1
PART 1: Preliminary Title (Civil Code)
PUBLICATION AND EFFECTIVITY OF LAWS, WHICH LAWS MUST BE PUBLISHED, WHICH NEED
NOT
EN BANC
G.R. No. L-63915 April 24, 1985
LORENZO M. TAÑADA, ABRAHAM F. SARMIENTO, and MOVEMENT OF ATTORNEYS FOR
BROTHERHOOD, INTEGRITY AND NATIONALISM, INC. [MABINI], petitioners,
vs.
HON. JUAN C. TUVERA, in his capacity as Executive Assistant to the President, HON.
JOAQUIN VENUS, in his capacity as Deputy Executive Assistant to the President ,
MELQUIADES P. DE LA CRUZ, in his capacity as Director, Malacañang Records Office, and
FLORENDO S. PABLO, in his capacity as Director, Bureau of Printing, respondents.
ESCOLIN, J.:
Invoking the people's right to be informed on matters of public concern, a right recognized in
Section 6, Article IV of the 1973 Philippine Constitution, 1 as well as the principle that laws to
be valid and enforceable must be published in the Official Gazette or otherwise effectively
promulgated, petitioners seek a writ of mandamus to compel respondent public officials to
publish, and/or cause the publication in the Official Gazette of various presidential decrees,
letters of instructions, general orders, proclamations, executive orders, letter of
implementation and administrative orders.
Specifically, the publication of the following presidential issuances is sought:
a] Presidential Decrees Nos. 12, 22, 37, 38, 59, 64, 103, 171, 179, 184,
197, 200, 234, 265, 286, 298, 303, 312, 324, 325, 326, 337, 355, 358, 359,
360, 361, 368, 404, 406, 415, 427, 429, 445, 447, 473, 486, 491, 503, 504,
521, 528, 551, 566, 573, 574, 594, 599, 644, 658, 661, 718, 731, 733, 793,
800, 802, 835, 836, 923, 935, 961, 1017-1030, 1050, 1060-1061, 1085,
1143, 1165, 1166, 1242, 1246, 1250, 1278, 1279, 1300, 1644, 1772, 1808,
1810, 1813-1817, 1819-1826, 1829-1840, 1842-1847.
b] Letter of Instructions Nos.: 10, 39, 49, 72, 107, 108, 116, 130, 136, 141,
150, 153, 155, 161, 173, 180, 187, 188, 192, 193, 199, 202, 204, 205, 209,
211-213, 215-224, 226-228, 231-239, 241-245, 248, 251, 253-261, 263-
269, 271-273, 275-283, 285-289, 291, 293, 297-299, 301-303, 309, 312-
315, 325, 327, 343, 346, 349, 357, 358, 362, 367, 370, 382, 385, 386, 396-
397, 405, 438-440, 444- 445, 473, 486, 488, 498, 501, 399, 527, 561, 576,
587, 594, 599, 600, 602, 609, 610, 611, 612, 615, 641, 642, 665, 702, 712-
713, 726, 837-839, 878-879, 881, 882, 939-940, 964,997,1149-1178,1180-
1278.
c] General Orders Nos.: 14, 52, 58, 59, 60, 62, 63, 64 & 65.
d] Proclamation Nos.: 1126, 1144, 1147, 1151, 1196, 1270, 1281, 1319-
1526, 1529, 1532, 1535, 1538, 1540-1547, 1550-1558, 1561-1588, 1590-
1595, 1594-1600, 1606-1609, 1612-1628, 1630-1649, 1694-1695, 1697-
1701, 1705-1723, 1731-1734, 1737-1742, 1744, 1746-1751, 1752, 1754,
1762, 1764-1787, 1789-1795, 1797, 1800, 1802-1804, 1806-1807, 1812-
1814, 1816, 1825-1826, 1829, 1831-1832, 1835-1836, 1839-1840, 1843-
1844, 1846-1847, 1849, 1853-1858, 1860, 1866, 1868, 1870, 1876-1889,
1892, 1900, 1918, 1923, 1933, 1952, 1963, 1965-1966, 1968-1984, 1986-
2028, 2030-2044, 2046-2145, 2147-2161, 2163-2244.
e] Executive Orders Nos.: 411, 413, 414, 427, 429-454, 457- 471, 474-492,
494-507, 509-510, 522, 524-528, 531-532, 536, 538, 543-544, 549, 551-
553, 560, 563, 567-568, 570, 574, 593, 594, 598-604, 609, 611- 647, 649-
677, 679-703, 705-707, 712-786, 788-852, 854-857.
f] Letters of Implementation Nos.: 7, 8, 9, 10, 11-22, 25-27, 39, 50, 51, 59,
76, 80-81, 92, 94, 95, 107, 120, 122, 123.
g] Administrative Orders Nos.: 347, 348, 352-354, 360- 378, 380-433,
436-439.
The respondents, through the Solicitor General, would have this case dismissed outright on
the ground that petitioners have no legal personality or standing to bring the instant petition.
The view is submitted that in the absence of any showing that petitioners are personally and
directly affected or prejudiced by the alleged non-publication of the presidential issuances in
question 2 said petitioners are without the requisite legal personality to institute this
mandamus proceeding, they are not being "aggrieved parties" within the meaning of Section
3, Rule 65 of the Rules of Court, which we quote:
SEC. 3. Petition for Mandamus.—When any tribunal, corporation, board
or person unlawfully neglects the performance of an act which the law
specifically enjoins as a duty resulting from an office, trust, or station, or
unlawfully excludes another from the use a rd enjoyment of a right or
office to which such other is entitled, and there is no other plain, speedy
and adequate remedy in the ordinary course of law, the person aggrieved
thereby may file a verified petition in the proper court alleging the facts
with certainty and praying that judgment be rendered commanding the

defendant, immediately or at some other specified time, to do the act
required to be done to Protect the rights of the petitioner, and to pay the
damages sustained by the petitioner by reason of the wrongful acts of
the defendant.
Upon the other hand, petitioners maintain that since the subject of the petition concerns a
public right and its object is to compel the performance of a public duty, they need not show
any specific interest for their petition to be given due course.
The issue posed is not one of first impression. As early as the 1910 case of Severino vs.
Governor General, 3 this Court held that while the general rule is that "a writ of mandamus
would be granted to a private individual only in those cases where he has some private or
particular interest to be subserved, or some particular right to be protected, independent of
that which he holds with the public at large," and "it is for the public officers exclusively to
apply for the writ when public rights are to be subserved [Mithchell vs. Boardmen, 79 M.e.,
469]," nevertheless, "when the question is one of public right and the object of the
mandamus is to procure the enforcement of a public duty, the people are regarded as the
real party in interest and the relator at whose instigation the proceedings are instituted need
not show that he has any legal or special interest in the result, it being sufficient to show that
he is a citizen and as such interested in the execution of the laws [High, Extraordinary Legal
Remedies, 3rd ed., sec. 431].
Thus, in said case, this Court recognized the relator Lope Severino, a private individual, as a
proper party to the mandamus proceedings brought to compel the Governor General to call
a special election for the position of municipal president in the town of Silay, Negros
Occidental. Speaking for this Court, Mr. Justice Grant T. Trent said:
We are therefore of the opinion that the weight of authority supports the
proposition that the relator is a proper party to proceedings of this
character when a public right is sought to be enforced. If the general rule
in America were otherwise, we think that it would not be applicable to
the case at bar for the reason 'that it is always dangerous to apply a
general rule to a particular case without keeping in mind the reason for
the rule, because, if under the particular circumstances the reason for the
rule does not exist, the rule itself is not applicable and reliance upon the
rule may well lead to error'
No reason exists in the case at bar for applying the general rule insisted
upon by counsel for the respondent. The circumstances which surround
this case are different from those in the United States, inasmuch as if the
relator is not a proper party to these proceedings no other person could
be, as we have seen that it is not the duty of the law officer of the
Government to appear and represent the people in cases of this
character.
2
The reasons given by the Court in recognizing a private citizen's legal personality in the
aforementioned case apply squarely to the present petition. Clearly, the right sought to be
enforced by petitioners herein is a public right recognized by no less than the fundamental
law of the land. If petitioners were not allowed to institute this proceeding, it would indeed
be difficult to conceive of any other person to initiate the same, considering that the Solicitor
General, the government officer generally empowered to represent the people, has entered
his appearance for respondents in this case.
Respondents further contend that publication in the Official Gazette is not a sine qua non
requirement for the effectivity of laws where the laws themselves provide for their own
effectivity dates. It is thus submitted that since the presidential issuances in question contain
special provisions as to the date they are to take effect, publication in the Official Gazette is
not indispensable for their effectivity. The point stressed is anchored on Article 2 of the Civil
Code:
Art. 2. Laws shall take effect after fifteen days following the completion
of their publication in the Official Gazette, unless it is otherwise provided,
...
The interpretation given by respondent is in accord with this Court's construction of said
article. In a long line of decisions,4 this Court has ruled that publication in the Official Gazette
is necessary in those cases where the legislation itself does not provide for its effectivity
date-for then the date of publication is material for determining its date of effectivity, which
is the fifteenth day following its publication-but not when the law itself provides for the date
when it goes into effect.
Respondents' argument, however, is logically correct only insofar as it equates the effectivity
of laws with the fact of publication. Considered in the light of other statutes applicable to the
issue at hand, the conclusion is easily reached that said Article 2 does not preclude the
requirement of publication in the Official Gazette, even if the law itself provides for the date
of its effectivity. Thus, Section 1 of Commonwealth Act 638 provides as follows:
Section 1. There shall be published in the Official Gazette [1] all important
legisiative acts and resolutions of a public nature of the, Congress of the
Philippines; [2] all executive and administrative orders and
proclamations, except such as have no general applicability; [3] decisions
or abstracts of decisions of the Supreme Court and the Court of Appeals
as may be deemed by said courts of sufficient importance to be so
published; [4] such documents or classes of documents as may be
required so to be published by law; and [5] such documents or classes of
documents as the President of the Philippines shall determine from time
to time to have general applicability and legal effect, or which he may
authorize so to be published. ...

The clear object of the above-quoted provision is to give the general public adequate notice
of the various laws which are to regulate their actions and conduct as citizens. Without such
notice and publication, there would be no basis for the application of the maxim "ignorantia
legis non excusat." It would be the height of injustice to punish or otherwise burden a citizen
for the transgression of a law of which he had no notice whatsoever, not even a constructive
one.
Perhaps at no time since the establishment of the Philippine Republic has the publication of
laws taken so vital significance that at this time when the people have bestowed upon the
President a power heretofore enjoyed solely by the legislature. While the people are kept
abreast by the mass media of the debates and deliberations in the Batasan Pambansa—and
for the diligent ones, ready access to the legislative records—no such publicity accompanies
the law-making process of the President. Thus, without publication, the people have no
means of knowing what presidential decrees have actually been promulgated, much less a
definite way of informing themselves of the specific contents and texts of such decrees. As
the Supreme Court of Spain ruled: "Bajo la denominacion generica de leyes, se comprenden
tambien los reglamentos, Reales decretos, Instrucciones, Circulares y Reales ordines dictadas
de conformidad con las mismas por el Gobierno en uso de su potestad.5
The very first clause of Section I of Commonwealth Act 638 reads: "There shall be published
in the Official Gazette ... ." The word "shall" used therein imposes upon respondent officials
an imperative duty. That duty must be enforced if the Constitutional right of the people to be
informed on matters of public concern is to be given substance and reality. The law itself
makes a list of what should be published in the Official Gazette. Such listing, to our mind,
leaves respondents with no discretion whatsoever as to what must be included or excluded
from such publication.
The publication of all presidential issuances "of a public nature" or "of general applicability"
is mandated by law. Obviously, presidential decrees that provide for fines, forfeitures or
penalties for their violation or otherwise impose a burden or. the people, such as tax and
revenue measures, fall within this category. Other presidential issuances which apply only to
particular persons or class of persons such as administrative and executive orders need not
be published on the assumption that they have been circularized to all concerned. 6
It is needless to add that the publication of presidential issuances "of a public nature" or "of
general applicability" is a requirement of due process. It is a rule of law that before a person
may be bound by law, he must first be officially and specifically informed of its contents. As
Justice Claudio Teehankee said in Peralta vs. COMELEC 7:
In a time of proliferating decrees, orders and letters of instructions which
all form part of the law of the land, the requirement of due process and
the Rule of Law demand that the Official Gazette as the official
government repository promulgate and publish the texts of all such
decrees, orders and instructions so that the people may know where to
obtain their official and specific contents.
3
The Court therefore declares that presidential issuances of general application, which have
not been published, shall have no force and effect. Some members of the Court, quite
apprehensive about the possible unsettling effect this decision might have on acts done in
reliance of the validity of those presidential decrees which were published only during the
pendency of this petition, have put the question as to whether the Court's declaration of
invalidity apply to P.D.s which had been enforced or implemented prior to their publication.
The answer is all too familiar. In similar situations in the past this Court had taken the
pragmatic and realistic course set forth in Chicot County Drainage District vs. Baxter Bank 8 to
wit:
The courts below have proceeded on the theory that the Act of Congress,
having been found to be unconstitutional, was not a law; that it was
inoperative, conferring no rights and imposing no duties, and hence
affording no basis for the challenged decree. Norton v. Shelby County,
118 U.S. 425, 442; Chicago, 1. & L. Ry. Co. v. Hackett, 228 U.S. 559, 566. It
is quite clear, however, that such broad statements as to the effect of a
determination of unconstitutionality must be taken with qualifications.
The actual existence of a statute, prior to such a determination, is an
operative fact and may have consequences which cannot justly be
ignored. The past cannot always be erased by a new judicial declaration.
The effect of the subsequent ruling as to invalidity may have to be
considered in various aspects-with respect to particular conduct, private
and official. Questions of rights claimed to have become vested, of status,
of prior determinations deemed to have finality and acted upon
accordingly, of public policy in the light of the nature both of the statute
and of its previous application, demand examination. These questions are
among the most difficult of those which have engaged the attention of
courts, state and federal and it is manifest from numerous decisions that
an all-inclusive statement of a principle of absolute retroactive invalidity
cannot be justified.
Consistently with the above principle, this Court in Rutter vs. Esteban 9 sustained the right of
a party under the Moratorium Law, albeit said right had accrued in his favor before said law
was declared unconstitutional by this Court.
Similarly, the implementation/enforcement of presidential decrees prior to their publication
in the Official Gazette is "an operative fact which may have consequences which cannot be
justly ignored. The past cannot always be erased by a new judicial declaration ... that an all-
inclusive statement of a principle of absolute retroactive invalidity cannot be justified."
From the report submitted to the Court by the Clerk of Court, it appears that of the
presidential decrees sought by petitioners to be published in the Official Gazette, only
Presidential Decrees Nos. 1019 to 1030, inclusive, 1278, and 1937 to 1939, inclusive, have
not been so published. 10 Neither the subject matters nor the texts of these PDs can be
ascertained since no copies thereof are available. But whatever their subject matter may be,

it is undisputed that none of these unpublished PDs has ever been implemented or enforced
by the government. In Pesigan vs. Angeles, 11 the Court, through Justice Ramon Aquino, ruled
that "publication is necessary to apprise the public of the contents of [penal] regulations and
make the said penalties binding on the persons affected thereby. " The cogency of this
holding is apparently recognized by respondent officials considering the manifestation in
their comment that "the government, as a matter of policy, refrains from prosecuting
violations of criminal laws until the same shall have been published in the Official Gazette or
in some other publication, even though some criminal laws provide that they shall take effect
immediately.
WHEREFORE, the Court hereby orders respondents to publish in the Official Gazette all
unpublished presidential issuances which are of general application, and unless so published,
they shall have no binding force and effect.
SO ORDERED.
Relova, J., concurs.
Aquino, J., took no part.
Concepcion, Jr., J., is on leave.
Separate Opinions
FERNANDO, C.J., concurring (with qualification):
There is on the whole acceptance on my part of the views expressed in the ably written
opinion of Justice Escolin. I am unable, however, to concur insofar as it would unqualifiedly
impose the requirement of publication in the Official Gazette for unpublished "presidential
issuances" to have binding force and effect.
I shall explain why.
1. It is of course true that without the requisite publication, a due process question would
arise if made to apply adversely to a party who is not even aware of the existence of any
legislative or executive act having the force and effect of law. My point is that such
publication required need not be confined to the Official Gazette. From the pragmatic
4
standpoint, there is an advantage to be gained. It conduces to certainty. That is too be
admitted. It does not follow, however, that failure to do so would in all cases and under all
circumstances result in a statute, presidential decree or any other executive act of the same
category being bereft of any binding force and effect. To so hold would, for me, raise a
constitutional question. Such a pronouncement would lend itself to the interpretation that
such a legislative or presidential act is bereft of the attribute of effectivity unless published in
the Official Gazette. There is no such requirement in the Constitution as Justice Plana so aptly
pointed out. It is true that what is decided now applies only to past "presidential issuances".
Nonetheless, this clarification is, to my mind, needed to avoid any possible misconception as
to what is required for any statute or presidential act to be impressed with binding force or
effectivity.
2. It is quite understandable then why I concur in the separate opinion of Justice Plana. Its
first paragraph sets forth what to me is the constitutional doctrine applicable to this case.
Thus: "The Philippine Constitution does not require the publication of laws as a prerequisite
for their effectivity, unlike some Constitutions elsewhere. It may be said though that the
guarantee of due process requires notice of laws to affected Parties before they can be
bound thereby; but such notice is not necessarily by publication in the Official Gazette. The
due process clause is not that precise. 1 I am likewise in agreement with its closing paragraph:
"In fine, I concur in the majority decision to the extent that it requires notice before laws
become effective, for no person should be bound by a law without notice. This is elementary
fairness. However, I beg to disagree insofar as it holds that such notice shall be by publication
in the Official Gazette. 2
3. It suffices, as was stated by Judge Learned Hand, that law as the command of the
government "must be ascertainable in some form if it is to be enforced at all. 3 It would
indeed be to reduce it to the level of mere futility, as pointed out by Justice Cardozo, "if it is
unknown and unknowable. 4 Publication, to repeat, is thus essential. What I am not prepared
to subscribe to is the doctrine that it must be in the Official Gazette. To be sure once
published therein there is the ascertainable mode of determining the exact date of its
effectivity. Still for me that does not dispose of the question of what is the jural effect of past
presidential decrees or executive acts not so published. For prior thereto, it could be that
parties aware of their existence could have conducted themselves in accordance with their
provisions. If no legal consequences could attach due to lack of publication in the Official
Gazette, then serious problems could arise. Previous transactions based on such "Presidential
Issuances" could be open to question. Matters deemed settled could still be inquired into. I
am not prepared to hold that such an effect is contemplated by our decision. Where such
presidential decree or executive act is made the basis of a criminal prosecution, then, of
course, its ex post facto character becomes evident. 5 In civil cases though, retroactivity as
such is not conclusive on the due process aspect. There must still be a showing of
arbitrariness. Moreover, where the challenged presidential decree or executive act was
issued under the police power, the non-impairment clause of the Constitution may not
always be successfully invoked. There must still be that process of balancing to determine
whether or not it could in such a case be tainted by infirmity. 6 In traditional terminology,
there could arise then a question of unconstitutional application. That is as far as it goes.

4. Let me make therefore that my qualified concurrence goes no further than to affirm that
publication is essential to the effectivity of a legislative or executive act of a general
application. I am not in agreement with the view that such publication must be in the Official
Gazette. The Civil Code itself in its Article 2 expressly recognizes that the rule as to laws
taking effect after fifteen days following the completion of their publication in the Official
Gazette is subject to this exception, "unless it is otherwise provided." Moreover, the Civil
Code is itself only a legislative enactment, Republic Act No. 386. It does not and cannot have
the juridical force of a constitutional command. A later legislative or executive act which has
the force and effect of law can legally provide for a different rule.
5. Nor can I agree with the rather sweeping conclusion in the opinion of Justice Escolin that
presidential decrees and executive acts not thus previously published in the Official Gazette
would be devoid of any legal character. That would be, in my opinion, to go too far. It may be
fraught, as earlier noted, with undesirable consequences. I find myself therefore unable to
yield assent to such a pronouncement.
I am authorized to state that Justices Makasiar, Abad Santos, Cuevas, and Alampay concur in
this separate opinion.
Makasiar, Abad Santos, Cuevas and Alampay, JJ., concur.
TEEHANKEE, J., concurring:
I concur with the main opinion of Mr. Justice Escolin and the concurring opinion of Mme.
Justice Herrera. The Rule of Law connotes a body of norms and laws published and
ascertainable and of equal application to all similarly circumstances and not subject to
arbitrary change but only under certain set procedures. The Court has consistently stressed
that "it is an elementary rule of fair play and justice that a reasonable opportunity to be
informed must be afforded to the people who are commanded to obey before they can be
punished for its violation,1 citing the settled principle based on due process enunciated in
earlier cases that "before the public is bound by its contents, especially its penal provisions, a
law, regulation or circular must first be published and the people officially and specially
informed of said contents and its penalties.
Without official publication in the Official Gazette as required by Article 2 of the Civil Code
and the Revised Administrative Code, there would be no basis nor justification for the
corollary rule of Article 3 of the Civil Code (based on constructive notice that the provisions
of the law are ascertainable from the public and official repository where they are duly
published) that "Ignorance of the law excuses no one from compliance therewith.
Respondents' contention based on a misreading of Article 2 of the Civil Code that "only laws
which are silent as to their effectivity [date] need be published in the Official Gazette for
5
their effectivity" is manifestly untenable. The plain text and meaning of the Civil Code is that
"laws shall take effect after fifteen days following the completion of their publication in the
Official Gazette, unless it is otherwise provided, " i.e. a different effectivity date is provided by
the law itself. This proviso perforce refers to a law that has been duly published pursuant to
the basic constitutional requirements of due process. The best example of this is the Civil
Code itself: the same Article 2 provides otherwise that it "shall take effect [only] one year
[not 15 days] after such publication. 2 To sustain respondents' misreading that "most laws or
decrees specify the date of their effectivity and for this reason, publication in the Official
Gazette is not necessary for their effectivity 3 would be to nullify and render nugatory the
Civil Code's indispensable and essential requirement of prior publication in the Official
Gazette by the simple expedient of providing for immediate effectivity or an earlier
effectivity date in the law itself before the completion of 15 days following its publication
which is the period generally fixed by the Civil Code for its proper dissemination.
MELENCIO-HERRERA, J., concurring:
I agree. There cannot be any question but that even if a decree provides for a date of
effectivity, it has to be published. What I would like to state in connection with that
proposition is that when a date of effectivity is mentioned in the decree but the decree
becomes effective only fifteen (15) days after its publication in the Official Gazette, it will not
mean that the decree can have retroactive effect to the date of effectivity mentioned in the
decree itself. There should be no retroactivity if the retroactivity will run counter to
constitutional rights or shall destroy vested rights.
PLANA, J., concurring (with qualification):
The Philippine Constitution does not require the publication of laws as a prerequisite for
their effectivity, unlike some Constitutions elsewhere. * It may be said though that the
guarantee of due process requires notice of laws to affected parties before they can be
bound thereby; but such notice is not necessarily by publication in the Official Gazette. The
due process clause is not that precise. Neither is the publication of laws in the Official
Gazette required by any statute as a prerequisite for their effectivity, if said laws already
provide for their effectivity date.
Article 2 of the Civil Code provides that "laws shall take effect after fifteen days following the
completion of their publication in the Official Gazette, unless it is otherwise provided " Two
things may be said of this provision: Firstly, it obviously does not apply to a law with a built-in
provision as to when it will take effect. Secondly, it clearly recognizes that each law may
provide not only a different period for reckoning its effectivity date but also a different mode

of notice. Thus, a law may prescribe that it shall be published elsewhere than in the Official
Gazette.
Commonwealth Act No. 638, in my opinion, does not support the proposition that for their
effectivity, laws must be published in the Official Gazette. The said law is simply "An Act to
Provide for the Uniform Publication and Distribution of the Official Gazette." Conformably
therewith, it authorizes the publication of the Official Gazette, determines its frequency,
provides for its sale and distribution, and defines the authority of the Director of Printing in
relation thereto. It also enumerates what shall be published in the Official Gazette, among
them, "important legislative acts and resolutions of a public nature of the Congress of the
Philippines" and "all executive and administrative orders and proclamations, except such as
have no general applicability." It is noteworthy that not all legislative acts are required to be
published in the Official Gazette but only "important" ones "of a public nature." Moreover,
the said law does not provide that publication in the Official Gazette is essential for the
effectivity of laws. This is as it should be, for all statutes are equal and stand on the same
footing. A law, especially an earlier one of general application such as Commonwealth Act
No. 638, cannot nullify or restrict the operation of a subsequent statute that has a provision
of its own as to when and how it will take effect. Only a higher law, which is the Constitution,
can assume that role.
In fine, I concur in the majority decision to the extent that it requires notice before laws
become effective, for no person should be bound by a law without notice. This is elementary
fairness. However, I beg to disagree insofar as it holds that such notice shall be by publication
in the Official Gazette.
Cuevas and Alampay, JJ., concur.
GUTIERREZ, Jr., J., concurring:
I concur insofar as publication is necessary but reserve my vote as to the necessity of such
publication being in the Official Gazette.
DE LA FUENTE, J., concurring:
I concur insofar as the opinion declares the unpublished decrees and issuances of a public
nature or general applicability ineffective, until due publication thereof.
6
Separate Opinions
FERNANDO, C.J., concurring (with qualification):
There is on the whole acceptance on my part of the views expressed in the ably written
opinion of Justice Escolin. I am unable, however, to concur insofar as it would unqualifiedly
impose the requirement of publication in the Official Gazette for unpublished "presidential
issuances" to have binding force and effect.
I shall explain why.
1. It is of course true that without the requisite publication, a due process question would
arise if made to apply adversely to a party who is not even aware of the existence of any
legislative or executive act having the force and effect of law. My point is that such
publication required need not be confined to the Official Gazette. From the pragmatic
standpoint, there is an advantage to be gained. It conduces to certainty. That is too be
admitted. It does not follow, however, that failure to do so would in all cases and under all
circumstances result in a statute, presidential decree or any other executive act of the same
category being bereft of any binding force and effect. To so hold would, for me, raise a
constitutional question. Such a pronouncement would lend itself to the interpretation that
such a legislative or presidential act is bereft of the attribute of effectivity unless published in
the Official Gazette. There is no such requirement in the Constitution as Justice Plana so aptly
pointed out. It is true that what is decided now applies only to past "presidential issuances".
Nonetheless, this clarification is, to my mind, needed to avoid any possible misconception as
to what is required for any statute or presidential act to be impressed with binding force or
effectivity.
2. It is quite understandable then why I concur in the separate opinion of Justice Plana. Its
first paragraph sets forth what to me is the constitutional doctrine applicable to this case.
Thus: "The Philippine Constitution does not require the publication of laws as a prerequisite
for their effectivity, unlike some Constitutions elsewhere. It may be said though that the
guarantee of due process requires notice of laws to affected Parties before they can be
bound thereby; but such notice is not necessarily by publication in the Official Gazette. The
due process clause is not that precise. 1 I am likewise in agreement with its closing paragraph:
"In fine, I concur in the majority decision to the extent that it requires notice before laws
become effective, for no person should be bound by a law without notice. This is elementary
fairness. However, I beg to disagree insofar as it holds that such notice shall be by publication
in the Official Gazette. 2

3. It suffices, as was stated by Judge Learned Hand, that law as the command of the
government "must be ascertainable in some form if it is to be enforced at all. 3 It would
indeed be to reduce it to the level of mere futility, as pointed out by Justice Cardozo, "if it is
unknown and unknowable. 4 Publication, to repeat, is thus essential. What I am not prepared
to subscribe to is the doctrine that it must be in the Official Gazette. To be sure once
published therein there is the ascertainable mode of determining the exact date of its
effectivity. Still for me that does not dispose of the question of what is the jural effect of past
presidential decrees or executive acts not so published. For prior thereto, it could be that
parties aware of their existence could have conducted themselves in accordance with their
provisions. If no legal consequences could attach due to lack of publication in the Official
Gazette, then serious problems could arise. Previous transactions based on such "Presidential
Issuances" could be open to question. Matters deemed settled could still be inquired into. I
am not prepared to hold that such an effect is contemplated by our decision. Where such
presidential decree or executive act is made the basis of a criminal prosecution, then, of
course, its ex post facto character becomes evident. 5 In civil cases though, retroactivity as
such is not conclusive on the due process aspect. There must still be a showing of
arbitrariness. Moreover, where the challenged presidential decree or executive act was
issued under the police power, the non-impairment clause of the Constitution may not
always be successfully invoked. There must still be that process of balancing to determine
whether or not it could in such a case be tainted by infirmity. 6 In traditional terminology,
there could arise then a question of unconstitutional application. That is as far as it goes.
4. Let me make therefore that my qualified concurrence goes no further than to affirm that
publication is essential to the effectivity of a legislative or executive act of a general
application. I am not in agreement with the view that such publication must be in the Official
Gazette. The Civil Code itself in its Article 2 expressly recognizes that the rule as to laws
taking effect after fifteen days following the completion of their publication in the Official
Gazette is subject to this exception, "unless it is otherwise provided." Moreover, the Civil
Code is itself only a legislative enactment, Republic Act No. 386. It does not and cannot have
the juridical force of a constitutional command. A later legislative or executive act which has
the force and effect of law can legally provide for a different rule.
5. Nor can I agree with the rather sweeping conclusion in the opinion of Justice Escolin that
presidential decrees and executive acts not thus previously published in the Official Gazette
would be devoid of any legal character. That would be, in my opinion, to go too far. It may be
fraught, as earlier noted, with undesirable consequences. I find myself therefore unable to
yield assent to such a pronouncement.
I am authorized to state that Justices Makasiar, Abad Santos, Cuevas, and Alampay concur in
this separate opinion.
Makasiar, Abad Santos, Cuevas and Alampay, JJ., concur.
TEEHANKEE, J., concurring:
7
I concur with the main opinion of Mr. Justice Escolin and the concurring opinion of Mme.
Justice Herrera. The Rule of Law connotes a body of norms and laws published and
ascertainable and of equal application to all similarly circumstances and not subject to
arbitrary change but only under certain set procedures. The Court has consistently stressed
that "it is an elementary rule of fair play and justice that a reasonable opportunity to be
informed must be afforded to the people who are commanded to obey before they can be
punished for its violation,1 citing the settled principle based on due process enunciated in
earlier cases that "before the public is bound by its contents, especially its penal provisions, a
law, regulation or circular must first be published and the people officially and specially
informed of said contents and its penalties.
Without official publication in the Official Gazette as required by Article 2 of the Civil Code
and the Revised Administrative Code, there would be no basis nor justification for the
corollary rule of Article 3 of the Civil Code (based on constructive notice that the provisions
of the law are ascertainable from the public and official repository where they are duly
published) that "Ignorance of the law excuses no one from compliance therewith.
Respondents' contention based on a misreading of Article 2 of the Civil Code that "only laws
which are silent as to their effectivity [date] need be published in the Official Gazette for
their effectivity" is manifestly untenable. The plain text and meaning of the Civil Code is that
"laws shall take effect after fifteen days following the completion of their publication in the
Official Gazette, unless it is otherwise provided, " i.e. a different effectivity date is provided by
the law itself. This proviso perforce refers to a law that has been duly published pursuant to
the basic constitutional requirements of due process. The best example of this is the Civil
Code itself: the same Article 2 provides otherwise that it "shall take effect [only] one year
[not 15 days] after such publication. 2 To sustain respondents' misreading that "most laws or
decrees specify the date of their effectivity and for this reason, publication in the Official
Gazette is not necessary for their effectivity 3 would be to nullify and render nugatory the
Civil Code's indispensable and essential requirement of prior publication in the Official
Gazette by the simple expedient of providing for immediate effectivity or an earlier
effectivity date in the law itself before the completion of 15 days following its publication
which is the period generally fixed by the Civil Code for its proper dissemination.
MELENCIO-HERRERA, J., concurring:
I agree. There cannot be any question but that even if a decree provides for a date of
effectivity, it has to be published. What I would like to state in connection with that
proposition is that when a date of effectivity is mentioned in the decree but the decree
becomes effective only fifteen (15) days after its publication in the Official Gazette, it will not
mean that the decree can have retroactive effect to the date of effectivity mentioned in the
decree itself. There should be no retroactivity if the retroactivity will run counter to
constitutional rights or shall destroy vested rights.
 8

PLANA, J., concurring (with qualification): I concur insofar as publication is necessary but reserve my vote as to the necessity of such
publication being in the Official Gazette.
The Philippine Constitution does not require the publication of laws as a prerequisite for
their effectivity, unlike some Constitutions elsewhere. * It may be said though that the
guarantee of due process requires notice of laws to affected parties before they can be DE LA FUENTE, J., concurring:
bound thereby; but such notice is not necessarily by publication in the Official Gazette. The
due process clause is not that precise. Neither is the publication of laws in the Official I concur insofar as the opinion declares the unpublished decrees and issuances of a public
Gazette required by any statute as a prerequisite for their effectivity, if said laws already nature or general applicability ineffective, until due publication thereof.
provide for their effectivity date.
Footnotes
Article 2 of the Civil Code provides that "laws shall take effect after fifteen days following the
completion of their publication in the Official Gazette, unless it is otherwise provided " Two
1 Section 6. The right of the people to information on matters of public
things may be said of this provision: Firstly, it obviously does not apply to a law with a built-in
concern shag be recognized, access to official records, and to documents
provision as to when it will take effect. Secondly, it clearly recognizes that each law may
and papers pertaining to official acts, transactions, or decisions, shag be
provide not only a different period for reckoning its effectivity date but also a different mode
afforded the citizens subject to such limitation as may be provided by
of notice. Thus, a law may prescribe that it shall be published elsewhere than in the Official
law.
Gazette.

2 Anti-Chinese League vs. Felix, 77 Phil. 1012; Costas vs. Aidanese, 45

Commonwealth Act No. 638, in my opinion, does not support the proposition that for their
Phil. 345; Almario vs. City Mayor, 16 SCRA 151;Parting vs. San Jose
effectivity, laws must be published in the Official Gazette. The said law is simply "An Act to
Petroleum, 18 SCRA 924; Dumlao vs. Comelec, 95 SCRA 392.
Provide for the Uniform Publication and Distribution of the Official Gazette." Conformably
therewith, it authorizes the publication of the Official Gazette, determines its frequency,
provides for its sale and distribution, and defines the authority of the Director of Printing in 3 16 Phil. 366, 378.
relation thereto. It also enumerates what shall be published in the Official Gazette, among
them, "important legislative acts and resolutions of a public nature of the Congress of the 4 Camacho vs. Court of Industrial Relations, 80 Phil 848; Mejia vs.
Philippines" and "all executive and administrative orders and proclamations, except such as Balolong, 81 Phil. 486; Republic of the Philippines vs. Encamacion, 87 Phil.
have no general applicability." It is noteworthy that not all legislative acts are required to be 843; Philippine Blooming Mills, Inc. vs. Social Security System, 17 SCRA
published in the Official Gazette but only "important" ones "of a public nature." Moreover, 1077; Askay vs. Cosalan, 46 Phil. 179.
the said law does not provide that publication in the Official Gazette is essential for the
effectivity of laws. This is as it should be, for all statutes are equal and stand on the same 5 1 Manresa, Codigo Civil 7th Ed., p. 146.
footing. A law, especially an earlier one of general application such as Commonwealth Act
No. 638, cannot nullify or restrict the operation of a subsequent statute that has a provision
of its own as to when and how it will take effect. Only a higher law, which is the Constitution, 6 People vs. Que Po Lay, 94 Phil. 640; Balbuena et al. vs. Secretary of
can assume that role. Education, et al., 110 Phil. 150.

