343, 346, 349, 357, 358, 362, 367, 370, 382, 385, 386, 396-
397, 405, 438-440, 444- 445, 473, 486, 488, 498, 501, 399,
CHAPTER 1
EFFECT & APLICATION OF LAW
ARTICLES 1-18
I. PUBLICATION & EFFECTIVITY OF LAW, WHICH LAWS
MUST BE PUBLISHED, WHICH NEED NOT
1. TANADA V TUVERA GR 63915
ESCOLIN, J.:
Invoking the people's right to be informed on matters of public
concern, a right recognized in Section 6, Article IV of the 1973
Philippine Constitution, 1 as well as the principle that laws to be
valid and enforceable must be published in the Official Gazette or
otherwise effectively promulgated, petitioners seek a writ of
mandamus to compel respondent public officials to publish,
and/or cause the publication in the Official Gazette of various
presidential decrees, letters of instructions, general orders,
proclamations, executive orders, letter of implementation and
administrative orders.
Specifically, the publication of the following presidential issuances
is sought:
a] Presidential Decrees Nos. 12, 22, 37, 38, 59, 64, 103, 171,
179, 184, 197, 200, 234, 265, 286, 298, 303, 312, 324, 325,
326, 337, 355, 358, 359, 360, 361, 368, 404, 406, 415, 427,
429, 445, 447, 473, 486, 491, 503, 504, 521, 528, 551, 566,
573, 574, 594, 599, 644, 658, 661, 718, 731, 733, 793, 800,
802, 835, 836, 923, 935, 961, 1017-1030, 1050, 1060-1061,
1085, 1143, 1165, 1166, 1242, 1246, 1250, 1278, 1279, 1300,
1644, 1772, 1808, 1810, 1813-1817, 1819-1826, 1829-1840,
18421847.
b] Letter of Instructions Nos.: 10, 39, 49, 72, 107, 108, 116,
130, 136, 141, 150, 153, 155, 161, 173, 180, 187, 188, 192,
193, 199, 202, 204, 205, 209, 211-213, 215-224, 226-228, 231-
239, 241-245, 248, 251, 253-261, 263-269, 271-273, 275-283,
285289, 291, 293, 297-299, 301-303, 309, 312-315, 325, 327,
527, 561, 576, 587, 594, 599, 600, 602, 609, 610, 611, 612,
615, 641, 642, 665, 702, 712-713, 726, 837-839, 878-879, 881,
882, 939-940, 964,997,11491178,1180-1278.
c] General Orders Nos.: 14, 52, 58, 59, 60, 62, 63, 64 & 65.
d] Proclamation Nos.: 1126, 1144, 1147, 1151, 1196, 1270,
1281, 1319-1526, 1529, 1532, 1535, 1538, 1540-1547, 1550-
1558, 1561-1588, 1590-1595, 1594-1600, 16061609, 1612-
1628, 1630-1649, 1694-1695, 1697-1701, 1705-1723, 1731-
1734, 17371742, 1744, 1746-1751, 1752, 1754, 1762, 1764-
1787, 1789-1795, 1797, 1800,
1802-1804, 1806-1807, 1812-1814, 1816, 1825-1826, 1829,
1831-1832, 1835-1836, 1839-1840, 1843-1844, 1846-1847,
1849, 1853-1858, 1860, 1866, 1868, 1870, 1876-1889, 1892,
1900, 1918, 1923, 1933, 1952, 1963, 1965-1966, 1968-1984,
1986-2028, 2030-2044, 2046-2145, 2147-2161, 2163-2244.
e] Executive Orders Nos.: 411, 413, 414, 427, 429-454, 457-
471, 474-492, 494-507, 509-510, 522, 524-528, 531-532, 536,
538, 543-544, 549, 551-553, 560, 563, 567568, 570, 574, 593,
594, 598-604, 609, 611- 647, 649-677, 679-703, 705-707,
712786, 788-852, 854-857.
f] Letters of Implementation Nos.: 7, 8, 9, 10, 11-22, 25-27, 39,
50, 51, 59, 76, 80-81, 92, 94, 95, 107, 120, 122, 123.
g] Administrative Orders Nos.: 347, 348, 352-354, 360- 378,
380-433, 436-439.
The respondents, through the Solicitor General, would have this
case dismissed outright on the ground that petitioners have no
legal personality or standing to bring the instant petition. The
view is submitted that in the absence of any showing that
petitioners are personally and directly affected or prejudiced by
the alleged non-publication of the presidential issuances in
question 2 said petitioners are without the requisite legal
personality to institute this mandamus proceeding, they are not
being "aggrieved parties" within the meaning of Section 3, Rule
65 of the Rules of Court, which we quote:
SEC. 3. Petition for Mandamus.When any tribunal, corporation,
board or person unlawfully neglects the performance of an act
which the law specifically enjoins as a duty resulting from an
office, trust, or station, or unlawfully excludes another from the
use a rd enjoyment of a right or office to which such other is
entitled, and there is no other plain, speedy and adequate
remedy in the ordinary course of law, the person aggrieved
thereby may file a verified petition in the proper court alleging
the facts with certainty and praying that judgment be rendered
commanding the defendant, immediately or at some other
specified time, to do the act required to be done to Protect the
rights of the petitioner, and to pay the damages sustained by the
petitioner by reason of the wrongful acts of the defendant.
Upon the other hand, petitioners maintain that since the subject
of the petition concerns a public right and its object is to compel
the performance of a public duty, they need not show any specific
interest for their petition to be given due course.
The issue posed is not one of first impression. As early as the
1910 case of Severino vs. Governor General, 3 this Court held
that while the general rule is that "a writ of mandamus would be
granted to a private individual only in those cases where he has
some private or particular interest to be subserved, or some
particular right to be protected, independent of that which he
holds with the public at large," and "it is for the public officers
exclusively to apply for the writ when public rights are to be
subserved [Mithchell vs. Boardmen, 79 M.e., 469]," nevertheless,
"when the question is one of public right and the object of the
mandamus is to procure the enforcement of a public duty, the
people are regarded as the real party in interest and the relator
at whose instigation the proceedings are instituted need not show
that he has any legal or special interest in the result, it being
sufficient to show that he is a citizen and as such interested in
the execution of the laws [High, Extraordinary Legal Remedies,
3rd ed., sec. 431].
Thus, in said case, this Court recognized the relator Lope
Severino, a private individual, as a proper party to the
mandamus proceedings brought to compel the Governor General
to call a special election for the position of municipal president in
the town of Silay, Negros Occidental. Speaking for this Court, Mr.
Justice Grant T. Trent said:
We are therefore of the opinion that the weight of authority
supports the proposition that the relator is a proper party to
proceedings of this character when a public right is sought to be
enforced. If the general rule in America were otherwise, we think
that it would not be applicable to the case at bar for the reason
'that it is always dangerous to apply a general rule to a particular
case without keeping in mind the reason for the rule, because, if
under the particular circumstances the reason for the rule does
not exist, the rule itself is not applicable and reliance upon the
rule may well lead to error'
No reason exists in the case at bar for applying the general rule
insisted upon by counsel for the respondent. The circumstances
which surround this case are different from those in the United
States, inasmuch as if the relator is not a proper party to these
proceedings no other person could be, as we have seen that it is
not the duty of the law officer of the Government to appear and
represent the people in cases of this character.
The reasons given by the Court in recognizing a private citizen's
legal personality in the aforementioned case apply squarely to the
present petition. Clearly, the right sought to be enforced by
petitioners herein is a public right recognized by no less than the
fundamental law of the land. If petitioners were not allowed to
institute this proceeding, it would indeed be difficult to conceive
of any other person to initiate the same, considering that the
Solicitor General, the government officer generally empowered to
represent the people, has entered his appearance for respondents
in this case.
Respondents further contend that publication in the Official
Gazette is not a sine qua non requirement for the effectivity of
laws where the laws themselves provide for their own effectivity
dates. It is thus submitted that since the presidential issuances in
question contain special provisions as to the date they are to take
effect, publication in the Official Gazette is not indispensable for
their effectivity. The point stressed is anchored on Article 2 of the
Civil Code:
Art. 2. Laws shall take effect after fifteen days following the
completion of their publication in the Official Gazette, unless it is
otherwise provided, ...
The interpretation given by respondent is in accord with this
Court's construction of said article. In a long line of decisions, 4
this Court has ruled that publication in the Official Gazette is
necessary in those cases where the legislation itself does not
provide for its effectivity date-for then the date of publication is
material for determining its date of effectivity, which is the
fifteenth day following its publication-but not when the law itself
provides for the date when it goes into effect.
Respondents' argument, however, is logically correct only insofar
as it equates the effectivity of laws with the fact of publication.
Considered in the light of other statutes applicable to the issue at
hand, the conclusion is easily reached that said Article 2 does not
preclude the requirement of publication in the Official Gazette,
even if the law itself provides for the date of its effectivity. Thus,
Section 1 of Commonwealth Act 638 provides as follows:
Section 1. There shall be published in the Official Gazette [1] all
importantlegisiative acts and resolutions of a public nature of the,
Congress of the Philippines; [2] all executive and administrative
orders and proclamations, except such as have no general
applicability; [3] decisions or abstracts of decisions of the
Supreme Court and the Court of Appeals as may be deemed by
said courts of sufficient importance to be so published; [4] such
documents or classes of documents as may be required so to be
published by law; and [5] such documents or classes of
documents as the President of the Philippines shall determine
from time to time to have general applicability and legal effect, or
which he may authorize so to be published. ...
The clear object of the above-quoted provision is to give the
general public adequate notice of the various laws which are to
regulate their actions and conduct as citizens. Without such
notice and publication, there would be no basis for the application
of the maxim "ignorantialegis non excusat." It would be the
height of injustice to punish or otherwise burden a citizen for the
transgression of a law of which he had no notice whatsoever, not
even a constructive one.
Perhaps at no time since the establishment of the Philippine
Republic has the publication of laws taken so vital significance
that at this time when the people have bestowed upon the
President a power heretofore enjoyed solely by the legislature.
While the people are kept abreast by the mass media of the
debates and deliberations in the BatasanPambansaand for the
diligent ones, ready access to the legislative recordsno such
publicity accompanies the law-making process of the President.
Thus, without publication, the people have no means of knowing
what presidential decrees have actually been promulgated, much
less a definite way of informing themselves of the specific
contents and texts of such decrees. As the Supreme Court of
Spain ruled: "Bajo la denominaciongenerica de leyes, se
comprendentambienlosreglamentos, Realesdecretos,
Instrucciones, Circulares y Reales ordines dictadas de
conformidad con las mismaspor el Gobiernoenuso de supotestad.
5 The Court therefore declares that presidential issuances of
The very first clause of Section I of Commonwealth Act 638
reads: "There shall be published in the Official Gazette ... ." The
word "shall" used therein imposes upon respondent officials an
imperative duty. That duty must be enforced if the Constitutional
right of the people to be informed on matters of public concern is
to be given substance and reality. The law itself makes a list of
what should be published in the Official Gazette. Such listing, to
our mind, leaves respondents with no discretion whatsoever as to
what must be included or excluded from such publication.
The publication of all presidential issuances "of a public nature" or
"of general applicability" is mandated by law. Obviously,
presidential decrees that provide for fines, forfeitures or penalties
for their violation or otherwise impose a burden or. the people,
such as tax and revenue measures, fall within this category.
Other presidential issuances which apply only to particular
persons or class of persons such as administrative and executive
orders need not be published on the assumption that they have
been circularized to all concerned. 6
It is needless to add that the publication of presidential issuances
"of a public nature" or "of general applicability" is a requirement
of due process. It is a rule of law that before a person may be
bound by law, he must first be officially and specifically informed
of its contents. As Justice Claudio Teehankee said in Peralta vs.
COMELEC 7:
In a time of proliferating decrees, orders and letters of
instructions which all form part of the law of the land, the
requirement of due process and the Rule of Law demand that the
Official Gazette as the official government repository promulgate
and publish the texts of all such decrees, orders and instructions
so that the people may know where to obtain their official and
specific contents.
general application, which have not been published, shall have no
force and effect. Some members of the Court, quite apprehensive
about the possible unsettling effect this decision might have on
acts done in reliance of the validity of those presidential decrees
which were published only during the pendency of this petition,
have put the question as to whether the Court's declaration of
invalidity apply to P.D.s which had been enforced or implemented
prior to their publication. The answer is all too familiar. In similar
situations in the past this Court had taken the pragmatic and
realistic course set forth in Chicot County Drainage District vs.
Baxter Bank 8 to wit:
The courts below have proceeded on the theory that the Act of
Congress, having been found to be unconstitutional, was not a
law; that it was inoperative, conferring no rights and imposing no
duties, and hence affording no basis for the challenged decree.
Norton v. Shelby County, 118 U.S. 425, 442; Chicago, 1.& L. Ry.
Co. v. Hackett, 228 U.S. 559, 566. It is quite clear, however, that
such broad statements as to the effect of a determination of
unconstitutionality must be taken with qualifications. The actual
existence of a statute, prior to such a determination, is an
operative fact and may have consequences which cannot justly
be ignored. The past cannot always be erased by a new judicial
declaration. The effect of the subsequent ruling as to invalidity
may have to be considered in various aspects-with respect to
particular conduct, private and official. Questions of rights
claimed to have become vested, of status, of prior determinations
deemed to have finality and acted upon accordingly, of public
policy in the light of the nature both of the statute and of its
previous application, demand examination. These questions are
among the most difficult of those which have engaged the
attention of courts, state and federal and it is manifest from
numerous decisions that an all-inclusive statement of a principle
of absolute retroactive invalidity cannot be justified.
Consistently with the above principle, this Court in Rutter vs.
Esteban 9 sustained the right of a party under the Moratorium
Law, albeit said right had accrued in his favor before said law was
declared unconstitutional by this Court.
Similarly, the implementation/enforcement of presidential
decrees prior to their publication in the Official Gazette is "an
operative fact which may have consequences which cannot be
justly ignored. The past cannot always be erased by a new
judicial declaration ... that an all-inclusive statement of a
principle of absolute retroactive invalidity cannot be justified."
From the report submitted to the Court by the Clerk of Court, it
appears that of the presidential decrees sought by petitioners to
be published in the Official Gazette, only Presidential Decrees
Nos. 1019 to 1030, inclusive, 1278, and 1937 to 1939, inclusive,
have not been so published. 10 Neither the subject matters nor
the texts of these PDs can be ascertained since no copies thereof
are available. But whatever their subject matter may be, it is
undisputed that none of these unpublished PDs has ever been
implemented or enforced by the government. In Pesigan vs.
Angeles, 11 the Court, through Justice Ramon Aquino, ruled that
"publication is necessary to apprise the public of the contents of
[penal] regulations and make the said penalties binding on the
persons affected thereby. " The cogency of this holding is
apparently recognized by respondent officials considering the
manifestation in their comment that "the government, as a
matter of policy, refrains from prosecuting violations of criminal
laws until the same shall have been published in the Official
Gazette or in some other publication, even though some criminal
laws provide that they shall take effect immediately.
WHEREFORE, the Court hereby orders respondents to publish in
the Official Gazette all unpublished presidential issuances which
are of general application, and unless so published, they shall
have no binding force and effect.
SO ORDERED.
2. DADOLE V COA GR 125350
CORONA, J.:
Before us is a petition for certiorari under Rule 64 to annul
the decision1 and resolution2, dated September 21, 1995
and May 28, 1996, respectively, of the respondent
Commission on Audit (COA) affirming the notices of the
Mandaue City Auditor which diminished the monthly
additional allowances received by the petitioner judges of
the Regional Trial Court (RTC) and Municipal Trial Court
(MTC) stationed in Mandaue City.
The undisputed facts are as follows:
In 1986, the RTC and MTC judges of Mandaue City started
receiving monthly allowances of P1,260 each through the
yearly appropriation ordinance enacted by the
SangguniangPanlungsod of the said city. In 1991, Mandaue
City increased the amount to P1,500 for each judge.
On March 15, 1994, the Department of Budget and
Management (DBM) issued the disputed Local Budget
Circular No. 55 (LBC 55) which provided that:
"x xxxxxxxx
2.3.2. In the light of the authority granted to the local
government units under the Local Government Code to
provide for additional allowances and other benefits to
national government officials and employees assigned in
their locality, such additional allowances in the form of
honorarium at rates not exceeding P1,000.00 in provinces
and cities and P700.00 in municipalities may be granted
subject to the following conditions:
a) That the grant is not mandatory on the part of the
LGUs;
b) That all contractual and statutory obligations of the LGU
including the implementation of R.A. 6758 shall have been
fully provided in the budget;
c) That the budgetary requirements/limitations under
Section 324 and 325 of R.A. 7160 should be satisfied
and/or complied with; and
d) That the LGU has fully implemented the devolution of
functions/personnel in accordance with R.A. 7160.3"
(italics supplied)
x xxxxxxxx
The said circular likewise provided for its immediate
effectivity without need of publication:
"5.0 EFFECTIVITY
This Circular shall take effect immediately."
Acting on the DBM directive, the Mandaue City Auditor
issued notices of disallowance to herein petitioners,
namely, Honorable RTC Judges Mercedes G. Dadole, Ulric
R. Caete, Agustin R. Vestil, Honorable MTC Judges
Temistocles M. Boholst, Vicente C. Fanilag and Wilfredo A.
Dagatan, in excess of the amount authorized by LBC 55.
Beginning October, 1994, the additional monthly
allowances of the petitioner judges were reduced to P1,000
each. They were also asked to reimburse the amount they
received in excess of P1,000 from April to September,
1994.
The petitioner judges filed with the Office of the City
Auditor a protest against the notices of disallowance. But
the City Auditor treated the protest as a motion for
reconsideration and indorsed the same to the COA
Regional Office No. 7. In turn, the COA Regional Office
referred the motion to the head office with a
recommendation that the same be denied.
On September 21, 1995, respondent COA rendered a
decision denying petitioners' motion for reconsideration.
The COA held that:
The issue to be resolved in the instant appeal is whether or
not the City Ordinance of Mandaue which provides a higher
rate of allowances to the appellant judges may prevail over
that fixed by the DBM under Local Budget Circular No. 55
dated March 15, 1994.
x xxxxxxxx
Applying the foregoing doctrine, appropriation ordinance of
local government units is subject to the organizational,
budgetary and compensation policies of budgetary
authorities (COA 5th Ind., dated March 17, 1994 re:
Province of Antique; COA letter dated May 17, 1994 re:
Request of Hon. Renato Leviste, Cong. 1st Dist. Oriental
Mindoro). In this regard, attention is invited to
Administrative Order No. 42 issued on March 3, 1993 by
the President of the Philippines clarifying the role of DBM in
the compensation and classification of local government
positions under RA No. 7160 vis-avis the provisions of RA
No. 6758 in view of the abolition of the JCLGPA. Section 1
of said Administrative Order provides that:
"Section 1. The Department of Budget and Management as
the lead administrator of RA No. 6758 shall, through its
Compensation and Position Classification Bureau, continue
to have the following responsibilities in connection with the
implementation of the Local Government Code of 1991:
a) Provide guidelines on the classification of local
government positions and on the specific rates of pay
therefore;
b) Provide criteria and guidelines for the grant of all
allowances and additional forms of compensation to local
government employees; xxx." (underscoring supplied)
To operationalize the aforecited presidential directive, DBM
issued LBC No. 55, dated March 15, 1994, whose
effectivity clause provides that:
x xxxxxxxx
"5.0 EFFECTIVITY
This Circular shall take effect immediately."
It is a well-settled rule that implementing rules and
regulations promulgated by administrative or executive
officer in accordance with, and as authorized by law, has
the force and effect of law or partake the nature of a
statute (Victorias Milling Co., Inc., vs. Social Security
Commission, 114 Phil. 555, cited in Agpalo's Statutory
Construction, 2nd Ed. P. 16; Justice Cruz's Phil. Political
Law, 1984 Ed., p. 103; Espanol vs. Phil Veterans
Administration, 137 SCRA 314; Antique Sawmills Inc. vs.
Tayco, 17 SCRA 316).
x xxxxxxxx
There being no statutory basis to grant additional
allowance to judges in excess of P1,000.00 chargeable
against the local government units where they are
stationed, this Commission finds no substantial grounds or
cogent reason to disturb the decision of the City Auditor,
Mandaue City, disallowing in audit the allowances in
question. Accordingly, the above-captioned appeal of the
MTC and RTC Judges of Mandaue City, insofar as the same
is not covered by Circular Letter No. 91-7, is hereby
dismissed for lack of merit.
x xxxxxxx x4
On November 27, 1995, Executive Judge Mercedes Gozo-
Dadole, for and in behalf of the petitioner judges, filed a
motion for reconsideration of the decision of the COA. In a
resolution dated May 28, 1996, the COA denied the
motion.
Hence, this petition for certiorari by the petitioner judges,
submitting the following questions for resolution:
I On the other hand, the yearly appropriation ordinance
HAS THE CITY OF MANDAUE STATUTORY AND
CONSTITUTIONAL BASIS TO PROVIDE ADDITIONAL
ALLOWANCES AND OTHER BENEFITS TO JUDGES
STATIONED IN AND ASSIGNED TO THE CITY?
II
CAN AN ADMINISTRATIVE CIRCULAR OR GUIDELINE SUCH
AS LOCAL BUDGET CIRCULAR NO. 55 RENDER
INOPERATIVE THE POWER OF THE LEGISLATIVE BODY OF
A CITY BY SETTING A LIMIT TO THE EXTENT OF THE
EXERCISE OF SUCH POWER?
III
HAS THE COMMISSION ON AUDIT CORRECTLY
INTERPRETED LOCAL BUDGET CIRCULAR NO. 55 TO
INCLUDE MEMBERS OF THE JUDICIARY IN FIXING THE
CEILING OF ADDITIONAL ALLOWANCES AND BENEFITS TO
BE PROVIDED TO JUDGES STATIONED IN AND ASSIGNED
TO MANDAUE CITY BY THE CITY GOVERNMENT AT
P1,000.00 PER MONTH NOTWITHSTANDING THAT THEY
HAVE BEEN RECEIVING ALLOWANCES OF P1,500.00
MONTHLY FOR THE PAST FIVE YEARS?
IV
IS LOCAL BUDGET CIRCULAR NO. 55 DATED MARCH 15,
1994 ISSUED BY THE DEPARTMENT OF BUDGET AND
MANAGEMENT VALID AND ENFORCEABLE CONSIDERING
THAT IT WAS NOT DULY PUBLISHED IN ACCODANCE WITH
LAW?5
Petitioner judges argue that LBC 55 is void for infringing on
the local autonomy of Mandaue City by dictating a uniform
amount that a local government unit can disburse as
additional allowances to judges stationed therein. They
maintain that said circular is not supported by any law and
therefore goes beyond the supervisory powers of the
President. They further allege that said circular is void for
lack of publication.
providing for additional allowances to judges is allowed by
Section 458, par. (a)(1)[xi], of RA 7160, otherwise known
as the Local Government Code of 1991, which provides
that:
Sec. 458.Powers, Duties, Functions and Compensation.
(a) The sangguniangpanlungsod, as the legislative body of
the city, shall enact ordinances, approve resolutions and
appropriate funds for the general welfare of the city and its
inhabitants pursuant to Section 16 of this Code and in the
proper exercise of the corporate powers of the city as
provided for under Section 22 of this Code, and shall:
(1) Approve ordinances and pass resolutions necessary for
an efficient and effective city government, and in this
connection, shall:
x xxxxxxxx
(xi) When the finances of the city government allow,
provide for additional allowances and other benefits to
judges, prosecutors, public elementary and high school
teachers, and other national government officials stationed
in or assigned to the city; (italics supplied)
Instead of filing a comment on behalf of respondent COA,
the Solicitor General filed a manifestation supporting the
position of the petitioner judges. The Solicitor General
argues that (1) DBM only enjoys the power to review and
determine whether the disbursements of funds were made
in accordance with the ordinance passed by a local
government unit while (2) the COA has no more than
auditorial visitation powers over local government units
pursuant to Section 348 of RA 7160 which provides for the
power to inspect at any time the financial accounts of local
government units.
