IV.

CONSTRUCTION AND INTERPRETETATION OF WORDS AND PHRASES

1. When the law does not distinguish, courts should not distinguish

FIRST DIVISION

G.R. No. 72005 May 29, 1987

PHILIPPINE BRITISH ASSURANCE CO., INC., petitioner,

vs.
HONORABLE INTERMEDIATE APPELLATE COURT; SYCWIN COATING & WIRES, INC., and
DOMINADOR CACPAL, CHIEF DEPUTY SHERRIF OF MANILA, respondents.

GANCAYCO, J.:

This is a Petition for Review on certiorari of the Resolution dated September 12, 1985 of the
Intermediate Appellate Court in AC-G.R. No. CR-05409 1 granting private respondent's motion for
execution pending appeal and ordering the issuance of the corresponding writ of execution on the
counterbond to lift attachment filed by petitioner. The focal issue that emerges is whether an order of
execution pending appeal of a judgment maybe enforced on the said bond. In the Resolution of
September 25, 1985 2 this Court as prayed for, without necessarily giving due course to the petition,
issued a temporary restraining order enjoining the respondents from enforcing the order complaint
of.

The records disclose that private respondent Sycwin Coating & Wires, Inc., filed a complaint for
collection of a sum of money against Varian Industrial Corporation before the Regional Trial Court
of Quezon City. During the pendency of the suit, private respondent succeeded in attaching some
of the properties of Varian Industrial Corporation upon the posting of a supersedeas bond. 3 The
latter in turn posted a counterbond in the sum of P1,400, 000.00 4 thru petitioner Philippine British
Assurance Co., Inc., so the attached properties were released.

On December 28, 1984, the trial court rendered a Decision, the dispositive portion of which reads:

WHEREFORE, plaintiff's Motion for Summary Judgment is hereby GRANTED, and

judgment is rendered in favor of the plaintiff and against the defendant Varian
Industrial Corporation, and the latter is hereby ordered:

1. To pay plaintiff the amount of P1,401,468.00, the principal obligation with

12% interest per annum from the date of default until fully paid;

2. To pay plaintiff 5% of the principal obligation as liquidated damages;

3. To pay plaintiff P30,000.00 as exemplary damages;

4. To pay plaintiff 15% of P1,401,468.00, the principal obligation, as and

for attorney's fees; and

5. To pay the costs of suit.

1
 Accordingly, the counterclaim of the defendant is hereby DISMISSED for lack of
merit.

SO ORDERED. 5

Varian Industrial Corporation appealed the decision to the respondent Court. Sycwin then filed a
petition for execution pending appeal against the properties of Varian in respondent Court. Varian
was required to file its comment but none was filed. In the Resolution of July 5, 1985, respondent
Court ordered the execution pending appeal as prayed for. 6 However, the writ of execution was
returned unsatisfied as Varian failed to deliver the previously attached personal properties upon
demand. In a Petition dated August 13, 1985 filed with respondent Court Sycwin prayed that the
surety (herein petitioner) be ordered to pay the value of its bond. 7 In compliance with the Resolution
of August 23, 1985 of the respondent Court herein petitioner filed its comment. 8 In the Resolution of
September 12, 1985, 9 the respondent Court granted the petition. Hence this action.

It is the submission of private respondent Sycwin that without a previous motion for reconsideration
of the questioned resolution, certiorari would not lie. While as a general rule a motion for
reconsideration has been considered a condition sine qua non for the granting of a writ of certiorari,
this rule does not apply when special circumstances warrant immediate or more direct action. 10 It has
been held further that a motion for reconsideration may be dispensed with in cases like this where execution had been ordered and the need
for relief was extremely urgent. 11

The counterbond provides:

WHEREAS, in the above-entitled case pending in the Regional Trial Court, National
Capital Judicial Region, Branch LXXXV, Quezon City, an order of Attachment was
issued against abovenamed Defendant;

WHEREAS, the Defendant, for the purpose of lifting and/or dissolving the order of
attachment issued against them in the above-en-titled case, have offered to file a
counterbond in the sum of PESOS ONE MILLION FOUR HUNDRED THOUSAND
ONLY (P1,400,000.00), Philippine Currency, as provided for in Section 5, Rule 57 of
the Revised Rules of Court.

NOW, THEREFORE, we, VARIAN INDUSTRIAL CORPORATION, as Principal and

the PHILIPPINE BRITISH ASSURANCE COMPANY, INC., a corporation duly
organized and existing under and by virtue of the laws of the Philippines, as Surety,
in consideration of the above and of the lifting or dissolution of the order of
attachment, hereby jointly and severally, bind ourselves in favor of the above Plaintiff
in the sum of PESOS ONE MILLION FOUR HUNDRED THOUSAND ONLY
(P1,400,000.00), Philippine Currency, under the condition that in case the Plaintiff
recovers judgment in the action, and Defendant will, on demand, re-deliver the
attached property so released to the Officer of the Court and the same shall be
applied to the payment of the judgment, or in default thereof, the defendant and
Surety will, on demand, pay to the Plaintiff the full value of the property released.

EXECUTED at Manila, Philippines, this 28th day of June, 1984. 12

Sections 5, 12, and 17 of Rule 57 of the Revised Rules of Court also provide:

SEC. 5. Manner of attaching property. — The officer executing the order shall without
delay attach, to await judgment and execution in the action, all the properties of the

2
 party against whom the order is issued in the province, not exempt from execution,
or so much thereof as may be sufficient to satisfy the applicant's demand, unless the
former makes a deposit with the clerk or judge of the court from which the order
issued, or gives a counter-bond executed to the applicant, in an amount sufficient to
satisfy such demand besides costs, or in an amount equal to the value of the
property which is about to be attached, to secure payment to the applicant of any
judgement ment which he may recover in the action. The officer shall also forthwith
serve a copy of the applicant's affidavit and bond, and of the order of attachment, on
the adverse party, if he be found within the province.

SEC. 12. Discharge of attachment upon giving counterbond. — At any time after an
order of attachment has been granted, the party whose property has been attached,
or the person appearing on his behalf, may, upon reasonable notice to the applicant,
apply to the judge who granted the order, or to the judge of the court in which the
action is pending, for an order discharging the attachment wholly or in part on the
security given. The judge shall, after hearing, order the discharge of the attachment if
a cash deposit is made, or a counter-bond executed to the attaching creditor is filed,
on behalf of the adverse party, with the clerk or judge of the court where the
application is made, in an amount equal to the value of the property attached as
determined by the judge, to secure the payment of any judgment that the attaching
creditor may recover in the action. Upon the filing of such counter-bond, copy thereof
shall forthwith be served on the attaching creditor or his lawyer. Upon the discharge
of an attachment in accordance with the provisions of this section the property
attached, or the proceeds of any sale thereof, shall be delivered to the party making
the deposit or giving the counterbond aforesaid standing in place of the property so
released. Should such counterbond for any reason be found to be, or become,
insufficient, and the party furnishing the same fail to file an additional counterbond,
the attaching creditor may apply for a new order of attachment.

SEC. 17. When execution returned unsatisfied, recovery had upon bond. — If the
execution be returned unsatisfied in whole or in part, the surety or sureties on any
counter-bond given pursuant to the provisions of this rule to secure the payment of
the judgment shall become charged on such counter- bond, and bound to pay to the
judgement creditor upon demand, the amount due under the judgment, which
amount may be recovered from such surety or sureties after notice and summary
hearing in the same action. (Emphasis supplied.)

Under Sections 5 and 12, Rule 57 above reproduced it is provided that the counterbond is intended
to secure the payment of "any judgment" that the attaching creditor may recover in the action. Under
Section 17 of same rule it provides that when "the execution be returned unsatisfied in whole or in
part" it is only then that "payment of the judgment shall become charged on such counterbond."

The counterbond was issued in accordance with the provisions of Section 5, Rule 57 of the Rules of
Court as provided in the second paragraph aforecited which is deemed reproduced as part of the
counterbond. In the third paragraph it is also stipulated that the counterbond is to be "applied for the
payment of the judgment." Neither the rules nor the provisions of the counterbond limited its
application to a final and executory judgment. Indeed, it is specified that it applies to the payment
of any judgment that maybe recovered by plaintiff. Thus, the only logical conclusion is that an
execution of any judgment including one pending appeal if returned unsatisfied maybe charged
against such a counterbond.

3
It is well recognized rule that where the law does not distinguish, courts should not distinguish. Ubi
lex non distinguish nec nos distinguere debemos. 13 "The rule, founded on logic, is a corollary of the principle that
general words and phrases in a statute should ordinarily be accorded their natural and general significance. 14 The rule requires that a
general term or phrase should not be reduced into parts and one part distinguished from the other so as to justify its exclusion from the
operation of the law. 15 In other words, there should be no distinction in the application of a statute where none is indicated. 16 For courts
are not authorized to distinguish where the law makes no distinction. They should instead administer the law not as they think it ought to be
but as they find it and without regard to consequences. 17

A corollary of the principle is the rule that where the law does not make any exception, courts may
not except something therefrom, unless there is compelling reason apparent in the law to justify
it.18 Thus where a statute grants a person against whom possession of "any land" is unlawfully withheld the right to bring an action for
unlawful detainer, this Court held that the phrase "any land" includes all kinds of land, whether agricultural, residential, or mineral. 19
Since the law in this case does not make any distinction nor intended to make any exception, when it speaks of "any judgment" which
maybe
charged against the counterbond, it should be interpreted to refer not only to a final and executory judgment in the case but also a judgment
pending appeal.

All that is required is that the conditions provided for by law are complied with, as outlined in the
case of Towers Assurance Corporation v. Ororama Supermart, 20

Under Section 17, in order that the judgment creditor might recover from the surety
on the counterbond, it is necessary (1) that the execution be first issued against the
principal debtor and that such execution was returned unsatisfied in whole or in
part;
(2) that the creditor make a demand upon the surety for the satisfaction of the
judgment, and (3) that the surety be given notice and a summary hearing on the
same action as to his liability for the judgment under his counterbond.

The rule therefore, is that the counterbond to lift attachment that is issued in accordance with the
provisions of Section 5, Rule 57, of the Rules of Court, shall be charged with the payment of any
judgment that is returned unsatisfied. It covers not only a final and executory judgement but also the
execution of a judgment pending appeal.

WHEREFORE, the petition is hereby DISMISSED for lack of merit and the restraining order issued
on September 25, 1985 is hereby dissolved with costs against petitioner.

SO ORDERED.

Yap (Chairman), Narvasa, Melencio-Herrera, Cruz and Sarmiento, JJ., concur.

Feliciano, J., is on leave.

4
 Republic of the Philippines
SUPREME COURT
Manila

EN BANC

G.R. No. 115245 July 11, 1995

JUANITO C. PILAR, petitioner,

vs.
COMMISSION ON ELECTIONS, respondent.

QUIASON, J.:

This is a petition for certiorari under Rule 65 of the Revised Rules of Court assailing the Resolution
dated April 28, 1994 of the Commission on Elections (COMELEC) in UND No. 94-040.

On March 22, 1992, petitioner Juanito C. Pilar filed his certificate of candidacy for the position of
member of the Sangguniang Panlalawigan of the Province of Isabela.

On March 25, 1992, petitioner withdrew his certificate of candidacy.

In M.R. Nos. 93-2654 and 94-0065 dated November 3, 1993 and February 13, 1994 respectively,
the COMELEC imposed upon petitioner the fine of Ten Thousand Pesos (P10,000.00) for failure to
file his statement of contributions and expenditures.

In M.R. No. 94-0594 dated February 24, 1994, the COMELEC denied the motion for reconsideration
of petitioner and deemed final M.R. Nos. 93-2654 and 94-0065 (Rollo, p. 14).

Petitioner went to the COMELEC En Banc (UND No. 94-040), which denied the petition in a
Resolution dated April 28, 1994 (Rollo, pp. 10-13).

Hence, this petition for certiorari.

We dismiss the petition.

II

Section 14 of R.A. No. 7166 entitled "An Act Providing for Synchronized National and Local
Elections and for Electoral Reforms, Authorizing Appropriations Therefor, and for Other Purposes"
provides as follows:

Statement of Contributions and Expenditures: Effect of Failure to File Statement.

Every candidate and treasurer of the political party shall, within thirty (30) days after
the day of the election, file in duplicate with the offices of the Commission the full,

5
 true and itemized statement of all contributions and expenditures in connection with
the election.

No person elected to any public office shall enter upon the duties of his office until he
has filed the statement of contributions and expenditures herein required.

The same prohibition shall apply if the political party which nominated the winning
candidate fails to file the statement required herein within the period prescribed
by this Act.

Except candidates for elective barangay office, failure to file the statements or
reports in connection with electoral contributions and expenditures as required
herein shall constitute an administrative offense for which the offenders shall be
liable to pay an administrative fine ranging from One Thousand Pesos ( P1,000.00)
to Thirty Thousand Pesos (P30,000.00), in the discretion of the Commission.

The fine shall be paid within thirty (30) days from receipt of notice of such failure;
otherwise, it shall be enforceable by a writ of execution issued by the Commission
against the properties of the offender.

It shall be the duty of every city or municipal election registrar to advise in writing, by
personal delivery or registered mail, within five (5) days from the date of election all
candidates residing in his jurisdiction to comply with their obligation to file their
statements of contributions and expenditures.

For the commission of a second or subsequent offense under this Section, the
administrative fine shall be from Two Thousand Pesos (P2,000.00) to Sixty
Thousand Pesos (P60,000.00), in the discretion of the Commission. In addition, the
offender shall be subject to perpetual disqualification to hold public office (Emphasis
supplied).

To implement the provisions of law relative to election contributions and expenditures, the
COMELEC promulgated on January 13, 1992 Resolution No. 2348 (Re: Rules and Regulations
Governing Electoral Contributions and Expenditures in Connection with the National and Local
Elections on
May 11, 1992). The pertinent provisions of said Resolution are:

Sec. 13. Statement of contributions and expenditures: Reminders to candidates to

file statements. Within five (5) days from the day of the election, the Law Department
of the Commission, the regional election director of the National Capital Region, the
provincial election supervisors and the election registrars shall advise in writing by
personal delivery or registered mail all candidates who filed their certificates of
candidacy with them to comply with their obligation to file their statements of
contributions and expenditures in connection with the elections. Every election
registrar shall also advise all candidates residing in his jurisdiction to comply with
said obligation (Emphasis supplied).

Sec. 17. Effect of failure to file statement. (a) No person elected to any public office
shall enter upon the duties of his office until he has filed the statement of
contributions and expenditures herein required.

6
 The same prohibition shall apply if the political party which nominated the winning
candidates fails to file the statement required within the period prescribed by law.

(b) Except candidates for elective barangay office, failure to file statements or reports
in connection with the electoral contributions and expenditures as required herein
shall constitute an administrative offense for which the offenders shall be liable to
pay an administrative fine ranging from One Thousand Pesos (P1,000) to Thirty
Thousand Pesos (P30,000), in the discretion of the Commission.

The fine shall be paid within thirty (30) days from receipt of notice of such failure;
otherwise, it shall be enforceable by a writ of execution issued by the Commission
against the properties of the offender.

For the commission of a second or subsequent offense under this section, the
administrative fine shall be from Two Thousand Pesos (P2,000) to Sixty Thousand
Pesos (P60,000), in the discretion of the Commission. In addition, the offender shall
be subject to perpetual disqualification to hold public office.

Petitioner argues that he cannot be held liable for failure to file a statement of contributions and
expenditures because he was a "non-candidate," having withdrawn his certificates of candidacy
three days after its filing. Petitioner posits that "it is . . . clear from the law that candidate must have
entered the political contest, and should have either won or lost" (Rollo, p. 39).

Petitioner's argument is without merit.

Section 14 of R.A. No. 7166 states that "every candidate" has the obligation to file his statement of
contributions and expenditures.

Well-recognized is the rule that where the law does not distinguish, courts should not distinguish,
Ubi lex non distinguit nec nos distinguere debemos (Philippine British Assurance Co. Inc. v.
Intermediate Appellate Court, 150 SCRA 520 [1987]; cf Olfato v. Commission on Elections, 103
SCRA 741 [1981]). No distinction is to be made in the application of a law where none is indicated
(Lo Cham v. Ocampo, 77 Phil. 636 [1946]).

In the case at bench, as the law makes no distinction or qualification as to whether the candidate
pursued his candidacy or withdrew the same, the term "every candidate" must be deemed to refer
not only to a candidate who pursued his campaign, but also to one who withdrew his candidacy.

The COMELEC, the body tasked with the enforcement and administration of all laws and regulations
relative to the conduct of an election, plebiscite, initiative, referendum, and recall (The Constitution of
the Republic of the Philippines, Art. IX(C), Sec. 2[1]), issued Resolution No. 2348 in implementation
or interpretation of the provisions of Republic Act No. 7166 on election contributions and
expenditures. Section 13 of Resolution No. 2348 categorically refers to "all candidates who filed their
certificates of candidacy."

Furthermore, Section 14 of the law uses the word "shall." As a general rule, the use of the word
"shall" in a statute implies that the statute is mandatory, and imposes a duty which may be enforced ,
particularly if public policy is in favor of this meaning or where public interest is involved. We apply
the general rule (Baranda v. Gustilo, 165 SCRA 757 [1988]; Diokno v. Rehabilitation Finance
Corporation, 91 Phil. 608 [1952]).

7
The state has an interest in seeing that the electoral process is clean, and ultimately expressive of
the true will of the electorate. One way of attaining such objective is to pass legislation regulating
contributions and expenditures of candidates, and compelling the publication of the same.
Admittedly, contributions and expenditures are made for the purpose of influencing the results of the
elections (B.P. Blg. 881, Sec. 94; Resolution No. 2348, Sec. 1). Thus, laws and regulations prescribe
what contributions are prohibited (B.P. Blg. 881, Sec. 95, Resolution No. 2348, Sec. 4), or unlawful
(B.P. Blg. 881, Sec. 96), and what expenditures are authorized (B.P. Blg. 881, Sec. 102; R.A. No.
7166, Sec. 13; Resolution No. 2348, Sec. 7) or lawful (Resolution No. 2348, Sec. 8).

Such statutes are not peculiar to the Philippines. In "corrupt and illegal practices acts" of several
states in the United States, as well as in federal statutes, expenditures of candidates are regulated
by requiring the filing of statements of expenses and by limiting the amount of money that may be
spent by a candidate. Some statutes also regulate the solicitation of campaign contributions (26 Am
Jur 2d, Elections § 287). These laws are designed to compel publicity with respect to matters
contained in the statements and to prevent, by such publicity, the improper use of moneys devoted
by candidates to the furtherance of their ambitions (26 Am Jur 2d, Elections § 289). These statutes
also enable voters to evaluate the influences exerted on behalf of candidates by the contributors,
and to furnish evidence of corrupt practices for annulment of elections (Sparkman v. Saylor [Court of
Appeals of Kentucky], 180 Ky. 263, 202 S.W. 649 [1918]).

State courts have also ruled that such provisions are mandatory as to the requirement of filing (State
ex rel. Butchofsky v. Crawford [Court of Civil Appeals of Texas], 269 S.W. 2d 536 [1954]; Best v.
Sidebottom, 270 Ky. 423,109 S.W. 2d 826 [1937]; Sparkman v. Saylor, supra.)

It is not improbable that a candidate who withdrew his candidacy has accepted contributions and
incurred expenditures, even in the short span of his campaign. The evil sought to be prevented by
the law is not all too remote.

It is notesworthy that Resolution No. 2348 even contemplates the situation where a candidate may
not have received any contribution or made any expenditure. Such a candidate is not excused from
filing a statement, and is in fact required to file a statement to that effect. Under Section 15 of
Resolution No. 2348, it is provided that "[i]f a candidate or treasurer of the party has received no
contribution, made no expenditure, or has no pending obligation, the statement shall reflect such
fact."

Lastly, we note that under the fourth paragraph of Section 73 of the B.P. Blg. 881 or the Omnibus
Election Code of the Philippines, it is provided that "[t]he filing or withdrawal of certificate of
candidacy shall not affect whatever civil, criminal or administrative liabilities which a candidate may
have incurred." Petitioner's withdrawal of his candidacy did not extinguish his liability for the
administrative fine.

WHEREFORE, the petition is DISMISSED.

Narvasa, C.J., Feliciano, Regalado, Davide, Jr., Romero, Bellosillo, Puno, Vitug, Mendoza and
Francisco, JJ., concur.

Kapunan, J., is on leave.

8
SECOND DIVISION

[G.R. No. 110898. February 20, 1996.]

PEOPLE OF THE PHILIPPINES, Petitioner, v. HON. JUDGE ANTONIO C. EVANGELISTA, as Presiding Judge of
Branch XXI, 10th Judicial Region, RTC of Misamis Oriental, Cagayan de Oro City, and GRILDO
S. TUGONON, Respondents.

The Solicitor General for Petitioner.

Carlito P. Somido for Private Respondent.

SYLLABUS

1. REMEDIAL LAW; SPECIAL CIVIL ACTION, CERTIORARI; GRANT OF PROBATION TO ACCUSED AFTER
APPEAL, A GRAVE ABUSE OF DISCRETION. — It was possible under P.D. No. 986, otherwise known
as the Probation Law, for the accused to take his chances on appeal by allowing probation to be
granted even after an accused had appealed his sentence and failed to obtain an acquittal, just
so long as he had not yet started to serve the sentence. The law was, however, amended by
P.D. No. 1990 which took effect on January 15, 1986 precisely to put a stop to the practice of
appealing from judgments of conviction even if the sentence is probationable for the purpose of
securing an acquittal and applying for probation only if the accused fails in his bid. Since private
respondent filed his application for probation on December 28, 1992, after P.D. No. 1990 had
taken effect, it is covered by the prohibition that "no application for probation shall be
entertained or granted if the defendant has perfected the appeal from the judgment of
conviction" and that "the filing of the application shall be deemed a waiver of the right to
appeal." Having appealed from the judgment of the trial court and having applied for probation
only after the Court of Appeals had affirmed his conviction, private respondent was clearly
precluded from the benefits of probation. WHEREFORE, the petition is GRANTED and the order of
April 23, 1993 of the Regional Trial Court of Misamis Oriental (Branch 21) granting probation to
private respondent Grildo S. Tugonon is SET ASIDE.

2. CRIMINAL LAW; PROBATION LAW; PROHIBITION AGAINST PERFECTION OF APPEAL;

APPEAL REFERS TO THAT TAKEN FROM JUDGMENT OF CONVICTION BY TRIAL COURT. — The

9
ruling of the RTC

10
that" [h]aving not perfected an appeal against the Court of Appeals decision, [private
respondent] is, therefore, not covered by [the amendment in] P.D. 1990" is an obvious
misreading of the law. The perfection of the appeal referred in the law refers to the appeal taken
from a judgment of conviction by the trial court and not that of the appellate court, since under
the law an application for probation is filed with the trial court which can only grant the same
"after it shall have convicted and sentenced [the] defendant, and upon application by said
defendant within the period for perfecting an appeal." Accordingly, in Llamado v. Court of
Appeals, it was held that the petitioner who had appealed his sentence could not subsequently
apply for probation.

DECISION

MENDOZA, J.:

Private respondent Grildo S. Tugonan was charged with frustrated homicide in the Regional Trial
Court of Misamis Oriental (Branch 21), the information against him alleging —

That on or about the 26th day of May, 1988, at more or less 9:00 o’clock in the evening at
Barangay Poblacion, Municipality of Villanueva, Province of Misamis Oriental, Republic of the
Philippines and within the jurisdiction of this Honorable court, the abovenamed accused with
intent to kill and with the use of a knife, which he was then conveniently provided of, did then
and there willfully, unlawfully and feloniously assault, attack and stab Roque T. Bade thereby
inflicting upon him the following injuries, to wit:chanrob1es virtual 1aw library

Stab wound, right iliac area,

0.5 cm. penetrating non

perforating lacerating posterlor

peritoneum, 0.5 cm.

thus performing all the acts of execution which would produce the crime of Homicide as a
consequence but which, nevertheless, did not produce it by reason of causes independent of the
will of the accused, that is by timely medical attendance which prevented his death.

11
CONTRARY TO and in violation of Article 249 in relation to Article 6 of the Revised Penal Code.

After trial he was found guilty and sentenced to one year of prision correccional in its minimum
period and ordered to pay to the offended party P5,000.00 for medical expense, without
subsidiary imprisonment, and the costs. The RTC appreciated in his favor the privileged mitigating
circumstances of incomplete self-defense and the mitigating circumstance of voluntary surrender.

On appeal the Court of Appeals affirmed private respondent’s conviction but modified his sentence
by imposing on him an indeterminate penalty of 2 months of arresto mayor, as minimum, to 2
years and 4 months of prision correccional, as maximum. 1

On December 21, 1992, respondent Judge Antonio C. Evangelista of the RTC set the
case for repromulgation on January 4, 1993.

On December 28, 1992, private respondent filed a petition for probation, 2 alleging that (1) he
possessed all the qualifications and none of the disqualifications for probation under P.D. No.
968, as amended; (2) the Court of Appeals had in fact reduced the penalty imposed on him by
the trial court; (3) in its resolution, the Court of Appeals took no action on a petition for probation
which he had earlier filed with it so that the petition could be filed with the trial court; (4) in the
trial court’s decision, two mitigating circumstances of incomplete self-defense and voluntary
surrender were appreciated in his favor; and (5) in Santos To v. Paño, 3 the Supreme Court
upheld the right of the accused to probation notwithstanding the fact that he had appealed from
his conviction by the trial court.

On February 2, 1993, the RTC ordered private respondent to report for interview to the Provincial
Probation Officer. The Provincial Probation Officer on the other hand was required to submit his report
with recommendation to the court within 60 days. 4

On February 18, 1993, Chief Probation and Parole Officer Isias B. Valdehueza recommended denial
of private respondent’s application for probation on the ground that by appealing the sentence
of the trial court, when he could have then applied for probation, private respondent waived the
right to make his
application. The Probation Officer thought the present case to be distinguishable from Santos To v.
Paño in the sense that in this case the original sentence imposed on private respondent by the
trial court (1 year of imprisonment) was probationable and there was no reason for private
respondent not to have filed his application for probation then, whereas in Santos To v. Paño
the penalty only became probationable after it had been reduced as a result of the appeal.
12
On April 16, 1993 Valdehueza reiterated 5 his "respectful recommendation that private respondent’s
application for probation be denied and that a warrant of arrest be issued for him to serve his
sentence in jail."cralaw virtua1aw library

The RTC set aside the Probation Officer’s recommendation and granted private respondent’s
application for probation in its order of April 23, 1993. 6 Hence this petition by the Prosecution.

The issue in this case is whether the RTC committed a grave abuse of its discretion by granting
private respondent’s application for probation despite the fact that he had appealed from the
judgment of his conviction of the trial court.

The Court holds that it did.

Until its amendment by P.D. No. 1990 in 1986, it was possible under P.D. No. 986, otherwise
known as the Probation Law, for the accused to take his chances on appeal by allowing
probation to be granted even after an accused had appealed his sentence and failed to obtain an
acquittal, just so long as he had not yet started to serve the sentence. 7 Accordingly, in Santos To
v. Paño, it was held that the fact that the accused had appealed did not bar him from applying for
probation especially because it was as a result of the appeal that his sentence was reduced and
made the probationable limit.

The law was, however, amended by P.D. No. 1990 which took effect on January 15, 1986 8
precisely to the practice of appealing from judgments put a stop to the practice of appealing from
judgments of conviction even if the sentence is probationable for the purpose of securing an
acquittal and applying for probation only if the accused fails in his bid. Thus, as amended by P.D.
No. 1990, §4 of the Probation Law now reads:chanrob1es virtual 1aw library

§4. Grant of Probation. — Subject to the provisions of this Decree, the trial court may, after
it shall have convicted and sentenced a defendant, and upon application by said defendant within
the period for perfecting an appeal, suspend the execution of the sentence and place the defendant
on probation for such period and upon such terms and conditions as it may deem best; Provided,
That no application for probation shall be entertained or granted if the defendant has perfected
the appeal from the judgment of conviction.

Probation may be granted whether the sentence imposes a term of imprisonment or a fine only.
An application for probation shall be filed with the trial court. The filing of the application shall be
deemed a waiver of the right to appeal.

13
An order granting or denying probation shall not be appealable. (Emphasis added)

Since private respondent filed his application for probation on December 28, 1992, after P.D. No. 1990
had taken effect, 9 it is covered by the prohibition that "no application for probation shall be
entertained or granted if the defendant has perfected the appeal from the judgment of conviction"
and that "the filing of the application shall be deemed a waiver of the right to appeal." Having
appealed from the judgment of the trial court and having applied for probation only after the Court
of Appeals had affirmed his conviction, private respondent was clearly precluded from the
benefits of probation.

Private respondent argues, however, that a distinction should be drawn between meritorious appeals
(like his appeal notwithstanding the appellate court’s affirmance of his conviction) and
unmeritorious appeals. But the law does not make any distinction and so neither should the
Court. In fact if an appeal is truly meritorious the accused would be set free and not only given
probation. Private respondent’s original sentence (1 year of prision correccional in its minimum
period) and the modified sentence imposed by the Court of Appeals (2 months of arresto
mayor, as minimum, to 2 years and 4 months of prision correccional, as maximum) are
probationable. Thus the fact that he appealed meant that private respondent was taking his
chances which the law precisely frowns upon. This is precisely the evil that the amendment in
P.D. No. 1990 sought to correct, since in the words of the preamble to the amendatory law,
"probation was not intended as an escape hatch and should not be used to obstruct and delay
the administration of justice, but should be availed of at the first opportunity by offenders who
are willing to be reformed and rehabilitated."cralaw virtua1aw library

The ruling of the RTC that" [h]aving not perfected an appeal against the Court of Appeals
decision, [private respondent] is, therefore, not covered by [the amendment in] P.D. 1990" is an
obvious misreading of the law. The perfection of the appeal referred in the law refers to the
appeal taken from a judgment of conviction by the trial court and not that of the appellate court,
since under the law an application for probation is filed with the trial court which can only grant
the same "after it shall have convicted and sentenced [the] defendant, and upon application by
said defendant within the period for perfecting an appeal." Accordingly, in Llamado v. Court of
Appeals, 10 it was held that the petitioner who had appealed his sentence could not
subsequently apply for probation.

WHEREFORE, the petition is GRANTED and the order of April 23, 1993 of the Regional Trial Court of
Misamis Oriental (Branch 21) granting probation to private respondent Grildo S. Tugonon is SET
ASIDE.

14
SO ORDERED.

Regalado, Romero and Puno, JJ., concur.

15
2. Words construed in their ordinary sense

Republic of the Philippines

SUPREME COURT
Manila

EN BANC

G.R. No. L-11176 June 29, 1959

THE COLLECTOR OF INTERNAL REVENUE, petitioner,

vs.
MANILA LODGE NO. 761 OF THE BENEVOLENT & PROTECTIVE ORDER OF ELKS and THE
COURT OF TAX APPEALS, respondents.

Office of the Solicitor General Ambrosio Padilla and Solicitor Frine C. Zaballero for petitioner.
Manuel O. Chan for respondent Lodge.

CONCEPCION, J.:

This is an appeal taken by the Collector of Internal Revenue from a decision of the Court of Tax
Appeals holding that the Manila Lodge No. 761 of the Benevolent & Protective Order of Elks "is not
liable for privilege taxes on its sale by retail of liquor and tobacco exclusively to its members and
their guests," and reversing and setting aside a decision of said appellant to the contrary, dated
November 19, 1953 without special pronouncement as to costs.

The uncontested facts are set forth in the decision of said Court, from which we quote:

This is an appeal from two decisions of the respondent Collector of Internal Revenue
assessing and demanding from the petitioner herein the sums of P1,203.50 and P332.00,
respectively representing fixed taxes as retail dealer in liquor, fermented liquor, and tobacco,
allegedly due from the petitioner for the period from the 4th quarter of 1946 to 1953 and the
period from 1954-1955, pursuant to subsections (i), (k) and (n) of section 193 of the Tax
Code, in relation to 178 of the same Code.

The petitioner, Manila Lodge No. 761 is admittedly a fraternal, civic, non-stock, non-profit
organization duly incorporated under Philippine laws. It owns and operates a clubhouse
located at Dewey Boulevard, Manila, wherein it sells at retail, liquor, fermented liquor, cigar
and cigarettes only to its members and their guests. B.I.R. agents discovered that the Manila
Elks Club had not paid for the period in question the privilege tax for retail liquor dealer (B-4),
retail dealer in fermented liquor (B-7), and retail tobacco dealer (B-9-a) prescribed in section
193 of the Tax Code.

On November 19, 1953, the Collector of Internal Revenue assessed against and demanded
from the petitioner the payment of the sum of P1,203.50 representing fixed taxes, as retail
dealer, for the period from its 4th quarter of 1946 to 1953, exclusive of the suggested
compromise penalty of P80.00. The petitioner, claiming that it was exempted from the
payment of the privilege taxes in question, requested that the said assessment be reviewed
by the Conference Staff of the Bureau of Internal Revenue. The Conference Staff, after due
hearing, upheld and reiterated the assessment made by the respondent Collector of Internal
Revenue. Forthwith, the petitioner appealed to this Court on June 1, 1955.

16
 During the pendency of the original petition for review in the above-entitled case, respondent
issued another assessment covering fixed taxes for the years 1954 to 1955 in the amount of
P332.00, exclusive of the suggested compromise penalty of P50.00. Consequently,
petitioner with leave of Court filed a supplemental petition for review which included the
latter assessment.

Petitioner bases its claim for exemption from the payment of the privilege taxes in question
on the grounds that it is not engaged in the business of selling at retail liquor, fermented
liquor, and tobacco because the sale of these aforementioned specific goods is made only to
members of the club and their guests' on a very limited scale in pursuance only of its general
purpose as a fraternal social club, to provide comfort, recreation, and convenience to such
members, and merely to provide enough margin to cover operational expenses. (Petitioner's
Memo p. 3).

Respondent, on the other hand, maintains that persons selling articles subject to specific tax,
such as cigars, tobacco, liquor and the like, are subject to the fixed taxes imposed by section
193 of the Tax Code, irrespective of whether or not they made profit, and whether or not they
are civic or fraternal clubs selling only to their members and their guests. This contention is
based on a ruling promulgated by the Bureau of Internal Revenue made in 1921.

Petitioner herein maintains that:

1. The respondent Court of Tax Appeals erred in reversing the decision of the petitioner-
appellant which held the respondent club liable for fixed taxes.

2. The respondent Court of Tax Appeals erred in holding that before respondent
club's liability for the privilege taxes imposed by section 193 of the Tax Code attaches
it is necessary that it be engaged in the "business" of selling liquor and tobacco.

3. The respondent Court of Tax of Appeals erred in holding that a fraternal, civic, non-stock,
non-profit organization like the respondent club selling at retail liquor and tobacco only to its
members and their guests with just enough margin to cover operational expenses should
not be held liable for the fixed taxes incident to the business of selling at retail, liquor and
tobacco.

4. The respondent Court of Tax Appeals erred in holding that the Administrative construction
of the Bureau of Internal Revenue on the matter in question is outside the ambit of, and is
inconsistent with, the Revised Administrative Code and Tax Code.

This appeal is untenable. In the language of the Court of Tax Appeals:

The bone of contention between the two parties herein . . ., lies in the proper interpretation
and application of the pertinent provisions of the Tax Code, namely, subsections (i), (k) and
(n) of section 193 in relation to section 178 of the Tax Code, which we quote hereunder:

Sec. 178. Payment of privilege taxes. — A privilege tax must be paid before any business or
occupation hereinafter specified can be lawfully begun or pursued. The tax on business is
payable for every separate or distinct establishment or place where the business subject to
the tax is conducted; and one occupation or line of business does not become exempt by
being conducted with some other occupation or business for which such tax has been paid.

17
 The occupation tax must be paid by each individual engaged in a calling subject thereto; the
tax on a business by the person, firm, or company conducting the same. (Emphasis
supplied.)

SEC. 193. Amount of tax on business. — Fixed taxes on business shall be collected as
follows, the amount stated being for the whole year when not otherwise specified:

(i) Retail liquor dealers, one hundred pesos.

(k) Retail dealers in fermented liquors, fifty pesos.

xxx xxx xxx

(n) Wholesale tobacco dealers, sixty pesos; retail tobacco dealers, sixteen pesos.

The aforequoted provisions of the Tax Code are clear and precise. The privilege taxes
prescribed in section 193 of the Tax Code in relation to section 178 of the same, are to be
imposed or classified therein for "business" purposes. This evident intention of the law
becomes more palpable when we take into consideration the facts that the drafters of our
Tax Code had grouped the aforequoted provisions of law under one general division of the
Tax Code headed as "Title V, Privilege Taxes on Business and occupation.

It is not therefore entirely correct to maintain as respondent does, that all person selling
articles subject to specific taxes, like liquor and tobacco, should likewise be subject to the
fixed taxes imposed by section 193 of the Tax Code. We believe, that in order that these
persons should be subjected to the privilege taxes imposed by the aforementioned section of
the Tax Code, it is necessary that they be engaged in the "business" of selling liquor and
tobacco, otherwise the privilege taxes as a dealer of liquor and tobacco can not attach.

At this juncture a definition of the word "business" is in order and we have the following:.

The word "business" in its ordinary and common use is employed to designate human efforts
which have for their and living or reward; it is not commonly used as descriptive of charitable,
religious, educational or social agencies. (Ballantine's Law Dictionary, 1948 Ed. P. 179)

Business — "that which busies or engages time, attention or labor as a principal serious
concern or interest; any particular occupation or employment habitually engaged in specially
for livelihood or gain." (Vol. 1, 1949 Merriam-Webster's New International Dictionary, 2nd Ed.
p. 362.)

Other definitions of the term "business" as given by judicial pronouncement are found in
Volume V, Words and Phrases, page 999 as follows:

Business is a word of large signification, and denotes the employment or occupation in

which a person is engaged to produce a living. (Citing: Goddard v. Chaffee, 84 Mass (Allen)
395; 79 Am Dec. 769).

Business in common speech means habitual or regular occupation that a party is engaged in
with a view to winning a livelihood or some gain. (Citing: In re Lemont, 41 p. 2D, 497, 502)

18
 An enterprise not conducted as a means of livelihood or for profit does not come within the
ordinary meaning of the terms, "business, trade or industry." (Citing City of Rochester vs.
Rochester Girl's Home, 194 N.Y.S. 236, 237).

The term "business" as used in law imposing a license tax on business, trades, etc. ordinarily
means business in the trade or commercial sense only, carried on with a view to profit or
livelihood. (Citing: Cuzner vs. California Club 100 p. 868, 867, 155, Cal. 303, 20 L.R.A. N.S.
1095).

From the foregoing definitions, it is evident that the plain ordinary meaning of "business" is
restricted to activities or affairs where profit is the purpose, or livelihood is the motive. The
term "business" being used without any qualification in section 193 of the Tax Code in
relation to section 178 of the same, should therefore be construed in its plain and ordinary
meaning, restricted to activities for profit or livelihood.

With these considerations in mind, we now come to the question of whether or not the Manila
Elks Club is engaged in the "business" of selling liquor and tobacco.

Respondent, in paragraph 1 of his answer, admits that the petitioner herein, Manila Elks Club
is a fraternal, civic, non-stock, non-profit organization. It has been established without
contradiction that the Manila Elks Club, in pursuance of its purpose as a fraternal social club,
sells on retail at its clubhouse on Dewey Boulevard, liquor, cigars and cigarettes, on a very
limited scale, only to its members and their guests, providing just enough margin to cover
operational expenses without intention to obtain profit. Such being the case then, the Manila
Elks Club cannot be considered as engaged in the "business" of selling liquor and tobacco.

Where the corporation handled no money except such as was necessary to

cover operational expenses, conducted no business for itself, and engaged in no
transactions that contemplated a profit for itself — such corporation is considered not
organized for profit under the General Corporation Law. (Read V. Tidewater Coal Exch., 116
A 898, 904, cited in Vol. 34 Words & Phrases, p. 220, defining "profits"; underscoring
provided.).

The petitioner herein, Manila elks Club, not being engaged in the business of selling at retail
liquor and tobacco, cannot therefore be held liable for the privilege taxes required by section
193, subsections (1), (k) and (n). The weight of American authorities enhances the strength
of our findings that a fraternal, civic, non-stock, non-profit organization, like the Elks Club,
selling at retail liquor and tobacco only to its members and their guests in pursuance with its
general purpose as a fraternal social club with just enough margin to cover operational
expenses, should not be held liable for the fixed taxes incident to the business of selling at
retail, liquor and tobacco.

A bonafide social club, which disposes of liquors at its clubhouse to members and their
guests at a fixed charge as incident to the general purposes of the organizational is not
required to take out a license by Rev. Laws No. 3777-3785, approved March 15, 1905, which
provides for a license upon the business of disposing intoxicating liquors; the term business
in such statute meaning business in the trade or commercial sense. (State v. university Club,
130 p. 468, 470; 35 Nev. 475; 44 L.R.A., N. S. 1026).

