct your goodself to remit all payments under your Contract
to Sell directly to China Banking Corporation at its Greenhills Branch located at Padilla
Arcade, Greenhills, M.M. effective April 1, 1998. Attached is your Statement of Account for your
guidance.
This payment arrangement shall in no way cause any amendment of the other terms and conditions,
nor the cancellation of the Contract to Sell you have executed with PPGI.
(Signed)
Salvador G. Prieto, Jr.
Sr. Manager
Credit and Collection Department
There is nothing on record to show any immediate action taken by the spouses Lozada on the afore-
quoted letter. But a year following the public auction sale of the foreclosed properties held on 11
September 1998, Erlina executed a Notice of Adverse Claim[17] dated 13 September 1999 as
regards Unit No. 402, which she registered with the Registry of Deeds of Makati City.[18] Said
Notice of Adverse Claim was subsequently annotated on CCT No. 69096 when it was issued in the
name of CBC.
Erlina next sent a letter dated 1 December 1999[19] to both PPGI and CBC, laying down her position
pertaining to Unit No. 402, to wit:
1. I have been ready, willing, and able since August 25, 1998 to pay the balance under my
contract and I have tendered payment as early as then.
2. My liability is limited to the amount stated thereunder plus reasonable expenses for the
transfer of title; no other liability such as for interests, penalties, charges or any other imposition is
recognized. The VAT is a liability of the seller and I have never consented to accept this burden.
3. On delivery of my full payment, I have a right to demand reasonable assurance that title could
be transferred to me immediately and so to require that the muniments of title and evidence of all
tax payments by seller (necessary for registration) be delivered to me.
In the same letter, she advised that she was tendering payment by opening an escrow account with CBC
in the amount of P1,010,809.83, representing the 70% balance of the purchase price of Unit No. 402 per
the Contract to Sell with PPGI. Not long thereafter, Erlina sent another letter[20] dated 3 December
1999 to PPGI and CBC stating that she was unable to open an escrow account as no one had advised her
on how to go about it. Instead, she opened a special account with the following details:
She reiterated that the amount represented the balance of the purchase price for Unit No. 402 under the
Contract to Sell, and shall be available to the party who shall establish the lawful right to the payment
and deliver the muniments of title and other documents necessary for the transfer of the same.
In reply, CBC sent Erlina a letter[21] dated 8 December 1999, telling her that the consideration for
Unit No. 402 was P1,100,788.29; thus, the amount she was tendering was insufficient. CBC also informed
her that all taxes including documentary stamp tax, capital gains tax, transfer tax, and all other expenses
for the transfer of title to her name shall be for her exclusive account.
In another letter dated 15 May 2001 to Erlina, CBC notified her that it had already consolidated its
title and ownership over Unit No. 402 which she presently occupied, and requested her to vacate and
surrender the said property, including the appurtenant keys, to its duly authorized representative within
15 days from receipt of the letter.
Following the 15 May 2001 letter of CBC to Erlina, a conference was held and more letters were
exchanged between the parties,[22] but, apparently, no agreement was reached.
On 27 July 2001, CBC filed an Ex Parte Petition for Issuance of a Writ of Possession[23] with
the Makati City RTC, docketed as Land Registration Commission (L.R.C.) Case No. M-4184. CBC prayed to
the court a quo for the following:
WHEREFORE, it is most respectfully prayed of this Honorable Court that the corresponding Writ
of Possession be issued ex parte by the Honorable Court in favor of petitioner [CBC] and
against Erlinda [sic] Lozada and/or all persons claiming rights under her name, over the
condominium unit covered by CCT No. 69096 (formerly CCT No. 34898), of the Registry of
Deeds for the City of Makati, with all the improvements existing thereon.
On the other hand, on 7 August 2001, the spouses Lozada instituted a Complaint[24] with the
HLURB, docketed as HLURB Case No. REM-0080701-11582, with the following prayer:
WHEREFORE, [herein respondents spouses Lozada] pray of this Honorable Board to order the
annulment of mortgage, foreclosure, sale, consolidation of ownership between CBC and [PPGI]
insofar as they pertain to [spouses Lozada] and to order the respondent Register of Deeds
of Makati City to cancel Condominium Certificate of Title No. 69096. It is likewise prayed that a
Temporary Restraining Order and/or Writ of Preliminary Injunction be issued to prevent [herein
petitioner] CBC from taking possession of the unit in question.
[Spouses Lozada] pray for such other relief and remedies that are just and equitable under the
premises.
L.R.C. Case No. M-4184 and HLURB Case No. REM-0080701-11582 proceeded simultaneously,
although it is principally the former which concerns this Court in the present Petition.
The Makati City RTC, finding that the prayer for issuance of a writ of possession of CBC in L.R.C.
Case No. M-4184 needed to be substantiated by evidence, initially set the hearing on 15 August
2001 at 10:00 a.m.[25] However, on motion of CBC, the Makati City RTC issued an Order[26] dated
15 August 2001 canceling the hearing for that day and transferring the same to 31 August 2001 at
10:00 a.m. The same Order expressly directed that Erlina be notified, but the records do not show
that said notice was actually sent and received by her.
The hearing on 31 August 2001 pushed through, even without the presence of the spouses Lozada,
during which the CBC presented and marked its documentary evidence.
On 31 August 2001, the Makati City RTC issued an Order[27] granting the Ex Parte Petition of CBC,
and decreeing that:
Finding the petition to be duly substantiated by the evidence presented and pursuant to the
provisions of section 7 of Act 3135 as amended by Act 4118, let a writ of possession issue in
favor of the petitioner China Banking Corporation.
In accordance with the foregoing Order, the RTC Branch Clerk of Court issued the Writ of
Possession[28] dated 3 September 2001 commanding the Sheriff to place CBC in possession of Unit
No. 402 and eject all its present occupants. The Sheriff, in turn, issued the Notices to
Vacate[29] dated 17 October 2001 and 22 October 2001 addressed to PPGI and the spouses Lozada,
respectively, directing them to vacate the said property within five days from receipt of the notices.
When the Sheriff went to Unit No. 402 on 30 October 2001, he failed to enforce the Writ of
Possession because the main door of the said property was padlocked,[30] prompting CBC to file
with the Makati City RTC an Urgent Ex Parte Motion to Break Open[31] the door to Unit No. 402 and
place CBC in possession thereof.
While the afore-mentioned events were unfolding in L.R.C. Case No. M-4184, the
spouses Lozada were seeking recourse elsewhere.
They were able to secure an Order[32] dated 25 October 2001 in HLURB Case No. REM-0080701-
11582 directing the parties therein to maintain status quoawaiting the resolution of the Application
for a Writ of Preliminary Injunction of the spouses Lozada.
Four days later, on 29 October 2001, the spouses Lozada filed with the Court of Appeals their
Petition for Certiorari and Prohibition, with Application for Writ of Preliminary Injunction/Temporary
Restraining Order[33] against the Makati City RTC, Sheriff, CBC, and PPGI, docketed as CA-G.R. SP
No. 67399, which was anchored on the following grounds:
I. Respondent Presiding Judge deprived your [herein respondents spouses Lozada] of due
process of law and their day in court, when he unjustifiably failed to order the service of notice on
[spouses Lozada] of the ex-parte petition of [herein petitioner] CBC;
II. The respondent Judge, contrary to law and existing jurisprudence, issued arbitrarily, without
jurisdiction and in excess of jurisdiction, the Writ of Possession to the irreparable damage and
[prejudice] of [spouses Lozada];
III. The respondent Judge in grave abuse of discretion, without jurisdiction and in excess of
jurisdiction, without giving [spouses Lozada] the opportunity to fully ventilate their possession over
the condominium unit purchased by them, he capriciously, arbitrarily and unjustifiably issued the
questioned Writ of Possession intended to eject the [spouses Lozada] from the condominium unit
that they purchased;
IV. The respondent Presiding Judge committed a grave abuse of discretion, amounting to lack or
excess of jurisdiction, when he issued the Order of August 31, 2001 granting the Writ of Possession
sought by [petitioner] CBC that will certainly interfere with the authority of [the] HLURB being
exercised in HLURB Case No. REM-008070-11582.
On 30 October 2001, the Court of Appeals issued a Resolution[34] granting in favor of the
spouses Lozada a temporary restraining order enjoining the Sheriff and the other respondents
therein from enforcing the Writ of Possession and Notices to Vacate. The spouses Lozada, however,
were directed to file an injunctive bond in the amount of P200,000.00.
The Court of Appeals rendered its assailed Decision[35] on 25 March 2004 ruling in favor of the
spouses Lozada. According to the appellate court, the issuance of the Writ of Possession was not
mandatory and ministerial on the part of the Makati City RTC, and the court a quo should have
afforded the spouses Lozada a hearing, considering that (1) Unit No. 402 was no longer in the
possession of the original debtor/mortgagor PPGI, but was already being enjoyed by the
spousesLozada; (2) the Makati City RTC was aware that Unit No. 402 was already in the possession
of the spouses Lozada because it was so stated in the ex parte petition of CBC, as well as the Notice
of Adverse Claim annotated on CCT No. 69096 presented by CBC as evidence before the trial court;
(3) the spouses Lozada , under Section 18 of Presidential Decree No. 957, had the right to continue
paying for Unit No. 402 to CBC, the purchaser thereof at the foreclosure sale, still in accordance with
the tenor of the Contract to Sell; and (4) the spouses Lozada had a perfect cause of action for the
annulment of the mortgage constituted by PPGI in favor of CBC since PPGI failed to comply with the
requirement in Union Bank of the Philippines v. Housing and Land Use Regulatory Board,[36] to
notify the installment buyer of the condominium unit of the mortgage constituted
thereon. The dispositive portion of the Decision reads:
WHEREFORE, premises considered, there being grave abuse of discretion on the part of the
court a quo in issuing the herein assailed Order, the instant Petition is GRANTED. Accordingly,
the August 31, 2001 Order, the Writ of Possession and the Notice to Vacate are hereby
ANNULLED and SET ASIDE.[37]
In its Resolution[38] dated 10 August 2004, the Court of Appeals denied the Motion for
Reconsideration of CBC, maintaining that the possession of the spousesLozada of Unit No. 402
constituted an effective obstacle barring the Makati City RTC from issuing a writ to place CBC in
possession of the same. The appellate court reiterated that there was grave abuse of discretion on
the part of the Makati City RTC when it included Unit No. 402 within the coverage of the writ of
possession, notwithstanding the fact that said unit was in possession of the spouses Lozada under a
legitimate claim of ownership on the strength of a Contract to Sell executed in their favor by PPGI.
Comes now CBC before this Court via the present Petition for Review on Certiorari under Rule 45 of
the Revised Rules of Court with the following assignment of errors:
THE HONORABLE COURT OF APPEALS GRAVELY ERRED WHEN IT TOOK COGNIZANCE OF THE
PETITION, STOPPED THE IMPLEMENTATION OF THE WRIT OF POSSESSION AND EVENTUALLY HAD IT
ANNULLED AND SET ASIDE.
II
THE HONORABLE COURT OF APPEALS GRAVELY ERRED IN RULING THAT THE RESPONDENTS WERE
HOLDING THE SUBJECT PROPERTY ADVERSELY TO THE JUDGMENT DEBTOR THUS THE ISSUANCE OF
THE WRIT OF POSSESSION WAS IMPROPER AND UNWARRANTED, WHICH IS IN DIRECT COLLISSION
(SIC) WITH APPLICABLE JURISPRUDENCE.
III
THE HONORABLE COURT OF APPEALS GRAVELY ERRED WHEN IT FAILED TO APPRECIATE THE
FACTUALITY THAT RESPONDENTS WERE SUBSEQUENTLY INFORMED OF THE MORTGAGE WITH AN
ADVISE OF PAYMENT OF INSTALLMENTS TO HEREIN PETITIONERS [sic], BUT WHICH RESPONDENTS
IGNORED, HENCE THEY MADE [sic] THEMSELVES BEYOND THE MANTLE OF PROTECTION UNDER P.D.
957.[39]
Sorting through the allegations and arguments presented by the parties, the Court ascertains that
the pivotal issue for its consideration is, given the circumstances in the present case, whether the
writ of possession may be granted and issued by the Makati City RTC ex parte or without notice to
other parties.[40]
At the outset, this Court establishes that the issue herein is one involving procedural due
process. Procedural due process "refers to the method or manner by which the law is
enforced."[41] It consists of the two basic rights of notice and hearing, as well as the guarantee of
being heard by an impartial and competent tribunal. True to the mandate of the due process clause,
the basic rights of notice and hearing pervade not only in criminal and civil proceedings, but in
administrative proceedings as well. Non-observance of these rights will invalidate the
proceedings. Individuals are entitled to be notified of any pending case affecting their interests; and
upon notice, they may claim the right to appear therein, present their side and refute the position of
the opposing parties.[42]
At the crux of the opposition of the spouses Lozada to the ex parte issuance by the Makati City RTC
of the writ of possession in favor of CBC was that it supposedly deprived them of the opportunity to
defend their title and right to possess; or simply, that it denied them due process.
The procedure for extrajudicial foreclosure of real estate mortgage is governed by Act No. 3135,
[43] as amended. The purchaser at the public auction sale of anextrajudicially foreclosed real
property may seek possession thereof in accordance with Section 7 of Act No. 3135, as amended,
which provides:
SEC. 7. In any sale made under the provisions of this Act, the purchaser may petition the Court
of First Instance of the province or place where the property or any part thereof is situated, to
give him possession thereof during the redemption period, furnishing bond in an amount
equivalent to the use of the property for a period of twelve months, to indemnify the debtor in
case it be shown that the sale was made without violating the mortgage or without complying
with the requirements of this Act. Such petition shall be made under oath and filed in
form or an ex parte motion in the registration or cadastral proceedings if the property is
registered, or in special proceedings in the case of property registered under the Mortgage Law
or under section one hundred and ninety-four of the Administrative Code, or of any other real
property encumbered with a mortgage duly registered in the office of any register of deeds in
accordance with any existing law, and in each case the clerk of court shall, upon the filing of
such petition, collect the fees specified in paragraph eleven of section one hundred and
fourteen of Act Numbered Four hundred and ninety six as amended by Act Numbered Twenty-
eight hundred and sixty-six, and the court shall, upon approval of the bond, order that a writ of
possession issue addressed to the sheriff of the province in which the property is situated, who
shall execute said order immediately. (Emphasis supplied.)
The Court expounded on the application of the foregoing provision in De Gracia v. San Jose,
[44] thus:
As may be seen, the law expressly authorizes the purchaser to petition for a writ of possession
during the redemption period by filing an ex parte motion under oath for that purpose in the
corresponding registration or cadastral proceeding in the case of property with Torrens title;
and upon the filing of such motion and the approval of the corresponding bond, the law also in
express terms directs the court to issue the order for a writ of possession. Under the legal
provisions above copied, the order for a writ of possession issues as a matter of course upon
the filing of the proper motion and the approval of the corresponding bond. No discretion is
left to the court. And any question regarding the regularity and validity of the sale (and the
consequent cancellation of the writ) is left to be determined in a subsequent proceeding as
outlined in section 8. Such question is not to be raised as a justification for opposing the
issuance of the writ of possession, since, under the Act, the proceeding for this
is ex parte. (Emphasis supplied.)
Strictly, Section 7 of Act No. 3135, as amended, refers to a situation wherein the purchaser seeks
possession of the foreclosed property during the 12-month period for redemption. Upon the
purchaser’s filing of the ex parte petition and posting of the appropriate bond, the RTC[45] shall, as
a matter of course, order the issuance of the writ of possession in the purchaser’s favor.
In IFC Service Leasing and Acceptance Corporation v. Nera,[46] the Court reasoned that if under
Section 7 of Act No. 3135, as amended, the RTC has the power during the period of redemption to
issue a writ of possession on the ex parte application of the purchaser, there is no reason why it
should not also have the same power after the expiration of the redemption period, especially where
a new title has already been issued in the name of the purchaser. Hence, the procedure under
Section 7 of Act No. 3135, as amended, may be availed of by a purchaser seeking possession of the
foreclosed property he bought at the public auction sale after the redemption period has expired
without redemption having been made.
The Court recognizes the rights acquired by the purchaser of the foreclosed property at the public
auction sale upon the consolidation of his title when no timely redemption of the property was
made, to wit:
It is settled that upon receipt of the definitive deed in an execution sale, legal title over the
property sold is perfected (33 C. J. S. 554). And this court has also [said] and that the land
bought by him and described in the deed deemed (sic) within the period allowed for that
purpose, its ownership becomes consolidated in the purchaser, and the latter, "as absolute
owner . . . is entitled to its possession and to receive the rents and fruits thereof." (Powell v.
Philippine National Bank, 54 Phil., 54, 63.) x x x.[47]
It is thus settled that the buyer in a foreclosure sale becomes the absolute owner of the property
purchased if it is not redeemed during the period of one year after the registration of the sale. As
such, he is entitled to the possession of the said property and can demand it at any time following
the consolidation of ownership in his name and the issuance to him of a new transfer certificate of
title. The buyer can in fact demand possession of the land even during the redemption period
except that he has to post a bond in accordance with Section 7 of Act No. 3135, as amended. No
such bond is required after the redemption period if the property is not redeemed. Possession of the
land then becomes an absolute right of the purchaser as confirmed owner. Upon proper application
and proof of title, the issuance of the writ of possession becomes a ministerial duty of the court.[48]
The purchaser, therefore, in the public auction sale of a foreclosed property is entitled to a writ of
possession; and upon an ex parte petition of the purchaser, it is ministerial upon the RTC to issue
such writ of possession in favor of the purchaser. However, while this is the general rule, as in all
general rules, there is an exception. The exception and its basis were summarized by the Court
in Roxas v. Buan,[49] thus:
In the extrajudicial foreclosure of real estate mortgages, possession of the property may be
awarded to the purchaser at the foreclosure sale during the pendency of the period of
redemption under the terms provided in Sec. 6 of Act 3135, as amended (An Act to Regulate
the Sale of Property Under Special Powers Inserted In or Annexed to Real Estate Mortgages), or
after the lapse of the redemption period, without need of a separate and independent action
[IFC Service Leasing and Acceptance Corp. v. Nera, G.R. No. L-21720, January 30, 1967, 19
SCRA 181). This is founded on his right of ownership over the property which he purchased at
the auction sale and his consequent right to be placed in possession thereof.
This rule is, however, not without exception. Under Sec. 35, Rule 39 of the Revised Rules of
Court, which was made applicable to the extrajudicial foreclosure of real estate mortgages by
Sec. 6 Act No. 3135, the possession of the mortgaged property may be awarded to a purchaser
in extrajudicial foreclosures "unless a third party is actually holding the property adversely to
the judgment debtor." (Clapano v. Gapultos, G.R. Nos. 51574-77, September 30, 1984, 132
SCRA 429, 434; Philippine National Bank v. Adil, G.R. No. 52823, November 2, 1982, 118 SCRA
110; IFC Service Leasing and Acceptance Corp. v. Nera, supra.) As explained by the Court
in IFC Service Leasing and Acceptance Corp. v. Nera, supra:
x x x The applicable provision of Act No. 3135 is Section 6 which provides that, in
cases in which an extrajudicial sale is made, "redemption shall be governed by the
provisions of sections four hundred and sixty-four to four hundred and sixty-six,
inclusive, of the Code of Civil Procedure in so far as these are not inconsistent with
the provisions of this Act." Sections 464-466 of the Code of Civil Procedure were
superseded by Sections 25-27 and Section 31 of Rule 39 of the Rules of Court which
in turn were replaced by Sections 29-31 and Section 35 of Rule 39 of the Revised
Rules of Court. Section 35 of the Revised Rules of Court expressly states that "If no
redemption be made within twelve (12) months after the sale, the purchaser, or his
assignee, is entitled to a conveyance and possession of the property x x x." The
possession of the property shall be given to the purchaser or last redemptioner by
the officer unless a party is actually holding the property adversely to the judgment
debtor, [Id. at 184-185; Emphasis in the original.]
After further revision of the Rules of Court, Section 35 of Rule 39 referred to above is now Section 33
of Rule 39, which reads:
SEC. 33. Deed and possession to be given at expiration of redemption period; by whom
executed or given. – If no redemption be made within one (1) year from the date of the
registration of the certificate of sale, the purchaser is entitled to a conveyance and possession
of the property; x x x.
Upon the expiration of the right of redemption, the purchaser or redemptioner shall be
substituted to and acquire all the rights, title, interest and claim of the judgment obligor to the
property as of the time of the levy. The possession of the property shall be given to the
purchaser or last redemptioner by the same officer unless a third party is actually holding
the property adversely to the judgment obligor. (Emphasis supplied.)
Where a parcel levied upon on execution is occupied by a party other than a judgment debtor, the
procedure is for the court to order a hearing to determine the nature of said adverse possession.
[50] Similarly, in an extrajudicial foreclosure of real property, when the foreclosed property is in the
possession of a third party holding the same adversely to the defaulting debtor/mortgagor, the
issuance by the RTC of a writ of possession in favor of the purchaser of the said real property ceases
to be ministerial and may no longer be done ex parte. For the exception to apply, however, the
property need not only be possessed by a third party, but also held by the third party adversely to
the debtor/mortgagor.
While CBC invokes the general rule in the Petition at bar, the spouses Lozada assert the exception.
The spouses Lozada aver that they are holding Unit No. 402 adversely to the debtor/mortgagor PPGI,
and that their possession is sufficient obstacle to the exparte issuance of a writ of possession in
favor of CBC. CBC, however, counters that the spouses Lozada are mere successors-in-interest of
PPGI who only stepped into the latter’s shoes and may not claim the defense of possession by third
persons.
It is thus incumbent upon this Court to scrutinize the nature of the spouses Lozada’s possession of
Unit No. 402.
The spouses Lozada acquired possession of Unit No. 402 pursuant to the Contract to Sell executed
in their favor by PPGI. According to the Contract to Sell, PPGI shall deliver Unit No. 402 to the
spouses Lozada upon the completion thereof, and the spouses Lozada, in turn, shall already be
bound at that point to pay the 70% balance of the purchase price for the said property. The records
do not establish the date when the spouses Lozada actually entered into possession of Unit No.
402. However, it is undisputed that they were already in possession thereof at the time CBC filed
its Ex Parte Petition for the Issuance of a Writ of Possession with theMakati City RTC on July 2001.
Given the foregoing, it is apparent that the spouses Lozada’s possession of Unit No. 402 cannot be
considered adverse to that of PPGI. Their right to possess the said property was derived from PPGI
under the terms of the Contract to Sell executed by the latter in their favor. It was because PPGI
contractually agreed to deliver Unit No. 402 to them even prior to the transfer of ownership and title
over the same that they came into its possession. They cannot assert that said right of possession
is adverse or contrary to that of PPGI when they have no independent right of possession other than
what they acquired from PPGI. The spouses Lozadacan be more appropriately considered the
transferee of or successor to the right of possession of PPGI over Unit No. 402.
Again relevant herein is the Court’s ruling in Roxas v. Buan,[51] which involved factual
circumstances akin to the instant Petition. Valentin executed a Deed of Real Estate Mortgage over a
house and lot in favor of Buan to secure a loan granted by the latter to the
former. When Valentin failed to pay his loan when it matured,Buan caused the extrajudicial
foreclosure of the real estate mortgage and was the winning bidder at the auction sale of the
foreclosed property. Upon the expiration of the period for redemption without Valentin redeeming
the foreclosed property, a Final Bill of Sale was issued by the Sheriff in Buan’s favor. Buan then filed
a petition for the issuance of a writ of possession, which, being uncontested, was granted by the trial
court. However, the Sheriff was unable to execute the writ of possession because the foreclosed
property was occupied by Roxas and the spouses De Guia. Roxas allegedly bought the foreclosed
property from Valentin and leased the same to the spouses De Guia. Roxas and the spouses
De Guia argued that the writ of possession was ineffective as against them, being third
parties. They also insisted thatBuan should file an independent action to recover the property,
otherwise, their right to due process of law would be violated since they were not given their day in
court to prove their adverse claim.
In the said case, the character of Roxas’ possession was directly put in issue. The Court determined
that Roxas was the successor-in-interest of the mortgagorValentin, and not a third party holding the
property adversely to the latter. The Court ratiocinated as follows:
Contending that petitioner Roxas is a party actually holding the property adversely to the
debtor, Arcadio Valentin, petitioners argue that under the provisions of Act No. 3135 they
cannot be ordered to vacate the property. Hence, the question of whether, under the
circumstances, petitioner Roxas indeed is a party actually holding the property adversely
to Valentin.
It will be recalled that Roxas' possession of the property was premised on its alleged sale to
him by Valentin for the amount of P100,000.00. Assuming this to be true, it is readily apparent
that Roxas holds title to and possesses the property as Valentin's transferee. Any right he has
to the property is necessarily derived from that of Valentin
THIRD DIVISION
METROPOLITAN BANK AND TRUST COMPANY, PETITIONER, VS. SPOUSES ELISA TAN AND
ANTONIO TAN AND SPOUSES LILIAN TAN AND MARCIAL SEE, RESPONDENTS.
DECISION
CHICO-NAZARIO, J.:
Before Us is a Petition for Review on Certiorari under Rule 45 of the 1997 Rules of Civil Procedure which
seeks to set aside the Decision[1] of the Court of Appeals dated 31 January 2007 in CA-G.R. CV No. 86214
affirming in toto the Decision[2] of Branch 32 of the Regional Trial Court (RTC) of Manila in Civil Case No.
97-85012 and its Resolution[3] dated 15 June 2007 denying petitioner's motion for reconsideration.
In June 1974, Ylang-Ylang Merchandising Company, a partnership between Angelita Rodriguez and
respondent Antonio Tan, obtained a loan in the amount of P250,000.00 from petitioner Metropolitan Bank
and Trust Company (Metrobank). To secure payment of the same, respondents spouses Marcial See and
Lilian Tan[4] constituted a real estate mortgage in favor of petitioner over their property consisting of
469.40 square meters, located in the District of Paco, Manila, covered by Transfer Certificate of Title (TCT)
No. 105233 of the Registry of Deeds of Manila. The mortgage, dated 14 June 1974, was annotated at the
back of the title.[5]
Subsequently, after the partnership had changed its name to Ajax Marketing Company, albeit without
changing its composition, it obtained another loan in July 1976 in the amount of P150,000.00 from
Metrobank. Again, to secure the loan, spouses Marcial See and Lilian Tan executed in favor of Metrobank a
second real estate mortgage dated 26 August 1976 over the same property. As in the first instance, the
mortgage was annotated at the back of TCT No. 105233.[6]
On 19 February 1979, the partnership (Ajax Marketing Company) was converted into a corporation
denominated as Ajax Marketing and Development Corporation (Ajax Marketing), with the original partners
(Angelita Rodriguez and Antonio Tan) as incorporators and three additional incorporators, namely,
respondent Elisa Tan, the wife of respondent Antonio Tan, and Jose San Diego and Tessie San Diego. Ajax
Marketing obtained from Metrobank a loan in the amount P600,000.00, the payment of which was secured
by another real estate mortgage executed by the spouses Marcial See and Lilian Tan over the same
property in favor of Metrobank. The third real estate mortgage was annotated at the back of TCT No.
105233.
On 2 December 1980, the three loans with an aggregate amount of P1,000,000.00 were re-structured and
consolidated into one loan and Ajax Marketing, represented by Antonio Tan as Board Chairman/President
and in his personal capacity as solidary co-obligor, and Elisa Tan as Vice-President/Treasurer and in her
personal capacity as solidary co-obligor, executed Promissory Note (PN) No. BDS-3605. Said loan was
payable in eight (8) equal quarterly installments of P125,000.00 starting 2 March 1981 until fully paid.[7]
On 24 April 1984, Metrobank filed a case for sum of money before the RTC of Manila against Ajax
Marketing, Elisa Tan and Antonio Tan for another loan earlier obtained in the amount of P970,000.00 that
the latter obtained from the former for which they executed Promissory Note (PN) No. BDS-3583. The
case was docketed as Civil Case No. 84-24065.[8] Subsequently, the lower court decided this case in favor
of Metrobank which decision was affirmed by the Court of Appeals.
For failure of Ajax Marketing to pay its obligation contained in PN No. BDS-3605, Metrobank foreclosed the
real estate mortgage. On 19 June 1984, the mortgaged property was sold at public auction for
P1,775,040.00 to Metrobank, it having the highest and winning bid.
On 11 December 1984, Civil Case No. 85-33933 for Annulment and Cancellation of Extra-judicial
Foreclosure Sale with Preliminary Injunction, Restraining Order and Damages was filed by Ajax Marketing
and spouses Marcial See and Lilian Tan, represented by their Attorney-in-Fact, Elisa Tan, and spouses
Antonio Tan and Elisa Tan (spouses Tan) against Metrobank and the Registry of Deeds of Manila. The
complaint asked that the extrajudicial foreclosure, as well as the auction sale, be declared null and void on
the ground that the real estate mortgages constituted on the property covered by TCT No. 105233 have
been extinguished or novated when PN No. BDS-3605 was executed. The trial court upheld the validity of
the extra-judicial foreclosure. On appeal to the Court of Appeals, the appellate court affirmed the decision
of the trial court. The decision was appealed to the Supreme Court.
In a letter dated 2 February 1995, spouses Antonio Tan and Elisa Tan wrote Metrobank a
letter[9] containing, inter alia, the following:
To end the controversy once and for all, the undersigned spouses hereby proposes (sic) to fully settle
the obligations of the borrowers in exchange of your release of the Real Estate Mortgage you are
presently holding, to wit:
xxxx
The attendant facts herein do not make a case of novation. There is nothing in the records to show
the unequivocal intent of the parties to novate the three loan agreements through the execution of
PN No. BDS-3065. The provisions of PN No. BDS-3605 yield no indication of the extinguishment of, or
an incompatibility with, the three loan agreements secured by the real estate mortgages over TCT
No. 105233. x x x
xxxx
x x x [P]etitioners posit that the extra-judicial foreclosure is invalid as it included two unsecured
loans: one, the consolidated loan of P1.0 million under PN BDS No. 3605, and two, the P970,000.00
loan under PN BDS No. 3583 subsequently extended by Metrobank.
An action to foreclose a mortgage is usually limited to the amount mentioned in the mortgage, but
where on the four corners of the mortgage contracts, as in this case, the intent of the contracting
parties is manifest that the mortgaged property shall also answer for future loans or advancements
then the same is not improper as it is valid and binding between the parties. For merely consolidating
and expediently making current the three previous loans, the loan of P1.0 million under PN BDS No.
3605, secured by the real estate property, was correctly included in the foreclosure's bid price. The
inclusion of the unsecured loan of P970,000.00 under PN BDS No. 3583, however, was found to be
improper by public respondent which ruling we shall not disturb for Metrobank's failure to appeal
therefrom. Nonetheless, the inclusion of PN BDS No. 3583 in the bid price did not invalidate the
foreclosure proceedings. As correctly pointed out by the Court of Appeals, the proceeds of the
auction sale should be applied to the obligation pertaining to PN BDS No. 3605 only, plus interests,
expenses and other charges accruing thereto. It is Metrobank's duty as mortgagee to return the
surplus in the selling price to the mortgagors.
On 12 September 1997, spouses Elisa Tan and Antonio Tan and spouses Lilian Tan and Marcial See filed a
civil case for Specific Performance, Injunction and Damages before the RTC of Manila, Branch 30, against
Metrobank and Ajax Marketing (origin of the instant petition). They prayed, among other things, that
Metrobank be ordered to allow them (spouses Tan) to exercise their right of redemption over the subject
foreclosed property and to accept the amount of P1,609,334.61 as the redemption price, and to order Ajax
Marketing to reimburse them the amount which they will pay as redemption price for the foreclosed
property.[11]
On 4 November 1997, an amended compliant was filed.[12] They included as defendants John Doe and
Peter Doe. They made the following allegations:
Spouses See and spouses Tan alleged that the property covered by TCT No. 105233, though registered in
the names of spouses Marcial See and Lilian Tan See is, in reality, co-owned by respondents and their
other siblings. They further allege that after the foreclosure sale, they offered to redeem the property
within the one-year redemption period and they discovered that Metrobank included in the bid price an
amount covered by PN No. BDS-3583 not secured by the mortgage over TCT No. 105233. They claim that
while the tender and offer of the redemption was seasonably made, same cannot be made because
Metrobank was ambivalent with respect to the redemption price. Redemption, they claim, was rendered
doubly difficult when Metrobank filed Civil Case No. 84-24065 with the RTC of Manila to collect on PN No.
BDS-3583. On their part, they filed Civil Case No. 85-33933 before the RTC of Manila for annulment and
cancellation of the extra-judicial foreclosure of the mortgage over TCT No. 105233 rendering more difficult
the resumption of negotiation for redemption of the foreclosed property. On 14 September 1995, the
Supreme Court, in G.R. No. 118585, declared the extra-judicial foreclosure valid but found the inclusion of
PN No. BDS-3583 in the bid price to be improper but same did not invalidate the foreclosure proceedings.
After said decision, they resumed to negotiate for the redemption of the foreclosed property and tendered
and offered P1,609,334.61 which Metrobank rejected and declined. They further alleged that Metrobank
encouraged their other siblings to repurchase the foreclosed property at a price over and above the lawful
redemption price. In fact, Metrobank sold the property to John and Peter Doe for P11,500,000.00 in
complete disregard of their right of redemption. They claim that Metrobank cannot sell the property
because ownership thereof has not been vested absolutely in its favor until they have exercised their right
of redemption. The sale of the property to their other siblings was fraudulent and therefore void. Because
of the sale, they and their other siblings were divested of their share in the property and are additionally
required by the purchasing siblings to reimburse a portion of the repurchase price (P11,500,000.00),
thereby fomenting trouble within the family. They asked, among other things, that the sale of the property
between Metrobank and defendants John and Peter Doe be declared null and void ab initio and that
Metrobank be ordered to allow them to exercise their right of redemption by accepting the amount of
P1,609,334.61 as the redemption price.
On 6 November 1997, Spouses Marcial See and Lilian Tan executed a document entitled "Deed of
Redemption and Reconveyance" wherein it was stated that the latter (redemptioners) paid Metrobank on
12 September 1997 the amount of P11,500,000.00 representing the redemption price for the
reconveyance/redemption of the foreclosed property (TCT No. 105233).[13]
On 2 February 1998, Metrobank filed a Motion to Dismiss on the ground that the claims and demands in
the amended complaint have been extinguished. Metrobank disclosed that the subject property was not
sold to John and Peter Doe, but to spouses Marcial See and Lilian Tan. As registered owners of the
property, the spouses were allowed to exercise their right of redemption on 6 November 1997 as
evidenced by the Deed of Redemption and Reconveyance.[14] On 7 December 1998, the motion was
denied.[15]
On 3 February 1999, Metrobank filed its Answer with Counterclaim. It declared that John and Peter Doe are
none other than spouses Marcial See and Lilian Tan. It alleged that neither Ajax Marketing nor the plaintiffs
(respondents herein) were able to redeem the subject property within the one-year period which
commenced from the date (20 June 1984) the Certificate of Sale issued by the auctioning sheriff was
registered with the concerned Registry of Deeds. Respondents did not even approach Metrobank to
negotiate the redemption of said property. Instead, Ajax Marketing and respondents instituted on 11
December 1984 an action to annul said extra-judicial foreclosure which foreclosure was upheld by the
Supreme Court in G.R. No. 118585 on 14 September 1995. It was only in 1997 that spouses Marcial See
and Lilian Tan communicated with Metrobank their intention to buy back the subject property. Metrobank
agreed to sell the property for the "redemption" price of P11,500,000.00. It further denied the allegations
with respect to the actual ownership of the subject property. It added that the sale of the foreclosed
property to spouses Marcial See and Lilian Tan was not fraudulent and that property was redeemed at a
mutually agreed price. It explained that spouses Marcial See and Lilian Tan are the proper "redemptioners"
of the subject property being the registered owners thereof. As such, Metrobank had the right to allow said
spouses to redeem the property and to reconvey the same under mutually agreed terms. It stressed that
assuming arguendothat spouses Marcial See and Lilian Tan never redeemed the subject property, spouses
Elisa Tan and Antonio Tan offered the amount of P1,609,334.61 when they communicated with Metrobank
in 1997 which amount they believe was the redemption price "in esse," Metrobank had rightfully rejected
the same for Act No. 3135, as amended, requires the payment of the redemption price equivalent to the
winning bid price (P1,775,040.00) plus interest up to the time of redemption, together with the amount of
any assessments or taxes paid by the purchaser after the auction sale, and interest on such last-named
amount at the same rate.[16]
In its Reply to the Answer, respondents claim the "Deed of Redemption and Reconveyance" does not bear
the true and genuine signatures of spouses Marcial See and Lilian Tan. It said that assuming arguendo that
the Deed of Redemption and Reconveyance is true, the difference between P11,500,000.00 and
P1,775,040.00 should be refunded to them.[17]
On 10 January 2000, the pre-trial of the case was terminated.[18] Thereafter, the case was heard.
Respondents-spouses Elisa and Antonio Tan testified in court on their behalf, while for the defense, only
Rito A. Negado, employee of Metrobank, testified on respondents' loan with Metrobank, the execution of
respondents Marcial See and Lilian Tan of the accommodation mortgage in favor of Metrobank, and
respondents' failure to pay their obligation which led Metrobank to initiate extra-judicial foreclosure
proceedings.
While the case was being heard, the presiding judge hearing the case voluntarily inhibited himself from the
case. Consequently, the case was re-raffled to Branch 32 of RTC, Manila.[19]
On 5 May 2005, the trial court rendered its decision, the dispositive portion of which reads:
WHEREFORE, premises considered, JUDGMENT is hereby rendered DECLARING the "DEED OF
REDEMPTION AND RECONVEYANCE" between Defendant Bank and the Sps. Marcial See and Lilian Tan
NULL and VOID ab initio. It is hereby further ADJUDGED that:
1. Plaintiffs Spouses Elisa and Antonio Tan are reinstated as Redemptioners with the right to
redeem the property foreclosed and mortgaged as they are hereby directed to pay Defendant
Bank the sum of Php 1,609,334.61 as redemption price in accordance with the Decision in G.R.
No. 118585 and in turn, Defendant Metrobank is ordered to reconvey TCT No. 105233 to
plaintiffs in exchange for the said redemption price.
2. Defendant Bank is ordered to refund and pay to plaintiffs Sps. Marcial See and Lilian Tan the
sum of Php11,500,000.00 with interests at the rate of 12% per annum beginning September
1995 until the whole obligation is fully paid;
3. Defendant Bank is finally ordered to pay, in addition to the costs of suit, the sum of
Php50,000.00 as and for attorney's fees over and above the contingent arrangement for legal
services rendered to plaintiffs Elisa and Antonio Tan by their lawyers.[20]
The RTC ruled that the nullification of the Deed of Redemption and Reconveyance dated 6 November 1997
is warranted. It declared that spouses Elisa and Antonio Tan, as mortgagors of the foreclosed property, are
entitled to exercise their right as redemptioners. As such, they should pay Metrobank as redemption price
the amount of Php1,609,334.61 or Php1,775,040.00, as the case may be, the latter price being
Metrobank's winning bid. The fact that spouses Marcial See and Lilian Tan are the registered owners of the
property foreclosed is not sufficient to entitle them to redeem over and above the willingness of spouses
Elisa and Antonio Tan to exercise their right of redemption. Spouses Elisa and Antonio Tan have the
preferential right as redemptioners of what they have mortgaged.
The trial court ruled that spouses Elisa and Antonio Tan are fully within their right to redeem the foreclosed
property after the finality of the Decision in G.R. No. 118585. Technically, it said, the tender and offer of
redemption of spouses Elisa and Antonio Tan was within the one-year period reckoned from the
registration of the Certificate of Sale in the Registry of Deeds because the redemption period was
"freezed" when respondents were forced to file Civil Case No. 85-33933 (Annulment and Cancellation of
Extra-judicial Foreclosure Sale with Preliminary Injunction, Restraining Order and Damages) on 11
December 1984 after said tender of redemption price was refused as a result of a misunderstanding as to
its amount. Respondents insisted to redeem on the basis of their PN No. BDS-3605 while Metrobank
demanded that the redemption price should include the unsecured PN No. BDS-3583. The filing of Civil
Case No. 85-33933 within the one-year redemption period preserved spouses Elisa and Antonio Tan's right
of redemption until said case has been decided with finality. Citing State Investment House, Inc. v. Court
of Appeals,[21] Belisario v. Intermediate Appellate Court[22] and Hi-Yield Realty, Inc. v. Court of Appeals,
[23] the Court said that the filing of the Civil Complaint has the effect of freezing the redemption period
and preserves the right of the mortgagor to redeem the property foreclosed, and that the filing of the court
action to enforce the correct redemption price is equivalent to a formal offer to redeem. The offer to
redeem in this case made sometime in 1985 was "frozen" and remained fresh and unexpired until Civil
Case No. 85-33933 was finally decided by the Supreme Court on 14 September 1995. Thereafter, the
redemption period resumed to run anew.
Metrobank appealed said decision to the Court of Appeals. On 31 January 2007, the appellate court
affirmed in toto the decision of the trial court. It disposed of the case as follows:
WHEREFORE, premises considered, the appeal is DISMISSED for lack of merit and the assailed
decision of the court a quo is hereby AFFIRMED in toto. No costs.[24]
The Court of Appeals said that the spouses Elisa and Antonio Tan were granted, no less by the Supreme
Court, the right to redeem the contested property. However, despite the finality of the Supreme Court
decision in G.R. No. 118585, Metrobank ignored spouses Elisa and Antonio Tan's right to redeem and
instead allowed spouses Marcial See and Lilian Tan to redeem the property. It described such act of
Metrobank to be contemptuous. It brushed away Metrobank's argument that spouses Elisa and Antonio
Tan have no more right to redeem as they failed to make a valid tender since what they did was a mere
proposal failing to actually deliver the redemption price. The appellate court added that Metrobank has no
right to demand from spouses Elisa and Antonio Tan the actual delivery of the redemption price because it
is not legally capacitated to surrender the possession and title of the subject property to said spouses until
such time the redemption of spouses Marcial See and Lilian Tan is declared null and void. It agreed with
the trial court that the one-year period to redeem the foreclosed property was deemed suspended.
Initially, this Court denied the petition for insufficient or defective verification and for failure to show that
the appellate court committed reversible error as to warrant the exercise by this Court of its discretionary
appellate jurisdiction.[25] Metrobank filed a motion for the reconsideration. On 12 November 2007, the
Court granted the motion and set aside the resolution denying the petition, and required respondents to
comment thereon within ten days from receipt of notice.[26] Respondents filed their Comment[27] to
which Metrobank filed a Reply.[28]
The Court gave due course to the petition and required the parties to submit their respective memoranda.
[29]
WHETHER THE COURT OF APPEALS ERRED WHEN IT DECLARED THAT RESPONDENT SPOUSES
ANTONIO AND ELISA TAN'S TENDER AND OFFER OF REDEMPTION WAS WITHIN THE ONE-YEAR PERIOD
STARTING FROM THE REGISTRATION OF THE CERTIFICATE OF SALE CONSIDERING THAT THE
REDEMPTION PERIOD WAS "FREEZED" WHEN RESPONDENTS WERE FORCED TO FILE CIVIL CASE NO.
85-33933 ON DECEMBER 11, 1984 AFTER THEIR TENDER OF THE REDEMPTION PRICE WAS REFUSED
BY METROBANK AND THAT THE REDEMPTION PERIOD REMAINED FRESH AND UNEXPIRED UNTIL CIVIL
CASE NO. 85-33933 WAS FINALLY ADJUDICATED BY THE SUPREME COURT IN SEPTEMBER 1995.
WHETHER THE COURT OF APPEALS ERRED IN DECLARING THAT METROBANK IS LIABLE TO PAY
RESPONDENTS ATTORNEY'S FEES.
WHETHER THE COURT OF APPEALS ERRED IN DECLARING THAT THE TRIAL COURT WAS CORRECT IN
SUBMITTING THE CASE IMMEDIATELY FOR DECISION AS THERE WAS UNREASONABLE DELAY ON THE
PART OF METROBANK IN THE PRESENTATION OF ITS EVIDENCE.[30]
There is no dispute that respondents were already in default in the payment of their obligation. Thus,
Metrobank had the right to foreclose any real estate mortgage executed in its favor as security for the
loans it has given to respondents. Foreclosure is valid where the debtor is in default in the payment of his
obligation. In a real estate mortgage when the principal obligation is not paid when due, the mortgagee
has the right to foreclose the mortgage and to have the property seized and sold with the view of applying
the proceeds to the payment of the obligation.[31]
The lower courts ruled that the filing of Civil Case No. 85-33933 suspended the running of the one-year
redemption period for which spouses Elisa and Antonio Tan can exercise their right of redemption. The
tender and offer of redemption made by spouses Elisa and Antonio Tan was within the one-year
redemption period. On the other hand, Metrobank insists that the filing of said case did not toll the running
of said redemption period and that they failed to exercise said right with the allowable period of one year.
The filing of Civil Case No. 85-33933 (Annulment and Cancellation of Extra-judicial Foreclosure Sale ) did
not toll the running of the one-year redemption period. Settled is the rule that the period within which to
redeem the property sold at a sheriff's sale is not suspended by the institution of an action to annul the
foreclosure sale.[32] Thus, both lower courts erred in ruling that the one-year redemption period was
interrupted.
It is apparent from the complaint filed in Civil Case No. 85-33933 that the issue advanced by respondents
is whether the extrajudicial foreclosure, as well as the auction sale, is void because the real estate
mortgages constituted on the property covered by TCT No. 105233 have been extinguished or novated
when PN No. BDS-3605 was executed. There is nothing in the complaint that deals with any right of
redemption. Respondents wanted to have the extrajudicial foreclosure proceedings nullified on the ground
that their obligation under PN No. BDS-3605 was no longer secured by any mortgage.
We likewise find the declaration of the Court of Appeals that the spouses Elisa and Antonio Tan were
granted by the Supreme Court the right to redeem the contested property pursuant to G.R. No. 118585 to
be without basis. There is nothing in G.R. No. 118585 that gave respondents the right to redeem. This
Court did not even determine the amount of the redemption price which, in the first place, was not raised
as an issue. What was upheld in said case was the validity of the extrajudicial foreclosure despite the
inclusion therein of an unsecured loan.
Having ruled that Civil Case No. 85-33933 did not toll the running of the one-year redemption period, did
spouses Elisa and Antonio Tan exercise their right o redemption within this period? They did not.
Section 6 of Republic Act No. 3135,[33] as amended by Republic Act No. 4118, provides:
Sec. 6. In all cases in which an extrajudicial sale is made under the special power hereinbefore
referred to, the debtor, his successors in interest or any judicial creditor or judgment creditor of said
debtor, or any person having a lien on the property subsequent to the mortgage or deed of trust
under which the property is sold, may redeem the same at any time within the term of one
year from and after the date of the sale; x x x. (Emphasis supplied.)
We, however, have consistently ruled that the one-year redemption period should be counted not from the
date of foreclosure sale, but from the time the certificate of sale is registered with the Registry of Deeds.
[34]
In the case before us, the certificate of sale was registered with the Registry of Deeds of Manila on 20 June
1984. Under Article 13 of the Civil Code, a year is understood to be three hundred sixty-five (365) days.
Thus excluding the first day and counting from 20 June 1984, respondents spouses Tan had only until 20
June 1985 within which to redeem the foreclosed property in accordance with law. Prior to this date, they
did not exercise their right to redeem the foreclosed property.
The only credible evidence respondents presented to show that they allegedly offered to redeem the
subject property was the letter[35] of spouses Elisa and Antonio Tan dated 2 February 1995 where they
offered the amount of two million pesos (in installment) as settlement of their obligation and for the
release of the real estate mortgages on TCT No. 105233. Other than this, we find nothing concrete to
prove that they (spouses Tan) tried to redeem within the one-year period and even after when this Court
ruled in G.R. No. 118585 on 14 September 1995. Their claims that they tendered their offer to redeem on
various times are all unsubstantiated and which Metrobank has denied.
The general rule in redemption is that it is not sufficient that a person offering to redeem manifests his/her
desire to do so. The statement of intention must be accompanied by an actual and simultaneous tender of
payment. This constitutes the exercise of the right to repurchase. Bona fide redemption necessarily implies
a reasonable and valid tender of the entire purchase price, otherwise the rule on the redemption period
fixed by law can easily be circumvented.[36] There is no cogent reason for requiring the vendee to accept
payment by installments from the redemptioner, as it would ultimately result in an indefinite extension of
the redemption period.[37]
In order to effect a redemption, the judgment debtor must pay the purchaser the redemption price
composed of the following: (1) the price which the purchaser paid for the property; (2) interest of 1% per
month on the purchase price; (3) the amount of any assessment or taxes which the purchaser may have
paid on the property after the purchase; and (4) interest of 1% per month on such assessment and taxes.
[38]
Even assuming that such offer was made by the spouses Elisa and Antonio Tan within the one-year
redemption period, we find said offer in the amount of two million pesos to be invalid and ineffectual. It is
clear from the letter that the tender was in installments. Same will not do for there is no showing that
Metrobank agreed via such payment. By paying in installments, the redemption period will be extended. It
could be otherwise if Metrobank agreed; in such case, the concept of legal redemption will be converted
into one of conventional redemption.[39] Moreover, though there was an offer, there was no evidence that
there was an actual and simultaneous tender of payment. Redemption within the period allowed by law is
not a matter of intent but a question of payment or valid tender of the full redemption price within said
period.[40]
The trial court, citing State Investment House, Inc. v. Court of Appeals,[41] Belisario v. Intermediate
Appellate Court[42] and Hi-Yield Realty, Inc. v. Court of Appeals,[43]declared that the filing of the Civil
Complaint has the effect of freezing the redemption period and preserves the right of the mortgagor to
redeem the property foreclosed, and that the filing of the court action to enforce the correct redemption
price is equivalent to a formal offer to redeem. Such rule has no application in the instant case. Such rule
applies only when the complaint to enforce a repurchase is filed within the period of redemption in
which case, the same will be equivalent to an offer to redeem and have the effect of preserving the right
of redemption. In the case before us, the complaint for redemption (Specific Performance) was
filed beyond the one-year redemption period or on 12 September 1997 , more than twelve
years from 20 June 1985 which is the last day of said period. We do not consider the complaint filed
by respondents on 11 December 1984, docketed as Civil Case No. 85-33933, for Annulment and
Cancellation of Extra-judicial Foreclosure Sale to be an action for judicial redemption because its purpose
was not for redemption but for nullification of extrajudicial foreclosure sale.
In the case at bar, respondents spouses Elisa and Antonio Tan failed to show good faith on their part. They
have failed to validly tender any redemption price nor consigned any amount, in any of the cases they
have filed, which they believed was the correct amount, if only to show their willingness and ability to pay.
It is not difficult to understand why the redemption price should either be fully offered in legal tender or
else validly consigned in court. Only by such means can the auction winner be assured that the offer to
redeem is being done in good faith.[44]
In the case before us, though the respondents spouses Marcial See and Lilian Tan signed a document
entitled "Deed of Redemption and Reconveyance" wherein they were called the "Redemptioners" and that
they paid the amount of P11,500,000.00 for the subject property, this Court finds that what was entered
into by them and Metrobank was not a redemption, but a sale. Being already the absolute owner of the
subject property because spouses Elisa and Antonio Tan failed to properly exercise their right of
redemption, Metrobank can sell, to a price of its liking, the foreclosed property to interested buyers which
in this case are respondents spouses Marcial See and Lilian Tan. The price itself (P11,500,000.00) is
indicative of a sale. If it were a redemption, the price would only be the winning bid price (P1,775,040.00)
plus interest up to the time of redemption, together with the amount of any assessments or taxes paid by
the purchaser after the auction sale, and interest on such last-named amount at the same rate.
The appellate court's ruling that Metrobank had no right to demand from spouses Elisa and Antonio Tan
the actual delivery of the redemption price because it is not legally capacitated to surrender the
possession and title of the subject property to said spouses until such time the redemption of spouses
Marcial See and Lillian Tan is declared null and void, is flawed.
Metrobank, as the highest bidder in the public auction sale, can demand from the redemptioner, in this
case spouses Elisa and Antonio Tan, the purchase price and taxes it had paid for the property, together
with interests with the one-year redemption period. If same is not paid by the redemptioner within the
time prescribed by law, the latter loses his/her right to redeem, and the buyer of the foreclosed property
becomes its absolute owner. Prior to selling the property to spouses Marcial See and Lilian
Tan via the Deed of Redemption and Reconveyance, Metrobank already consolidated its ownership over
the foreclosed property. We will not nullify the "redemption" (purchase) made by spouses Marcial See and
Lilian Tan so that respondents spouses Elisa and Antonio Tan can exercise their right of redemption which
has long been lost for their failure to exercise the same in accordance with law.
The trial court's ruling that respondents spouses Elisa and Antonio Tan should be allowed to redeem the
foreclosed property because Metrobank "allowed the execution of the Deed of Redemption and
Reconveyance to a wrong person and for wrong reason" is erroneous. As explained above, we consider the
"redemption" for P11,500,000.00 made by spouses Marcial See and Lilian Tan to be a sale in the guise of a
redemption. Such "redemption" will not restore respondents spouses Elisa and Antonio Tan's right to
legally redeem the subject property which right they have lost.
Respondents spouses Elisa and Antonio Tan were granted by the law the right of redemption which they
failed to exercise validly and effectively. Having failed to redeem the foreclosed property in the manner
and within the period prescribed by law, they have lost any right and interest over the subject property. In
so doing, Metrobank has the right to dispose of said property as it deems fit.
WHEREFORE, all the foregoing considered, the instant petition for review on certiorari is GRANTED and
the Decision of the Court of Appeals dated 31 January 2007 and its Resolution dated 15 June 2007 in CA-
G.R. CV No. 86214 are hereby REVERSED andSET ASIDE. The complaint in Civil Case No. 97-85012
before the Regional Trial Court of Manila, Branch 32, is DISMISSED.
SO ORDERED.
MINITA V. CHICO-NAZARIO
Associate Justice
WE CONCUR:
CONSUELO YNARES-SANTIAGO
Associate Justice
Chairperson
ADOLFO S. AZCUNA
Associate Justice
* Per Special Order No. 521, dated 29 September 2008, signed by Chief Justice Reynato S. Puno,
designating Associate Justice Adolfo S. Azcuna to replace Associate Justice Ruben T. Reyes, who is on
official leave.
[1] Penned by Associate Justice Andres B. Reyes, Jr. with Associate Justices Noel G. Tijam and Sesinando E. Villon , concurring; rollo, pp. 35-48.
[10] Ajax Marketing & Development Corporation v. Court of Appeals, G.R. No. 118585, 14 September 1995, 248 SCRA 222, 226-230.
[31] State Investment House, Inc. v. Court of Appeals, supra note 21 at 744.
[32] Landrito, Jr. v. Court of Appeals, G.R. No. 133079, 9 August 2005, 466 SCRA 107, 118; citing Conejero v. Court of Appeals, 123 Phil. 605, 612 (1966); Daza v. Tomacruz, 58 Phil.
414, 418 (1933); Sumerariz v. Development Bank of the Philippines, 129 Phil. 641, 648 (1967).
[33] An Act to Regulate the Sale of Property Under Special Powers Inserted In or Annexed to Real Real Estate Mortgages.
[34] Quimson v. Philippine National Bank, 146 Phil. 629, 636 (1970); Eastman Chemical Industries v. Court of Appeals, G.R. No. 76733, 30 June 1989, 174 SCRA 619, 630.
[37] State Investment House, Inc. v. Court of Appeals, supra note 21 at 746.
[38] Bodiongan v. Court of Appeals, G.R. No. 114418, 21 September 1995, 248 SCRA 496, 501.
[39] Lazo v. Republic Surety & Insurance Co., Inc., G.R. No. L-27365, 30 January 1970, 31 SCRA 329, 340.
[40] BPI Family Savings Bank, Inc. v. Veloso, G.R. No. 141974, 9 August 2004, 436 SCRA 1, 8.
