Republic of the Philippines

SUPREME COURT
Manila

THIRD DIVISION

G.R. No. 210760               January 26, 2015

KYLE ANTHONY ZABALA, Petitioner,

vs.
PEOPLE OF THE PHILIPPINES, Respondent.

DECISION

VELASCO, JR., J.:

The Case

Before this Court is a Petition for Review on Certiorari under Rule 45 of the Rules of Court, seeking
the reversal of the July 15, 2013 Decision of the Court of Appeals (CA) and its January 8, 2014
Resolution in CA-G.R. CR No. 34428, entitled People of the Philippines v. Kyle Anthony Zabala. The
assailed CA Decision affirmed the July 7, 2011 Judgment in Crim. Case No. 1676-M-2008 of the
Regional Trial Court (RTC), Branch 22, Malolos City, finding petitioner guilty beyond reasonable
doubt of the crime of theft, punishable under Articles 308 and 309 of the Revised Penal Code. The
assailed Resolution, meanwhile, denied petitioner's Motion for Reconsideration.

The Facts

An Information was filed against petitioner Kyle Anthony Zabala (Zabala) before the RTC, Branch
22, Malolos City, charging him with theft, the pertinent text of which states:

That on or about the 18th day of June 2007 in San Jose del Monte City, province of Bulacan,
Philippines, and within the jurisdiction of this Honorable Court, the above-named accused, with intent
to gain and without the knowledge and consent of the owner thereof, did then and there willfully,
unlawfully and feloniously take, steal and carry away with him,one envelope containing cash
amounting to SIXTY EIGHT THOUSAND PESOS (Ph₱68,000.00) belonging to Randolph V. Alas, to
the damage and prejudice of the said owner in the amount of Ph₱68,000.00. Contrary to law. 1

When arraigned, petitioner pleaded "not guilty." Trial on the merits ensued. During the trial, the
prosecution presented the testimonies of the complaining witness, Randolph Alas (Alas), and
petitioner’salleged former girlfriend, Marlyn Piñon (Piñon). On the other hand, the defense presented
the testimonies of petitioner and of one Muriel John Ganas (Ganas), his alleged companion on the
day that the incident took place.
2

Version of the Prosecution

The evidence for the prosecution tends to establish that Zabala is a jeepney driver who earns Two
Hundred Pesos (₱200) to Four Hundred Pesos (₱400) per day on an alternate day basis.
Complainant Alas, meanwhile, works at the Manila City Hall. It is through this job that he was able to
save the Sixty-Eight Thousand Pesos (₱68,000) stolen by Zabala.  Piñon, on the other hand, had
3

been the girlfriend of Zabalafor about five months when the incident pertinent to this case occurred.
Alas testified that he and Zabalawere neighbors in San Jose Del Monte City, Bulacan. As
neighbors,he had treated Zabala as his kumpare and would often invite the latter to drinking
sessions inside his house. At times, he would also call Zabala to repair his vehicle, because Zabala
is also a mechanic. He would allow Zabala to follow him to his bedroom to get cash whenever spare
parts are to be bought for the repair of his vehicle.
4

Alas further testified that on June 18, 2007, at about 4:00 in the morning, he left his house to go to
work. When he returned from work, at around 11:00 in the evening, he discovered that his money
amounting to Sixty Eight Thousand Pesos (₱68,000), which he kept in an envelope inside his closet,
was missing.  During that time, there were only five (5) persons living in their house: Alas, his
5

parents, his nine (9) year-old son, and his aunt. He asked his parents and aunt if they knew where
he kept his money, but they did not know. 6

Witness Piñon, on the other hand, testified that in the early morning of June 18, 2007, she and
Zabala, her boyfriend at the time, were together at a store owned by the latter, which was six to
seven steps away from the complainant’s house. She then saw Zabala climb the fence and scale the
tree in front of the complainant’s house, and enter the house. When he returned, she noticed that he
had a bulge in his pocket, which she later found to be a plentiful sum of money. Zabala then brought
her home, and agreed to meet her again at about 10:00 in the morning. They then went to
Greenhills, where Zabala bought two Nokia mobile phones, which cost about Eight Thousand Five
Hundred Pesos (₱8,500). 7

Version of the Defense

For his defense, Zabala testified that in the early morning of June 17, 2007, he was driving his
passenger jeepney, together with his friend, witness Ganas. They parted ways at around 6:00 in the
morning of the following day. During the whole time they were together, they did not drop by the
house of the private complainant. Neither did he have the time to meet Marilyn Piñon, of whom he
regarded only as an acquaintance and not his girlfriend. 8

Witness Ganas corroborated the declaration of Zabala. He testified that he was with petitioner,
acting as the conductor, while petitioner was plying the route of his driven jeepney. He had known
petitioner since his childhood, and was his good friend.
9

Ruling of the RTC

On July 7, 2011, the RTC rendered its Judgment convicting petitioner of the offense charged. The
dispositive portion of the RTC Decision reads:

WHEREFORE, finding guilt of the accused beyond reasonable doubt, judgment is hereby rendered
in Criminal Case No. 1676-M-2008 CONVICTING accused KYLE ANTHONY ZABALA with the crime
of theft defined and penalized under the provisions of Article 308 and 309 of the Revised Penal
Code and is hereby [sentenced] to suffer imprisonment of, applying the Indeterminate Sentence
Law, the MINIMUM penalty of prision correccional which is 6 years, to a MAXIMUM penalty of
prision mayorin its maximum period [of] 8 years.

Accused Zabala is likewise ordered to indemnify and pay the amount of sixty eight thousand pesos
(Php68,000.00) to complaining witness Randolph V. Alas by way of reparation of the damage
caused on him.

Furnish both the public prosecutor and defense counsel of this judgment including the accused. 10
Aggrieved by the Judgment, petitioner appealed to the CA, attributing to the lower court the following
errors: (1) there was a grave error in not giving credence to petitioner’s version; (2) petitioner was
convicted of the crime charged despite the failure of the prosecution to prove his guilt beyond
reasonable doubt; and (3) petitioner cannot be convicted based on circumstantial evidence.

Ruling of the CA

In its presently assailed Decision promulgated on July 15, 2013, the CA denied the appeal and
affirmed the decision of the trial court, but with modification as to the penalty to be imposed upon
petitioner. The CA ruled that the prosecution was able to prove beyond reasonable doubt the guilt of
the appellant through circumstantial evidence.

Citing People v. Modesto,  the CA said:

11

x x x [T]he doctrine on circumstantial evidence has been recognized as part of the legal tradition
when it was declared that "a rule of ancient respectability somolded into tradition is that
circumstantial evidence suffices to convict only if the following requisites concur: first, there is more
than one circumstance; second, the facts from which the inferences are derived are proven; and
finally, the combination of all the circumstances is such as to produce a conviction beyond
reasonable doubt. 12

The CA then found that the series of circumstances present in this case supports a conviction, and
constitutes the basis for a reasonable inference of the existence of the facts thereby sought to be
proved. 13

Rejecting the defense of petitioner, the CA ruled that he offered no evidence other than an alibi to
exculpate him from the crime charged. It then cited the rule that alibi is a weakdefense, and cannot
prevail over the positive testimony of a truthful witness.14

The CA disposed of petitioner’s appeal as follows:

WHEREFORE, premises considered, the appeal is DENIED. The assailed decision is AFFIRMED
with MODIFICATION. As modified, accused-appellant is sentenced to six (6) years of prision
correccional as minimum to twelve (12) years, eight (8) months and eight (8) days of reclusion
temporal as maximum.

Accused Zabala is likewise [ordered to] indemnify and pay the amount of Sixty Eight Thousand
Pesos (Php68,000.00) to complaining witness Randolph V. Alas by way of reparation of the damage
caused on him. 15

Petitioner moved for reconsideration,but in its assailed Resolution dated January 8, 2014,the CA
denied it.

Thus, the present recourse before this Court. Petitioner now argues that there is no sufficient
evidence on record to support his conviction for the charge of theft.

In its Comment, respondent People insists that the prosecution was able to establish petitioner’s
guilt beyond a reasonable doubt. It argues that the CA correctly ruled that the series of
circumstances presented before the trial court is sufficient to support a conviction. 16

The Issues
 I.

WHETHER THE HONORABLE COURT OF APPEALS ERRED IN AFFIRMING THE

PETITIONER’S CONVICTION BY GIVING FULL WEIGHT AND CREDENCE TO THE
PROSECUTION WITNESSES’ TESTIMONIES.

II.

WHETHER THE HONORABLE COURT OF APPEALS ERRED IN AFFIRMING THE

DECISION OF THE REGIONAL TRIAL COURT DESPITE THE FACT THAT THE
EVIDENCE ON RECORD FAILED TO SUPPORT A CONVICTION. 17

In fine, petitioner alleges that the evidence presented before the trial court is insufficient to convict
him of the offense charged.

The Court’s Ruling

We reverse the findings of the RTC and the CA. We agree with petitioner, and find that the evidence
presented below does not constitute proof beyond a reasonable doubt, sufficientto convict petitioner
of theft. Thus, he must be acquitted.

Discussion

Given that the case for the prosecution is largely based on circumstantial evidence, a short
discussion on the sufficiency of circumstantial evidence to convict an accused is in order.

Circumstantial evidence asbasis for conviction

It is a settled rule that circumstantial evidence is sufficient to support a conviction, and that direct
evidence isnot always necessary. This is but a recognition of the reality that in certain instances, due
to the inherent attempt to conceal a crime, it is not always possible to obtain direct evidence. In
Bacolod v. People, this Court had the occasion to say:

The lack or absence of direct evidence does not necessarily mean that the guilt of the accused
cannot be proved by evidence other than direct evidence. Direct evidence is not the sole means of
establishing guilt beyond reasonable doubt, because circumstantial evidence, if sufficient, can
supplant the absence of direct evidence. The crime charged may also be proved by circumstantial
evidence, sometimes referred to as indirect or presumptive evidence. Circumstantial evidence has
been defined as that which "goes to prove a fact or series of facts other than the facts in issue,
which, if proved, may tend by inference to establish a fact in issue." 18

The Rules of Court itself recognizes that circumstantial evidence is sufficient for conviction, under
certain circumstances:

Sec. 4. Circumstantial evidence, when sufficient. – Circumstantial evidence is sufficient for

conviction if:

(1) There is more than one circumstance;

(2) The facts from which the inferences are derived are proven;
 (3) The combination of all the circumstances is such as to produce a conviction beyond a
reasonable doubt.

Moreover, in Lozano v. People, this Court clarified the application of the circumstantial evidence rule:

To sustain a conviction based on circumstantial evidence, it is essential that the circumstantial

evidence presented must constitute an unbroken chain which leads one to a fair and reasonable
conclusion pointing to the accused, to the exclusion of the others, as the guilty person. The
circumstantial evidence must exclude the possibility that some other person has committed the
crime.  (emphasis in the original)
19

The prosecution failed to establish, by circumstantial

evidence, that petitioner is guilty of theft

Unfortunately, in the case at bar, this Court finds that the prosecution failed to present sufficient
circumstantial evidence to convict the petitioner of the offense charged. We find that the pieces of
evidence presented before the trial court fail to provide a sufficient combination of circumstances, as
to produce a conviction beyond reasonable doubt.

To recall, the evidence of the prosecution purports to establish the following narrative: first, that the
complaining witness Alas hides ₱68,000 in cash in his closet inside their house; second, that
petitioner is aware that Alas hides money in his bedroom closet; third, that on the night of the
incident, petitioner was with his then girlfriend, witness Piñon; fourth, that petitioner climbed through
the fence of Alas’s house, and was able to successfully gain entrance to his house; fifth, that
petitioner later went out of the house with a bulge in his pockets; and sixth, that later that day,
petitioner and Piñon went shopping for a cellphone.

The foregoing narration––based on the testimonies of the two witnesses of the prosecution, even if
given full faith and credit and considered as established facts––failsto establish that petitioner
committed the crime of theft. If at all, it may possibly constitute evidence that petitioner committed an
offense, but not necessarily theft.

In the case before the Court,the evidence presented by the prosecution fails to establish the corpus
delicti of theft. In Tan v. People, this Court said:

Corpus delicti means the "body or substance of the crime, and, in its primary sense, refers to the fact
that the crime has been actually committed." The "essential elements of theft are (1) the taking of
personal property; (2) the property belongs to another; (3) the taking away was done with intent of
gain; (4) the taking away was done without the consent of the owner; and (5) the taking away is
accomplished without violence or intimidation against persons or force upon things." In theft, corpus
delicti has two elements, namely: (1) that the property was lost by the owner, and (2) that it was lost
by felonious taking. 20

First, nobody saw Zabala enter the bedroom of Alas, where the money amounting to ₱68,000 was
allegedly kept and hidden. It is interesting to note that while Alas testified that there were other
persons living in that house, i.e. his family members, the prosecution failed to put any of them on the
witness stand, to testify that they saw or heard something out of the ordinary at the time the incident
allegedly took place, or to explain why nobody else was able to notice that the theft took place while
Alas was absent. Witness Piñon, meanwhile, merely testified that she saw Zabala scale the fence of
Alas’ house and enter it. She did not actually see Zabala enter the room of Alas, where the money
was hidden.

Second, the evidence presented below is insufficient to determine without a reasonable doubt that
the ₱68,000 in cash was lost due to felonious taking, and,more importantly, that it was petitioner who
committed the felonious taking. Even if believed in its entirety, the testimony of witness Piñon does
not show that when petitioner left the house of Alas, he was carrying the ₱68,000 incash which was
supposedly lost. All that Piñon saw was the bulge in petitioner’s pockets. Piñon’s testimony can
considered as evidence to prove that when petitioner entered the house of Alas, he did so because
of his intent to commit asportation.

Third, Piñon' s testimony fails to establish that Alas' pocket indeed contained the stolen money, as
she never actually saw what was inside the pocket of Zabala. While she testified that later that day,
they went to buy 2 cellphones amounting to ₱8,500, she failed to testify whether the money that
Zabala used in paying for the cellphone was retrieved from the very same bulging pocket which she
saw earlier in the day, which would have led to the conclusion that Zabala's pocket contained
money. Failing this, what is left is the fact that Pifion saw a bulge in Zabala's pocket, and there is no
evidence whatsoever to prove that his pocket in fact was used to hide the money that he allegedly
stole. The trial and appellate courts committed error in accepting as fact that Zabala's pocket
contained money, when there is a dearth of evidence to support such allegation.

And fourth, the rule in circumstantial evidence cases is that the evidence must exclude the possibility
that some other person committed the crime.  In the case here, however, the prosecution failed to
21

prove, or even allege, that it was impossible for some other person to have committed the crime of
theft against Alas. The prosecution failed to adduce evidence that at the time the theft was
committed, there was no other person inside the house of Alas, or that no other person could have
taken the money from the closet of Alas. Alas himself admitted that there were other residents in the
house, but these persons were never presented to prove their whereabouts at the time the incident
took place. This failure of the prosecution leads the Court to no other conclusion but that they failed
to establish that culpability could only belong to Zabala, and not to some other person.

Given the foregoing discussion, We find that petit10ner was wrongfully convicted of theft.  In the
1âwphi1

absence of proof beyond a reasonable doubt, the presumption of innocence must be upheld, and
thus, petitioner should be acquitted.

WHEREFORE, this petition is GRANTED. Accordingly, the July 15, 2013 Decision of the Court of
Appeals and its January 8, 2014 Resolution in CA-G.R. CR No. 34428 are hereby REVERSED and
SET ASIDE. Petitioner Kyle Anthony Zabala is ACQUITTED of the offense of theft, on account of
reasonable doubt. No costs.

SO ORDERED.
 Republic of the Philippines
SUPREME COURT
Manila

EN BANC

G.R. No. 192935               December 7, 2010

LOUIS "BAROK" C. BIRAOGO, Petitioner,

vs.
THE PHILIPPINE TRUTH COMMISSION OF 2010, Respondent.

x - - - - - - - - - - - - - - - - - - - - - - -x

G.R. No. 193036

REP. EDCEL C. LAGMAN, REP. RODOLFO B. ALBANO, JR., REP. SIMEON A.

DATUMANONG, and REP. ORLANDO B. FUA, SR., Petitioners,
vs.
EXECUTIVE SECRETARY PAQUITO N. OCHOA, JR. and DEPARTMENT OF BUDGET AND
MANAGEMENT SECRETARY FLORENCIO B. ABAD, Respondents.

DECISION

MENDOZA, J.:

When the judiciary mediates to allocate constitutional boundaries, it does not assert any superiority
over the other departments; it does not in reality nullify or invalidate an act of the legislature, but only
asserts the solemn and sacred obligation assigned to it by the Constitution to determine conflicting
claims of authority under the Constitution and to establish for the parties in an actual controversy the
rights which that instrument secures and guarantees to them.

--- Justice Jose P. Laurel1

The role of the Constitution cannot be overlooked. It is through the Constitution that the fundamental
powers of government are established, limited and defined, and by which these powers are
distributed among the several departments.2 The Constitution is the basic and paramount law to
which all other laws must conform and to which all persons, including the highest officials of the land,
must defer.3 Constitutional doctrines must remain steadfast no matter what may be the tides of time.
It cannot be simply made to sway and accommodate the call of situations and much more tailor itself
to the whims and caprices of government and the people who run it. 4

For consideration before the Court are two consolidated cases 5 both of which essentially assail the
validity and constitutionality of Executive Order No. 1, dated July 30, 2010, entitled "Creating the
Philippine Truth Commission of 2010."

The first case is G.R. No. 192935, a special civil action for prohibition instituted by petitioner Louis
Biraogo (Biraogo) in his capacity as a citizen and taxpayer. Biraogo assails Executive Order No. 1
for being violative of the legislative power of Congress under Section 1, Article VI of the
Constitution6 as it usurps the constitutional authority of the legislature to create a public office and to
appropriate funds therefor.7

The second case, G.R. No. 193036, is a special civil action for certiorari and prohibition filed by
petitioners Edcel C. Lagman, Rodolfo B. Albano Jr., Simeon A. Datumanong, and Orlando B. Fua,
Sr. (petitioners-legislators) as incumbent members of the House of Representatives.

The genesis of the foregoing cases can be traced to the events prior to the historic May 2010
elections, when then Senator Benigno Simeon Aquino III declared his staunch condemnation of graft
and corruption with his slogan, "Kung walang corrupt, walang mahirap." The Filipino people,
convinced of his sincerity and of his ability to carry out this noble objective, catapulted the good
senator to the presidency.

To transform his campaign slogan into reality, President Aquino found a need for a special body to
investigate reported cases of graft and corruption allegedly committed during the previous
administration.

Thus, at the dawn of his administration, the President on July 30, 2010, signed Executive Order No.
1 establishing the Philippine Truth Commission of 2010 (Truth Commission). Pertinent provisions of
said executive order read:

EXECUTIVE ORDER NO. 1

CREATING THE PHILIPPINE TRUTH COMMISSION OF 2010

WHEREAS, Article XI, Section 1 of the 1987 Constitution of the Philippines solemnly enshrines the
principle that a public office is a public trust and mandates that public officers and employees, who
are servants of the people, must at all times be accountable to the latter, serve them with utmost
responsibility, integrity, loyalty and efficiency, act with patriotism and justice, and lead modest lives;

WHEREAS, corruption is among the most despicable acts of defiance of this principle and notorious
violation of this mandate;

WHEREAS, corruption is an evil and scourge which seriously affects the political, economic, and
social life of a nation; in a very special way it inflicts untold misfortune and misery on the poor, the
marginalized and underprivileged sector of society;

WHEREAS, corruption in the Philippines has reached very alarming levels, and undermined the
people’s trust and confidence in the Government and its institutions;

WHEREAS, there is an urgent call for the determination of the truth regarding certain reports of large
scale graft and corruption in the government and to put a closure to them by the filing of the
appropriate cases against those involved, if warranted, and to deter others from committing the evil,
restore the people’s faith and confidence in the Government and in their public servants;

WHEREAS, the President’s battlecry during his campaign for the Presidency in the last elections
"kung walang corrupt, walang mahirap" expresses a solemn pledge that if elected, he would end
corruption and the evil it breeds;

WHEREAS, there is a need for a separate body dedicated solely to investigating and finding out the
truth concerning the reported cases of graft and corruption during the previous administration, and
which will recommend the prosecution of the offenders and secure justice for all;
WHEREAS, Book III, Chapter 10, Section 31 of Executive Order No. 292, otherwise known as the
Revised Administrative Code of the Philippines, gives the President the continuing authority to
reorganize the Office of the President.

NOW, THEREFORE, I, BENIGNO SIMEON AQUINO III, President of the Republic of the
Philippines, by virtue of the powers vested in me by law, do hereby order:

SECTION 1. Creation of a Commission. – There is hereby created the PHILIPPINE TRUTH

COMMISSION, hereinafter referred to as the "COMMISSION," which shall primarily seek and find
the truth on, and toward this end, investigate reports of graft and corruption of such scale and
magnitude that shock and offend the moral and ethical sensibilities of the people, committed by
public officers and employees, their co-principals, accomplices and accessories from the private
sector, if any, during the previous administration; and thereafter recommend the appropriate action
or measure to be taken thereon to ensure that the full measure of justice shall be served without fear
or favor.

The Commission shall be composed of a Chairman and four (4) members who will act as an
independent collegial body.

SECTION 2. Powers and Functions. – The Commission, which shall have all the powers of an
investigative body under Section 37, Chapter 9, Book I of the Administrative Code of 1987, is
primarily tasked to conduct a thorough fact-finding investigation of reported cases of graft and
corruption referred to in Section 1, involving third level public officers and higher, their co-principals,
accomplices and accessories from the private sector, if any, during the previous administration and
thereafter submit its finding and recommendations to the President, Congress and the Ombudsman.

In particular, it shall:

a) Identify and determine the reported cases of such graft and corruption which it will
investigate;

b) Collect, receive, review and evaluate evidence related to or regarding the cases of large
scale corruption which it has chosen to investigate, and to this end require any agency,
official or employee of the Executive Branch, including government-owned or controlled
corporations, to produce documents, books, records and other papers;

c) Upon proper request or representation, obtain information and documents from the
Senate and the House of Representatives records of investigations conducted by
committees thereof relating to matters or subjects being investigated by the Commission;

d) Upon proper request and representation, obtain information from the courts, including the
Sandiganbayan and the Office of the Court Administrator, information or documents in
respect to corruption cases filed with the Sandiganbayan or the regular courts, as the case
may be;

e) Invite or subpoena witnesses and take their testimonies and for that purpose, administer
oaths or affirmations as the case may be;

f) Recommend, in cases where there is a need to utilize any person as a state witness to
ensure that the ends of justice be fully served, that such person who qualifies as a state
witness under the Revised Rules of Court of the Philippines be admitted for that purpose;
 g) Turn over from time to time, for expeditious prosecution, to the appropriate prosecutorial
authorities, by means of a special or interim report and recommendation, all evidence on
corruption of public officers and employees and their private sector co-principals,
accomplices or accessories, if any, when in the course of its investigation the Commission
finds that there is reasonable ground to believe that they are liable for graft and corruption
under pertinent applicable laws;

h) Call upon any government investigative or prosecutorial agency such as the Department
of Justice or any of the agencies under it, and the Presidential Anti-Graft Commission, for
such assistance and cooperation as it may require in the discharge of its functions and
duties;

i) Engage or contract the services of resource persons, professionals and other personnel
determined by it as necessary to carry out its mandate;

j) Promulgate its rules and regulations or rules of procedure it deems necessary to effectively
and efficiently carry out the objectives of this Executive Order and to ensure the orderly
conduct of its investigations, proceedings and hearings, including the presentation of
evidence;

k) Exercise such other acts incident to or are appropriate and necessary in connection with
the objectives and purposes of this Order.

SECTION 3. Staffing Requirements. – x x x.

SECTION 4. Detail of Employees. – x x x.

SECTION 5. Engagement of Experts. – x x x

SECTION 6. Conduct of Proceedings. – x x x.

SECTION 7. Right to Counsel of Witnesses/Resource Persons. – x x x.

SECTION 8. Protection of Witnesses/Resource Persons. – x x x.

SECTION 9. Refusal to Obey Subpoena, Take Oath or Give Testimony. – Any government
official or personnel who, without lawful excuse, fails to appear upon subpoena issued by the
Commission or who, appearing before the Commission refuses to take oath or affirmation, give
testimony or produce documents for inspection, when required, shall be subject to administrative
disciplinary action. Any private person who does the same may be dealt with in accordance with law.

SECTION 10. Duty to Extend Assistance to the Commission. – x x x.

SECTION 11. Budget for the Commission. – The Office of the President shall provide the
necessary funds for the Commission to ensure that it can exercise its powers, execute its functions,
and perform its duties and responsibilities as effectively, efficiently, and expeditiously as possible.

SECTION 12. Office. – x x x.

SECTION 13. Furniture/Equipment. – x x x.

SECTION 14. Term of the Commission. – The Commission shall accomplish its mission on or
before December 31, 2012.

SECTION 15. Publication of Final Report. – x x x.

SECTION 16. Transfer of Records and Facilities of the Commission. – x x x.

SECTION 17. Special Provision Concerning Mandate. If and when in the judgment of the
President there is a need to expand the mandate of the Commission as defined in Section 1 hereof
to include the investigation of cases and instances of graft and corruption during the prior
administrations, such mandate may be so extended accordingly by way of a supplemental Executive
Order.

SECTION 18. Separability Clause. If any provision of this Order is declared unconstitutional, the
same shall not affect the validity and effectivity of the other provisions hereof.

SECTION 19. Effectivity. – This Executive Order shall take effect immediately.

DONE in the City of Manila, Philippines, this 30th day of July 2010.

(SGD.) BENIGNO S. AQUINO III

By the President:

(SGD.) PAQUITO N. OCHOA, JR.

Executive Secretary

Nature of the Truth Commission

As can be gleaned from the above-quoted provisions, the Philippine Truth Commission (PTC) is a
mere ad hoc body formed under the Office of the President with the primary task to investigate
reports of graft and corruption committed by third-level public officers and employees, their co-
principals, accomplices and accessories during the previous administration, and thereafter to submit
its finding and recommendations to the President, Congress and the Ombudsman. Though it has
been described as an "independent collegial body," it is essentially an entity within the Office of the
President Proper and subject to his control. Doubtless, it constitutes a public office, as an ad hoc
body is one.8

To accomplish its task, the PTC shall have all the powers of an investigative body under Section 37,
Chapter 9, Book I of the Administrative Code of 1987. It is not, however, a quasi-judicial body as it
cannot adjudicate, arbitrate, resolve, settle, or render awards in disputes between contending
parties. All it can do is gather, collect and assess evidence of graft and corruption and make
recommendations. It may have subpoena powers but it has no power to cite people in contempt,
much less order their arrest. Although it is a fact-finding body, it cannot determine from such facts if
probable cause exists as to warrant the filing of an information in our courts of law. Needless to
state, it cannot impose criminal, civil or administrative penalties or sanctions.

The PTC is different from the truth commissions in other countries which have been created as
official, transitory and non-judicial fact-finding bodies "to establish the facts and context of serious
violations of human rights or of international humanitarian law in a country’s past." 9 They are usually
established by states emerging from periods of internal unrest, civil strife or authoritarianism to serve
as mechanisms for transitional justice.
Truth commissions have been described as bodies that share the following characteristics: (1) they
examine only past events; (2) they investigate patterns of abuse committed over a period of time, as
opposed to a particular event; (3) they are temporary bodies that finish their work with the
submission of a report containing conclusions and recommendations; and (4) they are officially
sanctioned, authorized or empowered by the State. 10 "Commission’s members are usually
empowered to conduct research, support victims, and propose policy recommendations to prevent
recurrence of crimes. Through their investigations, the commissions may aim to discover and learn
more about past abuses, or formally acknowledge them. They may aim to prepare the way for
prosecutions and recommend institutional reforms."11

Thus, their main goals range from retribution to reconciliation. The Nuremburg and Tokyo war crime
tribunals are examples of a retributory or vindicatory body set up to try and punish those responsible
for crimes against humanity. A form of a reconciliatory tribunal is the Truth and Reconciliation
Commission of South Africa, the principal function of which was to heal the wounds of past violence
and to prevent future conflict by providing a cathartic experience for victims.

The PTC is a far cry from South Africa’s model. The latter placed more emphasis on reconciliation
than on judicial retribution, while the marching order of the PTC is the identification and punishment
of perpetrators. As one writer12 puts it:

The order ruled out reconciliation. It translated the Draconian code spelled out by Aquino in his
inaugural speech: "To those who talk about reconciliation, if they mean that they would like us to
simply forget about the wrongs that they have committed in the past, we have this to say: There can
be no reconciliation without justice. When we allow crimes to go unpunished, we give consent to
their occurring over and over again."

The Thrusts of the Petitions

Barely a month after the issuance of Executive Order No. 1, the petitioners asked the Court to
declare it unconstitutional and to enjoin the PTC from performing its functions. A perusal of the
arguments of the petitioners in both cases shows that they are essentially the same. The petitioners-
legislators summarized them in the following manner:

(a) E.O. No. 1 violates the separation of powers as it arrogates the power of the Congress to
create a public office and appropriate funds for its operation.

(b) The provision of Book III, Chapter 10, Section 31 of the Administrative Code of 1987
cannot legitimize E.O. No. 1 because the delegated authority of the President to structurally
reorganize the Office of the President to achieve economy, simplicity and efficiency does not
include the power to create an entirely new public office which was hitherto inexistent like the
"Truth Commission."

(c) E.O. No. 1 illegally amended the Constitution and pertinent statutes when it vested the
"Truth Commission" with quasi-judicial powers duplicating, if not superseding, those of the
Office of the Ombudsman created under the 1987 Constitution and the Department of
Justice created under the Administrative Code of 1987.

(d) E.O. No. 1 violates the equal protection clause as it selectively targets for investigation
and prosecution officials and personnel of the previous administration as if corruption is their
peculiar species even as it excludes those of the other administrations, past and present,
who may be indictable.
 (e) The creation of the "Philippine Truth Commission of 2010" violates the consistent and
general international practice of four decades wherein States constitute truth commissions to
exclusively investigate human rights violations, which customary practice forms part of the
generally accepted principles of international law which the Philippines is mandated to
adhere to pursuant to the Declaration of Principles enshrined in the Constitution.

(f) The creation of the "Truth Commission" is an exercise in futility, an adventure in partisan
hostility, a launching pad for trial/conviction by publicity and a mere populist propaganda to
mistakenly impress the people that widespread poverty will altogether vanish if corruption is
eliminated without even addressing the other major causes of poverty.

(g) The mere fact that previous commissions were not constitutionally challenged is of no
moment because neither laches nor estoppel can bar an eventual question on the
constitutionality and validity of an executive issuance or even a statute." 13

In their Consolidated Comment,14 the respondents, through the Office of the Solicitor

General (OSG), essentially questioned the legal standing of petitioners and defended the assailed
executive order with the following arguments:

1] E.O. No. 1 does not arrogate the powers of Congress to create a public office because the
President’s executive power and power of control necessarily include the inherent power to
conduct investigations to ensure that laws are faithfully executed and that, in any event, the
Constitution, Revised Administrative Code of 1987 (E.O. No. 292), 15 Presidential Decree
(P.D.) No. 141616 (as amended by P.D. No. 1772), R.A. No. 9970, 17 and settled jurisprudence
that authorize the President to create or form such bodies.

2] E.O. No. 1 does not usurp the power of Congress to appropriate funds because there is
no appropriation but a mere allocation of funds already appropriated by Congress.

3] The Truth Commission does not duplicate or supersede the functions of the Office of the
Ombudsman (Ombudsman) and the Department of Justice (DOJ), because it is a fact-finding
body and not a quasi-judicial body and its functions do not duplicate, supplant or erode the
latter’s jurisdiction.

4] The Truth Commission does not violate the equal protection clause because it was validly
created for laudable purposes.

The OSG then points to the continued existence and validity of other executive orders and
presidential issuances creating similar bodies to justify the creation of the PTC such as Presidential
Complaint and Action Commission (PCAC) by President Ramon B. Magsaysay, Presidential
Committee on Administrative Performance Efficiency (PCAPE) by President Carlos P. Garcia and
Presidential Agency on Reform and Government Operations (PARGO) by President Ferdinand E.
Marcos.18

From the petitions, pleadings, transcripts, and memoranda, the following are the principal issues to
be resolved:

1. Whether or not the petitioners have the legal standing to file their respective petitions and
question Executive Order No. 1;
 2. Whether or not Executive Order No. 1 violates the principle of separation of powers by
usurping the powers of Congress to create and to appropriate funds for public offices,
agencies and commissions;

3. Whether or not Executive Order No. 1 supplants the powers of the Ombudsman and the
DOJ;

4. Whether or not Executive Order No. 1 violates the equal protection clause; and

5. Whether or not petitioners are entitled to injunctive relief.

Essential requisites for judicial review

Before proceeding to resolve the issue of the constitutionality of Executive Order No. 1, the Court
needs to ascertain whether the requisites for a valid exercise of its power of judicial review are
present.

Like almost all powers conferred by the Constitution, the power of judicial review is subject to
limitations, to wit: (1) there must be an actual case or controversy calling for the exercise of judicial
power; (2) the person challenging the act must have the standing to question the validity of the
subject act or issuance; otherwise stated, he must have a personal and substantial interest in the
case such that he has sustained, or will sustain, direct injury as a result of its enforcement; (3) the
question of constitutionality must be raised at the earliest opportunity; and (4) the issue of
constitutionality must be the very lis mota of the case.19

Among all these limitations, only the legal standing of the petitioners has been put at issue.

Legal Standing of the Petitioners

The OSG attacks the legal personality of the petitioners-legislators to file their petition for failure to
demonstrate their personal stake in the outcome of the case. It argues that the petitioners have not
shown that they have sustained or are in danger of sustaining any personal injury attributable to the
creation of the PTC. Not claiming to be the subject of the commission’s investigations, petitioners will
not sustain injury in its creation or as a result of its proceedings. 20

The Court disagrees with the OSG in questioning the legal standing of the petitioners-legislators to
assail Executive Order No. 1. Evidently, their petition primarily invokes usurpation of the power of the
Congress as a body to which they belong as members. This certainly justifies their resolve to take
the cudgels for Congress as an institution and present the complaints on the usurpation of their
power and rights as members of the legislature before the Court. As held in Philippine Constitution
Association v. Enriquez,21

To the extent the powers of Congress are impaired, so is the power of each member thereof, since
his office confers a right to participate in the exercise of the powers of that institution.

An act of the Executive which injures the institution of Congress causes a derivative but nonetheless
substantial injury, which can be questioned by a member of Congress. In such a case, any member
of Congress can have a resort to the courts.
Indeed, legislators have a legal standing to see to it that the prerogative, powers and privileges
vested by the Constitution in their office remain inviolate. Thus, they are allowed to question the
validity of any official action which, to their mind, infringes on their prerogatives as legislators. 22

With regard to Biraogo, the OSG argues that, as a taxpayer, he has no standing to question the
creation of the PTC and the budget for its operations. 23 It emphasizes that the funds to be used for
the creation and operation of the commission are to be taken from those funds already appropriated
by Congress. Thus, the allocation and disbursement of funds for the commission will not entail
congressional action but will simply be an exercise of the President’s power over contingent funds.

