MARINA PORT SERVICES, INC., petitioner, vs.

AMERICAN HOME ASSURANCE

CORPORATION, respondent

G.R. No. 201822. August 12, 2015

Remedial Law; Civil Procedure; Appeals; Petition for Review on Certiorari; It is evident that the resolution
of the instant case requires the scrutiny of factual issues which are, however, outside the scope of the
present petition filed pursuant to Rule 45 of the Rules of Court.—At the outset, it is evident that the
resolution of the instant case requires the scrutiny of factual issues which are, however, outside the scope
of the present petition filed pursuant to Rule 45 of the Rules of Court. However, the Court held in Asian
Terminals, Inc. v. Philam Insurance Co., Inc., 702 SCRA 88 (2013), that: But while it is not our duty to
review, examine and evaluate or weigh all over again the probative value of the evidence presented, the
Court may nonetheless resolve questions of fact when the case falls under any of the following exceptions:
(1) when the findings are grounded entirely on speculation, surmises, or conjectures; (2) when the
inference made is manifestly mistaken, absurd, or impossible; (3) when there is grave abuse of discretion;
(4) when the judgment is based on a misapprehension of facts; (5) when the findings of fact are conflicting;
(6) when in making its findings the Court of Appeals went beyond the issues of the case, or its findings are
contrary to the admissions of both the appellant and the appellee; (7) when the findings are contrary to
those of the trial court; (8) when the findings are conclusions without citation of specific evidence on which
they are based; (9) when the facts set forth in the petition as well as in the petitioner’s main and reply
briefs are not disputed by the respondent; and (10) when the findings of fact are premised on the supposed
absence of evidence and contradicted by the evidence on record. The Court finds that the instant case falls
under the aforementioned second, fourth, fifth, and seventh exceptions. Hence, it shall proceed to delve
into factual matters essential to the proper determination of the merits of this case.

Mercantile Law; Common Carriers; Warehouse Receipts Act; Arrastre Operators; An arrastre operator
should adhere to the same degree of diligence as that legally expected of a warehouseman or a common
carrier as set forth in Section 3[b] of the Warehouse Receipts Act and Article 1733 of the Civil Code.—The
relationship between an arrastre operator and a consignee is similar to that between a warehouseman and
a depositor, or to that between a common carrier and the consignee and/or the owner of the shipped
goods. Thus, an arrastre operator should adhere to the same degree of diligence as that legally expected
of a warehouseman or a common carrier as set forth in Section 3[b] of the Warehouse Receipts [Act] and
Article 1733 of the Civil Code. As custodian of the shipment discharged from the vessel, the arrastre
operator must take good care of the same and turn it over to the party entitled to its possession.

Same; Same; Same; Same; In case of claim for loss filed by a consignee or the insurer as subrogee, it is
the arrastre operator that carries the burden of proving compliance with the obligation to deliver the goods
to the appropriate party.—In case of claim for loss filed by a consignee or the insurer as subrogee, it is the
arrastre operator that carries the burden of proving compliance with the obligation to deliver the goods to
the appropriate party. It must show that the losses were not due to its negligence or that of its employees.
It must establish that it observed the required diligence in handling the shipment. Otherwise, it shall be
presumed that the loss was due to its fault. In the same manner, an arrastre operator shall be liable for
damages if the seal and lock of the goods deposited and delivered to it as closed and sealed, be broken
through its fault. Such fault on the part of the arrastre operator is likewise presumed unless there is proof
to the contrary.

Same; Same; Same; Same; As held in International Container Terminal Services, Inc. v. Prudential
Guarantee & Assurance Co., Inc., 320 SCRA 244 (1999), the signature of the consignee’s representative
on the gate pass is evidence of receipt of the shipment in good order and condition.—As held in
International Container Terminal Services, Inc. v. Prudential Guarantee & Assurance Co., Inc., 320 SCRA
244 (1999), the signature of the consignee’s representative on the gate pass is evidence of receipt of the
shipment in good order and condition. Also, that MPSI delivered the subject shipment to MSC’s
representative in good and complete condition and with lock and seals intact is established by the

Page 1 of 61
testimonies of MPSI’s employees who were directly involved in the processing of the subject shipment. Mr.
Ponciano De Leon testified that as MPSI’s delivery checker, he personally examined the subject container
vans and issued the corresponding gate passes that were, in turn, countersigned by the consignee’s
representative. MPSI’s other witness, Chief Claims Officer Sergio Icasiano (Icasiano), testified that the
broker, as the consignee’s representative, neither registered any complaints nor requested for an
inspection.

Remedial Law; Evidence; Hearsay Evidence Rule; It is a basic rule that evidence, whether oral or
documentary, is hearsay, if its probative value is not based on the personal knowledge of the witness but
on the knowledge of another person who is not on the witness stand.—The person who prepared the said
report was not presented in court to testify on the same. Thus, the said survey report has no probative
value for being hearsay. “It is a basic rule that evidence, whether oral or documentary, is hearsay, if its
probative value is not based on the personal knowledge of the witness but on the knowledge of another
person who is not on the witness stand.” Moreover, “an unverified and unidentified private document
cannot be accorded probative value. It is precluded because the party against whom it is presented is
deprived of the right and opportunity to cross-examine the person to whom the statements or writings are
attributed. Its executor or author should be presented as a witness to provide the other party to the
litigation the opportunity to question its contents. Being mere hearsay evidence, failure to present the
author of the letter renders its contents suspect and of no probative value.”

Mercantile Law; Common Carriers; Shipper’s Load and Count; Marina Port Services, Inc. (MPSI) cannot just
the same be held liable for the missing bags of flour since the consigned goods were shipped under
“Shipper’s Load and Count” arrangement. This means that the shipper was solely responsible for the loading
of the container, while the carrier was oblivious to the contents of the shipment. Protection against pilferage
of the shipment was the consignee’s lookout.—MPSI cannot just the same be held liable for the missing
bags of flour since the consigned goods were shipped under “Shipper’s Load and Count” arrangement.
“This means that the shipper was solely responsible for the loading of the container, while the carrier was
oblivious to the contents of the shipment. Protection against pilferage of the shipment was the consignee’s
lookout. The arrastre operator was, like any ordinary depositary, duty-bound to take good care of the goods
received from the vessel and to turn the same over to the party entitled to their possession, subject to
such qualifications as may have validly been imposed in the contract between the parties. The arrastre
operator was not required to verify the contents of the container received and to compare them with those
declared by the shipper because, as earlier stated, the cargo was at the shipper’s load and count. The
arrastre operator was expected to deliver to the consignee only the container received from the carrier.”

PETITION for review on certiorari of the decision and resolution of the Court of Appeals.

The facts are stated in the opinion of the Court.

Poblador, Bautista and Reyes for petitioner.

Leaño, Leaño and Leaño III Law Office for respondent.

DEL CASTILLO, J.:

This Petition for Review on Certiorari filed pursuant to Rule 45 of the Rules of Court assails the December
29, 2011 Decision and May 8, 2012 Resolution of the Court of Appeals (CA) in C.A.-G.R. CV No. 88321,
which granted the appeal filed therein by respondent American Home Assurance Corporation (AHAC) and
reversed and set aside the October 17, 2006 Decision of the Regional Trial Court (RTC), Pasig City, Branch
271 dismissing AHAC’s Complaint for Damages against petitioner Marina Port Services, Inc. (MPSI).

Factual Antecedents

Page 2 of 61
On September 21, 1989, Countercorp Trading PTE., Ltd., shipped from Singapore to the Philippines 10
container vans of soft wheat flour with seals intact onboard the vessel M/V Uni Fortune. The shipment was
insured against all risks by AHAC and consigned to MSC Distributor (MSC).

Upon arrival at the Manila South Harbor on September 25, 1989, the shipment was discharged in good and
complete order condition and with safety seals in place to the custody of the arrastre operator, MPSI. After
unloading and prior to hauling, agents of the Bureau of Customs officially broke the seals, opened the
container vans, and examined the shipment for tax evaluation in the presence of MSC’s broker and checker.
Thereafter, the customs inspector closed the container vans and refastened them with safety wire seals
while MSC’s broker padlocked the same. MPSI then placed the said container vans in a back-to-back
arrangement at the delivery area of the harbor’s container yard where they were watched over by the
security guards of MPSI and of the Philippine Ports Authority.

On October 10, 1989, MSC’s representative, AD’s Customs Services (ACS), took out five container vans for
delivery to MSC. At the compound’s exit, MPSI issued to ACS the corresponding gate passes for the vans
indicating its turnover of the subject shipment to MSC. However, upon receipt of the container vans at its
warehouse, MSC discovered substantial shortages in the number of bags of flour delivered. Hence, it filed
a formal claim for loss with MPSI.

From October 12 to 14, 1989 and pursuant to the gate passes issued by MPSI, ACS took out the remaining
five container vans from the container yard and delivered them to MSC. Upon receipt, MSC once more
discovered substantial shortages. Thus, MSC filed another claim with MPSI.

Per MSC, the total number of the missing bags of flour was 1,650 with a value of P257,083.00.

MPSI denied both claims of MSC. As a result, MSC sought insurance indemnity for the lost cargoes from
AHAC. AHAC paid MSC the value of the missing bags of flour after finding the latter’s claim in order. In
turn, MSC issued a subrogation receipt in favor of AHAC.

Thereafter, AHAC filed a Complaint for damages against MPSI before the RTC.

Ruling of the Regional Trial Court

AHAC averred in its Complaint that the partial loss of the bags of flour was due to the fault or negligence
of MPSI since the loss happened while the shipment was still in MPSI’s custody.

MPSI, on the other hand, disclaimed any liability. It essentially maintained in its Answer that the bags of
flour were inside sealed container vans when it received the same; that it handled the subject shipment
with the diligence required of it; and that the container vans were turned over by it to MSC in the same
condition that they were in at the time of their discharge from the vessel. MPSI likewise countered that the
failure of MSC to request for a bad order survey belied the latter’s claim for loss.

Trial then ensued.

On October 17, 2006, the RTC rendered a Decision dismissing AHAC’s Complaint. It held that while there
was indeed a shortage of 1,650 sacks of soft wheat flour, AHAC’s evidence failed to clearly show that the
loss happened while the subject shipment was still under MPSI’s responsibility. Hence, the dispositive
portion of the RTC Decision:

WHEREFORE, premises considered, the complaint is hereby DISMISSED.

SO ORDERED.

Page 3 of 61
Ruling of the Court of Appeals

Aggrieved, AHAC appealed to the CA.

In its Decision dated December 29, 2011, the CA stressed that in a claim for loss filed by a consignee, the
burden of proof to show due compliance with the obligation to deliver the goods to the appropriate party
devolves upon the arrastre operator. In consonance with this, a presumption of fault or negligence for the
loss of the goods arises against the arrastre operator pursuant to Articles 1265 and 1981 of the Civil Code.
In this case, the CA found that MPSI failed to discharge such burden and to rebut the aforementioned
presumption.

Thus, it was held liable to AHAC for the value of the missing bags of flour, viz.:

We conclude that x x x MPSI was negligent in the handling and safekeeping of the subject shipment. It did
not create and implement a more defined, concrete and effective measure to detect, curb and prevent the
loss or pilferage of cargoes in its custody. This is manifested by the fact that [MPSI] never took any action
to address such complaint even after it received the formal claim of loss in the first five (5) vans. As a
consequence, more bags of flour were eventually lost or pilfered in the remaining container vans that were
still in [MPSI’s] custody at that time. Case law tells us that negligence is that conduct which creates undue
risk of harm to another, the failure to observe that degree of care, precaution and vigilance which the
circumstance[s] justly demand, whereby that other person suffers injury. Clearly, [MPSI] breached its
arrastre obligations to the consignee for it failed to deliver said bags in good and complete condition.

In view of MPSI’s failure to exercise that degree of diligence, precaution and care the law [requires] of
arrastre operators in the performance of their duties to the consignee, [MPSI] is legally bound to reimburse
[AHAC] for the value of the missing bags of flour that it paid to MSC pursuant to the insurance policy.

In view of the same, the said court disposed of the appeal in this wise:

WHEREFORE, premises considered, the appeal is GRANTED. The Decision of the Regional Trial Court of
Pasig City, Branch 271 dated 17 October 2006 is REVERSED and SET ASIDE. Appellee Marina Port Services,
Inc. is ORDERED to pay appellant, American Home Assurance Corporation, the sum of Two Hundred Fifty-
Seven Thousand and Eighty-Three Pesos (Php257,083.00) with interest thereon at six percent (6%) [per
annum] from the filing of this complaint on 24 September 1990 until the decision becomes final and
executory, and thereafter, at the rate of twelve (12) percent [per annum] until fully paid, and additionally,
to pay the x x x sum of Fifty Thousand Pesos (Php50,000.00) as attorney’s fees.

SO ORDERED.

MPSI moved for reconsideration but the CA denied the same in its Resolution15 dated May 8, 2012.

Hence, the present recourse.

Issue

The core issue to be resolved in this case is whether MPSI is liable for the loss of the bags of flour.

Our Ruling

There is merit in the Petition.

Page 4 of 61
Albeit involving factual questions, the Court shall proceed to resolve this case since it falls under several
exceptions to the rule that only questions of law are proper in a petition for review on certiorari.

At the outset, it is evident that the resolution of the instant case requires the scrutiny of factual issues
which are, however, outside the scope of the present petition filed pursuant to Rule 45 of the Rules of
Court. However, the Court held in Asian Terminals, Inc. v. Philam Insurance Co., Inc. that:

But while it is not our duty to review, examine and evaluate or weigh all over again the probative value of
the evidence presented, the Court may nonetheless resolve questions of fact when the case falls under any
of the following exceptions:

(1) when the findings are grounded entirely on speculation, surmises, or conjectures; (2) when the
inference made is manifestly mistaken, absurd, or impossible; (3) when there is grave abuse of discretion;
(4) when the judgment is based on a misapprehension of facts; (5) when the findings of fact are conflicting;
(6) when in making its findings the Court of Appeals went beyond the issues of the case, or its findings are
contrary to the admissions of both the appellant and the appellee; (7) when the findings are contrary to
those of the trial court; (8) when the findings are conclusions without citation of specific evidence on which
they are based; (9) when the facts set forth in the petition as well as in the petitioner’s main and reply
briefs are not disputed by the respondent; and (10) when the findings of fact are premised on the supposed
absence of evidence and contradicted by the evidence on record.

The Court finds that the instant case falls under the aforementioned second, fourth, fifth, and seventh
exceptions. Hence, it shall proceed to delve into factual matters essential to the proper determination of
the merits of this case.

Several well-entrenched legal principles govern the relationship of an arrastre operator and a consignee.

The relationship between an arrastre operator and a consignee is similar to that between a warehouseman
and a depositor, or to that between a common carrier and the consignee and/or the owner of the shipped
goods. Thus, an arrastre operator should adhere to the same degree of diligence as that legally expected
of a warehouseman or a common carrier as set forth in Section 3[b] of the Warehouse Receipts [Act] and
Article 1733 of the Civil Code. As custodian of the shipment discharged from the vessel, the arrastre
operator must take good care of the same and turn it over to the party entitled to its possession.

In case of claim for loss filed by a consignee or the insurer as subrogee, it is the arrastre operator that
carries the burden of proving compliance with the obligation to deliver the goods to the appropriate party.
It must show that the losses were not due to its negligence or that of its employees. It must establish that
it observed the required diligence in handling the shipment. Otherwise, it shall be presumed that the loss
was due to its fault. In the same manner, an arrastre operator shall be liable for damages if the seal and
lock of the goods deposited and delivered to it as closed and sealed, be broken through its fault. Such fault
on the part of the arrastre operator is likewise presumed unless there is proof to the contrary.

MPSI was able to prove delivery of the shipment to MSC in good and complete condition and with locks
and seals intact.

It is significant to note that MPSI, in order to prove that it properly delivered the subject shipment
consigned to MSC, presented 10 gate passes marked as Exhibits 4 to 13. Each of these gate passes bore
the duly identified signature of MSC’s representative which serves, among others, as an acknowledgment
that:

Issuance of [the] Gate Pass constitutes delivery to and receipt by consignee of the goods as described
above in good order and condition, unless an accompanying B.O. certificate duly issued and noted on the
face of [the] Gate Pass appears.

Page 5 of 61
As held in International Container Terminal Services, Inc. v. Prudential Guarantee & Assurance Co., Inc.,
the signature of the consignee’s representative on the gate pass is evidence of receipt of the shipment in
good order and condition.

Also, that MPSI delivered the subject shipment to MSC’s representative in good and complete condition and
with lock and seals intact is established by the testimonies of MPSI’s employees who were directly involved
in the processing of the subject shipment. Mr. Ponciano De Leon testified that as MPSI’s delivery checker,
he personally examined the subject container vans and issued the corresponding gate passes that were, in
turn, countersigned by the consignee’s representative. MPSI’s other witness, Chief Claims Officer Sergio
Icasiano (Icasiano), testified that the broker, as the consignee’s representative, neither registered any
complaints nor requested for an inspection, to wit:

REDIRECT EXAMINATION:

Atty. Laurente

xxxx

Q [A]fter receipt by the broker of the container van containing the cargo, do you require the broker to issue
you a report or certification as to the appearance of the container van?

A [W]e only rely on the gate pass.

Q [A]nd you don’t place there “the padlock is still intact or the wirings still intact?”

A [I]t is stated in the gate pass, your Honor.

xxxx

Q [A]nd the findings [are counter-signed] by the representative of the broker also on the same date?

A [Y]es, your honor.

xxxx

RECROSS EXAMINATION:

Atty. Laino

q [B]ut did you not say that in the gate pass it is stated there as to the external appearance of the container
van?

a [T]here was no indication of any inspection of the container van x x x meaning the container vans were
all in good condition, sir.

q [Y]ou said a [while] ago that you did not receive any complaint for broken seals, is it not?

a [Y]es, sir.

q [B]ut the complaint that you received indicates that there were losses.

Page 6 of 61
a [W]e did not receive any complaint from the broker, sir.

q [I]f the broker will complain they have to file a request for inspection of the cargo so that they will know
if there [are] shortages x x x.

a [Y]es, sir.

[C]ourt

q [A]nd if the broker would notice or detect [something] peculiar, the way the door of the container van
appears whether close[d] or not, they have to request for an inspection[?]

a [Y]es, your honor.

q [O]r in the absence of the padlock or wirings, the broker will request for an inspection[?]

a [Y]es, your honor[;] they can require for the examination of the cargo.

q [B]ut there was no request at all by the broker?

a [T]here was none, your Honor.

Verily, the testimonies of the aforementioned employees of MPSI confirm that the container vans, together
with their padlocks and wirings, were in order at the time the gate passes were issued up to the time the
said container vans were turned over to ACS.

AHAC justifies the failure of ACS to immediately protest the alleged loss or pilferage upon initial pickup of
the first batch of container vans. According to it, ACS could not have discovered the loss at that moment
since the stripping of container vans in the pier area is not allowed. The Court cannot, however, accept
such excuse. For one, AHAC’s claim that stripping of the container vans is not allowed in the pier area is a
mere allegation without proof. It is settled that “[m]ere allegations do not suffice; they must be
substantiated by clear and convincing proof.” For another, even assuming that stripping of the container
vans is indeed not allowed at the pier area, it is hard to believe that MSC or its repre--sen-tative ACS has
no precautionary measures to protect itself from any eventuality of loss or pilferage. To recall, ACS’s
representative signed the gate passes without any qualifications. This is despite the fact that such signature
serves as an acknowledgment of ACS’s receipt of the goods in good order and condition. If MSC was keen
enough in protecting its interest, it (through ACS) should have at least qualified the receipt of the goods
as subject to inspection, and thereafter arrange for such an inspection in an area where the same is allowed
to be done. However, no such action or other similar measure was shown to have been undertaken by
MSC. What is clear is that ACS accepted the container vans on its behalf without any qualification. As aptly
observed by the RTC:

During [the] period of turnover of goods from the arrastre to [ACS], there had been no protest on anything
on the part of consignee’s representative x x x. Otherwise, the complaint would have been shown [on] the
gate passes. In fact, each gate pass showed the date of delivery, the location of delivery, the truck number
of the truck used in the delivery, the actual quantity of goods delivered, the numbers of the safety wires
and padlocks of the vans and the signatures of the receiver. More importantly, the gate passes bared the
fact that the shipments were turned over by [MPSI] to [ACS] on the same dates of customs inspections
and turnovers.

Page 7 of 61
There being no exception as to bad order, the subject shipment, therefore, appears to have been accepted
by MSC, through ACS, in good order. “It logically follows [then] that the case at bar presents no occasion
for the necessity of discussing the diligence required of an [arrastre operator] or of the theory of [its] prima
facie liability x x x, for from all indications, the shipment did not suffer loss or damage while it was under
the care x x x of the arrastre operator x x x.”

Even in the light of Article 1981, no presumption of fault on the part of MPSI arises since it was not
sufficiently shown that the container vans were reopened or that their locks and seals were broken for the
second time.

Indeed, Article 1981 of the Civil Code also mandates a presumption of fault on the part of the arrastre
operator as follows:

Article 1981. When the thing deposited is delivered closed and sealed, the depositary must return it in
the same condition, and he shall be liable for damages should the seal or lock be broken through his fault.

Fault on the part of the depositary is presumed, unless there is proof to the contrary.

As regards the value of the thing deposited, the statement of the depositor shall be accepted, when the
forcible opening is imputable to the depositary, should there be no proof to the contrary. However, the
courts may pass upon the credibility of the depositor with respect to the value claimed by him.

When the seal or lock is broken, with or without the depositary’s fault, he shall keep the secret of the
deposit.

However, no such presumption arises in this case considering that it was not sufficiently shown that the
container vans were reopened or that their locks and seals were broken for the second time. As may be
recalled, the container vans were opened by a customs official for examination of the subject shipment and
were thereafter resealed with safety wires. While this fact is not disputed by both parties, AHAC alleges
that the container vans were reopened and this gave way to the alleged pilferage. The Court notes,
however, that AHAC based such allegation solely on the survey report of the Manila Adjuster & Surveyors
Company (MASCO). As observed by the RTC:

AHAC x x x claim[s] that there were two instances when the seals were broken. [First], when the customs
officer examined the shipment and had it resealed with safety wires. [Second], when the surveyor and
consignee’s broker visually inspected the shipment and allegedly found the safety wires of the customs
officer to have been detached and missing which they then replaced. This second instance is only upon
their say so as there is no

x x x documentary or testimonial proof on the matter [other] than the [MASCO] survey report.