THIRD DIVISION
x ---------------------------------------------------------------------------------------- x
DECISION
YNARES-SANTIAGO, J.:
This Petition for Review on Certiorari[1] assails the October 28, 2005 Decision[2] of the Court of
Appeals in CA-G.R. CV. No. 83794, which reversed the April 22, 2004 Decision[3] of the Regional Trial Court
of Mandaluyong City, Branch 213 in Civil Case No. MC-00-1063, as well as the January 31, 2006
Resolution[4]denying petitioner’s Motion for Reconsideration.
On July 16, 1998, Citytrust informed Tolentino that her credit line has expired thereby making her
P2,611,440.23 outstanding balance immediately due and demandable.[8] Tolentino failed to settle
her obligations thus her property was extrajudicially foreclosed and sold in a public auction, with
Citytrust as the highest bidder. On April 13, 1999, the Certificate of Sale was registered and duly
annotated on TCT No. 1933.
As of March 17, 2000, the “Statement of Account To Redeem” [9] sent by Citytrust showed
petitioner’s outstanding obligation at P5,386,993.91. Petitioner asked for a re-computation and the
deletion of certain charges, such as the late payment charges, foreclosure expenses, attorney’s fees,
liquidated damages, and interests, but was denied by Citytrust. As of April 10, 2000, petitioner’s
outstanding balance amounted to P5,431,337.41.
On April 7, 2000, petitioner filed a Complaint for Judicial Redemption, Accounting and Damages, with
application for the issuance of a Temporary Restraining Order/Writ of Preliminary Injunction, against
Citytrust and the Register of Deeds of Mandaluyong City.[10] Petitioner alleged that the bank
unilaterally increased the interest charges in her credit line from 17.75% to 23.04%; that she was
forced to convert her existing Home Owners Credit Line into an Amortized Term Loan with interest of
19.50%;[11] that the bank cancelled her credit line when she refused the said conversion; that her
mortgaged property was foreclosed and sold at public auction but the bank did not remit the balance
of the proceeds of the foreclosure sale; and that the bank unjustifiably refused her request for
accounting and re-computation of the redemption amount.
In its Answer with Counterclaim,[12] Citytrust asserted that petitioner’s credit line has a term of one
year and that upon the expiration of the said period, it may be cancelled and closed; that the
inclusion of late payment charges, foreclosure expense, attorney’s fees, liquidated damages,
foreclosure fee, and interests in the redemption price was in accordance with the terms and
conditions of their loan and mortgage contracts; that the bid price was applied to the outstanding
obligations of petitioner; and that the Complaint of petitioner was merely dilatory and frivolous
considering that she has admitted having defaulted in the payment of her obligations.
Meanwhile, TCT No. 1933 was cancelled and a new title[13] was issued in favor of
Citytrust. However, petitioner was able to secure a writ of preliminary injunction,[14] which enjoined
Citytrust from taking possession, selling, and/or otherwise disposing of the foreclosed property.
After trial on the merits, the Regional Trial Court of Mandaluyong City, Branch 213, rendered
judgment upholding petitioner’s right of redemption, but at the price computed by private
respondent. The dispositive portion of the Decision reads:
WHEREFORE, judgment is hereby rendered upholding the right of the herein plaintiff MARILOU
TOLENTINO to redeem the foreclosed property covered by Transfer Certificate of Title No. 1933
in accordance however with the computation stated in the account to redeem as of April 10,
2000 issued by the defendant CITYTRUST BANKING CORPORATION (now FAMILY BANK)
particularly marked as Exhibit 10 for the Defendant.
SO ORDERED.[15]
The trial court held that the filing of an action for judicial redemption by petitioner is equivalent to a
formal offer to redeem. Having exercised her right of legal redemption, petitioner should not be
barred from redeeming the property, but at the redemption price as computed by Citytrust pursuant
to the provisions of their loan agreement. The trial court held that petitioner cannot belatedly claim
that the loan agreement and mortgage contract are contracts of adhesion considering that she freely
and voluntarily executed the same, nor was she ignorant of the nature and provisions of the
agreements.
Both the petitioner and the bank appealed to the Court of Appeals, which rendered the assailed
Decision, the dispositive portion of which reads:
WHEREFORE, premises considered, the appeal of plaintiff is DISMISSED for lack of merit, while
the appeal of defendant Bank of the Philippine Islands is hereby GRANTED. The appealed
Decision dated April 22, 2004 of the Regional Trial Court of Mandaluyong City, Branch 213 is
hereby REVERSED and SET ASIDE. A new judgment is hereby entered DISMISSING the
complaint in Civil Case No. MC-00-1063.
SO ORDERED.[16]
The Court of Appeals held that petitioner’s act of filing an action for judicial redemption without
simultaneous consignation of redemption money was not valid. Having failed to exercise her right of
redemption within the one-year period provided by law, petitioner thus lost all her rights over the
foreclosed property. The appellate court noted that as early as March 17, 2000, Citytrust computed
the redemption price at P5,386,993.91; however, petitioner only offered to pay P3 million pesos,
without attempting to tender a single centavo to private respondent. Further, records show that
when asked during trial if she was prepared to tender the amount, petitioner replied in the negative.
Petitioner insists that the mortgage agreement is a contract of adhesion since it was solely prepared
by the bank and her only participation thereto was to affix her signature; that the 25% attorney’s
fees, penalty, late payment charges, and liquidated damages are excessive and unconscionable; that
the capital gains tax should not have been added to the computation of the redemption price; that
the filing of the complaint for judicial redemption effectively tolled the running one-year prescriptive
period; that the consignation of the redemption price is only necessary if the redemption suit was
filed after the expiration of the redemption period; and that without admitting the loss of right to
redeem, the surplus of the proceeds of the foreclosure sale should have been returned to her.
A contract of adhesion is an agreement where one of the parties imposes a ready-made form of
contract which the other party may accept or reject, but which the latter cannot modify. One
party prepares the stipulation in the contract, while the other party merely affixes his signature or his
“adhesion” thereto giving no room for negotiation and depriving the latter of the opportunity to
bargain on equal footing.[17]
It bears stressing that a contract of adhesion is just as binding as ordinary contracts. However, there
are instances when this Court has struck down such contract as void when the weaker party is
imposed upon in dealing with the dominant bargaining party and is reduced to the alternative of
taking it or leaving it, completely deprived of the opportunity to bargain on equal footing.
Nevertheless, a contract of adhesion is not invalid per se; it is not entirely prohibited. The one who
adheres to the contract is in reality free to reject it entirely; if he adheres, he gives his consent.[18]
In the instant case, it has not been shown that petitioner signed the contracts through mistake,
violence, intimidation, undue influence, or fraud. Petitioner even admitted during trial that she was
not compelled to sign the contracts, nor was she totally ignorant of their nature, having been
engaged in business since 1984.[20] Petitioner only raised in issue the following stipulations before
the redemption period expired, to wit:
2. Loan Line – CityTrust shall make the Loan Line available to Client for a period of one (1) year
from the date of this Agreement subject to Section 19; xxx
19. Cancellation – (a) The Loan Line may be cancelled by either party upon thirty-day written
notice to the other party.
(b) CityTrust may shorten the period of availability of the Loan Line upon thirty-day written notice to
Client.
(c) Upon cancellation of the Loan Line or expiration of the period of availability of the Loan Line, the
Loan Account and CityTrust Business Credit Line Current Account shall be automatically
cancelled/closed and Client shall immediately pay the entire Outstanding Balance. Client shall
immediately surrender to CityTrust any and all unused CityTrust Business Credit Line Check(s) as well
as the ATM card issued to access the CityTrust Business Credit Line Current Account.
7. Interest on Outstanding Balance – The Outstanding Balance shall earn simple interest,
computed daily, at such per annum rate for such interest period (of not less than 30 days) as shall be
determined in advance by CityTrust and advised initially through the Letter of Approval and
thereafter through the Statement of Loan Account. Interest shall be calculated on the basis of actual
number of days elapsed and a year of 360 days. Interest accrued shall be automatically debited by
the CityTrust against the Loan Account.
9. Penalty Charges – Failure to make the full remittance required to cover the Excess
Availment within fifteen (15) days from the date that the same is incurred shall subject the Excess
Availment to penalty charge. Failure to make the full remittance required to cover an Excess
Availment within fifty-nine (59) days from the date that the same is incurred shall subject the entire
Outstanding Balance to the aforesaid penalty charge. Penalty charges shall be imposed by CityTrust
without prejudice to Sections 7 (Interest on Outstanding Balance) and 15 [Events of Default].
The penalty charge shall be such per annum rate as shall be determined by CityTrust and advised
through the Statement of Loan Account and Demand Statement. Sail penalty charge shall be fixed
for thirty (30) days or such other period as may be determined by CityTrust and shall be
automatically debited against the Loan Account.
20. Collection/Attorney’s Fees – in the event CityTrust is compelled to litigate or engage the
services of a lawyer or collection agent for collection or implementation of the terms of the
Agreements, Client shall pay attorney’s fees in the sum equivalent to twenty-five (25%) percent of
the amount due but which attorney’s fees shall in any case be not less than FIVE THOUSAND PESOS
(P5,000.00) plus costs of suit and other litigation expenses and, in addition, liquidated damages in
the sum equivalent to ten (10%) percent of the amount due but which liquidated damages shall in
any case be not less than ONE THOUSAND PESOS (P1,000.00).[21]
We find the above-quoted provisions explicit and leave no room for construction. It is easily
understood, especially by a businesswoman like the petitioner. Thus, we agree with the conclusion of
the trial and appellate courts that no compelling reasons were presented to declare the subject
contractual documents as void contracts of adhesion.[22]
Anent the legality of petitioner’s judicial redemption and the bank’s computation of the redemption
price, Section 6 of Act No. 3135,[23] as amended,[24]provides for the requisites for a valid
redemption, to wit:
SEC. 6. In all cases in which an extrajudicial sale is made under the special power hereinbefore
referred to, the debtor, his successors in interest or any judicial creditor or judgment creditor of said
debtor, or any person having a lien on the property subsequent to the mortgage or deed of trust
under which the property is sold, may redeem the same at any time within the term of one year from
and after the date of sale; and such redemption shall be governed by the provisions of sections four
hundred and sixty-four to four hundred and sixty-six, inclusive, of the Code of Civil Procedure, insofar
as these are not inconsistent with the provisions of this Act.
However, considering that private respondent is a banking institution, the determination of the
redemption price is governed by Section 78 of the General Banking Act,[25] as amended by
Presidential Decree No. 1828, which provides:
In the event of foreclosure, whether judicially or extrajudicially, of any mortgage on real estate which
is security for any loan granted before the passage of this Act or under the provisions of this Act, the
mortgagor or debtor whose real property has been sold at public auction, judicially or extrajudicially,
for the full or partial payment of an obligation to any bank, banking or credit institution, within the
purview of this Act shall have the right, within one year after the sale of the real estate as a result of
the foreclosure of the respective mortgage, to redeem the property by paying the amount fixed by
the court in the order of execution, or the amount due under the mortgage deed, as the case may be,
with interest thereon at the rate specified in the mortgage, and all the costs, and judicial and other
expenses incurred by the bank or institution concerned by reason of the execution and sale and as a
result of the custody of said property less the income received from the property.
Section 78 of the General Banking Act amended Section 6 of Act No. 3135 insofar as the redemption
price is concerned when the mortgagee is a bank or a banking or credit institution.[26] Thus, the
amount at which the foreclosed property is redeemable is the amount due under the mortgage deed,
or the outstanding obligation of the mortgagor plus interest and expenses in accordance with Section
78 of the General Banking Act.[27]
In Banco Filipino Savings and Mortgage Bank v. Court of Appeals,[28] we ruled that the redemptioner
should make an actual tender in good faith of the full amount of the purchase price, i.e., the amount
fixed by the court in the order of execution or the amount due under the mortgage deed, as the case
may be, with interest thereon at the rate specified in the mortgage, and all the costs, and judicial and
other expenses incurred by the bank or institution concerned by reason of the execution and sale and
as a result of the custody of said property less the income received from the property.[29]
As correctly pointed out by the appellate court, the general rule in redemption is that it is not
sufficient that a person offering to redeem simply manifests his/her desire to do so. The statement of
intention must be accompanied by an actual and simultaneous tender of payment. This constitutes
the exercise of the right to repurchase. Bona fide redemption necessarily implies a reasonable and
valid tender of the entire purchase price, otherwise the rule on the redemption period fixed by law
can easily be circumvented.[30]
Petitioner however claims, citing Banco Filipino Savings and Mortgage Bank v. Court of
Appeals [31] and Lee Chuy Realty Corporation v. Court of Appeals[32] that in case of disagreement
over the redemption price, the redemptioner may preserve his right of redemption through judicial
action which must be filed within the one-year period of redemption. The filing of a court action to
enforce redemption, being equivalent to a formal offer to redeem, would have the effect of
preserving his redemptive rights and “freezing” the expiration of the one-year period.[33] Bona
fide tender of the redemption price, within the prescribed period is only essential to preserve the
right of redemption for future enforcement beyond such period of redemption and within the period
prescribed for the action by the statute of limitations. Where the right to redeem is exercised
through judicial action within the reglementary period, the offer to redeem, accompanied by a bona
fide tender of the redemption price, while proper, may be unessential.[34]
It should, however, be noted that in Hi-Yield Realty, Inc. v. Court of Appeals,[35] we held that the
action for judicial redemption should be filed on time and in good faith, the redemption price is finally
determined and paid within a reasonable time, and the rights of the parties are respected. Stated
otherwise, the foregoing interpretation has three critical dimensions: (1) timely redemption or
redemption by expiration date; (2) good faith as always, meaning, the filing of the action must have
been for the sole purpose of determining the redemption price and not to stretch the redemptive
period indefinitely; and (3) once the redemption price is determined within a reasonable time, the
redemptioner must make prompt payment in full.[36]
The records show that the correct redemption price had been determined prior to the filing of the
complaint for judicial redemption. Petitioner had been furnished updated Statements of Account
specifying the redemption price even prior to the consolidation of the title of the foreclosed property
in the bank’s name. The inclusion of late payment charges, foreclosure expense, attorney’s fees,
liquidated damages, foreclosure fee, and interests therein was pursuant to the Loan
Agreement. Considering that the Loan Agreement was read and freely adhered to by petitioner, the
stipulations therein are binding on her.[37]
Moreover, petitioner admitted during trial that she was not questioning the computation of the
redemption price, but she was requesting for a condonation of certain fees and charges.
Q. Now Madam Witness, during the last hearing, you were questioning the statement of account,
the computation, is that correct?
A. Yes, sir.
Q. In particular, you were questioning the attorney’s fees of twenty five percent (25%), is that
correct?
A. Yes, sir.
Q. Did you not read the mortgage loan agreement, Madam Witness?
A. I know its [sic] there in the mortgage loan what I said is that I was requesting for a
condonation.
Q. In your complaint there is an allegation that the computation has no basis, do you confirm
that, do you still maintain that?
A. Yes.
Q. So, it is not your statement in your complaint that the computation has no basis, is not
correct?
A. Yes, sir.
Q. So, the twenty five percent computation here has a basis, which is the mortgage
loan agreement, correct?
A. Yes, in your agreement.
Q. So, also with this liquidated damages of ten percent (10%), there is a basis under the
mortgage loan agreement?
A. I’m not sure.
xxxx
Q. Now, Ms. Witness, can you now say that this statement of account is with basis,
accurate and with basis [sic]?
A. It has a basis, based on your conditions as prepared by the bank.
Q. But the bank did not compel you to apply for a loan?
A. No, they did not compel me.
The records also reveal that petitioner offered to redeem the foreclosed property for P3 million but
failed to tender or consign the same, to wit:
Q. Ms. Witness, you stated that based on your computation[,] the redemption price should be
three million pesos (P3,000,000.00) more or less?
A. More or less.
Q. Do you have this amount right now? Do you have this three million (P3M) more or less, do
you have this amount right now?
A. Not right now, but if we will be given a few days to produce it, we will give us [sic] that kind.
xxxx
Q. Did you tender this amount of three million pesos (P3M) more or less, to the bank?
A. No, because that is not the amount that they were asking for.
Q. Did you at least offer to pay this amount of three million pesos (P3M) more or less?
A. During the discussion with the manager, Ms. Lolita Carrido, I ask [sic] her if the deletion of the
said [sic] is possible but she said it’s not possible.
xxxx
Q. Did you also consign with this amount of three million pesos (P3M) more or less?
A. No, sir.[39]
Based on the foregoing, it is clear that petitioner did not file the instant case for judicial redemption
in good faith. It was not filed for the purpose of determining the correct redemption price but to
stretch the redemption period indefinitely, which is not allowed by law.
WHEREFORE, the instant Petition for Review on Certiorari is DENIED. The Decision of the Court of
Appeals in CA-G.R. CV. No. 83794 dismissing the complaint for judicial redemption for lack of merit
and the Resolution denying petitioner’s motion for reconsideration are AFFIRMED.
SO ORDERED.
CONSUELO YNARES-SANTIAGO
Associate Justice
WE CONCUR:
ATTESTATION
I attest that the conclusions in the above decision were reached in consultation before the case was
assigned to the writer of the opinion of the Court’s Division.
CONSUELO YNARES-SANTIAGO
Associate
Justice Chairperson, Third Division
CERTIFICATION
Pursuant to Section 13, Article VIII of the Constitution and the Division Chairperson’s Attestation, it is
hereby certified that the conclusions in the above Decision were reached in consultation before the case
was assigned to the writer of the opinion of the Court’s Division.
REYNATO S. PUNO
Chief Justice
* On leave.
[1] Rollo, pp. 8-32.
[2] Id. at 33-48; penned by Associate Justice Martin S. Villarama, Jr. and concurred in by Associate Justices
Edgardo F. Sundiam and Japar B. Dimaampao.
[3] Id. at 33-34.
[4] Id. at 49.
[5] Records, pp. 51-54, 99-101, also known as Homeowners’ Credit Line.
[6] Rollo, pp. 50-53.
[7] Records, pp. 20-23.
[8] Id. at 24.
[9] Id. at 32.
[10] Id. at 7-14.
[11] Id. at 102.
[12] Id. at 44-49.
[13] TCT No. 15625, id. at 72.
[14] Id. at 167-168.
[15] CA Rollo, pp. 44-56.
[16] Id. at 48.
[17] South Pachem Development, Inc. v. Court of Appeals, G.R. No. 126260, December 16, 2004, 447 SCRA
85, 95.
[18] Rizal Commercial Banking Corporation v. Court of Appeals, 364 Phil. 947, 953-954 (2002).
[19] South Pachem Development, Inc. v. Court of Appeals, supra note 17 at 95-96.
[20] TSN, October 7, 2002, pp. 14-15.
[21] Records, pp. 51-53.
[22] Rollo, p. 40.
[23] An Act to Regulate the Sale of Property under Special Powers Inserted in or Annexed to Real Estate
Mortgages (1924).
[24] Act No. 4118 (1933).
[25] Republic Act No. 337 (1948).
[26] Sy v. Court of Appeals, G.R. No. 83139, April 12, 1989, 172 SCRA 125, 133-134.
[27] Union Bank of the Philippines v. Court of Appeals, 412 Phil. 64, 76 (2001).
[28] G.R. No. 143896, July 8, 2005, 463 SCRA 64.
[29] Id. at 75.
[30] BPI Family Savings Bank, Inc. v. Veloso, G.R. No. 141974, August 9, 2004, 436 SCRA 1, 6.
[31] Supra note 28.
[32] 321 Phil. 185 (1995).
[33] Banco Filipino Savings and Mortgage Bank v. Court of Appeals, supra note 28 at 75.
[34] Lee Chuy Realty Corporation v. Court of Appeals, supra note 32 at 190-191.
[35] 437 Phil. 483 (2002).
[36] Id. at 493.
[37] Consing v. Court of Appeals, G.R. No. 143584, March 10, 2004, 425 SCRA 192, 203.
[38] TSN, October 7, 2002, pp. 16-19.
[39] TSN, September 22, 2000, pp. 33-35.
Pasted from <http://sc.judiciary.gov.ph/jurisprudence/2007/march2007/171354.htm>
1 "Heirs of Norberto Quisumbing v. Philippine National Bank and Santiago Land Development
Corporation," Annex "A" of Petition, rollo, pp. 130-145. Penned by Associate Justice Jose C. Reyes, Jr., and
concurred in by Associate Justices Jose L. Sabio, Jr., and Myrna Dimaranan Vidal.
2 Annex "EE," id at. 747-757. Penned by Judge Roberto C. Diokno.
3 Exhibit "BB," id at 316-324.
4 Annex "N," id at 188-192.
5 Vide letter, Annex "O," id at 357 and 359.
6 Annex "Q," id at 193-196.
7 Vide letter, records, Vol. I, pp. 142-143.
8 Annex "C," id at 147-155.
9 N.B.: initially filed with Branch 149 but assailed Decision rendered by Branch 62.
10 Annex "D," id. at 209-213.
11 Art. 1491(5) justices, judges, prosecuting attorneys, clerks of superior and inferior courts, and other
officers and employees connected with the administration of justice, the property and rights in litigation
or levied upon an execution before the court within whose jurisdiction or territory they exercise their
respective functions; this prohibition includes the act of acquiring by assignment and shall apply to
lawyers, with respect to the property and rights which may be the object of any litigation in which they
may take part by virtue of their profession;
12 Santiago Land Development Corporation v. Court of Appeals, G.R. No. 106194, January 28, 1997, 267
SCRA 79.
13 Vide note 2.
14 110 Phil 42 (1960).
15 G.R. No. L-66597, August 29, 1986, 143 SCRA 705.
16 Rollo, pp. 1663-1715.
17 Id. at 1485-1589.
18 G.R. No. 127682, April 24, 1998, 289 SCRA 604.
19 Rollo, pp. 1728-1809.
20 Id. at 1469-1479.
21 G.R. No. 143896, July 8, 2005, 463 SCRA 64, 73-76.
22 Tolentino v. Court of Appeals and Citytrust Banking Corporation, G.R. No. 171354, March 7, 2007, 517
SCRA 732, 744-745.
23 TSN, hearing of Civil Case No. 10513 on March 3, 1987, records, Vol. III, pp. 190-191.
24 Id. at 199.
25 EXECUTIVE ORDER NO. 80
PROVIDING FOR THE 1986 REVISED CHARTER OF THE PHILIPPINE NATIONAL BANK (December
3, 1986)
xxxx
Sec. 38. Repealing Clauses. Subject to Section 31 of this Charter, Presidential Decree No. 694, as
amended, is hereby repealed. All other laws, decrees, acts, executive orders, administrative orders,
proclamations, rules and regulations or parts thereof inconsistent with any of the provisions of this
Charter are hereby repealed or modified accordingly. (emphasis supplied)
xxxx
Sec. 31. Banking Operations under the 1986 Revised Charters; Governing Laws. The Banking operations
of the Bank shall be governed by the provisions of this Charter beginning on January 1, 1987, or on such
subsequent date as may be determine by the President of the Philippine upon the recommendation of the
Minister of Finance. (Emphasis supplied)
on official leave
THIRD DIVISION
YNARES-SANTIAGO, J.,
Chairperson,
- versus - CARPIO,*
CORONA,**
NACHURA, and
PERALTA, JJ.
x------------------------------------------------------------------------------------x
DECISION
NACHURA, J.:
This petition for review filed by Philippine National Bank (PNB) seeks to nullify and set aside the
March 12, 2008 Decision[1] of the Court of Appeals (CA) in CA-G.R. SP No. 99194, which affirmed the
Orders dated August 24, 2006[2] and March 2, 2007[3] of the Regional Trial Court (RTC) of Pasig
City, and the June 6, 2008 Resolution,[4] denying PNB’s motion for reconsideration.
The antecedents.
On April 7, 1995, PNB, along with Metropolitan Bank and Trust Company (MBTC), United Coconut
Planters Bank (UCB), and Citytrust Banking Corporation (CBC), extended credit facilities
worth P800,000,000.00 to respondent Gotesco Tyan Ming Development, Inc. (GOTESCO). To secure
the credit facility, GOTESCO executed a Mortgage Trust Indenture over a parcel of land in Pasig City,
covered by Transfer Certificate of Title (TCT) No. PT-97306.[5] GOTESCO availed itself
of P800,000,000.00 from its credit line, but failed to pay it in full. Accordingly, PNB, MBTC, UCB, and
CBC instituted foreclosure proceedings on the GOTESCO property.
On July 30, 1999, the property was auctioned and was awarded to PNB as the highest bidder
for P1,240,000,496.82. A Certificate of Sale[6] was issued on August 4, 1999 and was registered
with the Register of Deeds on November 9, 1999.
The one-year redemption period expired without GOTESCO exercising its right of redemption.
Accordingly, PNB consolidated the title in its name and, on July 18, 2005, TCT No. PT-127557[7] in
the name of PNB was issued. Consequently, PNB filed an Ex-Parte Petition for Issuance of Writ of
Possession with the RTC of Pasig City. The case was docketed as LRC Case No. R-6695-PSG and was
raffled to Branch 155.
On August 24, 2006, Hon. Judge Luis R. Tongco of Branch 155 issued an Order granting the motion
for consolidation:
Finding merit in the Motion For Consolidation filed by [respondent] Gotesco Tyan Ming
Development, Inc., through counsel, on August 7, 2006, and as prayed for and over the
opposition of x x x petitioner Philippine National Bank (PNB), the same is hereby GRANTED.
Let, therefore, the entire records of the instant case be forwarded to the Office of the Clerk of
Court, RTC, Pasig City for CONSOLIDATION with Civil Case No. 68139, entitled “Gotesco Tyan
Ming Development, Inc. v. Philippine National Bank, et al.” filed on October 30, 2000 pending
before Branch 161, Regional Trial Court, Pasig City.
SO ORDERED.[8]
PNB filed a motion for reconsideration, but RTC Branch 161 denied the same, viz.:
After a careful and judicious consideration of the arguments raised by the parties in their
respective pleadings, this Court resolves to DENY the Urgent Motion for Reconsideration.
A perusal of the arguments/issues raised by the petitioner in its pleadings would clearly show
that they were mere reiteration of its previous arguments/issues which have been duly
considered and passed upon by Honorable Judge Luis R. Tongco who ordered the consolidation
of this case, in his discretion, to the civil case pending before this Court and no new matter was
raised to warrant the reconsideration of the assailed Order dated August 24, 2006.
As a rule, the consolidation of several cases involving the same parties and subject matter is
discretionary with the trial court. However, consolidation of these cases becomes a matter of
duty if two or more cases are tried before the same judge, or, if filed with different branches of
the same Court of First Instance, one of such cases has not been partially tried. (Raymundo, et
al. v. Felipe, L-30887, Dec. 24, 1971). Noteworthy is the fact that the civil case pending
before this Court is in the stage of presentation of [GOTESCO’s] initial evidence.
As stressed by the Honorable Supreme Court in the case of Philippine Savings Bank v. Spouses
Rodolfo C. Mañalac, Jr., G.R. No. 145441, April 26, 2005, to wit:
“In Active Wood Products Co., Inc. v. Court of Appeals, x x x The Court held that
while a petition for a writ of possession is an ex-parte proceeding, being made on a
presumed right of ownership, when such presumed right of ownership is contested
and is made the basis of another action, then the proceedings for writ of possession
would also become groundless. The entire case must be litigated and if need be
must be consolidated with a related case so as to thresh out thoroughly all related
issues.
In the same case, the Court likewise rejected the contention that under the Rules of
Court only actions can be consolidated. The Court held that the technical difference
between an action and a proceeding, which involve the same parties and subject
matter, becomes insignificant and consolidation becomes a logical conclusion in
order to avoid confusion and unnecessary expenses with the multiplicity of suits.”
WHEREFORE, in view of the foregoing, finding no cogent reason to reverse and set aside the
assailed Order dated August 24, 2006, the Urgent Motion for Reconsideration is hereby DENIED
and the two (2) cases being consolidated, this Court deems it proper to treat Civil Case No.
68139 for Annulment of Foreclosure Sale, etc. as an opposition to this case (LR Case No. R-
6695-PSG). Thus, petitioner should first present evidence.
Accordingly, the March 30, 2007 setting in Civil Case No. 68139 is cancelled and reset to April
13, 2007 at 1:30 o’clock (sic) in the afternoon for the presentation of x x x PNB’s evidence.
SO ORDERED.[9]
PNB then filed a petition for certiorari with the CA. On March 12, 2008, the CA rendered the assailed
Decision dismissing the petition. Citing Philippine Savings Bank v. Mañalac, Jr.,[10] the CA rejected
PNB’s argument that a petition for issuance of a writ of possession cannot be consolidated with an
ordinary civil action. The CA further held that the RTC merely complied with the express mandate
of Section 1, Rule 31 of the 1997 Rules of Civil Procedure in granting the motion for consolidation.
Thus, it cannot be charged with grave abuse of discretion.
PNB moved for reconsideration of the decision, but the CA denied it on June 6, 2008.
On March 27, 2009, PNB moved for the issuance of a temporary restraining order (TRO) and/or writ
of preliminary injunction to enjoin the proceedings in LRC Case No. R-6695-PSG and in Civil Case No.
68139. PNB claimed that its petition for issuance of a writ of possession, which is supposed to be
summary in nature, is in grave and imminent danger of being wrongfully subjected to litigation. It
alleged that its witness is set to be cross-examined on April 23, 2009 at 1:30 p.m. despite PNB’s
continuing objection as to the flow of trial. It argued that, in the event that the RTC further proceeds
with the hearing of the consolidated cases, the present petition will become moot and
academic. Thus, unless the RTC is restrained or enjoined from further hearing the two improperly
consolidated cases, PNB’s right to due process, particularly to an expeditious and summary hearing
of its ex-parte petition, will be utterly violated. PNB added that it would also suffer grave and
irreparable injury as its right to take immediate possession of the mortgaged property, with the title
thereto now consolidated in its name, would be rendered nugatory. In its April 20, 2009 Resolution,
this Court granted PNB’s prayer and issued a TRO enjoining the proceedings a quo.
In the main, PNB contends that the consolidation of its petition for issuance of a writ of possession
with GOTESCO’s case for annulment of foreclosure proceedings has seriously prejudiced its right to
a writ of possession. It points that after the consolidation of title in its name, when GOTESCO failed
to redeem the property, entitlement to a writ of possession becomes a matter of right. Moreover, a
petition for issuance of a writ of possession is a non-litigious proceeding; hence, it must not be
consolidated with a civil action for the annulment of foreclosure proceedings, specific performance,
and damages, which is litigious in nature. It faults the CA for affirming the RTC’s action.
GOTESCO, on the other hand, submits that the RTC and the CA did not err, much less abuse their
discretion, in granting the motion for consolidation. It cites judicial economy and convenience of
both parties as justification for granting the motion for consolidation.
The petition is meritorious.
The legal basis of an order of consolidation of two (2) cases is Section 1, Rule 31 of the Rules of Civil
Procedure, which states:
SECTION 1. Consolidation. — When actions involving a common question of law or fact are
pending before the court, it may order a joint hearing or trial of any or all the matters in issue
in the actions; it may order all the actions consolidated; and it may make such orders
concerning proceedings therein as may tend to avoid unnecessary costs or delay.
In Teston v. Development Bank of the Philippines,[11] we laid down the requisites for the
consolidation of cases, viz.:
A court may order several actions pending before it to be tried together where they arise from
the same act, event or transaction, involve the same or like issues, and depend largely or
substantially on the same evidence, provided that the court has jurisdiction over the cases to
be consolidated and that a joint trial will not give one party an undue advantage or prejudice
the substantial rights of any of the parties.[12]
The rule allowing consolidation is designed to avoid multiplicity of suits, to guard against oppression
or abuse, to prevent delays, to clear congested dockets, and to simplify the work of the trial court; in
short, the attainment of justice with the least expense and vexation to the parties- litigants.[13]
Thus, in Philippine Savings Bank v. Mañalac, Jr.,[14] we disregarded the technical difference
between an action and a proceeding, and upheld the consolidation of a petition for the issuance of a
writ of possession with an ordinary civil action in order to achieve a more expeditious resolution of
the cases, thus:
In the instant case, the consolidation of Civil Case No. 53967 with LRC Case No. R-3951 is more
in consonance with the rationale behind the consolidation of cases which is to promote a more
expeditious and less expensive resolution of the controversy than if they were heard
independently by separate branches of the trial court. Hence, the technical difference between
Civil Case No. 53967 and LRC Case No. R-3951 must be disregarded in order to promote the
ends of justice.[15]
But in the instant case, the consolidation of PNB’s petition for a writ of possession with GOTESCO’s
complaint for annulment of foreclosure proceeding serves none of the purposes cited above. On the
contrary, it defeated the very rationale of consolidation.
The record shows that PNB’s petition was filed on May 26, 2006, and remains pending after three (3)
years, despite the summary nature of the petition. Obviously, the consolidation only delayed the
issuance of the desired writ of possession. Further, it prejudiced PNB’s right to take immediate
possession of the property and gave GOTESCO undue advantage, for GOTESCO continues to possess
the property during the pendency of the consolidated cases, despite the fact that title to the
property is no longer in its name.
It should be stressed that GOTESCO was well aware of the expiration of the period to redeem the
property. Yet, it did not exercise its right of redemption. There was not even an attempt to redeem
the property. Instead, it filed a case for annulment of foreclosure, specific performance, and
damages and prayed for a writ of injunction to prevent PNB from consolidating its title. GOTESCO’s
maneuvering, however, failed, as the CA and this Court refused to issue the desired writ of
injunction.
Cognizant that the next logical step would be for PNB to seek the delivery of possession of the
property, GOTESCO now tries to delay the issuance of writ of possession. It is clear that the motion
for consolidation was filed merely to frustrate PNB’s right to immediate possession of the
property. It is a transparent ploy to delay, if not to prevent, PNB from taking possession of the
property it acquired at a public auction ten (10) years ago. This we cannot tolerate.
Jurisprudence teems with pronouncements that, upon the expiration of the redemption period, the
right of the purchaser to the possession of the foreclosed property becomes absolute. Thus, the
mere filing of an ex parte motion for the issuance of a writ of possession would suffice, and there is
no bond required since possession is a necessary consequence of the right of the confirmed owner.
It is a settled principle that a pending action for annulment of mortgage or foreclosure sale does not
stay the issuance of the writ of possession.[16] Indisputably, the consolidation of PNB’s petition with
GOTESCO’s complaint runs counter to this well established doctrine.
In De Vera v. Agloro[17] this Court upheld the denial by the RTC of a motion for consolidation of a
petition for issuance of a writ of possession with a civil action, as it would prejudice the right of one
of the parties, viz.:
It bears stressing that consolidation is aimed to obtain justice with the least expense and
vexation to the litigants. The object of consolidation is to avoid multiplicity of suits, guard
against oppression or abuse, prevent delays and save the litigants unnecessary acts and
expense. Consolidation should be denied when prejudice would result to any of the parties or
would cause complications, delay, prejudice, cut off, or restrict the rights of a party.
In the present case, the trial court acted in the exercise of its sound judicial discretion in
denying the motion of the petitioners for the consolidation of LRC Case No. P-97-2000 with Civil
Case No. 109-M-2000.
First. The proceedings in LRC Case No. P-97-2000 is not, strictly speaking, a judicial process
and is a non-litigious proceeding; it is summary in nature. In contrast, the action in Civil Case
No. 109-M-2000 is an ordinary civil action and adversarial in character. The rights of the
respondent in LRC Case No. P-97-2000 would be prejudiced if the said case were to be
consolidated with Civil Case No. 109-M-2000, especially since it had already adduced its
evidence.[18]
Likewise, in Teston v. Development Bank of the Philippines,[19] this Court explicitly declared that:
Consolidation should be denied when prejudice would result to any of the parties or would cause
complications, delay, cut off, or restrict the rights of a party.[20]
It is true that the trial court is vested with discretion whether or not to consolidate two or more
cases. But in the present case, we are of the considered view that the exercise of such discretion by
the RTC was less than judicious. We are constrained to agree with PNB that, given the
circumstances herein cited, the RTC’s discretion has been gravely abused. Accordingly, the CA
committed reversible error in upholding the RTC.
WHEREFORE, the petition is GRANTED. The assailed Decision and Resolution of the Court of
Appeals in CA-G.R. SP. No. 99194 and the Orders dated August 24, 2006 and March 2, 2007 of
the Regional Trial Court of Pasig City, Branch 155, are SET ASIDE. Let the Ex-Parte Petition for
Issuance of a Writ of Possession (LRC Case No. R-6695-PSG) and the Complaint for Annulment of
Foreclosure, Specific Performance and Damages (Civil Case No. 68139) proceed and be heard
independently in accordance with the Rules, and be resolved with dispatch.
SO ORDERED.
WE CONCUR:
CONSUELO YNARES-SANTIAGO
Associate Justice
Chairperson
DIOSDADO M. PERALTA
Associate Justice
ATTESTATION
I attest that the conclusions in the above Decision were reached in consultation before the case
was assigned to the writer of the opinion of the Court’s Division.
CONSUELO YNARES-SANTIAGO
Associate Justice
Chairperson, Third Division
CERTIFICATION
Pursuant to Section 13, Article VIII of the Constitution and the Division Chairperson's Attestation, I
certify that the conclusions in the above Decision had been reached in consultation before the case was
assigned to the writer of the opinion of the Court’s Division.
REYNATO S. PUNO
Chief Justice
* Additional member in lieu of Associate Justice Conchita Carpio Morales per Special Order No.
646 dated May 15, 2009.
** Additional member in lieu of Associate Justice Minita V. Chico-Nazario per Special Order No. 631
dated April 29, 2009.
[1] Penned by Associate Justice Amelita G. Tolentino, with Associate Justices Lucenito N. Tagle
and Agustin S. Dizon, concurring; rollo, pp. 49-56.
[2] Rollo, p. 113.
[3] Id. at 114-116.
[4] Id. at 19-20.
[5] Id. at 83-85.
[6] Id. at 80-82.
[7] Id. at 87-89.
[8] Id. at 113.
[9] Id. at 114-115.
[10] G.R. No. 145441, April 26, 2005, 457 SCRA 203.
[11] G.R. No. 144374, November 11, 2005, 474 SCRA 597.
[12] Teston v. Development Bank of the Philippines, id. at 605.
[13] Id.
[14] G.R. No. 145441, April 26, 2005, 457 SCRA 203.
[15] Philippine Savings Bank v. Mañalac, Jr., id. at 214.
[16] See Fernandez v. Espinoza, G.R. No. 156421, April 14, 2008, 551 SCRA 136, 150.
[17] G.R. No. 155673, January 14, 2005, 448 SCRA 203.
[18] De Vera v. Agloro, id. at 218. (Citations omitted.)
[19] Teston v. Development Bank of the Philippines, supra note 11.
[20] Id. at 606.
** Additional member in lieu of Associate Justice Minita V. Chico-Nazario per Special Order No. 631 dated April 29, 2009.
1 Rollo (G.R. No. 168332), pp. 48-49.
2 Now a Justice of the Court of Appeals.
3 Rollo (G.R. No. 168332), pp. 7-9.
4 CA rollo, p. 48.
5 Id. at 52-60.
6 Id. at 50.
7 Id. at 2-47.
8 Id. at 95-97.
9 Rollo (G.R. No. 168332), p. 196.
10 Id. at 197-198.
11 Id. at 49.
12 Id. at 40.
13 Penned by Associate Justice Eugenio S. Labitoria, with Associate Justices Eliezer R. delos Santos and
Arturo D. Brion (now a member of this Court), concurring; id. at 259-277.
14 Rollo (G.R. No. 169053), pp. 58-76.
15 Id. at 8-9.
16 Id. at 17-18.
17 Rollo (G.R. No. 168332), p. 44.
18 Id. at 286-288.
19 Id. at 290-292.
20 Rollo (G.R. No. 169053), p. 75.
21 Republic Act (R.A.) No. 8791.
22 R.A. No. 8791, Sec. 3 (3.1).
23 Central Bank of the Philippines v. Court of Appeals, G.R. No. 88353, May 8, 1992, 208 SCRA 652, 684-
685.
24 R.A. No. 7653.
25 R.A. No. 8791, Sec. 4. (Emphasis supplied.)
26 Memorandum, rollo (G.R. No. 169053), p. 717.
27 Miranda v. Philippine Deposit Insurance Corporation, G.R. No. 169334, September 8, 2006, 501 SCRA
288, 298.
28 Emphasis supplied.
29 Emphasis supplied.
30 See Prime White Cement Corporation v. Honorable Intermediate Appellate Court, et al., G.R. No.
68555, March 19, 1993, 220 SCRA 103.
31 In Re: Petition for Assistance in the Liquidation of the Rural Bank of Bokod (Benguet), Inc., PDIC v.
Bureau of Internal Revenue, G.R. No. 158261, December 18, 2006, 511 SCRA 123, 141, citing Laureano v.
Court of Appeals, 381 Phil. 403, 411-412 (2000).
32 A.M. No. 01-2-04-SC dated April 1, 2001.
33 Emphasis supplied.
34 Rollo (G.R. No. 169053), pp. 266-272
35 Id. at 271-272. (Citations omitted.)
36 Id. at p.457
37 Id. at pp. 459-462.
38 CA rollo, p. 460.
BSP Circulars…
Sunday, June 06, 2010
1:15 AM
ARMANDO L. SURATOS
Officer-In-Charge
AMANDO M. TETANGCO
Governor
This Circular shall take effect fifteen (15) days following its publication either in
the Official Gazette or in a newspaper of general circulation.
REPUBLIC ACT NO. 6037 - AN ACT TO AMEND CERTAIN SECTIONS OF REPUBLIC ACT NUMBERED
THREE THOUSAND FIVE HUNDRED NINETY ONE ENTITLED "AN ACT ESTABLISHING THE
PHILIPPINE DEPOSIT INSURANCE CORPORATION, DEFINING ITS POWERS AND DUTIES AND FOR
OTHER PURPOSES"
SECTION 1. Section 2 of Republic Act Numbered Three thousand five hundred ninety one is
hereby amended to read as follows:
"Sec. 2. The powers and functions of the Corporation shall be vested in a Board of Directors
consisting of three (3) members one of whom shall be the Governor of the Central Bank of the
Philippines and two of whom shall be citizens of the Republic of the Philippines to be
appointed by the President of the Philippines with the consent of the Commission on
Appointments. One of the appointive members shall be the Chairman of the Board of Directors
of the Corporation who shall be appointed on full time basis for a term of six (6) years at an
annual compensation which shall be fixed by the President of the Philippines. The other
appointive member, who shall be appointed for a term of four (4) years and the Governor of
the Central Bank shall each receive a per diem of not exceeding fifty pesos (P50.00) for each
day of meeting actually attended by them but in no case shall each of them receive more than
five hundred pesos (P500.00) a month.n the event of vacancy in the office of the Governor of
the Central Bank of the Philippines, and pending the appointment of his successor or during
the absence of the Governor, the Acting Governor of the Central Bank of the Philippines shall
act as member of the Board of Directors.n the event of a vacancy in the Office of the Chairman
of the Board of Directors and pending the appointment of his successor, the Governor of the
Central Bank of the Philippines shall act as Chairman. The members of the Board of Directors
shall be ineligible during the time they are in office and for a period of two years thereafter to
hold any office, position or employment in any insured bank, except that this restriction shall
not apply to any member who has served the full term for which he was appointed. No
member of the Board of Directors shall be an officer or director of any insured bank; and
before entering upon his duties as member of the Board of Directors, he shall certify under
oath that he has complied with this requirement and such certification shall be filed with the
Secretary of the Board of Directors. Any vacancy in the Board created by the death,
resignation, or removal of an appointive member shall be filled by the appointment of new
member to complete the unexpired period of the term of the member concerned.
"1. To prepare and issue rules and regulations as it considers necessary for the effective
discharge of its responsibilities.
"4. To authorize such expenditures by the Corporation as are in the interest of the effective
administration and operation of the Corporation."
"Sec. 4. The deposit liabilities of any bank or banking institution, which is engaged in the
business of receiving deposits as herein defined on the effective date of this Act, or which
thereafter may engage in the business of receiving deposits, shall be insured with the
corporation."
"Fourth — To sue and be sued, complain and defend, in any court of law in the Philippines. All
suits of a civil nature to which the Corporation shall be a part shall be deemed to arise under
the laws of the Philippines. No attachment or execution shall be issued against the
Corporation or its property before final judgment in any suit, action or proceeding in any
court. The Board of Directors shall designate an agent upon whom service of process may be
made in any province or city or jurisdiction in which the insured bank is located;
"Fifth — To appoint by its Board of Directors such officers and employees as are not otherwise
provided for in this Act, to define their duties, fix their compensation, require bonds of them
and fix penalty thereof and to dismiss such officers and employees for cause;
"Sixth — To prescribe, by its Board of Directors, by-laws not inconsistent with law, regulating
the manner in which its general business may be conducted, and the privileges granted to it
by law may be exercised and enjoyed;
"Seventh — To exercise, by its Board of Directors, or duly authorized officers or agents, all
powers specifically granted by the provisions of this Act, and such incidental powers as shall
be necessary to carry on the powers so granted;
"Eight — To make examinations of and to require information and reports from banks, as
provided in this Act: provided, that any examination shall be made simultaneously with the
examination by the Departments of the Central Bank conducting examinations on banks;
"Tenth — To prescribe by its Board of Directors such rules and regulations as it may deem
necessary to carry out the provisions of this Act."
"Sec. 12. (a) Money of the Corporation not otherwise employed shall be invested in
obligations of the Republic of the Philippines or in obligations guaranteed as to principal and
interest by the Republic of the Philippines.
"(b) The banking or checking accounts of the Corporation shall be kept with the Central Bank
of the Philippines, with the Philippine National Bank, or with any other bank designated as
depository or fiscal agent of the Philippine Government.
"(c) When the Corporation has determined that an insured bank is in danger of closing, in
order to prevent such closing, the Corporation, in the discretion of its Board of Directors is
authorized to make loans to, or purchase the assets of, or make deposits in, such insured
bank, upon such terms and conditions as the Board of Directors may prescribe, when in the
opinion of the Board of Directors the continued operation of such bank is essential to provided
adequate banking service in the community, Such loans and deposits may be in subordination
to the rights of depositors and other creditors."
"Sec. 13. The Corporation is authorized to borrow from the Central Bank of the Philippines
and the Central Bank is authorized and directed to loan the Corporation on such terms as may
be fixed by the Corporation and the Central Bank, such funds as in the judgment of the Board
of Directors of the Corporation are from time to time required for insurance purposes including
those provided for in section 12 (c) not exceeding in the aggregate of one hundred million
pesos at any one time: provided, that the rate of interest to be charged in connection with any
loan made pursuant to this Section shall not be less than the current average rate on
outstanding marketable and non-marketable obligations of the Republic of the Philippines as
of the last day of the month preceding the making of such loan. Any such loan shall be used by
the Corporation solely in carrying out its functions with respect to such insurance."
"Sec. 14. With the approval of the President of the Philippines, to issue bonds, debentures,
and other obligations whenever its capital or funds are not sufficient to meet its obligations to
depositors whose deposits are insured: provided, that the board of directors shall determine
the interest rates, maturity and other requirements of said obligations: provided, further, that
the corporation shall provide for appropriate reserves for the redemption or retirement of said
obligations.
"All notes, debentures, bonds or such obligations issued by the Corporation shall be exempt
from taxation."
SECTION 9. Section 16 (a) of the same Act is hereby amended to read as follows:
"Sec. 16. (a) Every insured bank shall display at each place of business maintained by it a
sign or signs, and shall include a statement to the effect that its deposits are insured by the
Corporation in all of its advertisements: provided, that the Board of Directors may exempt
from this requirement advertisements which do not relate to deposits or when it is impractical
to include such statement therein. The Board of Directors shall prescribe by regulation the
forms of such signs and the manner of display and the substance of such statements and the
manner of use. For each day an insured bank continues to violate any provisions of this
subsection or any lawful provisions of said regulations, it shall be subject to a penalty of not
more than P100.00 which the Corporation may recover for its use: provided, however, that the
penalty of imprisonment for not more than one (1) year or a fine of not exceeding two
thousand pesos (P2,000.00) or both, in the discretion of the court shall be imposed upon:
"1. The directors and officers of any Bank, Corporation, partnership or any other company
performing banking functions in the Philippines not insured under the provisions of this Act
which shall in any manner, advertise, or hold itself out as having insured status for the
purpose of making it appear that its deposits are insured with the corporation.
"2. The directors and officers of a bank whose insured status had already been terminated, if
such bank shall continue to advertise in any manner or hold itself out as having insured
deposits, unless in the same connection, it shall also state with the same prominence that
additional and/or new deposits made after the effective date of termination of its insured
status are no longer insured.
"3. Any person, who knowing the purpose for which the official sign, advertising statement
and/or emblem, as duly prescribed by the board of directors of the corporation is to be used,
reproduces or supplies such official sign, advertising statement and/or emblem or a colorable
imitation thereof, for the use of a bank not insured under the provisions of this act, to enable
such bank to fraudulently use the same in connection with the advertising of its services.
"(b) No insured bank shall pay any dividends on its capital stock or interest on its capital
notes or debentures (if such interest is required to be paid only out of net profits) or distribute
any of its capital assets while it remains in default in the payment of any assessment due to
the Corporation; and any director or officer of any insured bank who participates in the
declaration or payment of any such dividend or interest or in any such distribution shall, upon
conviction, be fined not more than P1,000 or imprisoned not more than one year, or both:
provided, that if such default is due to a dispute between the insured bank and the
Corporation over the amount of such assessment, this subsection shall not apply, if such bank
shall deposit security satisfactory to the Corporation for payment upon final determination of
the issue.
"(c) Without prior written consent by the Corporation, no insured bank shall (1) merge or
consolidate with any non-insured bank or institution or convert into a non-insured bank or
institution or (2) assume liability to pay any deposits made in, or similar liabilities of, any non-
insured bank or institution or (3) transfer assets to any non-insured bank or institution in
consideration of the assumption of liabilities for any portion of the deposits made in such
insured bank.
"(d) The Corporation may require any insured bank to provide protection and indemnity
against burglary, defalcation, and other similar insurable losses. Whenever any insured bank
refuses to comply with any such requirement the Corporation may contact for such protection
and indemnity and add the cost thereof to the assessment otherwise payable by such bank.
"(e) Any insured bank which willfully fails or refuses to file any certified statement or pay
any assessment required under this Act shall be subject to a penalty of not more than P100 for
each day that such violations continue, which penalty the Corporation may recover for its use:
provided, that this subsection shall not be applicable under the circumstances stated in the
provisions of subsection (b) of this section."
SECTION 10. This Act shall take effect upon its approval.
PD 120
Sunday, June 06, 2010
3:21 AM
MALACAÑANG
Manila
PRESIDENTIAL DECREE No. 120 January 29, 1973
AMENDING REPUBLIC ACT NUMBERED THREE THOUSAND FIVE HUNDRED NINETY-ONE, AS
AMENDED, ENTITLED "AN ACT ESTABLISHING THE PHILIPPINE DEPOSIT INSURANCE
CORPORATION, DEFINING ITS POWERS AND DUTIES AND FOR OTHER PURPOSES"
WHEREAS, there were pending before Congress prior to the promulgation of Proclamation No. 1081, dated
September 21, 1972, certain urgent measures proposing amendments to Republic Act No. 3591, as
amended;
WHEREAS, the deposit insurance scheme has been adopted to generate more faith and confidence in the
banking system and the Philippine Deposit Insurance Corporation, as an insurer of bank depositors, is
entrusted not only with the vital role of protecting depositors from loss resulting from bank closures but
also in helping develop a sound and stable banking system;
WHEREAS, the recommendations contained in the report on the Philippine financial system which have
been accepted, with certain modifications by the monetary authorities, included among others, certain
proposals geared toward ensuring the effectiveness of the Corporation in performing its assigned tasks;
NOW, THEREFORE, I, FERDINAND E. MARCOS, President of the Philippines, by virtue of the powers vested
in me by the Constitution as Commander-in-Chief of all the Armed Forces of the Philippines, and pursuant
to Proclamation No. 1081, dated September 21, 1972, and General Order No. 1, dated September 22,
1972, as amended, and in order to effect the desired changes and reforms in the social, economic, and
political structure of our society, do hereby order and decree the amendment of Republic Act No. 3591, as
amended, as follows:
Section 1. Section two of Republic Act Numbered Three thousand five hundred ninety-one, as amended,
is hereby amended to read as follows:
"Sec. 2. The powers and functions of the Corporation shall be vested in a Board of Directors consisting of
three (3) members one of whom shall be the Governor of the Central Bank of the Philippines and two of
whom shall be citizens of the Republic of the Philippines to be appointed by the President of the Philippines
with the consent of the Commission on Appointments. One of the appointive members shall be the
Chairman of the Board of Directors of the Corporation who shall be appointed on a full time basis for a
term of six (6) years at an annual compensation which shall be fixed by the President of the Philippines.
The other appointive member, who shall be appointed for a term of four (4) years and the Governor of the
Central Bank shall each receive a per diem of not exceeding fifty pesos (P50.00) for each day of meeting
actually attended by them but in no case shall each of them receive more than five hundred pesos
(P500.00) a month. In the event of vacancy in the office of the Governor of the Central Bank of the
Philippines, and pending the appointment of his successor or during the absence of the Governor the
Acting Governor of the Central Bank of the Philippines shall act as member of the Board of Directors. In the
event of a vacancy in the Office of the Chairman of the Board of Directors and pending the appointment of
his successor, the Governor of the Central Bank of the Philippines shall act as Chairman. The members of
the Board of Directors shall be ineligible during the time they are in office and for a period of two years
thereafter to hold office, position or employment in any insured bank, except that this restriction shall not
apply to any member who has served the full term for which he was appointed. No member of the Board of
Directors shall be an officer or director of any insured bank; and before entering upon his duties as
member of the Board of Directors, he shall certify under oath that he has complied with this requirement
and such certification shall be filed with the Secretary of the Board of Directors. Any vacancy in the Board
created by the death, resignation, or removal of an appointive member shall be filled by the appointment
of a new member to complete the unexpired period of the term of the member concerned.
"The Board of Directors shall have the authority:
"1. To prepare and issue rules and regulations as it considers necessary for the effective discharge of its
responsibilities;
"2. To direct the management, operations and administration of the Corporation;
"3. To appoint, fix the remuneration and remove any officer or employee of the Corporation for cause:
Provided, however, That officers exercising discretionary powers shall not be subject to the Civil Service
Law; and
"4. To authorize such expenditures by the Corporation as are in the interest of the effective administration
and operation of the Corporation: Provided, however, That not later than one year after the appropriation
and release of the additional fifteen million pesos for the permanent insurance fund as provided in Section
ten (a-1) of this Act, the annual operating expenses of the Corporation may amount to not more than the
equivalent of the annual gross income from the investment of the permanent insurance fund and not more
than fifteen per cent of the first ten million pesos of all other income, such as assessments and earnings
from the investment of funds of the Corporation other than the permanent insurance fund: Provided,
further, That if all other income exceeds ten million pesos, the prescribed ceiling for the annual operating
expenses may be increased by not more than ten per cent of the excess: Provided, finally, That in the
computation of income, recoveries and accrued income shall be excluded."
Section 2. Section ten (a) of the same Act is hereby amended by adding another paragraph after section
ten (a) which reads as follows:
"Sec. 10(a-1). The permanent insurance fund hereinabove created is hereby increased to twenty million
pesos for this purpose, the amount of fifteen million pesos is hereby appropriated from the General Fund."