A social club, not organized for the purpose of evading the liquor laws, but which furnishes
its members with liquors and refreshments without profit to itself, is not a retail liquor dealer,
within the statute imposing a license tax on all persons dealing in, selling or disposing of

19
 intoxicating liquors by retail. (Barden v. Montan Club, 25 P. 1042, 10 Mont. 330, II L.R.A.
593).

Acts 1881, C. 149, authorizing taxation of liquors dealers, does not include a social club
maintaining a library, giving musical entertainments, and furnishing meals for its members,
which keeps a small stock of liquor; the members paying for its drink as it is taken, but no
profit being made on such sales. (Tennessee Club of Memphis v. Dwyer, 79 Tenn. (11 Lea)
452, 461, 47 Am. Rep. 298.).

A social club composed of members who have no proprietary interest in the assets which
provides a reading room, restaurant, bar room, library, billiard rooms and sitting rooms for its
members, the expenses of which are defrayed by annual dues from each member, and by
payments made by the members for food and drinks, is not engaged in the business of a
retail liquor dealer, within section 11 of the Louisiana License Tax Laws. (La Ann. 585, 20
L.R.A. 185). Respondent however, insists that the petitioner should pay the privilege tax on
the sale at retail of liquor and tobacco because this has been allegedly the practice
consistently followed by the Bureau of Internal Revenue since 1921, and because section
1464 of the Revised Administrative Code under which said ruling was then based had been
reenacted by the legislature as section 193 of the National Internal Revenue Code. Thus,
respondent contends, that the policy of the Bureau of Internal Revenue has therefore gained
"approval by legislative reenactments."

The alleged administrative practice is founded upon the following ruling rendered in 1921.

Clubs selling exclusively to members thereof liquors and other products on which the specific
tax is imposed should pay the privilege tax corresponding to the business engaged in. The
fact that such products are sold at cost to the members of the club does not affect the club's
liability to tax. (Ruling, Oct. 13, 1921, B.I.R. 105.02; Exh. 3, pp. 66-69. BIR records.)

We do not agree with the contention of the respondent. While there is admittedly a ruling on
this point in 1921, there is no showing that such has been a long-continued practice. Be that
as it may, any such administrative construction must be within the ambit of, and must be
consistent with, the Revised Administrative Code and the Tax Code. It is likewise the rule
that where the statute is unambiguous, an administrative construction is unwarranted (U.S.
vs. Missouri P.R. Co. 278 U. S. 269, 73 L. Ed. 322) and no construction may be made to
restrict or enlarge the meaning of an Act. (Blatt vs. U.S.., 305 U.S. 267, 83 L. Ed. 167).

An examination of section 1464 of the Revised Administrative Code taken in connection with
section 1453 of the same, discloses the fact that aside from the change in rates of taxes to
be paid and the arrangement of the classification of business enumerated therein, section
193 of the present Tax Code is a verbatim copy of the aforementioned provisions of the
Revised Administrative Code. The policy or principle followed by the said code regarding
privileges taxes, i.e. that the privilege taxes are payable only by those persons or entities
engaged in the business enumerated in section 1464 of the said Code, has not suffered any
change, and the same still obtains under our present Tax Code. In the absence of a showing
that the legislative body had been apprised of the aforesaid ruling, what has gained
legislative approval thru reenactment is, we believe, the policy behind the above-mentioned
provision of the Revised Administrative Code of taxing persons engaged in business and not
the alleged practice following the administrative ruling of 1921. We believe that no amount of
trenchant adherence to an established practice may justify its continued application where it
is clear and manifest that the same is not in consonance with the policy of the legislature as
defined by law.

20
It is urged by appellant that emphasis should be placed not on the term "business", but on the
phrases "retail liquor dealers", in fermented liquors" and "retail tobacco dealers", appearing in
section 193 of the National Internal Revenue Code, which are defined in section 194 thereof as
follows:

SEC. 194. Words and phrases defined. — In applying the provisions of the preceding
section, words and phrases shall be taken in the sense and extension indicated below:

xxx xxx xxx

(i) "Retail liquor dealer" includes every person, except a retail vino dealer, who for himself or
on commission sells or offers for sale wine or distilled spirits (other than denatured alcohol)
in quantities of five liters or less at any one time and not for sale.

xxx xxx xxx

(k) "Retail dealer in fermented liquors" includes every person, except dealers in tuba, basi,
and tapuy, who for himself or on commission sells or offers for sale fermented liquors and
quantities of five liters or less at any one time and not for resale.

xxx xxx xxx

(o) "Tobacco dealer" comprehends every person who himself or on commission sells or
offers for sale cigars, cigarettes, or manufactured tobacco.

Undoubtedly, these definitions must be given all the weight due thereto, in the interpretation of
section 193 of the Tax Code. As used therein, the phrases above referred to are, however, part and
parcel of the provisions contained, not only in said section 193, but, also, in section 178 and other
parts of the Tax Code, all of which must be given effect in their entirety as a harmonious,
coordinated and integrated unit, not as a mass of heterogeneous and unrelated if not incongruous
terms, clauses and sentences. In other words, the phrases in question should be construed in the
light of the context of the whole Tax Code, of which they are integral parts. And when this is done —
when we consider that section 193 requires "retail liquor dealers", "retail dealers in fermented
liquors" and "retail tobacco dealers" to pay the taxes on business" therein specified; that said section
193 is entitled "Amount of tax on business", that said section 193 merely implements the general
provision in section 178, to the effect that "a privilege tax must be paid in before any business or
occupation hereinafter specified can be lawfully begun and pursued"; that the term "business" is
used in said section 178, six (6) times; and that the aforementioned sections 178, 193 and 194 are
part of Title V of the Tax Code, entitled "Privilege taxes on business and occupation" — it becomes
crystal clear that the "retail liquor dealers", "retail dealers in fermented liquors" and "retail tobacco
dealers" alluded to in said section 193 are those engaged in "business", not fraternal, civic, non-
stock, non-profit organizations, like herein respondent, which sells wines, distilled spirits, fermented
liquors and tobacco, exclusively to its members and their guests, at such prices as are merely
sufficient to cover operational expenses.

Petitioner assails the applicability of the decisions relied upon by the Court of Tax Appeals, upon the
ground that said decisions refer to the authority to license, and, hence, to the exercise to the police
power, not that of taxation which is involved in the case at bar. However, the distinction made
enhances — instead of detracting from — the weight of said decisions as precedents, insofar as the
issue herein is concerned. Indeed, the police power is, in general broader and subject to less
restrictions than the power to tax. It is not difficult to conceive the advisability, if not, necessity, of
requiring a license for some activities undertaken by so-called "clubs", owing to the possibility, if not

21
probability, of use of said name, appellation or denomination, in order to avoid or evade some laws
or to camouflage certain ventures, pursuits or enterprises which otherwise would clearly be illegal,
immoral or contrary to public policy. Upon the other hand, a tax is a burden and, as such, it will not
be deemed imposed upon fraternal, civic, non-profit, non-stock organizations, unless the intent to
the contrary is manifest and patent.

Wherefore, the appealed decision of the Court of Tax Appeals is hereby affirmed, without special
pronouncement as to costs. It is so ordered.

Paras, C.J., Bengzon, Padilla, Montemayor, Bautista Angelo, Endencia and Barrera, JJ., concur.

22
 Republic of the Philippines
SUPREME COURT
Manila

SECOND DIVISION

G.R. No. L-28742 April 30, 1982

VIRGILIO CAPATI, plaintiff-appellant,

vs.
DR. JESUS P. OCAMPO, defendant-appellee.

ESCOLIN, J.:

We set aside the order of the Court of First Instance of Pampanga in Civil Case No. 3188 which
dismissed the plaintiff's complaint on ground of improper venue.

Plaintiff Virgilio Capati a resident of Bacolor, Pampanga, was the contractor of the Feati Bank for the
construction of its building in Iriga, Camarines Sur. On May 23, 1967, plaintiff entered into a sub-
contract with the defendant Dr. Jesus Ocampo, a resident of Naga City, whereby the latter, in
consideration of the amount of P2,200.00, undertook to construct the vault walls, exterior walls and
columns of the said Feati building in accordance with the specifications indicated therein. Defendant
further bound himself to complete said construction on or before June 5, 1967 and, to emphasize
this time frame for the completion of the construction job, defendant affixed his signature below the
following stipulation written in bold letters in the sub-contract: "TIME IS ESSENTIAL, TO BE
FINISHED 5 JUNE' 67."

Claiming that defendant finished the construction in question only on June 20, 1967, plaintiff filed in
the Court of First Instance of Pampanga an action for recovery of consequential damages in the sum
of P85,000.00 with interest, plus attorney's fees and costs. The complaint alleged inter alia that "due
to the long unjustified delay committed by defendant, in open violation of his express written
agreement with plaintiff, the latter has suffered great irreparable loss and damage ... "

Defendant filed a motion to dismiss the complaint on the ground that venue of action was improperly
laid. The motion was premised on the stipulation printed at the back of the contract which reads:

14. That all actions arising out, or relating to this contract may be instituted in the
Court of First Instance of the City of Naga.

Plaintiff filed an opposition to the motion, claiming that their agreement to hold the venue in the Court
of First Instance of Naga City was merely optional to both contracting parties. In support thereof,
plaintiff cited the use of the word "may " in relation with the institution of any action arising out of the
contract.

The lower court, in resolving the motion to dismiss, ruled that "there was no sense in providing the
aforequoted stipulation, pursuant to Sec. 3 of Rule 4 of the Revised Rules of Court, if after all, the
parties are given the discretion or option of filing the action in their respective residences," and
thereby ordered the dismissal of the complaint.

23
Hence, this appeal.

The rule on venue of personal actions cognizable by the courts of first instance is found in Section 2
(b), Rule 4 of the Rules of Court, which provides that such "actions may be commenced and tried
where the defendant or any of the defendants resides or may be found, or where the plaintiff or any
of the plaintiffs resides, at the election of the plaintiff." The said section is qualified by the following
provisions of Section 3 of the same rule:

By written agreement of the parties the venue of an action may be changed or

transferred from one province to another.

Defendant stands firm on his contention that because of the aforequoted covenant
contained in par. 14 of the contract, he cannot be sued in any court except the Court
of First Instance of Naga City. We are thus called upon to rule on the issue as to
whether the stipulation of the parties on venue is restrictive in the sense that any
litigation arising from the contract can be filed only in the court of Naga City, or
merely permissive in that the parties may submit their disputes not only in Naga City
but also in the court where the defendant or the plaintiff resides, at the election of the
plaintiff, as provided for by Section 2 (b) Rule 4 of the Rules of Court.

It is well settled that the word "may" is merely permissive and operates to confer
discretion upon a party. Under ordinary circumstances, the term "may be" connotes
possibility; it does not connote certainty. "May" is an auxillary verb indicating liberty,
opportunity, permission or possibility. 1

In Nicolas vs. Reparations Commission 2, a case involving the interpretation of a stipulation as to venue
along lines similar to the present one, it was held that the agreement of the parties which provided that
"all legal actions arising out of this contract ... may be brought in and submitted to the jurisdiction of the
proper courts in the City of Manila," is not mandatory.

We hold that the stipulation as to venue in the contract in question is simply permissive. By the said
stipulation, the parties did not agree to file their suits solely and exclusively with the Court of First
Instance of Naga. They merely agreed to submit their disputes to the said court, without waiving their
right to seek recourse in the court specifically indicated in Section 2 (b), Rule 4 of the Rules of Court.

Since the complaint has been filed in the Court of First Instance of Pampanga, where the plaintiff
resides, the venue of action is properly laid in accordance with Section 2 (b), Rule 4 of the Rules of
Court.

WHEREFORE, the order appealed from is hereby set aside. Let the records be returned to the court
of origin for further proceedings. Costs against defendant-appellee.

SO ORDERED.

Barredo (Chairman), Aquino, De Castro and Ericta, JJ., concur.

Concepcion, Jr. and Abad Santos, J., are on leave.

24
 Republic of the Philippines
SUPREME COURT
Manila

SECOND DIVISION

G.R. No. L-51201 May 29, 1980

IN THE MATTER OF THE PETITION FOR CHANGE OF NAME OF MARIA ESTRELLA

VERONICA PRIMITIVA DUTERTE, ESTRELLA S. ALFON, petitioner,
vs.
REPUBLIC OF THE PHILIPPINES, respondent.

ABAD SANTOS, J.: ñé+ .£ªwp h!1

This is a petition filed pursuant to Republic Act No. 5440 to review an Order of the Court of First
Instance of Rizal, Branch XXIII, dated December 29, 1978, which partially denied petitioner's prayer
for a change of name. Only a question of law is involved and there is no controversy over the facts
which are well-stated in the questioned Order as follows: têñ.£îhqwâ £

This is verified petition filed on April 28, 1978 by petitioner Maria Estrella Veronica
Primitiva Duterte through her counsel, Atty. Rosauro Alvarez, praying that her name
be changed from Maria Estrella Veronica Primitiva Duterte to Estrella S. Alfon.

The notice setting the petition for hearing on December 14, 1978 at 8:30 o'clock in
the morning was published in the Times Journal in its issues of July 28, August 5
and 11, 1978 and a copy thereof together with a copy of the petition was furnished
the Office of the Solicitor General (Exhibits C, C-1, C-2 and C-3).

At the hearing of the petition on December 14, 1978, Atty. Rosauro Alvarez appeared
for the petitioner and Fiscal Donato Sor. Suyat, Jr. represented the office of the
Solicitor General, Upon motion of counsel for the petitioner, without objection on the
part of Fiscal Suyat, the Deputy Clerk of Court was appointed commissioner to
receive the evidence and to submit the same for resolution of the Court.

From the testimonial and document evidence presented, it appears that petitioner
Maria Estrella Veronica Primitiva Duterte was born on May 15, 1952 at the U.S.T.
Hospital (Exhibit A). She was registered at the local Civil Registrar's Office as Maria
Estrella Veronica Primitiva Duterte On June 15, 1952, she was baptized as Maria
Estrella Veronica Primitiva Duterte at the St. Anthony de Padua Church Singalong,
Manila (Exhibit B). Her parents are Filomeno Duterte and Estrella Veronica Primitiva
Duterte has been taken cared of by Mr. and Mrs. Hector Alfon. Petitioner and her
uncle, Hector Alfon, have been residing at 728 J.R. Yulo Street corner Ideal Street,
Mandaluyong, Metro Manila for twenty-three (23) years. When petitioner started
schooling, she used the name Estrella S. Alfon. She attended her first grade up to
fourth year high school at Stella Maris College using the name Estrella S. Alfon
(Exhibits E, E-1, E-2 and E-3). After graduating from high school she enrolled at the
Arellano University and finished Bachelor of Science in Nursing (Exhibit E-4). Her
scholastic records from elementary to college show that she was registered by the
name of Estrella S. Alfon. Petitioner has exercised her right of suffrage under the

25
 same name (Exhibit D). She has not committed any felony or misdemeanor (Exhibits
G, G-1, G-2, G-3 and G-4).

Petitioner has advanced the following reasons for filing the petition:

1. She has been using the name Estrella Alfon since her childhood;

2. She has been enrolled in the grade school and in college using the same name;

3. She has continuously used the name Estrella S. Alfon since her infancy and all
her friends and acquaintances know her by this name;

4. She has exercised her right of suffrage under the same name.

Section 5, Rule 103 of the Rules of Court provides:

Upon satisfactory proof in open court on the date fixed in the order that such order
has been published as directed and that the allegations of the petition are true, the
court shall if proper and reasonable cause appears for changing the name of the
petitioner adjudge that such name be changed in accordance with the prayer of the
petition.

The evidence submitted shows that the change of name from Maria Estrella Veronica
Primitiva Duterte to Estrella Alfon is not proper and reasonable with respect to the
surname. The fact that petitioner has been using a different surname and has
become known with such surname does not constitute proper and reasonable cause
to legally authorize and change her surname to Alfon. The birth certificate clearly
shows that the father of petitioner is Filomeno Duterte. Petitioner likewise admitted
this fact in her testimony. To allow petitioner to change her surname from Duterte to
Alfon is equivalent to allowing her to use her mother's surname. Article 364 of the
Civil Code provides:

Legitimate and legitimated children shall principally use the surname of the father.

If another purpose of the petitioner is to carry the surname of Alfon because her
uncle who reared her since childhood has the surname "Alfon" then the remedy is
not a petition for change of name.

WHEREFORE, the petition insofar as the first name is granted but denied with
respect to the surname. Petitioner is authorized to change her name from Maria
Estrella Veronica Primitiva Duterte to Estrella Alfon Duterte.

Let copy of this order be furnished the Local Civil Registrar of Pasig, Metro Manila
pursuant to Section 3, Rule 103 of the Rules of Court.

The lower court should have fully granted the petition.

The only reason why the lower court denied the petitioner's prayer to change her surname is that as
legitimate child of Filomeno Duterte and Estrella Alfon she should principally use the surname of
her father invoking Art. 364 of the Civil Code. But the word "principally" as used in the codal
provision is not equivalent to "exclusively" so that there is no legal obstacle if a legitimate or
legitimated child
26
should choose to use the surname of its mother to which it is equally entitled. Moreover, this Court in
Haw Liong vs. Republic, G.R. No. L-21194. April 29, 1966, 16 SCRA 677, 679, said: t êñ. £îhqw â£

The following may be considered, among others, as proper or reasonable causes

that may warrant the grant of a petitioner for change of name; (1) when the name is
ridiculous, tainted with dishonor, or is extremely difficult to write or pronounce; (2)
when the request for change is a consequence of a change of' status, such as when
a natural child is acknowledged or legitimated; and (3) when the change is necessary
to avoid confusion Tolentino, Civil Code of the Philippines, 1953 ed., Vol. 1, p. 660).

In the case at bar, it has been shown that petitioner has, since childhood, borne the name Estrella S.
Alfon although her birth records and baptismal certificate show otherwise; she was enrolled in the
schools from the grades up to college under the name Estrella S. Alfon; all her friends call her by
this name; she finished her course in Nursing in college and was graduated and given a diploma
under this name; and she exercised the right of suffrage likewise under this name. There is therefore
ample justification to grant fully her petition which is not whimsical but on the contrary is based on a
solid and reasonable ground, i.e. to avoid confusion.

WHEREFORE, the Order appealed from is hereby modified in that, the petitioner is allowed to
change not only her first name but also her surname so as to be known as ESTRELLA S. ALFON.
No costs.

SO ORDERED.

Barredo (Chairman), Aquino, Concepcion, Jr., and De Castro, JJ., concur. 1äwp hï1.ñ ët

27
3. Exceptions in the Statute

Republic of the Philippines

SUPREME COURT
Manila

SECOND DIVISION

G.R. No. 87416 April 8, 1991

CECILIO S. DE VILLA, petitioner,

vs.
THE HONORABLE COURT OF APPEALS, PEOPLE OF THE PHILIPPINES, HONORABLE JOB
B. MADAYAG, and ROBERTO Z. LORAYES, respondents.

San Jose Enriquez, Lacas Santos & Borje for petitioner.

Eduardo R. Robles for private respondent.

PARAS, J.:

This petition for review on certiorari seeks to reverse and set aside the decision* of the Court of
Appeals promulgated on February 1, 1989 in CA-G.R. SP No. 16071 entitled "Cecilio S. de Villa vs.
Judge Job B. Madayag, etc. and Roberto Z. Lorayes," dismissing the petition for certiorari filed
therein.

The factual backdrop of this case, as found by the Court of Appeals, is as follows:

On October 5, 1987, petitioner Cecilio S. de Villa was charged before the Regional Trial
Court of the National Capital Judicial Region (Makati, Branch 145) with violation of Batas
Pambansa Bilang 22, allegedly committed as follows:

That on or about the 3rd day of April 1987, in the municipality of Makati, Metro
Manila, Philippines and within the jurisdiction of this Honorable Court, the above-
named accused, did, then and there willfully, unlawfully and feloniously make or draw
and issue to ROBERTO Z. LORAYEZ, to apply on account or for value a Depositors
Trust Company Check No. 3371 antedated March 31, 1987, payable to herein
complainant in the total amount of U.S. $2,500.00 equivalent to P50,000.00, said
accused well knowing that at the time of issue he had no sufficient funds in or credit
with drawee bank for payment of such check in full upon its presentment which
check when presented to the drawee bank within ninety (90) days from the date
thereof was subsequently dishonored for the reason "INSUFFICIENT FUNDS" and
despite receipt of notice of such dishonor said accused failed to pay said ROBERTO
Z. LORAYEZ the amount of P50,000.00 of said check or to make arrangement for full
payment of the same within five (5) banking days after receiving said notice.

After arraignment and after private respondent had testified on direct examination, petitioner
moved to dismiss the Information on the following grounds: (a) Respondent court has no
jurisdiction over the offense charged; and (b) That no offense was committed since the check

28
 involved was payable in dollars, hence, the obligation created is null and void pursuant to
Republic Act No. 529 (An Act to Assure Uniform Value of Philippine Coin and Currency).

On July 19, 1988, respondent court issued its first questioned orders stating:

Accused's motion to dismiss dated July 5, 1988, is denied for lack of merit.

Under the Bouncing Checks Law (B.P. Blg. 22), foreign checks, provided they are
either drawn and issued in the Philippines though payable outside thereof, or made
payable and dishonored in the Philippines though drawn and issued outside thereof,
are within the coverage of said law. The law likewise applied to checks drawn against
current accounts in foreign currency.

Petitioner moved for reconsideration but his motion was subsequently denied by respondent
court in its order dated September 6, 1988, and which reads:

Accused's motion for reconsideration, dated August 9, 1988, which was opposed by
the prosecution, is denied for lack of merit.1âwphi1

The Bouncing Checks Law is applicable to checks drawn against current accounts in
foreign currency (Proceedings of the Batasang Pambansa, February 7, 1979, p.
1376, cited in Makati RTC Judge (now Manila City Fiscal) Jesus F. Guerrero's The
Ramifications of the Law on Bouncing Checks, p. 5). (Rollo, Annex "A", Decision, pp.
20-22).

A petition for certiorari seeking to declare the nullity of the aforequoted orders dated July 19,
1988 and September 6, 1988 was filed by the petitioner in the Court of Appeals wherein he
contended:

(a) That since the questioned check was drawn against the dollar account of
petitioner with a foreign bank, respondent court has no jurisdiction over the same or
with accounts outside the territorial jurisdiction of the Philippines and that Batas
Pambansa Bilang 22 could have not contemplated extending its coverage over
dollar accounts;

(b) That assuming that the subject check was issued in connection with a private
transaction between petitioner and private respondent, the payment could not be
legally paid in dollars as it would violate Republic Act No. 529; and

(c) That the obligation arising from the issuance of the questioned check is null and
void and is not enforceable with the Philippines either in a civil or criminal suit. Upon
such premises, petitioner concludes that the dishonor of the questioned check
cannot be said to have violated the provisions of Batas Pambansa Bilang 22. (Rollo,
Annex "A", Decision, p. 22).

On February 1, 1989, the Court of Appeals rendered a decision, the decretal portion of which
reads:

WHEREFORE, the petition is hereby dismissed. Costs against petitioner.

SO ORDERED. (Rollo, Annex "A", Decision, p. 5)

29
 A motion for reconsideration of the said decision was filed by the petitioner on February 7,
1989 (Rollo, Petition, p. 6) but the same was denied by the Court of Appeals in its resolution
dated March 3, 1989 (Rollo, Annex "B", p. 26).

Hence, this petition.

In its resolution dated November 13, 1989, the Second Division of this Court gave due
course to the petition and required the parties to submit simultaneously their respective
memoranda (Rollo, Resolution, p. 81).

The sole issue in this case is whether or not the Regional Trial Court of Makati has
jurisdiction over the case in question.

The petition is without merit.

Jurisdiction is the power with which courts are invested for administering justice, that is, for
hearing and deciding cases (Velunta vs. Philippine Constabulary, 157 SCRA 147 [1988]).

Jurisdiction in general, is either over the nature of the action, over the subject matter, over
the person of the defendant, or over the issues framed in the pleadings (Balais vs. Balais,
159 SCRA 37 [1988]).

Jurisdiction over the subject matter is determined by the statute in force at the time of
commencement of the action (De la Cruz vs. Moya, 160 SCRA 538 [1988]).

The trial court's jurisdiction over the case, subject of this review, can not be questioned.

Sections 10 and 15(a), Rule 110 of the Rules of Court specifically provide that:

Sec. 10. Place of the commission of the offense. The complaint or information is
sufficient if it can be understood therefrom that the offense was committed or some
of the essential ingredients thereof occured at some place within the jurisdiction of
the court, unless the particular place wherein it was committed constitutes an
essential element of the offense or is necessary for identifying the offense charged.

Sec. 15. Place where action is to be instituted. (a) Subject to existing laws, in all
criminal prosecutions the action shall be instituted and tried in the court of the
municipality or territory where the offense was committed or any of the essential
ingredients thereof took place.

In the case of People vs. Hon. Manzanilla (156 SCRA 279 [1987] cited in the case of Lim vs.
Rodrigo, 167 SCRA 487 [1988]), the Supreme Court ruled "that jurisdiction or venue is
determined by the allegations in the information."

The information under consideration specifically alleged that the offense was committed in
Makati, Metro Manila and therefore, the same is controlling and sufficient to vest jurisdiction
upon the Regional Trial Court of Makati. The Court acquires jurisdiction over the case and
over the person of the accused upon the filing of a complaint or information in court which
initiates a criminal action (Republic vs. Sunga, 162 SCRA 191 [1988]).

30
 Moreover, it has been held in the case of Que v. People of the Philippines (154 SCRA 160
[1987] cited in the case of People vs. Grospe, 157 SCRA 154 [1988]) that "the determinative
factor (in determining venue) is the place of the issuance of the check."

On the matter of venue for violation of Batas Pambansa Bilang 22, the Ministry of
Justice, citing the case of People vs. Yabut (76 SCRA 624 [1977], laid down the
following
guidelines in Memorandum Circular No. 4 dated December 15, 1981, the pertinent portion of
which reads:

(1) Venue of the offense lies at the place where the check was executed and
delivered; (2) the place where the check was written, signed or dated does not
necessarily fix the place where it was executed, as what is of decisive importance is
the delivery thereof which is the final act essential to its consummation as an
obligation; . . . (Res. No. 377, s. 1980, Filtex Mfg. Corp. vs. Manuel Chua, October
28, 1980)." (See The Law on Bouncing Checks Analyzed by Judge Jesus F.
Guerrero, Philippine Law Gazette, Vol. 7. Nos. 11 & 12, October-December, 1983, p.
14).

It is undisputed that the check in question was executed and delivered by the petitioner to
herein private respondent at Makati, Metro Manila.

However, petitioner argues that the check in question was drawn against the dollar
account of petitioner with a foreign bank, and is therefore, not covered by the Bouncing
Checks Law (B.P. Blg. 22).

But it will be noted that the law does not distinguish the currency involved in the case. As the
trial court correctly ruled in its order dated July 5, 1988:

Under the Bouncing Checks Law (B.P. Blg. 22), foreign checks, provided they
are either drawn and issued in the Philippines though payable outside thereof . . .
are within the coverage of said law.

It is a cardinal principle in statutory construction that where the law does not distinguish
courts should not distinguish. Parenthetically, the rule is that where the law does not make
1 âwphi 1

any exception, courts may not except something unless compelling reasons exist to justify it
(Phil. British Assurance Co., Inc. vs. IAC, 150 SCRA 520 [1987]).

More importantly, it is well established that courts may avail themselves of the actual
proceedings of the legislative body to assist in determining the construction of a statute of
doubtful meaning (Palanca vs. City of Manila, 41 Phil. 125 [1920]). Thus, where there is
doubts as to what a provision of a statute means, the meaning put to the provision during the
legislative deliberation or discussion on the bill may be adopted (Arenas vs. City of San
Carlos, 82 SCRA 318 [1978]).

The records of the Batasan, Vol. III, unmistakably show that the intention of the lawmakers is
to apply the law to whatever currency may be the subject thereof. The discussion on the floor
of the then Batasang Pambansa fully sustains this view, as follows:

xxx xxx xxx

THE SPEAKER. The Gentleman from Basilan is recognized.

31
 MR. TUPAY. Parliamentary inquiry, Mr. Speaker.

THE SPEAKER. The Gentleman may proceed.

MR. TUPAY. Mr. Speaker, it has been mentioned by one of the Gentlemen who
interpellated that any check may be involved, like U.S. dollar checks, etc. We are
talking about checks in our country. There are U.S. dollar checks, checks, in our
currency, and many others.

THE SPEAKER. The Sponsor may answer that inquiry.

MR. MENDOZA. The bill refers to any check, Mr. Speaker, and this check may be a
check in whatever currency. This would not even be limited to U.S. dollar checks.
The check may be in French francs or Japanese yen or deutschunorhs. (sic.) If
drawn, then this bill will apply.

MR TUPAY. So it include U.S. dollar checks.

MR. MENDOZA. Yes, Mr. Speaker.

xxx xxx xxx

(p. 1376, Records of the Batasan, Volume III; Emphasis supplied).

PREMISES CONSIDERED, the petition is DISMISSED for lack of merit.

Melencio-Herrera, Padilla, Sarmiento and Regalado, JJ., concur.

32
4. General Terms following Special Terms (Ejusdem Generis)

Republic of the Philippines

SUPREME COURT
Manila

EN BANC

G.R. No. L-14787 January 28, 1961

COLGATE-PALMOLIVE PHILIPPINE, INC., petitioner,

vs.
HON. PEDRO M. GIMENEZ as Auditor General and ISMAEL MATHAY as AUDITOR OF THE
CENTRAL BANK OF THE PHILIPPINES, respondents.

Ross, Selph and Carrascoso for petitioner.

Office of the Solicitor General for respondents.

GUTIERREZ DAVID, J.:

The petitioner Colgate-Palmolive Philippines, Inc. is a corporation duly organized and existing under
Philippine laws engaged in the manufacture of toilet preparations and household remedies. On
several occasions, it imported from abroad various materials such as irish moss extract, sodium
benzoate, sodium saccharinate precipitated calcium carbonate and dicalcium phosphate, for use as
stabilizers and flavoring of the dental cream it manufactures. For every importation made of these
materials, the petitioner paid to the Central Bank of the Philippines the 17% special excise tax on
the foreign exchange used for the payment of the cost, transportation and other charges incident
thereto, pursuant to Republic Act No. 601, as amended, commonly known as the Exchange Tax
Law.

On March 14, 1956, the petitioner filed with the Central Bank three applications for refund of the
17% special excise tax it had paid in the aggregate sum of P113,343.99. The claim for refund was
based on section 2 of Republic Act 601, which provides that "foreign exchange used for the
payment of the cost, transportation and/or other charges incident to the importation into the
Philippines of . . . stabilizer and flavors . . . shall be refunded to any importer making application
therefor, upon satisfactory proof of actual importation under the rules and regulations to be
promulgated pursuant to section seven thereof." After the applications were processed by the
officer-in-charge of the Exchange Tax Administration of the Central Bank, that official advised, the
petitioner that of the total sum of P113,343.99 claimed by it for refund, the amount of P23,958.13
representing the 17% special excise tax on the foreign exchange used to import irish moss extract,
sodium benzoate and precipitated calcium carbonate had been approved. The auditor of the Central
Bank, however, refused to pass in audit its claims for refund even for the reduced amount fixed by
the Officer-in- Charge of the Exchange Tax Administration, on the theory that toothpaste stabilizers
and flavors are not exempt under section 2 of the Exchange Tax Law.

Petitioner appealed to the Auditor General, but the latter or, December 4, 1958 affirmed the ruling of
the auditor of the Central Bank, maintaining that the term "stabilizer and flavors" mentioned in
section 2 of the Exchange Tax Law refers only to those used in the preparation or manufacture of
food or food products. Not satisfied, the petitioner brought the case to this Court thru the present
petition for review.

33
The decisive issue to be resolved is whether or not the foreign exchange used by petitioner for the
importation of dental cream stabilizers and flavors is exempt from the 17% special excise tax
imposed by the Exchange Tax Law, (Republic Act No. 601) so as to entitle it to refund under section
2 thereof, which reads as follows:

SEC, 2. The tax collected under the preceding section on foreign exchange used for the
payment of the cost, transportation and/or other charges incident to importation into the
Philippines of rice, flour, canned milk, cattle and beef, canned fish, soya beans, butterfat,
chocolate, malt syrup, tapioca, stabilizer and flavors, vitamin concentrate, fertilizer, poultry
feed; textbooks, reference books, and supplementary readers approved by the Board of
Textbooks and/or established public or private educational institutions; newsprint imported by
or for publishers for use in the publication of books, pamphlets, magazines and newspapers;
book paper, book cloth, chip board imported for the printing of supplementary readers
(approved by the Board of Textbooks) to be supplied to the Government under contracts
perfected before the approval of this Act, the quantity thereof to be certified by the Director of
Printing; anesthetics, anti-biotics, vitamins, hormones, x-ray films, laboratory reagents,
biologicals, dental supplies, and pharmaceutical drugs necessary for compounding
medicines; medical and hospital supplies listed in the appendix to this Act, in quantities to be
certified by the Director of Hospitals as actually needed by the hospitals applying therefor;
drugs and medicines listed in the said appendix; and such other drugs and medicines as
may be certified by the Secretary of Health from time to time to promote and protect the
health of the people of the Philippines shall be refunded to any importer making application
therefor, upon satisfactory proof of actual importation under the rules and regulations to be
promulgated pursuant to section seven thereof." (Emphasis supplied.)

The ruling of the Auditor General that the term "stabilizer and flavors" as used in the law refers only
to those materials actually used in the preparation or manufacture of food and food products is
based, apparently, on the principle of statutory construction that "general terms may be restricted by
specific words, with the result that the general language will be limited by the specific language
which indicates the statute's object and purpose." (Statutory Construction by Crawford, 1940 ed. p.
324-325.) The rule, however, is, in our opinion, applicable only to cases where, except for one
general term, all the items in an enumeration belong to or fall under one specific class. In the case at
bar, it is true that the term "stabilizer and flavors" is preceded by a number of articles that may be
classified as food or food products, but it is likewise true that the other items immediately following it
do not belong to the same classification. Thus "fertilizer" and "poultry feed" do not fall under the
category of food or food products because they are used in the farming and poultry industries,
respectively. "Vitamin concentrate" appears to be more of a medicine than food or food product, for,
as matter of fact, vitamins are among those enumerated in the list of medicines and drugs appearing
in the appendix to the law. It should also here be stated that "cattle", which is among those listed
preceding the term in question, includes not only those intended for slaughter but also those for
breeding purposes. Again, it is noteworthy that under, Republic Act No. 814 amending the above-
quoted section of Republic Act No. 601, "industrial starch", which does not always refer to food for
human consumption, was added among the items grouped with "stabilizer and flavors". Thus, on the
basis of the grouping of the articles alone, it cannot validly be maintained that the term "stabilizer
and flavors" as used in the above-quoted provision of the Exchange Tax Law refers only to those
used in the manufacture of food and food products. This view is supported by the principle "Ubi lex
non distinguish nec nos distinguire debemos", or "where the law does not distinguish, neither do we
distinguish". (Ligget & Myers Tobacco Company vs. Collector of Internal Revenue, 53 Off. Gaz. No.
15, page 4831). Since the law does not distinguish between "stabilizer and flavors" used in the
preparation of food and those used in the manufacture of toothpaste or dental cream, we are not
authorized to make any distinction and must construe the words in their general sense. The rule of
construction that general and unlimited terms are restrained and limited by particular recitals when
used in connection with them, does not require the rejection of general terms entirely. It is intended

34
merely as an aid in ascertaining the intention of the legislature and is to be taken in connection with
other rules of construction. (See Handbook of the Construction and Interpretation of Laws by Black,
p. 215.216, 2nd ed.)

Having arrived at the above conclusion, we deem it now idle to pass upon the other questions raised
by the parties.

WHEREFORE, the decision under review is reversed and the respondents are hereby ordered to
audit petitioners applications for refund which were approved by the Officer-in-Charge of the
Exchange Tax Administration in the total amount of P23,958.13.

Bengzon, Bautista Angelo, Concepcion, Reyes, J.B.L., Barrera, Paredes and Dizon, JJ., concur.
Labrador, J., reserves his vote.

35
 Republic of the Philippines
SUPREME COURT
Manila

SECOND DIVISION

G.R. No. L-47757-61 January 28, 1980

THE PEOPLE OF THE PHILIPPINES, ABUNDIO R. ELLO, As 4th Assistant of Provincial Bohol
VICENTE DE LA SERNA. JR., as complainant all private prosecutor, petitioners,
vs.
HON. VICENTE B. ECHAVES, JR., as Judge of the Court of First Instance of Bohol Branch II,
ANO DACULLO, GERONIMO OROYAN, MARIO APARICI, RUPERTO CAJES and MODESTO S
SUELLO, respondents.

AQUINO, J.:p

The legal issue in this case is whether Presidential Decree No. 772, which penalizes squatting and similar acts, applies to agricultural lands.
The decree (which took effect on August 20, 1975) provides:

SECTION 1. Any person who, with the use of force, intimidation or threat, or taking
advantage of the absence or tolerance of the landowner, succeeds in occupying or
possessing the property of the latter against his will for residential, commercial or
any other purposes, shall be punished by an imprisonment ranging from six months
to one year or a fine of not less than one thousand nor more than five thousand
pesos at the discretion of the court, with subsidiary imprisonment in case of
insolvency. (2nd paragraph is omitted.)

The record shows that on October 25, 1977 Fiscal Abundio R. Ello filed with the lower court separate
informations against sixteen persons charging them with squatting as penalized by Presidential
Decree No. 772. The information against Mario Aparici which is similar to the other fifteen
informations, reads:

That sometime in the year 1974 continuously up to the present at barangay

Magsaysay, municipality of Talibon, province of Bohol, Philippines and within the
jurisdiction of this Honorable Court, the above-named accused, with stealth and
strategy, enter into, occupy and cultivate a portion of a grazing land physically
occupied, possessed and claimed by Atty. Vicente de la Serna, Jr. as successor to
the pasture applicant Celestino de la Serna of Pasture Lease Application No. 8919,
accused's entrance into the area has been and is still against the win of the offended
party; did then and there willfully, unlawfully, and feloniously squat and cultivate a
portion of the said grazing land; said cultivating has rendered a nuisance to and has
deprived the pasture applicant from the full use thereof for which the land applied for
has been intended, that is preventing applicant's cattle from grazing the whole area,
thereby causing damage and prejudice to the said applicant-possessor-occupant,
Atty. Vicente de la Serna, Jr. (sic)

Five of the informations, wherein Ano Dacullo, Geronimo Oroyan, Mario Aparici, Ruperto Cajes and
Modesto Suello were the accused, were raffled to Judge Vicente B. Echaves, Jr. of Branch II
(Criminal Cases Nos. 1824, 1828, 1832, 1833 and 1839, respectively).

36
Before the accused could be arraigned, Judge Echaves motu proprio issued an omnibus order dated
December 9, 1977 dismissing the five informations on the grounds (1) that it was alleged that the
accused entered the land through "stealth and strategy", whereas under the decree the entry should
be effected "with the use of force, intimidation or threat, or taking advantage of the absence or
tolerance of the landowner", and (2) that under the rule of ejusdem generis the decree does not
apply to the cultivation of a grazing land.

Because of that order, the fiscal amended the informations by using in lieu of "stealth and strategy"
the expression "with threat, and taking advantage of the absence of the ranchowner and/or tolerance
of the said ranchowner". The fiscal asked that the dismissal order be reconsidered and that the
amended informations be admitted.

The lower court denied the motion. It insisted that the phrase "and for other purposes" in the decree
does not include agricultural purposes because its preamble does not mention the Secretary of
Agriculture and makes reference to the affluent class.

From the order of dismissal, the fiscal appealed to this Court under Republic Act No. 5440. The
appeal is devoid of merit.

We hold that the lower court correctly ruled that the decree does not apply to pasture lands because
its preamble shows that it was intended to apply to squatting in urban communities or more
particularly to illegal constructions in squatter areas made by well-to-do individuals. The squating
complained of involves pasture lands in rural areas.

The preamble of the decree is quoted below:

WHEREAS, it came to my knowledge that despite the issuance of Letter of

Instruction No. 19 dated October 2, 1972, directing the Secretaries of National
Defense, Public Work. 9 and communications, Social Welfare and the Director of
Public Works, the PHHC General Manager, the Presidential Assistant on Housing
and Rehabilitation Agency, Governors, City and Municipal Mayors, and City and
District Engineers, "to remove an illegal constructions including buildings on and
along esteros and river banks, those along railroad tracks and those built without
permits on public and private property." squatting is still a major problem in urban
communities all over the country;

WHEREAS, many persons or entities found to have been unlawfully occupying public
and private lands belong to the affluent class;

WHEREAS, there is a need to further intensify the government's drive against this
illegal and nefarious practice.

