People vs Pomar, 46 Phil 440

Facts:

The only question presented by this appeal is whether or not the provisions of sections 13 and 15
of Act No. 3071 are a reasonable and lawful exercise of the police power of the state.

It appears from the record that on the 26th day of October, 1923, the prosecuting attorney of the
City of Manila presented a complaint in the Court of First Instance, accusing the defendant of a
violation of section 13 in connection with section 15 of Act No. 3071 of the Philippine Legislature.
The complaint alleged:

That on or about the 27th day of August, 1923, and sometime prior thereto, in the City of
Manila, Philippine Islands, the said accused, being the manager and person in charge
of La Flor de la Isabela, a tobacco factory pertaining to La Campania General de
Tabacos de Filipinas, a corporation duly authorized to transact business in said city, and
having, during the year 1923, in his employ and service as cigar-maker in said factory, a
woman by the name of Macaria Fajardo, whom he granted vacation leave which began
on the 16th day of July, 1923, by reason of her pregnancy, did then and there willfully,
unlawfully, and feloniously fail and refuse to pay to said woman the sum of eighty pesos
(P80), Philippine currency, to which she was entitled as her regular wages corresponding
to thirty days before and thirty days after her delivery and confinement which took place
on the 12th day of August, 1923, despite and over the demands made by her, the said
Macaria Fajardo, upon said accused, to do so.

To said complaint, the defendant demurred, alleging that the facts therein contained did not
constitute an offense. The demurrer was overruled, whereupon the defendant answered and
admitted at the trial all of the allegations contained in the complaint, and contended that the
provisions of said Act No. 3071, upon which the complaint was based were illegal,
unconstitutional and void.

Upon a consideration of the facts charged in the complaint and admitted by the defendant, the
Honorable C. A. Imperial, judge, found the defendant guilty of the alleged offense described in
the complaint, and sentenced him to pay a fine of P50, in accordance with the provisions of
section 15 of said Act, to suffer subsidiary imprisonment in case of insolvency, and to pay the
costs.

From that sentence the defendant appealed, and now makes the following assignments of error:
That the court erred in overruling the demurrer; in convicting him of the crime charged in the
information; and in not declaring section 13 of Act No. 3071, unconstitutional:

Section 13 of Act No. 3071 is as follows:

Every person, firm or corporation owning or managing a factory, shop or place of labor of
any description shall be obliged to grant to any woman employed by it as laborer who
may be pregnant, thirty days vacation with pay before and another thirty days after
confinement: Provided, That the employer shall not discharge such laborer without just
cause, under the penalty of being required to pay to her wages equivalent to the total of
two months counted from the day of her discharge.

Section 15 of the same Act is as follows:

1
 Any person, firm or corporation violating any of the provisions of this Act shall be
punished by a fine of not less than fifty pesos nor more than two hundred and fifty, or by
imprisonment for not less than ten days nor more than six months, or both, in the
discretion of the court.

In the case of firms or corporations, the presidents, directors or managers thereof or, in
their default, the persons acting in their stead, shall be criminally responsible for each
violation of the provisions of this Act.

Ruling:

In determining whether a particular law promulgated under the police power of the state is, in
fact, within said power, it becomes necessary first, to determine what that power is, its limits and
scope. Literally hundreds of decisions have been promulgated in which definitions of the police
power have been attempted. An examination of all of said decisions will show that the definitions
are generally limited to particular cases and examples, which are as varied as they are
numerous.

By reason of the constant growth of public opinion in a developing civilization, the term "police
power" has never been, and we do not believe can be, clearly and definitely defined and
circumscribed. One hundred years ago, for example, it is doubtful whether the most eminent
jurist, or court, or legislature would have for a moment thought that, by any possibility, a law
providing for the destruction of a building in which alcoholic liquors were sold, was within a
reasonable and lawful exercise of the police power. (Mugler vs. Kansas, 123 U. S., 623.) The
development of civilization, the rapidly increasing population, the growth of public opinion, with a
desire on the part of the masses and of the government to look after and care for the interests of
the individuals of the state, have brought within the police power of the state many questions for
regulation which formerly were not so considered. In a republican form of government public
sentiment wields a tremendous influence upon what the state may or may not do, for the
protection of the health and public morals of the people. Yet, neither public sentiment, nor a
desire to ameliorate the public morals of the people of the state will justify the promulgation of a
law which contravenes the express provisions of the fundamental law of the people — the
constitutional of the state.

A definition of the police power of the state must depend upon the particular law and the
particular facts to which it is to be applied. The many definitions which have been given by the
highest courts may be examined, however, for the purpose of giving us a compass or guide to
assist us in arriving at a correct conclusion in the particular case before us. Sir William
Blackstone, one of the greatest expounders of the common law, defines the police power as "the
due regulation and domestic order of the kingdom, whereby the inhabitants of a state, like
members of a well-governed family, are bound to conform their general behavior to the rules of
propriety, good neighborhood, and good manners, and to be decent, industrious, and inoffensive
in their respective stations." (4 Blackstone's Commentaries, 162.)

Mr. Jeremy Bentham, in his General View of Public Offenses, gives us the following definition:
"Police is in general a system of precaution, either for the prevention of crimes or of calamities.
Its business may be distributed into eight distinct branches: (1) Police for the prevention of
offenses; (2) police for the prevention of calamities; (3) police for the prevention of endemic
diseased; (4) police of charity; (5) police of interior communications; (6) police of public
amusements; (7) police for recent intelligence; (8) police for registration."

2
Mr. Justice Cooley, perhaps the greatest expounder of the American Constitution, says: "The
police power is the power vested in the legislature by the constitution to make, ordain, and
establish all manner of wholesome and reasonable laws, statutes, and ordinances, either with
penalties or without, not repugnant to the constitution, as they shall judge to be for the good and
welfare of the commonwealth, and of the subject of the same. . . ." (Cooley's Constitutional
Limitations, p. 830.)

In the case of Commonwealth of Massachusetts vs. Alger (7 Cushing, 53), we find a very

comprehensive definition of the police power of the state. In that case it appears that the colony
of Massachusetts in 1647 adopted an Act to preserve the harbor of Boston and to prevent
encroachments therein. The defendant unlawfully erected, built, and established in said harbor,
and extended beyond said lines and into and over the tide water of the Commonwealth a certain
superstructure, obstruction and encumbrance. Said Act provided a penalty for its violation of a
fine of not less than $1,000 nor more than $5,000 for every offense, and for the destruction of
said buildings, or structures, or obstructions as a public nuisance. Alger was arrested and placed
on trial for violation of said Act. His defense was that the Act of 1647 was illegal and void,
because if permitted the destruction of private property without compensation. Mr. Justice Shaw,
speaking for the court in that said, said: "We think it is a settled principle, growing out of the
nature of well-ordered civil society, that every holder of property, however absolute and
unqualified may be his title, holds it under the implied liability that his use of it may be so
regulated, that it shall not be injurious to the equal environment of others having an equal right to
the enjoyment of their property nor injurious to the rights of the community. All property in this
commonwealth, as well that in the interior as that bordering on tide waters, is derived directly or
indirectly from the government and held subject to those general regulations, which are
necessary to the common good and general welfare. Rights of property, like all other social and
conventional rights, are subject to such reasonable limitations in their enjoyment, as shall prevent
them from being injurious, and to such reasonable restraints and regulations established by law,
as the legislature, under the governing and controlling power vested in them by the constitution,
may think necessary and expedient." Mr. Justice Shaw further adds: ". . . The power we allude to
is rather the police power, the power vested in the legislature by the constitution, to make, ordain
and establish all manner of wholesome and reasonable laws, statutes and ordinances, either
with penalties or without, not repugnant to the constitution, as they shall judge to be for the good
and welfare of the commonwealth, and of the subjects of the same."

This court has, in the case of Case vs. Board of Health and Heiser (24 Phil., 250), in discussing
the police power of the state, had occasion to say: ". . . It is a well settled principle, growing out of
the nature of well-ordered and civilized society, that every holder of property, however absolute
and unqualified may be his title, holds it under the implied liability that his use of it shall not be
injurious to the equal enjoyment of others having an equal right to the enjoyment of their
property, nor injurious to the rights of the community. All property in the state is held subject to its
general regulations, which are necessary to the common good and general welfare. Rights of
property, like all other social and conventional rights, are subject to such reasonable limitations in
their enjoyment as shall prevent them from being injurious, and to such reasonable restraints and
regulations, established by law, as the legislature, under the governing and controlling power
vested in them by the constitution, may think necessary and expedient. The state, under the
police power is possessed with plenary power to deal with all matters relating to the general
health, morals, and safety of the people, so long as it does not contravene any positive inhibition
of the organic law and providing that such power is not exercised in such a manner as to justify
the interference of the courts to prevent positive wrong and oppression."

3
Many other definitions have been given not only by the Supreme Court of the United States but
by the Supreme Court of every state of the Union. The foregoing definitions, however, cover the
general field of all of the definitions, found in jurisprudence. From all of the definitions we
conclude that it is much easier to perceive and realize the existence and sources of the police
power than to exactly mark its boundaries, or prescribe limits to its exercise by the legislative
department of the government.

The most recent definition which has been called to our attention is that found in the case of
Adkins vs. Children's Hospital of the District of Columbia (261 U. S., 525). In that case the
controversy arose in this way: A children's hospital employed a number of women at various
rates of wages, which were entirely satisfactory to both the hospital and the employees. A hotel
company employed a woman as elevator operator at P35 per month and two meals a day under
healthy and satisfactory conditions, and she did not risk to lose her position as she could not
earn so much anywhere else. Her wages were less than the minimum fixed by a board created
under a law for the purpose of fixing a minimum wage for women and children, with a penalty
providing a punishment for a failure or refusal to pay the minimum wage fixed. The wage paid by
the hotel company of P35 per month and two meals a day was less than the minimum wage fixed
by said board. By reason of the order of said board, the hotel company, was about to discharge
her, as it was unwilling to pay her more and could not give her employment at that salary without
risking the penalty of a fine and imprisonment under the law. She brought action to enjoin the
hotel company from discharging her upon the ground that the enforcement of the "Minimum
Wage Act" would deprive her of her employment and wages without due process of law, and that
she could not get as good a position anywhere else. The constitutionality of the Act was squarely
presented to the Supreme Court of the United States for decision.

It has been said that the particular statute before us is required in the interest of social justice for
whose end freedom of contract may lawfully be subjected to restraint. The liberty of the individual
to do as he pleases, even in innocent matters, is not absolute. That liberty must frequently yield
to the common good, and the line beyond which the power of interference may not be pressed is
neither definite nor unalterable, may be made to move, within limits not well defined, with
changing needs and circumstances.

The late Mr. Justice Harlan, in the case of Adair vs. United States (208 U. S., 161, 174), said that
the right of a person to sell his labor upon such terms as he deems proper is, in its essence, the
same as the right of the purchaser of labor to prescribe the conditions upon which he will accept
such labor from the person offering to sell. In all such particulars the employer and the employee
have equality of right, and any legislation that disturbs that equality is an arbitrary interference
with the liberty of contract, which no government can legally justify in a free land, under a
constitution which provides that no person shall be deprived of his liberty without due process of
law.

Mr. Justice Pitney, in the case of Coppage vs. Kansas (235 U. S., 1, 14), speaking for the
Supreme Court of the United States, said: ". . . Included in the right of personal liberty and the
right of private property — partaking of the nature of each — is the right to make contracts for the
acquisition of property. Chief among such contracts is that of personal employment, by which
labor and other services are exchange for money or other forms of property. If this right be struck
down or arbitrarily interfered with, there is a substantial impairment of liberty in the long
established constitutional sense. The right is as essential to the laborer as to the capitalist, to the
poor as to the rich; for the vast majority of persons have no other honest way to begin to acquire
property, save by working for money."

The right to liberty includes the right to enter into contracts and to terminate contracts. In the
case of Gillespie vs. People (118 Ill., 176, 183-185) it was held that a statute making it unlawful
to discharge an employee because of his connection with any lawful labor organization, and
providing a penalty therefor, is void, since the right to terminate a contract, subject to liability to
respond in a civil action for an unwarranted termination, is within the protection of the state and

4
Federal constitutions which guarantee that no person shall be deprived of life, liberty or property
without due process of law. The court said in part: ". . . One citizen cannot be compelled to give
employment to another citizen, nor can anyone be compelled to be employed against his will.
The Act of 1893, now under consideration, deprives the employer of the right to terminate his
contract with his employee. The right to terminate such a contract is guaranteed by the organic
law of the state. The legislature is forbidden to deprive the employer or employee of the exercise
of that right. The legislature has no authority to pronounce the performance of an innocent act
criminal when the public health, safety, comfort or welfare is not interfered with. The statute in
question says that, if a man exercises his constitutional right to terminate a contract with his
employee, he shall, without a hearing, be punished as for the commission of a crime.

The statute in question is exactly analogous to the "Minimum Wage Act" referred to above. In
section 13 it will be seen that no person, firm, or corporation owning or managing a factory shop,
or place of labor of any description, can make a contract with a woman without incurring the
obligation, whatever the contract of employment might be, unless he also promise to pay to such
woman employed as a laborer, who may become pregnant, her wages for thirty days before and
thirty days after confinement. In other words, said section creates a term or condition in every
contract made by every person, firm, or corporation with any woman who may, during the course
of her employment, become pregnant, and a failure to include in said contract the terms fixed to
a fine and imprisonment. Clearly, therefore, the law has deprived, every person, firm, or
corporation owning or managing a factory, shop or place of labor of any description within the
Philippine Islands, of his right to enter into contracts of employment upon such terms as he and
the employee may agree upon. The law creates a term in every such contract, without the
consent of the parties. Such persons are, therefore, deprived of their liberty to contract. The
constitution of the Philippine Islands guarantees to every citizen his liberty and one of
his liberties is the liberty to contract.

It is believed and confidently asserted that no case can be found, in civilized society and well-
organized governments, where individuals have been deprived of their property, under the police
power of the state, without compensation, except in cases where the property in question was
used for the purpose of violating some legally adopted, or constitutes a nuisance. Among such
cases may be mentioned: Apparatus used in counterfeiting the money of the state; firearms
illegally possessed; opium possessed in violation of law; apparatus used for gambling in violation
of law; buildings and property used for the purpose of violating laws prohibiting the manufacture
and sale of intoxicating liquors; and all cases in which the property itself has become a nuisance
and dangerous and detrimental to the public health, morals and general welfare of the state. In
all of such cases, and in many more which might be cited, the destruction of the property is
permitted in the exercise of the police power of the state. But it must first be established that
such property was used as the instrument for the violation of a valid existing law.
(Mugler vs. Kansas, 123 U. S., 623; Slaughter-House Cases, 16 Wall., [U. S.], 36; Butchers'
Union, etc., Co. vs. Crescent City, etc., Co., 111 U. S., 746 John Stuart Mill — "On Liberty," 28,
29.)

Without further attempting to define what are the peculiar subjects or limits of the police power, it
may safely be affirmed, that every law for the restraint and punishment of crimes, for the
preservation of the public peace, health, and morals, must come within this category. But the
state, when providing by legislation for the protection of the public health, the public morals, or
the public safety, is subject to and is controlled by the paramount authority of the constitution of
the state, and will not be permitted to violate rights secured or guaranteed by that instrument or
interfere with the execution of the powers and rights guaranteed to the people under their law —
the constitution. (Mugler vs. Kansas, 123 U. S., 623.)

The police power of the state is a growing and expanding power. As civilization develops and
public conscience becomes awakened, the police power may be extended, as has been
demonstrated in the growth of public sentiment with reference to the manufacture and sale of
intoxicating liquors. But that power cannot grow faster than the fundamental law of the state, nor
transcend or violate the express inhibition of the people's law — the constitution. If the people

5
desire to have the police power extended and applied to conditions and things prohibited by the
organic law, they must first amend that law. 1awphil.net

It will also be noted from an examination of said section 13, that it takes no account of contracts
for the employment of women by the day nor by the piece. The law is equally applicable to each
case. It will hardly be contended that the person, firm or corporation owning or managing a
factory, shop or place of labor, who employs women by the day or by the piece, could be
compelled under the law to pay for sixty days during which no services were rendered.

It has been decided in a long line of decisions of the Supreme Court of the United States, that the
right to contract about one's affairs is a part of the liberty of the individual, protected by the "due
process of law" clause of the constitution. (Allgeyer vs. Louisiana, 165 U. S., 578, 591; New York
Life Ins. Co. vs. Dodge, 246 U. S., 357, 373, 374; Coppage vs. Kansas, 236 U. S., 1, 10, 14;
Adair vs. United States, 208 U. S., 161; Lochner vs. New York, 198 U. S.; 45, 49;
Muller vs. Oregon, 208 U. S., 412, 421.)

The rule in this jurisdiction is, that the contracting parties may establish any agreements, terms,
and conditions they may deem advisable, provided they are not contrary to law, morals or public
policy. (Art. 1255, Civil Code.)

For all of the foregoing reasons, we are fully persuaded, under the facts and the law, that the
provisions of section 13, of Act No. 3071 of the Philippine Legislature, are unconstitutional and
void, in that they violate and are contrary to the provisions of the first paragraph of section 3 of
the Act of Congress of the United States of August 29, 1916. (Vol. 12, Public Laws, p. 238.)

Therefore, the sentence of the lower court is hereby revoked, the complaint is hereby dismissed,
and the defendant is hereby discharged from the custody of the law, with costs de oficio. So
ordered.

6
Basa vs. WCC, 103 SCRA 542 (1981).

Facts:

Mariano R. Basa, retired municipal judge of Calapan, Oriental Mindoro, seeks the review of the
December 12, 1975 decision of the Workmen's Compensation Commission in WC Case No. C-
958, which affirmed the October 14, 1975 order of the acting chief of Unit, Regional Office No. 5,
Department of Labor, at San Pablo City, denying his second claim for reimbursement of medical
expenses incurred in relation with his heart ailment.

On July 26, 1969, petitioner suffered a heart attack that incapacitated him from further performing
his function as municipal judge, and which forced him on October 16, 1969 to retire from the
service. Consequently, he filed a claim for compensation under the Workmen's Compensation
Act, as amended and was awarded on October 26, 1970 permanent and total disability benefits
and reimbursement of medical expenses incurred,

On January 26, 1975 or after a period of almost six (6) years his initial heart attack on July 26,
1969, petitioner suffered his second heart attack which proved more severe, causing loss of his
power of speech and the weakening of his body.

On June 26, 1975, he filed with the Workmen's Compensation Unit of the Department of Labor,
Regional Office No. 5, at San Pablo City, a claim for reimbursement of medical expenses
incurred in connection with his aforesaid second heart attack; but the same was denied on
October 14, 1975 by the acting chief of unit for lack of merit, reasoning that petitioner had been
awarded benefits under Section 15 of the Workmen's Compensation Act, as amended, for
permanent and total disability, plus reimbursement of medical expenses.

On December 27, 1976, respondent Commission rendered a decision affirming the decision of its
acting chief of unit, thus:

It appears that claimant of this case has previously been awarded compensation
under Section 15 of the Act and the instant case was subsequently filed in
relation thereto only for the sole purpose of seeking reimbursement under
Section 13.

We cannot sustain claimant's view. The claimant has already been declared
totally disabled in the previous award. That being so, no claim for reimbursement
of subsequent and Mother medical expenses may be entertained or awarded, in
accordance with the policy of this Commission.

Issue:

 whether or not petitioner is entitled to recover subsequent and further medical expenses for the
same permanent and total disability which had already been the subject of a maximum
compensation benefits under Section 15 of the Workmen's Compensation Act, as amended, and
for reimbursement of medical expenses already then incurred under Section 13 thereof.

7
Ruling:

The issue as framed admits the causal relationship of petitioner's 1969 heart attack to his 1975
heart attack. As a matter of fact, respondent employer did not allege and there was no evidence
presented that petitioner had fully recovered from his first heart attack in 1969 when
his second heart attack occurred in 1975. Moreover, petitioner's attending physician testified that
once the patient has been subjected to this kind of disease, and there is already exclusion in the
blood because of the previous thrombosis, the patient will be in serious condition because the
area in the brain will be involved (TSN, September 26, 1975, pp. 17-18, rec.).

The members of this Tribunal are aware of death induced by a second heart attack even after the
lapse of many years from the first attack.

Consequently, petitioner's second attack, being causally linked with his first heart attack which
was already declared compensable by the Workmen's Compensation, may be the source of a
claim for further compensation benefits. In the recent case of Enriquez versus Workmen's
Compensation Commission (93 SCRA 366 [1979]), WE stated that ... the right to compensation
extends to disability due to disease supervening upon and proximately and naturally resulting
from a compensable injury (82 Am Jur 132). Where the primary injury is shown to have arisen in
the course of employment, every natural consequence that flows from the injury likewise arises
out of the employment, unless it is the result of an independent intervening cause attributable to
claimant's own negligence or misconduct (Larson Workmen's Compensation law 3-279 [1972]).
Simply stated, all the medical consequences and sequelae that flow from the primary injury are
compensable (ibid.).