Moreover, the Solicitor General opines that "the DBM and
the respondent are only authorized under RA 7160 to
promulgate a Budget Operations Manual for local
government units, to improve and systematize methods,
techniques and procedures employed in budget
preparation, authorization, execution and accountability"
pursuant to Section 354 of RA 7160. The Solicitor General
points out that LBC 55 was not exercised under any of the
aforementioned provisions.
Respondent COA, on the other hand, insists that the
constitutional and statutory authority of a city government
to provide allowances to judges stationed therein is not
absolute. Congress may set limitations on the exercise of
autonomy. It is for the President, through the DBM, to
check whether these legislative limitations are being
followed by the local government units.
One such law imposing a limitation on a local government
unit's autonomy is Section 458, par. (a) (1) [xi], of RA
7160, which authorizes the disbursement of additional
allowances and other benefits to judges subject to the
condition that the finances of the city government should
allow the same. Thus, DBM is merely enforcing the
condition of the law when it sets a uniform maximum
amount for the additional allowances that a city
government can release to judges stationed therein.
Assuming arguendo that LBC 55 is void, respondent COA
maintains that the provisions of the yearly approved
ordinance granting additional allowances to judges are still
prohibited by the appropriation laws passed by Congress
every year. COA argues that Mandaue City gets the funds
for the said additional allowances of judges from the
Internal Revenue Allotment (IRA). But the General
Appropriations Acts of 1994 and 1995 do not mention the
disbursement of additional allowances to judges as one of
the allowable uses of the IRA. Hence, the provisions of said
ordinance granting additional allowances, taken from the
IRA, to herein petitioner judges are void for being contrary
to law.
To resolve the instant petition, there are two issues that
we must address: (1) whether LBC 55 of the DBM is void
for going beyond the supervisory powers of the President
and for not having been published and (2) whether the
yearly appropriation ordinance enacted by the City of
Mandaue that provides for additional allowances to judges
contravenes the annual appropriation laws enacted by
Congress.
We rule in favor of the petitioner judges.
On the first issue, we declare LBC 55 to be null and void.
We recognize that, although our Constitution6 guarantees
autonomy to local government units, the exercise of local
autonomy remains subject to the power of control by
Congress and the power of supervision by the President.
Section 4 of Article X of the 1987 Philippine Constitution
provides that:
Sec. 4. The President of the Philippines shall exercise
general supervision over local governments. x xx
In Pimentel vs. Aguirre7, we defined the supervisory power
of the President and distinguished it from the power of
control exercised by Congress. Thus:
This provision (Section 4 of Article X of the 1987 Philippine
Constitution) has been interpreted to exclude the power of
control. In Mondano v. Silvosa,i 5 the Court contrasted the
President's power of supervision over local government
officials with that of his power of control over executive
officials of the national government. It was emphasized
that the two terms -- supervision and control -- differed in
meaning and extent. The Court distinguished them as
follows:
"x xx
In administrative law, supervision means overseeing or the
power or authority of an officer to see that subordinate
officers perform their duties. If the latter fail or neglect to
fulfill them, the former may take such action or step as
prescribed by law to make them perform their duties.
Control, on the other hand, means the power of an officer
to alter or modify or nullify or set aside what a subordinate
officer ha[s] done in the performance of his duties and to
substitute the judgment of the former for that of the
latter."ii 6
In Taule v. Santos,iii 7 we further stated that the Chief
Executive wielded no more authority than that of checking
whether local governments or their officials were
performing their duties as provided by the fundamental law
and by statutes. He cannot interfere with local
governments, so long as they act within the scope of their
authority. "Supervisory power, when contrasted with
control, is the power of mere oversight over an inferior
body; it does not include any restraining authority over
such body,"iv 8 we said.
In a more recent case, Drilon v. Lim,v 9 the difference
between control and supervision was further delineated.
Officers in control lay down the rules in the performance or
accomplishment of an act. If these rules are not followed,
they may, in their discretion, order the act undone or
redone by their subordinates or even decide to do it
themselves. On the other hand, supervision does not cover
such authority. Supervising officials merely see to it that
the rules are followed, but they themselves do not lay
down such rules, nor do they have the discretion to modify
or replace them. If the rules are not observed, they may
order the work done or redone, but only to conform to
such rules. They may not prescribe their own manner of
execution of the act. They have no discretion on this
matter except to see to it that the rules are followed.
Under our present system of government, executive power
is vested in the President.vi10 The members of the Cabinet
and other executive officials are merely alter egos. As
such, they are subject to the power of control of the
President, at whose will and behest they can be removed
from office; or their actions and decisions changed,
suspended or reversed.vii 11 In contrast, the heads of
political subdivisions are elected by the people. Their
sovereign powers emanate from the electorate, to whom
they are directly accountable. By constitutional fiat, they
are subject to the President's supervision only, not control,
so long as their acts are exercised within the sphere of
their legitimate powers. By the same token, the President
may not withhold or alter any authority or power given
them by the Constitution and the law.
Clearly then, the President can only interfere in the affairs
and activities of a local government unit if he or she finds
that the latter has acted contrary to law. This is the scope
of the President's supervisory powers over local
government units. Hence, the President or any of his or
her alter egos cannot interfere in local affairs as long as
the concerned local government unit acts within the
parameters of the law and the Constitution. Any directive
therefore by the President or any of his or her alter egos
seeking to alter the wisdom of a law-conforming judgment
on local affairs of a local government unit is a patent nullity
because it violates the principle of local autonomy and
separation of powers of the executive and legislative
departments in governing municipal corporations.
Does LBC 55 go beyond the law it seeks to implement?
Yes.
LBC 55 provides that the additional monthly allowances to
be given by a local government unit should not
exceedP1,000 in provinces and cities and P700 in
municipalities. Section 458, par. (a)(1)(xi), of RA 7160,
the law that supposedly serves as the legal basis of LBC
55, allows the grant of additional allowances to judges
"when the finances of the city government allow." The said
provision does not authorize setting a definite maximum
limit to the additional allowances granted to judges. Thus,
we need not belabor the point that the finances of a city
government may allow the grant of additional allowances
higher than P1,000 if the revenues of the said city
government exceed its annual expenditures. Thus, to
illustrate, a city government with locally generated annual
revenues of P40 million and expenditures of P35 million
can afford to grant additional allowances of more
thanP1,000 each to, say, ten judges inasmuch as the
finances of the city can afford it.
Setting a uniform amount for the grant of additional
allowances is an inappropriate way of enforcing the
criterion found in Section 458, par. (a)(1)(xi), of RA 7160.
The DBM over-stepped its power of supervision over local
government units by imposing a prohibition that did not
correspond with the law it sought to implement. In other
words, the prohibitory nature of the circular had no legal
basis.
Furthermore, LBC 55 is void on account of its lack of
publication, in violation of our ruling in Taada vs.
Tuvera8where we held that:
xxx. Administrative rules and regulations must also be
published if their purpose is to enforce or implement
existing law pursuant to a valid delegation.
Interpretative regulations and those merely internal in
nature, that is, regulating only the personnel of an
administrative agency and the public, need not be
published. Neither is publication required of the so-called
letters of instruction issued by administrative superiors
concerning the rules or guidelines to be followed by their
subordinates in the performance of their duties.
Respondent COA claims that publication is not required for
LBC 55 inasmuch as it is merely an interpretative
regulation applicable to the personnel of an LGU. We
disagree. In De Jesus vs. Commission on Audit9 where we
dealt with the same issue, this Court declared void, for lack
of publication, a DBM circular that disallowed payment of
allowances and other additional compensation to
government officials and employees. In refuting
respondent COA's argument that said circular was merely
an internal regulation, we ruled that:
On the need for publication of subject DBM-CCC No. 10, we
rule in the affirmative. Following the doctrine enunciated in
Taada v. Tuvera, publication in the Official Gazette or in a
newspaper of general circulation in the Philippines is
required since DBM-CCC No. 10 is in the nature of an
administrative circular the purpose of which is to enforce or
implement an existing law. Stated differently, to be
effective and enforceable, DBM-CCC No. 10 must go
through the requisite publication in the Official Gazette or
in a newspaper of general circulation in the Philippines.
In the present case under scrutiny, it is decisively clear
that DBM-CCC No. 10, which completely disallows payment
of allowances and other additional compensation to
government officials and employees, starting November 1,
1989, is not a mere interpretative or internal regulation. It
is something more than that. And why not, when it tends
to deprive government workers of their allowance and
additional compensation sorely needed to keep body and
soul together. At the very least, before the said circular
under attack may be permitted to substantially reduce
their income, the government officials and employees
concerned should be apprised and alerted by the
publication of subject circular in the Official Gazette or in a
newspaper of general circulation in the Philippines to the
end that they be given amplest opportunity to voice out
whatever opposition they may have, and to ventilate their
stance on the matter. This approach is more in keeping
with democratic precepts and rudiments of fairness and
transparency. (emphasis supplied)
In Philippine International Trading Corporation vs.
Commission on Audit10, we again declared the same
circular as void, for lack of publication, despite the fact that
it was re-issued and then submitted for publication.
Emphasizing the importance of publication to the effectivity
of a regulation, we therein held that:
It has come to our knowledge that DBM-CCC No. 10 has
been re-issued in its entirety and submitted for publication
in the Official Gazette per letter to the National Printing
Office dated March 9, 1999. Would the subsequent
publication thereof cure the defect and retroact to the time
that the abovementioned items were disallowed in audit?
The answer is in the negative, precisely for the reason that
publication is required as a condition precedent to the
effectivity of a law to inform the public of the contents of
the law or rules and regulations before their rights and
interests are affected by the same. From the time the COA
disallowed the expenses in audit up to the filing of herein
petition the subject circular remained in legal limbo due to
its non-publication. As was stated in Taada v. Tuvera,
"prior publication of laws before they become effective
cannot be dispensed with, for the reason that it would
deny the public knowledge of the laws that are supposed to
govern it."11
We now resolve the second issue of whether the yearly
appropriation ordinance enacted by Mandaue City providing
for fixed allowances for judges contravenes any law and
should therefore be struck down as null and void.
According to respondent COA, even if LBC 55 were void,
the ordinances enacted by Mandaue City granting
additional allowances to the petitioner judges would "still
(be) bereft of legal basis for want of a lawful source of
funds considering that the IRA cannot be used for such
purposes." Respondent COA showed that Mandaue City's
funds consisted of locally generated revenues and the IRA.
From 1989 to 1995, Mandaue City's yearly expenditures
exceeded its locally generated revenues, thus resulting in a
deficit. During all those years, it was the IRA that enabled
Mandaue City to incur a surplus. Respondent avers that
Mandaue City used its IRA to pay for said additional
allowances and this violated paragraph 2 of the Special
Provisions, page 1060, of RA 7845 (The General
Appropriations Act of 1995)12 and paragraph 3 of the
Special Provision, page 1225, of RA 7663 (The General
Appropriations Act of 1994)13 which specifically identified
the objects of expenditure of the IRA. Nowhere in said
provisions of the two budgetary laws does it say that the
IRA can be used for additional allowances of judges.
Respondent COA thus argues that the provisions in the
ordinance providing for such disbursement are against the
law, considering that the grant of the subject allowances is
not within the specified use allowed by the aforesaid yearly
appropriations acts.
We disagree.
Respondent COA failed to prove that Mandaue City used
the IRA to spend for the additional allowances of the
judges. There was no evidence submitted by COA showing
the breakdown of the expenses of the city government and
the funds used for said expenses. All the COA presented
were the amounts expended, the locally generated
revenues, the deficit, the surplus and the IRA received
each year. Aside from these items, no data or figures were
presented to show that Mandaue City deducted the subject
allowances from the IRA. In other words, just because
Mandaue City's locally generated revenues were not
enough to cover its expenditures, this did not mean that
the additional allowances of petitioner judges were taken
from the IRA and not from the city's own revenues.
Moreover, the DBM neither conducted a formal review nor
ordered a disapproval of Mandaue City's appropriation
ordinances, in accordance with the procedure outlined by
Sections 326 and 327 of RA 7160 which provide that:
Section 326.Review of Appropriation Ordinances of
Provinces, Highly Urbanized Cities, Independent
Component Cities, and Municipalities within the
Metropolitan Manila Area. The Department of Budget and
Management shall review ordinances authorizing the
annual or supplemental appropriations of provinces,
highly-urbanized cities, independent component cities, and
municipalities within the Metropolitan Manila Area in
accordance with the immediately succeeding Section.
Section 327. Review of Appropriation Ordinances of
Component Cities and Municipalities.- The
sangguninangpanlalawigan shall review the ordinance
authorizing annual or supplemental appropriations of
component cities and municipalities in the same manner
and within the same period prescribed for the review of
other ordinances.
If within ninety (90) days from receipt of copies of such
ordinance, the sangguniangpanlalawigan takes no action
thereon, the same shall be deemed to have been reviewed
in accordance with law and shall continue to be in full force
and effect. (emphasis supplied)
Within 90 days from receipt of the copies of the
appropriation ordinance, the DBM should have taken
positive action. Otherwise, such ordinance was deemed to
have been properly reviewed and deemed to have taken
effect. Inasmuch as, in the instant case, the DBM did not
follow the appropriate procedure for reviewing the subject
ordinance of Mandaue City and allowed the 90-day period
 to lapse, it can no longer question the legality of the
provisions in the said ordinance granting additional
allowances to judges stationed in the said city.
WHEREFORE, the petition is hereby GRANTED, and the
assailed decision and resolution, dated September 21,
1995 and May 28, 1996, respectively, of the Commission
on Audit are hereby set aside.
No costs.
SO ORDERED.
3. CAWAD V ABAD GR 207145
PERALTA, J.:
Before the Court is a petition for certiorari and prohibition
under Rule 65 of the Rules of Court filed by the officers and
members of the Philippine Public Health Association, Inc.
(PPHAI) assailing the validity of Joint Circular No. 11 dated
November 29, 2012 of the Department of Budget and
Management (DBM) and the Department of Health (DOH)
as well as Item 6.5 of the Joint Circular2 dated September
3, 2012 of the DBM and the Civil Service Commission
(CSC).
The antecedent facts are as follows:
On March 26, 1992, Republic Act (RA) No. 7305,
otherwise known as The Magna Carta of Public Health
Workers was signed into law in order to promote the social
and economic well-being of health workers, their living and
working conditions and terms of employment, to develop
their skills and capabilities to be better equipped to deliver
health projects and programs, and to encourage those with
proper qualifications and excellent abilities to join and
remain in government service.3 Accordingly, public health
workers (PHWs) were granted the following allowances and
benefits, among others:
Section 20.Additional Compensation. - Notwithstanding
Section 12 of Republic Act No. 6758, public health workers
shall receive the following allowances: hazard allowance,
subsistence allowance, longevity pay, laundry allowance
and remote assignment allowance.
Section 21.Hazard Allowance. - Public health workers in
hospitals, sanitaria, rural health units, main health centers,
health infirmaries, barangay health stations, clinics and
other health-related establishments located in difficult
areas, strife-torn or embattled areas, distressed or isolated
stations, prisons camps, mental hospitals,
radiationexposed clinics, laboratories or disease-infested
areas or in areas declared under state of calamity or
emergency for the duration thereof which expose them to
great danger, contagion, radiation, volcanic
activity/eruption, occupational risks or perils to life as
determined by the Secretary of Health or the Head of the
unit with the approval of the Secretary of Health, shall be
compensated hazard allowances equivalent to at least
twenty-five percent (25%) of the monthly basic salary of
health workers receiving salary grade 19 and below, and
five percent (5%) for health workers with salary grade 20
and above.
Section 22.Subsistence Allowance. - Public health workers
who are required to render service within the premises of
hospitals, sanitaria, health infirmaries, main health
centers, rural health units and barangay health stations, or
clinics, and other health-related establishments in order to
make their services available at any and all times, shall be
entitled to full subsistence allowance of three (3) meals
which may be computed in accordance with prevailing
circumstances as determined by the Secretary of Health in
consultation with the Management-Health Worker's
Consultative Councils, as established under Section 33 of
this Act: Provided, That representation and travel
allowance shall be given to rural health physicians as
enjoyed by municipal agriculturists, municipal planning and
development officers and budget officers.
Section 23.Longevity Pay. - A monthly longevity pay
equivalent to five percent (5%) of the monthly basic pay
shall be paid to a health worker for every five (5) years of
continuous, efficient and meritorious services rendered as
certified by the chief of office concerned, commencing with
the service after the approval of this Act.4
Pursuant to Section 355 of the Magna Carta, the Secretary
of Health promulgated its Implementing Rules and
Regulations (IRR) in July 1992. Thereafter, in November
1999, the DOH, in collaboration with various government
agencies and health workers organizations, promulgated a
Revised IRR consolidating all additional and clarificatory
rules issued by the former Secretaries of Health dating
back from the effectivity of the Magna Carta. The pertinent
provisions of said Revised IRR provide:
6.3. Longevity Pay. A monthly longevity pay equivalent
to five percent (5%) of the present monthly basic pay shall
be paid to public health workers for every five (5) years of
continuous, efficient and meritorious services rendered as
certified by the Head of Agency/Local Chief Executives
commencing after the approval of the Act. (April 17, 1992)
x xxx
7.1.1. Eligibility to Receive Hazard Pay. All public health
workers covered under RA 7305 are eligible to receive
hazard pay when the nature of their work exposes them to
high risk/low risk hazards for at least fifty percent (50%)
of their working hours as determined and approved by the
Secretary of Health or his authorized representatives.
X and its IRR.
7.2.1. Eligibility for Subsistence Allowance
a. All public health workers covered under RA 7305 are
eligible to receive full subsistence allowance as long as
they render actual duty.
b. Public Health Workers shall be entitled to full
Subsistence Allowance of three (3) meals which may be
computed in accordance with prevailing circumstances as
determined by the Secretary of Health in consultation with
the Management-Health Workers Consultative Council, as
established under Section 33 of the Act.
c. Those public health workers who are out of station shall
be entitled to per diems in place of Subsistence Allowance.
Subsistence Allowance may also be commuted.
7.2.3 Rates of Subsistence Allowance
a. Subsistence allowance shall be implemented at not less
than PhP50.00 per day or PhP1,500.00 per month as
certified by head of agency.
x xxx
d. Part-time public health workers/consultants are entitled
to one-half (1/2) of the prescribed rates received by full-
time public health workers.6
On July 28, 2008, the Fourteenth Congress issued Joint
Resolution No. 4, entitled Joint Resolution Authorizing the
President of the Philippines to Modify the Compensation
and Position Classification System of Civilian Personnel and
the Base Pay Schedule of Military and Uniformed Personnel
in the Government, and for other Purposes, approved by
then President Gloria Macapagal-Arroyo on June 17, 2009,
which provided for certain amendments in the Magna Carta
On September 3, 2012, respondents DBM and CSC issued
one of the two assailed issuances, DBM-CSC Joint Circular
No. 1, Series of 2012, to prescribe the rules on the grant of
Step Increments due to meritorious performance and Step
Increment due to length of service.7 Specifically, it
provided that an official or employee authorized to be
granted Longevity Pay under an existing law is not eligible
for the grant of Step Increment due to length of service.8
Shortly thereafter, on November 29, 2012, respondents
DBM and DOH then circulated the other assailed issuance,
DBM-DOH Joint Circular No. 1, Series of 2012, the relevant
provisions of which state:
7.0. Hazard Pay. Hazard pay is an additional
compensation for performing hazardous duties and for
enduring physical hardships in the course of performance
of duties.
As a general compensation policy, and in line with Section
21 of R. A. No. 7305, Hazard Pay may be granted to PHWs
only if the nature of the duties and responsibilities of their
positions, their actual services, and location of work
expose them to great danger, occupational risks, perils of
life, and physical hardships; and only during periods of
actual exposure to hazards and hardships.
8.3 The Subsistence Allowance shall be P50 for each day
of actual full-time service, or P25 for each day of actual
part-time service.
x xxx
9.0 Longevity Pay (LP)
9.1 Pursuant to Section 23 of R. A. No. 7305, a PHW may
be granted LP at 5% of his/her current monthly basic
salary, in recognition of every 5 years of continuous,
efficient, and meritorious services rendered as PHW. The
grant thereof is based on the following criteria:
9.1.1 The PHW holds a position in the agency plantilla of
regular positions; and
9.1.2 He/She has rendered at least satisfactory
performance and has not been found guilty of any
administrative or criminal case within all rating periods
covered by the 5-year period.
In a letter9 dated January 23, 2013 addressed to
respondents Secretary of Budget and Management and
Secretary of Health, petitioners expressed their opposition
to the Joint Circular cited above on the ground that the
same diminishes the benefits granted by the Magna Carta
to PHWs.
Unsatisfied, petitioners, on May 30, 2013, filed the instant
petition raising the following issues:
I. WHETHER RESPONDENTS ENRIQUE T. ONA AND
FLORENCIO B. ABAD ACTED WITH GRAVE ABUSE OF
DISCRETION AND VIOLATED SUBSTANTIVE DUE PROCESS
WHEN THEY ISSUED DBM-DOH JOINT CIRCULAR NO. 1, S.
2012 WHICH:
A) MADE THE PAYMENT OF HAZARD PAY DEPENDENT ON
THE ACTUAL DAYS OF EXPOSURE TO THE RISK INVOLVED;
B) ALLOWED PAYMENT OF SUBSISTENCE ALLOWANCE AT
P50 FOR EACH DAY OF ACTUAL FULL-TIME SERVICE OR
P25 FOR EACH DAY OF ACTUAL PART-TIME SERVICE
WITHOUT CONSIDERATION OF THE PREVAILING
CIRCUMSTANCES AS DETERMINED BY THE SECRETARY OF
HEALTH IN CONSULTATION WITH THE MANAGEMENT
HEALTH WORKERS CONSULTATIVE COUNCILS; C)
REQUIRED THAT LONGEVITY PAY BE GRANTED ONLY TO
PHWs WHO HOLD PLANTILLA AND REGULAR POSITIONS;
AND
 9 Annex C to Petition,
rollo, pp. 125-127.
Decision - 6 -
G.R. No. 207145
D) MADE THE JOINT CIRCULAR EFFECTIVE ON JANUARY 1,
2013, BARELY THREE (3) DAYS AFTER IT WAS PUBLISHED
IN A NEWSPAPER OF GENERAL CIRCULATION ON
DECEMBER 29, 2012, IN VIOLATION OF THE RULES ON
PUBLICATION.
II. WHETHER RESPONDENTS FRANCISCO T. DUQUE AND
FLORENCIO B. ABAD ACTED WITH GRAVE ABUSE OF
DISCRETION WHEN THEY ISSUED DBM-CSC JOINT
CIRCULAR NO. 1, S. 2012 DATED SEPTEMBER 2, 2012
WHICH PROVIDED THAT AN OFFICIAL OR EMPLOYEE
ENTITLED TO LONGEVITY PAY UNDER EXISTING LAW
SHALL NO LONGER BE GRANTED STEP INCREMENT DUE
TO LENGTH OF SERVICE.
III. WHETHER RESPONDENTS ISSUANCE OF DBM-DOH
JOINT CIRCULAR NO. 1, S. 2012 IS NULL AND VOID FOR
BEING AN UNDUE EXERCISE OF LEGISLATIVE POWER BY
ADMINISTRATIVE BODIES WHEN RESPONDENT ONA
ALLOWED RESPONDENT ABAD TO SIGNIFICANTLY SHARE
THE POWER TO FORMULATE AND PREPARE THE
NECESSARY RULES AND REGULATIONS TO IMPLEMENT
THE PROVISIONS OF THE MAGNA CARTA.