However, the person who prepared the said report was not presented in court to testify on the same. Thus,
the said survey report has no probative value for being hearsay. “It is a basic rule that evidence, whether
oral or documentary, is hearsay, if its probative value is not based on the personal knowledge of the witness
but on the knowledge of another person who is not on the witness stand.” Moreover, “an unverified and
unidentified private document cannot be accorded probative value. It is precluded because the party
against whom it is presented is deprived of the right and opportunity to cross-examine the person to whom
the statements or writings are attributed. Its executor or author should be presented as a witness to provide
the other party to the litigation the opportunity to question its contents. Being mere hearsay evidence,
failure to present the author of the letter renders its contents suspect and of no probative value.”

Page 8 of 61
There being no other competent evidence that the container vans were reopened or that their locks and
seals were broken for the second time, MPSI cannot be held liable for damages due to the alleged loss of
the bags of flour pursuant to Article 1981 of the Civil Code.

At any rate, the goods were shipped under “Shipper’s Load and Count” arrangement. Thus, protection
against pilferage of the subject ship­ment was the consignee’s lookout.

At any rate, MPSI cannot just the same be held liable for the missing bags of flour since the consigned
goods were shipped under “Shipper’s Load and Count” arrangement. “This means that the shipper was
solely responsible for the loading of the container, while the carrier was oblivious to the contents of the
shipment. Protection against pilferage of the shipment was the consignee’s lookout. The arrastre operator
was, like any ordinary depositary, duty-bound to take good care of the goods received from the vessel and
to turn the same over to the party entitled to their possession, subject to such qualifications as may have
validly been imposed in the contract between the parties. The arrastre operator was not required to verify
the contents of the container received and to compare them with those declared by the shipper because,
as earlier stated, the cargo was at the shipper’s load and count. The arrastre operator was expected to
deliver to the consignee only the container received from the carrier.”

All told, the Court holds that MPSI is not liable for the loss of the bags of flour.

WHEREFORE, the Petition is GRANTED. The Decision dated December 29, 2011 and Resolution dated May
8, 2012 of the Court of Appeals in C.A.-G.R. CV No. 88321 are REVERSED and SET ASIDE. The Decision
dated October 17, 2006 of the Regional Trial Court, Branch 271, Pasig City in Civil Case No. 90-54517 is
REINSTATED and the Complaint in the said case is DISMISSED.

SO ORDERED.

Carpio (Chairperson), Brion, Mendoza and Leonen, JJ., concur.

Petition granted, judgment and resolution reversed and set aside.

Notes.—Hearsay evidence is admissible in determining probable cause in a preliminary investigation

because such investigation is merely preliminary, and does not finally adjudicate rights and obligations of
parties. (Estrada vs. Office of the Ombudsman, 748 SCRA 1 [2015])

The legal relationship between an arrastre operator and a consignee is akin to that between a
warehouseman and a depositor. (Unknown Owner of the Vessel M/V China Joy vs. Asian Terminals, Inc.,
752 SCRA 642 [2015])

——o0o——

Page 9 of 61
 ALICIA Y. LAUREL, substituted by her sole heir and legal representative JUAN MIGUEL Y.
LAUREL, petitioner, vs. FERDINAND M. VARDELEON, respondent

G.R. No. 202967. August 5, 2015

Remedial Law; Civil Procedure; Dismissal of Actions; Failure to Prosecute; The fundamental test for non
prosequitur is whether, under the circumstances, the plaintiff is chargeable with want of due diligence in
failing to proceed with reasonable promptitude.—This Court has said that “[t]he fundamental test for non
prosequitur is whether, under the circumstances, the plaintiff is chargeable with want of due diligence in
failing to proceed with reasonable promptitude. There must be unwillingness on the part of the plaintiff to
prosecute.” To constitute failure to prosecute, his nonappearance must be equated with unwillingness to
proceed with the trial as when both plaintiff and counsel made no appearance at all, or with the assumption
that plaintiff has already lost interest in prosecuting his action, in the same way that should the ground for
dismissal be delay, this delay or failure to proceed must be for an unreasonable length of time beyond the
reasonable allowance which by judicial leniency a litigant is normally entitled. Likewise — While a court can
dismiss a case on the ground of non prosequitur, the real test of such power is whether, under the
circumstances, plaintiff is chargeable with want of due diligence in failing to proceed with reasonable
promptitude. In the absence of a pattern or a scheme to delay the disposition of the case or a wanton
failure to observe the mandatory requirement of the rules on the part of the plaintiff, x x x courts should
decide to dispense rather than wield their authority to dismiss.

Same; Same; Same; Same; The delay or failure to prosecute contemplated under Section 3, Rule 17 of the
1997 Rules must be for an “unreasonable length of time.”—So long as the parties act within schedule, then
none of them should complain. Besides, the delay or failure to prosecute contemplated under Section 3,
Rule 17 of the 1997 Rules must be for an “unreasonable length of time.” In petitioner’s case, the
continuance she sought was not for an unreasonable length of time. It was within the period expected by
and made known to the defendant and the trial court during pretrial. In fact, it was only until the next
scheduled setting on November 23, 2005, which was just over one month away. This may not be
characterized as delay, as such scheduled hearing was expected by respondent and could not have come
as a surprise to him. He was expected, as he agreed, to wait until the termination of these three scheduled
hearings. Within such period, he can do nothing but await his turn to present evidence, unless petitioner
terminates it earlier. Moreover, respondent could not have been prejudiced by the postponement being
sought.

Administrative Law; Judges; The unreasonable delay of a judge in resolving a pending incident is a violation
of the norms of judicial conduct and constitutes a ground for administrative sanction against the defaulting
magistrate.—For its part, the trial court was remiss in its duty to act on the two pending motions before it.
It appears that it did not even grant the parties the opportunity to comment respectively on these motions,
and instead simply summarily denied them in open court during the October 12, 2005 scheduled hearing.
The trial court should be reminded that “the unreasonable delay of a judge in resolving a pending incident
is a violation of the norms of judicial conduct and constitutes a ground for administrative sanction against
the defaulting magistrate.”

PETITION for review on certiorari of the decision and resolution of the Court of Appeals.

The facts are stated in the opinion of the Court.

Torres & Sy Law Offices for petitioner.

Guillermo Sotto for respondent.

DEL CASTILLO, J.:

Page 10 of 61
This Petition for Review on Certiorari assails: 1) the October 13, 2011 Decision of the Court of Appeals (CA)
denying the appeal in C.A.-G.R. CEB CV No. 01360 and affirming the October 12, 2005 Order of the Regional
Trial Court (RTC), 6th Judicial Region, Kalibo, Aklan, Branch 6 in Civil Case No. 7249; and 2) the CA’s June
20, 2012 Resolution denying herein petitioner’s motion for reconsideration of the herein assailed Decision.

Factual Antecedents

On July 23, 2004, petitioner Alicia Y. Laurel filed a Complaint for recovery of possession and ownership
and/or quieting of title against respondent Ferdinand M. Vardeleon concerning a 20,306-square-meter
island in Caticlan, Malay, Aklan. The case was docketed as Civil Case No. 7249 and assigned to Branch 6
of the RTC of Kalibo, Aklan.

Respondent denied the material allegations in the complaint, claiming that he bought the island on April 9,
1973 from Avelina Casimero, and that petitioner was guilty of laches in filing her claim.

In a July 6, 2005 Pre-Trial Order, petitioner was scheduled to present her evidence on three separate dates:
September 7, 2005; October 12, 2005; and November 23, 2005.

Previously, on August 1, 2005, respondent moved to correct the Pre-Trial Order, in order to reflect therein
petitioner’s supposed admission made during pre­trial that she knew of respondent’s possession of the
subject property since 1975. Petitioner opposed the same.

In an August 19, 2005 Order, the trial court denied respondent’s motion to correct the Pre-Trial Order.
Respondent filed a motion for reconsideration but the trial court did not act on the motion.

On September 2, 2005, petitioner’s counsel moved to reset the scheduled September 7, 2005 hearing to
October 12, 2005 or any available date. The trial court, in a September 7, 2005 Order, granted the motion
provided that petitioner defrays the transportation expenses as well as the appearance fee of respondent’s
counsel. Petitioner moved to reconsider, but the court failed to act on the same.

During the scheduled October 12, 2005 hearing, petitioner was present, together with substitute counsel
Atty. Roy Villa and her first witness. Petitioner moved in open court to postpone trial on the ground that
there are pending motions that have to be resolved, and that the substitute lawyer had yet to confer with
the witness, since her true counsel, Atty. De la Vega — who originally interviewed the witness — was not
present. This time, the trial court, in an Order of even date, denied: 1) petitioner’s oral motion to postpone
trial; 2) her motion for reconsideration of the trial court’s September 7, 2005 Order directing her to defray
respondent’s counsel’s transportation expenses and appearance fees; and 3) respondent’s motion for
reconsideration of the trial court’s August 19, 2005 Order denying his motion to correct the Pre-Trial Order.
It likewise dismissed Civil Case No. 7249 on the ground of failure to prosecute on petitioner’s part, pursuant
to Section 3, Rule 17 of the 1997 Rules of Civil Procedure. It decreed, thus:

Resolving the Motion for Reconsideration filed by the plaintiff, the same is hereby DENIED. The alleged
illness of Atty. Maria Theresa Diaz-dela Vega which allegedly prevented [sic] from appearing at the initial
trial is not supported by a medical certificate that is under oath. (Sec. 4, Rule 30, 1997 Rules of Civil
Procedure)

As regards the Motion for Reconsideration filed by the defendant, the same was just a rehash of the ground
mentioned in their [sic] first motion which was amply discussed in the Order sought to be reconsidered.
Said Motion for Reconsideration is also DENIED.

Page 11 of 61
Called for trial, plaintiff is unable to present anew her evidence. She is asking for the postponement of the
trial. It is significant to take note that when this case was set for trial on September 7, 2005, plaintiff failed
to present evidence based on the alleged illness of her counsel. And today, plaintiff is not again ready to
present evidence.

Defendant opposed the motion, and manifested that he is willing that the counterclaim be dismissed to
facilitate the eventual dismissal of this case.

WHEREFORE, plaintiff’s verbal motion to postpone the trial is hereby DENIED and the case is DISMISSED
for failure to prosecute. The counterclaim is also DISMISSED.

SO ORDERED.

Open Court, Kalibo, Aklan.

October 12, 2005.

On November 9, 2005, petitioner filed a motion for reconsideration of the trial court’s October 12, 2005
Order, but in a January 31, 2006 Order, the trial court denied the same, stating among others that —

The fact that another trial date was left for her to present evidence cannot be made as a justification
because for two settings, i.e., September 7, 2005 and October 12, 2005, she admittedly failed to present
evidence. As a matter of fact, on September 7, 2005, the Court was already inclined to dismiss the case
for failure of the plaintiff to appear, especially that her motion to postpone the hearing failed to comply
with the 3-day period to file and serve the motion prior to the date of the hearing. The motion was filed
two (2) days before the date of the hearing. Nonetheless, the Court had to bend the procedural rules by
granting the motion and set the presentation of plaintiff’s evidence on October 12, 2005 as previously set
during the trial. The reason therefor is just to allow the plaintiff to present her evidence and decide the
case on the merits. Unfortunately, as earlier stated, plaintiff was again unable to present evidence.

Some pending incidents mentioned by the plaintiff is [sic] not a legal justification for her not to present
evidence. The same were already resolved when the Court directed plaintiff to proceed with the
presentation of her evidence. However, plaintiff refused to do so.

Hence, the dismissal of the complaint for failure to prosecute as mentioned at the outset.

WHEREFORE, the motion for reconsideration is denied for lack of merit.

SO ORDERED.

Ruling of the Court of Appeals

Petitioner filed an appeal before the CA, docketed as C.A.-G.R. CEB CV No. 01360. She claimed that the
trial court should not have dismissed her case since she still had one more scheduled hearing — November
23, 2005 — for the presentation of her evidence. Petitioner asserted that she could not begin trial since
respondent’s motion for reconsideration of the trial court’s August 19, 2005 Order remained unresolved
and was still awaiting resolution. Moreover, her own motion for reconsideration of the trial court’s
September 7, 2005 Order directing her to defray the transportation expenses and appearance fee of
respondent’s counsel was still pending at the time. But in an October 13, 2011 Decision, the CA denied the
appeal, stating thus:

Appellant claims that it was her honest belief that during the hearing on October 12, 2005, the trial court
would first hear and resolve appellee’s motion for reconsideration from the Order denying his earlier motion

Page 12 of 61
to correct the pre­trial order. She was caught by surprise when the trial court outrightly denied appellee’s
motion for reconsideration and directed her to present her witness. Moreover, under the Pre-Trial Order,
she still had another date to present her evidence, that is, on November 23, 2005.

We are not impressed with appellant’s contentions.

Under Section 3, Rule 17 of the Rules of Court, if, for no justifiable cause, the plaintiff fails to appear on
the date of the presentation of his evidence--in-chief on the complaint, or to prosecute his action for an
unreasonable length of time, or to comply with these Rules or any order of the court, the complaint may
be dismissed upon motion of the defendant or upon the court’s own motion, without prejudice to the right
of the defendant to prosecute his counterclaim in the same or in a separate action. This dismissal shall
have the effect of an adjudication upon the merits, unless otherwise provided by the court.

There is failure to prosecute when the plaintiff, being present, is not ready or is unwilling to proceed with
the scheduled trial or when postponements in the past were due to the plaintiff’s own making, intended to
be dilatory or caused substantial prejudice on the part of the defendant.

Appellant could not pretend that she did not know that she would be presenting her evidence on October
12, 2005. Appellant was duly notified of the hearing dates. The Pre-Trial Order dated July 6, 2005 clearly
stated that appellant was set to present her evidence on the following dates: September 7, 2005, October
12, 2005 and November 23, 2005 at 9:30 in the morning. When appellant’s counsel filed a motion to reset
the hearing, the trial court granted the same.

With due notice of the proceedings, appellant and her counsel were both well aware that they had to
present their evidence on October 12, 2005. This was their chosen date, but instead of corning prepared,
appellant moved for another postponement. Appellant’s justification that her counsel was not yet able to
talk to the witness is not a meritorious ground to defer the hearing of the case. In fact, under Sec. 3, Rule
30 of the Rules of Court, a motion to postpone a trial on the ground of absence of evidence can be granted
only upon affidavit showing the materiality or relevancy of such evidence and that due diligence had been
utilized to procure it. There was no such affidavit in this case, nor was there any showing that due diligence
had been exerted to procure the attendance of the intended witness.

The fact that the trial court no longer heard appellee’s motion for reconsideration is of no moment.
Appellant’s complacent attitude and lack of preparedness [in pursuing] her case warrants its dismissal for
failure to prosecute. x x x [A] plaintiff is duty-bound to prosecute his action with utmost diligence and with
reasonable dispatch in order to obtain the relief prayed for and, at the same time, minimize the clogging
of court dockets. The expeditious disposition of cases is as much the duty of the plaintiff as the court’s.

The trial court therefore did not err in issuing the assailed Order since it was only performing its duty in
ensuring that litigations are prosecuted and resolved with dispatch. To allow appellant to postpone the case
until such time that she is ready to present her evidence would only cause unreasonable delay and violate
appellee’s right to speedy trial.

Accordingly, We sustain the trial court’s dismissal of appellant’s complaint for failure to prosecute.

WHEREFORE, the Appeal is DENIED. The Order dated October 12, 2005 of the Regional Trial Court, 6th
Judicial Region, Branch 6 of Kalibo, Aklan in Civil Case No. 7249 is AFFIRMED in toto. Costs on plaintiff-
appellant.

SO ORDERED.

Page 13 of 61
Petitioner moved to reconsider, but in its assailed June 20, 2012 Resolution, the CA held its ground. Hence,
the present Petition.

Issues

Petitioner submits that —

THE HONORABLE COURT OF APPEALS AND THE COURT A QUO COMMITTED SERIOUS ERROR AND GRAVE
ABUSE OF DISCRETION IN DISMISSING PETITIONER’S COMPLAINT FOR SUPPOSED FAILURE TO
PROSECUTE DESPITE THE FACT THAT PETITIONER THROUGH HER COUNSEL HAD ACTIVELY
PARTICIPATED IN THE PROCEEDINGS IN THE COURT A QUO AND DESPITE THE FACT THAT THERE WAS
A PENDING UNRESOLVED MOTION INVOLVING THE PRETRIAL ORDER.

BOTH THE COURT A QUO AND THE HONORABLE COURT OF APPEALS HAVE CLEARLY DEPARTED FROM
THE ACCEPTED AND USUAL COURSE OF JUDICIAL PROCEEDINGS AS TO CALL FOR AN EXERCISE OF THE
POWER OF SUPERVISION BY THIS HONORABLE COURT.

Petitioner’s Arguments

Praying that the assailed CA dispositions be set aside and that Civil Case No. 7249 be reinstated, petitioner
essentially maintains in her Petition and Reply that during the October 12, 2005 scheduled hearing, her
counsel and witness were present but they did not commence trial because they honestly believed that the
respondent’s pending motion for reconsideration of the trial court’s August 19, 2005 Order denying his
motion to correct/amend the July 6, 2005 Pre-Trial Order needed to be resolved first. Petitioner insists that
said motion for reconsideration had a direct bearing on the course of the trial, thus the necessity of resolving
it first. In any case, it was already agreed upon during pretrial and allowed by the trial court in its pretrial
order, that she still had one more opportunity to present her evidence on the scheduled hearing on
November 23, 2005. Thus, the RTC — instead of dismissing the case — should have allowed her to present
evidence on said date. Petitioner posits that agreements reached at the pretrial conference and embodied
in the pretrial order control the course of trial and should not be disturbed unless there would be manifest
injustice. Since she had one more scheduled hearing available to her, it cannot be concluded that she has
failed to prosecute her case. In addition, petitioner claims that she has a meritorious case since she
purchased the property from a seller who has a valid tax declaration in his name, while respondent himself
admitted during pretrial that his supposed predecessor-in-interest Avelina Casimero had no document or
tax declaration to support her title to the subject property. She points out that the trial court erred in not
giving the parties the opportunity to present their arguments on their pending motions for reconsideration,
and instead denied them outright on October 12, 2005; and that the power to dismiss the case for failure
to prosecute should be exercised with care, as it may forever bar a litigant from pursuing judicial relief,
and so the circumstances surrounding the case should be considered to the end that technicality shall not
take precedence over substantial justice.

Respondent’s Arguments

In his Comment, respondent maintains that the CA is correct in affirming the dismissal. He labels petitioner’s
insistence for the RTC to resolve first the pending motions for reconsideration before trial could commence,
and for her to be allowed to commence the presentation of evidence on November 23, 2005, as specious
and flimsy. He argues that these claims even constitute glaring proof of petitioner’s lack of interest in
prosecuting her case; and that if petitioner was keen on pursuing her case, then the substitute counsel
(Atty. Villa) should nonetheless have been prepared on October 12, 2005. He avers that petitioner has
exhibited a complacent attitude toward her case in violation of his right to speedy trial/dis-position of his
case. Finally, he contends that petitioner has been accorded due process and given ample opportunity to
present her case.

Page 14 of 61
Our Ruling

The Petition must be granted.

This Court has said that “[t]he fundamental test for non prosequitur is whether, under the circumstances,
the plaintiff is chargeable with want of due diligence in failing to proceed with reasonable promptitude.
There must be unwillingness on the part of the plaintiff to prosecute.”

To constitute failure to prosecute, his nonappearance must be equated with unwillingness to proceed with
the trial as when both plaintiff and counsel made no appearance at all, or with the assumption that plaintiff
has already lost interest in prosecuting his action, in the same way that should the ground for dismissal be
delay, this delay or failure to proceed must be for an unreasonable length of time beyond the reasonable
allowance which by judicial leniency a litigant is normally entitled.

Likewise —

While a court can dismiss a case on the ground of non prosequitur, the real test of such power is whether,
under the circumstances, plaintiff is chargeable with want of due diligence in failing to proceed with
reasonable promptitude. In the absence of a pattern or a scheme to delay the disposition of the case or a
wanton failure to observe the mandatory requirement of the rules on the part of the plaintiff, x x x courts
should decide to dispense rather than wield their authority to dismiss.

Finally, in Padua v. Hon. Ericta, the following pronouncement was made:

... (T)rial courts have ... the duty to dispose of controversies after trial on the merits whenever possible. It
is deemed an abuse of discretion for them, on their own motion, to enter a dismissal which is not warranted
by the circumstances of the case. (Municipality of Dingras v. Bonoan, 85 Phil. 458-459 [1950]) While it is
true that the dismissal of an action on grounds specified under Section 3, Rule 17 of the Revised Rules of
Court is addressed to their discretion (Flores v. Phil. Alien Property Administrator, 107 Phil. 778 [1960];
Montelibano v. Benares, 103 Phil. 110 [1958]; Adorable v. Bonifacio, 105 Phil. 1269 [1959]; Inter-Island
Gas Service, Inc. v. De la Gema, No. L-17631, October 19, 1966, 18 SCRA 390), such discretion must be
exercised soundly with a view to the circumstances surrounding each particular case. (Vemus-Sanciangco
v. Sanciangco, No. L-12619, April 28, 1962, 4 SCRA 1209) If facts obtain that serve as mitigating
circumstances for the delay, the same should be considered and dismissal denied or set aside. (Rudd v.
Rogerson, 15 ALR 2d 672; Cervi v. Greenwood, 147 Colo 190, 362 P. 2d 1050 [1961]) especially where the
suit appears to be meritorious and the plaintiff was not culpably negligent and no injury results to
defendant. (27 C.J.S. 235-36; 15 ALR 3rd 680) (Abinales v. Court of First Instance of Zamboanga City, Br.
I, 70 SCRA 590, 595) (Emphasis supplied)

With the above cited pronouncements as guides, the Court declares that the trial court erred in dismissing
Civil Case No. 7249, and the appellate court should not have affirmed such dismissal. Petitioner’s actuations
indicate that she was not at all unwilling to prosecute her case; nor can it be said that — as the trial court
puts it — she “refused” to present her evidence. Far from these, she was indeed more than eager to see
her case through. When she instituted Civil Case No. 7249 in 2004, petitioner was already eighty-one (81)
years of age.