It should be stressed that Letter of Instruction No. 19 refers to illegal constructions on public and
private property. It is complemented by Letter of Instruction No. 19-A which provides for the
relocation of squatters in the interest of public health, safety and peace and order.

On the other hand, it should be noted that squatting on public agricultural lands, like the grazing
lands involved in this case, is punished by Republic Act No. 947 which makes it unlawful for any
person, corporation or association to forcibly enter or occupy public agricultural lands. That law
provides:

37
 SECTION 1. It shall be unlawful for any person corporation or association to enter or
occupy, through force, intimidation, threat, strategy or stealth, any public agriculture
land including such public lands as are granted to private individuals under the
provision of the Public Land Act or any other laws providing for the of public
agriculture lands in the Philippines and are duly covered by the corresponding
applications for the notwithstanding standing the fact that title thereto still remains in
the Government or for any person, natural or judicial to investigate induce or force
another to commit such acts.

Violations of the law are punished by a fine of not exceeding one thousand or imprisonment for not
more than one year, or both such fine and imprisonment in the discretion of the court, with subsidiary
imprisonment in case of insolvency. (See People vs. Lapasaran 100 Phil. 40.)

The rule of ejusdem generis (of the same kind or species) invoked by the trial court does not apply to
this case. Here, the intent of the decree is unmistakable. It is intended to apply only to urban
communities, particularly to illegal constructions. The rule of ejusdem generis is merely a tool of
statutory construction which is resorted to when the legislative intent is uncertain (Genato
Commercial Corp. vs. Court of Tax Appeals, 104 Phil. 615,618; 28 C.J.S. 1049-50).

WHEREFORE, the trial court's order of dismissal is affirmed. No costs.

SO ORDERED.

Barredo, Antonio, Concepcion Jr. and Abad Santos, J., concur.

38
FIRST DIVISION

G.R. No. L-33693-94 May 31, 1979

MISAEL P. VERA, as Commissioner of Internal Revenue, and THE FAIR TRADE BOARD, Petitioner,
vs. HON. SERAFIN R. CUEVAS, as Judge of the Court of First Instance of Manila, Branch IV,
INSTITUTE OF
EVAPORATED FILLED MILK MANUFACTURERS OF THE PHILIPPINES, INC., CONSOLIDATED MILK
COMPANY (PHIL.) INC., and MILK INDUSTRIES, INC., Respondents.

Solicitor General Felix Q. Antonio and Solicitor Bernardo P. Pardo for petitioners.

Sycip, Salazar, Luna, Manalo & Feliciano for private respondents.

DE CASTRO, J.:

This is a petition for certiorari with preliminary injunction to review the decision rendered by
respondent judge, in Civil Case No. 52276 and in Special Civil Action No. 52383 both of the Court of
First Instance of Manila.

Plaintiffs, in Civil Case No. 52276 private respondents herein, are engaged in the manufacture, sale
and distribution of filled milk products throughout the Philippines. The products of private
respondent, Consolidated Philippines Inc. are marketed and sold under the brand Darigold whereas
those of private respondent, General Milk Company (Phil.), Inc., under the brand "Liberty;" and
those of private respondent, Milk Industries Inc., under the brand "Dutch Baby." Private
respondent, Institute of Evaporated Filled Milk Manufacturers of the Philippines, is a corporation
organized for the principal purpose of upholding and maintaining at its highest the standards of
local filled milk industry, of which all the other private respondents are members.

Civil Case No. 52276 is an action for declaratory relief with ex-parte petition for preliminary injunction
wherein plaintiffs pray for an adjudication of their respective rights and obligations in relation to
the enforcement of Section 169 of the Tax Code against their filled milk products.

The controversy arose from the order of defendant, Commissioner of Internal Revenue now petitioner
herein, requiring plaintiffs- private respondents to withdraw from the market all of their filled milk
products which do not bear the inscription required by Section 169 of the Tax Code within fifteen
(15) days from receipt of the order with the explicit warning that failure of plaintiffs' private
39
respondents to

40
 comply with said order will result in the institution of the necessary action against any
violation of the aforesaid order. Section 169 of the Tax Code reads as follows:

Section 169. Inscription to be placed on skimmed milk. - All condensed skimmed milk and all
milk in whatever form, from which the fatty part has been removed totally or in part, sold or put
on sale in the Philippines shall be clearly and legibly marked on its immediate containers, and
in all the language in which such containers are marked, with the words, "This milk is not
suitable for nourishment for infants less than one year of age," or with other equivalent words.

The Court issued a writ of preliminary injunction dated February 16, 1963 restraining the
Commissioner of Internal Revenue from requiring plaintiffs' private respondents to print on the
labels of their rifled milk products the words, "This milk is not suitable for nourishment for infants
less than one year of age or words of similar import, " as directed by the above quoted provision
of Law, and from taking any action to enforce the above legal provision against the plaintiffs' private
respondents in connection with their rifled milk products, pending the final determination of the
case, Civil Case No. 52276, on the merits.

On July 25, 1969, however, the Office of the Solicitor General brought an appeal from the said order
by way of certiorari to the Supreme Court. 1In view thereof, the respondent court in the meantime
suspended disposition of these cases but in view of the absence of any injunction or restraining
order from the Supreme Court, it resumed action on them until their final disposition therein.

Special Civil Action No. 52383, on the other hand, is an action for prohibition and injunction with
a petition for preliminary injunction. Petitioners therein pray that the respondent Fair Trade
Board desist from further proceeding with FTB I.S. No. I . entitled "Antonio R. de Joya vs.
Institute of Evaporated Milk Manufacturers of the Philippines, etc." pending final determination of
Civil Case No. 52276. The facts of this special civil action show that on December 7, 1962, Antonio
R. de Joya and Sufronio Carrasco, both in their individual capacities and in their capacities as
Public Relations Counsel and President of the Philippine Association of Nutrition, respectively,
filed FTB I.S. No. 1 with Fair Trade Board for misleading advertisement, mislabeling and/or
misbranding. Among other things, the complaint filed include the charge of omitting to state in
their labels any statement sufficient to Identify their filled milk products as "imitation milk" or as
an imitation of genuine cows milk. and omitting to mark the immediate containers of their filled
milk products with the words: "This milk is not suitable for nourishment for infants less than one
year of age or with other equivalent words as required under Section 169 of the Tax Code. The
Board proceeded to hear the complaint until it received the writ of preliminary injunction issued
by the Court of First Instance on March 19, 1963.chanroblesvirtualawlibrary

Upon agreement of the parties, Civil Case No. 52276 and Special Civil Action No. 52383 were
heard jointly being intimately related with each other, with common facts and issues being also
41
involved

42
therein. On April 16, 1971, the respondent court issued its decision, the dispositive part of which
reads as follows:

Wherefore, judgment is hereby rendered:

In Civil Case No. 52276:

(a) Perpetually restraining the defendant, Commissioner of Internal Revenue, his agents,
or employees from requiring plaintiffs to print on the labels of their filled milk products the
words: "This milk is not suitable for nourishment for infants less than one year of age" or
words with equivalent import and declaring as nun and void and without authority in law, the
order of said defendant dated September 28, 1961, Annex A of the complaint, and the Ruling
of the Secretary of Finance, dated November 12, 1962, Annex G of the complaint; and

In Special Civil Action No. 52383:

(b) Restraining perpetually the respondent Fair Trade Board, its agents or employees from
continuing in the investigation of the complaints against petitioners docketed as FTB I.S. No. 2, or
any charges related to the manufacture or sale by the petitioners of their filled milk products
and declaring as null the proceedings so far undertaken by the respondent Board on said
complaints. (pp. 20- 21, Rollo).

From the above decision of the respondent court, the Commissioner of Internal Revenue and the Fair
Trade Board joined together to file the present petition for certiorari with preliminary injunction,
assigning the following errors:

I. THE LOWER COURT ERRED IN RULING THAT SEC. TION 169 OF THE TAX CODE HAS
BEEN REPEALED BY IMPLICATION.

II. THE LOWER COURT ERRED IN RULING THAT SECTION 169 OF THE TAX CODE HAS LOST ITS
TAX PURPOSE, AND THAT COMMISSIONER NECESSARILY LOST HIS AUTHORITY TO ENFORCE THE SAME
AND THAT THE PROPER AUTHORITY TO PROMOTE THE HEALTH OF INFANTS IS THE FOOD
AND DRUG ADMINISTRATION, THE SECRETARY OF HEALTH AND THE SECRETARY OF JUSTICE, AS
PROVIDED FOR IN RA 3720, NOT THE COMMISSIONER OF INTERNAL REVENUE.

43
 III. THE LOWER COURT ERRED IN RULING THAT THE POWER TO INVESTIGATE AND TO
PROSECUTE VIOLATIONS OF FOOD LAWS IS ENTRUSTED TO THE FOOD AND DRUG INSPECTION,
THE FOOD AND DRUG ADMINISTRATION, THE SECRETARY OF HEALTH AND THE SECRETARY OF
JUSTICE, AND THAT THE FAIR TRADE BOARD IS WITHOUT JURISDICTION TO INVESTIGATE AND
PROSECUTE ALLEGED MISBRANDING, MISLABELLING AND/OR MISLEADING ADVERTISEMENT OF
FILLED MILK PRODUCTS. (pp, 4-5, Rollo).

The lower court did not err in ruling that Section 169 of the Tax Code has been repealed by
implication. Section 169 was enacted in 1939, together with Section 141 (which imposed a Specific
tax on skimmed milk) and Section 177 (which penalized the sale of skimmed milk without payment of
the specific tax and without the legend required by Section 169). However, Section 141 was
expressly repealed by Section 1 of Republic Act No. 344, and Section 177, by Section 1 of Republic
Act No. 463. By the express repeal of Sections 141 and 177, Section 169 became a merely
declaratory provision, without a tax purpose, or a penal sanction.

Moreover, it seems apparent that Section 169 of the Tax Code does not apply to filled milk. The
use of the specific and qualifying terms "skimmed milk" in the headnote and "condensed skimmed
milk" in the text of the cited section, would restrict the scope of the general clause "all milk, in
whatever form, from which the fatty pat has been removed totally or in part." In other words, the
general clause is restricted by the specific term "skimmed milk" under the familiar rule of
ejusdem generis that general and unlimited terms are restrained and limited by the particular
terms they follow in the statute.

Skimmed milk is different from filled milk. According to the "Definitions, Standards of Purity,
Rules and Regulations of the Board of Food Inspection," skimmed milk is milk in whatever form
from which the fatty part has been removed. Filled milk, on the other hand, is any milk, whether
or not condensed, evaporated concentrated, powdered, dried, dessicated, to which has been
added or which has been blended or compounded with any fat or oil other than milk fat so that
the resulting product is an imitation or semblance of milk cream or skim milk." The difference,
therefore, between skimmed milk and filled milk is that in the former, the fatty part has been
removed while in the latter, the fatty part is likewise removed but is substituted with refined
coconut oil or corn oil or both. It cannot then be readily or safely assumed that Section 169
applies both to skimmed milk and filled milk.

The Board of Food Inspection way back in 1961 rendered an opinion that filled milk does not
come within the purview of Section 169, it being a product distinct from those specified in the said
Section since the removed fat portion of the milk has been replaced with coconut oil and Vitamins
A and D as fortifying substances (p. 58, Rollo). This opinion bolsters the Court's stand as to its
interpretation of the scope of Section 169. Opinions and rulings of officials of the government
called upon to execute or implement administrative laws command much respect and weight.
(Asturias Sugar Central Inc. vs.
44
Commissioner of Customs, G. R. No. L-19337, September 30, 1969, 29 SCRA 617; Tan, et. al. vs. The

45
 Municipality of Pagbilao et. al., L-14264, April 30, 1963, 7 SCRA 887; Grapilon vs. Municipal Council
of Carigara L-12347, May 30, 1961, 2 SCRA 103).

This Court is, likewise, induced to the belief that filled milk is suitable for nourishment for infants
of all ages. The Petitioners themselves admitted that: "the filled milk products of the petitioners
(now private respondents) are safe, nutritious, wholesome and suitable for feeding infants of all
ages" (p. 44, Rollo) and that "up to the present, Filipino infants fed since birth with filled milk have
not suffered any defects, illness or disease attributable to their having been fed with filled milk."
(p. 45, Rollo).

There would seem, therefore, to be no dispute that filled milk is suitable for feeding infants of
all ages. Being so, the declaration required by Section 169 of the Tax Code that filled milk is
not suitable for nourishment for infants less than one year of age would, in effect, constitute a
deprivation of property without due. process of law.

Section 169 is being enforced only against respondent manufacturers of filled milk product and not as
against manufacturers, distributors or sellers of condensed skimmed milk such as SIMILAC,
SMA, BREMIL, ENFAMIL, OLAC, in which, as admitted by the petitioner, the fatty part has been
removed and substituted with vegetable or corn oil. The enforcement of Section 169 against the
private respondents only but not against other persons similarly situated as the private
respondents amounts to an unconstitutional denial of the equal pro petition of the laws, for the
law, equally enforced, would similarly offend against the Constitution. Yick Wo vs. Hopkins, 118
U.S. 356,30 L. ed. 220).

As stated in the early part of this decision, with the repeal of Sections 141 and 177 of the Tax
Code, Section 169 has lost its tax purpose. Since Section 169 is devoid of any tax purpose,
petitioner Commissioner necessarily lost his authority to enforce the same. This was so held by his
predecessor immediately after Sections 141 and 177 were repealed in General Circular No. V-85
as stated in paragraph IX of the Partial Stipulation of facts entered into by the parties, to wit:

... As the act of sewing skimmed milk without first paying the specific tax thereon is no longer
unlawful and the enforcement of the requirement in regard to the placing of the proper legend
on its immediate containers is a subject which does not come within the jurisdiction of the
Bureau of Internal Revenue, the penal provisions of Section 177 of the said Code having been
repealed by Republic Act No. 463. (p. 102, Rollo).

Petitioner's contention that he still has jurisdiction to enforce Section 169 by virtue of Section 3
of the Tax Code which provides that the Bureau of Internal Revenue shall also "give effect to
and administer the supervisory and police power conferred to it by this Code or other laws" is
46
untenable. The Bureau of Internal Revenue may claim police power only when necessary in the
enforcement of its principal

47
powers and duties consisting of the "collection of all national internal revenue taxes, fees and charges,
and the enforcement of all forfeitures, penalties and fines connected therewith." The enforcement
of Section 169 entails the promotion of the health of the nation and is thus unconnected with any
tax purpose. This is the exclusive function of the Food and Drug Administration of the Department of
Health as provided for in Republic Act No. 3720. In particular, Republic Act No. 3720 provides:

Section 9............It shall be the duty of the Board (Food and Drug Inspection), conformably with
the
rules and regulations, to hold hearings and conduct investigations relative to matters touching
the Administration of this Act, to investigate processes of food, drug and cosmetic
manufacture and to subject reports to the Food and Drug Administrator, recommending food
and drug standards for adoption. Said Board shall also perform such additional functions,
properly within the scope of the administration thereof, as maybe assigned to it by the Food and
Drug Administrator. The decisions of the Board shall be advisory to the Food and Drug
Administrator.

Section 26. ...

xxx xxx xxx

(c) Hearing authorized or required by this Act shall be conducted by the Board of Food and
Drug Inspection which shall submit recommendation to the Food and Drug Administrator.

(d) When it appears to the Food and Drug Administrator from the reports of the Food and
Drug Laboratory that any article of food or any drug or cosmetic secured pursuant to Section
28 of this Act is adulterated or branded he shall cause notice thereof to be given to the person
or persons concerned and such person or persons shall be given an opportunity to subject
evidence impeaching the correctness of the finding or charge in question.

(e) When a violation of any provisions of this Act comes to the knowledge of the Food and
Drug Administrator of such character that a criminal prosecution ought to be instituted against
the offender, he shall certify the facts to the Secretary of Justice through the Secretary of
Health, together with the chemists' report, the findings of the Board of Food and Drug Inspection, or
other documentary evidence on which the charge is based.

(f) Nothing in this Act shall be construed as requiring the Food and Drug Administrator to
certify for prosecution pursuant to subparagraph (e) hereof, minor violations of this Act whenever he
believes that public interest will be adequately served by a suitable written notice or warning.

48
The aforequoted provisions of law clearly show that petitioners, Commissioner of Internal Revenue
and the Fair Trade Board, are without jurisdiction to investigate and to prosecute alleged
misbranding, mislabeling and/or misleading advertisements of filled milk. The jurisdiction on the
matters cited is vested upon the Board of Food and Drug inspection and the Food and Drug
Administrator, with the Secretary of Health and the Secretary of Justice, also intervening in case
criminal prosecution has to be instituted. To hold that the petitioners have also jurisdiction as would
be the result were their instant petition granted, would only cause overlapping of powers and
functions likely to produce confusion and conflict of official action which is neither practical nor
desirable.

WHEREFORE, the decision appealed from is hereby affirmed en toto. No costs.

SO ORDERED.

Teehankee, (Chairman), Fernandez, Melencio-Herrera, JJ., concur.

49
 5. Express Mention and Implied

Exclusion SECOND DIVISION

[G.R. NO. 148408 : July 14, 2006]

CONCEPCION PARAYNO, Petitioner, v. JOSE JOVELLANOS and the MUNICIPALITY OF CALASIAO,

PANGASINAN,* Respondents.

DECISION

CORONA, J.:

This is a Petition for Review on Certiorari under Rule 45 of the 1997 Rules of Court questioning
the resolution of the Court of Appeals (CA) which dismissed the petition for certiorari, mandamus
and prohibition, with prayer for issuance of a preliminary and mandatory injunction, filed by
petitioner Concepcion Parayno against respondents Jose Jovellanos and the Municipality of Calasiao,
Pangasinan.

Petitioner was the owner of a gasoline filling station in Calasiao, Pangasinan. In 1989, some residents
of Calasiao petitioned the Sangguniang Bayan (SB) of said municipality for the closure or transfer of
the station to another location. The matter was referred to the Municipal Engineer, Chief of
Police, Municipal Health Officer and the Bureau of Fire Protection for investigation. Upon their
advise, the Sangguniang Bayan recommended to the Mayor the closure or transfer of location of
petitioner's gasoline station. In Resolution No. 50, it declared:

a) xxx the existing gasoline station is a blatant violation and disregard of existing law to wit:

The Official Zoning Code of Calasiao, Art. 6, Section 44,1 the nearest school building which is San
Miguel Elementary School and church, the distances are less than 100 meters. No neighbors
were called as witnesses when actual measurements were done by HLURB Staff, Baguio City dated
22 June 1989.

b) The gasoline station remains in thickly populated area with commercial/residential buildings,
houses closed (sic) to each other which still endangers the lives and safety of the people in
case of fire. Moreover, additional selling and storing of several LPG tanks in the station (sic).
50
c) The residents of our barangay always complain of the irritating smell of gasoline most of the
time especially during gas filling which tend to expose residents especially children to frequent
colds, asthma, cough and the like nowadays.

d) xxx the gasoline station violated Building and Fire Safety Codes because the station has 2nd
floor storey building used for business rental offices, with iron grilled windows, no firewalls. It also
endangers the lives of people upstairs.

e) It hampers the flow of traffic, the gasoline station is too small and narrow, the entrance and
exit are closed to the street property lines. It couldn't cope situation (sic) on traffic because the
place is a congested area.2

Petitioner moved for the reconsideration of the SB resolution but it was denied. Hence, she
filed a special civil action for prohibition and mandamus with the Regional Trial Court (RTC) of
Dagupan City, Branch 44 against respondents. The case, docketed as SP Civil Case No. 99-
03010-D, was raffled to the sala of Judge Crispin Laron.

Petitioner claimed that her gasoline station was not covered by Section 44 of the Official Zoning
Code since it was not a "gasoline service station" but a "gasoline filling station" governed by
Section 21 thereof. She added that the decision of the Housing and Land Use Regulatory Board
(HLURB),3 in a previous case filed by the same respondent Jovellanos against her predecessor
(Dennis Parayno), barred the grounds invoked by respondent municipality in Resolution No. 50. In
the HLURB case, respondent Jovellanos opposed the establishment of the gas station on the
grounds that: (1) it was within the 100- meter prohibited radius under Section 44 and (2) it
posed a pernicious effect on the health and safety of the people in Calasiao.

After the hearing on the propriety of issuing a writ of preliminary prohibitory and mandatory
injunction, the trial court ruled:

There is no basis for the court to issue a writ of preliminary prohibitory and mandatory
injunction. Albeit, Section 44 of the Official Zoning Code of respondent municipality does not
mention a gasoline filling station, [but] following the principle of ejusdem generis, a gasoline
filling station falls within the ambit of Section 44.

51
The gasoline filling station of the petitioner is located under the establishment belonging to the
petitioner and is very near several buildings occupied by several persons. Justice dictates that the
same should not be allowed to continue operating its business on that particular place. Further,
the gasoline filling station endangers the lives and safety of people because once there is fire, the
establishment and houses nearby will be razed to the ground.4 (emphasis supplied)

Petitioner moved for reconsideration of the decision but it was denied by the trial court.

Petitioner elevated the case to the CA via a petition for certiorari, prohibition and mandamus,
5 with a prayer for injunctive relief. She ascribed grave abuse of discretion, amounting to lack
or excess of jurisdiction, on the part of Judge Laron who dismissed her case.

After the CA dismissed the petition, petitioner filed a motion for reconsideration but the
same was denied. Hence, this appeal.

Before us, petitioner insists that (1) the legal maxim of ejusdem generis did not apply to her
case; (2) the closure/transfer of her gasoline filling station by respondent municipality was an
invalid exercise of the latter's police powers and (3) it was the principle of res judicata that
applied in this case.6

We find merit in the petition.

The Principle of Ejusdem Generis

We hold that the zoning ordinance of respondent municipality made a clear distinction between
"gasoline service station" and "gasoline filling station." The pertinent provisions read:

xxx xxx xxx

Section 21. Filling Station. A retail station servicing automobiles and other motor vehicles with gasoline
and oil only.7

xxx xxx xxx

52
Section 42. Service Station. A building and its premises where gasoline oil, grease, batteries, tires
and car accessories may be supplied and dispensed at retail and where, in addition, the following
services may be rendered and sales and no other.

A. Sale and servicing of spark plugs, batteries, and distributor parts;

b. Tire servicing and repair, but not recapping or regrooving;

c. Replacement of mufflers and tail pipes, water hose, fan belts, brake fluids, light bulbs, fuses,
floor mats, seat covers, windshield wipers and wiper blades, grease retainers, wheel, bearing,
mirrors and the like;

d. Radiator cleaning and flushing;

e. Washing and polishing, and sale of automobile washing and polishing materials;

f. Grease and lubricating;

g. Emergency wiring repairs;

h. Minor servicing of carburators;

i. Adjusting and repairing brakes;

j. Minor motor adjustments not involving removal of the head or crankcase, or raising the motor.8

It is evident from the foregoing that the ordinance intended these two terms to be separate and
distinct from each other. Even respondent municipality's counsel admitted this dissimilarity during
the hearing on the application for the issuance of a writ of preliminary prohibitory and mandatory
injunction.
Counsel in fact admitted:

53
 1. That there exist[ed] an official zoning code of Calasiao, Pangasinan which [was] not yet
amended;

2. That under Article III of said official zoning code there [were] certain distinctions made by
said municipality about the designation of the gasoline filling station and that of the gasoline service
station as appearing in Article III, Nos. 21 and 42, [respectively];

3. That the business of the petitioner [was] one of a gasoline filling station as defined in Article
III, Section 21 of the zoning code and not as a service station as differently defined under
Article 42 of the said official zoning code;

4. That under Section 44 of the official zoning code of Calasiao, the term filling station as clearly
defined under Article III, Section 21, [did] not appear in the wordings thereof;9 (emphasis
supplied)cralawlibrary

The foregoing were judicial admissions which were conclusive on the municipality, the party
making them.10 Respondent municipality thus could not find solace in the legal maxim of
ejusdem generis11 which means "of the same kind, class or nature." Under this maxim, where
general words follow the enumeration of particular classes of persons or things, the general
words will apply only to persons or things of the same general nature or class as those
enumerated.12 Instead, what applied in this case was the legal maxim expressio unius est exclusio
alterius which means that the express mention of one thing implies the exclusion of others.13 Hence,
because of the distinct and definite meanings alluded to the two terms by the zoning ordinance,
respondents could not insist that "gasoline service station" under Section 44 necessarily included
"gasoline filling station" under Section 21. Indeed, the activities undertaken in a "gas service station"
did not automatically embrace those in a "gas filling station."

The Exercise of Police Powers

Respondent municipality invalidly used its police powers in ordering the closure/transfer of
petitioner's gasoline station. While it had, under RA 7160,14 the power to take actions and enact
measures to promote the health and general welfare of its constituents, it should have given
due deference to the law and the rights of petitioner.

A local government is considered to have properly exercised its police powers only when the
following requisites are met: (1) the interests of the public generally, as distinguished from those
of a particular class, require the interference of the State and (2) the means employed are reasonably
necessary for the attainment of the object sought to be accomplished and not unduly oppressive.15
54
The first requirement refers to the equal protection clause and the second, to the due process
clause of the Constitution.16

55
Respondent municipality failed to comply with the due process clause when it passed Resolution No.
50. While it maintained that the gasoline filling station of petitioner was less than 100 meters from
the nearest public school and church, the records do not show that it even attempted to measure
the distance, notwithstanding that such distance was crucial in determining whether there was an
actual violation of Section 44. The different local offices that respondent municipality tapped to
conduct an investigation never conducted such measurement either.

Moreover, petitioner's business could not be considered a nuisance which respondent

municipality could summarily abate in the guise of exercising its police powers. The abatement of a
nuisance without judicial proceedings is possible only if it is a nuisance per se. A gas station is not a
nuisance per se or one affecting the immediate safety of persons and property,17 hence, it cannot
be closed down or transferred summarily to another location.

As a rule, this Court does not pass upon evidence submitted by the parties in the lower courts.18
We deem it necessary, however, to recall the findings of the HLURB which petitioner submitted as
evidence during the proceedings before the trial court, if only to underscore petitioner's
compliance with the requirements of law before she put up her gasoline station.

Another factor that should not be left unnoticed is the diligence exercised by [petitioner] in
complying with the requirements of the several laws prior to the actual implementation of the
project as can be attested by the fact that [petitioner] has secured the necessary building
permit and approval of [her] application for authority to relocate as per the letter of the Energy
Regulatory Board xxx.19

On the alleged hazardous effects of the gasoline station to the lives and properties of the
people of Calasiao, we again note:

Relative to the allegations that the project (gasoline station) is hazardous to life and property, the
Board takes cognizance of the respondent's contention that the project "is not a fire hazard since
petroleum products shall be safely stored in underground tanks and that the installation and
construction of the underground tanks shall be in accordance with the Caltex Engineering
Procedures which is true to all gasoline stations in the country. xxx

Hence, the Board is inclined to believe that the project being hazardous to life and property is
more perceived than factual. For, after all, even the Fire Station Commander, after studying the
plans and specifications of the subject proposed construction, recommended on 20 January 1989, "to
build such buildings after conform (sic) all the requirements of PP 1185." It is further alleged by the
56
complainants

57
that the proposed location is "in the heart of the thickly populated residential area of
Calasiao." Again, findings of the [HLURB] staff negate the allegations as the same is within a
designated Business/Commercial Zone per the Zoning Ordinance. xxx20 (emphasis supplied)

The findings of fact of the HLURB are binding as they are already final and conclusive vis - Ã -vis the
evidence submitted by respondents.

The Principle of Res Judicata

Petitioner points out that the HLURB decision in the previous case filed against her predecessor
(Dennis Parayno) by respondent Jovellanos had effectively barred the issues in Resolution No. 50
based on the principle of res judicata. We agree.

Res judicata refers to the rule that a final judgment or decree on the merits by a court of
competent jurisdiction is conclusive of the rights of the parties or their privies in all later suits
on all points and matters determined in the former suit.21 For res judicata to apply, the
following elements must be present: (1) the judgment or order must be final; (2) the judgment
must be on the merits; (3) it must have been rendered by a court having jurisdiction over the
subject matter and the parties and (4) there must be, between the first and second actions,
identity of parties, of subject matter and of cause of action.22

Respondent municipality does not contest the first, second and third requisites. However, it claims
that it was not a party to the HLURB case but only its co-respondent Jovellanos, hence, the fourth
requisite was not met. The argument is untenable.

The absolute identity of parties is not required for the principle of res judicata to apply.23 A
shared identity of interests is sufficient to invoke the application of this principle.24 The
proscription may not be evaded by the mere expedient of including an additional party.25 Res
judicata may lie as long as there is a community of interests between a party in the first case
and a party in the second case although the latter may not have been impleaded in the
first.26

In the assailed resolution of respondent municipality, it raised the same grounds invoked by its
co- respondent in the HLURB: (1) that the resolution aimed to close down or transfer the gasoline
station to another location due to the alleged violation of Section 44 of the zoning ordinance and
(2) that the hazards of said gasoline station threatened the health and safety of the public. The
HLURB had already settled these concerns and its adjudication had long attained finality. It is to

58
the interest of the public

59
that there should be an end to litigation by the parties over a subject matter already fully and fairly
adjudged. Furthermore, an individual should not be vexed twice for the same cause.27

WHEREFORE, the petition is hereby GRANTED. The assailed resolution of the Court of the
Appeals is REVERSED and SET ASIDE. Respondent Municipality of Calasiao is hereby directed to
cease and desist from enforcing Resolution No. 50 against petitioner insofar as it seeks to
close down or transfer her gasoline station to another location.

No costs.

SO ORDERED.

Puno, Chairperson, Sandoval-Gutierrez, Azcuna, Garcia, JJ., concur.

60
 SECOND DIVISION

G.R. No. 147749 June 22, 2006

SAN PABLO MANUFACTURING CORPORATION, Petitioner,

vs.
COMMISSIONER OF INTERNAL REVENUE,* Respondent.

DECISION

CORONA, J.:

In this petition for review under Rule 45 of the Rules of Court, San Pablo Manufacturing Corporation
(SPMC) assails the July 19, 20001 and April 3, 2001 resolutions of the Court of Appeals in CA-G.R.
SP No. 59139.

SPMC is a domestic corporation engaged in the business of milling, manufacturing and exporting of
coconut oil and other allied products. It was assessed and ordered to pay by the Commissioner of
Internal Revenue the total amount of P8,182,182.852 representing deficiency miller’s tax and
manufacturer’s sales tax,3 among other deficiency taxes,4 for taxable year 1987. The deficiency
miller’s tax was imposed on SPMC’s sales of crude oil to United Coconut Chemicals, Inc.
(UNICHEM) while the deficiency sales tax was applied on its sales of corn and edible oil as
manufactured products.

SPMC opposed the assessments but the Commissioner denied its protest. SPMC appealed the
denial of its protest to the Court of Tax Appeals (CTA) by way of a petition for review docketed as
CTA Case No. 5423.

In its March 10, 2000 decision, the CTA cancelled SPMC’s liability for deficiency manufacturer’s tax
on the sales of corn and edible oils but upheld the Commissioner’s assessment for the deficiency
miller’s tax. SPMC moved for the partial reconsideration of the CTA affirmation of the miller’s tax
assessment but it was denied.

SPMC elevated the case to the Court of Appeals via a petition for review of the CTA decision insofar
as it upheld the deficiency miller’s tax assessment. In its July 19, 2000 resolution, the appellate court
dismissed the petition on the principal ground 5 that the verification attached to it was signed merely
by SPMC’s chief financial officer ― without the corporate secretary’s certificate, board resolution or
power of attorney authorizing him to sign the verification and certification against forum shopping.
SPMC sought a reconsideration of the resolution but the same was denied. Hence, this petition.

Did the Court of Appeals err when it dismissed SPMC’s appeal?

SPMC contends that its appeal should have been given due course since it substantially complied
with the requirements on verification and certification against forum shopping. It insists on the liberal
application of the rules because, on the merits of the petition, SPMC was not liable for the 3%
miller’s tax. It maintains that the crude oil which it sold to UNICHEM was actually exported by
UNICHEM as an ingredient of fatty acid and glycerine, hence, not subject to miller’s tax pursuant to
Section 168 of the 1987 Tax Code.

For SPMC, Section 168 of the 1987 Tax Code contemplates two exemptions from the miller’s tax:
(a) the milled products in their original state were actually exported by the miller himself or by

61
another person, and (b) the milled products sold by the miller were actually exported as an
ingredient or part of any manufactured article by the buyer or manufacturer of the milled
products. The exportation may be effected by the miller himself or by the buyer or manufacturer of
the milled products. Since UNICHEM, the buyer of SPMC’s milled products, subsequently exported
said products, SPMC should be exempted from the miller’s tax.

The petition must fail.

Under Rule 43, Section 5 of the Rules of Court, appeals from the CTA and quasi-judicial agencies to
the Court of Appeals should be verified. A pleading required to be verified which lacks proper
verification shall be treated as an unsigned pleading. 6

Moreover, a petition for review under Rule 43 requires a sworn certification against forum
shopping.7 Failure of the petitioner to comply with any of the requirements of a petition for review is
sufficient ground for the dismissal of the petition. 8

A corporation may exercise the powers expressly conferred upon it by the Corporation Code and
those that are implied by or are incidental to its existence through its board of directors and/or duly
authorized officers and agents. 9 Hence, physical acts, like the signing of documents, can be
performed only by natural persons duly authorized for the purpose by corporate by-laws or by
specific act of the board of directors.10 In the absence of authority from the board of directors, no
person, not even the officers of the corporation, can bind the corporation .11

SPMC’s petition in the Court of Appeals did not indicate that the person who signed the
verification/certification on non-forum shopping was authorized to do so. SPMC merely relied on the
alleged inherent power of its chief financial officer to represent SPMC in all matters regarding the
finances of the corporation including, among others, the filing of suits to defend or protect it from
assessments and to recover erroneously paid taxes. SPMC even admitted that no power of attorney,
secretary’s certificate or board resolution to prove the affiant’s authority was attached to the petition.
Thus, the petition was not properly verified. Since the petition lacked proper verification, it was to be
treated as an unsigned pleading subject to dismissal. 12

In PET Plans, Inc. v. Court of Appeals,13 the Court upheld the dismissal by the Court of Appeals of
the petition on the ground that the verification and certification against forum shopping was signed
by PET Plans, Inc.’s first vice-president for legal affairs/corporate secretary without any certification
that he was authorized to sign in behalf of the corporation.

In BPI Leasing Corporation v. Court of Appeals ,14 the Court ruled that the petition should be
dismissed outright on the ground that the verification/certification against forum shopping was signed
by BPI Leasing Corporation’s counsel with no specific authority to do so. Since the counsel was
purportedly acting for the corporation, he needed a resolution issued by the board of directors that
specifically authorized him to institute the petition and execute the certification. Only then would his
actions be legally binding on the corporation. 15

In this case, therefore, the appellate court did not commit an error when it dismissed the petition on
the ground that it was signed by a person who had not been issued any authority by the board of
directors to represent the corporation.

Neither can the Court subscribe to SPMC’s claim of substantial compliance or to its plea for a liberal
application of the rules. Save for the most persuasive of reasons, strict compliance with procedural
rules is enjoined to facilitate the orderly administration of justice. 16 Substantial compliance will not
suffice in a matter involving strict observance such as the requirement on non-forum shopping ,17 as

62
well as verification. Utter disregard of the rules cannot justly be rationalized by harping on the policy
of liberal construction.18

But even if the fatal procedural infirmity were to be disregarded, the petition must still fail for lack of
merit.

As the CTA correctly ruled, SPMC’s sale of crude coconut oil to UNICHEM was subject to the 3%
miller’s tax. Section 168 of the 1987 Tax Code provided:

Sec. 168. Percentage tax upon proprietors or operators of rope factories, sugar central mills,
coconut oil mills, palm oil mills, cassava mills and desiccated coconut factories. Proprietors or
operators of rope factories, sugar central and mills, coconut oil mills, palm oil mills, cassava mills
and desiccated coconut factories, shall pay a tax equivalent to three percent (3%) of the gross value
in money of all the rope, sugar, coconut oil, palm oil, cassava flour or starch, dessicated coconut,
manufactured, processed or milled by them, including the by-product of the raw materials from which
said articles are produced, processed or manufactured, such tax to be based on the actual selling
price or market value of these articles at the time they leave the factory or mill
warehouse: Provided, however, That this tax shall not apply to rope, coconut oil, palm oil and
the by-product of copra from which it is produced or manufactured and dessicated coconut,
if such rope, coconut oil, palm oil, copra by-products and dessicated coconuts, shall be
removed for exportation by the proprietor or operator of the factory or the miller himself, and
are actually exported without returning to the Philippines, whether in their original state or as
an ingredient or part of any manufactured article or products: Provided further, That where the
planter or the owner of the raw materials is the exporter of the aforementioned milled or
manufactured products, he shall be entitled to a tax credit of the miller's taxes withheld by the
proprietor or operator of the factory or mill, corresponding to the quantity exported, which may be
used against any internal revenue tax directly due from him: and Provided, finally, That credit for any
sales, miller's or excise taxes paid on raw materials or supplies used in the milling process shall not
be allowed against the miller's tax due, except in the case of a proprietor or operator of a refined
sugar factory as provided hereunder. (emphasis supplied)

The language of the exempting clause of Section 168 of the 1987 Tax Code was clear. The tax
exemption applied only to the exportation of rope, coconut oil, palm oil, copra by-products and
dessicated coconuts, whether in their original state or as an ingredient or part of any manufactured
article or products, by the proprietor or operator of the factory or by the miller himself.

The language of the exemption proviso did not warrant the interpretation advanced by SPMC.
Nowhere did it provide that the exportation made by the purchaser of the materials enumerated in
the exempting clause or the manufacturer of products utilizing the said materials was covered by the
exemption. Since SPMC’s situation was not within the ambit of the exemption, it was subject to the
3% miller’s tax imposed under Section 168 of the 1987 Tax Code.

SPMC’s proposed interpretation unduly enlarged the scope of the exemption clause. The rule is that
the exemption must not be so enlarged by construction since the reasonable presumption is that the
State has granted in express terms all it intended to grant and that, unless the privilege is limited to
the very terms of the statute, the favor would be intended beyond what was meant .19

Where the law enumerates the subject or condition upon which it applies, it is to be construed as
excluding from its effects all those not expressly mentioned. Expressio unius est exclusio alterius.
Anything that is not included in the enumeration is excluded therefrom and a meaning that does not
appear nor is intended or reflected in the very language of the statute cannot be placed
therein.20 The rule proceeds from the premise that the legislature would not have made specific

63
enumerations in a statute if it had the intention not to restrict its meaning and confine its terms to
those expressly mentioned.21

The rule of expressio unius est exclusio alterius is a canon of restrictive interpretation. 22 Its
application in this case is consistent with the construction of tax exemptions in strictissimi
juris against the taxpayer. To allow SPMC’s claim for tax exemption will violate these established
principles and unduly derogate sovereign authority.

WHEREFORE, the petition is hereby DENIED.

Costs against petitioner.

SO ORDERED.

RENATO C. CORONA
Associate Justice

64
 Republic of the Philippines
SUPREME COURT

EN BANC

G.R. No. 132527. July 29, 2005

COCONUT OIL REFINERS ASSOCIATION, INC. represented by its President, JESUS L.

ARRANZA, PHILIPPINE ASSOCIATION OF MEAT PROCESSORS, INC. (PAMPI), represented
by its Secretary, ROMEO G. HIDALGO, FEDERATION OF FREE FARMERS (FFF), represented
by its President, JEREMIAS U. MONTEMAYOR, and BUKLURAN NG MANGGAGAWANG
PILIPINO (BMP), represented by its Chairperson, FELIMON C. LAGMAN, Petitioners,
vs.
HON. RUBEN TORRES, in his capacity as Executive Secretary; BASES CONVERSION AND
DEVELOPMENT AUTHORITY, CLARK DEVELOPMENT CORPORATION, SUBIC BAY
METROPOLITAN AUTHORITY, 88 MART DUTY FREE, FREEPORT TRADERS, PX CLUB,
AMERICAN HARDWARE, ROYAL DUTY FREE SHOPS, INC., DFS SPORTS, ASIA PACIFIC, MCI
DUTY FREE DISTRIBUTOR CORP. (formerly MCI RESOURCES, CORP.), PARK & SHOP, DUTY
FREE COMMODITIES, L. FURNISHING, SHAMBURGH, SUBIC DFS, ARGAN TRADING CORP.,
ASIPINE CORP., BEST BUY, INC., PX CLUB, CLARK TRADING, DEMAGUS TRADING CORP.,
D.F.S. SPORTS UNLIMITED, INC., DUTY FREE FIRST SUPERSTORE, INC., FREEPORT,
JC MALL DUTY FREE INC. (formerly 88 Mart [Clark] Duty Free Corp.), LILLY HILL CORP.,
MARSHALL, PUREGOLD DUTY FREE, INC., ROYAL DFS and ZAXXON PHILIPPINES,
INC., Respondents.