IV. WHETHER RESPONDENT ONA WAS REMISS IN
IMPLEMENTING THE MANDATE OF THE MAGNA CARTA
WHEN HE DID NOT INCLUDE THE MAGNA CARTA
BENEFITS IN THE DEPARTMENTS YEARLY BUDGET.
V. WHETHER RESPONDENTS ISSUANCE OF DBM-DOH
JOINT CIRCULAR NO. 1, S. 2012 IS NULL AND VOID FOR
BEING AN UNDUE EXERCISE OF LEGISLATIVE POWER BY
ADMINISTRATIVE BODIES WHEN THE SAME WAS ISSUED
SANS CONSULTATION WITH PROFESSIONAL AND HEALTH
WORKERS ORGANZATIONS AND UNIONS.
Petitioners contend that respondents acted with grave
abuse of discretion when they issued DBM-DOH Joint
Circular No. 1, Series of 2012 and DBM-CSC Joint Circular
No. 1, Series of 2012 which prescribe certain requirements
on the grant of benefits that are not otherwise required by
RA No. 7305. Specifically, petitioners assert that the DBM-
DOH Joint Circular grants the payment of Hazard Pay only
if the nature of the PHWs duties expose them to danger
when RA No. 7305 does not make any qualification. They
likewise claim that said circular unduly fixes Subsistence
Allowance at P50 for each day of full-time service and P25
for part-time service which are not in accordance with
prevailing circumstances determined by the Secretary of
Health as required by RA No. 7305. Moreover, petitioners
fault respondents for the premature effectivity of the DBM-
DOH Joint Circular
Decision - 7 -
G.R. No. 207145
which they believe should have been on January 29, 2012
and not on January 1, 2012. As to the grant of Longevity
Pay, petitioners posit that the same was wrongfully
granted only to PHWs holding regular plantilla positions.
Petitioners likewise criticize the DBM-CSC Joint Circular
insofar as it withheld the Step Increment due to length of
service from those who are already being granted
Longevity Pay. As a result, petitioners claim that the
subject circulars are void for being an undue exercise of
legislative power by administrative bodies.
In their Comment, respondents, through the Solicitor
General, refute petitioners allegations in stating that the
assailed circulars were issued within the scope of their
authority, and are therefore valid and binding. They also
assert the authority of Joint Resolution No. 4, Series of
2009, approved by the President, in accordance with the
prescribed procedure. Moreover, respondents question the
remedies of Certiorari and Prohibition used by petitioners
for the assailed circulars were done in the exercise of their
quasilegislative, and not of their judicial or quasi-judicial
functions.
The petition is partly meritorious.
At the outset, the petition for certiorari and prohibition filed
by petitioners is not the appropriate remedy to assail the
validity of respondents circulars. Sections 1 and 2 of Rule
65 of the Rules of Court provide:
RULE 65 CERTIORARI, PROHIBITION AND MANDAMUS
Section 1.Petition for certiorari. - When any tribunal, board
or officer exercising judicial or quasi-judicial functions has
acted without or in excess of its or his jurisdiction, or with
grave abuse of discretion amounting to lack or excess of
jurisdiction, and there is no appeal, or any plain, speedy,
and adequate remedy in the ordinary course of law, a
person aggrieved thereby may file a verified petition in the
proper court, alleging the facts with certainty and praying
that judgment be rendered annulling or modifying the
proceedings of such tribunal, board or officer, and granting
such incidental reliefs as law and justice may require.
x xxx
Sec. 2.Petition for Prohibition. - When the proceedings of
any tribunal, corporation, board, officer or person, whether
exercising judicial, quasi-judicial or ministerial functions,
are without or in excess of its jurisdiction, or with grave
abuse of discretion amounting to lack or excess of
jurisdiction, and there is no appeal or any other plain,
speedy, and adequate remedy in the ordinary course of
law, a person aggrieved thereby may file a verified petition
in the proper court, alleging the facts with certainty and
praying that judgment be rendered commanding the
respondent to desist from further proceedings in the action
or matter specified therein, or otherwise granting such
incidental reliefs as law and justice may require.10
Thus, on the one hand, certiorari as a special civil
action is available only if: (1) it is directed against a
tribunal, board, or officer exercising judicial or quasi-
judicial functions; (2) the tribunal, board, or officer acted
without or in excess of jurisdiction or with grave abuse of
discretion amounting to lack or excess of jurisdiction; and
(3) there is no appeal nor any plain, speedy, and adequate
remedy in the ordinary course of law.11
On the other hand, prohibition is available only if:
(1) it is directed against a tribunal, corporation, board,
officer, or person exercising functions, judicial, quasi-
judicial, or ministerial; (2) the tribunal, corporation, board
or person acted without or in excess of its jurisdiction, or
with grave abuse of discretion amounting to lack or excess
of jurisdiction; and (3) there is no appeal or any other
plain, speedy, and adequate remedy in the ordinary course
of law.12 Based on the foregoing, this Court has
consistently reiterated that petitions for certiorari and
prohibition may be invoked only against tribunals,
corporations, boards, officers, or persons exercising
judicial, quasi-judicial or ministerial functions, and not
against their exercise of legislative or quasi-legislative
functions.13
 Judicial functions involve the power to determine
what the law is and what the legal rights of the parties are,
and then undertaking to determine these questions and
adjudicate upon the rights of the parties.14 Quasijudicial
functions apply to the actions and discretion of public
administrative officers or bodies required to investigate
facts, hold hearings, and draw conclusions from them as a
basis for their official action, in their exercise of discretion
of a judicial nature.15 Ministerial functions are those
which an officer or tribunal performs in the context of a
given set of facts, in a prescribed manner and without
regard to the exercise of his own judgment upon the
propriety or impropriety of the act done.16
Before a tribunal, board, or officer may exercise
judicial or quasijudicial acts, it is necessary that there be a
law that gives rise to some specific rights under which
adverse claims are made, and the controversy ensuing
therefrom is brought before a tribunal, board, or officer
clothed with authority to determine the law and adjudicate
the respective rights of the contending parties.17
In this case, respondents did not act in any judicial,
quasi-judicial, or ministerial capacity in their issuance of
the assailed joint circulars. In issuing and implementing
the subject circulars, respondents were not called upon to
adjudicate the rights of contending parties to exercise, in
any manner, discretion of a judicial nature. The issuance
and enforcement by the Secretaries of the DBM, CSC and
DOH of the questioned joint circulars were done in the
exercise of their quasi-legislative and administrative
functions. It was in the nature of subordinate legislation,
promulgated by them in their exercise of delegated power.
Quasi-legislative power is exercised by administrative
agencies through the promulgation of rules and regulations
within the confines of the granting statute and the doctrine
of non-delegation of powers from the separation of the
branches of the government.18
Based on the foregoing, certiorari and prohibition do
not lie against herein respondents issuances. It is beyond
the province of certiorari to declare the aforesaid
administrative issuances illegal because petitions for
certiorari seek solely to correct defects in jurisdiction, and
not to correct just any error committed by a court, board,
or officer exercising judicial or quasijudicial functions
unless such court, board, or officer thereby acts without or
in excess of jurisdiction or with such grave abuse of
discretion amounting to lack of jurisdiction.19
It is likewise beyond the territory of a writ of
prohibition since generally, the purpose of the same is to
keep a lower court within the limits of its jurisdiction in
order to maintain the administration of justice in orderly
channels. It affords relief against usurpation of jurisdiction
by an inferior court, or when, in the exercise of jurisdiction,
the inferior court transgresses the bounds prescribed by
the law, or where there is no adequate remedy available in
the ordinary course of law.20
Be that as it may, We proceed to discuss the
substantive issues raised in the petition in order to finally
resolve the doubt over the Joint Circulars validity. For
proper guidance, the pressing issue of whether or not the
joint circulars regulating the salaries and benefits relied
upon by public health workers were tainted with grave
abuse of discretion rightly deserves its prompt resolution.
With respect to the infirmities of the DBM-DOH Joint
Circular raised in the petition, they cannot be said to have
been issued with grave abuse of discretion for not only are
they reasonable, they were likewise issued well within the
scope of authority granted to the respondents. In fact, as
may be gathered from prior issuances on the matter, the
circular did not make any substantial deviation therefrom,
but actually remained consistent with, and germane to, the
purposes of the law.
 First, the qualification imposed by the DBM-DOH
Joint Circular granting the payment of Hazard Pay only if
the nature of PHWs duties expose them to danger and
depending on whether the risk involved is high or low was
merely derived from Section 7.1.1 of the Revised IRR of RA
No. 7305, duly promulgated by the DOH in collaboration
with various government health agencies and health
workers organizations in November 1999, to wit:
SECTION 7.1.1.Eligibility to Receive Hazard Pay. All
public health workers covered under RA 7305 are eligible
to receive hazard pay when the nature of their work
exposes them to high risk/low risk hazards for at least fifty
percent (50%) of their working hours as determined and
approved by the Secretary of Health or his authorized
representatives.21
Second, fixing the Subsistence Allowance at P50 for each
day of fulltime service and P25 for part-time service was
also merely a reiteration of the limits prescribed by the
Revised IRR, validly issued by the Secretary of Health
pursuant to Section 3522 of RA No. 7305, the pertinent
portions of which states:
Section 7.2.3 Rates of Subsistence Allowance
a. Subsistence allowance shall be implemented at not less
than PhP50.00 per day or PhP1,500.00 per month as
certified by head of agency.
d. Part-time public health workers/consultants are entitled
to one-half (1/2) of the prescribed rates received by full-
time public health workers.
Third, the condition imposed by the DBM-DOH Joint
Circular granting longevity pay only to those PHWs holding
regular plantilla positions merely implements the
qualification imposed by the Revised IRR which provides:
6.3. Longevity Pay. A monthly longevity pay equivalent
to five percent (5%) of the present monthly basic pay shall
be paid to public health workers for every five (5) years of
continuous, efficient and meritorious services rendered as
certified by the Head of Agency/Local Chief Executives
commencing after the approval of the Act. (April 17, 1992)
6.3.1. Criteria for Efficient and Meritorious Service A Public
Worker shall have:
a. At least a satisfactory performance rating within the
rating period.
b. Not been found guilty of any administrative or criminal
case within the rating period.
As can be gleaned from the aforequoted provision,
petitioners failed to show any real inconsistency in granting
longevity pay to PHWs holding regular plantilla positions.
Not only are they based on the same premise, but the
intent of longevity pay, which is paid to workers for every
five (5) years of continuous, efficient and meritorious
services, necessarily coincides with that of regularization.
Thus, the assailed circular cannot be invalidated for its
issuance is consistent with, and germane to, the purposes
of the law.
Anent petitioners contention that the DBM-DOH Joint
Circular is null and void for its failure to comply with
Section 3523 of RA No. 7305 providing that its
implementing rules shall take effect thirty (30) days after
publication in a newspaper of general circulation, as well as
its failure to file a copy of the same with the University of
the Philippines Law Center-Office of the National
Administrative Register (UP Law Center-ONAR),
jurisprudence as well as the circumstances of this case
dictate otherwise.
Indeed, publication, as a basic postulate of procedural due
process, is required by law in order for administrative rules
and regulations to be
23 Section 35. Rules and Regulations. - The Secretary of
Health after consultation with appropriate agencies of the
Government as well as professional and health workers'
organizations or unions, shall formulate and prepare the
necessary rules and regulations to implement the
provisions of this Act. Rules and regulations issued
pursuant to this Section shall take effect thirty (30) days
after publication in a newspaper of general circulation.
(Emphasis ours)
Decision - 12 -
G.R. No. 207145
effective.24 There are, however, several exceptions, one of
which are interpretative regulations which need nothing
further than their bare issuance for they give no real
consequence more than what the law itself has already
prescribed.25 These regulations need not be published for
they add nothing to the law and do not affect substantial
rights of any person.26
Thus, in Association of Southern Tagalog Electric
Cooperatives, et. al. v. Energy Regulatory Commission
(ERC),27 wherein several orders issued by the ERC were
sought to be invalidated for lack of publication and
nonsubmission of copies thereof to the UP Law Center -
ONAR, it has been held that since they merely interpret RA
No. 7832 and its IRR, particularly on the computation of
the cost of purchased power, without modifying, amending
or supplanting the same, they cannot be rendered
ineffective, to wit:
When the policy guidelines of the ERC directed the
exclusion of discounts extended by power suppliers in the
computation of the cost of purchased power, the guidelines
merely affirmed the plain and unambiguous meaning of
"cost" in Section 5, Rule IX of the IRR of R.A. No. 7832.
"Cost" is an item of outlay, and must therefore exclude
discounts since these are "not amounts paid or charged for
the sale of electricity, but are reductions in rates.
x xxx
Thus, the policy guidelines of the ERC on the
treatment of discounts extended by power suppliers "give
no real consequence more than what the law itself has
already prescribed." Publication is not necessary for the
effectivity of the policy guidelines.
As interpretative regulations, the policy guidelines of
the ERC on the treatment of discounts extended by power
suppliers are also not required to be filed with the U.P. Law
Center in order to be effective. Section 4, Chapter 2, Book
VII of the Administrative Code of 1987 requires every rule
adopted by an agency to be filed with the U.P. Law Center
to be effective. However, in Board of Trustees of the
Government Service Insurance System v. Velasco, this
Court pronounced that "not all rules and regulations
adopted by every government agency are to be filed with
the UP Law Center." Interpretative regulations and those
merely internal in nature are not required to be filed with
the U.P. Law Center. Paragraph 9 (a) of the Guidelines for
Receiving and Publication of Rules and Regulations FileD w/
UP. 9. Rules and Regulations which need not be filed with
the U.P. Law Center, shall, among others, include but not
be limited to, the following:
a. Those which are interpretative regulations and those
merely internal in nature, that is, regulating only the
personnel of the Administrative agency and not the public.
x xxx
Furthermore, the policy guidelines of the ERC did not
create a new obligation and impose a new duty, nor did it
attach a new disability. As previously discussed, the policy
guidelines merely interpret R.A. No. 7832 and its IRR,
particularly on the computation of the cost of purchased
power. The policy guidelines did not modify, amend or
supplant the IRR.
Similarly, in Republic v. Drugmakers Laboratories, Inc.,28
the validity of circulars issued by the Food and Drug
Administration (FDA) was upheld in spite of the non-
compliance with the publication, prior hearing, and
consultation requirements for they merely implemented
the provisions of Administrative Order No. 67, entitled
Revised Rules and Regulations on Registration of
Pharmaceutical Products issued by the DOH, in the
following wise:
A careful scrutiny of the foregoing issuances would reveal
that AO 67, s. 1989 is actually the rule that originally
introduced the BA/BE testing requirement as a component
of applications for the issuance of CPRs covering certain
pharmaceutical products. As such, it is considered an
administrative regulation a legislative rule to be exact
issued by the Secretary of Health in consonance with the
express authority granted to him by RA 3720 to implement
the statutory mandate that all drugs and devices should
first be registered with the FDA prior to their manufacture
and sale. Considering that neither party contested the
validity of its issuance, the Court deems that AO 67, s.
1989 complied with the requirements of prior hearing,
notice, and publication pursuant to the presumption of
regularity accorded to the government in the exercise of its
official duties.42
On the other hand, Circular Nos. 1 and 8, s. 1997 cannot
be considered as administrative regulations because they
do not: (a) implement a primary legislation by providing
the details thereof; (b) interpret, clarify, or explain existing
statutory regulations under which the FDA operates;
and/or (c) ascertain the existence of certain facts or things
upon which the enforcement of RA 3720 depends. In fact,
the only purpose of these circulars is for the FDA to
administer and supervise the implementation of the
provisions of AO 67, s. 1989, including those covering the
BA/BE testing requirement, consistent with and pursuant
to RA 3720.43 Therefore, the FDA has sufficient authority
to issue the said circulars and since they would not affect
the substantive rights of the parties that they seek to
govern as they are not, strictly speaking, administrative
regulations in the first place no prior hearing,
consultation, and publication are needed for their validity.
In this case, the DBM-DOH Joint Circular in question gives
no real consequence more than what the law itself had
already prescribed. As previously discussed, the
qualification of actual exposure to danger for the PHWs
entitlement to hazard pay, the rates of P50 and P25
subsistence allowance, and the entitlement to longevity
pay on the basis of PHWs status in the plantilla of regular
positions were already prescribed and authorized by pre-
existing law. There is really no new obligation or duty
imposed by the subject circular for it merely reiterated
those embodied in RA No. 7305 and its Revised IRR. The
Joint Circular did not modify, amend nor supplant the
Revised IRR, the validity of which is undisputed.
Consequently, whether it was duly published and filed with
the UP Law Center ONAR is necessarily immaterial to its
validity because in view of the pronouncements above,
interpretative regulations, such as the DBM-DOH circular
herein, need not be published nor filed with the UP Law
Center ONAR in order to be effective. Neither is prior
hearing or consultation mandatory.
Nevertheless, it bears stressing that in spite of the
immateriality of the publication requirement in this case,
and even assuming the necessity of the same, its basic
objective in informing the public of the contents of the law
was sufficiently accomplished when the DBM-DOH Joint
Circular was published in the Philippine Star, a newspaper
of general circulation, on December 29, 2012.29
As to petitioners allegation of grave abuse of discretion on
the part of respondent DOH Secretary in failing to include
the Magna Carta benefits in his departments yearly
budget, the same is belied by the fact that petitioners
themselves specifically provided in their petition an
account of the amounts allocated for the same in the years
2012 and 2013.30
Based on the foregoing, it must be recalled that
administrative regulations, such as the DBM-DOH Joint
Circular herein, enacted by administrative agencies to
implement and interpret the law they are entrusted to
enforce are entitled to great respect.31 They partake of
the nature of a statute and are just as binding as if they
have been written in the statute itself. As such,
administrative regulations have the force and effect of law
and enjoy the presumption of legality. Unless and until
they are overcome by sufficient evidence showing that
they exceeded the bounds of the law,32 their validity and
legality must be upheld.
Thus, notwithstanding the contention that the Joint
Resolution No. 4 promulgated by Congress cannot be a
proper source of delegated power, the subject Circular was
nevertheless issued well within the scope of authority
granted to the respondents. The issue in this case is not
whether the Joint Resolution No. 4 can become law and,
consequently, authorize the issuance of the regulation in
question, but whether the circular can be struck down as
invalid for being tainted with grave abuse of discretion.
Regardless, therefore, of the validity or invalidity of Joint
Resolution No. 4, the DBMDOH Joint Circular assailed
herein cannot be said to have been arbitrarily or
capriciously issued for being consistent with prior issuances
duly promulgated pursuant to valid and binding law.
Distinction must be made, however, with respect to the
DBM-CSC Joint Circular, the contested provision of which
states:
6.5 An official or employee authorized to be granted
Longevity Pay under an existing law is not eligible for the
grant of Step Increment Due to Length of Service.
A review of RA No. 7305 and its Revised IRR reveals that
the law does not similarly impose such condition on the
grant of longevity pay to PHWs in the government service.
As such, the DBM-CSC Joint Circular effectively created a
new imposition which was not otherwise stipulated in the
law it sought to interpret. Consequently, the same
exception granted to the DBM-DOH Joint Circular cannot be
applied to the DBM-CSC Joint Circular insofar as the
requirements on publication and submission with the UP
Law Center ONAR are concerned. Thus, while it was well
within the authority of the respondents to issue rules
regulating the grant of step increments as provided by RA
No. 6758, otherwise known as the Compensation and
Position Classification Act of 1989, which pertinently
states:
Section 13. Pay Adjustments. - Paragraphs (b) and
(c), Section 15 of Presidential Decree No. 985 are hereby
amended to read as follows:
x xxx
(c) Step Increments - Effective January 1, 1990 step
increments shall be granted based on merit and/or length
of service in accordance with rules and regulations that will
be promulgated jointly by the DBM and the Civil Service
Commission, and while it was duly published in the
Philippine Star, a newspaper of general circulation, on
September 15, 2012,33 the DBM-CSC Joint Circular
remains unenforceable for the failure of respondents to file
the same with the UP Law Center ONAR.34
Moreover, insofar as the DBM-DOH Joint Circular similarly
withholds the Step Increment due to length of service from
those who are already being granted Longevity Pay, the
same must likewise be declared unenforceable.35
Note also that the DBM-DOH Joint Circular must further be
invalidated insofar as it lowers the hazard pay at rates
below the minimum prescribed by Section 21 of RA No.
7305 and Section 7.1.5 (a) of its Revised IRR as follows:
SEC. 21.Hazard Allowance. - Public health worker in
hospitals, sanitaria, rural health units, main centers, health
infirmaries, barangay health stations, clinics and other
health-related establishments located in difficult areas,
strife-torn or embattled areas, distresses or isolated
stations, prisons camps, mental hospitals, radiation-
exposed clinics, laboratories or disease-infested areas or in
areas declared under state of calamity or emergency for
the duration thereof which expose them to great danger,
contagion, radiation, volcanic activity/eruption occupational
risks or perils to life as determined by the Secretary of
Health or the Head of the unit with the approval of the
Secretary of Health, shall be compensated hazard
allowance equivalent to at least twenty-five percent (25%)
of the monthly basic salary of health workers receiving
salary grade 19 and below, and five percent (5%) for
health workers with salary grade 20 and above.
7.1.5. Rates of Hazard Pay
a. Public health workers shall be compensated hazard
allowances equivalent to at least twenty five (25%) of the
monthly basic salary of health workers, receiving salary
grade 19 and below, and five percent (5%) for health
workers with salary grade 20 and above. This may be
granted on a monthly, quarterly or annual basis.
It is evident from the foregoing provisions that the rates of
hazard pay must be at least 25% of the basic monthly
salary of PWHs receiving salary grade 19 and below, and
5% receiving salary grade 20 and above. As such, RA No.
7305 and its implementing rules noticeably prescribe the
minimum rates of hazard pay due all PHWs in the
government, as is clear in the selfexplanatory phrase "at
least" used in both the law and the rules.36 Thus, the
following rates embodied in Section 7.2 of DBM-DOH Joint
Circular must be struck down as invalid for being contrary
to the mandate of RA No. 7305 and its Revised IRR:
7.2.l For PHWs whose positions are at SG-19 and below,
Hazard Pay shall be based on the degree of exposure to
high risk or low risk hazards, as specified in sub-items 7
.1.1 and 7 .1.2 above, and the number of workdays of
actual exposure over 22 workdays in a month, at rates not
to exceed 25% of monthly basic salary. In case of
exposure to both high risk and low risk hazards, the
Hazard Pay for the month shall be based on only one risk
level, whichever is more advantageous to the PHW.
7.2.2 PHWs whose positions are at SG-20 and above may
be entitled to Hazard Pay at 5% of their monthly basic
salaries for all days of exposure to high risk and/or low risk
hazards. However, those exposed to high risk hazards for
12 or more days in a month may be entitled to a fixed
amount of P4,989.75 per month.
 WHEREFORE, premises considered, the instant petition is
PARTLY GRANTED. The DBM-DOH Joint Circular, insofar as
it lowers the hazard pay at rates below the minimum
prescribed by Section 21 of RA No. 7305 and Section 7.1.5
(a) of its Revised IRR, is declared INVALID. The DBM-CSC
Joint Circular, insofar as it provides that an official or
employee authorized to be granted Longevity Pay under an
existing law is not eligible for the grant of Step Increment
Due to Length of Service, is declared UNENFORCEABLE.
The validity, however, of the DBM-DOH Joint Circular as to
the qualification of actual exposure to danger for the PHW's
entitlement to hazard pay, the rates of P50 and P25
subsistence allowance, and the entitlement to longevity
pay on the basis of the PHW' s status in the plantilla of
regular positions, is UPHELD.
SO ORDERED.
II. MANDATORY EFFECTS OF LAWS; MISTAKE OF FACT VS
MISTAKE OF LAW ; NON RETROACTIVITY OF LAWS
4. LIAM LAW V OLYMPIC SAWMILL GR L307771
MELENCIO-HERRERA, J.:
This is an appeal by defendants from a Decision rendered
by the then Court of First Instance of Bulacan. The appeal
was originally taken to the then Court of Appeals, which
endorsed it to this instance stating that the issue involved
was one of law.