Yet, despite her advanced age, the record indicates that petitioner attended the scheduled hearing of
October 12, 2005, together with her counsel and the first witness — only that the lawyer who attended
was a mere proxy, and not petitioner’s true counsel who previously conferred with the witness. Moreover,
in coming to court that day, petitioner and the substitute counsel were acting in the honest belief that trial
cannot proceed on account of pending incidents which the trial court has failed to resolve, that is: 1) her
motion for reconsideration of the trial court’s September 7, 2005 Order directing her to defray respondent’s
counsel’s transportation expenses and appearance fees; and 2) respondent’s motion for reconsideration of

Page 15 of 61
the trial court’s August 19, 2005 Order denying his motion to correct the Pre-Trial Order. Given the
circumstances petitioner was confronted with at the time, it is understandable that she should seek another
continuance. Given her advanced age, determination, the surrounding circumstances of the case, and the
fact that no prejudice is caused to respondent by further postponement of trial since petitioner — by prior
agreement during pretrial — is expected to conclude her case within the agreed three settings, the trial
court should have extended to petitioner the courtesy she deserved by granting a continuance.

There is merit in petitioner’s argument that since she was granted three scheduled hearings within which
to present her evidence, then she should have been afforded such opportunity. Thus, it was error for the
trial court to summarily dismiss the case after only the second hearing. Since petitioner and respondent
agreed to the three settings during pretrial, then petitioner should have been given three opportunities to
present her case, and not merely two. As far as the parties are concerned, an allocation of time for trial
has been made and agreed upon by and between them. So long as the parties act within schedule, then
none of them should complain. Besides, the delay or failure to prosecute contemplated under Section 3,
Rule 17 of the 1997 Rules must be for an “unreasonable length of time.” In petitioner’s case, the
continuance she sought was not for an unreasonable length of time. It was within the period expected by
and made known to the defendant and the trial court during pretrial. In fact, it was only until the next
scheduled setting on November 23, 2005, which was just over one month away. This may not be
characterized as delay, as such scheduled hearing was expected by respondent and could not have come
as a surprise to him. He was expected, as he agreed, to wait until the termination of these three scheduled
hearings. Within such period, he can do nothing but await his turn to present evidence, unless petitioner
terminates it earlier. Moreover, respondent could not have been prejudiced by the postponement being
sought. The trial court even ordered petitioner to reimburse his counsel’s expenses and attorney’s fees for
the scheduled September 7, 2005 hearing. Using this as precedent, it could have ordered the same with
respect to the October 12, 2005 setting.

In a number of previous cases, we have consistently warned that courts must ensure that litigations are
prosecuted and resolved with dispatch. We also held that although the grant or denial of postponements
rests entirely on the sound discretion of the judge, we cautioned that the exercise of that discretion must
be reasonably and wisely exercised. Postponements should not be allowed except on meritorious grounds,
in light of the attendant circumstances. Deferment of the proceedings may be allowed or tolerated
especially where the deferment would cause no substantial prejudice to any party. ‘The desideratum of a
speedy disposition of cases should not, if at all possible, result in the precipitate loss of a party’s right to
present evidence and either in the plaintiff’s being nonsuited or of the defendant’s being pronounced liable
under an ex parte judgment.’ While a court can dismiss a case on the ground of non prosequitur, the real
test for the exercise of such power is whether, under the circumstances, plaintiff is chargeable with want
of due diligence in failing to proceed with reasonable promptitude. (Emphasis supplied)

As the Court has ruled in Shimizu Philippines Contractors, Inc. v. Magsalin:

While it is discretionary on the trial court to dismiss cases, dismissals of actions should be made with care.
The repressive or restraining effect of the rule amounting to adjudication upon the merits may cut short a
case even before it is fully litigated; a ruling of dismissal may forever bar a litigant from pursuing judicial
relief under the same cause of action. Hence, sound discretion demands vigilance in duly recognizing the
circumstances surrounding the case to the end that technicality shall not prevail over substantial justice.

For its part, the trial court was remiss in its duty to act on the two pending motions before it. It appears
that it did not even grant the parties the opportunity to comment respectively on these motions, and instead
simply summarily denied them in open court during the October 12, 2005 scheduled hearing. The trial court
should be reminded that “the unreasonable delay of a judge in resolving a pending incident is a violation
of the norms of judicial conduct and constitutes a ground for administrative sanction against the defaulting
magistrate.”

Page 16 of 61
On respondent’s argument that he is entitled to a speedy disposition of his case by agreeing to grant
petitioner three scheduled hearings for the presentation of her evidence, respondent is expected to honor
such agreement and await his turn. So long as petitioner acts within the period allowed her for the
presentation of her evidence, respondent may not complain; any grumbling on his part would be flimsy,
arbitrary, and unfair. As far as petitioner is concerned, no right of respondent has been violated by her
actions; as elsewhere declared herein, petitioner is not guilty of delay and/or failure to prosecute her case
for an unreasonable length of time.

The foregoing disquisition is consistent with the trial court’s exercise of discretion in deciding how best to
administer justice, taking into consideration the rules of procedure, applicable jurisprudence, and the
circumstances of the case. In not assuming a similar stance, the trial court and the CA committed evident
error, thus resulting in misguided and unjust dispositions that unnecessarily took the parties all the way to
this Court.

WHEREFORE, the Petition is GRANTED. The assailed October 13, 2011 Decision and June 20, 2012
Resolution of the Court of Appeals in C.A.-G.R. CEB CV No. 01360 are REVERSED and SET ASIDE. Civil
Case No. 7249 is REINSTATED, and the Regional Trial Court, 6th Judicial Region, Kalibo, Aklan, Branch 6
is ORDERED to forthwith set the case for the reception of petitioner Alicia Y. Laurel’s evidence.

SO ORDERED.

Carpio (Chairperson), Brion, Mendoza and Leonen, JJ., concur.

Petition granted, judgment and resolution reversed and set aside.

Notes.—An action may be dismissed for failure to prosecute in any of the following instances: (1) if the
plaintiff fails to appear at the time of trial; or (2) if he fails to prosecute the action for an unreasonable
length of time; or (3) if he fails to comply with the Rules of Court or any order of the court. (Armed Forces
of the Philippines Retirement and Separation Benefits System vs. Republic, 694 SCRA 118 [2013])

The general rule is that dismissal of a case for failure to prosecute is to be regarded as an adjudication on
the merits and with prejudice to the filing of another action, and the only exception is when the order of
dismissal expressly contains a qualification that the dismissal is without prejudice. (Quintos vs. Nicolas, 726
SCRA 482 [2014])

——o0o——

Page 17 of 61
JOSE YULO AGRICULTURAL CORPORATION, petitioner, vs. SPOUSES PERLA CABAYLO DAVIS
and SCOTT DAVIS, respondents.

G.R. No. 197709. August 3, 2015

Remedial Law; Civil Procedure; Appeals; It has been repeatedly held that the jurisdiction of the Supreme
Court (SC) in cases brought before it from the Court of Appeals (CA) is limited to reviewing errors of law;
findings of fact of the appellate court are conclusive upon the SC, as it is not its function to analyze and
weigh the evidence all over again; Exceptions: (1) when the findings are grounded entirely on speculations,
surmises or conjectures; (2) when the inference made is manifestly mistaken, absurd or impossible; (3)
when there is grave abuse of discretion; (4) when the judgment is based on a misapprehension of facts;
(5) when the findings of fact are conflicting; (6) when in making its findings the CA went beyond the issues
of the case, or its findings are contrary to the admissions of both the appellant and the appellee; (7) when
the findings are contrary to those of the trial court; (8) when the findings are conclusions without citation
of specific evidence on which they are based; (9) when the facts set forth in the petition as well as in the
petitioner’s main and reply briefs are not disputed by the respondent; (10) when the findings of fact are
premised on the supposed absence of evidence and contradicted by the evidence on record; or (11) when
the CA manifestly overlooked certain relevant facts not disputed by the parties, which, if properly
considered, would justify a different conclusion.—A petition to review the decision of the CA is not a matter
of right but of sound judicial discretion. It has been repeatedly held that the jurisdiction of this Court in
cases brought before it from the CA is limited to reviewing errors of law; findings of fact of the appellate
court are conclusive upon this Court, as it is not its function to analyze and weigh the evidence all over
again. There are recognized exceptions to the rule, however, such as: (1) when the findings are grounded
entirely on speculations, surmises or conjectures; (2) when the inference made is manifestly mistaken,
absurd or impossible; (3) when there is grave abuse of discretion; (4) when the judgment is based on a
misapprehension of facts; (5) when the findings of fact are conflicting; (6) when in making its findings the
CA went beyond the issues of the case, or its findings are contrary to the admissions of both the appellant
and the appellee; (7) when the findings are contrary to those of the trial court; (8) when the findings are
conclusions without citation of specific evidence on which they are based; (9) when the facts set forth in
the petition as well as in the petitioner’s main and reply briefs are not disputed by the respondent; (10)
when the findings of fact are premised on the supposed absence of evidence and contradicted by the
evidence on record; or (11) when the CA manifestly overlooked certain relevant facts not disputed by the
parties, which, if properly considered, would justify a different conclusion.

Same; Same; Same; Since the award of damages was raised for the first time in petitioner’s motion for
reconsideration of the assailed Court of Appeals’ (CA’s) Decision and not in its appellant’s brief, the award
must stand.—As for damages, we can only reiterate what the CA has said. Since the award of damages
was raised for the first time in petitioner’s motion for reconsideration of the assailed CA’s Decision and not
in its appellant’s brief, the award must stand. The general rule is that issues raised for the first time on
appeal and not raised in the proceedings in the lower court are barred by estoppel. Points of law, theories,
issues, and arguments not brought to the attention of the trial court ought not to be considered by a
reviewing court, as these cannot be raised for the first time on appeal. To consider the alleged facts and
arguments raised belatedly would amount to trampling on the basic principles of fair play, justice, and due
process.

PETITION for review on certiorari of the decision and resolution of the Court of Appeals.

The facts are stated in the opinion of the Court.

John Mark M. Tamaño for petitioner.

Clodualdo Subaldo for respondents.

Page 18 of 61
DEL CASTILLO, J.:

The general rule is that where two certificates of title purport to include the same land, the earlier in date
prevails.

Assailed in this Petition for Review on Certiorari are dispositions of the Court of Appeals (CA), particularly:
1) its May 29, 2009 Decision in C.A.-G.R. CV No. 00155 which denied herein petitioner’s appeal and instead
affirmed the March 21, 2003 Decision of the Regional Trial Court (RTC) of Himamaylan City, Negros
Occidental, Branch 55 in Civil Case No. 648; and 2) its July 6, 2011 Resolution denying petitioner’s motion
for reconsideration.

Factual Antecedents

Lot 62-A in Binalbagan, Negros Occidental, consisting of 204,560 square meters, was registered as Transfer
Certificate of Title No. (TCT) T-1081 in the name of Jose L. Yulo (Yulo). It was subdivided in 1963 into lots
covered by TCT Nos. 36824 to 36852.

TCT 36852, covering Lot 29 with an area of 198,595 square meters, was further subdivided in 1969 into
several lots which were all registered in Yulo’s name. Among these lots are Lots 24, 25, 72 (TCT T-62499),
91 (TCT T-64737), 92 (TCT T-64738), and 96 (TCT T-64742). The titles to Lots 91, 92 and 96 were issued
in 1971.

Yulo sold Lots 91, 92 and 96 to spouses Ignacio Madrina, Jr. and Teresa Saldua (the Madrinas) in 1975.

Lots 24, 25, 91, 92 and 96 were subsequently mortgaged to Nation Bank, which eventually foreclosed and
became owner of the lots. At the time of the foreclosure and sale to Nation Bank, the said lots already
contained improvements in the form of a house and fence which were constructed by the previous
occupants, spouses Ernesto and Wendelina Gaba-yeron (the Gabayerons). In 1992, Nation Bank sold these
five lots with existing improvements to the herein respondents, spouses Scott and Perla Cabaylo Davis.
Consequently, TCT Nos. T--163622, T-163623 and T-163624 over Lots 91, 92 and 96, respectively, were
issued in respondents’ favor on December 11, 1992.

On the other hand, TCT T-62499 covering Lot 72 — consisting of 183,920 square meters — was cancelled
and TCT T-113437 was issued in 1979 in the name of herein petitioner Jose L. Yulo Agricultural Corporation.

In 1982, Lot 72 was further subdivided into several lots and registered in petitioner’s name. Among these
lots are Lots 3 (TCT T-126644), 4 (TCT T--126645), and 5 (TCT T-126646). In 1994, Lot 5 was sold to
spouses Jose and Pet-ronila Trajera (the Trajeras), and thus TCT T-167841 over said lot was issued in their
favor.

In 1999, respondents received separate demand letters from petitioner and the Trajeras requiring them to
remove a portion of the Gabayeron home and fence which they claim encroached upon their respective
properties (petitioner’s Lots 3 and 4, and the Trajeras’ Lot 5) — to the extent of 60.89 square meters with
respect to the Trajeras’ property, and 100 square meters for petitioner’s Lot 3 and 102 square meters for
its Lot 4. Respondents also received a letter from the Local Building Official of Binalbagan, Negros
Occidental threatening them with sanction under the National Building Code unless they remove the
encroaching improvements which allegedly extended beyond the boundary lines of their property.

A relocation survey was conducted on respondents’ land, which indicated that their concrete fence
encroached upon the adjacent lands to the extent of 16 square meters.

Page 19 of 61
Ruling of the Regional Trial Court

On March 10, 1999, respondents filed a case for quieting of title and damages against the Trajeras, Yulo,
Nation Bank and the Binalbagan Local Building Official, Engineer Patrick Mabag (Mabag) before the RTC of
Himamaylan City, Negros Occidental. The case was docketed as Civil Case No. 648 and assigned to Branch
55.

After trial, the RTC rendered a Decision on March 21, 2003 as follows:

The issues confronting the court are: (1) whether the house and concrete fence of the plaintiffs have
occupied portions of Lot No. 3 x x x; and (2) whether the house and concrete fence x x x have occupied
portion[s] of Lot Nos. 4 and 5 x x x. With respect to the first issue, the answer is in the negative while in
the second issue the answer is in the affirmative.

As noted by the court, Lot Nos. 24, 25, 91, 92 and 96 x x x were already existing when Lot No. 72 which
is a portion of Lot No. 29, was subdivided sometime in 1982 and the corresponding certificates of title for
Lots 3, 4 and 5 x x x were issued in 1983. The subdivision made in 1982 did not only cover the whole area
of Lot No. 72. The testimony of Petronilo Ayson of the Ayson Surveying Office herein quoted, to wit:

Q. And what was included in Lot 3?

A. The whole of Lot 92 of the spouses Davis contains an area of 100 square meters. So, 100 square meters
is now the area included in Lot 3 block 12 the area of lot 92.

Q. And how about lots 91 and 96 are they included in the titles of lots 5 and 4?

A. So, lots 91 and 96 are x x x included in the title of lot 4 block 12 and lot 5 block 12.

is clear that the whole area of Lot No. 92 x x x consisting of an area of one hundred (100) square meters
x x x in the name of Perla Cabaylo Davis x x x is included or overlapped by Lot No. 3 x x x owned by Jose
L. Yulo Agricultural Corporation while Lot No. 91 x x x and Lot No. 96 x x x are all included or overlapped
by Lot No. 4 and Lot No. 5 x x x respectively registered in the name of Jose L. Yulo Agricultural Corporation
and Spouses Jose and Petronila Trajera. Considering that [Lot] Nos. 91, 92 and 96 were all registered and
the corresponding certificates of title were issued ahead of Lot Nos. 3, 4 and 5 x x x, the overlapped
portions consisting of ninety-five (95) square meters for Lot No. 91, one hundred (100) square meters for
Lot No. 92 and forty-six (46) square meters of Lot No. 96 are all owned by Perla Cabaylo Davis married to
Scott Davis. In this regard, it is relevant to cite the ruling of the High Court in the case of Verdant Acres,
Inc. v. Hernandez, 157 SCRA 495, where it held, thus:

“Lands described and embraced in the certificate of title asserted by both parties which overlapped each
other, on the question of who, as between the parties, is entitled to the overlapped portion, the earlier
registered title is the owner.”

Indubitably, the wall or concrete wall of the spouses Davis’ house has occupied sixteen (16) square meters
of Lot Nos. 4 and 5 x x x.

However, since the said house was already existing when the spouses Perla x x x and Scott Davis purchased
the lots where said house stands, from Nation Bank x x x, the said spouses cannot be considered a builder
in bad faith. The existence of the house before the spouses Davis bought the lots is admitted by defendant
Jose Trajera when he testified under cross-examination in court on June 26, 2000 x x x.

xxxx

Page 20 of 61
The Spouses x x x Davis deserve to be accorded with the benefits granted to a builder in good faith.

As the spouses x x x Davis are not builders in bad faith, the rights of the plaintiffs and the defendants are
governed by the provision of Article 448 of the Civil Code x x x:

xxxx

Under this provision, the choice or option belongs to the owner of the land, in this case Jose L. Yulo
Agricultural Corporation and the Spouses x x x Trajera. However, the choice or option granted to them is
not absolute. Since it is impractical to allow them to own the concrete wall of the plaintiffs’ house as there
is a possibility of an invasion of the plaintiffs’ right to privacy, the workable solution is for the defendants
Jose L. Yulo Agricultural Corporation and the Spouses x x x Trajera to select the second alternative, namely,
to sell to the Spouses x x x Davis that part of their land on which was constructed a portion of the plaintiffs’
house. (Leonor Grana and Julieta Torralba v. Court of Appeals, et al., No. L-12486, August 31, 1960).

The boundary disputes arose when Lot No. 72, which is part of Lot No. 29, was subdivided into seventy-
six (76) sublots as a result of which Lot No. 3 overlapped the whole area of Lot No. 92 while Lot Nos. 4
and 5 overlapped the whole area of Lot Nos. 91 and 96.

Moral damages may be awarded by reason of the sufferings, physical or mental, sustained by the claiming
party. However, the grant of such damages is not subject to the whims and caprices of judges or courts.
The court’s discretion in granting or refusing it is governed by reason and justice. In order that an individual
may be made liable, the law requires that his act be wrongful. The adverse result of an action does not per
se make it wrongful as to justify an assessment of damages against the actor. (Rubio v. Court of Appeals,
141 SCRA 488)

In this case, there is no basis to justify the award for moral damages. As owner, Jose L. Yulo Agricultural
Corporation has the right to have Lot No. 72 subdivided into sublots. The overlapping of Lot No. 3 over Lot
No. 92 was caused by an error committed by the Geodetic Engineer who conducted the [survey] of said
lot. In a similar situation, the overlapping of Lot Nos. 4 and 5 over Lot Nos. 91 and 96 was due to the
subdivision of Lot No. 72 into sublots made by a Geodetic Engineer. In other words, the wrongful act was
not committed by the management of the corporation in order for it to be held liable for moral damages.
Settled is the rule that moral damages cannot be awarded in the absence of a wrongful act or omission or
of fraud or bad faith. (Siasat v. Intermediate Appellate Court, 139 SCRA 238)

As Local Building Official of the Municipality of Binalbagan, Engineer Patrick Mabag, is clothed with authority
to enforce the provision of the National Building Code. x x x However, the fault cannot be ascribed to the
Spouses x x x Davis as the house was already existing when they bought it from the former owner and
they did not introduce any improvement on the said house. This fact was admitted by the defendant Jose
Trajera when he testified in court on June 26, 2000. (TSN, p. 22)

Exemplary or corrective damages are imposed by way of example or correction for the public good. This is
in addition to moral, temperate, liquidated or compensatory damages. Public policy requires the award of
exemplary damages in order to suppress wanton acts committed against the aggrieved party. However, in
the absence of moral, temperate, liquidated, or compensatory damages, as in this case, no exemplary
damages can be granted x x x.

However, considering that the Spouses x x x Davis were compelled to litigate in order to protect their
interest, they incurred expenses in prosecuting their case. Prudence demands that they should be awarded
litigation and attorney’s fees.

Page 21 of 61
WHEREFORE, based on the foregoing premises and consideration, the court hereby renders a decision in
favor of the plaintiffs and against the defendants confirming plaintiffs’ title to Lot No. 92, Binalbagan
Cadastre, overlapped by Lot No. 3, Block 12 and to Lot Nos. 91 and 96, all of Binalbagan Cadastre,
overlapped by [Lot] Nos. 4 and 5 respectively and hereby:

1) Orders the appropriation of the sixteen (16) square meters land owned by defendants Jose L. Yulo
Agricultural Corporation and Spouses Jose and Petronila Trajera occupied by the house which was already
existing when the plaintiffs bought [Lot] Nos. 91 and 96 upon payment of the value of the portion of said
lots based on the prevailing market value;

2) Orders the defendant Jose L. Yulo Agricultural Corporation to pay the plaintiffs the amount of
P88,818.40 and P75,000.00 representing [the price of] their plane ticket[s] as actual damages, P50,000.00
Attorney’s Fees and P1,500.00 per court appearance as appearance fees deducting therefrom the value of
the portion of Lot No. 4 occupied by the house of the plaintiffs;

3) Orders the plaintiffs to observe the provision on easement of light and view in order to protect the
privacy of the defendant Spouses Jose and Petronila Trajera.

SO ORDERED.

Ruling of the Court of Appeals

Petitioner and the Trajeras interposed an appeal before the CA. Docketed as C.A.-G.R. CV No. 00155, the
appellants therein essentially argued that since Lots 91, 92 and 96 are nonexistent as per records of the
Land Registration Authority (LRA), it was erroneous for the RTC to have ruled in favor of the respondents.

On May 29, 2009, the CA issued its Decision affirming the RTC’s March 21, 2003 judgment.

Anent the first error, defendants-appellants claim that contrary to what their titles purport to show, Lots
91, 92 and 96 allegedly owned by the Davis spouses are not valid subdivisions of Lot 29, Psd-69136 covered
by TCT T-36852. In support of their allegation, they presented a letter from the LRA signed by one Renato
R. Obra as Chief of the Plan Examination Section, Subdivision & Consolidation Division which essentially
explained that Lots 91, 92, and 96 could not have resulted from the subdivision survey of Lot 29 pursuant
to plan (LRC) Psd-118336 since only 74 lots resulted therefrom. In addition, they introduced the LRA-
certified copy of the subdivision survey/plan Psd-118336 wherein Lots 91, 92 and 96 do not appear as
sublots therein.

xxxx

In an action for quieting of title, the issue to be resolved is who, between the parties, has a better right to
the challenged property. After an exhaustive examination of the evidence and the records in this case, We
rule in favor of the Davis spouses.