Petitioner's case therefore comes within the ambit of the 1980 precedents-setting decision of the
Supreme Court En Banc in Biscarra vs. Workmen's Compensation Commission (G.R. No. L-
43425, January 22, 1980), where it sustained the right of an ailing employee under Section 13 of
the Workmen's Compensation Act, as amended, to continuous medical treatment and therefore
reimbursement for subsequent medical expenses incurred even after he is declared permanently
disabled.

In this case of petitioner who served the government as municipal judge from 1947 to 1969,
risking his health and life, and who prays for a second reimbursement of his medical
expenses, ... this Court has the singular opportunity to afford him relief from his misery and not
let him deteriorate until his body is finally and totally decomposed and dissolved into dust. Any
gratuity that he might have received, aside from the first compensation for wage loss and the first
refund for hospitalization and medical treatment, would not even be sufficient to maintain his
family for the remaining few years of his life. With his retirement gratuity and disability
compensation already exhausted by now (after eleven years from 1969), he and his family are
exposed to complete misery. The government or the court that does not lift a hand to rescue the
ailing employee and his family from such abject penury cannot rightly claim to be an agency of
social justice, much less pretend to be compassionate.

In this case of petitioner who served the government as municipal judge from 1947 to 1969,
risking his health and life, and who prays for a second reimbursement of his medical
expenses, ... this Court has the singular opportunity to afford him relief from his misery and not
let him deteriorate until his body is finally and totally decomposed and dissolved into dust. Any
gratuity that he might have received, aside from the first compensation for wage loss and the first
refund for hospitalization and medical treatment, would not even be sufficient to maintain his
family for the remaining few years of his life. With his retirement gratuity and disability
compensation already exhausted by now (after eleven years from 1969), he and his family are
exposed to complete misery. The government or the court that does not lift a hand to rescue the
ailing employee and his family from such abject penury cannot rightly claim to be an agency of
social justice, much less pretend to be compassionate.

8
MELENCIO-HERRERA, J., dissenting:

Petitioner herein was appointed Municipal Judge ill 194-1. He suffered his first heart attack in
July, 1969. Here tired from the service in October, 1969 and was awarded, in October 1970, by
the Workmen's Compensation Commission, permanent and total disability benefits and
reimbursement, of medical expenses incurred.

After approximately six years from The date of his retirement, or in 1975, petitioner suffered a
second heart attack. He incurred further medical expenses consisting of hospitalization and
physician's fees in the amount of P19,880. Respondent Commission denied his claim for further
reimbursement.

The question is. should petitioner be entitled to reimbursement for the subsequent medical and
hospitalization expenses that he had incurred?

Although under the ruling of the Court En Banc in Biscarra vs. Workmen's Compensation
Commission (95 SCRA 248 [19801), petitioner is so entitled, I am constrained, as a matter of
principle, to reiterate my dissent in that case to the effect that under the Workmen's
Compensation Act, a totally and permanently disabled claimant is not entitled, up to his death, to
continued hospital, medical and surgical services, nor to further reimbursement of his medical
expenses.

Briefly, the reasons I stated were: 1) under section 13 of the said Act, an employee is entitled to
such services and expenses "immediately ...during the subsequent period of disability or, to
immediate medical expenses. 2) Under sections 22 and 29 of the Act, "the employer shall be
exempt from all liability under this Act as soon as the compensation has been paid under this
section, saving the provisions of section six of this Act." 3) Throughout the said Act, the
legislative intent to limit payable compensation to P6,000.00 is evident (see secs. 12, 14, 16, 18).
4) The administrative interpretation given by the Workmen's Compensation Commission to
Section 13 of the Act, although never conclusive, is usually given great weight by the Courts as it
is the department charged with the implementation of the Workmen's Compensation Act
(Madrigal & Paterno vs. Rafferty & Concepcion, 38 Phil. 415 [1918]; Asturias Sugar Central vs.
Commissioner of Customs, 1 SCRA 617 [1961]).

Relative to the assertion that the Philippines is a "welfare state" (p. 26, majority Decision) to
which I also took exception in my previous dissent in Biscarra and which I reiterate herein, I need
mention only the statement of President Marcos, quoted in the local Times Journal of April 27,
1980, reading as follows:

Speaking during a breakfast hosted by the Hawaii Chamber of Commerce and

Industry at the Oahu Country Club in Honolulu, the President further pledged not
to adopt the welfare state policy. This could render industry bankrupt, he said,
stressing that his policy is for a proportionate sharing of wealth between capital
and labor.

9
PASEI vs Drilon, 163 SCRA 386

Facts:

The petitioner, Philippine Association of Service Exporters, Inc. (PASEI, for short), a firm
"engaged principally in the recruitment of Filipino workers, male and female, for overseas
placement," 1 challenges the Constitutional validity of Department Order No. 1, Series of
1988, of the Department of Labor and Employment, in the character of "GUIDELINES
GOVERNING THE TEMPORARY SUSPENSION OF DEPLOYMENT OF FILIPINO
DOMESTIC AND HOUSEHOLD WORKERS," in this petition for certiorari and prohibition.
Specifically, the measure is assailed for "discrimination against males or females;" 2 that it
"does not apply to all Filipino workers but only to domestic helpers and females with similar
skills;" 3 and that it is violative of the right to travel. It is held likewise to be an invalid exercise
of the lawmaking power, police power being legislative, and not executive, in character.

In its supplement to the petition, PASEI invokes Section 3, of Article XIII, of the Constitution,
providing for worker participation "in policy and decision-making processes affecting their rights
and benefits as may be provided by law."   Department Order No. 1, it is contended, was passed
4

in the absence of prior consultations. It is claimed, finally, to be in violation of the Charter's non-
impairment clause, in addition to the "great and irreparable injury" that PASEI members face
should the Order be further enforced.

On May 25, 1988, the Solicitor General, on behalf of the respondents Secretary of Labor and
Administrator of the Philippine Overseas Employment Administration, filed a Comment informing
the Court that on March 8, 1988, the respondent Labor Secretary lifted the deployment ban in the
states of Iraq, Jordan, Qatar, Canada, Hongkong, United States, Italy, Norway, Austria, and
Switzerland. * In submitting the validity of the challenged "guidelines," the Solicitor General invokes the police power of the
Philippine State.

It is admitted that Department Order No. 1 is in the nature of a police power measure. The only
question is whether or not it is valid under the Constitution.

Issue:

Whether or not Department Order 1 is constitutional?

Ruling:

The concept of police power is well-established in this jurisdiction. It has been defined as the
"state authority to enact legislation that may interfere with personal liberty or property in order to
promote the general welfare."   As defined, it consists of (1) an imposition of restraint upon liberty
5

or property, (2) in order to foster the common good. It is not capable of an exact definition but
has been, purposely, veiled in general terms to underscore its all-comprehensive embrace.

"Its scope, ever-expanding to meet the exigencies of the times, even to anticipate the future
where it could be done, provides enough room for an efficient and flexible response to conditions
and circumstances thus assuring the greatest benefits."  6

It finds no specific Constitutional grant for the plain reason that it does not owe its origin to the
Charter. Along with the taxing power and eminent domain, it is inborn in the very fact of
statehood and sovereignty. It is a fundamental attribute of government that has enabled it to

10
perform the most vital functions of governance. Marshall, to whom the expression has been
credited,   refers to it succinctly as the plenary power of the State "to govern its citizens." 
7 8

"The police power of the State ... is a power coextensive with self- protection, and it is not inaptly
termed the "law of overwhelming necessity." It may be said to be that inherent and plenary power
in the State which enables it to prohibit all things hurtful to the comfort, safety, and welfare of
society." 9

It constitutes an implied limitation on the Bill of Rights. According to Fernando, it is "rooted in the
conception that men in organizing the state and imposing upon its government limitations to
safeguard constitutional rights did not intend thereby to enable an individual citizen or a group of
citizens to obstruct unreasonably the enactment of such salutary measures calculated to ensure
communal peace, safety, good order, and welfare."   Significantly, the Bill of Rights itself does
10

not purport to be an absolute guaranty of individual rights and liberties "Even liberty itself, the
greatest of all rights, is not unrestricted license to act according to one's will."   It is subject to the
11

far more overriding demands and requirements of the greater number.

Notwithstanding its extensive sweep, police power is not without its own limitations. For all its
awesome consequences, it may not be exercised arbitrarily or unreasonably. Otherwise, and in
that event, it defeats the purpose for which it is exercised, that is, to advance the public good.
Thus, when the power is used to further private interests at the expense of the citizenry, there is
a clear misuse of the power.  12

In the light of the foregoing, the petition must be dismissed.

As a general rule, official acts enjoy a presumed vahdity.   In the absence of clear and
13

convincing evidence to the contrary, the presumption logically stands.

The petitioner has shown no satisfactory reason why the contested measure should be nullified.
There is no question that Department Order No. 1 applies only to "female contract workers,"   but 14

it does not thereby make an undue discrimination between the sexes. It is well-settled that
"equality before the law" under the Constitution   does not import a perfect Identity of rights
15

among all men and women. It admits of classifications, provided that (1) such classifications rest
on substantial distinctions; (2) they are germane to the purposes of the law; (3) they are not
confined to existing conditions; and (4) they apply equally to all members of the same class.  16

The Court is satisfied that the classification made-the preference for female workers — rests on
substantial distinctions.

As a matter of judicial notice, the Court is well aware of the unhappy plight that has befallen our
female labor force abroad, especially domestic servants, amid exploitative working conditions
marked by, in not a few cases, physical and personal abuse. The sordid tales of maltreatment
suffered by migrant Filipina workers, even rape and various forms of torture, confirmed by
testimonies of returning workers, are compelling motives for urgent Government action. As
precisely the caretaker of Constitutional rights, the Court is called upon to protect victims of
exploitation. In fulfilling that duty, the Court sustains the Government's efforts.

The same, however, cannot be said of our male workers. In the first place, there is no evidence
that, except perhaps for isolated instances, our men abroad have been afflicted with an Identical
predicament. The petitioner has proffered no argument that the Government should act similarly
with respect to male workers. The Court, of course, is not impressing some male chauvinistic
notion that men are superior to women. What the Court is saying is that it was largely a matter of
evidence (that women domestic workers are being ill-treated abroad in massive instances) and
not upon some fanciful or arbitrary yardstick that the Government acted in this case. It is
evidence capable indeed of unquestionable demonstration and evidence this Court accepts. The
Court cannot, however, say the same thing as far as men are concerned. There is simply no

11
evidence to justify such an inference. Suffice it to state, then, that insofar as classifications are
concerned, this Court is content that distinctions are borne by the evidence. Discrimination in this
case is justified.

As we have furthermore indicated, executive determinations are generally final on the Court.
Under a republican regime, it is the executive branch that enforces policy. For their part, the
courts decide, in the proper cases, whether that policy, or the manner by which it is implemented,
agrees with the Constitution or the laws, but it is not for them to question its wisdom. As a co-
equal body, the judiciary has great respect for determinations of the Chief Executive or his
subalterns, especially when the legislature itself has specifically given them enough room on how
the law should be effectively enforced. In the case at bar, there is no gainsaying the fact, and the
Court will deal with this at greater length shortly, that Department Order No. 1 implements the
rule-making powers granted by the Labor Code. But what should be noted is the fact that in spite
of such a fiction of finality, the Court is on its own persuaded that prevailing conditions indeed call
for a deployment ban.

There is likewise no doubt that such a classification is germane to the purpose behind the
measure. Unquestionably, it is the avowed objective of Department Order No. 1 to "enhance the
protection for Filipino female overseas workers"   this Court has no quarrel that in the midst of
17

the terrible mistreatment Filipina workers have suffered abroad, a ban on deployment will be for
their own good and welfare.

The Order does not narrowly apply to existing conditions. Rather, it is intended to apply
indefinitely so long as those conditions exist. This is clear from the Order itself ("Pending review
of the administrative and legal measures, in the Philippines and in the host countries . . ." ),
18

meaning to say that should the authorities arrive at a means impressed with a greater degree of
permanency, the ban shall be lifted. As a stop-gap measure, it is possessed of a necessary
malleability, depending on the circumstances of each case. 

The Court finds, finally, the impugned guidelines to be applicable to all female domestic overseas
workers. That it does not apply to "all Filipina workers"   is not an argument for
20

unconstitutionality. Had the ban been given universal applicability, then it would have been
unreasonable and arbitrary. For obvious reasons, not all of them are similarly circumstanced.
What the Constitution prohibits is the singling out of a select person or group of persons within an
existing class, to the prejudice of such a person or group or resulting in an unfair advantage to
another person or group of persons. To apply the ban, say exclusively to workers deployed by A,
but not to those recruited by B, would obviously clash with the equal protection clause of the
Charter. It would be a classic case of what Chase refers to as a law that "takes property from A
and gives it to B."   It would be an unlawful invasion of property rights and freedom of contract
21

and needless to state, an invalid act.   (Fernando says: "Where the classification is based on
22

such distinctions that make a real difference as infancy, sex, and stage of civilization of minority
groups, the better rule, it would seem, is to recognize its validity only if the young, the women,
and the cultural minorities are singled out for favorable treatment. There would be an element of
unreasonableness if on the contrary their status that calls for the law ministering to their needs is
made the basis of discriminatory legislation against them. If such be the case, it would be difficult
to refute the assertion of denial of equal protection."   In the case at bar, the assailed Order
23

clearly accords protection to certain women workers, and not the contrary.)

It is incorrect to say that Department Order No. 1 prescribes a total ban on overseas deployment.

12
The consequence the deployment ban has on the right to travel does not impair the right. The
right to travel is subject, among other things, to the requirements of "public safety," "as may be
provided by law."   Department Order No. 1 is a valid implementation of the Labor Code, in
25

particular, its basic policy to "afford protection to labor,"   pursuant to the respondent Department
26

of Labor's rule-making authority vested in it by the Labor Code.   The petitioner assumes that it is
27

unreasonable simply because of its impact on the right to travel, but as we have stated, the right
itself is not absolute. The disputed Order is a valid qualification thereto.

Neither is there merit in the contention that Department Order No. 1 constitutes an invalid
exercise of legislative power. It is true that police power is the domain of the legislature, but it
does not mean that such an authority may not be lawfully delegated. As we have mentioned, the
Labor Code itself vests the Department of Labor and Employment with rulemaking powers in the
enforcement whereof.  28

The petitioners's reliance on the Constitutional guaranty of worker participation "in policy and
decision-making processes affecting their rights and benefits"   is not well-taken. The right
29

granted by this provision, again, must submit to the demands and necessities of the State's
power of regulation.

The Constitution declares that:

Sec. 3. The State shall afford full protection to labor, local and overseas,
organized and unorganized, and promote full employment and equality of
employment opportunities for all.  30

"Protection to labor" does not signify the promotion of employment alone. What concerns the
Constitution more paramountly is that such an employment be above all, decent, just, and
humane. It is bad enough that the country has to send its sons and daughters to strange lands
because it cannot satisfy their employment needs at home. Under these circumstances, the
Government is duty-bound to insure that our toiling expatriates have adequate protection,
personally and economically, while away from home. In this case, the Government has evidence,
an evidence the petitioner cannot seriously dispute, of the lack or inadequacy of such protection,
and as part of its duty, it has precisely ordered an indefinite ban on deployment.

The Court finds furthermore that the Government has not indiscriminately made use of its
authority. It is not contested that it has in fact removed the prohibition with respect to certain
countries as manifested by the Solicitor General.

The non-impairment clause of the Constitution, invoked by the petitioner, must yield to the loftier
purposes targetted by the Government.   Freedom of contract and enterprise, like all other
31

freedoms, is not free from restrictions, more so in this jurisdiction, where laissez faire has never
been fully accepted as a controlling economic way of life.

This Court understands the grave implications the questioned Order has on the business of
recruitment. The concern of the Government, however, is not necessarily to maintain profits of
business firms. In the ordinary sequence of events, it is profits that suffer as a result of
Government regulation. The interest of the State is to provide a decent living to its citizens. The
Government has convinced the Court in this case that this is its intent. We do not find the
impugned Order to be tainted with a grave abuse of discretion to warrant the extraordinary relief
prayed for.

13
CMS Estate Inc. vs SSS, 132 SCRA 108

Facts:

This appeal by the CMS Estate, Inc. from the decision rendered by the Social Security
Commission in its Case No. 12, entitled "CMS Estate, Inc. vs. Social Security System, declaring
CMS subject to compulsory coverage as of September 1, 1957 and "directing the Social Security
System to effect such coverage of the petitioner's employees in its logging and real estate
business conformably to the provision of Republic Act No. 1161, as amended was certified to Us
by the defunct Court of Appeals 1 for further disposition considering that purely questions of law are involved.

Petitioner is a domestic corporation organized primarily for the purpose of engaging in the real
estate business. On December 1, 1952, it started doing business with only six (6) employees. It's
Articles of Incorporation was amended on June 4, 1956 in order to engage in the logging
business. The Securities and Exchange Commission issued the certificate of filing of said
amended articles on June 18, 1956. Petitioner likewise obtained an ordinary license from the
Bureau of Forestry to operate a forest concession of 13,000 hectares situated in the municipality
of Baganga, Province of Davao.

On January 28, 1957, petitioner entered into a contract of management with one Eufracio D.
Rojas for the operation and exploitation of the forest concession The logging operation actually
started on April 1, 1957 with four monthly salaried employees. As of September 1, 1957,
petitioner had 89 employees and laborers in the logging operation. On December 26, 1957,
petitioner revoked its contract of management with Mr. Rojas.

On August 1, 1958, petitioner became a member of the Social Security System with respect to its
real estate business. On September 6, 1958, petitioner remitted to the System the sum of
P203.13 representing the initial premium on the monthly salaries of the employees in its logging
business. However, on October 9, 1958, petitioner demanded the refund of the said amount,
claiming that it is not yet subject to compulsory coverage with respect to its logging business.
The request was denied by respondent System on the ground that the logging business was a
mere expansion of petitioner's activities and for purposes of the Social Security Act, petitioner
should be considered a member of the System since December 1, 1952 when it commenced its
real estate business.

On November 10, 1958, petitioner filed a petition with the Social Security Commission praying for
the determination of the effectivity date of the compulsory coverage of petitioner's logging
business.

After both parties have submitted their respective memoranda, the Commission issued on
January 14, 1960, Resolution No. 91,   the dispositive portion of which reads as follows:
2

Premises considered, the instant petition is hereby denied and petitioner is

hereby adjudged to be subject to compulsory coverage as of Sept. 1, 1957 and
the Social Security System is hereby directed to effect such coverage of
petitioner's employees in its logging and real estate business conformably to the
provisions of Rep. Act No. 1161, as amended.

14
Issue:

These two (2) resolutions are now the subject of petitioner's appeal. Petitioner submits that
respondent Commission erred in holding —

(1) that the contributions required of employers and employees under our Social
Security Act of 1954 are not in the nature of excise taxes because the said Act
was allegedly enacted by Congress in the exercise of the police power of the
State, not of its taxing power;

(2) that no contractee — independent contractor relationship existed between

petitioner and Eufracio D. Rojas during the time that he was operating its forest
concession at Baganga, Davao;

(3) that a corporation which has been in operation for more than two years in one
business is immediately covered with respect to any new and independent
business it may subsequently engage in;

(4) that a corporation should be treated as a single employing unit for purposes of
coverage under the Social Security Act, irrespective of its separate, unrelated
and independent business established and operated at different places and on
different dates; and

(5) that Section 9 of the Social Security Act on the question of compulsory
membership and employers should be given a liberal interpretation.

Ruling:

The Social Security Law was enacted pursuant to the policy of the government "to develop,
establish gradually and perfect a social security system which shall be suitable to the needs of
the people throughout the Philippines, and shall provide protection against the hazards of
disability, sickness, old age and death" (Sec. 2, RA 1161, as amended). It is thus clear that said
enactment implements the general welfare mandate of the Constitution and constitutes a
legitimate exercise of the police power of the State. As held in the case of Philippine Blooming
Mills Co., Inc., et al. vs. SSS   —
3

Membership in the SSS is not a result of bilateral, concensual agreement where

the rights and obligations of the parties are defined by and subject to their will,
RA 1161 requires compulsory coverage of employees and employers under the
System. It is actually a legal imposition on said employers and employees,
designed to provide social security to the workingmen. Membership in the SSS is
therefore, in compliance with the lawful exercise of the police power of the State,
to which the principle of non-impairment of the obligation of contract is not a
proper defense.

The taxing power of the State is exercised for the purpose of raising revenues. However, under
our Social Security Law, the emphasis is more on the promotion of the general welfare. The Act
is not part of out Internal Revenue Code nor are the contributions and premiums therein dealt
with and provided for, collectible by the Bureau of Internal Revenue. The funds contributed to the
System belong to the members who will receive benefits, as a matter of right, whenever the
hazards provided by the law occur.

15
Because of the broad social purpose of the Social Security Act, all doubts in construing the Act
should favor coverage rather than exemption.

Prior to its amendment, Sec. 9 of the Act provides that before an employer could be compelled to
become a member of the System, he must have been in operation for at least two years and has
at the time of admission at least six employees. It should be pointed out that it is the employer,
either natural, or judicial person, who is subject to compulsory coverage and not the business. If
the intention of the legislature was to consider every venture of the employer as the basis of a
separate coverage, an express provision to that effect could have been made. Unfortunately,
however, none of that sort appeared provided for in the said law.