Section 3. Section twelve, subsection (c) of the same Act is hereby amended to read as follows:
"Sec. 12(c). When the Corporation has determined that an insured bank is in danger of closing, in order to
prevent such closing, the Corporation, in the discretion of its Board of Directors, is authorized to make
loans to, or purchase the assets of, or make deposits in, such insured bank, upon such terms and
conditions as the Board of Directors may prescribe, when in the opinion of the Board of Directors, the
continued operation of such bank is essential to provide adequate banking service in the community:
Provided, however, That funds available for this purpose shall be limited only to the permanent insurance
fund referred to in Section ten (a) of this Act, additional appropriations thereto, and money borrowed from
the Central Bank in accordance with the provisions of Section thirteen of this Act: Provided, further, That
funds of the Corporation accumulated from assessments paid by insured banks shall not be available for
this purpose nor for the repayment of loans obtained from the Central Bank for the funding of assistance to
insured banks as provided in this section. Such loans and deposits may be in subordination to the rights of
depositors and other creditors."
Section 4. This Decree shall take effect immediately.
Done in the City of Manila, this 29th day of January, in the year of Our Lord, nineteen hundred and
seventy-three.
PD 1094
Sunday, June 06, 2010
3:22 AM
PRESIDENTIAL DECREE NO. 1094 - AMENDING CERTAIN PROVISIONS OF R.A. 3591 AS AMENDED
ENTITLED "AN ACT ESTABLISHING THE PHILIPPINE DEPOSIT INSURANCE CORPORATION,
DEFINING ITS POWERS AND DUTIES AND FOR OTHER PURPOSES"
Section 1. Section 2 of R.A. 3591 as amended is hereby further amended to read as follows:
"Sec. 2 . The powers and functions of the Corporation shall be vested in a Board of Directors
consisting of three (3) members one of whom shall be the Governor of the Central Bank of the
Republic of the Philippines to be appointed by the President of the Philippines with the
consent of the Commission on Appointments. One of the appointive members shall be the
Chairman of the Board of Directors of the Corporation who shall be appointed on a full time
basis for a term of six (6) years at an annual compensation [which shall] AS MAY be fixed
FROM TIME TO TIME by the President of the Philippines BUT WHICH SHALL UNTIL AMENDED BY
LAW BE FIFTY THOUSAND (P50,000.00) PESOS PER ANNUM. The other appointive member, who
shall be appointed for a term of four (4) years and the Governor of the Central Bank shall each
receive a per diem of not exceeding [fifty pesos (P50.00)] TWO HUNDRED FIFTY PESOS
(P250.00) FOR each day of meeting actually attended by them but in no case shall each of
them receive more, than [five hundred (P500.00] ONE THOUSAND PESOS (P1,000.00) a month.
In the event of vacancy in the office of the Governor of the Central Bank of the Philippines,
and pending the appointment of his successor or during the absence of the Governor, the
Acting Governor of the Central Bank of the Philippines shall act as member of the Board of
Directors. In the event of a vacancy in the Office of the Chairman of the Board of Directors and
pending the appointment of his successor, the Governor of the Central Bank of the Philippines
shall act as Chairman. The members of the Board of Directors shall be ineligible during the
time they are in office and for a period of two years thereafter to hold office or employment in
any insured bank, except that this restriction shall not apply to any member who has served
the full term for which he was appointed. No member of the Board of Directors shall be an
officer or director of any insured bank, and before entering upon his duties as member of the
Board of Directors he shall certify under oath that he has complied with this requirement and
such certification shall be filed with the Secretary of the Board of Directors. Any vacancy in
the Board created by the death, resignation, or removal of an appointive member shall be
filled by the appointment of a new member to complete the unexpired period of the term of
the member concerned.
Section 2. All laws, decrees, orders, rules and regulations inconsistent herewith are hereby
repealed or amended accordingly.
DONE in the City of Manila, this 18th of February, in the year of Our Lord, nineteen hundred
and seventy-seven.
PD 1451
Sunday, June 06, 2010
3:23 AM
MALACAÑANG
Manila
PRESIDENTIAL DECREE No. 1451
AMENDING REPUBLIC ACT NUMBERED THREE THOUSAND FIVE HUNDRED NINETY-ONE, AS
AMENDED, ENTITLED "AN ACT ESTABLISHING THE PHILIPPINE DEPOSIT INSURANCE
CORPORATION, DEFINING ITS POWERS AND DUTIES AND FOR OTHER PURPOSES"
WHEREAS, the deposit insurance scheme has been adopted to generate public faith and
confidence in the banking system and the Philippine Deposit Insurance Corporation has been
established to serve as the implementing agency of the Government;
WHEREAS, the Government is currently engaged in the institution of vital reforms in the
banking system to enable it to play a more effective role in the socio-economic development of
the country;
WHEREAS, as a means of encouraging the accumulation of more deposits in order to
contribute to the socio-economic progress of the country, it is imperative that protection of
deposits in banks be enhanced;
NOW, THEREFORE, I, FERDINAND E. MARCOS, President of the Philippines, by virtue of the
powers in me vested by the Constitution, do hereby order and decree the amendment of
Republic Act No. 3591, as amended, as follows:
Section 1. Section three (g) of Republic Act Numbered Three Thousand Five Hundred Ninety-
One, as amended, is hereby amended to read as follows:
"Sec. 3. (g) The term "insured deposit" means the net amount due to any depositor for
deposits in an insured bank (after deducting offsets) less any part thereof which is in excess
of (P15,000.00. Such net amount shall be determined according to such regulations as the
Board of Directors may prescribe and in determining the amount due to any depositor there
shall be added together all deposits in the bank maintained in the same capacity and the same
right for his benefit either in his own name or in the name of others."
Section 2. Section six (i) of the same Act is hereby amended to read as follows:
"Sec. 6. (i) Trust funds held by an insured bank in a fiduciary capacity whether held in trust or
deposited in any other department or in another bank shall be insured like other forms of
deposits, in an amount not to exceed (P15,000.00 for each trust estate, and when deposited
by the fiduciary bank in another bank such trust funds shall be similarly insured to the
fiduciary bank according to the trust estates represented. Notwithstanding any other
provision of this Act, such insurance shall be separate from and additional to that covering
other deposits of the owners of such trust funds or the beneficiaries of such trust estates:
Provided, That where the fiduciary bank deposits any of such trust funds in other insured
banks, the amount so held by other insured banks on deposit shall not for the purpose of any
certified statement required under subsections (b) and (c) of this section be considered to be
a deposit liability of the fiduciary bank, but shall be considered to be a deposit liability of the
bank in which such funds are so deposited by such fiduciary bank. The Board of Directors shall
have the power by regulation to prescribe the manner of reporting and of depositing such
trust funds."
Section 3. Section ten (a) and (a-1) of the same Act is hereby amended by deleting and adding
the following provisions to read as follows:
"Sec. 10(a) A permanent insurance fund in the amount of P5,000,000 to be appropriated from
the General Fund, is hereby created to be used by the Corporation to carry out the purposes of
this Act.
(a-1) The permanent insurance fund hereinabove created is hereby increased to twenty million
pesos and for this purpose, the amount of fifteen million pesos is hereby appropriated from
the General Fund: Provided, That the maximum amount of the insured deposit of any depositor
is hereby increased to P15,000.00."
Section 4. This Decree shall take effect immediately.
Done in the City of Manila, this 11th day of June, in the year of Our Lord, nineteen hundred and
seventy-eight.
PD 1935
Sunday, June 06, 2010
3:24 AM
WHEREAS, there is an apparent need to pursue this objective further particularly in the light of
the present economic situation;
"Sec. 1. There is hereby imposed, in lieu of the travel taxes levied under Section three of
Republic Act No. 1478, as amended, and Section six of Republic Act No. 6141, a travel tax from
(a) all citizens of the Philippines; (b) permanent resident aliens; and (c) non-immigrant aliens
who have stayed in the Philippines for more than one (1) year who are leaving the country,
irrespective of the place of issuance of ticket and the form and place of payment. A travel tax
of the equivalent in pesos of Two Hundred Dollars (US$200.00) shall be imposed on
passengers travelling under first class passage and the peso equivalent of One Hundred
Twenty Dollars (US$120.00) for those travelling under economy class passage; Provided,
however, that a reduced rate of the peso equivalent of One Hundred Twenty-five Dollars
(US$125.00) for first class passage and the peso equivalent of Seventy-Five Dollars (US$75.00)
for economy class passage shall be imposed on those enumerated under Section 2-A of this
Decree."
Section 2. Section 2 of the Presidential Decree No. 1867 is hereby amended to read as
follows:
"Sec. 2. Proceeds to be realized from the additional tax shall accrue entirely to the General
Fund of the National Government; Provided, however, that the Philippine Tourism Authority
shall be allowed to maintain its projected receipts for 1984 out of total travel tax collections."
Section 3. Section 2 of Presidential Decree No. 1183 as amended, is hereby further amended
to read as follows:
"Sec. 2. The following shall be exempt from the payment of the travel tax imposed under
Section 1 of this Decree by securing a Travel Tax Exemption Certificate from the Philippine
Tourism Authority:
"(a) Foreign diplomatic and consular officials and members of their staff who are duly
accredited to the Republic of the Philippines including the immediate members of their
families and household domestics whose entry as such has been authorized by the Philippine
Government;
"(b) Officials, consultants, experts and employees of the United Nations Organization and of
its agencies, and those exempted under existing laws, treaties and international agreements;
"(c) Personnel of multi-national companies with regional headquarters at, but not engaged in
business in the Philippines and their dependents if joining them during the period of their
assignment in the Philippines as certified to by the Ministry of Trade and Industry;
"(d) Crew members of ships andrplanes plying international routes who are leaving the
country to join their vessels orrplanes or to assume their position therein;
"(e) Filipino citizens who are permanent residents of foreign countries who have stayed in
the Philippines for a period of not more than one (1) year;
"(f) Bona fide students who studies abroad have been approved by the NEDA Scholarship
Committee and foreign students whose studies in the country is financed by their government
or by an international organization;
"(h) United States military personnel and other United States nationals, including their
dependents in proper cases as indicated hereinbelow, who are travelling on United States
Government-owned or chartered transport facilities or with fares expended out of United
States Government funds, to wit:
"2) Filipinos in the United States Military Service and their dependents;
"3) Filipino employees of the United States Government travelling on United States
Government business;
"4) U.S. State Department visitor grantees travelling on United States Government business
and
"i) Persons whose travel is provided or funded by foreign governments with which the
Philippine Government maintains diplomatic relations;
"j) Those authorized by the President of the Philippines for reasons of national interest."
Section 4. Section 2-A of the same decree is hereby further amended to read as follows:
"Sec. 2-A. Unless otherwise exempted under Section 2 of the same Act, a reduced rate of the
peso equivalent of One Hundred Twenty-Five Dollars (US$125.00) for first class passage and
the peso equivalent of Seventy-Five Dollars (US$75.00) for economy class passage shall be
imposed on the following:
"a) Individuals who are twelve years old or below but over two years of age;
"b) Those travelling under steerage class;
"c) Recipients of awards and grants from foreign governments, institutions and
organizations as certified to by the NEDA;
"d) Those authorized by the President of the Philippines for reasons of national interest."
Section 5. Section 2-B, as inserted by Batas Pambansa Blg. 38, is hereby amended to read as
follows:
"Sec. 2-B. Contract workers, their spouses, and dependents 21 years of age or below, with
approved employment contracts and duly certified by the Ministry of Labor and Employment
shall be subject to a rate of the peso equivalent of Sixty Dollars (US$60.00) for first class
passage and the peso equivalent of Thirty-Five Dollars (US$35.00) for economy class passage."
Section 6. All Laws, decrees, orders and regulations or parts thereof, which are inconsistent
herewith, are hereby repealed or modified accordingly.
Done in the City of Manila, this 11th of June in the Year of Our Lord, Nineteen Hundred Eighty-
Four.
RA 7400
Sunday, June 06, 2010
3:25 AM
An Act Further Amending Republic Act Numbered Three Thousand Five Hundred Ninety-One, As Amended,
Otherwise Known as the Charter of the Philippine Deposit Insurance Corporation, and for Other Purposes.
SECTION 1. Section 2 of Republic Act No. 3591, as amended, is hereby further amended to read as follows:
"Sec. 2. The powers and functions of the Corporation shall be vested in and exercised by a Board of
Directors which shall be composed of five (5) members as follows:
"(a) The Secretary of Finance who shall be the ex officio Chairman of the Board without
compensation.
"(b) The Governor of the Central Bank, who shall be the ex officio member of the Board without
compensation.
"(c) The President of the Corporation, who shall be appointed by the President of the Philippines from
either the Government or private sector to serve on a full-time basis for a term of six (6) years. The
President shall also serve vice chairman of the Board.
"(d) Two (2) members from the private sector, to be appointed for a term of six (6) years without
reappointment from the President of the Philippines: Provided, That of those first appointed, the first
appointee shall serve a period of two (2) years.
"No person shall be appointed as member of the Board unless he be of good moral character and of
unquestionable integrity and responsibility, and who is of recognized competence in economics, banking
and finance, law, management administration or insurance, and shall be at least thirty-five (35) years of
age. For the duration of their tenure or term in office and for a period of one year thereafter, the
appointive members of the Board shall be disqualified from holding any office, position or employment in
any insured bank.
"Whenever the Chairman of the Board is unable to attend a meeting of the Board, or in the event of a
vacancy in the office of the Secretary of Finance, the President of the Corporation shall act as the
chairman.
"The presence of three (3) members shall constitute a quorum, and all decisions shall require a vote of a
majority of the members present, there being a quorum.
"The members of the Board of Directors from the private sector, except the President shall receive a per
diem for every board meeting attended, the amount of which shall be Five hundred pesos (P500.00) per
meeting but not to exceed the sum of Two thousand pesos (P2,000.00) for every single month.
"The Board of Directors shall have the authority:
"1.To prepare and issue rules and regulations as it considers necessary for the effective discharge of
its responsibilities;
"2.To direct the management, operations and administration of the Corporation;
"3.To appoint, establish the rank, fix the remuneration and remove any officer or employee of the
Corporation for cause; subject to the Civil Service and pertinent compensation laws; and
"4.To authorize such expenditures by the corporation as are in the interest of the effective
administration and operation of the Corporation."
Sec. 2. Section 2-A of the same Act is hereby amended to read as follows:
"Sec. 2-A. The President of the Corporation shall be the Chief Executive thereof and his salary shall be
fixed by the President of the Philippines at a sum commensurate to the importance and responsibility
attached to the position. The sum total of the salary of the President and the allowances and other
emoluments which the Board of Directors may grant him shall be ceiling for fixing the salary allowances
and other emoluments of all other personnel in the Corporation.
"The powers and duties of the president of the Corporation are:
"(a) To prepare the agenda for the meeting of the Board and to submit for the consideration of the
Board the policies and measures which he believes to be necessary to carry out the purposes and
provisions of this Act;
"(b) To execute and administer the policies and measures approved by the Board;
"(c) To direct and supervise the operations and internal administration of the Corporation in
accordance with the policies established by the Board. The President may delegate certain of his
administrative responsibilities to other officers of the Corporation, subject to the rules and regulations of
the Board;
"(d) To represent the Corporation, upon prior authority of the Board, in all dealings with other offices,
agencies and instrumentalities of the Government and with all other persons or entities, public or private,
whether domestic, foreign or international;
"(e) To authorize, with his signature, upon prior authority of the Board, contracts entered into by the
Corporation, notes and securities issued by the Corporation, and the annual reports, balance sheets,
profits and loss statements, correspondence and other documents of the Corporation. The signature of the
President may be in facsimile wherever appropriate;
"(f) To represent the corporation, either personally or through counsel, in all legal proceedings or
actions;
"(g) To delegate, with the prior approval of the Board of Directors, his power to represent the
Corporation, as provided in subsections (d) and (f) of this Section, to other officers of the Corporation; and
"(h) To exercise such other powers as may be vested in him by the Board.
"The President shall be assisted by a Vice-President and other officials whose appointment and removal
for cause shall be approved and whose salary shall be fixed by the Board of Directors upon
recommendation of the President of the Corporation. During the absence or temporary incapacity of the
President, or in case of vacancy or permanent incapacity and pending the appointment of a new President
of the Corporation by the President of the Philippines, the Vice-President shall act as President and
discharge the duties and responsibilities thereof."
Sec. 3. Section 3, subsections (b), (c), (f) and (g) is hereby amended to read as follows:
"(b) The term ‘Bank’ and ‘Banking Institution’ shall be synonymous and interchangeable and shall
include banks, commercial banks, savings bank, mortgage banks, rural banks, development banks,
cooperative banks, stock savings and loan associations and branches and agencies in the Philippines of
foreign banks and all other corporations authorized to perform banking functions in the Philippines."
"(c) The term ‘receiver’ includes a receiver, commission, person or other agency charged by law with
the duty to take charge of the assets and liabilities of a bank which has been forbidden from doing
business in the Philippines, as well as the duty to gather, preserve and administer such assets and
liabilities for the benefit of the depositors and creditors of said bank, and to continue into liquidation
whenever authorized under this Act other laws, and to dispose of the assets and to wind up the affairs of
such bank."
"(f) The term ‘deposit’ means the unpaid balance of money or its equivalent received by a bank in the
usual course of business and for which it has given or its obliged to give credit to a commercial, checking,
savings, time or thrift account or which is evidenced by passbook check, and/or certificate of deposit,
printed or issued in accordance with Central Bank Rules and Regulations and other applicable laws,
together with such other obligations of a bank, which, consistent with banking usage and practices, the
Board of Directors shall determine and prescribe by regulations to be deposit liabilities of the Bank:
Provided, That any obligation of a bank which is payable at the office of the bank located outside of the
Philippines shall no be a deposit for any of the purposes of this Act or included as part of the total deposits
or in insured deposit: Provided, further, That, subject to the approval of the Board of Directors, any insured
bank which is incorporated under the laws of the Philippines which maintains a branch outside the
Philippines may elect to include for insurance its deposit obligations payable only at such branch."
"(g) The term ‘insured deposit’ means the net amount due to any depositor for deposits in an insured
bank (after deducting offsets) less any part thereof which is in excess of One hundred thousand pesos
(P1,000.00). Such net amount shall be determined according to such regulations as the Board of Directors
may prescribe and in determining such amount due to any depositor, there shall be added together all
deposits in the bank maintained in the same capacity and the same right for his benefit either in his own
name or in the name of others: Provided, That the provisions of any law to the contrary notwithstanding no
owner/holder of any negotiable certificate of deposit shall be recognized as a depositor entitled to the
rights provided in this Act unless his name is registered as owner/holder thereof in the books of the issuing
banks."
Sec. 4. Section 6, Subsections (a) and (h), of the same Act is hereby amended to read as follows:
"(a) The assessment rate shall be determined by the Board of Directors: Provided, That the assessment
rate shall not exceed one fifth (1/5) of one per centum (1%) per annum. The semi-annual assessment for
each insured bank shall be in the amount of the product of one half (½) the assessment rate multiplied by
the assessment based but in no case shall it be less than the amount of Two hundred fifty (P250.00). The
assessment base shall be the amount of the liability of the bank for deposits, according to the definition of
the term ‘deposit’ in and pursuant to subsection (f) of Section 3 without any deduction for indebtedness of
depositors.
"The semi-annual assessment base for one semi-annual period shall be the average of the assessment
base of the bank as of the close of business on March thirty-one and June thirty and the semi-annual
assessment base for the other-semi-annual period shall be the average of the assessment base of the
bank as for the close of business on September thirty and December thirty-one: Provided, That when any
of said days in a non-business day or legal holiday, either national or provincial, the preceding business
day shall be used. The certified statements required to be filed with the Corporation under subsections (b)
and (c) of this Section shall be in such form and set forth such supporting information as the Board of
Directors shall prescribed. The assessment payments required from the insured banks under subsections
(b) and (c) of this Section shall be made in such manner and at such time or times as the Board of Director
shall prescribe, provided the time or times so prescribed shall not be later than sixty (60) days after filing
the certified statement setting forth the amount of assessment."
"(h) Should any insured bank fail or refused to pay any assessment required to be paid by such bank
under any provision of this Act, and should the bank not correct such failure or refusal within thirty (30)
days after written notice has been given by the Corporation to an officer of the bank citing this subsection,
and stating that the bank has failed or refused to pay as required by the law the insured status of such
bank shall be determined by the Board of Directors: Provided, that, after the lapse of thirty (30) days from
the date when the written notice has been sent by registered mail, whether or not such notice has been
actually received by the bank, the Corporation shall terminate the insured status of the bank. The bank
shall give written notice of such termination to each of the depositors at his last address of record on the
books of the bank and the Corporation shall publish the notice of the termination of insured status of the
bank. After the termination of the insured status, the insured deposit of each depositor in the bank on the
date of such termination, less all subsequent withdrawals from the deposits of such depositor, shall
continue to be insured for a period of ninety (90) days. No additions to any such deposits and no new
deposits in such bank, after the date of such termination shall be insured by the Corporation, and the bank
shall not advertise or hold itself out as having insured deposits unless the same connection shall also state
with equal prominence that such additions to deposits and new deposits made be closed on account of
insolvency within the period of ninety (90) days, the Corporation shall have the same powers and rights
with respect to such bank as in the case of an insured bank."
Sec. 5. Section 7 of the same Act is hereby amended to read as follows:
"Sec. 7 (a). Whenever upon examination by the Corporation into the condition of any insured bank, it
shall be disclosed that an insured bank or its directors or agents have committed, are committing or about
to commit unsafe or unsound practices in conducting the business of the bank, or have violated, are
violating or about to violate any provisions of any law or regulation to which the insured bank is subject,
the Board of Directors shall submit the report of the examination to the monetary board to secure
corrective action thereon. If no such corrective action is taken by the Monetary Board within sixty (60)
days from the submission of the report, the Board of Directors shall, motu proprio, institute corrective
action which it deems necessary. The Board of Directors may issue a cease and desist order and require
the bank or its directors or agents concerned to correct the practices or violations within sixty (60) days.
However, If the practice or violation is likely to cause insolvency or substantial dissipation of assets or
earnings of the bank, or is likely to seriously weaken the condition of the bank or otherwise seriously
prejudice the interests of its depositors and the Corporation, the period to take corrective action shall not
be more than fifteen (15) days. The order may also include the imposition of fines provided in Section 16
(f) hereof. The Board of Directors shall duly inform the Monetary Board of the Central Bank of the
Philippines of action it has taken with respect to such practices or violations. If the bank violates the cease
and desist order or fails to correct the practices or violations as required within the period prescribed
herein, the corporation shall terminate the insured status of the bank the consequences of the termination
of insured status of the bank on the Corporation, the bank and the depositor and their deposits shall be
governed by Section 6 (h) hereof.
"(b) The actions and proceedings provided in the proceeding subsection may be undertaken by the
Corporation if, in its opinion, an insured bank or its directors or agents have violated, are violating or about
to violate any provisions of this Act or any order, rule or instruction issued by the Corporation or any
written condition imposed by the Corporation in connection with any transaction with or grant by the
Corporation."
Sec. 6. Section 8 is hereby amended by adding a new paragraph to be designated as paragraph twelfth.
Paragraph eighth is likewise amended. Paragraphs eighth and twelfth shall read as follows:
"Eight — To conduct independent examinations of and to required information and reports from bank, as
provided in this Act, whenever deemed necessary by the Board of Directors: Provided, That to the extent
practicable, said examinations shall maximize the efficient use of available relevant reports, information
and findings, specifically from the Central Bank. The Board of Directors shall prescribe such regulations as
may be necessary to ensure the special nature and reasonable exercise of this power."
"Twelfth — To compromise, condone or release, in whole or in part, any of claim or settled liability to the
Corporation, regardless of the amount involved, under such terms and conditions as may be imposed by
the Board of Directors to protect the interest of Corporation."
Sec. 7. Section 9, subsection (b) and (d) of the same Act is hereby amended to read as follows:
"(b) The Board of Directors shall appoint examiners who shall have power, on behalf of the Corporation
to examine any insured bank. Each such examiner shall have the power to make a through examination of
all the affairs of the bank and in doing so, he shall have the power to administer oaths, to examine and
take and preserve the testimony of any the officers and agents thereof, and to compel the presentation of
books, documents, papers or records necessary in his judgment to ascertain the facts relative to the
condition of the bank: and shall make a full and detailed report of the condition of the bank to the
Corporation. The Board of Directors in like manner shall appoint claim agents who shall have the power to
investigate and examine all claims for insured deposits and transferred deposits. Each claim agent shall
have the power to administer oaths and examine under oath and take and preserve testimony of any
person relating to such claim."
"(d) The Corporation shall have access to reports of examination made by, and reports of condition
made to the Central Bank of the Philippines or its appropriate supervising departments, and the Central
Bank of the Philippines shall also have access to reports of examination made by, and reports of condition
made to the Corporation: Provided, That the provisions of any law to the contrary notwithstanding, the
Corporation shall likewise have access to reports, findings and any other information derived from any
special or general examination of inquiry conducted by the Central Bank in respect to bank fraud or
serious irregularity in an insured bank: Provided, that, the Corporation shall use such reports and findings
under similar terms and conditions prescribed by applicable laws on the Central Bank."
Sec. 8. Section 9, subsection (e) of the same Act is hereby amended to read as follows:
"(e) Personnel of the Corporation are hereby prohibited from:
"(1) being an officer, director, consultant, employee or stockholder, directly or indirectly, of any bank
or banking institution except as otherwise provided in this Act;
"(2) receiving any gift or thing of value from any officer, director or employee thereof:
"(3) revealing in any manner, except under order of the court or authorized herein in such condition
or business of any such institution. The prohibition shall not be held to apply to the giving of information to
the Board of Directors or to any person authorized by neither of them in writing to receive such
information.
"Notwithstanding the provisions of this Section and Section 2, members of the Board of Directors and
other personnel of the Corporation may become directors and officers of any bank and banking institution
and of any entity related to such institution in connection with financial assistance extended by the
Corporation to such institution and when in the opinion of the Board it is appropriate to make such a
designation to protect the interest of the Corporation.
"Borrowing from any bank or banking institution by examiners and other personnel of the examination
departments of the corporation shall be prohibited only with respect to the particular institution in which
they are assigned, or are conducting an examination. Personnel of other departments, offices or units of
the Corporation shall likewise be prohibited from borrowing from any bank or banking institution during the
period of time that a transaction of such institution with the corporation is being evaluated, processed or
acted upon by such personnel: Provided, however, that the Board may, at its discretion, indicate the
position levels or functional groups to which the prohibition is applicable.
"Borrowing by all full-time personnel of the corporation from any bank or banking institution shall be
secured and disclosed to the Board, and shall be subject to such further rules and regulations as the Board
may prescribe."
Sec. 9. The same Act is hereby amended by adding new sections after Section 9 thereof, to read as
follows:
"Sec. 9-A. The provisions of other laws, general or special, to the contrary notwithstanding, whenever it
shall be appropriate for the Monetary Board of the Central Bank of the Philippines to appoint a receiver of
any banking institution pursuant to existing laws, the Monetary Board shall give price notice and appoint
the Corporation as receiver.
"In addition to the powers of a receiver pursuant to existing laws, the Corporation is empowered to bring
suits to enforce liabilities to or recoveries of the bank. Further, the Corporation may, upon its own
responsibility, in the discretion of its Board of Directors and upon justifiable reasons, appoint and hire
persons or entities of recognized competence in banking or finance as its deputies and assistants.
"The Corporation, its directors, officers and employees shall not be subject to any action, claim or
demand for or in connection with any act done or omitted to be done by them in good faith in the exercise
of their functions or in connection with the exercise of the powers under this Section and Sections 9-b, 9-c
and 12(c) of this Act.
"Sec. 9-B. Before any distribution of the assets of the closed bank in accordance with the preferences
established by law, the Corporation shall periodically charge against said assets such reasonable
receivership expenses and subject to approval by the proper court, such reasonable liquidation expenses,
it has incurred as part of the costs of receivership/liquidation proceedings and collect payment therefor
from available assets.
"Sec. 9-C. Cases not provided in Section 9-A above including the filing of cases to modify, set aside or
restrain any action of the Corporation therein shall be governed by Section 29 of R. A. 265, as amended."
Sec. 10. Section 10, subsections (a-1,) (c) and (d) is hereby amended to read as follows:
"(a-1) The permanent insurance fund hereinabove created is hereby increased to Three billion pesos
(P3,000,000,000.00) and for this purpose, such sum as may be necessary is hereby appropriated from the
General Fund: Provided, That the maximum amount of the insured deposit of any depositor is hereby
increased to One hundred thousand pesos (P100,000.00)."
"(c) Whenever an insured bank shall have been closed on account of insolvency payment of the insured
deposits in such shall be made by the Corporation as soon as possible either (1) by cash or (2) by making
available to each depositor a transferred deposit in another insured bank in an amount equal to the
insured deposit of such depositor: Provided, however, That the corporation, in its discretion may required
proof of claims to be filed before paying the insured deposits, and that it any case where the Corporation is
not satisfied as to the viability of a claim for an insured deposit, it may require the final determination of a
court of competent jurisdiction before paying such claim: Provided, further, That failure to settle the claim
within six (6) months from the date of filing of the claim for insured deposit shall, upon conviction, subject
the directors, officers or employees of the corporation responsible for the delay, to imprisonment from six
(6) months to one (1) year: Provided, however, That the period shall not apply if the validity of the claim
requires the resolution of issues of facts and or law by another office, body or agency including the case
mentioned in the first proviso or by the Corporation together with such other office, body or agency.
"(d) The Corporation, upon payment of any depositor as provided for in subsection (c) of this Section,
shall be subrogated to all rights of the depositor against the closed bank to the extent of such payment.
Such subrogation shall include the right on the part of the Corporation to receive the same dividends and
payments from the proceeds of the assets of such closed bank and recoveries on account of stockholders
liability as would have been payable to the depositor on a claim for the insured deposits but, such
depositor shall retain his claim for any uninsured portion of his deposit. All payments by the corporation of
insured deposits in closed banks partake of the nature of public funds, and as such, must be considered a
preferred credit similar to taxes due to the National Government in the order of preference under Article
2244 of the New Civil Code: Provided, further, That this preference shall be likewise effective upon
liquidation proceedings already commenced and pending as of the approval of this Act, where no
distribution of assets has been made."
Sec. 11. Section 11, subsection (d) of the same Act is hereby amended to read as follows:
"(d) If, after the Corporation have given at least three (3) months notice to the depositor by mailing a
copy thereof to his last known address appearing on the records of the closed bank, the depositor in the
closed bank shall fail to file a claim for his insured deposit from the Corporation within eighteen (18)
months after the Monetary Board of the Central Bank of the Philippines shall have ordered the closure of
said bank, pursuant to Section 29 of R.A. 265 as amended, all rights of the depositor against the
Corporation with respect to the insured deposit shall be barred, and all rights of the depositor against the
closed bank and its shareholders or the receivership estate to which the Corporation may have become
subrogated shall thereupon revert to the depositor: Provided, That the claimant shall enforce his duly-filed
claim against the Corporation within one (1) year after the eighteen-month period heretofore mentioned.
Thereafter, the Corporation shall be discharged from any liability on the insured deposit without prejudice
to the rights of the claimants against the closed bank and its shareholders or the receivership estate:
Provided, further, That when practicable, the Board of Directors may adopt other adequate means of
notice to the depositor."
Sec. 12. Section 12, subsection (c) of the same Act is hereby amended to read as follows:
"(c) When the Corporation has determined that an insured bank is in danger of closing, in order to
prevent such closing, the Corporation, in the discretion of its Board of Directors, is authorized to make
loans to, or purchase the assets of, or assume liabilities of, or make deposits in, such insured bank, upon
such terms and conditions as the Board of Directors may prescribe, when in the opinion of the Board of
Directors, the continued operation of such bank in essential to provide adequate banking service in the
community or maintain financial stability in the economy.
"The authority of the Corporation under the foregoing paragraph to extend financial assistance to,
assume liabilities of, purchase the assets of an insured bank may also be exercised in the case of a closed
insured bank if the Corporation finds that the resumption of operations of such bank is vital to the interest
of the community or, a severe financial climate exists which threatens the stability of a number of banks
possessing significant resources: Provided, That the reopening and resumption of operations of the closed
bank shall be subject to the prior approval of the Monetary Board.
"The Corporation may provide any Corporation acquiring control of, merging or consolidating with or
acquiring the assets of an insured bank in danger of closing in order to prevent such closing or of a closed
insured bank in order to restore to normal operations, with such financial assistance as it could provide an
insured bank under this subsection: Provided, That, within sixty (60) days from a date of assistance the
Corporation shall submit a report thereof to the Monetary Board.
"In all case, however, the Corporation, prior to the exercise of this power, shall determine that actual
payoff and liquidation thereof will be more expensive than the exercise of this power. Finally, the
Corporation may not use its authority under this subsection to purchase the voting or common stock of an
insured bank but it can enter into and enforce agreements that it determines to be necessary to protect its
financial interests."
Sec. 13. Section 13 of the same Act is hereby amended to read as follows:
"The Corporation is authorized to borrow from the Central Bank of the Philippines and the Central Bank
is authorized to lend the Corporation on such terms as may be agreed upon by the Corporation and the
Central Bank, such funds as in the judgment of the Board of Directors of the Corporation are from time to
time required for insurance purposes including those provided for in Section 12(c) of this Act: Provided,
That any such loan as may be granted by the Central Bank shall be consistent with monetary policy; and
Provided, further, That the rate of interest thereon shall be fixed by the Monetary Board but shall not
exceed the treasury bill rate.
"When in the judgment to the board of Directors the funds of the Corporation are not sufficient to
provide for an emergency or urgent need to attain the purposes of this Act, the Corporation is likewise
authorized to borrow money, obtain loans or arrange credit lines or other credit accommodations from any
bank designated as depository or fiscal agent of the Philippine Government: Provided, That such loan shall
be of short term duration."
Sec. 14. Section 16, subsections (a), (d), (e) and (f) of the same Act is hereby amended to read as follows:
"(a) Every insured bank shall display at each place of business maintained by it a sign or signs, and shall
include a statement to the effect that its deposits are insured by the Corporation in all its advertisements:
Provided, That the Board of Directors may exempt from this requirement advertisements which do not
relate to deposits or when it is impractical to include such statement therein. The Board of Directors shall
prescribe by regulations the forms of such signs and the manner of use. For each day an insured bank
continues to violate any provisions of this subsection or any lawful provisions of said regulations, it shall be
subject to a penalty of not more than One thousand pesos (P1,000) which the Corporation may recover for
its use: Provided, however, That the penalty of imprisonment for not more than one (1) year or a fine of
not exceeding Twenty thousand pesos (P20,000.00) or both, in the discretion of the insured under the
provisions of this Act which shall in any manner, advertise or hold itself out as having insured status for the
purpose of making it appear that its deposits are insured with the Corporation."
"(d) The Corporation may require an insured bank to provide protection and indemnity against burglary,
defalcation, losses arising from discharge of duties by, or particular acts of defaults of its directors,
officers, or employees, and other similar insurable losses. The Board of Directors in consultation with the
Central Bank, shall determine the bonding requirement as it referred to directors, officers and employers
of the insured bank as well as the form and amount of the bond. Whenever any insured bank refuses to
comply with any such requirement the Corporation may contract for such protection and add the cost
thereof to the assessment otherwise payable by such bank."
"(e) Any assessment payable by an insured bank under this Act shall be subject to payment of interest
computed from the date such assessment became due and payable and at the legal rate for loans as
prescribed by law or appropriate authority and in case of willful failure or refusal to pay such assessment
and interest thereon, there shall be added a penalty equivalent to twice the amount of interest payable as
computed herein for each day such violations continue, which the interest and penalty the Corporation
may recover for its use: Provided, That the penalty shall not be applicable under the circumstances stated
in the provisions of subsection (b) of this Section."
"(f) The Board of Directors is hereby authorized at its discretion to impose upon insured banks, their
directors, and/or officers, for any willful delay in the submission of reports as required by law, rules and
regulations; any refusal to permit examination in the affairs of the institution; any willful making of a false
statement to the Corporation; any willful failure or refusal to comply with, or violation of any provision of
this Act, or any order, instruction, or regulations issued by the Corporation or any commission of
irregularities, and/or conducting business in an unsafe or unsound manner as may be determined by the
Board of Directors, a fine not exceeding One thousand pesos (P1,000.00) a day for each type of violation,
the imposition of which shall be final and executory until reversed, modified or lifted by the Board of
Directors."
Sec. 15. Transitory Provisions. — (a) Authority to Reorganize. — In view of the new powers and functions
herein provided, a reorganization of the Corporation is hereby authorized including adopting a new staffing
pattern for effective and efficient exercise and performance of such powers and function.
The formulation of the program of reorganization shall be completed as soon as possible and the
implementation of such program within eighteen (18) months after approval of this Act.
(b) Implementing Details. — Organization and Staffing of the Corporation. — Upon effectivity of this Act,
the Secretary of Finance, the incumbent President of the Corporation and the Governor of the Central Bank
shall constitute the Chairman and members of the Board provided hereof. The President is hereby
authorized subject to the approval of the Board of Directors as appropriate, to issue such orders, rules and
regulations as may be necessary to implement the reorganization authorized under the preceding section
which will involve the determination and adoption of (1) a new internal structure of the Corporation as
reorganized down to the divisional, section or lowest reorganization levels; (2) a new staffing pattern
including appropriate salary rates.
The provisions of any law to the contrary notwithstanding, in the implementation of the reorganization
herein, and in appointments to appropriate positions in the new staffing pattern of the Corporation, no
preferential or priority rights shall be given to or enjoyed by any officer or personnel of the Corporation for
appointment to any position in the new staffing pattern not shall any officer or personnel be considered as
having prior or vested rights with respect to retention in the Corporation or in any position as may have
been created in its new staffing pattern, even if he should be the incumbent of a similar position therein.
Pending the completion of the personnel actions above provided and the issuance of the appropriate
implementing orders, all incumbent shall continue to exercise their mutual functions, duties and
responsibilities.
Sec. 16. Any amount appropriated under the General Appropriations Act or any other appropriation or
supplemental appropriation act shall be regularly released in accordance with the allotment system
established under existing law.
Sec. 17. All acts or parts of act, presidential decrees, executive orders, administrative orders or parts
thereof which are inconsistent with the provisions of this Act are hereby repealed.
Sec. 18. This Act shall take effect upon its approval.
Approved: April 13, 1992
RA 9302
Sunday, June 06, 2010
3:26 AM
RA 9576
Sunday, June 06, 2010
3:27 AM
PD 1792
Sunday, June 06, 2010
3:28 AM
MALACAÑANG
Manila
PRESIDENTIAL DECREE No. 1792
AMENDING REPUBLIC ACT NO. 1405
WHEREAS, under existing legal framework, the Central Bank has the authority to examine all records of
banks in the discharge of its responsibilities under the Central Bank Charter;
WHEREAS, the prohibition against inquiry into bank deposits adversely delimits the examining authority of
the Central Bank.
WHEREAS, limited examination powers operate against effective supervision of banks and endangers the
safety of deposits which may affect the public's faith in the banking system.
NOW, THEREFORE, I, FERDINAND E. MARCOS, President of the Philippines, by virtue of the powers in me
vested by the Constitution, do hereby decree and make the following part of the law of the land;
Section 1. Section 2 of Republic Act No. 1405 is hereby amended to read as follows:
Section 2. All deposits of whatever nature with banks or banking institutions in the Philippines including
investments in bonds issued by the Government of the Philippines, its political subdivisions and its
instrumentalities, are hereby considered as of an absolutely confidential nature and may not be examined,
inquired or looked into by any person, government official, bureau or office, except when the examination
is made in the course of a special or general examination of a bank and is specifically authorized by the
Monetary Board after being satisfied that there is reasonable ground to believe that a bank fraud or
serious irregularity has been or is being committed and that it is necessary to look into the deposit to
establish such fraud or irregularity, or when the examination is made by an independent auditor hired by
the bank to conduct its regular audit provided that the examination is for audit purposes only and the
results thereof shall be for the exclusive use of the bank, or upon written permission of the depositor, or in
cases of impeachment, or upon order of a competent court in cases of bribery or dereliction of duty of
public officials, or in cases where the money deposited or invested is the subject matter of the litigation.
Section 2. Section 3 of the same Act is hereby amended to read as follows:
Section 3. It shall be unlawful for any official or employee of a bank to disclose to any person other than
those mentioned in Section Two hereof, or for an independent auditor hired by a bank to conduct its
regular audit to disclose to any person other than a bank director, official or employee authorized by the
bank, any information concerning said deposits.
Section 3. This Decree shall take effect immediately.
Done in the City of Manila, this 16th day of January, in the year of Our Lord, nineteen hundred and eighty-
one.
RA 6832
Sunday, June 06, 2010
3:29 AM
RA 7653
Sunday, June 06, 2010
3:29 AM
RA 6770
Sunday, June 06, 2010
3:30 AM
RA 9160
Sunday, June 06, 2010
3:31 AM
Congress of the Philippines
Twelfth Congress
REPUBLIC ACT NO. 9160 September 29, 2001
AN ACT DEFINING THE CRIME OF MONEY LAUNDERING, PROVIDING PENALTIES THEREFOR AND
FOR OTHER PURPOSES
Be it enacted by the Senate and House of Representatives of the Philippines in Congress assembled:
Section 1. Short Title. – This Act shall be known as the "Anti-Money Laundering Act of 2001."
Section 2. Declaration of Policy. – It is hereby declared the policy of the State to protect and preserve the
integrity and confidentiality of bank accounts and to ensure that the Philippines shall not be used as a
money laundering site for the proceeds of any unlawful activity. Consistent with its foreign policy, the
State shall extend cooperation in transnational investigations and prosecutions of persons involved in
money laundering activities whenever committed.
Section 3. Definitions. For purposes of this Act, the following terms are hereby defined as follows:
(a) "Covered Institution" refers to:
(1) banks, non-banks, quasi-banks, trust entities, and all other institutions and their subsidiaries and
affiliates supervised or regulated by the Bangko Sentral ng Pilipinas (BSP);
(2) Insurance companies and all other institutions supervised or regulated by the Insurance Commission;
and
(3) (i) securities dealers, brokers, salesmen, investment houses and other similar entities managing
securities or rendering services as investment agent, advisor, or consultant, (ii) mutual funds, close and
investment companies, common trust funds, pre-need companies and other similar entities, (iii) foreign
exchange corporations, money changers, money payment, remittance, and transfer companies and other
similar entities, and (iv) other entities administering or otherwise dealing in currency, commodities or
financial derivatives based thereon, valuable objects, cash substitutes and other similar monetary
instruments or property supervised or regulated by Securities and Exchange Commission.
(b) "Covered transaction" is a single, series, or combination of transactions involving a total amount in
excess of Four million Philippine pesos (Php4,000,000.00) or an equivalent amount in foreign currency
based on the prevailing exchange rate within five (5) consecutive banking days except those between a
covered institution and a person who, at the time of the transaction was a properly identified client and the
amount is commensurate with the business or financial capacity of the client; or those with an underlying
legal or trade obligation, purpose, origin or economic justification.
It likewise refers to a single, series or combination or pattern of unusually large and complex transactions
in excess of Four million Philippine pesos (Php4,000,000.00) especially cash deposits and investments
having no credible purpose or origin, underlying trade obligation or contract.
(c) "Monetary Instrument" refers to:
(1) coins or currency of legal tender of the Philippines, or of any other country;
(2) drafts, checks and notes;
(3) securities or negotiable instruments, bonds, commercial papers, deposit certificates, trust certificates,
custodial receipts or deposit substitute instruments, trading orders, transaction tickets and confirmations
of sale or investments and money marked instruments; and
(4) other similar instruments where title thereto passes to another by endorsement, assignment or
delivery.
(d) "Offender" refers to any person who commits a money laundering offense.
(e) "Person" refers to any natural or juridical person.
(f) "Proceeds" refers to an amount derived or realized from an unlawful activity.
(g) "Supervising Authority" refers to the appropriate supervisory or regulatory agency, department or
office supervising or regulating the covered institutions enumerated in Section 3(a).
(h) "Transaction" refers to any act establishing any right or obligation or giving rise to any contractual or
legal relationship between the parties thereto. It also includes any movement of funds by any means with
a covered institution.
(l) "Unlawful activity" refers to any act or omission or series or combination thereof involving or having
relation to the following:
(1) Kidnapping for ransom under Article 267 of Act No. 3815, otherwise known as the Revised Penal Code,
as amended;
(2) Sections 3, 4, 5, 7, 8 and 9 of Article Two of Republic Act No. 6425, as amended, otherwise known as
the Dangerous Drugs Act of 1972;
(3) Section 3 paragraphs B, C, E, G, H and I of Republic Act No. 3019, as amended; otherwise known as the
Anti-Graft and Corrupt Practices Act;
(4) Plunder under Republic Act No. 7080, as amended;
(5) Robbery and extortion under Articles 294, 295, 296, 299, 300, 301 and 302 of the Revised Penal Code,
as amended;
(6) Jueteng and Masiao punished as illegal gambling under Presidential Decree No. 1602;
(7) Piracy on the high seas under the Revised Penal Code, as amended and Presidential Decree No. 532;
(8) Qualified theft under, Article 310 of the Revised Penal Code, as amended;
(9) Swindling under Article 315 of the Revised Penal Code, as amended;
(10) Smuggling under Republic Act Nos. 455 and 1937;
(11) Violations under Republic Act No. 8792, otherwise known as the Electronic Commerce Act of 2000;
(12) Hijacking and other violations under Republic Act No. 6235; destructive arson and murder, as defined
under the Revised Penal Code, as amended, including those perpetrated by terrorists against non-
combatant persons and similar targets;
(13) Fraudulent practices and other violations under Republic Act No. 8799, otherwise known as the
Securities Regulation Code of 2000;
(14) Felonies or offenses of a similar nature that are punishable under the penal laws of other countries.
Section 4. Money Laundering Offense. – Money laundering is a crime whereby the proceeds of an unlawful
activity are transacted, thereby making them appear to have originated from legitimate sources. It is
committed by the following:
(a) Any person knowing that any monetary instrument or property represents, involves, or relates to the
proceeds of any unlawful activity, transacts or attempts to transact said monetary instrument or property.
(b) Any person knowing that any monetary instrument or property involves the proceeds of any unlawful
activity, performs or fails to perform any act as a result of which he facilitates the offense of money
laundering referred to in paragraph (a) above.
(c) Any person knowing that any monetary instrument or property is required under this Act to be
disclosed and filed with the Anti-Money Laundering Council (AMLC), fails to do so.
Section 5. Jurisdiction of Money Laundering Cases. – The regional trial courts shall have jurisdiction to try
all cases on money laundering. Those committed by public officers and private persons who are in
conspiracy with such public officers shall be under the jurisdiction of the Sandiganbayan.
Section 6. Prosecution of Money Laundering. –
(a) Any person may be charged with and convicted of both the offense of money laundering and the
unlawful activity as herein defined.
(b) Any proceeding relating to the unlawful activity shall be given precedence over the prosecution of any
offense or violation under this Act without prejudice to the freezing and other remedies provided.
Section 7. Creation of Anti-Money Laundering Council (AMLC). – The Anti-Money Laundering Council is
hereby created and shall be composed of the Governor of the Bangko Sentral ng Pilipinas as chairman, the
Commissioner of the Insurance Commission and the Chairman of the Securities and Exchange Commission
as members. The AMLC shall act unanimously in the discharge of its functions as defined hereunder:
(1) to require and receive covered transaction reports from covered institutions;
(2) to issue orders addressed to the appropriate Supervising Authority or the covered institution to
determine the true identity of the owner of any monetary instrument or property subject of a covered
transaction report or request for assistance from a foreign State, or believed by the Council, on the basis of
substantial evidence to be in whole or in part, whenever located, representing, involving, or related to,
directly or indirectly, in any manner or by any means, the proceeds of an unlawful activity;
(3) to institute civil forfeiture proceedings and all other remedial proceedings through the Office of the
Solicitor General;
(4) to cause the filing of complaints with the Department of Justice or the Ombudsman for the prosecution
of money laundering offenses;
(5) to initiate investigations of covered transactions, money laundering activities and other violations of
this Act;
(6) to freeze any monetary instrument or property alleged to be proceed of any unlawful activity;
(7) to implement such measures as may be necessary and justified under this Act to counteract money
laundering;
(8) to receive and take action in respect of, any request from foreign states for assistance in their own
anti-money laundering operations provided in this Act;
(9) to develop educational programs on the pernicious effects of money laundering, the methods and
techniques used in money laundering, the viable means of preventing money laundering and the effective
ways of prosecuting and punishing offenders; and
(10) to enlist the assistance of any branch, department, bureau, office, agency or instrumentality of the
government, including government-owned and –controlled corporations, in undertaking any and all anti-
money laundering operations, which may include the use of its personnel, facilities and resources for the
more resolute prevention, detection and investigation of money laundering offenses and prosecution of
offenders.
Section 8. Creation of a Secretariat. – The AMLC is hereby authorized to establish a secretariat to be
headed by an Executive Director who shall be appointed by the Council for a term of five (5) years. He
must be a member of the Philippine Bar, at least thirty-five (35) years of age and of good moral character,
unquestionable integrity and known probity. All members of the Secretariat must have served for at least
five (5) years either in the Insurance Commission, the Securities and Exchange Commission or the Bangko
Sentral ng Pilipinas (BSP) and shall hold full-time permanent positions within the BSP.
Section 9. Prevention of Money Laundering; Customer Identification Requirements and Record Keeping. –
(a) Customer Identification, - Covered institutions shall establish and record the true identity of its
clients based on official documents. They shall maintain a system of verifying the true identity of their
clients and, in case of corporate clients, require a system of verifying their legal existence and
organizational structure, as well as the authority and identification of all persons purporting to act on their
behalf.
The provisions of existing laws to the contrary notwithstanding, anonymous accounts, accounts under
fictitious names, and all other similar accounts shall be absolutely prohibited. Peso and foreign currency
non-checking numbered accounts shall be allowed. The BSP may conduct annual testing solely limited to
the determination of the existence and true identity of the owners of such accounts.
(b) Record Keeping – All records of all transactions of covered institutions shall be maintained and safely
stored for five (5) years from the date of transactions. With respect to closed accounts, the records on
customer identification, account files and business correspondence, shall be preserved and safety stored
for at least five (5) years from the dates when they were closed.
(c) Reporting of Covered Transactions. – Covered institutions shall report to the AMLC all covered
transactions within five (5) working days from occurrence thereof, unless the Supervising Authority
concerned prescribes a longer period not exceeding ten (10) working days.
When reporting covered transactions to the AMLC, covered institutions and their officers, employees,
representatives, agents, advisors, consultants or associates shall not be deemed to have violated Republic
Act No. 1405, as amended; Republic Act No. 6426, as amended; Republic Act No. 8791 and other similar
laws, but are prohibited from communicating, directly or indirectly, in any manner or by any means, to any
person the fact that a covered transaction report was made, the contents thereof, or any other information
in relation thereto. In case of violation thereof, the concerned officer, employee, representative, agent,
advisor, consultant or associate of the covered institution, shall be criminally liable. However, no
administrative, criminal or civil proceedings, shall lie against any person for having made a covered
transaction report in the regular performance of his duties and in good faith, whether or not such reporting
results in any criminal prosecution under this Act or any other Philippine law.
When reporting covered transactions to the AMLC, covered institutions and their officers, employees,
representatives, agents, advisors, consultants or associates are prohibited from communicating, directly or
indirectly, in any manner or by any means, to any person, entity, the media, the fact that a covered
transaction report was made, the contents thereof, or any other information in relation thereto. Neither
may such reporting be published or aired in any manner or form by the mass media, electronic mail, or
other similar devices. In case of violation thereof, the concerned officer, employee, representative, agent,
advisor, consultant or associate of the covered institution, or media shall be held criminally liable.
Section 10. Authority to Freeze. – Upon determination that probable cause exists that any deposit or
similar account is in any way related to an unlawful activity, the AMLC may issue a freeze order, which
shall be effective immediately, on the account for a period not exceeding fifteen (15) days. Notice to the
depositor that his account has been frozen shall be issued simultaneously with the issuance of the freeze
order. The depositor shall have seventy-two (72) hours upon receipt of the notice to explain why the freeze
order should be lifted. The AMLC has seventy-two (72) hours to dispose of the depositor's explanation. If it
falls to act within seventy-two (72) hours from receipt of the depositor's explanation, the freeze order shall
automatically be dissolved. The fifteen (15)-day freeze order of the AMLC may be extended upon order of
the court, provided that the fifteen (15)-day period shall be tolled pending the court's decision to extend
the period.
No court shall issue a temporary restraining order or writ of injunction against any freeze order issued by
the AMLC except the Court of Appeals or the Supreme Court.
Section 11. Authority to inquire into Bank Deposits. – Notwithstanding the provisions of Republic Act No.
1405, as amended; Republic Act No. 6426, as amended; Republic Act No. 8791, and other laws, the AMLC
may inquire into or examine any particular deposit or investment with any banking institution or non-bank
financial institution upon order of any competent court in cases of violation of this Act when it has been
established that there is probable cause that the deposits or investments involved are in any way related
to a money laundering offense: Provided, That this provision shall not apply to deposits and investments
made prior to the effectivity of this Act.
Section 12. Forfeiture Provisions. –
(a) Civil Forfeiture. – When there is a covered transaction report made, and the court has, in a petition
filed for the purpose ordered seizure of any monetary instrument or property, in whole or in part, directly
or indirectly, related to said report, the Revised Rules of Court on civil forfeiture shall apply.
(b) Claim on Forfeited Assets. – Where the court has issued an order of forfeiture of the monetary
instrument or property in a criminal prosecution for any money laundering offense defined under Section 4
of this Act, the offender or any other person claiming an interest therein may apply, by verified petition, for
a declaration that the same legitimately belongs to him and for segregation or exclusion of the monetary
instrument or property corresponding thereto. The verified petition shall be filed with the court which
rendered the judgment of conviction and order of forfeiture, within fifteen (15) days from the date of the
order or forfeiture, in default of which the said order shall become final and executory. This provision shall
apply in both civil and criminal forfeiture.
(c) Payment in Lieu of Forfeiture. – Where the court has issued an order of forfeiture of the monetary
instrument or property subject of a money laundering offense defined under Section 4, and said order
cannot be enforced because any particular monetary instrument or property cannot, with due diligence, be
located, or it has been substantially altered, destroyed, diminished in value or otherwise rendered
worthless by any act or omission, directly or indirectly, attributable to the offender, or it has been
concealed, removed, converted or otherwise transferred to prevent the same from being found or to avoid
forfeiture thereof, or it is located outside the Philippines or has been placed or brought outside the
jurisdiction of the court, or it has been commingled with other monetary instruments or property belonging
to either the offender himself or a third person or entity, thereby rendering the same difficult to identify or
be segregated for purposes of forfeiture, the court may, instead of enforcing the order of forfeiture of the
monetary instrument or property or part thereof or interest therein, accordingly order the convicted
offender to pay an amount equal to the value of said monetary instrument or property. This provision shall
apply in both civil and criminal forfeiture.
Section 13. Mutual Assistance among States. –
(a) Request for Assistance from a Foreign State. – Where a foreign State makes a request for
assistance in the investigation or prosecution of a money laundering offense, the AMLC may execute the
request or refuse to execute the same and inform the foreign State of any valid reason for not executing
the request or for delaying the execution thereof. The principles of mutuality and reciprocity shall, for this
purpose, be at all times recognized.
(b) Power of the AMLC to Act on a Request for Assistance from a Foreign State. – The AMLC may
execute a request for assistance from a foreign State by: (1) tracking down, freezing, restraining and
seizing assets alleged to be proceeds of any unlawful activity under the procedures laid down in this Act;
(2) giving information needed by the foreign State within the procedures laid down in this Act; and (3)
applying for an order of forfeiture of any monetary instrument or property in the court: Provided, That the
court shall not issue such an order unless the application is accompanied by an authenticated copy of the
order of a court in the requesting State ordering the forfeiture of said monetary instrument or properly of a
person who has been convicted of a money laundering offense in the requesting State, and a certification
of an affidavit of a competent officer of the requesting State stating that the conviction and the order of
forfeiture are final and then no further appeal lies in respect or either.