It appears that on or about September 7, 1957, plaintiff
loaned P10,000.00, without interest, to defendant
partnership and defendant Elino Lee Chi, as the managing
partner. The loan became ultimately due on January 31,
1960, but was not paid on that date, with the debtors
asking for an extension of three months, or up to April 30,
1960.
On March 17, 1960, the parties executed another loan
document. Payment of the P10,000.00 was extended to
April 30, 1960, but the obligation was increased by
P6,000.00 as follows:
That the sum of SIX THOUSAND PESOS (P6,000.00),
Philippine currency shall form part of the principal
obligation to answer for attorney's fees, legal interest, and
other cost incident thereto to be paid unto the creditor and
his successors in interest upon the termination of this
agreement.
Defendants again failed to pay their obligation by April 30,
1960 and, on September 23, 1960, plaintiff instituted this
collection case. Defendants admitted the P10,000.00
principal obligation, but claimed that the additional
P6,000.00 constituted usurious interest.
Upon application of plaintiff, the Trial Court issued, on the
same date of September 23, 1960, a writ of Attachment on
real and personal properties of defendants located at
Karanglan, Nueva Ecija. After the Writ of Attachment was
implemented, proceedings before the Trial Court versed
principally in regards to the attachment.
On January 18, 1961, an Order was issued by the Trial
Court stating that "after considering the manifestation of
both counsel in Chambers, the Court hereby allows both
parties to simultaneously submit a Motion for Summary
Judgment. 1 The plaintiff filed his Motion for Summary
Judgment on January 31, 1961, while defendants filed
theirs on February 2, 196l. 2
On June 26, 1961, the Trial Court rendered decision
ordering defendants to pay plaintiff "the amount of
P10,000.00 plus the further sum of P6,000.00 by way of
liquidated damages . . . with legal rate of interest on both
amounts from April 30, 1960." It is from this judgment
that defendants have appealed.
We have decided to affirm.
Under Article 1354 of the Civil Code, in regards to the
agreement of the parties relative to the P6,000.00
obligation, "it is presumed that it exists and is lawful,
unless the debtor proves the contrary". No evidentiary
hearing having been held, it has to be concluded that
defendants had not proven that the P6,000.00 obligation
was illegal. Confirming the Trial Court's finding, we view
the P6,000.00 obligation as liquidated damages suffered by
plaintiff, as of March 17, 1960, representing loss of interest
income, attorney's fees and incidentals.
The main thrust of defendants' appeal is the allegation in
their Answer that the P6,000.00 constituted usurious
interest. They insist the claim of usury should have been
deemed admitted by plaintiff as it was "not denied
specifically and under oath". 3
Section 9 of the Usury Law (Act 2655) provided:
SEC. 9. The person or corporation sued shall file its answer
in writing under oath to any complaint brought or filed
against said person or corporation before a competent
court to recover the money or other personal or real
property, seeds or agricultural products, charged or
received in violation of the provisions of this Act. The lack
of taking an oath to an answer to a complaint will mean
the admission of the facts contained in the latter.
The foregoing provision envisages a complaint filed against
an entity which has committed usury, for the recovery of
the usurious interest paid. In that case, if the entity sued
shall not file its answer under oath denying the allegation
of usury, the defendant shall be deemed to have admitted
the usury. The provision does not apply to a case, as in the
present, where it is the defendant, not the plaintiff, who is
alleging usury.
Moreover, for sometime now, usury has been legally non-
existent. Interest can now be charged as lender and
borrower may agree upon. 4 The Rules of Court in regards
to allegations of usury, procedural in nature, should be
considered repealed with retroactive effect.
Statutes regulating the procedure of the courts will be
construed as applicable to actions pending and
undetermined at the time of their passage. Procedural laws
are retrospective in that sense and to that extent. 5
... Section 24(d), Republic Act No. 876, known as the
Arbitration Law, which took effect on 19 December 1953,
and may be retroactively applied to the case at bar
because it is procedural in nature. ... 6
WHEREFORE, the appealed judgment is hereby affirmed,
without pronouncement as to costs.
SO ORDERED.
5. SEC VS LAIGO GR 188639
In this petition for certiorari1 under Rule 65 of the Rules of
Court, petitioner Securities and Exchange Commission
(SEC), through the Office of the Solicitor General (OSG),
assails the June 26, 2009 Order2 (June 26, 2009 Order)
issued by respondent Judge Reynaldo M. Laigo (Judge
Laigo) of the Regional Trial Court, Branch 56, Makati City
(RTC), in Sp. Proc. No. M-6758,3 a petition for involuntary
insolvency of Legacy Consolidated Plans, Incorporated
(Legacy), ordering the inclusion of the trust fund in its
corporate assets to the prejudice of the planholders.
 Factual Antecedents
Republic Act (R.A.) No. 8799, otherwise known as the
Securities Regulation Code (SRC), specifically Section 16
thereof, mandated the Securities and Exchange
Commission (SEC) to prescribe rules and regulations
governing the pre-need industry. Pursuant thereto, the
SEC issued the correspondingNew Rules on the
Registration and Sale of Pre-Need Plans (New
Rules)4 to govern the pre-need industry prior to the
enactment of R.A. No. 9829, otherwise known as the Pre-
need Code of the Philippines (Pre-Need Code). It
required from the pre-need providers the creation of trust
funds as a requirement for registration.
As defined in Rule 1.9 of the New Rules, " 'Trust Fund'
means a fund set up from planholders' payments, separate
and distinct from the paid-up capital of a registered pre-
need company, established with a trustee under a trust
agreement approved by the SEC, to pay for the benefits as
provided in the pre-need plan."
Legacy, being a pre-need provider, complied with the trust fund
requirement and entered into a trust agreement with the Land
Bank of the Philippines (IBP).
In mid-2000, the industry collapsed for a range of reasons.
Legacy, like the others, was unable to pay its obligations to the
planholders.
This resulted in Legacy being the subject of a petition for
involuntary insolvency filed on February 18, 2009 by private
respondents in their capacity as planholders. Through its
manifestation filed in the RTC, Legacy did not object to the
proceedings. Accordingly, it was declared insolvent by the RTC in
its Order,5 dated April 27, 2009. The trial court also ordered
Legacy to submit an inventory of its assets and liabilities
pursuant to Sections 15 and 16 of Act No. 1956,6 otherwise
known as the Insolvency Law, the applicable bankruptcy law at
that time.
On May 15, 2009, the RTC ordered the SEC, being the pre-need
industry's regulator, to submit the documents pertaining to
Legacy's assets and liabilities.
In its Manifestation with Evaluation, dated June 10, 2009, the
SEC opposed the inclusion of the trust fund in the inventory of
corporate assets on the ground that to do so would contravene
the New Rules which treated trust funds as principally established
for the exclusive purpose of guaranteeing the delivery of benefits
due to the planholders. It was of the position that the inclusion of
the trust fund in the insolvent's estate and its being opened to
claims by non-planholders would contravene the purpose for its
establishment.
On June 26, 2009, despite the opposition of the SEC, Judge Laigo
ordered the insolvency Assignee, Gener T. Mendoza (Assignee) to
take possession of the trust fund. Judge Laigo viewed the trust
fund as Legacy's corporate assets and, for said reason, included it
in the insolvent's estate. Thus:ChanRoblesvirtualLawlibrary
WHEREFORE, the Court rules as follows:Ch
anRoblesvirtualLawlibrary
1. Directing the afore-named banks to report to Assignee, Gener
T. Mendoza, whose address is at c/o GNCA Holdings, Inc., Unit
322, 3/F, LRI design Center, 210 Nicanor Garcia St., Makati City,
the total funds as of today deposited to the insolvent debtor's
respective Trust Funds, within five (5) days from receipt of this
Order.
2. Subject funds can be withdrawn by the Assignee only upon
Order of the Court for distribution among the creditors who have
officially filed their valid claims with this Court, and for all the
expenses to be incurred by the Assignee in the course of the
discharge of his duties and responsibilities as such Assignee.
3. Stopping the Securities and Exchange Commission (SEC) from
further validating the claims of planholders (now creditors)
pertaining to their pre-need plans.
xxxxxxxxx
SO ORDERED.7
The RTC stated that the trust fund could be withdrawn by the
Assignee to be used for the expenses he would incur in the
discharge of his functions and to be distributed among the
creditors who had officially filed their valid claims with the court.
The Present Petition
Intent on protecting the interest of the investing public and
securing the trust fund exclusively for the planholders, the SEC
filed "this present recourse directly to this Honorable Court in
accordance with Section 5 (1), Article VIII of the 1987
Constitution for the reason that the matters involve an issue
oftranscendental importance to numerous hard-working Filipinos
who had invested their lifetime savings and hard-earned money
in Legacy, hoping that through this pre-need company they will
be able to fulfill their dreams of providing a bright future for their
children."8
The SEC's Position
In essence, the SEC contends that Judge Laigo gravely abused
his discretion in treating the trust fund as part of the insolvency
estate of Legacy. It argues that the trust fund should redound
exclusively to the benefit of the planholders, who are the ultimate
beneficial owners; that the trust fund is held, managed and
administered by the trustee bank to address and answer the
claims against the pre-need company by all its planholders
and/or beneficiaries; that to consider the said fund as corporate
assets is to open the floodgates to creditors of Legacy other than
the planholders; and that, in issuing the order, Judge Laigo
effectively allowed non-planholders to reach the trust fund in
patent violation of the New Rules established to protect the pre-
need investors.
In its Memorandum,9 the SEC stressed that the setting-up of the
trust funds effectively created a demarcation line between the
claims of planholders vis-a-vis those of the other creditors of
Legacy; that Legacy's interest over the trust properties was only
by virtue of it being a trustor and not the owner; and that the
SEC was authorized to validate claims of planholders in the
exercise of its power as regulator of pre-need corporations.
Further, the SEC is of the position that Section 52 of the Pre-
Need Code10 should be given retroactive effect for being
procedural in character.
Thus, the SEC raises the following ISSUES Private Respondents 'position

I. In their Comment/Opposition,12 the private respondents,

Whether or not the Trust Funds of Legacy form part of its
Corporate Assets.
II.
Whether or not respondent Trial Court Judge committed
grave abuse of discretion amounting to lack or excess of
jurisdiction in issuing the herein assailed Order dated June
26, 2009.
III.
Whether or not the claims of planholders are to be treated
differently from the claims of other creditors of Legacy.
IV.
Whether or not Legacy retains ownership over the trust
funds assets despite the execution of trust agreements.
V.
Whether or not the insolvency court, presided by
respondent Trial Court Judge, has the authority to enjoin
petitioner SEC from further validating the claims of
Legacy's planholders and treating them as if they are
ordinary creditors of Legacy.
VI.
Whether or not the provision of the Pre-need Code
regarding liquidation is in the nature of a procedural law
that can be retroactively applied to the case at bar.11
GliceraAyad, Sahlee Delos Reyes and Antonio P. Huerte, Jr.
(private respondents), submit that nothing in the New Rules
expressly provided that the trust fund is excluded from the
inventory of corporate assets which is required to be submitted to
the insolvency court; that the SEC's interference in the insolvency
proceedings is incongruous to the legal system; and that under
the provisions of the Insolvency Law, all claims, including those
against the trust funds should be filed in the liquidation
proceedings.13 Hence, private respondents assert that no grave
abuse of discretion was committed by Judge Laigo in issuing the
June 26, 2009 Order.
The Assignee's Position
In his separate Comments on Petition14 and Memorandum,15 the
Assignee contends that the trust fund forms part of Legacy's
corporate assets for the following reasons: first, the insolvency
court has jurisdiction over all the claims against the insolvent and
the trust fund forms part of the company's corporate assets. It
cited Abrera v. College Assurance Plan,16 where the Court held
that claims arising from pre-need contracts should not be treated
separately from other claims against a pre-need company. As
such, the claims over the trust fund, being claims against Legacy,
are necessarily lodged with the insolvency court. Second, the
setting up of the trust fund is a mere scheme to attain an
administrative end, that is, the assurance that the benefits will be
delivered under the pre-need contracts.
Considering that Legacy is the debtor as regards such benefits, it
is only through it, or through the insolvency court, that the assets
including the trust fund can be distributed to satisfy valid claims.
Third, though the trustee banks hold legal title over the funds,
the real parties-in-interest are the pre-need companies as the
terms of the trust agreement between Legacy and LBP (as
trustee) show this intent.
The Assignee also submits that no law authorized the SEC to
interfere in the insolvency proceedings because its authority
under the SRC is only to regulate the sale of pre-need plans and
not to regulate the management of trust funds.
In sum, the Assignee interprets the June 26, 2009 Order in this
wise: that the creditors, planholders or not, should first line up
and file valid claims with the insolvency court and not get
entangled in the validation process of the SEC; and that once the
planholders have qualified, they will be given preference in the
distribution of the trust assets. Moreover, he proposes that if the
trust fund assets will not be enough to satisfy all claims, the
planholders can still join other claimants and participate in the
distribution of the other assets of the pre-need
company.17cralawrednad
From the foregoing, the Court is called to determine whether
Judge Laigo gravely abused his discretion in:ChanR
1. Including the trust properties in the insolvent's estate; and
2. Prohibiting the SEC from validating the claims filed by the
planholders against the trust fund.
The Court's Ruling
The overarching consideration in the legislative mandate to
establish trust funds is the protection of the interest of the
planholders in the investment plans. The SRC provides in no
uncertain terms the intent to make such interests paramount
above all else. Thus, it directed the SEC to come up with rules
and regulations to govern not only trust funds but the industry as
a whole. Pursuant to its mandate and delegated authority, the
SEC came out with the New Rules, which the Congress later on
toughened through the enactment of the Pre-Need Code, carrying
similar protection but far more detailed in scope.
It is in this context that this Court rules to grant the petition filed
by the SEC. The Court finds that Judge Laigo gravely abused his
discretion in treating the trust fund as assets that form part of
Legacy's insolvency estate and in enjoining the SEC's validation
of the planholders' claims against the trust properties.
The Trust Fund is for the sole benefit
of the planholders and cannot be used to
satisfy the claims of other creditors of Legacy
Section 30 of the Pre-Need Code clearly provides that the
proceeds of trust funds shall redound solely to the planholders.
Section 30 reads:Cha
nRoblesvirtualLawlibrary
Trust Fund
SECTION 30.Trust Fund. To ensure the delivery of the
guaranteed benefits and services provided under a pre-need plan
contract, a trust fund per pre-need plan category shall be
established. A portion of the installment payment collected shall
be deposited by the pre-need company in the trust fund, the
amount of which will be as determined by the actuary based on
the viability study of the pre-need plan approved by the
Commission. Assets in the trust fund shall at all times
remain for the sole benefit of the planholders. At no time
shall any part of the trust fund be used for or diverted to any
purpose other than for the exclusive benefit of the
planholders. In no case shall the trust fund assets be used
to satisfy claims of other creditors of the pre-need
company. The provision of any law to the contrary
notwithstanding, in case of insolvency of the pre-need company,
the general creditors shall not be entitled to the trust fund.

Except for the payment of the cost of benefits or services, the
termination values payable to the planholders, the insurance
premium payments for insurance-funded benefits of memorial life
plans and other costs necessary to ensure the delivery of benefits
or services to planholders, no withdrawal shall be made from the
trust fund unless approved by the Commission. The benefits
received by the planholders shall be exempt from all taxes and
the trust fund shall not be held liable for attachment,
garnishment, levy or seizure by or under any legal or equitable
processes except to pay for the debt of the planholder to the
benefit plan or that arising from criminal liability imposed in a
criminal action.
[Emphases Supplied]
The Assignee argues that Legacy has retained a beneficial
interest in the trust fund despite the execution of the trust
agreement and that the properties can be the subject of
insolvency proceedings. In this regard, the Assignee calls the
Court's attention to the trust agreement provisions which
supposedly refer to the interest of Legacy in the trust properties,
to wit:Ch
anRoblesvirtualLawlibrary
The TRUSTEE hereby undertakes to perform the functions and
duties of a TRUSTEE provided for in this Agreement with the
utmost good faith, care and prudence required by a fiduciary
relation, being understood, however, that the COMPANY shall be
solely and exclusive (sic) responsible for (1) fulfilling the services
referred to in the recital clauses, (ii) the settlement/payment of
claims of any person or firm availing of such services, (iii)
compliance with all laws and governmental regulations on pre-
need plans, and (iv) submission of other data or information as
may be prescribed by the Commission.
xxx
xxx
the Trustee shall from time to time on the written directions of
the Company make payments out of the Trust Fund to the
Company. To the extent permitted by law, the Trustee shall be
under no liability for any payment made pursuant to the direction
of the Company. Any written direction of the Company shall
constitute a certification that the distribution of payment so
directed is one which the Company is authorized to direct. From
time to time and when directed in writing by the Company, the
Trustee shall pay monies from the Trust Fund in amounts equal
to the outstanding amount of the Trust Fund at any given time to
defray the Company's obligations to the Planholders under its
pre-need plan contract and provided further that the company
shall be reimbursed by the Trustee from the Trust Fund for
whatever amounts it has advanced to its beneficiaries.18 [Italics
supplied]
To the Assignee, these "control" mechanisms are indicative of the
interest of Legacy in the enforcement of the trust fund because
the agreement gives it the power to dictate on LBP the fulfillment
of the trust, such as the delivery of monies to it to facilitate the
payment to the planholders.
The Court, however, sees it differently.
In the course of delving into the complex relationships created by
the agreement and the existing regulatory framework, this Court
finds that Legacy's claimed interest in the enforcement of the
trust and in the trust properties is mere apparent than real.
Legacy is not a beneficiary.
First, it must be stressed that a person is considered as a
beneficiary of a trust if there is a manifest intention to give such
a person the beneficial interest over the trust properties.19 This is
the considered opinion expressed in the Restatement of the Law
of Trust (Restatement)20 which Justice Vicente Abad Santos has
described in his contribution to the Philippine Law Journal as
containing the more salient principles, doctrines and rules on the
subject.21 Here, the terms of the trust agreement plainly confer
the status of beneficiary to the planholders, not to Legacy. In the
recital clauses of the said agreement, Legacy bound itself to
provide for the sound, prudent and efficient management and
administration of such portion of the collection "for the benefit
and account of the planholders,"22through LBP (as the trustee).
This categorical declaration doubtless indicates that the intention
of the trustor is to make the planholders the beneficiaries of the
trust properties, and not Legacy. It is clear that because the
beneficial ownership is vested in the planholders and the legal
ownership in the trustee, LBP, Legacy, as trustor, is left without
any iota of interest in the trust fund. This is consistent with the
nature of a trust arrangement, whereby there is a separation of
interests in the subject matter of the trust, the beneficiary having
an equitable interest, and the trustee having an interest which is
normally legal interest.23cral
awrednad
Second, considering the fact that a mandated pre-need trust is
one imbued with public interest, the issue on who the beneficiary
is must be determined on the basis of the entire regulatory
framework. Under the New Rules, it is unmistakable that the
beneficial interest over the trust properties is with the
planholders. Rule 16.3 of the New Rules provides that : [n]o
withdrawal shall be made from the trust fund except for paying
the benefits such as monetary consideration, the cost of services
rendered or property delivered, trust fees, bank charges and
investment expenses in the operation of the trust fund,
termination values payable to the planholders, annuities,
contributions of cancelled plans to the fund and taxes on trust
funds.
Rule 17.1 also states that to ensure the liquidity of the trust fund
to guarantee the delivery of the benefits provided for under the
plan contract and to obtain sufficient capital growth to meet the
growing actuarial reserve liabilities, all investments of the trust
fund shall be limited to Fixed Income Instruments, Mutual Funds,
Equities, and Real Estate, subject to certain limitations.
Further, Rule 20.1 directs the trustee to exercise due diligence for
the protection of the planholders guided by sound investment
principles in the exclusive management and control over the
funds and its right, at any time, to sell, convert, invest, change,
transfer, or otherwise change or dispose of the assets comprising
the funds. All these certainly underscore the importance of the
planholders being recognized as the ultimate beneficiaries of the
SEC-mandated trust.
This consistently runs in accord with the legislative intent laid
down in Chapter IV of R.A. No. 8799, or the SRC, which provides
for the establishment of trust funds for the payment of
benefits under such plans. Section 16 of the SRC
provides:ChanRoblesvirtualLawlibrary
SEC. 16. Pre-Need Plans. - No person shall sell or offer for sale to
the public any pre-need plan except in accordance with rules and
regulations which the Commission shall prescribe. Such rules
shall regulate the sale of pre-need plans by, among other
things, requiring the registration of pre-need plans, licensing
persons involved in the sale of pre-need plans, requiring
disclosures to prospective plan holders, prescribing advertising
guidelines, providing for uniform accounting system, reports and
record keeping with respect to such plans, imposing capital,
bonding and other financial responsibility, and establishing trust
funds for the payment of benefits under such plans. [Emphasis
supplied]
It is clear from Section 16 that the underlying congressional
intent is to make the planholders the exclusive beneficiaries. It
has been said that what is within the spirit is within the law even
if it is not within the letter of the law because the spirit prevails
over the letter.24c
ralawrednad
This will by the legislature was fortified with the enactment of
R.A. No. 9829 or the Pre-Need Code in 2009.25The Congress,
because of the chaos confounding the industry at the time,
considered it necessary to provide a stronger legal framework so
that no entity could claim that the mandate and delegated
authority of the SEC under the SRC was nebulous. The Pre-Need
Code cemented the regulatory framework governing the pre-need
industry with precise specifics to ensure that the rights of the
pre-need planholders would be categorically defined and
protected. Similar provisions in the Pre-Need Code are the
following:ChanRoblesvirtualLawlibrary
SECTION 32.Terms and Conditions of a Trust Fund. A
trust fund must be established separately for each type of pre-
need plan with the trust department of a trust company, bank or
investment house doing business in the Philippines. No trust fund
shall be established by a pre-need company with an affiliate trust
entity subject to Section 38 hereof.
The trust agreement shall be submitted to the Commission for
approval before execution and shall contain the following salient
provisions, among others:Chan
RoblesvirtualLawlibrary
(a) The manner in which the trust fund is to be operated;
(b) Investment powers of the trustee with respect to trust
deposits, including the character and kind of investment;
(c) Auditing and settlement of accounts of the trustee with
respect to the trust fund;
(d) Basis upon which the trust fund may be terminated;
(e) Provisions for withdrawals from the trust fund;
(f) That the trustee shall submit to the power of the Commission
to examine and verify the trust fund;
(g) An undertaking by the trustee that it shall abide by the rules
and regulations of the Commission with respect to the trust fund;
and
(h) An undertaking by the trustee that it shall submit such other
data or information as may be prescribed by the Commission.
SECTION 33.Responsibilities of the Trustee. - The trustee
shall:ChanRoblesvirtualLawlibrary
(a) Administer and manage the trust fund with utmost good faith,
care and prudence required by a fiduciary relationship;
(b) The trustee shall have the exclusive management and control
over the funds and the right at any time to sell, convert, invest,
change, transfer or otherwise change or dispose of the assets
comprising the funds within the parameters prescribed by the
pre-need company and provided these parameters are compliant
with the Commission's regulations; and
(c) Not use the trust fund to invest in or extend any loan or
credit accommodation to the pre-need company, its directors,
officers, stockholders, and related interests as well as to persons
or enterprises controlling, owned or controlled by, or under
common control with said company, its directors, officers,
stockholders and related interests except for entities which are
direct providers of pre-need companies.