Should each business venture of the employer be considered as the basis of the coverage, an
employer with more than one line of business but with less than six employees in each, would
never be covered although he has in his employ a total of more than six employees which is
sufficient to bring him within the ambit of compulsory coverage. This would frustrate rather than
foster the policy of the Act. The legislative intent must be respected. In the absence of an
express provision for a separate coverage for each kind of business, the reasonable
interpretation is that once an employer is covered in a particular kind of business, he should be
automatically covered with respect to any new name. Any interpretation which would defeat
rather than promote the ends for which the Social Security Act was enacted should be
eschewed.  5

Petitioner contends that the Commission cannot indiscriminately combine for purposes of
coverage two distinct and separate businesses when one has not yet been in operation for more
than two years thus rendering nugatory the period for more than two years thus rendering
nugatory the period of stabilization fixed by the Act. This contention lacks merit since the
amendatory law, RA 2658, which was approved on June 18, 1960, eliminated the two-year
stabilization period as employers now become automatically covered immediately upon the start
of the business

As We have previously mentioned, it is the intention of the law to cover as many persons as
possible so as to promote the constitutional objective of social justice. It is axiomatic that a later
law prevails over a prior statute and moreover the legislative in tent must be given effect.  6

Petitioner further submits that Eufrancio Rojas is an independent contractor who engages in an
independent business of his own consisting of the operation of the timber concession of the
former. Rojas was appointed as operations manager of the logging consession;   he has no
7

power to appoint or hire employees; as the term implies, he only manages the employees and it
is petitioner who furnishes him the necessary equipment for use in the logging business; and he
is not free from the control and direction of his employer in matter connected with the
performance of his work. These factors clearly indicate that Rojas is not an independent
contractor but merely an employee of petitioner; and should be entitled to the compulsory
coverage of the Act.

The records indubitably show that petitioner started its real estate business on December 1,
1952 while its logging operation was actually commenced on April 1, 1957. Applying the
provision of Sec. 10 of the Act, petitioner is subject to compulsory coverage as of December 1,
1952 with respect to the real estate business and as of April 1, 1957 with respect to its logging
operation.

16
Calalang vs Williams,70 Phil 728;

Facts:

Maximo Calalang, in his capacity as a private citizen and as a taxpayer of Manila,

brought before this court this petition for a writ of prohibition against the
respondents, A. D. Williams, as Chairman of the National Traffic Commission;
Vicente Fragante, as Director of Public Works; Sergio Bayan, as Acting Secretary of
Public Works and Communications; Eulogio Rodriguez, as Mayor of the City of
Manila; and Juan Dominguez, as Acting Chief of Police of Manila.

It is alleged in the petition that the National Traffic Commission, in its resolution of
July 17, 1940, resolved to recommend to the Director of Public Works and to the
Secretary of Public Works and Communications that animal-drawn vehicles be
prohibited from passing along Rosario Street extending from Plaza Calderon de la
Barca to Dasmariñas Street, from 7:30 a.m. to 12:30 p.m. and from 1:30 p.m. to
5:30 p.m.; and along Rizal Avenue extending from the railroad crossing at Antipolo
Street to Echague Street, from 7 a.m. to 11 p.m., from a period of one year from
the date of the opening of the Colgante Bridge to traffic; that the Chairman of the
National Traffic Commission, on July 18, 1940 recommended to the Director of
Public Works the adoption of the measure proposed in the resolution
aforementioned, in pursuance of the provisions of Commonwealth Act No. 548 which
authorizes said Director of Public Works, with the approval of the Secretary of Public
Works and Communications, to promulgate rules and regulations to regulate and
control the use of and traffic on national roads; that on August 2, 1940, the Director
of Public Works, in his first indorsement to the Secretary of Public Works and
Communications, recommended to the latter the approval of the recommendation
made by the Chairman of the National Traffic Commission as aforesaid, with the
modification that the closing of Rizal Avenue to traffic to animal-drawn vehicles be
limited to the portion thereof extending from the railroad crossing at Antipolo Street
to Azcarraga Street; that on August 10, 1940, the Secretary of Public Works and
Communications, in his second indorsement addressed to the Director of Public
Works, approved the recommendation of the latter that Rosario Street and Rizal
Avenue be closed to traffic of animal-drawn vehicles, between the points and during
the hours as above indicated, for a period of one year from the date of the opening
of the Colgante Bridge to traffic; that the Mayor of Manila and the Acting Chief of
Police of Manila have enforced and caused to be enforced the rules and regulations
thus adopted; that as a consequence of such enforcement, all animal-drawn vehicles
are not allowed to pass and pick up passengers in the places above-mentioned to
the detriment not only of their owners but of the riding public as well.

It is contended by the petitioner that Commonwealth Act No. 548 by which the
Director of Public Works, with the approval of the Secretary of Public Works and
Communications, is authorized to promulgate rules and regulations for the
regulation and control of the use of and traffic on national roads and streets is
unconstitutional because it constitutes an undue delegation of legislative power.

17
Ruling:

Section 1 of Commonwealth Act No. 548 reads as follows: jgc:chanrobles.com.ph

"SECTION 1. To promote safe transit upon, and avoid obstructions on, roads and
streets designated as national roads by acts of the National Assembly or by
executive orders of the President of the Philippines, the Director of Public Works,
with the approval of the Secretary of Public Works and Communications, shall
promulgate the necessary rules and regulations to regulate and control the use of
and traffic on such roads and streets. Such rules and regulations, with the approval
of the President, may contain provisions controlling or regulating the construction of
buildings or other structures within a reasonable distance from along the national
roads. Such roads may be temporarily closed to any or all classes of traffic by the
Director of Public Works and his duly authorized representatives whenever the
condition of the road or the traffic thereon makes such action necessary or advisable
in the public convenience and interest, or for a specified period, with the approval of
the Secretary of Public Works and Communications." cralaw virtua1aw library

The above provisions of law do not confer legislative power upon the Director of
Public Works and the Secretary of Public Works and Communications. The authority
therein conferred upon them and under which they promulgated the rules and
regulations now complained of is not to determine what public policy demands but
merely to carry out the legislative policy laid down by the National Assembly in said
Act, to wit, "to promote safe transit upon and avoid obstructions on, roads and
streets designated as national roads by acts of the National Assembly or by
executive orders of the President of the Philippines" and to close them temporarily to
any or all classes of traffic "whenever the condition of the road or the traffic makes
such action necessary or advisable in the public convenience and interest." The
delegated power, if at all, therefore, is not the determination of what the law shall
be, but merely the ascertainment of the facts and circumstances upon which the
application of said law is to be predicated. To promulgate rules and regulations on
the use of national roads and to determine when and how long a national road
should be closed to traffic, in view of the condition of the road or the traffic thereon
and the requirements of public convenience and interest, is an administrative
function which cannot be directly discharged by the National Assembly. It must
depend on the discretion of some other government official to whom is confided the
duty of determining whether the proper occasion exists for executing the law. But it
cannot be said that the exercise of such discretion is the making of the law. As was
said in Locke’s Appeal (72 Pa. 491): "To assert that a law is less than a law, because
it is made to depend on a future event or act, is to rob the Legislature of the power
to act wisely for the public welfare whenever a law is passed relating to a state of
affairs not yet developed, or to things future and impossible to fully know." The
proper distinction the court said was this: "The Legislature cannot delegate its power
to make the law; but it can make a law to delegate a power to determine some fact
or state of things upon which the law makes, or intends to make, its own action
depend. To deny this would be to stop the wheels of government. There are many
things upon which wise and useful legislation must depend which cannot be known
to the law-making power, and, must, therefore, be a subject of inquiry and
determination outside of the halls of legislation." (Field v. Clark, 143 U. S. 649, 694;
36 L. Ed. 294.)

18
Accordingly, with the growing complexity of modern life, the multiplication of the
subjects of governmental regulations, and the increased difficulty of administering
the laws, the rigidity of the theory of separation of governmental powers has, to a
large extent, been relaxed by permitting the delegation of greater powers by the
legislative and vesting a larger amount of discretion in administrative and executive
officials, not only in the execution of the laws, but also in the promulgation of certain
rules and regulations calculated to promote public interest.

The petitioner further contends that the rules and regulations promulgated by the
respondents pursuant to the provisions of Commonwealth Act No. 548 constitute an
unlawful interference with legitimate business or trade and abridge the right to
personal liberty and freedom of locomotion. Commonwealth Act No. 548 was passed
by the National Assembly in the exercise of the paramount police power of the state.

Said Act, by virtue of which the rules and regulations complained of were
promulgated, aims to promote safe transit upon and avoid obstructions on national
roads, in the interest and convenience of the public. In enacting said law, therefore,
the National Assembly was prompted by considerations of public convenience and
welfare. It was inspired by a desire to relieve congestion of traffic. which is, to say
the least, a menace to public safety. Public welfare, then, lies at the bottom of the
enactment of said law, and the state in order to promote the general welfare may
interfere with personal liberty, with property, and with business and occupations.
Persons and property may be subjected to all kinds of restraints and burdens, in
order to secure the general comfort, health, and prosperity of the state (U.S. v.
Gomez Jesus, 31 Phil., 218). To this fundamental aim of our Government the rights
of the individual are subordinated. Liberty is a blessing without which life is a
misery, but liberty should not be made to prevail over authority because then
society will fall into anarchy. Neither should authority be made to prevail over liberty
because then the individual will fall into slavery. The citizen should achieve the
required balance of liberty and authority in his mind through education and personal
discipline, so that there may be established the resultant equilibrium, which means
peace and order and happiness for all. The moment greater authority is conferred
upon the government, logically so much is withdrawn from the residuum of liberty
which resides in the people. The paradox lies in the fact that the apparent
curtailment of liberty is precisely the very means of insuring its preservation.

The scope of police power keeps expanding as civilization advances. As was said in
the case of Dobbins v. Los Angeles (195 U.S. 223, 238; 49 L. ed. 169), "the right to
exercise the police power is a continuing one, and a business lawful today may in
the future, because of the changed situation, the growth of population or other
causes, become a menace to the public health and welfare, and be required to yield
to the public good." And in People v. Pomar (46 Phil., 440), it was observed that
"advancing civilization is bringing within the police power of the state today things
which were not thought of as being within such power yesterday. The development
of civilization, the rapidly increasing population, the growth of public opinion, with an
increasing desire on the part of the masses and of the government to look after and
care for the interests of the individuals of the state, have brought within the police
power many questions for regulation which formerly were not so considered." cralaw virtua1aw library

The petitioner finally avers that the rules and regulations complained of infringe
upon the constitutional precept regarding the promotion of social justice to insure
the well-being and economic security of all the people. The promotion of social

19
justice, however, is to be achieved not through a mistaken sympathy towards any
given group. Social justice is "neither communism, nor despotism, nor atomism, nor
anarchy," but the humanization of laws and the equalization of social and economic
forces by the State so that justice in its rational and objectively secular conception
may at least be approximated. Social justice means the promotion of the welfare of
all the people, the adoption by the Government of measures calculated to insure
economic stability of all the competent elements of society, through the
maintenance of a proper economic and social equilibrium in the interrelations of the
members of the community, constitutionally, through the adoption of measures
legally justifiable, or extra-constitutionally, through the exercise of powers
underlying the existence of all governments on the time-honored principle of salus
populi est suprema lex.

Social justice, therefore, must be founded on the recognition of the necessity of

interdependence among divers and diverse units of a society and of the protection
that should be equally and evenly extended to all groups as a combined force in our
social and economic life, consistent with the fundamental and paramount objective
of the state of promoting the health, comfort, and quiet of all persons, and of
bringing about "the greatest good to the greatest number."

20
Garcia vs PAL, GR No. 1648561, 20 Jan. 2009

Facts:

The case stemmed from the administrative charge filed by PAL against its employees-herein
petitioners3 after they were allegedly caught in the act of sniffing shabu when a team of company
security personnel and law enforcers raided the PAL Technical Center’s Toolroom Section on
July 24, 1995.

After due notice, PAL dismissed petitioners on October 9, 1995 for transgressing the PAL Code
of Discipline,4 prompting them to file a complaint for illegal dismissal and damages which was, by
Decision of January 11, 1999, 5 resolved by the Labor Arbiter in their favor, thus ordering PAL
to, inter alia, immediately comply with the reinstatement aspect of the decision.

Prior to the promulgation of the Labor Arbiter’s decision, the Securities and Exchange
Commission (SEC) placed PAL (hereafter referred to as respondent), which was suffering from
severe financial losses, under an Interim Rehabilitation Receiver, who was subsequently
replaced by a Permanent Rehabilitation Receiver on June 7, 1999.

From the Labor Arbiter’s decision, respondent appealed to the NLRC which, by Resolution of
January 31, 2000, reversed said decision and dismissed petitioners’ complaint for lack of merit.

einstatement aspect of his January 11, 1999 Decision, and on October 25, 2000, he issued a
Notice of Garnishment (Notice). Respondent thereupon moved to quash the Writ and to lift the
Notice while petitioners moved to release the garnished amount.

In a related move, respondent filed an Urgent Petition for Injunction with the NLRC which, by
Resolutions of November 26, 2001 and January 28, 2002, affirmed the validity of the Writ and the
Notice issued by the Labor Arbiter but suspended and referred the action to the Rehabilitation
Receiver for appropriate action.

Respondent elevated the matter to the appellate court which issued the herein challenged
Decision and Resolution nullifying the NLRC Resolutions on two grounds, essentially espousing
that: (1) a subsequent finding of a valid dismissal removes the basis for implementing the
reinstatement aspect of a labor arbiter’s decision (the first ground), and (2) the impossibility to
comply with the reinstatement order due to corporate rehabilitation provides a reasonable
justification for the failure to exercise the options under Article 223 of the Labor Code (the second
ground).

By Decision of August 29, 2007, this Court PARTIALLY GRANTED the present petition and
effectively reinstated the NLRC Resolutions insofar as it suspended the proceedings, viz:

Since petitioners’ claim against PAL is a money claim for their wages during the pendency of
PAL’s appeal to the NLRC, the same should have been suspended pending the rehabilitation
proceedings. The Labor Arbiter, the NLRC, as well as the Court of Appeals should have
abstained from resolving petitioners’ case for illegal dismissal and should instead have directed
them to lodge their claim before PAL’s receiver.

However, to still require petitioners at this time to re-file their labor claim against PAL under
peculiar circumstances of the case– that their dismissal was eventually held valid with only the
matter of reinstatement pending appeal being the issue– this Court deems it legally expedient to
suspend the proceedings in this case.

21
Issue:

 whether petitioners may collect their wages during the period between the Labor Arbiter’s order
of reinstatement pending appeal and the NLRC decision overturning that of the Labor Arbiter,
now that respondent has exited from rehabilitation proceedings.

Ruling:

he appellate court counted on as its first ground the view that a subsequent finding of a valid
dismissal removes the basis for implementing the reinstatement aspect of a labor arbiter’s
decision.

On this score, the Court’s attention is drawn to seemingly divergent decisions concerning
reinstatement pending appeal or, particularly, the option of payroll reinstatement. On the one
hand is the jurisprudential trend as expounded in a line of cases including Air Philippines Corp. v.
Zamora,10 while on the other is the recent case of Genuino v. National Labor Relations
Commission.11 At the core of the seeming divergence is the application of paragraph 3 of Article
223 of the Labor Code which reads:

In any event, the decision of the Labor Arbiter reinstating a dismissed or separated employee,
insofar as the reinstatement aspect is concerned, shall immediately be executory, pending
appeal. The employee shall either be admitted back to work under the same terms and
conditions prevailing prior to his dismissal or separation or, at the option of the employer, merely
reinstated in the payroll. The posting of a bond by the employer shall not stay the execution for
reinstatement provided herein. (Emphasis and underscoring supplied)

The view as maintained in a number of cases is that:

x x x [E]ven if the order of reinstatement of the Labor Arbiter is reversed on appeal, it is

obligatory on the part of the employer to reinstate and pay the wages of the dismissed
employee during the period of appeal until reversal by the higher court. On the other
hand, if the employee has been reinstated during the appeal period and such reinstatement
order is reversed with finality, the employee is not required to reimburse whatever salary he
received for he is entitled to such, more so if he actually rendered services during the
period.12 (Emphasis in the original; italics and underscoring supplied)

In other words, a dismissed employee whose case was favorably decided by the Labor Arbiter is
entitled to receive wages pending appeal upon reinstatement, which is immediately executory.
Unless there is a restraining order, it is ministerial upon the Labor Arbiter to implement the order
of reinstatement and it is mandatory on the employer to comply therewith. 13

The opposite view is articulated in Genuino which states:

If the decision of the labor arbiter is later reversed on appeal upon the finding that the ground for
dismissal is valid, then the employer has the right to require the dismissed employee on
payroll reinstatement to refund the salaries s/he received  while the case was pending
appeal, or it can be deducted from the accrued benefits that the dismissed employee was entitled
to receive from his/her employer under existing laws, collective bargaining agreement provisions,
and company practices. However, if the employee was reinstated to work during the pendency of
the appeal, then the employee is entitled to the compensation received for actual services
rendered without need of refund.

22
Considering that Genuino was not reinstated to work or placed on payroll reinstatement, and her
dismissal is based on a just cause, then she is not entitled to be paid the salaries stated in item
no. 3 of the fallo of the September 3, 1994 NLRC Decision. 14 (Emphasis, italics and underscoring
supplied)

It has thus been advanced that there is no point in releasing the wages to petitioners since their
dismissal was found to be valid, and to do so would constitute unjust enrichment.

Prior to Genuino, there had been no known similar case containing a dispositive portion where
the employee was required to refund the salaries received on payroll reinstatement. In fact, in a
catena of cases,15 the Court did not order the refund of salaries garnished or received by payroll-
reinstated employees despite a subsequent reversal of the reinstatement order.

The dearth of authority supporting Genuino is not difficult to fathom for it would otherwise render
inutile the rationale of reinstatement pending appeal.

x x x [T]he law itself has laid down a compassionate policy which, once more, vivifies and
enhances the provisions of the 1987 Constitution on labor and the working man.

xxxx

These duties and responsibilities of the State are imposed not so much to express sympathy for
the workingman as to forcefully and meaningfully underscore labor as a primary social and
economic force, which the Constitution also expressly affirms with equal intensity. Labor is an
indispensable partner for the nation's progress and stability.

xxxx

x x x In short, with respect to decisions reinstating employees, the law itself has determined a
sufficiently overwhelming reason for its execution pending appeal.

xxxx

x x x Then, by and pursuant to the same power (police power), the State may authorize an
immediate implementation, pending appeal, of a decision reinstating a dismissed or separated
employee since that saving act is designed to stop, although temporarily since the appeal may
be decided in favor of the appellant, a continuing threat or danger to the survival or even the life
of the dismissed or separated employee and his family. 16

The social justice principles of labor law outweigh or render inapplicable the civil law doctrine of
unjust enrichment espoused by Justice Presbitero Velasco, Jr. in his Separate Opinion. The
constitutional and statutory precepts portray the otherwise "unjust" situation as a condition
affording full protection to labor.

Even outside the theoretical trappings of the discussion and into the mundane realities of human
experience, the "refund doctrine" easily demonstrates how a favorable decision by the Labor
Arbiter could harm, more than help, a dismissed employee. The employee, to make both ends
meet, would necessarily have to use up the salaries received during the pendency of the appeal,
only to end up having to refund the sum in case of a final unfavorable decision. It is mirage of a
stop-gap leading the employee to a risky cliff of insolvency.

Advisably, the sum is better left unspent. It becomes more logical and practical for the employee
to refuse payroll reinstatement and simply find work elsewhere in the interim, if any is available.
Notably, the option of payroll reinstatement belongs to the employer, even if the employee is able
and raring to return to work. Prior to Genuino, it is unthinkable for one to refuse payroll

23
reinstatement. In the face of the grim possibilities, the rise of concerned employees declining
payroll reinstatement is on the horizon.

Further, the Genuino ruling not only disregards the social justice principles behind the rule, but
also institutes a scheme unduly favorable to management. Under such scheme, the salaries
dispensed pendente lite merely serve as a bond posted in installment by the employer. For in the
event of a reversal of the Labor Arbiter’s decision ordering reinstatement, the employer gets back
the same amount without having to spend ordinarily for bond premiums. This circumvents, if not
directly contradicts, the proscription that the "posting of a bond [even a cash bond] by the
employer shall not stay the execution for reinstatement." 17

In playing down the stray posture in Genuino requiring the dismissed employee on payroll
reinstatement to refund the salaries in case a final decision upholds the validity of the dismissal,
the Court realigns the proper course of the prevailing doctrine on reinstatement pending appeal
vis-à-vis the effect of a reversal on appeal.

Respondent insists that with the reversal of the Labor Arbiter’s Decision, there is no more basis
to enforce the reinstatement aspect of the said decision. In his Separate Opinion, Justice
Presbitero Velasco, Jr. supports this argument and finds the prevailing doctrine in Air
Philippines and allied cases inapplicable because, unlike the present case, the writ of execution
therein was secured prior to the reversal of the Labor Arbiter’s decision.