(c) Obtaining Assistance from Foreign States. – The AMLC may make a request to any foreign State
for assistance in (1) tracking down, freezing, restraining and seizing assets alleged to be proceeds of any
unlawful activity; (2) obtaining information that it needs relating to any covered transaction, money
laundering offense or any other matter directly or indirectly, related thereto; (3) to the extent allowed by
the law of the Foreign State, applying with the proper court therein for an order to enter any premises
belonging to or in the possession or control of, any or all of the persons named in said request, and/or
search any or all such persons named therein and/or remove any document, material or object named in
said request:Provided, That the documents accompanying the request in support of the application have
been duly authenticated in accordance with the applicable law or regulation of the foreign State; and (4)
applying for an order of forfeiture of any monetary instrument or property in the proper court in the foreign
State:Provided, That the request is accompanied by an authenticated copy of the order of the regional trial
court ordering the forfeiture of said monetary instrument or property of a convicted offender and an
affidavit of the clerk of court stating that the conviction and the order of forfeiture are final and that no
further appeal lies in respect of either.
(d) Limitations on Request for Mutual Assistance. – The AMLC may refuse to comply with any request
for assistance where the action sought by the request contravenes any provision of the Constitution or the
execution of a request is likely to prejudice the national interest of the Philippines unless there is a treaty
between the Philippines and the requesting State relating to the provision of assistance in relation to
money laundering offenses.
(e) Requirements for Requests for Mutual Assistance from Foreign State. – A request for mutual
assistance from a foreign State must (1) confirm that an investigation or prosecution is being conducted in
respect of a money launderer named therein or that he has been convicted of any money laundering
offense; (2) state the grounds on which any person is being investigated or prosecuted for money
laundering or the details of his conviction; (3) gives sufficient particulars as to the identity of said person;
(4) give particulars sufficient to identity any covered institution believed to have any information,
document, material or object which may be of assistance to the investigation or prosecution; (5) ask from
the covered institution concerned any information, document, material or object which may be of
assistance to the investigation or prosecution; (6) specify the manner in which and to whom said
information, document, material or object detained pursuant to said request, is to be produced; (7) give all
the particulars necessary for the issuance by the court in the requested State of the writs, orders or
processes needed by the requesting State; and (8) contain such other information as may assist in the
execution of the request.
(f) Authentication of Documents. – For purposes of this Section, a document is authenticated if the
same is signed or certified by a judge, magistrate or equivalent officer in or of, the requesting State, and
authenticated by the oath or affirmation of a witness or sealed with an official or public seal of a minister,
secretary of State, or officer in or of, the government of the requesting State, or of the person
administering the government or a department of the requesting territory, protectorate or colony. The
certificate of authentication may also be made by a secretary of the embassy or legation, consul general,
consul, vice consul, consular agent or any officer in the foreign service of the Philippines stationed in the
foreign State in which the record is kept, and authenticated by the seal of his office.
(g) Extradition. – The Philippines shall negotiate for the inclusion of money laundering offenses as herein
defined among extraditable offenses in all future treaties.
Section 14. Penal Provisions. –
(a) Penalties for the Crime of Money Laundering. The penalty of imprisonment ranging from seven
(7) to fourteen (14) years and a fine of not less than Three million Philippine pesos (Php 3,000,000.00) but
not more than twice the value of the monetary instrument or property involved in the offense, shall be
imposed upon a person convicted under Section 4(a) of this Act.
The penalty of imprisonment from four (4) to seven (7) years and a fine of not less than One million five
hundred thousand Philippine pesos (Php 1,500,000.00) but not more than Three million Philippine pesos
(Php 3,000,000.00), shall be imposed upon a person convicted under Section 4(b) of this Act.
The penalty of imprisonment from six (6) months to four (4) years or a fine of not less than One hundred
thousand Philippine pesos (Php 100,000.00) but not more than Five hundred thousand Philippine pesos
(Php 500,000.00), or both, shall be imposed on a person convicted under Section 4(c) of this Act.
(b) Penalties for Failure to Keep Records. The penalty of imprisonment from six (6) months to one (1)
year or a fine of not less than One hundred thousand Philippine pesos (Php 100,000.00) but not more than
Five hundred thousand Philippine pesos (Php 500,000.00), or both, shall be imposed on a person convicted
under Section 9(b) of this Act.
(c) Malicious Reporting. Any person who, with malice, or in bad faith, report or files a completely
unwarranted or false information relative to money laundering transaction against any person shall be
subject to a penalty of six (6) months to four (4) years imprisonment and a fine of not less than One
hundred thousand Philippine pesos (Php 100,000.00) but not more than Five hundred thousand Philippine
pesos (Php 500,000.00), at the discretion of the court: Provided, That the offender is not entitled to avail
the benefits of the Probation Law.
If the offender is a corporation, association, partnership or any juridical person, the penalty shall be
imposed upon the responsible officers, as the case may be, who participated in the commission of the
crime or who shall have knowingly permitted or failed to prevent its commission. If the offender is a
juridical person, the court may suspend or revoke its license. If the offender is an alien, he shall, in addition
to the penalties herein prescribed, be deported without further proceedings after serving the penalties
herein prescribed. If the offender is a public official or employee, he shall, in addition to the penalties
prescribed herein, suffer perpetual or temporary absolute disqualification from office, as the case may be;
Any public official or employee who is called upon to testify and refuses to do the same or purposely fails
to testify shall suffer the same penalties prescribed herein.
(d) Breach of Confidentiality. The punishment of imprisonment ranging from three (3) to eight (8) years
and a fine of not less than Five hundred thousand Philippine pesos (Php 500,000.00) but not more than
One million Philippine pesos (Php 1,000,000.00), shall be imposed on a person convicted for a violation
under Section 9(c).
Section 15. System of Incentives and Rewards. – A system of special incentives and rewards is hereby
established to be given to the appropriate government agency and its personnel that led and initiated an
investigation, prosecution and conviction of persons involved in the offense penalized in Section 4 of this
Act.
Section 16. Prohibitions Against Political Harassment. – This Act shall not be used for political prosecution
or harassment or as an instrument to hamper competition in trade and commerce.
No case for money laundering may be filed against and no assets shall be frozen, attached or forfeited to
the prejudice of a candidate for an electoral office during an election period.
Section 17. Restitution. – Restitution for any aggrieved party shall be governed by the provisions of the
New Civil Code.
Section 18. Implementing Rules and Regulations. – Within thirty (30) days from the effectivity of this Act,
the Bangko Sentral ng Pilipinas, the Insurance Commission and the Securities and Exchange Commission
shall promulgate the rules and regulations to implement effectivity the provisions of this Act. Said rules
and regulations shall be submitted to the Congressional Oversight Committee for approval.
Covered institutions shall formulate their respective money laundering prevention programs in accordance
with this Act including, but not limited to, information dissemination on money laundering activities and its
prevention, detection and reporting, and the training of responsible officers and personnel of covered
institutions.
Section 19. Congressional Oversight Committee. – There is hereby created a Congressional Oversight
Committee composed of seven (7) members from the Senate and seven (7) members from the House of
Representatives. The members from the Senate shall be appointed by the Senate President based on the
proportional representation of the parties or coalitions therein with at least two (2) Senators representing
the minority. The members from the House of Representatives shall be appointed by the Speaker also
based on proportional representation of the parties or coalitions therein with at least two (2) members
representing the minority.
The Oversight Committee shall have the power to promulgate its own rules, to oversee the implementation
of this Act, and to review or revise the implementing rules issued by the Anti-Money Laundering Council
within thirty (30) days from the promulgation of the said rules.
Section 20. Appropriations Clause. – The AMLC shall be provided with an initial appropriation of Twenty-
five million Philippine pesos (Php 25,000,000.00) to be drawn from the national government.
Appropriations for the succeeding years shall be included in the General Appropriations Act.
Section 21. Separability Clause. – If any provision or section of this Act or the application thereof to any
person or circumstance is held to be invalid, the other provisions or sections of this Act, and the
application of such provision or section to other persons or circumstances, shall not be affected thereby.
Section 22. Repealing Clause. – All laws, decrees, executive orders, rules and regulations or parts thereof,
including the relevant provisions of Republic Act No. 1405, as amended; Republic Act No. 6426, as
amended; Republic Act No. 8791, as amended and other similar laws, as are inconsistent with this Act, are
hereby repealed, amended or modified accordingly.
Section 23. Effectivity. – This Act shall take effect fifteen (15) days after its complete publication in the
Official Gazette or in at least two (2) national newspapers of general circulation.
The provisions of this Act shall not apply to deposits and investments made prior to its effectivity.
Approved,
(Sgd)
FRANKLIN M. DRILON
President of the Senate
(Sgd)
JOSE DE VENECIA, JR.
Speaker of the House of Representatives
This Act which is a consolidation of House Bill No. 3083 and Senate Bill No. 1745 was finally passed by the
House of Representatives and the Senate on September 29, 2001.
(Sgd)
OSCAR G. YARES
Secretary of the Senate
(Sgd)
ROBERTO P. NAZARENO
Secretary General
House of Representatives
Approved: September 29, 2001
(Sgd)
GLORIA MACAPAGAL-ARROYO
President of the Philippines
RULES AND REGULATION "REPUBLIC ACT NO. 9160" ANTI-MONEY LAUNDERING ACT OF 2001
RA 9372
Sunday, June 06, 2010
3:33 AM
Republic Act No. 9372 March 6, 2007
AN ACT TO SECURE THE STATE AND PROTECT OUR PEOPLE FROM TERRORISM
Be it enacted by the Senate and the House of Representatives of the Philippines in Congress assembled:
SECTION 1. Short Title. - This Act shall henceforth be known as the "Human Security Act of 2007."
SEC. 2. Declaration of Policy. - It is declared a policy of the State to protect life, liberty, and property
from acts of terrorism, to condemn terrorism as inimical and dangerous to the national security of the
country and to the welfare of the people, and to make terrorism a crime against the Filipino people,
against humanity, and against the law of nations.
In the implementation of the policy stated above, the State shall uphold the basic rights and fundamental
liberties of the people as enshrined in the Constitution.
The State recognizes that the fight against terrorism requires a comprehensive approach, comprising
political, economic, diplomatic, military, and legal means duly taking into account the root causes of
terrorism without acknowledging these as justifications for terrorist and/or criminal activities. Such
measures shall include conflict management and post-conflict peace-building, addressing the roots of
conflict by building state capacity and promoting equitable economic development.
Nothing in this Act shall be interpreted as a curtailment, restriction or diminution of constitutionally
recognized powers of the executive branch of the government. It is to be understood, however that the
exercise of the constitutionally recognized powers of the executive department of the government shall
not prejudice respect for human rights which shall be absolute and protected at all times.
SEC. 3. Terrorism.- Any person who commits an act punishable under any of the following provisions of
the Revised Penal Code:
a. Article 122 (Piracy in General and Mutiny in the High Seas or in the Philippine Waters);
b. Article 134 (Rebellion or Insurrection);
c. Article 134-a (Coup d' Etat), including acts committed by private persons;
d. Article 248 (Murder);
e. Article 267 (Kidnapping and Serious Illegal Detention);
f. Article 324 (Crimes Involving Destruction), or under
1. Presidential Decree No. 1613 (The Law on Arson);
2. Republic Act No. 6969 (Toxic Substances and Hazardous and Nuclear Waste Control Act of 1990);
3. Republic Act No. 5207, (Atomic Energy Regulatory and Liability Act of 1968);
4. Republic Act No. 6235 (Anti-Hijacking Law);
5. Presidential Decree No. 532 (Anti-Piracy and Anti-Highway Robbery Law of 1974); and,
6. Presidential Decree No. 1866, as amended (Decree Codifying the Laws on Illegal and Unlawful
Possession, Manufacture, Dealing in, Acquisition or Disposition of Firearms, Ammunitions or Explosives)
thereby sowing and creating a condition of widespread and extraordinary fear and panic among the
populace, in order to coerce the government to give in to an unlawful demand shall be guilty of the crime
of terrorism and shall suffer the penalty of forty (40) years of imprisonment, without the benefit of parole
as provided for under Act No. 4103, otherwise known as the Indeterminate Sentence Law, as amended.
SEC. 4. Conspiracy to Commit Terrorism. - Persons who conspire to commit the crime of terrorism
shall suffer the penalty of forty (40) years of imprisonment.
There is conspiracy when two or more persons come to an agreement concerning the commission of the
crime of terrorism as defined in Section 3 hereof and decide to commit the same.
SEC. 5. Accomplice. - Any person who, not being a principal under Article 17 of the Revised Penal Code
or a conspirator as defined in Section 4 hereof, cooperates in the execution of either the crime of
terrorism or conspiracy to commit terrorism by previous or simultaneous acts shall suffer the penalty of
from seventeen (17) years, four months one day to twenty (20) years of imprisonment.
SEC. 6. Accessory. - Any person who, having knowledge of the commission of the crime of terrorism or
conspiracy to commit terrorism, and without having participated therein, either as principal or accomplice
under Articles 17 and 18 of the Revised Penal Code, takes part subsequent to its commission in any of the
following manner: (a) by profiting himself or assisting the offender to profit by the effects of the crime; (b)
by concealing or destroying the body of the crime, or the effects, or instruments thereof, in order to
prevent its discovery; (c) by harboring, concealing, or assisting in the escape of the principal or
conspirator of the crime, shall suffer the penalty of ten (10) years and one day to twelve (12) years of
imprisonment.
Notwithstanding the above paragraph, the penalties prescribed for accessories shall not be imposed upon
those who are such with respect to their spouses, ascendants, descendants, legitimate, natural, and
adopted brothers and sisters, or relatives by affinity within the same degrees, with the single exception of
accessories falling within the provisions of subparagraph (a).
SEC. 7. Surveillance of Suspects and Interception and Recording of Communications. -The
provisions of Republic Act No. 4200 (Anti-Wire Tapping Law) to the contrary notwithstanding, a police or
law enforcement official and the members of his team may, upon a written order of the Court of Appeals,
listen to, intercept and record, with the use of any mode, form, kind or type of electronic or other
surveillance equipment or intercepting and tracking devices, or with the use of any other suitable ways
and means for that purpose, any communication, message, conversation, discussion, or spoken or written
words between members of a judicially declared and outlawed terrorist organization, association, or
group of persons or of any person charged with or suspected of the crime of terrorism or conspiracy to
commit terrorism.
Provided, That surveillance, interception and recording of communications between lawyers and clients,
doctors and patients, journalists and their sources and confidential business correspondence shall not be
authorized.
SEC. 8. Formal Application for Judicial Authorization. - The written order of the authorizing division
of the Court of Appeals to track down, tap, listen to, intercept, and record communications, messages,
conversations, discussions, or spoken or written words of any person suspected of the crime of terrorism
or the crime of conspiracy to commit terrorism shall only be granted by the authorizing division of the
Court of Appeals upon an ex parte written application of a police or of a law enforcement official who has
been duly authorized in writing by the Anti-Terrorism Council created in Section 53 of this Act to file such
ex parte application, and upon examination under oath or affirmation of the applicant and the witnesses
he may produce to establish: (a) that there is probable cause to believe based on personal knowledge of
facts or circumstances that the said crime of terrorism or conspiracy to commit terrorism has been
committed, or is being committed, or is about to be committed; (b) that there is probable cause to believe
based on personal knowledge of facts or circumstances that evidence, which is essential to the conviction
of any charged or suspected person for, or to the solution or prevention of, any such crimes, will be
obtained; and, (c) that there is no other effective means readily available for acquiring such evidence.
SEC. 9. Classification and Contents of the Order of the Court. - The written order granted by the
authorizing division of the Court of Appeals as well as its order, if any, to extend or renew the same, the
original application of the applicant, including his application to extend or renew, if any, and the written
authorizations of the Anti-Terrorism Council shall be deemed and are hereby declared as classified
information: Provided, That the person being surveilled or whose communications, letters, papers,
messages, conversations, discussions, spoken or written words and effects have been monitored, listened
to, bugged or recorded by law enforcement authorities has the right to be informed of the acts done by
the law enforcement authorities in the premises or to challenge, if he or she intends to do so, the legality
of the interference before the Court of Appeals which issued the written order. The written order of the
authorizing division of the Court of Appeals shall specify the following: (a) the identity, such as name and
address, if known, of the charged or suspected person whose communications, messages, conversations,
discussions, or spoken or written words are to be tracked down, tapped, listened to, intercepted, and
recorded and, in the case of radio, electronic, or telephonic (whether wireless or otherwise)
communications, messages, conversations, discussions, or spoken or written words, the electronic
transmission systems or the telephone numbers to be tracked down, tapped, listened to, intercepted, and
recorded and their locations or if the person suspected of the crime of terrorism or conspiracy to commit
terrorism is not fully known, such person shall be subject to continuous surveillance provided there is a
reasonable ground to do so; (b) the identity (name, address, and the police or law enforcement
organization) of the police or of the law enforcement official, including the individual identity (names,
addresses, and the police or law enforcement organization) of the members of his team, judicially
authorized to track down, tap, listen to, intercept, and record the communications, messages,
conversations, discussions, or spoken or written words; (c) the offense or offenses committed, or being
committed, or sought to be prevented; and, (d) the length of time within which the authorization shall be
used or carried out.
SEC. 10. Effective Period of Judicial Authorization. - Any authorization granted by the authorizing
division of the Court of Appeals, pursuant to Section 9(d) of this Act, shall only be effective for the length
of time specified in the written order of the authorizing division of the Court of Appeals, which shall not
exceed a period of thirty (30) days from the date of receipt of the written order of the authorizing division
of the Court of Appeals by the applicant police or law enforcement official.
The authorizing division of the Court of Appeals may extend or renew the said authorization for another
non-extendible period, which shall not exceed thirty (30) days from the expiration of the original period:
Provided, That the authorizing division of the Court of Appeals is satisfied that such extension or renewal
is in the public interest: and Provided, further, That the ex parte application for extension or renewal,
which must be filed by the original applicant, has been duly authorized in writing by the Anti-Terrorism
Council.
In case of death of the original applicant or in case he is physically disabled to file the application for
extension or renewal, the one next in rank to the original applicant among the members of the team
named in the original written order of the authorizing division of the Court of Appeals shall file the
application for extension or renewal: Provided, That, without prejudice to the liability of the police or law
enforcement personnel under Section 20 hereof, the applicant police or law enforcement official shall
have thirty (30) days after the termination of the period granted by the Court of Appeals as provided in
the preceding paragraphs within which to file the appropriate case before the Public Prosecutor's Office
for any violation of this Act.
If no case is filed within the thirty (30)-day period, the applicant police or law enforcement official shall
immediately notify the person subject of the surveillance, interception and recording of the termination of
the said surveillance, interception and recording. The penalty of ten (10) years and one day to twelve (12)
years of imprisonment shall be imposed upon the applicant police or law enforcement official who fails to
notify the person subject of the surveillance, monitoring, interception and recording as specified above.
SEC. 11. Custody of Intercepted and Recorded Communications. - All tapes, discs, and recordings
made pursuant to the authorization of the authorizing division of the Court of Appeals, including all
excerpts and summaries thereof as well as all written notes or memoranda made in connection therewith,
shall, within forty-eight (48) hours after the expiration of the period fixed in the written order of the
authorizing division of the Court of Appeals or within forty-eight (48) hours after the expiration of any
extension or renewal granted by the authorizing division of the Court of Appeals, be deposited with the
authorizing Division of the Court of Appeals in a sealed envelope or sealed package, as the case may be,
and shall be accompanied by a joint affidavit of the applicant police or law enforcement official and the
members of his team.
In case of death of the applicant or in case he is physically disabled to execute the required affidavit, the
one next in rank to the applicant among the members of the team named in the written order of the
authorizing division of the Court of Appeals shall execute with the members of the team that required
affidavit.
It shall be unlawful for any person, police officer or any custodian of the tapes, discs and recording, and
their excerpts and summaries, written notes or memoranda to copy in whatever form, to remove, delete,
expunge, incinerate, shred or destroy in any manner the items enumerated above in whole or in part
under any pretext whatsoever.
Any person who removes, deletes, expunges, incinerates, shreds or destroys the items enumerated
above shall suffer a penalty of not less than six years and one day to twelve (12) years of imprisonment.
SEC. 12. Contents of Joint Affidavit. - The joint affidavit of the police or of the law enforcement official
and the individual members of his team shall state: (a) the number of tapes, discs, and recordings that
have been made, as well as the number of excerpts and summaries thereof and the number of written
notes and memoranda, if any, made in connection therewith; (b) the dates and times covered by each of
such tapes, discs, and recordings; (c) the number of tapes, discs, and recordings, as well as the number
of excerpts and summaries thereof and the number of written notes and memoranda made in connection
therewith that have been included in the deposit; and (d) the date of the original written authorization
granted by the Anti-Terrorism Council to the applicant to file the ex parte application to conduct the
tracking down, tapping, intercepting, and recording, as well as the date of any extension or renewal of
the original written authority granted by the authorizing division of the Court of Appeals.
The joint affidavit shall also certify under oath that no duplicates or copies of the whole or any part of any
of such tapes, discs, and recordings, and that no duplicates or copies of the whole or any part of any of
such excerpts, summaries, written notes, and memoranda, have been made, or, if made, that all such
duplicates and copies are included in the sealed envelope or sealed package, as the case may be,
deposited with the authorizing division of the Court of Appeals.
It shall be unlawful for any person, police or law enforcement official to omit or exclude from the joint
affidavit any item or portion thereof mentioned in this Section.
Any person, police or law enforcement officer who violates any of the acts prescribed in the preceding
paragraph shall suffer the penalty of not less than ten (10) years and one day to twelve (12) years of
imprisonment.
SEC. 13. Disposition of Deposited Material. -The sealed envelope or sealed package and the
contents thereof, which are deposited with the authorizing division of the Court of Appeals, shall be
deemed and are hereby declared classified information, and the sealed envelope or sealed package shall
not be opened and its contents (including the tapes, discs, and recordings and all the excerpts and
summaries thereof and the notes and memoranda made in connection therewith) shall not be divulged,
revealed, read, replayed, or used as evidence unless authorized by written order of the authorizing
division of the Court of Appeals, which written order shall be granted only upon a written application of
the Department of Justice filed before the authorizing division of the Court of Appeals and only upon a
showing that the Department of Justice has been duly authorized in writing by the Anti-Terrorism Council
to file the application with proper written notice the person whose conversation, communication,
message discussion or spoken or written words have been the subject of surveillance, monitoring,
recording and interception to open, reveal, divulge, and use the contents of the sealed envelope or sealed
package as evidence.
Any person, law enforcement official or judicial authority who violates his duty to notify in writing the
persons subject of the surveillance as defined above shall suffer the penalty of six years and one day to
eight years of imprisonment.
SEC. 14. Application to Open Deposited Sealed Envelope or Sealed Package. - The written
application with notice to the party concerned to open the deposited sealed envelope or sealed package
shall clearly state the purpose or reason: (a) for opening the sealed envelope or sealed package; (b) for
revealing or disclosing its classified contents; (c) for replaying, divulging, and or reading any of the
listened to, intercepted, and recorded communications, messages, conversations, discussions, or spoken
or written words (including any of the excerpts and summaries thereof and any of the notes or
memoranda made in connection therewith); [ and, (d) for using any of said listened to, intercepted, and
recorded communications, messages, conversations, discussions, or spoken or written words (including
any of the excerpts and summaries thereof and any of the notes or memoranda made in connection
therewith) as evidence.
Any person, law enforcement official or judicial authority who violates his duty to notify as defined above
shall suffer the penalty of six years and one day to eight years of imprisonment.
SEC. 15. Evidentiary Value of Deposited Materials. - Any listened to, intercepted, and recorded
communications, messages, conversations, discussions, or spoken or written words, or any part or parts
thereof, or any information or fact contained therein, including their existence, content, substance,
purport, effect, or meaning, which have been secured in violation of the pertinent provisions of this Act,
shall absolutely not be admissible and usable as evidence against anybody in any judicial, quasi-judicial,
legislative, or administrative investigation, inquiry, proceeding, or hearing.
SEC. 16. Penalty for Unauthorized or Malicious Interceptions and/or Recordings. - Any police or
law enforcement personnel who, not being authorized to do so by the authorizing division of the Court of
Appeals, tracks down, taps, listens to, intercepts, and records in whatever manner or form any
communication, message, conversation, discussion, or spoken or written word of a person charged with
or suspected of the crime of terrorism or the crime of conspiracy to commit terrorism shall be guilty of an
offense and shall suffer the penalty of ten (10) years and one day to twelve (12) years of imprisonment.
In addition to the liability attaching to the offender for the commission of any other offense, the penalty of
ten (10) years and one day to twelve (12) years of imprisonment and the accessory penalty of perpetual
absolute disqualification from public office shall be imposed upon any police or law enforcement
personnel who maliciously obtained an authority from the Court of Appeals to track down, tap, listen to,
intercept, and record in whatever manner or form any communication, message, conversation,
discussion, or spoken or written words of a person charged with or suspected of the crime of terrorism or
conspiracy to commit terrorism: Provided, That notwithstanding Section 13 of this Act, the party
aggrieved by such authorization shall be allowed access to the sealed envelope or sealed package and
the contents thereof as evidence for the prosecution of any police or law enforcement personnel who
maliciously procured said authorization.
SEC. 17. Proscription of Terrorist Organizations, Association, or Group of Persons. - Any
organization, association, or group of persons organized for the purpose of engaging in terrorism, or
which, although not organized for that purpose, actually uses the acts to terrorize mentioned in this Act or
to sow and create a condition of widespread and extraordinary fear and panic among the populace in
order to coerce the government to give in to an unlawful demand shall, upon application of the
Department of Justice before a competent Regional Trial Court, with due notice and opportunity to be
heard given to the organization, association, or group of persons concerned, be declared as a terrorist
and outlawed organization, association, or group of persons by the said Regional Trial Court.
SEC. 18. Period of Detention Without Judicial Warrant of Arrest. - The provisions of Article 125 of
the Revised Penal Code to the contrary notwithstanding, any police or law enforcement personnel, who,
having been duly authorized in writing by the Anti-Terrorism Council has taken custody of a person
charged with or suspected of the crime of terrorism or the crime of conspiracy to commit terrorism shall,
without incurring any criminal liability for delay in the delivery of detained persons to the proper judicial
authorities, deliver said charged or suspected person to the proper judicial authority within a period of
three days counted from the moment the said charged or suspected person has been apprehended or
arrested, detained, and taken into custody by the said police, or law enforcement personnel: Provided,
That the arrest of those suspected of the crime of terrorism or conspiracy to commit terrorism must result
from the surveillance under Section 7 and examination of bank deposits under Section 27 of this Act.
The police or law enforcement personnel concerned shall, before detaining the person suspected of the
crime of terrorism, present him or her before any judge at the latter's residence or office nearest the
place where the arrest took place at any time of the day or night. It shall be the duty of the judge, among
other things, to ascertain the identity of the police or law enforcement personnel and the person or
persons they have arrested and presented before him or her, to inquire of them the reasons why they
have arrested the person and determine by questioning and personal observation whether or not the
suspect has been subjected to any physical, moral or psychological torture by whom and why. The judge
shall then submit a written report of what he/she had observed when the subject was brought before him
to the proper court that has jurisdiction over the case of the person thus arrested. The judge shall
forthwith submit his/her report within three calendar days from the time the suspect was brought to
his/her residence or office.
Immediately after taking custody of a person charged with or suspected of the crime of terrorism or
conspiracy to commit terrorism, the police or law enforcement personnel shall notify in writing the judge
of the court nearest the place of apprehension or arrest: Provided ,That where the arrest is made during
Saturdays, Sundays, holidays or after office hours, the written notice shall be served at the residence of
the judge nearest the place where the accused was arrested.
The penalty of ten (10) years and one day to twelve (12) years of imprisonment shall be imposed upon
the police or law enforcement personnel who fails to notify and judge as Provided in the preceding
paragraph.
SEC. 19. Period of Detention in the Event of an Actual or Imminent Terrorist Attack. - In the
event of an actual or imminent terrorist attack, suspects may not be detained for more than three days
without the written approval of a municipal, city, provincial or regional official of a Human Rights
Commission or judge of the municipal, regional trial court, the Sandiganbayan or a justice of the Court of
Appeals nearest the place of the arrest. If the arrest is made during Saturdays, Sundays, holidays or after
office hours, the arresting police or law enforcement personnel shall bring the person thus arrested to the
residence of any of the officials mentioned above that is nearest the place where the accused was
arrested. The approval in writing of any of the said officials shall be secured by the police or law
enforcement personnel concerned within five days after the date of the detention of the persons
concerned: Provided, however, That within three days after the detention the suspects, whose connection
with the terror attack or threat is not established, shall be released immediately.
SEC. 20. Penalty for Failure to Deliver Suspect to the Proper Judicial Authority within Three
Days. - The penalty of ten (10) years and one day to twelve (12) years of imprisonment shall be imposed
upon any police or law enforcement personnel who has apprehended or arrested, detained and taken
custody of a person charged with or suspected of the crime of terrorism or conspiracy to commit
terrorism and fails to deliver such charged or suspected person to the proper judicial authority within the
period of three days.
SEC. 21. Rights of a Person under Custodial Detention. - The moment a person charged with or
suspected of the crime of terrorism or the crime of conspiracy to commit terrorism is apprehended or
arrested and detained, he shall forthwith be informed, by the arresting police or law enforcement officers
or by the police or law enforcement officers to whose custody the person concerned is brought, of his or
her right: (a) to be informed of the nature and cause of his arrest, to remain silent and to have competent
and independent counsel preferably of his choice. If the person cannot afford the services of counsel of
his or her choice, the police or law enforcement officers concerned shall immediately contact the free
legal assistance unit of the Integrated Bar of the Philippines (IBP) or the Public Attorney's Office (PAO). It
shall be the duty of the free legal assistance unit of the IBP or the PAO thus contacted to immediately visit
the person(s) detained and provide him or her with legal assistance. These rights cannot be waived
except in writing and in the presence of the counsel of choice; (b) informed of the cause or causes of his
detention in the presence of his legal counsel; (c) allowed to communicate freely with his legal counsel
and to confer with them at any time without restriction; (d) allowed to communicate freely and privately
without restrictions with the members of his family or with his nearest relatives and to be visited by them;
and, (e) allowed freely to avail of the service of a physician or physicians of choice.
SEC. 22. Penalty for Violation of the Rights of a Detainee. - Any police or law enforcement
personnel, or any personnel of the police or other law enforcement custodial unit that violates any of the
aforesaid rights of a person charged with or suspected of the crime of terrorism or the crime of conspiracy
to commit terrorism shall be guilty of an offense and shall suffer the penalty of ten (10) years and one
day to twelve (12) years of imprisonment.
Unless the police or law enforcement personnel who violated the rights of a detainee or detainees as
stated above is duly identified, the same penalty shall be imposed on the police officer or hear or leader
of the law enforcement unit having custody of the detainee at the time the violation was done.
SEC. 23. Requirement for an Official Custodial Logbook and its Contents. - The police or other
law enforcement custodial unit in whose care and control the person charged with or suspected of the
crime of terrorism or the crime of conspiracy to commit terrorism has been placed under custodial arrest
and detention shall keep a securely and orderly maintained official logbook, which is hereby declared as a
public document and opened to and made available for .the inspection and scrutiny of the lawyer or
lawyers of the person under custody or any member of his or her family or relative by consanguinity or
affinity within the fourth civil degree or his or her physician at any time of the day or night without any
form of restriction. The logbook shall contain a clear and concise record of: (a) the name, description, and
address of the detained person; (b) the date and exact time of his initial admission for custodial arrest
and detention; (c) the name and address of the physician or physicians who examined him physically and
medically; (d) the state of his health and physical condition at the time of his initial admission for
custodial detention; (e) the date and time of each removal of the detained person from his cell for
interrogation or for any purpose; (f) the date and time of his return to his cell; (g) the name and address
of the physician or physicians who physically and medically examined him after each interrogation; (h) a
summary of the physical and medical findings on the detained person after each of such interrogation; (i)
the names and addresses of his family members and nearest relatives, if any and if available; (j) the
names and addresses of persons, who visit the detained person; (k) the date and time of each of such
visits; (1) the date and time of each request of the detained person to communicate and confer with his
legal counsel or counsels; (m) the date and time of each visit, and date and time of each departure of his
legal counsel or counsels; and, (n) all other important events bearing on and all relevant details regarding
the treatment of the detained person while under custodial arrest and detention.
The said police or law enforcement custodial unit shall upon demand of the aforementioned lawyer or
lawyers or members of the family or relatives within the fourth civil degree of consanguinity or affinity of
the person under custody or his or her physician issue a certified true copy of the entries of the logbook
relative to the concerned detained person without delay or restriction or requiring any fees whatsoever
including documentary stamp tax, notarial fees, and the like. This certified true copy may be attested by
the person who has custody of the logbook or who allowed the party concerned to scrutinize it at the time
the demand for the certified true copy is made.
The police or other law enforcement custodial unit who fails to comply with the preceding paragraph to
keep an official logbook shall suffer the penalty of ten (10) years and one day to twelve (12) years of
imprisonment.
SEC. 24. No Torture or Coercion in Investigation and Interrogation. - No threat, intimidation, or
coercion, and no act which will inflict any form of physical pain or torment, or mental, moral, or
psychological pressure, on the detained person, which shall vitiate his freewill, shall be employed in his
investigation and interrogation for the crime of terrorism or the crime of conspiracy to commit terrorism;
otherwise, the evidence obtained from said detained person resulting from such threat, intimidation, or
coercion, or from such inflicted physical pain or torment, or mental, moral, or psychological pressure,
shall be, in its entirety, absolutely not admissible and usable as evidence in any judicial, quasi-judicial,
legislative, or administrative investigation, inquiry, proceeding, or hearing.
SEC. 25. Penalty for Threat, Intimidation, Coercion, or Torture in the Investigation and
Interrogation of a Detained Person. - Any person or persons who use threat, intimidation, or coercion,
or who inflict physical pain or torment, or mental, moral, or psychological pressure, which shall vitiate the
free-will of a charged or suspected person under investigation and interrogation for the crime of terrorism
or the crime of conspiracy to commit terrorism shall be guilty of an offense and shall suffer the penalty of
twelve (12) years and one day to twenty (20) years of imprisonment.
When death or serious permanent disability of said detained person occurs as a consequence of the use
of such threat, intimidation, or coercion, or as a consequence of the infliction on him of such physical pain
or torment, or as a consequence of the infliction on him of such mental, moral, or psychological pressure,
the penalty shall be twelve (12) years and one day to twenty (20) years of imprisonment.
SEC. 26. Restriction on Travel. - In cases where evidence of guilt is not strong, and the person
charged with the crime of terrorism or conspiracy to commit terrorism is entitled to bail and is granted
the same, the court, upon application by the prosecutor, shall limit the right of travel of the accused to
within the municipality or city where he resides or where the case is pending, in the interest of national
security and public safety, consistent with Article III, Section 6 of the Constitution. Travel outside of said
municipality or city, without the authorization of the court, shall be deemed a violation of the terms and
conditions of his bail, which shall then be forfeited as provided under the Rules of Court.
He/she may also be placed under house arrest by order of the court at his or her usual place of residence.
While under house arrest, he or she may not use telephones, cellphones, e-mails, computers, the internet
or other means of communications with people outside the residence until otherwise ordered by the
court.
The restrictions abovementioned shall be terminated upon the acquittal of the accused or of the dismissal
of the case filed against him or earlier upon the discretion of the court on motion of the prosecutor or of
the accused.
SEC. 27. Judicial Authorization Required to Examine Bank Deposits, Accounts, and Records. -
The provisions of Republic Act No. 1405 as amended, to the contrary notwithstanding, the justices of the
Court of Appeals designated as a special court to handle anti-terrorism cases after satisfying themselves
of the existence of probable cause in a hearing called for that purpose that: (1) a person charged with or
suspected of the crime of terrorism or, conspiracy to commit terrorism, (2) of a judicially declared and
outlawed terrorist organization, association, or group of persons; and (3) of a member of such judicially
declared and outlawed organization, association, or group of persons, may authorize in writing any police
or law enforcement officer and the members of his/her team duly authorized in writing by the anti-
terrorism council to: (a) examine, or cause the examination of, the deposits, placements, trust accounts,
assets and records in a bank or financial institution; and (b) gather or cause the gathering of any relevant
information about such deposits, placements, trust accounts, assets, and records from a bank or financial
institution. The bank or financial institution concerned, shall not refuse to allow such examination or to
provide the desired information, when so, ordered by and served with the written order of the Court of
Appeals.
SEC. 28. Application to Examine Bank Deposits, Accounts, and Records. - The written order of the
Court of Appeals authorizing the examination of bank deposits, placements, trust accounts, assets, and
records: (1) of a person charged with or suspected of the crime of terrorism or conspiracy to commit
terrorism; (2) of any judicially declared and outlawed terrorist organization, association, or group of
persons, or (3) of any member of such organization, association, or group of persons in a bank or financial
institution, and the gathering of any relevant information about the same from said bank or financial
institution, shall only be granted by the authorizing division of the Court of Appeals upon an ex parte
application to that effect of a police or of a law enforcement official who has been duly authorized in
writing to file such ex parte application by the Anti-Terrorism Council created in Section 53 of this Act to
file such ex parte application, and upon examination under oath or affirmation of the applicant and, the
witnesses he may produce to establish the facts that will justify the need and urgency of examining and
freezing the bank deposits, placements, trust accounts, assets, and records: (1) of the person charged
with or suspected of the crime of terrorism or conspiracy to commit terrorism; (2) of a judicially declared
and outlawed terrorist organization, association or group of persons; or (3) of any member of such
organization, association, or group of persons.
SEC. 29. Classification and Contents of the Court Order Authorizing the Examination of Bank
Deposits, Accounts, and Records. - The written order granted by the authorizing division of the Court
of Appeals as well as its order, if any, to extend or renew the same, the original ex parte application of
the applicant, including his ex parte application to extend or renew, if any, and the written authorizations
of the Anti-Terrorism Council, shall be deemed and are hereby declared as classified information:
Provided, That the person whose bank deposits, placements, trust accounts, assets, and records have
been examined, frozen, sequestered and seized by law enforcement authorities has the right to be
informed of the acts done by the law enforcement authorities in the premises or to challenge, if he or she
intends to do so, the legality of the interference. The written order of the authorizing division of the Court
of Appeals designated to handle cases involving terrorism shall specify: (a) the identify of the said: (1)
person charged with or suspected of the crime of terrorism or conspiracy to commit terrorism; (2)
judicially declared and outlawed terrorist organization, association, or group of persons; and (3) member
of such judicially declared and outlawed organization, association, or group of persons, as the case may
be. whose deposits, placements, trust accounts, assets, and records are to be examined or the
information to be gathered; (b) the identity of the bank or financial Institution where such deposits,
placements, trust accounts, assets, and records are held and maintained; (c) the identity of the persons
who will conduct the said examination and the gathering of the desired information; and, (d) the length of
time the authorization shall be carried out.
SEC. 30. Effective Period of Court Authorization to Examine and Obtain Information on Bank
Deposits, Accounts, and Records. - The authorization issued or granted by the authorizing division of
the Court of Appeals to examine or cause the examination of and to freeze bank deposits, placements,
trust accounts, assets, and records, or to gather information about the same, shall be effective for the
length of time specified in the written order of the authorizing division of the Court of Appeals, which shall
not exceed a period of thirty (30) days from the date of receipt of the written order of the authorizing
division of the Court of Appeals by the applicant police or law enforcement official.
The authorizing division of the Court of Appeals may extend or renew the said authorization for another
period, which shall not exceed thirty (30) days renewable to another thirty (30) days from the expiration
of the original period: Provided, That the authorizing division of the Court of Appeals is satisfied that such
extension or renewal is in the public interest: and, Provided, further, That the application for extension or
renewal, which must be filed by the original applicant, has been duly authorized in writing by the Anti-
Terrorism Council.
In case of death of the original applicant or in case he is physically disabled to file the application for
extension or renewal, the one next in rank to the original applicant among the members of the ream
named in the original written order of the authorizing division of the Court of Appeals shall file the
application for extension or renewal: Provided, That, without prejudice to the liability of the police or law
enforcement personnel under Section 19 hereof, the applicant police or law enforcement official shall
have thirty (30) days after the termination of the period granted by the Court of Appeals as provided in
the preceding paragraphs within which to file the appropriate case before the Public Prosecutor's Office
for any violation of this Act.
If no case is filed within the thirty (30)-day period, the applicant police or law enforcement official shall
immediately notify in writing the person subject of the bank examination and freezing of bank deposits,
placements, trust accounts, assets and records. The penalty of ten (10) years and one day to twelve (12)
years of imprisonment shall be imposed upon the applicant police or law enforcement official who fails to
notify in writing the person subject of the bank examination and freezing of bank deposits, placements,
trust accounts, assets and records.
Any person, law enforcement official or judicial authority who violates his duty to notify in writing as
defined above shall suffer the penalty of six years and one day to eight years of imprisonment.
SEC. 31. Custody of Bank Data and Information Obtained after Examination of Deposits,
Placements, Trust Accounts, Assets and Records. - All information, data, excerpts, summaries,
notes, memoranda, working sheets, reports, and other documents obtained from the examination of the
bank deposits, placements, trust accounts, assets and records of: (1) a person charged with or suspected
of the crime of terrorism or the crime of conspiracy to commit terrorism; (2) a judicially declared and
outlawed terrorist organization, association, or group of persons; or (3) a member of any such
organization, association, or group of persons shall, within forty-eight (48) hours after the expiration of
the period fixed in the written order of the authorizing division of the Court of Appeals or within forty-
eight (48) hours after the expiration of the extension or renewal granted by the authorizing division of the
Court of Appeals, be deposited with the authorizing division of the Court of Appeals in a sealed envelope
or sealed package, as the case may be, and shall be accompanied by a joint affidavit of the applicant
police or law enforcement official and the persons who actually conducted the examination of said bank
deposits, placements, trust accounts, assets and records.
SEC. 32. Contents of Joint Affidavit. - The joint affidavit shall state: (a) the identifying marks,
numbers, or symbols of the deposits, placements, trust accounts, assets, and records examined; (b) the
identity and address of the bank or financial institution where such deposits, placements, trust accounts,
assets, and records are held and maintained; (c) the number of bank deposits, placements, trust
accounts, assets, and records discovered, examined, and frozen; (d) the outstanding balances of each of
such deposits, placements, trust accounts, assets; (e) all information, data, excerpts, summaries, notes,
memoranda, working sheets, reports, documents, records examined and placed in the sealed envelope or
sealed package deposited with the authorizing division of the Court of Appeals; (f) the date of the original
written authorization granted by the Anti-Terrorism Council to the applicant to file the ex parte
Application to conduct the examination of the said bank deposits, placements, trust accounts, assets and
records, as well as the date of any extension or renewal of the original written authorization granted by
the authorizing division of the Court of Appeals; and (g) that the items Enumerated were all that were
found in the bank or financial institution examined at the time of the completion of the examination.
The joint affidavit shall also certify under oath that no duplicates or copies of the information, data,
excerpts, summaries, notes, memoranda, working sheets, reports, and documents acquired from the
examination of the bank deposits, placements, trust accounts, assets and records have been made, or, if
made, that all such duplicates and copies are placed in the sealed envelope or sealed package deposited
with the authorizing division of the Court of Appeals.
It shall be unlawful for any person, police officer or custodian of the bank data and information obtained
after examination of deposits, placements, trust accounts, assets and records to copy, to remove, delete,
expunge, incinerate, shred or destroy in any manner the items enumerated above in whole or in part
under any pretext whatsoever,
Any person who copies, removes, deletes, expunges, incinerates, shreds or destroys the items
enumerated above shall suffer a penalty of not less than six years and one day to twelve (12) years of
imprisonment.
SEC. 33. Disposition of Bank Materials. - The sealed envelope or sealed package and the contents
thereof, which are deposited with the authorizing division of the Court of Appeals, shall be deemed and
are hereby declared classified information and the sealed envelope or sealed package shall not be
opened and its contents shall not be divulged, revealed, read, or used as evidence unless authorized in a
written order of the authorizing division of the Court of Appeals, which written order shall be granted only
upon a written application of the Department of Justice filed before the authorizing division of the Court of
Appeals and only upon a showing that the Department of Justice has been duly authorized in writing by
the Anti-Terrorism Council to file the application, with notice in writing to the party concerned not later
than three days before the scheduled opening, to open, reveal, divulge, and use the contents of the
sealed envelope or sealed package as evidence.
Any person, law enforcement official or judicial authority who violates his duty to notify in writing as
defined above shall suffer the penalty of six years and one day to eight years of imprisonment.
SEC. 34. Application to Open Deposited Bank Materials. - The written application, with notice in
writing to the party concerned not later than three days of the scheduled opening, to open the sealed
envelope or sealed package shall clearly state the purpose and reason: (a) for opening the sealed
envelope or sealed package; (b) for revealing and disclosing its classified contents; and, (c) for using the
classified information, data, excerpts, summaries, notes, memoranda, working sheets, reports, and
documents as evidence.
SEC. 35. Evidentiary Value of Deposited Bank Materials. - Any information, data, excerpts,
summaries, notes, memoranda, work sheets, reports, or documents acquired from the examination of the
bank deposits, placements, trust accounts, assets and records of: (1) a person charged or suspected of
the crime of terrorism or the crime of conspiracy to commit terrorism; (2) a judicially declared and
outlawed terrorist organization, association, or group of persons; or (3) a member of such organization,
association, or group of persons, which have been secured in violation of the provisions of this Act, shall
absolutely not be admissible and usable as evidence against anybody in any judicial, quasi-judicial,
legislative, or administrative investigation, inquiry, proceeding, or hearing.
SEC. 36. Penalty for Unauthorized or Malicious Examination of a Bank or a Financial
Institution. - Any person, police or law enforcement personnel who examines the deposits, placements,
trust accounts, assets, or records in a bank or financial institution of: (1) a person charged with or
suspected of the crime of terrorism or the crime of conspiracy to commit terrorism; (2) a judicially
declared and outlawed terrorist organization, association, or group of persons; or (3) a member of such
organization, association, or group of persons, without being authorized to do so by the Court of Appeals,
shall be guilty of an offense and shall suffer the penalty of ten (10) years and one day to twelve (12)
years of imprisonment.
In addition to the liability attaching to the offender for the commission of any other offense, the penalty of
ten (10) years and one day to twelve (12) years of imprisonment shall be imposed upon any police or law
enforcement personnel, who maliciously obtained an authority from the Court of Appeals to examine the
deposits, placements, trust accounts, assets, or records in a bank or financial institution of: (1) a person
charged with or suspected of the crime of terrorism or conspiracy to commit terrorism; (2) a judicially
declared and outlawed terrorist organization, association, or group of persons; or (3) a member of such
organization, association, or group of persons: Provided, That notwithstanding Section 33 of this Act, the
party aggrieved by such authorization shall upon motion duly filed be allowed access to the sealed
envelope or sealed package and the contents thereof as evidence for the prosecution of any police or law
enforcement personnel who maliciously procured said authorization.
SEC. 37. Penalty of Bank Officials and Employees Defying a Court Authorization. - An employee,
official, or a member of the board of directors of a bank or financial institution, who refuses to allow the
examination of the deposits, placements, trust accounts, assets, and records of: (1) a person charged
with or suspected of the crime of terrorism or the crime of conspiracy to commit terrorism; (2) a judicially
declared and outlawed organization, association, or group of persons; or (3) a member of such judicially
declared and outlawed organization, association, or group of persons in said bank or financial institution,
when duly served with the written order of the authorizing division of the Court of Appeals, shall be guilty
of an offense and shall suffer the penalty of ten (10) years and one day to twelve (12) years of
imprisonment.
SEC. 38. Penalty for False or Untruthful Statement or Misrepresentation of Material Fact in
Joint Affidavits.- Any false or untruthful statement or misrepresentation of material fact in the joint
affidavits required respectively in Section 12 and Section 32 of this Act shall constitute a criminal offense
and the affiants shall suffer individually the penalty of ten (10) years and one day to twelve (12) years of
imprisonment.
SEC. 39. Seizure and Sequestration. - The deposits and their outstanding balances, placements, trust
accounts, assets, and records in any bank or financial institution, moneys, businesses, transportation and
communication equipment, supplies and other implements, and property of whatever kind and nature
belonging: (1) to any person suspected of or charged before a competent Regional Trial Court for the
crime of terrorism or the crime of conspiracy to commit terrorism; (2) to a judicially declared and
outlawed organization, association, or group of persons; or (3) to a member of such organization,
association, or group of persons shall be seized, sequestered, and frozen in order to prevent their use,
transfer, or conveyance for purposes that are inimical to the safety and security of the people or injurious
to the interest of the State.
The accused or a person suspected of may withdraw such sums as may be reasonably needed by the
monthly needs of his family including the services of his or her counsel and his or her family's medical
needs upon approval of the court. He or she may also use any of his property that is under seizure or
sequestration or frozen because of his/her indictment as a terrorist upon permission of the court for any
legitimate reason.
Any person who unjustifiably refuses to follow the order of the proper division of the Court of Appeals to
allow the person accused of the crime of terrorism or of the crime of conspiracy to commit terrorism to
withdraw such sums from sequestered or frozen deposits, placements, trust accounts, assets and records
as may be necessary for the regular sustenance of his/her family or to use any of his/her property that
has been seized, sequestered or frozen for legitimate purposes while his/her case is pending shall suffer
the penalty of ten (10) years and one day to twelve (12) years of imprisonment.
SEC. 40. Nature of Seized. Sequestered and Frozen Bank Deposits, Placements, Trust
Accounts, Assets and Records. - The seized, sequestered and frozen bank deposits, placements, trust
accounts, assets and records belonging to a person suspected of or charged with the crime of terrorism or
conspiracy to commit terrorism shall be deemed as property held in trust by the bank or financial
institution for such person and the government during the pendency of the investigation of the person
suspected of or during the pendency of the trial of the person charged with any of the said crimes, as the
case may be and their use or disposition while the case is pending shall be subject to the approval of the
court before which the case or cases are pending.
SEC. 41. Disposition of the Seized, Sequestered and Frozen Bank Deposits, Placements, Trust
Accounts, Assets and Record. - If the person suspected of or charged with the crime of terrorism or
conspiracy to commit terrorism is found, after his investigation, to be innocent by the investigating body,
or is acquitted, after his arraignment or his case is dismissed before his arraignment by a competent
court, the seizure, sequestration and freezing of his bank deposits, placements, trust accounts, assets
and records shall forthwith be deemed lifted by the investigating body or by the competent court, as the
case may be, and his bank deposits, placements, trust accounts, assets and records shall be deemed
released from such seizure, sequestration and freezing, and shall be restored to him without any delay by
the bank or financial institution concerned without any further action on his part. The filing of any appeal
on motion for reconsideration shall not state the release of said funds from seizure, sequestration and
freezing.
If the person charged with the crime of terrorism or conspiracy to commit terrorism is convicted by a final
judgment of a competent trial court, his seized, sequestered and frozen bank deposits, placements, trust
accounts, assets and records shall be automatically forfeited in favor of the government.
Upon his or her acquittal or the dismissal of the charges against him or her, the amount of Five hundred
thousand pesos (P500.000.00) a day for the period in which his properties, assets or funds were seized
shall be paid to him on the concept of liquidated damages. The amount shall be taken from the
appropriations of the police or law enforcement agency that caused the filing of the enumerated charges
against him/her.
SEC. 42. Penalty for Unjustified Refusal to Restore or Delay in Restoring Seized, Sequestered
and Frozen Bank Deposits, Placements, Trust Accounts, Assets and Records. - Any person who
unjustifiably refuses to restore or delays the restoration of seized, sequestered and frozen bank deposits,
placements, trust accounts, assets and records of a person suspected of or charged with the crime of
terrorism or conspiracy to commit terrorism after such suspected person has been found innocent by the
investigating body or after the case against such charged person has been dismissed or after he is
acquitted by a competent court shall suffer the penalty of ten (10) years and one day to twelve (12) years
of imprisonment.
SEC. 43. Penalty for the Loss, Misuse, Diversion or Dissipation of Seized, Sequestered and
Frozen Bank Deposits, Placements, Trust Accounts, Assets and Records. - Any person who is
responsible for the loss, misuse, diversion, or dissipation of the whole or any part of the seized,
sequestered and frozen bank deposits, placements, trust accounts, assets and records of a person
suspected of or charged with the crime of terrorism or conspiracy to commit terrorism shall suffer the
penalty of ten (10) years and one day to twelve (12) years of imprisonment.
SEC. 44. Infidelity in the Custody of Detained Persons. - Any public officer who has direct custody
of a detained person or under the provisions of this Act and who by his deliberate act, misconduct, or
inexcusable negligence causes or allows the escape of such detained person shall be guilty of an offense
and shall suffer the penalty of: (a) twelve (12) years and one day to twenty (20) years of imprisonment, if
the detained person has already been convicted and sentenced in a final judgment of a competent court;
and (b) six years and one day to twelve (12) years of imprisonment, if the detained person has not been
convicted and sentenced in a final judgment of a competent court.
SEC. 45. Immunity and Protection of Government Witnesses. - The provisions of Republic Act No.
6981 (Witness Protection, Security and Benefits Act) to the contrary notwithstanding, the immunity of
government witnesses testifying under this Act shall be governed by Sections 17 and 18 of Rule 119 of
the Rules of Court: Provided, however, That said witnesses shall be entitled to benefits granted to
witnesses under said Republic Act No.6981.
SEC. 46. Penalty for Unauthorized Revelation of Classified Materials. - The penalty of ten (10)
years and one day to twelve (12) years of imprisonment shall be imposed upon any person, police or law
enforcement agent, judicial officer or civil servant who, not being authorized by the Court of Appeals to
do so, reveals in any manner or form any classified information under this Act.
SEC. 47. Penalty for Furnishing False Evidence, Forged Document, or Spurious Evidence. - The
penalty of twelve (12) years and one day to twenty (20) years of imprisonment shall be imposed upon
any person who knowingly furnishes false testimony, forged document or spurious evidence in any
investigation or hearing under this Act.
SEC. 48. Continuous Trial. - In cases of terrorism or conspiracy to commit terrorism, the judge shall set
the continuous trial on a daily basis from Monday to Friday or other short-term trial calendar so as to
ensure speedy trial.
SEC. 49. Prosecution Under This Act Shall be a Bar to Another Prosecution under the Revised
Penal Code or any Special Penal Laws. - When a person has been prosecuted under a provision of
this Act, upon a valid complaint or information or other formal charge sufficient in form and substance to
sustain a conviction and after the accused had pleaded to the charge, the acquittal of the accused or the
dismissal of the case shall be a bar to another prosecution for any offense or felony which is necessarily
included in the offense charged under this Act.
SEC. 50. Damages for Unproven Charge of Terrorism. - Upon acquittal, any person who is accused
of terrorism shall be entitled to the payment of damages in the amount of Five hundred thousand pesos
(P500,000.00) for every day that he or she has been detained or deprived of liberty or arrested without a
warrant as a result of such an accusation. The amount of damages shall be automatically charged against
the appropriations of the police agency or the Anti-Terrorism Council that brought or sanctioned the filing
of the charges against the accused. It shall also be released within fifteen (15) days from the date of the
acquittal of the accused. The award of damages mentioned above shall be without prejudice to the right
of the acquitted accused to file criminal or administrative charges against those responsible for charging
him with the case of terrorism.
Any officer, employee, personnel, or person who delays the release or refuses to release the amounts
awarded to the individual acquitted of the crime of terrorism as directed in the paragraph immediately
preceding shall suffer the penalty of six months of imprisonment.
If the deductions are less than the amounts due to the detained persons, the amount needed to complete
the compensation shall be taken from the current appropriations for intelligence, emergency, social or
other funds of the Office of the President.
In the event that the amount cannot be covered by the current budget of the police or law enforcement
agency concerned, the amount shall be automatically included in the appropriations of the said agency
for the coming year.
SEC. 51. Duty to Record and Report the Name and Address of the Informant. - The police or law
enforcement officers to whom the name or a suspect in the crime of terrorism was first revealed shall
record the real name and the specific address of the informant.