SECTION 34.Investment of the Trust Fund. To ensure the
liquidity of the trust fund to guarantee the delivery of the benefits
provided for under the plan contract and likewise obtain sufficient
capital growth to meet the growing actuarial reserve liabilities, all
investments of the trust fund/s of a pre-need company shall be
limited to the following and subject to limitations, to
wit:ChanRoblesvirtualLawlibrary
(a) Fixed income instruments. These maybe classified into
short-term and long-term instruments. The instrument is short-
term if the maturity period is three hundred sixty-five (365) days
or less. This category includes:Chan
RoblesvirtualLawlibrary
(1) Government securities which shall not be less than ten
percent (10%) of the trust fund amount;
(2) Savings/time deposits and unit investment trust funds
maintained with and managed by a duly authorized bank with
satisfactory examination rating as of the last examination by the
BSP;
(3) Commercial papers duly registered with the SEC with a credit
rating of "1" for short-term and "AAA" for long- term based on
the rating scale of an accredited Philippine Rating Agency or its
equivalent at the time of investment.
The maximum exposure to long-term commercial papers shall not
exceed fifteen percent (15%) of the total trust fund amount while
the exposure to each commercial paper issuer shall not exceed
ten percent (10%) of the allocated amount; and
(4) Direct loans to corporations which are financially stable,
profitable for the last three (3) years and have a good track
record of paying their previous loans.
These loans shall be fully secured by a real estate mortgage up to
the extent of sixty percent (60%) of the zonal valuation of the
property at the time the loan was granted.
The property shall be covered by a transfer certificate of title
registered in the name of the mortgagor and free from liens and
encumbrances.
The maximum amount to be allocated for direct loans shall not
exceed five percent (5%) of the total trust fund amount while the
amount to be granted to each corporate borrower shall not
exceed ten percent (10%) of the amount allocated.
The maximum term of the loan should be no longer than four (4)
years.
Direct loans to planholders are exempt from the limitations set
forth under this section: Provided, That such loans to planholders
shall not exceed ten percent (10%) of the total trust fund
amount.
(b) Equities. Investments in equities shall be limited to stocks
listed on the main board of a local stock exchange.
Investments in duly registered collective investment instruments
such as mutual funds are allowed hereunder: Provided, That such
funds are invested only in fixed income instruments and blue
chips securities, subject to the limitations prescribed by laws,
rules and regulations.
These investments shall include stocks issued by companies that
are financially stable, actively traded, possess good track record
of growth and have declared dividends for the past three (3)
years. Notwithstanding the prohibition against transactions with
directors, officers, stockholders and related interests, the trustee
may invest in equities of companies related to the trustee
provided these companies comply with the foregoing criteria
provided in this paragraph forEQUITY INVESTMENTS .
The amount to be allocated for this purpose shall not exceed
thirty percent (30%) of the total trust fund while the investment
in any particular issue shall not exceed ten percent (10%) of the
allocated amount. The investment shall be recorded at the
aggregate of the lower of cost or market.

Existing investments which are not in accordance herewith shall
be disposed of within three (3) years from the effectivity of this
Act.
(c) Real Estate. These shall include real estate properties
located in strategic areas of cities and first class municipalities.
The transfer certificate of title (TCT) shall be in the name of the
seller, free from liens and encumbrances and shall be transferred
in the name of the trustee in trust for the planholders unless the
seller/transferor is the pre-need company wherein an annotation
to the TCT relative to the sale/transfer may be allowed. It shall
be recorded at acquisition cost.
However, the real estate shall be appraised every three (3) years
by a licensed real estate appraiser, accredited by the Philippine
Association of Real Estate Appraisers, to reflect the increase or
decrease in the value of the property. In case the appraisal would
result in an increase in the value, only sixty percent (60%) of the
appraisal increase is allowed to be recorded in the books of the
trust fund but in case of decline in value, the entire decline shall
be recorded. Appraisal increment should not be used to cover up
the required monthly contribution to the trust fund.
The total recorded value of the real estate investment shall not
exceed ten percent (10%) of the total trust fund amount of the
pre-need company. In the event that the existing real estate
investment exceeds the aforesaid limit, the same shall be leveled
off to the prescribed limit within three (3) years from the
effectivity of this Code.
Investment of the trust fund, which is not in accordance with the
preceding paragraphs, shall not be allowed unless the prior
written approval of the Commission had been secured: Provided,
further, That no deposit or investment in any single entity shall
exceed fifteen percent (15%) of the total value of the trust fund:
Provided, finally, That the Commission is authorized to adjust the
percentage allocation per category set forth herein not in excess
of two percentage (2%) points upward or downward and no
oftener than once every five (5) years. The first adjustment
hereunder may be made no earlier than five (5) years from the
effectivity of this Act. The pre-need company shall not use the
trust fund to extend any loan to or to invest in its directors,
stockholders, officers or its affiliates.
xxx
SECTION 36. Trust Fund Deficiencies. Upon approval by
the Commission of the pre-need reserve computation submitted
in the preceding section, any deficiency in the trust fund, when
compared to the reserve liabilities as reported in the pre-need
reserve valuation report, shall be funded by the pre-need
company within sixty (60) days from such approval. Failure to
cover the deficiency in an appropriate manner within the time
required shall subject the pre-need company to the payment of a
penalty, in addition to other remedies exercisable by the
Commission, as provided for in this Code. Any excess of the trust
fund over the actuarial reserve liabilities may be credited to
future deposit requirements.
SECTION 37.Liquidity Reserve. The trustee shall at all times
maintain a liquidity reserve which shall be sufficient to cover at
least fifteen percent (15%) of the trust fund but in no case less
than one hundred twenty-five percent (125%) of the amount of
the availing plans for the succeeding year. For this purpose, the
pre-need company shall timely submit to the trustee a summary
of benefits payable for the succeeding year.
The following shall qualify as investments for the liquidity
reserve:ChanRoblesvirtualLawlibrary
(a) Loans secured by a hold-out on assignment or pledge
deposits maintained either with the trustee or other banks, or of
deposit substitute of the trustee itself or mortgage and chattel
mortgage bonds issued by the trustee;
(b) Treasury notes or bills, other government securities or
bonds, and such other evidences or indebtedness or obligations
the servicing and repayment of which are fully guaranteed by the
Republic of the Philippines;
(c) Repurchase agreements with any of those mentioned in Item
"b" above, as underlying instruments thereof; and
(d) Savings or time deposits with government-owned banks or
commercial banks.
SECTION 38.Trustees. Upon approval of the Commission or
when the Commission requires for the protection of planholders,
the pre-need company shall entrust the management and
administration of the trust fund to any reputable bank's trust
department, trust company or any entity authorized to perform
trust functions in the Philippines: Provided, That no director
and/or officer of the pre-need company shall at the same time
serve as director and/or officer of the affiliate or related trust
entity: Provided, further, That no trust fund shall be established
by a pre-need company with a subsidiary, affiliate or related trust
entity. However, such may be allowed: Provided, That the
following conditions are complied with:Cha
]nRoblesvirtualLawlibrary
(a) A written approval of the Commission has been previously
obtained; and
(b) Public disclosure of the affiliation with the trust entity be
included in all materials in whatever form.
The Commission shall have the authority to prescribe appropriate
rules that shall ensure that the yield of the trust fund is
maximized, consistent with the requirements of safety and
liquidity.
[Italics Supplied]
"Under the principle of legislative approval of administrative
interpretation by re-enactment, the re-enactment of a statute,
substantially unchanged (as in this case), is persuasive indication
of the adoption by Congress of a prior executive
construction."26 Accordingly, where a statute is susceptible of the
meaning placed upon it by a ruling of the government agency
charged with its enforcement and the legislature thereafter
reenacts the provisions without substantial change, such action is
to some extent confirmatory that the ruling carries out the
legislative purpose.27c
ralawrednad
The Court cannot go against that legislative intent for it is the
duty of this institution to read what the law intends. It is a
cardinal rule that, in seeking the meaning of the law, the first
concern of the judge should be to discover in its provisions the
intent of the lawmaker. Unquestionably, the law should never be
interpreted in such a way as to cause injustice as this is never
within the legislative intent. An indispensable part of that intent,
in fact, for we presume the good motives of the legislature, is to
render justice.28cr
alawrednad
To rule that Legacy has retained a beneficial interest in the trust
fund is to perpetuate the injustices being committed against the
planholders and violate not only the spirit of the trust agreement
but, more importantly, the lawmaker's intent. If indeed Legacy
had an interest that could be reached by its creditors even during
insolvency, the planholders would be prejudiced as they would be
forced to share in the assets that would be distributed pro rata to
all creditors, whether planholders or not. It would contradict the
very purpose for which the trust was mandated by the Congress
in the first place.
Third, the perceived interest of Legacy, as touted by the the planholders, as creditors, they can rightfully use equitable
Assignee, has simply no basis. It may appear that Legacy under remedies against the trustee for the protection of their interest in
the agreement has control over the enforcement of the trust the trust fund and, in particular, their right to demand the
because of its provisions stating that Legacy shall "solely and payment of what is due them from the fund. Verily, Legacy is out
exclusively] [be] responsible for fulfilling the services referred to of the picture and exists only as a representative of the trustee,
in the recital clauses and the settlement/payment of claims of LBP, with the limited role of facilitating the delivery of the
any person or firm availing of such services" and that "[a]ny benefits of the trust fund to the beneficiaries -the planholders.
written direction of the Company [to the trustee] shall constitute The trust fund should not revert to Legacy, which has no
a certification that the distribution of payment so directed is one beneficial interest over it. Not being an asset of Legacy, the trust
which the Company is authorized to direct"29 Such provisions, fund is immune from its reach and cannot be included by the RTC
however, cannot be construed as Legacy having retained a in the insolvency estate.
beneficial interest in the trust fund.
In the end, the failure of Judge Laigo to consider the provisions of
To begin with, the aforestated provisions refer solely to the the SRC, the New Rules and the law on trusts, that should have
delivery of the proceeds of the trust from LBP to Legacy and then warranted the exclusion of the trust fund from the insolvency
finally to the beneficiaries. In effect, Legacy merely agreed to estate of Legacy, constituted grave abuse of discretion. In
facilitate the payment of the benefits from the trust fund treating the trust fund as forming part of Legacy's insolvency
to the intended beneficiaries, acting as a conduit or an estate, Judge Laigo acted against what was contemplated by law.
agent of the trustee in the enforcement of the trust He turned a blind eye to the will of the Congress as expressed
agreement. Under the general principles of trust, a through the SRC and the Pre-Need Code. In the process, he
trustee, by the terms of the agreement may be permitted endangered the claims of the planholders by allowing the
to delegate to agents or to co-trustees or to other persons probability that they would be drastically reduced or dissipated.
the administration of the trust or the performance of act He should have acted prudently bearing in mind that the
which could not otherwise be properly delegated.30 Thus, establishment of the trust was precisely for the exclusive benefit
by the terms of the trust, as in this case, a trustee may be of the planholders.
authorized or permit an agent to do acts such as the delivery of
the benefits out of the trust fund. Enjoining the SEC from validating the
claims against the trust fund is grave
The Court cannot subscribe either to the Assignee's position that abuse of discretion for the insolvency
Legacy is a debtor of the planholders relative to the trust fund. In court has no authority to order the
trust, it is the trustee, and not the trustor, who owes fiduciary reversion of properties that do not
duty to the beneficiary. The Restatement is clear on this point. form part of Legacy's insolvent estate.
Section 170 thereof provides that the "trustee is under a duty to
the beneficiary to administer the trust solely in the interest of the
beneficiary."31 Section 182 also states that the duty of a trustee
is to pay income to the beneficiary.32Thus, LBP is tasked with the
fiduciary duty to act for the benefit of the planholders as to
matters within the scope of the relation.33 Like a debtor, LBP
owes the planholders the amounts due from the trust fund. As to
The Assignee cited Abrera v. College Assurance Plan34 (Abrera),
where the Court held that claims covered by rehabilitation
proceedings before the RTC should include all claims or demands
of whatever nature or character against a debtor or its property.
At the heart of the Assignee's argument is that because the
authority is with the RTC, the SEC has no right to interfere in the
insolvency proceedings.
It is an error for the Assignee to assume that the authority of the
RTC extends to the claims against the trust fund. Claims against
the trust fund must be distinguished from claims against Legacy.
The claims against the trust fund are directed not against Legacy,
but against LBP, the trustee, being the debtor relative to the trust
properties.
The Pre-Need Code is clear on this. It recognizes the distinction
between claims against the pre-need company and those against
the trust fund. Section 52 (b) states that liquidation "proceedings
in court shall proceed independently of proceedings in the
Commission for the liquidation of claims, andcreditors of the
pre-need company shall have no personality whatsoever in
the Commission proceedings to litigate their claims
against the trust funds." The reason why claims against the
trust funds can proceed independently of the proceedings in the
courts is the fact that the latter is directed against a different
person or entity.
Moreover, the Assignee must be reminded that the issue
in Abrera is not similar to the question raised here by the SEC. In
the case at bench, the SEC questions the propriety of including
the trust fund in the inventory of Legacy's corporate assets.
Jurisdiction over claims filed against the trust fund
From the effectivity of the Pre-Need Code, it is the Insurance
Commission (IC) that "shall have the primary and exclusive
power to adjudicate any and all claims involving pre-need
plans."35The transitory provisions of the Pre-Need Code,
however, provide that "[notwithstanding any provision to
the contrary, all pending claims, complaints and cases
(referring to pre-need contract and trust claims) filed with
the SEC shall be continued in its full and final
conclusion."36cralawrednad
The Pre-Need Code recognizes that the jurisdiction over pending
claims against the trust funds prior to its effectivity is vested with
the SEC. Such authority can be easily discerned even from the
provisions of the SRC. Section 4 thereof provides that despite the
transfer of jurisdiction37 to the RTC of those matters enumerated
under Section 5 of P.D. No. 902-A,38 the SEC remains authorized
to "exercise such other powers as may be provided by law as well
as those which may be implied from, or which are necessary or
incidental to the carrying out of, the express powers granted
the Commission39 to achieve the objectives and purposes of these
laws."40 Relevant thereto is Section 36.5 (b) of the SRC which
states that:Cha
nRoblesvirtualLawlibrary
The Commission may, having due regard to the public interest or
the protection of investors, regulate, supervise, examine,
suspend or otherwise discontinue such and other similar funds
under such rules and regulations which the Commission may
promulgate, and which may include taking custody and
management of the fund itself as well as investments in, and
disbursements from, the funds under such forms of control and
supervision by the Commission as it may from time to time
require. The authority granted to the Commission under this
subsection shall also apply to all funds established for the
protection of investors (which necessarily includes the trust
funds), whether established by the Commission or otherwise.41

Concomitantly, under the New Rules, the SEC "may, at its
discretion, demand for the conversion to cash or other near cash
assets of the investments made by the Trustee to protect the
interest of the Planholders."42
Therefore, even prior to the transfer to the IC of matters
pertaining to pre-need plans and trust funds, the SEC had
authority to regulate, manage, and hear all claims involving trust
fund assets, if in its discretion, public interest so required.
Accordingly, all claims against the trust funds, which have been
pending before it, are clearly within the SEC's authority to rule
upon.
Pre-Need Code is curative and remedial in character and,
therefore, can be applied retroactively
Finally, it must be stressed that the primary protection accorded
by the Pre-Need Code to the planholders is curative and remedial
and, therefore, can be applied retroactively. The rule is that
where the provisions of a statute clarify an existing law and do
not contemplate a change in that law, the statute may be given
curative, remedial and retroactive effect.43 To review, curative
statutes are those enacted to cure defects, abridge superfluities,
and curb certain evils.44 As stressed by the Court in Fabian v.
Desierto,45cralawrednad
If the rule takes away a vested right, it is not procedural. If the
rule creates a right such as the right to appeal, it may be clarified
as a substantive matter; but if it operates as a means of
implementing an existing right then the rule deals merely
with procedure.
[Emphasis Supplied]
A reading of the Pre-Need Code immediately shows that its
provisions operate merely in furtherance of the remedy or
confirmation of the right of the planholders to exclusively claim
against the trust funds as intended by the legislature. No new
substantive right was created or bestowed upon the planholders.
Section 52 of the Pre-Need Code only echoes and clarifies the
SRC's intent to exclude from the insolvency proceeding trust fund
assets that have been established "exclusively for the benefit
of planholders." It was precisely enacted to foil the tactic of
taking undue advantage of any ambiguities in the New Rules.
Any doubt or reservation in this regard has been dispelled by the
Pre-Need Code. Section 57 thereof provides that "[a]ny pre-need
company who, at the time of the effectivitv of this Code has
been registered and licensed to sell pre-need plans and
similar contracts, shall be considered registered and
licensed under the provision of this Code and its
implementing rules and regulations and shall be subject to
and governed by the provisions hereof xxx." Thus, Legacy
and all other existing pre-need companies cannot claim that the
provisions of the Pre-Need Code are not applicable to them and
to the claims which accrued prior to the enactment of the said
law.
"[I]t has been said that a remedial statute must be so construed
as to make it effect the evident purpose for which it was enacted,
so that if the reason of the statute extends to past transactions,
as well as to those in the future, then it will be so applied
although the statute does not in terms so direct:46 With the Pre-
Need Code having the attribute of a remedial statute, Legacy and
all pre-need providers or their creditors cannot argue that it
cannot be retroactively applied.
Conclusion
III. MANDATORY & PROHIBITORY LAWS
In sum, improvidently ordering the inclusion of the trust
fund in Legacy's insolvency estate without regard to the
avowed state policy of protecting the consumer of pre-
need plans, as laid down in the SRC, the New Rules, and
the Pre-Need Code, constitutes grave abuse of discretion.
The RTC should have known, and ought to know, the
overarching consideration the Congress intended in
requiring the establishment of trust funds - to uphold first
and foremost the interest of the planholders.
The Court upholds its duty to protect the ordinary Filipino
workers who are seeking a future for their children through
pre-need contracts. Their incredibly long wait is over as
this is the moment when their rightful and exclusive right
to the trust funds, created primarily for them, is judicially
respected and affirmed.
WHEREFORE, the petition is GRANTED. The June 26,
2009 Order of the Regional Trial Court, Branch 56, Makati
City, is declared NULL and VOID.
The Securities and Exchange Commission is directed to
process the claims of legitimate planholders with dispatch.
SO ORDERED.
6. UOBP V BOARD OF COMMISSIONERS GR 182133
DECISION
PERALTA, J.:
Before this Court is a Petition for Review
on Certiorari under Rule 45 of the Rules of Court, assailing
the Decision1 and Resolution2 of the Court of Appeals (CA),
dated February 27, 2006 and March 5, 2008, respectively,
in CAG.R.SP No. 86401.
The antecedents are as follows:LawlibraryofCRAlaw
Respondent J.O.S. Managing Builders, Inc. (JOS Managing
Builders) is the registered owner and developer of the
condominium project Aurora Milestone Tower. On
December 16, 1997, JOS Managing Builders and
respondent EDUPLAN Philippines, Inc. (EDUPLAN) entered
into a Contract to Sell covering Condominium Unit E,
10th Floor of the Aurora Milestone Tower with an area of
149.72 square meters, more or less. In August 1998,
EDUPLAN effected full payment, and in December 1998,
JOS Managing Builders and EDUPLAN executed a Deed of
Absolute Sale over the condominium unit. Notwithstanding
the execution of the deed of sale in favor of EDUPLAN, JOS
Managing Builders failed to cause the issuance of a
Condominium Certificate of Title over the condominium
unit in the name of EDUPLAN. EDUPLAN learned that the
lots on which the condominium building project Aurora
Milestone Tower was erected had been mortgaged by JOS
Managing Builders to petitioner United Overseas Bank of
the Philippines (United Overseas Bank) without the prior
written approval of the Housing and Land Use Regulatory
Board (HLURB). Due to the inability of JOS Managing
Builders to deliver the condominium certificate of title
covering the unit purchased by EDUPLAN, the latter filed a
complaint for specific performance and damages against
JOS Managing Builders and United Overseas Bank before
the HLURB praying that: (a) the mortgage between JOS
Managing Builders and United Overseas Bank be declared
null and void; (b) JOS Managing Builders and United
Overseas Bank be compelled to cause the issuance and
release of the Condominium Certificate of Title; and (c)
JOS Managing Builders be ordered to provide emergency
power facilities, to refund the monthly telephone carrier
charges, and to permanently cease and desist from further
collecting such charges.
In its defense, JOS Managing Builders alleged that it could
not issue an individual Condominium Certificate of Title in
favor of EDUPLAN, because petitioner United Overseas
Bank has custody of the Transfer Certificates of Title
covering the condominium building.
United Overseas Bank, on the other hand, alleged that JOS
Managing Builders is the owner of several parcels of land
covered by Transfer Certificate of Title (TCT) Nos. N-
146444, N-146445 and N-143601. On April 3, 1997, JOS
Managing Builders executed in favor of United Overseas
Bank a Real Estate Mortgage3 over the said parcels of land
and the improvements existing or to be erected thereon to
secure the Two Hundred Million Peso
(PhP200,000,000.00) loan it acquired from the bank. The
4
subject condominium building project Aurora Milestone
Tower, which is situated in the said parcels of land, are
part of the properties mortgaged to United Overseas Bank.
JOS Managing Builders defaulted in the payment of its loan
obligations to United Overseas Bank. Hence, United
Overseas Bank foreclosed the mortgage constituted over
properties of JOS Managing Builders and the subject
properties were sold by public auction on March 22, 1999
wherein United Overseas Bank was declared as the highest
bidder. Subsequently, a certificate of sale was issued in
favor of United Overseas Bank corresponding to the
foreclosed properties, which was registered with the
Register of Deeds of Quezon City on April 27, 1999.
On August 15, 2001, the HLURB Arbiter ruled,5 in favor of
EDUPLAN and declared the mortgage executed between
JOS Managing Builders and United Overseas Bank as well
as the foreclosure proceedings null and void, pointing out
that the mortgage was executed without the approval of
the HLURB as required under Section 18 of Presidential
Decree (P.D.) No. 957.6 The Arbiter held that that since
EDUPLAN has paid the full purchase price of the
condominium unit, JOS Managing Builders and United
Overseas Bank should cause the release from
encumbrance of the mother titles to the condominium
building project, and issue the corresponding condominium
certificate of title in favor of EDUPLAN. Further, JOS
Managing Builders should provide EDUPLAN with
emergency power facilities and refund it with the monthly
telephone carrier charges it has been collecting since
September 1999, and permanently cease and desist from
further imposing and collecting such fees. Moreover, JOS
Managing Builders was directed to pay EDUPLAN damages,
attorney's fees and costs of suit. The dispositive portion of
the decision reads:L
awlibraryofCRAllesVirtualawlibrary
7. Wherefore, the foregoing premises considered and
as prayed for, judgment is hereby rendered in favor
of the Complainant and against the Respondents as
follows:LawlibraryofCRAlaw
ChanRoblesVirtualawlibrary
8. 1. Declaring the mortgage executed by Respondent
J.O.S. Managing Builders in favor of Respondent
United Overseas Bank (Westmont) as null and void,
including the foreclosure of the mortgage, for being
in violation of Section 18 of P.D. 957;

2. Ordering Respondents to cause the release from
the encumbrances of the "mother titles" to the
Condominium Building Project and, issuance of the
individual Condominium Certificate of Title of
Complainant to its Condominium Unit, free from any
and all liens and encumbrances;
3. Ordering Respondent J.O.S. Managing Builders to
provide the Complainant with emergency power
facilities, strictly as represented in its sales
brochures;
4. Ordering Respondent J.O.S. Managing Builders to
refund to Complainant the monthly telephone carrier
charges it has been collecting since September 1,
1999 and permanently cease and desist from further
imposing and collecting said charges;
5. Ordering Respondent J.O.S. to pay the
complainant P100,000.00 by way of temperate
damages, P50,000.00 by way of exemplary
damages, P40,000.00 as and by way of Attorney's
Fees; and the costs of suit.
6. Ordering Respondent J.O.S. Managing Builders to
pay Respondent United Overseas Bank (Westmont)
the loan release value of the subject condominium
unit.