As correctly pointed out by the OSG, Biraogo has not shown that he sustained, or is in danger of
sustaining, any personal and direct injury attributable to the implementation of Executive Order No.
1. Nowhere in his petition is an assertion of a clear right that may justify his clamor for the Court to
exercise judicial power and to wield the axe over presidential issuances in defense of the
Constitution. The case of David v. Arroyo24 explained the deep-seated rules on locus standi. Thus:

Locus standi is defined as "a right of appearance in a court of justice on a given question." In private
suits, standing is governed by the "real-parties-in interest" rule as contained in Section 2, Rule 3 of
the 1997 Rules of Civil Procedure, as amended. It provides that "every action must be prosecuted
or defended in the name of the real party in interest." Accordingly, the "real-party-in interest" is
"the party who stands to be benefited or injured by the judgment in the suit or the party entitled to the
avails of the suit." Succinctly put, the plaintiff’s standing is based on his own right to the relief sought.

The difficulty of determining locus standi arises in public suits. Here, the plaintiff who asserts a
"public right" in assailing an allegedly illegal official action, does so as a representative of the general
public. He may be a person who is affected no differently from any other person. He could be suing
as a "stranger," or in the category of a "citizen," or ‘taxpayer." In either case, he has to adequately
show that he is entitled to seek judicial protection. In other words, he has to make out a sufficient
interest in the vindication of the public order and the securing of relief as a "citizen" or "taxpayer.

Case law in most jurisdictions now allows both "citizen" and "taxpayer" standing in public actions.
The distinction was first laid down in Beauchamp v. Silk, where it was held that the plaintiff in a
taxpayer’s suit is in a different category from the plaintiff in a citizen’s suit. In the former, the plaintiff
is affected by the expenditure of public funds, while in the latter, he is but the mere instrument of the
public concern. As held by the New York Supreme Court in People ex rel Case v. Collins: "In matter
of mere public right, however…the people are the real parties…It is at least the right, if not the duty,
of every citizen to interfere and see that a public offence be properly pursued and punished, and that
a public grievance be remedied." With respect to taxpayer’s suits, Terr v. Jordan held that "the right
of a citizen and a taxpayer to maintain an action in courts to restrain the unlawful use of public funds
to his injury cannot be denied."

However, to prevent just about any person from seeking judicial interference in any official policy or
act with which he disagreed with, and thus hinders the activities of governmental agencies engaged
in public service, the United State Supreme Court laid down the more stringent "direct
injury" test in Ex Parte Levitt, later reaffirmed in Tileston v. Ullman. The same Court ruled that for a
private individual to invoke the judicial power to determine the validity of an executive or legislative
action, he must show that he has sustained a direct injury as a result of that action, and it is
not sufficient that he has a general interest common to all members of the public.

This Court adopted the "direct injury" test in our jurisdiction. In People v. Vera, it held that the
person who impugns the validity of a statute must have "a personal and substantial interest in the
case such that he has sustained, or will sustain direct injury as a result." The Vera doctrine
was upheld in a litany of cases, such as, Custodio v. President of the Senate, Manila Race Horse
Trainers’ Association v. De la Fuente, Pascual v. Secretary of Public Works and Anti-Chinese
League of the Philippines v. Felix. [Emphases included. Citations omitted]

Notwithstanding, the Court leans on the doctrine that "the rule on standing is a matter of procedure,
hence, can be relaxed for nontraditional plaintiffs like ordinary citizens, taxpayers, and legislators
when the public interest so requires, such as when the matter is of transcendental importance, of
overreaching significance to society, or of paramount public interest." 25

Thus, in Coconut Oil Refiners Association, Inc. v. Torres,26 the Court 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. In the first Emergency Powers Cases, 27 ordinary citizens and
taxpayers were allowed to question the constitutionality of several executive orders although they
had only an indirect and general interest shared in common with the public.

The OSG claims that the determinants of transcendental importance 28 laid down in CREBA v. ERC
and Meralco29 are non-existent in this case. The Court, however, finds reason in Biraogo’s assertion
that the petition covers matters of transcendental importance to justify the exercise of jurisdiction by
the Court. There are constitutional issues in the petition which deserve the attention of this Court in
view of their seriousness, novelty and weight as precedents. Where the issues are of transcendental
and paramount importance not only to the public but also to the Bench and the Bar, they should be
resolved for the guidance of all.30 Undoubtedly, the Filipino people are more than interested to know
the status of the President’s first effort to bring about a promised change to the country. The Court
takes cognizance of the petition not due to overwhelming political undertones that clothe the issue in
the eyes of the public, but because the Court stands firm in its oath to perform its constitutional duty
to settle legal controversies with overreaching significance to society.

Power of the President to Create the Truth Commission

In his memorandum in G.R. No. 192935, Biraogo asserts that the Truth Commission is a public
office and not merely an adjunct body of the Office of the President. 31 Thus, in order that the
President may create a public office he must be empowered by the Constitution, a statute or an
authorization vested in him by law. According to petitioner, such power cannot be presumed 32 since
there is no provision in the Constitution or any specific law that authorizes the President to create a
truth commission.33 He adds that Section 31 of the Administrative Code of 1987, granting the
President the continuing authority to reorganize his office, cannot serve as basis for the creation of a
truth commission considering the aforesaid provision merely uses verbs such as "reorganize,"
"transfer," "consolidate," "merge," and "abolish." 34 Insofar as it vests in the President the plenary
power to reorganize the Office of the President to the extent of creating a public office, Section 31 is
inconsistent with the principle of separation of powers enshrined in the Constitution and must be
deemed repealed upon the effectivity thereof.35

Similarly, in G.R. No. 193036, petitioners-legislators argue that the creation of a public office lies
within the province of Congress and not with the executive branch of government. They maintain
that the delegated authority of the President to reorganize under Section 31 of the Revised
Administrative Code: 1) does not permit the President to create a public office, much less a truth
commission; 2) is limited to the reorganization of the administrative structure of the Office of the
President; 3) is limited to the restructuring of the internal organs of the Office of the President
Proper, transfer of functions and transfer of agencies; and 4) only to achieve simplicity, economy
and efficiency.36 Such continuing authority of the President to reorganize his office is limited, and by
issuing Executive Order No. 1, the President overstepped the limits of this delegated authority.
The OSG counters that there is nothing exclusively legislative about the creation by the President of
a fact-finding body such as a truth commission. Pointing to numerous offices created by past
presidents, it argues that the authority of the President to create public offices within the Office of the
President Proper has long been recognized. 37 According to the OSG, the Executive, just like the
other two branches of government, possesses the inherent authority to create fact-finding
committees to assist it in the performance of its constitutionally mandated functions and in the
exercise of its administrative functions.38 This power, as the OSG explains it, is but an adjunct of the
plenary powers wielded by the President under Section 1 and his power of control under Section 17,
both of Article VII of the Constitution. 39

It contends that the President is necessarily vested with the power to conduct fact-finding
investigations, pursuant to his duty to ensure that all laws are enforced by public officials and
employees of his department and in the exercise of his authority to assume directly the functions of
the executive department, bureau and office, or interfere with the discretion of his officials. 40 The
power of the President to investigate is not limited to the exercise of his power of control over his
subordinates in the executive branch, but extends further in the exercise of his other powers, such
as his power to discipline subordinates, 41 his power for rule making, adjudication and licensing
purposes42 and in order to be informed on matters which he is entitled to know. 43

The OSG also cites the recent case of Banda v. Ermita, 44 where it was held that the President has
the power to reorganize the offices and agencies in the executive department in line with his
constitutionally granted power of control and by virtue of a valid delegation of the legislative power to
reorganize executive offices under existing statutes.

Thus, the OSG concludes that the power of control necessarily includes the power to create offices.
For the OSG, the President may create the PTC in order to, among others, put a closure to the
reported large scale graft and corruption in the government. 45

The question, therefore, before the Court is this: Does the creation of the PTC fall within the ambit of
the power to reorganize as expressed in Section 31 of the Revised Administrative Code? Section 31
contemplates "reorganization" as limited by the following functional and structural lines: (1)
restructuring the internal organization of the Office of the President Proper by abolishing,
consolidating or merging units thereof or transferring functions from one unit to another; (2)
transferring any function under the Office of the President to any other Department/Agency or vice
versa; or (3) transferring any agency under the Office of the President to any other
Department/Agency or vice versa. Clearly, the provision refers to reduction of personnel,
consolidation of offices, or abolition thereof by reason of economy or redundancy of functions. These
point to situations where a body or an office is already existent but a modification or alteration
thereof has to be effected. The creation of an office is nowhere mentioned, much less envisioned in
said provision. Accordingly, the answer to the question is in the negative.

To say that the PTC is borne out of a restructuring of the Office of the President under Section 31 is
a misplaced supposition, even in the plainest meaning attributable to the term "restructure"– an
"alteration of an existing structure." Evidently, the PTC was not part of the structure of the Office of
the President prior to the enactment of Executive Order No. 1. As held in Buklod ng Kawaning EIIB
v. Hon. Executive Secretary,46

But of course, the list of legal basis authorizing the President to reorganize any department or
agency in the executive branch does not have to end here. We must not lose sight of the very
source of the power – that which constitutes an express grant of power. Under Section 31, Book III
of Executive Order No. 292 (otherwise known as the Administrative Code of 1987), "the President,
subject to the policy in the Executive Office and in order to achieve simplicity, economy and
efficiency, shall have the continuing authority to reorganize the administrative structure of the Office
of the President." For this purpose, he may transfer the functions of other Departments or Agencies
to the Office of the President. In Canonizado v. Aguirre [323 SCRA 312 (2000)], we ruled that
reorganization "involves the reduction of personnel, consolidation of offices, or abolition thereof by
reason of economy or redundancy of functions." It takes place when there is an alteration of the
existing structure of government offices or units therein, including the lines of control, authority and
responsibility between them. The EIIB is a bureau attached to the Department of Finance. It falls
under the Office of the President. Hence, it is subject to the President’s continuing authority to
reorganize. [Emphasis Supplied]

In the same vein, the creation of the PTC is not justified by the President’s power of control. Control
is essentially the power to alter or modify or nullify or set aside what a subordinate officer had done
in the performance of his duties and to substitute the judgment of the former with that of the
latter.47 Clearly, the power of control is entirely different from the power to create public offices. The
former is inherent in the Executive, while the latter finds basis from either a valid delegation from
Congress, or his inherent duty to faithfully execute the laws.

The question is this, is there a valid delegation of power from Congress, empowering the President
to create a public office?

According to the OSG, the power to create a truth commission pursuant to the above provision finds
statutory basis under P.D. 1416, as amended by P.D. No. 1772. 48 The said law granted the President
the continuing authority to reorganize the national government, including the power to group,
consolidate bureaus and agencies, to abolish offices, to transfer functions, to create and classify
functions, services and activities, transfer appropriations, and to standardize salaries and materials.
This decree, in relation to Section 20, Title I, Book III of E.O. 292 has been invoked in several cases
such as Larin v. Executive Secretary.49

The Court, however, declines to recognize P.D. No. 1416 as a justification for the President to create
a public office. Said decree is already stale, anachronistic and inoperable. P.D. No. 1416 was a
delegation to then President Marcos of the authority to reorganize the administrative structure of the
national government including the power to create offices and transfer appropriations pursuant to
one of the purposes of the decree, embodied in its last "Whereas" clause:

WHEREAS, the transition towards the parliamentary form of government will necessitate flexibility

in the organization of the national government.

Clearly, as it was only for the purpose of providing manageability and resiliency during the interim,
P.D. No. 1416, as amended by P.D. No. 1772, became functus oficio upon the convening of the First
Congress, as expressly provided in Section 6, Article XVIII of the 1987 Constitution. In fact, even the
Solicitor General agrees with this view. Thus:

ASSOCIATE JUSTICE CARPIO: Because P.D. 1416 was enacted was the last whereas clause of
P.D. 1416 says "it was enacted to prepare the transition from presidential to parliamentary. Now, in a
parliamentary form of government, the legislative and executive powers are fused, correct?

SOLICITOR GENERAL CADIZ: Yes, Your Honor.

ASSOCIATE JUSTICE CARPIO: That is why, that P.D. 1416 was issued. Now would you agree with
me that P.D. 1416 should not be considered effective anymore upon the promulgation, adoption,
ratification of the 1987 Constitution.
SOLICITOR GENERAL CADIZ: Not the whole of P.D. [No.] 1416, Your Honor.

ASSOCIATE JUSTICE CARPIO: The power of the President to reorganize the entire National
Government is deemed repealed, at least, upon the adoption of the 1987 Constitution, correct.

SOLICITOR GENERAL CADIZ: Yes, Your Honor.50

While the power to create a truth commission cannot pass muster on the basis of P.D. No. 1416 as
amended by P.D. No. 1772, the creation of the PTC finds justification under Section 17, Article VII of
the Constitution, imposing upon the President the duty to ensure that the laws are faithfully
executed. Section 17 reads:

Section 17. The President shall have control of all the executive departments, bureaus, and offices.
He shall ensure that the laws be faithfully executed. (Emphasis supplied).

As correctly pointed out by the respondents, the allocation of power in the three principal branches
of government is a grant of all powers inherent in them. The President’s power to conduct
investigations to aid him in ensuring the faithful execution of laws – in this case, fundamental laws on
public accountability and transparency – is inherent in the President’s powers as the Chief
Executive. That the authority of the President to conduct investigations and to create bodies to
execute this power is not explicitly mentioned in the Constitution or in statutes does not mean that he
is bereft of such authority.51 As explained in the landmark case of Marcos v. Manglapus: 52

x x x. The 1987 Constitution, however, brought back the presidential system of government and
restored the separation of legislative, executive and judicial powers by their actual distribution
among three distinct branches of government with provision for checks and balances.

It would not be accurate, however, to state that "executive power" is the power to enforce the laws,
for the President is head of state as well as head of government and whatever powers inhere in such
positions pertain to the office unless the Constitution itself withholds it. Furthermore, the Constitution
itself provides that the execution of the laws is only one of the powers of the President. It also grants
the President other powers that do not involve the execution of any provision of law, e.g., his power
over the country's foreign relations.

On these premises, we hold the view that although the 1987 Constitution imposes limitations on the
exercise of specific powers of the President, it maintains intact what is traditionally considered as
within the scope of "executive power." Corollarily, the powers of the President cannot be said to be
limited only to the specific powers enumerated in the Constitution. In other words, executive power is
more than the sum of specific powers so enumerated.

It has been advanced that whatever power inherent in the government that is neither legislative nor
judicial has to be executive. x x x.

Indeed, the Executive is given much leeway in ensuring that our laws are faithfully executed. As
stated above, the powers of the President are not limited to those specific powers under the
Constitution.53 One of the recognized powers of the President granted pursuant to this
constitutionally-mandated duty is the power to create ad hoc committees. This flows from the
obvious need to ascertain facts and determine if laws have been faithfully executed. Thus,
in Department of Health v. Camposano,54 the authority of the President to issue Administrative Order
No. 298, creating an investigative committee to look into the administrative charges filed against the
employees of the Department of Health for the anomalous purchase of medicines was upheld. In
said case, it was ruled:

The Chief Executive’s power to create the Ad hoc Investigating Committee cannot be
doubted. Having been constitutionally granted full control of the Executive Department, to which
respondents belong, the President has the obligation to ensure that all executive officials and
employees faithfully comply with the law. With AO 298 as mandate, the legality of the investigation is
sustained. Such validity is not affected by the fact that the investigating team and the PCAGC had
the same composition, or that the former used the offices and facilities of the latter in conducting the
inquiry. [Emphasis supplied]

It should be stressed that the purpose of allowing ad hoc investigating bodies to exist is to allow an
inquiry into matters which the President is entitled to know so that he can be properly advised and
guided in the performance of his duties relative to the execution and enforcement of the laws of the
land. And if history is to be revisited, this was also the objective of the investigative bodies created in
the past like the PCAC, PCAPE, PARGO, the Feliciano Commission, the Melo Commission and the
Zenarosa Commission. There being no changes in the government structure, the Court is not
inclined to declare such executive power as non-existent just because the direction of the political
winds have changed.

On the charge that Executive Order No. 1 transgresses the power of Congress to appropriate funds
for the operation of a public office, suffice it to say that there will be no appropriation but only an
allotment or allocations of existing funds already appropriated. Accordingly, there is no usurpation on
the part of the Executive of the power of Congress to appropriate funds. Further, there is no need to
specify the amount to be earmarked for the operation of the commission because, in the words of
the Solicitor General, "whatever funds the Congress has provided for the Office of the President will
be the very source of the funds for the commission."55 Moreover, since the amount that would be
allocated to the PTC shall be subject to existing auditing rules and regulations, there is no
impropriety in the funding.

Power of the Truth Commission to Investigate

The President’s power to conduct investigations to ensure that laws are faithfully executed is well
recognized. It flows from the faithful-execution clause of the Constitution under Article VII, Section 17
thereof.56 As the Chief Executive, the president represents the government as a whole and sees to it
that all laws are enforced by the officials and employees of his department. He has the authority to
directly assume the functions of the executive department. 57

Invoking this authority, the President constituted the PTC to primarily investigate reports of graft and
corruption and to recommend the appropriate action. As previously stated, no quasi-judicial powers
have been vested in the said body as it cannot adjudicate rights of persons who come before it. It
has been said that "Quasi-judicial powers involve the power to hear and determine questions of fact
to which the legislative policy is to apply and to decide in accordance with the standards laid down
by law itself in enforcing and administering the same law." 58 In simpler terms, judicial discretion is
involved in the exercise of these quasi-judicial power, such that it is exclusively vested in the
judiciary and must be clearly authorized by the legislature in the case of administrative agencies.

The distinction between the power to investigate and the power to adjudicate was delineated by the
Court in Cariño v. Commission on Human Rights.59 Thus:

"Investigate," commonly understood, means to examine, explore, inquire or delve or probe into,

research on, study. The dictionary definition of "investigate" is "to observe or study closely: inquire
into systematically: "to search or inquire into: x x to subject to an official probe x x: to conduct an
official inquiry." The purpose of investigation, of course, is to discover, to find out, to learn, obtain
information. Nowhere included or intimated is the notion of settling, deciding or resolving a
controversy involved in the facts inquired into by application of the law to the facts established by the
inquiry.

The legal meaning of "investigate" is essentially the same: "(t)o follow up step by step by patient
inquiry or observation. To trace or track; to search into; to examine and inquire into with care and
accuracy; to find out by careful inquisition; examination; the taking of evidence; a legal inquiry;" "to
inquire; to make an investigation," "investigation" being in turn described as "(a)n administrative
function, the exercise of which ordinarily does not require a hearing. 2 Am J2d Adm L Sec. 257; x x
an inquiry, judicial or otherwise, for the discovery and collection of facts concerning a certain matter
or matters."

"Adjudicate," commonly or popularly understood, means to adjudge, arbitrate, judge, decide,

determine, resolve, rule on, settle. The dictionary defines the term as "to settle finally (the rights and
duties of the parties to a court case) on the merits of issues raised: x x to pass judgment on: settle
judicially: x x act as judge." And "adjudge" means "to decide or rule upon as a judge or with judicial
or quasi-judicial powers: x x to award or grant judicially in a case of controversy x x."

In the legal sense, "adjudicate" means: "To settle in the exercise of judicial authority. To determine
finally. Synonymous with adjudge in its strictest sense;" and "adjudge" means: "To pass on judicially,
to decide, settle or decree, or to sentence or condemn. x x. Implies a judicial determination of a fact,
and the entry of a judgment." [Italics included. Citations Omitted]

Fact-finding is not adjudication and it cannot be likened to the judicial function of a court of justice, or
even a quasi-judicial agency or office. The function of receiving evidence and ascertaining therefrom
the facts of a controversy is not a judicial function. To be considered as such, the act of receiving
evidence and arriving at factual conclusions in a controversy must be accompanied by the authority
of applying the law to the factual conclusions to the end that the controversy may be decided or
resolved authoritatively, finally and definitively, subject to appeals or modes of review as may be
provided by law.60 Even respondents themselves admit that the commission is bereft of any quasi-
judicial power.61

Contrary to petitioners’ apprehension, the PTC will not supplant the Ombudsman or the DOJ or
erode their respective powers. If at all, the investigative function of the commission will complement
those of the two offices. As pointed out by the Solicitor General, the recommendation to prosecute is
but a consequence of the overall task of the commission to conduct a fact-finding
investigation."62 The actual prosecution of suspected offenders, much less adjudication on the merits
of the charges against them,63 is certainly not a function given to the commission. The phrase, "when
in the course of its investigation," under Section 2(g), highlights this fact and gives credence to a
contrary interpretation from that of the petitioners. The function of determining probable cause for the
filing of the appropriate complaints before the courts remains to be with the DOJ and the
Ombudsman.64

At any rate, the Ombudsman’s power to investigate under R.A. No. 6770 is not exclusive but is
shared with other similarly authorized government agencies. Thus, in the case of Ombudsman v.
Galicia,65 it was written:

This power of investigation granted to the Ombudsman by the 1987 Constitution and The
Ombudsman Act is not exclusive but is shared with other similarly authorized government agencies
such as the PCGG and judges of municipal trial courts and municipal circuit trial courts. The power
to conduct preliminary investigation on charges against public employees and officials is likewise
concurrently shared with the Department of Justice. Despite the passage of the Local Government
Code in 1991, the Ombudsman retains concurrent jurisdiction with the Office of the President and
the local Sanggunians to investigate complaints against local elective officials. [Emphasis supplied].

Also, Executive Order No. 1 cannot contravene the power of the Ombudsman to investigate criminal
cases under Section 15 (1) of R.A. No. 6770, which states:

(1) Investigate and prosecute on its own or on complaint by any person, any act or omission of any
public officer or employee, office or agency, when such act or omission appears to be illegal, unjust,
improper or inefficient. It has primary jurisdiction over cases cognizable by the Sandiganbayan and,
in the exercise of its primary jurisdiction, it may take over, at any stage, from any investigatory
agency of government, the investigation of such cases. [Emphases supplied]

The act of investigation by the Ombudsman as enunciated above contemplates the conduct of a
preliminary investigation or the determination of the existence of probable cause. This is
categorically out of the PTC’s sphere of functions. Its power to investigate is limited to obtaining facts
so that it can advise and guide the President in the performance of his duties relative to the
execution and enforcement of the laws of the land. In this regard, the PTC commits no act of
usurpation of the Ombudsman’s primordial duties.

The same holds true with respect to the DOJ. Its authority under Section 3 (2), Chapter 1, Title III,
Book IV in the Revised Administrative Code is by no means exclusive and, thus, can be shared with
a body likewise tasked to investigate the commission of crimes.

Finally, nowhere in Executive Order No. 1 can it be inferred that the findings of the PTC are to be
accorded conclusiveness. Much like its predecessors, the Davide Commission, the Feliciano
Commission and the Zenarosa Commission, its findings would, at best, be recommendatory in
nature. And being so, the Ombudsman and the DOJ have a wider degree of latitude to decide
whether or not to reject the recommendation. These offices, therefore, are not deprived of their
mandated duties but will instead be aided by the reports of the PTC for possible indictments for
violations of graft laws.

Violation of the Equal Protection Clause

Although the purpose of the Truth Commission falls within the investigative power of the President,
the Court finds difficulty in upholding the constitutionality of Executive Order No. 1 in view of its
apparent transgression of the equal protection clause enshrined in Section 1, Article III (Bill of
Rights) of the 1987 Constitution. Section 1 reads:

Section 1. No person shall be deprived of life, liberty, or property without due process of law, nor
shall any person be denied the equal protection of the laws.

The petitioners assail Executive Order No. 1 because it is violative of this constitutional safeguard.
They contend that it does not apply equally to all members of the same class such that the intent of
singling out the "previous administration" as its sole object makes the PTC an "adventure in partisan
hostility."66 Thus, in order to be accorded with validity, the commission must also cover reports of
graft and corruption in virtually all administrations previous to that of former President Arroyo. 67

The petitioners argue that the search for truth behind the reported cases of graft and corruption must
encompass acts committed not only during the administration of former President Arroyo but also
during prior administrations where the "same magnitude of controversies and anomalies" 68 were
reported to have been committed against the Filipino people. They assail the classification
formulated by the respondents as it does not fall under the recognized exceptions because first,
"there is no substantial distinction between the group of officials targeted for investigation by
Executive Order No. 1 and other groups or persons who abused their public office for personal gain;
and second, the selective classification is not germane to the purpose of Executive Order No. 1 to
end corruption."69 In order to attain constitutional permission, the petitioners advocate that the
commission should deal with "graft and grafters prior and subsequent to the Arroyo administration
with the strong arm of the law with equal force."70

Position of respondents

According to respondents, while Executive Order No. 1 identifies the "previous administration" as the
initial subject of the investigation, following Section 17 thereof, the PTC will not confine itself to
cases of large scale graft and corruption solely during the said administration. 71 Assuming arguendo
that the commission would confine its proceedings to officials of the previous administration, the
petitioners argue that no offense is committed against the equal protection clause for "the
segregation of the transactions of public officers during the previous administration as possible
subjects of investigation is a valid classification based on substantial distinctions and is germane to
the evils which the Executive Order seeks to correct."72 To distinguish the Arroyo administration from
past administrations, it recited the following:

First. E.O. No. 1 was issued in view of widespread reports of large scale graft and corruption in the
previous administration which have eroded public confidence in public institutions. There is,
therefore, an urgent call for the determination of the truth regarding certain reports of large scale
graft and corruption in the government and to put a closure to them by the filing of the appropriate
cases against those involved, if warranted, and to deter others from committing the evil, restore the
people’s faith and confidence in the Government and in their public servants.

Second. The segregation of the preceding administration as the object of fact-finding is warranted by

the reality that unlike with administrations long gone, the current administration will most likely bear
the immediate consequence of the policies of the previous administration.

Third. The classification of the previous administration as a separate class for investigation lies in the
reality that the evidence of possible criminal activity, the evidence that could lead to recovery of
public monies illegally dissipated, the policy lessons to be learned to ensure that anti-corruption laws
are faithfully executed, are more easily established in the regime that immediately precede the
current administration.

Fourth. Many administrations subject the transactions of their predecessors to investigations to

provide closure to issues that are pivotal to national life or even as a routine measure of due
diligence and good housekeeping by a nascent administration like the Presidential Commission on
Good Government (PCGG), created by the late President Corazon C. Aquino under Executive Order
No. 1 to pursue the recovery of ill-gotten wealth of her predecessor former President Ferdinand
Marcos and his cronies, and the Saguisag Commission created by former President Joseph Estrada
under Administrative Order No, 53, to form an ad-hoc and independent citizens’ committee to
investigate all the facts and circumstances surrounding "Philippine Centennial projects" of his
predecessor, former President Fidel V. Ramos.73 [Emphases supplied]

Concept of the Equal Protection Clause

One of the basic principles on which this government was founded is that of the equality of right
which is embodied in Section 1, Article III of the 1987 Constitution. The equal protection of the laws
is embraced in the concept of due process, as every unfair discrimination offends the requirements
of justice and fair play. It has been embodied in a separate clause, however, to provide for a more
specific guaranty against any form of undue favoritism or hostility from the government. Arbitrariness
in general may be challenged on the basis of the due process clause. But if the particular act
assailed partakes of an unwarranted partiality or prejudice, the sharper weapon to cut it down is the
equal protection clause.74

"According to a long line of decisions, equal protection simply requires that all persons or things
similarly situated should be treated alike, both as to rights conferred and responsibilities
imposed."75 It "requires public bodies and institutions to treat similarly situated individuals in a similar
manner."76 "The purpose of the equal protection clause is to secure every person within a state’s
jurisdiction against intentional and arbitrary discrimination, whether occasioned by the express terms
of a statue or by its improper execution through the state’s duly constituted authorities." 77 "In other
words, the concept of equal justice under the law requires the state to govern impartially, and it may
not draw distinctions between individuals solely on differences that are irrelevant to a legitimate
governmental objective."78

The equal protection clause is aimed at all official state actions, not just those of the legislature. 79 Its
inhibitions cover all the departments of the government including the political and executive
departments, and extend to all actions of a state denying equal protection of the laws, through
whatever agency or whatever guise is taken. 80

It, however, does not require the universal application of the laws to all persons or things without
distinction. What it simply requires is equality among equals as determined according to a valid
classification. Indeed, the equal protection clause permits classification. Such classification,
however, to be valid must pass the test of reasonableness. The test has four requisites: (1) The
classification rests on substantial distinctions; (2) It is germane to the purpose of the law; (3) It is not
limited to existing conditions only; and

(4) It applies equally to all members of the same class. 81 "Superficial differences do not make for a
valid classification."82

For a classification to meet the requirements of constitutionality, it must include or embrace all
persons who naturally belong to the class.83 "The classification will be regarded as invalid if all the
members of the class are not similarly treated, both as to rights conferred and obligations imposed. It
is not necessary that the classification be made with absolute symmetry, in the sense that the
members of the class should possess the same characteristics in equal degree. Substantial
similarity will suffice; and as long as this is achieved, all those covered by the classification are to be
treated equally. The mere fact that an individual belonging to a class differs from the other members,
as long as that class is substantially distinguishable from all others, does not justify the non-
application of the law to him."84

The classification must not be based on existing circumstances only, or so constituted as to preclude
addition to the number included in the class. It must be of such a nature as to embrace all those who
may thereafter be in similar circumstances and conditions. It must not leave out or "underinclude"
those that should otherwise fall into a certain classification. As elucidated in Victoriano v. Elizalde
Rope Workers' Union85 and reiterated in a long line of cases,86

The guaranty of equal protection of the laws is not a guaranty of equality in the application of the
laws upon all citizens of the state. It is not, therefore, a requirement, in order to avoid the
constitutional prohibition against inequality, that every man, woman and child should be affected
alike by a statute. Equality of operation of statutes does not mean indiscriminate operation on
persons merely as such, but on persons according to the circumstances surrounding them. It
guarantees equality, not identity of rights. The Constitution does not require that things which are
different in fact be treated in law as though they were the same. The equal protection clause does
not forbid discrimination as to things that are different. It does not prohibit legislation which is limited
either in the object to which it is directed or by the territory within which it is to operate.

The equal protection of the laws clause of the Constitution allows classification. Classification in law,
as in the other departments of knowledge or practice, is the grouping of things in speculation or
practice because they agree with one another in certain particulars. A law is not invalid because of
simple inequality. The very idea of classification is that of inequality, so that it goes without saying
that the mere fact of inequality in no manner determines the matter of constitutionality. All that is
required of a valid classification is that it be reasonable, which means that the classification should
be based on substantial distinctions which make for real differences, that it must be germane to the
purpose of the law; that it must not be limited to existing conditions only; and that it must apply
equally to each member of the class. This Court has held that the standard is satisfied if the
classification or distinction is based on a reasonable foundation or rational basis and is not palpably
arbitrary. [Citations omitted]

Applying these precepts to this case, Executive Order No. 1 should be struck down as violative of
the equal protection clause. The clear mandate of the envisioned truth commission is to investigate
and find out the truth "concerning the reported cases of graft and corruption during the previous
administration"87 only. The intent to single out the previous administration is plain, patent and
manifest. Mention of it has been made in at least three portions of the questioned executive order.
Specifically, these are:

WHEREAS, there is a need for a separate body dedicated solely to investigating and finding out the
truth concerning the reported cases of graft and corruption during the previous administration, and
which will recommend the prosecution of the offenders and secure justice for all;

SECTION 1. Creation of a Commission. – There is hereby created the PHILIPPINE TRUTH

COMMISSION, hereinafter referred to as the "COMMISSION," which shall primarily seek and find
the truth on, and toward this end, investigate reports of graft and corruption of such scale and
magnitude that shock and offend the moral and ethical sensibilities of the people, committed by
public officers and employees, their co-principals, accomplices and accessories from the private
sector, if any, during the previous administration; and thereafter recommend the appropriate action
or measure to be taken thereon to ensure that the full measure of justice shall be served without fear
or favor.

SECTION 2. Powers and Functions. – The Commission, which shall have all the powers of an
investigative body under Section 37, Chapter 9, Book I of the Administrative Code of 1987, is
primarily tasked to conduct a thorough fact-finding investigation of reported cases of graft and
corruption referred to in Section 1, involving third level public officers and higher, their co-principals,
accomplices and accessories from the private sector, if any, during the previous administration and
thereafter submit its finding and recommendations to the President, Congress and the Ombudsman.
[Emphases supplied]

In this regard, it must be borne in mind that the Arroyo administration is but just a member of a class,
that is, a class of past administrations. It is not a class of its own. Not to include past administrations
similarly situated constitutes arbitrariness which the equal protection clause cannot sanction. Such
discriminating differentiation clearly reverberates to label the commission as a vehicle for
vindictiveness and selective retribution.