The police or law enforcement officials concerned shall report the informant's name and address to their
superior officer who shall transmit the information to the Congressional Oversight Committee or to the
proper court within five days after the suspect was placed under arrest or his properties were
sequestered, seized or frozen.
The name and address of the informant shall be considered confidential and shall not be unnecessarily
revealed until after the proceedings against the suspect shall have been terminated.
SEC. 52. Applicability of the Revised Penal Code. - The provisions of Book I of the Revised Penal
Code shall be applicable to this Act.
SEC. 53. Anti-Terrorism Council. - An Anti-Terrorism Council, hereinafter referred to, for brevity, as the
"Council," is hereby created. The members of the Council are: (1) the Executive Secretary, who shall be
its Chairperson; (2) the Secretary of Justice, who shall be its Vice Chairperson; and (3) the Secretary of
Foreign Affairs; (4) the Secretary of National Defense; (5) the Secretary of the Interior and Local
Government; (6) the Secretary of Finance; and (7) the National Security Advisor, as its other members.
The Council shall implement this Act and assume the responsibility for the proper and effective
implementation of the anti-terrorism policy of the country. The Council shall keep records of its
proceedings and decisions. All records of the Council shall be subject to such security classifications as
the Council may, in its judgment and discretion, decide to adopt to safeguard the safety of the people,
the security of the Republic, and the welfare of the nation.
The National Intelligence Coordinating Agency shall be the Secretariat of the Council. The Council shall
define the powers, duties, and functions of the National Intelligence Coordinating Agency as Secretariat of
the Council. The National Bureau of Investigation, the Bureau of Immigration, the Office of Civil Defense,
the Intelligence Service of the Armed Forces of the Philippines, the Anti-Money Laundering Council, the
Philippine Center on Transnational Crime, and the Philippine National Police intelligence and investigative
elements shall serve as support agencies for the Council.
The Council shall formulate and adopt comprehensive, adequate, efficient, and effective anti-terrorism
plans, programs, and counter-measures to suppress and eradicate terrorism in the country and to protect
the people from acts of terrorism. Nothing herein shall be interpreted to empower the Anti-Terrorism
Council to exercise any judicial or quasi-judicial power or authority.
SEC. 54. Functions of the Council. - In pursuit of its mandate in the previous Section, the Council shall
have the following functions with due regard for the rights of the people as mandated by the Constitution
and pertinent laws:
1. Formulate and adopt plans, programs and counter-measures against terrorists and acts of terrorism in
the country;
2. Coordinate all national efforts to suppress and eradicate acts of terrorism in the country and mobilize
the entire nation against terrorism prescribed in this Act;
3. Direct the speedy investigation and prosecution of all persons accused or detained for the crime of
terrorism or conspiracy to commit terrorism and other offenses punishable under this Act, and monitor
the progress of their cases;
4. Establish and maintain comprehensive data-base information system on terrorism, terrorist activities,
and counter-terrorism operations;
5. Freeze the funds property, bank deposits, placements, trust accounts, assets and records belonging to
a person suspected of or charged with the crime of terrorism or conspiracy to commit terrorism, pursuant
to Republic Act No. 9160, otherwise known as the Anti-Money Laundering Act of 2001, as amended;
6. Grant monetary rewards and other incentives to informers who give vital information leading to the
apprehension, arrest, detention, prosecution, and conviction of person or persons who are liable for the
crime of terrorism or conspiracy to commit terrorism;
7. Establish and maintain coordination with and the cooperation and assistance of other nations in the
struggle against international terrorism; and
8. Request the Supreme Court to designate specific divisions of the Court of Appeals and Regional Trial
Courts in Manila, Cebu City and Cagayan de Oro City, as the case may be, to handle all cases involving
the crime of terrorism or conspiracy to commit terrorism and all matters incident to said crimes. The
Secretary of Justice shall assign a team of prosecutors from: (a) Luzon to handle terrorism cases filed in
the Regional Trial Court in Manila; (b) from the Visayas to handle cases filed in Cebu City; and (c) from
Mindanao to handle cases filed in Cagayan de Oro City.
SEC. 55. Role of the Commission on Human Rights. - The Commission on Human Rights shall give
the highest priority to the investigation and prosecution of violations of civil and political rights of persons
in relation to the implementation of this Act; and for this purpose, the Commission shall have the
concurrent jurisdiction to prosecute public officials, law enforcers, and other persons who may have
violated the civil and political rights of persons suspected of, or detained for the crime of terrorism or
conspiracy to commit terrorism.
SEC. 56. Creation of a Grievance Committee. - There is hereby created a Grievance Committee
composed of the Ombudsman, as chair, and the Solicitor General, and an undersecretary from the
Department of Justice (DOJ), as members, to receive and evaluate complaints against the actuations of
the police and law enforcement officials in the implementation of this Act. The Committee shall hold office
in Manila. The Committee shall have three subcommittees that will be respectively headed by the Deputy
Ombudsmen in Luzon, the Visayas and Mindanao. The subcommittees shall respectively hold office at the
Offices of Deputy Ombudsman. Three Assistant Solicitors General designated by the Solicitor General,
and the regional prosecutors of the DOJ assigned to the regions where the Deputy Ombudsmen hold
office shall be members thereof. The three subcommittees shall assist the Grievance Committee in
receiving, investigating and evaluating complaints against the police and other law enforcement officers
in the implementation of this Act. If the evidence warrants it, they may file the appropriate cases against
the erring police and law enforcement officers. Unless seasonably disowned or denounced by the
complainants, decisions or judgments in the said cases shall preclude the filing of other cases based on
the same cause or causes of action as those that were filed with the Grievance Committee or its
branches.
SEC. 57. Ban on Extraordinary Rendition. - No person suspected or convicted of the crime of
terrorism shall be subjected to extraordinary rendition to any country unless his or her testimony is
needed for terrorist related police investigations or judicial trials in the said country and unless his or her
human rights, including the right against torture, and right to counsel, are officially assured by the
requesting country and transmitted accordingly and approved by the Department of Justice.
SEC. 58. Extra-Territorial Application of this Act. - Subject to the provision of an existing treaty of
which the Philippines is a signatory and to any contrary provision of any law of preferential application,
the provisions of this Act shall apply: (1) to individual persons who commit any of the crimes defined and
punished in this Act within the terrestrial domain, interior waters, maritime zone, and airspace of the
Philippines; (2) to individual persons who, although physically outside the territorial limits of the
Philippines, commit, conspire or plot to commit any of the crimes defined and punished in this Act inside
the territorial limits of the Philippines; (3) to individual persons who, although physically outside the
territorial limits of the Philippines, commit any of the said crimes on board Philippine ship or Philippine
airship; (4) to individual persons who commit any of said crimes within any embassy, consulate, or
diplomatic premises belonging to or occupied by the Philippine government in an official capacity; (5) to
individual persons who, although physically outside the territorial limits of the Philippines, commit said
crimes against Philippine citizens or persons of Philippines descent, where their citizenship or ethnicity
was a factor in the commission of the crime; and (6) to individual persons who, although physically
outside the territorial limits of the Philippines, commit said crimes directly against the Philippine
government.
SEC. 59. Joint Oversight Committee. - There is hereby created a Joint Oversight Committee to oversee
the implementation of this Act. The Oversight Committee shall be composed of five members each from
the Senate and the House in addition to the Chairs of the Committees of Public Order of both Houses who
shall also Chair the Oversight Committee in the order specified herein. The membership of the Committee
for every House shall at least have two opposition or minority members. The Joint Oversight Committee
shall have its own independent counsel. The Chair of the Committee shall rotate every six months with
the Senate chairing it for the first six months and the House for the next six months. In every case, the
ranking opposition or minority member of the Committee shall be the Vice Chair. Upon the expiration of
one year after this Act is approved by the President, the Committee shall review the Act particularly the
provision that authorize the surveillance of suspects of or persons charged with the crime of terrorism. To
that end, the Committee shall summon the police and law enforcement officers and the members of the
Anti-Terrorism Council and require them to answer questions from the members of Congress and to
submit a written report of the acts they have done in the implementation of the law including the manner
in which the persons suspected of or charged with the crime of terrorism have been dealt with in their
custody and from the date when the movements of the latter were subjected to surveillance and his or
her correspondences, messages, conversations and the like were listened to or subjected to monitoring,
recording and tapping. Without prejudice to its submitting other reports, the Committee shall render a
semiannual report to both Houses of Congress. The report may include where necessary a
recommendation to reassess the effects of globalization on terrorist activities on the people, provide a
sunset clause to or amend any portion of the Act or to repeal the Act in its entirety. The courts dealing
with anti-terrorism cases shall submit to Congress and the President a report every six months of the
status of anti-terrorism cases that have been filed with them starting from the date this Act is
implemented.
SEC. 60. Separability Clause. - If for any reason any part or provision of this Act is declared
unconstitutional or invalid, the other parts or provisions hereof which are not affected thereby shall
remain and continue to be in full force and effect.
SEC. 61. Repealing Clause. - All laws, decrees, executive orders, rules or regulations or parts thereof,
inconsistent with the provisions of this Act are hereby repealed, amended, or modified accordingly.
SEC. 62. Special Effectivity Clause. - After the bill shall have been signed into law by the President,
the Act shall be published in three newspapers of national circulation; three newspapers of local
circulation, one each in llocos Norte, Baguio City and Pampanga; three newspapers of local circulation,
one each in Cebu, lloilo and Tacloban; and three newspapers of local circulation, one each in Cagayan de
Oro, Davao and General Santos city.
The title of the Act and its provisions defining the acts of terrorism that are punished shall be aired
everyday at primetime for seven days, morning, noon and night over three national television and radio
networks; three radio and television networks, one each in Cebu, Tacloban and lloilo; and in five radio and
television networks, one each in Lanao del Sur, Cagayan de Oro, Davao City, Cotabato City and
Zamboanga City. The publication in the newspapers of local circulation and the announcements over local
radio and television networks shall be done in the dominant language of the community. After the
publication required above shall have been done, the Act shall take effect two months after the elections
are held in May 2007. Thereafter, the provisions of this Act shall be automatically suspended one month
before and two months as after the holding of any election.
Approved,
Code of Commerce
Sunday, June 06, 2010
3:34 AM
Code of Commerce
• BOOK ONE
• BOOK TWO
• BOOK ONE
• BOOK TWO
BOOK ONE
Merchants and Commerce in General
• Title I – Merchants and Acts of Commerce
Title I – Merchants and Acts of Commerce
ARTICLE 1. For purposes of this Code, merchants are:
1. Those who, having legal capacity to engage in commerce, habitually devote themselves to it;
2. The commercial or industrial companies which may be created in accordance with [this Code]
existing legislation.
ARTICLE 2. Acts of commerce, whether those who execute them be merchants or not, and whether
specified in this Code or not, should be governed by the provisions contained in it, in their absence, by
the usages of commerce generally observed in each place; and in the absence of both rules, by those
of the civil law.
Those acts contained in this Code and all others of analogous character shall be deemed acts of
commerce.
ARTICLE 3. The legal presumption of habitually engaging in commerce shall exist from the moment
the person who intends to engage therein announces through circulars, newspapers, handbills, posters
exhibited to the public, or in any other manner whatsoever, an establishment which has for its object
some commercial operation.
ARTICLE 4. Persons who possess the following qualifications shall have legal capacity to habitually
engage in commerce:
1. Having completed the age of twenty-one years.
2. Not being subject to the authority of the father or of the mother nor to marital authority.
3. Having the free disposition of their property.
ARTICLE 5. Those under twenty-one years of age and those incapacitated may continue, through
their guardians, the business engaged in by their parents or their predecessors. If the guardians do not
have legal capacity to trade or are under some disqualifications, they shall be obliged to appoint one
or more factors having the legal qualifications who shall substitute them in conduct of the business.
ARTICLE 6. (Repealed) 1
ARTICLE 7. (Repealed) 2
ARTICLE 8. The husband may freely revoke the authorization impliedly or expressly granted to his
wife to trade, stating the revocation in a public instrument which shall also be recorded in the
commercial registry, published in the official periodical of the town, if there be one, or otherwise in that
of the town, if there be one, or otherwise in that of the province, and announced to her correspondents
by means of circulars. The publication may also be made, if the husband so demands, by
proclamations and common criers.
This revocation may, in no case, prejudice rights acquired before its publication in the official
periodical.
ARTICLE 9. (Repealed) 3
ARTICLE 10. (Repealed) 4
ARTICLE 11. (Repealed) 5
ARTICLE 12. (Repealed) 6
ARTICLE 13. The following may not engage in commerce nor hold office or have any direct
administrative or financial intervention in commercial or industrial companies:
1. Those sentenced to the penalty of civil interdiction, while they have not served their sentence or
have not been amnestied or pardoned.
2. Those declared bankrupt, while they have not obtained their discharge [or have not been
authorized, by virtue of an agreement accepted at a general meeting of creditors and approved by
judicial authority, to continue at the head of the establishment, the authority being understood in such
case as limited to that expressed in the agreement.]
3. Those who on account of special laws or provisions can not trade.
ARTICLE 14. The following cannot engage in the mercantile profession, in person or through another,
nor hold office or have any direct administrative or financial intervention in commercial or industrial
associations, within the limits of the districts, provinces or towns in which they discharge their duties:
1. Justices, judges and officials of the fiscals’ office in active service.
This provision shall not be applicable to the municipal mayors, judges and prosecuting attorneys, nor
to those who may temporarily discharge judicial or prosecution duties.
2. Administrative, economic or military heads of districts, provinces, or posts.
3. Those employed in the collection and administration of funds of the State, appointed by the
Government.
Those who administer and collect under contract and their representative are excepted.
4. Stock and commercial brokers of whatever class they may be.
5. Those who, under special laws and provisions, cannot trade in specified territory.
ARTICLE 15. Foreigners and companies created abroad may engage in commerce in the Philippines,
subject to the laws of their country with respect to their capacity to contract, and to the provisions of
this Code as regard the creation of their establishments in Philippine territory, their mercantile
operations, and the jurisdiction of the courts of the nation.
The provisions of the article shall be understood to be without prejudice to what, in particular cases,
may be established by treaties or agreements with other powers.
BOOK TWO
Special Commercial Contracts
• Title I – Commercial Associations
SECTION ONE
Manner of Establishing Associations and Their Kinds
[ARTICLE 116. Articles of association by which two or more persons obligate themselves to place in a
common fund any property, industry, or any of these things, in order to obtain profit, shall be
commercial, no matter what its class may be, provided it has been established in accordance with the
provisions of this Code.
After a commercial association has been established, it shall have legal representation in all its acts
and contracts.
[ARTICLE 117. Articles of mercantile association, executed with the essential requisites of law, shall
be valid and binding between the parties thereto, no matter what form, conditions, and combinations,
legal and honest, are included therein, provided they are not expressly prohibited by this Code.
The establishment of land, agricultural, issuing, and discount banks, of loan and mortgage loan
associations, of concessionaires of public works, manufacturing, general warehouses, of mines, of the
establishment of principals and life annuities, of insurance and other associations, the purpose of
which is any industrial or commercial enterprise shall be unrestricted.
[ARTICLE 118. Contracts executed between commercial associations and any other persons capable
of binding themselves shall also be valid and binding, provided the same are legal and honest, and
that the requisites mentioned in the following article have been complied with.
[ARTICLE 119. Every commercial association, before beginning its business, must state its articles,
agreements, and conditions in a public instrument, which shall be presented for record in the
mercantile registry, in accordance with the provisions of Article 17.
Additional instruments which modify or alter in any manner whatsoever the original contracts of the
association are subject to the same formalities, in accordance with the provisions of Article 25.
The members can not make private agreements, but all must appear in the articles of association.
[ARTICLE 120. The persons in charge of the management of the association who violate the
provisions of the foregoing article shall be responsible in solidum to the person not members of the
association with whom they may have transacted business in the name of the association.
[ARTICLE 121. Commercial associations shall be governed by the clauses and conditions of their
articles, and in all that is not determined and prescribed therein, by the provisions of this Code.
[ARTICLE 122. As a general rule, commercial associations shall be established by the adoption of any
of the following forms:
1. The regular general copartnership in which all the partners, under a collective and commercial
name, bind themselves to participate, in the proportion they may establish, in the same rights and
obligations.
2. The limited copartnership to which one or more persons contribute a specific amount of capital
to a common fund, to become liable for the business transactions of the firm executed exclusively by
others under a collective name.
3. The corporation, in which the members form the common fund by means of specific parts or
portions, represented by shares or in any other unquestionable manner, leaving its management to
removable managers or administrators, who represent the company under an appropriate
denomination according to the purpose or undertaking for which funds are to be employed.
[ARTICLE 123. Commercial associations may be, according to the character of their operations:
Loan associations.
Banks of issue and discount.
Mortgage loan associations.
Mining associations.
Agricultural banks.
Concessionaires of railroads, tramways, and public works.
General warehouse companies.
And of other kinds, provided their agreements are legal, and industry or commerce is their object.
[ARTICLE 124. Mutual fire insurance companies, companies of tontine life combinations for help in old
age, and companies, of any other class, as well as co-operative companies of production, loan, or
consumption, shall only be considered commercial, and shall be subject to the provisions of this Code
when they are engaged in commercial transactions which are not mutual or when they are converted
into associations charging a fixed premium.]
SECTION TWO
General Copartnerships
[ARTICLE 125. The articles of general copartnership must state:
The names, surnames, and domiciles of the partners.
The firm name.
The names and surnames of the partners to whom the management of the firm and the use of its
signature is intrusted.
The capital which each partner contributes in cash, credits, or property, stating the value given the
latter or the basis on which their appraisement is to be made.
The duration of the copartnership.
The amounts which, in a proper case, are to be given to each managing partner annually for his
private expenses.
There may be also included in the articles the other legal agreements and special conditions which the
partners may wish to make.
[ARTICLE 126. The general copartnership must transact business under the name of all its members,
of several of them, or of one only, it being necessary to add in the latter two cases to the name or
names given the words "and company."
This collective name shall constitute the firm name or signature, in which there shall never be included
the name of a person who is not at the time a partner in the association.
Those who not being members of the partnership, include their names in the firm name shall be
subject to joint liability, without prejudice to the penal liability which may be proper.
[ARTICLE 127. All the members of the general copartnership, be they or be they not managing
partners of the same, are liable personally and in solidum with all their property for the results of the
transactions made in the name and for the account of the partnership, under the signature of the
latter, and by a person authorized to make use thereof.
[ARTICLE 128. The partners not duly authorized to make use of the firm signature shall not make the
company liable through their acts and contracts, even though they execute them in the name of the
latter and under its signature. The civil or criminal liability for these acts shall be incurred exclusively
by the authors thereof.
[ARTICLE 129. If the management of the general copartnerships has not been limited by a special
instrument to one of its members, all of them shall have the right to take part in the direction and
management of the common business and the partners present shall come to an agreement with
regard to all contracts or obligations in which the company may be interested.
[ARTICLE 130. No new obligation shall be contracted against the will of one of the managing partners,
should he have expressly stated it; but if, however, it should be contracted it shall not be annulled for
this reason, and shall have its effects without prejudice to the liability of the partner or partners who
contracted it to reimburse the firm for any loss occasioned by reason thereof.
[ARTICLE 131. Should there be partners especially intrusted with the management, the other
partners can not oppose nor hinder the actions of the former nor prevent their effects.
[ARTICLE 132. When the special power to manage and to use the signature of the copartnership has
been conferred in an express condition of the articles of copartnership, the person who obtained the
same can not be deprived thereof; but should the latter make an improper use of said power, and his
management cause serious damage to the common capital, the rest of the partners may appoint from
among themselves a comanager to take part in all transactions, or they may request the rescission of
the articles before the judge or court of competent jurisdiction, who shall declare them annulled should
such damage be proven.
[ARTICLE 133. In general copartnerships all the partners, be they managing or not, have a right to
examine the condition of the administration and of the bookkeeping and to make the objections which
they may consider proper, in accordance with the agreements contained in the articles of
copartnership or in the general provisions of law.
[ARTICLE 134. Transactions made by the partners in their own names and with their private funds
shall not be communicated to the company nor shall it be liable therefor, provided they are of a kind
that partners may legally make for their own account and risk.
[ARTICLE 135. The partners can not apply the funds of the copartnership nor make use of the firm
signature for business for their own account; and should they do so, they shall lose to the benefit of
the company that part of the profit which in the transaction or transactions made in this manner may
be due them, and the articles of copartnership in so far as they are concerned may be annulled,
without prejudice to the return of the funds they may have made use of, and to indemnify the
copartnership for all losses and damages which it may have suffered.
[ARTICLE 136. In general copartnerships which do not transact business in a specific branch of
commerce their members can not make transactions for their own account without the previous
consent of the copartnership, which can not refuse it without proving that it will suffer thereby
manifest and pecuniary damage.
Partners who do not comply with this provision shall contribute to the common funds the profit they
may derive from these transactions and they shall individually suffer the losses should there be any.
[ARTICLE 137. If the copartnership should have determined in its articles of copartnership the branch
of commerce in which it is to engage, the partners may legally transact any commercial business they
may desire, provided it does not belong to the kind of transactions the copartnership of which they are
partners is engaged in, unless there is a special agreement to the contrary.
[ARTICLE 138. An industrial partner (socio industrial) can not engage in any kind of business
transactions whatsoever, unless expressly permitted to do so by the company, and should he do so the
capitalist partners (socios capitalistas) may, at their option, remove them from the company, depriving
them of the profits due them in the same, or they may enjoy the profits said partner may have
obtained in violation of this provision.
[ARTICLE 139. In general or in limited copartnerships, no partner may remove or divert from the
common funds a larger amount than that assigned to each one for his personal expenses; should he do
so, he may be compelled to repay it as if he had not completed the portion of the capital which he
bound himself to contribute to the copartnership.
[ARTICLE 140. Should there not have been stated in the articles of copartnership the portion of the
profits to be received by each partner, said profits shall be divided pro rata in accordance with the
interest each one may have in the copartnership, the industrial partners, if there are any, should be
considered in the distribution of profits as among the partners who have contributed the smallest
capital.
[ARTICLE 141. Losses shall be computed in the same proportion among the capitalist partners
without including the industrial partners, unless by special agreement the latter have been constituted
as participants therein.
[ARTICLE 142. The copartnership must reimburse the partners of the expenses they may incur, and
indemnify them for the damages they may suffer, when caused immediately and directly by the
business which the former may intrust to them; but it shall not be bound to indemnify for the losses
the partners may incur by their own fault, in an accidental case, or on account of any other reason,
independent of the business, during the time they were transacting the same.
[ARTICLE 143. No partner can transfer to another person the interest he may have in the
copartnership, nor can he substitute another person in his place for the discharge of the work under his
charge in the partnership administration, without the previous consent of the partners.
[ARTICLE 144. The damage suffered by the copartnership by reason of malice, abuse of powers, or
serious negligence on the part of one of the partners, shall obligate the author thereof to indemnify it,
should the other partners request it, provided an express or virtual approval or ratification of the act
on which the claim is based can not be deduced in any manner whatsoever.]
SECTION THREE
Limited Copartnerships
[ARTICLE 145. The same statements shall be included in the articles of limited partnerships which are
required for those of general copartnerships.
[ARTICLE 146. Limited copartnerships must transact business under the name of all the general
members thereof, of several of them, or of one only, it being necessary to add in the latter two cases
to the name or names given, the words "and company" and in all cases the words "limited
copartnership".
[ARTICLE 147. This collective name shall constitute the firm name, in which there may never be
included the names of limited partners.
Should any limited partner include his name or permit its inclusion in the firm name, he shall be
subject, with regard to persons not members of the copartnership, to the same liabilities as the
managing partners, without acquiring any more rights than those corresponding to his character of a
limited partner.
[ARTICLE 148. All the general members of the copartnership, be they or be they not managing
partners of the limited copartnership, shall be liable personally and in solidum for the results of the
transactions of the latter in the same manner and to the same extent as in general copartnerships, as
set forth in Article 127.
They shall furthermore have the same rights and obligations which are prescribed in the foregoing
sections for partners in general copartnerships. The liability of limited partners for the obligations and
losses of the copartnership shall be limited to the funds which they contributed or bound themselves to
contribute to the limited copartnership, with the exception of the case mentioned in Article 147.
Limited partners can not take any part whatsoever in the management of the interests of the
copartnership, not even in the capacity of special agents of the managing partners.
[ARTICLE 149. The provisions of Article 144 shall be applicable to partners in limited copartnerships.
[ARTICLE 150. Limited partners can not examine the condition and situation of the management of
the partnership except at the times and under the penalties prescribed in the articles of copartnership
or in additional ones.
Should the articles not contain any provision of this character the balance of the copartnership shall
necessarily be communicated to the limited copartners at the end of the year, exhibiting for a period
which can not be less than fifteen days the exact data and documents proving said balance and
permitting the transactions to be understood.
SECTION FOUR
Corporations
[ARTICLE 151. The articles of incorporation must include:
The names, surnames, and domiciles of the incorporators.
The name of the corporation.
The designation of the person or persons who are to direct the affairs of the same and the manner
of filling vacancies.
The corporation capital, stating the value at which property, not cash, contributed has been
appraised, or the basis on which the appraisement is to be made.
The number of shares into which the corporation capital is divided and represented.
The period or periods within which the portion of the capital not subscribed at the time of
incorporation is to be contributed, otherwise stating the person or persons authorized to determine the
time and manner in which the assessments are to be made.
The time the corporation is to continue in existence.
The transactions the capital is to be employed in.
The periods and manner of calling and holding general ordinary meetings of members, and the
cases and manner of calling and holding extraordinary ones.
The submission to the vote of the majority of the meeting of members, duly called and held, of such
matters as may properly be brought before the same.
The manner of counting and constituting the majority, in order to adopt binding resolutions, at
ordinary as well as at extraordinary meetings.
There may furthermore be included in the articles all legal agreements and special conditions the
members may agree to.
[ARTICLE 152. The name of a corporation shall be adequate to the purpose or purposes of the branch
of business adopted.
No name can be adopted identical with that of a pre-existing corporation.
[ARTICLE 153. The liability of the members of a corporation for the obligations and losses of the same
shall be limited to the funds they contributed or bound themselves to contribute to the corporate
capital. iatdclet
[ARTICLE 154. The corporate capital, composed of the stock and of the accrued profits, shall be liable
for the obligations contracted in its management and administration by a person legally authorized
thereto and in the manner prescribed in the articles of incorporation, by-laws, or regulations.
[ARTICLE 155. The managers of corporations shall be designated by the members thereof in the
manner determined in the articles or incorporation, by-laws, or regulations.
[ARTICLE 156. The managers of a corporation are its agents, and during the time they observe the
rules of the commission they shall not be subject to personal nor to joint liability on account of the
corporation business; and if by reason of infraction of the laws and the statutes of the corporation, or if
by acting in violation of the legitimate resolutions adopted at general meetings, they should incur
losses, and there should be several persons responsible therefor, each one of the latter shall answer
pro rata.
[ARTICLE 157. Corporations are under the obligation to publish monthly in the Gaceta de Madrid
detailed balance of the business, stating the rate at which the balance on hand in securities is
calculated, as well as all kinds of property, the prices of which can be quoted on exchange.
[ARTICLE 158. The members or stockholders of corporations can not examine the management
thereof nor make any investigation with regard thereto except at the times and in the manner
prescribed by their statutes and regulations.
[ARTICLE 159. Corporations existing prior to the publication of this Code, and which are still governed
by their regulations and by-laws, may choose between continuing to be governed thereby or by the
provisions of this Code.]
SECTION FIVE
Shares
[ARTICLE 160. The common capital of limited copartnerships belonging to the special partners and
that of corporations may be represented by shares or other equivalent certificates.
[ARTICLE 161. The shares may be payable to order or to bearer.
[ARTICLE 162. The shares payable to order must be recorded in a book which the copartnership or
corporations shall keep for this purpose, and in which subsequent transfers shall be entered.
[ARTICLE 163. The shares payable to bearer shall be enumerated, and shall be recorded in stub
books.
[ARTICLE 164. In all certificates of shares, either payable to order or to bearer, there shall always be
entered the sum which has been paid on account of its nominal value or that they are fully paid.
In shares payable to order, until the full value thereof has been paid, the first subscriber or holder of
the share, his assignee, and each person succeeding the latter, should they be transferred, shall
answer of the payment of the portion not contributed, jointly and at the option of the directors of the
corporations, against whose liability, thus determined, no agreement whatsoever suppressing it can be
established.
After an action to enforce said liability has been instituted against any of the persons mentioned in the
foregoing paragraph no new action against any other of the holders or assignees of the shares can be
instituted, except when it is proved that the person who was first or previously proceeded against is
insolvent.
When shares not fully paid for are payable to bearer the persons who appear as the holders thereof
only shall be liable for the payment of their share. Should they not appear, making a personal claim
impossible, the corporations or copartnerships may resolve to annul the certificates corresponding to
the shares on which the requisite quotas for the full payment of the value of each one have not been
satisfied. In such case the copartnerships or corporations shall have the right to issue duplicate
certificates of the same shares, in order to convey them for and against the account of the defaulting
holders of the certificates annulled.
All shares shall be payable to order until 50 per cent of their nominal value has been paid in. After said
50 per cent has been paid in they may be converted into shares payable to bearer, if it is thus resolved
upon by the copartnership or corporations in their by-laws or by means of special acts subsequent to
the same.
[ARTICLE 165. New series of stock can not be issued before the total payment of the series previously
issued has been made. Any agreement to the contrary included in the articles of co-partnership or of
corporation, in the by-laws or regulations, or any resolution adopted at a general meeting of members
in opposition to this precept shall be null and of no value.
[ARTICLE 166. Corporations may only purchase their own shares with the profits of their capital for
the purpose of amortization.
In case of a reduction in the corporate capital, when it is proper in accordance with the provisions of
this Code, there may also be amortization with a portion of said capital, the legal measures which may
be considered advisable being employed.
[ARTICLE 167. Corporations can never give guaranties by pledging their own shares.
[ARTICLE 168. Corporations sitting in a general meeting of stockholders previously called for the
purpose shall have the power to resolve upon the reduction or increase of the corporate capital.
In no case can these resolutions be adopted at ordinary meetings unless it was stated, in the call or
sufficient time in advance, that an increase or reduction of the capital would be discussed and voted
upon.
The by-laws of each corporation shall fix the number of members and the amount of capital which shall
be required to be present at meetings at which said capital is to be reduced or increased or in which
the modification or dissolution of the corporation is to be treated of. In no case shall it be less than
three-fourths of the number of the former and two-thirds of the nominal value of the latter.
The directors may immediately take steps to carry out the resolution of reduction adopted legally at a
general meeting if the capital remaining after said reduction has been made exceeds 75 per cent of
the amount of the debts and obligations of the corporation. Otherwise the reduction can not take place
until all the debts and obligations pending at the date of the resolution have been liquidated and paid,
unless the copartnership or corporation obtains the previous consent of its creditors.
For the execution of this article the directors shall present to the judge or court an inventory, in which
the stock held shall be appraised at the average quotation for the last quarter and the property by a
capitalization of the profits accruing there from according to the legal rate of interest on money.
[ARTICLE 169. Funds belonging to foreigners invested in corporations shall not be subject to reprisals
in case of war.]
SECTION SIX
Rights and Obligations of Members
[ARTICLE 170. If within the period agreed upon any member does not contribute to the common
funds the amount of capital he has obligated himself to contribute, the association may choose
between proceeding to obtain an execution against his property to recover the portion of capital not
contributed, or to rescind the contract with regard to the member in default, retaining the amounts
which belong to him in the common capital.
[ARTICLE 171. A member who, for any reason whatsoever, delays the full contribution of his capital,
after the period fixed in the articles of association has elapsed, or should said period not have been
fixed therein, from the time the fund is established, shall pay into the common funds the legal interest
on the money he has not delivered at the proper time and the amount of the damages and losses he
may have occasioned by reason of him default.
[ARTICLE 172. When the capital or the part thereof which a partner is to contribute consists of
property, the appraisement thereof shall be made in the manner prescribed in the articles of
association, and should there be no special agreement on the matter the appraisement shall be made
by experts selected by both parties and according to current prices, subsequent increases or
reductions therein being for the account of the association.
In case of disagreement between the experts a third one shall be designated, selected by lot from
among persons of his class who appear as paying the highest taxes in the locality, in order that he may
adjust said disagreement.
[ARTICLE 173. The managers or directors of commercial associations can not refuse to permit
partners or stockholders to examine all the vouchers of the balances drawn up showing the condition
of the management, with the exception of the provisions of Articles 150 and 158.
[ARTICLE 174. The creditors of a member shall not have, with regard to the association, not even in
the case of the failure of the same, any further right than that of attaching and collecting the amounts
which may be due the debtor partner by reason of profits or liquidation. The provisions contained in
the latter part of the foregoing paragraph shall not be applicable to stock companies, except when said
stock is payable to order, or when the legitimate owner thereof is established without question, should
it be payable to bearer.]
SECTION SEVEN
Special Rules for Loan Associations
[ARTICLE 175. The following transactions are mainly the business of these associations:
1. To receive subscriptions or contract loans for the government, and provincial or municipal
corporations.
2. To acquire public funds and shares or securities of all kinds of industrial undertakings or of loan
associations.
3. To create companies of railroads, canals, factories, mines, docks, general warehouses, lighting,
excavations and breaking of ground, irrigation, drainage, and any other industrial enterprises or those
of public utility.
4. To effect the fusion or transformation of all kinds of commercial associations, and take charge of
the issue of shares or securities of the same.
5. To administer and lease all kinds of taxes and public services, and execute for their own account
or assign, with the approval of the Government, contracts subscribed for the purpose.
6. To sell or give as security all shares, bonds and securities acquired by the association, and
exchange them when they consider it advisable.
7. To make loans on public effects, shares or bonds, produce, commodities, crops, estates,
factories, vessels and their cargoes and other property, and open credits in account current, receiving
as a guaranty property of the same kind.
8. To effect for the account of other associations or persons all kind of collections and payments,
and transact any other business for the account of others.
9. To receive on deposit all kinds of negotiable paper and cash, and keep current accounts with
any corporations, copartnerships, or persons.
10. To draw and discount bills of exchange and other exchange paper.
[ARTICLE 176. Loan associations may issue obligations for an amount equal to that invested in, and
which is represented by securities on hand, in accordance with the provisions of the title relating to the
commercial registry. These obligations shall be payable to order or to bearer at fixed period, which
shall not be less than thirty days in any case, with the amortization, should there be any, and the rate
of interest fixed.]
SECTION EIGHT
Banks of Issue and Discount
[ARTICLE 177. The following is the principal business of these institutions:
Discounts, deposits, current accounts, collections, loans, drafts, and contracts with the Government or
public corporations.
[ARTICLE 178. Banks can not make transactions extending over a period of more than ninety days.
Neither shall they discount drafts, promissory notes, or other commercial paper without the guaranty
of two responsible firms.
[ARTICLE 179. Banks may issue notes payable to bearer, but their admission in business transactions
shall not be compulsory. This privilege of the issue of notes payable to bearer shall continue in
suspense, however, during the time the privilege actually enjoyed by the Spanish Philippine Bank
(Banco Español Filipino), by virtue of special laws, continues.
[ARTICLE 180. Banks shall keep in their vaults in cash at least one-fourth of the amount of the
deposits and current cash accounts and of notes in circulation.
[ARTICLE 181. Banks are under the obligation to change their notes for cash upon their presentation
by the bearer. Non-compliance with this obligation shall give rise to an action to secure a judgment in
favor of the bearer, after a demand for payment, through a notary.
[ARTICLE 182. The value of the notes in circulation, together with the sum represented by the
deposits and current accounts, can not exceed, in any case, the amount of the cash reserve and of the
securities on hand which can be realized within the maximum period of ninety days.
[ARTICLE 183. Banks of issue and discount shall publish, at least once a month, and under the
liability of their directors, statements of their condition in the Gaceta of Manila and in the official
bulletin, where there is one.]
SECTION NINE
Railroads and Other Public Works Companies
[ARTICLE 184. The following are the principal transactions of these companies:
1. The construction of railroads and other public works of any kind whatsoever.
2. The operation thereof, either in perpetuity or during the period of time fixed in the concession.
[ARTICLE 185. The capital stock of the company, together with the subsidy, should there be any, shall
represent at least half the amount of the total estimate of the work.
The companies can not establish themselves before half of the capital stock has been subscribed to
and 25 per cent thereof has been realized.
[ARTICLE 186. Railroad companies and companies of other public works may issue bonds payable to
bearer or to order unrestrictedly and without further limitations than those contained in this Code and
those established in their respective by-laws. These issues must be recorded in the commercial
registry of the province; and if the bonds are mortgage bonds, said issues shall furthermore be
recorded in the escribania or receptoria in charge of the registry of property. The issues of prior dates
shall have preference over subsequent ones for the payment of coupons and for the amortization of
the bonds, should there be any.
[ARTICLE 187. The bonds issued by companies shall be subject to amortization or not, at their option,
and in accordance with the provisions of their by-laws.
Whenever railroads or other public works enjoying a subsidy from the State are in question, or for the
construction of which a legislative or administrative concession was granted, if the concession is
temporary, the bonds issued by the concessionaire company shall be withdrawn by amortization or
extinguished within the period of said concession, and the State shall receive the work at the
termination of this period free from all incumbrances.
[ARTICLE 188. Railroad companies and other public work companies may sell, assign, and transfer
their rights in the respective undertakings, and may also combine with other similar companies.
In order that these transfers and fusions may be effectual, it shall be necessary —
1. That the stockholders unanimously agree thereto, unless it is otherwise prescribed in the by-laws
with relation to a change in the object of the company.
2. That all the creditors of said companies also agree thereto. This consent shall not be necessary
when the purchase or fusion takes place without confounding the guaranties and mortgages and when
the creditors retain their respective rights in full.
[ARTICLE 189. For the transfers and fusions of the companies referred to in the foregoing article no
authorization whatsoever shall be necessary from the government, even though the work has been
declared of public utility for the purpose of the right of the exercise of eminent domain, unless the
company enjoys a direct subsidy from the State, or has been incorporated by a law or other
administrative provision.
[ARTICLE 190. The action to secure an execution referred to in the law of civil procedure with regard
to the due coupons of securities issued by railroad companies and companies of other public works, as
well as with relation to the bonds drawn by lot for amortization, should there be any, can only be
brought against the net receipts of the company and against the other property owned by the same,
which is not a part of the road, or work, nor necessary for the operation.
[ARTICLE 191. Railroad and other public work companies may employ the funds remaining from the
construction, operation, and payment of credits when they fall due, in the manner they may deem fit,
in accordance with their by-laws.
Said surplus shall be invested at such times, as not to leave in any case the construction, preservation,
operation, and payment of credits unattended to, under the liability of the directors.
[ARTICLE 192. After the forfeiture of a concession has been declared the creditors of a company shall
have as a guaranty:
1. The net receipts of the company.
2. When said receipts are not sufficient the net proceeds from the works sold at public auction for
the time still remaining of the concession.
3. The other property owned by the company, if it does not constitute part of the road or of the
work, or is not necessary for its movement or operation.]
SECTION TEN
General Warehouse Associations
[ARTICLE 193. The following are the principal transactions of the associations:
1. The deposit, preservation, and custody of produce and merchandise intrusted to them.
2. The issue of receipts to order or to bearer.
[ARTICLE 194. The receipts issued by general warehouse associations for the produce and
merchandise they accept to care for shall be negotiable, shall be transferred by indorsement,
assignment, or in any other manner transferring ownership, according as to whether they are issued to
order or to bearer, and shall have the force and value of commercial bills of lading.
These receipts must necessarily state the class of goods, with the number or amount each one
represents.
[ARTICLE 195. The owner of the receipts is vested with the full ownership of the commodities
deposited in the warehouses of the association, and shall be exempted from all liability for claims
brought against the receiver, the indorsers, or prior owners, except if said claims arise from the
transportation, storage, and preservation of the merchandise.
[ARTICLE 196. If a creditor who has legal possession of a receipt as security should not be paid on the
day his claim falls due, he may require the association to sell the goods on deposit sufficient to cover
his credit, and shall have preference over other debts of the depositor, with the exception of those
mentioned in the foregoing article, who shall enjoy the preference.
[ARTICLE 197. The sales referred to in the preceding article shall be made in the warehouse of the
association, without the necessity of a judicial decree, at a public auction previously announced, and
through a licensed broker, where there is any, and otherwise through a notary or the person
discharging his duties.
[ARTICLE 198. General warehouse associations shall in all cases be liable for the identity and
preservation of the goods on deposit, according to law relating to deposits for which compensation is
agreed on.]
SECTION ELEVEN
Mortgage Loan Associations or Banks
[ARTICLE 199. The following shall be the principal transactions of these associations or banks:
1. To make loans of real estate on time.
2. To issue mortgage bonds and certificates.
[ARTICLE 200. Loans shall be made on mortgages of real estate the ownership of which is recorded in
the registry in the name of the person creating said mortgage, and shall be repaid in annual payments.
[ARTICLE 201. These associations and banks can not issue bonds nor certificates to the bearer during
the time the privilege actually enjoyed by virtue of special laws by the Mortgage Bank of Spain
continues.
[ARTICLE 202. Loans made to provinces and to towns are excepted from the mortgage required by
Article 200 when said provinces or towns are legally authorized to contract loans within the limit of
said authorization, and provided the repayment of the capital loaned, together with interest and
expenses, is assured by revenues, taxes, and capitals, or surtaxes or special imports.
Loans to the State are also excepted which can be made, furthermore, on promissory notes of
purchasers of national property. Loans to the State, to provinces, or to towns may be repaid within a
period of less than five years.
[ARTICLE 203. In no case may loans exceed half the values of the property on which the mortgage is
to be created. The basis and manner of appraising the real property shall be fixed exactly in the by-
laws or regulations.
[ARTICLE 204. The amount of the coupon and the rate of amortization of mortgage certificates, which
are issued by virtue of a loan, shall never exceed the amount of the net annual profits which the real
estate offered and taken in mortgage as security for the said loan produce on an average during five
years. The computation shall always be made with relation to the loan, the income of the property
mortgaged, and the annual premium of the certificates issued by virtue of said mortgage. This annuity
may at any time be less than the net income of the respective real estate mortgaged as security for
the loan and for the issue of the certificates.
[ARTICLE 205. When the real estate mortgaged diminishes in value by 40 per cent, the bank may
request the increase of the mortgage in order to cover said depreciation, or the annulment of the
contract, and the debtor shall choose between these two measures.
[ARTICLE 206. Mortgage loan banks may issue mortgage certificates to an amount equal to the total
value of the loans on real estate.
They may, furthermore, issue special obligations for the amount of the loans to the State, to provinces,
or to towns.
[ARTICLE 207. The mortgage certificates and special obligations treated of in the foregoing article
shall be payable to order or to bearer, with or without amortization, for short or long periods, with or
without premium.
These certificates and obligations, their coupons and the premiums, shall be the basis for an execution
in the manner prescribed in the law of civil procedure.
[ARTICLE 208. The mortgage certificates and special obligations, as well as their interest and
coupons, and the premiums assigned to them, shall be secured, with preference over all other
creditors or obligations, by the credits and loans in favor of the bank or association which may have
issued the same and which represent said credits and loans, being, therefore, jointly and severally
liable for the payment thereof.
Without prejudice to this special guaranty, they shall enjoy the general guaranty of the capital of the
association; also with preference in regard to the latter over the credits resulting from other
transactions.
[ARTICLE 209. Mortgage loan banks may also make loans secured by mortgage, repayable in a
period of less than five years.
These loans at short time shall be without amortization, and shall not authorize the issue of mortgage
obligations or certificates, and must be made from the capital of the common funds and from the
accrued profits.
[ARTICLE 210. Mortgage loan banks may receive, with or without interest, capital on deposit, and
employ half thereof in making advances for a period not to exceed ninety days on their mortgage
obligations and certificates, as well as on any other deeds which banks of issue and discount receive
as security.
In case of default in payment on the part of the person who secure the loan, the bank may demand the
sale of the certificates or deeds given as security, in accordance with the provisions of Article 323.
[ARTICLE 211. All combinations for mortgage loans, including mutual associations of landowners,
shall be subject, in so far as the issue of mortgage certificates and obligations is concerned, to the
rules contained in this section.]
SECTION TWELVE
Special Rules for Agricultural Banks and Associations
[ARTICLE 212. The following shall be the principal transactions of these associations:
1. To make loans in cash or in kind, for a period not to exceed three years, on products, crops,
cattle, or other special pledges or securities.
2. To guarantee with their signature promissory notes and paper demandable within a period not to
exceed ninety days, in order to facilitate its discount or negotiation to the owner or farmer.
3. Other transactions, the purpose of which is to favor the breaking or improving of ground, draining
of lands, and the development of agriculture and other industries related thereto.
[ARTICLE 213. Agricultural loan banks or associations may have agents outside of their domicile who
may personally answer for the solvency of the landowners or tenants who request the assistance of
the association, placing their signature on the promissory note which said association is to discount or
indorse.
[ARTICLE 214. The guaranty or indorsement placed by these associations or their representatives, or
by the agents referred to in the foregoing article, on the promissory notes of the landowner or farmer
shall entitle the bearer thereof to demand their payment directly, and to obtain an execution on the
day any of the subscriptions fall due.
[ARTICLE 215. The promissory notes of the landowner or farmer, be they either held by the
association or negotiated by the same, shall when they fall due give rise to the execution which may
be proper, in accordance with the law of civil procedure, against the property of the landowner or
farmer who may have subscribed them.
[ARTICLE 216. The interest and commission which the agricultural loan associations and their agents
or representatives are to receive shall be unrestrictedly stipulated within the limits fixed by the by-
laws.
[ARTICLE 217. Agricultural loan associations can not devote to the transactions referred to in
paragraphs 2 and 3 of Article 212 more than 50 per cent of the common capital, applying the
remaining 50 per cent to the loans referred to in number 1 of the same article.]
SECTION THIRTEEN
Expiration and Liquidation of Commercial Associations
[ARTICLE 218. The partial rescission of the articles of general and limited commercial copartnerships
shall take place in any of the following causes:
1. When a partner makes use of the common capital and of the firm name for private business.
2. When a partner interferes in the management of the company who has no right to do so,
according to the conditions of the articles of copartnership.
3. When any managing partner commits a fraud in the management or in the bookkeeping of the
copartnership.
4. When any partner fails to contribute to the common capital the amount stipulated in the articles
of copartnership, after having been requested to do so.
5. When a partner transacts commercial business for his own account, which is not lawful in
accordance with the provisions of Articles 136, 137, and 138.
6. When a partner who is under the obligation to render personal services to the copartnership
absents himself, after having been requested to return and comply with his duties, and does not do so
or does not give a good reason which temporarily prevents him from returning.
7. When one or more partners fail to comply, in any manner whatsoever, with the obligations
imposed in the articles of copartnership.
[ARTICLE 219. The partial rescission of the copartnership will produce the annulment of the articles in
so far as the partner at fault is concerned, who shall be considered as excluded therefrom, requiring
him to pay the amount of the loss which may correspond to him, should there be any, and the
copartnership shall be authorized to retain the funds he may have contributed to the common capital,
until all the transactions pending at the time of the rescission have been concluded and liquidated,
without allowing him to participate in the profits nor giving him any indemnification.
[ARTICLE 220. The liability of the excluded partner as well as that of the copartnership to third
persons for all acts and obligations contracted in the name and for the account of the latter, shall
continue until the record of the partial rescission of the articles of copartnership has been made in the
commercial registry.
[ARTICLE 221. Associations of any kind whatsoever shall be completely dissolved for the following
causes:
1. The termination of the period fixed in the articles of association or the conclusion of the
enterprise which constitutes its purpose.
2. The entire loss of the capital.
3. The bankruptcy of the association.
[ARTICLE 222. General and limited copartnerships shall furthermore be totally dissolved for the
following causes:
1. The death of one of the general partners if the articles of copartnership do not contain an
express agreement that the heirs of the deceased partner are to continue in the copartnership, or that
said copartnership will continue between the surviving partners.
2. The insanity of a managing partner or any other cause which renders him incapable of
administering his property.
3. The bankruptcy of any of the general partners.
[ARTICLE 223. Commercial associations shall not be understood as extended by the implied or
presumed will of the members after the period for which they were constituted has elapsed; and if the
members desire to continue in association they shall draw up new articles, subject to all the formalities
prescribed for their creation, according to the provisions of Article 119.
[ARTICLE 224. In general or limited copartnerships, created for an indefinite period, if any of the
partners requests its dissolution, the other partners can not oppose it except for reasons of bad faith
on the part of the persons suggesting it.
It shall be understood that a partner acts in bad faith with regard to the dissolution of the
copartnership when he would thereby derive a private profit which he would not receive should the
copartnership continue.
[ARTICLE 225. A member who retires from a partnership on his own accord or who suggests its
dissolution can not prevent pending transactions to be concluded in the manner most convenient to
the common interests, and until said transactions are concluded the division of the property and assets
of the copartnership shall not take place.
[ARTICLE 226. The dissolution of a commercial association, which proceeds from any other cause but
the termination of the period for which it was constituted, shall not cause any prejudice to third parties
until it has been recorded in the commercial registry.
[ARTICLE 227. In the liquidation and division of the common assets the rules established in the
articles of association shall be observed, and in their absence the rules contained in the following
articles.
[ARTICLE 228. From the time an association is declared in liquidation the representation of the
managing members to make new contracts and obligations shall cease, their powers being limited as
liquidators to collecting the credits of the association, to extinguishing the obligations previously
contracted as they fall due, and to realizing pending transactions.
[ARTICLE 229. In general or limited copartnerships, should there be no opposition on the part of any
of the partners, the person who managed the common funds shall continue in charge of the
liquidation; but should all the partners not agree thereto a general meeting shall be called without
delay, and the decision adopted at the same shall be enforced with regard to the appointment of
liquidators from among the members of the association or not, as well as in all that refers to the form
and proceedings of the liquidation and the management of the common funds.
[ARTICLE 230. Under the penalty of removal the liquidators shall —
1. Draw up and communicate to the members, within the period of twenty days, an inventory of the
firm assets with a balance of accounts of the association in liquidation, according to its books.
2. Communicate in the same manner to the members every month the condition of the liquidation.
[ARTICLE 231. The liquidators shall be liable to the members for any loss suffered by the common
funds on account of fraud or serious negligence in the discharge of their duty, without thereby being
understood as authorized to compromise or to submit to arbitration the common interests, unless the
members have expressly granted them these privileges.
[ARTICLE 232. At the conclusion of the liquidation and when the time has come to make the division
of the common funds, according to the classifications made by the liquidators, or by the meeting of
members, which any of whom can request to be held for this purpose, said liquidators shall make the
division within the period decided by the meeting.
[ARTICLE 233. If any of the members considers himself unjustly treated in the division made, he may
make use of his right before the judge or court of competent jurisdiction.
[ARTICLE 234. In the liquidation of commercial associations in which minors or incapacitated persons
are interested, the fathers, mothers, or guardians of the latter shall act, as may be the case, with full
powers, as though the business were their own and all the acts done and consented to by said
representatives for their principal shall be valid and irrevocable without the right of restitution and
without prejudice to the liability the former may incur to the latter by reason of their carelessness or
negligence.
[ARTICLE 235. No member can demand the delivery to him of the assets due him from the common
funds while all the debts and obligations of the association have not yet been extinguished, or the
amount thereof has not been deposited, if the delivery can not at once take place.
[ARTICLE 236. There shall be deducted from the first divisions made among the members the sums
they may have received for personal expenses or which have been advanced them by the company for
any other reason whatsoever.
[ARTICLE 237. The private property of the general partners which has not been included in the assets
of the copartnership when it was formed can not be seized for the payment of the obligations
contracted by the copartnership until after the common assets have been attached.
[ARTICLE 238. In corporations in liquidation, the provisions of their by-laws shall continue to be
observed in so far as ordinary or extraordinary general meetings are concerned, as well as with
relation to the accounts to be given of the progress of the liquidation, and to resolve upon what may
be advisable for the common interests.
• Title XI – Drafts, Bills, and Promissory Notes Payable to Order and Checks
SECTION ONE
Drafts, Bills, and Promissory Notes Payable to Order
[ARTICLE 531. The drafts, bills, and promissory notes payable to order must contain:
1. The specific name of the draft, bill or promissory note.
2. The date of issue.
3. The amount.
4. The time of payment.
5. The person to whose order the payment is to be made, and, in drafts, the name and domicile of
the person against whom they are drawn.
6. The place where the payment is to be made.
7. The origin and kind of value they represent.
8. The signature of the person making the draft, and, in bills or promissory notes, the person who
contracts the obligation to pay them.
Bills which are to be paid in a place other than that of the residence of the payor, shall indicate a
domicile for the payment.
[ARTICLE 532. Drafts payable to order between merchants and the bills or promissory notes likewise
payable to order, which arise from commercial transactions, shall produce the same obligations and
effects as bills of exchange, except with regard to acceptance, which is a quality of the latter only.
The bills or promissory notes which are not payable to order shall be considered simple promises to
pay subject to the common law or the commercial law according to their nature, excepting the
provisions contained in the following title.
[ARTICLE 533. The indorsements on drafts and promissory notes payable to order must contain the
same statements as those on bills of exchange.]
SECTION TWO
Checks
[ARTICLE 534. The order to pay, known in commerce by the name of check, is an instrument which
permits the maker to withdraw for his benefit or for that of a third person the whole or part of the
funds he may have at his disposal in the hands of the depositary.
[ARTICLE 535. The check must contain:
The name and the signature of the maker, and the name of the person on whom it is drawn and his
domicile, amount and date of issue, which must be written out, and if payable to bearer, to a
determined person, or to order; in the latter case it shall be transferable by indorsement.]
ARTICLE 536. It may be drawn in the same place it is to be paid, or in a different place; but the maker
shall be obliged to previously have the funds on deposit with the person on whom it is drawn.
[ARTICLE 537. The holder of a check must present it for payment within five days of its issue, if
drawn in the same place, and within eight days if drawn in another one. The holder who allows this
period to elapse shall lose his right of action against the indorsers as well as against the maker, if the
funds deposited with the person on whom it is drawn should disappear because the latter has
suspended payments or is a bankrupt.
[ARTICLE 538. The period of eight days following the arrival of the mail fixed in the foregoing article
shall also be understood for those drawn abroad.]
ARTICLE 539. Payment of a check shall be demanded of the depository on presentation.
[The person to whom payment is made shall state in his receipt his name and the date of payment.]
[ARTICLE 540. Duplicates of checks can not be issued unless the originals have been previously
canceled after they have lapsed and the agreement thereto of the depository has been obtained.]
ARTICLE 541. The maker or any legal holder of a check shall be entitled to indicate therein that it be
paid to a certain banker or institution, which he shall do by writing across the face the name of said
banker or institution, or only the words “and company.” The payment made to a person other than
banker or institution shall not exempt the person on whom it is drawn, if the payment was not correctly
made.
[ARTICLE 542. The provisions contained in this Code relating to the joint liability of the maker and
indorsers, and to protests, as well as to the exercise of the actions arising from bills of exchange, shall
be applicable to these instruments.
[ARTICLE 543. The foregoing provision, in so far as they are applicable, shall govern pay orders
known by the name of stubs, in current account, of banks or institutions.]
Pasted from <http://www.openlexproject.com/commercial/code-of-commerce/book-two/title-xi-drafts-
bills-and-promissory-notes-payable-to-order-and-checks/>
• Title XII – Instruments Payable to Bearer, and Forgery, Robbery, Theft, or Loss of the Same
SECTION ONE
Instruments Payable to Bearer
[ARTICLE 544. All instruments payable to order, discussed in the foregoing title, may be issued
payable to bearer, and shall, the same as the former, include an attachment from the day they fall
due, without further requisite than the acknowledgment of the signature of the person liable for the
payment.
The due date shall be counted according to the rules established for instruments issued payable to
order, and against the action to secure judgment no exceptions but those mentioned in Article 523
shall be admitted.