DECISION

AZCUNA, J.:

This is a Petition for Prohibition and Injunction seeking to enjoin and prohibit the Executive Branch,
through the public respondents Ruben Torres in his capacity as Executive Secretary, the Bases
Conversion Development Authority (BCDA), the Clark Development Corporation (CDC) and the
Subic Bay Metropolitan Authority (SBMA), from allowing, and the private respondents from
continuing with, the operation of tax and duty-free shops located at the Subic Special Economic
Zone (SSEZ) and the Clark Special Economic Zone (CSEZ), and to declare the following issuances
as unconstitutional, illegal, and void:

1. Section 5 of Executive Order No. 80,1 dated April 3, 1993, regarding the CSEZ.

2. Executive Order No. 97-A, dated June 19, 1993, pertaining to the SSEZ.

3. Section 4 of BCDA Board Resolution No. 93-05-034, 2 dated May 18, 1993, pertaining to the
CSEZ.

Petitioners contend that the aforecited issuances are unconstitutional and void as they constitute
executive lawmaking, and that they are contrary to Republic Act No. 7227 3 and in violation of the
Constitution, particularly Section 1, Article III (equal protection clause), Section 19, Article XII
(prohibition of unfair competition and combinations in restraint of trade), and Section 12, Article XII
(preferential use of Filipino labor, domestic materials and locally produced goods).

The facts are as follows:

65
On March 13, 1992, Republic Act No. 7227 was enacted, providing for, among other things, the
sound and balanced conversion of the Clark and Subic military reservations and their extensions into
alternative productive uses in the form of special economic zones in order to promote the economic
and social development of Central Luzon in particular and the country in general. Among the salient
provisions are as follows:

SECTION 12. Subic Special Economic Zone. —

...

The abovementioned zone shall be subject to the following policies:

(a) Within the framework and subject to the mandate and limitations of the Constitution and the
pertinent provisions of the Local Government Code, the Subic Special Economic Zone shall be
developed into a self-sustaining, industrial, commercial, financial and investment center to
generate employment opportunities in and around the zone and to attract and promote productive
foreign investments;

(b) The Subic Special Economic Zone shall be operated and managed as a separate customs
territory ensuring free flow or movement of goods and capital within, into and exported out of the
Subic Special Economic Zone, as well as provide incentives such as tax and duty-free importations
of raw materials, capital and equipment. However, exportation or removal of goods from the territory
of the Subic Special Economic Zone to the other parts of the Philippine territory shall be subject to
customs duties and taxes under the Customs and Tariff Code and other relevant tax laws of the
;
Philippines 4

(c) The provision of existing laws, rules and regulations to the contrary notwithstanding, no taxes,
local and national, shall be imposed within the Subic Special Economic Zone. In lieu of paying
taxes, three percent (3%) of the gross income earned by all businesses and enterprises within the
Subic Special Ecoomic Zone shall be remitted to the National Government, one percent (1%) each
to the local government units affected by the declaration of the zone in proportion to their population
area, and other factors. In addition, there is hereby established a development fund of one percent
(1%) of the gross income earned by all businesses and enterprises within the Subic Special
Economic Zone to be utilized for the development of municipalities outside the City of Olangapo and
the Municipality of Subic, and other municipalities contiguous to the base areas.

...

SECTION 15. Clark and Other Special Economic Zones. — Subject to the concurrence by resolution
of the local government units directly affected, the President is hereby authorized to create by
executive proclamation a Special Economic Zone covering the lands occupied by the Clark military
reservations and its contiguous extensions as embraced, covered and defined by the 1947 Military
Bases Agreement between the Philippines and the United States of America, as amended, located
within the territorial jurisdiction of Angeles City, Municipalities of Mabalacat and Porac, Province of
Pampanga and the Municipality of Capas, Province of Tarlac, in accordance with the policies as
herein provided insofar as applicable to the Clark military reservations.

The governing body of the Clark Special Economic Zone shall likewise be established by executive
proclamation with such powers and functions exercised by the Export Processing Zone Authority
pursuant to Presidential Decree No. 66 as amended.

66
The policies to govern and regulate the Clark Special Economic Zone shall be determined upon
consultation with the inhabitants of the local government units directly affected which shall be
conducted within six (6) months upon approval of this Act.

Similarly, subject to the concurrence by resolution of the local government units directly affected, the
President shall create other Special Economic Zones, in the base areas of Wallace Air Station in
San Fernando, La Union (excluding areas designated for communications, advance warning and
radar requirements of the Philippine Air Force to be determined by the Conversion Authority) and
Camp John Hay in the City of Baguio.

Upon recommendation of the Conversion Authority, the President is likewise authorized to create
Special Economic Zones covering the Municipalities of Morong, Hermosa, Dinalupihan, Castillejos
and San Marcelino.

On April 3, 1993, President Fidel V. Ramos issued Executive Order No. 80, which declared, among
others, that Clark shall have all the applicable incentives granted to the Subic Special Economic and
Free Port Zone under Republic Act No. 7227. The pertinent provision assailed therein is as follows:

SECTION 5. Investments Climate in the CSEZ. — Pursuant to Section 5(m) and Section 15 of RA
7227, the BCDA shall promulgate all necessary policies, rules and regulations governing the CSEZ,
including investment incentives, in consultation with the local government units and pertinent
government departments for implementation by the CDC.

Among others, the CSEZ shall have all the applicable incentives in the Subic Special Economic and
Free Port Zone under RA 7227 and those applicable incentives granted in the Export Processing
Zones, the Omnibus Investments Code of 1987, the Foreign Investments Act of 1991 and new
investments laws which may hereinafter be enacted.

The CSEZ Main Zone covering the Clark Air Base proper shall have all the aforecited investment
incentives, while the CSEZ Sub-Zone covering the rest of the CSEZ shall have limited incentives.
The full incentives in the Clark SEZ Main Zone and the limited incentives in the Clark SEZ Sub-Zone
shall be determined by the BCDA.

Pursuant to the directive under Executive Order No. 80, the BCDA passed Board Resolution No. 93-
05-034 on May 18, 1993, allowing the tax and duty-free sale at retail of consumer goods imported
via Clark for consumption outside the CSEZ. The assailed provisions of said resolution read, as
follows:

Section 4. SPECIFIC INCENTIVES IN THE CSEZ MAIN ZONE. – The CSEZ-registered

enterprises/businesses shall be entitled to all the incentives available under R.A. No. 7227, E.O. No.
226 and R.A. No. 7042 which shall include, but not limited to, the following:

I. As in Subic Economic and Free Port Zone:

A. Customs:

...

4. Tax and duty-free purchase and consumption of goods/articles (duty free shopping) within
the CSEZ Main Zone.

67
5. For individuals, duty-free consumer goods may be brought out of the CSEZ Main Zone into
the Philippine Customs territory but not to exceed US$200.00 per month per CDC-registered
person, similar to the limits imposed in the Subic SEZ. This privilege shall be enjoyed only once
a month. Any excess shall be levied taxes and duties by the Bureau of Customs.

On June 10, 1993, the President issued Executive Order No. 97, "Clarifying the Tax and Duty Free
Incentive Within the Subic Special Economic Zone Pursuant to R.A. No. 7227." Said issuance in part
states, thus:

SECTION 1. On Import Taxes and Duties – Tax and duty-free importations shall apply only to raw
materials, capital goods and equipment brought in by business enterprises into the SSEZ. Except for
these items, importations of other goods into the SSEZ, whether by business enterprises or resident
individuals, are subject to taxes and duties under relevant Philippine laws.

The exportation or removal of tax and duty-free goods from the territory of the SSEZ to other parts of
the Philippine territory shall be subject to duties and taxes under relevant Philippine laws.

Nine days after, on June 19, 1993, Executive Order No. 97-A was issued, "Further Clarifying the Tax
and Duty-Free Privilege Within the Subic Special Economic and Free Port Zone." The relevant
provisions read, as follows:

SECTION 1. The following guidelines shall govern the tax and duty-free privilege within the Secured
Area of the Subic Special Economic and Free Port Zone:

1.1 The Secured Area consisting of the presently fenced-in former Subic Naval Base shall be the
only completely tax and duty-free area in the SSEFPZ. Business enterprises and individuals
(Filipinos and foreigners) residing within the Secured Area are free to import raw materials, capital
goods, equipment, and consumer items tax and duty-free. Consumption items, however, must be
consumed within the Secured Area. Removal of raw materials, capital goods, equipment and
consumer items out of the Secured Area for sale to non-SSEFPZ registered enterprises shall be
subject to the usual taxes and duties, except as may be provided herein.

1.2. Residents of the SSEFPZ living outside the Secured Area can enter the Secured Area
and consume any quantity of consumption items in hotels and restaurants within the Secured
Area. However, these residents can purchase and bring out of the Secured Area to other parts
of the Philippine territory consumer items worth not exceeding US$100 per month per person.
Only residents age 15 and over are entitled to this privilege.

1.3. Filipinos not residing within the SSEFPZ can enter the Secured Area and consume any quantity
of consumption items in hotels and restaurants within the Secured Area. However, they can
purchase and bring out [of] the Secured Area to other parts of the Philippine territory consumer items
worth not exceeding US$200 per year per person. Only Filipinos age 15 and over are entitled to this
privilege.

Petitioners assail the $100 monthly and $200 yearly tax-free shopping privileges granted by the
aforecited provisions respectively to SSEZ residents living outside the Secured Area of the SSEZ
and to Filipinos aged 15 and over residing outside the SSEZ.

On February 23, 1998, petitioners thus filed the instant petition, seeking the declaration of nullity of
the assailed issuances on the following grounds:

68
I.

EXECUTIVE ORDER NO. 97-A, SECTION 5 OF EXECUTIVE ORDER NO. 80, AND SECTION 4
OF BCDA BOARD RESOLUTION NO. 93-05-034 ARE NULL AND VOID [FOR] BEING AN
EXERCISE OF EXECUTIVE LAWMAKING.

II.

EXECUTIVE ORDER NO. 97-A, SECTION 5 OF EXECUTIVE ORDER NO. 80, AND SECTION 4
OF BCDA BOARD RESOLUTION NO. 93-05-034 ARE UNCONSTITUTIONAL FOR BEING
VIOLATIVE OF THE EQUAL PROTECTION CLAUSE AND THE PROHIBITION AGAINST UNFAIR
COMPETITION AND PRACTICES IN RESTRAINT OF TRADE.

III.

EXECUTIVE ORDER NO. 97-A, SECTION 5 OF EXECUTIVE ORDER NO. 80, AND SECTION 4
OF BCDA BOARD RESOLUTION NO. 93-05-034 ARE NULL AND VOID [FOR] BEING VIOLATIVE
OF REPUBLIC ACT NO. 7227.

IV.

THE CONTINUED IMPLEMENTATION OF THE CHALLENGED ISSUANCES IF NOT

RESTRAINED WILL CONTINUE TO CAUSE PETITIONERS TO SUFFER GRAVE AND
IRREPARABLE INJURY.5

In their Comments, respondents point out procedural issues, alleging lack of petitioners’ legal
standing, the unreasonable delay in the filing of the petition, laches, and the propriety of the remedy
of prohibition.

Anent the claim on lack of legal standing, respondents argue that petitioners, being mere suppliers
of the local retailers operating outside the special economic zones, do not stand to suffer direct injury
in the enforcement of the issuances being assailed herein. Assuming this is true, this Court has
nevertheless held that in cases of paramount importance where serious constitutional questions are
involved, the standing requirements may be relaxed and a suit may be allowed to prosper even
where there is no direct injury to the party claiming the right of judicial review.6

In the same vein, with respect to the other alleged procedural flaws, even assuming the existence of
such defects, this Court, in the exercise of its discretion, brushes aside these technicalities and takes
cognizance of the petition considering the importance to the public of the present case and in
keeping with the duty to determine whether the other branches of the government have kept
themselves within the limits of the Constitution.7

Now, on the constitutional arguments raised:

As this Court enters upon the task of passing on the validity of an act of a co-equal and coordinate
branch of the Government, it bears emphasis that deeply ingrained in our jurisprudence is the time-
honored principle that a statute is presumed to be valid. 8 This presumption is rooted in the doctrine
of separation of powers which enjoins upon the three coordinate departments of the Government a
becoming courtesy for each other’s acts.9 Hence, to doubt is to sustain. The theory is that before the
act was done or the law was enacted, earnest studies were made by Congress, or the President, or
both, to insure that the Constitution would not be breached. 10 This Court, however, may declare a

69
law, or portions thereof, unconstitutional where a petitioner has shown a clear and unequivocal
breach of the Constitution, not merely a doubtful or argumentative one .11 In other words, before a
statute or a portion thereof may be declared unconstitutional, it must be shown that the statute or
issuance violates the Constitution clearly, palpably and plainly, and in such a manner as to leave no
doubt or hesitation in the mind of the Court.12

The Issue on Executive Legislation

Petitioners claim that the assailed issuances (Executive Order No. 97-A; Section 5 of Executive
Order No. 80; and Section 4 of BCDA Board Resolution No. 93-05-034) constitute executive
legislation, in violation of the rule on separation of powers. Petitioners argue that the Executive
Department, by allowing through the questioned issuances the setting up of tax and duty-free shops
and the removal of consumer goods and items from the zones without payment of corresponding
duties and taxes, arbitrarily provided additional exemptions to the limitations imposed by Republic
Act No. 7227, which limitations petitioners identify as follows:

(1) [Republic Act No. 7227] allowed only tax and duty-free importation of raw materials, capital and
equipment.

(2) It provides that any exportation or removal of goods from the territory of the Subic Special
Economic Zone to other parts of the Philippine territory shall be subject to customs duties and
taxes under the Customs and Tariff Code and other relevant tax laws of the Philippines.

Anent the first alleged limitation, petitioners contend that the wording of Republic Act No. 7227
clearly limits the grant of tax incentives to the importation of raw materials, capital and equipment
only. Hence, they claim that the assailed issuances constitute executive legislation for invalidly
granting tax incentives in the importation of consumer goods such as those being sold in the duty-
free shops, in violation of the letter and intent of Republic Act No. 7227.

A careful reading of Section 12 of Republic Act No. 7227, which pertains to the SSEZ, would show
that it does not restrict the duty-free importation only to "raw materials, capital and equipment."
Section 12 of the cited law is partly reproduced, as follows:

SECTION 12. Subic Special Economic Zone. —

...

The abovementioned zone shall be subject to the following policies:

...

(b) The Subic Special Economic Zone shall be operated and managed as a separate customs
territory ensuring free flow or movement of goods and capital within, into and exported out of the
Subic Special Economic Zone, as well as provide incentives such as tax and duty-free importations
of raw materials, capital and equipment. However, exportation or removal of goods from the territory
of the Subic Special Economic Zone to the other parts of the Philippine territory shall be subject to
customs duties and taxes under the Customs and Tariff Code and other relevant tax laws of the
Philippines.13

While it is true that Section 12 (b) of Republic Act No. 7227 mentions only raw materials, capital and
equipment, this does not necessarily mean that the tax and duty-free buying privilege is limited to

70
these types of articles to the exclusion of consumer goods. It must be remembered that in construing
statutes, the proper course is to start out and follow the true intent of the Legislature and to adopt
that sense which harmonizes best with the context and promotes in the fullest manner the policy and
objects of the Legislature.14

In the present case, there appears to be no logic in following the narrow interpretation petitioners
urge. To limit the tax-free importation privilege of enterprises located inside the special economic
zone only to raw materials, capital and equipment clearly runs counter to the intention of the
Legislature to create a free port where the "free flow of goods or capital within, into, and out of the
zones" is insured.

The phrase "tax and duty-free importations of raw materials, capital and equipment" was merely
cited as an example of incentives that may be given to entities operating within the zone. Public
respondent SBMA correctly argued that the maxim expressio unius est exclusio alterius, on which
petitioners impliedly rely to support their restrictive interpretation, does not apply when words are
mentioned by way of example.15 It is obvious from the wording of Republic Act No. 7227, particularly
the use of the phrase "such as," that the enumeration only meant to illustrate incentives that the
SSEZ is authorized to grant, in line with its being a free port zone.

Furthermore, said legal maxim should be applied only as a means of discovering legislative intent
which is not otherwise manifest, and should not be permitted to defeat the plainly indicated purpose
of the Legislature.16

The records of the Senate containing the discussion of the concept of "special economic zone" in
Section 12 (a) of Republic Act No. 7227 show the legislative intent that consumer goods entering the
SSEZ which satisfy the needs of the zone and are consumed there are not subject to duties and
taxes in accordance with Philippine laws, thus:

Senator Guingona........The concept of Special Economic Zone is one that really includes the
concept of a free port, but it is broader. While a free port is necessarily included in the Special
Economic Zone, the reverse is not true that a free port would include a special economic zone.

Special Economic Zone, Mr. President, would include not only the incoming and outgoing of vessels,
duty-free and tax-free, but it would involve also tourism, servicing, financing and all the
appurtenances of an investment center. So, that is the concept, Mr. President. It is broader. It
includes the free port concept and would cater to the greater needs of Olangapo City, Subic Bay and
the surrounding municipalities.

Senator Enrile. May I know then if a factory located within the jurisdiction of Morong, Bataan that
was originally a part of the Subic Naval reservation, be entitled to a free port treatment or just a
special economic zone treatment?

Senator Guingona. As far as the goods required for manufacture is concerned, Mr. President, it
would have privileges of duty-free and tax-free. But in addition, the Special Economic Zone could
embrace the needs of tourism, could embrace the needs of servicing, could embrace the needs of
financing and other investment aspects.

Senator Enrile. When a hotel is constructed, Mr. President, in this geographical unit which we call a
special economic zone, will the goods entering to be consumed by the customers or guests of the
hotel be subject to duties?

Senator Guingona. That is the concept that we are crafting, Mr. President.

71
Senator Enrile. No. I am asking whether those goods will be duty-free, because it is constructed
within a free port.

Senator Guingona. For as long as it services the needs of the Special Economic Zone, yes.

Senator Enrile. For as long as the goods remain within the zone, whether we call it an economic
zone or a free port, for as long as we say in this law that all goods entering this particular territory will
be duty-free and tax-free, for as long as they remain there, consumed there or reexported or
destroyed in that place, then they are not subject to the duties and taxes in accordance with the laws
of the Philippines?

.
Senator Guingona. Yes 17

Petitioners rely on Committee Report No. 1206 submitted by the Ad Hoc Oversight Committee on
Bases Conversion on June 26, 1995. Petitioners put emphasis on the report’s finding that the setting
up of duty-free stores never figured in the minds of the authors of Republic Act No. 7227 in attracting
foreign investors to the former military baselands. They maintain that said law aimed to attract
manufacturing and service enterprises that will employ the dislocated former military base workers,
but not investors who would buy consumer goods from duty-free stores.

The Court is not persuaded. Indeed, it is well-established that opinions expressed in the debates and
proceedings of the Legislature, steps taken in the enactment of a law, or the history of the passage
of the law through the Legislature, may be resorted to as aids in the interpretation of a statute with a
doubtful meaning.18 Petitioners’ posture, however, overlooks the fact that the 1995 Committee Report
they are referring to came into being well after the enactment of Republic Act No. 7227 in 1993.
Hence, as pointed out by respondent Executive Secretary Torres, the aforementioned report cannot
be said to form part of Republic Act No. 7227’s legislative history.

Section 12 of Republic Act No. 7227, provides in part, thus:

SEC. 12. Subic Special Economic Zone. -- . . .

The abovementioned zone shall be subject to the following policies:

(a) Within the framework and subject to the mandate and limitations of the Constitution and the
pertinent provisions of the Local Government Code, the Subic Special Economic Zone shall be
developed into a self-sustaining, industrial, commercial, financial and investment center to generate
employment opportunities in and around the zone and to attract and promote productive foreign
investments. 19

The aforecited policy was mentioned as a basis for the issuance of Executive Order No. 97-A, thus:

WHEREAS, Republic Act No. 7227 provides that within the framework and subject to the mandate
and limitations of the Constitution and the pertinent provisions of the Local Government Code, the
Subic Special Economic and Free Port Zone (SSEFPZ) shall be developed into a self-sustaining
industrial, commercial, financial and investment center to generate employment opportunities in and
around the zone and to attract and promote productive foreign investments; and

WHEREAS, a special tax and duty-free privilege within a Secured Area in the SSEFPZ subject, to
existing laws has been determined necessary to attract local and foreign visitors to the zone.

72
Executive Order No. 97-A provides guidelines to govern the "tax and duty-free privileges within the
Secured Area of the Subic Special Economic and Free Port Zone." Paragraph 1.6 thereof states that
"(t)he sale of tax and duty-free consumer items in the Secured Area shall only be allowed in duly
authorized duty-free shops."

The Court finds that the setting up of such commercial establishments which are the only ones duly
authorized to sell consumer items tax and duty-free is still well within the policy enunciated in
Section 12 of Republic Act No. 7227 that ". . .the Subic Special Economic Zone shall be
developed into a self-sustaining, industrial, commercial,financial and investment center to
generate employment opportunities in and around the zone and to attract and promote
productive foreign investments." (Emphasis supplied.)

However, the Court reiterates that the second sentences of paragraphs 1.2 and 1.3 of Executive
Order No. 97-A, allowing tax and duty-free removal of goods to certain individuals, even in a
limited amount, from the Secured Area of the SSEZ, are null and void for being contrary to
Section 12 of Republic Act No. 7227. Said Section clearly provides that "exportation or removal of
goods from the territory of the Subic Special Economic Zone to the other parts of the Philippine
territory shall be subject to customs duties and taxes under the Customs and Tariff Code and other
relevant tax laws of the Philippines."

On the other hand, insofar as the CSEZ is concerned, the case for an invalid exercise of executive
legislation is tenable.

In John Hay Peoples Alternative Coalition, et al. v. Victor Lim, et al.,20 this Court resolved an issue,
very much like the one herein, concerning the legality of the tax exemption benefits given to the John
Hay Economic Zone under Presidential Proclamation No. 420, Series of 1994, "CREATING AND
DESIGNATING A PORTION OF THE AREA COVERED BY THE FORMER CAMP JOHN AS THE
JOHN HAY SPECIAL ECONOMIC ZONE PURSUANT TO REPUBLIC ACT NO. 7227."

In that case, among the arguments raised was that the granting of tax exemptions to John Hay was
an invalid and illegal exercise by the President of the powers granted only to the Legislature.
Petitioners therein argued that Republic Act No. 7227 expressly granted tax exemption only to Subic
and not to the other economic zones yet to be established. Thus, the grant of tax exemption to John
Hay by Presidential Proclamation contravenes the constitutional mandate that "[n]o law granting any
tax exemption shall be passed without the concurrence of a majority of all the members of
Congress."21

This Court sustained the argument and ruled that the incentives under Republic Act No. 7227 are
exclusive only to the SSEZ. The President, therefore, had no authority to extend their application to
John Hay. To quote from the Decision:

More importantly, the nature of most of the assailed privileges is one of tax exemption. It is the
legislature, unless limited by a provision of a state constitution, that has full power to exempt any
person or corporation or class of property from taxation, its power to exempt being as broad as its
power to tax. Other than Congress, the Constitution may itself provide for specific tax exemptions, or
local governments may pass ordinances on exemption only from local taxes.

The challenged grant of tax exemption would circumvent the Constitution’s imposition that a law
granting any tax exemption must have the concurrence of a majority of all the members of Congress.
In the same vein, the other kinds of privileges extended to the John Hay SEZ are by tradition and
usage for Congress to legislate upon.

73
Contrary to public respondents’ suggestions, the claimed statutory exemption of the John Hay SEZ
from taxation should be manifest and unmistakable from the language of the law on which it is
based; it must be expressly granted in a statute stated in a language too clear to be mistaken. Tax
exemption cannot be implied as it must be categorically and unmistakably expressed.

If it were the intent of the legislature to grant to John Hay SEZ the same tax exemption and
incentives given to the Subic SEZ, it would have so expressly provided in R.A. No. 7227. 22

In the present case, while Section 12 of Republic Act No. 7227 expressly provides for the grant of
incentives to the SSEZ, it fails to make any similar grant in favor of other economic zones, including
the CSEZ. Tax and duty-free incentives being in the nature of tax exemptions, the basis thereof
should be categorically and unmistakably expressed from the language of the statute. Consequently,
in the absence of any express grant of tax and duty-free privileges to the CSEZ in Republic Act No.
7227, there would be no legal basis to uphold the questioned portions of two issuances: Section 5 of
Executive Order No. 80 and Section 4 of BCDA Board Resolution No. 93-05-034, which both pertain
to the CSEZ.

Petitioners also contend that the questioned issuances constitute executive legislation for allowing
the removal of consumer goods and items from the zones without payment of corresponding duties
and taxes in violation of Republic Act No. 7227 as Section 12 thereof provides for the taxation of
goods that are exported or removed from the SSEZ to other parts of the Philippine territory.

On September 26, 1997, Executive Order No. 444 was issued, curtailing the duty-free shopping
privileges in the SSEZ and the CSEZ "to prevent abuse of duty-free privilege and to protect local
industries from unfair competition." The pertinent provisions of said issuance state, as follows:

SECTION 3. Special Shopping Privileges Granted During the Year-round Centennial Anniversary
Celebration in 1998. — Upon effectivity of this Order and up to the Centennial Year 1998, in
addition to the permanent residents, locators and employees of the fenced-in areas of the Subic
Special Economic and Freeport Zone and the Clark Special Economic Zone who are allowed
unlimited duty free purchases, provided these are consumed within said fenced-in areas of the
Zones, the residents of the municipalities adjacent to Subic and Clark as respectively provided in
R.A. 7227 (1992) and E.O. 97-A s. 1993 shall continue to be allowed One Hundred US Dollars
(US$100) monthly shopping privilege until 31 December 1998. Domestic tourists visiting Subic and
Clark shall be allowed a shopping privilege of US$25 for consumable goods which shall be
consumed only in the fenced-in area during their visit therein.

SECTION 4. Grant of Duty Free Shopping Privileges Limited Only To Individuals Allowed by Law.
— Starting 1 January 1999, only the following persons shall continue to be eligible to shop in duty
free shops/outlets with their corresponding purchase limits:

a. Tourists and Filipinos traveling to or returning from foreign destinations under E.O. 97-A s. 1993
— One Thousand US Dollars (US$1,000) but not to exceed Ten Thousand US Dollars
(US$10,000) in any given year;

b. Overseas Filipino Workers (OFWs) and Balikbayans defined under R.A. 6768 dated 3
November 1989 — Two Thousand US Dollars (US$2,000);

c. Residents, eighteen (18) years old and above, of the fenced-in areas of the freeports under R.A.
7227 (1992) and E.O. 97-A s. 1993 — Unlimited purchase as long as these are for consumption
within these freeports.

74
The term "Residents" mentioned in item c above shall refer to individuals who, by virtue of domicile
or employment, reside on permanent basis within the freeport area. The term excludes (1) non-
residents who have entered into short- or long-term property lease inside the freeport, (2) outsiders
engaged in doing business within the freeport, and (3) members of private clubs (e.g., yacht and golf
clubs) based or located within the freeport. In this regard, duty free privileges granted to any of the
above individuals (e.g., unlimited shopping privilege, tax-free importation of cars, etc.) are hereby
revoked.23

A perusal of the above provisions indicates that effective January 1, 1999, the grant of duty-free
shopping privileges to domestic tourists and to residents living adjacent to SSEZ and the CSEZ had
been revoked. Residents of the fenced-in area of the free port are still allowed unlimited purchase of
consumer goods, "as long as these are for consumption within these freeports." Hence, the only
individuals allowed by law to shop in the duty-free outlets and remove consumer goods out of the
free ports tax-free are tourists and Filipinos traveling to or returning from foreign destinations, and
Overseas Filipino Workers and Balikbayans as defined under Republic Act No. 6768. 24

Subsequently, on October 20, 2000, Executive Order No. 303 was issued, amending Executive
Order No. 444. Pursuant to the limited duration of the privileges granted under the preceding
issuance, Section 2 of Executive Order No. 303 declared that "[a]ll special shopping privileges as
granted under Section 3 of Executive Order 444, s. 1997, are hereby deemed terminated. The grant
of duty free shopping privileges shall be restricted to qualified individuals as provided by law."

It bears noting at this point that the shopping privileges currently being enjoyed by Overseas Filipino
Workers, Balikbayans, and tourists traveling to and from foreign destinations, draw authority not from
the issuances being assailed herein, but from Executive Order No. 46 25 and Republic Act No. 6768,
both enacted prior to the promulgation of Republic Act No. 7227.

From the foregoing, it appears that petitioners’ objection to the allowance of tax-free removal of
goods from the special economic zones as previously authorized by the questioned issuances has
become moot and academic.

In any event, Republic Act No. 7227, specifically Section 12 (b) thereof, clearly provides that
"exportation or removal of goods from the territory of the Subic Special Economic Zone to the other
parts of the Philippine territory shall be subject to customs duties and taxes under the Customs and
Tariff Code and other relevant tax laws of the Philippines."

Thus, the removal of goods from the SSEZ to other parts of the Philippine territory without payment
of said customs duties and taxes is not authorized by the Act. Consequently, the following italicized
provisions found in the second sentences of paragraphs 1.2 and 1.3, Section 1 of Executive Order
No. 97-A are null and void:

1.2 Residents of the SSEFPZ living outside the Secured Area can enter and consume any
quantity of consumption items in hotels and restaurants within the Secured Area. However, these
residents can purchase and bring out of the Secured Area to other parts of the Philippine territory
consumer items worth not exceeding US $100 per month per person. Only residents age 15 and
over are entitled to this privilege.

1.3 Filipinos not residing within the SSEFPZ can enter the Secured Area and consume any quantity
of consumption items in hotels and restaurants within the Secured Area. However, they can
purchase and bring out of the Secured Area to other parts of the Philippine territory consumer items
worth not exceeding US $200 per year per person. Only Filipinos age 15 and over are entitled to
this privilege.26

75
A similar provision found in paragraph 5, Section 4(A) of BCDA Board Resolution No. 93-05-034 is
also null and void. Said Resolution applied the incentives given to the SSEZ under Republic Act No.
7227 to the CSEZ, which, as aforestated, is without legal basis.

Having concluded earlier that the CSEZ is excluded from the tax and duty-free incentives provided
under Republic Act No. 7227, this Court will resolve the remaining arguments only with regard to the
operations of the SSEZ. Thus, the assailed issuance that will be discussed is solely Executive Order
No. 97-A, since it is the only one among the three questioned issuances which pertains to the SSEZ.

Equal Protection of the Laws

Petitioners argue that the assailed issuance (Executive Order No. 97-A) is violative of their right to
equal protection of the laws, as enshrined in Section 1, Article III of the Constitution. To support this
argument, they assert that private respondents operating inside the SSEZ are not different from the
retail establishments located outside, the products sold being essentially the same. The only
distinction, they claim, lies in the products’ variety and source, and the fact that private respondents
import their items tax-free, to the prejudice of the retailers and manufacturers located outside the
zone.

Petitioners’ contention cannot be sustained. It is an established principle of constitutional law that the
guaranty of the equal protection of the laws is not violated by a legislation based on a reasonable
classification.27 Classification, to be valid, must (1) rest on substantial distinction, (2) be germane to
the purpose of the law, (3) not be limited to existing conditions only, and (4) apply equally to all
members of the same class.28

Applying the foregoing test to the present case, this Court finds no violation of the right to equal
protection of the laws. First, contrary to petitioners’ claim, substantial distinctions lie between the
establishments inside and outside the zone, justifying the difference in their treatment. In Tiu v.
Court of Appeals,29 the constitutionality of Executive Order No. 97-A was challenged for being
violative of the equal protection clause. In that case, petitioners claimed that Executive Order No. 97-
A was discriminatory in confining the application of Republic Act No. 7227 within a secured area of
the SSEZ, to the exclusion of those outside but are, nevertheless, still within the economic zone.

Upholding the constitutionality of Executive Order No. 97-A, this Court therein found substantial
differences between the retailers inside and outside the secured area, thereby justifying a valid and
reasonable classification:

Certainly, there are substantial differences between the big investors who are being lured to
establish and operate their industries in the so-called "secured area" and the present business
operators outside the area. On the one hand, we are talking of billion-peso investments and
thousands of new jobs. On the other hand, definitely none of such magnitude. In the first, the
economic impact will be national; in the second, only local. Even more important, at this time the
business activities outside the "secured area" are not likely to have any impact in achieving the
purpose of the law, which is to turn the former military base to productive use for the benefit of the
Philippine economy. There is, then, hardly any reasonable basis to extend to them the benefits and
incentives accorded in R.A. 7227. Additionally, as the Court of Appeals pointed out, it will be easier
to manage and monitor the activities within the "secured area," which is already fenced off, to
prevent "fraudulent importation of merchandise" or smuggling.

It is well-settled that the equal-protection guarantee does not require territorial uniformity of laws. As
long as there are actual and material differences between territories, there is no violation of the
constitutional clause. And of course, anyone, including the petitioners, possessing the requisite

76
investment capital can always avail of the same benefits by channeling his or her resources or
business operations into the fenced-off free port zone. 30

The Court in Tiu found real and substantial distinctions between residents within the secured area
and those living within the economic zone but outside the fenced-off area. Similarly, real and
substantial differences exist between the establishments herein involved. A significant distinction
between the two groups is that enterprises outside the zones maintain their businesses within
Philippine customs territory, while private respondents and the other duly-registered zone
enterprises operate within the so-called "separate customs territory." To grant the same tax
incentives given to enterprises within the zones to businesses operating outside the zones, as
petitioners insist, would clearly defeat the statute’s intent to carve a territory out of the military
reservations in Subic Bay where free flow of goods and capital is maintained.

The classification is germane to the purpose of Republic Act No. 7227. As held in Tiu, the real
concern of Republic Act No. 7227 is to convert the lands formerly occupied by the US military bases
into economic or industrial areas. In furtherance of such objective, Congress deemed it necessary to
extend economic incentives to the establishments within the zone to attract and encourage foreign
and local investors. This is the very rationale behind Republic Act No. 7227 and other similar special
economic zone laws which grant a complete package of tax incentives and other benefits.

The classification, moreover, is not limited to the existing conditions when the law was promulgated,
but to future conditions as well, inasmuch as the law envisioned the former military reservation to
ultimately develop into a self-sustaining investment center.

And, lastly, the classification applies equally to all retailers found within the "secured area." As ruled
in Tiu, the individuals and businesses within the "secured area," being in like circumstances or
contributing directly to the achievement of the end purpose of the law, are not categorized further.
They are all similarly treated, both in privileges granted and in obligations required.

With all the four requisites for a reasonable classification present, there is no ground to invalidate
Executive Order No. 97-A for being violative of the equal protection clause.

Prohibition against Unfair Competition

and Practices in Restraint of Trade

Petitioners next argue that the grant of special tax exemptions and privileges gave the private
respondents undue advantage over local enterprises which do not operate inside the SSEZ, thereby
creating unfair competition in violation of the constitutional prohibition against unfair competition and
practices in restraint of trade.

The argument is without merit. Just how the assailed issuance is violative of the prohibition against
unfair competition and practices in restraint of trade is not clearly explained in the petition. Republic
Act No. 7227, and consequently Executive Order No. 97-A, cannot be said to be distinctively
arbitrary against the welfare of businesses outside the zones. The mere fact that incentives and
privileges are granted to certain enterprises to the exclusion of others does not render the issuance
unconstitutional for espousing unfair competition. Said constitutional prohibition cannot hinder the
Legislature from using tax incentives as a tool to pursue its policies.

Suffice it to say that Congress had justifiable reasons in granting incentives to the private
respondents, in accordance with Republic Act No. 7227’s policy of developing the SSEZ into a self-
sustaining entity that will generate employment and attract foreign and local investment. If petitioners

77
had wanted to avoid any alleged unfavorable consequences on their profits, they should upgrade
their standards of quality so as to effectively compete in the market. In the alternative, if petitioners
really wanted the preferential treatment accorded to the private respondents, they could have opted
to register with SSEZ in order to operate within the special economic zone.

Preferential Use of Filipino Labor, Domestic Materials

and Locally Produced Goods

Lastly, petitioners claim that the questioned issuance (Executive Order No. 97-A) openly violated the
State policy of promoting the preferential use of Filipino labor, domestic materials and locally
produced goods and adopting measures to help make them competitive.

Again, the argument lacks merit. This Court notes that petitioners failed to substantiate their
sweeping conclusion that the issuance has violated the State policy of giving preference to Filipino
goods and labor. The mere fact that said issuance authorizes the importation and trade of foreign
goods does not suffice to declare it unconstitutional on this ground.

Petitioners cite Manila Prince Hotel v. GSIS31 which, however, does not apply. That case dealt with
the policy enunciated under the second paragraph of Section 10, Article XII of the
Constitution,32 applicable to the grant of rights, privileges, and concessions "covering the national
economy and patrimony," which is different from the policy invoked in this petition, specifically that of
giving preference to Filipino materials and labor found under Section 12 of the same Article of the
Constitution. (Emphasis supplied).

In Tañada v. Angara,33 this Court elaborated on the meaning of Section 12, Article XII of the
Constitution in this wise:

[W]hile the Constitution indeed mandates a bias in favor of Filipino goods, services, labor and
enterprises, at the same time, it recognizes the need for business exchange with the rest of the
world on the bases of equality and reciprocity and limits protection of Filipino enterprises only
against foreign competition and trade practices that are unfair. In other words, the Constitution did
not intend to pursue an isolationist policy. It did not shut out foreign investments, goods and
services in the development of the Philippine economy. While the Constitution does not encourage
the unlimited entry of foreign goods, services and investments into the country, it does not prohibit
them either. In fact, it allows an exchange on the basis of equality and reciprocity, frowning only on
foreign competition that is unfair.34

This Court notes that the Executive Department, with its subsequent issuance of Executive Order
Nos. 444 and 303, has provided certain measures to prevent unfair competition. In particular,
Executive Order Nos. 444 and 303 have restricted the special shopping privileges to certain
individuals.35 Executive Order No. 303 has limited the range of items that may be sold in the duty-
free outlets,36 and imposed sanctions to curb abuses of duty-free privileges. 37With these measures,
this Court finds no reason to strike down Executive Order No. 97-A for allegedly being prejudicial to
Filipino labor, domestic materials and locally produced goods.

WHEREFORE, the petition is PARTLY GRANTED. Section 5 of Executive Order No. 80 and Section
4 of BCDA Board Resolution No. 93-05-034 are hereby declared NULL and VOID and are
accordingly declared of no legal force and effect. Respondents are hereby enjoined from
implementing the aforesaid void provisions. All portions of Executive Order No. 97-A are valid and
effective, except the second sentences in paragraphs 1.2 and 1.3 of said Executive Order, which are
hereby declared INVALID.

78
No costs.

SO ORDERED.

Davide, Jr., C.J., Puno, Panganiban, Quisumbing, Ynares-Santiago, Sandoval-Gutierrez, Austria-

Martinez, Carpio-Morales, Callejo, Sr., Tinga, Chico-Nazario, and Garcia, JJ., concur.

Carpio, J., no part.

Corona, J., on official leave.

79
6. Associated Words (Noscitur A Sociis)

Republic of the Philippines

SUPREME COURT
Manila

EN BANC

G.R. No. 106719 September 21, 1993

DRA. BRIGIDA S. BUENASEDA, Lt. Col. ISABELO BANEZ, JR., ENGR. CONRADO REY
MATIAS, Ms. CORA S. SOLIS and Ms. ENYA N. LOPEZ, petitioners,
vs.
SECRETARY JUAN FLAVIER, Ombudsman CONRADO M. VASQUEZ, and NCMH NURSES
ASSOCIATION, represented by RAOULITO GAYUTIN, respondents.

Renato J. Dilag and Benjamin C. Santos for petitioners.

Danilo C. Cunanan for respondent Ombudsman.

Crispin T. Reyes and Florencio T. Domingo for private respondent.

QUIASON, J.:

This is a Petition for Certiorari, Prohibition and Mandamus, with Prayer for Preliminary Injunction or
Temporary Restraining Order, under Rule 65 of the Revised Rules of Court.

Principally, the petition seeks to nullify the Order of the Ombudsman dated January 7, 1992,
directing the preventive suspension of petitioners,
Dr. Brigida S. Buenaseda, Chief of Hospital III; Isabelo C. Banez, Jr., Administrative Officer III;
Conrado Rey Matias, Technical Assistant to the Chief of Hospital; Cora C. Solis, Accountant III; and
Enya N. Lopez, Supply Officer III, all of the National Center for Mental Health. The petition also asks
for an order directing the Ombudsman to disqualify Director Raul Arnaw and Investigator Amy de
Villa-Rosero, of the Office of the Ombudsman, from participation in the preliminary investigation of
the charges against petitioner (Rollo, pp. 2-17; Annexes to Petition, Rollo, pp. 19-21).