Though the OSG enumerates several differences between the Arroyo administration and other past
administrations, these distinctions are not substantial enough to merit the restriction of the
investigation to the "previous administration" only. The reports of widespread corruption in the
Arroyo administration cannot be taken as basis for distinguishing said administration from earlier
administrations which were also blemished by similar widespread reports of impropriety. They are
not inherent in, and do not inure solely to, the Arroyo administration. As Justice Isagani Cruz put it,
"Superficial differences do not make for a valid classification." 88

The public needs to be enlightened why Executive Order No. 1 chooses to limit the scope of the
intended investigation to the previous administration only. The OSG ventures to opine that "to
include other past administrations, at this point, may unnecessarily overburden the commission and
lead it to lose its effectiveness."89 The reason given is specious. It is without doubt irrelevant to the
legitimate and noble objective of the PTC to stamp out or "end corruption and the evil it breeds." 90

The probability that there would be difficulty in unearthing evidence or that the earlier reports
involving the earlier administrations were already inquired into is beside the point. Obviously,
deceased presidents and cases which have already prescribed can no longer be the subjects of
inquiry by the PTC. Neither is the PTC expected to conduct simultaneous investigations of previous
administrations, given the body’s limited time and resources. "The law does not require the
impossible" (Lex non cogit ad impossibilia). 91

Given the foregoing physical and legal impossibility, the Court logically recognizes the unfeasibility of
investigating almost a century’s worth of graft cases. However, the fact remains that Executive Order
No. 1 suffers from arbitrary classification. The PTC, to be true to its mandate of searching for the
truth, must not exclude the other past administrations. The PTC must, at least, have the authority to
investigate all past administrations. While reasonable prioritization is permitted, it should not be
arbitrary lest it be struck down for being unconstitutional. In the often quoted language of Yick Wo v.
Hopkins,92

Though the law itself be fair on its face and impartial in appearance, yet, if applied and administered
by public authority with an evil eye and an unequal hand, so as practically to make unjust and illegal
discriminations between persons in similar circumstances, material to their rights, the denial of equal
justice is still within the prohibition of the constitution. [Emphasis supplied]

It could be argued that considering that the PTC is an ad hoc body, its scope is limited. The Court,
however, is of the considered view that although its focus is restricted, the constitutional guarantee
of equal protection under the laws should not in any way be circumvented. The Constitution is the
fundamental and paramount law of the nation to which all other laws must conform and in
accordance with which all private rights determined and all public authority administered. 93 Laws that
do not conform to the Constitution should be stricken down for being unconstitutional. 94 While the
thrust of the PTC is specific, that is, for investigation of acts of graft and corruption, Executive Order
No. 1, to survive, must be read together with the provisions of the Constitution. To exclude the
earlier administrations in the guise of "substantial distinctions" would only confirm the petitioners’
lament that the subject executive order is only an "adventure in partisan hostility." In the case of US
v. Cyprian,95 it was written: "A rather limited number of such classifications have routinely been held
or assumed to be arbitrary; those include: race, national origin, gender, political activity or
membership in a political party, union activity or membership in a labor union, or more generally the
exercise of first amendment rights."
To reiterate, in order for a classification to meet the requirements of constitutionality, it must include
or embrace all persons who naturally belong to the class.96 "Such a classification must not be based
on existing circumstances only, or so constituted as to preclude additions to the number included
within a class, but must be of such a nature as to embrace all those who may thereafter be in similar
circumstances and conditions. Furthermore, all who are in situations and circumstances which are
relative to the discriminatory legislation and which are indistinguishable from those of the members
of the class must be brought under the influence of the law and treated by it in the same way as are
the members of the class."97

The Court is not unaware that "mere underinclusiveness is not fatal to the validity of a law under the
equal protection clause."98 "Legislation is not unconstitutional merely because it is not all-embracing
and does not include all the evils within its reach."99 It has been written that a regulation challenged
under the equal protection clause is not devoid of a rational predicate simply because it happens to
be incomplete.100 In several instances, the underinclusiveness was not considered a valid reason to
strike down a law or regulation where the purpose can be attained in future legislations or
regulations. These cases refer to the "step by step" process.101 "With regard to equal protection
claims, a legislature does not run the risk of losing the entire remedial scheme simply because it
fails, through inadvertence or otherwise, to cover every evil that might conceivably have been
attacked."102

In Executive Order No. 1, however, there is no inadvertence. That the previous administration was
picked out was deliberate and intentional as can be gleaned from the fact that it was underscored at
least three times in the assailed executive order. It must be noted that Executive Order No. 1 does
not even mention any particular act, event or report to be focused on unlike the investigative
commissions created in the past. "The equal protection clause is violated by purposeful and
intentional discrimination."103

To disprove petitioners’ contention that there is deliberate discrimination, the OSG clarifies that the
commission does not only confine itself to cases of large scale graft and corruption committed during
the previous administration.104 The OSG points to Section 17 of Executive Order No. 1, which
provides:

SECTION 17. Special Provision Concerning Mandate. If and when in the judgment of the President
there is a need to expand the mandate of the Commission as defined in Section 1 hereof to include
the investigation of cases and instances of graft and corruption during the prior administrations, such
mandate may be so extended accordingly by way of a supplemental Executive Order.

The Court is not convinced. Although Section 17 allows the President the discretion to expand the
scope of investigations of the PTC so as to include the acts of graft and corruption committed in
other past administrations, it does not guarantee that they would be covered in the future. Such
expanded mandate of the commission will still depend on the whim and caprice of the President. If
he would decide not to include them, the section would then be meaningless. This will only fortify the
fears of the petitioners that the Executive Order No. 1 was "crafted to tailor-fit the prosecution of
officials and personalities of the Arroyo administration." 105

The Court tried to seek guidance from the pronouncement in the case of Virata v.
Sandiganbayan,106 that the "PCGG Charter (composed of Executive Orders Nos. 1, 2 and 14) does
not violate the equal protection clause." The decision, however, was devoid of any discussion on
how such conclusory statement was arrived at, the principal issue in said case being only the
sufficiency of a cause of action.

A final word
The issue that seems to take center stage at present is - whether or not the Supreme Court, in the
exercise of its constitutionally mandated power of Judicial Review with respect to recent initiatives of
the legislature and the executive department, is exercising undue interference. Is the Highest
Tribunal, which is expected to be the protector of the Constitution, itself guilty of violating
fundamental tenets like the doctrine of separation of powers? Time and again, this issue has been
addressed by the Court, but it seems that the present political situation calls for it to once again
explain the legal basis of its action lest it continually be accused of being a hindrance to the nation’s
thrust to progress.

The Philippine Supreme Court, according to Article VIII, Section 1 of the 1987 Constitution, is vested
with Judicial Power that "includes the duty of the courts of justice to settle actual controversies
involving rights which are legally demandable and enforceable, and to determine whether or not
there has been a grave of abuse of discretion amounting to lack or excess of jurisdiction on the part
of any branch or instrumentality of the government."

Furthermore, in Section 4(2) thereof, it is vested with the power of judicial review which is the power
to declare a treaty, international or executive agreement, law, presidential decree, proclamation,
order, instruction, ordinance, or regulation unconstitutional. This power also includes the duty to rule
on the constitutionality of the application, or operation of presidential decrees, proclamations, orders,
instructions, ordinances, and other regulations. These provisions, however, have been fertile
grounds of conflict between the Supreme Court, on one hand, and the two co-equal bodies of
government, on the other. Many times the Court has been accused of asserting superiority over the
other departments.

To answer this accusation, the words of Justice Laurel would be a good source of enlightenment, to
wit: "And when the judiciary mediates to allocate constitutional boundaries, it does not assert any
superiority over the other departments; it does not in reality nullify or invalidate an act of the
legislature, but only asserts the solemn and sacred obligation assigned to it by the Constitution to
determine conflicting claims of authority under the Constitution and to establish for the parties in an
actual controversy the rights which that instrument secures and guarantees to them." 107

Thus, the Court, in exercising its power of judicial review, is not imposing its own will upon a co-
equal body but rather simply making sure that any act of government is done in consonance with the
authorities and rights allocated to it by the Constitution. And, if after said review, the Court finds no
constitutional violations of any sort, then, it has no more authority of proscribing the actions under
review. Otherwise, the Court will not be deterred to pronounce said act as void and unconstitutional.

It cannot be denied that most government actions are inspired with noble intentions, all geared
towards the betterment of the nation and its people. But then again, it is important to remember this
ethical principle: "The end does not justify the means." No matter how noble and worthy of
admiration the purpose of an act, but if the means to be employed in accomplishing it is simply
irreconcilable with constitutional parameters, then it cannot still be allowed. 108 The Court cannot just
turn a blind eye and simply let it pass. It will continue to uphold the Constitution and its enshrined
principles.

"The Constitution must ever remain supreme. All must bow to the mandate of this law. Expediency
must not be allowed to sap its strength nor greed for power debase its rectitude." 109

Lest it be misunderstood, this is not the death knell for a truth commission as nobly envisioned by
the present administration. Perhaps a revision of the executive issuance so as to include the earlier
past administrations would allow it to pass the test of reasonableness and not be an affront to the
Constitution. Of all the branches of the government, it is the judiciary which is the most interested in
knowing the truth and so it will not allow itself to be a hindrance or obstacle to its attainment. It must,
however, be emphasized that the search for the truth must be within constitutional bounds for "ours
is still a government of laws and not of men." 110

WHEREFORE, the petitions are GRANTED. Executive Order No. 1 is hereby declared
UNCONSTITUTIONAL insofar as it is violative of the equal protection clause of the Constitution.

As also prayed for, the respondents are hereby ordered to cease and desist from carrying out the
provisions of Executive Order No. 1.

SO ORDERED.
 Republic of the Philippines
SUPREME COURT
Manila

FIRST DIVISION

G.R. No. 204866               January 21, 2015

RUKS KONSULT AND CONSTRUCTION, Petitioner,

vs.
ADWORLD SIGN AND ADVERTISING CORPORATION* and TRANSWORLD MEDIA ADS,
INC., Respondents.

DECISION

PERLAS-BERNABE, J.:

Assailed in this petition for review on certiorari  are the Decision  dated November 16, 2011 and the
1 2

Resolution  dated December 10, 2012 of the Court of Appeals (CA) in CA-G.R. CV No. 94693 which
3

affirmed the Decision  dated August 25, 2009 of the Regional Trial Court of Makati City, Branch 142
4

(RTC) in Civil Case No. 03-1452 holding, inter alia, petitioner Ruks Konsult and Construction (Ruks)
and respondent Transworld Media Ads, Inc. (Transworld) jointly and severally liable to respondent
Adworld Sign and Advertising Corporation (Adworld) for damages.

The Facts

The instant case arose from a complaint for damages filed by Adworld against Transworld and
Comark International Corporation (Comark) before the RTC.  In the complaint, Adworld alleged that
5

it is the owner of a 75 ft. x 60 ft. billboard structure located at EDSA Tulay, Guadalupe, Barangka
Mandaluyong, which was misaligned and its foundation impaired when, on August 11, 2003, the
adjacent billboard structure owned by Transworld and used by Comark collapsed and crashed
against it. Resultantly, on August 19, 2003, Adworld sent Transworld and Comark a letter
demanding payment for the repairs of its billboard as well asloss of rental income. On August 29,
2003, Transworld sent its reply, admitting the damage caused by its billboard structure on Adworld’s
billboard, but nevertheless, refused and failed to pay the amounts demanded by Adworld. As
Adworld’s final demand letter also went unheeded, it was constrained to file the instant complaint,
praying for damages in the aggregate amount of ₱474,204.00, comprised of ₱281,204.00 for
materials, ₱72,000.00 for labor, and ₱121,000.00 for indemnity for loss of income. 6

In its Answer with Counterclaim, Transworld averred that the collapse of its billboard structure was
due to extraordinarily strong winds that occurred instantly and unexpectedly, and maintained that the
damage caused to Adworld’s billboard structure was hardly noticeable. Transworld likewise filed a
Third-Party Complaint against Ruks, the company which built the collapsed billboard structure in the
former’s favor.  It was alleged therein that the structure constructed by Ruks had a weak and poor
1âwphi1

foundation not suited for billboards, thus, prone to collapse, and as such, Ruks should ultimately be
held liable for the damages caused to Adworld’s billboard structure. 7

For its part, Comark denied liability for the damages caused to Adworld’s billboard structure,
maintaining that it does not have any interest on Transworld’s collapsed billboard structure as it only
contracted the use of the same. In this relation, Comark prayed for exemplary damages from
Transworld for unreasonably includingit as a party-defendant in the complaint. 8

Lastly, Ruks admitted that it entered into a contract with Transworld for the construction of the
latter’s billboard structure, but denied liability for the damages caused by its collapse. It contended
that when Transworld hired its services, there was already an existing foundation for the billboard
and that it merely finished the structure according to the terms and conditions of its contract with the
latter.
9

The RTC Ruling

In a Decision  dated August 25, 2009, the RTC ultimately ruled in Adworld’s favor, and accordingly,
10

declared, inter alia, Transworld and Ruks jointly and severally liable to Adworld in the amount of
₱474,204.00 as actual damages, with legal interest from the date of the filing of the complaint until
full payment thereof, plus attorney’s fees in the amount of ₱50,000.00.  The RTC found both
11

Transworld and Ruks negligent in the construction of the collapsed billboard as they knew that the
foundation supporting the same was weak and would pose danger to the safety of the motorists and
the other adjacent properties, such as Adworld’s billboard, and yet, they did not do anything to
remedy the situation.  In particular, the RTC explained that Transworld was made aware by Ruks
12

that the initial construction of the lower structure of its billboard did not have the proper foundation
and would require additional columns and pedestals to support the structure. Notwithstanding,
however, Ruks proceeded with the construction of the billboard’s upper structure and merely
assumed that Transworld would reinforce its lower structure.  The RTC then concluded that these
13

negligent acts were the direct and proximate cause of the damages suffered by Adworld’s billboard. 14

Aggrieved, both Transworld and Ruks appealed to the CA. In a Resolution dated February 3, 2011,
the CA dismissed Transworld’s appeal for its failure to file an appellant’s brief on time.  Transworld
15

elevated its case before the Court, docketed as G.R. No. 197601.  However, in a Resolution  dated
16 17

November 23, 2011, the Court declared the case closed and terminated for failure of Transworld to
file the intended petition for review on certiorariwithin the extended reglementary period.
Subsequently, the Court issued an Entry of Judgment  dated February 22, 2012 in G.R. No. 197601
18

declaring the Court’s November 23, 2011 Resolution final and executory.

The CA Ruling

In a Decision  dated November 16, 2011, the CA denied Ruks’s appeal and affirmed the ruling of the
19

RTC. It adhered to the RTC’s finding of negligence on the part of Transworld and Ruks which
brought about the damage to Adworld’s billboard. It found that Transworld failed to ensure that Ruks
will comply with the approved plans and specifications of the structure, and that Ruks continued to
install and finish the billboard structure despite the knowledge that there were no adequate columns
to support the same. 20

Dissatisfied, Ruks moved for reconsideration,  which was, however, denied in a Resolution  dated
21 22

December 10, 2012,hence, this petition.

On the other hand, Transworld filed another appeal before the Court, docketed as G.R. No.
205120.  However, the Court denied outright Transworld’s petition in a Resolution  dated April 15,
23 24

2013, holding that the same was already bound by the dismissal of its petition filed in G.R. No.
197601.

The Issue Before the Court

The primordial issue for the Court’s resolution is whether or not the CA correctly affirmed the ruling
of the RTC declaring Ruks jointly and severally liable with Transworld for damages sustained by
Adworld.

The Court’s Ruling

The petition is without merit.

At the outset, it must be stressed that factual findings of the RTC, when affirmed by the CA, are
entitled to great weight by the Court and are deemed final and conclusive when supported by the
evidence on record.  Absent any exceptions to this rule – such as when it is established that the trial
25

court ignored, overlooked, misconstrued, or misinterpreted cogent facts and circumstances that, if
considered, would change the outcome of the case  – such findings must stand.
26

After a judicious perusal of the records, the Court sees no cogent reason to deviate from the findings
of the RTC and the CA and their uniform conclusion that both Transworld and Ruks committed acts
resulting in the collapse of the former’s billboard, which in turn, caused damage to the adjacent
billboard of Adworld.

Jurisprudence defines negligence as the omission to do something which a reasonable man, guided
by those considerations which ordinarily regulate the conduct of human affairs, would do, or the
doing of something which a prudent and reasonable man would not do.  It is the failure to observe
27

for the protection of the interest of another person that degree of care, precaution, and vigilance
which the circumstances justly demand, whereby such other person suffers injury. 28

In this case, the CA correctly affirmed the RTC’s finding that Transworld’s initial construction of its
billboard’s lower structure without the proper foundation, and that of Ruks’s finishing its upper
structure and just merely assuming that Transworld would reinforce the weak foundation are the two
(2) successive acts which were the direct and proximate cause of the damages sustained by
Adworld. Worse, both Transworld and Ruks were fully aware that the foundation for the former’s
billboard was weak; yet, neither of them took any positive step to reinforce the same. They merely
relied on each other’s word that repairs would be done to such foundation, but none was done at all.
Clearly, the foregoing circumstances show that both Transworld and Ruks are guilty of negligence in
the construction of the former’s billboard, and perforce, should be held liable for its collapse and the
resulting damage to Adworld’s billboard structure. As joint tortfeasors, therefore, they are solidarily
liable to Adworld. Verily, "[j]oint tortfeasors are those who command, instigate, promote, encourage,
advise, countenance, cooperate in, aid or abet the commission of a tort, or approve of it after it is
done, if done for their benefit. They are also referred to as those who act together in committing
wrong or whose acts, if independent of each other, unite in causing a single injury. Under Article
2194  of the Civil Code, joint tortfeasors are solidarily liable for the resulting damage. In other words,
29

joint tortfeasors are each liable as principals, to the same extent and in the same manner as if they
had performed the wrongful act themselves."  The Court’s pronouncement in People v. Velasco  is
30 31

instructive on this matter, to wit:

32

Where several causes producing an injury are concurrent and each is an efficient cause without
which the injury would not have happened, the injury may be attributed to all or any of the causes
and recovery may be had against any or all of the responsible persons although under the
circumstances of the case, it may appear that one of them was more culpable, and that the duty
owed by them to the injured person was not same. No actor's negligence ceases to be a proximate
cause merely because it does not exceed the negligence of other actors. Each wrongdoer is
responsible for the entire result and is liable as though his acts were the sole cause of the injury.
There is no contribution between joint [tortfeasors] whose liability is solidary since both of them are
liable for the total damage.  Where the concurrent or successive negligent acts or omissions of two
1âwphi1

or more persons, although acting independently, are in combination the direct and proximate cause
of a single injury to a third person, it is impossible to determine in what proportion each contributed
to the injury and either of them is responsible for the whole injury. x x x. (Emphases and
underscoring supplied)

In conclusion, the CA correctly affirmed the ruling of the RTC declaring Ruks jointly and severally
liable with Transworld for damages sustained by Adworld.

WHEREFORE, the petition is DENIED. The Decision dated November 16, 2011 and the Resolution
dated December 10, 2012 of the Court of Appeals in CA-G.R. CV No. 94693 are hereby AFFIRMED.

SO ORDERED.
 Republic of the Philippines
SUPREME COURT
Manila

THIRD DIVISION

G.R. No. 174161               February 18, 2015

R TRANSPORT CORPORATION, Petitioner,
vs.
LUISITO G. YU, Respondent.

DECISION

PERALTA, J.:

Before the Court is a petition for review on certiorari under Rule 45 of the Rules of Court seeking to
reverse and set aside the Decision  and Resolution,  dated September 9, 2005 and August 8, 2006,
1 2

respectively, of the Court of Appeals (CA) in CA-G.R. CV No. 84175.

The antecedent facts are as follows:

At around 8:45 in the morning of December 12, 1993, Loreta J. Yu, after having alighted from a
passenger bus in front of Robinson's Galleria along the north-bound lane of Epifanio de los Santos
Avenue (EDSA), was hit and run over by a bus driven by Antonio P. Gimena, who was then
employed by petitioner R Transport Corporation. Loreta was immediately rushed to Medical City
Hospital where she was pronounced dead on arrival. 3

On February 3, 1994, the husband of the deceased, respondent Luisito G. Yu, filed a Complaint for
damages before the Regional Trial Court (RTC) of Makati City against petitioner R Transport,
Antonio Gimena, and Metro Manila Transport Corporation (MMTC) for the death of his wife. MMTC
denied its liability reasoning that it is merely the registered owner of the bus involved in the incident,
the actual owner, being petitioner R Transport.  It explained that under the Bus Installment Purchase
4

Program of the government, MMTC merely purchased the subject bus, among several others, for
resale to petitioner R Transport, which will in turn operate the same within Metro Manila. Since it was
not actually operating the bus which killed respondent’s wife, nor was it the employer of the driver
thereof, MMTC alleged that the complaint against it should be dismissed.  For its part, petitioner R
5

Transport alleged that respondent had no cause of action against it for it had exercised due diligence
in the selection and supervision of its employees and drivers and that its buses are in good
condition. Meanwhile, the driver Antonio Gimena was declared in default for his failure to file an
answer to the complaint.

After trial on the merits, wherein the parties presented their respective witnesses and documentary
evidence, the trial court rendered judgment in favor of respondent Yu ruling that petitioner R
Transport failed to prove that it exercised the diligence required of a good father of a family in the
selection and supervision of its driver, who, by its negligence, ran over the deceased resulting in her
death. It also held that MMTC should be held solidarily liable with petitioner R Transport because it
would unduly prejudice a third person who is a victim of a tort to look beyond the certificate of
registration and prove who the actual owner is in order to enforce a right of action. Thus, the trial
court ordered the payment of damages in its Decision  dated June 3, 2004, the dispositive portion of
6

which reads:

WHEREFORE, foregoing premises considered, judgment is hereby rendered ordering defendants

Rizal Transport and Metro Manila Transport Corporation to be primarily and solidarily liable and
defendant Antonio Parraba Gimena subsidiarily liable to plaintiff Luisito Yu as follows: 1. Actual
damages in the amount of Php78,357.00 subject to interest at the legal rate from the filing of the
complaint until fully paid;

2. Loss of income in the amount of Php500,000.00;

3. Moral damages in the amount of ₱150,000.00;

4. Exemplary damages in the amount of ₱20,000.00;

5. Attorney’s fees in the amount of ₱10,000.00; and

6. Costs of suit. 7

On September 9, 2005, the CA affirmed the Decision of the RTC with modification that defendant
Antonio Gimena is made solidarily liable for the damages caused to respondent. According to the
appellate court, considering that the negligence of Antonio Gimena was sufficiently proven by the
records of the case, and that no evidence of whatever nature was presented by petitioner to support
its defense of due diligence in the selection and supervision of its employees, petitioner, as the
employer of Gimena, may be held liable for the damage caused. The CA noted that the fact that
petitioner is not the registered owner of the bus which caused the death of the victim does not
exculpate it from liability.  Thereafter, petitioner’s Motion for Reconsideration was further denied by
8

the CA in its Resolution  dated August 8, 2006.

9

Hence, the present petition.

Petitioner essentially invokes the following ground to support its petition:

I.

THE COURT OF APPEALS ERRED IN AFFIRMING THE RULING OF THE REGIONAL TRIAL
COURT FINDING PETITIONER LIABLE FOR THE DAMAGES CAUSED BY THE NEGLIGENCE
OF ITS EMPLOYEE, WHICH WAS NOT SUPPORTED BY THE EVIDENCE ON RECORD.

Petitioner insists that the CA and the RTC were incorrect in ruling that its driver was negligent for
aside from the mere speculations and uncorroborated testimonies of the police officers on duty at
the time of the accident, no other evidence had been adduced to prove that its driver was driving in a
reckless and imprudent manner. It asserts that contrary to the findings of the courts below, the bus
from which the victim alighted is actually the proximate cause of the victim’s death for having
unloaded its passengers on the lane where the subject bus was traversing. Moreover, petitioner
reiterates its argument that since it is not the registered owner of the bus which bumped the victim, it
cannot be held liable for the damage caused by the same.

We disagree.
Time and again, it has been ruled that whether a person is negligent or not is a question of fact
which this Court cannot pass upon in a petition for review on certiorari, as its jurisdiction is limited to
reviewing errors of law.  This Court is not bound to weigh all over again the evidence adduced by
10

the parties, particularly where the findings of both the trial and the appellate courts on the matter of
petitioners’ negligence coincide. As a general rule, therefore, the resolution off actual issues is a
function of the trial court, whose findings on these matters are binding on this Court, more so where
these have been affirmed by the Court of Appeals,  save for the following exceptional and
11

meritorious circumstances: (1) when the factual findings of the appellate court and the trial court are
contradictory; (2) when the findings of the trial court are grounded entirely on speculation, surmises
or conjectures; (3) when the lower court’s inference from its factual findings is manifestly mistaken,
absurd or impossible; (4) when there is grave abuse of discretion in the appreciation of facts; (5)
when the findings of the appellate court go beyond the issues of the case, or fail to notice certain
relevant facts which, if properly considered, will justify a different conclusion; (6) when there is a
misappreciation of facts; (7) when the findings of fact are themselves conflicting; and (8) when the
findings of fact are conclusions without mention of the specific evidence on which they are based,
are premised on the absence of evidence, or are contradicted by evidence on record. 12

After a review of the records of the case, we find no cogent reason to reverse the rulings of the
courts below for none of the aforementioned exceptions are present herein. Both the trial and
appellate courts found driver Gimena negligent in hitting and running over the victim and ruled that
his negligence was the proximate cause of her death. Negligence has been defined as "the failure to
observe for the protection of the interests of another person that degree of care, precaution, and
vigilance which the circumstances justly demand, whereby such other person suffers injury."  Verily,
13

foreseeability is the fundamental test of negligence.  It is the omission to do something which a
14

reasonable man, guided by those considerations which ordinarily regulate the conduct of human
affairs, would do, or the doing of something which a prudent and reasonable man would not do. 15

In this case, the records show that driver Gimena was clearly running at a reckless speed. As
testified by the police officer on duty at the time of the incident  and indicated in the Autopsy
16

Report,  not only were the deceased’s clothes ripped off from her body, her brain even spewed out
17

from her skull and spilled over the road. Indeed, this Court is not prepared to believe petitioner’s
contention that its bus was travelling at a "normal speed" in preparation for a full stop in view of the
fatal injuries sustained by the deceased. Moreover, the location wherein the deceased was hit and
run over further indicates Gimena’s negligence. As borne by the records, the bus driven by Gimena
bumped the deceased in a loading and unloading area of a commercial center. The fact that he was
approaching such a busy part of EDSA should have already cautioned the driver of the bus. In fact,
upon seeing that a bus has stopped beside his lane should have signalled him to step on his brakes
to slow down for the possibility that said bus was unloading its passengers in the area.
Unfortunately, he did not take the necessary precaution and instead, drove on and bumped the
deceased despite being aware that he was traversing a commercial center where pedestrians were
crossing the street. Ultimately, Gimena should have observed due diligence of a reasonably prudent
man by slackening his speed and proceeding cautiously while passing the area.

Under Article 2180  of the New Civil Code, employers are liable for the damages caused by their
18

employees acting within the scope of their assigned tasks. Once negligence on the part of the
employee is established, a presumption instantly arises that the employer was remiss in the
selection and/or supervision of the negligent employee. To avoid liability for the quasi-delict
committed by its employee, it is incumbent upon the employer to rebut this presumption by
presenting adequate and convincing proof that it exercised the care and diligence of a good father of
a family in the selection and supervision of its employees. 19
Unfortunately, however, the records of this case are bereft of any proof showing the exercise by
petitioner of the required diligence. As aptly observed by the CA, no evidence of whatever nature
was ever presented depicting petitioner’s due diligence in the selection and supervision of its driver,
Gimena, despite several opportunities to do so. In fact, in its petition, apart from denying the
negligence of its employee and imputing the same to the bus from which the victim alighted,
petitioner merely reiterates its argument that since it is not the registered owner of the bus which
bumped the victim, it cannot be held liable for the damage caused by the same. Nowhere was it
even remotely alleged that petitioner had exercised the required diligence in the selection and
supervision of its employee. Because of this failure, petitioner cannot now avoid liability for the
quasi-delict committed by its negligent employee.

At this point, it must be noted that petitioner, in its relentless attempt to evade liability, cites our
rulings in Vargas v. Langcay  and Tamayo v. Aquino  insisting that it should not be held solidarily
20 21

liable with MMTC for it is not the registered owner of the bus which killed the deceased. However,
this Court, in Jereos v. Court of Appeals, et al.,  rejected such contention in the following wise:
22

Finally, the petitioner, citing the case of Vargas vs. Langcay, contends that it is the registered owner
of the vehicle, rather than the actual owner, who must be jointly and severally liable with the driver of
the passenger vehicle for damages incurred by third persons as a consequence of injuries or death
sustained in the operation of said vehicle.

The contention is devoid of merit. While the Court therein ruled that the registered owner or operator
of a passenger vehicle is jointly and severally liable with the driver of the said vehicle for damages
incurred by passengers or third persons as a consequence of injuries or death sustained in the
operation of the said vehicle, the Court did so to correct the erroneous findings of the Court of
Appeals that the liability of the registered owner or operator of a passenger vehicle is merely
subsidiary, as contemplated in Art. 103 of the Revised Penal Code. In no case did the Court exempt
the actual owner of the passenger vehicle from liability. On the contrary, it adhered to the rule
followed in the cases of Erezo vs. Jepte, Tamayo vs. Aquino, and De Peralta vs. Mangusang,
among others, that the registered owner or operator has the right to be indemnified by the real or
actual owner of the amount that he may be required to pay as damage for the injury caused.

The right to be indemnified being recognized, recovery by the registered owner or operator may be
made in any form-either by a cross-claim, third-party complaint, or an independent action. The result
is the same. 23

Moreover, while We held in Tamayo that the responsibility of the registered owner and actual
operator of a truck which caused the death of its passenger is not solidary, We noted therein that the
same is due to the fact that the action instituted was one for breach of contract, to wit:

The decision of the Court of Appeals is also attacked insofar as it holds that inasmuch as the third-
party defendant had used the truck on a route not covered by the registered owner's franchise, both
the registered owner and the actual owner and operator should be considered as joint tortfeasors
and should be made liable in accordance with Article 2194 of the Civil Code. This Article is as
follows:

Art. 2194. The responsibility of two or more persons who are liable for a quasi-delict is solidary.  But
1âwphi1

the action instituted in the case at bar is one for breach of contract, for failure of the defendant to
carry safely the deceased for her destination. The liability for which he is made responsible, i.e., for
the death of the passenger, may not be considered as arising from a quasi-delict. As the registered
owner Tamayo and his transferee Rayos may not be held guilty of tort or a quasi-delict; their
responsibility is not solidary as held by the Court of Appeals.
The question that poses, therefore, is how should the holder of the certificate of public convenience,
Tamayo, participate with his transferee, operator Rayos, in the damages recoverable by the heirs of
the deceased passenger, if their liability is not that of Joint tortfeasors in accordance with Article
2194 of the Civil Code. The following considerations must be borne in mind in determining this
question. As Tamayo is the registered owner of the truck, his responsibility to the public orto any
passenger riding in the vehicle or truck must be direct, for the reasons given in our decision in the
case of Erezo vs. Jepte, supra, as quoted above. But as the transferee, who operated the vehicle
when the passenger died, is the one directly responsible for the accident and death he should in turn
be made responsible to the registered owner for what the latter may have been adjudged to pay. In
operating the truck without transfer thereof having been approved by the Public Service
Commission, the transferee acted merely as agent of the registered owner and should be
responsible to him (the registered owner), for any damages that he may cause the latter by his
negligence. 24

However, it must be noted that the case at hand does not involve a breach of contract of carriage, as
in Tamayo, but a tort or quasi-delict under Article 2176,  in relation to Article 2180  of the New Civil
25 26

Code. As such, the liability for which petitioner is being made responsible actually arises not from a
pre-existing contractual relation between petitioner and the deceased, but from a damage caused by
the negligence of its employee. Petitioner cannot, therefore, rely on our ruling in Tamayo and escape
its solidary liability for the liability of the employer for the negligent conduct of its subordinate is direct
and primary, subject only to the defense of due diligence in the selection and supervision of the
employee. 27

Indeed, this Court has consistently been of the view that it is for the better protection of the public for
both the owner of record and the actual operator to be adjudged jointly and severally liable with the
driver.  As aptly stated by the appellate court, "the principle of holding the registered owner liable for
28

damages notwithstanding that ownership of the offending vehicle has already been transferred to
another is designed to protect the public and not as a shield on the part of unscrupulous transferees
of the vehicle to take refuge in, in order to free itself from liability arising from its own negligent act. "
29

Hence, considering that the negligence of driver Gimena was sufficiently proven by the records of
the case, and that no evidence of whatever nature was presented by petitioner to support its defense
of due diligence in the selection and supervision of its employees, petitioner, as the employer of
Gimena, may be held liable for damages arising from the death of respondent Yu's wife.

WHEREFORE, premises considered, the instant petition is DENIED. The Decision and Resolution,
dated September 9, 2005 and August 8, 2006, respectively, of the Court of Appeals in CA-G.R. CV
No. 84175 are hereby AFFIRMED.

SO ORDERED.
 THIRD DIVISION

September 23, 2015

G.R. No. 178317

SPOUSES RICARDO and ELENA C. GOLEZ, Petitioners,

vs.
MELITON NEMENO, , Respondent.
1

DECISION

VILLARAMA, JR., J.:

This is a petition for review on certiorari under Rule 45 of the 1997 Rules of Civil Procedure, as
amended, assailing the January 20, 2006 Decision  and April 18, 2007 .Resolution  of the Court of
2 3

Appeals (CA) in CA-G.R. CV No. 60638. The appellate court affirmed with modification the March
16, 1998 Decision  of the Regional Trial Court (RTC) ofMolave, Zamboanga del Sur, Branch 23,
4

ordering petitioners Spouses Ricardo and Elena C. Golez to pay respondent Meliton Nemefi.o the
contract amount in their lease agreement of P143,823.00 with 12% interest per annum plus
damages.

The antecedents of the case follow:

Respondent is the registered owner of a commercial lot located in Molave, Zamboanga del Sur
known as Lot No. 7728 and covered by Original Certificate of Title No. 0-2,233  of the Registry of
5

Deeds of Zamboanga del Sur.

On May 31, 1989, respondent entered into a Lease Contract  over a portion of Lot No. 7728 with
6

petitioners as "lessees." The pertinent portion of the contract is quoted verbatim hereunder:

That, the Party of the First Part/Lessor hereby leased a portion of that Commercial Lot with an area
of 12 meters by 7 meters to the Party of the Second Part;

That, the Party of the Second Part shall construct a Commercial Building thereon amounting to ONE
HUNDRED FORTY THREE THOUSAND EIGHT HUNDRED TWENTY THREE (P143,823.00)
PESOS;

That, the Party of the Second Part shall pay a monthly rental of the space occupied by the building in
the amount of TWO THOUSAND (P2,000) PESOS, of which amount, the Party of the First Part shall
not collect, instead, said amount shall be used/paid to the herein Lessee as payment of the cost of
building built on the aforesaid lot;

That, the total amount payable by the herein Lessor to the Lessee includes the following: a. Building
permit fees; b. Cost of building; c. 21 pcs. tables; d. 23 pcs. chairs; e. 5 pcs[.] benches; f. 1 unit
cabinet; g. 3 window trapal; h. 1 unit deepwell handpump with accessories; j. lighting facilities; and
all things permanently attached to the building; of which the total amount is the one reflected above;
That, the term of this contract shall be for FOUR (4) Years only, however, if the amount of
(P143,823.00) shall not be fully paid within the period, the parties hereby reserves the right to extend
this contract, until such time that the above[-]mentioned amount shall have been fully paid;

That, as soon as the above amount shall be fully paid, the building shall be deemed owned by the
herein Party of the First Part; however, the Party of the Second Part is hereby obligated to cause the
repair of the building before it shall be turned over to the Party of the First Part;

That, this contract shall take effect on June 1, 1989, whereby payment of the rental shall take effect
on the said date[.]

On May 23, 1992, the building subject of the lease contract was burned down.

Because of the destruction of the building, respondent, on May 29, 1992, sent a letter  to petitioners
7

demanding the accumulated rentals for the leased property from March 17, 1989 to June 17, 1992
totaling P78,000.00. As the demand was left unheeded, respondent filed a complaint  for collection
8

of rentals plus damages before the Molave RTC.

Respondent alleged that Ricardo is the proximate cause of the fire that razed the building to the
ground. He also claimed that without his knowledge, petitioners insured the building with two
insurance companies for face values of more than its cost. He further alleged that Ricardo was
charged with arson before the Municipal Trial Court (MTC) of Molave in relation to the burning of the
subject building. He prayed that petitioners be ordered to pay him P96,000.00 representing the
unpaid rentals from March 17, 1989 until the expiration of the lease and P100,000.00 representing
damages for violating the lease contract. Respondent also sought the issuance of a writ of
attachment in his favor.