The proposition is tenuous. First, the matter is treated as a mere race against time. The
discussion stopped there without considering the cause of the delay. Second, it requires the
issuance of a writ of execution despite the immediately executory nature of the reinstatement
aspect of the decision. In Pioneer Texturing Corp. v. NLRC,18 which was cited in Panuncillo v.
CAP Philippines, Inc.,19 the Court observed:

x x x The provision of Article 223 is clear that an award [by the Labor Arbiter] for
reinstatement shall be immediately executory even pending appeal and the posting of a bond by
the employer shall not stay the execution for reinstatement. The legislative intent is quite
obvious, i.e., to make an award of reinstatement immediately enforceable, even pending appeal.
To require the application for and issuance of a writ of execution as prerequisites for the
execution of a reinstatement award would certainly betray and run counter to the very object and
intent of Article 223, i.e., the immediate execution of a reinstatement order. The reason is simple.
An application for a writ of execution and its issuance could be delayed for numerous reasons. A
mere continuance or postponement of a scheduled hearing, for instance, or an inaction on the
part of the Labor Arbiter or the NLRC could easily delay the issuance of the writ thereby setting
at naught the strict mandate and noble purpose envisioned by Article 223. In other words, if the
requirements of Article 224 [including the issuance of a writ of execution] were to govern, as we
so declared in Maranaw, then the executory nature of a reinstatement order or award
contemplated by Article 223 will be unduly circumscribed and rendered ineffectual. In enacting
the law, the legislature is presumed to have ordained a valid and sensible law, one which
operates no further than may be necessary to achieve its specific purpose. Statutes, as a rule,
are to be construed in the light of the purpose to be achieved and the evil sought to be remedied.
x x x In introducing a new rule on the reinstatement aspect of a labor decision under Republic Act
No. 6715, Congress should not be considered to be indulging in mere semantic exercise. x x
x20 (Italics in the original; emphasis and underscoring supplied)

The Court reaffirms the prevailing principle that even if the order of reinstatement of the Labor
Arbiter is reversed on appeal, it is obligatory on the part of the employer to reinstate and pay the
wages of the dismissed employee during the period of appeal until reversal by the higher
court.21 It settles the view that the Labor Arbiter's order of reinstatement is immediately executory
and the employer has to either re-admit them to work under the same terms and conditions
prevailing prior to their dismissal, or to reinstate them in the payroll, and that failing to exercise
the options in the alternative, employer must pay the employee’s salaries.

24
Capitol Medical Center vs. Meris, 470 SCRA 125

Facts:

Capitol Medical Center, Inc., resulting to the termination of the services of herein respondent Dr.
Cesar Meris as Chief thereof, was valid.

On January 16, 1974, petitioner Capitol Medical Center, Inc. (Capitol) hired Dr. Cesar Meris (Dr.
Meris),4 one of its stockholders,5 as in charge of its Industrial Service Unit (ISU) at a monthly
salary of ₱10,270.00.

Until the closure of the ISU on April 30, 1992, 6 Dr. Meris performed dual functions of providing
medical services to Capitol’s more than 500 employees and health workers as well as to
employees and workers of companies having retainer contracts with it.7

On March 31, 1992, Dr. Meris received from Capitol’s president and chairman of the board, Dr.
Thelma Navarette-Clemente (Dr. Clemente), a notice advising him of the management’s decision
to close or abolish the ISU and the consequent termination of his services as Chief thereof,
effective April 30, 1992.

Dr. Meris, doubting the reason behind the management’s decision to close the ISU and believing
that the ISU was not in fact abolished as it continued to operate and offer services to the client
companies with Dr. Clemente as its head and the notice of closure was a mere ploy for his ouster
in view of his refusal to retire despite Dr. Clemente’s previous prodding for him to do so, 10 sought
his reinstatement but it was unheeded.

Dr. Meris thus filed on September 7, 1992 a complaint against Capitol and Dr. Clemente for
illegal dismissal and reinstatement with claims for backwages, moral and exemplary damages,
plus attorney’s fees.11

Finding for Capitol and Dr. Clemente, the Labor Arbiter held that the abolition of the ISU was a
valid and lawful exercise of management prerogatives and there was convincing evidence to
show that ISU was being operated at a loss.

Issues:

. . . IN OVERTURNING THE FACTUAL FINDINGS AND CONCLUSIONS OF BOTH THE

NATIONAL LABOR RELATIONS COMMISSION (NLRC) AND THE LABOR ARBITER.

II

. . . IN HOLDING, CONTRARY TO THE FINDINGS OF BOTH THE LABOR ARBITER AND THE
NATIONAL LABOR RELATIONS COMMISSION, THAT THE INDUSTRIAL UNIT (ISU) WAS
NOT INCURRING LOSSES AND THAT IT WAS NOT IN FACT ABOLISHED.

III

. . . IN NOT UPHOLDING PETITIONERS’ MANAGEMENT PREROGATIVE TO ABOLISH THE

INDUSTRIAL SERVICE UNIT (ISU).

25
Ruling:

Besides, Capitol stresses, the health care needs of the hospital employees had been taken over
by other units without added expense to it;32 the appellate court’s decision is at best an undue
interference with, and curtailment of, the exercise by an employer of its management
prerogatives;33 at the time of the closure of the ISU, Dr. Meris was already eligible for retirement
under the Capitol’s retirement plan; and the appellate court adverted to the alleged lack of notice
to the DOLE regarding Dr. Meris’s dismissal but the latter never raised such issue in his appeal
to the NLRC or even in his petition for review before the Court of Appeals, hence, the latter did
not have authority to pass on the matter.34

Work is a necessity that has economic significance deserving legal protection. The social justice
and protection to labor provisions in the Constitution dictate so.

Employers are also accorded rights and privileges to assure their self-determination and
independence and reasonable return of capital. This mass of privileges comprises the so-called
management prerogatives. Although they may be broad and unlimited in scope, the State has
the right to determine whether an employer’s privilege is exercised in a manner that complies
with the legal requirements and does not offend the protected rights of labor. One of the rights
accorded an employer is the right to close an establishment or undertaking.

The right to close the operation of an establishment or undertaking is explicitly recognized under
the Labor Code as one of the authorized causes in terminating employment of workers, the only
limitation being that the closure must not be for the purpose of circumventing the provisions on
termination of employment embodied in the Labor Code.

ART. 283. Closure of establishment and reduction of personnel. – The employer may also
terminate the employment of any employee due to the installation of labor saving devices,
redundancy, retrenchment to prevent losses or the closing or cessation of operation of the
establishment or undertaking unless the closing is for the purpose of circumventing the
provisions of this Title, by serving a written notice on the workers and the Ministry of Labor and
Employment at least one (1) month before the intended date thereof. In case of termination due
to the installation of labor saving devices or redundancy, the worker affected shall be entitled to a
separation pay equivalent to at least his one (1) month pay or to at least one (1) month pay for
every year of service, whichever is higher. In case retrenchment to prevent losses and in cases
of closures or cessation of
operations of establishment or undertaking not due to serious business losses or financial
reverses, the separation pay shall be equivalent to one (1) month pay or at least one-half (1/2)
month pay for every year of service, whichever is higher. A fraction of at least six (6) months
shall be considered one (1) whole year. (Emphasis and underscoring supplied)

The phrase "closures or cessation of operations of establishment or undertaking" includes a

partial or total closure or cessation. 35

x x x Ordinarily, the closing of a warehouse facility and the termination of the services of
employees there assigned is a matter that is left to the determination of the employer in the good
faith exercise of its management prerogatives. The applicable law in such a case is Article 283 of
the Labor Code which permits ‘closure or cessation of operation of an establishment or
undertaking not due to serious business losses or financial reverses,’ which, in our reading
includes both the complete cessation of operations and the cessation of only part of a
company’s business. (Emphasis supplied)

26
And the phrase "closures or cessation x x x not due to serious business losses or financial
reverses" recognizes the right of the employer to close or cease his business operations or
undertaking even if he is not suffering from serious business losses or financial reverses, as long
as he pays his employees their termination pay in the amount corresponding to their length of
service.36

It would indeed be stretching the intent and spirit of the law if a court were to unjustly interfere in
management’s prerogative to close or cease its business operations just because said business
operation or undertaking is not suffering from any loss.37 As long as the company’s exercise of
the same is in good faith to advance its interest and not for the purpose of defeating or
circumventing the rights of employees under the law or a valid agreement, such exercise
will be upheld.38

Clearly then, the right to close an establishment or undertaking may be justified on grounds other
than business losses but it cannot be an unbridled prerogative to suit the whims of the employer.

The ultimate test of the validity of closure or cessation of establishment or undertaking is that it
must be bona fide in character.39 And the burden of proving such falls upon the employer. 40

In the case at bar, Capitol failed to sufficiently prove its good faith in closing the ISU.

From the letter of Dr. Clemente to Dr. Meris, it is gathered that the abolition of the ISU was due to
the "almost extinct demand for
direct medical service by the private and semi-government corporations in providing health care
for their employees;" and that such extinct demand was brought about by "the existing trend of
industrial companies allocating their health care requirements to Health Maintenance
Organizations (HMOs) or thru a tripartite arrangement with medical insurance carriers and
designated hospitals."

The records of the case, however, fail to impress that there was indeed extinct demand for the
medical services rendered by the ISU. The ISU’s Annual Report for the fiscal years 1986 to
1991, submitted by Dr. Meris to Dr. Clemente, and uncontroverted by Capitol, 

If there was extinct demand for the ISU medical services as what Capitol and Dr. Clemente
purport to convey, why the number of client companies of the ISU increased from 11 to 18 from
1986 to 1991, as well as the number of patients from both industrial corporations and Capitol
employees, they did not explain.

At all events, the claimed losses are contradicted by the accounting records of Capitol itself
which show that ISU had increasing revenue from 1989 to 1991.

The foregoing disquisition notwithstanding, as reflected above, the existence of business losses
is not required to justify the closure or cessation of establishment or undertaking as a ground to
terminate employment of employees. Even if the ISU were not incurring losses, its abolition or
closure could be justified on other grounds like that proffered by Capitol – extinct demand.
Capitol failed, however, to present sufficient and convincing evidence to support such claim of
extinct demand. In fact, the employees of Capitol submitted a petition 46 dated April 21, 1992
addressed to Dr. Clemente opposing the abolition of the ISU.

The closure of ISU then surfaces to be contrary to the provisions of the Labor Code on
termination of employment.

The termination of the services of Dr. Meris not having been premised on a just or authorized
cause, he is entitled to either reinstatement or separation pay if reinstatement is no longer viable,
and to backwages.

27
Reinstatement, however, is not feasible in case of a strained employer-employee relationship or
when the work or position formerly held by the dismissed employee no longer exists, as in the
instant case.47 Dr. Meris is thus entitled to payment of separation pay at the rate of one (1) month
salary for every year of his employment, with a fraction of at least six (6) months being
considered as one(1) year,48 and full backwages from the time of his dismissal from April 30,
1992 until the expiration of his term as Chief of ISU or his mandatory retirement, whichever
comes first.

WHEREFORE, the decision of the Court of Appeals dated February 15, 2002 is
hereby AFFIRMED with MODIFICATION. As modified, judgment is hereby rendered ordering
Capitol Medical Center, Inc. to pay Dr. Cesar Meris separation pay at the rate of One (1) Month
salary for every year of his employment, with a fraction of at least Six (6) Months being
considered as One (1) Year, full backwages from the time of his dismissal from April 30, 1992
until the expiration of his term as Chief of the ISU or his mandatory retirement, whichever comes
first; other benefits due him or their money equivalent; and attorney’s fees.

ARTICLE II

SECTION 9. The State shall promote a just and dynamic social order that will ensure
the prosperity and independence of the nation and free the people from poverty
through policies that provide adequate social services, promote full employment, a
rising standard of living, and an improved quality of life for all.

SECTION 10. The State shall promote social justice in all phases of national
development.

SECTION 18. The State affirms labor as a primary social economic force. It shall
protect the rights of workers and promote their welfare.

SECTION 20. The State recognizes the indispensable role of the private sector,
encourages private enterprise, and provides incentives to needed investments.

SECTION 21. The State shall promote comprehensive rural development and
agrarian reform.

28
ARTICLE XII: National Economy and Patrimony

SECTION 1. The goals of the national economy are a more equitable distribution of
opportunities, income, and wealth; a sustained increase in the amount of goods and
services produced by the nation for the benefit of the people; and an expanding
productivity as the key to raising the quality of life for all, especially the
underprivileged.

The State shall promote industrialization and full employment based on sound
agricultural development and agrarian reform, through industries that make full and
efficient use of human and natural resources, and which are competitive in both
domestic and foreign markets. However, the State shall protect Filipino enterprises
against unfair foreign competition and trade practices.

In the pursuit of these goals, all sectors of the economy and all regions of the
country shall be given optimum opportunity to develop. Private enterprises, including
corporations, cooperatives, and similar collective organizations, shall be encouraged
to broaden the base of their ownership.

SECTION 3. Lands of the public domain are classified into agricultural, forest or
timber, mineral lands, and national parks. Agricultural lands of the public domain
may be further classified by law according to the uses which they may be devoted.
Alienable lands of the public domain shall be limited to agricultural lands. Private
corporations or associations may not hold such alienable lands of the public domain
except by lease, for a period not exceeding twenty-five years, renewable for not more
than twenty-five years, and not to exceed one thousand hectares in area. Citizens of
the Philippines may lease not more than five hundred hectares, or acquire not more
than twelve hectares thereof by purchase, homestead, or grant.

ARTICLE XIII
Agrarian and Natural Resources Reform

SECTION 4. The State shall, by law, undertake an agrarian reform program founded
on the right of farmers and regular farmworkers, who are landless, to own directly or
collectively the lands they till or, in the case of other farmworkers, to receive a just
share of the fruits thereof. To this end, the State shall encourage and undertake the
just distribution of all agricultural lands, subject to such priorities and reasonable
retention limits as the Congress may prescribe, taking into account ecological,
developmental, or equity considerations, and subject to the payment of just
compensation. In determining retention limits, the State shall respect the right of

29
small landowners. The State shall further provide incentives for voluntary land-
sharing.

SECTION 5. The State shall recognize the right of farmers, farmworkers, and
landowners, as well as cooperatives, and other independent farmers’ organizations
to participate in the planning, organization, and management of the program, and
shall provide support to agriculture through appropriate technology and research,
and adequate financial, production, marketing, and other support services.

SECTION 6. The State shall apply the principles of agrarian reform or stewardship,
whenever applicable in accordance with law, in the disposition or utilization of other
natural resources, including lands of the public domain under lease or concession
suitable to agriculture, subject to prior rights, homestead rights of small settlers, and
the rights of indigenous communities to their ancestral lands.

The State may resettle landless farmers and farmworkers in its own agricultural
estates which shall be distributed to them in the manner provided by law.

SECTION 7. The State shall protect the rights of subsistence fishermen, especially of
local communities, to the preferential use of local marine and fishing resources, both
inland and offshore. It shall provide support to such fishermen through appropriate
technology and research, adequate financial, production, and marketing assistance,
and other services. The State shall also protect, develop, and conserve such
resources. The protection shall extend to offshore fishing grounds of subsistence
fishermen against foreign intrusion. Fishworkers shall receive a just share from their
labor in the utilization of marine and fishing resources.

SECTION 8. The State shall provide incentives to landowners to invest the proceeds
of the agrarian reform program to promote industrialization, employment creation,
and privatization of public sector enterprises. Financial instruments used as
payment for their lands shall be honored as equity in enterprises of their choice.

Article VIII: Transitory Provisions

SECTION 22. At the earliest possible time, the Government shall expropriate idle or
abandoned agricultural lands as may be defined by law, for distribution to the
beneficiaries of the agrarian reform program.

Labor Code

30
Article 3. Declaration of basic policy. The State shall afford protection to labor, promote full
employment, ensure equal work opportunities regardless of sex, race or creed and regulate the
relations between workers and employers. The State shall assure the rights of workers to self-
organization, collective bargaining, security of tenure, and just and humane conditions of work.

Article 7. Statement of objectives. Inasmuch as the old concept of land ownership by a few has
spawned valid and legitimate grievances that gave rise to violent conflict and social tension and
the redress of such legitimate grievances being one of the fundamental objectives of the New
Society, it has become imperative to start reformation with the emancipation of the tiller of the
soil from his bondage.

Article 8. Transfer of lands to tenant-workers. Being a vital part of the labor force, tenant-farmers
on private agricultural lands primarily devoted to rice and corn under a system of share crop or
lease tenancy whether classified as landed estate or not shall be deemed owner of a portion
constituting a family-size farm of five (5) hectares, if not irrigated and three (3) hectares, if
irrigated.

In all cases, the land owner may retain an area of not more than seven (7) hectares if such
landowner is cultivating such area or will now cultivate it.

Article 9. Determination of land value. For the purpose of determining the cost of the land to be
transferred to the tenant-farmer, the value of the land shall be equivalent to two and one-half (2-
1/2) times the average harvest of three (3) normal crop years immediately preceding the
promulgation of Presidential Decree No. 27 on October 21, 1972.

The total cost of the land, including interest at the rate of six percent (6%) per annum, shall be
paid by the tenant in fifteen (15) years of fifteen (15) equal annual amortizations.

In case of default, the amortization due shall be paid by the farmers’ cooperative in which the
defaulting tenant-farmer is a member, with the cooperative having a right of recourse against
him.

The government shall guarantee such amortizations with shares of stock in government-owned
and government-controlled corporations.

Article 10. Conditions of ownership. No title to the land acquired by the tenant-farmer under
Presidential Decree No. 27 shall be actually issued to him unless and until he has become a full-
fledged member of a duly recognized farmers’ cooperative.

Title to the land acquired pursuant to Presidential Decree No. 27 or the Land Reform Program of
the Government shall not be transferable except by hereditary succession or to the Government
in accordance with the provisions of Presidential Decree No. 27, the Code of Agrarian Reforms
and other existing laws and regulations.

Article 11. Implementing agency. The Department of Agrarian Reform shall promulgate the

necessary rules and regulations to implement the provisions of this Chapter.

Civil Code

Article 1700. The relations between capital and labor are not merely contractual. They are so
impressed with public interest that labor contracts must yield to the common good. Therefore,
such contracts are subject to the special laws on labor unions, collective bargaining, strikes and
lockouts, closed shop, wages, working conditions, hours of labor and similar subjects.

31
Article 1702. In case of doubt, all labor legislation and all labor contracts shall be construed in
favor of the safety and decent living for the laborer.

PD 27

In as much as the old concept of land ownership by a few has spawned valid and legitimate
grievances that gave rise to violent conflict and social tension,

The redress of such legitimate grievances being one of the fundamental objectives of the New
Society,

Since Reformation must start with the emancipation of the tiller of the soil from his bondage,

NOW, THEREFORE, I, FERDINAND E. MARCOS, President of the Philippines, by virtue of the

powers vested in me by the Constitution as Commander-in-Chief of all the Armed Forces of the
Philippines, and pursuant to Proclamation No. 1081, dated September 21, 1972, and General
Order No. 1 dated September 22, 1972, as amended do hereby decree and order the
emancipation of all tenant farmers as of this day, October 21, 1972:

This shall apply to tenant farmers of private agricultural lands primarily devoted to rice and corn
under a system of sharecrop or lease-tenancy, whether classified as landed estate or not;

The tenant farmer, whether in land classified as landed estate or not, shall be deemed owner of a
portion constituting a family-size farm of five (5) hectares if not irrigated and three (3) hectares if
irrigated;

In all cases, the landowner may retain an area of not more than seven (7) hectares if such
landowner is cultivating such area or will now cultivate it;

For the purpose of determining the cost of the land to be transferred to the tenant-farmer
pursuant to this Decree, the value of the land shall be equivalent to two and one-half (2 1/2)
times the average harvest of three normal crop years immediately preceding the promulgation of
this Decree;

The total cost of the land, including interest at the rate of six (6) per centum per annum, shall be
paid by the tenant in fifteen (15) years of fifteen (15) equal annual amortizations;

In case of default, the amortization due shall be paid by the farmers' cooperative in which the
defaulting tenant-farmer is a member, with the cooperative having a right of recourse against
him;

The government shall guaranty such amortizations with shares of stock in government-owned
and government-controlled corporations;

No title to the land owned by the tenant-farmers under this Decree shall be actually issued to a
tenant-farmer unless and until the tenant-farmer has become a full-fledged member of a duly
recognized farmer's cooperative;

32
Title to land acquired pursuant to this Decree or the Land Reform Program of the Government
shall not be transferable except by hereditary succession or to the Government in accordance
with the provisions of this Decree, the Code of Agrarian Reforms and other existing laws and
regulations;

The Department of Agrarian Reform through its Secretary is hereby empowered to promulgate
rules and regulations for the implementation of this Decree.

All laws, executive orders, decrees and rules and regulations, or parts thereof, inconsistent with
this Decree are hereby repealed and or modified accordingly.