A perusal of the boundaries of the disputed lots discloses that these lots supposedly adjoin each other, all
being portions of Lot 29. For the Davis spouses, Lot 92 is east of Lot 91 while Lot 96 is south of Lot 91. On
the northern side of Lots 91 and 92, they are adjoined by Lots 24 and 25 also registered in the name of
the Davis spouses. Adjacent to Lots 96 and 92 on the southern side is Lot 72 which is from where Lots 3,
4 and 5 of the defendants-appellants are derived. Conversely, the titles of defendants-appellants show that
Lot 5 is west of Lot 4 while Lot 3 is adjacent to Lot 4 on the east. But on the north, they are all described
to be bounded by Lot 24 only, resulting in the anomaly wherein Lots 91, 92 and 96 as well as Lot 25 appear
to be completely missing. Faced with these facts, it becomes clear that what is involved herein is a case
of overlapping of titles over the same property. It must be noted, however, that the lots in dispute in this
case involve only Lots 91, 92 and 96 of the Davis spouses as against Lots 3, 4, and 5 of the defendants-

Page 22 of 61
appellants. Consequently, in view of the overlapping, it is imperative to determine which of the parties’
titles [were issued] earlier.

From a cursory glance at the titles (T-163622 to 163624) of the Davis spouses over Lots 91, 92 and 96, it
is apparent that their issuance was recent, having been issued only on December 11, 1992. However,
Teody Teovisio (Record Officer of the Register of Deeds of Negros Occidental) and surveyor Ariel Peñaranda
testified that Lots 91, 92 and 96 covered by T-163622 to 163624 have the same technical description as
Lots 91, 92 and 96 covered by TCT T--64737, T-64738 and T-64742 and registered in the name of Jose L.
Yulo. In other words, the titles of the Davis spouses are derived from Jose L. Yulo who, as early as October
18, 1971, was issued the transfer certificates of title for Lots 91, 92, and 96. On the other hand, the titles
(T-126644 to 126646) of the defendants-appellants over Lots 3, 4 and 5 are derived from TCT T-113427
[sic] covering Lot 72 which mother title was issued only on September 3, 1979.

From the foregoing, it is apparent that at the time the predecessor-in--interest of defendants-appellants
were issued its titles in 1979, Lots 91, 92, and 96 now owned by the Davis spouses were already in
existence. As testified to by surveyor Petronilo Ayson, it was Lots 91, 92 and 96 that were overlapped by
Lots 3, 4 and 5 and not the [other way around] since the defendants-appellants’ lots resulted only after
the subdivision survey of Lot 72 in 1982. In MWSS v. Court of Appeals, the Honorable Supreme Court
pronounced:

“Where two certificates (of title) purport to include the same land, the earlier in date prevails… In successive
registrations, where more than one certificate is issued in respect of a particular estate or interest in land,
the person claiming under the prior certificate is entitled to the estate or interest; and the person is deemed
to hold under the prior certificate who is the holder of, or whose claim is derived directly or indirectly from
the person who was the holder of the earliest certificate issued in respect thereof.”

Hence, in priority of issuance, the title of the Davis spouses must be upheld over that of the defendants-
appellants, but only with respect to the overlapped portions.

But defendants-appellants insist that Lots 91, 92 and 96 are inexistent lots as can easily be seen from the
certified copy of subdivision plan Psd-118336 that they secured from the LRA. However, as between the
Torrens titles of the Davis spouses confirming their ownership of Lots 91, 92 and 96 and the subdivision
plan of defendants-appellants disproving such fact, the Torrens titles must inevitably prevail over the survey
plan as the more superior proof of ownership.

It bears stressing that defendants-appellants anchor their appeal on the alleged nonexistence of Lots 91,
92 and 96 which are now registered in the name of the plaintiffs-appellees. But to sustain such allegations
would necessarily entail the cancellation of the titles of the Davis spouses, which is equivalent to an indirect
attack on such titles. Well-settled is the rule that a certificate of title cannot be altered, modified, or
cancelled except in a direct proceeding in accordance with law. Hence, on this score, defendants-appellants’
claim must likewise fail.

Lastly, defendants-appellants question the RTC’s order requiring them to “give up” the sixteen (16) square
meters that are allegedly included in Lots 91, 92 (and) 96. But a thorough reading of the RTC Decision
implies no such ruling. Perhaps the defendants-appellants misunderstood the full import of the RTC’s
decision. What the court a quo concluded — which judgment We wholly sustain — was that plaintiffs-
appellees are considered builders in good faith who are duly entitled to the benefits flowing therefrom
pursuant to Article 448 of the New Civil Code.

It must be remembered that the Davis spouses purchased their titled lots from Nation Bank [which]
foreclosed the same from the Gabayeron spouses. Included in such purchase was the Gabayerons’ house
and fence now owned by the Davises and challenged by the defendants-appellants as encroaching on their
lots. Since the Gabayeron spouses constructed the said house and fence on land which they believed was

Page 23 of 61
theirs, they are considered builders in good faith which benefit likewise extends in favor of the Davis
spouses who purchased the property unaware of any flaw in the same. Article 448 has been applied to
improvements or portions of improvements built by mistaken belief on land belonging to the adjoining
owner. We quote with approval the ratiocination of the court a quo on this matter:

xxxx

It must be noted that good faith is always presumed, and upon him who alleges bad faith on the part of a
possessor rests the burden of proof. This being the case, the rights of plaintiff-appellees as builders in good
faith cannot be denied.

WHEREFORE, in view of the foregoing premises, the appeal is hereby DENIED. The assailed Decision of
the Regional Trial Court, Branch 55 of Himamaylan City, Negros Occidental in Civil Case No. 648 is
AFFIRMED.

SO ORDERED.

Petitioner filed its Motion for Reconsideration, which the CA denied in its assailed July 6, 2011 Resolution.
The appellate court held that petitioner raised the same issues which were passed upon in the main
decision. As for the award of damages, it held that petitioner did not raise the award as an issue in its
appeal, and questioned the same for the first time only in its motion for reconsideration; thus, the award
must stand.

Hence, the present Petition.

Issues

Petitioner raises the following issues:

THE HONORABLE COURT OF APPEALS ERRED IN FINDING THAT THE RESPONDENTS HAVE BETTER
RIGHTS THAN THE [PETITIONER] IN AS FAR AS LOTS 91, 92 AND 96 ARE CONCERNED AS [IT] DERIVED
[OWNERSHIP OVER SAID LOTS] FROM JOSE L. YULO WHO AS EARLY AS OCTOBER 18, 1971 WAS ISSUED
THE TRANSFER CERTIFICATES OF TITLE FOR LOTS 91, 92 AND 96.

II

THE HONORABLE COURT OF APPEALS ERRED IN AFFIRMING THE AWARD OF DAMAGES IN THE FORM OF
COST OF PLANE [FARE] AND ATTORNEY’S FEES.

Petitioner’s Arguments

Petitioner argues in its Petition and Reply that Lots 91, 92 and 96 are non-existent lots and thus the titles
thereto are spurious. It points out that Lot 29 (then covered by TCT 36852 and from which Lots 91, 92 and
96 were derived) was subdivided in 1969 into 74 lots only (or Lots 1 to 74 only). Petitioner insists as
irrelevant the earlier registration of Lots 91, 92 and 96 in 1971, as compared to the registration of Lots 3,
4 and 5 in 1979, precisely since Lots 91, 92 and 96 are nonexistent lots, and thus the titles thereto are void
ab initio. And, for the same reason that the titles to Lots 91, 92 and 96 are spurious, there could be no
overlapping of titles. Petitioner also argues that respondents were not buyers in good faith as they did not
cause the survey of the properties at the time they bought the same; that had they inspected the properties
and gone beyond the titles thereto prior to the sale, they would have discovered that the house and fence

Page 24 of 61
encroached upon adjacent lots. Finally, petitioner contends that the grant of damages and attorney’s fees
was erroneous because of the absence of a cause of action against it, and because respondents did not
suffer any injury.

Thus, petitioner prays that Lots 91, 92 and 96 be declared nonexistent; that respondents be ordered to
return the land which they occupy; that the award of damages and attorney’s fees be deleted; that
respondents be ordered to remove the improvements which encroached upon its land; and that its
counterclaim be granted.

Respondents’ Arguments

Respondents, on the other hand, argue in their Comment that the Petition requires a reevaluation of the
evidence, which is proscribed by Rule 45 of the 1997 Rules of Civil Procedure; that in raising the issue of
good faith, the petitioner questions the findings of fact of the CA which, as far as this Court is concerned,
are final; and that given the unanimous conclusion arrived at by the trial and appellate courts, there is no
reason to review their findings of fact and law.

Our Ruling

The Court denies the Petition.

A petition to review the decision of the CA is not a matter of right but of sound judicial discretion. It has
been repeatedly held that the jurisdiction of this Court in cases brought before it from the CA is limited to
reviewing errors of law; findings of fact of the appellate court are conclusive upon this Court, as it is not
its function to analyze and weigh the evidence all over again. There are recognized exceptions to the rule,
however, such as: (1) when the findings are grounded entirely on speculations, surmises or conjectures;
(2) when the inference made is manifestly mistaken, absurd or impossible; (3) when there is grave abuse
of discretion; (4) when the judgment is based on a misapprehension of facts; (5) when the findings of fact
are conflicting; (6) when in making its findings the CA went beyond the issues of the case, or its findings
are contrary to the admissions of both the appellant and the appellee; (7) when the findings are contrary
to those of the trial court; (8) when the findings are conclusions without citation of specific evidence on
which they are based; (9) when the facts set forth in the petition as well as in the petitioner’s main and
reply briefs are not disputed by the respondent; (10) when the findings of fact are premised on the
supposed absence of evidence and contradicted by the evidence on record; or (11) when the CA manifestly
overlooked certain relevant facts not disputed by the parties, which, if properly considered, would justify a
different conclusion.

However, petitioner has not shown that this case falls under any of the above exceptions. On the contrary,
We are in agreement with the appellate court’s pronouncement that respondents’ title must be upheld over
that of the petitioner’s as it is derived from titles that were issued earlier — in 1971, as opposed to 1979
with respect to petitioner’s and the Trajeras’ properties. The CA’s citation of Manila Waterworks and
Sewerage System v. Court of Appeals23 is correct. The pronouncement in said case was reiterated in
Spouses Carpo v. Ayala Land, Inc., thus:

x x x (T)his controversy has been reduced to the sole substantive issue of which between the two titles,
purporting to cover the same property, deserves priority. This is hardly a novel issue. As petitioners
themselves are aware, in Realty, it was held that:

In this jurisdiction, it is settled that ‘(t)he general rule is that in the case of two certificates of title, purporting
to include the same land, the earlier in date prevails x x x. In successive registrations, where more than
one certificate is issued in respect of a particular estate or interest in land, the person claiming under the
prior certificate is entitled to the estate or interest; and that person is deemed to hold under the prior

Page 25 of 61
certificate who is the holder of, or whose claim is derived directly or indirectly from the person who was
the holder of the earliest certificate issued in respect thereof x x x.’

In Degollacion v. Register of Deeds of Cavite, we held that ‘[w]here two certificates of title purport to
include the same land, whether wholly or partly, the better approach is to trace the original certificates
from which the certificates of title were derived.’

Tracing the origins of the titles involved will disclose that they all came from a single individual — Yulo —
who caused his landholding (Lot 62-A) to be subdivided into what are now the contested lots. Indeed, what
he did each time — his business model, so to speak — was to subdivide his large landholding into several
small plots and one large plot. The small plots he sold, while he kept for future use the single large parcel
— to be subdivided once more if he desired to. Thus, in 1963, Yulo subdivided Lot 62-A into several small
plots and one large plot (Lot 29). In 1969, he once more subdivided Lot 29 into several plots and one large
plot (Lot 72). At this point, the titles from which respondents’ titles were derived were issued. Lot 72, on
the other hand, was titled in the name of petitioner Jose L. Yulo Agricultural Corporation — which, judging
from the nomenclature alone, can safely be said belonged to Yulo, or is connected to him. Then again, in
1982, Lot 72 was further subdivided into several lots and registered in petitioner’s name. At this point, the
Trajeras purchased one of the subdivided lots.

Given the foregoing, Yulo — and petitioner for that matter, which is a corporation that belonged to Yulo
himself or is connected to him and which became his successor-in-interest — knew everything as far as his
land is concerned, or is charged with knowledge at least. Yulo was the sole owner of the properties involved,
and he and his outfit were the sellers of the properties which eventually were acquired by the respondents
and the Trajeras. They cannot claim to be ignorant of everything that went on with the properties they
owned. They cannot be allowed to benefit from their own mistakes at the expense of the respondents.
Indeed, if there is anybody who must be considered in bad faith, it is they; they should have known that
there was an overlapping of titles in their very own lands. And if it is true that Lots 91, 92 and 96 are
nonexistent lots, Yulo and petitioner would have known it; yet Yulo sold them in 1975 to the Madrinas, and
eventually found their way to respondents. Indeed, as testified to by the Records Officer of the Register of
Deeds of Negros Occidental, Lots 91, 92 and 96 covered by T--163622 to 163624 in the name of
respondents have the same technical description as Lots 91, 92 and 96 covered by TCT T-64737, T-64738
and T-64742 and registered in the name of Yulo. In other words, there is no doubt that respondents’ titles
were derived from Yulo’s; this fact is not even assailed or denied by petitioner in any of its pleadings.

As for damages, we can only reiterate what the CA has said. Since the award of damages was raised for
the first time in petitioner’s motion for reconsideration of the assailed CA’s Decision and not in its appellant’s
brief, the award must stand.

The general rule is that issues raised for the first time on appeal and not raised in the proceedings in the
lower court are barred by estoppel. Points of law, theories, issues, and arguments not brought to the
attention of the trial court ought not to be considered by a reviewing court, as these cannot be raised for
the first time on appeal. To consider the alleged facts and arguments raised belatedly would amount to
trampling on the basic principles of fair play, justice, and due process.

WHEREFORE, the Petition is DENIED. The assailed May 29, 2009 Decision and July 6, 2011 Resolution of
the Court of Appeals in C.A.-G.R. CV No. 00155 are AFFIRMED.

SO ORDERED.

Carpio (Chairperson), Brion, Mendoza and Leonen, JJ., concur.

Petition denied, judgment and resolution affirmed.

Page 26 of 61
Notes.—It is an established rule that the jurisdiction of the Supreme Court (SC) in cases brought before it
from the Court of Appeals (CA) via Rule 45 of the 1997 Rules of Civil Procedure is generally limited to
reviewing errors of law; There are, however, recognized exceptions to this rule such as when there is a
divergence between the findings of facts of the National Labor Relations Commission (NLRC) and that of
the Court of Appeals (CA). (Castillo vs. Prudentialife Plans, Inc., 720 SCRA 129 [2014])

As a general rule, in petitions for review under Rule 45 of the Rules of Court, the jurisdiction of this Court
in cases brought before it from the Court of Appeals (CA) is limited to the review and revision of errors of
law allegedly committed by the appellate court. (Tong vs. Go Tiat Kun, 722 SCRA 623 [2014])

——o0o——

Page 27 of 61
 COMMISSIONER OF INTERNAL REVENUE, petitioner, vs. LA TONDEÑA DISTILLERS, INC.,
(LTDI [now GINEBRA SAN MIGUEL]), respondent.

G.R. No. 175188. July 15, 2015.

Remedial Law; Civil Procedure; Judgments; Stare Decisis; The doctrine of stare decisis dictates that when
a court has reached a conclusion in one case, it should be applied to those that follow if the facts are
substantially the same, even though the parties may be different.—Following the doctrine of stare decisis,
which dictates that when a court has reached a conclusion in one case, it should be applied to those that
follow if the facts are substantially the same, even though the parties may be different, we find that
respondent is not liable for DST as the transfer of real properties from the absorbed corporations to
respondent was pursuant to a merger. And having complied with the provisions of Sections 204(C) and 229
of the NIRC, we agree with the CTA that respondent is entitled to a refund of the DST it erroneously paid
on various dates between October 31, 2001 to November 15, 2001 in the total amount of P14,140,980.00.

Taxation; Tax laws must be construed strictly against the State and liberally in favor of the taxpayer.—In
closing, we must stress that taxes must not be imposed beyond what the law expressly and clearly declares
as tax laws must be construed strictly against the State and liberally in favor of the taxpayer.

PETITION for review on certiorari of the decision and resolution of the Court of Tax Appeals.

The facts are stated in the opinion of the Court.

Office of the Solicitor General for petitioner.

Salvador, Guevarra & Associates for respondent.

DEL CASTILLO,** J.:

The transfer of real property to a surviving corporation pursuant to a merger is not subject to Documentary
Stamp Tax (DST).

This Petition for Review on Certiorari under Rule 45 of the Rules of Court assails the September 26, 2006
Decision and the October 31, 2006 Resolution of the Court of Tax Appeals (CTA) in C.T.A. E.B. No. 178.

Factual Antecedents

On September 17, 2001, respondent La Tondeña Distillers, Inc. entered into a Plan of Merger with
Sugarland Beverage Corporation (SBC), SMC Juice, Inc. (SMCJI), and Metro Bottled Water Corporation
(MBWC). As a result of the merger, the assets and liabilities of the absorbed corporations were transferred
to respondent, the surviving corporation. Respondent later changed its corporate name to Ginebra San
Miguel, Inc. (GSMI).

On September 26, 2001, respondent requested for a confirmation of the tax-free nature of the said merger
from the Bureau of Internal Revenue (BIR).

On November 5, 2001, the BIR issued a ruling stating that pursuant to Section 40(C)(2) and (6)(b) of the
1997 National Internal Revenue Code (NIRC), no gain or loss shall be recognized by the absorbed
corporations as transferors of all assets and liabilities. However, the transfer of assets, such as real
properties, shall be subject to DST imposed under Section 196 of the NIRC.

Consequently, on various dates from October 31, 2001 to November 15, 2001, respondent paid to the BIR
the following DST, to wit:

Page 28 of 61
On October 14, 2003, claiming that it is exempt from paying DST, respondent filed with petitioner
Commissioner of Internal Revenue (CIR) an administrative claim for tax refund or tax credit in the amount
of P14,140,980.00, representing the DST it allegedly erroneously paid on the occasion of the merger.

On the same day, respondent filed with the CTA a Petition for Review, docketed as C.T.A. Case No. 6796
and raffled to the Second (2nd) Division of the CTA.

Ruling of the Court of Tax Appeals Division

On January 6, 2006, the 2nd Division of the CTA rendered a Decision finding respondent entitled to its
claim for tax refund or tax credit in the amount of P14,140,980.00, representing its erroneously paid DST
for the taxable year 2001. The 2nd Division of the CTA ruled that Section 196 of the NIRC does not apply
because there is no purchaser or buyer in the case of a merger. Citing Section 80 of the Corporation Code
of the Philippines, the 2nd Division of the CTA explained that the assets of the absorbed corporations were
not bought or purchased by respondent but were transferred to and vested in respondent as an inherent
legal consequence of the merger, without any further act or deed. It also noted that any doubts as to the
tax-free nature of the merger had been already removed by the subsequent enactment of Republic Act No.
(RA) 9243, which amended Section 199 of the NIRC by specifically exempting from the payment of DST
the transfer of property pursuant to a merger.

Aggrieved, petitioner moved for reconsideration but the 2nd Division of the CTA denied the same in a
Resolution dated April 4, 2006.

Unfazed, petitioner elevated the matter to the CTA En Banc via a Petition for Review, docketed as C.T.A.
E.B. No. 178.

Ruling of the Court of Tax Appeals En Banc

On September 26, 2006, the CTA En Banc rendered the assailed Decision, finding no reversible error on
the part of the 2nd Division of the CTA in granting respondent’s claim for tax refund or tax credit. The CTA
En Banc opined that Section 196 of the NIRC does not apply to a merger as the properties subject of a
merger are not sold, but are merely absorbed by the surviving corporation. In other words, the properties
are transferred by operation of law, without any further act or deed.

Petitioner sought reconsideration of the assailed Decision.

On October 31, 2006, the CTA En Banc issued the assailed Resolution, denying petitioner’s motion for
reconsideration.

Issue

Hence, petitioner filed the instant Petition for Review on Certiorari raising the sole issue of whether the
CTA En Banc erred in ruling that respondent is exempt from payment of DST.

Petitioner’s Arguments

Petitioner posits that DST is levied on the exercise of the privilege to convey real property regardless of the
manner of conveyance. Thus, it is imposed on all conveyances of realty, including realty transfer during a
corporate merger. As to the subsequent enactment of RA 9243, petitioner claims that respondent cannot
benefit from it as laws apply prospectively.

Page 29 of 61
Respondent’s Arguments

Respondent, on the other hand, contends that DST is imposed only on conveyances, deeds, instruments,
or writing, where realty sold shall be conveyed to a purchaser or buyer. In this case, there is no purchaser
or buyer as a merger is neither a sale nor a liquidation of corporate property but a consolidation of
properties, powers, and facilities of the constituent companies.

Our Ruling

The Petition must fail.

In Commissioner of Internal Revenue v. Pilipinas Shell Petroleum Corporation,38 the Supreme Court already
ruled that Section 196 of the NIRC does not include the transfer of real property from one corporation to
another pursuant to a merger. It explained that:

[W]e do not find merit in petitioner’s contention that Section 196 covers all transfers and conveyances of
real property for a valuable consideration. A perusal of the subject provision would clearly show it pertains
only to sale transactions where real property is conveyed to a purchaser for a consideration. The phrase
“granted, assigned, transferred or otherwise conveyed” is qualified by the word “sold” which means that
documentary stamp tax under Section 196 is imposed on the transfer of realty by way of sale and does not
apply to all conveyances of real property. Indeed, as correctly noted by the respondent, the fact that
Section 196 refers to words “sold,” “purchaser” and “consideration” undoubtedly leads to the conclusion
that only sales of real property are contemplated therein.

Thus, petitioner obviously erred when it relied on the phrase “granted, assigned, transferred or otherwise
conveyed” in claiming that all conveyances of real property regardless of the manner of transfer are subject
to documentary stamp tax under Section 196. It is not proper to construe the meaning of a statute on the
basis of one part. x x x

xxxx

It should be emphasized that in the instant case, the transfer of SPPC’s real property to respondent was
pursuant to their approved plan of merger. In a merger of two existing corporations, one of the corporations
survives and continues the business, while the other is dissolved, and all its rights, properties, and liabilities
are acquired by the surviving corporation. Although there is a dissolution of the absorbed or merged
corporations, there is no winding up of their affairs or liquidation of their assets because the surviving
corporation automatically acquires all their rights, privileges, and powers, as well as their liabilities. Here,
SPPC ceased to have any legal personality and respondent PSPC stepped into everything that was SPPC’s,
pursuant to the law and the terms of their Plan of Merger.