[ARTICLE 545. Other instruments payable to bearer, be they either the ones mentioned in Article 68
or bank notes, shares, or obligations of other banks, mortgage loan, agricultural loan, or of
associations handling public securities, railroad companies, companies of public works, industrial or
commercial associations, or of any other kind whatsoever, issued in accordance with the laws and
provisions of this Code, shall produce the following effects:
1. They shall include attachment, as well as their coupons, from the day the respective obligation
falls due, or when they are presented, if no due date has been affixed.
2. They shall be transferable by the simple delivery of the instrument.
3. They are not subject to restitution if they were negotiated on exchange with the intervention of a
licensed agent, and where there is no such agent with the intervention of a notary public or of a
commercial broker.
The rights and actions of the legitimate owner against the vendor or other persons liable according to
the laws for the acts which deprived him of the possession and ownership of the instruments sold, shall
be reserved.]
ARTICLE 546. The holder of an instrument payable to bearer shall have a right to compare it with the
original whenever he consider it advisable.
SECTION TWO
Robbery; Theft, or Loss of Instruments of Credit and those Payable to Bearer
ARTICLE 547. The following shall be instruments of credit payable to bearer for the effects of this
section, according to the following cases:
1. Instruments of credit against the State, provinces or municipalities, legally issued.
2. Those issued by foreign countries the quotation of which has been authorized by the
Government, on the recommendation of the board of directors of the associations of agents.
3. Instruments of credit payable to bearer, of foreign enterprises, established in accordance with
the law of the State to which they belong.
4. Instruments of credit payable to bearer issued in accordance with the laws of their association by
national establishments, associations, or enterprises.
5. Those issued by private parties, provided they are mortgaged or are sufficiently secured.
ARTICLE 548. The dispossessed owner, no matter for what cause it may be, may apply to the judge or
court of competent jurisdiction, asking that the principal, interest or dividends due or about to become
due, be not paid a third person, as well as in order to prevent the ownership of the instrument from
being transferred to another person, or he may request that a duplicate he issued him.
The judge or court exercising jurisdiction in the district in which the debtor establishment or person is
situated shall be of competent jurisdiction.
ARTICLE 549. In the complaint made to the judge or court by the dispossessed owner, he must state
the name, character, nominal value, number if it should have one, and the series of the instrument;
and furthermore, if it were possible, the time and place he acquired ownership and the manner of
acquisition thereof, the time and place where he received the last interest or dividends, and the
circumstances attending the dispossession.
The person dispossessed, in making the complaint, shall indicate within the district in which the judge
or court of competent jurisdiction exercises the domicile where he is to be served with all notifications.
ARTICLE 550. If the complaint relates only to the payment of the principal or interest or dividends
which are due or about to become due, the judge or court, when the legality of the acquisition of the
instrument has been proved, must admit said complaint immediately ordering:
[1. That the complaint be immediately published in the Gacetas of Madrid and Manila, in the Boletin
oficial of the province, and in the Diario oficial de Avisos of the place, should there be one fixing a short
period within which the holder of the instrument may appear.]
2. That it be communicated to the managing office of the institution which issued the instrument, or
to the association or private person from whom it originates, in order that the payment of the principal
or interest may be suspended.
[ARTICLE 551. The request shall be heard in the presence of a member of the department of public
prosecution, and in the manner prescribed in the law of civil procedure for interlocutory issues.]
ARTICLE 552. After one year has elapsed since the complaint without anybody contradicting it, and, if
in the interval, two dividends have been distributed, the complainant may request the judge or court
for authority not only to recover the interest of dividends due or about to become due, in the
proportion and means of their collectibility, but also the principal of the instruments, if it is
demandable.
ARTICLE 553. After authorization has been granted by the judge or court, the person dispossessed
must, before receiving the interest or dividends, or the principal, give sufficient security to cover the
amount of the annuities recoverable, and, furthermore, twice the amount of the last annuity due.
After two years have elapsed from the date of the authorization without the complainant being
contradicted, the guaranty shall be cancelled.
If the complainant does not wish to or cannot give the security, the debtor association or private
person may request the deposit of the interest or dividends past due or of the principal recoverable,
and to receive after the two years the amount deposited if there be no objection.
ARTICLE 554. If the principal should be recoverable after the authorization, it may be demanded
under security or the deposit may be required. After five years have elapsed, without opposition, from
the date of the authorization, or ten years from the date it was demandable, the person dispossessed
may receive the securities deposited.
ARTICLE 555. The solvency of the guaranty shall be passed upon by the judges and courts.
The complainant may give security in bonds of the State, recovering them at the termination of the
period fixed for the guaranty.
ARTICLE 556. If the complaint relates to coupons payable to bearer separated from the instrument,
and the claim should not be overruled, the claimant may recover the amount of the coupons after
three years have elapsed, counted from the date of the judicial declaration admitting the complaint.
ARTICLE 557. The payments made to the person dispossessed in accordance with the rules above
established exempt the debtor from all the liability; and a third person who considers himself injured
shall only retain the right of personal action against the claimant who acted without just cause.
ARTICLE 558. If, before the exemption of the debtor, a third holder should appear with the
instruments the subject of the complaint, the former must retain possession thereof and inform the
judge or court and the first claimant, at the same time stating the name, residence, or manner in
which the third holder may be found. The appearance of a third person shall suspend the effects of
the claim until it is decided by the judge or court.
[ARTICLE 559. If the purpose of the complaint should be to prevent the negotiation or transfer of
instruments which can be quoted, the person dispossessed may address himself to the board of
directors of the association of agents, and, in the absence of the latter, to the board of the association
of commercial brokers, complaining of the robbery, theft, or loss, and accompanying thereto a
memorandum giving the series and numbers of the instruments lost, time of their acquisition, and
manner in which they were acquired.
The board of directors, on the same day of the exchanges or on the following one, shall affix a notice
to the board, and shall announce at the opening of the exchange the complaint made, and also advise
the other boards of directors of exchanges of said complaint.
In the absence of a board of directors of the association of agents or of commercial brokers, the person
dispossessed shall complain of the robbery, theft, or loss in the manner prescribed in this article, to the
Judge of First Instance of his domicile, which authority shall make it public by means of letters regatory
to the board of directors of the association of agents of Madrid.
The complaints to which this article limits itself shall be inserted at the expense of the complainant in
the official Gaceta of Manila, and in one or two of the newspapers having the largest circulation, in the
opinion of the judge.
[ARTICLE 560. The negotiation of securities lost or stolen, which take place after the announcements
referred to in the foregoing article, shall be void, and the person acquiring the same shall not enjoy the
right of remaining in undisturbed possession thereof; but the right of the third person against the
vendor and against the agent who took part in the transaction shall be reserved.
[ARTICLE 561. If the complainant should apply directly to the board of directors of the exchange of
Madrid, or of other exchanges, he shall be required, in order for the complaint to have effect, to
communicate it to the judge of his domicile in order that the latter may ratify the prohibition to
negotiate or transfer the instruments. If the decision rendered should not be communicated to the
board of directors by the first mail after the complainant gave notice, the board shall annul the notice
after nine days from the date of the arrival of the mail at the place of residence of the board of
directors have elapsed, and the transfer of the instruments which may subsequently be made shall be
valid.
[ARTICLE 562. After five years have elapsed to be counted from the date of the publications made by
virtue of the provisions of Articles 550 and 559, and from that of the ratification of the judge or court
referred to in Article 561, without any objection to the complaint having been made, the judge or court
shall declare the nullity of the instrument stolen or lost, and shall communicate it to the official
managing office, association, or private person from whom it came, ordering the issue of a duplicate to
the person who appears to be its legal owner. If within the five years a third complainant should
appear, the period shall be suspended until the decision of the judges or courts is rendered.
[ARTICLE 563. The duplicate shall bear the same number as the original instrument; it shall state that
it was issued in duplicate; it shall produce the same effects as the former, and shall be negotiable
under the same conditions. The issue of the duplicate shall annul the original instrument, and this shall
be stated in the entires or records relating thereto.
[ARTICLE 564. If the complaint of the person who suffered the loss should be for the purpose of
recovering the principal, dividends, or coupons, and also to prevent the negotiation or transfer on
exchange of the instruments which can be quoted thereon, the rules established for each one of the
foregoing articles shall be observed according to the cases.
[ARTICLE 565. Notwithstanding the provisions contained in this section, if the person dispossessed
should have acquired the instruments on exchange, and if he attaches to the complaint the certificate
of the agent in which the instruments are detailed or specified in such manner that they can be
identified before applying to the judge or court, he may do so to the debtor institution or person, and
even to the board of directors of the association of agents objecting to making the payment and
requesting that the proper notices be issued. In such case the debtor institution or person and the
board of directors shall be obliged to act as if the court or judge has notified them of the admission of
the complaint and that it has been passed upon.
If the judge or court, within the period of one month, does not order the retention or publication, the
complaint made by the person dispossessed shall have no effect, and the debtor institution or person
and the board of directors shall be exempted from all liability.]
ARTICLE 566. The foregoing provisions shall not be applicable to the bank notes of the Spanish
Philippine Bank (Banco Español-Filipino), nor to notes of the same kind issued by institutions subject to
the same rule, nor to the instruments payable to bearer issued by the State, which are governed by
special laws, decrees, or regulations.
• Maritime Commerce
• TITLE ONE – Vessel
ARTICLE 573. Merchant vessels constitute property which may be acquired and transferred by any of
the means recognized by law. The acquisition of a vessel must appear in a written instrument, which
shall not produce any effect with respect to third persons if not inscribed in the registry of vessels.
The ownership of a vessel shall likewise be acquired by possession in good faith, continued for three
years, with a just title duly recorded.
In the absence of any of these requisites, continuous possession for ten years shall be necessary in
order to acquire ownership. A captain may not acquire by prescription the vessel of which he is in
command.
ARTICLE 574. Builders of vessels may employ the materials and follow, with respect to their
construction and rigging, the systems most suitable to their interests. Ship owners and seamen shall
be subject to what the laws and regulations of the public administration on navigation, customs,
health, safety of vessels, and other similar matters.
ARTICLE 575. Co-owners of vessels shall have the right of repurchase and redemption in sales made
to strangers, but they may exercise the same only within the nine days following the inscription of the
sale in the registry, and by depositing the price at the same time.
ARTICLE 576. In the sale of a vessel it shall always be understood as included the rigging, masts,
stores and engine of a streamer appurtenant thereto, which at the time belongs to the vendor.
The arms, munitions of war, provisions and fuel shall not be considered as included in the sale.
The vendor shall be under the obligation to deliver to the purchaser a certified copy of the record sheet
of the vessel in the registry up to the date of the sale.
ARTICLE 577. If the alienation of the vessel should be made while it is on a voyage, the freightage
which it earns from the time it receives its last cargo shall pertain entirely to the purchaser, and the
payment of the crew and other persons who make up its complement for the same voyage shall be for
his account.
If the sale is made after the vessel has arrived at the port of its destination, the freightage shall pertain
to the vendor, and the payment of the crew and other individuals who make up its complement shall
be for his account, unless the contrary is stipulated in either case.
ARTICLE 578. If the vessel being on a voyage or in a foreign port, its owner or owners should
voluntarily alienate it, either to Filipinos or to foreigners domiciled in the capital or in a port of another
country, the bill of sale shall be executed before the consul of the Republic of the Philippines at the
port where it terminates its voyage and said instrument shall produce no effect with respect to third
persons if it is not inscribed in the registry of the consulate. The consul shall immediately forward a
true copy of the instrument of purchase and sale of the vessel to the registry of vessels of the port
where said vessel is inscribed and registered.
In every case the alienation of the vessel must be made to appear with a statement of whether the
vendor receives its price in whole or in part, or whether he preserves in whole or in part any claim on
said vessel. In case the sale is made to a Filipino, this fact shall be stated in the certificate of
navigation.
When a vessel, being on a voyage, shall be rendered useless for navigation, the captain shall apply to
the competent judge on court of the port of arrival, should it be in the Philippines; and should it be in a
foreign country, to the consul of the Republic of the Philippines, should there be one, or, where there is
none, to the judge or court or to the local authority; and the consul, or the judge or court, shall order
an examination of the vessel to be made.
If the consignee or the insurer should reside at said port, or should have representatives there, they
must be cited in order that they may take part in the proceedings on behalf of whoever may be
concerned.
ARTICLE 579. After the damage to the vessel and the impossibility of her being repaired, in order to
continue the voyage had been shown, its sale at public auction shall be ordered, subject to the
following rules:
1. The hull of the vessel, its rigging, engines, stores, and other articles shall be appraised, after
making an inventory, said proceedings to be brought to the notice of the persons who may wish to
take part in the auction.
2. The order or decree ordering the auction to be held shall be posted in the usual places, an
announcement thereof to be inserted in the Official Gazette and in two of the newspapers of the
largest circulation of the port where the auction is to be held, should there be any.
The period which may be fixed for the auction shall not be less than twenty days.
3. These announcements shall be repeated every ten days, and their publication shall be made to
appear in the records.
4. The auction shall be held on the day fixed, with the formalities prescribed in the common law for
judicial sales.
5. If the sale should take place while the vessel is in a foreign country, the special provisions
governing such cases shall be observed.
ARTICLE 580. In all judicial sales of any vessel for the payment of creditors, the following shall have
preference in the order stated:
1. The credit in favor of the public treasury proven by means of an official certificate of competent
authority.
2. The judicial costs of the proceedings, according to an appraisement approved by the judge or
court.
3. The pilotage charges, tonnage dues, and the other sea or port charges, proven by means of
proper certificates of the officers intrusted with the collection thereof.
4. The salaries of the depositaries and keepers of the vessel and any other expenses for its
preservation from the time of arrival at the port until the sale, which appear to have been paid or be
due by virtue of an account verified and approved by the judge or court.
5. The rent of the warehouse where the rigging and stores of the vessel have been taken care of,
according to contract.
6. The salaries due the captain and crew during its last voyage, which shall be verified by means of
the liquidation to be made in view of the lists and of the books of account of the vessel, approved by
the chief of the Bureau of Merchant Marine, where there is one, and in his absence by the consul or
judge or court.
7. The reimbursement for the goods of the freight which the captain may have sold in order to
repair the vessel, provided that the sale has been ordered through a judicial proceedings held with the
formalities required in such cases, and recorded in the certificate of registry of the vessel.
8. The part of the price which has not been paid to the said vendor, the unpaid credits for materials
and labor in the construction of the vessel, when it has not navigated, and those arising from the
repair and equipment of the vessels and from its provisioning with victuals and fuel during the last
voyage.
In order that the credits provided for in this subdivision may enjoy this preference, they must appear
by contracts recorded in the registry of vessels, or if they were contracted for the vessel while on a
voyage and said vessel has not returned to the port where it is registered, they must be made with the
authorization required for such cases and annotated in the certificate of registration of the vessel.
9. The amount borrowed on bottomry on the hull, keel, tackle, and stores of the vessel before its
departure, proven by means of the contract executed according to law and recorded in the registry of
vessels; those borrowed during the voyage with the authorization mentioned in the preceding
subdivision, satisfying the same requisites; and the insurance premium, proven by the insurance policy
or a certificate taken from the books of the broker.
10. The indemnity due the shipper for the value of the goods shipped which were not delivered to
the consignees, or for averages suffered for which the vessel is liable, provided that either appear in a
judicial or arbitration decision.
ARTICLE 581. If the proceeds of the sale should not be sufficient to pay all the creditors included in
one number or grade, the residue shall be divided among them pro rata.
ARTICLE 582. After the bill of the judicial sale at public auction has been executed and inscribed in
the registry of vessels, all the other liabilities of the vessel in favor of the creditors shall be considered
extinguished.
But if the sale should have been voluntary and should have been made while the vessel was on a
voyage, the creditors shall preserve their rights against the vessel until it returns to the port of her
registry, and three months after the inscription of the sale in the registry of vessel or the arrival.
ARTICLE 583. If while on a voyage the captain should find it necessary to contract one or more of the
obligations mentioned in subdivisions 8 and 9 of Article 580, he shall apply to the judge or court if he is
in Philippine territory, and otherwise to the consul of the Republic of the Philippines, should there be
one, and, in his absence, to the judge or court or proper local authority, presenting the certificate of
the registration sheet treated of in Article 612 and the instruments proving the obligation contracted.
The judge or court, the consul, or the local authority, as the case may be, in view of the result of the
proceedings instituted, shall make a temporary memorandum of their result in the certificate, in order
that it may be recorded in the registry when the vessel returns to the port of its registry, or so that it
can be admitted as a legal and preferred obligation in case of sale before its return, by reason of the
sale of the vessel on account of a declaration of unseaworthiness.
The omission of this formality shall make the captain personally liable for the credits prejudiced on his
account.
ARTICLE 584. The vessels subject to liability for the credits mentioned in Article 580 may be attached
and judicially sold in the manner prescribed in Article 579, in the port in which they may be found, at
the instance of any of the creditors; but if they should be loaded and ready to sail, the attachment may
not be effected except for debts contracted to prepare and provision the vessel for the same voyage,
and even then the attachment shall be dissolved if any person interested in its sailing should give a
bond for the return of the vessel within the period fixed in the certificate of navigation binding himself
to pay the indebtedness insofar as it may be legal, should it fail to do so, even if this failure be due to
fortuitous event.
For debts of any other kind whatsoever not comprised within the said Article 580, the vessel may be
attached only in the port of her registry.
ARTICLE 585. For all purposes of law not modified or restricted by the provisions of this Code, vessels
shall continue to be considered as personal property.
Changes in the Rules of Procedure on Corporate Rehabilitation: Provisions Applicable to all Proceedings
Published by Atty. Fred February 20th, 2009 in Corporate and Investments.0 Comments
On 2 December 2008, the Supreme Court en banc issued A.M. No. 00-8-10-SC, approving the RULES OF
PROCEDURE ON CORPORATE REHABILITATION (“Rules”). The new Rules took effect on 16 January 2009.
Here are the salient features of the new Rules, in contrast to the old Interim Rules of Procedure on
Corporate Rehabilitation (“Interim Rules). Unless otherwise indicated, the old provisions remain the same.
Effect on pending rehabilitation proceedings. –
Unless the court orders otherwise to prevent manifest injustice, any pending petition for rehabilitation that
has not undergone the initial hearing prescribed under the Interim Rules of Procedure for Corporate
Rehabilitation at the time of the effectivity (16 January 2009) of the new Rules shall be governed by the
Rules. (Rule 9, Sec. 2)
Recognition of foreign proceedings. –
The provisions on Recognition of Foreign Proceedings (Rule 7) are not expressly provided in the Interim
Rules. The procedure will be separately discussed. (Comment: This is a welcome addition because based
on our experience, the absence of express provisions gave rise to many issues that only delayed the
speedy resolution of the proceedings.)
Types of Petition based on the party filing it. –
The Interim Rules only cover rehabilitations that are: (1) Debtor-Rehabilitation; and (2) Creditor-Initiated.
The two are also lumped in a single Rule (Rule 4).
The new Rules add a third type, the Pre-Negotiated Rehabilitation, and distinctly set forth the applicable
provisions for each:
Rule 4 – Debtor-Initiated Rehabilitation
Rule 5 – Creditor-Initiated Rehabilitation
Rule 6 – Pre-Negotiated Rehabilitation
The General Provisions (Rule 3), of course applies to all types. Also, certain provisions on Debtor-Initiated
Rehabilitation (Sections 5-12 of Rule 4) are expressly made applicable to Creditor-Initiated Rehabilitation
(Rule 5).
Each procedure will be separately discussed.
Venue. –
The Interim Rules merely provides that the petition shall be filed in the regional trial court (RTC) which has
jurisdiction over the principal office of the debtor. The new Rules now explicitly provides (Rule 3, Sec. 2):
1. It should be the office specified in its articles of incorporation or partnership.
2. Where the principal office of the corporation, partnership or association is registered in the SEC as
“Metro Manila”, the action must be filed in the RTC of the city or municipality where the head office is
located.
3. A joint petition by a group of companies shall be filed in the RTC which has jurisdiction over the principal
office of the parent company, as specified in its Articles of Incorporation.
Stay Order. –
The new Rules (Rule 3, Sec. 7) expressly provide that the “issuance of a stay order does not affect the
right to commence actions or proceedings insofar as it is necessary to preserve a claim against the
debtor.”
The following are also added to the required contents of the Stay Order:
1. Sub-paragraph (b) in the Interim Rules simply provides that the court shall issue an order “staying
enforcement of all claims, whether for money or otherwise and whether such enforcement is by court
action or otherwise, against the debtor, its guarantors and persons not solidarily liable with the debtor”,
but the new Rules add a proviso that “the stay order shall not cover claims against letters of credit and
similar security arrangements issued by a third party to secure the payment of the debtor’s obligations;
provided, further, that the stay order shall not cover foreclosure by a creditor of property not belonging to
a debtor under corporate rehabilitation; provided, however, that where the owner of such property sought
to be foreclosed is also a guarantor or one who is not solidarily liable, said owner shall be entitled to the
benefit of excussion as such guarantor”.
2. Sub-paragraph (b) in the Interim Rules simply provides that the order shall prohibit the debtor from
making any payment of its liabilities “as of the date of the petition”, but this phrase was deleted and
substituted with: “except as provided in items (e), (f) and (g) of this Section or when ordered by the court
pursuant to Section 10 of Rule 3.”
3. This provision was added as sub-paragraph (g): “directing the payment of new loans or other forms of
credit accommodations obtained for the rehabilitation of the debtor with prior court approval”.
4. This provision was also added as sub-paragraph (j): “directing the petitioner to furnish a copy of the
petition and its annexes, as well as the stay order, to the creditors named in the petition and the
appropriate regulatory agencies such as, but not limited to, the Securities and Exchange Commission, the
Bangko Sentral ng Pilipinas, the Insurance Commission, the National Telecommunications Commission, the
Housing and Land Use Regulatory Board and the Energy Regulatory Commission.”
5. The time to file a verified comment by the creditors was increased to 15 days before the date of the first
initial hearing, from 10 days under the Interim Rules.
Period of Stay Order. —
The new Rules retain the language in the Interim Rules that the “stay order shall be effective from the
date of its issuance until the approval of the rehabilitation plan or the dismissal of the petition” (Rule 3,
Sec. 9), but deleted the proviso in the second paragraph of Rule 4, Sec. 11 of the Interim Rules that the
petition shall be dismissed if no rehabilitation plan is approved after 180 days from the date of the initial
hearing.
Relief from, modification, or termination of Stay Order. —
Another ground was added to the original 3 grounds to terminate, modify, or set conditions for the
continuance of the stay order under the Interim Rules – that “the property covered by the stay order is not
essential or necessary to the rehabilitation and the creditor’s failure to enforce its claim will cause more
damage to the creditor than to the debtor.” (Rule 3, Sec. 10)
Reports. —
The new Rules now indicate that the report “shall include, at the minimum, interim financial statements of
the debtor.” (Rule 3, Sec. 16)
Dismissal of rehabilitation receiver. —
Under the Interim Rules, the court may, motu propio or on its own initiative, dismiss the rehabilitation
receiver. This is deleted under the new Rules. (Rule 3, Sec. 17)
Repayment Period. —
The new Rules now provides that if “the rehabilitation plan extends the period for the debtor to pay its
contractual obligations, the new period should not extend beyond 15 years from the expiration of the
stipulated term existing at the time of filing of the petition.” (Rule 3, Sec. 19)
Termination of proceedings. —
Under the Interim Rules, the court may, motu propio or on its own initiative, terminate the proceedings.
This is deleted under the new Rules. (Rule 3, Sec. 23) Also, the same provision expressly adds the
“dismissal of the petition” in the enumeration of grounds for termination of the proceedings. (Comment:
While this is not included in the enumeration under Rule 4, Sec. 27 of the Interim Rules, this was
understood to be one of the grounds for termination, expressly mentioned in Rule 4, Sec. 11 of the Interim
Rules.)
Prohibited pleadings. –
The following prohibited pleadings are added under Rule 3, Sec. 1 of the new Rules:
1. Motion to hear affirmative defenses; and
2. Any pleading or motion which is similar to or of like effect as any of the foregoing.
On the other hand, the following grounds were removed from the list of prohibited pleadings:
1. Petition for Relief
2. Memorandum
3. Reply or Rejoinder
4. Motion for New Trial or Reconsideration. A party may file a motion for reconsideration of any order
issued by the court prior to the approval of the rehabilitation plan. No relief can be extended to the party
aggrieved by the court’s order on the motion through a special civil action for certiorari under Rule 65 of
the Rules of Court. Such order can only be elevated to the Court of Appeals (CA) as an assigned error in
the petition for review of the decision or order approving or disapproving the rehabilitation plan. An order
issued after the approval of the rehabilitation plan can be reviewed only through a special civil action for
certiorari under Rule 65 of the Rules of Court. (Rule 8, Sec. 1)
Review of decision on Rehabilitation Plan. —
The new Rules now expressly provide that an order approving or disapproving a rehabilitation plan can
only be reviewed through a petition for review to the CA under Rule 43 of the Rules of Court within 15 days
from notice of the decision or order. (Rule 8, Sec. 2) (Comment: Please also refer to A.M. No. 00-8-10-SC
[September 4, 2001] and A.M. No. 04-9-07-SC [September 14, 2004].)
Definitions. –
Under the new Rules, the following terms are expressly defined as follows:
“Administrative Expenses” shall refer to (a) reasonable and necessary expenses that are incurred in
connection with the filing of the petition; (b) expenses incurred in the ordinary course of business after the
issuance of the stay order, excluding interest payable to the creditors for loans and credit accommodations
existing at the time of the issuance of the stay order; and (c) other expenses that are authorized under
these Rules.
“Affiliate” is a corporation that directly or indirectly, through one or more intermediaries, is controlled by,
or is under the common control of another corporation, which thereby becomes its parent corporation.
“Asset” is anything of value that can be in the form of money, such as cash at the bank or amounts owed;
fixed assets such as property or equipment; or intangibles including intellectual property, the book value
of which is shown in the last three audited financial statements immediately preceding the filing of the
petition. In case the debtor is less than three years in operation, it is sufficient that the book value is based
on the audited financial statement/s for the two years or year immediately preceding the filing of the
petition, as the case may be.
“Control” is the power of a parent corporation to direct or govern the financial and operating policies of an
enterprise so as to obtain benefits from its activities. Control is presumed to exist when the parent owns,
directly or indirectly through subsidiaries, more than one–half (1/2) of the voting power of an enterprise
unless, in exceptional circumstances, it can clearly be demonstrated that such ownership does not
constitute control. Control also exists even when the parent owns one-half (1/2) or less of the
voting power of an enterprise when there is power:
(a) Over more than one-half (1/2) of the voting rights by virtue of an agreement with investors;
(b) To direct or govern the financial and operating policies of the enterprise under a statute or an
agreement;
(c) To appoint or remove the majority of the members of the board of directors or equivalent governing
body; or
(d) To cast the majority votes at meetings of the board of directors or equivalent governing body.
“Days” shall refer to calendar days unless otherwise provided in these Rules.
“Foreign court” means a judicial or other authority competent to control or supervise a foreign proceeding.
“Foreign proceeding” means a collective judicial or administrative proceeding in a foreign State, including
an interim proceeding, pursuant to a law relating to insolvency in which proceeding the assets and affairs
of the debtor are subject to control or supervision by a foreign court, for the purpose of rehabilitation or re-
organization.
“Foreign representative” means a person or entity, including one appointed on an interim basis, authorized
in a foreign proceeding to administer the reorganization or rehabilitation of the debtor or to act as a
representative of the foreign proceeding.
“Group of companies” refers to, and can cover only, corporations that are financially related to one
another as parent corporations, subsidiaries and affiliates. When the petition covers a group of companies,
all reference under these Rules to “debtor” shall include and apply to the group of companies.
“Liabilities” shall refer to monetary claims against the debtor, including stockholder’s advances that have
been recorded in the debtor’s audited financial statements as advances for future subscriptions.
“Parent” is a corporation which has control over another corporation directly or indirectly through one or
more intermediaries.
“Rehabilitation” shall mean the restoration of the debtor to a position of successful operation and
solvency, if it is shown that its continuance of operation is economically feasible and its creditors can
recover by way of the present value of payments projected in the plan, more if the corporation continues
as a going concern than if it is immediately liquidated.
“Secured claim” shall refer to any claim whose payment or fulfillment is secured by contract or by law,
including any claim or credit enumerated under Articles 2241 and 2242 of the Civil Code and Article 110,
as amended, of the Labor Code of the Philippines.
“Subsidiary” means a corporation more than fifty percent (50%) of the voting stock of which is owned or
controlled directly or indirectly through one or more intermediaries by another corporation, which thereby
becomes its parent corporation.
“Unsecured claim” shall mean any claim other than a secured claim.
GENERAL PROVISIONS
SECTION 1. (a) Cases covered. - These Rules shall govern the procedure to be observed in civil cases
involving the following:
(1) Devices or schemes employed by, or any act of, the board of directors, business associates,
officers or partners, amounting to fraud or misrepresentation which may be detrimental to the
interest of the public and/or of the stockholders, partners, or members of any corporation,
partnership, or association;
(2) Controversies arising out of intra-corporate, partnership, or association relations, between and
among stockholders, members, or associates; and between, any or all of them and the corporation,
partnership, or association of which they are stockholders, members, or associates, respectively;
(b) Prohibition against nuisance and harassment suits. - Nuisance and harassment suits are prohibited. In
determining whether a suit is a nuisance or harassment suit, the court shall consider, among others, the
following:
(1) The extent of the shareholding or interest of the initiating stockholder or member;
(4) Availability of appraisal rights for the act or acts complained of; and
(5) Prejudice or damage to the corporation, partnership, or association in relation to the relief sought.
In case of nuisance or harassment suits, the court may, motu proprio or upon motion, forthwith dismiss the
case.
SEC. 2. Suppletory application of the Rules of Court. - The Rules of Court, in so far as they may be
applicable and are not inconsistent with these Rules, are hereby adopted to form an integral part of these
Rules.
SEC. 3. Construction. - These Rules shall be liberally construed in order to promote their objective of
securing a just, summary, speedy and inexpensive determination of every action or proceeding.
SEC. 4. Executory nature of decisions and orders. - All decisions and orders issued under these Rules shall
immediately be executory. No appeal or petition taken therefrom shall stay the enforcement or
implementation of the decision or order, unless restrained by an appellate court. Interlocutory orders shall
not be subject to appeal.
SEC. 5. Venue. - All actions covered by these Rules shall be commenced and tried in the Regional Trial
Court which has jurisdiction over the principal office of the corporation, partnership, or association
concerned. Where the principal office of the corporation, partnership or association is registered in the
Securities and Exchange Commission as Metro Manila, the action must be filed in the city or municipality
where the head office is located.
SEC. 6. Service of pleadings. - When so authorized by the court, any pleading and/or document required by
these Rules may be filed with the court and/or served upon the other parties by facsimile transmission
(fax) or electronic mail (e-mail). In such cases, the date of transmission shall be deemed to be prima facie
the date of service.
SEC. 7. Signing of pleadings, motions and other papers. - Every pleading, motion, and other paper of a
party represented by an attorney shall be signed by at least one attorney of record in the attorney’s
individual name, whose address shall be stated. A party who is not represented by an attorney shall sign
the pleading, motion, or other paper and state his address.
The signature of an attorney or party constitutes a certification by the signer that he has read the
pleading, motion, or other paper; that to the best of his knowledge, information, and belief formed after
reasonable inquiry, it is well grounded in fact and is warranted by existing law or a good faith argument for
the extension, modification, or reversal of existing jurisprudence; and that it is not interposed for any
improper purpose, such as to harass or to cause unnecessary delay or needless increase in the cost of
litigation.
If a pleading, motion, or other paper is not signed, it shall be stricken off the record unless it is promptly
signed by the pleader or movant, after he is notified of the omission.
(3) Motion for new trial, or for reconsideration of judgment or order, or for re-opening of trial;
(4) Motion for extension of time to file pleadings, affidavits or any other paper, except those filed due
to clearly compelling reasons. Such motion must be verified and under oath; and
(5) Motion for postponement and other motions of similar intent, except those filed due to clearly
compelling reasons. Such motion must be verified and under oath.
SEC. 9. Assignment of cases. - All cases filed under these Rules shall be tried by judges designated by the
Supreme Court to hear and decide cases transferred from the Securities and Exchange Commission to the
Regional Trial Courts and filed directly with said courts pursuant to Republic Act No. 8799, otherwise
known as the Securities and Regulation Code.
RULE 2
COMMENCEMENT OF ACTION
AND PLEADINGS
SECTION 1. Commencement of action. - An action under these Rules is commenced by the filing of a
verified complaint with the proper Regional Trial Court.
SEC. 2. Pleadings allowed. - The only pleadings allowed to be filed under these Rules are the complaint,
answer, compulsory counterclaims or cross-claims pleaded in the answer, and the answer to the
counterclaims or cross-claims.
SEC. 3. Verification. - The complaint and the answer shall be verified by an affidavit stating that the affiant
has read the pleading and the allegations therein are true and correct based on his own personal
knowledge or on authentic records.
(1) the names, addresses, and other relevant personal or juridical circumstances of the parties;
(2) all facts material and relevant to the plaintiff’s cause or causes of action, which shall be supported
by affidavits of the plaintiff or his witnesses and copies of documentary and other evidence
supportive of such cause or causes of action;
(3) the law, rule, or regulation relied upon, violated, or sought to be enforced;
(4) a certification that (a) the plaintiff has not theretofore commenced any action or filed any claim
involving the same issues in any court, tribunal or quasi-judicial agency, and, to the best of his
knowledge, no such other action or claim is pending therein; (b) if there is such other action or claim,
a complete statement of the present status thereof; and (c) if he should thereafter learn that the
same or similar action or claim has been filed or is pending, he shall report that fact within five (5)
days therefrom to the court; and
SEC. 5. Summons. - The summons and the complaint shall be served together not later than five (5) days
from the date of filing of the complaint.
(a) Service upon domestic private juridical entities. - If the defendant is a domestic corporation, service
shall be deemed adequate if made upon any of the statutory or corporate officers as fixed by the by-laws
or their respective secretaries. If the defendant is a partnership, service shall be deemed adequate if made
upon any of the managing or general partners or upon their respective secretaries. If the defendant is an
association, service shall be deemed adequate if made upon any of its officers or their respective
secretaries.
(b) Service upon foreign private juridical entity. - When the defendant is a foreign private juridical entity
which is transacting or has transacted business in the Philippines, service may be made on its resident
agent designated in accordance with law for that purpose, or, if there be no such agent, on the
government official designated by law to that effect, or on any of its officers or agents within the
Philippines.
SEC. 6. Answer. - The defendant shall file his answer to the complaint, serving a copy thereof on the
plaintiff, within fifteen (15) days from service of summons.
(1) Specify each material allegation of fact the truth of which he admits;
(2) Specify each material allegation of fact the truth of which he does not admit. Where the
defendant desires to deny only a part of an averment, he shall specify so much of it as true and
material and shall deny only the remainder;
(3) Specify each material allegation of fact as to which truth he has no knowledge or information
sufficient to form a belief, and this shall have the effect of a denial;
(4) State the defenses, including grounds for a motion to dismiss under the Rules of Court;
(7) State the facts upon which he relies for his defense, including affidavits of witnesses and copies of
documentary and other evidence supportive of such cause or causes of action;
The answer to counterclaims or cross-claims shall be filed within ten (10) days from service of the answer
in which they are pleaded.
SEC. 7. Effect of failure to answer. - If the defendant fails to answer within the period above provided, he
shall be considered in default. Upon motion or motu proprio, the court shall render judgment either
dismissing the complaint or granting the relief prayed for as the records may warrant. In no case shall the
court award a relief beyond or different from that prayed for.
SEC. 8. Affidavits, documentary and other evidence. - Affidavits shall be based on personal knowledge,
shall set forth such facts as would be admissible in evidence, and shall show affirmatively that the affiant
is competent to testify on the matters stated therein. The affidavits shall be in question and answer form,
and shall comply with the rules on admissibility of evidence.
Affidavits of witnesses as well as documentary and other evidence shall be attached to the appropriate
pleading; Provided, however, that affidavits, documentary and other evidence not so submitted may be
attached to the pre-trial brief required under these Rules. Affidavits and other evidence not so submitted
shall not be admitted in evidence, except in the following cases:
(1) Testimony of unwilling, hostile, or adverse party witnesses. A witness is presumed prima facie
hostile if he fails or refuses to execute an affidavit after a written request therefor;
(2) If the failure to submit the evidence is for meritorious and compelling reasons; and
(3) Newly discovered evidence.
In case of (2) and (3) above, the affidavit and evidence must be submitted not later than five (5) days prior
to its introduction in evidence.
RULE 3
MODES OF DISCOVERY
SECTION 1. In general. - A party can only avail of any of the modes of discovery not later than fifteen (15)
days from the joinder of issues.
SEC. 2. Objections. - Any mode of discovery such as interrogatories, request for admission, production or
inspection of documents or things, may be objected to within ten (10) days from receipt of the discovery
device and only on the ground that the matter requested is patently incompetent, immaterial, irrelevant or
privileged in nature.
The court shall rule on the objections not later than fifteen (15) days from the filing thereof.
SEC. 3. Compliance. - Compliance with any mode of discovery shall be made within ten (10) days from
receipt of the discovery device, or if there are objections, from receipt of the ruling of the court.
SEC. 4. Sanctions. - The sanctions prescribed in the Rules of Court for failure to avail of, or refusal to
comply with, the modes of discovery shall apply. In addition, the court may, upon motion, declare a party
non-suited or as in default, as the case may be, if the refusal to comply with a mode of discovery is
patently unjustified.
RULE 4
PRE-TRIAL
SECTION 1. Pre-trial conference; mandatory nature. - Within five (5) days after the period for availment of,
and compliance with, the modes of discovery prescribed in Rule 3 hereof, whichever comes later, the court
shall issue and serve an order immediately setting the case for pre-trial conference and directing the
parties to submit their respective pre-trial briefs. The parties shall file with the court and furnish each other
copies of their respective pre-trial brief in such manner as to ensure its receipt by the court and the other
party at least five (5) days before the date set for the pre-trial.
The parties shall set forth in their pre-trial briefs, among other matters, the following:
(1) Brief statement of the nature of the case, which shall summarize the theory or theories of the
party in clear and concise language;
(4) Documents not specifically denied under oath by either or both parties;
(6) Statement of the issues, which shall separately summarize the factual and legal issues involved in
the case;
(7) Names of witnesses to be presented and the summary of their testimony as contained in their
affidavits supporting their positions on each of the issues;
(8) All other pieces of evidence, whether documentary or otherwise and their respective purposes;
(12) Such other matters as may aid in the just and speedy disposition of the case.
SEC. 2. Nature and purpose of pre-trial conference. - During the pre-trial conference, the court shall, with
its active participation, ensure that the parties consider in detail all of the following:
(3) Facts that need not be proven, either because they are matters of judicial notice or expressly or
deemed admitted;
(5) The possibility of obtaining stipulations and admissions of facts and documents;
(9) The possibility of submitting the case for decision on the basis of position papers, affidavits,
documentary and real evidence;
(11) Such other matters as may aid in the speedy and summary disposition of the case.
SEC. 3. Termination. - The preliminary conference shall be terminated not later than ten (10) days after its
commencement, whether or not the parties have agreed to settle amicably.
SEC. 4. Judgment before pre-trial. - If, after submission of the pre-trial briefs, the court determines that,
upon consideration of the pleadings, the affidavits and other evidence submitted by the parties, a
judgment may be rendered, the court may order the parties to file simultaneously their respective
memoranda within a non-extendible period of twenty (20) days from receipt of the order. Thereafter, the
court shall render judgment, either full or otherwise, not later than ninety (90) days from the expiration of
the period to file the memoranda.
SEC. 5. Pre-trial order; judgment after pre-trial. - The proceedings in the pre-trial shall be recorded. Within
ten (10) days after the termination of the pre-trial, the court shall issue an order which shall recite in detail
the matters taken up in the conference, the actions taken thereon, the amendments allowed in the
pleadings, and the agreements or admissions made by the parties as to any of the matters considered.
The court shall rule on all objections to or comments on the admissibility of any documentary or other
evidence, including any affidavit or any part thereof. Should the action proceed to trial, the order shall
explicitly define and limit the issues to be tried and shall strictly follow the form set forth in Annex “A” of
these Rules.
The contents of the order shall control the subsequent course of the action, unless modified before trial to
prevent manifest injustice.
After the pre-trial, the court may render judgment, either full or partial, as the evidence presented during
the pre-trial may warrant.
RULE 5
TRIAL
SECTION 1. Witnesses. - If the court deems necessary to hold hearings to determine specific factual
matters before rendering judgment, it shall, in the pre-trial order, set the case for trial on the dates agreed
upon by the parties.
Only persons whose affidavits were submitted may be presented as witnesses, except in cases specified in
section 8, Rule 2 of these Rules. The affidavits of the witnesses shall serve as their direct testimonies,
subject to cross-examination in accordance with existing rules on evidence.
SEC. 2. Trial schedule. - Unless judgment is rendered pursuant to Rule 4 of these Rules, the initial hearing
shall be held not later than thirty (30) days from the date of the pre-trial order. The hearings shall be
completed not later than sixty (60) days from the date of the initial hearing, thirty (30) days of which shall
be allotted to the plaintiffs and thirty (30) days to the defendants in the manner prescribed in the pre-trial
order. The failure of a party to present a witness on a scheduled hearing date shall be deemed a waiver of
such hearing date. However, a party may present such witness or witnesses within his remaining allotted
hearing dates.
SEC. 3. Written offer of evidence. - Evidence not otherwise admitted by the parties or ruled upon by the
court during the pre-trial conference shall be offered in writing not later than five (5) days from the
completion of the presentation of evidence of the party concerned. The opposing party shall have five (5)
days from receipt of the offer to file his comments or objections. The court shall make its ruling on the
offer within five (5) days from the expiration of the period to file comments or objections.
SEC. 4. Memoranda. - Immediately after ruling on the last offer of evidence, the court shall order the
parties to simultaneously file, within thirty (30) days from receipt of the order, their respective
memoranda. The memoranda shall contain the following:
(1) A “Statement of the Case,” which is a clear and concise statement of the nature of the action and
a summary of the proceedings;
(2) A “Statement of the Facts,” which is a clear and concise statement in narrative form of the
established facts, with reference to the testimonial, documentary or other evidence in support
thereof;
(3) A “Statement of the Issues,” which is a clear and concise statement of the issues presented to the
court for resolution;
(4) The “Arguments,” which is a clear and concise presentation of the argument in support of each
issue; and
(5) The “Relief,” which is a specification of the order or judgment which the party seeks to obtain.
SEC. 5. Decision after trial. - The court shall render a decision not later than (90) days from the lapse of the
period to file the memoranda, with or without said pleading having been filed.
RULE 6
ELECTION CONTESTS
SECTION 1. Cases covered. - The provisions of this rule shall apply to election contests in stock and non-
stock corporations.
SEC. 2. Definition. - An election contest refers to any controversy or dispute involving title or claim to any
elective office in a stock or non-stock corporation, the validation of proxies, the manner and validity of
elections, and the qualifications of candidates, including the proclamation of winners, to the office of
director, trustee or other officer directly elected by the stockholders in a close corporation or by members
of a non-stock corporation where the articles of incorporation or by-laws so provide.
SEC. 3. Complaint. - In addition to the requirements in section 4, Rule 2 of these Rules, the complaint in an
election contest must state the following:
(1) The case was filed within fifteen (15) days from the date of the election if the by-laws of the
corporation do not provide for a procedure for resolution of the controversy, or within fifteen (15)
days from the resolution of the controversy by the corporation as provided in its by-laws; and
(2) The plaintiff has exhausted all intra-corporate remedies in election cases as provided for in the
by-laws of the corporation.
SEC. 4. Duty of the court upon the filing of the complaint. - Within two (2) days from the filing of the
complaint, the court, upon a consideration of the allegations thereof, may dismiss the complaint outright if
it is not sufficient in form and substance, or, if it is sufficient, order the issuance of summons which shall
be served, together with a copy of the complaint, on the defendant within two (2) days from its issuance.
SEC. 5. Answer. - The defendant shall file his answer to the complaint, serving a copy thereof on the
plaintiff, within ten (10) days from service of summons and the complaint. The answer shall contain the
matters required in section 6, Rule 2 of these Rules.
SEC. 6. Affidavits, documentary and other evidence. - The parties shall attach to the complaint and answer
the affidavits of witnesses, documentary and other evidence in support thereof, if any.
SEC. 7. Effect of failure to answer. - If the defendant fails to file an answer within the period above
provided, the court shall, within ten (10) days from the lapse of said period, motu proprio or on motion,
render judgment as may be warranted by the allegations of the complaint, as well as the affidavits,
documentary and other evidence on record. In no case shall the court award a relief beyond or different
from that prayed for.
SEC. 8. Trial. - If the court deems it necessary to hold a hearing to clarify specific factual matters before
rendering judgment, it shall, within ten (10) days from the filing of the last pleading, issue an order setting
the case for hearing for the purpose. The order shall, in clear and concise terms, specify the factual
matters the court desires to be clarified and the witnesses, whose affidavits have been submitted, who will
give the necessary clarification.
The hearing shall be set on a date not later than ten (10) days from the date of the order, and shall be
completed not later than fifteen (15) days from the date of the first hearing. The affidavit of a witness who
fails to appear for clarificatory questions of the court shall be ordered stricken off the record.
SEC. 9. Decision. - The Court shall render a decision within fifteen (15) days from receipt of the last
pleading, or from the date of the last hearing as the case may be. The decision shall be based on the
pleadings, affidavits, documentary and other evidence attached thereto and the answers of the witnesses
to the clarificatory questions of the court given during the hearings.
RULE 7
SEC. 2. Complaint. – In addition to the requirements in section 4, Rule 2 of these Rules, the complaint must
state the following:
(1) The case is for the enforcement of plaintiff’s right of inspection of corporate orders or records
and/or to be furnished with financial statements under sections 74 and 75 of the Corporation Code of
the Philippines;
(2) A demand for inspection and copying of books and records and/or to be furnished with financial
statements made by the plaintiff upon defendant;
(3) The refusal of defendant to grant the demands of the plaintiff and the reasons given for such
refusal, if any; and
(4) The reasons why the refusal of defendant to grant the demands of the plaintiff is unjustified and
illegal, stating the law and jurisprudence in support thereof.
SEC. 3. Duty of the court upon the filing of the complaint. - Within two (2) days from the filing of the
complaint, the court, upon a consideration of the allegations thereof, may dismiss the complaint outright if
it is not sufficient in form and substance, or, if it is sufficient, order the issuance of summons which shall
be served, together with a copy of the complaint, on the defendant within two (2) days from its issuance.
SEC. 4. Answer. – The defendant shall file his answer to the complaint, serving a copy thereof on the
plaintiff, within ten (10) days from service of summons and the complaint. In addition to the requirements
in section 6, Rule 2 of these Rules, the answer must state the following:
(1) The grounds for the refusal of defendant to grant the demands of the plaintiff, stating the law and
jurisprudence in support thereof;
(2) The conditions or limitations on the exercise of the right to inspect which should be imposed by
the court; and
(3) The cost of inspection, including manpower and photocopying expenses, if the right to inspect is
granted.
SEC. 5. Affidavits, documentary and other evidence. – The parties shall attach to the complaint and answer
the affidavits of witnesses, documentary and other evidence in support thereof, if any.
SEC. 6. Effect of failure to answer. – If the defendant fails to file an answer within the period above
provided, the court, within ten (10) days from the lapse of the said period, motu proprio or upon motion,
shall render judgment as warranted by the allegations of the complaint, as well as the affidavits,
documentary and other evidence on record. In no case shall the court award a relief beyond or different
from that prayed for.
SEC. 7. Decision. – The court shall render a decision based on the pleadings, affidavits and documentary
and other evidence attached thereto within fifteen (15) days from receipt of the last pleading. A decision
ordering defendants to allow the inspection of books and records and/or to furnish copies thereof shall also
order the plaintiff to deposit the estimated cost of the manpower necessary to produce the books and
records and the cost of copying, and state, in clear and categorical terms, the limitations and conditions to
the exercise of the right allowed or enforced.
RULE 8
DERIVATIVE SUITS
SECTION 1. Derivative action. - A stockholder or member may bring an action in the name of a corporation
or association, as the case may be, provided, that:
(1) He was a stockholder or member at the time the acts or transactions subject of the action
occurred and at the time the action was filed;
(2) He exerted all reasonable efforts, and alleges the same with particularity in the complaint, to
exhaust all remedies available under the articles of incorporation, by-laws, laws or rules governing
the corporation or partnership to obtain the relief he desires;
(3) No appraisal rights are available for the act or acts complained of; and
In case of nuisance or harassment suit, the court shall forthwith dismiss the case.
SEC. 2. Discontinuance. - A derivative action shall not be discontinued, compromised or settled without
approval of the court. During the pendency of the action, any sale of shares of the complaining stockholder
shall be approved by the court. If the court determines that the interest of the stockholders or members
will be substantially affected by the discontinuance, compromise or settlement, the court may direct that
notice, by publication or otherwise, be given to the stockholders or members whose interests it determines
will be so affected.
RULE 9
MANAGEMENT COMMITTEE
SECTION 1. Creation of a management committee. - As an incident to any of the cases filed under these
Rules or the Interim Rules on Corporate Rehabilitation, a party may apply for the appointment of a
management committee for the corporation, partnership or association, when there is imminent danger of:
(2) Paralyzation of its business operations which may be prejudicial to the interest of the minority
stockholders, parties-litigants or the general public.
SEC. 2. Receiver. - In the event the court finds the application to be sufficient in form and substance, the
court shall issue an order: (a) appointing a receiver of known probity, integrity and competence and
without any conflict of interest as hereunder defined to immediately take over the corporation, partnership
or association, specifying such powers as it may deem appropriate under the circumstances, including any
of the powers specified in section 5 of this Rule; (b) fixing the bond of the receiver; (c) directing the
receiver to make a report as to the affairs of the entity under receivership and on other relevant matters
within sixty (60) days from the time he assumes office; (d) prohibiting the incumbent management of the
company, partnership or association from selling, encumbering, transferring or disposing in any manner
any of its properties except in the ordinary course of business; and (e) directing the payment in full of all
administrative expenses incurred after the issuance of the order.
SEC. 3. Receiver and management committee as officers of the court. - The receiver and the members of
the management committee in the exercise of their powers and performance of their duties are considered
officers of the court and shall be under its control and supervision.
SEC. 4. Composition of the management committee. - After due notice and hearing, the court may appoint
a management committee composed of three (3) members chosen by the court. In the appointment of the
members of the management committee, the following qualifications shall be taken into consideration by
the court:
(1) Expertise and acumen to manage and operate a business similar in size and complexity as that of
the corporation, association or partnership sought to be put under management committee;
(5) Willingness and ability to file a bond in such amount as may be determined by the court.
Without limiting the generality of the following, a member of a management committee may be deemed to
have a conflict of interest if:
(1) He is engaged in a line of business which competes with the corporation, association or
partnership sought to be placed under management;
(3) He is related by consanguinity or affinity within the fourth civil degree to any director, officer or
stockholder charged with mismanagement, dissipation or wastage of the properties of the entity
under management.
SEC. 5. Powers and functions of the management committee. - Upon assumption to office of the
management committee, the receiver shall immediately render a report and turn over the management
and control of the entity under his receivership to the management committee.
The management committee shall have the power to take custody of and control all assets and properties
owned or possessed by the entity under management. It shall take the place of the management and
board of directors of the entity under management, assume their rights and responsibilities, and preserve
the entity’s assets and properties in its possession.
Without limiting the generality of the foregoing, the management committee shall exercise the following
powers and functions:
(1) To investigate the acts, conduct, properties, liabilities, and financial condition of the corporation,
association or partnership under management;
(2) To examine under oath the directors and officers of the entity and any other witnesses that it may
deem appropriate;
(3) To report to the court any fact ascertained by it pertaining to the causes of the problems, fraud,
misconduct, mismanagement and irregularities committed by the stockholders, directors,
management or any other person;
(4) To employ such person or persons such as lawyers, accountants, auditors, appraisers and staff as
are necessary in performing its functions and duties as management committee;
(5) To report to the court any material adverse change in the business of the corporation, association
or partnership under management;
(6) To evaluate the existing assets and liabilities, earnings and operations of the corporation,
association or partnership under management;
(7) To determine and recommend to the court the best way to salvage and protect the interest of the
creditors, stockholders and the general public, including the rehabilitation of the corporation,
association or partnership under management;
(8) To prohibit and report to the court any encumbrance, transfer, or disposition of the debtor’s
property outside of the ordinary course of business or what is allowed by the court;
(9) To prohibit and report to the court any payments made outside of the ordinary course of business;
(10) To have unlimited access to the employees, premises, books, records and financial documents
during business hours;
(11) To inspect, copy, photocopy or photograph any document, paper, book, account or letter,
whether in the possession of the corporation, association or partnership or other persons;
(12) To gain entry into any property for the purposes of inspecting, measuring, surveying, or
photographing it or any designated relevant object or operation thereon;
(13) To bring to the attention of the court any material change affecting the entity’s ability to meet
its obligations;
(14) To revoke resolutions passed by the Executive Committee or Board of Directors/Trustees or any
governing body of the entity under management and pass resolution in substitution of the same to
enable it to more effectively exercise its powers and functions;
(15) To modify, nullify or revoke transactions coming to its knowledge which it deems detrimental or
prejudicial to the interest of the entity under management;
(16) To recommend the termination of the proceedings and the dissolution of the entity if it
determines that the continuance in business of such entity is no longer feasible or profitable or no
longer works to the best interest of the stockholders, parties-litigants, creditors or the general public;
(17) To apply to the court for any order or directive that it may deem necessary or desirable to aid it
in the exercise of its powers and performance of its duties and functions; and
(18) To exercise such other powers as may, from time to time, be conferred upon it by the court.
SEC. 6. Action by management committee. - A majority of its members shall be necessary for the
management committee to act or make a decision. The chairman of the management committee shall be
chosen by the members from among themselves. The committee may delegate its management functions
as may be necessary to operate the business of the entity under management and preserve its assets.
SEC. 7. Transactions deemed to be in bad faith. - All transactions made by the previous management and
directors shall be deemed fraudulent and are rescissible if made within thirty (30) days prior to the
appointment of the receiver or management committee or during their incumbency as receiver or
management committee.
SEC. 8. Fees and expenses. - The receiver or the management committee and the persons hired by it shall
be entitled to reasonable professional fees and reimbursement of expenses which shall be considered as
administrative expenses.
SEC. 9. Immunity from suit. - The receiver and members of the management committee and the persons
employed by them shall not be subject to any action, claim or demand in connection with any act done or
omitted by them in good faith in the exercise of their functions and powers. All official acts and
transactions of the receiver or management committee duly approved or ratified by the court shall render
them immune from any suit in connection with such act or transaction.
SEC. 10. Reports. - Within a period of sixty (60) days from the appointment of its members, the
management committee shall make a report to the court on the state of the corporation, partnership or
association under management. Thereafter, the management committee shall report every three (3)
months to the court or as often as the court may require on the general condition of the entity under
management.
SEC. 11. Removal and replacement of a member of the management committee. - A member of the
management committee is deemed removed upon appointment by the court of his replacement chosen in
accordance with section 4 of this Rule.
SEC. 12. Discharge of the management committee. - The management committee shall be discharged and
dissolved under the following circumstances:
(1) Whenever the court, on motion or motu proprio, has determined that the necessity for the
management committee no longer exists;
Upon its discharge and dissolution, the management committee shall submit its final report and render an
accounting of its management within such reasonable time as the court may allow.
RULE 10
PROVISIONAL REMEDIES
SECTION 1. Provisional remedies. - A party may apply for any of the provisional remedies provided in the
Rules of Court as may be available for the purposes. However, no temporary restraining order or status
quo order shall be issued save in exceptional cases and only after hearing the parties and the posting of a
bond.