In fine, I concur in the majority decision to the extent that it requires notice before laws
become effective, for no person should be bound by a law without notice. This is elementary
fairness. However, I beg to disagree insofar as it holds that such notice shall be by publication
in the Official Gazette.
Cuevas and Alampay, JJ., concur.
GUTIERREZ, Jr., J., concurring:
7 82 SCRA 30, dissenting opinion.
8 308 U.S. 371, 374.
9 93 Phil.. 68,.
10 The report was prepared by the Clerk of Court after Acting Director
Florendo S. Pablo Jr. of the Government Printing Office, failed to respond
to her letter-request regarding the respective dates of publication in the
Official Gazette of the presidential issuances listed therein. No report has

been submitted by the Clerk of Court as to the publication or non-
publication of other presidential issuances.
11 129 SCRA 174.
Fernando, CJ.:
1 Separate Opinion of Justice Plana, first paragraph. He mentioned in tills
connection Article 7, Sec. 21 of the Wisconsin Constitution and State ex
rel. White v. Grand Superior Ct., 71 ALR 1354, citing the Constitution of
Indiana, U.S.A
2 Ibid, closing paragraph.
3 Learned Hand, The Spirit of Liberty 104 (1960).
4 Cardozo, The Growth of the Law, 3 (1924).
5 Cf. Nunez v. Sandiganbayan, G.R. No. 50581-50617, January 30, 1982,
111 SCRA 433.
6 Cf. Alalayan v. National Power Corporation, L-24396, July 29, 1968, 24
SCRA 172.
Teehankee, J.:
1 People vs. de Dios, G.R. No. 11003, Aug. 3l, 1959, per the late Chief
Justice Paras.
2 Notes in brackets supplied.
3 Respondents: comment, pp. 14-15.
Plana, J.:
* See e.g., Wisconsin Constitution, Art. 7, Sec. 21: "The legislature shall
provide publication of all statute laws ... and no general law shall be in
force until published." See also S ate ex rel. White vs. Grand Superior Ct.,
71 ALR 1354, citing Constitution of Indiana, U.S.A.
EN BANC
9
G.R. No. 125350 December 3, 2002
HON. RTC JUDGES MERCEDES G. DADOLE (Executive Judge, Branch 28),
ULRIC R. CAÑETE (Presiding Judge, Branch 25),
AGUSTINE R. VESTIL (Presiding Judge, Branch 56),
HON. MTC JUDGES TEMISTOCLES M. BOHOLST (Presiding Judge, Branch 1),
VICENTE C. FANILAG (Judge Designate, Branch 2),
and WILFREDO A. DAGATAN (Presiding Judge, Branch 3), all of Mandaue City, petitioners,
vs.
COMMISSION ON AUDIT, respondent.
DECISION
CORONA, J.:
Before us is a petition for certiorari under Rule 64 to annul the decision1 and resolution2,
dated September 21, 1995 and May 28, 1996, respectively, of the respondent Commission on
Audit (COA) affirming the notices of the Mandaue City Auditor which diminished the monthly
additional allowances received by the petitioner judges of the Regional Trial Court (RTC) and
Municipal Trial Court (MTC) stationed in Mandaue City.
The undisputed facts are as follows:
In 1986, the RTC and MTC judges of Mandaue City started receiving monthly allowances
of P1,260 each through the yearly appropriation ordinance enacted by the Sangguniang
Panlungsod of the said city. In 1991, Mandaue City increased the amount to P1,500 for each
judge.
On March 15, 1994, the Department of Budget and Management (DBM) issued the disputed
Local Budget Circular No. 55 (LBC 55) which provided that:
"x x x xxx xxx
2.3.2. In the light of the authority granted to the local government units under the
Local Government Code to provide for additional allowances and other benefits to
national government officials and employees assigned in their locality, such
additional allowances in the form of honorarium at rates not exceeding P1,000.00
in provinces and cities and P700.00 in municipalities may be granted subject to the
following conditions:
a) That the grant is not mandatory on the part of the LGUs;

b) That all contractual and statutory obligations of the LGU including the
implementation of R.A. 6758 shall have been fully provided in the budget;
c) That the budgetary requirements/limitations under Section 324 and 325 of R.A.
7160 should be satisfied and/or complied with; and
d) That the LGU has fully implemented the devolution of functions/personnel in
accordance with R.A. 7160.3" (italics supplied)
xxx xxx xxx
The said circular likewise provided for its immediate effectivity without need of publication:
"5.0 EFFECTIVITY
This Circular shall take effect immediately."
Acting on the DBM directive, the Mandaue City Auditor issued notices of disallowance to
herein petitioners, namely, Honorable RTC Judges Mercedes G. Dadole, Ulric R. Cañete,
Agustin R. Vestil, Honorable MTC Judges Temistocles M. Boholst, Vicente C. Fanilag and
Wilfredo A. Dagatan, in excess of the amount authorized by LBC 55. Beginning October, 1994,
the additional monthly allowances of the petitioner judges were reduced to P1,000 each.
They were also asked to reimburse the amount they received in excess of P1,000 from April
to September, 1994.
The petitioner judges filed with the Office of the City Auditor a protest against the notices of
disallowance. But the City Auditor treated the protest as a motion for reconsideration and
indorsed the same to the COA Regional Office No. 7. In turn, the COA Regional Office
referred the motion to the head office with a recommendation that the same be denied.
On September 21, 1995, respondent COA rendered a decision denying petitioners' motion
for reconsideration. The COA held that:
The issue to be resolved in the instant appeal is whether or not the City Ordinance of
Mandaue which provides a higher rate of allowances to the appellant judges may prevail
over that fixed by the DBM under Local Budget Circular No. 55 dated March 15, 1994.
xxx xxx xxx
Applying the foregoing doctrine, appropriation ordinance of local government units is subject
to the organizational, budgetary and compensation policies of budgetary authorities (COA
5th Ind., dated March 17, 1994 re: Province of Antique; COA letter dated May 17, 1994 re:
Request of Hon. Renato Leviste, Cong. 1st Dist. Oriental Mindoro). In this regard, attention is
10
invited to Administrative Order No. 42 issued on March 3, 1993 by the President of the
Philippines clarifying the role of DBM in the compensation and classification of local
government positions under RA No. 7160 vis-avis the provisions of RA No. 6758 in view of the
abolition of the JCLGPA. Section 1 of said Administrative Order provides that:
"Section 1. The Department of Budget and Management as the lead administrator
of RA No. 6758 shall, through its Compensation and Position Classification Bureau,
continue to have the following responsibilities in connection with the
implementation of the Local Government Code of 1991:
a) Provide guidelines on the classification of local government positions
and on the specific rates of pay therefore;
b) Provide criteria and guidelines for the grant of
all allowances and additional forms of compensation to local government
employees; xxx." (underscoring supplied)
To operationalize the aforecited presidential directive, DBM issued LBC No. 55, dated March
15, 1994, whose effectivity clause provides that:
xxx xxx xxx
"5.0 EFFECTIVITY
This Circular shall take effect immediately."
It is a well-settled rule that implementing rules and regulations promulgated by
administrative or executive officer in accordance with, and as authorized by law, has the
force and effect of law or partake the nature of a statute (Victorias Milling Co., Inc., vs. Social
Security Commission, 114 Phil. 555, cited in Agpalo's Statutory Construction, 2nd Ed. P. 16;
Justice Cruz's Phil. Political Law, 1984 Ed., p. 103; Espanol vs. Phil Veterans Administration,
137 SCRA 314; Antique Sawmills Inc. vs. Tayco, 17 SCRA 316).
xxx xxx xxx
There being no statutory basis to grant additional allowance to judges in excess of P1,000.00
chargeable against the local government units where they are stationed, this Commission
finds no substantial grounds or cogent reason to disturb the decision of the City Auditor,
Mandaue City, disallowing in audit the allowances in question. Accordingly, the above-
captioned appeal of the MTC and RTC Judges of Mandaue City, insofar as the same is not
covered by Circular Letter No. 91-7, is hereby dismissed for lack of merit.
xxx xxx x x x4

On November 27, 1995, Executive Judge Mercedes Gozo-Dadole, for and in behalf of the
petitioner judges, filed a motion for reconsideration of the decision of the COA. In a
resolution dated May 28, 1996, the COA denied the motion.
Hence, this petition for certiorari by the petitioner judges, submitting the following questions
for resolution:
I government, and in this connection, shall:
HAS THE CITY OF MANDAUE STATUTORY AND CONSTITUTIONAL BASIS TO PROVIDE
ADDITIONAL ALLOWANCES AND OTHER BENEFITS TO JUDGES STATIONED IN AND ASSIGNED
TO THE CITY?
II
CAN AN ADMINISTRATIVE CIRCULAR OR GUIDELINE SUCH AS LOCAL BUDGET CIRCULAR NO.
55 RENDER INOPERATIVE THE POWER OF THE LEGISLATIVE BODY OF A CITY BY SETTING A
LIMIT TO THE EXTENT OF THE EXERCISE OF SUCH POWER?
III
HAS THE COMMISSION ON AUDIT CORRECTLY INTERPRETED LOCAL BUDGET CIRCULAR NO.
55 TO INCLUDE MEMBERS OF THE JUDICIARY IN FIXING THE CEILING OF ADDITIONAL
ALLOWANCES AND BENEFITS TO BE PROVIDED TO JUDGES STATIONED IN AND ASSIGNED TO
MANDAUE CITY BY THE CITY GOVERNMENT AT P1,000.00 PER MONTH NOTWITHSTANDING
THAT THEY HAVE BEEN RECEIVING ALLOWANCES OF P1,500.00 MONTHLY FOR THE PAST FIVE
YEARS?
IV
IS LOCAL BUDGET CIRCULAR NO. 55 DATED MARCH 15, 1994 ISSUED BY THE DEPARTMENT
OF BUDGET AND MANAGEMENT VALID AND ENFORCEABLE CONSIDERING THAT IT WAS NOT
DULY PUBLISHED IN ACCODANCE WITH LAW?5
Petitioner judges argue that LBC 55 is void for infringing on the local autonomy of Mandaue
City by dictating a uniform amount that a local government unit can disburse as additional
allowances to judges stationed therein. They maintain that said circular is not supported by
any law and therefore goes beyond the supervisory powers of the President. They further
allege that said circular is void for lack of publication.
On the other hand, the yearly appropriation ordinance providing for additional allowances to
judges is allowed by Section 458, par. (a)(1)[xi], of RA 7160, otherwise known as the Local
Government Code of 1991, which provides that:
11
Sec. 458. Powers, Duties, Functions and Compensation. – (a) The sangguniang panlungsod, as
the legislative body of the city, shall enact ordinances, approve resolutions and appropriate
funds for the general welfare of the city and its inhabitants pursuant to Section 16 of this
Code and in the proper exercise of the corporate powers of the city as provided for under
Section 22 of this Code, and shall:
(1) Approve ordinances and pass resolutions necessary for an efficient and effective city
xxx xxx xxx
(xi) When the finances of the city government allow, provide for additional allowances and
other benefits to judges, prosecutors, public elementary and high school teachers, and other
national government officials stationed in or assigned to the city; (italics supplied)
Instead of filing a comment on behalf of respondent COA, the Solicitor General filed a
manifestation supporting the position of the petitioner judges. The Solicitor General argues
that (1) DBM only enjoys the power to review and determine whether the disbursements of
funds were made in accordance with the ordinance passed by a local government unit while
(2) the COA has no more than auditorial visitation powers over local government units
pursuant to Section 348 of RA 7160 which provides for the power to inspect at any time the
financial accounts of local government units.
Moreover, the Solicitor General opines that "the DBM and the respondent are only
authorized under RA 7160 to promulgate a Budget Operations Manual for local government
units, to improve and systematize methods, techniques and procedures employed in budget
preparation, authorization, execution and accountability" pursuant to Section 354 of RA
7160. The Solicitor General points out that LBC 55 was not exercised under any of the
aforementioned provisions.
Respondent COA, on the other hand, insists that the constitutional and statutory authority of
a city government to provide allowances to judges stationed therein is not absolute.
Congress may set limitations on the exercise of autonomy. It is for the President, through the
DBM, to check whether these legislative limitations are being followed by the local
government units.
One such law imposing a limitation on a local government unit's autonomy is Section 458,
par. (a) (1) [xi], of RA 7160, which authorizes the disbursement of additional allowances and
other benefits to judges subject to the condition that the finances of the city government
should allow the same. Thus, DBM is merely enforcing the condition of the law when it sets a
uniform maximum amount for the additional allowances that a city government can release
to judges stationed therein.

Assuming arguendo that LBC 55 is void, respondent COA maintains that the provisions of the
yearly approved ordinance granting additional allowances to judges are still prohibited by the
appropriation laws passed by Congress every year. COA argues that Mandaue City gets the
funds for the said additional allowances of judges from the Internal Revenue Allotment (IRA).
But the General Appropriations Acts of 1994 and 1995 do not mention the disbursement of
additional allowances to judges as one of the allowable uses of the IRA. Hence, the provisions
of said ordinance granting additional allowances, taken from the IRA, to herein petitioner
judges are void for being contrary to law.
To resolve the instant petition, there are two issues that we must address: (1) whether LBC
55 of the DBM is void for going beyond the supervisory powers of the President and for not
having been published and (2) whether the yearly appropriation ordinance enacted by the
City of Mandaue that provides for additional allowances to judges contravenes the annual
appropriation laws enacted by Congress.
We rule in favor of the petitioner judges.
On the first issue, we declare LBC 55 to be null and void.
We recognize that, although our Constitution6 guarantees autonomy to local government
units, the exercise of local autonomy remains subject to the power of control by Congress
and the power of supervision by the President. Section 4 of Article X of the 1987 Philippine
Constitution provides that:
Sec. 4. The President of the Philippines shall exercise general supervision over local
governments. x x x
In Pimentel vs. Aguirre7, we defined the supervisory power of the President and distinguished
it from the power of control exercised by Congress. Thus:
This provision (Section 4 of Article X of the 1987 Philippine Constitution) has been
interpreted to exclude the power of control. In Mondano v. Silvosa,i 5 the Court contrasted
the President's power of supervision over local government officials with that of his power of
control over executive officials of the national government. It was emphasized that the two
terms -- supervision and control -- differed in meaning and extent. The Court distinguished
them as follows:
"x x x In administrative law, supervision means overseeing or the power or authority of an
officer to see that subordinate officers perform their duties. If the latter fail or neglect to
fulfill them, the former may take such action or step as prescribed by law to make them
perform their duties. Control, on the other hand, means the power of an officer to alter or
modify or nullify or set aside what a subordinate officer ha[s] done in the performance of his
duties and to substitute the judgment of the former for that of the latter."ii 6
12
In Taule v. Santos,iii 7 we further stated that the Chief Executive wielded no more authority
than that of checking whether local governments or their officials were performing their
duties as provided by the fundamental law and by statutes. He cannot interfere with local
governments, so long as they act within the scope of their authority. "Supervisory power,
when contrasted with control, is the power of mere oversight over an inferior body; it does
not include any restraining authority over such body,"iv 8 we said.
In a more recent case, Drilon v. Lim,v 9 the difference between control and supervision was
further delineated. Officers in control lay down the rules in the performance or
accomplishment of an act. If these rules are not followed, they may, in their discretion, order
the act undone or redone by their subordinates or even decide to do it themselves. On the
other hand, supervision does not cover such authority. Supervising officials merely see to it
that the rules are followed, but they themselves do not lay down such rules, nor do they
have the discretion to modify or replace them. If the rules are not observed, they may order
the work done or redone, but only to conform to such rules. They may not prescribe their
own manner of execution of the act. They have no discretion on this matter except to see to
it that the rules are followed.
Under our present system of government, executive power is vested in the President.vi10 The
members of the Cabinet and other executive officials are merely alter egos. As such, they are
subject to the power of control of the President, at whose will and behest they can be
removed from office; or their actions and decisions changed, suspended or reversed.vii 11 In
contrast, the heads of political subdivisions are elected by the people. Their sovereign
powers emanate from the electorate, to whom they are directly accountable. By
constitutional fiat, they are subject to the President's supervision only, not control, so long as
their acts are exercised within the sphere of their legitimate powers. By the same token, the
President may not withhold or alter any authority or power given them by the Constitution
and the law.
Clearly then, the President can only interfere in the affairs and activities of a local
government unit if he or she finds that the latter has acted contrary to law. This is the scope
of the President's supervisory powers over local government units. Hence, the President or
any of his or her alter egos cannot interfere in local affairs as long as the concerned local
government unit acts within the parameters of the law and the Constitution. Any directive
therefore by the President or any of his or her alter egos seeking to alter the wisdom of a
law-conforming judgment on local affairs of a local government unit is a patent nullity
because it violates the principle of local autonomy and separation of powers of the executive
and legislative departments in governing municipal corporations.
Does LBC 55 go beyond the law it seeks to implement? Yes.
LBC 55 provides that the additional monthly allowances to be given by a local government
unit should not exceed P1,000 in provinces and cities and P700 in municipalities. Section 458,
par. (a)(1)(xi), of RA 7160, the law that supposedly serves as the legal basis of LBC 55, allows
the grant of additional allowances to judges "when the finances of the city government

allow." The said provision does not authorize setting a definite maximum limit to the
additional allowances granted to judges. Thus, we need not belabor the point that the
finances of a city government may allow the grant of additional allowances higher
than P1,000 if the revenues of the said city government exceed its annual expenditures.
Thus, to illustrate, a city government with locally generated annual revenues of P40 million
and expenditures of P35 million can afford to grant additional allowances of more
than P1,000 each to, say, ten judges inasmuch as the finances of the city can afford it.
Setting a uniform amount for the grant of additional allowances is an inappropriate way of
enforcing the criterion found in Section 458, par. (a)(1)(xi), of RA 7160. The DBM over-
stepped its power of supervision over local government units by imposing a prohibition that
did not correspond with the law it sought to implement. In other words, the prohibitory
nature of the circular had no legal basis.
Furthermore, LBC 55 is void on account of its lack of publication, in violation of our ruling
in Tañada vs. Tuvera8where we held that:
xxx. Administrative rules and regulations must also be published if their purpose is to enforce
or implement existing law pursuant to a valid delegation.
Interpretative regulations and those merely internal in nature, that is, regulating only the
personnel of an administrative agency and the public, need not be published. Neither is
publication required of the so-called letters of instruction issued by administrative superiors
concerning the rules or guidelines to be followed by their subordinates in the performance of
their duties.
Respondent COA claims that publication is not required for LBC 55 inasmuch as it is merely
an interpretative regulation applicable to the personnel of an LGU. We disagree. In De Jesus
vs. Commission on Audit9 where we dealt with the same issue, this Court declared void, for
lack of publication, a DBM circular that disallowed payment of allowances and other
additional compensation to government officials and employees. In refuting respondent
COA's argument that said circular was merely an internal regulation, we ruled that:
On the need for publication of subject DBM-CCC No. 10, we rule in the affirmative. Following
the doctrine enunciated in Tañada v. Tuvera, publication in the Official Gazette or in a
newspaper of general circulation in the Philippines is required since DBM-CCC No. 10 is in
the nature of an administrative circular the purpose of which is to enforce or implement an
existing law. Stated differently, to be effective and enforceable, DBM-CCC No. 10 must go
through the requisite publication in the Official Gazette or in a newspaper of general
circulation in the Philippines.
In the present case under scrutiny, it is decisively clear that DBM-CCC No. 10, which
completely disallows payment of allowances and other additional compensation to
government officials and employees, starting November 1, 1989, is not a mere interpretative
13
or internal regulation. It is something more than that. And why not, when it tends to deprive
government workers of their allowance and additional compensation sorely needed to keep
body and soul together. At the very least, before the said circular under attack may be
permitted to substantially reduce their income, the government officials and employees
concerned should be apprised and alerted by the publication of subject circular in the
Official Gazette or in a newspaper of general circulation in the Philippines – to the end that
they be given amplest opportunity to voice out whatever opposition they may have, and to
ventilate their stance on the matter. This approach is more in keeping with democratic
precepts and rudiments of fairness and transparency. (emphasis supplied)
In Philippine International Trading Corporation vs. Commission on Audit10, we again declared
the same circular as void, for lack of publication, despite the fact that it was re-issued and
then submitted for publication. Emphasizing the importance of publication to the effectivity
of a regulation, we therein held that:
It has come to our knowledge that DBM-CCC No. 10 has been re-issued in its entirety and
submitted for publication in the Official Gazette per letter to the National Printing Office
dated March 9, 1999. Would the subsequent publication thereof cure the defect and retroact
to the time that the above-mentioned items were disallowed in audit?
The answer is in the negative, precisely for the reason that publication is required as
a condition precedent to the effectivity of a law to inform the public of the contents of the
law or rules and regulations before their rights and interests are affected by the same. From
the time the COA disallowed the expenses in audit up to the filing of herein petition the
subject circular remained in legal limbo due to its non-publication. As was stated in Tañada v.
Tuvera, "prior publication of laws before they become effective cannot be dispensed with,
for the reason that it would deny the public knowledge of the laws that are supposed to
govern it."11
We now resolve the second issue of whether the yearly appropriation ordinance enacted by
Mandaue City providing for fixed allowances for judges contravenes any law and should
therefore be struck down as null and void.
According to respondent COA, even if LBC 55 were void, the ordinances enacted by Mandaue
City granting additional allowances to the petitioner judges would "still (be) bereft of legal
basis for want of a lawful source of funds considering that the IRA cannot be used for such
purposes." Respondent COA showed that Mandaue City's funds consisted of locally
generated revenues and the IRA. From 1989 to 1995, Mandaue City's yearly expenditures
exceeded its locally generated revenues, thus resulting in a deficit. During all those years, it
was the IRA that enabled Mandaue City to incur a surplus. Respondent avers that Mandaue
City used its IRA to pay for said additional allowances and this violated paragraph 2 of the
Special Provisions, page 1060, of RA 7845 (The General Appropriations Act of 1995)12 and
paragraph 3 of the Special Provision, page 1225, of RA 7663 (The General Appropriations Act
of 1994)13 which specifically identified the objects of expenditure of the IRA. Nowhere in said
provisions of the two budgetary laws does it say that the IRA can be used for additional
 14

allowances of judges. Respondent COA thus argues that the provisions in the ordinance WHEREFORE, the petition is hereby GRANTED, and the assailed decision and resolution,
providing for such disbursement are against the law, considering that the grant of the subject dated September 21, 1995 and May 28, 1996, respectively, of the Commission on Audit are
allowances is not within the specified use allowed by the aforesaid yearly appropriations hereby set aside.
acts.
No costs.
We disagree.
SO ORDERED.
Respondent COA failed to prove that Mandaue City used the IRA to spend for the additional
allowances of the judges. There was no evidence submitted by COA showing the breakdown Davide, Jr., C.J., Bellosillo, Vitug, Mendoza, Panganiban, Quisumbing, Ynares-Santiago,
of the expenses of the city government and the funds used for said expenses. All the COA Sandoval-Gutierrez, Carpio, Austria-Martinez, Carpio-Morales, and Callejo, Sr., JJ., concur.
presented were the amounts expended, the locally generated revenues, the deficit, the Puno, J., on official business.
surplus and the IRA received each year. Aside from these items, no data or figures were Azcuna, J., on leave.
presented to show that Mandaue City deducted the subject allowances from the IRA. In
other words, just because Mandaue City's locally generated revenues were not enough to
cover its expenditures, this did not mean that the additional allowances of petitioner judges
were taken from the IRA and not from the city's own revenues.
Footnotes

Moreover, the DBM neither conducted a formal review nor ordered a disapproval of
Mandaue City's appropriation ordinances, in accordance with the procedure outlined by
Sections 326 and 327 of RA 7160 which provide that: 1 COA Decision No. 95-568; Rollo, pp. 42-47.

Section 326. Review of Appropriation Ordinances of Provinces, Highly Urbanized Cities, 2 COA Decision No. 96-282; Rollo, pp. 48-49.
Independent Component Cities, and Municipalities within the Metropolitan Manila Area. The
Department of Budget and Management shall review ordinances authorizing the annual or
3 Rollo, p. 128; Rollo, p. 47.
supplemental appropriations of provinces, highly-urbanized cities, independent component
cities, and municipalities within the Metropolitan Manila Area in accordance with the
immediately succeeding Section. 4 Rollo, pp. 44-47.

Section 327. Review of Appropriation Ordinances of Component Cities and Municipalities.- 5 Rollo, p. 24.
The sangguninang panlalawigan shall review the ordinance authorizing annual or
supplemental appropriations of component cities and municipalities in the same manner and 6 Sec. 25, [Art. II]. The State shall ensure the autonomy of local governments.
within the same period prescribed for the review of other ordinances.

Sec. 2, [Art. X]. The territorial and political subdivisions shall enjoy local
If within ninety (90) days from receipt of copies of such ordinance, the sangguniang autonomy.
panlalawigan takes no action thereon, the same shall be deemed to have been reviewed in
accordance with law and shall continue to be in full force and effect. (emphasis supplied)
7 336 SCRA 201, 214-215 (2000).
Within 90 days from receipt of the copies of the appropriation ordinance, the DBM should
8 146 SCRA 453, 454 (1986).
have taken positive action. Otherwise, such ordinance was deemed to have been properly
reviewed and deemed to have taken effect. Inasmuch as, in the instant case, the DBM did
9 294 SCRA 152, 157-158 (1998).
not follow the appropriate procedure for reviewing the subject ordinance of Mandaue City
and allowed the 90-day period to lapse, it can no longer question the legality of the
provisions in the said ordinance granting additional allowances to judges stationed in the said 10 309 SCRA 179, 189 (1999).
city.

11 Id., p. 189.
12 SPECIAL PROVISIONS
xxx xxx xxx
3. Use of Funds. The amount herein shall, pursuant to Section 17(g) of the
Code, provide for the cost of basic services and facilities enumerated
under Section 17(b) thereof, particularly those which have been devolved
by the Department of Health, the Department of Social Welfare and
Development, the Department of Agriculture, and the Department of
Environment and Natural Resources as well as other agencies of the
national government, including (1) construction/improvement, repair and
maintenance of local roads; (2) concrete barangay roads/multi-purpose
pavements construction and improvement program to be implemented
in accordance with R.A. No. 6763; (3) construction, rehabilitation and
improvement of communal irrigation projects/systems; PROVIDED, That
each local government unit shall, in accordance with Section 287 of the
Code, appropriate in its annual budget no less than twenty percent (20%)
of its share from internal revenue allotment for development projects;
PROVIDED, FURTHER, That enforcement of the provisions of Sections
325(a) and 331(b) of the Code shall be waived to enable local
government units to absorb national government personnel transferred
on account of devolution, create the mandatory positions specified in the
Code, enable the barangay officials to receive the minimum allowable
level of remuneration provided under Section 393 of the Code as well as
continue the implementation of the salary standardization authorized
under R.A. No. 6758: PROVIDED, FINALLY, That such amounts as may be
determined by the Department of Budget and Management
corresponding to the requirements of health care and services as
devolved to Local Governments Units R.A. No. 7160 shall not be realigned
or utilized by LGUs concerned for any other expenditure or purpose.
13 SPECIAL PROVISIONS
xxx xxx xxx
2. Use of Funds. - The amount herein appropriated shall, pursuant to
Section 17(g) of the Code, provide for the cost of basic services and
facilities enumerated under Section 17(b) thereof, particularly those
devolved by the Department of Health, the Department of Social Welfare
and Development, the Department of Agriculture, and the Department of
Environment and Natural Resources as well as other agencies of the
National Government, including (1) construction/improvement, repair
and maintenance of local roads; (2) concrete barangay roads/multi-
15
purpose pavements, construction and improvement program to be
implemented in accordance with R.A. No. 6763; (2) construction,
rehabilitation and improvement of communal irrigation projects/systems;
and (4) payment of not less than fifty percent (50%) of the total
requirement for the Magna Carta benefits of devolved health workers
pursuant to the provisions of R.A. No. 7305 and such other guidelines
that may be issued by the Department of Health for the purpose:
PROVIDED, That each local government unit shall, in accordance with
Section 287 of the Code, appropriate in its budget no less than twenty
percent (20%) of its share from Internal Revenue Allotment for
development projects; PROVIDED, FURTHER, That enforcement of the
provisions of Sections 325(a) and 331(b) of the Code shall be waived
enable local government units to absorb and/or maintain national
government personnel transferred on account of devolution, create the
mandatory positions specified in the Code, enable the barangay officials
to receive the minimum allowable level of remuneration provided under
Section 393 of the Code, as well as continue the implementation of the
salary standardization authorized under R.A. No. 6758 and the payment
of not less than fifty percent (50%) of the total requirement for the
Magna Carta benefits of health workers mandated under R.A. No. 7305
and such other guidelines as may be issued by the Department of Health
for the purpose.
EN BANC
G.R. No. 207145 July 28, 2015
GIL G. CAWAD, MARIO BENEDICT P. GALON, DOMINGO E. LUSAYA, JEAN V. APOLINARES,
MA. LUISA S. OREZCA, JULIO R. GARCIA, NESTOR M. INTIA, RUBEN C. CALIWATAN, ADOLFO
Q. ROSALES, MA. LUISA NAVARRO, and the PHILIPPINE PUBLIC HEALTH ASSOCIATION,
INC., Petitioners,
vs.
FLORENCIO B. ABAD, in his capacity as Secretary of the Department of Budget and
Management (DBM); ENRIQUE T. ONA, in his capacity as Secretary of the Department of
Health (DOH); and FRANCISCO T. DUQUE III, in his capacity as Chairman of the Civil Service
Commission (CSC), Respondents.
DECISION
PERALTA, J.:
Before the Court is a petition for certiorari and prohibition under Rule 65 of the Rules of
Court filed by the officers and members of the Philippine Public Health Association, Inc.
(PPHAI) assailing the validity of Joint Circular No. 11dated November 29, 2012 of the
Department of Budget and Management (DBM) and the Department of Health (DOH) as well

as Item 6.5 of the Joint Circular2 dated September 3, 2012 of the DBM and the Civil Service
Commission (CSC).
The antecedent facts are as follows:
On March 26, 1992, Republic Act (RA) No. 7305, otherwise known as The Magna Carta of
Public Health Workerswas signed into law in order to promote the social and economic well-
being of health workers, their living and working conditions and terms of employment, to
develop their skills and capabilities to be better equipped to deliver health projects and
programs, and to encourage those with proper qualifications and excellent abilities to join
and remain in government service.3 Accordingly, public health workers (PHWs) were granted
the following allowances and benefits, among others:
Section 20. Additional Compensation. - Notwithstanding Section 12 of Republic Act No. 6758,
public health workers shall receive the following allowances: hazard allowance, subsistence
allowance, longevity pay, laundry allowance and remote assignment allowance.
Section 21. Hazard Allowance. - Public health workers in hospitals, sanitaria, rural health
units, main health centers, health infirmaries, barangay health stations, clinics and other
health-related establishments located in difficult areas, strife-torn or embattled areas,
distressed or isolated stations, prisons camps, mental hospitals, radiation exposed clinics,
laboratories or disease-infested areas or in areas declared under state of calamity or
emergency for the duration thereof which expose them to great danger, contagion,
radiation, volcanic activity/eruption, occupational risks or perils to life as determined by the
Secretary of Health or the Head of the unit with the approval of the Secretary of Health, shall
be compensated hazard allowances equivalent to at least twenty-five percent (25%) of the
monthly basic salary of health workers receiving salary grade 19 and below, and five percent
(5%) for health workers with<="" b="">
Section 22. Subsistence Allowance. - Public health workers who are required to render
service within the premises of hospitals, sanitaria, health infirmaries, main health centers,
rural health units and barangay health stations, or clinics, and other health-related
establishments in order to make their services available at any and all times, shall be entitled
to full subsistence allowance of three (3) meals which may be computed in accordance with
prevailing circumstances as determined by the Secretary of Health in consultation with the
Management-Health Worker's Consultative Councils, as established under Section 33 of this
Act: Provided, That representation and travel allowance shall be given to rural health
physicians as enjoyed by municipal agriculturists, municipal planning and development
officers and budget officers.
Section 23. Longevity Pay.- A monthly longevity pay equivalent to five percent (5%)of the
monthly basic pay shall be paid to a health worker for every five (5) years of continuous,
efficient and meritorious services rendered as certified by the chief of office concerned,
commencing with the service after the approval of this Act.4
16
Pursuant to Section 355 of the Magna Carta, the Secretary of Health promulgated its
Implementing Rules and Regulations (IRR) in July 1992. Thereafter, in November 1999, the
DOH, in collaboration with various government agencies and health workers' organizations,
promulgated a Revised IRR consolidating all additional and clarificatory rules issued by the
former Secretaries of Health dating back from the effectivity of the Magna Carta. The
pertinent provisions of said Revised IRR provide:
6.3. Longevity Pay.- A monthly longevity pay equivalent to five percent (5%)of the present
monthly basic pay shall be paid to public health workers for every five (5) years of
continuous, efficient and meritorious services rendered as certified by the Head of
Agency/Local Chief Executives commencing after the approval of the Act. (April 17, 1992)
xxxx
7.1.1. Eligibility to Receive Hazard Pay.- All public health workers covered under RA 7305 are
eligible to receive hazard pay when the nature of their work exposes them to high risk/low
risk hazards for at least fifty percent (50%) of their working hours as determined and
approved by the Secretary of Health or his authorized representatives.
xxxx
7.2.1. Eligibility for Subsistence Allowance
a. All public health workers covered under RA 7305 are eligible to receive
full subsistence allowance as long as they render actual duty.
b. Public Health Workers shall be entitled to full Subsistence Allowance of
three (3) meals which may be computed in accordance with prevailing
circumstances as determined by the Secretary of Health in consultation
with the Management-Health Workers Consultative Council, as
established under Section 33 of the Act.
c. Those public health workers who are out of station shall be entitled to
per diems in place of Subsistence Allowance. Subsistence Allowance may
also be commuted.
xxxx
7.2.3 Rates of Subsistence Allowance
a. Subsistence allowance shall be implemented at not less than Ph₱50.00
per day or Ph₱1,500.00 per month as certified by head of agency.
 17

xxxx 9.1.1 The PHW holds a position in the agency plantilla of regular positions; and

d. Part-time public health workers/consultants are entitled to one-half 9.1.2 He/She has rendered at least satisfactory performance and has not been found guilty of
(1/2)of the prescribed rates received by full-time public health workers.6 any administrative or criminal case within all rating periods covered by the 5-year period.

On July 28, 2008, the Fourteenth Congress issued Joint Resolution No. 4, entitled Joint In a letter9 dated January 23, 2013 addressed to respondents Secretary of Budget and
Resolution Authorizing the President of the Philippines to Modify the Compensation and Management and Secretary of Health, petitioners expressed their opposition to the Joint
Position Classification System of Civilian Personnel and the Base Pay Schedule of Military and Circular cited above on the ground that the same diminishes the benefits granted by the
Uniformed Personnel in the Government, and for other Purposes, approved by then Magna Carta to PHWs.
President Gloria Macapagal-Arroyo on June 17,2009, which provided for certain amendments
in the Magna Carta and its IRR. Unsatisfied, petitioners, on May 30, 2013, filed the instant petition raising the following
issues:
On September 3, 2012, respondents DBM and CSC issued one of the two assailed issuances,
DBM-CSC Joint Circular No. 1, Series of 2012, to prescribe the rules on the grant of Step I.
Increments due to meritorious performance and Step Increment due to length of
service.7 Specifically, it provided that "an official or employee authorized to be granted
WHETHER RESPONDENTS ENRIQUE T. ONA AND FLORENCIO B. ABAD ACTED WITH GRAVE
Longevity Pay under an existing law is not eligible for the grant of Step Increment due to
ABUSE OF DISCRETION AND VIOLATED SUBSTANTIVE DUE PROCESS WHEN THEY ISSUED
length of service."8 Shortly thereafter, on November29, 2012, respondents DBM and DOH
DBM-DOH JOINT CIRCULAR NO. 1, S. 2012 WHICH:
then circulated the other assailed issuance, DBM-DOH Joint Circular No. 1, Series of 2012, the
relevant provisions of which state:
A) MADE THE PAYMENT OF HAZARD PAY DEPENDENT ON THE ACTUAL
DAYS OF EXPOSURE TO THE RISK INVOLVED;
7.0. Hazard Pay. - Hazard pay is an additional compensation for performing hazardous duties
and for enduring physical hardships in the course of performance of duties.
B) ALLOWED PAYMENT OF SUBSISTENCE ALLOWANCE AT ₱50 FOR EACH
DAY OF ACTUAL FULL-TIME SERVICE OR ₱25 FOR EACH DAY OF ACTUAL
As a general compensation policy, and in line with Section 21 of R. A. No. 7305, Hazard Pay
PART-TIME SERVICE WITHOUT CONSIDERATION OF THE PREVAILING
may be granted to PHWs only if the nature of the duties and responsibilities of their
CIRCUMSTANCES AS DETERMINED BY THE SECRETARY OF HEALTH IN
positions, their actual services, and location of work expose them to great danger,
CONSULTATION WITH THE MANAGEMENT HEALTH WORKERS'
occupational risks, perils of life, and physical hardships; and only during periods of actual
CONSULTATIVE COUNCILS;
exposure to hazards and hardships.

C) REQUIRED THAT LONGEVITY PAY BE GRANTED ONLY TO PHWs WHO

xxxx
HOLD PLANTILLA AND REGULAR POSITIONS; AND

8.3 The Subsistence Allowance shall be ₱50for each day of actual full-time service, or ₱25for
D) MADE THE JOINT CIRCULAR EFFECTIVE ON JANUARY 1, 2013, BARELY
each day of actual part-time service.
THREE (3) DAYS AFTER IT WAS PUBLISHED IN A NEWSPAPER OF GENERAL
CIRCULATION ON DECEMBER 29, 2012, IN VIOLATION OF THE RULES ON
xxxx PUBLICATION.