Pertinently, a merger of two corporations produces the following effects, among others:

Sec. 80. Effects of merger or consolidation.—x x x

xxxx

4. The surviving or the consolidated corporation shall thereupon and thereafter possess all the rights,
privileges, immunities and franchises of each of the constituent corporations; and all property, real or
personal, and all receivables due on whatever account, including subscriptions to shares and other choses
in action, and all and every other interest of, or belonging to, or due to each constituent corporations, shall
be taken and deemed to be transferred to and vested in such surviving or consolidated corporation without
further act or deed.

Page 30 of 61
In a merger, the real properties are not deemed “sold” to the surviving corporation and the latter could not
be considered as “purchaser” of realty since the real properties subject of the merger were merely absorbed
by the surviving corporation by operation of law and these properties are deemed automatically transferred
to and vested in the surviving corporation without further act or deed. Therefore, the transfer of real
properties to the surviving corporation in pursuance of a merger is not subject to documentary stamp tax.
As stated at the outset, documentary stamp tax is imposed only on all conveyances, deeds, instruments or
writing where realty sold shall be conveyed to a purchaser or purchasers. The transfer of SPPC’s real
property to respondent was neither a sale nor was it a conveyance of real property for a consideration
contracted to be paid as contemplated under Section 196 of the Tax Code. Hence, Section 196 of the Tax
Code is inapplicable and respondent is not liable for documentary stamp tax. (Emphasis in the original)

Following the doctrine of stare decisis, which dictates that when a court has reached a conclusion in one
case, it should be applied to those that follow if the facts are substantially the same, even though the
parties may be different, we find that respondent is not liable for DST as the transfer of real properties
from the absorbed corporations to respondent was pursuant to a merger. And having complied with the
provisions of Sections 204(C) and 229 of the NIRC, we agree with the CTA that respondent is entitled to a
refund of the DST it erroneously paid on various dates between October 31, 2001 to November 15, 2001
in the total amount of P14,140,980.00.

Likewise without merit is petitioner’s contention that respondent cannot claim exemption under RA 9243
as this was enacted only in 2004 or after respondent’s tax liability accrued. To be clear, respondent did not
file its claim for tax refund or tax credit based on the exemption found in RA 9243. Rather, it filed a claim
for tax refund or tax credit on the ground that Section 196 of the NIRC does not include the transfer of
real property pursuant to a merger. In fact, the ratio decidendi (or reason for the decision) in Pilipinas Shell
Petroleum Corporation was based on Section 196 of the NIRC, in relation to Section 80 of the Corporation
Code, not RA 9243. In that case, RA 9243 was mentioned only to emphasize that “the enactment of the
said law now removes any doubt and had made clear that the transfer of real properties as a consequence
of merger or consolidation is not subject to [DST].”

All told, we find no error on the part of the CTA in granting respondent’s claim for tax refund or tax credit
in the amount of P14,140,980.00, representing its erroneously paid DST for the taxable year 2001.

In closing, we must stress that taxes must not be imposed beyond what the law expressly and clearly
declares as tax laws must be construed strictly against the State and liberally in favor of the taxpayer.

WHEREFORE, the Petition is hereby DENIED. The assailed September 26, 2006 Decision and the October
31, 2006 Resolution of the Court of Tax Appeals in C.T.A. E.B. No. 178 are hereby AFFIRMED.

SO ORDERED.

Petition denied, judgment and resolution affirmed.

Notes.—In case of doubt, tax laws must be construed strictly against the State and liberally in favor of the
taxpayer. The reason for this ruling is not hard to grasp: taxes, as burdens which must be endured by the
taxpayer, should not be presumed to go beyond what the law expressly and clearly declares. (Philacor
Credit Corporation vs. Commissioner of Internal Revenue, 690 SCRA 28 [2013])

Under the doctrine of stare decisis, when a court has laid down a principle of law as applicable to a certain
state of facts, it will adhere to that principle and apply it to all future cases in which the facts are
substantially the same, even though the parties may be different. (Philippine Carpet Manufacturing
Corporation vs. Tagyamon, 712 SCRA 489 [2013])

——o0o——

Page 31 of 61
 OFFICE OF THE COURT ADMINISTRATOR, complainant, vs. JOEBERT C. GUAN, former Clerk
of Court, Municipal Trial Court, Bulan, Sorsogon, respondent

A.M. No. P-07-2293. July 15, 2015.

(formerly A.M. No. 06-12-411-MTC)

Administrative Law; Court Personnel; Clerks of Court; In the Office of the Court Administrator v. Acampado,
709 SCRA 254 (2013), the Supreme Court (SC) declared that any shortages in the amounts to be remitted
and the delay in the actual remittance thereof constitute gross neglect of duty for which the clerk of court
shall be held administratively liable.—In the Office of the Court Administrator v. Acampado, 709 SCRA 254
(2013), the Court declared that any shortages in the amounts to be remitted and the delay in the actual
remittance thereof constitute gross neglect of duty for which the clerk of court shall be held administratively
liable. Moreover, in the Office of the Court Administrator v. Melchor, Jr., 733 SCRA 246 (2014), it was held
that delayed remittance of cash collections constitutes gross neglect of duty because this omission deprives
the court of interest that could have been earned if the amounts were deposited in the authorized
depository bank. This was also reiterated in the fairly recent case of Office of the Court Administrator v.
Mrs. Aurora T. Zuniga, 740 SCRA 466 (2014). Here, Guan’s shortages with respect to the JDF in the total
amount of P49,609.10 and to the SAJF totaling to P5,824.00 were both due to unreported and undeposited
collections. In other words, Guan’s transgressions did not merely consist of delay in the remittance of his
collections but to his total failure to deposit the same as well. This is a clear case of gross neglect of
duty. As held, “[g]ross neglect is such neglect which, from the gravity of the case or the frequency of
instances, becomes so serious in its character as to endanger or threaten the public welfare.” In this case,
the frequency of the instances alone, i.e., for two separate periods of accountability, Guan was both found
to have incurred shortages with respect to the JDF and SAJF due to unreported and undeposited collections,
makes respondent’s neglect of duty so serious in its character as to threaten the public welfare.

Same; Gross Neglect of Duty; Penalties; Uniform Rules on Administrative Cases in the Civil Service; Gross
neglect of duty is classified as a grave offense and punishable by dismissal even if for the first offense
pursuant to Section 52(A)(2) of Rule IV of the Uniform Rules on Administrative Cases in the Civil Service
(URACCS).—“Gross neglect of duty is classified as a grave offense and punishable by dismissal even if for
the first offense pursuant to Section 52(A)(2) of Rule IV of the Uniform Rules on Administrative Cases in
the Civil Service.” While Guan had already been dropped from the rolls for being absent without official
leave (AWOL) in A.M. No. 06-5-171-MTC, he still remains administratively liable, although the penalty of
dismissal cannot be imposed upon him. Nevertheless, “[a] fine can be imposed, instead, and its amount is
subject to the sound discretion of the Court. Section 56(e) of Rule IV of the Revised Uniform Rules provides
that fine as a penalty shall be in an amount not exceeding the salary for six months had the respondent
not resigned [or been dropped from the rolls] the rate for which is that obtaining at the time of his
resignation. The fine shall be deducted from any accrued leave credits, with the respondent being
personally liable for any deficiency that should be directly payable to this Court. He is [also] further declared
disqualified from any future government service.”

Same; Same; Clerks of Court; Any shortages in the amounts to be remitted and the delay in the actual
remittance ‘constitute gross neglect of duty for which the clerk of court shall be held administratively
liable.’—As a final note, “Clerks of Court are the custodians of the courts’ ‘funds and revenues, records,
properties, and premises.’ They are ‘liable for any loss, shortage, destruction or impairment’ of those
entrusted to them. Any shortages in the amounts to be remitted and the delay in the actual remittance
‘constitute gross neglect of duty for which the clerk of court shall be held administratively liable.’”

ADMINISTRATIVE MATTER in the Supreme Court. Gross Neglect of Duty.

The facts are stated in the resolution of the Court.

RESOLUTION

Page 32 of 61
DEL CASTILLO,** J.:

Clerks of courts are custodians of the court’s funds and revenues. Any delay in its remittance, or any
shortages in the amounts, shall make the clerk of court administratively liable. Respondent Joebert C. Guan
(Guan), former Clerk of Court of Municipal Trial Court (MTC), Bulan, Sorsogon, was found remiss in his
duties and is accordingly penalized.

Factual Background

A financial audit of the books of accounts of MTC, Bulan, Sorsogon covering the period July 28, 1993 to
August 31, 2004 disclosed that: (1) some collections were not properly and accurately recorded in the
cashbooks; (2) there were shortages in the Judiciary Development Fund (JDF) and Special Allowance for
the Judiciary Fund in the amounts of P48,207.10 and P5,116.00, respectively; (3) the financial reports on
the JDF, General/Special Allowance for the Judicial Fund (SAJF) and Fiduciary Fund (FF) were not regularly
submitted to Accounting Division of the Office of the Court Administrator (OCA); (4) the records control is
not systematic; (5) no legal fees forms were attached to the case records; (6) daily transactions in the FF
account were not duly recorded in the cashbooks; and (7) documents needed to validate withdrawals of
cash bonds from the Municipal Treasurer’s Office (MTO) of Bulan were missing. The audit team thus made
the following recommendation in its Partial Report on the financial audit:

PREMISES CONSIDERED, it is most respectfully recommended that:

I. This report be docketed as a complaint against Mr. Joebert C. Guan, former Clerk of Court of MTC,
Bulan, Sorsogon and DIRECT Mr. Guan to:

1. IMMEDIATELY RESTITUTE his incurred shortages [in the] Judiciary Development Fund and Special
Allowance for the Judiciary Fund amounting to Forty-Eight Thousand Two Hundred Seven Pesos and 10/100
(P48,207.10) and Five Thousand [One] Hundred Sixteen Pesos and 00/100 (P5,116.00) respectively by
depositing the same to [their] respective bank account[s] through Mr. Joseph G. Guim, the incumbent
Officer-in-Charge, copy furnished the Fiscal Monitoring Division, Court Management Office with the machine
validated deposit slip/s as proof of compliance;

2. EXPLAIN within ten (10) days from notice why he incurred such shortages and why he should not be
administratively dealt with for failure to comply with the court circulars and issuances regarding proper
handling of court collections;

3. SECURE from the Municipal Treasurer’s Office of Bulan[,] Sorsogon an itemized list of Unwithdrawn
Fiduciary Fund or cashbonds he deposited thereat, certified correct by the Municipal Accountant and the
Municipal Treasurer; and

4. TRANSMIT to [the Office of the Court Administrator] through the Fiscal Monitoring Division, Court
Management Office all the documents regarding the deposits and withdrawals of cashbonds from the
Municipal Treasurer’s Office for the period covering May 1998 to July 31, 2005, i.e., triplicate copies of
Official Receipts issued, Fiduciary Fund official cash-books, and file copies of monthly Reports of
Col-lections, Deposits and Withdrawals together with the corresponding supporting docu-ments like the
court order, original copy of surrendered official receipts, vouchers and acknowledgment receipts as proof
that all withdrawn cashbonds were properly received by the bondsmen or their authorized representatives.

xxxx

Page 33 of 61
Then Court Administrator Christopher O. Lock approved the recommendation and submitted the same to
the Court. On January 29, 2007, the Court issued a Resolution adopting the recommendation of the OCA. In
addition, this Court held in abeyance any claim of Guan for separation benefits pending resolution of the
administrative matter against him.

Subsequently, Guan wrote the Court a letter dated March 12, 2007 requesting that the monetary value of
his leave credits be applied as payment for his accountability amounting to P53,323.10. He explained that
he could no longer account for the shortages because some of the records pertaining thereto, as well as
his Judiciary and General Fund reports, could no longer be found.

In a Resolution dated August 13, 2007, the Court deferred action on Guan’s request pending submission
of the documents required of him, specifically (1) an itemized list from the MTO of the unwithdrawn
fiduciary fund or cash bonds, certified correct by the Municipal Accountant and Municipal Treasurer; and
(2) all documents regarding the deposits to and withdrawals of cash bonds from the MTO for the period
covering May 1998 to July 31, 2005. But since Guan still failed to submit all the required documents, he
was directed, through a Resolution dated October 17, 2011, (1) to show cause why he should not be held
in contempt for such failure and (2) to comply by submitting the said documents.

In a letter10 dated August 26, 2011, Guan explained that while he was able to secure from the MTO a list
of cash bond deposits made by him, the Fiscal Monitoring Division (FMD) of the OCA did not accept the
same for being incomplete. He thus exerted all efforts to secure a complete list but what was issued him
was the same incomplete list, which when submitted was again rejected by the FMD. And while he was
also able to present to the FMD a certification from the MTO that its records were damaged by typhoon
“Melenyo” in July 2007 (which thereby hindered the MTO from providing a complete list), the same still
proved futile as the FMD did not accept the certificate. Therefore, Guan requested that an audit be
conducted in the MTC of Bulan, Sorsogon. Granting Guan’s request, the Court, via a Resolution dated
August 13, 2012, directed Executive Judge Adolfo G. Fajardo of the Regional Trial Court, Branch 65 of
Bulan, Sorsogon, to conduct a financial audit on the itemized list of unwithdrawn fiduciary fund or
cashbonds deposited by Guan and to thereafter submit a report thereon. Unfortunately, Judge Fajardo, in
his Compliance dated January 24, 2013, informed the Court that he cannot make an intelligible and
comprehensive financial audit as several pertinent records were nowhere to be found.

In view of this, the Court issued its July 24, 2013 Resolution directing the OCA to constitute a financial
audit team to conduct the audit. Accordingly, an audit team was again sent to the MTC of Bulan, Sorsogon.

Upon the conclusion of the audit, it was revealed that both the former Officer-In-Charge, Joseph C. Guim
(Guim) and the incumbent Clerk of Court, Emerose F. Denso, have no accountability insofar as their periods
of accountability are concerned as their books of account were in order. With respect to Guan, however,
the audit team found him accountable for the following:

I. FIDUCIARY FUND (FF) FOR THE PERIOD COVERED:

June 17, 1998 to September 23, 2004

Guan’s final accountability/shortage is P238,000.00. The audit team noted that Guan’s FF accountability
was not due to undeposited collections but to lacking documentations, specifically the deficient supporting
documents on cashbonds withdrawal transactions.

II. JUDICIAL DEVELOPMENT FUND (JDF) FOR THE PERIOD COVERED

September 1 to 23, 2004

Page 34 of 61
Guan’s accountability/shortage is P1,402.00. This comprised the unreported and undeposited collections
for the period covered.

III. SPECIAL ALLOWANCE FOR THE JUDICIARY FUND (SAJF) FOR THE PERIOD COVERED:

September 1 to 23, 2004

Guan’s SAJF accountability/shortage is P708.00. This comprised the unreported and undeposited collections
for the covered period.

Thus, including his previous accountabilities for JDF and SAJF as found during the earlier audit in 2006,
Guan’s balance of accountabilities are as follows:

In its report dated November 7, 2014, the OCA concluded that Guan was remiss in the performance of his
duties and is administratively liable for:

1) failing to properly remit his cash collections in contrast with the requirements set forth in the
Commission on Audit (COA) and Department of Finance (DOF) Joint Circular 1-81 and in Administrative
Circular No. 13-92 dated March 1, 1992 as amended by Administrative Circular (A.C.) No. 3-2000 dated
June 15, 2000; and

2) failing to remit FF collections, in complete derogation of Administrative Circular No. 50-95 dated
October 11, 1995.

Thus, it recommended that:

1. Mr. Joebert C. Guan, former Clerk of Court II, Municipal Trial Court, Bulan, Sorsogon, be found GUILTY
of Violation of Office Rules and Regulations and Simple Neglect of Duty and that he be ordered to PAY A
FINE of P10,000.00 to be deducted from the monetary value of his earned leave credits and/or other
retirement benefits;

2. the Office of the Administrative Services, OCA be DIRECTED to provide the Financial Management
Office (FMO), OCA with the following documents pertaining to Mr. Joebert C. Guan:

2.1) Official Service Record;

2.2) Certification of Leave Credits; and

2.3) Notice of Salary Adjustment (NOSA) if any.

3. The FMO, OCA be further DIRECTED to:

3.1) PROCESS the money value of the terminal leave benefits of Mr. Joebert C. Guan, dispensing with the
usual documentary requirements, and apply the same to the following shortages:

3.2) COORDINATE with the Fiscal Monitoring Division, Court Management Office, OCA, before the
processing of the checks to be issued in favour of the Fiduciary Fund account of the MTC, Bulan, Sorsogon,
and for the preparation of the necessary communication with the incumbent Clerk of Court/Officer-in-
Charge thereat;

Page 35 of 61
4. ORDER Mr. Guan to restitute the remaining shortages in case the monetary value of his earned leave
credits and/or other benefits would not be sufficient to cover the aforementioned shortages; and

5. CLEAR MR. JOSEPH G. GUIM AND MS. EMEROSE F. DENSO, former Officer-in-Charge and incumbent
Clerk of Court, respectively, MTC, Bulan, Sorsogon, of any accountability insofar as their corresponding
periods of accountability are concerned, after having been audited of their books of accounts which were
found to be in order.

Our Ruling

The Court modifies the findings and recommendations of the OCA.

As found by the audit team, Guan’s accountabilities were either due to unreported or undeposited
collections or to deposited collection but with lacking documentation. This only demonstrates Guan’s
disorganized way of managing and documenting his collections which, as aptly observed by the OCA, is in
violation of Administrative Circular No. 5-93 that provides, viz.:

3. Duty of the Clerks of Court, Officers-in-Charge or accountable officers.—The Clerk of Court, Officers-in-
Charge of the Office of the Clerk of Court, or their accountable duly authorized representative designated
by them in writing, who must be accountable officers, shall receive the Judiciary Development Fund
collections, issue the proper receipt therefor, maintain a separate cash book properly marked CASH BOOK
FOR JUDICIARY DEVELOPMENT FUND, deposit such collections in the manner herein prescribed and render
the proper Monthly Report of Collections for said Fund.

However, the Court disagrees with the OCA’s finding that Guan’s transgressions constitute simple neglect
of duty only.

In the Office of the Court Administrator v. Acampado, the Court declared that any shortages in the amounts
to be remitted and the delay in the actual remittance thereof constitute gross neglect of duty for which the
clerk of court shall be held administratively liable. Moreover, in the Office of the Court Administrator v.
Melchor, Jr., it was held that delayed remittance of cash collections constitutes gross neglect of duty
because this omission deprives the court of interest that could have been earned if the amounts were
deposited in the authorized depository bank. This was also reiterated in the fairly recent case of Office of
the Court Administrator v. Mrs. Aurora T. Zuniga.

Here, Guan’s shortages with respect to the JDF in the total amount of P49,609.10 and to the SAJF totaling
to P5,824.00 were both due to unreported and undeposited collections. In other words, Guan’s
transgressions did not merely consist of delay in the remittance of his collections but to his total failure to
deposit the same as well. This is a clear case of gross neglect of duty. As held, “[g]ross neglect is such
neglect which, from the gravity of the case or the frequency of instances, becomes so serious in its
character as to endanger or threaten the public welfare.” In this case, the frequency of the instances alone,
i.e., for two separate periods of accountability, Guan was both found to have incurred shortages with
respect to the JDF and SAJF due to unreported and undeposited collections, makes respondent’s neglect
of duty so serious in its character as to threaten the public welfare.

Anent Guan’s accountability of P238,000.00 in FF, the audit team noted that the same was not due to
unreported or undeposited collections but to incomplete documentation to support cash bond withdrawals
therefrom. Still, it is well to state that documentation of cash collections is essential to the orderly
administration of justice. It is for this reason that court circulars and other relevant rules for proper
documentation such as by submission to the court of reports of collections of all funds and proper issuance
of receipts, among others, were designed. Evidently, respondent failed to comply with the same and this
likewise constitutes gross neglect of duty.

Page 36 of 61
“Gross neglect of duty is classified as a grave offense and punishable by dismissal even if for the first
offense pursuant to Section 52(A)(2) of Rule IV of the Uniform Rules on Administrative Cases in the Civil
Service.” While Guan had already been dropped from the rolls for being absent without official leave
(AWOL) in A.M. No. 06-5-171-MTC, he still remains administratively liable, although the penalty of dismissal
cannot be imposed upon him. Nevertheless, “[a] fine can be imposed, instead, and its amount is subject
to the sound discretion of the Court. Section 56(e) of Rule IV of the Revised Uniform Rules provides that
fine as a penalty shall be in an amount not exceeding the salary for six months had the respondent not
resigned [or been dropped from the rolls] the rate for which is that obtaining at the time of his
resignation. The fine shall be deducted from any accrued leave credits, with the respondent being
personally liable for any deficiency that should be directly payable to this Court. He is [also] further
declared disqualified from any future government service.”

As a final note, “Clerks of Court are the custodians of the courts’ ‘funds and revenues, records, properties,
and premises.’ They are ‘liable for any loss, shortage, destruction or impairment’ of those entrusted to
them. Any shortages in the amounts to be remitted and the delay in the actual remittance ‘constitute gross
neglect of duty for which the clerk of court shall be held administratively liable.’”

WHEREFORE, the Court finds respondent Joebert C. Guan GUILTY of gross neglect of duty and resolves
to:

1. ORDER respondent TO PAY A FINE equivalent to his salary for six months computed at the salary rate
of his former position at the time he was dropped from the rolls to be deducted from the monetary value
of his earned leave credits and/or other retirement benefits, and DECLARE him DISQUALIFIED from
reemployment in any branch or instrumentality of the government, including government-owned or -
con-trolled corporations;

2. DIRECT the Office of the Administrative Services of Office of the Court Administrator to provide the
Financial Management Office, Office of the Court Administrator, with the following documents pertaining
to respondent Joebert C. Guan:

a. Official Service Record;

b. Certification of Leave Credits; and

c. Notice of Salary Adjustment, if any.

3. FURTHER DIRECT the Financial Management Office of the Office of the Court Administrator to:

3.1 PROCESS the monetary value of the terminal leave benefits of respondent Joebert C. Guan, dispensing
with the usual documentary requirements, and whatever remains therefrom after deducting the fine
imposed upon him, APPLY the same to the following shortages:

Name of Fund Period Covered Amount

Fiduciary Fund 17 June 1998 to 23 September 2004 P238,000.00
Judiciary Development Fund 28 July 1993 to 23 September 2001 P49,609.10
Special Allowance for the Judiciary Fund 28 July 1993 to 23 September 2004 P5,824.00
Total P293,433.10

3.2 COORDINATE with the Fiscal Monitoring Division, Court Management Office of the Office of the Court
Administrator, before the processing of the checks to be issued in favor of the Fiduciary Fund account of
the MTC, Bulan, Sorsogon, and for the preparation of the necessary communication with the incumbent
Clerk of Court/Officer-in-Charge thereat;

Page 37 of 61
4. ORDER respondent Guan to pay any remainder of the fine and/or restitute any remaining shortages in
case the monetary value of his earned leave credits and/or other benefits would not be sufficient to cover
the same; and

5. CLEAR MR. JOSEPH G. GUIM AND MS. EME-ROSE F. DENSO, former Officer-in-Charge and incumbent
Clerk of Court, respectively, MTC, Bulan, Sorsogon, of any accountability insofar as their corresponding
periods of accountability are concerned, after having been audited of their books of accounts which were
found to be in order.