Fuentes et al vs. NLRC et al., 266 SCRA 24

1. LABOR AND SOCIAL LEGISLATION; LABOR CODE; EMPLOYMENT;

RETRENCHMENT; REQUISITES FOR VALIDITY. — Under Art. 283
retrenchment may be valid only when the following requisites are met: (a) it
is to prevent losses; (b) written notices were served on the workers and the
Department of Labor and Employment (DOLE) at least one (1) month before
the effective date of retrenchment; and (c) separation pay is paid to the
affected workers.

2. ID.; ID.; ID.; ID.; BUSINESS LOSSES, MUST BE SUFFICIENTLY PROVED;

CLAIM NOT PROVED IN CASE AT BAR. — The closure of a business
establishment is a ground for the termination of the services of an employee
unless the closing is for the purpose of circumventing pertinent provisions of
the Labor Code. But while business reverses can be a just cause for
terminating employees, they must be sufficiently proved by the employer.
There is no question that an employer may reduce its work force to prevent
losses. However, these losses must be serious, actual and real. Otherwise,
this ground for termination of employment would be susceptible to abuse by
scheming employers who might be merely feigning losses in their business
ventures in order to ease out employees. Indeed, private respondents failed
to prove their claim of business losses. What they submitted to the Labor
Arbiter were mere self-serving documents and allegations. Private
respondents never adduced evidence which would show clearly the extent of
losses they suffered as a result of lack of capital funding, which failure is fatal
to their cause.

Facts:

The State is bound under the Constitution to afford full protection to labor and when
conflicting interests of labor and capital are to be weighed on the scales of social
justice the heavier influence of the latter should be counterbalanced with the
sympathy and compassion the law accords the less privileged workingman. This is
only fair if the worker is to be given the opportunity and the right to assert and
defend his cause not as a subordinate but as part of management with which he can
negotiate on even plane. Thus labor is not a mere employee of capital but its active
and equal partner.

33
Petitioners, numbering seventy-five (75) in all, seek to set aside the decision of
respondent National Labor Relations Commission dated 27 November 1992 reversing
that of the Labor Arbiter which granted their claims, for having been rendered with
grave abuse of discretion amounting to lack or excess of jurisdiction.

Petitioners were regular employees of private respondent Agusan Plantations, Inc.,

which was engaged in the operation of a palm tree plantation in Trento, Agusan del
Sur, since September 1982. Claiming that it was suffering business losses which
resulted in the decision of the head office in Singapore to undertake retrenchment
measures, private respondent sent notices of termination to petitioners and the
Department of Labor and Employment (DOLE).

On 31 October 1990 petitioners filed with the DOLE office in Cagayan de Oro City a
complaint for illegal dismissal with prayer for reinstatement, backwages and
damages against private respondent Agusan Plantation, Inc., and/or Chang Chee
Kong. In their answer respondents denied the allegations of petitioners and
contended that upon receipt of instructions from the head office in Singapore to
implement retrenchment, private respondents conducted grievance conferences or
meetings with petitioners’ representative labor organization, the Association of Trade
Unions through its national president Jorge Alegarbes, its local president and its
board of directors. Private respondents also contended that the 30-day notices of
termination were duly sent to petitioners.

After both parties submitted their position papers articulating their respective
theses, the Labor Arbiter rendered a decision on 27 May 1992 in favor of petitioners
ordering private respondents to pay the former separation pay equivalent to fifteen
(15) days pay for every year of service plus salary differentials and attorney’s fees.

Petitioners elevated their plight to this Court on a special civil action

for certiorari under Rule 65 of the Rules of Court alleging that respondent NLRC
gravely abused its discretion amounting to lack or excess of jurisdiction in ruling that
petitioners were legally terminated from their employment. They argued that their
dismissal or retrenchment did not comply with the requirements of Art. 283 of the
Labor Code.

Ruling:

We sustain petitioners. The ruling of the Labor Arbiter that there was no valid
retrenchment is correct. Article 283 of the Labor Code clearly states: chanrob1es virtual 1aw library

Art 283. Closure of establishment and reduction of personnel. — The employer may
also terminate the employment of any employee due to the installation of labor-
saving devices, redundancy, retrenchment to prevent losses or the closing or
cessation of operation of the establishment or undertaking unless the closing is for
the purpose of circumventing the provisions of the title, by serving a written notice
on the workers and the Ministry of Labor and Employment at least one (1) month
before the intended date thereof. In case of termination due to the installation of
labor-saving devices or redundancy, the worker affected thereby shall be entitled to
a separation pay equivalent to at least his one (1) month pay or to at least one (1)
month pay for every year of service, whichever is higher. In case of retrenchment to
prevent losses and in case of closure or cessation of operations of establishment or
undertaking not due to serious business losses or financial reverses, the separation

34
pay shall be equivalent to one (1) month pay or at least one-half (1/2) month pay
for every year of service, whichever is higher. A fraction of at least six (6) months
shall be considered one (1) whole year.

Under Art. 283 therefore retrenchment may be valid only when the following
requisites are met: (a) it is to prevent losses; (b) written notices were served on the
workers and the Department of Labor and Employment (DOLE) at least one (1)
month before the effective date of retrenchment; and, (c) separation pay is paid to
the affected workers.

The closure of a business establishment is a ground for the termination of the

services of an employee unless the closing is for the purpose of circumventing
pertinent provisions of the Labor Code. But while business reverses can be a just
cause for terminating employees, they must be sufficiently proved by the employer.
2

In the case before us, private respondents merely alleged in their answer and
position paper that after their officials from the head office had visited the plantation
respondent manager Chang Chee Kong received a letter from the head office
directing him to proceed immediately with the termination of redundant workers and
staff, and change the operations to contract system against direct employment.
They also alleged that after five (5) years of operations, the return of investments of
respondent company was meager; that the coup attempt in August 1987 as well as
that of December 1989 aggravated the floundering financial state of respondent
company; that the financial losses due to lack of capital funding resulted in the non-
payment of long-overdue accounts; that the untimely cut in the supply of fertilizers
and manuring materials and equipment parts delayed the payment of salaries and
the implementation of weekly job rotations by the workers. Except for these
allegations, private respondents did not present any other documentary proof of
their alleged losses which could have been easily proven in the financial statements
which unfortunately were not shown.  chanroblesvirtual|awlibrary

There is no question that an employer may reduce its work force to prevent losses.
However, these losses must be serious, actual and real. 3 Otherwise, this ground for
termination of employment would be susceptible to abuse by scheming employers
who might be merely feigning losses in their business ventures in order to ease out
employees. 4

Indeed, private respondents failed to prove their claim of business losses. What they
submitted to the Labor Arbiter were mere self-serving documents and allegations.
Private respondents never adduced evidence which would show clearly the extent of
losses they suffered as a result of lack of capital funding, which failure is fatal to
their cause.

As regards the requirement of notices of termination to the employees, it is

undisputed that the Notice of Retrenchment was submitted to the Department of
Labor and Employment on 12 September 1990.

Culled from the above data, the termination of petitioners could not have validly
taken effect either on 25 or 30 September 1990. The one-month notice of
retrenchment filed with the DOLE and served on the workers before the intended
date thereof is mandatory. Private respondents failed to comply with this requisite.

35
The earliest possible date of termination should be 12 October 1990 or one (1)
month after notice was sent to DOLE unless the notice of termination was sent to
the workers later than the notice to DOLE on 12 September 1990, in which case, the
date of termination should be at least one (1) month from the date of notice to the
workers. Petitioners were terminated less than a month after notice was sent to
DOLE and to each of the workers.

We agree with the conclusion of the Labor Arbiter that the termination of the
services of petitioners was illegal as there was no valid retrenchment. Respondent
NLRC committed grave abuse of discretion in reversing the findings of the Labor
Arbiter and ruling that there was substantial compliance with the law. This Court
firmly holds that measures should be strictly implemented to ensure that such
constitutional mandate on protection to labor is not rendered meaningless by an
erroneous interpretation of applicable laws.

We uphold the monetary award of the Labor Arbiter for: (a) the balance of the
separation pay benefits of petitioners equivalent to fifteen (15) days for every year
of service after finding that reinstatement is no longer feasible under the
circumstances, and (b) the salary differentials for complainants who were relieved
during the pendency of the case before the Labor Arbiter and full back wages for the
rest of the complainants. This is in accord with Art. 279 of the Labor Code as
amended by R.A. 6715 under which petitioners who were unjustly dismissed from
work shall be entitled to full back wages inclusive of allowances and other benefits or
their monetary equivalent computed from the time their compensation was withheld
up to the date of this decision.
chanroblesvirtuallawlibrary:red

WHEREFORE, the Petition is GRANTED.

36
Capili vs. NLRC 270 SCRA 488

Facts:

Respondents Benigno Santos, Delfin Yuson, Luisito Santos, Ursino Basister, Ricardo Reyes,
Joselito Santos, Jorge Binuya and Nicolas Mulingbayan are licensed drivers of public utility
jeepneys plying the Libertad-Sta. Cruz route in Manila. The jeepneys were formerly owned
by petitioner Gil Capili. For the use of the jeepney for twelve hours a driver would pay rent
or so-called “boundary” of P280.00 and earn a net profit of P200.00 per day.

On 7 May 1991, at a time when petitioner Ricardo Capili jointly with his wife had assumed
ownership and operation of the jeepneys driven by private respondents, the latter and the
other drivers similarly situated were required by the jeepney operators to sign individually
contracts of lease of the jeepneys to formalize their lessor-lessee relationship. However,
having gathered the impression that the signing of the contracts of lease was a condition
precedent before they could continue driving for petitioners, all the drivers stopped plying
their assigned routes beginning 7 May 1991.

A week later or on 14 May 1991 the drivers, numbering twenty- two (22), filed a complaint
for illegal dismissal before the Labor Arbiter praying not for reinstatement but for separation
pay.

Petitioners opposed the claim of private respondents before the Labor Arbiter alleging that
the latter voluntarily abandoned their respective jobs without any valid cause and thereafter
refused and still continue to refuse to return to work despite repeated demands and/or notices
given to them to return to work.

In resolving the dispute, the Labor Arbiter ruled — On the issue of dismissal versus
abandonment, we are inclined to believe that the latter scenario happened. It is not sound
business practice to dismiss many employees at the same time since it would cripple the
operations. What was more likely was that the drivers, all 22 of them boycotted respondents
on May 7, 1991 by not reporting for work on that day. To remedy the situation, we feel that
the most prudent approach would be to let the parties return to the relationship that existed
between them prior to May 7, 1991.

Issue:

37
Petitioners impute grave abuse of discretion on the part of respondent NLRC in awarding
separation pay to private respondents.

Ruling:

We agree with petitioners. The legal basis for the award of separation pay is clearly provided
by Art. 279 of the Labor Code which states that the remedy for illegal dismissal is
reinstatement without loss of seniority rights plus back wages computed from the time
compensation was withheld up to reinstatement. However there may be instances where
reinstatement is not a viable remedy as where the relations between employer and employee
have been so severely strained that it is no longer advisable to order reinstatement or where
the employee decides not to be reinstated. In such events, the employer will instead be
ordered to pay separation pay.

A reading of Art. 279 in relation to Art. 282 of the Labor Code reveals that an employee who
is dismissed for cause after appropriate proceedings in compliance with the due process
requirements is not entitled to an award of separation pay. Under Arts. 283 and 284 of the
same Code, separation pay is authorized only in cases of dismissals due to any of these
reasons: (a) installation of labor saving devices; (b) redundancy; (c) retrenchment; (d)
cessation of the employer’s business, and, (e) when the employee is suffering from a disease
and his continued employment is prohibited by law or is prejudicial to his health and to the
health of his co-employees.[7] However, separation pay shall be allowed as a measure of
social justice in those cases where the employee is validly dismissed for causes other than
serious misconduct or those reflecting on his moral character, but only when he was illegally
dismissed.

The common denominator of those instances where payment of separation pay is warranted is
that the employee was dismissed by the employer. In the instant case there was no dismissal
at all. Respondent NLRC affirmed the factual findings of the Labor Arbiter that there was
only a misunderstanding between petitioners and private respondents which caused the latter
to stop reporting for work. If the Labor Arbiter ordered reinstatement it should not be
construed as relief proceeding from illegal dismissal; instead, it should be considered as a
declaration or affirmation that private respondents may return to work because they were not
dismissed in the first place, and they should be happy that their employers are accepting them
back. This could be the reason why complainants asked only for separation pay — not for
reinstatement — in their complaint before the Labor Arbiter.

The award of separation pay cannot be justified solely because of the existence of “strained
relations” between the employer and the employee. It must be given to the employee only as
an alternative to reinstatement emanating from illegal dismissal. When there is no illegal
dismissal even if the relations are strained, separation pay has no legal basis. Besides, the
doctrine on “strained relations” cannot be applied indiscriminately since every labor dispute

38
almost invariably results in “strained relations;” otherwise, reinstatement can never be
possible simply because some hostility is engendered between the parties as a result of their
disagreement. That is human nature.

The constitutional policy of providing full protection to labor is not intended to oppress or
destroy management. The commitment of this Court to the cause of labor does not prevent us
from sustaining the employer when it is in the right, as in this case.

When respondents filed their complaint, and taking account of the allegations therein, they
foreclosed reinstatement as a relief, since they prayed only for an award of separation pay.
This is confirmed in their appeal to the NLRC where they prayed for a modification of the
decision of the Labor Arbiter, from reinstatement without back wages to payment of three (3)
years back wages and separation pay equivalent to one (1) month salary for every year of
service. It is therefore clear that respondents never desired to be reinstated. This being so, the
Court cannot order them to return to work.[11] If private respondents voluntarily chose not to
return to work anymore they must be considered as having resigned from their employment.
This is without prejudice however to the willingness of both parties to continue with their
former contract of employment or enter into a new one whenever they so desire.

WHEREFORE, the Petition is GRANTED and the employer employee relationship between
petitioners on one hand and each private respondent on the other is deemed voluntarily
terminated. Consequently, the Decision of respondent National Labor Relations Commission
dated 28 February 1994 is REVERSED and SET ASIDE.

39
Jamer vs. NLRC, 278 SCRA 632

Facts:

Complainant, Corazon Jamer was employed on February 10, 1976 as a Cashier at "Joy Mart," a
sister company of Isetann. After two (2) years, she was later on promoted to the position of
counter supervisor. She was transferred to Isetann, Carriedo Branch, as a money changer. In
1982 she was transferred to the Cubao Branch of Isetann, as a money changer, till her dismissal
on August 31, 1990.

Complainant Cristina Amortizado, on the other hand, was employed also at "Joy Mart" in May,
1977 as a sales clerk. In 1980 she was promoted to the position as counter cashier. Thereafter,
she was transferred to "Young Un Department Store" as an assistant to the money changer.
Later on, or in 1985, she was transferred to Isetann, Cubao Branch where she worked as a Store
Cashier till her dismissal on August 31, 1990.

Both complainants were receiving a salary of P4,182.00 for eight (8) hours work at the time of
their dismissal.

Respondent Isetann Department Store on the other hand, is a corporation duly organized and
existing under the laws of the Philippines and is engaged in retail trade and the department store
business. Individual respondent, John Go is the President/General (Manager) of respondent
Department Store.

This complaint arose from the dismissal of the complainants by the respondents. They were both
dismissed on August 31, 1990 on the alleged ground of dishonesty in their work as Store
Cashiers.

Complainant's (sic) function as Store Cashiers is to accumulate, at the end of daily operations,
the cash sales receipts of the selling floor cash register clerks. At the close of business hours, all
the cash sales of the floor cash register clerks are turned over by them to the Store Cashiers,
complainants herein, together with the tally sheets prepared by the cash register clerks.
Thereafter, complainants will reconcile the cash sales with the tally sheets to determine
shortages or coverages (sic) and deposit the same with the bank depositor(sic) of respondent's
company. Thereafter, the recorded transactions are forwarded to the main branch of
respondent's company at Carriedo for counter-checking.

On July 16, 1990, complainants discovered a shortage of P15,353.78. It was complainant

Corazon Jamer who first discovered the shortage. In fact at first, she thought that it was merely a
P1,000.00 shortage but when she reconciled the cash receipts, from the cash register counters,
with the tally sheets and the actual money on hand, the shortage amounted to P15,353.78. She
informed her co-store cashier, complainant Cristina Amortizado, about the shortage. Cristina

40
Amortizado also reconciled and re-counted the sale previous to July 16, 1990 and she also
confirmed that there was a discrepancy or a shortage of P15,353.78. They did not, (sic)
immediately report the shortage to management hoping to find the cause of the shortage but to
no avail they failed to reconcile the same. Hence, they had no other alternative but to report the
same to the management on July 17, 1990.

Complainants, together with another Store Cashier, Lutgarda Inducta, were asked to explain and
they submitted their respective written explanations for the shortage of P15,353.78 and the
P450.00 under deposit last July 14, 1990.

Respondents placed both complainants and their co-store cashier Lutgarda Inducta under
preventive suspension for the alleged shortages. Thereafter, respondents conducted an
administrative investigation. Finding the explanation of the complainants to be unsatisfactory,
respondent dismissed the complainants from the service on August 31, 1990. Aggrieved and not
satisfied with the decision of management terminating their services, complainants instituted this
present action on September 26, 1990 for illegal dismissal praying for reinstatement with
payment of backwages and other benefits.

On July 23, 1991, Labor Arbiter Nieves V. de Castro, to whom the instant controversy was
originally assigned, rendered a decision  in favor of herein petitioners, finding that petitioners had
9

been illegally dismissed.

Dissatisfied over the decision of the Labor Arbiter which struck private respondents as grossly
contrary to the evidence presented, the herein private respondents once again appealed to the
NLRC. And, as earlier stated, the NLRC rendered the challenged decision   on November 12,
15

1993, vacating the decision of the Labor Arbiter and entering a new one dismissing the
petitioners' complaint.

Issue:

Hence, this petition wherein the main issue to be resolved is whether NLRC committed grave
abuse of discretion in finding that petitioners were validly dismissed on the ground of loss of trust
and confidence.

Ruling:

In the merits, we find and so hold that substantial evidence exists to warrant the finding that
petitioners were validly dismissed for just cause and after observance of due process.

Under the Labor Code, as amended, the requirements for the lawful dismissal of an employee by
his employer are two-fold: the substantive and the procedural. Not only must the dismissal be for
a valid or authorized cause as provided by law (Articles 282, 283 and 284, of the Labor Code, as
amended), but the rudimentary requirements of due process, basic of which are the opportunity
to be heard and to defend himself, must be observed before an employee may be dismissed.  23

With respect to the first requisite, Article 282 of the Labor Code, as amended, provides:

Art. 282. Termination by Employer. — An employer may terminate an

employment for any of the followings causes:

41
 (a) Serious misconduct or willful disobedience by the employee of
the lawful orders of his employer or representative in connection
with his work;

(b) Gross and habitual neglect by the employee of his duties;

(c) Fraud or willful breach by the employee of the trust reposed in

him by his employer or duly authorized representative;

(d) Commission of a crime or offense by the employee against the

person of his employer or any immediate member of his family or
his duly authorized representative; and

(e) Other causes analogous to the foregoing. (Emphasis

supplied).

In the instant case, we find no difficulty in agreeing with the findings of the public respondent that
the herein petitioners were guilty of acts of dishonesty by incurring several occurrences of
shortages in the amounts of P15,353.78, P1,000.00, P450.00 and P70.00 which they failed to
turnover and account for/and in behalf of respondent Isetann. Fittingly, the findings of the NLRC
are worth stressing at this point, to wit:

From the foregoing premises, it is crystal clear that the failure of petitioners to report the
aforequoted shortages and overages to management as soon as they arose resulted in the
breach of the fiduciary trust reposed in them by respondent company, thereby causing the latter
to lose confidence in them. This warrants their dismissal. Moreover, it must be pointed out that
herein petitioners have in fact admitted the underpayment of P450.00 not only in their
"Sinumpaang Salaysay" but also during the hearing conducted before Labor Arbiter Pablo C.
Espirutu.   And, the record shows that the petitioners in fact made a last ditch effort to conceal
25

the same. Were it not for its timely discovery by private respondents' trusted employees, the
incident could not have been discovered at all. Furthermore, it is worth stressing at this juncture
that the petitioners have also expressly admitted the shortage of P15,353.78 — a substantial
amount — in their respective sworn statements, and they were not able to satisfactorily explain
such shortage.   The Court is convinced that these particular acts or omissions provided Isetann
26

with enough basis to forfeit its trust and confidence over herein petitioners.

The NLRC, therefore, did not act with grave abuse of discretion in declaring that petitioners were
legally dismissed from employment. The failure of petitioners to report to management the
aforementioned irregularities constitute "fraud or willful breach of the trust reposed in them by
their employer or duly authorized representative" — one of the just causes in terminating
employment as provided for by paragraph (c), Article 282 of the Labor Code, as amended.