The questioned order was issued in connection with the administrative complaint filed with the
Ombudsman (OBM-ADM-0-91-0151) by the private respondents against the petitioners for violation
of the Anti-Graft and Corrupt Practices Act.

According to the petition, the said order was issued upon the recommendation of Director Raul
Arnaw and Investigator Amy de Villa-Rosero, without affording petitioners the opportunity to
controvert the charges filed against them. Petitioners had sought to disqualify Director Arnaw and
Investigator Villa-Rosero for manifest partiality and bias (Rollo, pp. 4-15).

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On September 10, 1992, this Court required respondents' Comment on the petition.

On September 14 and September 22, 1992, petitioners filed a "Supplemental Petition (Rollo, pp.
124-130); Annexes to Supplemental Petition; Rollo pp. 140-163) and an "Urgent Supplemental
Manifestation" (Rollo,
pp. 164-172; Annexes to Urgent Supplemental Manifestation; Rollo, pp. 173-176), respectively,
averring developments that transpired after the filing of the petition and stressing the urgency for the
issuance of the writ of preliminary injunction or temporary restraining order.

On September 22, 1992, this Court ". . . Resolved to REQUIRE the respondents to MAINTAIN in the
meantime, the STATUS QUO pending filing of comments by said respondents on the original
supplemental manifestation" (Rollo, p. 177).

On September 29, 1992, petitioners filed a motion to direct respondent Secretary of Health to
comply with the Resolution dated September 22, 1992 (Rollo, pp. 182-192, Annexes, pp. 192-203).
In a Resolution dated October 1, 1992, this Court required respondent Secretary of Health to
comment on the said motion.

On September 29, 1992, in a pleading entitled "Omnibus Submission," respondent NCMH Nurses
Association submitted its Comment to the Petition, Supplemental Petition and Urgent Supplemental
Manifestation. Included in said pleadings were the motions to hold the lawyers of petitioners in
contempt and to disbar them (Rollo, pp. 210-267). Attached to the "Omnibus Submission" as
annexes were the orders and pleadings filed in Administrative Case No. OBM-ADM-0-91-1051
against petitioners (Rollo, pp. 268-480).

The Motion for Disbarment charges the lawyers of petitioners with:

(1) unlawfully advising or otherwise causing or inducing their clients — petitioners Buenaseda, et
al., to openly defy, ignore, disregard, disobey or otherwise violate, maliciously evade their
preventive suspension by Order of July 7, 1992 of the Ombudsman . . ."; (2) "unlawfully interfering
with and obstructing the implementation of the said order (Omnibus Submission, pp. 50-52; Rollo,
pp. 259- 260); and (3) violation of the Canons of the Code of Professional Responsibility and of
unprofessional and unethical conduct "by foisting blatant lies, malicious falsehood and outrageous
deception" and by committing subornation of perjury, falsification and fabrication in their pleadings
(Omnibus Submission, pp. 52-54; Rollo, pp. 261-263).

On November 11, 1992, petitioners filed a "Manifestation and Supplement to 'Motion to Direct
Respondent Secretary of Health to Comply with 22 September 1992 Resolution'" (Manifestation
attached to Rollo without pagination between pp. 613 and 614 thereof).

On November 13, 1992, the Solicitor General submitted its Comment dated November 10, 1992,
alleging that: (a) "despite the issuance of the September 22, 1992 Resolution directing respondents
to maintain the status quo, respondent Secretary refuses to hold in abeyance the implementation of
petitioners' preventive suspension; (b) the clear intent and spirit of the Resolution dated September
22, 1992 is to hold in abeyance the implementation of petitioners' preventive suspension, the status
quo obtaining the time of the filing of the instant petition; (c) respondent Secretary's acts in refusing
to hold in abeyance implementation of petitioners' preventive suspension and in tolerating and
approving the acts of Dr. Abueva, the OIC appointed to replace petitioner Buenaseda, are in
violation of the Resolution dated September 22, 1992; and
(d) therefore, respondent Secretary should be directed to comply with the Resolution dated
September 22, 1992 immediately, by restoring the status quo ante contemplated by the aforesaid
resolution" (Comment attached to Rollowithout paginations between pp. 613-614 thereof).

81
In the Resolution dated November 25, 1992, this Court required respondent Secretary to comply
with the aforestated status quo order, stating inter alia, that:

It appearing that the status quo ante litem motam, or the last peaceable uncontested
status which preceded the present controversy was the situation obtaining at the time
of the filing of the petition at bar on September 7, 1992 wherein petitioners were then
actually occupying their respective positions, the Court hereby ORDERS that
petitioners be allowed to perform the duties of their respective positions and to
receive such salaries and benefits as they may be lawfully entitled to, and that
respondents and/or any and all persons acting under their authority desist and refrain
from performing any act in violation of the aforementioned Resolution of September
22, 1992 until further orders from the Court (Attached to Rollo after p. 615 thereof).

On December 9, 1992, the Solicitor General, commenting on the Petition, Supplemental Petition and
Supplemental Manifestation, stated that (a) "The authority of the Ombudsman is only to recommend
suspension and he has no direct power to suspend;" and (b) "Assuming the Ombudsman has the
power to directly suspend a government official or employee, there are conditions required by law for
the exercise of such powers; [and] said conditions have not been met in the instant case" (Attached
to Rollo without pagination).

In the pleading filed on January 25, 1993, petitioners adopted the position of the Solicitor General
that the Ombudsman can only suspend government officials or employees connected with his office.
Petitioners also refuted private respondents' motion to disbar petitioners' counsel and to cite them for
contempt (Attached to Rollo without pagination).

The crucial issue to resolve is whether the Ombudsman has the power to suspend government
officials and employees working in offices other than the Office of the Ombudsman, pending the
investigation of the administrative complaints filed against said officials and employees.

In upholding the power of the Ombudsman to preventively suspend petitioners, respondents (Urgent
Motion to Lift Status Quo, etc, dated January 11, 1993, pp. 10-11), invoke Section 24 of R.A. No.
6770, which provides:

Sec. 24. Preventive Suspension. — The Ombudsman or his Deputy may preventively
suspend any officer or employee under his authority pending an investigation, if in his
judgment the evidence of guilt is strong, and (a) the charge against such officer or
employee involves dishonesty, oppression or grave misconduct or neglect in the
performance of duty; (b) the charge would warrant removal from the service; or (c)
the respondent's continued stay in office may prejudice the case filed against him.

The preventive suspension shall continue until the case is terminated by the Office of
Ombudsman but not more than six months, without pay, except when the delay in
the disposition of the case by the Office of the Ombudsman is due to the fault,
negligence or petition of the respondent, in which case the period of such delay shall
not be counted in computing the period of suspension herein provided.

Respondents argue that the power of preventive suspension given the Ombudsman under Section
24 of R.A. No. 6770 was contemplated by Section 13 (8) of Article XI of the 1987 Constitution, which
provides that the Ombudsman shall exercise such other power or perform such functions or duties
as may be provided by law."

82
On the other hand, the Solicitor General and the petitioners claim that under the 1987 Constitution,
the Ombudsman can only recommend to the heads of the departments and other agencies the
preventive suspension of officials and employees facing administrative investigation conducted by
his office. Hence, he cannot order the preventive suspension himself.

They invoke Section 13(3) of the 1987 Constitution which provides that the Office of the
Ombudsman shall have inter alia the power, function, and duty to:

Direct the officer concerned to take appropriate action against a public official or
employee at fault, and recommend his removal, suspension, demotion, fine, censure
or prosecution, and ensure compliance therewith.

The Solicitor General argues that under said provision of the Constitutions, the Ombudsman has
three distinct powers, namely: (1) direct the officer concerned to take appropriate action against
public officials or employees at fault; (2) recommend their removal, suspension, demotion fine,
censure, or prosecution; and (3) compel compliance with the recommendation (Comment dated
December 3, 1992, pp. 9-10).

The line of argument of the Solicitor General is a siren call that can easily mislead, unless one bears
in mind that what the Ombudsman imposed on petitioners was not a punitive but only a preventive
suspension.

When the constitution vested on the Ombudsman the power "to recommend the suspension" of a
public official or employees (Sec. 13 [3]), it referred to "suspension," as a punitive measure. All the
words associated with the word "suspension" in said provision referred to penalties in administrative
cases, e.g. removal, demotion, fine, censure. Under the rule of Noscitor a sociis, the word
"suspension" should be given the same sense as the other words with which it is associated. Where
a particular word is equally susceptible of various meanings, its correct construction may be made
specific by considering the company of terms in which it is found or with which it is associated (Co
Kim Chan v. Valdez Tan Keh, 75 Phil. 371 [1945]; Caltex (Phils.) Inc. v. Palomar, 18 SCRA 247
[1966]).

Section 24 of R.A. No. 6770, which grants the Ombudsman the power to preventively suspend
public officials and employees facing administrative charges before him, is a procedural, not a penal
statute. The preventive suspension is imposed after compliance with the requisites therein set forth,
as an aid in the investigation of the administrative charges.

Under the Constitution, the Ombudsman is expressly authorized to recommend to the appropriate
official the discipline or prosecution of erring public officials or employees. In order to make an
intelligent determination whether to recommend such actions, the Ombudsman has to conduct an
investigation. In turn, in order for him to conduct such investigation in an expeditious and efficient
manner, he may need to suspend the respondent.

The need for the preventive suspension may arise from several causes, among them, the danger of
tampering or destruction of evidence in the possession of respondent; the intimidation of witnesses,
etc. The Ombudsman should be given the discretion to decide when the persons facing
administrative charges should be preventively suspended.

Penal statutes are strictly construed while procedural statutes are liberally construed (Crawford,
Statutory Construction, Interpretation of Laws, pp. 460-461; Lacson v. Romero, 92 Phil. 456 [1953]).
The test in determining if a statute is penal is whether a penalty is imposed for the punishment of a
wrong to the public or for the redress of an injury to an individual (59 Corpuz Juris, Sec. 658;

83
Crawford, Statutory Construction, pp. 496-497). A Code prescribing the procedure in criminal cases
is not a penal statute and is to be interpreted liberally (People v. Adler, 140 N.Y. 331; 35 N.E. 644).

The purpose of R.A. No. 6770 is to give the Ombudsman such powers as he may need to perform
efficiently the task committed to him by the Constitution. Such being the case, said statute,
particularly its provisions dealing with procedure, should be given such interpretation that will
effectuate the purposes and objectives of the Constitution. Any interpretation that will hamper the
work of the Ombudsman should be avoided.

A statute granting powers to an agency created by the Constitution should be liberally construed
for the advancement of the purposes and objectives for which it was created (Cf. Department of
Public Utilities v. Arkansas Louisiana Gas. Co., 200 Ark. 983, 142 S.W. (2d) 213 [1940]; Wallace v.
Feehan, 206 Ind. 522, 190 N.E., 438 [1934]).

In Nera v. Garcia, 106 Phil. 1031 [1960], this Court, holding that a preventive suspension is not a
penalty, said:

Suspension is a preliminary step in an administrative investigation. If after such

investigation, the charges are established and the person investigated is found guilty
of acts warranting his removal, then he is removed or dismissed. This is the penalty.

To support his theory that the Ombudsman can only preventively suspend respondents in
administrative cases who are employed in his office, the Solicitor General leans heavily on the
phrase "suspend any officer or employee under his authority" in Section 24 of R.A. No. 6770.

The origin of the phrase can be traced to Section 694 of the Revised Administrative Code, which
dealt with preventive suspension and which authorized the chief of a bureau or office to
"suspend any subordinate or employee in his bureau or under his authority pending an
investigation "

Section 34 of the Civil Service Act of 1959 (R.A. No. 2266), which superseded Section 694 of the
Revised Administrative Code also authorized the chief of a bureau or office to "suspend any
subordinate officer or employees, in his bureau or under his authority."

However, when the power to discipline government officials and employees was extended to the
Civil Service Commission by the Civil Service Law of 1975 (P.D. No. 805), concurrently with the
President, the Department Secretaries and the heads of bureaus and offices, the phrase
"subordinate officer and employee in his bureau" was deleted, appropriately leaving the phrase
"under his authority." Therefore, Section 41 of said law only mentions that the proper disciplining
authority may preventively suspend "any subordinate officer or employee under his authority
pending an investigation " (Sec. 41).

The Administrative Code of 1987 also empowered the proper disciplining authority to "preventively
suspend any subordinate officer or employee under his authority pending an investigation" (Sec. 51).

The Ombudsman Law advisedly deleted the words "subordinate" and "in his bureau," leaving the
phrase to read "suspend any officer or employee under his authority pending an investigation......."
The conclusion that can be deduced from the deletion of the word "subordinate" before and the
words "in his bureau" after "officer or employee" is that the Congress intended to empower the
Ombudsman to preventively suspend all officials and employees under investigation by his office,
irrespective of whether they are employed "in his office" or in other offices of the government. The
moment a criminal or administrative complaint is filed with the Ombudsman, the respondent therein

84
is deemed to be "in his authority" and he can proceed to determine whether said respondent should
be placed under preventive suspension.

In their petition, petitioners also claim that the Ombudsman committed grave abuse of discretion
amounting to lack of jurisdiction when he issued the suspension order without affording petitioners
the opportunity to confront the charges against them during the preliminary conference and even
after petitioners had asked for the disqualification of Director Arnaw and Atty. Villa-Rosero (Rollo, pp.
6-13). Joining petitioners, the Solicitor General contends that assuming arguendo that the
Ombudsman has the power to preventively suspend erring public officials and employees who are
working in other departments and offices, the questioned order remains null and void for his failure
to comply with the requisites in Section 24 of the Ombudsman Law (Comment dated December 3,
1992, pp. 11-19).

Being a mere order for preventive suspension, the questioned order of the Ombudsman was validly
issued even without a full-blown hearing and the formal presentation of evidence by the parties.
In Nera, supra, petitioner therein also claimed that the Secretary of Health could not preventively
suspend him before he could file his answer to the administrative complaint. The contention of
petitioners herein can be dismissed perfunctorily by holding that the suspension meted out was
merely preventive and therefore, as held in Nera, there was "nothing improper in suspending an
officer pending his investigation and before tho charges against him are heard . . . (Nera v.
Garcia., supra).

There is no question that under Section 24 of R.A. No. 6770, the Ombudsman cannot order the
preventive suspension of a respondent unless the evidence of guilt is strong and (1) the charts
against such officer or employee involves dishonesty, oppression or grave misconduct or neglect in
the performance of duty; (2) the charge would warrant removal from the service; or (3) the
respondent's continued stay in office may prejudice the case filed against him.

The same conditions for the exercise of the power to preventively suspend officials or employees
under investigation were found in Section 34 of R.A. No. 2260.

The import of the Nera decision is that the disciplining authority is given the discretion to decide
when the evidence of guilt is strong. This fact is bolstered by Section 24 of R.A. No. 6770, which
expressly left such determination of guilt to the "judgment" of the Ombudsman on the basis of the
administrative complaint. In the case at bench, the Ombudsman issued the order of preventive
suspension only after: (a) petitioners had filed their answer to the administrative complaint and the
"Motion for the Preventive Suspension" of petitioners, which incorporated the charges in the criminal
complaint against them (Annex 3, Omnibus Submission, Rollo, pp. 288-289; Annex 4, Rollo,
pp. 290-296); (b) private respondent had filed a reply to the answer of petitioners, specifying 23
cases of harassment by petitioners of the members of the private respondent (Annex 6, Omnibus
Submission, Rollo, pp. 309-333); and (c) a preliminary conference wherein the complainant and the
respondents in the administrative case agreed to submit their list of witnesses and documentary
evidence.

Petitioners herein submitted on November 7, 1991 their list of exhibits (Annex 8 of Omnibus
Submission, Rollo, pp. 336-337) while private respondents submitted their list of exhibits (Annex 9 of
Omnibus Submission, Rollo, pp. 338-348).

Under these circumstances, it can not be said that Director Raul Arnaw and Investigator Amy de
Villa-Rosero acted with manifest partiality and bias in recommending the suspension of petitioners.
Neither can it be said that the Ombudsman had acted with grave abuse of discretion in acting
favorably on their recommendation.

85
The Motion for Contempt, which charges the lawyers of petitioners with unlawfully causing or
otherwise inducing their clients to openly defy and disobey the preventive suspension as ordered by
the Ombudsman and the Secretary of Health can not prosper (Rollo, pp. 259-261). The Motion
should be filed, as in fact such a motion was filed, with the Ombudsman. At any rate, we find that the
acts alleged to constitute indirect contempt were legitimate measures taken by said lawyers to
question the validity and propriety of the preventive suspension of their clients.

On the other hand, we take cognizance of the intemperate language used by counsel for private
respondents hurled against petitioners and their counsel (Consolidated: (1) Comment on
Private Respondent" "Urgent Motions, etc.;
(2) Adoption of OSG's Comment; and (3) Reply to Private Respondent's Comment
and Supplemental Comment, pp. 4-5).

A lawyer should not be carried away in espousing his client's cause. The language of a lawyer, both
oral or written, must be respectful and restrained in keeping with the dignity of the legal profession
and with his behavioral attitude toward his brethren in the profession (Lubiano v. Gordolla, 115
SCRA 459 [1982]). The use of abusive language by counsel against the opposing counsel
constitutes at the same time a disrespect to the dignity of the court of justice. Besides, the use of
impassioned language in pleadings, more often than not, creates more heat than light.

The Motion for Disbarment (Rollo, p. 261) has no place in the instant special civil action, which is
confined to questions of jurisdiction or abuse of discretion for the purpose of relieving persons from
the arbitrary acts of judges and quasi-judicial officers. There is a set of procedure for the discipline of
members of the bar separate and apart from the present special civil action.

WHEREFORE, the petition is DISMISSED and the Status quo ordered to be maintained in the
Resolution dated September 22, 1992 is LIFTED and SET ASIDE.

SO ORDERED.

Narvasa, C.J., Cruz, Padilla, Bidin, Griño-Aquino, Regalado, Davide, Jr., Romero, Nocon, Melo,
Puno and Vitug, JJ., concur.

Feliciano, J., is on leave.

86
 Republic of the Philippines
SUPREME COURT
Manila

EN BANC

G.R. No. 111097 July 20, 1994

MAYOR PABLO P. MAGTAJAS & THE CITY OF CAGAYAN DE ORO, petitioners,

vs.
PRYCE PROPERTIES CORPORATION, INC. & PHILIPPINE AMUSEMENT AND GAMING
CORPORATION, respondents.

Aquilino G. Pimentel, Jr. and Associates for petitioners.

R.R. Torralba & Associates for private respondent.

CRUZ, J.:

There was instant opposition when PAGCOR announced the opening of a casino in Cagayan de Oro
City. Civic organizations angrily denounced the project. The religious elements echoed the objection
and so did the women's groups and the youth. Demonstrations were led by the mayor and the city
legislators. The media trumpeted the protest, describing the casino as an affront to the welfare of the
city.

The trouble arose when in 1992, flush with its tremendous success in several cities, PAGCOR
decided to expand its operations to Cagayan de Oro City. To this end, it leased a portion of a
building belonging to Pryce Properties Corporation, Inc., one of the herein private respondents,
renovated and equipped the same, and prepared to inaugurate its casino there during the Christmas
season.

The reaction of the Sangguniang Panlungsod of Cagayan de Oro City was swift and hostile. On
December 7, 1992, it enacted Ordinance No. 3353 reading as follows:

ORDINANCE NO. 3353

AN ORDINANCE PROHIBITING THE ISSUANCE OF BUSINESS PERMIT AND

CANCELLING EXISTING BUSINESS PERMIT TO ANY ESTABLISHMENT FOR
THE USING AND ALLOWING TO BE USED ITS PREMISES OR PORTION
THEREOF FOR THE OPERATION OF CASINO.

BE IT ORDAINED by the Sangguniang Panlungsod of the City of Cagayan de Oro, in

session assembled that:

Sec. 1. — That pursuant to the policy of the city banning the operation of casino
within its territorial jurisdiction, no business permit shall be issued to any
person, partnership or corporation for the operation of casino within the city
limits.
87
 Sec. 2. — That it shall be a violation of existing business permit by any persons,
partnership or corporation to use its business establishment or portion thereof, or
allow the use thereof by others for casino operation and other gambling activities.

Sec. 3. — PENALTIES. — Any violation of such existing business permit as defined

in the preceding section shall suffer the following penalties, to wit:

a) Suspension of the business permit for sixty (60)

days for the first offense and a fine of
P1,000.00/day

b) Suspension of the business permit for Six

(6) months for the second offense, and a fine of
P3,000.00/day

c) Permanent revocation of the business permit

and imprisonment of One (1) year, for the third and
subsequent offenses.

Sec. 4. — This Ordinance shall take effect ten (10) days from publication thereof.

Nor was this all. On January 4, 1993, it adopted a sterner Ordinance No. 3375-93 reading as follows:

ORDINANCE NO. 3375-93

AN ORDINANCE PROHIBITING THE OPERATION OF CASINO AND PROVIDING

PENALTY FOR VIOLATION THEREFOR.

WHEREAS, the City Council established a policy as early as 1990 against CASINO
under its Resolution No. 2295;

WHEREAS, on October 14, 1992, the City Council passed another Resolution No.
2673, reiterating its policy against the establishment of CASINO;

WHEREAS, subsequently, thereafter, it likewise passed Ordinance No. 3353,

prohibiting the issuance of Business Permit and to cancel existing Business Permit to
any establishment for the using and allowing to be used its premises or portion
thereof for the operation of CASINO;

WHEREAS, under Art. 3, section 458, No. (4), sub paragraph VI of the Local
Government Code of 1991 (Rep. Act 7160) and under Art. 99, No. (4), Paragraph VI
of the implementing rules of the Local Government Code, the City Council as the
Legislative Body shall enact measure to suppress any activity inimical to public
morals and general welfare of the people and/or regulate or prohibit such activity
pertaining to amusement or entertainment in order to protect social and moral
welfare of the community;

NOW THEREFORE,

BE IT ORDAINED by the City Council in session duly assembled that:

88
 Sec. 1. — The operation of gambling CASINO in the City of Cagayan de Oro is
hereby prohibited.

Sec. 2. — Any violation of this Ordinance shall be subject to the following penalties:

a) Administrative fine of P5,000.00 shall be imposed against the proprietor,

partnership or corporation undertaking the operation, conduct, maintenance
of gambling CASINO in the City and closure thereof;

b) Imprisonment of not less than six (6) months nor more than one (1) year or a fine
in the amount of P5,000.00 or both at the discretion of the court against the
manager, supervisor, and/or any person responsible in the establishment, conduct
and maintenance of gambling CASINO.

Sec. 3. — This Ordinance shall take effect ten (10) days after its publication in a local
newspaper of general circulation.

Pryce assailed the ordinances before the Court of Appeals, where it was joined by PAGCOR as
intervenor and supplemental petitioner. Their challenge succeeded. On March 31, 1993, the Court of
Appeals declared the ordinances invalid and issued the writ prayed for to prohibit their
enforcement. 1 Reconsideration of this decision was denied on July 13, 1993. 2

Cagayan de Oro City and its mayor are now before us in this petition for review under Rule 45 of the
Rules of Court. 3 They aver that the respondent Court of Appeals erred in holding that:

1. Under existing laws, the Sangguniang Panlungsod of the City of Cagayan de Oro
does not have the power and authority to prohibit the establishment and operation
of a PAGCOR gambling casino within the City's territorial limits.

2. The phrase "gambling and other prohibited games of chance" found in Sec.
458, par. (a), sub-par. (1) — (v) of R.A. 7160 could only mean "illegal gambling."

3. The questioned Ordinances in effect annul P.D. 1869 and are therefore invalid on
that point.

4. The questioned Ordinances are discriminatory to casino and partial to

cockfighting and are therefore invalid on that point.

5. The questioned Ordinances are not reasonable, not consonant with the general
powers and purposes of the instrumentality concerned and inconsistent with the
laws or policy of the State.

6. It had no option but to follow the ruling in the case of Basco, et al. v.
PAGCOR, G.R. No. 91649, May 14, 1991, 197 SCRA 53 in disposing of the issues
presented in this present case.

PAGCOR is a corporation created directly by P.D. 1869 to help centralize and regulate all games of
chance, including casinos on land and sea within the territorial jurisdiction of the Philippines.
In Basco v. Philippine Amusements and Gaming Corporation, 4 this Court sustained the
constitutionality of the decree and even cited the benefits of the entity to the national economy as the
third highest revenue-earner in the government, next only to the BIR and the Bureau of Customs.
89
Cagayan de Oro City, like other local political subdivisions, is empowered to enact ordinances for
the purposes indicated in the Local Government Code. It is expressly vested with the police power
under what is known as the General Welfare Clause now embodied in Section 16 as follows:

Sec. 16. — General Welfare. — Every local government unit shall exercise the
powers expressly granted, those necessarily implied therefrom, as well as powers
necessary, appropriate, or incidental for its efficient and effective governance, and
those which are essential to the promotion of the general welfare. Within their
respective territorial jurisdictions, local government units shall ensure and support,
among other things, the preservation and enrichment of culture, promote health and
safety, enhance the right of the people to a balanced ecology, encourage and
support the development of appropriate and self-reliant scientific and technological
capabilities, improve public morals, enhance economic prosperity and social justice,
promote full employment among their residents, maintain peace and order, and
preserve the comfort and convenience of their inhabitants.

In addition, Section 458 of the said Code specifically declares that:

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 government, and in this connection, shall:

xxx xxx xxx

(v) Enact ordinances intended to prevent, suppress

and impose appropriate penalties for habitual
drunkenness in public places, vagrancy, mendicancy,
prostitution, establishment and maintenance of
houses of ill repute, gamblingand other prohibited
games of chance, fraudulent devices and ways to
obtain money or property, drug addiction,
maintenance of drug dens, drug pushing, juvenile
delinquency, the printing, distribution or exhibition of
obscene or pornographic materials or publications,
and such other activities inimical to the welfare and
morals of the inhabitants of the city;

This section also authorizes the local government units to regulate properties and businesses within
their territorial limits in the interest of the general welfare. 5

The petitioners argue that by virtue of these provisions, the Sangguniang Panlungsod may prohibit
the operation of casinos because they involve games of chance, which are detrimental to the
people. Gambling is not allowed by general law and even by the Constitution itself. The legislative
power conferred upon local government units may be exercised over all kinds of gambling and not
only over "illegal gambling" as the respondents erroneously argue. Even if the operation of casinos
may have been permitted under P.D. 1869, the government of Cagayan de Oro City has the
authority to

90
prohibit them within its territory pursuant to the authority entrusted to it by the Local Government
Code.

It is submitted that this interpretation is consonant with the policy of local autonomy as mandated in
Article II, Section 25, and Article X of the Constitution, as well as various other provisions therein
seeking to strengthen the character of the nation. In giving the local government units the power to
prevent or suppress gambling and other social problems, the Local Government Code has
recognized the competence of such communities to determine and adopt the measures best
expected to promote the general welfare of their inhabitants in line with the policies of the State.

The petitioners also stress that when the Code expressly authorized the local government units to
prevent and suppress gambling and other prohibited games of chance, like craps, baccarat,
blackjack and roulette, it meant allforms of gambling without distinction. Ubi lex non distinguit, nec
nos distinguere debemos. 6 Otherwise, it would have expressly excluded from the scope of their
power casinos and other forms of gambling authorized by special law, as it could have easily done.
The fact that it did not do so simply means that the local government units are permitted to prohibit
all kinds of gambling within their territories, including the operation of casinos.

The adoption of the Local Government Code, it is pointed out, had the effect of modifying the charter
of the PAGCOR. The Code is not only a later enactment than P.D. 1869 and so is deemed to prevail
in case of inconsistencies between them. More than this, the powers of the PAGCOR under the
decree are expressly discontinued by the Code insofar as they do not conform to its philosophy and
provisions, pursuant to Par. (f) of its repealing clause reading as follows:

(f) All general and special laws, acts, city charters, decrees, executive orders,
proclamations and administrative regulations, or part or parts thereof which are
inconsistent with any of the provisions of this Code are hereby repealed or modified
accordingly.

It is also maintained that assuming there is doubt regarding the effect of the Local Government Code
on P.D. 1869, the doubt must be resolved in favor of the petitioners, in accordance with the direction
in the Code calling for its liberal interpretation in favor of the local government units. Section 5 of the
Code specifically provides:

Sec. 5. Rules of Interpretation. — In the interpretation of the provisions of this Code,

the following rules shall apply:

(a) Any provision on a power of a local government unit shall be liberally interpreted
in its favor, and in case of doubt, any question thereon shall be resolved in favor of
devolution of powers and of the lower local government unit. Any fair and reasonable
doubt as to the existence of the power shall be interpreted in favor of the local
government unit concerned;

xxx xxx xxx

(c) The general welfare provisions in this Code shall be liberally interpreted to give
more powers to local government units in accelerating economic development and
upgrading the quality of life for the people in the community; . . . (Emphasis
supplied.)

Finally, the petitioners also attack gambling as intrinsically harmful and cite various provisions of the
Constitution and several decisions of this Court expressive of the general and official disapprobation

91
of the vice. They invoke the State policies on the family and the proper upbringing of the youth and,
as might be expected, call attention to the old case of U.S. v. Salaveria,7 which sustained a municipal
ordinance prohibiting the playing of panguingue. The petitioners decry the immorality of gambling.
They also impugn the wisdom of P.D. 1869 (which they describe as "a martial law instrument") in
creating PAGCOR and authorizing it to operate casinos "on land and sea within the territorial
jurisdiction of the Philippines."

This is the opportune time to stress an important point.

The morality of gambling is not a justiciable issue. Gambling is not illegal per se. While it is generally
considered inimical to the interests of the people, there is nothing in the Constitution categorically
proscribing or penalizing gambling or, for that matter, even mentioning it at all. It is left to Congress
to deal with the activity as it sees fit. In the exercise of its own discretion, the legislature may prohibit
gambling altogether or allow it without limitation or it may prohibit some forms of gambling and allow
others for whatever reasons it may consider sufficient. Thus, it has prohibited jueteng and monte but
permits lotteries, cockfighting and horse-racing. In making such choices, Congress has consulted its
own wisdom, which this Court has no authority to review, much less reverse. Well has it been said
that courts do not sit to resolve the merits of conflicting theories. 8 That is the prerogative of the
political departments. It is settled that questions regarding the wisdom, morality, or practicibility of
statutes are not addressed to the judiciary but may be resolved only by the legislative and executive
departments, to which the function belongs in our scheme of government. That function is exclusive.
Whichever way these branches decide, they are answerable only to their own conscience and the
constituents who will ultimately judge their acts, and not to the courts of justice.

The only question we can and shall resolve in this petition is the validity of Ordinance No. 3355 and
Ordinance No. 3375-93 as enacted by the Sangguniang Panlungsod of Cagayan de Oro City. And
we shall do so only by the criteria laid down by law and not by our own convictions on the propriety
of gambling.

The tests of a valid ordinance are well established. A long line of decisions 9 has held that to be valid,
an ordinance must conform to the following substantive requirements:

1) It must not contravene the constitution or any statute.

2) It must not be unfair or oppressive.

3) It must not be partial or discriminatory.

4) It must not prohibit but may regulate trade.

5) It must be general and consistent with public policy.

6) It must not be unreasonable.

We begin by observing that under Sec. 458 of the Local Government Code, local government units
are authorized to prevent or suppress, among others, "gambling and other prohibited games of
chance." Obviously, this provision excludes games of chance which are not prohibited but are in fact
permitted by law. The petitioners are less than accurate in claiming that the Code could have
excluded such games of chance but did not. In fact it does. The language of the section is clear and
unmistakable. Under the rule of noscitur a sociis, a word or phrase should be interpreted in relation
to, or given the same meaning of, words with which it is associated. Accordingly, we conclude that

92
since the word "gambling" is associated with "and other prohibited games of chance," the word
should be read as referring to only illegal gambling which, like the other prohibited games of chance,
must be prevented or suppressed.

We could stop here as this interpretation should settle the problem quite conclusively. But we will
not. The vigorous efforts of the petitioners on behalf of the inhabitants of Cagayan de Oro City, and
the earnestness of their advocacy, deserve more than short shrift from this Court.

The apparent flaw in the ordinances in question is that they contravene P.D. 1869 and the public
policy embodied therein insofar as they prevent PAGCOR from exercising the power conferred on it
to operate a casino in Cagayan de Oro City. The petitioners have an ingenious answer to this
misgiving. They deny that it is the ordinances that have changed P.D. 1869 for an ordinance
admittedly cannot prevail against a statute. Their theory is that the change has been made by the
Local Government Code itself, which was also enacted by the national lawmaking authority. In their
view, the decree has been, not really repealed by the Code, but merely "modified pro tanto" in the
sense that PAGCOR cannot now operate a casino over the objection of the local government unit
concerned. This modification of P.D. 1869 by the Local Government Code is permissible because
one law can change or repeal another law.

It seems to us that the petitioners are playing with words. While insisting that the decree has only
been "modifiedpro tanto," they are actually arguing that it is already dead, repealed and useless for
all intents and purposes because the Code has shorn PAGCOR of all power to centralize and
regulate casinos. Strictly speaking, its operations may now be not only prohibited by the local
government unit; in fact, the prohibition is not only discretionary but mandated by Section 458 of the
Code if the word "shall" as used therein is to be given its accepted meaning. Local government units
have now no choice but to prevent and suppress gambling, which in the petitioners' view includes
both legal and illegal gambling. Under this construction, PAGCOR will have no more games of
chance to regulate or centralize as they must all be prohibited by the local government units
pursuant to the mandatory duty imposed upon them by the Code. In this situation, PAGCOR cannot
continue to exist except only as a toothless tiger or a white elephant and will no longer be able to
exercise its powers as a prime source of government revenue through the operation of casinos.

It is noteworthy that the petitioners have cited only Par. (f) of the repealing clause, conveniently
discarding the rest of the provision which painstakingly mentions the specific laws or the parts
thereof which are repealed (or modified) by the Code. Significantly, P.D. 1869 is not one of them. A
reading of the entire repealing clause, which is reproduced below, will disclose the omission:

Sec. 534. Repealing Clause. — (a) Batas Pambansa Blg. 337, otherwise known as
the "Local Government Code," Executive Order No. 112 (1987), and Executive Order
No. 319 (1988) are hereby repealed.

(b) Presidential Decree Nos. 684, 1191, 1508 and such other decrees, orders,
instructions, memoranda and issuances related to or concerning the barangay
are hereby repealed.

(c) The provisions of Sections 2, 3, and 4 of Republic Act No. 1939 regarding
hospital fund; Section 3, a (3) and b (2) of Republic Act. No. 5447 regarding the
Special Education Fund; Presidential Decree No. 144 as amended by Presidential
Decree Nos. 559 and 1741; Presidential Decree No. 231 as amended; Presidential
Decree No. 436 as amended by Presidential Decree No. 558; and Presidential
Decree Nos. 381, 436, 464, 477, 526, 632, 752, and 1136 are hereby repealed and
rendered of no force and effect.

93
 (d) Presidential Decree No. 1594 is hereby repealed insofar as it governs
locally- funded projects.

(e) The following provisions are hereby repealed or amended insofar as they are
inconsistent with the provisions of this Code: Sections 2, 16, and 29 of Presidential
Decree No. 704; Sections 12 of Presidential Decree No. 87, as amended;
Sections 52, 53, 66, 67, 68, 69, 70, 71, 72, 73, and 74 of Presidential Decree No.
463, as amended; and Section 16 of Presidential Decree No. 972, as amended,
and

(f) All general and special laws, acts, city charters, decrees, executive orders,
proclamations and administrative regulations, or part or parts thereof which are
inconsistent with any of the provisions of this Code are hereby repealed or
modified accordingly.

Furthermore, it is a familiar rule that implied repeals are not lightly presumed in the absence of a
clear and unmistakable showing of such intention. In Lichauco & Co. v. Apostol, 10 this Court
explained:

The cases relating to the subject of repeal by implication all proceed on the
assumption that if the act of later date clearly reveals an intention on the part of the
lawmaking power to abrogate the prior law, this intention must be given effect; but
there must always be a sufficient revelation of this intention, and it has become an
unbending rule of statutory construction that the intention to repeal a former law will
not be imputed to the Legislature when it appears that the two statutes, or provisions,
with reference to which the question arises bear to each other the relation of general
to special.

There is no sufficient indication of an implied repeal of P.D. 1869. On the contrary, as the private
respondent points out, PAGCOR is mentioned as the source of funding in two later enactments of
Congress, to wit, R.A. 7309, creating a Board of Claims under the Department of Justice for the
benefit of victims of unjust punishment or detention or of violent crimes, and R.A. 7648, providing for
measures for the solution of the power crisis. PAGCOR revenues are tapped by these two statutes.
This would show that the PAGCOR charter has not been repealed by the Local Government Code
but has in fact been improved as it were to make the entity more responsive to the fiscal problems of
the government.

It is a canon of legal hermeneutics that instead of pitting one statute against another in an inevitably
destructive confrontation, courts must exert every effort to reconcile them, remembering that both
laws deserve a becoming respect as the handiwork of a coordinate branch of the government. On
the assumption of a conflict between P.D. 1869 and the Code, the proper action is not to uphold one
and annul the other but to give effect to both by harmonizing them if possible. This is possible in the
case before us. The proper resolution of the problem at hand is to hold that under the Local
Government Code, local government units may (and indeed must) prevent and suppress all kinds of
gambling within their territories except only those allowed by statutes like P.D. 1869. The exception
reserved in such laws must be read into the Code, to make both the Code and such laws equally
effective and mutually complementary.

This approach would also affirm that there are indeed two kinds of gambling, to wit, the illegal and
those authorized by law. Legalized gambling is not a modern concept; it is probably as old as illegal
gambling, if not indeed more so. The petitioners' suggestion that the Code authorizes them to
prohibit all kinds of gambling would erase the distinction between these two forms of gambling
without a clear indication that this is the will of the legislature. Plausibly, following this theory, the City
94
of Manila could, by mere ordinance, prohibit the Philippine Charity Sweepstakes Office from
conducting a lottery as authorized by R.A. 1169 and B.P. 42 or stop the races at the San Lazaro
Hippodrome as authorized by R.A. 309 and R.A. 983.

In light of all the above considerations, we see no way of arriving at the conclusion urged on us by
the petitioners that the ordinances in question are valid. On the contrary, we find that the ordinances
violate P.D. 1869, which has the character and force of a statute, as well as the public policy
expressed in the decree allowing the playing of certain games of chance despite the prohibition of
gambling in general.

The rationale of the requirement that the ordinances should not contravene a statute is obvious.
Municipal governments are only agents of the national government. Local councils exercise only
delegated legislative powers conferred on them by Congress as the national lawmaking body. The
delegate cannot be superior to the principal or exercise powers higher than those of the latter. It is a
heresy to suggest that the local government units can undo the acts of Congress, from which they
have derived their power in the first place, and negate by mere ordinance the mandate of the statute.

Municipal corporations owe their origin to, and derive their powers and rights wholly
from the legislature. It breathes into them the breath of life, without which they cannot
exist. As it creates, so it may destroy. As it may destroy, it may abridge and control.
Unless there is some constitutional limitation on the right, the legislature might, by a
single act, and if we can suppose it capable of so great a folly and so great a wrong,
sweep from existence all of the municipal corporations in the State, and the
corporation could not prevent it. We know of no limitation on the right so far as to the
corporation themselves are concerned. They are, so to phrase it, the mere tenants at
will of the legislature. 11

This basic relationship between the national legislature and the local government units has not been
enfeebled by the new provisions in the Constitution strengthening the policy of local autonomy.
Without meaning to detract from that policy, we here confirm that Congress retains control of the
local government units although in significantly reduced degree now than under our previous
Constitutions. The power to create still includes the power to destroy. The power to grant still
includes the power to withhold or recall. True, there are certain notable innovations in the
Constitution, like the direct conferment on the local government units of the power to tax, 12 which
cannot now be withdrawn by mere statute. By and large, however, the national legislature is still the
principal of the local government units, which cannot defy its will or modify or violate it.

The Court understands and admires the concern of the petitioners for the welfare of their
constituents and their apprehensions that the welfare of Cagayan de Oro City will be endangered by
the opening of the casino. We share the view that "the hope of large or easy gain, obtained without
special effort, turns the head of the workman" 13 and that "habitual gambling is a cause of laziness
and ruin." 14 In People v. Gorostiza, 15 we declared: "The social scourge of gambling must be stamped
out. The laws against gambling must be enforced to the limit." George Washington called gambling
"the child of avarice, the brother of iniquity and the father of mischief." Nevertheless, we must
recognize the power of the legislature to decide, in its own wisdom, to legalize certain forms of
gambling, as was done in P.D. 1869 and impliedly affirmed in the Local Government Code. That
decision can be revoked by this Court only if it contravenes the Constitution as the touchstone of all
official acts. We do not find such contravention here.