SO ORDERED.

Peralta,*** Bersamin,**** Mendoza and Leonen, JJ., concur.

Respondent Joebert C. Guan meted with fine equivalent to his salary for six (6) months at the rate of his
former position at the time he was dropped from the rolls, with disqualification from reemploy-ment in
government service. Mr. Joseph G. Guim and Ms. Emerose F. Denso cleared of any accountability.

Notes.—Shortages in the amounts to be remitted and the years of delay in the actual remittance constitute
gross neglect of duty for which the clerk of court shall be administratively liable. (Office of the Court
Administrator vs. Fontanilla, 681 SCRA 17 [2012])

Any shortages in the amounts to be remitted and the delay in the actual remittance “constitute gross
neglect of duty for which the clerk of court shall be held administratively liable.” (Office of the Court
Administrator vs. Acampado, 709 SCRA 254 [2013])

——o0o——

Page 38 of 61
 ROBERT CHUA, petitioner, vs. PEOPLE OF THE PHILIPPINES, respondent

G.R. No. 196853. July 13, 2015.

Remedial Law; Special Civil Actions; Certiorari; “Question of Law” and “Question of Fact,” Distinguished.—
The OSG argues that the issues raised by Chua involve questions of fact which are not within the province
of the present petition for review on certiorari. The Court, however, upon perusal of the petition, finds that
the issues raised and the arguments advanced by Chua in support thereof, concern questions of law.
“Jurisprudence dictates that there is a ‘question of law’ when the doubt or difference arises as to what the
law is on a certain set of facts or circumstances; on the other hand, there is a ‘question of fact’ when the
issue raised on appeal pertains to the truth or falsity of the alleged facts. The test for determining whether
the supposed error was one of ‘law’ or ‘fact’ is not the appellation given by the parties raising the same;
rather, it is whether the reviewing court can resolve the issues raised without evaluating the evidence, in
which case, it is a question of law; otherwise, it is one of fact. In other words, where there is no dispute
as to the facts, the question of whether or not the conclusions drawn from these facts are correct is a
question of law. However, if the question posed requires a reevaluation of the credibility of witnesses, or
the existence or relevance of surrounding circumstances and their relationship to each other, the issue is
factual.”

Same; Same; Same; The rule that factual findings of the lower courts are not proper subject of certiorari
petition admits of exceptions.—Nevertheless, assuming that the questions posed before this Court are
indeed factual, the rule that factual findings of the lower courts are not proper subject of certiorari petition
admits of exceptions. One of these exceptions is when the lower courts failed to appreciate certain facts
and circumstances which, if taken into account, would materially affect the result of the case. The Court
finds the said exception applicable in the instant case. Clearly, the petition deserves the consideration of
this Court.

Criminal Law; Bouncing Checks Law; Elements of.—In order to successfully hold an accused liable for
violation of BP 22, the following essential elements must be present: “(1) the making, drawing, and issuance
of any check to apply for account or for value; (2) the knowledge of the maker, drawer, or issuer that at
the time of issue he does not have sufficient funds in or credit with the drawee bank for the payment of
the check in full upon its presentment; and (3) the subsequent dishonor of the check by the drawee bank
for insufficiency of funds or credit or dishonor for the same reason had not the drawer, without any valid
cause, ordered the bank to stop payment.” “Of the three (3) elements, the second element is the hardest
to prove as it involves a state of mind. Thus, Section 2 of BP 22 creates a presumption of knowledge of
insufficiency of funds, which, however, arises only after it is proved that the issuer had received a written
notice of dishonor and that within five days from receipt thereof, he failed to pay the amount of the check
or to make arrangements for its payment.”

Same; Same; Notice of Dishonor; The prosecution must also prove actual receipt of [the notice of dishonor]
because the fact of service provided for in the law is reckoned from receipt of such notice of dishonor by
the accused.—Similarly in the present case, there is no way to ascertain when the five-day period under
Section 22 of BP 22 would start and end since there is no showing when Chua actually received the demand
letter dated November 30, 1993. The MeTC cannot simply presume that the date of the demand letter was
likewise the date of Chua’s receipt thereof. There is simply no such presumption provided in our rules on
evidence. In addition, from the inception of this case Chua has consistently denied having received subject
demand letter. He maintains that the paper used for the purported demand letter was still blank when
presented to him for signature and that he signed the same for another purpose. Given Chua’s denial, it
behooved upon the prosecution to present proof of his actual receipt of the November 30, 1993 demand
letter. However, all that the prosecution did was to present it without, however, adducing any evidence as
to the date of Chua’s actual receipt thereof. It must be stressed that “[t]he prosecution must also prove
actual receipt of [the notice of dishonor] because the fact of service provided for in the law is reckoned

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from receipt of such notice of dishonor by the accused.” “The burden of proving notice rests upon the party
asserting its existence. Ordinarily, preponderance of evidence is sufficient to prove notice. In criminal cases,
however, the quantum of proof required is proof beyond reasonable doubt. Hence, for B.P. Blg. 22 cases,
there should be clear proof of notice” which the Court finds wanting in this case.

Remedial Law; Evidence; Newly Discovered Evidence; Under the Rules of Court, the requisites for newly
discovered evidence are: (a) the evidence was discovered after trial; (b) such evidence could not have
been discovered and produced at the trial with reasonable diligence; and (c) it is material, not merely
cumulative, corroborative or impeaching, and is of such weight that, if admitted, will probably change the
judgment.—“Under the Rules of Court, the requisites for newly discovered evidence are: (a) the evidence
was discovered after trial; (b) such evidence could not have been discovered and produced at the trial with
reasonable diligence; and (c) it is material, not merely cumulative, corroborative or impeaching, and is of
such weight that, if admitted, will probably change the judgment.”

Criminal Law; Bouncing Checks Law; Notice of Dishonor; Checks can only be dishonored after they have
been issued and presented for payment.—It may not be amiss to add at this point that out of the 54 cases
for violation of BP 22 filed against Chua, 22 involve checks issued on November 30, 1993 or thereafter.
Hence, the lower courts grievously erred in convicting Chua for those 22 cases on the basis of a purported
demand letter written and sent to Chua prior to the issuance of said 22 checks. Checks can only be
dishonored after they have been issued and presented for payment. Before that, dishonor cannot take
place. Thus, a demand letter that precedes the issuance of checks cannot constitute as sufficient notice of
dishonor within the contemplation of BP 22. It is likewise significant to note that aside from the absence of
a date, the signature of Chua appearing on the questioned November 30, 1993 demand letter is not
accompanied by any word or phrase indicating that he affixed his signature thereon to signify his receipt
thereof. Indeed, “conviction must rest upon the strength of the evidence of the prosecution and not on the
weakness of the evidence for the defense.” In view of the foregoing, the Court cannot accord the demand
letter dated November 30, 1993 any weight and credence. Consequently, it cannot be used to support
Chua’s guilt of the offenses charged.

Same; Civil Liability; An acquittal based on lack of proof beyond reasonable doubt does not preclude the
award of civil damages.—Chua’s acquittal, however, does not entail the extinguishment of his civil liability
for the dishonored checks. “An acquittal based on lack of proof beyond reasonable doubt does not preclude
the award of civil damages.” For this reason, Chua must be directed to restitute See the total amount of
the face value of all the checks subject of the case with legal interest at the rate of 12% per annum
reckoned from the time the said checks became due and demandable up to June 30, 2013 and 6% per
annum from July 1, 2013 until fully paid.

PETITION for review on certiorari of a decision of the Court of Appeals.

The facts are stated in the opinion of the Court.

Valenton, Gramata, Loseriaga Law Offices for petitioner Robert Chua.

Office of the Solicitor General for respondent.

DEL CASTILLO,** J.:

Petitioner Robert Chua (Chua) was charged with 54 counts of violation of Batas Pambansa Blg. 22 (BP 22)
for issuing checks which were dishonored for either being drawn against insufficient funds or closed
account.

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Factual Antecedents

Chua and private complainant Philip See (See) were long-time friends and neighbors. On different dates
from 1992 until 1993, Chua issued several postdated PSBank checks of varying amounts to See pursuant
to their rediscounting arrangement at a 3% rate, to wit:

PSBANK

CHECK NO.

DATED AMOUNT
1 018062 December 25, 1993 Php300,000.00
2 018061 December 23, 1993 Php350,000.00
3 017996 December 16, 1993 Php100,000.00
4 017992 December 14, 1993 Php200,000.00
5 017993 December 14, 1993 Php200,000.00
6 018138 November 22, 1993 Php6,000.00
7 018122 November 19, 1993 Php13,000.00
8 018120 November 18, 1993 Php6,000.00
9 018162 November 22, 1993 Php10,800.00
10 018069 November 17, 1993 Php9,744.25
11 018117 November 17, 1993 Php8,000.00
12 018149 November 28, 1993 Php6,000.00
13 018146 November 27, 1993 Php7,000.00
14 006478 November 26, 1993 Php200,000.00
15 018148 November 26, 1993 Php300,000.00
16 018145 November 26, 1993 Php7,000.00
17 018137 December 10, 1993 Php150,000.00
18 017991 December 10, 1993 Php150,000.00
19 018151 December 10, 1993 Php150,000.00
20 017962 December 08, 1993 Php150,000.00
21 018165 December 08, 1993 Php14,000.00
22 018154 December 07, 1993 Php100,000.00
23 018164 December 07, 1993 Php14,000.00
24 018157 December 07, 1993 Php600,000.00
25 018161 December 06, 1993 Php12,000.00
26 018160 December 05, 1993 Php12,000.00
27 018033 November 09, 1993 Php3,096.00
28 018032 November 08, 1993 Php12,000.00
29 018071 November 06, 1993 Php150,000.00
30 018070 November 06, 1993 Php150,000.00
31 006210 October 21, 1993 Php100,000.00
32 006251 October 18, 1993 Php200,000.00
33 006250 October 18, 1993 Php200,000.00
34 017971 October 13, 1993 Php400,000.00
35 017972 October 12, 1993 Php335,450.00
36 017973 October 11, 1993 Php464,550.00
37 006433 September 24, 1993 Php520,000.00
38 006213 August 30, 1993 Php100,000.00
39 017976 December 13, 1993 Php100,000.00
40 018139 December 13, 1993 Php125,000.00
41 018141 December 13, 1993 Php175,000.00
42 018143 December 13, 1993 Php300,000.00

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43 018121 December 10, 1993 Php166,934.00
44 018063 November 12, 1993 Php12,000.00
45 018035 November 11, 1993 Php7,789.00
46 017970 November 11, 1993 Php600,000.00
47 018068 November 18, 1993 Php7,800.00
48 017956 November 10, 1993 Php800,000.00
49 018034 November 10, 1993 Php7,116.00
50 017907 December 1, 1993 Php200,000.00
51 018152 November 30, 1993 Php6,000.00
52 018067 November 30, 1993 Php7,800.00
53 006490 November 29, 1993 Php100,000.00
54 018150 November 29, 1993
Php6,000.00

However, See claimed that when he deposited the checks, they were dishonored either due to insufficient
funds or closed account. Despite demands, Chua failed to make good the checks. Hence, See filed on
December 23, 1993 a Complaint for violations of BP 22 before the Office of the City Prosecutor of Quezon
City. He attached thereto a demand letter dated December 10, 1993.

In a Resolution dated April 25, 1994, the prosecutor found probable cause and recommended the filing of
charges against Chua. Accordingly, 54 counts of violation of BP 22 were filed against him before the
Metropolitan Trial Court (MeTC) of Quezon City.

Proceedings before the Metropolitan Trial Court

During the course of the trial, the prosecution formally offered as its evidence the demand letter dated
December 10, 1993 marked as Exhibit “B.” Chua, however, objected to its admissibility on the grounds that
it is a mere photocopy and that it does not bear any proof that he actually received it. In view of these,
Chua filed on April 14, 1999 a Motion to Submit Demurrer to Evidence. Per Chua’s allegation, however, the
MeTC failed to act on his motion since the judge of said court vacated his post.

Several years later, the prosecution filed a Motion to Re-Open Presentation of Prosecution’s Evidence and
Motion to Allow Prosecution to Submit Additional Formal Offer of Evidence dated March 28, 2003. It averred
that while See was still trying to locate a demand letter dated November 30, 1993 (which it alleged to have
been personally served upon Chua), the prosecution nevertheless decided to rest its case on February 24,
1999 so as not to further delay the proceedings. However, sometime in February 2002, See decided to
have his house rented out such that he emptied it with all his belongings and had it cleaned. It was during
this time that he found the demand letter dated November 30, 1993. The prosecution thus prayed that it
be allowed to submit a supplemental offer of evidence to include said demand letter dated November 30,
1993 as part of its evidence. Again, the records of the case bear no copy of an MeTC Order or Resolution
granting the aforesaid motion of the prosecution. Nevertheless, extant on records is a Formal Offer of
Evidence filed by the private prosecutor submitting the demand letter dated November 30, 1993 as
additional evidence. In his objection thereto, Chua averred that the papers on which the demand letter
dated November 30, 1993 are written were given to him as blank papers. He affixed his signature thereon
purportedly to give See the authority to retrieve a car which was supposed to serve as payment for Chua’s
obligation to See. In an Order dated November 18, 2005, the MeTC refused to take cognizance of the
supplemental formal offer on the ground that the same was filed by the private prosecutor without the
conformity of the public prosecutor. Be that as it may, the demand letter dated November 30, 1993
eventually found its way into the records of this case as Exhibit “SSS.”

Later, the defense, with leave of court, filed a Demurrer to Evidence. It again pointed out that the demand
letter dated December 10, 1993 attached to See’s affidavit-complaint is a mere photocopy and not
accompanied with a Post Office Registry Receipt and Registry Return Receipt. Most importantly, it does not

Page 42 of 61
contain Chua’s signature that would serve as proof of his actual receipt thereof. In view of these, the
defense surmised that the prosecution fabricated the demand letter dated November 30, 1993 to remedy
the lack of a proper notice of dishonor upon Chua. At any rate, it argued that while the November 30, 1993
demand letter contains Chua’s signature, the same should not be given any probative value since it does
not contain the date when he allegedly received the same. Hence, there is simply no way of reckoning the
crucial five-day period that the law affords an issuer to make good the check from the date of his notice of
its dishonor.

In an Order dated January 12, 2007, the MeTC denied the defense’s Demurrer to Evidence. The Motion for
Reconsideration thereto was likewise denied in an Order dated May 23, 2007. Hence, the trial of the case
proceeded.

In a Consolidated Decision dated May 12, 2008, the MeTC convicted Chua of 54 counts of violation of BP
22 after it found all the elements of the offense obtaining in the case. Anent Chua’s receipt of the notice of
dishonor, it ratiocinated, viz.:

xxxx

The prosecution had proved also that private complainant personally sen[t] a written notice of dishonor of
the subject check to the accused and that the latter personally received the same. In fact, the defense
stipulated in open court the existence of the said demand letter and the signature of the accused as
reflected in the face of the demand letter. x x x In view of that stipulation, the defense is now estopped
[from] denying its receipt thereof. Although there was no date when accused received the demand letter
x x x the demand letter was dated, thus it is presumed that the accused received the said demand letter
on the date reflected on it. It has been said that “admission verbal or written made by the party in the
course of the proceedings in the same case does not require proof.” x x x

[In spite of] receipt thereof, the accused failed to pay the amount of the checks or make arrangement for
its payment [w]ithin five (5) banking days after receiving notice that the said checks have not been paid
by the drawee bank. As a result, the presumption of knowledge as provided for in Section 2 of Batas
Pambansa Bilang 22 which was the basis of reckoning the crucial five (5)-day period was established.

Hence, the dispositive portion of the MeTC Decision:

WHEREFORE, premises considered, this court finds accused Robert Chua GUILTY, beyond reasonable
doubt, of fifty-four (54) counts of Violation of Batas Pambansa Bilang 22 and hereby sentence[s] him to
suffer the penalty of six (6) months imprisonment for each case and to restitute to the private complainant
the total amount of the face value of all the subject checks in these cases with legal interest of 12% per
annum reckoned from the filing of the informations until the full amount is fully paid and to pay the costs
of suit.

SO ORDERED.

Ruling of the Regional Trial Court (RTC)

Aggrieved, Chua appealed to the RTC where he argued that: (1) the complaint was prematurely filed since
the demand letter dated December 10, 1993 had not yet been sent to him at the time of filing of the
Complaint; (2) the demand letter dated November 30, 1993 has no probative value since it lacked proof of
the date when Chua received the same; and (3) since Chua was acquitted in two other BP 22 cases involving
the same parties, facts and issues, he should likewise be acquitted in the present case based on the principle
of stare decisis.

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In a Decision21 dated July 1, 2009, the RTC likewise found all the elements of BP 22 to have been
sufficiently established by the prosecution, to wit:

(1) the making, drawing, and issuance of any check to apply for account or for value;

(2) the knowledge of the maker, drawer, or issuer that at the time of issue he does not have sufficient
funds in or credit with the drawee bank for the payment of the check in full upon its presentment;

(3) the subsequent dishonor of the check by the drawee bank for insufficient funds or credit or dishonor
for the same reason had not the drawer, without any valid cause ordered the bank to stop payment.

As to first element, the RTC held that the evidence shows that Chua issued the checks in question. Next,
on the basis of the demand letter dated November 30, 1993 bearing Chua’s signature as proof of receipt
thereof, it was likewise established that he had knowledge of the insufficiency of his funds with the drawee
bank at the time he issued the checks, thus, satisfying the second element. It expounded:

Thus, in order to create the prima facie presumption that the issuer knew of the insufficiency of funds, it
must be shown that he or she received a notice of dishonor and, within five banking days thereafter, failed
to satisfy the amount of the check or make arrangement for its payment. x x x

In the present case, a demand letter (Exh. “SSS”) was sent to accused-appellant informing him of the
dishonor of the check and demanding he make good of the checks. The prosecution offered this in evidence,
and the accused’s signature thereon evidences his receipt of the said demand letter. Accused-appellant
argues that there is no proof that he received the same considering that there is no date on his signature
appearing on the document. But as borne out by the records of the proceedings, the defense even
stipulated in open court the existence of the demand letter. x x x

Thus, considering that the demand letter was dated November 30, 1993, the reckoning of the crucial five-
day period was established. Accused failed to make arrangement for the payment of the amount of check
within five-day period from notice of the checks’ dishonor.

Finally, the RTC ruled that the prosecution was able to prove the existence of the third element when it
presented a bank employee who testified that the subject checks were dishonored due to insufficiency of
funds or closed account.

Anent the defense’s invocation of the principle of stare decisis, the RTC found the same inapplicable since
there is a distinction between the present case and the other cases where Chua was acquitted. In the
instant case, the prosecution, as mentioned, was able to establish the second element of the offense by
way of the demand letter dated November 30, 1993 duly received by Chua. Whereas in the other cases
where Chua was acquitted, there was no proof that he received a demand letter.

Hence, the dispositive portion of the RTC Decision:

WHEREFORE, the appealed decision dated May 12, 2008 is hereby AFFIRMED.

SO ORDERED.

Ruling of the Court of Appeals (CA)

Before the CA, Chua argued against the probative value of the demand letter dated November 30, 1993 by
pointing out that: (1) for more than 10 years from the time the case was filed, the prosecution never
adverted to its existence. He thus surmised that this was because the document was not really missing but
in fact inexistent — a mere afterthought as to make it appear that the second element of the offense is

Page 44 of 61
obtaining in the case; (2) the subject demand letter is not a newly discovered evidence as it could have
been discovered earlier through the exercise of due diligence; and (3) his counsel’s admission of the
physical existence of the subject demand letter and Chua’s signature thereon does not carry with it the
admission of its contents and his receipt of the same.

Unpersuaded, the CA, in its November 11, 2010 Decision brushed aside Chua’s arguments in this wise:

x x x [A]s aptly pointed out by the Solicitor General, See could not have waited for a decade just to fabricate
an evidence against petitioner. The contention that petitioner’s counsel was tricked by the prosecution into
stipulating on the admissibility of the demand letter is without basis. Once validly entered into, stipulations
will not be set aside unless for good cause. They should be enforced especially when they are not false,
unreasonable or against good morals and sound public policy. When made before the court, they are
conclusive. And the party who validly made them can be relieved therefrom only upon a showing of
collusion, duress, fraud, misrepresentation as to facts, and undue influence; or upon a showing of sufficient
cause on such terms as will serve justice in a particular case. Moreover, the power to relieve a party from
a stipulation validly made lies in the court’s sound discretion which, unless exercised with grave abuse, will
not be disturbed on appeal.

And just like the MeTC and the RTC, the CA concluded that the prosecution clearly established all the
elements of the offense of violation of BP 22. Ultimately, it ruled as follows:

WHEREFORE, the instant petition is hereby DENIED for lack of merit. The assailed decision dated July 1,
2009 and order dated October 30, 2009 of the RTC of Quezon City, Branch 219, are hereby AFFIRMED.

SO ORDERED.

Chua filed a Motion for Reconsideration, but the same was denied in a Resolution dated May 4, 2011.

Hence, this Petition for Review on Certiorari.

Issues

THE COURT OF APPEALS SERIOUSLY ERRED WHEN IT UPHELD THE RULINGS OF THE TRIAL COURTS
THAT THE ACCUSED AT THE TIME OF THE ISSUANCE OF THE DISHONORED CHECKS HAD KNOWLEDGE
OF THE INSUFFICIENCY OF FUNDS FOR THE PAYMENT OF THE CHECKS UPON THEIR PRESENTMENT,
BASED MERELY ON THE PRESUMPTION THAT THE DATE OF THE PREPARATION OF THE LETTER IS THE
DATE OF RECEIPT BY THE ADDRESSEE.

II

THE COURT OF APPEALS SERIOUSLY ERRED WHEN IT CONSIDERED THE DEMAND LETTER DATED 30
NOVEMBER 1993 AS A NEWLY-DIS-COVERED EVIDENCE.