Petitioners, for their part, admitted the execution of the contract of lease but dispute their liability to
pay respondent rentals. They contended that under the contract of lease, the rental payment is
amortized over the cost of the subject building, thus, respondent had already become its co-owner
who must suffer the loss of his property. They also denied liability for the burning of the building
contending that it has been destroyed by a fortuitous event. They admitted though that they insured
the building beyond their insurable interest over it. By way of counterclaim, they alleged that they
extended various cash loans to respondent in the total amount of P11,000.00 starting April 1989 with
an agreed monthly interest of 5%. Because respondent failed to pay the loan, they claimed that the
total demandable amount from him is already P39,104.00 as of the filing of their Answer. Petitioners
are also demanding P1,000,000.00 in damages from respondent for publicly imputing to them the
burning of the subject building.

On July 9, 1992, Molave MTC Judge Diosdado C. Arriesgado, the investigating judge on the criminal
complaint for arson filed by respondent against Ricardo, issued an Order  finding probable cause to
9

indict the latter for arson. The findings of the investigating judge were approved by Zamboanga del
Sur Provincial Prosecutor Elpidio A. Nacua on September 4, 1992.  However, upon motion for
10

reconsideration filed by Ricardo, the criminal case for arson was dismissed in a Resolution  dated
11

November 3, 1992 issued by Prosecutor Nacua. This prompted respondent to file a motion for
reconsideration of the resolution issued by the Provincial Prosecutor.

In the meantime, the RTC issued a Pre-trial Order  dated November 18, 1992, which stated, among
12

others, the following issues the parties agreed to litigate on:

Issues submitted by [respondent]:

 1. Whether or not under the contract of lease entered into by [petitioners] and [respondent],
[petitioners are] liable for back rentals to [respondent];

2. Whether or not [petitioners have] any responsibility to the burning of the house which is
the subject matter of the lease contract.

Issues submitted by [petitioners]:

1. Whether or not [respondent] has unpaid loan in favor of [petitioners] in the amount of
P39,000.00;

2. Whether or not [petitioners have] the right to claim moral damages for the alleged
character assassination made by the [respondent] against [petitioners] for having burned the
house built on the leased premises.  (Emphasis supplied)
13

During trial, respondent testified on the contract he executed in favor of petitioners; the subject
building built thereon by the latter to be delivered at the end of the term of the contract; the burning
of the subject building; and that after the building was burned, he demanded payment of rentals from
petitioners but said demand remained unheeded. When respondent was about to present evidence
to supposedly prove that Ricardo was the author of the fire that gutted down the subject building, the
trial court prohibited him and his counsel on the ground that the alleged arson is not the basis of his
complaint. The pertinent portion of respondent’s testimony is quoted hereunder:

ATTY. ACAIN Q: Do you know if the Office of the Chief of Police file[d] a case of Arson against
defendant Ricardo Golez

COURT: If your theory is that the defendant is responsible for the burning of the building[,] why is
this collection of rental not damages?

xxxx

ATTY. ACAIN : Our theory, Your Honor, is that recollect (sic) the rental and that there is a breach of
contract.

COURT : Then this evidence of the responsibility of the burning is not relevant to this case.

ATTY. ACAIN : We submit, Your Honor, but we contend that the defendant is still violating the
contract by burning the subject matter of the contract. Because the contract says that upon the
expiration[,] this building will go to the lessor. There are two causes of action here, Your Honor,
which is payment of rental and damages, Your Honor.

COURT : But the claim for damages is based on the non[-] performance of the contract not on the
criminal act of Arson.

ATTY. ACAIN : Yes, Your Honor, but I would like to make it of record, Your Honor, that he still ha[s]
a pending case of Arson against the defendants, Your Honor, and it is in that case that we are
claiming damages for the building that [was] destroyed, Your Honor, We are claiming damages as
far as this building is concerned, Your Honor. 14
Respondent also testified on the damages he was claiming in the amount of P100,000.00 for
petitioners’ failure to comply with the agreement "that after four (4) years the building will be
delivered to [him]."
15

When it was petitioners’ turn to present their evidence, the trial court likewise prohibited them from
proving that Ricardo was not responsible for the burning of the subject building. The relevant portion
of Ricardo’s testimony reads:

ATTY. R. ALOOT Q : Now I am confronting you with a certain receipt from the [F]aith Hospital which
is dated May 23, 1992, will you please examine this document which is merely a xerox copy and tell
the court what is this having a relation to stay in your house? (sic)

ATTY. A. ACAIN : We beg[,] Your Honor[,] incompetent, the witness Your Honor (sic) . . . . .

ATTY. R. ALOOT : Because at the time Your Honor there was I think an incident which cause for the
attention of the witness to the fact that he should stay in the house. (sic)

ATTY. A. ACAIN : Already answered[,] Your Honor.

COURT : What has this to do with the cause of action[?] [T]he cause of action is collection of the
rental. It is admitted facts that there was a rented premises (sic) no payment was made and the
house that was supposed to be made as payment of the rental got burned.

ATTY. R. ALOOT : Your Honor[,] please[.] [T]here was a claimed (sic) that the defendant[,] Ricardo
Golez[,] was responsible [for] the fire on May 23, 1992.

ATTY. A. ACAIN : He [denied] that already.

ATTY. R. ALOOT : Yes[,] that is denied but ….

COURT : That [has] nothing to do with the cause of action[.] [T]he cause of action is not the burning
of the house[.] [T]he cause of action is collection of the rental. Now, if the parties was (sic) to
establish that the defendant is responsible for damages for the burning of the house[,] you can file
another case.

ATTY. R. ALOOT : If the plaintiff agrees[,] Your Honor[,] that there is no claim for the burning of the
house . . .

COURT : The complaint will bear that out[.] [T]here is no claim[.] You point to any claim of the
alleged burning of the house, the court did not notice anything. 16

Ricardo also testified on his counterclaim referring to an indebtedness of respondent amounting to

P11,000.00 as evidenced by a promissory note dated January 1, 1990 signed by the latter.
According to him, the loan remained unpaid and ballooned to P368,362.50 as of December 1995
because of the 5% monthly interest.  Petitioners likewise presented two handwritten letters of
17

respondent, one dated May 8, 1991  and another dated January 12, 1992,  to supposedly prove that
18 19

said loan remains outstanding.

On rebuttal, respondent took again the witness stand to refute petitioners’ allegation that his debt
was still unpaid. He presented the supposed original of the January 1, 1990 promissory note that
was in his possession since July 26, 1990, the date when he claimed to have paid his debt. He also
testified that he wrote the May 8, 1991 and January 12, 1992 letters to demand from petitioners the
previous promissory notes which were consolidated in the January 1, 1990 promissory note. 20

While the trial was ongoing, the Department of Justice (DOJ) through Undersecretary Ramon S.
Esguerra, denied the motion for reconsideration filed by respondent on February 10, 1994 and
upheld the dismissal of the criminal complaint for arson against Ricardo. 21

In a Decision dated March 16, 1998, the trial court ruled in favor of respondent. The fallo reads:

WHEREFORE, judgment is hereby rendered in favor of the plaintiff and against the defendants –

1. Ordering the defendants jointly and severally to pay the plaintiff the contract amount
of P143,823.00, to bear interest at 12% a year from the filing of this action up to the
time the same is fully paid.
2. Ordering the defendants jointly and severally to pay the plaintiff the following sums:

a) Moral damages in the sum of P150,000.00;

b) Temperate or compensatory damage in the sum of

P100,000.00;

c) Exemplary damage in the sum [of] P50,000.00;

d) Litigation expenses in the sum of P15,000.00;

e) Attorney’s fees in the sum of P25,000.00;

3. Ordering the issuance of a writ of attachment against the properties of the

defendants to secure the payment of the above judgment amounts.
4. Ordering the defendants to pay triple of the cost of this action.
5. Ordering the dismissal of all counterclaims of defendants against the plaintiff.

SO ORDERED. 22

The trial court ruled that respondent did not become the co-owner of the subject building before it
was burned down. It held that ownership will only pertain to him as soon as the amount agreed upon
under the contract shall have been fully paid. It further held that under the law, it would still be
necessary for petitioners to deliver the building to respondent in order that acquisition of the real
right of ownership can take place. It noted that not only was the amount agreed upon under the
contract not yet fully paid, there was no delivery of the building at all to respondent. It ruled that the
building was still wholly owned by petitioners at the time the same was gutted by fire and thus, they
should be the only ones to suffer the loss.

The trial court likewise noted that petitioners have never paid respondent rent for the leased
premises. Since they can no longer deliver the building which the contract obliged them to deliver,
the trial court ruled that they are legally obliged to pay the rentals for their use and enjoyment of the
leased premises to prevent unjust enrichment on the part of petitioners.
The trial court likewise found that Ricardo is indeed the author of the burning. It took into
consideration the insurance proceeds petitioners would get from the burning of the building in
question.

With regard to the respondent’s debt to petitioners, the trial court ruled that since the promissory
note is in the possession of respondent, the debtor, it can be presumed that it has already been
paid. It also found no evidence that respondent consented to the raising of the interest rate from 3%
to 5% which was handwritten on the note by Ricardo.

The trial court likewise found that petitioners have acted in wanton, fraudulent, malicious, felonious,
oppressive and malevolent manner in the performance of their contractual obligations towards
respondent justifying the award of damages.

Aggrieved, petitioners appealed the trial court’s decision to the CA raising the following arguments:

THE LOWER COURT ERRED IN FINDING THAT DEFENDANTSAPPELLANTS ARE LIABLE

WHEN THE TERMS OF THE CONTRACT THAT THE PARTIES ENTERED INTO CLEARLY SHOW
OTHERWISE.

II

THIS CASE BEING PRIMARILY FOR COLLECTION AND PAYMENT OF RENTALS, THE LOWER
COURT ERRED IN FINDING DEFENDANTS-APPELLANTS LIABLE FOR THE BURNING OF THE
BUILDING IN QUESTION.

III

THE LOWER COURT ERRED IN ISSUING THE QUESTIONED WRIT OF ATTACHMENT

WITHOUT COMPLYING WITH THE PROCEDURAL AS WELL AS SUBSTANTIVE
REQUIREMENTS THEREFOR.

IV

THE LOWER COURT ERRED IN DENYING HEREIN DEFENDANTS-APPELLANTS’

COUNTERCLAIM.

THE LOWER COURT ERRED IN AWARDING EXCESSIVE DAMAGES IN FAVOR OF PLAINTIFF-

APPELLEE. 23

The CA, in the assailed decision, set aside the writ of attachment and notices of garnishment issued
in favor of respondent. It, however, affirmed the decision of the trial court in all other respects. It held
that the ownership of the subject building still pertains to petitioners and therefore, they must solely
bear the loss. The CA also ruled that the fact that the building was destroyed before it was delivered
to respondent does not free petitioners from paying back rentals. It held that petitioners cannot use
respondent’s land and deprive him of rents due him, otherwise, it would be a case of unjust
enrichment at the expense of respondent.
The CA likewise agreed with the trial court’s finding that petitioner Ricardo is liable for the burning of
the building. It took note of respondent’s testimony that he saw Ricardo entering the subject building
an hour and a half before the fire; Ricardo’s alleged indifference regarding the fire; the investigating
judge’s finding of probable cause to indict Ricardo for arson; and the fact that the latter insured the
subject building for more than its actual value. The appellate court also upheld the award of
damages upon this finding of liability on the part of Ricardo.

The appellate court also upheld the trial court’s dismissal of petitioners’ counterclaim on the ground
that the possession of respondent of the promissory note evidencing his debt is prima facie evidence
of payment.

It ruled that the letters presented by Ricardo did not suffice to overturn said presumption as they do
not conclusively show that the obligation of respondent remains outstanding.

Hence this petition anchored on the following grounds:

I. THE HONORABLE COURT OF APPEALS AND THE TRIAL COURT GROSSLY

VIOLATED PETITIONERS’ RIGHT TO DUE PROCESS OF LAW WHEN THE CASE
WAS DECIDED ON THE BASIS OF ISSUES AND EVIDENCE EXPRESSLY
EXCLUDED BY THE COURT DURING TRIAL PROPER.
II. THE HONORABLE COURT OF APPEALS AND THE TRIAL COURT FAILED TO
APPLY ART. 1262 OF THE CIVIL CODE WHEN THE SAME IS CLEARLY AND
SQUARELY APPLICABLE IN THE INSTANT CASE.
III. THE HONORABLE COURT OF APPEALS AND THE TRIAL COURT FAILED TO
CONSIDER THE FACT THAT THERE ARE NO LEGAL AND FACTUAL
BASES FOR THE GRANT OF DAMAGES IN FAVOR OF RESPONDENT IN THAT
HE HAS NOT PRESENTED A SINGLE PROOF OR EVIDENCE AND THE LOWER
COURTS HAVE NOT CITED ANY LAW REMOTELY SERVING AS JURAL
FOUNDATION FOR THE UNWARRANTED AWARD OF DAMAGES.
IV. THE HONORABLE COURT OF APPEALS AND THE TRIAL COURT ERRED IN
FAILING TO GRANT PETITIONERS’ COUNTERCLAIM AND IN FAILING TO
CONSIDER A GLARING EVIDENCE OF ADMISSION OF INDEBTEDNESS BY
RESPONDENT CONSISTING OF TWO HANDWRITTEN LETTERS WRITTEN IN
RESPONDENT’S OWN LANGUAGE ADMITTING LOAN OBLIGATION WITH
PETITIONERS. INSTEAD, THE TRIAL AND APPELLATE COURTS RELIED ON
MERE DISPUTABLE PRESUMPTION OF LAW WHICH DOES NOT EVEN FIND
APPLICATION IN THE CASE, ALL OF WHICH COMBINED TO RESULT IN A
LOPSIDED DECISION WARRANTING REVERSAL BY THE HONORABLE
SUPREME COURT. 24

Petitioners argue that the trial court itself made it clear to all concerned that the suit is not based on
any alleged arson. They contend that despite said declaration by the trial court, the latter heavily
relied on the result of the preliminary investigation finding petitioner Ricardo chargeable for arson
when the same preliminary investigation was reversed with finality by the DOJ.

They also fault the trial court for its heavy reliance on the presumption of arson found in Section
6  of Presidential Decree No. 1613, Amending the Law on Arson, contending that it is not applicable
25

to the case at bar since first, the issue of arson has been excluded and second, there was no
admission of over-insurance on their part.

Petitioners also felt that they were intentionally misled because they were made to believe that the
issue of arson will not be taken up and yet the trial court made a finding that petitioner Ricardo had a
hand in the burning of the subject building. Petitioners contend that the transcript of stenographic
notes will reveal that they were stopped by the trial court from presenting evidence to disprove that
there was arson.

Petitioners likewise asseverate that they are not liable to pay back rentals insisting the applicability
of Article 1262  to the case at bar. They contend that the "rentals" are supposed to be "refund" to
26

petitioners for the cost of the subject building and thus, no "rental" is due. Petitioners also submit
that based on the contract, they had an obligation to deliver a determinate thing, i.e., the subject
building, but applying Article 1262, the total loss thereof extinguished their obligation. They likewise
point out that there was no stipulation in the contract making them liable even for fortuitous events or
that the nature of the obligation requires the assumption of risk.

Petitioners further contend that there were no legal nor factual bases for the grant of damages in
favor of respondent. They argue that respondent immediately took possession of the lot after the fire
so at most, the trial court should have awarded back rentals from 1989 to 1992. They contend that
there was no basis to award the sum of P143,823.00 as it was not a loan or forbearance for the use
of money. They further submit that there was no explanation on the award of moral and temperate
damages.

Petitioners also argue that the presumption in Section 3(h) of Rule 131 of the Rules of Court is not
applicable to the instant case.  They cite the letters sent by respondent to them allegedly
1âwphi1

acknowledging the obligation and offering payment. They contend that if the debt has already been
paid as ruled by the trial and appellate courts, why would respondent still offer payment in said
letters.

Thus, the main issues for this Court’s resolution are: (1) Are petitioners liable to pay respondent for
back rentals?; (2) Are petitioners liable for damages; and (3) Are petitioners entitled to their
counterclaim?

The petition is partly granted.

This Court finds no reason to depart from the ruling of the courts a quo that petitioners should pay
respondent for back rentals. There is no dispute that the contract entered into by the parties is one of
lease. True, it had some modifications such that instead of paying the rent in the form of money,
petitioners will withhold such payment and will apply the accumulated rent to the cost of the building
they built on the leased property. Thereafter, at the end of the lease period or until such time the cost
of the building has been fully covered by the rent accumulated, petitioners, as lessees will transfer
the ownership of said building to respondent. Unfortunately, the subject building was gutted down by
fire. However, the destruction of the building should not in any way be made a basis to exempt
petitioners from paying rent for the period they made use of the leased property. Otherwise, this will
be a clear case of unjust enrichment. As held in P.C. Javier & Sons, Inc. v. Court of Appeals: 27

x x x The fundamental doctrine of unjust enrichment is the transfer of value without just cause or
consideration. The elements of this doctrine are: enrichment on the part of the defendant;
impoverishment on the part of the plaintiff; and lack of cause. The main objective is to prevent one to
enrich himself at the expense of another. It is commonly accepted that this doctrine simply means
that a person shall not be allowed to profit or enrich himself inequitably at another’s expense.

In the instant case, there is no dispute that petitioners used the property for several years for their
own benefit having operated a restaurant thereon. Therefore, it would be the height of injustice to
deprive respondent of compensation due him on the use of his property by petitioners. The fact that
the parties agreed to a different mode of payment – in this case, a building – does not in any way
exempt petitioners from paying compensation due to respondent for the use of the latter’s property
because the building was destroyed.

While we sustain the award of back rentals in favor of respondent, we do not agree with the amount
imposed by the courts a quo. Petitioners should only be liable for rent during the period within which
they were in possession of the leased property. Respondent himself testified that petitioner Ricardo
stayed in the building on the leased premises just before it was burned down.  There was no
28

evidence submitted to prove that petitioners were in possession of the leased property after the fire.
Therefore, petitioners should be made to pay rent until that time only. To order petitioners to pay for
back rentals equivalent to the cost of the building is in the same way, unjust enrichment this time on
the part of respondent considering that the rent due for the period petitioners occupied the leased
premises is way below the cost of the building.

This Court further finds the awards for moral, "temperate/compensatory" and exemplary damages
lacking in factual and legal bases. As correctly argued by petitioners, these damages were not
pleaded in respondent’s complaint nor proven during trial. A perusal of the complaint, as amended,
reveals that respondent was praying for "P100,000.00 as damages for the violation."  He did not
29

specifically pray that it was for moral, temperate or exemplary damages. It is well-settled that in
order that moral damages may be awarded, there must be pleading and proof of moral suffering,
mental anguish, fright and the like.  And even if the moral damages were specifically pleaded in his
30

complaint, nothing on the records would show that respondent testified on said damages.

Even the trial court’s finding that petitioner Ricardo was the author of the fire will not make
respondent entitled to moral damages and exemplary damages. As correctly pointed out by
petitioners, both parties were prevented from presenting evidence to prove or disprove that there
was arson. Thus, there cannot be a finding on petitioners’ liability of willful injury as basis of moral
damages as provided in Article 2220  and exemplary damages as provided in Article 2232  of the
31 32

Civil Code. It is also worthy to note that the criminal complaint for arson filed against petitioner
Ricardo was dismissed with finality by the DOJ thus precluding any criminal liability on his part
regarding the burning of the subject building. There was no evidence presented by respondent that
the dismissal of the criminal complaint was reversed.

As to the award of litigation expenses, we find the same to be justified. As provided under Article
2208 of the Civil Code, they may be recovered when the defendant’s act or omission has compelled
the plaintiff to litigate with third persons or to incur expenses to protect his interest. However, we find
no basis for a separate award of attorney’s fees since they were not prayed for in both the original
and amended complaints. 33

As to the order of the courts a quo for petitioners to pay triple of the cost of the action, this Court also
finds the same without basis. Nowhere in the decision can its factual or legal justification be found.

This Court likewise affirms the dismissal of petitioners’ counterclaims. As correctly ruled by the trial
and appellate courts, the possession of respondent of the promissory note evidencing his debt to
petitioners is prima facie evidence of the payment of the same as provided in Section 3(h) of Rule
131 of the Rules of Court which reads:

SEC. 3. Disputable presumptions. – The following presumptions are satisfactory if uncontradicted,

but may be contradicted and overcome by other evidence:

xxxx

(h) That an obligation delivered up to the debtor has been paid;

 xxxx

Unfortunately for petitioners, the evidence they presented failed to contradict the above presumption
as they did not conclusively show that respondent’s obligation to them remains outstanding. The two
letters written by respondent to petitioner Ricardo which were relied on by petitioners to refute the
presumption are quoted hereunder verbatim:

[First Letter dated May 8, 1991:]

Dear Compadre,

Please return to me now the three (3) receipts or promissory notes with the total amount of
P10,900.00 because we have already consolidated my indebtedness to you by making it to
P11,000.00. You were even the one that personally made/drafted the consolidated amount which I
signed and you made me pay interest as appearing in the consolidated receipt that you made on
January 1, 1990.

Up to now that you still have in your possession the three (3) receipts or promissory notes which
were consolidated into one and you only made [promises] to return, although you furnished me
xerox copies from those originals.

It is painful on my part by not returning those originals and I now entertained suspicion that you have
ill design against me but please Compadre do not do it to me because I am poor as compared to
you.

You know there’s God that is looking on to all of us.

Your brother in Christ,

(SGD.) MELING D. NEMENO, SR. 34

[Second letter dated January 12, 1992:]

Dear Compadre,

How are you together with the members of your family? It’s already a long time that we have not met
each other. Accordingly, you must have been occupied by your Pawnshop business at Molave and
at Ipil.

How's your plan to run for Vice Mayor? You seemed to be silent. Please let me know whether or not
you will proceed because I might be committed for another whom we do not know its background or
ability to perform the duties of the office.

Compadre, how's the receipts which show an obligation of Pl 1,000.00 to you? If you find them,
please bring them to the house because these receipts appear having already lapsed, nonetheless,
if they cannot be located, that's not hard between us.

I shall be waiting.

Your brother in Christ,

(SGD.) COMPADRE MELING NEMEN0 35

To the Court's mind, the letters of respondent were written to demand the surrender of the three
previous promissory notes he executed before they were consolidated into one promissory note with
the amount of P 11,000.00.

Thus, they cannot prove that respondent acknowledges that his obligation remains outstanding. This
being the case, the presumption still stands.

WHEREFORE, the petition is PARTLY GRANTED. The January 20, 2006 Decision of the Court of
Appeals in CA-G.R. CV No. 60638 is AFFIRMED with MODIFICATIONS. As modified, petitioners
Spouses

Ricardo and Elena C. Golez are ORDERED to pay respondent Meliton Nemeño:

1. Back rentals with a monthly rate of P2,000.00 for the period commencing June I, 1989 to
May 23, 1992 and shall earn a corresponding interest of six percent ( 6%) per annum, to be
computed from May 29, 1992 until full satisfaction;
2. Litigation expenses amounting to P15,000.00.

All other awards are DELETED.

No pronouncement as to costs.

SO ORDERED.
 Republic of the Philippines
SUPREME COURT
Manila

FIRST DIVISION

G.R. No. 180257               February 23, 2011

EUSEBIO GONZALES, Petitioner,
vs.
PHILIPPINE COMMERCIAL AND INTERNATIONAL BANK, EDNA OCAMPO, and ROBERTO
NOCEDA, Respondents.

DECISION

VELASCO, JR., J.:

The Case

This is an appeal via a Petition for Review on Certiorari under Rule 45 from the Decision1 dated
October 22, 2007 of the Court of Appeals (CA) in CA-G.R. CV No. 74466, which denied petitioner’s
appeal from the December 10, 2001 Decision 2 in Civil Case No. 99-1324 of the Regional Trial Court
(RTC), Branch 138 in Makati City. The RTC found justification for respondents’ dishonor of
petitioner’s check and found petitioner solidarily liable with the spouses Jose and Jocelyn Panlilio
(spouses Panlilio) for the three promissory notes they executed in favor of respondent Philippine
Commercial and International Bank (PCIB).

The Facts

Petitioner Eusebio Gonzales (Gonzales) was a client of PCIB for a good 15 years before he filed the
instant case. His account with PCIB was handled by respondent Edna Ocampo (Ocampo) until she
was replaced by respondent Roberto Noceda (Noceda).

In October 1992, PCIB granted a credit line to Gonzales through the execution of a Credit-On-Hand
Loan Agreement3 (COHLA), in which the aggregate amount of the accounts of Gonzales with PCIB
served as collateral for and his availment limit under the credit line. Gonzales drew from said credit
line through the issuance of check. At the institution of the instant case, Gonzales had a Foreign
Currency Deposit (FCD) of USD 8,715.72 with PCIB.

On October 30, 1995, Gonzales and his wife obtained a loan for PhP 500,000. Subsequently, on
December 26, 1995 and January 3, 1999, the spouses Panlilio and Gonzales obtained two
additional loans from PCIB in the amounts of PhP 1,000,000 and PhP 300,000, respectively. These
three loans amounting to PhP 1,800,000 were covered by three promissory notes. 4 To secure the
loans, a real estate mortgage (REM) over a parcel of land covered by Transfer Certificate of Title
(TCT) No. 38012 was executed by Gonzales and the spouses Panlilio. Notably, the promissory
notes specified, among others, the solidary liability of Gonzales and the spouses Panlilio for the
payment of the loans. However, it was the spouses Panlilio who received the loan proceeds of PhP
1,800,000.
The monthly interest dues of the loans were paid by the spouses Panlilio through the automatic
debiting of their account with PCIB. But the spouses Panlilio, from the month of July 1998, defaulted
in the payment of the periodic interest dues from their PCIB account which apparently was not
maintained with enough deposits. PCIB allegedly called the attention of Gonzales regarding the July
1998 defaults and the subsequent accumulating periodic interest dues which were left still left
unpaid.

In the meantime, Gonzales issued a check dated September 30, 1998 in favor of Rene Unson
(Unson) for PhP 250,000 drawn against the credit line (COHLA). However, on October 13, 1998,
upon presentment for payment by Unson of said check, it was dishonored by PCIB due to the
termination by PCIB of the credit line under COHLA on October 7, 1998 for the unpaid periodic
interest dues from the loans of Gonzales and the spouses Panlilio. PCIB likewise froze the FCD
account of Gonzales.

Consequently, Gonzales had a falling out with Unson due to the dishonor of the check. They had a
heated argument in the premises of the Philippine Columbian Association (PCA) where they are
both members, which caused great embarrassment and humiliation to Gonzales. Thereafter, on
November 5, 1998, Unson sent a demand letter5 to Gonzales for the PhP 250,000. And on
December 3, 1998, the counsel of Unson sent a second demand letter 6 to Gonzales with the threat
of legal action. With his FCD account that PCIB froze, Gonzales was forced to source out and pay
the PhP 250,000 he owed to Unson in cash.

On January 28, 1999, Gonzales, through counsel, wrote PCIB insisting that the check he issued had
been fully funded, and demanded the return of the proceeds of his FCD as well as damages for the
unjust dishonor of the check.7 PCIB replied on March 22, 1999 and stood its ground in freezing
Gonzales’ accounts due to the outstanding dues of the loans. 8 On May 26, 1999, Gonzales
reiterated his demand, reminding PCIB that it knew well that the actual borrowers were the spouses
Panlilio and he never benefited from the proceeds of the loans, which were serviced by the PCIB
account of the spouses Panlilio.9

PCIB’s refusal to heed his demands compelled Gonzales to file the instant case for damages with
the RTC, on account of the alleged unjust dishonor of the check issued in favor of Unson.

The Ruling of the RTC

After due trial, on December 10, 2001, the RTC rendered a Decision in favor of PCIB. The decretal
portion reads:

WHEREFORE, judgment is rendered as follows –

(a) on the first issue, plaintiff is liable to pay defendant Bank as principal under the
promissory notes, Exhibits A, B and C;

(b) on the second issue, the Court finds that there is justification on part of the defendant
Bank to dishonor the check, Exhibit H;

(c) on the third issue, plaintiff and defendants are not entitled to damages from each other.

No pronouncement as to costs.

SO ORDERED.10
The RTC found Gonzales solidarily liable with the spouses Panlilio on the three promissory notes
relative to the outstanding REM loan. The trial court found no fault in the termination by PCIB of the
COHLA with Gonzales and in freezing the latter’s accounts to answer for the past due PhP
1,800,000 loan. The trial court ruled that the dishonor of the check issued by Gonzales in favor of
Unson was proper considering that the credit line under the COHLA had already been terminated or
revoked before the presentment of the check.

Aggrieved, Gonzales appealed the RTC Decision before the CA.

The Ruling of the CA

On September 26, 2007, the appellate court rendered its Decision dismissing Gonzales’ appeal and
affirming in toto the RTC Decision. The fallo reads:

WHEREFORE, in view of the foregoing, the decision, dated December 10, 2001, in Civil Case No.
99-1324 is hereby AFFIRMED in toto.

SO ORDERED.11

In dismissing Gonzales’ appeal, the CA, first, confirmed the RTC’s findings that Gonzales was
indeed solidarily liable with the spouses Panlilio for the three promissory notes executed for the REM
loan; second, it likewise found neither fault nor negligence on the part of PCIB in dishonoring the
check issued by Gonzales in favor of Unson, ratiocinating that PCIB was merely exercising its rights
under the contractual stipulations in the COHLA brought about by the outstanding past dues of the
REM loan and interests for which Gonzales was solidarily liable with the spouses Panlilio to pay
under the promissory notes.

Thus, we have this petition.

The Issues

Gonzales, as before the CA, raises again the following assignment of errors:

I - IN NOT CONSIDERING THAT THE LIABILITY ARISING FROM PROMISSORY NOTES

(EXHIBITS "A", "B" AND "C", PETITIONER; EXHIBITS "1", "2" AND "3", RESPONDENT)
PERTAINED TO BORROWER JOSE MA. PANLILIO AND NOT TO APPELLANT AS
RECOGNIZED AND ACKNOWLEDGE[D] BY RESPONDENT PHILIPPINE COMMERCIAL &
INDUSTRIAL BANK (RESPONDENT BANK).

II - IN FINDING THAT THE RESPONDENTS WERE NOT AT FAULT NOR GUILTY OF

GROSS NEGLIGENCE IN DISHONORING PETITIONER’S CHECK DATED 30
SEPTEMBER 1998 IN THE AMOUNT OF P250,000.00 FOR THE REASON "ACCOUNT
CLOSED", INSTEAD OF MERELY "REFER TO DRAWER" GIVEN THE FACT THAT EVEN
AFTER DISHONOR, RESPONDENT SIGNED A CERTIFICATION DATED 7 DECEMBER
1998 THAT CREDIT ON HAND (COH) LOAN AGREEMENT WAS STILL VALID WITH A
COLLATERAL OF FOREIGN CURRENCY DEPOSIT (FCD) OF [USD] 48,715.72.

III - IN NOT AWARDING DAMAGES AGAINST RESPONDENTS DESPITE

PRESENTATION OF CLEAR PROOF TO SUPPORT ACTION FOR DAMAGES.12

The Court’s Ruling

The core issues can be summarized, as follows: first, whether Gonzales is liable for the three
promissory notes covering the PhP 1,800,000 loan he made with the spouses Panlilio where a REM
over a parcel of land covered by TCT No. 38012 was constituted as security; and second, whether
PCIB properly dishonored the check of Gonzales drawn against the COHLA he had with the bank.

The petition is partly meritorious.

First Issue: Solidarily Liability on Promissory Notes

A close perusal of the records shows that the courts a quo correctly found Gonzales solidarily liable
with the spouses Panlilio for the three promissory notes.

The promissory notes covering the PhP 1,800,000 loan show the following:

(1) Promissory Note BD-090-1766-95,13 dated October 30, 1995, for PhP 500,000 was
signed by Gonzales and his wife, Jessica Gonzales;

(2) Promissory Note BD-090-2122-95,14 dated December 26, 1995, for PhP 1,000,000 was
signed by Gonzales and the spouses Panlilio; and

(3) Promissory Note BD-090-011-96,15 dated January 3, 1996, for PhP 300,000 was signed
by Gonzales and the spouses Panlilio.

Clearly, Gonzales is liable for the loans covered by the above promissory notes. First, Gonzales
admitted that he is an accommodation party which PCIB did not dispute. In his testimony, Gonzales
admitted that he merely accommodated the spouses Panlilio at the suggestion of Ocampo, who was
then handling his accounts, in order to facilitate the fast release of the loan. Gonzales testified:

ATTY. DE JESUS:

Now in this case you filed against the bank you mentioned there was a loan also applied for by the
Panlilio’s in the sum of P1.8 Million Pesos. Will you please tell this Court how this came about?

GONZALES:

Mr. Panlilio requested his account officer . . . . at that time it is a P42.0 Million loan and if he secures
another P1.8 Million loan the release will be longer because it has to pass to XO.

Q: After that what happened?

A: So as per suggestion since Mr. Panlilio is a good friend of mine and we co-owned the property I
agreed initially to use my name so that the loan can be utilized immediately by Mr. Panlilio.

Q: Who is actually the borrower of this P1.8 Million Pesos?

A: Well, in paper me and Mr. Panlilio.

Q: Who received the proceeds of said loan?

A: Mr. Panlilio.
Q: Do you have any proof that it was Mr. Panlilio who actually received the proceeds of this P1.8
Million Pesos loan?

A: A check was deposited in the account of Mr. Panlilio. 16

xxxx

Q: By the way upon whose suggestion was the loan of Mr. Panlilio also placed under your name
initially?

A: Well it was actually suggested by the account officer at that time Edna Ocampo.

Q: How about this Mr. Rodolfo Noceda?

A: As you look at the authorization aspect of the loan Mr. Noceda is the boss of Edna so he has
been familiar with my account ever since its inception.

Q: So these two officers Ocampo and Noceda knew that this was actually the account of Mr. Panlilio
and not your account?

A: Yes, sir. In fact even if there is a change of account officer they are always informing me that the
account will be debited to Mr. Panlilio’s account.17

Moreover, the first note for PhP 500,000 was signed by Gonzales and his wife as borrowers, while
the two subsequent notes showed the spouses Panlilio sign as borrowers with Gonzales. It is, thus,
evident that Gonzales signed, as borrower, the promissory notes covering the PhP 1,800,000 loan
despite not receiving any of the proceeds.

Second, the records of PCIB indeed bear out, and was admitted by Noceda, that the PhP 1,800,000
loan proceeds went to the spouses Panlilio, thus:

ATTY. DE JESUS: [on Cross-Examination]

Is it not a fact that as far as the records of the bank [are] concerned the proceeds of the 1.8 million
loan was received by Mr. Panlilio?

NOCEDA:

Yes sir.18

The fact that the loans were undertaken by Gonzales when he signed as borrower or co-borrower for
the benefit of the spouses Panlilio—as shown by the fact that the proceeds went to the spouses
Panlilio who were servicing or paying the monthly dues—is beside the point. For signing as borrower
and co-borrower on the promissory notes with the proceeds of the loans going to the spouses
Panlilio, Gonzales has extended an accommodation to said spouses.