9.0 Longevity Pay (LP) II.

9.1 Pursuant to Section 23 of R.A. No. 7305, a PHW may be granted LP at 5% of his/her WHETHER RESPONDENTS FRANCISCO T. DUQUE AND FLORENCIO B. ABAD ACTED WITH
current monthly basic salary, in recognition of every 5 years of continuous, efficient, and GRAVE ABUSE OF DISCRETION WHEN THEY ISSUED DBM-CSC JOINT CIRCULAR NO. 1, S. 2012
meritorious services rendered as PHW. The grant thereof is based on the following criteria: DATED SEPTEMBER 2, 2012 WHICH PROVIDED THAT AN OFFICIAL OR EMPLOYEE ENTITLED TO

LONGEVITY PAY UNDER EXISTING LAW SHALL NO LONGER BE GRANTED STEP INCREMENT
DUE TO LENGTH OF SERVICE.
III.
WHETHER RESPONDENTS' ISSUANCE OF DBM-DOH JOINT CIRCULAR NO. 1, S. 2012 IS NULL
AND VOID FOR BEING AN UNDUE EXERCISE OF LEGISLATIVE POWER BY ADMINISTRATIVE
BODIES WHEN RESPONDENT ONA ALLOWED RESPONDENT ABAD TOSIGNIFICANTLY SHARE
THE POWER TO FORMULATE AND PREPARE THE NECESSARY RULES AND REGULATIONS TO
IMPLEMENT THE PROVISIONS OF THE MAGNA CARTA.
IV.
WHETHER RESPONDENT ONA WAS REMISS IN IMPLEMENTING THE MANDATE OF THE
MAGNA CARTA WHEN HE DID NOT INCLUDE THE MAGNA CARTA BENEFITS IN THE
DEPARTMENT'S YEARLY BUDGET.
V.
WHETHER RESPONDENTS' ISSUANCE OF DBM-DOH JOINT CIRCULAR NO. 1, S. 2012 IS NULL
AND VOID FOR BEING AN UNDUE EXERCISE OF LEGISLATIVE POWER BY ADMINISTRATIVE
BODIES WHEN THE SAME WAS ISSUED SANS CONSULTATION WITH PROFESSIONAL AND
HEALTH WORKERS' ORGANZATIONS AND UNIONS.
Petitioners contend that respondents acted with grave abuse of discretion when they issued
DBM-DOH Joint Circular No. 1, Series of 2012 and DBM-CSC Joint Circular No. 1, Series of
2012 which prescribe certain requirements on the grant of benefits that are not otherwise
required by RA No. 7305. Specifically, petitioners assert that the DBM-DOH Joint Circular
grants the payment of Hazard Pay only if the nature of the PHWs' duties expose them to
danger when RA No. 7305 does not make any qualification. They likewise claim that said
circular unduly fixes Subsistence Allowance at ₱50 for each day of full-time service and ₱25
for part-time service which are not in accordance with prevailing circumstances determined
by the Secretary of Health as required by RA No. 7305. Moreover, petitioners fault
respondents for the premature effectivity of the DBM-DOH Joint Circular which they believe
should have been on January 29, 2012 and not on January 1, 2012. As to the grant of
Longevity Pay, petitioners posit that the same was wrongfully granted only to PHWs holding
regular plantilla positions. Petitioners likewise criticize the DBM-CSC Joint Circular insofar as
it withheld the Step Increment due to length of service from those who are already being
granted Longevity Pay. As a result, petitioners claim that the subject circulars are void for
being an undue exercise of legislative power by administrative bodies.
In their Comment, respondents, through the Solicitor General, refute petitioners' allegations
in stating that the assailed circulars were issued within the scope of their authority, and are
therefore valid and binding. They also assert the authority of Joint Resolution No. 4, Series of
18
2009, approved by the President, in accordance with the prescribed procedure. Moreover,
respondents question the remedies of Certiorari and Prohibition used by petitioners for the
assailed circulars were done in the exercise of their quasi-legislative, and not of their judicial
or quasi-judicial functions.
The petition is partly meritorious.
At the outset, the petition for certiorari and prohibition filed by petitioners is not the
appropriate remedy to assail the validity of respondents' circulars. Sections 1 and 2 of Rule
65 of the Rules of Court provide:
RULE 65
CERTIORARI, PROHIBITION AND MANDAMUS
Section 1. Petition for certiorari. - When any tribunal, board or officer exercising judicial or
quasi-judicial functions has acted without or in excess of its or his jurisdiction, or with grave
abuse of discretion amounting to lack or excess of jurisdiction, and there is no appeal, or any
plain, speedy, and adequate remedy in the ordinary course of law, a person aggrieved
thereby may file a verified petition in the proper court, alleging the facts with certainty and
praying that judgment be rendered annulling or modifying the proceedings of such tribunal,
board or officer, and granting such incidental reliefs as law and justice may require.
xxxx
Sec. 2. Petition for Prohibition. - When the proceedings of any tribunal, corporation, board,
officer or person, whether exercising judicial, quasi-judicial or ministerial functions, are
without or in excess of its jurisdiction, or with grave abuse of discretion amounting to lack or
excess of jurisdiction, and there is no appeal or any other plain, speedy, and adequate
remedy in the ordinary course of law, a person aggrieved thereby may file a verified petition
in the proper court, alleging the facts with certainty and praying that judgment be rendered
commanding the respondent to desist from further proceedings in the action or matter
specified therein, or otherwise granting such incidental reliefs as law and justice may
require.10
Thus, on the one hand, certiorari as a special civil action is available only if: (1) it is directed
against a tribunal, board, or officer exercising judicial or quasi-judicial functions; (2) the
tribunal, board, or officer acted without or in excess of jurisdiction or with grave abuse of
discretion amounting to lack or excess of jurisdiction; and (3) there is no appeal nor any
plain, speedy, and adequate remedy in the ordinary course of law.11
On the other hand, prohibition is available only if: (1) it is directed against a tribunal,
corporation, board, officer, or person exercising functions, judicial, quasi-judicial, or
ministerial; (2) the tribunal, corporation, board or person acted without or in excess of its
jurisdiction, or with grave abuse of discretion amounting to lack or excess of jurisdiction; and

(3) there is no appeal or any other plain, speedy, and adequate remedy in the ordinary
course of law.12 Based on the foregoing, this Court has consistently reiterated that petitions
for certiorari and prohibition may be invoked only against tribunals, corporations, boards,
officers, or persons exercising judicial, quasi-judicial or ministerial functions, and not against
their exercise of legislative or quasi-legislative functions.13
Judicial functions involve the power to determine what the law is and what the legal rights of
the parties are, and then undertaking to determine these questions and adjudicate upon the
rights of the parties.14 Quasi judicial functions apply to the actions and discretion of public
administrative officers or bodies required to investigate facts, hold hearings, and draw
conclusions from them as a basis for their official action, in their exercise of discretion of a
judicial nature.15 Ministerial functions are those which an officer or tribunal performs in the
context of a given set of facts, in a prescribed manner and without regard to the exercise of
his own judgment upon the propriety or impropriety of the act done.16
Before a tribunal, board, or officer may exercise judicial or quasi-judicial acts, it is necessary
that there be a law that gives rise to some specific rights under which adverse claims are
made, and the controversy ensuing therefrom is brought before a tribunal, board, or officer
clothed with authority to determine the law and adjudicate the respective rights of the
contending parties.17 In this case, respondents did not act in any judicial, quasi-judicial, or
ministerial capacity in their issuance of the assailed joint circulars. In issuing and
implementing the subject circulars, respondents were not called upon to adjudicate the
rights of contending parties to exercise, in any manner, discretion of a judicial nature. The
issuance and enforcement by the Secretaries of the DBM, CSC and DOH of the questioned
joint circulars were done in the exercise of their quasi-legislative and administrative
functions. It was in the nature of subordinate legislation, promulgated by them in their
exercise of delegated power. Quasi-legislative power is exercised by administrative agencies
through the promulgation of rules and regulations within the confines of the granting statute
and the doctrine of non-delegation of powers from the separation of the branches of the
government.18
Based on the foregoing, certiorari and prohibition do not lie against herein respondents'
issuances. It is beyond the province of certiorari to declare the aforesaid administrative
issuances illegal because petitions for certiorari seek solely to correct defects in jurisdiction,
and not to correct just any error committed by a court, board, or officer exercising judicial or
quasi-judicial functions unless such court, board, or officer thereby acts without or in excess
of jurisdiction or with such grave abuse of discretion amounting to lack of jurisdiction.19
It is likewise beyond the territory of a writ of prohibition since generally, the purpose of the
same is to keep a lower court within the limits of its jurisdiction in order to maintain the
administration of justice in orderly channels. It affords relief against usurpation of jurisdiction
by an inferior court, or when, in the exercise of jurisdiction, the inferior court transgresses
the bounds prescribed by the law, or where there is no adequate remedy available in the
ordinary course of law.20
19
Be that as it may, We proceed to discuss the substantive issues raised in the petition in order
to finally resolve the doubt over the Joint Circulars' validity. For proper guidance, the
pressing issue of whether or not the joint circulars regulating the salaries and benefits relied
upon by public health workers were tainted with grave abuse of discretion rightly deserves
its prompt resolution. With respect to the infirmities of the DBM-DOH Joint Circular raised in
the petition, they cannot be said to have been issued with grave abuse of discretion for not
only are they reasonable, they were likewise issued well within the scope of authority
granted to the respondents. In fact, as may be gathered from prior issuances on the matter,
the circular did not make any substantial deviation therefrom, but actually remained
consistent with, and germane to, the purposes of the law.
First, the qualification imposed by the DBM-DOH Joint Circular granting the payment of
Hazard Pay only if the nature of PHWs' duties expose them to danger and depending on
whether the risk involved is high or low was merely derived from Section 7.1.1 of the Revised
IRR of RA No. 7305, duly promulgated by the DOH in collaboration with various government
health agencies and health workers' organizations in November 1999, to wit:
SECTION 7.1.1. Eligibility to Receive Hazard Pay. - All public health workers covered under RA
7305 are eligible to receive hazard pay when the nature of their work exposes them to high
risk/low risk hazards for at least fifty percent (50%) of their working hours as determined and
approved by the Secretary of Health or his authorized representatives.21
Second, fixing the Subsistence Allowance at ₱50 for each day of full-time service and ₱25 for
part-time service was also merely a reiteration of the limits prescribed by the Revised IRR,
validly issued by the Secretary of Health pursuant to Section 3522 of RA No. 7305, the
pertinent portions of which states:
Section 7.2.3 Rates of Subsistence Allowance
a. Subsistence allowance shall be implemented at not less than Ph₱50.00 per day or
Ph₱1,500.00 per month as certified by head of agency.
xxxx
d. Part-time public health workers/consultants are entitled to one-half (1/2)of the prescribed
rates received by full-time public health workers.
Third, the condition imposed by the DBM-DOH Joint Circular granting longevity pay only to
those PHWs holding regular plantilla positions merely implements the qualification imposed
by the Revised IRR which provides:
6.3. Longevity Pay. - A monthly longevity pay equivalent to five percent (5%) of the present
monthly basic pay shall be paid to public health workers for every five (5) years of

continuous, efficient and meritorious services rendered as certified by the Head of
Agency/Local Chief Executives commencing after the approval of the Act. (April 17, 1992)
6.3.1. Criteria for Efficient and Meritorious Service A Public Worker shall have:
a. At least a satisfactory performance rating within the rating period.
b. Not been found guilty of any administrative or criminal case within the rating period.
As can be gleaned from the aforequoted provision, petitioners failed to show any real
inconsistency in granting longevity pay to PHWs holding regular plantilla positions. Not only
are they based on the same premise, but the intent of longevity pay, which is paid to workers
for every five (5) years of continuous, efficient and meritorious services, necessarily coincides
with that of regularization. Thus, the assailed circular cannot be invalidated for its issuance is
consistent with, and germane to, the purposes of the law.
Anent petitioners' contention that the DBM-DOH Joint Circular is null and void for its failure
to comply with Section 3523 of RA No. 7305 providing that its implementing rules shall take
effect thirty (30) days after publication in a newspaper of general circulation, as well as its
failure to file a copy of the same with the University of the Philippines Law Center-Office of
the National Administrative Register (UP Law Center-ONAR), jurisprudence as well as the
circumstances of this case dictate otherwise.
Indeed, publication, as a basic postulate of procedural due process, is required by law in
order for administrative rules and regulations to be effective. 24 There are, however, several
exceptions, one of which are interpretative regulations which "need nothing further than
their bare issuance for they give no real consequence more than what the law itself has
already prescribed."25 These regulations need not be published for they add nothing to the
law and do not affect substantial rights of any person.26
Thus, in Association of Southern Tagalog Electric Cooperatives, et. al. v. Energy Regulatory
Commission (ERC),27wherein several orders issued by the ERC were sought to be invalidated
for lack of publication and non-submission of copies thereof to the UP Law Center - ONAR, it
has been held that since they merely interpret RA No. 7832 and its IRR, particularly on the
computation of the cost of purchased power, without modifying, amending or supplanting
the same, they cannot be rendered ineffective, to wit:
When the policy guidelines of the ERC directed the exclusion of discounts extended by power
suppliers in the computation of the cost of purchased power, the guidelines merely affirmed
the plain and unambiguous meaning of "cost" in Section 5, Rule IX of the IRR of R.A. No.
7832."Cost" is an item of outlay, and must therefore exclude discounts since these are "not
amounts paid or charged for the sale of electricity, but are reductions in rates.
xxxx
20
Thus, the policy guidelines of the ERC on the treatment of discounts extended by power
suppliers "give no real consequence more than what the law itself has already prescribed."
Publication is not necessary for the effectivity of the policy guidelines.
As interpretative regulations, the policy guidelines of the ERC on the treatment of discounts
extended by power suppliers are also not required to be filed with the U.P. Law Center in
order to be effective. Section 4, Chapter 2, Book VII of the Administrative Code of 1987
requires every rule adopted by an agency to be filed with the U.P. Law Center to be effective.
However, in Board of Trustees of the Government Service Insurance System v. Velasco, this
Court pronounced that "not all rules and regulations adopted by every government agency
are to be filed with the UP Law Center." Interpretative regulations and those merely internal
in nature are not required to be filed with the U.P. Law Center. Paragraph 9 (a) of the
Guidelines for Receiving and Publication of Rules and Regulations Filed with the U.P. Law
Center states:
9. Rules and Regulations which need not be filed with the U.P. Law Center, shall, among
others, include but not be limited to, the following:
a. Those which are interpretative regulations and those merely internal in nature, that is,
regulating only the personnel of the Administrative agency and not the public.
xxxx
Furthermore, the policy guidelines of the ERC did not create a new obligation and impose a
new duty, nor did it attach a new disability. As previously discussed, the policy guidelines
merely interpret R.A. No. 7832 and its IRR, particularly on the computation of the cost of
purchased power. The policy guidelines did not modify, amend or supplant the IRR.
Similarly, in Republic v. Drugmaker's Laboratories, Inc.,28 the validity of circulars issued by the
Food and Drug Administration (FDA) was upheld in spite of the non-compliance with the
publication, prior hearing, and consultation requirements for they merely implemented the
provisions of Administrative Order No. 67, entitled "Revised Rules and Regulations on
Registration of Pharmaceutical Products" issued by the DOH, in the following wise:
A careful scrutiny of the foregoing issuances would reveal that AO 67, s. 1989 is actually the
rule that originally introduced the BA/BE testing requirement as a component of
applications for the issuance of CPRs covering certain pharmaceutical products. As such, it
is considered an administrative regulation - a legislative rule to be exact - issued by the
Secretary of Health in consonance with the express authority granted to him by RA 3720 to
implement the statutory mandate that all drugs and devices should first be registered with
the FDA prior to their manufacture and sale. Considering that neither party contested the
validity of its issuance, the Court deems that AO 67, s. 1989 complied with the requirements
of prior hearing, notice, and publication pursuant to the presumption of regularity accorded
to the government in the exercise of its official duties.42

On the other hand, Circular Nos. 1 and 8, s. 1997 cannot be considered as administrative
regulations because they do not: (a) implement a primary legislation by providing the
details thereof; (b) interpret, clarify, or explain existing statutory regulations under which
the FDA operates; and/or (c) ascertain the existence of certain facts or things upon which
the enforcement of RA 3720 depends. In fact, the only purpose of these circulars is for the
FDA to administer and supervise the implementation of the provisions of AO 67, s. 1989,
including those covering the BA/BE testing requirement, consistent with and pursuant to
RA 3720.43 Therefore, the FDA has sufficient authority to issue the said circulars and since
they would not affect the substantive rights of the parties that they seek to govern - as
they are not, strictly speaking, administrative regulations in the first place - no prior
hearing, consultation, and publication are needed for their validity.
In this case, the DBM-DOH Joint Circular in question gives no real consequence more than
what the law itself had already prescribed. As previously discussed, the qualification of actual
exposure to danger for the PHW's entitlement to hazard pay, the rates of ₱50 and ₱25
subsistence allowance, and the entitlement to longevity pay on the basis of PHW's status in
the plantilla of regular positions were already prescribed and authorized by pre-existing law.
There is really no new obligation or duty imposed by the subject circular for it merely
reiterated those embodied in RA No. 7305 and its Revised IRR. The Joint Circular did not
modify, amend nor supplant the Revised IRR, the validity of which is undisputed.
Consequently, whether it was duly published and filed with the UP Law Center - ONAR is
necessarily immaterial to its validity because in view of the pronouncements above,
interpretative regulations, such as the DBM-DOH circular herein, need not be published nor
filed with the UP Law Center - ONAR in order to be effective. Neither is prior hearing or
consultation mandatory.
Nevertheless, it bears stressing that in spite of the immateriality of the publication
requirement in this case, and even assuming the necessity of the same, its basic objective in
informing the public of the contents of the law was sufficiently accomplished when the DBM-
DOH Joint Circular was published in the Philippine Star, a newspaper of general circulation,
on December 29, 2012.29
As to petitioners' allegation of grave abuse of discretion on the part of respondent DOH
Secretary in failing to include the Magna Carta benefits in his department's yearly budget,
the same is belied by the fact that petitioners themselves specifically provided in their
petition an account of the amounts allocated for the same in the years 2012 and 2013. 30
Based on the foregoing, it must be recalled that administrative regulations, such as the DBM-
DOH Joint Circular herein, enacted by administrative agencies to implement and interpret the
law they are entrusted to enforce are entitled to great respect.31 They partake of the nature
of a statute and are just as binding as if they have been written in the statute itself. As such,
administrative regulations have the force and effect of law and enjoy the presumption of
legality. Unless and until they are overcome by sufficient evidence showing that they
exceeded the bounds of the law,32 their validity and legality must be upheld.
21
Thus, notwithstanding the contention that the Joint Resolution No. 4 promulgated by
Congress cannot be a proper source of delegated power, the subject Circular was
nevertheless issued well within the scope of authority granted to the respondents. The issue
in this case is not whether the Joint Resolution No. 4 can become law and, consequently,
authorize the issuance of the regulation in question, but whether the circular can be struck
down as invalid for being tainted with grave abuse of discretion. Regardless, therefore, of the
validity or invalidity of Joint Resolution No. 4, the DBMDOH Joint Circular assailed herein
cannot be said to have been arbitrarily or capriciously issued for being consistent with prior
issuances duly promulgated pursuant to valid and binding law.
Distinction must be made, however, with respect to the DBM-CSC Joint Circular, the
contested provision of which states:
6.5 An official or employee authorized to be granted Longevity Pay under an existing law is
not eligible for the grant of Step Increment Due to Length of Service.
A review of RA No. 7305 and its Revised IRR reveals that the law does not similarly impose
such condition on the grant of longevity pay to PHWs in the government service. As such, the
DBM-CSC Joint Circular effectively created a new imposition which was not otherwise
stipulated in the law it sought to interpret. Consequently, the same exception granted to the
DBM-DOH Joint Circular cannot be applied to the DBM-CSC Joint Circular insofar as the
requirements on publication and submission with the UP Law Center - ONAR are concerned.
Thus, while it was well within the authority of the respondents to issue rules regulating the
grant of step increments as provided by RA No. 6758, otherwise known as the Compensation
and Position Classification Act of 1989, which pertinently states:
Section 13. Pay Adjustments. - Paragraphs (b) and (c), Section 15 of Presidential Decree No.
985 are hereby amended to read as follows:
xxxx
(c) Step Increments- Effective January 1, 1990 step increments shall be granted based on
merit and/or length of service in accordance with rules and regulations that will be
promulgated jointly by the DBM and the Civil Service Commission,
and while it was duly published in the Philippine Star, a newspaper of general circulation, on
September 15, 2012,33the DBM-CSC Joint Circular remains unenforceable for the failure of
respondents to file the same with the UP Law Center - ONAR.34 Moreover, insofar as the
DBM-DOH Joint Circular similarly withholds the Step Increment due to length of service from
those who are already being granted Longevity Pay, the same must likewise be declared
unenforceable.[35
 22

Note also that the DBM-DOH Joint Circular must further be invalidated insofar as it lowers Rates of Hazard Pay
the hazard pay at rates below the minimum prescribed by Section 21 of RA No. 7305 and Actual Exposure/ High Risk Low Risk
Section 7.1.5 (a) of its Revised IRR as follows: Level of Risk

SEC. 21. Hazard Allowance. - Public health worker in hospitals, sanitaria, rural health units, 12 or more days 25% of monthly basic salary 14% of monthly basic salary
main centers, health infirmaries, barangay health stations, clinics and other health-related
6 to 11 days 14% of monthly basic salary 8% of monthly basic salary
establishments located in difficult areas, strife-torn or embattled areas, distresses or isolated
stations, prisons camps, mental hospitals, radiation-exposed clinics, laboratories or disease- Less than 6 days 8% monthly basic salary 5% of monthly basic salary
infested areas or in areas declared under state of calamity or emergency for the duration
thereof which expose them to great danger, contagion, radiation, volcanic activity/eruption
occupational risks or perils to life as determined by the Secretary of Health or the Head of WHEREFORE, premises considered, the instant petition is PARTLY GRANTED. The DBM-DOH
the unit with the approval of the Secretary of Health, shall be compensated hazard allowance Joint Circular, insofar as it lowers the hazard pay at rates below the minimum prescribed by
equivalent to at least twenty-five percent (25%)of the monthly basic salary of health workers Section 21 of RA No. 7305 and Section 7.1.5 (a) of its Revised IRR, is declared INVALID. The
receiving salary grade 19 and below, and five percent (5%) for health workers with salary DBM-CSC Joint Circular, insofar as it provides that an official or employee authorized to be
grade 20 and above. granted Longevity Pay under an existing law is not eligible for the grant of Step Increment
Due to Length of Service, is declared UNENFORCEABLE. The validity, however, of the DBM-
DOH Joint Circular as to the qualification of actual exposure to danger for the PHW's
xxxx
entitlement to hazard pay, the rates of ₱50 and ₱25 subsistence allowance, and the
entitlement to longevity pay on the basis of the PHW' s status in the plantilla of regular
7.1.5. Rates of Hazard Pay positions, is UPHELD.

a. Public health workers shall be compensated hazard allowances equivalent to at least SO ORDERED.
twenty five (25%)of the monthly basic salary of health workers, receiving salary grade 19 and
below, and five percent (5%)for health workers with salary grade 20 and above. This may be
DIOSDADO M. PERALTA
granted on a monthly, quarterly or annual basis.
Associate Justice

It is evident from the foregoing provisions that the rates of hazard pay must be at least25%
WE CONCUR:
of the basic monthly salary of PWHs receiving salary grade 19 and below, and 5% receiving
salary grade 20 and above. As such, RA No. 7305 and its implementing rules noticeably
prescribe the minimum rates of hazard pay due all PHWs in the government, as is clear in the On official leave
self-explanatory phrase "at least" used in both the law and the rules.36 Thus, the following MARIA LOURDES P.A. SERENO*
rates embodied in Section 7.2 of DBM-DOH Joint Circular must be struck down as invalid for Chief Justice
being contrary to the mandate of RA No. 7305 and its Revised IRR:
ANTONIO T. CARPIO** PRESBITERO J. VELASCO, JR.
Associate Justice Associate Justice
7.2.1 For PHWs whose positions are at SG-19 and below, Hazard Pay shall be based on the
degree of exposure to high risk or low risk hazards, as specified in sub-items 7 .1.1 and 7 .1.2
above, and the number of workdays of actual exposure over 22 workdays in a month, at See: Separate Opinion
TERESITA J. LEONARDO-DE CASTRO*
rates not to exceed 25% of monthly basic salary. In case of exposure to both high risk and low ARTURO D. BRION
Associate Justice
risk hazards, the Hazard Pay for the month shall be based on only one risk level, whichever is Associate Justice
more advantageous to the PHW.
On official leave
LUCAS P. BERSAMIN
7.2.2 PHWs whose positions are at SG-20 and above may be entitled to Hazard Pay at 5% of MARIANO C. DEL CASTILLO*
Associate Justice
their monthly basic salaries for all days of exposure to high risk and/or low risk hazards. Associate Justice
However, those exposed to high risk hazards for 12 or more days in a month may be entitled
to a fixed amount of ₱4,989.75 per month.
 23

4 Emphasis ours.
MARTIN S. VILLARAMA, JR. JOSE PORTUGAL PEREZ
Associate Justice Associate Justice 5 Section 35. Rules and Regulations. - The Secretary of Health after consultation
with appropriate agencies of the Government as well as professional and health
On official leave workers' organizations or unions, shall formulate and prepare the necessary rules
JOSE CATRAL MENDOZA
BIENVENIDO L. REYES* and regulations to implement the provisions of this Act. Rules and regulations
Associate Justice
Associate Justice issued pursuant to this Section shall take effect thirty (30) days after publication in
a newspaper of general circulation.
See separate concurring and dissenting
6 Emphasis ours.
ESTELA M. PERLAS-BERNABE opinion
Associate Justice MARVIC M.V.F. LEONEN
Associate Justice 7 Section 2, supra note 2.

8 Section 6.5, id.

Prior OSG action
No part 9 Annex "C" to Petition, rollo, pp. 125-127.
FRANCIS H. JARDELEZA***
Associate Justice
10 Emphasis ours.
CERTIFICATION
11Metropolitan Bank and Trust Company, Inc. v. National Wages and Productivity
Commission and Regional Tripartite Wages and Productivity Board - Region II, 543
Pursuant to Section 13, Article VIII of the Constitution, I certify that the conclusions in the
Phil. 318, 328 (2007).
above Decision were reached in consultation before the case was assigned to the writer of
the opinion of the Court.
12 Id. at 328-329.
ANTONIO T. CARPIO
13 Dela Llana v. The Chairperson, Commission on Audit, G.R. No. 180989, February
Acting Chief Justice
7, 2012, 665 SCRA 176, 184, Liga ng mga Barangay National v. City Mayor of Manila,
465 Phil. 529 (2004), Southern Hemisphere Engagement Network, Inc. v. Anti-
Terrorism Council, 646 Phil. 452, 470-471 (2010).
Footnotes
14Chamber of Real Estate and Builders Associations, Inc. v. Secretary of Agrarian
* Reform, 635 Phil. 283, 304, citing Liga ng mga Barangay National v. City Mayor of
On official leave.
Manila, supra, at 543.
** Designated Acting Chief Justice per Special Order No. 2101 dated July 13, 2015. 15 Id.
*** No part. 16 Metropolitan Bank and Trust Company, Inc. v. National Wages And Productivity
Commission And Regional Tripartite Wages And Productivity Board - Region II,
1 Annex "B" to Petition, rollo, pp. 67-83. supra note 11, at 329, citing De Guzman, Jr. v. Mendoza, 493 Phil. 690, 696 (2005);
Sismaet v. Sabas, 473 Phil. 230, 239 (2004)Philippine Bank of Communications v.
2 Annex "A" to Petition, id. at 58-66. Torio, 348 Phil. 74, 84 (1998).

3 Republic Act No. 7305, Sec. 2.

 24

17Chamber of Real Estate and Builders Association, Inc. v. Secretary of Agrarian 31Dacudao v. Secretary of Justice, G.R. No. 188056, January 8, 2013, 688 SCRA 109,
Reform, supra note 14, at 304-305. 123, citing ABAKADA Guro Party List v. Purisima, 584 Phil. 246, 283 (2008).

18Metropolitan Bank and Trust Company, Inc. v. National Wages and Productivity 32 Id.
Commission and Regional Tripartite Wages and Productivity Board-Region II, supra
note 11, at 330. 33 Rollo, p. 179.

19 Yusay v. Court of Appeals, G.R. No. 156684, April 6, 2011,647 SCRA 269, 277,
citing Republic v. Yang Chi Hao, 617 Phil. 422, 425 (2009) and Chua v. Court of
Appeals, 338 Phil. 262, 269 (1997).
20Holy Spirit Homeowners' Association, Inc. v. Sec. Defensor, 529 Phil. 573, 587
(2006).
21 Emphasis ours.
22 Supra note 4.
23 Section 35. Rules and Regulations. - The Secretary of Health after consultation
with appropriate agencies of the Government as well as professional and health
workers' organizations or unions, shall formulate and prepare the necessary rules
and regulations to implement the provisions of this Act. Rules and regulations
issued pursuant to this Section shall take effect thirty (30) days after publication in
a newspaper of general circulation. (Emphasis ours)
24National Association of Electricity Consumers for Reforms (NASECORE) v. Energy
Regulatory Commission, 517 Phil. 23, 61-62 (2006).
34
Araos, et. al. v. Hon. Regala, 627 Phil. 13, 22 (2010), citing GMA Network, Inc. v.
Movie Television Review and Classification Board, 543 Phil. 178, 183 (2007).
35 Section 9.5 of DBM-DOH Joint Circular provides:
9.5 On or after the effectivity of this JC, a PHW previously granted Step
Increment Due to Length of Service shall no longer be granted
subsequent Step Increment Due to Length of Service in view of the
prohibition in item (4)(d) of said JR No. 4. Likewise, a PHW hired on or
after the effectivity of this JC shall not be granted Step Increment Due to
Length of Service.
36
Re: Entitlement to Hazard Pay of SC Medical and Dental Clinic Personnel, 592
Phil. 389, 397 (2008)
MANDATORY EFFECT OF LAWS; MISTAKE OF FACT V MISTAKE OF LAW; NON-
RETROACTIVITY OF LAWS
FIRST DIVISION
G.R. No. L-30771 May 28, 1984

25Association of Southern Tagalog Electric Cooperatives, Inc. (ASTEC), et al. v. LIAM LAW, plaintiff-appellee,
Energy Regulatory Commission, G.R. Nos. 192117 and 192118, September 18, vs.
2012, 681 SCRA 119, 151, citing Commissioner of Internal Revenue v. Court of OLYMPIC SAWMILL CO. and ELINO LEE CHI, defendants-appellants.
Appeals, 329 Phil. 987, 1007 (1996).
Felizardo S.M. de Guzman for plaintiff-appellee.
26Id., citing The Veterans Federation of the Philippines v. Reyes, 518 Phil. 668, 704
(2006).
Mariano M. de Joya for defendants-appellants.
27 Id.
MELENCIO-HERRERA, J.:
28 G.R. No. 190837, March 5, 2014.
This is an appeal by defendants from a Decision rendered by the then Court of First Instance
29 Rollo, p. 179. of Bulacan. The appeal was originally taken to the then Court of Appeals, which endorsed it
to this instance stating that the issue involved was one of law.
30 Id. at 47.

It appears that on or about September 7, 1957, plaintiff loaned P10,000.00, without interest,
to defendant partnership and defendant Elino Lee Chi, as the managing partner. The loan
became ultimately due on January 31, 1960, but was not paid on that date, with the debtors
asking for an extension of three months, or up to April 30, 1960.
On March 17, 1960, the parties executed another loan document. Payment of the P10,000.00
was extended to April 30, 1960, but the obligation was increased by P6,000.00 as follows:
That the sum of SIX THOUSAND PESOS (P6,000.00), Philippine currency
shall form part of the principal obligation to answer for attorney's fees,
legal interest, and other cost incident thereto to be paid unto the creditor
and his successors in interest upon the termination of this agreement.
Defendants again failed to pay their obligation by April 30, 1960 and, on September 23, 1960,
plaintiff instituted this collection case. Defendants admitted the P10,000.00 principal
obligation, but claimed that the additional P6,000.00 constituted usurious interest.
Upon application of plaintiff, the Trial Court issued, on the same date of September 23, 1960,
a writ of Attachment on real and personal properties of defendants located at Karanglan,
Nueva Ecija. After the Writ of Attachment was implemented, proceedings before the Trial
Court versed principally in regards to the attachment.
On January 18, 1961, an Order was issued by the Trial Court stating that "after considering
the manifestation of both counsel in Chambers, the Court hereby allows both parties to
simultaneously submit a Motion for Summary Judgment. 1 The plaintiff filed his Motion for
Summary Judgment on January 31, 1961, while defendants filed theirs on February 2, 196l. 2
On June 26, 1961, the Trial Court rendered decision ordering defendants to pay plaintiff "the
amount of P10,000.00 plus the further sum of P6,000.00 by way of liquidated damages . . .
with legal rate of interest on both amounts from April 30, 1960." It is from this judgment that
defendants have appealed.
We have decided to affirm.
Under Article 1354 of the Civil Code, in regards to the agreement of the parties relative to
the P6,000.00 obligation, "it is presumed that it exists and is lawful, unless the debtor proves
the contrary". No evidentiary hearing having been held, it has to be concluded that
defendants had not proven that the P6,000.00 obligation was illegal. Confirming the Trial
Court's finding, we view the P6,000.00 obligation as liquidated damages suffered by plaintiff,
as of March 17, 1960, representing loss of interest income, attorney's fees and incidentals.
The main thrust of defendants' appeal is the allegation in their Answer that the P6,000.00
constituted usurious interest. They insist the claim of usury should have been deemed
admitted by plaintiff as it was "not denied specifically and under oath". 3
25
Section 9 of the Usury Law (Act 2655) provided:
SEC. 9. The person or corporation sued shall file its answer in writing
under oath to any complaint brought or filed against said person or
corporation before a competent court to recover the money or other
personal or real property, seeds or agricultural products, charged or
received in violation of the provisions of this Act. The lack of taking an
oath to an answer to a complaint will mean the admission of the facts
contained in the latter.
The foregoing provision envisages a complaint filed against an entity which has committed
usury, for the recovery of the usurious interest paid. In that case, if the entity sued shall not
file its answer under oath denying the allegation of usury, the defendant shall be deemed to
have admitted the usury. The provision does not apply to a case, as in the present, where it is
the defendant, not the plaintiff, who is alleging usury.
Moreover, for sometime now, usury has been legally non-existent. Interest can now be
charged as lender and borrower may agree upon. 4 The Rules of Court in regards to
allegations of usury, procedural in nature, should be considered repealed with retroactive
effect.
Statutes regulating the procedure of the courts will be construed as
applicable to actions pending and undetermined at the time of their
passage. Procedural laws are retrospective in that sense and to that
extent. 5
... Section 24(d), Republic Act No. 876, known as the Arbitration Law,
which took effect on 19 December 1953, and may be retroactively
applied to the case at bar because it is procedural in nature. ... 6
WHEREFORE, the appealed judgment is hereby affirmed, without pronouncement as to costs.
SO ORDERED.
Teehankee (Chairman), Plana, Relova, Gutierrez, Jr. and De la Fuente, JJ., concur.
Footnotes
1 p. 81, Record on Appeal.
2 p. 116, Ibid.

3 Section 1, Rule 9.
4 "SECTION 1. The rate of interest, including commissions, premiums,
fees and other charges, on a loan or forbearance of any money, goods, or
credits, regardless of maturity and whether secured or unsecured, that
may be charged or collected by any person, whether natural or judicial
shag not be subject to any ceiling prescribed under or pursuant to the
Usury Law, as amended." (Central Bank Circular No. 905, Series of 1982,
78 Off. Gaz. 7336).
5 People vs. Sumilang, 77 Phil. 764 (1946).
6 De Lopez, et al. vs. Vda. de Fajardo, et al., 101 Phil., pp. 1104, 1109
(1957).
SECOND DIVISION
G.R. No. 188639, September 02, 2015
SECURITIES AND EXCHANGE COMMISSION, Petitioner, v. HON. REYNALDO M. LAIGO, IN HIS
CAPACITY AS PRESIDING JUDGE OF THE REGIONAL TRIAL COURT, NATIONAL CAPITAL
JUDICIAL REGION, MAKATI CITY, BRANCH 56, GLICERIA AYAD, SAHLEE DELOS REYES AND
ANTONIO P. HUETE, JR., Respondents.
DECISION
MENDOZA, J.:
In this petition for certiorari1 under Rule 65 of the Rules of Court, petitioner Securities and
Exchange Commission (SEC), through the Office of the Solicitor General (OSG), assails the
June 26, 2009 Order2(June 26, 2009 Order) issued by respondent Judge Reynaldo M. Laigo
(Judge Laigo) of the Regional Trial Court, Branch 56, Makati City (RTC), in Sp. Proc. No. M-
6758,3 a petition for involuntary insolvency of Legacy Consolidated Plans, Incorporated
(Legacy), ordering the inclusion of the trust fund in its corporate assets to the prejudice of
the planholders.
Factual Antecedents
Republic Act (R.A.) No. 8799, otherwise known as the Securities Regulation Code (SRC),
specifically Section 16 thereof, mandated the Securities and Exchange Commission (SEC) to
prescribe rules and regulations governing the pre-need industry. Pursuant thereto, the SEC
issued the corresponding New Rules on the Registration and Sale of Pre-Need Plans (New
Rules)4 to govern the pre-need industry prior to the enactment of R.A. No. 9829, otherwise
known as the Pre-need Code of the Philippines(Pre-Need Code). It required from the pre-
need providers the creation of trust funds as a requirement for registration.
26
As defined in Rule 1.9 of the New Rules, " 'Trust Fund' means a fund set up from planholders'
payments, separate and distinct from the paid-up capital of a registered pre-need company,
established with a trustee under a trust agreement approved by the SEC, to pay for the
benefits as provided in the pre-need plan."
Legacy, being a pre-need provider, complied with the trust fund requirement and entered
into a trust agreement with the Land Bank of the Philippines (IBP).
In mid-2000, the industry collapsed for a range of reasons. Legacy, like the others, was
unable to pay its obligations to the planholders.
This resulted in Legacy being the subject of a petition for involuntary insolvency filed on
February 18, 2009 by private respondents in their capacity as planholders. Through its
manifestation filed in the RTC, Legacy did not object to the proceedings. Accordingly, it was
declared insolvent by the RTC in its Order,5dated April 27, 2009. The trial court also ordered
Legacy to submit an inventory of its assets and liabilities pursuant to Sections 15 and 16 of
Act No. 1956,6 otherwise known as the Insolvency Law, the applicable bankruptcy law at that
time.
On May 15, 2009, the RTC ordered the SEC, being the pre-need industry's regulator, to
submit the documents pertaining to Legacy's assets and liabilities.
In its Manifestation with Evaluation, dated June 10, 2009, the SEC opposed the inclusion of
the trust fund in the inventory of corporate assets on the ground that to do so would
contravene the New Rules which treated trust funds as principally established for the
exclusive purpose of guaranteeing the delivery of benefits due to the planholders. It was of
the position that the inclusion of the trust fund in the insolvent's estate and its being opened
to claims by non-planholders would contravene the purpose for its establishment.
On June 26, 2009, despite the opposition of the SEC, Judge Laigo ordered the insolvency
Assignee, Gener T. Mendoza (Assignee) to take possession of the trust fund. Judge Laigo
viewed the trust fund as Legacy's corporate assets and, for said reason, included it in the
insolvent's estate. Thus:ChanRoblesvirtualLawlibrary
WHEREFORE, the Court rules as follows:ChanRoblesvirtualLawlibrary
1. Directing the afore-named banks to report to Assignee, Gener T. Mendoza, whose address
is at c/o GNCA Holdings, Inc., Unit 322, 3/F, LRI design Center, 210 Nicanor Garcia St., Makati
City, the total funds as of today deposited to the insolvent debtor's respective Trust Funds,
within five (5) days from receipt of this Order.
2. Subject funds can be withdrawn by the Assignee only upon Order of the Court for
distribution among the creditors who have officially filed their valid claims with this Court,
and for all the expenses to be incurred by the Assignee in the course of the discharge of his
duties and responsibilities as such Assignee.

3. Stopping the Securities and Exchange Commission (SEC) from further validating the claims
of planholders (now creditors) pertaining to their pre-need plans.
xxx xxx xxx
SO ORDERED.7
The RTC stated that the trust fund could be withdrawn by the Assignee to be used for the
expenses he would incur in the discharge of his functions and to be distributed among the
creditors who had officially filed their valid claims with the court.
The Present Petition
Intent on protecting the interest of the investing public and securing the trust fund
exclusively for the planholders, the SEC filed "this present recourse directly to this Honorable
Court in accordance with Section 5 (1), Article VIII of the 1987 Constitution for the reason
that the matters involve an issue of transcendental importance to numerous hard-working
Filipinos who had invested their lifetime savings and hard-earned money in Legacy, hoping
that through this pre-need company they will be able to fulfill their dreams of providing a
bright future for their children."8
The SEC's Position
In essence, the SEC contends that Judge Laigo gravely abused his discretion in treating the
trust fund as part of the insolvency estate of Legacy. It argues that the trust fund should
redound exclusively to the benefit of the planholders, who are the ultimate beneficial
owners; that the trust fund is held, managed and administered by the trustee bank to
address and answer the claims against the pre-need company by all its planholders and/or
beneficiaries; that to consider the said fund as corporate assets is to open the floodgates to
creditors of Legacy other than the planholders; and that, in issuing the order, Judge Laigo
effectively allowed non-planholders to reach the trust fund in patent violation of the New
Rules established to protect the pre-need investors.
In its Memorandum,9 the SEC stressed that the setting-up of the trust funds effectively
created a demarcation line between the claims of planholders vis-a-vis those of the other
creditors of Legacy; that Legacy's interest over the trust properties was only by virtue of it
being a trustor and not the owner; and that the SEC was authorized to validate claims of
planholders in the exercise of its power as regulator of pre-need corporations.
Further, the SEC is of the position that Section 52 of the Pre-Need Code10 should be given
retroactive effect for being procedural in character.
Thus, the SEC raises the following
ISSUES
I.
Whether or not the Trust Funds of Legacy form part of its Corporate Assets.
27
II.
Whether or not respondent Trial Court Judge committed grave abuse of discretion
amounting to lack or excess of jurisdiction in issuing the herein assailed Order dated June
26, 2009.
III.
Whether or not the claims of planholders are to be treated differently from the claims of
other creditors of Legacy.
IV.
Whether or not Legacy retains ownership over the trust funds assets despite the execution
of trust agreements.
V.
Whether or not the insolvency court, presided by respondent Trial Court Judge, has the
authority to enjoin petitioner SEC from further validating the claims of Legacy's planholders
and treating them as if they are ordinary creditors of Legacy.
VI.
Whether or not the provision of the Pre-need Code regarding liquidation is in the nature of
a procedural law that can be retroactively applied to the case at bar.11
Private Respondents 'position
In their Comment/Opposition,12 the private respondents, Glicera Ayad, Sahlee Delos Reyes
and Antonio P. Huerte, Jr. (private respondents), submit that nothing in the New Rules
expressly provided that the trust fund is excluded from the inventory of corporate assets
which is required to be submitted to the insolvency court; that the SEC's interference in the
insolvency proceedings is incongruous to the legal system; and that under the provisions of
the Insolvency Law, all claims, including those against the trust funds should be filed in the
liquidation proceedings.13 Hence, private respondents assert that no grave abuse of
discretion was committed by Judge Laigo in issuing the June 26, 2009 Order.
The Assignee's Position
In his separate Comments on Petition14 and Memorandum,15 the Assignee contends that the
trust fund forms part of Legacy's corporate assets for the following reasons: first, the
insolvency court has jurisdiction over all the claims against the insolvent and the trust fund
forms part of the company's corporate assets. It cited Abrera v. College Assurance
Plan,16 where the Court held that claims arising from pre-need contracts should not be
treated separately from other claims against a pre-need company. As such, the claims over
the trust fund, being claims against Legacy, are necessarily lodged with the insolvency court.
Second, the setting up of the trust fund is a mere scheme to attain an administrative end,
that is, the assurance that the benefits will be delivered under the pre-need contracts.