We hold that the power of PAGCOR to centralize and regulate all games of chance, including
casinos on land and sea within the territorial jurisdiction of the Philippines, remains unimpaired. P.D.

95
1869 has not been modified by the Local Government Code, which empowers the local government
units to prevent or suppress only those forms of gambling prohibited by law.

Casino gambling is authorized by P.D. 1869. This decree has the status of a statute that cannot be
amended or nullified by a mere ordinance. Hence, it was not competent for the Sangguniang
Panlungsod of Cagayan de Oro City to enact Ordinance No. 3353 prohibiting the use of buildings for
the operation of a casino and Ordinance No. 3375-93 prohibiting the operation of casinos. For all
their praiseworthy motives, these ordinances are contrary to P.D. 1869 and the public policy
announced therein and are therefore ultra vires and void.

WHEREFORE, the petition is DENIED and the challenged decision of the respondent Court of
Appeals is AFFIRMED, with costs against the petitioners. It is so ordered.

Narvasa, C.J., Feliciano, Bidin, Regalado, Romero, Bellosillo, Melo, Quiason, Puno, Vitug,
Kapunan and Mendoza, JJ., concur.

96
7. Use of Technical Terms

Republic of the Philippines

SUPREME COURT
Manila

EN BANC

G.R. No. L-4268 January 18, 1951

MANILA HERALD PUBLISHING CO., INC., doing business under the name of Evening Herald
Publishing Co., Inc., and Printers, Inc., petitioner,
vs.
SIMEON RAMOS, Judge of the Court of First Instance of Manila, MACARIO A.
OFILADA, Sheriff of City of Manila, ANTONIO QUIRINO and ALTO SURETY AND
INSURANCE CO., INC., respondents.

Edmundo M. Reyes and Antonio Barredo for petitioners.

Bausa and Ampil for respondents.

TUASON, J.:

This is a petition for "certiorari with preliminary injunction" arising upon the following antecedents:

Respondent Antonio Quirino filed a libel suit, docketed as civil case No. 11531, against Aproniano
G. Borres, Pedro Padilla and Loreto Pastor, editor, managing editor and reporter, respectively, of the
Daily Record, a daily newspaper published in Manila, asking damages aggregating P90,000. With
the filing of this suit, the plaintiff secureda writ of preliminary attachment upon putting up a P50,000
bond, and the Sheriff of the City of Manila levied an attachment upon certain office and printing
equipment found in the premises of the Daily Record.

Thereafter the Manila Herald Publishing Co. Inc. and Printers, Inc., filed with the sheriff separate
third-party claims, alleging that they were the owners of the property attached. Whereupon, the
sheriff required of Quirino a counter bound of P41,500 to meet the claim of the Manila Herald
Publishing Co., Inc., and another bond of P59,500 to meet the claim of Printers, Inc. These amounts,
upon Quirino's motion filed under Section 13, Rule 59, of the Rules of Court, were reduced by the
court to P11,000 and P10,000 respectively.

Unsuccessful in their attempt to quash the attachment, on October 7, 1950, the Manila Herald
Publishing Co., Inc. and Printers, Inc. commenced a joint suit against the sheriff, Quirino and Alto
Surety and Insurance Co. Inc., in which the former sought (1) to enjoin the defendants from
proceeding with the attachment of the properties above mentioned and (2) P45,000 damages. This
suit was docketed as civil case No. 12263.

Whereas case No. 11531 was being handled by Judge Sanchez or pending in the branch of the
Court presided by him, case No. 12263 fell in the branch of Judge Pecson. On the same date, in
virtue of an ex parte motion in case No. 12263 by the Manila Herald Publishing Co. Inc., and
Printers, Inc., Judge Pecson issued a writ of preliminary injunction to the sheriff directing him to
desist from proceeding with the attachment of the said properties.

97
After the issuance of that preliminary injunction, Antonio Quirino filed an ex parte petition for its
dissolution, and Judge Simeon Ramos, to whom case No. 12263 had in the meanwhile been
transferred, granted the petition on a bond of P21,000. However Judge Ramos soon set aside the
order just mentioned on a motion for reconsideration by the Manila Herald Publishing Co. Inc. and
Printer, Inc. and set the matter for hearing for October 14, then continued to October 16.

Upon the conclusion of that hearing, Judge Ramos required the parties to submit memoranda on the
question whether "the subject matter of civil case No. 12263 should be ventilated in an independent
action or by means of a complaint in intervention in civil case No. 11531." Memoranda having been
filed, His Honor declared that the suit, in case No. 12263, was "unnecessary, superfluous and illegal"
and so dismissed the same. He held that what Manila Herald Publishing Co., Inc., and Printers, Inc.,
should do was intervene in Case No. 11531.

The questions that emerge from these facts and the arguments are: Did Judge Ramos have
authority to dismiss case No. 12263 at the stage when it was thrown out of court? Should the Manila
Herald Publishing Co., Inc., and Printers, Inc., come as intervernors into the case for libel instead of
bringing an independent action? And did Judge Pecson or Judge Ramos have jurisdiction in case
No. 12263 to quash the attachment levied in case No. 11531?

In case No. 12263, it should be recalled, neither a motion to dismiss nor an answer had been made
when the decision under consideration was handed down. The matter then before the court was a
motion seeking a provisional or collateral remedy, connected with and incidental to the principal
action. It was a motion to dissolve the preliminary injunction granted by Judge Pecson restraining the
sheriff from proceeding with the attachment in case No. 11531. The question of dismissal was
suggested by Judge Ramos on a ground perceived by His Honor. To all intents and purposes, the
dismissal was decreed by the court on its own initiative.

Section 1 Rule 8 enumerates the grounds upon which an action may be dismissed, and it specifically
ordains that a motion to this end be filed. In the light of this express requirement we do not believe
that the court had power to dismiss the case without the requisite motion duly presented. The fact
that the parties filed memoranda upon the court's indication or order in which they discussed the
proposition that the action was unnecessary and was improperly brought outside and independently
of the case for libel did not supply deficiency. Rule 30 of the Rules of Court provides for the cases in
which an action may be dismissed, and the inclusion of those therein provided excludes any other,
under the familiar maxim, inclusio unius est exclusio alterius. The only instance in which, according
to said Rules, the court may dismiss upon the court's own motion an action is, when the "plaintiff fails
to appear at the time of the trial or to prosecute his action for an unreasonable length of time or to
comply with the Rules or any order of the court."

The Rules of Court are devised as a matter of necessity, intended to be observed with diligence by
the courts as well as by the parties for the orderly conduct of litigation and judicial business. In
general, it is compliance with these rules which gives the court jurisdiction to act.

We are the opinion that the court acted with grave abuse of discretion if not in excess of its
jurisdiction in dismissing the case without any formal motion to dismiss.

The foregoing conclusions should suffice to dispose of this proceeding for certiorari, but the parties
have discussed the second question and we propose to rule upon it if only to put out of the way a
probable cause for future controversy and consequent delay in the disposal of the main cause.

Section 14 of rule 59, which treats of the steps to betaken when property attached is claimed by the
other person than that defendant or his agent, contains the proviso that "Nothing herein contained

98
shall prevent such third person from vindicating his claim to the property by any proper action." What
is "proper action"? Section 1 of Rule 2 defines action as "an ordinary suit in court of justice, by which
one party prosecutes another for the enforcement or protection of a right, or the prevention or
redress of a wrong," while section 2, entitled "Commencement of Action," says that "civil action may
be commenced by filing a complaint with the court."

"Action" has acquired a well-define, technical meaning, and it is in this restricted sense that the word
"action" is used in the above rule. In employing the word "commencement" the rule clearly indicates
an action which originates an entire proceeding and puts in motion the instruments of the court
calling for summons, answer, etc, and not any intermediary step taken in the course of the
proceeding whether by the parties themselves or by a stranger. It would be strange indeed if the
framers of the Rules of Court or the Legislature should have employed the term "proper action"
instead of "intervention" or equivalent expression if the intention had been just that. It was all the
easier, simplier and the more natural to say intervention if that had been the purpose, since the
asserted right of the third-party claimant necessarily grows out of the pending suit, the suit in which
the order of attachment was issued.

The most liberal view that can be taken in favor of the respondents' position is that intervention as a
means of protecting the third-party claimants' right is not exclusive but cumulative and suppletory to
the right to bring a new, independent suit. It is significant that there are courts which go so far as to
take the view that even where the statute expressly grants the right of intervention is such cases as
this, the statute does not extend to owners of property attached, for, under this view, "it is
considered that the ownership is not one of the essential questions to be determined in the litigation
between plaintiff and defendant;" that "whether the property belongs to defendant or claimant, if
determined, is considered as shedding no light upon the question in controversy, namely, that
defendant is indebted to plaintiff."

(See 7 C. J. S., 545 and footnote No. 89 where extracts from the decision in Lewis vs. Lewis, 10 N.
W., 586, a leading case, are printed.)

Separate action was indeed said to be the correct and only procedure contemplated by Act No. 190,
intervention addition to, but not in substitution of, the old process. The new Rules adopted section
121 of Act No. 190 and added thereto Rule 24 (a) of the Federal Rules of Procedure. Combined, the
two modes of redress are now section 1 of Rule 13, 1 the last clause of which is the newly added
provision. The result is that, whereas, "under the old procedure, the third person could not intervene,
he having no interest in the debt (or damages) sued upon by the plaintiff," under the present Rules,
"a third person claiming to be the owner of such property may, not only file a third-party claim with
the sheriff, but also intervene in the action to ask that the writ of attachment be quashed." (I Moran's
Comments on the Rules of Court, 3rd Ed., 238, 239.) Yet, the right to inetervene, unlike the right to
bring a new action, is not absolute but left to the sound discretion of the court to allow. This
qualification makes intervention less preferable to an independent action from the standpoint of the
claimants, at least. Because availability of intervention depends upon the court in which Case No.
11531 is pending, there would be assurance for the herein petitioners that they would be permitted
to come into that case.

Little reflection should disabuse the mind from the assumption that an independent action creates a
multiplicity of suits. There can be no multiplicity of suits when the parties in the suit where the
attachment was levied are different from the parties in the new action, and so are the issues in the
two cases entirely different. In the circumstances, separate action might, indeed, be the more
convenient of the two competing modes of redress, in that intervention is more likely to inject
confusion into the issues between the parties in the case for debt or damages with which the third-
party claimant has nothing to do and thereby retard instead of facilitate the prompt dispatch of the

99
controversy which is underlying objective of the rules of pleading and practice. That is why
intervention is subject to the court's discretion.

The same reasons which impelled us to decide the second question, just discussed, urge us to take
cognizance of and express an opinion on the third.

The objection that at once suggests itself entertaining in Case No. 12263 the motion to discharge the
preliminary attachment levied in case No. 11531 is that by so doing one judge would intefere with
another judge's actuations. The objection is superficial and will not bear analysis.

It has been seen that a separate action by the third party who claims to be the owner of the property
attached is appropriate. If this is so, it must be admitted that the judge trying such action may render
judgment ordering the sheriff of whoever has in possession the attached property to deliver it to the
plaintiff-claimant or desist from seizing it. It follows further that the court may make an interlocutory
order, upon the filing of such bond as may be necessary, to release the property pending final
adjudication of the title. Jurisdiction over an action includes jurisdiction over a interlocutory matter
incidental to the cause and deemed necessary to preserve the subject matter of the suit or protect
the parties' interests. This is self-evident.

The fault with the respondents' argument is that it assumes that the Sheriff is holding the property in
question by order of the court handling the case for libel. In reality this is true only to limited extent.
That court did not direct the sheriff to attach the particular property in dispute. The order was for the
sheriff to attach Borres', Padilla's and Pastor's property. He was not supposed to touch any property
other than that of these defendants', and if he did, he acted beyond the limits of his authority and
upon his personal responsibility.

It is true of course that property in custody of the law can not be interferred with without the
permission of the proper court, and property legally attached is property in custodia legis. But for the
reason just stated, this rule is confined to cases where the property belongs to the defendant or one
in which the defendant has proprietary interest. When the sheriff acting beyond the bounds of his
office seizes a stranger's property, the rule does not apply and interference with his custody is not
interference with another court's order of attachment.

It may be argued that the third-party claim may be unfounded; but so may it be meritorious, for the
matter. Speculations are however beside the point. The title is the very issue in the case for the
recovery of property or the dissolution of the attachment, and pending final decision, the court may
enter any interlocutory order calculated to preserve the property in litigation and protect the parties'
rights and interests.

None of what has been said is to be construed as implying that the setting aside of the attachment
prayed for by the plaintiffs in Case No. 12263 should be granted. The preceding discussion is
intended merely to point out that the court has jurisdiction to act in the premises, not the way the
jurisdiction should be exercised. The granting or denial, as the case may be, of the prayer for the
dissolution of the attachment would be a proper subject of a new proceeding if the party adversely
affected should be dissatisfied.

The petition for certiorari is granted with costs against the respondents except the respondent
Judge.

Moran, C.J., Paras, Feria, Pablo, Bengzon, Padilla, Montemayor, Reyes, Jugo and Bautista Angelo,
JJ., concur.

100
8. Use of Negative Words

Republic of the Philippines

SUPREME COURT
Manila

EN BANC

G.R. No. 79094 June 22, 1988

MANOLO P. FULE, petitioner,

vs.
THE HONORABLE COURT OF APPEALS, respondent.

Balagtas P. Ilagan for petitioner.

The Solicitor General for respondent.

MELENCIO-HERRERA, J.:

This is a Petition for Review on certiorari of the Decision of respondent Appellate Court, which affirmed the judgment of the Regional Trial
Court, Lucena City, Branch LIV, convicting petitioner (the accused-appellant) of Violation of Batas Pambansa Blg. 22 (The Bouncing Checks
Law) on the basis of the Stipulation of Facts entered into between the prosecution and the defense during the pre-trial conference in the Trial
Court. The facts stipulated upon read:

a) That this Court has jurisdiction over the person and subject matter of this case;

b) That the accused was an agent of the Towers Assurance Corporation on or before
January 21, 1981;

c) That on January 21, 1981, the accused issued and made out check No.
26741, dated January 24, 1981 in the sum of P2,541.05;

d) That the said check was drawn in favor of the complaining witness, Roy Nadera;

e) That the check was drawn in favor of the complaining witness in remittance
of collection;

f) That the said check was presented for payment on January 24, 1981 but the same
was dishonored for the reason that the said checking account was already closed;

g) That the accused Manolo Fule has been properly Identified as the accused
party in this case.

At the hearing of August 23, 1985, only the prosecution presented its evidence consisting of Exhibits
"A," "B" and "C." At the subsequent hearing on September 17, 1985, petitioner-appellant waived the
right to present evidence and, in lieu thereof, submitted a Memorandum confirming the Stipulation of
Facts. The Trial Court convicted petitioner-appellant.

101
On appeal, respondent Appellate Court upheld the Stipulation of Facts and affirmed the judgment of
conviction. 1

Hence, this recourse, with petitioner-appellant contending that:

The Honorable Respondent Court of Appeals erred in the decision of the Regional
Trial Court convicting the petitioner of the offense charged, despite the cold fact that
the basis of the conviction was based solely on the stipulation of facts made during
the pre-trial on August 8, 1985, which was not signed by the petitioner, nor by his
counsel.

Finding the petition meritorious, we resolved to give due course.

The 1985 Rules on Criminal Procedure, which became effective on January 1, 1985, applicable to
this case since the pre-trial was held on August 8, 1985, provides:

SEC. 4. Pre-trial agreements must be signed. — No agreement or admission made

or entered during the pre-trial conference shall be used in evidence against the
accused unless reduced to writing and signed by him and his counsel. (Rule 118)
[Emphasis supplied]

By its very language, the Rule is mandatory. Under the rule of statutory construction, negative words
and phrases are to be regarded as mandatory while those in the affirmative are merely directory
(McGee vs. Republic, 94 Phil. 820 [1954]). The use of the term "shall" further emphasizes its
mandatory character and means that it is imperative, operating to impose a duty which may be
enforced (Bersabal vs. Salvador, No. L-35910, July 21, 1978, 84 SCRA 176). And more importantly,
penal statutes whether substantive and remedial or procedural are, by consecrated rule, to be strictly
applied against the government and liberally in favor of the accused (People vs. Terrado No. L-
23625, November 25, 1983, 125 SCRA 648).

The conclusion is inevitable, therefore, that the omission of the signature of the accused and his
counsel, as mandatorily required by the Rules, renders the Stipulation of Facts inadmissible in
evidence. The fact that the lawyer of the accused, in his memorandum, confirmed the Stipulation of
Facts does not cure the defect because Rule 118 requires both the accused and his counsel to sign
the Stipulation of Facts. What the prosecution should have done, upon discovering that the accused
did not sign the Stipulation of Facts, as required by Rule 118, was to submit evidence to establish
the elements of the crime, instead of relying solely on the supposed admission of the accused in the
Stipulation of Facts. Without said evidence independent of the admission, the guilt of the accused
cannot be deemed established beyond reasonable doubt.

Consequently, under the circumstances obtaining in this case, the ends of justice require that
evidence be presented to determine the culpability of the accused. When a judgment has been
entered by consent of an attorney without special authority, it will sometimes be set aside or
reopened (Natividad vs. Natividad, 51 Phil. 613 [1928]).

WHEREFORE, the judgment of respondent Appellate Court is REVERSED and this case is hereby
ordered RE-OPENED and REMANDED to the appropriate Branch of the Regional Trial Court of
Lucena City, for further reception of evidence.

SO ORDERED.

102
9. The use of the words “May” and “Shall” in a statute

Republic of the Philippines

SUPREME COURT
Manila

THIRD DIVISION

G.R. No. 167982 August 13, 2008

OFFICE OF THE OMBUDSMAN, petitioner,

vs.
MERCEDITAS DE SAHAGUN, MANUELA T. WAQUIZ and RAIDIS J. BASSIG, respondent.*

DECISION

AUSTRIA-MARTINEZ, J.:

Before the Court is a Petition for Review on Certiorari under Rule 45 of the Rules of Court assailing the
Decision1 dated April 28, 2005 of the Court of Appeals (CA) in CA-G.R. SP No. 78008 which set aside the
Orders dated March 10, 2003 and June 24, 2003 of the petitioner Office of the Ombudsman in OMB-
ADM-0-00-0721.

The material antecedents are as follows:

On November 13, 1992, respondent Raidis J. Bassig, Chief of the Research and Publications Division of
the Intramuros Administration, submitted a Memorandum to then Intramuros Administrator Edda V.
Henson (Henson) recommending that Brand Asia, Ltd. be commissioned to produce a video documentary
for a television program, as well implement a media plan and marketing support services for Intramuros.

On November 17, 1992, the Bids and Awards Committee (BAC) of the Intramuros Administration,
composed of respondent Merceditas de Sahagun, as Chairman, with respondent Manuela T. Waquiz and
Dominador C. Ferrer, Jr. (Ferrer), as members, submitted a recommendation to Henson for the approval
of the award of said contract to Brand Asia, Ltd. On the same day, Henson approved the
recommendation and issued a Notice of Award to Brand Asia, Ltd.

On November 23, 1992, a contract of service to produce a video documentary on Intramuros for TV
program airing was executed between Henson and Brand Asia, Ltd. On December 1, 1992, a Notice to
Proceed was issued to Brand Asia, Ltd.

On June 2, 1993, the BAC, with Augusto P. Rustia (Rustia) as additional member, recommended to
Henson the approval of the award of contract for print collaterals to Brand Asia, Ltd. On the same day,
Henson approved the recommendation and issued a Notice of Award/Notice to Proceed to Brand Asia,
Ltd.

On June 22, 1993, a contract of services to produce print collaterals was entered between Henson and
Brand Asia, Ltd.

On March 7, 1995, an anonymous complaint was filed with the Presidential Commission Against Graft
and Corruption (PGAC) against Henson in relation to the contracts entered into with Brand Asia, Ltd.

103
On November 30, 1995, Henson was dismissed from the service by the Office of the President upon
recommendation of the PGAC which found that the contracts were entered into without the required
public bidding and in violation of Section 3 (a) and (e) of Republic Act (R.A.) No. 3019, or the Anti-Graft
and Corrupt Practices Act.

On August 8, 1996, an anonymous complaint was filed with the Ombudsman against the BAC in relation
to the latter’s participation in the contracts with Brand Asia, Ltd. for which Henson was dismissed from
service.

On September 5, 2000, Fact-Finding Intelligence Bureau (FFIB) filed criminal and administrative charges
against respondents, along with Ferrer and Rustia, for violation of Section 3 (a) and (c) of R.A. No. 3019
in relation to Section 1 of Executive Order No. 302 and grave misconduct, conduct grossly prejudicial to
the best interest of the service and gross violation of Rules and Regulations pursuant to the
Administrative Code of 1987, docketed as OMB-0-00-1411 and OMB-ADM-0-00-0721,
respectively.2 OMB-0-00-1411 was dismissed on February 27, 2002 for lack of probable cause .3

In his proposed Decision4 dated June 19, 2002, Graft Investigation Officer II Joselito P. Fangon
recommended the dismissal of OMB-ADM-0-00-0721.

However, then Ombudsman Simeon V. Marcelo disapproved the recommendation. In an Orde r5 dated
March 10, 2003, he held that there was substantial evidence to hold respondents administratively liable
since the contracts awarded to Brand Asia, Ltd. failed to go through the required procedure for public
bidding under Executive Order No. 301 dated July 26, 1987. Respondents and Ferrer were found guilty of
grave misconduct and dismissed from service. Rustia was found guilty of simple misconduct and
suspended for six months without pay.

On March 17, 2003, respondents, along with Rustia, filed a Motion for Reconsideration .6

On June 24, 2003, Ombudsman Marcelo issued an Order7 partially granting the motion for
reconsideration. Respondents and Ferrer were found guilty of the lesser offense of simple misconduct
and suspended for six months without pay. Rustia's suspension was reduced to three months.

Dissatisfied, respondents filed a Petition for Review8 with the CA assailing the Orders dated March 10,
2003 and June 24, 2003 of the Ombudsman.

On April 28, 2005, the CA rendered a Decision9 setting aside the Orders dated March 10, 2003 and June
24, 2003 of the Ombudsman. The CA held that respondents may no longer be prosecuted since the
complaint was filed more than seven years after the imputed acts were committed which was beyond the
one year period provided for by Section 20 (5) of Republic Act (R.A.) No. 6770, otherwise known as "The
Ombudsman Act of 1989"; and that the nature of the function of the Ombudsman was purely
recommendatory and it did not have the power to penalize erring government officials and employees.
The CA relied on the following statement made by the Court in Tapiador v. Office of the Ombudsman,10 to
wit:

x x x Besides, assuming arguendo, that petitioner [Tapiador] was administratively liable, the
Ombudsman has no authority to directly dismiss the petitioner from the government
service, more particularly from his position in the BID. Under Section 13, subparagraph 3, of
Article XI of the 1987 Constitution, the Ombudsman can only "recommend" the removal of
the public official or employee found to be at fault, to the public official
.
concerned 11 (Emphasis supplied)

Hence, the present petition raising the following issues (1) whether Section 20 (5) of R.A. No. 6770
prohibits administrative investigations in cases filed more than one year after commission, and (2)

104
whether the Ombudsman only has recommendatory, not punitive, powers against erring government
officials and employees.

The Court rules in favor of the petitioner.

The issues in the present case are settled by precedents.

On the first issue, well-entrenched is the rule that administrative offenses do not
prescribe.12 Administrative offenses by their very nature pertain to the character of public officers and
employees. In disciplining public officers and employees, the object sought is not the punishment of the
officer or employee but the improvement of the public service and the preservation of the public’s faith
and confidence in our government.13

Respondents insist that Section 20 (5) of R.A. No. 6770, to wit:

SEC. 20. Exceptions. – The Office of the Ombudsman may not conduct the necessary
investigation of any administrative act or omission complained of if it believes that:

xxx

(5) The complaint was filed after one year from the occurrence of the act or omission complained
of. (Emphasis supplied)

proscribes the investigation of any administrative act or omission if the complaint was filed after one year
from the occurrence of the complained act or omission.

In Melchor v. Gironella,14 the Court held that the period stated in Section 20(5) of R.A. No. 6770 does not
refer to the prescription of the offense but to the discretion given to the Ombudsman on whether it would
investigate a particular administrative offense. The use of the word "may" in the provision is construed as
permissive and operating to confer discretion.15 Where the words of a statute are clear, plain and free
from ambiguity, they must be given their literal meaning and applied without attempted interpretation .16

,
In Filipino v. Macabuhay 17 the Court interpreted Section 20 (5) of R.A. No. 6770 in this manner:

Petitioner argues that based on the abovementioned provision [Section 20(5) of RA 6770)],
respondent's complaint is barred by prescription considering that it was filed more than one year
after the alleged commission of the acts complained of.

Petitioner's argument is without merit.

The use of the word "may" clearly shows that it is directory in nature and not mandatory as
petitioner contends. When used in a statute, it is permissive only and operates to confer
discretion; while the word "shall" is imperative, operating to impose a duty which may be
enforced. Applying Section 20(5), therefore, it is discretionary upon the Ombudsman whether
or not to conduct an investigation on a complaint even if it was filed after one year from
the occurrence of the act or omission complained of. In fine, the complaint is not barred
.
by prescription 18(Emphasis supplied)

The declaration of the CA in its assailed decision that while as a general rule the word "may" is directory,
the negative phrase "may not" is mandatory in tenor; that a directory word, when qualified by the word
"not," becomes prohibitory and therefore becomes mandatory in character, is not plausible. It is not
supported by jurisprudence on statutory construction.

105
 ,
As the Court recently held in Office of the Ombudsman v. Court of Appeals 19 Section 20 of R.A. No. 6770
,20
has been clarified by Administrative Order No. 17 which amended Administrative Order No. 07,
otherwise known as the Rules of Procedure of the Office of the Ombudsman. Section 4, Rule III21 of the
amended Rules of Procedure of the Office of the Ombudsmanreads:

Section 4. Evaluation. - Upon receipt of the complaint, the same shall be evaluated to determine
whether the same may be:

a) dismissed outright for any grounds stated under Section 20 of Republic Act No. 6770,
provided, however, that the dismissal thereof is not mandatory and shall be discretionary
on the part of the Ombudsman or the Deputy Ombudsman concerned;

b) treated as a grievance/request for assistance which may be referred to the Public

Assistance Bureau, this Office, for appropriate action under Section 2, Rule IV of this Rules;

c) referred to other disciplinary authorities under paragraph 2, Section 23, R.A. 6770 for the
taking of appropriate administrative proceedings;

d) referred to the appropriate office/agency or official for the conduct of further fact-finding
investigation; or

e) docketed as an administrative case for the purpose of administrative adjudication by the Office
of the Ombudsman. (Emphasis supplied)

It is, therefore, discretionary upon the Ombudsman whether or not to conduct an investigation of a
complaint even if it was filed after one year from the occurrence of the act or omission complained of.

Thus, while the complaint herein was filed only on September 5, 2000, or more than seven years after the
commission of the acts imputed against respondents in November 1992 and June 1993, it was within the
authority of the Ombudsman to conduct the investigation of the subject complaint.

On the second issue, the authority of the Ombudsman to determine the administrative liability of a public
official or employee, and to direct and compel the head of the office or agency concerned to implement
the penalty imposed is likewise settled.

,
In Ledesma v. Court of Appeals 22 the Court has ruled that the statement in Tapiador that made reference
to the power of the Ombudsman to impose an administrative penalty was merely an obiter dictum and
could not be cited as a doctrinal declaration of this Court, thus:

x x x [A] cursory reading of Tapiador reveals that the main point of the case was the failure of the
complainant therein to present substantial evidence to prove the charges of the administrative
case. The statement that made reference to the power of the Ombudsman is, at best,
merely an obiter dictum and, as it is unsupported by sufficient explanation, is susceptible to
varying interpretations, as what precisely is before us in this case. Hence, it cannot be cited as
.
a doctrinal declaration of this Court nor is it safe from judicial examination 23 (Emphasis
supplied)

,
In Estarija v. Ranada 24 the Court reiterated its pronouncements in Ledesma and categorically stated:

x x x [T]he Constitution does not restrict the powers of the Ombudsman in Section 13, Article XI
of the 1987 Constitution, but allows the Legislature to enact a law that would spell out the powers
of the Ombudsman. Through the enactment of Rep. Act No. 6770, specifically Section 15, par. 3,
106
 the lawmakers gave the Ombudsman such powers to sanction erring officials and employees,

107
 except members of Congress, and the Judiciary. To conclude, we hold that Sections 15, 21, 22
and 25 of Republic Act No. 6770 are constitutionally sound. The powers of the Ombudsman
are not merely recommendatory. His office was given teeth to render this constitutional body
not merely functional but also effective. Thus, we hold that under Republic Act No. 6770 and
the 1987 Constitution, the Ombudsman has the constitutional power to directly remove
from government service an erring public official other than a member of Congress and the
Judiciary.25 (Emphasis supplied)

The power of the Ombudsman to directly impose administrative sanctions has been repeatedly reiterated
in the subsequent cases of Barillo v. Gervasio,26 Office of the Ombudsman v. Madriaga,27 Office of the
Ombudsman v. Court of Appeals,28Balbastro v. Junio,29 Commission on Audit, Regional Office No. 13,
,
Butuan City v. Hinampas 30 Office of the Ombudsman v. Santiago,31 Office of the Ombudsman v.
,
Lisondra 32 and most recently in Deputy Ombudsman for the Visayas v. Abugan33and continues to be the
controlling doctrine.

In fine, it is already well-settled that the Ombudsman's power as regards the administrative penalty to be
imposed on an erring public officer or employee is not merely recommendatory. The Ombudsman has the
power to directly impose the penalty of removal, suspension, demotion, fine, censure, or prosecution of a
public officer or employee, other than a member of Congress and the Judiciary, found to be at fault, within
the exercise of its administrative disciplinary authority as provided in the Constitution, R.A. No. 6770, as
well as jurisprudence. This power gives the said constitutional office teeth to render it not merely
functional, but also effective.34

Thus, the CA committed a reversible error in holding that the case had already prescribed and that
the Ombudsman does not have the power to penalize erring government officials and employees.

WHEREFORE, the petition is GRANTED. The Decision dated April 28, 2005 of the Court of Appeals in
CA-G.R. SP No. 78008 is REVERSED and SET ASIDE. The Order dated June 24, 2003 of the Office of
the Ombudsman is REINSTATED.

SO ORDERED.

*HINDI KO NA NILAGAY ‘YUNG REPIBLIC VS SERENO

108
10. The use of the word “Must”

Republic of the Philippines

SUPREME COURT
Manila

SECOND DIVISION

G.R. No. 117188 August 7, 1997

LOYOLA GRAND VILLAS HOMEOWNERS (SOUTH) ASSOCIATION, INC., petitioner,

vs.
HON. COURT OF APPEALS, HOME INSURANCE AND GUARANTY CORPORATION, EMDEN
ENCARNACION and HORATIO AYCARDO, respondents.

ROMERO, J.:

May the failure of a corporation to file its by-laws within one month from the date of its incorporation,
as mandated by Section 46 of the Corporation Code, result in its automatic dissolution?

This is the issue raised in this petition for review on certiorari of the Decision1 of the Court of Appeals
affirming the decision of the Home Insurance and Guaranty Corporation (HIGC). This quasi-judicial
body recognized Loyola Grand Villas Homeowners Association (LGVHA) as the sole homeowners'
association in Loyola Grand Villas, a duly registered subdivision in Quezon City and Marikina City
that was owned and developed by Solid Homes, Inc. It revoked the certificates of registration issued
to Loyola Grand Villas homeowners (North) Association Incorporated (the North Association for
brevity) and Loyola Grand Villas Homeowners (South) Association Incorporated (the South
Association).

LGVHAI was organized on February 8, 1983 as the association of homeowners and residents of the
Loyola Grand Villas. It was registered with the Home Financing Corporation, the predecessor of
herein respondent HIGC, as the sole homeowners' organization in the said subdivision under
Certificate of Registration No. 04-197. It was organized by the developer of the subdivision and its
first president was Victorio V. Soliven, himself the owner of the developer. For unknown reasons,
however, LGVHAI did not file its corporate by-laws.

Sometime in 1988, the officers of the LGVHAI tried to register its by-laws. They failed to do so. 2 To
the officers' consternation, they discovered that there were two other organizations within the
subdivision — the North Association and the South Association. According to private respondents, a
non-resident and Soliven himself, respectively headed these associations. They also discovered that
these associations had five (5) registered homeowners each who were also the incorporators,
directors and officers thereof. None of the members of the LGVHAI was listed as member of the
North Association while three (3) members of LGVHAI were listed as members of the South
Association.3 The North Association was registered with the HIGC on February 13, 1989 under
Certificate of Registration No. 04-1160 covering Phases West II, East III, West III and East IV. It
submitted its by-laws on December 20, 1988.

109
In July, 1989, when Soliven inquired about the status of LGVHAI, Atty. Joaquin A. Bautista, the head
of the legal department of the HIGC, informed him that LGVHAI had been automatically dissolved for
two reasons. First, it did not submit its by-laws within the period required by the Corporation Code
and, second, there was non-user of corporate charter because HIGC had not received any report on
the association's activities. Apparently, this information resulted in the registration of the South
Association with the HIGC on July 27, 1989 covering Phases West I, East I and East II. It filed its by-
laws on July 26, 1989.

These developments prompted the officers of the LGVHAI to lodge a complaint with the HIGC. They
questioned the revocation of LGVHAI's certificate of registration without due notice and hearing and
concomitantly prayed for the cancellation of the certificates of registration of the North and South
Associations by reason of the earlier issuance of a certificate of registration in favor of LGVHAI.

On January 26, 1993, after due notice and hearing, private respondents obtained a favorable ruling
from HIGC Hearing Officer Danilo C. Javier who disposed of HIGC Case No. RRM-5-89 as follows:

WHEREFORE, judgment is hereby rendered recognizing the Loyola Grand Villas

Homeowners Association, Inc., under Certificate of Registration No. 04-197 as the duly
registered and existing homeowners association for Loyola Grand Villas homeowners, and
declaring the Certificates of Registration of Loyola Grand Villas Homeowners (North)
Association, Inc. and Loyola Grand Villas Homeowners (South) Association, Inc. as hereby
revoked or cancelled; that the receivership be terminated and the Receiver is hereby ordered
to render an accounting and turn-over to Loyola Grand Villas Homeowners Association, Inc.,
all assets and records of the Association now under his custody and possession.

The South Association appealed to the Appeals Board of the HIGC. In its Resolution of September
8, 1993, the Board 4 dismissed the appeal for lack of merit.

Rebuffed, the South Association in turn appealed to the Court of Appeals, raising two issues. First,
whether or not LGVHAI's failure to file its by-laws within the period prescribed by Section 46 of the
Corporation Code resulted in the automatic dissolution of LGVHAI. Second, whether or not two
homeowners' associations may be authorized by the HIGC in one "sprawling subdivision." However,
in the Decision of August 23, 1994 being assailed here, the Court of Appeals affirmed the Resolution
of the HIGC Appeals Board.

In resolving the first issue, the Court of Appeals held that under the Corporation Code, a private
corporation commences to have corporate existence and juridical personality from the date the
Securities and Exchange Commission (SEC) issues a certificate of incorporation under its official
seal. The requirement for the filing of by-laws under Section 46 of the Corporation Code within one
month from official notice of the issuance of the certificate of incorporation presupposes that it is
already incorporated, although it may file its by-laws with its articles of incorporation. Elucidating on
the effect of a delayed filing of by-laws, the Court of Appeals said:

We also find nothing in the provisions cited by the petitioner, i.e., Section 46 and 22,
Corporation Code, or in any other provision of the Code and other laws which provide or at
least imply that failure to file the by-laws results in an automatic dissolution of the
corporation. While Section 46, in prescribing that by-laws must be adopted within the period
prescribed therein, may be interpreted as a mandatory provision, particularly because of the
use of the word "must," its meaning cannot be stretched to support the argument that
automatic dissolution results from non-compliance.

110
 We realize that Section 46 or other provisions of the Corporation Code are silent on the
result of the failure to adopt and file the by-laws within the required period. Thus, Section 46
and other related provisions of the Corporation Code are to be construed with Section 6 (1)
of P.D. 902-A. This section empowers the SEC to suspend or revoke certificates of
registration on the grounds listed therein. Among the grounds stated is the failure to file by-
laws (see also II Campos: The Corporation Code, 1990 ed., pp. 124-125). Such suspension
or revocation, the same section provides, should be made upon proper notice and hearing.
Although P.D. 902-A refers to the SEC, the same principles and procedures apply to the
public respondent HIGC as it exercises its power to revoke or suspend the certificates of
registration or homeowners association. (Section 2 [a], E.O. 535, series 1979, transferred the
powers and authorities of the SEC over homeowners associations to the HIGC.)

We also do not agree with the petitioner's interpretation that Section 46, Corporation Code
prevails over Section 6, P.D. 902-A and that the latter is invalid because it contravenes the
former. There is no basis for such interpretation considering that these two provisions are not
inconsistent with each other. They are, in fact, complementary to each other so that one
cannot be considered as invalidating the other.

The Court of Appeals added that, as there was no showing that the registration of LGVHAI had been
validly revoked, it continued to be the duly registered homeowners' association in the Loyola Grand
Villas. More importantly, the South Association did not dispute the fact that LGVHAI had been
organized and that, thereafter, it transacted business within the period prescribed by law.

On the second issue, the Court of Appeals reiterated its previous ruling 5 that the HIGC has the
authority to order the holding of a referendum to determine which of two contending associations
should represent the entire community, village or subdivision.

Undaunted, the South Association filed the instant petition for review on certiorari. It elevates as sole
issue for resolution the first issue it had raised before the Court of Appeals, i.e., whether or not the
LGVHAI's failure to file its by-laws within the period prescribed by Section 46 of the Corporation
Code had the effect of automatically dissolving the said corporation.

Petitioner contends that, since Section 46 uses the word "must" with respect to the filing of by-laws,
noncompliance therewith would result in "self-extinction" either due to non-occurrence of a
suspensive condition or the occurrence of a resolutory condition "under the hypothesis that (by) the
issuance of the certificate of registration alone the corporate personality is deemed already formed."
It asserts that the Corporation Code provides for a "gradation of violations of requirements." Hence,
Section 22 mandates that the corporation must be formally organized and should commence
transaction within two years from date of incorporation. Otherwise, the corporation would be deemed
dissolved. On the other hand, if the corporation commences operations but becomes continuously
inoperative for five years, then it may be suspended or its corporate franchise revoked.

Petitioner concedes that Section 46 and the other provisions of the Corporation Code do not provide
for sanctions for non-filing of the by-laws. However, it insists that no sanction need be provided
"because the mandatory nature of the provision is so clear that there can be no doubt about its
being an essential attribute of corporate birth." To petitioner, its submission is buttressed by the facts
that the period for compliance is "spelled out distinctly;" that the certification of the SEC/HIGC must
show that the by-laws are not inconsistent with the Code, and that a copy of the by-laws "has to be
attached to the articles of incorporation." Moreover, no sanction is provided for because "in the first
place, no corporate identity has been completed." Petitioner asserts that "non-provision for remedy
or sanction is itself the tacit proclamation that non-compliance is fatal and no corporate existence

111
had yet evolved," and therefore, there was "no need to proclaim its demise." 6 In a bid to convince
the Court of its arguments, petitioner stresses that:

. . . the word MUST is used in Sec. 46 in its universal literal meaning and corollary human
implication — its compulsion is integrated in its very essence — MUST is always enforceable
by the inevitable consequence — that is, "OR ELSE". The use of the word MUST in Sec. 46
is no exception — it means file the by-laws within one month after notice of issuance of
certificate of registration OR ELSE. The OR ELSE, though not specified, is inextricably a part
of MUST . Do this or if you do not you are "Kaput". The importance of the by-laws to
corporate existence compels such meaning for as decreed the by-laws is "the government"
of the corporation. Indeed, how can the corporation do any lawful act as such without by-
laws. Surely, no law is indeed to create chaos. 7

Petitioner asserts that P.D. No. 902-A cannot exceed the scope and power of the Corporation Code
which itself does not provide sanctions for non-filing of by-laws. For the petitioner, it is "not proper to
assess the true meaning of Sec. 46 . . . on an unauthorized provision on such matter contained in
the said decree."