The Parties’ Arguments

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Chua asserts that the second element of the offense charged, i.e., knowledge of the maker, drawer, or
issuer that at the time of issue there are no sufficient funds in or credit with the drawee bank for the
payment of such check in full upon its presentment, was not proved by the prosecution. He argues that
the presumption that the issuer had knowledge of the insufficiency of funds only arises after it is proved
that the issuer actually received a notice of dishonor and within five days from receipt thereof failed to pay
the amount of the check or make arrangement for its payment. Here, the date when Chua allegedly received
the demand letter dated November 30, 1993 was not established by the prosecution. Citing Danao v. Court
of Appeals, he thus contends that since there is no date of receipt from which to reckon the aforementioned
five-day period, the presumption that he has knowledge of the insufficiency of funds at the time of the
issuance of the checks did not arise.

In any case, Chua argues that the demand letter dated November 30, 1993 is not a newly discovered
evidence. He points out that a newly discovered evidence is one which could not have been discovered
even in the exercise of due diligence in locating the same. In this case, See claims that he only found the
letter after having his house cleaned. This means that he could have found it early on had he exercised
due diligence, which, however, was neither shown by the prosecution.

On the other hand, respondent People of the Philippines, through the Office of the Solicitor General (OSG),
avers that Chua’s contention that there is no proof of the date when he actually received the demand letter
dated November 30, 1993 involves a factual issue which is not within the province of a certiorari petition.
As to the matter of whether the subject demand letter is a newly discovered evidence, the OSG calls
attention to the fact that the MeTC, RTC and the CA all considered the said document as a newly discovered
evidence. Hence, such finding deserves full faith and credence. Besides, Chua was correctly convicted for
violation of BP 22 since all the elements of the offense were sufficiently proven by the prosecution.

Our Ruling

The Petition is impressed with merit.

The issues raised by Chua involve questions of law.

The OSG argues that the issues raised by Chua involve questions of fact which are not within the province
of the present petition for review on certiorari. The Court, however, upon perusal of the petition, finds that
the issues raised and the arguments advanced by Chua in support thereof, concern questions of law.
“Jurisprudence dictates that there is a ‘question of law’ when the doubt or difference arises as to what the
law is on a certain set of facts or circumstances; on the other hand, there is a ‘question of fact’ when the
issue raised on appeal pertains to the truth or falsity of the alleged facts. The test for determining whether
the supposed error was one of ‘law’ or ‘fact’ is not the appellation given by the parties raising the same;
rather, it is whether the reviewing court can resolve the issues raised without evaluating the evidence, in
which case, it is a question of law; otherwise, it is one of fact. In other words, where there is no dispute
as to the facts, the question of whether or not the conclusions drawn from these facts are correct is a
question of law. However, if the question posed requires a reevaluation of the credibility of witnesses, or
the existence or relevance of surrounding circumstances and their relationship to each other, the issue is
factual.”

Chua raises two issues in this petition, to wit: (1) whether the MeTC, RTC and the CA correctly applied the
legal presumption that Chua has knowledge of the insufficiency of funds at the time he issued the check
based on his alleged receipt of the demand letter dated November 30, 1993 and his failure to make good
the checks five days from such receipt; and (2) whether the said courts correctly considered the demand
letter dated November 30, 1993 as newly discovered evidence. As to the first issue, it is not disputed that
the subject demand letter, while bearing the signature of Chua, does not indicate any date as to his receipt
thereof. There being no disagreement as to this fact, the propriety of the conclusion drawn from the same
by the courts below, that is, the date of the said letter is considered as the date when Chua received the

Page 46 of 61
same for the purpose of reckoning the five-day period to make good the checks, clearly refers to a question
of law. Similarly, the second issue is one concerning a question of law because it requires the application
of the provision of the Rules of Court concerning a newly discovered evidence.

Nevertheless, assuming that the questions posed before this Court are indeed factual, the rule that factual
findings of the lower courts are not proper subject of certiorari petition admits of exceptions. One of these
exceptions is when the lower courts failed to appreciate certain facts and circumstances which, if taken
into account, would materially affect the result of the case. The Court finds the said exception applicable
in the instant case. Clearly, the petition deserves the consideration of this Court.

The prosecution failed to prove all the elements of the offenses charged.

In order to successfully hold an accused liable for violation of BP 22, the following essential elements must
be present: “(1) the making, drawing, and issuance of any check to apply for account or for value; (2) the
knowledge of the maker, drawer, or issuer that at the time of issue he does not have sufficient funds in or
credit with the drawee bank for the payment of the check in full upon its presentment; and (3) the
subsequent dishonor of the check by the drawee bank for insufficiency of funds or credit or dishonor for
the same reason had not the drawer, without any valid cause, ordered the bank to stop payment.”33 “Of
the three (3) elements, the second element is the hardest to prove as it involves a state of mind. Thus,
Section 2 of BP 22 creates a presumption of knowledge of insufficiency of funds, which, however, arises
only after it is proved that the issuer had received a written notice of dishonor and that within five days
from receipt thereof, he failed to pay the amount of the check or to make arrangements for its payment.”

In the instant case, what is in dispute is the existence of the second element. Chua asserts that the absence
of the date of his actual receipt on the face of the demand letter dated November 30, 1993 prevented the
legal presumption of knowledge of insufficiency of funds from arising. On the other hand, the MeTC opined
that while the date of Chua’s actual receipt of the subject demand letter is not affixed thereon, it is
presumed that he received the same on the date of the demand letter (November 30, 1993). Moreover,
the lower courts banked on the stipulation entered into by Chua’s counsel as to the existence of the demand
letter and of Chua’s signature thereon. By reason of such stipulation, they all held that Chua could no longer
impugn the said demand letter.

In Danao v. Court of Appeals, the Court discussed the importance of proving the date of actual receipt of
the notice of dishonor, viz.:

In King v. People, this Court, through Justice Artemio V. Panganiban, held: “To hold a person liable under
B.P. Blg. 22, it is not enough to establish that a check issued was subsequently dishonored. It must be
shown further that the person who issued the check knew ‘at the time of issue that he does not have
sufficient funds in or credit with the drawee bank for the payment of such check in full upon its
presentment.’ Because this element involves a state of mind which is difficult to establish, Section 2 of the
law creates a prima facie presumption of such knowledge, as follows:

SEC. 2. Evidence of knowledge of insufficient funds.—The making, drawing and issuance of a check
payment of which is refused by the drawee because of insufficient funds in or credit with such bank, when
presented within ninety (90) days from the date of the check, shall be prima facie evidence of knowledge
of such insufficiency of funds or credit unless such maker or drawer pays the holder thereof the amount
due thereon, or makes arrangements for payment in full by the drawee of such check within five (5) banking
days after receiving notice that such check has not been paid by the drawee.

Thus, this Court further ruled in King, “in order to create the prima facie presumption that the issuer knew
of the insufficiency of funds, it must be shown that he or she received a notice of dishonor and, within five
banking days thereafter, failed to satisfy the amount of the check or make arrangement for its payment.”

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 Indeed, the prima facie presumption in Section 2 of B.P. Blg. 22 gives the accused an opportunity to satisfy
the amount indicated in the check and thus avert prosecution. This opportunity, as this Court stated in
Lozano v. Martinez, serves to mitigate the harshness of the law in its application.

In other words, if such notice of nonpayment by the drawee bank is not sent to the maker or drawer of
the bum check, or if there is no proof as to when such notice was received by the drawer, then the
presumption or prima facie evidence as provided in Section 2 of B.P. Blg. 22 cannot arise, since there would
simply be no way of reckoning the crucial 5-day period.”36 (Italics in the original, emphasis supplied)

Similarly in the present case, there is no way to ascertain when the five-day period under Section 22 of BP
22 would start and end since there is no showing when Chua actually received the demand letter dated
November 30, 1993. The MeTC cannot simply presume that the date of the demand letter was likewise the
date of Chua’s receipt thereof. There is simply no such presumption provided in our rules on evidence. In
addition, from the inception of this case Chua has consistently denied having received subject demand
letter. He maintains that the paper used for the purported demand letter was still blank when presented to
him for signature and that he signed the same for another purpose. Given Chua’s denial, it behooved upon
the prosecution to present proof of his actual receipt of the November 30, 1993 demand letter. However,
all that the prosecution did was to present it without, however, adducing any evidence as to the date of
Chua’s actual receipt thereof. It must be stressed that “[t]he prosecution must also prove actual receipt of
[the notice of dishonor] because the fact of service provided for in the law is reckoned from receipt of such
notice of dishonor by the accused.”37 “The burden of proving notice rests upon the party asserting its
existence. Ordinarily, preponderance of evidence is sufficient to prove notice. In criminal cases, however,
the quantum of proof required is proof beyond reasonable doubt. Hence, for B.P. Blg. 22 cases, there
should be clear proof of notice”38 which the Court finds wanting in this case.

Anent the stipulation entered into by Chua’s counsel, the MeTC stated:

In the course of the said proceedings, the defense counsel manifested that he is willing to stipulate as to
the existence of the demand letter and the signature of the accused as reflected on the face of the demand
letter. x x x

xxxx

The prosecution had proved also that private complainant personally sent a written notice of dishonor of
the subject checks to the accused and that the latter personally received the same. In fact, the defense
stipulated in open court the existence of the said demand letter and the signature of the accused as
reflected in the face of the demand letter. x x x In view of that stipulation, the defense is now estopped in
denying its receipt thereof.

As earlier mentioned, this ruling of the MeTC was affirmed by both the RTC and the CA.

The Court, however, disagrees with the lower courts. It is plain that the stipulation only refers to the
existence of the demand letter and of Chua’s signature thereon. In no way can an admission of Chua’s
receipt of the demand letter be inferred therefrom. Hence, Chua cannot be considered estopped from
claiming nonreceipt. Also, the Court observes that Chua’s admission with respect to his signature on the
demand letter is consistent with his claim that See made him sign blank papers where the contents of the
demand letter dated November 30, 1993 were later intercalated.

In view of the above discussion, the Court rules that the prosecution was not able to sufficiently prove the
existence of the second element of BP 22.

At any rate, the demand letter dated November 30, 1993 deserves no weight and credence not only be-

Page 48 of 61
cause it does not qualify as a newly discovered evidence within the purview of the law but also because of
its doubtful character.

As may be recalled, the prosecution had already long rested its case when it filed a Motion to Re-Open
Presentation of Prosecution’s Evidence and Motion To Allow Prosecution To Submit Additional Formal Offer
of Evidence dated March 28, 2003. Intending to introduce the demand letter dated November 30, 1993 as
a newly discovered evidence, See attached to the said motion an affidavit40 of even date where he stated
the circumstances surrounding the fact of his location of the same, viz.:

2. When we initially presented our evidence in support of these criminal complaints, I was already looking
for a copy of the demand letter personally served by the affiant (See) and duly received by [Chua];

3. That despite diligent efforts to locate the demand letter x x x dated November 30, 1993, the same was
not located until sometime in February 2002 when I was having our old house/office located at C-5 Christian
Street, Grace Village, Quezon City, cleaned and ready to be rented out;

4. x x x [upon] showing the same to the new handling public prosecutor, he advised the affiant to have
it presented in Court.

In Ybiernas v. Tanco-Gabaldon, the Court held that:

x x x The question of whether evidence is newly discovered has two aspects: a temporal one, i.e., when
was the evidence discovered, and a predictive one, i.e., when should or could it have been discovered. It
is to the latter that the requirement of due diligence has relevance. We have held that in order that a
particular piece of evidence may be properly regarded as newly discovered to justify new trial, what is
essential is not so much the time when the evidence offered first sprang into existence nor the time when
it first came to the knowledge of the party now submitting it; what is essential is that the offering party
had exercised reasonable diligence in seeking to locate such evidence before or during trial but had
nonetheless failed to secure it.

The Rules do not give an exact definition of due diligence, and whether the movant has exercised due
diligence depends upon the particular circumstances of each case. Nonetheless, it has been observed that
the phrase is often equated with “reasonable promptness to avoid prejudice to the defendant.” In other
words, the concept of due diligence has both a time component and a good faith component. The movant
for a new trial must not only act in a timely fashion in gathering evidence in support of the motion; he must
act reasonably and in good faith as well. Due diligence contemplates that the defendant acts reasonably
and in good faith to obtain the evidence, in light of the totality of the circumstances and the facts known
to him.

“Under the Rules of Court, the requisites for newly discovered evidence are: (a) the evidence was
discovered after trial; (b) such evidence could not have been discovered and produced at the trial with
reasonable diligence; and (c) it is material, not merely cumulative, corroborative or impeaching, and is of
such weight that, if admitted, will probably change the judgment.”

In this case, the Court holds that the demand letter dated November 30, 1993 does not qualify as a newly
discovered evidence within the purview of the law. Per See’s statements in his affidavit, the said evidence
was already known to him at the time he filed his complaint against Chua. It was also apparently available
considering that it was just kept in his house. Undeniably, had See exercised reasonable diligence, he could
have promptly located the said demand letter and presented it during trial. However, the circumstances
suggest otherwise.

Curiously, while See claims that the demand letter dated November 30, 1993 was already existing at the
time he filed the complaint, the same was not mentioned therein. Only the demand letter dated December

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10, 1993 was referred to in the complaint, which per See’s own allegations, was also not actually received
by Chua. In addition, the prosecution failed to present the original copy of the demand letter dated
December 10, 1993 during trial. Clearly on the basis of the demand letter dated December 10, 1993 alone,
the prosecution cannot possibly establish the existence of the second element of the offense. Indeed, the
surrounding circumstances and the doubtful character of the demand letter dated November 30, 1993
make it susceptible to the conclusion that its introduction was a mere afterthought — a belated attempt to
fill in a missing component necessary for the existence of the second element of BP 22.

It may not be amiss to add at this point that out of the 54 cases for violation of BP 22 filed against Chua,
22 involve checks issued on November 30, 1993 or thereafter. Hence, the lower courts grievously erred in
convicting Chua for those 22 cases on the basis of a purported demand letter written and sent to Chua
prior to the issuance of said 22 checks. Checks can only be dishonored after they have been issued and
presented for payment. Before that, dishonor cannot take place. Thus, a demand letter that precedes the
issuance of checks cannot constitute as sufficient notice of dishonor within the contemplation of BP 22. It
is likewise significant to note that aside from the absence of a date, the signature of Chua appearing on
the questioned November 30, 1993 demand letter is not accompanied by any word or phrase indicating
that he affixed his signature thereon to signify his receipt thereof. Indeed, “conviction must rest upon the
strength of the evidence of the prosecution and not on the weakness of the evidence for the defense.”45
In view of the foregoing, the Court cannot accord the demand letter dated November 30, 1993 any weight
and credence. Consequently, it cannot be used to support Chua’s guilt of the offenses charged.

All told, the Court cannot convict Chua for violation of BP 22 with moral certainty.

Chua’s acquittal, however, does not entail the extinguishment of his civil liability for the dishonored checks.
“An acquittal based on lack of proof beyond reasonable doubt does not preclude the award of civil
damages.” For this reason, Chua must be directed to restitute See the total amount of the face value of all
the checks subject of the case with legal interest at the rate of 12% per annum reckoned from the time
the said checks became due and demandable up to June 30, 2013 and 6% per annum from July 1, 2013
until fully paid.

WHEREFORE, the Court GRANTS the Petition. The assailed Decision dated November 11, 2010 of the Court
of Appeals in C.A.-G.R. CR No. 33079 which affirmed the Decisions of the Metropolitan Trial Court of Quezon
City, Branch 36 and the Regional Trial Court of Quezon City, Branch 219 finding petitioner Robert Chua
guilty beyond reasonable doubt of 54 counts of Violation of Batas Pambansa Blg. 22 is

REVERSED and SET ASIDE. Petitioner Robert Chua is hereby ACQUITTED on the ground that his guilt has
not been established beyond reasonable doubt and ordered RELEASED immediately unless he is detained
for some other legal cause. He is ordered, however, to indemnify the private complainant Philip See the
total value of the 54 checks subject of this case plus legal interest of 12% per annum from the time the
said sum became due and demandable until June 30, 2013 and 6% per annum from July 1, 2013 until fully
paid.

SO ORDERED.

Peralta,** *Bersamin,**** Mendoza and Leonen, JJ., concur.

Petition granted, judgment reversed and set aside. Petitioner Robert Chua acquitted.

Notes.—It is not enough for the prosecution to prove that a notice of dishonor was sent to the drawee of
the check — the prosecution must also prove actual receipt of said notice because the fact of service
provided for in the law is reckoned from receipt of such notice of dishonor by the drawee of the check.
(Moster vs. People, 546 SCRA 287 [2008])

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The notice of dishonor of a check, which must be in writing, may be sent to the drawer or maker by the
drawee bank, the holder of the check, or the offended party either by personal delivery or by registered
mail. (Ambito vs. People, 579 SCRA 69 [2009])

——o0o——

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 U-BIX CORPORATION and EDILBERTO B. BRAVO, petitioners, vs. VALERIE ANNE H.
HOLLERO, respondent

G.R. No. 199660. July 13, 2015

Labor Law; Appeals; Surety Bond; In case of a surety bond, the applicable Section 6, Rule VI of the 2005
Revised Rules of Procedure of the National Labor Relations Commission (NLRC) requires that the same
should be accompanied by original and certified true copies of, among others, proof of security deposit or
collateral securing the bond; provided, that a check shall not be considered as an acceptable security.—In
case of a surety bond, the applicable Section 6, Rule VI of the 2005 Revised Rules of Procedure of the
NLRC requires that the same should be accompanied by original and certified true copies of the following:
a) a joint declaration under oath by the employer, his counsel and the bonding company, attesting that the
bond posted is genuine, and shall be in effect until final disposition of the case; b) an indemnity agreement
between the employer-appellant and bonding company; c) proof of security deposit or collateral securing
the bond; provided, that a check shall not be considered as an acceptable security; d) a certificate of
authority from the Insurance Commission; e) certificate of registration from the Securities Exchange
Commission; f) certificate of authority to transact surety business from the Office of the President; g)
certificate of accreditation and authority from the Supreme Court; and h) notarized board resolution or
secretary’s certificate from the bonding company showing its authorized signatories and their specimen
signatures. Here, petitioners did not submit any proof of security deposit or collateral securing the bond.
They themselves admit this in their Petition by stating that they no longer attached a separate document
of security deposit or collateral securing the bond because Mapfre did not find it necessary to require them
to give a security deposit and/or collateral. According to them, Mapfre finds it sufficient that the Indemnity
Agreement attached to the Memorandum of Appeal was signed by petitioner Bravo, the president of
petitioner U-Bix, in his personal capacity.

Procedural Rules and Technicalities; Parties are not at a liberty to choose which rule of technicality to
comply with or not.—It must be noted that right from the start, petitioners were well-represented by
counsel who is presumed to know the explicit requirement under the aforementioned Section 6 that a
surety bond should be accompanied by a proof of security deposit or collateral. Hence, petitioners cannot
reason out that they were not able to submit the same because
Mapfre did not require them to give such a deposit or collateral. What appears here instead is that while
petitioners seem to be aware of the said requirement, they risked dispensing with the same and chose to
stand by the alleged word of Mapfre that they need not submit any proof of security deposit or collateral.
It is well to remind petitioners that parties are not at a liberty to choose which rule of technicality to comply
with or not. To stress, “[t]he requirements for perfecting an appeal must, as a rule, be strictly followed.
Such requirements are considered indispensable interdictions against needless delay and are necessary for
the orderly discharge of the judicial business.”

Labor Law; Appeals; Surety Bond; The intention in requiring a security deposit or collateral to secure the
bond, apart from the indemnity agreement between the employer-appellant and the bonding company, is
to further ensure recovery by the employee of the judgment award should the same be affirmed, in any
and all eventualities.—Petitioners are clutching at straws in impressing upon this Court that petitioner Bravo,
in signing the Indemnity Agreement in his personal capacity, has already bound himself to be jointly and
severally liable with Mapfre for the monetary award and this has the effect of securing the bond. Suffice it
to say that “[t]he obvious purpose of an appeal bond is to ensure, during the period of appeal, against any
occurrence that would defeat or diminish recovery by the aggrieved employees under the judgment if
subsequently affirmed.” To the Court’s mind, the intention in requiring a security deposit or collateral to
secure the bond, apart from the indemnity agreement between the employer-appellant and the bonding
company, is to further ensure recovery by the employee of the judgment award should the same be
affirmed, in any and all eventualities. This is also in keeping with the purpose of the bond requirement
which is to “discourage employers from using the appeal to delay, or even evade, their obligation to satisfy
their employee’s possible just and lawful claims.” Besides, it is an all-too familiar rule in statutory

Page 52 of 61
construction that when a rule is clear and unambiguous, interpretation need not be resorted to. Since
Section 6, Rule VI of the 2005 NLRC Rules of Procedure requires that a surety bond should be accompanied
by both an indemnity agreement and proof of security deposit or collateral securing the bond, among
others, that two must be presented. The submission of one cannot be considered sufficient as to dispense
with the other. No resort to any interpretation is necessary, there is only room for application.

Same; Same; It is a settled rule that “the perfection of an appeal in the manner and within the period
prescribed by law is, not only mandatory, but jurisdictional, and failure to conform to the rules will render
the judgment sought to be reviewed final and unappealable.”—It is a settled rule that “the perfection of an
appeal in the manner and within the period prescribed by law is, not only mandatory, but jurisdictional,
and failure to conform to the rules will render the judgment sought to be reviewed final and unappealable.”
As can be gleaned from the foregoing, petitioners failed to perfect their appeal in the manner prescribed
by the rules. Hence and as correctly ruled by the NLRC and affirmed by the CA, the April 16, 2010 Order
of Labor Arbiter Flores approving the recomputation of the money award and ordering the issuance of a
writ of execution has already attained finality and this warranted the dismissal of petitioners’ appeal
therefrom before the NLRC.

Liberal Interpretation; The policy of liberal interpretation is qualified by the requirement that there must be
exceptional circumstances to allow the relaxation of the rules.—It must be emphasized, however, that “the
policy of liberal interpretation is qualified by the requirement that there must be exceptional circumstances
to allow the relaxation of the rules. Absent exceptional circumstances, [the Court adheres] to the rule that
certain procedural precepts must remain inviolable x x x.” After all, an “appeal is not a constitutional right,
but a mere statutory privilege. Thus, parties who seek to avail themselves of it must comply with the
statutes or rules allowing it.” The Court adheres to the strict interpretation of the rule in this case in the
absence of exceptional circumstance or compelling reason to depart from the same.