Considering that Legacy is the debtor as regards such benefits, it is only through it, or
through the insolvency court, that the assets including the trust fund can be distributed to
satisfy valid claims. Third, though the trustee banks hold legal title over the funds, the real
parties-in-interest are the pre-need companies as the terms of the trust agreement between
Legacy and LBP (as trustee) show this intent.
The Assignee also submits that no law authorized the SEC to interfere in the insolvency
proceedings because its authority under the SRC is only to regulate the sale of pre-need plans
and not to regulate the management of trust funds.
In sum, the Assignee interprets the June 26, 2009 Order in this wise: that the creditors,
planholders or not, should first line up and file valid claims with the insolvency court and not
get entangled in the validation process of the SEC; and that once the planholders have
qualified, they will be given preference in the distribution of the trust assets. Moreover, he
proposes that if the trust fund assets will not be enough to satisfy all claims, the planholders
can still join other claimants and participate in the distribution of the other assets of the pre-
need company.17cralawrednad
From the foregoing, the Court is called to determine whether Judge Laigo gravely abused his
discretion in:ChanRoblesvirtualLawlibrary
1. Including the trust properties in the insolvent's estate; and
2. Prohibiting the SEC from validating the claims filed by the planholders against the
trust fund.
The Court's Ruling
The overarching consideration in the legislative mandate to establish trust funds is the
protection of the interest of the planholders in the investment plans. The SRC provides in no
uncertain terms the intent to make such interests paramount above all else. Thus, it directed
the SEC to come up with rules and regulations to govern not only trust funds but the industry
as a whole. Pursuant to its mandate and delegated authority, the SEC came out with the New
Rules, which the Congress later on toughened through the enactment of the Pre-Need Code,
carrying similar protection but far more detailed in scope.
It is in this context that this Court rules to grant the petition filed by the SEC. The Court finds
that Judge Laigo gravely abused his discretion in treating the trust fund as assets that form
part of Legacy's insolvency estate and in enjoining the SEC's validation of the planholders'
claims against the trust properties.
The Trust Fund is for the sole benefit
of the planholders and cannot be used to
satisfy the claims of other creditors of Legacy
28
Section 30 of the Pre-Need Code clearly provides that the proceeds of trust funds shall
redound solely to the planholders. Section 30 reads:ChanRoblesvirtualLawlibrary
Trust Fund
SECTION 30. Trust Fund. — To ensure the delivery of the guaranteed benefits and services
provided under a pre-need plan contract, a trust fund per pre-need plan category shall be
established. A portion of the installment payment collected shall be deposited by the pre-
need company in the trust fund, the amount of which will be as determined by the actuary
based on the viability study of the pre-need plan approved by the Commission. Assets in the
trust fund shall at all times remain for the sole benefit of the planholders. At no time shall
any part of the trust fund be used for or diverted to any purpose other than for the exclusive
benefit of the planholders. In no case shall the trust fund assets be used to satisfy claims of
other creditors of the pre-need company. The provision of any law to the contrary
notwithstanding, in case of insolvency of the pre-need company, the general creditors shall
not be entitled to the trust fund.
Except for the payment of the cost of benefits or services, the termination values payable to
the planholders, the insurance premium payments for insurance-funded benefits of
memorial life plans and other costs necessary to ensure the delivery of benefits or services to
planholders, no withdrawal shall be made from the trust fund unless approved by the
Commission. The benefits received by the planholders shall be exempt from all taxes and the
trust fund shall not be held liable for attachment, garnishment, levy or seizure by or under
any legal or equitable processes except to pay for the debt of the planholder to the benefit
plan or that arising from criminal liability imposed in a criminal action.
[Emphases Supplied]
The Assignee argues that Legacy has retained a beneficial interest in the trust fund despite
the execution of the trust agreement and that the properties can be the subject of insolvency
proceedings. In this regard, the Assignee calls the Court's attention to the trust agreement
provisions which supposedly refer to the interest of Legacy in the trust properties, to
wit:ChanRoblesvirtualLawlibrary
The TRUSTEE hereby undertakes to perform the functions and duties of a TRUSTEE provided
for in this Agreement with the utmost good faith, care and prudence required by a fiduciary
relation, being understood, however, that the COMPANY shall be solely and exclusive (sic)
responsible for (1) fulfilling the services referred to in the recital clauses, (ii) the
settlement/payment of claims of any person or firm availing of such services, (iii) compliance
with all laws and governmental regulations on pre-need plans, and (iv) submission of other
data or information as may be prescribed by the Commission.
xxx
xxx the Trustee shall from time to time on the written directions of the Company make
payments out of the Trust Fund to the Company. To the extent permitted by law, the Trustee
shall be under no liability for any payment made pursuant to the direction of the Company.
Any written direction of the Company shall constitute a certification that the distribution of
payment so directed is one which the Company is authorized to direct. From time to time
and when directed in writing by the Company, the Trustee shall pay monies from the Trust

Fund in amounts equal to the outstanding amount of the Trust Fund at any given time to
defray the Company's obligations to the Planholders under its pre-need plan contract and
provided further that the company shall be reimbursed by the Trustee from the Trust Fund
for whatever amounts it has advanced to its beneficiaries.18 [Italics supplied]
To the Assignee, these "control" mechanisms are indicative of the interest of Legacy in the
enforcement of the trust fund because the agreement gives it the power to dictate on LBP
the fulfillment of the trust, such as the delivery of monies to it to facilitate the payment to
the planholders.
The Court, however, sees it differently.
In the course of delving into the complex relationships created by the agreement and the
existing regulatory framework, this Court finds that Legacy's claimed interest in the
enforcement of the trust and in the trust properties is mere apparent than real. Legacy is not
a beneficiary.
First, it must be stressed that a person is considered as a beneficiary of a trust if there is a
manifest intention to give such a person the beneficial interest over the trust
properties.19 This is the considered opinion expressed in the Restatement of the Law of Trust
(Restatement)20 which Justice Vicente Abad Santos has described in his contribution to the
Philippine Law Journal as containing the more salient principles, doctrines and rules on the
subject.21 Here, the terms of the trust agreement plainly confer the status of beneficiary to
the planholders, not to Legacy. In the recital clauses of the said agreement, Legacy bound
itself to provide for the sound, prudent and efficient management and administration of such
portion of the collection "for the benefit and account of the planholders,"22 through LBP (as
the trustee).
This categorical declaration doubtless indicates that the intention of the trustor is to make
the planholders the beneficiaries of the trust properties, and not Legacy. It is clear that
because the beneficial ownership is vested in the planholders and the legal ownership in the
trustee, LBP, Legacy, as trustor, is left without any iota of interest in the trust fund. This is
consistent with the nature of a trust arrangement, whereby there is a separation of interests
in the subject matter of the trust, the beneficiary having an equitable interest, and the
trustee having an interest which is normally legal interest.23cralawrednad
Second, considering the fact that a mandated pre-need trust is one imbued with public
interest, the issue on who the beneficiary is must be determined on the basis of the entire
regulatory framework. Under the New Rules, it is unmistakable that the beneficial interest
over the trust properties is with the planholders. Rule 16.3 of the New Rules provides that
: [n]o withdrawal shall be made from the trust fund except for paying the benefits such as
monetary consideration, the cost of services rendered or property delivered, trust fees, bank
charges and investment expenses in the operation of the trust fund, termination values
payable to the planholders, annuities, contributions of cancelled plans to the fund and taxes
on trust funds.
29
Rule 17.1 also states that to ensure the liquidity of the trust fund to guarantee the delivery of
the benefits provided for under the plan contract and to obtain sufficient capital growth to
meet the growing actuarial reserve liabilities, all investments of the trust fund shall be limited
to Fixed Income Instruments, Mutual Funds, Equities, and Real Estate, subject to certain
limitations.
Further, Rule 20.1 directs the trustee to exercise due diligence for the protection of the
planholders guided by sound investment principles in the exclusive management and control
over the funds and its right, at any time, to sell, convert, invest, change, transfer, or
otherwise change or dispose of the assets comprising the funds. All these certainly
underscore the importance of the planholders being recognized as the ultimate beneficiaries
of the SEC-mandated trust.
This consistently runs in accord with the legislative intent laid down in Chapter IV of R.A. No.
8799, or the SRC, which provides for the establishment of trust funds for the payment of
benefits under such plans. Section 16 of the SRC provides:ChanRoblesvirtualLawlibrary
SEC. 16. Pre-Need Plans. - No person shall sell or offer for sale to the public any pre-need plan
except in accordance with rules and regulations which the Commission shall prescribe. Such
rules shall regulate the sale of pre-need plans by, among other things, requiring the
registration of pre-need plans, licensing persons involved in the sale of pre-need plans,
requiring disclosures to prospective plan holders, prescribing advertising guidelines,
providing for uniform accounting system, reports and record keeping with respect to such
plans, imposing capital, bonding and other financial responsibility, and establishing trust
funds for the payment of benefits under such plans. [Emphasis supplied]
It is clear from Section 16 that the underlying congressional intent is to make the planholders
the exclusive beneficiaries. It has been said that what is within the spirit is within the law
even if it is not within the letter of the law because the spirit prevails over the
letter.24cralawrednad
This will by the legislature was fortified with the enactment of R.A. No. 9829 or the Pre-Need
Code in 2009.25cralawred The Congress, because of the chaos confounding the industry at
the time, considered it necessary to provide a stronger legal framework so that no entity
could claim that the mandate and delegated authority of the SEC under the SRC was
nebulous. The Pre-Need Code cemented the regulatory framework governing the pre-need
industry with precise specifics to ensure that the rights of the pre-need planholders would be
categorically defined and protected. Similar provisions in the Pre-Need Code are the
following:ChanRoblesvirtualLawlibrary
SECTION 32. Terms and Conditions of a Trust Fund. — A trust fund must be established
separately for each type of pre-need plan with the trust department of a trust company,
bank or investment house doing business in the Philippines. No trust fund shall be
established by a pre-need company with an affiliate trust entity subject to Section 38 hereof.
The trust agreement shall be submitted to the Commission for approval before execution
and shall contain the following salient provisions, among others:ChanRoblesvirtualLawlibrary

(a) The manner in which the trust fund is to be operated;
(b) Investment powers of the trustee with respect to trust deposits, including the character
and kind of investment;
(c) Auditing and settlement of accounts of the trustee with respect to the trust fund;
(d) Basis upon which the trust fund may be terminated;
(e) Provisions for withdrawals from the trust fund;
(f) That the trustee shall submit to the power of the Commission to examine and verify the
trust fund;
(g) An undertaking by the trustee that it shall abide by the rules and regulations of the
Commission with respect to the trust fund; and
(h) An undertaking by the trustee that it shall submit such other data or information as may
be prescribed by the Commission.
SECTION 33. Responsibilities of the Trustee. - The trustee shall:ChanRoblesvirtualLawlibrary
(a) Administer and manage the trust fund with utmost good faith, care and prudence
required by a fiduciary relationship;
(b) The trustee shall have the exclusive management and control over the funds and the right
at any time to sell, convert, invest, change, transfer or otherwise change or dispose of the
assets comprising the funds within the parameters prescribed by the pre-need company and
provided these parameters are compliant with the Commission's regulations; and
(c) Not use the trust fund to invest in or extend any loan or credit accommodation
to the pre-need company, its directors, officers, stockholders, and related interests as well
as to persons or enterprises controlling, owned or controlled by,
or under common control with said company, its directors, officers, stockholders and
related interests except for entities which are direct providers of pre-need companies.
SECTION 34. Investment of the Trust Fund. — To ensure the liquidity of the trust fund to
guarantee the delivery of the benefits provided for under the plan contract and likewise
obtain sufficient capital growth to meet the growing actuarial reserve liabilities, all
investments of the trust fund/s of a pre-need company shall be limited to the following and
subject to limitations, to wit:ChanRoblesvirtualLawlibrary
(a) Fixed income instruments. — These maybe classified into short-term and long-term
instruments. The instrument is short- term if the maturity period is three hundred sixty-five
(365) days or less. This category includes:ChanRoblesvirtualLawlibrary
30
(1) Government securities which shall not be less than ten percent (10%) of the trust fund
amount;
(2) Savings/time deposits and unit investment trust funds maintained with and managed by a
duly authorized bank with satisfactory examination rating as of the last examination by the
BSP;
(3) Commercial papers duly registered with the SEC with a credit rating of "1" for short-term
and "AAA" for long- term based on the rating scale of an accredited Philippine Rating Agency
or its equivalent at the time of investment.
The maximum exposure to long-term commercial papers shall not exceed fifteen percent
(15%) of the total trust fund amount while the exposure to each commercial paper issuer
shall not exceed ten percent (10%) of the allocated amount; and
(4) Direct loans to corporations which are financially stable, profitable for the last three (3)
years and have a good track record of paying their previous loans.
These loans shall be fully secured by a real estate mortgage up to the extent of sixty percent
(60%) of the zonal valuation of the property at the time the loan was granted.
The property shall be covered by a transfer certificate of title registered in the name of the
mortgagor and free from liens and encumbrances.
The maximum amount to be allocated for direct loans shall not exceed five percent (5%) of
the total trust fund amount while the amount to be granted to each corporate borrower shall
not exceed ten percent (10%) of the amount allocated.
The maximum term of the loan should be no longer than four (4) years.
Direct loans to planholders are exempt from the limitations set forth under this section:
Provided, That such loans to planholders shall not exceed ten percent (10%) of the total trust
fund amount.
(b) Equities. — Investments in equities shall be limited to stocks listed on the main board of a
local stock exchange.
Investments in duly registered collective investment instruments such as mutual funds are
allowed hereunder: Provided, That such funds are invested only in fixed income instruments
and blue chips securities, subject to the limitations prescribed by laws, rules and regulations.
These investments shall include stocks issued by companies that are financially stable,
actively traded, possess good track record of growth and have declared dividends for the
past three (3) years. Notwithstanding the prohibition against transactions with directors,
officers, stockholders and related interests, the trustee may invest in equities of companies
related to the trustee provided these companies comply with the foregoing criteria provided

in this paragraph for equity investments.
The amount to be allocated for this purpose shall not exceed thirty percent (30%) of the total
trust fund while the investment in any particular issue shall not exceed ten percent (10%) of
the allocated amount. The investment shall be recorded at the aggregate of the lower of cost
or market.
Existing investments which are not in accordance herewith shall be disposed of within three
(3) years from the effectivity of this Act.
(c) Real Estate. — These shall include real estate properties located in strategic areas of cities
and first class municipalities. The transfer certificate of title (TCT) shall be in the name of the
seller, free from liens and encumbrances and shall be transferred in the name of the trustee
in trust for the planholders unless the seller/transferor is the pre-need company wherein an
annotation to the TCT relative to the sale/transfer may be allowed. It shall be recorded at
acquisition cost.
However, the real estate shall be appraised every three (3) years by a licensed real estate
appraiser, accredited by the Philippine Association of Real Estate Appraisers, to reflect the
increase or decrease in the value of the property. In case the appraisal would result in an
increase in the value, only sixty percent (60%) of the appraisal increase is allowed to be
recorded in the books of the trust fund but in case of decline in value, the entire decline shall
be recorded. Appraisal increment should not be used to cover up the required monthly
contribution to the trust fund.
The total recorded value of the real estate investment shall not exceed ten percent (10%) of
the total trust fund amount of the pre-need company. In the event that the existing real
estate investment exceeds the aforesaid limit, the same shall be leveled off to the prescribed
limit within three (3) years from the effectivity of this Code.
Investment of the trust fund, which is not in accordance with the preceding paragraphs, shall
not be allowed unless the prior written approval of the Commission had been secured:
Provided, further, That no deposit or investment in any single entity shall exceed fifteen
percent (15%) of the total value of the trust fund: Provided, finally, That the Commission is
authorized to adjust the percentage allocation per category set forth herein not in excess of
two percentage (2%) points upward or downward and no oftener than once every five (5)
years. The first adjustment hereunder may be made no earlier than five (5) years from the
effectivity of this Act. The pre-need company shall not use the trust fund to extend any loan
to or to invest in its directors, stockholders, officers or its affiliates.
xxx
SECTION 36. Trust Fund Deficiencies. — Upon approval by the Commission of the pre-need
reserve computation submitted in the preceding section, any deficiency in the trust fund,
when compared to the reserve liabilities as reported in the pre-need reserve valuation
report, shall be funded by the pre-need company within sixty (60) days from such approval.
31
Failure to cover the deficiency in an appropriate manner within the time required shall
subject the pre-need company to the payment of a penalty, in addition to other remedies
exercisable by the Commission, as provided for in this Code. Any excess of the trust fund over
the actuarial reserve liabilities may be credited to future deposit requirements.
SECTION 37. Liquidity Reserve. — The trustee shall at all times maintain a liquidity reserve
which shall be sufficient to cover at least fifteen percent (15%) of the trust fund but in no
case less than one hundred twenty-five percent (125%) of the amount of the availing plans
for the succeeding year. For this purpose, the pre-need company shall timely submit to the
trustee a summary of benefits payable for the succeeding year.
The following shall qualify as investments for the liquidity
reserve:ChanRoblesvirtualLawlibrary
(a) Loans secured by a hold-out on assignment or pledge deposits maintained either with the
trustee or other banks, or of deposit substitute of the trustee itself or mortgage and chattel
mortgage bonds issued by the trustee;
(b) Treasury notes or bills, other government securities or bonds, and such other evidences
or indebtedness or obligations the servicing and repayment of which are fully guaranteed by
the Republic of the Philippines;
(c) Repurchase agreements with any of those mentioned in Item "b" above, as underlying
instruments thereof; and
(d) Savings or time deposits with government-owned banks or commercial banks.
SECTION 38. Trustees. — Upon approval of the Commission or when the Commission
requires for the protection of planholders, the pre-need company shall entrust the
management and administration of the trust fund to any reputable bank's trust department,
trust company or any entity authorized to perform trust functions in the
Philippines: Provided, That no director and/or officer of the pre-need company shall at the
same time serve as director and/or officer of the affiliate or related trust entity: Provided,
further, That no trust fund shall be established by a pre-need company with a subsidiary,
affiliate or related trust entity. However, such may be allowed: Provided, That the following
conditions are complied with:ChanRoblesvirtualLawlibrary
(a) A written approval of the Commission has been previously obtained; and
(b) Public disclosure of the affiliation with the trust entity be included in all materials in
whatever form.
The Commission shall have the authority to prescribe appropriate rules that shall ensure that
the yield of the trust fund is maximized, consistent with the requirements of safety and
liquidity.
[Italics Supplied]

"Under the principle of legislative approval of administrative interpretation by re-enactment,
the re-enactment of a statute, substantially unchanged (as in this case), is persuasive
indication of the adoption by Congress of a prior executive construction."26 Accordingly,
where a statute is susceptible of the meaning placed upon it by a ruling of the government
agency charged with its enforcement and the legislature thereafter reenacts the provisions
without substantial change, such action is to some extent confirmatory that the ruling carries
out the legislative purpose.27cralawrednad
The Court cannot go against that legislative intent for it is the duty of this institution to read
what the law intends. It is a cardinal rule that, in seeking the meaning of the law, the first
concern of the judge should be to discover in its provisions the intent of the lawmaker.
Unquestionably, the law should never be interpreted in such a way as to cause injustice as
this is never within the legislative intent. An indispensable part of that intent, in fact, for we
presume the good motives of the legislature, is to render justice.28cralawrednad
To rule that Legacy has retained a beneficial interest in the trust fund is to perpetuate the
injustices being committed against the planholders and violate not only the spirit of the trust
agreement but, more importantly, the lawmaker's intent. If indeed Legacy had an interest
that could be reached by its creditors even during insolvency, the planholders would be
prejudiced as they would be forced to share in the assets that would be distributed pro rata
to all creditors, whether planholders or not. It would contradict the very purpose for which
the trust was mandated by the Congress in the first place.
Third, the perceived interest of Legacy, as touted by the Assignee, has simply no basis. It may
appear that Legacy under the agreement has control over the enforcement of the trust
because of its provisions stating that Legacy shall "solely and exclusively] [be] responsible for
fulfilling the services referred to in the recital clauses and the settlement/payment of claims
of any person or firm availing of such services" and that "[a]ny written direction of the
Company [to the trustee] shall constitute a certification that the distribution of payment so
directed is one which the Company is authorized to direct"29 Such provisions, however,
cannot be construed as Legacy having retained a beneficial interest in the trust fund.
To begin with, the aforestated provisions refer solely to the delivery of the proceeds of the
trust from LBP to Legacy and then finally to the beneficiaries. In effect, Legacy merely agreed
to facilitate the payment of the benefits from the trust fund to the intended beneficiaries,
acting as a conduit or an agent of the trustee in the enforcement of the trust agreement.
Under the general principles of trust, a trustee, by the terms of the agreement may be
permitted to delegate to agents or to co-trustees or to other persons the administration of
the trust or the performance of act which could not otherwise be properly
delegated.30 Thus, by the terms of the trust, as in this case, a trustee may be authorized or
permit an agent to do acts such as the delivery of the benefits out of the trust fund.
The Court cannot subscribe either to the Assignee's position that Legacy is a debtor of the
planholders relative to the trust fund. In trust, it is the trustee, and not the trustor, who owes
fiduciary duty to the beneficiary. The Restatement is clear on this point. Section 170 thereof
32
provides that the "trustee is under a duty to the beneficiary to administer the trust solely in
the interest of the beneficiary."31 Section 182 also states that the duty of a trustee is to pay
income to the beneficiary.32 Thus, LBP is tasked with the fiduciary duty to act for the benefit
of the planholders as to matters within the scope of the relation.33 Like a debtor, LBP owes
the planholders the amounts due from the trust fund. As to the planholders, as creditors,
they can rightfully use equitable remedies against the trustee for the protection of their
interest in the trust fund and, in particular, their right to demand the payment of what is due
them from the fund. Verily, Legacy is out of the picture and exists only as a representative of
the trustee, LBP, with the limited role of facilitating the delivery of the benefits of the trust
fund to the beneficiaries -the planholders. The trust fund should not revert to Legacy, which
has no beneficial interest over it. Not being an asset of Legacy, the trust fund is immune from
its reach and cannot be included by the RTC in the insolvency estate.
In the end, the failure of Judge Laigo to consider the provisions of the SRC, the New Rules
and the law on trusts, that should have warranted the exclusion of the trust fund from the
insolvency estate of Legacy, constituted grave abuse of discretion. In treating the trust fund
as forming part of Legacy's insolvency estate, Judge Laigo acted against what was
contemplated by law. He turned a blind eye to the will of the Congress as expressed through
the SRC and the Pre-Need Code. In the process, he endangered the claims of the planholders
by allowing the probability that they would be drastically reduced or dissipated. He should
have acted prudently bearing in mind that the establishment of the trust was precisely for
the exclusive benefit of the planholders.
Enjoining the SEC from validating the
claims against the trust fund is grave
abuse of discretion for the insolvency
court has no authority to order the
reversion of properties that do not
form part of Legacy's insolvent estate.
The Assignee cited Abrera v. College Assurance Plan34 (Abrera), where the Court held that
claims covered by rehabilitation proceedings before the RTC should include all claims or
demands of whatever nature or character against a debtor or its property. At the heart of the
Assignee's argument is that because the authority is with the RTC, the SEC has no right to
interfere in the insolvency proceedings.
It is an error for the Assignee to assume that the authority of the RTC extends to the claims
against the trust fund. Claims against the trust fund must be distinguished from claims
against Legacy. The claims against the trust fund are directed not against Legacy, but against
LBP, the trustee, being the debtor relative to the trust properties.
The Pre-Need Code is clear on this. It recognizes the distinction between claims against the
pre-need company and those against the trust fund. Section 52 (b) states that liquidation
"proceedings in court shall proceed independently of proceedings in the Commission for the
liquidation of claims, and creditors of the pre-need company shall have no personality
whatsoever in the Commission proceedings to litigate their claims against the trust

funds." The reason why claims against the trust funds can proceed independently of the
proceedings in the courts is the fact that the latter is directed against a different person or
entity.
Moreover, the Assignee must be reminded that the issue in Abrera is not similar to the
question raised here by the SEC. In the case at bench, the SEC questions the propriety of
including the trust fund in the inventory of Legacy's corporate assets.
Jurisdiction over claims filed
against the trust fund
From the effectivity of the Pre-Need Code, it is the Insurance Commission (IC) that "shall
have the primary and exclusive power to adjudicate any and all claims involving pre-need
plans."35The transitory provisions of the Pre-Need Code, however, provide that
"[notwithstanding any provision to the contrary, all pending claims, complaints and cases
(referring to pre-need contract and trust claims) filed with the SEC shall be continued in its
full and final conclusion."36cralawrednad
The Pre-Need Code recognizes that the jurisdiction over pending claims against the trust
funds prior to its effectivity is vested with the SEC. Such authority can be easily discerned
even from the provisions of the SRC. Section 4 thereof provides that despite the transfer of
jurisdiction37 to the RTC of those matters enumerated under Section 5 of P.D. No. 902-
A,38 the SEC remains authorized to "exercise such other powers as may be provided by law as
well as those which may be implied from, or which are necessary or incidental to
the carrying out of, the express powers granted the Commission39 to achieve the objectives
and purposes of these laws."40 Relevant thereto is Section 36.5 (b) of the SRC which states
that:ChanRoblesvirtualLawlibrary
The Commission may, having due regard to the public interest or the protection of investors,
regulate, supervise, examine, suspend or otherwise discontinue such and other similar funds
under such rules and regulations which the Commission may promulgate, and which may
include taking custody and management of the fund itself as well as investments in, and
disbursements from, the funds under such forms of control and supervision by the
Commission as it may from time to time require. The authority granted to the Commission
under this subsection shall also apply to all funds established for the protection of investors
(which necessarily includes the trust funds), whether established by the Commission or
otherwise.41
Concomitantly, under the New Rules, the SEC "may, at its discretion, demand for the
conversion to cash or other near cash assets of the investments made by the Trustee to
protect the interest of the Planholders."42
Therefore, even prior to the transfer to the IC of matters pertaining to pre-need plans and
trust funds, the SEC had authority to regulate, manage, and hear all claims involving trust
fund assets, if in its discretion, public interest so required. Accordingly, all claims against the
trust funds, which have been pending before it, are clearly within the SEC's authority to rule
upon.
33
Pre-Need Code is curative and
remedial in character and, therefore,
can be applied retroactively
Finally, it must be stressed that the primary protection accorded by the Pre-Need Code to the
planholders is curative and remedial and, therefore, can be applied retroactively. The rule is
that where the provisions of a statute clarify an existing law and do not contemplate a
change in that law, the statute may be given curative, remedial and retroactive effect.43 To
review, curative statutes are those enacted to cure defects, abridge superfluities, and curb
certain evils.44 As stressed by the Court in Fabian v. Desierto,45cralawrednad
If the rule takes away a vested right, it is not procedural. If the rule creates a right such as the
right to appeal, it may be clarified as a substantive matter; but if it operates as a means of
implementing an existing right then the rule deals merely with procedure.
[Emphasis Supplied]
A reading of the Pre-Need Code immediately shows that its provisions operate merely in
furtherance of the remedy or confirmation of the right of the planholders to exclusively claim
against the trust funds as intended by the legislature. No new substantive right was created
or bestowed upon the planholders. Section 52 of the Pre-Need Code only echoes and clarifies
the SRC's intent to exclude from the insolvency proceeding trust fund assets that have been
established "exclusively for the benefit of planholders." It was precisely enacted to foil the
tactic of taking undue advantage of any ambiguities in the New Rules.
Any doubt or reservation in this regard has been dispelled by the Pre-Need Code. Section 57
thereof provides that "[a]ny pre-need company who, at the time of the effectivitv of this
Code has been registered and licensed to sell pre-need plans and similar contracts, shall be
considered registered and licensed under the provision of this Code and its implementing
rules and regulations and shall be subject to and governed by the provisions hereof xxx."
Thus, Legacy and all other existing pre-need companies cannot claim that the provisions of
the Pre-Need Code are not applicable to them and to the claims which accrued prior to the
enactment of the said law.
"[I]t has been said that a remedial statute must be so construed as to make it effect the
evident purpose for which it was enacted, so that if the reason of the statute extends to past
transactions, as well as to those in the future, then it will be so applied although the statute
does not in terms so direct:46 With the Pre-Need Code having the attribute of a remedial
statute, Legacy and all pre-need providers or their creditors cannot argue that it cannot be
retroactively applied.
Conclusion
In sum, improvidently ordering the inclusion of the trust fund in Legacy's insolvency estate
without regard to the avowed state policy of protecting the consumer of pre-need plans, as
laid down in the SRC, the New Rules, and the Pre-Need Code, constitutes grave abuse of
discretion. The RTC should have known, and ought to know, the overarching consideration
the Congress intended in requiring the establishment of trust funds - to uphold first and
 34

foremost the interest of the planholders. rise to a cause of action against such insolvent debtor.

The Court upholds its duty to protect the ordinary Filipino workers who are seeking a future
for their children through pre-need contracts. Their incredibly long wait is over as this is the
moment when their rightful and exclusive right to the trust funds, created primarily for them,
is judicially respected and affirmed.
WHEREFORE, the petition is GRANTED. The June 26, 2009 Order of the Regional Trial Court,
Branch 56, Makati City, is declared NULL and VOID.
The Securities and Exchange Commission is directed to process the claims of legitimate
planholders with dispatch.
Sec. 16. Description of real and personal property. — Said inventory must contain, besides
the creditors, an accurate description of all the real and personal property, estate, and
effects of the petitioner, including his homestead, if any, together with a statement of the
value of each item of said property, estate, and effects and its location, and a statement of
the incumbrances thereon. All property exempt by law from execution 2 shall be set out in
said inventory with a statement of its valuation, location, and the incumbrances thereon, if
any. The inventory shall contain an outline of the facts giving rise, or which might give rise, to
a right of action in favor of the insolvent debtor.
7Rollo, p. 50.

SO ORDERED.chanrobles virtuallawlibrary 8 Petitioner's Memorandum, p. 6; id. at 544.

Carpio, (Chairperson), Brion, Del Castillo, and Leonen, JJ., concur.ChanRoblesVirtualawlibrary 9 Id. at 465-525.

10The Pre-need Code, Sec. 52. Liquidation. - (a) In cases where the Commission determines
Endnotes:
that the pre-need company shall be liquidated, it shall have the power to commence
1Rollo, pp. 2-40. insolvency proceedings in the appropriate court which shall have jurisdiction over the assets
of the pre-need company, excluding trust fund assets that have been established exclusively
2 Id. at 49-50. Penned by Judge Reynaldo M. Laigo. for the benefit of planholders.

3Entitled "Petition for Involuntary Insolvency of Legacy Consolidated Plans, Incorporated, (b) Proceedings in court shall proceed independently of proceedings in the Commission for
Gliceria Ayad, Sahlee delos Reyes, and Antonio P. Huerte, Jr., Petitioners." the liquidation of claims, and creditors of the pre-need company shall have no personality
whatsoever in the Commission proceedings to litigate their claims against the trust funds,
4 Issued by the Securities and Exchange Commission pursuant to Section 16 of the Securities xxx xxx xxx.
Regulation Code. Pre-Need Plans. - No person shall sell or offer for sale to the public any pre-
11Rollo, p. 480.
need plan except in accordance with rules and regulations which the Commission shall
prescribe. Such rules shall regulate the sale of pre-need plans by, among other things,
12 Id. at 142-150.
requiring the registration of pre-need plans, licensing persons involved in the sale of pre-
need plans, requiring disclosures to prospective plan holders, prescribing advertising
13 Id. at 142.
guidelines, providing for uniform accounting system, reports and record keeping with respect
to such plans, imposing capital, bonding and other financial responsibility, and establishing
14 Id. at 159-185.
trust funds for the payment of benefits under such plans. (Emphasis ours)
15 Id. at 410-437.
5Rollo, pp. 63-64.
16 615 Phil. 595(2009).
6 Sec. 15. Statement of debts and liabilities. — Said schedule must contain a full and true
statement of all his debts and liabilities, together with a list of all those to whom, to the best
17Rollo, pp. 182-183.
of his knowledge and belief, said debts or liabilities are due, the place of residence of his
creditors and the sum due each the nature of the indebtedness or liability and whether
18 Id. at 105.
founded on written security, obligation, contract or otherwise, the true cause and
consideration thereof, the time and place when and where such indebtedness or liability
19 Restatement (Second) of Trusts, § 127 (1959).
accrued, a declaration of any existing pledge, lien, mortgage, judgment, or other security for
the payment of the debt or liability, and an outline of the facts giving rise or which might give
 35

20
The Restatement of the Law of Trusts (Second) was adopted and promulgated by the
American Law Institute on May 23, 1957.
21Associate Justice Vicente Abad Santos, Trusts: A Fertile Field for Philippine Jurisprudence,
25 PHIL L.J. 519, 526 (1950), describing the Restatement as having won, though by no means
universal acceptance in the United States and on which reliance can be made.
Supreme Court in the exercise of its authority may designate the Regional Trial Court
branches that shall exercise jurisdiction over these cases. The Commission shall retain
jurisdiction over pending cases involving intra-corporate disputes submitted for final
resolution which should be resolved within one (1) year from the enactment of this Code.
The Commission shall retain jurisdiction over pending suspension of payments/rehabilitation
cases filed as of 30 June 2000 until finally disposed.