RULE 11
SANCTIONS
SECTION 1. Sanctions on the parties or counsel. - In any of the following cases, the court may, upon motion
or motu proprio, impose appropriate sanctions:
(1) In case the court determines in the course of the proceeding that the action is a nuisance or
harassment suit;
(2) In case a pleading, motion or other paper is filed in violation of section 7, Rule 1 of these Rules;
(3) In case a party omits or violates the certification required under section 4, Rule 2 of these Rules;
The sanctions may include an order to pay the other party or parties the amount of the reasonable
expenses incurred because of the act complained of, including reasonable attorney’s fees.
SEC. 2. Disciplinary sanctions on the judge. - The presiding judge may, upon a verified complaint filed with
the Office of the Court Administrator, be subject to disciplinary action under any of the following cases:
(1) Failure to observe the special summary procedures prescribed in these Rules; or
(2) Failure to issue a pre-trial order in the form prescribed in these Rules.
RULE 12
FINAL PROVISIONS
SECTION 1. Severability. - If any provision or section of these Rules is held invalid, the remaining provisions
or sections shall not be affected thereby.
SEC. 2. Effectivity. - These Rules shall take effect on 1 April 2001 following its publication in two (2)
newspapers of general circulation in the Philippines.
Annex “A”
NAME(s) OF PLAINTIFF/S,
Plaintiff/s
- versus - Case No. __________
NAME(s) OF DEFENDANT/S,
Defendant/s.
x———————————x
PRE-TRIAL ORDER
A. Admitted
B. Disputed
A. Factual
B. Legal
V. Applicable Laws
All evidence to be adduced and presented by both parties shall be limited to those identified below. All
documentary evidence have already been pre-marked and copies thereof, after comparison with the
original, have been given the other party or such party has been given an opportunity to examine the
same in cases when generating copies proves impractical. The testimonies of the witnesses have all been
reduced to affidavit form in accordance with these Rules and copies thereof given to the other party.
No other evidence shall be allowed other than those indicated below except in accordance with section 8,
Rule 2 of the Interim Rules of Procedure for Intra-Corporate Controversies.
1. Documentary Evidence
a) Document No. 1 (Exh. ___ )
1. Name/Type
2. Pre-Marking Number
3. Summary
4. Purpose
3. Other Evidence
3. Other Evidence
(These hearing dates, which should be scheduled not later than thirty (30) days from the completion at the
pre-trial, shall be strictly followed and all postponements by either party shall be deducted from such
party’s allotted time to present evidence.)
FERNAN, C.J.:
Assailed in this petition for certiorari with prayer for preliminary mandatory injunction is the order dated
May 15, 1986 issued by respondent Regional Trial Court, Branch 141 (Makati) denying petitioner's motion
to discharge the writ of execution despite an earlier order suspending proceedings in said court.
On December 11, 1984, private respondent G.A. Yupangco and Co. Inc. (G.A. Yupangco) filed an action
with respondent trial court for collection of a sum of money with prayer for damages and preliminary
attachment against Alemar's Bookstore, a business entity owned and managed by petitioner Alemar's
Sibal & Sons, Inc. (Alemar's). 1
On August 30, 1985, respondent court rendered its decision, to wit:
Wherefore, finding plaintiffs claim to be substantiated, the Court hereby renders judgment by default,
ordering defendant, Alemar's Book Store, to pay G.A. Yupangco & Co., Inc., the following:
1) P 39,502.57 representing defendant's unpaid obligation, plus 2% per month interest beginning
December 11, 1984, until fully paid;
2) the stipulated 25% of the recoverable amount as attorney's fees; and
3) cost of suit. 2
Subsequently, on September 23, 1985, Ledesma, Saludo and Associates, as intervenor-movant, filed an
omnibus motion informing the respondent trial court that the petitioner Alemar's has been placed under
rehabilitation receivership by the Securities and Exchange Commission and that movant has been
appointed as its receiver. It prayed that it be allowed to intervene, that the decision of August 30, 1985 be
set aside and that further proceedings in this case be suspended. 3 Attached to its motion is the order of
the Securities and Exchange Commission dated August 1, 1984 which states in part:
Therefore, pursuant to Presidential Decree No. 902-A, as amended, the Securities and Exchange
Commission hereby appoints as Rehabilitation Receiver, Ledesma, Saludo & Associates ... in order to meet
the imminent danger of dissipation, loss, wastage or destruction of the assets and other properties and
deterioration of vital financial ratios ... of said corporation and to ensure the orderly payment of claims
against the said corporation.
All actions for claims against the corporation pending before any court, tribunal, board or body are
suspended accordingly.
No disbursements or expenditures of funds shall be made other than what is usual in the ordinary course
of the business operations of the corporation. All withdrawals against the accounts of the corporation shag
be signed or authorized by any partner designated by the Rehabilitation Receiver. Resolutions of the Board
of Directors of Alemar's Sibal & Sons, Inc. pertaining to check signatories shall be made subject to the
foregoing conditions.4
In its opposition, G.A. Yupangco maintained that it received notice of the receivership only on January 10,
1985 or after one month after the collection suit. It further averred that the motion to intervene by the
receiver was not seasonably made. Accordingly, on October 29, 1985, respondent court issued an order,
the dispositive portion of which reads:
Wherefore, on the ground raised by plaintiff that movant now is barred from its present action, the court
hereby denies the motion for intervention, and the motion to set the aforesaid judgment by default;
however, movant's motion to suspend the proceedings in this Court is granted as plaintiff may present said
judgment by default to the receiver as the basis for the settlement of its claim defendant. 5
In a motion dated January 7, 1986, G.A. Yupangco urged the issuance of a writ of execution to implement
the August 30, 1985 default judgment which had become final and executory, there being no motion for
reconsideration or appeal. The corresponding writ was issued on January 15, 1986. 6
Petitioner Alemar's moved for the discharge of the writ on the ground that its issuance was improper since
the proceedings in Civil Case No. 9252 have been suspended pursuant to the October 29, 1985 order.
Respondent court, however, held the resolution of the motion in abeyance.
On January 31, 1986, the branch manager of the Bank of the Philippine Islands, after having previously
stopped payment of the cashier's check issued to satisfy the August 30, 1985 money judgment, allowed
the encashment of said check in the amount of P62,240.00. And in compliance with a subsequent order of
the respondent court, BPI also compensated G.A. Yupangco for the delay in payment in an amount
equivalent to the interest of P62,240.00 from January 17, 1986 to January 31, 1986 or a total of 14 days. 7
Contending that the payment of P 62,240.00 to G.A. Yupangco through the BPI has defeated the purpose
for which petitioner has been placed under receivership, petitioner filed a supplement to its motion to
discharge the writ of execution praying that the aforesaid payment be returned to petitioner or to its
account with the BPI.
On May 15, 1986, respondent court issued the questioned order denying petitioner's motions to discharge
the writ of execution. It reasoned:
... To discharge the writ would only cause undue delay in plaintiffs effort at satisfying its claim under the
judgment by default that had become final and executory. The fact that defendant is under receivership
presupposes that it has been declared insolvent, and the receiver is supposed to have brought into its
custody all available assets in defendant's name. The continuing effectivity of the writ of execution will not
prejudice defendant unless some assets of defendant have been improperly left out beyond reach of the
receiver and/or creditors. On the other hand, to discharge the writ will leave plaintiff with no recourse to
enforce the judgment in its favor.... 8
Hence this petition which raises the issue of whether or not respondent court can validly proceed with the
execution of a final decision for the payment of a sum of money despite the fact that the judgment debtor
has been placed under receivership.
It is the general rule that once a decision becomes final and executory, its enforcement becomes the
ministerial duty of the court. Equally settled is that the rule admits of certain exceptions, one of which is
where it becomes imperative in the higher interest of justice to direct the deferment of execution. In the
instant case, the stay of execution is warranted by the fact that petitioner Alemar's has been placed under
"rehabilitation receivership".
What are the legal consequences of such a receivership? For one thing, the SEC has expressly decreed
that "all actions for claims against the corporation pending before any court ... are suspended
accordingly". Respondent court apparently demurred to the SEC action when it granted petitioner's motion
to suspend its own proceedings. It even went as far as to suggest to the creditor to present the "judgment
by default to the receiver as the basis for settlement of its claim against defendant". So when respondent
court ordered the execution of its August 30, 1985 judgment, it assumed a rather myopic view of its own
suspension order. Verily, the proceedings sought to be suspended by the order of October 29, 1985
necessarily includes the issuance of the writ of execution.
The cases of Central Bank vs. Morfe, 9 and Lipana vs. Development Bank of Rizal, 10 are most
enlightening on why an execution in this particular instance could be legally held in abeyance despite a
final judgment. In both cases, there was an attempt by a creditor to enforce payment against a bank
(which was either declared insolvent or placed under receivership) by obtaining a favorable judgment in
the regular court and insisting upon its execution on the ground that the courts cannot validly obstruct the
enforcement of judgments that have become final and executory.
The rationale behind the Court's imprimatur of the stay of execution in the aforementioned cases is
squarely applicable to the instant petition even if Alemar's is obviously not a banking institution.
It must be stressed that the SEC had earlier ordered the suspension of all actions for claims against
Alemar's in order that all the assets of said petitioner could be inventoried and kept intact for the purpose
of ascertaining an equitable scheme of distribution among its creditors.
During rehabilitation receivership, the assets are held in trust for the equal benefit of all creditors to
preclude one from obtaining an advantage or preference over another by the expediency of an
attachment, execution or otherwise. For what would prevent an alert creditor, upon learning of the
receivership, from rushing posthaste to the courts to secure judgments for the satisfaction of its claims to
the prejudice of the less alert creditors.
As between creditors, the key phrase is "equality is equity." 11 When a corporation threatened by
bankruptcy is taken over by a receiver, all the creditors should stand on an equal footing. Not anyone of
them should be given any preference by paying one or some of them ahead of the others. This is precisely
the reason for the suspension of all pending claims against the corporation under receivership. Instead of
creditors vexing the courts with suits against the distressed firm, they are directed to file their claims with
the receiver who is a duly appointed officer of the SEC.
When respondent court ruled in favor of G.A. Yupangco in the collection case, it only determined the exact
extent of petitioner's indebtedness and in no way gave G.A. Yupangco a priority over the other creditors.
However, it clearly exceeded its jurisdiction when it allowed G.A. Yupangco to encash the check of P
62,240.00 pursuant to the writ of execution. In so doing, respondent court gave G.A. Yupangco an undue
preference by reducing the assets of the petitioner corporation for its sole benefit to the grave damage
and prejudice of the other creditors, and thus frustrating the very purpose for which petitioner has been
placed under receivership.
WHEREFORE, the writ is granted. The questioned order of respondent court dated May 15, 1986 denying
petitioner's motion to discharge the writ of execution in Civil Case No. 9252 is hereby reversed and set
aside. All proceedings in connection with the aforesaid case are declared suspended. Private respondent
G.A. Yupangco is ordered to return to petitioner Alemar's the amount it had actually received through the
Bank of the Philippine Islands. This decision is immediately executory. No costs.
SO ORDERED.
Gutierrez, Jr. and Bidin, JJ., concur.
Feliciano and Cortes, JJ., is on leave.
Footnotes
1 Civil Case No. 9252.
2 Annex E, Rollo, p. 23.
3 Annex F, Rollo, pp. 24-27.
4 Annex H, Rollo, pp. 36-37.
5 Annex I, Rollo, p. 39.
6 Annex L, Rollo, pp. 5, 43
7 Annex O, Rollo, p. 43.
8 Rollo, p. 17.
9 G.R. No. L-34827, March 12, 1975,63 SCRA 114.
10 G.R No. 73884, September 24,1987, 154 SCRA 257.
11 Central Bank vs. Morfe, supra, citing Ramisch vs. Fulton, 41 Ohio App. 443, 180 N.E. 735.
FIRST DIVISION
DECISION
AZCUNA, J.:
This is a Petition for Review on Certiorari under Rule 45, in relation to Section 2(c) of Rule 41 of the Rules
of Court, assailing the Resolution[1] dated April 6, 1998, issued by the Regional Trial Court (RTC), Branch
161, Pasig City, in SCA No. 1259.
Petitioner Tiong Rosario is the proprietor of TR Mercantile (TRM), a single proprietorship engaged in the
business of selling and trading paper products and supplies of various kinds; while respondent Alfonso Co
is the Chairman and President of Modern Paper Products, Inc. (MPPI). In the course of its business, MPPI
purchased from TRM a variety of paper products on credit.[2] As payment for his purchases, respondent
issued the following China Banking Corporation checks in favor of TRM:
In a letter[7] dated June 27, 1995, TRM demanded that respondent make good the checks and pay MPPI's
outstanding obligations within five banking days from receipt of the letter, otherwise, it would be
constrained to file both criminal and civil actions to protect its interest. Respondent, however, failed to
heed the demand.
Thus, on July 21, 1995, petitioner filed a complaint against respondent for violation of Batas Pambansa
(B.P.) Blg. 22 with the Office of the City Prosecutor, Pasig City. On November 6, 1995, finding probable
cause against respondent, the investigating prosecutor filed three separate informations against him for
violation of B.P. Blg. 22 before the Metropolitan Trial Court (MeTC), Pasig City, later docketed as Criminal
Case Nos. 18521, 18522 and 18523.[8]
Prior thereto, or on May 12, 1995, MPPI and its principal stockholders, the Spouses Alfredo and Elizabeth
Co filed before the Securities and Exchange Commission (SEC), under P.D. No. 902-A, a Petition for
Suspension of Payments for Rehabilitation Purposes with prayer for the creation of a management
committee and for a temporary restraining order and/or preliminary injunction, docketed as SEC Case No.
05-95-5054.
On October 3, 1995, the SEC issued an Omnibus Order creating a Management Committee and
consequently suspending all actions for claims against MPPI pending before any court, tribunal, branch or
body.[9]
Meanwhile, in the criminal cases pending before the MeTC, respondent was arraigned, and the cases were
set for trial.[10]
Prior to initial trial, respondent filed a Motion to Suspend Proceedings.[11] In support of his motion,
movant relied on the following grounds:
I.
A corporation under suspension of payments and corporate rehabilitation pursuant to P.D. No. 902-A,
as amended, may not be validly charged for violation of B.P. Blg. 22, when demand on said
corporation for dishonored checks was made subsequent to the filing of said petition for suspension
of payments.
II.
Pursuant to Sec. 6 (c) of P.D. 902-A, as amended, and in view of the pendency of SEC Case No. 05-95-
5054, as well as of the issuance of by the SEC of an order creating a management committee to
oversee the operations of the corporation and suspending all actions for claims against the
corporation, the suspension of the proceedings in the instant suit is warranted.
III.
Pendency of SEC Case No. 05-95-5054 presents a prejudicial question within the scope of Sections 5
and 6, Rule 111, New Rules of Criminal Procedure, and therefore warrants the suspension of the
instant proceedings.[12]
Respondent prayed that the proceedings in the MeTC be suspended during the pendency of the SEC
proceedings for rehabilitation and suspension of payments of MPPI.[13] Petitioner opposed said motion.
[14]
Corollarilly, in an Order dated March 19, 1996, the SEC granted respondent's Motion to Compel Compliance
and For Issuance of Orders of Suspension in the Criminal Cases. In said order, the SEC directed the
creditors of MPPI, including TRM, to desist from filing and/or prosecuting cases for violations of B.P. Blg. 22,
Estafa or other criminal cases against respondent and/or the officers of MPPI pursuant to its order dated
October 3, 1995 and Sec. 6 (c) of P.D. No. 902-A.[15]
On September 3, 1996, the MeTC issued an Order[16] denying respondent's motion to suspend
proceedings. It held that the issue raised in SEC Case No. 05-95-5054 is not similar or intimately related to
the issue involved in the criminal cases before it and therefore the elements of a prejudicial question do
not exist. Respondent filed a Motion for Reconsideration[17] but it was denied in the Order[18] dated
October 30, 1996.
Aggrieved, respondent filed on December 19, 1996 a petition for certiorari[19] before the RTC questioning
the above orders, later docketed as SCA No. 1259.
In his petition, respondent admitted that he issued the subject checks as a corporate officer of MPPI as
payment for purchases made from TRM. He further claimed that he did not make good the checks upon
demand because MPPI had already filed a petition for suspension of payments before the SEC which
ordered that all actions for claims against MPPI be suspended.
On February 26, 1997, the RTC enjoined the MeTC from further proceeding with Criminal Case Nos. 18521-
23 during the pendency of the action before it.[20] On April 17, 1997, petitioner filed a Motion for Partial
Reconsideration.[21] However, upon agreement of the parties, resolution on the motion was held in
abeyance awaiting the RTC resolution in the main case, the issues raised being identical.[22]
On April 6, 1998, the RTC issued the assailed Resolution[23] the decretal portion of which reads as follows:
IN VIEW OF THE FOREGOING, Respondent Court is directed to suspend the proceedings in Criminal
Cases Nos. 18521-3 during the pendency of the petition in SEC Case No. 05-95-5054.[24]
In granting the petition, the RTC ratiocinated that from the time MPPI placed itself under the operation of
P.D. No. 902-A on May 12, 1995, it was temporarily legally restricted to pay the holder of the subject
checks or make arrangements for payment in full by the drawee. To hold otherwise would lead to the
inevitable conclusion that respondent, so as to avoid being criminally sued for the returned checks, would
personally make good the same.[25]
THE REGIONAL TRIAL COURT ERRED IN ORDERING THE SUSPENSION OF THE CRIMINAL PROCEEDINGS
AGAINST RESPONDENT CO, IN THAT:
A. THERE IS NO LAW WHICH AUTHORIZES THE SUSPENSION OF CRIMINAL PROCEEDINGS
AGAINST A CORPORATE OFFICER FOR VIOLATION OF B.P. 22 ON ACCOUNT OF THE PENDENCY
OF A PETITION FOR SUSPENSION OF PAYMENTS FILED BY HIS CORPORATION.
B. CRIMINAL PROSECUTION CANNOT BE ENJOINED.
C. IN SEEKING SUSPENSION OF THE CRIMINAL PROCEEDINGS AGAINST HIM IN VIEW ALONE OF
THE PENDENCY OF HIS CORPORATION'S PETITION FOR SUSPENSION OF PAYMENTS,
RESPONDENT CO IN EFFECT PLEADS FINANCIAL HARDSHIPS AS A DEFENSE TO A B.P. 22
PROSECUTION, WHICH, HOWEVER, IS NOT RECOGNIZED.
II
IT WAS ERROR FOR THE REGIONAL TRIAL COURT, AS A CIVIL COURT IN A CIVIL PROCEEDING, TO TAKE
COGNIZANCE OF MATTERS OF DEFENSE WHICH COULD BE RAISED ONLY AT THE TRIAL IN THE
CRIMINAL CASE BEFORE THE METROPOLITAN TRIAL COURT. [26]
The issue is:
WHETHER A CRIMINAL CASE AGAINST A CORPORATE OFFICER FOR VIOLATION OF BP 22 COULD BE
SUSPENDED ON ACCOUNT OF THE PENDENCY OF A PETITION FOR SUSPENSION OF PAYMENTS FILED
BY THAT OFFICER'S CORPORATION WITH THE SECURITIES AND EXCHANGE COMMISSION.[27]
Petitioner argues that nowhere in the Insolvency Law or P.D. No. 902-A is it provided that criminal
prosecution of a corporate officer for violation of B.P. Blg. 22 shall be suspended on account of the
pendency of a petition for suspension of payments. Under the Insolvency Law, the filing of a petition for
suspension of payments will only result in the suspension of any execution pending against the debtor,
and only upon request by the debtor to this effect, and that, generally, from the time of filing of the
petition, no creditor may sue to collect his claim against the debtor.[28]
Petitioner adds that under P.D. No. 902-A, the appointment of a management committee, rehabilitation
receiver, board or body in a petition for suspension of payments would only have the effect of suspending
"all actions for claims" against the corporation, partnership, or association under management or
receivership. Prosecution for violation of B.P. Blg. 22 is not an "action for claim" against a corporation but a
criminal proceeding brought by the State against a violator of the law.[29]
To buttress her claim, petitioner contends that criminal prosecution of the respondent is specifically
mandated by law considering that B.P. Blg. 22 states that where a check is drawn by a corporation,
company or entity, the person or persons who actually signed the check in behalf of such drawer shall be
liable.[30] Further, P.D. No. 902-A was never intended to suspend criminal proceedings for violation of B.P.
Blg. 22.
Petitioner further argues that the general rule is that injunction or prohibition does not lie to restrain a
criminal prosecution subject to well-defined exceptions which do not include the instant case.[31]
Petitioner maintains that a petition for suspension of payments is founded on the inability to pay a debt
when it falls due which cannot stand as a ground to suspend criminal prosecution, especially where the
individual defendant is not the party seeking suspension of payment but a corporation.[32]
Finally, petitioner contends that respondent's petition before the RTC presented an issue of whether his
prosecution in the MeTC should be enjoined due to the pendency of MPPI's petition for suspension of
payments in the SEC. However, the RTC, sitting in a civil court in a civil proceeding under Rule 65 of the
Rules of Court, went beyond this issue and took cognizance of, and passed upon, an issue which could only
be raised in the MeTC as a matter of defense.[33]
For his part, respondent posits that the filing and pendency of SEC Case No. 05-95-5054 prevented him
from making good the subject checks. He maintains that while he could have funded the checks when
demand was made by the petitioner, he could not legally do so. Had he made arrangements for the
payment of the checks notwithstanding the pendency of the SEC case, such act would have had the effect
of the corporation paying a creditor and giving it undue preference over the others, which is disallowed by
law.[34]
Stripped of the non-essentials, the issue before this Court is the propriety of the suspension of Criminal
Case Nos. 18521, 18522, and 18523 during the pendency of SEC Case No. 05-95-5054. Considering that
the rehabilitation proceedings result in the suspension of all claims against a corporation, the issue of
whether or not the suspension includes the criminal cases against the respondent must be resolved.
The resolution of the above issues hinges on the determination of the following: (1) the meaning of
"actions for claims" against the distressed corporation; and (2) the effectivity of the suspension.
xxx
c) To appoint one or more receivers of the property, real or personal, which is the subject of the
action pending before the Commission in accordance with the pertinent provisions of the Rules of
Court in such other cases whenever necessary in order to preserve the rights of the parties-litigants
and/or protect the interest of the investing public and creditors: ... Provided, finally, That upon
appointment of a management committee, the rehabilitation receiver, board or body, pursuant to
this Decree, all actions for claims against corporations, partnerships, or associations under
management or receivership pending before any court, tribunal, board or body shall be suspended
accordingly.(italics supplied)
As early as Finasia Investment and Finance Corp. v. Court of Appeals,[35] this Court clarified that the word
"claim" used in Sec. 6 (c) of P.D. No. 902-A, as amended, refers to debts or demands of a pecuniary nature
and the assertion of a right to have money paid. It is used in special proceedings like those before AN
administrative court on insolvency.[36] In Arranza v. B.F. Homes, Inc.,[37] "claim" was defined as an action
involving monetary considerations. Clearly, the suspension contemplated under Sec. 6 (c) of P.D. No. 902-
A refers only to claims involving actions which are pecuniary in nature.
The purpose of suspending the proceedings under P.D. No. 902-A is to prevent a creditor from obtaining an
advantage or preference over another and to protect and preserve the rights of party litigants as well as
the interest of the investing public or creditors.[38] It is intended to give enough breathing space for the
management committee or rehabilitation receiver to make the business viable again, without having to
divert attention and resources to litigations in various fora.[39] The suspension would enable the
management committee or rehabilitation receiver to effectively exercise its/his powers free from any
judicial or extrajudicial interference that might unduly hinder or prevent the "rescue" of the debtor
company. To allow such other action to continue would only add to the burden of the management
committee or rehabilitation receiver, whose time, effort and resources would be wasted in defending
claims against the corporation instead of being directed toward its restructuring and rehabilitation.[40]
Whereas, the gravamen of the offense punished by B.P. Blg. 22 is the act of making and issuing a
worthless check; that is, a check that is dishonored upon its presentation for payment.[41] It is designed
to prevent damage to trade, commerce, and banking caused by worthless checks. In Lozano v. Martinez,
[42] this Court declared that it is not the nonpayment of an obligation which the law punishes. The law is
not intended or designed to coerce a debtor to pay his debt. The thrust of the law is to prohibit, under
pain of penal sanctions, the making and circulation of worthless checks. Because of its deleterious effects
on the public interest, the practice is proscribed by the law. The law punishes the act not as an offense
against property, but an offense against public order. The prime purpose of the criminal action is to punish
the offender in order to deter him and others from committing the same or similar offense, to isolate him
from society, to reform and rehabilitate him or, in general, to maintain social order.[43] Hence, the
criminal prosecution is designed to promote the public welfare by punishing offenders and deterring
others.
Consequently, the filing of the case for violation of B.P. Blg. 22 is not a "claim" that can be enjoined within
the purview of P.D. No. 902-A. True, although conviction of the accused for the alleged crime could result
in the restitution, reparation or indemnification of the private offended party for the damage or injury he
sustained by reason of the felonious act of the accused, nevertheless, prosecution for violation of B.P. Blg.
22 is a criminal action.
A criminal action has a dual purpose, namely, the punishment of the offender and indemnity to the
offended party. The dominant and primordial objective of the criminal action is the punishment of the
offender. The civil action is merely incidental to and consequent to the conviction of the accused. The
reason for this is that criminal actions are primarily intended to vindicate an outrage against the
sovereignty of the state and to impose the appropriate penalty for the vindication of the disturbance to the
social order caused by the offender. On the other hand, the action between the private complainant and
the accused is intended solely to indemnify the former.[44]
As to when the suspension commences, as held in Rizal Commercial Banking Corporation v. Intermediate
Appellate Court[45]:
1. All claims against corporations, partnerships, or associations that are pending before any
court, tribunal, or board, without distinction as to whether or not a creditor is secured or
unsecured, shall be suspended effective upon the appointment of a management committee,
rehabilitation receiver, board, or bodyin accordance with the provisions of Presidential Decree
No. 902-A.[46] (italics supplied)
Otherwise stated, from the time a management committee, rehabilitation receiver, board or body is duly
appointed pursuant to P.D. No. 902-A, all actions for claims against a distressed corporation pending
before any court, tribunal, board or body shall be suspended accordingly. As rationalized in RCBC:
It is thus adequately clear that suspension of claims against a corporation under rehabilitation is
counted or figured up only upon the appointment of a management committee or a rehabilitation
receiver. The holding that suspension of actions for claims against a corporation under rehabilitation
takes effect as soon as the application or a petition for rehabilitation is filed with the SEC -- may, to
some, be more logical and wise but unfortunately, such is incongruent with the clear language of the
law. To insist on such ruling, no matter how practical and noble, would be to encroach upon
legislative prerogative to define the wisdom of the law -- plainly judicial legislation.[47]
From the sequence of events, it is apparent that Check Nos. B032101, B032138, and B032122 were
dishonored on May 11, 1995, April 6, 1995, and April 28, 1995, respectively. Respondent was formally
notified of the dishonor when petitioner, in a letter dated June 27, 1995, demanded that he make good the
checks and pay MPPI's outstanding obligations within five banking days from receipt. Yet, it was only on
October 3, 1995, or more than three months after, that the SEC issued the omnibus order creating the
Management Committee and ordering the suspension of all pending actions for claims against MPPI.
Respondent was, thus, not precluded from making good the checks during that three-month gap when he
received the letter and when the SEC issued the order.
It must be emphasized at this point that as far as the criminal aspect of the cases is concerned, the
provisions of Sec. 6 (c) of P.D. No. 902-A should not interfere with the prosecution of a case for violation of
B.P. Blg. 22, even if restitution, reparation or indemnification could be ordered, because an absurdity
would result, i.e., one who has engaged in criminal conduct could escape punishment by the mere filing of
a petition for rehabilitation by the corporation of which he is an officer. At any rate, should the court deem
it fit to award indemnification, such award would now fall under the category of a claim under Sec. 6 (c) of
P.D. No. 902-A, considering that it is already one for monetary or pecuniary consideration. Only to this
extent can the order of suspension be considered obligatory upon any court, tribunal, branch or body
where there are pending actions for claims against the distressed corporation.
The trend is towards vesting administrative bodies like the SEC with the power to adjudicate matters
coming under their particular specialization, to ensure a more knowledgeable solution of the problems
submitted to them. This would also relieve the regular courts of a substantial number of cases that would
otherwise swell their already clogged dockets. But as expedient as this policy may be, it should not deprive
the courts of justice of their power to decide criminal cases. Otherwise, the creeping take-over by the
administrative agencies of the judicial power vested in the courts would render the judiciary virtually
impotent in the discharge of the duties assigned to it by the Constitution.[48]
WHEREFORE, the Petition is hereby GRANTED. The Resolution of the Regional Trial Court, Branch 161,
Pasig City in SCA No. 1259, dated April 6, 1998, is REVERSED andSET ASIDE. The Metropolitan Trial
Court, Pasig City, is ordered to proceed with Criminal Case Nos. 18521, 18522 and 18523.
No costs.
SO ORDERED.
Puno, C.J., (Chairperson), Carpio, Corona, and Leonardo-De Castro, JJ., concur.
[6] Id. at 4.
[8] Id. at 6.
[10] Id. at 7.
[30] Id.
[36] Id. at 450, citing Sibal, PHIL. LEGAL ENCYCLOPEDIA, p. 132, 1986 ed.
[39] Rubberworld (Phils.), Inc. v. NLRC, 365 Phil. 273, 276-277 (1999).
[40] Sobrejuanite v. ASB Development Corporation, G.R. No. 165675, September 30, 2005, 471 SCRA 763, 771.
[41] Ricaforte v. Jurado, G.R. No. 154438, September 25, 2007, 532 SCRA 317, 330,citing Ngo v. People of the Philippines, G.R. No. 155815, July 14, 2004, 434 SCRA 522, 530-
531, citing Recuerdo v. People of the Philippines, 443 Phil. 770, 777 (2003).
[43] Quinto v. Andres, G.R. No. 155791, March 16, 2005, 453 SCRA 511, 519.
[44] Salazar v. People, G.R. No. 151931, September 23, 2003, 411 SCRA 598, 605.
[48] Saura v. Saura, Jr., G.R. No. 136159, September 1, 1999, 313 SCRA 465, 474,citing Macapalan v. Katalbas-Moscardon, G.R. No. 101711, October 1, 1993, 227 SCRA 49, 54-55.
DANTE O. TINGA
Associate Justice
* RUBEN T. REYES ** TERESITA J. LEONARDO-DE CASTRO
Associate Justice Associate Justice
ARTURO D. BRION
Associate Justice
ATTESTATION
I attest that the conclusions in the above Decision had been reached in consultation before the case was
assigned to the writer of the opinion of the Court's Division.
LEONARDO A. QUISUMBING
Associate Justice
Chairperson
CERTIFICATION
Pursuant to Section 13, Article VIII of the Constitution, and the Division Chairperson's Attestation, it is
hereby certified that the conclusions in the above Decision were reached in consultation before the case
was assigned to the writer of the opinion of the Court's Division.
REYNATO S. PUNO
Chief Justice
Footnotes
* Additional member in place of Associate Justice Presbitero J. Velasco, Jr. who is on official leave.
** Additional member in place of Associate Justice Conchita Carpio Morales who is on official leave.
1 Rollo, pp. 43-50. Penned by Associate Justice Juan Q. Enriquez, Jr., with Associate Justices Salvador J.
Valdez, Jr. and Vicente Q. Roxas concurring.
2 Id. at 52-53.
3 Id. at 412-415.
4 Id. at 54-60.
5 Id. at 588.
6 Id. at 348.
7 Records, folder 17, pp. 143-149.
8 Rollo, pp. 276-277.
9 Id. at 359.
10 Id. at 50.
11 Id. at 660.
12 Philippine Stock Exchange, Inc. v. The Honorable Court of Appeals, G.R. No. 125469, October 27, 1997,
281 SCRA 232, 246.
13 Id.
14 Securities and Exchange Commission v. Court of Appeals, G.R. Nos. 106425 & 106431-32, July 21,
1995, 246 SCRA 738, 740.
15 Rollo, pp. 358-359.
16 Records, folder 17, pp. 44-80.
ANGELINA SANDOVAL-GUTIERREZ
Associate Justice
RENATO C. CORONA ADOLFO S. AZCUNA
Associate Justice Associate Justice
TERESITA J. LEONARDO-DE CASTRO
Associate Justice
CERTIFICATION
Pursuant to Section 13, Article VIII of the Constitution, I certify that the conclusions in the above decision
had been reached in consultation before the case was assigned to the writer of the opinion of the Court’s
Division.
REYNATO S. PUNO
Chief Justice
Footnotes
1 Penned by Associate Justice Eloy R. Bello, Jr., concurred in by then Presiding Justice Cancio C. Garcia
and Associate Justice Mariano C. Del Castillo; rollo, pp. 104-112.
2 CED Case No. 20-2486, signed by "Order of the Commission" Emilio B. Aquino, Director, Compliance and
Enforcement Department; rollo, pp. 42-52.
3 Ibid., id. at 134-135.
4 Id. at 107.
5 Sec. 3.1. "Securities" are shares, participation or interests in a corporation or in a commercial enterprise
or profit-making venture and evidenced by a certificate, contract, instrument, whether written or
electronic in character. It includes:
xxxx
(b) Investment contracts, x x x x
6 Sec. 8.1. – Securities shall not be sold or offered for sale or distribution within the Philippines, without a
registration statement duly filed with and approved by the Commission. Prior to such sale, information on
the securities, in such form and with such substance as the Commission may prescribe, shall be made
available to each prospective purchaser.
7 Rollo, pp. 107-108.
8 Id. at 84.
9 See Note 1; the Court shall only discuss the petition of Power Homes Unlimited Corporation as the other
petitioner did not elevate its case before the Supreme Court.
10 See Note 3.
11 See Note 4.
12 Rollo, pp. 33-34.
13 Rule 3, 1 (G), Definition of Terms Used in the Rules and Regulations.
14 328 U.S. 293, 66 S.Ct. 1100, 163 A.L.R. 1043, 90 L.Ed. 1244 (1946), where investment contract was
defined as "a contract, transaction or scheme whereby a person invests money in a common enterprise
expecting profits to accrue solely from the efforts of the promoter or third parties."
15 Id. at 297.
16 Id. at 298.
17 Id.
18 From 1911 to 1931, forty-seven of forty-eight states enacted statutes regulating the sales of
securities. One advocate of the laws purportedly asserted that "securities salesmen were so dishonest
that they would attempt to sell ‘building lots in the blue sky.’" Thus, the statutes came to be known as the
"blue sky" laws. (Paul G. Mahoney, The Origins of the Blue Sky Laws: A Test of Competing Hypotheses, 46
J.L. & Econ. 229 [2003].)
19 See Note 14.
20 Id.
21 Id. at 298-299.
22 Id.
23 Id. at 299.
24 474 F.2d 476, Fed.Sec. L. Rep. P 93, 748.
25 Id.
FELICIANO, J.:
Petitioner Dennis T. Gabionza asks us to reverse and set aside the Decision of
the Court of Appeals which dismissed a Petition for Certiorari and Prohibition for failure to comply with
the requirements of Circular No. 28-91 of the Supreme Court (dated 3 September 1991). This Circular is
entitled: "Additional Requisites for Petitions Filed with the Supreme Court and the Court of Appeals to
Prevent Forum Shopping or Multiple Filing of Petitions and Complaints."
Gabionza was a defendant in a civil case entitled "Achievers Sales Corporation v. Pasvil Liner, Inc., et al."
filed before the Regional Trial Court, Branch 155, of Pasig. Contending that there was no basis for
impleading him as a party-defendant in that case, Gabionza filed a motion to dismiss the complaint as
against himself. The motion was denied by the trial court.
Gabionza then filed a Petition for Certiorari and Prohibition with the Court of Appeals, assailing the
denial of his motion to dismiss. In a one paragraph Resolution, 1 the Court of Appeals disposed of the
Petition in the following manner:
The Court resolved to dismiss the instant petition for certiorari and prohibition with a prayer for the
issuance of a writ of preliminary injunction having failed to indicate in the caption thereof the docket
number of the case in the trial court whose orders are sought to be reviewed (Supreme CourtCircular No.
28-91). (Emphasis supplied)
In the present Petition for Review, Gabionza admits that the docket number of the case before the
trial courtwhose order was sought to be set aside, had not been set forth in the caption of his Petition
for Certiorari and Prohibition with the Court of Appeals. Gabionza, however, maintains that his Petition
should nevertheless not have been dismissed by the Court of Appeals, but rather should have been
deemed in substantial compliance with Circular
No. 28-91, for the reason that the docket number of the case pending before the trial court was in fact set
out in the body of his Petition for Certiorari and Prohibition. Page 2 of his Petition before the
appellate court stated, among other things:
Respondent Honorable Fernando Gerona (hereinafter referred to as the respondent Judge) is the presiding
Judge of Branch 155 of the Regional Trial Court of Pasig to whom Civil Case No. 54984 entitled "Achievers
Sales Corporation v. Pasvil Liner, Inc., et al." is assigned. He may be served with notice at his office at the
Regional Trial Court, Branch 155, Pasig, Metro Manila. 2 (Emphasis supplied)
Deliberating on the instant Petition for Review, the Comment thereon by private respondent and
petitioner's Reply, the Court considers that Gabionza's Petition for Certiorari and Prohibition dismissed by
the Court of Appeals was indeed in substantial compliance with the requirements of the Circular on
forum shopping and that that Petition should not have been dismissed.
Forum shopping has been characterized as an act of malpractice that is prohibited and condemned as
trifling with the courts and abusing their processes. It constitutes improper conduct which tends to
degrade the administration of justice. It has also been aptly described as deplorable because it adds to the
congestion of the already heavily burdened dockets of the courts. 3
Circular No. 28-91 has its roots in the rule that a party-litigant shall not be allowed to pursue simultaneous
remedies in two (2) different forums, for such practice works havoc upon orderly judicial procedure. 4 That
rule was formalized in Section 17 of the Interim Rules and Guidelines issued by the Supreme Court on 11
January 1983 in connection with the implementation of Batas Pambansa Blg. 129. Section 17 read as
follows:
17. Petitions for writs of certiorari, etc. — No petition for certiorari, mandamus, prohibition, habeas
corpus or quo warranto may be filed in the Intermediate Appellate Court if another similar petition has
been filed or is still pending in the Supreme Court. Nor may a petition be filed in the Supreme Courtif a
similar petition has been filed or is still pending in the Intermediate Appellate Court, unless it be to review
the action taken by the Intermediate Appellate Court on the petition filed with it. A violation of this rule
shall constitute contempt of court and shall be a cause for the summary dismissal of both petitions
without prejudice to the taking of appropriate actions against the counsel or party concerned.
Circular No. 28-91, in its original form, established two (2) requirements which are to be complied with by
every petition filed with the Supreme Court or the Court of Appeals. The first requirement related to the
caption of a petition or complaint filed with the Supreme Court or the Court of Appeals; 5 the second
requirement related to the certification which must accompany that petition or complaint.
The first requirement was set out in the following terms:
The attention of this court has been called to the filing of multiple petitions and complaints involving the
same issues in the Supreme Court, the Court of Appeals and the different divisions thereof, or any other
tribunal or agency with the result that said tribunals or agency have to resolve the same issues.
To avoid the foregoing, every petition or complaint filed with the Supreme Court, Court of Appeals, or
different divisions thereof, or any other tribunal or agency shall comply with the following requirements,
aside from pertinent provisions of the Rules of Court and existing circulars:
1. Caption of petition or complaint. — The caption of the petition or complaint must include the docket
number of the case in the lower court or quasi-judicial agency whose order or judgment is sought to be
reviewed.
xxx xxx xxx
(Emphases supplied).
The first requirement had two (2) components: first, the docket number of the case before the
lower court whose order is sought to be reviewed, should be in the petition; and second, that docket
number should be in the captionof the petition. In the instant case, there is no dispute that the docket
number of the case before the trial courthad not been set out in the caption of the Petition
for Certiorari and Prohibition filed with the Court of Appeals. However, that docket number, as well as the
title of the case, before the trial court had in fact been set out in the second page of the Petition
for Certiorari and Prohibition.
There is also no dispute that petitioner Gabionza had complied with the second requirement of Circular
No. 28-91, i.e., that the required sworn certification (to the effect that "there is no similar petition [with]
the same subject matter previously filed, pending, withdrawn or dismissed in the Supreme Court, in this
Honorable Court [Court ofAppeals] or different divisions thereof, or any other tribunal or agency") 6 was
attached to the Petition forCertiorari and Prohibition filed with the Court of Appeals. There has been no
allegation that the sworn certification filed by petitioner was false or untrue in a material respect or that
petitioner Gabionza had sought to deceive the Court of Appeals.
We, therefore, believe and so hold that the Petition for Certiorari and Prohibition filed by Gabionza with
the Courtof Appeals was in substantial compliance with the original requirements of Circular No. 28-91
and that the objectives of that Circular were not being subverted by Gabionza's Petition. It is scarcely
necessary to add that Circular No. 28-91 must be so interpreted and applied as to achieve the purposes
projected by the SupremeCourt when it promulgated that Circular. Circular No. 28-91 was designed to
serve as an instrument to promote and facilitate the orderly administration of justice and should not be
interpreted with such absolute literalness as to subvert its own ultimate and legitimate objective or the
goal of all rules of procedure — which is to achieve substantial justice as expeditiously as possible.
The Court of Appeals could and should have required petitionerGabionza simply to comply with Circular
No. 28-91 by amending the caption of his petition, instead of dismissing that petition altogether.
ACCORDINGLY, the Court Resolved to GRANT DUE COURSE to the Petition for Review on Certiorari, to
TREAT private respondent's Comment as its Answer to the Petition, and to REVERSE and SET ASIDE the
Resolutions of the Court of Appeals dated 4 August 1993 and 10 November 1993 rendered in C.A.-G.R.
SP No. 31549. This case is hereby REMANDED to the Court of Appeals, and the Petition for Certiorari and
Prohibition there filed is hereby REINSTATED, for further proceedings consistent with this Resolution. No
costs.
Bidin, Romero, Melo and Vitug, JJ., concur.
#Footnotes
REYNATO S. PUNO
Chief Justice
LEONARDO A. QUISUMBING CONSUELO YNARES-SANTIAGO
Associate Justice Associate Justice
ANTONIO T. CARPIO MA. ALICIA AUSTRIA-MARTINEZ
Associate Justice Associate Justice
*RENATO C. CORONA CONCHITA CARPIO MORALES
Associate Justice Associate Justice
ADOLFO S. AZCUNA DANTE O. TINGA
Associate Justice Associate Justice
PRESBITERO J. VELASCO, JR. **ANTONIO EDUARDO B. NACHURA
Associate Justice Associate Justice
RUBEN T. REYES TERESITA LEONARDO DE CASTRO
Associate Justice Associate Justice
**ARTURO D. BRION
Associate Justice
CERTIFICATION
Pursuant to Article VIII, Section 13 of the Constitution, it is hereby certified that the conclusions in the
above Decision were reached in consultation before the case was assigned to the writer of the opinion of
the Court.
REYNATO S. PUNO
Chief Justice
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EN BANC
G.R. No. 135808 October 6, 2008
SECURITIES AND EXCHANGE COMMISSION, petitioner,
vs.
INTERPORT RESOURCES CORPORATION, MANUEL S. RECTO, RENE S. VILLARICA, PELAGIO
RICALDE, ANTONIO REINA, FRANCISCO ANONUEVO, JOSEPH SY and SANTIAGO TANCHAN,
JR., respondents.
Promulgated:
October 6, 2008
x-----------------------------------------------------------------------------------------x
DISSENTING OPINION
CARPIO, J.:
I dissent because the majority opinion is patently contrary to the express provision of Section 2 of Act
No. 3326.
The majority opinion holds that the administrative investigation by the Securities and Exchange
Commission (SEC) interrupted the running of the prescriptive period for violation of the Securities
Regulation Code (Code). The majority opinion holds:
x x x It should be noted that the SEC started investigative proceedings against the respondents as early
as 1994. This investigation effectively interrupted the prescriptive period.
xxx
x x x Thus, the investigation that was commenced by the SEC in 1995 (sic), soon after they
discovered the questionable acts made by the respondents, effectively interrupted the
prescriptive period. (Emphasis supplied)
This ruling of the majority violates Section 2 of Act No. 3326 entitled An Act to Establish Periods of
Prescription for Violations Penalized by Special Acts and Municipal Ordinances and To Provide When
Prescription Shall Begin To Run. Section 2 provides:
Section 2. Prescription shall begin to run from the day of the commission of the violation of the law, and if
the same be not known at the time, from the discovery thereof and the institution
of judicialproceedings for its investigation and punishment. (Emphasis and underscoring supplied)
In Zaldivia v. Reyes, Jr.,1 the Court ruled that the proceedings referred to in Section 2 of Act No. 3326
are judicial proceedings and not administrative proceedings. The Court held:
x x x This means that the running of the prescriptive period shall be halted on the date the
case is actually filed in court and not on any date before that.
This interpretation is in consonance with the afore-quoted Act No. 3326 which says that the period of
prescription shall be suspended "when proceedings are instituted against the guilty party." The
proceedings referred to in Section 2 thereof are "judicial proceedings," contrary to the
submission of the Solicitor General that they include administrative proceedings. His contention is that we
must not distinguish as the law does not distinguish. As a matter of fact, it does. (Emphasis and
underscoring supplied)
Indeed, Section 2 of Act No. 3326 expressly refers to the "institution of judicial proceedings."
Contrary to the majority opinion's claim that "a preliminary investigation interrupts the prescriptive
period," only the institution of judicial proceedings can interrupt the running of the
prescriptive period. Thus, in the present case, since no criminal case was filed in any court against
respondents since 1994 for violation of the Code, the prescriptive period of twelve years under Section
12 of Act No. 3326 has now expired.
The fact that the Court of Appeals enjoined the SEC from filing any criminal, civil or administrative case
against respondents for violation of the Code is immaterial. The SEC has no jurisdiction to institute judicial
proceedings against respondents for criminal violation of the Code. Even if the Court of Appeals did not
issue the injunction, the SEC could still not have instituted any judicial proceedings against respondents
for criminal violation of the Code. The Code empowers the SEC to conduct only administrative
investigations and to impose fines and other administrative sanctions3 against violators of the
Code. Section 54.2 of the Code states that the "imposition of x x x administrative sanctions shall be
without prejudice to the filing of criminal charges against the individuals responsible for the
violation." Thus, the criminal charges may proceed separately and independently of the
administrative proceedings.
Under Section 53.1 of the Code,4 jurisdiction to institute judicial proceedings against respondents for
criminal violation of the Code lies exclusively with the Department of Justice (DOJ). Section 53.1 of the
Code expressly states that "all criminal complaints for violations of this Code x x x shall be
referred to the Department of Justice for preliminary investigation and prosecution before the
proper court." No court ever enjoined the DOJ to institute judicial proceedings against respondents for
criminal violation of the Code. Nothing prevented the DOJ's National Bureau of Investigation from
investigating the alleged criminal violations of the Code by respondents. Thereafter, the DOJ could have
conducted a preliminary investigation and instituted judicial proceedings against respondents. The DOJ
did not and prescription has now set in.
Accordingly, I vote to DISMISS the petition.
ANTONIO T. CARPIO
Associate Justice
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Promulgated:
October 6, 2008
x------------------------------------------------------------------------------x
CONCURRING OPINION
TINGA, J.:
While I fully concur with the ponencia ably penned by Justice Chico-Nazario, I write separately to highlight
the factual and legal background behind the legal proscription against the blight that is "insider trading."
This case is the farthest yet this Court has explored the matter, and it is heartening that our decision
today affirms the viability for prosecutions against insider trading, an offense that assaults the integrity of
our vital securities market. This case bears special significance, even if it does not dwell on the guilt or
innocence of petitioners who are charged with insider trading, simply because the arguments raised by
them essentially assail the validity of our laws against insider trading. Since we deny certiorari and
debunk the challenge, our ruling will embolden our securities regulators to investigate and prosecute
insider trading cases, thereby ensuring a more stable, mature and investor-friendly stock market.
The securities market, when active and vibrant, is an effective engine of economic growth. It is more able
to channel capital as it tends to favor start-up and venture capital companies. To remain attractive to
investors, however, the stock market should be fair and orderly. All the regulations, all the requirements,
all the procedures and all the people in the industry should strive to achieve this avowed objective.
Manipulative devices and deceptive practices, including insider trading, throw a monkey wrench right into
the heart of the securities industry. When someone trades in the market with unfair advantage in the
form of highly valuable secret inside information, all other participants are defrauded. All of the
mechanisms become worthless. Given enough of stock market scandals coupled with the related loss of
faith in the market, such abuses could presage a severe drain of capital. And investors would eventually
feel more secure with their money invested elsewhere.1
The securities market is imbued with public interest and as such it is regulated. Specifically, the reasons
given for securities regulation are (1) to protect investors, (2) to supply the informational needs of
investors, (3) to ensure that stock prices conform to the fundamental value of the companies traded, (4)
to allow shareholders to gain greater control over their corporate managers, and (5) to foster economic
growth, innovation and access to capital.2
In checking securities fraud, regulation of the stock market assumes quite a few forms, the most common
being disclosure regulation and financial activity regulation.
Disclosure regulation requires issuers of securities to make public a large amount of financial information
to actual and potential investors. The standard justification for disclosure rules is that the managers of
the issuing firm have more information about the financial health and future of the firm than investors
who own or are considering the purchase of the firm's securities. Financial activity regulation consists of
rules about traders of securities and trading on or off the stock exchange. A prime example of this form of
regulation is the set of rules against trading by insiders.3
I.
In its barest essence, insider trading involves the trading of securities based on knowledge of material
information not disclosed to the public at the time.4 Such activity is generally prohibited in many
jurisdictions, including our own, though the particular scope and definition of "insider trading" depends on
the legislation or case law of each jurisdiction. In the United States, the rule has been stated as "that
anyone who, for trading for his own account in the securities of a corporation has ‘access, directly or
indirectly, to information intended to be available only for a corporate purpose and not for the personal
benefit of anyone' may not take ‘advantage of such information knowing it is unavailable to those with
whom he is dealing', i.e., the investing public."5
It would be useful to examine the historical evolution of the rule.
In the United States, legal abhorrence of insider trading preceded the modern securities market. Prior to
1900, it was treatise law that the doctrine that officers and directors of corporations are trustees of the
stockholders does not extend to their private dealings with stockholders or others, though in such
dealings they take advantage of knowledge gained through their official position.6 Under that doctrine,
the misrepresentation or fraudulent concealment of a material fact by such corporate officers or directors
gave rise to liability based on general fraud as understood in common law, yet such liability would arise
only if the defendant actively prevented the plaintiff from looking into or inquiring upon the affairs or
condition of the corporation and its prospects for dividends.7 The rule, as understood then, did not
encompass a positive duty for public disclosure of any material information pertinent to a corporation
and/or its securities.
The first paradigm shift came with a decision in 1903 of the Georgia Supreme Court in Oliver v.
Oliver,8 which pronounced that the shareholder had a right to disclosure, and the corporation a
corresponding duty to disclose such material information, based on the principle that "[w]here the
director obtains the information giving added value to the stock by virtue of his official position, he holds
the information in trust for the benefit of [the shareholders]."9 Subsequent state jurisprudence affirmed
this fiduciary obligation to disclose material nonpublic information to shareholders before trading with
them, otherwise known as the "minority" or the "duty to disclose" rule. However, the U.S. Supreme Court
in 1909 expressed preference for a different rule in Strong v. Repide,10acknowledging that the corporate
directors generally owed no duty to disclose material facts when trading with shareholders, unless there
were "special circumstances" that gave rise to such duty. The "special circumstances," as identified
in Strong, were the concealment of identity by the defendant, and the failure to disclose significant facts
having a dramatic impact on the stock price.
Both the "special circumstances" and "duty to disclose" rules gained adherents in the next several years.
In the meantime, the 1920s saw the unprecedented popularity of the stock market with the general
public, which was widely taken advantage of by corporations and brokers through unscrupulous practices.
The American stock market collapse of October 1929, which helped trigger the worldwide Great
Depression, left fully half of the $25 million worth of securities floated during the post-First World War
period as worthless, to the injury of thousands of individuals who had invested their life savings in those
securities.11 The consequent wellspring of concern over the welfare of the investors animated the
passage of the first U.S. federal securities laws, such as the Securities Exchange Act of 1934 which
declared that "transactions in securities as commonly conducted upon securities exchanges and over-the-
counter markets are affected with a national public interest which makes it necessary to provide for
regulation and control of such transactions."12
Section 10(b) of the Securities Exchange Act of 1934 provided that:
It shall be unlawful for any person, directly or indirectly, by the use of any means or instrumentality of
interstate commerce or of the mails, or of any facility of the national securities exchange ─ x x x
(b) To use or employ, in connection with the purchase or sale of any security registered on a national
securities exchange or any security not so registered, any manipulative or deceptive device or
contrivance in contravention of such rules and regulations as the Commission may prescribe as necessary
or appropriate in the public interest or for the protection of investors.13
It is this provision which stands as the core statutory authority prohibiting insider trading under U.S.
federal law.14Yet the provision itself does not utilize the term "insider trading," and indeed doubts have
been expressed whether it was intended at all by the U.S. Congress to impose a ban on insider trading
through the 1934 Securities Exchange Act.15 At the same time, the provision did grant to the U.S.
Securities and Exchange Commission (U.S. SEC) the authority to promulgate rules and regulations "as
necessary or appropriate in the public interest or for the protection of investors." This power was
exercised by the U.S. SEC in 1942, when it enacted Rule 10b-5, which has been described as "the
foundation on which the modern insider trading prohibition rests."16 The Rule reads:
It shall be unlawful for any person, directly or indirectly, by the use of any means or instrumentality of
interstate commerce, or of the mails or of any facility of any national securities exchange,
(a) To employ any device, scheme, or artifice to defraud,
(b) To make any untrue statement of a material fact or to omit to state a material fact necessary in order
to make the statements made, in the light of the circumstances under which they were made, not
misleading, or
(c) To engage in any act, practice, or course of business which operates or would operate as a fraud or
deceipt upon any person,
in connection with the purchase or sale of any security.17
Again, the rule by itself did not provide for an explicit prohibition on insider trading practices, and
commentators have expressed doubts whether the U.S. SEC in 1942 had indeed contemplated that the
rule work to such effect.18 Yet undoubtedly the Rule created a powerful antifraud weapon,19 and it would
finally be applied by the U.S. SEC as a prohibition against insider trading in the 1961 case of In re Cady,
Roberts & Co.20
The facts of that case hew closely to our traditional understanding of insider trading. A corporate director
of Curtiss-Wright Corporation had told one of his business partners, Gimpel, that the board of directors
had decided to reduce the company's quarterly dividend. Armed with such information even before the
news was announced, Gimpel sold several thousand shares in the corporation's stock held in customer
accounts over which he had discretionary trading authority. When the news of the reduced dividend was
publicly disclosed, the corporation's share prices predictably dropped, and the owners of the sold shares
were able to avoid injury. The U.S. SEC ruled that Gimpel had violated Rule 10b-5, even though he was
not an insider privy to the confidential material information, but merely a "tippee" of that insider. In doing
so, the U.S. SEC formulated the "disclose or abstain" rule, requiring that an insider in possession of
material nonpublic information must disclose such information before trading or, if disclosure is
impossible or improper, abstain from trading.21
Not long after, the American federal courts adopted the principles pronounced by the U.S. SEC
in Cady, Roberts, and the rule
evolved that insider trading was deemed a form of securities fraud within the U.S. SEC's regulatory
jurisdiction.22Subsequently, jurisprudential limitations were imposed by the U.S. Supreme Court, ruling
for example that an insider bears a duty to disclose on the basis of a fiduciary relationship of trust and
confidence as between him and the shareholders;23 or that a tippee is liable for insider trading only if the
tipper breached a fiduciary relationship by disclosing information to the tippee, who knew or had reason
to know of the breach of duty.24 In response to these decisions, the U.S. SEC promulgated Rule 14e-3,
which specifically prohibited insiders of the bidder and the target company from divulging confidential
information about a tender offer to persons that are likely to violate the rule by trading on the basis of
that information.25
In the United Kingdom, insider trading is considered as a type of "market abuse" assuming the form of
behavior "based on information which is not generally available to those using the market but which, if
available to a regular user of the market, would or would be likely to be regarded by him as relevant
when deciding the terms on which transactions in investments of the kind in question should be
effected."26
The Philippines has adopted statutory regulations in the trading of securities, tracing in fact as far back as
1936, or just two years after the enactment of the US Securities Exchange Act of 1934. The then National
Assembly of the Philippines enacted in 1936 Commonwealth Act No. 83, also known as the Securities
Act,27 designed to regulate the sale of securities and to create a Securities and Exchange Commission
(SEC) for that purpose. Notably, Com. Act No. 83 did not contain any explicit provision prohibiting insider
trading in precise terms, even as it contained specific provisions prohibiting the manipulation of stock
prices28 or the employment of manipulative and deceptive devices.29 This silence is unsurprising,
considering that American federal law had similarly failed to enact so specific a prohibition and that Rule
10b-5 of the U.S. SEC had not yet come into existence then.