Third, as an accommodation party, Gonzales is solidarily liable with the spouses Panlilio for the
loans. In Ang v. Associated Bank,19 quoting the definition of an accommodation party under Section
29 of the Negotiable Instruments Law, the Court cited that an accommodation party is a person "who
has signed the instrument as maker, drawer, acceptor, or indorser, without receiving value therefor,
and for the purpose of lending his name to some other person." 20 The Court further explained:
[A]n accommodation party is one who meets all the three requisites, viz: (1) he must be a party to
the instrument, signing as maker, drawer, acceptor, or indorser; (2) he must not receive value
therefor; and (3) he must sign for the purpose of lending his name or credit to some other person. An
accommodation party lends his name to enable the accommodated party to obtain credit or to raise
money; he receives no part of the consideration for the instrument but assumes liability to the other
party/ies thereto. The accommodation party is liable on the instrument to a holder for value even
though the holder, at the time of taking the instrument, knew him or her to be merely an
accommodation party, as if the contract was not for accommodation.

As petitioner acknowledged it to be, the relation between an accommodation party and the
accommodated party is one of principal and surety—the accommodation party being the surety. As
such, he is deemed an original promisor and debtor from the beginning; he is considered in law as
the same party as the debtor in relation to whatever is adjudged touching the obligation of the latter
since their liabilities are interwoven as to be inseparable. Although a contract of suretyship is in
essence accessory or collateral to a valid principal obligation, the surety’s liability to the creditor
is immediate, primary and absolute; he is directly and equally bound with the principal. As an
equivalent of a regular party to the undertaking, a surety becomes liable to the debt and duty of the
principal obligor even without possessing a direct or personal interest in the obligations nor does he
receive any benefit therefrom. 21

Thus, the knowledge, acquiescence, or even demand by Ocampo for an accommodation by

Gonzales in order to extend the credit or loan of PhP 1,800,000 to the spouses Panlilio does not
exonerate Gonzales from liability on the three promissory notes.

Fourth, the solidary liability of Gonzales is clearly stipulated in the promissory notes which uniformly
begin, "For value received, the undersigned (the "BORROWER") jointly and severally promise to
pay x x x." Solidary liability cannot be presumed but must be established by law or contract. 22 Article
1207 of the Civil Code pertinently states that "there is solidary liability only when the obligation
expressly so states, or when the obligation requires solidarity." This is true in the instant case where
Gonzales, as accommodation party, is immediately, equally, and absolutely bound with the spouses
Panlilio on the promissory notes which indubitably stipulated solidary liability for all the borrowers.
Moreover, the three promissory notes serve as the contract between the parties. Contracts have the
force of law between the parties and must be complied with in good faith. 23

Second Issue: Improper Dishonor of Check

Having ruled that Gonzales is solidarily liable for the three promissory notes, We shall now touch
upon the question of whether it was proper for PCIB to dishonor the check issued by Gonzales
against the credit line under the COHLA.

We answer in the negative.

As a rule, an appeal by certiorari under Rule 45 of the Rules of Court is limited to review of errors of
law.24 The factual findings of the trial court, especially when affirmed by the appellate court, are
generally binding on us unless there was a misapprehension of facts or when the inference drawn
from the facts was manifestly mistaken. 25 The instant case falls within the exception.

The courts a quo found and held that there was a proper dishonor of the PhP 250,000 check issued
by Gonzales against the credit line, because the credit line was already closed prior to the
presentment of the check by Unson; and the closing of the credit line was likewise proper pursuant
to the stipulations in the promissory notes on the bank’s right to set off or apply all moneys of the
debtor in PCIB’s hand and the stipulations in the COHLA on the PCIB’s right to terminate the credit
line on grounds of default by Gonzales.

Gonzales argues otherwise, pointing out that he was not informed about the default of the spouses
Panlilio and that the September 21, 1998 account statement of the credit line shows a balance of
PhP 270,000 which was likewise borne out by the December 7, 1998 PCIB’s certification that he has
USD 8,715.72 in his FCD account which is more than sufficient collateral to guarantee the PhP
250,000 check, dated September 30, 1998, he issued against the credit line.

A careful scrutiny of the records shows that the courts a quo committed reversible error in not finding
negligence by PCIB in the dishonor of the PhP 250,000 check.

First. There was no proper notice to Gonzales of the default and delinquency of the PhP 1,800,000
loan. It must be borne in mind that while solidarily liable with the spouses Panlilio on the PhP
1,800,000 loan covered by the three promissory notes, Gonzales is only an accommodation party
and as such only lent his name and credit to the spouses Panlilio. While not exonerating his solidary
liability, Gonzales has a right to be properly apprised of the default or delinquency of the loan
precisely because he is a co-signatory of the promissory notes and of his solidary liability.

We note that it is indeed understandable for Gonzales to push the spouses Panlilio to pay the
outstanding dues of the PhP 1,800,000 loan, since he was only an accommodation party and was
not personally interested in the loan. Thus, a meeting was set by Gonzales with the spouses Panlilio
and the PCIB officers, Noceda and Ocampo, in the spouses Panlilio’s jewelry shop in SM Megamall
on October 5, 1998. Unfortunately, the meeting did not push through due to the heavy traffic Noceda
and Ocampo encountered.

Such knowledge of the default by Gonzales was, however, not enough to properly apprise Gonzales
about the default and the outstanding dues. Verily, it is not enough to be merely informed to pay over
a hundred thousand without being formally apprised of the exact aggregate amount and the
corresponding dues pertaining to specific loans and the dates they became due.

Gonzales testified that he was not duly notified about the outstanding interest dues of the loan:

ATTY. DE JESUS:

Now when Mr. Panlilio’s was encountering problems with the bank did the defendant bank [advise]
you of any problem with the same account?

GONZALES:

They never [advised] me in writing.

Q: How did you come to know that there was a problem?

A: When my check bounced sir.26

On the other hand, the PCIB contends otherwise, as Corazon Nepomuceno testified:

ATTY. PADILLA:
Can you tell this Honorable Court what is it that you told Mr. Gonzales when you spoke to him at the
celphone?

NEPOMUCENO:

I just told him to update the interest so that we would not have to cancel the COH Line and he could
withdraw the money that was in the deposit because technically, if an account is past due we are not
allowed to let the client withdraw funds because they are allowed to offset funds so, just to help him
get his money, just to update the interest so that we could allow him to withdraw.

Q: Withdraw what?

A: His money on the COH, whatever deposit he has with us.

Q: Did you inform him that if he did not update the interest he would not be able to withdraw his
money?

A: Yes sir, we will be forced to hold on to any assets that he has with us so that’s why we suggested
just to update the interest because at the end of everything, he would be able to withdraw more
funds than the interest that the money he would be needed to update the interest. 27

From the foregoing testimonies, between the denial of Gonzales and the assertion by PCIB that
Gonzales was properly apprised, we find for Gonzales. We find the testimonies of the former PCIB
employees to be self-serving and tenuous at best, for there was no proper written notice given by the
bank. The record is bereft of any document showing that, indeed, Gonzales was formally informed
by PCIB about the past due periodic interests.

PCIB is well aware and did not dispute the fact that Gonzales is an accommodation party. It also
acted in accordance with such fact by releasing the proceeds of the loan to the spouses Panlilio and
likewise only informed the spouses Panlilio of the interest dues. The spouses Panlilio, through their
account28 with PCIB, were paying the periodic interest dues and were the ones periodically informed
by the bank of the debiting of the amounts for the periodic interest payments. Gonzales never paid
any of the periodic interest dues. PCIB’s Noceda admitted as much in his cross-examination:

ATTY. DE JESUS: [on Cross-Examination]

And there was no instance that Mr. Gonzales ever made even interest for this loan, is it not, it’s
always Mr. Panlilio who was paying the interest for this loan?

NOCEDA:

Yes sir.29

Indeed, no evidence was presented tending to show that Gonzales was periodically sent notices or
notified of the various periodic interest dues covering the three promissory notes. Neither do the
records show that Gonzales was aware of amounts for the periodic interests and the payment for
them. Such were serviced by the spouses Panlilio.

Thus, PCIB ought to have notified Gonzales about the status of the default or delinquency of the
interest dues that were not paid starting July 1998. And such notification must be formal or in written
form considering that the outstanding periodic interests became due at various dates, i.e., on July 8,
17, and 28, 1998, and the various amounts have to be certain so that Gonzales is not only properly
apprised but is given the opportunity to pay them being solidarily liable for the loans covered by the
promissory notes.

It is the bank which computes these periodic interests and such dues must be put into writing and
formally served to Gonzales if he were asked to pay them, more so when the payments by the
spouses Panlilio were charged through the account of the spouses Panlilio where the interest dues
were simply debited. Such arrangement did not cover Gonzales’ bank account with PCIB, since he is
only an accommodation party who has no personal interest in the PhP 1,800,000 loan. Without a
clear and determinate demand through a formal written notice for the exact periodic interest dues for
the loans, Gonzales cannot be expected to pay for them.

In business, more so for banks, the amounts demanded from the debtor or borrower have to be
definite, clear, and without ambiguity. It is not sufficient simply to be informed that one must pay over
a hundred thousand aggregate outstanding interest dues without clear and certain figures. Thus, We
find PCIB negligent in not properly informing Gonzales, who is an accommodation party, about the
default and the exact outstanding periodic interest dues. Without being properly apprised, Gonzales
was not given the opportunity to properly act on them.

It was only through a letter30 sent by PCIB dated October 2, 1998 but incongruously showing the
delinquencies of the PhP 1,800,000 loan at a much later date, i.e., as of October 31, 1998, when
Gonzales was formally apprised by PCIB. In it, the interest due was PhP 106,1616.71 and penalties
for the unpaid interest due of PhP 64,766.66, or a total aggregate due of PhP 171,383.37. But it is
not certain and the records do not show when the letter was sent and when Gonzales received it.
What is clear is that such letter was belatedly sent by PCIB and received by Gonzales after the fact
that the latter’s FCD was already frozen, his credit line under the COHLA was terminated or
suspended, and his PhP 250,000 check in favor of Unson was dishonored.

And way much later, or on May 4, 1999, was a demand letter from the counsel of PCIB sent to
Gonzales demanding payment of the PhP 1,800,000 loan. Obviously, these formal written notices
sent to Gonzales were too late in the day for Gonzales to act properly on the delinquency and he
already suffered the humiliation and embarrassment from the dishonor of his check drawn against
the credit line.

To reiterate, a written notice on the default and deficiency of the PhP 1,800,000 loan covered by the
three promissory notes was required to apprise Gonzales, an accommodation party. PCIB is obliged
to formally inform and apprise Gonzales of the defaults and the outstanding obligations, more so
when PCIB was invoking the solidary liability of Gonzales. This PCIB failed to do.

Second. PCIB was grossly negligent in not giving prior notice to Gonzales about its course of action
to suspend, terminate, or revoke the credit line, thereby violating the clear stipulation in the COHLA.

The COHLA, in its effectivity clause, clearly provides:

4. EFFECTIVITY — The COH shall be effective for a period of one (1) year commencing from the
receipt by the CLIENT of the COH checkbook issued by the BANK, subject to automatic renewals for
same periods unless terminated by the BANK upon prior notice served on CLIENT.31 (Emphasis
ours.)

It is undisputed that the bank unilaterally revoked, suspended, and terminated the COHLA without
giving Gonzales prior notice as required by the above stipulation in the COHLA. Noceda testified on
cross-examination on the Offering Ticket32 recommending the termination of the credit line, thus:
ATTY. DE JESUS: [on Cross-Examination]

This Exhibit 8, you have not furnished at anytime a copy to the plaintiff Mr. Gonzales is it not?

NOCEDA:

No sir but verbally it was relayed to him.

Q: But you have no proof that Mr. Gonzales came to know about this Exhibit 8?

A: It was relayed to him verbally.

Q: But there is no written proof?

A: No sir.

Q: And it is only now that you claim that it was verbally relayed to him, it’s only now when you
testified in Court?

A: Before . . .

Q: To whom did you relay this information?

A: It was during the time that we were going to Megamall, it was relayed by Liza that he has to pay
his obligations or else it will adversely affect the status of the account. 33

On the other hand, the testimony of Corazon Nepomuceno shows:

ATTY. DE JESUS: [on Cross-Examination]

Now we go to the other credit facility which is the credit on hand extended solely of course to Mr.
Eusebio Gonzales who is the plaintiff here, Mr. Panlilio is not included in this credit on hand facility.
Did I gather from you as per your Exhibit 7 as of October 2, 1998 you were the one who
recommended the cancellation of this credit on hand facility?

NEPOMUCENO:

It was recommended by the account officer and I supported it.

Q: And you approved it?

A: Yes sir.

Q: Did you inform Mr. Gonzales that you have already cancelled his credit on hand facility?

A: As far as I know, it is the account officer who will inform him.

Q: But you have no record that he was informed?

A: I don’t recall and we have to look at the folder to determine if they were informed.
Q: If you will notice, this letter . . . what do you call this letter of yours?

A: That is our letter advising them or reminding them of their unpaid interest and that if he is able to
update his interest he can extend the promissory note or restructure the outstanding.

Q: Now, I call your attention madam witness, there is nothing in this letter to the clients advising
them or Mr. Gonzales that his credit on hand facility was already cancelled?

A: I don’t know if there are other letters aside from this.

Q: So in this letter there is nothing to inform or to make Mr. Eusebio aware that his credit on hand
facility was already cancelled?

A: No actually he can understand it from the last sentence. "If you will be able to update your
outstanding interest, we can apply the extention of your promissory note" so in other words we are
saying that if you don’t, you cannot extend the promissory note.

Q: You will notice that the subject matter of this October 2, 1998 letter is only the loan of 1.8 million
is it not, as you can see from the letter? Okay?

A: Ah . . .

Q: Okay. There is nothing there that will show that that also refers to the credit on hand facility which
was being utilized by Mr. Gonzales is it not?

A: But I don’t know if there are other letters that are not presented to me now. 34

The foregoing testimonies of PCIB officers clearly show that not only did PCIB fail to give prior notice
to Gonzales about the Offering Ticket for the process of termination, suspension, or revocation of the
credit line under the COHLA, but PCIB likewise failed to inform Gonzales of the fact that his credit
line has been terminated. Thus, we find PCIB grossly negligent in the termination, revocation, or
suspension of the credit line under the COHLA. While PCIB invokes its right on the so-called "cross
default provisions," it may not with impunity ignore the rights of Gonzales under the COHLA.

Indeed, the business of banking is impressed with public interest and great reliance is made on the
bank’s sworn profession of diligence and meticulousness in giving irreproachable service. Like a
common carrier whose business is imbued with public interest, a bank should exercise extraordinary
diligence to negate its liability to the depositors.35 In this instance, PCIB is sorely remiss in the
diligence required in treating with its client, Gonzales. It may not wantonly exercise its rights without
respecting and honoring the rights of its clients.

Art. 19 of the New Civil Code clearly provides that "[e]very person must, in the exercise of his rights
and in the performance of his duties, act with justice, give everyone his due, and observe honesty
and good faith." This is the basis of the principle of abuse of right which, in turn, is based upon the
maxim suum jus summa injuria (the abuse of right is the greatest possible wrong). 36

In order for Art. 19 to be actionable, the following elements must be present: "(1) the existence of a
legal right or duty, (2) which is exercised in bad faith, and (3) for the sole intent of prejudicing or
injuring another."37 We find that such elements are present in the instant case. The effectivity clause
of the COHLA is crystal clear that termination of the COH should be done only upon prior notice
served on the CLIENT. This is the legal duty of PCIB––to inform Gonzales of the termination.
However, as shown by the above testimonies, PCIB failed to give prior notice to Gonzales.

Malice or bad faith is at the core of Art. 19. Malice or bad faith "implies a conscious and intentional
design to do a wrongful act for a dishonest purpose or moral obliquity." 38 In the instant case, PCIB
was able to send a letter advising Gonzales of the unpaid interest on the loans 39 but failed to mention
anything about the termination of the COHLA. More significantly, no letter was ever sent to him
about the termination of the COHLA. The failure to give prior notice on the part of PCIB is already
prima facie evidence of bad faith. 40 Therefore, it is abundantly clear that this case falls squarely
within the purview of the principle of abuse of rights as embodied in Art. 19.

Third. There is no dispute on the right of PCIB to suspend, terminate, or revoke the COHLA under
the "cross default provisions" of both the promissory notes and the COHLA. However, these cross
default provisions do not confer absolute unilateral right to PCIB, as they are qualified by the other
stipulations in the contracts or specific circumstances, like in the instant case of an accommodation
party.

The promissory notes uniformly provide:

The lender is hereby authorized, at its option and without notice, to set off or apply to the
payment of this Note any and all moneys which may be in its hands on deposit or otherwise
belonging to the Borrower. The Borrower irrevocably appoint/s the Lender, effective upon the
nonpayment of this Note on demand/at maturity or upon the happening of any of the events of
default, but without any obligation on the Lender’s part should it choose not to perform this mandate,
as the attorney-in-fact of the Borrower, to sell and dispose of any property of the Borrower, which
may be in the Lender’s possession by public or private sale, and to apply the proceeds thereof to the
payment of this Note; the Borrower, however, shall remain liable for any deficiency. 41 (Emphasis
ours.)

The above provisos are indeed qualified with the specific circumstance of an accommodation party
who, as such, has not been servicing the payment of the dues of the loans, and must first be
properly apprised in writing of the outstanding dues in order to answer for his solidary obligation.

The same is true for the COHLA, which in its default clause provides:

16. DEFAULT — The CLIENT shall be considered in default under the COH if any of the following
events shall occur:

1. x x x

2. Violation of the terms and conditions of this Agreement or any contract of the CLIENT with
the BANK or any bank, persons, corporations or entities for the payment of borrowed money,
or any other event of default in such contracts.42

The above pertinent default clause must be read in conjunction with the effectivity clause (No. 4 of
the COHLA, quoted above), which expressly provides for the right of client to prior notice. The
rationale is simple: in cases where the bank has the right to terminate, revoke, or suspend the credit
line, the client must be notified of such intent in order for the latter to act accordingly—whether to
correct any ground giving rise to the right of the bank to terminate the credit line and to dishonor any
check issued or to act in accord with such termination, i.e., not to issue any check drawn from the
credit line or to replace any checks that had been issued. This, the bank—with gross negligence—
failed to accord Gonzales, a valued client for more than 15 years.

Fourth. We find the testimony43 of Ocampo incredible on the point that the principal borrower of the
PhP 1,800,000 loan covered by the three promissory notes is Gonzales for which the bank officers
had special instructions to grant and that it was through the instructions of Gonzales that the
payment of the periodic interest dues were debited from the account of the spouses Panlilio.

For one, while the first promissory note dated October 30, 1995 indeed shows Gonzales as the
principal borrower, the other promissory notes dated December 26, 1995 and January 3, 1996
evidently show that it was Jose Panlilio who was the principal borrower with Gonzales as co-
borrower. For another, Ocampo cannot feign ignorance on the arrangement of the payments by the
spouses Panlilio through the debiting of their bank account. It is incredulous that the payment
arrangement is merely at the behest of Gonzales and at a mere verbal directive to do so. The fact
that the spouses Panlilio not only received the proceeds of the loan but were servicing the periodic
interest dues reinforces the fact that Gonzales was only an accommodation party.

Thus, due to PCIB’s negligence in not giving Gonzales—an accommodation party—proper notice
relative to the delinquencies in the PhP 1,800,000 loan covered by the three promissory notes, the
unjust termination, revocation, or suspension of the credit line under the COHLA from PCIB’s gross
negligence in not honoring its obligation to give prior notice to Gonzales about such termination and
in not informing Gonzales of the fact of such termination, treating Gonzales’ account as closed and
dishonoring his PhP 250,000 check, was certainly a reckless act by PCIB. This resulted in the actual
injury of PhP 250,000 to Gonzales whose FCD account was frozen and had to look elsewhere for
money to pay Unson.

With banks, the degree of diligence required is more than that of a good father of the family
considering that the business of banking is imbued with public interest due to the nature of their
function. The law imposes on banks a high degree of obligation to treat the accounts of its
depositors with meticulous care, always having in mind the fiduciary nature of banking. 44 Had
Gonzales been properly notified of the delinquencies of the PhP 1,800,000 loan and the process of
terminating his credit line under the COHLA, he could have acted accordingly and the dishonor of
the check would have been avoided.

Third Issue: Award of Damages

The banking system has become an indispensable institution in the modern world and plays a vital
role in the economic life of every civilized society—banks have attained a ubiquitous presence
among the people, who have come to regard them with respect and even gratitude and most of all,
confidence, and it is for this reason, banks should guard against injury attributable to negligence or
bad faith on its part.45

In the instant case, Gonzales suffered from the negligence and bad faith of PCIB. From the
testimonies of Gonzales’ witnesses, particularly those of Dominador Santos 46 and Freddy
Gomez,47 the embarrassment and humiliation Gonzales has to endure not only before his former
close friend Unson but more from the members and families of his friends and associates in the
PCA, which he continues to experience considering the confrontation he had with Unson and the
consequent loss of standing and credibility among them from the fact of the apparent bouncing
check he issued. Credit is very important to businessmen and its loss or impairment needs to be
recognized and compensated.48
The termination of the COHLA by PCIB without prior notice and the subsequent dishonor of the
check issued by Gonzales constitute acts of contra bonus mores. Art. 21 of the Civil Code refers to
such acts when it says, "Any person who willfully causes loss or injury to another in a manner that is
contrary to morals, good customs or public policy shall compensate the latter for damage."

Accordingly, this Court finds that such acts warrant the payment of indemnity in the form of nominal
damages.  Nominal damages "are recoverable where a legal right is technically violated and must
1avvphi1

be vindicated against an invasion that has produced no actual present loss of any kind x x x." 49 We
further explained the nature of nominal damages in Almeda v. Cariño:

x x x Its award is thus not for the purpose of indemnification for a loss but for the recognition and
vindication of a right. Indeed, nominal damages are damages in name only and not in fact. When
granted by the courts, they are not treated as an equivalent of a wrong inflicted but simply a
recognition of the existence of a technical injury. A violation of the plaintiff’s right, even if only
technical, is sufficient to support an award of nominal damages. Conversely, so long as there is a
showing of a violation of the right of the plaintiff, an award of nominal damages is
proper.50 (Emphasis Ours.)

In the present case, Gonzales had the right to be informed of the accrued interest and most
especially, for the suspension of his COHLA. For failure to do so, the bank is liable to pay nominal
damages. The amount of such damages is addressed to the sound discretion of the court, taking
into account the relevant circumstances.51 In this case, the Court finds that the grant of PhP 50,000
as nominal damages is proper.

Moreover, as We held in MERALCO v. CA,52 failure to give prior notice when required, such as in the
instant case, constitutes a breach of contract and is a clear violation of Art. 21 of the Code. In cases
such as this, Art. 2219 of the Code provides that moral damages may be recovered in acts referred
to in its Art. 21. Further, Art. 2220 of the Code provides that "[w]illful injury to property may be a legal
ground for awarding moral damages if the court should find that, under the circumstances, such
damages are justly due. The same rule applies to breaches of contract where the defendant acted
fraudulently or in bad faith." Similarly, "every person who, contrary to law, willfully or negligently
causes damage to another, shall indemnify the latter for the same." 53 Evidently, Gonzales is entitled
to recover moral damages.

Even in the absence of malice or bad faith, a depositor still has the right to recover reasonable moral
damages, if the depositor suffered mental anguish, serious anxiety, embarrassment, and
humiliation.54 Although incapable of pecuniary estimation, moral damages are certainly recoverable if
they are the proximate result of the defendant’s wrongful act or omission. The factual antecedents
bolstered by undisputed testimonies likewise show the mental anguish and anxiety Gonzales had to
endure with the threat of Unson to file a suit. Gonzales had to pay Unson PhP 250,000, while his
FCD account in PCIB was frozen, prompting Gonzales to demand from PCIB and to file the instant
suit.

The award of moral damages is aimed at a restoration within the limits of the possible, of the
spiritual status quo ante—it must always reasonably approximate the extent of injury and be
proportional to the wrong committed. 55 Thus, an award of PhP 50,000 is reasonable moral damages
for the unjust dishonor of the PhP 250,000 which was the proximate cause of the consequent
humiliation, embarrassment, anxiety, and mental anguish suffered by Gonzales from his loss of
credibility among his friends, colleagues and peers.

Furthermore, the initial carelessness of the bank’s omission in not properly informing Gonzales of
the outstanding interest dues––aggravated by its gross neglect in omitting to give prior notice as
stipulated under the COHLA and in not giving actual notice of the termination of the credit line––
justifies the grant of exemplary damages of PhP 10,000. Such an award is imposed by way of
example or correction for the public good.

Finally, an award for attorney’s fees is likewise called for from PCIB’s negligence which compelled
Gonzales to litigate to protect his interest. In accordance with Art. 2208(1) of the Code, attorney’s
fees may be recovered when exemplary damages are awarded. We find that the amount of PhP
50,000 as attorney’s fees is reasonable.

WHEREFORE, this petition is PARTLY GRANTED. Accordingly, the CA Decision dated October 22,
2007 in CA-G.R. CV No. 74466 is hereby REVERSED and SET ASIDE. The Philippine Commercial
and International Bank (now Banco De Oro) is ORDERED to pay Eusebio Gonzales PhP 50,000 as
nominal damages, PhP 50,000 as moral damages, PhP 10,000 as exemplary damages, and PhP
50,000 as attorney’s fees.

No pronouncement as to costs.

SO ORDERED.
 Republic of the Philippines
SUPREME COURT
Manila

THIRD DIVISION

G.R. No. 183896               January 30, 2013

SYED AZHAR ABBAS, Petitioner,

vs.
GLORIA GOO ABBAS, Respondent.

DECISION

VELASCO, JR., J.:

This is a Petition for Review on Certiorari under Rule 45 of the 1997 Rules of Civil Procedure,
questioning the Decision1 of the Court of Appeals (CA) dated March 11, 2008 in CA-G.R. CV No.
86760, which reversed the Decision2 in Civil Case No. 03-0382-CFM dated October 5, 2005 of the
Regional Trial Court (RTC), Branch 109, Pasay City, and the CA Resolution dated July 24, 2008,
denying petitioner's Motion for Reconsideration of the CA Decision.

The present case stems from a petition filed by petitioner Syed Azhar Abbas (Syed) for the
declaration of nullity of his marriage to Gloria Goo-Abbas (Gloria) with the RTC of Pasay City,
docketed as Civil Case No. 03-0382-CFM, and raffled to RTC Branch 109. Syed alleged the
absence of a marriage license, as provided for in Article 4, Chapter I, Title 1 of Executive Order No.
269, otherwise known as the Family Code of the Philippines, as a ground for the annulment of his
marriage to Gloria.

In the Marriage Contract3 of Gloria and Syed, it is stated that Marriage License No. 9969967, issued
at Carmona, Cavite on January 8, 1993, was presented to the solemnizing officer. It is this
information that is crucial to the resolution of this case.

At the trial court, Syed, a Pakistani citizen, testified that he met Gloria, a Filipino citizen, in Taiwan in
1991, and they were married on August 9, 1992 at the Taipei Mosque in Taiwan.4 He arrived in the
Philippines in December of 1992. On January 9, 1993, at around 5 o’clock in the afternoon, he was
at his mother-in-law’s residence, located at 2676 F. Muñoz St., Malate, Manila, when his mother-in-
law arrived with two men. He testified that he was told that he was going to undergo some
ceremony, one of the requirements for his stay in the Philippines, but was not told of the nature of
said ceremony. During the ceremony he and Gloria signed a document. He claimed that he did not
know that the ceremony was a marriage until Gloria told him later. He further testified that he did not
go to Carmona, Cavite to apply for a marriage license, and that he had never resided in that area. In
July of 2003, he went to the Office of the Civil Registrar of Carmona, Cavite, to check on their
marriage license, and was asked to show a copy of their marriage contract wherein the marriage
license number could be found. 5 The Municipal Civil Registrar, Leodivinia C. Encarnacion, issued a
certification on July 11, 2003 to the effect that the marriage license number appearing in the
marriage contract he submitted, Marriage License No. 9969967, was the number of another
marriage license issued to a certain Arlindo Getalado and Myra Mabilangan. 6 Said certification reads
as follows:
11 July 2003

TO WHOM IT MAY CONCERN:

This is to certify as per Registry Records of Marriage License filed in this office, Marriage License
No. 9969967 was issued in favor of MR. ARLINDO GETALADO and MISS MYRA MABILANGAN on
January 19, 1993.

No Marriage License appear [sic] to have been issued to MR. SYED AZHAR ABBAS and MISS
GLORIA F. GOO on January 8, 1993.

This certification is being issued to Mr. Syed Azhar Abbas for whatever legal purpose or intents it
may serve.7

On cross-examination, Syed testified that Gloria had filed bigamy cases against him in 2001 and
2002, and that he had gone to the Municipal Civil Registrar of Carmona, Cavite to get certification on
whether or not there was a marriage license on advice of his counsel. 8

Petitioner also presented Norberto Bagsic (Bagsic), an employee of the Municipal Civil Registrar of
Carmona, Cavite. Bagsic appeared under a letter of authority from the Municipal Civil Registrar of
Carmona, Cavite, and brought documents pertaining to Marriage License No. 9969967, which was
issued to Arlindo Getalado and Myra Mabilangan on January 20, 1993. 9

Bagsic testified that their office issues serial numbers for marriage licenses and that the numbers are
issued chronologically.10 He testified that the certification dated July 11, 2003, was issued and signed
by Leodivina Encarnacion, Registrar of the Municipality of Carmona, Cavite, certifying that Marriage
License No. 9969967 was issued for Arlindo Getalado and Myra Mabilangan on January 19, 1993,
and that their office had not issued any other license of the same serial number, namely 9969967, to
any other person.11

For her part, Gloria testified on her own behalf, and presented Reverend Mario Dauz, Atty. Lorenzo
Sanchez, Felicitas Goo and May Ann Ceriola.

Reverend Mario Dauz (Rev. Dauz) testified that he was a minister of the Gospel and a barangay
captain, and that he is authorized to solemnize marriages within the Philippines. 12 He testified that he
solemnized the marriage of Syed Azhar Abbas and Gloria Goo at the residence of the bride on
January 9, 1993.13 He stated that the witnesses were Atty. Lorenzo Sanchez (Atty. Sanchez) and
Mary Ann Ceriola.14 He testified that he had been solemnizing marriages since 1982, and that he is
familiar with the requirements.15 Rev. Dauz further testified that Atty. Sanchez gave him the marriage
license the day before the actual wedding, and that the marriage contract was prepared by his
secretary.16 After the solemnization of the marriage, it was registered with the Local Civil Registrar of
Manila, and Rev. Dauz submitted the marriage contract and copy of the marriage license with that
office.17

Atty. Sanchez testified that he was asked to be the sponsor of the wedding of Syed Abbas and
Gloria Goo by the mother of the bride, Felicitas Goo.18 He testified that he requested a certain Qualin
to secure the marriage license for the couple, and that this Qualin secured the license and gave the
same to him on January 8, 1993.19 He further testified that he did not know where the marriage
license was obtained.20 He attended the wedding ceremony on January 9, 1993, signed the marriage
contract as sponsor, and witnessed the signing of the marriage contract by the couple, the
solemnizing officer and the other witness, Mary Ann Ceriola. 21
Felicitas Goo testified that Gloria Goo is her daughter and Syed Azhar Abbas is her son-in-law, and
that she was present at the wedding ceremony held on January 9, 1993 at her house. 22 She testified
that she sought the help of Atty. Sanchez at the Manila City Hall in securing the marriage license,
and that a week before the marriage was to take place, a male person went to their house with the
application for marriage license.23 Three days later, the same person went back to their house,
showed her the marriage license before returning it to Atty. Sanchez who then gave it to Rev. Dauz,
the solemnizing officer.24 She further testified that she did not read all of the contents of the marriage
license, and that she was told that the marriage license was obtained from Carmona. 25 She also
testified that a bigamy case had been filed by Gloria against Syed at the Regional Trial Court of
Manila, evidenced by an information for Bigamy dated January 10, 2003, pending before Branch 47
of the Regional Trial Court of Manila. 26

As to Mary Ann Ceriola’s testimony, the counsels for both parties stipulated that: (a) she is one of
the sponsors at the wedding of Gloria Goo and Syed Abbas on January 9, 1993; (b) she was seen in
the wedding photos and she could identify all the persons depicted in said photos; and (c) her
testimony corroborates that of Felicitas Goo and Atty. Sanchez.

The respondent, Gloria, testified that Syed is her husband, and presented the marriage contract
bearing their signatures as proof. 27 She and her mother sought the help of Atty. Sanchez in securing
a marriage license, and asked him to be one of the sponsors. A certain Qualin went to their house
and said that he will get the marriage license for them, and after several days returned with an
application for marriage license for them to sign, which she and Syed did. After Qualin returned with
the marriage license, they gave the license to Atty. Sanchez who gave it to Rev. Dauz, the
solemnizing officer. Gloria testified that she and Syed were married on January 9, 1993 at their
residence.28

Gloria further testified that she has a daughter with Syed, born on June 15, 1993. 29

Gloria also testified that she filed a bigamy case against Syed, who had married a certain Maria
Corazon Buenaventura during the existence of the previous marriage, and that the case was
docketed as Criminal Case No. 02A-03408, with the RTC of Manila. 30

Gloria stated that she and Syed had already been married on August 9, 1992 in Taiwan, but that she
did not know if said marriage had been celebrated under Muslim rites, because the one who
celebrated their marriage was Chinese, and those around them at the time were Chinese.31

The Ruling of the RTC

In its October 5, 2005 Decision, the Pasay City RTC held that no valid marriage license was issued
by the Municipal Civil Registrar of Carmona, Cavite in favor of Gloria and Syed, as Marriage License
No. 9969967 had been issued to Arlindo Getalado and Myra Mabilangan, and the Municipal Civil
Registrar of Carmona, Cavite had certified that no marriage license had been issued for Gloria and
Syed.32 It also took into account the fact that neither party was a resident of Carmona, Cavite, the
place where Marriage License No. 9969967 was issued, in violation of Article 9 of the Family
Code.33 As the marriage was not one of those exempt from the license requirement, and that the lack
of a valid marriage license is an absence of a formal requisite, the marriage of Gloria and Syed on
January 9, 1993 was void ab initio.

The dispositive portion of the Decision reads as follows:

WHEREFORE, judgment is hereby rendered in favor of the petitioner, and against the respondent
declaring as follows:
 1. The marriage on January 9, 1993 between petitioner Syed Azhar Abbas and respondent
Gloria Goo-Abbas is hereby annulled;

2. Terminating the community of property relations between the petitioner and the
respondent even if no property was acquired during their cohabitation by reason of the nullity
of the marriage of the parties.

3. The Local Civil Registrar of Manila and the Civil Registrar General, National Statistics
Office, are hereby ordered to cancel from their respective civil registries the marriage
contracted by petitioner Syed Azhar Abbas and respondent Gloria Goo-Abbas on January 9,
1993 in Manila.