22Rollo, p. 104. 38 The Reorganization of the Securities and Exchange Commission with Additional Powers and
Placing the Said Agency Under the Administrative Supervision of the Office of the President.
23 Restatement (Second) of Trusts, Introductory Note (1959). Sec. 5. In addition to the regulatory and adjudicative functions of the Securities and Exchange
Commission over corporations, partnerships and other forms of associations registered with
24Dumaguete Cathedral Credit Cooperative v. Commissioner of Internal Revenue, 624 it as expressly granted under existing laws and decrees, it shall have original and exclusive
Phil.650, 665 (2010), citing Taada and Macapagal v. Cuenco, et al, 103 Phil. 1051, 1086 jurisdiction to hear and decide cases involving.
(1957).
(a) Devices or schemes employed by or any acts, of the board of directors, business
25cralawred The Pre-need Code became effective in 2010. associates, its officers or partnership, amounting to fraud and misrepresentation which may
be detrimental to the interest of the public and/or of the stockholder, partners, members of
26Dumaguete Cathedral Credit Cooperative v. Commissioner of Internal Revenue, supra note associations or organizations registered with the Commission;
24, citing Commissioner of Internal Revenue v. American Express International, Inc. (Philippine
Branch), 500 Phil. 586(2005). (b) Controversies arising out of intra-corporate or partnership relations, between and among
stockholders, members, or associates; between any or all of them and the corporation,
27Gulf Air Company, Philippine Branch v. CIR, G.R. No. 182045, September 19, 2012, 681 partnership or association of which they are stockholders, members or associates,
SCRA 377, 387, citing Howden v. Collector of Internal Revenue, 121 Phil. 579, 587 (1965). respectively; and between such corporation, partnership or association and the state insofar
as it concerns their individual franchise or right to exist as such entity; and
28Dumaguete Cathedral Credit Cooperative v. Commissioner of Internal Revenue, supra note
24, citing Alonzo v. Intermediate Appellate Court, 234 Phil. 267, 272-273 (1987). (c) Controversies in the election or appointments of directors, trustees, officers or managers
of such corporations, partnerships or associations.
29Rollo, p. 105.
39 The Securities and Exchange Commission.
30 Restatement (Second) of Trusts, § 171 cmt. j. (1959).
The Securities and Regulation Code. Section 5. xxx xxx xxx
31 Restatement (Second) of Trusts, § 170 (1959).
(n) Exercise such other powers as may be provided by law as well as those which may be
32 Restatement (Second) of Trusts, § 182 (1959). implied from, or which are necessary or incidental to the carrying out of, the express powers
granted the Commission to achieve the objectives and purposes of these laws.
33 See Restatement (Second) of Trusts, § 170 (1959).
41 The Securities and Regulation Code.
34 615 Phil. 595(2009).
42New Rules on Pre-Need Plans. Rule 21. Commission Power Regarding Trust Fund Assets.
35 Section 55, Republic Act No. 9829. The Commission may, at its discretion, demand for the conversion to cash or other near cash
assets of the investments made by the Trustee to protect the interest of the Planholders.
36 Section 57, Republic Act No. 9829.
43 Jan G. Laitos, Legislative Retroactivity, 52 Wash. U.J. Urb. & Contemp. L. 081 (1997),
37The Securities Regulation Code. Section 5.2. The Commission's jurisdiction over all cases citing GTE Sprint Communications Corp. v. State Bd. of Equalization, 2 Cal. Rptr. 2d 441, 444-
enumerated under Section 5 of Presidential Decree No. 902-A is hereby transferred to the 45 (Cal. Ct. App. 1991) ("Where a statute or amendment clarifies existing law, such action is
Courts of general jurisdiction or the appropriate Regional Trial Court: Provided, that the not considered a change because it merely restates the law as it was at the time, and

retroactivity is not involved."); Tomlinson v. Clarke, 825 P.2d 706, 713 (Wash. 1992) (en bane)
("When an amendment clarifies existing law and where that amendment does not
contravene previous constructions of the law, the amendment may be deemed curative,
remedial and retroactive."). http://openscholarship.
wustl.edu/cgi/viewcontent.cgi?article=1050&context=law_urbanlaw (Last visited, August 5,
2015.)
44Fernando v. St. Scholastica's College, G.R. No. 161107, March 12, 2013, 693 SCRA 141.
45 356 Phil. 787 (1998)
46Frivaldo v. COMELEC, 327 Phil. 521, citing 73 Am Jur 2d, Sec. 354, p. 490; italics supplied.
MANDATORY V PROHIBITORY LAWS
EN BANC
G.R. No. 182133, June 23, 2015
UNITED OVERSEAS BANK OF THE PHILIPPINES, INC., Petitioner, v. THE BOARD OF
COMMISSIONERS-HLURB, J.O.S. MANAGING BUILDERS, INC., AND EDUPLAN PHILS.,
INC., Respondents.
DECISION
PERALTA, J.:
Before this Court is a Petition for Review on Certiorari under Rule 45 of the Rules of Court,
assailing the Decision1 and Resolution2 of the Court of Appeals (CA), dated February 27, 2006
and March 5, 2008, respectively, in CAG.R.SP No. 86401.
The antecedents are as follows:LawlibraryofCRAlaw
Respondent J.O.S. Managing Builders, Inc. (JOS Managing Builders) is the registered owner
and developer of the condominium project Aurora Milestone Tower. On December 16, 1997,
JOS Managing Builders and respondent EDUPLAN Philippines, Inc. (EDUPLAN) entered into a
Contract to Sell covering Condominium Unit E, 10th Floor of the Aurora Milestone Tower with
an area of 149.72 square meters, more or less. In August 1998, EDUPLAN effected full
payment, and in December 1998, JOS Managing Builders and EDUPLAN executed a Deed of
Absolute Sale over the condominium unit. Notwithstanding the execution of the deed of sale
in favor of EDUPLAN, JOS Managing Builders failed to cause the issuance of a Condominium
Certificate of Title over the condominium unit in the name of EDUPLAN. EDUPLAN learned
that the lots on which the condominium building project Aurora Milestone Tower was
erected had been mortgaged by JOS Managing Builders to petitioner United Overseas Bank
of the Philippines (United Overseas Bank) without the prior written approval of the Housing
36
and Land Use Regulatory Board (HLURB). Due to the inability of JOS Managing Builders to
deliver the condominium certificate of title covering the unit purchased by EDUPLAN, the
latter filed a complaint for specific performance and damages against JOS Managing Builders
and United Overseas Bank before the HLURB praying that: (a) the mortgage between JOS
Managing Builders and United Overseas Bank be declared null and void; (b) JOS Managing
Builders and United Overseas Bank be compelled to cause the issuance and release of the
Condominium Certificate of Title; and (c) JOS Managing Builders be ordered to provide
emergency power facilities, to refund the monthly telephone carrier charges, and to
permanently cease and desist from further collecting such charges.
In its defense, JOS Managing Builders alleged that it could not issue an individual
Condominium Certificate of Title in favor of EDUPLAN, because petitioner United Overseas
Bank has custody of the Transfer Certificates of Title covering the condominium building.
United Overseas Bank, on the other hand, alleged that JOS Managing Builders is the owner of
several parcels of land covered by Transfer Certificate of Title (TCT) Nos. N-146444, N-146445
and N-143601. On April 3, 1997, JOS Managing Builders executed in favor of United Overseas
Bank a Real Estate Mortgage3 over the said parcels of land and the improvements existing or
to be erected thereon to secure the Two Hundred Million Peso (PhP200,000,000.00)4 loan it
acquired from the bank. The subject condominium building project Aurora Milestone Tower,
which is situated in the said parcels of land, are part of the properties mortgaged to United
Overseas Bank. JOS Managing Builders defaulted in the payment of its loan obligations to
United Overseas Bank. Hence, United Overseas Bank foreclosed the mortgage constituted
over properties of JOS Managing Builders and the subject properties were sold by public
auction on March 22, 1999 wherein United Overseas Bank was declared as the highest
bidder. Subsequently, a certificate of sale was issued in favor of United Overseas Bank
corresponding to the foreclosed properties, which was registered with the Register of Deeds
of Quezon City on April 27, 1999.
On August 15, 2001, the HLURB Arbiter ruled,5 in favor of EDUPLAN and declared the
mortgage executed between JOS Managing Builders and United Overseas Bank as well as the
foreclosure proceedings null and void, pointing out that the mortgage was executed without
the approval of the HLURB as required under Section 18 of Presidential Decree (P.D.) No.
957.6 The Arbiter held that that since EDUPLAN has paid the full purchase price of the
condominium unit, JOS Managing Builders and United Overseas Bank should cause the
release from encumbrance of the mother titles to the condominium building project, and
issue the corresponding condominium certificate of title in favor of EDUPLAN. Further, JOS
Managing Builders should provide EDUPLAN with emergency power facilities and refund it
with the monthly telephone carrier charges it has been collecting since September 1999, and
permanently cease and desist from further imposing and collecting such fees. Moreover, JOS
Managing Builders was directed to pay EDUPLAN damages, attorney's fees and costs of suit.
The dispositive portion of the decision reads:LawlibraryofCRAlaw
ChanRoblesVirtualawlibrary
Wherefore, the foregoing premises considered and as prayed for, judgment is hereby
rendered in favor of the Complainant and against the Respondents as

follows:LawlibraryofCRAlaw
ChanRoblesVirtualawlibrary
1. Declaring the mortgage executed by Respondent J.O.S. Managing Builders in favor of
Respondent United Overseas Bank (Westmont) as null and void, including the foreclosure of
the mortgage, for being in violation of Section 18 of P.D. 957;
2. Ordering Respondents to cause the release from the encumbrances of the "mother titles"
to the Condominium Building Project and, issuance of the individual Condominium Certificate
of Title of Complainant to its Condominium Unit, free from any and all liens and
encumbrances;
3. Ordering Respondent J.O.S. Managing Builders to provide the Complainant with
emergency power facilities, strictly as represented in its sales brochures;
4. Ordering Respondent J.O.S. Managing Builders to refund to Complainant the monthly
telephone carrier charges it has been collecting since September 1, 1999 and permanently
cease and desist from further imposing and collecting said charges;
5. Ordering Respondent J.O.S. to pay the complainant P100,000.00 by way of temperate
damages, P50,000.00 by way of exemplary damages, P40,000.00 as and by way of Attorney's
Fees; and the costs of suit.
6. Ordering Respondent J.O.S. Managing Builders to pay Respondent United Overseas Bank
(Westmont) the loan release value of the subject condominium unit.
United Overseas Bank then filed a petition for review with the HLURB. On August 20, 2004,
the HLURB Board of Commissioners affirmed the Arbiter's decision, but deleted the award of
emergency power facilities and refund of the monthly telephone carrier charges. Hence,
United Overseas Bank filed a petition for review under Rule 43 before the CA.7redarclaw
On February 27, 2006, the CA dismissed the petition.8 A motion for reconsideration was filed,
but it was denied for lack of merit.9 The CA held that United Overseas Bank did not exhaust
the administrative remedies available to it due to its failure to appeal the decision of the
HLURB Board of Commissioners to the Office of the President before going to the CA.
Hence, the petition assigning the lone error:LawlibraryofCRAlaw
ChanRoblesVirtualawlibrary
THE COURT OF APPEALS ERRED IN REFUSING TO APPLY THE EXCEPTION TO THE DOCTRINE OF
EXHAUSTION OF ADMINISTRATIVE REMEDIES.10
Petitioner United Overseas Bank argues that the CA erred when it dismissed the petition due
to its failure to exhaust administrative remedies. It alleges that the question on whether the
HLURB is correct in declaring null and void the entire mortgage constituted by JOS Managing
Builders in favor of United Overseas Bank, as well as the foreclosure of the entire mortgage,
is a legal question which is an exception to the rule on exhaustion of administrative
remedies.
The petition is meritorious.
37
The doctrine of exhaustion of administrative remedies is a cornerstone of our judicial system.
The thrust of the rule is that courts must allow administrative agencies to carry out their
functions and discharge their responsibilities within the specialized areas of their respective
competence.11 It has been held, however, that the doctrine of exhaustion of administrative
remedies and the doctrine of primary jurisdiction are not iron-clad rules. In the case
of Republic v. Lacap,12 the Court enumerated the numerous exceptions to these rules,
namely: (a) where there is estoppel on the part of the party invoking the doctrine; (b) where
the challenged administrative act is patently illegal, amounting to lack of jurisdiction; (c)
where there is unreasonable delay or official inaction that will irretrievably prejudice the
complainant; (d) where the amount involved is relatively so small as to make the rule
impractical and oppressive; (e) where the question involved is purely legal and will ultimately
have to be decided by the courts of justice; (f) where judicial intervention is urgent; (g) where
the application of the doctrine may cause great and irreparable damage; (h) where the
controverted acts violate due process; (i) where the issue of non-exhaustion of
administrative remedies has been rendered moot; (j) where there is no other plain, speedy
and adequate remedy; (k) where strong public interest is involved; and (1) in quo
warrantoproceedings.13redarclaw
The situation in paragraph (e) of the foregoing enumeration obtains in this case.
The issue on whether non-compliance with the clearance requirement with the HLURB would
result to the nullification of the entire mortgage contract or only a part of it is purely legal
which will have to be decided ultimately by a regular court of law. It does not involve an
examination of the probative value of the evidence presented by the parties. There is a
question of law when the doubt or difference arises as to what the law is on a certain state of
facts, and not as to the truth or the falsehood of alleged facts. Said question at best could be
resolved only tentatively by the administrative authorities. The final decision on the matter
rests not with them but with the courts of justice. Exhaustion of administrative remedies
does not apply, because nothing of an administrative nature is to be or can be done. The
issue does not require technical knowledge and experience, but one that would involve the
interpretation and application of law.14 There is, thus, no need to exhaust administrative
remedies, under the premises.
The Court will now proceed to the legal issue on hand.
Petitioner United Overseas Bank alleges that the HLURB erred in declaring null and void the
entire mortgage constituted by JOS Managing Builders in its favor, as EDUPLAN does not
claim ownership over all the properties mortgaged by JOS Managing Builders in favor of
United Overseas Bank, but only over a single condominium unit, i.e., Unit E, 10th Floor of the
Aurora Milestone Tower.
We agree with petitioner.
The HLURB erred in declaring null and void the entire mortgage executed between JOS
Managing Builders and United Overseas Bank.

At the onset, it is worthy to note that jurisprudence have varying conclusions of the issue at
hand. In Far East Bank & Trust Co. v Marquez,15 the Court sustained the HLURB when it
declared the mortgage entered into between the subdivision developer and the bank as
unenforceable against the lot buyer for failure of the developer to obtain the prior written
approval of the HLURB. However, we were categorical that the HLURB acted beyond bounds
when it nullified the mortgage covering the entire parcel of land, of which the lot subject of
the buyer's complaint is merely a part of.
In Far East Bank, the Court held that:LawlibraryofCRAlaw
ChanRoblesVirtualawlibrary
Acts executed against the provisions of mandatory or prohibitory laws shall be void. Hence,
the mortgage over the lot is null and void insofar as private respondent is concerned.
The remedy granted by the HLURB and sustained by the Office of the President is proper only
insofar as it refers to the lot of respondent. In short, the mortgage contract is void as against
him. Since there is no law stating the specifics of what should be done under the
circumstances, that which is in accord with equity, should be ordered. The remedy granted
by the HLURB in the first and the second paragraphs of the dispositive portion of its Decision
insofar as it referred to respondent's lot is in accord with equity.
The HLURB, however, went overboard in its disposition in paragraphs 3 and 4, which
pertained not only to the lot but to the entire parcel of land mortgaged. Such ruling was
improper. The subject of this litigation is limited only to the lot that respondent is buying, not
to the entire parcel of land. He has no personality or standing to bring suit on the whole
property, as he has actionable interest over the subject lot only. (Citations omitted and
underscoring ours)16
In Metropolitan Bank and Trust Co., Inc. v. SLGT Holdings, Inc.,17 however, the Court nullified
the entire mortgage contract executed between the subdivision developer and the bank
albeit the fact that only two units or lot buyer/s filed a case for declaration of nullity of
mortgage. In the said case, the entire mortgage contract was nullified on the basis of the
principle of indivisibility of mortgage as provided in Article 208918 of the New Civil Code.
This notwithstanding, in the fairly recent case of Philippine National Bank v. Lim,19 the Court
reverted to our previous ruling in Far East Bank that a unit buyer has no standing to seek for
the complete nullification of the entire mortgage, because he has an actionable interest only
over the unit he has bought. Hence, in the said case, the mortgage was nullified only insofar
as it affected the unit buyer.
We find the recent view espoused in Philippine National Bank to be in accord with law and
equity. While a mortgage may be nullified if it was in violation of Section 18 of P.D. No. 957,
such nullification applies only to the interest of the complaining buyer. It cannot extend to
the entire mortgage. A buyer of a particular unit or lot has no standing to ask for the
nullification of the entire mortgage.
Since EDUPLAN has an actionable interest only over Unit E, 10th Floor, Aurora Milestone
38
Tower, it is but logical to conclude that it has no standing to seek for the complete
nullification of the subject mortgage and the HLURB was incorrect when it voided the whole
mortgage between JOS Managing Builders and United Overseas Bank.
Considering that EDUPLAN had already paid the full purchase price of the subject unit, the
latter is entitled to the transfer of ownership of the subject property in its favor. This right is
provided for in Section 25 of P.D. No. 957, 50 wit:LawlibraryofCRAlaw
ChanRoblesVirtualawlibrary
Issuance of Title. The owner or development shall deliver the title of the lot or unit to the
buyer upon full payment of the lot or unit, x x x.
Verily, JOS Managing Builders has the obligation to cause the delivery of the Title to the
subject condominium unit in favor of EDUPALN.
Nevertheless, despite the fact that the mortgage constituted between JOS Managing Builders
and United Overseas Bank cannot bind EDUPLAN, because of the non-observance of the
provision of P.D. No. 957 by JOS managing Builders, the mortgage between the former and
United Overseas Bank is still valid.
In the present case, it is undisputed that JOS Managing Builders mortgaged several parcels of
land, including all the buildings and improvements therein covered by TCT Nos. N-146444, N-
146445 and N-143601 to United Overseas Bank without prior clearance from the HLURB. The
said omission clearly violates Section 18 of P.D. No. 957 (The Subdivision and condominium
Buyers' Protective Decree), which provides as follows:LawlibraryofCRAlaw
ChanRoblesVirtualawlibrary
Section 18. Mortgages. - No mortgage on any unit or lot shall be made by the owner or
developer without prior written approval of the [HLURB]. xxx (Word in bracket added)
It should be noted, however, that the failure of JOS Managing Builders to secure prior
approval of the mortgage from the HLURB and United Overseas Bank's failure to inquire on
the status of the property offered for mortgage placed the condominium developer and the
creditor Bank in pari delicto.20 Hence, they cannot ask the courts for relief for such parties
should be left where they are found for being equally at fault.
More importantly, it should be understood that the prior approval requirement is intended
to protect buyers of condominium units from fraudulent manipulations perpetrated by
unscrupulous condominium sellers and operators, such as their failure to deliver titles to the
buyer or titles free from lien and encumbrances.21 This is pursuant to the intent of P.D. No.
957 to protect hapless buyers from the unjust practices of unscrupulous developers which
may constitute mortgages over condominium projects sans the knowledge of the former and
the consent of the HLURB.22redarclaw
Thus, failure to secure the HLURB'S prior written approval as required by P.D. No. 957 will
not annul the entire mortgage between the condominium developer and the creditor bank,
otherwise the protection intended for condominium buyers will inadvertently be extended to
the condominium developer even though, by failing to secure the government's prior
approval, it is the party at fault.
 39

To rule otherwise would certainly affect the stability of large-scale mortgages, which is
prevalent in the real estate industry. To be sure, mortgagee banks would be indubitably 7Rollo, pp. 23-25.
placed at risk if condominium developers are empowered to unilaterally invalidate mortgage
contracts based on their mere failure to secure prior written approval of the mortgage by the 8Id. at 15-22.
HLURB, which could be easily caused by inadvertence or by deliberate intent.
9Id. at 24-29.
From all the foregoing, the HLURB erred when it declared the entire mortgage constituted by
JOS Managing Builders, Inc. in favor of United Overseas Bank null and void based solely on 10Id. at 37.
the complaint of EDUPLAN which was only claiming ownership over a single condominium
unit of Aurora Milestone Tower. Accordingly, the mortgage executed between JOS Managing 11Universal
Robina Corp. (Corn Division) v. Laguna Lake Development Authority, G.R No.
Builders and United Overseas Bank is valid. 191427, May 30, 2011, 649 SCRA 506, 511.

WHEREFORE, the petition is GRANTED. The Decision and Resolution of the Court of Appeals, 12 546 Phil. 87 (2007).
dated February 27, 2006 and March 5, 2008, respectively, in CA-G.R. SP No. 86401,
are REVERSED and SET ASIDE. The Decision of the HLURB, dated August 20, 2004, 13Republic v. Lacap, supra, at 97-98. (Underscoring supplied)
is AFFIRMED with MODIFICATION. The mortgage executed and the succeeding foreclosure
proceedings between respondent J.O.S. Managing Builders, Inc. and petitioner United 14Vigilarv. Aquino, G.R. No. 180388, January 18, 2011, 639 SCRA 772, 778, citing Republic v.
Overseas Bank of the Philippines, Inc., with respect to respondent EDUPLAN Philippines, Lacap, supra note 12, at 98.
Inc.'s unit E., 10TH Floor, Aurora Milestone Tower, is declared null and void.
15 465 Phil. 276 (2004).
SO ORDERED.cralawlawlibrary
16Far East Bank & Trust Co. v. Marquez, supra, at 298, cited in Philippine National Bank v.
Sereno, C.J., Carpio, Leonardo-De Castro, Villarama, Jr., Perez, Mendoza, Reyes, Lim, supra note 15, at 543-544.
and Jardeleza, JJ., concur.
Velasco, Jr., J., on leave. 17G.R. Nos. 175181-82 and G.R. Nos. 175354 & 175387-88, September 14, 2007, 533 SCRA
Brion, J., on leave. I certify that J. Brion left his dissenting opinion. 516.
Bersamin, J., please see concurring opinion.
Del Castillo, J., I join J. Brion in his dissenting opinion. 18Article 2089. A pledge or mortgage is indivisible, even though the debt may be divided
Perlas-Bernabe, J., I am joining the opinion of J. Leonen. among the successors-in-interest of the debtor or of the creditor, x x x.
Leonen, J., see separate concurring and dissenting opinion.
19 G.R. No. 171677, January 30, 2013, 689 SCRA 523, 543, citing Manila Banking Corporation
Endnotes: v. Rabina, G.R. No. 145941, December 16, 2008, 574 SCRA 16, 23.

20The pari delicto rule porivdes that when two parties are equally at fault, the law leaves
1Penned by Associate Justice Portia Alino-Hormachuelos, with Associate Justices Amelita G.
Tolentino and Vicente S. E. Veloso, concurring; rollo, pp. 15-22. them as they are and denies recovery by either one of them. (Land Bank of the Philippines v.
Poblete, G.R. No. 196577, February 25, 2013, 691 SCRA 613).
2Rollo, pp. 24-29.
21 See third Whereas Clause of P.D. No. 957.
3 CA rollo, pp. 102-103.
22Id.

4This amount was later on increased to PhP250,000,000.00 by virtue of an Amendment of

Real Estate Mortgage, id. at 105.

5 CA rollo, pp. 52-63. DISSENTING OPINION

6 The Subdivision and Condominium Buyers Protective Decree.


BRION, J.:
While I see no basis to disagree with the ponencia on the inapplicability of exhaustion of
administrative remedies in the present case, I dissent against its far-reaching conclusion to
limit the nullity of the mortgage contract to the interest of the complaining buyer. Thus, on
the whole, I express this Opinion as a dissenting one instead of a concurrence and a dissent.
Section 18 of P.D. 9571 provides as follows:LawlibraryofCRAlaw
SEC: 18. Mortgages. - No mortgage on any unit or lot shall be made by the owner or
developer without prior written approval of the Authority. Such approval shall not be
granted unless it is shown that the proceeds of the mortgage loan shall be used for the
development of the condominium or subdivision project and effective measures have been
provided to ensure such utilization. The loan value of .each lot or unit covered by the
mortgage shall be determined and the buyer thereof, if any, shall be notified before the
release of the loan. The buyer may, at his option, pay his installment for the lot or unit
directly to the mortgagee who shall apply the payments to the corresponding mortgage
indebtedness secured by the particular lot or unit being paid for, with a view to enabling said
buyer to obtain title over the lot or unit promptly after full payment thereof.
Section 18 of the decree directly addresses the problem of fraud committed against buyers
when the lots they have contracted to purchase, and which they have religiously paid for, are
mortgaged without their knowledge.
The avowed purpose of P.D. 957 compels the reading of Section 18 to be prohibitory so
that acts committed contrary to it are void.2 This construction ensures the attainment of the
purpose of the law: to protect lot buyers so they do not end up homeless despite full
payment of the home lots they bought with their hard-earned cash.3 We fully recognized this
intent when we held in Philippine National Bank v. Office of the President that:4
ChanRoblesVirtualawlibrary
xxx [T]he unmistakable intent of the law [is] to protect innocent lot buyers from scheming
subdivision developers. As between these small lot buyers and the gigantic financial
institutions which the developers deal with, it is obvious that the law - as an instrument of
social justice - must favor the weak. Indeed, the petitioner bank had at its disposal vast
resources with which it could adequately protect its loan activities, and therefore is
presumed to have conducted the usual "due diligence" checking and ascertaining xxx the
actual status, condition, utilization and occupancy of the property offered as collateral, xxx
On the other hand, private respondents obviously were powerless to discover the attempt of
the land developer to hypothecate the property being sold to them. It was precisely in order
to deal with this kind of situation that P.D. 957 was enacted, its very essence and intendment
being to provide a protective mantle over helpless citizens who may fall prey to the
razzmatazz of what P.D. 957 termed "unscrupulous subdivision and condominium sellers.
Despite the clear and unambiguous provisions of P.D. 957 that clearly reflect this intent,
the ponencianow still hesitates to nullify the entire mortgage contract between United
Overseas Bank (UOB) and JOS Management Builders Inc. (JOS), and opts instead for a
tempered approach that only declares a partial invalidity of the mortgage contract; it does so
by relying on our ruling in the case of Far East Bank v. Marquez.5redarclaw
40
In this cited case, this Court - speaking through then Associate Justice Artemio Panganiban -
held that the subject of this litigation is limited only to the lot that the respondent bought;6he
has no personality or standing to bring suit on the whole property, as his actionable
interest is only over the subject lot7 This kind of ruling, of course, is the unscrupulous
subdivision developer's dream as he thereby divides the opposition to his fraudulent scheme
into individual lot owners, many of whom can ill-afford to devote time and resources to the
formal assertion of their rights.
While this Court was briefly enlightened in the subsequent case of Metropolitan Bank and
Trust Company, Inc. v. SLGT Holding, Inc.,8 the present case now resurrects
the Marquez reasoning and thereby allows the watering down of what Section 18, P.D. 957
forcefully commands. It is in the spirit of preventing this retrogressive consequence that I
now submit this Dissenting Opinion.
I outline below the reasons supporting my view.
First, the action in the present case assails the validity of the entire mortgage
contract between UOB and JOS, not solely the validity of the contract to sell between JOS
and EDUPLAN Inc. (EDUPLAN). While the contract to sell between JOS and EDUPLAN gave the
latter the legal right to assail the validity of the real estate mortgage, that right is by no
means limited to its juridical effect on EDUPLAN.
In other words, the principal issue pertains to the validity of the mortgage contract, not
simply on its effect on EDUPLAN as a buyer. The juridical effect on EDUPLAN only gives rise
to the right to assail the validity of the contract as a whole. As aptly stated by the eminent
Civil Code Commentator, Senator Arturo Tolentino:9
ChanRoblesVirtualawlibrary
xxx any person may invoke the inexistence of the contract whenever its juridical effects
founded thereon are asserted against him. Thus, if there has been a void transfer of
property, the transferor can recover it by accion reinvidicatoria, and any possessor may
refuse to deliver it to the transferee who cannot enforce the transfer. Creditors may attach a
property of the debtor, which has been alienated by the latter under a void contract; a
debtor can assert the nullity of an assignment of credit as a defense to an action by the
assignee, xxx
The ponencia tried to wiggle out of this tight spot by stating that EDUPLAN has actionable
interest solely on the unit it bought. The ponencia's reasoning, however, is badly flawed for
although the juridical effect of the void mortgage contract condominium buyer is grounded
on his purchased unit, it necessarily extends to the completion of the entire project itself.
Section 2 of Republic Act 4726, otherwise known as the "Condominium Act"
provides:LawlibraryofCRAlaw
ChanRoblesVirtualawlibrary
Sec. 2. A condominium is an interest in real property consisting of separate interest in a
unit in a residential, industrial or commercial building and an undivided interest in
common, directly or indirectly, in the land on which it is located and in other common

areas of the building. A condominium may include, in addition, a separate interest in other
portions of such real property. Title to the common areas, including the land, or the
appurtenant interests in such areas, may be held by a corporation specially formed for the
purpose (hereinafter known as the "condominium corporation") in which the holders of
separate interest shall automatically be members or shareholders, to the exclusion of others,
in proportion to the appurtenant interest of their respective units in the common areas, x x x
While a buyer purchases a unit in a condominium project for independent use or
ownership,10 his interests thereon are not limited to that livable space but extends to the
entire project itself. These include the facilities, improvements, infrastructures, and other
forms of development, such as water supply and lighting facilities offered and indicated in
the condominium plan, brochure, prospectus, or in any form of advertisement.11 All these
facilities and conveniences materially affect the buyer's investment and the level of use and
enjoyment of his unit.
So important is the interest of a condominium buyer to the completion of the project that
public policy as enshrined in P.D. 957 jealously protects it in its scattered provisions. In
particular, P.D. 957 instructs the Housing and Land Use Regulatory Board (HLURB) to ensure
the financial viability of the owner of the lot intended to be converted into a subdivision.
ChanRoblesVirtualawlibrary
xxx
The owner or the real estate dealer interested in the sale of lots or units, respectively, in such
subdivision project or condominium project shall register the project with the Authority by
filing therewith a sworn registration statement containing the following information
xxx
(e) A statement of the capitalization of the owner, including the authorized and
outstanding amounts of its capital stock and the proportion thereof which is paid up.
xxx
The following documents shall be attached to the registration statement:LawlibraryofCRAlaw
xxx
(c) In case of a business firm, a balance sheet showing the amount and general character of
its assets and liabilities and a copy of its articles of incorporation or articles of partnership
or association, as the case may be, with all the amendments thereof and existing bylaws or
instruments corresponding thereto.
xxx
Section 5. License to sell. Such owner or dealer to whom has been issued a registration
certificate shall not, however, be authorized to sell any subdivision lot or condominium unit
in the registered project unless he shall have first obtained a license to sell the project within
two weeks from the registration of such project.
41
The Authority, upon proper application therefor, shall issue to such owner or dealer of a
registered project a license to sell the project if, after an examination of the registration
statement filed by said owner or dealer and all the pertinent documents attached thereto,
he is convinced that the owner or dealer is of good repute, that his business is financially
stable, and that the proposed sale of the subdivision lots or condominium units to the
public would not be fraudulent.
Section 6. Performance Bond. No license to sell subdivision lots or condominium units shall
be issued by the Authority under Section 5 of this Decree unless the owner or dealer shall
have filed an adequate performance bond approved by said Authority to guarantee the
construction and maintenance of the roads, gutters, drainage, sewerage, water system,
lighting systems, and full development of the subdivision project or the condominium
project and the compliance by the owner or dealer with the applicable laws and rules and
regulations.
The performance bond shall be executed in favor of the Republic of the Philippines and shall
authorize the Authority to use the proceeds thereof for the purposes of its undertaking in
case of forfeiture as provided in this Decree.
Similarly, Section 18 of P.D. 957 provides for the regulatory mechanisms precisely to
minimize the risk of noncompletion of the project and to protect the buyer's interest. In
particular, it states that no mortgage on any unit or lot shall be made by the owner or
developer without prior written approval of the HLURB. Such approval shall not be granted
unless it is shown that the proceeds of the mortgage loan shall be used for the
development of the condominium or subdivision project and effective measures have been
provided to ensure such utilization.
The loan thus, is primarily intended to be a capital infusion to complete the project and not
simply as a respirator to a barely breathing developer, who or which does not possess the
financial means and adequate level of liquidity, and which only relies on leveraging its
capital asset and revenues from pre-selling to sustain the project.
The reason for this is that the last thing the State wants is an unfinished condominium
project which has surreptitiously been foreclosed by a financial institution. At that point, the
buyer practically is left with no recourse but to sue a defaulting developer for refund to
recover his meager life savings while the mortgagee bank could sleep at night in view of its
secured credit. This Court precisely observed this scheme in Metropolitan Bank and Trust
Company, Inc. v. SLGT Holding, Inc.,12 where we stated:LawlibraryofCRAlaw
ChanRoblesVirtualawlibrary
It happened before; it will likely happen again. A developer embarks on an aggressive
marketing campaign and succeeds in selling units in a yet to-be completed condominium
project. Short of funds, the developer borrows money from a bank and, without apprising
the latter of the pre-selling transactions, mortgages the condominium complex, but also
without informing the buyers of the mortgage constitution. Saddled with debts, the
developer fails to meet its part of the bargain. The defaulting developer is soon sued by the
fully paid unit buyers for specific performance or refund and is threatened at the same time
with a foreclosure of mortgage. Having his hands full parrying legal blows from different

directions, the developer seeks a declaration of suspension of payment, followed by a
petition for rehabilitation with suspension of action.
Second, it would have been different if EDUPLAN had opted for a partial release of the
mortgage, instead of seeking a declaration of its nullity. Such partial release, however, could
have only been resorted to if the real estate mortgage is valid, that is, obtained with the
prior approval of the Housing and Land Use Regulatory Board under Section 18 of P.D.
957.13 In the absence of an HLURB approval, as in the present case, a partial release of
mortgage may not be availed of.
Mr. Justice Bersamin, in his concurring opinion, lamentably, supports the ponencia 's
reasoning and even attempts to strengthen the arguments by generously citing Belo v.
Philippine National Bank.14redarclaw
In citing Belo,15 Mr. Justice Bersamin sought to impress upon this Court that the mortgage
between JOS and UOB is divisible considering that the principle of indivisibility of mortgages
only applies to debtor-creditor relations. To further support his contention, Justice Bersamin
cites the last sentence of Section 18 of P.D. 957 which provides that the buyer may, at his
option, pay his installment for the lot or unit directly to the mortgagee who shall apply the
payments to the corresponding mortgage indebtedness secured by the particular lot or unit
being paid for, with a view to enabling said buyer to obtain title over the lot or unit promptly
after full payment thereof.
Unfortunately, in his earnestness to support the ponencia, Justice Bersamin glossed over the
critical fact that Belo was decided on a valid mortgage contract. In particular, in Belo,16 this
Court upheld the partial redemption by the owner of the lot on a validly constituted
mortgage. Justice Bersamin therefore suffered the critical error of putting the cart before the
horse and effectively assumed the divisibility of mortgage and the remedy of partial release,
to argue the validity of the mortgage itself. What he fatally overlooked, however, is that
these remedies are only available when the mortgage is validly constituted.
Notably, this principle of partial release is likewise echoed in Section 18 of P.D. 957 which
allows the buyer to pay his installment for the unit directly to the mortgagee who shall
apply the payments to the corresponding mortgage indebtedness secured by the particular
lot or unit being paid for, with a view to enabling said buyer to obtain the title over the lot
for validly constituted mortgages. This, however, mandates that the parties to the
mortgage secure the prior clearance from the HLURB before the constitution of mortgage.
In the absence of this mandatory provision of law, the remedies provided by divisibility and
release are not available.
Third, as a void contract, the mortgage in favor of the UOB has no legal force and effect
from the very beginning; it is equivalent to a contract that has never been entered into and
that cannot be validated by time nor by ratification.17 The contract produces no effect
whatsoever either against or in favor of anyone; hence it does not create, modify or
extinguish the juridical relation to which it refers.18 The nullity exists ipsojure, and judgment
of nullity would be merely declaratory.19redarclaw
42
In declaring a partial invalidity of the mortgage contract, the ponencia practically "gave
effect" to a patently void agreement with respect to buyers who fail to seek legal
intervention to assail the validity of the real estate mortgage. This kind of declaration goes
against the concept of void agreements that, by law and by its nature, should produce no
civil effects.20 This is the same principle that is taught to students in law schools as a basic
characteristic of void contracts. This cannot be overemphasized in void contracts which
violate an overriding public policy, such as in the present case, for to do so would interfere
with an established interest of society and injure public interest.
Moreover, the partial invalidity of mortgage goes against established principles of justice and
equity, and circumvents the very purpose of P.D. 957. The whereas clauses of P.D. 957
expressly state that:LawlibraryofCRAlaw
ChanRoblesVirtualawlibrary
WHEREAS, reports of alarming magnitude also show cases of swindling and fraudulent
manipulations perpetrated by unscrupulous subdivision and condominium sellers and
operators, such as failure to deliver titles to the buyers or titles free from liens and
encumbrances, and to pay real estate taxes, and fraudulent sales of the same subdivision lots
to different innocent purchasers for value;
WHEREAS, these acts not only undermine the land and housing program of the government
but also defeat the objectives of the New Society, particularly the promotion of peace and
order and the enhancement of the economic, social and moral condition of the Filipino
people;21
Fourth, the ponencia 's reliance on the doctrine of in pari delicto in justifying the partial
invalidity of the mortgage is fatally flawed. The phrase means, in essence, that since both
parties are equally at fault, the court will not involve itself in resolving one side's claim over
the other, and whoever possesses whatever is in dispute may continue to do so in the
absence of a superior claim.22 Nonetheless, the application of the doctrine of in pari delicto is
not always rigid. An accepted exception arises when its application contravenes well-
established public policy.23 As we held in Prudential Bank v. Panis.24
ChanRoblesVirtualawlibrary
Nonetheless, we apply our earlier rulings because we believe that as in pari delicto may not
be invoked to defeat the policy of the State neither may the doctrine of estoppel give a
validating effect to a void contract. Indeed, it is generally considered that as between parties
to a contract, validity cannot be given to it by estoppel if it is prohibited by law or is against
public policy. It is not within the competence of any citizen to barter away what public
policy by law was to preserve.25
The application of the principle of in pari delicto to the present case is fraught with danger.
To validate the present transaction on the basis of in pari delicto would open the flood gates
to fraud, and much worse, conspiracy, perpetuated by unscrupulous developers and financial
institutions at the expense of condominium buyers. An unscrupulous condominium
developer without any substantial financial capacity to complete a project could obtain a
developer's loan from any financial institution by mortgaging certain parcels of land,
emboldened by the knowledge that the courts would leave them where they are until each
of the condominium buyers initiate an action to question the nullity of the mortgage. From a
business standpoint, said practice is worth the risk for the labyrinth of legalities often serve
 43

as a protective mantle for unsound business practices.
Translated to its practical effects, the result will prejudice buyers who do not have the
resources to engage their own counsel to defend their rights; at the very least, it will
prejudice them to the extent of the time, money, efforts, and resources they will use to
protect their rights to the lots or units they have already paid for.
Fifth, the intent of P.D. 957 is to protect buyers from fraudulent manipulations perpetrated
by unscrupulous subdivision and condominium sellers and operators, and not large scale
mortgages. In construing P.D. 957, this Court must recognize this legislative policy to the
fullest extent. Already, this Court has adopted and articulated its full recognition and support
for this intent in Philippine National Bank v. Office of the President when it said:26
ChanRoblesVirtualawlibrary
Protection must be afforded small homeowners who toil and save if only to purchase on
installment a tiny home lot they can call their own. The consuming dream of every Filipino is
to be able to buy a lot, no matter how small, so that he may somehow build a house. It has,
however, been seen of late that these honest, hard-living individuals are taken advantage of,
with the delivery of titles delayed, the subdivision facilities, including the most essential such
as water installations not completed, or worse yet, as in the instant case, after almost
completing the payments for the property and after constructing a house, the buyer is
suddenly confronted by the stark reality, contrived or otherwise, in which another person
would now appear to be owner.
Let us not now return to this ruling and definitively reject other rulings thait reject the
salutary purposes of P.D. 957.
In these lights, I vote to DENY the petition.
9Tolentino, Commentaries on Jurisprudence on Civil Code of the Philippines, Vol. V., 1986 Ed
at p. 632.
10P.D. 957, Section 2 (b) "Unit" means a part of the condominium project intended for any
type of independent use or ownership, including one or more rooms or spaces located in one
or more floors (or part or parts of floors) in a building or buildings and such accessories as
may be appended thereto.
11 Section 19, P.D. 957.
12Supra note 8.
13SEC. 18. Mortgages. - No mortgage on any unit or lot shall be made by the owner or
developer without prior written approval of the Authority. Such approval shall not be
granted unless it is shown that the proceeds of the mortgage loan shall be used for the
development of the condominium or subdivision project and effective measures have been
provided to ensure such utilization. The loan value of each lot or unit covered by the
mortgage shall be determined and the buyer thereof, if any, shall be notified before the
release of the loan. The buyer may, at his option, pay his installment for the lot or unit
directly to the mortgagee who shall apply the payments to the corresponding mortgage
indebtedness secured by the particular lot or unit being paid for, with a view to enabling said
buyer to obtain title over the lot or unit promptly after full payment thereof. See also Section
4 par 4(d), (Id.) which states that in case any subdivision lot or condominium unit is
mortgaged, it is sufficient if the instrument of mortgage contains a stipulation that the
mortgagee shall release the mortgage on any subdivision lot or condominium unit as soon as
the full purchase price for the same is paid by the buyer. [Emphasis supplied]

14 G.R. No. 134330, March 1, 2001, 353 SCRA 359.

Endnotes:
15 Id.
1REGULATING THE SALE OF SUBDIVISION LOTS AND CONDOMINIUMS, PROVIDING
PENALTIES FOR VIOLATIONS THEREOF.
16 Id.
2Far East Bank & Trust Co. v. Marquez, G.R. No. 147964, January 20, 2004, 420 SCRA 349.
17Supra note 9.
3 Id.
18 Id.
4 G.R. No. 104528, January 18, 1996, 252 SCRA 5.
19 Id.
5Supra note 2.
20 Id. at 629.
6 Id.
21Emphasis supplied.
7 Id.
22http://en.wikipedia.org/wiki/In_pari_delicto.

8 G.R. Nos. 175181-82, September 14, 2007, 533 SCRA 516.

23Gonzalo v. Tarnate, G.R. No. 160600, January 15, 2014.
 44

be divided into valid or invalid parts. The mortgage is either valid in its entirety or not valid at
24 G.R. No. L-50008, August 31, 1987, 153 SCRA 390. all. In the present case, there is doubtless only one mortgage to speak of. Ergo, a declaration
of nullity for violation of Section 18 of PD 957 should result to the mortgage being nullified
25 Citations omitted. wholly.2
On the other hand, the Court has ruled in Far East Bank and Trust Co. v. Marquez3 that the
26Supra note 4. mortgage is void only with respect to the portion of the property under mortgage that is the
subject of the litigation, explaining:LawlibraryofCRAlaw
ChanRoblesVirtualawlibrary
The lot was mortgaged in violation of Section 18 of PD 957. Respondent, who was the buyer
CONCURRING OPINION of the property, was not notified of the mortgage before the release of the loan proceeds by
petitioner. Acts executed against the provisions of mandatory or prohibitory laws shall be
void. Hence, the mortgage over the lot is null and void insofar as private respondent is
BERSAMIN, J.: concerned.