Labor Law; Separation Pay; Backwages; The computation of separation pay is based on the length of the
employee’s service; and the computation of backwages is based on the actual period when the employee
was unlawfully prevented from working.—This Court has already meticulously explained in Bani Rural Bank,
Inc. v. De Guz-man, 709 SCRA 330 (2013), that: The computation of separation pay is based on the length
of the employee’s service; and the computation of backwages is based on the actual period when the
employee was unlawfully prevented from working. The basis of computation of backwages. The
computation of backwages depends on the final awards adjudged as a consequence of illegal dismissal, in
that: First, when reinstatement is ordered, the general concept under Article 279 of the Labor Code, as
amended, computes the backwages from the time of dismissal until the employee’s reinstatement. The
computation of backwages (and similar benefits considered part of the backwages) can even continue
beyond the decision of the labor arbiter or NLRC and ends only when the employee is actually reinstated.
Second, when separation pay is ordered in lieu of reinstatement (in the event that this aspect of the case
is disputed) or reinstatement is waived by the employee (in the event that the payment of separation pay,
in lieu, is not disputed), backwages is computed from the time of dismissal until the finality of the decision
ordering separation pay. Third, when separation pay is ordered after the finality of the decision ordering
the reinstatement by reason of a supervening event that makes the award of reinstatement no longer
possible x x x backwages is computed from the time of dismissal until the finality of the decision ordering
separation pay.

PETITION for review on certiorari of the decision and resolution of the Court of Appeals.

The facts are stated in the resolution of the Court.

Belo, Gozon, Parel, Asuncion & Lucila for petitioners.

Santos, Parungao, Aquino, Abejo & Santos Law Offices and Abejo, Tayag & Juarez Law Offices for
respondent.

Page 53 of 61
RESOLUTION

DEL CASTILLO,** J.:

This is a Petition for Review on Certiorari of the Court of Appeals (CA) Decision dated August 9, 2011 and
Resolution dated December 7, 2011 in C.A.--G.R. S.P. No. 117199, which affirmed the National Labor
Relations Commission (NLRC) Resolution dated June 29, 2010 and Resolution dated September 27, 2010
denying the appeal of petitioners U-Bix Corporation and Edilberto B. Bravo (petitioners) from Labor Arbiter
Enrique S. Flores, Jr.’s (Labor Arbiter Flores) Order dated April 16, 2010 approving the recomputation of
the monetary award in favor of respondent Valerie Anne H. Hollero (respondent) and ordering the issuance
of a writ of execution.

Factual Antecedents

Petitioners filed a complaint against respondent for reimbursement of training costs plus interest, exemplary
damages, attorney’s fees and litigation expenses, docketed as NLRC-NCR-Case No. 00-05-03696-97. On
the other hand, respondent filed against petitioners a complaint for illegal dismissal, unpaid wages,
backwages, moral and exemplary damages, and attorney’s fees, docketed as NLRC-NCR-Case No. 00-08-
05988-97. The two complaints were later on consolidated.

In a Decision dated February 8, 1999, the Labor Arbiter found respondent’s dismissal to be valid; she was
also ordered to reimburse the amount spent by petitioners for her training, with interest at the rate of 12%
per annum.

On appeal, the NLRC reversed the Labor Arbiter’s Decision. Finding respondent to have been illegally
dismissed, it awarded her backwages from the date of her dismissal up to the date of the NLRC Decision
and separation pay in lieu of reinstatement due to strained relations. Anent petitioners’ complaint for
reimbursement, the NLRC held that the same is one for collection of sum of money over which it has no
jurisdiction. Hence, the dispositive portion of the NLRC Resolution dated July 12, 1999:

WHEREFORE, premises considered, the assailed decision dated February 8, 1999, is hereby REVERSED and
SET ASIDE and a new one entered as follows:

A. Dismissing the complaint of the [petitioner]

U-BIX CORPORATION, in NLRC NCR Case No. 00-05-03696-97 for lack of jurisdiction; and

B. Finding the dismissal of [respondent] Valerie Anne H. Hollero in NLRC NCR Case No. 00-08-05988-97
to be illegal thereby ordering [petitioners] U-BIX CORPORATION/Edilberto B. Bravo to pay the former the
following:

1. Backwages P520,000.00

2. Separation Pay 60,000.00; and

TOTAL P580,000.00

All other claims for damages are dismissed for insufficiency of evidence.

SO ORDERED.

Page 54 of 61
Petitioners’ Petition for Certiorari before the CA was dismissed through a Decision dated January 8, 2007.
Since petitioners’ motion for reconsideration thereto was likewise denied by the CA, they elevated the case
before this Court.

In a Decision dated October 31, 2008, the Court affirmed the CA Decision. This became final and executory
on March 12, 2009.

Subsequently, respondent filed a Motion for Issuance of Writ of Execution before the Labor Arbiter. In the
course of the pre-execution conferences, petitioners moved for the recomputation of the monetary award.
Acting on the same, Labor Arbiter Elizabeth C. Avedoso (Labor Arbiter Avedoso) came up with a recomputed
total monetary award of P3,330,512.82. Petitioners opposed this recomputation for lack of legal basis.
Thus, a second recomputation in the reduced amount of P3,270,512.82 was presented to the parties in a
conference held on February 18, 2010. Still, they failed to reach an agreement.

In the meantime, respondent filed a Supplemental Motion for Issuance of Writ of Execution to which
petitioners filed an Opposition.

Ruling of the Labor Arbiter

In an Order dated April 16, 2010, Labor Arbiter Flores found the recomputation of the total award at
P3,270,512.82 correct. Hence, he ruled:

Finding the Motion for Issuance of Writ of Execution to be well-taken, the same is hereby GRANTED.

WHEREFORE, the corresponding Writ of Execution be issued pursuant to the recomputed monetary award
in the amount of P3,270,512.8[2].

SO ORDERED.

Accordingly, Labor Arbiter Flores issued a Writ of Execution dated April 20, 2010.

Ruling of the National Labor Relations Commission

Petitioners filed before the NLRC a Notice and Memorandum of Appeal. At the same time, they posted a
corresponding supersedeas bond issued by Mapfre Insular Insurance Corporation (Mapfre) in the amount
of P3,270,512.82. Subsequently, petitioners also filed an Omnibus Motion to Quash Writ of Execution and
to Lift Order of Garnishment.

In a Resolution dated June 29, 2010, the NLRC denied for lack of merit petitioners’ Appeal and their
Omnibus Motion to Quash Writ of Execution and to Lift Order of Garnishment.

With respect to the appeal, the NLRC held that the super-sedeas bond posted by petitioners has no force
and effect, viz.:

A perusal of the bond, however, revealed that the Certification of Accreditation and Authority of Jose Midas
P. Marquez, Supreme Court Administrator, covers an authority to transact surety business in relation to
CIVIL/ SPECIAL PROCEEDINGS CASES ONLY filed/pending before the Regional Trial Courts of Caloocan
City, City of Manila, Las Piñas City, Makati City, Marikina City, Mandaluyong City, Muntinlupa City, Parañaque
City, Pasay City, Pasig City and Quezon City x x x. Clearly, the authority does not include labor cases filed
before the NLRC. Thus, as far as the NLRC is concerned, the [s]upersedeas bond posted by U-Bix
Corporation has no force and effect.

Page 55 of 61
Assuming only that it is authorized, it failed to present proof of security deposit or collateral securing the
bond as required by Section 6(c) of Rule 6, NLRC Rules of Procedure. U-Bix failed to perfect its appeal.
Therefore, the Order appealed from has attained finality.

Anent the Motion to Quash Writ of Execution and to Lift Order of Garnishment, it held as follows:

As mentioned earlier, the Order approving the judgment award has become final and executory, thus, the
issuance of the writ of execution is proper. There is nothing more left to be done except its execution.

Hence:

WHEREFORE, premises considered, the Appeal, Omnibus Motion to Quash Writ of Execution and to Lift
Order of Garnishment filed by U-Bix Corporation and Edilberto Bravo are DENIED for lack of merit.

SO ORDERED.

Petitioners moved for reconsideration which was dismissed in a Resolution30 dated September 27, 2010.

Ruling of the Court of Appeals

Thus, petitioners sought recourse from the CA through a Petition for Certiorari with Prayer for the Issuance
of Temporary Restraining Order and/or Writ of Preliminary Injunction. They imputed upon the NLRC grave
abuse of discretion amounting to lack or in excess of jurisdiction when it denied their appeal outright on
the ground that the supersedeas bond accompanying the appeal has no force and effect. They argue that:
(1) Mapfre is a bonding company accredited by this Court and the NLRC; (2) petitioner Bravo’s signature
in the indemnity agreement constitutes his personal guarantee of the supersedeas bond; and (3) the
grounds relied upon in their memorandum of appeal are meritorious.

In a Decision dated August 9, 2011, the CA denied the Petition. Citing Article 22333 of the Labor Code and
Section 6 Rule VI of the New Rules of Procedure of the NLRC, it emphasized that the filing of a supersedeas
bond for the perfection of an appeal is mandatory and jurisdictional. In this case, the CA found the
supersedeas bond posted by petitioners to be irregular in view of the Certification of Accreditation and
Authority issued by the Office of the Court Administrator (OCA) that Mapfre’s authority to transact business
was limited only to Civil/Special cases and does not cover labor cases. Besides, the said court found no
meritorious ground to relax the requirement of posting a supersedeas bond. Thus:

WHEREFORE, in view of the foregoing premises, the petition filed in this case is hereby DENIED for lack of
merit. The Resolutions issued by the Third Division of the National Labor Relations Commission dated June
29, 2010 and September 27, 2010 in NLRC NCR Case No. 00-05-03696-97 is hereby AFFIRMED.

SO ORDERED.

As petitioners’ Motion for Reconsideration was likewise denied in a Resolution dated December 7, 2011,
they are now before this Court through this Petition for Review on Certiorari.

Issues

THE COURT OF APPEALS COMMITTED GRAVE REVERSIBLE ERROR IN AFFIRMING THE NLRC’S DECISION
DISMISSING OUTRIGHT PETITIONERS’ APPEAL ON THE GROUND THAT THE ACCOMPANYING
SUPERSEDEAS BOND WAS INVALID, CONSIDERING THAT:

Page 56 of 61
A. MAPFRE INSULAR INSURANCE CORPORATION IS A BONDING COMPANY ACCREDITED BY BOTH THE
NLRC AND THE SUPREME COURT.

B. PETITIONER BRAVO’S SIGNATURE IN THE INDEMNITY AGREEMENT CONSTITUTES HIS PERSONAL

GUARANTEE OF THE SUPER-SEDEAS BOND.

C. PETITIONERS’ MEMORANDUM OF APPEAL IS IMPRESSED WITH MERIT SUCH THAT A RESOLUTION OF

THE SUBSTANTIAL ISSUES RAISED THEREIN WAS WARRANTED.38

Our Ruling

The Petition has no merit.

Perfection of an appeal in the manner

and within the period prescribed by
law is not only mandatory and juris-
dictional and failure to conform to the
rules will render the judgment sought
to be reviewed final and unappealable.

Petitioners argue that the CA erred in concluding that the supersedeas bond they posted was irregular and
therefore has no force and effect based on the OCA certification that Mapfre’s authority to transact business
as a bonding company refers only to civil and special cases. They call attention to the Memorandum39
dated June 8, 2010 issued by the NLRC’s Legal and Enforcement Division for the information and guidance
of all Presiding/Commissioners and Executive/Labor Arbiters regarding the list of bonding companies
accredited by this Court with respect to criminal and civil cases, which include Mapfre. Petitioners assert
that the NLRC’s endorsement of the said list to all Presiding Commissioners and Executive/Labor Arbiters
could only mean that the bonding companies therein listed can also well be considered for labor cases.

The Court agrees with petitioners. In the 2013 Guidelines for Accreditation of Surety Companies40 of the
NLRC, one of the requirements for the accreditation of a bonding company is the submission of a valid
Certificate of Accreditation and Authority issued by the OCA. Upon a bonding company’s submission of the
same and compliance with the other requirements, the Legal and Enforcement Division of the NLRC shall
furnish all Presiding/Commissioners and Deputy/Executive Clerks of Court a copy of the Certificate of
Accredita-tion and Authority and a list of accredited surety companies and their agents. While the said
guidelines were issued only in 2013, it is logical to conclude that the Memorandum dated June 8, 2010 was
for the same purpose mentioned, i.e., to furnish all Presiding/Commissioners and Executive/Labor Arbiters
a list of accredited bonding companies. For one, the said Memorandum was issued by the Legal and
Enforcement Division to all Presiding/Commissioners and Executive/Labor Arbiters or similar to what is
outlined under the aforementioned guidelines. For another, and as aptly pointed out by petitioners, there
could have been no other plausible reason for the said issuance but to apprise the concerned labor officials
of the list of bonding companies which they may consider in transacting business in their respective offices.

Nevertheless, the Court still finds that petitioners failed to comply with the bond requirement in perfecting
their appeal. Article 223 of the Labor Code provides in part:

Article 223. Appeal.—Decisions, awards, or orders of the Labor Arbiter are final and executory unless
appealed to the Commission by any or both parties within ten (10) calendar days from receipt of such
decisions, awards, or orders. x x x

xxxx

Page 57 of 61
In case of a judgment involving a monetary award, an appeal by the employer may be perfected only upon
the posting of a cash or surety bond issued by a reputable bonding company duly accredited by the
Commission in the amount equivalent to the monetary award in the judgment appealed from. (Emphasis
supplied)

In case of a surety bond, the applicable Section 6, Rule VI of the 2005 Revised Rules of Procedure of the
NLRC requires that the same should be accompanied by original and certified true copies of the following:

a) a joint declaration under oath by the employer, his counsel and the bonding company, attesting that the
bond posted is genuine, and shall be in effect until final disposition of the case;

b) an indemnity agreement between the employer-appellant and bonding company;

c) proof of security deposit or collateral securing the bond; provided, that a check shall not be considered
as an acceptable security;

d) a certificate of authority from the Insurance Commission;

e) certificate of registration from the Securities Exchange Commission;

f) certificate of authority to transact surety business from the Office of the President;

g) certificate of accreditation and authority from the Supreme Court; and

h) notarized board resolution or secretary’s certificate from the bonding company showing its authorized
signatories and their specimen signatures.

Here, petitioners did not submit any proof of security deposit or collateral securing the bond. They
themselves admit this in their Petition by stating that they no longer attached a separate document of
security deposit or collateral securing the bond because Mapfre did not find it necessary to require them to
give a security deposit and/or collateral. According to them, Mapfre finds it sufficient that the Indemnity
Agreement attached to the Memorandum of Appeal was signed by petitioner Bravo, the president of
petitioner U-Bix, in his personal capacity.

The Court, however, cannot accept such flimsy excuse of petitioners.

It must be noted that right from the start, petitioners were well-represented by counsel who is presumed
to know the explicit requirement under the aforementioned Section 6 that a surety bond should be
accompanied by a proof of security deposit or collateral. Hence, petitioners cannot reason out that they
were not able to submit the same because Mapfre did not require them to give such a deposit or collateral.
What appears here instead is that while petitioners seem to be aware of the said requirement, they risked
dispensing with the same and chose to stand by the alleged word of Mapfre that they need not submit any
proof of security deposit or collateral. It is well to remind petitioners that parties are not at a liberty to
choose which rule of technicality to comply with or not. To stress, “[t]he requirements for perfecting an
appeal must, as a rule, be strictly followed. Such requirements are considered indispensable interdictions
against needless delay and are necessary for the orderly discharge of the judicial business.”

In the same vein, petitioners are clutching at straws in impressing upon this Court that petitioner Bravo, in
signing the Indemnity Agreement in his personal capacity, has already bound himself to be jointly and
severally liable with Mapfre for the monetary award and this has the effect of securing the bond. Suffice it
to say that “[t]he obvious purpose of an appeal bond is to ensure, during the period of appeal, against any
occurrence that would defeat or diminish recovery by the aggrieved employees under the judgment if
subsequently affirmed.” To the Court’s mind, the intention in requiring a security deposit or collateral to

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secure the bond, apart from the indemnity agreement between the employer-appellant and the bonding
company, is to further ensure recovery by the employee of the judgment award should the same be
affirmed, in any and all eventualities. This is also in keeping with the purpose of the bond requirement
which is to “discourage employers from using the appeal to delay, or even evade, their obligation to satisfy
their employee’s possible just and lawful claims.”43 Besides, it is an all-too familiar rule in statutory
construction that when a rule is clear and unambiguous, interpretation need not be resorted to.44 Since
Section 6, Rule VI of the 2005 NLRC Rules of Procedure requires that a surety bond should be accompanied
by both an indemnity agreement and proof of security deposit or collateral securing the bond, among
others, that two must be presented. The submission of one cannot be considered sufficient as to dispense
with the other. No resort to any interpretation is necessary, there is only room for application.45

It is a settled rule that “the perfection of an appeal in the manner and within the period prescribed by law
is, not only mandatory, but jurisdictional, and failure to conform to the rules will render the judgment
sought to be reviewed final and unappealable.”46 As can be gleaned from the foregoing, petitioners failed
to perfect their appeal in the manner prescribed by the rules. Hence and as correctly ruled by the NLRC
and affirmed by the CA, the April 16, 2010 Order of Labor Arbiter Flores approving the recomputation of
the money award and ordering the issuance of a writ of execution has already attained finality and this
warranted the dismissal of petitioners’ appeal therefrom before the NLRC.

It is worth stating that indeed in several cases, the Court — relaxed the rigid application of the rules of
procedure to afford the parties the opportunity to fully ventilate their cases on the merits. This is in line
with the time-honored principle that cases should be decided only after giving all the parties the chance to
argue their causes and defenses. Technicality and procedural imperfections should thus not serve as bases
of decisions. In that way, the ends of justice would be better served. For indeed, the general objective of
procedure is to facilitate the application of justice to the rival claims of contending parties, bearing always
in mind that procedure is not to hinder but to promote the administration of justice.

It must be emphasized, however, that “the policy of liberal interpretation is qualified by the requirement
that there must be exceptional circumstances to allow the relaxation of the rules. Absent exceptional
circumstances, [the Court adheres] to the rule that certain procedural precepts must remain inviolable
x x x.”48 After all, an “appeal is not a constitutional right, but a mere statutory privilege. Thus, parties who
seek to avail themselves of it must comply with the statutes or rules allowing it.”49 The Court adheres to
the strict interpretation of the rule in this case in the absence of exceptional circumstance or compelling
reason to depart from the same.

The questioned recomputation

of monetary award is in order.

Petitioners argue that the recomputation of the monetary award in the sum of P3,270,512.82 is erroneous.
In particular, they assail the computation of backwages from the time of respondent’s dismissal up to the
finality of the Court’s October 31, 2008 Decision in the illegal dismissal case on March 12, 2009. They point
out that full backwages is computed from the time an illegally dismissed employee’s compensation is
withheld up to the time of his actual reinstatement. And since the July 12, 1999 Decision of the NLRC
awarded separation pay in lieu of reinstatement, petitioners argue that backwages should no longer accrue
beyond the date of the said NLRC Decision. This is because when the NLRC awarded separation pay in lieu
of reinstatement in its Decision, the employment tie between petitioners and respondent was already
effectively severed.

This Court has already meticulously explained in Bani Rural Bank, Inc. v. De Guzman that:

The computation of separation pay is based on the length of the employee’s service; and the computation
of backwages is based on the actual period when the employee was unlawfully prevented from working.

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The basis of computation of backwages

The computation of backwages depends on the final awards adjudged as a consequence of illegal dismissal,
in that:

First, when reinstatement is ordered, the general concept under Article 279 of the Labor Code, as amended,
computes the backwages from the time of dismissal until the employee’s reinstatement. The computation
of backwages (and similar benefits considered part of the backwages) can even continue beyond the
decision of the labor arbiter or NLRC and ends only when the employee is actually reinstated.

Second, when separation pay is ordered in lieu of reinstatement (in the event that this aspect of the case
is disputed) or reinstatement is waived by the employee (in the event that the payment of separation pay,
in lieu, is not disputed), backwages is computed from the time of dismissal until the finality of the decision
ordering separation pay.

Third, when separation pay is ordered after the finality of the decision ordering the reinstatement by reason
of a supervening event that makes the award of reinstatement no longer possible x x x backwages is
computed from the time of dismissal until the finality of the decision ordering separation pay.

The above computation of backwages, when separation pay is ordered, has been the Court’s consistent
ruling. In Session Delights Ice Cream and Fast Foods v. Court Appeals Sixth Division, we explained that the
finality of the decision becomes the reckoning point because in allowing separation pay, the final decision
effectively declares that the employment relationship ended so that separation pay and backwages are to
be computed up to that point.

We may also view the proper computation of backwages (whether based on reinstatement or an order of
separation pay) in terms of the life of the employment relationship itself.

When reinstatement is ordered, the employment relationship continues. Once the illegally dismissed
employee is reinstated, any compensation and benefits thereafter received stem from the employee’s
continued employment. In this instance, backwages are computed only up until the reinstatement of the
employee since after the reinstatement, the employee begins to receive compensation from his resumed
employment.

When there is an order of separation pay (in lieu of reinstatement or when the reinstatement aspect is
waived or subsequently ordered in light of a supervening event making the award of reinstatement no
longer possible), the employment relationship is terminated only upon the finality of the decision ordering
the separation pay. The finality of the decision cuts off the employment relationship and represents the
final settlement of the rights and obligations of the parties against each other. Hence, backwages no longer
accumulate upon the finality of the decision ordering the payment of separation pay since the employee is
no longer entitled to any compensation from the employer by reason of the severance of his employment.51
(Citations omitted; emphases and underscoring supplied)

Clearly, therefore, respondent is entitled to backwages computed from the time she was illegally dismissed
up to the date of the finality of the Court’s October 31, 2008 Decision in the illegal dismissal case on March
12, 2009. The Court, thus, finds the subject recomputation of money award to be in order.

WHEREFORE, premises considered, the Petition is here-by DENIED. The Decision dated August 9, 2011
and the Resolution dated December 7, 2011 of the Court of Appeals in C.A.-G.R. S.P. No. 117199 are
hereby AFFIRMED.

SO ORDERED.

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Peralta,*** Perez,**** Mendoza and Leonen, JJ., concur.

Petition denied, judgment and resolution affirmed.

Notes.—In case of a judgment involving a monetary award, an appeal by the employer may be perfected
only upon the posting of a cash or surety bond issued by a reputable bonding company duly accredited by
the Commission in the amount equivalent to the monetary award in the judgment appealed from. (Lopez
vs. Quezon City Sports Club, Inc., 576 SCRA 188 [2009])

Appeals involving monetary awards are perfected only upon compliance with the following mandatory
requisites, namely: 1) payment of the appeal fees; 2) filing of the memorandum of appeal; and 3) payment
of the required cash or surety bond. (Id.)

——o0o——

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