SO ORDERED.34

Gloria filed a Motion for Reconsideration dated November 7, 2005, but the RTC denied the same,
prompting her to appeal the questioned decision to the Court of Appeals.

The Ruling of the CA

In her appeal to the CA, Gloria submitted the following assignment of errors:

THE LOWER COURT ERRED IN DECLARING THE MARRIAGE BETWEEN THE

PETITIONER AND RESPONDENT AS NULL AND VOID DUE TO THE ABSENCE OF A
MARRIAGE LICENSE DESPITE EVIDENCE CLEARLY SHOWING THAT THERE WAS
ONE.

II

THE LOWER COURT ERRED IN NOT CONSIDERING, AS A REQUISITE OF A VALID

MARRIAGE, THE OVERWHELMING EVIDENCE SHOWING THAT A MARRIAGE
CEREMONY TOOK PLACE WITH THE APPEARANCE OF THE CONTRACTING PARTIES
BEFORE THE SOLEMNIZING OFFICER AND THEIR PERSONAL DECLARATION THAT
THEY TOOK EACH OTHER AS HUSBAND AND WIFE IN THE PRESENCE OF NOT LESS
THAN TWO WITNESSES OF LEGAL AGE.

III

THE LOWER COURT ERRED IN NOT RULING ON THE ISSUE OF ESTOPPEL BY

LACHES ON THE PART OF THE PETITIONER, AN ISSUE TIMELY RAISED IN THE
COURT BELOW.35

The CA gave credence to Gloria’s arguments, and granted her appeal. It held that the certification of
the Municipal Civil Registrar failed to categorically state that a diligent search for the marriage
license of Gloria and Syed was conducted, and thus held that said certification could not be
accorded probative value.36 The CA ruled that there was sufficient testimonial and documentary
evidence that Gloria and Syed had been validly married and that there was compliance with all the
requisites laid down by law.37
It gave weight to the fact that Syed had admitted to having signed the marriage contract. The CA
also considered that the parties had comported themselves as husband and wife, and that Syed only
instituted his petition after Gloria had filed a case against him for bigamy. 38

The dispositive portion of the CA Decision reads as follows:

WHEREFORE, premises considered, the appeal is GRANTED. The Decision dated 05 October
2005 and Order dated 27 January 2006 of the Regional Trial Court of Pasay City, Branch 109, in
Civil Case No. 03-0382-CFM are REVERSED and SET ASIDE and the Petition for Declaration of
Nullity of Marriage is DISMISSED. The marriage between Shed [sic] Azhar Abbas and Gloria Goo
Abbas contracted on 09 January 1993 remains valid and subsisting. No costs.

SO ORDERED.39

Syed then filed a Motion for Reconsideration dated April 1, 200840 but the same was denied by the
CA in a Resolution dated July 24, 2008.41

Hence, this petition.

Grounds in Support of Petition

THE HONORABLE COURT OF APPEALS COMMITTED SERIOUS ERROR OF LAW IN

CITING REPUBLIC VS. COURT OF APPEALS AS THE SAME IS DIAMETRICALLY
INCONSISTENT AND CONTRARY TO THE COURT’S OWN FINDINGS AND
CONCLUSIONS IN THIS CASE.

II

THE HONORABLE COURT OF APPEALS GRAVELY ERRED IN REVERSING AND

SETTING ASIDE, WITHOUT ANY FACTUAL AND LEGAL BASIS, THE DECISION OF THE
REGIONAL TRIAL COURT GRANTING THE PETITION FOR DECLARATION OF NULLITY
OF MARRIAGE.42

The Ruling of this Court

The petition is meritorious.

As the marriage of Gloria and Syed was solemnized on January 9, 1993, Executive Order No. 209,
or the Family Code of the Philippines, is the applicable law. The pertinent provisions that would
apply to this particular case are Articles 3, 4 and 35(3), which read as follows:

Art. 3. The formal requisites of marriage are:

(1) Authority of the solemnizing officer;

(2) A valid marriage license except in the cases provided for in Chapter 2 of this Title; and
 (3) A marriage ceremony which takes place with the appearance of the contracting parties
before the solemnizing officer and their personal declaration that they take each other as
husband and wife in the presence of not less than two witnesses of legal age.

Art. 4. The absence of any of the essential or formal requisites shall render the marriage void ab
initio, except as stated in Article 35(2).

A defect in any of the essential requisites shall render the marriage voidable as provided in Article
45.

An irregularity in the formal requisites shall not affect the validity of the marriage but the party or
parties responsible for the irregularity shall be civilly, criminally and administratively liable.

Art. 35. The following marriages shall be void from the beginning:

xxxx

(3) Those solemnized without a license, except those covered by the preceding Chapter.

There is no issue with the essential requisites under Art. 2 of the Family Code, nor with the formal
requisites of the authority of the solemnizing officer and the conduct of the marriage ceremony. Nor
is the marriage one that is exempt from the requirement of a valid marriage license under Chapter 2,
Title I of the Family Code. The resolution of this case, thus, hinges on whether or not a valid
marriage license had been issued for the couple. The RTC held that no valid marriage license had
been issued. The CA held that there was a valid marriage license.

We find the RTC to be correct in this instance.

Respondent Gloria failed to present the actual marriage license, or a copy thereof, and relied on the
marriage contract as well as the testimonies of her witnesses to prove the existence of said license.
To prove that no such license was issued, Syed turned to the office of the Municipal Civil Registrar
of Carmona, Cavite which had allegedly issued said license. It was there that he requested
certification that no such license was issued. In the case of Republic v. Court of Appeals 43 such
certification was allowed, as permitted by Sec. 29, Rule 132 of the Rules of Court, which reads:

SEC. 28. Proof of lack of record. – A written statement signed by an officer having the custody of an
official record or by his deputy that after diligent search, no record or entry of a specified tenor is
found to exist in the records of his office, accompanied by a certificate as above provided, is
admissible as evidence that the records of his office contain no such record or entry.

In the case of Republic, in allowing the certification of the Civil Registrar of Pasig to prove the non-
issuance of a marriage license, the Court held:

The above Rule authorized the custodian of the documents to certify that despite diligent search, a
particular document does not exist in his office or that a particular entry of a specified tenor was not
to be found in a register. As custodians of public documents, civil registrars are public officers
charged with the duty, inter alia, of maintaining a register book where they are required to enter all
applications for marriage licenses, including the names of the applicants, the date the marriage
license was issued and such other relevant data. 44
The Court held in that case that the certification issued by the civil registrar enjoyed probative value,
as his duty was to maintain records of data relative to the issuance of a marriage license.

The Municipal Civil Registrar of Carmona, Cavite, where the marriage license of Gloria and Syed
was allegedly issued, issued a certification to the effect that no such marriage license for Gloria and
Syed was issued, and that the serial number of the marriage license pertained to another couple,
Arlindo Getalado and Myra Mabilangan. A certified machine copy of Marriage License No. 9969967
was presented, which was issued in Carmona, Cavite, and indeed, the names of Gloria and Syed do
not appear in the document.

In reversing the RTC, the CA focused on the wording of the certification, stating that it did not comply
with Section 28, Rule 132 of the Rules of Court.

The CA deduced that from the absence of the words "despite diligent search" in the certification, and
since the certification used stated that no marriage license appears to have been issued, no diligent
search had been conducted and thus the certification could not be given probative value.

To justify that deduction, the CA cited the case of Republic v. Court of Appeals. 45 It is worth noting
that in that particular case, the Court, in sustaining the finding of the lower court that a marriage
license was lacking, relied on the Certification issued by the Civil Registrar of Pasig, which merely
stated that the alleged marriage license could not be located as the same did not appear in their
records. Nowhere in the Certification was it categorically stated that the officer involved conducted a
diligent search, nor is a categorical declaration absolutely necessary for Sec. 28, Rule 132 of the
Rules of Court to apply.

Under Sec. 3(m), Rule 131 of the Rules of Court, it is a disputable presumption that an official duty
has been regularly performed, absent contradiction or other evidence to the contrary. We held, "The
presumption of regularity of official acts may be rebutted by affirmative evidence of irregularity or
failure to perform a duty."46 No such affirmative evidence was shown that the Municipal Civil
Registrar was lax in performing her duty of checking the records of their office, thus the presumption
must stand. In fact, proof does exist of a diligent search having been conducted, as Marriage
License No. 996967 was indeed located and submitted to the court. The fact that the names in said
license do not correspond to those of Gloria and Syed does not overturn the presumption that the
registrar conducted a diligent search of the records of her office.

It is telling that Gloria failed to present their marriage license or a copy thereof to the court. She
failed to explain why the marriage license was secured in Carmona, Cavite, a location where,
admittedly, neither party resided. She took no pains to apply for the license, so she is not the best
witness to testify to the validity and existence of said license. Neither could the other witnesses she
presented prove the existence of the marriage license, as none of them applied for the license in
Carmona, Cavite. Her mother, Felicitas Goo, could not even testify as to the contents of the license,
having admitted to not reading all of its contents. Atty. Sanchez, one of the sponsors, whom Gloria
and Felicitas Goo approached for assistance in securing the license, admitted not knowing where
the license came from. The task of applying for the license was delegated to a certain Qualin, who
could have testified as to how the license was secured and thus impeached the certification of the
Municipal Civil Registrar as well as the testimony of her representative. As Gloria failed to present
this Qualin, the certification of the Municipal Civil Registrar still enjoys probative value.

It is also noted that the solemnizing officer testified that the marriage contract and a copy of the
marriage license were submitted to the Local Civil Registrar of Manila. Thus, a copy of the marriage
license could have simply been secured from that office and submitted to the court. However, Gloria
inexplicably failed to do so, further weakening her claim that there was a valid marriage license
issued for her and Syed.

In the case of Cariño v. Cariño, 47 following the case of Republic,48 it was held that the certification of
the Local Civil Registrar that their office had no record of a marriage license was adequate to prove
the non-issuance of said license. The case of Cariño further held that the presumed validity of the
marriage of the parties had been overcome, and that it became the burden of the party alleging a
valid marriage to prove that the marriage was valid, and that the required marriage license had been
secured.49 Gloria has failed to discharge that burden, and the only conclusion that can be reached is
that no valid marriage license was issued. It cannot be said that there was a simple irregularity in the
marriage license that would not affect the validity of the marriage, as no license was presented by
the respondent. No marriage license was proven to have been issued to Gloria and Syed, based on
the certification of the Municipal Civil Registrar of Carmona, Cavite and Gloria’s failure to produce a
copy of the alleged marriage license.

To bolster its ruling, the CA cited other evidence to support its conclusion that Gloria and Syed were
validly married. To quote the CA:

Moreover, the record is replete with evidence, testimonial and documentary, that appellant and
appellee have been validly married and there was compliance with all the requisites laid down by
law. Both parties are legally capacitated to marry. A certificate of legal capacity was even issued by
the Embassy of Pakistan in favor of appellee. The parties herein gave their consent freely. Appellee
admitted that the signature above his name in the marriage contract was his. Several pictures were
presented showing appellant and appellee, before the solemnizing officer, the witnesses and other
members of appellant’s family, taken during the marriage ceremony, as well as in the restaurant
where the lunch was held after the marriage ceremony. Most telling of all is Exhibit "5-C" which
shows appellee signing the Marriage Contract.

xxxx

The parties have comported themselves as husband and wife and has [sic] one offspring, Aliea
Fatima Goo Abbas, who was born on 15 June 1993. It took appellee more than ten (10) years before
he filed on 01 August 2003 his Petition for Declaration of Nullity of Marriage under Article 4 of the
Family Code. We take serious note that said Petition appears to have been instituted by him only
after an Information for Bigamy (Exhibit "1") dated 10 January 2003 was filed against him for
contracting a second or subsequent marriage with one Ma. Corazon (Maryam) T. Buenaventura. We
are not ready to reward (appellee) by declaring the nullity of his marriage and give him his freedom
and in the process allow him to profit from his own deceit and perfidy. 50

All the evidence cited by the CA to show that a wedding ceremony was conducted and a marriage
contract was signed does not operate to cure the absence of a valid marriage license. Article 4 of the
Family Code is clear when it says, "The absence of any of the essential or formal requisites shall
render the marriage void ab initio, except as stated in Article 35(2)." Article 35(3) of the Family Code
also provides that a marriage solemnized without a license is void from the beginning, except those
exempt from the license requirement under Articles 27 to 34, Chapter 2, Title I of the same
Code.51 Again, this marriage cannot be characterized as among the exemptions, and thus, having
been solemnized without a marriage license, is void ab initio. 1âwphi1

As to the motive of Syed in seeking to annul his marriage to Gloria, it may well be that his motives
are less than pure, that he seeks to evade a bigamy suit. Be that as it may, the same does not make
up for the failure of the respondent to prove that they had a valid marriage license, given the weight
of evidence presented by petitioner. The lack of a valid marriage license cannot be attributed to him,
as it was Gloria who took steps to procure the same. The law must be applied. As the marriage
license, a formal requisite, is clearly absent, the marriage of Gloria and Syed is void ab initio.

WHEREFORE, in light of the foregoing, the petition is hereby GRANTED. The assailed Decision
dated March 11, 2008 and Resolution dated July 24, 2008 of the Court of Appeals in CA-G.R. CV
No. 86760 are hereby REVERSED and SET ASIDE. The Decision of the Regional Trial Court,
Branch 109, Pasay City dated October 5, 2005 in Civil Case No. 03-0382-CFM annulling the
marriage of petitioner with respondent on January 9, 1993 is hereby REINSTATED.

No costs.

SO ORDERED.
 Republic of the Philippines
SUPREME COURT
Manila

FIRST DIVISION

G.R. No. 189207               June 15, 2011

ERIC U. YU, Petitioner,
vs.
HONORABLE JUDGE AGNES REYES-CARPIO, in her official capacity as Presiding Judge,
Regional Trial Court of Pasig-Branch 261; and CAROLINE T. YU, Respondents.

DECISION

VELASCO, JR., J.:

The Case

This is a Petition for Certiorari under Rule 65 which seeks to annul and set aside the March 31, 2009
Decision1 of the Court of Appeals (CA) in CA-G.R. SP No. 106878. The CA Decision affirmed the
Orders dated August 4, 20082 and October 24, 20083 of the Regional Trial Court (RTC), Branch 261
in Pasig City.

The Facts

The instant petition stemmed from a petition for declaration of nullity of marriage filed by petitioner
Eric U. Yu against private respondent Caroline T. Yu with the RTC in Pasig City. The case was
initially raffled to Branch 163.

On May 30, 2006, Judge Leili Cruz Suarez of the RTC-Branch 163 issued an Order, stating that
petitioner’s Partial Offer of Evidence dated April 18, 2006 would already be submitted for resolution
after certain exhibits of petitioner have been remarked. But the exhibits were only relative to the
issue of the nullity of marriage of the parties.4

On September 12, 2006, private respondent moved to submit the incident on the declaration of
nullity of marriage for resolution of the court, considering that the incidents on custody, support, and
property relations were mere consequences of the declaration of nullity of the parties’ marriage. 5

On September 28, 2006, petitioner opposed private respondent’s Motion, claiming that the incident
on the declaration of nullity of marriage cannot be resolved without the presentation of evidence for
the incidents on custody, support, and property relations. 6 Petitioner, therefore, averred that the
incident on nullity of marriage, on the one hand, and the incidents on custody, support, and property
relations, on the other, should both proceed and be simultaneously resolved.

On March 21, 2007, RTC-Branch 163 issued an Order in favor of petitioner’s opposition. Particularly,
it stated that:
The Court agrees with the contention of the Petitioner that it would be more in accord with the rules if
the Parties were first allowed to present their evidence relative to the issues of property relations,
custody and support to enable the Court to issue a comprehensive decision thereon. 7

Subsequently, private respondent was able to successfully cause the inhibition of Judge Cruz
Suarez of the RTC-Branch 163. Consequently, the case was re-raffled to another branch of the
Pasig RTC, particularly Branch 261, presided by Judge Agnes Reyes-Carpio.8

Thereafter, while the case was being heard by the RTC-Branch 261, private respondent filed an
Omnibus Motion on May 21, 2008. The Omnibus Motion sought (1) the strict observation by the
RTC-Branch 261 of the Rule on Declaration of Absolute Nullity of Void Marriages, as codified in A.M.
No. 02-11-10-SC, in the subject proceedings; and (2) that the incident on the declaration of nullity of
marriage be already submitted for resolution.9 Conversely, private respondent prayed that the
incident on the declaration of nullity of marriage be resolved ahead of the incidents on custody,
support, and property relations, and not simultaneously.

Quite expectedly, petitioner opposed the Omnibus Motion, arguing that the issues that were the
subject of the Omnibus Motion had already been resolved in the March 21, 2007 Order.
Concurrently, petitioner prayed that the incidents on nullity, custody, support, and property relations
of the spouses be resolved simultaneously.10

In its Order dated August 4, 2008, the RTC-Branch 261 granted the Omnibus Motion. Judge Reyes-
Carpio explained that:

At the outset, the parties are reminded that the main cause of action in this case is the declaration of
nullity of marriage of the parties and the issues relating to property relations, custody and support
are merely ancillary incidents thereto.

xxxx

Consistent, therefore, with Section 19 of A.M. No. 02-11-10-SC, the Court finds it more prudent to
rule first on the petitioner’s petition and respondent’s counter-petition for declaration of nullity of
marriage on the ground of each other’s psychological incapacity to perform their respective marital
obligations. If the Court eventually finds that the parties’ respective petitions for declaration of nullity
of marriage is indeed meritorious on the basis of either or both of the parties’ psychological
incapacity, then the parties shall proceed to comply with Article[s] 50 and 51 of the Family Code
before a final decree of absolute nullity of marriage can be issued. Pending such ruling on the
declaration of nullity of the parties’ marriage, the Court finds no legal ground, at this stage, to
proceed with the reception of evidence in regard the issues on custody and property relations, since
these are mere incidents of the nullity of the parties’ marriage. 11

On August, 28, 2008, petitioner moved for the reconsideration of the August 4, 2008 Order. On
October 24, 2008, Judge Reyes-Carpio issued an Order denying petitioner’s motion for
reconsideration. In denying the motion, Judge Reyes-Carpio reasoned:

x x x [I]t is very clear that what petitioner seeks to reconsider in the Court’s Order dated August 4,
2008 is the procedure regarding the reception of evidence on the issues of property relations,
custody and support. He opposes the fact that the main issue on declaration of nullity is submitted
for decision when he has not yet presented evidence on the issues on property relations, custody
and support.
Considering that what he seeks to set aside is the procedural aspect of the instanct case, i.e. the
reception of evidence which is a matter of procedure, there is no question that it is A.M. 02-11-[10]-
SC which should be followed and not the procedures provided in Articles 50 and 51 of the Family
Code. While it is true that the Family Code is a substantive law and rule of procedure cannot alter a
substantive law, the provisions laid in Articles 50 and 51 relative to the liquidation and dissolution of
properties are by nature procedural, thus there are no substantive rights which may be prejudiced or
any vested rights that may be impaired.

In fact, the Supreme Court in a number of cases has even held that there are some provisions of the
Family Code which are procedural in nature, such as Article[s] 185 and 50 of the Family Code which
may be given retroactive effect to pending suits. Adopting such rationale in the instant case, if the
Court is to adopt the procedures laid down in A.M. No. 02-11-[10]-SC, no vested or substantive right
will be impaired on the part of the petitioner or the respondent. Even Section 17 of A.M. No. 02-11-
[10]-SC allows the reception of evidence to a commissioner in matters involving property relations of
the spouses.

xxxx

Lastly, it is the policy of the courts to give effect to both procedural and substantive laws, as
complementing each other, in the just and speedy resolution of the dispute between the parties.
Moreover, as previously stated, the Court finds it more prudent to rule first on the petitioner’s petition
and respondent’s counter-petition for declaration of nullity of marriage on the ground of each other’s
psychological incapacity to perform their respective marital obligations. If the Court eventually finds
that the parties’ respective petitions for declaration of nullity of marriage is indeed meritorious on the
basis of either or both of the parties’ psychological incapacity, then the parties shall proceed to
comply with Article[s] 50 and 51 of the Family Code before a final decree of absolute nullity of
marriage can be issued.12

The Ruling of the Appellate Court

On January 8, 2009, petitioner filed a Petition for Certiorari under Rule 65 with the CA, assailing both
the RTC Orders dated August 4, 2008 and October 24, 2008. The petition impleaded Judge Reyes-
Carpio as respondent and alleged that the latter committed grave abuse of discretion in the issuance
of the assailed orders.

On March 31, 2009, the CA affirmed the judgment of the trial court and dismissed the petition. The
dispositive portion of the CA Decision reads:

All told, absent any arbitrary or despotic exercise of judicial power as to amount to abuse of
discretion on the part of respondent Judge in issuing the assailed Orders, the instant petition for
certiorari cannot prosper.

WHEREFORE, the petition is hereby DISMISSED.

SO ORDERED.13

The Issues

This appeal is, hence, before Us, with petitioner maintaining that the CA committed grave abuse of
discretion in upholding the assailed orders issued by the trial court and dismissing the Petition for
Certiorari. Particularly, petitioner brings forth the following issues:
 A. Whether or not the [CA] committed grave abuse of discretion amounting to lack of
jurisdiction in holding that a petition for certiorari is not a proper remedy of the Petitioner

B. Whether or not the [CA] committed grave abuse of discretion amounting to lack [or
excess] of jurisdiction in upholding the Respondent Judge in submitting the main issue of
nullity of marriage for resolution ahead of the reception of evidence on custody, support, and
property relations

C. Whether or not the reception of evidence on custody, support and property relations is
necessary for a complete and comprehensive adjudication of the parties’ respective claims
and [defenses].14

The Court’s Ruling

We find the petition without merit.

A Petition for Certiorari under Rule 65 is the proper remedy in assailing that a judge has committed
grave abuse of discretion amounting to lack or excess of jurisdiction. Section 1, Rule 65 of the Rules
of Court clearly sets forth when a petition for certiorari can be used as a proper remedy:

SECTION 1. Petition for certiorari. – When any tribunal, board or officer exercising judicial or quasi-
judicial functions has acted without or in excess of its jurisdiction, or with grave abuse of discretion
amounting to lack or excess of jurisdiction, and there is no appeal, or any plain, speedy, and
adequate remedy in the ordinary course of law, a person aggrieved thereby may file a verified
petition in the proper court, alleging the facts with certainty and praying that judgment be rendered
annulling or modifying the proceedings of such tribunal, board or officer, and granting such incidental
reliefs as law and justice may require. (Emphasis Ours.)

The term "grave abuse of discretion" has a specific meaning. An act of a court or tribunal can only
be considered as with grave abuse of discretion when such act is done in a "capricious or whimsical
exercise of judgment as is equivalent to lack of jurisdiction." 15 The abuse of discretion must be so
patent and gross as to amount to an "evasion of a positive duty or to a virtual refusal to perform a
duty enjoined by law, or to act at all in contemplation of law, as where the power is exercised in an
arbitrary and despotic manner by reason of passion and hostility." 16 Furthermore, the use of a
petition for certiorari is restricted only to "truly extraordinary cases wherein the act of the lower court
or quasi-judicial body is wholly void."17 From the foregoing definition, it is clear that the special civil
action of certiorari under Rule 65 can only strike an act down for having been done with grave abuse
of discretion if the petitioner could manifestly show that such act was patent and gross. 18 But this is
not the case here.

Nowhere in the petition was it shown that the acts being alleged to have been exercised with grave
abuse of discretion––(1) the Orders of the RTC deferring the presentation of evidence on custody,
support, and property relations; and (2) the appellate court’s Decision of upholding the Orders––
were patent and gross that would warrant striking down through a petition for certiorari under Rule
65.

At the very least, petitioner should prove and demonstrate that the RTC Orders and the CA Decision
were done in a capricious or whimsical exercise of judgment. 19 This, however, has not been shown in
the petition.
It appears in the records that the Orders in question, or what are alleged to have been exercised
with grave abuse of discretion, are interlocutory orders. An interlocutory order is one which "does not
finally dispose of the case, and does not end the Court’s task of adjudicating the parties’ contentions
and determining their rights and liabilities as regards each other, but obviously indicates that other
things remain to be done by the Court."20 To be clear, certiorari under Rule 65 is appropriate to strike
down an interlocutory order only when the following requisites concur:

(1) when the tribunal issued such order without or in excess of jurisdiction or with grave
abuse of discretion; and

(2) when the assailed interlocutory order is patently erroneous and the remedy of appeal
would not afford adequate and expeditious relief. 21

In this case, as We have discussed earlier, petitioner failed to prove that the assailed orders were
issued with grave abuse of discretion and that those were patently erroneous. Considering that the
requisites that would justify certiorari as an appropriate remedy to assail an interlocutory order have
not been complied with, the proper recourse for petitioner should have been an appeal in due course
of the judgment of the trial court on the merits, incorporating the grounds for assailing the
interlocutory orders.22 The appellate court, thus, correctly cited Triplex Enterprises, Inc. v. PNB-
Republic Bank and Solid Builders, Inc., penned by Chief Justice Renato Corona, which held:

Certiorari as a special civil action is proper when any tribunal, board or officer exercising judicial or
quasi-judicial functions has acted without or in excess of its jurisdiction, or with grave abuse of
discretion, and there is no appeal nor any plain, speedy and adequate remedy at law. The writ may
be issued only where it is convincingly proved that the lower court committed grave abuse of
discretion, or an act too patent and gross as to amount to an evasion of a duty, or to a virtual refusal
to perform the duty enjoined or act in contemplation of law, or that the trial court exercised its power
in an arbitrary and despotic manner by reason of passion or personal hostility.

While certiorari may be maintained as an appropriate remedy to assail an interlocutory order in

cases where the tribunal has issued an order without or in excess of jurisdiction or with grave abuse
of discretion, it does not lie to correct every controversial interlocutory ruling. In this connection, we
quote with approval the pronouncement of the appellate court:

In this jurisdiction, there is an "erroneous impression that interlocutory [orders] of trial courts on
debatable legal points may be assailed by certiorari. To correct that impression and to avoid
clogging the appellate court with future certiorari petitions it should be underscored that the office of
the writ of certiorari has been reduced to the correction of defects of jurisdiction solely and cannot
legally be used for any other purpose."

The writ of certiorari is restricted to truly extraordinary cases wherein the act of the lower court or
quasi-judicial body is wholly void. Moreover, it is designed to correct errors of jurisdiction and not
errors in judgment. The rationale of this rule is that, when a court exercises its jurisdiction, an error
committed while so engaged does not deprive it of the jurisdiction being exercised when the error is
committed. Otherwise, every mistake made by a court will deprive it of its jurisdiction and every
erroneous judgment will be a void judgment.

When the court has jurisdiction over the case and person of the defendant, any mistake in the
application of the law and the appreciation of evidence committed by a court may be corrected only
by appeal. The determination made by the trial court regarding the admissibility of evidence is but an
exercise of its jurisdiction and whatever fault it may have perpetrated in making such a determination
is an error in judgment, not of jurisdiction. Hence, settled is the rule that rulings of the trial court on
procedural questions and on admissibility of evidence during the course of a trial are interlocutory in
nature and may not be the subject of a separate appeal or review on certiorari. They must be
assigned as errors and reviewed in the appeal properly taken from the decision rendered by the trial
court on the merits of the case.

Here, petitioner assails the order of the trial court disallowing the admission in evidence of the
testimony of Roque on the opinion of the OGCC. By that fact alone, no grave abuse of discretion
could be imputed to the trial court. Furthermore, the said order was not an error of jurisdiction. Even
assuming that it was erroneous, the mistake was an error in judgment not correctable by the writ of
certiorari.23

Be that as it may, even dwelling on the merits of the case just as the CA has already done and
clearly explicated, We still find no reason to grant the petition.

It must be noted that Judge Reyes-Carpio did not disallow the presentation of evidence on the
incidents on custody, support, and property relations. It is clear in the assailed orders that the trial
court judge merely deferred the reception of evidence relating to custody, support, and property
relations, to wit:

August 4, 2008 Order

Consistent, therefore, with Section 19 of A.M. No. 02-11-10-SC, the Court finds it more prudent to
rule first on the petitioner’s petition and respondent’s counter-petition for declaration of nullity of
marriage on the ground of each other’s psychological incapacity to perform their respective marital
obligations. If the Court eventually finds that the parties’ respective petitions for declaration of nullity
of marriage is indeed meritorious on the basis of either or both of the parties’ psychological
incapacity, then the parties shall proceed to comply with Article[s] 50 and 51 of the Family Code
before a final decree of absolute nullity of marriage can be issued. Pending such ruling on the
declaration of nullity of the parties’ marriage, the Court finds no legal ground, at this stage, to
proceed with the reception of evidence in regard the issues on custody and property relations, since
these are mere incidents of the nullity of the parties’ marriage. 24

October 24, 2008 Order

Lastly, it is the policy of the courts to give effect to both procedural and substantive laws, as
complementing each other, in the just and speedy resolution of the dispute between the parties.
Moreover, as previously stated, the Court finds it more prudent to rule first on the petitioner’s petition
and respondent’s counter-petition for declaration of nullity of marriage on the ground of each other’s
psychological incapacity to perform their respective marital obligations. If the Court eventually finds
that the parties’ respective petitions for declaration of nullity of marriage is indeed meritorious on the
basis of either or both of the parties’ psychological incapacity, then the parties shall proceed to
comply with Article (sic) 50 and 51 of the Family Code before a final decree of absolute nullity of
marriage can be issued.25

And the trial judge’s decision was not without basis. Judge Reyes-Carpio finds support in the Court
En Banc Resolution in A.M. No. 02-11-10-SC or the Rule on Declaration of Absolute Nullity of Void
Marriages and Annulment of Voidable Marriages. Particularly, Secs. 19 and 21 of the Rule clearly
allow the reception of evidence on custody, support, and property relations after the trial court
renders a decision granting the petition, or upon entry of judgment granting the petition:

Section 19. Decision. - (1) If the court renders a decision granting the petition, it shall declare
therein that the decree of absolute nullity or decree of annulment shall be issued by the court only
after compliance with Articles 50 and 51 of the Family Code as implemented under the Rule on
Liquidation, Partition and Distribution of Properties.

xxxx

Section 21. Liquidation, partition and distribution, custody, support of common children and delivery
of their presumptive legitimes. - Upon entry of the judgment granting the petition, or, in case of
appeal, upon receipt of the entry of judgment of the appellate court granting the petition, the Family
Court, on motion of either party, shall proceed with the liquidation, partition and distribution of the
properties of the spouses, including custody, support of common children and delivery of their
presumptive legitimes pursuant to Articles 50 and 51 of the Family Code unless such matters had
been adjudicated in previous judicial proceedings.

Evidently, Judge Reyes-Carpio did not deny the reception of evidence on custody, support, and
property relations but merely deferred it, based on the existing rules issued by this Court, to a time
when a decision granting the petition is already at hand and before a final decree is issued.
Conversely, the trial court, or more particularly the family court, shall proceed with the liquidation,
partition and distribution, custody, support of common children, and delivery of their presumptive
legitimes upon entry of judgment granting the petition. And following the pertinent provisions of the
Court En Banc Resolution in A.M. No. 02-11-10-SC, this act is undoubtedly consistent with Articles
50 and 51 of the Family Code, contrary to what petitioner asserts. Particularly, Arts. 50 and 51 of the
Family Code state:

Article 50. x x x

The final judgment in such cases shall provide for the liquidation, partition and distribution of
the properties of the spouses, the custody and support of the common children, and the
delivery of their presumptive legitimes, unless such matters had been adjudicated in the previous
judicial proceedings.

xxxx

Article 51. In said partition, the value of the presumptive legitimes of all common children, computed
as of the date of the final judgment of the trial court, shall be delivered in cash, property or
sound securities, unless the parties, by mutual agreement judicially approved, had already provided
for such matters. (Emphasis Ours.)

Finally, petitioner asserts that the deferment of the reception of evidence on custody, support, and
property relations would amount to an ambiguous and fragmentary judgment on the main
issue.26 This argument does not hold water. The Court En Banc Resolution in A.M. No. 02-11-10-SC
clearly allows the deferment of the reception of evidence on custody, support, and property relations.
Conversely, the trial court may receive evidence on the subject incidents after a judgment granting
the petition but before the decree of nullity or annulment of marriage is issued. And this is what
Judge Reyes-Carpio sought to comply with in issuing the assailed orders. As correctly pointed out by
the CA, petitioner’s assertion that ruling the main issue without receiving evidence on the subject
incidents would result in an ambiguous and fragmentary judgment is certainly speculative and,
hence, contravenes the legal presumption that a trial judge can fairly weigh and appraise the
evidence submitted by the parties.271âwphi1

Therefore, it cannot be said at all that Judge Reyes-Carpio acted in a capricious and whimsical
manner, much less in a way that is patently gross and erroneous, when she issued the assailed
orders deferring the reception of evidence on custody, support, and property relations. To reiterate,
this decision is left to the trial court’s wisdom and legal soundness. Consequently, therefore, the CA
cannot likewise be said to have committed grave abuse of discretion in upholding the Orders of
Judge Reyes-Carpio and in ultimately finding an absence of grave abuse of discretion on her part.

WHEREFORE, the petition is DISMISSED. The CA Decision in CA-G.R. SP No. 106878 finding that
Judge Agnes Reyes-Carpio did not commit grave abuse of discretion amounting to lack or excess of
jurisdiction is AFFIRMED.

SO ORDERED.
 Republic of the Philippines
SUPREME COURT
Manila

THIRD DIVISION

G.R. No. 179518               November 19, 2014

BANK OF THE PHILIPPINE ISLANDS, Petitioner,

vs.
VICENTE VICTOR C. SANCHEZ, HEIRS OF KENNETH NEREO SANCHEZ, represented by
FELISA GARCIA YAP, and HEIRS OF IMELDA C. VDA. DE SANCHEZ, represented by
VICENTE VICTOR C. SANCHEZ, Respondents.

x-----------------------x

G.R. No. 179835

GENEROSO TULAGAN, HEIRS OF ARTURO MARQUEZ, represented by ROMMEL MARQUEZ,

and VARIED TRADERS CONCEPT, INC., represented by its President and General Manager,
ANTHONY QUINA, Petitioners,
vs.
VICENTE VICTOR C. SANCHEZ, HEIRS OF KENNETH NEREO SANCHEZ, represented by
FELISA GARCIA YAP, and HEIRS OF IMELDA C. VDA. DE SANCHEZ, represented by
VICENTE VICTOR C. SANCHEZ, JESUS V. GARCIA, and TRANSAMERICAN SALES &
EXPOSITION, INC., Respondents.

x-----------------------x

G.R. No. 179954

REYNALDO V. MANIWANG, Petitioner,
vs.
VICENTE VICTOR C. SANCHEZ and FELISA GARCIA YAP, Respondents.