The remedy granted by the HLURB and sustained by the Office of the President is proper only
The legal issue for resolution concerns the validity of the mortgage constituted between
insofar as it refers to the lot of respondent. In short, the mortgage contract is void as against
petitioner bank and respondent developer of a condominium project under Section 18 of
him. Since there is no law stating the specifics of what should be done under the
Presidential Decree No. 957 (The Subdivision and Condominium Buyers' Protective Decree) to
circumstances, that which is in accord with equity should be ordered. The remedy granted by
secure the performance of the latter's obligations in favor of the former.
the HLURB in the first and the second paragraphs of the dispositive portion of its Decision
insofar as it referred to respondent's lot is in accord with equity.
Our relevant existing jurisprudence is settled insofar as declaring that the failure to obtain
the prior written approval of the Housing and Land Use Regulatory Board (HLURB) renders
The HLURB, however, went overboard in its disposition in paragraphs 3 and 4, which
the mortgage null and void. However, a conflict exists as to the extent of the nullity of the
pertained not only to the lot but to the entire parcel of land mortgaged. Such ruling was
mortgage.
improper. The subject of this litigation is limited only to the lot that respondent is buying, not
to the entire parcel of land. He has no personality or standing to bring suit on the whole
On the one hand, the Court has pronounced in Metropolitan Bank and Trust Co., Inc. v. SLGT
property, as he has actionable interest over the subject lot only.4
Holdings, Inc.1 that the nullity extends to the entire mortgage, opining:LawlibraryofCRAlaw
Far East Bank and Trust Co. v. Marquez has been reiterated in Philippine National Bank v.
x x x This disposition stems from the basic postulate that a mortgage contract is, by nature,
Lim.5redarclaw
indivisible. Consequent to this feature, a debtor cannot ask for the release of any portion of
the mortgaged property or of one or some of the several properties mortgaged unless and
Before resolving the conflict, let us look at the established facts of this case.
until the loan thus secured has been fully paid, notwithstanding the fact that there has been
partial fulfillment of the obligation. Hence, it is provided that the debtor who has paid a part
Respondent EDUPLAN Philippines Inc. (EDUPLAN) bought a condominium unit with an area of
of the debt cannot ask for the proportionate extinguishments of the mortgage as long as the
149.72 square meters, more or less, known as Unit E located in the 10th Floor of the Aurora
debt is not completely satisfied.
Milestone Tower, from respondent J.O.S. Managing Builders, Inc. (J.O.S. Managing Builders)
under a contract to sell. In August 1998, EDUPLAN effected full payment; hence, J.O.S.
The situation obtaining in the case at bench is within the purview of the aforesaid rule on the
Managing Builders and EDUPLAN executed their deed of absolute sale in December 1998.
indivisibility of mortgage. It may be that Section 18 of PD 957 allows partial redemption of
Despite the execution of the deed of absolute sale, J.O.S. Managing Builders did not deliver
the mortgage in the sense that the buyer is entitled to pay his installment for the lot or unit
the condominium certificate of title to EDUPLAN, which, in due time, discovered that the lots
directly to the mortgagee so as to enable him - the said buyer - to obtain title over the lot or
on which the condominium project was being constructed had been made the subject of the
unit after full payment thereof. Such accommodation statutorily given to a unit/lot buyer
mortgage by J.O.S. Managing Builders in favor of United Overseas Bank without the prior
does not, however, render the mortgage contract also divisible. Generally, the divisibility of
written approval of the HLURJB.
the principal obligation is not affected by the indivisibility of the mortgage. The real estate
mortgage voluntarily constituted by the debtor (ASB) on the lots or units is one and
Consequently, EDUPLAN filed its complaint for specific performance and damages against
indivisible. In this case, the mortgage contract executed between ASB and the petitioner
J.O.S. Managing Builders and United Overseas Bank in the HLURB, praying, among others,
banks is considered indivisible, that is, it cannot be divided among the different buildings or
that the mortgage between J.O.S. Managing Builders and United Overseas Bank be declared
units of the Project. Necessarily, partial extinguishment of the mortgage cannot be allowed.
null and void.
In the same token, the annulment of the mortgage is an all or nothing proposition. It cannot

On August 15, 2001, the HLURB Arbiter rendered a decision declaring, inter alia, that the
mortgage between J.O.S. Managing Builders and United Overseas Bank and the foreclosure
of the mortgage were null and void for being in violation of Section 18 of P.D. No. 957.
United Overseas Bank brought its petition for review to the HLURB Board of Commissioners,
which, on August 20, 2004, affirmed the HLURB Arbiter's decision with modification.
United Overseas Bank elevated the case to the Court of Appeals (CA), which affirmed the
HLURB Board of Commissioners through the now assailed judgment promulgated on
February 27, 2006.
The CA also denied United Overseas Bank's motion for reconsideration, observing that
United Overseas Bank did not exhaust administrative remedies due to its failure to appeal
the decision of the HLURB EJoard of Commissioners to the Office of the President before
filing its petition for review in the CA.
In its present appeal, United Overseas Bank raises as the lone error of the CA the refusal to
apply the exception to the doctrine of exhaustion of administrative remedies.
The very erudite main opinion written by Justice Peralta considers the petition meritorious.
Firstly, it says that this case presents a purely legal question - whether failure to obtain prior
written approval of the HLURB would result to the nullification of the entire mortgage
contract - that will eventually be decided by the courts. With the presence of such recognized
exception, the rule on exhaustion of administrative remedies need not strictly apply. It insists
anent the legal issue that the HLURB erred in declaring the entire mortgage executed
between J.O.S. Managing Builders and United Overseas Bank null and void in view of the
pronouncement in Philippine National Bank v. Lim because although the mortgage could be
nullified if it was in violation of Section 18 of P.D. No. 957, the nullification should apply only
to the interest of the complaining buyer, and should not extend to the entire mortgage
considering that the buyer of a particular unit or lot has no standing to ask for the
nullification of the entire mortgage. It explains that the principle of indivisibility of mortgage
under Article 2089 of the Civil Code cannot be applied herein because Section 18 of P.D. No.
957 expressly allows the proportionate extinguishment of a mortgage upon payment of the
debt corresponding to the lot or unit of a particular buyer; that it follows that the mortgage
can be partially nullified insofar as it affects the complaining party; and that the mortgage
executed and the succeeding foreclosure proceedings between J.O.S. Managing Builders and
United Overseas Bank were consequently null and void only with respect to EDUPLAN's Unit
E at the 10thFloor of the Aurora Milestone Tower.
I CONCUR with the main opinion in its declaration that the mortgage contract between J.O.S.
Managing Builders and United Overseas Bank should be declared null and void only insofar as
it concerns EDUPLAN's condominium unit.
The general rule that a mortgage is an indivisible contract6 applies only between the
contracting parties where a debtor-creditor relationship exists. This the Court has made clear
45
in Belo v. Philippine National Bank,7 declaring:LawlibraryofCRAlaw
ChanRoblesVirtualawlibrary
There is no dispute that the mortgage on the four (4) parcels of land by the Eslabon spouses
and the other mortgage on the property of Eduarda Belo both secure the loan obligation of
respondents spouses Eslabon to respondent PNB. However, we are not persuaded by the
contention of the respondent PNB that the indivisibility concept applies to the right of
redemption of an accommodation mortgagor and her assignees. The jurisprudence
in Philippine National Bank v. Agudelo is enlightening to the case at bar, to
wit:LawlibraryofCRAlaw
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xxxx
However, Paz Agudelo y Gonzaga (the principal) ... gave her consent to the lien on lot No. 878
.... This acknowledgment however, does not extend to lots Nos. 207 and 61 ... inasmuch
as, although it is true that a mortgage is indivisible as to the contracting parties and as to
their successors in interest (Article 1860, Civil code), it is not so with respect to a third person
who did not take part in the constitution thereof either personally or through an agent x x x.
Therefore, the only liability of the defendant-appellant Paz Agudelo y Gonzaga is that which
arises from the aforesaid acknowledgment but only with respect to the lien and not to the
principal obligation secured by the mortgage acknowledged by her to have been constituted
on said lot No. 878 .... Such liability is not direct but a subsidiary one.
xxxx
Wherefore, it is hereby held that the liability contracted by the aforesaid defendant-
appellant Paz Agudelo y Gonzaga is merely subsidiary to that of Mauro A. Garrucho (the
agent), limited to lot No. 87.
xxxx
From the wordings of the law, indivisibility arises only when there is a debt, that is, there is a
debtor-creditor relationship. But, this relationship is wanting in the case at bar in the sense
that petitioners are assignees of an accommodation mortgagor and not of a debtor-
mortgagor. Hence, it is fair and logical to allow the petitioners to redeem only the property
belonging to their assignor, Eduarda Belo.
Although the concept of indivisibility does not apply to the unit buyers of the condominium
project because they are not parties to the principal contract of loan and the mortgage, the
agreements that they enter into with the developer nevertheless affect the nature of the
mortgage. In consideration of the agreements and conformably with the governing law, I
humbly opine that the mortgage contract between J.O.S. Managing Builders and United
Overseas Bank is not indivisible in this context.
To begin with, there are certain factors that may be considered to properly determine
whether an obligation is divisible or indivisible, namely: (1) the will or intention of the
parties, which may be express or presumed; (2) the objective or purpose of the stipulated
prestation; (3) the nature of the thing; and (4) provisions of law affecting the
prestation.8redarclaw

In a real estate mortgage, the object or prestation does not refer to the lots or units
mortgaged, but to the security given by the debtor to the creditor to guarantee the
fulfillment of the principal obligation. However, unlike in the case of ordinary mortgage
contracts, the provisions of P.D. No. 957 are embedded in the mortgage contract between
J.O.S. Managing Builders and United Overseas Bank, particularly Section 18 which
states:LawlibraryofCRAlaw
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Section 18. Mortgages. No mortgage on any unit or lot shall be made by the owner or
developer without prior written approval of the Authority. Such approval shall not be
granted unless it is shown that the proceeds of the mortgage loan shall be used for the
development of the condominium or subdivision project and effective measures have been
provided to ensure such utilization. The loan value of each lot or unit covered by the
mortgage shall be determined and the buyer thereof, if any, shall be notified before the
release of the loan. The buyer may, at his option, pay his installment for the lot or unit
directly to the mortgagee who shall apply the payments to the corresponding mortgage
indebtedness secured by the particular lot or unit being paid for, with a view to enabling
said buyer to obtain title over the lot or unit promptly after full payment thereto.
It is easily discernible from Section 18 that the partial extinguishment of the mortgage
corresponding to a particular lot or unit that is meanwhile fully paid for is expressly
permitted. As such, Section 18 affects the prestation of the mortgage because it releases a
portion that no longer belongs to the mortgagor-developer and thus ceases to be the object
of its mortgage.9 In short, Section 18 of P.D. No. 957 renders mortgages of this nature
divisible.
By virtue of Section 18 of P.D. No. 957, the parties of the mortgage become bound to respect
the agreements from which the rights of lot or unit buyers arise. The Court has fittingly
observed in Philippine National Bank v. Dee:10
ChanRoblesVirtualawlibrary
Nevertheless, despite the apparent validity of the mortgage between the petitioner and PEPI,
the former is still bound to respect the transactions between respondents PEPI and Dee. The
petitioner was well aware that the properties mortgaged by PEPI were also the subject of
existing contracts to sell with other buyers. While it may be that the petitioner is protected
by Act No. 3135, as amended, it cannot claim any superior right as against the installment
buyers. This is because the contract between the respondents is protected by P.D. No. 957, a
social justice measure enacted primarily to protect innocent lot buyers. Thus, in Luzon
Development Bank v. Enriquez, the Court reiterated the rule that a bank dealing with a
property that is already subject of a contract to sell and is protected by the provisions of P.D.
No. 957, is bound by the contract to sell.
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However, the transferee BANK is bound by the Contract to Sell and has to respect Enriquez's
rights thereunder. This is because the Contract to Sell, involving a subdivision lot, is covered
and protected by PD 957.x x x.
xxxx
46
xxx Under these circumstances, the BANK knew or should have known of the possibility and
risk that the assigned properties were already covered by existing contracts to sell in favor of
subdivision lot. buyers. As observed by the Court in another case involving a bank regarding a
subdivision lot that was already subject of a contract to sell with a third
party:LawlibraryofCRAlaw
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[The Bank] should have considered that it was dealing with a property subject of a real estate
development project. A reasonable person, particularly a financial institution x x x, should
have been aware that, to finance the project, funds other than those obtained from the loan
could have been used to serve the purpose, albeit partially. Hence, there was a need to verify
whether any part of the property was already intended to be the subject of any other
contract involving buyers or potential buyers. In granting the loan, [the Bank] should not
have been content merely with a clean title, considering the presence of circumstances
indicating the need for a thorough investigation of the existence of buyers x x x. Wanting in
care and prudence, the [Bank] cannot be deemed to be an innocent mortgagee, x x x
The possibility exists that the developer's principal obligation with the financial institution
will eventually become unsecured should all unit buyers of the condominium project effect
full payment. In consideration of this possibility, the mortgage between J.O.S. Managing
Builders and United Overseas Bank should be construed as divisible instead of indivisible.
Hence, the nullity of the mortgage contract should be confined only to the interest of the
complaining buyer, EDUPLAN.
I should stress that the right to set up the nullity of a void or nonexistent contract is not
limited to the parties, as in the case of annullable or voidable contracts. Under Article 1421
of the Civil Code, the defense of the illegality of a contract is available to third persons whose
interests are directly affected.11redarclaw
The interests of EDUPLAN, while not a party to the mortgage contract between J.O.S.
Managing Builders and United Overseas Bank, are directly affected if the mortgage and its
foreclosure were to be upheld. Even so, EDUPLAN, not being directly injured by the
foreclosure of the other units, has no right to bring an action in behalf of the other unit
buyers because its actionable interest is limited to its purchased unit. Indeed, Section 2, Rule
3 of the Rules of Court generally limits the right of action only to the real party-in-
interest, viz:LawlibraryofCRAlaw
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Sec. 2. Parties in interest. - A real party in interest is the party who stands to be benefited or
injured by the judgment in the suit, or the party entitled to the avails of the suit. Unless
otherwise authorized by law or these Rules, every action must be prosecuted or defended in
the name of the real party in interest.
Interest within the meaning of this rule means material interest, or an interest in issue to be
affected by the decree or judgment of the case, as distinguished from mere curiosity about
the question involved. Accordingly, a real party in interest is the party who, by the
substantive law, has the right sought to be enforced.12 Following Philippine National Bank v.
Lim, supra, the HLURB really went overboard in voiding the entire mortgage without an
action being filed by all the real parties in interest.

The fear exists that this interpretation may result in the filing of multiple actions for the
annulment of mortgage and foreclosure proceedings by unit buyers of condominium
projects. The situation is not necessarily adverse to procedural orderliness, however, because
the Rules of Court may partly address it under the rule on the permissive joinder of parties.
Thus, Rule 3, Section 6 of the Rules of Court, which embodies the rule on permissive joinder
of parties, states:LawlibraryofCRAlaw
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Sec. 6. Permissive joinder of parties. - All persons in whom or against whom any right to relief
in respect to or arising out of the same transaction or scries of transactions is alleged to exist,
whether jointly, severally, or in the alternative, may, except as otherwise provided in these
Rules, join as plaintiffs or be joined as defendants in one complaint, where any question of
law or fact common to all such plaintiffs or to all such defendants may arise in the action; but
the court may make such orders as may be just to prevent any plaintiff or defendant from
being embarrassed or put to expense in connection with any proceedings in which he may
have no interest.
IN VIEW OF THE FOREGOING, I vote to GRANT the petition for review on certiorari.
Endnotes:
1G.R. Nos. 175181-82 and G.R. Nos. 175354 & 175387-88, September 14, 2007, 533 SCRA
516.
2Id. at 527-528.
3 G.R. No. 147964, January 20, 2004, 420 SCRA 349.
4Id. at 357-358.
5 G.R. No. 171677, January 30, 2013, 689 SCRA 523.
6 Article 2089, Civil Code.
7 G.R. No. 134330, March 1, 2001, 353 SCRA 359, 378-379.
8 IV Tolentino, Civil Code of the Philippines, (1999), p. 255.
9 Article 2085, Civil Code.
10 G.R. No. 182128, February 19, 2014, 717 SCRA 14, 25-26.
11See also Heirs of Policronio M. Ureta, Sr. v. Heirs of Liberate M. Ureta, G.R. No. 165748,
September 14, 2011, 657 SCRA 555, 589.
12Ang v. Ang, G.R. No. 186993, August 22, 2012, 678 SCRA 699, 707-708.
47
CONCURRING AND DISSENTING OPINION
LEONEN, J.:
The case involves the doctrines on exhaustion of administrative remedies and void mortgage
contracts under Section 18 of Presidential Decree No. 957.1redarclaw
This is a Petition for Review on Certiorari assailing the Decision dated February 27, 2006 and
Resolution dated March 5, 2008 of the Court of Appeals in CA-G.R. SP No. 86401.2 The Court
of Appeals dismissed petitioner's Petition for Review under Rule 43 of the Rules of Court for
failure to exhaust administrative remedies available to petitioner.
Respondent J.O.S. Managing Builders, Inc. (JOS) is the registered owner and developer of
Aurora Milestone Tower (the condominium project).3The condominium project is located on
Aurora Boulevard, Quezon City.
JOS mortgaged the condominium project, among other properties, to Far East Bank and Trust
Co. (Far East). The properties were security for JOS loan of P112,002,000.00.
However, as requested by JOS, petitioner United Overseas Bank (UOB) assumed the
indebtedness of JOS with Far East.4 The mortgage was released on April 15, 1997 for P200
million, which represented JOS principal loan plus interest. The mortgaged properties
transfer certificates of title were delivered to UOB as the new mortgagee. UOB did not secure
a mortgage clearance from the Housing and Land Use Regulatory Board (HLURB).
JOS failed to pay its loan with UOB.5 The real estate mortgage was then foreclosed, and UOB
was declared as the highest bidder in the public auction held on March 22, 1999.6redarclaw
In the meantime, on December 16, 1997, JOS and EDUPLAN Phils., Inc. (EDUPLAN) entered
into a contract to sell.7 The contract covered Unit E, 10th Floor of the condominium project.
The cost of the unit was P9,028,116.00 payable in installments within six (6) years.
EDUPLAN fully paid JOS on August 24, 1998.8 The parties then executed a Deed of Absolute
Sale9 where it was disclosed that there was a mortgage lien in favor of UOB.10redarclaw
JOS was not able to issue the individual condominium certificate of title in favor of EDUPLAN
as UOB had custody of the transfer certificate of title covering the condominium
building.11redarclaw
On February 11, 2000, EDUPLAN filed a Complaint for specific performance and damages
against JOS and UOB before the HLURB Arbiter.12 The Complaint prayed for the following
reliefs:LawlibraryofCRAlaw

(a) that the mortgage between JOS and UOB be declared void; (b) that [JOS and EDUPLAN] be
compelled to issue and release the condominium certificate of title; and (c) that JOS be
ordered to provide emergency power facilities, to refund the monthly telephone carrier
charges, and to permanently cease and desist from further collecting such charges.13
The HLURB Arbiter issued a Decision in favor of EDUPLAN on August 15, 2001.14 The Decision
declared that the mortgage between JOS and UOB, including the foreclosure proceedings,
was void for violating Section 18 of Presidential Decree No. 957. Moreover, the HLURB
Arbiter ruled that since EDUPLAN had already fully paid for the condominium unit, JOS and
UOB should cause the release of the title to the condominium building or the "mother title"
free from all liens and encumbrances in connection with Section 25 of Presidential Decree
No. 957. The HLURB Arbiter also held that JOS should provide emergency power facilities to
EDUPLAN in consonance with its sales brochure. JOS should also refund monthly telephone
carrier charges from September 1, 1999 to EDUPLAN, and stop the collection of such fees.
In addition, JOS should pay UOB the loan release value of EDUPLAN's unit. JOS was also held
liable for damages, attorney's fees, and the costs of suit.15redarclaw
Upon UOB's filing of its Petition for Review, the HLURB Board of Commissioners affirmed
with modification the HLURB Arbiter's Decision.16 According to the Board of Commissioners,
EDUPLAN was entitled to the delivery of the title of the fully paid unit under Section 25 of
Presidential Decree No. 957.17 JOS had the legal obligation to cause the release of titles
despite non-payment of its loan with UOB.18redarclaw
The Board of Commissioners also ruled that JOS and UOB violated Section 18 of Presidential
Decree No. 957 for not securing the Board's prior approval before the mortgage was
executed.19 However, the Board of Commissioners found that there was no basis to support
the refund of the payment for telephone carrier services and the order of desistance to
collect such and other similar fees.20redarclaw
The dispositive portion of the August 20, 2004 Decision of the Board of Commissioners
provides:LawlibraryofCRAlaw
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In the light of the foregoing premises, the decision of the Office Below is hereby modified as
follows:LawlibraryofCRAlaw
1. The mortgage executed by Respondent J.O.S. Managing Builders in favor of
Respondent United Overseas Bank (Westmont), including the foreclosure of the
mortgage, is declared as null and void for being in violation of Section 18 of
Presidential Decree No. 957.
2. Respondent JOS is ordered to cause the release of the mother titles to the Aurora
Milestone Tower condominium building from the mortgage held by Respondent
Westmont and to issue an individual Condominium Certificate of Title to
Complainant over its condominium unit, free from any and all liens and
encumbrances.
48
3. Respondent JOS is ordered to pay the Complainant P100,000.00 by way of
temperate damages; P50,000.00 by way of exemplary damages; P40,000.00 as and
by way of Attorney's Fees; and the costs of suit.
4. Respondent J.O.S. is ordered to pay respondent Westmont the loan release value
of complainant's condominium unit.
5. All other claims are hereby dismissed.
So ordered.21
As stated earlier, UOB filed a Petition for Review under Rule 43 of the Rules of Court before
the Court of Appeals. The Court of Appeals dismissed the Petition for its belated filing and for
failing to exhaust administrative remedies.22 According to the Court of Appeals, the proper
recourse of UOB was to file the appeal of the Board of Commissioners' Decision before the
Office of the President within 15 days from receipt of the Decision.23redarclaw
On Motion for Reconsideration, the Court of Appeals affirmed its earlier Decision.24 However,
it reconsidered its finding that the Petition was filed out of time.25 The Court of Appeals also
ruled that UOB's argument involving a purely legal question was raised for the first time in its
Motion and Supplemental Motion for Reconsideration.26redarclaw
The present Petition was filed before this court on May 5, 2008.27 This court resolved to
require JOS and EDUPLAN to submit their Comment on July 16, 2008.28redarclaw
After receipt of JOS' and EDUPLAN's Comments dated September 11, 2008 and February 11,
2009, respectively, this court granted UOB's Motion for leave and extension of 15 days to file
a consolidated Reply.29redarclaw
UOB's consolidated Reply was noted on June 3, 2009.30redarclaw
UOB raised the lone issue of whether the Court of Appeals erred in not applying the
exception to the doctrine of exhaustion of administrative remedies. However, as noted by
the ponencia, the more important issue at hand is whether the HLURB's nullification of the
entire mortgage over the condominium project is proper.
UOB argued that the issues it raised before the Court of Appeals were purely legal, with this
being a proper exception to the doctrine of exhaustion of administrative remedies.31 The
Court of Appeals erred in dismissing the Petition for Review and calling UOB's argument on
the exception to the doctrine of exhaustion of administrative remedies a "mere
afterthought" since UOB raised issues on HLURB's jurisdiction and on the patent illegality of
HLURB's actions.32redarclaw
According to UOB, the HLURB went overboard or went beyond its jurisdiction when it
declared the entire mortgage void.33 Citing Far East Bank & Trust Co. v. Marquez,34 UOB
claimed that the mortgage should be declared void only as to Unit E, 10th Floor, Aurora
Milestone Tower, or EDUPLAN's unit, since EDUPLAN did not have any claim over other units
covered by the mortgage.35redarclaw
Furthermore, the burden to comply with Section 18 of Presidential Decree No. 957 rests on

JOS and not on UOB, thus, JOS cannot rely on the law to renege on its loan obligations.36 To
allow JOS to do so would "allow JOS to profit from its own misdeed."37redarclaw
On the other hand, EDUPLAN claimed in its Comment that UOB's argument of exception to
the rule of exhaustion of administrative remedies "was a mere afterthought."38 UOB had all
the opportunity to invoke questions of law. However, it remained silent to its
detriment.39 EDUPLAN prayed that this court dismiss the Petition for lack of
merit.40redarclaw
Likewise, JOS argued that UOB fatally erred when it appealed the Decision of the HLURB
Board of Commissioners to the Court of Appeals instead of the Office of the President, which
the rules specifically provide.41 This Petition should also be denied as UOB belatedly claimed
an exception to the doctrine of exhaustion of administrative remedies.42 Nevertheless, there
is no purely legal question involved, thus, the exception is inexistent.43redarclaw
At the outset, what is only questioned in this Petition is the validity of the Court of Appeals'
ruling with regard to the existence of an exception to the doctrine of exhaustion of
administrative remedies. However, in view of the importance of the issues involved, this
court must go beyond the issues brought by the parties to this forum.
The doctrine of exhaustion of administrative remedies is already settled in this
jurisdiction.44 UOB admitted that it raised the exception to the doctrine in its Motion for
Reconsideration filed before the Court of Appeals after the court had already ruled on the
propriety of UOB's appeal.45redarclaw
I concur with the ponencia when it held that an exception to the doctrine of administrative
remedies exists in this case, specifically that the main issue involves a legal question that only
the courts may address.46 This opinion shall focus on the legality of the nullification of the
entire mortgage over the condominium project.
Presidential Decree No. 957 stands as legislation that promotes the enforcement of social
justice.47 It occupies a unique place in this jurisdiction wherein economic considerations are
trumped by the need to protect unit or lot buyers with the view of ensuring improvement in
the quality of life of Filipinos.48redarclaw
Section 18 of this law provides:LawlibraryofCRAlaw
ChanRoblesVirtualawlibrary
SECTION 18. Mortgages. - No mortgage on any unit or lot shall be made by the owner or
developer without prior written approval of the Authority. Such approval shall not. be granted
unless it is shown that the proceeds of the mortgage loan shall be used for the development
of the condominium or subdivision project and effective measures have been provided to
ensure such utilization. The loan value of each lot or unit covered by the mortgage shall be
determined and the buyer thereof, if any, shall be notified before the release of the loan. The
buyer may, at his option, pay his installment for the lot or unit directly to the mortgagee who
shall apply the payments to the corresponding mortgage indebtedness secured by the
49
particular lot or unit being paid for, with a view to enabling said buyer to obtain title over the
lot or unit promptly after full payment thereto;
With Section 18 of Presidential Decree No. 957 being a prohibitory law,49 acts done contrary
to its provisions are invalid.50redarclaw
I concur with the ponencia when it held that the lack of mortgage clearance from the HLURB
in this case resulted in the nullity of the mortgage under Section 18 of Presidential Decree
No. 957.51redarclaw
However, I disagree with the conclusion that the HLURB erred in declaring the entire
mortgage void. In refusing to declare the entire mortgage void, the ponencia cites Far East
Bank & Trust Co. v. Marquez,52which was reiterated in Philippine National Bank v.
Lim.53redarclaw
It is true that Far East Bank ruled that the HLURB went overboard in declaring the mortgage
over the entire land void. The court reasoned that respondent-buyer had "no personality
standing to bring suit on the whole property, as he has actionable interest over the subject
lot only."54 Similarly, Philippine National Bank had language which states
that:LawlibraryofCRAlaw
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[W]hile it is within Lim's right to file a complaint before the HLURB to protect her right as a
condominium unit buyer, she has no standing to seek for the complete nullification of the
subject mortgage. She has an actionable interest only over Unit 48C of Cluster Dominiko of
Vista de Loro, no more and no less.55
Philippine National Bank, however, involved a peculiar set of facts. It involved the application
of res judicata wherein this court previously upheld the trial court's decision that the
mortgage contract over the subject properties was merely voidable and not void. Thus, the
mortgage was held valid between the developer and the bank.56redarclaw
The principal obligation, i.e., the loan contract of JOS, is different from the mortgage
constituted over the lots and its improvements. The loan obligation, in turn, is separate from
the developer's obligation to deliver the property to the buyers.
The divisibility of the principal obligation is, thus, distinct from the indivisibility of the
mortgage.57 The mortgage contract cannot be divided among the different lots or units.58 To
rule that the nullity of the mortgage contract under Section 18 of Presidential Decree No. 957
only applies to the property of the lot or unit owner bringing the case implies that the
mortgage is divisible among the properties it covers.
Article 2089 of the Civil Code provides:LawlibraryofCRAlaw
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Art. 2089. A pledge or mortgage is indivisible, even though the debt may be divided among
the successors in interest of the debtor or of the creditor.
In Metropolitan Bank and Trust Company, Inc. v. SLGT Holdings, Inc.,59 this court definitively
ruled on the issue of the nullity of the entire mortgage contract under Section 18 of

Presidential Decree No. 957. Thus:LawlibraryofCRAlaw
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This disposition stems from the basic postulate that a mortgage contract is, by nature,
indivisible. Consequent to this feature, a debtor cannot ask for the release of any portion of
the mortgaged property or of one or some of the several properties mortgaged unless and
until the loan thus secured has been fully paid, notwithstanding the fact that there has been
partial fulfillment of the obligation. Hence, it is provided that the debtor who has paid a part
of the debt cannot ask for the proportionate extinguishments of the mortgage as long as the
debt is not completely satisfied.
The situation obtaining in the case at bench is within the purview of the aforesaid rule on the
indivisibility of mortgage. It may be that Section 18 of PD 957 allows partial redemption of
the mortgage in the sense that the buyer is entitled to pay his installment for the lot or unit
directly to the mortgagee so as to enable him - the said buyer - to obtain title over the lot or
unit after full payment thereof. Such accommodation statutorily given to a unit/lot buyer
does not, however, render the mortgage contract also divisible. Generally, the divisibility of
the principal obligation is not affected by the indivisibility of the mortgage. The real estate
mortgage voluntarily constituted by the debtor (ASB) on the lots or units is one and
indivisible. In this case, the mortgage contract executed between ASB and the petitioner
banks is considered indivisible, that is, it cannot be divided among the different buildings or
units of the Project. Necessarily, partial extinguishment of the mortgage cannot be
allowed. In the same token, the annulment of the mortgage is an all or nothing proposition. It
cannot be divided into valid, or invalid parts. The mortgage is either valid in its entirety or not
valid at all. In the present case, there is doubtless only one mortgage to speak of. Ergo, a
declaration of nullity for violation of Section 18 of PD 957 should result to the mortgage
being nullified wholly.60 (Emphasis supplied)
In Luzon Development Bank v. Enriquez,61 this court again nullified the entire mortgage,
constituted over several parcels of land, notwithstanding the dacion en pago executed
between the developer and petitioner bank. Among the properties included as security for
the developer's loan was respondent's Lot 4. The court upheld the law's intent to protect
subdivision lot or condominium unit buyers above everything else.62 The nullity was in
accordance with Section 18 of Presidential Decree No. 957 and was unqualified as to extent
of the nullity.63 Citing Metropolitan Bank and Trust Company, Inc.:LawlibraryofCRAlaw
ChanRoblesVirtualawlibrary
As the HLURB Arbiter and Board of Commissioners both found, DELTA violated Section 18 of
PD 957 in mortgaging the properties in Delta Homes I (including Lot 4) to the BANK without
prior clearance from the HLURB.
This violation of Section 18 renders the mortgage executed by DELTA void. We have held
before that "a mortgage contract executed in breach of Section 18 of [PD 957] is null and
void." Considering that "PD 957 aims to protect innocent subdivision lot and condominium
unit buyers against fraudulent real estate practices," we have construed Section 18 thereof
as "prohibitory and acts committed contrary to it are void."
Because of the nullity of the mortgage, neither DELTA nor the BANK could assert any right
50
arising therefrom. The BANK'S loan of P8 million to DELTA has effectively become unsecured
due to the nullity of the mortgage. . . . 64 (Emphasis supplied, citations omitted)
To construe Section 18 of Presidential Decree No. 957 to mean that only those buyers or
owners who brought a claim against the developer and mortgagee bank should be entitled to
the nullity of the mortgage would be to undermine the purpose of the law: protection of real
estate buyers.65 The declaration of nullity of only a part of the mortgage contract
furthermore encourages litigation and circumvention of the clear provisions of the
law.66redarclaw
The interpretation in the ponencia will mean sanctioning partial mortgage releases. It will
require all buyers of condominium projects to file their own cases to nullify a void mortgage
over their property and claim release of their titles. Innocent lot or unit buyers will be left
vulnerable to the whims and manipulations of the developer and/or the mortgagee.
Another unintended consequence of the majority's decision is the weakening of HLURB's
regulatory functions. Developers will take advantage of the ambiguity that the allowance of
partial mortgage releases will create.
It is the court's duty to interpret the law as intended by the legislature. As stated before,
"[t]he lofty aspirations of P.D. No. 957 should be read in every provision of the statute, in
every contract that undermines its objects, in every transaction which threatens its
fruition."67 The law is a tool for social justice. Circumvention should not be
tolerated.68redarclaw
The HLURB, therefore, acted within its powers when it nullified the entire mortgage, as well
as the foreclosure proceedings.69 Consequently, the title to EDUPLAN's Unit E, 10th Floor,
Aurora Milestone Tower should be issued pursuant to Section 25 of Presidential Decree No.
957.70redarclaw
ACCORDINGLY, I vote that the Petition be DENIED. The Decision dated February 27, 2006 and
Resolution dated March 5, 2008 of the Court of Appeals in CA-G.R. SP No. 86401, insofar as it
dismissed the Petition for Review of the Housing and Land Use Regulatory Board Decision
dated August 20, 2004, should be AFFIRMED, The mortgage constituted over the Aurora
Milestone Tower by respondent J.O.S. Managing Builders, Inc. with petitioner United
Overseas Bank of the Philippines, Inc. is void in its entirety.
Endnotes:
1Regulating the Sale of Subdivision Lots and Condominiums, Providing Penalties for
Violations Thereof (1976).
2Rollo,pp. 59-66. The Decision, promulgated on February 27, 2006, was penned by Justice
Portia Alino-Hormachuelos and concurred in by Justices Amelita G. Tolentino and Vicente S.E.
Veloso of the Fourth Division, Court of Appeals Manila.
3 Id. at 60.
 51

26 Id. at 72.
4 Id. at 61.
27 Id. at 31-57.
5 Id.
28 Id. at 94.
6 Id.
29 Id. at 133-A.
7 Id.
30 Id. at 160.
8 Id.
31 Id. at 37-38.
9 Id.
32 Id. at 39-40.
10 Id.
33 Id. at 43-45.
11 Id.
34 Id. at 43-44.
12 Id. at 62.
35 Id. at 44.
13 Id.
36 Id. at 45-46.
14 Id.
37 Id. at 46.
15 Id. at 63.
38 Id. at 112.
16 Id. at 93.
39 Id. at 113.
17 Id. at 92.
40 Id. at 114.
18 Id.
41 Id. at 100.
19 Id. at 92-93.
42 Id. at 102.
20 Id. at 93.
43 Id.
21 Id. at 93.
44See Addition Hills Mandaluyong Civic & Social Organization, Inc. v. Megaworld Properties &
22 Id. at 65. Holdings, Inc., G.R. No. 175039, April 18, 2012, 670 SCRA 83 [Per J. Leonardo-De Castro, First
Division].
23citing
Rule XXI, sec. 2 of the 2004 Rules of Procedure of the Housing and Land Use
Regulatory Board. See rollo, pp. 70-73. 45Rollo, p. 39.

24 Id. at 73. 46See Go v. Distinction Properties Development and Construction, Inc., G.R. No. 194024, April
25, 2012, 671 SCRA 461, 481 [Per J. Mendoza, Third Division].
25 Id. at 69.
47See Philippine National Bank v. Office of the President, 322 Phil. 6 (1996) [Per J. Panganiban,
 52

Third Division Resolution]. See also Philippine Bank of Communications v. Pridisons Realty 65SeePhilippine National Bank v. Office of the President, G.R. No. 104528, January 18, 1996,
Corporation, G.R. No. 155113, January 9, 2013, 688 SCRA 200, 214 [Per J. Brion, Second 252 SCRA 5, 10 [Per J. Panganiban, Third Division Resolution].
Division].
66 See Go v. Distinction Properties Development and Construction, Inc., G.R. No. 194024, April
48See 1st whereas clause, Pres. Decree No. 957. 25, 2012, 671 SCRA 461, 473 [Per J. Mendoza, Third Division], citing Luzon Development Bank
v. Enriquez, G.R. Nos. 168646 and 168666, January 12, 2011, 639 SCRA 332, 337-338 [Per J.
49Metropolitan Bank and Trust Company, Inc. v. SLGT Holdings, Inc., 559 Phil. 914 (2007) [Per Del Castillo, First Division].
J. Garcia, First Division]. See The Manila Banking Corporation v. Rabina, 594 Phil. 422 (2008)
[Per J. Carpio Morales, Second Division]. 67Luzon Development Bank v. Enrique, G.R. No. 168646, January 12, 2011, 639 SCRA 332, 337
[Per J. Del Castillo, First Division].
50See CIVIL CODE - art. 5 - Acts executed against the provisions of mandatory or prohibitory
laws shall be void, except when the law itself authorizes their validity. (4a) 68SeePhilippine Bank of Communications v. Pridisons Realty Corporation, G.R. No. 155113,
January 9, 2013, 688 SCRA 200, 214 [Per J. Brion, Second Division], citing Philippine National
51 Ponencia, p. 6. Bank v. Office of the President, 322 Phil. 6 (1996) [Per J. Panganiban, Third Division].

52 465 Phil. 276 (2004) [Per J. Panganiban, First Division]. 69SeeThe Manila Banking Corporation v. Rabina, 594 Phil. 422 (2008) [Per J. Carpio Morales,
Second Division], citing Section 3 of Pres. Decree No. 957 in relation to Section 1 of Pres.
53 G.R. No. 171677, January 30, 2013, 689 SCRA 523 [Per J. Reyes, First Division]. Decree No. 1344:LawlibraryofCRAlaw

54Far East Bank & Trust Co. v. Marquez, 465 Phil. 276 (2004) [Per J. Panganiban, First SECTION 3. National Housing Authority - The National Housing Authority shall have exclusive
Division]. jurisdiction to regulate the real estate trade and business in accordance with the provisions
of this Decree.
55Philippine National Bank v. Lim, G.R. No. 171677, January 30, 2013, 689 SCRA 523, 544 [Per
J. Reyes, First Division]. SECTION 1. In the exercise of its functions to regulate the real estate trade and business and
in addition to its powers provided for in Presidential Decree No. 957, the National Housing
56 Id. at 540542. Authority shall have exclusive jurisdiction to hear and decide cases of the following
nature:LawlibraryofCRAlaw
57Gonzalesv. Government Service Insurance System, 194 Phil. 465, 476 (1981) [Per J.
Melencio-Herrera, First Division]. A. Unsound real estate business practices;

58 Id. See also Aquino v. Macondray & Co., Inc., et al., 97 Phil. 731, 741 (1955) [Per J. Jugo, B. Claims involving refund and any other claims filed by subdivision lot or condominium unit
First Division]. buyer against the project owner, developer, dealer, broker or salesman; and

59 559 Phil. 914 (2007) [Per J. Garcia, First Division]. C. Cases involving specific performance of contractual and statutory obligations filed by
buyers of subdivision lot or condominium unit against the owner, developer, dealer, or
60 Id. at 927-928. salesman.