9. United Overseas Bank then filed a petition for review with
the HLURB. On August 20, 2004, the HLURB Board of
Commissioners affirmed the Arbiter's decision, but deleted
the award of emergency power facilities and refund of the
monthly telephone carrier charges. Hence, United Overseas
Bank filed a petition for review under Rule 43 before the
CA.7redar
claw
On February 27, 2006, the CA dismissed the petition.8 A
motion for reconsideration was filed, but it was denied for
lack of merit.9 The CA held that United Overseas Bank did
not exhaust the administrative remedies available to it due
to its failure to appeal the decision of the HLURB Board of
Commissioners to the Office of the President before going
to the CA.
Hence, the petition assigning the lone
error:LawlibraryofCRAlaw
ChanRobesVirtualawlibrary
10.THE COURT OF APPEALS ERRED IN REFUSING TO APPLY
THE EXCEPTION TO THE DOCTRINE OF EXHAUSTION OF
ADMINISTRATIVE REMEDIES.10
11.Petitioner United Overseas Bank argues that the CA erred
when it dismissed the petition due to its failure to exhaust
administrative remedies. It alleges that the question on
whether the HLURB is correct in declaring null and void the
entire mortgage constituted by JOS Managing Builders in
favor of United Overseas Bank, as well as the foreclosure
of the entire mortgage, is a legal question which is an
exception to the rule on exhaustion of administrative
remedies.
The petition is meritorious.
The doctrine of exhaustion of administrative remedies is a
cornerstone of our judicial system. The thrust of the rule is
that courts must allow administrative agencies to carry out
their functions and discharge their responsibilities within
the specialized areas of their respective competence.11 It
has been held, however, that the doctrine of exhaustion of
administrative remedies and the doctrine of primary
jurisdiction are not iron-clad rules. In the case of Republic
v. Lacap,12 the Court enumerated the numerous exceptions
to these rules, namely: (a) where there is estoppel on the
part of the party invoking the doctrine; (b) where the
challenged administrative act is patently illegal, amounting
to lack of jurisdiction; (c) where there is unreasonable
delay or official inaction that will irretrievably prejudice the
complainant; (d) where the amount involved is relatively
so small as to make the rule impractical and oppressive;
(e) where the question involved is purely legal and will
ultimately have to be decided by the courts of justice; (f)
where judicial intervention is urgent; (g) where the
application of the doctrine may cause great and irreparable
damage; (h) where the controverted acts violate due
process; (i) where the issue of non-exhaustion of
administrative remedies has been rendered moot; (j)
where there is no other plain, speedy and adequate
remedy; (k) where strong public interest is involved; and
(1) in quo warranto proceedings.13redarclaw
The situation in paragraph (e) of the foregoing
enumeration obtains in this case.
The issue on whether non-compliance with the clearance
requirement with the HLURB would result to the
nullification of the entire mortgage contract or only a part
of it is purely legal which will have to be decided ultimately
by a regular court of law. It does not involve an
examination of the probative value of the evidence
presented by the parties. There is a question of law when
the doubt or difference arises as to what the law is on a
certain state of facts, and not as to the truth or the
falsehood of alleged facts. Said question at best could be
resolved only tentatively by the administrative authorities.
The final decision on the matter rests not with them but
with the courts of justice. Exhaustion of administrative
remedies does not apply, because nothing of an
administrative nature is to be or can be done. The issue
does not require technical knowledge and experience, but
one that would involve the interpretation and application of
law.14 There is, thus, no need to exhaust administrative
remedies, under the premises.
The Court will now proceed to the legal issue on hand.
Petitioner United Overseas Bank alleges that the HLURB
erred in declaring null and void the entire mortgage
constituted by JOS Managing Builders in its favor, as
EDUPLAN does not claim ownership over all the properties
mortgaged by JOS Managing Builders in favor of United
Overseas Bank, but only over a single condominium
unit, i.e., Unit E, 10th Floor of the Aurora Milestone Tower.
We agree with petitioner.
The HLURB erred in declaring null and void the entire
mortgage executed between JOS Managing Builders and
United Overseas Bank.
At the onset, it is worthy to note that jurisprudence have
varying conclusions of the issue at hand. InFar East Bank &
Trust Co. v Marquez,15 the Court sustained the HLURB
when it declared the mortgage entered into between the
subdivision developer and the bank as unenforceable
against the lot buyer for failure of the developer to obtain
the prior written approval of the HLURB. However, we were
categorical that the HLURB acted beyond bounds when it
nullified the mortgage covering the entire parcel of land, of
which the lot subject of the buyer's complaint is merely a
part of.
In Far East Bank, the Court held that:LawlibraryofCRAlaw
ChanRoblesVirtualawlibrary
12.Acts executed against the provisions of mandatory or
prohibitory laws shall be void. Hence, the mortgage over
the lot is null and void insofar as private respondent is
concerned.
 The remedy granted by the HLURB and sustained by the
Office of the President is proper only insofar as it refers to
the lot of respondent. In short, the mortgage contract is
void as against him. Since there is no law stating the
specifics of what should be done under the circumstances,
that which is in accord with equity, should be ordered. The
remedy granted by the HLURB in the first and the second
paragraphs of the dispositive portion of its Decision insofar
as it referred to respondent's lot is in accord with equity.
The HLURB, however, went overboard in its disposition in
paragraphs 3 and 4, which pertained not only to the lot but
to the entire parcel of land mortgaged. Such ruling was
improper. The subject of this litigation is limited only to the
lot that respondent is buying, not to the entire parcel of
land. He has no personality or standing to bring suit on the
whole property, as he has actionable interest over the
subject lot only. (Citations omitted and underscoring
ours)16
13.In Metropolitan Bank and Trust Co., Inc. v. SLGT Holdings,
Inc.,17 however, the Court nullified the entire mortgage
contract executed between the subdivision developer and
the bank albeit the fact that only two units or lot buyer/s
filed a case for declaration of nullity of mortgage. In the
said case, the entire mortgage contract was nullified on the
basis of the principle of indivisibility of mortgage as
provided in Article 208918 of the New Civil Code.
This notwithstanding, in the fairly recent case of Philippine
National Bank v. Lim,19 the Court reverted to our previous
ruling in Far East Bank that a unit buyer has no standing to
seek for the complete nullification of the entire mortgage,
because he has an actionable interest only over the unit he
has bought. Hence, in the said case, the mortgage was
nullified only insofar as it affected the unit buyer.
We find the recent view espoused in Philippine National
Bank to be in accord with law and equity. While a
mortgage may be nullified if it was in violation of Section
18 of P.D. No. 957, such nullification applies only to the
interest of the complaining buyer. It cannot extend to the
entire mortgage. A buyer of a particular unit or lot has no
standing to ask for the nullification of the entire mortgage.
Since EDUPLAN has an actionable interest only over Unit E,
10th Floor, Aurora Milestone Tower, it is but logical to
conclude that it has no standing to seek for the complete
nullification of the subject mortgage and the HLURB was
incorrect when it voided the whole mortgage between JOS
Managing Builders and United Overseas Bank.
Considering that EDUPLAN had already paid the full
purchase price of the subject unit, the latter is entitled to
the transfer of ownership of the subject property in its
favor. This right is provided for in Section 25 of P.D. No.
957, 50 wit:Lawlib
raryofCRAlairtualawlibrary
14.Issuance of Title. The owner or development shall deliver
the title of the lot or unit to the buyer upon full payment of
the lot or unit, x xx.
15.Verily, JOS Managing Builders has the obligation to cause
the delivery of the Title to the subject condominium unit in
favor of EDUPALN.
Nevertheless, despite the fact that the mortgage
constituted between JOS Managing Builders and United
Overseas Bank cannot bind EDUPLAN, because of the non-
observance of the provision of P.D. No. 957 by JOS
managing Builders, the mortgage between the former and
United Overseas Bank is still valid.

In the present case, it is undisputed that JOS Managing
Builders mortgaged several parcels of land, including all
the buildings and improvements therein covered by TCT
Nos. N-146444, N-146445 and N-143601 to United
Overseas Bank without prior clearance from the HLURB.
The said omission clearly violates Section 18 of P.D. No.
957 (The Subdivision and condominium Buyers' Protective
Decree), which provides as follows:LawlibraryofCRAlaw
ChanRoblesVirtualawlibrary
16.Section 18. Mortgages. - No mortgage on any unit or lot
shall be made by the owner or developer without prior
written approval of the [HLURB]. xxx (Word in bracket
added)
17.It should be noted, however, that the failure of JOS
Managing Builders to secure prior approval of the
mortgage from the HLURB and United Overseas Bank's
failure to inquire on the status of the property offered for
mortgage placed the condominium developer and the
creditor Bank in pari delicto.20Hence, they cannot ask the
courts for relief for such parties should be left where they
are found for being equally at fault.
More importantly, it should be understood that the prior
approval requirement is intended to protect buyers of
condominium units from fraudulent manipulations
perpetrated by unscrupulous condominium sellers and
operators, such as their failure to deliver titles to the buyer
or titles free from lien and encumbrances.21 This is
pursuant to the intent of P.D. No. 957 to protect hapless
buyers from the unjust practices of unscrupulous
developers which may constitute mortgages over
condominium projects sans the knowledge of the former
and the consent of the HLURB.22red
arclaw
Thus, failure to secure the HLURB'S prior written approval
as required by P.D. No. 957 will not annul the entire
mortgage between the condominium developer and the
creditor bank, otherwise the protection intended for
condominium buyers will inadvertently be extended to the
condominium developer even though, by failing to secure
the government's prior approval, it is the party at fault.
To rule otherwise would certainly affect the stability of
large-scale mortgages, which is prevalent in the real estate
industry. To be sure, mortgagee banks would be
indubitably placed at risk if condominium developers are
empowered to unilaterally invalidate mortgage contracts
based on their mere failure to secure prior written approval
of the mortgage by the HLURB, which could be easily
caused by inadvertence or by deliberate intent.
From all the foregoing, the HLURB erred when it declared
the entire mortgage constituted by JOS Managing Builders,
Inc. in favor of United Overseas Bank null and void based
solely on the complaint of EDUPLAN which was only
claiming ownership over a single condominium unit of
Aurora Milestone Tower. Accordingly, the mortgage
executed between JOS Managing Builders and United
Overseas Bank is valid.
WHEREFORE, the petition is GRANTED. The Decision and
Resolution of the Court of Appeals, dated February 27,
2006 and March 5, 2008, respectively, in CA-G.R. SP No.
86401, are REVERSED andSET ASIDE. The Decision of
the HLURB, dated August 20, 2004, is AFFIRMED with
MODIFICATION. The mortgage executed and the
succeeding foreclosure proceedings between respondent
J.O.S. Managing Builders, Inc. and petitioner United
Overseas Bank of the Philippines, Inc., with respect to
respondent EDUPLAN Philippines, Inc.'s unit E., 10TH Floor,
Aurora Milestone Tower, is declared null and void.
SO ORDERED.c
 ralawlawlibrary
IV. TERMINATION OF EFFECTIVITY OF LAWS; JUDICIAL DECISION
18. DE ROY V CA GR 80718
CORTES, J.:
This special civil action for certiorari seeks to declare null and
void two (2) resolutions of the Special First Division of the Court
of Appeals in the case of Luis Bernal, Sr., et al. v. FelisaPerdosa
De Roy, et al., CA-G.R. CV No. 07286. The first resolution
promulgated on 30 September 1987 denied petitioners' motion
for extension of time to file a motion for reconsideration and
directed entry of judgment since the decision in said case had
become final; and the second Resolution dated 27 October 1987
denied petitioners' motion for reconsideration for having been
filed out of time.
At the outset, this Court could have denied the petition outright
for not being verified as required by Rule 65 section 1 of the
Rules of Court. However, even if the instant petition did not
suffer from this defect, this Court, on procedural and substantive
grounds, would still resolve to deny it.
The facts of the case are undisputed. The firewall of a burned-out
building owned by petitioners collapsed and destroyed the
tailoring shop occupied by the family of private respondents,
resulting in injuries to private respondents and the death of
Marissa Bernal, a daughter. Private respondents had been warned
by petitioners to vacate their shop in view of its proximity to the
weakened wall but the former failed to do so. On the basis of the
foregoing facts, the Regional Trial Court. First Judicial Region,
Branch XXXVIII, presided by the Hon. Antonio M. Belen, rendered
judgment finding petitioners guilty of gross negligence and
awarding damages to private respondents. On appeal, the
decision of the trial court was affirmed in toto by the Court of
Appeals in a decision promulgated on August 17, 1987, a copy of
which was received by petitioners on August 25, 1987. On
September 9, 1987, the last day of the fifteen-day period to file
an appeal, petitioners filed a motion for extension of time to file a
motion for reconsideration, which was eventually denied by the
appellate court in the Resolution of September 30, 1987.
III. Nfiled their motion for reconsideration on September
Petitioners
24, 1987 but this was denied in the Resolution of October 27,
1987.
This Court finds that the Court of Appeals did not commit a grave
abuse of discretion when it denied petitioners' motion for
extension of time to file a motion for reconsideration, directed
entry of judgment and denied their motion for reconsideration. It
correctly applied the rule laid down in Habaluyas Enterprises, Inc.
v. Japzon, [G.R. No. 70895, August 5, 1985,138 SCRA 461, that
the fifteen-day period for appealing or for filing a motion for
reconsideration cannot be extended. In its Resolution denying the
motion for reconsideration, promulgated on July 30, 1986 (142
SCRA 208), this Court en banc restated and clarified the rule, to
wit:
Beginning one month after the promulgation of this Resolution,
the rule shall be strictly enforced that no motion for extension of
time to file a motion for reconsideration may be filed with the
Metropolitan or Municipal Trial Courts, the Regional Trial Courts,
and the Intermediate Appellate Court. Such a motion may be
filed only in cases pending with the Supreme Court as the court
of last resort, which may in its sound discretion either grant or
deny the extension requested. (at p. 212)
Lacsamana v. Second Special Cases Division of the intermediate
Appellate Court, [G.R. No. 73146-53, August 26, 1986, 143 SCRA
643], reiterated the rule and went further to restate and clarify
the modes and periods of appeal.
Bacaya v. Intermediate Appellate Court, [G.R. No. 74824, Sept.
15, 1986,144 SCRA 161],stressed the prospective application of
said rule, and explained the operation of the grace period, to wit:
In other words, there is a one-month grace period from the
promulgation on May 30, 1986 of the Court's Resolution in the
clarificatoryHabaluyas case, or up to June 30, 1986, within which
the rule barring extensions of time to file motions for new trial or
reconsideration is, as yet, not strictly enforceable.
Since petitioners herein filed their motion for extension on
February 27, 1986, it is still within the grace period, which
expired on June 30, 1986, and may still be allowed.
This grace period was also applied in Mission v. Intermediate
Appellate Court [G.R. No. 73669, October 28, 1986, 145 SCRA
306].]
In the instant case, however, petitioners' motion for extension of
time was filed on September 9, 1987, more than a year after the
expiration of the grace period on June 30, 1986. Hence, it is no
longer within the coverage of the grace period. Considering the
length of time from the expiration of the grace period to the
promulgation of the decision of the Court of Appeals on August
25, 1987, petitioners cannot seek refuge in the ignorance of their
counsel regarding said rule for their failure to file a motion for
reconsideration within the reglementary period.
Petitioners contend that the rule enunciated in the Habaluyas
case should not be made to apply to the case at bar owing to the
non-publication of the Habaluyas decision in the Official Gazette
as of the time the subject decision of the Court of Appeals was
promulgated. Contrary to petitioners' view, there is no law
requiring the publication of Supreme Court decisions in the
Official Gazette before they can be binding and as a condition to
their becoming effective. It is the bounden duty of counsel as
lawyer in active law practice to keep abreast of decisions of the
Supreme Court particularly where issues have been clarified,
consistently reiterated, and published in the advance reports of
Supreme Court decisions (G. R. s) and in such publications as the
Supreme Court Reports Annotated (SCRA) and law journals.
This Court likewise finds that the Court of Appeals committed no
grave abuse of discretion in affirming the trial court's decision
holding petitioner liable under Article 2190 of the Civil Code,
which provides that "the proprietor of a building or structure is
responsible for the damage resulting from its total or partial
collapse, if it should be due to the lack of necessary repairs.
Nor was there error in rejecting petitioners argument that private
respondents had the "last clear chance" to avoid the accident if
only they heeded the. warning to vacate the tailoring shop and ,
therefore, petitioners prior negligence should be disregarded,
since the doctrine of "last clear chance," which has been applied
to vehicular accidents, is inapplicable to this case.
WHEREFORE, in view of the foregoing, the Court Resolved to
DENY the instant petition for lack of merit.
V.TERMINATION OF EFFECTIVITY OF LAWS; JUDICIAL
DECISION
8. QUIQUI VS BONCAROS GR 51841
GANCAYCO, J.:
This is a Petition for certiorari, prohibition and mandamus. It
concerns a parcel of agricultural land situated in Barangay
Cabangan, Siaton, Negros Oriental with an area of about 450
square meters. The said parcel of land is a portion of Lot No.
3217, Pls-659-D covered by Free Patent Title No. FV-13703. The
improvements on the parcel of land in question include several
fruit trees and a modest residential house.
The record of the case reveals that on May 22, 1973, the herein
private respondents Estefania G. Amolo, Lope Amolo, Sofia G.
Albon, Pastor Gadingan, Angel Gadingan, Antero Gadingan,
TeofiloGadingan and Felicitas Gadingan were able to secure Free
Patent Title No. FV-13703 in their names. The 450-square meter
lot in question was included in the survey of the entire parcel of
land covered by the said Title.
On the other hand, it is the position of the herein petitioners
RemigioQuiqui, Emiliana Q. Arellano, Turcuata Q. Diputado,
Apolonia Q. Salcedor, Loreto Quiqui, Suplicia Q. Chan, Eldegunda
Q. Monasterio, Elsa Q. Arbon and Antipas Q. Yang that the 450-
square meter lot in question belongs to them and not to the
private respondents. They contend that the said lot was
purchased by their late father sometime in 1920 and that ever
since then, they have been in actual possession thereof,
peacefully, openly continuously and adversely, for a period of 56
years already. They also contend that the private respondents
succeeded in putting the said property in their name by
clandestinely including the said lot in the survey of the premises
undertaken by the Government sometime in the 1970s.
On November 9, 1976, the petitioners, assisted by the Citizens
Legal Assistance Office of the then Ministry of Justice, filed a
Complaint in the Court of First Instance of Negros Oriental for
"reconveyance and/or annulment of Title with damages" against
the private respondents. 1 The said Complaint was anchored on
the theory that the title to the lot in question obtained by the
private respondents in their name was secured through fraud.
The case was docketed as Civil Case No. 6606.
On December 5, 1976, the private respondents filed their Answer
to the Complaint, alleging, inter alia, that the petitioners have no
cause of action against them. By way of Counterclaim, the private
respondents sought the payment to them of moral damages and
attorney's fees. 2
Thereafter, a pre-trial conference was scheduled by the trial
court. Inasmuch as the parties could not reach an amicable
settlement of their case, the pre-trial conference was terminated
and the case was set for trial on the merits. In the course of the
proceedings, more particularly on May 10, 1979, the private
respondents filed a Motion to dismiss the case on the ground of
lack of jurisdiction on the part of the trial court. 3
On June 7, 1979, the petitioners submitted their Opposition to
the said Motion, stressing that the trial court has jurisdiction over
cases for reconveyance. 4 In its Order dated July 16, 1979, the
trial court, with respondent Judge Alejandro R. Boncaros
presiding, dismissed the Complaint for reconveyance on the
ground that it had no jurisdiction over the case. 5 Counsel for the
petitioners received a copy of the said Order on July 17, 1979. 6
On August 17, 1979, the petitioners filed a Motion for the
reconsideration of the Order of the trial court dismissing the
Complaint. 7 The said Motion for Reconsideration is dated August
16, 1979.
The private respondents opposed the Motion for Reconsideration,
stating that the same had been filed beyond the 30 day
reglementary period under the Rules. The private respondents
maintain that inasmuch as the petitioners received their copy of
the Order of dismissal on July 17, 1979, they had up to August
16, 1979 to file the Motion for reconsideration, computed on the
basis of the 30-day reglementary period. They contend that since
the said Motion was filed beyond the 30-day period, the Order of
dismissal has become final and executory and could no longer be
the subject of a Motion for reconsideration. 8 In its Order dated
August 21, 1979, the trial court denied the Motion for
Reconsideration on the ground asserted by the private
respondents. 9
On August 23, 1979, the petitioners filed a Notice of Appeal,
seeking relief from the Court of Appeals. They sought the Appeal
on the ground that the Orders of the trial court dismissing their
Complaint and denying their Motion for Reconsideration are
contrary to law and the evidence submitted. 10 On August 24,
1979, the petitioners filed their Appeal Bond, together with their
Motion to approve the same.
In its Order dated August 28, 1979, the trial court denied the
Notice of Appeal, including the Motion to approve the Appeal
Bond. The pertinent portion of the said Order are as follows
The order of dismissal of this Court which was dated July 16,
1979 was received by the plaintiffs (the herein petitioners) on
July 17, 1979. Under Section 3, Rule 41 of the Revised Rules of
Court, the period to appeal is thirty (30) days, so with the motion
for a reconsideration so that (sic) under Art. 13 of the Civil Code
that in the computation of the period exclude the first (day),
include the last (sic), August 16, 1979 therefore was the last day
to file the motion for reconsideration but it was filed on August 17
or one day late and this motion for reconsideration was denied by
this Court on August 21, 1979 (sic). The reason for the denial
was the motion for reconsideration was filed (sic) beyond the
reglementary period, in which case, the notice of appeal ... (was)
likewise filed beyond the reglementaryperiod ....
xxxxxxxxx 11
Finding the action taken by the trial court unsatisfactory, the
petitioners brought their case directly to this Court by way of the
instant Petition for certiorari, prohibition and mandamus under
Rule 65 of the Rules of Court. They maintain that the Order of the
trial court dated July 16, 1979 is illegal and void for having been
"issued without jurisdiction or in excess of jurisdiction or with
grave abuse of discretion, for the so called "one day late"
(ground) upon which it is based does not actually exist. " 12 They
pray, inter alia, that the trial court be ordered to approve their
Notice of Appeal.13
Complying with the instructions of this Court, the private
respondents submitted their Comment on the Petition. 14
In the Resolution of this Court dated January 14, 1980, We gave
due course to the instant Petition. 15 The parties submitted their
respective Memoranda after which the case was deemed
submitted for decision on June 11, 1980.
After a careful examination of the entire record of the case, We
find the instant Petition devoid of merit.
At the time this litigation was instituted in the trial court, Section
3, Rule 41 of the Rules of Court was the provision governing the
period within which an Appeal may be taken to the Court of
Appeals, to wit
SEC. 3. How appeal is taken. Appeal may be taken by serving
upon the adverse party and filing with the trial court within thirty
(30) days from notice of order or judgment, a notice of appeal,
an appeal bond, and a record on appeal. The time during which a
motion to set aside the judgment or order or for a new trial has
been pending shall be deducted, unless such motion fails to
satisfy the requirements of Rule 37.
But where such a motion has been filed during office hours of the
last day of the period herein provided, the appeal must be
perfected within the day following that in which the party
appealing received notice of the denial of said motion.