In their comment on the petition, private respondents counter that the requirement of adoption of by-
laws is not mandatory. They point to P.D. No. 902-A as having resolved the issue of whether said
requirement is mandatory or merely directory. Citing Chung Ka Bio v. Intermediate Appellate
Court, 8 private respondents contend that Section 6(I) of that decree provides that non-filing of by-
laws is only a ground for suspension or revocation of the certificate of registration of corporations
and, therefore, it may not result in automatic dissolution of the corporation. Moreover, the adoption
and filing of by-laws is a condition subsequent which does not affect the corporate personality of a
corporation like the LGVHAI. This is so because Section 9 of the Corporation Code provides that the
corporate existence and juridical personality of a corporation begins from the date the SEC issues a
certificate of incorporation under its official seal. Consequently, even if the by-laws have not yet been
filed, a corporation may be considered a de facto corporation. To emphasize the fact the LGVHAI
was registered as the sole homeowners' association in the Loyola Grand Villas, private respondents
point out that membership in the LGVHAI was an "unconditional restriction in the deeds of sale
signed by lot buyers."

In its reply to private respondents' comment on the petition, petitioner reiterates its argument that the
word " must" in Section 46 of the Corporation Code is mandatory. It adds that, before the ruling
in Chung Ka Bio v. Intermediate Appellate Court could be applied to this case, this Court must first
resolve the issue of whether or not the provisions of P.D. No. 902-A prescribing the rules and
regulations to implement the Corporation Code can "rise above and change" the substantive
provisions of the Code.

The pertinent provision of the Corporation Code that is the focal point of controversy in this case
states:

Sec. 46. Adoption of by-laws. — Every corporation formed under this Code, must within one
(1) month after receipt of official notice of the issuance of its certificate of incorporation by the
Securities and Exchange Commission, adopt a code of by-laws for its government not
inconsistent with this Code. For the adoption of by-laws by the corporation, the affirmative
vote of the stockholders representing at least a majority of the outstanding capital stock, or of
at least a majority of the members, in the case of non-stock corporations, shall be necessary.
The by-laws shall be signed by the stockholders or members voting for them and shall be
kept in the principal office of the corporation, subject to the stockholders or members voting
for them and shall be kept in the principal office of the corporation, subject to inspection of

112
 the stockholders or members during office hours; and a copy thereof, shall be filed with the
Securities and Exchange Commission which shall be attached to the original articles of
incorporation.

Notwithstanding the provisions of the preceding paragraph, by-laws may be adopted and
filed prior to incorporation; in such case, such by-laws shall be approved and signed by all
the incorporators and submitted to the Securities and Exchange Commission, together with
the articles of incorporation.

In all cases, by-laws shall be effective only upon the issuance by the Securities and
Exchange Commission of a certification that the by-laws are not inconsistent with this Code.

The Securities and Exchange Commission shall not accept for filing the by-laws or any
amendment thereto of any bank, banking institution, building and loan association, trust
company, insurance company, public utility, educational institution or other special
corporations governed by special laws, unless accompanied by a certificate of the
appropriate government agency to the effect that such by-laws or amendments are in
accordance with law.

As correctly postulated by the petitioner, interpretation of this provision of law begins with the
determination of the meaning and import of the word "must" in this section Ordinarily, the word
"must" connotes an imperative act or operates to impose a duty which may be enforced. 9 It is
synonymous with "ought" which connotes compulsion or mandatoriness. 10 However, the word "must"
in a statute, like "shall," is not always imperative. It may be consistent with an exercise of discretion.
In this jurisdiction, the tendency has been to interpret "shall" as the context or a reasonable
construction of the statute in which it is used demands or requires. 11 This is equally true as regards
the word "must." Thus, if the languages of a statute considered as a whole and with due regard to its
nature and object reveals that the legislature intended to use the words "shall" and "must" to be
directory, they should be given that meaning.12

In this respect, the following portions of the deliberations of the Batasang Pambansa No. 68 are
illuminating:

MR. FUENTEBELLA. Thank you, Mr. Speaker.

On page 34, referring to the adoption of by-laws, are we made to understand here, Mr.
Speaker, that by-laws must immediately be filed within one month after the issuance? In
other words, would this be mandatory or directory in character?

MR. MENDOZA. This is mandatory.

MR. FUENTEBELLA. It being mandatory, Mr. Speaker, what would be the effect of the
failure of the corporation to file these by-laws within one month?

MR. MENDOZA. There is a provision in the latter part of the Code which identifies and
describes the consequences of violations of any provision of this Code. One such
consequences is the dissolution of the corporation for its inability, or perhaps, incurring
certain penalties.

113
 MR. FUENTEBELLA. But it will not automatically amount to a dissolution of the corporation
by merely failing to file the by-laws within one month. Supposing the corporation was late,
say, five days, what would be the mandatory penalty?

MR. MENDOZA. I do not think it will necessarily result in the automatic or ipso
facto dissolution of the corporation. Perhaps, as in the case, as you suggested, in the case
of El Hogar Filipino where a quo warrantoaction is brought, one takes into account the
gravity of the violation committed. If the by-laws were late — the filing of the by-laws were
late by, perhaps, a day or two, I would suppose that might be a tolerable delay, but if they
are delayed over a period of months — as is happening now — because of the absence of a
clear requirement that by-laws must be completed within a specified period of time, the
corporation must suffer certain consequences. 13

This exchange of views demonstrates clearly that automatic corporate dissolution for failure to file
the by-laws on time was never the intention of the legislature. Moreover, even without resorting to
the records of deliberations of the Batasang Pambansa, the law itself provides the answer to the
issue propounded by petitioner.

Taken as a whole and under the principle that the best interpreter of a statute is the statute itself
(optima statuli interpretatix est ipsum statutum), 14 Section 46 aforequoted reveals the legislative
intent to attach a directory, and not mandatory, meaning for the word "must" in the first sentence
thereof. Note should be taken of the second paragraph of the law which allows the filing of the by-
laws even prior to incorporation. This provision in the same section of the Code rules out mandatory
compliance with the requirement of filing the by-laws "within one (1) month after receipt of official
notice of the issuance of its certificate of incorporation by the Securities and Exchange
Commission." It necessarily follows that failure to file the by-laws within that period does not imply
the "demise" of the corporation. By-laws may be necessary for the "government" of the corporation
but these are subordinate to the articles of incorporation as well as to the Corporation Code and
related
statutes.15 There are in fact cases where by-laws are unnecessary to corporate existence or to the
valid exercise of corporate powers, thus:

In the absence of charter or statutory provisions to the contrary, by-laws are not necessary
either to the existence of a corporation or to the valid exercise of the powers conferred upon
it, certainly in all cases where the charter sufficiently provides for the government of the
body; and even where the governing statute in express terms confers upon the corporation
the power to adopt by-laws, the failure to exercise the power will be ascribed to mere
nonaction which will not render void any acts of the corporation which would otherwise be
valid. 16 (Emphasis supplied.)

As Fletcher aptly puts it:

It has been said that the by-laws of a corporation are the rule of its life, and that until by-laws
have been adopted the corporation may not be able to act for the purposes of its creation,
and that the first and most important duty of the members is to adopt them. This would seem
to follow as a matter of principle from the office and functions of by-laws. Viewed in this light,
the adoption of by-laws is a matter of practical, if not one of legal, necessity. Moreover, the
peculiar circumstances attending the formation of a corporation may impose the obligation to
adopt certain by-laws, as in the case of a close corporation organized for specific purposes.
And the statute or general laws from which the corporation derives its corporate existence
may expressly require it to make and adopt by-laws and specify to some extent what they
shall contain and the manner of their adoption. The mere fact, however, of the existence of

114
 power in the corporation to adopt by-laws does not ordinarily and of necessity make the
exercise of such power essential to its corporate life, or to the validity of any of its acts. 17

Although the Corporation Code requires the filing of by-laws, it does not expressly provide for the
consequences of the non-filing of the same within the period provided for in Section 46. However,
such omission has been rectified by Presidential Decree No. 902-A, the pertinent provisions on the
jurisdiction of the SEC of which state:

Sec. 6. In order to effectively exercise such jurisdiction, the Commission shall possess the
following powers:

xxx xxx xxx

(1) To suspend, or revoke, after proper notice and hearing, the franchise or certificate of
registration of corporations, partnerships or associations, upon any of the grounds provided
by law, including the following:

xxx xxx xxx

5. Failure to file by-laws within the required period;

xxx xxx xxx

In the exercise of the foregoing authority and jurisdiction of the Commission or by a

Commissioner or by such other bodies, boards, committees and/or any officer as may be
created or designated by the Commission for the purpose. The decision, ruling or order of
any such Commissioner, bodies, boards, committees and/or officer may be appealed to the
Commission sitting en banc within thirty (30) days after receipt by the appellant of notice of
such decision, ruling or order. The Commission shall promulgate rules of procedures to
govern the proceedings, hearings and appeals of cases falling with its jurisdiction.

The aggrieved party may appeal the order, decision or ruling of the Commission sitting en
banc to the Supreme Court by petition for review in accordance with the pertinent provisions
of the Rules of Court.

Even under the foregoing express grant of power and authority, there can be no automatic
corporate dissolutionsimply because the incorporators failed to abide by the required filing of by-
laws embodied in Section 46 of the Corporation Code. There is no outright "demise" of corporate
existence. Proper notice and hearing are cardinal components of due process in any democratic
institution, agency or society. In other words, the incorporators must be given the chance to explain
their neglect or omission and remedy the same.

That the failure to file by-laws is not provided for by the Corporation Code but in another law is of no
moment. P.D. No. 902-A, which took effect immediately after its promulgation on March 11, 1976, is
very much apposite to the Code. Accordingly, the provisions abovequoted supply the law governing
the situation in the case at bar, inasmuch as the Corporation Code and P.D. No. 902-A are statutes
in pari materia. Interpretare et concordare legibus est optimus interpretandi. Every statute must be
so construed and harmonized with other statutes as to form a uniform system of jurisprudence. 18

As the "rules and regulations or private laws enacted by the corporation to regulate, govern and
control its own actions, affairs and concerns and its stockholders or members and directors and

115
officers with relation thereto and among themselves in their relation to it," 19 by-laws are
indispensable to corporations in this jurisdiction. These may not be essential to corporate birth but
certainly, these are required by law for an orderly governance and management of corporations.
Nonetheless, failure to file them within the period required by law by no means tolls the automatic
dissolution of a corporation.

In this regard, private respondents are correct in relying on the pronouncements of this Court
in Chung Ka Bio v.Intermediate Appellate Court, 20 as follows:

. . . . Moreover, failure to file the by-laws does not automatically operate to dissolve a
corporation but is now considered only a ground for such dissolution.

Section 19 of the Corporation Law, part of which is now Section 22 of the Corporation Code,
provided that the powers of the corporation would cease if it did not formally organize and
commence the transaction of its business or the continuation of its works within two years
from date of its incorporation. Section 20, which has been reproduced with some
modifications in Section 46 of the Corporation Code, expressly declared that "every
corporation formed under this Act, must within one month after the filing of the articles of
incorporation with the Securities and Exchange Commission, adopt a code of by-laws."
Whether this provision should be given mandatory or only directory effect remained a
controversial question until it became academic with the adoption of PD 902-A. Under this
decree, it is now clear that the failure to file by-laws within the required period is only a
ground for suspension or revocation of the certificate of registration of corporations.

Non-filing of the by-laws will not result in automatic dissolution of the corporation. Under
Section 6(I) of PD 902-A, the SEC is empowered to "suspend or revoke, after proper notice
and hearing, the franchise or certificate of registration of a corporation" on the ground inter
alia of "failure to file by-laws within the required period." It is clear from this provision that
there must first of all be a hearing to determine the existence of the ground, and secondly,
assuming such finding, the penalty is not necessarily revocation but may be only suspension
of the charter. In fact, under the rules and regulations of the SEC, failure to file the by-laws
on time may be penalized merely with the imposition of an administrative fine without
affecting the corporate existence of the erring firm.

It should be stressed in this connection that substantial compliance with conditions

subsequent will suffice to perfect corporate personality. Organization and commencement of
transaction of corporate business are but conditions subsequent and not prerequisites for
acquisition of corporate personality. The adoption and filing of by-laws is also a condition
subsequent. Under Section 19 of the Corporation Code, a Corporation commences its
corporate existence and juridical personality and is deemed incorporated from the date the
Securities and Exchange Commission issues certificate of incorporation under its official
seal. This may be done even before the filing of the by-laws, which under Section 46 of the
Corporation Code, must be adopted "within one month after receipt of official notice of the
issuance of its certificate of incorporation." 21

That the corporation involved herein is under the supervision of the HIGC does not alter the result of
this case. The HIGC has taken over the specialized functions of the former Home Financing
Corporation by virtue of Executive Order No. 90 dated December 17, 1989. 22 With respect to
homeowners associations, the HIGC shall "exercise all the powers, authorities and responsibilities
that are vested on the Securities and Exchange Commission . . . , the provision of Act 1459, as
amended by P.D. 902-A, to the contrary notwithstanding." 23

116
WHEREFORE, the instant petition for review on certiorari is hereby DENIED and the questioned
Decision of the Court of Appeals AFFIRMED. This Decision is immediately executory. Costs against
petitioner.

SO ORDERED.

Regalado, Puno and Mendoza, JJ., concur.

Torres, Jr., J., is on leave.

117
11. The use of the term “And” and the word “Or”

Republic of the Philippines

SUPREME COURT
Manila

SECOND DIVISION

G.R. No. 78585 July 5, 1989

JOSE ANTONIO MAPA, petitioner,

vs.
HON. JOKER ARROYO, in his Capacity as Executive Secretary, and LABRADOR
DEVELOPMENT CORPORATION, respondents.

Francisco T. Mamaug for petitioner.

Emiliano S. Samson for private respondent.

REGALADO, J.:

We are called upon once again, in this special civil action for certiorari, for a pronouncement as to
whether or not there has been grave abuse of discretion amounting to lack or excess of jurisdiction
on the part of the executive branch of Government, particularly in the adjudication of a controversy
originally commenced in one of its regulatory agencies.

Petitioner herein seeks the reversal of the decision of the Office of the President, rendered by the
Deputy Executive Secretary on April 24,1987, 1 which dismissed his appeal from the resolution of the
Commission Proper, Human Settlements Regulatory Commission (HSRC, for short), promulgated on
January 10, 1986 and affirming the decision of July 3, 1985 of the Office of Adjudication and Legal
Affairs (OAALA, for brevity) of HSRC. Petitioner avers that public respondent "gravely transcended
the sphere of his discretion" in finding that Presidential Decree No. 957 is inapplicable to the
contracts to sell involved in this case and in consequently dismissing the same. 2

The established facts on which the assailed decision is based are set out therein as follows:

Records disclose that, on September 18, 1975, appellant Jose Antonio Mapa and
appellee Labrador Development Corporation (Labrador, for short), owner/developer
of the Barangay Hills Subdivision in Antipolo, Rizal, entered into two contracts to sell
over lots 12 and 13 of said subdivision. On different months in 1976, they again
entered into two similar contracts involving lots 15 and 16 in the same subdivision.
Under said contracts, Mapa undertook to make a total monthly installment of
P2,137.54 over a period of ten (10) years. Mapa, however, defaulted in the payment
thereof starting December 1976, prompting Labrador to send to the former a demand
letter, dated May 5, 1977, giving him until May 18, 1977, within which to settle his
unpaid installments for the 4 lots amounting to P15,411.66, with a warning that non-
payment thereof will result in the cancellation of the four (4) contracts. Despite
receipt of said letter on May 6,1977, Mapa failed to take any action thereon. Labrador
subsequently wrote Mapa another letter, dated June 15, 1982, which the latter

118
 received on June 21, 1982, reminding him of his total arrears amounting to
P180,065.27 and demanding payment within 5 days from receipt thereof, but which
letter Mapa likewise ignored. Thus, on August 16, 1982, Labrador sent Mapa a
notarial cancellation of the four (4) contracts to sell, which Mapa received on August
20, 1982. On September 10, 1982, however, Mapa's counsel sent Labrador a letter
calling Labrador's attention to, and demanding its compliance with, Clause 20 of the
four (4) contracts to sell which relates to Labrador's obligation to provide, among
others, lighting/water facilities to subdivision lot buyers.

On September 10, 1982, Labrador issued a certification holding the implementation

of the letter dated August 16, 1982 (re notarial cancellation) pending the complete
development of road lot cul de sac within the properties of Mapa at Barangay Hills
Subdivision.' Thereafter on October 25,1982, Labrador sent Mapa a letter informing
him 'that the construction of road, sidewalk, curbs and gutters adjacent to Block 11
Barangay Hills Subdivision are already completed' and further requesting Mapa to
'come to our office within five (5) days upon receipt of this letter to settle your
account.'

On December 10, 1982, Mapa tendered payment by means of a check in the amount
of P 2,137.54, but Labrador refused to accept payment for the reason that it was
agreed 'that after the development of the cul de sac, he (complainant) will pay in full
the total amount due,' which Labrador computed at P 260,138.61. On December 14,
1982, Mapa wrote Labrador claiming that 'you have not complied with the
requirements for water and light facilities in lots 12, 13, 15 & 16 Block 2 of Barangay
Hills Subdivision.' The following day, Mapa filed a complaint against Labrador for the
latter's neglect to put 1) a water system that meets the minimum standard as
specified by HSRC, and 2) electrical power supply. By way of relief, Mapa requested
the HSRC to direct Labrador to provide the facilities aforementioned, and to issue a
cease and desist order enjoining Labrador from cancelling the contracts to sell.

After due hearing/investigation, which included an on-site inspection of the

subdivision, OAALA, issued its decision of July 3, 1985, dismissing the complaint and
declaring that after the lapse of 5 years from complainant's default respondent had
every right to rescind the contract pursuant to Clause 7 thereof. . .

Per its resolution of January 10, 1986, the Commission Proper, HSRC, affirmed the
aforesaid OAALA decision.3

It was petitioner's adamant submission in the administrative proceedings that the provisions of
Presidential Decree No. 957 4 and implementing rules form part of the contracts to sell executed by
him and respondent corporation, hence the obligations imposed therein had to be complied with by
Labrador within the period provided. Since, according to petitioner, Labrador failed to perform the
aforementioned obligations, it is precluded from rescinding the subject contracts to sell since
petitioner consequently did not incur in delay on his part.

Such intransigent position of petitioner has not changed in the petition at bar and unyielding reliance
is placed on the provisions of Presidential Decree No. 957 and its implementing rules. The specific
provisions of the Decree which are persistently relied upon read:

SEC. 20. Time of Completion. — Every owner or developer shall construct and
provide the facilities, improvements, infrastructures and other forms of development,
including water supply and lighting facilities, which are offered and indicated in the

119
 approved subdivision or condominium plans, brochures, prospectus, printed matters
letters or in any form of advertisements, within one year from the date of the
issuance of the license for the subdivision or condominium project or such other
period of time as may be fixed by the Authority.

SEC. 21. Sales Prior to Decree. — In cases of subdivision lots or condominium units
sold or disposed of prior to the effectivity of this Decree, it shall be incumbent upon
the owner or developer of the subdivision or condominium project to complete
compliance with his or its obligations as provided in the preceding section within two
years from the date of this Decree unless otherwise extended by the Authority or
unless an adequate performance bond is filed in accordance with Section 6 hereof.

Failure of the owner or developer to comply with the obligations under this and the
preceding provisions shall constitute a violation punishable under Sections 38 and 39
of this Decree.

Rule V of the implementing rules, on the other hand, requires two (2) sources of electric power, two
(2) deep-well and pump sets with a specified capacity and two standard fire hose flows with
a capacity of 175 gallons per minute. 5

The provision, in said contracts to sell which, according to petitioner, includes and incorporates the
aforequoted statutory provisions, is Clause 20 of said contracts which provides:

Clause 20. SUBDIVISION DEVELOPMENT — To insure the physical development

of the subdivision, the SELLER hereby obliges itself to provide the individual lot
buyer with the following:

a) PAVED ROADS

b) UNDERGROUND DRAINAGE

c) CONCRETE CURBS AND GUTTERS

d) WATER SYSTEM

e) PARK AND OPEN SPACE

These improvements shall apply only to the portions of the subdivision which are for
sale or have been sold. All improvements except those requiring the services of a
public utility company or the government shall be completed within a period of three
(3) years from date of this contract. Failure by the SELLER to reasonably
comply with the above schedule shall permit the BUYER/ S to suspend his
monthly installments without any penalties or interest charges until such time
that these improvements shall have been made as scheduled.6

As recently reiterated, it is jurisprudentially settled that absent a clear, manifest and grave abuse of
discretion amounting to want of jurisdiction, the findings of the administrative agency on matters
falling within its competence will not be disturbed by the courts. 7 Specifically with respect to factual
findings, they are accorded respect, if not finality, because of the special knowledge and expertise
gained by these tribunals from handling the specific matters falling under their jurisdiction. Such
factual findings may be disregarded only if they "are not supported by evidence; where the findings

120
are vitiated by fraud, imposition or collusion; where the procedure which led to the factual findings is
irregular; when palpable errors are committed; or when grave abuse of discretion, arbitrariness or
capriciousness is manifest." 8

A careful scrutiny of the records of the instant case reveals that the circumstances thereof do not fag
under the aforesaid excepted cases, with the findings duly supported by the evidence.

Petitioner's insistence on the applicability of Presidential Decree No. 957 must be rejected. Said
decree was issued on July 12, 1976 long after the execution of the contracts involved. Obviously
and necessarily, what subsequently were statutorily provided therein as obligations of the owner or
developer could not have been intended by the parties to be a part of their contracts. No intention to
give restrospective application to the provisions of said decree can be gathered from the language
thereof. Section 20, in relation to Section 21, of the decree merely requires the owner or developer
to construct the facilities, improvements, infrastructures and other forms of development but only
such as are offered and indicated in the approved subdivision or condominium plans, brochures,
prospectus, printed matters, letters or in any form of advertisements. Other than what are provided
in Clause 20 of the contract, no further written commitment was made by the developer in this
respect. To read into the contract the matters desired by petitioner would have the law impose
additional obligations on the parties to a contract executed before that very law existed or was
contemplated.

We further reject petitioner's strained and tenuous application of the so-called doctrine of last
antecedent in the interpretation of Section 20 and, correlatively, of Section 21. He would thereby
have the enumeration of "facilities, improvements, infrastructures and other forms of development"
interpreted to mean that the demonstrative phrase "which are offered and indicated in the approved
subdivision plans, etc." refer only to "other forms of development" and not to "facilities,
improvements and infrastructures." While this subserves his purpose, such bifurcation whereby the
supposed adjectival phrase is set apart from the antecedent words, is illogical and erroneous. The
complete and applicable rule is ad proximum antecedens fiat relatio nisi impediatur
sentencia. 9 Relative words refer to the nearest antecedent, unless it be prevented by the context. In
the present case, the employment of the word "and" between "facilities, improvements,
infrastructures" and "other forms of development," far from supporting petitioner's theory, enervates
it instead since it is basic in legal hermeneutics that "and" is not meant to separate words but is a
conjunction used to denote a joinder or union.

Thus, if ever there is any valid ground to suspend the monthly installments due from petitioner, it
would only be based on non-performance of the obligations provided in Clause 20 of the contract,
particularly the alleged non-construction of the cul-de-sac. But, even this is unavailing and is
obviously being used only to justify petitioner's default. The on-site inspection of the subdivision
conducted by the OAALA and its subsequent report reveal that Labrador substantially complied with
its obligation. 10

Furthermore, the initial non-construction of the cul-de-sac, as private respondent Labrador

explained, was because petitioner Mapa requested the suspension of its construction since his
intention was to purchase the adjoining lots and thereafter enclose the same. 11 If these were not
true, petitioner would have invoked that supposed default in the first instance. As the OAALA noted,
petitioner "stopped payments of his monthly obligations as early as December, 1976, which is a
mere five months after the effectivity of P.D. No. 957 or about a year after the execution of the
contracts. This means that respondent still has 1 and 1/2 years to comply with its legal obligation to
develop the subdivision under said P.D. and two years to do so under the agreement, hence, it was
improper for complainant to have suspended payments in December, 1976 on the ground of non-
development since the period allowed for respondent's obligation to undertake such development
has not yet expired." 12
121
ON THE FOREGOING CONSIDERATIONS, the petition should be, as it is hereby DISMISSED.

SO ORDERED.

Melencio-Herrera (Chairperson), Paras, Padilla and Sarmiento, JJ., concur.

122
 FIRST DIVISION

G.R. No. 131082 June 19, 2000

ROMULO, MABANTA, BUENAVENTURA, SAYOC & DE LOS ANGELES, petitioner,

vs.
HOME DEVELOPMENT MUTUAL FUND, respondent.

DAVIDE, JR., C.J.:

Once again, this Court is confronted with the issue of the validity of the Amendments to the Rules
and Regulations Implementing Republic Act No. 7742, which require the existence of a plan
providing for both provident/retirement and housing benefits for exemption from the Pag-IBIG Fund
coverage under Presidential Decree No. 1752, as amended.

Pursuant to Section 19 1 of P.D. No. 1752, as amended by R.A. No. 7742, petitioner Romulo,
Mabanta, Buenaventura, Sayoc and De Los Angeles (hereafter PETITIONER), a law firm, was
exempted for the period 1 January to 31 December 1995 from the Pag-IBIG Fund coverage by
respondent Home Development Mutual Fund (hereafter HDMF) because of a superior retirement
plan. 2

On 1 September 1995, the HDMF Board of Trustees, pursuant to Section 5 of Republic Act No.
7742, issued Board Resolution No. 1011, Series of 1995, amending and modifying the Rules and
Regulations Implementing R.A. No. 7742. As amended, Section 1 of Rule VII provides that for a
company to be entitled to a waiver or suspension of Fund coverage, 3 it must have a plan providing
for both provident/retirement and housing benefits superior to those provided under the Pag-IBIG
Fund. On 16 November 1995, PETITIONER filed with the respondent an application for Waiver or
Suspension of Fund Coverage because of its superior retirement plan. 4 In support of said
application, PETITIONER submitted to the HDMF a letter explaining that the 1995 Amendments to
the Rules are invalid. 5 In a letter dated 18 March 1996, the President and Chief Executive Officer of
HDMF disapproved PETITIONER's application on the ground that the requirement that there should
be both a provident retirement fund and a housing plan is clear in the use of the phrase "and/or,"
and that the Rules Implementing R.A. No. 7742 did not amend nor repeal Section 19 of P.D. No.
1752 but merely implement the law. 6

PETITIONER's appeal 7 with the HDMF Board of Trustees was denied for having been rendered
moot and academic by Board Resolution No. 1208, Series of 1996, removing the availment of waiver
of the mandatory coverage of the Pag-IBIG Fund, except for distressed employers. 8

On 31 March 1997, PETITIONER filed a petition for review 9 before the Court of Appeals. On motion
by HDMF, the Court of Appeals dismissed 10 the petition on the ground that the coverage of
employers and employees under the Home Development Mutual Fund is mandatory in character as
clearly worded in Section 4 of P.D. No. 1752, as amended by R.A. No. 7742. There is no allegation
that petitioner is a distressed employer to warrant its exemption from the Fund coverage. As to the
amendments to the Rules and Regulations Implementing R.A. No. 7742, the same are valid. Under
P.D. No. 1752 and R.A. No. 7742 the Board of Trustees of the HDMF is authorized to promulgate
rules and regulations, as well as amendments thereto, concerning the extension, waiver or
suspension of coverage under the Pag-IBIG Fund. And the publication requirement was amply met,
since the questioned amendments were published in the 21 October 1995 issue of the Philippine
Star, which is a newspaper of general circulation.

123
PETITIONER's motion for reconsideration 11 was denied. 12 Hence, on 6 November 1997,
PETITIONER filed a petition before this Court assailing the 1995 and the 1996 Amendments to the
Rules and Regulations Implementing Republic Act No. 7742 for being contrary to law. In support
thereof, PETITIONER contends that the subject 1995 Amendments issued by HDMF are
inconsistent with the enabling law, P.D. No. 1752, as amended by R.A. No. 7742, which merely
requires as a pre-condition for exemption from coverage the existence of either a superior
provident/retirement plan or a superior housing plan, and not the concurrence of both plans. Hence,
considering that PETITIONER has a provident plan superior to that offered by the HDMF, it is
entitled to exemption from the coverage in accordance with Section 19 of P.D. No. 1752. The 1996
Amendment are also void insofar as they abolished the exemption granted by Section 19 of P.D.
1752, as amended. The repeal of such exemption involves the exercise of legislative power, which
cannot be delegated to HMDF.

PETITIONER also cites Section 9 (1), Chapter 2, Book VII of the Administrative Code of 1987, which
provides:

Sec. 9. Public Participation — (1) If not otherwise required by law, an agency shall, as far as
practicable, publish or circulate notices of proposed rules and afford interested parties the
opportunity to submit their views prior to the adoption of any rule.

Since the Amendments to the Rules and Regulations Implementing Republic Act No. 7742 involve
an imposition of an additional burden, a public hearing should have first been conducted to give
chance to the employers, like PETITIONER, to be heard before the HDMF adopted the said
Amendments. Absent such public hearing, the amendments should be voided.

Finally, PETITIONER contends that HDMF did not comply with Section 3, Chapter 2, Book VII of
the Administrative Code of 1987, which provides that "[e]very agency shall file with the University of
the Philippines Law Center three (3) certified copies of every rule adopted by it."

On the other hand, the HDMF contends that in promulgating the amendments to the rules and
regulations which require the existence of a plan providing for both provident and housing benefits
for exemption from the Fund Coverage, the respondent Board was merely exercising its rule-making
power under Section 13 of P.D. No. 1752. It had the option to use "and" only instead of "or" in the
rules on waiver in order to effectively implement the Pag-IBIG Fund Law. By choosing "and," the
Board has clarified the confusion brought about by the use of "and/or" in Section 19 of P.D. No.
1752, as amended.

As to the public hearing, HDMF maintains that as can be clearly deduced from Section 9(1),
Chapter 2, Book VII of the Revised Administrative Code of 1987, public hearing is required only
when the law so provides, and if not, only if the same is practicable. It follows that public hearing is
only optional or discretionary on the part of the agency concerned, except when the same is
required by law. P.D. No. 1752 does not require that pubic hearing be first conducted before the
rules and regulations implementing it would become valid and effective. What it requires is the
publication of said rules and regulations at least once in a newspaper of general circulation. Having
published said 1995 and 1996 Amendments through the Philippine Star on 21 October 1995 1 and
15 November
1996, 14respectively, HDMF has complied with the publication requirement.

Finally, HDMF claims that as early as 18 October 1996, it had already filed certified true copies of
the Amendments to the Rules and Regulations with the University of the Philippines Law Center.
This fact is evidenced by certified true copies of the Certification from the Office of the National
Administrative Register of the U.P. Law Center. 15

124
 We find for the PETITIONER.

The issue of the validity of the 1995 Amendments to the Rules and Regulations Implementing R.A.
No. 7742, specifically Section I, Rule VII on Waiver and Suspension, has been squarely resolved in
the relatively recent case of China Banking Corp. v. The Members of the Board of Trustees of the
HDMF. 16 We held in that case that Section 1 of Rule VII of the Amendments to the Rules and
Regulations Implementing R.A. No. 7742, and HDMF Circular No. 124-B prescribing the Revised
Guidelines and Procedure for Filing Application for Waiver or Suspension of Fund Coverage under
P.D. No. 1752, as amended by R.A. No. 7742, are null and void insofar as they require that an
employer should have both a provident/retirement plan and a housing plan superior to the benefits
offered by the Fund in order to qualify for waiver or suspension of the Fund coverage. In arriving at
said conclusion, we ruled:

The controversy lies in the legal signification of the words "and/or."

In the instant case, the legal meaning of the words "and/or" should be taken in its ordinary
signification, i.e., "either and or; e.g. butter and/or eggs means butter and eggs or butter
or eggs.

The term "and/or" means that the effect shall be given to both the conjunctive "and"
and the disjunctive "or"; or that one word or the other may be taken accordingly as
one or the other will best effectuate the purpose intended by the legislature as
gathered from the whole statute. The term is used to avoid a construction which by
the use of the disjunctive "or" alone will exclude the combination of several of the
alternatives or by the use of the conjunctive "and" will exclude the efficacy of any one
of the alternatives standing alone. 1 avvp hi1

It is accordingly ordinarily held that the intention of the legislature in using the term "and/or"
is that the word "and" and the word "or" are to be used interchangeably.

It . . . seems to us clear from the language of the enabling law that Section 19 of P.D. No.
1752 intended that an employer with a provident plan or an employee housing plan superior
to that of the fund may obtain exemption from coverage. If the law had intended that the
employee [sic] should have both a superior provident plan and a housing plan in order to
qualify for exemption, it would have used the words "and" instead of "and/or." Notably,
paragraph (a) of Section 19 requires for annual certification of waiver or suspension, that the
features of the plan or plans are superior to the fund or continue to be so. The law obviously
contemplates that the existence of either plan is considered as sufficient basis for the grant
of an exemption; needless to state, the concurrence of both plans is more than sufficient. To
require the existence of both plans would radically impose a more stringent condition for
waiver which was not clearly envisioned by the basic law. By removing the disjunctive word
"or" in the implementing rules the respondent Board has exceeded its authority.

It is without doubt that the HDMF Board has rule-making power as provided in Section 51 17 of R.A.
No. 7742 and Section 13 18 of P.D. No. 1752. However, it is well-settled that rules and regulations,
which are the product of a delegated power to create new and additional legal provisions that have
the effect of law, should be within the scope of the statutory authority granted by the legislature to
the administrative agency. 19 It is required that the regulation be germane to the objects and
purposes of the law, and be not in contradiction to, but in conformity with, the standards prescribed
by law. 20

In the present case, when the Board of Trustees of the HDMF required in Section 1, Rule VII of the
1995 Amendments to the Rules and Regulations Implementing R.A. No. 7742 that employers should
125
have both provident/retirement and housing benefits for all its employees in order to qualify for
exemption from the Fund, it effectively amended Section 19 of P.D. No. 1752. And when the Board
subsequently abolished that exemption through the 1996 Amendments, it repealed Section 19 of
P.D. No. 1752. Such amendment and subsequent repeal of Section 19 are both invalid, as they are
not within the delegated power of the Board. The HDMF cannot, in the exercise of its rule-making
power, issue a regulation not consistent with the law it seeks to apply. Indeed, administrative
issuances must not override, supplant or modify the law, but must remain consistent with the law
they intend to carry out. 21 Only Congress can repeal or amend the law.

While it may be conceded that the requirement of having both plans to qualify for an exemption, as
well as the abolition of the exemption, would enhance the interest of the working group and further
strengthen the Home Development Mutual Fund in its pursuit of promoting public welfare through
ample social services as mandated by the Constitution, we are of the opinion that the basic law
should prevail. A department zeal may not be permitted to outrun the authority conferred by the
statute. 22

Considering the foregoing conclusions, it is unnecessary to dwell on the other issues raised.

WHEREFORE, the petition is GRANTED. The assailed decision of 31 July 1997 of the Court of
Appeals in CA-G.R. No. SP-43668 and its Resolution of 15 October 1997 are hereby REVERSED
and SET ASIDE. The disapproval by the Home Development Mutual Fund of the application of the
petitioner for waiver or suspension of Fund coverage is SET ASIDE, and the Home Development
Mutual Fund is hereby directed to refund to petitioner all sums of money it collected from the latter.

SO ORDERED.

Puno, Kapunan and Ynares-Santiago, JJ., concur.

Pardo, J., no part, related to a party.

126
12. The use of the word “Only”

Republic of the Philippines

SUPREME COURT
Manila

SECOND DIVISION

G.R. No. 172409 February 4, 2008

ROOS INDUSTRIAL CONSTRUCTION, INC. and OSCAR TOCMO, petitioners,

vs.
NATIONAL LABOR RELATIONS COMMISSION and JOSE MARTILLOS, respondents.

DECISION

TINGA, J.:

In this Petition for Review on Certiorar i1 under Rule 45 of the 1997 Rules of Civil Procedure,
petitioners Roos Industrial Construction, Inc. and Oscar Tocmo assail the Court of
Appeals’2 Decision dated 12 January 2006 in C.A. G.R. SP No. 87572 and its Resolution 3 dated 10
April 2006 denying their Motion for Reconsideration. 4

The following are the antecedents.

On 9 April 2002, private respondent Jose Martillos (respondent) filed a complaint against petitioners
for illegal dismissal and money claims such as the payment of separation pay in lieu of reinstatement
plus full backwages, service incentive leave, 13th month pay, litigation expenses, underpayment of
holiday pay and other equitable reliefs before the National Capital Arbitration Branch of the National
Labor Relations Commission (NLRC), docketed as NLRC NCR South Sector Case No. 30-04-
01856-02.

Respondent alleged that he had been hired as a driver-mechanic sometime in 1988 but was not
made to sign any employment contract by petitioners. As driver mechanic, respondent was assigned
to work at Carmona, Cavite and he worked daily from 7:00 a.m. to 10:00 p.m. at the rate of P200.00
a day. He was also required to work during legal holidays but was only paid an additional 30%
holiday pay. He likewise claimed that he had not been paid service incentive leave and 13 th month
pay during the entire course of his employment. On 16 March 2002, his employment was allegedly
terminated without due process.5

Petitioners denied respondent’s allegations. They contended that respondent had been hired on
several occasions as a project employee and that his employment was coterminous with the
duration of the projects. They also maintained that respondent was fully aware of this arrangement.
Considering that respondent’s employment had been validly terminated after the completion of the
projects, petitioners concluded that he is not entitled to separation pay and other monetary claims,
even attorney’s fees.6

The Labor Arbiter ruled that respondent had been illegally dismissed after finding that he had
acquired the status of a regular employee as he was hired as a driver with little interruption from one

127
project to another, a task which is necessary to the usual trade of his employer. 7 The Labor Arbiter
pertinently stated as follows:

x x x If it were true that complainant was hired as project employee, then there should have
been project employment contracts specifying the project for which complainant’s services
were hired, as well as the duration of the project as required in Art. 280 of the Labor Code.
As there were four (4) projects where complainant was allegedly assigned, there should
have been the equal number of project employment contracts executed by the complainant.
Further, for every project termination, there should have been the equal number of
termination report submitted to the Department of Labor and Employment. However, the
record shows that there is only one termination [report] submitted to DOLE pertaining to the
last project assignment of complainant in Carmona, Cavite.

In the absence of said project employment contracts and the corresponding Termination
Report to DOLE at every project termination, the inevitable conclusion is that the
complainant was a regular employee of the respondents.

In the case of Maraguinot, Jr. v. NLRC, 284 SCRA 539, 556 [1998], citing capital Industrial
Construction Group v. NLRC, 221 SCRA 469, 473-474 [1993], it was ruled therein that a
project employee may acquire the status of a regular employee when the following concurs:
(1) there is a continuous rehiring of project employees even after the cessation of a project;
and (2) the tasks performed by the alleged "project employee" are vital, necessary and
indispensable to the usual business or trade of the employer. Both factors are present in the
instant case. Thus, even granting that complainant was hired as a project employee, he
eventually became a regular employee as there was a continuous rehiring of this services.

xxx

In the instant case, apart from the fact that complainant was not made to sign any project
employment contract x x x he was successively transferred from one project after another,
and he was made to perform the same kind of work as driver.8

The Labor Arbiter ordered petitioners to pay respondent the aggregate sum of P224,647.17
representing backwages, separation pay, salary differential, holiday pay, service incentive leave pay
and 13th month pay.9

Petitioners received a copy of the Labor Arbiter’s decision on 17 December 2003. On 29 December
2003, the last day of the reglementary period for perfecting an appeal, petitioners filed a
Memorandum of Appeal10 before the NLRC and paid the appeal fee. However, instead of posting the
required cash or surety bond within the reglementary period, petitioners filed a Motion for Extension
of Time to Submit/Post Surety Bond. 11 Petitioners stated that they could not post and submit the
required surety bond as the signatories to the bond were on leave during the holiday season, and
made a commitment to post and submit the surety bond on or before 6 January 2004. The NLRC did
not act on the motion. Thereafter, on 6 January 2004, petitioners filed a surety bond equivalent to
the award of the Labor Arbiter.12

In a Resolution13 dated July 29, 2004, the Second Division of the NLRC dismissed petitioners’
appeal for lack of jurisdiction. The NLRC stressed that the bond is an indispensable requisite for the
perfection of an appeal by the employer and that the perfection of an appeal within the reglementary
period and in the manner prescribed by law is mandatory and jurisdictional. In addition, the NLRC
restated that its Rules of Procedure proscribes the filing of any motion for extension of the period
within which to perfect an appeal. The NLRC summed up that considering that petitioners’ appeal

128
had not been perfected, it had no jurisdiction to act on said appeal and the assailed decision, as a
consequence, has become final and executory.14 The NLRC likewise denied petitioners’ Motion for
Reconsideration15 for lack of merit in another Resolution.16 On 11 November 2004, the NLRC issued
an entry of judgment declaring its resolution final and executory as of 9 October 2004. On
respondent’s motion, the Labor Arbiter ordered that the writ of execution be issued to enforce the
award. On 26 January 2005, a writ of execution was issued. 17

Petitioners elevated the dismissal of their appeal to the Court of Appeals by way of a special civil
action of certiorari. They argued that the filing of the appeal bond evinced their willingness to comply
and was in fact substantial compliance with the Rules. They likewise maintained that the NLRC
gravely abused its discretion in failing to consider the meritorious grounds for their motion for
extension of time to file the appeal bond. Lastly, petitioners contended that the NLRC gravely erred
in issuing an entry of judgment as the assailed resolution is still open for review .18 On 12 January
2006, the Court of Appeals affirmed the challenged resolution of the NLRC. Hence, the instant
petition.