61 654 Phil. 315 (2011) [Per J. Del Castillo, First Division]. 70SECTION 25. Issuance of Title. - The owner or developer shall deliver the title of the lot or
unit to the buyer upon full payment of the lot or unit.
62 Id.
TERMINATION OF EFFECTIVITY OF LAWS; JUDICIAL DECISIONS
63Id. at 331. The specific subject matter of the case pertained to Lot 4 of the Delta Homes I
project. However, the declaration of nullity of the real estate mortgage was unqualified. THIRD DIVISION
64 Id.
G.R. No. 80718 January 29, 1988

FELIZA P. DE ROY and VIRGILIO RAMOS, petitioners,
vs.
COURT OF APPEALS and LUIS BERNAL, SR., GLENIA BERNAL, LUIS BERNAL, JR., HEIRS OF
MARISSA BERNAL, namely, GLICERIA DELA CRUZ BERNAL and LUIS BERNAL,
SR., respondents.
RESOLUTION
CORTES, J.:
This special civil action for certiorari seeks to declare null and void two (2) resolutions of the
Special First Division of the Court of Appeals in the case of Luis Bernal, Sr., et al. v. Felisa
Perdosa De Roy, et al., CA-G.R. CV No. 07286. The first resolution promulgated on 30
September 1987 denied petitioners' motion for extension of time to file a motion for
reconsideration and directed entry of judgment since the decision in said case had become
final; and the second Resolution dated 27 October 1987 denied petitioners' motion for
reconsideration for having been filed out of time.
At the outset, this Court could have denied the petition outright for not being verified as
required by Rule 65 section 1 of the Rules of Court. However, even if the instant petition did
not suffer from this defect, this Court, on procedural and substantive grounds, would still
resolve to deny it.
The facts of the case are undisputed. The firewall of a burned-out building owned by
petitioners collapsed and destroyed the tailoring shop occupied by the family of private
respondents, resulting in injuries to private respondents and the death of Marissa Bernal, a
daughter. Private respondents had been warned by petitioners to vacate their shop in view
of its proximity to the weakened wall but the former failed to do so. On the basis of the
foregoing facts, the Regional Trial Court. First Judicial Region, Branch XXXVIII, presided by the
Hon. Antonio M. Belen, rendered judgment finding petitioners guilty of gross negligence and
awarding damages to private respondents. On appeal, the decision of the trial court was
affirmed in toto by the Court of Appeals in a decision promulgated on August 17, 1987, a
copy of which was received by petitioners on August 25, 1987. On September 9, 1987, the
last day of the fifteen-day period to file an appeal, petitioners filed a motion for extension of
time to file a motion for reconsideration, which was eventually denied by the appellate court
in the Resolution of September 30, 1987. Petitioners filed their motion for reconsideration on
September 24, 1987 but this was denied in the Resolution of October 27, 1987.
This Court finds that the Court of Appeals did not commit a grave abuse of discretion when it
denied petitioners' motion for extension of time to file a motion for reconsideration, directed
entry of judgment and denied their motion for reconsideration. It correctly applied the rule
laid down in Habaluyas Enterprises, Inc. v. Japzon, [G.R. No. 70895, August 5, 1985,138 SCRA
53
461, that the fifteen-day period for appealing or for filing a motion for reconsideration
cannot be extended. In its Resolution denying the motion for reconsideration, promulgated
on July 30, 1986 (142 SCRA 208), this Court en banc restated and clarified the rule, to wit:
Beginning one month after the promulgation of this Resolution, the rule shall be strictly
enforced that no motion for extension of time to file a motion for reconsideration may be
filed with the Metropolitan or Municipal Trial Courts, the Regional Trial Courts, and the
Intermediate Appellate Court. Such a motion may be filed only in cases pending with the
Supreme Court as the court of last resort, which may in its sound discretion either grant or
deny the extension requested. (at p. 212)
Lacsamana v. Second Special Cases Division of the intermediate Appellate Court, [G.R. No.
73146-53, August 26, 1986, 143 SCRA 643], reiterated the rule and went further to restate
and clarify the modes and periods of appeal.
Bacaya v. Intermediate Appellate Court, [G.R. No. 74824, Sept. 15, 1986,144 SCRA
161],stressed the prospective application of said rule, and explained the operation of the
grace period, to wit:
In other words, there is a one-month grace period from the promulgation
on May 30, 1986 of the Court's Resolution in the clarificatory Habaluyas
case, or up to June 30, 1986, within which the rule barring extensions of
time to file motions for new trial or reconsideration is, as yet, not strictly
enforceable.
Since petitioners herein filed their motion for extension on February 27,
1986, it is still within the grace period, which expired on June 30, 1986,
and may still be allowed.
This grace period was also applied in Mission v. Intermediate Appellate Court [G.R. No.
73669, October 28, 1986, 145 SCRA 306].]
In the instant case, however, petitioners' motion for extension of time was filed on
September 9, 1987, more than a year after the expiration of the grace period on June 30,
1986. Hence, it is no longer within the coverage of the grace period. Considering the length
of time from the expiration of the grace period to the promulgation of the decision of the
Court of Appeals on August 25, 1987, petitioners cannot seek refuge in the ignorance of their
counsel regarding said rule for their failure to file a motion for reconsideration within the
reglementary period.
Petitioners contend that the rule enunciated in the Habaluyas case should not be made to
apply to the case at bar owing to the non-publication of the Habaluyas decision in the Official
Gazette as of the time the subject decision of the Court of Appeals was promulgated.
Contrary to petitioners' view, there is no law requiring the publication of Supreme Court

decisions in the Official Gazette before they can be binding and as a condition to their
becoming effective. It is the bounden duty of counsel as lawyer in active law practice to keep
abreast of decisions of the Supreme Court particularly where issues have been clarified,
consistently reiterated, and published in the advance reports of Supreme Court decisions (G.
R. s) and in such publications as the Supreme Court Reports Annotated (SCRA) and law
journals.
This Court likewise finds that the Court of Appeals committed no grave abuse of discretion in
affirming the trial court's decision holding petitioner liable under Article 2190 of the Civil
Code, which provides that "the proprietor of a building or structure is responsible for the
damage resulting from its total or partial collapse, if it should be due to the lack of necessary
repairs.
Nor was there error in rejecting petitioners argument that private respondents had the "last
clear chance" to avoid the accident if only they heeded the. warning to vacate the tailoring
shop and , therefore, petitioners prior negligence should be disregarded, since the doctrine
of "last clear chance," which has been applied to vehicular accidents, is inapplicable to this
case.
WHEREFORE, in view of the foregoing, the Court Resolved to DENY the instant petition for
lack of merit.
Fernan (Chairman), Gutierrez, Jr., Feliciano and Bidin, JJ., concur.
COMPUTATION OF TIME
FIRST DIVISION
June 30, 1987
G.R. No. L-51841
REMIGIO QUIQUI, EMILIANA Q. ARELLANO, TURCUATA Q. DIPUTADO, APOLONIA Q.
SALCEDOR, LORETO QUIQUI, SUPLICIA Q. CHAN, ELDEGUNDA Q. MONASTERIO, ELSA Q.
ARBON and ANTIPAS Q. YANG, petitioners
vs.
The Honorable Judge ALEJANDRO R. BONCAROS of Branch V, Court of First Instance of
Negros Oriental, ESTEFANIA G. AMOLO, LOPE AMOLO, SOFIA G. ALBON, PASTOR
GADINGAN, ANGEL GADINGAN, ANTERO GADINGAN, TEOFILO GADINGAN and FELICITAS
GADINGAN, respondents.
GANCAYCO, J.:
54
This is a Petition for certiorari, prohibition and mandamus. It concerns a parcel of agricultural
land situated in Barangay Cabangan, Siaton, Negros Oriental with an area of about 450
square meters. The said parcel of land is a portion of Lot No. 3217, Pls-659-D covered by Free
Patent Title No. FV-13703. The improvements on the parcel of land in question include
several fruit trees and a modest residential house.
The record of the case reveals that on May 22, 1973, the herein private respondents
Estefania G. Amolo, Lope Amolo, Sofia G. Albon, Pastor Gadingan, Angel Gadingan, Antero
Gadingan, Teofilo Gadingan and Felicitas Gadingan were able to secure Free Patent Title No.
FV-13703 in their names. The 450-square meter lot in question was included in the survey of
the entire parcel of land covered by the said Title.
On the other hand, it is the position of the herein petitioners Remigio Quiqui, Emiliana Q.
Arellano, Turcuata Q. Diputado, Apolonia Q. Salcedor, Loreto Quiqui, Suplicia Q. Chan,
Eldegunda Q. Monasterio, Elsa Q. Arbon and Antipas Q. Yang that the 450-square meter lot in
question belongs to them and not to the private respondents. They contend that the said lot
was purchased by their late father sometime in 1920 and that ever since then, they have
been in actual possession thereof, peacefully, openly continuously and adversely, for a
period of 56 years already. They also contend that the private respondents succeeded in
putting the said property in their name by clandestinely including the said lot in the survey of
the premises undertaken by the Government sometime in the 1970s.
On November 9, 1976, the petitioners, assisted by the Citizens Legal Assistance Office of the
then Ministry of Justice, filed a Complaint in the Court of First Instance of Negros Oriental for
"reconveyance and/or annulment of Title with damages" against the private
respondents. 1 The said Complaint was anchored on the theory that the title to the lot in
question obtained by the private respondents in their name was secured through fraud. The
case was docketed as Civil Case No. 6606.
On December 5, 1976, the private respondents filed their Answer to the Complaint,
alleging, inter alia, that the petitioners have no cause of action against them. By way of
Counterclaim, the private respondents sought the payment to them of moral damages and
attorney's fees. 2
Thereafter, a pre-trial conference was scheduled by the trial court. Inasmuch as the parties
could not reach an amicable settlement of their case, the pre-trial conference was
terminated and the case was set for trial on the merits. In the course of the proceedings,
more particularly on May 10, 1979, the private respondents filed a Motion to dismiss the
case on the ground of lack of jurisdiction on the part of the trial court. 3
On June 7, 1979, the petitioners submitted their Opposition to the said Motion, stressing that
the trial court has jurisdiction over cases for reconveyance. 4 In its Order dated July 16, 1979,
the trial court, with respondent Judge Alejandro R. Boncaros presiding, dismissed the
Complaint for reconveyance on the ground that it had no jurisdiction over the case. 5 Counsel
for the petitioners received a copy of the said Order on July 17, 1979. 6
 55

On August 17, 1979, the petitioners filed a Motion for the reconsideration of the Order of the
trial court dismissing the Complaint. 7 The said Motion for Reconsideration is dated August
16, 1979.
The private respondents opposed the Motion for Reconsideration, stating that the same had
been filed beyond the 30 day reglementary period under the Rules. The private respondents
maintain that inasmuch as the petitioners received their copy of the Order of dismissal on
July 17, 1979, they had up to August 16, 1979 to file the Motion for reconsideration,
computed on the basis of the 30-day reglementary period. They contend that since the said
Motion was filed beyond the 30-day period, the Order of dismissal has become final and
executory and could no longer be the subject of a Motion for reconsideration. 8 In its Order
dated August 21, 1979, the trial court denied the Motion for Reconsideration on the ground
asserted by the private respondents.9
Complying with the instructions of this Court, the private respondents submitted their
Comment on the Petition. 14
In the Resolution of this Court dated January 14, 1980, We gave due course to the instant
Petition. 15 The parties submitted their respective Memoranda after which the case was
deemed submitted for decision on June 11, 1980.
After a careful examination of the entire record of the case, We find the instant Petition
devoid of merit.
At the time this litigation was instituted in the trial court, Section 3, Rule 41 of the Rules of
Court was the provision governing the period within which an Appeal may be taken to the
Court of Appeals, to wit —

On August 23, 1979, the petitioners filed a Notice of Appeal, seeking relief from the Court of
SEC. 3. How appeal is taken. — Appeal may be taken by serving upon the adverse
Appeals. They sought the Appeal on the ground that the Orders of the trial court dismissing
party and filing with the trial court within thirty (30) days from notice of order or
their Complaint and denying their Motion for Reconsideration are contrary to law and the
judgment, a notice of appeal, an appeal bond, and a record on appeal. The time
evidence submitted. 10 On August 24, 1979, the petitioners filed their Appeal Bond, together
during which a motion to set aside the judgment or order or for a new trial has
with their Motion to approve the same.
been pending shall be deducted, unless such motion fails to satisfy the
requirements of Rule 37.
In its Order dated August 28, 1979, the trial court denied the Notice of Appeal, including the
Motion to approve the Appeal Bond. The pertinent portion of the said Order are as follows —
But where such a motion has been filed during office hours of the last day of the
period herein provided, the appeal must be perfected within the day following that
The order of dismissal of this Court which was dated July 16, 1979 was received by in which the party appealing received notice of the denial of said motion.
the plaintiffs (the herein petitioners) on July 17, 1979. Under Section 3, Rule 41 of
the Revised Rules of Court, the period to appeal is thirty (30) days, so with the
Under this cited provision, the Appeal may be taken within 30 days from notice of the
motion for a reconsideration so that (sic) under Art. 13 of the Civil Code that in the
judgment or order of the trial court. 16 In the event that the party aggrieved by the judgment
computation of the period exclude the first (day), include the last (sic), August 16,
or order of the trial court files a Motion to set aside the judgment or order, i. e a Motion for
1979 therefore was the last day to file the motion for reconsideration but it was
Reconsideration, the time during which such Motion is pending resolution shall, as a rule, be
filed on August 17 or one day late and this motion for reconsideration was denied
deducted from the 30-day period. 17 In relation thereto, the New Civil Code states that in
by this Court on August 21, 1979 (sic). The reason for the denial was the motion for
computing a period, the first day shall be excluded and the last day included. 18
reconsideration was filed (sic) beyond the reglementary period, in which case, the
notice of appeal ... (was) likewise filed beyond the reglementary period ....
The petitioners admit that they received their copy of the Order of dismissal of their
11 Complaint on July 17, 1979. Under Section 3, Rule 41, they had 30 days within which to
xxx xxx xxx
appeal their case or to file a Motion for Reconsideration of the judgment or order of the trial
court. In computing the 30-day period, July 17, 1979 (the first day) is excluded, pursuant to
Finding the action taken by the trial court unsatisfactory, the petitioners brought their case Article 13 of the New Civil Code. Counting 30 days thereafter, beginning on July 18, 1979, the
directly to this Court by way of the instant Petition for certiorari, prohibition and mandamus petitioners had up to August 16, 1979 to file their Motion for Reconsideration. Their Motion
under Rule 65 of the Rules of Court. They maintain that the Order of the trial court dated July for Reconsideration, although dated August 16, 1979, was filed with the trial court on August
16, 1979 is illegal and void for having been "issued without jurisdiction or in excess of 17, 1979 or one day beyond the 30-day reglementary period prescribed by Section 3 of Rule
jurisdiction or with grave abuse of discretion, for the so called "one day late" (ground) upon 41.
which it is based does not actually exist. " 12 They pray, inter alia, that the trial court be
ordered to approve their Notice of Appeal. 13
Under these circumstances, the order of the trial court dismissing the Complaint has become
final and executory. As such, it is beyond the reach of a Motion for consideration. 19 The
 56

Notice of Appeal, therefore, was properly denied. Perfection of an appeal in the manner and
within the period laid down by law is not only mandatory but also jurisdictional and failure to
perfect an appeal as required by the rules has the effect of rendering the judgment final and
executory. A strict observance of the reglementary period within which to exercise the
statutory right of appeal has been considered as absolutely indispensable to the prevention
of needless delays. 20
As a last recourse in support of their case, the petitioners invoke the following observations
made by this Court in De Las Alas v. Court of Appeals, 21 to wit:
Regardless, however, of the above findings and even assuming that respondents'
position were correct, WE find that a one-day delay does not justify the dismissal of
the appeal under the circumstances obtaining in this case. The real purpose behind
the limitation of the period of appeal is to forestall or avoid an unreasonable delay
in the administration of justice and to put an end to controversies ... 22
Unfortunately for the petitioners, the observation made by this Court in De Las Alas does not
apply to their case.
following. 24 In the case at bar, however, there is no such doubtful or controversial question
of law submitted for Our resolution.
For the petitioners to seek exception for their failure to comply strictly with the requirements
for perfecting their Appeal, strong compelling reasons, like the prevention of a grave
miscarriage of justice, must be shown to exist in order to warrant this Court to suspend the
Rules. 25 No such reasons have been shown to exist in this case. In fact, the petitioners did
not even offer any reasonable explanation for their delay.
On the basis of the foregoing discussion, We find no jurisdictional infirmity, sufficient to call
for the issuance of the corrective writ of certiorari in the action taken by the trial court. As
stated earlier, the instant Petition is devoid of merit.
WHEREFORE, in view of the foregoing, the instant Petition for certiorari prohibition
and mandamus is hereby DISMISSED for lack of merit. We make no pronouncement as to
costs.
SO ORDERED.

In De Las Alas, the view expressed by this Court to the effect that "a one-day delay does not Yap (Chairman), Narvasa, Melencio-Herrera, Cruz, Feliciano and Sarmiento, JJ., concur.
justify the dismissal of the appeal" is qualified by the phrase "under the circumstances
obtaining in this case". Unlike the situation faced by the herein petitioners, there is no
showing that the petitioners in the De Las Alas case failed to file their Motion for
Reconsideration as well as their Record on Appeal within the reglementary period. On the
Footnotes
contrary, this Court noted therein the lack of delay on the part of the petitioners in that
case, viz —
1 Pages 13 to 16, Rollo.
Furthermore, WE note from the records the absence or lack of the element of
2 Page 19, Rollo.
intent to delay the administration of justice on the part of petitioners in this case.
On the contrary, petitioners' counsel have demonstrated cautiousness, concern
and punctuality in the prosecution of the appeal. They filed their motion for 3 Pages 23 to 26, Rollo.
reconsideration October 7, 1972, even if the respondent lower court judge had
given them an extension up to October 24, 1972, within which to file the said 4 Pages 28 to 31, Rollo.
motion. Petitioners had up to December 25, 1972, within which to submit their
record on appeal, yet they filed their record on appeal on December 8, 1972, or 17
5 Pages 32 to 33, Rollo.
days before the deadline. 23

6 Pages 4 and 5, Petition.

Moreover, a doubtful and controversial question of law confronted the parties in the De Las
Alas case, i.e., the matter of computing the reglementary period for filing an Appeal. The
7 Page 5, Petition; pages 34 to 36, Rollo.
respondent court found petitioner had only two (2) days left to perfect the appeal after the
denial of the motion for reconsideration while this Court held petitioners had three (3) days
left deducting the period within which the motion for reconsideration has been pending, 8 Page 37, Rollo.
excluding the first day in the computation of the period, but since the last day falls on a
Sunday the period of appeal is ipso jure extended to the first working day immediately 9 Page 38, Rollo.
 57

10 Page 39, Rollo. IMELDA MANALAYSAY PILAPIL, petitioner,

vs.
11 Page 44, Rollo. HON. CORONA IBAY-SOMERA, in her capacity as Presiding Judge of the Regional Trial Court
of Manila, Branch XXVI; HON. LUIS C. VICTOR, in his capacity as the City Fiscal of Manila;
12
and ERICH EKKEHARD GEILING, respondents.
Page 7, Petition.

13 Page 9, Petition.
REGALADO, J.:
14 Pages 47 to 49, Rollo.
An ill-starred marriage of a Filipina and a foreigner which ended in a foreign absolute divorce,
only to be followed by a criminal infidelity suit of the latter against the former, provides Us
15 Page 52, Rollo. the opportunity to lay down a decisional rule on what hitherto appears to be an unresolved
jurisdictional question.
16Section 3, Rule 41 has been modified by Section 39 of Batas Pambansa Blg. 129,
otherwise known as The Judiciary Act of 1981. The period within which an Appeal On September 7, 1979, petitioner Imelda Manalaysay Pilapil, a Filipino citizen, and private
may be taken has been reduced to 15 days, except in habeas corpus cases. respondent Erich Ekkehard Geiling, a German national, were married before the Registrar of
Births, Marriages and Deaths at Friedensweiler in the Federal Republic of Germany. The
17 First paragraph, Section 3, Rule 41. marriage started auspiciously enough, and the couple lived together for some time in Malate,
Manila where their only child, Isabella Pilapil Geiling, was born on April 20, 1980. 1
18 Article 13, New Civil Code.
Thereafter, marital discord set in, with mutual recriminations between the spouses, followed
19Elizalde & Co., Inc. v. Court of Industrial Relations, 25 SCRA 58, 61-62 (1968). See by a separation de facto between them.
also Carreon v. Workmen's Compensation Commission, 77 SCRA 297, 300 (1977).
After about three and a half years of marriage, such connubial disharmony eventuated in
20Macabingkil vs. People's Homesite and Housing Corp., 72 SCRA 339, L-29080, private respondent initiating a divorce proceeding against petitioner in Germany before the
Aug. 17, 1976; Luzon Stevedoring Corp. vs. Reyes, 71 SCRA 66 1, L-43469, June 30, Schoneberg Local Court in January, 1983. He claimed that there was failure of their marriage
1976. and that they had been living apart since April, 1982. 2

21 83 SCRA 200 (1978). Petitioner, on the other hand, filed an action for legal separation, support and separation of
property before the Regional Trial Court of Manila, Branch XXXII, on January 23, 1983 where
the same is still pending as Civil Case No. 83-15866. 3
22 Citing Dy Cay v. Crossfield, 38 Phil. 521 (1918).
On January 15, 1986, Division 20 of the Schoneberg Local Court, Federal Republic of
23 83 SCRA at 215. Germany, promulgated a decree of divorce on the ground of failure of marriage of the
spouses. The custody of the child was granted to petitioner. The records show that under
24 Supra, applying Lloren vs. De Vera, 4 SCRA 637. German law said court was locally and internationally competent for the divorce proceeding
and that the dissolution of said marriage was legally founded on and authorized by the
25
Workmen's Insurance Co., Inc. v. Augusto, 40 SCRA 123, 127 (1971). See also applicable law of that foreign jurisdiction. 4
Ronquillo v. Marasigan, 5 SCRA 304, 312-313 (1962).
CONFLICT RULES: PRINCIPLE OF TERRITORIALITY, NATIONALITY PRINCIPLE On June 27, 1986, or more than five months after the issuance of the divorce decree, private
respondent filed two complaints for adultery before the City Fiscal of Manila alleging that,
SECOND DIVISION while still married to said respondent, petitioner "had an affair with a certain William Chia as
early as 1982 and with yet another man named Jesus Chua sometime in 1983". Assistant
Fiscal Jacinto A. de los Reyes, Jr., after the corresponding investigation, recommended the
G.R. No. 80116 June 30, 1989
 58

dismissal of the cases on the ground of insufficiency of evidence. 5 However, upon review,
the respondent city fiscal approved a resolution, dated January 8, 1986, directing the filing of
two complaints for adultery against the petitioner. 6 The complaints were accordingly filed
and were eventually raffled to two branches of the Regional Trial Court of Manila. The case
entitled "People of the Philippines vs. Imelda Pilapil and William Chia", docketed as Criminal
Case No. 87-52435, was assigned to Branch XXVI presided by the respondent judge; while the
other case, "People of the Philippines vs. Imelda Pilapil and James Chua", docketed as
Criminal Case No. 87-52434 went to the sala of Judge Leonardo Cruz, Branch XXV, of the
same court. 7
On March 14, 1987, petitioner filed a petition with the Secretary of Justice asking that the
aforesaid resolution of respondent fiscal be set aside and the cases against her be
dismissed. 8 A similar petition was filed by James Chua, her co-accused in Criminal Case No.
87-52434. The Secretary of Justice, through the Chief State Prosecutor, gave due course to
both petitions and directed the respondent city fiscal to inform the Department of Justice "if
the accused have already been arraigned and if not yet arraigned, to move to defer further
proceedings" and to elevate the entire records of both cases to his office for review. 9
Petitioner thereafter filed a motion in both criminal cases to defer her arraignment and to
suspend further proceedings thereon. 10 As a consequence, Judge Leonardo Cruz suspended
proceedings in Criminal Case No. 87-52434. On the other hand, respondent judge merely
reset the date of the arraignment in Criminal Case No. 87-52435 to April 6, 1987. Before such
scheduled date, petitioner moved for the cancellation of the arraignment and for the
suspension of proceedings in said Criminal Case No. 87-52435 until after the resolution of the
petition for review then pending before the Secretary of Justice. 11 A motion to quash was
also filed in the same case on the ground of lack of jurisdiction, 12 which motion was denied
by the respondent judge in an order dated September 8, 1987. The same order also directed
the arraignment of both accused therein, that is, petitioner and William Chia. The latter
entered a plea of not guilty while the petitioner refused to be arraigned. Such refusal of the
petitioner being considered by respondent judge as direct contempt, she and her counsel
were fined and the former was ordered detained until she submitted herself for
arraignment. 13 Later, private respondent entered a plea of not guilty. 14
petitioner's ratiocinations, issued a resolution directing the respondent city fiscal to move for
the dismissal of the complaints against the petitioner. 16
We find this petition meritorious. The writs prayed for shall accordingly issue.
Under Article 344 of the Revised Penal Code, 17 the crime of adultery, as well as four other
crimes against chastity, cannot be prosecuted except upon a sworn written complaint filed
by the offended spouse. It has long since been established, with unwavering consistency, that
compliance with this rule is a jurisdictional, and not merely a formal, requirement. 18 While in
point of strict law the jurisdiction of the court over the offense is vested in it by the Judiciary
Law, the requirement for a sworn written complaint is just as jurisdictional a mandate since it
is that complaint which starts the prosecutory proceeding 19 and without which the court
cannot exercise its jurisdiction to try the case.
Now, the law specifically provides that in prosecutions for adultery and concubinage the
person who can legally file the complaint should be the offended spouse, and nobody else.
Unlike the offenses of seduction, abduction, rape and acts of lasciviousness, no provision is
made for the prosecution of the crimes of adultery and concubinage by the parents,
grandparents or guardian of the offended party. The so-called exclusive and successive rule
in the prosecution of the first four offenses above mentioned do not apply to adultery and
concubinage. It is significant that while the State, as parens patriae, was added and vested by
the 1985 Rules of Criminal Procedure with the power to initiate the criminal action for a
deceased or incapacitated victim in the aforesaid offenses of seduction, abduction, rape and
acts of lasciviousness, in default of her parents, grandparents or guardian, such amendment
did not include the crimes of adultery and concubinage. In other words, only the offended
spouse, and no other, is authorized by law to initiate the action therefor.
Corollary to such exclusive grant of power to the offended spouse to institute the action, it
necessarily follows that such initiator must have the status, capacity or legal representation
to do so at the time of the filing of the criminal action. This is a familiar and express rule in
civil actions; in fact, lack of legal capacity to sue, as a ground for a motion to dismiss in civil
cases, is determined as of the filing of the complaint or petition.

On October 27, 1987, petitioner filed this special civil action for certiorari and prohibition,
The absence of an equivalent explicit rule in the prosecution of criminal cases does not mean
with a prayer for a temporary restraining order, seeking the annulment of the order of the
that the same requirement and rationale would not apply. Understandably, it may not have
lower court denying her motion to quash. The petition is anchored on the main ground that
been found necessary since criminal actions are generally and fundamentally commenced by
the court is without jurisdiction "to try and decide the charge of adultery, which is a private
the State, through the People of the Philippines, the offended party being merely the
offense that cannot be prosecuted de officio (sic), since the purported complainant, a
complaining witness therein. However, in the so-called "private crimes" or those which
foreigner, does not qualify as an offended spouse having obtained a final divorce decree
cannot be prosecuted de oficio, and the present prosecution for adultery is of such genre, the
under his national law prior to his filing the criminal complaint." 15
offended spouse assumes a more predominant role since the right to commence the action,
or to refrain therefrom, is a matter exclusively within his power and option.
On October 21, 1987, this Court issued a temporary restraining order enjoining the
respondents from implementing the aforesaid order of September 8, 1987 and from further
This policy was adopted out of consideration for the aggrieved party who might prefer to
proceeding with Criminal Case No. 87-52435. Subsequently, on March 23, 1988 Secretary of
suffer the outrage in silence rather than go through the scandal of a public trial. 20 Hence, as
Justice Sedfrey A. Ordoñez acted on the aforesaid petitions for review and, upholding
cogently argued by petitioner, Article 344 of the Revised Penal Code thus presupposes that

the marital relationship is still subsisting at the time of the institution of the criminal action
for, adultery. This is a logical consequence since the raison d'etre of said provision of law
would be absent where the supposed offended party had ceased to be the spouse of the
alleged offender at the time of the filing of the criminal case. 21
In these cases, therefore, it is indispensable that the status and capacity of the complainant
to commence the action be definitely established and, as already demonstrated, such status
or capacity must indubitably exist as of the time he initiates the action. It would be absurd if
his capacity to bring the action would be determined by his status beforeor subsequent to the
commencement thereof, where such capacity or status existed prior to but ceased before, or
was acquired subsequent to but did not exist at the time of, the institution of the case. We
would thereby have the anomalous spectacle of a party bringing suit at the very time when
he is without the legal capacity to do so.
To repeat, there does not appear to be any local precedential jurisprudence on the specific
issue as to when precisely the status of a complainant as an offended spouse must exist
where a criminal prosecution can be commenced only by one who in law can be categorized
as possessed of such status. Stated differently and with reference to the present case, the
inquiry ;would be whether it is necessary in the commencement of a criminal action for
adultery that the marital bonds between the complainant and the accused be unsevered and
existing at the time of the institution of the action by the former against the latter.
American jurisprudence, on cases involving statutes in that jurisdiction which are in pari
materia with ours, yields the rule that after a divorce has been decreed, the innocent spouse
no longer has the right to institute proceedings against the offenders where the statute
provides that the innocent spouse shall have the exclusive right to institute a prosecution for
adultery. Where, however, proceedings have been properly commenced, a divorce
subsequently granted can have no legal effect on the prosecution of the criminal proceedings
to a conclusion. 22
In the cited Loftus case, the Supreme Court of Iowa held that —
'No prosecution for adultery can be commenced except on the complaint
of the husband or wife.' Section 4932, Code. Though Loftus was husband
of defendant when the offense is said to have been committed, he had
ceased to be such when the prosecution was begun; and appellant insists
that his status was not such as to entitle him to make the complaint. We
have repeatedly said that the offense is against the unoffending spouse,
as well as the state, in explaining the reason for this provision in the
statute; and we are of the opinion that the unoffending spouse must be
such when the prosecution is commenced. (Emphasis supplied.)
We see no reason why the same doctrinal rule should not apply in this case and in our
jurisdiction, considering our statutory law and jural policy on the matter. We are convinced
that in cases of such nature, the status of the complainant vis-a-vis the accused must be
59
determined as of the time the complaint was filed. Thus, the person who initiates the
adultery case must be an offended spouse, and by this is meant that he is still married to the
accused spouse, at the time of the filing of the complaint.
In the present case, the fact that private respondent obtained a valid divorce in his country,
the Federal Republic of Germany, is admitted. Said divorce and its legal effects may be
recognized in the Philippines insofar as private respondent is concerned 23 in view of the
nationality principle in our civil law on the matter of status of persons.
Thus, in the recent case of Van Dorn vs. Romillo, Jr., et al., 24 after a divorce was granted by a
United States court between Alice Van Dornja Filipina, and her American husband, the latter
filed a civil case in a trial court here alleging that her business concern was conjugal property
and praying that she be ordered to render an accounting and that the plaintiff be granted the
right to manage the business. Rejecting his pretensions, this Court perspicuously
demonstrated the error of such stance, thus:
There can be no question as to the validity of that Nevada divorce in any
of the States of the United States. The decree is binding on private
respondent as an American citizen. For instance, private respondent
cannot sue petitioner, as her husband, in any State of the Union. ...
It is true that owing to the nationality principle embodied in Article 15 of
the Civil Code, only Philippine nationals are covered by the policy against
absolute divorces the same being considered contrary to our concept of
public policy and morality. However, aliens may obtain divorces abroad,
which may be recognized in the Philippines, provided they are valid
according to their national law. ...
Thus, pursuant to his national law, private respondent is no longer the
husband of petitioner. He would have no standing to sue in the case
below as petitioner's husband entitled to exercise control over conjugal
assets. ... 25
Under the same considerations and rationale, private respondent, being no longer the
husband of petitioner, had no legal standing to commence the adultery case under the
imposture that he was the offended spouse at the time he filed suit.
The allegation of private respondent that he could not have brought this case before the
decree of divorce for lack of knowledge, even if true, is of no legal significance or
consequence in this case. When said respondent initiated the divorce proceeding, he
obviously knew that there would no longer be a family nor marriage vows to protect once a
dissolution of the marriage is decreed. Neither would there be a danger of introducing
spurious heirs into the family, which is said to be one of the reasons for the particular
formulation of our law on adultery, 26 since there would thenceforth be no spousal

relationship to speak of. The severance of the marital bond had the effect of dissociating the
former spouses from each other, hence the actuations of one would not affect or cast
obloquy on the other.
The aforecited case of United States vs. Mata cannot be successfully relied upon by private
respondent. In applying Article 433 of the old Penal Code, substantially the same as Article
333 of the Revised Penal Code, which punished adultery "although the marriage be
afterwards declared void", the Court merely stated that "the lawmakers intended to declare
adulterous the infidelity of a married woman to her marital vows, even though it should be
made to appear that she is entitled to have her marriage contract declared null and void,
until and unless she actually secures a formal judicial declaration to that effect". Definitely, it
cannot be logically inferred therefrom that the complaint can still be filed after the
declaration of nullity because such declaration that the marriage is void ab initio is equivalent
to stating that it never existed. There being no marriage from the beginning, any complaint
for adultery filed after said declaration of nullity would no longer have a leg to stand on.
Moreover, what was consequently contemplated and within the purview of the decision in
said case is the situation where the criminal action for adultery was filed beforethe
termination of the marriage by a judicial declaration of its nullity ab initio. The same rule and
requisite would necessarily apply where the termination of the marriage was effected, as in
this case, by a valid foreign divorce.
Private respondent's invocation of Donio-Teves, et al. vs. Vamenta, hereinbefore
cited, 27 must suffer the same fate of inapplicability. A cursory reading of said case reveals
that the offended spouse therein had duly and seasonably filed a complaint for adultery,
although an issue was raised as to its sufficiency but which was resolved in favor of the
complainant. Said case did not involve a factual situation akin to the one at bar or any issue
determinative of the controversy herein.
WHEREFORE, the questioned order denying petitioner's motion to quash is SET ASIDE and
another one entered DISMISSING the complaint in Criminal Case No. 87-52435 for lack of
jurisdiction. The temporary restraining order issued in this case on October 21, 1987 is
hereby made permanent.
SO ORDERED.
Melencio-Herrera, Padilla and Sarmiento, JJ., concur.
Separate Opinions
60
PARAS, J., concurring:
It is my considered opinion that regardless of whether We consider the German absolute
divorce as valid also in the Philippines, the fact is that the husband in the instant case, by the
very act of his obtaining an absolute divorce in Germany can no longer be considered as the
offended party in case his former wife actually has carnal knowledge with another, because
in divorcing her, he already implicitly authorized the woman to have sexual relations with
others. A contrary ruling would be less than fair for a man, who is free to have sex will be
allowed to deprive the woman of the same privilege.
In the case of Recto v. Harden (100 Phil. 427 [1956]), the Supreme Court considered the
absolute divorce between the American husband and his American wife as valid and binding
in the Philippines on the theory that their status and capacity are governed by their National
law, namely, American law. There is no decision yet of the Supreme Court regarding the
validity of such a divorce if one of the parties, say an American, is married to a Filipino wife,
for then two (2) different nationalities would be involved.
In the book of Senate President Jovito Salonga entitled Private International Law and
precisely because of the National law doctrine, he considers the absolute divorce as valid
insofar as the American husband is concerned but void insofar as the Filipino wife is involved.
This results in what he calls a "socially grotesque situation," where a Filipino woman is still
married to a man who is no longer her husband. It is the opinion however, of the
undersigned that very likely the opposite expresses the correct view. While under
the national law of the husband the absolute divorce will be valid, still one of the exceptions
to the application of the proper foreign law (one of the exceptions to comity) is when the
foreign law will work an injustice or injury to the people or residents of the forum.
Consequently since to recognize the absolute divorce as valid on the part of the husband
would be injurious or prejudicial to the Filipino wife whose marriage would be still valid
under her national law, it would seem that under our law existing before the new Family
Code (which took effect on August 3, 1988) the divorce should be considered void both with
respect to the American husband and the Filipino wife.
The recent case of Van Dorn v. Romillo, Jr. (139 SCRA [1985]) cannot apply despite the fact
that the husband was an American can with a Filipino wife because in said case the validity of
the divorce insofar as the Filipino wife is concerned was NEVER put in issue.
Separate Opinions
PARAS, J., concurring:
It is my considered opinion that regardless of whether We consider the German absolute
divorce as valid also in the Philippines, the fact is that the husband in the instant case, by the
 61

very act of his obtaining an absolute divorce in Germany can no longer be considered as the 6 Ibid., 8; Annexes B, B-1 and B-2, id.
offended party in case his former wife actually has carnal knowledge with another, because
in divorcing her, he already implicitly authorized the woman to have sexual relations with 7 Ibid., 8-9, 178.
others. A contrary ruling would be less than fair for a man, who is free to have sex will be
allowed to deprive the woman of the same privilege.
8 Ibid., 9, 178; Annex C, id.

In the case of Recto v. Harden (100 Phil. 427 [1956]), the Supreme Court considered the
9 Ibid., 9-10, 178; Annex D, id.
absolute divorce between the American husband and his American wife as valid and binding
in the Philippines on the theory that their status and capacity are governed by their National
law, namely, American law. There is no decision yet of the Supreme Court regarding the 10 Ibid., 9; Annexes E and E-1, id.
validity of such a divorce if one of the parties, say an American, is married to a Filipino wife,
for then two (2) different nationalities would be involved. 11 Ibid., 10; Annex F, id.