DECISION

VELASCO, JR., J.:

The Case

These are consolidated Petitions for Review on Certiorari under Rule 45 of the Rules of Court
assailing the November 6, 2006 Decision  and August 31, 2007 Resolution of the Court of Appeals in
1

CA-G.R. No. 83236 entitled Vicente Victor C. Sanchez, Heirs of Kenneth Nereo Sanchez
represented by Felisa Garcia Yap, and Heirs of Imelda C. Vda. de Sanchez represented by Vicente
Victor C. Sanchez v. Jesus V Garcia and TransAmerican Sales and Exposition, Inc. The assailed
Decision affirmed with modification the Decision dated July 14, 2004 of the Regional Trial Court,
Branch 89 in Quezon City, in Civil Case No. Q-90-4690.

The Facts
The facts of the case are as follows:

Vicente Victor C. Sanchez (Vicente), Kenneth Nereo Sanchez and Imelda C. V da. De Sanchez
owned a parcel of land located at No. 10 Panay A venue, Quezon City consisting of 900 square
meters. The property was registered under Transfer Certificate of Title No. (TCT) 156254 of the
Registry of Deeds of Quezon City (the Subject Property). 2

On October 10, 1988, Jesus V. Garcia (Garcia), doing business under the name TransAmerican
Sales and Exposition, Inc. (TSEI), wrote a letter  to Vicente offering to buy the Subject Property for
3

One Million Eight Hundred Thousand Pesos (₱1,800,000) under the following terms and conditions:

Following are my basic terms and conditions in buying the abovementioned property:

1. ₱50,000.00 - Reservation/earnest money to be paid upon execution of reservation

agreement

2. ₱1,750,000.00 - To be paid to seller as soon as all pertinent sales documents, including a

Deed of Absolute Sale are prepared and executed in my favor.

3. As per standard practice, the capital gain [sic] tax, documentary stamps, brokers
commission of 5% and Deed of Sale documents shall be in the account of the Seller.

4. Registration expenses and transfer tax shall be my obligations [sic]. 4

The offer was good for only seven (7) days. The period elapsed with the parties failing to come to an
agreement.

Sometime in the third week of October 1988, Felisa Yap (Yap), the widow of Kenneth Nereo
Sanchez, and Garcia had a meeting at the Quezon City Sports Club wherein the parties agreed to
the sale of the subject property under the following terms and conditions:

1.7.1. Garcia shall buy the property for ₱1.850 million payable in cash immediately after the
occupants thereof shall have vacated the property.

1.7.2. Garcia shall immediately pay (the) amount of ₱50,000.00 creditable against the total
purchase.

1.7.3. Garcia shall take care of all documentation necessary for the transfer of the title in his
favor, including the reconstitution of the original title x x x and the extra judicial settlement of
the property, considering that, as stated, the title is still registered in the names of plaintiff
Sanchez, the late Kenneth Nereo Sanchez and the lateImelda C. Vda. De Sanchez. For this
purpose, the original owner’s copy of Transfer Certificate of Title, the copy of the application
for the reconstitution of title of the property, and copies of receipts of real estate taxes were
to be entrusted to defendant Garcia;

1.7.4. Garcia shall cause the demolition of the old house standing on the property and shall
sell the scrap materials thereof for not less than ₱50,000.00. All proceeds to be realized on
account of said demolition shall be turned over to the [Sanchezes]. 5
Pursuant to this agreement, Yap turned over to Garcia the original owner’s copy of TCT 156254, the
copy of the filed Application for Restitution of Title to the property, and copies of all receipts for the
payment of real estate taxes on the property,while Garcia paid Yap 50,000 as earnest money. 6

Afterwards, Yap required the occupants of the subject property to vacate the same. Immediately
after it was vacated, Garcia, without Yap’s knowledge and consent, took possession of the lot and
installed his own caretaker thereon with strict instructions not to allow anyone to enter the property.
Yap later learned that Garcia had also demolished the house on the property and advertised the
construction and sale of "Trans American Townhouse V" thereon. The foregoing developments
notwithstanding and despite numerous demands, Garcia failed to pay the balance of the purchase
price as agreed upon. 7

Then, on December 5, 1988, Yap was informed that the checks representing the purchase price of
the subject property were ready but that Vicente must pick up his checks personally. On December
8, 1988, Vicente came to Manila from Laguna and proceeded to Garcia’s office to get the checks.
However, out of the six (6) checks that were presented to them, four (4) of them were post-dated,
further delaying their overdue payment.  In order to properly document such check payments, the
8

parties executed an Agreement dated December 8, 1988,9 paragraphs 3 to 8 of which relevantly

provide:

3. That the total consideration of sale of the rights, interest, participation and title of the First (Yap)
and Second (Vicente) Parties of the aforestated parcel of land to the Third Party (Garcia) shall be
One Million Eight Hundred Fifty Thousand Pesos (₱1,850,000.00), Philippine Currency, payable in
check, as follows:

a) RBC Check No. 290258 to be drawn in favor of Felisa G. Yap and dated
December 8, 1988 for the sum of ₱250,000.00;

b) RBC Check No. 290257 to be drawn in favor of Vicente Victor Sanchez and dated
December 8, 1988 for the sum of ₱250,000.00;

c) RBC Check No. 290261 to be drawn in favor of Felisa G. Yap and dated
December 14, 1988 for the sum of ₱250,000.00;

d) RBC Check No. 290260 to be drawn in favor of Vicente Victor Sanchez and dated
December 14, 1988 for the sum of ₱250,000.00;

e) RBC Check No. 290263 to be drawn in favor of Felisa G. Yap and dated
December 22, 1988 for the sum of ₱400,000.00; and

f) RBC Check No. 290262 to be drawn in favor of Vicente Victor Sanchez and dated
December 22, 1988 for the sum of ₱400,000.00.

4. That the parties hereto agree that once the aforestated checks are honored by the bank and
encashed by the payees thereof, the First and Second Parties shall execute an EXTRA-JUDICIAL
SETTLEMENT OF ESTATE WITH SALE distributing and dividing among themselves the aforestated
parcelof land and conveying in the said instrument all their rights, interest, share, title and
participation in the said property to the Third Party for the consideration stated in the preceding
paragraph.
5. That once the aforestated EXTRA-JUDICIAL SETTLEMENT OF ESTATE WITH SALE is
executed, the First and Second Parties shall immediately deliver the said document to the Third
Party who, on the strength of the same, shall reconstitute the burned Title of the aforesaid Transfer
Certificate of Title No. 156254, copy attached, in the Registry of Deed of Quezon City and thereafter
effect the transfer and registration of the said property inhis name; it being understood however that
all necessary expenses necessary for such reconstitution of title, transfer and registration, shall
beborne by the Third Party while the inheritance tax, capital gains tax and documentary stamps
required to be paid therefor shall be borne by the First and Second Parties, but in no case shall it
exceed the combined amount of P____________.

6. That it is agreed by the parties hereof that if at any time one of the aforestated checks is
dishonored by the bank, the First and Second Parties may opt to rescind this contract and that in the
event of rescission, the First and Second Parties shall forfeit the earnest money of ₱50,000.00 and
retain or withhold the amount representing the value of damage effected by way of demolition by the
Third Party on the property standing and situated on the aforestated parcel of land, which value shall
not exceed the sum of ₱290,000 -- depreciated cost of the building therein and that whatever then
remain as proceeds of the aforestated checks shall be returned to the Third Party.

7. It is also agreed that after the delivery of the EXTRAJUDICIAL SETTLEMENT OF ESTATE WITH
SALE by the First and Second Parties after the encashment of the last check, the Third Party shall
also pay the balance of the demolition proceeds in the amount of ₱20,000.00.

8. That after the delivery of the EXTRA-JUDICIAL SETTLEMENT OF ESTATE WITH SALE to the
Third Party, the First and Second Parties shall, except those stipulated above, then have only the
remaining obligation to deliver to the Third Party any document in their possession or what they can
lawfully and validly execute in accordance with their rights as aforestated and/or shown in the
aforementioned title. 10

Subsequently, the first four (4) checks were deposited with no issue. However, the last two (2)
checks, amounting to ₱400,000 each, were dishonored for the reason of "DAIF" or drawn against
insufficient funds.
11

Thus, Yap wrote a letter dated December 26, 1988  to Garcia informing him that the two (2) checks
12

were dishonored and asking that the checks be replaced within five (5) days from receipt of the
letter. Such request was left unheeded.

On January 10, 1989, Yap informed Garcia in a letter  that she and Vicente were rescinding the
13

Agreement while demanding the return of the original owner’s copy of TCT 156254. This prompted
Garcia to offer two (2) manager’s checks in the aggregate amount of ₱300,000 which Yap flatly
refused, reiterating the rescission of their Agreement and demanding for the return of all documents
entrusted to Garcia through a January 21, 1989 letter. 14

However, in a letter dated January 27, 1989,  Garcia’s counsel, Atty. Francisco Beato, Jr. (Beato),
15

informed Yap that they (Garcia, Vicente and Yap) had an agreement that the ₱800,000 balance of
the purchase price was due to be paid by Garcia only upon Yap and Vicente’s payment of the realty,
inheritance and capital gains taxes due on the transfer of the property. Thus, Garcia effectively
refused to return the documents and to vacate the subject property. Yap referred Beato’s letter to
her own counsel, Atty. Julian S. Yap, who wrote back in a letter dated February 16, 1989, refuting
the claim of Garcia that the ₱800,000 was not yet due and reiterating their decision to rescind the
Agreement and demanding that Garcia vacate the property and return the documents that were
surrendered to him by Yap. 16
In the meantime, on February 19, 1989, Yap and Vicente discovered that Garcia posted an
advertisement in the classified ads of the Manila Bulletin offering to sell units at the Trans American
Townhouse V situated at the subject property. 17

Thus, on February 27, 1989, Atty. Yap wrote the Housing and Land Use Regulatory Board (HLURB)
informing the latter of the existing public advertisement of TSEI offering for sale townhouses illegally
constructed on the subject property and urging the HLURB to cancel any existing permit or license to
sell the said townhouse unitsor to deny any application therefor. 18

On March 17, 1989, the HLURB issued a Cease and Desist Order  (CDO) enjoining TSEI and
19

Garcia from further developing and selling the townhouses. In the said order, Commissioner Amado
B. Celoria of the HLURB certified that respondents Garcia and TSEI have not been issued any
permit by said Board for the townhouse Project on the subject lot. Respondents Garcia and TSEI
were directed to immediately stop from further developing the project. Additionally, such cease and
desist order as well as warnings to possible buyers of the townhouses were published with the
Philippine Daily Inquirer on April 16, 1989, and with the Manila Bulletin on April 19, 1989.  On May 5,
20

1989, the HLURB issued another letter to TSEI reiterating its previous directive for it to cease and
desist from selling the townhouse units.  In compliance, Garcia and TSEI stopped construction of the
21

townhouses units on March 30, 1989. 22

In a delayed response to the CDO, TSEI wrote a letter to the HLURB alleging that only ground
leveling works were being undertaken on the project. This was rebuffed by the HLURB in a letter
dated May 8, 1989  stating that ocular inspections of the project revealed that 2nd floor construction
23

on the townhouses were already being undertaken. Thus, the HLURB ordered TSEI to explain in
writing why administrative sanctions should not be meted out against it and reiterating its earlier
cease and desist order. Undeterred, TSEI continued its construction and selling activities for the
townhouses. Thus, the HLURB issued an Order dated June 1, 1989  fining TSEI in the amount of
24

₱10,000.

To further protect their interests, Yap and Vicente also inquired from the City Building Official of
Quezon City, whether a building permit had been issued for the construction on the Subject
Property. In a letter dated March 14, 1989, the office found that the construction on the subject
property was indeed illegal and at its 5% initial stage.  Additionally, Yap also wrote a letter dated
25

April 3, 1989  to the Register of Deeds in Quezon City informing it that TCT 156254 was no longer in
26

their possession and requesting that the office clear the matter with them first before acting on any
transaction pertaining to the subject property.

In the meantime, the HLURB issued another letter dated June 22, 1989  denying TSEI’s proposed
27

compromise penalty of ₱2,500 and directing TSEI to pay the ₱10,000 fine. And on June 23, 1989, it
issued another letter  to TSEI refuting the latter’s claim that they were not selling townhouses by
28

citing advertisements of TransAmerican Townhouse V units at No. 10, Panay Avenue in the
Philippine Daily Inquirer (PDI) and the Manila Bulletin (MB).

Then, on August 21, 1989, Yap filed a formal complaint  with the Office of the City Building Official of
29

Quezon City. The complaint was set for hearing on August 30, 1989 with an order for Garcia and
TSEI to produce their building permit.  However, both Garciaand TSEI failed to attend the said
30

hearing.

Thereafter, on February 15, 1990, Yap and Vicente, in his own behalf and representing the heirs of
Imelda C.Vda. De Sanchez, filed before the Regional Trial Court (RTC) in Quezon City, Branch 89 a
Complaint dated February 14, 1990  for the rescission of contract, restitution and damages with
31
prayer for TRO/preliminary injunction against TSEI and Garcia, docketed as Civil Case No. Q-90-
4690.

Meanwhile, Garcia managed to cause the cancellation of TCT 156254 and its replacement with TCT
383697 in the name of TSEI.  TCT 383697, however, bore the date of issuance as June 9,
32

1988,way before the parties agreed on the sale sometimein October 1988. Garcia apparently used
TCT 383697 to entice several buyers tobuy the townhouse units being constructed by TSEI on the
subject lot. Claiming to have bought townhouse units sometime in early 1989, the following
intervened in the instant case: the spouses Jose and Visitacion Caminas (Caminas), Reynaldo V.
Maniwang (Maniwang), Generoso C. Tulagan (Tulagan), Varied Traders Concept, Inc. (VTCI), and
Arturo Marquez (Marquez).

The records reveal that on January 31, 1989, TSEI sold to Tulagan a 52-square meter portion of
TCT 156254 and the townhouse unit that was going to be built upon it for the amount of ₱800,000 as
evidenced by a Conditional Deed of Sale of even date.  Later, Tulagan bought another unit from
33

TSEI this time for ₱600,000 as shown by a Contract to Sell dated February 21, 1989.  Then, 34

Maniwang bought a unit from TSEI for ₱700,000 through an Absolute Deed of Sale dated February
22, 1989.  Later, Marquez purchased a townhouse unit from TSEI for ₱800,000 in a Contract to Sell
35

dated March 13, 1989.  Afterwards, TSEI sold to Caminas a townhouse unit for ₱650,000 through
36

an Absolute Deed of Sale dated March 21, 1989.  Thereafter, VTCI bought three (3) townhouses
37

from TSEI for ₱700,000 each in three (3) separate Absolute Deeds of Sale all dated October 30,
1989.  TSEI left the townhouse units unfinished, leaving these intervenors to finish their townhouses
38

by themselves.

Notably, except for the Absolute Deeds of Sale executed between TSEI and VTCI, all the other
intervenors’ contracts conveying townhouses in their favor identified their purchased lots as covered
by TCT 156254 (the title of the Sanchezes). As culled fromthe transcripts, the intervenors
Caminas,  Maniwang,  Tulagan,  and Marquez  asserted that they were all shown TCT 383697 in
39 40 41 42

the name of TSEI but nevertheless signed their respective contracts with TSEI indicating the subject
property as covered by TCT 156254. Subsequently, they all got a photocopy of TCT 383697 and
verified the same with the Registry of Deeds of Quezon City, which confirmed that the title was
clean. Onthe other hand, only the Absolute Deed of Sale in favor of VTCI, dated October 30, 1987,
reflected that the property sold was covered by TCT 383697. 43

Far East Bank and Trust Company (FEBTC) entered into a Loan Agreement 44 dated May 22, 1989
with TSEIsecured by a Real Estate Mortgage over TCT 156254.FEBTC later merged with the Bank
of the Philippine Islands (BPI) with the latter as the surviving bank. Garcia purportedly explained to
FEBTC that the parties were still in the process of transferring the title. Afterwards, Garcia submitted
a copy of TCT 383697 in TSEI’s name. Upon default, FEBTC (now BPI) foreclosed the subject lot
and had the Foreclosure Certificate of Sale annotated on TCT 383697. The Ruling of the Regional
Trial Court

On July 14, 2004, the RTC rendered a Decision in favor of the Sanchezes as plaintiffs, the
dispositive portion of which reads:

WHEREFORE, judgment is hereby rendered as follows:

1. Declaring the legality and validity of the Extrajudicial Rescission effected by the plaintiffs
on the Contract to Sell on the subject property, covered by TCT No. 156254 in their names;
2. Ordering the defendants and all persons acting on their behalf to return to the plaintiffs the
Owner’s Copy of TCT No. 156254, including all the documents entrusted to them in
consideration of their Contract to Sell;

3. Ordering defendants and all persons, including the intervenors and all persons claiming
rights under them to return and surrender to the plaintiffs the peaceful possession of the
subject property covered by TCT No. 156254 located at No. 10 Panay Avenue, Quezon City;

4. Ordering the defendants jointly and severally to pay the plaintiffs the sum of One Hundred
Thousand (₱100,000.00) Pesos, Philippine Currency as and by way of attorney’s fees;

5. Ordering the defendants jointly and severally to pay the plaintiffs the sum of Two Hundred
Thousand (₱200,000.00) Pesos, Philippine Currency as and by way of moral damages;

6. Ordering the defendants jointly and severally to pay the plaintiffs the sum of Two Hundred
Thousand (₱200,000.00) Pesos, Philippine Currency as and by way ofexemplary damages
to serve as correction or example for the public good;

7. Ordering the defendants jointly and severally to pay the plaintiffs the sum of Two Hundred
Ninety Thousand (₱290,000.00) Pesos, representing the depreciated cost of the plaintiffs’
demolished building per their Agreement (Exhibit "D");

8. Dismissing defendants’ counterclaim as well as intervenors’ counterclaims/complaints and

answers in intervention against the plaintiffs;

9. Ordering the plaintiffs to return to the defendants, after deducting the damages herein
awarded, the remaining amount on the sum paid by the defendants on the subject property;

10. Dismissing the counterclaim of plaintiffs against all intervenors;

11. Ordering the defendants to return to intervenors, Jose and Visitacion Caminas, Reynaldo
Maniwang, Generoso "Gener" Tulagan, and VTCI, and Arturo Marquez, the following sum to
wit:

1. CAMINAS - ₱650,000.00 (Absolute Deed of Sale dated 14 March 1989);

2. MANIWANG - ₱700,000.00 (Absolute Deed of Sale dated 22 February 1989);

3. TULAGAN - ₱1.4 Million, representing the following:

3.1 ₱600,000.00 – (Contract To Sell dated 21 February 1989);

3.2 ₱800,000.00 – (Conditional Deed of Sale dated 31 January 1989);

4. VTCI - ₱2.1 Million, representing the following:

4.1 ₱700,000.00 – (Absolute Deed of Sale dated 30 October 1989 – Lot 1-K);

4.2 ₱700,000.00 – (Absolute Deed of Sale dated 30 October 1989 – Lot 1-I);
 4.3 ₱700,000.00 – (Absolute Deed of Sale dated 30 October 1989 – Lot 1-F);

5. MARQUEZ - ₱600,000.00 (Contract To Sell dated 8 March 1989);

6. BPI - Declaring the intervention of the Bank without merit. respectively,

representing the full and/or partial purchase price of their respective units, all with six
(6) percent interest per annum counted from the time of their filing of their
intervention of judicial demand, and twelve (12) percent per annum upon the finality
of this decision.

With costs against defendants.

SO ORDERED. 45

The RTC declared that the Sanchezes have the right to rescind the Agreement they entered into
with Garcia and TSEI under proviso no. 6  of the Agreement. In fact, the RTC enunciated that
46

because the Agreement is in the nature of a contract to sell, the ownership over the subject property
remained with the Sanchezes as the suspensive condition––that the check payments shall be
honored––was not complied with. Thus, the RTC concluded that there was not even any need for
rescission in this case. Moreover, the RTC found that TSEI and Garcia were builders in bad faith as
the Sanchezes never consented to the construction of the townhouses. Furthermore, the
presentation by Garcia and TSEI to the intervenors of TCT 383697 in TSEI’s name sufficiently
shows their bad faith. Anent the rights of intervenors, the RTC found the Sanchezes to have a better
right over the subject property considering that the transactions between Garcia/TSEI and the
intervenors suffered from several irregularities, which they, the intervenors, in bad faith, ignored.

The Ruling of the Court of Appeals

Upon appeal by the intervenors-appellants, the CA rendered, on November 6, 2006, the assailed
Decision affirming the RTC Decision with modifications, the decretal portion of which reads:
WHEREFORE, the judgment appealed from is hereby AFFIRMED with MODIFICATIONS in that (1)
the Register of Deeds of Quezon City is hereby directed to cancel the Transfer Certificate of Title
No. 383697 in the name of Trans American Sales and Exposition, Inc. and to reinstate Transfer
Certificate of Title No. 156254 in the name of the [sic] Kenneth Nereo Sanchez, Vicente Victor
Sanchez and Imelda C. Vda. de Sanchez in its original status prior to the claim of the intervenors-
appellants; and (2) the plaintiffs and the defendants are ordered to follow the provisions of Article
448 of the Civil Code of the Philippines as regards the improvements constructed on the subject
property. The questioned decision is affirmed in all other respects. SO ORDERED. 47

Thus, the CA ordered the cancellation of TCT 383697 in TSEI’s name and the reinstatement of TCT
156254 in the names of the Sanchezes. However, the appellate court found the Sanchezes equally
inbad faith with TSEI and Garcia, and gave the Sanchezes the option either to appropriate the
townhouses by paying for them or to oblige TSEI and Garcia to pay the price of the land, unless the
subject lot’s value is considerably more than that of the structures built thereon in which case TSEI
and Garcia would have to pay the Sanchezes reasonable rent for the use of the subject property.
Hence, these petitions under Rule 45 separately interposed by the intervenors.

The Issues

In G.R. No. 179518, BPI raises the following issues:

 V.

Grounds for this Appeal

A. The Court of Appeals erred in decreeing the rescission of the Agreement between plaintiffs
Sanchez, et al. and defendants TSE and Garcia.

i. Sanchez, et al. had no intention of rescinding their Agreement.

ii. Rescission cannot take place because the property was already acquired by third
person who acted in good faith.

iii. Sanchez, et al. should bear all the losses arising from their own negligence.

B. The Court of Appeals erred in ordering the annulment of TCT No. 383697 in a collateral action.

C. The Court of Appeals erred in ordering the annulment of TCT No. 383697 notwithstanding that it
had no jurisdiction to do so, since such relief was never prayed for in the complaint.

D. The Court of Appeals erred in decreeing rescission, notwithstanding that it would result in the
unjust enrichment of plaintiffs Sanchez, et al., at the expense of BPI.

E. Assuming that Article 448 of the Civil Code is applicable, the Court of Appeals erred in not ruling
that BPI already acquired the rights of defendants under the said article. 48

In G.R. No. 179835, Tulagan, the heirs of Marquez and VTCI raise the following issue:

Whether or not the herein petitioners, as buyers and possessors of their respective units that were
constructed by respondent Garcia in the subject property, are entitled, to the same benefit granted to
the latter (who was subsequently declared by the Court of Appeals as a builder in good faith of the
improvements he introduced in the subject property), under the provision of Article 448 of the Civil
Code of the Philippines.49

While in G.R. No. 179954, Maniwang raises the following issues:

Grounds for the Petition

With all due respect, the Honorable Court of Appeals failed to apply the pertinent provisions of law
and utterly failed to consider prevailing jurisprudence when it totally disregarded the perfected
Contract of Sale under the nomenclature "Contract to Sell" entered into by respondents and
defendants prior to the "Agreement" entered into by them.

With all due respect, the Honorable Court of Appeals utterly neglected to apply pertinent provisions
of the Civil Code and prevailing jurisprudence on the matter when it affirmed the trial court’s decision
granting the respondents’ prayer for rescission.

With all due respect, it is respectfully submitted that the Honorable Court of Appeals erred in not
finding that petitioner Reynaldo Maniwang is an innocent purchaser in good faith, thus resulting in
the total disregard of his rights over the subject property when it applied to the instant case the
provisions of Article 448 of the Civil Code of the Philippines.
50
The essential common issues presented by intervenors-petitioners are: first, whether the parties all
acted in bad faith; second, whether there was a valid rescission of the Agreement between the
Sanchezes and TSEI/Garcia; and third, whether TCT 383697 in the name of TSEI may be cancelled.

The Court’s Ruling

The petitions in these consolidated cases must be denied.

The Sanchezes are not guilty of negligence

Petitioners would lay the blame on the Sanchezes and argue that there was negligence on the
latter’s part when they turned over the owner’s original duplicate copy of TCT 156254 despite
receiving only the ₱50,000 earnest money, which led tothe fraudulent transfer oftitle over the subject
lot by Garcia and the issuance of TCT 383697 in the name of TSEI. They also argue that the
Sanchezes werealso negligent for surrendering possession of the subject property to Garcia and
TSEI, and for failing to stop the construction of the townhouses on the subject property.

It must be stated that the CA already ruled that the issue of the Sanchezes’ negligence was never
raised at the pre-trial. As such, it can no longer be raised on appeal. Nevertheless, even if such
issue were to be passed upon, the Sanchezes cannot be considered negligent, much less in bad
faith.

As explained by the CA:

It must be noted that defendant Garcia committed himself that, upon full payment of the purchase
price, he would personally undertake the preparation and execution of the Extrajudicial Settlement
with Sale as well as the reconstitution of the original copy of TCT No. 156254 on file with the
Register of Deeds of Quezon City. Thus, it was inevitably for plaintiff-appellant/appellee Felisa Yap
to surrender to defendant Garcia the owner’s duplicate copy of the aforesaid title as well as the other
documents pertinent for such documentation and reconstitution. To Our mind, this does not
constitute negligence on the part of the plaintiffs appellants/appellees as the surrender was purely to
comply with and in pursuance to their earlier agreement with the defendants.

As regards the alleged relinquishment of possession of the subject property, We also do not find any
negligence on the part of the plaintiffs appellants/appellees. The records would disclose that the
plaintiffs appellants/appellees did not voluntarily surrender possession thereof to defendants. On the
contrary, it was defendant Garcia who took possession of the subject property, without plaintiffs-
appellants/appellees knowledge, posted his own caretaker therein with strict instructions not to allow
anyone to enter the same. The latter also caused the demolition of the old house standing thereon
and advertised the same for sale by placing a large billboard in front of the subject property. In fact,
had it not been for persistent efforts of plaintiffs-appellants/appellees, the Agreement which
eventually protected the latter’s rights over the subject property, could not have been executed. 51

Negligence is the omission of that diligence required by the nature of the obligation and corresponds
to the circumstances of the persons, of the time and of the place.  The Sanchezes could not be
52

found negligent as they relied upon the assurances of Garcia after their oral agreement to sell was
negotiated. The Sanchezes trusted Garcia and entrusted to him—per their oral agreement—the
owner’s original duplicate of TCT 156254 in order to facilitate the documentation required under the
terms of agreement for the sale of the subject lot. It must be pointed out that the parties in this case
were not dealing on equal terms.The Sanchezes had insufficient knowledge in the legalities of
transacting with real estate. This is evidenced by the fact that they already considered an oral
agreement for the sale of real property as sufficient. Had they been knowledgeable in such matters,
they would have known that such oral agreement is unenforceable and instead sought the
production of a written agreement. Moreover, the facts show that the Sanchezes did not simply
surrender possession of the property to TSEI and Garcia, but that such possession was taken from
them without their consent.

The Sanchezes did not act in bad faith

Contrary to the finding of the CA, the Sanchezes cannot be considered to be in bad faith for failing to
file an action for injunction against the construction of the townhouses on the subject property. The
CA stated:

x x x However, it appears that plaintiffs/appellants/appellees did not take any step to forestall the
continued construction of the townhouses. The records do no [sic] show that the
plaintiffs/appellants/appellees filed any case for injunction to at least restrain the defendants from
continuing with the construction. Conversely, they allowed the same to continue despite the fact that
they were not asyet fully paid of the purchase price on the subject property and no contract of sale
has been executed by them in defendants’ favor. Under these circumstances, the provision of Article
453 of the Civil Code should have been applied by the trial court. 53

Such ruling is erroneous.

Article 453 of the Civil Code relevantly states:

Article 453. If there was bad faith, not only on the part of the person who built, planted or sowed on
the land of another, but also on the part of the owner of such land, the rights of one and the other
shall be the same as though both had acted in good faith.

It is understood that there is bad faith on the part of the landowner whenever the act was done with
his knowledge and without opposition on his part. (emphasis supplied)

The second paragraph of the provision clearly reads that a landowner is considered in bad faith if he
does not oppose the unauthorized construction thereon despite knowledge of the same. It does not,
however, state what form such opposition should take. The fact of the matter is that the Sanchezes
did take action to oppose the construction on their property by writing the HLURB and the City
Building Official of Quezon City. As a result, the HLURB issued two (2) Cease and Desist Orders
and several directives against Garcia/TSEI which, however, were left unheeded. In addition, the
Sanchezes could not be faulted for not having been able to enjoin the sale of the townhouses by
Garcia and TSEI to the intervenors Sps. Caminas, Maniwang, Tulagan, and Marquez who bought
their townhouse units during the sameperiod that the Sanchezes were demanding the full payment
of the subject lot and were exercising their right of extrajudicial rescission of the Agreement. As the
intervenors asserted having bought the townhouse units in early 1989, it can be seen that the
preselling was done almost immediately after the Sanchezes and Garcia/TSEI agreed on the terms
of the sale of the subject lot, or shortly after Garcia and TSEI had taken over the property and
demolished the old house built thereon. In either case, the pre-selling already commenced and was
continuing when the two postdated checks amounting to the remaining balance of ₱800,000
bounced. And whenthe Sanchezes informed Garcia and TSEI that they were rescinding the
Agreement in early 1989, the intervenors apparently werealready in the process of closing their
deals with TSEI for the purchase of townhouse units. As to the transactions between FEBTC and
Garcia/TSEI and that between VTCI and Garcia/TSEI, it is suffice to state that the Sanchezes,
despite the actions they undertook, were not aware of the said dealings.

Garcia, TSEI, BPI, and the intervenors acted in bad faith

a. Garcia and TSEI acted in bad faith

The Court agrees with both the RTC and the CA that Garcia and/or TSEI are builders in bad faith.
They knew for a fact that the property still belonged to the Sanchezes and yet proceeded to build the
townhouses not just without the authority of the landowners, but also against their will. Thus, the CA
wrote:

Anent the improvements constructed on the subject property, the defendants were undoubtedly
builders in bad faith. As borne out by the evidence, the defendants took possession of the subject
property and constructed the 20-unit townhouses thereon without prior consent of the plaintiffs-
appellants/appellees. On top of this, defendant Garcia was aware that the defendants have not as
yet fully paid the purchase price thereof and therefore are not yet owner/s of the subject property. In
fact, no contract of sale over the subject property has been executed by the
plaintiffs/appellants/appellees in defendants’ favor.  x x x
54

The next query: are the intervenors purchasers in good faith?

The Court rules otherwise.

b. Intervenors Sps. Caminas,

Maniwang, Tulagan, and

Marquez acted in bad faith

Prevailing jurisprudence reveals the following established rules:

1. Well settled is the rule that all persons dealing with property covered by a torrens
certificate of title are not required to go beyond what appears on the face of the title.
Whenthere is nothing on the certificate of title to indicate any cloud or vice in the ownership
of the property, or any encumbrance thereon, the purchaser is not required to explore further
than what the torrens title upon its face indicates in quest for any hidden defect or inchoate
right that may subsequently defeat his right thereto. 55

2. This rule, however, admits of an exception as where the purchaser or mortgagee has
knowledge of a defect or lack of title in the vendor, or that he was aware ofsufficient facts to
induce a reasonably prudent man to inquire into the status of the property in
litigation.  (emphasis supplied)
56

3. Likewise, one who buys property withfull knowledge of the flaws and defects in the title of
the vendor is enough proof of his bad faith and estopped from claiming that he acquired the
property in good faith against the owners. 57

4. To prove good faith, the following conditions must be present: (a) the seller is the
registered owner of the land; (b) the owner is in possession thereof; and (3) at the time of the
sale, the buyer was not aware of any claim or interest of some other personin the property,
or of any defect or restriction in the titleof the seller or in his capacity to convey title to the
property. All these conditions must be present, otherwise, the buyer is under obligation to
exercise extra ordinary diligence by scrutinizing the certificates of title and examining all
factual circumstances to enable him to ascertain the seller’s title and capacity to transfer any
interest in the property.
58
The factual milieu of the case reveals that intervenors are buyers in bad faith for the following
reasons, viz:

Firstly, they admitted that they executed either contracts of sale or contracts to sell indicating that the
lot is covered by TCT No. 156254 registered under the name of the respondent Sanchezes. While
the established rule is that persons dealing with property covered by a Torrens certificate of title are
not required togo beyond what appears on the face of the title, intervenors cannot seek haven from
such doctrine as the title of the lot does not pertain to the vendor (Garcia or TSEI) they dealt with.
The fact that the lot being sold to them belonged to persons other than TSEI or Garcia should have
driven the intervenors, as prudence would dictate, to investigate the true status of the property. They
should have gone to the Register of Deeds of Quezon City (RD) to verifyif in fact TCT No. 156254
had already been cancelled and a new title has been issued to TSEI or Garcia. They should have
asked for the deed of absolute sale filed and registered with the RD to find out if the Sanchezes
indeedsold the lot in question to TSEI. They could have verified from the primary entry book of said
office if the deed of absolute sale from the Sanchezes in favor of TSEI was registered in said book,
which, under the Property Registration Decree (PD No. 1529), is considered as an effective and
legal notice to third persons and the whole world of such transfer. Evidently, the intervenors failed to
do so.

Secondly, the intervenors know, based on the contract of sale or contract to sell, that the property
isregistered under TCT No. 156254 in the name of the Sanchezes. As such, they should have
insisted that they talk to the Sanchezes before executing said conveyances. Had they done so, they
would have known that the Sanchezes have not executed a written deed of absolute sale in favor of
TSEI for the latter’s failure to pay the consideration in full. Having failed to ferret out the truth from
the Sanchezes, intervenors cannot be considered innocent purchasers for failure to exercise utmost
caution and extra diligence in determining the true owner of the property.

Thirdly, the intervenors should havebeen suspicious of the explanation of Garcia that TCT No.
383697, reflecting TSEI as the owner of the property, has been burned and that he is in the process
of reconstituting the title. Before signing the contract of sale or contract to sell, they should have
asked Garcia where the reconstitution case has been filed or is pending and proceeded to verify with
the said court the status of the reconstitution. Had they done so, they would have known that neither
Garcia nor TSEI had a deed of absolute sale executed in their favor over the lot in question. The
truth of the matter is that it is the duplicate certificate of title of TCT No. 156254 that has been lost or
misplaced, and is being sought to be reconstituted, not TCT No. 383697. Had intervenors been
prudent enough to verify with the court the status of the alleged TCT No. 383697, they would have
known that Garcia planned to deceive them in the sale of the subject property.