Before this Court, petitioners reiterate their previous assertions. They insist on the application of
Star Angel Handicraft v. National Labor Relations Commission, et al. 19where it was held that a
motion for reduction of bond may be filed in lieu of the bond during the period for appeal. They aver
that Borja Estate v. Ballad,20which underscored the importance of the filing of a cash or surety bond
in the perfection of appeals in labor cases, had not been promulgated yet in 2003 when they filed
their appeal. As such, the doctrine in Borja could not be given retroactive effect for to do so would
prejudice and impair petitioners’ right to appeal. Moreover, they point out that judicial decisions have
no retroactive effect.21

The Court denies the petition.

The Court reiterates the settled rule that an appeal from the decision of the Labor Arbiter involving a
monetary award is only deemed perfected upon the posting of a cash or surety bond within ten (10)
days from such decision.22 Article 223 of the Labor Code states:

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

In case of a judgment involving a monetary award, an appeal by the employer may be

perfected only upon the posting of a cash or surety bond issued by a reputable bonding
company duly accredited by the Commission in the amount equivalent to the monetary
award in the judgment appealed from.

xxx

Contrary to petitioners’ assertion, the appeal bond is not merely procedural but jurisdictional. Without
said bond, the NLRC does not acquire jurisdiction over the appeal. 23 Indeed, non-compliance with
such legal requirements is fatal and has the effect of rendering the judgment final and executory. 24 It
must be stressed that there is no inherent right to an appeal in a labor case, as it arises solely from
the grant of statute.25

Evidently, the NLRC did not acquire jurisdiction over petitioners’ appeal within the ten (10)-day
reglementary period to perfect the appeal as the appeal bond was filed eight (8) days after the last
day thereof. Thus, the Court cannot ascribe grave abuse of discretion to the NLRC or error to the
Court of Appeals in refusing to take cognizance of petitioners’ belated appeal.

129
While indeed the Court has relaxed the application of this requirement in cases where the failure to
comply with the requirement was justified or where there was substantial compliance with the
rules,26 the overpowering legislative intent of Article 223 remains to be for a strict application of the
appeal bond requirement as a requisite for the perfection of an appeal and as a burden imposed on
the employer.27 As the Court held in the case of Borja Estate v. Ballad:28

The intention of the lawmakers to make the bond an indispensable requisite for the
perfection of an appeal by the employer is underscored by the provision that an appeal may
be perfected "only upon the posting of a cash or surety bond." The word "only" makes it
perfectly clear that the LAWMAKERS intended the posting of a cash or surety bond by the
employer to be

the exclusive means by which an employer’s appeal may be considered completed. The law
however does not require its outright payment, but only the posting of a bond to ensure that
the award will be eventually paid should the appeal fail. What petitioners have to pay is a
moderate and reasonable sum for the premium of such bond. 29

Moreover, no exceptional circumstances obtain in the case at bar which would warrant a relaxation
of the bond requirement as a condition for perfecting the appeal. It is only in highly meritorious
cases that this Court opts not to strictly apply the rules and thus prevent a grave injustice from being
done30 and this is not one of those cases.

In addition, petitioners cannot take refuge behind the Court’s ruling in Star Angel. Pertinently, the
Court stated in Computer Innovations Center v. National Labor Relations Commission:31

Moreover, the reference in Star Angel to the distinction between the period to file the appeal
and to perfect the appeal has been pointedly made only once by this Court in Gensoli v.
NLRC thus, it has not acquired the sheen of venerability reserved for repeatedly-cited cases.
The distinction, if any, is not particularly evident or material in the Labor Code; hence, the
reluctance of the Court to adopt such doctrine. Moreover, the present provision in the NLRC
Rules of Procedure, that "the filing of a motion to reduce bond shall not stop the running of
the period to perfect appeal" flatly contradicts the notion expressed in Star Angel that there is
a distinction between filing an appeal and perfecting an appeal.

Ultimately, the disposition of Star Angel was premised on the ruling that a motion for
reduction of the appeal bond necessarily stays the period for perfecting the appeal, and that
the employer cannot be expected to perfect the appeal by posting the proper bond until such
time the said motion for reduction is resolved. The unduly stretched-out distinction between
the period to file an appeal and to perfect an appeal was not material to the resolution of
Star Angel, and thus could properly be considered as obiter dictum.32

Lastly, the Court does not agree that the Borja doctrine should only be applied prospectively. In the
first place, Borjais not a ground-breaking precedent as it is a reiteration, emphatic though, of long
standing jurisprudence.33 It is well to recall too our pronouncement in Senarillos v. Hermosisima, et
al.34 that the judicial interpretation of a statute constitutes part of the law as of the date it was
originally passed, since the Court’s construction merely establishes the contemporaneous legislative
intent that the interpreted law carried into effect. Such judicial doctrine does not amount to the
passage of a new law but consists merely of a construction or interpretation of a pre-existing one, as
is the situation in this case.35

At all events, the decision of the Labor Arbiter appears to be well-founded and petitioners’ ill-starred
appeal untenable.WHEREFORE, the Petition is DENIED. Costs against petitioners. SO ORDERED.

130
13. Computation of Time

Republic of the Philippines

SUPREME COURT
Manila

THIRD DIVISION

G.R. No. 98382 May 17, 1993

PHILIPPINE NATIONAL BANK, petitioner,

vs.
THE COURT OF APPEALS and EPIFANIO DE LA CRUZ, respondents.

Santiago, Jr., Vidad, Corpus & Associates for

petitioner. Pedro R. Lazo for spouses-intervenors.

Rosendo G. Tansinsin, Jr. for private respondent.

MELO, J.:

The notices of sale under Section 3 of Act No. 3135, as amended by Act No. 4118, on extra-judicial
foreclosure of real estate mortgage are required to be posted for not less than twenty days in at least
three public places of the municipality or city where the property is situated, and if such property is
worth more than four hundred pesos, such notices shall also be published once a week for at least
three consecutive weeks in a newspaper of general circulation in the municipality or city.

Respondent court, through Justice Filemon Mendoza with whom Justices Campos, Jr. and Aldecoa,
Jr. concurred, construed the publication of the notices on March 28, April 11 and l2, 1969 as a fatal
announcement and reversed the judgment appealed from by declaring void, inter alia, the auction
sale of the foreclosed pieces of realty, the final deed of sale, and the consolidation of ownership (p.
27, Rollo).

Hence, the petition at bar, premised on the following backdrop lifted from the text of the challenged
decision:

The facts of the case as related by the trial court are, as follows:

This is a verified complaint brought by the plaintiff for the

reconveyance to him (and resultant damages) of two (2) parcels of
land mortgaged by him to the defendant Philippine National Bank
(Manila), which the defendant allegedly unlawfully foreclosed. The
defendant then consolidated ownership unto itself, and subsequently
sold the parcels to third parties. The amended Answer of the
defendant states on the other hand that the extrajudicial foreclosure,
consolidation of ownership, and subsequent sale to the third parties

131
 were all valid, the bank therefore counterclaims for damages and
other equitable remedies.

xxx xxx xxx

From the evidence and exhibits presented by both parties, the Court
is of the opinion that the following facts have been proved: Two lots,
located at Bunlo, Bocaue, Bulacan (the first covered by Torrens
Certificate No. 16743 and possessed of an area of approximately
3,109 square meters: the second covered by Torrens Certificate No.
5787, possessed of an area of around 610 square meters, and upon
which stood a residential-commercial building were mortgaged to the
defendant Philippine National Bank. The lots were under the common
names of the plaintiff (Epifanio dela Cruz), his brother (Delfin) and his
sister (Maria). The mortgage was made possible because of the grant
by the latter two to the former of a special power of attorney to
mortgage the lots to the defendant. The lots were mortgaged to
guarantee the following promissory notes:

(1) a promissory note for Pl2,000.00, dated September 2, 1958, and payable
within 69 days (date of maturity — Nov. l0, 1958);

(2) a promissory note for P4,000.00, dated September 22, 1958, and payable
within 49 days (date of maturity — Nov. 10, 1958);

(3) a promissory note for P4,000.00, dated June 30, 1.9581 and payable within
120 days (date of maturity — Nov. 10, 1958) See also Annex C of the complaint
itself).

[1 This date of June 30, 1958 is disputed by the plaintiff who claims that the correct
date is June 30, 1961, which is the date actually mentioned in the promissory note. It
is however difficult to believe the plaintiff's contention since if it were true and correct,
this would mean that nearly three (3) years elapsed between the second and the
third promissory note; that at the time the third note was executed, the first two had
not yet been paid by the plaintiff despite the fact that the first two were supposed to
be payable within 69 and 49 days respectively. This state of affairs would have
necessitated the renewal of said two promissory notes. No such renewal was
proved, nor was the renewal ever alleged. Finally, and this is very significant: the
third mentioned promissory note states that the maturity date is Nov. 10, 1958. Now
then, how could the loan have been contracted on June 30, 1961? It will be observed
that in the bank records, the third mentioned promissory note was really executed on
June 30, 1958 (See Exhs. 9 and 9-A). The Court is therefore inclined to believe that
the date "June 30, 1961" was a mere clerical error and hat the true and correct date
is June 1958. However, even assuming that the true and correct date is June 30,
1961, the fact still remains that the first two promissory notes had been guaranteed
by the mortgage of the two lots, and therefore, it was legal and proper to foreclose on
the lots for failure to pay said two promissory notes.

On September 6, 1961, Atty. Ramon de los Reyes of the bank (PNB) presented
under Act No. 3135 a foreclosure petition of the two mortgaged lots before the
Sheriff's Office at Malolos, Bulacan; accordingly, the two lots were sold or auctioned
off on October 20, 1961 with the defendant PNB as the highest bidder for
P28,908.46. On March 7, 1963, Sheriff Leopoldo Palad executed a Final Deed of
132
 Sale, in response to a letter-request by the Manager of the PNB (Malolos Branch).
On January 15, 1963 a Certificate of Sale in favor of the defendant was executed by
Sheriff Palad. The final Deed of Sale was registered in the Bulacan Registry of
Property on March 19, 1963. Inasmuch as the plaintiff did not volunteer to buy back
from the PNB the two lots, the PNB sold on June 4, 1970 the same to spouses
Conrado de Vera and Marina de Vera in a "Deed of Conditional Sale". (Decision,
pp.3-5; Amended Record on Appeal, pp. 96-98).

After due consideration of the evidence, the CFI on January 22, 1978 rendered its
Decision, the dispositive portion of which reads:

WHEREFORE, PREMISES CONSIDERED, the instant complaint

against the defendant Philippine National Bank is hereby ordered
DISMISSED, with costs against the plaintiff. The Counterclaim
against the plaintiff is likewise DISMISSED, for the Court does not
believe that the complaint had been made in bad faith.

SO ORDERED. (Decision, p. B.; Amended Record on Appeal, p. 100)

Not satisfied with the judgment, plaintiff interposed the present appeal assigning as
errors the following:

I.

THE LOWER COURT ERRED IN HOLDING IN FOOTNOTE I OF ITS DECISION

THAT IT IS THEREFORE INCLINED TO BELIEVE THAT THE DATE "JUNE 30,
1962" WAS A MERE CLERICAL ERROR AND THAT THE TRUE AND CORRECT
DATE IS JUNE 30, 1958. IT ALSO ERRED IN HOLDING IN THE SAME
FOOTNOTE I THAT "HOWEVER, EVEN ASSUMING THAT THE TRUE AND
CORRECT DATE IS JUNE 30, 1961, THE FACT STILL REMAINS THAT THE
FIRST TWO PROMISSORY NOTES HAD BEEN GUARANTEED BY THE
MORTGAGE OF THE TWO LOTS, AND THEREFORE, IT WAS LEGAL AND
PROPER TO FORECLOSE ON THE LOTS FOR FAILURE TO PAY SAID TWO
PROMISSORY NOTES". (page 115, Amended Record on Appeal)

II.

THE LOWER COURT ERRED IN NOT HOLDING THAT THE PETITION FOR
EXTRAJUDICIAL FORECLOSURE WAS PREMATURELY FILED AND IS A MERE
SCRAP OF PAPER BECAUSE IT MERELY FORECLOSED THE ORIGINAL AND
NOT THE AMENDED MORTGAGE.

III.

THE LOWER COURT ERRED IN HOLDING THAT "IT IS CLEAR THAT THE
AUCTION SALE WAS NOT PREMATURE". (page 117, Amended Record on Appeal)

IV.

THE LOWER COURT ERRED IN HOLDING THAT "SUFFICE IT TO STATE THAT

ACTUALLY THE POWER OF ATTORNEY GIVEN TO THE PNB WAS EMBODIED

133
 IN THE REAL ESTATE MORTGAGE (EXB. 10) WHICH WAS REGISTERED IN THE
REGISTRY OF PROPERTY OF BULACAN AND WAS ANNOTATED ON THE TWO
TORRENS CERTIFICATES INVOLVED" (page 118, Amended Record on Appeal).

V.

THE LOWER COURT ERRED IN HOLDING THAT "THE NOTICES REQUIRED

UNDER SEC. 3 OF ACT NO. 3135 WERE ALL COMPLIED WITH" AND "THAT THE
DAILY RECORD . . . IS A NEWSPAPER OF GENERAL CIRCULATION (pages 117-
118, Amended Record on Appeal).

VI.

THE LOWER COURT ERRED IN NOT DECLARING THE CERTIFICATE OF SALE,

FINAL DEED OF SALE AND AFFIDAVIT OF CONSOLIDATION, NULL AND VOID.

VII.

THE LOWER COURT ERRED IN NOT ORDERING DEFENDANT TO RECONVEY

TO PLAINTIFF THE PARCELS OF LAND COVERED BY T.C.T. NOS. 40712 AND
40713 OF BULACAN (page 8, Amended Record on Appeal)

VIII.

THE LOWER COURT ERRED IN NOT ORDERING DEFENDANT TO PAY TO

PLAINTIFF REASONABLE AMOUNTS OF MORAL AND EXEMPLARY DAMAGES
AND ATTORNEY'S FEES (page 8. Amended Record on Appeal).

IX.

THE LOWER COURT ERRED IN DISMISSING THE INSTANT COMPLAINT

AGAINST THE PHILIPPINE NATIONAL BANK WITH COSTS AGAINST THE
PLAINTIFF. (page 118, Amended Record on Appeal)." (Brief for Plaintiff-Appellant,
pp. 1-4) (pp. 17-21, Rollo)

With reference to the pertinent issue at hand, respondent court opined:

The Notices of Sale of appellant's foreclosed properties were published on March

228, April 11 and April 12, 1969 issues of the newspaper "Daily Record" (Amended
Record on Appeal, p. 108). The date March 28, 1969 falls on a Friday while the dates
April 11 and 12, 1969 are on a Friday and Saturday, respectively. Section 3 of Act
No. 3135 requires that the notice of auction sale shall be "published once a week for
at least three consecutive weeks". Evidently, defendant-appellee bank failed to comly
with this legal requirement. The Supreme Court has held that:

The rule is that statutory provisions governing publication of notice of

mortgage foreclosure sales must be strictly complied with, and that
even slight deviations therefrom will invalidate the notice and render
the sale at least voidable (Jalandoni vs. Ledesma, 64 Phil. l058. G.R.
No. 42589, August 1937 and October 29, 1937). Interpreting Sec.
457 of the Code of Civil Procedure (reproduced in Sec. 18(c) of Rule

134
 39, Rules of Court and in Sec. 3 of Act No. 3135) in Campomanes vs.
Bartolome and German & Co. (38 Phil. 808, G.R. No. 1309, October
18, 1918), this Court held that if a sheriff sells without notice
prescribed by the Code of Civil Procedure induced thereto by the
judgment creditor, and the purchaser at the sale is the judgment
creditor, the sale is absolutely void and no title passes. This is
regarded as the settled doctrine in this jurisdiction whatever the rule
may be elsewhere (Boria vs. Addison, 14 Phil. 895, G.R. No. 18010,
June 21, 1922).

. . . It has been held that failure to advertise a mortgage foreclosure

sale in compliance with statutory requirements constitutes a
jurisdictional defect invalidating the sale and that a substantial error
or omission in a notice of sale will render the notice insufticient and
vitiate the sale (59 C.J.S. 1314). (Tambunting vs. Court of Appeals, L-
48278, November 8, 1988; 167 SCRA 16, 23-24).

In view of the admission of defendant-appellee in its pleading showing that there was
no compliance of the notice prescribed in Section 3 of Act No. 3135, as amended by
Act 4118, with respect to the notice of sale of the foreclosed real properties in this
case, we have no choice but to declare the auction sale as absolutely void in view of
the fact that the highest bidder and purchaser in said auction sale was defendant-
appellee bank. Consequently, the Certificate of Sale, the Final Deed of Sale and
Affidavit of Consolidation are likewise of no legal efffect. (pp. 24-25, Rollo)

Before we focus our attention on the subject of whether or not there was valid compliance in regard
to the required publication, we shall briefly discuss the other observations of respondent court vis-
a- vis herein private respondent's ascriptions raised with the appellate court when his suit for
reconveyance was dismissed by the court of origin even as private respondent does not impugn the
remarks of respondent court along this line.

Although respondent court acknowledged that there was an ambiguity on the date of execution of
the third promissory note (June 30, 1961) and the date of maturity thereof (October 28, 1958), it was
nonetheless established that the bank introduced sufficient proof to show that the discrepancy was
a mere clerical error pursuant to Section 7, Rule l30 of the Rules of Court. Anent the second
disputation aired by private respondent, the appellate court observed that inasmuch as the original
as well as the subsequent mortgage were foreclosed only after private respondent's default, the
procedure pursued by herein petitioner in foreclosing the collaterals was thus appropriate albeit the
petition therefor contained only a copy of the original mortgage.

It was only on the aspect of publication of the notices of sale under Act No. 3135, as amended, and
attorney's fees where herein private respondent scored points which eliminated in the reversal of the
trial court's decision. Respondent court was of the impression that herein petitioner failed to comply
with the legal requirement and the sale effected thereafter must be adjudged invalid following the
ruling of this Court in Tambunting vs. Court of Appeals (167 SCRA 16 [1988]); p. 8, Decision, p.
24, Rollo). In view of petitioner's so-called indifference to the rules set forth under Act No. 3135, as
amended, respondent court expressly authorized private respondent to recover attorney's fees
because he was compelled to incur expenses to protect his interest.

Immediately upon the submission of a supplemental petition, the spouses Conrado and Marina De
Vera filed a petition in intervention claiming that the two parcels of land involved herein were sold to
them on June 4, 1970 by petitioner for which transfer certificates of title were issued in their favor (p.

135
40, Rollo). On the other hand, private respondent pressed the idea that the alleged intervenors have
no more interest in the disputed lots in view of the sale effected by them to Teresa Castillo, Aquilino
and Antonio dela Cruz in 1990 (pp. 105-106, Rollo).

On March 9, 1992, the Court resolved to give due course to the petition and required the parties to
submit their respective memoranda (p. 110, Rollo).

Now, in support of the theory on adherence to the conditions spelled in the preliminary portion of this
discourse, the pronouncement of this Court in Bonnevie vs. Court of Appeals (125 SCRA [1983]; p.
135, Rollo) is sought to be utilized to press the point that the notice need not be published for three
full weeks. According to petitioner, there is no breach of the proviso since after the first publication
on March 28, 1969, the second notice was published on April 11, 1969 (the last day of the second
week), while the third publication on April 12, 1969 was announced on the first day of the third week.
Petitioner thus concludes that there was no violation from the mere happenstance that the third
publication was made only a day after the second publication since it is enough that the second
publication be made on any day within the second week and the third publication, on any day within
the third week. Moreover, in its bid to rectify its admission in judicio, petitioner asseverates that said
admission alluded to refers only to the dates of publications, not that there was non-compliance with
the publication requirement.

Private respondent, on the other hand, views the legal question from a different perspective. He
believes that the period between each publication must never be less than seven consecutive days
(p. 4, Memorandum; p. 124, Rollo).

We are not convinced by petitioner's submissions because the disquisition in support thereof rests
on the erroneous impression that the day on which the first publication was made, or on March
28, 1969, should be excluded pursuant to the third paragraph of Article 17 of the New Civil Code.

It must be conceded that Article 17 is completely silent as to the definition of what is a "week".
In Concepcion vs. Zandueta (36 O.G. 3139 [1938]; Moreno, Philippine Law Dictionary, Second Ed.,
1972, p. 660), this term was interpreted to mean as a period of time consisting of seven consecutive
days — a definition which dovetails with the ruling in E.M. Derby and Co. vs. City of Modesto, et al.
(38 Pac. Rep. 900 [1984]; 1 Paras, Civil Code of the Philippines Annotated, Twelfth Ed., 1989, p. 88;
1 Tolentino, Commentaries and Jurisprudence on th Civil Code, 1990, p. 46). Following the
interpretation in Derby as to the publication of an ordinance for "at least two weeks" in some
newspaper that:

. . . here there is no date or event suggesting the exclusion of the first day's
publication from the computation, and the cases above cited take this case out of the
rule stated in Section 12, Code Civ. Proc. which excludes the first day and includes
the last;

the publication effected on April 11, 1969 cannot be construed as sufficient advertisement for
the second week because the period for the first week should be reckoned from March 28,
1969 until April 3, 1969 while the second week should be counted from April 4, 1969 until
April 10, 1969. It is clear that the announcement on April 11, 1969 was both theoretically and
physically accomplished during the first day of the third week and cannot thus be equated
with compliance in law. Indeed, where the word is used simply as a measure of duration of
time and without reference to the calendar, it means a period of seven consecutive days
without regard to the day of the week on which it begins (1 Tolentino, supra at p. 467 citing
Derby).

136
Certainly, it would have been absurd to exclude March 28, 1969 as reckoning point in line with the
third paragraph of Article 13 of the New Civil Code, for the purpose of counting the first week of
publication as to the last day thereof fall on April 4, 1969 because this will have the effect of
extending the first week by another day. This incongruous repercussion could not have been the
unwritten intention of the lawmakers when Act No. 3135 was enacted. Verily, inclusion of the first
day of publication is in keeping with the computation in Bonnevie vs. Court of Appeals (125 SCRA
122 [1983]) where this Court had occasion to pronounce, through Justice Guerrero, that the
publication of notice on June 30, July 7 and July 14, 1968 satisfied the publication requirement under
Act No. 3135. Respondent court cannot, therefore, be faulted for holding that there was no
compliance with the strict requirements of publication independently of the so- called admission in
judicio.

WHEREFORE, the petitions for certiorari and intervention are hereby dismissed and the decision of
the Court of Appeals dated April 17, 1991 is hereby affirmed in toto.

SO ORDERED.

Feliciano, Bidin, Davide and Romero, JJ., concur.

137
EN BANC

G.R. No. L-31025 August 15, 1929

FRANCISCO GUTIERREZ, ET AL., Plaintiffs-Appellees, v. JUAN CARPIO, Defendant-Appellant.

Eusebio Orense and Marcelino Aguas for

appellant. Gutierrez David, Dizon & David for

appellee.

ROMUALDEZ, J.:

The litigants herein compromised a civil case on July 13, 1928, agreeing that if within one month
from the date thereof the plaintiffs failed to repurchase certain land, its ownership would vest
in the defendant.

The question now raised is whether or not the plaintiffs duly tendered the amount
of the reimbursement agreed upon in the proper form of money to the defendant.

The court below held in the affirmative, but the defendant, appealing from such judgment,
maintains that on August 13, when the plaintiffs tendered it, the stipulated period had already
elapsed; that the tender of reimbursement made by check is insufficient; and that the holding
of the trial court that the land in question is valued at P27,000 is groundless.

When did the stipulated month terminate? This is the first point in controversy, the
determination of which depends upon the kind of month agreed upon by the parties, and on
the day from its should be counted.

As to the kind of month, it is to be noted that, according to the ruling in the case of Guzman vs.
Lichauco (42 Phil., 291), article 7 of the Civil Code had been modified by section 13 of the
Administrative Code, according to which "month" now means the civil or calendar month and
not the regular thirty-day month.

And the civil or calendar month is defined as follows :

138
The civil or solar month is that which agrees with the Gregorian calendar; and these months are
known by the names of January, February, March, etc. They are composed of unequal portions
of time . . . (Bouvier's Law Dictionary.)

A calendar month is a month as designated in the calendar, without regard to the number of
days it may contain. In commercial transactions it means a month ending on the day in the
succeeding month corresponding to the day in the preceding month from which the computation
began, and if the last month have not so many days, then on the last day of that month. Daley vs.
Anderson, 48 Pac., 839, 840; 7 Wyo., 1; 75 Am. St. Rep., 870 (citing Migotti vs. Colvill, 4 C.P.
Div., 233). (1 Words and Phrases, 943.)

Hence, this court held in the case of Villegas vs. Capistrano (9 Phil., 416), that the period of three
months counted from February 13 did not expire on the 12th of the following May.

As to when said month began, said section 13 of the Administrative Code provides as follows:

In computing any fixed period of time, with reference to the performance of an act required by law
or contract to be done at a certain time or within a certain limit of time, the day of date, or day
from which the time is reckoned, is to be excluded and the date of performance included, unless
otherwise provided. (Emphasis ours)

Similar provisions may be found in article 1130 of the Civil Code, and in section 4 of the
Code of Civil Procedure.

There is nothing in the agreement under discussion providing otherwise, and according to the
phrase therein contained, "one month from this date," said date, which was July 13, 1928, is
exactly the date which must be excluded being the "day from which the time is reckoned,"
according to the words of the aforementioned section 13 of the Administrative Code, which we
have italicized above.

Wherefore, that civil month of thirty-one days began on July 14 and terminated with the end of
the thirteenth day of the following August. And as it has been proved without discussion that
the plaintiffs offered to repurchase the land from the defendant on August 13th, it follows that
such offer was made within the period stipulated.

But the defendant alleges that the offer to repurchase made by check was legally insufficient. We

139
agree that the payment by check does not per se have the effect of such payment. (Section 189, Act
No. 2031,

140
on Negotiable Instruments; article 1170, Civil Code; Bryan, Landon Co. vs. American Bank, 7 Phil.,
255; and Tan Sunco vs. Santos, 9 Phil., 44; 21 R.C.L., 60, 61.) But it appears from Felipe Gutierrez's
testimony that the defendant told him on August 12th that he would accept the repurchase by
check. Felipe Gutierrez is not very explicit about it, but we deem this to be the drift of his
testimony. The defendant must have so understood it, seeing that he thought it necessary to
rebut said detail in his testimony which, notwithstanding the defendant's denial, we hold to be
established by a preponderance of evidence, considering all the circumstances of the case. The
defendant having thus consented to the repurchase by check and having signified that by reason
of such repurchase the plaintiffs could return to their home, said defendant was in estoppel, and
could not, on the following day, refuse to accept such payment by check, because he induced
the plaintiffs to act upon the belief that he had consented to said manner of payment.

From this it follows that by virtue of the defendant's having consented to that payment by
check, which was neither alleged nor proved to be in any way defective, that offer to
repurchase was legally effective and sufficient to compel the defendant to accept it.

We conclude that the offer to repurchase was made within the stipulated period and in the form of
money accepted by the defendant, from whose refusal to allow the repurchase in such terms
originates the plaintiffs' right of action herein.

The last assignment of error touching the value of the land, cannot be a cause for the
reversal of the judgment appealed from for under the circumstances of the case, it has no bearing
on the decision of the case nor affects the result thereof.

The judgment appealed from is modified, and it is hereby ordered that the plaintiffs may, within
ten days from the date on which this judgment becomes final, repurchase the land, the subject
matter of these proceedings, through the delivery to the defendant at the latter's residence in
the municipality of Santa Rita, Pampanga, of the sum of fourteen thousand six hundred forty
three pesos and forty-three centavos (P14,643.43), Philippine currency (in coin or paper money).
The judgment appealed from is affirmed in all other respects, with costs against the appellant.
So ordered.

Avance�a, C.J., Johnson, Street, Villamor, Johns and Villa-Real, JJ., concur.

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14. Function of the provisio

Republic of the Philippines

SUPREME COURT
Manila

EN BANC

G.R. No. 109902 August 2, 1994

ALU-TUCP, Representing Members: ALAN BARINQUE, with 13 others, namely: ENGR. ALAN
G. BARINQUE, ENGR. DARRELL LEE ELTAGONDE, EDUARD H. FOOKSON, JR., ROMEO R.
SARONA, RUSSELL GACUS, JERRY BONTILAO, EUSEBIO MARIN, JR., LEONIDO ECHAVEZ,
BONIFACIO MEJOS, EDGAR S. BONTUYAN, JOSE G. GARGUENA, JR., OSIAS B.
DANDASAN, and GERRY I. FETALVERO, petitioners,
vs.
NATIONAL LABOR RELATIONS COMMISSION and NATIONAL STEEL CORPORATION
(NSC), respondents.

Leonard U. Sawal for petitioners.

Saturnino Mejorada for private

respondent.

FELICIANO, J.:

In this Petition for Certiorari, petitioners assail the Resolution of the National Labor Relations
Commission ("NLRC") dated 8 January 1993 which declared petitioners to be project employees of
private respondent National Steel Corporation ("NSC"), and the NLRC's subsequent Resolution of
15 February 1993, denying petitioners' motion for reconsideration.

Petitioners plead that they had been employed by respondent NSC in connection with its Five Year
Expansion Program (FAYEP I & II) 1 for varying lengths of time when they were separated from
NSC's service:

Employee Date Nature of Separated

Employed Employment

1. Alan Barinque 5-14-82 Engineer 1 8-31-91

2. Jerry Bontilao 8-05-85 Engineer 2 6-30-92
3. Edgar Bontuyan 11-03-82 Chairman to present
4. Osias Dandasan 9-21-82 Utilityman 1991
5. Leonido Echavez 6-16-82 Eng. Assistant 6-30-92
6. Darrell Eltagonde 5-20-85 Engineer 1 8-31-91
7. Gerry Fetalvero 4-08-85 Mat. Expediter regularized
8. Eduard Fookson 9-20-84 Eng. Assistant 8-31-91
142
 9. Russell Gacus 1-30-85 Engineer 1 6-30-92

143
 10. Jose Garguena 3-02-81 Warehouseman to present
11. Eusebio Mejos 11-17-82 Survey Aide 8-31-91
12. Bonifacio Mejos 11-17-82 Surv. Party Head 1992
13. Romeo Sarona 2-26-83 Machine Operator 8-31-912

On 5 July 1990, petitioners filed separate complaints for unfair labor practice, regularization and
monetary benefits with the NLRC, Sub-Regional Arbitration Branch XII, Iligan City.

The complaints were consolidated and after hearing, the Labor Arbiter in a Decision dated 7 June
1991, declared petitioners "regular project employees who shall continue their employment as such
for as long as such [project] activity exists," but entitled to the salary of a regular employee pursuant
to the provisions in the collective bargaining agreement. It also ordered payment of salary
differentials. 3

Both parties appealed to the NLRC from that decision. Petitioners argued that they were regular, not
project, employees. Private respondent, on the other hand, claimed that petitioners are project
employees as they were employed to undertake a specific project — NSC's Five Year Expansion
Program (FAYEP I & II).

The NLRC in its questioned resolutions modified the Labor Arbiter's decision. It affirmed the Labor
Arbiter's holding that petitioners were project employees since they were hired to perform work in a
specific undertaking — the Five Years Expansion Program, the completion of which had been
determined at the time of their engagement and which operation was not directly related to the
business of steel manufacturing. The NLRC, however, set aside the award to petitioners of the same
benefits enjoyed by regular employees for lack of legal and factual basis.

Deliberating on the present Petition for Certiorari, the Court considers that petitioners have failed to
show any grave abuse of discretion or any act without or in excess of jurisdiction on the part of the
NLRC in rendering its questioned resolutions of 8 January 1993 and 15 February 1993.

The law on the matter is Article 280 of the Labor Code which reads in full:

Art. 280. Regular and Casual Employment — The provisions of the written
agreement to the contrary notwithstanding and regardless of the oral agreement of
the parties, and employment shall be deemed to be regular where the employee has
been engaged to perform activities which are usually necessary or desirable in the
usual business or trade of the employer, except where the employment has been
fixed for a specific project or undertaking the completion or termination of which has
been determined at the time of the engagement of the employee or where the work
or services to be performed is seasonal in nature and the employment is for the
duration of the season.

An employment shall be deemed to be casual if it is not covered by the preceding

paragraph: Provided, That, any employee who has rendered at least one year
service, whether such service is continuous or broken, shall be considered a regular
employee with respect to the activity in which he is employed and his employment
shall continue while such actually exists. (Emphasis supplied)

Petitioners argue that they are "regular" employees of NSC because: (i) their jobs are "necessary,
desirable and work-related to private respondent's main business, steel-making"; and (ii) they have
rendered service for six (6) or more years to private respondent NSC. 4

144
The basic issue is thus whether or not petitioners are properly characterized as "project employees"
rather than "regular employees" of NSC. This issue relates, of course, to an important consequence:
the services of project employees are co-terminous with the project and may be terminated upon the
end or completion of the project for which they were hired. 5 Regular employees, in contract, are
legally entitled to remain in the service of their employer until that service is terminated by one or
another of the recognized modes of termination of service under the Labor Code. 6

It is evidently important to become clear about the meaning and scope of the term "project" in the
present context. The "project" for the carrying out of which "project employees" are hired would
ordinarily have some relationship to the usual business of the employer. Exceptionally, the "project"
undertaking might not have an ordinary or normal relationship to the usual business of the employer.
In this latter case, the determination of the scope and parameeters of the "project" becomes fairly
easy. It is unusual (but still conceivable) for a company to undertake a project which has absolutely
no relationship to the usual business of the company; thus, for instance, it would be an unusual
steel-making company which would undertake the breeding and production of fish or the cultivation
of vegetables. From the viewpoint, however, of the legal characterization problem here presented to
the Court, there should be no difficulty in designating the employees who are retained or hired for
the purpose of undertaking fish culture or the production of vegetables as "project employees," as
distinguished from ordinary or "regular employees," so long as the duration and scope of the project
were determined or specified at the time of engagement of the "project employees." 7 For, as is
evident from the provisions of Article 280 of the Labor Code, quoted earlier, the principal test for
determining whether particular employees are properly characterized as "project employees" as
distinguished from "regular employees," is whether or not the "project employees" were assigned to
carry out a "specific project or undertaking," the duration (and scope) of which were specified at the
time the employees were engaged for that project.

In the realm of business and industry, we note that "project" could refer to one or the other of at
least two (2) distinguishable types of activities. Firstly, a project could refer to a particular job or
undertaking that is within the regular or usual business of the employer company, but which is
distinct and separate, and identifiable as such, from the other undertakings of the company. Such
job or undertaking begins and ends at determined or determinable times. The typical example of this
first type of project is a particular construction job or project of a construction company. A
construction company ordinarily carries out two or more discrete identifiable construction projects:
e.g., a twenty-five- storey hotel in Makati; a residential condominium building in Baguio City; and a
domestic air terminal in Iloilo City. Employees who are hired for the carrying out of one of these
separate projects, the scope and duration of which has been determined and made known to the
employees at the time of employment, are properly treated as "project employees," and their
services may be lawfully terminated at completion of the project.

The term "project" could also refer to, secondly, a particular job or undertaking that is not within the
regular business of the corporation. Such a job or undertaking must also be identifiably separate and
distinct from the ordinary or regular business operations of the employer. The job or undertaking also
begins and ends at determined or determinable times. The case at bar presents what appears to our
mind as a typical example of this kind of "project."

NSC undertook the ambitious Five Year Expansion Program I and II with the ultimate end in view of
expanding the volume and increasing the kinds of products that it may offer for sale to the public.
The Five Year Expansion Program had a number of component projects: e.g., (a) the setting up of a
"Cold Rolling Mill Expansion Project"; (b) the establishment of a "Billet Steel-Making Plant" (BSP); (c)
the acquisition and installation of a "Five Stand TDM"; and (d) the "Cold Mill Peripherals
Project." 8 Instead of contracting out to an outside or independent contractor the tasks
of constructing the buildings with related civil and electrical works that would house the new
machinery and equipment, the installation of the newly acquired mill or plant machinery and

145
equipment and the commissioning of such machinery and equipment, NSC opted to execute and
carry out its Five Yeear Expansion Projects "in house," as it were, by administration. The carrying
out of the Five Year Expansion Program (or more precisely, each of its component projects)
constitutes a distinct undertaking identifiable from the ordinary business and activity of NSC. Each
component project, of course, begins and ends at specified times, which had already been
determined by the time petitioners were engaged. We also note that NSC did the work here
involved
— the construction of buildings and civil and electrical works, installation of machinery and
equipment and the commissioning of such machinery — only for itself. Private respondent NSC
was not in the business of constructing buildings and installing plant machinery for the general
business community, i.e., for unrelated, third party, corporations. NSC did not hold itself out to the
public as a construction company or as an engineering corporation.

Which ever type of project employment is found in a particular case, a common basic requisite is
that the designation of named employees as "project employees" and their assignment to a specific
project, are effected and implemented in good faith, and not merely as a means of evading
otherwise applicable requirements of labor laws.

Thus, the particular component projects embraced in the Five Year Expansion Program, to which
petitioners were assigned, were distinguishable from the regular or ordinary business of NSC which,
of course, is the production or making and marketing of steel products. During the time petitioners
rendered services to NSC, their work was limited to one or another of the specific component
projects which made up the FAYEP I and II. There is nothing in the record to show that petitioners
were hired for, or in fact assigned to, other purposes, e.g., for operating or maintaining the old, or
previously installed and commissioned, steel-making machinery and equipment, or for selling the
finished steel products.

We, therefore, agree with the basic finding of the NLRC (and the Labor Arbiter) that the petitioners
were indeed "project employees:"

It is well established by the facts and evidence on record that herein 13 complainants
were hired and engaged for specific activities or undertaking the period of which has
been determined at time of hiring or engagement. It is of public knowledge and which
this Commission can safely take judicial notice that the expansion program (FAYEP)
of respondent NSC consist of various phases [of] project components which are
being executed or implemented independently or simultaneously from each other . . .

In other words, the employment of each "project worker" is dependent and co-
terminous with the completion or termination of the specific activity or undertaking
[for which] he was hired which has been pre-determined at the time of
engagement. Since, there is no showing that they (13 complainants) were engaged
to perform work-related activities to the business of respondent which is steel-
making, there is no logical and legal sense of applying to them the proviso under
the second paragraph of Article 280 of the Labor Code, as amended.

xxx xxx xxx

The present case therefore strictly falls under the definition of "project employees" on
paragraph one of Article 280 of the Labor Code, as amended. Moreover, it has been
held that the length of service of a project employee is not the controlling test of
employment tenure but whether or not "the employment has been fixed for a specific
project or undertaking the completion or termination of which has been determined at
the time of the engagement of the employee". (See Hilario Rada v. NLRC, G.R. No.
146
 96078, January 9, 1992; and Sandoval Shipping, Inc. v. NLRC, 136 SCRA 674
(1985). 9

Petitioners next claim that their service to NSC of more than six (6) years should qualify them as
regular employees. We believe this claim is without legal basis. The simple fact that the employment
of petitioners as project employees had gone beyond one (1) year, does not detract from, or legally
dissolve, their status as project employees. 10 The second paragraph of Article 280 of the Labor
Code, quoted above, providing that an employee who has served for at least one (1) year, shall be
considered a regular employee, relates to casual employees, not to project employees.

In the case of Mercado, Sr. vs. National Labor Relations Commission, 11 this Court ruled that the
proviso in the second paragraph of Article 280 relates only to casual employees and is not
applicable to those who fall within the definition of said Article's first paragraph, i.e., project
employees. The familiar grammatical rule is that a proviso is to be construed with reference to the
immediately preceding part of the provision to which it is attached, and not to other sections thereof,
unless the clear legislative intent is to restrict or qualify not only the phrase immediately preceding
the proviso but also earlier provisions of the statute or even the statute itself as a whole. No such
intent is observable in Article 280 of the Labor Code, which has been quoted earlier.

ACCORDINGLY, in view of the foregoing, the Petition for Certiorari is hereby DISMISSED for lack of
merit. The Resolutions of the NLRC dated 8 January 1993 and 15 February 1993 are hereby
AFFIRMED. No pronouncement as to costs.

SO ORDERED.

Narvasa, C.J., Cruz, Padilla, Bidin, Regalado, Davide, Jr., Romero, Melo, Quiason, Puno,
Vitug, Kapunan and Mendoza, JJ., concur.

Bellosillo, J., is on leave.

147