In the book of Senate President Jovito Salonga entitled Private International Law and 12 Ibid., 9, 179; Annex G, id.
precisely because of the National law doctrine, he considers the absolute divorce as valid
insofar as the American husband is concerned but void insofar as the Filipino wife is involved. 13 Ibid., 10 Annex H, id.
This results in what he calls a "socially grotesque situation," where a Filipino woman is still
married to a man who is no longer her husband. It is the opinion however, of the
undersigned that very likely the opposite expresses the correct view. While under 14 Ibid, 105.
the national law of the husband the absolute divorce will be valid, still one of the exceptions
to the application of the proper foreign law (one of the exceptions to comity) is when the 15 Ibid., 11.
foreign law will work an injustice or injury to the people or residents of the forum.
Consequently since to recognize the absolute divorce as valid on the part of the husband 16 Ibid., 311-313.
would be injurious or prejudicial to the Filipino wife whose marriage would be still valid
under her national law, it would seem that under our law existing before the new Family
17 Cf. Sec. 5, Rule 110, Rules of Court.
Code (which took effect on August 3, 1988) the divorce should be considered void both with
respect to the American husband and the Filipino wife.
18 People vs. Mandia, 60 Phil. 372, 375 (1934); People vs. Zurbano, 37
SCRA 565, 569 (1971); People vs. Lingayen, G.R. No. 64556, June 10,
The recent case of Van Dorn v. Romillo, Jr. (139 SCRA [1985]) cannot apply despite the fact
1988.
that the husband was an American can with a Filipino wife because in said case the validity of
the divorce insofar as the Filipino wife is concerned was NEVER put in issue.
19 Valdepeñas vs. People, 16 SCRA 871 (1966); People vs. Babasa, 97
SCRA 672 (1980).
Footnotes

20 Samilin vs. Court of First Instance of Pangasinan, 57 Phil. 298 (1932);

1 Rollo, 5, 29.
Donio-Teves, et al. vs. Vamenta, et al., 133 SCRA 616 (1984).

2 Ibid., 6, 29.
21 Rollo, 289.

3 Ibid., 7.
22 2 Am. Jur. 2d., 973 citing State vs. Loftus, 104 NW 906, 907; Re Smith,
2 Okla. 153, 37 p. 1099; State vs. Russell, 90 Iowa 569, 58 NW 915.
4 Ibid., 7, 29-30; Annexes A and A-1, Petition.
23 Recto vs. Harden, 100 Phil. 427 (1956).
5 Ibid., 7, 178.
 62

24 139 SCRA 139,140 (1985).
25 The said pronouncements foreshadowed and are adopted in the
Family Code of the Philippines (Executive Order No. 209, as amended by
Executive Order No. 227, effective on August 3, 1988), Article 26 whereof
provides that "(w)here marriage between a Filipino citizen and a
foreigner is validly celebrated and a divorce is thereafter validly obtained
abroad by the alien spouse capacitating him or her to remarry, the
Filipino spouse shall likewise have capacity to re under Philippine law.
26 U.S. vs. Mata, 18 Phil. 490 (1911).
27 Footnote 20, ante.
FIRST DIVISION
On February 22, 1937, Lorenzo and petitioner Paula Llorente (hereinafter referred to as
"Paula") were married before a parish priest, Roman Catholic Church, in Nabua, Camarines
Sur.4
Before the outbreak of the Pacific War, Lorenzo departed for the United States and Paula
stayed in the conjugal home in barrio Antipolo, Nabua, Camarines Sur.5
On November 30, 1943, Lorenzo was admitted to United States citizenship and Certificate of
Naturalization No. 5579816 was issued in his favor by the United States District Court,
Southern District of New York.6
Upon the liberation of the Philippines by the American Forces in 1945, Lorenzo was granted
an accrued leave by the U. S. Navy, to visit his wife and he visited the Philippines.7 He
discovered that his wife Paula was pregnant and was "living in" and having an adulterous
relationship with his brother, Ceferino Llorente.8

G.R. No. 124371 November 23, 2000 On December 4, 1945, Paula gave birth to a boy registered in the Office of the Registrar of
Nabua as "Crisologo Llorente," with the certificate stating that the child was not legitimate
and the line for the father’s name was left blank.9
PAULA T. LLORENTE, petitioner,
vs.
COURT OF APPEALS and ALICIA F. LLORENTE, respondents. Lorenzo refused to forgive Paula and live with her. In fact, on February 2, 1946, the couple
drew a written agreement to the effect that (1) all the family allowances allotted by the
United States Navy as part of Lorenzo’s salary and all other obligations for Paula’s daily
DECISION
maintenance and support would be suspended; (2) they would dissolve their marital union in
accordance with judicial proceedings; (3) they would make a separate agreement regarding
PARDO, J.: their conjugal property acquired during their marital life; and (4) Lorenzo would not
prosecute Paula for her adulterous act since she voluntarily admitted her fault and agreed to
The Case separate from Lorenzo peacefully. The agreement was signed by both Lorenzo and Paula and
was witnessed by Paula’s father and stepmother. The agreement was notarized by Notary
The case raises a conflict of laws issue. Public Pedro Osabel.10

What is before us is an appeal from the decision of the Court of Appeals1 modifying that of
the Regional Trial Court, Camarines Sur, Branch 35, Iriga City2 declaring respondent Alicia F.
Llorente (herinafter referred to as "Alicia"), as co-owners of whatever property she and the
deceased Lorenzo N. Llorente (hereinafter referred to as "Lorenzo") may have acquired
during the twenty-five (25) years that they lived together as husband and wife.
Lorenzo returned to the United States and on November 16, 1951 filed for divorce with the
Superior Court of the State of California in and for the County of San Diego. Paula was
represented by counsel, John Riley, and actively participated in the proceedings. On
November 27, 1951, the Superior Court of the State of California, for the County of San Diego
found all factual allegations to be true and issued an interlocutory judgment of divorce.11

The Facts On December 4, 1952, the divorce decree became final.12

The deceased Lorenzo N. Llorente was an enlisted serviceman of the United States Navy from
March 10, 1927 to September 30, 1957.3
In the meantime, Lorenzo returned to the Philippines.
On January 16, 1958, Lorenzo married Alicia F. Llorente in Manila.13 Apparently, Alicia had no
knowledge of the first marriage even if they resided in the same town as Paula, who did not
oppose the marriage or cohabitation.14

From 1958 to 1985, Lorenzo and Alicia lived together as husband and wife.15 Their twenty-
five (25) year union produced three children, Raul, Luz and Beverly, all surnamed Llorente. 16
On March 13, 1981, Lorenzo executed a Last Will and Testament. The will was notarized by
Notary Public Salvador M. Occiano, duly signed by Lorenzo with attesting witnesses Francisco
Hugo, Francisco Neibres and Tito Trajano. In the will, Lorenzo bequeathed all his property to
Alicia and their three children, to wit:
"(1) I give and bequeath to my wife ALICIA R. FORTUNO exclusively my residential house and
lot, located at San Francisco, Nabua, Camarines Sur, Philippines, including ALL the personal
properties and other movables or belongings that may be found or existing therein;
"(2) I give and bequeath exclusively to my wife Alicia R. Fortuno and to my children, Raul F.
Llorente, Luz F. Llorente and Beverly F. Llorente, in equal shares, all my real properties
whatsoever and wheresoever located, specifically my real properties located at Barangay
Aro-Aldao, Nabua, Camarines Sur; Barangay Paloyon, Nabua, Camarines Sur; Barangay Baras,
Sitio Puga, Nabua, Camarines Sur; and Barangay Paloyon, Sitio Nalilidong, Nabua, Camarines
Sur;
"(3) I likewise give and bequeath exclusively unto my wife Alicia R. Fortuno and unto my
children, Raul F. Llorente, Luz F. Llorente and Beverly F. Llorente, in equal shares, my real
properties located in Quezon City Philippines, and covered by Transfer Certificate of Title No.
188652; and my lands in Antipolo, Rizal, Philippines, covered by Transfer Certificate of Title
Nos. 124196 and 165188, both of the Registry of Deeds of the province of Rizal, Philippines;
"(4) That their respective shares in the above-mentioned properties, whether real or
personal properties, shall not be disposed of, ceded, sold and conveyed to any other persons,
but could only be sold, ceded, conveyed and disposed of by and among themselves;
"(5) I designate my wife ALICIA R. FORTUNO to be the sole executor of this my Last Will and
Testament, and in her default or incapacity of the latter to act, any of my children in the
order of age, if of age;
"(6) I hereby direct that the executor named herein or her lawful substitute should served
(sic) without bond;
"(7) I hereby revoke any and all my other wills, codicils, or testamentary dispositions
heretofore executed, signed, or published, by me;
"(8) It is my final wish and desire that if I die, no relatives of mine in any degree in the
Llorente’s Side should ever bother and disturb in any manner whatsoever my wife Alicia R.
Fortunato and my children with respect to any real or personal properties I gave and
bequeathed respectively to each one of them by virtue of this Last Will and Testament."17
63
On December 14, 1983, Lorenzo filed with the Regional Trial Court, Iriga, Camarines Sur, a
petition for the probate and allowance of his last will and testament wherein Lorenzo moved
that Alicia be appointed Special Administratrix of his estate.18
On January 18, 1984, the trial court denied the motion for the reason that the testator
Lorenzo was still alive.19
On January 24, 1984, finding that the will was duly executed, the trial court admitted the will
to probate.20
On June 11, 1985, before the proceedings could be terminated, Lorenzo died.21
On September 4, 1985, Paula filed with the same court a petition22 for letters of
administration over Lorenzo’s estate in her favor. Paula contended (1) that she was Lorenzo’s
surviving spouse, (2) that the various property were acquired during their marriage, (3) that
Lorenzo’s will disposed of all his property in favor of Alicia and her children, encroaching on
her legitime and 1/2 share in the conjugal property.23
On December 13, 1985, Alicia filed in the testate proceeding (Sp. Proc. No. IR-755), a petition
for the issuance of letters testamentary.24
On October 14, 1985, without terminating the testate proceedings, the trial court gave due
course to Paula’s petition in Sp. Proc. No. IR-888.25
On November 6, 13 and 20, 1985, the order was published in the newspaper "Bicol Star".26
On May 18, 1987, the Regional Trial Court issued a joint decision, thus:
"Wherefore, considering that this court has so found that the divorce decree granted to the
late Lorenzo Llorente is void and inapplicable in the Philippines, therefore the marriage he
contracted with Alicia Fortunato on January 16, 1958 at Manila is likewise void. This being so
the petition of Alicia F. Llorente for the issuance of letters testamentary is denied. Likewise,
she is not entitled to receive any share from the estate even if the will especially said so her
relationship with Lorenzo having gained the status of paramour which is under Art. 739 (1).
"On the other hand, the court finds the petition of Paula Titular Llorente, meritorious, and so
declares the intrinsic disposition of the will of Lorenzo Llorente dated March 13, 1981 as void
and declares her entitled as conjugal partner and entitled to one-half of their conjugal
properties, and as primary compulsory heir, Paula T. Llorente is also entitled to one-third of
the estate and then one-third should go to the illegitimate children, Raul, Luz and Beverly, all
surname (sic) Llorente, for them to partition in equal shares and also entitled to the
remaining free portion in equal shares.

"Petitioner, Paula Llorente is appointed legal administrator of the estate of the deceased,
Lorenzo Llorente. As such let the corresponding letters of administration issue in her favor
upon her filing a bond in the amount (sic) of P100,000.00 conditioned for her to make a
return to the court within three (3) months a true and complete inventory of all goods,
chattels, rights, and credits, and estate which shall at any time come to her possession or to
the possession of any other person for her, and from the proceeds to pay and discharge all
debts, legacies and charges on the same, or such dividends thereon as shall be decreed or
required by this court; to render a true and just account of her administration to the court
within one (1) year, and at any other time when required by the court and to perform all
orders of this court by her to be performed.
"On the other matters prayed for in respective petitions for want of evidence could not be
granted.
"SO ORDERED."27
In time, Alicia filed with the trial court a motion for reconsideration of the aforequoted
decision.28
On September 14, 1987, the trial court denied Alicia’s motion for reconsideration but
modified its earlier decision, stating that Raul and Luz Llorente are not children "legitimate or
otherwise" of Lorenzo since they were not legally adopted by him.29 Amending its decision of
May 18, 1987, the trial court declared Beverly Llorente as the only illegitimate child of
Lorenzo, entitling her to one-third (1/3) of the estate and one-third (1/3) of the free portion
of the estate.30
On September 28, 1987, respondent appealed to the Court of Appeals.31
On July 31, 1995, the Court of Appeals promulgated its decision, affirming with modification
the decision of the trial court in this wise:
"WHEREFORE, the decision appealed from is hereby AFFIRMED with the MODIFICATION that
Alicia is declared as co-owner of whatever properties she and the deceased may have
acquired during the twenty-five (25) years of cohabitation.
"SO ORDERED."32
On August 25, 1995, petitioner filed with the Court of Appeals a motion for reconsideration
of the decision.33
On March 21, 1996, the Court of Appeals,34 denied the motion for lack of merit.
Hence, this petition.35
64
The Issue
Stripping the petition of its legalese and sorting through the various arguments raised,36 the
issue is simple. Who are entitled to inherit from the late Lorenzo N. Llorente?
We do not agree with the decision of the Court of Appeals. We remand the case to the trial
court for ruling on the intrinsic validity of the will of the deceased.
The Applicable Law
The fact that the late Lorenzo N. Llorente became an American citizen long before and at the
time of: (1) his divorce from Paula; (2) marriage to Alicia; (3) execution of his will; and (4)
death, is duly established, admitted and undisputed.
Thus, as a rule, issues arising from these incidents are necessarily governed by foreign law.
The Civil Code clearly provides:
"Art. 15. Laws relating to family rights and duties, or to the status, condition and legal
capacity of persons are binding upon citizens of the Philippines, even though living abroad.
"Art. 16. Real property as well as personal property is subject to the law of the country where
it is situated.
"However, intestate and testamentary succession, both with respect to the order of
succession and to the amount of successional rights and to the intrinsic validity of
testamentary provisions, shall be regulated by the national law of the person whose
succession is under consideration, whatever may be the nature of the property and
regardless of the country wherein said property may be found." (emphasis ours)
True, foreign laws do not prove themselves in our jurisdiction and our courts are not
authorized to take judicial notice of them. Like any other fact, they must be alleged and
proved.37
While the substance of the foreign law was pleaded, the Court of Appeals did not admit the
foreign law. The Court of Appeals and the trial court called to the fore the renvoi doctrine,
where the case was "referred back" to the law of the decedent’s domicile, in this case,
Philippine law.
We note that while the trial court stated that the law of New York was not sufficiently
proven, in the same breath it made the categorical, albeit equally unproven statement that
"American law follows the ‘domiciliary theory’ hence, Philippine law applies when
determining the validity of Lorenzo’s will.38

First, there is no such thing as one American law.1ªwph!1 The "national law" indicated in
Article 16 of the Civil Code cannot possibly apply to general American law. There is no such
law governing the validity of testamentary provisions in the United States. Each State of the
union has its own law applicable to its citizens and in force only within the State. It can
therefore refer to no other than the law of the State of which the decedent was a
resident.39 Second, there is no showing that the application of the renvoi doctrine is called for
or required by New York State law.
The trial court held that the will was intrinsically invalid since it contained dispositions in
favor of Alice, who in the trial court’s opinion was a mere paramour. The trial court threw the
will out, leaving Alice, and her two children, Raul and Luz, with nothing.
The Court of Appeals also disregarded the will. It declared Alice entitled to one half (1/2) of
whatever property she and Lorenzo acquired during their cohabitation, applying Article 144
of the Civil Code of the Philippines.
The hasty application of Philippine law and the complete disregard of the will, already
probated as duly executed in accordance with the formalities of Philippine law, is
fatal, especially in light of the factual and legal circumstances here obtaining.
Validity of the Foreign Divorce
In Van Dorn v. Romillo, Jr.40 we held that owing to the nationality principle embodied in
Article 15 of the Civil Code, only Philippine nationals are covered by the policy against
absolute divorces, the same being considered contrary to our concept of public policy and
morality. In the same case, the Court ruled that aliens may obtain divorces abroad, provided
they are valid according to their national law.
Citing this landmark case, the Court held in Quita v. Court of Appeals,41 that once proven that
respondent was no longer a Filipino citizen when he obtained the divorce from petitioner,
the ruling in Van Dorn would become applicable and petitioner could "very well lose her right
to inherit" from him.
In Pilapil v. Ibay-Somera,42 we recognized the divorce obtained by the respondent in his
country, the Federal Republic of Germany. There, we stated that divorce and its legal effects
may be recognized in the Philippines insofar as respondent is concerned in view of the
nationality principle in our civil law on the status of persons.
For failing to apply these doctrines, the decision of the Court of Appeals must be
reversed.43 We hold that the divorce obtained by Lorenzo H. Llorente from his first wife Paula
was valid and recognized in this jurisdiction as a matter of comity. Now, the effects of this
divorce (as to the succession to the estate of the decedent) are matters best left to the
determination of the trial court.
65
Validity of the Will
The Civil Code provides:
"Art. 17. The forms and solemnities of contracts, wills, and other public instruments shall be
governed by the laws of the country in which they are executed.
"When the acts referred to are executed before the diplomatic or consular officials of the
Republic of the Philippines in a foreign country, the solemnities established by Philippine
laws shall be observed in their execution." (underscoring ours)
The clear intent of Lorenzo to bequeath his property to his second wife and children by her is
glaringly shown in the will he executed. We do not wish to frustrate his wishes, since he was
a foreigner, not covered by our laws on "family rights and duties, status, condition and legal
capacity."44
Whether the will is intrinsically valid and who shall inherit from Lorenzo are issues best
proved by foreign law which must be pleaded and proved. Whether the will was executed in
accordance with the formalities required is answered by referring to Philippine law. In fact,
the will was duly probated.
As a guide however, the trial court should note that whatever public policy or good customs
may be involved in our system of legitimes, Congress did not intend to extend the same to
the succession of foreign nationals. Congress specifically left the amount of successional
rights to the decedent's national law.45
Having thus ruled, we find it unnecessary to pass upon the other issues raised.
The Fallo
WHEREFORE, the petition is GRANTED. The decision of the Court of Appeals in CA-G. R. SP
No. 17446 promulgated on July 31, 1995 is SET ASIDE.
In lieu thereof, the Court REVERSES the decision of the Regional Trial Court and RECOGNIZES
as VALID the decree of divorce granted in favor of the deceased Lorenzo N. Llorente by the
Superior Court of the State of California in and for the County of San Diego, made final on
December 4, 1952.
Further, the Court REMANDS the cases to the court of origin for determination of the
intrinsic validity of Lorenzo N. Llorente’s will and determination of the parties’ successional
rights allowing proof of foreign law with instructions that the trial court shall proceed with all
deliberate dispatch to settle the estate of the deceased within the framework of the Rules of
Court.
 66

No costs. 14 Decision, Court of Appeals, Rollo, p. 52.

SO ORDERED. 15 Comment, Rollo, p. 147.

Davide, Jr., C.J., (Chairman), Puno, Kapunan, and Ynares-Santiago, JJ., concur. 16 Decision, Court of Appeals, Rollo, p. 52.

17 Exh. "A", Trial Court Folder of Exhibits, pp. 3-4; Decision, Court of Appeals, Rollo,
p. 52.
Footnotes
18 Docketed as Spec. Proc. No. IR-755.
1 In
CA-G. R. SP. No. 17446, promulgated on July 31, 1995, Lipana-
Reyes+, J., ponente, Torres, Jr. and Hofilena, JJ., concurring. 19 Decision, RTC, Rollo, p. 37.

2 InSpec. Proc. No. IR-755 (In the Matter of the Probate and Allowance of the Last 20 Ibid.
Will and Testament of Lorenzo N. Llorente, Lorenzo N. Llorente, Petitioner) and
Spec. Proc. No. IR-888 (Petition for the Grant of Letters of Administration for the 21 Ibid.
Estate of Lorenzo N. Llorente, Paula T. Llorente, Petitioner), dated May 18, 1987,
Judge Esteban B. Abonal, presiding.
22 Docketed as Spec. Proc. No. IR-888.
3 Decision, Court of Appeals, Rollo, p. 51.
23 Decision, RTC, Rollo, p. 38.
4 Exh. "B", Trial Court Folder of Exhibits, p. 61.
24 Decision, Court of Appeals, Rollo, p. 52.
5 Ibid.
25 Ibid., pp. 52-53.
6 This
was issued pursuant to Lorenzo’s petition, Petition No. 4708849, filed with
26 Ibid., p. 53.
the U.S. Court. Exhs. "H" and "H-3" Trial Court Folder of Exhibits, p. 157, 159.

7 Decision, 27 RTC Decision, Rollo, p. 37.

Court of Appeals, Rollo, p. 51; Exh. "B", Trial Court Folder of Exhibits, p.
61.
28 Order, Regional Trial Court in Spec. Proc. Nos. IR-755 and 888, Rollo, p. 46.
8 Ibid.

29 Citing Article 335 of the Civil Code, which states, "The following cannot adopt: xxx
9 Exh. "A", Trial Court Folder of Exhibits, p. 60.
(3) a married person, without the consent of the other spouse; xxx", the
10 Exh. "B-1" Trial Court Folder of Exhibits, p. 62. trial court reasoned that since the divorce obtained by Lorenzo did not
dissolve his first marriage with Paula, then the adoption of Raul and Luz
11 Exh. was void, as Paula did not give her consent to it.
"D", Trial Court Folder of Exhibits, pp. 63-64.
30 Order, Regional Trial Court, Rollo, p. 47.
12 Exh. "E", Trial Court Folder of Exhibits, p. 69.
31 Docketed as CA-G. R. SP No. 17446.
13 Exh. "F", Trial Court Folder of Exhibits, p. 148.

32 Decision, Court of Appeals, Rollo, p. 56.
33 On August 31, 1995, petitioner also filed with this Court a verified complaint
against the members of the Special Thirteenth Division, Court of Appeals, Associate
Justices Justo P. Torres, Jr., Celia Lipana-Reyes + and Hector Hofilena for "gross
ignorance of the law, manifest incompetence and extreme bias (Rollo, p. 15)."
34 Againwith Associate Justice Celia Lipana-Reyes+, ponente, concurred in by
Associate Justices Justo P. Torres, Jr. and Hector Hofilena (Former Special
Thirteenth Division).
35 Filed on May 10, 1996, Rollo, pp. 9-36.
36 Petitioneralleges (1) That the Court of Appeals lost its jurisdiction over the case
when it issued the resolution denying the motion for reconsideration; (2) That Art.
144 of the Civil Case has been repealed by Arts. 253 and 147 of the Family Code
and (3) That Alicia and her children not are entitled to any share in the estate of the
deceased (Rollo, p. 19).
37 Collector of Internal Revenue v. Fisher, 110 Phil. 686 (1961).
38 Joint Record on Appeal, p. 255; Rollo, p. 40.
39 In Re: Estate of Edward Christensen, Aznar v. Helen Garcia, 117 Phil. 96 (1963).
40 139
SCRA 139 (1985).
41 300 SCRA 406 (1998).
42 174 SCRA 653 (1989).
43 The ruling in the case of Tenchavez v. Escano (122 Phil. 752 [1965]) that provides
that "a foreign divorce between Filipino citizens sought and decreed after the
effectivity of the present civil code is not entitled to recognition as valid in this
jurisdiction" is NOT applicable in the case at bar as Lorenzo was no longer a Filipino
citizen when he obtained the divorce.
44 Article15, Civil Code provides "Laws relating to family rights and duties, or to the
status, condition and legal capacity of persons are binding upon citizens of the
Philippines, even though living abroad." (Underscoring ours)
45 Bellis v. Bellis, 126 Phil. 726 (1967).
67
SECOND DIVISION
G.R. No. 142820 June 20, 2003
WOLFGANG O. ROEHR, petitioner,
vs.
MARIA CARMEN D. RODRIGUEZ, HON. JUDGE JOSEFINA GUEVARA-SALONGA, Presiding
Judge of Makati RTC, Branch 149, respondents.
QUISUMBING, J.:
At the core of the present controversy are issues of (a) grave abuse of discretion allegedly
committed by public respondent and (b) lack of jurisdiction of the regional trial court, in
matters that spring from a divorce decree obtained abroad by petitioner.
In this special civil action for certiorari, petitioner assails (a) the order1 dated September 30,
1999 of public respondent Judge Josefina Guevara-Salonga, Presiding Judge of Makati
Regional Trial Court,2 Branch 149, in Civil Case No. 96-1389 for declaration of nullity of
marriage, and (b) the order3 dated March 31, 2000 denying his motion for reconsideration.
The assailed orders partially set aside the trial court’s order dismissing Civil Case No. 96-1389,
for the purpose of resolving issues relating to the property settlement of the spouses and the
custody of their children.
Petitioner Wolfgang O. Roehr, a German citizen and resident of Germany, married private
respondent Carmen Rodriguez, a Filipina, on December 11, 1980 in Hamburg, Germany. Their
marriage was subsequently ratified on February 14, 1981 in Tayasan, Negros Oriental.4 Out of
their union were born Carolynne and Alexandra Kristine on November 18, 1981 and October
25, 1987, respectively.
On August 28, 1996, private respondent filed a petition5 for declaration of nullity of marriage
before the Regional Trial Court (RTC) of Makati City. On February 6, 1997, petitioner filed a
motion to dismiss,6 but it was denied by the trial court in its order7 dated May 28, 1997.
On June 5, 1997, petitioner filed a motion for reconsideration, but was also denied in an
order8 dated August 13, 1997. On September 5, 1997, petitioner filed a petition for certiorari
with the Court of Appeals. On November 27, 1998, the appellate court denied the petition
and remanded the case to the RTC.
Meanwhile, petitioner obtained a decree of divorce from the Court of First Instance of
Hamburg-Blankenese, promulgated on December 16, 1997.
The decree provides in part:

[T]he Court of First Instance, Hamburg-Blankenese, Branch 513, has ruled through
Judge van Buiren of the Court of First Instance on the basis of the oral proceedings
held on 4 Nov. 1997:
The marriage of the Parties contracted on 11 December 1980 before the Civil
Registrar of Hamburg-Altona is hereby dissolved.
The parental custody for the children
Carolynne Roehr, born 18 November 1981
Alexandra Kristine Roehr, born on 25 October 1987
is granted to the father.
The litigation expenses shall be assumed by the Parties.9
In view of said decree, petitioner filed a Second Motion to Dismiss on May 20, 1999 on the
ground that the trial court had no jurisdiction over the subject matter of the action or suit as
a decree of divorce had already been promulgated dissolving the marriage of petitioner and
private respondent.
On July 14, 1999, Judge Guevara-Salonga issued an order granting petitioner’s motion to
dismiss. Private respondent filed a Motion for Partial Reconsideration, with a prayer that the
case proceed for the purpose of determining the issues of custody of children and the
distribution of the properties between petitioner and private respondent.
On August 18, 1999, an Opposition to the Motion for Partial Reconsideration was filed by the
petitioner on the ground that there is nothing to be done anymore in the instant case as the
marital tie between petitioner Wolfgang Roehr and respondent Ma. Carmen D. Rodriguez
had already been severed by the decree of divorce promulgated by the Court of First
Instance of Hamburg, Germany on December 16, 1997 and in view of the fact that said
decree of divorce had already been recognized by the RTC in its order of July 14, 1999,
through the implementation of the mandate of Article 26 of the Family Code,10 endowing the
petitioner with the capacity to remarry under the Philippine law.
On September 30, 1999, respondent judge issued the assailed order partially setting aside
her order dated July 14, 1999 for the purpose of tackling the issues of property relations of
the spouses as well as support and custody of their children. The pertinent portion of said
order provides:
Acting on the Motion for Partial Reconsideration of the Order dated July 14, 1999
filed by petitioner thru counsel which was opposed by respondent and considering
68
that the second paragraph of Article 26 of the Family Code was included as an
amendment thru Executive Order 227, to avoid the absurd situation of a Filipino as
being still married to his or her alien spouse though the latter is no longer married
to the Filipino spouse because he/she had obtained a divorce abroad which is
recognized by his/her national law, and considering further the effects of the
termination of the marriage under Article 43 in relation to Article 50 and 52 of the
same Code, which include the dissolution of the property relations of the spouses,
and the support and custody of their children, the Order dismissing this case is
partially set aside with respect to these matterswhich may be ventilated in this
Court.
SO ORDERED.11 (Emphasis supplied.)
Petitioner filed a timely motion for reconsideration on October 19, 1999, which was denied
by respondent judge in an order dated March 31, 2000.12
Petitioner ascribes lack of jurisdiction of the trial court and grave abuse of discretion on the
part of respondent judge. He cites as grounds for his petition the following:
1. Partially setting aside the order dated July 14, 1999 dismissing the instant case is
not allowed by 1997 Rules of Civil Procedure.13
2. Respondent Maria Carmen Rodriguez by her motion for Partial Reconsideration
had recognized and admitted the Divorce Decision obtained by her ex-husband in
Hamburg, Germany.14
3. There is nothing left to be tackled by the Honorable Court as there are no
conjugal assets alleged in the Petition for Annulment of Marriage and in the
Divorce petition, and the custody of the children had already been awarded to
Petitioner Wolfgang Roehr.15
Pertinent in this case before us are the following issues:
1. Whether or not respondent judge gravely abused her discretion in issuing her
order dated September 30, 1999, which partially modified her order dated July 14,
1999; and
2. Whether or not respondent judge gravely abused her discretion when she
assumed and retained jurisdiction over the present case despite the fact that
petitioner has already obtained a divorce decree from a German court.

On the first issue, petitioner asserts that the assailed order of respondent judge is completely
inconsistent with her previous order and is contrary to Section 3, Rule 16, Rules of Civil
Procedure, which provides:
Sec. 3. Resolution of motion - After the hearing, the court may dismiss the action or
claim, deny the motion, or order the amendment of the pleading.
The court shall not defer the resolution of the motion for the reason that the
ground relied upon is not indubitable.
In every case, the resolution shall state clearly and distinctly the reasons therefor.
(Emphasis supplied.)
Petitioner avers that a court’s action on a motion is limited to dismissing the action or claim,
denying the motion, or ordering the amendment of the pleading.
Private respondent, on her part, argues that the RTC can validly reconsider its order dated
July 14, 1999 because it had not yet attained finality, given the timely filing of respondent’s
motion for reconsideration.
Pertinent to this issue is Section 3 in relation to Section 7, Rule 37 of the 1997 Rules of Civil
Procedure, which provides:
Sec. 3. Action upon motion for new trial or reconsideration.—The trial court may set
aside the judgment or final order and grant a new trial, upon such terms as may be
just, or may deny the motion. If the court finds that excessive damages have been
awarded or that the judgment or final order is contrary to the evidence or law, it
may amend such judgment or final order accordingly.
Sec. 7. Partial new trial or reconsideration.—If the grounds for a motion under this
Rule appear to the court to affect the issues as to only a part, or less than all of the
matters in controversy, or only one, or less than all, of the parties to it, the court
may order a new trial or grant reconsideration as to such issues if severable without
interfering with the judgment or final order upon the rest. (Emphasis supplied.)
It is clear from the foregoing rules that a judge can order a partial reconsideration of a case
that has not yet attained finality. Considering that private respondent filed a motion for
reconsideration within the reglementary period, the trial court's decision of July 14, 1999 can
still be modified. Moreover, in Sañado v. Court of Appeals,16 we held that the court could
modify or alter a judgment even after the same has become executory whenever
circumstances transpire rendering its decision unjust and inequitable, as where certain facts
and circumstances justifying or requiring such modification or alteration transpired after the
judgment has become final and executory17 and when it becomes imperative in the higher
69
interest of justice or when supervening events warrant it.18 In our view, there are even more
compelling reasons to do so when, as in this case, judgment has not yet attained finality.
Anent the second issue, petitioner claims that respondent judge committed grave abuse of
discretion when she partially set aside her order dated July 14, 1999, despite the fact that
petitioner has already obtained a divorce decree from the Court of First Instance of
Hamburg, Germany.
In Garcia v. Recio,19 Van Dorn v. Romillo, Jr.,20 and Llorente v. Court of Appeals,21 we
consistently held that a divorce obtained abroad by an alien may be recognized in our
jurisdiction, provided such decree is valid according to the national law of the foreigner.
Relevant to the present case is Pilapil v. Ibay-Somera,22 where this Court specifically
recognized the validity of a divorce obtained by a German citizen in his country, the Federal
Republic of Germany. We held in Pilapil that a foreign divorce and its legal effects may be
recognized in the Philippines insofar as respondent is concerned in view of the nationality
principle in our civil law on the status of persons.
In this case, the divorce decree issued by the German court dated December 16, 1997 has
not been challenged by either of the parties. In fact, save for the issue of parental custody,
even the trial court recognized said decree to be valid and binding, thereby endowing private
respondent the capacity to remarry. Thus, the present controversy mainly relates to the
award of the custody of their two children, Carolynne and Alexandra Kristine, to petitioner.
As a general rule, divorce decrees obtained by foreigners in other countries are recognizable
in our jurisdiction, but the legal effects thereof, e.g. on custody, care and support of the
children, must still be determined by our courts.23Before our courts can give the effect of res
judicata to a foreign judgment, such as the award of custody to petitioner by the German
court, it must be shown that the parties opposed to the judgment had been given ample
opportunity to do so on grounds allowed under Rule 39, Section 50 of the Rules of Court
(now Rule 39, Section 48, 1997 Rules of Civil Procedure), to wit:
SEC. 50. Effect of foreign judgments. - The effect of a judgment of a tribunal of a
foreign country, having jurisdiction to pronounce the judgment is as follows:
(a) In case of a judgment upon a specific thing, the judgment is conclusive upon the
title to the thing;
(b) In case of a judgment against a person, the judgment is presumptive evidence
of a right as between the parties and their successors in interest by a subsequent
title; but the judgment may be repelled by evidence of a want of jurisdiction, want
of notice to the party, collusion, fraud, or clear mistake of law or fact.
It is essential that there should be an opportunity to challenge the foreign judgment, in order
for the court in this jurisdiction to properly determine its efficacy. In this jurisdiction, our
 70

Rules of Court clearly provide that with respect to actions in personam, as distinguished from SO ORDERED.
actions in rem, a foreign judgment merely constitutes prima facieevidence of the justness of
the claim of a party and, as such, is subject to proof to the contrary.24 Bellosillo, (Chairman), and Callejo, Sr., JJ., concur.
Austria-Martinez, J., on official leave.
In the present case, it cannot be said that private respondent was given the opportunity to
challenge the judgment of the German court so that there is basis for declaring that
judgment as res judicata with regard to the rights of petitioner to have parental custody of
their two children. The proceedings in the German court were summary. As to what was the Footnotes
extent of private respondent’s participation in the proceedings in the German court, the
records remain unclear. The divorce decree itself states that neither has she commented on 1 Rollo, p. 15.
the proceedings25 nor has she given her opinion to the Social Services Office.26 Unlike
petitioner who was represented by two lawyers, private respondent had no counsel to assist
2 Judge Josefina Guevara-Salonga signed as Executive Judge.
her in said proceedings.27 More importantly, the divorce judgment was issued to petitioner
by virtue of the German Civil Code provision to the effect that when a couple lived separately
for three years, the marriage is deemed irrefutably dissolved. The decree did not touch on 3 Rollo, p. 16.
the issue as to who the offending spouse was. Absent any finding that private respondent is
unfit to obtain custody of the children, the trial court was correct in setting the issue for 4 Records, pp. 5-6.
hearing to determine the issue of parental custody, care, support and education mindful of
the best interests of the children. This is in consonance with the provision in the Child and
5 Id. at 1-4.
Youth Welfare Code that the child’s welfare is always the paramount consideration in all
questions concerning his care and custody. 28
6 Id. at 19-28.
On the matter of property relations, petitioner asserts that public respondent exceeded the
7 Id. at 147.
bounds of her jurisdiction when she claimed cognizance of the issue concerning property
relations between petitioner and private respondent. Private respondent herself has
admitted in Par. 14 of her petition for declaration of nullity of marriage dated August 26, 8 Id. at 165.
1996 filed with the RTC of Makati, subject of this case, that: "[p]etitioner and respondent
have not acquired any conjugal or community property nor have they incurred any debts 9 Rollo, p. 33.
during their marriage."29 Herein petitioner did not contest this averment. Basic is the rule
that a court shall grant relief warranted by the allegations and the proof.30Given the factual
10Art. 26. All marriages solemnized outside the Philippines, in accordance with the
admission by the parties in their pleadings that there is no property to be accounted for,
respondent judge has no basis to assert jurisdiction in this case to resolve a matter no longer laws in force in the country where they were solemnized, and valid there as such,
deemed in controversy. shall also be valid in this country, except those prohibited under Articles 35 (1), (4),
(5) and (6), 36, 37 and 38.
In sum, we find that respondent judge may proceed to determine the issue regarding the
custody of the two children born of the union between petitioner and private respondent. Where a marriage between a Filipino citizen and a foreigner is validly
Private respondent erred, however, in claiming cognizance to settle the matter of property celebrated and a divorce is thereafter validly obtained abroad by the
relations of the parties, which is not at issue. alien spouse capacitating him or her to remarry, the Filipino spouse shall
likewise have capacity to remarry under Philippine law. (As amended by
E. O. No. 227, dated July 17, 1987.)
WHEREFORE, the orders of the Regional Trial Court of Makati, Branch 149, issued on
September 30, 1999 and March 31, 2000 are AFFIRMED with MODIFICATION. We hereby
11 Supra, note 1.
declare that the trial court has jurisdiction over the issue between the parties as to who has
parental custody, including the care, support and education of the children, namely
Carolynne and Alexandra Kristine Roehr. Let the records of this case be remanded promptly 12 Supra, note 3.
to the trial court for continuation of appropriate proceedings. No pronouncement as to costs.
 71

13 Rollo, p. 6. 30 JG Summit Holdings, Inc. v. Court of Appeals, G.R. No. 124293, 20 November
2000, 345 SCRA 143, 154.
14 Id. at 8. LEX ISTUS, RULE OF EXTRATERRITORIALITY, RENVOI

15 Ibid.

16 G.R. No. 108338, 17 April 2001, 356 SCRA 546, 561.

17 David v. Court of Appeals, G.R. No. 115821, 13 October 1999, 316 SCRA 710, 719.

18 People v. Gallo, G.R. No. 124736, 29 September 1999, 315 SCRA 461, 463.

19 G.R. No. 138322, 2 October 2001, 366 SCRA 437, 447.

20 No. L-68470, 8 October 1985, 139 SCRA 139, 143.

21 G.R. No. 124371, 23 November 2000, 345 SCRA 592, 601.

22 G.R. No. 80116, 30 June 1989, 174 SCRA 653, 663.

23 Llorente v. Court of Appeals, supra at 602.

24Philsec Investment Corporation v. Court of Appeals, G.R. No. 103493, 19 June

1997, 274 SCRA 102, 110.

25 Rollo, p. 57.

26 Ibid.

27 Id. at 55-56.

28Sagala-Eslao v. Court of Appeals, G.R. No. 116773, 16 January 1997, 266 SCRA
317, 321, citing Art. 8, P.D. No. 603, The Child and Youth Welfare Code-

Art. 8. Child’s Welfare Paramount. - In all questions regarding the care,

custody, education and property of the child, his welfare shall be the
paramount consideration.

29 Rollo, p. 19.