In other words, petitioners' admissions in their sworn statements, together with the other
documentary evidences on record, constituted breach of trust on their part which justifies their
dismissal. Private respondents Isetann Department Store and Mr. John Go cannot be compelled
to retain employees who are clearly guilty of malfeasance as their continued employment will be
prejudicial to the formers' best interest.   The law, in protecting the rights of the employees,
27

authorizes neither oppression nor self-destruction of the employer.  28

The cause of social justice is not served by upholding the interest of petitioners in disregard of
the right of private respondents. Social justice ceases to be an effective instrument for the
"equalization of the social and economic forces" by the State when it is used to shield
wrongdoing.   While it is true that compassion and human consideration should guide the
29

disposition of cases involving termination of employment since it affects one's source or means
of livelihood, it should not be overlooked that the benefits accorded to labor do not include
compelling an employer to retain the services of an employee who has been shown to be a gross

42
liability to the employer. It should be made clear that when the law tilts the scale of justice in
favor of labor, it is but a recognition of the inherent economic inequality between labor and
management. The intent is to balance the scale of justice; to put the two parties on relatively
equal positions. There may be cases where the circumstances warrant favoring labor over the
interests of management but never should the scale be so tilted if the result is an injustice to the
employer, Justicia remini regarda est (Justice is to be denied to none).  30

Thus, this Court has held time and again, in a number of decisions,   that:
31

Loss of confidence is a valid ground for dismissing an employee and proof

beyond reasonable doubt of the employee's misconduct is not required to dismiss
him on this charge. It is sufficient if there is "some basis" for such loss of
confidence or if the employer has reasonable ground to believe or to entertain the
moral conviction that the employee concerned is responsible for the misconduct
and that the nature of his participation therein rendered him absolutely unworthy
of the trust and confidence demanded by his position.  32

Parenthetically, the fact that petitioners Jamer and Amortizado had worked for respondent
company for fourteen (14) and thirteen (13) years, respectively, should be taken against them.
The infractions that they committed, notwithstanding their long years of service with the
company, reflects a regrettable lack of loyalty — loyalty that they should have strengthened
instead of betrayed. If the petitioners' length of service is to be regarded as a justifying
circumstance in moderating the dismissal, it will actually become a prize for disloyalty, perverting
the meaning of social justice and undermining the efforts of labor to cleanse its ranks of all
undesirables. 

We also find this contention devoid of merit.

First, it must be pointed out that the petitioners' remark that there was laxity in the accounting
procedures of the company is a matter addressed to the respondent employer. However, this
does not excuse dishonesty of employees and should not in any case hamper the right of the
employer to terminate the employment of petitioners on the ground of loss of confidence or
breach of trust. Precisely, the accounting procedure which called for improvements was based
primarily on trust and confidence. 35

Secondly, it must be noted that the herein petitioners were store cashiers and as such, a special
and unique employment relationship exists between them and the respondent company. More
than most key positions, that of cashier calls for the utmost trust and confidence because their
primary function involves basically the handling of a highly essential property of the respondent
employer — the sales and revenues of the store. Employers are consequently given wider
latitude of discretion in terminating the employment of managerial employees or other personnel
occupying positions of responsibility, such as in the instant case, than in the case of ordinary
rank-and-file employees, whose termination on the basis of these same grounds requires proof
of involvement in the malfeasance in question. Mere uncorroborated assertions and accusations
by the employer will not suffice. 

In accordance with this requirement, petitioners were given the required notices, on August 2,
1990 and then on August 23, 1990. The Court finds that petitioners were accorded due process
before they were dismissed on August 31, 1990. It is a well-established rule that the essence of
due process is simply an opportunity to be heard, or as applied to administrative proceedings, an
opportunity to explain one's side or an opportunity to seek a reconsideration of the action or
ruling complained of.   It is evident from the records, that herein petitioners were given all the
42

opportunities to defend themselves and air their side before the Committee on Discipline, having
been notified by respondent Isetann's Human Resources Division Manager, Teresita A.

43
Villanueva, on August 2, 1990 through letters individually sent to them. However, when the
petitioners were confronted with reports of the anomalies, they offered no explanation or theory
which could account for money lost in their possession. Hence, the company had no other
alternative but to terminate their employment. As we elucidated in the case of Philippine Savings
Bank vs. National Labor Relations Commission,   to wit:
43

WHEREFORE, the assailed decision of the National Labor Relations Commission in NLRC NCR
CA 002074-91 is hereby AFFIRMED. The petition is DISMISSED for lack of merit.

Gandara Mill Supply vs NLRC, 300 SCRA 702

Facts:

Milagros Sy, owner of Gandara Mill Supply, at No. 708 Gandara

St., Binondo, Manila, was the respondent in NLRC Case No. 02-
01653-94 instituted by Silvestre Germano (now the private
respondent).

On February 6, 1995, the private respondent, without notifying

his employer, Milagros Sy, did not report for work until February
11, 1995. Like any expectant father, he chose to be near his wife
who was then about to deliver. The wife gave birth on February
12, 1995. Upon private respondents request, Milagros Sy
extended some financial assistance to the Germano couple.

The petition avers inter alia that Gandara Mill Supply is a small

business enterprise with only two (2) employees, including the
herein private respondent, to do manual work. With inadequate
manpower, the absence of just one worker can spell untold
difficulties in its operations. Matters became even worse when
private respondent, without informing his employer, was absent
for a long time, so much so that the former incurred the ire of the
latter. Two (2) weeks after, private respondent returned to
duty, and to his surprise, he was met by his employer to
personally tell him that someone had been hired to take his
place. He was advised, however, that he was to be re-admitted in
June 1996.

On February 27, 1995, a case of illegal dismissal was commenced

by the private respondent with the Department of Labor and
Employment.

To buy peace, petitioner offered P5,000.00 but to no avail. The

offer was flatly rejected by private respondent. When conciliation
efforts proved futile, the Labor Arbiter directed the parties to

44
submit their position papers on or before April 28, 1995, which
deadline was extended to May 5, 1995. In his Order of May 9,
1995, Labor Arbiter Facundo L. Leda gave petitioner a last
opportunity to file/submit their (sic) Position Paper within seven
(7) days from receipt hereof otherwise their (sic) right to be
heard are (sic) deemed waived and this case will be decided on
the basis of the documents on file.

Despite receipt of the aforesaid Order, however, petitioner still

failed to comply therewith, prompting the Labor Arbiter to hand
down a decision on January 29, 1996, disposing, thus:

WHEREFORE, decision is hereby rendered ordering respondent/s

Gandara Mill Supply and/or Milagros Sy to pay complainant
Silvestre Germano the sum of SIXTY FIVE THOUSAND SIX
HUNDRED EIGHTY FIVE PESOS AND 90/100 (P65,685.90)
representing separation pay, backwages, SLIP and attorneys fee
as iscussed and computed above.

Issue:

FIRST, did the public respondent act with grave abuse of

discretion in dismissing petitioners appeal and in not giving
petitioner a chance to prove that the private respondent was not
illegally dismissed but was merely suspended for abandoning his
job?;

Ruling:

After a careful study, and a thorough examination of the

pleadings and supporting documents, it appears decisively clear
that private respondent Silvestre Germano was illegally
dismissed. While a prolonged absence without leave may
constitute as a just cause of dismissal, its illegality stems from
the non-observance of due process. Applying the WenPhil
Doctrine by analogy, where dismissal was not preceded by the
twin requirement of notice and hearing, the legality of the
dismissal in question, is under heavy clouds and therefore illegal.
While it cannot be deduced unerringly from the records on hand
that private respondent was really dismissed, there is no clear

45
indication that the latter was to be reinstated. In fact, since the
inception of the case, what petitioner merely endeavored was to
compromise for a measly sum of P5,000.00, and no mention of
taking respondent back to his job was ever offered as part of the
deal to end the controversy. What can be surmised from
petitionerss offer to re-admit the private respondent, was nothing
but a polite gesture couched in words intended to make the
impact of his so-called suspension less severe. Invoking the plight
of a working man, where no work, no pay is the rule of thumb,
the court cannot sanction an over extended suspension. The
Labor Code explicitly provides, that :

No preventive suspension shall last longer than thirty (30) days.

The employer shall thereafter reinstate the worker to his former
or substantially equivalent position or the employer may extend
the period of suspension provided that during the period of
extension, he pays the wages and other benefits due to the
worker. In such case, the worker shall not be bound to reimburse
the amount paid to him during the extension if the employer
decides after completion of the hearing to dismiss the worker.[5]

In this case, the supposed suspension was expected to last for

more than the period allowed by law, thus making the suspension
constitutive of an illegal dismissal. Therefore, the Labor Arbiters
contention is upheld by the Court.

Granting arguendo that private respondents absence engendered

undue difficulty to the smooth operations of petitioners business,
considering the predicament of respondent Silvestre Germano,
his dismissal is unwarranted. In holding the constitutional
mandate of protection to labor, the rigid rules of procedure may
sometimes be dispensed with to give room for compassion. The
doctrine of compassionate justice is applicable under the
premises, private respondent being the breadwinner of his family.
The Social Justice policy mandates a compassionate attitude
toward the working class in its relation to management. In calling
for the protection to labor, the Constitution does not condone
wrongdoing by the employee, it nevertheless urges a moderation
of the sanctions that may be applied to him in the light of the
many disadvantages that weigh heavily on him like an albatross
on his neck.

46
American Period

“Long live America”

Significant legislation enacted during the American Period:

 Philippine Bill of 1902 – Set the ceilings on the hectarage of private individuals
and corporations may acquire: 16 has. for private individuals and 1,024 has. for
corporations.
 Land Registration Act of 1902 (Act No. 496) – Provided for a comprehensive
registration of land titles under the Torrens system.
 Public Land Act of 1903 – introduced the homestead system in the Philippines.
 Tenancy Act of 1933 (Act No. 4054 and 4113) – regulated relationships
between landowners and tenants of rice (50-50 sharing) and sugar cane lands.

The Torrens system, which the Americans instituted for the registration of lands, did
not solve the problem completely. Either they were not aware of the law or if they
did, they could not pay the survey cost and other fees required in applying for a
Torrens title.

Commonwealth Period

“Government for the Filipinos”

President Manuel L. Quezon espoused the "Social Justice" program to arrest the
increasing social unrest in Central Luzon.

Significant legislation enacted during Commonwealth Period:

 1935 Constitution – "The promotion of social justice to ensure the well-being

and economic security of all people should be the concern of the State"
 Commonwealth Act No. 178 (An Amendment to Rice Tenancy Act No. 4045),
Nov. 13, 1936 – Provided for certain controls in the landlord-tenant
relationships
 National Rice and Corn Corporation (NARIC), 1936 – Established the price of
rice and corn thereby help the poor tenants as well as consumers.

47
  Commonwealth Act. No. 461, 1937 – Specified reasons for the dismissal of
tenants and only with the approval of the Tenancy Division of the Department
of Justice.
 Rural Program Administration, created March 2, 1939 – Provided the purchase
and lease of haciendas and their sale and lease to the tenants.
Commonwealth Act No. 441 enacted on June 3, 1939 – Created the National
Settlement Administration with a capital stock of P20,000,000.

Japanese Occupation

“The Era of Hukbalahap”

The Second World War II started in Europe in 1939 and in the Pacific in 1941.

Hukbalahap controlled whole areas of Central Luzon; landlords who supported the
Japanese lost their lands to peasants while those who supported the Huks earned
fixed rentals in favor of the tenants.

Unfortunately, the end of war also signaled the end of gains acquired by the
peasants.

Upon the arrival of the Japanese in the Philippines in 1942, peasants and workers
organizations grew strength. Many peasants took up arms and identified themselves
with the anti-Japanese group, the HUKBALAHAP (Hukbo ng Bayan Laban sa Hapon).

Philippine Republic

“The New Republic”

After the establishment of the Philippine Independence in 1946, the problems of land
tenure remained. These became worst in certain areas. Thus the Congress of the
Philippines revised the tenancy law.

President Manuel A. Roxas (1946-1948) enacted the following laws:

 Republic Act No. 34 -- Established the 70-30 sharing arrangements and

regulating share-tenancy contracts.
 Republic Act No. 55 -- Provided for a more effective safeguard against
arbitrary ejectment of tenants.

Elpidio R. Quirino (1948-1953) enacted the following law:

Executive Order No. 355 issued on October 23, 1950 -- Replaced the National Land
Settlement Administration with Land Settlement Development Corporation

48
(LASEDECO) which takes over the responsibilities of the Agricultural Machinery
Equipment Corporation and the Rice and Corn Production Administration.

Ramon Magsaysay (1953-1957) enacted the following laws:

 Republic Act No. 1160 of 1954 -- Abolished the LASEDECO and established
the National Resettlement and Rehabilitation Administration (NARRA) to
resettle dissidents and landless farmers. It was particularly aimed at rebel
returnees providing home lots and farmlands in Palawan and Mindanao.
 Republic Act No. 1199 (Agricultural Tenancy Act of 1954) -- governed the
relationship between landowners and tenant farmers by organizing share-
tenancy and leasehold system. The law provided the security of tenure of
tenants. It also created the Court of Agrarian Relations.
 Republic Act No. 1400 (Land Reform Act of 1955) -- Created the Land Tenure
Administration (LTA) which was responsible for the acquisition and
distribution of large tenanted rice and corn lands over 200 hectares for
individuals and 600 hectares for corporations.
 Republic Act No. 821 (Creation of Agricultural Credit Cooperative Financing
Administration) -- Provided small farmers and share tenants loans with low
interest rates of six to eight percent.

President Carlos P. Garcia (1957-1961)

Continued the program of President Ramon Magsaysay. No new legislation passed.

President Diosdado P. Macapagal (1961-1965) enacted the following law:

Republic Act No. 3844 of August 8, 1963 (Agricultural Land Reform Code) --
Abolished share tenancy, institutionalized leasehold, set retention limit at 75
hectares, invested rights of preemption and redemption for tenant farmers, provided
for an administrative machinery for implementation, institutionalized a judicial
system of agrarian cases, incorporated extension, marketing and supervised credit
system of services of farmer beneficiaries.

The RA was hailed as one that would emancipate Filipino farmers from the bondage
of tenancy.

President Ferdinand E. Marcos (1965-1986)

Proclamation No. 1081 on September 21, 1972 ushered the Period of the New
Society. Five days after the proclamation of Martial Law, the entire country was
proclaimed a land reform area and simultaneously the Agrarian Reform Program was
decreed.

49
President Marcos enacted the following laws:

 Republic Act No. 6389, (Code of Agrarian Reform) and RA No. 6390 of 1971 --
Created the Department of Agrarian Reform and the Agrarian Reform Special
Account Fund. It strengthen the position of farmers and expanded the scope
of agrarian reform.
 Presidential Decree No. 2, September 26, 1972 -- Declared the country under
land reform program. It enjoined all agencies and offices of the government
to extend full cooperation and assistance to the DAR. It also activated the
Agrarian Reform Coordinating Council.
 Presidential Decree No. 27, October 21, 1972 -- Restricted land reform scope
to tenanted rice and corn lands and set the retention limit at 7 hectares.

President Corazon C. Aquino (1986-1992)

The Constitution ratified by the Filipino people during the administration of President
Corazon C. Aquino provides under Section 21 under Article II that “The State shall
promote comprehensive rural development and agrarian reform.”

On June 10, 1988, former President Corazon C. Aquino signed into law Republic Act
No. 6657 or otherwise known as the Comprehensive Agrarian Reform Law (CARL).
The law became effective on June 15, 1988.

Subsequently, four Presidential issuances were released in July 1987 after 48

nationwide consultations before the actual law was enacted.

President Corazon C. Aquino enacted the following laws:

 Executive Order No. 228, July 16, 1987 – Declared full ownership to qualified
farmer-beneficiaries covered by PD 27. It also determined the value remaining
unvalued rice and corn lands subject of PD 27 and provided for the manner of
payment by the FBs and mode of compensation to landowners.
 Executive Order No. 229, July 22, 1987 – Provided mechanism for the
implementation of the Comprehensive Agrarian Reform Program (CARP).
 Proclamation No. 131, July 22, 1987 – Instituted the CARP as a major program
of the government. It provided for a special fund known as the Agrarian
Reform Fund (ARF), with an initial amount of Php50 billion to cover the
estimated cost of the program from 1987-1992.
 Executive Order No. 129-A, July 26, 1987 – streamlined and expanded the
power and operations of the DAR.
 Republic Act No. 6657, June 10, 1988 (Comprehensive Agrarian Reform Law) –
An act which became effective June 15, 1988 and instituted a comprehensive
agrarian reform program to promote social justice and industrialization

50
 providing the mechanism for its implementation and for other purposes. This
law is still the one being implemented at present.
 Executive Order No. 405, June 14, 1990 – Vested in the Land Bank of the
Philippines the responsibility to determine land valuation and compensation
for all lands covered by CARP.
 Executive Order No. 407, June 14, 1990 – Accelerated the acquisition and
distribution of agricultural lands, pasture lands, fishponds, agro-forestry lands
and other lands of the public domain suitable for agriculture.

President Fidel V. Ramos (1992-1998)

When President Fidel V. Ramos formally took over in 1992, his administration came
face to face with publics who have lost confidence in the agrarian reform program.
His administration committed to the vision “Fairer, faster and more meaningful
implementation of the Agrarian Reform Program.

President Fidel V. Ramos enacted the following laws:

 Republic Act No. 7881, 1995 – Amended certain provisions of RA 6657 and
exempted fishponds and prawns from the coverage of CARP.
 Republic Act No. 7905, 1995 – Strengthened the implementation of the CARP.
 Executive Order No. 363, 1997 – Limits the type of lands that may be
converted by setting conditions under which limits the type of lands that may
be converted by setting conditions under which specific categories of
agricultural land are either absolutely non-negotiable for conversion or highly
restricted for conversion.
 Republic Act No. 8435, 1997 (Agriculture and Fisheries Modernization Act
AFMA) – Plugged the legal loopholes in land use conversion.
 Republic Act 8532, 1998 (Agrarian Reform Fund Bill) – Provided an additional
Php50 billion for CARP and extended its implementation for another 10 years.

President Joseph E. Estrada (1998-2000)

“ERAP PARA SA MAHIRAP’. This was the battle cry that endeared President Joseph
Estrada and made him very popular during the 1998 presidential election.

President Joseph E. Estrada initiated the enactment of the following law:

Executive Order N0. 151, September 1999 (Farmer’s Trust Fund) – Allowed the
voluntary consolidation of small farm operation into medium and large scale
integrated enterprise that can access long-term capital.

51
During his administration, President Estrada launched the Magkabalikat Para sa
Kaunlarang Agraryo or MAGKASAKA. The DAR forged into joint ventures with private
investors into agrarian sector to make FBs competitive.

However, the Estrada Administration was short lived. The masses who put him into
office demanded for his ouster.

President Gloria Macapacal-Arroyo (2000-2010)

The agrarian reform program under the Arroyo administration is anchored on the
vision “To make the countryside economically viable for the Filipino family by
building partnership and promoting social equity and new economic opportunities
towards lasting peace and sustainable rural development.”

Land Tenure Improvement - DAR will remain vigorous in implementing land

acquisition and distribution component of CARP. The DAR will improve land tenure
system through land distribution and leasehold.

Provision of Support Services - CARP not only involves the distribution of lands but
also included package of support services which includes: credit assistance, extension
services, irrigation facilities, roads and bridges, marketing facilities and training and
technical support programs.

Infrastrucre Projects - DAR will transform the agrarian reform communities (ARCs), an
area focused and integrated delivery of support services, into rural economic zones
that will help in the creation of job opportunities in the countryside.

KALAHI ARZone - The KALAHI Agrarian Reform (KAR) Zones were also launched.
These zones consists of one or more municipalities with concentration of ARC
population to achieve greater agro-productivity.

Agrarian Justice - To help clear the backlog of agrarian cases, DAR will hire more
paralegal officers to support undermanned adjudicatory boards and introduce quota
system to compel adjudicators to work faster on agrarian reform cases. DAR will
respect the rights of both farmers and landowners.

President Benigno Aquino III (2010-2016)

President Benigno Aquino III vowed during his 2012 State of the Nation Address that
he would complete before the end of his term the Comprehensive Agrarian Reform
Program (CARP), the centerpiece program of the administration of his mother,
President Corazon Aquino.

The younger Aquino distributed their family-owned Hacienda Luisita in Tarlac. Apart
from the said farm lots, he also promised to complete the distribution of privately-

52
owned lands of productive agricultural estates in the country that have escaped the
coverage of the program.

Under his administration, the Agrarian Reform Community Connectivity and

Economic Support Services (ARCCESS) project was created to contribute to the
overall goal of rural poverty reduction especially in agrarian reform areas.

Agrarian Production Credit Program (APCP) provided credit support for crop
production to newly organized and existing agrarian reform beneficiaries’
organizations (ARBOs) and farmers’ organizations not qualified to avail themselves of
loans under the regular credit windows of banks.

The legal case monitoring system (LCMS), a web-based legal system for recording
and monitoring various kinds of agrarian cases at the provincial, regional and central
offices of the DAR to ensure faster resolution and close monitoring of agrarian-
related cases, was also launched.

Aside from these initiatives, Aquino also enacted Executive Order No. 26, Series of
2011, to mandate the Department of Agriculture-Department of Environment and
Natural Resources-Department of Agrarian Reform Convergence Initiative to develop
a National Greening Program in cooperation with other government agencies.

President Rodrigo Roa Duterte (2016 – present) 

Under his leadership, the President wants to pursue an “aggressive” land reform
program that would help alleviate the life of poor Filipino farmers by prioritizing the
provision of support services alongside land distribution.