Under this cited provision, the Appeal may be taken within 30
days from notice of the judgment or order of the trial court. 16 In
the event that the party aggrieved by the judgment or order of
the trial court files a Motion to set aside the judgment or order, i.
e a Motion for Reconsideration, the time during which such
Motion is pending resolution shall, as a rule, be deducted from
the 30-day period. 17 In relation thereto, the New Civil Code
states that in computing a period, the first day shall be excluded
and the last day included. 18
The petitioners admit that they received their copy of the Order
of dismissal of their Complaint on July 17, 1979. Under Section 3,
Rule 41, they had 30 days within which to appeal their case or to
file a Motion for Reconsideration of the judgment or order of the
trial court. In computing the 30-day period, July 17, 1979 (the
first day) is excluded, pursuant to Article 13 of the New Civil
Code. Counting 30 days thereafter, beginning on July 18, 1979,
the petitioners had up to August 16, 1979 to file their Motion for
Reconsideration. Their Motion for Reconsideration, although
dated August 16, 1979, was filed with the trial court on August
17, 1979 or one day beyond the 30-day reglementary period
prescribed by Section 3 of Rule 41.
Under these circumstances, the order of the trial court dismissing
the Complaint has become final and executory. As such, it is
beyond the reach of a Motion for consideration. 19 The Notice of
Appeal, therefore, was properly denied. Perfection of an appeal in
the manner and within the period laid down by law is not only
mandatory but also jurisdictional and failure to perfect an appeal
as required by the rules has the effect of rendering the judgment
final and executory. A strict observance of the reglementary
period within which to exercise the statutory right of appeal has
been considered as absolutely indispensable to the prevention of
needless delays. 20
As a last recourse in support of their case, the petitioners invoke
the following observations made by this Court in De Las Alas v.
Court of Appeals, 21 to wit:
Regardless, however, of the above findings and even assuming
that respondents' position were correct, WE find that a one-day
delay does not justify the dismissal of the appeal under the
circumstances obtaining in this case. The real purpose behind the
limitation of the period of appeal is to forestall or avoid an
unreasonable delay in the administration of justice and to put an
end to controversies ... 22
Unfortunately for the petitioners, the observation made by this
Court in De Las Alas does not apply to their case.
In De Las Alas, the view expressed by this Court to the effect that
"a one-day delay does not justify the dismissal of the appeal" is
qualified by the phrase "under the circumstances obtaining in this
case". Unlike the situation faced by the herein petitioners, there
is no showing that the petitioners in the De Las Alas case failed to
file their Motion for Reconsideration as well as their Record on
Appeal within the reglementary period. On the contrary, this
Court noted therein the lack of delay on the part of the
petitioners in that case, viz
Furthermore, WE note from the records the absence or lack of
the element of intent to delay the administration of justice on the
part of petitioners in this case. On the contrary, petitioners'
counsel have demonstrated cautiousness, concern and
punctuality in the prosecution of the appeal. They filed their
motion for reconsideration October 7, 1972, even if the
respondent lower court judge had given them an extension up to
October 24, 1972, within which to file the said motion. Petitioners
had up to December 25, 1972, within which to submit their
record on appeal, yet they filed their record on appeal on
December 8, 1972, or 17 days before the deadline. 23
Moreover, a doubtful and controversial question of law confronted
the parties in the De Las Alas case, i.e., the matter of computing
the reglementary period for filing an Appeal. The respondent
court found petitioner had only two (2) days left to perfect the
appeal after the denial of the motion for reconsideration while
this Court held petitioners had three (3) days left deducting the
period within which the motion for reconsideration has been
pending, excluding the first day in the computation of the period,
but since the last day falls on a Sunday the period of appeal is
ipso jure extended to the first working day immediately following.
24 In the case at bar, however, there is no such doubtful or
controversial question of law submitted for Our resolution.
For the petitioners to seek exception for their failure to comply
strictly with the requirements for perfecting their Appeal, strong
compelling reasons, like the prevention of a grave miscarriage of
justice, must be shown to exist in order to warrant this Court to
suspend the Rules. 25 No such reasons have been shown to exist
in this case. In fact, the petitioners did not even offer any
reasonable explanation for their delay.
On the basis of the foregoing discussion, We find no jurisdictional
infirmity, sufficient to call for the issuance of the corrective writ of
certiorari in the action taken by the trial court. As stated earlier,
the instant Petition is devoid of merit.
WHEREFORE, in view of the foregoing, the instant Petition for
certiorari prohibition and mandamus is hereby DISMISSED for
lack of merit. We make no pronouncement as to costs.
SO ORDERED
VI.CONFLICT OF RULES PRINCIPLE OF TERRITORIALITY
NATIONALITY PRINCIPLE
19. PILAPIL V IBAY SOMERA GR 80116
REGALADO, J.:
An ill-starred marriage of a Filipina and a foreigner which ended
in a foreign absolute divorce, only to be followed by a criminal
infidelity suit of the latter against the former, provides Us the
opportunity to lay down a decisional rule on what hitherto
appears to be an unresolved jurisdictional question.
On September 7, 1979, petitioner Imelda ManalaysayPilapil, a
Filipino citizen, and private respondent Erich EkkehardGeiling, a
German national, were married before the Registrar of Births,
Marriages and Deaths at Friedensweiler in the Federal Republic of
Germany. The marriage started auspiciously enough, and the
couple lived together for some time in Malate, Manila where their
only child, Isabella PilapilGeiling, was born on April 20, 1980. 1
Thereafter, marital discord set in, with mutual recriminations
between the spouses, followed by a separation de facto between
them.
After about three and a half years of marriage, such connubial
disharmony eventuated in private respondent initiating a divorce
proceeding against petitioner in Germany before the Schoneberg
Local Court in January, 1983. He claimed that there was failure of
their marriage and that they had been living apart since April,
1982. 2
Petitioner, on the other hand, filed an action for legal separation,
support and separation of property before the Regional Trial
Court of Manila, Branch XXXII, on January 23, 1983 where the
same is still pending as Civil Case No. 83-15866. 3
On January 15, 1986, Division 20 of the Schoneberg Local Court,
Federal Republic of Germany, promulgated a decree of divorce on
the ground of failure of marriage of the spouses. The custody of
the child was granted to petitioner. The records show that under
German law said court was locally and internationally competent
for the divorce proceeding and that the dissolution of said
marriage was legally founded on and authorized by the applicable
law of that foreign jurisdiction. 4
On June 27, 1986, or more than five months after the issuance of
the divorce decree, private respondent filed two complaints for
adultery before the City Fiscal of Manila alleging that, while still
married to said respondent, petitioner "had an affair with a
certain William Chia as early as 1982 and with yet another man
named Jesus Chua sometime in 1983". Assistant Fiscal Jacinto A.
de los Reyes, Jr., after the corresponding investigation,
recommended the dismissal of the cases on the ground of
insufficiency of evidence. 5 However, upon review, the
respondent city fiscal approved a resolution, dated January 8,
1986, directing the filing of two complaints for adultery against
the petitioner. 6 The complaints were accordingly filed and were
eventually raffled to two branches of the Regional Trial Court of
Manila. The case entitled "People of the Philippines vs. Imelda
Pilapil and William Chia", docketed as Criminal Case No. 87-
52435, was assigned to Branch XXVI presided by the respondent
judge; while the other case, "People of the Philippines vs. Imelda
Pilapil and James Chua", docketed as Criminal Case No. 87-52434
went to the sala of Judge Leonardo Cruz, Branch XXV, of the
same court. 7
On March 14, 1987, petitioner filed a petition with the Secretary
of Justice asking that the aforesaid resolution of respondent fiscal
be set aside and the cases against her be dismissed. 8 A similar
petition was filed by James Chua, her co-accused in Criminal
Case No. 87-52434. The Secretary of Justice, through the Chief
State Prosecutor, gave due course to both petitions and directed
the respondent city fiscal to inform the Department of Justice "if
the accused have already been arraigned and if not yet
arraigned, to move to defer further proceedings" and to elevate
the entire records of both cases to his office for review. 9
Petitioner thereafter filed a motion in both criminal cases to defer
her arraignment and to suspend further proceedings thereon. 10
As a consequence, Judge Leonardo Cruz suspended proceedings
in Criminal Case No. 8752434. On the other hand, respondent
judge merely reset the date of the arraignment in Criminal Case
No. 87-52435 to April 6, 1987. Before such scheduled date,
petitioner moved for the cancellation of the arraignment and for
the suspension of proceedings in said Criminal Case No. 87-
52435 until after the resolution of the petition for review then
pending before the Secretary of Justice. 11 A motion to quash
was also filed in the same case on the ground of lack of
jurisdiction, 12 which motion was denied by the respondent judge
in an order dated September 8, 1987. The same order also
directed the arraignment of both accused therein, that is,
petitioner and William Chia. The latter entered a plea of not guilty
while the petitioner refused to be arraigned. Such refusal of the
petitioner being considered by respondent judge as direct
contempt, she and her counsel were fined and the former was
ordered detained until she submitted herself for arraignment. 13
Later, private respondent entered a plea of not guilty. 14
On October 27, 1987, petitioner filed this special civil action for
certiorari and prohibition, with a prayer for a temporary
restraining order, seeking the annulment of the order of the lower
court denying her motion to quash. The petition is anchored on
the main ground that the court is without jurisdiction "to try and
decide the charge of adultery, which is a private offense that
cannot be prosecuted de officio (sic), since the purported
complainant, a foreigner, does not qualify as an offended spouse
having obtained a final divorce decree under his national law
prior to his filing the criminal complaint." 15
On October 21, 1987, this Court issued a temporary restraining
order enjoining the respondents from implementing the aforesaid
order of September 8, 1987 and from further proceeding with
Criminal Case No. 87-52435. Subsequently, on March 23, 1988
Secretary of Justice Sedfrey A. Ordoez acted on the aforesaid
petitions for review and, upholding petitioner's ratiocinations,
issued a resolution directing the respondent city fiscal to move
for the dismissal of the complaints against the petitioner. 16
We find this petition meritorious. The writs prayed for shall
accordingly issue.
Under Article 344 of the Revised Penal Code, 17 the crime of
adultery, as well as four other crimes against chastity, cannot be
prosecuted except upon a sworn written complaint filed by the
offended spouse. It has long since been established, with
unwavering consistency, that compliance with this rule is a
jurisdictional, and not merely a formal, requirement. 18 While in
point of strict law the jurisdiction of the court over the offense is
vested in it by the Judiciary Law, the requirement for a sworn
written complaint is just as jurisdictional a mandate since it is
that complaint which starts the prosecutory proceeding 19 and
without which the court cannot exercise its jurisdiction to try the
case.
Now, the law specifically provides that in prosecutions for
adultery and concubinage the person who can legally file the
complaint should be the offended spouse, and nobody else.
Unlike the offenses of seduction, abduction, rape and acts of
lasciviousness, no provision is made for the prosecution of the
crimes of adultery and concubinage by the parents, grandparents
or guardian of the offended party. The so-called exclusive and
successive rule in the prosecution of the first four offenses above
mentioned do not apply to adultery and concubinage. It is
significant that while the State, as parenspatriae, was added and
vested by the 1985 Rules of Criminal Procedure with the power to
initiate the criminal action for a deceased or incapacitated victim
in the aforesaid offenses of seduction, abduction, rape and acts of
lasciviousness, in default of her parents, grandparents or
guardian, such amendment did not include the crimes of adultery
and concubinage. In other words, only the offended spouse, and
no other, is authorized by law to initiate the action therefor.
Corollary to such exclusive grant of power to the offended spouse
to institute the action, it necessarily follows that such initiator
must have the status, capacity or legal representation to do so at
the time of the filing of the criminal action. This is a familiar and
express rule in civil actions; in fact, lack of legal capacity to sue,
as a ground for a motion to dismiss in civil cases, is determined
as of the filing of the complaint or petition.
The absence of an equivalent explicit rule in the prosecution of
criminal cases does not mean that the same requirement and
rationale would not apply. Understandably, it may not have been
found necessary since criminal actions are generally and
fundamentally commenced by the State, through the People of
the Philippines, the offended party being merely the complaining
witness therein. However, in the so-called "private crimes" or
those which cannot be prosecuted de oficio, and the present
prosecution for adultery is of such genre, the offended spouse
assumes a more predominant role since the right to commence
the action, or to refrain therefrom, is a matter exclusively within
his power and option.
This policy was adopted out of consideration for the aggrieved
party who might prefer to suffer the outrage in silence rather
than go through the scandal of a public trial. 20 Hence, as
cogently argued by petitioner, Article 344 of the Revised Penal
Code thus presupposes that the marital relationship is still
subsisting at the time of the institution of the criminal action for,
adultery. This is a logical consequence since the raison d'etre of
said provision of law would be absent where the supposed
offended party had ceased to be the spouse of the alleged
offender at the time of the filing of the criminal case. 21
In these cases, therefore, it is indispensable that the status and
capacity of the complainant to commence the action be definitely
established and, as already demonstrated, such status or
capacity must indubitably exist as of the time he initiates the
action. It would be absurd if his capacity to bring the action
would be determined by his status before or subsequent to the
commencement thereof, where such capacity or status existed
prior to but ceased before, or was acquired subsequent to but did
not exist at the time of, the institution of the case. We would
thereby have the anomalous spectacle of a party bringing suit at
the very time when he is without the legal capacity to do so.
To repeat, there does not appear to be any local precedential
jurisprudence on the specific issue as to when precisely the
status of a complainant as an offended spouse must exist where
a criminal prosecution can be commenced only by one who in law
can be categorized as possessed of such status. Stated differently
and with reference to the present case, the inquiry ;would be
whether it is necessary in the commencement of a criminal action
for adultery that the marital bonds between the complainant and
the accused be unsevered and existing at the time of the
institution of the action by the former against the latter.
American jurisprudence, on cases involving statutes in that
jurisdiction which are in parimateria with ours, yields the rule
that after a divorce has been decreed, the innocent spouse no
longer has the right to institute proceedings against the offenders
where the statute provides that the innocent spouse shall have
the exclusive right to institute a prosecution for adultery. Where,
however, proceedings have been properly commenced, a divorce
subsequently granted can have no legal effect on the prosecution
of the criminal proceedings to a conclusion. 22
In the cited Loftus case, the Supreme Court of Iowa held that
'No prosecution for adultery can be commenced except on the
complaint of the husband or wife.' Section 4932, Code. Though
Loftus was husband of defendant when the offense is said to have
been committed, he had ceased to be such when the prosecution
was begun; and appellant insists that his status was not such as
to entitle him to make the complaint. We have repeatedly said
that the offense is against the unoffending spouse, as well as the
state, in explaining the reason for this provision in the statute;
and we are of the opinion that the unoffending spouse must be
such when the prosecution is commenced. (Emphasis supplied.)
We see no reason why the same doctrinal rule should not apply in
this case and in our jurisdiction, considering our statutory law
and jural policy on the matter. We are convinced that in cases of
such nature, the status of the complainant vis-a-vis the accused
must be determined as of the time the complaint was filed. Thus,
the person who initiates the adultery case must be an offended
spouse, and by this is meant that he is still married to the
accused spouse, at the time of the filing of the complaint.
In the present case, the fact that private respondent obtained a
valid divorce in his country, the Federal Republic of Germany, is
admitted. Said divorce and its legal effects may be recognized in
the Philippines insofar as private respondent is concerned 23 in
view of the nationality principle in our civil law on the matter of
status of persons.
Thus, in the recent case of Van Dorn vs. Romillo, Jr., et al., 24
after a divorce was granted by a United States court between
Alice Van Dornja Filipina, and her American husband, the latter
filed a civil case in a trial court here alleging that her business
concern was conjugal property and praying that she be ordered
to render an accounting and that the plaintiff be granted the right
to manage the business. Rejecting his pretensions, this Court
perspicuously demonstrated the error of such stance, thus:
There can be no question as to the validity of that Nevada divorce
in any of the States of the United States. The decree is binding
on private respondent as an American citizen. For instance,
private respondent cannot sue petitioner, as her husband, in any
State of the Union. ...
It is true that owing to the nationality principle embodied in
Article 15 of the Civil Code, only Philippine nationals are covered
by the policy against absolute divorces the same being
considered contrary to our concept of public policy and morality.
However, aliens may obtain divorces abroad, which may be
recognized in the Philippines, provided they are valid according to
their national law. ...
Thus, pursuant to his national law, private respondent is no
longer the husband of petitioner. He would have no standing to
sue in the case below as petitioner's husband entitled to exercise
control over conjugal assets. ... 25
Under the same considerations and rationale, private respondent,
being no longer the husband of petitioner, had no legal standing
to commence the adultery case under the imposture that he was
the offended spouse at the time he filed suit.
The allegation of private respondent that he could not have
brought this case before the decree of divorce for lack of
knowledge, even if true, is of no legal significance or
consequence in this case. When said respondent initiated the
divorce proceeding, he obviously knew that there would no longer
be a family nor marriage vows to protect once a dissolution of the
marriage is decreed. Neither would there be a danger of
introducing spurious heirs into the family, which is said to be one
of the reasons for the particular formulation of our law on
adultery, 26 since there would thenceforth be no spousal
relationship to speak of. The severance of the marital bond had
the effect of dissociating the former spouses from each other,
hence the actuations of one would not affect or cast obloquy on
the other.
The aforecited case of United States vs. Mata cannot be
successfully relied upon by private respondent. In applying Article
433 of the old Penal Code, substantially the same as Article 333
of the Revised Penal Code, which punished adultery "although the
marriage be afterwards declared void", the Court merely stated
that "the lawmakers intended to declare adulterous the infidelity
of a married woman to her marital vows, even though it should
be made to appear that she is entitled to have her marriage
contract declared null and void, until and unless she actually
secures a formal judicial declaration to that effect". Definitely, it
cannot be logically inferred therefrom that the complaint can still
be filed after the declaration of nullity because such declaration
that the marriage is void ab initio is equivalent to stating that it
never existed. There being no marriage from the beginning, any
complaint for adultery filed after said declaration of nullity would
no longer have a leg to stand on. Moreover, what was
consequently contemplated and within the purview of the
decision in said case is the situation where the criminal action for
adultery was filed before the termination of the marriage by a
judicial declaration of its nullity ab initio. The same rule and
requisite would necessarily apply where the termination of the
marriage was effected, as in this case, by a valid foreign divorce.
Private respondent's invocation of Donio-Teves, et al. vs.
Vamenta, hereinbefore cited, 27 must suffer the same fate of
inapplicability. A cursory reading of said case reveals that the
offended spouse therein had duly and seasonably filed a
complaint for adultery, although an issue was raised as to its
sufficiency but which was resolved in favor of the complainant.
Said case did not involve a factual situation akin to the one at bar
or any issue determinative of the controversy herein.
WHEREFORE, the questioned order denying petitioner's motion to
quash is SET ASIDE and another one enteredDISMISSING the
complaint in Criminal Case No. 87-52435 for lack of jurisdiction.
The temporary restraining order issued in this case on October
21, 1987 is hereby made permanent.
SO ORDERED
VI.CONFLICT OF RULES PRINCIPLE OF TERRITORIALITY
NATIONALITY PRINCIPLE
20. LLORENTE V CA GR 124371
The Case
The case raises a conflict of laws issue.
What is before us is an appeal from the decision of the Court
of Appeals[1] modifying that of the Regional Trial Court,
Camarines Sur, Branch 35, Iriga City[2] declaring respondent
Alicia F. Llorente (herinafter referred to as Alicia), as co-
owners of whatever property she and the deceased Lorenzo N.
Llorente (hereinafter referred to as Lorenzo) may have
acquired during the twenty-five (25) years that they lived
together as husband and wife.
The Facts
The deceased Lorenzo N. Llorente was an enlisted serviceman
of the United States Navy from March 10, 1927 to September
30, 1957.[3]
On February 22, 1937, Lorenzo and petitioner Paula Llorente
(hereinafter referred to as Paula) were married before a parish
priest, Roman Catholic Church, in Nabua, Camarines Sur.[4]
Before the outbreak of the Pacific War, Lorenzo departed for
the United States and Paula stayed in the conjugal home in
barrio Antipolo, Nabua, Camarines Sur.[5]
On November 30, 1943, Lorenzo was admitted to United
States citizenship and Certificate of Naturalization No.
5579816 was issued in his favor by the United States District
Court, Southern District of New York.[6]
Upon the liberation of the Philippines by the American Forces
in 1945, Lorenzo was granted an accrued leave by the U. S.
Navy, to visit his wife and he visited the Philippines.[7] He
discovered that his wife Paula was pregnant and was living in
and having an adulterous relationship with his brother,
CeferinoLlorente.[8]
On December 4, 1945, Paula gave birth to a boy registered in
the Office of the Registrar of Nabua as CrisologoLlorente, with
the certificate stating that the child was not legitimate and the
line for the fathers name was left blank.[9]
Lorenzo refused to forgive Paula and live with her. In fact, on
February 2, 1946, the couple drew a written agreement to the
effect that (1) all the family allowances allotted by the United
States Navy as part of Lorenzos salary and all other
obligations for Paulas daily maintenance and support would
be suspended; (2) they would dissolve their marital union in
accordance with judicial proceedings; (3) they would make a
separate agreement regarding their conjugal property
acquired during their marital life; and (4) Lorenzo would not
prosecute Paula for her adulterous act since she voluntarily
admitted her fault and agreed to separate from Lorenzo
peacefully. The agreement was signed by both Lorenzo and
Paula and was witnessed by Paulas father and stepmother.
The agreement was notarized by Notary Public Pedro
Osabel.[10]
Lorenzo returned to the United States and on November 16,
1951 filed for divorce with the Superior Court of the State of
California in and for the County of San Diego. Paula was
represented by counsel, John Riley, and actively participated
in the proceedings. On November 27, 1951, the Superior
Court of the State of California, for the County of San Diego
found all factual allegations to be true and issued an
interlocutory judgment of divorce.[11]
On December 4, 1952, the divorce decree became final.[12]
In the meantime, Lorenzo returned to the Philippines.
On January 16, 1958, Lorenzo married Alicia F. Llorente in
Manila.[13] Apparently, Alicia had no knowledge of the first
marriage even if they resided in the same town as Paula, who
did not oppose the marriage or cohabitation.[14]
From 1958 to 1985, Lorenzo and Alicia lived together as
husband and wife.[15] Their twenty-five (25) year union
produced three children, Raul, Luz and Beverly, all surnamed
Llorente.[16]
On March 13, 1981, Lorenzo executed a Last Will and
Testament. The will was notarized by Notary Public Salvador
M. Occiano, duly signed by Lorenzo with attesting witnesses
Francisco Hugo, Francisco Neibres and Tito Trajano. In the
will, Lorenzo bequeathed all his property to Alicia and their
three children, to wit:
(1) I give and bequeath to my wife ALICIA R. FORTUNO
exclusively my residential house and lot, located at San
Francisco, Nabua, Camarines Sur, Philippines, including ALL
the personal properties and other movables or belongings that
may be found or existing therein;
(2) I give and bequeath exclusively to my wife Alicia R.
Fortuno and to my children, Raul F. Llorente, Luz F. Llorente
and Beverly F. Llorente, in equal shares, all my real properties
whatsoever and wheresoever located, specifically my real
properties located at Barangay Aro-Aldao, Nabua, Camarines
Sur; Barangay Paloyon, Nabua, Camarines Sur; Barangay
Baras, SitioPuga, Nabua, Camarines Sur; and Barangay
Paloyon, SitioNalilidong, Nabua, Camarines Sur;
(3) I likewise give and bequeath exclusively unto my wife
Alicia R. Fortuno and unto my children, Raul F. Llorente, Luz F.
Llorente and Beverly F. Llorente, in equal shares, my real
properties located in Quezon City Philippines, and covered by
Transfer Certificate of Title No. 188652; and my lands in
Antipolo, Rizal, Philippines, covered by Transfer Certificate of
Title Nos. 124196 and 165188, both of the Registry of Deeds
of the province of Rizal, Philippines;
(4) That their respective shares in the above-mentioned
properties, whether real or personal properties, shall not be
disposed of, ceded, sold and conveyed to any other persons,
but could only be sold, ceded, conveyed and disposed of by
and among themselves;
(5) I designate my wife ALICIA R. FORTUNO to be the sole
executor of this my Last Will and Testament, and in her
default or incapacity of the latter to act, any of my children in
the order of age, if of age;
(6) I hereby direct that the executor named herein or her
lawful substitute should served (sic) without bond;
(7) I hereby revoke any and all my other wills, codicils, or
testamentary dispositions heretofore executed, signed, or
published, by me;
(8) It is my final wish and desire that if I die, no relatives of
mine in any degree in the Llorentes Side should ever bother
and disturb in any manner whatsoever my wife Alicia R.