However, in January of 1973, the SEC would issue a set of rules,30 which required specific insiders to
"make a resonably full, fair and accurate disclosure of every material fact relating or affecting it which is
of interest to investors."31 It was explained therein that a fact is material if it "induces or tends to induce
or otherwise affect the sale or purchase of the securities of the issuing corporation, such as an acquisition
of mining claims, patent or formula, real estate, or similar capital assets; discovery of mineral ores;
declaration of dividends; executing a contract of merger or consolidation; rights offering; and any other
important event or happening."32
The enactment of the Revised Securities Act in 1980 (Batas Pambansa Blg. 178, as amended) provided
for the first time a specific statutory prohibition in Philippine law against insider trading. This was
embodied in Section 30 of the law, which provides:
Sec. 30. Insider's duty to disclose when trading - (a) It shall be unlawful for an insider to sell or buy a
security of the issuer, if he knows a fact of special signifinace whith respest to the issuer or the security
that is not generally available, unless (1) the insider proves that the fact is generally available or (2) if the
other party to the transaction (or his agent ) is identified, (a) the insider proves that the other party
knows it, or (b) that other party in fact knows it from the insider or otherwise.
(b) "Insider" means (1) the issuer, (2) a director or officer of, or a person controlling, controlled by, or
under common control with, the issuer, (3) a person whose relationship or former relationship to the
issuer gives or gave him access to a fact of special significance about the issuer or the security that is not
generally available, or (4) a person who learns such a fact from any of the foregoing insiders as defined in
this subsection, with knowledge that the person from whom he learns the fact is such an insider.
(c) A fact is "of special significance" if (a) in addition to being material it would be likely, on being made
generally available, to affect the market price of a security to a significant extent, or (b) a reasonable
person would consider it especially important under the circumstances in determining his course of action
in the light of such factors as the degree of its specificity, the extent of its difference from information
generally available previously, and its nature and reliability.
(d) This section shall apply to an insider as defined in subsection (b) (3) hereof only to the extent that he
knows of a fact of special significance by virtue of his being an insider.
Contrary to the claims of respondents, such terms as "material fact," "reasonable person," "nature and
reliability" and "generally available" as utilized in Section 30 do not suffer from the vice of vagueness and
do not necessitate an administrative rule to supply definitions of the terms either. For example, as
the ponente points out, the 1973 Rules already provided for a definition of a "material fact," a definition
that was actually incorporated in Section 30.
Yet there is an underlying dangerous implication to respondents' arguments which makes the Court's
rejection thereof even more laudable. The ability of the SEC to effectively regulate the securities market
depends on the breadth of its discretion to undertake regulatory activities. The intractable adherents
of laissez-faire absolutism may decry the fact that there exists an SEC in the first place, yet it is that body
which assures the protection of interests of ordinary stockholders and investors in the capital markets,
interests which may be overlooked by the issuers of securities and their corporate overseers whose own
interests may not necessarily align with that of the investing public. A "free market" that is not a "fair
market" is not truly free, even if left unshackled by the State as it would in fact be shackled by the
uninhibited greed of only the largest players.
Respondents essentially contend that the SEC is precluded from enforcing its statutory powers unless it
first translates the statute into a more comprehensive set of rules. Without denigrating the SEC's
delegated rule-making power, each provision of the law already constitutes an executable command from
the legislature. Any refusal on the part of the SEC to enforce the statute on the premise that it had yet to
undergo the gauntlet of administrative interpretation is derelict to that body's legal mandate. By no
means is the Congress impervious to the concern that certain statutory provisions are best enforced only
after an administrative regulation implementing the same is promulgated. In such cases, the legislature is
solicitous enough to specifically condition the enforcement of the statute upon the promulgation of the
relevant administrative rules. Yet in cases where the legislature does not see fit to impose such a
conditionality, the body tasked with enforcing the law has no choice but to do so. Any quibbling as to the
precise meaning of the statutory language would be duly resolved through the exercise of judicial review.
It bears notice that unlike the American experience where the U.S. Congress has not seen fit to
specifically legislate prohibitions on insider trading, relying instead on the discretion of the U.S. SEC to
penalize such acts, our own legislature has proven to be more pro-active in that regard, legislating such
prohibition, not once, but twice. The Revised Securities Act was later superseded by the Securities
Regulation Code of 2000 (Rep. Act No. 8799), a law which is admittedly more precise and ambitious in its
regulation of such activity. The passage of that law is praiseworthy insofar as it strengthens the State's
commitment to combat insider trading. And the promulgation of this decision confirms that the judiciary
will not hesitate in performing its part in seeing to it that our securities laws are properly implemented
and enforced.
III
I also wish to share my thoughts on the issue of principles.
The issue boils down to the determination of whether the investigation conducted by the SEC pursuant to
Section 4533 of the Revised Securities Act in 1994 tolled the running of the period of prescription. I
submit it did.
Firstly, this Court, in ruling in Baviera v. Paglinawan34 that the Department of Justice cannot conduct a
preliminary investigation for the determination of probable cause for offenses under the Revised
Securities Code, without an investigation first had by the SEC, essentially underscored that the exercise is
a two-stage process. The procedure is similar to the two-phase preliminary investigation prior to the
prosecution of a criminal case in court under the old rules.35 The venerable J.B.L. Reyes in People v.
Olarte36 finally settled a long standing jurisprudential conflict at the time by holding that the filing of
the complaint in the Municipal Court, even if it be merely for purposes of preliminary
examination or investigation, should, and does, interrupt the period of prescription of the
criminal responsibility, even if the court where the complaint or information is filed cannot
try the case on its merits. The court gave three reasons in support of its decision, thus:
. . . Several reasons buttress this conclusion: first the text of Article 91 of the Revised Penal Code, in
declaring that the period of prescription "shall be interrupted by the filing of the complaint or information"
without distinguishing whether the complaint is filed in the court for preliminary examination or
investigation merely, or for action on the merits. Second, even if the court where the complaint or
information is filed may only proceed to investigate the case its actuations already represent the initial
step of the proceedings against the offender. Third, it is unjust to deprive the injured party of the right to
obtain vindication on account of delays that are not under his control. All that the victim of the offense
may do not on his part to initiate the prosecution is to file the requisite complaint.37
The same reasons which moved the Court in 1967 to declare that the mere filing of the complaint,
whether for purposes of preliminary examination or preliminary investigation should interrupt the
prescription of the criminal action inspire the Court's ruling in this case.
It should be emphasized that Sec. 45 of the Revised Securities Act invests the SEC with the power to
"make such investigations as it deems necessary to determine whether any person has violated or is
about to violate any provision of this Act or any rule or regulation thereunder, and may require or permit
any person to file with it a statement in writing, under oath or otherwise, as the Commission shall
determine, as to all facts and circumstances concerning the matter to be investigated" and to refer
criminal complaints for violations of the Act to the Department of Justice for preliminary investigation and
prosecution before the proper court.
The SEC's investigatory powers are obviously akin to the preliminary examination stage mentioned in
People v. Olarte. The SEC's investigation and determination that there was indeed a violation of the
provisions of the Revised Securities Act would set the stage for any further proceedings, such as
preliminary investigation, that may be conducted by the DOJ after the case is referred to it by the SEC.
Secondly, Sec. 2 of Act No. 332638 provides in part:
Prescription shall begin to run from the day of the commission of the violation of the law, and if the same
be not known at the time, from the discovery thereof and the institution of judicial proceedings for its
investigation and punishment. The prescription shall be interrupted when proceedings are
instituted against the guilty person, and shall begin to run again if the proceedings are dismissed for
reasons not constituting jeopardy. (Emphasis supplied)
Act No. 3326 was approved on 4 December 1926, at a time that the function of conducting the
preliminary investigation of criminal offenses was vested in the justices of the peace. The prevailing rule
at the time, embodied in the early case of U.S. v. Lazada39 and later affirmed in People v. Joson,40 is that
the prescription of the offense is halted once the complaint is filed with the justice of the peace for
preliminary investigation inasmuch as the filing of the complaint signifies the institution of criminal
proceedings against the accused.41 People v. Parao42—a case which affirmed the power of the then
municipal president to conduct preliminary investigation in the absence of the justice of the peace and of
the auxiliary justice of the peace when the same could not be deferred without prejudice to the interest of
justice—established the correlative rule that the first step taken in the investigation or examination of
offenses partakes the nature of a judicial proceedings which suspends the prescription of the
offense.43 But although the second Olarte44 case made an affirmative ruling that the preliminary
investigation is not part of the action proper, the Court therein nevertheless declared that such
investigation is quasi-judicial in nature and that as such, the mere filing of the complaint with the justice
of the peace should stall the exhaustion of the prescriptive period of the offense charged.
While it may be observed that the term "judicial proceedings" in Sec. 2 of Act No. 3326 appears before
"investigation and punishment" in the old law, with the subsequent change in set-up whereby the
investigation of the charge for purposes of prosecution has become the exclusive function of the
executive branch, the term "proceedings" should now be understood either executive or judicial in
character: executive when it involves the investigation phase and judicial when it refers to the trial and
judgment stage. With this clarification, any kind of investigative proceeding instituted against the guilty
person which may ultimately lead to his prosecution as provided by law shall suffice to toll prescription.
Thus, in the case at bar, the initiation of investigative proceedings against respondents, halted only by
the injunctive orders issued by the Court of Appeals upon their application no less, should and did
interrupt the prescriptive period of the criminal action.
DANTE O. TINGA
Associate Justice
Footnotes
* On Official leave.
** No part.
1 Penned by Associate Justice Emeterio C. Cui with Associate Justices Angelina Sandoval-Gutierrez and
Conrado M. Vasquez, Jr., concurring. Rollo, pp. 31-38.
2 GEHI is a subsidiary wholly owned by GHB. CA rollo, p. 51.
3 Id. at 46-49.
4 Id.
5 Id. at 5-6.
6 Rollo, pp. 9-10.
7 CA rollo, p. 6; Rules Requiring Disclosure of Material Facts by Corporations Whose Securities Are Listed
in Any Stock Exchange or Registered/Licensed Under the Securities Act, issued by the Securities and
Exchange Commission on 8 February 1973; see rollo, p. 65.
8 Rollo, p. 10.
9 SEC. 8. The Prosecution and Enforcement Department shall have, subject to the Commission's control
and supervision, the exclusive authority to investigate, on complaint or motu proprio, any act or omission
of the Board of Directors/Trustees of corporations, or of partnerships, or of other associations, or of their
stockholders, officers or partners, including any fraudulent devices, schemes or representations, in
violation of any law or rules and regulations administered and enforced by the Commission; to file and
prosecute in accordance with law and rules and regulations issued by the Commission and in appropriate
cases, the corresponding criminal or civil case before the Commission or the proper court or body upon
prima facie finding of violation of any laws or rules and regulations administered and enforced by the
Commission; and to perform such other powers and functions as may be provided by law or duly
delegated to it by the Commission.
10 CA rollo, pp. 68-94.
11 Id. at 95-107.
12 Id. at 39-43.
13 Id. at 152-162.
14 Id. at 44.
15 Id. at 1- 37.
16 CA rollo, pp. 214-230.
17 Id at .237-238.
18 Id.at 269-270.
19 Penned by Associate Justice Emeterio C. Cui with Associate Justices Angelina Sandoval-Gutierrez and
Conrado M. Vasquez, Jr., concurring. Rollo, pp. 31-38.
20 Id. at 35-36.
21 Id. at 36.
22 Id. at 37.
23 Id. at 40-41.
24 Id. at 14.
25 The Securities Investigation and Clearing Department (SICD) Rules of Procedure on Administrative
Actions/Proceedings took effect on 29 December 1996, after the violations allegedly took place.
26 118 U.S. 356.
27 Secretary of the Department of Transportation and Communications v. Mabalot, 428 Phil. 154, 164
(2002); Larin v. Executive Secretary, 345 Phil. 962, 979 (1997).
28 68 Phil. 328, 348 (1939).
29 G.R. No. 100883, 2 December 1991, 204 SCRA 516, 523.
30 Geukeko v. Araneta, 102 Phil. 706, 712-713 (1957).
31 Calalang v. Williams, 70 Phil. 726, 733 (1940).
32 Del Mar v. The Philippine Veterans Administration, 151-A Phil. 792, 802 (1973).
33 Supra note 23.
34 In the Matter of Cady, Roberts & Co., 40 S.E.C. 907 (1961).
35 Id. citing H.R. Rep. No. 1383, 73rd Cong., 2d Sess. 13 (1934); S. Rep. No.792, 73rd Cong., 2d Sess. 9
(1934). A significant purpose of the Exchange Act was to eliminate the idea that the use of inside
information for personal advantage was a normal emolument of corporate office.
36 In the Matter of Investors Management Co., Inc., 44 SEC 633, 29 July 1971; Securities and Exchange
Commission v. Texas Gulf Sulfur Co., 401 F. 2d 833, 13 August 1968.
37 Rollo, p. 459.
38 Negligence is defined as the omission to do something which a reasonable man, guided by those
considerations which ordinarily regulate the conduct of human affairs, would do, or the doing of
something which a prudent and reasonable man would not do. (Emphasis provided.) McKee v.
Intermediate Appellate Court, G.R. Nos. 68102-03, 16 July 1992, 211 SCRA 517, 539, citing Layugan v.
Intermediate Appellate Court, G.R. No. L-73998, 14 November 1988, 167 SCRA 363, 373.
39 Dela Cruz v. Intermediate Appellate Court, G.R. No. L-72981, 29 January 1988, 157 SCRA 660, 671 and
Balatbat v. Court of Appeals, 329 Phil. 858, 874 (1996).
40 Webb v. Hon. de Leon, 317 Phil. 758, 779 (1995).
41 Id. at 780.
42 48 L ed 2d 757, 766 (1976).
43 Supra note 33.
44 99 L ed 2d 194, 211 (1988).
45 Securities and Exchange Commission v. Texas Gulf Sulphur Co., 401 F.2d 833, 849 (1968).
46 Basic v. Levinson, supra note 41 at 211.
47 La Bugal-B'Laan Tribal Association, Inc. v. Ramos, G.R. No. 127882, 1 December 2004, 445 SCRA 1,
155-156, citing Black's Law Dictionary, 5th edition.
48 Gonzales v. Hon. Narvasa, 392 Phil. 518, 528 (2000), citing Sanidad v. Commission on Elections, G.R.
No. L-44640, 12 October 1976, 73 SCRA 333, 358.
49 Supra note 33.
50 Securities and Exchange Commission v. Capital Gains Research Bureau, Inc., 11 L ed 2d 237, 247
(1963).
51 346 Phil. 321, 362 (1997).
52 Balbuna v. Hon. Secretary of Education, 110 Phil. 150, 154 (1960).
53 People v. Rosenthal, 68 Phil. 328, 342 (1939).
54 Rubi v. Provincial Board of Mindoro, 39 Phil. 660, 702 (1919).
55 Sec. 8. Procedure for registration. — (a) All securities required to be registered under subsection (a) of
Section four of this Act shall be registered through the filing by the issuer or by any dealer or underwriter
interested in the sale thereof, in the office of the Commission, of a sworn registration statement with
respect to such securities, containing or having attached thereto, the following:
(1) Name of issuer and, if incorporated, place of incorporation.
(2) The location of the issuer's principal business office, and if such issuer is a non-resident or its place of
office is outside of the Philippines, the name and address of its agent in the Philippines authorized to
receive notice.
(3) The names and addresses of the directors or persons performing similar functions, and the chief
executive, financial and accounting officers, chosen or to be chosen, if the issuer be a corporation,
association, trust, or other entity; of all the partners, if the issuer be a partnership; and of the issuer, if
the issuer be an individual; and of the promoters in the case of a business to be formed.
(4) The names and addresses of the underwriters.
(5) The general character of the business actually transacted or to be transacted by, and the organization
and financial structure of, the issuer including identities of all companies controlling, controlled by or
commonly controlled with the issuer.
(6) The names and addresses of all persons, if any, owning of record or beneficially, if known, more than
ten (10%) per centum in the aggregate of the outstanding stock of the issuer as of a date within twenty
days prior to the filing of the registration statement.
(7) The amount of securities of the issuer held by any person specified in subparagraphs (3), (4), and (6)
of this subsection, as of a date within twenty days prior to the filing of the registration statement, and, if
possible, as of one year prior thereto, and the amount of the securities, for which the registration
statement is filed, to which such persons have indicated their intention to subscribe.
(8) A statement of the capitalization of the issuer and of all companies controlling, controlled by or
commonly controlled with the issuer, including the authorized and outstanding amounts of its capital
stock and the proportion thereof paid up; the number and classes of shares in which such capital stock is
divided; par value thereof, or if it has no par value, the stated or assigned value thereof; a description of
the respective voting rights, preferences, conversion and exchange rights, rights to dividends, profits, or
capital of each class, with respect to each other class, including the retirement and liquidation rights or
values thereof.
(9) A copy of the security for the registration of which application is made.
(10) A copy of any circular, prospectus, advertisement, letter, or communication to be used for the public
offering of the security.
(11) A statement of the securities, if any, covered by options outstanding or to be created in connection
with the security to be offered, together with the names and addresses of all persons, if any, to be
allotted more than ten (10%) per centum in the aggregate of such options.
(12) The amount of capital stock of each class issued or included in the shares of stock to be offered.
(13) The amount of the funded indebtedness outstanding and to be created by the security to be offered,
with a brief statement of the date, maturity, and character of such debt, rate of interest, character or
amortization provisions, other terms and conditions thereof and the security, if any, therefor. If
substitution of any security is permissible, a summarized statement of the conditions under which such
substitution is permitted. If substitution is permissible without notice, a specific statement to that effect.
(14) The specific purposes in detail and the approximate amounts to be devoted to such purposes, so far
as determinable, for which the security to be offered is to supply funds, and if the funds are to be raised
in part from other sources, the amounts and the sources thereof.
(15) The remuneration, paid or estimated to be paid, by the issuer or its predecessor, directly or
indirectly, during the past year and the ensuing year to (a) the directors or persons performing similar
functions, and (b) its officers and other persons, naming them whenever such remuneration exceeded
sixty thousand (P60,000.00) pesos during any such year.
(16) The amount of issue of the security to be offered.
(17) The estimated net proceeds to be derived from the security to be offered.
(18) The price at which the security is proposed to be offered to the public or the method by which such
price is computed and any variation therefrom at which any portion of such security is proposed to be
offered to persons or classes of persons, other than the underwriters, naming them or specifying the
class. A variation in price may be proposed prior to the date of the public offering of the security by filing
an amended registration statement.
(19) All commissions or discounts paid or to be paid, directly or indirectly, by the issuer to the
underwriters in respect of the sale of the security to be offered. Commissions shall include all cash,
securities, contracts, or anything of value, paid, to be set aside, or disposed of, or understanding with or
for the benefit of any other person in which any underwriter is interested, made in connection with the
sale of such security. A commission paid or to be paid in connection with the sale of such security by a
person in which the issuer has an interest or which is controlled by, or under common control with, the
issuer shall be deemed to have been paid by the issuer. Where any such commission is paid, the amount
of such commission paid to each underwriter shall be stated.
(20) The amount or estimated amounts, itemized in reasonable detail, of expenses, other than
commission specified in the next preceding paragraph, incurred or to be incurred by or for the account of
the issuer in connection with the sale of the security to be offered or properly chargeable thereto,
including legal, engineering, certification, authentication, and other charges.
(21) The net proceeds derived from any security sold by the issuer during the two years preceding the
filing of the registration statement, the price at which such security was offered to the public, and the
names of the principal underwriters of such security.
(22) Any amount paid within two years preceding the filing of the registration statement or intended to be
paid to any promoter and the consideration for any such payment.
(23) The names and addresses of the vendors and the purchase price of any property or goodwill,
acquired or to be acquired, not in the ordinary course of business, which is to be defrayed in whole or in
part from the proceeds of the security to be offered, the amount of any commission payable to any
person in connection with such acquisition, and the name or names of such person or persons, together
with any expense incurred or to be incurred in connection with such acquisition, including the cost of
borrowing money to finance such acquisition.
(24) Full particulars of the nature and extent of the interest, if any, of every director, principal executive
officer, and of every stockholder holding more than ten (10%) per centum in the aggregate of the stock of
the issuer, in any property acquired, not in the ordinary course of business of the issuer, within two years
preceding the filing of the registration statement or proposed to be acquired at such date.
(25) The names and addresses of independent counsel who have passed on the legality of the issue.
(26) Dates of and parties to, and the general effect concisely stated of every material contract made, not
in the ordinary course of business, which contract is to be executed in whole or in part at or after the
filing of the registration statement or which has been executed not more than two years before such
filing. Any management contract or contract providing for special bonuses or profit-sharing arrangements,
and every material patent or contract for a material patent right, and every contract by or with a public
utility company or an affiliate thereof, providing for the giving or receiving of technical or financial advice
or service shall be deemed a material contract.
Any contract, whether or not made in the ordinary course of business with any stockholder, whether a
natural or juridical person, owning more than ten (10%) per centum of the shares of the issuer shall be
deemed a material contract for the purpose of this Act.
(27) A balance sheet as of a date not more than ninety days prior to the date of the filing of the
registration statement showing all of the assets of the issuer, the nature and cost thereof, whenever
determinable with intangible items segregated, including any loan to or from any officer, director,
stockholder or person directly or indirectly controlling or controlled by the issuer, or person under direct
or indirect common control with the issuer. In the event any such assets consist of shares of stock in
other companies, the balance sheet and profit and loss statements of such companies for the past three
years shall likewise be enclosed. All the liabilities of the issuer, including surplus of the issuer, showing
how and from what sources such surplus was created, all as of a date not more than ninety days prior to
the filing of the registration statement. If such statement is not certified by an independent certified
public accountant, in addition to the balance sheet required to be submitted under this schedule, a similar
detailed balance sheet of the assets and liabilities of the issuer, certified by an independent certified
public accountant, of a date not more than one year prior to the filing of the registration statement, shall
be submitted.
(28) A profit and loss statement of the issuer showing earnings and income, the nature and source
thereof, and the expenses and fixed charges in such detail and such form as the Commission shall
prescribe for the latest fiscal year for which such statement is available and for the two preceding fiscal
years, year by year, or, if such issuer has been in actual business for less than three years, then for such
time as the issuer has been in actual business, year by year. If the date of the filing of the registration
statement is more than six months after the close of the last fiscal year, a statement from such closing
date to the latest practicable date. Such statement shall show what the practice of the issuer has been
during the three years or lesser period as to the character of the charges, dividends or other distributions
made against its various surplus accounts, and as to depreciation, depletion, and maintenance charges,
and if stock dividends or avails from the sale of rights have been credited to income, they shall be shown
separately with statement of the basis upon which credit is computed. Such statement shall also
differentiate between recurring and nonrecurring income and between any investment and operating
income. Such statement shall be certified by an independent certified public accountant.
(29) Any liabilities of the issuer to companies controlling or controlled by the issuer shall be disclosed in
full detail as to use of the proceeds thereof, the maturity and repayment schedule, nature of security
thereof, the rate of interest and other terms and conditions thereof. If the proceeds, or any part of the
proceeds, of the security to be issued is to be applied directly or indirectly to the purchase of any
business, a profit and loss statement of such business, certified by an independent certified public
accountant, meeting the requirements of subparagraph (28) of this subsection, for the three preceding
fiscal years, together with a balance sheet, similarly certified, of such business, meeting the requirements
of subparagraph (27) hereof of a date not more than ninety days prior to the filing of the registration
statement or at the date such business was acquired by the issuer more than ninety days prior to the
filing of the registration statement.
(30) A copy of any agreement or agreements or, if identical agreements are used, the forms thereof
made with any underwriter, including all contracts and agreements referred to in subparagraph (19)
hereof.
(31) A copy of the opinion or opinions of independent counsel in respect to the legality of the issue.
(32) A copy of all material contracts referred to in subparagraph (26) hereof, but no disclosure shall be
required by the Commission of any portion of any such contract if the disclosure of such portion would
impair the value of the contract and would not be necessary for the protection of the investors.
(33) A detailed statement showing the items of cash, property, services, patents, goodwill, and any other
consideration for which securities have been or are to be issued in payment.
(34) The amount of cash to be paid as promotion fees, or of capital stock which is to be set aside and
disposed of as promotion stock, and a statement of all stock issued from time to time as promotion stock.
(35) In connection with securities issued by a person engaged in the business of developing, exploiting or
operating mineral claims, a sworn statement of a mining engineer stating the ore possibilities of the mine
and such other information in connection therewith as will show the quality of the ore in such claims, and
the unit cost of extracting it.
(36) Unless previously filed and registered with the Commission and brought up to date:
(a) A copy of its articles of incorporation with all amendments thereof and its existing by-laws or
instruments corresponding thereto, whatever the name, if the issuer be a corporation;
(b) A copy of all instruments by which the trust is created or declared and in which it is accepted and
acknowledged, if the issuer is a trust;
(c) A copy of its articles of partnership or association and all the papers pertaining to its organization, if
the issuer is a partnership, unincorporated association, joint-stock company, syndicate, or any other form
of organization.
(37) A copy of the underlying agreements or indentures affecting any stock, bonds, or debentures offered
or to be offered by the issuer and outstanding on the part of companies controlling or controlled by the
issuer.
(38) Where the issuer or registrant is not formed, organized and existing under the laws of the Philippines
or is not domiciled in the Philippines, a written power of attorney, certified and authenticated in
accordance with law, designating some individual person, who must be a resident of the Philippines, on
whom any summons and other legal processes may be served in all actions or other legal proceedings
against him, and consenting that service upon such resident agent shall be admitted as valid and proper
service upon the issuer or registrant, and if at any time that service cannot be made upon such resident
agent, service shall be made upon the Commission.
Additional information or documents, including written information from an expert, may be required, or
anyone of the above requirements may be dispensed with, depending on the necessity thereof for the
protection of the public investors, or their applicability to the class of securities sought to be registered,
as the case may be.
The registration statement shall be signed by the issuer, its principal executive officer, its principal
operating officer, its principal financial officer, its comptroller or principal accounting officer or persons
performing similar functions. The written consent of the expert named as having certified any part of the
registration statement or any document used in connection therewith shall also be filed.
Upon filing of the registration statement, the registrant shall pay to the Commission a fee of not more
than one-tenth of one per centum of the maximum aggregate price at which such securities are proposed
to be offered and the fact of such filing shall be immediately published by the Commission, at the
expense of the registrant, in two newspapers of general circulation in the Philippines, once a week for two
consecutive weeks, reciting that a registration statement for the sale of such security has been filed with
it, and that the aforesaid registration statement, as well as the papers attached thereto, are open to
inspection during business hours, by interested parties, and copies thereof, photostatic or otherwise, shall
be furnished to every applicant at such reasonable charge as the Commission may prescribe.
Any interested party may file an opposition to the registration within ten days from the publication.
If after the completion of the aforesaid publication, the Commission finds that the registration statement
together with all the other papers and documents attached thereto, is on its face complete and that the
requirements and conditions for the protection of the investors have been complied with, and unless
there are grounds to reject a registration statement as herein provided, it shall as soon as feasible enter
an order making the registration effective, and issue to the registrant a permit reciting that such person,
its brokers or agents, are entitled to offer the securities named in said certificate, with such terms and
conditions as it may impose in the public interest and for the protection of investors.
The Commission shall, however, advise the public that the issuance of such permit shall not be deemed a
finding by the Commission that the registration statement is true and accurate on its face or that it does
not contain an untrue statement of fact or omit to state a material fact, or be held to mean that the
Commission has in any way given approval to the security included in the registration statement. Every
permit and any other statement, printed or otherwise, for public consumption, that makes reference to
such permit shall clearly and distinctively state that the issuance thereof is only permissive and does not
constitute a recommendation or endorsement of the securities permitted to be offered for sale. It shall be
unlawful to make, or cause to be made, to any prospective purchaser any representation contrary to the
foregoing.
Notwithstanding the foregoing, the Commission, for the guidance of investors, may require issuers to
submit their securities to rating by securities rating agencies accredited by the Commission, to provide all
information necessary therefor, and to report such rating in the registration statement and prospectus, if
any, offering the securities.
If any change occurs in the facts set forth in the registration statement, it shall be the obligation of the
issuer, dealer or underwriter who filed the original registration statement to submit to the Commission for
approval an amended registration statement.
The Commission, in its order, may fix the maximum amount of commission or other form of remuneration
to be paid in cash or otherwise, directly or indirectly, for or in connection with the sale or offering for sale
of such securities in the Philippines and the maximum amount of compensation which the issuer shall pay
for mining claims and mineral rights for which provision is made by the issuer for payment in cash or
securities. The amount of compensation which shall be paid the owner or holder of such mining claims or
mineral rights shall be a fair valuation thereof, as may be fixed by the Commission, after consultation
with the Bureau of Mines, and after receiving such technical information as the issuer or dealer or the
owner or owners of such claims may care to submit in the premises.
A copy of the order of the Commission making the registration effective, together with the registration
statement, shall be transmitted to the exchange wherein the security may be listed and shall be available
for inspection by any interested party during reasonable hours on any business day.
The order shall likewise be published, at the expense of the registrant, once in a newspaper of general
circulation within ten days from its promulgation.
The same rules shall apply to any amendment to the registration statement.
56 Section 8. Order of Investigation - The parties shall be afforded an opportunity to be present but
without the right to examine or cross-examine. If the parties so desire, they may submit questions to the
Hearing Officer which the latter may propound to the parties or witnesses concerned.
57 G.R. No. 96681, 2 December 1991, 204 SCRA 483, 495-496.
58 Gonzales v. Hon. Narvasa, supra note 45 at 528, citing Sanidad v. Commission on Elections, supra note
45 at 358; and Valmonte v. Philippine Charity Sweepstakes, G.R. No. 78716, 22 September 1987,
Resolution.
59 Rabago v. National Labor Relations Commission, G.R. No. 82868, 5 August 1991, 200 SCRA 158, 164-
165; Rase v. National Labor Relations Commission, G.R. No. 110637, 7 October 1994, 237 SCRA 523, 532.
60 Philippine Airlines, Inc. v. Tongson, 459 Phil. 742, 753 (2003).
61 Rase v. National Labor Relations Commission, supra note 56 at 534.
62 G.R. No. L-75501, 15 September 1987, 154 SCRA 49, 54.
63 Philippine Airlines, Inc. v. Tongson, supra note 57 at 753.
64 416 Phil. 722, 746-747 (2001).
65 SEC. 8. Requirement of Registration of Securities.
8.1. Securities shall not be sold or offered for sale or distribution within the Philippines, without a
registration statement duly filed with and approved by the Commission. Prior to such sale, information on
the securities, in such form and with such substance as the Commission may prescribe, shall be made
available to each prospective purchaser.
8.2. The Commission may conditionally approve the registration statement under such terms as it may
deem necessary.
8.3. The Commission may specify the terms and conditions under which any written communication,
including any summary prospectus, shall be deemed not to constitute an offer for sale under this Section.
8.4. A record of the registration of securities shall be kept in a Register of Securities in which shall be
recorded orders entered by the Commission with respect to such securities. Such register and all
documents or information with respect to the securities registered therein shall be open to public
inspection at reasonable hours on business days.
8.5. The Commission may audit the financial statements, assets and other information of a firm applying
for registration of its securities whenever it deems the same necessary to insure full disclosure or to
protect the interest of the investors and the public in general.
66 SEC. 12. Procedure for Registration of Securities. -
12.1. All securities required to be registered under Subsection 8.1 shall be registered through the filing by
the issuer in the main office of the Commission, of a sworn registration statement with respect to such
securities, in such form and containing such information and documents as the Commission shall
prescribe. The registration statement shall include any prospectus required or permitted to be delivered
under Subsections 8.2, 8.3 and 8.4.
12.2. In promulgating rules governing the content of any registration statement (including any prospectus
made a part thereof or annexed thereto), the Commission may require the registration statement to
contain such information or documents as it may, by rule, prescribe. It may dispense with any such
requirement, or may require additional information or documents, including written information from an
expert, depending on the necessity thereof or their applicability to the class of securities sought to be
registered.
12.3. The information required for the registration of any kind, and all securities, shall include, among
others, the effect of the securities issue on ownership, on the mix of ownership, especially foreign and
local ownership.
12.4. The registration statement shall be signed by the issuer's executive officer, its principal operating
officer, its principal financial officer, its comptroller, principal accounting officer, its corporate secretary or
persons performing similar functions accompanied by a duly verified resolution of the board of directors
of the issuer corporation. The written consent of the expert named as having certified any part of the
registration statement or any document used in connection therewith shall also be filed. Where the
registration statement includes shares to be sold by selling shareholders, a written certification by such
selling shareholders as to the accuracy of any part of the registration statement contributed to by such
selling shareholders shall also be filed.
12.5. a) Upon filing of the registration statement, the issuer shall pay to the Commission a fee of not more
than one-tenth (1/10) of one per centum (1%) of the maximum aggregate price at which such securities
are proposed to be offered. The Commission shall prescribe by rule diminishing fees in inverse proportion
to the value of the aggregate price of the offering.
b) Notice of the filing of the registration statement shall be immediately published by the issuer, at its
own expense, in two (2) newspapers of general circulation in the Philippines, once a week for two (2)
consecutive weeks, or in such other manner as the Commission by rule shall prescribe, reciting that a
registration statement for the sale of such security has been filed, and that the aforesaid registration
statement, as well as the papers attached thereto are open to inspection at the Commission during
business hours, and copies thereof, photostatic or otherwise, shall be furnished to interested parties at
such reasonable charge as the Commission may prescribe.
12.6. Within forty-five (45) days after the date of filing of the registration statement, or by such later date
to which the issuer has consented, the Commission shall declare the registration statement effective or
rejected, unless the applicant is allowed to amend the registration statement as provided in Section 14
hereof. The Commission shall enter an order declaring the registration statement to be effective if it finds
that the registration statement together with all the other papers and documents attached thereto, is on
its face complete and that the requirements have been complied with. The Commission may impose such
terms and conditions as may be necessary or appropriate for the protection of the investors.
12.7. Upon effectivity of the registration statement, the issuer shall state under oath in every prospectus
that all registration requirements have been met and that all information are true and correct as
represented by the issuer or the one making the statement. Any untrue statement of fact or omission to
state a material fact required to be stated therein or necessary to make the statement therein not
misleading shall constitute fraud.
67 SEC. 26. Fraudulent Transactions. - It shall be unlawful for any person, directly or indirectly, in
connection with the purchase or sale of any securities to:
26.1. Employ any device, scheme, or artifice to defraud;
26.2. Obtain money or property by means of any untrue statement of a material fact of any omission to
state a material fact necessary in order to make the statements made, in the light of the circumstances
under which they were made, not misleading; or
26.3. Engage in any act, transaction, practice or course of business which operates or would operate as a
fraud or deceit upon any person.
68 SEC. 27. Insider's Duty to Disclose When Trading. -
27.1. It shall be unlawful for an insider to sell or buy a security of the issuer, while in possession of
material information with respect to the issuer or the security that is not generally available to the public,
unless: (a) The insider proves that the information was not gained from such relationship; or (b) If the
other party selling to or buying from the insider (or his agent) is identified, the insider proves: (i) that he
disclosed the information to the other party, or (ii) that he had reason to believe that the other party
otherwise is also in possession of the information. A purchase or sale of a security of the issuer made by
an insider defined in Subsection 3.8, or such insider's spouse or relatives by affinity or consanguinity
within the second degree, legitimate or common-law, shall be presumed to have been effected while in
possession of material non-public information if transacted after such information came into existence but
prior to dissemination of such information to the public and the lapse of a reasonable time for the market
to absorb such information: Provided, however, That this presumption shall be rebutted upon a showing
by the purchaser or seller that he was not aware of the material non-public information at the time of the
purchase or sale.
27.2. For purposes of this Section, information is "material non-public" if: (a) It has not been generally
disclosed to the public and would likely affect the market price of the security after being disseminated to
the public and the lapse of a reasonable time for the market to absorb the information; or (b) would be
considered by a reasonable person important under the circumstances in determining his course of action
whether to buy, sell or hold a security.
27.3. It shall be unlawful for any insider to communicate material non-public information about the issuer
or the security to any person who, by virtue of the communication, becomes an insider as defined in
Subsection 3.8, where the insider communicating the information knows or has reason to believe that
such person will likely buy or sell a security of the issuer while in possession of such information.
27.4. a) It shall be unlawful where a tender offer has commenced or is about to commence for:
(i) Any person (other than the tender offeror) who is in possession of material non-public information
relating to such tender offer, to buy or sell the securities of the issuer that are sought or to be sought by
such tender offer if such person knows or has reason to believe that the information is non-public and has
been acquired directly or indirectly from the tender offeror, those acting on its behalf, the issuer of the
securities sought or to be sought by such tender offer, or any insider of such issuer; and
(ii) Any tender offeror, those acting on its behalf, the issuer of the securities sought or to be sought by
such tender offer, and any insider of such issuer to communicate material non-public information relating
to the tender offer to any other person where such communication is likely to result in a violation of
Subsection 27.4 (a)(i).
(b) For purposes of this subsection the term "securities of the issuer sought or to be sought by such
tender offer" shall include any securities convertible or exchangeable into such securities or any options
or rights in any of the foregoing securities.
69 SEC. 23. Transactions of Directors, Officers and Principal Stockholders.
23.1. Every person who is directly or indirectly the beneficial owner of more than ten per centum (10%) of
any class of any equity security which satisfies the requirements of Subsection 17.2, or who is a director
or an officer of the issuer of such security, shall file, at the time either such requirement is first satisfied
or within ten days after he becomes such a beneficial owner, director, or officer, a statement with the
Commission and, if such security is listed for trading on an Exchange, also with the Exchange, of the
amount of all equity securities of such issuer of which he is the beneficial owner, and within ten (10) days
after the close of each calendar month thereafter, if there has been a change in such ownership during
such month, shall file with the Commission, and if such security is listed for trading on an Exchange, shall
also file with the Exchange, a statement indicating his ownership at the close of the calendar month and
such changes in his ownership as have occurred during such calendar month.
70 SEC. 53. Investigations, Injunctions and Prosecution of Offenses. - 53.1 The Commission may, in its
discretion, make such investigations as it deems necessary to determine whether any person has violated
or is about to violate any provision of this Code, any rule, regulation or order thereunder, or any rule of an
Exchange, registered securities association, clearing agency, other self-regulatory organization, and may
require or permit any person to file with it a statement in writing, under oath or otherwise, as the
Commission shall determine, as to all facts and circumstances concerning the matter to be investigated.
The Commission may publish information concerning any such violations, and to investigate any fact,
condition, practice or matter which it may deem necessary or proper to aid in the enforcement of the
provisions of this Code, in prescribing of rules and regulations thereunder, or in securing information to
serve as a basis for recommending further legislation concerning the matters to which this Code relates:
Provided, however, That any person requested or subpoenaed to produce documents or testify in any
investigation shall simultaneously be notified in writing of the purpose of such investigation: Provided,
further, That all criminal complaints for violations of this Code, and the implementing rules and
regulations enforced or administered by the Commission shall be referred to the Department of Justice for
preliminary investigation and prosecution before the proper court: Provided, furthermore, That in
instances where the law allows independent civil or criminal proceedings of violations arising from the
same act, the Commission shall take appropriate action to implement the same: Provided, finally,That the
investigation, prosecution, and trial of such cases shall be given priority.
71 SEC. 54. Administrative Sanctions. - 54.1 If after due notice and hearing, the Commission finds that:
(a) There is a violation of this Code, its rules, or its orders; (b) Any registered broker or dealer, associated
person thereof has failed reasonably to supervise, with a view to preventing violations, another person
subject to supervision who commits any such violation; (c) Any registrant or other person has, in a
registration statement or in other reports, applications, accounts, records or documents required by law
or rules to be filed with the Commission, made any untrue statement of a material fact, or omitted to
state any material fact required to be stated therein or necessary to make the statements therein not
misleading; or, in the case of an underwriter, has failed to conduct an inquiry with reasonable diligence to
insure that a registration statement is accurate and complete in all material respects; or (d) Any person
has refused to permit any lawful examinations into its affairs, it shall in its discretion, and subject only to
the limitations hereinafter prescribed, impose any or all of the following sanctions as may be appropriate
in light of the facts and circumstances.
72 G.R. No. 141510, 13 August 2004, 436 SCRA 438, 458.
73 Rollo, p. 649-652.
74 Section 1. Violation penalized by special acts shall, unless otherwise provided in such acts, prescribe in
accordance with the following rules: (a) imprisonment for not more than one month, or both; (b) after four
years for those punished by imprisonment for more than one month, but less than two years; (c) after
eight years for those punished by imprisonment for two years or more, but less than six years; and (d)
after twelve years for any other offense punished by imprisonment for six years or more, except the
crime of treason, which shall prescribe after twenty years: provided, however, That all offenses against
any law or par of law administered by the Bureau of Internal Revenue shall prescribe after five years.
Violations penalized by municipal ordinances shall prescribe after two months. (Emphasis provided.)
75 Llenes v. Dicdican, G.R. No. 122274, 31 July 1986, 260 SCRA 207, 217-220; and Baytan v. Commission
on Elections, G.R. No. 153945, 4 February 2003, 396 SCRA 703, 713.
76 Bautista v. Court of Appeals, G.R. No. 143375, 6 July 2001, 360 SCRA 618, 623.
77 G.R. No. 168380, 8 February 2007.
78 The Revised Securities Act provides that:
Sec. 45. Investigations, injunctions and prosecution of offenses. — (a) The Commission may, in its
discretion, make such investigations as it deems necessary to determine whether any person
has violated or is about to violate any provision of this Act or any rule or regulation
thereunder, and may require or permit any person to file with it a statement in writing, under oath or
otherwise, as the Commission shall determine, as to all facts and circumstances concerning the matter to
be investigated. The Commission is authorized, in its discretion, to publish information concerning any
such violations, and to investigate any fact, condition, practice or matter which it may deem necessary or
proper to aid in the enforcement of the provisions of this Act, in the prescribing of rules and regulations
thereunder, or in securing information to serve as a basis for recommending further legislation
concerning the matters to which this Act relates: Provided, however, That no such investigation shall be
conducted unless the person investigated is furnished with a copy of any complaint which may have been
the cause of the initiation of the investigation or is notified in writing of the purpose of such investigation:
Provided, further, That all criminal complaints for violations of this Act, and the implementing rules and
regulations enforced or administered by the Commission shall be referred to the National Prosecution
Service of the Ministry of Justice for preliminary investigation and prosecution before the proper court:
and, Provided, finally, That the investigation, prosecution, and trial of such cases shall be given priority.
(Emphasis provided.)
The Securities Regulations Code provides that:
SEC. 53. Investigations, Injunctions and Prosecution of Offenses . - 53.1. The Commission may, in its
discretion, make such investigations as it deems necessary to determine whether any person has violated
or is about to violate any provision of this Code, any rule, regulation or order thereunder, or any rule of an
Exchange, registered securities association, clearing agency, other self-regulatory organization, and may
require or permit any person to file with it a statement in writing, under oath or otherwise, as the
Commission shall determine, as to all facts and circumstances concerning the matter to be investigated.
The Commission may publish information concerning any such violations, and to investigate any fact,
condition, practice or matter which it may deem necessary or proper to aid in the enforcement of the
provisions of this Code, in the prescribing of rules and regulations thereunder, or in securing information
to serve as a basis for recommending further legislation concerning the matters to which this Code
relates: Provided, however, That any person requested or subpoenaed to produce documents or testify in
any investigation shall simultaneously be notified in writing of the purpose of such
investigation: Provided, further, That all criminal complaints for violations of this Code, and the
implementing rules and regulations enforced or administered by the Commission shall be referred to the
Department of Justice for preliminary investigation and prosecution before the proper court: Provided,
furthermore, That in instances where the law allows independent civil or criminal proceedings of
violations arising from the same act, the Commission shall take appropriate action to implement the
same: Provided, finally, That the investigation, prosecution, and trial of such cases shall be given priority.
79 Rollo, p. 32.
80 G.R. No. 168380, 8 February 2007, 515 SCRA 170.
81 Id.
82 Section 5.2 of Republic Act No. 8799, known as the Securities Regulations Code, enacted on 19 July
2000, reads:
5.2 The Commission's jurisdiction over all cases enumerated under Section 5 of Presidential Decree No.
902-A is hereby transferred to the Courts of general jurisdiction or the appropriate Regional Trial Court:
Provided, That the Supreme Court in the exercise of its authority may designate the Regional Trial Court
branches that shall exercise jurisdiction over these cases. The Commission shall retain jurisdiction over
pending cases involving intra-corporate disputes submitted for final resolution which should be resolved
within one (1) year from the enactment of this Code. The Commission shall retain jurisdiction over
pending suspension of payments/rehabilitation cases filed as of 30 June 2000 until finally disposed.
CARPIO, J.:
1 G.R. No. 102342, 3 July 1991, 211 SCRA 277.
2 Section 1 of Act No. 3326 provides: "Violations penalized by special acts shall, unless otherwise
provided in such acts, prescribe in accordance with the following rules: (a) after a year for offences
punished only by a fine or by imprisonment for not more than one month, or both; (b) after four years for
those punished by imprisonment for more than one month, but less than two years; (c) after eight years
for those punished by imprisonment for two years or more, but less than six years; and (d) after twelve
years for any other offence punished by imprisonment for six years or more, except the crime of treason,
which shall prescribe after twenty years. Violations penalized by municipal ordinances shall prescribe
after two months." (Emphasis supplied)
3 Section 54 of the Securities Regulation Code provides: "Administrative Sanctions. — 54.1. If, after due
notice and hearing, the Commission finds that: (a) There is a violation of this Code, its rules, or its orders;
(b) Any registered broker or dealer, associated person thereof has failed reasonably to supervise, with a
view to preventing violations, another person subject to supervision who commits any such violation; (c)
Any registrant or other person has, in a registration statement or in other reports, applications, accounts,
records or documents required by law or rules to be filed with the Commission, made any untrue
statement of a material fact, or omitted to state any material fact required to be stated therein or
necessary to make the statements therein not misleading; or, in the case of an underwriter, has failed to
conduct an inquiry with reasonable diligence to insure that a registration statement is accurate and
complete in all material respects; or (d) Any person has refused to permit any lawful examinations into its
affairs, it shall, in its discretion, and subject only to the limitations hereinafter prescribed, impose any or
all of the following sanctions as may be appropriate in light of the facts and circumstances:
(i) Suspension, or revocation of any registration for the offering of securities;
(ii) A fine of no less than Ten thousand pesos (P10,000.00) nor more than One million pesos
(P1,000,000.00) plus not more than Two thousand pesos (P2,000.00) for each day of continuing violation;
(iii) In the case of a violation of Sections 19.2, 20, 24, 26 and 27, disqualification from being an officer,
member of the Board of Directors, or person performing similar functions, of an issuer required to file
reports under Section 17 of this Code or any other act, rule or regulation administered by the
Commission;
(iv) In the case of a violation of Section 34, a fine of no more than three (3) times the profit gained or loss
avoided as a result of the purchase, sale or communication proscribed by such Section; and
(v) Other penalties within the power of the Commission to impose.
54.2. The imposition of the foregoing administrative sanctions shall be without prejudice to the filing of
criminal charges against the individuals responsible for the violation.
54.3. The Commission shall have the power to issue writs of execution to enforce the provisions of this
Section and to enforce payment of the fees and other dues collectible under this Code.
4 Section 53.1 of the Securities Regulation Code provides that "all criminal complaints for violations
of this Code, and the implementing rules and regulations enforced or administered by the Commission
shall be referred to the Department of Justice for preliminary investigation and prosecution before the
proper court." Section 45 of the old Revised Securities Act contained substantially the same provision.
TINGA, J.:
1 See ColiN Chapman, How the Stock Market Works (1988 ed.), pp. 151-152.
2 See R. Jennings, H. Marsh, Jr., J. Coffee, Jr. and J. Salgiman, Securities REgulation: Cases and Materials
(8th ed., 1998), pp. 1-6.
3 F. Babozzi and F. Modigliani, Capital Markets (3rd ed., 2006).
4 "Generally speaking, insider trading is trading in securities while in possession of material nonpublic
information." S. Bainbridge, Corporation Law and Economics (2002 ed.), p. 519.
5 Matter of Cady, Roberts & Co., 40 SEC 907, 912 (1961); cited in Texas Gulf Sulpher Co., 401 F.2d 833
(2d Cir. 1968).
6 Bainbridge, supra note 4 at 520 citing H.L. Wilgus, Purchase of Shares of a Corporation by a Director
from a Shareholder, 8 Mich. L. Rev. 267, 267 (1910).
7 Id., citing Carpenter v. Danforth, 52 Barb. 581 589 (N.Y.Sup. Ct.1868).
8 45 S.E. 232 (Ga.1903)
9 Id.
10 213 U.S. 419 (1909).
11 See R. Jennings, H. Marsh Jr., J. Coffee Jr. and J. Seligman, supra note 2 at 2; citing H.R.Rep. No. 85,
73d Cong., 1st Sess. 2 (1933).
12 Id.
13 15 U.S.C. § 78j(b).
14 Bainbridge, supra note 4 at 525.
15 Id. at 526.
16 Id. at 527.
17 17 CFR §240.10b-5.
18 "According to one account, the decision to adopt the rule and model it on section 17(a) [of the 1933
Securities Exchange Act] was arrived at without any deliberation, with the only official discussion
consisting of one SEC Commissioner reportedly observing, "we are against fraud, aren't we?" T.L. Hazen,
The Law of Securities Regulation (4th ed., 2002), at 571; citing J. Blackmun, dissenting, Blue Chips
Stamps v. Manor Drug Stores, 421 U.S. 723, 767 (1975).
19 Id. at 570-571.
20 Supra note 5.
21 Bainbridge, supra note 4 at 528.
22 Particularly, through the case of SEC v. Texas Gulf Sulphur Co., 401 F.2d 833 (2d Cir.1968), which has
been described as "the first of the truly seminal insider trading cases," even though much of its core
insider trading holding had since been rejected by the U.S. Supreme Court. See Bainbridge, supra note 4,
at 529.
23 U.S. v. Chiarella, 445 U.S. 222 (1980).
24 Dirks v. SEC, 463 U.S. 646 (1984).
25 See Bainbridge, supra note 4, at 537.
26 Financial Securities and Markets Act of 2000, Part VIII (118)(2)(a).
27 See Sec. 1, Com. Act No. 83 (1936).
28 See Sec. 20, Com. Act No. 83 (1936)
29 See Sec. 21, Com. Act No. 83 (1936).
30 Rules Requiring Disclosure of Material Facts by Corporations whose Securities are Listed in any Stock
Exchange or Registered/Licensed Under the Revised Securities Act, dated 29 January 1973.
31 See R. Morales, The Philippine Securities Regulation Code (Annotated) (2002 ed.) at 199.
32 Id.
33 A similar provision is found in Section 53 of the Securities Regulation Code of 2008.
34 G.R. No. 168380, 8 February 2007, 515 SCRA 515.
35 The first phase was the preliminary examination for the determination of the fact of commission of the
offense and the existence of probable cause, as well as the issuance of the warrant of arrest. The second
phase was the preliminary investigation proper (after arrest, for the determination of whether there was a
prima facie case against the accused and whether the issuance of the arrest warrant was justified).
36 125 Phil. 895 (1967).
37 Id.
38 Entitled "An Act To Establish Periods of Prescription for Violation Penalized by Special Acts and
Municipals Ordinances And To Provide When Prescription Shall Begin To Act."
39 9 Phil. 509 (1908).
40 46 Phil. 380.
41 9 Phil. 509, 511.
42 52 Phil. 712 (1929).
43 52 Phil. 712, 715.
44 G.R. No. L-22465, 28 February 1967.
*LEONARDO A. QUISUMBING
Acting Chief Justice
CONCHITA CARPIO MORALES DANTE O. TINGA
Associate Justice Associate Justice
PRESBITERO J. VELASCO, JR.
Associate Justice
CERTIFICATION
Pursuant to Section 13, Article VIII of the Constitution, and the Division Chairperson's Attestation, it is
hereby certified that the conclusions in the above Decision were reached in consultation before the case
was assigned to the writer of the opinion of the Court's Division.
LEONARDO A. QUISUMBING
Acting Chief Justice
Footnotes
* Acting Chief Justice.
1 See Paragraph 3 of the Application; records, p. 96.
2 Id., pp. 98-101.
3 Id., pp. 108-109.
4 Sec. 168. Unfair Competition, Rights, Regulations and Remedies. -
xxx xxx xxx
Sec. 168.3: In particular, and without in any way limiting the scope of protection against unfair
competition, the following shall be deemed guilty of unfair competition:
xxx
(c) Any person who shall make any false statement in the course of trade or who shall commit any other
act contrary to good faith of a nature calculated to discredit the goods, business or service of another.
5 Sec. 170. Penalties. - Independent of the civil and administrative sanctions imposed by law, a criminal
penalty of imprisonment from two years to five years and a fine ranging from Fifty thousand pesos
(P50,000) to Two hundred thousand pesos (P200,000), shall be imposed on any person who is found
guilty of committing any of the acts mentioned in Section 155, Section 168 and Subsection 169.1.
6 Penned by Pairing Judge Irma Isidora M. Boncodin, MTC, Branch 1, Naga; records, p. 23.
7 Penned by Acting Presiding Judge Jose P. Nacional, MTC, Branch 1, Naga; id, p. 22.
8 Decision penned by Judge Ramon A. Cruz, RTC, Branch 21; id., pp. 202-211.
9 Id., p. 210.
10 Rule 126, Section 1. Search warrant defined. - A search warrant is an order in writing issued in the
name of the People of the Philippines, signed by a judge and directed to a peace officer, commanding him
to search for personal property described therein and bring it before the court.
11 Rule 126, Section 3. Personal property to be seized. - A search warrant may be issued for the search
and seizure of personal property:
(a) Subject of the offense;
(b) Stolen or embezzled and other proceeds or fruits of the offense; or
(c) Used or intended to be used as the means of committing an offense.
12 La Chemise Lacoste, S. A. v. Judge Fernandez, G.R. Nos. 63796-97, May 21, 1984, 129 SCRA 373.
13 Alhambra Cigar & Cigarette Manufacturing Co v. Mojica, 27 Phil. 266 (1914).
14 Compania General de Tabacos de Filipinas v. Alhambra Cigar & Cigarette Manufacturing Co., 33 Phil.
485 (1916).
15 Agpalo, Statutory Construction, 3rd (1995) Ed., at p. 159, citing Co Kim Chan v. Valdez Tan Keh, 75
Phil 371, and Soriano v. Sandiganbayan, G.R. No. 65952, July 1, 1984, among others.
16 Supra note 12, pp. 705-706.
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