The President directed the DAR to launch the 2nd phase of agrarian reform where
landless farmers would be awarded with undistributed lands under the
Comprehensive Agrarian Reform Program (CARP).

Duterte plans to place almost all public lands, including military reserves, under
agrarian reform.

The President also placed 400 hectares of agricultural lands in Boracay under CARP.

Under his administration the DAR created an anti-corruption task force to investigate
and handle reports on alleged anomalous activities by officials and employees of the
department.

The Department also pursues an “Oplan Zero Backlog” in the resolution of cases in
relation to agrarian justice delivery of the agrarian reform program to fast-track the
implementation of CARP.

53
Association of Small Landowners in the Philippines, Inc., vs Secretary of Agrarian
Reform,G.R. No. 79310, Aug 23, 1990

Facts:

"Land for the Landless" is a slogan that underscores the acute imbalance in the distribution of
this precious resource among our people. But it is more than a slogan. Through the brooding
centuries, it has become a battle-cry dramatizing the increasingly urgent demand of the
dispossessed among us for a plot of earth as their place in the sun.

Recognizing this need, the Constitution in 1935 mandated the policy of social justice to "insure
the well-being and economic security of all the people,"   especially the less privileged. In 1973,
1

the new Constitution affirmed this goal adding specifically that "the State shall regulate the
acquisition, ownership, use, enjoyment and disposition of private property and equitably diffuse
property ownership and profits."   Significantly, there was also the specific injunction to "formulate
2

and implement an agrarian reform program aimed at emancipating the tenant from the bondage
of the soil." 
3

The Constitution of 1987 was not to be outdone. Besides echoing these sentiments, it also
adopted one whole and separate Article XIII on Social Justice and Human Rights, containing
grandiose but undoubtedly sincere provisions for the uplift of the common people. These include
a call in the following words for the adoption by the State of an agrarian reform program:

SEC. 4. The State shall, by law, undertake an agrarian reform program founded
on the right of farmers and regular farmworkers, who are landless, to own directly
or collectively the lands they till or, in the case of other farmworkers, to receive a
just share of the fruits thereof. To this end, the State shall encourage and
undertake the just distribution of all agricultural lands, subject to such priorities
and reasonable retention limits as the Congress may prescribe, taking into
account ecological, developmental, or equity considerations and subject to the
payment of just compensation. In determining retention limits, the State shall
respect the right of small landowners. The State shall further provide incentives
for voluntary land-sharing.

Earlier, in fact, R.A. No. 3844, otherwise known as the Agricultural Land Reform Code, had
already been enacted by the Congress of the Philippines on August 8, 1963, in line with the
above-stated principles. This was substantially superseded almost a decade later by P.D. No. 27,
which was promulgated on October 21, 1972, along with martial law, to provide for the
compulsory acquisition of private lands for distribution among tenant-farmers and to specify
maximum retention limits for landowners.

The people power revolution of 1986 did not change and indeed even energized the thrust for
agrarian reform. Thus, on July 17, 1987, President Corazon C. Aquino issued E.O. No. 228,

54
declaring full land ownership in favor of the beneficiaries of P.D. No. 27 and providing for the
valuation of still unvalued lands covered by the decree as well as the manner of their payment.
This was followed on July 22, 1987 by Presidential Proclamation No. 131, instituting a
comprehensive agrarian reform program (CARP), and E.O. No. 229, providing the mechanics for
its implementation.

Subsequently, with its formal organization, the revived Congress of the Philippines took over
legislative power from the President and started its own deliberations, including extensive public
hearings, on the improvement of the interests of farmers. The result, after almost a year of
spirited debate, was the enactment of R.A. No. 6657, otherwise known as the Comprehensive
Agrarian Reform Law of 1988, which President Aquino signed on June 10, 1988. This law, while
considerably changing the earlier mentioned enactments, nevertheless gives them suppletory
effect insofar as they are not inconsistent with its provisions. 
4

The above-captioned cases have been consolidated because they involve common legal
questions, including serious challenges to the constitutionality of the several measures
mentioned above. They will be the subject of one common discussion and resolution, The
different antecedents of each case will require separate treatment, however, and will first be
explained hereunder.

Squarely raised in this petition is the constitutionality of P.D. No. 27, E.O. Nos. 228 and 229, and
R.A. No. 6657.

The subjects of this petition are a 9-hectare riceland worked by four tenants and owned by
petitioner Nicolas Manaay and his wife and a 5-hectare riceland worked by four tenants and
owned by petitioner Augustin Hermano, Jr. The tenants were declared full owners of these lands
by E.O. No. 228 as qualified farmers under P.D. No. 27.

The petitioners are questioning P.D. No. 27 and E.O. Nos. 228 and 229 on grounds inter alia of
separation of powers, due process, equal protection and the constitutional limitation that no
private property shall be taken for public use without just compensation.

The petitioners herein are landowners and sugar planters in the Victorias Mill District, Victorias,
Negros Occidental. Co-petitioner Planters' Committee, Inc. is an organization composed of 1,400
planter-members. This petition seeks to prohibit the implementation of Proc. No. 131 and E.O.
No. 229.

Ruling:

Significantly, the Congress she is alleged to have undercut has not rejected but in fact
substantially affirmed the challenged measures and has specifically provided that they shall be
suppletory to R.A. No. 6657 whenever not inconsistent with its provisions.   Indeed, some
17

portions of the said measures, like the creation of the P50 billion fund in Section 2 of Proc. No.
131, and Sections 20 and 21 of E.O. No. 229, have been incorporated by reference in the CARP
Law. 18

That fund, as earlier noted, is itself being questioned on the ground that it does not conform to
the requirements of a valid appropriation as specified in the Constitution. Clearly, however, Proc.
No. 131 is not an appropriation measure even if it does provide for the creation of said fund, for
that is not its principal purpose. An appropriation law is one the primary and specific purpose of
which is to authorize the release of public funds from the treasury.   The creation of the fund is
19

only incidental to the main objective of the proclamation, which is agrarian reform.

55
It should follow that the specific constitutional provisions invoked, to wit, Section 24 and Section
25(4) of Article VI, are not applicable. With particular reference to Section 24, this obviously could
not have been complied with for the simple reason that the House of Representatives, which now
has the exclusive power to initiate appropriation measures, had not yet been convened when the
proclamation was issued. The legislative power was then solely vested in the President of the
Philippines, who embodied, as it were, both houses of Congress.

The argument of some of the petitioners that Proc. No. 131 and E.O. No. 229 should be
invalidated because they do not provide for retention limits as required by Article XIII, Section 4
of the Constitution is no longer tenable. R.A. No. 6657 does provide for such limits now in
Section 6 of the law, which in fact is one of its most controversial provisions. 

There are traditional distinctions between the police power and the power of eminent domain that
logically preclude the application of both powers at the same time on the same subject. In the
case of City of Baguio v. NAWASA,   for example, where a law required the transfer of all
24

municipal waterworks systems to the NAWASA in exchange for its assets of equivalent value,
the Court held that the power being exercised was eminent domain because the property
involved was wholesome and intended for a public use. Property condemned under the police
power is noxious or intended for a noxious purpose, such as a building on the verge of collapse,
which should be demolished for the public safety, or obscene materials, which should be
destroyed in the interest of public morals. The confiscation of such property is not compensable,
unlike the taking of property under the power of expropriation, which requires the payment of just
compensation to the owner.

Recent trends, however, would indicate not a polarization but a mingling of the police power and
the power of eminent domain, with the latter being used as an implement of the former like the
power of taxation. The employment of the taxing power to achieve a police purpose has long
been accepted.   As for the power of expropriation
26

The cases before us present no knotty complication insofar as the question of compensable
taking is concerned. To the extent that the measures under challenge merely prescribe retention
limits for landowners, there is an exercise of the police power for the regulation of private
property in accordance with the Constitution. But where, to carry out such regulation, it becomes
necessary to deprive such owners of whatever lands they may own in excess of the maximum
area allowed, there is definitely a taking under the power of eminent domain for which payment
of just compensation is imperative. The taking contemplated is not a mere limitation of the use of
the land. What is required is the surrender of the title to and the physical possession of the said
excess and all beneficial rights accruing to the owner in favor of the farmer-beneficiary. This is
definitely an exercise not of the police power but of the power of eminent domain.

Whether as an exercise of the police power or of the power of eminent domain, the several
measures before us are challenged as violative of the due process and equal protection clauses.

The challenge to Proc. No. 131 and E.O. Nos. 228 and 299 on the ground that no retention limits
are prescribed has already been discussed and dismissed. It is noted that although they excited
many bitter exchanges during the deliberation of the CARP Law in Congress, the retention limits
finally agreed upon are, curiously enough, not being questioned in these petitions. We therefore
do not discuss them here. The Court will come to the other claimed violations of due process in
connection with our examination of the adequacy of just compensation as required under the
power of expropriation.

The argument of the small farmers that they have been denied equal protection because of the
absence of retention limits has also become academic under Section 6 of R.A. No. 6657.
Significantly, they too have not questioned the area of such limits. There is also the complaint

56
that they should not be made to share the burden of agrarian reform, an objection also made by
the sugar planters on the ground that they belong to a particular class with particular interests of
their own. However, no evidence has been submitted to the Court that the requisites of a valid
classification have been violated.

Classification has been defined as the grouping of persons or things similar to each other in
certain particulars and different from each other in these same particulars.   To be valid, it must
31

conform to the following requirements: (1) it must be based on substantial distinctions; (2) it must
be germane to the purposes of the law; (3) it must not be limited to existing conditions only; and
(4) it must apply equally to all the members of the class.   The Court finds that all these
32

requisites have been met by the measures here challenged as arbitrary and discriminatory.

Equal protection simply means that all persons or things similarly situated must be treated alike
both as to the rights conferred and the liabilities imposed.   The petitioners have not shown that
33

they belong to a different class and entitled to a different treatment. The argument that not only
landowners but also owners of other properties must be made to share the burden of
implementing land reform must be rejected. There is a substantial distinction between these two
classes of owners that is clearly visible except to those who will not see. There is no need to
elaborate on this matter. In any event, the Congress is allowed a wide leeway in providing for a
valid classification. Its decision is accorded recognition and respect by the courts of justice
except only where its discretion is abused to the detriment of the Bill of Rights.

It is worth remarking at this juncture that a statute may be sustained under the police power only
if there is a concurrence of the lawful subject and the lawful method. Put otherwise, the interests
of the public generally as distinguished from those of a particular class require the interference of
the State and, no less important, the means employed are reasonably necessary for the
attainment of the purpose sought to be achieved and not unduly oppressive upon
individuals.   As the subject and purpose of agrarian reform have been laid down by the
34

Constitution itself, we may say that the first requirement has been satisfied. What remains to be
examined is the validity of the method employed to achieve the constitutional goal.

One of the basic principles of the democratic system is that where the rights of the individual are
concerned, the end does not justify the means. It is not enough that there be a valid objective; it
is also necessary that the means employed to pursue it be in keeping with the Constitution. Mere
expediency will not excuse constitutional shortcuts. There is no question that not even the
strongest moral conviction or the most urgent public need, subject only to a few notable
exceptions, will excuse the bypassing of an individual's rights. It is no exaggeration to say that a,
person invoking a right guaranteed under Article III of the Constitution is a majority of one even
as against the rest of the nation who would deny him that right.

That right covers the person's life, his liberty and his property under Section 1 of Article III of the
Constitution. With regard to his property, the owner enjoys the added protection of Section 9,
which reaffirms the familiar rule that private property shall not be taken for public use without just
compensation.

This brings us now to the power of eminent domain.

IV

Eminent domain is an inherent power of the State that enables it to forcibly

acquire private lands intended for public use upon payment of just compensation
to the owner. Obviously, there is no need to expropriate where the owner is
willing to sell under terms also acceptable to the purchaser, in which case an
ordinary deed of sale may be agreed upon by the parties.   It is only where the
35

owner is unwilling to sell, or cannot accept the price or other conditions offered by
the vendee, that the power of eminent domain will come into play to assert the

57
 paramount authority of the State over the interests of the property owner. Private
rights must then yield to the irresistible demands of the public interest on the
time-honored justification, as in the case of the police power, that the welfare of
the people is the supreme law.

But for all its primacy and urgency, the power of expropriation is by no means absolute (as
indeed no power is absolute). The limitation is found in the constitutional injunction that "private
property shall not be taken for public use without just compensation" and in the abundant
jurisprudence that has evolved from the interpretation of this principle. Basically, the
requirements for a proper exercise of the power are: (1) public use and (2) just compensation.

Let us dispose first of the argument raised by the petitioners in G.R. No. 79310 that the State
should first distribute public agricultural lands in the pursuit of agrarian reform instead of
immediately disturbing property rights by forcibly acquiring private agricultural lands.
Parenthetically, it is not correct to say that only public agricultural lands may be covered by the
CARP as the Constitution calls for "the just distribution of all agricultural lands." In any event, the
decision to redistribute private agricultural lands in the manner prescribed by the CARP was
made by the legislative and executive departments in the exercise of their discretion. We are not
justified in reviewing that discretion in the absence of a clear showing that it has been abused.

The legislature and the executive have been seen fit, in their wisdom, to include in the CARP the
redistribution of private landholdings (even as the distribution of public agricultural lands is first
provided for, while also continuing apace under the Public Land Act and other cognate laws).
The Court sees no justification to interpose its authority, which we may assert only if we believe
that the political decision is not unwise, but illegal. We do not find it to be so.

As earlier observed, the requirement for public use has already been settled for us by the
Constitution itself No less than the 1987 Charter calls for agrarian reform, which is the reason
why private agricultural lands are to be taken from their owners, subject to the prescribed
maximum retention limits. The purposes specified in P.D. No. 27, Proc. No. 131 and R.A. No.
6657 are only an elaboration of the constitutional injunction that the State adopt the necessary
measures "to encourage and undertake the just distribution of all agricultural lands to enable
farmers who are landless to own directly or collectively the lands they till." That public use, as
pronounced by the fundamental law itself, must be binding on us.

The second requirement, i.e., the payment of just compensation, needs a longer and more
thoughtful examination.

Just compensation is defined as the full and fair equivalent of the property taken from its owner
by the expropriator.   It has been repeatedly stressed by this Court that the measure is not the
39

taker's gain but the owner's loss.   The word "just" is used to intensify the meaning of the word
40

"compensation" to convey the idea that the equivalent to be rendered for the property to be taken
shall be real, substantial, full, ample. 
41

It bears repeating that the measures challenged in these petitions contemplate more than a mere
regulation of the use of private lands under the police power. We deal here with an actual taking
of private agricultural lands that has dispossessed the owners of their property and deprived
them of all its beneficial use and enjoyment, to entitle them to the just compensation mandated
by the Constitution.

It cannot be denied from these cases that the traditional medium for the payment of just
compensation is money and no other. And so, conformably, has just compensation been paid in
the past solely in that medium. However, we do not deal here with the traditional excercise of the
power of eminent domain. This is not an ordinary expropriation where only a specific property of
relatively limited area is sought to be taken by the State from its owner for a specific and perhaps
local purpose.

58
What we deal with here is a revolutionary kind of expropriation.

The expropriation before us affects all private agricultural lands whenever found and of whatever
kind as long as they are in excess of the maximum retention limits allowed their owners. This
kind of expropriation is intended for the benefit not only of a particular community or of a small
segment of the population but of the entire Filipino nation, from all levels of our society, from the
impoverished farmer to the land-glutted owner. Its purpose does not cover only the whole
territory of this country but goes beyond in time to the foreseeable future, which it hopes to
secure and edify with the vision and the sacrifice of the present generation of Filipinos.
Generations yet to come are as involved in this program as we are today, although hopefully only
as beneficiaries of a richer and more fulfilling life we will guarantee to them tomorrow through our
thoughtfulness today. And, finally, let it not be forgotten that it is no less than the Constitution
itself that has ordained this revolution in the farms, calling for "a just distribution" among the
farmers of lands that have heretofore been the prison of their dreams but can now become the
key at least to their deliverance.

Such a program will involve not mere millions of pesos. The cost will be tremendous. Considering
the vast areas of land subject to expropriation under the laws before us, we estimate that
hundreds of billions of pesos will be needed, far more indeed than the amount of P50 billion
initially appropriated, which is already staggering as it is by our present standards. Such amount
is in fact not even fully available at this time.

We assume that the framers of the Constitution were aware of this difficulty when they called for
agrarian reform as a top priority project of the government. It is a part of this assumption that
when they envisioned the expropriation that would be needed, they also intended that the just
compensation would have to be paid not in the orthodox way but a less conventional if more
practical method. There can be no doubt that they were aware of the financial limitations of the
government and had no illusions that there would be enough money to pay in cash and in full for
the lands they wanted to be distributed among the farmers. We may therefore assume that their
intention was to allow such manner of payment as is now provided for by the CARP Law,
particularly the payment of the balance (if the owner cannot be paid fully with money), or indeed
of the entire amount of the just compensation, with other things of value. We may also suppose
that what they had in mind was a similar scheme of payment as that prescribed in P.D. No. 27,
which was the law in force at the time they deliberated on the new Charter and with which they
presumably agreed in principle.

The Court has not found in the records of the Constitutional Commission any categorical
agreement among the members regarding the meaning to be given the concept of just
compensation as applied to the comprehensive agrarian reform program being contemplated.
There was the suggestion to "fine tune" the requirement to suit the demands of the project even
as it was also felt that they should "leave it to Congress" to determine how payment should be
made to the landowner and reimbursement required from the farmer-beneficiaries. Such
innovations as "progressive compensation" and "State-subsidized compensation" were also
proposed. In the end, however, no special definition of the just compensation for the lands to be
expropriated was reached by the Commission.  50

On the other hand, there is nothing in the records either that militates against the assumptions
we are making of the general sentiments and intention of the members on the content and
manner of the payment to be made to the landowner in the light of the magnitude of the
expenditure and the limitations of the expropriator.

With these assumptions, the Court hereby declares that the content and manner of the just
compensation provided for in the afore- quoted Section 18 of the CARP Law is not violative of
the Constitution. We do not mind admitting that a certain degree of pragmatism has influenced
our decision on this issue, but after all this Court is not a cloistered institution removed from the
realities and demands of society or oblivious to the need for its enhancement. The Court is as

59
acutely anxious as the rest of our people to see the goal of agrarian reform achieved at last after
the frustrations and deprivations of our peasant masses during all these disappointing decades.
We are aware that invalidation of the said section will result in the nullification of the entire
program, killing the farmer's hopes even as they approach realization and resurrecting the
spectre of discontent and dissent in the restless countryside. That is not in our view the intention
of the Constitution, and that is not what we shall decree today.

Accepting the theory that payment of the just compensation is not always required to be made
fully in money, we find further that the proportion of cash payment to the other things of value
constituting the total payment, as determined on the basis of the areas of the lands expropriated,
is not unduly oppressive upon the landowner. It is noted that the smaller the land, the bigger the
payment in money, primarily because the small landowner will be needing it more than the big
landowners, who can afford a bigger balance in bonds and other things of value. No less
importantly, the government financial instruments making up the balance of the payment are
"negotiable at any time." The other modes, which are likewise available to the landowner at his
option, are also not unreasonable because payment is made in shares of stock, LBP bonds,
other properties or assets, tax credits, and other things of value equivalent to the amount of just
compensation.

Admittedly, the compensation contemplated in the law will cause the landowners, big and small,
not a little inconvenience. As already remarked, this cannot be avoided. Nevertheless, it is
devoutly hoped that these countrymen of ours, conscious as we know they are of the need for
their forebearance and even sacrifice, will not begrudge us their indispensable share in the
attainment of the ideal of agrarian reform. Otherwise, our pursuit of this elusive goal will be like
the quest for the Holy Grail.

The complaint against the effects of non-registration of the land under E.O. No. 229 does not
seem to be viable any more as it appears that Section 4 of the said Order has been superseded
by Section 14 of the CARP Law. This repeats the requisites of registration as embodied in the
earlier measure but does not provide, as the latter did, that in case of failure or refusal to register
the land, the valuation thereof shall be that given by the provincial or city assessor for tax
purposes. On the contrary, the CARP Law says that the just compensation shall be ascertained
on the basis of the factors mentioned in its Section 17 and in the manner provided for in Section
16.

The last major challenge to CARP is that the landowner is divested of his property even before
actual payment to him in full of just compensation, in contravention of a well- accepted principle
of eminent domain.

The recognized rule, indeed, is that title to the property expropriated shall pass from the owner to
the expropriator only upon full payment of the just compensation. Jurisprudence on this settled
principle is consistent both here and in other democratic jurisdictions. Thus:

Title to property which is the subject of condemnation proceedings does not vest the condemnor
until the judgment fixing just compensation is entered and paid, but the condemnor's title relates
back to the date on which the petition under the Eminent Domain Act, or the commissioner's
report under the Local Improvement Act, is filed. 

It is true that P.D. No. 27 expressly ordered the emancipation of tenant-farmer as October 21,
1972 and declared that he shall "be deemed the owner" of a portion of land consisting of a
family-sized farm except that "no title to the land owned by him was to be actually issued to him
unless and until he had become a full-fledged member of a duly recognized farmers'
cooperative." It was understood, however, that full payment of the just compensation also had to
be made first, conformably to the constitutional requirement.