Fortunato and my children with respect to any real or personal
properties I gave and bequeathed respectively to each one of
them by virtue of this Last Will and Testament.[17]
On December 14, 1983, Lorenzo filed with the Regional Trial
Court, Iriga, Camarines Sur, a petition for the probate and
allowance of his last will and testament wherein Lorenzo
moved that Alicia be appointed Special Administratrix of his
estate.[18]
On January 18, 1984, the trial court denied the motion for the
reason that the testator Lorenzo was still alive.[19]
On January 24, 1984, finding that the will was duly executed,
the trial court admitted the will to probate.[20]
On June 11, 1985, before the proceedings could be
terminated, Lorenzo died.[21]
On September 4, 1985, Paula filed with the same court a
petition[22] for letters of administration over Lorenzos estate
in her favor. Paula contended (1) that she was Lorenzos
surviving spouse, (2) that the various property were acquired
during their marriage, (3) that Lorenzos will disposed of all his
property in favor of Alicia and her children, encroaching on her
legitime and 1/2 share in the conjugal property.[23]
On December 13, 1985, Alicia filed in the testate proceeding
(Sp. Proc. No. IR-755), a petition for the issuance of letters
testamentary.[24]
On October 14, 1985, without terminating the testate
proceedings, the trial court gave due course to Paulas petition
in Sp. Proc. No. IR-888.[25]
On November 6, 13 and 20, 1985, the order was published in
the newspaper Bicol Star.[26]
On May 18, 1987, the Regional Trial Court issued a joint
decision, thus:
Wherefore, considering that this court has so found that the
divorce decree granted to the late Lorenzo Llorente is void and
inapplicable in the Philippines, therefore the marriage he
contracted with Alicia Fortunato on January 16, 1958 at Manila
is likewise void. This being so the petition of Alicia F. Llorente
for the issuance of letters testamentary is denied. Likewise,
she is not entitled to receive any share from the estate even if
the will especially said so her relationship with Lorenzo having
gained the status of paramour which is under Art. 739 (1).
On the other hand, the court finds the petition of Paula Titular
Llorente, meritorious, and so declares the intrinsic disposition
of the will of Lorenzo Llorente dated March 13, 1981 as void
and declares her entitled as conjugal partner and entitled to
one-half of their conjugal properties, and as primary
compulsory heir, Paula T. Llorente is also entitled to one-third
of the estate and then one-third should go to the illegitimate
children, Raul, Luz and Beverly, all surname (sic) Llorente, for
them to partition in equal shares and also entitled to the
remaining free portion in equal shares.
Petitioner, Paula Llorente is appointed legal administrator of
the estate of the deceased, Lorenzo Llorente. As such let the
corresponding letters of administration issue in her favor upon
her filing a bond in the amount (sic) of P100,000.00
conditioned for her to make a return to the court within three
(3) months a true and complete inventory of all goods,
chattels, rights, and credits, and estate which shall at any
time come to her possession or to the possession of any other
person for her, and from the proceeds to pay and discharge all
debts, legacies and charges on the same, or such dividends
thereon as shall be decreed or required by this court; to
render a true and just account of her administration to the
court within one (1) year, and at any other time when
required by the court and to perform all orders of this court by
her to be performed.
On the other matters prayed for in respective petitions for
want of evidence could not be granted.
SO ORDERED.[27]
In time, Alicia filed with the trial court a motion for
reconsideration of the aforequoted decision.[28]
On September 14, 1987, the trial court denied Alicias motion
for reconsideration but modified its earlier decision, stating
that Raul and Luz Llorente are not children legitimate or
otherwise of Lorenzo since they were not legally adopted by
him.[29] Amending its decision of May 18, 1987, the trial
court declared Beverly Llorente as the only illegitimate child of
Lorenzo, entitling her to one-third (1/3) of the estate and one-
third (1/3) of the free portion of the estate.[30]
On September 28, 1987, respondent appealed to the Court of
Appeals.[31]
On July 31, 1995, the Court of Appeals promulgated its
decision, affirming with modification the decision of the trial
court in this wise:
WHEREFORE, the decision appealed from is hereby AFFIRMED
with the MODIFICATION that Alicia is declared as co-owner of
whatever properties she and the deceased may have acquired
during the twenty-five (25) years of cohabitation.
SO ORDERED.[32]
On August 25, 1995, petitioner filed with the Court of Appeals
a motion for reconsideration of the decision.[33]
On March 21, 1996, the Court of Appeals,[34] denied the
motion for lack of merit.
Hence, this petition.[35]
The Issue
Stripping the petition of its legalese and sorting through the
various arguments raised,[36] the issue is simple. Who are
entitled to inherit from the late Lorenzo N. Llorente?
We do not agree with the decision of the Court of Appeals. We
remand the case to the trial court for ruling on the intrinsic
validity of the will of the deceased.
The Applicable Law
The fact that the late Lorenzo N. Llorente became an
American citizen long before and at the time of: (1) his
divorce from Paula; (2) marriage to Alicia; (3) execution of his
will; and (4) death, is duly established, admitted and
undisputed.
Thus, as a rule, issues arising from these incidents are
necessarily governed by foreign law.
The Civil Code clearly provides:
Art. 15. Laws relating to family rights and duties, or to the
status, condition and legal capacity of persons are binding
upon citizens of the Philippines, even though living abroad.
Art. 16. Real property as well as personal property is subject
to the law of the country where it is situated.
However, intestate and testamentary succession, both with
respect to the order of succession and to the amount of
successional rights and to the intrinsic validity of testamentary
provisions, shall be regulated by the national law of the
person whose succession is under consideration, whatever
may be the nature of the property and regardless of the
country wherein said property may be found. (emphasis ours)
True, foreign laws do not prove themselves in our jurisdiction
and our courts are not authorized to take judicial notice of
them. Like any other fact, they must be alleged and
proved.[37]
While the substance of the foreign law was pleaded, the Court
of Appeals did not admit the foreign law. The Court of Appeals
and the trial court called to the fore the renvoi doctrine, where
the case was referred back to the law of the decedents
domicile, in this case, Philippine law.
We note that while the trial court stated that the law of New
York was not sufficiently proven, in the same breath it made
the categorical, albeit equally unproven statement that
American law follows the domiciliary theory hence, Philippine
law applies when determining the validity of Lorenzos will.[38]
First, there is no such thing as one American law. The
"national law" indicated in Article 16 of the Civil Code cannot
possibly apply to general American law. There is no such law
governing the validity of testamentary provisions in the United
States. Each State of the union has its own law applicable to
its citizens and in force only within the State. It can therefore
refer to no other than the law of the State of which the
decedent was a resident.[39] Second, there is no showing
that the application of the renvoi doctrine is called for or
required by New York State law.
The trial court held that the will was intrinsically invalid since
it contained dispositions in favor of Alice, who in the trial
courts opinion was a mere paramour. The trial court threw the
will out, leaving Alice, and her two children, Raul and Luz,
with nothing.
The Court of Appeals also disregarded the will. It declared
Alice entitled to one half (1/2) of whatever property she and
Lorenzo acquired during their cohabitation, applying Article
144 of the Civil Code of the Philippines.
The hasty application of Philippine law and the complete
disregard of the will, already probated as duly executed in
accordance with the formalities of Philippine law, is fatal,
especially in light of the factual and legal circumstances here
obtaining.
Validity of the Foreign Divorce
In Van Dorn v. Romillo, Jr.[40] we held that owing to the
nationality principle embodied in Article 15 of the Civil Code,
only Philippine nationals are covered by the policy against
absolute divorces, the same being considered contrary to our
concept of public policy and morality. In the same case, the
Court ruled that aliens may obtain divorces abroad, provided
they are valid according to their national law.
Citing this landmark case, the Court held in Quita v. Court of
Appeals,[41] that once proven that respondent was no longer
a Filipino citizen when he obtained the divorce from petitioner,
the ruling in Van Dorn would become applicable and petitioner
could very well lose her right to inherit from him.
In Pilapil v. Ibay-Somera,[42] we recognized the divorce
obtained by the respondent in his country, the Federal
Republic of Germany. There, we stated that divorce and its
legal effects may be recognized in the Philippines insofar as
respondent is concerned in view of the nationality principle in
our civil law on the status of persons.
For failing to apply these doctrines, the decision of the Court
of Appeals must be reversed.[43] We hold that the divorce
obtained by Lorenzo H. Llorente from his first wife Paula was
valid and recognized in this jurisdiction as a matter of comity.
Now, the effects of this divorce (as to the succession to the
estate of the decedent) are matters best left to the
determination of the trial court.
Validity of the Will
The Civil Code provides:
Art. 17. The forms and solemnities of contracts, wills, and
other public instruments shall be governed by the laws of the
country in which they are executed.
When the acts referred to are executed before the diplomatic
or consular officials of the Republic of the Philippines in a
foreign country, the solemnities established by Philippine laws
shall be observed in their execution. (underscoring ours)
The clear intent of Lorenzo to bequeath his property to his
second wife and children by her is glaringly shown in the will
he executed. We do not wish to frustrate his wishes, since he
was a foreigner, not covered by our laws on family rights and
duties, status, condition and legal capacity.[44]
Whether the will is intrinsically valid and who shall inherit from
Lorenzo are issues best proved by foreign law which must be
pleaded and proved. Whether the will was executed in
accordance with the formalities required is answered by
referring to Philippine law. In fact, the will was duly probated.
As a guide however, the trial court should note that whatever
public policy or good customs may be involved in our system
of legitimes, Congress did not intend to extend the same to
the succession of foreign nationals. Congress specifically left
the amount of successional rights to the decedent's national
law.[45]
Having thus ruled, we find it unnecessary to pass upon the
other issues raised.
The Fallo
WHEREFORE, the petition is GRANTED. The decision of the
Court of Appeals in CA-G. R. SP No. 17446 promulgated on
July 31, 1995 is SET ASIDE.
In lieu thereof, the Court REVERSES the decision of the
Regional Trial Court and RECOGNIZES as VALID the decree of
divorce granted in favor of the deceased Lorenzo N. Llorente
by the Superior Court of the State of California in and for the
County of San Diego, made final on December 4, 1952.
Further, the Court REMANDS the cases to the court of origin
for determination of the intrinsic validity of Lorenzo N.
Llorentes will and determination of the parties successional
rights allowing proof of foreign law with instructions that the
trial court shall proceed with all deliberate dispatch to settle
the estate of the deceased within the framework of the Rules
of Court.
No costs.
SO ORDERED.
VI.CONFLICT OF RULES PRINCIPLE OF TERRITORIALITY
NATIONALITY PRINCIPLE
21. ROEHR V RODRIGUEZ GR 142820
QUISUMBING, J.:
At the core of the present controversy are issues of (a) grave
abuse of discretion allegedly committed by public respondent and
(b) lack of jurisdiction of the regional trial court, in matters that
spring from a divorce decree obtained abroad by petitioner.
In this special civil action for certiorari, petitioner assails (a) the
order1 dated September 30, 1999 of public respondent Judge
Josefina Guevara-Salonga, Presiding Judge of Makati Regional
Trial Court,2 Branch 149, in Civil Case No. 96-1389 for
declaration of nullity of marriage, and (b) the order3 dated March
31, 2000 denying his motion for reconsideration. The assailed
orders partially set aside the trial courts order dismissing Civil
Case No. 96-1389, for the purpose of resolving issues relating to
the property settlement of the spouses and the custody of their
children.
Petitioner Wolfgang O. Roehr, a German citizen and resident of
Germany, married private respondent Carmen Rodriguez, a
Filipina, on December 11, 1980 in Hamburg, Germany. Their
marriage was subsequently ratified on February 14, 1981 in
Tayasan, Negros Oriental.4 Out of their union were born
Carolynne and Alexandra Kristine on November 18, 1981 and
October 25, 1987, respectively.
On August 28, 1996, private respondent filed a petition5 for
declaration of nullity of marriage before the Regional Trial Court
(RTC) of Makati City. On February 6, 1997, petitioner filed a
motion to dismiss,6 but it was denied by the trial court in its
order7 dated May 28, 1997.
On June 5, 1997, petitioner filed a motion for reconsideration, but
was also denied in an order8 dated August 13, 1997. On
September 5, 1997, petitioner filed a petition for certiorari with
the Court of Appeals. On November 27, 1998, the appellate court
denied the petition and remanded the case to the RTC.
Meanwhile, petitioner obtained a decree of divorce from the Court
of First Instance of Hamburg-Blankenese, promulgated on
December 16, 1997.
The decree provides in part:
[T]he Court of First Instance, Hamburg-Blankenese, Branch 513,
has ruled through Judge van Buiren of the Court of First Instance
on the basis of the oral proceedings held on 4 Nov. 1997:
The marriage of the Parties contracted on 11 December 1980
before the Civil Registrar of Hamburg-Altona is hereby dissolved.
The parental custody for the children Carolynne Roehr, born 18
November 1981
Alexandra Kristine Roehr, born on 25 October 1987 is granted to
the father.
The litigation expenses shall be assumed by the Parties.9
In view of said decree, petitioner filed a Second Motion to Dismiss
on May 20, 1999 on the ground that the trial court had no
jurisdiction over the subject matter of the action or suit as a
decree of divorce had already been promulgated dissolving the
marriage of petitioner and private respondent.
On July 14, 1999, Judge Guevara-Salonga issued an order
granting petitioners motion to dismiss. Private respondent filed a
Motion for Partial Reconsideration, with a prayer that the case
proceed for the purpose of determining the issues of custody of
children and the distribution of the properties between petitioner
and private respondent.
On August 18, 1999, an Opposition to the Motion for Partial
Reconsideration was filed by the petitioner on the ground that
there is nothing to be done anymore in the instant case as the
marital tie between petitioner Wolfgang Roehr and respondent
Ma. Carmen D. Rodriguez had already been severed by the
decree of divorce promulgated by the Court of First Instance of
Hamburg, Germany on December 16, 1997 and in view of the
fact that said decree of divorce had already been recognized by
the RTC in its order of July 14, 1999, through the implementation
of the mandate of Article 26 of the Family Code,10 endowing the
petitioner with the capacity to remarry under the Philippine law.
On September 30, 1999, respondent judge issued the assailed
order partially setting aside her order dated July 14, 1999 for the
purpose of tackling the issues of property relations of the spouses
as well as support and custody of their children. The pertinent
portion of said order provides:
Acting on the Motion for Partial Reconsideration of the Order
dated July 14, 1999 filed by petitioner thru counsel which was
opposed by respondent and considering that the second
paragraph of Article 26 of the Family Code was included as an
amendment thru Executive Order 227, to avoid the absurd
situation of a Filipino as being still married to his or her alien
spouse though the latter is no longer married to the Filipino
spouse because he/she had obtained a divorce abroad which is
recognized by his/her national law, and considering further the
effects of the termination of the marriage under Article 43 in
relation to Article 50 and 52 of the same Code, which include the
dissolution of the property relations of the spouses, and the
support and custody of their children, the Order dismissing this
case is partially set aside with respect to these matters which
may be ventilated in this Court.
SO ORDERED.11 (Emphasis supplied.)
Petitioner filed a timely motion for reconsideration on October 19,
1999, which was denied by respondent judge in an order dated
March 31, 2000.12
Petitioner ascribes lack of jurisdiction of the trial court and grave
abuse of discretion on the part of respondent judge. He cites as
grounds for his petition the following:
1. Partially setting aside the order dated July 14, 1999 dismissing
the instant case is not allowed by 1997 Rules of Civil
Procedure.13
2. Respondent Maria Carmen Rodriguez by her motion for Partial
Reconsideration had recognized and admitted the Divorce
Decision obtained by her ex-husband in Hamburg, Germany.14
3. There is nothing left to be tackled by the Honorable Court as
there are no conjugal assets alleged in the Petition for Annulment
of Marriage and in the Divorce petition, and the custody of the
children had already been awarded to Petitioner Wolfgang
Roehr.15
Pertinent in this case before us are the following issues:
1. Whether or not respondent judge gravely abused her
discretion in issuing her order dated September 30, 1999, which
partially modified her order dated July 14, 1999; and
2. Whether or not respondent judge gravely abused her
discretion when she assumed and retained jurisdiction over the
present case despite the fact that petitioner has already obtained
a divorce decree from a German court.
On the first issue, petitioner asserts that the assailed order of
respondent judge is completely inconsistent with her previous
order and is contrary to Section 3, Rule 16, Rules of Civil
Procedure, which provides:
Sec. 3. Resolution of motion - After the hearing, the court may
dismiss the action or claim, deny the motion, or order the
amendment of the pleading.
The court shall not defer the resolution of the motion for the
reason that the ground relied upon is not indubitable.
In every case, the resolution shall state clearly and distinctly the
reasons therefor. (Emphasis supplied.)
Petitioner avers that a courts action on a motion is limited to
dismissing the action or claim, denying the motion, or ordering
the amendment of the pleading.
Private respondent, on her part, argues that the RTC can validly
reconsider its order dated July 14, 1999 because it had not yet
attained finality, given the timely filing of respondents motion for
reconsideration.
Pertinent to this issue is Section 3 in relation to Section 7, Rule
37 of the 1997 Rules of Civil Procedure, which provides:
Sec. 3. Action upon motion for new trial or reconsideration.The
trial court may set aside the judgment or final order and grant a
new trial, upon such terms as may be just, or may deny the
motion. If the court finds that excessive damages have been
awarded or that the judgment or final order is contrary to the
evidence or law, it may amend such judgment or final order
accordingly.
Sec. 7. Partial new trial or reconsideration.If the grounds for a
motion under this Rule appear to the court to affect the issues as
to only a part, or less than all of the matters in controversy, or
only one, or less than all, of the parties to it, the court may order
a new trial or grant reconsideration as to such issues if severable
without interfering with the judgment or final order upon the rest.
(Emphasis supplied.)
It is clear from the foregoing rules that a judge can order a
partial reconsideration of a case that has not yet attained finality.
Considering that private respondent filed a motion for
reconsideration within the reglementary period, the trial court's
decision of July 14, 1999 can still be modified. Moreover, in
Saado v. Court of Appeals,16we held that the court could modify
or alter a judgment even after the same has become executory
whenever circumstances transpire rendering its decision unjust
and inequitable, as where certain facts and circumstances
justifying or requiring such modification or alteration transpired
after the judgment has become final and executory17 and when
it becomes imperative in the higher interest of justice or when
supervening events warrant it.18 In our view, there are even
more compelling reasons to do so when, as in this case,
judgment has not yet attained finality.
Anent the second issue, petitioner claims that respondent judge
committed grave abuse of discretion when she partially set aside
her order dated July 14, 1999, despite the fact that petitioner has
already obtained a divorce decree from the Court of First
Instance of Hamburg, Germany.
In Garcia v. Recio,19 Van Dorn v. Romillo, Jr.,20 and Llorente v.
Court of Appeals,21 we consistently held that a divorce obtained
abroad by an alien may be recognized in our jurisdiction,
provided such decree is valid according to the national law of the
foreigner. Relevant to the present case is Pilapil v. Ibay-
Somera,22 where this Court specifically recognized the validity of
a divorce obtained by a German citizen in his country, the Federal
Republic of Germany. We held in Pilapil that a foreign divorce and
its legal effects may be recognized in the Philippines insofar as
respondent is concerned in view of the nationality principle in our
civil law on the status of persons.
In this case, the divorce decree issued by the German court
dated December 16, 1997 has not been challenged by either of
the parties. In fact, save for the issue of parental custody, even
the trial court recognized said decree to be valid and binding,
thereby endowing private respondent the capacity to remarry.
Thus, the present controversy mainly relates to the award of the
custody of their two children, Carolynne and Alexandra Kristine,
to petitioner.
As a general rule, divorce decrees obtained by foreigners in other
countries are recognizable in our jurisdiction, but the legal effects
thereof, e.g. on custody, care and support of the children, must
still be determined by our courts.23 Before our courts can give
the effect of res judicata to a foreign judgment, such as the
award of custody to petitioner by the German court, it must be
shown that the parties opposed to the judgment had been given
ample opportunity to do so on grounds allowed under Rule 39,
Section 50 of the Rules of Court (now Rule 39, Section 48, 1997
Rules of Civil Procedure), to wit:
SEC. 50.Effect of foreign judgments. - The effect of a judgment of
a tribunal of a foreign country, having jurisdiction to pronounce
the judgment is as follows:
(a) In case of a judgment upon a specific thing, the judgment is
conclusive upon the title to the thing;
(b) In case of a judgment against a person, the judgment is
presumptive evidence of a right as between the parties and their
successors in interest by a subsequent title; but the judgment
may be repelled by evidence of a want of jurisdiction, want of
notice to the party, collusion, fraud, or clear mistake of law or
fact.
It is essential that there should be an opportunity to challenge
the foreign judgment, in order for the court in this jurisdiction to
properly determine its efficacy. In this jurisdiction, our Rules of
Court clearly provide that with respect to actions in personam, as
distinguished from actions in rem, a foreign judgment merely
constitutes prima facie evidence of the justness of the claim of a
party and, as such, is subject to proof to the contrary.24
In the present case, it cannot be said that private respondent was In sum, we find that respondent judge may proceed to determine
given the opportunity to challenge the judgment of the German the issue regarding the custody of the two children born of the
court so that there is basis for declaring that judgment as res union between petitioner and private respondent. Private
judicata with regard to the rights of petitioner to have parental respondent erred, however, in claiming cognizance to settle the
custody of their two children. The proceedings in the German matter of property relations of the parties, which is not at issue.
court were summary. As to what was the extent of private WHEREFORE, the orders of the Regional Trial Court of Makati,
respondents participation in the proceedings in the German Branch 149, issued on September 30, 1999 and March 31, 2000
court, the records remain unclear. The divorce decree itself states are AFFIRMED with MODIFICATION. We hereby declare that the
that neither has she commented on the proceedings25 nor has trial court has jurisdiction over the issue between the parties as
she given her opinion to the Social Services Office.26 Unlike to who has parental custody, including the care, support and
petitioner who was represented by two lawyers, private education of the children, namely Carolynne and Alexandra
respondent had no counsel to assist her in said proceedings.27 Kristine Roehr. Let the records of this case be remanded
More importantly, the divorce judgment was issued to petitioner promptly to the trial court for continuation of appropriate
by virtue of the German Civil Code provision to the effect that proceedings. No pronouncement as to costs.
when a couple lived separately for three years, the marriage is
deemed irrefutably dissolved. The decree did not touch on the SO ORDERED
issue as to who the offending spouse was. Absent any finding
that private respondent is unfit to obtain custody of the children,
the trial court was correct in setting the issue for hearing to
determine the issue of parental custody, care, support and
education mindful of the best interests of the children. This is in
consonance with the provision in the Child and Youth Welfare
Code that the childs welfare is always the paramount
consideration in all questions concerning his care and custody. 28
On the matter of property relations, petitioner asserts that public
respondent exceeded the bounds of her jurisdiction when she
claimed cognizance of the issue concerning property relations
between petitioner and private respondent. Private respondent
herself has admitted in Par. 14 of her petition for declaration of
nullity of marriage dated August 26, 1996 filed with the RTC of
Makati, subject of this case, that: "[p]etitioner and respondent
have not acquired any conjugal or community property nor have
they incurred any debts during their marriage."29 Herein
petitioner did not contest this averment. Basic is the rule that a
court shall grant relief warranted by the allegations and the
proof.30 Given the factual admission by the parties in their
pleadings that there is no property to be accounted for,
respondent judge has no basis to assert jurisdiction in this case
to resolve a matter no longer deemed in controversy.