Fourthly, the intervenors knew that they were buying a townhouse over a subdivision lot from TSEI
and Garcia. Such being the case, they should have verified with the HLURB whether said project is
registered with said housing agency and if a license to sell has been issued to TSEI or Garcia. Had
they made such an inquiry, they would have known that instead of a permit for the project and a
license to sell the property, a cease and desist order was issued by the HLURB precisely to enjoin
TSEI and Garcia from selling said property to the public. Similarly, they could have inquired from the
City Building Official of Quezon City if a building permit was issued to TSEI and Garcia for the
construction of the townhouses, which would have yielded the same negative result.

c. VCTI acted in bad faith

As compared to the other purchasers,the Deeds of Absolute Sale of intervenor VTCI cited TCT
383697 inthe name of VTCI and not TCT 156254. Nevertheless, the Court finds that respondent
VTCI is a purchaser in bad faith for the following reasons:
Firstly, respondent VTCI has not shown that it verified with the RD if the alleged TCT 383697 of
respondent TSEI is valid and genuine. It did not present any certified true copy of said TCT 383697
to demonstrate that based on the RD’s records, said title exists and that it is genuine and valid. It
should be remembered that the duplicate certificate of TCT 156254 was lost and subject of
reconstitution. Yet respondents Garcia and TSEI were not able to show that it was already
reconstituted. In addition, there was no deed of absolute sale executed by the Sanchezes in favor of
TSEI as the latter failed to pay the last two (2) installments and subsequently, the agreement to sell
was rescinded by the Sanchezes for non-payment.There being no deed of absolute sale, there is,
consequently, no ground for the RD to cancel TCT No. 156254 and subsequently issue TCT 383697
in the name of TSEI. This goes to show that TCT 383697 of TSEI appears to be spurious and a fake
title. This is buttressed by the fact that the date of the issuance of TCT 383697 is June 9, l988, pre-
dating the execution of the Agreement between the Sanchezes and TSEI on December 8, l988. With
the failure of VTCI to exert earnest efforts to verify the authenticity of TCT 383697, then it is not a
purchaser in good faith.

Secondly, Garcia and TSEI stopped the construction of the townhouses on March 30, l989 pursuant
to the CDO of the HLURB. Thus, the townhouses were not fully finished and completed. Yet on
December 27, l989 (date of notarization), VTCI entered into three (3) Deeds of Absolute sale over
three (3) townhouses on three (3) lots covered by TCT 383697 and despite the non-completion of
the townhouses, it still fully paid the uniform price of ₱700,000 for the townhouse on each of the 3
lots – 1st lot with an area of 52.5 square meters; 2nd lot with an area of 72.5 square meters; and 3rd
lot with an area of 42.5 square meters. The price of ₱700,000 was even applied to all lots even if
ordinarily a bigger lot will commend a higher price. These are doubtful transactions since a man of
average intellect will not fully pay the price of a townhouse which has not yet been completed. The
alleged purchases are not in accord with the normal business practice and common behavior of an
ordinary human being. These circumstances sway the Court to believe that said alleged
conveyances are not genuine and that VTCI is not a purchaser in good faith.

Thirdly, with the CDO and the warnings to the public and prospective buyers published in the
Philippine Daily Inquirer on April 16, 1989 and in the Manila Bulletin on April 19, 2014, VTCI should
have been aware of the irregularities in the proposed sale of townhouses by Garcia and TSEI. The
failure of VTCI to heed the warnings and prohibition to buy said townhouses tends to show that said
respondent is not a purchaser in good faith.

Fourthly, with the issuance of the CDO by the HLURB and the notices in the major dailies, VTCI
should have inquired with the said HLURB if Garcia and TSEI have a permit to sell the townhouses.
Had it done so, it would have discovered that the project, as it lacks the necessary permits, is
unauthorized and that the title over the townhouses is questionable.

Fifthly, a buyer of a townhouse will ordinarily visit the project site and look at and investigate the lot,
the title and the townhouses being sold. If it inspected the site of the construction project, it would
have known from the other purchasers that the project has no permit from the HLURB and that
construction has been stopped because of the CDO. Had VTCI done the inspection and
investigation, then it would not have entered into the deeds of absolute sale with Garcia and TSEI.
Thus, respondent VTCI cannot be considered as a purchaser in good faith.

From the foregoing, the fact that all the intervenors turned a blind eye to the flaws and defects in the
ownership of TSEI over the property and miserably failed to undertake measures required of a
reasonably prudent man to investigate the title of the pseudo owner and the legality of the
townhouse project constitutes bad faith for which there is no available relief under the law.

d. BPI cannot be considered a mortgagee in good faith

Even as the intervenors have been found to be in bad faith, BPI, the successor of FEBTC, cannot be
considered a mortgagee in good faith, considering the glaring anomalies in the loan transaction
between TSEI and FEBTC. This can be gleaned from several undisputed factual circumstances:

Firstly, when Garcia gave TCT 156254 to FEBTC for the processing of a loan secured by a
mortgage, it indubitably showed that Garcia/TSEI did not yet own the subject property as said title
was in the name of the Sanchezes. But FEBTC did not require Garcia/TSEI to submit a Special
Power of Attorney (SPA) in their favor authorizing them to mortgage the subject property covered by
TCT 156254.

Secondly, considering that Garcia/TSEI were already selling the townhouse units to the public as
early as January 1989, FEBTC was also remiss in not requiring Garcia/TSEI to submit a written
approval from the HLURB for the mortgage of the subject property where the townhouse units were
being constructed as required under Sec. 18  of Presidential Decree No. (PD) 957.  Thirdly,
59 60

considering further that Garcia presented the Agreement between the Sanchezes and Garcia/TSEI
asbasis for ownership of the subject property covered by TCT 156254, FEBTC was remiss in neither
ascertaining whether the full payment of the ₱1.8 million covered by six (6) checks in view of the
proviso number 6 of the Agreement nor requiring the presentment of the EXTRA-JUDICIAL
SETTLEMENT OF ESTATE WITH SALE from the Sanchezes in favor of Garcia/TSEI.

Fourthly, FEBTC was again negligent in not scrutinizing the TCT 383697 considering that the title
has the purported issuance date of June 9, 1988 way before the December Agreement was
executed and when the loan was negotiated. More, the purported issuance of TCT 383697 was
made more than six (6) months before Garcia/TSEI approached the bank for the loan. Thus, FEBTC
should have been placed on guard as to why Garcia/TSEI initially gave it TCT 156254 in the name of
the Sanchezes when TCTC 383697 was purportedly already issued and in Garcia’s possession way
before the bank loan was negotiated. Again, FEBTC did not exercise the due diligence required of
banks.

Fifthly, the Court notes that FEBTC released portions of the loan proceeds in April even before it
approved the loan secured by a real estate mortgage on May 22, 1989. And more anomalous is the
fact that FEBTC had TCT 383697 verified for its veracity and genuineness way after it approved the
loan to Garcia/TSEI. The Certification  from the Register of Deeds was issued only on June 13,1989
61

upon the request of Garcia.

Verily, given the foregoing anomalies, the general rule that a mortgagee need not look beyond the
titledoes not apply tobanks and other financial institutions as greater care and due diligence are
required of them,  and FEBTC should have exercised the appropriate due diligence review and
62

made the requisite inquiries about the subject property which was offered to secure the loan applied
for by Garcia/TSEI under a real estate mortgage. FEBTC (now BPI) was negligent and cannot be
considered as a mortgagee in good faith.

The effects of attributing bad

faith to the intervenors, BPI,
TSEI, and Garcia

a. Rescission of the Agreement

was not barred by the
subsequent transfer

Article 1191 of the Civil Code states that rescission is available to a party in a reciprocal obligation
where one party fails to comply therewith:
Article 1191. The power to rescind obligations is implied in reciprocal ones, in case one of the
obligors should not comply with what is incumbent upon him.

The injured party may choose between the fulfillment and the rescission of the obligation, with the
payment of damages in either case. He may also seek rescission, even after he has chosen
fulfillment, if the latter should become impossible.

The court shall decree the rescission claimed, unless there be just cause authorizing the fixing of a
period.

This is understood to be without prejudice to the rights of third persons who have acquired the thing,
in accordance with Articles 1385 and 1388 and the Mortgage Law. (emphasis supplied) Article 1385
of the Civil Code does provide that rescission shall not take place if the subject matter of the prior
agreement is already in the hands of a third party who did not act in bad faith, to wit:

Article 1385. Rescission creates the obligation to return the things which were the object of the
contract, together with their fruits, and the price with its interest; consequently, it can be carried out
only when he who demands rescission can return whatever he may be obliged to restore. Neither
shall rescission take place when the things which are the object of the contract are legally in the
possession of third persons who did not act in bad faith.

In this case, indemnity for damages may be demanded from the person causing the loss. (emphasis
added)

In the extant case, the failure of TSEI to pay the consideration for the sale of the subject property
entitled the Sanchezes to rescind the Agreement. And in view of the finding that the intervenors
acted in bad faith in purchasing the property, the subsequent transfer in their favor did not and
cannot bar rescission.

b. The Sanchezes are to elect

their option under the Arts.
449-450 of the New Civil Code

Moreover, bad faith on the part of TSEI, Garcia and the intervenors leads to the application of
Articles 449-450 of the New Civil Code, which provide:

Article 449. He who builds, plants or sows in bad faith on the land of another, loses what is built,
planted or sown without right to indemnity.

Article 450. The owner of the land on which anything has been built, planted or sown in bad faith
may demand the demolition of the work, or that the planting or sowing be removed, in order to
replace things in their former condition at the expense of the person who built, planted or sowed; or
he may compel the builder or planter to pay the price of the land, and the sower the proper rent.

Consequently, the Sanchezes have the following options: (1) acquire the property with the
townhouses and other buildings and improvements that may be thereon without indemnifying TSEI
or the intervenors;  (2) demand from TSEI or the intervenors to demolish what has been built on the
63

property at the expense of TSEI or the intervenors; or (3) ask the intervenors to pay the price of the
land.  As such, the Sanchezes must choose from among these options within thirty (30) days from
64

finality of this Decision. Should the Sanchezes opt to ask from the intervenors the value of the land,
the case shall be remanded to the RTC for the sole purpose of determining the fair market value of
the lot at the time the same were taken from the Sanchezes in 1988.

If the Sanchezes decide to appropriate the townhouses, other structures and improvements as their
own pursuant to Article 449 of the Civil Code, then the intervenors-purchasers Caminas, Maniwang,
Tulagan, Marquez and VCTI shall be ordered to vacate said premises within a reasonable time from
notice of the finality of the decision by the Sanchezes. They have a right to recover their investment
in the townhouses from Garcia and TSEI. If the Sanchezes do not want to make use of the
townhouses and improvements on the subject lot, thenthe purchasers can be ordered to demolish
said townhouses or if theydon’t demolish the same within a reasonable time, then it can be
demolished at their expense. On the 3rd option, if the Sanchezes do not want toappropriate the
townhouses or have the same demolished, then they can ask that the townhouse purchasers pay to
them the fair market value of the respective areas allotted to their respective townhouses subject of
their deeds of sale.

The suit is not a collateral

attack on TSEI’s title

Finally, BPI argues that the CA erred in ordering the cancellation of TCT 383697 considering that
Section 48 of Presidential Decree No. 1529, or the Property Registration Decree, states that a
Torrens certificate of title cannot be cancelled except in a direct attack thereon. The provision reads:

Section 48. Certificate not subject to collateral attack. A certificate of title shall not be subjectto
collateral attack. It cannot be altered, modified, or canceled except ina direct proceeding in
accordance with law.

In Sarmiento v. Court of Appeals,  the Court differentiated a direct and a collateral attack in this
65

wise:

An action is deemed an attack on a title when the object of the action or proceeding is to nullify the
title, and thus challenge the judgment pursuant to which the title was decreed. The attack is direct
when the object of the action is to annul or set aside such judgment, or enjoin its enforcement. On
the other hand, the attack is indirect or collateral when, in an action to obtain a different relief, an
attack on the judgment is nevertheless made as an incident thereof.

In the instant case, contrary tothe contention of BPI, although the case was originally an action for
rescission, it became a direct attack on TCT 383697. To be sure, there is no indication that when the
Sanchezes filed their complaint with the RTC they already knew of the existence of TCT 383697.
However, when they were confronted with the title through the filing of the various Answers of the
intervenors, the Sanchezes directly stated that the title was a fake. Thus, in their Answer with
Counter claims to Complaint in Intervention filed by Varied Traders Concept, Inc. dated April 2,
1991, paragraph 2.1. thereof states:

2.1. Like the rest of the intervenors herein, VTCI is claiming rights under a forged deed and a fake or
absolutely void title. There was never any Deed of Absolute Sale between plaintiffs and defendants.
Much less was there any valid land title issued to defendants. Whatever deeds defendants may have
shown VTCI are definitely fakes or foregeries, hence, null and void. Thus, no rights to plaintiff’s
property ever passed to VTCI. 66

An identical paragraph is also contained in the Sanchezes’ Answer with Counter claims to
Intervention filed by Far East Bank and Trust Company and Supplement to Complaint dated January
11, 1993.  Thus, the complaint filed by the Sanchezes later became a direct attack against TCT
67

383697 and the CA correctly ordered the cancellation thereof.

WHEREFORE, the instant petitions are DENIED. The assailed November 6, 2006 Decision of the
Court of Appeals in CA-G.R. CV No. 83236 is hereby AFFIRMED with MODIFICATION. The
dispositive portion of the RTC Decision in Civil Case No. Q-90-4690, as affirmed by the CA, is
hereby modified to read:

WHEREFORE, judgment is hereby rendered as follows:

1. Directing the Register of Deeds of Quezon City to cancel Transfer Certificate ofTitle No.
383697 in the name of Trans American Sales and Exposition, Inc. and to reinstate Transfer
Certificate of Title No. 156254 in the name of the [sic] Kenneth Nereo Sanchez, Vicente
Victor Sanchez and Imelda C. Vda. de Sanchez in its original status prior to the claim of the
intervenors-appellants without need to pay any registration fee, transfer tax, documentary
stamp tax and other expenses in relation to transfer of title.

2. Granting to the Sanchezes the right to inform the Regional Trial Court of Quezon City,
Branch 89 in Civil Case No. Q-90-4690 within thirty (30) days from date of finality of decision
whether or not they will appropriate the townhouses and improvements on the lot covered by
TCT No. 156254 as their own without need to pay indemnity therefor pursuant to Article 449
of the Civil Code.

In such a case, the intervenors and all their successors-in-interest shall vacate the subject
property and surrender possession thereof to the Sanchezes within Thirty (30) Daysfrom
notice of their decision.

If the Sanchezes opt for the second option, the defendants or intervenors shall demolish the
townhouses and all other improvements on the property at their own expense within ninety
(90) days from notice of the Sanchezes’ decision. If they failto do so, the Sanchezes can
have the same demolished and the expenses of demolition shall be charged to the
intervenors on a pro rata basis based on the respective areas of their townhouses.

Finally, if the Sanchezes choose the third option, the case shall be remanded to the RTC to
determine the fair market value of the land at the time of the taking thereof in 1988 and the
intervenors-townhouse owners shall pay such value to the Sanchezes within Thirty (30) days
from the finality of the determination of the RTC of such fair market value;

3. Declaring the legality and validity of the Extrajudicial Rescission effected by the plaintiffs
on the Contract to Sell on the subject property, covered by TCT No. 156254 in their names;

4. Ordering the defendants and all persons acting on their behalf to return to the plaintiffs the
Owner’s Copy of TCT No. 156254, including all the documents entrusted to them in
consideration of their Contract to Sell;

5. Ordering defendants and all persons, including the intervenors and all persons claiming
rights under them to return and surrender to the plaintiffs the peaceful possession of the
subject property covered by TCT No. 156254 located atNo. 10 Panay Avenue, Quezon City
in the event plaintiffs Sanchezes decide to appropriate the townhouses and improvements
for their own without need of payment of indemnity;
6. Ordering the defendants jointly and severally to pay the plaintiffs the sum of One Hundred
Thousand (₱100,000.00) Pesos, Philippine Currency as and by way of attorney’s fees;

7. Ordering the defendants jointly and severally to pay the plaintiffs the sum of Two Hundred
Thousand (₱200,000.00) Pesos, Philippine Currency as and by way of moral damages;

8. Ordering the defendants jointly and severally to pay the plaintiffs the sum of Two Hundred
Thousand (₱200,000.00) Pesos, Philippine Currency as and by way ofexemplary damages
to serve as correction or example for the public good;

9. Ordering the defendants jointly and severally to pay the plaintiffs the sum of Two
HundredNinety Thousand (₱290,000.00) Pesos, representing the depreciated cost of the
plaintiffs’ demolished building per their Agreement (Exhibit "D");

10. Dismissing defendants’ counterclaim as well as intervenors’ counterclaims/complaints

and answers in intervention against the plaintiffs;

11. Ordering the plaintiffs to return to the defendants, after deducting the damages herein
awarded, the remaining amount on the sum paid by the defendants on the subject property;

12. Dismissing the counterclaim of plaintiffs against all intervenors except as awarded to the
former in this Decision;

13. Ordering the defendants jointly and severally to return to intervenors, Jose and Visitacion
Caminas, Reynaldo Maniwang, Generoso "Gener" Tulagan, and VTCI, and Arturo Marquez,
the following sum to wit:

1. CAMINAS - ₱650,000.00 (Absolute Deed of Sale dated 14 March 1989);

2. MANIWANG - ₱700,000.00 (Absolute Deed of Sale dated 22 February 1989);

3. TULAGAN - ₱1.4 Million, representing the following:

3.1 ₱600,000.00 – (Contract To Sell dated 21 February 1989);

3.2 ₱800,000.00 – (Conditional Deed of Sale dated 31 January 1989);

4. VTCI - ₱2.1 Million, representing the following:

4.1 ₱700,000.00 – (Absolute Deed of Sale dated 30 October 1989

– Lot 1-K);

4.2 ₱700,000.00 – (Absolute Deed of Sale dated 30 October 1989

– Lot 1-I);

4.3 ₱700,000.00 – (Absolute Deed of Sale dated 30 October 1989

– Lot 1-F);
 5. MARQUEZ - ₱600,000.00 (Contract To Sell dated 8 March 1989);

6. BPI - Declaring the intervention of the Bank without merit.

respectively, representing the fulland/or partial purchase price of their respective units, all
with six (6) percent interest per annum counted from the time of their filing of their
intervention of judicial demand until fully paid.

With costs against defendants.

SO ORDERED.
 Republic of the Philippines
SUPREME COURT
Manila

EN BANC

G.R. No. 206248               February 18, 2014

GRACE M. GRANDE, Petitioner,
vs.
PATRICIO T. ANTONIO, Respondent.

DECISION

VELASCO, JR., J.:

Before this Court is a Petition for Review on Certiorari under Rule 45, assailing the July 24, 2012
Decision  and March 5, 2013 Resolution  of the Court of Appeals (CA) in CA-G.R. CV No. 96406.
1 2

As culled from the records, the facts of this case are:

Petitioner Grace Grande (Grande) and respondent Patricio Antonio (Antonio) for a period of time
lived together as husband and wife, although Antonio was at that time already married to someone
else.  Out of this illicit relationship, two sons were born: Andre Lewis (on February 8, 1998) and
3

Jerard Patrick (on October 13, 1999).  The children were not expressly recognized by respondent as
4

his own in the Record of Births of the children in the Civil Registry. The parties’ relationship,
however, eventually turned sour, and Grande left for the United States with her two children in May
2007. This prompted respondent Antonio to file a Petition for Judicial Approval of Recognition with
Prayer to take Parental Authority, Parental Physical Custody, Correction/Change of Surname of
Minors and for the Issuance of Writ of Preliminary Injunction before the Regional Trial Court, Branch
8 of Aparri, Cagayan (RTC), appending a notarized Deed of Voluntary Recognition of Paternity of
the children.5

On September 28, 2010, the RTC rendered a Decision in favor of herein respondent Antonio, ruling
that "[t]he evidence at hand is overwhelming that the best interest of the children can be promoted if
they are under the sole parental authority and physical custody of [respondent Antonio]."  Thus, the
6

court a quo decreed the following:

WHEREFORE, foregoing premises considered, the Court hereby grants [Antonio’s] prayer for
recognition and the same is hereby judicially approved. x x x Consequently, the Court forthwith
issues the following Order granting the other reliefs sought in the Petition, to wit:

a. Ordering the Office of the City Registrar of the City of Makati to cause the entry of the
name of [Antonio] as the father of the aforementioned minors in their respective Certificate of
Live Birth and causing the correction/change and/or annotation of the surnames of said
minors in their Certificate of Live Birth from Grande to Antonio;

b. Granting [Antonio] the right to jointly exercise Parental Authority with [Grande] over the
persons of their minor children, Andre Lewis Grande and Jerard Patrick Grande;
 c. Granting [Antonio] primary right and immediate custody over the parties’ minor children
Andre Lewis Grandre and Jerard Patrick Grande who shall stay with [Antonio’s] residence in
the Philippines from Monday until Friday evening and to [Grande’s] custody from Saturday to
Sunday evening;

d. Ordering [Grande] to immediately surrender the persons and custody of minors Andre
Lewis Grande and Jerard Patrick Grande unto [Antonio] for the days covered by the Order;

e. Ordering parties to cease and desist from bringing the aforenamed minors outside of the
country, without the written consent of the other and permission from the court.

f. Ordering parties to give and share the support of the minor children Andre Lewis Grande
and Jerard Patrick Grande in the amount of ₱30,000 per month at the rate of 70% for
[Antonio] and 30% for [Grande].  (Emphasis supplied.)
7

Aggrieved, petitioner Grande moved for reconsideration. However, her motion was denied by the
trial court in its Resolution dated November 22, 2010  for being pro forma and for lack of merit.
8

Petitioner Grande then filed an appeal with the CA attributing grave error on the part of the RTC for
allegedly ruling contrary to the law and jurisprudence respecting the grant of sole custody to the
mother over her illegitimate children.  In resolving the appeal, the appellate court modified in part the
9

Decision of the RTC. The dispositive portion of the CA Decision reads:

WHEREFORE, the appeal is partly GRANTED. Accordingly, the appealed Decision of the Regional
Trial Court Branch 8, Aparri Cagayan in SP Proc. Case No. 11-4492 is MODIFIED in part and shall
hereinafter read as follows:

a. The Offices of the Civil Registrar General and the City Civil Registrar of Makati City are
DIRECTED to enter the surname Antonio as the surname of Jerard Patrick and Andre Lewis,
in their respective certificates of live birth, and record the same in the Register of Births;

b. [Antonio] is ORDERED to deliver the minor children Jerard Patrick and Andre Lewis to the
custody of their mother herein appellant, Grace Grande who by virtue hereof is hereby
awarded the full or sole custody of these minor children;

c. [Antonio] shall have visitorial rights at least twice a week, and may only take the children
out upon the written consent of [Grande]; and

d. The parties are DIRECTED to give and share in support of the minor children Jerard
Patrick and Andre Lewis in the amount of ₱30,000.00 per month at the rate of 70% for
[Antonio] and 30% for [Grande]. (Emphasis supplied.)

In ruling thus, the appellate court ratiocinated that notwithstanding the father’s recognition of his
children, the mother cannot be deprived of her sole parental custody over them absent the most
compelling of reasons.  Since respondent Antonio failed to prove that petitioner Grande committed
10

any act that adversely affected the welfare of the children or rendered her unsuitable to raise the
minors, she cannot be deprived of her sole parental custody over their children.

The appellate court, however, maintained that the legal consequence of the recognition made by
respondent Antonio that he is the father of the minors, taken in conjunction with the universally
protected "best-interest-of-the-child" clause, compels the use by the children of the surname
"ANTONIO." 11

As to the issue of support, the CA held that the grant is legally in order considering that not only did
Antonio express his willingness to give support, it is also a consequence of his acknowledging the
paternity of the minor children.  Lastly, the CA ruled that there is no reason to deprive respondent
12

Antonio of his visitorial right especially in view of the constitutionally inherent and natural right of
parents over their children.13

Not satisfied with the CA’s Decision, petitioner Grande interposed a partial motion for
reconsideration, particularly assailing the order of the CA insofar as it decreed the change of the
minors’ surname to "Antonio." When her motion was denied, petitioner came to this Court via the
present petition. In it, she posits that Article 176 of the Family Code––as amended by Republic Act
No. (RA) 9255, couched as it is in permissive language––may not be invoked by a father to compel
the use by his illegitimate children of his surname without the consent of their mother.

We find the present petition impressed with merit.

The sole issue at hand is the right of a father to compel the use of his surname by his illegitimate
children upon his recognition of their filiation. Central to the core issue is the application of Art. 176
of the Family Code, originally phrased as follows:

Illegitimate children shall use the surname and shall be under the parental authority of their mother,
and shall be entitled to support in conformity with this Code. The legitime of each illegitimate child
shall consist of one-half of the legitime of a legitimate child. Except for this modification, all other
provisions in the Civil Code governing successional rights shall remain in force.

This provision was later amended on March 19, 2004 by RA 9255  which now reads:
14

Art. 176. – Illegitimate children shall use the surname and shall be under the parental authority of
their mother, and shall be entitled to support in conformity with this Code. However, illegitimate
children may use the surname of their father if their filiation has been expressly recognized by their
father through the record of birth appearing in the civil register, or when an admission in a public
document or private handwritten instrument is made by the father. Provided, the father has the right
to institute an action before the regular courts to prove non-filiation during his lifetime. The legitime of
each illegitimate child shall consist of one-half of the legitime of a legitimate child. (Emphasis
supplied.)

From the foregoing provisions, it is clear that the general rule is that an illegitimate child shall use the
surname of his or her mother. The exception provided by RA 9255 is, in case his or her filiation is
expressly recognized by the father through the record of birth appearing in the civil register or when
an admission in a public document or private handwritten instrument is made by the father. In such a
situation, the illegitimate child may use the surname of the father.

In the case at bar, respondent filed a petition for judicial approval of recognition of the filiation of the
two children with the prayer for the correction or change of the surname of the minors from Grande
to Antonio when a public document acknowledged before a notary public under Sec. 19, Rule 132 of
the Rules of Court  is enough to establish the paternity of his children. But he wanted more: a
15

judicial conferment of parental authority, parental custody, and an official declaration of his children’s
surname as Antonio.
Parental authority over minor children is lodged by Art. 176 on the mother; hence, respondent’s
prayer has no legal mooring. Since parental authority is given to the mother, then custody over the
minor children also goes to the mother, unless she is shown to be unfit.

Now comes the matter of the change of surname of the illegitimate children. Is there a legal basis for
the court a quo to order the change of the surname to that of respondent?

Clearly, there is none. Otherwise, the order or ruling will contravene the explicit and unequivocal
provision of Art. 176 of the Family Code, as amended by RA 9255.

Art. 176 gives illegitimate children the right to decide if they want to use the surname of their father
or not. It is not the father (herein respondent) or the mother (herein petitioner) who is granted by law
the right to dictate the surname of their illegitimate children.

Nothing is more settled than that when the law is clear and free from ambiguity, it must be taken to
mean what it says and it must be given its literal meaning free from any
interpretation.  Respondent’s position that the court can order the minors to use his surname,
16

therefore, has no legal basis.

On its face, Art. 176, as amended, is free from ambiguity. And where there is no ambiguity, one must
abide by its words. The use of the word "may" in the provision readily shows that an acknowledged
illegitimate child is under no compulsion to use the surname of his illegitimate father. The word
"may" is permissive and operates to confer discretion  upon the illegitimate children.
17

It is best to emphasize once again that the yardstick by which policies affecting children are to be
measured is their best interest. On the matter of children’s surnames, this Court has, time and again,
rebuffed the idea that the use of the father’s surname serves the best interest of the minor child. In
Alfon v. Republic,  for instance, this Court allowed even a legitimate child to continue using the
18

surname of her mother rather than that of her legitimate father as it serves her best interest and
there is no legal obstacle to prevent her from using the surname of her mother to which she is
entitled. In fact, in Calderon v. Republic,  this Court, upholding the best interest of the child
19

concerned, even allowed the use of a surname different from the surnames of the child’s father or
mother. Indeed, the rule regarding the use of a child’s surname is second only to the rule requiring
that the child be placed in the best possible situation considering his circumstances.

In Republic of the Philippines v. Capote,  We gave due deference to the choice of an illegitimate
20

minor to use the surname of his mother as it would best serve his interest, thus:

The foregoing discussion establishes the significant connection of a person’s name to his identity,
his status in relation to his parents and his successional rights as a legitimate or illegitimate child.
For sure, these matters should not be taken lightly as to deprive those who may, in any way, be
affected by the right to present evidence in favor of or against such change.

The law and facts obtaining here favor Giovanni’s petition. Giovanni availed of the proper remedy, a
petition for change of name under Rule 103 of the Rules of Court, and complied with all the
procedural requirements. After hearing, the trial court found (and the appellate court affirmed) that
the evidence presented during the hearing of Giovanni’s petition sufficiently established that, under
Art. 176 of the Civil Code, Giovanni is entitled to change his name as he was never recognized by
his father while his mother has always recognized him as her child. A change of name will erase the
impression that he was ever recognized by his father. It is also to his best interest as it will facilitate
his mother’s intended petition to have him join her in the United States. This Court will not stand in
the way of the reunification of mother and son. (Emphasis supplied.)
An argument, however, may be advanced advocating the mandatory use of the father’s surname
upon his recognition of his illegitimate children, citing the Implementing Rules and Regulations (IRR)
of RA 9255,  which states:
21

Rule 7. Requirements for the Child to Use the Surname of the Father

7.1 For Births Not Yet Registered

7.1.1 The illegitimate child shall use the surname of the father if a public document is executed by
the father, either at the back of the Certificate of Live Birth or in a separate document.

7.1.2 If admission of paternity is made through a private instrument, the child shall use the surname
of the father, provided the registration is supported by the following documents:

xxxx

7.2. For Births Previously Registered under the Surname of the Mother

7.2.1 If filiation has been expressly recognized by the father, the child shall use the surname of the
father upon the submission of the accomplished AUSF [Affidavit of Use of the Surname of the
Father].

7.2.2 If filiation has not been expressly recognized by the father, the child shall use the surname of
the father upon submission of a public document or a private handwritten instrument supported by
the documents listed in Rule 7.1.2.

7.3 Except in Item 7.2.1, the consent of the illegitimate child is required if he/she has reached the
age of majority. The consent may be contained in a separate instrument duly notarized.

xxxx

Rule 8. Effects of Recognition

8.1 For Births Not Yet Registered

8.1.1 The surname of the father shall be entered as the last name of the child in the Certificate of
Live Birth. The Certificate of Live Birth shall be recorded in the Register of Births.

xxxx

8.2 For Births Previously Registered under the Surname of the Mother

8.2.1 If admission of paternity was made either at the back of the Certificate of Live Birth or in a
separate public document or in a private handwritten document, the public document or AUSF shall
be recorded in the Register of Live Birth and the Register of Births as follows:

"The surname of the child is hereby changed from (original surname) to (new surname) pursuant to
RA 9255."
The original surname of the child appearing in the Certificate of Live Birth and Register of Births shall
not be changed or deleted.

8.2.2 If filiation was not expressly recognized at the time of registration, the public document or
AUSF shall be recorded in the Register of Legal Instruments. Proper annotation shall be made in the
Certificate of Live Birth and the Register of Births as follows:

"Acknowledged by (name of father) on (date). The surname of the child is hereby changed from
(original surname) on (date) pursuant to RA 9255." (Emphasis supplied.)

Nonetheless, the hornbook rule is that an administrative issuance cannot amend a legislative act. In
MCC Industrial Sales Corp. v. Ssangyong Corporation,  We held:
22

After all, the power of administrative officials to promulgate rules in the implementation of a statute is
necessarily limited to what is found in the legislative enactment itself. The implementing rules and
regulations of a law cannot extend the law or expand its coverage, as the power to amend or repeal
a statute is vested in the Legislature. Thus, if a discrepancy occurs between the basic law and an
implementing rule or regulation, it is the former that prevails, because the law cannot be broadened
by a mere administrative issuance — an administrative agency certainly cannot amend an act of
Congress.

Thus, We can disregard contemporaneous construction where there is no ambiguity in law and/or
the construction is clearly erroneous.  What is more, this Court has the constitutional prerogative
23

and authority to strike down and declare as void the rules of procedure of special courts and quasi-
judicial bodies  when found contrary to statutes and/or the Constitution.  Section 5(5), Art. VIII of the
24 25

Constitution provides:

Sec. 5. The Supreme Court shall have the following powers:

xxxx

(5) Promulgate rules concerning the protection and enforcement of constitutional rights, pleading,
practice and procedure in all courts, the admission to the practice of law, the Integrated Bar, and
legal assistance to the underprivileged. Such rules shall provide a simplified and inexpensive
procedure for the speedy disposition of cases, shall be uniform for all courts of the same grade, and
shall not diminish, increase, or modify substantive rights. Rules of procedure of special courts and
quasi-judicial bodies shall remain effective unless disapproved by the Supreme Court. (Emphasis
supplied.)

Thus, We exercise this power in voiding the above-quoted provisions of the IRR of RA 9255 insofar
as it provides the mandatory use by illegitimate children of their father’s surname upon the latter’s
recognition of his paternity.

To conclude, the use of the word "shall" in the IRR of RA 9255 is of no moment. The clear,
unambiguous, and unequivocal use of "may" in Art. 176 rendering the use of an illegitimate father’s
surname discretionary controls, and illegitimate children are given the choice on the surnames by
which they will be known.

At this juncture, We take note of the letters submitted by the children, now aged thirteen (13) and
fifteen (15) years old, to this Court declaring their opposition to have their names changed to
"Antonio."  However, since these letters were not offered before and evaluated by the trial court,
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they do not provide any evidentiary weight to sway this Court to rule for or against petitioner.  A
27

proper inquiry into, and evaluation of the evidence of, the children's choice of surname by the trial
court is necessary.

WHEREFORE, the instant petition is PARTIALLY GRANTED. The July 24, 2012 Decision of the
Court of Appeals in CA-G.R. CV No. 96406 is MODIFIED, the dispositive portion of which shall read:

WHEREFORE, the appeal is partly GRANTED. Accordingly. the appealed Decision of the Regional
Trial Court Branch 8, Aparri Cagayan in SP Proc. Case No. 11-4492 is MODIFIED in part and shall
hereinafter read as follows:

a. [Antonio] is ORDERED to deliver the minor children Jerard Patrick and Andre Lewis to the
custody of their mother herein appellant, Grace Grande who by virtue hereof is hereby
awarded the full or sole custody of these minor children;

b. [Antonio] shall have visitation rights  at least twice a week, and may only take the children
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out upon the written consent of [Grande]:

c. The parties are DIRECTED to give and share in support of the minor children Jerard
Patrick and Andre Lewis in the amount of ₱30,000.00 per month at the rate of 70% for
[Antonio] and 30% for [Grande]; and

d. The case is REMANDED to the Regional Trial Court, Branch 8 of Aparri, Cagayan for the
sole purpose of determining the surname to be chosen by the children Jerard Patrick and
Andre Lewis.

Rule 7 and Rule 8 of the Office of the Civil Registrar General Administrative Order No. 1, Series of
2004 are DISAPPROVED and hereby declared NULL and VOID.

SO ORDERED.