When E.O. No. 228, categorically stated in its Section 1 that:

60
 All qualified farmer-beneficiaries are now deemed full owners as of October 21,
1972 of the land they acquired by virtue of Presidential Decree No. 27.
(Emphasis supplied.)

it was obviously referring to lands already validly acquired under the said decree, after proof of
full-fledged membership in the farmers' cooperatives and full payment of just compensation.
Hence, it was also perfectly proper for the Order to also provide in its Section 2 that the "lease
rentals paid to the landowner by the farmer- beneficiary after October 21, 1972 (pending transfer
of ownership after full payment of just compensation), shall be considered as advance payment
for the land."

The CARP Law, for its part, conditions the transfer of possession and ownership of the land to
the government on receipt by the landowner of the corresponding payment or the deposit by the
DAR of the compensation in cash or LBP bonds with an accessible bank. Until then, title also
remains with the landowner.   No outright change of ownership is contemplated either.
57

Hence, the argument that the assailed measures violate due process by arbitrarily transferring
title before the land is fully paid for must also be rejected.

It is worth stressing at this point that all rights acquired by the tenant-farmer under P.D. No. 27,
as recognized under E.O. No. 228, are retained by him even now under R.A. No. 6657. This
should counter-balance the express provision in Section 6 of the said law that "the landowners
whose lands have been covered by Presidential Decree No. 27 shall be allowed to keep the area
originally retained by them thereunder, further, That original homestead grantees or direct
compulsory heirs who still own the original homestead at the time of the approval of this Act shall
retain the same areas as long as they continue to cultivate said homestead."

In connection with these retained rights, it does not appear in G.R. No. 78742 that the appeal
filed by the petitioners with the Office of the President has already been resolved. Although we
have said that the doctrine of exhaustion of administrative remedies need not preclude
immediate resort to judicial action, there are factual issues that have yet to be examined on the
administrative level, especially the claim that the petitioners are not covered by LOI 474 because
they do not own other agricultural lands than the subjects of their petition.

Obviously, the Court cannot resolve these issues. In any event, assuming that the petitioners
have not yet exercised their retention rights, if any, under P.D. No. 27, the Court holds that they
are entitled to the new retention rights provided for by R.A. No. 6657, which in fact are on the
whole more liberal than those granted by the decree.

WHEREFORE, the Court holds as follows:

1. R.A. No. 6657, P.D. No. 27, Proc. No. 131, and E.O. Nos. 228 and 229 are
SUSTAINED against all the constitutional objections raised in the herein
petitions.

2. Title to all expropriated properties shall be transferred to the State only upon
full payment of compensation to their respective owners.

3. All rights previously acquired by the tenant- farmers under P.D. No. 27 are
retained and recognized.

4. Landowners who were unable to exercise their rights of retention under P.D.
No. 27 shall enjoy the retention rights granted by R.A. No. 6657 under the
conditions therein prescribed.

61
 5. Subject to the above-mentioned rulings all the petitions are DISMISSED,
without pronouncement as to costs.

Alfonso v Land Bank of the Phils. & DAR, G.R.Nos.181912 & 183347, November 29, 2016

Facts:

Cynthia Palomar (Palomar) was the registered owner of two (2) parcels of land. One is located in
San Juan, Sorsogon City, with an area of 1.6530 hectares covered by Transfer Certificate of Title
(TCT) No. T-21136,  and the other in Bibincahan, Sorsogon City, with an area of 26.2284
6

hectares covered by TCT No. T-23180. 7

Upon the effectivity of RA 6657, the DAR sought to acquire Palomar's San Juan and Bibincahan
properties at a valuation of ₱36,066.27 and ₱792,869.06,  respectively. Palomar, however,
8

rejected the valuations.

Land Valuation Case Nos. 68-01 and 70-01 were consequently filed before the DAR Provincial
Adjudication Board (Board) for summary determination of just compensation. In the meantime, or
on April 16, 2001, Palomar sold her rights over the two properties to petitioner Ramon M. Alfonso
(Alfonso ).
9

Upon orders from the Board, the parties submitted their position papers and evidence to support
their respective proposed valuations. On June 20, 2002, Provincial Adjudicator Manuel M.
Capellan issued Decisions  in Land Valuation Case Nos. 68-01 and 70-01.
10

Applying DAR Administrative Order No. 5, Series of 1998, (DAR AO No. 5 [1998]), Provincial
Adjudicator Capellan valued the properties as follows:

103,955.66(San Juan Property)

2,314,115.73(Bibincahan Property)

Respondent LBP, as the CARP financial intermediary pursuant to Section 64 of RA 6657,  filed a 13

motion seeking for a reconsideration of the Provincial Adjudicator's valuations. This was denied
in an Order  dated September 13, 2002.
14

Both the LBP  and Alfonso  filed separate actions for the judicial determination of just
15 16

compensation of the subject properties before Branch 52 of the Regional Trial Court, sitting as
Special Agrarian Court (SAC), of Sorsogon City. These actions were docketed as Civil Case No.
2002-7073 and Civil Case No. 2002-7090, respectively. Upon Alfonso's motion, the cases were
consolidated on December 10, 2002  and Amado Chua (Chua) of Cuervo Appraisers, Inc. was
17

appointed Commissioner who was ordered to submit his report (Cuervo Report) within thirty (30)
days.18

Trial on the merits ensued, with each party presenting witnesses and documentary evidence to
support their respective case

62
In his appraisal of the properties, Commissioner Chua utilized two approaches in valuing the
subject properties, the Market Data Approach (MDA) and the Capitalized Income Approach
(CIA), due to their "different actual land use."  He opined that "the average of the two indications
21

reasonably represented the just compensation (fair market value) of the land with productive
coconut trees":

Ruling of the SAC

On May 13, 2005, the SAC rendered its Decision. Finding the valuations of both the LBP and the
Provincial Adjudicator to be "unrealistically low,"  the SAC adopted Commissioner Chua's
25

valuation as set out in the Cuervo Report. It also held that the 'provisions of Section 2, Executive
Order No. 228 (EO 228) were mere "guiding principles" which cannot substitute the court's
judgment "as to what amount [of just compensation] should be awarded and how to arrive at
such amount."

Ruling of the Court of Appeals

In its challenged Decision dated July 19, 2007, the Court of Appeals found that the SAC failed to
observe the procedure and guidelines provided under DAR AO No. 5 (1998). It consequently
granted the petitions filed by the LBP and the DAR and ordered the remand of the case to the
SAC for the determination of just compensation in accordance with the DAR basic formula.

Issue

As stated in the outset, the issue sought to be resolved in this case involves the legal duty of the
courts in relation to Section 17 and the implementing DAR formulas. Otherwise stated, are courts
obliged to apply the DAR formula in cases where they are asked to determine just compensation
for property covered by RA 6657?

The resolution of the issue presented is fairly straightforward given the established jurisprudence
on the binding character of the DAR formulas. During the course of the deliberations of this case,
however, concerns were strongly raised (by way of dissents and separate concurring opinion) on
the propriety of maintaining the present rule.

This case presents an opportunity for the Court en banc not only to reaffirm the prevailing
doctrine, but also expound, more explicitly and unequivocally, on our understanding of the
exercise of our "judicial function" in relation to legislatively-defined factors and standards and
legislatively-provided regulatory schemes.

Ruling:

For clarity, we restate the body of rules as follows: The factors listed under Section 17 of RA
6657 and its resulting formulas provide a uniform framework or structure for the
computation of just compensation which ensures that the amounts to be paid to affected
landowners are not arbitrary, absurd or even contradictory to the objectives of agrarian
reform. Until and unless declared invalid in a proper case, the DAR formulas partake of

63
the nature of statutes, which under the 2009 amendment became law itself, and thus have
in their favor the presumption of legality, such that courts shall consider, and not
disregard, these formulas in the determination of just compensation for properties
covered by the CARP. When faced with situations which do not warrant the formula's
strict application, courts may, in the exercise of their judicial discretion, relax the
formula's application to fit the factual situations before them, subject only to the condition
that they clearly explain in their Decision their reasons (as borne by the evidence on
record) for the deviation undertaken. It is thus entirely allowable for a court to allow a
landowner's claim for an amount higher than what would otherwise have been offered
(based on an application of the formula) for as long as there is evidence on record
sufficient to support the award.

Applying DAR AO No. 5 (1998), the LBP and the DAR considered the following in its valuation of
Alfonso’s properties: (1) data from the Field Investigation Reports conducted on the
properties;  (2) data from the Philippine Coconut Authority (PCA) as to municipal selling price for
99

coconut in the Sorsogon Province;  and (3) the Schedule of Unit Market Value (SUMV).
100 101

Due to the absence of relevant comparable sales transactions in the area,  the DAR and the
102

LBP used the following formula:

LV = (CNI x 0.9) + (MV x 0.1)

It valued the San Juan and Bibincahan properties at ₱39,974.22  and

103

₱792,869.06,  respectively.
104

The SAC, in its Decision dated May 13, 2005, rejected this valuation for being "unrealistically
low"  and instead adopted Commissioner Chua's Cuervo Report, which valued the San Juan
105

and Bibincahan properties at the "more realistic" amounts of ₱442,830.00 and ₱5,650,680.00,
respectively. 106

That the SAC's adoption of the Cuervo Report valuation constitutes deviation from Section 17
and the prescribed formula is fairly evident.

Commissioner Chua employed a different formula, other than that set forth in DAR AO No. 5
(1998), to compute the valuation. While the DAR-issued formula generally uses the three (3)
traditional approaches to value, each with assigned weights, Commissioner Chua chose to apply
only two approaches, namely, the Market Data Approach (MDA) and the Capitalized Income
Approach (CIA)  and averaged the indications resulting from the two approaches. He thereafter
107

concluded that the result "reasonably represented the just compensation (fair market value) of
the land with productive coconut trees." 108

In addition, in his computation of the CNI factor, Commissioner Chua used, without any
explanation, a capitalization rate of eight percent (8% ),  instead of the twelve percent (12%)
109

rate provided under DAR AO No. 5 (1998).

As earlier explained, deviation from the strict application of the DAR formula is not absolutely
proscribed. For this reason, we find that the Court of Appeals erred in setting aside the SAC's
Decision on the mere fact of deviation from the prescribed legislative standards and basic
formula. Yatco teaches us that courts may, in the exercise of its judicial discretion, relax the
application of the DAR formula, subject only to the condition that the reasons for said deviation
be clearly explained.

In this case, the SAC, in adopting the Cuervo Report valuation, merely said:

64
Considering all these factors, the valuation made by the Commissioner and the potentials of the
property, the Court considers that the valuation of the Commissioner as the more realistic
appraisal which could be the basis for the full and fair equivalent of the property taken
from the owner while the Court finds that the valuation of the [LBP] as well as the
Provincial Adjudicator of Sorsogon in this (sic) particular parcels of land for acquisition
are unrealistically low.  (Emphasis and underscoring supplied.)
110

The statement that the government's valuation is "unrealistically low," without more, is

insufficient to justify its deviation from Section 17 and the implementing DAR
formula.  There is nothing in the SAC's Decision to show why it found Commissioner Chua's
111

method more appropriate for purposes of appraising the subject properties, apart from the fact
that his method yields a much higher (thus, in its view, "more realistic") result.

The Cuervo Report itself does not serve to enlighten this Court as to the reasons behind the non-
application of the legislative factors and the DAR-prescribed formula.

To this Court's mind, a reasoned explanation from the SAC to justify its deviation from the
foregoing guidelines is especially important considering that both the DAR and the LBP were
unable to find sales of comparable nature.

Worse, further examination of the cited sales would show that the same far from complies with
the guidelines as to the cut-off dates provided under the DAR AO No. 5 (1998). The purported
sales were dated between November 28, 1989 (at the earliest) to March 12, 2002 (at the
latest),  whereas DAR AO No. 5 (1998) had already and previously set the cut-off between June
113

to September of 1988. We also note that these purported sales involve much smaller parcels of
land (the smallest involving only 100 square meters). We can hardly see how these sales can be
considered "comparable" for purposes of determining just compensation for the subject land.

Neither was there any explanation as to the glaring discrepancies between the government and
Commissioner Chua's factual findings. Where, for example, the DAR and the LBP claim an
average yield of 666.67kg/ha.  and 952kgs./ha.,  the Cuervo Report asserts 1,656 kgs./ha. and
114 115

1,566 kgs./ha.,  for the San Juan and Bibincahan properties, respectively. Where the
116

government alleges an average selling price of ₱5.58 for coconuts,  the Cuervo Report claims
117

₱l2.50.  The Cuervo Report, however, is completely bereft of evidentiary support by which the
118

SAC could have confirmed or validated the statements made therein. In contrast, the valuations
submitted by the DAR and the LBP were amply supported by the relevant PCA data, SFMV and
Field Investigation Reports.

Considering the foregoing, we cannot but conclude that the SAC committed the very thing
cautioned about in Yatco, that is, "utter and blatant disregard of the factors spelled out by the law
and by the implementing rules."  In this sense, we AFFIRM the Court of Appeals' finding of
119

grave abuse of discretion and order the REMAND of the case to the SAC for computation of just
compensation in accordance with this Court's ruling in Yatco.

65
Torres v Ventura, 187 SCRA 96

Yet, despite such laws, it is a fact that the agrarian problems which beset our nation have
remained unsolved. Majority of our farmers still live a hand-to-mouth existence. The clamor for
change has not died down.

One need not go far in order to search for the reason behind this. We all know that our
beautifully-worded agrarian laws have never really been effectively implemented. Unscrupulous
individuals have found various ways in order to get around the laws. Loopholes in the law and
the ignorance of the poor farmers have been taken advantage of by them. Consequently, the
farmers who are intended to be protected and uplifted by the said laws find themselves back to
where they started or even in a worse position. We must put a stop to this vicious cycle and the
time to do it is now.

This case serves to remind those who are involved in the execution of agrarian laws that it is the
farmer-beneficiary's interest that must be primarily served. This also holds that agrarian laws are
to be liberally construed in favor of the farmer-beneficiary. Anyone who wishes to contest the
rights of the farmer to land given to him by the government in accordance with our agrarian laws
has the burden of proving that the farmer does not deserve the government grant.

Facts:

Petitioner was the leasehold tenant of a 4,000 square-meter parcel of land included in the
Florencio Firme Estate and located at Caloocan, Cabatuan, Isabela. In 1972, when Presidential
Decree No. 27 was signed into law, petitioner was the tiller of the aforementioned piece of land
and was automatically deemed owner of the property. Under Presidential Decree No. 27, any
form of transfer of those lands within the coverage of the law is prohibited except as otherwise
provided therein.

In 1978, urgently in need of money, petitioner was forced to enter into what is called a "selda"
agreement, with private respondent, wherein he transferred his rights of possession and
enjoyment over the landholding in question to the latter in consideration of a loan in the amount
of P5,000.00 to be paid not earlier than 1980. As part of the agreement, petitioner signed an
"Affidavit of Waiver" whereby he waived all his rights over the property in favor of private
respondent. According to petitioner, it was also agreed upon by them that upon the payment of
the loaned amount, private respondent will deliver possession and enjoyment of the property
back to petitioner.

Two years later or in 1980, petitioner offered to pay the loaned amount but private respondent
asked for an extension of one more year to continue cultivating the land and enjoying its fruits.
Because of this, the money being offered by petitioner to pay for the loan was utilized for other

66
purposes. In 1981, though petitioner really wanted to get the property back, he could not do so
because he lacked the necessary funds. It was only in 1985 when petitioner was able to save
enough money to make another offer but this time private respondent categorically denied said
offer and refused to vacate the land.

Hence, petitioner filed a complaint with the barangay captain of Magsaysay, Cabatuan, Isabela
stating therein that he mortgaged his land to private respondent and that he already wanted to
redeem it. On the scheduled date of hearing, private respondent failed to appear.

Upon the issuance by the barangay captain of a certificate to file action, petitioner filed a
complaint with the Regional Trial Court of Cauayan, Isabela for the recovery of possession of the
parcel of land in question. After due trial, the said court rendered a decision in favor of petitioner.

Ruling:

Taking into consideration the circumstances surrounding this case and bearing in mind the
constitutional mandate on the promotion of agrarian reform, We rule in favor of petitioner.

It is not disputed by private respondent that petitioner was in fact the tiller of the subject land
when Presidential Decree No. 27 was promulgated in 1972. As a consequence of the law,
petitioner was granted the right to possess and enjoy the property for himself.

The conflict arose when petitioner, by force of circumstances, transferred possession of his land
to private respondent in consideration of a sum certain. As to what was actually the contract that
was entered upon is being contested by the two parties herein. Petitioner has insisted from the
very beginning that the agreement entered into between him and private respondent was one of
mortgage and that private respondent promised to give back to him his landholding upon
payment of the loaned amount. The stand of private respondent, on the other hand, is that
petitioner relinquished all his rights over the property in his favor, as expressly written in the
Affidavit of Waiver that petitioner signed.

In its decision, the trial court ruled in favor of petitioner having found his version more convincing
than that of private respondent whose evasive attitude did not go unnoticed therein. The trial
court further ruled that the transfer of property from petitioner to private respondent is null and
void for being violative of Presidential Decree No. 27. The Court of Appeals, on the other hand,
believed that petitioner completely waived his rights over the land as evidenced by the Affidavit of
Waiver he executed. According to the Court of Appeals, the said Affidavit of Waiver is valid
because at the time of its execution, petitioner was not yet the owner of the land there having
been no title issued to him yet. As such, continued the Court of Appeals, the Affidavit of Waiver
did not violate Presidential Decree No. 27. The Court of Appeals further added that petitioner
abandoned his landholding and received benefits under the agreement, hence, should not be
rewarded at the expense of private respondent.

After a careful scrutiny of the two conflicting decisions and an exhaustive study of the laws and
jurisprudence applicable to this case, We affirm the judgment of the trial court.

Indeed, We find it hard to believe that petitioner, who has been tilling the land in question for a
long, long time would suddenly lose interest in it and decide to leave it for good at a time when
he knew that full ownership over the same was soon going to be in his hands. Furthermore, if the
situation were otherwise, petitioner would not have made repeated offers to pay for the amount
he borrowed from private respondent and demand from the latter the possession of the land. He
would not have even thought of bringing an action for the recovery of the same if he honestly
believed that he had already given it up in favor of private respondent. Petitioner, or anyone in
his right mind for that matter, would not waste his time, effort and money, especially if he is poor,
to prosecute an unworthy action. If at all, petitioner is an example of a poor tenant farmer who,
due to sheer poverty, was constrained to mortgage his only land   to somebody else   — situation
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which Presidential Decree No. 27 sought to prevent by providing an explicit prohibition on
transfers.

The above finding notwithstanding, and assuming that petitioner really waived his tenancy rights
in favor of private respondent, this case should still be resolved against private respondent. The
transfer would still be void for being made in violation of Presidential Decree No. 27.

We shall now take a closer look at the law.

Presidential Decree No. 27 was signed into law in view of the fact that the old concept of land
ownership by a few has spawned valid and legitimate grievances that gave rise to violent conflict
and social tension.   The law points out that reformation must start with the emancipation of the
6

tiller from the bondage of the soil. 

The law is clear and leaves no room for doubt. Upon the promulgation of Presidential Decree No.
27 on October 21, 1972, petitioner was DEEMED OWNER of the land in question. As of that
date, he was declared emancipated from the bondage of the soil. As such, he gained the rights
to possess, cultivate, and enjoy the landholding for himself. Those rights over that particular
property were granted by the government to him and to no other. To insure his continued
possession and enjoyment of the property, he could not, under the law, make any valid form of
transfer except to the government or by hereditary succession, to his successors.

Yet, it is a fact that despite the prohibition, many farmer-beneficiaries like petitioner herein were
tempted to make use of their land to acquire much needed money. Hence, the then Ministry of
Agrarian Reform issued the following Memorandum Circular:

Despite the above prohibition, however, there are reports that many farmer-
beneficiaries of PD 27 have transferred the ownership, rights, and/or possession
of their farms/homelots to other persons or have surrendered the same to their
former landowners. All these transactions/surrenders are violative of PD 27 and
therefore, null and
void.   (Emphasis supplied.)
9

We do not agree with the Court of Appeals when it ruled that petitioner's land is not included in
the legal prohibition since petitioner has not yet acquired absolute title to the land having failed to
comply with all the conditions set forth by the law. With regard to the legal prohibition, We hold
that title refers not only to that issued upon compliance by the tenant-farmer of the said
conditions but also includes those rights and interests that the tenant-farmer immediately
acquired upon the promulgation of the law. To rule otherwise would make a tenant — farmer
falling in the category of those who have not yet been issued a formal title to the land they till —
easy prey to those who would like to tempt them with cash in exchange for inchoate title over the
same. Following this, absolute title over lands covered by Presidential Decree No. 27 would end
up in the name of persons who were not the actual tillers when the law was promulgated.

Furthermore, the evidence on hand shows that Certificate of Land Transfer No. 096267 covering
the land in question is in the name of petitioner Victorino Torres. 

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